WEBVTT - Bond Market Inflation Signals and Paramount Drama 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen. And always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.440 the Bloomberg Terminal, and the Bloomberg Business app. In Pimpco 0:00:47.960 --> 0:00:50.880 in Newport Beach. I mean, in the old days, we're 0:00:50.880 --> 0:00:53.000 Bill and Muhammad down at the wedge surfing. 0:00:53.360 --> 0:00:56.800 I see Mohammad across the hall on television right now. 0:00:57.800 --> 0:00:59.440 I'm exciting much. 0:01:00.080 --> 0:01:03.920 Pimco Nexus here. Do you guys surf out of pimp. 0:01:04.240 --> 0:01:07.360 I can't swim. I have a place in the Caribbean. 0:01:07.480 --> 0:01:09.440 I have a place in the Caribbean, Turks and Caicos, 0:01:09.520 --> 0:01:11.399 and I have to wear a life jacket anytime the 0:01:11.440 --> 0:01:18.400 water is above five foot eleven. He's a concrete jungle. 0:01:18.440 --> 0:01:23.240 Any anyone from New York's and Coca. It's all concrete. 0:01:23.680 --> 0:01:26.040 I learned to swim in a fourth above ground pool 0:01:26.080 --> 0:01:28.319 that's twelve feet long, so I really could. 0:01:28.840 --> 0:01:31.240 Paul Saves, let's go to the bonds here. 0:01:31.480 --> 0:01:33.200 I mean, for the longest time, we had no interest 0:01:33.200 --> 0:01:35.600 in talking to the PIMPCO people. Interest rates were zero. 0:01:36.000 --> 0:01:38.080 Now we can can't even get a phone call return 0:01:38.120 --> 0:01:41.440 because everybody wants to talk about bonds here, Tony. We've 0:01:41.440 --> 0:01:44.320 got real interest rates out there. There is some significant 0:01:44.959 --> 0:01:46.920 carry here for a lot of people. What's kind of 0:01:47.000 --> 0:01:49.640 thirty thousand foot view from your perspective at PIMCO, What 0:01:49.680 --> 0:01:52.040 are you telling clients to do with their fix to 0:01:52.080 --> 0:01:52.800 come investments? 0:01:52.880 --> 0:01:55.720 Well, it's like a nirvana for an active bond manager. 0:01:55.760 --> 0:01:58.880 It's like a global bond buffet. There's so much to do. 0:01:59.480 --> 0:02:01.440 It hasn't been in a global bond market in a 0:02:01.440 --> 0:02:04.080 long time because, as you said, interest rates will low, 0:02:04.120 --> 0:02:06.680 and they will low everywhere in the twenty tens near zero, 0:02:06.840 --> 0:02:09.400 pin near zero, so there wasn't much to do. Now 0:02:09.440 --> 0:02:12.280 there's so many things moving around like butterflies. Just simply 0:02:12.320 --> 0:02:14.640 take your net, try to find the good ones and 0:02:14.760 --> 0:02:18.120 put them in your collection. So we'd say that drop 0:02:18.280 --> 0:02:22.280 lower your fears and anxieties. First, I'd say there's three 0:02:22.480 --> 0:02:24.799 things not to do. One, don't try to time the market. 0:02:24.840 --> 0:02:27.760 Yields are high, they look very good, historically very good 0:02:27.880 --> 0:02:32.639 versus expected inflation in the twos and versus what's typical volatility. 0:02:32.760 --> 0:02:35.800 So I'd say, generally speaking, you want to be enamored 0:02:35.840 --> 0:02:39.080 by the bond market opportunities today and lock in today's 0:02:39.080 --> 0:02:41.639 indust rates. It's total return time. It's time to think 0:02:41.639 --> 0:02:44.919 about something beyond the yield potential price gains, and that's 0:02:44.919 --> 0:02:48.360 what total return strategies are. And that could be and 0:02:48.360 --> 0:02:50.280 I don't mean a fund, but I mean the idea 0:02:50.400 --> 0:02:53.040 of potential gains and prices is what you want. And 0:02:53.320 --> 0:02:55.560 to put those yields higher, the returns higher. 0:02:56.160 --> 0:02:57.919 So where do I go, Tony? I mean I could 0:02:57.960 --> 0:03:00.240 just go right outside right now and get it two 0:03:00.320 --> 0:03:02.400 year treasury at four point eight percent? 