1 00:00:00,120 --> 00:00:04,360 Speaker 1: Bloomberg is now on your dashboard with Apple CarPlay and 2 00:00:04,360 --> 00:00:08,160 Speaker 1: Android Auto. It gives you access to every Bloomberg podcast, 3 00:00:08,280 --> 00:00:11,560 Speaker 1: live audio feeds from Bloomberg Radio, print stories from Bloomberg 4 00:00:11,640 --> 00:00:14,920 Speaker 1: News in audio form, and the latest headlines of the 5 00:00:14,920 --> 00:00:18,600 Speaker 1: click of a button with Bloomberg News. Now it's free 6 00:00:18,680 --> 00:00:21,439 Speaker 1: with the latest version of the Bloomberg Business App. That's 7 00:00:21,680 --> 00:00:24,400 Speaker 1: the Bloomberg Business App. Get it on your phone in 8 00:00:24,440 --> 00:00:27,760 Speaker 1: the Apple App Store or on Google Play. 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I'm Paul Sweeney alongside 12 00:00:38,640 --> 00:00:39,800 Speaker 2: my co host Matt Miller. 13 00:00:40,200 --> 00:00:44,279 Speaker 1: Every business day we bring you interviews from CEOs, market pros, 14 00:00:44,320 --> 00:00:48,160 Speaker 1: and Bloomberg experts, along with essential market moven News. 15 00:00:48,720 --> 00:00:51,839 Speaker 2: I'm the Bloomberg Markets podcast called Apple Podcasts or wherever 16 00:00:51,960 --> 00:00:55,080 Speaker 2: you listen to podcasts, and at Bloomberg dot Com Slash podcast. 17 00:00:55,560 --> 00:00:57,080 Speaker 2: I think we need to go over to the Red 18 00:00:57,120 --> 00:01:00,280 Speaker 2: Seat at the latest reporting on tensions in the Red 19 00:01:00,280 --> 00:01:03,320 Speaker 2: Sea and its impact on the global oil. Brendan Murray 20 00:01:03,360 --> 00:01:07,400 Speaker 2: joins us here Bloomberg News reporter out of London, Brendan, 21 00:01:07,600 --> 00:01:11,600 Speaker 2: I'm seeing an article on the Bloomberg Colonel Bloomberg news hop. 22 00:01:11,680 --> 00:01:15,399 Speaker 2: ULG Lloyd, a big, big global shipper. They're continuing to 23 00:01:15,440 --> 00:01:18,720 Speaker 2: reroute their ships away from the Red Sea. 24 00:01:18,760 --> 00:01:22,520 Speaker 3: What's the latest right, Well, there still seems to be 25 00:01:22,959 --> 00:01:26,520 Speaker 3: the risk of attacks sailing through the Red Sea. The 26 00:01:26,600 --> 00:01:31,800 Speaker 3: latest was an MSc ship that was attacked yesterday. So 27 00:01:31,840 --> 00:01:35,120 Speaker 3: hapag Lloyd is taking the stance that we're still going 28 00:01:35,200 --> 00:01:38,200 Speaker 3: to divert around Africa. These that would not take the 29 00:01:38,240 --> 00:01:41,720 Speaker 3: shortcut through the Suez Canal, seeing too much risk of 30 00:01:41,800 --> 00:01:45,119 Speaker 3: doing so. These ships are carrying anywhere from a half 31 00:01:45,200 --> 00:01:47,800 Speaker 3: a billion dollars to a couple of billion dollars in cargo, 32 00:01:48,280 --> 00:01:50,440 Speaker 3: not to mention the you know, the serious risks to 33 00:01:50,480 --> 00:01:51,000 Speaker 3: their crews. 34 00:01:51,080 --> 00:01:52,760 Speaker 4: So many of these big. 35 00:01:52,880 --> 00:01:56,160 Speaker 3: Shipping companies are saying it's still too risky to take 36 00:01:56,200 --> 00:01:59,280 Speaker 3: the chance. So they're they're making that extra twenty five 37 00:01:59,320 --> 00:02:03,680 Speaker 3: percent a journey that's twenty five percent longer than it 38 00:02:03,800 --> 00:02:06,960 Speaker 3: otherwise would be. They're still continuing to make that decision 39 00:02:07,000 --> 00:02:08,960 Speaker 3: and the number of ships that are diverting is still. 40 00:02:08,840 --> 00:02:12,160 Speaker 5: Rising well and Brendan, this is despite the US's efforts 41 00:02:12,200 --> 00:02:14,880 Speaker 5: through a maritime task force to make sure that merchant 42 00:02:14,960 --> 00:02:18,520 Speaker 5: vessels are protected, that any drones potentially shot down by 43 00:02:18,840 --> 00:02:21,480 Speaker 5: or sent by the Hoothies would be shot down. So 44 00:02:21,639 --> 00:02:24,480 Speaker 5: is anyone feeling protected enough to go through the Red 45 00:02:24,520 --> 00:02:26,520 Speaker 5: Seat right now? Is there any real activity? 46 00:02:27,480 --> 00:02:27,960 Speaker 4: Well heard? 47 00:02:28,000 --> 00:02:30,079 Speaker 3: We had a statement also from Marisk, which is the 48 00:02:30,160 --> 00:02:34,320 Speaker 3: number two global container shipping line, that said they're preparing 49 00:02:35,120 --> 00:02:39,480 Speaker 3: to resume sailing across the Red Sea as soon as 50 00:02:39,520 --> 00:02:43,400 Speaker 3: it's appropriate. Now when that is, we don't know, but 51 00:02:43,520 --> 00:02:48,840 Speaker 3: at least they're sounding like they're willing to take that 52 00:02:49,240 --> 00:02:51,560 Speaker 3: to take that trip as soon as they can get 53 00:02:51,600 --> 00:02:55,280 Speaker 3: assurances that their ships will be secure. That was a 54 00:02:55,360 --> 00:02:58,600 Speaker 3: turnaround from a week ago when they said they were 55 00:02:58,680 --> 00:03:02,320 Speaker 3: calling on the US, in the UK and other countries 56 00:03:02,400 --> 00:03:06,160 Speaker 3: to provide more protection. So we're seeing sort of incremental 57 00:03:06,200 --> 00:03:09,800 Speaker 3: steps back toward the direction of sailing through the Suez again, 58 00:03:10,120 --> 00:03:13,440 Speaker 3: but still it's not happening on any large scale. 59 00:03:14,080 --> 00:03:17,600 Speaker 2: I see Brendan from some Bloomberg Intelligence research that spot 60 00:03:17,720 --> 00:03:21,079 Speaker 2: rates for container shipping have jumped twenty six percent over 61 00:03:21,120 --> 00:03:25,359 Speaker 2: the past few weeks. Who pays that higher cost, Well, 62 00:03:25,400 --> 00:03:26,359 Speaker 2: that the cargo. 63 00:03:26,120 --> 00:03:27,160 Speaker 4: Owners pay that cost. 64 00:03:27,280 --> 00:03:31,040 Speaker 3: These get added on and surcharges and other sort of 65 00:03:31,120 --> 00:03:38,200 Speaker 3: incremental costs that the shipping lines charge them. Ultimately, the 66 00:03:38,320 --> 00:03:43,640 Speaker 3: customers of transport services pay those and they in turn 67 00:03:43,760 --> 00:03:46,560 Speaker 3: past those two consumers in one way or the other eventually. 68 00:03:47,000 --> 00:03:51,280 Speaker 3: So twenty six percent increase is not an enormous spike 69 00:03:51,400 --> 00:03:55,200 Speaker 3: higher when you look at shipping rates have plunged seventy 70 00:03:55,240 --> 00:03:59,080 Speaker 3: five percent this year, but it's still a turnaround from 71 00:03:59,160 --> 00:04:02,400 Speaker 3: the steady erod of freight rates that we've seen throughout 72 00:04:02,440 --> 00:04:05,040 Speaker 3: the year, and one that the shipping companies frankly would welcome. 