1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferroll and Lisa Brownwitz Jailey. We bring you 3 00:00:13,320 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:29,320 Speaker 1: and of course on the Bloomberg terminal. So I'm set 6 00:00:29,400 --> 00:00:31,479 Speaker 1: up our next guest. This from Ben Laidler of ETA. 7 00:00:31,480 --> 00:00:33,040 Speaker 1: All right, this is what he had to say. Analysts 8 00:00:33,040 --> 00:00:37,320 Speaker 1: are dramatically underestimating the recovering company profits. They have hugely 9 00:00:37,400 --> 00:00:40,080 Speaker 1: underestimated the earnings rebound for three quarters in a row, 10 00:00:40,520 --> 00:00:43,600 Speaker 1: and Tommy thinks they will continue to do so. This 11 00:00:43,720 --> 00:00:45,959 Speaker 1: is some of the nuances of the bullmarket. And with that, Yard, 12 00:00:46,040 --> 00:00:48,559 Speaker 1: Danny and David Coston with us later as a standout 13 00:00:48,600 --> 00:00:51,480 Speaker 1: show John, Ben Laidler more than anyone I know, he's 14 00:00:51,479 --> 00:00:54,800 Speaker 1: consistently been shut up and get along. He's been doing 15 00:00:54,840 --> 00:00:57,680 Speaker 1: that for pushing three years now. More than anyone else. 16 00:00:57,720 --> 00:01:00,880 Speaker 1: He has reaffirmed his optim as some week to week. 17 00:01:01,000 --> 00:01:03,240 Speaker 1: The Equity Bill joined us right now, Ben later at 18 00:01:03,400 --> 00:01:06,280 Speaker 1: a global market strategist. Ben, let's start there, why do 19 00:01:06,319 --> 00:01:09,600 Speaker 1: you think this will continue? So? I look at forecasts 20 00:01:09,600 --> 00:01:13,479 Speaker 1: from the consensus says that earnings actually four next quarter, 21 00:01:13,560 --> 00:01:15,280 Speaker 1: the quarter after that, and the quarter after that. But 22 00:01:15,400 --> 00:01:17,959 Speaker 1: this was the peak. I disagree with that. You look 23 00:01:18,000 --> 00:01:22,319 Speaker 1: forward to two, consensus has nine earnings growth. I mean 24 00:01:22,319 --> 00:01:24,399 Speaker 1: that just looks like a sort of placeholder that we 25 00:01:24,440 --> 00:01:26,360 Speaker 1: haven't really got around to sort of looking at yet. 26 00:01:26,800 --> 00:01:29,319 Speaker 1: Um And and again, you know, we're coming off just 27 00:01:29,360 --> 00:01:33,080 Speaker 1: this huge earnings rebound, which the market consistently underestimates. I mean, 28 00:01:33,160 --> 00:01:35,640 Speaker 1: just but overy one second. I mean the last quarter, 29 00:01:36,200 --> 00:01:38,840 Speaker 1: coming in, we thought we were gonna get sixty earnings growth. 30 00:01:39,160 --> 00:01:41,399 Speaker 1: Coming out, we had ninety. I mean that that's just 31 00:01:41,440 --> 00:01:45,039 Speaker 1: a dramatic, dramatic um, you know, earnings mix. And I 32 00:01:45,040 --> 00:01:47,320 Speaker 1: think that again there's more to come, I mean growth, 33 00:01:47,720 --> 00:01:50,800 Speaker 1: you know, it's very very high and very resilient to 34 00:01:51,040 --> 00:01:53,360 Speaker 1: you know, this third sort of virus way, these concerns 35 00:01:53,360 --> 00:01:55,920 Speaker 1: on margins. I think this is sort of the peak 36 00:01:55,960 --> 00:01:58,000 Speaker 1: of the margin pressure. And we just saw all time 37 00:01:58,080 --> 00:02:01,160 Speaker 1: high margins. So and I think that sort of underlying driver, 38 00:02:01,240 --> 00:02:03,360 Speaker 1: if you like, of why consensus is so verish. But 39 00:02:03,680 --> 00:02:05,840 Speaker 1: you know, I think the march impressure is right now. 40 00:02:05,880 --> 00:02:07,600 Speaker 1: It's not you know, it's it's it's not in twelve 41 00:02:07,640 --> 00:02:10,640 Speaker 1: months time, and that sort of top line remains remains 42 00:02:10,639 --> 00:02:14,480 Speaker 1: super strong, and people continue to underestimate the earnings leverage 43 00:02:14,480 --> 00:02:16,760 Speaker 1: to that top line. I mean, companies did a lot 44 00:02:16,760 --> 00:02:19,239 Speaker 1: of costs set over the last sort of twelve months 45 00:02:19,320 --> 00:02:22,040 Speaker 1: or so, and you know that's where the mistakes been made, 46 00:02:22,120 --> 00:02:26,639 Speaker 1: the leverage earnings to that sort of incremental improvement in revenues. 47 00:02:26,960 --> 00:02:29,840 Speaker 1: Then the key phrase there for me is placeholder. You 48 00:02:30,000 --> 00:02:33,160 Speaker 1: remember when the street at a conviction and they had 49 00:02:33,200 --> 00:02:35,639 Speaker 1: a twenty one belief for twenty two belief and they'd 50 00:02:35,680 --> 00:02:38,200 Speaker 1: even get out the June or twenty three right now, 51 00:02:38,320 --> 00:02:42,600 Speaker 1: I totally take your point and the timidity of the market. 52 00:02:42,840 --> 00:02:46,560 Speaker 1: How should our viewers and listeners play that timidity when 53 00:02:46,560 --> 00:02:48,959 Speaker 1: they look out to say, oh, I don't know February 54 00:02:49,040 --> 00:02:52,720 Speaker 1: of twenty two right. So so I think earnings are 55 00:02:52,720 --> 00:02:55,239 Speaker 1: being underestimated by maybe a factor of two for next year, 56 00:02:55,360 --> 00:02:57,560 Speaker 1: and I think the way to think about that is 57 00:02:57,600 --> 00:02:59,959 Speaker 1: a I think that gives more oxygen for this market 58 00:02:59,800 --> 00:03:03,200 Speaker 1: to keep moving up. And secondly, and as importantly, you know, 59 00:03:03,240 --> 00:03:05,040 Speaker 1: as we're facing sort of the fair about to make 60 00:03:05,080 --> 00:03:07,680 Speaker 1: a sort of decision on tapering. I think that's the 61 00:03:07,680 --> 00:03:10,639 Speaker 1: sort of insurance policy to the risk here. I mean, 62 00:03:10,680 --> 00:03:14,000 Speaker 1: earning evaluations at twenty one times, that's super high. You know, 63 00:03:14,040 --> 00:03:16,040 Speaker 1: bond yields go up. The FED tasks tapering. I mean, 64 00:03:16,080 --> 00:03:18,519 Speaker 1: those valuation numbers are probably gonna keep coming down a bit. 65 00:03:18,800 --> 00:03:20,560 Speaker 1: But the big offset to that, which I think we 66 00:03:20,600 --> 00:03:24,480 Speaker 1: continue to underestimate, is that growth will more than offset that. 67 00:03:24,720 --> 00:03:26,679 Speaker 1: And I think that's the pathway to this market to 68 00:03:26,800 --> 00:03:29,760 Speaker 1: sort of continuing higher even as we move through sort 69 00:03:29,760 --> 00:03:32,760 Speaker 1: of FED tapering and potentially lower evaluations. Then what do 70 00:03:32,800 --> 00:03:36,040 Speaker 1: you say to potential critics who say, look, take a 71 00:03:36,040 --> 00:03:38,000 Speaker 1: look at the delta area that's spreading, take a look 72 00:03:38,000 --> 00:03:39,840 Speaker 1: at some of the shutdowns that we're seeing in China, 73 00:03:40,120 --> 00:03:43,680 Speaker 1: some of the potential regulatory actions that are slowing growth there. 