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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Thank you so much for joining us on this special

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Speaker 2: edition of Bloomberg Daybreak. US markets are closed for the

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Speaker 2: Martin Luther King Junior Day holiday. I'm Nathan Hager, and

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Speaker 2: coming up this hour, we'll look ahead to the federal

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Speaker 2: reserves first policy decision of the year, what's in store

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Speaker 2: for interest rates after last week's key reports on inflation,

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Speaker 2: Plus streaming behemoth Netflix gets set to report earnings. We'll

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Speaker 2: have a special Bloomberg Intelligence roundtable with media analyst KEITHA.

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Speaker 2: Ronganathan and senior credit analyst Stephen Flynn. But first we

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Speaker 2: begin with politics because this is not only MLK Day

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Speaker 2: in a rare occurrence, it is also Inauguration Day, as

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Speaker 2: Donald Trump officially begins his second term as president. So

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Speaker 2: what will the next four years hold in store with

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Speaker 2: Trump back as commander in chief. We're pleased to welcome

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Speaker 2: Wendy Schiller, director of the Alfred Taubman Center for American

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Speaker 2: Politics and Policy at Brown University. Great to speak with

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Speaker 2: you on this inauguration Day. Wendy, thanks for being here,

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Speaker 2: And of course we saw plenty of dramatic moves in

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Speaker 2: the first hundred days of the first Trump administration, how

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Speaker 2: could the second first one hundred days be different?

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Speaker 3: Hello Nathan, and happy inauguration Day to you too. You know,

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Speaker 3: there's just a question mark, you know, will the second

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Speaker 3: Trump administration learn from some of the stumbles of the

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Speaker 3: first Trump administration, things like the travel band, things like

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Speaker 3: you know, sweeping immigration and deportation actions. This time, I

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Speaker 3: think the rollout will be much smoother, and I do

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Speaker 3: think that the Trump administration is planning ahead for things

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Speaker 3: like lawsuits or public challenges to some of the actions

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Speaker 3: that's going to take. Clearly it will use more security

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Speaker 3: and immigration as some of its pillar foundations in the

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Speaker 3: early part of the administration. But politically, you know, the

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Speaker 3: Trump administration, led by incoming President Trump, is very focused

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Speaker 3: on getting a tax cut bill and certainly making sure

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Speaker 3: the debt ceiling gets extended. And so those are the

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Speaker 3: things that the Trump administration wants to get done earlier

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Speaker 3: in sort of the congressional legislative season. Then we typically

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Speaker 3: see I do.

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Speaker 2: Want to get to the plans for tax policy. But

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Speaker 2: you mentioned the possibility or at least the preparation for

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Speaker 2: potential legal challenges to some of what President Trump may

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Speaker 2: have in store here. How prepared is the next president

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Speaker 2: for what could be coming in terms of the flurry

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Speaker 2: of executive orders that he has said he wants to

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Speaker 2: enact on day one.

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Speaker 3: This is all are very much dependent on the Justice Department.

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Speaker 3: You know, should the Attorney I'll be confirmed fairly, smoothly,

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Speaker 3: and then what happens to career Justice Department lawyers? Do

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Speaker 3: they stay or do they go? How much of an

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Speaker 3: exotus will there be in the executive branch for people

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Speaker 3: who are still service and who are either fearful of

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Speaker 3: served you projects twenty twenty five, or you know, any

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Speaker 3: kind of other attempt to cut or eliminate positions. But

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Speaker 3: even that, they don't want to carry out Trump administration policies.

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Speaker 3: So you know, if you get a hollowing out of.

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Speaker 4: The Justice Department.

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Speaker 3: I'm not suggesting that there will be a hollowing out,

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Speaker 3: but there could be. Then when groups that are gearing

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Speaker 3: up that are already prepared to challenge some of these

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Speaker 3: executive orders go to court, you know, who's going to

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Speaker 3: defend the Trump administration. That's where I think the opponent

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Speaker 3: may have a head start, depending on what the staff

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Speaker 3: situation looks like in the executive branch. So at the

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Speaker 3: same time you want, you know, elon Musk and then

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Speaker 3: go almost want me to clean up and limit and

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Speaker 3: trim government. He's going to need those people to implement

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Speaker 3: his policy.

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Speaker 2: Do you think we're going to see the kind of

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Speaker 2: sea change that President Trump has talked about if it

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Speaker 2: does produce some kind of backlash from the electorate, if

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Speaker 2: some of these things are seen as not popular, if

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Speaker 2: they come into drastically.

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Speaker 3: Well, Nadan, this is a really important part of the

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Speaker 3: federal government that a lot of people sort of overlook.

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Speaker 3: It is deeply embedded in every American's daily life. Everything

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Speaker 3: we do, the safety, the food we eat, the healthcare system,

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Speaker 3: the roads, which of course you know up in New

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Speaker 3: England we complain about all the time. Every single thing

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Speaker 3: we do is absolutely affected by the federal government. And

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Speaker 3: you need people to be implementing those policies and conducting

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Speaker 3: oversight of how they're going on the ground level. So

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Speaker 3: if you want to gut or trim or eliminate, people

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Speaker 3: will feel that. And so the big question is how

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Speaker 3: many of those people will be in Republican leading districts

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Speaker 3: and whether the House of Representatives they very slim Republican

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Speaker 3: majority react to the things that are happening on the

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Speaker 3: ground in their districts. So this is the big thing

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Speaker 3: that I'm watching for, and we may not see it

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Speaker 3: till this summer, but those of those who know history

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Speaker 3: go way back to nineteen ninety five and New Cambridge

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Speaker 3: to have got out of the gate very fast, very

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Speaker 3: successfully in the Republican House, and then by the summer

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Speaker 3: the impact of some of those decisions are being self

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Speaker 3: and districts and the party started to really fight with itself.

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Speaker 3: So we have to see how they roll it out,

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Speaker 3: where they roll it out, and what they're actually going

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Speaker 3: to cut.

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Speaker 2: Of course, it's not just you know, the Department of

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Speaker 2: Government efficiency that we've been looking forward to, but there's

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Speaker 2: been a lot of talk as well about plans to

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Speaker 2: really rain in immigration, boosting border security, a lot of

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Speaker 2: executive orders expected there as well. How could the rollout

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Speaker 2: of a border policy be different from where it was

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Speaker 2: the last time around, when, as you mentioned, it was

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Speaker 2: facing a lot of challenges under the first Trump administration.

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Speaker 3: Well, Nathan, when you think about the border policy and

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Speaker 3: shotainly what outcome President Biden did and many argues far

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Speaker 3: too late, But you know understanding that if you are

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Speaker 3: seeking asylum, and then refugees are different from assyl leads

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Speaker 3: for different kinds of reasons. You know, can you cross

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Speaker 3: the border and make the claim and then stay in

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Speaker 3: the United States while the claim is being processed. Certainly

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Speaker 3: that was the Biden administration policy, and we had millions

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Speaker 3: of people come over the border. The Trump administration will

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Speaker 3: not have that policy used to be called stay in Mexico.

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Speaker 3: But what they're going to say is you cannot come

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Speaker 3: here if you are not legally permitted to do so.

