Speaker 1: This is the Bloomberg Surveillance Podcast.
Speaker 2: I'm Tom Keen, along with Jonathan Farrow and Lisa Abramowitz.
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Speaker 2: Lisa Bramwitz and Tom Keen right now, and what we'd like.
Speaker 1: To do is go to Paris. And it is a
Speaker 1: Paris of.
Speaker 2: JP Morgan that is important in World War One. They
Speaker 2: I'm going to get the pronunciation wrong in Francine. Lacua
Speaker 2: is gonna correct me. It is Catore's plus vendome and
Speaker 2: it was the commitment of the JP Morgan bank to
Speaker 2: France in the heat of World War One. She is
Speaker 2: joined in Paris with James Steman, Our Francy and Laclosx.
Speaker 1: How is like pronunciation?
Speaker 3: Fancye Tom full marks for French pronunciation. You're almost French.
Speaker 3: I'm so excited for you. I am delighted to be
Speaker 3: joined by Jamie Diamond. JP Morgan Chairman and Chief executive officer,
Speaker 3: Thank you for joining us. As always, debt ceiling or
Speaker 3: banking turmoil? What are you most.
Speaker 4: Worried about you'd be here?
Speaker 5: Well, I think the debt steeling is potentially catastrophic. Yeah,
Speaker 5: so that's a whole different issue. Hopefully won't happen. You know,
Speaker 5: the banking crisis I still believe will kind of sort
Speaker 5: its way through, and it's not anything like eight or
Speaker 5: nine owing a couple of people off size, with all
Speaker 5: these various things which you knew about. So hopefully you
Speaker 5: know it's getting near the tail end of that.
Speaker 3: But if you're Janet Yellen right now, what would you
Speaker 3: do differently?
Speaker 5: I don't know. I think we need to finish the
Speaker 5: bank crisis. I think we've been we've had an uncertain
Speaker 5: policy on mergers. This first horizon deal. I think we
Speaker 5: have to assume they'll be a little bit more so,
Speaker 5: you know, whatever the FDI C, the occ the Fellow Reserve,
Speaker 5: you know, whatever they need to do to make it better,
Speaker 5: they should do be thoughtful, be very forward looking. You'll
Speaker 5: not be surprised constantly because some of these things have
Speaker 5: been known about for quite a while. And so we've
Speaker 5: handled three SVB signature first Republic and.
Speaker 3: So yes, asking, but I think it's very important.
Speaker 5: The regional banks who I've been speaking to like every
Speaker 5: day for the last week, they're quite strong. You know,
Speaker 5: they're quite worried because of the you know, run and
Speaker 5: deposited all that, but their financial results are good. The
Speaker 5: financial results are gonna be good, okay next quarter. You know,
Speaker 5: they're earning money. They get a very good clientele, very diversified.
Speaker 5: Uh uh, and they're they're quite strong.
Speaker 3: So Jenny for like a comprehensive solution. So if you're
Speaker 3: asking Jennet Young to get the job done, what does
Speaker 3: that look like that solution?
Speaker 4: Ask for compreend solution.
Speaker 5: Why not just be prepared for problems? There's no, we
Speaker 5: don't need a comprehend solution.
Speaker 3: What do we need right now? Do we regulators to
Speaker 3: look at short sellers of banks?
Speaker 5: Yes, you know, like, look, my folks are telling me
Speaker 5: that that's not the problem. The short selling ban if
Speaker 5: you actually analyze stocks and short doesn't seem that big
Speaker 5: a deal. I think they may partially wrong because, as
Speaker 5: you know, some people are unscrupulous and they use other
Speaker 5: means to go short.
Speaker 4: I think that if you look at the detail.
Speaker 5: The SEC has the enforcement capability to look at what
Speaker 5: people are doing by name, in options, derivatives, short sales,
Speaker 5: and they should go if someone's doing anything wrong, people
Speaker 5: are in collusion, or people going short and then making
Speaker 5: a tweet about a bank, they should go after them
Speaker 5: and vigorously, and they should be punished to the full
Speaker 5: extental law allows it. So I think it's possible to
Speaker 5: taking place. We have no evidence of it, but you know,
Speaker 5: my experience in life has been don't assume too much.
Speaker 3: Do you think that they're looking into it?
Speaker 4: I hope so. I don't know.
Speaker 3: When you look at some of the position of JP Morgan,
Speaker 3: of course you didn't really buy any long dated bonds,
Speaker 3: and at the time a lot of people said, look
Speaker 3: stop boarding cash. Do you think regulators and investors had
Speaker 3: pushed some of these banks to take unwarranted risk.
Speaker 5: Yes, I do, but let's be clear the people to blame,
Speaker 5: or the banks and the bank boards and things like that.
Speaker 5: Having said that, I think there would be the humility
Speaker 5: on the part of regulators. That the Federal Reserve itself
Speaker 5: never forecasts going up. Not one Fed governor forecast it.
Speaker 5: And whether you forecast it or not, you should be
Speaker 5: stress testing people for it. Their stress tests always had
Speaker 5: low rates. We always knew about uninsured deposits, and there
Speaker 5: were huge incentives that banks to put securities in health
Speaker 5: and maturity, lower capital requirements, huge incentives own treasuries, lower
Speaker 5: capital requirements, and they counted for liquidity. And I'm hoping
Speaker 5: all that gets looked at, and they should look at
Speaker 5: and say, oh, okay, we're a little bit part of
Speaker 5: the problem as opposed to just pointing fingers.
Speaker 3: So this is what not a regulation problem, it's a
Speaker 3: supervision problem.
Speaker 4: Yeah, it's a.
Speaker 5: Little bit of both. They become very related. I mean,
Speaker 5: supervisors look at are you doing the right thing by
Speaker 5: regulations and so, and like even the stress tests, I've
Speaker 5: always thought that you know, when you have one stress
Speaker 5: test and you have a company completely focused on that
Speaker 5: for three months, you know, does it lull people have a
Speaker 5: false sense of security that all these other things aren't
Speaker 5: gonna happen. And all these other things in history always happen,
Speaker 5: and so you know, I think it was a little
Speaker 5: bit of a mistake that one stress test. I'm not
Speaker 5: asking to do many at this level of detail, but
Speaker 5: you know, our stress test is two hundred thousand pages long.
Speaker 5: Do you think that last one hundred thousand pages added value?
Speaker 5: And my view is it did not.
Speaker 3: Do you think? But things will change because of this
Speaker 3: is just like a catalyst.
Speaker 4: We's gonna get worse for banks.
Speaker 5: I think that people they're just more regulations and more
Speaker 5: rules and more requirements. I hope they do it very
Speaker 5: thoughtfully because you know, if you we love the community banks,
Speaker 5: the regional banks, we're the biggest banks of those folks.