74 00:03:44,000 --> 00:03:47,840 Speaker 1: All of these issues a contribute to supply side constraints 75 00:03:48,080 --> 00:03:51,520 Speaker 1: that will lead to ongoing margin pressures and be removes 76 00:03:51,680 --> 00:03:54,520 Speaker 1: some China demand from the market. What do you say 77 00:03:54,680 --> 00:03:57,280 Speaker 1: to people who say, no, these margin pressures are going 78 00:03:57,280 --> 00:04:01,200 Speaker 1: to continue for a long time. I say, look at 79 00:04:01,200 --> 00:04:04,000 Speaker 1: the data right now, so PPR, you know producer prices 80 00:04:04,000 --> 00:04:06,280 Speaker 1: if you're gonna get today, you know minus consumer prices. 81 00:04:06,280 --> 00:04:07,720 Speaker 1: You look at the p M I S sort of 82 00:04:07,720 --> 00:04:11,160 Speaker 1: input prices minus output prices, it's really hard for me 83 00:04:11,240 --> 00:04:13,760 Speaker 1: to see that. You're going to see, you know, the discrepancy, 84 00:04:13,840 --> 00:04:16,120 Speaker 1: the gap, that huge gap that we've seen over the 85 00:04:16,200 --> 00:04:17,880 Speaker 1: last sort of six to nine months. You know, that 86 00:04:18,000 --> 00:04:19,920 Speaker 1: really continuing. So I think, you know, margins are going 87 00:04:19,960 --> 00:04:21,680 Speaker 1: to be under pressure, but I think that's going to 88 00:04:21,720 --> 00:04:25,200 Speaker 1: be more than offset by this, by by the revenue rebound. 89 00:04:25,200 --> 00:04:26,960 Speaker 1: I mean, just for example, just look at the sort 90 00:04:27,000 --> 00:04:30,400 Speaker 1: of these classic reopening stocks. You know, those earnings are 91 00:04:30,440 --> 00:04:34,599 Speaker 1: still down from where they work coming into the crisis. 92 00:04:34,839 --> 00:04:37,599 Speaker 1: I mean, this reopening trade has I would argue, hasn't 93 00:04:37,640 --> 00:04:39,680 Speaker 1: even started yet. I mean, these reopening stocks are still 94 00:04:39,760 --> 00:04:42,720 Speaker 1: under mowhelmed sort of work from home by six the 95 00:04:42,839 --> 00:04:46,240 Speaker 1: earnings have still been absolutely decimated, and you know, your 96 00:04:46,279 --> 00:04:48,600 Speaker 1: average economy glotally it's still you know, if you look 97 00:04:48,640 --> 00:04:51,400 Speaker 1: at these sort of lockdown indices, they're they're over fifty right, 98 00:04:51,440 --> 00:04:54,080 Speaker 1: relative to zero by definition before we came into this, 99 00:04:54,640 --> 00:04:57,280 Speaker 1: and you know, in the world hasn't been fully vaccinated yet. 100 00:04:57,279 --> 00:04:59,120 Speaker 1: So I think there's a reopening trade which is gonna 101 00:04:59,160 --> 00:05:02,359 Speaker 1: push revenues or it's gonna put journings is badly to 102 00:05:02,360 --> 00:05:05,520 Speaker 1: start started, and it may be delayed somewhat here, absolutely, 103 00:05:06,320 --> 00:05:09,039 Speaker 1: but it's it's it's not derailed. And and and the 104 00:05:09,040 --> 00:05:11,760 Speaker 1: macro day that we're seeing tells you we're just learning 105 00:05:11,800 --> 00:05:14,760 Speaker 1: to live with this. I mean, this is the third wave. Um, 106 00:05:14,800 --> 00:05:16,880 Speaker 1: you know, we're a bit more vaccinated, we're a bit 107 00:05:16,880 --> 00:05:19,280 Speaker 1: more used to dealing with this. And I think again, 108 00:05:19,360 --> 00:05:21,520 Speaker 1: earnings are going to remake very resilient and the market's 109 00:05:21,560 --> 00:05:24,360 Speaker 1: underestimating them. That is quite a statement to wrap things out. 110 00:05:24,440 --> 00:05:27,720 Speaker 1: Ben Laidla of ETA Global Market STRATEGYES Ben, thank you 111 00:05:32,279 --> 00:05:35,599 Speaker 1: right now, a massive joy. Michael Spence is any number 112 00:05:35,600 --> 00:05:38,400 Speaker 1: of things, including a noble lawyer. Yes it's General Atlantic 113 00:05:38,680 --> 00:05:42,240 Speaker 1: Senior Advisor, but he is someone who was thoughtfully rebuilt 114 00:05:42,279 --> 00:05:45,800 Speaker 1: American education with his work at Stanford and then onto 115 00:05:45,880 --> 00:05:49,080 Speaker 1: New York University and the Lawya joins us this morning 116 00:05:49,240 --> 00:05:53,159 Speaker 1: from Hello, welto Italy. This is something folks you need 117 00:05:53,240 --> 00:05:56,760 Speaker 1: to know about surveillance is these guys are on the shores. 118 00:05:57,120 --> 00:06:00,320 Speaker 1: It's some fancy, gorgeous place and they drive up in 119 00:06:00,360 --> 00:06:03,160 Speaker 1: whatever they want to drop in to pretend they're toughen 120 00:06:03,279 --> 00:06:06,839 Speaker 1: it out in Palo Alto at Stanford. You're not at Stanford, 121 00:06:06,839 --> 00:06:10,680 Speaker 1: are you, Professor Spence? I am not on the coast 122 00:06:10,680 --> 00:06:13,200 Speaker 1: of Italy. Very good, that's good to know. Right now, 123 00:06:13,320 --> 00:06:16,640 Speaker 1: I want to know a redo of your wonderful book 124 00:06:16,640 --> 00:06:20,080 Speaker 1: on convergence of a decade ago, and I want to 125 00:06:20,120 --> 00:06:23,920 Speaker 1: take a chapter there on multi speed globalism and say 126 00:06:24,040 --> 00:06:29,560 Speaker 1: it's convergence within what certainly we're seeing a multi speed pandemic. 