73 00:04:05,320 --> 00:04:08,400 Speaker 3: They can't really make money at rates the way they 74 00:04:08,440 --> 00:04:11,080 Speaker 3: were three weeks ago, but now they're kind of back 75 00:04:11,160 --> 00:04:12,760 Speaker 3: in the profit making zone. 76 00:04:13,120 --> 00:04:16,600 Speaker 5: So Brendan, obviously there's a cost calculation here in terms 77 00:04:16,640 --> 00:04:20,040 Speaker 5: of what the impact of this waterway, which is so 78 00:04:20,200 --> 00:04:22,880 Speaker 5: crucial in terms of maritrine trade being blocked, is. But 79 00:04:22,960 --> 00:04:25,000 Speaker 5: it also to your point you were making earlier about 80 00:04:25,000 --> 00:04:27,400 Speaker 5: the time it takes to go around the coast of 81 00:04:27,440 --> 00:04:31,080 Speaker 5: Africa instead, is about time, especially when we think about 82 00:04:31,080 --> 00:04:34,680 Speaker 5: how supply chains were so snarled back during the heart 83 00:04:34,800 --> 00:04:37,080 Speaker 5: of COVID days, are we going to see any of 84 00:04:37,200 --> 00:04:39,520 Speaker 5: that backups and ports as all of these ships are 85 00:04:39,560 --> 00:04:42,600 Speaker 5: taking longer to arrive at their destinations or is it 86 00:04:42,760 --> 00:04:45,200 Speaker 5: likely to be a bit smoother than we experienced a 87 00:04:45,240 --> 00:04:45,840 Speaker 5: few years ago. 88 00:04:46,920 --> 00:04:49,000 Speaker 3: Well, it all depends on how long this lasts. I mean, 89 00:04:49,360 --> 00:04:52,719 Speaker 3: we're seeing hundreds and hundreds of ships diverting. Now those 90 00:04:52,760 --> 00:04:54,520 Speaker 3: are all going to be late in their ports of 91 00:04:54,600 --> 00:04:57,560 Speaker 3: the original ports of destination. All that cargo is going 92 00:04:57,600 --> 00:05:01,800 Speaker 3: to have to be rerouted new schedules for for delivery 93 00:05:01,880 --> 00:05:05,120 Speaker 3: and pick up with trucks and trains, and so we'll 94 00:05:05,120 --> 00:05:08,720 Speaker 3: see an initial jolt to supply chains. But in truth, 95 00:05:09,000 --> 00:05:12,320 Speaker 3: supply chains have been pretty resilient. They and absorbed a 96 00:05:12,400 --> 00:05:15,720 Speaker 3: lot of these, even the biggest shocks. So we'll we'll 97 00:05:15,760 --> 00:05:20,000 Speaker 3: see some initial initial disruptions uh in the in the 98 00:05:20,080 --> 00:05:23,760 Speaker 3: coming weeks, and if it gets resolved and shipping continues 99 00:05:23,800 --> 00:05:27,160 Speaker 3: through the Suez Canal, the likelihood is this won't leave 100 00:05:27,200 --> 00:05:30,800 Speaker 3: a huge, huge dent on the on the global economy 101 00:05:30,880 --> 00:05:33,880 Speaker 3: or global trade more broadly, But initially it's going to 102 00:05:33,920 --> 00:05:37,360 Speaker 3: be painful, especially come January, when one of the peak 103 00:05:37,440 --> 00:05:40,360 Speaker 3: shipping seasons of the year happens as retailers look to 104 00:05:40,400 --> 00:05:41,560 Speaker 3: restock after the holidays. 105 00:05:42,040 --> 00:05:46,120 Speaker 2: Brendan Ultimately, who decides when it is safe to transit 106 00:05:46,200 --> 00:05:47,800 Speaker 2: the Red Sea is that the US Navy is the 107 00:05:47,839 --> 00:05:50,000 Speaker 2: shipping companies themselves who decides. 108 00:05:51,080 --> 00:05:54,240 Speaker 3: Well, it sounds like the shipping companies themselves are making 109 00:05:54,320 --> 00:05:57,839 Speaker 3: this decision based based in large part on the signals 110 00:05:57,839 --> 00:06:00,359 Speaker 3: they're getting from the forces in the area. 111 00:06:00,839 --> 00:06:00,919 Speaker 4: Uh. 112 00:06:01,320 --> 00:06:05,680 Speaker 3: It's there are a few containerships going through. Uh and 113 00:06:06,040 --> 00:06:08,120 Speaker 3: you know, as we saw yesterday with the MSc ship 114 00:06:08,200 --> 00:06:10,160 Speaker 3: that you know, they're they're getting attacked by drones and 115 00:06:10,279 --> 00:06:14,279 Speaker 3: rockets and other things. Uh So the shipping companies, though, 116 00:06:14,360 --> 00:06:17,599 Speaker 3: are taking their queue from their insurance companies that are saying, look, 117 00:06:17,640 --> 00:06:20,240 Speaker 3: it's it's it's too it's too costly for us, it's 118 00:06:20,279 --> 00:06:22,280 Speaker 3: going to be too We're going to raise your premium 119 00:06:22,320 --> 00:06:24,279 Speaker 3: if you want to do that. So it's a there's 120 00:06:24,279 --> 00:06:28,200 Speaker 3: a trade off that they're that they're weighing, and ultimately, uh, 121 00:06:28,440 --> 00:06:31,240 Speaker 3: you know, higher higher insurance costs will will sort of 122 00:06:31,320 --> 00:06:32,640 Speaker 3: dictate some of those decisions. 123 00:06:33,000 --> 00:06:33,360 Speaker 2: All right. 124 00:06:33,400 --> 00:06:35,599 Speaker 5: Brendan Murray, thanks so much for joining us from London. 125 00:06:35,680 --> 00:06:38,320 Speaker 5: He is our trades are here at Bloomberg. I love 126 00:06:38,360 --> 00:06:41,480 Speaker 5: this art. Those are the best titles in the building. 127 00:06:42,920 --> 00:06:46,720 Speaker 6: You're listening to the team kenjer Live program Bloomberg Markets 128 00:06:46,800 --> 00:06:49,840 Speaker 6: weekdays at ten am Eastern on Bloomberg dot com, the 129 00:06:49,960 --> 00:06:53,080 Speaker 6: iHeartRadio app and the Bloomberg Business app, or listen on 130 00:06:53,160 --> 00:06:55,120 Speaker 6: demand wherever you get your podcasts. 131 00:06:56,880 --> 00:06:59,560 Speaker 5: Another good title though is executive editor, and I'm pleased 132 00:06:59,560 --> 00:07:02,120 Speaker 5: to say our your executive editor for Energy in Commodities. 133 00:07:02,200 --> 00:07:04,760 Speaker 5: Will Kennedy is joining us now also from London, to 134 00:07:04,839 --> 00:07:08,320 Speaker 5: talk through how this is translating into oil markets. It's 135 00:07:08,360 --> 00:07:11,640 Speaker 5: actually interesting, Will, You had oil closing at the highest 136 00:07:11,720 --> 00:07:14,040 Speaker 5: level in about a month yesterday, coming off those levels 137 00:07:14,080 --> 00:07:16,200 Speaker 5: a touch today, we're now at eighty dollars and sixty 138 00:07:16,280 --> 00:07:19,560 Speaker 5: five cents for a barrel of Brent crude. Should we 139 00:07:19,680 --> 00:07:22,760 Speaker 5: be expecting this to resonate more with the oil market 140 00:07:22,920 --> 00:07:24,960 Speaker 5: or traders just expecting that this is going to be 141 00:07:25,000 --> 00:07:28,520 Speaker 5: a very short term impact that ultimately doesn't fundamentally change 142 00:07:28,560 --> 00:07:29,320 Speaker 5: anything that much. 143 00:07:31,040 --> 00:07:33,680 Speaker 4: Good morning, Katy. I think it has had an impact, 144 00:07:33,800 --> 00:07:36,240 Speaker 4: to be honest. Oil prices are high where they were. 145 00:07:36,640 --> 00:07:40,080 Speaker 4: They fallen really quite sharply early in December, and they've 146 00:07:40,240 --> 00:07:45,400 Speaker 4: rallied against this news. In the Red Sea. Let's still 147 00:07:45,520 --> 00:07:48,640 Speaker 4: below where they were at the beginning of the four 148 00:07:49,240 --> 00:07:51,120 Speaker 4: when they were close to one hundred dollars, but they 149 00:07:51,200 --> 00:07:53,240 Speaker 4: have run it. I think it does make people nervous. 150 00:07:53,720 --> 00:07:56,360 Speaker 4: It makes people nervous that the conflicts that we're seeing 151 00:07:56,360 --> 00:08:00,440 Speaker 4: in the Middle East could spread. Clearly the huts who 152 00:08:00,560 --> 00:08:03,520 Speaker 4: are responsible for this attacks as sponsored by a rob 153 00:08:04,520 --> 00:08:06,600 Speaker 4: as is the mass in the gards of strips, so 154 00:08:07,080 --> 00:08:10,880 Speaker 4: that wider regional tension remains, and it does make oil 155 00:08:10,960 --> 00:08:13,240 Speaker 4: traders nervous. But I think there are a couple of 156 00:08:13,280 --> 00:08:16,920 Speaker 4: reasons why the reaction perhaps hasn't been stronger. Oral markets 157 00:08:16,960 --> 00:08:22,680 Speaker 4: remain fairly well supplied globally, and a lot of the 158 00:08:23,160 --> 00:08:30,040 Speaker 4: oil coming through the Red Sea is destined for customer. 159 00:08:30,120 --> 00:08:32,640 Speaker 4: Is Russian oil destined Vasia, and it's unlikely the Russian 160 00:08:32,640 --> 00:08:36,880 Speaker 4: oal perhaps would be a target of these attacks, So 161 00:08:37,440 --> 00:08:41,200 Speaker 4: there are reasons why they that people aren't so nervous 162 00:08:41,200 --> 00:08:45,720 Speaker 4: about oil tankers in the Red Sea. And finally, Saudi 163 00:08:45,760 --> 00:08:50,040 Speaker 4: Arabia and its allies of OPEK, especially their moments, retain 164 00:08:50,160 --> 00:08:54,040 Speaker 4: a good amount of spare capacity, which means that if 165 00:08:54,520 --> 00:08:56,800 Speaker 4: the situation were to worse and that there are policy 166 00:08:56,880 --> 00:08:59,840 Speaker 4: responsibles that OPEC could make, And I think that means 167 00:08:59,880 --> 00:09:03,480 Speaker 4: that some of the sting of geopolitics or oil prices 168 00:09:03,920 --> 00:09:04,920 Speaker 4: is removed at the moment. 