Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg With
Speaker 1: the Call of the Morning, perhaps the Call of nineteen
Speaker 1: so far, JP Morgen's Bob Michael with a major multi
Speaker 1: year called Here's Bob on where he thinks ten year
Speaker 1: treasury yields a headache all the way down to zero,
Speaker 1: and I think that's where we're headed over the next
Speaker 1: couple of years. We've had the recovery, it's coming to
Speaker 1: an end, and now the central banks, one after another,
Speaker 1: are falling into line and cutting rates. We saw it
Speaker 1: overnight with the Bank of Korea. We've seen it with
Speaker 1: the Bank of Indonesia. You're going to see it at
Speaker 1: the month at the end of the month with the FED.
Speaker 1: You may see it from the ECB sooner than people expect.
Speaker 1: And we think at this point in the cycle you
Speaker 1: need some shock and all. So I'm not saying we're
Speaker 1: going to get there right away, but that's the journey
Speaker 1: we're on until something different happens. But Michael that of
Speaker 1: JP Mulkin Asset Management a wow moment. Tom Keane on
Speaker 1: Bloomberg TV about two hours again, I think we'll frame
Speaker 1: this and those will be a huge source of conversation
Speaker 1: through the year. UH. And and let me frame just
Speaker 1: you know, within the time that we've got UH. John Farris,
Speaker 1: you know this is Jan Lowe's UH work and Mr
Speaker 1: Michael giving him all the credit for it. And what's
Speaker 1: so important here is how it's commingled with other nations.
Speaker 1: It's not a discreet US call. It's about the international
Speaker 1: economics and finance we're living in so very familiar with
Speaker 1: Bob's thinking over the last few years, and he's believed
Speaker 1: the ten year rates across the world, in the developed
Speaker 1: world would come down to policy rates worldwide. We've seen
Speaker 1: that in Europe, We've seen that in Japan, we've seen
Speaker 1: it in the United States. Now his new call effectively
Speaker 1: the way he is thinking about this many different reason
Speaker 1: as to why we can head towards zero. But he's
Speaker 1: looking at the amount of money that has gone into
Speaker 1: money market funds over the last couple of years as
Speaker 1: rates have grinded higher, and it's the Federal Reserve starts
Speaker 1: to cut interest rates. He believes that will need a home,
Speaker 1: and that home says the Treasury markets price up, you'll down.
Speaker 1: And again this extends off of what we've heard from
Speaker 1: Street Camar Steve Major. It just bcing a course of
Speaker 1: legendary girls showing have all had there but they have
Speaker 1: a major house. Uh. John put a vector on the tenure.
Speaker 1: You're like that as a wow moment here in New York.
Speaker 1: To join us and continue the conversation. Tom por Sally
Speaker 1: of RBC Capital Markets, the chief US economist, Good morning
Speaker 1: to your Tom here. Good morning. Good. Let's just start
Speaker 1: with a question that I asked you as soon as
Speaker 1: you walked into this studio, just how frustrating is it
Speaker 1: covering this Fed at the moment and especially over the
Speaker 1: last six or seven months. Yeah, you know it's um.
Speaker 1: You know you you sort of realize that that sort
Speaker 1: of age old idea that you're you're taught, you know,
Speaker 1: your first year of working in research, that you're supposed
Speaker 1: to uh tell people what you think, um the FED
Speaker 1: will do, not not what they should do. Uh, and
Speaker 1: uh you know it's um uh and here we are.
Speaker 1: I I hate that we are talking about cuts, um,
Speaker 1: but we are. I think that there's no economic justification
Speaker 1: to cut rates, but they are. Uh. And you know
Speaker 1: I'm not. It's funny I said to someone like, I'm
Speaker 1: not going to stand on some high economic moral grounds
Speaker 1: um and and not forecast to cut because it's it's
Speaker 1: clearly coming. Powels made that abundantly clear. But I still
Speaker 1: struggle with the justification on this. Uh. And you know,
Speaker 1: I just find it. There's so many ironies here, but
Speaker 1: here's just at least one. You know, you're gonna have
Speaker 1: three days before the FOMC meeting, Uh, You're going to
Speaker 1: have a Q two GDP report that's probably going to
Speaker 1: show that consumption grew to four percent pace. Um. You
Speaker 1: know that that that sort of defies um, I think
Speaker 1: sort of rational thought process. But but again it I've
Speaker 1: I've I've I've come to grips with the reality that
Speaker 1: that they are going to cut. So you don't think
Speaker 1: they should, but you think they will. Let's talk about
Speaker 1: the potential impact of that potential interest, right, So so
Speaker 1: here's I mean, look, I think it's I think it's
Speaker 1: a goose is the backdrop, right, I mean, goose is
Speaker 1: mark if nothing else that goose is the markets, right,
Speaker 1: I mean I think this is more of a risk
Speaker 1: on backdrop. You know, the one thing I I we
Speaker 1: wrote about recently was you know it stated very simply, Um,
Speaker 1: it's pretty fascinating that we are we are lowering the
Speaker 1: discount rate in an environment where capital expenditures and consumption
Speaker 1: are moving along at a really good pace. What you know,
Speaker 1: what do you think happens in in in that backdrop?