0:03:02.440 --> 0:03:03.000 Do I do that? 0:03:03.160 --> 0:03:04.720 Or do I go out and maybe take some more 0:03:05.200 --> 0:03:06.120 credit risk here? 0:03:06.400 --> 0:03:07.239 How are you guys thinking about? 0:03:07.280 --> 0:03:11.440 Well, intermediate maturities are probably the sweet spot and the 0:03:11.480 --> 0:03:15.520 Bloomberg aggregate, which is a compilation of lots of bonds. 0:03:15.520 --> 0:03:18.600 It's sort of a market cap weighted index has about 0:03:18.639 --> 0:03:22.440 forty percent US treasuries, twenty five percent agency mortgage backed securities, 0:03:22.440 --> 0:03:26.720 and twenty five percent corporate BONDZI. The average maturity on that, 0:03:26.880 --> 0:03:30.760 or duration and fancy bond language lingo, is around six 0:03:30.880 --> 0:03:34.160 seven years now. I often call those maturities, especially the 0:03:34.160 --> 0:03:36.680 five year, the long bond of the short end. And 0:03:36.680 --> 0:03:38.400 if you think the Federal Reserve is going to be 0:03:38.480 --> 0:03:40.680 lowering short term interest rates, a two year, of course 0:03:40.680 --> 0:03:43.640 will rally, but not as much as the five year will, 0:03:43.680 --> 0:03:46.080 and so that'll really get moving when the Fed. 0:03:45.840 --> 0:03:48.120 Does my chart of the year right now, I haven't 0:03:48.120 --> 0:03:50.440 decided yet, and somebody gave it to me. Thank you 0:03:50.480 --> 0:03:53.080 out on Twitter. I'm stealing it from you. Is the 0:03:53.160 --> 0:03:56.200 yield to worst the old Lehman Barclays now Bloomberg index 0:03:56.280 --> 0:04:00.200 the global yield to worst tony it's about sevens and 0:04:00.400 --> 0:04:05.080 deviations off the Voker Great Moderation. We've had this shift 0:04:05.280 --> 0:04:08.600 in the bond market. Do we recover to some form 0:04:08.640 --> 0:04:12.800 of trend of the Great moderation? Or are we resetting 0:04:12.800 --> 0:04:13.360 a new. 0:04:13.280 --> 0:04:16.560 Vector of the bond market thinks it's the new vector 0:04:17.000 --> 0:04:21.080 looking at so future overnight futures, I think the likelihood 0:04:21.120 --> 0:04:23.320 is that interest rates that the twenty tens is the 0:04:23.320 --> 0:04:26.320 wrong analog for thinking about the future, meaning that it's 0:04:26.360 --> 0:04:29.400 more likely that we go back to the yields of 0:04:29.520 --> 0:04:33.839 past the past than we do the twenty tens, but 0:04:33.960 --> 0:04:37.000 not as high as the market's price. The market thinks 0:04:37.000 --> 0:04:39.479 the FED won't lower as possibly less than four the 0:04:39.839 --> 0:04:41.200 decade Closelue. 0:04:41.520 --> 0:04:44.960 The real solution here, which is iconic in your book, folks, 0:04:45.000 --> 0:04:49.000 is twelve vendred pages only some of the tales Reddit Tony. 0:04:50.080 --> 0:04:53.640 The loop here is the x axis solves everything. Time 0:04:54.000 --> 0:04:57.560 will heal the return to wherever that yield. Yes. 0:04:57.600 --> 0:05:03.520 In fact, the simple ideas that the stated yield is 0:05:03.560 --> 0:05:06.880 of course the likely return. So if you see on 0:05:06.920 --> 0:05:10.159 the Bloomberg aggregate five and an eighth five percent, that's 0:05:10.240 --> 0:05:12.200 likely to be your return over five years, as the 0:05:12.240 --> 0:05:15.159 starting yield is the major determinant of your future returns. 0:05:15.160 --> 0:05:17.320 There are things that could happen, could sprinkle in some 0:05:17.440 --> 0:05:20.400 outph and such, but that's the likely story. And given 0:05:20.440 --> 0:05:23.559 the now, here's really the most important thing to think about. 0:05:23.839 --> 0:05:27.600 Price stability and the FED credibility the ability to knock 0:05:27.600 --> 0:05:29.640 the inflation rate down if you think it's going to 0:05:29.720 --> 0:05:32.719 get the inflation rate into the twos. A yield of 0:05:32.880 --> 0:05:37.080 five historically relative to that is very good. Now, remember 0:05:37.080 --> 0:05:40.680 what Chair Powell said recently was X would you be 0:05:40.760 --> 0:05:43.320 satisfied with inflation of three percent? He said, you shouldn't 0:05:43.360 --> 0:05:46.520 use the word satisfied and three percent in the same sentence. 