Speaker 1: This is the Bloomberg Surveillance Podcast.
Speaker 2: I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz.
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Speaker 1: We're just going to move on to bonds, and we
Speaker 1: do that with Mark Cambana.
Speaker 2: He is one of our favorites here at Bloomberg Surveillance,
Speaker 2: head of US rates Strategy at Bank of America in
Speaker 2: the hallmark here as he writes with clarity and avoids
Speaker 2: bs and so you lead your note with one of
Speaker 2: the all time jargon words of the moment, resilience. Everybody
Speaker 2: out there, the Boston Red Sox are showing resilience.
Speaker 1: What a bunch of boloney.
Speaker 2: Translate your use of resilience to the real world of
Speaker 2: fixed income.
Speaker 3: Well, I think it's a generous characterization of the Red Sox.
Speaker 3: But what we mean by this is that the economy
Speaker 3: has really shown that it has been relatively insensitive to
Speaker 3: higher interest rates so far. We all thought that we
Speaker 3: would see the unemployment rate tick higher. We thought we
Speaker 3: would see fixed investment drop by more. We thought we
Speaker 3: would see financial conditions tightened more substantially as a result
Speaker 3: of all of the rate hikes that have been delivered
Speaker 3: so far and that are expected either in the future
Speaker 3: or that are expected to remain elevated for a while.
Speaker 3: And what we've seen is that the economy is really
Speaker 3: held in and that has challenged at least some perceptions
Speaker 3: at BAVA about how much we would expect to see
Speaker 3: the economy turn. Our economists just last week changed their
Speaker 3: base case from a recession to a soft landing. Now
Speaker 3: that's a maybe mindor distinction, but nonetheless it implies less
Speaker 3: of upward pressure in the unemployment rate. It implies an
Speaker 3: economy that can continue to grow for longer, and it
Speaker 3: implies that the FED is going to probably have to
Speaker 3: adjust accordingly. And the way that we think that that
Speaker 3: adjustment takes place is not necessarily through a higher overall
Speaker 3: terminal rate, But for a FED that does indeed remain
Speaker 3: higher for longer, and by cutting slower than the market anticipates,
Speaker 3: certainly higher for longer can mean that you hold the
Speaker 3: terminal rate for an extended period of time, or it
Speaker 3: can mean that you maybe cut once a quarter, which
Speaker 3: is now our economist base case, as opposed to the
Speaker 3: almost every meeting rate cut that the market is anticipating
Speaker 3: once it gets started.
Speaker 4: So would you push back against the people one after
Speaker 4: another who've come on this show and said we're buying
Speaker 4: long term bonds because we think it's great to lock
Speaker 4: in four percent yields. It's going down to three and
Speaker 4: a quarter three and a half percent on the tenure.
Speaker 3: So we're still reasonably constructive on duration. We do recommend
Speaker 3: that clients trade the back end of the rates curve
Speaker 3: with a tactical long bias. You've got to respect the range,
Speaker 3: which looks intends to be around three seventy five to
Speaker 3: four to twenty five now. And we think that because
Speaker 3: we just believe that long end rates look somewhat asymmetrically
Speaker 3: skewed to the downside. It's a lot more difficult for
Speaker 3: us to envision tends at five than it is tens
Speaker 3: at three. And with a FED that's cutting slow, No,
Speaker 3: you're not going to maybe see as significant of a
Speaker 3: bond market rally. You're not going to see as rapid
Speaker 3: of a yield decline. But we still think that yields
Speaker 3: will be moving lower in time as the FED does
Speaker 3: indeed move to cuts, but just cutting slower perhaps than
Speaker 3: the market anticipates.
Speaker 4: I want to just ask about the consequences of holding
Speaker 4: rates at this level for a longer period of time.
Speaker 4: Are people adequately understanding how restrictive that becomes as growth
Speaker 4: slows and as companies have to start refinancing.
Speaker 5: Yeah, it's a great question.
