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Speaker 1: This is Bloomberg Wall Street Week.

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Speaker 2: I mean may not have an overall recession. We're having

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Speaker 2: a rolling recession. To Kanye Roll looks pretty strongly when

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Speaker 2: it comes to jobs.

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Speaker 1: The financial story is that shape our work.

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Speaker 2: Three major regional bank failures send shockwaves through the banking system.

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Speaker 2: We're all trying to figure out what to make of

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Speaker 2: generative AI through.

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Speaker 1: The eyes of the most influential voices.

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Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, Bank of America,

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Speaker 2: deebro Lair of the Paulson Institute, Len Hubbard of the

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Speaker 2: Columbia Business.

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Speaker 1: School, Bloomberg Wall Street Week with David Weston from Bloomberg Radio.

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Speaker 3: The big rally in Wall Street this week? Who gets

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Speaker 3: the credit? The Fed, banks or big Tech? This is

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Speaker 3: Wall Street Week. I'm Romaine Bossic in for David Weston.

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Speaker 3: This week, Catherine Judge of Columbia Law School and what

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Speaker 3: steper capital requirements will mean for banks and their willingness

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Speaker 3: to lend.

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Speaker 4: What we really want is more lending during periods of distress,

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Speaker 4: and probably a little less lending when everything's going really well.

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Speaker 3: Rock Creek CEO Asani Beschloss on why the economies on mainland,

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Speaker 3: China and Taiwan are moving in different direction.

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Speaker 5: One thing that President v has created which will be

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Speaker 5: hard to undo is uncertainty.

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Speaker 3: And former CNN president John Klein on the disruptive effect

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Speaker 3: of AI on the business of media.

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Speaker 6: AI can be a very useful tool. On the other hand,

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Speaker 6: it can result in efficiencies for the studios.

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Speaker 3: The FED appeared to score one of its first victories

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Speaker 3: in the fight against inflation core CPI, posting its smallest

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Speaker 3: increase in June since twenty twenty one, but the FED

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Speaker 3: may hike again.

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Speaker 7: In July, it was very clear that inflation was and

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Speaker 7: still is at levels that are too high for their comfort.

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Speaker 7: I do think that the narrative both for the FED

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Speaker 7: and also for markets will now begin to change towards

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Speaker 7: growth towards employment.

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Speaker 3: Meanwhile, China faces a different problem, delytionary concerns, prompting the

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Speaker 3: Central Bank to step in MEANINGSHIDA.

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Speaker 8: Going forward, the People's Bank of China will continue to

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Speaker 8: provide support for small, medium and private businesses.

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Speaker 3: Media executives gathering in Sun Valley, Idaho, and One Big

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Speaker 3: Deal was all the buzz a US court rejecting the

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Speaker 3: US government's challenge of that Microsoft did the buy Activision.

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Speaker 3: The company is now moving forward with some additional measures

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Speaker 3: to appease UK regulators and finally close out that deal.

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Speaker 9: On the one hand, everyone was talking about the Microsoft's

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Speaker 9: activision deal, the efforts the FTC went to appeal the

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Speaker 9: decision by US district courts.

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Speaker 3: But strikes did loom over the annual gathering, members of

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Speaker 3: the sag AFTRA Actors Union joining writers who have been

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Speaker 3: on strike since May, making it the first time that

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Speaker 3: actors and writers have together walked out since nineteen sixty.

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Speaker 3: Back then, Ronald Reagan was president of the Actors Guild

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Speaker 3: and Marilyn Monroe was still gracing the screen.

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Speaker 10: You cannot change the business model as much as it

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Speaker 10: has changed, and not expect the contract to change.

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Speaker 3: Two and earnings kick off with a bit of a

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Speaker 3: sigh of relief on Wall Street. JP Worg and Wells

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Speaker 3: Fargo and City Group leading the big bank Earnings on

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Speaker 3: a high note, getting a big boost from the Fed's

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Speaker 3: recent rate heights, But we hit.

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Speaker 2: A hard landing. It's going to be very difficult for

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Speaker 2: the banks, including JP Morgan, but that doesn't appear to

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Speaker 2: be the case at least today.

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Speaker 3: A goldilocks type of week for the economy, a bit

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Speaker 3: of an everything rally for equities, the S and P

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Speaker 3: five hundred jumping more than two percent on the week,

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Speaker 3: the Nasdaq surging more than three and the Russell two

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Speaker 3: thousand index of small cap stocks coming close to a

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Speaker 3: four percent game. Discretionary stocks helping to lead the advance,

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Speaker 3: so too did big tech, and so too did homebuilders

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Speaker 3: Pulti Group and Toll Brothers, closing out the week at

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Speaker 3: an all time high, Microsoft finishing a fraction of a

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Speaker 3: percent away from a fresh record itself. But the biggest

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Speaker 3: moves cross asset wise, we're in treasuries, commodities, and dollar,

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Speaker 3: the US currency weakening to a fifteen month low versus

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Speaker 3: a global basket of its peers, and two year treasury

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Speaker 3: yields swinging more than thirty basis points from peak to

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Speaker 3: trough this week, a volatility in that space that is

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Speaker 3: expected to say as long as the Fed remains in play.

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Speaker 3: The big catalyst for these market moves came in the

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Speaker 3: form of two big economic reports this week to show

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Speaker 3: US inflation reverting back to its lowest levels in at

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Speaker 3: least two years. And that is where we start today.

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Speaker 3: Mona Maha John joining us right now, senior investment strategists

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Speaker 3: at Edward Jones and Dennis de Busher, chief market strategists

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Speaker 3: over at twenty two V Research and Mona. I'll start

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Speaker 3: with you. You look at that inflation report, particularly when

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Speaker 3: it comes to consumer prices, airfares down, used car prices down,

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Speaker 3: eight prices, which we've all been obsessing over for the

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Speaker 3: last couple of years, finally dropping back to sound down

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Speaker 3: to something that's somewhat more reasonable.

