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Speaker 1: This is the Bloomberg Surveillance Podcast.

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Speaker 2: I'm Tom Keen, along with Jonathan Farrow and Lisa Abramowitz.

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Speaker 2: Join us each day for insight from the best and economics, geopolitics,

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Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple,

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Speaker 2: Spotify and anywhere you get your podcasts, and always on

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Speaker 2: Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business App.

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Speaker 2: Lisa Bramwitz and Tom Keen right now, and what we'd like.

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Speaker 1: To do is go to Paris. And it is a

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Speaker 1: Paris of.

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Speaker 2: JP Morgan that is important in World War One. They

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Speaker 2: I'm going to get the pronunciation wrong in Francine. Lacua

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Speaker 2: is gonna correct me. It is Catore's plus vendome and

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Speaker 2: it was the commitment of the JP Morgan bank to

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Speaker 2: France in the heat of World War One. She is

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Speaker 2: joined in Paris with James Steman, Our Francy and Laclosx.

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Speaker 1: How is like pronunciation?

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Speaker 3: Fancye Tom full marks for French pronunciation. You're almost French.

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Speaker 3: I'm so excited for you. I am delighted to be

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Speaker 3: joined by Jamie Diamond. JP Morgan Chairman and Chief executive officer,

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Speaker 3: Thank you for joining us. As always, debt ceiling or

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Speaker 3: banking turmoil? What are you most.

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Speaker 4: Worried about you'd be here?

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Speaker 5: Well, I think the debt steeling is potentially catastrophic. Yeah,

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Speaker 5: so that's a whole different issue. Hopefully won't happen. You know,

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Speaker 5: the banking crisis I still believe will kind of sort

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Speaker 5: its way through, and it's not anything like eight or

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Speaker 5: nine owing a couple of people off size, with all

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Speaker 5: these various things which you knew about. So hopefully you

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Speaker 5: know it's getting near the tail end of that.

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Speaker 3: But if you're Janet Yellen right now, what would you

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Speaker 3: do differently?

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Speaker 5: I don't know. I think we need to finish the

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Speaker 5: bank crisis. I think we've been we've had an uncertain

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Speaker 5: policy on mergers. This first horizon deal. I think we

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Speaker 5: have to assume they'll be a little bit more so,

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Speaker 5: you know, whatever the FDI C, the occ the Fellow Reserve,

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Speaker 5: you know, whatever they need to do to make it better,

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Speaker 5: they should do be thoughtful, be very forward looking. You'll

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Speaker 5: not be surprised constantly because some of these things have

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Speaker 5: been known about for quite a while. And so we've

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Speaker 5: handled three SVB signature first Republic and.

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Speaker 3: So yes, asking, but I think it's very important.

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Speaker 5: The regional banks who I've been speaking to like every

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Speaker 5: day for the last week, they're quite strong. You know,

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Speaker 5: they're quite worried because of the you know, run and

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Speaker 5: deposited all that, but their financial results are good. The

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Speaker 5: financial results are gonna be good, okay next quarter. You know,

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Speaker 5: they're earning money. They get a very good clientele, very diversified.

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Speaker 5: Uh uh, and they're they're quite strong.

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Speaker 3: So Jenny for like a comprehensive solution. So if you're

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Speaker 3: asking Jennet Young to get the job done, what does

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Speaker 3: that look like that solution?

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Speaker 4: Ask for compreend solution.

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Speaker 5: Why not just be prepared for problems? There's no, we

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Speaker 5: don't need a comprehend solution.

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Speaker 3: What do we need right now? Do we regulators to

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Speaker 3: look at short sellers of banks?

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Speaker 5: Yes, you know, like, look, my folks are telling me

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Speaker 5: that that's not the problem. The short selling ban if

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Speaker 5: you actually analyze stocks and short doesn't seem that big

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Speaker 5: a deal. I think they may partially wrong because, as

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Speaker 5: you know, some people are unscrupulous and they use other

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Speaker 5: means to go short.

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Speaker 4: I think that if you look at the detail.

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Speaker 5: The SEC has the enforcement capability to look at what

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Speaker 5: people are doing by name, in options, derivatives, short sales,

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Speaker 5: and they should go if someone's doing anything wrong, people

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Speaker 5: are in collusion, or people going short and then making

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Speaker 5: a tweet about a bank, they should go after them

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Speaker 5: and vigorously, and they should be punished to the full

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Speaker 5: extental law allows it. So I think it's possible to

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Speaker 5: taking place. We have no evidence of it, but you know,

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Speaker 5: my experience in life has been don't assume too much.

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Speaker 3: Do you think that they're looking into it?

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Speaker 4: I hope so. I don't know.

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Speaker 3: When you look at some of the position of JP Morgan,

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Speaker 3: of course you didn't really buy any long dated bonds,

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Speaker 3: and at the time a lot of people said, look

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Speaker 3: stop boarding cash. Do you think regulators and investors had

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Speaker 3: pushed some of these banks to take unwarranted risk.

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Speaker 5: Yes, I do, but let's be clear the people to blame,

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Speaker 5: or the banks and the bank boards and things like that.

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Speaker 5: Having said that, I think there would be the humility

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Speaker 5: on the part of regulators. That the Federal Reserve itself

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Speaker 5: never forecasts going up. Not one Fed governor forecast it.

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Speaker 5: And whether you forecast it or not, you should be

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Speaker 5: stress testing people for it. Their stress tests always had

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Speaker 5: low rates. We always knew about uninsured deposits, and there

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Speaker 5: were huge incentives that banks to put securities in health

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Speaker 5: and maturity, lower capital requirements, huge incentives own treasuries, lower

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Speaker 5: capital requirements, and they counted for liquidity. And I'm hoping

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Speaker 5: all that gets looked at, and they should look at

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Speaker 5: and say, oh, okay, we're a little bit part of

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Speaker 5: the problem as opposed to just pointing fingers.

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Speaker 3: So this is what not a regulation problem, it's a

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Speaker 3: supervision problem.

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Speaker 4: Yeah, it's a.

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Speaker 5: Little bit of both. They become very related. I mean,

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Speaker 5: supervisors look at are you doing the right thing by

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Speaker 5: regulations and so, and like even the stress tests, I've

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Speaker 5: always thought that you know, when you have one stress

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Speaker 5: test and you have a company completely focused on that

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Speaker 5: for three months, you know, does it lull people have a

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Speaker 5: false sense of security that all these other things aren't

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Speaker 5: gonna happen. And all these other things in history always happen,

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Speaker 5: and so you know, I think it was a little

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Speaker 5: bit of a mistake that one stress test. I'm not

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Speaker 5: asking to do many at this level of detail, but

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Speaker 5: you know, our stress test is two hundred thousand pages long.

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Speaker 5: Do you think that last one hundred thousand pages added value?

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Speaker 5: And my view is it did not.

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Speaker 3: Do you think? But things will change because of this

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Speaker 3: is just like a catalyst.

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Speaker 4: We's gonna get worse for banks.

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Speaker 5: I think that people they're just more regulations and more

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Speaker 5: rules and more requirements. I hope they do it very

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Speaker 5: thoughtfully because you know, if you we love the community banks,

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Speaker 5: the regional banks, we're the biggest banks of those folks.

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Speaker 5: But you know, if you overdo certain rules, requirements, regulations.

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Speaker 5: You know, some of these community banks tell me to have,

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Speaker 5: you know, more compliance people than loan officers, you know,

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Speaker 5: and so at one point you make it harder for

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Speaker 5: them to do business. There are already hundreds of rules

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Speaker 5: in place in a lot of ways, it's the mix

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Speaker 5: of the rules. If you're gonna change the liquidity and

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Speaker 5: maybe not capital. If're gonna change capital and maybe not liquidity.

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Speaker 5: If you're gonna add t LAC, then maybe you should

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Speaker 5: do something with deposit insurance.

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Speaker 4: They should.

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Speaker 5: They should sit down and have a very thoughtful conversation

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Speaker 5: about what those things are and what we want the

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Speaker 5: outcome to be. If you look at the present outcome,

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Speaker 5: a lot of things are leaving banks and they should

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Speaker 5: you know, I'm not And if that's what they want,

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Speaker 5: so be it. But that should be done with the forethought.

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Speaker 5: That should not be done because you just putting rules

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Speaker 5: and regulations in place and you don't know the consequences.

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Speaker 4: The mortgage business, for example, is.

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Speaker 5: You know, largely not largely, eighty percent out of banks today,

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Speaker 5: and just be careful about what you what you wish for.

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Speaker 3: So you bought First Republic, you've had I imagine how

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Speaker 3: a good look at what's inside? It's what did you

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Speaker 3: find out?

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Speaker 4: Yeah, no, we had to go look before we bought it.

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Speaker 3: Okay, that's reassuring. But anything that you shigned.

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Speaker 5: Up to eight hundred people working around the clock for

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Speaker 5: a long time to look at something like that.

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Speaker 4: And and in reality, look, they did some things.

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Speaker 5: Really well, like if you talk to their customers, I've

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Speaker 5: getten calls and emails and great great culture, great customers

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Speaker 5: and things like that. Their credit is kind of pristine.

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Speaker 5: You know, that's good. So of course we marked all

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Speaker 5: the market and roll in very good shape. And we've

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Speaker 5: had all the in trade exposure together. We've got thousands

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Speaker 5: of people now going out learning about what.

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Speaker 4: Their best is.

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Speaker 5: We want the best of both about the kind of

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Speaker 5: company that comes in our highway, our way or the highway,

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Speaker 5: and so there's no surprise there. You know, it's if

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Speaker 5: it had to make sense for shareholders. But you know,

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Speaker 5: this notion, this notion that it was unbelieva in it

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Speaker 5: was a nice thing for shows that's why I have

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Speaker 5: to do that. But we also really did it to

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Speaker 5: assimilate the bank in a way that's very safe for

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Speaker 5: the system and didn't cost uninsured deposits, didn't cost the ft,

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Speaker 5: it costs the FDA C as little as possible. But

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Speaker 5: I also want to point out I'd be fine if

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Speaker 5: they want to change the rules a little bit to

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Speaker 5: make it easier for a regional bank to buy a

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Speaker 5: big bank. And the other thing about big banks, which

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Speaker 5: again is I know, I know, but the thing about

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Speaker 5: big banks, we need healthy big banks. We are the

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Speaker 5: best banking system in the world, you know, and you

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Speaker 5: want that very big, yeah, but we're not. Banks are

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Speaker 5: becoming smaller or smaller as a part of the global system.

