WEBVTT - Disney Tops Estimates, Tariffs Latest 0:00:02.720 --> 0:00:10.560 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.480 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:17.840 Eastern on Apple, Corplay and Android Auto with the Bloomberg 0:00:17.880 --> 0:00:21.000 Business App. Listen on demand wherever you get your podcasts, 0:00:21.320 --> 0:00:23.000 or watch us live on YouTube. 0:00:23.440 --> 0:00:26.040 All right, let's get back to Disney. I'm told the 0:00:26.079 --> 0:00:28.280 market can't make up its mind. I'm interested to see 0:00:28.320 --> 0:00:30.280 what the experts think we got, Paul. Let's get Keitha 0:00:30.320 --> 0:00:34.360 either wrong Nathan Boomberg, Intelligence, Senior analyst on US Media. 0:00:34.360 --> 0:00:36.839 All right, Keitha, what was your biggest takeaway here from Disney? 0:00:38.159 --> 0:00:40.599 Really solid quarter for them, Alex and this is a 0:00:40.640 --> 0:00:43.480 really strong start for them for fiscal twenty twenty five. 0:00:43.560 --> 0:00:45.199 So you know, the big numbers, of course that we 0:00:45.280 --> 0:00:48.000 constantly look for when Disney reports is how did it 0:00:48.080 --> 0:00:50.560 do on the streaming subscriber front? And we did expect 0:00:50.600 --> 0:00:53.680 them to lose a good amount of subscribers, just kind 0:00:53.720 --> 0:00:57.000 of given the price increases that went in effect date 0:00:57.120 --> 0:01:00.600 last year, almost fifteen to twenty five percent price increases, 0:01:00.760 --> 0:01:03.880 but churn was very very limited, so came in much 0:01:03.920 --> 0:01:07.680 better than they had expected, than we had expected. And 0:01:07.720 --> 0:01:10.520 then again the parks numbers. Now, remember, you know we 0:01:10.640 --> 0:01:13.560 have been seeing some demand moderation at the parks, but 0:01:13.600 --> 0:01:16.720 they actually again held up better than expected. So all 0:01:16.760 --> 0:01:18.679 of those you know, you put all of that together, 0:01:19.160 --> 0:01:23.120 including streaming profits, you had over a forty percent increase 0:01:23.160 --> 0:01:26.160 in adjusted EPs. So financially, I think the company is 0:01:26.200 --> 0:01:27.920 off on a solid footing and off to a very 0:01:27.959 --> 0:01:29.280 good start for twenty twenty five. 0:01:30.160 --> 0:01:33.720 What could be a less than positive view of this 0:01:33.800 --> 0:01:35.679 quarter here because I'm seeing the stock kind of all 0:01:35.720 --> 0:01:37.760 over the place, gith it teams like maybe the market 0:01:37.760 --> 0:01:39.840 can't really decide, So what are some of the concerns 0:01:39.840 --> 0:01:40.960 out there? Maybe from this quarter? 0:01:41.959 --> 0:01:44.480 I think what was slightly disappointing, Paul, is that they 0:01:44.480 --> 0:01:47.680 didn't raise guidance. So you know, they did deliver forty 0:01:47.720 --> 0:01:51.320 percent increase in EPs, but they're still talking about fullier 0:01:51.400 --> 0:01:54.080 EPs only growing in the high single digits. I think 0:01:54.120 --> 0:01:56.840 that's where maybe the market is slightly disappointed again with 0:01:56.920 --> 0:02:00.640 the parks, also, they didn't necessarily raise guidance. And remember 0:02:00.640 --> 0:02:02.840 with the parks, there is a little bit of concern 0:02:03.000 --> 0:02:07.200 about what competition can potentially do when a new theme 0:02:07.240 --> 0:02:10.400 park from Comcast NBC Epic Universe opens this May, and 0:02:10.560 --> 0:02:13.000 there's still like, you know, really conflicting views about this, 0:02:13.040 --> 0:02:16.359 although management seems to think that it's actually it's kind 0:02:16.360 --> 0:02:18.880 of this rising tide that lifts all boats, so they've 0:02:18.919 --> 0:02:21.320 downplayed it, but I think there is still some concern 0:02:21.400 --> 0:02:23.840 about that. And then the other big thing that you know, 0:02:23.880 --> 0:02:27.360 everyone's kind of looking at or waiting for, is the 0:02:27.480 --> 0:02:30.680 