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Speaker 11: Yeah, remain Look, it was a nice week in markets

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Speaker 11: for the bulls and certainly for investors and consumers broadly.

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Speaker 11: You know, I'll highlight three quick things, and one, of course,

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Speaker 11: is that CPI report that you mentioned, and in fact,

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Speaker 11: inflation broadly surprised to the downside in both the CPI

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Speaker 11: and PPI prints. But the good news was in CPI

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Speaker 11: not only headline inflation, but we did see a bit

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Speaker 11: of cooling in core inflation as well, driven by downward

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Speaker 11: pressure in the housing market, and even that non housing

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Speaker 11: services inflation that the FED is tracking carefully started to

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Speaker 11: ease as well. Number two is the Fed itself. You know,

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Speaker 11: I think markets are now looking for perhaps one more

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Speaker 11: rate height coming out of the FED and maybe they

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Speaker 11: can stept to the sidelines after that. That is welcome news.

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Speaker 11: After putting upward pressure on interest rates for the past

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Speaker 11: sixteen months, raising borrowing costs for consumers and corporations, we

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Speaker 11: are seeing a resilient consumer and an economy that's holding in. There,

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Speaker 11: so we have a backdrop of lower inflation, perhaps a

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Speaker 11: FED moving to the sideline, and an economy that's holding up.

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Speaker 11: That's good news for markets broadly.

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Speaker 3: Well, Dennis, I want to get your thoughts here on

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Speaker 3: those economic t leads. I mean, because these are kind

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Speaker 3: of the two big components of this economic narrative, right,

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Speaker 3: whether inflation is coming down to a reasonable enough level,

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Speaker 3: but also whether the economy is still unstable enough condition

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Speaker 3: following five percentage points of rate hikes out of the FED.

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Speaker 12: Yeah, you bring up a really important point.

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Speaker 8: And if we have to go back to why markets

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Speaker 8: have done so well, we know that.

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Speaker 12: Inflation is coming down.

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Speaker 13: The inflation appears to be coming down for now at least,

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Speaker 13: not the hardware.

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Speaker 12: You know, it can come down to the two ways.

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Speaker 8: An easy way which would be associated with the soft landing,

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Speaker 8: but the hard way, which be assiliunting obviously for the recession,

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Speaker 8: and so it is clear that it's coming down the

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Speaker 8: East way. For now, it's achieved. And part of the

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Speaker 8: reason we saw this big shift in the internals in

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Speaker 8: the market, so small capital performing like you know at

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Speaker 8: the top of the show, retail stocks out warming deeper,

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Speaker 8: cipples balancing is because the housing data stable plods and

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Speaker 8: the housing data stabilize it. Because that is the tip

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Speaker 8: of the sphere when it comes to interest rate policy.

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Speaker 3: We heard from three big banks, JP, Morgan, City Group,

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Speaker 3: and Wells Fargo officially kicked off the earning season with

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Speaker 3: better than expected results all around. Is this a harbinger

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Speaker 3: of things to come for the rest of the banking

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Speaker 3: sector and more importantly for the rest of corporate America overall.

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Speaker 3: Mona Mahajan is still with us over at Edward Jones

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Speaker 3: and Dennis to Busher over at twenty two V Research

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Speaker 3: and Dennis, I'll start with you. I think some of

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Speaker 3: the estimates coming into this earning season certainly not bullish,

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Speaker 3: but they certainly weren't as bearish as maybe what we

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Speaker 3: saw in the previous quarters.

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Speaker 12: Definitely not as parish previous quarters.

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Speaker 8: Hope you're earnings revisions are still running around the twenty

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Speaker 8: fifth percentile.

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Speaker 12: So you've seen a little bit of acceleration that earnings

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Speaker 12: revisions coming into the quarter.

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Speaker 8: And typically when that happens, you beat five about two

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Speaker 8: bucks relative to estimates, and I analize, right, they will

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Speaker 8: get us somewhere in the two sixteen, two seventeen rings

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Speaker 8: for the year, So you know, coming in a little

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Speaker 8: bit low on the estimate side, that's not too out

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Speaker 8: of bounds relative to history, but not as nearly as poor.

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Speaker 13: And I was just saying early sentiment wise, not nearly

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Speaker 13: as poor as we've seen.

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Speaker 12: The last three or four earning season were really bad.

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Speaker 12: En upcoming in.

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Speaker 3: We got the banker in these earlier this morning, Dennis,

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Speaker 3: or at least three of the big banks here. There

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Speaker 3: were some upside surprises there. I'm wondering, what are you

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Speaker 3: expecting overall to hear out of not just the banks,

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Speaker 3: but overall the companies overall, in terms of how their

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Speaker 3: businesses are holding up.

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Speaker 12: Shopping lead well.

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Speaker 13: Relative to what we've heard and the fears over the

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Speaker 13: last I guess yeah, basically here and particularly since the

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Speaker 13: banking crisis, when people thought following up there was going

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Speaker 13: to be a significant type of financial conditions that was

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Speaker 13: going to lead to a sharp curation in the economy.

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Speaker 13: I think you're going to hear from companies that things

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Speaker 13: are holding up pretty well, consistent with slower growth than

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Speaker 13: what we've seen the last two years, but expansionary like economy.

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Speaker 12: And we'll see what happens in the future with Ernie.

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Speaker 8: We'll see what happens in the future with the economy,

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Speaker 8: but for now, it seem relatively okay.

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Speaker 12: Earnings consistent with an expansion mona.

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Speaker 3: We've already started to see a lot of equity strategists

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Speaker 3: and analysts are to ratchet up their expectations not only

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Speaker 3: for overall aggregate earnings for the S and P five hundred,

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Speaker 3: but of course you're twelve month price targets as well.

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Speaker 11: Yeah, you know, look, I think the earnings recession that

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Speaker 11: we went through, and really Q four and Q one

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Speaker 11: came in negative year on year earnings growth for the

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Speaker 11: S and P five hundred. Q Q two earnings, which

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Speaker 11: we're getting right now, could also be the perhaps last

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Speaker 11: quarter that we get a negative year on year number.