0:05:46.760 --> 0:05:48.960 And you should believe. And here's the adage, don't fight 0:05:49.000 --> 0:05:51.440 the Fed. Don't fight the FED means believing in its 0:05:51.520 --> 0:05:54.360 eventual success it will be able to get the inflation 0:05:54.440 --> 0:05:56.440 rate below three percent and keep it below. And it 0:05:56.480 --> 0:05:58.080 is already for the gauge of churn. 0:05:58.960 --> 0:06:00.920 We don't care. What's to pretty wild? Did you think? 0:06:00.960 --> 0:06:02.920 Does she think we're going to get to two point xx? 0:06:02.960 --> 0:06:03.560 Like Clarendon? 0:06:04.160 --> 0:06:07.640 They the economics team does. And I give you one 0:06:07.800 --> 0:06:10.159 really strong reason to think this. And I was reading 0:06:10.200 --> 0:06:13.640 back at Irving Fisher nineteen thirty three, Dead Deflation Theory. 0:06:13.400 --> 0:06:16.599 Of Depression Fisher, Irving Fisher, Fisher. 0:06:16.839 --> 0:06:21.279 Irving Fish, trying to understand the Great Depression. The key 0:06:21.400 --> 0:06:24.560 is loan growth. In the end, banks are factories. They 0:06:24.600 --> 0:06:27.280 make money. They're the only entities that can private credit 0:06:27.400 --> 0:06:29.880 entities slash money around that was already in the system. 0:06:30.160 --> 0:06:32.240 And long growth in the United States since the bank 0:06:32.279 --> 0:06:35.640 stress of twenty twenty three really meager two percent in 0:06:35.640 --> 0:06:38.400 Europe flat to negative for the past year and a half. 0:06:38.680 --> 0:06:41.760 You can't have strong spending in the long run with 0:06:41.839 --> 0:06:43.479 note with the factories not printing money. 0:06:43.520 --> 0:06:45.640 I got, I got thirty seconds. Can you put Phil 0:06:45.720 --> 0:06:48.680 Knight into this or Chicago, if you're Fisher, can we 0:06:48.720 --> 0:06:50.120 get Knight or Humping into this? 0:06:51.000 --> 0:06:51.640 Just do it. 0:06:51.800 --> 0:06:56.479 I guess invest in bonds, lock in these swimming cast 0:06:57.200 --> 0:07:00.000 Please someone help me. I can't I do the doggy paddle. 0:07:00.560 --> 0:07:02.960 Within seconds of reaching Lisa took. 0:07:02.800 --> 0:07:04.960 Me from a beginner to an advanced. 0:07:04.520 --> 0:07:08.840 Interviewing red I wear a life jackets six feet out 0:07:08.839 --> 0:07:09.240 in the water. 0:07:09.640 --> 0:07:12.080 We got to work on it. Anthony Crescenzi, thank you 0:07:12.120 --> 0:07:14.960 so much. Thank You's with Pimco. Smart stuff there and yield, 0:07:14.960 --> 0:07:17.600 and we'll get Tiffany Wilding on to straighten out the 0:07:17.600 --> 0:07:31.480 Pimpko dialog. Now is our most important interview of the day. 0:07:32.360 --> 0:07:34.520 Stop what you're doing, and we're going to do this 0:07:34.720 --> 0:07:39.960 very carefully. Lindsay Piegs works for Stifil outlier. I'm kidding, 0:07:40.000 --> 0:07:42.560 that's an economic firm out in the Midwest. And Lindsay 0:07:42.640 --> 0:07:46.680 has staked the ground. If this is a FED, it's 0:07:46.720 --> 0:07:50.640 gonna be higher for longer, and even raise rates. Lindsay 0:07:50.720 --> 0:07:53.520 an update and your research notes it's stephel. Do you 0:07:53.840 --> 0:07:57.679 still believe that your own Powell will need to raise 0:07:57.720 --> 0:07:58.400 interest rates? 