Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along
Speaker 1: with Paul Sweeney. Join us each day for insight from
Speaker 1: the best in economics, finance, investment, and international relations. You
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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. For this introduction,
Speaker 1: I need to go to a note which was codified
Speaker 1: in market economics long ago at CJ. Lawrence. You had
Speaker 1: a headline, and then you had a subhead, and then
Speaker 1: you had a chart. And it was of course the
Speaker 1: discussion around the chart that led to the invention of
Speaker 1: modern market economics and many people. This began with Eddheimen
Speaker 1: at CJ. Lawrence just a few years ago. Ed, let
Speaker 1: me get to your most recent note, coveted on Wall Street. Remember, folks,
Speaker 1: we protect the copyright of all of our guests. Get
Speaker 1: the Edheimen note through Evercore Isi Edheimen. We're back in
Speaker 1: the old normal inflation range. Is it all clear on
Speaker 1: the Edheimen front for Jerome Powell?
Speaker 2: I wouldn't say it's all clear, but it's pretty dark clear.
Speaker 3: It's clear enough for them to continue to pursue the pause.
Speaker 3: Whether they cut in March, it's a little early. It
Speaker 3: might you'll want to wait another meeting or two. But
Speaker 3: my strongest conviction is that inflation is slowing and we'll
Speaker 3: continue to slow. You have rents, wages, but I don't
Speaker 3: want to overlook that there are some prices that are
Speaker 3: going up like crazy. But in general I think that
Speaker 3: inflation is coming down.
Speaker 2: And tell that know.
Speaker 3: I have a warm spot of a warm spot in
Speaker 3: my heart for Milton Friedman, and money growth has slowed down.
Speaker 3: So I'm sort of following his right and his footsteps, and.
Speaker 1: I'm looking at shelter inflation as a part and parcel
Speaker 1: the goofiness of a you've always ignored that you've gone
Speaker 1: out for granular data and you feature mortgage rates coming down?
Speaker 1: Is the mortgage rates coming down from eight percent? Say?
Speaker 1: Is it a linear function or is there a tip
Speaker 1: point where home building becomes normal again?
Speaker 3: It seems to be a tip point somewhere, a little
Speaker 3: bit above seven. Boys race War eight, maybe a little
Speaker 3: over eight, and now they're around seven. And all the
Speaker 3: information that we have shows that housing has bounced back
Speaker 3: pretty nicely. Even Tom, we're getting a little bit of
Speaker 3: an improvement in rents, which surprises me.
Speaker 2: For three weeks.
Speaker 3: We survey, the survey we've done of apartment companies has
Speaker 3: picked up a little bit.
Speaker 2: Right, excuse excuse me, it's okay.
Speaker 1: We a love gasping on the show at Heimen. I'm
Speaker 1: gasping when it's okay, you know, just have some tang
Speaker 1: and move on.
Speaker 4: Paul, Hey, save us ed talk to us about the
Speaker 4: labor market. I have been so amazed and surprised, pleasantly
Speaker 4: so by the strength the resilience of the US labor market.
Speaker 4: How do you put that into context with everything else
Speaker 4: that's going on out there?
Speaker 3: Economy is still pretty good. But I'm just I'm just
Speaker 3: telling you what you just told me. It's pretty good
Speaker 3: because the labor market is still pretty good.
Speaker 1: YEP.
Speaker 3: In about twenty five minutes, we'll get another reading for
Speaker 3: unemplomba claims. But uneplomba claims are the government's best economic indicator,
Speaker 3: and last week they fell below two hundred thousand and
Speaker 3: was just incredible how low they are. And so until
Speaker 3: the lever market eases up a little bit, the Fed
Speaker 3: is going to be reluctant to cut rates. I think
Speaker 3: they'd be happy to be pausing because inflation is coming down.
Speaker 2: Now there are I thought you were going.
Speaker 3: To say that you've been surprised at how much wages
Speaker 3: have slowed given how strong labor markets are. But there
Speaker 3: are some signs that the laver markets are easing up.
Speaker 3: For example, the Basebook came out last week and like
Speaker 3: some others, it showed some easing in the labor markets.
Speaker 3: And we survey employment agencies every week like a Manpower Inc.
Speaker 3: And they and they have reported a clear easing up
Speaker 3: in the labor market and in wages, and a measured
Speaker 3: by Indeed Lever Market company has showed a way h
Speaker 3: tracker has come from five and a half down to
Speaker 3: three and a half. There's a lot of signs that
Speaker 3: labor has eased, but not enough. I'm not I guess
Speaker 3: I guess I've been I'm not sure shocked, but I've
Speaker 3: been surprised. But whatever it is, it's the key. You've
Speaker 3: got to get labor to ease up. Some to get
Speaker 3: the economy to slow down more than it has. If
Speaker 3: you're plumbing, increases have slowed. From about five hundred thousand
Speaker 3: a month, they were increasing five hundred thousand a month.
Speaker 3: In the past three months they've been about one seventy.
Speaker 3: So you know, it's like, you know, watching a frog.
Speaker 2: Cook in a path. They don't notice it, but I
Speaker 2: noticed it.
Speaker 1: Wonderful. We're going to continue. We are commercial free. Don't
Speaker 1: don't go away. We are commercial free across this entire hour.
Speaker 1: Lukashaw to join us on the side of the economic
Speaker 1: data here but on YouTube and on card play. We're
Speaker 1: thrilled bring you Ed Hyman this morning, Paul Sweeney.
Speaker 4: So, Ed, can we officially take I don't know, for
Speaker 4: the remainder of twenty twenty four, can we take the
Speaker 4: recession talk off the table? I've had enough of this.
Speaker 4: How about you?
Speaker 3: Well, I probably have been giving you a problem in this,
Speaker 3: but I don't think so. I appreciate the question, and
Speaker 3: let me give you my best shot. So, the yell
Speaker 3: curve has worked seven times, six times in a row.
Speaker 3: Every time you've had a recession, your curves been inverted.
Speaker 3: So I'm just saying that we've had extreme monetary titan.
Speaker 3: Now it's taken eighteen months for that to work, so
Speaker 3: long that by the time you get to like month fourteen,
Speaker 3: all you and I want to say is like, get
Speaker 3: out of here. It's not going to happen. It's different
Speaker 3: this time. But the Yell curve inverted, for example, in
Speaker 3: the summurb of six, and the recession didn't start until
Speaker 3: eight eighteen months later. So we still have another four
Speaker 3: months and if we can stand it. But I guess
Speaker 3: the main thing I'm trying to say from a practical
Speaker 3: point of view is that I think the economy is
Speaker 3: at a slowing pattern.
Speaker 2: I mentioned the plummet increases slowing, and so I.
Speaker 3: Could continue to be part of Tom's thought process.
Speaker 2: Our company surveys have slowed.
Speaker 3: They were we survey companies and zero to one hundred
Speaker 3: and fifty is in the middle.
Speaker 2: And the surveys two years ago were sixty one and
Speaker 2: last week there were forty nine.
Speaker 1: And I want to digress over to your wonderful page
Speaker 1: and your research note on China and what ed Heymen does, folks,
Speaker 1: and this is textbook at Hymen is he looks at
Speaker 1: the equity market and all the media overwhelm of the
Speaker 1: hangsing in, the indecks, the Hong Kong Index, and the
Speaker 1: Shanghi composite, and you bring it right over ed hein
Speaker 1: to the decline and interest rates in China. Are they
Speaker 1: going to export a new low yield? Are they going
Speaker 1: to export disinflation? Wow? In deflation to the United States?
Speaker 2: Well, I was you got me there. I was going
Speaker 2: in a different direction. But let me explain.
Speaker 3: Their yields, like you point out, have been making new lows,
Speaker 3: and that helps explain why US yields have been pretty quiet.
Speaker 3: And also the weakness in China has helped explain why
Speaker 3: commodity prices have been weak. And it's been pretty clear
Speaker 3: to me that China has been exporting at least disinflation
Speaker 3: or slower inflation and in some cases deflation. There's a
Speaker 3: lot of news in the papers a day about lithium
Speaker 3: prices which are down eighty percent, and so there's you're right,
Speaker 3: they're exporting either disinflation or deflation.
Speaker 2: But also.
Speaker 3: You go back to the George Soros reflexivity, which is
Speaker 3: that when something can't go on forever, it doesn't, And
Speaker 3: there's a chance that we've reached that point in China
Speaker 3: this week with their cut in the triple R and
Speaker 3: so the stock market there has rallied almost ten percent.
Speaker 3: And this morning the price of oil the WTI in
Speaker 3: the US is up to about forty six dollars. It
Speaker 3: was in the low forties.
Speaker 4: So so anyway, so, Ed, I mean, you know, that
Speaker 4: kind of brings up a good point. I want to
Speaker 4: follow on Tom's question here. If we've got China slower
Speaker 4: than people anticipated, if we've got Europe weaker than people
Speaker 4: would like to see, particularly Germany, I mean, boy, you
Speaker 4: see that the challenge is there, can the US be
Speaker 4: that decoupled from the rest of the world in being
Speaker 4: a growth marketplace when so much of the rest of
Speaker 4: the world is, you know, if not in recession, darned
Speaker 4: close to it.
Speaker 3: No to Alan Greenspan, who enjoyed being inscrutable, but he
Speaker 3: also coined some pretty good dogs, one of which in
Speaker 3: the late nineties was that the US cannot be an
Speaker 3: oasis of prosperity. And that's what we have now. I
Speaker 3: think you're correctly pointing that out. And the data of
Speaker 3: this morning out of Europe is week we also survey
Speaker 3: companies that have sales week in Europe and that survey
Speaker 3: is about thirty two. The US comparable survey is forty nine,
Speaker 3: to put it in perspective. And then over in China,
Speaker 3: our survey there is about thirty two, and so that
Speaker 3: gives the world economy, you know.
Speaker 2: A soft inclination.
Speaker 3: But like I mentioned this morning, because I live up
Speaker 3: right on the edge, the news out of China is
Speaker 3: a little bit better.
Speaker 2: I mentioned, all prices have bounced.
Speaker 3: Up a little bit, and there's not market has bounced
Speaker 3: up a little bit. So I can't tell if if
Speaker 3: this triple R cut this week is the beginning of a.
Speaker 2: Real serious effort.
Speaker 3: They've had some false starts before, but it's a move
Speaker 3: in the right direction and we'll see if it bears fruit.
Speaker 1: And Man, I want you to talk about one of
Speaker 1: the great fears you harken back the nineties, and I'd
Speaker 1: even take it back to mister Isaacs in the eighties
Speaker 1: as well. In the zeitgeist of American global Wall Street,
Speaker 1: there is a real fear of our small banks linked
Speaker 1: in to bad real estate loans. Is it a legitimate fear?
Speaker 1: Is this something that we need to study or is
Speaker 1: it noise?
Speaker 2: It's not noise. So every week.
Speaker 3: On Friday afternoon, I get the GUMMA data on bank
Speaker 3: deposits and they are going down. They're down about two
Speaker 3: or three percent, which is the biggest drop since the nineteen.
Speaker 2: Thirties, which is a sobering point by itself.
Speaker 3: So I guess back, the bank deposits are essentially the
Speaker 3: money supply. It's eighty five percent of the money supply.
Speaker 3: So it's if you've got to watch it. This is
Speaker 3: my thirteenth bed tightening cycle, so I'm not this is
Speaker 3: I'm a I'm a gnarl veteran of these cycles, and
Speaker 3: right every single one of them has had financial shocks
Speaker 3: or crises.
Speaker 2: And so the one we had earlier this year, earlier
Speaker 2: last year.
Speaker 3: Excuse me, with SBB and the small banks having a
Speaker 3: deposit running their deposits, that was a shock crisis.
Speaker 2: And I think we're probably gonna get another one before
Speaker 2: this is over.
Speaker 1: And I got one last thought here before I let
Speaker 1: you go, And this is a great respect for what folks.
Speaker 1: I can't say enough. And I understand Sweeney and McKee
Speaker 1: and Lisa are too young for this, but we used
Speaker 1: to actually get printed research reports and you would wait
Speaker 1: on Tuesday to get the CJ. Lawrence Green Book, and
Speaker 1: it would come out. It was Edjimen, and then a
Speaker 1: guy named Ed yard Denny picked it up. Edjimen, do
Speaker 1: you have the yard Denny optimism? The corporations will adapt
Speaker 1: that we will see a ten fifteen to twenty percent
Speaker 1: lift in the Yard Denny duration of stock prosperity in
Speaker 1: America getting out to what now forty thousand dow forty
Speaker 1: five thousand. Do you share that optimism with the gentleman
Speaker 1: from Yale University?
Speaker 3: I don't, but I like Ed Yardini a lot, and
Speaker 3: I follow his work, I follow his thanking, I respect him.
Speaker 3: When I left CJLR he replaced me.
Speaker 2: I'm happy. So you know, the world goes around, But.
Speaker 3: I really do think about what he's thinking about, and
Speaker 3: it goes back to, you know, some thoughts about the
Speaker 3: nineteen thirties.
Speaker 2: As I mentioned, I think monetary tightening.
Speaker 3: Is extremely strong right now, monetary tightening, and that keeps
Speaker 3: me away.
Speaker 2: At the moment.
Speaker 3: My view and our house view is that the market's
Speaker 3: going up, and that's because inflation's coming down.
Speaker 2: The fence ont pause, and economy is still fine. But
Speaker 2: I would guess, and Paul, you.
Speaker 3: Are needling me a little bit there on the recession
Speaker 3: of the story, but I think the economy can get weaker,
Speaker 3: arnies will go down, and then it'll be a fight
Speaker 3: between declining earnings and the FED cutting interest rates.
Speaker 1: Edheimen, thank you so much with Evercore. I can't say
Speaker 1: enough about how he changed modern market economics. I put
Speaker 1: him and Alan green Span together. They simply changed how
Speaker 1: we digest the game day by day. And I'm in
Speaker 1: thank you on YouTube on card Player, this is a
Speaker 1: joy and Paul like, I gotta I just did this
Speaker 1: on LinkedIn and Twitter, which is it's borderline entertainment about entertainment.
Speaker 1: Lucas Shaw pulls out the typewriter Saturday evening, eight pm.
Speaker 1: And you don't know this, but he's doing this at
Speaker 1: the bar of the Sunset Tower Ill. I mean it's exclusive.
Speaker 1: I've sat there with a number of fancy people. I
Speaker 1: mean the owner, Jeff Klein, knows that Lucas Shaw is
Speaker 1: a player. I love what Jeff Clein says about the
Speaker 1: Sunset Tower Grill. He says it's where a duchess can
Speaker 1: be a devil. A celebrity like Lucas Shaw can dine
Speaker 1: with his family one night and this mistress the next
Speaker 1: and that's the la that Lucas Shaw covers here. Have
Speaker 1: you ever been in the Sunset grill with fancy people
Speaker 1: having fancy drinks? I was there. What happens two weeks ago? Okay,
Speaker 1: you didn't fall in the swimming pool, right.
Speaker 5: I did not follow the simmer.
Speaker 1: Okay, what happens now with Paul Sweeney and Lucashaw's Hollywood
Speaker 1: blown up? What are the conversation at Jeff Klein's grill?
Speaker 5: The conversation depending on what company you work for, but
Speaker 5: at a lot of them, is will my company still
Speaker 5: be around, or at least still be independent in six
Speaker 5: to twelve months, I'd say so. You've got Paramount, which
Speaker 5: has been the subject of near constant deal speculation for
Speaker 5: several months, and it's now starting to feel pretty real.
Speaker 5: You've got Warner Brothers Discovery, led by David Zaslev, who
Speaker 5: seems like he realizes his company is still not big enough,
Speaker 5: or feels his company still not big enough and wants
Speaker 5: to merge with something else. You've got Comcast sitting on
Speaker 5: the sidelines figuring if it wants to do something. You've
Speaker 5: got Disney and Bob Eyer making cuts and also talking
Speaker 5: about different deals. So there's a lot going on.
Speaker 1: I got eight questions. They've got to resell those folks.
Speaker 1: We're commercial free this entire hour. We go from Edward
Speaker 1: Hyman and then step it up to Lucas Shaw. I mean,
Speaker 1: it's pretty good here and we're on car play on
Speaker 1: YouTube as well. Paul Swingey with fourteen questions for Lucashaw.
Speaker 4: And Lucashaw covers all a media entertainment for Bloomberg News
Speaker 4: out of our stylish LA office. I will mention Lucas.
Speaker 4: Let's start with Paramount Global. We have to go to
Speaker 4: Sherry Redstone, the daughter of one of the greatest media mobiles.
Speaker 4: I think over the last fifty years, Sumner Redstone, she's
Speaker 4: the controlled shareholder. What do you think she's thinking here?
Speaker 4: Why would she consider now after all these years, maybe
Speaker 4: thinking about selling the company.
Speaker 5: I think there are two primary reasons. I mean, there's
Speaker 5: been a lot of talk about Paramount over the years,
Speaker 5: most of it not real. There weren't she did not
Speaker 5: seem open to selling. But I think now she's looking
Speaker 5: at her business and it is more challenged than it's
Speaker 5: ever been, and it doesn't seem like there's an obvious
Speaker 5: or even a particularly difficult solution. You know, they own
Speaker 5: all these cable networks that are shrinking by the day.
