WEBVTT - Markets Await Incoming Trump Tariff Policy 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App, 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.000 us live on YouTube. 0:00:27.120 --> 0:00:29.640 You usually would dive in with Richard Clarina of Pimcoe's, Hey, 0:00:29.640 --> 0:00:31.840 what's the market going to do? What's the fed gonna do? 0:00:32.360 --> 0:00:34.920 We're gonna stop and this is why we're talking to 0:00:35.040 --> 0:00:38.839 Richard Clareda, and today Kachola Coda of Rochester, when he 0:00:38.920 --> 0:00:42.640 was fed a Reserve Bank of Minnesota said, of the 0:00:42.640 --> 0:00:48.159 theories wrapped around Professor Clareda, modern macro models do not 0:00:48.440 --> 0:00:53.080 capture an intermediate, messy reality that's out there right now. 0:00:53.120 --> 0:00:57.240 There's a messy, messy reality that we're all facing there. 0:00:57.760 --> 0:01:03.840 And to me, looking at the magnificent architecture of dssee, folks, 0:01:03.920 --> 0:01:09.399 I'll say, at once dynamics, stochastic general equilibrium theory in 0:01:09.520 --> 0:01:13.160 the beauty of it, and not the physics envy, but 0:01:13.360 --> 0:01:17.080 just the wonderful thinking of it. You come here and 0:01:17.120 --> 0:01:20.440 as Ned Phelps would say, go to the XX short term, 0:01:20.680 --> 0:01:25.000 medium term, long term, you're in the Oval Office right now, 0:01:25.040 --> 0:01:27.720 and you've got to explain to Trump and the gentleman 0:01:27.760 --> 0:01:32.600 from Pennsylvania Hasset the short term, the medium term, the 0:01:32.680 --> 0:01:36.440 long term of what they are doing right now. How 0:01:36.480 --> 0:01:37.560 do you explain that. 0:01:38.280 --> 0:01:41.360 Well, what you say is the goal is to onshore, 0:01:41.440 --> 0:01:45.560 bring production back to the US, reduce the trade deficit. 0:01:46.640 --> 0:01:48.320 What we know is they can put on tariffs. 0:01:48.360 --> 0:01:50.160 They have. The liberation day is. 0:01:50.160 --> 0:01:55.080 Tomorrow, but it will take several years for that production 0:01:55.480 --> 0:01:58.560 if it eventually does ramp up. To boost the supply 0:01:58.720 --> 0:02:02.400 side of the economy, we have supply chains. Tariffs are 0:02:02.480 --> 0:02:05.720 essentially attacks on inputs to production, so that slows it down. 0:02:06.080 --> 0:02:09.480 Also the uncertainty about what the policy will look like 0:02:09.600 --> 0:02:12.880 in the future as well. So right now what you're 0:02:12.880 --> 0:02:16.360 getting is a lot of uncertainty. It's slowing the demand 0:02:16.480 --> 0:02:19.520 and the economy. Eventually you may get more jobs and 0:02:19.560 --> 0:02:22.040 more production, but that's several years down the road. So 0:02:22.480 --> 0:02:25.000 I think I want the folks in the Oval Office 0:02:25.040 --> 0:02:27.160 to understand the time dimensions at work here. 0:02:27.200 --> 0:02:27.560 For sure. 0:02:27.680 --> 0:02:30.560 Stephanie Kelton has a theory which is very much against 0:02:30.560 --> 0:02:34.720 people like you on what modern monetary theory should look like, 0:02:35.360 --> 0:02:39.280 and part of that theory is the intrusion of politics 0:02:39.320 --> 0:02:44.919 into monetary economics. Right now, we're doing almost Vorescian tariff law, 0:02:45.040 --> 0:02:49.320 mkindling tariff law, certainly from a nineteenth century. Can the 0:02:49.360 --> 0:02:53.440 political system be patient enough to get declared as medium 0:02:53.520 --> 0:02:54.440 term success? 