169 00:09:05,640 --> 00:09:08,280 Speaker 2: Well before this latest flare up in the Red Sea 170 00:09:08,320 --> 00:09:10,760 Speaker 2: oil preces had been trading Lord and WTI crude oil 171 00:09:10,840 --> 00:09:14,920 Speaker 2: was below seventy Where is the market now in terms 172 00:09:14,920 --> 00:09:18,680 Speaker 2: of assessing demand here? It appears that the US economy 173 00:09:19,360 --> 00:09:22,000 Speaker 2: at least may be in for a soft landing. Where's 174 00:09:22,040 --> 00:09:23,959 Speaker 2: the sense of demand over the next three to six 175 00:09:24,040 --> 00:09:24,600 Speaker 2: to twelve months. 176 00:09:25,200 --> 00:09:27,960 Speaker 4: Yeah, I think we should start that conversation ball by 177 00:09:28,080 --> 00:09:30,640 Speaker 4: talking about demand this year, which has been a lot 178 00:09:30,679 --> 00:09:33,800 Speaker 4: stronger than many people expected. It'd be bounded infamily sharply 179 00:09:33,840 --> 00:09:35,959 Speaker 4: in China, as China was the last major economy to 180 00:09:36,000 --> 00:09:39,240 Speaker 4: come out of COVID, It's been very healthy in the 181 00:09:39,360 --> 00:09:42,400 Speaker 4: United States. As you say, the economy continues to do well. 182 00:09:42,720 --> 00:09:47,640 Speaker 4: People continue to drive, and they continue to demand goods 183 00:09:47,679 --> 00:09:53,080 Speaker 4: that are transported by trucks. I think that demand has 184 00:09:53,120 --> 00:09:56,040 Speaker 4: been much stronger than many people expected, and if the 185 00:09:56,120 --> 00:09:58,839 Speaker 4: economy does have that soft landing, there's every reason to 186 00:09:58,960 --> 00:10:02,120 Speaker 4: expect that demand will continue to be fairly strong. It 187 00:10:02,200 --> 00:10:04,040 Speaker 4: might not be as strong as I have been this year, 188 00:10:04,040 --> 00:10:06,160 Speaker 4: because I think that coming out of COVID in China 189 00:10:06,240 --> 00:10:08,960 Speaker 4: effect was particularly strong. We had that really big snapback. 190 00:10:09,480 --> 00:10:10,880 Speaker 4: But you know, we may add more than a million 191 00:10:10,920 --> 00:10:14,319 Speaker 4: pounds a year day next year. That's the sort of 192 00:10:14,480 --> 00:10:16,520 Speaker 4: forecast that you were looking at, And that's a fairly 193 00:10:16,640 --> 00:10:21,160 Speaker 4: healthy increase in demand by historical standards. So the question 194 00:10:21,320 --> 00:10:24,560 Speaker 4: then becomes what happens with supply and is it more 195 00:10:24,640 --> 00:10:27,160 Speaker 4: than matched with supply and that balance. But I think 196 00:10:27,200 --> 00:10:29,760 Speaker 4: you'll like to point out for that as people think 197 00:10:29,760 --> 00:10:33,040 Speaker 4: about the market next year, that strength in demand is 198 00:10:33,040 --> 00:10:35,280 Speaker 4: one of the key questions that they're thinking about. 199 00:10:35,880 --> 00:10:38,920 Speaker 5: But to your point, will about supply, We've obviously learned 200 00:10:38,960 --> 00:10:41,400 Speaker 5: within the last several weeks that shaled this year in 201 00:10:41,480 --> 00:10:44,800 Speaker 5: the US far exceeded expectations in terms of what they 202 00:10:44,840 --> 00:10:47,480 Speaker 5: were able to produce in twenty twenty three. It's OPEC 203 00:10:47,559 --> 00:10:50,000 Speaker 5: really that has been more restrictive. The saudis really the 204 00:10:50,080 --> 00:10:53,160 Speaker 5: ones leading that is, they would like to keep prices elevated. 205 00:10:53,240 --> 00:10:56,520 Speaker 5: If indeed that demand picture you're painting does come true 206 00:10:56,600 --> 00:10:58,800 Speaker 5: in twenty twenty four and you see an uptick in demand, 207 00:10:58,840 --> 00:11:02,240 Speaker 5: should we expect that OPA is necessarily going to respond 208 00:11:02,679 --> 00:11:04,640 Speaker 5: by putting more out there on the market. Are they 209 00:11:04,800 --> 00:11:08,280 Speaker 5: likely to try to keep things as tight as possible, so. 210 00:11:08,360 --> 00:11:11,120 Speaker 4: They agreed to they agree to cut more in the 211 00:11:11,240 --> 00:11:13,600 Speaker 4: recent meeting in the beginning of December, and the Saudis 212 00:11:14,040 --> 00:11:17,440 Speaker 4: themselves were not contributing to that, but other members agree 213 00:11:17,480 --> 00:11:20,280 Speaker 4: to pair that production or fore go increases that they 214 00:11:20,320 --> 00:11:22,559 Speaker 4: had already agreed in the case of they liked our members. 215 00:11:22,960 --> 00:11:24,720 Speaker 4: I think what that means is that Opek will want 216 00:11:24,760 --> 00:11:26,079 Speaker 4: to say that to see that play out in the 217 00:11:26,120 --> 00:11:29,160 Speaker 4: first quarter. When we last spoke to the Saudi Energy minister, 218 00:11:29,280 --> 00:11:31,559 Speaker 4: he said they were willing to keep those curves in 219 00:11:31,640 --> 00:11:35,199 Speaker 4: place beyond the first quarter to see demand titan. So 220 00:11:36,080 --> 00:11:38,160 Speaker 4: I think when you put that together, they are likely 221 00:11:38,240 --> 00:11:41,240 Speaker 4: to put more oil in the market in the short term. 222 00:11:42,240 --> 00:11:45,079 Speaker 4: They really would like to see these cuts work and 223 00:11:45,120 --> 00:11:49,360 Speaker 4: they would like to see the market tightened, so they 224 00:11:49,400 --> 00:11:51,360 Speaker 4: will be patient to wait for that to happen before 225 00:11:51,400 --> 00:11:55,440 Speaker 4: they before they think about putting many more well back 226 00:11:55,480 --> 00:11:56,040 Speaker 4: into the market. 227 00:11:56,400 --> 00:11:58,679 Speaker 2: Despite some of the at least warmer temperatures here in 228 00:11:58,720 --> 00:12:01,240 Speaker 2: the US, we are in peak heating season. Here will 229 00:12:01,280 --> 00:12:04,080 Speaker 2: goes the sense how things are in Europe turned out 230 00:12:04,120 --> 00:12:07,760 Speaker 2: better than expected last winter. What's the situation for this winter? 231 00:12:08,760 --> 00:12:11,160 Speaker 4: Yeah, we haven't. We've had a bit of cold winter. 232 00:12:11,240 --> 00:12:13,720 Speaker 4: I mean here in the UK it's been an incredibly warm, 233 00:12:13,800 --> 00:12:17,840 Speaker 4: wet and windy winter. And that kind of weather means 234 00:12:17,920 --> 00:12:21,439 Speaker 4: that energy supplies are fairly ample for two reasons. One, 235 00:12:22,080 --> 00:12:24,400 Speaker 4: it doesn't put a huge strain on gas demand because 236 00:12:24,520 --> 00:12:27,080 Speaker 4: people aren't needing it to heat their homes or heating 237 00:12:27,160 --> 00:12:29,679 Speaker 4: all demand. And two, all this wind means that we're 238 00:12:29,679 --> 00:12:33,120 Speaker 4: generating a huge amount of power through wind through the 239 00:12:33,360 --> 00:12:34,839 Speaker 4: you know, I think I looked this morning and the 240 00:12:34,960 --> 00:12:37,079 Speaker 4: UK was producing more than sixty percent of its power 241 00:12:37,080 --> 00:12:40,640 Speaker 4: demand through wind turbines. So you put that together and 242 00:12:40,760 --> 00:12:43,760 Speaker 4: it means that if that weather continues, we should come 243 00:12:43,800 --> 00:12:46,360 Speaker 4: through this winter in fairly good shape. And in fact, 244 00:12:46,640 --> 00:12:49,680 Speaker 4: people are fairly confident this winter wold be too bad. 245 00:12:49,840 --> 00:12:54,600 Speaker 4: There are above average levels of gas supply and as 246 00:12:54,640 --> 00:12:56,360 Speaker 4: we say, we haven't had a big coal slap yet, 247 00:12:56,400 --> 00:13:01,120 Speaker 4: but that could of course change weather is under all right. 