launch of what they call Flagship ESPN, which is the 0:02:30.720 --> 0:02:33.760 first time that ESPN, the full blown product will be 0:02:33.760 --> 0:02:37.160 available without a PATV subscription. So that's going to happen 0:02:37.160 --> 0:02:39.600 sometime in the fall of this year, and so again 0:02:39.639 --> 0:02:41.359 there are going to be some launch casts where that 0:02:41.400 --> 0:02:44.160 product prices, what the subscriber outlook will be, so a 0:02:44.160 --> 0:02:46.600 little bit of uncertainty there as well. But overall, really 0:02:46.639 --> 0:02:48.000 really strong results and. 0:02:47.960 --> 0:02:50.000 The streaming operation in Film Studio look me in like 0:02:50.040 --> 0:02:53.520 a thirty percent thirty one percent gain and operating income. 0:02:53.520 --> 0:02:55.800 For the quarter. Was that really driven by price hikes 0:02:55.800 --> 0:02:56.720 for streaming. 0:02:57.520 --> 0:02:59.679 For streaming, yes, it was a lot of it was 0:02:59.760 --> 0:03:02.919 driven by you know, we saw really solid our pool growth. 0:03:03.600 --> 0:03:05.639 What we're going to continue to see Alex through the 0:03:05.720 --> 0:03:08.240 rest of the quarters is what you know, exactly what 0:03:08.280 --> 0:03:10.359 Netflix did. You know, Disney's kind of taking a page 0:03:10.400 --> 0:03:13.079 out of that Netflix playbook with what they call page 0:03:13.120 --> 0:03:16.519 sharing or cracking down on passwords sharing, and so we're 0:03:16.520 --> 0:03:19.560 going to see that kind of really ramp up in 0:03:19.680 --> 0:03:22.520 terms of the streaming profitability numbers. And then you pointed to, 0:03:22.840 --> 0:03:26.600 you know, content, the box office has absolutely had a 0:03:26.639 --> 0:03:29.880 marvelous run kind of reversing so many of you know, 0:03:29.919 --> 0:03:32.679 the misfires that we had in earlier years, and they're 0:03:32.680 --> 0:03:34.359 going to continue to build on that. And as some 0:03:34.400 --> 0:03:36.800 of those movies come on to the streaming platform again, 0:03:36.920 --> 0:03:39.240 they expect that to drive subscriber growth as well. 0:03:40.120 --> 0:03:44.600 So, Keith, what's the market thinking about profitability for streaming 0:03:44.680 --> 0:03:47.160 at Disney? We kind of you look at the Netflix 0:03:47.200 --> 0:03:51.080 margins and is there a belief that this isn't can 0:03:51.400 --> 0:03:57.240 at least get approached. The Netflix profitabiliting absolutely, I think so. 0:03:57.280 --> 0:03:59.360 I don't think it's going to be immediate though, Paul. 0:03:59.400 --> 0:04:01.640 I mean for this year they are guiding to about 0:04:01.640 --> 0:04:04.280 a billion dollars in profit. They did say that they 0:04:04.320 --> 0:04:08.000 will get to double digit margins in fiscal twenty twenty six. Now, 0:04:08.040 --> 0:04:12.080 remember Netflix is already close to thirty percent margins. So 0:04:12.160 --> 0:04:14.280 you know, you still do have that big delta ten 0:04:14.320 --> 0:04:16.840 percent versus thirty percent. But I think that's where all 0:04:16.839 --> 0:04:18.960 of the upside really is with Disney. I mean, this 0:04:19.000 --> 0:04:21.800 is a complex story with many many different moving parts, 0:04:22.080 --> 0:04:24.479 but streaming is obviously one of the you know, huge 0:04:24.520 --> 0:04:26.800 positive catalysts and I think we're going to see that 0:04:26.880 --> 0:04:29.880 streaming profitability continue to build, especially as they have a 0:04:29.920 --> 0:04:33.080 lot of pricing power and all of these other different initiatives. 0:04:33.120 --> 0:04:35.719 And remember, for them, as opposed to Netflix, one area 0:04:35.760 --> 0:04:38.960 where Disney is better than Netflix is advertising. They've got 0:04:39.080 --> 0:04:41.360 all of those different you know, all of the plumbing 0:04:41.400 --> 0:04:45.160 is in place. They are the biggest digital advertiser right 0:04:45.200 --> 0:04:46.920 now out there in the market. They make even more 0:04:46.960 --> 0:04:50.240 in connected TV advertising than YouTube does, so you know, 0:04:50.320 --> 0:04:54.839 they obviously have you know, an advantage of first moved advantage, 0:04:54.880 --> 0:04:56.560 I would say with respect advertising. 