Speaker 5: But you know, if you overdo certain rules, requirements, regulations.
Speaker 5: You know, some of these community banks tell me to have,
Speaker 5: you know, more compliance people than loan officers, you know,
Speaker 5: and so at one point you make it harder for
Speaker 5: them to do business. There are already hundreds of rules
Speaker 5: in place in a lot of ways, it's the mix
Speaker 5: of the rules. If you're gonna change the liquidity and
Speaker 5: maybe not capital. If're gonna change capital and maybe not liquidity.
Speaker 5: If you're gonna add t LAC, then maybe you should
Speaker 5: do something with deposit insurance.
Speaker 4: They should.
Speaker 5: They should sit down and have a very thoughtful conversation
Speaker 5: about what those things are and what we want the
Speaker 5: outcome to be. If you look at the present outcome,
Speaker 5: a lot of things are leaving banks and they should
Speaker 5: you know, I'm not And if that's what they want,
Speaker 5: so be it. But that should be done with the forethought.
Speaker 5: That should not be done because you just putting rules
Speaker 5: and regulations in place and you don't know the consequences.
Speaker 4: The mortgage business, for example, is.
Speaker 5: You know, largely not largely, eighty percent out of banks today,
Speaker 5: and just be careful about what you what you wish for.
Speaker 3: So you bought First Republic, you've had I imagine how
Speaker 3: a good look at what's inside? It's what did you
Speaker 3: find out?
Speaker 4: Yeah, no, we had to go look before we bought it.
Speaker 3: Okay, that's reassuring. But anything that you shigned.
Speaker 5: Up to eight hundred people working around the clock for
Speaker 5: a long time to look at something like that.
Speaker 4: And and in reality, look, they did some things.
Speaker 5: Really well, like if you talk to their customers, I've
Speaker 5: getten calls and emails and great great culture, great customers
Speaker 5: and things like that. Their credit is kind of pristine.
Speaker 5: You know, that's good. So of course we marked all
Speaker 5: the market and roll in very good shape. And we've
Speaker 5: had all the in trade exposure together. We've got thousands
Speaker 5: of people now going out learning about what.
Speaker 4: Their best is.
Speaker 5: We want the best of both about the kind of
Speaker 5: company that comes in our highway, our way or the highway,
Speaker 5: and so there's no surprise there. You know, it's if
Speaker 5: it had to make sense for shareholders. But you know,
Speaker 5: this notion, this notion that it was unbelieva in it
Speaker 5: was a nice thing for shows that's why I have
Speaker 5: to do that. But we also really did it to
Speaker 5: assimilate the bank in a way that's very safe for
Speaker 5: the system and didn't cost uninsured deposits, didn't cost the ft,
Speaker 5: it costs the FDA C as little as possible. But
Speaker 5: I also want to point out I'd be fine if
Speaker 5: they want to change the rules a little bit to
Speaker 5: make it easier for a regional bank to buy a
Speaker 5: big bank. And the other thing about big banks, which
Speaker 5: again is I know, I know, but the thing about
Speaker 5: big banks, we need healthy big banks. We are the
Speaker 5: best banking system in the world, you know, and you
Speaker 5: want that very big, yeah, but we're not. Banks are
Speaker 5: becoming smaller or smaller as a part of the global system.
Speaker 5: So when they look at banks, they say, oh, it's big,
Speaker 5: But when you look at the banking system to the system,
Speaker 5: mortgage have left, a lot of private credits left, certain
Speaker 5: trading functional left, A lot of things are gonna leave.
Speaker 5: You have Apple, you have the neo banks. You have
Speaker 5: you better be a little more thoughtful about when you
Speaker 5: say we, you mean banking per se and so.
Speaker 3: But the US, the Americans, should not fear too much
Speaker 3: finance consolidation in your hands.
Speaker 5: No, because you know, most of our size accrues to
Speaker 5: our clients. So if you look at you know we
Speaker 5: do most large small banks can't do. We do like
Speaker 5: banking large corporations of fifty countries around the world to
Speaker 5: move ten trillion dollars a day. You know, it's hard.
Speaker 5: So these are these are big, complex things. We're not
Speaker 5: big and complex. We want to be for big and
Speaker 5: complex because the Pee we serve a bigger comp We
Speaker 5: bank countries, the World Bank. You know, we do a
Speaker 5: lot of things. And yes, we also bank consumers in the
Speaker 5: United States. So but I want the community banks to thrive.
Speaker 5: I mean, like I said, we want to do everything
Speaker 5: can help them. We didn't want this to happen. We
Speaker 5: didn't cause to happen. The second happened, we knew it
Speaker 5: was bad for old banks.
Speaker 3: Are you too big to fail.
Speaker 5: I don't know what that word means anymore. I mean,
Speaker 5: we're not gonna fail, and I don't know if that means.
Speaker 5: But we certainly didn't mean it to be an advantage.
Speaker 5: Like so, you know, we've asked all our people when
Speaker 5: this crisis happened, I don't want anyone listing any client
Speaker 5: or any bank or from any of the any bank's,
Speaker 5: regional bank or community bank, et cetera.
Speaker 3: So is there anything else that you'd that you'd be buying.
Speaker 3: I mean some of the smaller banks fault, you know,
Speaker 3: fun that's it.
Speaker 5: No, I mean, we're gonna have a lot of blowback
Speaker 5: and having bought this one, but it was the right
Speaker 5: thing to do, you know.
Speaker 4: But we'll get the blowback.
Speaker 5: But again, my job is this people at this thing
Speaker 5: they always look at like the financial deal. Forget the
Speaker 5: financial deal. Eight hundred people working around the clock. Ten
Speaker 5: thousand people deployed now to consolidate systems, risk fraud, credit payments, branches,
Speaker 5: real estate vendors, technology. It's a lot of work, you know,
Speaker 5: and it just tracks us from those other things. And so,
Speaker 5: you know, like I said, we did it. It was
Speaker 5: marginally benefits for shareholders. It was good for the system.
Speaker 5: But and you know we got now we have to
Speaker 5: be prepared for the other side of that mountain.
Speaker 3: How worried are you about the dead ceiling? So Donald Trump,
Speaker 3: Yester the town Halicynna did not seem too worried, and
Speaker 3: to actually told Republicans to stick to their guns.
Speaker 5: Well, it's one more thing he does know very much about.
Speaker 5: It may be put in two categories. One is actual default.
Speaker 5: That is potentially catastrophic. And you can go through a
Speaker 5: million ways, but everyone, anyone's anyone knows that's potentially catastrophic.
Speaker 5: And I don't think that's gonna happen because it gets catastropericy.
Speaker 5: And the closer you get to it, you will have panic.
