1 00:00:02,440 --> 00:00:09,119 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:09,160 --> 00:00:13,320 Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am 3 00:00:13,360 --> 00:00:17,040 Speaker 1: Eastern on afocarplaying and broyd Outo with the Bloomberg Business app. 4 00:00:17,079 --> 00:00:20,279 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:20,360 --> 00:00:22,800 Speaker 1: us live on YouTube. 6 00:00:23,360 --> 00:00:26,439 Speaker 2: One of the big stock stories of to day is CBS, 7 00:00:26,520 --> 00:00:30,880 Speaker 2: the healthcare company. CBS stocks down today. Management change is 8 00:00:30,920 --> 00:00:32,360 Speaker 2: never a good thing. We wanted to get to the 9 00:00:32,360 --> 00:00:34,120 Speaker 2: bottom of it because a lot of people don't really 10 00:00:34,159 --> 00:00:37,400 Speaker 2: know what CBS is. It's not CBS the television network. 11 00:00:37,560 --> 00:00:42,080 Speaker 2: It's c and Victor and s CBS. Jonathan Palmer, he 12 00:00:42,120 --> 00:00:43,880 Speaker 2: knows what's going on. He's a senior healthcare anles for 13 00:00:43,960 --> 00:00:46,680 Speaker 2: Bloomberg Intelligence. Hey, Jonathan, thanks so much for joining us. 14 00:00:46,720 --> 00:00:48,120 Speaker 2: I know you know this company. Well, can you tell 15 00:00:48,159 --> 00:00:51,600 Speaker 2: us what CBS is and why the stock is down today? 16 00:00:51,640 --> 00:00:52,400 Speaker 2: What's going on there? 17 00:00:53,479 --> 00:00:55,440 Speaker 3: Yeah, Paul, thanks for having me on. So you know, 18 00:00:55,440 --> 00:00:58,720 Speaker 3: most people think of CBS as their corner drug store, 19 00:00:58,760 --> 00:01:01,680 Speaker 3: but really it's a far bigger healthcare company in the 20 00:01:02,080 --> 00:01:06,120 Speaker 3: ecosystem than just that pharmacy that you see around your corner. 21 00:01:06,480 --> 00:01:09,640 Speaker 3: They own the benefits manager Etna, and they also own 22 00:01:09,720 --> 00:01:13,360 Speaker 3: what's called a large PBM, a pharmacy benefit manager called 23 00:01:13,440 --> 00:01:17,520 Speaker 3: care Mark. So really it's a vertically integrated enterprise that 24 00:01:17,959 --> 00:01:20,480 Speaker 3: you know, most people knows their corner pharmacy, but actually 25 00:01:20,560 --> 00:01:23,039 Speaker 3: has a far bigger reach through the insurance side of 26 00:01:23,040 --> 00:01:26,080 Speaker 3: the business as well. So the stocks down today. They 27 00:01:26,200 --> 00:01:30,120 Speaker 3: pre announced earnings that missed. They announced the management change. 28 00:01:30,240 --> 00:01:34,560 Speaker 3: The CEO has left. They're calling it a resignation, but 29 00:01:34,600 --> 00:01:37,080 Speaker 3: this was really probably the last straw in her tenure, 30 00:01:37,880 --> 00:01:41,399 Speaker 3: and they promoted the head of care Mark, the benefits 31 00:01:41,400 --> 00:01:44,040 Speaker 3: manager and a longtime employee to become the new CEO. 32 00:01:45,319 --> 00:01:48,240 Speaker 4: Talk us through the build up to this management change 33 00:01:48,240 --> 00:01:49,280 Speaker 4: what was going on exactly. 34 00:01:50,920 --> 00:01:53,520 Speaker 3: Yeah, So the story of CBS, or the narrative on 35 00:01:53,560 --> 00:01:56,880 Speaker 3: the stock, has been one of missed expectations. You know, 36 00:01:56,920 --> 00:01:59,480 Speaker 3: they've been trying to get back to the double digit 37 00:01:59,520 --> 00:02:02,560 Speaker 3: EPs growth and they've put that out in the in 38 00:02:02,640 --> 00:02:06,520 Speaker 3: the outer years, and they keep pulling back on that guidance, 39 00:02:06,560 --> 00:02:10,280 Speaker 3: you know, both reaching that milestone, but also every year 40 00:02:10,320 --> 00:02:12,959 Speaker 3: they've been kind of missing their EPs guidance, and so 41 00:02:13,400 --> 00:02:17,560 Speaker 3: they'd already revised guidance down last year they revised guidance 42 00:02:17,600 --> 00:02:21,760 Speaker 3: down with two Q earnings last quarter, and so really 43 00:02:21,800 --> 00:02:25,720 Speaker 3: I think it's a question of execution. The CEO just 44 00:02:25,800 --> 00:02:28,840 Speaker 3: hasn't executed on the game plan that she has spoused, 45 00:02:28,880 --> 00:02:31,920 Speaker 3: and so they've got little they can do to kind 46 00:02:31,919 --> 00:02:34,840 Speaker 3: of turn the story around other than making the management change. 47 00:02:35,200 --> 00:02:37,959 Speaker 2: Thirty seconds, Jonathan, do you think it can be done 48 00:02:38,000 --> 00:02:38,960 Speaker 2: and in what timeframe? 49 00:02:40,400 --> 00:02:40,640 Speaker 1: Yeah? 50 00:02:40,680 --> 00:02:42,440 Speaker 3: I do, you know, I think it's going to take 51 00:02:42,480 --> 00:02:45,880 Speaker 3: a lot of blocking and tackling. But the hard part 52 00:02:45,880 --> 00:02:48,800 Speaker 3: about this business is it's based on contracts, and contracts 53 00:02:48,800 --> 00:02:51,200 Speaker 3: are typically two to three years, and so it's going 54 00:02:51,280 --> 00:02:53,320 Speaker 3: to take it take some time to work through the 55 00:02:53,320 --> 00:02:57,360 Speaker 3: headwinds that they're facing and their benefits business on the 56 00:02:57,360 --> 00:03:00,120 Speaker 3: pharmacy side. But these can be overcome. 57 00:03:00,200 --> 00:03:02,440 Speaker 2: All right, Jonathan, thanks so much for joining us. Jonathan Palmer, 58 00:03:02,520 --> 00:03:06,040 Speaker 2: senior healthcare analyso Bloomberg Intelligence, joining us via zoom talking 59 00:03:06,040 --> 00:03:09,160 Speaker 2: about CBS Health the economics of the healthcare business. I 60 00:03:09,160 --> 00:03:10,760 Speaker 2: don't pretend to understand that. I think one of the 61 00:03:10,760 --> 00:03:13,720 Speaker 2: most complex businesses to analyze. So we're glad we have 62 00:03:13,800 --> 00:03:15,440 Speaker 2: a smart people like Jonathan Parker. 63 00:03:15,520 --> 00:03:16,280 Speaker 5: The cupons are good. 64 00:03:16,840 --> 00:03:19,240 Speaker 4: The coupons are good. Coupons we get some really good 65 00:03:19,320 --> 00:03:21,600 Speaker 4: coupons for CBS through our CBS care Mark. 66 00:03:21,720 --> 00:03:26,280 Speaker 2: Yeah, but in New York City, in New York City Weekly, exactly, 67 00:03:26,440 --> 00:03:28,600 Speaker 2: you believe it, exactly. There you go, stock off eight 68 00:03:28,600 --> 00:03:31,000 Speaker 2: and a half percent today. So again, maybe this is 69 00:03:31,040 --> 00:03:33,240 Speaker 2: a little bit of a kitchen sink moment for the company, 70 00:03:33,240 --> 00:03:36,480 Speaker 2: and Jonathan Palmer suggested there is a path towards improved 71 00:03:36,480 --> 00:03:39,040 Speaker 2: profitability there, So we'll see how they do their. 72 00:03:40,360 --> 00:03:44,240 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 73 00:03:44,320 --> 00:03:47,880 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 74 00:03:47,880 --> 00:03:50,680 Speaker 1: Auto with the Bloomberg Business app. You can also listen 75 00:03:50,760 --> 00:03:53,880 Speaker 1: live on Amazon Alexa from our flagship New York station 76 00:03:54,240 --> 00:03:57,960 Speaker 1: just say Alexa playing Bloomberg eleven thirty. 77 00:03:58,400 --> 00:04:01,880 Speaker 2: China it's front center, not just for folks that invest 78 00:04:01,920 --> 00:04:04,760 Speaker 2: in China or in emerging markets, but it's one could 79 00:04:04,840 --> 00:04:07,800 Speaker 2: argue as the second largest economy in world. Everybody has 80 00:04:07,840 --> 00:04:10,520 Speaker 2: to have a view on China. Our next guest, does 81 00:04:10,640 --> 00:04:16,640 Speaker 2: Urar DiPippo, Senior geoeconomics analyst for Bloomberg Economics, joins us Geron. 82 00:04:16,720 --> 00:04:18,360 Speaker 2: I guess the question a lot of people have as 83 00:04:18,360 --> 00:04:21,920 Speaker 2: it releas to China is are their fiscal and monetary 84 00:04:21,960 --> 00:04:25,440 Speaker 2: moves to support this economy? Are they enough? What do 85 00:04:25,440 --> 00:04:26,360 Speaker 2: you think at this stage? 86 00:04:27,440 --> 00:04:30,880 Speaker 6: So they've already announced monetary policies a few weeks ago, 87 00:04:31,120 --> 00:04:34,280 Speaker 6: those by their centers are fairly aggressive. The big question 88 00:04:34,800 --> 00:04:38,279 Speaker 6: is how big will the fiscal policies be. They the 89 00:04:38,360 --> 00:04:41,800 Speaker 6: Ministry of Finance had a press conference on Saturday where 90 00:04:41,920 --> 00:04:45,760 Speaker 6: reporters asked many questions, but they didn't provide any actual number. 91 00:04:46,040 --> 00:04:49,200 Speaker 6: The reason for that is that in China, they actually 92 00:04:49,200 --> 00:04:52,240 Speaker 6: need the legislator to approve any change in fiscal policy 93 00:04:52,640 --> 00:04:56,600 Speaker 6: like government borrowing. They won't be meeting until probably late October, 94 00:04:56,640 --> 00:04:59,159 Speaker 6: possibly early November, so we don't actually know, but I 95 00:04:59,160 --> 00:05:01,680 Speaker 6: think that the general consensus is that there was sort 96 00:05:01,680 --> 00:05:05,840 Speaker 6: of this initial euphoria in late September, which explains the 97 00:05:05,839 --> 00:05:07,760 Speaker 6: massive stock market rally, that they were going to do 98 00:05:07,800 --> 00:05:10,279 Speaker 6: this big bang stimulus. They kind of are on the 99 00:05:10,320 --> 00:05:13,000 Speaker 6: monetary side, but it's not exactly clear yet whether they're 100 00:05:13,040 --> 00:05:15,120 Speaker 6: going to do it on the fiscal side. But what 101 00:05:15,360 --> 00:05:18,320 Speaker 6: sort of qualitatively what they're saying suggests that the early 102 00:05:18,360 --> 00:05:21,640 Speaker 6: hopes of doing sort of a big consumer oriented fiscal 103 00:05:21,640 --> 00:05:24,159 Speaker 6: stimulus that's likely not going to happen, but we're still 104 00:05:24,160 --> 00:05:25,359 Speaker 6: waiting for the top line number. 105 00:05:25,760 --> 00:05:27,640 Speaker 4: So what does this all mean for investors who are 106 00:05:27,640 --> 00:05:31,280 Speaker 4: interested in equities in China? 