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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg terminal. William Dudley joins us.

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Speaker 1: He's a former New York Fed president and of course

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Speaker 1: writing for Bloomberg Opinion, and he has been out front

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Speaker 1: on what has happened. I'm not going to mince words,

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Speaker 1: Bill Dudley. This is one inflation report but important and

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Speaker 1: you highlight are jarring disconnect? How disconnected are we right

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Speaker 1: now from where we need to go? I think the

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Speaker 1: problem is that the Fed Reserve has not been forceful

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Speaker 1: enough and stating not just what their goal is supercent inflation,

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Speaker 1: but the means to achieve that goal. A chair Pole

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Speaker 1: in his press conference last week didn't really want to

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Speaker 1: talk about why Monterrey policy might actually not just have

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Speaker 1: to go to neutral, it might have to go to type.

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Speaker 1: And I think a type Monterrey policy is what's going

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Speaker 1: to be required to get inflation under control. Why are

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Speaker 1: they timid. It's not clear to me. Uh, they're not timid.

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Speaker 1: Certainly they're not timid about talking about what the end

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Speaker 1: goal is. But to me, if you're if you're talking

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Speaker 1: about the end goal to percent inflation, you've gotta also

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Speaker 1: subscribe how you're actually gonna get there. And if if

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Speaker 1: you start to sugarcoat it, then financial conditions don't tighten

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Speaker 1: as much, and you also run the risk that people

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Speaker 1: will lose confidence in the federals are. One thing that's

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Speaker 1: actually in the FED favor up to now is people

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Speaker 1: still are confident in the Federals Erve is going to

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Speaker 1: do his job. But if you keep under promising you

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Speaker 1: know what you're gonna you know what's required, then I

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Speaker 1: think there is a risk to the FED credibility down

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Speaker 1: the road. Bill. Do you think that this really is

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Speaker 1: sugarcoating or do you think that FED Chair J. Powell

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Speaker 1: just does not believe that we're going to get a

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Speaker 1: more persistent level of inflation that many people, including yourself

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Speaker 1: are talking about. Well, I think you can see it

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Speaker 1: also in the own projection economic projections. For example, after

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Speaker 1: the March eff Once meeting, the published the Summary of

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Speaker 1: Economic Projections and what they showed was infliction was just

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Speaker 1: magically melting away despite the Monterrey policy that didn't really

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Speaker 1: get to tight, and despite the fact that the unemployer

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Speaker 1: rate did not rise, that the bondemplary was still projecting

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Speaker 1: b around three and a half percent. So that's sort

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Speaker 1: of a magical, immaculate disinflation. And I just don't think

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Speaker 1: that's how it works. The Reserve has to tighten, moject

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Speaker 1: policy sufficiently, just still get coming down to push the

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Speaker 1: unemployer right up. That's what's required, and I think the

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Speaker 1: feder Reserves should be more forthright about explaining that to

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Speaker 1: the American public. Do you think that Andrew Bailey over

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Speaker 1: at the Bank of England really basically charted the path

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Speaker 1: for FED officials saying, Look, we're going to be hiking

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Speaker 1: rates into a slowing economy. We might just exacerbate a recession,

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Speaker 1: but a near term recession will be what's necessary to

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Speaker 1: bring supply and demand more into balance to actually create

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Speaker 1: it more growth later on. I don't think that that

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Speaker 1: necessarily has to say that they're going there's going to

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Speaker 1: be every session in the fetch still shoot for a

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Speaker 1: soft lanning, but I think they should explain that soft

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Speaker 1: lanning is very difficult to achieve when you have to

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Speaker 1: push up the unemployer rate to hold down inflation. Bill

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Speaker 1: from where you sit, and of course decades with Goldman

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Speaker 1: Sachs and the grind of this with Ed mcclvey, and

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Speaker 1: also all of your academics as well. I think our

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Speaker 1: audience is fascinated by what politicians can do. And if

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Speaker 1: we stretch in our recent memory from lb J to

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Speaker 1: Jimmy Carter to Richard Nixon, who has handed that from

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Speaker 1: Carter and onto the present president, what do presidents do

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Speaker 1: about inflation? Are they even part of the discussion. Well,

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Speaker 1: I think the public has an exaggerated view about what

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Speaker 1: any administration can you do about inflation. By administration, probably

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Speaker 1: the most important thing they've done is the soil from

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Speaker 1: the Strategic Patrolling Reserve, and that's probably putting some downward

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Speaker 1: pressure on oil prices relative to what they otherwise be.

