Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: I mean may not have an overall recession. We're having
Speaker 2: a rolling recession. To Kanye Roll looks pretty strongly when
Speaker 2: it comes to jobs.
Speaker 1: The financial story is that shape our work.
Speaker 2: Three major regional bank failures send shockwaves through the banking system.
Speaker 2: We're all trying to figure out what to make of
Speaker 2: generative AI through.
Speaker 1: The eyes of the most influential voices.
Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, Bank of America,
Speaker 2: deebro Lair of the Paulson Institute, Len Hubbard of the
Speaker 2: Columbia Business.
Speaker 1: School, Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 3: The big rally in Wall Street this week? Who gets
Speaker 3: the credit? The Fed, banks or big Tech? This is
Speaker 3: Wall Street Week. I'm Romaine Bossic in for David Weston.
Speaker 3: This week, Catherine Judge of Columbia Law School and what
Speaker 3: steper capital requirements will mean for banks and their willingness
Speaker 3: to lend.
Speaker 4: What we really want is more lending during periods of distress,
Speaker 4: and probably a little less lending when everything's going really well.
Speaker 3: Rock Creek CEO Asani Beschloss on why the economies on mainland,
Speaker 3: China and Taiwan are moving in different direction.
Speaker 5: One thing that President v has created which will be
Speaker 5: hard to undo is uncertainty.
Speaker 3: And former CNN president John Klein on the disruptive effect
Speaker 3: of AI on the business of media.
Speaker 6: AI can be a very useful tool. On the other hand,
Speaker 6: it can result in efficiencies for the studios.
Speaker 3: The FED appeared to score one of its first victories
Speaker 3: in the fight against inflation core CPI, posting its smallest
Speaker 3: increase in June since twenty twenty one, but the FED
Speaker 3: may hike again.
Speaker 7: In July, it was very clear that inflation was and
Speaker 7: still is at levels that are too high for their comfort.
Speaker 7: I do think that the narrative both for the FED
Speaker 7: and also for markets will now begin to change towards
Speaker 7: growth towards employment.
Speaker 3: Meanwhile, China faces a different problem, delytionary concerns, prompting the
Speaker 3: Central Bank to step in MEANINGSHIDA.
Speaker 8: Going forward, the People's Bank of China will continue to
Speaker 8: provide support for small, medium and private businesses.
Speaker 3: Media executives gathering in Sun Valley, Idaho, and One Big
Speaker 3: Deal was all the buzz a US court rejecting the
Speaker 3: US government's challenge of that Microsoft did the buy Activision.
Speaker 3: The company is now moving forward with some additional measures
Speaker 3: to appease UK regulators and finally close out that deal.
Speaker 9: On the one hand, everyone was talking about the Microsoft's
Speaker 9: activision deal, the efforts the FTC went to appeal the
Speaker 9: decision by US district courts.
Speaker 3: But strikes did loom over the annual gathering, members of
Speaker 3: the sag AFTRA Actors Union joining writers who have been
Speaker 3: on strike since May, making it the first time that
Speaker 3: actors and writers have together walked out since nineteen sixty.
Speaker 3: Back then, Ronald Reagan was president of the Actors Guild
Speaker 3: and Marilyn Monroe was still gracing the screen.
Speaker 10: You cannot change the business model as much as it
Speaker 10: has changed, and not expect the contract to change.
Speaker 3: Two and earnings kick off with a bit of a
Speaker 3: sigh of relief on Wall Street. JP Worg and Wells
Speaker 3: Fargo and City Group leading the big bank Earnings on
Speaker 3: a high note, getting a big boost from the Fed's
Speaker 3: recent rate heights, But we hit.
Speaker 2: A hard landing. It's going to be very difficult for
Speaker 2: the banks, including JP Morgan, but that doesn't appear to
Speaker 2: be the case at least today.
Speaker 3: A goldilocks type of week for the economy, a bit
Speaker 3: of an everything rally for equities, the S and P
Speaker 3: five hundred jumping more than two percent on the week,
Speaker 3: the Nasdaq surging more than three and the Russell two
Speaker 3: thousand index of small cap stocks coming close to a
Speaker 3: four percent game. Discretionary stocks helping to lead the advance,
Speaker 3: so too did big tech, and so too did homebuilders
Speaker 3: Pulti Group and Toll Brothers, closing out the week at
Speaker 3: an all time high, Microsoft finishing a fraction of a
Speaker 3: percent away from a fresh record itself. But the biggest
Speaker 3: moves cross asset wise, we're in treasuries, commodities, and dollar,
Speaker 3: the US currency weakening to a fifteen month low versus
Speaker 3: a global basket of its peers, and two year treasury
Speaker 3: yields swinging more than thirty basis points from peak to
Speaker 3: trough this week, a volatility in that space that is
Speaker 3: expected to say as long as the Fed remains in play.