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Speaker 3: If you don't have legal permanent residents, you cannot come

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Speaker 3: and stay. And that will be disruptive to those people

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Speaker 3: who are currently have being allowed by the bidenmistration to

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Speaker 3: come here stay here. Will the Trump administration force all

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Speaker 3: those people to return to their home countries. That's a

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Speaker 3: lot of people, So when we think about undocumented, it's

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Speaker 3: a very long range of people. But certainly these sylum

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Speaker 3: seekers are probably going to be the first target after

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Speaker 3: what they view as the criminals. Those people are irrestively

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Speaker 3: hard to find, and that will be a steady stream

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Speaker 3: of women and children being shown to being deported. And

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Speaker 3: we saw last time that did not go overwhel with

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Speaker 3: the American public, So they're even disconnecting voters' minds. They

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Speaker 3: want border security, they want limited on document and immigration.

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Speaker 3: Of course, on the other hand, they don't like the

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Speaker 3: images of seeing women and children, you know, forcibly deported

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Speaker 3: from the United States.

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Speaker 2: We're speaking with Wendy Schiller, director of the Alfred Taubman

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Speaker 2: Center for American Politics and Policy at Brown University. Of course,

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Speaker 2: the policy that markets are looking for in terms of

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Speaker 2: the rollout is tax cuts and the potential for expanded tariffs,

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Speaker 2: not just on adversaries but potentially on allies as well.

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Speaker 2: When it comes to the tax cut piece, how much

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Speaker 2: of a difficulty is the new president going to face

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Speaker 2: when the margins in Congress are so much tighter than

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Speaker 2: they were when the twenty seventeen tax cuts were passed

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Speaker 2: the last time around.

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Speaker 3: Well, I mean, you know, the Democrats and Republicans will

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Speaker 3: vote for a renewal of some version of the original

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Speaker 3: trop tax cuts. Congress rarely meets the tax cut. They

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Speaker 3: don't want to pay us. And that's true across the

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Speaker 3: aisle political aisle. Question is what are the specifics of

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Speaker 3: the you know, what are we going to do with corporations,

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Speaker 3: what about repatriation coming back to the United States, you know,

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Speaker 3: or everything capital gains, particularly you know, the state and

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Speaker 3: local tax possession fault, which disproportionately affects a Democrat or

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Speaker 3: blue leaning state. These are the sort of nuts and

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Speaker 3: bolts of the bill that will bog it down, and

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Speaker 3: you'll see very strong differences I think, between the House

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Speaker 3: and the Senate based on geography. You know, a district's

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Speaker 3: impact from some of this stuff is not the same

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Speaker 3: as the space impact, so you know you're going to

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Speaker 3: see that. And at the same time, if you see

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Speaker 3: tariffs negatively affecting particular industries geographically, that's also going to

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Speaker 3: be something that the GOP has to manage internally within

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Speaker 3: its caucus. That's where I see the biggest difficulties in

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Speaker 3: the response to any kind of sweeping Trump tariffs. You know,

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Speaker 3: Pennsylvania went for Trump right like it's starting to lean Republican.

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Speaker 3: You start throwing tariff on things, does that affect manufacturing

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Speaker 3: in Pennsylvania? So we will see that local nature of

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Speaker 3: Congress rear its head, I think, particularly in the Republican

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Speaker 3: CLOCKUS in response to.

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Speaker 2: What Trump does in terms of the herding of cats

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Speaker 2: on Capitol Hill. How do you see President Trump dealing

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Speaker 2: with the congressional leadership. Of course, you've got House Speaker

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Speaker 2: Mike Johnson and a brand new majority leader in the

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Speaker 2: Senate in John Thynne.

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Speaker 3: No President denpawn Republican, loved Congress go all aback to

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Speaker 3: George Washington is constantly complaining about Congress even before he

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Speaker 3: was President of United States. They don't like it. They

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Speaker 3: think they got elected their president. They also be able

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Speaker 3: to do what they want to do, and the party

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Speaker 3: is you know, a trifecta. But Trump will get frustrated

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Speaker 3: very quickly if things don't go his way. We've seen

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Speaker 3: Mike Johnson even do some small things like you know,

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Speaker 3: raising the flags and inauguration around the Capitol. You know,

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Speaker 3: we have a period of morning for Jimmy Carter, usually

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Speaker 3: supposed to be a half step, they'll be raised because

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Speaker 3: Trump complained about it. It may seem small, but if

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Speaker 3: it's an indication of the President's influence and House of

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Speaker 3: Representatives in the Senate, Johnson's a pretty healthy majority, so

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Speaker 3: he doesn't really have to trade away too much. But

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Speaker 3: he's got people with Lisa Murkowski, sus and Collins, who

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Speaker 3: may not go along with everything, You've still got some

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Speaker 3: leeway there. So I think Soon and Trump may have

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Speaker 3: a so smoother relationship because soone can deliver in ways

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Speaker 3: that Mike Johnson's gonna have very difficult time doing.

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Speaker 2: As we get into this new administration, Wendy, we're returning

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Speaker 2: to unified government in Washington. We have a Republican president

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Speaker 2: and Republican majorities on both sides of Capitol Hill. How

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Speaker 2: do Democrats regroup after President Trump's win?

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Speaker 3: People think about regrouping politically, these broader teams moving to

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Speaker 3: the center. I do see it that way. In the

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Speaker 3: first year of the Trump administration. You're going to twenty

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Speaker 3: twenty six, which are midterm elections more locally focused. It's

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Speaker 3: really hammering home if it happens negative impacts from the

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Speaker 3: Trump administration policies on local constituents have to go back

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Speaker 3: to their retail routes and really sort of lead bigger

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Speaker 3: issues I think on the table probably leading up to

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Speaker 3: twenty eight, but for twenty six, it's how are these

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Speaker 3: benefiting you or hurting you? And we are the party

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Speaker 3: that tries to help you, and this is what we're

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Speaker 3: trying to do. And a consistent message. Chancy Pelosi was

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Speaker 3: very good at this in two thousand and six, consistent

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Speaker 3: message across district about the way that Trump policies are

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Speaker 3: hurting voters where they live, where their kids go to school,

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Speaker 3: where they work. And that's sort of the key for

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Speaker 3: Democrats to regain their footing, and they have a very

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Speaker 3: good chance of taking the House back in twenty and

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Speaker 3: twenty six. The Republicans are well aware of that, so

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Speaker 3: focusing local, focusing on the things they can stop or obstruct,

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Speaker 3: and if they can't, focusing on the negative impact of

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Speaker 3: their constituents, you know, focusing on the national I don't

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Speaker 3: think it's going to get a very cost And.

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Speaker 2: In terms of the focus for President Trump, do you

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Speaker 2: see him being focused on policy, implementing an agenda or

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Speaker 2: how much do you think he's going to be focusing

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Speaker 2: on on retribution in the first one hundred days.