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Speaker 5: So when they look at banks, they say, oh, it's big,

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Speaker 5: But when you look at the banking system to the system,

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Speaker 5: mortgage have left, a lot of private credits left, certain

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Speaker 5: trading functional left, A lot of things are gonna leave.

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Speaker 5: You have Apple, you have the neo banks. You have

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Speaker 5: you better be a little more thoughtful about when you

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Speaker 5: say we, you mean banking per se and so.

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Speaker 3: But the US, the Americans, should not fear too much

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Speaker 3: finance consolidation in your hands.

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Speaker 5: No, because you know, most of our size accrues to

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Speaker 5: our clients. So if you look at you know we

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Speaker 5: do most large small banks can't do. We do like

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Speaker 5: banking large corporations of fifty countries around the world to

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Speaker 5: move ten trillion dollars a day. You know, it's hard.

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Speaker 5: So these are these are big, complex things. We're not

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Speaker 5: big and complex. We want to be for big and

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Speaker 5: complex because the Pee we serve a bigger comp We

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Speaker 5: bank countries, the World Bank. You know, we do a

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Speaker 5: lot of things. And yes, we also bank consumers in the

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Speaker 5: United States. So but I want the community banks to thrive.

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Speaker 5: I mean, like I said, we want to do everything

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Speaker 5: can help them. We didn't want this to happen. We

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Speaker 5: didn't cause to happen. The second happened, we knew it

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Speaker 5: was bad for old banks.

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Speaker 3: Are you too big to fail.

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Speaker 5: I don't know what that word means anymore. I mean,

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Speaker 5: we're not gonna fail, and I don't know if that means.

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Speaker 5: But we certainly didn't mean it to be an advantage.

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Speaker 5: Like so, you know, we've asked all our people when

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Speaker 5: this crisis happened, I don't want anyone listing any client

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Speaker 5: or any bank or from any of the any bank's,

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Speaker 5: regional bank or community bank, et cetera.

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Speaker 3: So is there anything else that you'd that you'd be buying.

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Speaker 3: I mean some of the smaller banks fault, you know,

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Speaker 3: fun that's it.

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Speaker 5: No, I mean, we're gonna have a lot of blowback

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Speaker 5: and having bought this one, but it was the right

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Speaker 5: thing to do, you know.

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Speaker 4: But we'll get the blowback.

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Speaker 5: But again, my job is this people at this thing

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Speaker 5: they always look at like the financial deal. Forget the

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Speaker 5: financial deal. Eight hundred people working around the clock. Ten

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Speaker 5: thousand people deployed now to consolidate systems, risk fraud, credit payments, branches,

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Speaker 5: real estate vendors, technology. It's a lot of work, you know,

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Speaker 5: and it just tracks us from those other things. And so,

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Speaker 5: you know, like I said, we did it. It was

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Speaker 5: marginally benefits for shareholders. It was good for the system.

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Speaker 5: But and you know we got now we have to

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Speaker 5: be prepared for the other side of that mountain.

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Speaker 3: How worried are you about the dead ceiling? So Donald Trump,

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Speaker 3: Yester the town Halicynna did not seem too worried, and

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Speaker 3: to actually told Republicans to stick to their guns.

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Speaker 5: Well, it's one more thing he does know very much about.

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Speaker 5: It may be put in two categories. One is actual default.

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Speaker 5: That is potentially catastrophic. And you can go through a

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Speaker 5: million ways, but everyone, anyone's anyone knows that's potentially catastrophic.

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Speaker 5: And I don't think that's gonna happen because it gets catastropericy.

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Speaker 5: And the closer you get to it, you will have panic.

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Speaker 5: And so the closer you get you have markets get volatile.

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Speaker 5: Maybe there's Doc mar go down the treasury. Markets will

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Speaker 5: have their own problems.

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Speaker 4: It's amazing.

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Speaker 5: You already have certain T bills it's trading three percent

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Speaker 5: and right next to them five percent.

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Speaker 4: This is not good.

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Speaker 5: And people just remember the American financial system is the

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Speaker 5: foundation to the to the global economics system. And so

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Speaker 5: and the closer we get more panic, we might get downgraded.

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Speaker 5: The last time we were downgrade. We had like sixty

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Speaker 5: five or seventy percent debt to GDP. Now it's one

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Speaker 5: hundred and five. Now our deficits are two or three

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Speaker 5: times that that we had back then. So you know,

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Speaker 5: we better be very careful. And I wish we didn't

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Speaker 5: get through at all. I'm respectful of both sides who

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Speaker 5: you know, one side wants to use the makeup for

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Speaker 5: we've got jam down their throats, you know. And I

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Speaker 5: would love to get rid of the debt ceiling thing,

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Speaker 5: but please negotiate a deal.

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Speaker 3: Do you think that it'll be at the end of

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Speaker 3: the day of the markets that will spur a deal

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Speaker 3: that we have to get to the point where there's

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Speaker 3: where there's panic.

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Speaker 5: It's a really bad idea because panic becomes something that

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Speaker 5: is not good and it could affect other markets around

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Speaker 5: the world. But yes, at the end of the day,

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Speaker 5: if it gets to that panic point, people have to react,

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Speaker 5: and we've seen that before. Another thing about markets is

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Speaker 5: always remember panic is the one thing that scares people

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Speaker 5: like they take irrational decisions. I remember, even in eight

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Speaker 5: people are selling certain securities at forty percent of what

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Speaker 5: they would.

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Speaker 4: Be worth if we had a great depression.

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Speaker 5: But they were like, I want out, I want cash.

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Speaker 5: I'm not betting my family's money on this and my

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Speaker 5: company's money. People will panic, and again we got to

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Speaker 5: be very careful about getting close situation that causes that.

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Speaker 3: Do you get a call from Janet yelling about this?

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Speaker 4: I'm not gonna talk about personal calls.

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Speaker 5: I'm getting We've all spoken about that's youlling, I mean

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Speaker 5: everyone's that's.

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Speaker 3: Everyone's no for big banks, are you ready? Actually, how

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Speaker 3: do you prepare for possible?

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Speaker 5: Have a group of people who are very smart we're

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Speaker 5: looking at again, it's very unfortunate, it's time consuming. Hopefully

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Speaker 5: won't happen, but it affects contracts, collateral clearing houses, clients,

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Speaker 5: and affect clients differently around the world. You have to

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Speaker 5: then anticipate what people are going to do, which is

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Speaker 5: very different than the legality of it. And you know,

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Speaker 5: and the closer we get, the more those kind of

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Speaker 5: that war room will start. Now it's taking place once

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Speaker 5: a week, but my guess is sometimes.

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Speaker 4: Call it May twenty.

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Speaker 5: First it'll be every day, and then it'll be three

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Speaker 5: times a day, and then it'll be much more conversations

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Speaker 5: with clients. But what they need to do to help

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Speaker 5: get them through it and things like that. It's very unfortunate.

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Speaker 5: It should never happen this way.

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Speaker 3: Fortress Diamond is always about the balance sheet. Should there

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Speaker 3: be a special commission looking at debts in the US

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Speaker 3: that you should run?

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Speaker 6: Oh?

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Speaker 4: God, no, why not? I don't want to.

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Speaker 3: On China, they went after tech, they're looking out at finance.

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Speaker 3: What kind of message does it tell companies that want

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Speaker 3: to do business there.

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Speaker 4: Well, I think we say they're looking at finance. It's

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Speaker 4: been very limited.

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Speaker 5: They've been very much more careful about touching the financial system.

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Speaker 5: Who we're outsiders. But look, this is a serious subject

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Speaker 5: and anything that relates to national security. I'm a patriot first,

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Speaker 5: and I'm going to salute my government, So put that.

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Speaker 5: But put that aside. What the government should do and

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Speaker 5: it wants to do, and is now say they are

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Speaker 5: going to do, is have conversations. They're gonna be tough,

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Speaker 5: but they should be thoughtful. Certain things are really national security,

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Speaker 5: certain things are not, you know, and we shouldn't confuse

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Speaker 5: the two Americans. Shine of a lot of common interest climate,

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Speaker 5: nuclear pliferation, anti terrorism, global stability, you know, and we

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Speaker 5: have differences. You know, we're capitalists, they're not, you know,

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Speaker 5: And it's okay, we could short that out, but we

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Speaker 5: need to keep the Western alliances together, not just around

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Speaker 5: war and Ukraine, but around strategic economic relationships, including trade,

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Speaker 5: including trade.

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Speaker 4: We can't take trade.

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Speaker 5: Off the table every time we talk to Europe or

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Speaker 5: Asian and stuff like that. So I would go back

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Speaker 5: into TPP, I would surround the world. I'd want to

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Speaker 5: keep the world safe for democracy, and I want to

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Speaker 5: have open markets, particularly Europe. And I mean I was

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Speaker 5: here last time is when we passed Iraq. A lot

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Speaker 5: of great things that act, but there are things I

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Speaker 5: don't like, like too much social engineering side of it,

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Speaker 5: but also a pistol off all of.

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Speaker 3: Our allies put on the China side. So if they

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Speaker 3: if they start doing more noise on finance, does that

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Speaker 3: hurt Chinese growth?

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Speaker 5: Like probably, I think you've already seen it's not trade,

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Speaker 5: but you've seen investment going both ways coming down. And

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Speaker 5: that's okay in the short run and the long run,

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Speaker 5: we should say what and the government's got to decide

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Speaker 5: this is not gonna be business companies designed, should they?

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Speaker 5: So when Congress criticizes business sometimes there may be truth

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Speaker 5: to that. They have to decide what is okay, what's

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Speaker 5: not okay?

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Speaker 4: What do they want? What security?

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Speaker 5: And that's around trade, that's around investment, that's around sharing ipay, I.