Speaker 1: And John we featured this morning Honeywell buried in the
Speaker 1: honeywe and forks. To be clear, Honeywell has one of
Speaker 1: the best press releases out there and earnings buried in that.
Speaker 1: Their CEO says, their goose in their nominal view for
Speaker 1: to six percent on our good ex sales. This is buried.
Speaker 1: First of all, you gotta do bigger fun personally. You
Speaker 1: can see this on radio. Are you kidding me? I
Speaker 1: think it says end of two thousand, twenty two point four,
Speaker 1: what are the economic conditions we need to get the
Speaker 1: jpet Morgan's call, So I not to zero, but to
Speaker 1: get you from a two five to a So you know,
Speaker 1: I think what what needs to So let me be clear,
Speaker 1: I don't think that tens are going very far from
Speaker 1: where they are right now. UM, And and our our
Speaker 1: house view is more or less a reflection of that
Speaker 1: UM tip tip. For yield to continue to drift lower, UM,
Speaker 1: you know, you need an event. Uh. Let me be clear.
Speaker 1: In the immediate term, if this we're talking about a
Speaker 1: structural dynamic, this is a totally different conversation. But in
Speaker 1: the immediate term for race to really drift materially lower
Speaker 1: from here, you need an event like like a recession
Speaker 1: like the FED to really embark on UM and a
Speaker 1: real easing cycle, not whatever this is, this notion of
Speaker 1: insurance cuts. UM. I think that's uh, in the immediate term,
Speaker 1: how you get there in the longer term, which I
Speaker 1: think is probably the much more interesting conversation, UM, what
Speaker 1: what you have to have happened is exactly the path
Speaker 1: that we're going down now. You need the structural dynamics
Speaker 1: I eat, the aging population idea slower trend rates of growth. UM.
Speaker 1: All those things are are they lay in front of us.
Speaker 1: And as Tom, you and I talked about a little earlier,
Speaker 1: you know, one of the things that could help save
Speaker 1: the day is is productivity. UM. But again short of that,
Speaker 1: which again is much easier said than done. Um, you know,
Speaker 1: I think that you're in a sort of a more
Speaker 1: permanent as a sort of a tricky word, but for
Speaker 1: lack of a better word, right now, you're in a
Speaker 1: permanently low U rate structure. What do your conversation sound
Speaker 1: like with clients at the moment? Help? Yeah, T John,
Speaker 1: I I love this question, so you know, and and
Speaker 1: again something you're not were sort of talking about a
Speaker 1: little bit. Uh. People keep on saying the market wants cuts. Um. Uh,
Speaker 1: you know, I don't know. I speak with a lot
Speaker 1: of people that are you know, quote unquote the market. Um,
Speaker 1: some some pretty big investors in various markets, whether it's
Speaker 1: equities or fixed income. Um. No, no one's clamoring for
Speaker 1: a cut. No, no, No one is demanding that the
Speaker 1: Fed cut rates right now. So so this idea that, um,
Speaker 1: you know, sort of the quote unquote market want to
Speaker 1: cut like, I don't. I don't know where that is really, um,
Speaker 1: because I don't see it in in any of the
Speaker 1: conversations I'm having with clients. What do you think, Shaman
Speaker 1: pals herring, I think Chairman Pale is hearing a lot
Speaker 1: of nervousness from the the sort of the c suite
Speaker 1: slash executives that he speaks to around the country. Look
Speaker 1: that yesterday's bage book is a perfect reflection of that.