0:02:55.919 --> 0:02:56.920 Well, I'm not sure. 0:02:57.000 --> 0:02:59.480 And in particular it gets it another fundamental idea in 0:02:59.560 --> 0:03:03.200 economic which is the idea of time consistency, that eventually 0:03:03.240 --> 0:03:06.000 people figure out that your promise now may not be 0:03:06.480 --> 0:03:09.520 delivered in the future. And so that's why, in particular, 0:03:09.600 --> 0:03:12.960 if the twenty percent tariffs that we're hearing about are 0:03:13.000 --> 0:03:16.160 really the beginning of a negotiation, that also adds an 0:03:16.200 --> 0:03:18.880 additional layer of uncertainty on top of just knowing what 0:03:18.960 --> 0:03:22.320 the tariff number is is now. You know, Tom, we 0:03:22.400 --> 0:03:24.040 saw him when I was at the Fed in twenty 0:03:24.160 --> 0:03:28.680 nineteen that, in fact, just the uncertainty about the trade 0:03:28.680 --> 0:03:32.200 policy itself was a damper to the economy. And that's 0:03:32.200 --> 0:03:35.440 a very tangible factor fact of life in macro and 0:03:35.480 --> 0:03:37.680 I think we're seeing an elevated version of it now. 0:03:37.880 --> 0:03:40.560 And Richard, I think we're seeing some the folks on 0:03:40.800 --> 0:03:43.200 Wall Street start to take down their GDP numbers being 0:03:43.400 --> 0:03:46.880 ratchet up their inflation expectations. Are they too early here 0:03:46.960 --> 0:03:49.840 or is that a reasonable I guess near to intermediate 0:03:49.880 --> 0:03:50.440 term outlook. 0:03:51.280 --> 0:03:53.920 Well, you know, Paul, everything in macro is a probability, 0:03:54.320 --> 0:03:56.640 and so I think it is appropriate to move up 0:03:56.680 --> 0:04:00.120 the probability of a recession. Certainly it would not d 0:04:00.280 --> 0:04:04.120 my base case now, but it's certainly somewhat more elevated 0:04:04.320 --> 0:04:07.160 than it was in particular. I think the other piece 0:04:07.200 --> 0:04:09.280 of this time, getting back to your point about the 0:04:09.920 --> 0:04:12.800 but the AX axis, is there's a lot of talk 0:04:12.840 --> 0:04:16.240 about fiscal you know, no tax on tips, social Security, 0:04:16.720 --> 0:04:19.160 you know, tax deductions to buy a car. 0:04:19.480 --> 0:04:20.600 But again that's going to. 0:04:20.520 --> 0:04:22.839 Take most of the rest of this year to work 0:04:22.880 --> 0:04:25.480 its way through through Congress, and so again there'll be 0:04:25.600 --> 0:04:28.279 uncertainty over that piece of it as well. 0:04:28.920 --> 0:04:32.919 And given that backdrop of uncertainty, Richard, is there anything 0:04:33.440 --> 0:04:37.000 FED and policy can do to it to really, I 0:04:37.000 --> 0:04:40.360 don't counteractor to impact the economy because it doesn't feel 0:04:40.360 --> 0:04:42.880 like there's much that FED it can do in the 0:04:42.920 --> 0:04:45.040 face of what could be a slowing economy in higher inflation. 0:04:45.320 --> 0:04:48.000 Well, I think here we want to distinguish between what 0:04:48.040 --> 0:04:50.320 the FED can do and what they will do. You know, 0:04:50.360 --> 0:04:53.640 what the FED could do is cut rates preemptively. That's 0:04:53.680 --> 0:04:55.680 more or less what the power FED did during my 0:04:55.800 --> 0:04:58.960 teim there in twenty nineteen. The economy began to slow 0:04:59.000 --> 0:05:02.200 because of trade policy uncertainty, inflation began to fall, and 0:05:02.240 --> 0:05:05.560 so we cut rates, essentially an insurance cut. I don't 0:05:05.560 --> 0:05:08.400 think the FED really now has the runway to do 0:05:08.440 --> 0:05:11.120 an insurance cut. In other words, we may need to 0:05:11.160 --> 0:05:14.359 see a very tangible slowing in the economy, in the 0:05:14.400 --> 0:05:16.720 labor market, rising the unemployment. 0:05:16.240 --> 0:05:19.159 Rate to get the Fed off of Hold right here. 0:05:19.120 --> 0:05:22.240 If you just joining it, because across the nation, we're with 0:05:22.320 --> 0:05:24.360 Richard clair To, the former vice chairman of the FED. 0:05:24.440 --> 0:05:27.640 We have a spectacular set of conversations for you today. 0:05:27.720 --> 0:05:31.760 Nancy Lazar will be with us later. Among us Michael Nathanson. 0:05:32.200 --> 0:05:35.880 Paul had a tantrum yesterday and said, get Nathanson. We 0:05:35.920 --> 0:05:40.440 have Michael Nathanson here with a interesting essay on YouTube. 