Speaker 1: This is the Bloomberg Surveillance Podcast.
Speaker 2: I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz.
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Speaker 2: Jeremy Stretch of CIBC as he considers these headlines, not
Speaker 2: much movement in the market. I've got ero one oh
Speaker 2: five forty, Jeremy. A key question to me is simple,
Speaker 2: and that is the idea of what two percent means.
Speaker 2: These are different economies, different nations. Do you look at
Speaker 2: it as two point zero percent? Is the ECB Bundesbank
Speaker 2: hope two point two percent while the FEDS two percent
Speaker 2: is two point eight percent?
Speaker 3: Well, of course, the Eurozone is a difficult beast to manage,
Speaker 3: and I think President Leguard is very mindful of that because,
Speaker 3: as we've touched upon, there is a very different degree
Speaker 3: of performance and activity in a number of the different
Speaker 3: economies across the zone. Now, the Eurozone and ECB is
Speaker 3: aiming to get back inflation to that two percent target
Speaker 3: threshold over the medium term. I think it was notable
Speaker 3: that obviously inflation in September did fall a little fast
Speaker 3: and the ECB had been expecting.
Speaker 4: And as I say, I think.
Speaker 3: The next meeting in December will prove to be particularly
Speaker 3: instructive as we get forecasts out to twenty twenty six
Speaker 3: for the first time, but also looking at those longer
Speaker 3: run inflation expectations and if those are back towards the
Speaker 3: two percent threshold in aggregate across the whole of the zone, and.
Speaker 4: That of course is the difficulty.
Speaker 3: We will still get divergence in the individual nations, but
Speaker 3: as an aggregate measure, the ECB is going to be
Speaker 3: aiming to get back to that two percent target threshold
Speaker 3: over the course of the next two years.
Speaker 2: Jeremy, I'm going to go to a wonderful moment I
Speaker 2: had with the August and here from Leon Jean Claude Trichet,
Speaker 2: and he talked to me about transmission, the diffusement of
Speaker 2: an economy across borders. Europe doesn't have the transmission mechanisms
Speaker 2: of America, do they.
Speaker 3: Well, there is obviously one of the inadequacies of the
Speaker 3: Eurozone project is the you know, the difficulties on the
Speaker 3: fiscal side on a relative basis that the US obviously
Speaker 3: has because the US has the you know, the federal system,
Speaker 3: and we do get that disperse into federal funds across
Speaker 3: the fiscal dynamics. So we are in a situation where
Speaker 3: the plumbing, if you like, in terms of the Eurozone economy,
Speaker 3: in terms of monetary and fiscal policy is very diverse
Speaker 3: because of course fiscal dynamics, and that's still much more
Speaker 3: at the behest of national governments. But I think the
Speaker 3: other interesting dynamic to consider as we move into twenty
Speaker 3: twenty four is that the Eurozone is thinking about bringing
Speaker 3: back those fiscal thresholds that were put on or suspending
Speaker 3: during the COVID period, and that will be an interesting
Speaker 3: dynasm to add to the rinkle about fragmentation risk, and
Speaker 3: that of course is one of the big concerns that
Speaker 3: the ECB has to be mindfulwed even if prisident, Legard
Speaker 3: will try and downplay any concerns at this particular.
Speaker 1: Poet, Jeremy Stretch, thank you so much.
Speaker 2: October thirty, Apple to announce new MacBook pros I should
Speaker 2: say Lindsay Piaggs is pleased with that because as she
Speaker 2: ran her Excel spreadsheet on the American economy at burn
Speaker 2: Up or MacBook a couple days ago, Doctor piags it
Speaker 2: joins us now from Stifel as well. How hard is
Speaker 2: it to put together an Excel spreadsheet with the mysteries
Speaker 2: of this American economy.
Speaker 5: Well, it's typically difficult, but it's become increasingly difficult with
Speaker 5: all of these ancillary factors that are coming in that
Speaker 5: are virtually impossible to model. We do have a lot
Speaker 5: of international factors that are impacting the market's expectations. We
Speaker 5: do have now unprecedented fiscal variables that we're trying to
Speaker 5: account for. But I think right now the market is
Speaker 5: very much discounting that third quarter number, focusing onstead on
Speaker 5: the latest central bank decisions the BOC the ECB as
Speaker 5: a proxy for what to expect from the Fed next week,
Speaker 5: suggesting that developed central banks around the world, despite still
Speaker 5: elevated inflation, are starting to pull back in anticipation of
Speaker 5: a slower level of longer term growth. So the market
Speaker 5: very much anticipating the Fed maybe moving to the sideline
Speaker 5: for certainly a prolonged period of time, but maybe indefinitely
Speaker 5: at this point.
