1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:35,840 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,520 --> 00:00:40,080 Speaker 1: Stephen Arthur federated Hermes, writing this, we remain optimistic. 11 00:00:40,159 --> 00:00:41,240 Speaker 3: This season has been. 12 00:00:41,120 --> 00:00:44,919 Speaker 1: Exceptionally positive, with earnings running eight percent year over year 13 00:00:44,960 --> 00:00:48,720 Speaker 1: and upward revisions running higher than usual. Stephen joins us. Now, Stephen, 14 00:00:48,880 --> 00:00:51,040 Speaker 1: wonderful to see you. Thank you so much for coming back. 15 00:00:51,159 --> 00:00:54,600 Speaker 1: You're right, earnings have been surprising to the upside. Why 16 00:00:54,720 --> 00:00:57,280 Speaker 1: are stock traders not necessarily impressed? 17 00:00:57,640 --> 00:01:00,320 Speaker 3: Lisa? Could you repeat that again? Your right? I loved that? 18 00:01:00,640 --> 00:01:03,040 Speaker 1: All right, all right, you're right, ste This sounds like 19 00:01:03,080 --> 00:01:04,240 Speaker 1: a home squabble, Evehn. 20 00:01:04,280 --> 00:01:06,240 Speaker 3: You're right, so carry on. 21 00:01:07,920 --> 00:01:09,880 Speaker 4: At least that these stocks have had big run like, 22 00:01:09,920 --> 00:01:12,119 Speaker 4: look at Disney, it's almost doubled over the last year. 23 00:01:12,160 --> 00:01:14,480 Speaker 4: A lot of these stocks have run into earnings, and 24 00:01:14,560 --> 00:01:19,080 Speaker 4: so you know, traders are taking profit. That's pretty normal, actually, 25 00:01:19,840 --> 00:01:23,160 Speaker 4: and we tend not obviously we're too big to trade 26 00:01:23,200 --> 00:01:25,520 Speaker 4: the day, we don't really do that. But we look 27 00:01:25,520 --> 00:01:28,400 Speaker 4: at the longer term picture, the next twelve months, we 28 00:01:28,440 --> 00:01:31,440 Speaker 4: see a broad rotation out into everything else. 29 00:01:31,560 --> 00:01:32,680 Speaker 3: Just starting to see it already. 30 00:01:33,080 --> 00:01:35,520 Speaker 4: Disney's not like on our by list per se, but 31 00:01:35,560 --> 00:01:38,400 Speaker 4: it's one of those stocks that probably is going to 32 00:01:38,480 --> 00:01:39,840 Speaker 4: participate in that rotation. 33 00:01:40,200 --> 00:01:40,360 Speaker 2: Right. 34 00:01:40,400 --> 00:01:44,800 Speaker 4: It's relatively inexpensive. It's really been in a doghouse for 35 00:01:44,800 --> 00:01:46,840 Speaker 4: a long time. It's starting to come to life. It's 36 00:01:46,880 --> 00:01:48,240 Speaker 4: got a long way to go to get back to 37 00:01:48,240 --> 00:01:49,960 Speaker 4: where it used to be three four years ago. 38 00:01:50,320 --> 00:01:52,920 Speaker 1: So the numbers allow people who like to spend narratives 39 00:01:52,960 --> 00:01:54,440 Speaker 1: to spend them in any which way they want to, 40 00:01:54,520 --> 00:01:56,040 Speaker 1: and so it's kind of a field day for people 41 00:01:56,080 --> 00:01:58,480 Speaker 1: who have lots of creativity and some time to do so. 42 00:01:58,640 --> 00:02:02,000 Speaker 1: I'm curious if you look at the earnings, it does 43 00:02:02,040 --> 00:02:04,920 Speaker 1: look like any mention of uncertainty is punished at a 44 00:02:04,920 --> 00:02:07,440 Speaker 1: time where there's a lot of uncertainty, and some of 45 00:02:07,440 --> 00:02:10,960 Speaker 1: the economic data has pointed to a potential stagflationary type 46 00:02:11,000 --> 00:02:13,680 Speaker 1: of mix that definitely surprised markets. 47 00:02:13,680 --> 00:02:14,799 Speaker 3: So which is it. 48 00:02:14,880 --> 00:02:18,080 Speaker 1: Are people responding to that and penalizing that. Have people 49 00:02:18,240 --> 00:02:21,080 Speaker 1: recognized those risks in valuations? 50 00:02:21,720 --> 00:02:22,040 Speaker 2: Well? 51 00:02:22,320 --> 00:02:25,239 Speaker 4: Yeah, I mean, the overall market's really not that expensive 52 00:02:25,280 --> 00:02:27,600 Speaker 4: once you take out the MAC seven, which are kind 53 00:02:27,600 --> 00:02:31,280 Speaker 4: of special exceptional companies globally, right, you take them out, 54 00:02:31,320 --> 00:02:33,920 Speaker 4: the rest of the market's trading around nineteen twenty times. 55 00:02:34,280 --> 00:02:36,960 Speaker 4: We don't think that's an unreasonable level, and we think 56 00:02:37,000 --> 00:02:39,000 Speaker 4: it's the rest of the market where there's value right 57 00:02:39,040 --> 00:02:42,560 Speaker 4: now in the market. So you know, I would call 58 00:02:42,600 --> 00:02:45,800 Speaker 4: it it's an environment where there's short term certainty and 59 00:02:45,880 --> 00:02:48,560 Speaker 4: long term less uncertainty. I mean, if you look at 60 00:02:48,560 --> 00:02:52,200 Speaker 4: the pattern of what's happening right now as an example, 61 00:02:52,680 --> 00:02:54,760 Speaker 4: when I was on a few months ago, we were 62 00:02:54,800 --> 00:02:59,680 Speaker 4: talking about this, the soft soft data is signaling a 63 00:02:59,720 --> 00:03:00,359 Speaker 4: slow down. 64 00:03:00,360 --> 00:03:02,160 Speaker 3: The hard data is still good. When is it going 65 00:03:02,200 --> 00:03:02,799 Speaker 3: to catch up? 66 00:03:03,200 --> 00:03:05,839 Speaker 4: The hard data by virtue of the fact that it's 67 00:03:05,880 --> 00:03:09,760 Speaker 4: hard is rear view mirror stuff. It's what the FED 68 00:03:09,919 --> 00:03:11,240 Speaker 4: uses as an example. 69 00:03:11,280 --> 00:03:13,120 Speaker 3: I call it the cracked rear view mirror. 70 00:03:13,760 --> 00:03:17,320 Speaker 4: We're in a news cycle here that's twenty four to 71 00:03:17,360 --> 00:03:21,320 Speaker 4: seven now more than ever. Trying to make forecasts bake 72 00:03:21,560 --> 00:03:26,280 Speaker 4: based on hard data is you're fighting yesterday's war. So 73 00:03:26,320 --> 00:03:28,679 Speaker 4: the FED is now coming around because the hard data 74 00:03:28,720 --> 00:03:31,320 Speaker 4: is finally softening up. We've been screaming that they should 75 00:03:31,320 --> 00:03:33,920 Speaker 4: be cutting way back in the spring. They're now going 76 00:03:34,000 --> 00:03:36,720 Speaker 4: to do that. We're entering a cutting cycle. But the 77 00:03:36,800 --> 00:03:39,760 Speaker 4: soft data is starting to turn. Look at things like 78 00:03:39,880 --> 00:03:44,200 Speaker 4: air travel boom, it's spiking. The Dallas Fed's real time 79 00:03:44,240 --> 00:03:47,120 Speaker 4: economic indicators, it's up one hundred basis points in the 80 00:03:47,200 --> 00:03:50,840 Speaker 4: last month. You look at consumer sentiment surveys up ten 81 00:03:50,920 --> 00:03:54,720 Speaker 4: points in the last couple of months. You got small 82 00:03:54,720 --> 00:03:59,200 Speaker 4: business confidence indicators up ten percent last couple of months. 