127 00:06:29,960 --> 00:06:36,400 Speaker 1: How do we come out of this with constructive convergence? Well, Tom, 128 00:06:36,440 --> 00:06:38,919 Speaker 1: I mean it's a very important question that you raised 129 00:06:38,920 --> 00:06:43,039 Speaker 1: so briefly. Um, I think there's some serious question about 130 00:06:43,040 --> 00:06:46,320 Speaker 1: whether the convergence is going to be fairly complete with 131 00:06:46,360 --> 00:06:49,360 Speaker 1: respect to the low income countries. I mean, they're adversely 132 00:06:49,400 --> 00:06:53,479 Speaker 1: affected by it's nearly a perfect storm, the pandemic, with 133 00:06:53,720 --> 00:06:58,600 Speaker 1: very very slow vaccine rollout, that the the climate change 134 00:06:58,880 --> 00:07:03,239 Speaker 1: is obviously accelerating. They have demographic problems, they have internal 135 00:07:03,279 --> 00:07:06,640 Speaker 1: governance problems. So so you know, it was always going 136 00:07:06,680 --> 00:07:09,239 Speaker 1: to be a kind of struggle to get there. But 137 00:07:09,240 --> 00:07:13,480 Speaker 1: but I think, you know, with digital technology coming, questioning 138 00:07:13,560 --> 00:07:15,680 Speaker 1: the growth model and so on, I think you know, 139 00:07:15,840 --> 00:07:19,320 Speaker 1: we probably have to rethink this and in in the meantime, 140 00:07:19,360 --> 00:07:22,280 Speaker 1: I mean, we have some important priorities before us, and 141 00:07:22,320 --> 00:07:26,160 Speaker 1: I think item one on the list would be a 142 00:07:26,240 --> 00:07:29,440 Speaker 1: real plan to roll out the vaccine global. You have 143 00:07:29,480 --> 00:07:33,440 Speaker 1: a cottage industry and consultancy on the Pacific RIM and 144 00:07:33,480 --> 00:07:38,280 Speaker 1: particularly to China. You have studied the domestic dynamics of China. 145 00:07:38,800 --> 00:07:43,600 Speaker 1: What is our best practice to assist Beijing to diminish 146 00:07:43,680 --> 00:07:49,400 Speaker 1: the use of coal? Um? You know, they have the 147 00:07:49,440 --> 00:07:53,400 Speaker 1: technology to get this done. Um. And it's not clear 148 00:07:53,440 --> 00:07:56,240 Speaker 1: to me why they aren't moving faster. Now. You know, 149 00:07:56,360 --> 00:07:58,960 Speaker 1: China is far enough along in their economic development that 150 00:07:59,040 --> 00:08:02,440 Speaker 1: they have a problem that's similar cars, which is replacing 151 00:08:02,520 --> 00:08:09,400 Speaker 1: coal and fossil fuels with green energy and electricity generation. Uh. 152 00:08:09,440 --> 00:08:12,840 Speaker 1: And whereas a lot of you know, earlier stage countries, 153 00:08:12,880 --> 00:08:16,120 Speaker 1: you know, can have most of the electricity generation capacity 154 00:08:16,160 --> 00:08:18,520 Speaker 1: to build, so they can build it green, you know, 155 00:08:18,680 --> 00:08:22,200 Speaker 1: ab initio, so to speak. Um. But I I think 156 00:08:22,240 --> 00:08:24,240 Speaker 1: you know the answer to that is, I don't know. 157 00:08:24,400 --> 00:08:26,440 Speaker 1: And I think we ought to have a serious talk 158 00:08:26,520 --> 00:08:31,400 Speaker 1: in the context of what is now you know, globally 159 00:08:31,440 --> 00:08:34,120 Speaker 1: perceived as a serious problem. And I think we need 160 00:08:34,160 --> 00:08:37,400 Speaker 1: acceleration everywhere on a broader level of Michael in order 161 00:08:37,440 --> 00:08:42,400 Speaker 1: to lobby for an acceleration to greenify the industries like 162 00:08:42,520 --> 00:08:46,240 Speaker 1: coal and like fossil fuels. In general, there's a question 163 00:08:46,520 --> 00:08:49,920 Speaker 1: of the labor market and whether some of the adaptation 164 00:08:50,280 --> 00:08:53,040 Speaker 1: of the U the U S and Chinese economy actually 165 00:08:53,040 --> 00:08:55,280 Speaker 1: helps the labor market, where you can make an argument 166 00:08:55,480 --> 00:08:59,960 Speaker 1: that it will actually provide some sort of back tail 167 00:09:00,040 --> 00:09:03,640 Speaker 1: win basically to the improvements that the Biden administration and 168 00:09:03,960 --> 00:09:07,080 Speaker 1: jes and Ping would like to see. I think I 169 00:09:07,080 --> 00:09:09,120 Speaker 1: think there's a lot of merit in that argument, Lisa. 170 00:09:09,520 --> 00:09:13,360 Speaker 1: I mean, you know, with very large amounts of public 171 00:09:13,400 --> 00:09:17,040 Speaker 1: sector and private sector investment, which is what it's going 172 00:09:17,080 --> 00:09:19,760 Speaker 1: to take to deal with this problem in China, in 173 00:09:19,840 --> 00:09:23,199 Speaker 1: the United States, in Europe. Um, there's gonna be lots 174 00:09:23,240 --> 00:09:27,680 Speaker 1: of you know, economic activity and employment associated with it. Now, 175 00:09:27,720 --> 00:09:29,920 Speaker 1: you know, the flip side of the coin is this 176 00:09:30,000 --> 00:09:32,440 Speaker 1: is a transition and the structure of the economy, So 177 00:09:32,480 --> 00:09:38,160 Speaker 1: they'll be pockets of distress that require some kind of support. 178 00:09:38,240 --> 00:09:40,440 Speaker 1: But I think when you add it all up, it's 179 00:09:40,440 --> 00:09:45,920 Speaker 1: a positive provided the provided the investment momentum is behind it. 180 00:09:46,000 --> 00:09:49,480 Speaker 1: Is the investment momentum more likely to come from public entities, 181 00:09:49,640 --> 00:09:54,319 Speaker 1: or private entities. You know what what I was talking 182 00:09:54,320 --> 00:09:57,320 Speaker 1: with John Brown the other day, who's you know, probably 183 00:09:57,480 --> 00:09:59,520 Speaker 1: one of one of the most knowledgeable people I know 184 00:09:59,760 --> 00:10:02,360 Speaker 1: in in the in the energy field, and he thinks 185 00:10:02,400 --> 00:10:05,040 Speaker 1: it's a combination, right. You know, I don't know exactly 186 00:10:05,040 --> 00:10:08,720 Speaker 1: what the percentages. Let's call it. We need public sector 187 00:10:08,760 --> 00:10:12,840 Speaker 1: investment UM in the whole variety of kinds of infrastructure 188 00:10:12,960 --> 00:10:16,280 Speaker 1: and research and stuff. But we need private sector investment 189 00:10:16,320 --> 00:10:20,640 Speaker 1: to deliver the technologies that that businesses are now demanding. 190 00:10:20,679 --> 00:10:25,320 Speaker 1: I mean business is business broadly globally, not completely, has 191 00:10:25,360 --> 00:10:28,559 Speaker 1: committed to being part of the solution to this problem. 