Speaker 5: And so the closer you get you have markets get volatile.
Speaker 5: Maybe there's Doc mar go down the treasury. Markets will
Speaker 5: have their own problems.
Speaker 4: It's amazing.
Speaker 5: You already have certain T bills it's trading three percent
Speaker 5: and right next to them five percent.
Speaker 4: This is not good.
Speaker 5: And people just remember the American financial system is the
Speaker 5: foundation to the to the global economics system. And so
Speaker 5: and the closer we get more panic, we might get downgraded.
Speaker 5: The last time we were downgrade. We had like sixty
Speaker 5: five or seventy percent debt to GDP. Now it's one
Speaker 5: hundred and five. Now our deficits are two or three
Speaker 5: times that that we had back then. So you know,
Speaker 5: we better be very careful. And I wish we didn't
Speaker 5: get through at all. I'm respectful of both sides who
Speaker 5: you know, one side wants to use the makeup for
Speaker 5: we've got jam down their throats, you know. And I
Speaker 5: would love to get rid of the debt ceiling thing,
Speaker 5: but please negotiate a deal.
Speaker 3: Do you think that it'll be at the end of
Speaker 3: the day of the markets that will spur a deal
Speaker 3: that we have to get to the point where there's
Speaker 3: where there's panic.
Speaker 5: It's a really bad idea because panic becomes something that
Speaker 5: is not good and it could affect other markets around
Speaker 5: the world. But yes, at the end of the day,
Speaker 5: if it gets to that panic point, people have to react,
Speaker 5: and we've seen that before. Another thing about markets is
Speaker 5: always remember panic is the one thing that scares people
Speaker 5: like they take irrational decisions. I remember, even in eight
Speaker 5: people are selling certain securities at forty percent of what
Speaker 5: they would.
Speaker 4: Be worth if we had a great depression.
Speaker 5: But they were like, I want out, I want cash.
Speaker 5: I'm not betting my family's money on this and my
Speaker 5: company's money. People will panic, and again we got to
Speaker 5: be very careful about getting close situation that causes that.
Speaker 3: Do you get a call from Janet yelling about this?
Speaker 4: I'm not gonna talk about personal calls.
Speaker 5: I'm getting We've all spoken about that's youlling, I mean
Speaker 5: everyone's that's.
Speaker 3: Everyone's no for big banks, are you ready? Actually, how
Speaker 3: do you prepare for possible?
Speaker 5: Have a group of people who are very smart we're
Speaker 5: looking at again, it's very unfortunate, it's time consuming. Hopefully
Speaker 5: won't happen, but it affects contracts, collateral clearing houses, clients,
Speaker 5: and affect clients differently around the world. You have to
Speaker 5: then anticipate what people are going to do, which is
Speaker 5: very different than the legality of it. And you know,
Speaker 5: and the closer we get, the more those kind of
Speaker 5: that war room will start. Now it's taking place once
Speaker 5: a week, but my guess is sometimes.
Speaker 4: Call it May twenty.
Speaker 5: First it'll be every day, and then it'll be three
Speaker 5: times a day, and then it'll be much more conversations
Speaker 5: with clients. But what they need to do to help
Speaker 5: get them through it and things like that. It's very unfortunate.
Speaker 5: It should never happen this way.
Speaker 3: Fortress Diamond is always about the balance sheet. Should there
Speaker 3: be a special commission looking at debts in the US
Speaker 3: that you should run?
Speaker 6: Oh?
Speaker 4: God, no, why not? I don't want to.
Speaker 3: On China, they went after tech, they're looking out at finance.
Speaker 3: What kind of message does it tell companies that want
Speaker 3: to do business there.
Speaker 4: Well, I think we say they're looking at finance. It's
Speaker 4: been very limited.
Speaker 5: They've been very much more careful about touching the financial system.
Speaker 5: Who we're outsiders. But look, this is a serious subject
Speaker 5: and anything that relates to national security. I'm a patriot first,
Speaker 5: and I'm going to salute my government, So put that.
Speaker 5: But put that aside. What the government should do and
Speaker 5: it wants to do, and is now say they are
Speaker 5: going to do, is have conversations. They're gonna be tough,
Speaker 5: but they should be thoughtful. Certain things are really national security,
Speaker 5: certain things are not, you know, and we shouldn't confuse
Speaker 5: the two Americans. Shine of a lot of common interest climate,
Speaker 5: nuclear pliferation, anti terrorism, global stability, you know, and we
Speaker 5: have differences. You know, we're capitalists, they're not, you know,
Speaker 5: And it's okay, we could short that out, but we
Speaker 5: need to keep the Western alliances together, not just around
Speaker 5: war and Ukraine, but around strategic economic relationships, including trade,
Speaker 5: including trade.
Speaker 4: We can't take trade.
Speaker 5: Off the table every time we talk to Europe or
Speaker 5: Asian and stuff like that. So I would go back
Speaker 5: into TPP, I would surround the world. I'd want to
Speaker 5: keep the world safe for democracy, and I want to
Speaker 5: have open markets, particularly Europe. And I mean I was
Speaker 5: here last time is when we passed Iraq. A lot
Speaker 5: of great things that act, but there are things I
Speaker 5: don't like, like too much social engineering side of it,
Speaker 5: but also a pistol off all of.
Speaker 3: Our allies put on the China side. So if they
Speaker 3: if they start doing more noise on finance, does that
Speaker 3: hurt Chinese growth?
Speaker 5: Like probably, I think you've already seen it's not trade,
Speaker 5: but you've seen investment going both ways coming down. And
Speaker 5: that's okay in the short run and the long run,
Speaker 5: we should say what and the government's got to decide
Speaker 5: this is not gonna be business companies designed, should they?
Speaker 5: So when Congress criticizes business sometimes there may be truth
Speaker 5: to that. They have to decide what is okay, what's
Speaker 5: not okay?
Speaker 4: What do they want? What security?
Speaker 5: And that's around trade, that's around investment, that's around sharing ipay, I.
Speaker 3: Give you a million pounds or maybe you take it,
Speaker 3: you know, your own million pounds? Where'd you invest.
Speaker 5: Organ I wouldn't buy sovereign debt anywhere? Why, I think
Speaker 5: there's too much The amount of fiscal stimus took place
Speaker 5: and still surging through the system, the amount of QI.
Speaker 5: These were extraordinary numbers, and not just in the US,
Speaker 5: but in Europe and in other parts of the world. Now,
Speaker 5: when I say extraordinary, I mean extraordinary, And therefore I
Speaker 5: think there's a chance you have more inflation than people think.