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Speaker 11: And then we start to see improvement in Q three

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Speaker 11: and Q four and really into twenty twenty four as well,

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Speaker 11: and so as we head towards the next six to

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Speaker 11: twelve months, we also know markets are pretty forward looking

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Speaker 11: right now, twenty twenty four estimates are calling for double

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Speaker 11: digit earnings growth. Now we will have to assess the

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Speaker 11: backdrop as we head into twenty twenty four, but if

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Speaker 11: we are in an environment where yields are moving lower

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Speaker 11: and the economy is improving from any sort of softening,

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Speaker 11: we could certainly see a rebound in earnings growth. So

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Speaker 11: some of the momentum that we've seen in markets recently

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Speaker 11: could be an expression of the direction of try level

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Speaker 11: of earnings over the next six months as well, So

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Speaker 11: we certainly see progress there. Of course, we've moved pretty far,

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Speaker 11: pretty fast, as we noted, across equities now, and so

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Speaker 11: we think some bird of consolidation makes sense. Perhaps we'll

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Speaker 11: get some earnings figures over the next few weeks that

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Speaker 11: give us some reason to pause, but we do think

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Speaker 11: broadly the opportunity will come as we head towards the

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Speaker 11: back half.

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Speaker 4: Of this year.

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Speaker 3: Yeah, and it'll be interesting to see whether some of

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Speaker 3: the moves that we see in equity market actually start

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Speaker 3: to broaden out just a little bit. Our appreciation to

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Speaker 3: both of you monamaje On over at Edward Jones, Dennis

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Speaker 3: the Busher over at twenty two V Research.

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Speaker 2: Coming up. One China, But Two Economies. We talked with

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Speaker 2: us Sonny Bechelist of Rock Creek about the disappointing performance

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Speaker 2: of mainland China so far this year and how different

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Speaker 2: it is from Taiwan.

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Speaker 5: Who knew in the beginning of the year, that's with

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Speaker 5: ais becoming so important and the Taiwan news market would

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Speaker 5: do so well.

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Speaker 2: That's next on Wall Street Week on Bloomberg.

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Speaker 1: This is Bloomberg Wall Street Week with David Weston from

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Speaker 1: Bloomberg Radio.

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Speaker 2: One China, but Two Economies. The United States continues to

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Speaker 2: go out of its way to underscore its One China policy,

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Speaker 2: as Secretary of State Blincoln did during his recent visit

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Speaker 2: to Beijing. Our reiterated the long standing US One China policy.

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Speaker 2: That policy has not changed. We do not support Taiwan independence.

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Speaker 2: We were made opposed to any unilateral changes to the

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Speaker 2: statis quo by either side, even as the United States

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Speaker 2: seeks to compete with that one China without coming to blows.

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Speaker 14: I also believe that the United States in China should

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Speaker 14: seek a relationship of healthy economic competition that is not

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Speaker 14: winner take all, but with a fair set of rules,

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Speaker 14: we benefit both our countries over time.

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Speaker 2: But recently the economies of mainland China and Taiwan have

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Speaker 2: been headed in very different directions. As the mainland finds

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Speaker 2: it's harder than expected to come back from the COVID lockdown.

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Speaker 12: I have been a.

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Speaker 4: Little surprised with the degree of how quickly it's moderated.

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Speaker 6: China is going to need to do more stimulus.

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Speaker 2: Leading Beijing this week to undertake new stimulus measures, particularly

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Speaker 2: to help its struggling property market.

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Speaker 10: There's a lot of expectation that there will be more

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Speaker 10: coming from Beijing to help the property sector, but the

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Speaker 10: question is what can the government actually do when there

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Speaker 10: is so much debt at the local government level.

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Speaker 2: While Taiwan continues to thrive economically with the move to

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Speaker 2: AI spurring on chip manufacturer TSMC and lifting the entire market.

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Speaker 3: So why is Taiwan and this bull run and can

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Speaker 3: it last?

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Speaker 5: One things?

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Speaker 11: For sure, stocks have been riding on this AI wave,

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Speaker 11: but the head.

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Speaker 2: Of the Taiwan Stock Exchange says it's not just Ai

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Speaker 2: that is driving market strength, as.

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Speaker 15: The pace of the US is His high stowing and

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Speaker 15: also the Girlball economy remain the statues. I think mostly investors,

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Speaker 15: we all pay attentions. Again, I'm Peter A. Bresse and

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Speaker 15: the kesh In Frost. I expect it in the second

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Speaker 15: half of this year.

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Speaker 2: All of which makes the geopolitics across the Taiwan Strait

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Speaker 2: just that much more complicated. And to take us through

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Speaker 2: the geopondse and the economics of mainland China and its environs,

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Speaker 2: we welcome to somebody who knows it terribly well. She

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Speaker 2: is a Sunny bachelist. She is the CEO of Rock

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Speaker 2: Creek of Sanae. You come on regular. We really value

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Speaker 2: you on Wall Street. We thank you for being here.

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Speaker 2: As I say, you've spent a lot of your career

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Speaker 2: dealing with and around China. Start with what I would

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Speaker 2: call mainland China right now, I think that if you

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Speaker 2: go back to the first of the year, people expect

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Speaker 2: it to really be a rebound year for China, given

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Speaker 2: what had happened with COVID doesn't seem to be playing

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Speaker 2: out that way.

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Speaker 5: You're so right. Stated in the beginning of the year

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Speaker 5: markets went up twenty percent. People expected markets to be

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Speaker 5: up another ten to twenty percent in mainland China with

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Speaker 5: all the geopolitical issues going on. If anyone had guessed,

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Speaker 5: you would think Taiwan would be down and the rest

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Speaker 5: of Asia would be sort of so so, and Asian

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Speaker 5: would be doing relatively well. And if you look actually today,

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Speaker 5: it's a very very different story. Number one, what you

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Speaker 5: saw is as China came out of COVID, it has

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Speaker 5: been taking much longer. Chinese consumers were supposed to be

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Speaker 5: the big fource carrying us out of COVID and sort

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Speaker 5: of creating this huge growth in the economy, and they

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Speaker 5: have been really scared because they went through their savings

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Speaker 5: during three years and they are trying to save more.