Speaker 5: Their streaming service is the sixth best, fifth, sixth best
Speaker 5: streaming service, and it loses a bunch of money. So
Speaker 5: that's one issue. You know, they've had to cut the
Speaker 5: dividend that gets paid to the holding company of her family,
Speaker 5: which is sort of like it's piggybank. The other one
Speaker 5: that I've been told by people close to her was
Speaker 5: that she was pretty seriously She's Jewish, and she was
Speaker 5: very affected by what happened in October and is starting
Speaker 5: to devote more of her time and attention to matters
Speaker 5: related to that and education. And so you combine the
Speaker 5: fact that the family empire is sort of crumbling and
Speaker 5: she now has something else that she figured she could
Speaker 5: spend her time and money on, and I think that
Speaker 5: combination means that she's now ready to part with it.
Speaker 4: Well, the reporting today David Ellison, the son of Larry
Speaker 4: Elson of Oracle, Maybe he's considered what do we know
Speaker 4: about David Ellison and how legit he might be as
Speaker 4: a potential buyer.
Speaker 5: Look, he is is very impressive. I will say he entered.
Speaker 5: You had these two Elison kids, David Ellison and Megan Ellison,
Speaker 5: enter Hollywood ten fifteen years ago, and I think a
Speaker 5: lot of people looked at them with suspicion. You know,
Speaker 5: you trust fund kids. Their dad's one of the richest
Speaker 5: guys in the world. They just want to play with
Speaker 5: daddy's money and make movies. Megan Ellison went one direction.
Speaker 5: She made all these art house movies with high end directors.
Speaker 5: The product creatively was great. Commercially it was a disaster.
Speaker 5: David Ellison basically went in the opposite direction. He decided
Speaker 5: he liked making big, blockbuster movies, and so he went
Speaker 5: and had a deal with Paramount where he co financed,
Speaker 5: co produced their biggest movies, Star Trek and Mission Impossible,
Speaker 5: and has done pretty well and continues to expand his business. Now,
Speaker 5: if he is he the person who's going to have
Speaker 5: a solution for Paramount, that's hard for me to say,
Speaker 5: because I'm not sure anyone does. But it would be
Speaker 5: foolish to bet against him because he's proven to be
Speaker 5: a pretty good operator in the last fifteen years.
Speaker 1: Down Sunset Boulevard is my favorite leather chairs in America.
Speaker 1: It's a Cuban Seed cigar company, which has literally been
Speaker 1: there in the middle of World War Two. It's a
Speaker 1: great story of families that rolls their own cigars. It's
Speaker 1: just a glorious Glories family. Every time I sit there, Lucas,
Speaker 1: somebody fancy walks in. So two guys are sitting there
Speaker 1: right now, what are they saying about David Zavslov. We've
Speaker 1: seen New York media right that this guy, after everything
Speaker 1: with Warner Brothers Discovery, is still an outsider with a
Speaker 1: stock performance. Is mister Zavslov ever more an outsider?
Speaker 5: I have to start by asking what is your favorite
Speaker 5: or preferred type of cigar?
Speaker 1: Well, what I go for is not treated. I mean,
Speaker 1: you know, like Lisa's trying to get me on the
Speaker 1: fancy cherry oaked ones and all that. No, So my
Speaker 1: favorite run of the mill cigar is a Padrona nineteen
Speaker 1: sixty four. It's a little lighter than the nineteen twenty six.
Speaker 1: So I go with that. But you're a Cuban Seed.
Speaker 1: I mean, one day on their cy stalone walks in.
Speaker 1: I mean, what is that about? You know I didn't say,
Speaker 1: mister Stallone. You know, all that Lisa would have gone mental?
Speaker 1: Is the Rock walked in there? Once? We were here yesterday.
Speaker 1: Lisa's going nuts about the Rock. Let's rip up the
Speaker 1: script right, Yes, how big is the Rock in LA
Speaker 1: right now? With this deal with Netflix?
Speaker 5: His deal with Endeavor? Or does he have a deal
Speaker 5: with Netflix that I missed?
Speaker 1: Help me here, Lisa.
Speaker 6: He's now part of the board for TKO.
Speaker 5: Yes, which is sorry affiliated with Endeavor. Yeah, he's one
Speaker 5: of the Well, I'll do the Rock briefly and then
Speaker 5: we can go to Zaslav. The Rock is one of
Speaker 5: the biggest movie stars in the world. His dependability I
Speaker 5: think in the last couple of years has actually been
Speaker 5: a little shakier than it was before. But he's he's
Speaker 5: a huge star, huge following, and then obviously because of
Speaker 5: his his history with the WWB, joining the board at
Speaker 5: TKO makes lots and.
Speaker 1: Things X I do over there, there's a Kleenex full lease. Okay,
Speaker 1: go to Zavizlov. Now this is serious. I mean he
Speaker 1: was CNN and all that. Where does mister Zazlov fit
Speaker 1: in for twenty twenty four?
Speaker 5: Look, he's had his bumps as the CEO of that company.
Speaker 5: A lot of them, I think have been about how
Speaker 5: he's executed, and the selling of those strategies have just
Speaker 5: they have pissed off a lot of people in Hollywood
Speaker 5: because of the way that he's treated certain filmmakers and
Speaker 5: certain ideas. But his company faces basically the same challenges
Speaker 5: as Sherry Redstone in Paramount. They're just maybe twice as big.
Speaker 5: And the two things that I do think they have
Speaker 5: going for them are their TV studio is much larger
Speaker 5: and more productive and so they can keep selling stuff,
Speaker 5: and they have a streaming service that is better than
Speaker 5: Paramount Plus.
Speaker 1: Mike just emailed and I said, my headphones. Mike says,
Speaker 1: forget the Hollywood talk to the market, So hold on, Lucas.
Speaker 1: Paul Sweety's got a bunch of questions. Is Ira Jersey
Speaker 1: told you the GDB price indext really something in yields
Speaker 1: come in. Thank you Rich Truman for that to two
Speaker 1: year yield in a solid two basis points ten You're
Speaker 1: in a big, big three basis points. So there is
Speaker 1: a yield move off the data, and you see it
Speaker 1: in the equity markets with a lift here. We'll get
Speaker 1: to the entertainment stocks in a moment, but it's it's
Speaker 1: ugly on car play on YouTube. Lucas Shaw with this,
Speaker 1: I can't say enough about screen time. Paul.