0:04:56.960 --> 0:04:59.960 Okay, so you mentioned how that flagship ESPN. 0:05:00.200 --> 0:05:00.800 Area will do. 0:05:00.960 --> 0:05:03.480 What's your biggest question now going forward? 0:05:04.680 --> 0:05:08.080 Yes, it's really going to be how exactly. So again 0:05:08.160 --> 0:05:10.400 with with ESPN, we have a little bit of you know, 0:05:10.480 --> 0:05:14.520 questions in terms of where exactly the subscribers will trend 0:05:14.520 --> 0:05:16.039 for that product. A lot of it I think will 0:05:16.279 --> 0:05:20.040 depend on where the product prices. So that's a little 0:05:20.040 --> 0:05:22.520 bit of a wait and watch story. And then with parks, 0:05:22.760 --> 0:05:26.320 you know, yes, we do have confidence that they do 0:05:26.400 --> 0:05:28.599 have a lot of positive levers. We know that, you know, 0:05:28.600 --> 0:05:32.039 the international parks are performing extremely well. Cruise lines is 0:05:32.080 --> 0:05:34.160 something that they're really expanding into. And if you just 0:05:34.240 --> 0:05:36.000 kind of look at the cruise line trajectory, I mean, 0:05:36.000 --> 0:05:38.719 this was a two billion dollar revenue business in twenty 0:05:38.760 --> 0:05:41.520 twenty four. We think this will potentially get to about 0:05:41.520 --> 0:05:45.520 ten billion dollars by you know, twenty thirty. And at 0:05:45.520 --> 0:05:47.600 that point, Paul, you know, we think it could make 0:05:47.720 --> 0:05:50.480 well over three four billion dollars in ibade, which means 0:05:50.480 --> 0:05:52.919 it's bigger than ESPN at that point. So, you know, 0:05:53.000 --> 0:05:55.800 cruises is going to be a big portion of their 0:05:55.839 --> 0:05:59.640 park story. So I think the diversification you know, story 0:05:59.680 --> 0:06:02.800 is playing out really well for them with barks. But 0:06:02.839 --> 0:06:04.400 again there's a little bit of weight and watch. I 0:06:04.400 --> 0:06:06.280 think twenty twenty five is still a little bit of 0:06:06.320 --> 0:06:07.440 a transition year for them. 0:06:07.680 --> 0:06:09.640 All right, Githa, let's back up. We you know, I 0:06:09.640 --> 0:06:11.920 think there's a fair level of confidence in the Disney 0:06:11.960 --> 0:06:13.440 story how about some of the other companies. 0:06:13.480 --> 0:06:14.240 I think about. 0:06:14.279 --> 0:06:17.800 Warner Brothers Discovery, I think about Paramount. What are companies 0:06:17.920 --> 0:06:21.640 like that do this in this world? How do you 0:06:21.680 --> 0:06:22.480 think that plays out? 0:06:23.839 --> 0:06:26.280 Yeah, So I think for Warner Brothers Discovery, Paul, I 0:06:26.320 --> 0:06:28.159 think there is still going to be a lot of 0:06:28.200 --> 0:06:32.240 focus on how the TV business is going to perform. Ironically, 0:06:32.400 --> 0:06:35.200 I think this year TV is actually in good shape. 0:06:35.200 --> 0:06:37.280 I mean why I say ironically is because they actually 0:06:37.279 --> 0:06:40.200 lost the rights to the NBA, and so everybody was 0:06:40.320 --> 0:06:43.200 kind of very, very fearful of how exactly, you know, 0:06:43.279 --> 0:06:45.480 Ibadah was going to be, how affiliate revenue was going 0:06:45.520 --> 0:06:47.640 to be for this year. But they actually got two 0:06:47.839 --> 0:06:50.520 huge deals in place, one with Comcasts, the other one 0:06:50.520 --> 0:06:54.360 with Charter, which basically kept their affiliate fees flat. So 0:06:54.839 --> 0:06:57.400 the revenue trajectory looks decent. I would say for Warner 0:06:57.400 --> 0:06:59.640 Brothers Discovery, I think the problem really for them is 0:06:59.720 --> 0:07:02.240 going out, you know, into the future, and what they 0:07:02.279 --> 0:07:04.760 decide to do. Is consolidation going to be a big thing. 