83 00:03:59,360 --> 00:04:02,320 Speaker 4: You look at the market and the industrials, the cyclicals 84 00:04:02,360 --> 00:04:04,880 Speaker 4: are starting to lead. You know, we do a lot 85 00:04:04,920 --> 00:04:08,680 Speaker 4: of bipos and federate hermes. Right, I got I'm teasing 86 00:04:08,680 --> 00:04:11,200 Speaker 4: the guys in the office. I've become the office receptionist 87 00:04:11,320 --> 00:04:14,200 Speaker 4: after five PM. I mean, like, I get these companies 88 00:04:14,240 --> 00:04:17,839 Speaker 4: all showing up, right, I mean that market is really 89 00:04:17,880 --> 00:04:21,360 Speaker 4: picked up. That's not a sign that confidence is falling 90 00:04:21,400 --> 00:04:24,599 Speaker 4: over amongst the people that actually make decisions in the economy. 91 00:04:24,680 --> 00:04:28,479 Speaker 4: So we see all the soft indicators picking here most 92 00:04:28,520 --> 00:04:32,320 Speaker 4: of them, and uh, you know, we're pretty optimistic, as 93 00:04:32,320 --> 00:04:32,479 Speaker 4: you know. 94 00:04:32,560 --> 00:04:35,040 Speaker 5: But we're all our good news though. What's been pricing 95 00:04:35,080 --> 00:04:37,560 Speaker 5: in is the uncertainty of tariffs. They're actually going to 96 00:04:37,560 --> 00:04:39,440 Speaker 5: bite and we're going to have an average terif rate 97 00:04:39,480 --> 00:04:42,080 Speaker 5: about fifteen to twenty percent this time last year was 98 00:04:42,160 --> 00:04:43,320 Speaker 5: two point five percent. 99 00:04:43,640 --> 00:04:45,920 Speaker 4: Yeah, I think you got to check the math on that, 100 00:04:46,120 --> 00:04:50,839 Speaker 4: because the actual remember that a lot of the goods 101 00:04:50,839 --> 00:04:53,600 Speaker 4: that come in that come into the US come through 102 00:04:53,680 --> 00:04:56,760 Speaker 4: Canada and Mexico. The goods that come in there through 103 00:04:56,880 --> 00:05:01,480 Speaker 4: USMCA are zero percent. So when Trump talks about these 104 00:05:01,480 --> 00:05:05,120 Speaker 4: massive tarifs on canemas are he's talking about trade that 105 00:05:05,200 --> 00:05:09,120 Speaker 4: they've brought across the border that doesn't conform with USMCA, 106 00:05:09,320 --> 00:05:11,280 Speaker 4: which in the case of Europe, if they were doing that, 107 00:05:11,320 --> 00:05:14,279 Speaker 4: they'd throw them out of the union. So you've got 108 00:05:14,279 --> 00:05:16,760 Speaker 4: to make you've got to account for that zero part 109 00:05:16,760 --> 00:05:19,560 Speaker 4: of the thing. The actual tariff rate on average right 110 00:05:19,600 --> 00:05:22,719 Speaker 4: now as we know it is about thirteen percent. We 111 00:05:22,839 --> 00:05:24,840 Speaker 4: figure about half of that's going to be paid by 112 00:05:24,839 --> 00:05:28,040 Speaker 4: the foreign importers. So you're looking at fifteen percent of 113 00:05:28,080 --> 00:05:30,800 Speaker 4: the economy's imports. Half of that is not going to 114 00:05:30,800 --> 00:05:33,240 Speaker 4: be you work out the math, it's about an eighty 115 00:05:33,480 --> 00:05:39,000 Speaker 4: or ninety basis point price increase, probably spread over six months. 116 00:05:39,680 --> 00:05:45,320 Speaker 4: There's all these other things that are decreasing in price, commodities, steel, oil, 117 00:05:46,960 --> 00:05:52,520 Speaker 4: regulatory costs, taxes. Another way to think about what Trump 118 00:05:52,600 --> 00:05:56,440 Speaker 4: is doing here is he's increasing a consumption tax, a 119 00:05:56,480 --> 00:05:59,120 Speaker 4: prely efficient one, by the way, because it's partly paid 120 00:05:59,160 --> 00:06:02,880 Speaker 4: by foreigners, and he's using it to fund an investment 121 00:06:02,960 --> 00:06:08,200 Speaker 4: tax reduction. With all these accelerated, the multiplier on investment 122 00:06:08,320 --> 00:06:12,239 Speaker 4: spending is multiples of what it is on consumption spending. 123 00:06:12,360 --> 00:06:15,360 Speaker 4: So there's a kind of shift going on in the economy. 124 00:06:15,600 --> 00:06:18,360 Speaker 4: I get the tariff thing is not that positive, but 125 00:06:18,440 --> 00:06:21,279 Speaker 4: it's not as big of a deal. It's the one 126 00:06:21,279 --> 00:06:23,320 Speaker 4: thing everyone can hang on to. So it's a good 127 00:06:23,360 --> 00:06:24,080 Speaker 4: discussion point. 128 00:06:24,320 --> 00:06:25,880 Speaker 3: You mentioned the president a few times. 129 00:06:25,880 --> 00:06:27,960 Speaker 5: He thinks you have great analysis, by way, because I 130 00:06:28,000 --> 00:06:30,680 Speaker 5: follow his truth social and he has treated about you 131 00:06:31,240 --> 00:06:34,360 Speaker 5: right now. He has what some would say, undermined market 132 00:06:34,360 --> 00:06:37,480 Speaker 5: credibility when it comes to hard data releases by firing 133 00:06:37,480 --> 00:06:40,760 Speaker 5: the commissioner at the BLS continually going after the FED, 134 00:06:40,839 --> 00:06:42,600 Speaker 5: and some are saying maybe it's going to be very 135 00:06:42,600 --> 00:06:45,760 Speaker 5: overtly political individual he'll put at the FED. 136 00:06:46,200 --> 00:06:49,760 Speaker 3: Do you think he's undermining market confidence a little bit? 137 00:06:49,760 --> 00:06:53,360 Speaker 4: I'm my advice to him, not that he takes my advice, 138 00:06:53,400 --> 00:06:56,840 Speaker 4: but I don't think it's necessary to pound the FED 139 00:06:56,960 --> 00:06:59,960 Speaker 4: chair as an example. On that case, I would just say, look, 140 00:07:00,120 --> 00:07:05,000 Speaker 4: the FED chair is a rear view mirror looking guy. 141 00:07:04,880 --> 00:07:08,120 Speaker 4: He simply is going stop listening to what he says 142 00:07:08,120 --> 00:07:10,280 Speaker 4: he's going to do, and just think about what he's 143 00:07:10,440 --> 00:07:13,120 Speaker 4: likely to do. And we think we've been saying for 144 00:07:13,160 --> 00:07:15,720 Speaker 4: a while he's going to start cutting in September. Now 145 00:07:15,720 --> 00:07:17,920 Speaker 4: that the rearview mirror is looking like it should, he 146 00:07:18,040 --> 00:07:22,440 Speaker 4: will on the labor secretary. One reason that storm is passed, 147 00:07:22,600 --> 00:07:25,200 Speaker 4: and I don't necessarily agree with the pressure there either, 148 00:07:25,320 --> 00:07:28,280 Speaker 4: but one reason that storm is passed is because the 149 00:07:28,320 --> 00:07:31,760 Speaker 4: reality is, let's face it, I've heard you complain on 150 00:07:31,800 --> 00:07:32,960 Speaker 4: the air about the labor numbers. 151 00:07:33,000 --> 00:07:33,800 Speaker 3: They've been terrible. 152 00:07:34,000 --> 00:07:38,000 Speaker 4: Yeah, there needs to be an overhaul of that department. 