Speaker 3: The big catalyst for these market moves came in the
Speaker 3: form of two big economic reports this week to show
Speaker 3: US inflation reverting back to its lowest levels in at
Speaker 3: least two years. And that is where we start today.
Speaker 3: Mona Maha John joining us right now, senior investment strategists
Speaker 3: at Edward Jones and Dennis de Busher, chief market strategists
Speaker 3: over at twenty two V Research and Mona. I'll start
Speaker 3: with you. You look at that inflation report, particularly when
Speaker 3: it comes to consumer prices, airfares down, used car prices down,
Speaker 3: eight prices, which we've all been obsessing over for the
Speaker 3: last couple of years, finally dropping back to sound down
Speaker 3: to something that's somewhat more reasonable.
Speaker 11: Yeah, remain Look, it was a nice week in markets
Speaker 11: for the bulls and certainly for investors and consumers broadly.
Speaker 11: You know, I'll highlight three quick things, and one, of course,
Speaker 11: is that CPI report that you mentioned, and in fact,
Speaker 11: inflation broadly surprised to the downside in both the CPI
Speaker 11: and PPI prints. But the good news was in CPI
Speaker 11: not only headline inflation, but we did see a bit
Speaker 11: of cooling in core inflation as well, driven by downward
Speaker 11: pressure in the housing market, and even that non housing
Speaker 11: services inflation that the FED is tracking carefully started to
Speaker 11: ease as well. Number two is the Fed itself. You know,
Speaker 11: I think markets are now looking for perhaps one more
Speaker 11: rate height coming out of the FED and maybe they
Speaker 11: can stept to the sidelines after that. That is welcome news.
Speaker 11: After putting upward pressure on interest rates for the past
Speaker 11: sixteen months, raising borrowing costs for consumers and corporations, we
Speaker 11: are seeing a resilient consumer and an economy that's holding in. There,
Speaker 11: so we have a backdrop of lower inflation, perhaps a
Speaker 11: FED moving to the sideline, and an economy that's holding up.
Speaker 11: That's good news for markets broadly.
Speaker 3: Well, Dennis, I want to get your thoughts here on
Speaker 3: those economic t leads. I mean, because these are kind
Speaker 3: of the two big components of this economic narrative, right,
Speaker 3: whether inflation is coming down to a reasonable enough level,
Speaker 3: but also whether the economy is still unstable enough condition
Speaker 3: following five percentage points of rate hikes out of the FED.
Speaker 12: Yeah, you bring up a really important point.
Speaker 8: And if we have to go back to why markets
Speaker 8: have done so well, we know that.
Speaker 12: Inflation is coming down.
Speaker 13: The inflation appears to be coming down for now at least,
Speaker 13: not the hardware.
Speaker 12: You know, it can come down to the two ways.
Speaker 8: An easy way which would be associated with the soft landing,
Speaker 8: but the hard way, which be assiliunting obviously for the recession,
Speaker 8: and so it is clear that it's coming down the
Speaker 8: East way. For now, it's achieved. And part of the
Speaker 8: reason we saw this big shift in the internals in
Speaker 8: the market, so small capital performing like you know at
Speaker 8: the top of the show, retail stocks out warming deeper,
Speaker 8: cipples balancing is because the housing data stable plods and
Speaker 8: the housing data stabilize it. Because that is the tip
Speaker 8: of the sphere when it comes to interest rate policy.
Speaker 3: We heard from three big banks, JP, Morgan, City Group,
Speaker 3: and Wells Fargo officially kicked off the earning season with
Speaker 3: better than expected results all around. Is this a harbinger
Speaker 3: of things to come for the rest of the banking
Speaker 3: sector and more importantly for the rest of corporate America overall.
Speaker 3: Mona Mahajan is still with us over at Edward Jones
Speaker 3: and Dennis to Busher over at twenty two V Research
Speaker 3: and Dennis, I'll start with you. I think some of
Speaker 3: the estimates coming into this earning season certainly not bullish,
Speaker 3: but they certainly weren't as bearish as maybe what we
Speaker 3: saw in the previous quarters.
Speaker 12: Definitely not as parish previous quarters.
Speaker 8: Hope you're earnings revisions are still running around the twenty
Speaker 8: fifth percentile.
Speaker 12: So you've seen a little bit of acceleration that earnings
Speaker 12: revisions coming into the quarter.