107 00:05:31,360 --> 00:05:33,440 Speaker 6: So I mean it was a good day for equities 108 00:05:33,440 --> 00:05:36,400 Speaker 6: in China. The two big things that happened today were 109 00:05:36,480 --> 00:05:39,000 Speaker 6: they put out their Q three data, which is generally 110 00:05:39,040 --> 00:05:41,920 Speaker 6: above consensus, and how well it did, including for GDP. 111 00:05:42,320 --> 00:05:43,960 Speaker 6: The other thing that might have helped for the stock 112 00:05:43,960 --> 00:05:47,279 Speaker 6: market was that the PBAC reiterated that it has these 113 00:05:47,360 --> 00:05:50,960 Speaker 6: these swap facilities, including to help companies buy back shares, 114 00:05:51,000 --> 00:05:53,839 Speaker 6: which then puts up the stock market. In general. The 115 00:05:53,839 --> 00:05:56,680 Speaker 6: stock market has done well over the last few weeks, 116 00:05:56,880 --> 00:05:59,440 Speaker 6: but over the past year not so much. The Chinese 117 00:05:59,440 --> 00:06:03,120 Speaker 6: stock market has sort of a feast or famine tendency 118 00:06:03,120 --> 00:06:04,960 Speaker 6: when it comes to sort of boom and bus. This 119 00:06:05,000 --> 00:06:07,559 Speaker 6: has happened over the past decade or so. It often 120 00:06:07,600 --> 00:06:10,200 Speaker 6: sort of appears to underperform. Then there's a lot of euphoria, 121 00:06:10,240 --> 00:06:11,599 Speaker 6: and then a lot of that is often based on 122 00:06:11,640 --> 00:06:14,320 Speaker 6: what the government is doing. So I think what everyone 123 00:06:14,400 --> 00:06:16,880 Speaker 6: is waiting for now is again, what is the actual 124 00:06:16,920 --> 00:06:20,039 Speaker 6: top line number for fiscal fiscal stimulus, Because if it 125 00:06:20,040 --> 00:06:23,560 Speaker 6: comes in below expectations. The rally, which has already given 126 00:06:23,640 --> 00:06:25,320 Speaker 6: up some of its gains, could give up even more. 127 00:06:25,320 --> 00:06:27,920 Speaker 6: But if it's actually at that level three trillion R 128 00:06:27,960 --> 00:06:31,120 Speaker 6: and B, maybe more than you could see some upside. 129 00:06:31,440 --> 00:06:35,040 Speaker 2: Hey, Gerard, I see that the China GDP numbers recently 130 00:06:35,040 --> 00:06:37,880 Speaker 2: came out at rows four point six percent from last year. 131 00:06:37,880 --> 00:06:41,080 Speaker 2: That's the slowest pace in six quarters. Is there still 132 00:06:41,160 --> 00:06:44,600 Speaker 2: room to go in terms of decelerating booth or economists 133 00:06:44,600 --> 00:06:46,240 Speaker 2: out there are they saying, hey, maybe we're atur near 134 00:06:46,320 --> 00:06:47,080 Speaker 2: the bottom. 135 00:06:47,880 --> 00:06:49,880 Speaker 6: So at Bloomerg Economics, we think they're probably at the 136 00:06:49,880 --> 00:06:52,680 Speaker 6: bottom in terms of top line GDP growth, And in 137 00:06:52,720 --> 00:06:56,839 Speaker 6: general the data was fairly good, so industrial production, retail sales, 138 00:06:57,200 --> 00:07:01,200 Speaker 6: fixed ass and investment were all just slightly above the consensus. 139 00:07:02,120 --> 00:07:05,160 Speaker 6: But the sort of broader bad news is that those 140 00:07:05,160 --> 00:07:09,800 Speaker 6: things are still generally below the sequential trend. So consumption, 141 00:07:09,840 --> 00:07:13,160 Speaker 6: particularly retail sales, is still well below its pre pandemic trend. 142 00:07:13,680 --> 00:07:15,920 Speaker 6: And the bottom line is that even though the sort 143 00:07:15,920 --> 00:07:19,560 Speaker 6: of top line number might have bottomed out, the economy 144 00:07:19,640 --> 00:07:22,000 Speaker 6: needs more stimulus and that's what everyone's waiting for. And 145 00:07:22,040 --> 00:07:24,560 Speaker 6: the big thing in particular, it's really two that are 146 00:07:24,560 --> 00:07:27,120 Speaker 6: related one is the property sector with the government that 147 00:07:27,280 --> 00:07:31,320 Speaker 6: intends to stabilize probably through stabilizing the purchases, not investment 148 00:07:31,360 --> 00:07:33,880 Speaker 6: or prices per se. And the other thing that's related 149 00:07:33,880 --> 00:07:37,000 Speaker 6: to that is consumption or consumer confidence, which is integral 150 00:07:37,400 --> 00:07:40,040 Speaker 6: linked to the property sector, which is where people have 151 00:07:40,080 --> 00:07:40,680 Speaker 6: their savings. 152 00:07:41,480 --> 00:07:44,000 Speaker 4: So what further risks are out there, especially as we 153 00:07:44,080 --> 00:07:46,240 Speaker 4: dig a bit deeper into the property market that they 154 00:07:46,240 --> 00:07:48,680 Speaker 4: did say has still yet to stabilize. 155 00:07:50,200 --> 00:07:52,960 Speaker 6: Well, so in the property sector, I mean, the main 156 00:07:53,240 --> 00:07:56,040 Speaker 6: thing is that one of them is that the property 157 00:07:56,080 --> 00:07:59,720 Speaker 6: developers are still in a tough spot. They are in 158 00:07:59,760 --> 00:08:02,520 Speaker 6: the process of recapitalizing banks in parts of the banks 159 00:08:02,560 --> 00:08:04,800 Speaker 6: can lend to the property developers and help stabilize that, 160 00:08:05,160 --> 00:08:07,200 Speaker 6: but ultimately you have to get sales back, you have 161 00:08:07,240 --> 00:08:10,280 Speaker 6: to basically get the confidence back in. And what's tricky 162 00:08:10,320 --> 00:08:12,480 Speaker 6: for the Chinese government is they actually wanted to deflate 163 00:08:12,480 --> 00:08:14,760 Speaker 6: the property center. It was a property bubble. They have 164 00:08:14,840 --> 00:08:17,040 Speaker 6: deflated it. It needed to happen, But then what they 165 00:08:17,040 --> 00:08:20,160 Speaker 6: don't want to do is reinflate it to restabilize the economy. 166 00:08:20,360 --> 00:08:23,760 Speaker 6: So they're walking a sort of a tightrope at the moment. 167 00:08:23,800 --> 00:08:26,480 Speaker 2: With that, what are the next data points that we 168 00:08:26,480 --> 00:08:28,800 Speaker 2: need to be looking for for China here. 169 00:08:29,800 --> 00:08:32,680 Speaker 6: I mean we would be the high frequency indicators like 170 00:08:32,720 --> 00:08:38,880 Speaker 6: PMIS or in general things like retail sales. The thing 171 00:08:38,960 --> 00:08:41,360 Speaker 6: that the event to look forward to would be the 172 00:08:41,440 --> 00:08:45,120 Speaker 6: National People's Congress meeting that will be happening probably in 173 00:08:45,160 --> 00:08:47,240 Speaker 6: a few weeks, and that is when they'll announce the 174 00:08:47,280 --> 00:08:49,240 Speaker 6: big stimulus or whatever the number is. 175 00:08:49,760 --> 00:08:51,760 Speaker 2: That'll be interesting to see because a lot of folks 176 00:08:51,800 --> 00:08:53,760 Speaker 2: and a lot of I think investments are weighing in 177 00:08:53,880 --> 00:08:56,360 Speaker 2: large part on what the Chinese government will do. We here, Gerard, 178 00:08:56,440 --> 00:08:58,920 Speaker 2: thanks so much for joining us. Gerard to Pippo, senior 179 00:08:59,000 --> 00:09:02,920 Speaker 2: geoeconomics fist for Bloomberg Economics, giving us the latest on 180 00:09:03,000 --> 00:09:07,040 Speaker 2: the monetary fiscal stimulus in China. Again, the GDP last 181 00:09:07,080 --> 00:09:09,560 Speaker 2: period rows four point six percent from last year, but 182 00:09:09,600 --> 00:09:11,800 Speaker 2: that was the slowest pace in six years. 183 00:09:13,160 --> 00:09:17,040 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 184 00:09:17,120 --> 00:09:20,440 Speaker 1: weekdays at ten am Eastern on focarplaying and broud Otto 185 00:09:20,559 --> 00:09:23,440 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 186 00:09:23,520 --> 00:09:27,199 Speaker 1: get your podcasts, or watch us live on YouTube. 187 00:09:28,440 --> 00:09:32,240 Speaker 2: Our good friends over at Netflix and FLX is the 188 00:09:32,320 --> 00:09:35,480 Speaker 2: ticker symbol. They reported numbers last night, beat the streets, 189 00:09:35,520 --> 00:09:38,200 Speaker 2: some good guidance, some good discussion around kind of the 190 00:09:38,200 --> 00:09:41,440 Speaker 2: growth out look. The stock's up ten percent today fifty 191 00:09:41,480 --> 00:09:43,319 Speaker 2: two week hig. I'm guessing that's probably close to on 192 00:09:43,320 --> 00:09:45,920 Speaker 2: an all time high three hundred and twenty five billion 193 00:09:45,920 --> 00:09:49,240 Speaker 2: dollar market cap. I don't know what's going on there, 194 00:09:49,360 --> 00:09:51,480 Speaker 2: Keith rag and Othin does because she's the analyst of 195 00:09:51,480 --> 00:09:56,280 Speaker 2: Bloomberg Intelligence who follows Netflix. Boy, what happened last night? 196 00:09:56,280 --> 00:09:57,640 Speaker 2: What did Netflix report? Ethan? 197 00:09:59,000 --> 00:10:02,959 Speaker 7: Yeah, Netflix had an actually very very high quality earnings 198 00:10:03,000 --> 00:10:06,880 Speaker 7: report last night, Paul. So they were up on subscriber metrics. 199 00:10:06,880 --> 00:10:09,160 Speaker 7: They came in ahead of consensus. But I think really 200 00:10:09,160 --> 00:10:12,280 Speaker 7: what excited the street was they were ahead in terms 201 00:10:12,280 --> 00:10:15,120 Speaker 7: of guidance both for the fourth quarter revenue guidance as 202 00:10:15,120 --> 00:10:19,200 Speaker 7: well as operating margin guidance, and their outlook for twenty 203 00:10:19,280 --> 00:10:23,640 Speaker 7: twenty five was slightly ahead of consensus. And mind you, 204 00:10:23,720 --> 00:10:27,840 Speaker 7: it was slightly ahead of consensus just based on subscriber growth. 205 00:10:28,000 --> 00:10:30,840 Speaker 7: So the two big growth levers that you know, everybody 206 00:10:30,920 --> 00:10:33,560 Speaker 7: was expecting they would pull. One was, of course, the 207 00:10:33,600 --> 00:10:35,360 Speaker 7: ad business that doesn't look like it's going to be 208 00:10:35,360 --> 00:10:37,480 Speaker 7: a huge contributor in twenty twenty five looks more like 209 00:10:37,480 --> 00:10:40,000 Speaker 7: a twenty twenty six event. And then, of course the thing, 210 00:10:40,080 --> 00:10:41,840 Speaker 7: the event that we were all waiting for, which was 211 00:10:41,960 --> 00:10:44,679 Speaker 7: you know, a price increase on their standard plan in 212 00:10:45,040 --> 00:10:47,440 Speaker 7: the US, and they didn't announce that. And so the 213 00:10:47,480 --> 00:10:50,360 Speaker 7: fact that they're able to guide to double digit, solid 214 00:10:50,400 --> 00:10:53,040 Speaker 7: double digit revenue growth without pulling any of those growth 215 00:10:53,120 --> 00:10:55,640 Speaker 7: levers just tells us that there's a lot more Jews 216 00:10:55,720 --> 00:10:58,760 Speaker 7: left in this business, even with you know, just playing subscriber. 