0:07:05.400 --> 0:07:06.800 It could be a big thing for them. I mean, 0:07:06.920 --> 0:07:09.120 we already know that Comcast is kind of spun out. 0:07:09.160 --> 0:07:11.920 It's cable networks. We don't know if Warner Brothers is 0:07:11.960 --> 0:07:13.880 kind of going to follow suit and you know, maybe 0:07:14.640 --> 0:07:16.680 do some kind of transaction with Comcast. So that's a 0:07:16.720 --> 0:07:18.800 little bit of a wait and watch. And again with 0:07:18.840 --> 0:07:22.000 Paramount again, we're kind of in limbo here because we 0:07:22.120 --> 0:07:24.480 really don't know what sky Dance is going to do 0:07:24.880 --> 0:07:27.560 in terms of strategy for the new company. I mean, 0:07:27.560 --> 0:07:31.440 they're already facing some regulatory hurdles, but assuming the transaction 0:07:31.560 --> 0:07:33.440 goes through, we really have to kind of wait and 0:07:33.440 --> 0:07:35.800 see exactly what sky Dance wants to do with the 0:07:35.800 --> 0:07:37.840 assets again, whether they're going to let go of some 0:07:37.880 --> 0:07:40.520 of those linear TV assets, what their real trust is 0:07:40.520 --> 0:07:40.960 going to be. 0:07:41.720 --> 0:07:45.320 Great stuff, Thank you so much. Gita really appreciated best analysis. 0:07:45.320 --> 0:07:46.760 Along with Paul on the street. The two of you 0:07:46.840 --> 0:07:48.960 like cannot get any better than that, Either wrong or 0:07:48.960 --> 0:07:52.680 anthen a Bloomerg Intelligence Senior US media analyst. 0:07:54.400 --> 0:07:58.080 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:07:58.160 --> 0:08:01.720 weekdays at ten am Eastern Applecarplay and Android Otto with 0:08:01.800 --> 0:08:04.920 the Bloomberg Business App. Listen on demand wherever you get 0:08:04.960 --> 0:08:07.720 your podcasts, or watch us live on YouTube. 0:08:08.240 --> 0:08:09.680 This is Bloomberg Intelligence Radio. 0:08:09.800 --> 0:08:12.520 We're broadcasting to you live from Interactive Broker Studio right 0:08:12.560 --> 0:08:15.119 here in Midtown Manhattan. You can also check us out 0:08:15.320 --> 0:08:18.440 on YouTube dot com. I should point out like my 0:08:18.520 --> 0:08:21.520 daughter still loved Mowana to and Mohana had a sister 0:08:21.640 --> 0:08:24.240 Mowana too, so cute, so that worked. 0:08:24.400 --> 0:08:27.720 Did you miss Tom singing the Moana song this morning? 0:08:28.120 --> 0:08:30.160 I did. That's sad for you. It's good for you. 0:08:30.560 --> 0:08:32.560 That's all right, because I was to like this song. 0:08:32.600 --> 0:08:34.240 I was also singing one of the Little mermaid songs 0:08:34.240 --> 0:08:36.440 and break, so we can all have a Disney sing fest. 0:08:36.640 --> 0:08:37.000 All right. 0:08:37.320 --> 0:08:39.720 Back to the markets and the question marks, the question 0:08:39.760 --> 0:08:42.960 marks right now, coming very much from DC. I want 0:08:42.960 --> 0:08:44.800 to get more intake right now with Henry de Tris, 0:08:44.920 --> 0:08:48.000 Managing partner and director of Economic Policy at Beta Partner. 0:08:48.120 --> 0:08:51.240 She joins us from Louisiana. Henritta, Last time we talked, 0:08:51.240 --> 0:08:53.520 you said you're going to be looking for signals from 0:08:53.559 --> 0:08:57.000 what happens to Trump's cabinet nominees. Who protests, who doesn't? 0:08:57.040 --> 0:09:00.160 Do they sail through? To me, everyone's sailing through. So 0:09:00.240 --> 0:09:01.040 what does that tell you? 0:09:02.080 --> 0:09:02.320 Yeah? 0:09:02.360 --> 0:09:05.560 Absolutely, it tells me quite a few things actually, which 0:09:05.600 --> 0:09:09.840 is really helpful and constructive. Number One the Senate Majority 0:09:09.880 --> 0:09:12.920 Leader John Dune does not want to hear Trump reiterate 0:09:12.960 --> 0:09:15.959 his calls for recess appointments, which takes quite a bit 0:09:15.960 --> 0:09:18.880 of power away from the United States Senate to advising consent, 0:09:18.960 --> 0:09:20.280 which they take very seriously. 