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Speaker 3: Well, predicting President Trump is a risky business. I think

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Speaker 3: he could derail his agenda if he focuses too much

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Speaker 3: on retribution. And I think that's where the Democrats may

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Speaker 3: have their singular national issue is if he looks like

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Speaker 3: his abusing presidential power to go after personal enemies and

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Speaker 3: sort of personal grudges. That's going to derail things. It's

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Speaker 3: hard for Congress that to send that. It's harder soon

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Speaker 3: and Mike Johnson to actually publicly defend that behavior. So

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Speaker 3: I think his advisor is going to say, don't do that.

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Speaker 3: We play the long game. Got four years. Let's focus

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Speaker 3: on wins. And I think the president wants to keep

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Speaker 3: his very high approval rating highest he's never had. It's

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Speaker 3: comparable for Reagan and Clinton at the end of their administrations.

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Speaker 3: He's going to want to keep that and stay popular.

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Speaker 3: So he'll want win after win after win. But I

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Speaker 3: think he's less concerned with the actual policy and more

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Speaker 3: concernable with the outfix of winning.

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Speaker 2: Really good to have you with us on what happens

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Speaker 2: to be an inauguration day on a federal holiday. Wendy

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Speaker 2: Schiller there, Director of Brown Universities, Alfred Taubman Center from

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Speaker 2: American Politics and Policy, and up next, we're going to

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Speaker 2: preview earnings tomorrow from Netflix and a special Bloomberg Intelligence roundtable,

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Speaker 2: So stay with us for that. I'm Nathan Hager, and

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Speaker 2: this is Bloomberg. Welcome back to this special edition of

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Speaker 2: Bloomberg daybreak, markets are closed from the Martin Luther King holiday.

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Speaker 2: I'm Nathan Hager, and Wall Street gets back to work

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Speaker 2: tomorrow with a key earnings report on the docket. After

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Speaker 2: the close of trading, we get the latest quarterly numbers

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Speaker 2: from Netflix. So what should we expect from the streaming behemoth.

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Speaker 2: Let's find out with a special Bloomberg Intelligence roundtable. Joining

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Speaker 2: us now Bloomberg Intelligence Media analyst Geeta Ranganathan and BI

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Speaker 2: Senior credit analyst Stephen Flint. Great to have both of

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Speaker 2: you with us as we wait for these results. And

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Speaker 2: as I recall, Githa, Netflix had a pretty solid quarter

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Speaker 2: last time around, So what are we expecting now?

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Speaker 4: Yeah, they've had solid multiple quarters, Nathan, and I think

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Speaker 4: we're going to continue to see that play out again

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Speaker 4: for the fourth quarter when they report results. So you know,

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Speaker 4: it's actually been this perfect moment for them because they've

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Speaker 4: had one of the strongest content cycles ever in their history.

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Speaker 4: They've made this very big foray into live events. We

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Speaker 4: had two huge live events that they streamed on their

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Speaker 4: service actually in the fourth quarter. One was the big

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Speaker 4: Mike Tyson Versus Jake Paul boxing event, which happened in

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Speaker 4: November and then in December, on Christmas Day, you had

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Speaker 4: two NFL games, and both those along with the release

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Speaker 4: of their biggest hit ever, which was Quid Game Season

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Speaker 4: two on December twenty sixth, is believed to have really

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Speaker 4: kind of boosted those subscriber numbers. So we're expecting roughly

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Speaker 4: about eleven million or so subscriber editions will make, you know,

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Speaker 4: one of their biggest years ever in terms of adding subscribers.

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Speaker 2: And Stephen, in terms of the numbers that you look

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Speaker 2: at on the credit side, what are your expectations. Yeah, well, Netflix's.

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Speaker 5: Credit profile is very strong and we believe it's likely

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Speaker 5: to stay that way given the companies capital allocation priorities

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Speaker 5: and its ability to generate significant free cash flow. The

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Speaker 5: company has a pretty conservative approach to cash and debt

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Speaker 5: and I don't see that changing.

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Speaker 2: When it comes to that cash flow. Githa, Is it

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Speaker 2: all about the subscriber numbers? Is it about the advertising

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Speaker 2: revenue that they're starting to generate now with these new

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Speaker 2: ads supported tiers? What are you looking at?

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Speaker 4: It's a little bit of everything, Nathan. So remember after

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Speaker 4: this report, they will stop disclosing subscriber metrics, So you know,

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Speaker 4: Netflix of course, we all kind of think and we

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Speaker 4: know highly anticipate the subscriber numbers when they come out

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Speaker 4: every quarter, but they will no longer be providing those metrics.

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Speaker 4: So really this is kind of almost this watershed moment

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Speaker 4: for Netflix because investors have to kind of really refocus

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Speaker 4: how they think about Netflix, and so the metrics that

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Speaker 4: we are really going to be focusing on is revenue growth,

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Speaker 4: is operating income growth, as well as operating margins. And

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Speaker 4: if you just kind of see the profile for Netflix

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Speaker 4: over the next few years, you're absolutely right. Advertising is

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Speaker 4: going to be a significant portion driving that revenue growth.

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Speaker 4: So we're expecting obviously ten plus percent revenue growth for

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Speaker 4: the next few years, as well as operating margin, and

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Speaker 4: all of those actually then factor into free cash flow

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Speaker 4: because remember Netflix, along with increasing its revenue as well

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Speaker 4: as subscribers, has also really been very disciplined when it

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Speaker 4: comes to costs, and that has really helped fuel free

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Speaker 4: cash flow pretty dramatically.

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Speaker 2: Gud, you reminded me about the end of subscriber number reporting,

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Speaker 2: because Steven raises the question for you about what kind

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Speaker 2: of metrics you're going to be looking at in terms

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Speaker 2: of gauging the ongoing health of this company.

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Speaker 5: Yeah, so from the credit side, we look at a

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Speaker 5: lot of the traditional credit metrics. We look at free

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Speaker 5: cash flow, what the company is doing with the free

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Speaker 5: cash flow. Obviously leverage. Netflix's leverage is very low. Net

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Speaker 5: leverages less than one times, and it should remain around

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Speaker 5: the one times area going forward. I mean compare that

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Speaker 5: to companies like very highly rated Disney or Comcast. They

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Speaker 5: each have a net leverage ratio about two point four times,

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Speaker 5: so Netflix is very conservative relative to them. Netflix has

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Speaker 5: no plans to add debt to its balance sheet to

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Speaker 5: fund dividend or fund buybacks, so they're very conservative. We'd

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Speaker 5: like to keep a couple of billion dollars of cash

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Speaker 5: on hands. We look at a lot of those metrics

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Speaker 5: going forward, and Netflix's credit profile looks very strong.

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Speaker 2: Another way even to look.

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Speaker 5: At it is if you look at Netflix's debt versus

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Speaker 5: its equity market cap, it shows you how conservative they are.

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Speaker 5: The company has about sixteen billion dollars at debt right

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Speaker 5: now and the market cap is, you know, over three

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Speaker 5: hundred and fifty billion dollars, so it's a very conservative profile.

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Speaker 2: And Githa. When it comes to then you mentioned some

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Speaker 2: of the live events and the scripted content that Netflix

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Speaker 2: is expected to put out. What more are you looking

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Speaker 2: for when it comes to the type of content that

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Speaker 2: Netflix is putting out there and how it could stack

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Speaker 2: up to some of its competitors.