217 00:10:58,400 --> 00:11:02,640 Speaker 4: Growth, right, good news coming out of this report. Where 218 00:11:02,679 --> 00:11:04,360 Speaker 4: are some areas that they could have done better? Is 219 00:11:04,400 --> 00:11:06,280 Speaker 4: there any areas that people are critiquing? 220 00:11:07,600 --> 00:11:09,600 Speaker 7: I think the areas that people are critiquing is really 221 00:11:09,640 --> 00:11:13,200 Speaker 7: just the lack of disclosure around advertising. And one can 222 00:11:13,320 --> 00:11:16,160 Speaker 7: understand why they are holding their cards close to their chest. 223 00:11:16,160 --> 00:11:18,920 Speaker 7: So this is still a very small business. They have 224 00:11:19,120 --> 00:11:22,840 Speaker 7: not disclosed the number of subscribers that they have on 225 00:11:22,880 --> 00:11:26,520 Speaker 7: the ad tear and that's you know, color that investors 226 00:11:26,520 --> 00:11:28,640 Speaker 7: and the whole investment community has kind of been looking 227 00:11:28,679 --> 00:11:30,800 Speaker 7: for for a long time. But they did give us 228 00:11:30,880 --> 00:11:34,160 Speaker 7: some qualitative kind of guidelines, right, They said that, yes, 229 00:11:34,240 --> 00:11:36,640 Speaker 7: we are growing pretty fast, but it's off a small base. 230 00:11:36,800 --> 00:11:39,520 Speaker 7: Don't expect the advertising business to be a huge growth 231 00:11:39,559 --> 00:11:41,880 Speaker 7: driver in twenty twenty five, but I think come twenty 232 00:11:41,960 --> 00:11:44,079 Speaker 7: twenty six, that completely changes. 233 00:11:44,200 --> 00:11:46,880 Speaker 2: Where we on programming budgets Keith, because I think one 234 00:11:46,920 --> 00:11:48,760 Speaker 2: of the things that you and you and I worked together, 235 00:11:48,760 --> 00:11:51,600 Speaker 2: we were just shocked at the early days of Netflix 236 00:11:51,640 --> 00:11:53,960 Speaker 2: and the types of money they were willing to spend, 237 00:11:54,400 --> 00:11:56,240 Speaker 2: the billions of dollars they're willing to spend on their 238 00:11:56,280 --> 00:11:58,960 Speaker 2: programming budget, and that forced everybody else to kind of 239 00:11:59,280 --> 00:12:02,559 Speaker 2: keep pace. Where are they with their spending their spending strategy. 240 00:12:02,600 --> 00:12:06,079 Speaker 2: Do they have to keep spending to get subscribers? 241 00:12:06,880 --> 00:12:08,880 Speaker 7: I think they do, but they're doing it in a 242 00:12:08,960 --> 00:12:13,080 Speaker 7: much more intelligent, much more efficient way. And the ROI 243 00:12:13,160 --> 00:12:16,320 Speaker 7: on the content spend has absolutely, you know, increased so 244 00:12:16,320 --> 00:12:18,920 Speaker 7: so much, Paul, And that's just because you know, it's 245 00:12:19,000 --> 00:12:20,880 Speaker 7: been a function of just the operating leverage that they 246 00:12:20,920 --> 00:12:23,280 Speaker 7: have in the model, with the scale and the way 247 00:12:23,280 --> 00:12:25,319 Speaker 7: that they're able to spread those costs over you know, 248 00:12:25,360 --> 00:12:28,600 Speaker 7: a two hundred and eighty five million subscriber base. So 249 00:12:29,000 --> 00:12:31,880 Speaker 7: you know, yes, there has been some content cost rationalization 250 00:12:31,960 --> 00:12:35,079 Speaker 7: across the board, including Netflix, They are still spending about 251 00:12:35,120 --> 00:12:37,960 Speaker 7: seventeen billion dollars this year on content, which makes them 252 00:12:38,000 --> 00:12:41,240 Speaker 7: one of the biggest spenders in the streaming space. They 253 00:12:41,240 --> 00:12:45,000 Speaker 7: are planning to increase their budget a little bit going forward, 254 00:12:45,000 --> 00:12:47,199 Speaker 7: so I think closed about eighteen billion dollars in twenty 255 00:12:47,200 --> 00:12:51,240 Speaker 7: twenty five is what the general estimate is. But then again, 256 00:12:51,320 --> 00:12:54,560 Speaker 7: remember they are looking to build out an AD business, 257 00:12:54,720 --> 00:12:57,840 Speaker 7: and for ads you do need to invest in different 258 00:12:57,920 --> 00:13:01,400 Speaker 7: kinds of programming, not really the entertainment programming. It probably 259 00:13:01,440 --> 00:13:03,840 Speaker 7: has to be more a live sports or a live 260 00:13:03,920 --> 00:13:06,800 Speaker 7: events type of strategy, and they I think are willing 261 00:13:06,840 --> 00:13:09,640 Speaker 7: to kind of splurge on that to really build up 262 00:13:09,640 --> 00:13:11,520 Speaker 7: and scale up that AD business. 263 00:13:11,880 --> 00:13:13,840 Speaker 4: How's the debt looking on their balance sheet? I know 264 00:13:13,840 --> 00:13:15,960 Speaker 4: there are big spenders, especially as we think about all 265 00:13:15,960 --> 00:13:17,959 Speaker 4: the shows and the movies that they're rolling out. Are 266 00:13:17,960 --> 00:13:19,120 Speaker 4: they staying above water? 267 00:13:20,120 --> 00:13:22,480 Speaker 7: Oh, very very much so. They have about fourteen billion 268 00:13:22,520 --> 00:13:26,640 Speaker 7: dollars in debt, but remember they have over seven billion 269 00:13:26,679 --> 00:13:29,120 Speaker 7: dollars in cash on there on their balance sheet and 270 00:13:29,120 --> 00:13:31,280 Speaker 7: they're going to throw out, you know, six billion this year. 271 00:13:31,320 --> 00:13:33,880 Speaker 7: So absolutely in very very good shape. 272 00:13:34,600 --> 00:13:37,400 Speaker 2: So the sixty four thousand dollars question geetha which I'm 273 00:13:37,400 --> 00:13:39,679 Speaker 2: sure you get asked by your institutional investor clients all 274 00:13:39,679 --> 00:13:42,760 Speaker 2: the time, is how about everybody else? When you see 275 00:13:42,760 --> 00:13:46,439 Speaker 2: a Netflix quarter like this, you're like, boy, how's everybody 276 00:13:46,440 --> 00:13:49,240 Speaker 2: else can to compete against these guys in the streaming world? 277 00:13:49,400 --> 00:13:51,000 Speaker 2: What are you saying to them? 278 00:13:51,400 --> 00:13:54,560 Speaker 7: Yeah, so they definitely Netflix has definitely won the streaming wars. 279 00:13:54,559 --> 00:13:57,080 Speaker 7: They're going to keep it that way. You know, we 280 00:13:57,200 --> 00:14:00,600 Speaker 7: know that they have about ten percent of all viewing 281 00:14:00,679 --> 00:14:03,600 Speaker 7: time in the United States, so they obviously see much 282 00:14:03,640 --> 00:14:06,480 Speaker 7: more upside for themselves to kind of grow. And I 283 00:14:06,480 --> 00:14:09,360 Speaker 7: think that's exactly what's going to happen, you know, as 284 00:14:09,400 --> 00:14:12,760 Speaker 7: they have more and more plans, you know, cheaper plans 285 00:14:13,040 --> 00:14:15,040 Speaker 7: with of course the advertising based here, and of course 286 00:14:15,040 --> 00:14:18,120 Speaker 7: as they have more and more must have content. So 287 00:14:18,240 --> 00:14:23,680 Speaker 7: there's definitely the competitive intensity is absolutely easing, which allows 288 00:14:23,720 --> 00:14:25,880 Speaker 7: them to be a dominant player. But I think also 289 00:14:25,960 --> 00:14:29,520 Speaker 7: Netflix is really showing the other players how it's done. 290 00:14:29,600 --> 00:14:32,080 Speaker 7: So one of the big points that came out yesterday 291 00:14:32,640 --> 00:14:35,800 Speaker 7: from their earnings report was the fact that they've increased margins. 292 00:14:35,840 --> 00:14:37,800 Speaker 7: Remember at the start of twenty twenty four they said 293 00:14:37,840 --> 00:14:41,720 Speaker 7: twenty two percent operating margin. Yesterday, they're saying twenty seven 294 00:14:41,840 --> 00:14:45,640 Speaker 7: percent operating margin for twenty twenty four. And remember, Paul, 295 00:14:45,680 --> 00:14:47,680 Speaker 7: I mean you know this, well, the Bogie has always 296 00:14:47,680 --> 00:14:49,680 Speaker 7: been about thirty thirty five percent margins, and it looks 297 00:14:49,720 --> 00:14:50,760 Speaker 7: like they're going to be able to get there in 298 00:14:50,800 --> 00:14:52,760 Speaker 7: the next couple of years. So this is going to 299 00:14:52,800 --> 00:14:56,960 Speaker 7: be and probably even more profitable model than the traditional 300 00:14:56,960 --> 00:14:58,680 Speaker 7: TV model, which is great news. 301 00:14:58,880 --> 00:15:02,320 Speaker 2: Well can am I I'm not seeing that or are 302 00:15:02,760 --> 00:15:04,080 Speaker 2: we going to see that with some of the other 303 00:15:04,120 --> 00:15:07,800 Speaker 2: traditional media companies which are still chasing profitability Because you 304 00:15:07,840 --> 00:15:09,520 Speaker 2: say it can be done, I'd go out there and 305 00:15:09,600 --> 00:15:12,120 Speaker 2: take a flyer on Warner Brothers, Discovery. I take a 306 00:15:12,160 --> 00:15:15,040 Speaker 2: flyer maybe even on Power Amount. If you're saying that 307 00:15:15,080 --> 00:15:17,920 Speaker 2: model can be profitable, yeah, it. 308 00:15:17,880 --> 00:15:19,920 Speaker 7: Can be profitable, but of course it depends on so 309 00:15:19,960 --> 00:15:22,280 Speaker 7: many other factors. I think Disney is definitely in the 310 00:15:22,320 --> 00:15:26,120 Speaker 7: strongest position to kind of replicate this success. The other 311 00:15:26,240 --> 00:15:28,640 Speaker 7: is not so much because again, you know, scale is 312 00:15:28,680 --> 00:15:30,920 Speaker 7: going to be a huge issue for them, Marketing costs 313 00:15:31,000 --> 00:15:32,480 Speaker 7: is going to be a huge issue for them. They 314 00:15:32,560 --> 00:15:35,880 Speaker 7: just don't have that cloud or the firepower that you know, 315 00:15:35,920 --> 00:15:38,120 Speaker 7: Netflix and Disney kind of have with their IP and 316 00:15:38,160 --> 00:15:39,000 Speaker 7: their franchises. 