Speaker 8: And typically when that happens, you beat five about two
Speaker 8: bucks relative to estimates, and I analize, right, they will
Speaker 8: get us somewhere in the two sixteen, two seventeen rings
Speaker 8: for the year, So you know, coming in a little
Speaker 8: bit low on the estimate side, that's not too out
Speaker 8: of bounds relative to history, but not as nearly as poor.
Speaker 13: And I was just saying early sentiment wise, not nearly
Speaker 13: as poor as we've seen.
Speaker 12: The last three or four earning season were really bad.
Speaker 12: En upcoming in.
Speaker 3: We got the banker in these earlier this morning, Dennis,
Speaker 3: or at least three of the big banks here. There
Speaker 3: were some upside surprises there. I'm wondering, what are you
Speaker 3: expecting overall to hear out of not just the banks,
Speaker 3: but overall the companies overall, in terms of how their
Speaker 3: businesses are holding up.
Speaker 12: Shopping lead well.
Speaker 13: Relative to what we've heard and the fears over the
Speaker 13: last I guess yeah, basically here and particularly since the
Speaker 13: banking crisis, when people thought following up there was going
Speaker 13: to be a significant type of financial conditions that was
Speaker 13: going to lead to a sharp curation in the economy.
Speaker 13: I think you're going to hear from companies that things
Speaker 13: are holding up pretty well, consistent with slower growth than
Speaker 13: what we've seen the last two years, but expansionary like economy.
Speaker 12: And we'll see what happens in the future with Ernie.
Speaker 8: We'll see what happens in the future with the economy,
Speaker 8: but for now, it seem relatively okay.
Speaker 12: Earnings consistent with an expansion mona.
Speaker 3: We've already started to see a lot of equity strategists
Speaker 3: and analysts are to ratchet up their expectations not only
Speaker 3: for overall aggregate earnings for the S and P five hundred,
Speaker 3: but of course you're twelve month price targets as well.
Speaker 11: Yeah, you know, look, I think the earnings recession that
Speaker 11: we went through, and really Q four and Q one
Speaker 11: came in negative year on year earnings growth for the
Speaker 11: S and P five hundred. Q Q two earnings, which
Speaker 11: we're getting right now, could also be the perhaps last
Speaker 11: quarter that we get a negative year on year number.
Speaker 11: And then we start to see improvement in Q three
Speaker 11: and Q four and really into twenty twenty four as well,
Speaker 11: and so as we head towards the next six to
Speaker 11: twelve months, we also know markets are pretty forward looking
Speaker 11: right now, twenty twenty four estimates are calling for double
Speaker 11: digit earnings growth. Now we will have to assess the
Speaker 11: backdrop as we head into twenty twenty four, but if
Speaker 11: we are in an environment where yields are moving lower
Speaker 11: and the economy is improving from any sort of softening,
Speaker 11: we could certainly see a rebound in earnings growth. So
Speaker 11: some of the momentum that we've seen in markets recently
Speaker 11: could be an expression of the direction of try level
Speaker 11: of earnings over the next six months as well, So
Speaker 11: we certainly see progress there. Of course, we've moved pretty far,
Speaker 11: pretty fast, as we noted, across equities now, and so
Speaker 11: we think some bird of consolidation makes sense. Perhaps we'll
Speaker 11: get some earnings figures over the next few weeks that
Speaker 11: give us some reason to pause, but we do think
Speaker 11: broadly the opportunity will come as we head towards the
Speaker 11: back half.
Speaker 4: Of this year.
Speaker 3: Yeah, and it'll be interesting to see whether some of
Speaker 3: the moves that we see in equity market actually start
Speaker 3: to broaden out just a little bit. Our appreciation to
Speaker 3: both of you monamaje On over at Edward Jones, Dennis
Speaker 3: the Busher over at twenty two V Research.
Speaker 2: Coming up. One China, But Two Economies. We talked with
Speaker 2: us Sonny Bechelist of Rock Creek about the disappointing performance
Speaker 2: of mainland China so far this year and how different
Speaker 2: it is from Taiwan.
Speaker 5: Who knew in the beginning of the year, that's with
Speaker 5: ais becoming so important and the Taiwan news market would
Speaker 5: do so well.
Speaker 2: That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: One China, but Two Economies. The United States continues to
Speaker 2: go out of its way to underscore its One China policy,
Speaker 2: as Secretary of State Blincoln did during his recent visit
Speaker 2: to Beijing. Our reiterated the long standing US One China policy.
Speaker 2: That policy has not changed. We do not support Taiwan independence.
