Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Along
Speaker 1: with my co host of Bonnie Quinn. Every business day
Speaker 1: we bring you interviews from CEO, market pros and Bloomberg experts,
Speaker 1: along with essential market moving news. Find the Bloomberg Markets
Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
Speaker 1: and on Bloomberg dot com. Eric weltunas e t F
Speaker 1: specialists here at Bloomberg, joins us now for our next
Speaker 1: segment and Eric, welcome, has Robin Hood and here we
Speaker 1: go again because it's sort of fascinating. Has it taken
Speaker 1: away investors from e t s? From run of the
Speaker 1: mills sort of vanilla e t F And some of
Speaker 1: them aren't that vanilla either. Yeah. You know, when et
Speaker 1: s were introduced back in the nineties, it was like, hey,
Speaker 1: you know, you can now trade a whole basket like
Speaker 1: it were a stock. So you get to the benefit
Speaker 1: of the liquidity of the stock, but it's a diversified basket,
Speaker 1: so your risk is a little lower. That used to
Speaker 1: be a feature. They see it as a bug. That's too.
Speaker 1: It's not enough jus for them, and so that's why
Speaker 1: we are seeing they might start with e t s,
Speaker 1: but they will end up at stocks and options, the
Speaker 1: e T s or the gateway. Yes, uh we We
Speaker 1: interviewed two actual gen Z traders on our podcast and
Speaker 1: both of them had the same kind of experience. Maybe
Speaker 1: you know, started off slow, but they always end up
Speaker 1: at stocks and options. If they do use e t s,
Speaker 1: they tend to like leverage gtfs like t q q
Speaker 1: Q and s q q Q, which is a way
Speaker 1: to sort of bet on the queues movement um. But look,
Speaker 1: I think they are a legitimate force in the market.
Speaker 1: But if you look at the assets, robin Hood might
Speaker 1: have what fifty sixty billion in terms of all of
Speaker 1: their accounts. Now Vanguard takes that in about two months.
Speaker 1: So I think at the end of the day, the
Speaker 1: real retail investor army is still the buy and hold
Speaker 1: advisor world. That is really big money that's day, but
Speaker 1: they don't trade a lot. So I do think when
Speaker 1: you get to mid and small stocks, robin Hood can
Speaker 1: move the market and retail investors can move it. They
Speaker 1: make of about eighteen percent of the trading according to
Speaker 1: my colleague Larry tab which has some great data. That's
Speaker 1: up from fifteen percent last year. And ten percent ten
Speaker 1: years ago. So this has been on the rise for
Speaker 1: a while, and so has high frequency trading. So it's
Speaker 1: a lot of retail and al goes out there right
Speaker 1: now moving the market, especially for the smaller stocks. So Eric,
Speaker 1: as you look across your E t F universe, and
Speaker 1: I know you've been doing it for years, so you
Speaker 1: see everything. Where's the money flowing? When you take a
Speaker 1: look at Vanguard flows and the black Rock flows, are
Speaker 1: there certain E t F sectors or areas that are
Speaker 1: more popular. Yeah, fixed income is just ruling the year.