Speaker 4: Hey, Lucas, you and your team, you're in Hollywood, you're
Speaker 4: based in LA you really got your finger on the
Speaker 4: pulse of what's happening in that town. I got to believe,
Speaker 4: as you mentioned earlier, people got to be just really
Speaker 4: scared about the future of their business. You know, as
Speaker 4: an investor, I don't think I can invest in that
Speaker 4: business right now. And I've been investing in media for
Speaker 4: thirty five years. I can't do it right now because
Speaker 4: I have no idea where the business is going. What's
Speaker 4: the feeling in Los Angeles when you talk to the writers,
Speaker 4: the directors, the people that are really involved in this business,
Speaker 4: are they really scared about the future of media?
Speaker 5: Well, I'd say the feelings are mixed, because you have
Speaker 5: to remember that when you're talking about writers and actors
Speaker 5: and directors, a lot of them spent twenty twenty three
Speaker 5: out of work, right They were two prolonged labor stoppages.
Speaker 5: The writers went on strike, followed by the actors, and
Speaker 5: so I think some people entered this year are slightly
Speaker 5: hopeful because they at least could get back to work now.
Speaker 5: I think those paying attention to the macro story, to
Speaker 5: kind of to what you said, are a little more
Speaker 5: concerned because they're seeing almost every company, if not cutting back,
Speaker 5: kind of leveling off to spend. And you have to,
Speaker 5: you know, think about the fact that over the last
Speaker 5: eight ten years, there's been this sort of unprecedented surge
Speaker 5: in the amount of stuff being made. Yep, just you know,
Speaker 5: the number of TV shows from like two hundred to
Speaker 5: six hundred, and that's leveling off. I think people think
Speaker 5: that's going to go down. This business is not collapsing,
Speaker 5: you know, you talk about investing the you know, people
Speaker 5: who've invested in Netflix have done pretty well over the
Speaker 5: last couple of years, certainly over the last ten. But
Speaker 5: what we don't know is which companies are going to
Speaker 5: benefit or kind of survive the shakeout. And there's a
Speaker 5: little bit of market distortion because you've got a couple
Speaker 5: of players in Apple and Amazon who are who can
Speaker 5: spend a lot of money without really worrying about how
Speaker 5: profitable their entertainment businesses are.
Speaker 4: That's true, That's that's really tough. How about our good
Speaker 4: friends at Disney. That's one of the stories that I
Speaker 4: think people have a lot of interest in Bob Iger
Speaker 4: coming back. What's the call there on Disney there? What's
Speaker 4: the feeling in Los Angeles about the future of this company,
Speaker 4: maybe the future of Bob Byger and the management team there.
Speaker 5: Well, Disney provokes a lot of uncertainty.
Speaker 1: You know.
Speaker 5: Iiger comes back and he had been one of the
Speaker 5: great media CEO is really one of the great CEOs
Speaker 5: of the twenty first century, and they thought that he
Speaker 5: was going to study the company. Then he goes about
Speaker 5: and fires a bunch of people and starts talking about
Speaker 5: what he's going to sell, what he's not going to sell,
Speaker 5: sort of almost seems to be flirting with potential suitors
Speaker 5: through the press to figure out what's possible. But the
Speaker 5: real problem for Iiger and Disney is that they had
Speaker 5: been the most dependable studio in the town. You know,
Speaker 5: their every movie they made seemed to become a big hit.
Speaker 5: When they launched their streaming service, they did it perfectly
Speaker 5: with The Mandalorian, the Right, Star Wars Show, and yet
Speaker 5: all at the same time Lucasfilm which makes Star Wars,
Speaker 5: Pixar Disney Animation, and the Disney Live Action movie seem
Speaker 5: to have hit a wall. And it's hard to know
Speaker 5: what to do about that, and it takes a few
Speaker 5: years to turn it around.
Speaker 1: I want to we got to be positive here, Lucas
Speaker 1: and all swing and Lucas here. It's like the world's
Speaker 1: coming doing at Hollywood. I showed Afterthought the other day
Speaker 1: Greg Peck in twelve o'clock High, and it's just she
Speaker 1: was she fell apart. I mean, come on, it's real
Speaker 1: war footage nineteen fifties, Hank's and Spielberg. In two days, folks,
Speaker 1: Apple TV, you're going to see Masters of the Air Lucas.
Speaker 1: This is a bet by the old school on the
Speaker 1: new technology through Apple TV and a ten year soap
Speaker 1: opera of getting this thing made. I've been looking at
Speaker 1: the British reviews, The Guardian, BBC in that which are
Speaker 1: massively rave. What's the buzz on Screen Time about the
Speaker 1: Hank Spielberg vehicle on World War Two? Why?
Speaker 5: In general the buzz around Apple original programming is strong.
Speaker 5: You know, they have come in and invested in really
Speaker 5: high caliber filmmakers and movie stars to make their TV
Speaker 5: shows pop and stand out. Because you have to remember,
Speaker 5: there's nothing else to watch on Apple TV plus but
Speaker 5: their original programming now not to go negative. The challenge
Speaker 5: for Apple is that nobody watches their stuff outside of
Speaker 5: like Lai York because the audio well, partially because they
Speaker 5: don't have that library, and so it's harder for people
Speaker 5: to People don't make it a habit of going into that.
Speaker 1: Shy by paramount and put them out of their.
Speaker 5: Misery because Apple doesn't like to do things like that.