317 00:15:39,640 --> 00:15:41,360 Speaker 4: I mean, after these results, it seems like a bit 318 00:15:41,400 --> 00:15:43,600 Speaker 4: of a positive start so far. When we're thinking about 319 00:15:43,600 --> 00:15:46,760 Speaker 4: those sort of former fameing names. What is the next 320 00:15:46,800 --> 00:15:49,680 Speaker 4: thing that investors are looking for? Has the company talked 321 00:15:49,720 --> 00:15:51,880 Speaker 4: anything about new projects that they're rolling out? What are 322 00:15:51,880 --> 00:15:53,040 Speaker 4: investors on the watch for? 323 00:15:54,200 --> 00:15:56,760 Speaker 7: Yeah, so the new projects right now? Rah. Of course, 324 00:15:56,760 --> 00:15:58,880 Speaker 7: the big thing that everybody has kind of got their 325 00:15:58,960 --> 00:16:01,840 Speaker 7: hat hanging on is the advertising business and how big 326 00:16:01,880 --> 00:16:04,200 Speaker 7: that can potentially be when it takes off in a 327 00:16:04,200 --> 00:16:07,000 Speaker 7: big way. They also, of course again are making this 328 00:16:07,080 --> 00:16:10,360 Speaker 7: big you know splash or this big foray into live events. 329 00:16:10,360 --> 00:16:12,040 Speaker 7: So you have you know, the NFL games that are 330 00:16:12,040 --> 00:16:13,960 Speaker 7: going to come up, you have that Jake Paul Versus 331 00:16:14,040 --> 00:16:16,240 Speaker 7: Mike Tyson event. The question is how many more of 332 00:16:16,280 --> 00:16:18,680 Speaker 7: those are they going to do and will those actually 333 00:16:18,720 --> 00:16:22,160 Speaker 7: be a big you know, needle mover for them, and 334 00:16:22,200 --> 00:16:24,320 Speaker 7: then of course you would have them kind of taken 335 00:16:25,240 --> 00:16:27,040 Speaker 7: you know, these baby steps in the in the gaming 336 00:16:27,040 --> 00:16:30,720 Speaker 7: industry again not necessarily been a game changer so far, 337 00:16:31,040 --> 00:16:34,200 Speaker 7: but over time it certainly can be. So they have 338 00:16:34,320 --> 00:16:39,000 Speaker 7: these different ancillary revenue streams that can definitely build uh 339 00:16:39,080 --> 00:16:42,560 Speaker 7: and kind of increase their not only their catalog of content, 340 00:16:42,880 --> 00:16:46,840 Speaker 7: but also their competitive positioning as in strengthening their competitive positioning. 341 00:16:48,040 --> 00:16:49,800 Speaker 8: I need I need some tips on how to get 342 00:16:49,840 --> 00:16:50,760 Speaker 8: around the sharing. 343 00:16:50,920 --> 00:16:53,520 Speaker 2: Well that's the thing. I mean, getha, that's sharing thing. 344 00:16:53,640 --> 00:16:54,000 Speaker 4: Please? 345 00:16:54,160 --> 00:16:55,520 Speaker 2: That's that that helps them out. 346 00:16:55,480 --> 00:16:59,200 Speaker 7: Right them out huge, big time, big time, one hundred 347 00:16:59,240 --> 00:17:03,080 Speaker 7: million subscribe versus the opportunity that they outlined there. 348 00:17:03,160 --> 00:17:07,080 Speaker 2: So they've identified that. The Tucker offspring, I think is 349 00:17:07,960 --> 00:17:11,680 Speaker 2: the dead beats like me to get around I know, 350 00:17:11,960 --> 00:17:14,359 Speaker 2: all right, thanks so much. Keith wrong an oath and 351 00:17:14,400 --> 00:17:17,040 Speaker 2: she's a medias for Bloomberg Intelligence. And I'll notice what's. 352 00:17:16,880 --> 00:17:19,000 Speaker 8: The Netflix nowadays? 353 00:17:19,400 --> 00:17:21,959 Speaker 2: Since I don't get it anymore? Oh you you were 354 00:17:22,000 --> 00:17:23,360 Speaker 2: cripping off one of your kids. 355 00:17:24,000 --> 00:17:28,080 Speaker 8: No, I'm not going to make yourself. It's called sharing, 356 00:17:28,520 --> 00:17:29,800 Speaker 8: right is carring? 357 00:17:30,080 --> 00:17:30,240 Speaker 3: Yes? 358 00:17:30,640 --> 00:17:34,639 Speaker 2: Thank you? Sweeny shocked when this happened. Oh, I like 359 00:17:34,800 --> 00:17:37,439 Speaker 2: they were calling like all like, Dad, would you do 360 00:17:37,440 --> 00:17:38,000 Speaker 2: you cut us off? 361 00:17:38,000 --> 00:17:38,200 Speaker 5: Said? 362 00:17:38,240 --> 00:17:39,160 Speaker 2: I didn't cut you off. 363 00:17:39,640 --> 00:17:40,840 Speaker 4: My dad was like, I don't even know how to 364 00:17:40,880 --> 00:17:42,160 Speaker 4: work this cut it off. 365 00:17:43,359 --> 00:17:45,080 Speaker 2: That's why we own the stock. It's one of the 366 00:17:45,080 --> 00:17:48,520 Speaker 2: many reasons for Dead beats like you were off the 367 00:17:48,600 --> 00:17:52,080 Speaker 2: doll So so that's important. And the advertising, is Keitha said, 368 00:17:52,119 --> 00:17:54,240 Speaker 2: is a you know, twenty five twenty six event that 369 00:17:54,359 --> 00:17:56,040 Speaker 2: investors can hold their hats on as they look for 370 00:17:56,119 --> 00:17:58,520 Speaker 2: growth to continue to support that multiple. 371 00:17:58,560 --> 00:18:03,880 Speaker 1: There you're listening to the Bloomberg Intelligence Podcast. Catch us 372 00:18:03,920 --> 00:18:07,280 Speaker 1: live weekdays at ten am Eastern on applecar Play and 373 00:18:07,280 --> 00:18:10,240 Speaker 1: Android Outo with the Bloomberg Business Act. You can also 374 00:18:10,280 --> 00:18:13,480 Speaker 1: listen live on Amazon Alexa from our flagship New York 375 00:18:13,520 --> 00:18:19,200 Speaker 1: station Just Say Alexa Play Bloomberg eleven thirty. 376 00:18:18,560 --> 00:18:22,960 Speaker 2: SAMAS officials they have confirmed the dethical maas leader Yagat Sinwar, 377 00:18:23,440 --> 00:18:25,640 Speaker 2: who was said to be the architect behind October seventh 378 00:18:25,640 --> 00:18:29,680 Speaker 2: attack order. Today, President Joe Biden spoke on Sinewar's death, 379 00:18:29,800 --> 00:18:33,480 Speaker 2: seeing it as a quote moment of justice and quote 380 00:18:33,800 --> 00:18:36,320 Speaker 2: while also renewing the call for a cease fire dealist 381 00:18:36,320 --> 00:18:36,840 Speaker 2: take a listen. 382 00:18:37,200 --> 00:18:41,400 Speaker 9: The death of leader AMAS represents a moment of justice. 383 00:18:41,640 --> 00:18:44,760 Speaker 9: He had the blood of Americans and Israelis, Palestinians in Germany, 384 00:18:44,760 --> 00:18:48,600 Speaker 9: and so many others on his hands. I told the 385 00:18:48,600 --> 00:18:52,800 Speaker 9: Prime Minister Visil yesterday, let's also make this moment an 386 00:18:52,800 --> 00:18:57,399 Speaker 9: opportunity to seek a path to piece a better future 387 00:18:57,440 --> 00:18:58,800 Speaker 9: in Gaza without Amas. 388 00:19:00,400 --> 00:19:03,879 Speaker 2: All right, That was President Biden earlier today speaking about 389 00:19:03,920 --> 00:19:06,119 Speaker 2: the death of Sinwar's death, again calling it a moment 390 00:19:06,240 --> 00:19:08,160 Speaker 2: of justice. Let's break it down a little bit farther. 391 00:19:08,359 --> 00:19:11,440 Speaker 2: We talked geopolitics in the Middle East. Some smart voices 392 00:19:11,440 --> 00:19:13,920 Speaker 2: help us out there. Jonathan Schanzer, He's the senior vice 393 00:19:13,920 --> 00:19:17,000 Speaker 2: president for research. He's at the non partisan Foundation for 394 00:19:17,080 --> 00:19:21,680 Speaker 2: Defense of Democracies think tank. Joins us from Washington, DC 395 00:19:21,880 --> 00:19:25,440 Speaker 2: via zoom. Jonathan, what do you make of this latest news? 396 00:19:25,480 --> 00:19:28,880 Speaker 2: I mean, the Israeli seemed to be quite successful targeting 397 00:19:29,280 --> 00:19:33,800 Speaker 2: leaders of Hamas and Hesbola. What do you think their 398 00:19:33,800 --> 00:19:35,160 Speaker 2: strategy is right now? 399 00:19:36,640 --> 00:19:39,399 Speaker 10: Well, first, I think we need to acknowledge something that 400 00:19:39,480 --> 00:19:44,159 Speaker 10: yesterday's strike against Sinwar was dumb luck. The Israelis have 401 00:19:44,240 --> 00:19:47,199 Speaker 10: pulled off a lot of serious operations and places like 402 00:19:47,280 --> 00:19:50,919 Speaker 10: Lebanon and Iran. In Gaza, this was the result of 403 00:19:51,160 --> 00:19:57,200 Speaker 10: a couple of younger IDF soldiers simply happenstance falling upon 404 00:19:57,359 --> 00:20:02,720 Speaker 10: Sinhwar's position. After a brief altercation, they called in a 405 00:20:02,840 --> 00:20:06,000 Speaker 10: tank strike and ended up killing him. Really just a 406 00:20:06,040 --> 00:20:08,800 Speaker 10: remarkable turn of events. But what the Israelis have done, 407 00:20:09,840 --> 00:20:13,720 Speaker 10: you know, outside of this particular strike that killed Sinowar 408 00:20:13,880 --> 00:20:17,600 Speaker 10: is they have just been using their intelligence advantage. They've 409 00:20:17,600 --> 00:20:22,680 Speaker 10: been using their technology advantage to effectively evisceerate Hamas. They've 410 00:20:22,720 --> 00:20:26,679 Speaker 10: got his balla on the ropes. They're now preparing for 411 00:20:26,760 --> 00:20:30,080 Speaker 10: a strike against the Iranians. I think the expectation there 412 00:20:30,119 --> 00:20:32,919 Speaker 10: is they're going to take away some of Iran's capabilities. 413 00:20:33,320 --> 00:20:35,480 Speaker 10: This has been not the war that the Israelis wanted 414 00:20:35,480 --> 00:20:37,320 Speaker 10: to fight. It's been a war of attrition. It's been 415 00:20:37,359 --> 00:20:40,000 Speaker 10: fought in some cases on their turf that runs one 416 00:20:40,080 --> 00:20:44,000 Speaker 10: hundred and eighty degrees away from their doctrine, which is 417 00:20:44,040 --> 00:20:48,160 Speaker 10: fighting fast wars on other people's turf. But I do 418 00:20:48,240 --> 00:20:51,720 Speaker 10: you get the sense right now that through these precisions, strikes, 419 00:20:51,760 --> 00:20:55,560 Speaker 10: through the technology, through their comparative advantage, they're starting to 420 00:20:55,600 --> 00:20:59,760 Speaker 10: gain the upper hand against the Iranians and six or 421 00:20:59,800 --> 00:21:04,600 Speaker 10: seven in other proxies, which is truly a formidable axis 422 00:21:04,600 --> 00:21:06,800 Speaker 10: that they are fighting. But you do get a sense 423 00:21:06,840 --> 00:21:08,199 Speaker 10: that they're starting to make some headway. 424 00:21:09,040 --> 00:21:12,160 Speaker 4: Jonathan, this war has been going on for over a year. 425 00:21:12,440 --> 00:21:14,720 Speaker 4: What chapter are we in? How much closer Are we 426 00:21:14,840 --> 00:21:16,200 Speaker 4: to a truce? What are people saying? 