Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best and economics, geopolitics, finance and investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. Jered Cassidy
Speaker 1: joins us. He's a large cat bank analyst at RBC Capital.
Speaker 1: Marcus the decades of experience. What will the cost reductions be, Gerard,
Speaker 1: I mean, I get they're gonna come out and they're
Speaker 1: going to manage that.
Speaker 2: But it's twenty.
Speaker 1: Twenty four beginnings with this earnings report, a year of
Speaker 1: cost reductions for these major banks.
Speaker 3: Tom, I think they will be an increased focus on
Speaker 3: reducing costs, no doubt about it. The banks are striving
Speaker 3: for positive operating leverage, and as you know, the net
Speaker 3: interest revenue numbers will start the year of on the
Speaker 3: weak side because of the margin pressure that the banks
Speaker 3: are experiencing. We expect that to inflect though sometime in
Speaker 3: the first or second quarter or twenty four. But to
Speaker 3: your point, we do expect to see further announcements of
Speaker 3: downsizing of personnel.
Speaker 4: We've already had some announcements, as you know. P and
Speaker 4: C is an example. Of course. City Group's got a
Speaker 4: big restructuring going on.
Speaker 3: So yes, Tom, we do expect to hear more about
Speaker 3: reducing costs.
Speaker 1: So good Friday, folks, I zeld In Offspring, Jared Cass
Speaker 1: and you know Zell Works. How's a digital banking battle?
Speaker 1: Who is winning the digital bank wars?
Speaker 4: Tom?
Speaker 3: All of the major banks have incredibly good digital products.
Speaker 3: You know, when you think about the introduction of the
Speaker 3: iPhone back and I think it was seven eight, it
Speaker 3: really has transformed banking like so many other industries around
Speaker 3: the world, especially on the consumer banking side. But as
Speaker 3: we know, you can buy a very strong product off
Speaker 3: the shelf, which allows the smaller community banks to compete
Speaker 3: against the likes of Bank America and JP Morgan.
Speaker 4: With the digital product, and probably as.
Speaker 3: You know from your own personal experience, is only a
Speaker 3: handful of app or transactions we do on the phone,
Speaker 3: so you don't need all the bills and whistles. It's
Speaker 3: like the old VHS machines, Tom, we only use them
Speaker 3: to play tapes and maybe record, even though they had
Speaker 3: all those other bells and whistles on it.
Speaker 4: Changing the digital apps.
Speaker 2: He's he busted my jobs just a little bit. He
Speaker 2: knows you have no clue what we're talking about.
Speaker 5: I remember VHS, Tom, I was around for VHS. Well,
Speaker 5: that's good, Jp Morgan, you are a bank for America.
Speaker 5: Just around the corner. Before we get there, Jared, let's
Speaker 5: talk about how to navigate these numbers from BFA. The
Speaker 5: one time items are anticipating how to really get a
Speaker 5: sense of the underlying business, the strength of the underlying business,
Speaker 5: what we look for.
Speaker 3: That's true, John, We're going to obviously, you know, exclude
Speaker 3: the one time items. Everybody's going to have the big
Speaker 3: FDIC charge you might recall from what happened last spring
Speaker 3: with the failures, So that's a one time item that
Speaker 3: the banks will incur. But it's really going to come
Speaker 3: down to the core numbers, and that's going to really
Speaker 3: focus on two areas, the ninja's.
Speaker 4: Revenue growth and fee revenue growth.
Speaker 3: And within the fee revenue growth, of course, with the
Speaker 3: big universal banks, we're going to be very focused on
Speaker 3: the capital markets numbers, especially for read throughs for next
Speaker 3: week when Goldman and Morgan Stanley report.
Speaker 5: I've has been really soft. You know that, Jared. I'm
Speaker 5: just wondering where the pie hasn't been getting bigger, which
Speaker 5: bank has been getting a bigger slice of that pie?
Speaker 5: How are they out performing relative to other banks? Who's winning?
Speaker 3: Yeah, it appears that Bank America is showing the best
Speaker 3: improvement of taking a bigger piece of the pie. It's
Speaker 3: somewhat difficult on the trading side to really get a
Speaker 3: good handle on who's got the better market shares. The
Speaker 3: Geologic numbers help us on the investment banking side because
Speaker 3: those are public, they reported numbers, and those are good
Speaker 3: estimates that Theologic has. And in that area, the dominant players,
Speaker 3: of course are Golmen, Sachs, JP, Morgan Chase, and so
Speaker 3: we'll see if Bank America or City can creep up
Speaker 3: in their market share in that area as well.
Speaker 1: Jero, are you going to undersell their success here? I
Speaker 1: always it's not a joke, folks. I'm serious about it
Speaker 1: when I say they almost have to apologize for their
Speaker 1: concentration and their success down the income statement. Is it
Speaker 1: the same old, same old this time around with these
Speaker 1: four reporting.
Speaker 3: I would say that they are going to be very
Speaker 3: straightforward about the efforts that they're doing, the success that
Speaker 3: they're having, but also pointing out Tom that they're not
Speaker 3: only making money for their shareholders, but they're really investing
Speaker 3: in their communities. You know, the banking industry never really
Speaker 3: receives any credit to the amount of volunteer hours and
Speaker 3: money that's investing that they donate to communities around this country.
Speaker 3: And so it's that win for everybody when these banks
Speaker 3: produce strong numbers, and they have been producing strong numbers,
Speaker 3: these big four banks, and I expect today we'll see
Speaker 3: some really impressive numbers.
Speaker 1: Jared, I believe this, and I've said this from the
Speaker 1: day I walked to the Dorrit Bloomberg. We don't understand
Speaker 1: how big these people are. I just added up an
Speaker 1: approximation of how many people they have. Some together, these
Speaker 1: four banks are nine hundred eighty nine thousand plus employees.
Speaker 1: A lot of that's retail banking. Where's that statistic? In
Speaker 1: five years, it's.
Speaker 4: Going to be interesting.
Speaker 3: I think that number, depending on how well they can grow,
Speaker 3: will probably be flatted down because of the expectation over
Speaker 3: the next five years of increased use of artificial intelligence
Speaker 3: to really make the banks more efficient and more profitable.
Speaker 4: But nobody should expect those.
Speaker 3: Numbers to be down twenty to thirty percent because of
Speaker 3: new technologies these companies.
Speaker 4: It's a people business time.
Speaker 3: As you well know, financial services is generally a high
Speaker 3: touch business in many areas.
Speaker 4: There is opportunities for digital.
Speaker 3: Banking as we as we know, but it's not a
Speaker 3: total elimination of the human touch, which is an important
Speaker 3: part of banking.
Speaker 5: Jared to stay close said type. We've got some numbers
Speaker 5: in just a moment from Bank for America and JP
Speaker 5: Morgan Wels, Fargo City, all coming up later this morning
Speaker 5: going into it. If you are just joining us, welcome
Speaker 5: to the program. It got to futures on the S
Speaker 5: and P five hundred just slightly negative. We're down by
Speaker 5: zero point two percent. The tension in the Middle East
Speaker 5: continues to build. Crude is up by more than four percent,
Speaker 5: seventy five dollars on WTI on brank crude we are
Speaker 5: in the eighties eighty dollars and about seventy cents. With
Speaker 5: us around the table to break down these numbers on
Speaker 5: please to say it's Bloomberg stionnale bassectionalite, four big banks,
Speaker 5: four different stories. What are you looking for?