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Speaker 3: Give you a million pounds or maybe you take it,

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Speaker 3: you know, your own million pounds? Where'd you invest.

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Speaker 5: Organ I wouldn't buy sovereign debt anywhere? Why, I think

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Speaker 5: there's too much The amount of fiscal stimus took place

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Speaker 5: and still surging through the system, the amount of QI.

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Speaker 5: These were extraordinary numbers, and not just in the US,

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Speaker 5: but in Europe and in other parts of the world. Now,

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Speaker 5: when I say extraordinary, I mean extraordinary, And therefore I

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Speaker 5: think there's a chance you have more inflation than people think.

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Speaker 5: So while the FED controls short rates, they don't completely

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Speaker 5: control longer rates, and then you could see longer rates

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Speaker 5: ticking up because of higher inflation, and even if there's

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Speaker 5: a mild recession, they continue to tick up. You know

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Speaker 5: a lot of US experience that in the seventies and eighties,

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Speaker 5: and I would be a little worried about that. So

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Speaker 5: rates are kind of low, spreads still kind of low, okay.

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Speaker 3: So you're not putting them in suffering.

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Speaker 5: Where are you putting that million I'm central banks.

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Speaker 3: For stability. If you look at fragmentation, I mean, the

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Speaker 3: world seems a little bit odd, like equities are doing

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Speaker 3: one thing, but we keep on being told there's a recession.

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Speaker 3: Why is there this massive adusyncrasy.

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Speaker 4: That's the contradiction.

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Speaker 5: There's still consumers in America job unemployed three point five percent.

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Speaker 5: Home prizes have gone up for ten to fifteen years.

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Speaker 5: Stock prize has gone in for ten to fifteen years.

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Speaker 5: They have a trillion dollars more in their checking accounts.

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Speaker 5: They're spending that money. You see it in travel, you

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Speaker 5: see it in restaurants, you see it, and you've been

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Speaker 5: around here and you see in hotels, you see it.

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Speaker 5: That's all good, but the excess money is being spent down.

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Speaker 5: So the bite of that is going to happen later

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Speaker 5: this year early next year. And the bite of QT

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Speaker 5: hasn't happened yet. So if you have higher inflation, so

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Speaker 5: I think it's a reasonable thing to say those things

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Speaker 5: are coming to fruition.

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Speaker 4: Maybe sometime in the end of the year.

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Speaker 5: We don't know the effect of that, you know, if

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Speaker 5: there's I mean, I would take a mild recession and

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Speaker 5: happily right now, I am far more concerned about geopolitics, Ukraine, trade,

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Speaker 5: you know, Russia, our relays with China, et cetera. And

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Speaker 5: I always have to mind all of our public America

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Speaker 5: has a seventy five thousand per person GDP, China's is fifteen.

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Speaker 5: We have all the food warn and energy we want.

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Speaker 5: They import ten million barrels of oil a day. I

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Speaker 5: mean it's not They're not a ten for giant and

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Speaker 5: that's a four foot pigmy.

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Speaker 4: We have to manage ourselves back. I think we can

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Speaker 4: grow more and more thoughtful.

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Speaker 3: So you know, a lot of people say it's commercial

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Speaker 3: real estates. I mean we talk about nothing else. Everybody

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Speaker 3: knows that that could break. Is there something that we're

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Speaker 3: not seeing that could break?

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Speaker 5: I think it's amazing when you talk about Marcus that

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Speaker 5: sometimes it's and the press sometimes like a bunch of

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Speaker 5: birds flocking to one thing with endless comments about it.

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Speaker 4: Yes, that's an issue.

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Speaker 5: So you know, if you look at office real estate

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Speaker 5: in be and C real estate with private problem Chicago,

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Speaker 5: New York, Partland, Seattle, but probably not Nashville, Tampa, Orlando, Miami,

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Speaker 5: et cetera. So you got to you gotta be a

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Speaker 5: little more thoughtful about it. And I think if I'm

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Speaker 5: the number, banks have six hundred billion of office commercial

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Speaker 5: real estate. You know, they had a cushion even dropped

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Speaker 5: in value their self equity in it. Maybe something that

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Speaker 5: will go bad, particularly the recession, they're gonna be okay.

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Speaker 5: It may take a few banks down. That's normal. Stuff

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Speaker 5: that isn't abnormal. What is abnormal is the war trade

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Speaker 5: the future of democracy. That is abnormal. I'm much more

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Speaker 5: concerned about that than the.

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Speaker 3: Markets trade that.

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Speaker 6: Right.

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Speaker 3: If there's a big geopolitics, there's there's how do the

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Speaker 3: markets talk them do that?

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Speaker 1: Okay?

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Speaker 5: Look, if I was a what's cautious, I remind you

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Speaker 5: of I'm not. Businesses aren't there to trade its. Sometimes

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Speaker 5: they do serve our clients, okay, and so we're gonna

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Speaker 5: serve our clients no.

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Speaker 4: Matter what happens.

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Speaker 3: Very quickly, final question, how are you feeling about the

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Speaker 3: Epstein deposition this month?

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Speaker 5: I am so sad that we had any relays with

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Speaker 5: that man whatsoever. You know, we had top lawyers of

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Speaker 5: value in this, from the SEC, Enforcement, the DOJ. You

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Speaker 5: know obviously have we known them, we know today we

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Speaker 5: would have done things differently. But it's very unfortunate and

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Speaker 5: I have deep respect.

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Speaker 4: For these women.

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Speaker 5: That doesn't mean reliable for the action of an individual,

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Speaker 5: but I do have deep respect for them.

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Speaker 4: My heart goes out to them and.

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Speaker 3: Jimmy daviond thank you so much for your time today.

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Speaker 1: Thank you, thank you, Francy Lacua, thank you so much.

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Speaker 2: It's the conversation with the chairman and the chief executive

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Speaker 2: officer of JP Morgan. I would really underscore off of

438
00:19:29,720 --> 00:19:33,359
Speaker 2: his annual letter, his focus on geopolitics, and as he

439
00:19:33,440 --> 00:19:36,399
Speaker 2: says in his letter in his Wall Street Journal essay

440
00:19:36,400 --> 00:19:38,560
Speaker 2: of a number of months ago, he is very concerned

441
00:19:38,600 --> 00:19:44,679
Speaker 2: of the Western alliances, including France. Lacroix from Paris this morning,

442
00:19:54,560 --> 00:19:58,320
Speaker 2: I'm joining us now, John writing on his Bank of

443
00:19:58,400 --> 00:20:01,399
Speaker 2: England City Group come out. They say we got it wrong.

444
00:20:01,800 --> 00:20:04,919
Speaker 2: We were calling recession doom and gloom, and your United

445
00:20:05,000 --> 00:20:08,560
Speaker 2: Kingdom it looks more resilient. Do you buy the resilience?

446
00:20:10,720 --> 00:20:13,480
Speaker 7: The UK is a small, open economy and what happens

447
00:20:13,520 --> 00:20:15,199
Speaker 7: in the rest of the world is going to be

448
00:20:15,280 --> 00:20:19,320
Speaker 7: very important for the UK. I'm still a bit skeptical

449
00:20:19,720 --> 00:20:24,399
Speaker 7: on that. I think the full impact of adjustments post

450
00:20:24,440 --> 00:20:28,919
Speaker 7: breaks it. That's still out there for the UK. But

451
00:20:29,040 --> 00:20:33,000
Speaker 7: what I'm more skeptical about is the decline in inflation,

452
00:20:33,640 --> 00:20:36,840
Speaker 7: where the inflation rates in the UK is currently ten

453
00:20:36,880 --> 00:20:40,560
Speaker 7: point one percent and within a couple of years they're

454
00:20:40,760 --> 00:20:44,240
Speaker 7: down to basically one percent. And I don't see how

455
00:20:44,320 --> 00:20:47,320
Speaker 7: you get that kind of inflation drop with an interest

456
00:20:47,400 --> 00:20:53,520
Speaker 7: rate of four and a half percent. I'd be very

457
00:20:53,560 --> 00:20:57,320
Speaker 7: surprised if in the US we're above five percent we've

458
00:20:57,359 --> 00:21:00,160
Speaker 7: got and the inflation problem is not as bad as

459
00:21:00,359 --> 00:21:03,000
Speaker 7: in the UK, that there's more rate hypes than the

460
00:21:03,040 --> 00:21:03,879
Speaker 7: market has priced.

461
00:21:04,040 --> 00:21:06,159
Speaker 2: You are the single best person I know in the

462
00:21:06,160 --> 00:21:09,520
Speaker 2: world qualified for this delicate question. I began this morning

463
00:21:09,560 --> 00:21:13,479
Speaker 2: with Jeffrey U on this I was thunderstruck by what

464
00:21:13,520 --> 00:21:17,840
Speaker 2: the PhD from Stanford, Hugh Pill said this morning about

465
00:21:18,280 --> 00:21:22,160
Speaker 2: begging United Kingdom people to spend less money. It reminded

466
00:21:22,200 --> 00:21:25,679
Speaker 2: me back to the thirties Clement Attlee the elites telling

467
00:21:26,080 --> 00:21:31,560
Speaker 2: United Kingdom please don't spend money. I'm absolutely the non

468
00:21:31,760 --> 00:21:35,240
Speaker 2: American like language that we hear out of the United

469
00:21:35,359 --> 00:21:39,240
Speaker 2: Kingdom elites and authorities now is absolutely exceptional.

470
00:21:39,960 --> 00:21:42,639
Speaker 7: Well, I think it's a very I create, but I

471
00:21:42,720 --> 00:21:45,520
Speaker 7: think it was a very interesting that dun com. I

472
00:21:45,560 --> 00:21:47,520
Speaker 7: think it was brought up just the other day about you.