0:07:59.680 --> 0:08:02.800 I think right now, looking at the inflationary environment, it's 0:08:02.960 --> 0:08:06.880 clear that inflation is very sticky and will likely remain 0:08:07.280 --> 0:08:11.559 noticeably above the two percent target for quite some time now. 0:08:11.680 --> 0:08:14.880 The Committee should take that as an indication that they 0:08:14.920 --> 0:08:19.000 stop short of a sufficiently restrictive level and take further action, 0:08:19.240 --> 0:08:22.400 meaning re engage in rate hikes. But Tom, I'm not 0:08:22.640 --> 0:08:26.000 confident that they will listening to the latest message. It 0:08:26.040 --> 0:08:29.320 feels as if they'd rather remain on the sidelines, keeping 0:08:29.360 --> 0:08:32.800 this current elevated level of rates in place and wait 0:08:32.880 --> 0:08:35.199 for the improvement to happen more organically. 0:08:35.679 --> 0:08:37.839 The real rate, the ten year real rates would I 0:08:37.920 --> 0:08:39.880 use Lindsay, I'm sure you've got stuff better than me. 0:08:40.000 --> 0:08:43.880 Two point zero eight percent right now, it didn't move 0:08:43.960 --> 0:08:46.680 all that much off this inflation nirvana of the last 0:08:46.720 --> 0:08:51.240 ten days. Where are the tip points? Where's the bracket? 0:08:51.240 --> 0:08:54.120 If you will around the real rate, that will force 0:08:54.160 --> 0:08:54.920 the Fed's. 0:08:54.640 --> 0:08:59.800 Hand, that's a good question, because we didn't see much movement, 0:09:00.080 --> 0:09:04.439 even with the market cheering that cooler than expected CPI number, 0:09:04.520 --> 0:09:09.120 And given the fact that I don't see inflation moving much, 0:09:09.559 --> 0:09:12.360 in fact, nominal rates I think are pretty much range 0:09:12.400 --> 0:09:15.800 bound at this point. It's difficult to say what the 0:09:15.880 --> 0:09:19.440 threshold of pressure will be on the Fed because the 0:09:19.520 --> 0:09:23.480 Fed has been very clear that they're focused on policy easing. 0:09:23.960 --> 0:09:28.240 So unless we saw a material backup in inflation, and 0:09:28.280 --> 0:09:30.199 I don't mean one tens of a percentage point, it 0:09:30.200 --> 0:09:32.800 would probably be in the range of half a percentage point, 0:09:33.160 --> 0:09:37.439 if not more. Only then would the Fed really feel 0:09:37.480 --> 0:09:40.280 as if they're backed up into a corner to take 0:09:40.440 --> 0:09:43.120 further action to re engage. They're going to fight that 0:09:43.200 --> 0:09:46.600 prospect as much as possible as it forces them to 0:09:46.800 --> 0:09:50.880 admit a second policy error on the back end after 0:09:50.960 --> 0:09:54.280 a first round policy error of holding crisis level accommodation 0:09:54.400 --> 0:09:58.040 in place well passed it was appropriate waiting at those 0:09:58.240 --> 0:10:00.040 low levels till March of twenty. 0:09:59.840 --> 0:10:04.560 T lindsay, if the Fed does stay consistent here at 0:10:04.559 --> 0:10:07.200 these levels in terms of the rates, is that going 0:10:07.240 --> 0:10:10.240 to be enough to slow down inflation? Will that be 0:10:10.400 --> 0:10:13.760 perhaps enough to push this economy into maybe a recession, 0:10:13.760 --> 0:10:15.280 which will certainly take care of inflation. 0:10:16.640 --> 0:10:18.960 Well, I do think that at these rates we're going 0:10:19.000 --> 0:10:22.800 to continue to lose momentum. We've already seen the economy 0:10:22.880 --> 0:10:25.720 slow from five percent to three percent let's call it 0:10:25.720 --> 0:10:28.200 at year end, to sub two percent at the start 0:10:28.240 --> 0:10:31.360 of the year, but quarter to quarter volatility aside. I 0:10:31.400 --> 0:10:34.360 do expect the US economy to remain in positive territory 0:10:34.400 --> 0:10:38.959 for twenty twenty four, bouncing around a two ish percent pace. 0:10:39.400 --> 0:10:42.120 That's not enough to bring down inflation in of itself. 0:10:42.600 --> 0:10:46.559 But that being said, momentum is waning. Consumers are feeling pressure, 0:10:46.640 --> 0:10:51.040 businesses are feeling the weight of higher costs, higher borrowing costs. Now, 0:10:51.080 --> 0:10:54.600 at this point, consumers are still spending, businesses are still investing. 