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Speaker 4: It stacks up really, really well, Nate than compared to

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Speaker 4: its competitors, And we are actually going to see Netflix

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Speaker 4: make a deeper and deeper foray into live events, especially

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Speaker 4: as it looks to build that advertising business. So we

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Speaker 4: talked a little bit about, you know, the Jake Paul

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Speaker 4: Mike Tyson event, we talked a little bit about the

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Speaker 4: NFL games, but the real big move happened actually a

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Speaker 4: few weeks back when Netflix really started streaming WWE's raw

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Speaker 4: content every Monday. So that's live on Netflix globally, and

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Speaker 4: we're going to see you know, Netflix actually make I think,

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Speaker 4: bigger investments, you know, and MLB and NFL rights may

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Speaker 4: be available in the next few years, you know, we think.

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Speaker 4: And Netflix definitely obviously gained in terms of both subscribers

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Speaker 4: as well as made good advertising money as well on

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Speaker 4: the Christmas Day games, and so I think this is

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Speaker 4: going to definitely become a bigger portion of their content strategy.

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Speaker 4: Going forward. Along with that, of course, we do have

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Speaker 4: you know, all the usual hits in terms of scripted content.

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Speaker 4: So if you just kind of look at the slate

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Speaker 4: for twenty twenty five, it's once again it's a blockbuster slate.

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Speaker 4: So you have you know, hit shows like Stranger Things, Wednesday,

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Speaker 4: Squid Game, you Cobraki, So it's just endless. So again,

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Speaker 4: the content cycle looks extremely strong for the next twelve months.

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Speaker 2: And Stephen, when we think about those kinds of investments,

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Speaker 2: not just in the scripted content but live events, how

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Speaker 2: could that affect the balance sheet for Netflix?

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Speaker 5: Well, Netflix has plenty of cash flow to handle that.

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Speaker 5: It's very interesting you think about the history of Netflix.

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Speaker 5: For many, many years, it was a high yield rated

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Speaker 5: company that would borrow to invest in its business, and

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Speaker 5: it had pretty significant free cash flow losses every year.

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Speaker 5: But they were able to finance that in the bond

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Speaker 5: market until they got to the point where they got

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Speaker 5: scale and they were able to flip that to pause

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Speaker 5: a free cash flow. And the credit has significantly improved

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Speaker 5: over the past couple of years, and so they have

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Speaker 5: plenty of cash, plenty of cash on hand, plenty of

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Speaker 5: free cash flow coming in the future to invest in

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Speaker 5: their business, and the company could even easily borrow to invest,

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Speaker 5: but there's no need for them to do that, and

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Speaker 5: they seem to have no desire to do that.

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Speaker 2: Speaking with Steven Flynn, Senior credit analyst for Bloomberg Intelligence

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Speaker 2: along with Bimedia analyst Githa Rongganathan, as we look ahead

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Speaker 2: to Netflix earnings this week. Githa, we've been talking about content, subscribers, advertising.

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Speaker 2: How is the advertising environment right now? Do you see

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Speaker 2: advertisers willing to spend to be on Netflix, particularly with

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Speaker 2: some of these live events.

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Speaker 4: I absolutely think so. So advertisers are going to go

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Speaker 4: wherever eyeballs go, and we are seeing more and more

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Speaker 4: content move to streaming. So we've seen this big shift

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Speaker 4: away NASAN from linear TV into what is known as

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Speaker 4: connected TV. Linear TV is know was a sixty sixty

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Speaker 4: five billion market, but connect to TV has been really

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Speaker 4: growing at a very very rapid pace and advertisers are

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Speaker 4: kind of really scrambling to make sure that they reach

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Speaker 4: their audiences. We've seen some pretty hefty numbers in terms

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Speaker 4: of viewership for all of these Netflix events. So if

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Speaker 4: you look at those Christmas Day games, for instance, we

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Speaker 4: had an average twenty seven million people you tune into

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Speaker 4: those games. That compares very nicely to broadcast television. So

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Speaker 4: they were able to kind of gain the same amount

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Speaker 4: of reach that broadcast TV has had, which means that

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Speaker 4: they should be very easily able to command the same

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Speaker 4: amount of advertising revenue.

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Speaker 2: And how do you see the ad environment, Steven, not

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Speaker 2: just for Netflix, but for the streaming and a linear

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Speaker 2: industream more broadly.

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Speaker 5: Yeah, well, obviously linear has its challenges with subscribers moving

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Speaker 5: from linear television to streaming services or just you know,

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Speaker 5: cutting the cord completely. I think overall advertising is going

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Speaker 5: to be better in twenty twenty five, giving a stronger

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Speaker 5: underlying economic environment.

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Speaker 2: And for subscriber churn Githa, We've talked about that in

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Speaker 2: the past, you know, customers canceling, renewing depending on how

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Speaker 2: they can handle it. How do things look for Netflix

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Speaker 2: when it comes to that now that we do have

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Speaker 2: these ads supported tiers as well.

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Speaker 4: So churn actually has been historically pretty low for Netflix,

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Speaker 4: and we think it will continue to trend downwards. And

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Speaker 4: that's really mainly a factor of industry dynamics nation. So

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Speaker 4: we've seen you know, obviously the streaming wars were very

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Speaker 4: intense at one point of time, but we've seen kind

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Speaker 4: of Netflix really cement its dominance. They've they've kind of

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Speaker 4: become the go to TV viewing options, so they are

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Speaker 4: the undisputed leader right now in streaming. So not a

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Speaker 4: lot of cancelations right now as we see, you know,

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Speaker 4: for Netflix, and then if in the future, you know,

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Speaker 4: obviously one of the main triggers for chure and for

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Speaker 4: subscriber cancelations are price sikes. And even if Netflix does

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Speaker 4: decide to high prices in the near future, they obviously

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Speaker 4: do have that the AD tier, which can handle that

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Speaker 4: because it's a much more cheaper economic option that people

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Speaker 4: could kind of defall to.

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Speaker 2: And Stephen, you've mentioned how much cash on hand Netflix has.

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Speaker 2: Do you see a need for the company to raise

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Speaker 2: rates at any point?

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Speaker 5: Well, they have the power to do it, but I

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Speaker 5: don't think they would need to do it for generating

436
00:23:22,920 --> 00:23:25,399
Speaker 5: enough cash. Company does generate a lot of cash.

437
00:23:26,200 --> 00:23:30,119
Speaker 2: KEITHA. Where do you see the stock price going for Netflix?

438
00:23:30,440 --> 00:23:31,960
Speaker 2: The last time I looked at the A and R

439
00:23:32,040 --> 00:23:34,320
Speaker 2: function on the Bloomberg terminal, there are a lot of

440
00:23:34,359 --> 00:23:37,800
Speaker 2: buys for the stock, not very many cells and a

441
00:23:37,840 --> 00:23:40,840
Speaker 2: pretty wide range in terms of price targets. After we

442
00:23:40,880 --> 00:23:43,320
Speaker 2: get these earnings, do you expect a lot of change

443
00:23:43,359 --> 00:23:45,480
Speaker 2: in terms of how Wall Street looks at this company?

444
00:23:46,440 --> 00:23:51,040
Speaker 4: Valuation is definitely very, very demanding for Netflix. It currently

445
00:23:51,119 --> 00:23:54,600
Speaker 4: trades at about twenty nine times forward but about forty

446
00:23:54,640 --> 00:23:58,760
Speaker 4: two times forward PE. And just for context there, Nathan Disney,

447
00:23:58,760 --> 00:24:01,960
Speaker 4: for instance, trades about twenty times forward PE. So definitely

448
00:24:02,040 --> 00:24:05,040
Speaker 4: rich valuation. But I think it has definitely grown into

449
00:24:05,080 --> 00:24:07,880
Speaker 4: those metrics, and you know, after it reports, I think

450
00:24:07,920 --> 00:24:10,600
Speaker 4: what investors are really going to look for is color

451
00:24:10,720 --> 00:24:14,600
Speaker 4: on advertising and how it can potentially be a driver

452
00:24:14,920 --> 00:24:17,679
Speaker 4: off that double digit revenue growth. So we're seeing fifteen

453
00:24:17,720 --> 00:24:21,520
Speaker 4: percent revenue growth in twenty twenty four. The question is

454
00:24:21,560 --> 00:24:24,520
Speaker 4: can it sustain that same level for the next few years,

455
00:24:25,000 --> 00:24:27,359
Speaker 4: And if they do provide some color would suggest that

456
00:24:27,440 --> 00:24:30,360
Speaker 4: advertising is going to ramp significantly. We think that those

457
00:24:30,440 --> 00:24:32,320
Speaker 4: levels of valuation can be supported.

458
00:24:32,760 --> 00:24:34,560
Speaker 2: And not to put either of you on the spot

459
00:24:34,600 --> 00:24:37,760
Speaker 2: here in our last minute, but are there shows coming

460
00:24:37,840 --> 00:24:40,639
Speaker 2: up on Netflix or any of the other streamers that

461
00:24:40,680 --> 00:24:43,560
Speaker 2: you're particularly excited about? Steven, I'll start with you.

462
00:24:44,119 --> 00:24:45,719
Speaker 5: I have talked to my wife. She tells me about that.

463
00:24:46,359 --> 00:24:49,639
Speaker 2: Okay, Gita, you mentioned quite a few What are you

464
00:24:49,680 --> 00:24:54,239
Speaker 2: looking for Love Blind? Oh my goodness, Really tell me

465
00:24:54,280 --> 00:24:58,439
Speaker 2: more about why you look forward to Love is Blind.

466
00:24:58,520 --> 00:25:01,560
Speaker 4: That's interesting. It's the perfect show. And you know it's

467
00:25:01,560 --> 00:25:05,800
Speaker 4: interesting because it's reality television. They have actually Love is

468
00:25:05,800 --> 00:25:08,520
Speaker 4: Blind now and you know they're running so many different

469
00:25:08,800 --> 00:25:12,199
Speaker 4: shows across different parts of the university. You know, you

470
00:25:12,240 --> 00:25:15,040
Speaker 4: have Love is Blind US, you have Japan, you have Brazil,

471
00:25:15,320 --> 00:25:18,000
Speaker 4: and it's so interesting to see the difference in cultures.

472
00:25:18,040 --> 00:25:21,000
Speaker 4: I think it's one of the most fascinating watches on Netflix.

473
00:25:21,160 --> 00:25:23,280
Speaker 2: Well, you know, there is a lot more reality TV

474
00:25:23,400 --> 00:25:26,040
Speaker 2: across all these streaming services. It just goes to show

475
00:25:26,080 --> 00:25:28,720
Speaker 2: you how the landscape has changed. Used to see it

476
00:25:28,760 --> 00:25:32,240
Speaker 2: on cable. Now, like everything else, it's moved on to streaming.

477
00:25:32,840 --> 00:25:35,840
Speaker 2: Thanks for this roundtable. Really appreciate you having you both

478
00:25:35,960 --> 00:25:40,159
Speaker 2: on with us today. That's Githa Ranganathan, media analysts for

479
00:25:40,160 --> 00:25:45,160
Speaker 2: Bloomberg Intelligence, and BI Senior credit analyst Stephen Flynn, head

480
00:25:45,200 --> 00:25:49,520
Speaker 2: of the Netflix earnings this week. Up next, we'll take

481
00:25:49,560 --> 00:25:52,600
Speaker 2: a look at the fed's first interest rate decision of

482
00:25:52,640 --> 00:25:56,040
Speaker 2: the year. We'll speak with Bloomberg International Economics and Policy

483
00:25:56,040 --> 00:26:00,880
Speaker 2: correspondent Michael McKee. I'm Nathan Hager, and this is S Blimberg.

484
00:26:15,680 --> 00:26:18,040
Speaker 2: We're just over a week away from the Federal reserves

485
00:26:18,080 --> 00:26:21,760
Speaker 2: first policy decision of twenty twenty five. How many rate

486
00:26:21,760 --> 00:26:24,440
Speaker 2: cuts are in store after the latest reports on inflation

487
00:26:24,560 --> 00:26:25,240
Speaker 2: and employment?

488
00:26:25,640 --> 00:26:26,000
Speaker 6: For more.

489
00:26:26,040 --> 00:26:31,040
Speaker 2: We're joined by Bloomberg International Economics and Policy correspondent Michael McKee.

490
00:26:31,040 --> 00:26:33,240
Speaker 2: Great to speak with you, Mike, But before we get

491
00:26:33,280 --> 00:26:36,639
Speaker 2: to you, here's what Chair Powell had to say. The

492
00:26:36,720 --> 00:26:38,840
Speaker 2: last time the Fed cut rates.

493
00:26:38,720 --> 00:26:41,399
Speaker 7: We reduced our policy rate now by one hundred basis points,

494
00:26:41,440 --> 00:26:45,159
Speaker 7: were significantly closer to neutral at four point three percent

495
00:26:45,280 --> 00:26:48,639
Speaker 7: and change. We believe policy is still meaningfully restrictive. But

496
00:26:48,720 --> 00:26:50,919
Speaker 7: as for additional cuts, we're going to be looking for

497
00:26:51,000 --> 00:26:54,320
Speaker 7: further progress on inflation, as well as continued strength in

498
00:26:54,359 --> 00:26:55,040
Speaker 7: the labor market.

499
00:26:55,359 --> 00:26:57,199
Speaker 2: That was just over a month ago, and here we

500
00:26:57,240 --> 00:26:59,679
Speaker 2: are with a dip in core consumer prices and the

501
00:27:00,000 --> 00:27:02,720
Speaker 2: paper market sure looks strong. Is there room for the

502
00:27:02,760 --> 00:27:05,480
Speaker 2: Fed to start thinking about thinking about cutting again?

503
00:27:05,520 --> 00:27:05,760
Speaker 4: Mike.

504
00:27:06,920 --> 00:27:09,160
Speaker 6: I suppose there's room to start thinking about thinking about

505
00:27:09,200 --> 00:27:12,240
Speaker 6: but there's no room for them to actually start cutting.

506
00:27:12,560 --> 00:27:16,120
Speaker 6: Why not January I know, I'm the party pooper here.