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Speaker 5: And the uncertainties that have been created both internally and

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Speaker 5: by geopolitics is getting the Chinese consumer to save more

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Speaker 5: and spend less now At the same time, I should say,

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Speaker 5: what happened also is that in Taiwan, for example, where

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Speaker 5: we did not necessarily expect this kind of rise of

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Speaker 5: like twenty two percent year to date. Who knew in

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Speaker 5: the beginning of the year that with ai becoming so important,

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Speaker 5: the micro chip that is made in Taiwan would become

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Speaker 5: even more important and the Taiwanese a market would do

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Speaker 5: so well. Last but not least. Of course, you've seen

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Speaker 5: a lot of outflows from US and European and other

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Speaker 5: global investors going out of China. If anything, the flows

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Speaker 5: seem to be increasing coming into July than getting reduced,

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Speaker 5: and a lot of very interesting phenomena going on on

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Speaker 5: that point.

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Speaker 2: So, Sonny, as a longtime investor, you're the first one

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Speaker 2: to know that markets go up, markets go down. You

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Speaker 2: can't overreact to short term developments. When you look at

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Speaker 2: mainland again, i'll call it mainland China for the moment,

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Speaker 2: how much of this is a short term thing, do

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Speaker 2: you think? And how much are there larger underlying structural

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Speaker 2: factors that may hold back mainland China from the remarkable

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Speaker 2: growth we've seen or the last generation.

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Speaker 5: David, I think the fact that you have twenty percent

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Speaker 5: youth unemployment is a very big factor. That's a long

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Speaker 5: term issue and that is not going to get affected

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Speaker 5: by short term monetary policy changes. So even though at

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Speaker 5: the moment the monthly policy is trying to help push

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Speaker 5: the economy forward, the job creation is much less, particularly

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Speaker 5: because these jobs were in the tech sector, in services

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Speaker 5: in areas that have got affected and have not been

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Speaker 5: expanding as much as you would expect. The other area

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Speaker 5: I think to look at in China that has been

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Speaker 5: affected is sort of the old age population and the

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Speaker 5: demographics that also, if you look long term, is a

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Speaker 5: big issue with the aging of the population in China.

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Speaker 5: With Secretary Yellans visit, we saw we went from decoupling

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Speaker 5: to the risking and what the term she used last

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Speaker 5: week while she was in China was diversifying. I think

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Speaker 5: every country, having experienced the issues the supply chain issues

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Speaker 5: that the experience, including the US during COVID, is diversifying

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Speaker 5: its sources of input and trade, and we saw for

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Speaker 5: example Mexico overtake China in terms of trade. Those I

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Speaker 5: think are longer term issues as countries, including the US,

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Speaker 5: diversify trade sources. There is one big positive though, looking

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Speaker 5: at China, which is that they have continued to invest

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Speaker 5: in their green economy, not as much as they could

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Speaker 5: or should. In fact, Secretary in fact mister carry will

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Speaker 5: be will be going there shortly and I think that

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Speaker 5: meeting will be quite important. But even looking at their

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Speaker 5: domestic economy, the Chinese are putting in a lot of

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Speaker 5: resources and investments into ev into solar. As you know,

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Speaker 5: they're still the biggest supplier to the world of solar

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Speaker 5: facilities as well as now starting to become the largest producer.

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Speaker 2: Of ev asny. You mentioned the demographics issues in China.

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Speaker 2: Perhaps a related issue is for some time China was

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Speaker 2: something of a talent magnet. I remember going over there

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Speaker 2: a few years ago, and they're attracting Chinese American scientists

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Speaker 2: back to mainland China to live with their families. Is

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Speaker 2: there a risk of really not altogether turning around, but

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Speaker 2: actually reducing the attraction of mainland China for talent from

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Speaker 2: around the world because of some of the reforms as

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Speaker 2: you would put it from presidency.

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Speaker 5: I think we have about three hundred thousand Chinese students

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Speaker 5: in the US, and a lot of them would go

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Speaker 5: back to China, and there's a question mark as to

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Speaker 5: whether that flow will be back to China or back.

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Speaker 5: Some stay here, some go in to other countries for

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Speaker 5: exactly the reason you said. For example, Ai, which is

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Speaker 5: a very exciting area for some of the scientists you

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Speaker 5: are talking about, is heavily government controlled, right, So if

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Speaker 5: you are working for the largest state owned enterprises and

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Speaker 5: under direct government supervision. You will be you will be

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Speaker 5: benefiting from working on AI. But if you're working in

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Speaker 5: the private sector, in some of the private sector companies

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Speaker 5: or the ones that we're working with the venture industry

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Speaker 5: in the US, that is something that is now think

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Speaker 5: of the past, we've seen that a kind of cooperation

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Speaker 5: between venture in the US and venture in China.

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Speaker 12: Duendo.

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Speaker 5: It's not gone, it's still there is still some going on,

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Speaker 5: but at a very different level. So that will definitely

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Speaker 5: impact the flow of the brain flow as it were

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Speaker 5: into China. Asta.

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Speaker 2: It's always so good to have your walls. Rybick, thank

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Speaker 2: you so much. As ny Rshalist, she is the CEO

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Speaker 2: of Rock Creek.

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Speaker 1: Coming up.

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Speaker 2: Media at a crossroads as leaders meet in Sun Valley

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Speaker 2: in the middle of a strike with more uncertainty than

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Speaker 2: they've seen for a long time. We go through it

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Speaker 2: with Streaming and Cable executive Jonathan Klein.

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Speaker 6: They know something is coming their way, they just don't.