Speaker 5: So while the FED controls short rates, they don't completely
Speaker 5: control longer rates, and then you could see longer rates
Speaker 5: ticking up because of higher inflation, and even if there's
Speaker 5: a mild recession, they continue to tick up. You know
Speaker 5: a lot of US experience that in the seventies and eighties,
Speaker 5: and I would be a little worried about that. So
Speaker 5: rates are kind of low, spreads still kind of low, okay.
Speaker 3: So you're not putting them in suffering.
Speaker 5: Where are you putting that million I'm central banks.
Speaker 3: For stability. If you look at fragmentation, I mean, the
Speaker 3: world seems a little bit odd, like equities are doing
Speaker 3: one thing, but we keep on being told there's a recession.
Speaker 3: Why is there this massive adusyncrasy.
Speaker 4: That's the contradiction.
Speaker 5: There's still consumers in America job unemployed three point five percent.
Speaker 5: Home prizes have gone up for ten to fifteen years.
Speaker 5: Stock prize has gone in for ten to fifteen years.
Speaker 5: They have a trillion dollars more in their checking accounts.
Speaker 5: They're spending that money. You see it in travel, you
Speaker 5: see it in restaurants, you see it, and you've been
Speaker 5: around here and you see in hotels, you see it.
Speaker 5: That's all good, but the excess money is being spent down.
Speaker 5: So the bite of that is going to happen later
Speaker 5: this year early next year. And the bite of QT
Speaker 5: hasn't happened yet. So if you have higher inflation, so
Speaker 5: I think it's a reasonable thing to say those things
Speaker 5: are coming to fruition.
Speaker 4: Maybe sometime in the end of the year.
Speaker 5: We don't know the effect of that, you know, if
Speaker 5: there's I mean, I would take a mild recession and
Speaker 5: happily right now, I am far more concerned about geopolitics, Ukraine, trade,
Speaker 5: you know, Russia, our relays with China, et cetera. And
Speaker 5: I always have to mind all of our public America
Speaker 5: has a seventy five thousand per person GDP, China's is fifteen.
Speaker 5: We have all the food warn and energy we want.
Speaker 5: They import ten million barrels of oil a day. I
Speaker 5: mean it's not They're not a ten for giant and
Speaker 5: that's a four foot pigmy.
Speaker 4: We have to manage ourselves back. I think we can
Speaker 4: grow more and more thoughtful.
Speaker 3: So you know, a lot of people say it's commercial
Speaker 3: real estates. I mean we talk about nothing else. Everybody
Speaker 3: knows that that could break. Is there something that we're
Speaker 3: not seeing that could break?
Speaker 5: I think it's amazing when you talk about Marcus that
Speaker 5: sometimes it's and the press sometimes like a bunch of
Speaker 5: birds flocking to one thing with endless comments about it.
Speaker 4: Yes, that's an issue.
Speaker 5: So you know, if you look at office real estate
Speaker 5: in be and C real estate with private problem Chicago,
Speaker 5: New York, Partland, Seattle, but probably not Nashville, Tampa, Orlando, Miami,
Speaker 5: et cetera. So you got to you gotta be a
Speaker 5: little more thoughtful about it. And I think if I'm
Speaker 5: the number, banks have six hundred billion of office commercial
Speaker 5: real estate. You know, they had a cushion even dropped
Speaker 5: in value their self equity in it. Maybe something that
Speaker 5: will go bad, particularly the recession, they're gonna be okay.
Speaker 5: It may take a few banks down. That's normal. Stuff
Speaker 5: that isn't abnormal. What is abnormal is the war trade
Speaker 5: the future of democracy. That is abnormal. I'm much more
Speaker 5: concerned about that than the.
Speaker 3: Markets trade that.
Speaker 6: Right.
Speaker 3: If there's a big geopolitics, there's there's how do the
Speaker 3: markets talk them do that?
Speaker 1: Okay?
Speaker 5: Look, if I was a what's cautious, I remind you
Speaker 5: of I'm not. Businesses aren't there to trade its. Sometimes
Speaker 5: they do serve our clients, okay, and so we're gonna
Speaker 5: serve our clients no.
Speaker 4: Matter what happens.
Speaker 3: Very quickly, final question, how are you feeling about the
Speaker 3: Epstein deposition this month?
Speaker 5: I am so sad that we had any relays with
Speaker 5: that man whatsoever. You know, we had top lawyers of
Speaker 5: value in this, from the SEC, Enforcement, the DOJ. You
Speaker 5: know obviously have we known them, we know today we
Speaker 5: would have done things differently. But it's very unfortunate and
Speaker 5: I have deep respect.
Speaker 4: For these women.
Speaker 5: That doesn't mean reliable for the action of an individual,
Speaker 5: but I do have deep respect for them.
Speaker 4: My heart goes out to them and.
Speaker 3: Jimmy daviond thank you so much for your time today.
Speaker 1: Thank you, thank you, Francy Lacua, thank you so much.
Speaker 2: It's the conversation with the chairman and the chief executive
Speaker 2: officer of JP Morgan. I would really underscore off of
Speaker 2: his annual letter, his focus on geopolitics, and as he
Speaker 2: says in his letter in his Wall Street Journal essay
Speaker 2: of a number of months ago, he is very concerned
Speaker 2: of the Western alliances, including France. Lacroix from Paris this morning,
Speaker 2: I'm joining us now, John writing on his Bank of
Speaker 2: England City Group come out. They say we got it wrong.
Speaker 2: We were calling recession doom and gloom, and your United
Speaker 2: Kingdom it looks more resilient. Do you buy the resilience?
Speaker 7: The UK is a small, open economy and what happens
Speaker 7: in the rest of the world is going to be
Speaker 7: very important for the UK. I'm still a bit skeptical
Speaker 7: on that. I think the full impact of adjustments post
Speaker 7: breaks it. That's still out there for the UK. But
Speaker 7: what I'm more skeptical about is the decline in inflation,
Speaker 7: where the inflation rates in the UK is currently ten
Speaker 7: point one percent and within a couple of years they're
Speaker 7: down to basically one percent. And I don't see how
Speaker 7: you get that kind of inflation drop with an interest
Speaker 7: rate of four and a half percent. I'd be very
Speaker 7: surprised if in the US we're above five percent we've
Speaker 7: got and the inflation problem is not as bad as
Speaker 7: in the UK, that there's more rate hypes than the
Speaker 7: market has priced.
Speaker 2: You are the single best person I know in the
Speaker 2: world qualified for this delicate question. I began this morning
Speaker 2: with Jeffrey U on this I was thunderstruck by what
Speaker 2: the PhD from Stanford, Hugh Pill said this morning about
Speaker 2: begging United Kingdom people to spend less money. It reminded
Speaker 2: me back to the thirties Clement Attlee the elites telling
Speaker 2: United Kingdom please don't spend money. I'm absolutely the non
Speaker 2: American like language that we hear out of the United
Speaker 2: Kingdom elites and authorities now is absolutely exceptional.