507
00:27:17,160 --> 00:27:19,719
Speaker 6: The FED has basically said they're going to be on hold,

508
00:27:19,760 --> 00:27:23,760
Speaker 6: and the underlying reason, which they won't say out loud,

509
00:27:24,000 --> 00:27:29,080
Speaker 6: is Donald Trump and the fact that he's now president

510
00:27:29,280 --> 00:27:32,800
Speaker 6: and what's he going to do. They don't know the

511
00:27:32,920 --> 00:27:35,800
Speaker 6: impact that his policies are going to have on the economy,

512
00:27:35,840 --> 00:27:39,159
Speaker 6: so better to wait and see a lot of the

513
00:27:39,480 --> 00:27:44,960
Speaker 6: policies he's talked about could be inflationary. You've heard that before,

514
00:27:45,000 --> 00:27:49,320
Speaker 6: the tariffs and deportations and things. But until we know

515
00:27:49,520 --> 00:27:52,199
Speaker 6: what the details are, is no way to tell. So

516
00:27:52,359 --> 00:27:54,360
Speaker 6: right now, the Fed's on hold in January. The real

517
00:27:54,440 --> 00:27:56,359
Speaker 6: question is what are they going to do in March,

518
00:27:56,960 --> 00:28:02,000
Speaker 6: and that'll depend in part on what Trump proposes and

519
00:28:02,920 --> 00:28:06,440
Speaker 6: in part on how inflation develops between now and then.

520
00:28:07,200 --> 00:28:10,240
Speaker 2: So does this mean that the FED is moving from

521
00:28:10,359 --> 00:28:14,080
Speaker 2: a data dependent FED to a Trump dependent FED or

522
00:28:14,119 --> 00:28:15,880
Speaker 2: is it a combination of the two or what.

523
00:28:16,320 --> 00:28:18,480
Speaker 6: Well, it's a combination of the two, because they won't

524
00:28:18,640 --> 00:28:23,119
Speaker 6: move up or down if the data don't support it.

525
00:28:23,640 --> 00:28:27,560
Speaker 6: But if they're thinking about what the Trump administration may do,

526
00:28:28,040 --> 00:28:31,359
Speaker 6: they have to look forward because it takes maybe a

527
00:28:31,440 --> 00:28:35,040
Speaker 6: year to get a rate move into the markets and

528
00:28:35,200 --> 00:28:39,880
Speaker 6: into the loans that people actually take out in the economy,

529
00:28:40,200 --> 00:28:41,720
Speaker 6: and so they got to think about what's going to

530
00:28:41,720 --> 00:28:48,200
Speaker 6: be happening going forward. Obviously President Trump can propose something immediately,

531
00:28:48,880 --> 00:28:50,600
Speaker 6: how long is that going to take to get done.

532
00:28:50,800 --> 00:28:53,880
Speaker 6: You've got all the Washington analysts saying extending the tax

533
00:28:53,920 --> 00:28:56,760
Speaker 6: cuts to the extent they do, that won't happen until

534
00:28:56,760 --> 00:29:00,960
Speaker 6: the fall. Yes, there's going to be a certain eyes

535
00:29:01,080 --> 00:29:04,720
Speaker 6: cast at what the administration proposes, but it also has

536
00:29:04,760 --> 00:29:08,080
Speaker 6: to be that inflation is continuing to fall towards two

537
00:29:08,120 --> 00:29:13,360
Speaker 6: percent and unemployment doesn't go down too much more for

538
00:29:13,440 --> 00:29:15,360
Speaker 6: the Fed to consider cutting again.

539
00:29:15,600 --> 00:29:17,800
Speaker 2: So is there some thinking in the market that that

540
00:29:17,880 --> 00:29:22,680
Speaker 2: could be why investors have dialed back their expectations for

541
00:29:22,720 --> 00:29:25,080
Speaker 2: the number of cuts they're expecting from the Fed this year,

542
00:29:25,120 --> 00:29:28,120
Speaker 2: something like one for the whole year, just because it

543
00:29:28,160 --> 00:29:31,960
Speaker 2: could take some time for not just Trump policies to

544
00:29:32,000 --> 00:29:34,880
Speaker 2: take effect, but for Trump policies to get passed.

545
00:29:35,280 --> 00:29:37,600
Speaker 6: I think the investors are more looking at the inflation

546
00:29:37,800 --> 00:29:41,280
Speaker 6: outlook and the fact that the economy has been growing

547
00:29:41,320 --> 00:29:45,280
Speaker 6: faster than anticipated, and we haven't got the fourth quarter

548
00:29:45,360 --> 00:29:48,440
Speaker 6: numbers yet, but when we do, it's expected to suggest

549
00:29:48,480 --> 00:29:52,280
Speaker 6: that the economy grew as strongly or a little more

550
00:29:52,320 --> 00:29:54,880
Speaker 6: than in the third quarter. So for the year, things

551
00:29:54,880 --> 00:29:56,680
Speaker 6: were pretty good and it sets us up for a

552
00:29:56,720 --> 00:30:00,880
Speaker 6: good beginning to twenty and twenty five. That means that

553
00:30:00,920 --> 00:30:04,080
Speaker 6: you're more likely to have in some inflationary pressures because

554
00:30:04,120 --> 00:30:07,480
Speaker 6: demand stays high, and so that's kind of what the

555
00:30:07,520 --> 00:30:10,200
Speaker 6: markets are looking at, and then they're trying to combine

556
00:30:10,280 --> 00:30:13,360
Speaker 6: that with well, what could Trump mean for all of this.

557
00:30:13,960 --> 00:30:17,280
Speaker 6: I think that's why you have seen because there's this uncertainty,

558
00:30:17,800 --> 00:30:21,840
Speaker 6: all these jitters in markets, and for the last week

559
00:30:21,920 --> 00:30:26,000
Speaker 6: or two we've seen incredible volatility in bonds. Yields went

560
00:30:26,080 --> 00:30:28,920
Speaker 6: way up ahead of the data that we got at

561
00:30:28,920 --> 00:30:31,240
Speaker 6: the end of last week. The middle of last week,

562
00:30:31,480 --> 00:30:35,280
Speaker 6: CPI came out and everybody changed their mind again because

563
00:30:35,320 --> 00:30:39,160
Speaker 6: they thought inflation's under control. It's hard to know exactly

564
00:30:39,200 --> 00:30:41,560
Speaker 6: where the markets are going to come down on all this,

565
00:30:41,680 --> 00:30:45,040
Speaker 6: but for right now they don't have to worry about

566
00:30:45,040 --> 00:30:47,360
Speaker 6: the FED through the end of the month, just.

567
00:30:47,320 --> 00:30:50,000
Speaker 2: To put policy uncertainty aside. I know that's a big

568
00:30:50,080 --> 00:30:53,920
Speaker 2: ask because it's so important to the market, but based

569
00:30:53,960 --> 00:30:57,200
Speaker 2: on the data that we've seen so far on inflation

570
00:30:57,760 --> 00:31:02,560
Speaker 2: cooling last month and the labor market still showing signs

571
00:31:02,600 --> 00:31:05,960
Speaker 2: of strength. What would that say for the Fed? Again

572
00:31:06,160 --> 00:31:09,440
Speaker 2: putting Trump policy uncertainty.