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Speaker 1: But I think the reality is the president's ability to

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Speaker 1: do something about inflation is extremely limited. Really, the only

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Speaker 1: thing that the president can do is get to Congress

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Speaker 1: to tighten fiscal policy, to make the fens job a

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Speaker 1: little bit more easy. On radio and television, truly an

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Speaker 1: historic moment and particularly the inflation adjusted real wage where

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Speaker 1: it is. William Dudley is with us. He's a former

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Speaker 1: New York Fed president. He has been shocking in his pressions.

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Speaker 1: Uh nature of guessing forward on where this price change

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Speaker 1: is going. If you're just uh, we're just joining us.

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Speaker 1: We're getting used to eight percent inflation. Ira Jersey scheduled

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Speaker 1: to be with us, are waiting to get Mr Jersey

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Speaker 1: lined up on a bond market with a two year

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Speaker 1: yield higher by nine basis points. And Michael McKee doing

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Speaker 1: what he does best, which you speak to people like

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Speaker 1: President Dudley and also goes through the minutia and the data.

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Speaker 1: Michael McKee, what does this report say about wage growth

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Speaker 1: in the fear of a wage spiral? Uh, it doesn't

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Speaker 1: give us a whole lot of new information because the

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Speaker 1: real average hourly earnings, which they calculate by subtracting inflation

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Speaker 1: from where people were, are down two point six same

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Speaker 1: as last month. So no change there. We're still behind inflation.

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Speaker 1: I've talked to a number of Fed officials in the

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Speaker 1: last few days about whether companies are telling them that

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Speaker 1: they are seeing a wage price spiral and they're seeing

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Speaker 1: prices continue to go up, but they don't feel like

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Speaker 1: they have enormous pressure on them yet to raise prices.

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Speaker 1: And then Bill Donald to go to you on this question.

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Speaker 1: I see the wage growth, but I also see the

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Speaker 1: lack of wage growth over the last fifteen years or so.

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Speaker 1: Is our fear of a wage spiral different now than

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Speaker 1: it was decades ago? I think there has to be

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Speaker 1: some fear of it. Given the tightness of the lander market.

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Speaker 1: You have one point nine until jobs for every unemployed worker.

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Speaker 1: That's an all time record. So the laber market has

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Speaker 1: really never been this type and the consequence of that

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Speaker 1: should be higher wages. Higher wages should also be the

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Speaker 1: consequence of headline inflation running persistently above what wages are

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Speaker 1: actually doing today. So I think the risk is that

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Speaker 1: wages what you're trending about five and a percent year

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Speaker 1: a year, go higher. Do you agree Bill with Chris

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Speaker 1: Waller who came out yesterday and said that there's so

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Speaker 1: much froth in the labor market that we could actually

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Speaker 1: withstand a softening there that would be more beneficial rather

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Speaker 1: than detrimental, even if it led to less opportunity fewer opportunities. Well,

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Speaker 1: I think that's what they have to do. I mean,

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Speaker 1: I think they're trying to also, you know, sugarcoat this

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Speaker 1: a little bit too. We can basically reduce the demand

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Speaker 1: for labor without increasing unemployment, so it will be fewer

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Speaker 1: jobs available, but don't worry, you'll get a job because

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Speaker 1: there'll still be enough for you. I think that's again sugarcoating.

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Speaker 1: You know how easy is going to be. I think

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Speaker 1: at the end of the day, they have to push

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Speaker 1: the downiform rate up, and that's going to be painful. Bill.