473
00:21:47,680 --> 00:21:53,200
Speaker 7: There's too many Keynesians, there's too much group think. Inflation

474
00:21:53,520 --> 00:21:57,879
Speaker 7: is a product in the end of too much money

475
00:21:58,080 --> 00:22:02,280
Speaker 7: chasing too few goods of services. And it's not about,

476
00:22:03,560 --> 00:22:08,280
Speaker 7: in my opinion, how much consumers spend. You know, that's

477
00:22:08,359 --> 00:22:11,520
Speaker 7: part of the transmission mechanism of rate hikes soften the

478
00:22:11,520 --> 00:22:16,159
Speaker 7: housing market, they ultimately soften consumer spending. But you know,

479
00:22:16,240 --> 00:22:18,280
Speaker 7: if the banking then to put more thought in the

480
00:22:18,280 --> 00:22:22,040
Speaker 7: first place to not if saying true with the Federal Reserve,

481
00:22:22,240 --> 00:22:24,000
Speaker 7: and they put more thought in the first place to

482
00:22:24,080 --> 00:22:28,320
Speaker 7: not letting the inflation genie out of the bottle, he

483
00:22:28,359 --> 00:22:31,679
Speaker 7: wouldn't be out there begging down consumers not to spend

484
00:22:31,840 --> 00:22:34,959
Speaker 7: I mean, you know, or saying people have got to

485
00:22:34,960 --> 00:22:36,600
Speaker 7: get used to being worse.

486
00:22:36,760 --> 00:22:38,560
Speaker 2: So just because of time, John, I want to bring

487
00:22:38,600 --> 00:22:41,000
Speaker 2: this over and you know we're talking here, folks about

488
00:22:41,000 --> 00:22:44,040
Speaker 2: a middle twentieth century theory of theology. If you will,

489
00:22:44,040 --> 00:22:47,199
Speaker 2: in the United Kingdom, do youse censor Kinesi and tilt

490
00:22:47,760 --> 00:22:50,520
Speaker 2: at the federal system of the United States, do they

491
00:22:50,520 --> 00:22:54,480
Speaker 2: have illusions of a demand side ordering of people to

492
00:22:54,520 --> 00:22:56,480
Speaker 2: spend less money here, or are we do a new

493
00:22:56,560 --> 00:22:57,920
Speaker 2: regime in America?

494
00:22:58,800 --> 00:23:01,560
Speaker 7: Well, this exact actly what the Fed's trying to do.

495
00:23:01,680 --> 00:23:06,119
Speaker 7: But what has prevented monetary policy from biting on the

496
00:23:06,160 --> 00:23:10,200
Speaker 7: economy was all of the fiscal injections, the income support

497
00:23:10,280 --> 00:23:14,040
Speaker 7: provided during the pandemic, which ended up in people's bank accounts.

498
00:23:14,040 --> 00:23:17,440
Speaker 7: So at the peak, people had two and a half

499
00:23:17,520 --> 00:23:21,439
Speaker 7: trillion dollars more in aggregat in their bank accounts than

500
00:23:21,480 --> 00:23:23,560
Speaker 7: they would have had had there not been a pandemic.

501
00:23:23,640 --> 00:23:27,480
Speaker 7: So it's very hard to slow the economy down on

502
00:23:27,520 --> 00:23:29,440
Speaker 7: the consumer side. It's much easier on the house.

503
00:23:29,480 --> 00:23:34,040
Speaker 2: And Olivia Bonchari calls the Biden stimulus do you? And

504
00:23:34,160 --> 00:23:37,479
Speaker 2: Conrad to Quadro suggests we've run out the stimulus and

505
00:23:37,480 --> 00:23:40,560
Speaker 2: now we're back to some form of normal American economy.

506
00:23:41,600 --> 00:23:43,320
Speaker 7: I don't think we've run out all the stimulus. It's

507
00:23:43,359 --> 00:23:47,040
Speaker 7: probably close to a trillion dollars still of excess savings,

508
00:23:47,080 --> 00:23:50,840
Speaker 7: but we have seen an adjustment in the savings rate,

509
00:23:52,720 --> 00:23:56,439
Speaker 7: which is still lower than one would expect given more

510
00:23:56,480 --> 00:23:59,120
Speaker 7: inflation is given where interest rates are, people are still

511
00:23:59,160 --> 00:24:05,679
Speaker 7: spending more than you would expect given fundamentals. Because of this,

512
00:24:06,119 --> 00:24:08,440
Speaker 7: these excess savings that have got thirty seconds.

513
00:24:08,480 --> 00:24:10,040
Speaker 1: Do you have a recession call?

514
00:24:10,880 --> 00:24:14,879
Speaker 7: I think that in both the UK and the US

515
00:24:14,920 --> 00:24:21,359
Speaker 7: it's inevitable but not imminent. The inversion of the three

516
00:24:21,359 --> 00:24:26,000
Speaker 7: months T bill to the tenure yield has invariably correctly

517
00:24:26,080 --> 00:24:30,240
Speaker 7: predicted recession a year or so out. Now we may

518
00:24:30,280 --> 00:24:33,560
Speaker 7: have a rolling recession, the housing markets in recession, the

519
00:24:33,720 --> 00:24:37,600
Speaker 7: manufacturing sectors in recession. The service sector is still going

520
00:24:38,240 --> 00:24:43,080
Speaker 7: relatively speaking strongly. So maybe it's a rolling recession, but

521
00:24:43,960 --> 00:24:44,920
Speaker 7: I think it's inevitable.

522
00:24:45,040 --> 00:24:46,960
Speaker 2: John Rny think you're just bringing up there with his

523
00:24:47,080 --> 00:24:49,639
Speaker 2: experience with the Bank of England, the federal reserve system.

524
00:24:49,680 --> 00:24:57,320
Speaker 2: He is with breing a capital. We have to get

525
00:24:57,320 --> 00:24:59,600
Speaker 2: the bank at Horneman. But but Lisa, I'm sorry to

526
00:24:59,680 --> 00:25:03,679
Speaker 2: for just three point eight five seven eight percent. We

527
00:25:03,720 --> 00:25:06,560
Speaker 2: are now fifteen full basis points in on the two

528
00:25:06,600 --> 00:25:08,959
Speaker 2: year yield. In a long cup of SANCA. I mean,

529
00:25:08,960 --> 00:25:10,240
Speaker 2: it's amazing how we moved.

530
00:25:10,760 --> 00:25:13,480
Speaker 8: Yes, And at the same time, the volatility in the

531
00:25:13,520 --> 00:25:15,679
Speaker 8: two year really is what gets my attention, let alone

532
00:25:15,720 --> 00:25:18,000
Speaker 8: which direction it's going. In the fact that a whipsaws

533
00:25:18,040 --> 00:25:20,879
Speaker 8: back and forth, how do you get any stability given

534
00:25:21,160 --> 00:25:24,560
Speaker 8: some sort of risk appetite without that joining us now

535
00:25:24,560 --> 00:25:28,200
Speaker 8: to discuss as we head into a really important our.

536
00:25:28,400 --> 00:25:31,639
Speaker 8: Megan Horneman, chief investment officer at Verden's Capital Advisors. Meghan,

537
00:25:31,880 --> 00:25:34,240
Speaker 8: as we look for the data in the US in

538
00:25:34,280 --> 00:25:36,480
Speaker 8: a half an hour time, how much are you expecting

539
00:25:36,480 --> 00:25:39,199
Speaker 8: it to really represent the strength the resilience that so

540
00:25:39,240 --> 00:25:42,520
Speaker 8: many people are rejecting right now as simply a passing phenomenon.

541
00:25:43,920 --> 00:25:44,120
Speaker 6: Yeah.

542
00:25:44,280 --> 00:25:47,040
Speaker 9: I think that there is some inconsistency in what we're

543
00:25:47,040 --> 00:25:50,720
Speaker 9: seeing in from whether it's the labor market showing showing strength,

544
00:25:50,960 --> 00:25:53,040
Speaker 9: but then there's really that's the only thing from an

545
00:25:53,040 --> 00:25:55,919
Speaker 9: economic standpoint in the US that's showing strength. Whether you

546
00:25:55,960 --> 00:25:59,040
Speaker 9: look at manufacturing or you look at housing, all of

547
00:25:59,080 --> 00:26:02,359
Speaker 9: these things are that we're headed towards a downturn. And

548
00:26:02,400 --> 00:26:05,840
Speaker 9: then you take into into account the federal reserve tightening

549
00:26:05,880 --> 00:26:08,840
Speaker 9: cycle and then the tighter lending conditions. These things are

550
00:26:08,840 --> 00:26:11,040
Speaker 9: going to start to filter into data, not right away,

551
00:26:11,359 --> 00:26:13,240
Speaker 9: but we think in the rest of this year.

552
00:26:13,560 --> 00:26:15,960
Speaker 2: Megan, I want to go to your heritage, leg Mason

553
00:26:16,240 --> 00:26:19,240
Speaker 2: in Baltimore. All the great value house action of leg

554
00:26:19,280 --> 00:26:22,280
Speaker 2: Mason non de Deutsche Bank is a substantial East Coast

555
00:26:22,320 --> 00:26:26,600
Speaker 2: competitor to JP Morgan. We're going to talk to Jamie

556
00:26:26,640 --> 00:26:31,240
Speaker 2: Diamond here in about nine minutes. He's salvaging our banking

557
00:26:31,320 --> 00:26:34,159
Speaker 2: crisis as it is. Is he going to have to

558
00:26:34,160 --> 00:26:35,960
Speaker 2: do more from where Verden sits?

559
00:26:37,240 --> 00:26:37,440
Speaker 10: Yeah?

560
00:26:37,480 --> 00:26:39,760
Speaker 9: Unfortunately, I don't think the regional side of the banking

561
00:26:39,800 --> 00:26:42,440
Speaker 9: crisis is over. I do think that the bigger banks

562
00:26:42,440 --> 00:26:43,960
Speaker 9: are going to have to step in and do more.