Speaker 1: I mean, you know, the amount of time that you know,
Speaker 1: sort of soft words were used, you know, like the
Speaker 1: softening or weakening and etcetera, etcetera. It was pretty significant.
Speaker 1: In fact, it jumped relative to what we had seen recently.
Speaker 1: And I think that that that that permeated the bage
Speaker 1: book and I think it's I think it's absolutely influencing
Speaker 1: the chairman right now, Tom Person, Thank thanks guys, always
Speaker 1: going to do with you coming in today. George Kessidy
Speaker 1: joins us with RBC Capital Market's twenty years or more
Speaker 1: of experience watching the game. Is a game gonna be
Speaker 1: there in five years, Gerard. For young bucks that want
Speaker 1: to have to term Bloomberg terminals in front of their
Speaker 1: desk and they have the Royal Dalton shina on the
Speaker 1: lunch served to them to the next side, and you
Speaker 1: know they've paid a good amount of money and then
Speaker 1: a ginormous bonus every three or four years. Is that
Speaker 1: game over? I would say the games on overtown, but
Speaker 1: I think the Royal Dalton dishware probably is um. I
Speaker 1: think what you're going to see is that when we
Speaker 1: look at over time, there will be fewer players in
Speaker 1: the business because we have too much capacity, and so
Speaker 1: for the survivors, it's kind of like the USS Indianapolis.
Speaker 1: It was the guys that survived the shark attacks in
Speaker 1: the end. We're find the same thing here. It's the
Speaker 1: survivors that will be fine, but there are a lot
Speaker 1: of people that are going to go the way of
Speaker 1: others and not being in the business. In five years,
Speaker 1: what will the concentration look like will be three and
Speaker 1: four giants and then a regional player here, a regional
Speaker 1: player there, or is there a different Cassidy vision to that.
Speaker 1: I think you're going down the right path because economy
Speaker 1: is a scale are very important, more so today than
Speaker 1: we've seen in your my career, in your career because
Speaker 1: of the cost of the technology, the need to have
Speaker 1: this technology to be a player. So I do think
Speaker 1: you're going to probably see five or so big players
Speaker 1: and then you'll get some regional players. But it's the
Speaker 1: ones in the middle that cannot make that commitment to
Speaker 1: the Economy is a scale that may really struggle. You know,
Speaker 1: three to five years down the road, Joe, I get
Speaker 1: to some of the valuations of some of these banks
Speaker 1: in just a moment. I do want your view on
Speaker 1: what is happening with equity trading over at Morgan Stanley.
Speaker 1: Big part of the bank and a big drop, He thoughts, Yes, John,
Speaker 1: what we saw was when you look at the equity
Speaker 1: trading for all of the investment banks on a year
Speaker 1: over year basis, it was down now relative to expectations.
Speaker 1: In the quarter it was in Morgan Stanley's case was
Speaker 1: better than expected. But you're bringing up a good point.
Speaker 1: You think about for a moment the amount of trading
Speaker 1: in ETFs and these other types of passive investment funds.
Speaker 1: It's not just retail investors that are using these funds,
Speaker 1: it's institutional investors as well. So you're seeing there's less
Speaker 1: of less volume on the exchanges relative to some years back,
Speaker 1: and as a result, it's affecting the equity trading areas
Speaker 1: for these very reputable firms like Morgan Stanley. So, Jared,
Speaker 1: we wrap up earning season for the Wall Street players
Speaker 1: with Morgan Stanley your tape. You're great so far, Jerrard.
Speaker 1: I would say that generally speaking, the numbers were in
Speaker 1: line to slightly below expectations for everyone. Now that being said,
Speaker 1: when you compare it to a year ago, the numbers
Speaker 1: for the group were not very good. So though on
Speaker 1: an expectation standpoint they were okay, but when you see
Speaker 1: the declines d c M, DICK capital markets, FICK trating
Speaker 1: you know, fixing income, commodities, and currency, those numbers are
Speaker 1: real weak for most players. The equity markets and the
Speaker 1: ECM area were the better of the areas. Advisory was
Speaker 1: okay as well, but generally speaking, year of a year,
Speaker 1: the numbers were weak, no doubt about it. One of
Speaker 1: the concerns for the outlooked in an interest income over
Speaker 1: places like JP Morgan and Bank for America. The money
Speaker 1: made on loans and minus the money paid on deposits
Speaker 1: and as race get cut at the f at the
Speaker 1: Federal Reserve seemingly over the next year or so. Jerrard,
Speaker 1: the view is that it's going to get difficult for
Speaker 1: these guys. You don't necessarily agree with that. You think
Speaker 1: that these stocks can perform well, just like they did
Speaker 1: in the mid ninety nineties. Gerard, just walk us through
Speaker 1: this big idea that you and my may, however, at
Speaker 1: whilst not a share at the moment for the valuation
Speaker 1: of these banks and how these stocks will try Sure, John,
Speaker 1: and you bring up the critical point today, I think
Speaker 1: literally this quarter is the maximum pain point for this
Speaker 1: issue with interest rates, because when you look at what
Speaker 1: happened in the second quarter, deposit rates continue to go
Speaker 1: up from the December hike, and libor fell more so
Speaker 1: in the quarter than anyone had expected. But to your point, John,
Speaker 1: when you look to the mid nineties and you see
Speaker 1: the steepening of the curve caused by Greenspan at the
Speaker 1: time the FED chairman cutting rates, we think that eventually
Speaker 1: will filter into the thinking. Over the next twelve months plus,
Speaker 1: you're going to see growth. The loan growth on the
Speaker 1: consumer lending side was especially good for these big banks
Speaker 1: to this quarter. So what they can do is grow
Speaker 1: their balance sheets to offset any pressure in the margin.
Speaker 1: But right now, I think the maximum pain point on
Speaker 1: the margin pressure was this quarter due to the impact
Speaker 1: that deposit race and not come down yet. They will
Speaker 1: come down when they start cutting interest rates. Granted, acid
Speaker 1: needs will come down too, but I think there will
Speaker 1: be some relief there for the banks. Gerard when I
Speaker 1: look at the screen, I see a nice thirty margin
Speaker 1: bank to bank to bank to bank, but what I
Speaker 1: really see is flatline revenue growth. Institutionally and strategically, do
Speaker 1: they manage for flat revenue growth or by definition do
Speaker 1: they have to merge. It's a great question, Tom, because
Speaker 1: if you think back for a moment, Mike O'Neil, the
Speaker 1: former chairman of City Group who just retired, he was
Speaker 1: the CEO of Bank Hawaii back in the early two
Speaker 1: thousand's when the place was a mess, and he did
Speaker 1: something what I would call shrinking to profitability, and when
Speaker 1: you look at the stocks back then, the footings of
Speaker 1: the company came down by almost a third. It was
Speaker 1: the best performing bank stock because he brought back his
Speaker 1: stock very aggressively. So to a I think it's somewhat similar.
Speaker 1: Either you can merge, which I think some will choose
Speaker 1: to do big mergers, and on the other hand, you
Speaker 1: can manage for profitability so you don't necessarily have to
Speaker 1: have top line growth if the excess capital is given
Speaker 1: back to the shareholders. And you know what's interesting, Tom,
Speaker 1: look at the tangible books that you growth here over year.
Speaker 1: Some of these big banks are giving us ten because
Speaker 1: they're buying back their stock. Okay, this is usually Gerard
Speaker 1: where we go to you on some small bank I've
Speaker 1: never heard of, where you always meant money, which is
Speaker 1: why you're retiring large up in Maine. We're not going
Speaker 1: to do that. Today we got record heat degrees drees whatever,
Speaker 1: New York, it's cool in Portland, Maine. Eighty nine degrees.
Speaker 1: How are the lobster doing? I mean, it's the water
Speaker 1: warmer and they're crawling north. I mean, what's the give
Speaker 1: us the cassidy main lobster report? Right now, I'm literally
Speaker 1: looking out my window down on the lobs of boats
Speaker 1: tom here in Portland at the the guys of some
Speaker 1: of them have left for the for the day to
Speaker 1: haul their traps. And I would say that the lobster
Speaker 1: season so far has gotten off to a slower start
Speaker 1: because of the colder weather. But with the warmer weather
Speaker 1: coming in, this is peak season for catches and they
Speaker 1: are fighting actually some regulations for regulators, but right now
Speaker 1: it's it looks good. The business is strong, and I
Speaker 1: you know, one of these times, hopefully you can join
Speaker 1: me up here. And well, I was just gonna say,
Speaker 1: I mean, one of your kids, has got to be
Speaker 1: doing the college trip at the tent company, Me and
Speaker 1: Pharaoh with a tent set up on the dock that John,
Speaker 1: have you ever had Maine lobster? I have ane, There's
Speaker 1: there's no other lobster. I've tried them all. Cassidy has
Speaker 1: a franchise on this. What are we doing, kids? You're
Speaker 1: looking out the window. It's dunk. Cassidy is so sensitive
Speaker 1: and environmentally correct. He never lets a three pounder in
Speaker 1: the house. You know that's right. You have no idea
Speaker 1: what I'm talking Michael. Can we explain to Pharaoh how
Speaker 1: good America a lobster is main lobster. It's it's like
Speaker 1: nothing else meant written a love your faces. It's great.
Speaker 1: I mean I think we should do I'm not it's
Speaker 1: not great. I'd love to be that Monday Monday. We
Speaker 1: could do that Monday Tuesday. Why don't we do that Saturday?
Speaker 1: So let's get a plan. Let's talk to Al from
Speaker 1: New Jersey. Thank you so much. Have a lobster r us.
Speaker 1: Mr Cassidy, of course, legendary at RBC Capital Markets. Some
Speaker 1: important comments there in the beginning, and John, this is
Speaker 1: really dead serious. The future of trading on Global Wallster generally.
Speaker 1: You know it's again into question breaking news. Is Netflix
Speaker 1: is broke? John Farrell? Since you are glued to netfix,
Speaker 1: Netflix and all the Stranger things and all that, why
Speaker 1: don't you our street He's never seen it. You've never
Speaker 1: seen strangers now. And by the way, I don't like
Speaker 1: the way the Netflix is laid out, so I don't
Speaker 1: like my totally agree to prefer Amazon Prime. I walked
Speaker 1: into the tiles and the layout of the Afterthoughts bedroom
Speaker 1: and she's watching all this garbage on netflixing is it appropriate? Oh? Yes,
Speaker 1: it is. I can't find anything share overdate. We found
Speaker 1: her bloom Bug opinion columnist. She joins us, right now,
Speaker 1: how do you miss and miss that bad? It's a
Speaker 1: good question. And I was surprised that Netflix didn't have
Speaker 1: better answers, But yeah, they you know, subscriber numbers are
Speaker 1: the one thing in Netflix that investors care about. Growth
Speaker 1: is the only thing that matters at Netflix, at least
Speaker 1: two investors. And they miss their own subscriber forecast by
Speaker 1: about fifty so that's yeah, pretty big miss. And they said, look,
Speaker 1: a few things happened. One is Netflix increased prices for
Speaker 1: its subscribers in many countries, including the United States. That
Speaker 1: obviously affected subscriber growth. They also blamed um you know,
Speaker 1: some of the slate of original programming that they rolled
Speaker 1: out in the second quarter was maybe not as attractive
Speaker 1: to to new subscribers as they had expected, and the
Speaker 1: result was a big miss. The messages it's okay because
Speaker 1: Q three is going to be much much better. How
Speaker 1: much fight do you have in that? I think that's
Speaker 1: a fair question. I mean, you know, Netflix is fond
Speaker 1: of saying that sometimes they miss guidance higher, sometimes they
Speaker 1: miss guidance lower. Generally the trend is up into the right.
Speaker 1: But I think that's a very fair point that if
Speaker 1: Netflix now says things will return back to normal in
Speaker 1: the third quarter, can you really believe that? Are you
Speaker 1: doing level four? Level five? Which is I can't remember
Speaker 1: none of the levels? Okay, if you look at the
Speaker 1: glide path of revenue is a wise one. They're killing
Speaker 1: it with a revenue growth and it's coming down with
Speaker 1: all the competition in a Shia over day, perfectly competitive world,
Speaker 1: where does revenue growth glide to It's gotta really come in,
Speaker 1: doesn't it. It's it's a little bit hard to figure right,
Speaker 1: because on the one hand, yes, they're increasing prices, which
Speaker 1: investors like, right because you want them to have the ability.
Speaker 1: There is a right. The pricing power obviously has a limit.
Speaker 1: That Netflix lost customers in the United States, maybe for
Speaker 1: the first time ever. I mean I I was trying
Speaker 1: really hard last night to go through the numbers going
Speaker 1: back to and I couldn't find any evidence of prayer
Speaker 1: quarters where they had lost customers in the United States. Um.
Speaker 1: But I think that's an open question about how fast
Speaker 1: can revenue grow if they're relying on price increases and
Speaker 1: not subscriber increases. What is their best practice all these
Speaker 1: other competitors want to do. Isn't it just about content?
Speaker 1: Give me a game of Thrones, give me it? What's orange? Oranges?
Speaker 1: You know whatever stranger thing. You seem to know a
Speaker 1: lot about this stuff. I just go work in the
Speaker 1: room and say, is this appropriate? Act on here? I
Speaker 1: think you might what the I'll watch these programs. When
Speaker 1: I watched Love, I give read a book quickly and
Speaker 1: then sit down, get comfortable, relax, put on Oranges the
Speaker 1: New Black, I Know your Friday. The last time I
Speaker 1: logged on a Netflix was a Crown did they do
Speaker 1: the Crown are mown? I mean, there are more seasons
Speaker 1: of the Crown coming. I don't know how to start
Speaker 1: into a Netflix promo, no, but I just that's the
Speaker 1: heart of it is content. Well, I think that's a
Speaker 1: that's a very good question. I actually think for Netflix
Speaker 1: content is maybe less important than it is for other
Speaker 1: entertainment services. And the reason is the the implicit promise
Speaker 1: of Netflix is you give us your ten or thirteen
Speaker 1: dollars a month, and when you have an hour to
Speaker 1: kill when you're born on a Saturday afternoon, turn on
Speaker 1: Netflix and we will have something that you'll want to watch. Now, look,
Speaker 1: they're losing programming because people like A T and T,
Speaker 1: which which owns Friends, they're pulling it back to run
Speaker 1: Friends on their own service. Disney Movies are leaving Netflix
Speaker 1: so that so that Disney can run those movies in
Speaker 1: its own service. But the implicit promises we will have
Speaker 1: just about anything you can possibly imagine to kill an
Speaker 1: hour or two. And I wonder if they're that everything
Speaker 1: store for video promises kind of losing some steam. One
Speaker 1: Apple question back to school, mac book, Are everybody's got
Speaker 1: a walls out? And by the cherubs stuff. Does it
Speaker 1: really matter? Does it move the needle? For Apple? The
Speaker 1: only thing that matters at Apple is the size of
Speaker 1: iPhone sales. Size of iPhone sales, and what they're doing
Speaker 1: in China right and what they're yes, which are related
Speaker 1: obviously um and and their ability to grow at a
Speaker 1: time when the smartphone industry is not growing. Thank you
Speaker 1: for coming and share over. They always brilliant on all
Speaker 1: this tech stuff. Thank you, huge value. Uh there the
Speaker 1: interview of the day for you in your house where
Speaker 1: content is king for me, Michael Nathanson as I walk
Speaker 1: into the children's room and goes disappropriate because that's usually
Speaker 1: the uh, the gist of it. Pault Tweeney, Please bring
Speaker 1: in the extinguished Michael Nathanson of Moffatt Nathanson. I'm content, absolutely,
Speaker 1: this is the one we want to talk to, want
Speaker 1: to talk to Michael. Thanks so much for joining us. Michael,
Speaker 1: So a big miss last night for Netflix is stocks
Speaker 1: off about ten percent? Here? What did you take away
Speaker 1: from how how important was last night's result? Yeah? I was, guys,
Speaker 1: I was. I was shocked by the results. I really was,
Speaker 1: because what really surprised me the most was the company
Speaker 1: acknowledged that the combination of price increases and a weaker
Speaker 1: content cycle led to slower subscriber growth. And that's the
Speaker 1: entire Bull case, right, the Bull cases they could raise prices,
Speaker 1: they can slow down content spending, and its stock is
Speaker 1: going to be you know, a billion, you know it's
Speaker 1: right now, hundred sixty billion dollars doesn't keep growing. And
Speaker 1: to me, that court really raised doubts to me, on
Speaker 1: on on the Bull case, it really good. So, Michael,
Speaker 1: the Bull case, just to summarize that, as I understand,
Speaker 1: it has always been, Listen, we're gonna spend money on content,
Speaker 1: whether it's our own or we get it from Hollywood.
Speaker 1: That's gonna drive subscriber growth. That's gonna fund revenue and
Speaker 1: eventually cash flow, which will allow us to invest in
Speaker 1: even more and better content. And that virtuous cycle goes
Speaker 1: on and on, but it seems to be the lynch
Speaker 1: pin of that cycle is continuing to add subscribers. So, UM,
Speaker 1: do you since that maybe that virtuous cycle might be
Speaker 1: at risk? I do? You know? I do, because our
Speaker 1: thesis has been all along and when you lose other
Speaker 1: people's content, what happens is you lose a built in
Speaker 1: audience right, So people may not go to Netflix Friends
Speaker 1: in the Office, which is still in the service. But
Speaker 1: as time goes on, as you lose the old reliable hits,
Speaker 1: the comfort food, that puts more pressure on your ability
Speaker 1: to find new hits. Right, and you know, pause, being
Speaker 1: an analyst in media, you know prediction hits is a
Speaker 1: hard business, right, So as you mean into being forced
Speaker 1: to make more and more hits been more content, the
Speaker 1: risk profile changes. And that's been our point for two
Speaker 1: or three years now, you know, Tom, the business is changing,
Speaker 1: and you have the stock market doesn't realize that. Michael
Speaker 1: Nathan said, you know, barriers to entry, And of course
Speaker 1: we associate this with Michael Porter at Harvard and his
Speaker 1: visits with us over the years. Or you can take
Speaker 1: it back to George Stigler or Chicago or even Bain
Speaker 1: and Company way back before that. Are there any barriers
Speaker 1: to entry in content and streaming or is it everybody
Speaker 1: for themselves? Tom, That's been part of what when Craig
Speaker 1: and I sit down and talk about this often you
Speaker 1: go back to that idea, what's what is the mode
Speaker 1: that they're building, right? And the mode of the building here,
Speaker 1: I think it's just the subscriber base and their ability
Speaker 1: to outspend other people on content. You know, you know,
Speaker 1: the delivery itself of the content is not a mode.
Speaker 1: The technology itself is not a mode. It's easily copied.
Speaker 1: It's the idea that by spending more, you'll have more
Speaker 1: hits and you'll be able to satisfrate customer base. And
Speaker 1: I can tell you that spending more on content doesn't
Speaker 1: necessarily mean you have hits, right that. Look at Sony
Speaker 1: Studio versus Disney Studio. They may spend the same amount
Speaker 1: of money on content, but Disney is ten times more
Speaker 1: profitable than Sony Studio. Yes, so, Michael, we talk about,
Speaker 1: you know, the competition coming. The whole landscape is really
Speaker 1: about to change in a big way with Disney Plus
Speaker 1: coming this year and a T and T and Comcast
Speaker 1: and others coming next year. What is your sense of
Speaker 1: the competitive landscape for streaming coming going forward. Yeah, it's
Speaker 1: going to be highly competitive. You have you have Disney
Speaker 1: starting off at the very low price points. Disney pretty
Speaker 1: much shocked the system by launching Disney, you know, at
Speaker 1: a very low price point. That's going to create pricing
Speaker 1: pressure for people entering the business. So you know I'm
Speaker 1: not taking this in the past ball and my view
Speaker 1: is I'm not sure that this is a great business
Speaker 1: to go into. It be a good business. The media
Speaker 1: was a great business. So I really worry about just
Speaker 1: the cost of create, you know, the churning, the churn
Speaker 1: up capabilities here. So you're you're skepticism. I can tell
Speaker 1: bad questions, is my skepticism, guys. I mean, Michael Nathanson.
Speaker 1: The one thing I've learned this week in economics, finance,
Speaker 1: investment is John Ferrell bin watch Binge watches Love Island.
Speaker 1: I mean that was a very informative thing to learn.
Speaker 1: And I get there are these properties and all that,
Speaker 1: but it's wrapped around Hulu at sixty dollars or YouTube
Speaker 1: TV at this or that. Are we going to get
Speaker 1: price compression and traditional TV like you're saying in streaming service? Oh,
Speaker 1: without a doubt? Right, what's going to happen is it's
Speaker 1: all these virtual products and the virtual like which is
Speaker 1: who and YouTube TV they've been raising price, but they're
Speaker 1: still thirty free as cheaper than the then the price
Speaker 1: of a tocial bundle. Right, So are you here is
Speaker 1: that you're gonna see price impression on Craig's video side
Speaker 1: on on my my industry, Like that's just the that's
Speaker 1: going to be a way of the world. Does Craig
Speaker 1: Moffitt does he? Binge watched Love Island Michael Nathan to
Speaker 1: thank us so much with Moffitt Naked. Thanks for listening
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