Speaker 7: Well, I think it's a very I create, but I
Speaker 7: think it was a very interesting that dun com. I
Speaker 7: think it was brought up just the other day about you.
Speaker 7: There's too many Keynesians, there's too much group think. Inflation
Speaker 7: is a product in the end of too much money
Speaker 7: chasing too few goods of services. And it's not about,
Speaker 7: in my opinion, how much consumers spend. You know, that's
Speaker 7: part of the transmission mechanism of rate hikes soften the
Speaker 7: housing market, they ultimately soften consumer spending. But you know,
Speaker 7: if the banking then to put more thought in the
Speaker 7: first place to not if saying true with the Federal Reserve,
Speaker 7: and they put more thought in the first place to
Speaker 7: not letting the inflation genie out of the bottle, he
Speaker 7: wouldn't be out there begging down consumers not to spend
Speaker 7: I mean, you know, or saying people have got to
Speaker 7: get used to being worse.
Speaker 2: So just because of time, John, I want to bring
Speaker 2: this over and you know we're talking here, folks about
Speaker 2: a middle twentieth century theory of theology. If you will,
Speaker 2: in the United Kingdom, do youse censor Kinesi and tilt
Speaker 2: at the federal system of the United States, do they
Speaker 2: have illusions of a demand side ordering of people to
Speaker 2: spend less money here, or are we do a new
Speaker 2: regime in America?
Speaker 7: Well, this exact actly what the Fed's trying to do.
Speaker 7: But what has prevented monetary policy from biting on the
Speaker 7: economy was all of the fiscal injections, the income support
Speaker 7: provided during the pandemic, which ended up in people's bank accounts.
Speaker 7: So at the peak, people had two and a half
Speaker 7: trillion dollars more in aggregat in their bank accounts than
Speaker 7: they would have had had there not been a pandemic.
Speaker 7: So it's very hard to slow the economy down on
Speaker 7: the consumer side. It's much easier on the house.
Speaker 2: And Olivia Bonchari calls the Biden stimulus do you? And
Speaker 2: Conrad to Quadro suggests we've run out the stimulus and
Speaker 2: now we're back to some form of normal American economy.
Speaker 7: I don't think we've run out all the stimulus. It's
Speaker 7: probably close to a trillion dollars still of excess savings,
Speaker 7: but we have seen an adjustment in the savings rate,
Speaker 7: which is still lower than one would expect given more
Speaker 7: inflation is given where interest rates are, people are still
Speaker 7: spending more than you would expect given fundamentals. Because of this,
Speaker 7: these excess savings that have got thirty seconds.
Speaker 1: Do you have a recession call?
Speaker 7: I think that in both the UK and the US
Speaker 7: it's inevitable but not imminent. The inversion of the three
Speaker 7: months T bill to the tenure yield has invariably correctly
Speaker 7: predicted recession a year or so out. Now we may
Speaker 7: have a rolling recession, the housing markets in recession, the
Speaker 7: manufacturing sectors in recession. The service sector is still going
Speaker 7: relatively speaking strongly. So maybe it's a rolling recession, but
Speaker 7: I think it's inevitable.
Speaker 2: John Rny think you're just bringing up there with his
Speaker 2: experience with the Bank of England, the federal reserve system.
Speaker 2: He is with breing a capital. We have to get
Speaker 2: the bank at Horneman. But but Lisa, I'm sorry to
Speaker 2: for just three point eight five seven eight percent. We
Speaker 2: are now fifteen full basis points in on the two
Speaker 2: year yield. In a long cup of SANCA. I mean,
Speaker 2: it's amazing how we moved.
Speaker 8: Yes, And at the same time, the volatility in the
Speaker 8: two year really is what gets my attention, let alone
Speaker 8: which direction it's going. In the fact that a whipsaws
Speaker 8: back and forth, how do you get any stability given
Speaker 8: some sort of risk appetite without that joining us now
Speaker 8: to discuss as we head into a really important our.
Speaker 8: Megan Horneman, chief investment officer at Verden's Capital Advisors. Meghan,
Speaker 8: as we look for the data in the US in
Speaker 8: a half an hour time, how much are you expecting
Speaker 8: it to really represent the strength the resilience that so
Speaker 8: many people are rejecting right now as simply a passing phenomenon.
Speaker 6: Yeah.
Speaker 9: I think that there is some inconsistency in what we're
Speaker 9: seeing in from whether it's the labor market showing showing strength,
Speaker 9: but then there's really that's the only thing from an
Speaker 9: economic standpoint in the US that's showing strength. Whether you
Speaker 9: look at manufacturing or you look at housing, all of
Speaker 9: these things are that we're headed towards a downturn. And
Speaker 9: then you take into into account the federal reserve tightening
Speaker 9: cycle and then the tighter lending conditions. These things are
Speaker 9: going to start to filter into data, not right away,
Speaker 9: but we think in the rest of this year.
Speaker 2: Megan, I want to go to your heritage, leg Mason
Speaker 2: in Baltimore. All the great value house action of leg
Speaker 2: Mason non de Deutsche Bank is a substantial East Coast
Speaker 2: competitor to JP Morgan. We're going to talk to Jamie
Speaker 2: Diamond here in about nine minutes. He's salvaging our banking
Speaker 2: crisis as it is. Is he going to have to
Speaker 2: do more from where Verden sits?
Speaker 10: Yeah?
Speaker 9: Unfortunately, I don't think the regional side of the banking
Speaker 9: crisis is over. I do think that the bigger banks
Speaker 9: are going to have to step in and do more.
Speaker 9: What's changed If you look at over the past couple
Speaker 9: of weeks since he came in and rescued the last bank,
Speaker 9: nothing's changed from a regulatory standpoint, nothing's changed from the
Speaker 9: Federal Reserve. In fact, the only thing that's changed is
Speaker 9: that the Federal Reserve has said, hey, we're not going
Speaker 9: to see rate cuts right away. So the pressure that
Speaker 9: was on the small and MidCap banks earlier this year
Speaker 9: with higher interest rates and taking losses there, that still
Speaker 9: is the case, and that's going to be a problem
Speaker 9: for these banks. So in the absence of knowing anything
Speaker 9: that's changed, I don't think that that, unfortunately is over.
Speaker 9: So I think there's going to be more to come.
Speaker 2: You have the advantage of not being Manhattan based. How
Speaker 2: does commercial real estate look like for Verdun's capital. I mean,
Speaker 2: I know it's off your remit, but what is all
Speaker 2: the analysis you see that you listen to on CIRE.