0:09:20.320 --> 0:09:22.040 So they're picking and choosing their battles. 0:09:22.360 --> 0:09:25.400 And why is that Because we have a massive legislative 0:09:25.440 --> 0:09:28.840 agenda heading their way and they want to be able 0:09:28.920 --> 0:09:32.400 to override the House Republican leadership. So this comes into 0:09:32.440 --> 0:09:36.560 play with a one or two reconciliation bill strategy, and 0:09:36.840 --> 0:09:40.800 as of this afternoon, Senate Budget Committee Chairman Lindsay Graham 0:09:40.880 --> 0:09:43.760 is going to start exerting his power to run over 0:09:43.960 --> 0:09:49.440 the better legislative agenda intuitions of the House Republican leadership. 0:09:49.480 --> 0:09:51.760 So this to me signals that the Senate's trying to 0:09:51.800 --> 0:09:54.559 keep Trump happy knowing that they're about to run rough 0:09:54.559 --> 0:09:57.040 shot over the House, which is very normal, and that 0:09:57.080 --> 0:09:59.640 they also want to avoid the idea of recess appointment 0:10:00.160 --> 0:10:03.679 constructive guidance coming from just their actions here. 0:10:04.120 --> 0:10:08.280 All right, from the White House. Henriette Tariff's on Tariff's off, 0:10:08.320 --> 0:10:11.520 Tariff's delayed, is there? What's the sense in Washington, DC 0:10:11.679 --> 0:10:15.240 about what the strategy is maybe a President Trump administration. 0:10:16.360 --> 0:10:18.920 I think a lot of members are sort of not 0:10:19.040 --> 0:10:21.800 even bothering to pretend that they know strategy, but are 0:10:21.840 --> 0:10:25.320 instead giving us also really important context clues about what 0:10:25.360 --> 0:10:29.080 they're expecting to factor in from tariff revenue on the 0:10:29.120 --> 0:10:34.040 next tax bill or the next immigration, military spending. 0:10:33.800 --> 0:10:34.760 Energy package. 0:10:35.080 --> 0:10:38.280 They are factoring in some level of revenue from tariffs, 0:10:38.280 --> 0:10:40.880 and the estimates are anywhere between seven hundred billion and 0:10:40.960 --> 0:10:44.000 one trillion dollars. So it's not really a question of 0:10:44.040 --> 0:10:47.960 how the President goes about landing on putting tariffs in place. 0:10:48.480 --> 0:10:52.000 There's obviously been fits and starts, thirty day delays with Canada, Mexico. 0:10:52.240 --> 0:10:54.320 Maybe there will be a phone call with President she 0:10:54.520 --> 0:10:56.920 and China. But they're really more. 0:10:57.000 --> 0:10:59.640 Giving us the valuable guidance that they are going to 0:10:59.679 --> 0:11:02.640 be being tariffs in their revenue scores, which means that 0:11:02.679 --> 0:11:05.600 they expect tariffs to go on. However the President decides 0:11:05.600 --> 0:11:09.200 to impose them, so again instructive just in their directionality 0:11:09.280 --> 0:11:11.679 of incorporating tariff revenue into their forecast. 0:11:11.760 --> 0:11:12.920 Yeah, I thought we were going to get that g 0:11:13.120 --> 0:11:15.640 Trump call yesterday, So I don't know. I'll keep waiting 0:11:15.640 --> 0:11:18.280 for that one. So actually, let's combine these two points then, 0:11:18.360 --> 0:11:21.280 because if we do expect to see some form of 0:11:21.280 --> 0:11:23.600 tariffs because of that revenue estimate that you talked about, 0:11:23.640 --> 0:11:25.800 and we do see no one wanting to torpedo the 0:11:25.840 --> 0:11:28.360 Trump agenda on their Republican side, does this mean that 0:11:28.400 --> 0:11:31.240 the tax bill has a significant chance of getting through 0:11:31.280 --> 0:11:32.160 and getting through quickly. 