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Speaker 1: When we talk about the drivers of inflation, it's one

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Speaker 1: thing for the FED to respond to a labor market

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Speaker 1: that's hot, two rents that are going up. It's another

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Speaker 1: thing to respond to supply chains that are disrupted and

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Speaker 1: a shortage of goods that ensues they're in Do you

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Speaker 1: think that it doesn't really matter that the FED has

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Speaker 1: to reduce demand and that is the only tool that

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Speaker 1: they have in order to prevent inflation from becoming entrenched

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Speaker 1: in the psyches of Americans. Well, the end of the day,

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Speaker 1: that's job is to make sure that demand and supply

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Speaker 1: are aligned. Now, the supply shock is very temporary. The

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Speaker 1: FED can look through it because it knows that supply

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Speaker 1: is going to increase in the future, but the supply shock,

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Speaker 1: you know, last for a long time, which seems to

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Speaker 1: be the case currently. Then the fact that it's due

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Speaker 1: to supply chain disruption, that doesn't really matter, because if

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Speaker 1: those supply chain disruptions are persistent, then you're gonna have

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Speaker 1: an inflation consequence bill. Just real quick here, You're talking

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Speaker 1: earlier about a FED funds rate in order to be

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Speaker 1: truly restrictive. Have you changed your view on how high

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Speaker 1: the FED will have to go? Well, I think it's

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Speaker 1: four to five or higher. Um, you know, I was

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Speaker 1: three or four maybe six months to go on four

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Speaker 1: to five and shocked me if I'm you know, five

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Speaker 1: to six a few months from now, Well, what does

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Speaker 1: that do to the employment trend in the economy? What's

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Speaker 1: that gonna do to the unemployment rate? I wanted you

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Speaker 1: to go off Phillips curve here and link it right,

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Speaker 1: and what's it due to the unemployment? Right? Well, I

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Speaker 1: think the umployment is really all about what's happening to demand.

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Speaker 1: And I think in the short term demands gonna be fine,

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Speaker 1: because right now demand is above supplying a number of

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Speaker 1: key areas like housing and autos. So I don't I

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Speaker 1: think the economy is going to be fine in two

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Speaker 1: thousand and twenty two. But of course that just makes

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Speaker 1: the fence job more difficult. Bill Dudley, thank you so

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Speaker 1: much an important essay. I'll get that out for you

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Speaker 1: this morning as well on Bloomberg Opinion. He's a former

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Speaker 1: president of the New York Fed. Michael Darda joins now

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Speaker 1: chief economist macro strategist mk M Partners. Michael, you and

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Speaker 1: I had assimilating conversation five or six days ago about

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Speaker 1: the nominal nature of the American economy, this kind of inflation,

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Speaker 1: if we see it over one month, two months, three months,

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Speaker 1: what does it say about the combination of real GDP

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Speaker 1: and inflation by Tom, Yeah, I think you know, these

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Speaker 1: numbers obviously are too hot. Um, so you know this

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Speaker 1: is a bit of a shot to the upside. But

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Speaker 1: i'd actually go to the point that you know that

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Speaker 1: Jonathan just made where the you know, the peak which

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Speaker 1: looks like it it is in now on a year

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Speaker 1: over year basis, is potentially a lot less important than

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Speaker 1: where these numbers settle or where the plateau is. And

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Speaker 1: if we have really rapid nominal GDP aggregate demand even

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Speaker 1: if these year over year numbers were to come down

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Speaker 1: by half, right, and we settle around four percent or

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Speaker 1: just above that by the end of the year, and

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Speaker 1: it looks like that's the plateau. That's still a major

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Speaker 1: problem for this bond market, a major problem for this

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Speaker 1: federal reserve. And as we're seeing a major problem for

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Speaker 1: the valuations that support b S and P five hundred.

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Speaker 1: They are going down, and they are going down because

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Speaker 1: long term interest rates have been going up. My does

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Speaker 1: that landing strip for self landing just get that little

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Speaker 1: bit narrower with this number? Yes, I I think it does. Um.

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Speaker 1: You know, the Fed has its work cut out for it.

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Speaker 1: It does need to slow aggregate demand. Um. And typically,

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Speaker 1: you know, starting from behind the curve, the success rate

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Speaker 1: isn't very high. Uh So, Usually what happens is central

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Speaker 1: banks start off too slow when they're behind the curve.

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Speaker 1: That's the definition of being behind the curve. And then

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Speaker 1: eventually they apply too much breaking force later on, and

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Speaker 1: that's you know, typically when you're in a bust part

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Speaker 1: of the cycle. So I don't think that that part

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Speaker 1: plays out this year, um, you know, but they've they've

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Speaker 1: missed the boat a bit here. I think it's pretty

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Speaker 1: obvious now they really should have gotten a tightening process

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Speaker 1: going last year. And then even you know, with that

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Speaker 1: that press conference last week, Powell seemingly you know, you know,

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Speaker 1: explicitly ruling out greater than fifty basis points point moves.

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Speaker 1: You mean, why rule anything out in the early innings, Um,

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Speaker 1: you know, step away from the forward guidance and you know,

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Speaker 1: take it meeting by meeting. So I think the message

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Speaker 1: was a bit bungled and confused as well, and that

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Speaker 1: is not helpful in this environment. There's a big debate

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Speaker 1: Mike about where the drivers of inflation are coming from

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Speaker 1: and how much is really within the Fed's control, and

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Speaker 1: that's perhaps underpinning some of the hesitants for a more

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Speaker 1: aggressive approach by FED Chair J. Powell. How much do

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Speaker 1: you agree with that that the bulk of the inflationary

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Speaker 1: pressures are coming from overseas, from supply chain disruptions, from

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Speaker 1: geopolitical issues, and not from the dynamism in the labor market,

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Speaker 1: from the willingness to spend from consumers that still have

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Speaker 1: a lot of cash. Yeah, you know, it's confusing because

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Speaker 1: we do have these supply side shocks playing out, and

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Speaker 1: those shocks are raising inflation, and the FED cannot do

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Speaker 1: anything specifically about those shocks. But we've also had a

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Speaker 1: super robust nominal GDP backdrop, and nominal GDP is robust

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Speaker 1: to supply side shocks, meaning that a supply side shock

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Speaker 1: will change the composition but not the level or growth

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Speaker 1: rate of nominal GDP. So you know, we can actually

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Speaker 1: get to a rough and ready answer to that question

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Speaker 1: by looking at how much nominal GDP has overshot its

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Speaker 1: previous trend and how much inflation has overshot the previous trend.

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Speaker 1: And if you do that, it looks like six of

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Speaker 1: the inflation overshoot is actually demand side aggregate demand nominal GDP.

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Speaker 1: If that's not the province of the FED, why don't

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Speaker 1: why do we even have a FED? So that is

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Speaker 1: the fed's responsibility, not the supply shocks. They are real,

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Speaker 1: But this inflationary overshoot in large measures is due to

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Speaker 1: aggregate demand. Michael, if they politically embed fifty basis point

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Speaker 1: rate hikes, and they sort of say, I'm being very

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Speaker 1: sufficsticated here, let's see what happens. How far out of

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Speaker 1: trajectory do you see there if they go fifty fifty, etcetera.

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Speaker 1: Do they really analyze two meetings out in July or

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Speaker 1: do they go out further before. There's a lot of

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Speaker 1: naval gazing over what to do next. Yeah, I think

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Speaker 1: they just need to try to extricate themselves from the

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Speaker 1: last business cycle. You know, we still have Fed officials

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Speaker 1: out there saying, well, we want to get to neutral,

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Speaker 1: and neutral is you know, around two and a half. Well,

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Speaker 1: you know that might have applied to the last business cycle,

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Speaker 1: but this cycle looks quite different, whether it's nominal GDP inflation,

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Speaker 1: the rapidity of the fall, and the unemployment rate. And

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Speaker 1: so the Fed's basically made two mistakes here. One isn't

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Speaker 1: is assuming a flat Phillips curve up until you know,

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Speaker 1: three and a half percent unemployment, because that's where we're

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Speaker 1: at the end of the last cycle. And then assuming

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Speaker 1: that the neutral interest rate is right around the same

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Speaker 1: position that it was in the last cycle. So you know,

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Speaker 1: that's a that's a problem. You know, really what they

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Speaker 1: should be doing is saying, look, we are explicitly aiming

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Speaker 1: to blow nominal GDP to a more sustainable growth rate

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Speaker 1: consistent with two percent average inflation over time that would

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Speaker 1: probably be around four percent per annum growth. It looks

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Speaker 1: as of April the proxies for money in common nominal

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Speaker 1: GDP we're closer to nine percent, so still way too fast.

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Speaker 1: I think that's the best shot. The FED has engineering

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Speaker 1: a soft landing. It's going to be difficult, um, but

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Speaker 1: you know, embracing the Phillips curve in the neutral interest

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Speaker 1: rate of the last cycle is just simply not going

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Speaker 1: to cut it. That will lead to a policy mistake

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Speaker 1: in a severe face plant for the US ecompany a

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Speaker 1: line Michael Bolson as alwise Michael Dowd that thank you,

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Speaker 1: sir of m Camponts. Karl Weinberg has been doing this

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Speaker 1: for more than ten years, and within that is a

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Speaker 1: story career, including the workout of distress. He's someone that's

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Speaker 1: actually addressed distress. See how you see how I did that?

