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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We

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Speaker 1: were just talking with the Edward Strangling about the optimism

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Speaker 1: UH that's being unleashed as a result of the trade

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Speaker 1: Pact that we still have yet to learn very much about,

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Speaker 1: which brings us really to the commodities market, because arguably

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Speaker 1: that's where you're seeing the biggest UH signs of optimism

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Speaker 1: heading into next year, where you're seeing the highest level

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Speaker 1: certainly in crude and copper, depending on what you look

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Speaker 1: at in more than a year. And luckily for us,

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Speaker 1: we have someone who's going to join us who actually

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Speaker 1: understands the commodities angle and compare it perfectly with the

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Speaker 1: macro angle, and that's Kona Hack. She is D and

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Speaker 1: F Man, head of research focused on macro as well

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Speaker 1: as commodities. Thank you so much for joining us, really

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Speaker 1: appreciate it. I'm wondering whether you think that the optimism

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Speaker 1: is well placed that we're seeing, certainly in commodity markets

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Speaker 1: right now. UM, I think it's justified because what we've

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Speaker 1: seen in the last eighteen months is every time there's

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Speaker 1: been some kind of talk or resemblance of a talk

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Speaker 1: about a trade deal you've had, you've seen markets pick up.

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Speaker 1: But we need to apply caution because the minute it

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Speaker 1: seemed to be fizzling out, or these negotiations disappear, or

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Speaker 1: it actually ends up being um non emvoid, then the

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Speaker 1: markets will tumble. So I think, yes, if this were

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Speaker 1: to go ahead, and this phase one trade deal seems

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Speaker 1: to be the most concrete thing we've had in a while.

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Speaker 1: At least we've have verted those December fifteen tariff hikes. Um,

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Speaker 1: I think that's already something to which we can be

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Speaker 1: optimistic about. But there's still so much to be signed

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Speaker 1: upon implemented that could all take time. And I do

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Speaker 1: worry that the markets thrown a little bit ahead of

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Speaker 1: themselves in crude, metals and even aggs. It's Asian code.

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Speaker 1: I wanted to go to crude right away because it

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Speaker 1: just seems to me that one of the you know,

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Speaker 1: the the commodities that really whips all around in relation

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Speaker 1: to trade talk is crude and I'm looking at w

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Speaker 1: T I at sixty two, you know, and Brent, they've

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Speaker 1: had a rally here kind of off of their bottoms.

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Speaker 1: What is your thought is it? Is it really the

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Speaker 1: demand side of the equation you think is really driving

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Speaker 1: crude prices globally as more more so than supply, say,

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Speaker 1: I feel at the moment it's very much demand. I

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Speaker 1: mean the global GDP growth we all know is directly

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Speaker 1: impacted by trade um and trade wars and trade tensions

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Speaker 1: if you like. So anything that can help alleviate that tension,

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Speaker 1: at least on the surface, provides some optimism on global

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Speaker 1: GDP growth, and then that directly impacts energy demand, which

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Speaker 1: in turn pushes up crude oil. So yes, this is

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Speaker 1: a demand side lead rally, and it's also sentiment really,

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Speaker 1: so if the world's economy recovers on the back of

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Speaker 1: a trade deal, I think that would directly benefit UM crude.

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Speaker 1: On the other hand, you've also got the potential of

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Speaker 1: UM the US buying more Chinese good than vice versa.

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Speaker 1: You know, that could mean Chinese buying more US crude

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Speaker 1: as well. You know, we're we're one of the big

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Speaker 1: um bearish fundamental issues of the last few years in

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Speaker 1: crude oil markets globally has been the huge increase in

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Speaker 1: US shale oil. If they find a new market in

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Speaker 1: China because of a trade deal, that's that's really important,

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Speaker 1: and you know it cannot be discounted. But you know,

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Speaker 1: to maintain a rally like this, you really need open

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Speaker 1: to maintain its cutback and discipline. You need non opegs,

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Speaker 1: you know, including the US, to be also be a

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Speaker 1: little bit more disciplined. Just to put some numbers to this,

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Speaker 1: the Bloomer commodity spot in x is hit the highest

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Speaker 1: level since November, is up about this year, which is