Speaker 5: They don't do big m and A. They don't seem
Speaker 5: interested in a library. But the shows that they make
Speaker 5: are really good. That's why you know. They just got
Speaker 5: the I don't know, second third most Oscar nominations of
Speaker 5: any studio, largely because of the Scarsesing movie, but also
Speaker 5: the Ridley Scott movie. They've got a really impressive lineup
Speaker 5: of movies coming out later this year. And the thing
Speaker 5: to remember, I mean, all of these companies are still
Speaker 5: making great products.
Speaker 1: I'm going to bring this over to Paul Sweeney's world.
Speaker 1: What did Masters the Year cost?
Speaker 5: I haven't seen what the estimates are, but I would
Speaker 5: imagine a heck of a lot of money.
Speaker 1: A lot of money. See they just see right there? Well,
Speaker 1: come on, it costs one hundred million dollars plus more.
Speaker 1: Money than God finance for low rates. Spielberg and Hanks, Ye,
Speaker 1: Paul Sweeney, they're doing that on what nine to ninety
Speaker 1: nine a month?
Speaker 4: Yeah, they got Apple's got ten million dollars a free
Speaker 4: cash flow. So to Lucas's point, they can invest whatever
Speaker 4: they want. Let's go to one of the really positive
Speaker 4: stories coming out of Hollywood or just entertainment business, that
Speaker 4: a being Netflix. They've obviously revolutionized the television business, disrupted
Speaker 4: it like no other business. They said, forever and ever
Speaker 4: and ever, We're not gonna do live events, We're not
Speaker 4: gonna do sports. Who needs that kind of stuff? Then
Speaker 4: they do this deal with WWE. Did that change the
Speaker 4: minds in Hollywood? Are people kind of saying, hmm, maybe
Speaker 4: there will consider live events, maybe make a move for
Speaker 4: live sports, that kind of thing.
Speaker 5: I did a poll of some top entertainment industry executives
Speaker 5: at the end of last year, and I asked them
Speaker 5: how many years they thought it would be before Netflix
Speaker 5: got into live sports live events, And the first of all,
Speaker 5: I'd say eighty to ninety percent of people said that
Speaker 5: they would as opposed to never, And of those, most
Speaker 5: people thought it would be in the next three years.
Speaker 5: I think there was this. Netflix has said they wouldn't
Speaker 5: do a lot of things. They said they wouldn't do advertising,
Speaker 5: now they're doing advertising. They said they wouldn't abandon binge
Speaker 5: viewing or binge releases, which they haven't, but they now
Speaker 5: space out some of their seasons, drop them in two parts.
Speaker 5: And so I think over time, Netflix has embraced certain
Speaker 5: traditional behaviors because it turns out that you don't have
Speaker 5: to reinvent everything in the playbook, and once you go
Speaker 5: into an advertising supported service, having a live event that
Speaker 5: can command a lot of years, like wrestling is good.
Speaker 5: Now whether they're going to go in and bid a
Speaker 5: couple billion dollars a year for NBA rights that I'm
Speaker 5: still a little skeptical of, but I'm less skeptical of
Speaker 5: it than I was before one minute.
Speaker 1: Thank you so much for joining us. Off of Tokyo
Speaker 1: and Sundance and the rest of it. The glory we's got,
Speaker 1: the rock star life of it was Lucas Shaw. It
Speaker 1: was screen time, the death of the Los Angeles times.
Speaker 1: I get.
Speaker 5: I wasn't sure where you're going.
Speaker 1: Yeah, nobody ever knows, Lucas Lisa never knows where I'm going.
Speaker 1: I mean, come on, I grew up where the Los
Speaker 1: Angeles Times mattered times. Is it dying?
Speaker 5: Look, my dad worked there for almost forty years. It's
Speaker 5: one of the saddest things I could see. I don't
Speaker 5: know that it's dying, but it's in really, really, really
Speaker 5: really bad shape.
Speaker 7: You know.
Speaker 5: It was one of these newspapers that got bought by
Speaker 5: a billionaire who seemed to want to do the right thing,
Speaker 5: and his and his daughter had certain ideas about it,
Speaker 5: but they've just never figured out what the editorial and
Speaker 5: business strategy is to make it a sustainable paper, which
Speaker 5: is insane to me because it's the it's the only
Speaker 5: real newspaper in the second biggest city in the country.
Speaker 5: It's becoming kind of the only real newspaper in California,
Speaker 5: which is home so many people. And you'd think you
Speaker 5: could figure it out, and I'd it baffles me.
Speaker 1: This is great. Lucas and I Paul, you can join
Speaker 1: us here. We can bring Lisa as well, you know,
Speaker 1: I mean, I just I can see us at the
Speaker 1: Sunset grill where the Dutchess can be a devil and
Speaker 1: a celebrity like Lucas Shack and dine with his family
Speaker 1: one night and his mistress the next. Lisa, this is inappropriate.
Speaker 1: That's why Lucas Shaw's here exactly. Thank you so much
Speaker 1: with screen time. I put it out on Twitter and LinkedIn.
Speaker 1: Can't say enough. This guy works on all the entertainment
Speaker 1: that we consume. Joining us now in the train wreck
Speaker 1: is Garrett Nelson, CFIA Research, senior equity analyst, Garrett, help
Speaker 1: me here on Tesla? How bad was the conference call?
Speaker 7: Well, our point is that this is a stock that
Speaker 7: more than doubled last year, so we think what you're
Speaker 7: seeing in terms of this profit taking is healthy price action.
Speaker 7: We didn't think the call was that bad. We think
Speaker 7: the stock is selling off because investors are alarmed about
Speaker 7: the guidance for slowing auto shipment growth in twenty twenty four,
Speaker 7: but that was already baked into everyone's estimates, so it
Speaker 7: was understood that they were not going to continue to
Speaker 7: grow their auto deliveries by thirty eight percent this year
Speaker 7: like they did last year.
Speaker 1: Is only there are people only buying Tesla's the cliche
Speaker 1: out there, and we go to Lisa Matteo on this
Speaker 1: because she's like EV Queen. But the basic idea I
Speaker 1: have is EV's are a failure in America except Tesla,
Speaker 1: and so the units are pretty good because that's the
Speaker 1: only car people are buying. Is that right?