Speaker 3: I heard you come on earlier about credit and Torsten
Speaker 3: Slock and what he is saying about underlying fundamentals there. Look,
Speaker 3: we do think that the credit markets are going to
Speaker 3: be okay if the FED ultimately delivers on what's priced
Speaker 3: for cuts in the forwards, because as you have a
Speaker 3: lot of maturities that come do the FED will be
Speaker 3: lowering rates and that's going to soften the blow to
Speaker 3: some extent. The challenge will be if the FED does
Speaker 3: indeed remain higher for longer and if you start to
Speaker 3: see some of those refinancings occur at higher rates and
Speaker 3: see companies begin to adjust how they're going to manage
Speaker 3: that cost factor into their own calculus. But it's a
Speaker 3: part of what I think the FED is looking for.
Speaker 3: They need to slow the economy somewhat, and they need
Speaker 3: to ensure that inflation does indeed remain around two in
Speaker 3: our economist's new profile for growth. They do think that
Speaker 3: inflation just falls slower understandably. Right You're going to be
Speaker 3: averaging two point eight percent next year, almost two to
Speaker 3: two and a half percent in twenty twenty five, and
Speaker 3: the Fed's going to have to move rates slower, allow
Speaker 3: for more restrictive monetary policy over time in order to
Speaker 3: ensure that that's sticks.
Speaker 2: We're tight in time, But the questions too important. Can
Speaker 2: price give way? Is yield moose higher? If I look
Speaker 2: at the Bloomberg Total Return Index, I got a Pennant formation.
Speaker 2: I'm really on support right now? Can price break through
Speaker 2: that price down yield up?
Speaker 3: What we think you need to see is that you
Speaker 3: need to see some type of economic driver for that.
Speaker 3: We know that supply demand in the treasure market is
Speaker 3: really quite daunting right now. You had a surprise from
Speaker 3: the US Treasury on supply last week. The number one
Speaker 3: question that we get right now is who's going to
Speaker 3: buy the b and so what you really need to
Speaker 3: see is that you need to see the economy provide
Speaker 3: cover for investors to justify that long duration bias that
Speaker 3: we've been recommending that they appear to be holding, especially
Speaker 3: on the real money side, and thus far you haven't
Speaker 3: really had it yet. CPI tomorrow should hopefully move us
Speaker 3: in that direction, but you really need to see signs
Speaker 3: of a broader economic moderation, and right now the growth
Speaker 3: data is not providing that because the economy continues to
Speaker 3: re accelerate.
Speaker 5: CPI tomorrow, morning, Mark, this was good as alwise, Mark
Speaker 5: about it. Thank you, sir, of Thanks for America right now.
Speaker 2: If Kathleen bus Johnson joins US chief economist at Nationwide Mutual,
Speaker 2: katy Am, I right that the public here doesn't really
Speaker 2: care about all this microdata analysis. They're looking at the
Speaker 2: one year, the two year, the three year pandemic inflation
Speaker 2: and it's killing them.
Speaker 6: Well, good, good morning. Time'm happy to be with you
Speaker 6: Lisa and Mike this morning. I think that weighs on
Speaker 6: the Fed Reserve, not just ways on consumers, but it
Speaker 6: is something in the back of all the Fed officials,
Speaker 6: you know mind when they think about inflation. Yes, they're
Speaker 6: looking at the most recent print and they're doing the
Speaker 6: three month annualized, six month annualize, but they know that
Speaker 6: this inflation is really attacks on consumers, especially lower income
Speaker 6: and middle income households. So you know, Chairman Pale wants
Speaker 6: to make sure that you know, when he looks back
Speaker 6: and his legacy is assessed, he's not seen as leaving
Speaker 6: with high inflation. He missed right, The Fed thought it
Speaker 6: would be transitory. You don't really want to leave and
Speaker 6: move on and still have high inflation, you know, as
Speaker 6: you ended your tenure.