Speaker 6: So, lindsay, just to crystallize what you're saying, are you
Speaker 6: saying that the Fed can kind of look through what
Speaker 6: we're getting out of this blowout GDP print, or at
Speaker 6: least that's the market's expectation.
Speaker 7: No, that's the market's expectation.
Speaker 5: But remember the market has been preemptively calling an end
Speaker 5: to FED rate hikes for the past two years and
Speaker 5: wrongly pricing in rate cuts. The Fed, however, has been
Speaker 5: very clear beating drum of higher for longer, very consistent
Speaker 5: in their message, and I think when we look at
Speaker 5: some of the underlying data in the Q three report,
Speaker 5: the resilience of businesses, the resilience of the consumer, and yes,
Speaker 5: to Lisa's point, we have seen a little bit of
Speaker 5: an uptick in claims, particularly continuing claims, but broadly speaking,
Speaker 5: the labor market is still extremely tight. So the FED
Speaker 5: is looking at all of these data juxtaposed with inflation
Speaker 5: that's still too high. I think the Committee is going
Speaker 5: to have a very difficult time selling a prolonged period
Speaker 5: of a pause. I think there is still more work
Speaker 5: to be done before they reach a sufficiently restrictive level
Speaker 5: to ensure that we remain on a disinflationary trend back
Speaker 5: to two percent.
Speaker 6: Well, Linda, you're getting of what I've been wondering about.
Speaker 6: Of course, this is a very binary question, and we
Speaker 6: live in a shades of gray world. But when you
Speaker 6: think about the just raft of numbers that we got
Speaker 6: this morning, you take a look at to blow out
Speaker 6: GDP print, but then you look at initial jobless claims
Speaker 6: a little bit higher. What's the stronger signal there? Which
Speaker 6: one should we be focusing on?
Speaker 5: Oh, the consumer, certainly, And I understand that this is
Speaker 5: backward looking, but remember claims are extremely volatile, and we
Speaker 5: don't want to look at one data point, but rather
Speaker 5: the underlying trend in claims, which is still extremely low,
Speaker 5: still signaling that tight labor market or tight labor market conditions,
Speaker 5: which is going to continue to perpetuate the ability for
Speaker 5: upward pressure on wages, extending that to further purchasing power
Speaker 5: for the consumer in the marketplace, suggesting again the backbone
Speaker 5: of the economy, the underlying support of the economy, i e.
Speaker 5: The consumer remains resilient.
Speaker 8: There's been a real angst to underpinning some of the
Speaker 8: recent sell off in the bond market. The longer end
Speaker 8: that hasn't been tied to the Fed at all. It's
Speaker 8: been tied to a widening deficit and likely increasing spending.
Speaker 8: How much is the FED going to find itself increasingly
Speaker 8: at odds with fiscal spending because you talk about the
Speaker 8: need potentially for the Feds do more. How much is
Speaker 8: the strength that we're seeing in the gd preprint tied
Speaker 8: directly to that government spending.
Speaker 5: Oh? Absolutely, this is one of the problems when monetary
Speaker 5: policy and fiscal policy are moving in opposite directions, that's
Speaker 5: going to force the Fed's hand to take an even
Speaker 5: firmer position to counteract that expansion of government outlays. Now,
Speaker 5: we do know that federal stimulus has largely concluded, but
Speaker 5: there's other fiscal stimulus that's coming down the pipeline as
Speaker 5: a result of legislation that was passed over the last
Speaker 5: twelve to eighteen months, be that infrastructure spending, the IRA,
Speaker 5: the Chips Act, and other spatterings of state and local
Speaker 5: stimulus that is still being spent on constituents. So there
Speaker 5: is still a lot of purchasing power, a lot of
Speaker 5: borrowing and investment power out in the marketplace that the
Speaker 5: FED is desperately trying to drain out of the system.