0:10:55.000 --> 0:10:57.280 But again it's that second derivative to client, it's that 0:10:57.480 --> 0:11:00.880 loss of momentum. So the bigger question is where do 0:11:00.920 --> 0:11:03.199 we go as we turn the calendar page into twenty 0:11:03.240 --> 0:11:06.199 twenty five, and if we continue to see this loss 0:11:06.200 --> 0:11:10.720 of momentum with growth slowing to maybe a non accelerating pace, 0:11:11.120 --> 0:11:14.240 or at least falling below the bare minimum that you 0:11:14.240 --> 0:11:17.560 would expect for a developed economy, while at that point, 0:11:17.760 --> 0:11:22.080 if the FED is still tolerating above target inflation, my 0:11:22.160 --> 0:11:25.560 bigger concern is not a recession or a downturn, but 0:11:25.640 --> 0:11:30.600 a period of stagflation, slow growth, elevated prices. That's going 0:11:30.640 --> 0:11:34.000 to make it very difficult for the FED to stimulate 0:11:34.040 --> 0:11:36.480 the economy and get us back onto a longer term 0:11:36.520 --> 0:11:42.440 trajectory of prosperity. Given this conundrum of low growth, high inflation, 0:11:42.679 --> 0:11:49.360 that really leaves traditional monetary policy metrics less than robust 0:11:49.600 --> 0:11:52.360 in terms of their impact on the economy. 0:11:52.480 --> 0:11:52.920 He Lindzui. 0:11:53.080 --> 0:11:55.959 This week, we also got a weaker than expected retail 0:11:56.000 --> 0:11:58.600 sales number. Some folks are telling me, don't worry about it. 0:11:58.920 --> 0:12:02.200 We had some good sales numbers out of Walmart yesterday. 0:12:02.360 --> 0:12:05.960 What's your take on this consumer well? 0:12:06.160 --> 0:12:09.680 Certainly exacerbating the market's optimism for nearer term rate cuts 0:12:09.880 --> 0:12:13.680 was that softer than expected consumer spending report, because the 0:12:13.760 --> 0:12:18.360 prospect of slower inflation is certainly more convincing when domestic 0:12:18.440 --> 0:12:22.079 demand appears to be slowing in tandem. But I'm not 0:12:22.120 --> 0:12:25.120 necessarily convinced that that's what we're seeing, a material slow 0:12:25.200 --> 0:12:28.720 down in the consumer as the annual pace still remains 0:12:28.840 --> 0:12:32.080 very solid. So yes, month to month volatility we are 0:12:32.120 --> 0:12:35.360 seeing as consumers shift the groups of services in their basket, 0:12:35.920 --> 0:12:38.960 but on an annual basis, three percent is still indicative 0:12:39.000 --> 0:12:41.200 of a very solid, resilient consumer. 0:12:41.559 --> 0:12:44.800 I agree with you completely, lindsay A really important question. 0:12:44.840 --> 0:12:47.720 If we get a pigs in market and inflation is 0:12:47.760 --> 0:12:51.880 sticky and we have a two part America, do they 0:12:51.920 --> 0:12:56.319 haves the people with assets, do they benefit or are 0:12:56.360 --> 0:13:00.400 they harmed by difficult inflation? 0:13:01.559 --> 0:13:03.800 No, I think we continue to see a growing divide 0:13:03.800 --> 0:13:06.880 between the asset holders and the non asset holders, because 0:13:06.920 --> 0:13:10.400 as long as the market continues to anticipate the FED 0:13:10.520 --> 0:13:16.079 eventually cutting rates, the market eventually focused on this easing 0:13:16.200 --> 0:13:20.120 policy that's going to continue to fuel these asset valuations 0:13:20.160 --> 0:13:22.440 in terms of the equity markets. And then from a 0:13:22.440 --> 0:13:25.840 housing market standpoint, which is the other sizeable component of 0:13:25.880 --> 0:13:29.760 growing these asset valuations, well, that comes down to a 0:13:29.760 --> 0:13:32.840 simple supply and demand. And we came into this housing 0:13:32.880 --> 0:13:35.920 market cycle at a multi year deficit. So just by 0:13:35.920 --> 0:13:41.800 the nature of household formation, population growth, massive flows of immigration, 0:13:42.400 --> 0:13:45.920 it's likely that we continue to see housing demand outpaced supply, 0:13:46.440 --> 0:13:50.560 keeping prices elevated and again perpetuating that divide between asset 0:13:50.559 --> 0:13:51.960 holders and non asset holders. 