Speaker 4: There, Kathy, are you in the camp who believes that
Speaker 4: the CPI report will be really important in order to
Speaker 4: determine whether the Fed hikes or stays put, or are
Speaker 4: you in the camp that probably it will not give
Speaker 4: us a whole lot of information. It might even be
Speaker 4: a head fake for reinflation that we see later this year.
Speaker 6: Yeah, so timing is always difficult. I think for now
Speaker 6: we are in a disinflationary trend, and I do think
Speaker 6: tomorrow's report and the subsequent report after that will be
Speaker 6: important as the Fed convenience in September to decide whether
Speaker 6: you know, to keep you know, raise rates again or
Speaker 6: to be on hold. But you're right when you look out.
Speaker 6: The problem is there's quite a long lag. So we
Speaker 6: look at home prices. They lead the rental inflation by
Speaker 6: about a year and a half in our modeling. So yes,
Speaker 6: eventually could start to turn back up, but it's a
Speaker 6: long time before that. But yeah, we are concerned about that.
Speaker 6: You know, what I'm also concerned about is the fact
Speaker 6: you were talking about this earlier with GDP growth. We
Speaker 6: seem to be accelerating, right we two percent Q one
Speaker 6: to four Q two and now you know at least
Speaker 6: three percent. We're not quite at the four percent they
Speaker 6: Atlanta Fed, as Mike rightly said, that's kind of a
Speaker 6: snapshot of current data. But the economy accelerating or not
Speaker 6: certainly not soling below potential what the Fed wants. I
Speaker 6: think it's tough for to bring down inflation from an
Speaker 6: economic perspective.
Speaker 4: We were talking about wage inflation with respective particularly to
Speaker 4: the union organization and what we saw with ups and
Speaker 4: some of the wages. John wants to get one hundred
Speaker 4: and seventy thousand dollars job driving a truck, as he
Speaker 4: informed us this morning, does that factor into your estimates
Speaker 4: of wage inflation of the dynamic of how much you
Speaker 4: could get an acceleration in the economy as wages continue
Speaker 4: to increase. Is that something that you're looking more closely
Speaker 4: at as you do hear more of these organized labor discussions.
Speaker 6: Yeah, I'm concerned, you know, I'm concerned that not that
Speaker 6: wage growth is the strong wage growth is causing inflation,
Speaker 6: but that it's a barrier to lower inflation. Certainly, it's
Speaker 6: great for workers to get their share of the income PI,
Speaker 6: but it comes at a time where we had these
Speaker 6: inflation pressures, and again it's just a barrier to lowering it.
Speaker 6: So I think it makes it more difficult, keeps the
Speaker 6: Fed more in a hawkish tone or mood, and may
Speaker 6: even lead them to raise rates further.
Speaker 1: Kathy went from rent and housing.
Speaker 2: That's what we talked to, particularly in New York, were
Speaker 2: really focused on at twenty four to seven. What's food
Speaker 2: inflation doing, what's auto inflation doing?
Speaker 6: Yeah, So food and inflation has come down quite nicely
Speaker 6: since the peak, especially right after the Ukraine the outbreak
Speaker 6: of the Ukraine Russia War, and that's encouraging. Now there's
Speaker 6: still concerns, right if there's some kind of blockade and
Speaker 6: what happens with wet prices and just in general there's
Speaker 6: still I think a fragility and uncertainty about you know,
Speaker 6: if there could be disruptions. But in general food inflation
Speaker 6: we should be key, as Mike said earlier, inflation slowing,
Speaker 6: but we're not seeing outright declines. Now the auto sector
Speaker 6: is different. We are seeing used car prices outright decline,
Speaker 6: and that's welcome news for consumers and also for inflation measures.
Speaker 6: But you know, how far that goes is key. You know,
Speaker 6: we may see some outright declines, but we're still seeing
Speaker 6: a supply demand imbalance in the auto sector. Meeting auto
Speaker 6: companies when they do produce and supply comes online, we're
Speaker 6: seeing demand exactly match that. So I think there's still
Speaker 6: upward pressure. Again, resistance in the auto sector, especially for
Speaker 6: new autos.