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Speaker 2: Know what that's next. On Wall Street Week on Bloomberg,

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Speaker 2: this is Wall Street Week. I'm David Weston This week,

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Speaker 2: media moguls had their annual Allen and Company meeting out

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Speaker 2: in Sun Valley with the fundamentals of their business more uncertain,

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Speaker 2: perhaps than ever before, as people rush to a streaming

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Speaker 2: world with uncertain profits, the basic cable model is melting

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Speaker 2: out from under them, and strikes are starting to shut

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Speaker 2: down their businesses all together. To take us through where

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Speaker 2: the business of media is heading, Welcome down, Jonathan Klin.

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Speaker 2: He's a former PRESIDENCYNN now a media entrepreneur whose latest

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Speaker 2: venture is Hanging Media, a sports streaming platform. John, Thank

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Speaker 2: you so much for being with us. Thanks for having

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Speaker 2: me so you know this business over a number of

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Speaker 2: years from the point of view of cable as well

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Speaker 2: as now streaming. You understand it. Give us your sense

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Speaker 2: of how fundamental the shift is as we, I guess,

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Speaker 2: are moving away from cable pretty quickly into this streaming world.

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Speaker 6: It's all exploded right in front of our faces. There's

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Speaker 6: more change hitting media today than ever in the course

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Speaker 6: of either of our careers. It's all accelerated so much,

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Speaker 6: and ultimately it comes down to consumers embracing the idea

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Speaker 6: that they really do have total control in the media ecosystem.

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Speaker 2: One of the things that strikes me is I certainly

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Speaker 2: watch streaming services, but if you asked me what service

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Speaker 2: it was on. I'm sorry to say often I couldn't

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Speaker 2: tell you I know what the program is, I don't

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Speaker 2: necessarily know what the services. What's the role of brands.

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Speaker 2: We used to know ESPN, we used to know CNN.

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Speaker 2: I'm not sure if we know the brands and streaming

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Speaker 2: as well.

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Speaker 6: The strongest brands today are the shows themselves and often

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Speaker 6: the creators.

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Speaker 11: You know.

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Speaker 6: I was the media consultant for Succession on HBO.

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Speaker 2: Congratulations on them.

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Speaker 6: They were an incredible group. I mean Jesse Armstrong, who

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Speaker 6: was the creator and show runner, a phenomenal guy and

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Speaker 6: a wonderful manager for all of the managers who might

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Speaker 6: be watching this, really understood how to empower a team

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Speaker 6: to yield amazing results. I mean, no ego there, but

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Speaker 6: he is sitting pretty Because if you are a streaming

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Speaker 6: service witnessing twenty four percent churn year over year, you

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Speaker 6: need retention, and shows like Succession or White Lotus or

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Speaker 6: d and or or pick them, they are retention magnets.

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Speaker 6: That's what keeps users there. That said users are completely promiscuous.

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Speaker 6: I just saw a survey I think it was Publisher's

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Speaker 6: Clearinghouse to the survey, and they found that only less

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Speaker 6: than seven percent of viewers plan to keep the subscription

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Speaker 6: service that they are currently subscribed to. So what that

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Speaker 6: means is consumers completely understand their ability to float from

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Speaker 6: service to service in search of the shows that they want.

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Speaker 2: But does that suggest, as we would call in the

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Speaker 2: financial world, of maturity mismatch. On the one hand, you

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Speaker 2: have to make long term commitments to creators, to the actors,

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Speaker 2: the writers, the producers, tens of millions, hundreds of millions

443
00:23:29,160 --> 00:23:31,199
Speaker 2: of dollars on these series. At the same time, on

444
00:23:31,240 --> 00:23:33,919
Speaker 2: the revenue side, you don't have the assurance of the

445
00:23:33,920 --> 00:23:35,880
Speaker 2: cable dollars coming in. And think about this.

446
00:23:36,720 --> 00:23:41,640
Speaker 6: Added to that, the most popular network on television today

447
00:23:42,560 --> 00:23:46,919
Speaker 6: is YouTube. Everyone's smart TV. You power it up. You

448
00:23:46,960 --> 00:23:50,040
Speaker 6: can watch not only traditional broadcasts, but you can watch

449
00:23:50,160 --> 00:23:53,879
Speaker 6: internet chat. So YouTube has something like one hundred and

450
00:23:53,920 --> 00:24:01,359
Speaker 6: sixty million regular viewers. Their viewership dwarfs Netflix, Disney plus

451
00:24:01,400 --> 00:24:02,760
Speaker 6: Max combined.

452
00:24:03,480 --> 00:24:05,480
Speaker 2: Let me add a further complication of this, and that's

453
00:24:05,520 --> 00:24:07,960
Speaker 2: artificial intelligence. Right now, we have the writers on strike,

454
00:24:08,000 --> 00:24:10,120
Speaker 2: we've got issues about SAG after whether they go out,

455
00:24:10,400 --> 00:24:13,040
Speaker 2: and as I understand, artificial intelligence and its role in

456
00:24:13,040 --> 00:24:15,840
Speaker 2: the creative process is key to that element. What is

457
00:24:15,920 --> 00:24:18,000
Speaker 2: artificial intelligence likely to do to all of this?

458
00:24:18,520 --> 00:24:22,680
Speaker 6: So AI and I ran an AI company that Apple

459
00:24:22,720 --> 00:24:25,440
Speaker 6: acquired a couple of years ago and it's now Apple's

460
00:24:25,480 --> 00:24:32,359
Speaker 6: Media Intelligence division. AI can be a very useful tool

461
00:24:32,680 --> 00:24:40,400
Speaker 6: to creators, enabling them to make projects that look every

462
00:24:40,440 --> 00:24:44,960
Speaker 6: bit as good as the most lavish, high end productions

463
00:24:44,960 --> 00:24:48,400
Speaker 6: on any of the services, which is going to unleash

464
00:24:48,720 --> 00:24:52,800
Speaker 6: another tide of creativity. On the other hand, it can

465
00:24:52,880 --> 00:24:58,560
Speaker 6: result in efficiencies for the studios and the networks, so

466
00:24:58,640 --> 00:25:02,600
Speaker 6: they can outsource some of the creative process that.