192 00:10:28,640 --> 00:10:31,320 Speaker 1: So that then the question is, and what are we 193 00:10:31,360 --> 00:10:35,040 Speaker 1: gonna do? And the answer is, a whole bunch of 194 00:10:35,080 --> 00:10:39,000 Speaker 1: investment has to occur to provide solutions, uh, in the 195 00:10:39,040 --> 00:10:42,320 Speaker 1: whole variety of sectors. I think it's coming. Whether it's 196 00:10:42,320 --> 00:10:45,800 Speaker 1: coming fast enough, I think it's the open question. Your 197 00:10:45,840 --> 00:10:50,920 Speaker 1: speech in Stockholm a few years ago, Professor Spence, was 198 00:10:50,960 --> 00:10:54,800 Speaker 1: about signaling about the things that we do within our 199 00:10:54,840 --> 00:10:58,839 Speaker 1: system and in our financial system that signaled to us, 200 00:10:59,320 --> 00:11:02,800 Speaker 1: what is the signal of this odd time? We live 201 00:11:02,840 --> 00:11:09,720 Speaker 1: in a massive monetary accommodation and particularly unprecedented fiscal stimulus 202 00:11:09,720 --> 00:11:15,240 Speaker 1: in the United States. What are we signaling? I think, 203 00:11:15,280 --> 00:11:18,400 Speaker 1: what what's what's being signaled? And it's the Central Bank 204 00:11:18,440 --> 00:11:22,160 Speaker 1: in the administration. Is that, you know, in balancing off 205 00:11:22,240 --> 00:11:26,280 Speaker 1: sort of you know, potential inflation slash instability as opposed 206 00:11:26,320 --> 00:11:30,160 Speaker 1: to sort of righting the ship in terms of inclusive growth. 207 00:11:30,200 --> 00:11:34,720 Speaker 1: They're going for inclusive growth. Uh and and there I 208 00:11:34,760 --> 00:11:38,160 Speaker 1: think if you've got them privately, they would say, yeah, 209 00:11:38,200 --> 00:11:41,440 Speaker 1: I know we're running some risks on on the other side, 210 00:11:41,880 --> 00:11:45,439 Speaker 1: but but it's worth it. We we had a terribly 211 00:11:45,480 --> 00:11:49,320 Speaker 1: weak um and unequal recovery from the Great Financial Crisis. 212 00:11:49,400 --> 00:11:53,160 Speaker 1: We're not doing it again, and we're gonna you know, 213 00:11:54,920 --> 00:11:58,880 Speaker 1: fire all the guns. I mean, just johonn if I 214 00:11:58,960 --> 00:12:02,840 Speaker 1: may here Pressure Spence, a guy named Boston, a guy 215 00:12:02,880 --> 00:12:06,280 Speaker 1: named John Taylor out at Palo Alto, Stanford. It looks 216 00:12:06,280 --> 00:12:09,400 Speaker 1: a lot like Palo Alto, Italy, Michael Spence, but it's 217 00:12:09,400 --> 00:12:12,720 Speaker 1: out at Stanford. They're gonna take a more conservative tax 218 00:12:12,840 --> 00:12:16,599 Speaker 1: to this and say we can't trust the path to 219 00:12:16,840 --> 00:12:21,439 Speaker 1: inclusive growth. How should the Biden administration respond to that? 220 00:12:21,720 --> 00:12:27,720 Speaker 1: In liberals worldwide, Well, you know, I think the Biden administration. 221 00:12:29,640 --> 00:12:32,680 Speaker 1: This is a personal opinion, and I respect my colleagues 222 00:12:32,720 --> 00:12:34,600 Speaker 1: who are you know, at Stanford, who are I think 223 00:12:34,640 --> 00:12:37,280 Speaker 1: a little bit more conservative on this than I am possible. 224 00:12:37,280 --> 00:12:41,520 Speaker 1: But my view is the deficit that we faced in 225 00:12:41,559 --> 00:12:45,320 Speaker 1: America that caused our growth patterns to be um out 226 00:12:45,320 --> 00:12:49,439 Speaker 1: of out of kilter in terms of inclusiveness were investment deficits, 227 00:12:49,800 --> 00:12:52,520 Speaker 1: some of its infrastructure, some of its human capital, some 228 00:12:52,640 --> 00:12:55,560 Speaker 1: of it's you know, kind of new technology and so on. 229 00:12:55,679 --> 00:12:57,560 Speaker 1: I think they're trying to address that now. They have 230 00:12:57,640 --> 00:13:00,199 Speaker 1: pressure on the left to do a whole lot more 231 00:13:00,280 --> 00:13:03,640 Speaker 1: than that, um, you know, and make the government a 232 00:13:03,640 --> 00:13:07,120 Speaker 1: whole lot bigger, and to be perfectly honest, you know, 233 00:13:07,200 --> 00:13:09,320 Speaker 1: beyond a certain point. I don't think that's gonna fly 234 00:13:09,679 --> 00:13:12,120 Speaker 1: in the American context. I mean, you know, when you 235 00:13:12,240 --> 00:13:16,040 Speaker 1: when you start getting governments that are noticeably larger than 236 00:13:16,520 --> 00:13:20,960 Speaker 1: what Americans broadly are comfortable with. The bark uh And 237 00:13:21,000 --> 00:13:23,760 Speaker 1: we won't go down that road onto the midterms next 238 00:13:23,840 --> 00:13:27,280 Speaker 1: year politically speaking, anyway, Michael gonna catch up. Appreciate time, sir, 239 00:13:27,360 --> 00:13:30,319 Speaker 1: as always the wonderful Michael spents there Nobolt Laureate and 240 00:13:30,400 --> 00:13:38,560 Speaker 1: General Atlantic Senior advisor. Well, let's get one for you 241 00:13:38,840 --> 00:13:42,640 Speaker 1: right now with any research founder and chief investment strategist, 242 00:13:42,720 --> 00:13:45,760 Speaker 1: and let's start there. The path to five K on 243 00:13:45,800 --> 00:13:48,480 Speaker 1: the SMP five hundred next year. Just walk us through 244 00:13:48,480 --> 00:13:51,600 Speaker 1: the framework for you, Ed. Well, you know, forecasting the 245 00:13:51,640 --> 00:13:54,400 Speaker 1: stock market is actually very easy. It's only two variables. 246 00:13:54,440 --> 00:13:56,400 Speaker 1: What do you have to do is get P and 247 00:13:56,559 --> 00:14:00,199 Speaker 1: E right. The trick is getting them right. Uh. And 248 00:14:01,160 --> 00:14:03,559 Speaker 1: the challenge up ahead here, I think is the valuation 249 00:14:03,640 --> 00:14:08,160 Speaker 1: multiple has already quite elevated at around twenty two. It's 250 00:14:08,240 --> 00:14:11,520 Speaker 1: been an earnings driven bull market. We've had a melt 251 00:14:11,600 --> 00:14:15,920 Speaker 1: up really since March twenty three of last year, and 252 00:14:15,960 --> 00:14:19,560 Speaker 1: initially that melt up was led by the PE. Uh forward. 