0:13:52.040 --> 0:13:55.439 Lindsay, thank you so much. Just brilliant, Lindsay, pegs are congratulations. 0:13:55.480 --> 0:14:03.240 I can't say enough, folks. Sir Paul, along with a 0:14:03.240 --> 0:14:07.720 guy named Jackson, invented modern publishing and he was determined 0:14:08.000 --> 0:14:11.640 his show and Mike Bloomberg was a huge participant in 0:14:11.679 --> 0:14:14.000 the show at the National Gallery in London, and it's 0:14:14.000 --> 0:14:16.880 down in Brooklyn right now. You can go see Paul 0:14:16.920 --> 0:14:20.880 McCartney nineteen sixty five black and white photographs, the original. 0:14:21.120 --> 0:14:23.360 They have the original copy of I Want to Hold 0:14:23.400 --> 0:14:29.240 Your Hand. But Paul McCartney changed how musicians worldwide get 0:14:29.280 --> 0:14:32.240 paid single handedly did that with a guy named Michael 0:14:32.320 --> 0:14:37.080 Jackson at ATV Music years ago ATV Music, Yeah, sony 0:14:37.120 --> 0:14:40.520 ATV Music. That was mister Jackson. They owned the known 0:14:40.560 --> 0:14:43.200 world as we know it. This is a joy. Look 0:14:43.200 --> 0:14:45.200 at Shaw darkens the door. We never speak to him 0:14:45.200 --> 0:14:47.080 because he's in LA and gets in at three am. 0:14:47.360 --> 0:14:51.040 You know, the whole thing. And Paul and I are 0:14:51.120 --> 0:14:53.520 really interested in like the death of Hollywood in that 0:14:54.200 --> 0:14:56.960 and yesterday I got a big hug from Michael McCarty 0:14:57.000 --> 0:15:01.120 over at Michael's who's iconic in californ Fournia cuisine and 0:15:01.160 --> 0:15:03.720 it's where you go when you're beautiful. I was supposed 0:15:03.760 --> 0:15:05.560 to go with ger today. I know, you know, girls 0:15:05.960 --> 0:15:07.840 has got to be I'm there with Jumana the other day, 0:15:07.920 --> 0:15:13.400 Jamana Bertucci. Michael's is old, Hollywood is old Hollywood gone. 0:15:13.440 --> 0:15:16.600 Is there anybody darkening the door at McCarty's place anymore? 0:15:17.200 --> 0:15:20.520 In Los Angeles? I would say that the there was 0:15:20.560 --> 0:15:23.000 a there was a generation of chefs that sort of 0:15:23.000 --> 0:15:26.080 typified Hollywood in the eighties, right Michael McCarty, Wolf King, Puck. 0:15:26.120 --> 0:15:29.880 Those people, their restaurants are still open, They're still vibrant. 0:15:29.880 --> 0:15:32.800 They definitely appeal to an older clientele. I don't think 0:15:32.840 --> 0:15:34.960 that if you were to Lisa wouldn't go, you know, 0:15:36.040 --> 0:15:39.200 if you were to talk to the people running some 0:15:39.320 --> 0:15:40.960 of the studios or maybe the new stars, because the 0:15:40.960 --> 0:15:42.720 fact is most of the people running the studios in 0:15:42.760 --> 0:15:45.120 Hollywood are the Michael's demographic. I mean, that's one of 0:15:45.160 --> 0:15:47.800 the complaints in the business right now, is that Hollywood 0:15:47.840 --> 0:15:49.920 is being run by people in their sixties and seventies, 0:15:49.920 --> 0:15:51.960 and they're not a lot of opportunities for people in 0:15:52.000 --> 0:15:54.200 their thirties and forties to have a chance to make 0:15:54.240 --> 0:15:54.880 some changes. 0:15:55.080 --> 0:15:58.080 Right, We've been talking about mister Ripley and you know 0:15:58.120 --> 0:16:00.800 within your magnificent nos folks, look show on a high 0:16:00.880 --> 0:16:02.400 ground Sunday once it come out. 0:16:02.280 --> 0:16:04.640 Sunday, Sunday, three pm Pacific. 0:16:04.720 --> 0:16:06.680 Do you have your interns type it or you know? 0:16:06.680 --> 0:16:08.080 How's that word right? Every word? 0:16:08.240 --> 0:16:10.920 Okay, we've been talking about I hope I'm pronouncing right, 0:16:11.000 --> 0:16:12.800 Steven Zalien and mister Ripley. 0:16:12.920 --> 0:16:13.920 Yeah, he did. 0:16:13.800 --> 0:16:15.440 Shindler's List, He's done all this. 0:16:15.400 --> 0:16:16.680 Stuff, legendary screenwriter. 