Speaker 2: We were made opposed to any unilateral changes to the
Speaker 2: statis quo by either side, even as the United States
Speaker 2: seeks to compete with that one China without coming to blows.
Speaker 14: I also believe that the United States in China should
Speaker 14: seek a relationship of healthy economic competition that is not
Speaker 14: winner take all, but with a fair set of rules,
Speaker 14: we benefit both our countries over time.
Speaker 2: But recently the economies of mainland China and Taiwan have
Speaker 2: been headed in very different directions. As the mainland finds
Speaker 2: it's harder than expected to come back from the COVID lockdown.
Speaker 12: I have been a.
Speaker 4: Little surprised with the degree of how quickly it's moderated.
Speaker 6: China is going to need to do more stimulus.
Speaker 2: Leading Beijing this week to undertake new stimulus measures, particularly
Speaker 2: to help its struggling property market.
Speaker 10: There's a lot of expectation that there will be more
Speaker 10: coming from Beijing to help the property sector, but the
Speaker 10: question is what can the government actually do when there
Speaker 10: is so much debt at the local government level.
Speaker 2: While Taiwan continues to thrive economically with the move to
Speaker 2: AI spurring on chip manufacturer TSMC and lifting the entire market.
Speaker 3: So why is Taiwan and this bull run and can
Speaker 3: it last?
Speaker 5: One things?
Speaker 11: For sure, stocks have been riding on this AI wave,
Speaker 11: but the head.
Speaker 2: Of the Taiwan Stock Exchange says it's not just Ai
Speaker 2: that is driving market strength, as.
Speaker 15: The pace of the US is His high stowing and
Speaker 15: also the Girlball economy remain the statues. I think mostly investors,
Speaker 15: we all pay attentions. Again, I'm Peter A. Bresse and
Speaker 15: the kesh In Frost. I expect it in the second
Speaker 15: half of this year.
Speaker 2: All of which makes the geopolitics across the Taiwan Strait
Speaker 2: just that much more complicated. And to take us through
Speaker 2: the geopondse and the economics of mainland China and its environs,
Speaker 2: we welcome to somebody who knows it terribly well. She
Speaker 2: is a Sunny bachelist. She is the CEO of Rock
Speaker 2: Creek of Sanae. You come on regular. We really value
Speaker 2: you on Wall Street. We thank you for being here.
Speaker 2: As I say, you've spent a lot of your career
Speaker 2: dealing with and around China. Start with what I would
Speaker 2: call mainland China right now, I think that if you
Speaker 2: go back to the first of the year, people expect
Speaker 2: it to really be a rebound year for China, given
Speaker 2: what had happened with COVID doesn't seem to be playing
Speaker 2: out that way.
Speaker 5: You're so right. Stated in the beginning of the year
Speaker 5: markets went up twenty percent. People expected markets to be
Speaker 5: up another ten to twenty percent in mainland China with
Speaker 5: all the geopolitical issues going on. If anyone had guessed,
Speaker 5: you would think Taiwan would be down and the rest
Speaker 5: of Asia would be sort of so so, and Asian
Speaker 5: would be doing relatively well. And if you look actually today,
Speaker 5: it's a very very different story. Number one, what you
Speaker 5: saw is as China came out of COVID, it has
Speaker 5: been taking much longer. Chinese consumers were supposed to be
Speaker 5: the big fource carrying us out of COVID and sort
Speaker 5: of creating this huge growth in the economy, and they
Speaker 5: have been really scared because they went through their savings
Speaker 5: during three years and they are trying to save more.
Speaker 5: And the uncertainties that have been created both internally and
Speaker 5: by geopolitics is getting the Chinese consumer to save more
Speaker 5: and spend less now At the same time, I should say,
Speaker 5: what happened also is that in Taiwan, for example, where
Speaker 5: we did not necessarily expect this kind of rise of
Speaker 5: like twenty two percent year to date. Who knew in
Speaker 5: the beginning of the year that with ai becoming so important,
Speaker 5: the micro chip that is made in Taiwan would become
Speaker 5: even more important and the Taiwanese a market would do
Speaker 5: so well. Last but not least. Of course, you've seen
Speaker 5: a lot of outflows from US and European and other
Speaker 5: global investors going out of China. If anything, the flows
Speaker 5: seem to be increasing coming into July than getting reduced,
Speaker 5: and a lot of very interesting phenomena going on on
Speaker 5: that point.
Speaker 2: So, Sonny, as a longtime investor, you're the first one
Speaker 2: to know that markets go up, markets go down. You
Speaker 2: can't overreact to short term developments. When you look at
Speaker 2: mainland again, i'll call it mainland China for the moment,
Speaker 2: how much of this is a short term thing, do
Speaker 2: you think? And how much are there larger underlying structural
Speaker 2: factors that may hold back mainland China from the remarkable
Speaker 2: growth we've seen or the last generation.