253 00:14:19,560 --> 00:14:23,520 Speaker 1: PE went from twelve point nine to twenty three by 254 00:14:23,880 --> 00:14:27,400 Speaker 1: m September of last year. And since May of last year, 255 00:14:27,480 --> 00:14:29,880 Speaker 1: earnings have been on fire. They're gonna be up eighty 256 00:14:29,920 --> 00:14:32,400 Speaker 1: percent on a year over year basis just in the 257 00:14:32,440 --> 00:14:36,880 Speaker 1: second quarter. It should be up about forty for the 258 00:14:36,960 --> 00:14:40,200 Speaker 1: year as a whole. Uh. So, I think the market's 259 00:14:40,240 --> 00:14:43,320 Speaker 1: going higher. And my bullishness is based on my perception 260 00:14:43,560 --> 00:14:46,320 Speaker 1: that there's no recession ahead, there's no credit crunch ahead. 261 00:14:46,600 --> 00:14:49,440 Speaker 1: And they're still higher earnings ahead your Denny, when you 262 00:14:49,440 --> 00:14:53,040 Speaker 1: took your PhD at Yale University with a privileged faculty 263 00:14:53,040 --> 00:14:55,160 Speaker 1: at the time. I can't say enough about the quality 264 00:14:55,200 --> 00:14:58,840 Speaker 1: of Yale in nineteen seventy six and down migrated from 265 00:14:58,880 --> 00:15:01,800 Speaker 1: one thousand out to where we are now at thirty 266 00:15:01,880 --> 00:15:05,160 Speaker 1: six thousand. On the way was a Carter malaise. As 267 00:15:05,240 --> 00:15:08,440 Speaker 1: you know, from seventy six to roughly eighty two there 268 00:15:08,560 --> 00:15:11,680 Speaker 1: was just a flatness. Is the thing we're not seeing 269 00:15:11,720 --> 00:15:14,400 Speaker 1: here is not the up and down to the financial media, 270 00:15:14,920 --> 00:15:18,320 Speaker 1: but the ability to just go flat and rest for 271 00:15:18,360 --> 00:15:21,320 Speaker 1: a while. I think the huge story when you compare 272 00:15:21,360 --> 00:15:26,760 Speaker 1: the nineteen seventies, which was called the Great Inflation Era, uh, 273 00:15:26,800 --> 00:15:29,600 Speaker 1: and the what I think is going to is the 274 00:15:29,680 --> 00:15:34,520 Speaker 1: Roaring twenties era right now is productivity. Productivity collapsed in 275 00:15:34,560 --> 00:15:39,200 Speaker 1: the nine and this time around, productivity is up from 276 00:15:39,360 --> 00:15:43,080 Speaker 1: zero point six percent on a twenty quarter basis. I 277 00:15:43,080 --> 00:15:46,120 Speaker 1: try to smooth it out. That's what it was not 278 00:15:46,240 --> 00:15:49,720 Speaker 1: too long ago, at the end of fifteen. Right now, 279 00:15:50,000 --> 00:15:52,200 Speaker 1: we just got a new number. It's a two percent. 280 00:15:52,480 --> 00:15:55,440 Speaker 1: I think it's going to four percent at leasta. Greg 281 00:15:55,440 --> 00:15:58,880 Speaker 1: Granton at Yale University. The acclaimed his story and calls 282 00:15:58,920 --> 00:16:01,240 Speaker 1: it the dismal seven in these I don't hear that 283 00:16:01,360 --> 00:16:03,760 Speaker 1: right now, No no one saying it's the dismal seventies. 284 00:16:03,760 --> 00:16:05,360 Speaker 1: Some people saying that we might get some sort of 285 00:16:05,400 --> 00:16:09,720 Speaker 1: inflationary pressures that resemble something at last seen perhaps closer 286 00:16:09,760 --> 00:16:12,680 Speaker 1: to seventies than we've seen in recent decades. And how 287 00:16:12,760 --> 00:16:15,080 Speaker 1: much is your call five thousand by the year end 288 00:16:15,120 --> 00:16:18,600 Speaker 1: of two predicated on treasury yields remaining where they are 289 00:16:18,840 --> 00:16:23,080 Speaker 1: or around or around there. Well, I have to say 290 00:16:23,160 --> 00:16:26,640 Speaker 1: that this year has been a tricky one, uh for 291 00:16:26,640 --> 00:16:30,840 Speaker 1: forecasting the bond market. And uh I was I wasn't 292 00:16:30,880 --> 00:16:33,520 Speaker 1: surprised that I went to one point seven percent back 293 00:16:33,560 --> 00:16:36,560 Speaker 1: in March. I was surprised that I went back to 294 00:16:36,680 --> 00:16:40,080 Speaker 1: one point one twelve percent recently, But now I'm not 295 00:16:40,160 --> 00:16:42,960 Speaker 1: surprised again that it's heading back up to one point 296 00:16:42,960 --> 00:16:45,960 Speaker 1: three five And I think we could be a two 297 00:16:45,960 --> 00:16:48,160 Speaker 1: percent by the end of the year or sometime next year. 298 00:16:48,440 --> 00:16:50,360 Speaker 1: And I think that would be a clearly a sign 299 00:16:50,400 --> 00:16:54,200 Speaker 1: that the economy is getting a little bit closer to 300 00:16:54,280 --> 00:16:57,160 Speaker 1: normal than it had been for quite some time. Uh. 301 00:16:57,200 --> 00:17:00,440 Speaker 1: Now that could weigh on the on the evaluation ultiple, 302 00:17:00,800 --> 00:17:04,080 Speaker 1: I suppose, And but you know, five thousand is actually 303 00:17:04,119 --> 00:17:08,760 Speaker 1: a fairly conservative outlook. It's in of next year. There's 304 00:17:09,160 --> 00:17:11,600 Speaker 1: plenty of time for earnings to grow along the along 305 00:17:11,640 --> 00:17:13,560 Speaker 1: that time. And by the way, by the end of 306 00:17:13,600 --> 00:17:17,880 Speaker 1: next year, the markets are going to be really discounting three. 307 00:17:17,920 --> 00:17:20,440 Speaker 1: I know it's weird to be talking about that far out, 308 00:17:20,480 --> 00:17:23,560 Speaker 1: but that's what the market does. And I got earnings 309 00:17:23,560 --> 00:17:26,520 Speaker 1: two five this year, two dollars two hundred five dollars 310 00:17:26,560 --> 00:17:29,000 Speaker 1: this year for the SMP five hundred next year two 311 00:17:29,080 --> 00:17:32,760 Speaker 1: hundred fifteen, and then in two thousand and thirteen, looking 312 00:17:32,840 --> 00:17:35,680 Speaker 1: that far out, it could be up two hundred forty bucks. 