Speaker 1: I mean, this is the fed trade and gold those
Speaker 1: I put under just fed induced money. That's basically been
Speaker 1: the story. The only it's it's interesting. There's been definitely
Speaker 1: some money into equities, but not a lot, not as
Speaker 1: much as you think because the equity markets up what
Speaker 1: since some kitchen sink day at the end of March,
Speaker 1: and there hasn't been much flows into equities because most
Speaker 1: people wanted to front run the ad over in the
Speaker 1: corporate bond area. So when you look at black Rock
Speaker 1: in particular, all of their fifty two billion flows are
Speaker 1: fixed income um. Every last dime that's weird um. And
Speaker 1: equities have been a little left behind. And what's interesting
Speaker 1: is small caps had their best quarter in I think
Speaker 1: thirty years, same with mid caps, and they're both saw
Speaker 1: outflows in e t s. It's interesting there's been a
Speaker 1: lot of areas left behind. Emerging markets saw outflows and
Speaker 1: they just had a best quarter in a decade. That's
Speaker 1: how it's a it's an embarrassment of riches I think
Speaker 1: for investors, and where they see it right now is gold,
Speaker 1: corporate bonds and the queues. That is the one area
Speaker 1: of equities people are piling into. So I suppose you're
Speaker 1: getting some kind of yielding corporate bonds, but you're not
Speaker 1: getting a huge yield. Eric are people that's scared about
Speaker 1: the economy that they're they're going for sort of the
Speaker 1: very safest asset. Well, the corporate bonds is just because
Speaker 1: you know the Fed's coming. So for the past three months,
Speaker 1: the set says, hey, we're gonna buy lq D. So everybody,
Speaker 1: the smart money just piled into l q D. L
Speaker 1: q D took in more flows in the second quarter
Speaker 1: than it ever has in a year because people are
Speaker 1: just like, don't fight the Fed. I'll get right in
Speaker 1: front of the sid started buying LQD. So I try
Speaker 1: to basically contextualize this by saying the FED owns about
Speaker 1: eight billion of corporate bond ETFs, but the whole area
Speaker 1: took in about sixt so most of the money was
Speaker 1: made in front running. I think what you're going to
Speaker 1: see now, though, is people moving out of it. I
Speaker 1: think they're gonna go, Okay, the FED has kind of
Speaker 1: tapped out on their corporate bond ETF buying, let me
Speaker 1: move to something else. So I think we're going to
Speaker 1: see a swing into small cap, midcab emerging markets and
Speaker 1: some of those areas that we're a little left behind
Speaker 1: in the first half. So Eric just real quickly twenty
Speaker 1: seconds or so overall give us a sense of kind
Speaker 1: of the funds flows into ETS in general. Well, they're
Speaker 1: on pace to have a record year. Uh so there's
Speaker 1: still that sort of shift from high costs to low cost.
Speaker 1: People came. You know, ETS went through a lot, but liquidity,
Speaker 1: low cost and tax efficiency kind of trumps all any
Speaker 1: you know, everything right now, and you continue to see
Speaker 1: money flows a two d and twelve billion so far
Speaker 1: year day, so we expect to see more. But I
Speaker 1: do think we're going to see some of those left
Speaker 1: behind sectors see some blows interesting. Eric Balchinis, thanks for
Speaker 1: joining us always the expert Vannie on all things ETF.
Speaker 1: Are fortunate have his ear. Eric's a senior et F
Speaker 1: ANALYSTO Bloomberg Intelligence joining us on the phone. So, Fannie,
Speaker 1: it's just interesting that you know, I've been in this
Speaker 1: business a long time and this E t F phenomena
Speaker 1: has just been amazing, and it's really been i think,
Speaker 1: so widely embraced by many investors exactly, and you see
Speaker 1: some of the same debates going on in the E
Speaker 1: t F world as you do in other words, like
Speaker 1: the fee war for example, you know, the the chasing
Speaker 1: the fees to zero if you like, is flowing into
Speaker 1: quantity TF since long and even the discount brokers, I mean,
Speaker 1: you know, you see the Charles Schwab going to zero
Speaker 1: trading commission. So just again it's a boon for the
Speaker 1: consumer and for the investor well as we all know
Speaker 1: it has been. Why they reported Congress is in the
Speaker 1: midst of negotiating a fourth round of fiscal stimulus in time.
Speaker 1: Certainly of the essence as many of the programs from
Speaker 1: that from the third round that nearly three trillion dollars
Speaker 1: of stimulus in the third round. Those are set to
Speaker 1: expire in the coming weeks and months. Of time is
Speaker 1: certainly of the essence to get an update on how
Speaker 1: that is all playing out. We welcome Lauren Davidson, Congressional
Speaker 1: tax reporter for Bloomberg News. Laura, what's the latest on
Speaker 1: this next round of fiscal stimulus, because again, some of
Speaker 1: these existing programs are about to expire. Well, the latest
Speaker 1: is that they're still really far apart from having a deal.