467
00:25:02,680 --> 00:25:04,960
Speaker 2: Jonathan Klein, he's the former head of CNN and now

468
00:25:05,000 --> 00:25:06,879
Speaker 2: a serial media entrepreneur.

469
00:25:07,359 --> 00:25:09,600
Speaker 16: The problem is they have to sell off assets in

470
00:25:09,680 --> 00:25:12,280
Speaker 16: order to keep their capital up. In the bank's shrink

471
00:25:12,760 --> 00:25:15,560
Speaker 16: and is their asset based shrinks. They can't loan out money,

472
00:25:15,600 --> 00:25:18,600
Speaker 16: and that's the real problem because banks are contracting and

473
00:25:18,680 --> 00:25:21,400
Speaker 16: the marginal borrowers shut out, and that kills the economy.

474
00:25:22,160 --> 00:25:24,359
Speaker 2: To take us through the issues banks face. In twenty

475
00:25:24,400 --> 00:25:27,800
Speaker 2: twenty three, we welcome now Catherine Judge. She's professor at

476
00:25:27,800 --> 00:25:30,119
Speaker 2: Columbia Law School. So, Kate, thank you so much for

477
00:25:30,160 --> 00:25:31,879
Speaker 2: being back here on Wall Street. We great to have

478
00:25:31,960 --> 00:25:34,119
Speaker 2: you before we get to the question that Marty addressed

479
00:25:34,160 --> 00:25:36,840
Speaker 2: about whether it's going to affect lending or not. First

480
00:25:36,840 --> 00:25:39,920
Speaker 2: of all, tell us why did Michael Barr think he

481
00:25:39,960 --> 00:25:42,440
Speaker 2: needed this at all? What's the issue that they're addressing.

482
00:25:43,040 --> 00:25:43,879
Speaker 5: So a couple of things.

483
00:25:44,000 --> 00:25:47,800
Speaker 4: One is, we still haven't fully implemented Basil three in

484
00:25:47,840 --> 00:25:50,080
Speaker 4: the United States. So there's been a lot of conversation

485
00:25:50,160 --> 00:25:53,320
Speaker 4: for a long time around Basil three end game and

486
00:25:53,560 --> 00:25:56,479
Speaker 4: helping to bring the US into conformity with some of

487
00:25:56,520 --> 00:26:00,879
Speaker 4: the international standards they degree to. But Michael Barr has

488
00:26:00,920 --> 00:26:04,919
Speaker 4: gone further. Price sher Bar very shortly after taking office

489
00:26:05,240 --> 00:26:08,479
Speaker 4: said he's going to engage in a broad, holistic review

490
00:26:08,560 --> 00:26:11,080
Speaker 4: of capital requirements. There's a whole host of requirement that

491
00:26:11,080 --> 00:26:14,720
Speaker 4: we're put into place in Dodd Frank modified somewhat since then,

492
00:26:15,400 --> 00:26:17,560
Speaker 4: and he wanted to take a more comprehensive look of

493
00:26:17,600 --> 00:26:20,119
Speaker 4: how they work together, how well they were working, and

494
00:26:20,160 --> 00:26:22,399
Speaker 4: the changes that needed to be made. So what the

495
00:26:22,440 --> 00:26:26,560
Speaker 4: speech was the summary of what he sees as the

496
00:26:26,600 --> 00:26:30,080
Speaker 4: problems and how he wants to proceeed. And it is

497
00:26:30,119 --> 00:26:32,800
Speaker 4: going to mean more capital for all the large banks.

498
00:26:33,720 --> 00:26:35,639
Speaker 2: Let's go beyond the banks and the effects of this

499
00:26:35,720 --> 00:26:37,920
Speaker 2: potentially and go back again to what Marty's Wige said,

500
00:26:38,200 --> 00:26:40,880
Speaker 2: what Randy Quarrels is saying now. I talked to Mike

501
00:26:41,040 --> 00:26:43,439
Speaker 2: Brian moynihand at Bank of America two free weeks ago,

502
00:26:43,520 --> 00:26:45,080
Speaker 2: and he said, it's a very simple thing for Bank

503
00:26:45,119 --> 00:26:47,960
Speaker 2: of America. For every one hundred basis points increase in

504
00:26:48,040 --> 00:26:50,440
Speaker 2: the capital requirements, it means one hundred and fifty billion

505
00:26:50,480 --> 00:26:53,240
Speaker 2: dollars less in loans. Does that sound right? And does

506
00:26:53,240 --> 00:26:55,200
Speaker 2: that really have an effect on the real economy as

507
00:26:55,200 --> 00:26:55,480
Speaker 2: it were?

508
00:26:55,920 --> 00:26:57,600
Speaker 4: Again, a bank CEO is going to know better than

509
00:26:57,600 --> 00:27:00,639
Speaker 4: I'm exactly how those trade offs are happening. Everything with

510
00:27:00,680 --> 00:27:03,240
Speaker 4: a little bit of grain of salt. There are meaningful

511
00:27:03,280 --> 00:27:08,080
Speaker 4: trade offs, but two important qualifications. So first, when banks

512
00:27:08,280 --> 00:27:10,159
Speaker 4: pull back up, so first it's hard to know how

513
00:27:10,240 --> 00:27:11,679
Speaker 4: much acually going to pull back on lending.

514
00:27:12,119 --> 00:27:13,640
Speaker 5: When they do pull back on lending.

515
00:27:14,119 --> 00:27:17,560
Speaker 4: Another challenge that arises is not that that lending doesn't happen,

516
00:27:18,080 --> 00:27:21,000
Speaker 4: that lending moves outside of the banking space to less

517
00:27:21,040 --> 00:27:22,760
Speaker 4: regulated domains. So a lot of what we have to

518
00:27:22,760 --> 00:27:25,119
Speaker 4: pay attention to is where these loans are being made.

