Speaker 1: Welcome to the Bloomberg's Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Ferrell and Lisa A. Brawmowitz Jaily. We bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. To find Bloomberg Surveillance on Apple podcast, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg terminal.
Speaker 1: Right now, Kristen barely joins us, and she has an
Speaker 1: exceptionally important single sentence of courage in her research. Note
Speaker 1: anytime the index has sold off by more than the
Speaker 1: three year future return has an average of forty Kristen,
Speaker 1: this is off the bounce. How do you know when
Speaker 1: to step in and go along? It's it's a really
Speaker 1: really hard decision, and we can understand why people are
Speaker 1: naturally nervous given everything that's going on. But I think
Speaker 1: for those investors that are able to take a long
Speaker 1: term view, and three years isn't necessarily a long term view,
Speaker 1: the data is in your favor and and time it's
Speaker 1: certainly on your side. So exactly as you said, Tom,
Speaker 1: the three year forward return. Any time that we've seen
Speaker 1: the SMP five hundred sell off by more than twenty
Speaker 1: five percent has always been positive and has averaged a
Speaker 1: to Google return of five years. It's actually talk to
Speaker 1: times on your side. There are buying opportunities here. Talk
Speaker 1: to us at City Group about the huge advantage you have.
Speaker 1: And I'm gonna pick on Jim Suva today, but there's
Speaker 1: Horrowits and the rest of them. You've got the security
Speaker 1: analysts talking day today today with the corporations. Now ban
Speaker 1: came out of Bank of America said business is good
Speaker 1: J and J is giving some form of decent forward guidance.
Speaker 1: What are you hearing from your research staff about corporations
Speaker 1: are weathering this moment? Yeah, so we've been coming into
Speaker 1: Q three earnings and you will talking about this a
Speaker 1: little bit earlier. The bar has been revised down and
Speaker 1: said pretty low, so we could see some of those
Speaker 1: counter trend rallies on the back of it. But what
Speaker 1: are we watching and what are we listening for in earnings?
Speaker 1: All about the consumer? So obviously that was a key
Speaker 1: point in financial earnings, just listening to is the consumer strong?
Speaker 1: Are they continuing to spend? I think there's a nuance
Speaker 1: here though, so as we see credit card balances increase,
Speaker 1: as we're looking at spending patterns. There's a big difference
Speaker 1: between nominal and real numbers here, and so inflation is
Speaker 1: impacting our consumers. They are impacting spending patterns, and so
Speaker 1: inflation benefits top line revenue growth. So we have to
Speaker 1: get down to those unit numbers and see whether they're
Speaker 1: spending on the same things and whether they're buying the
Speaker 1: same quantity. And that's something that can flow through to
Speaker 1: earnings and put pressure in on Q four and going
Speaker 1: into as well. Christen, I'm still stuck on the first
Speaker 1: point here talking about history and not necessarily predicting the future,
Speaker 1: but being a guide for perhaps it is a good
Speaker 1: time to invest just based on how much stocks have
Speaker 1: gone down, And I do ask is this time different?
Speaker 1: I mean, does that give you enough conviction in its
Speaker 1: own right to go all in with risk if you
Speaker 1: have a longer time horizon. So to be fair here,
Speaker 1: and so we are actually defensively positioned. We're fully invested,
Speaker 1: but defensively positioned in this market. We believe that these
Speaker 1: markets require patients, diversification and discipline, so we don't want
Speaker 1: investors all in cash, and so in our portfolios we're
Speaker 1: actually overweight fixed income. Ever since we saw. I mean
Speaker 1: the tenure right now at four percent for investors who
Speaker 1: are in cash, and you even look out at six
Speaker 1: months te bills yielding close to four percent. We want
Speaker 1: to basically increase those yields and see opportunities and fixed
Speaker 1: income in investment, grade, in in government, in munis, and
Speaker 1: even in prefers where we see some opportunity as opposed
Speaker 1: to going long financial stocks. Getting that yield and preferreds
Speaker 1: of high single digits is something that's attractive and can
Speaker 1: combat some of the impacts of inflation. So how much
Speaker 1: are you going to the long end of the curve?
Speaker 1: And I go there because a lot of people have
Speaker 1: been hesitant saying, yeah, perhaps skills are close to their peak,
Speaker 1: but not quite yet, because we have seen the whole
Speaker 1: curve shift up again and again again. It depends on
Speaker 1: the risk applicate of the investor. I would say the
Speaker 1: sweet spot right now, because we could continue to see
Speaker 1: some volatility is probably out about two to five years.