427 00:21:17,280 --> 00:21:20,600 Speaker 10: Yeah, Look, I think there's a possibility of possibly getting 428 00:21:20,640 --> 00:21:25,880 Speaker 10: to a truce with Hamas because they've just been eviscerated, right, 429 00:21:25,920 --> 00:21:27,920 Speaker 10: I mean, I think they have to at some point 430 00:21:28,040 --> 00:21:30,560 Speaker 10: understand that fighting is just not worth it any longer, 431 00:21:30,760 --> 00:21:33,520 Speaker 10: not for the people of Gaza, not for the organization itself. 432 00:21:34,800 --> 00:21:37,919 Speaker 10: They're still holding one hundred and one hostages, including I 433 00:21:37,960 --> 00:21:41,640 Speaker 10: believe seven Americans right now. A deal can be cut 434 00:21:41,680 --> 00:21:43,600 Speaker 10: that would end the fighting in Gaza. But I think 435 00:21:43,760 --> 00:21:46,160 Speaker 10: we need to all be clear about something. This seven 436 00:21:46,240 --> 00:21:49,960 Speaker 10: front war that the Iranians are waging against Israel, that's 437 00:21:50,000 --> 00:21:51,919 Speaker 10: going to keep going, and we're seeing it now. His 438 00:21:52,040 --> 00:21:54,399 Speaker 10: Ballas declared that they're going to up the ante and 439 00:21:54,480 --> 00:21:57,920 Speaker 10: possibly use more advanced weapons against Israel than we've seen 440 00:21:57,960 --> 00:22:01,080 Speaker 10: so far deployed in that theater. The Huthi's are still 441 00:22:01,119 --> 00:22:04,160 Speaker 10: at it, the SAI militias in Iraq and Syria are 442 00:22:04,200 --> 00:22:07,200 Speaker 10: still at it. Various terrorist groups that have been attacking 443 00:22:07,280 --> 00:22:09,600 Speaker 10: Israel out of the West Bank they're still at it. 444 00:22:09,640 --> 00:22:12,280 Speaker 10: And then of course there's Iran itself, which recently lobbed 445 00:22:12,280 --> 00:22:14,720 Speaker 10: one hundred and eighty one ballistic missiles at Israel in 446 00:22:14,760 --> 00:22:17,760 Speaker 10: one night. So this war is going to continue on 447 00:22:17,920 --> 00:22:20,840 Speaker 10: other fronts. But certainly it would be welcome to see 448 00:22:20,840 --> 00:22:23,199 Speaker 10: the fighting finally stop in Gaza. It would be a 449 00:22:23,400 --> 00:22:26,720 Speaker 10: welcome relief for the people of Gaza, who really do 450 00:22:26,800 --> 00:22:29,439 Speaker 10: I think, need to see that place go under some 451 00:22:29,440 --> 00:22:33,879 Speaker 10: serious reconstruction, both politically and physically. That needs to happen 452 00:22:33,960 --> 00:22:36,560 Speaker 10: sooner rather than later. But the war, the broader war 453 00:22:36,560 --> 00:22:38,159 Speaker 10: in the Middle East, is going to continue. 454 00:22:38,359 --> 00:22:41,560 Speaker 2: Yeah, Jonathan, it seems like, you know, in this year 455 00:22:42,800 --> 00:22:45,240 Speaker 2: that there's been this hostilities in Middle East, it's gone 456 00:22:45,240 --> 00:22:48,840 Speaker 2: from a limited war in Hamas to simply you know, 457 00:22:48,920 --> 00:22:51,320 Speaker 2: evistrate Hamas and get the hostages back to a much 458 00:22:51,440 --> 00:22:54,639 Speaker 2: much broader regional conflict, something that the US wanted to 459 00:22:54,720 --> 00:22:58,000 Speaker 2: avoid here. But it feels like the Israelis recognize this 460 00:22:58,000 --> 00:23:00,720 Speaker 2: as a moment in time where they can settle everything 461 00:23:01,520 --> 00:23:04,080 Speaker 2: everywhere in the region. Is that what you're thinking at 462 00:23:04,080 --> 00:23:04,480 Speaker 2: this point? 463 00:23:05,240 --> 00:23:08,560 Speaker 10: Look, you know, I think first to frame this properly, 464 00:23:08,560 --> 00:23:10,600 Speaker 10: you have to understand that what started with Hamas, it 465 00:23:10,640 --> 00:23:14,040 Speaker 10: was never about you know, Hamas versus Israel, or Israel 466 00:23:14,160 --> 00:23:17,960 Speaker 10: versus the Palestinians, or you know, a war in Gaza. 467 00:23:18,320 --> 00:23:23,880 Speaker 10: This was an Iranian proxy hamas you know, waging more 468 00:23:23,920 --> 00:23:26,960 Speaker 10: against Israel and then opening up multiple fronts at once, 469 00:23:27,280 --> 00:23:29,640 Speaker 10: and so now we're seeing all those fronts, it's become 470 00:23:29,720 --> 00:23:31,879 Speaker 10: even more clear. I think it was a clarifying the 471 00:23:32,080 --> 00:23:35,760 Speaker 10: moment yesterday. With sinwar gone, you begin to see that 472 00:23:35,920 --> 00:23:39,040 Speaker 10: these other fronts haven't stopped. If anything, they may actually 473 00:23:39,119 --> 00:23:41,840 Speaker 10: only get hotter. And so I think for many of 474 00:23:41,920 --> 00:23:43,360 Speaker 10: us here in the West, it was kind of an 475 00:23:43,359 --> 00:23:46,320 Speaker 10: aha moment where we say, Okay, wow, this really is 476 00:23:46,680 --> 00:23:49,679 Speaker 10: a wider war in Iran is behind it now? Israel 477 00:23:49,720 --> 00:23:51,840 Speaker 10: I think has some choices in front of it, right, 478 00:23:52,200 --> 00:23:57,000 Speaker 10: it can try to fight to a ceasefire in Lebanon 479 00:23:57,560 --> 00:24:00,800 Speaker 10: where you know, maybe his Bala is forced to withdraw 480 00:24:00,920 --> 00:24:03,720 Speaker 10: above the Latani River, which is you know, what was 481 00:24:03,800 --> 00:24:06,880 Speaker 10: enshrined the international law after the last war in two 482 00:24:06,880 --> 00:24:09,960 Speaker 10: thousand and six. But it doesn't solve for all of 483 00:24:10,000 --> 00:24:13,120 Speaker 10: the other challenges that Israel still facing, these Sheite militias 484 00:24:13,119 --> 00:24:16,680 Speaker 10: that have been firing drones and rockets and missiles at 485 00:24:16,720 --> 00:24:19,919 Speaker 10: Israel over the last year. There's still a problem. The 486 00:24:19,960 --> 00:24:23,720 Speaker 10: regime itself is still the big problem, and the biggest 487 00:24:23,720 --> 00:24:26,399 Speaker 10: problem of all is that Iran is still flirting with 488 00:24:26,480 --> 00:24:29,800 Speaker 10: that nuclear weapon. They may use all of this as 489 00:24:29,840 --> 00:24:32,960 Speaker 10: a distraction to make a dash to that bomb, and 490 00:24:33,000 --> 00:24:35,520 Speaker 10: then the entire map changes. In the Middle East. You've 491 00:24:35,520 --> 00:24:39,520 Speaker 10: got basically a regime that is as malign as North 492 00:24:39,600 --> 00:24:43,480 Speaker 10: Korea in the heart of the Middle East, threatening to 493 00:24:43,520 --> 00:24:45,920 Speaker 10: pull the trigger at any time, and using, by the way, 494 00:24:45,920 --> 00:24:49,200 Speaker 10: in nuke as the ultimate insurance policy to be able 495 00:24:49,280 --> 00:24:51,359 Speaker 10: to continue the kind of mayhem that we've been watching. 496 00:24:51,400 --> 00:24:53,640 Speaker 10: So the Israelis, I think, are looking at all these 497 00:24:53,680 --> 00:24:56,040 Speaker 10: and I think they're clear eyed about it. They see 498 00:24:56,080 --> 00:24:58,639 Speaker 10: the need to bring down the regime in Iran. I 499 00:24:58,680 --> 00:25:01,760 Speaker 10: don't know if they can do so without help from 500 00:25:01,760 --> 00:25:05,040 Speaker 10: the United States or maybe more importantly, help from the 501 00:25:05,040 --> 00:25:07,800 Speaker 10: Iranian people. These are people that truly hate their regime, 502 00:25:08,119 --> 00:25:10,040 Speaker 10: and I think we're now starting to see a strategy 503 00:25:10,119 --> 00:25:13,920 Speaker 10: take shape where the Israelis. The Israeli Prime Minister spoke 504 00:25:14,000 --> 00:25:17,320 Speaker 10: directly to the Iranian people a little bit more than 505 00:25:17,359 --> 00:25:20,600 Speaker 10: a week ago, enlisting them in the battle against their 506 00:25:20,800 --> 00:25:21,600 Speaker 10: mutual enemy. 507 00:25:22,000 --> 00:25:24,120 Speaker 2: Jonathan, thanks so much for giving us a few minutes 508 00:25:24,119 --> 00:25:27,479 Speaker 2: of your time. Really appreciated. Jonathan Schanzer, Senior vice president 509 00:25:27,520 --> 00:25:30,840 Speaker 2: for research at the non partisan Foundation for Defensive Democracies. 510 00:25:31,040 --> 00:25:33,399 Speaker 2: That's a think tank in Washington, DC. There are a 511 00:25:33,440 --> 00:25:35,359 Speaker 2: lot of smart people out there that help us understand 512 00:25:35,400 --> 00:25:38,160 Speaker 2: what's going on in a very difficult part of the world. 513 00:25:38,160 --> 00:25:41,840 Speaker 2: We appreciate getting few minutes of Jonathan's time there. 514 00:25:42,400 --> 00:25:46,280 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 515 00:25:46,359 --> 00:25:49,880 Speaker 1: weekdays at ten am Eastern on applecard Play and Android 516 00:25:49,920 --> 00:25:52,680 Speaker 1: Otto with the Bloomberg Business app. You can also listen 517 00:25:52,800 --> 00:25:55,880 Speaker 1: live on Amazon Alexa from our flagship New York station, 518 00:25:56,280 --> 00:26:00,800 Speaker 1: Just Say Alexa playing Bloomberg eleven thirty Normal. 519 00:26:00,840 --> 00:26:03,119 Speaker 2: Linda sitting in for Alex Steele. I am Paul Sweeney. 520 00:26:03,119 --> 00:26:05,760 Speaker 2: We're live here in our Bloomberg Interactive Broker's studio. We're 521 00:26:05,800 --> 00:26:08,080 Speaker 2: streaming live on YouTube as well. To check us out there. 