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Speaker 1: That's good. Thank you. Dr Weinberg joins us this morning

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Speaker 1: with high frequency economics. Carl, the zeitgeist is you have

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Speaker 1: to manufacture some form of economic slowdown, contraction or n

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Speaker 1: the art recession to extricate ourselves from eight percent inflation.

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Speaker 1: Do you buy it? Absolutely? Tom, Good morning, and thank

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Speaker 1: you for all of those words that rhyme, stress, distressed,

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Speaker 1: and grizzled. Very kind. Um, Yes, we have the the

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Speaker 1: only tool that that that that monetary policy has to

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Speaker 1: bring price increases down, or the rate of price increases down.

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Speaker 1: It's the cause of recession. It's just as simple as that.

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Speaker 1: The instrument is interest rates. That's a blunt edge sword

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Speaker 1: and that swings against all sectors of the economy and

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Speaker 1: it basically hammers demand down to meet supply in times

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Speaker 1: when there are excess demand. My question is is the

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Speaker 1: problem that there's too much demand right now or is

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Speaker 1: the problem that there's too little supply? Because if there's

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Speaker 1: too little supply, then a different policy mix should be implemented.

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Speaker 1: This goes back to Irving Fisher one, oh fund one.

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Speaker 1: Not Stanley Fisher, folks, but Irving Fisher, one of the

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Speaker 1: giants in the history of economics. He doesn't get nearly

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Speaker 1: the play he should. And Carl, does Irving Fisher dynamics

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Speaker 1: work now in a modern, open global economy or are

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Speaker 1: the rules different this time? All the rules certainly are

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Speaker 1: different this time compared to say seventy three, which was

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Speaker 1: the last time when we saw significant supply constraints, and

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Speaker 1: back then economies were more closed. Today economies are more open.

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Speaker 1: So when you have more demanded than supply, you don't

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Speaker 1: necessarily have to get inflation as prices are bid up

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Speaker 1: to ration out that demand, but instead you can get

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Speaker 1: more imports. And that's what we're seeing when we look

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Speaker 1: at the data for every major oil important country, We're

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Speaker 1: seeing the balance of payments blowout. We're seeing trade deficits widen,

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Speaker 1: We're seeing trade surpluses, even the mighty German and Japanese

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Speaker 1: surpluses are dwindling down or turning into deficits in the

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Speaker 1: case of Japan. Because when you have too much money, Jason,

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Speaker 1: too few goods, the resolution of it need not be inflation. Carl.

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Speaker 1: It just feels like, as I think back over the

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Speaker 1: last you know, several months, that the inflation that we're

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Speaker 1: dealing with today is not necessarily wasn't caused by the

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Speaker 1: Federal Reserve. I'm not sure the Federal Reserve can get

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Speaker 1: get us out of this. It feels like it's more

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Speaker 1: of a supply side issue that has impacted a lot

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Speaker 1: of the prices that were paying, whether it's at the

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Speaker 1: pomper or in the supermarket. What can the FED really

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Speaker 1: do and should we depend upon the Fed to get

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Speaker 1: us out of this inflationary environment? Well, you know, I

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Speaker 1: agree with all of that, and we've been telling our

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Speaker 1: clients at High Frequency Economics that on top of the

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Speaker 1: inflation story, there's an even more important story, which is

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Speaker 1: that within the inflation that we're experiences we're experiencing right now,

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Speaker 1: that's the rise of all prices in all wages, we

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Speaker 1: also have at the same time a change in the

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Speaker 1: relative prices energy compared to all other goods. And that's

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Speaker 1: a different, separate problem, and it's a much more difficult

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Speaker 1: kettle of fish to digest when energy prices go up

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Speaker 1: relative to all other prices. Even in an inflationary environment,

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Speaker 1: that is deflationary because even when people have to pay

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Speaker 1: to fuel their cars and to heat their houses and

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Speaker 1: to light their homes, right when they're done paying for

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Speaker 1: all that energy, they then have less money left over

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Speaker 1: to spend on other stuff. And that's a separate problem,

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Speaker 1: and in my view, that's a growth problem that's much

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Speaker 1: more important than the little bit of inflation that we're

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Speaker 1: seeing right now. Kurl Weinberg, with this High Frequency Economics,

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Speaker 1: this day of elevated inflation in negative wage growth down

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Speaker 1: negative one oh three. The vix thirty three point four

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Speaker 1: or five NASK went under down one percent. These statistics

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Speaker 1: are better than what we saw before the market open.