153 00:07:39,280 --> 00:07:40,360 Speaker 3: The physician did. 154 00:07:40,520 --> 00:07:43,600 Speaker 4: From that perspective, it probably would have not even been 155 00:07:43,640 --> 00:07:46,080 Speaker 4: a news story. But the end of the day, people 156 00:07:46,120 --> 00:07:48,360 Speaker 4: are saying, yeah, the labor numbers aren't really good. Yeah, 157 00:07:48,360 --> 00:07:50,160 Speaker 4: the Fed, No, they've been in a lot of bad 158 00:07:50,240 --> 00:07:54,560 Speaker 4: calls here, So he's not completely off base with the 159 00:07:54,600 --> 00:07:55,880 Speaker 4: pressure in these areas. 160 00:07:56,080 --> 00:07:58,520 Speaker 1: How concerned are you about inflation given the fact that 161 00:07:58,640 --> 00:08:01,040 Speaker 1: right now you look at backward looking numbers that might 162 00:08:01,080 --> 00:08:04,440 Speaker 1: constrain the economy, but the forward look is pretty rosy 163 00:08:04,560 --> 00:08:06,560 Speaker 1: at a time where you do have some input pressures 164 00:08:06,760 --> 00:08:07,480 Speaker 1: with prices. 165 00:08:07,640 --> 00:08:10,160 Speaker 4: Yeah, but the Fed's not looking forward so bad. 166 00:08:11,120 --> 00:08:12,360 Speaker 3: That's fine. 167 00:08:12,000 --> 00:08:15,200 Speaker 4: And the other thing is that, you know, I look 168 00:08:15,240 --> 00:08:18,600 Speaker 4: at the actual ongoing inflation rate here, it's kind of 169 00:08:18,680 --> 00:08:22,000 Speaker 4: stabilizing around two point five to two point well, it's right, 170 00:08:22,160 --> 00:08:23,640 Speaker 4: two point six, two point seven, but it's going to 171 00:08:23,680 --> 00:08:26,200 Speaker 4: stabilize by next year two point five. That's really the 172 00:08:26,200 --> 00:08:28,520 Speaker 4: feds informal target. I think they figured out a long 173 00:08:28,560 --> 00:08:32,560 Speaker 4: time ago two is too close to zero for government work. 174 00:08:33,120 --> 00:08:36,920 Speaker 4: So assuming that, right, shouldn't the FED funds rate, if 175 00:08:36,960 --> 00:08:39,480 Speaker 4: you look at history, should be about fifty basis points 176 00:08:39,520 --> 00:08:40,520 Speaker 4: above that. 177 00:08:40,520 --> 00:08:41,320 Speaker 3: That's three. 178 00:08:41,679 --> 00:08:44,040 Speaker 4: So we have FED funds going to three over the 179 00:08:44,040 --> 00:08:46,520 Speaker 4: next eighteen months. I think that's where we're heading. Here, 180 00:08:47,120 --> 00:08:49,080 Speaker 4: and so I would just say I got six cuts 181 00:08:49,120 --> 00:08:50,559 Speaker 4: coming against a backdrop. 182 00:08:50,600 --> 00:08:51,320 Speaker 3: That's pretty good. 183 00:08:51,679 --> 00:08:54,199 Speaker 4: We have the FED cutting not because they need to, 184 00:08:54,880 --> 00:08:58,360 Speaker 4: but because they can. And now that they think they 185 00:08:58,400 --> 00:09:01,559 Speaker 4: need to, they'll start doing it. And once they realize 186 00:09:01,760 --> 00:09:02,800 Speaker 4: they can, they will. 187 00:09:03,559 --> 00:09:07,160 Speaker 1: Stephen as he is the receptionist at Federated Armies where 188 00:09:07,240 --> 00:09:09,640 Speaker 1: he offers lots of pigs in a blanket. Do you 189 00:09:09,640 --> 00:09:11,440 Speaker 1: have your your your different facts? 190 00:09:12,280 --> 00:09:13,160 Speaker 3: Ye? Yeah, exactly. 191 00:09:13,600 --> 00:09:16,640 Speaker 1: Stephen off Cio of Equity is a Federated Armies. 192 00:09:16,640 --> 00:09:16,920 Speaker 3: Thank you. 193 00:09:26,280 --> 00:09:28,480 Speaker 1: Turning back to markets, we are seeing stocks looking through 194 00:09:28,480 --> 00:09:30,680 Speaker 1: all of this looking to rebound after the S and 195 00:09:30,679 --> 00:09:32,880 Speaker 1: P five hundred posted its fifth down day in the 196 00:09:32,960 --> 00:09:36,440 Speaker 1: last six Anastasia and Moroso Partners Group writing this, this 197 00:09:36,600 --> 00:09:39,360 Speaker 1: is a long awaited quarter of adjustment and the market 198 00:09:39,480 --> 00:09:41,080 Speaker 1: may need to act accordingly. 199 00:09:41,160 --> 00:09:43,000 Speaker 3: Expect expecting less. 200 00:09:42,880 --> 00:09:46,120 Speaker 1: Upside and more choppiness in Q three and the Stasia 201 00:09:46,200 --> 00:09:49,040 Speaker 1: joins us, now, great to see it morning. All right, 202 00:09:49,080 --> 00:09:51,080 Speaker 1: So this is the adjustment that everyone is expecting, that 203 00:09:51,120 --> 00:09:52,360 Speaker 1: everyone's looking to buy into. 204 00:09:52,440 --> 00:09:53,480 Speaker 3: How do you get an adjustment? 205 00:09:53,480 --> 00:09:55,400 Speaker 1: And I asked this question yesterday, how do you get 206 00:09:55,400 --> 00:09:56,760 Speaker 1: a sell off if everyone's looking to. 207 00:09:56,720 --> 00:09:57,240 Speaker 3: Buy the dip. 208 00:09:57,760 --> 00:09:59,680 Speaker 6: Well, I think the newsflow is going to dictate that, 209 00:10:00,040 --> 00:10:03,280 Speaker 6: and we need to have more Caterpillar like reports that 210 00:10:03,440 --> 00:10:05,800 Speaker 6: talk about the tariff hit that some of these companies 211 00:10:05,840 --> 00:10:07,839 Speaker 6: are going to have to absorb, and some of them 212 00:10:07,880 --> 00:10:10,199 Speaker 6: may be in line with consensus expectations and some of 213 00:10:10,240 --> 00:10:11,960 Speaker 6: it may not. You know, I think that could be 214 00:10:12,000 --> 00:10:15,000 Speaker 6: one trigger for a potential pullback as we really do 215 00:10:15,080 --> 00:10:17,840 Speaker 6: realize the tariff hit. The other trigger, of course, is inflation, 216 00:10:18,080 --> 00:10:21,600 Speaker 6: and inflation and expectations for next week are somewhat subdued, 217 00:10:21,679 --> 00:10:25,680 Speaker 6: but could we see some potential surprises there, so you know, maybe, Lisa, 218 00:10:25,920 --> 00:10:29,320 Speaker 6: the move here in the market is not necessarily tremendous downside, 219 00:10:29,360 --> 00:10:32,080 Speaker 6: because I think some level of expectations already baked in. 220 00:10:32,360 --> 00:10:34,080 Speaker 6: But that's why I really kind of call it the 221 00:10:34,200 --> 00:10:37,440 Speaker 6: quarter of choppiness, because on the one hand, we need 222 00:10:37,480 --> 00:10:39,800 Speaker 6: to mark to market some of these tariffs, and at 223 00:10:39,800 --> 00:10:41,840 Speaker 6: the same time, we also know that if the label 224 00:10:41,880 --> 00:10:44,520 Speaker 6: market weakness weakens as a result of that, then that 225 00:10:44,600 --> 00:10:47,000 Speaker 6: sets us up for a September cut. And I think 226 00:10:47,040 --> 00:10:50,240 Speaker 6: that's what the markets are caught in between, and that's 227 00:10:50,240 --> 00:10:52,440 Speaker 6: why we sort of get the back to back days 228 00:10:52,440 --> 00:10:54,560 Speaker 6: of selling and buying and selling and buying, and I 229 00:10:54,559 --> 00:10:55,400 Speaker 6: think that could continue. 