522 00:26:08,119 --> 00:26:11,080 Speaker 2: Sylvia Jablonski joins us. She's a chief executive officer and 523 00:26:11,160 --> 00:26:14,000 Speaker 2: chief investment officer Defiance ETFs. So we're gonna talk to 524 00:26:14,080 --> 00:26:16,480 Speaker 2: market with Sylvia, and I also want to talk ETFs 525 00:26:16,480 --> 00:26:19,480 Speaker 2: because I'm just continue to be shocked at the amount 526 00:26:19,520 --> 00:26:21,600 Speaker 2: of money going into the ETF space. It's one of 527 00:26:21,640 --> 00:26:24,520 Speaker 2: the great stories of my during my career on Wall 528 00:26:24,520 --> 00:26:26,960 Speaker 2: Street to see the fun flow there. Sylvia, thanks so 529 00:26:27,040 --> 00:26:28,840 Speaker 2: much for joining us here. We've got a lot of 530 00:26:28,960 --> 00:26:32,359 Speaker 2: economic data that looks pretty solid. Maybe a lot of 531 00:26:32,359 --> 00:26:34,160 Speaker 2: folks in that soft landing camp, I think they're feeling 532 00:26:34,200 --> 00:26:37,840 Speaker 2: pretty comfortable with that kind of backdrop. Where are you 533 00:26:37,920 --> 00:26:40,280 Speaker 2: telling your clients to all k capital these days? 534 00:26:40,960 --> 00:26:43,000 Speaker 11: Hi, Paul, Thanks for having me, And first of all, 535 00:26:43,000 --> 00:26:44,879 Speaker 11: I would like to have a best but to whiz 536 00:26:44,880 --> 00:26:46,840 Speaker 11: her on the jersey you are with that sounds like 537 00:26:46,880 --> 00:26:50,520 Speaker 11: a lot of fun. Yeah, I think you know, I 538 00:26:50,520 --> 00:26:52,240 Speaker 11: think the markets are in a good spot, right we 539 00:26:52,840 --> 00:26:55,520 Speaker 11: it all kind of started, the momentum restarted, I should say, 540 00:26:55,560 --> 00:26:57,639 Speaker 11: with that job's number that looked a little bit better 541 00:26:57,760 --> 00:27:02,400 Speaker 11: after concerns of the report prior. Inflation is looking good. 542 00:27:02,440 --> 00:27:04,879 Speaker 11: So we have the situation now where monetary policy is 543 00:27:04,920 --> 00:27:08,119 Speaker 11: becoming a little bit more favorable. We have steady jobs, 544 00:27:08,119 --> 00:27:10,600 Speaker 11: we have wage growth, we have consumer sentiment, you know, 545 00:27:10,880 --> 00:27:14,919 Speaker 11: pretty solid, and consumer spending and then earnings earnings are 546 00:27:14,920 --> 00:27:17,760 Speaker 11: holding up, right, So while valuations are high, companies are 547 00:27:17,840 --> 00:27:20,359 Speaker 11: proving that they're profitable and that they're continuing to grow. 548 00:27:20,440 --> 00:27:23,160 Speaker 11: So it does feel a little bit like a goldilocks 549 00:27:23,240 --> 00:27:26,480 Speaker 11: market right now, particularly you know, we're going into that 550 00:27:26,640 --> 00:27:29,959 Speaker 11: seasonally strong time of year next month, we have an 551 00:27:29,960 --> 00:27:32,000 Speaker 11: election year. I think it's it's going to be a 552 00:27:32,000 --> 00:27:33,800 Speaker 11: pretty good ending to the you know, to the S 553 00:27:33,840 --> 00:27:36,080 Speaker 11: and P five hundred and NASDAC, and so where do 554 00:27:36,080 --> 00:27:38,480 Speaker 11: you allocate? You know, whenever the market pulls back on 555 00:27:38,520 --> 00:27:41,000 Speaker 11: dips and AI stocks, I always buy them. We've talked 556 00:27:41,000 --> 00:27:43,679 Speaker 11: about that. You know, a lot of people probably already 557 00:27:43,720 --> 00:27:46,919 Speaker 11: know my picks there right then, videos the AMD's super 558 00:27:46,920 --> 00:27:51,000 Speaker 11: micro micro strategies. But I'm also starting to allocate to XMAG. 559 00:27:51,119 --> 00:27:53,399 Speaker 11: So the other two hundred and ninety three stocks in 560 00:27:53,440 --> 00:27:55,520 Speaker 11: the S and P five hundred that are kind of 561 00:27:55,560 --> 00:27:57,680 Speaker 11: forgotten over the last couple of years, I think they're 562 00:27:57,680 --> 00:27:59,120 Speaker 11: going to start having their day in the sun. 563 00:28:00,160 --> 00:28:01,440 Speaker 4: What areas are you avoiding? 564 00:28:03,920 --> 00:28:07,040 Speaker 11: You know, I think the breath is increasing in the market, 565 00:28:07,080 --> 00:28:09,719 Speaker 11: and I think that the overall market is starting to perform. 566 00:28:09,760 --> 00:28:12,960 Speaker 11: So it's not that I'm necessarily avoiding a particular sector. 567 00:28:13,520 --> 00:28:16,200 Speaker 11: I think if I look at the MAG seven for example, 568 00:28:16,480 --> 00:28:18,960 Speaker 11: actually there's only two of them that are now outperforming 569 00:28:18,960 --> 00:28:21,840 Speaker 11: the S and P five hundred, and that's Nvidia and 570 00:28:22,280 --> 00:28:25,240 Speaker 11: Meta and the others, although Apple might have picked up 571 00:28:25,280 --> 00:28:26,840 Speaker 11: after the last couple of days, but the others are 572 00:28:26,920 --> 00:28:29,280 Speaker 11: kind of slowing down in terms of outperformance, and so 573 00:28:29,760 --> 00:28:31,960 Speaker 11: I'm not really looking to pick up like the classic 574 00:28:32,040 --> 00:28:35,359 Speaker 11: mag seven. But that's not to say that I'm selling 575 00:28:35,359 --> 00:28:37,760 Speaker 11: the positions that I already have. I think if I 576 00:28:37,840 --> 00:28:39,320 Speaker 11: just put new money to work, I'm going to be 577 00:28:39,360 --> 00:28:41,800 Speaker 11: a little bit more thoughtful about where I diversify it, 578 00:28:41,840 --> 00:28:44,160 Speaker 11: and that probably will be away from some of these 579 00:28:44,520 --> 00:28:47,640 Speaker 11: names that have flown high. 580 00:28:47,920 --> 00:28:50,440 Speaker 2: You've got excellon in your notes here. That's the name 581 00:28:50,440 --> 00:28:53,560 Speaker 2: we don't talk about, I think enough here John Tucker 582 00:28:53,560 --> 00:28:56,120 Speaker 2: and I were just talking about oil coming back down 583 00:28:56,120 --> 00:28:58,520 Speaker 2: now below seventy dollars a hour for WTA crude oil. 584 00:28:58,960 --> 00:29:01,240 Speaker 2: What's the investor call on Exxon. 585 00:29:02,280 --> 00:29:03,840 Speaker 11: Yeah, I mean that's why I like it, right. I 586 00:29:03,840 --> 00:29:05,560 Speaker 11: think it's it's come down quite a bit. But if 587 00:29:05,600 --> 00:29:06,920 Speaker 11: you look at what's going on in the rest of 588 00:29:06,960 --> 00:29:08,680 Speaker 11: the world, to me, this is this is a bit 589 00:29:08,720 --> 00:29:11,680 Speaker 11: of a you know, a bit of a diversifier to 590 00:29:11,720 --> 00:29:13,960 Speaker 11: the portfolio. First of all, it's again it's not the 591 00:29:14,040 --> 00:29:16,400 Speaker 11: Max seven. It's in that four ninety three it's a 592 00:29:16,440 --> 00:29:19,200 Speaker 11: strong company with a solid balance sheet. They pay a dividend, 593 00:29:19,600 --> 00:29:21,840 Speaker 11: and I think the company's also well positioned, you know, 594 00:29:21,880 --> 00:29:25,840 Speaker 11: whether whether or not. Of course, they're tied to oil 595 00:29:25,920 --> 00:29:27,479 Speaker 11: and whatnot, but I think that they're doing a lot 596 00:29:27,520 --> 00:29:30,520 Speaker 11: of investing in kind of you know, green energy and 597 00:29:30,520 --> 00:29:33,200 Speaker 11: going climate neutral to twenty fifty, they'll be big players 598 00:29:33,920 --> 00:29:36,320 Speaker 11: in that space because I think they've learned that they 599 00:29:36,320 --> 00:29:38,640 Speaker 11: have to be evolved. So I just like that company overall. 600 00:29:38,680 --> 00:29:40,080 Speaker 11: But I do think that oil is going to be 601 00:29:40,160 --> 00:29:41,640 Speaker 11: a story. You know, there's so much going on in 602 00:29:41,640 --> 00:29:44,080 Speaker 11: the Middle East right now. I don't think it's necessarily 603 00:29:44,160 --> 00:29:48,200 Speaker 11: over and that's an impetus for potentially oil to spike 604 00:29:48,280 --> 00:29:51,000 Speaker 11: throughout the months coming ahead. And then the other thing is, 605 00:29:51,280 --> 00:29:53,480 Speaker 11: you know China, if we keep seeing China, if we 606 00:29:53,520 --> 00:29:55,880 Speaker 11: see that stimulus there and we see the second largest 607 00:29:55,880 --> 00:29:58,120 Speaker 11: economy in the world growing. You know, they're one of 608 00:29:58,160 --> 00:30:01,360 Speaker 11: the biggest consumers of X products, and so I think 609 00:30:01,360 --> 00:30:04,160 Speaker 11: that that company has a shot of growing. 610 00:30:04,200 --> 00:30:07,160 Speaker 4: Here talk to me about healthcare. I know this is 611 00:30:07,160 --> 00:30:09,959 Speaker 4: an area that can get really nitty, griny and niche, 612 00:30:10,080 --> 00:30:11,640 Speaker 4: but what's going on? 613 00:30:13,200 --> 00:30:15,560 Speaker 11: So healthcare again, this goes to my to my ex 614 00:30:15,600 --> 00:30:17,560 Speaker 11: mag right, if you look at if you look at 615 00:30:17,560 --> 00:30:19,440 Speaker 11: the MAG seven and then kind of start going down 616 00:30:19,480 --> 00:30:21,840 Speaker 11: the list and start trying to look at the companies 617 00:30:21,880 --> 00:30:24,280 Speaker 11: that are outperforming the S and P five hundred. You know, 618 00:30:24,360 --> 00:30:27,440 Speaker 11: Eli Lie Lily is one of them. Can't talk today. 619 00:30:28,200 --> 00:30:30,240 Speaker 11: I think you know, part of that is is the 620 00:30:30,320 --> 00:30:33,080 Speaker 11: GLP one craze and the weight loss drugs, and you 621 00:30:33,120 --> 00:30:36,320 Speaker 11: have you know, Novo and Lily playing in that space. 622 00:30:36,360 --> 00:30:40,320 Speaker 11: But that company in particular has a big portfolio of drugs, 623 00:30:40,320 --> 00:30:43,240 Speaker 11: whether it's Manjaro, whether it's you know, cancer drugs and 624 00:30:43,320 --> 00:30:46,560 Speaker 11: FDA trials, Alzheimer's disease drugs on trials and things like this. 625 00:30:46,680 --> 00:30:49,120 Speaker 11: But I think it's a macro story that's starting to 626 00:30:49,120 --> 00:30:51,160 Speaker 11: play out. To be honest, I thought that these companies, 627 00:30:51,360 --> 00:30:53,920 Speaker 11: these you know, big pharma companies would do better than 628 00:30:53,960 --> 00:30:57,000 Speaker 11: they have sooner than they have. They're getting some steam now, 629 00:30:57,080 --> 00:31:00,000 Speaker 11: but you know, you have this massive aging baby boom 630 00:31:00,160 --> 00:31:03,920 Speaker 11: population people started to consume medical services and you know, 631 00:31:04,000 --> 00:31:07,680 Speaker 11: these these products post COVID. I think that's going to continue. 632 00:31:07,800 --> 00:31:10,440 Speaker 11: And just strong balance sheet. They pay a nice dividend, 633 00:31:10,640 --> 00:31:14,120 Speaker 11: good diversifier, you know, defensive play for the market. So 634 00:31:14,160 --> 00:31:16,880 Speaker 11: I do think it's worth looking at Sylvia. 635 00:31:17,040 --> 00:31:18,360 Speaker 2: You know, when I was growing up on Wall Street, 636 00:31:18,400 --> 00:31:20,920 Speaker 2: it was all about the mutual funds. Now, the funds 637 00:31:20,960 --> 00:31:24,240 Speaker 2: flows over the last decade plus have just been extraordinary 638 00:31:24,240 --> 00:31:27,080 Speaker 2: to this new rapper called the ETFs at your platform 639 00:31:27,080 --> 00:31:29,880 Speaker 2: defines ETFs. What are you seeing today trips of funds 640 00:31:29,880 --> 00:31:31,640 Speaker 2: flows and kind of where are they going? 