519
00:27:25,800 --> 00:27:28,960
Speaker 4: But the other core thing to note is not all

520
00:27:29,040 --> 00:27:32,639
Speaker 4: lending is of equal social value, right, What we really

521
00:27:32,680 --> 00:27:36,720
Speaker 4: want is more lending during periods of distress, and probably

522
00:27:36,800 --> 00:27:40,600
Speaker 4: a little less lending when everything's going really well and

523
00:27:41,080 --> 00:27:44,680
Speaker 4: assets are potentially inflated. And so one of the things

524
00:27:44,680 --> 00:27:48,720
Speaker 4: we know from history is that better capitalized banks tend

525
00:27:48,720 --> 00:27:52,600
Speaker 4: to be more willing to make loans during periods of distress,

526
00:27:52,880 --> 00:27:55,560
Speaker 4: which is when we most need that lending. So my

527
00:27:55,680 --> 00:27:58,520
Speaker 4: guess is by share Bard's response would be, even if

528
00:27:58,520 --> 00:28:02,360
Speaker 4: we have a little less blending during the good times,

529
00:28:02,480 --> 00:28:05,040
Speaker 4: we're going to have more lending when we most need

530
00:28:05,040 --> 00:28:07,760
Speaker 4: it during the bad times, in ways that are going

531
00:28:07,760 --> 00:28:09,480
Speaker 4: to make us overall better off.

532
00:28:10,240 --> 00:28:11,679
Speaker 2: Kate, I'm not going to ask you to predict the

533
00:28:11,680 --> 00:28:15,560
Speaker 2: future necessarily, but is this possibly a candidate for one

534
00:28:15,600 --> 00:28:17,240
Speaker 2: of those times we're going to need a little more help.

535
00:28:17,240 --> 00:28:20,200
Speaker 2: We're just going in a bank earning season now this

536
00:28:20,240 --> 00:28:23,400
Speaker 2: week and next week, and there's a lot of anticipation

537
00:28:23,800 --> 00:28:29,000
Speaker 2: about watching exactly default rates, delinquency rates, reserves being taken,

538
00:28:29,200 --> 00:28:31,159
Speaker 2: particularly in the consumer areas. There are a lot of

539
00:28:31,160 --> 00:28:33,720
Speaker 2: concern that we're going into one of those difficult periods.

540
00:28:33,880 --> 00:28:35,520
Speaker 2: What are you expecting? What are you looking for?

541
00:28:36,600 --> 00:28:38,800
Speaker 4: I think I'll be looking really closely at what we

542
00:28:38,840 --> 00:28:41,560
Speaker 4: actually see in terms of the productions, right, So we

543
00:28:41,640 --> 00:28:43,400
Speaker 4: want to know what the default rates are looking like,

544
00:28:43,800 --> 00:28:46,440
Speaker 4: what is the rate at which they are accelerating. But

545
00:28:46,520 --> 00:28:48,040
Speaker 4: a lot of what we want to see is what

546
00:28:48,160 --> 00:28:52,200
Speaker 4: are the projections that the different banks are making regarding

547
00:28:52,200 --> 00:28:55,160
Speaker 4: how much additional pain they see coming down the road.

548
00:28:55,440 --> 00:28:58,720
Speaker 4: I think we're certainly going to see some challenges, and

549
00:28:58,760 --> 00:29:01,680
Speaker 4: the question really is going to be bad magnitude. You know,

550
00:29:01,720 --> 00:29:03,480
Speaker 4: we're helped a little bit by some of the recent

551
00:29:03,560 --> 00:29:07,480
Speaker 4: inflation data and hopefully some stabilization and the economy which

552
00:29:07,480 --> 00:29:09,680
Speaker 4: would mean balancing out and a little more of the

553
00:29:09,720 --> 00:29:13,320
Speaker 4: soft landing, but that can't be guaranteed, so there's still

554
00:29:13,360 --> 00:29:15,520
Speaker 4: going to be a lot of noise in all the figures.

555
00:29:15,960 --> 00:29:17,280
Speaker 4: But part of what we're going to be trying to

556
00:29:17,280 --> 00:29:20,080
Speaker 4: figure out is is there a possibility not just on

557
00:29:20,120 --> 00:29:22,840
Speaker 4: the employment side, but the employment side as it interacts

558
00:29:23,800 --> 00:29:27,880
Speaker 4: with the lending and the credit of the ability of

559
00:29:28,000 --> 00:29:28,920
Speaker 4: getting through all this.

560
00:29:29,320 --> 00:29:31,280
Speaker 2: Okay, Kay, thank you so much. Always great to have

561
00:29:31,320 --> 00:29:34,000
Speaker 2: you on Wall Street Week. Really appreciate that's Katherine Judge Supers,

562
00:29:34,000 --> 00:29:39,640
Speaker 2: Professor at Law at Columbia university coming up. Trying so

563
00:29:39,840 --> 00:29:42,560
Speaker 2: hard to get into the club that just doesn't want you.

564
00:29:43,040 --> 00:29:45,440
Speaker 2: That's next on Wall Street Week on Bloomberg.

565
00:29:48,080 --> 00:29:52,280
Speaker 1: This is Bloomberg Well Street Week with David Weston from

566
00:29:52,400 --> 00:29:53,360
Speaker 1: Bloomberg Radio.

567
00:30:00,360 --> 00:30:04,000
Speaker 2: Finally, one more thought. I refuse to join any club

568
00:30:04,040 --> 00:30:07,680
Speaker 2: that would have me as a member, so joked Groucho Marx.

569
00:30:07,840 --> 00:30:10,440
Speaker 2: But these days some of those clubs are getting pretty picky.

570
00:30:10,880 --> 00:30:13,440
Speaker 2: Take the Club of NATO for example. Sure, they moved

571
00:30:13,440 --> 00:30:16,520
Speaker 2: this week to admit two new members in Sweden and Finland,

572
00:30:16,720 --> 00:30:18,920
Speaker 2: even though if Turkey had some doubts right up to

573
00:30:18,960 --> 00:30:19,320
Speaker 2: the end.