230 00:10:55,520 --> 00:10:57,679 Speaker 1: That's the reason why you're seeing some selling even on 231 00:10:57,720 --> 00:11:00,360 Speaker 1: the heels of earning supports that are really positive, which 232 00:11:00,360 --> 00:11:03,559 Speaker 1: we've seen increases to forecasts that beat expectations, and then 233 00:11:03,720 --> 00:11:06,240 Speaker 1: the likes of AMD selling off. 234 00:11:06,360 --> 00:11:07,840 Speaker 3: I'm just wondering, what do you do with the job? 235 00:11:08,880 --> 00:11:12,680 Speaker 6: Well, I think for public market investors, if you have 236 00:11:12,840 --> 00:11:14,960 Speaker 6: any sort of pullback, of course, you step in and 237 00:11:15,000 --> 00:11:17,720 Speaker 6: you sort of buy your favorite names, and I would say, 238 00:11:17,720 --> 00:11:19,840 Speaker 6: you know, for us, it's really about long term investing 239 00:11:19,880 --> 00:11:23,439 Speaker 6: at Partners Group and focusing on thematic investing and really 240 00:11:23,520 --> 00:11:24,600 Speaker 6: aligning yourself with some. 241 00:11:24,559 --> 00:11:26,000 Speaker 3: Of the key secular growth themes. 242 00:11:26,120 --> 00:11:27,800 Speaker 6: You know, as much as we worry about the next 243 00:11:27,800 --> 00:11:30,600 Speaker 6: inflation report or the next you know, rate cut or not, 244 00:11:30,760 --> 00:11:34,120 Speaker 6: what truly determines whether the company is going to outperform 245 00:11:34,200 --> 00:11:36,080 Speaker 6: or not is whether it's aligned with the lawng term 246 00:11:36,120 --> 00:11:39,640 Speaker 6: trend of let's say, artificial intelligence or perhaps healthcare innovation 247 00:11:40,440 --> 00:11:43,079 Speaker 6: or new way of living, and whether you align with. 248 00:11:43,080 --> 00:11:44,600 Speaker 3: That and benefiting from that. 249 00:11:44,800 --> 00:11:47,760 Speaker 6: So, you know, if there is an opportunity to buy 250 00:11:47,800 --> 00:11:51,480 Speaker 6: into that in public markets, that's great for us. I 251 00:11:51,480 --> 00:11:55,360 Speaker 6: think there's a lot of delectivity that we're looking at, 252 00:11:55,440 --> 00:11:59,800 Speaker 6: and given the clarity of tariffs that is emerging, I 253 00:11:59,840 --> 00:12:03,040 Speaker 6: think for the private equity industry in general, the deal 254 00:12:03,040 --> 00:12:04,559 Speaker 6: activity is likely to pick up. 255 00:12:04,840 --> 00:12:07,560 Speaker 5: Is it the clarity because the rates are set, or 256 00:12:07,600 --> 00:12:10,079 Speaker 5: is it the clarity that they're not as bad as 257 00:12:10,080 --> 00:12:11,360 Speaker 5: some would expect. 258 00:12:11,720 --> 00:12:12,559 Speaker 3: Both both. 259 00:12:12,600 --> 00:12:14,560 Speaker 6: I mean, Emory, you know, we put this chart together, 260 00:12:14,679 --> 00:12:16,600 Speaker 6: you know, looking at the percent of world GDP that 261 00:12:16,760 --> 00:12:19,720 Speaker 6: had a deal in place. Back in April, it was zero, 262 00:12:19,840 --> 00:12:21,559 Speaker 6: you know, nobody had a trade deal done with the 263 00:12:21,640 --> 00:12:24,680 Speaker 6: United States. And today, fast forward to today, in about 264 00:12:24,679 --> 00:12:27,280 Speaker 6: thirty percent, about twenty eight percent of the world GDP 265 00:12:27,440 --> 00:12:29,560 Speaker 6: has some sort of a deal in place, and there's 266 00:12:29,600 --> 00:12:32,840 Speaker 6: still a big chunk of global GDP that's in negotiation. 267 00:12:33,320 --> 00:12:34,120 Speaker 3: So that's the. 268 00:12:34,040 --> 00:12:37,080 Speaker 6: First point is that you have predictability, you have some 269 00:12:37,160 --> 00:12:41,080 Speaker 6: clarity for a growing share of GDP. The second point 270 00:12:41,120 --> 00:12:43,840 Speaker 6: is the one you made, which is, you know, for 271 00:12:44,040 --> 00:12:48,200 Speaker 6: most countries that are able to negotiate a deal, they're 272 00:12:48,240 --> 00:12:50,440 Speaker 6: doing so at a lower ter afraid that could have 273 00:12:50,520 --> 00:12:53,000 Speaker 6: been under the Liberation Day announcement. So I think it's 274 00:12:53,040 --> 00:12:55,320 Speaker 6: both of those things. And then the third point is 275 00:12:55,360 --> 00:12:56,880 Speaker 6: now that we have the numbers, Now that we have 276 00:12:57,080 --> 00:12:59,640 Speaker 6: the certainty, we actually know how to price things. And 277 00:12:59,679 --> 00:13:01,920 Speaker 6: this is why I say some of the delactivity can 278 00:13:02,040 --> 00:13:06,520 Speaker 6: also move from being contemplated to actually being materialized because 279 00:13:06,520 --> 00:13:09,280 Speaker 6: we know exactly what we have to pencil into the models. 280 00:13:09,280 --> 00:13:11,280 Speaker 5: But what happens when the higher rates, which is a 281 00:13:11,360 --> 00:13:14,480 Speaker 5: much higher average rate than we had last year, actually 282 00:13:14,520 --> 00:13:18,920 Speaker 5: starts to get digested in this economy two point five 283 00:13:18,960 --> 00:13:23,160 Speaker 5: percent versus fifteen percent, twenty percent depending on righty right. 284 00:13:23,520 --> 00:13:25,640 Speaker 6: Well, that's why I call this a quarter of adjustment, 285 00:13:25,679 --> 00:13:28,000 Speaker 6: and is going to happen this quarter. If you think about, 286 00:13:28,040 --> 00:13:30,880 Speaker 6: for example, the tariffs that were back back in April 287 00:13:30,880 --> 00:13:33,480 Speaker 6: about three percent. Now the tariffs have ratched up closer 288 00:13:33,520 --> 00:13:35,320 Speaker 6: to ten percent, and I think most of that is 289 00:13:35,360 --> 00:13:37,600 Speaker 6: being collected now, and in the next month or two 290 00:13:37,600 --> 00:13:40,760 Speaker 6: we're going to see fifteen or sixteen percent that's collected. 291 00:13:41,080 --> 00:13:43,200 Speaker 6: But one thing that I will refer back to the 292 00:13:43,200 --> 00:13:45,040 Speaker 6: Caterpillar report that I found interesting. 293 00:13:45,320 --> 00:13:47,319 Speaker 3: They very much talk about profit. 294 00:13:47,000 --> 00:13:51,559 Speaker 6: Margins including the tariff hit, but also profit margins excluding 295 00:13:51,600 --> 00:13:54,040 Speaker 6: the tariff hit, and that really suggests to me that 296 00:13:54,160 --> 00:13:57,320 Speaker 6: companies as well as the FED are treating this as 297 00:13:57,360 --> 00:14:00,200 Speaker 6: a one off adjustment that they need to take, they 298 00:14:00,240 --> 00:14:02,880 Speaker 6: need to process, and I think it happens in Q. 299 00:14:02,760 --> 00:14:05,079 Speaker 1: Three as you see the pipeline of opportunities in the 300 00:14:05,120 --> 00:14:08,000 Speaker 1: private markets really build steam. You're buying it to open 301 00:14:08,040 --> 00:14:09,840 Speaker 1: AI at five hundred billion dollars. 