641 00:31:32,560 --> 00:31:34,720 Speaker 11: Yeah, I mean this was our best year yet. I 642 00:31:34,720 --> 00:31:37,360 Speaker 11: think it was the best year yet for the ETF industry. 643 00:31:37,360 --> 00:31:40,640 Speaker 11: I know you guys have Eric talking about that pretty 644 00:31:40,640 --> 00:31:43,640 Speaker 11: regularly out there, but it's it's a multi trillion dollar 645 00:31:44,120 --> 00:31:46,040 Speaker 11: business and state of the world now. And if you 646 00:31:46,040 --> 00:31:48,680 Speaker 11: look at you know, these big mutual fund companies, I mean, 647 00:31:48,680 --> 00:31:51,000 Speaker 11: they're all trying to figure out how they can do 648 00:31:51,040 --> 00:31:53,400 Speaker 11: these conversions to ETF products because I think it's the 649 00:31:53,440 --> 00:31:56,520 Speaker 11: way of the future. I mean, I'll say something bold. 650 00:31:56,640 --> 00:31:58,520 Speaker 11: I don't think that you know, I have young kids. 651 00:31:58,560 --> 00:31:59,960 Speaker 11: I don't think that they'll know what a mutual fund 652 00:31:59,960 --> 00:32:03,880 Speaker 11: is by the time they're teenagers right when they invest. 653 00:32:03,920 --> 00:32:06,600 Speaker 11: I mean, it'll be some it'll be like a you know, 654 00:32:06,720 --> 00:32:09,360 Speaker 11: rotary phone or something like that. But I just think 655 00:32:09,360 --> 00:32:11,240 Speaker 11: ETFs are a better product. Right, you can trade them 656 00:32:11,280 --> 00:32:14,120 Speaker 11: throughout the day. They're transparent, and they're a lot cheaper, 657 00:32:14,240 --> 00:32:16,400 Speaker 11: I think the days of expensive mutual funds, I mean, 658 00:32:16,440 --> 00:32:18,640 Speaker 11: give or take a few. Like the market leaders, it's 659 00:32:18,680 --> 00:32:20,800 Speaker 11: just like have their client base. I think they'll have 660 00:32:20,840 --> 00:32:22,680 Speaker 11: it for a while, but you kind of have to 661 00:32:22,720 --> 00:32:25,720 Speaker 11: adapt and go you know, cheaper, more transparent, unless it's 662 00:32:25,760 --> 00:32:28,840 Speaker 11: like a super sophisticated active strategy, but that probably still 663 00:32:28,880 --> 00:32:31,440 Speaker 11: works better than an ETF forepper. So I think growth 664 00:32:31,440 --> 00:32:32,160 Speaker 11: continues there. 665 00:32:32,720 --> 00:32:35,120 Speaker 2: Yeah, but when I was, they're not as profitable to me. 666 00:32:35,160 --> 00:32:37,960 Speaker 2: When I'm trading for Salomon Brothers, I'm wearing Stanley back 667 00:32:38,000 --> 00:32:38,520 Speaker 2: in the day. 668 00:32:39,600 --> 00:32:41,320 Speaker 11: You're not going to make its much money as an advisor, 669 00:32:41,440 --> 00:32:44,040 Speaker 11: that's for sure. And that's you know, but I think 670 00:32:44,080 --> 00:32:46,320 Speaker 11: if you you know, the good news is that the 671 00:32:46,400 --> 00:32:49,800 Speaker 11: types of ETFs that are out there are are more interesting. 672 00:32:49,840 --> 00:32:51,880 Speaker 11: You know, there's a lot of great thematic products, options 673 00:32:51,920 --> 00:32:53,920 Speaker 11: based products and things like this, and so an advisor 674 00:32:54,000 --> 00:32:58,000 Speaker 11: I think can now be you know, really providing a 675 00:32:58,040 --> 00:33:01,240 Speaker 11: good service by alerting ret tell clients of theirs that 676 00:33:01,280 --> 00:33:02,800 Speaker 11: there's all this other stuff out there that they can 677 00:33:02,920 --> 00:33:05,720 Speaker 11: get exposure to, including bitcoin, right, I mean Bitcoin wasn't 678 00:33:05,720 --> 00:33:08,280 Speaker 11: a thing a few years ago within an ETF product. 679 00:33:08,320 --> 00:33:11,200 Speaker 11: Now people are putting it in their IRA, so it's 680 00:33:11,360 --> 00:33:12,320 Speaker 11: a different world. 681 00:33:12,440 --> 00:33:14,680 Speaker 2: It is a different world, and as you mentioned, it 682 00:33:14,720 --> 00:33:17,880 Speaker 2: is arguably much better for investors, and that's the most 683 00:33:17,880 --> 00:33:20,160 Speaker 2: important thing. Sovia Jablonski, thanks so much for joining us 684 00:33:20,200 --> 00:33:23,440 Speaker 2: chief executive officer and chief investment Officer for Defiance at ETFs. 685 00:33:24,960 --> 00:33:28,840 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 686 00:33:28,920 --> 00:33:32,440 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 687 00:33:32,480 --> 00:33:35,640 Speaker 1: Auto with the Bloomberg Business. You can also listen live 688 00:33:35,720 --> 00:33:38,880 Speaker 1: on Amazon Alexa from our flagship New York station Just 689 00:33:38,960 --> 00:33:43,360 Speaker 1: Say Alexa playing Bloomberg eleven thirty. 690 00:33:42,720 --> 00:33:44,920 Speaker 2: Romelina sitting in for Alex Deel poul Swinging. You live 691 00:33:44,960 --> 00:33:47,080 Speaker 2: here in our Bloomberg Interactive Brokers studio. I'm going to 692 00:33:47,080 --> 00:33:49,120 Speaker 2: get right to our next guest here. A very cool 693 00:33:49,160 --> 00:33:52,680 Speaker 2: story here, Roland Martineque, CEO of Data Bank. Data Bank 694 00:33:52,760 --> 00:33:55,760 Speaker 2: is a private company. Tell us what you guys do 695 00:33:55,920 --> 00:33:57,680 Speaker 2: role because I think a lot of people are really 696 00:33:57,760 --> 00:33:59,160 Speaker 2: interested in your business. 697 00:33:59,200 --> 00:34:00,400 Speaker 5: Sure be here. 698 00:34:00,440 --> 00:34:03,160 Speaker 12: Thanks for having me so, data Bank we're a US 699 00:34:03,160 --> 00:34:06,360 Speaker 12: based company. We're a data center developer, data center. So 700 00:34:06,440 --> 00:34:09,719 Speaker 12: we have over seventy data centers in twenty seven markets, 701 00:34:09,960 --> 00:34:14,160 Speaker 12: giving us the largest geographic footprint of data centers in America. 702 00:34:14,920 --> 00:34:16,600 Speaker 12: A data center, I like to say, if you know, 703 00:34:16,640 --> 00:34:20,080 Speaker 12: it's basically the foundation for technology adoption. Right, you think 704 00:34:20,080 --> 00:34:22,839 Speaker 12: about anything on your phone, anything on your computer, it 705 00:34:22,920 --> 00:34:26,200 Speaker 12: basically originates and terminates in a data center. So we 706 00:34:26,239 --> 00:34:29,280 Speaker 12: support over twenty five hundred customers, you know, from the 707 00:34:29,320 --> 00:34:34,080 Speaker 12: major hyperscalers to major enterprises to smaller businesses that want 708 00:34:34,120 --> 00:34:38,920 Speaker 12: to put their critical data, their applications, their services inside 709 00:34:39,040 --> 00:34:41,800 Speaker 12: a hard and facility that a data center. Because obviously 710 00:34:41,840 --> 00:34:45,320 Speaker 12: in today's world, everyone's really dependent on on their digital footprint. 711 00:34:45,719 --> 00:34:48,200 Speaker 4: Throw me a few names of your customers. 712 00:34:48,120 --> 00:34:56,120 Speaker 12: So Amazon, Google, Netflix, JP, Morgan, just A and C Bank, Carnival, Cruiser. 713 00:34:56,239 --> 00:34:58,800 Speaker 2: Right, so even simple people like Nora, and I know, 714 00:34:58,840 --> 00:35:01,040 Speaker 2: nor is much smarter than is the real estate business. 715 00:35:01,239 --> 00:35:04,680 Speaker 2: I know that the data center business is a good business, booming, 716 00:35:04,800 --> 00:35:08,560 Speaker 2: really good business. Some people want to invest with you 717 00:35:08,600 --> 00:35:10,480 Speaker 2: and you just raise some capital. Talk to us about that. 718 00:35:10,800 --> 00:35:14,279 Speaker 12: Yeah, So one thing about data centers is they're really expensive. Right, 719 00:35:14,719 --> 00:35:17,200 Speaker 12: you know, we measure everything in power. We call it, 720 00:35:17,239 --> 00:35:19,480 Speaker 12: you know, by the megawatt, which is a million watts. 721 00:35:19,840 --> 00:35:23,040 Speaker 12: It costs about ten to twelve million dollars per megawat 722 00:35:23,200 --> 00:35:25,960 Speaker 12: to build out data centers, and we're building data centers 723 00:35:25,960 --> 00:35:29,719 Speaker 12: that are sixty megawats, seventy two megawats, forty megawatts. So 724 00:35:30,280 --> 00:35:32,200 Speaker 12: you know, we're now in the kind of the billions 725 00:35:32,280 --> 00:35:35,680 Speaker 12: range when it comes to these investments across the sector. 726 00:35:35,840 --> 00:35:38,319 Speaker 12: So this week we announced that we had raised two 727 00:35:38,360 --> 00:35:41,200 Speaker 12: billion of equity capital with Aussie Super which is an 728 00:35:41,239 --> 00:35:44,319 Speaker 12: Australian pension fund, as our new lead investor, with a 729 00:35:44,400 --> 00:35:46,080 Speaker 12: one point five billion dollar commitment. 730 00:35:46,840 --> 00:35:49,640 Speaker 4: So, I mean, the tech industry moves fast and breaks things, 731 00:35:49,680 --> 00:35:51,520 Speaker 4: but if you think about the utility industry, it's a 732 00:35:51,520 --> 00:35:55,000 Speaker 4: bit slower and tries never to break anything at all. Obviously, 733 00:35:55,000 --> 00:35:57,960 Speaker 4: you work as the middleman here. I'm curious, how do 734 00:35:58,000 --> 00:36:00,280 Speaker 4: you manage the relationships between both ends. 735 00:36:00,480 --> 00:36:03,040 Speaker 12: Yeah, that's a great question. Yeah, these two kind of 736 00:36:03,040 --> 00:36:04,680 Speaker 12: galaxies are really colliding now. 737 00:36:05,239 --> 00:36:05,440 Speaker 5: You know. 738 00:36:05,560 --> 00:36:09,080 Speaker 12: Obviously we always were good partners with utilities, but over 739 00:36:09,080 --> 00:36:11,799 Speaker 12: the last twenty four months, with the advent of generative AI, 740 00:36:12,360 --> 00:36:15,480 Speaker 12: the demand for data center capacity has just skyrocketed. To 741 00:36:15,520 --> 00:36:18,319 Speaker 12: give you some example, in twenty twenty let's say twenty 742 00:36:18,360 --> 00:36:21,400 Speaker 12: twenty one RIP. Before chat GPT, there was probably about 743 00:36:21,400 --> 00:36:24,719 Speaker 12: a gigawats seven hundred and fifty megawatts of absorption in 744 00:36:24,760 --> 00:36:28,439 Speaker 12: the United States for new data center capacity. This year, 745 00:36:28,480 --> 00:36:31,759 Speaker 12: the estimate is six gigawatts of new data center capacity 746 00:36:31,760 --> 00:36:35,480 Speaker 12: will be absorbed. So our relationships with ver utilities are critical. 