Speaker 1: Even Republicans in the Senate and and the White House
Speaker 1: are not on the same page. Just yesterday, uh, you know,
Speaker 1: President Trump said it would be a red line if
Speaker 1: the bill did not include a payroll tax cut, which
Speaker 1: is something that Republicans in the Senate are not all
Speaker 1: excited about. But meanwhile, there's a lot of deadlines that
Speaker 1: are pressing down on lawmakers kind of the most important
Speaker 1: one being the end of the six dollar a week
Speaker 1: federal uninsurance uh sorry, unemployment insurance benefit that expires at
Speaker 1: the end of the month. And and that's going to
Speaker 1: be a problem for from millions of people. Uh if
Speaker 1: if Congress lets that lapse without you know, filling something
Speaker 1: to to replace it. So the extra six dollar part
Speaker 1: would laps the unemployment insurance sort of ability to collect,
Speaker 1: wouldn't right, lor would there be anything on top of
Speaker 1: the of the of the minimum, Well, they would have
Speaker 1: their their state benefit you know, which varies by state,
Speaker 1: but it's about a couple hundred dollars. Uh. The but
Speaker 1: the idea is from that the federal government was to
Speaker 1: sort of backstop that and make sure that people basically
Speaker 1: had enough to to pay their rent and and pay
Speaker 1: pay all their bills while uh, you know, they were
Speaker 1: basically shut out of their jobs. Will the economy were
Speaker 1: shut down. Uh, you know, when this was set back
Speaker 1: in late March, they thought, oh, this will be plenty
Speaker 1: of time. But you know, both sides thought, you know,
Speaker 1: this will this little good plenty of runaway. You know,
Speaker 1: now that we're you know, several months down the line,
Speaker 1: and you know, we're seeing states like California shut back
Speaker 1: down again, the virus is spreading even faster than it
Speaker 1: was um several months ago. That there's a lot of concerns.
Speaker 1: There are a lot of people who you know, suddenly
Speaker 1: will be able to pay their mortgages, hey, their rent bills, uh,
Speaker 1: you know, and and that's going to cause wider ripples
Speaker 1: throughout the economy. Yeah, Laura, I know some of the
Speaker 1: debate within Congress about that six d a week supplemental
Speaker 1: payment is that perhaps, uh, it's such a it's it's
Speaker 1: an amount that you know, disincentivizes people to go back
Speaker 1: to work. Is there any sense that they're coming to
Speaker 1: a resolution on that fundamental disconnect? What care? What they're
Speaker 1: looking at is they're looking at sort of two things
Speaker 1: up kind of two sides of the scale. One is
Speaker 1: that they're going to have some sort of federal benefit,
Speaker 1: probably not as high as six hundred dollars, but some
Speaker 1: amount below that. And then what Republicans want is they
Speaker 1: want some sort of back to work bonus. You know
Speaker 1: that there's one idea out there that would be a
Speaker 1: four hundred and fifty dollar a week back to work
Speaker 1: bonus for several weeks to encourage people who may have uh,
Speaker 1: you know, been making more from unemployment, to encourage them
Speaker 1: back to work. Uh. You know, we'll see exactly where
Speaker 1: those land and if they're you know, if they're able
Speaker 1: to to reach a deal in the next couple of
Speaker 1: weeks on that. What about the other parts of it.
Speaker 1: So does you know all sorts of state and local
Speaker 1: government relief packages as part of this as well? What
Speaker 1: will wigons allow and what do they want to what
Speaker 1: do they want to cut back on. Republicans really don't
Speaker 1: want much at all for state and local local governments
Speaker 1: in that package. Um. You know. Of course Democrats that's
Speaker 1: one of their top priorities. So there will likely be
Speaker 1: some sort of money in there. But the big overall
Speaker 1: question here is how much is this bill going to pass?
Speaker 1: You know, several months ago we saw the House passed
Speaker 1: the Heroes Bill that had three point five trillion in
Speaker 1: UH in new stimulus spending. UH. Mitch McConnell for the
Speaker 1: Republicans and said they want something no more than one trillion.
Speaker 1: So there's a there's a vast difference in where the
Speaker 1: both sides are. Uh. You know, again, this is a
Speaker 1: compromise between Pelosi, the White House and and McConnell's. So
Speaker 1: will probably see something above one trillion, but not as
Speaker 1: high as three point five trillion. And and it's really
Speaker 1: just about making the money work once you look at
Speaker 1: unemployment money for state and local there's also concern about
Speaker 1: more money for for a vaccine and for PPE and
Speaker 1: for the health issues. Is that continues to be an
Speaker 1: ongoing problem plus other things, you know, like another round
Speaker 1: of stimulus checks or or more money for us for
Speaker 1: small businesses. Mark, give us a sense of timing here
Speaker 1: about when Congress leaves for their summer vacation. What are
Speaker 1: the odds of getting something done before that recess? Well,
Speaker 1: the goodness is the summer vacation is a is a
Speaker 1: very a good incentive for for lawmakers to to get
Speaker 1: things done in Congress typically doesn't act until it has to,
Speaker 1: and we're rapidly approaching that point. So about the House
Speaker 1: and the Senate will be back next week. They basically
Speaker 1: have two weeks before they're they're scheduled to leave on
Speaker 1: their break. Uh. You know, these things could spill over
Speaker 1: a couple of days into August. But I think there
Speaker 1: is um growing optimism that there will be a deal, uh,
Speaker 1: you know, within the next two or three weeks. What
Speaker 1: happens then, I mean, will the will will whatever is
Speaker 1: decided upon, will it last for? I mean, how do
Speaker 1: they decide how long this lasts? Four? I mean, nobody
Speaker 1: knows when a vaccine is going to be available. You know,
Speaker 1: most businesses that are you know, not able to reopen.