Speaker 5: David, I think the fact that you have twenty percent
Speaker 5: youth unemployment is a very big factor. That's a long
Speaker 5: term issue and that is not going to get affected
Speaker 5: by short term monetary policy changes. So even though at
Speaker 5: the moment the monthly policy is trying to help push
Speaker 5: the economy forward, the job creation is much less, particularly
Speaker 5: because these jobs were in the tech sector, in services
Speaker 5: in areas that have got affected and have not been
Speaker 5: expanding as much as you would expect. The other area
Speaker 5: I think to look at in China that has been
Speaker 5: affected is sort of the old age population and the
Speaker 5: demographics that also, if you look long term, is a
Speaker 5: big issue with the aging of the population in China.
Speaker 5: With Secretary Yellans visit, we saw we went from decoupling
Speaker 5: to the risking and what the term she used last
Speaker 5: week while she was in China was diversifying. I think
Speaker 5: every country, having experienced the issues the supply chain issues
Speaker 5: that the experience, including the US during COVID, is diversifying
Speaker 5: its sources of input and trade, and we saw for
Speaker 5: example Mexico overtake China in terms of trade. Those I
Speaker 5: think are longer term issues as countries, including the US,
Speaker 5: diversify trade sources. There is one big positive though, looking
Speaker 5: at China, which is that they have continued to invest
Speaker 5: in their green economy, not as much as they could
Speaker 5: or should. In fact, Secretary in fact mister carry will
Speaker 5: be will be going there shortly and I think that
Speaker 5: meeting will be quite important. But even looking at their
Speaker 5: domestic economy, the Chinese are putting in a lot of
Speaker 5: resources and investments into ev into solar. As you know,
Speaker 5: they're still the biggest supplier to the world of solar
Speaker 5: facilities as well as now starting to become the largest producer.
Speaker 2: Of ev asny. You mentioned the demographics issues in China.
Speaker 2: Perhaps a related issue is for some time China was
Speaker 2: something of a talent magnet. I remember going over there
Speaker 2: a few years ago, and they're attracting Chinese American scientists
Speaker 2: back to mainland China to live with their families. Is
Speaker 2: there a risk of really not altogether turning around, but
Speaker 2: actually reducing the attraction of mainland China for talent from
Speaker 2: around the world because of some of the reforms as
Speaker 2: you would put it from presidency.
Speaker 5: I think we have about three hundred thousand Chinese students
Speaker 5: in the US, and a lot of them would go
Speaker 5: back to China, and there's a question mark as to
Speaker 5: whether that flow will be back to China or back.
Speaker 5: Some stay here, some go in to other countries for
Speaker 5: exactly the reason you said. For example, Ai, which is
Speaker 5: a very exciting area for some of the scientists you
Speaker 5: are talking about, is heavily government controlled, right, So if
Speaker 5: you are working for the largest state owned enterprises and
Speaker 5: under direct government supervision. You will be you will be
Speaker 5: benefiting from working on AI. But if you're working in
Speaker 5: the private sector, in some of the private sector companies
Speaker 5: or the ones that we're working with the venture industry
Speaker 5: in the US, that is something that is now think
Speaker 5: of the past, we've seen that a kind of cooperation
Speaker 5: between venture in the US and venture in China.
Speaker 12: Duendo.
Speaker 5: It's not gone, it's still there is still some going on,
Speaker 5: but at a very different level. So that will definitely
Speaker 5: impact the flow of the brain flow as it were
Speaker 5: into China. Asta.
Speaker 2: It's always so good to have your walls. Rybick, thank
Speaker 2: you so much. As ny Rshalist, she is the CEO
Speaker 2: of Rock Creek.
Speaker 1: Coming up.
Speaker 2: Media at a crossroads as leaders meet in Sun Valley
Speaker 2: in the middle of a strike with more uncertainty than
Speaker 2: they've seen for a long time. We go through it
Speaker 2: with Streaming and Cable executive Jonathan Klein.
Speaker 6: They know something is coming their way, they just don't.
Speaker 2: Know what that's next. On Wall Street Week on Bloomberg,
Speaker 2: this is Wall Street Week. I'm David Weston This week,
Speaker 2: media moguls had their annual Allen and Company meeting out
Speaker 2: in Sun Valley with the fundamentals of their business more uncertain,
Speaker 2: perhaps than ever before, as people rush to a streaming
Speaker 2: world with uncertain profits, the basic cable model is melting
Speaker 2: out from under them, and strikes are starting to shut
Speaker 2: down their businesses all together. To take us through where
Speaker 2: the business of media is heading, Welcome down, Jonathan Klin.