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Speaker 1: the best annual return since six A lot of the

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Speaker 1: outlook here does hinge on China's economy, and I have

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Speaker 1: to wonder whether people are conflicting a trade deal. However,

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Speaker 1: peripheral with the Chinese economy that is showing signs of

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Speaker 1: weakness in certain spots, and thinking of the housing market

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Speaker 1: as well as housing related industrial companies, how concerned are

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Speaker 1: you about a bigger than expected slow down in those

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Speaker 1: areas kind of overshadowing some the optimistic relief that we're

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Speaker 1: getting from trade agreements. Yeah, and I mean, I do,

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Speaker 1: I mean so much. I think I am kind of

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Speaker 1: cautiously optimistic. I feel that the Chinese economy has suffered

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Speaker 1: a great deal on the trade tensions U. On the

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Speaker 1: other hand, they have done what they can in terms

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Speaker 1: of kind of stimulating the economy wherever they could. I

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Speaker 1: feel that more of that would have to be maintained

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Speaker 1: into um. Yes, you mentioned how the economy that's showing

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Speaker 1: signs of bubble has been for a while. The Chinese

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Speaker 1: debt burton is very huge, but lately, at least in

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Speaker 1: November December, the p m I manufacturing in the because

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Speaker 1: have actually on some signs of resilience, and that's crucial

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Speaker 1: for industrial commodities, not just energy but also for metals.

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Speaker 1: So I think that's a positive sign. It would get

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Speaker 1: a big boost if the trade deal were actually implemented,

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Speaker 1: but I think it's fair to say that the Chinese

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Speaker 1: government would have to continue to apply some stimulus to

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Speaker 1: keep that growth momentum ticking. ConA, Heck, thanks so much

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Speaker 1: for joining us. We really appreciate your thoughts as if

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Speaker 1: we think about the commodity space. Uh. In addition to

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Speaker 1: twenty what we've seen in the stock markets, in the

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Speaker 1: bond markets, routing in nineteen Cone hack E d and

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Speaker 1: f Man, head of Research, joining us on the phone

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Speaker 1: from London. Let's set the stage a little bit for

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Speaker 1: financial markets for after the extraordinary rise we've had in

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Speaker 1: the markets in nineteen We welcome our next guest, Mike Gallagher.

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Speaker 1: He's Managing director of Macro and Strategy at Continuum Economics.

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Speaker 1: He joins us from London. Uh, Mike, thanks so much

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Speaker 1: for joining us. Let's set the stage. Just give us

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Speaker 1: your sense of how you think, let's say, the UK

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Speaker 1: and European markets from an economic perspective are shaping up

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Speaker 1: for and given that Brexit appears to be moving forward

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Speaker 1: certainly Paul Um you know, I think, first of all,

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Speaker 1: actually removing some of the uncertainty so surrounding Brexit um

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Speaker 1: does actually help both Europe as well as the UK.

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Speaker 1: It has been sort of a factor that influenced some

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Speaker 1: of the the exports coming from Europe into the UK

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Speaker 1: and has had a bit of an impact. So that

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Speaker 1: will certainly help, but I think equally important in helping

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Speaker 1: to revive the Eurozone and the UK economy with two

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Speaker 1: of the things. One the decline in bond yields which

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Speaker 1: have occurred since the middle of the year, which will

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Speaker 1: filter through UM. And then also the US China trade

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Speaker 1: deal because Europe's a very important exports or into China

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Speaker 1: and the prospect of a Phase one deal will actually

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Speaker 1: I think calm some nerves UM. So it's certainly better prospects.

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Speaker 1: But you shouldn't get carried away. Shouldn't get carried away.

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Speaker 1: Let's talk about the consensus, and then let's talk about

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Speaker 1: your take. Consensus that the economy is going to gain

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Speaker 1: steam globally next year. There could potentially be fiscal stimulus,

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Speaker 1: but yields are still not going to climb that much.