Speaker 2: Remind us as we end this Kathleen mus Johnsick. The
Speaker 2: inflation series that matters to Chairman Powell, which is it?
Speaker 6: So it is core inflation, and I would say it's
Speaker 6: super core inflation. So that's core inflation less the rent
Speaker 6: and the reason being that rental inflation even when we
Speaker 6: model that should come down very short. We think it
Speaker 6: goes from eight percent at the peak to about five
Speaker 6: percent by year end, but that is bigd then they
Speaker 6: want to see what's happening the service prices elsewhere, you know,
Speaker 6: outside of rental Kales, great.
Speaker 1: Brief, Kathy Beson Thick, thank you so much.
Speaker 5: Victoria Fernandez, is whether it's around the table, Chief Market Strategistic,
Speaker 5: Crossmark Global Investments, Victoria, good morning, Good morning. Not going
Speaker 5: to ask you rupert in this morning. Let's talk about
Speaker 5: your price target on the S and P five hundred.
Speaker 5: It's amazing for me that we've seen this day to
Speaker 5: come out of China and typically years ago what we
Speaker 5: would have seen on the morning like this morning through
Speaker 5: this week, it's just an aggressive running in the bond market,
Speaker 5: yields much lower. We'd be talking about China exporting deflation
Speaker 5: to the rest of the world. What's changed, Well.
Speaker 7: I think we have to look under the hood a
Speaker 7: little bit on this China data. Yes, the headline numbers
Speaker 7: are down and we're seeing deflation, there are disinflation, but
Speaker 7: the core number is actually the highest it's been since January.
Speaker 7: It's the food prices in China that brought down that
Speaker 7: headline number. You had port prices up twenty six percent
Speaker 7: in June of last year. They're flat this month, so
Speaker 7: we have to look a little bit more and see
Speaker 7: what is driving it. Typically you would see a response,
Speaker 7: but I think because that underlying core inflation, which is
Speaker 7: the concern here in the US, what is that core
Speaker 7: inflation going to look like? Is that going to remain sticky,
Speaker 7: especially with wages? That's going to be the concern.
Speaker 2: I'm so happy you're here. Cross Mark has such a
Speaker 2: pulse on what people emotionally are doing with their money
Speaker 2: right now, institutional, high high networth and the whole thing.
Speaker 2: What's the fear level out there meeting to meeting at
Speaker 2: cross Mark.
Speaker 7: Yeah, it's gone up definitely over the last quarter. Each
Speaker 7: meeting that we have. People are concerned because we've been
Speaker 7: telling our clients we think there's going to be some
Speaker 7: choppiness here. We think we're going to see a pullback
Speaker 7: in the fourth quarter of this year, so we need
Speaker 7: to be prepared for that. So they're getting a little concerned.
Speaker 7: What we've seen as of late, though, is more people
Speaker 7: wanting to go into the bond market. They see these yields,
Speaker 7: they think that we're probably at peak close to peak
Speaker 7: in bond yields. You know, we were what floor in
Speaker 7: a quarter in October of last year. We think that's
Speaker 7: the peak for the cycle. So if those yields start
Speaker 7: to come down, they want to add some duration in
Speaker 7: their fixed income markets. So we're seeing that there. But
Speaker 7: they like the fact that we're being cautious a little bit.
Speaker 7: In the equity market. We're invested, we're in there, we're
Speaker 7: getting them a good return, but we're being a little
Speaker 7: bit cautious as to where we invest.
Speaker 4: So I just want to go through the chronology of
Speaker 4: this year. It was, I believe a soft landing than
Speaker 4: a no landing. Then it was a hard landing in March. John,
Speaker 4: you've been very good about documenting the different charctershifts.
Speaker 6: You're tracking it. Now we're in soft landing.
Speaker 5: Do you buy it?