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Speaker 1: But now with the market open we get a reading.

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Speaker 1: I should mention Bitcoin down dollars it is under thirty.

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Speaker 1: So Carl, you know again, I guess one of the

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Speaker 1: questions is is as this feder reserve you know, moves higher,

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Speaker 1: moves more aggressively on the interest right front, the risk

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Speaker 1: of a recession is that much more prominent? Is that

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Speaker 1: in your model either twenty two or twenty three, it

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Speaker 1: certainly is. I mean, our job at high frequency economics

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Speaker 1: is not to tell but fed what to do, but

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Speaker 1: to tell the markets about the consequences of what the

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Speaker 1: set is doing. And our view the rise and energy

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Speaker 1: prices is causing at least a growth pause or possibly

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Speaker 1: of session on its own and hammering demand down to

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Speaker 1: meet a shortage of supply, my view, is not the

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Speaker 1: right policy recommendation. It will make the be session the

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Speaker 1: downturn more severe than it otherwise would be, or than

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Speaker 1: it has to be. What you want to have right

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Speaker 1: now are zero or negative interest rates to encourage investment,

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Speaker 1: to get people to substitute different sources of energy for

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Speaker 1: petro energy, to get people to invest in being more efficient.

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Speaker 1: That's what you need. You need low interest rates for that,

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Speaker 1: not higher interest rates. Carl, I want to go back

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Speaker 1: to your you. This is folks back when the ice

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Speaker 1: say you're just pulling back up the Taconic Parkway. Carl,

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Speaker 1: I want to go back to what all this means

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Speaker 1: for e M. I mentioned Irving Fisher Well, the red

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Speaker 1: monograph that Stanley Fisher Road in two thousand is incredibly important.

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Speaker 1: What does e M do in this mass? And I

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Speaker 1: don't mean the idiosyncrasies of Turkish lira on winding over

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Speaker 1: five team lyra por dollar, but as a general statement,

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Speaker 1: what does Singapore do? What does giant India do? Indonesia?

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Speaker 1: What does the Czech Republic do? Well, Tom, you just

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Speaker 1: spend a whole range of different circumstances. I think you

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Speaker 1: can Grossomoto divide emerging market economies into two kinds. There

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Speaker 1: are those that import commodities that are getting a windfall,

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Speaker 1: and there are those that export commodities that are hurting.

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Speaker 1: And for the economies that import commodities that are hurting.

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Speaker 1: They are going to face both lower revenue up their

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Speaker 1: higher import bills because of the higher prices of commodities

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Speaker 1: that they have to buy, and at the same time

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Speaker 1: interest rates are going to go up on the debt

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Speaker 1: that they have. So I think there's a subclass of

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Speaker 1: highly indebted commodity importing economies that have to be watched carefully.

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Speaker 1: I know that the I m F is already on

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Speaker 1: this story. Investors also have to pay attention to the

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Speaker 1: balance of payments challenges that many emerging the market economies

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Speaker 1: are going to face. Carl, thank you so much. It's

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Speaker 1: been too long, Carl Weinberger with this with high frequency economics.

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Speaker 1: Now for a different conversation on Disney, on entertainment and

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Speaker 1: on the Bob's Burgers movie, which is the next big

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Speaker 1: thing to be launched by Disney. Michael Nathanson joins us,

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Speaker 1: of course, with Moffatt Nathanson and Michael will be blunt.

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Speaker 1: Nobody's talking about the Bob's Burgers movie launched by twentieth Century.