Speaker 7: That's pretty much accurate. If you look, Tesla's market share
Speaker 7: in the US was fifty five percent of the of
Speaker 7: the US EV market last year. Where the real oversaturation
Speaker 7: is is the other forty five percent. All the non
Speaker 7: Tesla evs are just not selling well. They're sitting on
Speaker 7: dealer lots. Inventories in December were one hundred and seventeen
Speaker 7: days supply for EV's overall, which is way above the
Speaker 7: historic average for automobiles of sixty days. So there's a
Speaker 7: huge inventory glut of non Tesla evs.
Speaker 4: So, Garrett, if I'm a bull, if I have a
Speaker 4: buy rating and I think it's a fifty pe is
Speaker 4: based upon my target, I have to be bullish about
Speaker 4: EV's in general, don't I. It's not just a Tesla call.
Speaker 4: I have to be a bull on EV's in North America,
Speaker 4: don't I?
Speaker 7: Not necessarily you have to be bullish, I think on Tesla.
Speaker 7: We're actually fairly bullish on the EV fairly bearish on
Speaker 7: the EV market overall in terms of adoption rates are
Speaker 7: much slower than we thought we would see a few
Speaker 7: years ago. If you look, seven point six percent of
Speaker 7: all new vehicle sales last year, we're eves. We think
Speaker 7: a lot of automakers were hoping that those percentages would
Speaker 7: be above ten percent at that point. So, but there's
Speaker 7: no question there's a lot of demand for Tesla EV's.
Speaker 7: We know the cyber truck reservation count is somewhere north
Speaker 7: of two million units, far and away the highest of
Speaker 7: any vehicle model in the US. And then last night
Speaker 7: they confirmed these rumors of this next gen mass market
Speaker 7: EV where first production could come as soon as mid
Speaker 7: next year.
Speaker 4: So, I mean, Garrett, I just bought a new car,
Speaker 4: and I did at the car, I was looking at
Speaker 4: the automobile I was looking at. I did look at
Speaker 4: the EV version, But the premium to go EV over
Speaker 4: ICE was so big, and me I could care less
Speaker 4: about EV's in the environment. I'll do it another way.
Speaker 4: But I mean, what do you do here? I mean,
Speaker 4: do you have to bring the price down? Don't you?
Speaker 4: Is that even viable for this industry over the next
Speaker 4: several years.
Speaker 7: So if you look over the last year, the price
Speaker 7: has come down. You look at the EV price premium.
Speaker 7: In December it was only four percent. A year earlier
Speaker 7: was over thirty percent. So twenty twenty three was a
Speaker 7: year in which the EV price premium really collapsed. And
Speaker 7: we think that we're getting near an inflection point where
Speaker 7: evs are are gonna well, they're already very close to
Speaker 7: price parody with internal combustion engine vehicles, and that's gonna
Speaker 7: be a big positive. That's going to stimulate demand.
Speaker 1: Garrett, Let's talk about mister Musk, and I do this
Speaker 1: with great respect, folks, for his technological innovation and all
Speaker 1: that he's done. You know, forget about the notoriety and
Speaker 1: all the idiocy. Garrett, Is he devoting chairman or CEO
Speaker 1: energy to Tesla?
Speaker 5: Good question?
Speaker 7: Yeah, that's a good question. There's nearly good in the day,
Speaker 7: So go with it, Garrett.
Speaker 1: That's it. He has all the good ones.
Speaker 7: He's spread very thin across SpaceX, Tesla and all his
Speaker 7: other businesses now X formerly Twitter, So there's no question
Speaker 7: he's spread thin. But what's become clear if you look back,
Speaker 7: you know, the investor days over the last two or
Speaker 7: three years, there's a very deep bench at Tesla. While
Speaker 7: he is the face of the company, the face of
Speaker 7: the brand. Behind him is a very strong capable team
Speaker 7: of brilliant engineers.
Speaker 1: Bloomber Business Flash. This is from our European travel correspondent,
Speaker 1: Charles Pellett Europe on five dollars a day Paris. Garrett
Speaker 1: Nelson bans big, ugly American cars and they lead with
Speaker 1: a cyber truck. How's the cyber truck doing? Besides I'm
Speaker 1: not going to see it on Rudolphine in Paris.
Speaker 7: Well, the Tesla faces a high class problem with the
Speaker 7: cyber truck. We know the reservation count is off the charts.
Speaker 7: The problem with this is the manufacturing methods are much
Speaker 7: more difficult than the Model Y or the Model three.
Speaker 7: So and Musk himself has admitted this. It's going to
Speaker 7: be very difficult to ramp production of the cyber truck.
Speaker 7: It's not going to look anything like the ramp up
Speaker 7: of the Model three or the Model Y that we've
Speaker 7: seen in the past years. So, you know, the challenge
Speaker 7: for them is really how quickly can they ramp up
Speaker 7: and get that vehicle in the hands of reservation holders.
Speaker 4: So Garrett I looked at the Ford. I actually drove
Speaker 4: the Ford F one fifty Lightning, which is an awesome vehicle,
Speaker 4: but I was actually surprised at Ford cut back the
Speaker 4: production there. So what does that tell you about the
Speaker 4: EV space or is that a Ford specific issue?
Speaker 6: Yeah?
Speaker 7: We think again that goes back to the issue with
Speaker 7: non Tesla EV's. The demand just isn't there, and so
Speaker 7: you're seeing automakers, you're seeing GM Ford and others start
Speaker 7: to cut back on those models in favor of gas
Speaker 7: powered models which are selling much better. In Ford's case,
Speaker 7: the Bronco.
Speaker 1: Oh, I gotta leave it there, Garrett Nelson, Thanks for
Speaker 1: the brief there in Tesla Worring is good for Rabobank.