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Speaker 1: Risk assets will have another good year, I'll be not

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Speaker 1: as good as twenty nineteen. Uh and everything just chugs along,

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Speaker 1: with the first half being better and more stable than

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Speaker 1: the second half of the year. What's wrong with that

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Speaker 1: consensus call right now? I think one of the things

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Speaker 1: that's wrong with that consensus call is that people are

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Speaker 1: relatively upbeat on the US, whereas we still haven't seen

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Speaker 1: the full lagged effects of the flowing and manufacturing and

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Speaker 1: business investment feed through into the US jobs growth and

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Speaker 1: U S consumption. We're not talking a harder landing in

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Speaker 1: the US, but you know, we're talking one and half

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Speaker 1: a cent growth consensus of two percent. So I think

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Speaker 1: there's gonna be a bit of disappointment as we we

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Speaker 1: carry on. In terms of the US. The second thing

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Speaker 1: is China. Um. China is not going to get a

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Speaker 1: major lift from the trade truths, Um, there's other things

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Speaker 1: going on in China. China's sluggishness, by their own standards

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Speaker 1: is partly due to their clean up for the shadow

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Speaker 1: banking system, which will continue in twenty and consequently, we

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Speaker 1: think that growth can slip below six percent UM. So

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Speaker 1: while the Eurozone is a little bit brighter, UM, it's

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Speaker 1: not making up for what we think is slower growth

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Speaker 1: in the US and the Eurozone. Admittedly, things look better elsewhere,

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Speaker 1: but in terms of world growth it could be pretty

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Speaker 1: much the same in nineteen. It's interesting. I like you.

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Speaker 1: I'm looking at your research right here, Mike, and I

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Speaker 1: like how the nice graphics make it nice and easy

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Speaker 1: for me to understand. So I got a couple of questions.

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Speaker 1: You're like, I like the pretty picture, like the pretty

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Speaker 1: and the colors and everything like that. The asset allocation

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Speaker 1: really interesting for equities. Well, but did you expect to

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Speaker 1: come on radio today and have uh and have I

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Speaker 1: say to you, we like the pretty pictures. Thank you.

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Speaker 1: You don't have to answer worth more than a thousand words.

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Speaker 1: All right, So let's take a look at the equities.

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Speaker 1: Your global asset allocations seem to be favoring emerging markets

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Speaker 1: a little bit more than maybe, let's say the US

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Speaker 1: and Japan. So willing to go out on the risk

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Speaker 1: curve a little bit, give us your thoughts on global equities. Yeah,

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Speaker 1: I think there's three sort of reasons for for that.

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Speaker 1: All view on terms of US equities is pretty flat

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Speaker 1: for next year. UM. What happened in two thousand nineteen

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Speaker 1: was there was very little learnings growth. There was a

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Speaker 1: lot of multiple expansion in the US market. And now

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Speaker 1: a number of evaluation metrics are pretty rich in the

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Speaker 1: US market. So we think we'll probably tread water, particularly

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Speaker 1: given the degree of un certainty surrounding the outcome of

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Speaker 1: the US presidential election. UM, and we'll see rotation elsewhere

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Speaker 1: to to markets that have been left a little bit behind,

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Speaker 1: but now don't have a U. S. China trade war

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Speaker 1: in UM, and a lot of that's got to push

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Speaker 1: towards emerging markets, we think. I think, secondly, UM, you

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Speaker 1: do have a little bit of rotation lower in the

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Speaker 1: dollar into which is partly because the dollars overvalued and

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Speaker 1: has been sort of supported by some of normal flows

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Speaker 1: in namely the repatriation of funds by US corporates UM,

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Speaker 1: and as we get into twenty that will tend to

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Speaker 1: drift lower UM. An e M risk generally performs better

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Speaker 1: when the dollars trading lower UM, and then there's still

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Speaker 1: some valuation benefit in terms of the M assets UM.

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Speaker 1: There they look cheap relative to d M assets developed

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Speaker 1: market assets UM, whether it's fixed income or alternatively equities.

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Speaker 1: But haven't people been saying this for the past ten years.