Speaker 9: It's something that we're concerned about. I don't think that
Speaker 9: it's being talked about enough. Obviously we're concerned just because
Speaker 9: of a slowing economy and higher vacancies, but then you
Speaker 9: kind of the double effect on that is that we
Speaker 9: have higher interest rates and then you throw on top
Speaker 9: of that that we have this maturity wall. That's where
Speaker 9: the big concern comes in. So between twenty three, twenty
Speaker 9: four and twenty five, these are big years where there's
Speaker 9: going to be these commercial real estates. Loans are going
Speaker 9: to have to refinance, and they're refinancing at higher rates
Speaker 9: as well as in a situation where you have tighter
Speaker 9: lending conditions.
Speaker 8: That's an area of concern, an area of strength that
Speaker 8: we may get a better sense of at about twenty
Speaker 8: minutes time as we get the PPI, the factory input
Speaker 8: prices that comes out in the US, it's expected to
Speaker 8: be significantly below CPI, that sort of headline consumer figure
Speaker 8: which is being captured as profits at a lot of
Speaker 8: companies that are actually increasing their profit margins at a
Speaker 8: time when people expected them to shrink for them to
Speaker 8: absorb some of the inflation against some pushback by consumers.
Speaker 8: Is this giving you optimism to go into certain stocks,
Speaker 8: to go into certain credit.
Speaker 9: No, Unfortunately, at this time, I think that that's probably
Speaker 9: short lived. The consumer is weak. We've seen that in
Speaker 9: some of the recent data, and we've also seen that
Speaker 9: with the fact that they're relying a lot more on
Speaker 9: credit card debt, they're not spending the way that they
Speaker 9: used to. If you looked at even the CPI report
Speaker 9: yesterday that show that airfare is actually starting to come down,
Speaker 9: So you're starting to see some weakness in that part
Speaker 9: of the market, part of the economy that was consumers
Speaker 9: were really spending money on, so your leisure and hospitality.
Speaker 9: There's a lot of cracks surfacing, So I'm not optimistic
Speaker 9: that that businesses can continue to pass on those costs
Speaker 9: without it further hurting the consumers.
Speaker 8: So are you basically in the camp that there is
Speaker 8: going to be this inflation that will accompany the weakness
Speaker 8: that we see as it accelerates throughout the end of
Speaker 8: the year. Basically, what's been pushing everybody to keep going
Speaker 8: into bonds.
Speaker 9: Yeah, I do think that we are going to be
Speaker 9: looking at again slowing inflation, a slow down the economy,
Speaker 9: most likely a recession. The inflation situation has been improving
Speaker 9: and we can't deny that.
Speaker 3: But there still is a lot of work to go.
Speaker 9: The biggest inconsistency, and you mentioned that people are going
Speaker 9: into bonds, The biggest inconsistency that we see is that
Speaker 9: investors are pricing in rate cuts, and that's not something
Speaker 9: that we see. The FED is not there. They don't
Speaker 9: have the ability to do that with inflation where it is.
Speaker 9: They can't come in with a stop and go approach,
Speaker 9: which is what they did in the seventies and eighties,
Speaker 9: which proved to be not the right thing to do.
Speaker 9: I think they're going to stay on hold. Interest rates
Speaker 9: will stay higher for longer. They've made it clear in
Speaker 9: their last meaning that they will sacrifice economic growth to
Speaker 9: achieve their goal of bringing inflation down. So I think
Speaker 9: the bomb market's not necessarily pricing that in. Unfortunately within bonds.
Speaker 9: I think the best place to be right now is
Speaker 9: just to park money in cash, have dry powder, take
Speaker 9: advantage of opportunities because they will arise in the second
Speaker 9: half of this year.
Speaker 2: And then on equity markets, do you deploy that cash
Speaker 2: here or do you just wait, wait, wait.
Speaker 9: It depends on what we see from an equity standpoint.
Speaker 9: I think equities are similar to bonds to the equity market. Specifically,
Speaker 9: some of the high growth technology names. These are I
Speaker 9: think still too high from a price to earnings multiple.
Speaker 9: I think they have room to decline and kind of
Speaker 9: realize the fact that the Fed's not going to come
Speaker 9: in and save the day. They've been able to do
Speaker 9: that in the past, They're not able to do it
Speaker 9: this time around. So I think there's going to be
Speaker 9: some correction here in US equities.
Speaker 1: Megan, thank you so much.
Speaker 2: Megan Horneman there with Vernon's Capital Advisors.
Speaker 1: Thomas A.
Speaker 2: Taurus has had a fixed income research it's Chigus, a
Speaker 2: bird company and joins us this morning. You have the
Speaker 2: advantage of down the hall is one. J Trnard Jason
Speaker 2: Trennard looking at the equity market, folding in the JP
Speaker 2: Morgans of the world into your fixed income analysis. What
Speaker 2: is a strateigous view on the length of this banking crisis?
Speaker 2: Does it get fixed?
Speaker 11: What's your definition of fixed? Do we have more bank
Speaker 11: failures along the way, probably. Does it become systemic risk,
Speaker 11: particularly to Ciffy's, Probably not. Does it become a risk
Speaker 11: to super regional banks, probably not as well. But is
Speaker 11: there incremental credit tightening to the US economy from.
Speaker 8: This ahead of US?
Speaker 6: Absolutely?
Speaker 11: And with monetary policy acting with the lag we have
Speaker 11: to assume there are more shoes to drop here and
Speaker 11: more banks to fail.
Speaker 2: Which spread a comparison of two yields is most valid
Speaker 2: to you to get the temperature of PacWest and other banks.
Speaker 2: I'm looking at three months tenure, but there's debt sealing
Speaker 2: issues in that as well. Which spread tells the best story?
Speaker 11: Well, three months tenure might be a better measure for
Speaker 11: banks because you're looking at funding cost relative on the
Speaker 11: front end of the curve versus there. Essentially, what are
Speaker 11: they they potentially getting for yield for new assets they
Speaker 11: might be purchasing. But I don't think anything really gives
Speaker 11: you a good picture of how much their net interest
Speaker 11: margins have compressed over the last two years. I mean
Speaker 11: those are probably zero to negative at this point in time,
Speaker 11: given where they bought those assets, Those long duration assets
Speaker 11: might have been bought at a yield of two to
Speaker 11: two and a half percent, and their funding costs today
Speaker 11: might be four and a half to five and a
Speaker 11: quarter percent.
Speaker 8: This is a really important point that we have moved
Speaker 8: from just simply deposits being there too. Even the deposits
Speaker 8: staying are going to be a problem, given how much
Speaker 8: they're going to have to pay to keep them. From
Speaker 8: your vantage point, what are you expecting in terms of
Speaker 8: the number of failures and the ramifications for monetary policy
Speaker 8: in broader market conditions.