313 00:17:35,760 --> 00:17:38,080 Speaker 1: So and I think I think on your point, I 314 00:17:38,080 --> 00:17:41,240 Speaker 1: think profit margins are gonna hold up surprisingly well because 315 00:17:41,280 --> 00:17:43,800 Speaker 1: of the productivity story. The story then comes down to 316 00:17:43,800 --> 00:17:45,720 Speaker 1: the second point. Then it's the multiple And if we 317 00:17:45,760 --> 00:17:47,560 Speaker 1: want to talk about twenty three, we'll be talking about 318 00:17:47,600 --> 00:17:52,080 Speaker 1: ray hikes. Can we really tried positively through tapering given 319 00:17:52,080 --> 00:17:54,280 Speaker 1: the amount of stimulus we've had from this federal Reserve 320 00:17:54,600 --> 00:17:58,600 Speaker 1: into a conversation about ray hikes? Well, John, you know 321 00:17:59,600 --> 00:18:02,120 Speaker 1: this tapering talks been around for a long time. It's 322 00:18:02,160 --> 00:18:05,880 Speaker 1: not like a surprise. We've had previous tampering episodes which 323 00:18:05,880 --> 00:18:09,119 Speaker 1: were more on the surprising side. This one certainly isn't. 324 00:18:09,280 --> 00:18:11,280 Speaker 1: As a matter of fact, everybody's kind of wondering why 325 00:18:11,320 --> 00:18:14,400 Speaker 1: they haven't started already given some of the economic data 326 00:18:14,440 --> 00:18:17,320 Speaker 1: that we've had. So I think the market is gonna 327 00:18:17,320 --> 00:18:19,719 Speaker 1: handle tapering just fine. By the way, m too, some 328 00:18:19,760 --> 00:18:23,080 Speaker 1: people are getting starting to freak out about the empty 329 00:18:23,200 --> 00:18:26,800 Speaker 1: growth rate. Uh, what they don't really appreciate is that 330 00:18:26,880 --> 00:18:30,159 Speaker 1: empty today is five trillion dollars higher than there was 331 00:18:30,240 --> 00:18:33,040 Speaker 1: before the pandemic. There's still just a tremendous amount of 332 00:18:33,080 --> 00:18:36,760 Speaker 1: liquidity just sitting there. Uh. People look at velocity. I 333 00:18:36,760 --> 00:18:39,080 Speaker 1: I look at the other side of velocity. If you 334 00:18:39,160 --> 00:18:42,720 Speaker 1: take EMPTWO divided by nominal GDP, it's almost the year's 335 00:18:42,720 --> 00:18:45,159 Speaker 1: worth of them too. Now with nominal GDP it's an 336 00:18:45,160 --> 00:18:48,200 Speaker 1: all time record high. So there's lots of liquidity out 337 00:18:48,200 --> 00:18:52,040 Speaker 1: there that's still kind of pent up. Supply of liquidity 338 00:18:52,240 --> 00:18:54,600 Speaker 1: still bullish at John Tanny, It's gonna catch up, sir 339 00:18:54,880 --> 00:19:02,560 Speaker 1: at any Research founder and chief Investment Strategistics right now. 340 00:19:02,640 --> 00:19:05,560 Speaker 1: Treat for Lisa Rammins and myself, Craig MafA and Michael 341 00:19:05,640 --> 00:19:08,520 Speaker 1: Nathanson they pick up the pieces after the Olympics, the 342 00:19:08,640 --> 00:19:12,040 Speaker 1: streaming frenzy that's out there. And also, and we we 343 00:19:12,160 --> 00:19:17,159 Speaker 1: do a tangent here Lisa on what's going on in Washington. 344 00:19:17,280 --> 00:19:19,080 Speaker 1: Let me go to Craig Mafat on this. This is 345 00:19:19,080 --> 00:19:22,760 Speaker 1: his wheelhouse as well. Craig, this is a story not told, 346 00:19:22,840 --> 00:19:25,520 Speaker 1: which is we're almost on the edge of where there 347 00:19:25,640 --> 00:19:29,639 Speaker 1: is a right to the Internet versus a privilege of 348 00:19:29,680 --> 00:19:33,080 Speaker 1: the Internet. To me, it's a real subtle sea change. 349 00:19:33,320 --> 00:19:37,000 Speaker 1: Are we at the point with Biden legislation that we're 350 00:19:37,000 --> 00:19:43,960 Speaker 1: gonna demand pristine internet coast to coast? Well, first of all, 351 00:19:44,000 --> 00:19:46,280 Speaker 1: thank you for having us back on. Always a pleasure 352 00:19:46,320 --> 00:19:50,960 Speaker 1: to be here. You know, I'm not sure about that. 353 00:19:50,760 --> 00:19:55,080 Speaker 1: That's been a push pull through the last what five administrations. 354 00:19:55,240 --> 00:19:59,960 Speaker 1: And um, and this this question of is broadband utility? 355 00:20:00,040 --> 00:20:04,200 Speaker 1: Should it be treated as a utility versus h that 356 00:20:04,359 --> 00:20:06,680 Speaker 1: that the private sector has actually done a pretty good 357 00:20:06,760 --> 00:20:10,240 Speaker 1: job bringing broadband to Americans. Um and that tension I 358 00:20:10,240 --> 00:20:12,879 Speaker 1: think is appropriate. I don't think it's going to change 359 00:20:13,280 --> 00:20:17,320 Speaker 1: my takeaway from from what's happened in Washington. And look, 360 00:20:17,359 --> 00:20:20,399 Speaker 1: this shouldn't be a surprise is despite the fact that 361 00:20:20,440 --> 00:20:24,200 Speaker 1: we've swung back to a democratic administration, Biden is who 362 00:20:24,240 --> 00:20:27,000 Speaker 1: he said he was. He's a moderate and and and 363 00:20:27,200 --> 00:20:32,560 Speaker 1: actually what we've seen fairly consistently is moderation in most 364 00:20:32,600 --> 00:20:35,320 Speaker 1: of the policies around broadband. There was some talk about 365 00:20:35,800 --> 00:20:39,919 Speaker 1: price regulation and some flirtations in the early drafts of 366 00:20:40,000 --> 00:20:42,800 Speaker 1: the infrastructure plan. That's not where we ended up. So 367 00:20:42,840 --> 00:20:45,920 Speaker 1: I think overall what we're seeing is reasonably friendly to 368 00:20:46,000 --> 00:20:48,479 Speaker 1: the incumbents. There's so many things to talk to you 369 00:20:48,520 --> 00:20:51,359 Speaker 1: about your claim to research here on the hardware of 370 00:20:51,400 --> 00:20:54,120 Speaker 1: the media we look at every day and again, the 371 00:20:54,160 --> 00:20:57,679 Speaker 1: media is content is king and Michael Nathanson, if I 372 00:20:57,720 --> 00:21:00,320 Speaker 1: could go to you, what are you prepared for? What 373 00:21:00,400 --> 00:21:04,000 Speaker 1: are you stealed for? In the streaming wars? Where's the 374 00:21:04,200 --> 00:21:10,280 Speaker 1: curiosity right now? Well, Wren Tom, what I'm waiting for. 375 00:21:11,160 --> 00:21:14,720 Speaker 1: There's someone to tap out, someone who looks at I 376 00:21:14,720 --> 00:21:18,040 Speaker 1: guess we were a solid Warner Media and Discovery merge 377 00:21:18,119 --> 00:21:21,080 Speaker 1: and acknowledgement that this is a hard business to uh 378 00:21:21,119 --> 00:21:23,840 Speaker 1: to master. But I'm waiting to see what VI Common 379 00:21:23,920 --> 00:21:27,720 Speaker 1: Comcast do. They're both too small to win this. So 380 00:21:28,119 --> 00:21:30,760 Speaker 1: Craig and I are both waiting for somebody to realize 381 00:21:30,800 --> 00:21:33,440 Speaker 1: that this is not a great business to chase. It's 382 00:21:33,440 --> 00:21:36,960 Speaker 1: probably better to be a content seller than you know, 383 00:21:37,000 --> 00:21:41,639 Speaker 1: a fifth rated streamer. So we're waiting for more consolidation here. Um. 384 00:21:41,680 --> 00:21:43,199 Speaker 1: I don't know when that's going to be, but to 385 