563
00:26:44,680 --> 00:26:47,240
Speaker 9: What's changed If you look at over the past couple

564
00:26:47,280 --> 00:26:49,400
Speaker 9: of weeks since he came in and rescued the last bank,

565
00:26:49,760 --> 00:26:52,800
Speaker 9: nothing's changed from a regulatory standpoint, nothing's changed from the

566
00:26:52,840 --> 00:26:55,600
Speaker 9: Federal Reserve. In fact, the only thing that's changed is

567
00:26:55,640 --> 00:26:58,920
Speaker 9: that the Federal Reserve has said, hey, we're not going

568
00:26:58,920 --> 00:27:01,119
Speaker 9: to see rate cuts right away. So the pressure that

569
00:27:01,200 --> 00:27:04,160
Speaker 9: was on the small and MidCap banks earlier this year

570
00:27:04,200 --> 00:27:07,320
Speaker 9: with higher interest rates and taking losses there, that still

571
00:27:07,359 --> 00:27:09,480
Speaker 9: is the case, and that's going to be a problem

572
00:27:09,480 --> 00:27:12,560
Speaker 9: for these banks. So in the absence of knowing anything

573
00:27:12,600 --> 00:27:15,880
Speaker 9: that's changed, I don't think that that, unfortunately is over.

574
00:27:15,960 --> 00:27:17,440
Speaker 9: So I think there's going to be more to come.

575
00:27:17,600 --> 00:27:20,280
Speaker 2: You have the advantage of not being Manhattan based. How

576
00:27:20,320 --> 00:27:23,800
Speaker 2: does commercial real estate look like for Verdun's capital. I mean,

577
00:27:23,840 --> 00:27:26,320
Speaker 2: I know it's off your remit, but what is all

578
00:27:26,359 --> 00:27:30,280
Speaker 2: the analysis you see that you listen to on CIRE.

579
00:27:32,000 --> 00:27:34,199
Speaker 9: It's something that we're concerned about. I don't think that

580
00:27:34,240 --> 00:27:37,879
Speaker 9: it's being talked about enough. Obviously we're concerned just because

581
00:27:37,880 --> 00:27:41,200
Speaker 9: of a slowing economy and higher vacancies, but then you

582
00:27:41,400 --> 00:27:43,280
Speaker 9: kind of the double effect on that is that we

583
00:27:43,320 --> 00:27:45,600
Speaker 9: have higher interest rates and then you throw on top

584
00:27:45,640 --> 00:27:48,440
Speaker 9: of that that we have this maturity wall. That's where

585
00:27:48,480 --> 00:27:51,560
Speaker 9: the big concern comes in. So between twenty three, twenty

586
00:27:51,560 --> 00:27:54,360
Speaker 9: four and twenty five, these are big years where there's

587
00:27:54,400 --> 00:27:57,479
Speaker 9: going to be these commercial real estates. Loans are going

588
00:27:57,520 --> 00:28:00,480
Speaker 9: to have to refinance, and they're refinancing at higher rates

589
00:28:00,720 --> 00:28:02,960
Speaker 9: as well as in a situation where you have tighter

590
00:28:03,040 --> 00:28:03,919
Speaker 9: lending conditions.

591
00:28:04,280 --> 00:28:06,639
Speaker 8: That's an area of concern, an area of strength that

592
00:28:06,680 --> 00:28:09,000
Speaker 8: we may get a better sense of at about twenty

593
00:28:09,000 --> 00:28:11,680
Speaker 8: minutes time as we get the PPI, the factory input

594
00:28:12,200 --> 00:28:14,600
Speaker 8: prices that comes out in the US, it's expected to

595
00:28:14,600 --> 00:28:18,560
Speaker 8: be significantly below CPI, that sort of headline consumer figure

596
00:28:18,920 --> 00:28:21,240
Speaker 8: which is being captured as profits at a lot of

597
00:28:21,240 --> 00:28:24,000
Speaker 8: companies that are actually increasing their profit margins at a

598
00:28:24,080 --> 00:28:26,439
Speaker 8: time when people expected them to shrink for them to

599
00:28:26,520 --> 00:28:31,000
Speaker 8: absorb some of the inflation against some pushback by consumers.

600
00:28:31,440 --> 00:28:34,760
Speaker 8: Is this giving you optimism to go into certain stocks,

601
00:28:34,800 --> 00:28:36,600
Speaker 8: to go into certain credit.

602
00:28:37,760 --> 00:28:41,120
Speaker 9: No, Unfortunately, at this time, I think that that's probably

603
00:28:41,200 --> 00:28:45,040
Speaker 9: short lived. The consumer is weak. We've seen that in

604
00:28:45,080 --> 00:28:47,800
Speaker 9: some of the recent data, and we've also seen that

605
00:28:47,840 --> 00:28:49,680
Speaker 9: with the fact that they're relying a lot more on

606
00:28:49,760 --> 00:28:52,480
Speaker 9: credit card debt, they're not spending the way that they

607
00:28:52,640 --> 00:28:55,320
Speaker 9: used to. If you looked at even the CPI report

608
00:28:55,400 --> 00:28:58,800
Speaker 9: yesterday that show that airfare is actually starting to come down,

609
00:28:58,840 --> 00:29:00,880
Speaker 9: So you're starting to see some weakness in that part

610
00:29:00,920 --> 00:29:04,280
Speaker 9: of the market, part of the economy that was consumers

611
00:29:04,320 --> 00:29:07,760
Speaker 9: were really spending money on, so your leisure and hospitality.

612
00:29:07,960 --> 00:29:11,120
Speaker 9: There's a lot of cracks surfacing, So I'm not optimistic

613
00:29:11,200 --> 00:29:14,880
Speaker 9: that that businesses can continue to pass on those costs

614
00:29:14,920 --> 00:29:16,760
Speaker 9: without it further hurting the consumers.

615
00:29:16,920 --> 00:29:19,080
Speaker 8: So are you basically in the camp that there is

616
00:29:19,160 --> 00:29:21,720
Speaker 8: going to be this inflation that will accompany the weakness

617
00:29:21,720 --> 00:29:24,080
Speaker 8: that we see as it accelerates throughout the end of

618
00:29:24,080 --> 00:29:26,680
Speaker 8: the year. Basically, what's been pushing everybody to keep going

619
00:29:26,680 --> 00:29:27,280
Speaker 8: into bonds.

620
00:29:28,720 --> 00:29:30,640
Speaker 9: Yeah, I do think that we are going to be

621
00:29:30,640 --> 00:29:34,960
Speaker 9: looking at again slowing inflation, a slow down the economy,

622
00:29:35,000 --> 00:29:39,200
Speaker 9: most likely a recession. The inflation situation has been improving

623
00:29:39,240 --> 00:29:40,440
Speaker 9: and we can't deny that.

624
00:29:40,520 --> 00:29:42,160
Speaker 3: But there still is a lot of work to go.

625
00:29:42,480 --> 00:29:45,240
Speaker 9: The biggest inconsistency, and you mentioned that people are going

626
00:29:45,280 --> 00:29:48,320
Speaker 9: into bonds, The biggest inconsistency that we see is that

627
00:29:48,440 --> 00:29:51,200
Speaker 9: investors are pricing in rate cuts, and that's not something

628
00:29:51,240 --> 00:29:53,880
Speaker 9: that we see. The FED is not there. They don't

629
00:29:53,880 --> 00:29:56,479
Speaker 9: have the ability to do that with inflation where it is.

630
00:29:56,880 --> 00:29:59,040
Speaker 9: They can't come in with a stop and go approach,

631
00:29:59,080 --> 00:30:01,120
Speaker 9: which is what they did in the seventies and eighties,

632
00:30:01,160 --> 00:30:03,920
Speaker 9: which proved to be not the right thing to do.

633
00:30:04,480 --> 00:30:06,720
Speaker 9: I think they're going to stay on hold. Interest rates

634
00:30:06,720 --> 00:30:09,440
Speaker 9: will stay higher for longer. They've made it clear in

635
00:30:09,480 --> 00:30:12,320
Speaker 9: their last meaning that they will sacrifice economic growth to

636
00:30:12,400 --> 00:30:14,880
Speaker 9: achieve their goal of bringing inflation down. So I think

637
00:30:14,880 --> 00:30:18,680
Speaker 9: the bomb market's not necessarily pricing that in. Unfortunately within bonds.

638
00:30:18,720 --> 00:30:20,200
Speaker 9: I think the best place to be right now is

639
00:30:20,240 --> 00:30:22,680
Speaker 9: just to park money in cash, have dry powder, take

640
00:30:22,720 --> 00:30:25,720
Speaker 9: advantage of opportunities because they will arise in the second

641
00:30:25,720 --> 00:30:26,600
Speaker 9: half of this year.

642
00:30:26,520 --> 00:30:29,560
Speaker 2: And then on equity markets, do you deploy that cash

643
00:30:29,600 --> 00:30:31,320
Speaker 2: here or do you just wait, wait, wait.

644
00:30:32,960 --> 00:30:35,280
Speaker 9: It depends on what we see from an equity standpoint.

645
00:30:35,360 --> 00:30:38,840
Speaker 9: I think equities are similar to bonds to the equity market. Specifically,

646
00:30:38,880 --> 00:30:42,760
Speaker 9: some of the high growth technology names. These are I

647
00:30:42,800 --> 00:30:45,680
Speaker 9: think still too high from a price to earnings multiple.

648
00:30:45,760 --> 00:30:48,200
Speaker 9: I think they have room to decline and kind of

649
00:30:48,200 --> 00:30:50,120
Speaker 9: realize the fact that the Fed's not going to come

650
00:30:50,160 --> 00:30:52,280
Speaker 9: in and save the day. They've been able to do

651
00:30:52,320 --> 00:30:54,040
Speaker 9: that in the past, They're not able to do it

652
00:30:54,080 --> 00:30:56,080
Speaker 9: this time around. So I think there's going to be

653
00:30:56,120 --> 00:30:58,000
Speaker 9: some correction here in US equities.

654
00:30:58,120 --> 00:30:59,200
Speaker 1: Megan, thank you so much.

655
00:30:59,280 --> 00:31:06,280
Speaker 2: Megan Horneman there with Vernon's Capital Advisors.

656
00:31:13,080 --> 00:31:13,480
Speaker 1: Thomas A.