0:16:16.720 --> 0:16:20.440 Now tell us about that person in the New Hollywood 0:16:20.440 --> 0:16:22.800 that we see dying when you look at the stock prices. 0:16:22.840 --> 0:16:25.240 Well, if you think about that show, and I think 0:16:25.280 --> 0:16:27.480 I'm getting this right, that show is initially set up 0:16:27.480 --> 0:16:32.880 at Showtime and then when Paramount basically killed Showtime or 0:16:32.920 --> 0:16:36.400 folded it into Paramount Plus, that the new boss of 0:16:36.840 --> 0:16:39.760 Paramount Plus with Showtime, Chris McCarthy, who's now the co 0:16:39.960 --> 0:16:42.960 CEO of Paramount, I think, decided it wasn't the best 0:16:43.000 --> 0:16:45.320 fit for what they were trying to do. Strategically, look 0:16:46.000 --> 0:16:49.640 black and white period piece. I get it. It doesn't 0:16:49.680 --> 0:16:53.080 scream commercial and Netflix, Switch has more money than almost 0:16:53.120 --> 0:16:55.360 anyone else to take some risks and pick things up. 0:16:55.440 --> 0:16:58.720 Swooped in and took it. Look, I don't think that 0:16:58.720 --> 0:17:02.120 show's a huge hit for that, but it certainly is 0:17:03.040 --> 0:17:05.360 beloved artistically, and we'll see if it gets a bunch 0:17:05.359 --> 0:17:07.600 of Emmy nominations when those come out over the summer. 0:17:08.160 --> 0:17:09.880 So, Lucas, one of the things Tom and I talk 0:17:09.880 --> 0:17:11.840 about a lot is just kind of where we go 0:17:11.960 --> 0:17:16.040 here going forward from the media industry perspective, the business. 0:17:16.040 --> 0:17:19.480 I grew up in the media business. Everybody made money, 0:17:19.560 --> 0:17:23.560 everybody made money. Now those economics are really up. 0:17:23.400 --> 0:17:26.400 For grad very challenged. Yeah, and do you think the. 0:17:26.359 --> 0:17:29.240 Traditional media companies in Hollywood? You live there, you're seeing 0:17:29.240 --> 0:17:32.119 it every day, are they prepared to make that pivot? 0:17:32.200 --> 0:17:35.439 I'm thinking Paramount, I'm thinking Warner Brothers, Discovery. What's the 0:17:35.440 --> 0:17:37.600 feeling in Hollywood in LA about that? 0:17:38.480 --> 0:17:42.480 I mean, look, the mood is pretty dour at the moment, 0:17:42.600 --> 0:17:46.440 because you see, the word for a year or two 0:17:46.480 --> 0:17:49.600 now has been sort of efficiency and economy and trying 0:17:49.640 --> 0:17:51.520 to cut back and save money. Right. You just had 0:17:51.560 --> 0:17:54.080 Bob Iger come out earlier this week at an investor 0:17:54.119 --> 0:17:57.760 conference and say we spent too much money launching Disney Plus. 0:17:57.760 --> 0:18:00.400 Now I think that's up for debate. They probably spent 0:18:00.680 --> 0:18:03.280 an appropriate amount of money. But there's no question that 0:18:03.320 --> 0:18:06.280 you had a lot of companies, and especially the traditional ones, 0:18:06.320 --> 0:18:08.919 that were seeing their cable networks shrivel, and so they 0:18:09.000 --> 0:18:11.080 spent all this money on streaming and they haven't been 0:18:11.119 --> 0:18:13.199 able to make it a profitable business. Then they didn't 0:18:13.240 --> 0:18:16.119 necessarily have the right approach, and so now everyone's pulling 0:18:16.160 --> 0:18:19.440 back and everyone is scared about that because it's much much, 0:18:19.640 --> 0:18:21.680 much harder to get a project made than it used 0:18:21.680 --> 0:18:21.879 to be. 0:18:22.600 --> 0:18:24.040 Let's talk just about Powermount. 0:18:24.320 --> 0:18:26.480 That's the number one. 0:18:25.960 --> 0:18:27.280 What happens this weekend, Lucas. 0:18:28.240 --> 0:18:30.119 I keep telling Tom five years ago, I could have 0:18:30.119 --> 0:18:31.560 sold that company with three phone calls. 0:18:31.760 --> 0:18:34.320 Now you can't give it away. Well, we will probably 0:18:34.400 --> 0:18:37.040 have an update on that later this morning. 