0:11:33.280 --> 0:11:34.200 No, definitely not. 0:11:34.800 --> 0:11:38.720 What's never reminds the Senate is about too, it's exactly 0:11:38.800 --> 0:11:41.199 the opposite of that. I think the House Republican Conference 0:11:41.240 --> 0:11:44.600 is effectively nowhere on a budget. They have a very 0:11:44.640 --> 0:11:47.720 fractured conference and only one seat to spare in terms 0:11:47.760 --> 0:11:49.360 of votes, so they don't have a path. 0:11:49.160 --> 0:11:51.560 Forward on one big bill or maybe even two. 0:11:52.040 --> 0:11:54.160 However, what the Senate is doing is they're trying to 0:11:54.160 --> 0:11:56.880 give President Trump a legislative win, especially going into his 0:11:56.920 --> 0:11:59.400 Joint Address to Congress on March fourth. They have an 0:11:59.400 --> 0:12:01.600 ambitious online where they're going to try to get budget 0:12:01.600 --> 0:12:05.839 reconciliation instructions done in February and early March. Tea up 0:12:05.920 --> 0:12:08.280 actually writing the bill in April, but this would be 0:12:08.320 --> 0:12:11.960 on the smaller immigration and military spend package the tax bill. 0:12:12.040 --> 0:12:14.800 In my opinion has been consistent. It's not going to 0:12:14.800 --> 0:12:15.800 pass until December. 0:12:16.040 --> 0:12:19.520 We're talking about five trillion dollars worth of negotiations that 0:12:19.640 --> 0:12:23.640 takes months, indeed almost a full year, and they've known 0:12:23.640 --> 0:12:25.760 that this is coming since twenty seventeen when the tax 0:12:25.760 --> 0:12:27.680 bill passed. So we still have a lot of work 0:12:27.720 --> 0:12:30.840 to do, and in the intervening months we have to 0:12:30.880 --> 0:12:33.760 deal with a government shutdown on March fourteenth, a debt 0:12:33.760 --> 0:12:38.640 ceiling negotiation over the summer, another perspective, government shutdown September thirtieth. 0:12:38.800 --> 0:12:41.520 There's a lot of opportunities for Democrats to throw wrenches 0:12:41.760 --> 0:12:45.600 in the gears of the Republican legislative agenda, and to me, 0:12:45.720 --> 0:12:49.080 that point's a pretty clear experienced picture that the tax 0:12:49.080 --> 0:12:50.480 bill won't happen until December. 0:12:50.880 --> 0:12:54.079 Henryette, I guess it's to be no surprise to observers 0:12:54.120 --> 0:12:57.000 that President Trump sucks most of the air out of 0:12:57.040 --> 0:12:59.880 the room most of the time. Are you surprised that 0:13:00.000 --> 0:13:07.400 we don't hear more leadership from either congressional Republicans or Democrats. 0:13:07.880 --> 0:13:10.640 I think that they have been out of session, to 0:13:10.760 --> 0:13:14.160 be fair, and now that they are back in session, 0:13:14.520 --> 0:13:16.480 they have to deal with things like Hey, are we 0:13:16.520 --> 0:13:19.480 going to occupy Gaza. What's going on with DOJE, what's 0:13:19.520 --> 0:13:24.440 going on with potentially the DOGE team being able to 0:13:24.480 --> 0:13:28.400 access treasury payment systems. There's so much out there that 0:13:28.679 --> 0:13:32.559 they're really just flying with it and negotiating behind the 0:13:32.600 --> 0:13:36.320 scenes on those legislative agenda items. Especially on the Republican side. 0:13:36.320 --> 0:13:38.439 I think Democrats have not found their footing at all. 0:13:38.840 --> 0:13:41.480 I do see some opportunity for them to coalesce behind 0:13:41.480 --> 0:13:43.880 that March fourteenth deadline for a government funding bill. 0:13:44.120 --> 0:13:47.800 If they can come together with the appropriators. 0:13:47.000 --> 0:13:49.080 And leadership and say we want one percent more in 0:13:49.120 --> 0:13:51.880 federal spending in twenty five, we want aid to the 0:13:51.920 --> 0:13:53.600 California wildfires, etc. 0:13:54.000 --> 0:13:56.240 They can get in a cohesive place. But right now 0:13:56.280 --> 0:13:57.360 they're just letting Trump. 0:13:57.160 --> 0:13:57.600 Have the show. 0:13:58.040 --> 0:14:00.559 So what is up with doche. 0:14:01.640 --> 0:14:03.559 What's up with those That's a great question. I think 0:14:03.600 --> 0:14:06.160 that is the question right now. They've implemented a number 0:14:06.160 --> 0:14:10.880 of freezes and that is something that's obviously creating a 0:14:10.880 --> 0:14:14.479 lot of lawsuits, and two judges have stayed those actions. 