Speaker 2: He's a former PRESIDENCYNN now a media entrepreneur whose latest
Speaker 2: venture is Hanging Media, a sports streaming platform. John, Thank
Speaker 2: you so much for being with us. Thanks for having
Speaker 2: me so you know this business over a number of
Speaker 2: years from the point of view of cable as well
Speaker 2: as now streaming. You understand it. Give us your sense
Speaker 2: of how fundamental the shift is as we, I guess,
Speaker 2: are moving away from cable pretty quickly into this streaming world.
Speaker 6: It's all exploded right in front of our faces. There's
Speaker 6: more change hitting media today than ever in the course
Speaker 6: of either of our careers. It's all accelerated so much,
Speaker 6: and ultimately it comes down to consumers embracing the idea
Speaker 6: that they really do have total control in the media ecosystem.
Speaker 2: One of the things that strikes me is I certainly
Speaker 2: watch streaming services, but if you asked me what service
Speaker 2: it was on. I'm sorry to say often I couldn't
Speaker 2: tell you I know what the program is, I don't
Speaker 2: necessarily know what the services. What's the role of brands.
Speaker 2: We used to know ESPN, we used to know CNN.
Speaker 2: I'm not sure if we know the brands and streaming
Speaker 2: as well.
Speaker 6: The strongest brands today are the shows themselves and often
Speaker 6: the creators.
Speaker 11: You know.
Speaker 6: I was the media consultant for Succession on HBO.
Speaker 2: Congratulations on them.
Speaker 6: They were an incredible group. I mean Jesse Armstrong, who
Speaker 6: was the creator and show runner, a phenomenal guy and
Speaker 6: a wonderful manager for all of the managers who might
Speaker 6: be watching this, really understood how to empower a team
Speaker 6: to yield amazing results. I mean, no ego there, but
Speaker 6: he is sitting pretty Because if you are a streaming
Speaker 6: service witnessing twenty four percent churn year over year, you
Speaker 6: need retention, and shows like Succession or White Lotus or
Speaker 6: d and or or pick them, they are retention magnets.
Speaker 6: That's what keeps users there. That said users are completely promiscuous.
Speaker 6: I just saw a survey I think it was Publisher's
Speaker 6: Clearinghouse to the survey, and they found that only less
Speaker 6: than seven percent of viewers plan to keep the subscription
Speaker 6: service that they are currently subscribed to. So what that
Speaker 6: means is consumers completely understand their ability to float from
Speaker 6: service to service in search of the shows that they want.
Speaker 2: But does that suggest, as we would call in the
Speaker 2: financial world, of maturity mismatch. On the one hand, you
Speaker 2: have to make long term commitments to creators, to the actors,
Speaker 2: the writers, the producers, tens of millions, hundreds of millions
Speaker 2: of dollars on these series. At the same time, on
Speaker 2: the revenue side, you don't have the assurance of the
Speaker 2: cable dollars coming in. And think about this.
Speaker 6: Added to that, the most popular network on television today
Speaker 6: is YouTube. Everyone's smart TV. You power it up. You
Speaker 6: can watch not only traditional broadcasts, but you can watch
Speaker 6: internet chat. So YouTube has something like one hundred and
Speaker 6: sixty million regular viewers. Their viewership dwarfs Netflix, Disney plus
Speaker 6: Max combined.
Speaker 2: Let me add a further complication of this, and that's
Speaker 2: artificial intelligence. Right now, we have the writers on strike,
Speaker 2: we've got issues about SAG after whether they go out,
Speaker 2: and as I understand, artificial intelligence and its role in
Speaker 2: the creative process is key to that element. What is
Speaker 2: artificial intelligence likely to do to all of this?
Speaker 6: So AI and I ran an AI company that Apple
Speaker 6: acquired a couple of years ago and it's now Apple's
Speaker 6: Media Intelligence division. AI can be a very useful tool
Speaker 6: to creators, enabling them to make projects that look every
Speaker 6: bit as good as the most lavish, high end productions
Speaker 6: on any of the services, which is going to unleash
Speaker 6: another tide of creativity. On the other hand, it can
Speaker 6: result in efficiencies for the studios and the networks, so
Speaker 6: they can outsource some of the creative process that.
Speaker 2: Jonathan Klein, he's the former head of CNN and now
Speaker 2: a serial media entrepreneur.