302 00:14:10,640 --> 00:14:12,720 Speaker 6: I will defer to our investment teams on that, but 303 00:14:12,880 --> 00:14:15,600 Speaker 6: you know, I think valuation is something we take very seriously. 304 00:14:15,960 --> 00:14:19,280 Speaker 6: And look, I will say Lisa broadly speaking, and private markets, 305 00:14:19,320 --> 00:14:21,520 Speaker 6: you know, it's where can we find the most robust 306 00:14:21,560 --> 00:14:24,800 Speaker 6: margins and where can we find the fastest growth rate 307 00:14:24,840 --> 00:14:26,960 Speaker 6: and EPs and how can we actually build that. 308 00:14:26,960 --> 00:14:29,400 Speaker 1: That's where we're focused on building, rather than maybe buying 309 00:14:29,400 --> 00:14:31,280 Speaker 1: into after the fact. You give one hundred million dollar 310 00:14:31,360 --> 00:14:33,240 Speaker 1: bonuses to all the people to have them stay in place, 311 00:14:33,240 --> 00:14:37,479 Speaker 1: although that might be the benefit for some of these strategies. 312 00:14:37,520 --> 00:14:40,160 Speaker 1: ANC Gamors a partners group. Thank you, wonderful, Thanks to 313 00:14:40,160 --> 00:14:53,800 Speaker 1: you as always. Frankly of HSBC has a buy rating 314 00:14:53,880 --> 00:14:55,880 Speaker 1: on the stock and a price target of two hundred 315 00:14:55,960 --> 00:14:58,560 Speaker 1: dollars from the current one hundred and sixty three, Noting 316 00:14:58,720 --> 00:15:01,880 Speaker 1: a bullish AI own a need for higher conviction to 317 00:15:02,040 --> 00:15:03,280 Speaker 1: drive earnings upside. 318 00:15:03,360 --> 00:15:05,280 Speaker 3: Frank joins us now for more. Frank, thank you so 319 00:15:05,360 --> 00:15:06,160 Speaker 3: much for being with us. 320 00:15:06,520 --> 00:15:09,240 Speaker 1: How frustrating is it to get the fundamental story right 321 00:15:09,600 --> 00:15:11,120 Speaker 1: and the price action wrong. 322 00:15:12,640 --> 00:15:14,840 Speaker 7: Yeah, that's a good question, I think when you think 323 00:15:14,840 --> 00:15:17,200 Speaker 7: about this, though, it was just really about the conviction 324 00:15:17,760 --> 00:15:20,240 Speaker 7: that the management needed to give people. We had a 325 00:15:20,320 --> 00:15:22,920 Speaker 7: really strong enough into results. So I think going into 326 00:15:22,960 --> 00:15:26,000 Speaker 7: these results, people were looking not only for a good number, 327 00:15:26,160 --> 00:15:29,080 Speaker 7: but something tangible for analysts to be able to raise 328 00:15:29,120 --> 00:15:32,040 Speaker 7: their numbers significantly after these results. I don't think we 329 00:15:32,120 --> 00:15:35,560 Speaker 7: got that, so I think that was why the shares 330 00:15:35,600 --> 00:15:37,960 Speaker 7: didn't react so well. And I think the other point 331 00:15:38,160 --> 00:15:41,000 Speaker 7: was China as well. There was a lot of expectations 332 00:15:41,040 --> 00:15:43,640 Speaker 7: built into that d I threeh eight would come back, 333 00:15:43,880 --> 00:15:47,160 Speaker 7: But it also shows you the complexities of the China 334 00:15:47,280 --> 00:15:50,000 Speaker 7: US relationship. So I think now people are going to 335 00:15:50,040 --> 00:15:51,960 Speaker 7: have to take a step back and look at whether 336 00:15:52,040 --> 00:15:54,520 Speaker 7: or not how quickly these licenses can come and how 337 00:15:54,600 --> 00:15:57,160 Speaker 7: quickly these revenues can come. But again, I think the 338 00:15:57,280 --> 00:15:59,480 Speaker 7: market is over focusing a bit on it, because if 339 00:15:59,480 --> 00:16:02,160 Speaker 7: you look at the fundamentals, there's a lot of growth 340 00:16:02,160 --> 00:16:04,920 Speaker 7: still in the hyperscalers that's more than enough to go 341 00:16:05,040 --> 00:16:06,520 Speaker 7: around to drive their growth, So. 342 00:16:06,840 --> 00:16:09,960 Speaker 1: Our investors just sort of looking for certainty where there 343 00:16:10,080 --> 00:16:14,080 Speaker 1: is none. Are the outperformers right now just giving false 344 00:16:14,120 --> 00:16:17,360 Speaker 1: promises of hope or are you saying that essentially there 345 00:16:17,400 --> 00:16:20,400 Speaker 1: are some companies that are more fortified against some of 346 00:16:20,440 --> 00:16:22,040 Speaker 1: these uncertainties and are getting. 347 00:16:21,800 --> 00:16:24,200 Speaker 3: Rewarded for that, and these others are sort of in. 348 00:16:24,200 --> 00:16:26,720 Speaker 1: A weight and see mode from a stock performance standpoint. 349 00:16:27,960 --> 00:16:28,160 Speaker 8: Yeah. 350 00:16:28,200 --> 00:16:30,520 Speaker 7: So, I think you know that the China element certainly 351 00:16:30,720 --> 00:16:32,800 Speaker 7: has become a big part of the narrative this year, 352 00:16:33,080 --> 00:16:36,160 Speaker 7: not only for AMD but also for Ennvidia, So I 353 00:16:36,200 --> 00:16:39,280 Speaker 7: think that has complicated the AI story a bit in 354 00:16:39,520 --> 00:16:41,560 Speaker 7: a way. I think you know that the expectations are 355 00:16:41,840 --> 00:16:44,040 Speaker 7: probably a bit more bullish on that. But we also 356 00:16:44,120 --> 00:16:47,120 Speaker 7: believe though that you don't quite need the China story 357 00:16:47,480 --> 00:16:49,440 Speaker 7: for this to play out. I mean, we still see 358 00:16:49,600 --> 00:16:52,040 Speaker 7: very strong demand. They highlight on the call that the 359 00:16:52,160 --> 00:16:54,320 Speaker 7: Mi I three five five is doing very well, better 360 00:16:54,360 --> 00:16:57,400 Speaker 7: than expected, and the pricing OUTLOAK is better, So we 361 00:16:57,480 --> 00:17:00,280 Speaker 7: do think that it can continue to work. I think 362 00:17:00,280 --> 00:17:02,320 Speaker 7: the narrative has been a little bit too narrowly focused 363 00:17:02,360 --> 00:17:04,560 Speaker 7: on on the China part, and we've come to realization 364 00:17:04,680 --> 00:17:06,720 Speaker 7: that is not going to be as easy for China 365 00:17:06,800 --> 00:17:08,840 Speaker 7: revenues to come back in as people previously expected. 366 00:17:08,880 --> 00:17:10,720 Speaker 5: If we get sit on China for a second, why 367 00:17:10,840 --> 00:17:13,119 Speaker 5: is it so much harder for AMD than in Video. 368 00:17:14,760 --> 00:17:17,640 Speaker 7: Well, we haven't seen the Nvidia numbers yet, so I guess, 369 00:17:17,760 --> 00:17:19,800 Speaker 7: you know, in the next or the next month, we'll 370 00:17:19,840 --> 00:17:23,560 Speaker 7: see how much Nvidia ad back comes back from China. 