Speaker 1: Let's get right to it. Jane Foley joins us at
Speaker 1: robobank in London. When is this quiet? Jane? The shop
Speaker 1: does well right because people are hedging commercial transactions. You're
Speaker 1: taking in a fee. I mean it must be glorious
Speaker 1: now that foreign exchange is so boring.
Speaker 6: Well not necessarily, I mean I've met clients before. He said, oh,
Speaker 6: you know what, we didn't bother hedge in last year
Speaker 6: because the phoney change was flat, and now this year
Speaker 6: we wish we had because it's really eaten into our profits.
Speaker 6: And sometimes they come to us when the door is
Speaker 6: already you know, the horse has already bolted. But so
Speaker 6: not necessarily good. But you know, I would say that
Speaker 6: there's still lots to be considering in the foreign exchange. Well,
Speaker 6: we've seen the euro move a little bit this afternoon
Speaker 6: on the back of the Laguard press conference, and of
Speaker 6: course this week we've seen the yen moving too, as
Speaker 6: the market begins to get a bit more excited about
Speaker 6: an earlier possible interest rate hike. Well maybe soon as much.
Speaker 1: Let me go there, so we're gonna make some money, folks.
Speaker 1: For those of you global wall streets that don't look
Speaker 1: at euro yen, Euro yen is my litmus paper a week.
Speaker 1: Yen is a bigger number one fifty five, one sixty
Speaker 1: hit one sixty one last week. What is the tension
Speaker 1: for the institution two shoes of Japan with euro yen ever,
Speaker 1: weaker yen stronger Euro.
Speaker 6: Well, again, it depends who you are in Japan. So
Speaker 6: you know the big exporters, the toyotas, etc. Of this world, Well,
Speaker 6: they tend to do pretty well when the yen is
Speaker 6: pretty weak, you know, and then they see demands picking up,
Speaker 6: and that's pretty good for them because even if inflation
Speaker 6: is high in Japan and has been relatively high in
Speaker 6: the last couple of years, they can just export that
Speaker 6: through their pric scenes. But it's the domestic companies who,
Speaker 6: or at least the companies with the domestic audience, domestic
Speaker 6: consumer facing consumer. They're the ones that in the last
Speaker 6: couple of years who've been a little bit uncomfortable because
Speaker 6: they've seen, you know, higher commodity prices, which of course
Speaker 6: have calm off those peaks right now, but they cannot
Speaker 6: or they find it much more difficult to pass on
Speaker 6: the pricing into a country where people have to until
Speaker 6: very recently been reluctant to accept that prices ever go up.
Speaker 4: Hey, Jane, we did hear from the European Central Bank today,
Speaker 4: Christine the guards standing by comments on a quote likely
Speaker 4: summer rate cut. How does that kind of inform your
Speaker 4: view of some of the European currencies.
Speaker 6: You know that that that speech when she talked about
Speaker 6: the likely summer rake cut was made last week to
Speaker 6: you know, one of your colleagues in Davos, and I
Speaker 6: think there was a little bit of you know, the headlines,
Speaker 6: you know, take away some of the context of that.
Speaker 6: I don't think you know, she was saying, yes, we
Speaker 6: you know, we'll be cutting into interest rates in June.
Speaker 6: I just think she was being a little bit more
Speaker 6: vague really about that, about that timing. But you know,
Speaker 6: I think what's interesting today, particularly from today's comments, at
Speaker 6: least in the market reaction, because the market reaction has
Speaker 6: seen this has been fairly darvas. And I think the
Speaker 6: reason for that is that there wasn't a forceful pushback
Speaker 6: against market pricing, and market pricing, as we know it has
Speaker 6: been pricing in you know, a couple of interest rate
Speaker 6: cuts to say in a six month few many economists
Speaker 6: are more doubtful of that. But if she could have
Speaker 6: used that opportunity to push back on that, and she didn't,
Speaker 6: and I think therefore the market thought, well, you know,
Speaker 6: she's not pushing back on us, maybe maybe the UCB
Speaker 6: could go, could go earlier. So I think that's been
Speaker 6: the takeaway today. But what she did say is that
Speaker 6: they are data focused and I don't think any decision
Speaker 6: yet has been made by them.
Speaker 4: Jane the British pound sterling here, you've got a no
Speaker 4: doubt saying hey, politics matter here and the debt of
Speaker 4: the UK Matters talked to us about kind of your
Speaker 4: views on the pound Sterling.
Speaker 6: Well, you know, this comes on the back of some
Speaker 6: data we had earlier in the week that said actually,
Speaker 6: in December public financing figures were better than expected, which
Speaker 6: they were. And because that feeds into Jeremy Hunt, the Chancellor,
Speaker 6: who's already indicated in fact he was at to have
Speaker 6: us last week saying this that he will be cutting taxes. Now,
Speaker 6: obviously that is designed to help the Tory parties into
Speaker 6: the election which is expected at the end of the year.
Speaker 6: But the toy Party are so far behind Labor, you know,
Speaker 6: good twenty points or so behind Labor, that it probably
Speaker 6: won't make too much difference. But the the issue with
Speaker 6: the fiscal situation, and we had you know, another thing
Speaker 6: teach this morning saying that the new government, whoever wins election,
Speaker 6: will be faced the worst fiscal position that a new
Speaker 6: government has taken in seventy years. And that I think
Speaker 6: is quite interesting because you recall a couple of years
Speaker 6: ago we had the Liz trus Fiesco. The market basically
Speaker 6: said no, you know, we're not going to tolerate unfunded spending.
Speaker 6: And with that memory, I think whoever takes over the
Speaker 6: chancellorship after this election, you know we'll have to take
Speaker 6: upon fiscal discipline, which actually might mean that from the markets,
Speaker 6: this is a boring election.
Speaker 1: Jane. Thank you. Jane Fowley with an FX update. I've
Speaker 1: been remiss and not doing enough on foreign exchange. You
Speaker 1: will promise to do more of that. This is the
Speaker 1: Bloomberg Surveillance Podcast, bringing you the best in economics, finance, investment,
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