Speaker 5: But again, the more that we see monetary and fiscal
Speaker 5: policy moving in opposite directions, the more that becomes a
Speaker 5: barrier for the FED to achieve its goal of price stability.
Speaker 7: Lindsay. A lot of people are writing in.
Speaker 8: They're saying that I didn't really have a right to
Speaker 8: be confused because it's core PCE. When you look at
Speaker 8: the actual inflation, yes, you're seeing growth, but it is
Speaker 8: disinflation stare you are seeing a reduced pace of growth
Speaker 8: when you strip out energy and food. How much credence
Speaker 8: do you give the idea that we got in this
Speaker 8: gdpreprint a core PCE read two point four percent.
Speaker 7: Is that the sort of number to hinge off.
Speaker 5: It's certainly encouraging, But again, when we look at some
Speaker 5: of the other data metrics, when we look at headline
Speaker 5: pc when we look at the headline CPI, we're not
Speaker 5: seeing this clear downward trend of disinflation. Now, of course,
Speaker 5: monetary policy is not based on headline price pressures. We
Speaker 5: strip out those volatile food and energy composedonents.
Speaker 2: Lindsay piigs a stiff very near her good conversation with
Speaker 2: US year Edward Mills. Hugely experienced. He is at Raymond
Speaker 2: James with far more has legit committee, an individual congresspeople's
Speaker 2: skills in Washington, particularly working with Maloney of.
Speaker 1: New York ed Mills.
Speaker 2: This new speaker the uproar that I hear, and yet
Speaker 2: your research note says he can drive to the center.
Speaker 2: How does the gentleman from Louisiana move the Republicans to
Speaker 2: a doable center.
Speaker 9: I think it's going to be a tough task. I
Speaker 9: think Tom the thing that I am most focused on
Speaker 9: with the news speaker is how quickly at the end
Speaker 9: it happens. In DC things appear impossible right up until
Speaker 9: the moment it's inevitable. So having a unified Republican caucus
Speaker 9: is not something we would have thought. But the big
Speaker 9: question in my mind is this is a speaker who
Speaker 9: has not been vetted, and as he is vetted, how
Speaker 9: does he come out of that vet?
Speaker 10: What type of narrative about his leadership?
Speaker 9: And I think what we're talking about is for him
Speaker 9: to keep that, for him to keep the seat, for
Speaker 9: him to be able to govern.
Speaker 10: Do you need to.
Speaker 9: Find the middle, because what we've seen is that the
Speaker 9: fringe does not support many legislative packages, and that's paralysis.
Speaker 1: Help me with the sequence here.
Speaker 2: Course before Kart is November seventeenth and a government shut
Speaker 2: down prior to the defense allocations you mentioned, the first
Speaker 2: task of Senate House House Senate is well war funding
Speaker 2: if you will. Is that going to be before November seventeen?
Speaker 9: I think it's kind of a toss up between the two.
Speaker 9: I think to start with the November seventeenth deadline, Tom.
Speaker 10: We're not going to have a government shut down.
Speaker 9: It looks like we are going to punt government funding
Speaker 9: either into January or maybe as far as April. But
Speaker 9: in doing that there will be the conversation about defense funding.
Speaker 9: The President has sent up to Congress a robust supplemental package,
Speaker 9: and what we're hearing is the Senate will want to
Speaker 9: have a strong, by hardistan vote on that, trying to
Speaker 9: put pressure on the House, not differentiating aid for Ukraine
Speaker 9: from Israel or Taiwan.
Speaker 8: So how do you understand the fact that Mike Johnson
Speaker 8: has made a real important issue of his cutting the deficit,
Speaker 8: and yet there are all of these requests to finance
Speaker 8: some pretty big military expenditures. How much is that going
Speaker 8: to be a sticking point that makes it uncertain whether
Speaker 8: we get this aid across. We were speaking earlier with
Speaker 8: John Lieber of Eurasia and he was saying, we're going
Speaker 8: to get it passed. Are you as confident?
Speaker 9: I am confident that will get something passed. I think
Speaker 9: that the big question is timing in the scale of.
Speaker 10: This, Lisa.
Speaker 9: When you go back to some of the other pushes
Speaker 9: to become speaker, this was probably most out in the
Speaker 9: focus during.
Speaker 10: The push for Jim Jordan.
Speaker 9: The only way some of the defense hawks within the
Speaker 9: Republican Caucus who were willing to support him and the
Speaker 9: expectation is the only reason why they're willing to sport Johnson.