371 00:17:24,280 --> 00:17:27,320 Speaker 7: I think AMD did disappoint the fact that they haven't 372 00:17:27,320 --> 00:17:30,840 Speaker 7: started their revenues. We do expect. I think Nvidia had 373 00:17:31,080 --> 00:17:33,920 Speaker 7: more inventory on hand that they could probably ship out. 374 00:17:34,200 --> 00:17:36,120 Speaker 7: You also saw that AMD had a lot of work 375 00:17:36,160 --> 00:17:39,080 Speaker 7: in progress inventory, so that has to be resumed. So 376 00:17:39,160 --> 00:17:40,920 Speaker 7: that's going to take a bit longer versus what we 377 00:17:41,040 --> 00:17:44,080 Speaker 7: saw for potentially for Nvidia, which had already built up 378 00:17:44,520 --> 00:17:45,680 Speaker 7: you know, finished good inventory. 379 00:17:45,880 --> 00:17:47,920 Speaker 5: But in Vidia has been, at least when it comes 380 00:17:47,960 --> 00:17:50,720 Speaker 5: to the rhetoric, very bullish on getting back into China. 381 00:17:50,920 --> 00:17:54,720 Speaker 5: Actually we learned of the Trump administrations you turn on 382 00:17:54,960 --> 00:17:58,800 Speaker 5: these export controls because Jensen Wang was in Beijing and 383 00:17:58,880 --> 00:18:01,320 Speaker 5: in video released this statement that they're going to put 384 00:18:01,320 --> 00:18:03,280 Speaker 5: the age twenties back in the Chinese market. 385 00:18:03,600 --> 00:18:05,720 Speaker 3: So would you say they are months ahead of where 386 00:18:05,760 --> 00:18:06,399 Speaker 3: am D is. 387 00:18:08,080 --> 00:18:09,840 Speaker 7: I think they you know, I guess said earlier. I 388 00:18:09,840 --> 00:18:12,920 Speaker 7: think the way their product has been built out, they've 389 00:18:12,960 --> 00:18:15,560 Speaker 7: already shipped out a lot more chips, so I think 390 00:18:15,640 --> 00:18:18,119 Speaker 7: they are in that sense ahead, Whereas you know, AMD 391 00:18:18,240 --> 00:18:20,560 Speaker 7: has admitted that they have a lot of these products 392 00:18:20,560 --> 00:18:23,320 Speaker 7: are still in the building phase, so that's why it's 393 00:18:23,320 --> 00:18:25,680 Speaker 7: going to take longer, as well as waiting for the licenses. 394 00:18:25,920 --> 00:18:28,240 Speaker 7: So I think that's probably the one of the reasons 395 00:18:28,320 --> 00:18:31,800 Speaker 7: why you see a stronger recovery for EN video from 396 00:18:31,840 --> 00:18:32,440 Speaker 7: the China. 397 00:18:32,240 --> 00:18:34,440 Speaker 1: Part, Frank, we hear a lot of noise about tariffs 398 00:18:34,480 --> 00:18:38,240 Speaker 1: and ongoing discussions that are happening right now. The President 399 00:18:38,480 --> 00:18:41,639 Speaker 1: of the United States has talked about semiconductor tariffs that 400 00:18:41,680 --> 00:18:43,880 Speaker 1: could go on as soon as this week. How much 401 00:18:43,920 --> 00:18:45,840 Speaker 1: has that already factored into a lot of the earnings. 402 00:18:45,880 --> 00:18:47,920 Speaker 1: How much noise is there and how much signal? 403 00:18:49,400 --> 00:18:51,879 Speaker 7: Yeah, so I think, you know, the the semiconductor tariff 404 00:18:51,920 --> 00:18:55,159 Speaker 7: is definitely something that has been on people's minds. I 405 00:18:55,240 --> 00:18:57,560 Speaker 7: think for the most part, if you see a tariff 406 00:18:57,600 --> 00:18:59,840 Speaker 7: that's less than twenty percent, I think the market will 407 00:18:59,840 --> 00:19:02,879 Speaker 7: be we'll take that quite well. But it could be 408 00:19:02,920 --> 00:19:04,920 Speaker 7: a lot higher than that. I think it's going to 409 00:19:05,000 --> 00:19:08,040 Speaker 7: hit the actual chip makers like TSMC a lot harder. 410 00:19:08,400 --> 00:19:11,080 Speaker 7: I think the actual the companies that are leveraged to 411 00:19:11,200 --> 00:19:13,920 Speaker 7: the hyperscllic growth then can pass on some of these 412 00:19:14,000 --> 00:19:18,119 Speaker 7: crises increases more effectively as the hyperscillars have a lot 413 00:19:18,200 --> 00:19:20,680 Speaker 7: bigger CAPEX budgets and continue to raise them. So I 414 00:19:20,720 --> 00:19:22,680 Speaker 7: think it's going to hit the consumer part of this 415 00:19:22,920 --> 00:19:25,520 Speaker 7: semiconductor pile a lot, a lot harder than it's going 416 00:19:25,600 --> 00:19:26,800 Speaker 7: to be on the AI side. 417 00:19:27,000 --> 00:19:29,399 Speaker 1: Frank, what about some of these proposals to put tracking 418 00:19:29,480 --> 00:19:34,080 Speaker 1: devices in certain high caliber chips as well as some 419 00:19:34,280 --> 00:19:37,400 Speaker 1: of the constraints without constraining the supply chips. I'm really 420 00:19:37,440 --> 00:19:40,000 Speaker 1: trying to wrap my head around what the administration is 421 00:19:40,080 --> 00:19:43,240 Speaker 1: trying to do to keep the flow of commerce while 422 00:19:43,440 --> 00:19:46,760 Speaker 1: clamping down on some of the more sensitive chips. Do 423 00:19:46,800 --> 00:19:48,679 Speaker 1: you have a sense of how this is coming together, 424 00:19:48,800 --> 00:19:50,280 Speaker 1: of what this proposal looks like. 425 00:19:51,720 --> 00:19:54,080 Speaker 7: I think it's still very difficult to have an idea 426 00:19:54,080 --> 00:19:56,359 Speaker 7: of how it's going to end up. But remember this 427 00:19:56,480 --> 00:20:00,320 Speaker 7: also isn't entirely one sided. We've had some chatter last 428 00:20:00,359 --> 00:20:03,520 Speaker 7: week of China having some concerns about the video chips 429 00:20:03,520 --> 00:20:06,320 Speaker 7: as well, you know, in terms of whether there's kind 430 00:20:06,320 --> 00:20:08,560 Speaker 7: of a kill switch. So I think there's going to 431 00:20:08,600 --> 00:20:10,520 Speaker 7: be a lot of back and forth when it comes 432 00:20:10,560 --> 00:20:13,040 Speaker 7: to this. So I think for most people that look 433 00:20:13,119 --> 00:20:15,800 Speaker 7: at the AI story, we should continue to look at 434 00:20:16,359 --> 00:20:18,240 Speaker 7: outside China as an area of growth. 435 00:20:18,320 --> 00:20:18,439 Speaker 3: Right. 436 00:20:18,800 --> 00:20:21,160 Speaker 7: I know there's the narrative continues to be on China, 437 00:20:21,440 --> 00:20:24,240 Speaker 7: but if you look at you know what's really doing well. Basically, 438 00:20:24,600 --> 00:20:27,520 Speaker 7: you know, the AI companies, these chips are doing fine 439 00:20:27,560 --> 00:20:29,680 Speaker 7: without the China market. I know people would like the 440 00:20:29,760 --> 00:20:31,920 Speaker 7: China market, but if you take out the China market, 441 00:20:32,000 --> 00:20:34,480 Speaker 7: these guys are still growing and I think the most 442 00:20:34,520 --> 00:20:35,919 Speaker 7: part still beating expectations. 