657
00:31:13,560 --> 00:31:16,480
Speaker 2: Taurus has had a fixed income research it's Chigus, a

658
00:31:16,520 --> 00:31:18,920
Speaker 2: bird company and joins us this morning. You have the

659
00:31:18,960 --> 00:31:21,960
Speaker 2: advantage of down the hall is one. J Trnard Jason

660
00:31:21,960 --> 00:31:25,200
Speaker 2: Trennard looking at the equity market, folding in the JP

661
00:31:25,360 --> 00:31:29,600
Speaker 2: Morgans of the world into your fixed income analysis. What

662
00:31:29,760 --> 00:31:34,360
Speaker 2: is a strateigous view on the length of this banking crisis?

663
00:31:34,440 --> 00:31:35,480
Speaker 2: Does it get fixed?

664
00:31:36,160 --> 00:31:38,560
Speaker 11: What's your definition of fixed? Do we have more bank

665
00:31:38,560 --> 00:31:41,920
Speaker 11: failures along the way, probably. Does it become systemic risk,

666
00:31:42,040 --> 00:31:45,800
Speaker 11: particularly to Ciffy's, Probably not. Does it become a risk

667
00:31:45,880 --> 00:31:48,480
Speaker 11: to super regional banks, probably not as well. But is

668
00:31:48,520 --> 00:31:51,280
Speaker 11: there incremental credit tightening to the US economy from.

669
00:31:51,160 --> 00:31:52,560
Speaker 8: This ahead of US?

670
00:31:52,640 --> 00:31:53,280
Speaker 6: Absolutely?

671
00:31:53,640 --> 00:31:56,360
Speaker 11: And with monetary policy acting with the lag we have

672
00:31:56,440 --> 00:31:58,600
Speaker 11: to assume there are more shoes to drop here and

673
00:31:58,680 --> 00:31:59,480
Speaker 11: more banks to fail.

674
00:31:59,600 --> 00:32:03,600
Speaker 2: Which spread a comparison of two yields is most valid

675
00:32:03,640 --> 00:32:07,040
Speaker 2: to you to get the temperature of PacWest and other banks.

676
00:32:07,080 --> 00:32:10,000
Speaker 2: I'm looking at three months tenure, but there's debt sealing

677
00:32:10,120 --> 00:32:13,080
Speaker 2: issues in that as well. Which spread tells the best story?

678
00:32:13,160 --> 00:32:15,320
Speaker 11: Well, three months tenure might be a better measure for

679
00:32:15,400 --> 00:32:18,000
Speaker 11: banks because you're looking at funding cost relative on the

680
00:32:18,040 --> 00:32:21,320
Speaker 11: front end of the curve versus there. Essentially, what are

681
00:32:21,320 --> 00:32:24,000
Speaker 11: they they potentially getting for yield for new assets they

682
00:32:24,040 --> 00:32:27,080
Speaker 11: might be purchasing. But I don't think anything really gives

683
00:32:27,080 --> 00:32:29,320
Speaker 11: you a good picture of how much their net interest

684
00:32:29,360 --> 00:32:31,640
Speaker 11: margins have compressed over the last two years. I mean

685
00:32:31,680 --> 00:32:34,320
Speaker 11: those are probably zero to negative at this point in time,

686
00:32:34,400 --> 00:32:37,600
Speaker 11: given where they bought those assets, Those long duration assets

687
00:32:37,640 --> 00:32:39,120
Speaker 11: might have been bought at a yield of two to

688
00:32:39,200 --> 00:32:41,520
Speaker 11: two and a half percent, and their funding costs today

689
00:32:41,600 --> 00:32:43,320
Speaker 11: might be four and a half to five and a

690
00:32:43,400 --> 00:32:43,960
Speaker 11: quarter percent.

691
00:32:44,240 --> 00:32:46,520
Speaker 8: This is a really important point that we have moved

692
00:32:46,520 --> 00:32:49,760
Speaker 8: from just simply deposits being there too. Even the deposits

693
00:32:49,760 --> 00:32:51,760
Speaker 8: staying are going to be a problem, given how much

694
00:32:51,800 --> 00:32:54,480
Speaker 8: they're going to have to pay to keep them. From

695
00:32:54,560 --> 00:32:57,160
Speaker 8: your vantage point, what are you expecting in terms of

696
00:32:57,160 --> 00:33:00,000
Speaker 8: the number of failures and the ramifications for monetary policy

697
00:33:00,040 --> 00:33:01,600
Speaker 8: in broader market conditions.

698
00:33:01,120 --> 00:33:05,680
Speaker 11: Well, probably low double digits, maybe high single digits, So

699
00:33:05,760 --> 00:33:08,720
Speaker 11: maybe not many more to come, and fairly small in size.

700
00:33:08,840 --> 00:33:11,200
Speaker 11: But you got to remember, though, that's the norm over

701
00:33:11,320 --> 00:33:14,280
Speaker 11: any given two three year period in the past. Keep

702
00:33:14,320 --> 00:33:16,560
Speaker 11: in mind, from nineteen eighty to about nineteen ninety two

703
00:33:16,560 --> 00:33:18,960
Speaker 11: we had over a thousand bank failures. In the last

704
00:33:19,040 --> 00:33:21,840
Speaker 11: dozen years we've had about a dozen failures. Sore, you

705
00:33:21,880 --> 00:33:24,680
Speaker 11: can say we're overdue. So the norm might be two

706
00:33:24,760 --> 00:33:26,720
Speaker 11: to three per year on average.

707
00:33:26,800 --> 00:33:28,680
Speaker 8: Well, but this is the question, right, if it is

708
00:33:28,800 --> 00:33:31,240
Speaker 8: just the norm, is it not? Setting any alarm bells

709
00:33:31,320 --> 00:33:33,959
Speaker 8: doesn't change anything with respect to the rate hiking cycle.

710
00:33:34,160 --> 00:33:36,920
Speaker 8: It doesn't change anything with respect to your approach to

711
00:33:37,240 --> 00:33:38,160
Speaker 8: what you invest in.

712
00:33:38,440 --> 00:33:41,280
Speaker 11: Well, let me answer this. From our Fed's perspective, this

713
00:33:41,360 --> 00:33:45,000
Speaker 11: absolutely should change their perspective and what they do going forward.

714
00:33:45,280 --> 00:33:48,040
Speaker 11: You have monetary policy acting with the lag, you have

715
00:33:48,160 --> 00:33:51,360
Speaker 11: multiple bank failures, and you have at best multiple banks

716
00:33:51,360 --> 00:33:53,640
Speaker 11: are going to be a negative net interest margin for

717
00:33:53,680 --> 00:33:56,680
Speaker 11: at least the next twelve months. That's a reason to

718
00:33:56,680 --> 00:34:00,160
Speaker 11: pause rate there. Mission is not accomplished on inflation, but

719
00:34:00,240 --> 00:34:02,320
Speaker 11: that's a good reason to pause tightening to see how

720
00:34:02,320 --> 00:34:04,800
Speaker 11: the incremental tightening from the critic tightening that is to

721
00:34:04,800 --> 00:34:07,200
Speaker 11: come plays out. You may end up having to hike

722
00:34:07,240 --> 00:34:08,840
Speaker 11: again in the future, but this is a good opportunity

723
00:34:08,880 --> 00:34:09,240
Speaker 11: to pause.

724
00:34:09,440 --> 00:34:12,600
Speaker 2: Briefest on James Diamond coming up here in forty five

725
00:34:12,800 --> 00:34:15,640
Speaker 2: minutes as well, This conversation is frankly just as important

726
00:34:15,640 --> 00:34:19,440
Speaker 2: because you're in the trenches looking at the ramifications of

727
00:34:19,480 --> 00:34:22,480
Speaker 2: a trust in the JP Morgan Company or from a

728
00:34:22,600 --> 00:34:25,480
Speaker 2: frankly Bank of America to save the day. Are they

729
00:34:25,520 --> 00:34:27,400
Speaker 2: going to come in and have to save the day again?

730
00:34:28,320 --> 00:34:29,600
Speaker 4: I don't think they're going to have to.

731
00:34:29,680 --> 00:34:32,359
Speaker 11: Whether they do come in and make additional plays here

732
00:34:32,400 --> 00:34:33,960
Speaker 11: that I can't speak to, but I don't think they're

733
00:34:33,960 --> 00:34:36,000
Speaker 11: going to need to. I think that this is a

734
00:34:36,040 --> 00:34:40,160
Speaker 11: system that essentially your super regionals are in good standing

735
00:34:40,200 --> 00:34:42,759
Speaker 11: right now, your cities are in good standing. You're talking

736
00:34:42,800 --> 00:34:45,600
Speaker 11: about smaller banks going forward, There's going to have to

737
00:34:45,640 --> 00:34:49,480
Speaker 11: be consolidation in the regional banks. Some of them may

738
00:34:49,600 --> 00:34:50,360
Speaker 11: be boring.

739
00:34:50,800 --> 00:34:52,560
Speaker 2: I don't mean to interrupt, but this is an important

740
00:34:52,600 --> 00:34:55,279
Speaker 2: nuance within a bidding process where the government's forced to

741
00:34:55,320 --> 00:34:57,719
Speaker 2: take a little bitter or just in a normal m

742
00:34:57,719 --> 00:34:58,960
Speaker 2: and A context.

743
00:34:58,480 --> 00:35:02,120
Speaker 11: Both could have could have additional failures where there are

744
00:35:02,280 --> 00:35:06,600
Speaker 11: essentially negative net asset values there that government is forced

745
00:35:06,640 --> 00:35:08,759
Speaker 11: to take the lowest bidder. But you should also be

746
00:35:08,800 --> 00:35:11,719
Speaker 11: expecting going forward to see a typical m and A

747
00:35:11,840 --> 00:35:15,920
Speaker 11: where some regional banks consolidate and become superregionals going forward,

748
00:35:16,000 --> 00:35:19,120
Speaker 11: and even some superregionals may grow themselves to become to

749
00:35:19,200 --> 00:35:22,760
Speaker 11: breach that Siffy threshold. That should be the expectation going forward.