Speaker 10: Was that they needed to get a guarantee on a.
Speaker 9: Robust defense bill extra defense funding in the Defense Authorization
Speaker 9: Act before the end of the year. That group is
Speaker 9: far greater than the ord needed to keep that speakership.
Speaker 9: So if he wants to keep that speakership, he's been
Speaker 9: against that Defense aid in the past, and especially voted
Speaker 9: against Ukraine aid, but the geopolitical environment's very different now
Speaker 9: in his political position is completely changed and ed.
Speaker 7: To do all that.
Speaker 6: You made the point that Johnson really needs to find
Speaker 6: the middle here. But if he doesn't, I was speaking
Speaker 6: to Henrietta Treys Yester and she made the point that
Speaker 6: the Senate is still functional. That's the saving grace because
Speaker 6: at the end of the day, the House will do
Speaker 6: what the Senate tells it to do.
Speaker 10: You agree with that logic largely.
Speaker 9: I think when you see the Senate, if they pass
Speaker 9: something with eighty ninety votes, it's not a politically tenable
Speaker 9: position not to even have a vote on that in
Speaker 9: the House. And if you were to have a vote
Speaker 9: on something that ascid with eighty or ninety of one
Speaker 9: hundred votes in the Senate, in the House is near
Speaker 9: guaranteed to have a majority go to the president's desk.
Speaker 9: And I do think Johnson has a little bit of
Speaker 9: leeway here where he doesn't have the baggage of some
Speaker 9: of the previous ones. So some of the first fights,
Speaker 9: which will be government funding and defense funding, he's not
Speaker 9: necessarily going to get blamed for the position that Republicans
Speaker 9: are in because he's new to the job.
Speaker 1: Hey, you know, Ed Mills, I look at this.
Speaker 2: I was taking ann Rey hoard in three to zero two,
Speaker 2: which is advanced Civics lessons inside the Beltleigh, and I
Speaker 2: guess every speaker has a lot of power. Is he
Speaker 2: going to blow up the leadership of the Republican Party
Speaker 2: or is he going to attach himself to, say the
Speaker 2: hockey player from Minnesota and the others.
Speaker 9: Well, I think he's going to attach himself to the
Speaker 9: majority leader. I think i'd go back to the last
Speaker 9: time we had a speaker that no one really had
Speaker 9: heard of, which was Speaker Hasser. And you have the
Speaker 9: most empowered majority leader of in decades with Tom Delay
Speaker 9: when you saw him have the press constraints and there
Speaker 9: was some booze by Virginia Fox. What I was watching
Speaker 9: is Steve Scalise, the majority leader from his state of Louisiana,
Speaker 9: was standing right behind him and told him exactly what
Speaker 9: he said. He said, next question, let's talk about policy.
Speaker 9: Then Mike Johnson said, next question. So he is a
Speaker 9: lockstep with the current majority.
Speaker 1: And that is the Edmills perspectives.
Speaker 2: It's so valuable with Raymond James, Edmills, thank you so much.
Speaker 8: Meta shares not diverging from the rest of the complex,
Speaker 8: shares falling after the company warned a quote uncertain revenue
Speaker 8: outlook for next year.
Speaker 7: This was the dominant narrative.
Speaker 8: Even though the tech giant beat expectations on third quarter revenue.
Speaker 8: All of this dashing hopes for a long term recovery
Speaker 8: in the company's advertising business. It's spending, though aggressively in
Speaker 8: other areas and artificial intelligence and virtual reality. It raises
Speaker 8: this question, you know, what are people hinging onto just
Speaker 8: this hope of uncertainty or expectation of uncertainty that we
Speaker 8: all know just Instagram?
Speaker 1: You know, it's just Instagram. It's it's what Storm's doing
Speaker 1: over at Instagram.
Speaker 8: Plus six classics, mandeep sexy technology analytics.
Speaker 1: Through Instagram and Go. That's a short.
Speaker 7: Bloomberg Intelligence joining us.
Speaker 8: Now, Mandy, what does it tell you that they came
Speaker 8: out with really good earnings at least on the fundamental
Speaker 8: basis that they say that there's uncertainty and that they
Speaker 8: share sell off.