0:05:40.440 --> 0:05:44.440 We welcome all of you on YouTube. Subscribe to Bloomberg Podcast. 0:05:44.480 --> 0:05:48.680 It's our wonderful new distribution. Thank you for a successful march, Paul. 0:05:48.920 --> 0:05:52.880 Richard, So you know, it's interesting some of the hit 0:05:53.520 --> 0:05:56.039 you know, the data that the FED looks at. Historical 0:05:56.120 --> 0:05:59.600 data still shows the economies in pretty solid shape. But boy, 0:05:59.640 --> 0:06:01.280 I get kind of spooking. I think the market gets 0:06:01.279 --> 0:06:03.640 a little spooky when they see survey data like the 0:06:03.720 --> 0:06:07.799 University of Michigan data showing that WIT consumers really are concerned, 0:06:07.800 --> 0:06:11.720 their sentiment is following, their inflation expectations are arising. How 0:06:11.760 --> 0:06:13.640 does the FED look at that type of data. 0:06:13.880 --> 0:06:18.200 It's an input into the projection. I think cher Palell 0:06:18.200 --> 0:06:21.240 mentioned at the press conference last week that they look 0:06:21.279 --> 0:06:24.000 at the survey data, but the survey data doesn't necessarily 0:06:24.000 --> 0:06:27.480 translate into hard data eventually. I think what we have seen, 0:06:27.520 --> 0:06:31.800 even Paul in the hard data is a pretty noteworthy 0:06:31.880 --> 0:06:35.240 slowing in consumption side of the economy relative to a 0:06:35.279 --> 0:06:37.279 really strong fourth quarter. 0:06:37.320 --> 0:06:38.720 I think a lot of reason why. 0:06:38.600 --> 0:06:42.039 Cell side houses are marking down their forecast is not 0:06:42.120 --> 0:06:45.160 so much the survey data. It's the tangible data on 0:06:46.120 --> 0:06:49.200 consumption being very very soft in Q one. 0:06:49.200 --> 0:06:51.800 You more than anyone, have got to go from the 0:06:51.839 --> 0:06:55.320 academics of DSGE and your work at literally building the 0:06:55.400 --> 0:06:59.680 modern Columbia program. Did you bring Woodford over were You're 0:06:59.720 --> 0:07:01.360 the one? And it said Michael come on over. 0:07:01.839 --> 0:07:03.240 I wish I could take credit for that. 0:07:03.240 --> 0:07:06.320 That was my success was Don Davis who brought Woodford over, 0:07:06.440 --> 0:07:09.760 but I was leading the cheerleading effort to do it. 0:07:10.200 --> 0:07:12.840 There was a cheerleading effort and they used torpedo bets 0:07:12.880 --> 0:07:18.200 at the Columbia Right now, so Richard did bring in Stiglitz. Okay, well, 0:07:18.240 --> 0:07:21.320 that takes credit for that. Okay, that's good. But the 0:07:21.480 --> 0:07:24.040 thing in Richard clar Day is to bring this over 0:07:24.160 --> 0:07:27.640 to the application of what we're doing now that the 0:07:27.640 --> 0:07:30.920 theories to me are literally out the window. What is 0:07:30.960 --> 0:07:33.239 the theory of the dual mandate right now? 0:07:34.320 --> 0:07:36.440 Well, right now, the labor markets where the Fed wants 0:07:36.440 --> 0:07:36.760 it to be. 0:07:36.800 --> 0:07:40.720 We have about a four percent unemployment rate and all 0:07:41.080 --> 0:07:43.680 broad measures of the labor market. So the Fed wants 0:07:43.720 --> 0:07:45.880 to keep the market labor market where it is right now. 0:07:46.120 --> 0:07:48.720 Chair Pale has said a number of times that the 0:07:48.760 --> 0:07:51.240 Committee doesn't think that the labor market now is a 0:07:51.280 --> 0:07:54.360 source of inflation. So they're very happy where the labor 0:07:54.400 --> 0:07:57.400 market is. What they were thinking six months ago is 0:07:57.400 --> 0:08:01.119 that they were on a glide path to this soft landing, 0:08:01.160 --> 0:08:03.080 although they didn't use that term, and I think the 0:08:03.080 --> 0:08:05.840 glide path has been delayed somewhat. 