00:21:43,320 --> 00:21:45,840 Speaker 1: us that has to happen. Well, Michael, just to follow 386 00:21:45,920 --> 00:21:50,600 Speaker 1: up on that, are we passed peak content? Lisa? Um, 387 00:21:50,640 --> 00:21:52,639 Speaker 1: I think we're a year two years away. You know, 388 00:21:52,760 --> 00:21:56,640 Speaker 1: Apple's it's gonna put more money to work. Amazon will 389 00:21:56,640 --> 00:21:58,560 Speaker 1: as well, So I would say the next one or 390 00:21:58,600 --> 00:22:01,840 Speaker 1: two years gets peaked. There's clearly to your question, there's 391 00:22:01,920 --> 00:22:03,920 Speaker 1: clearly too much content out there is not enough time 392 00:22:03,920 --> 00:22:08,360 Speaker 1: in the day. The economics are forcing lower, lower returns. Um. 393 00:22:08,359 --> 00:22:09,919 Speaker 1: But I think we're one two years away from it 394 00:22:09,920 --> 00:22:12,639 Speaker 1: when realizing that they need to change their approach. Right, 395 00:22:12,680 --> 00:22:16,880 Speaker 1: there's just too much capital chasing chasing this opportunity. Craig, 396 00:22:16,920 --> 00:22:20,399 Speaker 1: which really wears on the hardware store a story of 397 00:22:20,440 --> 00:22:23,920 Speaker 1: things basically that regardless of who wins the content wars, 398 00:22:24,160 --> 00:22:26,879 Speaker 1: the bottom line is more people are going to be streaming, 399 00:22:27,160 --> 00:22:30,120 Speaker 1: and so perhaps is that the pure play going forward 400 00:22:30,240 --> 00:22:34,400 Speaker 1: to basically hinge on the streaming phenomenon that's only getting stronger, 401 00:22:34,560 --> 00:22:37,320 Speaker 1: even if there is this war on content that perhaps 402 00:22:37,520 --> 00:22:41,240 Speaker 1: has created some peaks in pricing at least down the road. Well, 403 00:22:41,640 --> 00:22:45,000 Speaker 1: I wish I could say, yes, there's certainly going to 404 00:22:45,000 --> 00:22:47,760 Speaker 1: be a lot of demand for for bits and bites. 405 00:22:48,400 --> 00:22:51,399 Speaker 1: The question is really whether there's a mechanism for the 406 00:22:51,440 --> 00:22:56,119 Speaker 1: industry's eye cover telecommon and cable to monetize that. You know, 407 00:22:56,160 --> 00:22:59,920 Speaker 1: you could make the argument that in this particular gold rush, 408 00:23:00,040 --> 00:23:02,520 Speaker 1: the ones that are selling the pickaxes and the shovels 409 00:23:02,520 --> 00:23:05,359 Speaker 1: are not so much the network operators, but the network 410 00:23:05,400 --> 00:23:10,080 Speaker 1: equipment suppliers who really are are I think seeing a 411 00:23:11,040 --> 00:23:15,880 Speaker 1: serious boom for the For the wireless operators, monetizing incremental 412 00:23:15,960 --> 00:23:19,240 Speaker 1: traffic has always been problematic. And for the cable operators, 413 00:23:19,920 --> 00:23:23,200 Speaker 1: they have a better business structurally than the wireless operators, 414 00:23:23,600 --> 00:23:26,960 Speaker 1: tend to be less competition, but they too generally don't 415 00:23:27,160 --> 00:23:31,320 Speaker 1: charge extra for the throughput. If you're just joining us 416 00:23:31,320 --> 00:23:33,840 Speaker 1: on Bloomberg Television in Bloomberg Radio, we are thrilled to 417 00:23:33,840 --> 00:23:37,160 Speaker 1: bring you both Craig Moffatt and Michael Nathanson of Moffatt 418 00:23:37,240 --> 00:23:41,480 Speaker 1: Nathanson years at Sanford Burnstein and truly definitive on all 419 00:23:41,560 --> 00:23:44,359 Speaker 1: that we do in media. This is a joint question 420 00:23:44,400 --> 00:23:46,119 Speaker 1: to both of you, and then Lisa is gonna pound 421 00:23:46,119 --> 00:23:49,080 Speaker 1: in with another question. Michael Nathanson, I'm gonna let you 422 00:23:49,119 --> 00:23:51,840 Speaker 1: go first. What are the two of you learn about 423 00:23:51,880 --> 00:23:55,359 Speaker 1: the Olympics that NBC has to tattoo to their brain 424 00:23:55,760 --> 00:24:00,280 Speaker 1: as they go to China and beyond. Michael First, well, Tom, 425 00:24:00,440 --> 00:24:03,760 Speaker 1: great question. They need to change and who am? I am? 426 00:24:03,800 --> 00:24:07,639 Speaker 1: An analyst? But no stuff, you're Michael Nathanson. They're gonna 427 00:24:07,680 --> 00:24:12,120 Speaker 1: listen to this. Go okay. They need a constant always 428 00:24:12,359 --> 00:24:16,960 Speaker 1: on Barker channel where I can go to watch Olympics. 429 00:24:17,119 --> 00:24:20,560 Speaker 1: It was a hodgepodge to right, you do know what 430 00:24:20,600 --> 00:24:23,680 Speaker 1: was on where it was there was no excitement. They 431 00:24:23,680 --> 00:24:27,359 Speaker 1: basically need to take over either NBC or USA and 432 00:24:27,400 --> 00:24:31,639 Speaker 1: make it Olympics and show game show everything live on 433 00:24:31,760 --> 00:24:37,119 Speaker 1: broadcast and linear, then use digital to basically augment the 434 00:24:37,280 --> 00:24:42,159 Speaker 1: non core you know events. I think ESPN has done 435 00:24:42,160 --> 00:24:45,280 Speaker 1: a great job they figured that out. ESPN uses ESPN 436 00:24:45,359 --> 00:24:47,600 Speaker 1: one for all their Maine events. They have all the 437 00:24:47,600 --> 00:24:51,239 Speaker 1: other ESPN channels for the secondary and tertiary events. They 438 00:24:51,280 --> 00:24:55,040 Speaker 1: need to rethink it. I thought it was really poorly done. 439 00:24:55,040 --> 00:24:58,920 Speaker 1: It was a sad It was a sad Okay, Craig, Craig, 440 00:24:58,960 --> 00:25:01,240 Speaker 1: your briefing. Brian Robert's here and you're looking more at 441 00:25:01,280 --> 00:25:03,399 Speaker 1: the hardware as well. What do you tell Brian Roberts 442 00:25:03,480 --> 00:25:06,720 Speaker 1: to do next on the Olympics. Well, I'll tell you so, 443 00:25:07,320 --> 00:25:09,960 Speaker 1: you know, I think first you have to recognize in 444 00:25:10,000 --> 00:25:13,160 Speaker 1: the diagnosis of the problem here. Rating ratings were down 445 00:25:14,480 --> 00:25:18,880 Speaker 1: from five years ago total day um. A large part 446 00:25:18,920 --> 00:25:20,479 Speaker 1: of that is the fact that there are just a 447 00:25:20,480 --> 00:25:26,400 Speaker 1: lot fewer television households to uh to to watch the Olympics. Right. 