443 00:20:36,200 --> 00:20:39,280 Speaker 1: Frankly of HSBC, thank you so much as always for 444 00:20:39,480 --> 00:20:52,320 Speaker 1: your insights. Joining us now is Rich Greenfield of Lightshed 445 00:20:52,400 --> 00:20:55,479 Speaker 1: Partners Rich. Before we get into the nitty gritty, why 446 00:20:55,560 --> 00:20:58,320 Speaker 1: are shares lower after what Githa just described was a 447 00:20:58,320 --> 00:20:59,560 Speaker 1: pretty blowout report. 448 00:21:00,480 --> 00:21:02,600 Speaker 8: I mean, I think you got to sort of step back. 449 00:21:02,680 --> 00:21:04,880 Speaker 8: First of all, I think blowout might be a strong word. 450 00:21:05,160 --> 00:21:07,679 Speaker 8: I think the reality is Disney Stock has obviously had 451 00:21:07,720 --> 00:21:10,400 Speaker 8: a nice little run over the course of the last 452 00:21:10,440 --> 00:21:13,639 Speaker 8: six months. I think the company definitely I don't want 453 00:21:13,680 --> 00:21:15,480 Speaker 8: to say with sandbagging, but you know, if you listen 454 00:21:15,560 --> 00:21:19,639 Speaker 8: to Hugh Johnson Disney CFO, he certainly was keeping you know, 455 00:21:19,760 --> 00:21:23,200 Speaker 8: he didn't raise expectations after last quarter is pretty meaningful, 456 00:21:23,400 --> 00:21:25,760 Speaker 8: you know, upside in the first you know, several quarters 457 00:21:25,760 --> 00:21:27,280 Speaker 8: of the year. So I think there was sort of 458 00:21:27,320 --> 00:21:31,280 Speaker 8: an expectation that this was going to be good, that 459 00:21:31,400 --> 00:21:35,359 Speaker 8: they were going to exceed expectations and raise the guidance, 460 00:21:35,400 --> 00:21:37,000 Speaker 8: and so I think it was sort of in the stock. 461 00:21:37,080 --> 00:21:38,800 Speaker 8: So I again, I think this has been a very 462 00:21:38,880 --> 00:21:41,480 Speaker 8: widely owned stock. People were sort of knew that the 463 00:21:41,680 --> 00:21:45,560 Speaker 8: outperformance was coming. And I think the reality is I 464 00:21:45,600 --> 00:21:47,520 Speaker 8: think the thing that surprises me is that there isn't 465 00:21:47,640 --> 00:21:51,639 Speaker 8: more excitement around the WWE deal this morning or the 466 00:21:51,880 --> 00:21:54,399 Speaker 8: NFL deal. But I think just sort of the you know, 467 00:21:54,520 --> 00:21:57,800 Speaker 8: sort of hitting what people have thought and you're sort 468 00:21:57,840 --> 00:21:59,880 Speaker 8: of seeing sell on the news more than anything else. 469 00:22:00,119 --> 00:22:02,560 Speaker 3: Well, the market initially really did like that deal. 470 00:22:02,600 --> 00:22:05,960 Speaker 5: When it comes to ESPN and the NFL media, what 471 00:22:06,040 --> 00:22:08,320 Speaker 5: does this say to you about the direction of travel 472 00:22:08,640 --> 00:22:10,920 Speaker 5: for Disney and the company r at large? 473 00:22:10,960 --> 00:22:12,320 Speaker 3: Is that going to be a spinofferage? 474 00:22:13,320 --> 00:22:15,080 Speaker 8: Well, look, I think that you got to step back, 475 00:22:15,160 --> 00:22:17,000 Speaker 8: and so you know, the stock is trading. You know, 476 00:22:17,080 --> 00:22:19,320 Speaker 8: you've got it up on the screen right now, one 477 00:22:19,400 --> 00:22:22,480 Speaker 8: hundred and fifteen dollars. If you go back ten years ago, 478 00:22:22,680 --> 00:22:27,359 Speaker 8: Disney reported their fiscal you know, Q three earnings the 479 00:22:27,480 --> 00:22:30,600 Speaker 8: same week. Ten years ago, the stock was trading at 480 00:22:30,680 --> 00:22:33,119 Speaker 8: this exact same level. So this has been sort of 481 00:22:33,200 --> 00:22:36,280 Speaker 8: a lost decade for Disney in terms of the stock. Yes, 482 00:22:36,359 --> 00:22:38,080 Speaker 8: it's been up and down in between, but you know, 483 00:22:38,200 --> 00:22:41,359 Speaker 8: ten years it hasn't performed. I think it's really setting 484 00:22:41,440 --> 00:22:44,520 Speaker 8: the stage for a strategic transformation. And you know, iigers 485 00:22:44,600 --> 00:22:47,320 Speaker 8: last year is twenty twenty six, and I think when 486 00:22:47,320 --> 00:22:50,320 Speaker 8: you look at how they're positioning ESPN, you know, if 487 00:22:50,400 --> 00:22:53,280 Speaker 8: you think about sort of launching the direct to consumer service, 488 00:22:53,720 --> 00:22:57,240 Speaker 8: having its stand on its own, adding in the NFL content, 489 00:22:57,440 --> 00:23:00,719 Speaker 8: doing the big NBA deal this morning, doing the WWE 490 00:23:00,920 --> 00:23:04,880 Speaker 8: WrestleMania deal. They are putting all of the pieces together 491 00:23:05,400 --> 00:23:09,000 Speaker 8: to separate ESPN and probably ESPN and ABC from the 492 00:23:09,080 --> 00:23:11,880 Speaker 8: rest of the Walt Disney Company at some point over 493 00:23:11,920 --> 00:23:14,480 Speaker 8: the next twelve to eighteen months. And I think that 494 00:23:14,760 --> 00:23:17,520 Speaker 8: is going to be the next strategic catalyst for Disney. 495 00:23:18,119 --> 00:23:19,639 Speaker 8: I don't know, I don't think they'll talk about it 496 00:23:19,720 --> 00:23:22,200 Speaker 8: this morning, but it feels like they're setting the stage 497 00:23:22,240 --> 00:23:22,440 Speaker 8: for that. 498 00:23:22,720 --> 00:23:25,919 Speaker 5: Does Bob Iger want that before he exits the company? 499 00:23:25,960 --> 00:23:27,840 Speaker 5: And by the way, we should we should not. It's 500 00:23:28,200 --> 00:23:30,200 Speaker 5: expectations he's going to exit. 501 00:23:31,200 --> 00:23:33,159 Speaker 3: Some think maybe he's going to stay on. 502 00:23:34,560 --> 00:23:39,800 Speaker 8: Look, I have no insight into whether Bob actually leaves. 503 00:23:39,840 --> 00:23:42,080 Speaker 8: He certainly has been telling everyone that is close to 504 00:23:42,200 --> 00:23:44,880 Speaker 8: him that when he's that he's really leaving this time. 505 00:23:45,680 --> 00:23:48,840 Speaker 8: You know, the chairman of the board, Gorman, is certainly 506 00:23:48,960 --> 00:23:51,760 Speaker 8: tasked with finding a replacement. I think you're going to 507 00:23:51,840 --> 00:23:54,560 Speaker 8: see that replacement. And you know, look, I think Disney 508 00:23:54,640 --> 00:23:57,639 Speaker 8: has two core challenges figuring out the future. You know, 509 00:23:57,680 --> 00:23:59,879 Speaker 8: if you think about youth culture, my partner Brandon row 510 00:24:00,040 --> 00:24:03,639 Speaker 8: Us has been writing about sort of the incredible surge 511 00:24:03,680 --> 00:24:06,440 Speaker 8: of engagement around roadblocks, Like if you look at where 512 00:24:06,640 --> 00:24:09,640 Speaker 8: youth culture is and where kids are spending their time, 513 00:24:10,160 --> 00:24:12,399 Speaker 8: it's hard not to look at something like roadblocks and go, 514 00:24:12,800 --> 00:24:15,600 Speaker 8: how is Disney not in this world? Like, sure, they're 515 00:24:15,640 --> 00:24:17,880 Speaker 8: building something on Fortnite, but if you look at sort 516 00:24:17,920 --> 00:24:22,520 Speaker 8: of the UGC growth that's happening so organically on roadblocks, 517 00:24:22,560 --> 00:24:25,560 Speaker 8: like that seems more like where Disney should be than 518 00:24:25,640 --> 00:24:28,200 Speaker 8: trying to figure out the future of sports streaming with 519 00:24:28,600 --> 00:24:31,800 Speaker 8: ESPN and ABC, And so I think, sort of whoever 520 00:24:32,000 --> 00:24:34,960 Speaker 8: is Disney's CEO? I think the big task is figuring 521 00:24:35,040 --> 00:24:38,080 Speaker 8: out what is the future mix of this company? What 522 00:24:38,280 --> 00:24:41,359 Speaker 8: is the ideal mix of assets to be positioned so 523 00:24:41,480 --> 00:24:43,680 Speaker 8: that the next decade looks a lot better than the 524 00:24:43,760 --> 00:24:44,439 Speaker 8: last decade. 