0:08:06.000 --> 0:08:08.360 My ten year real yield here Jerome Schneider called me 0:08:08.440 --> 0:08:11.000 up from PIMCO. Yet up early, he says, Tom, the 0:08:11.040 --> 0:08:14.320 ten year real yield one point seventy eight percent. It's 0:08:14.360 --> 0:08:18.160 coming down, down, down. If you're talking to Pimco troops 0:08:18.280 --> 0:08:21.600 right now, are you modeling out a higher unemployment rate? 0:08:21.840 --> 0:08:25.400 I got Atlanta GDP, GRIMM, I got feder Re zero 0:08:25.480 --> 0:08:28.840 Bank of New York disagreeing with that. Where is Richard 0:08:28.880 --> 0:08:32.560 Clarida on the I guess the vector of the unemployment rate? 0:08:32.800 --> 0:08:34.520 I think the risk is to the upside. 0:08:34.520 --> 0:08:37.160 And indeed, if you look at the Fed's projections two 0:08:37.200 --> 0:08:39.560 weeks ago, where they show a chart that what is 0:08:39.600 --> 0:08:42.360 the risk to the unemployment outlook, it's to the upside. 0:08:42.400 --> 0:08:44.760 So I think there's some upside risk right here. 0:08:44.880 --> 0:08:45.440 You know, at. 0:08:45.320 --> 0:08:49.800 Minimum, given what's going on with DOGE right now, we're 0:08:49.840 --> 0:08:54.960 going to see some increase in unemployment through those efforts. 0:08:55.000 --> 0:08:58.640 Also important to note that even coming into the year, Tom, 0:08:58.800 --> 0:09:02.360 if you look at private employloyment in particular, excluding healthcare 0:09:02.360 --> 0:09:05.840 and education, which have a pretty big government backstop, private 0:09:05.880 --> 0:09:09.120 employment had been really slowing throughout much of last year. 0:09:09.160 --> 0:09:11.040 So that. I think that's also irrelevant. 0:09:11.160 --> 0:09:13.360 How do you view the consumer here today, Richard? It 0:09:13.480 --> 0:09:17.439 just seems like anytime over the last twelve fifteen years 0:09:17.480 --> 0:09:20.760 to get concerned about the economy, but the consumer hangs 0:09:20.800 --> 0:09:24.120 in there and generally keep spending pretty well. How do 0:09:24.120 --> 0:09:25.240 you think about the US consumer? 0:09:25.760 --> 0:09:27.800 Well, in the aggregate, you know, there are three hundred 0:09:27.840 --> 0:09:30.640 million consumers, and in the aggregate they're in great shape. 0:09:31.240 --> 0:09:33.400 You know, in particular high levels of net worth. If 0:09:33.440 --> 0:09:35.520 you own a house, if you have money in the 0:09:35.559 --> 0:09:38.480 stock market, you've had a really good run for the 0:09:38.520 --> 0:09:42.040 last several years. But about a third of Americans don't 0:09:42.040 --> 0:09:44.600 own their own home or don't hold any stock, and 0:09:44.640 --> 0:09:46.719 for them it's a very different outcome. So what you're 0:09:46.720 --> 0:09:49.480 starting to see in the data now is a pretty strong, 0:09:49.600 --> 0:09:52.400 if I may use the term bifurcation between upper ear 0:09:52.520 --> 0:09:55.360 consumers and consumers who don't own their own homes or 0:09:55.400 --> 0:09:58.520 have a lot of stock market wealth, and then they're 0:09:58.559 --> 0:09:59.280 getting pinched. 0:10:00.240 --> 0:10:01.960 Okay, this is the heart of the matter. I mean, 0:10:02.000 --> 0:10:04.920 Alan Meltzer almost took it, almost took a swing at me. 0:10:05.080 --> 0:10:07.960 Jackson holds over this because Alan Meltzer want to go 0:10:08.000 --> 0:10:11.080 back to forty seven and aggregate data. You've been teaching 0:10:11.080 --> 0:10:13.600 that for twenty five years back when you were at Illinois. 0:10:13.600 --> 0:10:17.680 We're aggregating data. You just described a barbelle John Edwards 0:10:17.960 --> 0:10:21.520 to Americas. Yeah, around the table at the Eccles building. 0:10:22.880 --> 0:10:26.040 Besides arguing over who's got redskins dads? Forget about that. 0:10:26.440 --> 0:10:28.960 But around the table at the Eccles building, are you 0:10:29.080 --> 0:10:33.160 looking at two Americas or some economic aggregated fiction. 