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Speaker 1: So the trigger this time around is that we actually

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Speaker 1: get UM the U S. China trade war shifting to

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Speaker 1: a trade truth in because the phase one trade deal

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Speaker 1: is not going to be followed by new outbreak, Trump

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Speaker 1: will consolidated gains into the election UM, and so we're

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Speaker 1: likely to see a breakout of any problems on the

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Speaker 1: China trade front UM. And then also that the dollar

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Speaker 1: gravitating blower UM. So I think that that that's enough

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Speaker 1: to actually trigger and unlock this valuation story. So, Mike,

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Speaker 1: I'm also looking at your fixed income allocation appear to

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Speaker 1: be underweighting Eurozone in the UK, so suggesting that greater

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Speaker 1: clarification on Brexit is not enough to maybe drive performance

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Speaker 1: in Western Europe and UK. Well, I think in terms

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Speaker 1: of Eurozone bond yields generally, they've got had such a

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Speaker 1: good run with the ECB easing and the ECB constitutas

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Speaker 1: ng um, it's now brought yields down to a level

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Speaker 1: that are extremely low on a five to ten year basis. Um.

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Speaker 1: You know, you're looking at negative returns on a five

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Speaker 1: year basis in a nominal and real terms for the

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Speaker 1: Eurozone bonds. And if you've got that kind of backdrop,

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Speaker 1: people are going to start to look at that expensiveness

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Speaker 1: because there's no storm clouds hanging over the horizon. We've

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Speaker 1: we've fixed Brexit, We've fixed the face one thing. We're

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Speaker 1: gonna come back to you next year and say we

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Speaker 1: fixed we fixed Brexit. Carry on. Yeah, yeah, I know,

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Speaker 1: but no, for at leastfully for the first half of

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Speaker 1: the year, there's no immediate crisis point that that exists.

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Speaker 1: So um, and that's going to lead people to rotate

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Speaker 1: away and out of your zone fixed income and out

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Speaker 1: of UK fixed income. It's It's been really surprising me

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Speaker 1: to see this bifurcation in fixed income markets, with some

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Speaker 1: people saying that they expect a bond rally, certainly in

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Speaker 1: the US next year as a consumer fails to deliver

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Speaker 1: some of the on the expectations that people have for them. Uh.

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Speaker 1: Then you have other people saying that coordinated fiscal stimulus

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Speaker 1: will lead to significantly higher yields in the next five

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Speaker 1: to ten years in developed markets. Which do you think

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Speaker 1: is the more accurate take on global rates markets? I

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Speaker 1: think in terms of the twenty outlook, it's the form

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Speaker 1: and namely that we'll see a gentle rotation lower and

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Speaker 1: it's not only what I've sort of said in terms

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Speaker 1: of the I'm more referring to the US government bond

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Speaker 1: market lower yields, higher press lower yields. Yeah, so we're

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Speaker 1: seeing the ten year yield in the US at one

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Speaker 1: fifty five by the end of twenty and that's on

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Speaker 1: the soft consumer story. But also additionally, um, you know,

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Speaker 1: I think if you if you look at the fiscal picture,

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Speaker 1: you're not going to see any fiscal policy change in

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Speaker 1: the US or Europe. You will see some further fiscal

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Speaker 1: easing in China, you are seeing a modest amount of

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Speaker 1: fiscal easing in the UK after the action, but it

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Speaker 1: doesn't really add up to the kind of fiscal policy

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Speaker 1: expansion you saw in two thousand and nine, two tho

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Speaker 1: and ten from the g twenty UM so stories about

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Speaker 1: major fiscal expansion I think are a bit premature, really,

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Speaker 1: and I think the more likely sort of situation is

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Speaker 1: either little or very modest and fiscal expansion UM and

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Speaker 1: that's not going to really destabilize coming upon markets. The

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Speaker 1: exception to all of this is on deals where we're

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Speaker 1: looking for them to actually go to zero UM in

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Speaker 1: the tenure areas by the end of a fair is

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Speaker 1: a fair sell off. And what that reflects is that

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Speaker 1: you know, we're at the moment, we're at minus not

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Speaker 1: point one nine tenure yields in Germany today UM, and

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Speaker 1: that really reflects that really we need to get back

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Speaker 1: towards positive territory and to avoid this or of evaluation.

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Speaker 1: Mike Gallagher, thank you so much for being with us.