Speaker 1: I'm thinking of even you know, arts organizations like Carnegie
Speaker 1: Hold and Concenter and so on. They're talking about after Christmas, Broadways,
Speaker 1: after the new year. I mean, we're really stretching into
Speaker 1: next year. So anything that gets decided upon on do
Speaker 1: we know how long it will last for we don't
Speaker 1: know exactly, And part of that will be determined by
Speaker 1: the cost. And also it's a political calculation both. You know,
Speaker 1: remember there's an election in November, and if you know,
Speaker 1: especially for Democrats, they think they have a chance of
Speaker 1: winning back the Senate, they may want to just negotiate
Speaker 1: a deal that just goes you know, into the fall
Speaker 1: for a little lies, a little while, and then if
Speaker 1: they were to have control of both the House and
Speaker 1: the Senate, you know, they could pick up a new
Speaker 1: bill in January and hadn't have basically more favorable negotiating
Speaker 1: partners on the other side of the building. So, Laura,
Speaker 1: is the expectation that no matter what Congress delivers to
Speaker 1: the President, that he will sign it. Given that we
Speaker 1: are so close to a presidential election, there is no
Speaker 1: certainty there. Um, you know, there was some concern in
Speaker 1: the Senate yesterday with U with the White House coming
Speaker 1: out and saying that payroll tax cut would be a
Speaker 1: red line. Um, that's something that the Republicans and Senate
Speaker 1: don't really want. It's expensive, it doesn't help people that
Speaker 1: are necessarily not working, so that that's a that's a
Speaker 1: concern though, you know, some some aids have indicated to
Speaker 1: me that this is the demand that the White House
Speaker 1: has made before UH and and the President has caved
Speaker 1: on it. Also. You know, we've seen in previous negotiations
Speaker 1: over over government funding UH demands about money for the
Speaker 1: border wall of Mexico. President has also caved there. So
Speaker 1: I think there's some expectation that there's you know, a
Speaker 1: redline may not be a firm, bright redline. Laura Davison,
Speaker 1: thanks so much for joining us. We appreciate that. Laura Davison,
Speaker 1: Congressional tax reporter for Bloomberg News and Vanni. I think
Speaker 1: this is going to be, UH, a pretty contentious negotiation,
Speaker 1: as Laura was suggesting, coming you know, right down to
Speaker 1: the wire, probably right and today we actually have Manation
Speaker 1: testifying as well before Congress. There there will be a
Speaker 1: lot of information, but will there be enough information Paul.
Speaker 1: I mean, we don't really know yet how many businesses
Speaker 1: were able to get their hands on money to stay open.
Speaker 1: We don't know how many of their employees will actually
Speaker 1: have been uh you know, kept on the pay rolls
Speaker 1: and how money won't So we don't really know how
Speaker 1: much suffering is out there. But one thing's for sure.
Speaker 1: You know, Republicans do not wanted to be as generous
Speaker 1: as the first time out, and it won't be I
Speaker 1: think that's something we can definitely say. Sure, yeah, I
Speaker 1: think you're right. That three trillion we had in the
Speaker 1: third round, that was you know, really a major major
Speaker 1: statement there right at the beginning of the pandemic. But
Speaker 1: you know, we see these states around the country having
Speaker 1: you know, seeing surges. Well it just kind of goes
Speaker 1: to the issue when can we get this thing kind
Speaker 1: of get a handle on it um And it doesn't
Speaker 1: really bode well right now. The data no, a record
Speaker 1: number of cases in the United States. Now this after
Speaker 1: already having seen you know, what we thought was the
Speaker 1: record a couple of months ago. Well, I'm looking at
Speaker 1: gold here up about twenty percent year the date, a
Speaker 1: real rise here. We had a big dip in March
Speaker 1: along with pretty much everything else when the COVID hit,
Speaker 1: but since then been marching ever higher to get a
Speaker 1: sense of what the outlook is for the precious metal.