Speaker 11: Well, so I think they gave a pretty broad guidance
Speaker 11: thirteen to twenty four percent for next quarter. When you
Speaker 11: see that sort of white guidance, you know, you know
Speaker 11: the company is not sure and they didn't have that
Speaker 11: sort of uncertain guidance on the expense side, So they
Speaker 11: said reality labs losses would mount, and I think fear
Speaker 11: that company is really feeling the investors is not giving
Speaker 11: them markers around what they're actually doing. I mean, losing
Speaker 11: fifteen billion dollars a year on reality labs and not
Speaker 11: telling what you are investing in. Because we know Apple
Speaker 11: has a new virtual reality headset. It didn't take them
Speaker 11: fifteen billion dollars to make that headset. So clearly they
Speaker 11: are investing in something that nobody knows, and I think
Speaker 11: that's the uncertain How is.
Speaker 2: AI different for Zuckerberg than AI is different for Google
Speaker 2: where AI is different for Microsoft.
Speaker 11: So there is an overlap between Google and Meta's version
Speaker 11: of AI versus Microsoft's.
Speaker 1: And microsofce corporate. I got to get a job done.
Speaker 11: Let's go Yeah, and what's Meta's AI is? You are
Speaker 11: consuming Instagram feeds, Facebook feeds, I mean the average user is,
Speaker 11: and so how can AI enhance that experience both for
Speaker 11: the consumer as well as for the creator who's creating
Speaker 11: content for the feed? And AI can offer you a
Speaker 11: lot of tools to generate images based on text description.
Speaker 11: So there's a lot that AI can do in messaging,
Speaker 11: think of customer service, you know WhatsApp.
Speaker 2: So this AI and Instagram. I don't buy it AI
Speaker 2: and Amazon this afternoon. What is Josie going to spin
Speaker 2: on AI? Amazon?
Speaker 11: I mean amazonal story hardboard box is about compute training
Speaker 11: the models. Everyone wants these GPUs to train their large
Speaker 11: language model.
Speaker 2: They're buying AI from Microsoft. I saw that ten days
Speaker 2: ago or so, right.
Speaker 11: Yeah, well they are upgrading their three sixty five on
Speaker 11: Prime version to Microsoft.
Speaker 1: So completely lost.
Speaker 11: And so that's the thing about the generative AI wave
Speaker 11: that it is quite broad and every company can use
Speaker 11: it in different ways. Some companies are focusing on training models,
Speaker 11: some are focused on inferencing use cases.
Speaker 1: And you don't even know what this is, Cady. It
Speaker 1: feels like a Morcan mindy skip. You know, Robin Williams
Speaker 1: is going no, no, no, no. I just everybody's got
Speaker 1: a different definition of.
Speaker 11: AI or I guess they're trying to play for a
Speaker 11: different part of this large pie that everyone sees with generator.
Speaker 1: Save me.
Speaker 6: Let's talk about something we all know. Let's talk about
Speaker 6: the cloud business at Amazon.
Speaker 7: Of course AWS.
Speaker 6: You saw sales growth there slow to a record low
Speaker 6: in the second quarter. We know that the cloud business
Speaker 6: was why Alphabet had such a.
Speaker 7: Bad day yesterday.
Speaker 6: What are we going to see out of the cloud
Speaker 6: business at Amazon?
Speaker 11: I mean, the good thing is expectations are lower for Amazon,
Speaker 11: and we're talking about mid teen's growth for AWS, and yes,
Speaker 11: it has the largest base in cloud, but everyone perceives
Speaker 11: them to be behind with generative AI workloads. That may
Speaker 11: not be the case, and so there is room for
Speaker 11: an upside as long as they prove to the street
Speaker 11: that you know, they are catching up with Jenai and
Speaker 11: offering the compute that everyone needs to train their models.
Speaker 7: And not to go back in time.
Speaker 6: But you think about what happened at Alphabet, I mean,
Speaker 6: I'm just stuck on the share price move yesterday down
Speaker 6: almost ten percent, worst day since March twenty twenty. Is
Speaker 6: that an overreaction?
Speaker 7: Was it that bad with Alphabet?
Speaker 11: It definitely feels felt like an overreaction, simply because the
Speaker 11: search business actually did remarkably well, and unlike Meta, which
Speaker 11: continues to see ad pricing declined, Alphabet saw an ad
Speaker 11: pricing increase, which is a positive sign. It's an auction mechanism,
Speaker 11: so advertisers are bidding up for your ads. And there
Speaker 11: was talk about uncertainty yesterday around the Middle East war
Speaker 11: and everything that will draw down the advertisers spending. But
Speaker 11: clearly Alphabet had a positive print on the search side
Speaker 11: and the cloud side.
Speaker 1: Really the expectations were.
Speaker 11: Too high, So I think that's where Amazon may have
Speaker 11: an advantage going into the print.
Speaker 8: I want to try to understand the psychology of the
Speaker 8: investor base in some of these tech names, because it's
Speaker 8: been shifting over time and we've seen that. What are
Speaker 8: we learning about what the key triggers are going to
Speaker 8: be to buy and what the key triggers are going
Speaker 8: to be to sell after the games that we've seen
Speaker 8: so far this year.
Speaker 11: I mean, look, the cost of capital is going up,
Speaker 11: and so I think the days of spending fifteen billion
Speaker 11: dollars a year on moonshots are probably gone even for
Speaker 11: larger companies, as long as they keep deliver bring you know,
Speaker 11: twenty percent plus growth meta for Meta. Everyone is okay
Speaker 11: with them spending on reality labs. The moment that growth decelerates,
Speaker 11: that's when that fifteen billion dollar loss really becomes a
Speaker 11: sticking point for free cash flow.
Speaker 8: Is that the reason why you expect things for Amazon
Speaker 8: to be positive because they have that infrastructure AWS, which
Speaker 8: is the major player in the cloud space, they have
Speaker 8: that revenue coming in, they have Tom Keynes offspring buying
Speaker 8: lots of boxes.
Speaker 7: How much is that really going to play into a.
Speaker 8: Positive that could offset some of the negativity that we're
Speaker 8: hearing from the likes of ups this morning.
Speaker 11: Clearly, I think everyone believes that, you know, digital transformation,
Speaker 11: generative AI. These are secular trends, and right now, I
Speaker 11: think for Meta to spend thirty billion dollars in capex
Speaker 11: and not have a cloud business or something equivalent is
Speaker 11: also sticking out because that could have been a key
Speaker 11: source of diversification for them.
Speaker 1: This is an arch question.
Speaker 2: Do you and Anna rod Rana see the cloud business?
Speaker 2: I have no idea what I'm saying when you see
Speaker 2: the cloud business? Is it a classicdopoly or triopoly or
Speaker 2: can there be a set you know, number five sixty
Speaker 2: seven players. I just don't buy it.
Speaker 11: I mean, right now it's a triopoly and Oracle actually
Speaker 11: is investing a lot in building it's cloud investing.
Speaker 2: But do you believe people can grab share and come
Speaker 2: down and make a fundamental free cash flow generation or
Speaker 2: is it going to squeeze into a triapoly?
Speaker 12: No?
Speaker 11: I think you can, because right now the compute. Nature
Speaker 11: of compute is changing, so it's not CPUs consumed on
Speaker 11: the cloud anymore, it's GPUs, different types of accelerators, different
Speaker 11: types of databases, and that's where if you don't have
Speaker 11: a legacy business, which Microsoft does, I think Google has
Speaker 11: an advantage. Amazon has an advantage that they don't have
Speaker 11: a legacy business, and that's where they can keep building that.
Speaker 2: Joining us right now, John Fair on assignment, Kavin Greifeld
Speaker 2: with us this morning.
Speaker 1: Michael Nathanson joins.
Speaker 2: This is senior research analyst at Mofatt Nathanson on a
Speaker 2: pluthor of things. Lisa, why don't you drag in Nathanson
Speaker 2: here on Facebook because you know the story better than
Speaker 2: I do?
Speaker 7: All right, Michael, thank you for joining us.
Speaker 8: I want to start with the one note of caution
Speaker 8: that really drove all of the price action. They came
Speaker 8: out and said, we don't know what's going to happen.
Speaker 8: What else is new advertising? Who knows? Oh my goodness,
Speaker 8: the stock fell. How realistic is this or instructive of
Speaker 8: what we can expect in the year to come.
Speaker 12: Yeah, I was disappointed by that fact that the market
Speaker 12: took that comment around with him. These guys just put
Speaker 12: up twenty three percent AGROTH in a quarter and a
Speaker 12: year ago. People were thinking this business was dead, right,
Speaker 12: all the momentum is behind them. They called out a
Speaker 12: little bit of choppiness because what's happening in the Middle East.
Speaker 4: But I don't think it was that big of a deal.
Speaker 4: I mean, their guidance is still pretty strong.
Speaker 12: So I think this is This is an amazing story
Speaker 12: in terms of Tom and T Mobile.
Speaker 4: This could be. This could be the second story. People
Speaker 4: have just.
Speaker 12: Underestimated the strength of a business model. The recover it
Speaker 12: has been amazing.
Speaker 8: There's been a lot of There's been a lot of
Speaker 8: questions though around just in general the online advertising business,
Speaker 8: especially at a time where all of the content creators
Speaker 8: are facing off with consumers that really don't like advertising
Speaker 8: and are willing to spend to avoid it.
Speaker 7: How much are we seeing.
Speaker 8: With respect to consolidation of market share at the likes
Speaker 8: of Meta at a time when Google also saw an
Speaker 8: increase in ads bend despite.
Speaker 7: Their cloud issues.
Speaker 8: What does that tell us about the overall market versus
Speaker 8: just consolidation with the leaders?
Speaker 12: Okay, big picture, those two companies, the growth rates of
Speaker 12: Meta and Alphabet are back to where.
Speaker 4: They were in early twenty two.
Speaker 12: So if you remember the past couple of quarters, there's
Speaker 12: all kinds of worries about e commerce slowing. It's getting
Speaker 12: better about changes to Apple's IDFA system that's been fixed.
Speaker 12: So it says to you like the market's actually really
Speaker 12: healthy and that you're seeing kind of the structural tailwinds
Speaker 12: and online gaming discontinue.
Speaker 4: Right.
Speaker 12: We had a very tough compare in twenty twenty two
Speaker 12: that's now behind you.
Speaker 4: So I felt pretty good about the health of this
Speaker 4: business with the scale. Prayers for a snap for a
Speaker 4: Twitter go luck to you. It's not going to happen,
Speaker 4: you know.
Speaker 2: Michael math is a congratulations. Netflix has done a double.
Speaker 2: It's off Mark Mahaney.
Speaker 1: What's he know? He's going up another one hundred dollars on.
Speaker 2: Netflix review for us, the winner of streaming is Netflix
Speaker 2: and a Microsoft equivalent, even at thirty eight times earnings.
Speaker 4: It's a good question, Tom.
Speaker 12: It's different than Microsoft because you don't have the operating
Speaker 12: leverage you know, longer term, right, so you have to
Speaker 12: keep investing in content. The great thing about software models
Speaker 12: is that incremental margins are massive.
Speaker 4: Once you build it, you get the benefit of scale.
Speaker 4: In media for the most part.
Speaker 12: In the streaming model, you have to keep an investing
Speaker 12: in content, so they'll have margin leverage, but nowhere near
Speaker 12: the same margin leverage of what we saw last night
Speaker 12: with Meadow or Microsoft.
Speaker 4: So but in streaming there a winner. It's because it's.
Speaker 12: Such a tough business for everyone that's not in Netflix
Speaker 12: right now.
Speaker 4: So it's really there's one winner. There's Disney, and then
Speaker 4: there's everyone.
Speaker 12: Disney's not even a winner yet, and they're going to
Speaker 12: just churning cash flow to get your attention.
Speaker 1: Yeah, I mean, you know, I just brought up the
Speaker 1: Disney chart.
Speaker 2: You know, I just do we do this for Michael Nathanson,
Speaker 2: folks to give him, give him a little bit of
Speaker 2: angst here on a Thursday morning, Michael Nathans and Disney
Speaker 2: is back to twenty fourteen pricing.
Speaker 1: Help yeap, When does it turn You've been wrong, wrong, wrong.
Speaker 2: It's been like the New York Yankees. It's a disaster.
Speaker 2: I say, when does thank you? When does Disney Chern?
Speaker 4: Can?
Speaker 11: I say?
Speaker 4: Upgraded?
Speaker 12: When Bob Eyer came back in ninety bucks And it's
Speaker 12: just been painful to me.
Speaker 4: So thank you Tom for reminding me.
Speaker 1: It's good, so we do about it.
Speaker 12: It's got exactly and sell and sell houses in the suburbs.
Speaker 4: So here's what here's what I think is going to happen.
Speaker 12: Twenty twenty four is a year of they have to
Speaker 12: consolidate Hulu and Disney plus margins and streaming or negative
Speaker 12: netflixes are in the twenties. To me, it's about streaming
Speaker 12: profitability in twenty twenty four, and they have to get
Speaker 12: who in house, which is going to happen by hopefully
Speaker 12: the end of the year. So I've a lost hope
Speaker 12: in Disney. I think that is again, I think this
Speaker 12: is your meta in twenty four. I mean a year
Speaker 12: ago people were killing the stock, and I think that
Speaker 12: Disney could be a great stock in twenty four, but
Speaker 12: you need to get streaming margins up to a level
Speaker 12: that people start caring about, which is gonna take some time.
Speaker 6: Well, Michael, it's really interesting to hear this conversation because
Speaker 6: you're still a buy on Disney. Okay, it could be
Speaker 6: a great stock in twenty twenty four, But to meditate
Speaker 6: a little bit longer on your Netflix comments, you're still
Speaker 6: neutral on the stock.
Speaker 7: What would bump you up to a buy.
Speaker 4: Bump m to.
Speaker 12: Buy would be to have earnings numbers because evaluation to
Speaker 12: Thomas point to me is it's pretty full. Look at
Speaker 12: it versus Google, Alphabet or Meta. To me, it's having
Speaker 12: faith and numbers that are above consensus. And I think
Speaker 12: we all have the same numbers now we pretty much
Speaker 12: a model with the companies told us there's no way
Speaker 12: to doubt it at this point, So you know, pretty
Speaker 12: much we're just debating multiple at this point. I don't
Speaker 12: think people have a real edge on earnings. And our
Speaker 12: numbers pretty much were consensus. We're at Meta and other names.
Speaker 12: We've been above consensus and that's been our call.
Speaker 3: You know.
Speaker 4: We we have conviction that numbers are wrong.
Speaker 12: To the upside, we will get very aggressive about the
Speaker 12: buy rating.
Speaker 6: And when it comes to Netflix and the streaming business
Speaker 6: in general, how does Netflix maintain market share here?
Speaker 7: Does that really all just come back to the content slate?
Speaker 4: Well, it's interesting.
Speaker 12: You know, when they built their business, they borrowed other
Speaker 12: people's content, and we were writing for many years and
Speaker 12: that was a dumb idea.
Speaker 4: So they would rent the office, they would rent friends.
Speaker 4: Given the state of media, you're starting to see evidence that.
Speaker 12: They could go back to renting other people's content, which
Speaker 12: is a very cost effective way to build a business.
Speaker 12: So what can happen longer term is that they could
Speaker 12: blend from making all these originals, which is a much
Speaker 12: tougher business, to renting people's movies and TV shows and
Speaker 12: given and again the state of media companies, that can happen.
Speaker 12: You know, I don't think Disney will do that, but
Speaker 12: you know, Warners, Paramount, you know, NBC Universal talked about
Speaker 12: licensing more content.
Speaker 8: Michael, what do you expected to hear after the bell
Speaker 8: when we get Amazon earnings, particularly around the acquisition of
Speaker 8: content having to do with sports. NFL the last sort
Speaker 8: of death now for cable.
Speaker 12: Right, So Mike Morton covers Amazon for us. He's very
Speaker 12: bullish on next year's margin opportunity. They're going to be
Speaker 12: looking at the NBA. Right, So the NFL has gone
Speaker 12: well for them, The ratings are up in a really
Speaker 12: strong amount this year, and the NBA is the next
Speaker 12: big package for grabs, and there's a good chance that
Speaker 12: they can get a slate of games, you know, getting
Speaker 12: out Tuesday or Thursday night games.
Speaker 4: So I think they're going to tell you that, Look,
Speaker 4: it's going well you see.
Speaker 12: This as a chance, to your point to really distance
Speaker 12: remediate cable networks thein thing.
Speaker 4: They're going to go for it. So you know, Amazon
Speaker 4: to us is.
Speaker 12: Is really in the second or third position behind ESPN
Speaker 12: for getting the next set of big rights.
Speaker 4: Here for Sports.
Speaker 1: Award winning Michael Nathanson was just decades of good good
Speaker 1: news is here.
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