750
00:35:22,840 --> 00:35:25,239
Speaker 11: The reality is, I think the US banking system is

751
00:35:25,360 --> 00:35:28,440
Speaker 11: migrating more towards what you might have in Canada or Australia,

752
00:35:28,440 --> 00:35:33,080
Speaker 11: where you have a few very large dominant banks. It's

753
00:35:33,120 --> 00:35:34,480
Speaker 11: not going to be three or four like you have

754
00:35:34,520 --> 00:35:36,880
Speaker 11: in those regions. It might be eight to ten in

755
00:35:36,920 --> 00:35:37,279
Speaker 11: the US.

756
00:35:37,360 --> 00:35:39,560
Speaker 8: Let's toff tail this question about financial stability and to

757
00:35:39,600 --> 00:35:41,160
Speaker 8: what we're going to get in about fifteen minutes, which

758
00:35:41,160 --> 00:35:43,840
Speaker 8: is the latest reat on inflation as well as the

759
00:35:43,920 --> 00:35:46,759
Speaker 8: labor market. There is a question about whether there is

760
00:35:46,840 --> 00:35:48,920
Speaker 8: more strength and whether what we've seen in the banking

761
00:35:49,000 --> 00:35:51,200
Speaker 8: sector is more of the normalcy, as you point out,

762
00:35:51,480 --> 00:35:53,880
Speaker 8: rather than a sign of some sort of massive fissure.

763
00:35:54,239 --> 00:35:56,480
Speaker 8: If it is a sign of strength, what does that

764
00:35:56,600 --> 00:35:59,640
Speaker 8: do in terms of the stickiness of inflation as well

765
00:35:59,680 --> 00:36:02,000
Speaker 8: as growth, just like what we saw over in England.

766
00:36:02,120 --> 00:36:05,000
Speaker 11: Yeah, well, I think you had mentioned earlier discussion on

767
00:36:05,280 --> 00:36:09,040
Speaker 11: sales from places like Proder luxury goods. The US economy

768
00:36:09,120 --> 00:36:11,720
Speaker 11: still continues to be driven by a consumer, which whether

769
00:36:11,960 --> 00:36:15,040
Speaker 11: they're spending more than they can afford, it's irrelevant. They're

770
00:36:15,040 --> 00:36:17,480
Speaker 11: still spending more and the labor market is not yet

771
00:36:17,560 --> 00:36:20,120
Speaker 11: rolling over, So there's still strength to the consumer side.

772
00:36:20,200 --> 00:36:22,560
Speaker 11: There's still strength to the labor market, and in particular

773
00:36:22,600 --> 00:36:25,680
Speaker 11: in the retail space and in in luxury space, in

774
00:36:25,719 --> 00:36:27,880
Speaker 11: the leisure space. So there's still strength to come in

775
00:36:27,920 --> 00:36:30,800
Speaker 11: the US economy, and there's still likely to be sticky inflation.

776
00:36:31,120 --> 00:36:34,319
Speaker 11: What that means is that even if the Fed pauses here.

777
00:36:35,280 --> 00:36:37,720
Speaker 11: They're not likely to cut as soon as the market

778
00:36:37,760 --> 00:36:39,759
Speaker 11: is pricing, and the market is pricing in rate cuts

779
00:36:39,760 --> 00:36:42,000
Speaker 11: for we'll say July to August. That seems too early

780
00:36:42,320 --> 00:36:45,040
Speaker 11: given how sticky inflation is and how strong the labor

781
00:36:45,080 --> 00:36:47,440
Speaker 11: market continues to be. We do think the labor market's

782
00:36:47,480 --> 00:36:49,400
Speaker 11: going to roll over, but we think inflation is going

783
00:36:49,440 --> 00:36:51,319
Speaker 11: to remain sticky, which means that there's going to be

784
00:36:51,360 --> 00:36:54,040
Speaker 11: more stress on banks because the Fed funds rate is

785
00:36:54,080 --> 00:36:56,480
Speaker 11: going to remain at this five percent to five and

786
00:36:56,480 --> 00:36:58,800
Speaker 11: a quarter percent longer, and you're going to continue to

787
00:36:58,920 --> 00:37:02,879
Speaker 11: drag drag on credit formation and stress on banks because

788
00:37:02,920 --> 00:37:04,840
Speaker 11: net interest margins is going to remain negative for longer.

789
00:37:04,920 --> 00:37:07,200
Speaker 8: How do you play this, because it's really against consensus

790
00:37:07,200 --> 00:37:09,280
Speaker 8: at least as it's being played out in market pricing.

791
00:37:09,600 --> 00:37:11,960
Speaker 11: Well, that's a tough question because right now you look

792
00:37:12,000 --> 00:37:15,480
Speaker 11: at equity valuations, they don't reflect a recession risk, and

793
00:37:15,520 --> 00:37:18,120
Speaker 11: they also don't reflect the fact that there's credit tightening

794
00:37:18,160 --> 00:37:20,760
Speaker 11: to come later on. Same thing for corporate credit markets,

795
00:37:20,760 --> 00:37:23,000
Speaker 11: spreads are a little bit too tight at these levels.

796
00:37:23,239 --> 00:37:25,320
Speaker 11: So I think you play this by being very cautious.

797
00:37:25,400 --> 00:37:28,960
Speaker 11: You continue to hold cash at elevated or above average levels,

798
00:37:29,160 --> 00:37:31,240
Speaker 11: and you wait for something to break to the downside.

799
00:37:31,280 --> 00:37:31,919
Speaker 1: Two part question.

800
00:37:31,920 --> 00:37:33,480
Speaker 2: We got to be quick because of the time we're

801
00:37:33,600 --> 00:37:36,280
Speaker 2: trenderd on the equity market. Is he called a bottom

802
00:37:36,320 --> 00:37:38,440
Speaker 2: of the bear market in October or does he have

803
00:37:38,480 --> 00:37:40,720
Speaker 2: a more cautious few more cautious.

804
00:37:40,719 --> 00:37:43,959
Speaker 11: We're expecting equity prices equity valuations to dip lower again.

805
00:37:44,080 --> 00:37:45,839
Speaker 2: So you had a ten yere yield four point two

806
00:37:45,960 --> 00:37:48,680
Speaker 2: zero percent, The ten year yield is crater down. What

807
00:37:48,719 --> 00:37:51,080
Speaker 2: are the ramifications to you if the ten year breaks

808
00:37:51,120 --> 00:37:53,600
Speaker 2: down to a new lower yield below three point three

809
00:37:53,719 --> 00:37:54,400
Speaker 2: zero percent.

810
00:37:55,040 --> 00:37:57,160
Speaker 11: Well, so we're our forecast is about three to two

811
00:37:57,360 --> 00:37:59,359
Speaker 11: for a bottom this cycle. We could easily on intery

812
00:37:59,400 --> 00:38:01,960
Speaker 11: day get down close to three. If we get down

813
00:38:02,000 --> 00:38:04,360
Speaker 11: two or below three, it tells us that something is

814
00:38:04,440 --> 00:38:07,560
Speaker 11: breaking on the credit side. That's bigger than a regional bank.

815
00:38:07,800 --> 00:38:10,279
Speaker 11: That would be my takeaway from that.

816
00:38:10,360 --> 00:38:12,720
Speaker 1: Qus you valuable, Tom, Thank you so much. Tom. Stores

817
00:38:12,840 --> 00:38:13,760
Speaker 1: is where this was Strateigua.

818
00:38:13,800 --> 00:38:20,040
Speaker 8: It's a bird company, Brian Weezer, isn't we just got

819
00:38:20,040 --> 00:38:22,520
Speaker 8: one out? In terms of Disney, he is a principal

820
00:38:22,520 --> 00:38:25,600
Speaker 8: at madisone and Wall covering all things media for decades.

821
00:38:25,640 --> 00:38:28,239
Speaker 8: There is a question here about why this is surprising,

822
00:38:28,360 --> 00:38:31,560
Speaker 8: given that this transition was going to be awkward from

823
00:38:31,600 --> 00:38:35,360
Speaker 8: a cable to streaming, and it's a rocky process amid

824
00:38:35,360 --> 00:38:36,759
Speaker 8: a lot of economic uncertainty.

825
00:38:37,280 --> 00:38:40,319
Speaker 10: Yeah, I don't think it's that surprising. I mean, this

826
00:38:40,440 --> 00:38:42,160
Speaker 10: was never going to be a better business than the

827
00:38:42,160 --> 00:38:45,680
Speaker 10: one that it's replacing. They had a fort nearly forty

828
00:38:45,680 --> 00:38:48,360
Speaker 10: percent margin business in the Media Network's division back in

829
00:38:48,840 --> 00:38:51,960
Speaker 10: ten years ago. And you're getting in care, more costs

830
00:38:51,960 --> 00:38:56,080
Speaker 10: for marketing, more costs for streaming, physically delivering content, and

831
00:38:56,080 --> 00:38:58,439
Speaker 10: then you need way more content to make this whole

832
00:38:58,440 --> 00:39:02,000
Speaker 10: thing work, and you can't force sleep. This is the

833
00:39:02,080 --> 00:39:04,239
Speaker 10: right thing to do. It's the right way to make

834
00:39:04,280 --> 00:39:06,880
Speaker 10: a business that survives for fifty years and beyond. And

835
00:39:06,880 --> 00:39:08,439
Speaker 10: that's why I said what it was an analyst covering

836
00:39:08,480 --> 00:39:10,959
Speaker 10: the stock thinking, oh, it's the best the fair price

837
00:39:11,040 --> 00:39:15,319
Speaker 10: right now, and that's kind of what's played out for everyone.

838
00:39:15,640 --> 00:39:15,920
Speaker 6: Brian.

839
00:39:16,000 --> 00:39:19,720
Speaker 8: There's this concern as we try to grow subscriber bases,

840
00:39:19,800 --> 00:39:23,920
Speaker 8: or as different people, different streaming companies try to expand

841
00:39:24,120 --> 00:39:27,960
Speaker 8: their user base, do you continue to raise prices, what

842
00:39:28,040 --> 00:39:33,000
Speaker 8: do you prioritize either increasing subscribers or increasing revenues. How

843
00:39:33,080 --> 00:39:35,040
Speaker 8: is does he doing on that front, given that they

844
00:39:35,080 --> 00:39:37,400
Speaker 8: came in with a pretty disappointing projection of just growth.