Speaker 1: We welcome Everett Millman's precious metal specialist for Gainesville Coins
Speaker 1: every Thanks so much for joining us here. Again, I'm
Speaker 1: a little surprised here the golds performed so well, but
Speaker 1: it's just been a stalwart here. What's your view going
Speaker 1: forward for this precious metal? Yeah, thanks for having me
Speaker 1: on UM. As we've seen basically the entire way up
Speaker 1: of these past twelve months, there's been a pretty reliably
Speaker 1: strong bid that comes in any time the gold price
Speaker 1: dips significantly UM, and that durable base of support appears
Speaker 1: to be forming at the eight hundred pounds level right now.
Speaker 1: But as you pointed out, it's interesting that we've seen
Speaker 1: prices recover pretty handsomely in the equity market without much
Speaker 1: of an impact on risk off assets like gold and
Speaker 1: longer data treasuries UM. In fact, both of those have
Speaker 1: continued to rally right alongside starts, right alongside the stock market.
Speaker 1: So even as pockets of the world economy open up,
Speaker 1: UM as economic activity gradually recovers in the second half
Speaker 1: of the year, eighteen hundred dollar gold maybe the new normal. UM.
Speaker 1: On the other hand, if we see some exceedingly good
Speaker 1: developments on the economic reopening or on the trade front,
Speaker 1: for instance, that would relieve a considerable portion of the
Speaker 1: pent up safe haven pressure that's been buoying the gold price.
Speaker 1: So although those kinds of positive developments appear rather unlikely today,
Speaker 1: there is some degree of downside risk for gold UM.
Speaker 1: It could swiftly fall back below six d announces if
Speaker 1: indeed the economy or the financial system looks drastically more
Speaker 1: stable by the third or fourth quarter of this year.
Speaker 1: So I remember speaking with Paul Tutor Jones. Now it
Speaker 1: is probably more than a year ago at this point,
Speaker 1: but he was calling for gold to go higher at
Speaker 1: the time and said that if it hit eighteen hundred,
Speaker 1: you know it would it would it would go beyond
Speaker 1: two thousand dollars nounce. But that didn't happen. We are
Speaker 1: still above eighteen hundred, but we're not moving higher from
Speaker 1: here ever, at what is the reason for that? So
Speaker 1: that is a very interesting development, And what I would
Speaker 1: point to is that investment demand for gold has been
Speaker 1: hitting all time highs, but it's had to make up
Speaker 1: for the near eradication of physical demand for gold jewelry
Speaker 1: in places like India and other key jewelry districts in
Speaker 1: the Middle East and East Asia. So to me, that
Speaker 1: points to the importance of some of the institutional trends
Speaker 1: we're seeing that institutional buyers, hedge funds, central banks, that's
Speaker 1: who's buying gold right now. But if some of the
Speaker 1: assumptions of the gold bears were correct, then losing a
Speaker 1: huge chunk of the biggest source of demand for the
Speaker 1: gold sector. More than fifty of demand for gold is
Speaker 1: made up by the jewelry industry. The fact that that
Speaker 1: market has been significantly impaired for months should have dragged
Speaker 1: prices much lower. Instead, we have seen that face have
Speaker 1: and demand predominantly from Western institutions, has more than compensated
Speaker 1: for that lack of wholesale and retail activity and gold jewelry.
Speaker 1: So let's go to the other side of the equation. Ever,
Speaker 1: the supply side gives a sense of kind of the
Speaker 1: supply dynamics we're seeing in the global gold market here right.
Speaker 1: That is definitely an interesting one to look at because
Speaker 1: COVID has sort of thrown everything into the wind. UM,
Speaker 1: it's very uncertain whether minds are going to be able
Speaker 1: to open at full capacity UM, certainly with the other
Speaker 1: precious metals. In the silver market, we have seen that
Speaker 1: Latin America has been hit pretty hard by COVID and
Speaker 1: that is causing some tighter supply dynamics. So I think
Speaker 1: that that is also adding some positive pressure underneath the
Speaker 1: gold price, and we don't expect that to clear up
Speaker 1: any time in the next few months, so into the
Speaker 1: second half of it could even spill over into early
Speaker 1: We should expect some tighter supply not only in gold,
Speaker 1: but also in silver and the other metals, and that
Speaker 1: is positive for price action. What about jewelry demand, Everett,
Speaker 1: has it gone away completely? Not completely, but as I said,
Speaker 1: it is significantly impaired. UM. Much of the world's jewelry
Speaker 1: demand comes from East Asia and from India, and those
Speaker 1: regions have simply had to shut down a lot of
Speaker 1: their jewelry businesses UM. The same is true in China.