248 00:13:01,240 --> 00:13:02,400 Speaker 2: Well, Kennedy, thank you so much. 249 00:13:02,440 --> 00:13:02,959 Speaker 3: We appreciate it. 250 00:13:03,000 --> 00:13:03,120 Speaker 4: Well. 251 00:13:03,160 --> 00:13:06,440 Speaker 2: Kennedy, Senior Managing editor over there in lundon covering all 252 00:13:06,520 --> 00:13:07,600 Speaker 2: things on the energy front. 253 00:13:07,920 --> 00:13:11,000 Speaker 6: You're listening to the tape Cat's are Live program Bloomberg 254 00:13:11,080 --> 00:13:14,640 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 255 00:13:14,720 --> 00:13:17,920 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 256 00:13:18,000 --> 00:13:20,800 Speaker 6: You can also listen live on Amazon Alexa from our 257 00:13:20,840 --> 00:13:25,199 Speaker 6: flagship New York station, Just say Alexa, play Bloomberg eleven thirty. 258 00:13:27,080 --> 00:13:29,880 Speaker 7: Really, there is still so much geopolitics a play trade 259 00:13:30,080 --> 00:13:32,640 Speaker 7: to be digesting all of it and it's impact on 260 00:13:32,679 --> 00:13:33,000 Speaker 7: the market. 261 00:13:33,240 --> 00:13:34,760 Speaker 2: Yeah, we are seeing yields move though. We've got the 262 00:13:34,800 --> 00:13:37,720 Speaker 2: ten year treasury off about eight basis points three point 263 00:13:37,760 --> 00:13:40,839 Speaker 2: eight one percent. Boy, it wasn't that long ago we 264 00:13:40,920 --> 00:13:43,040 Speaker 2: had the tenure was trading north of five percent there, 265 00:13:43,160 --> 00:13:46,040 Speaker 2: So big big move in racers saying mortgage rates come down. 266 00:13:46,280 --> 00:13:49,000 Speaker 2: That was important for Kaylee Lions as she's house hunting 267 00:13:49,040 --> 00:13:51,760 Speaker 2: and she liked to see those rates come down even more. 268 00:13:51,880 --> 00:13:54,880 Speaker 2: Let's get a sense of maybe where these markets are going, 269 00:13:54,920 --> 00:13:56,680 Speaker 2: because it's been such a move just over the last 270 00:13:57,080 --> 00:13:59,160 Speaker 2: seven eight nine weeks here, big big moves up in 271 00:13:59,200 --> 00:14:01,760 Speaker 2: the acquity markets, moves down in yields. I'm not sure 272 00:14:02,400 --> 00:14:04,920 Speaker 2: how many people kind of saw that on their Bingo card. 273 00:14:04,960 --> 00:14:08,000 Speaker 2: But Nancy Tangler joins us. She's the CIO of Laffer 274 00:14:08,200 --> 00:14:12,360 Speaker 2: Tangler investments joining us via zoom here. Nancy, boy, this 275 00:14:12,600 --> 00:14:14,520 Speaker 2: move we've had over the last eight nine weeks has 276 00:14:14,679 --> 00:14:17,000 Speaker 2: really been something to marvel at. What do you make 277 00:14:17,040 --> 00:14:17,199 Speaker 2: of it? 278 00:14:18,520 --> 00:14:23,400 Speaker 8: Well, I love the bingo card analogy. I never had 279 00:14:23,480 --> 00:14:26,320 Speaker 8: much luck with that myself, But yeah, I think a 280 00:14:26,400 --> 00:14:26,840 Speaker 8: couple things. 281 00:14:26,880 --> 00:14:27,080 Speaker 4: Paul. 282 00:14:27,120 --> 00:14:29,240 Speaker 8: We wrote a piece on October thirty first that said 283 00:14:29,320 --> 00:14:32,120 Speaker 8: opportunity in every difficulty, And at the beginning of last 284 00:14:32,160 --> 00:14:35,600 Speaker 8: year we wrote a piece that said of this year 285 00:14:35,880 --> 00:14:39,280 Speaker 8: that we thought investors were being way too pessimistic and 286 00:14:39,440 --> 00:14:41,960 Speaker 8: that we expected to see the markets do much better 287 00:14:42,080 --> 00:14:45,040 Speaker 8: than most thought. We don't do market forecasts for the 288 00:14:45,120 --> 00:14:47,560 Speaker 8: year end, but we did say in the October thirty 289 00:14:47,600 --> 00:14:49,680 Speaker 8: one piece we thought we'd see a rally and not 290 00:14:50,600 --> 00:14:53,480 Speaker 8: expecting this much of a rally. To be sure, I 291 00:14:53,560 --> 00:14:54,440 Speaker 8: think you've got a lot. 292 00:14:54,360 --> 00:14:55,120 Speaker 4: Of things going on. 293 00:14:55,400 --> 00:14:58,120 Speaker 8: It's not just the FED, it's you know, the money 294 00:14:58,160 --> 00:15:01,600 Speaker 8: on the sidelines, it's creeping in window dressing. But I 295 00:15:01,720 --> 00:15:04,520 Speaker 8: do think that stocks, if you look at the multiple 296 00:15:04,960 --> 00:15:07,520 Speaker 8: you're at fifteen times fifteen point three times S and 297 00:15:07,600 --> 00:15:10,760 Speaker 8: p X fang with fang you're at seventeen times next 298 00:15:10,840 --> 00:15:13,920 Speaker 8: year's earnings, that that is not super lofty, and I 299 00:15:14,000 --> 00:15:16,280 Speaker 8: think we have the opportunity to move up from here 300 00:15:16,640 --> 00:15:18,320 Speaker 8: with some choppiness in the first quarter. 301 00:15:18,920 --> 00:15:22,080 Speaker 7: I always love Nancy your notes in particular, and I 302 00:15:22,160 --> 00:15:24,640 Speaker 7: think back to sort of the October thirty first note. 303 00:15:24,680 --> 00:15:27,280 Speaker 7: I think back to some of the quotes you use 304 00:15:27,320 --> 00:15:29,760 Speaker 7: in Winston Churchill in particular, you say, a pessimists is 305 00:15:29,760 --> 00:15:32,360 Speaker 7: the difficulty and every opportunity, and optimisty is the opportunity 306 00:15:32,400 --> 00:15:35,080 Speaker 7: and every difficulty. So be the optimist, and I know 307 00:15:35,160 --> 00:15:37,760 Speaker 7: you are one. What are some of the difficulties that 308 00:15:37,840 --> 00:15:39,840 Speaker 7: you're going to be keeping a keen eye on as 309 00:15:39,960 --> 00:15:41,600 Speaker 7: you try and assert some of the optimism. 310 00:15:42,600 --> 00:15:46,040 Speaker 8: Well, I love your Winston Churchill, Caroline, so I quote 311 00:15:46,080 --> 00:15:47,080 Speaker 8: him at every opportunity. 312 00:15:48,200 --> 00:15:48,400 Speaker 9: Yeah. 313 00:15:48,480 --> 00:15:50,680 Speaker 8: So, I think one of the biggest concerns is is 314 00:15:50,840 --> 00:15:54,120 Speaker 8: inflation licks. Now we know that the core number, the 315 00:15:54,200 --> 00:15:57,200 Speaker 8: PCE number, has been coming down, but the sticky inflation 316 00:15:57,440 --> 00:15:59,760 Speaker 8: number at per the Atlanta feed is still very high. 317 00:16:00,160 --> 00:16:02,280 Speaker 8: And if you look at historical numbers back in the 318 00:16:02,720 --> 00:16:07,360 Speaker 8: seventies and period where we had inflation restart, it's pretty 319 00:16:07,400 --> 00:16:11,120 Speaker 8: positively correlated. Now we're at the turning point. So whether 320 00:16:11,200 --> 00:16:15,400 Speaker 8: or not that happens remains to be seen. But I 321 00:16:15,480 --> 00:16:17,680 Speaker 8: think the other thing I'm quite concerned about is the 322 00:16:17,760 --> 00:16:20,720 Speaker 8: Red Sea And if you look at the good news 323 00:16:20,800 --> 00:16:23,400 Speaker 8: in the PMIS, it's that delivery times have come down, 324 00:16:23,880 --> 00:16:26,080 Speaker 8: but they're about to go up if we have to 325 00:16:26,160 --> 00:16:30,240 Speaker 8: continue to go in alternate routes for shipping. So that's 326 00:16:30,280 --> 00:16:34,320 Speaker 8: something on our radar. We're also we're not concerned about earnings. 