0:14:14.720 --> 0:14:18.199 They are going through and combing through the trade repayment systems. 0:14:18.360 --> 0:14:20.560 There's reports that Elon Musk has been at the VA 0:14:20.680 --> 0:14:23.360 going through some of those payment systems potentially, And the 0:14:23.440 --> 0:14:27.000 question is, really, have they identified via their AI tech 0:14:27.040 --> 0:14:30.960 savvy any duplicatus payments, any payments they. 0:14:30.920 --> 0:14:32.720 Are going to people who are no longer with us? 0:14:32.720 --> 0:14:32.880 You know? 0:14:32.960 --> 0:14:35.240 Is there any kind of abnormalities? Those are the areas 0:14:35.280 --> 0:14:38.280 where they're trying to find savings. And then obviously you 0:14:38.360 --> 0:14:42.320 have that idea of cutting the overall federal employee base. 0:14:42.720 --> 0:14:46.120 But all told, those are really small dollar amounts, less 0:14:46.120 --> 0:14:47.680 than one percent of federal spending. 0:14:48.000 --> 0:14:49.640 And by the things that. 0:14:49.600 --> 0:14:51.920 I just listed a moment ago, aid to the wildfires, 0:14:51.960 --> 0:14:55.480 aid to farmers, as we prepare for the trade wars. 0:14:55.720 --> 0:14:58.000 Continued spending on the tax side. 0:14:57.640 --> 0:15:00.280 And one percent increases in twenty twenty five, spending hundred 0:15:00.280 --> 0:15:03.200 billion dollars in military spending. Whatever Dude is able to find, 0:15:03.200 --> 0:15:06.040 Congress has already spent. So I'm not seeing a lot 0:15:06.120 --> 0:15:09.800 in terms of functional deficit reduction or spending cuts that 0:15:09.880 --> 0:15:11.120 will offset what Congress will do. 0:15:11.520 --> 0:15:14.520 Okay, Henriette, thank you so much for that great synopsis. 0:15:14.560 --> 0:15:17.040 There a lot of moving parts down there in Washington, 0:15:17.080 --> 0:15:20.200 DC in Congress with all those bills that Hendriyette was 0:15:20.280 --> 0:15:23.160 laying out for us. Henrietta Tres, managing partner and director 0:15:23.160 --> 0:15:25.920 of Economic Policy of Bervada Partners, kind of laying it 0:15:25.960 --> 0:15:26.640 all out for us. 0:15:28.280 --> 0:15:32.000 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:15:32.080 --> 0:15:35.160 weekdays at ten am Eastern on Apple, Coarclay and Android 0:15:35.160 --> 0:15:38.480 Auto with the Bloomberg Business Appum Listen on demand wherever 0:15:38.520 --> 0:15:42.960 you get your podcasts, or watch us live on YouTube. 0:15:42.960 --> 0:15:43.600 In the streets. 0:15:43.680 --> 0:15:46.240 You know what they impact stuff? 0:15:46.280 --> 0:15:46.880 State business? 0:15:46.920 --> 0:15:47.520 Oh yeah, it does. 0:15:47.520 --> 0:15:49.720 It's a real estate business. Lisa Need joins us, managing 0:15:49.720 --> 0:15:52.080 partner and head of real Estate for Eisner a Forerd, 0:15:52.120 --> 0:15:52.640 joining us here in. 0:15:52.600 --> 0:15:54.160 Our Bloomberg Interactive Brokers studio. 0:15:54.360 --> 0:15:56.440 Lisa, let's talk about that. I mean, it looks like 0:15:56.600 --> 0:15:58.360 rates are coming down, but maybe not as fast as 0:15:58.360 --> 0:15:58.960 people like. 0:15:59.280 --> 0:15:59.960 How's that impact? 0:16:00.000 --> 0:16:02.280 I think just commercial real estate probably defined what are 0:16:02.320 --> 0:16:03.520 you seeing out through with your clients? 0:16:03.640 --> 0:16:05.960 What a great segue. Thank you for having me. So 0:16:06.520 --> 0:16:08.920 it's exactly the perfect way to start talking about this 0:16:09.120 --> 0:16:10.960 is that with interest rates being where they are and 0:16:10.960 --> 0:16:13.760 the unknown of what's going to happen going forward, we're 0:16:13.840 --> 0:16:17.880 sort of at a standstill and valuation however, the activity 0:16:17.880 --> 0:16:20.280 in real estate for twenty twenty four was up, and 0:16:20.600 --> 0:16:23.200 we do predict twenty twenty five having a lot more 0:16:23.200 --> 0:16:25.520 trading people going back and forth and trying to figure 0:16:25.520 --> 0:16:27.840 out some deal flow, which means that valuations have to come, 0:16:27.880 --> 0:16:29.920 which is tied to interest rates. It's not going to 0:16:29.920 --> 0:16:31.760 get back up to where we were in twenty seventeen. 