Speaker 11: Well, probably low double digits, maybe high single digits, So
Speaker 11: maybe not many more to come, and fairly small in size.
Speaker 11: But you got to remember, though, that's the norm over
Speaker 11: any given two three year period in the past. Keep
Speaker 11: in mind, from nineteen eighty to about nineteen ninety two
Speaker 11: we had over a thousand bank failures. In the last
Speaker 11: dozen years we've had about a dozen failures. Sore, you
Speaker 11: can say we're overdue. So the norm might be two
Speaker 11: to three per year on average.
Speaker 8: Well, but this is the question, right, if it is
Speaker 8: just the norm, is it not? Setting any alarm bells
Speaker 8: doesn't change anything with respect to the rate hiking cycle.
Speaker 8: It doesn't change anything with respect to your approach to
Speaker 8: what you invest in.
Speaker 11: Well, let me answer this. From our Fed's perspective, this
Speaker 11: absolutely should change their perspective and what they do going forward.
Speaker 11: You have monetary policy acting with the lag, you have
Speaker 11: multiple bank failures, and you have at best multiple banks
Speaker 11: are going to be a negative net interest margin for
Speaker 11: at least the next twelve months. That's a reason to
Speaker 11: pause rate there. Mission is not accomplished on inflation, but
Speaker 11: that's a good reason to pause tightening to see how
Speaker 11: the incremental tightening from the critic tightening that is to
Speaker 11: come plays out. You may end up having to hike
Speaker 11: again in the future, but this is a good opportunity
Speaker 11: to pause.
Speaker 2: Briefest on James Diamond coming up here in forty five
Speaker 2: minutes as well, This conversation is frankly just as important
Speaker 2: because you're in the trenches looking at the ramifications of
Speaker 2: a trust in the JP Morgan Company or from a
Speaker 2: frankly Bank of America to save the day. Are they
Speaker 2: going to come in and have to save the day again?
Speaker 4: I don't think they're going to have to.
Speaker 11: Whether they do come in and make additional plays here
Speaker 11: that I can't speak to, but I don't think they're
Speaker 11: going to need to. I think that this is a
Speaker 11: system that essentially your super regionals are in good standing
Speaker 11: right now, your cities are in good standing. You're talking
Speaker 11: about smaller banks going forward, There's going to have to
Speaker 11: be consolidation in the regional banks. Some of them may
Speaker 11: be boring.
Speaker 2: I don't mean to interrupt, but this is an important
Speaker 2: nuance within a bidding process where the government's forced to
Speaker 2: take a little bitter or just in a normal m
Speaker 2: and A context.
Speaker 11: Both could have could have additional failures where there are
Speaker 11: essentially negative net asset values there that government is forced
Speaker 11: to take the lowest bidder. But you should also be
Speaker 11: expecting going forward to see a typical m and A
Speaker 11: where some regional banks consolidate and become superregionals going forward,
Speaker 11: and even some superregionals may grow themselves to become to
Speaker 11: breach that Siffy threshold. That should be the expectation going forward.
Speaker 11: The reality is, I think the US banking system is
Speaker 11: migrating more towards what you might have in Canada or Australia,
Speaker 11: where you have a few very large dominant banks. It's
Speaker 11: not going to be three or four like you have
Speaker 11: in those regions. It might be eight to ten in
Speaker 11: the US.
Speaker 8: Let's toff tail this question about financial stability and to
Speaker 8: what we're going to get in about fifteen minutes, which
Speaker 8: is the latest reat on inflation as well as the
Speaker 8: labor market. There is a question about whether there is
Speaker 8: more strength and whether what we've seen in the banking
Speaker 8: sector is more of the normalcy, as you point out,
Speaker 8: rather than a sign of some sort of massive fissure.
Speaker 8: If it is a sign of strength, what does that
Speaker 8: do in terms of the stickiness of inflation as well
Speaker 8: as growth, just like what we saw over in England.
Speaker 11: Yeah, well, I think you had mentioned earlier discussion on
Speaker 11: sales from places like Proder luxury goods. The US economy
Speaker 11: still continues to be driven by a consumer, which whether
Speaker 11: they're spending more than they can afford, it's irrelevant. They're
Speaker 11: still spending more and the labor market is not yet
Speaker 11: rolling over, So there's still strength to the consumer side.
Speaker 11: There's still strength to the labor market, and in particular
Speaker 11: in the retail space and in in luxury space, in
Speaker 11: the leisure space. So there's still strength to come in
Speaker 11: the US economy, and there's still likely to be sticky inflation.
Speaker 11: What that means is that even if the Fed pauses here.
Speaker 11: They're not likely to cut as soon as the market
Speaker 11: is pricing, and the market is pricing in rate cuts
Speaker 11: for we'll say July to August. That seems too early
Speaker 11: given how sticky inflation is and how strong the labor
Speaker 11: market continues to be. We do think the labor market's
Speaker 11: going to roll over, but we think inflation is going
Speaker 11: to remain sticky, which means that there's going to be
Speaker 11: more stress on banks because the Fed funds rate is
Speaker 11: going to remain at this five percent to five and
Speaker 11: a quarter percent longer, and you're going to continue to
Speaker 11: drag drag on credit formation and stress on banks because
Speaker 11: net interest margins is going to remain negative for longer.
Speaker 8: How do you play this, because it's really against consensus
Speaker 8: at least as it's being played out in market pricing.
Speaker 11: Well, that's a tough question because right now you look
Speaker 11: at equity valuations, they don't reflect a recession risk, and
Speaker 11: they also don't reflect the fact that there's credit tightening
Speaker 11: to come later on. Same thing for corporate credit markets,
Speaker 11: spreads are a little bit too tight at these levels.
Speaker 11: So I think you play this by being very cautious.
Speaker 11: You continue to hold cash at elevated or above average levels,
Speaker 11: and you wait for something to break to the downside.
Speaker 1: Two part question.
Speaker 2: We got to be quick because of the time we're
Speaker 2: trenderd on the equity market. Is he called a bottom
Speaker 2: of the bear market in October or does he have
Speaker 2: a more cautious few more cautious.
Speaker 11: We're expecting equity prices equity valuations to dip lower again.
Speaker 2: So you had a ten yere yield four point two
Speaker 2: zero percent, The ten year yield is crater down. What
Speaker 2: are the ramifications to you if the ten year breaks
Speaker 2: down to a new lower yield below three point three
Speaker 2: zero percent.
Speaker 11: Well, so we're our forecast is about three to two
Speaker 11: for a bottom this cycle. We could easily on intery
Speaker 11: day get down close to three. If we get down
Speaker 11: two or below three, it tells us that something is
Speaker 11: breaking on the credit side. That's bigger than a regional bank.
Speaker 11: That would be my takeaway from that.