327 00:16:34,400 --> 00:16:36,800 Speaker 8: We think margins are going to continue to improve. That 328 00:16:37,000 --> 00:16:39,440 Speaker 8: was the good news story in the second half of 329 00:16:39,520 --> 00:16:42,840 Speaker 8: this year, and so we think that continues. Managements have 330 00:16:42,920 --> 00:16:46,400 Speaker 8: done an excellent job because most of them refinanced before 331 00:16:46,960 --> 00:16:50,680 Speaker 8: rates went up, But I haven't been particularly complementary of 332 00:16:50,760 --> 00:16:52,880 Speaker 8: the FED, and they can still screw this up. 333 00:16:53,480 --> 00:16:57,400 Speaker 7: In my view, we are going to go into Red 334 00:16:57,520 --> 00:16:59,400 Speaker 7: Sea in a moment, but I want to go back 335 00:16:59,400 --> 00:17:01,520 Speaker 7: to some of the ex I'm so pleased you bring 336 00:17:01,600 --> 00:17:04,080 Speaker 7: to our technology shows on the odd occasion that we're 337 00:17:04,160 --> 00:17:06,800 Speaker 7: lucky enough to welcome you on NANCI. You are someone 338 00:17:06,840 --> 00:17:09,439 Speaker 7: who you might not think that the Fed's always doing 339 00:17:09,520 --> 00:17:12,720 Speaker 7: that great, but you are pretty focused on certain leadership, 340 00:17:12,760 --> 00:17:14,919 Speaker 7: and you've called out certain tech companies are done particularly 341 00:17:14,960 --> 00:17:19,159 Speaker 7: well in this environment. What of breadth in technology. You've 342 00:17:19,160 --> 00:17:20,840 Speaker 7: been trying to say, Look, it's not just all about 343 00:17:20,880 --> 00:17:23,040 Speaker 7: these seven killer stocks. There are others to be had. 344 00:17:23,119 --> 00:17:25,240 Speaker 7: Do you still believe in that area being able to 345 00:17:25,320 --> 00:17:26,600 Speaker 7: lead US high for twenty twenty four? 346 00:17:27,320 --> 00:17:30,520 Speaker 8: I do, Caroline. The total addressable market for generative AI 347 00:17:31,200 --> 00:17:36,040 Speaker 8: cloud digital transition is enormous. It's in the trillions of dollars, 348 00:17:36,160 --> 00:17:38,480 Speaker 8: and so the question becomes, who are going to be 349 00:17:38,560 --> 00:17:40,360 Speaker 8: the leader or who are going to be the survivors 350 00:17:40,400 --> 00:17:43,200 Speaker 8: and the thrivers in this environment. We still think you 351 00:17:43,240 --> 00:17:44,879 Speaker 8: want to own a couple of the fang names, but 352 00:17:45,000 --> 00:17:48,520 Speaker 8: there are much broader places to be focused on some 353 00:17:48,840 --> 00:17:51,719 Speaker 8: old economy tech like Oracle. I don't know, I call 354 00:17:51,800 --> 00:17:56,160 Speaker 8: Broadcom the poor man's Nvidia. That that is one place 355 00:17:56,200 --> 00:17:58,320 Speaker 8: that we think still has plenty of room to run. 356 00:17:58,920 --> 00:18:01,120 Speaker 8: We've started looking at you new names, which you can't 357 00:18:01,160 --> 00:18:03,000 Speaker 8: talk about because we're in the process of buying them, 358 00:18:03,040 --> 00:18:06,200 Speaker 8: but I shortly talk about them. And I think you 359 00:18:06,280 --> 00:18:09,520 Speaker 8: want to remain overweight this group, but we are also 360 00:18:09,680 --> 00:18:12,879 Speaker 8: overweight industrials. And our big move at the end in 361 00:18:12,960 --> 00:18:14,680 Speaker 8: the fall of twenty twenty two was to add to 362 00:18:14,720 --> 00:18:18,080 Speaker 8: consumer discretionary in tech, and those two have been two 363 00:18:18,160 --> 00:18:20,879 Speaker 8: of the three best performing sectors this year. I think 364 00:18:20,960 --> 00:18:23,680 Speaker 8: there's still opportunities in consumer discretionary as well. 365 00:18:24,280 --> 00:18:25,840 Speaker 2: Well, that's kind of where I wanted to go, Nancy, 366 00:18:25,960 --> 00:18:28,119 Speaker 2: because it may surprise you to find out that I 367 00:18:28,600 --> 00:18:32,320 Speaker 2: am not long that magnificent socks seven stocks in twenty 368 00:18:32,400 --> 00:18:33,840 Speaker 2: twenty three. So what do I do in twenty four. 369 00:18:33,920 --> 00:18:37,240 Speaker 2: Do I try to chase those names a big tech 370 00:18:37,440 --> 00:18:39,400 Speaker 2: growth or do I, I don't know, try to find 371 00:18:39,440 --> 00:18:40,360 Speaker 2: some value somewhere else. 372 00:18:41,280 --> 00:18:42,919 Speaker 8: Well, Paul, you know what's so interesting is that if 373 00:18:42,960 --> 00:18:45,560 Speaker 8: you look at the valuations compared to the nineties, and 374 00:18:45,600 --> 00:18:47,200 Speaker 8: I think when I was on with you last Caroline, 375 00:18:47,200 --> 00:18:51,119 Speaker 8: I talked about that this market is an analog or 376 00:18:51,200 --> 00:18:53,639 Speaker 8: the nineties is an analog to this market. A lot 377 00:18:53,720 --> 00:18:56,840 Speaker 8: of similarities in terms of inflation, high rates and inverted 378 00:18:56,920 --> 00:19:00,920 Speaker 8: yield curve, of soft landing a war, and those valuations. 379 00:19:01,000 --> 00:19:02,840 Speaker 8: I mean, all you have to do is look at Microsoft. 380 00:19:02,920 --> 00:19:05,159 Speaker 8: It was training at the end of the nineties at 381 00:19:05,320 --> 00:19:09,040 Speaker 8: fifty plus times peak earnings and it's currently at somewhere 382 00:19:09,040 --> 00:19:11,439 Speaker 8: between twenty eight and thirty times forward earnings. These are 383 00:19:11,480 --> 00:19:13,840 Speaker 8: not peak earnings for the company. So I think there 384 00:19:14,040 --> 00:19:17,440 Speaker 8: are spots like I'm less enamored though I know people 385 00:19:17,560 --> 00:19:20,159 Speaker 8: love Meta. It's not one of our top picks, But 386 00:19:20,359 --> 00:19:24,160 Speaker 8: would I continue to add to Microsoft here or Amazon 387 00:19:24,480 --> 00:19:26,520 Speaker 8: is a name that we think is probably our top 388 00:19:26,600 --> 00:19:29,280 Speaker 8: pick in that space for next year. Yeah, I think 389 00:19:29,320 --> 00:19:32,000 Speaker 8: you use weakness and you just be disciplined. You don't 390 00:19:32,400 --> 00:19:34,480 Speaker 8: chase any of them. The last thing I'll say is, 391 00:19:34,520 --> 00:19:37,800 Speaker 8: if you look at Nvidia on a forward multiple basis, 392 00:19:38,040 --> 00:19:42,000 Speaker 8: it's pretty cheap compared to what you might think since 393 00:19:42,040 --> 00:19:44,480 Speaker 8: the stock has doubled. It's in the the mid twenty 394 00:19:44,560 --> 00:19:47,520 Speaker 8: five range. So I think those are all names that 395 00:19:47,600 --> 00:19:51,800 Speaker 8: you can use as opportunistically to round out holdings. Don't 396 00:19:51,880 --> 00:19:55,000 Speaker 8: chase anything because the market will pull back. We'll get 397 00:19:55,000 --> 00:19:58,000 Speaker 8: a correction, and that's when you step in and buy 398 00:19:58,119 --> 00:19:59,399 Speaker 8: with you know, both hands. 399 00:20:00,160 --> 00:20:01,879 Speaker 2: Correction, Nancy, to the extent we want to buy with 400 00:20:01,960 --> 00:20:03,600 Speaker 2: both hands at some point this year. Will it be 401 00:20:03,680 --> 00:20:05,600 Speaker 2: earnings based? I mean, you look at the S and 402 00:20:05,640 --> 00:20:08,879 Speaker 2: P five hundred. Earnings expectations are about twelve to thirteen 403 00:20:08,920 --> 00:20:11,760 Speaker 2: percent for twenty twenty four. It feels a little frothy 404 00:20:11,840 --> 00:20:13,840 Speaker 2: to me. Do you think there's material earnings risk in 405 00:20:13,880 --> 00:20:14,320 Speaker 2: this market? 406 00:20:15,800 --> 00:20:16,040 Speaker 4: Well? 407 00:20:16,600 --> 00:20:19,240 Speaker 8: What I well, I think the dollars coming down, so 408 00:20:19,359 --> 00:20:21,399 Speaker 8: that will help some of the multinationals. I think it 409 00:20:21,400 --> 00:20:22,960 Speaker 8: will con I mean it has come down, it will 410 00:20:22,960 --> 00:20:27,200 Speaker 8: continue to come down. But I'm not sure about that 411 00:20:27,440 --> 00:20:31,320 Speaker 8: because if you look at the companies that we've just 412 00:20:31,400 --> 00:20:34,600 Speaker 8: been talking about, they have not only been guiding up, 413 00:20:34,760 --> 00:20:37,680 Speaker 8: but they've been expanding margins. I mean, there will be 414 00:20:37,800 --> 00:20:41,600 Speaker 8: companies that miss earnings and they will be punished. Oracle 415 00:20:41,840 --> 00:20:44,720 Speaker 8: just missed guidance and so it was punished, and we 416 00:20:44,840 --> 00:20:47,680 Speaker 8: use that as an opportunity to add to holdings because 417 00:20:47,680 --> 00:20:50,159 Speaker 8: we think long term, these are the companies that you 418 00:20:50,240 --> 00:20:52,280 Speaker 8: want to own in a slowing growth environment and a 419 00:20:52,359 --> 00:20:56,920 Speaker 8: tight labor market where technology spend is how companies get productivity. 