Speaker 16: The problem is they have to sell off assets in
Speaker 16: order to keep their capital up. In the bank's shrink
Speaker 16: and is their asset based shrinks. They can't loan out money,
Speaker 16: and that's the real problem because banks are contracting and
Speaker 16: the marginal borrowers shut out, and that kills the economy.
Speaker 2: To take us through the issues banks face. In twenty
Speaker 2: twenty three, we welcome now Catherine Judge. She's professor at
Speaker 2: Columbia Law School. So, Kate, thank you so much for
Speaker 2: being back here on Wall Street. We great to have
Speaker 2: you before we get to the question that Marty addressed
Speaker 2: about whether it's going to affect lending or not. First
Speaker 2: of all, tell us why did Michael Barr think he
Speaker 2: needed this at all? What's the issue that they're addressing.
Speaker 5: So a couple of things.
Speaker 4: One is, we still haven't fully implemented Basil three in
Speaker 4: the United States. So there's been a lot of conversation
Speaker 4: for a long time around Basil three end game and
Speaker 4: helping to bring the US into conformity with some of
Speaker 4: the international standards they degree to. But Michael Barr has
Speaker 4: gone further. Price sher Bar very shortly after taking office
Speaker 4: said he's going to engage in a broad, holistic review
Speaker 4: of capital requirements. There's a whole host of requirement that
Speaker 4: we're put into place in Dodd Frank modified somewhat since then,
Speaker 4: and he wanted to take a more comprehensive look of
Speaker 4: how they work together, how well they were working, and
Speaker 4: the changes that needed to be made. So what the
Speaker 4: speech was the summary of what he sees as the
Speaker 4: problems and how he wants to proceeed. And it is
Speaker 4: going to mean more capital for all the large banks.
Speaker 2: Let's go beyond the banks and the effects of this
Speaker 2: potentially and go back again to what Marty's Wige said,
Speaker 2: what Randy Quarrels is saying now. I talked to Mike
Speaker 2: Brian moynihand at Bank of America two free weeks ago,
Speaker 2: and he said, it's a very simple thing for Bank
Speaker 2: of America. For every one hundred basis points increase in
Speaker 2: the capital requirements, it means one hundred and fifty billion
Speaker 2: dollars less in loans. Does that sound right? And does
Speaker 2: that really have an effect on the real economy as
Speaker 2: it were?
Speaker 4: Again, a bank CEO is going to know better than
Speaker 4: I'm exactly how those trade offs are happening. Everything with
Speaker 4: a little bit of grain of salt. There are meaningful
Speaker 4: trade offs, but two important qualifications. So first, when banks
Speaker 4: pull back up, so first it's hard to know how
Speaker 4: much acually going to pull back on lending.
Speaker 5: When they do pull back on lending.
Speaker 4: Another challenge that arises is not that that lending doesn't happen,
Speaker 4: that lending moves outside of the banking space to less
Speaker 4: regulated domains. So a lot of what we have to
Speaker 4: pay attention to is where these loans are being made.
Speaker 4: But the other core thing to note is not all
Speaker 4: lending is of equal social value, right, What we really
Speaker 4: want is more lending during periods of distress, and probably
Speaker 4: a little less lending when everything's going really well and
Speaker 4: assets are potentially inflated. And so one of the things
Speaker 4: we know from history is that better capitalized banks tend
Speaker 4: to be more willing to make loans during periods of distress,
Speaker 4: which is when we most need that lending. So my
Speaker 4: guess is by share Bard's response would be, even if
Speaker 4: we have a little less blending during the good times,
Speaker 4: we're going to have more lending when we most need
Speaker 4: it during the bad times, in ways that are going
Speaker 4: to make us overall better off.
Speaker 2: Kate, I'm not going to ask you to predict the
Speaker 2: future necessarily, but is this possibly a candidate for one
Speaker 2: of those times we're going to need a little more help.
Speaker 2: We're just going in a bank earning season now this
Speaker 2: week and next week, and there's a lot of anticipation
Speaker 2: about watching exactly default rates, delinquency rates, reserves being taken,
Speaker 2: particularly in the consumer areas. There are a lot of
Speaker 2: concern that we're going into one of those difficult periods.
Speaker 2: What are you expecting? What are you looking for?
Speaker 4: I think I'll be looking really closely at what we
Speaker 4: actually see in terms of the productions, right, So we
Speaker 4: want to know what the default rates are looking like,
Speaker 4: what is the rate at which they are accelerating. But
Speaker 4: a lot of what we want to see is what
Speaker 4: are the projections that the different banks are making regarding
Speaker 4: how much additional pain they see coming down the road.