0:18:36.359 --> 0:18:41.320 I listen to Lucas Wispy. 0:18:42.119 --> 0:18:45.760 But you're correct that. Look, it's not the most attractive 0:18:45.800 --> 0:18:48.679 business for people, right you know, it has it's the 0:18:48.720 --> 0:18:51.320 way it still makes all of its money for the 0:18:51.320 --> 0:18:53.639 most part is these cable networks that are getting smaller 0:18:53.680 --> 0:18:56.280 every year. It has a streaming business that's growing but 0:18:56.359 --> 0:18:58.960 doesn't make any money, and it has one of the 0:18:59.000 --> 0:19:02.520 weaker film and television studios around. And so you know, 0:19:02.560 --> 0:19:06.320 you've got David Ellison who has a lot of money 0:19:06.640 --> 0:19:09.520 and father. His father has a lot of money. He's 0:19:09.600 --> 0:19:12.520 now built a decent sized media business. He wants to 0:19:12.560 --> 0:19:14.400 buy it. I think partially because it would make skuy 0:19:14.480 --> 0:19:17.200 Dance much bigger and build in the studio, but also 0:19:17.240 --> 0:19:19.920 because there's legacy there. Most of the other folks who'd 0:19:19.960 --> 0:19:22.160 be interested, you'd, yeah, you'd be buying it almost because 0:19:22.160 --> 0:19:24.800 you like the history of Paramount, not because it's a 0:19:24.800 --> 0:19:25.280 great business. 0:19:25.600 --> 0:19:27.480 In the crushing lack of time that we have, because 0:19:27.520 --> 0:19:30.560 you refuse to get up at three am, Lucas Shaw. 0:19:30.880 --> 0:19:34.280 Does Tim Cook want to be in Hollywood? Does Jesse 0:19:34.440 --> 0:19:39.040 of Amazon want to be in Hollywood? Does Satya up 0:19:39.080 --> 0:19:42.800 north there in Washington? Do those tech people really want 0:19:42.840 --> 0:19:45.160 to play the Michaels lunch game. 0:19:45.320 --> 0:19:47.920 I think it depends on how you define Hollywood. So Satya, Nadella, 0:19:47.960 --> 0:19:50.200 and Microsoft they're in entertainment right, They're one of the 0:19:50.200 --> 0:19:52.680 biggest video game companies in the world. I don't think 0:19:52.720 --> 0:19:56.040 they're especially interested in the film and television business. Sort 0:19:56.040 --> 0:19:59.080 of classic Hollywood. Amazon is in it. You know, they 0:19:59.080 --> 0:20:01.119 have a I don't know that they're going to invest 0:20:01.200 --> 0:20:03.400 at the same level as Netflix, but you know they 0:20:03.440 --> 0:20:05.480 have a bunch of sports rights. They're spending billions of 0:20:05.520 --> 0:20:08.000 dollars on programming. Their prime video business is one of 0:20:08.040 --> 0:20:10.359 the largest in the world. Apple is sort of the 0:20:10.359 --> 0:20:13.040 big question mark. They have invested a bunch of money, 0:20:13.359 --> 0:20:14.880 but I don't think they're they're going to go buy 0:20:14.880 --> 0:20:15.360 a studio. 0:20:15.440 --> 0:20:19.160 Paul's upset is Christmas NFL football un American. 0:20:19.640 --> 0:20:21.600 Why they have Christmas NBA basketball? 0:20:22.160 --> 0:20:22.920 Right? 0:20:24.280 --> 0:20:30.120 So what happens here with sports? I mean Netflix, they're 0:20:30.119 --> 0:20:33.040 starting to go into sports. I mean, one could argue 0:20:33.160 --> 0:20:36.080 that the future of sports revenue and the value of 0:20:36.240 --> 0:20:39.159 all these franchises and all these big contracts, it's going to. 0:20:39.160 --> 0:20:42.480 Be paid out of Silicon Valley, not Hollywood. Well, right now, 0:20:42.520 --> 0:20:44.720 the leagues are sort of have the best of both worlds. 0:20:44.800 --> 0:20:47.800 Right There was a while in scripted entertainment where you 0:20:47.880 --> 0:20:51.159 had broadcast and cable networks and streaming services and just 0:20:51.200 --> 0:20:52.840 all this money being spent, and that's sort of where 0:20:52.840 --> 0:20:54.800 we are with sports right now. You look at the NFL, 0:20:55.080 --> 0:20:59.040