420 00:20:57,280 --> 00:20:59,240 Speaker 8: So I think we may be surprised, but remember, and 421 00:20:59,320 --> 00:21:01,760 Speaker 8: you know this is what I do. Analysts are wrong 422 00:21:01,920 --> 00:21:04,359 Speaker 8: to the tune of about two thirds of the time. 423 00:21:04,600 --> 00:21:05,400 Speaker 9: It's a quarter. 424 00:21:06,240 --> 00:21:08,560 Speaker 8: So we know to the upside and the downside. So 425 00:21:08,640 --> 00:21:10,720 Speaker 8: I think what you have to just be ready to 426 00:21:10,840 --> 00:21:13,640 Speaker 8: do is you have your list, and if they do disappoint, 427 00:21:13,680 --> 00:21:15,320 Speaker 8: you step in and you add to those names. 428 00:21:15,920 --> 00:21:18,159 Speaker 7: Naci Tangler, it is always such a joy to have 429 00:21:18,280 --> 00:21:21,320 Speaker 7: you on the show with our CIO of Lafatanga Investments, 430 00:21:21,560 --> 00:21:23,840 Speaker 7: wishing you a wonderful new year, and I'm sure we'll 431 00:21:23,840 --> 00:21:26,800 Speaker 7: be having you across our network soon in January. 432 00:21:27,400 --> 00:21:30,480 Speaker 6: You're listening to the tape canser our live program Bloomberg 433 00:21:30,600 --> 00:21:34,159 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 434 00:21:34,240 --> 00:21:37,440 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 435 00:21:37,520 --> 00:21:40,280 Speaker 6: You can also listen live on Amazon Alexa from our 436 00:21:40,359 --> 00:21:44,720 Speaker 6: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 437 00:21:47,040 --> 00:21:49,280 Speaker 2: Boy. We were just talking about the value of sports, 438 00:21:49,280 --> 00:21:52,080 Speaker 2: and it's just some red headline across the Bloomberg terminal. 439 00:21:52,280 --> 00:21:56,320 Speaker 2: NBA approves Dallas Maverick's sale to Miriam Adelson. That is 440 00:21:56,400 --> 00:21:59,720 Speaker 2: the from the gaming Adlson family in Vegas. So again 441 00:21:59,720 --> 00:22:02,480 Speaker 2: a big news, big dollars, and that's kind of what 442 00:22:02,520 --> 00:22:05,560 Speaker 2: we're seeing in sports, no doubt about it. Let's bring 443 00:22:05,640 --> 00:22:07,879 Speaker 2: in someone I've known for a long time and one 444 00:22:07,920 --> 00:22:11,560 Speaker 2: of the smartest voices in the global media space, Ian Whitaker, 445 00:22:11,760 --> 00:22:15,520 Speaker 2: Managing director and owner at Liberty Sky Advisors. He's based 446 00:22:15,640 --> 00:22:19,080 Speaker 2: in London. So let's start with kind of the number 447 00:22:19,160 --> 00:22:21,840 Speaker 2: one issue I think for most investors out look at 448 00:22:21,840 --> 00:22:27,000 Speaker 2: global media, it's like, what's the new world order? It's streaming, 449 00:22:27,119 --> 00:22:30,520 Speaker 2: I guess, But who are the companies that can survive this? 450 00:22:30,680 --> 00:22:32,000 Speaker 2: How do you think this is going to plug out 451 00:22:32,880 --> 00:22:33,760 Speaker 2: in twenty twenty four? 452 00:22:34,880 --> 00:22:38,720 Speaker 9: Yeah, well, thanks very for the very kind words. I mean, 453 00:22:39,240 --> 00:22:41,160 Speaker 9: I think you have to go back to the fundamentals here. 454 00:22:41,280 --> 00:22:43,560 Speaker 9: If you look who's going to be the ultimate winners 455 00:22:43,600 --> 00:22:45,639 Speaker 9: of this game, I think he is going to be 456 00:22:45,680 --> 00:22:48,240 Speaker 9: the tech company simply because they have the deep pockets 457 00:22:48,760 --> 00:22:51,120 Speaker 9: that the other players do not. I think what you're 458 00:22:51,160 --> 00:22:53,119 Speaker 9: going to find is that some of the players, like 459 00:22:53,200 --> 00:22:57,359 Speaker 9: a Disney, a Comcast, probably also Warner, will have to 460 00:22:57,440 --> 00:23:00,879 Speaker 9: now stay in the streaming market because essentially those companies 461 00:23:00,920 --> 00:23:03,920 Speaker 9: what they made was a big, big strategic mistake several 462 00:23:04,040 --> 00:23:06,879 Speaker 9: years ago, which is really to go in all in 463 00:23:07,000 --> 00:23:10,480 Speaker 9: on streaming, and I think, you know the consequences of 464 00:23:10,600 --> 00:23:12,959 Speaker 9: that are still rippling through the market. I think there 465 00:23:13,000 --> 00:23:15,920 Speaker 9: will have to be consolidation that will eventually come through. 466 00:23:16,000 --> 00:23:19,760 Speaker 9: I think Warner power Mount deal possibly gets some with 467 00:23:19,840 --> 00:23:21,920 Speaker 9: the next twelve months, so I'd be slightly longer with that. 468 00:23:22,520 --> 00:23:24,920 Speaker 9: But I would say in terms of who who has 469 00:23:25,119 --> 00:23:29,760 Speaker 9: deep pockets. It's really the Apples, the Amazons and so forth. 470 00:23:30,160 --> 00:23:32,080 Speaker 9: One thing I would say, and I think this is 471 00:23:32,160 --> 00:23:35,800 Speaker 9: important because all these streaming companies, and I think it's 472 00:23:35,840 --> 00:23:37,520 Speaker 9: one of the other big mistakes that they also made 473 00:23:37,560 --> 00:23:40,160 Speaker 9: as well. They looked at the world from a very 474 00:23:40,400 --> 00:23:43,520 Speaker 9: US centric point of view and they thought that essentially, 475 00:23:43,800 --> 00:23:45,160 Speaker 9: you know, the dynamics. 476 00:23:44,720 --> 00:23:46,760 Speaker 4: Of what would work in the US would. 477 00:23:46,560 --> 00:23:48,920 Speaker 9: Work globally, and therefore it made sense to go after 478 00:23:49,600 --> 00:23:54,560 Speaker 9: big subscribing numbers globally. It doesn't Europe pass structurally lower penetration, 479 00:23:54,720 --> 00:23:57,600 Speaker 9: structly lower RPO the the US market, And if you 480 00:23:57,680 --> 00:23:59,960 Speaker 9: look what's happened with the Premier League rights for example, 481 00:24:00,400 --> 00:24:03,200 Speaker 9: sort of you're talking there about the NBA rights and 482 00:24:03,240 --> 00:24:06,879 Speaker 9: what's happening. None of the tech companies actually sort of 483 00:24:06,920 --> 00:24:09,200 Speaker 9: bit aggressively for the Premier League rightes in the UK. 484 00:24:09,640 --> 00:24:12,240 Speaker 9: The dynamics, the economics of it just don't work. So 485 00:24:12,359 --> 00:24:15,400 Speaker 9: I think what we're going to see here is increasingly 486 00:24:15,520 --> 00:24:19,280 Speaker 9: with streaming that effectively, there's going to be the realization 487 00:24:19,800 --> 00:24:22,600 Speaker 9: that different models work in different geographical markets. 488 00:24:23,760 --> 00:24:27,320 Speaker 2: So Ian, you know, I've pitched every tech company, basically 489 00:24:27,400 --> 00:24:29,680 Speaker 2: every media company that's out there for twenty five years 490 00:24:29,720 --> 00:24:33,760 Speaker 2: and I've gotten no bites whatsoever. Really, you know, I'm 491 00:24:33,800 --> 00:24:36,000 Speaker 2: wondering if they can just stay on the sidelines and 492 00:24:36,080 --> 00:24:37,719 Speaker 2: let some of these media companies just beat each other 493 00:24:37,840 --> 00:24:39,920 Speaker 2: over the head and then pick up the content on 494 00:24:40,000 --> 00:24:43,240 Speaker 2: the cheap. I'm just not sure the appetite for Silicon 495 00:24:43,320 --> 00:24:44,480 Speaker 2: value to come into Hollywood. 496 00:24:45,520 --> 00:24:48,000 Speaker 9: Yeah, I think that's I think that's a very good point. 