0:16:32.000 --> 0:16:34.520 But I think everyone's really optimistic for twenty twenty five 0:16:34.800 --> 0:16:36.800 that there is going to be some things happening in there. 0:16:36.960 --> 0:16:39.120 When we talk about interest rates, and you know, we 0:16:39.240 --> 0:16:41.760 just heard from Mike McKee where the settling is and 0:16:42.000 --> 0:16:45.040 what the Feds are doing, it's interesting. Once rates are 0:16:45.040 --> 0:16:48.440 still low for the people who have existing mortgages and things, 0:16:48.640 --> 0:16:50.560 it's not going to make us able to go out 0:16:50.600 --> 0:16:53.160 and sell our houses because we still have very low 0:16:53.160 --> 0:16:55.560 interest rates, and so all of that is going to 0:16:55.640 --> 0:16:59.000 affect you know, multi family home buyers, it's going to 0:16:59.000 --> 0:17:01.600 affect office to trickle through the rest of all the 0:17:01.640 --> 0:17:04.320 sectors of real estate. So, yes, you're right, it's a 0:17:04.320 --> 0:17:06.840 great segue into real estate is where we are on 0:17:06.960 --> 0:17:09.359 interest rates, and that's the big unknown and waiting and 0:17:09.400 --> 0:17:11.840 seeing with the inflation being where it is and the 0:17:11.880 --> 0:17:14.479 economy doing well, it's a wait and see approach. 0:17:14.560 --> 0:17:16.840 Yeah, and just how quickly like we've rerated really like 0:17:16.880 --> 0:17:19.000 we're looking at just over like forty basis points of 0:17:19.040 --> 0:17:23.520 couz priced into world imply probability. Morgan Stanley sees just 0:17:23.560 --> 0:17:25.800 one cut now in June, round than two in March 0:17:25.880 --> 0:17:26.600 and June. 0:17:27.320 --> 0:17:30.119 How quickly does that feed through to like prices? 0:17:30.600 --> 0:17:32.800 It actually feeds through quicker than it's even announced. It's 0:17:32.800 --> 0:17:35.080 almost like people know before and anticipate it. So the 0:17:35.160 --> 0:17:38.080 valuation is already baked into it, and so it feeds 0:17:38.119 --> 0:17:40.199 in immediately. And so when you think that FEDS are 0:17:40.240 --> 0:17:42.280 going to announce it and things are going to move drastically, 0:17:42.280 --> 0:17:44.919 it's already moved once the anticipation is there, and what 0:17:44.960 --> 0:17:47.159 they think are going to do, what they think is 0:17:47.200 --> 0:17:48.639 going to happen with those rates. 0:17:49.800 --> 0:17:52.399 You know, office work, Yeah, are there any what are 0:17:52.400 --> 0:17:54.520 the trends here in office? I guess the first question 0:17:54.600 --> 0:17:57.879 is does anybody going to call a bottom? Has anybody 0:17:57.920 --> 0:18:00.399 called a bottom? Is anybody think about that? 0:18:00.480 --> 0:18:01.880 Do you want me to make a prediction right here? 0:18:01.960 --> 0:18:02.640 Should we do it? 0:18:03.359 --> 0:18:03.600 Fun? 0:18:03.960 --> 0:18:06.920 Okay? So prediction that I heard was twenty twenty six 0:18:07.440 --> 0:18:10.320 New York city is going to have a shortage of 0:18:10.320 --> 0:18:15.359 office available, a shortage because there's been a lot less construction. 0:18:15.640 --> 0:18:17.439 We do have some conversions, not a lot, but there 0:18:17.480 --> 0:18:21.480 will be some conversions to residential. The trophy buildings are occupied, 0:18:21.480 --> 0:18:23.760 which is going to help the a's and b's and 0:18:23.880 --> 0:18:26.720 so you know, we know that tech is back, is 0:18:26.760 --> 0:18:30.159 going back to work. We've heard those announcements today. This 0:18:30.240 --> 0:18:32.119 place is the busiest it's been I think in a 0:18:32.160 --> 0:18:35.040 long time. And media has made announcement that they need 0:18:35.040 --> 0:18:37.280 to start coming back to work. So with everybody making 0:18:37.280 --> 0:18:40.959