0:10:33.640 --> 0:10:36.079 Well, I'll put and say you look at both. But 0:10:36.120 --> 0:10:39.160 certainly during my time there, the staff did very very 0:10:39.200 --> 0:10:43.880 good work on looking a very disaggregated data. Forget you know, 0:10:43.960 --> 0:10:46.319 two Americas that were looked at like thirty eight different 0:10:47.040 --> 0:10:48.120 parts of the economy. 0:10:48.160 --> 0:10:51.040 So you do both? Oh, come on, I mean Jason 0:10:51.080 --> 0:10:53.800 Furman in his wonderful New York got bed. We'll get 0:10:53.800 --> 0:10:57.040 Professor Furman in up in a schools up at a 0:10:57.080 --> 0:11:00.800 school in New England somewhere. Jason says, flat out, tariffs 0:11:00.880 --> 0:11:03.440 kill the poor and the tax cut goes to the rich. 0:11:03.559 --> 0:11:07.000 It's a single sense in surveillance correction, Lisa, thank you 0:11:07.040 --> 0:11:10.400 for noting it. It's not the Washington Redskins, it's the 0:11:10.480 --> 0:11:14.480 Commander's my folks, it's my excuse me. 0:11:14.559 --> 0:11:15.240 Maybe we'll go back. 0:11:15.280 --> 0:11:17.080 Who knows, maybe I'll still have a job. 0:11:17.160 --> 0:11:20.560 The world's changed. So Richard, where do we go from here? 0:11:20.600 --> 0:11:23.080 What's the key thing that you're looking at here for 0:11:23.200 --> 0:11:26.600 this economy? Is it the tariffs? Is it the consumer? 0:11:26.760 --> 0:11:28.839 Is it the labor market? What's the key thing you're 0:11:28.880 --> 0:11:29.480 focusing on? 0:11:29.760 --> 0:11:30.000 Look? 0:11:30.080 --> 0:11:33.280 I think I think the issue is we're in a 0:11:33.320 --> 0:11:36.760 period now where measured inflation is going to go up 0:11:36.920 --> 0:11:40.240 because of the pass through of the tariffs, and activity 0:11:40.320 --> 0:11:42.400 is going to slow. So the real question for me, Paul, 0:11:42.520 --> 0:11:44.640 is are we going through what I call a whiff 0:11:44.679 --> 0:11:47.599 of stagflation or are we really entering what would be 0:11:47.640 --> 0:11:52.679 a pretty very pretty persistent stagflationary crunch. You know, I'm 0:11:52.720 --> 0:11:55.400 still relatively optimistic. I think it's more of a whiff 0:11:55.440 --> 0:11:58.360 than a new normal, but it's certainly something that that 0:11:58.679 --> 0:12:00.920 is would be would be quite relevant. 0:12:02.280 --> 0:12:04.800 It seems like a tough political call there to slow 0:12:04.840 --> 0:12:08.800 this economy and the rise inflation. Is the longer term 0:12:08.840 --> 0:12:13.559 gain that this administration sees from perhaps restoring more manufacturing. 0:12:14.200 --> 0:12:15.960 Is that a realistic expectation? 0:12:16.080 --> 0:12:18.160 Do you think, well, that it is. 0:12:18.080 --> 0:12:21.400 A realistic expectation, But it will not happen overnight. It 0:12:21.400 --> 0:12:25.760 will take several years. And in particular, in fairness, we 0:12:25.840 --> 0:12:29.400 saw a version of this in the Reagan administration. People 0:12:29.440 --> 0:12:31.360 think of Reagan as being a free trader, and he 0:12:31.440 --> 0:12:35.079 may have been philosophically, but the Reagan administration, which I 0:12:35.120 --> 0:12:39.000 actually worked with back in my youth, was actually quite interventionist. 0:12:39.040 --> 0:12:41.920 In particular, they had a policy known as voluntary export 0:12:42.000 --> 0:12:46.199 restraints on Japanese cars. And what the big Japanese automaker's 0:12:46.240 --> 0:12:50.520 Toylet and Honda realized is the only way for them 0:12:50.520 --> 0:12:52.800 to have a presence in the US was to build 0:12:52.840 --> 0:12:53.240 a lot. 0:12:53.080 --> 0:12:55.520 Of factories in the US. And so it worked. 0:12:57.240 --> 0:13:01.800 An ambitious enough trade policy and lead over time to 0:13:01.880 --> 0:13:03.880 some onshoing, but it won't happen overnight. 0:13:03.960 --> 0:13:05.839 I got eight ways to go. For a final question, 0:13:06.000 --> 0:13:07.960 I want to go to zero sum, but it's too 0:13:08.000 --> 0:13:11.160 early in the morning for a zero sum discussion. Here 0:13:11.400 --> 0:13:14.560 the heart of the matter is a president is looking 0:13:14.600 --> 0:13:18.840 at this is a bilateral discussion. The giant William Klein 0:13:18.960 --> 0:13:24.600 at the Peterson Institute aggressively disagrees with that. What's our 0:13:24.720 --> 0:13:29.880 multilateral outcome of this bilateral naivete? 0:13:30.160 --> 0:13:32.839 I think we'll learn a little bit more tomorrow about 0:13:32.880 --> 0:13:35.560 how much of this is intended to be permanent and 0:13:35.600 --> 0:13:37.880 how much is an opening, you know, art of the 0:13:37.920 --> 0:13:42.760 deal negotiation. If it is, if it is as I 0:13:42.800 --> 0:13:46.880 suspect it will be the opening rounds of multiple negotiations 0:13:46.880 --> 0:13:50.199 across different countries, then it's certainly not going to be 0:13:50.360 --> 0:13:53.080 it's certainly not going to really be a multilateral plan 0:13:53.160 --> 0:13:55.080 or be a series of bilateral deals. 0:13:55.240 --> 0:13:58.040 Is get gone to, you know hard in the phrases 0:13:58.080 --> 0:13:58.760 get gone. 0:13:59.040 --> 0:14:00.840 And I think the evidence in favor of that is 0:14:00.840 --> 0:14:05.280 that the Biden administration really didn't try to resuscitate the WTO. 0:14:05.480 --> 0:14:09.520 So why didn't they? Why did Why did they resuscitate 0:14:09.920 --> 0:14:14.120 the Atlantic Charter off of Newfoundland in nineteen forty two 0:14:14.160 --> 0:14:15.440 when we were flat on our back? 0:14:15.600 --> 0:14:20.960 Well you would have to ask them, but they're the 0:14:21.000 --> 0:14:25.960 political center of gravity in the last four years before 0:14:26.040 --> 0:14:28.560 Trump two point zero was really not to engage in 0:14:28.600 --> 0:14:32.200 the WTO. We never staffed up the dispute settlement process. 0:14:32.600 --> 0:14:36.240 It's completely fair. I mean, it goes back to transpecific failure. 0:14:36.320 --> 0:14:40.160 Yeah, and very good reminder the Transpacific Partnership exactly. 0:14:40.400 --> 0:14:44.440 Yeah, you can come into all for liberation data. I'll 0:14:44.440 --> 0:14:46.800 do it by phone. How about that, Richard clear to 0:14:46.840 --> 0:14:48.400 thank you so much, generous. 0:14:48.000 --> 0:14:48.800 Of you to be with us. 0:14:49.120 --> 0:14:53.000 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:14:53.040 --> 0:14:56.080 starting at seven am Eastern on Apple Coarplay and Android 0:14:56.080 --> 0:14:59.120 Auto with the Bloomberg Business App. You can also listen 0:14:59.200 --> 0:15:02.440 live on Amazon on Alexa from our flagship New York station. 0:15:03.000 --> 0:15:05.920 Just say Alexa play Bloomberg eleven thirty. 0:15:05.800 --> 0:15:08.080 The only one on Wall Street with a torpedo bat 0:15:08.120 --> 0:15:12.040 at home first in line with Anthony Volpi's bat. Michael 0:15:12.120 --> 0:15:15.080 Nathanson joins us right now, Mike, I don't care about 0:15:15.120 --> 0:15:18.880 YouTube your wonderful essay with Maffatt Nathanson. All I want 0:15:18.880 --> 0:15:21.600 to know is a torpedo bat. Do we ban it 0:15:21.640 --> 0:15:23.400 and get back to traditional baseball? 0:15:24.400 --> 0:15:27.080 Oh? Tom, it's the best thing for baseball. How can 0:15:27.120 --> 0:15:28.960 we ban it? This is This is a sport that 0:15:29.120 --> 0:15:33.600 needs something right. It needs some excitement and energy. Say 0:15:33.720 --> 0:15:35.360 give he went to bat? 0:15:35.520 --> 0:15:37.480 So this is this is like the Wilson I think 0:15:37.520 --> 0:15:39.640 it was the A two thousand of Jimmy Connors. As 0:15:39.680 --> 0:15:42.040 we got a metal tennis racket, get used to it. 0:15:42.840 --> 0:15:45.640 Oh, without a doubt and Baseball could not have made 0:15:45.680 --> 0:15:48.280 a better outcome for themselves right now, right keep such 0:15:48.400 --> 0:15:50.120 thousand home runs for the Yankees. 0:15:50.360 --> 0:15:54.440 It's a gift the season. It's like homebred Derby. Would 0:15:54.480 --> 0:15:56.200 you like to start the interview. 0:15:55.800 --> 0:15:57.240 Paul Sweed exactly. 0:15:57.600 --> 0:16:00.960 Hey, Mike, your your your note on YouTube hit my 0:16:01.200 --> 0:16:03.600 inbox yesterday. I read every word of it. I know 0:16:03.640 --> 0:16:05.560 it's been picked up by a lot of media. Can 0:16:05.600 --> 0:16:09.680 you frame out for us how big YouTube has become 0:16:09.760 --> 0:16:11.400 as a media company. 0:16:12.320 --> 0:16:15.120 Okay, so those compoys look at it and good morning guys. 0:16:15.560 --> 0:16:18.600 One is simply by revenues, Believe it or not. It's 0:16:18.640 --> 0:16:23.200 fifty four billion in revenues with advertising, you know the 0:16:23.240 --> 0:16:25.040 bulk of that. But there is a subscription business. It's 0:16:25.080 --> 0:16:28.400 fifty four billion. It's literally you know, with the rounding 0:16:28.440 --> 0:16:31.560 era of Disney, and by this year that will pass 0:16:31.640 --> 0:16:36.120 Disney in revenues advertising subscription in terms of time spent. 0:16:37.280 --> 0:16:39.600 I think you knowed from where you guys have your 0:16:39.880 --> 0:16:42.880 your your show playing. If you look at connected TVs, 0:16:43.320 --> 0:16:47.440 more people watch YouTube than any other service. Wow, you know, 0:16:47.480 --> 0:16:50.120 it's bigger than Netflix, It's big than Disney. Plus if 0:16:50.120 --> 0:16:55.000 you can look more broadly, just content, linear content channels, 0:16:55.040 --> 0:16:58.800 cable plus satellite plus streaming. They are still the biggest 0:16:58.960 --> 0:17:02.960 service of of the TV glass, right, and they also 0:17:03.160 --> 0:17:07.480 position on your phone and your desktop, and they're also global, right, 0:17:07.520 --> 0:17:10.840 So it's it's a monster of a company. Unfortunately, because 0:17:10.880 --> 0:17:14.560 of Google's, you know, the focus at Google Search and 0:17:14.640 --> 0:17:18.359 kind of the worries about search, people have ignored just 0:17:18.359 --> 0:17:20.600 the strength of YouTube. But we keep pointing out every 0:17:20.680 --> 0:17:23.239 year just the monster that it is, and it's going 0:17:23.280 --> 0:17:25.040 to overtake Disney by twenty twenty five. 0:17:25.720 --> 0:17:29.720 Michael, what does I'm look at the subscription revenue for YouTube, 0:17:29.720 --> 0:17:33.280 which has become a force mine assume that most of 0:17:33.280 --> 0:17:36.080 that subscription revenue was folks that maybe cut the cord 0:17:36.760 --> 0:17:38.720 and said, but I find value on YouTube. 0:17:39.720 --> 0:17:41.400 It's a bit of a blend. So it's I think 0:17:41.480 --> 0:17:44.359 Thomas and before half of its YouTube premium, which includes 0:17:44.400 --> 0:17:47.560 YouTube music, and we'd say there's about nine to ten 0:17:47.600 --> 0:17:52.320 billion remains is YouTube TV, which I have. They just 0:17:52.400 --> 0:17:56.000 raise prices unfortunately, but we think by twenty twenty six 0:17:56.040 --> 0:17:59.320 and twenty six they'll be the biggest PTV company in America. 0:17:59.680 --> 0:18:02.320 There will pass Charter and contract. 0:18:02.440 --> 0:18:03.760 Right, they're ending a. 0:18:03.760 --> 0:18:05.639 Million subs a year, and noone else is losing subs 0:18:05.640 --> 0:18:07.879 so it's going to get to be a monster of 0:18:07.880 --> 0:18:09.160 a company on PTV as well. 0:18:09.359 --> 0:18:11.960 Michael, I want you to talk to entertainment Global Wall 0:18:12.000 --> 0:18:13.879 Street that listens to us. We thank all of you 0:18:13.960 --> 0:18:16.440 around the world and particularly in LA and New York, 0:18:17.200 --> 0:18:19.840 glued to Lucas Shaw and screen time and what we're 0:18:19.840 --> 0:18:23.399 doing here with Paul Sweeney's leadership on entertainment. I'm going 0:18:23.440 --> 0:18:26.080 to pick on CNN just because Mark Thompson had a 0:18:26.119 --> 0:18:29.280 wonderful interview I think in the New York Times nine 0:18:29.280 --> 0:18:32.800 months ago. I'm guessing where every other paragraph ended with 0:18:32.880 --> 0:18:36.760 the basic thought, we don't know what to do with YouTube. 0:18:37.320 --> 0:18:42.400 What should traditional large media companies do with YouTube? 0:18:43.440 --> 0:18:48.760 Yeah, Tom, you have no choice. YouTube is the platform, right, 0:18:48.840 --> 0:18:50.720 you have to do what you're doing. You have to 0:18:50.760 --> 0:18:54.719 basically use it for fust capabilities, right. So you have 0:18:54.760 --> 0:18:57.920 to basic program a long form like you're doing. What's 0:18:58.000 --> 0:19:00.359 missing in media is short form. 0:19:00.440 --> 0:19:00.560 Right. 0:19:00.720 --> 0:19:05.199 There's not enough attention on kind of the YouTube shorts 0:19:05.280 --> 0:19:08.760 or or TikTok you know, or meta reels. You have 0:19:08.840 --> 0:19:12.080 to come up with a way to leverage short form video. 0:19:12.119 --> 0:19:14.159 And also you have to become a creator like you 0:19:14.200 --> 0:19:17.000 have to basically become a mister beast, which I don't 0:19:17.000 --> 0:19:21.119 know if you're familiar with, and basically you have to 0:19:21.240 --> 0:19:23.720 program for all types of consumption. 0:19:23.840 --> 0:19:24.000 Right. 0:19:24.040 --> 0:19:26.160 So I think what everyone can do is do long 0:19:26.200 --> 0:19:28.720 form content. But what's missing here in the DNA of 0:19:28.720 --> 0:19:32.520 these companies is that short form creator economy where you're 0:19:32.640 --> 0:19:35.680 using the difference, you know, kind of the short form 0:19:36.200 --> 0:19:40.080 essence of YouTube to break through the clutter. It's hard 0:19:40.240 --> 0:19:43.520 because there's no barriers to entry, right, Like great business 0:19:43.800 --> 0:19:47.200 that we've analyzed in our careers had a big moat 0:19:47.800 --> 0:19:49.800 cord cord cutting the. 0:19:49.840 --> 0:19:52.600 Cord, you know. Okay, but this is first of all. 0:19:52.640 --> 0:19:54.880 I was talking with Jimmy Donaldson the other day, really 0:19:54.880 --> 0:19:57.920 told him he's killing it with mister beasts. I'm looking 0:19:58.040 --> 0:20:02.640 Michael Nathanson hit the financial side of this. How does 0:20:02.760 --> 0:20:07.679 traditional media find Paul help me here the fixed cost 0:20:08.800 --> 0:20:11.560 benefit of YouTube? I don't see it. How do they 0:20:11.600 --> 0:20:16.440 cover fixed costs on revenue or down the income a 0:20:16.560 --> 0:20:19.360 statement to the Paul Sweeney's looking at this ebit that thing. 0:20:19.840 --> 0:20:22.240 How do they do that on YouTube? I see no evidence? 0:20:22.880 --> 0:20:27.560 Well, Tom, you have to basically create an alternative studio. Right, 0:20:27.600 --> 0:20:32.160 you have basically have to invest in startups, and it's 0:20:32.200 --> 0:20:33.560 not going to be in your P and L. Right, 0:20:33.600 --> 0:20:36.439 it has to be. To your point, the infrastructure of 0:20:36.480 --> 0:20:38.720 the companies we cover are just too large to make 0:20:38.800 --> 0:20:42.680 money in YouTube. But it has to be a confederation 0:20:42.800 --> 0:20:45.040 of small startups that you invest in. 0:20:45.119 --> 0:20:45.280 Right. 0:20:45.320 --> 0:20:47.800 You have to basically think of this as a portfolio 0:20:48.240 --> 0:20:51.159 that you're investing in off to the side that's going 0:20:51.240 --> 0:20:53.320 to grow one day. I don't think they have the 0:20:53.680 --> 0:20:57.880 DNA to your point, and the financial structure to play 0:20:57.880 --> 0:21:00.480 a small ball, right. This is a small all kind 0:21:00.480 --> 0:21:04.200 of approach. You have to break yourself away and basically 0:21:04.280 --> 0:21:06.800 hire a bunch of young people to do it. You 0:21:06.840 --> 0:21:08.800