Speaker 4: I think we're certainly going to see some challenges, and
Speaker 4: the question really is going to be bad magnitude. You know,
Speaker 4: we're helped a little bit by some of the recent
Speaker 4: inflation data and hopefully some stabilization and the economy which
Speaker 4: would mean balancing out and a little more of the
Speaker 4: soft landing, but that can't be guaranteed, so there's still
Speaker 4: going to be a lot of noise in all the figures.
Speaker 4: But part of what we're going to be trying to
Speaker 4: figure out is is there a possibility not just on
Speaker 4: the employment side, but the employment side as it interacts
Speaker 4: with the lending and the credit of the ability of
Speaker 4: getting through all this.
Speaker 2: Okay, Kay, thank you so much. Always great to have
Speaker 2: you on Wall Street Week. Really appreciate that's Katherine Judge Supers,
Speaker 2: Professor at Law at Columbia university coming up. Trying so
Speaker 2: hard to get into the club that just doesn't want you.
Speaker 2: That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Well Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: Finally, one more thought. I refuse to join any club
Speaker 2: that would have me as a member, so joked Groucho Marx.
Speaker 2: But these days some of those clubs are getting pretty picky.
Speaker 2: Take the Club of NATO for example. Sure, they moved
Speaker 2: this week to admit two new members in Sweden and Finland,
Speaker 2: even though if Turkey had some doubts right up to
Speaker 2: the end.
Speaker 15: Under ratification of Sweden's membership does not mean the end.
Speaker 12: Of cooperation with Turkeia, far from it.
Speaker 2: And though they let two more into the club, they
Speaker 2: gave Ukraine something of a cold shoulder, saying they will
Speaker 2: consider it somewhere down the road without any indication of when,
Speaker 2: which didn't make President Zelenski or his foreign minister any
Speaker 2: too happy.
Speaker 17: These decisions they make our path to NATO shorter, and
Speaker 17: they could have done it faster too if there was
Speaker 17: a clear indication when the invitation to Ukraine would be extended.
Speaker 2: And then there's the Club of the Financial World, which
Speaker 2: recently voted long term member Crispin Oday off the island
Speaker 2: for allegations of some pretty odious conduct.
Speaker 5: We're in the process of moving away from that.
Speaker 2: Business and active as short sellers have never truly been
Speaker 2: embraced by the club of financial players, something felt powerfully
Speaker 2: by Andrew Left, who's under investigation by the Department of
Speaker 2: Justice and the SEC. People think there's just like underground
Speaker 2: network of short sellers who try to ruin companies or
Speaker 2: anything like that. It doesn't work like that. But whoever
Speaker 2: thought that the world of affordable housing would itself start
Speaker 2: to act like an exclusive club. We all know we
Speaker 2: don't have enough existing houses for sale.
Speaker 12: The new home.
Speaker 2: Market is benefiting from a very severe shortage of existing
Speaker 2: homes for sale, and that makes it awfully difficult for
Speaker 2: ordinary people to afford a house.
Speaker 12: The post single multi in house prices.
Speaker 2: You know, I do think we have an affordability issue
Speaker 2: that needs to be resolved one way or the other,
Speaker 2: which could lead some as fire homeowners to take some
Speaker 2: risks they probably shouldn't a magnificent new home that they
Speaker 2: bought for a song who says they can't have it all,
Speaker 2: But that assumes they can get someone to sell in
Speaker 2: the house in the first place. This week comes news
Speaker 2: of the Nimbi that is not in my backyard phenomenon
Speaker 2: coming to none other than Levittown out on Long Island.
Speaker 2: Levittown was a series of housing golls built by William
Speaker 2: Levitt after World War II for returning vets. The whole
Speaker 2: idea was affordable housing for eighty four thousand people, mass produced,
Speaker 2: government subsidized, and with the price of just seven nine
Speaker 2: hundred dollars a house. But time has moved on, and
Speaker 2: with it the price of houses in Levittown now averaging
Speaker 2: over five hundred and seventy five thousand dollars, helped by
Speaker 2: local restrictions on multi family residences. While New Jersey allows
Speaker 2: about twenty five new apartment buildings per thousand people a year,
Speaker 2: San Francisco builds about sixteen. Out of Long Island, the
Speaker 2: number is just two point three multi family units per
Speaker 2: thousand per year. It turns out that all those residents
Speaker 2: have won it's affordable housing are pretty picky about their neighbors.
Speaker 2: Get off my lawn. That does it. For this episode
Speaker 2: of Wall Street Week, I'm David Weston This is Bloomberg.
Speaker 2: See you next week,