497 00:24:48,080 --> 00:24:50,000 Speaker 9: If you look at when if you look at the 498 00:24:50,119 --> 00:24:54,120 Speaker 9: various maneuvers that have gone on Apple, Essentially, yes, it's 499 00:24:54,160 --> 00:24:57,080 Speaker 9: got into films, so it's been very selective. Amazon bought MGM, 500 00:24:57,160 --> 00:24:59,240 Speaker 9: but that hasn't been a major push that has come through. 501 00:25:00,040 --> 00:25:02,119 Speaker 9: Interesting one would be what Netflix would do. I mean, 502 00:25:02,200 --> 00:25:05,560 Speaker 9: for me, sort of Netflix joining in the Powermount apposition 503 00:25:05,680 --> 00:25:07,920 Speaker 9: talks and makes sense for Netflix. There's a number of 504 00:25:08,040 --> 00:25:11,480 Speaker 9: sort of areas that a tie in there would actually 505 00:25:11,640 --> 00:25:14,200 Speaker 9: help out on things. The analogy I've used in the past, 506 00:25:14,240 --> 00:25:16,600 Speaker 9: I've been using this for several years now, is that 507 00:25:16,720 --> 00:25:19,960 Speaker 9: what you've gotten streaming is if you want a historical analogy, 508 00:25:20,240 --> 00:25:22,440 Speaker 9: it's sort of akin to World War One. But what 509 00:25:22,600 --> 00:25:24,800 Speaker 9: you've got is that you've got the major media companies. 510 00:25:24,840 --> 00:25:27,480 Speaker 9: As you say, essentially bashing each other over the heads, 511 00:25:27,960 --> 00:25:32,560 Speaker 9: really exhausting themselves into a state where quite frankly, it's 512 00:25:32,720 --> 00:25:35,800 Speaker 9: very very hard to actually make major games and actually 513 00:25:35,880 --> 00:25:40,520 Speaker 9: sort of wink convincingly. And then if you look actually 514 00:25:40,560 --> 00:25:43,200 Speaker 9: what happened in World War One, the Americans came in 515 00:25:43,440 --> 00:25:45,560 Speaker 9: and effectively sort of of one being die to the 516 00:25:45,640 --> 00:25:48,480 Speaker 9: last players in the game. And that's essentially where we 517 00:25:48,560 --> 00:25:51,680 Speaker 9: are with the tech companies now that the Apples, the Amazons, 518 00:25:51,720 --> 00:25:55,320 Speaker 9: the Googles, and so forth, particularly in the US market 519 00:25:55,359 --> 00:25:58,440 Speaker 9: when it comes to sports, Yeah, they really now sort 520 00:25:58,440 --> 00:26:01,480 Speaker 9: of let everyone else exhaust them. I can now just 521 00:26:01,640 --> 00:26:04,720 Speaker 9: march in and really take up the spoils. So I think, 522 00:26:04,800 --> 00:26:07,560 Speaker 9: particularly in the US, I would say the tech companies 523 00:26:07,600 --> 00:26:09,880 Speaker 9: you would say, would be the ultimate winners. I think 524 00:26:09,920 --> 00:26:13,280 Speaker 9: when it's globally, I think the picture is a lot more. 525 00:26:13,760 --> 00:26:16,920 Speaker 9: It's a lot more varied. Europe, for example, I think 526 00:26:17,000 --> 00:26:20,959 Speaker 9: the freeware broadcast is there. Yet there are different viewing habits, 527 00:26:21,000 --> 00:26:23,480 Speaker 9: there's different ways of paying for PATV and so forth. 528 00:26:24,080 --> 00:26:27,040 Speaker 9: But I think most of the major established media companies 529 00:26:27,280 --> 00:26:30,679 Speaker 9: really made a massive strategic Kevin is something I've been 530 00:26:30,680 --> 00:26:33,720 Speaker 9: saying for several years in going full on into the 531 00:26:33,760 --> 00:26:37,600 Speaker 9: streaming model, which quite frankly destroyed a lot of the 532 00:26:37,640 --> 00:26:40,280 Speaker 9: infrastructure that had worked so well for several decades. 533 00:26:40,320 --> 00:26:43,359 Speaker 7: Okay, So, playing devil's advocate, you sit down with a 534 00:26:43,480 --> 00:26:46,520 Speaker 7: CEO of the legacy media companies. Many of them would say, look, 535 00:26:47,160 --> 00:26:49,600 Speaker 7: from a standing start, I've now built a business that's 536 00:26:50,080 --> 00:26:53,439 Speaker 7: several billions. Yes, you might not say streaming is working, 537 00:26:53,560 --> 00:26:56,440 Speaker 7: but I've managed to make it a significant revenue driver. 538 00:26:56,560 --> 00:26:57,320 Speaker 7: What would you say to that. 539 00:26:58,440 --> 00:27:00,960 Speaker 9: Well, it may be a significant revenue, but from an analyst, 540 00:27:01,080 --> 00:27:03,800 Speaker 9: you know, from an analytical standpoint, financial market standpoint, what 541 00:27:03,960 --> 00:27:06,879 Speaker 9: people care about the profits? Yeah, and you look at 542 00:27:06,920 --> 00:27:09,720 Speaker 9: the courting basis. You've got Warner, which is made a 543 00:27:09,800 --> 00:27:12,600 Speaker 9: slight profit. Netflix, as you say, is the only one 544 00:27:12,640 --> 00:27:15,440 Speaker 9: that so far has managed to make a consistent operating 545 00:27:15,480 --> 00:27:18,160 Speaker 9: profit moving forwards and so on. But it's free cash 546 00:27:18,200 --> 00:27:21,119 Speaker 9: flow isn't particularly sort of, I mean, it's okay, but 547 00:27:21,280 --> 00:27:24,920 Speaker 9: when you look against its peers, definitely not huge and 548 00:27:25,000 --> 00:27:27,119 Speaker 9: so forth. I think you've got sort of You've got 549 00:27:27,160 --> 00:27:30,879 Speaker 9: several ways you can approach this. You can say, look, 550 00:27:31,720 --> 00:27:35,480 Speaker 9: we made a fundamental strategic error here in really going 551 00:27:35,560 --> 00:27:38,800 Speaker 9: for long into streaming we now actually have the courage 552 00:27:38,880 --> 00:27:42,440 Speaker 9: to step back and say, you know what, maybe maybe 553 00:27:42,480 --> 00:27:44,960 Speaker 9: we actually need to exit this game. For me, the 554 00:27:45,040 --> 00:27:48,200 Speaker 9: smartest player when it came the smartest media company when 555 00:27:48,240 --> 00:27:50,920 Speaker 9: it came to what happened with streaming with Sony, Yeah, 556 00:27:51,240 --> 00:27:54,000 Speaker 9: and Sony decided we're not getting involved. We're just going 557 00:27:54,080 --> 00:27:56,719 Speaker 9: to license our contents to everyone else. An effective day 558 00:27:56,760 --> 00:27:57,880 Speaker 9: with the arms dealer ian. 559 00:27:58,080 --> 00:28:00,280 Speaker 7: Yeah, to use that analogy, though, I've heard that lot 560 00:28:00,400 --> 00:28:02,280 Speaker 7: of late be an arms dealer, be an arms dealer. 561 00:28:02,280 --> 00:28:04,320 Speaker 7: A lot of these companies don't want to be arms dealer. 562 00:28:04,400 --> 00:28:06,800 Speaker 7: They don't think that it's lucrative enough. They don't want 563 00:28:06,840 --> 00:28:09,119 Speaker 7: to just be supplying content. Why would they not want that? 564 00:28:10,680 --> 00:28:11,520 Speaker 4: Well, I think a. 565 00:28:11,560 --> 00:28:14,359 Speaker 9: Lot of it is essentially they've been invested in the 566 00:28:14,400 --> 00:28:16,920 Speaker 9: streaming pattern. They've said, they've gone down for several years 567 00:28:17,000 --> 00:28:19,520 Speaker 9: now down this route. As you say, they've built an infrastructure. 568 00:28:20,119 --> 00:28:23,119 Speaker 9: They in many cases they realign their companies really to 569 00:28:23,200 --> 00:28:24,760 Speaker 9: focus on primarily. 570 00:28:24,359 --> 00:28:26,040 Speaker 4: On the streaming operations and so forth. 571 00:28:26,359 --> 00:28:28,800 Speaker 9: It's a very very hard job for companies to step 572 00:28:28,840 --> 00:28:30,960 Speaker 9: back and say, you know what, maybe we made a 573 00:28:31,040 --> 00:28:34,200 Speaker 9: mistake here, Maybe we need to re align again. Shareholders 574 00:28:34,280 --> 00:28:37,120 Speaker 9: don't like it. Investors don't like it, Yeah, simply because 575 00:28:37,119 --> 00:28:39,400 Speaker 9: it raises questions about the quality of the management and 576 00:28:39,520 --> 00:28:42,440 Speaker 9: the decisions they've taken as well. I think one way 577 00:28:42,520 --> 00:28:45,320 Speaker 9: to look at this is to say, yeah, flip it round. 