845
00:39:38,000 --> 00:39:41,040
Speaker 6: Well, here's the thing. They can continue to raise prices

846
00:39:41,080 --> 00:39:43,720
Speaker 6: and still grow subscribers on a earier basis.

847
00:39:43,719 --> 00:39:45,920
Speaker 10: I think they'll continue to do so, as other services

848
00:39:45,920 --> 00:39:48,600
Speaker 10: will when they raise prices. The problem is that that

849
00:39:48,640 --> 00:39:52,080
Speaker 10: money is coming out of traditional PATV. I publish something

850
00:39:52,120 --> 00:39:54,440
Speaker 10: on my sub stack this past week pointing out there

851
00:39:54,440 --> 00:39:56,759
Speaker 10: there is about one hundred billion dollars of spending in

852
00:39:56,800 --> 00:39:59,640
Speaker 10: the United States at least by consumers on PATV services

853
00:40:00,040 --> 00:40:02,320
Speaker 10: now declining in terms of actual spending.

854
00:40:03,120 --> 00:40:05,880
Speaker 6: That's one hundred billion dollars of money that can go

855
00:40:06,000 --> 00:40:09,040
Speaker 6: into these streaming services still, but it's going to come

856
00:40:09,080 --> 00:40:09,600
Speaker 6: out of PATV.

857
00:40:10,160 --> 00:40:13,640
Speaker 2: Where are sports in five years? Brian Disney has a

858
00:40:13,760 --> 00:40:16,719
Speaker 2: huge effect on sports with the ESPN, I get it,

859
00:40:17,120 --> 00:40:21,279
Speaker 2: But where is the Brian Weezer view on sports entertainment

860
00:40:21,640 --> 00:40:22,520
Speaker 2: in five years?

861
00:40:23,239 --> 00:40:24,760
Speaker 6: Yeah, it will still be super important.

862
00:40:24,760 --> 00:40:27,960
Speaker 10: I mean, but Bob Iger, at least, why is enough

863
00:40:28,000 --> 00:40:31,080
Speaker 10: to point out that there is an inevitability to ESPN

864
00:40:31,160 --> 00:40:33,480
Speaker 10: in particular eventually.

865
00:40:33,000 --> 00:40:35,320
Speaker 6: Having a slagship services and streaming service.

866
00:40:35,920 --> 00:40:38,960
Speaker 10: The reality is that not everyone needs to watch everything

867
00:40:39,000 --> 00:40:44,640
Speaker 10: that's on ESPN or on traditional TV sports, so it

868
00:40:44,680 --> 00:40:47,720
Speaker 10: may end up being a little bit more niche maybe

869
00:40:47,760 --> 00:40:51,000
Speaker 10: not as ubiquitous as it has a historical United States.

870
00:40:51,560 --> 00:40:54,320
Speaker 2: I look at Disney and I look at a creative

871
00:40:54,400 --> 00:40:57,320
Speaker 2: guy as well. Is there a lot of cost coding

872
00:40:57,400 --> 00:41:00,560
Speaker 2: to do? Is Disney and for that matter, other companies

873
00:41:00,719 --> 00:41:03,200
Speaker 2: like it. Is there a lot of fat there to cut?

874
00:41:03,400 --> 00:41:05,080
Speaker 2: Or are they bear bones right now?

875
00:41:06,480 --> 00:41:09,719
Speaker 10: You know, they talk certainly about containing their increases in

876
00:41:09,880 --> 00:41:13,880
Speaker 10: spending on content, and it's hard to say what's that is.

877
00:41:13,920 --> 00:41:16,600
Speaker 6: I mean, certainly there's a great story.

878
00:41:16,520 --> 00:41:19,920
Speaker 10: In the journal about what's happening for a paramount on

879
00:41:20,000 --> 00:41:22,239
Speaker 10: content spending on Yellowstone and other related shows, and that's

880
00:41:22,239 --> 00:41:25,720
Speaker 10: a good example. Maybe a bit extreme in terms of spending,

881
00:41:25,920 --> 00:41:28,239
Speaker 10: but I think in general that the thing is if

882
00:41:28,280 --> 00:41:31,600
Speaker 10: you spend more money on programming, you will get more viewers. Right,

883
00:41:31,719 --> 00:41:35,360
Speaker 10: they will continue to grow the platform, the streaming platform,

884
00:41:35,560 --> 00:41:36,920
Speaker 10: as long as they continue.

885
00:41:36,520 --> 00:41:39,799
Speaker 6: To increase their spending overall on programming. Obviously, they need

886
00:41:39,840 --> 00:41:42,480
Speaker 6: good editorial choices and good content.

887
00:41:43,040 --> 00:41:45,640
Speaker 8: We used to say content is king and today, we're

888
00:41:45,640 --> 00:41:48,200
Speaker 8: talking about cost cutting and a lot of these different platforms.

889
00:41:49,120 --> 00:41:52,239
Speaker 8: If anyone goes anywhere near social media, they'll see a

890
00:41:52,280 --> 00:41:55,400
Speaker 8: discussion of the writer strike in Hollywood. That's affecting a

891
00:41:55,400 --> 00:41:57,560
Speaker 8: whole host of different streaming networks. And I wonder how

892
00:41:57,600 --> 00:42:00,719
Speaker 8: dovetailed these ideas. Are this idea so that writers want

893
00:42:00,760 --> 00:42:03,760
Speaker 8: to get paid, that content wants to get rewarded given

894
00:42:04,000 --> 00:42:07,720
Speaker 8: the years of large s and the networks just aren't

895
00:42:07,760 --> 00:42:09,759
Speaker 8: willing at this time. How much is that going to

896
00:42:09,760 --> 00:42:12,319
Speaker 8: be a persistent battle based on the dynamic that we've

897
00:42:12,320 --> 00:42:13,080
Speaker 8: been talking about.

898
00:42:13,880 --> 00:42:17,399
Speaker 10: Yeah, I worry about that because I'm not sure how

899
00:42:18,080 --> 00:42:20,279
Speaker 10: First of all, both sides on the strike might be

900
00:42:20,280 --> 00:42:23,360
Speaker 10: too optimistic in their expectations where the industry's going to evolve.

901
00:42:23,360 --> 00:42:23,600
Speaker 6: Again.

902
00:42:23,760 --> 00:42:28,640
Speaker 10: I've rolled up all spending on video, including theatrical spending, DVDs,

903
00:42:28,880 --> 00:42:32,560
Speaker 10: whatever the left of that streaming atv ette, and basically

904
00:42:32,600 --> 00:42:35,200
Speaker 10: I calculate about a one percent growth rate over the

905
00:42:35,280 --> 00:42:38,000
Speaker 10: last fifteen years every year on average.

906
00:42:38,480 --> 00:42:39,400
Speaker 6: Maybe that's about right.

907
00:42:39,480 --> 00:42:43,640
Speaker 10: Going forward, it's all shifting towards the far less profitable

908
00:42:43,680 --> 00:42:48,560
Speaker 10: businesses streaming, so there's less money to divide up.

909
00:42:48,760 --> 00:42:50,839
Speaker 6: Whatever the outcome is Brian.

910
00:42:50,960 --> 00:42:53,279
Speaker 8: There was also discussion just to finish up here with

911
00:42:53,360 --> 00:42:58,200
Speaker 8: Disney about declining revenues on their cable networks from advertisers.

912
00:42:58,640 --> 00:42:59,839
Speaker 4: How much of this is.

913
00:42:59,840 --> 00:43:03,600
Speaker 8: Companies not necessarily having the extra money to advertise. How

914
00:43:03,680 --> 00:43:05,960
Speaker 8: much of this is just all of the advertising moving

915
00:43:06,520 --> 00:43:09,920
Speaker 8: to Google, to Facebook or Meta to all of these

916
00:43:09,960 --> 00:43:11,480
Speaker 8: other social media platforms.

917
00:43:12,480 --> 00:43:14,040
Speaker 6: That's been a big factor for sure.

918
00:43:14,120 --> 00:43:16,879
Speaker 10: I mean, we're seeing television has probably declined by high

919
00:43:16,880 --> 00:43:20,080
Speaker 10: school digits at this point. I don't think I'll say

920
00:43:20,120 --> 00:43:22,279
Speaker 10: that bad all year long. It'll probably get less bad

921
00:43:22,320 --> 00:43:23,239
Speaker 10: as your progress is.

922
00:43:23,840 --> 00:43:27,520
Speaker 6: The typical advertiser is absolutely shifting their spending primarily.

923
00:43:27,560 --> 00:43:30,000
Speaker 10: I think package goods companies are shifting spending into retail

924
00:43:30,040 --> 00:43:34,399
Speaker 10: media networks. We're just doing possibly well. TikTok for now

925
00:43:34,680 --> 00:43:36,719
Speaker 10: is at least still doing really well. There's a lot

926
00:43:36,719 --> 00:43:38,680
Speaker 10: of new places that are seeing a lot of growth.

927
00:43:38,719 --> 00:43:41,760
Speaker 10: And Uber is an ad platform. Walmart selling ad that's.

928
00:43:41,640 --> 00:43:45,160
Speaker 2: Where Brian, Thank you Brian Weiser from Madison and Wall

929
00:43:45,200 --> 00:43:47,399
Speaker 2: with an update there and streaming and.

930
00:43:47,360 --> 00:43:48,759
Speaker 1: A lack of profit out there.

931
00:43:49,080 --> 00:43:52,920
Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and

932
00:43:53,040 --> 00:43:57,240
Speaker 2: anywhere else you get your podcasts. Listen live every weekday,

933
00:43:57,520 --> 00:44:02,480
Speaker 2: starting at seven am Easternloomberg dot com, the iHeartRadio app

934
00:44:02,800 --> 00:44:06,360
Speaker 2: tune In, and the Bloomberg Business app. You can watch

935
00:44:06,560 --> 00:44:10,840
Speaker 2: us live on Bloomberg Television and always on the Bloomberg Terminal.

936
00:44:11,239 --> 00:44:15,440
Speaker 1: Thanks for listening. I'm Tom Keen, and this is Bloomberg