Speaker 4: Are you basically leaning in that there is this idea
Speaker 4: just to you divine a soft landing that we could
Speaker 4: get back down to near two percent inflation without unemployment
Speaker 4: rates really rising all that much.
Speaker 7: I don't think so. I don't think we're going to
Speaker 7: be able to have whatever the magic is, the sparkle
Speaker 7: dusk that's going to make that happen for us. I mean,
Speaker 7: we assume that the Fed people were close to peak
Speaker 7: FED funds.
Speaker 6: Are we there?
Speaker 2: I don't know.
Speaker 7: I wouldn't be surprised to see the fedgo another twenty
Speaker 7: five or fifty basis points. When you look at some
Speaker 7: of the inflation numbers, you look at average hourly earnings
Speaker 7: over the last three months, it's up about five percent
Speaker 7: on an annual basis. If you look at just the
Speaker 7: goods producing sector over the same timeframe, up seven percent.
Speaker 7: We've got the UAW their contract ending in September. If
Speaker 7: we could have wages go even higher than so, I
Speaker 7: think there's some underlying pressure on inflation that's going to
Speaker 7: continue to be there. And you have an economy that
Speaker 7: is doing pretty well because the consumer is there, because
Speaker 7: the labor market is strong. So at some point we're
Speaker 7: going to have to pay the piper for everything that
Speaker 7: we've seen up until now. I think we could start
Speaker 7: to have a consolidation around a forty two hundred to
Speaker 7: forty three hundred on the SMP take us back another
Speaker 7: five percent to us, that's your opportunity to get into
Speaker 7: the market.
Speaker 4: Are you staying away from companies where there as strong
Speaker 4: labor negotiations or a potential risk there for either shutdowns
Speaker 4: or a significant incre in some of their compensation costs.
Speaker 7: Yeah, I wouldn't say we're staying away. We're not pulling
Speaker 7: out of those names completely, but we could be a
Speaker 7: little underweight in those names. And if we start to
Speaker 7: see more pressure ramp up, especially with the auto makers,
Speaker 7: then yes, we could come out of those names to
Speaker 7: avoid some you know, some choppiness.
Speaker 2: Jeah, And I think this is insane. We are down
Speaker 2: six percent standard and pores five hundred from the peak
Speaker 2: of late twenty twenty one. We are down one point
Speaker 2: five percent from the recent peak of days weeks months ago.
Speaker 2: I think it's literally August financial media hysteria going on.
Speaker 2: And I don't mean just TV and radio, I mean
Speaker 2: print in the whole. We got nothing better to do,
Speaker 2: so let's talk about SPX down five.
Speaker 1: Days in a row or what.
Speaker 5: Yeah, that's anyone suggesting this, Cinama, get somewhere, Dan, like.
Speaker 1: I think the tone is out there a lot.
Speaker 5: Oh you think you think this is ready next to the correction.
Speaker 5: You think the comfort to the last week is that negative.
Speaker 5: I haven't found that.
Speaker 2: I don't think at Bloomberg. I think we're just reporting
Speaker 2: the statistics. I mean, pretty group is always.
Speaker 5: Very negative, but you're blaming the media organization.
Speaker 2: No, I'm just saying there's a hysteriaut there among our
Speaker 2: listeners and viewers over OMG, we're not going up two
Speaker 2: percent a week.
Speaker 7: You are seeing some capitulation along that line.
Speaker 1: This you capitulated a negative one per four four.
Speaker 7: Percent because people have been so positive and I don't
Speaker 7: think anything has been.
Speaker 1: Priced in the market off of October.
Speaker 7: That's exactly right.
Speaker 5: Let's compare multiplese now compared to the start of the year.
Speaker 5: Just how much multiple growth has to been.