747 00:36:35,560 --> 00:36:39,000 Speaker 12: And yes, they are more on the slow moving side, right. 748 00:36:39,000 --> 00:36:41,799 Speaker 12: They're utilities that are regulated. They think of things in 749 00:36:41,840 --> 00:36:44,759 Speaker 12: ten year cycles. Meanwhile our customers think of things in 750 00:36:44,920 --> 00:36:48,799 Speaker 12: twelve month cycles. So there's a lot of activity going 751 00:36:48,840 --> 00:36:51,399 Speaker 12: on there. But the utilities are, you know, working hard 752 00:36:51,400 --> 00:36:53,160 Speaker 12: to try to figure out how they're going to meet 753 00:36:53,520 --> 00:36:56,440 Speaker 12: the expected demand of AI over the coming decade. 754 00:36:57,040 --> 00:36:59,040 Speaker 2: So what do you do when you develop a data 755 00:36:59,040 --> 00:37:01,160 Speaker 2: center g you us assume the utilities can be there 756 00:37:01,200 --> 00:37:03,719 Speaker 2: to support you, or do you build your own power there? 757 00:37:03,800 --> 00:37:06,680 Speaker 2: Like John Tucker lakes to talk about these small. 758 00:37:06,400 --> 00:37:09,560 Speaker 8: Well, you couldn't build your own power, Like if a 759 00:37:09,640 --> 00:37:12,720 Speaker 8: littleminum produce al CoA had to build its own power 760 00:37:13,000 --> 00:37:16,600 Speaker 8: its own dam in the wherever it was. But you 761 00:37:16,680 --> 00:37:17,719 Speaker 8: can't do something. 762 00:37:17,520 --> 00:37:21,239 Speaker 12: Like that technically, you can, I mean that self generation, right, 763 00:37:21,320 --> 00:37:24,280 Speaker 12: that is becoming a topic that is much more discussed 764 00:37:24,280 --> 00:37:25,400 Speaker 12: now than it was before. 765 00:37:25,440 --> 00:37:27,680 Speaker 5: But ultimately, what we do is, you know, before we. 766 00:37:27,680 --> 00:37:30,799 Speaker 12: Acquire land, we're already working with the utilities to understand 767 00:37:30,840 --> 00:37:34,120 Speaker 12: where they have capacity on their platform. 768 00:37:34,239 --> 00:37:34,439 Speaker 5: Right. 769 00:37:34,719 --> 00:37:38,080 Speaker 12: We look for, you know, transmission lines that obviously carry 770 00:37:38,360 --> 00:37:41,319 Speaker 12: the electrons, and then we'll buy a land kind of 771 00:37:41,320 --> 00:37:43,840 Speaker 12: in close proximity to those transmission lines so that we 772 00:37:43,920 --> 00:37:46,720 Speaker 12: can tap into them to grab power. And that's exactly 773 00:37:46,800 --> 00:37:49,480 Speaker 12: what we did with the three announcements we made this year. 774 00:37:49,480 --> 00:37:52,359 Speaker 12: We're building a four hundred and eighty megawat data center 775 00:37:52,440 --> 00:37:56,120 Speaker 12: campus in Texas South Dallas. We worked with Encore there 776 00:37:56,160 --> 00:37:59,359 Speaker 12: to identify that spot. We're building one hundred and twenty 777 00:37:59,360 --> 00:38:02,560 Speaker 12: megawat data center campus in Atlanta. We worked with Georgia 778 00:38:02,560 --> 00:38:05,280 Speaker 12: Power to again identify a suitable location. 779 00:38:05,680 --> 00:38:07,479 Speaker 5: And then we're building one hundred and ninety two. 780 00:38:07,400 --> 00:38:10,400 Speaker 12: Mega walk campus in Culpepper, Virginia, which is about fifty 781 00:38:10,440 --> 00:38:12,279 Speaker 12: miles south of kind of data center. 782 00:38:12,280 --> 00:38:14,440 Speaker 8: Ally as when are you eyeing nuclear plants? 783 00:38:14,760 --> 00:38:17,919 Speaker 12: No, most of the power here is kind of there's 784 00:38:17,960 --> 00:38:20,640 Speaker 12: a it's a grid mix, right, So like in Texas, 785 00:38:21,000 --> 00:38:23,800 Speaker 12: you know, Encore is you know, very proactive in terms 786 00:38:23,800 --> 00:38:26,759 Speaker 12: of connecting new generation there, believe it or not. As 787 00:38:26,760 --> 00:38:29,680 Speaker 12: an example, you know, on any given sunny day in Texas, 788 00:38:29,719 --> 00:38:32,960 Speaker 12: you know, forty five percent of the power is coming 789 00:38:33,000 --> 00:38:36,960 Speaker 12: from solar, wind and batteries. So there's been a huge 790 00:38:37,239 --> 00:38:40,480 Speaker 12: investment in those kind of renewable power generation sources. 791 00:38:40,480 --> 00:38:43,120 Speaker 2: You get in Dallas, right we are. We just had 792 00:38:43,120 --> 00:38:45,759 Speaker 2: a story your pension. You've got a pension problem in 793 00:38:45,800 --> 00:38:50,360 Speaker 2: your city, right and like an incredibly unfunded pension. And 794 00:38:50,400 --> 00:38:52,640 Speaker 2: I looked at this story. I like, there's a million 795 00:38:52,640 --> 00:38:56,200 Speaker 2: companies like your smart young companies fucking to Texas, fucking 796 00:38:56,239 --> 00:38:57,960 Speaker 2: to Dallas. I don't know how you guys got yourself 797 00:38:57,960 --> 00:38:59,799 Speaker 2: in that pickle in the city of Dallas. But that's 798 00:38:59,880 --> 00:39:02,759 Speaker 2: another story for another time. So talk to us about 799 00:39:02,760 --> 00:39:06,560 Speaker 2: this investment here. I mean, what are the Australians are they? 800 00:39:06,680 --> 00:39:08,560 Speaker 2: Did they see this as an AI play for them? 801 00:39:08,600 --> 00:39:10,279 Speaker 2: What's the angle for them? 802 00:39:10,520 --> 00:39:10,719 Speaker 5: Yeah? 803 00:39:10,760 --> 00:39:13,239 Speaker 12: I mean what's great about our business is that, you know, 804 00:39:13,360 --> 00:39:16,160 Speaker 12: we're really a pick and shoble business, right. You know, 805 00:39:16,239 --> 00:39:19,360 Speaker 12: data centers are agnostic. It doesn't matter what technology you 806 00:39:19,400 --> 00:39:21,719 Speaker 12: put into a data center. All that matters is that 807 00:39:21,760 --> 00:39:24,640 Speaker 12: people consume technology That's what I love about our business 808 00:39:25,120 --> 00:39:28,040 Speaker 12: that you know, we're really indexed to technology adoption, and 809 00:39:28,480 --> 00:39:31,600 Speaker 12: I would argue humans are addicted to technology, right, and 810 00:39:31,640 --> 00:39:33,799 Speaker 12: that because of that, we think there's going to be 811 00:39:33,800 --> 00:39:37,239 Speaker 12: you know, long term demand. So so you know, these 812 00:39:37,239 --> 00:39:39,799 Speaker 12: investments are very long term investments. You know, we build 813 00:39:39,840 --> 00:39:41,680 Speaker 12: a data center, you know, we expected to have an 814 00:39:41,680 --> 00:39:45,200 Speaker 12: operational life of thirty to forty years. In fact, you know, 815 00:39:45,200 --> 00:39:48,080 Speaker 12: there's the data center sector really has only been around 816 00:39:48,080 --> 00:39:50,200 Speaker 12: for about twenty five years, so you still have assets 817 00:39:50,239 --> 00:39:50,640 Speaker 12: that were. 818 00:39:50,480 --> 00:39:52,320 Speaker 5: Built in the nineties. 819 00:39:51,880 --> 00:39:54,719 Speaker 12: They're in the dot com bubble that are still relevant 820 00:39:54,760 --> 00:39:58,480 Speaker 12: and active today. So Australian Super they're looking to support 821 00:39:58,520 --> 00:40:01,280 Speaker 12: us as we build out this eight hundred and fifty 822 00:40:01,320 --> 00:40:04,520 Speaker 12: megawatts that I just described over these three campuses, and 823 00:40:04,600 --> 00:40:07,239 Speaker 12: this equity will help us build those facilities. 824 00:40:07,400 --> 00:40:09,880 Speaker 4: I mean, there's insatiable demand right now in the market. 825 00:40:09,960 --> 00:40:11,960 Speaker 4: How are you all thinking about sustainability, I know you 826 00:40:12,040 --> 00:40:13,200 Speaker 4: mentioned renewable power. 827 00:40:13,800 --> 00:40:16,000 Speaker 12: Yeah, so the good news is is that you know, 828 00:40:16,120 --> 00:40:18,560 Speaker 12: there's a commitment with the sector, and there's a commitment 829 00:40:18,640 --> 00:40:22,319 Speaker 12: from the largest consumers of data center capacity, which are 830 00:40:22,320 --> 00:40:27,279 Speaker 12: the hyperscalers, to a renewable future, so ourselves obviously all 831 00:40:27,280 --> 00:40:29,240 Speaker 12: the major hyperscalers, we all have kind. 832 00:40:29,080 --> 00:40:31,880 Speaker 5: Of carbon neutral net zero goals. 833 00:40:32,000 --> 00:40:35,560 Speaker 12: Ours is for twenty thirty and the major hyperscalers are 834 00:40:35,600 --> 00:40:40,720 Speaker 12: also in that range. You know, they are the largest consumers. 835 00:40:40,160 --> 00:40:41,839 Speaker 5: Of renewable energy in the world. 836 00:40:42,040 --> 00:40:44,719 Speaker 12: I've just read recently because of Google's announcement about that 837 00:40:45,040 --> 00:40:49,000 Speaker 12: nuclear that they consume fourteen gigawatts of renewable energy. So 838 00:40:49,040 --> 00:40:52,359 Speaker 12: these companies have a corporate commitment to renewables and that 839 00:40:52,400 --> 00:40:55,400 Speaker 12: creates a demand signal for people to invest because they 840 00:40:55,440 --> 00:40:57,560 Speaker 12: know there's going to be a buyer for that product. 841 00:40:57,880 --> 00:40:59,920 Speaker 2: Ro thank you so much for coming in. Really appreciate it. 842 00:41:00,000 --> 00:41:04,040 Speaker 2: Fascinating story. Raoul Martineck. He is the CEO of a 843 00:41:04,239 --> 00:41:06,399 Speaker 2: Data bank. Is the company sup private company based down 844 00:41:06,520 --> 00:41:09,480 Speaker 2: in Dallas, Texas, the data center of business. 845 00:41:09,520 --> 00:41:09,680 Speaker 1: Boy. 846 00:41:09,920 --> 00:41:13,000 Speaker 2: I know that's a great business. So interesting story there. 847 00:41:13,040 --> 00:41:13,400 Speaker 2: Of course. 848 00:41:13,719 --> 00:41:18,239 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify, 849 00:41:18,440 --> 00:41:21,640 Speaker 1: and anywhere else you'll get your podcasts. Listen live each 850 00:41:21,680 --> 00:41:25,080 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 851 00:41:25,160 --> 00:41:28,560 Speaker 1: the iHeartRadio app Tune In, and the Bloomberg Business app. 852 00:41:28,680 --> 00:41:31,799 Speaker 1: You can also watch us live every weekday on YouTube 853 00:41:31,920 --> 00:41:33,760 Speaker 1: and always on the Bloomberg Terminal