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Speaker 1: Here they're talking about the fractured management of Disney. What

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Speaker 1: happens here? What is Susan Arnold x Carlyle, What does

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Speaker 1: she do? In the board do with the management of

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Speaker 1: Disney looking more and Tom, that's a great question. I

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Speaker 1: think they give a little more time. Um. Bob Jakick's

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Speaker 1: contract has another ten months on it hit a three

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Speaker 1: year do um, and I think they said observe he's

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Speaker 1: done a great job on the parks. He's an ex

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Speaker 1: part chief getting through that. But the streets really wondering

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Speaker 1: about their streaming strategy, and I think they give it

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Speaker 1: a little more time to see if if they're executing

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Speaker 1: against that strategy. Right. So, UM, get the tb D

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Speaker 1: at this point, it really is And Michael, what questions

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Speaker 1: do you have about the streaming strategy at the moment? Okay, Johnson,

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Speaker 1: So here's here's the big question. They had an investor

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Speaker 1: day back in the original Investerday where they rolled out

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Speaker 1: of strategy really a super fan Disney plus service that

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Speaker 1: was targeted to their key verticals, right, Pixar, Lucasfilm, Marvel.

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Speaker 1: That was about Iger Yesterday. About eighteen months later, in

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Speaker 1: the December part of the pandemic, they had a second Investerday.

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Speaker 1: They raised their targets massively because they apple form those

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Speaker 1: first targets, and then they also wanted to broad it

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Speaker 1: out Disney Plus. So it's a one way of saying,

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Speaker 1: I really wonder if that broader strategy is the right strategy. Right,

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Speaker 1: it was the idea to be a supertamp service. It

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Speaker 1: will be a smaller adjustable marketing a gap of probably

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Speaker 1: higher price price point. I just wonder if they have

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Speaker 1: the right strategy and and and you know, were they

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Speaker 1: misled by the pandemic and the strength of the first year.

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Speaker 1: I thought they had a bigger, bigger business here, right,

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Speaker 1: So that's it's it's a big question, and I like

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Speaker 1: to hear them, you know, answer the questions whether or

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00:24:28,320 --> 00:24:30,679
Speaker 1: not they have the right strategy. Have they gone too broad?

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00:24:31,280 --> 00:24:32,960
Speaker 1: And so they kind of rain in the horns and

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00:24:33,280 --> 00:24:36,520
Speaker 1: become a more midge product, which is still a big business,

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Speaker 1: but not the super business that maybe they wanted to be,

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00:24:38,960 --> 00:24:41,800
Speaker 1: like Netflix. How low is the bar right now, Michael,

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00:24:41,800 --> 00:24:44,280
Speaker 1: considering that the shares are poised for their biggest decline

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00:24:44,280 --> 00:24:49,480
Speaker 1: since the bar is low? But at least, you know,

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00:24:49,600 --> 00:24:53,439
Speaker 1: the issue is obviously it's the concern on the macro, right,

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00:24:53,560 --> 00:24:56,639
Speaker 1: So the parks of Stage and will Stage and Massive

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00:24:56,720 --> 00:24:59,080
Speaker 1: comeback better than I ever thought? If you ask me

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00:24:59,119 --> 00:25:01,200
Speaker 1: two years ago to the stay, I would say it's

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00:25:01,200 --> 00:25:03,439
Speaker 1: going to take years for the parks to recover. Well,

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00:25:03,480 --> 00:25:06,359
Speaker 1: they've recovered, So I think what people concern about is,

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00:25:06,480 --> 00:25:08,320
Speaker 1: you know, are we at a point of the parks,

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00:25:08,600 --> 00:25:11,320
Speaker 1: you know, six months from now rolling over again. You know,

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00:25:11,400 --> 00:25:13,679
Speaker 1: the linear networks we talked about all these years are

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00:25:13,760 --> 00:25:16,720
Speaker 1: not in great shape because of court cutting. Streaming is

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00:25:16,720 --> 00:25:19,280
Speaker 1: a capital intensive business, right, so there's you know, to me,

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00:25:19,480 --> 00:25:23,240
Speaker 1: the Macro and the Netflix sell officer has really hit this.

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00:25:23,400 --> 00:25:26,320
Speaker 1: But you know, I understand that nothing sell off the Macro.