Speaker 1: Even though the Chinese economy obviously bounced back pretty strongly
Speaker 1: in the second quarter, copper demand in China rebounded, we
Speaker 1: haven't seen the same in gold, gold, jewelry has seen
Speaker 1: very low volumes as sales in China. In fact um
Speaker 1: on the Shanghai Gold Exchange, where a lot of that
Speaker 1: jewelry is traded, we've seen the lowest volumes since two
Speaker 1: thousands thirteen. So it is actually rather impressive that the
Speaker 1: gold price has held around eighteen hundred announced because we've
Speaker 1: lost so much of that main source of demand for
Speaker 1: gold under normal circumstances. Every other than gold, what else
Speaker 1: are you looking at in the precious of metal space
Speaker 1: right now? That has your attention? So I'm looking for
Speaker 1: silver to kind of finally play catch up to gold.
Speaker 1: At this point in the bowl market. Um, we've seen
Speaker 1: the gold silver ratio has finally corrected back below one
Speaker 1: to one. That's a pretty significant move, and out of
Speaker 1: all the precious metals, I believe that silver has the
Speaker 1: greatest upside potential and the greatest downside potential. Unfortunately it
Speaker 1: has these very symmetric risks to both sides. Right now,
Speaker 1: the technicals for silver look pretty bullish. UM, we're above
Speaker 1: all of our short term moving averages, and we continue
Speaker 1: to test our two thousand nineteen high around nineteen. But
Speaker 1: unfortunately all of that could reverse quickly. UM in terms
Speaker 1: of behaving like a Saife Haven investment. Silver doesn't tend
Speaker 1: to engender the same level of trust and stability as gold.
Speaker 1: So I'm very keyed in on watching what silver does
Speaker 1: in the short term because I think that will tell
Speaker 1: us uh much about where the future trend is moving.
Speaker 1: All right, we will keep an eye on silver if
Speaker 1: you say so. Everett, thank you for that little tour
Speaker 1: around the precious metals space. Everett Millman is precious metals
Speaker 1: specialist at Gainesville Coins in Gainesville. It is time checking
Speaker 1: out on Bloomberg Opinion, and today we'll speak with Boomberg
Speaker 1: Opinion columnist Tara la Chapelle on Netflix. A little softer
Speaker 1: outlook than people were expecting, and the stalk is down
Speaker 1: seven percent today. But let's remember this was being closely
Speaker 1: watched because it's how to run up of more than
Speaker 1: fifty percent so far this year. It is a stay
Speaker 1: at home stock, and it's adding subscribers, even if not
Speaker 1: at the pace that Old Street was expecting. So Tara,
Speaker 1: thanks for joining. How should we think about Netflix? It
Speaker 1: did add two and a half million subscribers, and by
Speaker 1: most stretches of the imagination, that's a phenomenal number of
Speaker 1: new subscribers. Can Netflix keep it up? So I think
Speaker 1: Netflix warned last quarter that you know, they can't keep
Speaker 1: this growth up. And that's because a lot of the uh,
Speaker 1: the users who joined the last quarter and in the
Speaker 1: first quarter, where people that probably would have joined you know,
Speaker 1: down the road later this year, let's say, so that
Speaker 1: that big growth number takes away from subsequent quarters. So
Speaker 1: that's what we saw again happen where they added almost
Speaker 1: sixteen million subscribers in the first quarter, they added almost
Speaker 1: ten million in the second quarter, but now they're forecasting
Speaker 1: just two and a half million. It's still an incredible
Speaker 1: growth rate. They're still growing more than every quarter year
Speaker 1: on year. But I think that you know, investors and
Speaker 1: analyst got a little bit ahead of themselves, let themselves
Speaker 1: up for disappointment, didn't really listen to those guidance that
Speaker 1: Netflix is giving. And so the stock price is taking
Speaker 1: you know, it deserved breather. It trades it a very
Speaker 1: rich multiple. It doesn't really say much about the outlook
Speaker 1: for Netflix, the product and the successes having, but it
Speaker 1: does say that the stock valuation was probably a little
Speaker 1: bit inflated. So Tara, I know, this is a stock
Speaker 1: that's really driven by the momentum of the subscriber gains um.