573
00:31:08,840 --> 00:31:13,440
Speaker 6: Aside, I think you have to wait. You have to wait,

574
00:31:13,480 --> 00:31:16,800
Speaker 6: and I know it is the problem if you're just

575
00:31:16,880 --> 00:31:20,840
Speaker 6: looking at it in a world minus and administration. I

576
00:31:20,840 --> 00:31:23,480
Speaker 6: don't say by style Trump, but if Joe Biden wasn't

577
00:31:23,480 --> 00:31:27,280
Speaker 6: there either, you would be looking at an economy that

578
00:31:27,560 --> 00:31:30,880
Speaker 6: is moving in the right direction but still very strong,

579
00:31:31,520 --> 00:31:36,440
Speaker 6: and so you have that underlying possibility of inflation. But

580
00:31:36,640 --> 00:31:40,680
Speaker 6: inflation is coming down from where it was, and we've

581
00:31:40,680 --> 00:31:45,440
Speaker 6: had a lot of idiosyncratic reasons for inflation to go higher.

582
00:31:46,240 --> 00:31:50,520
Speaker 6: We had the hurricanes ripped through the southeast, destroyed many

583
00:31:50,520 --> 00:31:53,239
Speaker 6: many people's cars. They got to get to work, so

584
00:31:53,280 --> 00:31:54,680
Speaker 6: they go out and buy a new used car. That

585
00:31:54,680 --> 00:31:58,120
Speaker 6: pushes up the prices of used cars, and that tends

586
00:31:58,120 --> 00:32:02,040
Speaker 6: to fade out, so then there'll be something else. End

587
00:32:02,040 --> 00:32:05,760
Speaker 6: of the year, we saw airfares go up significantly and

588
00:32:06,080 --> 00:32:10,800
Speaker 6: that will probably not continue. It'll sort of level out.

589
00:32:11,040 --> 00:32:14,120
Speaker 6: So it just depends on how strong the economy is

590
00:32:14,400 --> 00:32:19,520
Speaker 6: and whether some of these idiosyncratic moves start to level off.

591
00:32:19,760 --> 00:32:25,040
Speaker 6: We did see housing in the CPI continue its lower move.

592
00:32:25,080 --> 00:32:27,160
Speaker 6: It went up a tenth of a percent on a

593
00:32:27,280 --> 00:32:31,760
Speaker 6: rounding basis, But in general, housing prices have started to

594
00:32:32,000 --> 00:32:33,560
Speaker 6: do what the Fed's been waiting for them to do,

595
00:32:33,600 --> 00:32:36,960
Speaker 6: which has come down. And if that continues, that continue

596
00:32:36,960 --> 00:32:41,120
Speaker 6: to put downward pressure on inflation, and hopefully if inflation

597
00:32:41,240 --> 00:32:44,360
Speaker 6: gets closer to two percent, if then can say, well,

598
00:32:44,360 --> 00:32:47,120
Speaker 6: all right, we need to continue cutting rates to get

599
00:32:47,160 --> 00:32:49,320
Speaker 6: back to whatever we think normal might be.

600
00:32:49,800 --> 00:32:53,680
Speaker 2: Speaking with Mike McKee, international economics and policy correspondent for

601
00:32:53,720 --> 00:32:56,080
Speaker 2: a Bloomberg News and I wanted to pick your brain

602
00:32:56,200 --> 00:32:58,840
Speaker 2: on that just a little bit, Mike, because it feeds

603
00:32:58,840 --> 00:33:02,640
Speaker 2: into the debate about out whether FED policy is as

604
00:33:02,640 --> 00:33:06,080
Speaker 2: restrictive as the FED has said it feels like it

605
00:33:06,160 --> 00:33:09,240
Speaker 2: is when we continue to see these signs of economic strength.

606
00:33:09,320 --> 00:33:11,680
Speaker 2: Is there a debate going on within the Fed, not

607
00:33:11,760 --> 00:33:14,600
Speaker 2: just in the markets, but within the FED about whether

608
00:33:14,720 --> 00:33:17,760
Speaker 2: policy is restrictive, whether we have to think about a

609
00:33:17,840 --> 00:33:19,040
Speaker 2: new neutral rate.

610
00:33:19,640 --> 00:33:21,560
Speaker 6: Well, we do have to think about a new neutral rate,

611
00:33:21,600 --> 00:33:24,520
Speaker 6: because we never know exactly what the neutral rate is.

612
00:33:24,800 --> 00:33:27,480
Speaker 6: You can only observe it in the past tense. But

613
00:33:28,000 --> 00:33:30,880
Speaker 6: it does seem that the economy is stronger right now.

614
00:33:30,960 --> 00:33:32,520
Speaker 6: So for the short term, I think you get a

615
00:33:32,560 --> 00:33:36,680
Speaker 6: lot of agreement with members of the FED that we

616
00:33:36,760 --> 00:33:40,560
Speaker 6: do need higher rates right now. Maybe not. They may

617
00:33:40,600 --> 00:33:43,520
Speaker 6: disagree about whether we need to be at four and

618
00:33:43,520 --> 00:33:45,600
Speaker 6: a quarter to four and a half percent could be

619
00:33:45,600 --> 00:33:48,120
Speaker 6: a little lower, but they're not going down to three

620
00:33:48,160 --> 00:33:51,600
Speaker 6: percent that quickly until they see signs that the economy

621
00:33:51,640 --> 00:33:55,440
Speaker 6: may have cooled off. So on a short run basis, yes,

622
00:33:55,680 --> 00:33:58,280
Speaker 6: we get a higher neutral rate, but on a longer

623
00:33:58,360 --> 00:34:01,680
Speaker 6: term basis, that's going to depend on the way productivity develops.

624
00:34:01,760 --> 00:34:04,400
Speaker 6: We do know that the number of people who are

625
00:34:04,560 --> 00:34:09,040
Speaker 6: entering the labor force has been strong because of immigration,

626
00:34:09,640 --> 00:34:14,440
Speaker 6: illegal or not, and if that goes down, then productivity

627
00:34:14,480 --> 00:34:17,160
Speaker 6: is the way you get stronger growth, and productivity could

628
00:34:17,160 --> 00:34:21,520
Speaker 6: go up because of AI things like that. So there's

629
00:34:21,520 --> 00:34:24,680
Speaker 6: a lot of uncertainty about that at this point, but

630
00:34:24,800 --> 00:34:29,400
Speaker 6: I think most people think on the FED there within

631
00:34:29,520 --> 00:34:33,200
Speaker 6: striking distance of neutral for right now. A year from

632
00:34:33,239 --> 00:34:34,480
Speaker 6: now that may be different.

633
00:34:35,040 --> 00:34:37,360
Speaker 2: Still quite a bit of a ways of striking distance

634
00:34:37,400 --> 00:34:40,959
Speaker 2: from the fed's two percent inflation target. And there's an

635
00:34:41,000 --> 00:34:44,000
Speaker 2: ongoing debate in the market as well about whether the

636
00:34:44,040 --> 00:34:48,160
Speaker 2: FED can reach that anytime soon. Is a two percent

637
00:34:48,400 --> 00:34:53,520
Speaker 2: inflation target realistic, particularly when I bring back the idea

638
00:34:53,640 --> 00:34:56,439
Speaker 2: of Trump policy uncertainty.