525 00:24:44,600 --> 00:24:46,840 Speaker 3: There's also a question of the geographic footprint rich. 526 00:24:46,880 --> 00:24:48,960 Speaker 1: I mean, we're seeing AMD shares fall because of a 527 00:24:49,040 --> 00:24:52,280 Speaker 1: lack of certainty with China, but we understand that Disney 528 00:24:52,359 --> 00:24:55,720 Speaker 1: has its footprints in China as well as around the world, 529 00:24:56,040 --> 00:24:58,040 Speaker 1: even though some people might see it as sort of 530 00:24:58,080 --> 00:25:01,119 Speaker 1: brand Americana. How much does that throw button or how 531 00:25:01,200 --> 00:25:03,640 Speaker 1: much do you want to hear about that on today's call? 532 00:25:04,840 --> 00:25:07,560 Speaker 8: And look, you know, I think a topic that people 533 00:25:07,600 --> 00:25:10,399 Speaker 8: don't really like to talk about, right is how are 534 00:25:10,600 --> 00:25:13,360 Speaker 8: US movies performing overseas? And I think if you look 535 00:25:13,400 --> 00:25:16,800 Speaker 8: at a lot of the international performance, you're seeing it 536 00:25:16,920 --> 00:25:20,879 Speaker 8: be relatively underwhelming. And you know, I do scratch my 537 00:25:21,000 --> 00:25:23,840 Speaker 8: head and wonder whether there is sort of a greater 538 00:25:24,080 --> 00:25:28,040 Speaker 8: sort of anti American sentiment. Certainly China has boxed almost 539 00:25:28,440 --> 00:25:30,639 Speaker 8: even if they let us movies in, they don't do 540 00:25:30,720 --> 00:25:33,280 Speaker 8: any box office anymore. And so I do think that 541 00:25:33,400 --> 00:25:36,720 Speaker 8: there is this growing fear I have around Hollywood and 542 00:25:37,600 --> 00:25:41,760 Speaker 8: the movie exhibition business that international which used to be 543 00:25:41,960 --> 00:25:44,320 Speaker 8: sort of the huge upside for these films, like you 544 00:25:44,400 --> 00:25:46,320 Speaker 8: did a good number in the US and then you 545 00:25:46,440 --> 00:25:50,359 Speaker 8: blew it out overseas. We're seeing a lot of underperformance 546 00:25:50,480 --> 00:25:53,160 Speaker 8: overseas that is increasingly concerning. 547 00:25:53,280 --> 00:25:54,680 Speaker 3: Which I'm just wanting looking forward. 548 00:25:54,920 --> 00:25:56,440 Speaker 1: The other thing that we've heard in terms of a 549 00:25:56,520 --> 00:25:59,440 Speaker 1: theme from companies has been artificial intelligence. And I know 550 00:25:59,520 --> 00:26:03,440 Speaker 1: that Disney and other content creators have really not wanted 551 00:26:03,440 --> 00:26:05,680 Speaker 1: to talk about this because of the strikes in Hollywood 552 00:26:05,840 --> 00:26:08,400 Speaker 1: and some of the other concerns around what this will 553 00:26:08,440 --> 00:26:09,439 Speaker 1: do to jobs. 554 00:26:09,520 --> 00:26:12,680 Speaker 3: But is that going to be something that you expect. 555 00:26:12,400 --> 00:26:15,520 Speaker 1: To hear about given that it's kind of a tool 556 00:26:15,600 --> 00:26:16,880 Speaker 1: that they will need to be using. 557 00:26:19,080 --> 00:26:21,840 Speaker 8: I think everyone in Hollywood is going to initially look 558 00:26:21,920 --> 00:26:25,080 Speaker 8: to how do they use this to speed up creation 559 00:26:25,600 --> 00:26:29,560 Speaker 8: and reduce cost. You know, the challenge is going to 560 00:26:29,680 --> 00:26:32,440 Speaker 8: be not so much how a company like Disney or 561 00:26:32,560 --> 00:26:36,520 Speaker 8: Warner Brothers, Discovery or Paramount uses these tools but how 562 00:26:36,680 --> 00:26:39,760 Speaker 8: the kid in their basement, you know, who never could 563 00:26:39,800 --> 00:26:45,040 Speaker 8: have created a feature film before now can like will 564 00:26:45,160 --> 00:26:47,120 Speaker 8: somebody come up with Bluey in their basement? 565 00:26:47,280 --> 00:26:47,399 Speaker 4: Right? 566 00:26:47,560 --> 00:26:47,600 Speaker 7: Like? 567 00:26:47,800 --> 00:26:50,200 Speaker 8: Just using all of these powerful tools. If you're a 568 00:26:50,240 --> 00:26:53,359 Speaker 8: good storyteller, you don't have to be a good animator anymore. 569 00:26:53,480 --> 00:26:55,840 Speaker 8: AI can do that for you. And so I think 570 00:26:55,920 --> 00:26:58,200 Speaker 8: what's going to be really interesting as you look forward 571 00:26:58,320 --> 00:27:02,280 Speaker 8: is is the how the competition or the competitive landscape, 572 00:27:02,640 --> 00:27:05,560 Speaker 8: not just for Disney, but for all these media companies 573 00:27:06,080 --> 00:27:08,320 Speaker 8: changes over the course of probably the next three to 574 00:27:08,400 --> 00:27:12,439 Speaker 8: five years. I mean, the pace of AI innovation is astounding, 575 00:27:12,960 --> 00:27:15,119 Speaker 8: and I think what you can do is only getting 576 00:27:15,320 --> 00:27:19,720 Speaker 8: cheaper and faster and easier. And so the competitive dynamic 577 00:27:19,840 --> 00:27:23,840 Speaker 8: that currently exists there aren't many companies that do feature 578 00:27:23,920 --> 00:27:27,560 Speaker 8: linked animation. I wonder in five years how we're going 579 00:27:27,680 --> 00:27:30,320 Speaker 8: to think about the competitive set for animation. 580 00:27:30,840 --> 00:27:32,960 Speaker 1: Rich Greenfield of Lightshed Partners, thank you so much for 581 00:27:33,040 --> 00:27:33,879 Speaker 1: being with us today. 582 00:27:34,760 --> 00:27:38,280 Speaker 2: This is the Bloomberg Savnants podcast, bringing you the best 583 00:27:38,359 --> 00:27:41,640 Speaker 2: in markets, economics, anchient politics. You can watch the show 584 00:27:41,720 --> 00:27:44,639 Speaker 2: live on bloombag TV weekday mornings from six am to 585 00:27:44,800 --> 00:27:48,520 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 586 00:27:48,680 --> 00:27:50,920 Speaker 2: or anywhere else you listen, and as always, on the 587 00:27:50,960 --> 00:27:53,400 Speaker 2: bloom Blog terminal and the Bloomberg Business apps.