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00:25:26,560 --> 00:25:29,520
Speaker 1: Of course, care really wound Disney here, Michael, I just

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00:25:29,560 --> 00:25:31,920
Speaker 1: want to finish on the social issues. You'll view on

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00:25:32,000 --> 00:25:34,639
Speaker 1: how the navigating them at the moment and whether it's

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00:25:34,640 --> 00:25:36,719
Speaker 1: crucial at any point to the bottom line. They've got

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00:25:36,760 --> 00:25:39,480
Speaker 1: them sounds in this mess down in Florida. They're also

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00:25:39,640 --> 00:25:42,920
Speaker 1: very cozy with China, with the Chinese Communist partsy. You'll

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00:25:42,960 --> 00:25:47,280
Speaker 1: view them when this stuff really starts to match up. Yeah. Um,

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00:25:48,080 --> 00:25:54,480
Speaker 1: it's interesting. Um on the China, the China front, there's

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00:25:54,560 --> 00:25:57,080
Speaker 1: been you know, the park in China Shanghai and the

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00:25:57,320 --> 00:25:59,520
Speaker 1: Hangheim Park which be there for longer, have not to

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00:25:59,680 --> 00:26:03,240
Speaker 1: big tributors in fact, the Chinese promise that China would

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00:26:03,240 --> 00:26:06,720
Speaker 1: open up its arms to let Disney in and have

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00:26:07,000 --> 00:26:10,760
Speaker 1: run the box with Puss and TV. So thoughts that's

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00:26:10,760 --> 00:26:14,360
Speaker 1: not happened. The question of Florida's one that is more

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00:26:14,880 --> 00:26:18,520
Speaker 1: in our view. Um, they haven't really addressed it. You know,

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00:26:18,600 --> 00:26:22,400
Speaker 1: what's the impact of losing their special protection as as

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00:26:22,880 --> 00:26:26,480
Speaker 1: illegal entity. I suspect it actually is worse for the

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00:26:26,520 --> 00:26:30,080
Speaker 1: state of Florida than for the Disney because I think

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00:26:30,119 --> 00:26:31,960
Speaker 1: that the state would have to pick up where the

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00:26:32,000 --> 00:26:34,800
Speaker 1: counties have to pick up all their protection. But then

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00:26:35,119 --> 00:26:37,639
Speaker 1: jovin where we don't know, we've never seen before, is

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00:26:37,720 --> 00:26:40,600
Speaker 1: you know, will will it be a cohort of visitors

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00:26:40,680 --> 00:26:43,320
Speaker 1: at the parks who will be offended by disney stance

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00:26:43,560 --> 00:26:47,160
Speaker 1: or decide not to go. Historically that's not been the case. Um.

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00:26:48,000 --> 00:26:51,440
Speaker 1: So you know, I tend to discount, you know, all

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Speaker 1: the political news, but I do think it damages the

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00:26:54,240 --> 00:26:57,000
Speaker 1: terms in the past kind of the you know, the

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00:26:57,160 --> 00:27:00,600
Speaker 1: brand image of Disney and investing public eyes. They've made

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00:27:00,640 --> 00:27:03,840
Speaker 1: a number of missteps that were self self inflicted. I

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00:27:04,000 --> 00:27:06,639
Speaker 1: just bring the guide about you know, how good is

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00:27:07,000 --> 00:27:10,200
Speaker 1: is you know the directions company and how good is

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00:27:10,240 --> 00:27:13,960
Speaker 1: the leadership to which takes us back to the very beginning. Michael,

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00:27:14,000 --> 00:27:15,640
Speaker 1: thank you. We've got to leave it at this conversation

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00:27:15,680 --> 00:27:18,920
Speaker 1: on going, Tom, the drama continues Michael Nathans and mfint

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00:27:18,960 --> 00:27:20,520
Speaker 1: Nathans and almost tried to catch up the good friend

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00:27:20,560 --> 00:27:24,040
Speaker 1: of this program. This is the Bloomberg Surveillance Podcast. Thanks

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00:27:24,080 --> 00:27:27,400
Speaker 1: for listening. Join us live weekdays from seven to ten

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00:27:27,440 --> 00:27:31,880
Speaker 1: AMI Eastern on Bloomberg Radio and on Bloomberg Television each

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00:27:32,040 --> 00:27:35,720
Speaker 1: day from six to nine am for insight from the

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00:27:35,800 --> 00:27:40,960
Speaker 1: best in economics, finance, investment, and international relations. And subscribe

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00:27:41,040 --> 00:27:45,920
Speaker 1: to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com,

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00:27:46,040 --> 00:27:49,280
Speaker 1: and of course on the terminal. I'm Tom Keene, and

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00:27:49,440 --> 00:27:51,200
Speaker 1: this is Bloomberg