574
00:30:19,800 --> 00:30:23,680
Speaker 15: Under ratification of Sweden's membership does not mean the end.

575
00:30:23,560 --> 00:30:26,720
Speaker 12: Of cooperation with Turkeia, far from it.

576
00:30:27,320 --> 00:30:29,560
Speaker 2: And though they let two more into the club, they

577
00:30:29,560 --> 00:30:32,960
Speaker 2: gave Ukraine something of a cold shoulder, saying they will

578
00:30:33,000 --> 00:30:36,440
Speaker 2: consider it somewhere down the road without any indication of when,

579
00:30:36,840 --> 00:30:39,720
Speaker 2: which didn't make President Zelenski or his foreign minister any

580
00:30:39,760 --> 00:30:40,280
Speaker 2: too happy.

581
00:30:40,600 --> 00:30:45,360
Speaker 17: These decisions they make our path to NATO shorter, and

582
00:30:45,480 --> 00:30:49,040
Speaker 17: they could have done it faster too if there was

583
00:30:49,080 --> 00:30:54,600
Speaker 17: a clear indication when the invitation to Ukraine would be extended.

584
00:30:54,920 --> 00:30:57,080
Speaker 2: And then there's the Club of the Financial World, which

585
00:30:57,120 --> 00:31:00,600
Speaker 2: recently voted long term member Crispin Oday off the island

586
00:31:00,600 --> 00:31:03,240
Speaker 2: for allegations of some pretty odious conduct.

587
00:31:03,520 --> 00:31:07,760
Speaker 5: We're in the process of moving away from that.

588
00:31:07,800 --> 00:31:10,960
Speaker 2: Business and active as short sellers have never truly been

589
00:31:10,960 --> 00:31:14,400
Speaker 2: embraced by the club of financial players, something felt powerfully

590
00:31:14,400 --> 00:31:17,360
Speaker 2: by Andrew Left, who's under investigation by the Department of

591
00:31:17,400 --> 00:31:20,640
Speaker 2: Justice and the SEC. People think there's just like underground

592
00:31:20,640 --> 00:31:22,880
Speaker 2: network of short sellers who try to ruin companies or

593
00:31:22,880 --> 00:31:26,160
Speaker 2: anything like that. It doesn't work like that. But whoever

594
00:31:26,240 --> 00:31:29,320
Speaker 2: thought that the world of affordable housing would itself start

595
00:31:29,360 --> 00:31:32,320
Speaker 2: to act like an exclusive club. We all know we

596
00:31:32,400 --> 00:31:34,440
Speaker 2: don't have enough existing houses for sale.

597
00:31:34,680 --> 00:31:35,440
Speaker 12: The new home.

598
00:31:35,280 --> 00:31:39,680
Speaker 2: Market is benefiting from a very severe shortage of existing

599
00:31:39,720 --> 00:31:42,320
Speaker 2: homes for sale, and that makes it awfully difficult for

600
00:31:42,480 --> 00:31:44,760
Speaker 2: ordinary people to afford a house.

601
00:31:44,720 --> 00:31:47,520
Speaker 12: The post single multi in house prices.

602
00:31:47,560 --> 00:31:49,840
Speaker 2: You know, I do think we have an affordability issue

603
00:31:49,880 --> 00:31:51,680
Speaker 2: that needs to be resolved one way or the other,

604
00:31:51,840 --> 00:31:54,400
Speaker 2: which could lead some as fire homeowners to take some

605
00:31:54,640 --> 00:31:59,120
Speaker 2: risks they probably shouldn't a magnificent new home that they

606
00:31:59,160 --> 00:32:04,960
Speaker 2: bought for a song who says they can't have it all,

607
00:32:05,160 --> 00:32:07,760
Speaker 2: But that assumes they can get someone to sell in

608
00:32:07,800 --> 00:32:11,200
Speaker 2: the house in the first place. This week comes news

609
00:32:11,240 --> 00:32:14,520
Speaker 2: of the Nimbi that is not in my backyard phenomenon

610
00:32:14,560 --> 00:32:17,440
Speaker 2: coming to none other than Levittown out on Long Island.

611
00:32:17,960 --> 00:32:20,600
Speaker 2: Levittown was a series of housing golls built by William

612
00:32:20,680 --> 00:32:23,760
Speaker 2: Levitt after World War II for returning vets. The whole

613
00:32:23,800 --> 00:32:28,440
Speaker 2: idea was affordable housing for eighty four thousand people, mass produced,

614
00:32:28,600 --> 00:32:31,960
Speaker 2: government subsidized, and with the price of just seven nine

615
00:32:32,040 --> 00:32:35,280
Speaker 2: hundred dollars a house. But time has moved on, and

616
00:32:35,320 --> 00:32:38,200
Speaker 2: with it the price of houses in Levittown now averaging

617
00:32:38,240 --> 00:32:41,720
Speaker 2: over five hundred and seventy five thousand dollars, helped by

618
00:32:41,720 --> 00:32:45,880
Speaker 2: local restrictions on multi family residences. While New Jersey allows

619
00:32:45,920 --> 00:32:49,080
Speaker 2: about twenty five new apartment buildings per thousand people a year,

620
00:32:49,240 --> 00:32:52,720
Speaker 2: San Francisco builds about sixteen. Out of Long Island, the

621
00:32:52,800 --> 00:32:56,040
Speaker 2: number is just two point three multi family units per

622
00:32:56,120 --> 00:32:59,600
Speaker 2: thousand per year. It turns out that all those residents

623
00:32:59,640 --> 00:33:03,000
Speaker 2: have won it's affordable housing are pretty picky about their neighbors.

624
00:33:03,640 --> 00:33:06,520
Speaker 2: Get off my lawn. That does it. For this episode

625
00:33:06,560 --> 00:33:09,000
Speaker 2: of Wall Street Week, I'm David Weston This is Bloomberg.

626
00:33:09,320 --> 00:33:25,280
Speaker 2: See you next week,