Speaker 1: And I guess the big question for a lot of
Speaker 1: investors now is, you know, as I think about that
Speaker 1: softer than expected third quarter guidance for subscriber net adds,
Speaker 1: how much of that was the pull ahead effect of
Speaker 1: the first half versus just a more competitive environment out there.
Speaker 1: Now we've got almost every major media coman just got
Speaker 1: a streaming product in the marketplace. Did the company talk
Speaker 1: about that, Yeah, I mean, and it's a really good point.
Speaker 1: The company did talk a little bit more about the
Speaker 1: competition they're seeing, But as Real Tasting said was, you know,
Speaker 1: their subscribers, even when they turn out, even when they cancel,
Speaker 1: they expect a lot of them to come back, which
Speaker 1: I do think is a fair statement with Netflix. I
Speaker 1: think Netflix has kind of established itself as it this
Speaker 1: base subscription that a lot of people need, and then
Speaker 1: everything else you kind of tested out and have as
Speaker 1: an add on service. And that's why I've been writing
Speaker 1: that a lot of these other services they're they're good,
Speaker 1: but they're not good enough to replace cable or to
Speaker 1: replace Netflix, So they're really just competing for second place
Speaker 1: at this point. Of course, that could change at any
Speaker 1: point if Netflix suddenly doesn't have enough good content, which
Speaker 1: is very possible the longer that this pandemic stretches on
Speaker 1: and they're unable to add new material. But right now,
Speaker 1: I think, you know, Netflix really has the deepest library.
Speaker 1: They had a lot of their stuff for twenty already
Speaker 1: completed and ready to go, so they're not really as
Speaker 1: affected right now, whereas if you have Disney Plus or
Speaker 1: HBO Max, you're really feeling that programming drought at the
Speaker 1: moment you're looking and you're running out of new things
Speaker 1: to watch. And so I think that's how Netflix has
Speaker 1: really kind of established itself with the mode that these
Speaker 1: other companies haven't quite gotten yet. Yes, I mean production
Speaker 1: is resuming and else in Germany, France, Spain, Portugal, Italy
Speaker 1: and the UK, so that should deliver something for the
Speaker 1: consumer by the end of this year. And then Netflix
Speaker 1: has new titles one, so it's really getting around restrictions
Speaker 1: with production and sort of the the need for new material,
Speaker 1: isn't it. Yeah, So they said, you know, next year,
Speaker 1: probably the second half of is when you'll see a
Speaker 1: lot more of their newer stuff because they are you know,
Speaker 1: eventually they'll start to feel the effects of the pandemic
Speaker 1: not having everything completed in time. But even with that said,
Speaker 1: Netflix still has sort of the deepest library, the most
Speaker 1: new material. They've been doing a lot with reality TV,
Speaker 1: which has worked really well for them. They had to
Speaker 1: hit shows too hot to handle Love his Mind, and
Speaker 1: I think that made them realize, you a, reality TV
Speaker 1: is a really big part of this. It's easier to
Speaker 1: make remotely, it's cheaper to produce, and also they're experimenting
Speaker 1: more with animated which a lot of their UH employees
Speaker 1: can do remotely should they need to, so they're not
Speaker 1: having to do these big production sets necessarily where you
Speaker 1: have hundreds of people on set at a time, which
Speaker 1: is something that's going to be really hard for these
Speaker 1: Hollywood studios to work around and going forward, Hey, Tera,
Speaker 1: what didn't you make of the announcement that they're naming
Speaker 1: Ted Surrandos is the longtime product person at the company
Speaker 1: and a senior executive as co CEO with Read Hastings.
Speaker 1: Kind Of an odd organizational setup, isn't it. Yeah, it is,
Speaker 1: you know, And a lot of writers have pointed out
Speaker 1: that those co CEO arrangements tend to spell trouble eventually.