578 00:28:45,880 --> 00:28:49,200 Speaker 9: What exactly is going to change with the streaming model 579 00:28:49,400 --> 00:28:52,280 Speaker 9: that will suddenly make it a hugely more profitable model. 580 00:28:52,640 --> 00:28:54,160 Speaker 9: And the question is, when you look at things at 581 00:28:54,160 --> 00:28:56,280 Speaker 9: the moment, you can't really look at anything that will 582 00:28:56,320 --> 00:28:57,640 Speaker 9: say there's a real. 583 00:28:57,520 --> 00:28:58,320 Speaker 4: Game changer here. 584 00:28:59,120 --> 00:29:01,400 Speaker 2: All right, Well, here's a game changer in Bloomberg Intelligence 585 00:29:01,480 --> 00:29:03,720 Speaker 2: is that with some research saying with around six billion 586 00:29:03,760 --> 00:29:07,240 Speaker 2: dollars in estimated twenty twenty four losses, Apple TV Plus 587 00:29:07,280 --> 00:29:10,200 Speaker 2: will lose eighty percent more on its streaming business than 588 00:29:10,280 --> 00:29:15,760 Speaker 2: Disney Paramount, NBC, and Warner Brothers Discovery combined. So you 589 00:29:15,840 --> 00:29:19,040 Speaker 2: talk about an mptity that can spend like crazy and 590 00:29:19,200 --> 00:29:21,520 Speaker 2: just let everybody else kind of fall by the wayside. 591 00:29:21,720 --> 00:29:23,239 Speaker 2: So Ian I got to ask you, when you talk 592 00:29:23,320 --> 00:29:28,120 Speaker 2: to institutional investors, why is anybody buying any of these 593 00:29:28,160 --> 00:29:29,960 Speaker 2: big media names. I just don't get it. 594 00:29:31,600 --> 00:29:35,000 Speaker 9: Well, I think what you've got, I mean, it's a 595 00:29:35,080 --> 00:29:38,320 Speaker 9: very good question. I think there are several elements here. 596 00:29:38,400 --> 00:29:41,000 Speaker 9: If you look particularly at the US media companies, they 597 00:29:41,080 --> 00:29:43,560 Speaker 9: do have other assets that are performing well. Disney, for example, 598 00:29:43,640 --> 00:29:47,080 Speaker 9: theme parks theme parks sector have done very well. They 599 00:29:47,160 --> 00:29:51,520 Speaker 9: do have very very good historical content assets. And is 600 00:29:51,560 --> 00:29:53,160 Speaker 9: to go back to the point before about being the 601 00:29:53,280 --> 00:29:55,400 Speaker 9: arms dealer. You know what you've got to hear if 602 00:29:55,400 --> 00:29:57,840 Speaker 9: you look, for example, in terms of streaming, it's always 603 00:29:57,880 --> 00:30:00,560 Speaker 9: the old shows that seem to perform the best. The 604 00:30:00,720 --> 00:30:04,120 Speaker 9: new shows effectively are you know, they come out, they 605 00:30:04,200 --> 00:30:06,440 Speaker 9: get lauded, and then they get forgotten off and within 606 00:30:06,560 --> 00:30:07,240 Speaker 9: six to nine. 607 00:30:07,160 --> 00:30:09,400 Speaker 7: Months we're all back to listening to suits again on 608 00:30:09,520 --> 00:30:10,440 Speaker 7: a different type. 609 00:30:10,200 --> 00:30:13,480 Speaker 9: Of device exactly. And that's the whole point. And I 610 00:30:13,560 --> 00:30:16,200 Speaker 9: think for what you've got for many of these play 611 00:30:16,360 --> 00:30:19,960 Speaker 9: for many investors here is what they're thinking is at 612 00:30:20,040 --> 00:30:22,680 Speaker 9: some point it will all come out right. And the 613 00:30:22,840 --> 00:30:26,040 Speaker 9: problem becomes with that is that it doesn't come out 614 00:30:26,160 --> 00:30:29,280 Speaker 9: right automatically. You've got to take the companies and the 615 00:30:29,400 --> 00:30:33,240 Speaker 9: managements and they've actually got to take active measures to 616 00:30:33,400 --> 00:30:35,640 Speaker 9: make sure that they go down in the right route. 617 00:30:35,640 --> 00:30:38,080 Speaker 9: And I look at all the certainly I look at 618 00:30:38,080 --> 00:30:40,160 Speaker 9: the legacy media companies and I look at what they're 619 00:30:40,240 --> 00:30:43,160 Speaker 9: doing at the moment. I think, you know, Water Discovery, 620 00:30:43,280 --> 00:30:45,920 Speaker 9: I think you know they they have started to sort 621 00:30:45,960 --> 00:30:47,920 Speaker 9: of go on the right route by saying, Okay, we 622 00:30:48,040 --> 00:30:51,880 Speaker 9: won't let the streaming tail wag the the WBD dog. 623 00:30:52,440 --> 00:30:55,160 Speaker 9: I think Comcast has its broadband business, and that's different. 624 00:30:55,240 --> 00:30:58,240 Speaker 9: I look at Disney, I think strategically and in terms 625 00:30:58,280 --> 00:31:00,200 Speaker 9: of some of the decisions they've made, they really been 626 00:31:00,240 --> 00:31:03,320 Speaker 9: poured in several different directions. And I look at Powermount, 627 00:31:03,400 --> 00:31:06,360 Speaker 9: I just think, as an independent sort of entity, how 628 00:31:06,440 --> 00:31:09,120 Speaker 9: does that actually sort of survive in the certainly in 629 00:31:09,120 --> 00:31:12,280 Speaker 9: the streaming anyway, How does the survivor over the longer term? 630 00:31:12,640 --> 00:31:12,880 Speaker 4: Yep. 631 00:31:12,960 --> 00:31:16,040 Speaker 9: Personally, I also think there's a question mark over here 632 00:31:16,120 --> 00:31:19,680 Speaker 9: over Netflix. Yes, Netflix has done very well. It's making profits, 633 00:31:20,280 --> 00:31:23,600 Speaker 9: it is, it's got a global presence, but quite frankly, 634 00:31:23,640 --> 00:31:26,360 Speaker 9: when you look at his historical content, it doesn't really 635 00:31:26,400 --> 00:31:26,880 Speaker 9: have that much. 636 00:31:27,120 --> 00:31:27,840 Speaker 4: This is why I made the. 637 00:31:27,840 --> 00:31:30,840 Speaker 9: Point before about maybe Netflix looking at Powermount, and again 638 00:31:30,920 --> 00:31:33,200 Speaker 9: I go to this sort of total addressful market picture 639 00:31:33,680 --> 00:31:36,040 Speaker 9: if you look accord to Canto in the US as 640 00:31:36,120 --> 00:31:39,200 Speaker 9: for penetration is probably around eighty five eighty six percent. 641 00:31:39,680 --> 00:31:41,840 Speaker 9: If you look at Europe, there are clear signs that 642 00:31:42,120 --> 00:31:44,880 Speaker 9: is even in the most markets you know, it's flatlining 643 00:31:44,920 --> 00:31:48,320 Speaker 9: around sixty five percent in somewhere like the UK, aust 644 00:31:48,440 --> 00:31:50,160 Speaker 9: as well. And this is the other thing that gets 645 00:31:50,200 --> 00:31:53,600 Speaker 9: missed with these streaming models. It's not just about subscriber numbers, 646 00:31:53,960 --> 00:31:56,680 Speaker 9: it's about the average revenue per user, and that is 647 00:31:56,880 --> 00:32:00,520 Speaker 9: much lower outside the US. So again you've got those 648 00:32:00,600 --> 00:32:01,320 Speaker 9: dynamics as well. 649 00:32:01,720 --> 00:32:04,360 Speaker 2: Ian, great stuff. Thanks thanks for breaking it down for US. 650 00:32:04,400 --> 00:32:08,360 Speaker 2: Ian Whittaker, Managing director and owner at Liberty Skuy Advisors 651 00:32:08,400 --> 00:32:10,200 Speaker 2: over in London. Been covered in the media industry for 652 00:32:10,280 --> 00:32:13,360 Speaker 2: Decades's got great perspective. Appreciate getting a few minutes of 653 00:32:13,400 --> 00:32:13,760 Speaker 2: his time. 654 00:32:15,640 --> 00:32:18,719 Speaker 1: Thanks for listening to the Bloomberg Markets podcasts. You can 655 00:32:18,800 --> 00:32:22,520 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 656 00:32:22,640 --> 00:32:26,280 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 657 00:32:26,600 --> 00:32:28,480 Speaker 1: at Matt Miller nineteen seventy three. 658 00:32:28,960 --> 00:32:31,320 Speaker 2: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. 659 00:32:31,440 --> 00:32:34,120 Speaker 2: Before the podcast, you can always catch us worldwide at 660 00:32:34,120 --> 00:32:34,880 Speaker 2: Bloomberg Radio.