Speaker 7: Well, the gains that we've seen in earnings are all
Speaker 7: pe expansions, right, It's not the earnings itself that are
Speaker 7: really driving it. And we're actually in what the third
Speaker 7: month of an earnings recession going on here, So I
Speaker 7: think we have to be very cautious. It's one of
Speaker 7: the things you look at. Valuations are too high, especially
Speaker 7: for the level of inflation that we're at, so we're
Speaker 7: going to have to see something give, and I think
Speaker 7: it's probably going.
Speaker 2: To be pees.
Speaker 8: Well.
Speaker 5: The question we could to ask is where does the
Speaker 5: endings acceleration come from. It's next year West, not coming
Speaker 5: from He's driving that.
Speaker 7: Yeah, I don't know we're not seeing it really and truly.
Speaker 7: Is it going to be more hope? Is that what's
Speaker 7: going to get us there? To me, that's pretty shaky
Speaker 7: ground if that's what you're betting on.
Speaker 4: So what's your top kind of shift heading into the
Speaker 4: last couple of months of the year.
Speaker 7: Well, we've always been cautious this year, and we've talked
Speaker 7: about that story. But adding some cyclicality to your portfolio
Speaker 7: along with some of your more value focused names, I
Speaker 7: think is really smart to have that balanced approach, and
Speaker 7: so I think you need to do that. Have some
Speaker 7: cyclical names. Look at the finance names. Banks have taken
Speaker 7: a hit obviously just because of the headlines over the
Speaker 7: last few days, the downgrades coming out of Moody's and
Speaker 7: then Italy as well, but financial services should do quite well.
Speaker 7: A Visa, a MasterCard, maybe an amor prize names we
Speaker 7: own just for full disclosure, but I think you can
Speaker 7: find pockets. The correlation between stocks is very low right now.
Speaker 7: That tells us it's a stock pickers market.
Speaker 2: I don't care what I want to know. The reason
Speaker 2: we had you up here, Thank you so much for
Speaker 2: coming in. Can you explain Astro's rangers rivalry. I think
Speaker 2: for north people like us. Yeah, it's like a it's
Speaker 2: like literally a foreign country. Is it a big deal
Speaker 2: Astro's Rangers baseball, it's.
Speaker 7: A big deal, but I'd say it's not as big
Speaker 7: a deal now as it used to be. But look
Speaker 7: Houston Dallas, there's a rivalry on everything there. So even
Speaker 7: though we're in the same state, we are world on
Speaker 7: the road trips.
Speaker 2: Labor Day weekends September fifth. Yeah, Astro's Rangers, and I
Speaker 2: think it's in near Dallas.
Speaker 5: Which is the team that chased Arlington.
Speaker 1: Oh, listen to yours.
Speaker 7: It runs the won the World Series twice.
Speaker 5: Yeah, all right, that's the same that chiefs. Okay, Victoria,
Speaker 5: thank you, it's good to see you. I need that Victoria.
Speaker 5: If not is a cross smock club and investments.
Speaker 1: This is too important.
Speaker 2: It's a two hour conversation with Michael Nathan's senior Research Channel's.
Speaker 1: Moffatt Nathanson, expert on Disney.
Speaker 2: Michael, I'm going to go back a few years to
Speaker 2: the summer of two thousand and three where you were
Speaker 2: a young Buck analyst and you were forced to watch
Speaker 2: Finding Nemo Pirates of the Caribbean bringing down the House
Speaker 2: in Freaky Friday all back to back. Disney was riding
Speaker 2: a high.
Speaker 1: It was a.
Speaker 2: Double digit layup, and it's been the mother of all disappointments.
Speaker 2: What does Aiger do today and in the next ninety
Speaker 2: days to write the ship.
Speaker 9: Tom He has a long checklist of things he has
Speaker 9: to fix, right.
Speaker 8: He has to.
Speaker 9: Your content, your content pipeline that you spoke of. It's broken.
Speaker 9: It will not be ninety days and better. It has
Speaker 9: to work on trying to figure out why they misfired
Speaker 9: so much on the film side, maybe changing some leadership there.
Speaker 9: He has to work on getting ESPN some new partners,
Speaker 9: as you talked about, maybe finding a partner to invest
Speaker 9: in ESPN and potentially getting that off his books.
Speaker 8: He needs to then figure out what to do with
Speaker 8: his cable network.
Speaker 9: Maybe he needs to sell those as well. And he
Speaker 9: has to work with Comcasts to buy in the Hulu
Speaker 9: thirty three percent stake that is coming to him next year.
Speaker 9: And he asked to worry about DeSantis in Florida. His
Speaker 9: checklist is enormous, right, so he is very busy ninety
Speaker 9: days ahead of him and probably in the next two
Speaker 9: years to fix re has to text.
Speaker 5: Might be easier to find the question the following way.
Speaker 5: What isn't for sale?
Speaker 8: Michael, Right, Well, it isn't for Selle John is the
Speaker 8: parks right?
Speaker 9: Like, I think what's happening here is that the Parks
Speaker 9: are taking over leadership of this company, and as long
Speaker 9: as the US economy does not weaken materially, the park
Speaker 9: story should hold pretty well. And our thinking is that
Speaker 9: this company's in transition from what Tom described as an
Speaker 9: ip led company for Parkside company right with streaming attached
Speaker 9: to it. So I think we're in the beginning of
Speaker 9: a real transition of Disney's app set to a more
Speaker 9: targeted company.
Speaker 5: Michael asked how long is this going to take? Because
Speaker 5: as a leadership question embedded in that, how long will
Speaker 5: this take?
Speaker 9: It take the next two years? And that's why he's
Speaker 9: been re extended, right, it's they need to make some
Speaker 9: very tough decisions.
Speaker 8: Which he's hinted about.
Speaker 9: Our point is like, look, we've been negative about a
Speaker 9: linear networks and we started talking to you know, the
Speaker 9: weakness is apparent.
Speaker 8: It's here. He wants to get those businesses office books.
Speaker 8: It's not gonna be easy, it's not.
Speaker 9: Gonna be very ACCREEDO to do that, but he needs
Speaker 9: to get those office books. He needs to change leadership,
Speaker 9: you know, in the content side. To fix streaming. It's
Speaker 9: going to take time.
Speaker 8: It really is.
Speaker 4: When you talk about some of the units for sale.
Speaker 4: I wonder how the deal that was announced yesterday with
Speaker 4: ESPN and Pen Entertainment factors into that this idea that
Speaker 4: ESPN is going to be going into sports betting, which
Speaker 4: isn't completely congruent with the sort of family friendly image
Speaker 4: that the rest of the parks kind of cater to.
Speaker 4: Do you think that this is sort of a predecessor
Speaker 4: to a spinoff.
Speaker 9: I think it is. I think they decided the past
Speaker 9: two years that the US perception on gambling had changed
Speaker 9: and their perception had changed. Visited a deal where ESPN
Speaker 9: gets a billion and a half dollars and some some warrants.
Speaker 9: But I do think it's a processor to finding new
Speaker 9: partnerships and trying to reposition ESPN off of their books
Speaker 9: in partnership with other companies. Right, so the ESPN's troubles
Speaker 9: to me are not easily fixed. Perhaps you can find
Speaker 9: some ancillary businesses like gambling, maybe e commerce.
Speaker 8: You have to build a new streaming business for them.
Speaker 9: So I think you'll see ESPN, you know, spinning off
Speaker 9: of being spun off of Disney, maybe even taken in
Speaker 9: private for the next couple of years.
Speaker 8: So that could be done off stage somewhere.
Speaker 4: When it comes to fixing the content issues on the
Speaker 4: streaming side, how much of the focus is going to
Speaker 4: be on art of intelligence creating content that is less
Speaker 4: dependent on some of the talent, the writers, the actors,
Speaker 4: et cetera, versus just streamlining everything and having a more
Speaker 4: targeted package and then selling off the rest.
Speaker 9: Lisa, That's that's a really good question. I think in
Speaker 9: the near term it's about streamlining. I think they would say,
Speaker 9: and he said this, that they've just made too much content.
Speaker 9: They've been stretched too thin at Marvel, Lucasfilm Pixar has
Speaker 9: the own issues. But I think in the near term
Speaker 9: it's trying to figure out the optimal set of content choices,
Speaker 9: trying to look at the leadership of some of these verticals.
Speaker 9: Longer term, the AI question is hanging over this entire industry.
Speaker 9: It's a potential risk, right if also in the Barrett's
Speaker 9: and Entry have dropped so much that you know, your
Speaker 9: kids could start making Disney Movies.
Speaker 2: Michael, I got eight ways to go here, eight ways
Speaker 2: to go here. We could do a two hour conversation
Speaker 2: on this. We're thrilled here with us the botto.
Speaker 1: I'm going to go financial.
Speaker 2: I got sixty percent plus dot pharamount, sixty plus debt
Speaker 2: at Warner Brothers Discovery disaster. I've got thirty plus debt
Speaker 2: at Fox. Whatever in Disney's debt lessoncumbered twenty one percent
Speaker 2: on the balance sheet is debt Eiger salvation to merge
Speaker 2: for scale.
Speaker 8: It's a good question.
Speaker 9: I think. I think his salvation is getting cached cash.
Speaker 9: So you know it's Tom he theycsually generate ten billion
Speaker 9: of cash flow a few years ago. Now they generate
Speaker 9: about four billion of cash flow. I think his opportunity
Speaker 9: is really to focus you on the park business and
Speaker 9: fix and streaming. You know givesn't to your point, because
Speaker 9: he owns parks, his balance sheet is not the same
Speaker 9: risk of the other companies you mentioned right that those
Speaker 9: balance sheets are going to be the story the next
Speaker 9: couple of years. I think Disney can work the way
Speaker 9: out of it by focusing on parks and fixing profitability
Speaker 9: on streaming.
Speaker 8: So to your point.
Speaker 9: He has flexibility here, and I do think the story
Speaker 9: is if you look at the value of a resort
Speaker 9: assets where they moved to, Disney stock is cheap. If
Speaker 9: you think about it as a different type of company
Speaker 9: led by resorts and hotels and parks.
Speaker 8: That's what I think Bob's looking at the next a
Speaker 8: couple of years.
Speaker 5: Mike, I've got a squeeze to send. You're in the
Speaker 5: perfect seat to ask this question. It's het in November
Speaker 5: twenty twenty two. Everyone hates Facebook Meta and Mark Zuckerberg. Yep,
Speaker 5: it's now in the summer of twenty twenty three. Everyone
Speaker 5: loves Facebook Meta and still hates Mark Zuckerberg. Is there
Speaker 5: something that the world Disney Company can announce in the
Speaker 5: same way that Zuckerberg did a early November to talk
Speaker 5: about the Year of Efficiency, to turn this name around
Speaker 5: more quickly?
Speaker 8: Yes?
Speaker 9: And John, you remember I was on air with the
Speaker 9: guys defending Facebook and Metal the whole time.
Speaker 5: Right, Well, you've got thirty seconds to tell me now.
Speaker 9: Yes, because the reality is their streaming businesses lose too
Speaker 9: much money.
Speaker 8: Netflix is worth two hundred billion dollars. Disney steaming businesses
Speaker 8: are worth ten billion. Dollars right.
Speaker 9: The focus is a fixing profitability of streaming. You know,
Speaker 9: let parks continue, but fixture and profitability, get those leading numbers.
Speaker 9: Talk your books and people look at this and say, wow,
Speaker 9: this stock is really cheap. So we've been buying Disney.
Speaker 9: I think next twelve months we come back to a
Speaker 9: litmus stocks hire from here because of what.
Speaker 5: You said, Michael, Thank you, sir. That's what you said,
Speaker 5: not what I said. Michael, Thank you. Michael Nathan sent
Speaker 5: of s We beam up at ninth and cent.
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