Speaker 1: Qus you valuable, Tom, Thank you so much. Tom. Stores
Speaker 1: is where this was Strateigua.
Speaker 8: It's a bird company, Brian Weezer, isn't we just got
Speaker 8: one out? In terms of Disney, he is a principal
Speaker 8: at madisone and Wall covering all things media for decades.
Speaker 8: There is a question here about why this is surprising,
Speaker 8: given that this transition was going to be awkward from
Speaker 8: a cable to streaming, and it's a rocky process amid
Speaker 8: a lot of economic uncertainty.
Speaker 10: Yeah, I don't think it's that surprising. I mean, this
Speaker 10: was never going to be a better business than the
Speaker 10: one that it's replacing. They had a fort nearly forty
Speaker 10: percent margin business in the Media Network's division back in
Speaker 10: ten years ago. And you're getting in care, more costs
Speaker 10: for marketing, more costs for streaming, physically delivering content, and
Speaker 10: then you need way more content to make this whole
Speaker 10: thing work, and you can't force sleep. This is the
Speaker 10: right thing to do. It's the right way to make
Speaker 10: a business that survives for fifty years and beyond. And
Speaker 10: that's why I said what it was an analyst covering
Speaker 10: the stock thinking, oh, it's the best the fair price
Speaker 10: right now, and that's kind of what's played out for everyone.
Speaker 6: Brian.
Speaker 8: There's this concern as we try to grow subscriber bases,
Speaker 8: or as different people, different streaming companies try to expand
Speaker 8: their user base, do you continue to raise prices, what
Speaker 8: do you prioritize either increasing subscribers or increasing revenues. How
Speaker 8: is does he doing on that front, given that they
Speaker 8: came in with a pretty disappointing projection of just growth.
Speaker 6: Well, here's the thing. They can continue to raise prices
Speaker 6: and still grow subscribers on a earier basis.
Speaker 10: I think they'll continue to do so, as other services
Speaker 10: will when they raise prices. The problem is that that
Speaker 10: money is coming out of traditional PATV. I publish something
Speaker 10: on my sub stack this past week pointing out there
Speaker 10: there is about one hundred billion dollars of spending in
Speaker 10: the United States at least by consumers on PATV services
Speaker 10: now declining in terms of actual spending.
Speaker 6: That's one hundred billion dollars of money that can go
Speaker 6: into these streaming services still, but it's going to come
Speaker 6: out of PATV.
Speaker 2: Where are sports in five years? Brian Disney has a
Speaker 2: huge effect on sports with the ESPN, I get it,
Speaker 2: But where is the Brian Weezer view on sports entertainment
Speaker 2: in five years?
Speaker 6: Yeah, it will still be super important.
Speaker 10: I mean, but Bob Iger, at least, why is enough
Speaker 10: to point out that there is an inevitability to ESPN
Speaker 10: in particular eventually.
Speaker 6: Having a slagship services and streaming service.
Speaker 10: The reality is that not everyone needs to watch everything
Speaker 10: that's on ESPN or on traditional TV sports, so it
Speaker 10: may end up being a little bit more niche maybe
Speaker 10: not as ubiquitous as it has a historical United States.
Speaker 2: I look at Disney and I look at a creative
Speaker 2: guy as well. Is there a lot of cost coding
Speaker 2: to do? Is Disney and for that matter, other companies
Speaker 2: like it. Is there a lot of fat there to cut?
Speaker 2: Or are they bear bones right now?
Speaker 10: You know, they talk certainly about containing their increases in
Speaker 10: spending on content, and it's hard to say what's that is.
Speaker 6: I mean, certainly there's a great story.
Speaker 10: In the journal about what's happening for a paramount on
Speaker 10: content spending on Yellowstone and other related shows, and that's
Speaker 10: a good example. Maybe a bit extreme in terms of spending,
Speaker 10: but I think in general that the thing is if
Speaker 10: you spend more money on programming, you will get more viewers. Right,
Speaker 10: they will continue to grow the platform, the streaming platform,
Speaker 10: as long as they continue.
Speaker 6: To increase their spending overall on programming. Obviously, they need
Speaker 6: good editorial choices and good content.
Speaker 8: We used to say content is king and today, we're
Speaker 8: talking about cost cutting and a lot of these different platforms.
Speaker 8: If anyone goes anywhere near social media, they'll see a
Speaker 8: discussion of the writer strike in Hollywood. That's affecting a
Speaker 8: whole host of different streaming networks. And I wonder how
Speaker 8: dovetailed these ideas. Are this idea so that writers want
Speaker 8: to get paid, that content wants to get rewarded given
Speaker 8: the years of large s and the networks just aren't
Speaker 8: willing at this time. How much is that going to
Speaker 8: be a persistent battle based on the dynamic that we've
Speaker 8: been talking about.
Speaker 10: Yeah, I worry about that because I'm not sure how
Speaker 10: First of all, both sides on the strike might be
Speaker 10: too optimistic in their expectations where the industry's going to evolve.
Speaker 6: Again.
Speaker 10: I've rolled up all spending on video, including theatrical spending, DVDs,
Speaker 10: whatever the left of that streaming atv ette, and basically
Speaker 10: I calculate about a one percent growth rate over the
Speaker 10: last fifteen years every year on average.
Speaker 6: Maybe that's about right.
Speaker 10: Going forward, it's all shifting towards the far less profitable
Speaker 10: businesses streaming, so there's less money to divide up.
Speaker 6: Whatever the outcome is Brian.
Speaker 8: There was also discussion just to finish up here with
Speaker 8: Disney about declining revenues on their cable networks from advertisers.
Speaker 4: How much of this is.
Speaker 8: Companies not necessarily having the extra money to advertise. How
Speaker 8: much of this is just all of the advertising moving
Speaker 8: to Google, to Facebook or Meta to all of these
Speaker 8: other social media platforms.
Speaker 6: That's been a big factor for sure.
Speaker 10: I mean, we're seeing television has probably declined by high
Speaker 10: school digits at this point. I don't think I'll say
Speaker 10: that bad all year long. It'll probably get less bad
Speaker 10: as your progress is.
Speaker 6: The typical advertiser is absolutely shifting their spending primarily.
Speaker 10: I think package goods companies are shifting spending into retail
Speaker 10: media networks. We're just doing possibly well. TikTok for now
Speaker 10: is at least still doing really well. There's a lot
Speaker 10: of new places that are seeing a lot of growth.
Speaker 10: And Uber is an ad platform. Walmart selling ad that's.
Speaker 2: Where Brian, Thank you Brian Weiser from Madison and Wall
Speaker 2: with an update there and streaming and.
Speaker 1: A lack of profit out there.
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Speaker 1: Thanks for listening. I'm Tom Keen, and this is Bloomberg