639
00:34:56,360 --> 00:34:59,839
Speaker 6: Well, unfortunately, whether it's realistic or not, it's what you got.

640
00:35:00,320 --> 00:35:04,880
Speaker 6: The FED is looking at its framework for Monetary policy,

641
00:35:05,280 --> 00:35:08,239
Speaker 6: reviewing it this year, but jay Pole has already said

642
00:35:08,239 --> 00:35:10,000
Speaker 6: we're not going to change the two percent target. The

643
00:35:10,000 --> 00:35:12,439
Speaker 6: thing the FED worries about is that if you move

644
00:35:12,480 --> 00:35:15,400
Speaker 6: the goalposts, then the markets will always expect you to

645
00:35:15,600 --> 00:35:19,320
Speaker 6: move the goalposts. And if we have another bout of inflation,

646
00:35:20,080 --> 00:35:23,080
Speaker 6: the FED might say, well, we'll do three percent target,

647
00:35:23,239 --> 00:35:26,200
Speaker 6: and then inflation doesn't come down as much and people

648
00:35:26,239 --> 00:35:28,719
Speaker 6: lose confidence in the FED. So they're saying they're going

649
00:35:28,760 --> 00:35:30,920
Speaker 6: to leave it at two percent at this point.

650
00:35:31,680 --> 00:35:34,279
Speaker 2: And in terms of the data we've gotten most recently

651
00:35:34,520 --> 00:35:37,600
Speaker 2: obviously producer consumer prices, how does it all feed into

652
00:35:37,760 --> 00:35:42,520
Speaker 2: the Fed's preferred measure of inflation? What are the expectations there?

653
00:35:43,040 --> 00:35:46,759
Speaker 6: Well, that's a good question because the PPI has more

654
00:35:46,840 --> 00:35:50,080
Speaker 6: categories that feed into the PCE, and it suggested that

655
00:35:50,200 --> 00:35:56,320
Speaker 6: we would see a higher PCE than people anticipated. CPI

656
00:35:57,120 --> 00:35:59,279
Speaker 6: also has a few things that feed into it that

657
00:35:59,320 --> 00:36:02,960
Speaker 6: were lower than anticipated. So the general feeling now is

658
00:36:03,080 --> 00:36:06,439
Speaker 6: that PCEE will come in maybe about where people thought

659
00:36:06,480 --> 00:36:09,319
Speaker 6: it was, which is little changed on the month. But

660
00:36:10,560 --> 00:36:14,080
Speaker 6: there's a risk either way because we're in this world

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00:36:14,200 --> 00:36:17,799
Speaker 6: now where we go out to three descperate places to

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00:36:18,000 --> 00:36:21,440
Speaker 6: measure inflation, and then it becomes a rounding issue.

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00:36:21,880 --> 00:36:23,920
Speaker 2: In the time we have left. Now that we are

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00:36:24,040 --> 00:36:28,120
Speaker 2: getting a new administration, we've got to think about how

665
00:36:28,160 --> 00:36:31,160
Speaker 2: the Federal Reserve is preparing for that. We heard during

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00:36:31,200 --> 00:36:35,879
Speaker 2: the campaign President Trump talking about how presidents should have

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00:36:36,040 --> 00:36:39,279
Speaker 2: a say when it comes to monetary policy. Are you

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00:36:39,320 --> 00:36:43,000
Speaker 2: going to be watching for challenges to FED independence as

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00:36:43,040 --> 00:36:45,400
Speaker 2: we embark on this second Trump administration.

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00:36:45,800 --> 00:36:49,239
Speaker 6: We'll be watching for it, But there is a kind

671
00:36:49,239 --> 00:36:52,839
Speaker 6: of growing feeling that maybe for the time being they

672
00:36:52,880 --> 00:36:56,120
Speaker 6: won't do anything because we saw Michael Barr, the Vice

673
00:36:56,160 --> 00:37:00,880
Speaker 6: chair for Supervision, resigned that post on the FED. But

674
00:37:01,480 --> 00:37:05,240
Speaker 6: the regulatory clash that we might have expected could be avoided.

675
00:37:05,600 --> 00:37:07,319
Speaker 6: And then when you think about it, Jay Powell is

676
00:37:07,360 --> 00:37:11,319
Speaker 6: going to be gone in May as chair in May

677
00:37:11,360 --> 00:37:13,960
Speaker 6: of next year. Is it worth it to the new

678
00:37:13,960 --> 00:37:17,960
Speaker 6: Trump administration to start a fight now and end up

679
00:37:18,000 --> 00:37:19,719
Speaker 6: in court and all the things that you end up

680
00:37:19,719 --> 00:37:22,759
Speaker 6: having to do to fight that out if he's going

681
00:37:22,800 --> 00:37:25,120
Speaker 6: to leave right away, and so they may hold off

682
00:37:25,120 --> 00:37:26,080
Speaker 6: for a little bit on that.

683
00:37:26,600 --> 00:37:30,200
Speaker 2: So do you think this idea that President Trump could

684
00:37:30,320 --> 00:37:33,520
Speaker 2: challenge the Fed's independence? Is it something that's kind of

685
00:37:33,520 --> 00:37:36,560
Speaker 2: been a little overblown by critics or is it something

686
00:37:36,600 --> 00:37:37,360
Speaker 2: really worth watching?

687
00:37:37,480 --> 00:37:39,920
Speaker 6: Probably a little overblown, but it depends on what you

688
00:37:39,960 --> 00:37:42,920
Speaker 6: mean by challenge. Does he really try to fire J Powell?

689
00:37:43,000 --> 00:37:46,720
Speaker 6: I don't think so. Does he go on social media

690
00:37:46,880 --> 00:37:48,799
Speaker 6: and say bad things about him?

691
00:37:48,840 --> 00:37:49,000
Speaker 3: Oh?

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00:37:49,080 --> 00:37:52,680
Speaker 6: Of course he does that about everybody, and so I

693
00:37:52,719 --> 00:37:54,840
Speaker 6: would expect, especially with the FED on hold instead of

694
00:37:54,880 --> 00:37:57,280
Speaker 6: cutting rates, I would expect some nasty comments.

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00:37:58,080 --> 00:38:01,920
Speaker 2: Appreciate this, Mike, always good speaking with you. That's Bloomberg

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Speaker 2: International Economics and Policy correspondent Michael McKee with us on

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Speaker 2: this special edition of Bloomberg Daybreak. Thanks as well to

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Speaker 2: a Bloomberg intelligence analyst, get the Ranganathan and Stephen Flynn,

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00:38:13,560 --> 00:38:17,560
Speaker 2: along with Brown University political scientist Wendy Schuller. And we'd

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Speaker 2: like to thank you, of course as well for listening.

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Speaker 1: Ie.

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Speaker 2: You enjoy this MLK and Inauguration Day. I'm Nathan Hager,

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Speaker 2: and this is Bloomberg