Speaker 1: And most of our investors are long individual bonds, so
Speaker 1: that ability to be able to hold. And we have
Speaker 1: to remember that even just two years ago we had
Speaker 1: forty of the world's government dead was negative yielding so
Speaker 1: seeing some of these yields out five years pit mid
Speaker 1: single digits and slightly more is an area where we're
Speaker 1: comfortable and we're comfortable holding and withstanding some of that
Speaker 1: mark to market movement. Yeah, but in the bills portfolio
Speaker 1: right now, I think of the great Margie Patella on this.
Speaker 1: How do you judge between forget about sixty theory, it's
Speaker 1: all gone down in flames. How do you judge between
Speaker 1: bonds and equities? Our equity has given your enthusiasm the
Speaker 1: new bond. Yeah, so I think this is why we're
Speaker 1: actually pretty balanced, are in pretty defensive. So we do
Speaker 1: think that we are going to see pe grades. We
Speaker 1: do think that we are going to see peak inflation.
Speaker 1: But what you're going to see dominate over the next
Speaker 1: couple of months is volatility, and so you will see
Speaker 1: these type of counter trend rallies. Like we mentioned. If
Speaker 1: you are playing that long game, there are certainly opportunities,
Speaker 1: But if you're someone who's looking right at the short term,
Speaker 1: what you want to have is that balance. Because Q
Speaker 1: four so Q four in U S equities going back
Speaker 1: to Night of the Time has generated positive returns and
Speaker 1: an average of four point four percent it is the
Speaker 1: best quarter for US equities of any quarter throughout the
Speaker 1: year if we have some surprises and earnings as well.
Speaker 1: But where do you want to be positioned there? You
Speaker 1: want to be positioned in dividend growers. You want to
Speaker 1: be positioned in sectors that will be able to withstand
Speaker 1: the recession. This is why you hear a lot about healthcare.
Speaker 1: Health Care is a sector that's been able to consistently
Speaker 1: grow earnings the past four recessions at a clip. THEMA
Speaker 1: eight percent. Consumer staples is supposed to five percent, So
Speaker 1: you're not searching too much there, but you still have
Speaker 1: exclosure to equities. What about high quality big tech? I
Speaker 1: mean we're coming into that season. I think it's October
Speaker 1: is when we get Apple learn is what about big tech?
Speaker 1: So high quality big tex you were talking about this thrilier.
Speaker 1: We have to look at the international exposure, We have
Speaker 1: to look at at the pressure in terms of just
Speaker 1: how strong the dollar is. Overall. That being said, in technology,
Speaker 1: there's a huge difference between profitable tech and unprofitable tech.
Speaker 1: When we think of unprofitable tech, I like to think
Speaker 1: of that as a call option on an unknown future.
Speaker 1: So in long term secular bowl markets and low interest
Speaker 1: rate environments that call option on an unknown future is
Speaker 1: much more palatable than in this type of market conditions.
Speaker 1: So even when I was talking about the dividend growers,
Speaker 1: these types of companies exist within technology as well, and
Speaker 1: you could make the argument that a lot of the
Speaker 1: profitable tech we're going to be looking for those signs
Speaker 1: of not only margin compression, but we're also going to
Speaker 1: be looking for signs of durable demand. Which of these
Speaker 1: companies continue to have durable demand, whether that's a partner
Speaker 1: that's in software. Christen, awesome to hear from you, as
Speaker 1: always Christin Piddley that a city Global West Management. Let
Speaker 1: us continue right now, and we do so and celebrate
Speaker 1: the holiday season. We begin Thanksgiving with Jerome Schneider, Managing Director.
Speaker 1: I had a short term portfolio management an adviser and
Speaker 1: Thanksgiving dinner at Pimco and here on Bloomberg Surveillance as well.
Speaker 1: How's your year been? Short term paper is a place
Speaker 1: to hide, right, It's busy, It's quite busy, and absolutely
Speaker 1: short term paper is a place to hide. I think
Speaker 1: the nuances a short term paper really are with the
Speaker 1: story is about for two thousand twenty two in actually
Speaker 1: two thousand twenty three, folks, as you've highlighted before is
Speaker 1: cash is not necessarily as democratic as people would like
Speaker 1: to think. And well cash is king the crown jewel
Speaker 1: of how you want to think about it is really
Speaker 1: more nuanced than that. Yes, bank deposits are some cases
Speaker 1: slowly moving. Higher T bills may offer some attraction, but
Speaker 1: the reality is they're treating act quite rich in some
Speaker 1: cases thirty to fifty basis points through benchmark rates, meaning
Speaker 1: what the FED is expected to be at. So there's
Speaker 1: other value if you actually want to be more appropriately
Speaker 1: highlighting and thinking where interest rates should be headed based
Speaker 1: upon Fed expectation. PIMCO meeting that you have out there,
Speaker 1: the tenant meeting, whatever the legendary meeting is, what do
Speaker 1: you say about the short term space and dollar ill
Speaker 1: liquidity worldwide? There was no other theme, Well, there's there's
Speaker 1: a reality of what we're thinking about is that we
Speaker 1: are facing a change where people need to digest the
Speaker 1: changing cost of capital, and the notion of liquidity is
Speaker 1: one that has been more prolific. People are concerned about
Speaker 1: liquidity has been sort of a call word, if you will,
Speaker 1: but it means very different things to very different people,
Speaker 1: and I think that's the consequence of when we want
Speaker 1: to think about the marketplace. You have macro economic liquidity,
Speaker 1: you have liquidity concerns driven to quantitative tightening. You have
Speaker 1: haircut concerns and marginal requirement concerns, which we've clearly it's
Speaker 1: seen within England, and more importantly as the as the
Speaker 1: economy progresses to more of a state of concerns about growth,
Speaker 1: then we're gonna see other tightening, ratchets of illiquidity and haircuts.
Speaker 1: Those are the liquidity fact thats we really need to
Speaker 1: be paying attention to. So from a starting place at
Speaker 1: PIMCO and everybody else, we have relatively judicious high amounts
Speaker 1: of liquidity, preventative liquidity, defensive liquidity. But the key then
Speaker 1: comes into how do you use it? How do you
Speaker 1: think about it opportunistically given the uncertain outcome, given the
Speaker 1: growth environment, given the slow GDP but perhaps shallow but
Speaker 1: longer recession that we think at PIMCO, And then ultimately
Speaker 1: how do we then extrapolate that to value in the future.
Speaker 1: So it's all about really how does liquidity translate to
Speaker 1: volatility within the marketplace and how do investors absorb that
Speaker 1: volatility properly? The problem for a lot of people in
Speaker 1: the market right natural roum, as you know, is when
Speaker 1: you expect that to be liquidity in an act of
Speaker 1: class where there should be liquidity and then there is not. Right.
Speaker 1: Can you talk to us about what's happening in the
Speaker 1: treasury market? We know that last week the Treasury reached
Speaker 1: out to a group of individual is to try to
Speaker 1: he has this connection with a group of individuals in
Speaker 1: the market. They spake to they try and get feedback
Speaker 1: about what's going gone. One thing they asked about was
Speaker 1: whether they should buy back certain securities to improve the
Speaker 1: liquidity and the functioning of the market. What do you
Speaker 1: say back to that there's there's This has actually been
Speaker 1: top of mind, not just simply over the past few months,
Speaker 1: and we published a paper at PINCO sort of highlighting this,
Speaker 1: suggesting some all to all trading and actually elicited some
Speaker 1: pretty positive constructive dialogue within the marketplace. That's a function
Speaker 1: aspect of where you want to think about where the
Speaker 1: market and how the market is digesting actual functional, high
Speaker 1: quality assets is a concern, but it's also an opportunity
Speaker 1: for investors those investors they can really think about how
Speaker 1: to maneuver around these higher cost of capital and more importantly,
Speaker 1: the opportunity sets because of the wider bit offers. So
Speaker 1: what I would suggest is, yes, it's a transformation from
Speaker 1: what we've been used to over the past one to
Speaker 1: two decades. And it is a concern when you think
Speaker 1: about some of the curtailments that you have more regulatory
Speaker 1: and sort of functional framework, But as an active manager,
Speaker 1: you're going to incorporate it and find opportunities to incorporate it.
Speaker 1: And it just might simply mean that, yes, there's more
Speaker 1: volatile volatility, but you're gonna have to be more convicted
Speaker 1: and have longer holding periods. So there are two different
Speaker 1: things here. There's one about the treasury possibly buying back debt,
Speaker 1: and then there's investors acting as liquidity providers and stepping
Speaker 1: in and the all to all and disintermediating banks. Is
Speaker 1: that what you're saying that if the banks were not
Speaker 1: necessarily the ones that were there, and you had a
Speaker 1: platform where you could really make markets in real time,
Speaker 1: that that would possibly be a more effective way providing
Speaker 1: liquidity to this market. Well, I think liquidity in general
Speaker 1: isn't necessarily a democratic process. And so when you think
Speaker 1: about it, there's different layers of liquidity within the marketplace,
Speaker 1: and we're suggesting is you have more degrees of freedom
Speaker 1: than maybe perhaps that's better for the market liquidity as
Speaker 1: you go for it. It doesn't necessarily mean that people
Speaker 1: have a view or a more constructive you are a
Speaker 1: less CONSTRUCTI view of where the market is headed. The
Speaker 1: market is the market, but when we think about it,
Speaker 1: that broader based landscape is we're really trying to head
Speaker 1: in that regard. I mean, while the Bank of America
Speaker 1: Fund Manager survey showed that investors are holding the highest
Speaker 1: cash piles going back to two thousand and one, and
Speaker 1: we hear that from everyone. You know, cash is your friend.
Speaker 1: You want to be liquid, you want to be nimble.
Speaker 1: Is your experience, And it's just flooding in that people
Speaker 1: are coming to you and basically just saying, please give
Speaker 1: us anything you can to give us a sense of
Speaker 1: what our income could be, how to be safe, and
Speaker 1: you're sort of overwhelmed or is it not really the case?
Speaker 1: You know? Where the problem is LESA is that people
Speaker 1: are focused on looking and driving in the rear view
Speaker 1: mirror and the reality is that as you're thinking about
Speaker 1: where it is to come, they're so focused on what
Speaker 1: has happened in the past one to two quarters they
Speaker 1: don't necessarily have the ability to look out the front
Speaker 1: window and see the opportunity set that perhaps that cash
Speaker 1: and more importantly fixed income provides in this landscape. One
Speaker 1: of the concerns that you have is obviously growth. One
Speaker 1: of the concerns you have is sort of does the
Speaker 1: risk parity element of having interest rate exposure duration offset
Speaker 1: some credit risk taking and broader risk taking with inequity markets,
Speaker 1: And maybe those correlations don't hold at this moment, but
Speaker 1: if they do re emerge, then there's some different opportunity sets.
Speaker 1: And the higher, the higher rate of environment we're finding
Speaker 1: in right now is actually the setting of the table
Speaker 1: or something that's very different than we had for the
Speaker 1: past few years, in decades. So don't keep looking in
Speaker 1: the review mirror. Ultimately, in that review mirror is not
Speaker 1: just two quarters, it's a decade's worth of zero rights
Speaker 1: negative rights QA. When I hear you talk and I
Speaker 1: get the sense that you think this is something that's
Speaker 1: going to hang around, well just one year, twelve months,
Speaker 1: that this is something we need to adjust to. It's
Speaker 1: going to be unlikely that we get back to a
Speaker 1: zero rate level for you know, in a flat yolk
Speaker 1: curve like we've been witnessing. Is a two year note
Speaker 1: at twenty five basis points seems to be something that's
Speaker 1: out in the past. But what I do think is
Speaker 1: going to happen is that when you see where we
Speaker 1: are at least for the next one to two years,
Speaker 1: a higher inflationary print. When you're a PC that might
Speaker 1: level out about three point five percent closer to two percent.
Speaker 1: That means front and rates are probably going to be
Speaker 1: in this vicinity for some period of time, and investors
Speaker 1: should be comfortable with that. In that notion obviously has
Speaker 1: onset effects of what happens with equity markets, risk taking,
Speaker 1: and things like that, but fundamentally, this is a higher
Speaker 1: rate level and investors need to think about the value
Speaker 1: of fixed income in this environment, not just because of
Speaker 1: higher rates, but because of its complementary effects to total
Speaker 1: portfolio alt Well, that's where I wanted to go to
Speaker 1: to short term, guy, let's go we could long term.
Speaker 1: Does the actually assumption shift we've been going from eight
Speaker 1: percent to six percent? Good news? In terms of cash
Speaker 1: imputed into plans. Are we going the other way now
Speaker 1: where we're gonna have a higher actuarial assumption of our
Speaker 1: retirement plans? Yeah, Tom. Ultimately, investors are gonna look for
Speaker 1: different sources of how to produce total return. What we've
Speaker 1: focused on is declining interest rates happened over the previous
Speaker 1: three decades with simply that lower rates spread on higher
Speaker 1: capital appreciation opportunities. That calculus has fundamentally changed, and so
Speaker 1: the total return composition is not just on capital appreciation.
Speaker 1: It's on the ability to carry and earn income with
Speaker 1: us through dividend income or income from bonds in the
Speaker 1: traditional sense. And that is quite honestly one of the
Speaker 1: things that investors who are maybe new to the markets
Speaker 1: or the past decades so need to be thinking about.
Speaker 1: So a lot of factors are putting us back into
Speaker 1: a more traditional nineteen seventies, eighties and early nineties mindset,
Speaker 1: not only how to trade markets from a liquid perspective,
Speaker 1: but also how to think about constructing portfolios. When was
Speaker 1: the last time we sat around the table together? Isn't
Speaker 1: this nice? It's going to see? It was more and
Speaker 1: more in town for the Yankees, t k no, no, no,
Speaker 1: just just happened to the Yankees are playing that he's
Speaker 1: in town. Total coincidence. Okay, I'm sorry to accuse you
Speaker 1: for being in town for the Yankees. I'm here to
Speaker 1: give tricky advice. Of course, Jo Schnyder and Pimcoke great
Speaker 1: to see it. Let's talk about the raped market. We
Speaker 1: can talk about QT, and let's talk about Sterling. We'll
Speaker 1: do that with Kit Juke's chief FX strategistics sock Gen.
Speaker 1: Kit help me out here. So when a report that
Speaker 1: QT gets delayed, Sterling climbs to session highs through one fourteen.
Speaker 1: On the pushback from the Bank of England, sterling falls
Speaker 1: to session those Kit am I to believe that QT
Speaker 1: is somehow sterling negative if and delaying QUT is somehow
Speaker 1: sterling positive based on a price action, That's what it's
Speaker 1: telling me. What do you make of that? I think
Speaker 1: the price actually tells you. By the time you've had
Speaker 1: two conflicting messages within one morning, the second one coming
Speaker 1: at the start of a guilt auction, everybody's looking at
Speaker 1: the UK and said, please, please, please, can you get
Speaker 1: the messaging right to us? We are all confused because
Speaker 1: you know what, what we need for the currency, what
Speaker 1: we need for the market, is for the volatility to
Speaker 1: go away, for everything to calm down, and to put
Speaker 1: this kind of period of massive uncertainty behind us. So
Speaker 1: contradictory reports just don't help in that regard at this
Speaker 1: point in time. I mean, the most confusing thing of all.
Speaker 1: Next would be and that, although they're not planning on
Speaker 1: delaying the start of QUT, if they go on and
Speaker 1: do it anyway because of the volatility and the guilt
Speaker 1: market at some point in the next couple of weeks,
Speaker 1: and then we'll then we're full circle. I thought you
Speaker 1: maybe some people should say less. I thought, you know,
Speaker 1: today was really lovely and it was very indeterminate. It
Speaker 1: was like, we need to wait, we need to wait. Now.
Speaker 1: What what do you do with a straw dollar reality,
Speaker 1: given the unsettled nous of your note? Can you go
Speaker 1: the other way and call finally week dollar or do
Speaker 1: you just sit here? I wish I could, But that's
Speaker 1: why I think that what we do is we get
Speaker 1: stuck with less volatility. I mean, you know that there
Speaker 1: are two problems with with looking for a week dollar.
Speaker 1: One is you just have to embrace the idea that
Speaker 1: we're going to have the softest of soft landings in
Speaker 1: the United States and everything's going to be fine and lovely,
Speaker 1: and the equity bulls are right. And the difficulty with
Speaker 1: that is if the economy doesn't slow, they'll they'll hike more,
Speaker 1: not less, and we're going to get a very very
Speaker 1: inverted curve by Christmas at this rate. So that that's
Speaker 1: the first tip, and the second one, frankly is still
Speaker 1: Russia Ukraine. The whole problem that we have out there
Speaker 1: that how how do I turn around in Europe and
Speaker 1: say I want to sell the dollar? Shall I buy?
Speaker 1: Shall I buy the pound? Shall I buy the euro?
Speaker 1: When I'm getting newspaper reports about Yeah, if we have
Speaker 1: cold days in the middle of winter in January February,
Speaker 1: you're gonna have to light slow going to go out
Speaker 1: um that that you know, have we priced that in
Speaker 1: properly yet? I'm not sure? So it could We could
Speaker 1: get stuck here, I guess that's the that's the end
Speaker 1: conclusion of that until we get the next trend, and
Speaker 1: the next trend might be kicked off by the next
Speaker 1: leg up. Inten you not just quickly. Jordan Rochester resign
Speaker 1: yesterday of Nomura, and he was talking about how, yeah,
Speaker 1: central banks are important, but really it's about the economic
Speaker 1: trajectory and right now, more of an austerity kind of
Speaker 1: approach from fiscal policymakers in the UK will lead to
Speaker 1: a deeper recession and that means a more negative outcome
Speaker 1: for the pound. Is that the kind of rash now
Speaker 1: that you think is what you should be following? How
Speaker 1: much is the economy really the main driver here? I
Speaker 1: think the economy becomes one once we start focusing on
Speaker 1: the policy because it's not as important and the economy
Speaker 1: is heading into a recession that could last a long time.
Speaker 1: And yes, to the extent of that, you know that
Speaker 1: there's a sort of a wisdom out there that says
Speaker 1: what you need to do when your financial position as
Speaker 1: a country, your fiscal positions poor, is tighten fiscal policy
Speaker 1: really aggressively, and you know in the hope that will
Speaker 1: improve it as opposed to get yourself any chance of
Speaker 1: growing out of your fiscal problems. Then then we start
Speaker 1: looking more like Japan every second, and so you know
Speaker 1: that that's pretty scary for a country like the UK
Speaker 1: with the current account deficit and for sterling so yeah,
Speaker 1: it's not a great picture. Um. I think the only
Speaker 1: piece about Sterling right now is you know we're priced
Speaker 1: for a lot of bad news. Sterling can be held
Speaker 1: down here. I don't know how much further it can
Speaker 1: fall unless something really negative happens. What I still can't
Speaker 1: see is the policies that would let the economy do
Speaker 1: better than expected and people start looking around and saying, hey,
Speaker 1: you know this thing a cheap asset that I want
Speaker 1: to buy. Final question, can Arsenal win the league? No,
Speaker 1: it's flat out no. Are you saying no because you're
Speaker 1: worried that if you say yes, it won't happen. I'm
Speaker 1: saying no because Manchester City of the best side in
Speaker 1: that lead. Whatever happened at the weekend, thank you. We
Speaker 1: need to get an update on entertainment always. We can
Speaker 1: do this with Krackten and Michael Nathanson of Moffat Nathan
Speaker 1: Center division of SVB, and we're thrilled at the well
Speaker 1: caught Nathanson could join us at this morning. Michael, I'm
Speaker 1: gonna digress here to when the thund you heard was
Speaker 1: me falling off my chair is Mr Murdoch wants to
Speaker 1: piece umpty Dumpty back together again. What did you think
Speaker 1: when you saw young Murdoch said, let's bring it back
Speaker 1: together again. Yeah, that was not the other playbook we
Speaker 1: wanted to see. We have a buying Fox. Robert Fisherman
Speaker 1: covers it are viewing foxes. It's the it's a pure
Speaker 1: play on sports and news, which we think is the
Speaker 1: glue of the bundle. And they're not wasting their money
Speaker 1: fighting streaming wars. Right Tom's a very clean story. We
Speaker 1: thought at some point they would sell Fox to private
Speaker 1: equity or another another media company. So here, I think
Speaker 1: what the narrative is from here is the company that
Speaker 1: the company is gonna need approved from the majority of
Speaker 1: the minorities. And I don't think that's coming because I
Speaker 1: think our clients we talked to who own Box are
Speaker 1: not happy with this decision. We'll see, we'll see what
Speaker 1: comes next. There's probably a second a second leg of
Speaker 1: the story right there. Put them together and then do
Speaker 1: something with those assets, which we're waiting to hear more
Speaker 1: from the Murdocks of what's their intention after they combined
Speaker 1: these two companies. Just because of the calendar, I've got
Speaker 1: to go to Netflix. They're teetering on three legs. Someone
Speaker 1: even say a two legged table is well, what will
Speaker 1: you listen for from Netflix today? Okay, so they're introducing
Speaker 1: an advertising tier for six in the fourth quarter. What
Speaker 1: I want to hear is why are they so confident
Speaker 1: that that there won't be as spin down as they
Speaker 1: say in the UK from a higher price point down
Speaker 1: to this new tier, which would be very dilutive in
Speaker 1: the near term for for for revenue for users. So
Speaker 1: I'd like to hear why they're so confident that this
Speaker 1: will not be in the near term very diluted of strategy, right,
Speaker 1: that's to us, you know, given the drop, their dropping
Speaker 1: price and as as we talked earlier, you know, they
Speaker 1: don't have the same grip on users as they once did.
Speaker 1: I think there's a risk that there's a spin down here. Michael.
Speaker 1: How much are you looking at the potential for some
Speaker 1: of these media Darling's the online streaming services, certainly during
Speaker 1: the pandemic at least being acquired by the likes of Walmart,
Speaker 1: being acquired by the likes of Apple, and this has
Speaker 1: been something increasingly rumored about. Yeah, we're The challenge we
Speaker 1: have is some of these companies are family held. You
Speaker 1: know Tom mentioned the Murdochs. The red Stones control Paramount Global,
Speaker 1: NBCU is controlled by the Roberts family. There has to
Speaker 1: be capitulation, which we don't see yet. Right everyone thinks
Speaker 1: they have the right strategy of bleeding linear and investing
Speaker 1: in streaming. At some point, we think in the next
Speaker 1: twelve months twenty four months, there will be capitulation. Your
Speaker 1: companies will realize that they have the wrong st agy.
Speaker 1: They don't have the balance sheet to make us pivot
Speaker 1: there under undersized, and maybe there'll be some M and A.
Speaker 1: But you know that's not our working thesis right now.
Speaker 1: Right there has to be some level of realization that
Speaker 1: these strategies are just not going to work. Right, Like,
Speaker 1: you have four or five large players in streaming with
Speaker 1: much better positions. So the people who are lagging have
Speaker 1: to have to get out, and I'm much where they're
Speaker 1: ready to do that right now. So how do you
Speaker 1: think the ones that need to get out? Actually, yeah,
Speaker 1: well you would say that Peacock Paramount there has to
Speaker 1: be some combination that would be Comcast and Paramount level
Speaker 1: that they've done well within the US, but they're really
Speaker 1: not They're not going to scale to that higher level
Speaker 1: with a profitable business model, they're gonna need to find
Speaker 1: somebody to combine combined streaming assets. So it happens to
Speaker 1: Warner's w B d um. You know, like the market
Speaker 1: is really worried about the debt load there. There's a
Speaker 1: true asset value of that company, but the debtload is
Speaker 1: scaring people away. So you would say those three companies
Speaker 1: need to figure out some path forward, maybe consolidation, to
Speaker 1: get some some more scale. Michael, do you think that
Speaker 1: Disney is making the cable package the cable bundle all
Speaker 1: over again with Hulo? Is that where that's coming They're
Speaker 1: trying to write so they have Disney plus hul plus
Speaker 1: Hulu and ESPN plus you're John, are you know? Our
Speaker 1: concern is the cable bundle is the best product we've
Speaker 1: ever seen or from from an economic standpoint. Right, everyone's
Speaker 1: paying the same amount of money, no one's watching the
Speaker 1: same amount of channels. You have to be very very
Speaker 1: careful not to further disrupt that bundle. I think Disney
Speaker 1: things long term. We have the goods that we can
Speaker 1: replicate the product, but the economics of that new offering
Speaker 1: are going to be so below them. What we're coming from,
Speaker 1: and I think it'd be really, really careful, but they
Speaker 1: have the pieces in place. I'm just hoping that the
Speaker 1: speed to change is slower by them. Maybe what they
Speaker 1: want to do. Michael, we didn't have you on for
Speaker 1: all this chet chat Yankees Cleveland cut to the chase.
Speaker 1: Tom the guy behind me. I wish he was pitching tonight,
Speaker 1: right or today I'm worried about I'm worried about the
Speaker 1: bullpen is as everyone is right, it's not the bullpen
Speaker 1: of number forty two behind me. He's satisfied with that response.
Speaker 1: I am radio. It was great. Mr rivera behind as well. Michael.
Speaker 1: Thank you. Michael Knightthensen of Moffatt nine and Sin. This
Speaker 1: is the Bloomberg Surveillance Podcast. Thanks for listening. Join us
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