Speaker 6: What is going to turn around the story for Bank
Speaker 6: of America? I think is an interesting question we started there.
Speaker 6: Can you imagine, John, that capital won last year was
Speaker 6: up forty two percent and Bank of America only up
Speaker 6: two percent?
Speaker 7: Right?
Speaker 6: Because people are borrowing on their credit cards. If you
Speaker 6: think about it, on one hand, it's that strict balance
Speaker 6: between being able to borrow and being able to not
Speaker 6: lose money on those loans.
Speaker 1: Okay, But to be careful here, moynihan has to come
Speaker 1: out today. Does he have to address not concerns or
Speaker 1: fears that overdoes it, but just a study of Bank
Speaker 1: of America's liquid in the insolvency position?
Speaker 6: Well, he does not, because Bank of America has really
Speaker 6: taken care of that problem over the last decade, haven't they.
Speaker 6: And you know, you could make an argument that investors
Speaker 6: maybe want Bank of America to take on more risk. Remember,
Speaker 6: they have piled a lot of their balance sheet into
Speaker 6: bonds when yields were next to nothing, and so they
Speaker 6: have had that money tied up. That balance sheet is
Speaker 6: starting to roll off quite a bit, and you're starting
Speaker 6: to see their health maturity, losses starting to shrink as
Speaker 6: well as rates rise, so the or rates come down
Speaker 6: rather so they want them to put that money to work. Remember,
Speaker 6: their average fight go score is higher than some of
Speaker 6: these risky borrowers here, But does that mean they want
Speaker 6: them to lend harder? I think this is the balance
Speaker 6: question of the banks, especially as delinquencies start to rise
Speaker 6: on credit cards. How much risk are you really willing
Speaker 6: to take on as a bank?
Speaker 1: Today will be all loving kisses. What happens in February.
Speaker 1: Do we see a lot of right sizing and rationalizations.
Speaker 1: Do we see announcements or is it dribs and drabs
Speaker 1: through the late winner.
Speaker 6: We've been talking about this, the calling. We have seen
Speaker 6: stricter callings right at the end of last year.
Speaker 5: The media too.
Speaker 6: It is brutal. It's absolutely brutal. And remember we saw
Speaker 6: so many job cuts last year. The hope this year
Speaker 6: is that things start to turn around and they can
Speaker 6: keep more people on staff. To Gerard Cassidy's point here,
Speaker 6: you did see Bank of America gain little share in
Speaker 6: investment banking, and they also bank in the middle market
Speaker 6: where a lot of banks don't have that wide American
Speaker 6: footprint and deals happen faster when they're less than ten
Speaker 6: billion dollars.
Speaker 5: We've been talking about banks for the last fifteen minutes.
Speaker 5: Haven't mentioned last sprink? Have we left that all behind?
Speaker 2: Now?
Speaker 5: The bank facty is of nine months ago.
Speaker 6: Yes, I mean in the sense that you are going
Speaker 6: to see those FDIC charges. But the idea of the
Speaker 6: severe crisis that the people felt back in March, they
Speaker 6: don't feel that now. But we do see pain still
Speaker 6: and you'll see that in places like commercial real estate.
Speaker 6: By the way, you'll also see it in places like
Speaker 6: auto and credit cards that could get messy in the
Speaker 6: coming quarters, as we see from FED studies that delinquencies
Speaker 6: are rising.
Speaker 1: They all come out with their different power points. What's
Speaker 1: the first thing you look for?
Speaker 2: I mean, they're like forty two pages.
Speaker 1: Let's say, what's the first thing Chanelli Bessett goes to.
Speaker 6: I go to You and I both do this. We
Speaker 6: go to the returns. At the end of the day,
Speaker 6: it comes down to the returns on tangible common equity.
Speaker 6: It comes down to the returns on equity. It's the
Speaker 6: best clean way to gauge the banks.
Speaker 1: But the profitability it's basically except for city group, big
Speaker 1: double digit, right is that there.
Speaker 6: Again everybody else is wavering against that double digit number.
Speaker 6: And it comes down to the costs as well. Those
Speaker 6: returns can't be gauged if you can't keep your costs
Speaker 6: under control. Interestingly enough, Bank of America had made that
Speaker 6: great move to increase their minimum wage to twenty five
Speaker 6: dollars per person in the next year or so in
Speaker 6: the next couple of years, so they do have a
Speaker 6: cost base, a big employee base that they have to
Speaker 6: contend to while also managing how to bring in more
Speaker 6: net interest income at a time where people are over
Speaker 6: extended on loads.
Speaker 2: I don't think we've ever done this job.
Speaker 1: It's six forty four Wall Street time, and we're waiting
Speaker 1: for four separate button pushes.
Speaker 2: It's six forty five.
Speaker 5: This is his fault?
Speaker 6: Whose fault is it? I remember that time Bank of
Speaker 6: America came out at five forty five in the morning.
Speaker 1: But Jared Cassey, he remembers when there's carrier pigeons, I mean,
Speaker 1: you know the pigeon. That's how the bird would fly
Speaker 1: up from New York to Boston and he'd be a
Speaker 1: tucker Anthon can chest out with a big net out
Speaker 1: the window to.
Speaker 5: Capture the booby to run again these numbers in the
Speaker 5: next five ten minutes. Shinale just quickly briefly what you
Speaker 5: make of that black Rock tail this morning.
Speaker 6: Blackrock has been struggling to grow its alternatives business, and
Speaker 6: to do it in infrastructure is one place it makes
Speaker 6: the most sense. If you think about their competition now
Speaker 6: it's Brookfield, and you will wonder if they will dig
Speaker 6: deeper into those other alternatives like private credit that you've
Speaker 6: seen others really dive into.
Speaker 1: Would you suggest that we're going to be very careful
Speaker 1: here with the time folks will give you the banks
Speaker 1: the moment that come.
Speaker 2: Out, John'll do that.
Speaker 1: I'm fascinated if this was a bidding war, I mean Gatwick,
Speaker 1: who as Canal, whatever it is, there's different there. And
Speaker 1: the basic idea to me is everybody else must have
Speaker 1: been bidding as well, right.
Speaker 6: These alternative asset managers. When I talk to folks in
Speaker 6: the market, they're all up for sale.
Speaker 2: Everybody is up.
Speaker 7: Everyone is because now.
Speaker 2: Money costs something and everybody's for song.
Speaker 6: And scale matters. Unfortunately, scale matters, So if you're not
Speaker 6: big enough, then you're not invited to the Party.
Speaker 5: The push into private markets has been absolutely phenomenal. I
Speaker 5: want to bring back into on cassidy if ABC as
Speaker 5: we wait for these numbers from JP Morgan and Bank
Speaker 5: for America to add the competition private markets deep Bankking,
Speaker 5: these guys starting to eat the lunch of some of
Speaker 5: these big banks on Wall Street.
Speaker 3: I would say, John, they certainly have increased their competitive
Speaker 3: positions because many of the big banks that are regulated
Speaker 3: by the Federal Reserve, the controller of the currency, they've
Speaker 3: been de risked following the financial crisis, as we all know,
Speaker 3: the Fed made a push to de risk the large banks,
Speaker 3: and that's what's happening. But all in all, the shadow
Speaker 3: banking industry has been around, as we all know, for
Speaker 3: forty years, and it has taken over a very large
Speaker 3: position of providing financing for companies in this country. It
Speaker 3: has intensified more recently as you pointed out, John, and
Speaker 3: so the banks are competitive, but the private side has
Speaker 3: certainly taken a leg up more recently.
Speaker 5: Take turn out the numbers TWOP for BFA. Let's get
Speaker 5: to those numbers. There's a couple of one time items
Speaker 5: in here that you need to strip out to really
Speaker 5: gage the underlying business. You're not getting a full of
Speaker 5: picture of what's dropping the stockcase right now we down
Speaker 5: five five percent.
Speaker 6: They missed on a lot of critical figures here, going
Speaker 6: down to the core item here, for example, in trading,
Speaker 6: where you've seen them really punch above their weight, they
Speaker 6: did come in below estimates on fixed income as well
Speaker 6: as total sales and trading revenue. Importantly, also, they came
Speaker 6: in below estimates on net interest income. This is what
Speaker 6: we've been talking about their ability to bring in lending
Speaker 6: money at the time when you do see consumers still borrowing.
Speaker 6: Are people going to slow down their borrowing activity if
Speaker 6: they feel overextended? The outlook for that is really important
Speaker 6: here as we wait for further communication from executives. Here
Speaker 6: provision for credit losses, while that came in below estimates, John,
Speaker 6: you did see charge offs come in above estimates, which
Speaker 6: means loans are starting tour just a little bit more
Speaker 6: than Wall Street expense.
Speaker 1: As the statement comes out, John, and is a generalization
Speaker 1: here in Shanelle and Gerard of the pros on this
Speaker 1: return on average tangible common equity goes from fifteen ish
Speaker 1: to thirteen for.
Speaker 2: Bank of America. So there's that key ratio ebbing away a.
Speaker 5: Little bit Wellstanka coming out as well. But let's just
Speaker 5: sit on the training numbers out of Bank of America,
Speaker 5: just for Abate Shinali four Q trading revenue as you
Speaker 5: point it out, three point seventy five billion, the estimate
Speaker 5: three point eighty four FICK trading. Can break it down
Speaker 5: from fick trading to equities trading, Fick trading coming in
Speaker 5: at two point two one billion, the estimate two point four,
Speaker 5: equities at one point five to five the estimate one
Speaker 5: point full four. What would you read into that? Right now?
Speaker 6: They had zero days of trading losses. On one hand,
Speaker 6: that is great for a bank. On the other hand,
Speaker 6: remember prime services, the ability to service asset managers and
Speaker 6: hedge funds super competitive. Goldman has been trying to eat
Speaker 6: away at everyone's share and so watching into next week
Speaker 6: how trading falls across the pack will be important. How
Speaker 6: much risk are you willing to take on in this
Speaker 6: volatile market is a question for these question.
Speaker 2: Surely global markets.
Speaker 1: Bank of America is zero trading loss days in twenty
Speaker 1: twenty three. Is that good or bad? I mean, I mean,
Speaker 1: I guess they're bragging about that. What does that really
Speaker 1: mean they took no risk on their desk.
Speaker 5: It is a good thing.
Speaker 6: You don't want to see these banks losing much money.
Speaker 6: But to your point here, at this point in time,
Speaker 6: can you afford to lose a little bit of money?
Speaker 6: That is a big question here. It's a tough, tough balance.
Speaker 6: You have to remember we're living in a time where
Speaker 6: non bank market makers are gaining a lot of share.
Speaker 6: Look at those Jane Street numbers, for example Citadel Securities.
Speaker 6: We don't know what they look like for all year.
Speaker 6: And remember, guys, trading activity bounce back at the end
Speaker 6: of last year, and so Bank of America is competitive positioning.
Speaker 6: We have to wait for everybody else's numbers, but you
Speaker 6: want to see if they are kind of holding their
Speaker 6: ground against the big guys.
Speaker 5: More numbers, Wells Fargo, I promised you those just briefly.
Speaker 5: Four quarter revenue twenty point four eight billion, the estimate
Speaker 5: twenty point three five. The stock is down by two
Speaker 5: point six percent. JP Morgan up next. We'll go through
Speaker 5: this piece by piece. Four Q Investment Bank in revenue
Speaker 5: one point five to eight billion, the estimate one point
Speaker 5: seven two. We talked about trading revenue over at Bank
Speaker 5: of America. Let's do that at JP Morgan as well.
Speaker 5: E Grete salsand trading revenue one point seven eight billion,
Speaker 5: the estimate one point nine to three. FIT comes in
Speaker 5: at four point zero three bid in the estimate three
Speaker 5: point eighty four. There's a ton to get through here
Speaker 5: with JP Morgan. Just the early stock reaction down four percent. Nalie,
Speaker 5: what do you see?
Speaker 8: Yeah?
Speaker 6: The interesting thing here is investment banking is not jumping
Speaker 6: back as quickly as anybody expects. Remember, even if dealmaking
Speaker 6: came back at the end of last year, you're not
Speaker 6: seeing the banks clip those fees yet from this activity.
Speaker 6: It takes a while for those fees to float in.
Speaker 6: Remember equities also below estimates. This is another competitive place
Speaker 6: on Wall Street today. Fees have been light the last
Speaker 6: couple of years, but that's a place that investors are
Speaker 6: expecting a bounce back as well. Fick came in above estimates,
Speaker 6: whopping four billion dollars, but is it enough to offset
Speaker 6: weakness elsewhere? We're keeping an eye on those provisions as well.
Speaker 6: Remember a JP Morgan a first glance, they're coming in
Speaker 6: above estimates for the provisions. Do they expect the environment
Speaker 6: to be weakening a little faster than investors expect.
Speaker 1: Burd at the bottom of the very clear JP Morgan report.
Speaker 1: This is not c if the institute worked Fortress principles.
Speaker 1: Book value up sixteen percent, tangible book value up eighteen percent.
Speaker 5: Fortress Diamond a bit of commentary from Jamie Diamond himself.
Speaker 5: The JP Morgan CEO race may be higher the markets expect.
Speaker 5: Inflation maybe stick here the markets expect. We've had these
Speaker 5: kind of warnings from Jamie Diamond over the last year
Speaker 5: or so. John Cassidy has had a bit of time
Speaker 5: to go through these numbers, tons of numbers here out
Speaker 5: wows Bank for America. JP Morgan put it all together
Speaker 5: for us. What's the story.
Speaker 3: It's certainly complicated because of all the one time charges,
Speaker 3: as we touched on a moment ago. But what caught
Speaker 3: my attention already is that the credit quality picture for
Speaker 3: the banks was strong in the quarter. For example, in
Speaker 3: Bank America, the provision for loan losses was less than expected.
Speaker 3: In the charge offs in our estimate were a little
Speaker 3: better than what we were anticipating.
Speaker 4: And so I think that's one of the messages for investors.
Speaker 3: When you talk to investors everybody is very concerned about
Speaker 3: the outlook for credit quality for the banks, and it
Speaker 3: it looks.
Speaker 4: Like it's shaping up toward the end of the year
Speaker 4: to be pretty strong.
Speaker 3: But the investment banking results, capital market results are coming
Speaker 3: in lighted and expected.
Speaker 4: As you guys have pointed it out.
Speaker 1: Edgier artists not the fine print, but it's on the
Speaker 1: edge of fine print.
Speaker 2: This is JP Morgan.
Speaker 1: Average deposits flat are down three percent excluding their first
Speaker 1: republic soiree. How do these banks react if yields come
Speaker 1: down and the money market fund wall migrates back to them.
Speaker 4: Tom, That's an interesting observation.
Speaker 3: The read intermediation back into the banks could certainly happen because,
Speaker 3: as you pointed out, the money market mutual funds, they're
Speaker 3: tied very tightly to the Fed funds rate. So if
Speaker 3: the Fed was to cut Fed funds this year, the
Speaker 3: money market mutual fund yields fall, the banks are a
Speaker 3: little slower to bring their yield them, So you could
Speaker 3: see that put JP Morgan and the other big banks,
Speaker 3: as you know, are confronting quantitative titment. As we recall,
Speaker 3: under quantitative viasing in the pandemic, we estimate that the
Speaker 3: Federal Reserve pump four trillion dollars of deposits into the
Speaker 3: banking system and now they're taking them out, and that's
Speaker 3: why you see some of these deposit numbers down.
Speaker 1: Let's bring James Gorman retired into this film, Morgan Stanley
Speaker 1: Shaneli bask with that important conversation recently at JP Morgan
Speaker 1: Wealth Management Roe of thirty one percent.
Speaker 2: That's the jewel of each of these banks. I mean,
Speaker 2: they all want to be James Gorman. Right.
Speaker 6: It's incredible what they're bringing in in terms of margins
Speaker 6: from these asset and wealth managers, and it is worth
Speaker 6: keeping an eye on. But again, Tom, if they can't
Speaker 6: make money at these other businesses, it does damp in
Speaker 6: the story for even the profitable parts of the business.
Speaker 6: We'll have a city group later in the hour. They're
Speaker 6: making tons of money at their treasury and trade services business,
Speaker 6: but markets, investment banking are lagging, and credit quality they're
Speaker 6: below Gerard's estimates, but they're broadly over the estimates of
Speaker 6: all Bloomberg estimates combined on average and on costs. Can
Speaker 6: you imagine JP Morgan, which is among the best at
Speaker 6: cost control here for such a large bank really able
Speaker 6: to keep a handle on their numbers here on their returns.
Speaker 6: They're even above estimates here on non interest expenses. So
Speaker 6: keeping these costs under control for the top four consumer
Speaker 6: banks is going to be a very interesting balance.
Speaker 5: This year, we're down across the board on these full
Speaker 5: banks by a little more than two percent. Jared's slightly
Speaker 5: unfair of me to ask this question, given you've only
Speaker 5: had about twenty four minutes to look at some of
Speaker 5: the numbers. In fact less than that, I think you've
Speaker 5: had about fifteen Based on what you have seen. Who
Speaker 5: won the quarter?
Speaker 3: I would say that it's hard to say, but JP
Speaker 3: Morgan's numbers look pretty dune good. I'm interested to dive
Speaker 3: into the Wells Fargo numbers because they have been making
Speaker 3: real inroads into those trading and capital market areas that
Speaker 3: has been very beneficial to the any area. But overall,
Speaker 3: the important part John, as we go through these numbers
Speaker 3: is going to be what the outlook is for twenty
Speaker 3: twenty four. So I know we're going to focus on
Speaker 3: the earnings calls to hear what the guidance is for
Speaker 3: twenty twenty four and if we are in for a
Speaker 3: soft landing, and the Federal Reserve is finished in raising
Speaker 3: church and interest rates.
Speaker 4: All four of these banks are going to.
Speaker 3: Be winners in twenty twenty four as their business benefits
Speaker 3: from those types of conditions.
Speaker 5: Jared, thank you, sir for the anticipation of these numbers
Speaker 5: and the reaction to them this morning. Jared Cassidy if
Speaker 5: RBC Capital Markets, he's tant and rusted joined us right now,
Speaker 5: director of Equity Research at CFRA. Can you've had some
Speaker 5: time to pour over the numbers. Good morning to you, sir.
Speaker 5: What stands out for you?
Speaker 9: Well, I think first on bank stock prices, they're really consolidating.
Speaker 9: If they're a big move in the fourth quarter, and
Speaker 9: looking out to twenty twenty four, it's not going to
Speaker 9: be a V shape, if you will, strong recovery in
Speaker 9: any of the areas. But overall, what we're seeing is stability,
Speaker 9: and stability is going to lead to growth, loan growth,
Speaker 9: Net interest income just doesn't fall off the cliff when
Speaker 9: rates are cut, mostly because it's the spreads as it
Speaker 9: was talked about earlier, and I think overall it's the
Speaker 9: inflection point in investment banking going into twenty twenty four,
Speaker 9: there is significant backlog, particularly from the private equity firms,
Speaker 9: to monetize those investments into the market, which would benefit
Speaker 9: the banks for investment banking, for underwriting.
Speaker 4: And m and A.
Speaker 9: Additionally, banks are going to be conservative in their message
Speaker 9: with analysts today, mostly because we expect to see.
Speaker 4: Tighter regulation by the end of this year.
Speaker 9: And you're going to hear the term both from banks
Speaker 9: and from analysts about capital bill.
Speaker 7: That's going to be the clear message.
Speaker 1: Kley and Jane Frasier out later with two hundred and
Speaker 1: forty thousand employees. I tried to add up the combined
Speaker 1: four bank employees and came up with over nine hundred
Speaker 1: thousand employees between the four. You've covered this for decades.
Speaker 1: Where's their employee account in five years? I mean, is
Speaker 1: this a shrinking business or do they just keep on
Speaker 1: keep on going.
Speaker 9: Dank Fraser is doing a great job on a transformation,
Speaker 9: but for investors, transformation is a multi year story with bumps,
Speaker 9: and I think for what will be the headcount for
Speaker 9: a streamlined city group as we look at it two
Speaker 9: to three years out is perhaps going to be ten
Speaker 9: to fifteen percent lower. There's a whole list of businesses
Speaker 9: that are already announced as sold and consumer outside the US.
Speaker 9: So I think what Jane Fraser is looking for is execution.
Speaker 9: And I think by pre announcing, if you will, those
Speaker 9: one time chargers, they want to show what that runway
Speaker 9: is of this transformation.
Speaker 2: What is that runway? What will we learn in the
Speaker 2: hour from Jane Fraser.
Speaker 9: I think what Jane Fraser is going to articulate is
Speaker 9: that city has some very durable businesses that have very
Speaker 9: reliable recurring revenue, whether it's in corporate or treasury services
Speaker 9: and payments. And then when they look at the other
Speaker 9: businesses where maybe they had only one eye on the business,
Speaker 9: They're going to reinvest in wealth management along with selective
Speaker 9: areas of investment banking. But this is going to be
Speaker 9: a streamline bank looking out two to three years. I
Speaker 9: would say, though there will be bumps along the way.
Speaker 9: We had that same narrative with Wells Fargo. They're in
Speaker 9: a better position today than a few years ago. So
Speaker 9: I think for Jane Fraser, it's just really showing that
Speaker 9: the strategy is beginning to work. It's not going to
Speaker 9: be a turnaround. Just in twenty twenty.
Speaker 5: Four, Kenley on there of Cflight joining US now is
Speaker 5: Norman Rols, senior advisor on the Transnational Threats Project as CSIS,
Speaker 5: and former senior US intelligence official Norman Good morning to you, sir.
Speaker 5: The first question from US this morning, overnight and through
Speaker 5: this morning was that a strike on Houthy rebels or
Speaker 5: a strike against Iran.
Speaker 7: Good morning. The attack was a strike on Houthy rebels.
Speaker 7: It is a attack consistent with the administration's plan to
Speaker 7: have a gradual escalatory approach to the region. It certainly
Speaker 7: will degrade Hoothy capabilities. It's unclear to the extent those
Speaker 7: capabilities will be degraded. It is unlikely to deter the
Speaker 7: HOUTHIS from future attacks, although the HOUTHIS will likely calibrate
Speaker 7: those attacks in discussion with Iran to prevent a more
Speaker 7: significant regime to stabilizing response.
Speaker 1: Mister Rowland Nicolas Smith in the Telegraph as a really
Speaker 1: terse essay on the actual missiles that the Huties have,
Speaker 1: and what I read out of it is this is
Speaker 1: I see the stereotype of the media that this is
Speaker 1: a bunch of terraces off on a desert island.
Speaker 2: That's not the case. They have very sophisticated missiles.
Speaker 1: For example, the USS gravelyes there the aarli Berg destroyer,
Speaker 1: and they've got some missiles here of real capability, including ASBMs.
Speaker 1: Do we underestimate their sophistication.
Speaker 7: No, And in fact it's a well known fact among
Speaker 7: the governments of the region in Europe that Behuthies have
Speaker 7: acquired powerful missiles and more importantly training from Iran and
Speaker 7: in Iran on those missiles to make them lethal threat
Speaker 7: to the region.
Speaker 1: What is the difference for our ships at sea at
Speaker 1: the Red Sea and frankly outside the Red Sea today,
Speaker 1: now that this attack has occurred by.
Speaker 2: The Allies, what's the new risk to our sailors.
Speaker 7: Well, the Houthis are certainly going to sit back and
Speaker 7: say what do they have left, what has been damaged?
Speaker 4: How can they disperse and use other tools?
Speaker 7: We have to remember the Houthies still have a vast
Speaker 7: drone fleet, probably some missile capacity of drone boats and
Speaker 7: also naval minds. Now, a naval facility was struck as
Speaker 7: part of the attack profile, but that doesn't mean that
Speaker 7: we have taken out all of those capabilities, and the
Speaker 7: Houthis again can use those as long as they keep
Speaker 7: the nature of the attacks below the level that would
Speaker 7: cause a very significant counter strike.
Speaker 5: The Norman This effort has been led by the United
Speaker 5: States and the United Kingdom. What do you think we
Speaker 5: can learn from the countries who were involved and the
Speaker 5: countries who weren't.
Speaker 7: Well, the United States and the United Kingdom as usual
Speaker 7: or very close partners, and their intelligence and military authorities
Speaker 7: would have coordinated very closely over the weeks prior to this.
Speaker 7: Within the region, we had support from involvement by Bahrain
Speaker 7: and the European Union from never That doesn't mean these
Speaker 7: other countries weren't playing different roles for security in the region,
Speaker 7: but for their own political and security reasons, they could
Speaker 7: not involve themselves in the attack. And frankly, the United
Speaker 7: States and the United Kingdom had more than enough ordinance
Speaker 7: to undertake these activities. Between our missiles, the US submarine
Speaker 7: and the four typhoons launched from Cyprus.
Speaker 5: Can you take us into RIHANNT and give us a
Speaker 5: deeper understanding of how Saudi Arabia will be thinking about
Speaker 5: this moment.
Speaker 7: Saudi Arabia has issued a muted response calling for restraint
Speaker 7: from all parties. The Saudis will probably be pushing a
Speaker 7: diplomatic initiative to send eturn messages to the who theis
Speaker 7: and to the Iranians. I'm not sure the impact of that,
Speaker 7: but the Saudis also have to recognize that if the
Speaker 7: conflict were to escalate, it would impact their security issues.
Speaker 7: And the international community has not shown much appetite for
Speaker 7: working against Yemen in the long term, so they have
Speaker 7: to be careful. If you're going to involve yourself in Yemen,
Speaker 7: what's the plan, how does this end? And are you
Speaker 7: going to be with us as long as takes and
Speaker 7: the United States and Europe have not comonstrated that interest.
Speaker 1: Norman Road Bahrain near Cutter Sandwich, between Kuwait to the
Speaker 1: north and Uae Dubai and Abu Dhabi to the south,
Speaker 1: that the Persian Gulf the Arabian Sea, I should say,
Speaker 1: I'm looking at berin what is their relationship to the
Speaker 1: other Arab states? Are they alone this morning or are
Speaker 1: they acting in support with the support I should say
Speaker 1: of the other Arab nations.
Speaker 7: Well, there's no opposition to Bahrain's activities. Bahrain is not
Speaker 7: the largest country in the region, but it consistently shows
Speaker 7: significant leadership on issues ranging from the Abraham Accords on
Speaker 7: opposing what hamas did on October seventh, and on its
Speaker 7: support with allied and partner military activities. The Naval nav
Speaker 7: sent Our Naval Command center in the region is located
Speaker 7: in Minama, and the Bahraini leadership is a very supportive
Speaker 7: and reliable partner.
Speaker 1: What is the level of our intelligence this morning? You've
Speaker 1: been so good at outline to us. How we know
Speaker 1: what we know? That's always worry.
Speaker 2: Do we have good intelligence after these attacks?
Speaker 7: The nature of the attacks demonstrates a clear and good
Speaker 7: understanding of the locations from which attacks have taken place.
Speaker 7: We have infrared satellite capability that, according to press reports,
Speaker 7: allows us to understand whence attacks originates. So I'm confident
Speaker 7: that the intelligence behind these attacks and subsequent Hoothy operations
Speaker 7: will be good and consistent with the past.
Speaker 5: I'd love your interpretation of a headline we got in
Speaker 5: the last hour or so, Norman. I wonder what you
Speaker 5: think about this when you hear the Hoothy say that
Speaker 5: all us UK interests are now legitimate targets. Norman, what
Speaker 5: does that mean?
Speaker 7: Huthi rhetorica and Iranian rhetoric will remain defiant and strong,
Speaker 7: But again we're likely to see Hoo they attacks against
Speaker 7: shipping in the in their neighborhood. There reach is really
Speaker 7: not far beyond that. But again they are going to
Speaker 7: want to calibrate this for their own domestic audience and
Speaker 7: for the region as they move forward without again and
Speaker 7: we're getting another major missile response, particularly one aim at
Speaker 7: their leadership. This response was tactical in deterring and degrading activity.
Speaker 7: It was not strategic. It was not aimed at leadership
Speaker 7: or destroying all Hohothy military assets. And again we're managing
Speaker 7: that escalatory ladder and the administration of London or doing
Speaker 7: this carefully.
Speaker 5: The administration and Westminster will have to manage the domestic
Speaker 5: reaction as well.
Speaker 4: Norman.
Speaker 5: This came from Richard Sunak, the British Prime Minister, describe
Speaker 5: the hits on Yemen as limited, necessary and proportionate after
Speaker 5: weeks of dangerous and destabilizing attacks the elector, and I
Speaker 5: think domestically within the United States, within the UK, they're
Speaker 5: going to be increasingly worried about their countries, their nations
Speaker 5: being drawn into this tension in the Middle East. Norman,
Speaker 5: would you describe what we saw overnight through this morning
Speaker 5: as a one off where we set in the stage
Speaker 5: for a repeat of this through the next few weeks.
Speaker 7: The British Prime Minister's statement is accurate and crisply said.
Speaker 4: We hope it's.
Speaker 7: A one off, but that's really up to the Hoothy's
Speaker 7: I think what we have to look at is whether
Speaker 7: a Hoothi counter strike will be a symbolic meant to
Speaker 7: show defiance or really something that indicates that they haven't
Speaker 7: got the message. If the latter is the case, there
Speaker 7: will certainly be a broader strike by the United States,
Speaker 7: probably the United Kingdom, but again it'll be carefully calibrated
Speaker 7: to move up the escalatory ladder. Neither Washington or London.
Speaker 4: Or industry in an all out conflict in the region.
Speaker 5: And Norman I Ran and who is at the moment,
Speaker 5: You're comfortable that there is some kind of distinction between
Speaker 5: Iran and Hoothy rebels, because a lot of people struggle
Speaker 5: with that idea.
Speaker 7: You will note that in the US statement on the attack,
Speaker 7: Iran is not mentioned, although in any explanation of the
Speaker 7: attack and the problem said, Iran is always described as
Speaker 7: being behind this activity. Iran will attempt with difficulty to
Speaker 7: deliver new weapons and provide support to the Houthis, but
Speaker 7: the naval capacity in the region will likely disrupt that.
Speaker 7: I think the broader problem is going to be the
Speaker 7: capacity of Iran's embassy and the people involved provide intelligence
Speaker 7: and counsel to the Huthis as they deliberate their way forward.
Speaker 7: But that's the nature of the relationship between Iran and
Speaker 7: the Huthis.
Speaker 5: Norman, We're very lucky to catch up with you, sir.
Speaker 5: Thanks for your time. Norman rule there a CSIS.
Speaker 1: We are going to turn now to Mohammed El Area
Speaker 1: and at Queen's College, Cambridge, and it is on economics,
Speaker 1: finance and investment, but today it's on something different after
Speaker 1: the attacks we saw overnight against Huti revels and terrorists
Speaker 1: and of course their relationship to Iran. Muhammad, this goes
Speaker 1: back to Albert Harani and what we all learned about
Speaker 1: the history of the Arab people Byreen is one of
Speaker 1: our allies.
Speaker 2: Here.
Speaker 1: Would you suggest that the Arab nations are in support
Speaker 1: of this, how I'd attack on these rebels?
Speaker 8: I would suggest then nervous. You saw a statement by
Speaker 8: Saudi Arabia that is warning against escalation, and the concern here,
Speaker 8: Tom is that other proxies. Other Iranian proxies in the
Speaker 8: Middle East will see this as a reason to escalate
Speaker 8: what's going on in that region. So that's why you
Speaker 8: hear concern from the air countries. The last thing anybody
Speaker 8: wants is an escalation that becomes region wide.
Speaker 1: Which institution can create a dialogue between Tehran and a
Speaker 1: Western world word.
Speaker 8: I think first you need to see a cessation of
Speaker 8: hostilities in Gaza. That is a Greek condition. There won't
Speaker 8: be the ability to get people talking in a broader
Speaker 8: sense in the region until you get a cessation of
Speaker 8: hostilities in Gather. Once you get that, then you know
Speaker 8: that the relationship between Saudi Arabia and Iran has improved.
Speaker 8: You know that the UEE plays a critical role in
Speaker 8: conversations among countries in the region. So there are parties
Speaker 8: that can help, but you need to precondition first.
Speaker 5: Mohammad, you warned in Projects Syndicate recently not to extrapolate
Speaker 5: out the favorable trends that we finished last year with.
Speaker 5: Is there something that's developing in the Middle East right
Speaker 5: now that you think is a direct threat to that.
Speaker 8: It's one of the things John, I mean, my major
Speaker 8: concern is that if you look at the three systemically
Speaker 8: important regions in the world economically, the euro Zone, the US,
Speaker 8: and China, all three are having issues growing in a
Speaker 8: robust manner. The US is the exceptional there, but even
Speaker 8: the US now is facing lower household savings, higher debt.
Speaker 8: China needs to fundamentally change its economic models, and we
Speaker 8: know that without a healthy Germany, Europe is going to struggle.
Speaker 8: So if you actually look at who is the locomotive
Speaker 8: of growth, it's very hard to point to one locomotive.
Speaker 8: It's hard to believe that the US will be able
Speaker 8: to maintain what it was very impressive growth ways now.
Speaker 8: Put on top of that the geopolitical concerns, and that's
Speaker 8: why this recency bias, where people simply extrapolate what was
Speaker 8: a surprisingly good year from last year, is something that
Speaker 8: we have to guard against.
Speaker 5: So you're questioning the resilient growth story, are you also
Speaker 5: questioning the disinflationary trans muhammad that has started to develop
Speaker 5: over the last twelve months.
Speaker 8: Yeah, I smiled when I heard the conversation before I
Speaker 8: came on that you know it's disinflation ahead, It's not
Speaker 8: We're going to see and we already are seeing cost
Speaker 8: push pressures in the pipeline. That's two. In particular, what's
Speaker 8: happened to navigation in the Red Sea is directly and
Speaker 8: indirectly increasing inflation pressures, directly by hiking input prices, indirectly
Speaker 8: by causing shortages that then influence other prices. And then
Speaker 8: we have the labor market issue. We have high labor
Speaker 8: costs coming through the pipeline, so you've got cost push
Speaker 8: pressures coming in. I suspect we will see inflation at
Speaker 8: the CPI level get stuck at three percent, and then
Speaker 8: the Fed is going to have to make a difficult decision.
Speaker 8: I either tolerated for longer and I was encouraged by
Speaker 8: John William's use of the word a longer term inflation
Speaker 8: target is two percent, or try to reduce it to
Speaker 8: two percent too quickly and risk the wheel economy. But
Speaker 8: this notion that immaculate this inflation is going to continue
Speaker 8: is something that I find very hard to reconcile with
Speaker 8: actual data.
Speaker 5: Muhammad, you really challenge that theory. I think that we
Speaker 5: get a lot of people on this program, and I
Speaker 5: know you tuned in and you've heard them say it
Speaker 5: that the economy is rebalancaying. This will continue. You just
Speaker 5: give it time, we'll get there. You push back against that.
Speaker 5: I hear other people say things haven't changed, we will
Speaker 5: go back to the pre twenty twenty economic regime, low
Speaker 5: and stable inflation, growth in and around two percent. You
Speaker 5: really believe something has changed. What are the issues that
Speaker 5: you can point to, Muhammad, that you think have fundamentally
Speaker 5: changed since the pandemic.
Speaker 8: So I think it has fundamentally changed since what work
Speaker 8: was before the pandemic. Coming out of the global financial crisis,
Speaker 8: we had major balance sheet damage and that resulted in
Speaker 8: a decade of insufficient argugod demand. There simply wasn't enough demand.
Speaker 7: In the system.
Speaker 8: And when there isn't enough demand in the system, you
Speaker 8: pump in liquidity from the monetary side, from the fiscal side,
Speaker 8: and you don't have to worry about inflation. You boost
Speaker 8: up asset prices and you get some growth response, but
Speaker 8: nothing really exciting. That was the story before the pandemic.
Speaker 8: Coming out of the pandemic, in addition, well, in addition
Speaker 8: to the pandemic disruptions, we have four factors that are
Speaker 8: leading to insufficient aggregate supply. So it's a fundamental change
Speaker 8: in the macro environment. So what are those factors. We
Speaker 8: have fragmenting globalization, which means that supply chains are starting
Speaker 8: to be determined by geopolitical and not just commercial reason.
Speaker 8: We have companies themselves looking for more resilience balance sheets,
Speaker 8: more resilient supply chains after what happened during the pandemic.
Speaker 8: We have a significant transition on climate, and we have
Speaker 8: the labor market also where labor force participation has not
Speaker 8: gone up as much as all of us wish. This
Speaker 8: is a world in which we are frat trial to
Speaker 8: begin with on the supply side, and then you get
Speaker 8: the original shock. So that is a fundamental.
Speaker 2: Change, Muhammad. I'm not going to be at Davos.
Speaker 1: I'm going to be watching QPR at Watchford this week
Speaker 1: and we're looking forward to.
Speaker 5: That, Mohammedan.
Speaker 2: But I'll be there, Mohammad.
Speaker 1: If I was in Davos, my banner for the year
Speaker 1: would be its cost of carry Davos. What's fundamentally changed
Speaker 1: off of you're good analysis there moments ago, is all
Speaker 1: of a sudden money costs something. Every single business and
Speaker 1: family out there has a new cost of money. How's
Speaker 1: the world going to change a year out with this
Speaker 1: new new After the free lunch of the last decade.
Speaker 8: Yeah, and the issue is the legacy of the free lunch.
Speaker 8: I think on a flow basis, we can deal with
Speaker 8: the higher cost of money. The problem is the stock.
Speaker 8: And we know there are three major areas that somehow
Speaker 8: have to refinanced and you've got to get volume back.
Speaker 8: One is the US housing market, where the higher mortgage
Speaker 8: rate is just stopping people from moving and it's very
Speaker 8: hard to get onto the housing ladder right now because
Speaker 8: you're not getting the flow you need. Second is commercial
Speaker 8: real estate. There's a trillion plus that has to be refinanced,
Speaker 8: and some of it cannot be refinanced at what is
Speaker 8: assumed in terms of value. And then the third area
Speaker 8: that needs to do is we have a wall of
Speaker 8: corporate maturities coming up in twenty twenty five and companies
Speaker 8: normally try to get ahead of it. So if we
Speaker 8: can deal with the stock issue, with the legacy of
Speaker 8: this borrowing that occurred when rates were artificially low, we
Speaker 8: can deal with the flow aspect. The flow aspects, Tom,
Speaker 8: don't worry me. We just have to deal with the stock.
Speaker 5: Mahammed, We'll continue this conversation. Do you want to tell
Speaker 5: Tom about QPR or should I.
Speaker 8: No, I really don't want to get depressed and start
Speaker 8: crying on it.
Speaker 5: Zone TK relegation zone.
Speaker 2: Couldn't the Jets be relegated?
Speaker 5: They are like the Jets of English football in the championship.
Speaker 2: Real now, and there's a level below them.
Speaker 5: They can go down a league. Yet this is not
Speaker 5: looking good for QPR.
Speaker 1: Well, you know, mister Ruberstone's room to be looking at
Speaker 1: the Baltimore.
Speaker 5: Else if they get relegated. Can we get some kind
Speaker 5: of consortium together and take out QPR.
Speaker 2: Yeah, that's what you know. Get some movie in the
Speaker 2: unio thing you could go over and I could.
Speaker 5: Go and coach the team or something. Anyone at QPR
Speaker 5: wants that? I'm not sure.
Speaker 7: Either.
Speaker 5: The brilliant Mhammadalarian of Queen's College, Cambridge. The NFL reporting
Speaker 5: it's best rating since twenty ten. Ninety three of the
Speaker 5: top one hundred TV broadcast last year NFL games and
Speaker 5: it's not just YouTube. Pecre't getting involved this weekend said
Speaker 5: to broadcast their first playoff game the NFL, signaling a
Speaker 5: shift away from linear TV. Michael Nathanson and Muffett Nathanson
Speaker 5: wank in writing quote where the history of linear TV
Speaker 5: has been written. A sad and sorry chapter will be
Speaker 5: dedicated to how such a once great business was supplanted
Speaker 5: by a model that wasn't nearly as good for anyone.
Speaker 5: Michael and Police to say, join us right now, Michael,
Speaker 5: great to catch up with you. Say let's discuss it.
Speaker 5: Let's talk about the sport itself, the dominance of football
Speaker 5: in this country. What's everyone else getting wrong?
Speaker 4: Yeah, American football? What else is getting wrong? It's a
Speaker 4: perfect sport for a TV right.
Speaker 3: You have.
Speaker 10: You a set of games, very predictable every week. It's
Speaker 10: a short season, every game matters, and sports gambling is
Speaker 10: growing very quickly, so it's a combination of it. It's
Speaker 10: easy to watch, you can bet on it, and we
Speaker 10: have national storylines.
Speaker 7: Right.
Speaker 10: The teams are now nationally followed in a way that
Speaker 10: when Tom and I we are wasn't the case. It
Speaker 10: was a regional sport and now it's national in terms
Speaker 10: of fandom.
Speaker 1: Michael's watching Digita, reading Digita, I should say about the
Speaker 1: complete total dominance of mister Moran's YouTube. And I'm absolutely
Speaker 1: fat You've been so far out front on this with
Speaker 1: Craig Moffatt. Is anybody down the road, you going to
Speaker 1: compete with the two consolidated giants YouTube and Netflix.
Speaker 10: Amazon. So it's interesting people have always said content is king.
Speaker 10: I think the past decade, what's what we've seen now
Speaker 10: as the platform is king, and I pulled Amazon, Netflix
Speaker 10: and YouTube as the future leaders in this industry right,
Speaker 10: current leaders in the future. And the challenge for media
Speaker 10: companies is how do you play in that world?
Speaker 4: Right?
Speaker 10: How does your content resonate in a world where you
Speaker 10: have these massive platforms with so much choice?
Speaker 4: And this is this is the challenge the next next decade.
Speaker 1: Michael, we got to make some news here, so let's
Speaker 1: get to it. It's a Friday. You need Nathanson news
Speaker 1: right now. Paul Sweeney modeled out yesterday the idea of
Speaker 1: ESPN with a forty percent lift. I believe an expense
Speaker 1: they have to pay for all this sporting activity. Is
Speaker 1: mister Eigers setting up ESPN for an immediate sale to Amazon.
Speaker 10: You know, he has flowed the idea of finding minority partners.
Speaker 10: I don't think he wants to give it up at
Speaker 10: this point in time.
Speaker 4: He's flowed to.
Speaker 10: Partners from the platforms, from the leagues, maybe some of
Speaker 10: the third parties. I think Disneyland wants in the sports
Speaker 10: business and they just want to find some funding to
Speaker 10: help them get through. We have wondered for a while
Speaker 10: now how ESPN is a better business going forward than
Speaker 10: it's been. Costizing work cutting continues to slide. So we've
Speaker 10: been writing lately. We'll started this a couple of weeks
Speaker 10: ago time with you, is that we think streaming and
Speaker 10: they've not had a good streaming run here. They need
Speaker 10: to focus more energy on streaming and less on ESPN,
Speaker 10: and we'll see if they listen to us.
Speaker 1: Just to me is like the interview of the Year John,
Speaker 1: and it was Daniell leave you and you in London,
Speaker 1: And at the end of that interview I was standing
Speaker 1: there folks off the side having a pre cocky eil
Speaker 1: tang And the answer is John is he said, well,
Speaker 1: we just we don't really want to win. We just
Speaker 1: sort of want to compete and have again entertainment. I'm
Speaker 1: not hearing that from Nathan center Iger. It's totally different
Speaker 1: over here about winning.
Speaker 5: Let's talk about the sport, Michael, how do you break it?
Speaker 5: I think you break it by airing playoff games on
Speaker 5: streaming platforms that people don't have. I asked my producer
Speaker 5: Jamie this morning, simple question. You have a producer, Jamie James, fantastic,
Speaker 5: you don't get to share it. One atturn to Jamie
Speaker 5: Michael and I said, how do you watch the football?
Speaker 5: Win's it on? And he gave me an answer immediately.
Speaker 5: I said, how do you watch the baseball? Win's it on?
Speaker 5: Couldn't answer the question. He's a basketball fanasaid, when's the
Speaker 5: basketball on? How do you watch it? Couldn't answer the
Speaker 5: question with a direct answer. That's the problem for all
Speaker 5: these other sports. And a great example of that is Boxinc.
Speaker 5: They have killed Boxinc. This used to be something everyone
Speaker 5: used to watch together. It's not anymore. It's buried on
Speaker 5: a streaming platform, whatever it's called. I don't know. I
Speaker 5: like boxing and I don't pay to watch it. Michael,
Speaker 5: are they about to break it? You talked about the
Speaker 5: loss of the experience, and I'm with you. They're killing git.
Speaker 5: They've got success. Are they about to break it?
Speaker 4: Yeah?
Speaker 10: John, I'll break news on the air with you. I
Speaker 10: totally agree with you. It makes me so angry as
Speaker 10: a consumer and an analyst that this is one of
Speaker 10: This playoff game is probably the top game of the weekend. Right,
Speaker 10: And when I got my show the schedule when it
Speaker 10: came out, I'm like, wait, they're they're putting the Dolphins
Speaker 10: Chiefs on Peacock. So we have to pay six bucks
Speaker 10: more a month together for one night. That's just outrageous
Speaker 10: to me, right, it just is. And I think it's greedy,
Speaker 10: and I know why comcasts are doing it in Peacock.
Speaker 7: I think the.
Speaker 10: League is overreaching here and they've done an amazing job
Speaker 10: navigating the entire pragmentation media.
Speaker 4: But I think you're right, John.
Speaker 10: I think there's a feedback group which says these guys
Speaker 10: don't care about the fans. They're in it for the money.
Speaker 10: And it's just loud and clear by having the best
Speaker 10: game of the weekend on Peacock. And I totally agree with.
Speaker 5: You, Michael, because the numbers simply don't work. I've heard
Speaker 5: TV executives talk about this. The problem with sport is
Speaker 5: that you build out the asset, but you never own it.
Speaker 5: You have to lease it. You get a four or
Speaker 5: five year deal. I just wonder whether the numbers really
Speaker 5: work anymore. It was always about grabbing that appointment of view.
Speaker 5: There were very few left, Let's go to Sports Live TV.
Speaker 5: All that's left is sports and this right here broadcast news. Michael,
Speaker 5: I just wonder the future of that given how much
Speaker 5: the asset now costs.
Speaker 10: That was interesting, John, when you're nighted one hundred million
Speaker 10: homes in America.
Speaker 4: It was a great model.
Speaker 10: But as holmes start to slide, the cost of sport
Speaker 10: keeps going up, the cost of and the revenues keep
Speaker 10: coming down or flattening, so it doesn't work for every sport.
Speaker 10: The NFL is key because for five months out of
Speaker 10: a year it maintained the PTV bundle. That is the difference, right, Hockey,
Speaker 10: as much as I know, hockey is small. Baseball's become,
Speaker 10: you know, a small.
Speaker 4: Sport in America.
Speaker 10: But the NFL and Collegetable are different.
Speaker 4: I think those two models great for the time being.
Speaker 4: For the time being, right, they.
Speaker 1: Hold Michael, you and Craig Moffett on the high ground.
Speaker 1: I'm predicting that we would cut the cord. I'm going
Speaker 1: to give credit also to your good competitor, Rich Greenfield
Speaker 1: for being out front in this as well. I want
Speaker 1: to talk about the new cord cutting, which is the
Speaker 1: churn model, A six percent churn and what that means
Speaker 1: for finance of our entertainment. To me, that's a ginormous
Speaker 1: number because I think over thirty six months a business
Speaker 1: plan that you lose eighteen percent of your people, am
Speaker 1: I right?
Speaker 10: Well yeah, you know, Tom, the chart is actually six
Speaker 10: percent a month percent of these services.
Speaker 4: So think about that, right though.
Speaker 10: In you know, over a couple of years, let's say
Speaker 10: a year and a calf, you can turn your entire
Speaker 10: base out. The streaming model does not work as built today.
Speaker 10: That's where you're seeing all these bundles come together because
Speaker 10: as Craig Craig's been on this from day one, there
Speaker 10: was nothing better. I mean twenty years ago, there was
Speaker 10: nothing better than the PTV bundle because you don't have
Speaker 10: to compete for customers. The customer is given to you
Speaker 10: by the cable operator. You just had to make one
Speaker 10: good show or quarter to get paid by the cable operator.
Speaker 10: In this world, you need to constant, constant hit cycle.
Speaker 10: It's impossible to do so it churns off the charts.
Speaker 10: The model, you know, Netflix has surprised me. We've been
Speaker 10: a bit of a doubt or on Netflix's model, but
Speaker 10: it's just worked their way so well, the number two
Speaker 10: position is not very pretty if you look at Disney
Speaker 10: in terms of the economics for those two and a
Speaker 10: half dollion dollars last year. You need to cut churn.
Speaker 10: And the only way you could schurn is by bundling
Speaker 10: with other people or seeing competitors die.
Speaker 4: That's where you are.
Speaker 1: I know, your single best buy is the New York
Speaker 1: Yankees with one soda.
Speaker 2: What a gift that is.
Speaker 1: But in the finance, in the stock market, Michael Nathanson,
Speaker 1: what's your single best buy right now?
Speaker 10: Well, it's funny. Our Centle best buy was actually a
Speaker 10: short call on Roku. So, like you know, we've been pushed.
Speaker 10: We've been very, very aggressive.
Speaker 4: On Meta and Alphabet in the past fifteen months.
Speaker 10: So we still like them, but it's getting harder and
Speaker 10: harder to see the you know, it was a home
Speaker 10: run a year ago. We were saying that immediately we've
Speaker 10: been buying Disney. But for Disney, I feel like the
Speaker 10: pressures on them to now prove the case for streaming right.
Speaker 10: So so our best call is shorting Roku here, which is,
Speaker 10: you know, a call on the state of streaming, right
Speaker 10: That's that's our the call of the year. We do
Speaker 10: this every six months. We update our call. Today for me,
Speaker 10: it's Roku on the cell side.
Speaker 5: Love this, Michael Estae again soon Michael Nathan's and the
Speaker 5: have Muffet NICSNS and thank you, Buddy.
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