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Speaker 1: Mike Gallagher, Managing director of MAC and Strategy at Continuum Economics. Well,

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Speaker 1: I do think that when we talk about the FED,

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Speaker 1: there is an interesting divergence going on right now I'm

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Speaker 1: fixing com markets. Our Jersey, who is the head of

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Speaker 1: US industry strategy for Bloomberg Intelligence joining us. Now. It

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Speaker 1: seems like there is a bifurcated market, with some people

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Speaker 1: saying we're going to see a significant rally Priamisra among

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Speaker 1: them a TV securities in rates at other people saying

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Speaker 1: we're going to see a significant sell off as fiscal

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Speaker 1: stimulus takes hold. Which camp are you in? So I

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Speaker 1: do think that yields you're probably going to sell off

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Speaker 1: a little bit, although you know, not a major cell off,

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Speaker 1: not a major trend here. So from this level, we

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Speaker 1: have to twenty as our base case scenario for the

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Speaker 1: end of next year, So we're talking about a twenty

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Speaker 1: five basis point sell off, which probably means that at

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Speaker 1: some level, um you can wind up with maybe a

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Speaker 1: you know, a little bit of an overshoot, so you

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Speaker 1: could see maybe two and a half percent, but ultimately

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Speaker 1: just you know, more of a range bound market in

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Speaker 1: a slightly better environment for the economy than you had

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Speaker 1: in uh in the slowdown during alright, so a range

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Speaker 1: bound in the tenure One thing I want to get

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Speaker 1: your thoughts on. I R I'm not sure if there's

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Speaker 1: been any real developments here, it's at that short end

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Speaker 1: of the market, the repo market. UM. One of the

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Speaker 1: things we've had, that uncertainty that came into the market.

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Speaker 1: I guess back in September, where are we or where

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Speaker 1: is the FED in terms of thinking about a long

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Speaker 1: term solution if one is even needed to kind of

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Speaker 1: stabilize that short end of the market. Well so, so, firstly,

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Speaker 1: I think that the interventions that they've done, they've done

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Speaker 1: over two hundred billion dollars of intervention so far, and

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Speaker 1: they're likely to get up towards three hundred, maybe not

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Speaker 1: up to the kind of fear levels that we thought

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Speaker 1: where they'd have to interview even more than that, primarily

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Speaker 1: because dealers haven't taken up all of the all of

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Speaker 1: the operations that that they've done so far. In fact,

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Speaker 1: the Morning's operation was only there was only eight billion

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Speaker 1: dollars of been submitted for their UM for their two

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Speaker 1: week operation when there was thirty five billion dollars available.

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Speaker 1: So you know, there's a lot of liquidity swishing around

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Speaker 1: in the market right now. UM. I do think that

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Speaker 1: the FED wants to have some type of standing facility

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Speaker 1: and operation as as opposed to doing the traditional open

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Speaker 1: market operations they've been doing for the last few months

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Speaker 1: and quite frankly that they used to do every day

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Speaker 1: prior to the financial crisis. Um. You know, I don't

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Speaker 1: know how they're going to do that though, because there's

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Speaker 1: a stigma issue where if you have a standing facility

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Speaker 1: and someone uses it, then people say, oh, well you

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Speaker 1: lack liquidity. Maybe I don't want to trade with you

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Speaker 1: because you lack liquidity. Goes back to the financial crisis

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Speaker 1: time period. So I think if they can figure out that, um,

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Speaker 1: that stigma issue, that they'll they'll do that. That could

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Speaker 1: be the interesting thing in the minutes actually that Leasta mentioned,

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Speaker 1: So when the Fed minutes come out, one of the

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Speaker 1: things that we'll be looking for is not so much

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Speaker 1: you know, what they're thinking about monetary policy, because I

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Speaker 1: think it's pretty clear they're going to be on hold

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Speaker 1: for a bulk of the year unless unless there's a

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Speaker 1: very significant change one way or the other the economy.

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Speaker 1: But it's how are they going to deal with the

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Speaker 1: funding stresses and the issues in the treasury and UH

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Speaker 1: and mortgage market funding. UM, that's going to be kind

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Speaker 1: of the focus. I think of most rates people. When

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Speaker 1: we get these minutes and we talk about mortgage bonds,

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Speaker 1: it's actually been one of the most understood under told

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Speaker 1: stories of the sort of rotation allowing mbs to roll

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Speaker 1: off and then reinvesting the proceeds into treasuries. How much

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Speaker 1: do you think that's going to be a support for

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Speaker 1: treasury valuations and a support for yields going too high?

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Speaker 1: The fact that the Treasury that that the devasures serve

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Speaker 1: is such a significant net buyer of treasuries with that

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Speaker 1: runoff from mortgage debt, Yeah, there's still going to be

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Speaker 1: a significant amount of net supply because deficits are still large,

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Speaker 1: so so visa v you know issue, I don't think

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Speaker 1: it's going to affect treasury valuations that much. I think, uh,

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Speaker 1: it affects mortgage valuations much more because the because the

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Speaker 1: Fed was buying a significant portion of net supply of

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Speaker 1: mortgage backed securities um through through the TB a market

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Speaker 1: kind of what mortgage forwards basically uh, that that they purchased.

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Speaker 1: So so the fact that they're not buying nearly as

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Speaker 1: much of that now than they were before, I think

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Speaker 1: it's really affected those valuations a lot. And in fact,

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Speaker 1: you've seen a significant widening of the spread we call

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Speaker 1: it the mortgage basis between mortgage backed securities and treasury yields.

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Speaker 1: So um, so, I think it's having much more of

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Speaker 1: an impact there on on mortgage rates and and UH

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Speaker 1: than it is on treasuries. And I think that that

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Speaker 1: will be the case going forward. Um, you know, particularly

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Speaker 1: since UH since net net we're we're gonna have you know,

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Speaker 1: slightly larger deficits this coming year than we did last year,

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Speaker 1: but it's not as significant as it was, say, you know,

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Speaker 1: back in seventeen when we had a massive UH increase

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Speaker 1: in eighteen in UH in the deficit. Jersey, thank you

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Speaker 1: so much for being with us our Jersey U s

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Speaker 1: Interes trade head strategist for Bloomberg Intelligence. As we head

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Speaker 1: into one big question is Paul Sweeney is very familiar with,

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Speaker 1: is what is going to be the fate of the

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Speaker 1: streaming services that continue to rival one another. Disney Plus

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Speaker 1: coming out, Hulu, we have of course Amazon Prime and Netflix,

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Speaker 1: which has rallied four thousand percent over the past ten years.

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Speaker 1: As people absolutely pile in and just compare that, Lisa,

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Speaker 1: that that four thousand percent over the last ten years

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Speaker 1: the SMP i'd respectable two fifty Disney four. Just to

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Speaker 1: put in context the four thousand percent total return over

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Speaker 1: the last ten years for Netflix, there was a time

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Speaker 1: when Netflix the market cap exceeded that of Disney, even

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Speaker 1: though it had been around that much less guitar around

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Speaker 1: nath and joining us now of Bloomberg Intelligence, who covers

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Speaker 1: all things in this space. What's your sense heading into

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Speaker 1: of the weeding out process that we expect to see

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Speaker 1: in the streaming service? Do you expect some real pressure

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Speaker 1: to come on Netflix? Is the other media giants try

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Speaker 1: to get in the game. Yeah, good morning, Falling Lisa. Yeah, definitely.

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Speaker 1: This has been the Netflix decade. As you pointed out,

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Speaker 1: you know one company that has been kind of singlehandedly

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Speaker 1: responsible for changing the way that we watch TV. And

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Speaker 1: obviously it has also been the catalyst for these streaming

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Speaker 1: wars that have overloaded dozens of platforms now with live

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Speaker 1: and on demand video. But I think, um, Netflix, as

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Speaker 1: you point out, Lisa, is going to be a little

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Speaker 1: bit of a victim of its own success because we

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Speaker 1: are seeing so this explosion of so many new streaming services.

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Speaker 1: And while I don't think that they are necessarily going

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Speaker 1: to cause the collapse of Netflix. I definitely think that

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Speaker 1: competition is heating up tremendous sleep. Uh, there is only

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Speaker 1: a certain number, there's only a limited number of UM

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Speaker 1: services that I think the market can sustain over the

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Speaker 1: long term. So we are going to see a shakeout.

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Speaker 1: But if there are a couple of services that emerge

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Speaker 1: as true winners, Netflix will definitely be one of them,

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Speaker 1: and along with that Disney plus two. So KEITHA. One

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Speaker 1: thing we've kind of learned from looking at the financial

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Speaker 1: statements of Netflix is this streaming business ain't cheap. It's

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Speaker 1: really expensive from a programmed perspective. And you know, Netflix

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Speaker 1: isn't even you know, nowhere close to free cashual positive.

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Speaker 1: What's your sense of, you know, kind of the overall

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Speaker 1: costs for a lot of these new players coming into

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Speaker 1: the market. Yes, absolutely, it's a very very costly endeavor.

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Speaker 1: As you point out, Paul, they are burning free cash.

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Speaker 1: They're spending about fifteen billion dollars in terms of content costs,

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Speaker 1: cash content costs this year, losing over three and a

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Speaker 1: half billion in free cash, and and all of these

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Speaker 1: new services that are coming to market are uh, you know,

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Speaker 1: spending on good least sums of money. Um, you know,

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Speaker 1: Disney plus itself pointing out that they're not going to

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Speaker 1: be that they're not going to be able to break

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Speaker 1: even for at least another three to four years, even

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Speaker 1: though they have a lot of the I P they

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Speaker 1: own a lot of the content, So this is really

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Speaker 1: an expensive proposition. And I think the key for Netflix

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Speaker 1: and Netflix management is they have promised that their free

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Speaker 1: cash flow burn is going to significantly reduce, but they

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Speaker 1: haven't really given any guidance. And I think that is

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Speaker 1: one area that investors are going to be truly a

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Speaker 1: little bit concerned about. Yether. Should I quit my job

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Speaker 1: and become a screenwriter? I mean, seriously, therese are such

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Speaker 1: a bubble in content right now. Is it a bubble

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Speaker 1: or or is this something that's really sustainable. I don't

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Speaker 1: think it is sustainable, And I think this is this

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Speaker 1: is kind of the monster. It's basically, don't quit my

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Speaker 1: day job. Yeah. I think you know, the Netflix has

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Speaker 1: kind of being partially responsible for this tremendous inflation. Um,

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Speaker 1: we've seen kind of prices per episode costs of certain

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Speaker 1: TV shows rise almost hundred two hundred and fift and

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Speaker 1: just a span of two years, and if you just

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Speaker 1: look at some of the new Disney Plus shows that

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Speaker 1: are coming out, I mean twenty five million dollars per episode.

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Speaker 1: I mean those are unheard of amounts of money. Even

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Speaker 1: even Game of Thrones costed only about you know, fifteen

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Speaker 1: million per episodes. So really, more and more of these

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Speaker 1: streaming services are are literally throwing money at UM at

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Speaker 1: these new shows, and it's as as you as you said,

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Speaker 1: it's it's really not sustainable. So that suggests kind of

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Speaker 1: the next I guess real call that investors need to

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00:24:31,960 --> 00:24:34,920
Speaker 1: get right is how will this thing shake out? Who

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Speaker 1: will be the winners and the losers? Is there a

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Speaker 1: sense of maybe how many streaming services this industry can

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Speaker 1: really support. So there have been a lot of studies

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Speaker 1: that have been conducted. Right now, it standard about three

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Speaker 1: to four. That's where UM. You know, if you just

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Speaker 1: look at households, even with a traditional cable TV subscription,

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Speaker 1: they do have in addition to that, most of them

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Speaker 1: have about three additional streaming services in the long run. UM.

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Speaker 1: Some of the studies are pointing to UM an average

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Speaker 1: US family having maybe about four to five subscriptions. That's

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Speaker 1: where you see costs coming in and around sixty seventy

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Speaker 1: dollars per month, and we think that's the maximum that, um,

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Speaker 1: you know, a consumer would be able to afford. Either, Nan,

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Speaker 1: thank you so much for being with us. Either. Wronk

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Speaker 1: and Aten covers all things in this space for Bloomberg Intelligence.

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Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

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Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

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Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before

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Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

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Speaker 1: Radio