448 00:25:27,760 --> 00:25:30,520 Speaker 1: The court cutting that has accumulated over the last five 449 00:25:30,600 --> 00:25:36,160 Speaker 1: years has left a mark and it hurts. The problem 450 00:25:36,240 --> 00:25:39,080 Speaker 1: that that creates, though, is actually deeper than that, because 451 00:25:39,359 --> 00:25:42,159 Speaker 1: I think about the machine that Comcast is or that 452 00:25:42,320 --> 00:25:45,400 Speaker 1: NBC is in creating the run up to the Olympics 453 00:25:45,440 --> 00:25:49,679 Speaker 1: and making people interested and engaged in the athletes and 454 00:25:49,720 --> 00:25:54,560 Speaker 1: the stories around the Olympics. If ratings are down or 455 00:25:54,640 --> 00:25:57,520 Speaker 1: more in the months leading up to the Olympics, then 456 00:25:58,040 --> 00:26:00,920 Speaker 1: so much of that is being lost. That engagement when 457 00:26:00,920 --> 00:26:03,800 Speaker 1: the Olympics comes around just isn't what it used to be. 458 00:26:03,840 --> 00:26:07,320 Speaker 1: And I think the real problem now is trying to 459 00:26:07,359 --> 00:26:13,159 Speaker 1: figure out whether the whole ecosystem that surrounds the Olympics 460 00:26:13,280 --> 00:26:18,080 Speaker 1: of public personal interest stories about athletes and national pride 461 00:26:18,080 --> 00:26:22,080 Speaker 1: and all that sort of thing is permanently damaged because fundamentally, 462 00:26:22,200 --> 00:26:24,560 Speaker 1: the Olympics are made for TV event and we're just 463 00:26:24,600 --> 00:26:26,919 Speaker 1: in a post TV world, right, Well, hold on a second, 464 00:26:26,960 --> 00:26:29,159 Speaker 1: That's where I wanted to go, Craig, Can we extrapolate 465 00:26:29,200 --> 00:26:32,720 Speaker 1: out beyond the Olympics two sports in general that perhaps 466 00:26:32,800 --> 00:26:36,040 Speaker 1: cable news doesn't capture the same kind of audience, and frankly, 467 00:26:36,320 --> 00:26:39,480 Speaker 1: some of these sports don't capture the same type of audiences. 468 00:26:39,520 --> 00:26:41,919 Speaker 1: That goes hand in hand and a sea change that 469 00:26:41,960 --> 00:26:46,920 Speaker 1: fundamentally undermines cable's prowess in this industry. Well, you can't say, Lesa. 470 00:26:46,920 --> 00:26:48,520 Speaker 1: It goes to your question to me about this is 471 00:26:48,560 --> 00:26:50,800 Speaker 1: just too much content out there, right, there's too much content. 472 00:26:51,200 --> 00:26:55,760 Speaker 1: Discoveries become impossible. To Greg's point, we lost the audience 473 00:26:55,800 --> 00:26:59,040 Speaker 1: past five years. It's incredible challenge right and sports right 474 00:26:59,119 --> 00:27:02,119 Speaker 1: to keep going up. Um, So we wonder what happens 475 00:27:02,119 --> 00:27:04,400 Speaker 1: in four or five years when the next NFL contract 476 00:27:04,400 --> 00:27:07,320 Speaker 1: really kicks in its part. In terms of the heart 477 00:27:07,320 --> 00:27:11,119 Speaker 1: of the escalation, it's a challenge, and I think I 478 00:27:11,160 --> 00:27:13,960 Speaker 1: think you have you need consolidation here, you need less 479 00:27:14,000 --> 00:27:17,480 Speaker 1: content being produced, and it eliminate some of the clutter 480 00:27:17,520 --> 00:27:19,840 Speaker 1: we see right now over the dial basically and all 481 00:27:19,880 --> 00:27:23,000 Speaker 1: over streaming and Craig From your perspective, what would it 482 00:27:23,040 --> 00:27:25,719 Speaker 1: do to some of these cable giants if they sold 483 00:27:26,000 --> 00:27:29,879 Speaker 1: the rights to some of the sports streaming well for 484 00:27:30,040 --> 00:27:35,120 Speaker 1: the broadband providers, that is, the infrastructure providers, The short 485 00:27:35,119 --> 00:27:38,800 Speaker 1: answer is not much. They're there, to some extent agnostic 486 00:27:38,840 --> 00:27:41,280 Speaker 1: about what travels over the networks. In fact, I think 487 00:27:41,600 --> 00:27:44,800 Speaker 1: they fought for years to say we don't want to 488 00:27:44,880 --> 00:27:48,240 Speaker 1: have to carry every regional sports net for example, on 489 00:27:48,320 --> 00:27:51,400 Speaker 1: the basic tier, and make everybody in America pay for 490 00:27:51,480 --> 00:27:54,400 Speaker 1: sports even if they don't watch it. The problem has 491 00:27:54,440 --> 00:27:56,919 Speaker 1: been that the programmers have been too strong and have 492 00:27:57,080 --> 00:28:01,800 Speaker 1: demanded basic tier carroag. That's clearly breaking down right now, 493 00:28:01,960 --> 00:28:06,040 Speaker 1: and and you wonder whether the straw that broke the 494 00:28:06,080 --> 00:28:08,560 Speaker 1: camel's back will be one or two more of these 495 00:28:08,640 --> 00:28:11,600 Speaker 1: networks being withdrawn, to the point that the sports system 496 00:28:11,600 --> 00:28:14,600 Speaker 1: as we know it today really on ravels and and 497 00:28:14,680 --> 00:28:17,560 Speaker 1: you're certainly seeing that on the regional sports side. UM, 498 00:28:17,920 --> 00:28:21,280 Speaker 1: the national sports side has held in better because Disney 499 00:28:21,320 --> 00:28:25,000 Speaker 1: has so much power in its negotiations, but the sports 500 00:28:25,040 --> 00:28:28,239 Speaker 1: ecosystem is feeling a lot of stress. I gotta leave 501 00:28:28,240 --> 00:28:30,640 Speaker 1: it there, Craig Moffatt, Michael Nathans is too just too 502 00:28:30,720 --> 00:28:33,040 Speaker 1: short of visit, but always very generous of you to 503 00:28:33,119 --> 00:28:37,520 Speaker 1: join us today with MONFTT Nathanson. This is the Bloomberg 504 00:28:37,600 --> 00:28:41,960 Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from 505 00:28:42,000 --> 00:28:45,360 Speaker 1: seven to ten am Eastern on Bloomberg Radio and on 506 00:28:45,440 --> 00:28:49,760 Speaker 1: Bloomberg Television each day from six to nine am for 507 00:28:50,000 --> 00:28:54,920 Speaker 1: insight from the best in economics, finance, investment, and international relations. 508 00:28:55,400 --> 00:28:59,960 Speaker 1: And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, 509 00:29:00,240 --> 00:29:03,800 Speaker 1: Bloomberg dot com, and of course on the terminal. I'm 510 00:29:03,840 --> 00:29:14,080 Speaker 1: Tom keene In. This is Bloombergh.