Speaker 1: I think it's probably a little too early to say
Speaker 1: that for Netflix. I mean, it's kind of been this
Speaker 1: informal arrangement for a while, which is what the company
Speaker 1: said in its letter last night, and I think that
Speaker 1: was a fair point that, you know, it has been
Speaker 1: Ted Surrandos and Read Hastings leading the company for many years,
Speaker 1: and they've worked together for about twenty years doing this,
Speaker 1: and Ted has been in charge of the content aspect
Speaker 1: of it. So I think, you know, there's there's some
Speaker 1: things you can glean from it that Netflix is very
Speaker 1: much tied to Hollywood now to producing its own content,
Speaker 1: being a direct rival with these other via companies. At
Speaker 1: the same time, it doesn't seem to really change too
Speaker 1: much of the day to day of Netflix at this moment,
Speaker 1: and perhaps it just has investors look at it more
Speaker 1: through the lens as a media and entertainment company as
Speaker 1: opposed to it's a purely tech company. Talk to us
Speaker 1: about CBS is new offering Peacock TV, a free streaming
Speaker 1: video app. Is it gaining subscribers? Will it provide something
Speaker 1: for Comcast down the road? Right? So Comcast launched Peacock
Speaker 1: in April just to their own Comcast customers, and so
Speaker 1: Comcast Internet subscribers get it for free or for no
Speaker 1: extra charge, I say, say, and so this week they've
Speaker 1: launched now to everybody. And I think that it's a
Speaker 1: it's a cool service, I think, especially if you're going
Speaker 1: to use the free version. There's a five dollar a
Speaker 1: month version that people who don't have Comcasts can also get,
Speaker 1: has a fuller library. Again, I don't think it's going
Speaker 1: to replace Netflix or cable TV and its own there's
Speaker 1: just not enough on there, but it is something that
Speaker 1: makes a good supplement to some to another service. So
Speaker 1: I think with your to see happen with a lot
Speaker 1: of these are people are going to start picking what
Speaker 1: combination of services do they need and fits their budget,
Speaker 1: And of course it's going to be a harder and
Speaker 1: harder decision the longer that this economic downturn goes on.
Speaker 1: But I think Comcast is doing something really interesting where
Speaker 1: instead of charging you know, a high price, they're they're
Speaker 1: keeping it cheap or even free in some cases, and
Speaker 1: they're really relying on advertising. So they think the advertising
Speaker 1: market is going to come back for streaming audiences, and
Speaker 1: so I think they're looking at it as this is
Speaker 1: a way to drive loyalty to Comcast Internet services and
Speaker 1: really control the bundle as they did during the cable
Speaker 1: TV era and Tera. Thanks so much for that rundown,
Speaker 1: We really appreciated it. Some interesting numbers out of a Netflix.
Speaker 1: Last night's stockdown about six point six percent, but, as
Speaker 1: Tara pointed out, had a big run so far this year.
Speaker 1: Tara la Chapelle Bloomberg Opinion, Media and Entertainment Calmness for
Speaker 1: Bloomberg Opinion. You can read her work and all of
Speaker 1: the fine work of Bloomberg Opinion writers at Bloomberg dot Com,
Speaker 1: Slash Opinion or O P. I N Go on the terminal.
Speaker 1: I guess, Vonnie. One of the questions remains is how
Speaker 1: many services do you and I and everybody else do
Speaker 1: we want to pay for going forward? Well, I'm afraid
Speaker 1: to count the ones that I'm currently paying for her
Speaker 1: poll because even though I keep thinking I'll call the core,
Speaker 1: there's something about watching something that's actually on now. There's
Speaker 1: something that keeps you attached to the world. I think,
Speaker 1: at least, you know, for me, for the moment. I
Speaker 1: know a lot of people don't feel that way. But
Speaker 1: I you know, I'd like to tune into things at
Speaker 1: a certain time sometimes, Yeah, exactly, And that we've seen
Speaker 1: courd cutting, you know, accelerate actually from the cable companies
Speaker 1: in the most recent quarter despite the pandemic, so people
Speaker 1: are really embracing streaming technologies and some of the skinny
Speaker 1: bundles out there. And again Netflix adding ten million subscribers
Speaker 1: in the second quarter, fifteen million in the first quarter.
Speaker 1: They have close to two million subscribers worldwide. Thanks for
Speaker 1: listening to the Boomberg Markets podcast. You can subscribe and
Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
Speaker 1: you prefer. I'm Bonnie Quinn, I'm on Twitter app Quinn,
Speaker 1: and I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio.