1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,720 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg With 5 00:00:27,800 --> 00:00:30,200 Speaker 1: the Call of the Morning, perhaps the Call of nineteen 6 00:00:30,320 --> 00:00:33,440 Speaker 1: so far, JP Morgen's Bob Michael with a major multi 7 00:00:33,520 --> 00:00:36,279 Speaker 1: year called Here's Bob on where he thinks ten year 8 00:00:36,360 --> 00:00:40,120 Speaker 1: treasury yields a headache all the way down to zero, 9 00:00:40,240 --> 00:00:42,240 Speaker 1: and I think that's where we're headed over the next 10 00:00:42,320 --> 00:00:46,320 Speaker 1: couple of years. We've had the recovery, it's coming to 11 00:00:46,440 --> 00:00:49,480 Speaker 1: an end, and now the central banks, one after another, 12 00:00:49,560 --> 00:00:51,720 Speaker 1: are falling into line and cutting rates. We saw it 13 00:00:51,760 --> 00:00:54,560 Speaker 1: overnight with the Bank of Korea. We've seen it with 14 00:00:54,640 --> 00:00:56,680 Speaker 1: the Bank of Indonesia. You're going to see it at 15 00:00:56,720 --> 00:00:58,880 Speaker 1: the month at the end of the month with the FED. 16 00:00:59,200 --> 00:01:02,280 Speaker 1: You may see it from the ECB sooner than people expect. 17 00:01:02,800 --> 00:01:04,800 Speaker 1: And we think at this point in the cycle you 18 00:01:04,880 --> 00:01:07,200 Speaker 1: need some shock and all. So I'm not saying we're 19 00:01:07,200 --> 00:01:09,679 Speaker 1: going to get there right away, but that's the journey 20 00:01:09,720 --> 00:01:12,679 Speaker 1: we're on until something different happens. But Michael that of 21 00:01:12,760 --> 00:01:16,160 Speaker 1: JP Mulkin Asset Management a wow moment. Tom Keane on 22 00:01:16,240 --> 00:01:18,880 Speaker 1: Bloomberg TV about two hours again, I think we'll frame 23 00:01:18,920 --> 00:01:21,040 Speaker 1: this and those will be a huge source of conversation 24 00:01:21,120 --> 00:01:23,600 Speaker 1: through the year. UH. And and let me frame just 25 00:01:23,720 --> 00:01:26,559 Speaker 1: you know, within the time that we've got UH. John Farris, 26 00:01:26,600 --> 00:01:29,440 Speaker 1: you know this is Jan Lowe's UH work and Mr 27 00:01:29,520 --> 00:01:32,160 Speaker 1: Michael giving him all the credit for it. And what's 28 00:01:32,160 --> 00:01:35,919 Speaker 1: so important here is how it's commingled with other nations. 29 00:01:35,959 --> 00:01:41,240 Speaker 1: It's not a discreet US call. It's about the international 30 00:01:41,800 --> 00:01:45,120 Speaker 1: economics and finance we're living in so very familiar with 31 00:01:45,160 --> 00:01:47,960 Speaker 1: Bob's thinking over the last few years, and he's believed 32 00:01:47,960 --> 00:01:50,640 Speaker 1: the ten year rates across the world, in the developed 33 00:01:50,680 --> 00:01:53,080 Speaker 1: world would come down to policy rates worldwide. We've seen 34 00:01:53,120 --> 00:01:55,480 Speaker 1: that in Europe, We've seen that in Japan, we've seen 35 00:01:55,480 --> 00:01:57,960 Speaker 1: it in the United States. Now his new call effectively 36 00:01:57,960 --> 00:01:59,920 Speaker 1: the way he is thinking about this many different reason 37 00:02:00,040 --> 00:02:02,120 Speaker 1: as to why we can head towards zero. But he's 38 00:02:02,120 --> 00:02:04,160 Speaker 1: looking at the amount of money that has gone into 39 00:02:04,200 --> 00:02:06,640 Speaker 1: money market funds over the last couple of years as 40 00:02:06,720 --> 00:02:09,480 Speaker 1: rates have grinded higher, and it's the Federal Reserve starts 41 00:02:09,520 --> 00:02:11,519 Speaker 1: to cut interest rates. He believes that will need a home, 42 00:02:11,720 --> 00:02:15,720 Speaker 1: and that home says the Treasury markets price up, you'll down. 43 00:02:15,760 --> 00:02:17,959 Speaker 1: And again this extends off of what we've heard from 44 00:02:17,960 --> 00:02:21,480 Speaker 1: Street Camar Steve Major. It just bcing a course of 45 00:02:21,600 --> 00:02:24,320 Speaker 1: legendary girls showing have all had there but they have 46 00:02:24,400 --> 00:02:28,360 Speaker 1: a major house. Uh. John put a vector on the tenure. 47 00:02:28,360 --> 00:02:30,639 Speaker 1: You're like that as a wow moment here in New York. 48 00:02:30,680 --> 00:02:33,120 Speaker 1: To join us and continue the conversation. Tom por Sally 49 00:02:33,160 --> 00:02:36,600 Speaker 1: of RBC Capital Markets, the chief US economist, Good morning 50 00:02:36,600 --> 00:02:38,520 Speaker 1: to your Tom here. Good morning. Good. Let's just start 51 00:02:38,560 --> 00:02:40,440 Speaker 1: with a question that I asked you as soon as 52 00:02:40,440 --> 00:02:43,520 Speaker 1: you walked into this studio, just how frustrating is it 53 00:02:43,960 --> 00:02:46,840 Speaker 1: covering this Fed at the moment and especially over the 54 00:02:46,919 --> 00:02:50,520 Speaker 1: last six or seven months. Yeah, you know it's um. 55 00:02:50,600 --> 00:02:53,679 Speaker 1: You know you you sort of realize that that sort 56 00:02:53,720 --> 00:02:57,440 Speaker 1: of age old idea that you're you're taught, you know, 57 00:02:57,520 --> 00:03:00,639 Speaker 1: your first year of working in research, that you're supposed 58 00:03:00,639 --> 00:03:04,040 Speaker 1: to uh tell people what you think, um the FED 59 00:03:04,120 --> 00:03:06,680 Speaker 1: will do, not not what they should do. Uh, and 60 00:03:07,080 --> 00:03:10,320 Speaker 1: uh you know it's um uh and here we are. 61 00:03:10,760 --> 00:03:14,120 Speaker 1: I I hate that we are talking about cuts, um, 62 00:03:14,120 --> 00:03:17,799 Speaker 1: but we are. I think that there's no economic justification 63 00:03:17,840 --> 00:03:21,000 Speaker 1: to cut rates, but they are. Uh. And you know 64 00:03:21,040 --> 00:03:23,040 Speaker 1: I'm not. It's funny I said to someone like, I'm 65 00:03:23,040 --> 00:03:26,480 Speaker 1: not going to stand on some high economic moral grounds 66 00:03:26,880 --> 00:03:30,280 Speaker 1: um and and not forecast to cut because it's it's 67 00:03:30,280 --> 00:03:33,079 Speaker 1: clearly coming. Powels made that abundantly clear. But I still 68 00:03:33,080 --> 00:03:36,160 Speaker 1: struggle with the justification on this. Uh. And you know, 69 00:03:36,600 --> 00:03:39,320 Speaker 1: I just find it. There's so many ironies here, but 70 00:03:39,680 --> 00:03:42,760 Speaker 1: here's just at least one. You know, you're gonna have 71 00:03:43,320 --> 00:03:46,400 Speaker 1: three days before the FOMC meeting, Uh, You're going to 72 00:03:46,520 --> 00:03:49,440 Speaker 1: have a Q two GDP report that's probably going to 73 00:03:49,480 --> 00:03:52,520 Speaker 1: show that consumption grew to four percent pace. Um. You 74 00:03:52,560 --> 00:03:55,520 Speaker 1: know that that that sort of defies um, I think 75 00:03:55,640 --> 00:03:59,040 Speaker 1: sort of rational thought process. But but again it I've 76 00:03:59,240 --> 00:04:02,520 Speaker 1: I've I've I've come to grips with the reality that 77 00:04:02,520 --> 00:04:04,200 Speaker 1: that they are going to cut. So you don't think 78 00:04:04,240 --> 00:04:07,000 Speaker 1: they should, but you think they will. Let's talk about 79 00:04:07,000 --> 00:04:11,680 Speaker 1: the potential impact of that potential interest, right, So so 80 00:04:11,760 --> 00:04:13,640 Speaker 1: here's I mean, look, I think it's I think it's 81 00:04:13,640 --> 00:04:16,480 Speaker 1: a goose is the backdrop, right, I mean, goose is 82 00:04:16,520 --> 00:04:19,919 Speaker 1: mark if nothing else that goose is the markets, right, 83 00:04:19,920 --> 00:04:21,120 Speaker 1: I mean I think this is more of a risk 84 00:04:21,160 --> 00:04:24,320 Speaker 1: on backdrop. You know, the one thing I I we 85 00:04:24,440 --> 00:04:28,679 Speaker 1: wrote about recently was you know it stated very simply, Um, 86 00:04:28,720 --> 00:04:32,360 Speaker 1: it's pretty fascinating that we are we are lowering the 87 00:04:32,440 --> 00:04:37,240 Speaker 1: discount rate in an environment where capital expenditures and consumption 88 00:04:37,279 --> 00:04:40,000 Speaker 1: are moving along at a really good pace. What you know, 89 00:04:40,040 --> 00:04:42,240 Speaker 1: what do you think happens in in in that backdrop? 90 00:04:42,279 --> 00:04:44,960 Speaker 1: And John we featured this morning Honeywell buried in the 91 00:04:45,000 --> 00:04:47,680 Speaker 1: honeywe and forks. To be clear, Honeywell has one of 92 00:04:47,760 --> 00:04:50,720 Speaker 1: the best press releases out there and earnings buried in that. 93 00:04:50,839 --> 00:04:53,720 Speaker 1: Their CEO says, their goose in their nominal view for 94 00:04:53,880 --> 00:04:57,159 Speaker 1: to six percent on our good ex sales. This is buried. 95 00:04:57,320 --> 00:05:00,320 Speaker 1: First of all, you gotta do bigger fun personally. You 96 00:05:00,320 --> 00:05:06,680 Speaker 1: can see this on radio. Are you kidding me? I 97 00:05:06,720 --> 00:05:10,640 Speaker 1: think it says end of two thousand, twenty two point four, 98 00:05:12,000 --> 00:05:15,680 Speaker 1: what are the economic conditions we need to get the 99 00:05:15,760 --> 00:05:19,880 Speaker 1: jpet Morgan's call, So I not to zero, but to 100 00:05:19,920 --> 00:05:26,120 Speaker 1: get you from a two five to a So you know, 101 00:05:26,360 --> 00:05:28,680 Speaker 1: I think what what needs to So let me be clear, 102 00:05:29,000 --> 00:05:31,000 Speaker 1: I don't think that tens are going very far from 103 00:05:31,040 --> 00:05:33,360 Speaker 1: where they are right now. UM, And and our our 104 00:05:33,440 --> 00:05:35,719 Speaker 1: house view is more or less a reflection of that 105 00:05:36,240 --> 00:05:40,040 Speaker 1: UM tip tip. For yield to continue to drift lower, UM, 106 00:05:40,279 --> 00:05:43,120 Speaker 1: you know, you need an event. Uh. Let me be clear. 107 00:05:43,200 --> 00:05:45,280 Speaker 1: In the immediate term, if this we're talking about a 108 00:05:45,279 --> 00:05:47,640 Speaker 1: structural dynamic, this is a totally different conversation. But in 109 00:05:47,680 --> 00:05:50,960 Speaker 1: the immediate term for race to really drift materially lower 110 00:05:51,000 --> 00:05:53,800 Speaker 1: from here, you need an event like like a recession 111 00:05:53,800 --> 00:05:56,960 Speaker 1: like the FED to really embark on UM and a 112 00:05:57,040 --> 00:05:59,440 Speaker 1: real easing cycle, not whatever this is, this notion of 113 00:05:59,480 --> 00:06:03,240 Speaker 1: insurance cuts. UM. I think that's uh, in the immediate term, 114 00:06:03,320 --> 00:06:05,000 Speaker 1: how you get there in the longer term, which I 115 00:06:05,040 --> 00:06:08,000 Speaker 1: think is probably the much more interesting conversation, UM, what 116 00:06:08,000 --> 00:06:10,159 Speaker 1: what you have to have happened is exactly the path 117 00:06:10,200 --> 00:06:12,800 Speaker 1: that we're going down now. You need the structural dynamics 118 00:06:13,080 --> 00:06:17,120 Speaker 1: I eat, the aging population idea slower trend rates of growth. UM. 119 00:06:17,160 --> 00:06:20,240 Speaker 1: All those things are are they lay in front of us. 120 00:06:20,279 --> 00:06:22,400 Speaker 1: And as Tom, you and I talked about a little earlier, 121 00:06:22,480 --> 00:06:23,920 Speaker 1: you know, one of the things that could help save 122 00:06:23,960 --> 00:06:27,000 Speaker 1: the day is is productivity. UM. But again short of that, 123 00:06:27,080 --> 00:06:29,479 Speaker 1: which again is much easier said than done. Um, you know, 124 00:06:29,520 --> 00:06:31,600 Speaker 1: I think that you're in a sort of a more 125 00:06:31,839 --> 00:06:33,560 Speaker 1: permanent as a sort of a tricky word, but for 126 00:06:33,720 --> 00:06:35,480 Speaker 1: lack of a better word, right now, you're in a 127 00:06:35,520 --> 00:06:39,239 Speaker 1: permanently low U rate structure. What do your conversation sound 128 00:06:39,279 --> 00:06:42,160 Speaker 1: like with clients at the moment? Help? Yeah, T John, 129 00:06:42,200 --> 00:06:44,640 Speaker 1: I I love this question, so you know, and and 130 00:06:44,640 --> 00:06:46,360 Speaker 1: again something you're not were sort of talking about a 131 00:06:46,400 --> 00:06:52,240 Speaker 1: little bit. Uh. People keep on saying the market wants cuts. Um. Uh, 132 00:06:52,400 --> 00:06:54,080 Speaker 1: you know, I don't know. I speak with a lot 133 00:06:54,120 --> 00:06:56,920 Speaker 1: of people that are you know, quote unquote the market. Um, 134 00:06:57,120 --> 00:07:00,320 Speaker 1: some some pretty big investors in various markets, whether it's 135 00:07:00,320 --> 00:07:04,040 Speaker 1: equities or fixed income. Um. No, no one's clamoring for 136 00:07:04,080 --> 00:07:06,400 Speaker 1: a cut. No, no, No one is demanding that the 137 00:07:06,400 --> 00:07:09,560 Speaker 1: Fed cut rates right now. So so this idea that, um, 138 00:07:09,600 --> 00:07:11,680 Speaker 1: you know, sort of the quote unquote market want to 139 00:07:11,720 --> 00:07:14,720 Speaker 1: cut like, I don't. I don't know where that is really, um, 140 00:07:14,760 --> 00:07:17,000 Speaker 1: because I don't see it in in any of the 141 00:07:17,040 --> 00:07:19,200 Speaker 1: conversations I'm having with clients. What do you think, Shaman 142 00:07:19,200 --> 00:07:21,760 Speaker 1: pals herring, I think Chairman Pale is hearing a lot 143 00:07:21,800 --> 00:07:25,080 Speaker 1: of nervousness from the the sort of the c suite 144 00:07:25,160 --> 00:07:27,760 Speaker 1: slash executives that he speaks to around the country. Look 145 00:07:28,000 --> 00:07:30,520 Speaker 1: that yesterday's bage book is a perfect reflection of that. 146 00:07:30,600 --> 00:07:33,040 Speaker 1: I mean, you know, the amount of time that you know, 147 00:07:33,080 --> 00:07:35,440 Speaker 1: sort of soft words were used, you know, like the 148 00:07:35,640 --> 00:07:38,680 Speaker 1: softening or weakening and etcetera, etcetera. It was pretty significant. 149 00:07:38,680 --> 00:07:41,560 Speaker 1: In fact, it jumped relative to what we had seen recently. 150 00:07:42,000 --> 00:07:44,600 Speaker 1: And I think that that that that permeated the bage 151 00:07:44,600 --> 00:07:47,400 Speaker 1: book and I think it's I think it's absolutely influencing 152 00:07:47,400 --> 00:07:51,160 Speaker 1: the chairman right now, Tom Person, Thank thanks guys, always 153 00:07:51,160 --> 00:08:10,000 Speaker 1: going to do with you coming in today. George Kessidy 154 00:08:10,080 --> 00:08:13,720 Speaker 1: joins us with RBC Capital Market's twenty years or more 155 00:08:14,280 --> 00:08:17,480 Speaker 1: of experience watching the game. Is a game gonna be 156 00:08:17,560 --> 00:08:21,320 Speaker 1: there in five years, Gerard. For young bucks that want 157 00:08:21,360 --> 00:08:23,920 Speaker 1: to have to term Bloomberg terminals in front of their 158 00:08:23,960 --> 00:08:26,760 Speaker 1: desk and they have the Royal Dalton shina on the 159 00:08:26,840 --> 00:08:29,640 Speaker 1: lunch served to them to the next side, and you 160 00:08:29,640 --> 00:08:31,280 Speaker 1: know they've paid a good amount of money and then 161 00:08:31,280 --> 00:08:34,600 Speaker 1: a ginormous bonus every three or four years. Is that 162 00:08:34,679 --> 00:08:37,720 Speaker 1: game over? I would say the games on overtown, but 163 00:08:37,760 --> 00:08:42,160 Speaker 1: I think the Royal Dalton dishware probably is um. I 164 00:08:42,200 --> 00:08:45,280 Speaker 1: think what you're going to see is that when we 165 00:08:45,280 --> 00:08:47,760 Speaker 1: look at over time, there will be fewer players in 166 00:08:47,840 --> 00:08:50,760 Speaker 1: the business because we have too much capacity, and so 167 00:08:50,920 --> 00:08:54,120 Speaker 1: for the survivors, it's kind of like the USS Indianapolis. 168 00:08:54,280 --> 00:08:56,600 Speaker 1: It was the guys that survived the shark attacks in 169 00:08:56,640 --> 00:08:59,120 Speaker 1: the end. We're find the same thing here. It's the 170 00:08:59,160 --> 00:09:00,920 Speaker 1: survivors that will be fine, but there are a lot 171 00:09:00,960 --> 00:09:03,040 Speaker 1: of people that are going to go the way of 172 00:09:03,440 --> 00:09:05,560 Speaker 1: others and not being in the business. In five years, 173 00:09:05,640 --> 00:09:09,080 Speaker 1: what will the concentration look like will be three and 174 00:09:09,240 --> 00:09:13,520 Speaker 1: four giants and then a regional player here, a regional 175 00:09:13,559 --> 00:09:16,680 Speaker 1: player there, or is there a different Cassidy vision to that. 176 00:09:17,320 --> 00:09:20,280 Speaker 1: I think you're going down the right path because economy 177 00:09:20,360 --> 00:09:23,400 Speaker 1: is a scale are very important, more so today than 178 00:09:23,440 --> 00:09:26,720 Speaker 1: we've seen in your my career, in your career because 179 00:09:26,720 --> 00:09:30,000 Speaker 1: of the cost of the technology, the need to have 180 00:09:30,120 --> 00:09:32,760 Speaker 1: this technology to be a player. So I do think 181 00:09:32,800 --> 00:09:36,440 Speaker 1: you're going to probably see five or so big players 182 00:09:36,840 --> 00:09:39,800 Speaker 1: and then you'll get some regional players. But it's the 183 00:09:39,840 --> 00:09:43,240 Speaker 1: ones in the middle that cannot make that commitment to 184 00:09:43,480 --> 00:09:47,080 Speaker 1: the Economy is a scale that may really struggle. You know, 185 00:09:47,120 --> 00:09:49,360 Speaker 1: three to five years down the road, Joe, I get 186 00:09:49,400 --> 00:09:51,120 Speaker 1: to some of the valuations of some of these banks 187 00:09:51,120 --> 00:09:53,440 Speaker 1: in just a moment. I do want your view on 188 00:09:53,520 --> 00:09:56,800 Speaker 1: what is happening with equity trading over at Morgan Stanley. 189 00:09:56,960 --> 00:10:01,120 Speaker 1: Big part of the bank and a big drop, He thoughts, Yes, John, 190 00:10:01,400 --> 00:10:04,320 Speaker 1: what we saw was when you look at the equity 191 00:10:04,360 --> 00:10:07,680 Speaker 1: trading for all of the investment banks on a year 192 00:10:07,679 --> 00:10:12,200 Speaker 1: over year basis, it was down now relative to expectations. 193 00:10:12,240 --> 00:10:15,640 Speaker 1: In the quarter it was in Morgan Stanley's case was 194 00:10:15,920 --> 00:10:18,760 Speaker 1: better than expected. But you're bringing up a good point. 195 00:10:19,400 --> 00:10:22,280 Speaker 1: You think about for a moment the amount of trading 196 00:10:22,320 --> 00:10:27,080 Speaker 1: in ETFs and these other types of passive investment funds. 197 00:10:27,280 --> 00:10:30,520 Speaker 1: It's not just retail investors that are using these funds, 198 00:10:30,760 --> 00:10:34,400 Speaker 1: it's institutional investors as well. So you're seeing there's less 199 00:10:34,360 --> 00:10:38,720 Speaker 1: of less volume on the exchanges relative to some years back, 200 00:10:39,040 --> 00:10:42,480 Speaker 1: and as a result, it's affecting the equity trading areas 201 00:10:42,480 --> 00:10:46,079 Speaker 1: for these very reputable firms like Morgan Stanley. So, Jared, 202 00:10:46,160 --> 00:10:48,760 Speaker 1: we wrap up earning season for the Wall Street players 203 00:10:49,040 --> 00:10:52,440 Speaker 1: with Morgan Stanley your tape. You're great so far, Jerrard. 204 00:10:53,120 --> 00:10:56,679 Speaker 1: I would say that generally speaking, the numbers were in 205 00:10:56,840 --> 00:11:02,240 Speaker 1: line to slightly below expectations for everyone. Now that being said, 206 00:11:02,640 --> 00:11:05,120 Speaker 1: when you compare it to a year ago, the numbers 207 00:11:05,200 --> 00:11:08,200 Speaker 1: for the group were not very good. So though on 208 00:11:08,280 --> 00:11:12,000 Speaker 1: an expectation standpoint they were okay, but when you see 209 00:11:12,000 --> 00:11:15,680 Speaker 1: the declines d c M, DICK capital markets, FICK trating 210 00:11:15,720 --> 00:11:19,640 Speaker 1: you know, fixing income, commodities, and currency, those numbers are 211 00:11:19,720 --> 00:11:23,000 Speaker 1: real weak for most players. The equity markets and the 212 00:11:23,040 --> 00:11:26,720 Speaker 1: ECM area were the better of the areas. Advisory was 213 00:11:26,760 --> 00:11:29,480 Speaker 1: okay as well, but generally speaking, year of a year, 214 00:11:29,480 --> 00:11:32,040 Speaker 1: the numbers were weak, no doubt about it. One of 215 00:11:32,040 --> 00:11:34,800 Speaker 1: the concerns for the outlooked in an interest income over 216 00:11:34,920 --> 00:11:37,640 Speaker 1: places like JP Morgan and Bank for America. The money 217 00:11:37,640 --> 00:11:40,719 Speaker 1: made on loans and minus the money paid on deposits 218 00:11:40,720 --> 00:11:42,640 Speaker 1: and as race get cut at the f at the 219 00:11:42,679 --> 00:11:46,720 Speaker 1: Federal Reserve seemingly over the next year or so. Jerrard, 220 00:11:46,800 --> 00:11:48,599 Speaker 1: the view is that it's going to get difficult for 221 00:11:48,640 --> 00:11:51,760 Speaker 1: these guys. You don't necessarily agree with that. You think 222 00:11:51,760 --> 00:11:54,600 Speaker 1: that these stocks can perform well, just like they did 223 00:11:54,600 --> 00:11:57,080 Speaker 1: in the mid ninety nineties. Gerard, just walk us through 224 00:11:57,120 --> 00:11:59,680 Speaker 1: this big idea that you and my may, however, at 225 00:11:59,679 --> 00:12:02,560 Speaker 1: whilst not a share at the moment for the valuation 226 00:12:02,960 --> 00:12:06,160 Speaker 1: of these banks and how these stocks will try Sure, John, 227 00:12:06,440 --> 00:12:10,560 Speaker 1: and you bring up the critical point today, I think 228 00:12:10,720 --> 00:12:14,240 Speaker 1: literally this quarter is the maximum pain point for this 229 00:12:14,320 --> 00:12:16,920 Speaker 1: issue with interest rates, because when you look at what 230 00:12:17,080 --> 00:12:20,280 Speaker 1: happened in the second quarter, deposit rates continue to go 231 00:12:20,360 --> 00:12:24,679 Speaker 1: up from the December hike, and libor fell more so 232 00:12:24,800 --> 00:12:27,800 Speaker 1: in the quarter than anyone had expected. But to your point, John, 233 00:12:28,040 --> 00:12:30,160 Speaker 1: when you look to the mid nineties and you see 234 00:12:30,160 --> 00:12:33,520 Speaker 1: the steepening of the curve caused by Greenspan at the 235 00:12:33,559 --> 00:12:36,680 Speaker 1: time the FED chairman cutting rates, we think that eventually 236 00:12:36,760 --> 00:12:40,600 Speaker 1: will filter into the thinking. Over the next twelve months plus, 237 00:12:41,000 --> 00:12:43,920 Speaker 1: you're going to see growth. The loan growth on the 238 00:12:43,960 --> 00:12:47,320 Speaker 1: consumer lending side was especially good for these big banks 239 00:12:47,320 --> 00:12:49,560 Speaker 1: to this quarter. So what they can do is grow 240 00:12:49,600 --> 00:12:52,800 Speaker 1: their balance sheets to offset any pressure in the margin. 241 00:12:53,040 --> 00:12:55,240 Speaker 1: But right now, I think the maximum pain point on 242 00:12:55,280 --> 00:12:59,000 Speaker 1: the margin pressure was this quarter due to the impact 243 00:12:59,040 --> 00:13:01,560 Speaker 1: that deposit race and not come down yet. They will 244 00:13:01,600 --> 00:13:04,640 Speaker 1: come down when they start cutting interest rates. Granted, acid 245 00:13:04,679 --> 00:13:06,640 Speaker 1: needs will come down too, but I think there will 246 00:13:06,679 --> 00:13:09,680 Speaker 1: be some relief there for the banks. Gerard when I 247 00:13:09,679 --> 00:13:13,559 Speaker 1: look at the screen, I see a nice thirty margin 248 00:13:13,640 --> 00:13:16,280 Speaker 1: bank to bank to bank to bank, but what I 249 00:13:16,400 --> 00:13:23,520 Speaker 1: really see is flatline revenue growth. Institutionally and strategically, do 250 00:13:23,600 --> 00:13:27,240 Speaker 1: they manage for flat revenue growth or by definition do 251 00:13:27,320 --> 00:13:31,640 Speaker 1: they have to merge. It's a great question, Tom, because 252 00:13:32,400 --> 00:13:35,400 Speaker 1: if you think back for a moment, Mike O'Neil, the 253 00:13:35,440 --> 00:13:38,480 Speaker 1: former chairman of City Group who just retired, he was 254 00:13:38,520 --> 00:13:42,200 Speaker 1: the CEO of Bank Hawaii back in the early two 255 00:13:42,200 --> 00:13:45,080 Speaker 1: thousand's when the place was a mess, and he did 256 00:13:45,120 --> 00:13:48,880 Speaker 1: something what I would call shrinking to profitability, and when 257 00:13:48,920 --> 00:13:52,520 Speaker 1: you look at the stocks back then, the footings of 258 00:13:52,559 --> 00:13:54,800 Speaker 1: the company came down by almost a third. It was 259 00:13:54,840 --> 00:13:57,959 Speaker 1: the best performing bank stock because he brought back his 260 00:13:58,080 --> 00:14:02,080 Speaker 1: stock very aggressively. So to a I think it's somewhat similar. 261 00:14:02,200 --> 00:14:05,040 Speaker 1: Either you can merge, which I think some will choose 262 00:14:05,559 --> 00:14:08,800 Speaker 1: to do big mergers, and on the other hand, you 263 00:14:08,840 --> 00:14:12,760 Speaker 1: can manage for profitability so you don't necessarily have to 264 00:14:12,840 --> 00:14:16,120 Speaker 1: have top line growth if the excess capital is given 265 00:14:16,160 --> 00:14:18,280 Speaker 1: back to the shareholders. And you know what's interesting, Tom, 266 00:14:18,559 --> 00:14:21,280 Speaker 1: look at the tangible books that you growth here over year. 267 00:14:21,400 --> 00:14:24,760 Speaker 1: Some of these big banks are giving us ten because 268 00:14:24,800 --> 00:14:28,640 Speaker 1: they're buying back their stock. Okay, this is usually Gerard 269 00:14:28,640 --> 00:14:30,960 Speaker 1: where we go to you on some small bank I've 270 00:14:30,960 --> 00:14:34,200 Speaker 1: never heard of, where you always meant money, which is 271 00:14:34,200 --> 00:14:36,600 Speaker 1: why you're retiring large up in Maine. We're not going 272 00:14:36,680 --> 00:14:40,520 Speaker 1: to do that. Today we got record heat degrees drees whatever, 273 00:14:40,600 --> 00:14:44,120 Speaker 1: New York, it's cool in Portland, Maine. Eighty nine degrees. 274 00:14:44,720 --> 00:14:47,320 Speaker 1: How are the lobster doing? I mean, it's the water 275 00:14:47,440 --> 00:14:50,960 Speaker 1: warmer and they're crawling north. I mean, what's the give 276 00:14:51,040 --> 00:14:56,000 Speaker 1: us the cassidy main lobster report? Right now, I'm literally 277 00:14:56,040 --> 00:14:58,400 Speaker 1: looking out my window down on the lobs of boats 278 00:14:58,440 --> 00:15:01,760 Speaker 1: tom here in Portland at the the guys of some 279 00:15:01,800 --> 00:15:03,320 Speaker 1: of them have left for the for the day to 280 00:15:03,400 --> 00:15:05,840 Speaker 1: haul their traps. And I would say that the lobster 281 00:15:06,000 --> 00:15:08,640 Speaker 1: season so far has gotten off to a slower start 282 00:15:09,000 --> 00:15:12,040 Speaker 1: because of the colder weather. But with the warmer weather 283 00:15:12,080 --> 00:15:16,040 Speaker 1: coming in, this is peak season for catches and they 284 00:15:16,080 --> 00:15:20,840 Speaker 1: are fighting actually some regulations for regulators, but right now 285 00:15:21,160 --> 00:15:23,760 Speaker 1: it's it looks good. The business is strong, and I 286 00:15:24,240 --> 00:15:26,040 Speaker 1: you know, one of these times, hopefully you can join 287 00:15:26,080 --> 00:15:27,880 Speaker 1: me up here. And well, I was just gonna say, 288 00:15:27,920 --> 00:15:29,400 Speaker 1: I mean, one of your kids, has got to be 289 00:15:29,440 --> 00:15:32,160 Speaker 1: doing the college trip at the tent company, Me and 290 00:15:32,160 --> 00:15:35,360 Speaker 1: Pharaoh with a tent set up on the dock that John, 291 00:15:35,400 --> 00:15:37,800 Speaker 1: have you ever had Maine lobster? I have ane, There's 292 00:15:37,960 --> 00:15:41,320 Speaker 1: there's no other lobster. I've tried them all. Cassidy has 293 00:15:41,320 --> 00:15:43,440 Speaker 1: a franchise on this. What are we doing, kids? You're 294 00:15:43,480 --> 00:15:47,680 Speaker 1: looking out the window. It's dunk. Cassidy is so sensitive 295 00:15:47,720 --> 00:15:50,360 Speaker 1: and environmentally correct. He never lets a three pounder in 296 00:15:50,400 --> 00:15:54,720 Speaker 1: the house. You know that's right. You have no idea 297 00:15:54,760 --> 00:15:59,160 Speaker 1: what I'm talking Michael. Can we explain to Pharaoh how 298 00:15:59,200 --> 00:16:03,080 Speaker 1: good America a lobster is main lobster. It's it's like 299 00:16:03,280 --> 00:16:07,640 Speaker 1: nothing else meant written a love your faces. It's great. 300 00:16:07,720 --> 00:16:09,880 Speaker 1: I mean I think we should do I'm not it's 301 00:16:09,920 --> 00:16:12,240 Speaker 1: not great. I'd love to be that Monday Monday. We 302 00:16:12,240 --> 00:16:14,280 Speaker 1: could do that Monday Tuesday. Why don't we do that Saturday? 303 00:16:14,280 --> 00:16:15,840 Speaker 1: So let's get a plan. Let's talk to Al from 304 00:16:15,840 --> 00:16:21,960 Speaker 1: New Jersey. Thank you so much. Have a lobster r us. 305 00:16:22,040 --> 00:16:25,520 Speaker 1: Mr Cassidy, of course, legendary at RBC Capital Markets. Some 306 00:16:25,640 --> 00:16:28,680 Speaker 1: important comments there in the beginning, and John, this is 307 00:16:28,720 --> 00:16:34,000 Speaker 1: really dead serious. The future of trading on Global Wallster generally. 308 00:16:34,000 --> 00:16:50,160 Speaker 1: You know it's again into question breaking news. Is Netflix 309 00:16:50,360 --> 00:16:54,560 Speaker 1: is broke? John Farrell? Since you are glued to netfix, 310 00:16:55,120 --> 00:16:57,840 Speaker 1: Netflix and all the Stranger things and all that, why 311 00:16:57,880 --> 00:17:02,160 Speaker 1: don't you our street He's never seen it. You've never 312 00:17:02,200 --> 00:17:04,320 Speaker 1: seen strangers now. And by the way, I don't like 313 00:17:04,359 --> 00:17:06,280 Speaker 1: the way the Netflix is laid out, so I don't 314 00:17:06,320 --> 00:17:10,080 Speaker 1: like my totally agree to prefer Amazon Prime. I walked 315 00:17:10,240 --> 00:17:13,800 Speaker 1: into the tiles and the layout of the Afterthoughts bedroom 316 00:17:13,840 --> 00:17:18,120 Speaker 1: and she's watching all this garbage on netflixing is it appropriate? Oh? Yes, 317 00:17:18,160 --> 00:17:20,960 Speaker 1: it is. I can't find anything share overdate. We found 318 00:17:21,000 --> 00:17:23,720 Speaker 1: her bloom Bug opinion columnist. She joins us, right now, 319 00:17:23,880 --> 00:17:27,639 Speaker 1: how do you miss and miss that bad? It's a 320 00:17:27,640 --> 00:17:30,840 Speaker 1: good question. And I was surprised that Netflix didn't have 321 00:17:30,880 --> 00:17:34,440 Speaker 1: better answers, But yeah, they you know, subscriber numbers are 322 00:17:34,600 --> 00:17:38,000 Speaker 1: the one thing in Netflix that investors care about. Growth 323 00:17:38,080 --> 00:17:40,680 Speaker 1: is the only thing that matters at Netflix, at least 324 00:17:40,680 --> 00:17:44,320 Speaker 1: two investors. And they miss their own subscriber forecast by 325 00:17:44,320 --> 00:17:47,880 Speaker 1: about fifty so that's yeah, pretty big miss. And they said, look, 326 00:17:47,880 --> 00:17:52,359 Speaker 1: a few things happened. One is Netflix increased prices for 327 00:17:52,480 --> 00:17:55,520 Speaker 1: its subscribers in many countries, including the United States. That 328 00:17:55,640 --> 00:18:00,840 Speaker 1: obviously affected subscriber growth. They also blamed um you know, 329 00:18:00,880 --> 00:18:04,160 Speaker 1: some of the slate of original programming that they rolled 330 00:18:04,200 --> 00:18:06,880 Speaker 1: out in the second quarter was maybe not as attractive 331 00:18:07,040 --> 00:18:10,520 Speaker 1: to to new subscribers as they had expected, and the 332 00:18:10,600 --> 00:18:14,600 Speaker 1: result was a big miss. The messages it's okay because 333 00:18:14,680 --> 00:18:16,679 Speaker 1: Q three is going to be much much better. How 334 00:18:16,760 --> 00:18:18,840 Speaker 1: much fight do you have in that? I think that's 335 00:18:18,880 --> 00:18:20,840 Speaker 1: a fair question. I mean, you know, Netflix is fond 336 00:18:20,880 --> 00:18:24,600 Speaker 1: of saying that sometimes they miss guidance higher, sometimes they 337 00:18:24,640 --> 00:18:28,680 Speaker 1: miss guidance lower. Generally the trend is up into the right. 338 00:18:29,040 --> 00:18:30,840 Speaker 1: But I think that's a very fair point that if 339 00:18:30,880 --> 00:18:34,480 Speaker 1: Netflix now says things will return back to normal in 340 00:18:34,520 --> 00:18:37,040 Speaker 1: the third quarter, can you really believe that? Are you 341 00:18:37,080 --> 00:18:40,080 Speaker 1: doing level four? Level five? Which is I can't remember 342 00:18:40,119 --> 00:18:42,520 Speaker 1: none of the levels? Okay, if you look at the 343 00:18:42,520 --> 00:18:45,560 Speaker 1: glide path of revenue is a wise one. They're killing 344 00:18:45,600 --> 00:18:50,480 Speaker 1: it with a revenue growth and it's coming down with 345 00:18:50,680 --> 00:18:54,639 Speaker 1: all the competition in a Shia over day, perfectly competitive world, 346 00:18:55,359 --> 00:18:59,240 Speaker 1: where does revenue growth glide to It's gotta really come in, 347 00:18:59,320 --> 00:19:01,959 Speaker 1: doesn't it. It's it's a little bit hard to figure right, 348 00:19:02,000 --> 00:19:06,160 Speaker 1: because on the one hand, yes, they're increasing prices, which 349 00:19:06,240 --> 00:19:09,840 Speaker 1: investors like, right because you want them to have the ability. 350 00:19:11,640 --> 00:19:15,679 Speaker 1: There is a right. The pricing power obviously has a limit. 351 00:19:15,960 --> 00:19:19,879 Speaker 1: That Netflix lost customers in the United States, maybe for 352 00:19:19,920 --> 00:19:22,080 Speaker 1: the first time ever. I mean I I was trying 353 00:19:22,119 --> 00:19:24,560 Speaker 1: really hard last night to go through the numbers going 354 00:19:24,560 --> 00:19:28,560 Speaker 1: back to and I couldn't find any evidence of prayer 355 00:19:28,640 --> 00:19:32,320 Speaker 1: quarters where they had lost customers in the United States. Um. 356 00:19:32,400 --> 00:19:35,000 Speaker 1: But I think that's an open question about how fast 357 00:19:35,040 --> 00:19:38,280 Speaker 1: can revenue grow if they're relying on price increases and 358 00:19:38,320 --> 00:19:41,840 Speaker 1: not subscriber increases. What is their best practice all these 359 00:19:41,840 --> 00:19:45,360 Speaker 1: other competitors want to do. Isn't it just about content? 360 00:19:45,840 --> 00:19:50,120 Speaker 1: Give me a game of Thrones, give me it? What's orange? Oranges? 361 00:19:50,280 --> 00:19:52,280 Speaker 1: You know whatever stranger thing. You seem to know a 362 00:19:52,280 --> 00:19:55,159 Speaker 1: lot about this stuff. I just go work in the 363 00:19:55,240 --> 00:19:58,400 Speaker 1: room and say, is this appropriate? Act on here? I 364 00:19:58,440 --> 00:20:03,560 Speaker 1: think you might what the I'll watch these programs. When 365 00:20:03,560 --> 00:20:06,560 Speaker 1: I watched Love, I give read a book quickly and 366 00:20:06,560 --> 00:20:10,000 Speaker 1: then sit down, get comfortable, relax, put on Oranges the 367 00:20:10,080 --> 00:20:14,399 Speaker 1: New Black, I Know your Friday. The last time I 368 00:20:14,440 --> 00:20:16,600 Speaker 1: logged on a Netflix was a Crown did they do 369 00:20:16,680 --> 00:20:20,760 Speaker 1: the Crown are mown? I mean, there are more seasons 370 00:20:20,760 --> 00:20:22,640 Speaker 1: of the Crown coming. I don't know how to start 371 00:20:22,680 --> 00:20:26,720 Speaker 1: into a Netflix promo, no, but I just that's the 372 00:20:26,760 --> 00:20:29,240 Speaker 1: heart of it is content. Well, I think that's a 373 00:20:29,520 --> 00:20:34,520 Speaker 1: that's a very good question. I actually think for Netflix 374 00:20:34,920 --> 00:20:38,640 Speaker 1: content is maybe less important than it is for other 375 00:20:39,200 --> 00:20:43,880 Speaker 1: entertainment services. And the reason is the the implicit promise 376 00:20:43,920 --> 00:20:47,800 Speaker 1: of Netflix is you give us your ten or thirteen 377 00:20:47,840 --> 00:20:50,879 Speaker 1: dollars a month, and when you have an hour to 378 00:20:50,960 --> 00:20:53,879 Speaker 1: kill when you're born on a Saturday afternoon, turn on 379 00:20:53,960 --> 00:20:57,840 Speaker 1: Netflix and we will have something that you'll want to watch. Now, look, 380 00:20:57,880 --> 00:21:01,480 Speaker 1: they're losing programming because people like A T and T, 381 00:21:01,800 --> 00:21:04,840 Speaker 1: which which owns Friends, they're pulling it back to run 382 00:21:04,880 --> 00:21:08,840 Speaker 1: Friends on their own service. Disney Movies are leaving Netflix 383 00:21:08,880 --> 00:21:11,240 Speaker 1: so that so that Disney can run those movies in 384 00:21:11,240 --> 00:21:14,399 Speaker 1: its own service. But the implicit promises we will have 385 00:21:14,600 --> 00:21:18,440 Speaker 1: just about anything you can possibly imagine to kill an 386 00:21:18,440 --> 00:21:22,200 Speaker 1: hour or two. And I wonder if they're that everything 387 00:21:22,320 --> 00:21:25,479 Speaker 1: store for video promises kind of losing some steam. One 388 00:21:25,560 --> 00:21:28,640 Speaker 1: Apple question back to school, mac book, Are everybody's got 389 00:21:28,640 --> 00:21:30,760 Speaker 1: a walls out? And by the cherubs stuff. Does it 390 00:21:30,840 --> 00:21:33,960 Speaker 1: really matter? Does it move the needle? For Apple? The 391 00:21:34,000 --> 00:21:37,320 Speaker 1: only thing that matters at Apple is the size of 392 00:21:37,320 --> 00:21:39,919 Speaker 1: iPhone sales. Size of iPhone sales, and what they're doing 393 00:21:39,960 --> 00:21:42,399 Speaker 1: in China right and what they're yes, which are related 394 00:21:42,440 --> 00:21:45,439 Speaker 1: obviously um and and their ability to grow at a 395 00:21:45,480 --> 00:21:48,159 Speaker 1: time when the smartphone industry is not growing. Thank you 396 00:21:48,200 --> 00:21:50,400 Speaker 1: for coming and share over. They always brilliant on all 397 00:21:50,440 --> 00:22:09,199 Speaker 1: this tech stuff. Thank you, huge value. Uh there the 398 00:22:09,200 --> 00:22:12,040 Speaker 1: interview of the day for you in your house where 399 00:22:12,119 --> 00:22:15,480 Speaker 1: content is king for me, Michael Nathanson as I walk 400 00:22:15,560 --> 00:22:18,800 Speaker 1: into the children's room and goes disappropriate because that's usually 401 00:22:18,840 --> 00:22:21,680 Speaker 1: the uh, the gist of it. Pault Tweeney, Please bring 402 00:22:21,720 --> 00:22:27,000 Speaker 1: in the extinguished Michael Nathanson of Moffatt Nathanson. I'm content, absolutely, 403 00:22:27,000 --> 00:22:28,160 Speaker 1: this is the one we want to talk to, want 404 00:22:28,200 --> 00:22:30,439 Speaker 1: to talk to Michael. Thanks so much for joining us. Michael, 405 00:22:30,520 --> 00:22:33,359 Speaker 1: So a big miss last night for Netflix is stocks 406 00:22:33,359 --> 00:22:36,360 Speaker 1: off about ten percent? Here? What did you take away 407 00:22:36,359 --> 00:22:41,119 Speaker 1: from how how important was last night's result? Yeah? I was, guys, 408 00:22:41,240 --> 00:22:45,240 Speaker 1: I was. I was shocked by the results. I really was, 409 00:22:45,320 --> 00:22:49,640 Speaker 1: because what really surprised me the most was the company 410 00:22:49,760 --> 00:22:54,760 Speaker 1: acknowledged that the combination of price increases and a weaker 411 00:22:54,840 --> 00:22:59,840 Speaker 1: content cycle led to slower subscriber growth. And that's the 412 00:23:00,080 --> 00:23:03,840 Speaker 1: entire Bull case, right, the Bull cases they could raise prices, 413 00:23:04,320 --> 00:23:06,760 Speaker 1: they can slow down content spending, and its stock is 414 00:23:06,800 --> 00:23:09,439 Speaker 1: going to be you know, a billion, you know it's 415 00:23:09,520 --> 00:23:12,000 Speaker 1: right now, hundred sixty billion dollars doesn't keep growing. And 416 00:23:12,400 --> 00:23:15,720 Speaker 1: to me, that court really raised doubts to me, on 417 00:23:15,720 --> 00:23:17,840 Speaker 1: on on the Bull case, it really good. So, Michael, 418 00:23:17,880 --> 00:23:20,200 Speaker 1: the Bull case, just to summarize that, as I understand, 419 00:23:20,240 --> 00:23:23,600 Speaker 1: it has always been, Listen, we're gonna spend money on content, 420 00:23:23,600 --> 00:23:25,480 Speaker 1: whether it's our own or we get it from Hollywood. 421 00:23:25,480 --> 00:23:28,480 Speaker 1: That's gonna drive subscriber growth. That's gonna fund revenue and 422 00:23:28,480 --> 00:23:30,439 Speaker 1: eventually cash flow, which will allow us to invest in 423 00:23:30,480 --> 00:23:34,080 Speaker 1: even more and better content. And that virtuous cycle goes 424 00:23:34,080 --> 00:23:35,520 Speaker 1: on and on, but it seems to be the lynch 425 00:23:35,560 --> 00:23:39,880 Speaker 1: pin of that cycle is continuing to add subscribers. So, UM, 426 00:23:40,040 --> 00:23:42,520 Speaker 1: do you since that maybe that virtuous cycle might be 427 00:23:42,560 --> 00:23:47,320 Speaker 1: at risk? I do? You know? I do, because our 428 00:23:47,520 --> 00:23:50,560 Speaker 1: thesis has been all along and when you lose other 429 00:23:50,600 --> 00:23:54,119 Speaker 1: people's content, what happens is you lose a built in 430 00:23:54,280 --> 00:23:57,600 Speaker 1: audience right, So people may not go to Netflix Friends 431 00:23:57,600 --> 00:23:59,639 Speaker 1: in the Office, which is still in the service. But 432 00:24:00,119 --> 00:24:03,600 Speaker 1: as time goes on, as you lose the old reliable hits, 433 00:24:03,600 --> 00:24:06,920 Speaker 1: the comfort food, that puts more pressure on your ability 434 00:24:06,960 --> 00:24:09,280 Speaker 1: to find new hits. Right, and you know, pause, being 435 00:24:09,280 --> 00:24:12,840 Speaker 1: an analyst in media, you know prediction hits is a 436 00:24:12,920 --> 00:24:16,240 Speaker 1: hard business, right, So as you mean into being forced 437 00:24:16,240 --> 00:24:19,000 Speaker 1: to make more and more hits been more content, the 438 00:24:19,119 --> 00:24:22,479 Speaker 1: risk profile changes. And that's been our point for two 439 00:24:22,560 --> 00:24:25,639 Speaker 1: or three years now, you know, Tom, the business is changing, 440 00:24:25,920 --> 00:24:29,480 Speaker 1: and you have the stock market doesn't realize that. Michael 441 00:24:29,560 --> 00:24:31,840 Speaker 1: Nathan said, you know, barriers to entry, And of course 442 00:24:31,880 --> 00:24:34,960 Speaker 1: we associate this with Michael Porter at Harvard and his 443 00:24:35,119 --> 00:24:37,120 Speaker 1: visits with us over the years. Or you can take 444 00:24:37,160 --> 00:24:41,480 Speaker 1: it back to George Stigler or Chicago or even Bain 445 00:24:41,560 --> 00:24:46,040 Speaker 1: and Company way back before that. Are there any barriers 446 00:24:46,119 --> 00:24:50,120 Speaker 1: to entry in content and streaming or is it everybody 447 00:24:50,160 --> 00:24:53,800 Speaker 1: for themselves? Tom, That's been part of what when Craig 448 00:24:53,840 --> 00:24:56,320 Speaker 1: and I sit down and talk about this often you 449 00:24:56,480 --> 00:24:58,520 Speaker 1: go back to that idea, what's what is the mode 450 00:24:58,560 --> 00:25:01,760 Speaker 1: that they're building, right? And the mode of the building here, 451 00:25:01,800 --> 00:25:04,680 Speaker 1: I think it's just the subscriber base and their ability 452 00:25:04,720 --> 00:25:08,879 Speaker 1: to outspend other people on content. You know, you know, 453 00:25:09,119 --> 00:25:12,320 Speaker 1: the delivery itself of the content is not a mode. 454 00:25:12,359 --> 00:25:14,680 Speaker 1: The technology itself is not a mode. It's easily copied. 455 00:25:15,119 --> 00:25:18,040 Speaker 1: It's the idea that by spending more, you'll have more 456 00:25:18,119 --> 00:25:20,840 Speaker 1: hits and you'll be able to satisfrate customer base. And 457 00:25:20,880 --> 00:25:23,680 Speaker 1: I can tell you that spending more on content doesn't 458 00:25:23,720 --> 00:25:27,240 Speaker 1: necessarily mean you have hits, right that. Look at Sony 459 00:25:27,359 --> 00:25:30,480 Speaker 1: Studio versus Disney Studio. They may spend the same amount 460 00:25:30,480 --> 00:25:33,280 Speaker 1: of money on content, but Disney is ten times more 461 00:25:33,400 --> 00:25:37,879 Speaker 1: profitable than Sony Studio. Yes, so, Michael, we talk about, 462 00:25:38,000 --> 00:25:40,640 Speaker 1: you know, the competition coming. The whole landscape is really 463 00:25:40,680 --> 00:25:43,480 Speaker 1: about to change in a big way with Disney Plus 464 00:25:43,520 --> 00:25:45,840 Speaker 1: coming this year and a T and T and Comcast 465 00:25:45,920 --> 00:25:49,240 Speaker 1: and others coming next year. What is your sense of 466 00:25:49,280 --> 00:25:54,240 Speaker 1: the competitive landscape for streaming coming going forward. Yeah, it's 467 00:25:54,240 --> 00:25:58,280 Speaker 1: going to be highly competitive. You have you have Disney 468 00:25:58,320 --> 00:26:01,320 Speaker 1: starting off at the very low price points. Disney pretty 469 00:26:01,359 --> 00:26:04,879 Speaker 1: much shocked the system by launching Disney, you know, at 470 00:26:04,880 --> 00:26:07,560 Speaker 1: a very low price point. That's going to create pricing 471 00:26:07,600 --> 00:26:10,680 Speaker 1: pressure for people entering the business. So you know I'm 472 00:26:10,720 --> 00:26:12,560 Speaker 1: not taking this in the past ball and my view 473 00:26:12,640 --> 00:26:14,879 Speaker 1: is I'm not sure that this is a great business 474 00:26:14,920 --> 00:26:17,680 Speaker 1: to go into. It be a good business. The media 475 00:26:17,840 --> 00:26:19,919 Speaker 1: was a great business. So I really worry about just 476 00:26:20,000 --> 00:26:22,960 Speaker 1: the cost of create, you know, the churning, the churn 477 00:26:23,040 --> 00:26:26,200 Speaker 1: up capabilities here. So you're you're skepticism. I can tell 478 00:26:26,240 --> 00:26:29,600 Speaker 1: bad questions, is my skepticism, guys. I mean, Michael Nathanson. 479 00:26:29,680 --> 00:26:31,879 Speaker 1: The one thing I've learned this week in economics, finance, 480 00:26:32,000 --> 00:26:35,640 Speaker 1: investment is John Ferrell bin watch Binge watches Love Island. 481 00:26:35,760 --> 00:26:38,680 Speaker 1: I mean that was a very informative thing to learn. 482 00:26:38,680 --> 00:26:40,399 Speaker 1: And I get there are these properties and all that, 483 00:26:40,440 --> 00:26:43,920 Speaker 1: but it's wrapped around Hulu at sixty dollars or YouTube 484 00:26:43,920 --> 00:26:46,240 Speaker 1: TV at this or that. Are we going to get 485 00:26:46,280 --> 00:26:51,880 Speaker 1: price compression and traditional TV like you're saying in streaming service? Oh, 486 00:26:51,960 --> 00:26:55,000 Speaker 1: without a doubt? Right, what's going to happen is it's 487 00:26:55,000 --> 00:26:57,800 Speaker 1: all these virtual products and the virtual like which is 488 00:26:57,960 --> 00:27:01,840 Speaker 1: who and YouTube TV they've been raising price, but they're 489 00:27:01,840 --> 00:27:05,359 Speaker 1: still thirty free as cheaper than the then the price 490 00:27:05,480 --> 00:27:08,440 Speaker 1: of a tocial bundle. Right, So are you here is 491 00:27:08,480 --> 00:27:11,919 Speaker 1: that you're gonna see price impression on Craig's video side 492 00:27:12,600 --> 00:27:15,560 Speaker 1: on on my my industry, Like that's just the that's 493 00:27:15,560 --> 00:27:18,000 Speaker 1: going to be a way of the world. Does Craig 494 00:27:18,080 --> 00:27:25,200 Speaker 1: Moffitt does he? Binge watched Love Island Michael Nathan to 495 00:27:25,280 --> 00:27:28,360 Speaker 1: thank us so much with Moffitt Naked. Thanks for listening 496 00:27:28,400 --> 00:27:32,960 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 497 00:27:32,960 --> 00:27:38,240 Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 498 00:27:38,760 --> 00:27:42,119 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 499 00:27:42,160 --> 00:27:45,560 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio