WEBVTT - Surveillance: Potential Rate Cuts with RBC's Porcelli 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.720 Bloomberg dot Com, and of course on the Bloomberg With 0:00:27.800 --> 0:00:30.200 the Call of the Morning, perhaps the Call of nineteen 0:00:30.320 --> 0:00:33.440 so far, JP Morgen's Bob Michael with a major multi 0:00:33.520 --> 0:00:36.279 year called Here's Bob on where he thinks ten year 0:00:36.360 --> 0:00:40.120 treasury yields a headache all the way down to zero, 0:00:40.240 --> 0:00:42.240 and I think that's where we're headed over the next 0:00:42.320 --> 0:00:46.320 couple of years. We've had the recovery, it's coming to 0:00:46.440 --> 0:00:49.480 an end, and now the central banks, one after another, 0:00:49.560 --> 0:00:51.720 are falling into line and cutting rates. We saw it 0:00:51.760 --> 0:00:54.560 overnight with the Bank of Korea. We've seen it with 0:00:54.640 --> 0:00:56.680 the Bank of Indonesia. You're going to see it at 0:00:56.720 --> 0:00:58.880 the month at the end of the month with the FED. 0:00:59.200 --> 0:01:02.280 You may see it from the ECB sooner than people expect. 0:01:02.800 --> 0:01:04.800 And we think at this point in the cycle you 0:01:04.880 --> 0:01:07.200 need some shock and all. So I'm not saying we're 0:01:07.200 --> 0:01:09.679 going to get there right away, but that's the journey 0:01:09.720 --> 0:01:12.679 we're on until something different happens. But Michael that of 0:01:12.760 --> 0:01:16.160 JP Mulkin Asset Management a wow moment. Tom Keane on 0:01:16.240 --> 0:01:18.880 Bloomberg TV about two hours again, I think we'll frame 0:01:18.920 --> 0:01:21.040 this and those will be a huge source of conversation 0:01:21.120 --> 0:01:23.600 through the year. UH. And and let me frame just 0:01:23.720 --> 0:01:26.559 you know, within the time that we've got UH. John Farris, 0:01:26.600 --> 0:01:29.440 you know this is Jan Lowe's UH work and Mr 0:01:29.520 --> 0:01:32.160 Michael giving him all the credit for it. And what's 0:01:32.160 --> 0:01:35.919 so important here is how it's commingled with other nations. 0:01:35.959 --> 0:01:41.240 It's not a discreet US call. It's about the international 0:01:41.800 --> 0:01:45.120 economics and finance we're living in so very familiar with 0:01:45.160 --> 0:01:47.960 Bob's thinking over the last few years, and he's believed 0:01:47.960 --> 0:01:50.640 the ten year rates across the world, in the developed 0:01:50.680 --> 0:01:53.080 world would come down to policy rates worldwide. We've seen 0:01:53.120 --> 0:01:55.480 that in Europe, We've seen that in Japan, we've seen 0:01:55.480 --> 0:01:57.960 it in the United States. Now his new call effectively 0:01:57.960 --> 0:01:59.920 the way he is thinking about this many different reason 0:02:00.040 --> 0:02:02.120 as to why we can head towards zero. But he's 0:02:02.120 --> 0:02:04.160 looking at the amount of money that has gone into 0:02:04.200 --> 0:02:06.640 money market funds over the last couple of years as 0:02:06.720 --> 0:02:09.480 rates have grinded higher, and it's the Federal Reserve starts 0:02:09.520 --> 0:02:11.519 to cut interest rates. He believes that will need a home, 0:02:11.720 --> 0:02:15.720 and that home says the Treasury markets price up, you'll down. 0:02:15.760 --> 0:02:17.959 And again this extends off of what we've heard from 0:02:17.960 --> 0:02:21.480 Street Camar Steve Major. It just bcing a course of 0:02:21.600 --> 0:02:24.320 legendary girls showing have all had there but they have 0:02:24.400 --> 0:02:28.360 a major house. Uh. John put a vector on the tenure. 0:02:28.360 --> 0:02:30.639 You're like that as a wow moment here in New York. 0:02:30.680 --> 0:02:33.120 To join us and continue the conversation. Tom por Sally 0:02:33.160 --> 0:02:36.600 of RBC Capital Markets, the chief US economist, Good morning 0:02:36.600 --> 0:02:38.520 to your Tom here. Good morning. Good. Let's just start 0:02:38.560 --> 0:02:40.440 with a question that I asked you as soon as 0:02:40.440 --> 0:02:43.520 you walked into this studio, just how frustrating is it 0:02:43.960 --> 0:02:46.840 covering this Fed at the moment and especially over the 0:02:46.919 --> 0:02:50.520 last six or seven months. Yeah, you know it's um. 0:02:50.600 --> 0:02:53.679 You know you you sort of realize that that sort 0:02:53.720 --> 0:02:57.440 of age old idea that you're you're taught, you know, 0:02:57.520 --> 0:03:00.639 your first year of working in research, that you're supposed 0:03:00.639 --> 0:03:04.040 to uh tell people what you think, um the FED 0:03:04.120 --> 0:03:06.680 will do, not not what they should do. Uh, and 0:03:07.080 --> 0:03:10.320 uh you know it's um uh and here we are. 0:03:10.760 --> 0:03:14.120 I I hate that we are talking about cuts, um, 0:03:14.120 --> 0:03:17.799 but we are. I think that there's no economic justification 0:03:17.840 --> 0:03:21.000 to cut rates, but they are. Uh. And you know 0:03:21.040 --> 0:03:23.040 I'm not. It's funny I said to someone like, I'm 0:03:23.040 --> 0:03:26.480 not going to stand on some high economic moral grounds 0:03:26.880 --> 0:03:30.280 um and and not forecast to cut because it's it's 0:03:30.280 --> 0:03:33.079 clearly coming. Powels made that abundantly clear. But I still 0:03:33.080 --> 0:03:36.160 struggle with the justification on this. Uh. And you know, 0:03:36.600 --> 0:03:39.320 I just find it. There's so many ironies here, but 0:03:39.680 --> 0:03:42.760 here's just at least one. You know, you're gonna have 0:03:43.320 --> 0:03:46.400 three days before the FOMC meeting, Uh, You're going to 0:03:46.520 --> 0:03:49.440 have a Q two GDP report that's probably going to 0:03:49.480 --> 0:03:52.520 show that consumption grew to four percent pace. Um. You 0:03:52.560 --> 0:03:55.520 know that that that sort of defies um, I think 0:03:55.640 --> 0:03:59.040 sort of rational thought process. But but again it I've 0:03:59.240 --> 0:04:02.520 I've I've I've come to grips with the reality that 0:04:02.520 --> 0:04:04.200 that they are going to cut. So you don't think 0:04:04.240 --> 0:04:07.000 they should, but you think they will. Let's talk about 0:04:07.000 --> 0:04:11.680 the potential impact of that potential interest, right, So so 0:04:11.760 --> 0:04:13.640 here's I mean, look, I think it's I think it's 0:04:13.640 --> 0:04:16.480 a goose is the backdrop, right, I mean, goose is 0:04:16.520 --> 0:04:19.919 mark if nothing else that goose is the markets, right, 0:04:19.920 --> 0:04:21.120 I mean I think this is more of a risk 0:04:21.160 --> 0:04:24.320 on backdrop. You know, the one thing I I we 0:04:24.440 --> 0:04:28.679 wrote about recently was you know it stated very simply, Um, 0:04:28.720 --> 0:04:32.360 it's pretty fascinating that we are we are lowering the 0:04:32.440 --> 0:04:37.240 discount rate in an environment where capital expenditures and consumption 0:04:37.279 --> 0:04:40.000 are moving along at a really good pace. What you know, 0:04:40.040 --> 0:04:42.240 what do you think happens in in in that backdrop? 0:04:42.279 --> 0:04:44.960 And John we featured this morning Honeywell buried in the 0:04:45.000 --> 0:04:47.680 honeywe and forks. To be clear, Honeywell has one of 0:04:47.760 --> 0:04:50.720 the best press releases out there and earnings buried in that. 0:04:50.839 --> 0:04:53.720 Their CEO says, their goose in their nominal view for 0:04:53.880 --> 0:04:57.159 to six percent on our good ex sales. This is buried. 0:04:57.320 --> 0:05:00.320 First of all, you gotta do bigger fun personally. You 0:05:00.320 --> 0:05:06.680 can see this on radio. Are you kidding me? I 0:05:06.720 --> 0:05:10.640 think it says end of two thousand, twenty two point four, 0:05:12.000 --> 0:05:15.680 what are the economic conditions we need to get the 0:05:15.760 --> 0:05:19.880 jpet Morgan's call, So I not to zero, but to 0:05:19.920 --> 0:05:26.120 get you from a two five to a So you know, 0:05:26.360 --> 0:05:28.680 I think what what needs to So let me be clear, 0:05:29.000 --> 0:05:31.000 I don't think that tens are going very far from 0:05:31.040 --> 0:05:33.360 where they are right now. UM, And and our our 0:05:33.440 --> 0:05:35.719 house view is more or less a reflection of that 0:05:36.240 --> 0:05:40.040 UM tip tip. For yield to continue to drift lower, UM, 0:05:40.279 --> 0:05:43.120 you know, you need an event. Uh. Let me be clear. 0:05:43.200 --> 0:05:45.280 In the immediate term, if this we're talking about a 0:05:45.279 --> 0:05:47.640 structural dynamic, this is a totally different conversation. But in 0:05:47.680 --> 0:05:50.960 the immediate term for race to really drift materially lower 0:05:51.000 --> 0:05:53.800 from here, you need an event like like a recession 0:05:53.800 --> 0:05:56.960 like the FED to really embark on UM and a 0:05:57.040 --> 0:05:59.440 real easing cycle, not whatever this is, this notion of 0:05:59.480 --> 0:06:03.240 insurance cuts. UM. I think that's uh, in the immediate term, 0:06:03.320 --> 0:06:05.000 how you get there in the longer term, which I 0:06:05.040 --> 0:06:08.000 think is probably the much more interesting conversation, UM, what 0:06:08.000 --> 0:06:10.159 what you have to have happened is exactly the path 0:06:10.200 --> 0:06:12.800 that we're going down now. You need the structural dynamics 0:06:13.080 --> 0:06:17.120 I eat, the aging population idea slower trend rates of growth. UM. 0:06:17.160 --> 0:06:20.240 All those things are are they lay in front of us. 0:06:20.279 --> 0:06:22.400 And as Tom, you and I talked about a little earlier, 0:06:22.480 --> 0:06:23.920 you know, one of the things that could help save 0:06:23.960 --> 0:06:27.000 the day is is productivity. UM. But again short of that, 0:06:27.080 --> 0:06:29.479 which again is much easier said than done. Um, you know, 0:06:29.520 --> 0:06:31.600 I think that you're in a sort of a more 0:06:31.839 --> 0:06:33.560 permanent as a sort of a tricky word, but for 0:06:33.720 --> 0:06:35.480 lack of a better word, right now, you're in a 0:06:35.520 --> 0:06:39.239 permanently low U rate structure. What do your conversation sound 0:06:39.279 --> 0:06:42.160 like with clients at the moment? Help? Yeah, T John, 0:06:42.200 --> 0:06:44.640 I I love this question, so you know, and and 0:06:44.640 --> 0:06:46.360 again something you're not were sort of talking about a 0:06:46.400 --> 0:06:52.240 little bit. Uh. People keep on saying the market wants cuts. Um. Uh, 0:06:52.400 --> 0:06:54.080 you know, I don't know. I speak with a lot 0:06:54.120 --> 0:06:56.920 of people that are you know, quote unquote the market. Um, 0:06:57.120 --> 0:07:00.320 some some pretty big investors in various markets, whether it's 0:07:00.320 --> 0:07:04.040 equities or fixed income. Um. No, no one's clamoring for 0:07:04.080 --> 0:07:06.400 a cut. No, no, No one is demanding that the 0:07:06.400 --> 0:07:09.560 Fed cut rates right now. So so this idea that, um, 0:07:09.600 --> 0:07:11.680 you know, sort of the quote unquote market want to 0:07:11.720 --> 0:07:14.720 cut like, I don't. I don't know where that is really, um, 0:07:14.760 --> 0:07:17.000 because I don't see it in in any of the 0:07:17.040 --> 0:07:19.200 conversations I'm having with clients. What do you think, Shaman 0:07:19.200 --> 0:07:21.760 pals herring, I think Chairman Pale is hearing a lot 0:07:21.800 --> 0:07:25.080 of nervousness from the the sort of the c suite 0:07:25.160 --> 0:07:27.760 slash executives that he speaks to around the country. Look 0:07:28.000 --> 0:07:30.520 that yesterday's bage book is a perfect reflection of that. 0:07:30.600 --> 0:07:33.040 I mean, you know, the amount of time that you know, 0:07:33.080 --> 0:07:35.440 sort of soft words were used, you know, like the 0:07:35.640 --> 0:07:38.680 softening or weakening and etcetera, etcetera. It was pretty significant. 0:07:38.680 --> 0:07:41.560 In fact, it jumped relative to what we had seen recently. 0:07:42.000 --> 0:07:44.600 And I think that that that that permeated the bage 0:07:44.600 --> 0:07:47.400 book and I think it's I think it's absolutely influencing 0:07:47.400 --> 0:07:51.160 the chairman right now, Tom Person, Thank thanks guys, always 0:07:51.160 --> 0:08:10.000 going to do with you coming in today. George Kessidy 0:08:10.080 --> 0:08:13.720 joins us with RBC Capital Market's twenty years or more 0:08:14.280 --> 0:08:17.480 of experience watching the game. Is a game gonna be 0:08:17.560 --> 0:08:21.320 there in five years, Gerard. For young bucks that want 0:08:21.360 --> 0:08:23.920 to have to term Bloomberg terminals in front of their 0:08:23.960 --> 0:08:26.760 desk and they have the Royal Dalton shina on the 0:08:26.840 --> 0:08:29.640 lunch served to them to the next side, and you 0:08:29.640 --> 0:08:31.280 know they've paid a good amount of money and then 0:08:31.280 --> 0:08:34.600 a ginormous bonus every three or four years. Is that 0:08:34.679 --> 0:08:37.720 game over? I would say the games on overtown, but 0:08:37.760 --> 0:08:42.160 I think the Royal Dalton dishware probably is um. I 0:08:42.200 --> 0:08:45.280 think what you're going to see is that when we 0:08:45.280 --> 0:08:47.760 look at over time, there will be fewer players in 0:08:47.840 --> 0:08:50.760 the business because we have too much capacity, and so 0:08:50.920 --> 0:08:54.120 for the survivors, it's kind of like the USS Indianapolis. 0:08:54.280 --> 0:08:56.600 It was the guys that survived the shark attacks in 0:08:56.640 --> 0:08:59.120 the end. We're find the same thing here. It's the 0:08:59.160 --> 0:09:00.920 survivors that will be fine, but there are a lot 0:09:00.960 --> 0:09:03.040 of people that are going to go the way of 0:09:03.440 --> 0:09:05.560 others and not being in the business. In five years, 0:09:05.640 --> 0:09:09.080 what will the concentration look like will be three and 0:09:09.240 --> 0:09:13.520 four giants and then a regional player here, a regional 0:09:13.559 --> 0:09:16.680 player there, or is there a different Cassidy vision to that. 0:09:17.320 --> 0:09:20.280 I think you're going down the right path because economy 0:09:20.360 --> 0:09:23.400 is a scale are very important, more so today than 0:09:23.440 --> 0:09:26.720 we've seen in your my career, in your career because 0:09:26.720 --> 0:09:30.000 of the cost of the technology, the need to have 0:09:30.120 --> 0:09:32.760 this technology to be a player. So I do think 0:09:32.800 --> 0:09:36.440 you're going to probably see five or so big players 0:09:36.840 --> 0:09:39.800 and then you'll get some regional players. But it's the 0:09:39.840 --> 0:09:43.240 ones in the middle that cannot make that commitment to 0:09:43.480 --> 0:09:47.080 the Economy is a scale that may really struggle. You know, 0:09:47.120 --> 0:09:49.360 three to five years down the road, Joe, I get 0:09:49.400 --> 0:09:51.120 to some of the valuations of some of these banks 0:09:51.120 --> 0:09:53.440 in just a moment. I do want your view on 0:09:53.520 --> 0:09:56.800 what is happening with equity trading over at Morgan Stanley. 0:09:56.960 --> 0:10:01.120 Big part of the bank and a big drop, He thoughts, Yes, John, 0:10:01.400 --> 0:10:04.320 what we saw was when you look at the equity 0:10:04.360 --> 0:10:07.680 trading for all of the investment banks on a year 0:10:07.679 --> 0:10:12.200 over year basis, it was down now relative to expectations. 0:10:12.240 --> 0:10:15.640 In the quarter it was in Morgan Stanley's case was 0:10:15.920 --> 0:10:18.760 better than expected. But you're bringing up a good point. 0:10:19.400 --> 0:10:22.280 You think about for a moment the amount of trading 0:10:22.320 --> 0:10:27.080 in ETFs and these other types of passive investment funds. 0:10:27.280 --> 0:10:30.520 It's not just retail investors that are using these funds, 0:10:30.760 --> 0:10:34.400 it's institutional investors as well. So you're seeing there's less 0:10:34.360 --> 0:10:38.720 of less volume on the exchanges relative to some years back, 0:10:39.040 --> 0:10:42.480 and as a result, it's affecting the equity trading areas 0:10:42.480 --> 0:10:46.079 for these very reputable firms like Morgan Stanley. So, Jared, 0:10:46.160 --> 0:10:48.760 we wrap up earning season for the Wall Street players 0:10:49.040 --> 0:10:52.440 with Morgan Stanley your tape. You're great so far, Jerrard. 0:10:53.120 --> 0:10:56.679 I would say that generally speaking, the numbers were in 0:10:56.840 --> 0:11:02.240 line to slightly below expectations for everyone. Now that being said, 0:11:02.640 --> 0:11:05.120 when you compare it to a year ago, the numbers 0:11:05.200 --> 0:11:08.200 for the group were not very good. So though on 0:11:08.280 --> 0:11:12.000 an expectation standpoint they were okay, but when you see 0:11:12.000 --> 0:11:15.680 the declines d c M, DICK capital markets, FICK trating 0:11:15.720 --> 0:11:19.640 you know, fixing income, commodities, and currency, those numbers are 0:11:19.720 --> 0:11:23.000 real weak for most players. The equity markets and the 0:11:23.040 --> 0:11:26.720 ECM area were the better of the areas. Advisory was 0:11:26.760 --> 0:11:29.480 okay as well, but generally speaking, year of a year, 0:11:29.480 --> 0:11:32.040 the numbers were weak, no doubt about it. One of 0:11:32.040 --> 0:11:34.800 the concerns for the outlooked in an interest income over 0:11:34.920 --> 0:11:37.640 places like JP Morgan and Bank for America. The money 0:11:37.640 --> 0:11:40.719 made on loans and minus the money paid on deposits 0:11:40.720 --> 0:11:42.640 and as race get cut at the f at the 0:11:42.679 --> 0:11:46.720 Federal Reserve seemingly over the next year or so. Jerrard, 0:11:46.800 --> 0:11:48.599 the view is that it's going to get difficult for 0:11:48.640 --> 0:11:51.760 these guys. You don't necessarily agree with that. You think 0:11:51.760 --> 0:11:54.600 that these stocks can perform well, just like they did 0:11:54.600 --> 0:11:57.080 in the mid ninety nineties. Gerard, just walk us through 0:11:57.120 --> 0:11:59.680 this big idea that you and my may, however, at 0:11:59.679 --> 0:12:02.560 whilst not a share at the moment for the valuation 0:12:02.960 --> 0:12:06.160 of these banks and how these stocks will try Sure, John, 0:12:06.440 --> 0:12:10.560 and you bring up the critical point today, I think 0:12:10.720 --> 0:12:14.240 literally this quarter is the maximum pain point for this 0:12:14.320 --> 0:12:16.920 issue with interest rates, because when you look at what 0:12:17.080 --> 0:12:20.280 happened in the second quarter, deposit rates continue to go 0:12:20.360 --> 0:12:24.679 up from the December hike, and libor fell more so 0:12:24.800 --> 0:12:27.800 in the quarter than anyone had expected. But to your point, John, 0:12:28.040 --> 0:12:30.160 when you look to the mid nineties and you see 0:12:30.160 --> 0:12:33.520 the steepening of the curve caused by Greenspan at the 0:12:33.559 --> 0:12:36.680 time the FED chairman cutting rates, we think that eventually 0:12:36.760 --> 0:12:40.600 will filter into the thinking. Over the next twelve months plus, 0:12:41.000 --> 0:12:43.920 you're going to see growth. The loan growth on the 0:12:43.960 --> 0:12:47.320 consumer lending side was especially good for these big banks 0:12:47.320 --> 0:12:49.560 to this quarter. So what they can do is grow 0:12:49.600 --> 0:12:52.800 their balance sheets to offset any pressure in the margin. 0:12:53.040 --> 0:12:55.240 But right now, I think the maximum pain point on 0:12:55.280 --> 0:12:59.000 the margin pressure was this quarter due to the impact 0:12:59.040 --> 0:13:01.560 that deposit race and not come down yet. They will 0:13:01.600 --> 0:13:04.640 come down when they start cutting interest rates. Granted, acid 0:13:04.679 --> 0:13:06.640 needs will come down too, but I think there will 0:13:06.679 --> 0:13:09.680 be some relief there for the banks. Gerard when I 0:13:09.679 --> 0:13:13.559 look at the screen, I see a nice thirty margin 0:13:13.640 --> 0:13:16.280 bank to bank to bank to bank, but what I 0:13:16.400 --> 0:13:23.520 really see is flatline revenue growth. Institutionally and strategically, do 0:13:23.600 --> 0:13:27.240 they manage for flat revenue growth or by definition do 0:13:27.320 --> 0:13:31.640 they have to merge. It's a great question, Tom, because 0:13:32.400 --> 0:13:35.400 if you think back for a moment, Mike O'Neil, the 0:13:35.440 --> 0:13:38.480 former chairman of City Group who just retired, he was 0:13:38.520 --> 0:13:42.200 the CEO of Bank Hawaii back in the early two 0:13:42.200 --> 0:13:45.080 thousand's when the place was a mess, and he did 0:13:45.120 --> 0:13:48.880 something what I would call shrinking to profitability, and when 0:13:48.920 --> 0:13:52.520 you look at the stocks back then, the footings of 0:13:52.559 --> 0:13:54.800 the company came down by almost a third. It was 0:13:54.840 --> 0:13:57.959 the best performing bank stock because he brought back his 0:13:58.080 --> 0:14:02.080 stock very aggressively. So to a I think it's somewhat similar. 0:14:02.200 --> 0:14:05.040 Either you can merge, which I think some will choose 0:14:05.559 --> 0:14:08.800 to do big mergers, and on the other hand, you 0:14:08.840 --> 0:14:12.760 can manage for profitability so you don't necessarily have to 0:14:12.840 --> 0:14:16.120 have top line growth if the excess capital is given 0:14:16.160 --> 0:14:18.280 back to the shareholders. And you know what's interesting, Tom, 0:14:18.559 --> 0:14:21.280 look at the tangible books that you growth here over year. 0:14:21.400 --> 0:14:24.760 Some of these big banks are giving us ten because 0:14:24.800 --> 0:14:28.640 they're buying back their stock. Okay, this is usually Gerard 0:14:28.640 --> 0:14:30.960 where we go to you on some small bank I've 0:14:30.960 --> 0:14:34.200 never heard of, where you always meant money, which is 0:14:34.200 --> 0:14:36.600 why you're retiring large up in Maine. We're not going 0:14:36.680 --> 0:14:40.520 to do that. Today we got record heat degrees drees whatever, 0:14:40.600 --> 0:14:44.120 New York, it's cool in Portland, Maine. Eighty nine degrees. 0:14:44.720 --> 0:14:47.320 How are the lobster doing? I mean, it's the water 0:14:47.440 --> 0:14:50.960 warmer and they're crawling north. I mean, what's the give 0:14:51.040 --> 0:14:56.000 us the cassidy main lobster report? Right now, I'm literally 0:14:56.040 --> 0:14:58.400 looking out my window down on the lobs of boats 0:14:58.440 --> 0:15:01.760 tom here in Portland at the the guys of some 0:15:01.800 --> 0:15:03.320 of them have left for the for the day to 0:15:03.400 --> 0:15:05.840 haul their traps. And I would say that the lobster 0:15:06.000 --> 0:15:08.640 season so far has gotten off to a slower start 0:15:09.000 --> 0:15:12.040 because of the colder weather. But with the warmer weather 0:15:12.080 --> 0:15:16.040 coming in, this is peak season for catches and they 0:15:16.080 --> 0:15:20.840 are fighting actually some regulations for regulators, but right now 0:15:21.160 --> 0:15:23.760 it's it looks good. The business is strong, and I 0:15:24.240 --> 0:15:26.040 you know, one of these times, hopefully you can join 0:15:26.080 --> 0:15:27.880 me up here. And well, I was just gonna say, 0:15:27.920 --> 0:15:29.400 I mean, one of your kids, has got to be 0:15:29.440 --> 0:15:32.160 doing the college trip at the tent company, Me and 0:15:32.160 --> 0:15:35.360 Pharaoh with a tent set up on the dock that John, 0:15:35.400 --> 0:15:37.800 have you ever had Maine lobster? I have ane, There's 0:15:37.960 --> 0:15:41.320 there's no other lobster. I've tried them all. Cassidy has 0:15:41.320 --> 0:15:43.440 a franchise on this. What are we doing, kids? You're 0:15:43.480 --> 0:15:47.680 looking out the window. It's dunk. Cassidy is so sensitive 0:15:47.720 --> 0:15:50.360 and environmentally correct. He never lets a three pounder in 0:15:50.400 --> 0:15:54.720 the house. You know that's right. You have no idea 0:15:54.760 --> 0:15:59.160 what I'm talking Michael. Can we explain to Pharaoh how 0:15:59.200 --> 0:16:03.080 good America a lobster is main lobster. It's it's like 0:16:03.280 --> 0:16:07.640 nothing else meant written a love your faces. It's great. 0:16:07.720 --> 0:16:09.880 I mean I think we should do I'm not it's 0:16:09.920 --> 0:16:12.240 not great. I'd love to be that Monday Monday. We 0:16:12.240 --> 0:16:14.280 could do that Monday Tuesday. Why don't we do that Saturday? 0:16:14.280 --> 0:16:15.840 So let's get a plan. Let's talk to Al from 0:16:15.840 --> 0:16:21.960 New Jersey. Thank you so much. Have a lobster r us. 0:16:22.040 --> 0:16:25.520 Mr Cassidy, of course, legendary at RBC Capital Markets. Some 0:16:25.640 --> 0:16:28.680 important comments there in the beginning, and John, this is 0:16:28.720 --> 0:16:34.000 really dead serious. The future of trading on Global Wallster generally. 0:16:34.000 --> 0:16:50.160 You know it's again into question breaking news. Is Netflix 0:16:50.360 --> 0:16:54.560 is broke? John Farrell? Since you are glued to netfix, 0:16:55.120 --> 0:16:57.840 Netflix and all the Stranger things and all that, why 0:16:57.880 --> 0:17:02.160 don't you our street He's never seen it. You've never 0:17:02.200 --> 0:17:04.320 seen strangers now. And by the way, I don't like 0:17:04.359 --> 0:17:06.280 the way the Netflix is laid out, so I don't 0:17:06.320 --> 0:17:10.080 like my totally agree to prefer Amazon Prime. I walked 0:17:10.240 --> 0:17:13.800 into the tiles and the layout of the Afterthoughts bedroom 0:17:13.840 --> 0:17:18.120 and she's watching all this garbage on netflixing is it appropriate? Oh? Yes, 0:17:18.160 --> 0:17:20.960 it is. I can't find anything share overdate. We found 0:17:21.000 --> 0:17:23.720 her bloom Bug opinion columnist. She joins us, right now, 0:17:23.880 --> 0:17:27.639 how do you miss and miss that bad? It's a 0:17:27.640 --> 0:17:30.840 good question. And I was surprised that Netflix didn't have 0:17:30.880 --> 0:17:34.440 better answers, But yeah, they you know, subscriber numbers are 0:17:34.600 --> 0:17:38.000 the one thing in Netflix that investors care about. Growth 0:17:38.080 --> 0:17:40.680 is the only thing that matters at Netflix, at least 0:17:40.680 --> 0:17:44.320 two investors. And they miss their own subscriber forecast by 0:17:44.320 --> 0:17:47.880 about fifty so that's yeah, pretty big miss. And they said, look, 0:17:47.880 --> 0:17:52.359 a few things happened. One is Netflix increased prices for 0:17:52.480 --> 0:17:55.520 its subscribers in many countries, including the United States. That 0:17:55.640 --> 0:18:00.840 obviously affected subscriber growth. They also blamed um you know, 0:18:00.880 --> 0:18:04.160 some of the slate of original programming that they rolled 0:18:04.200 --> 0:18:06.880 out in the second quarter was maybe not as attractive 0:18:07.040 --> 0:18:10.520 to to new subscribers as they had expected, and the 0:18:10.600 --> 0:18:14.600 result was a big miss. The messages it's okay because 0:18:14.680 --> 0:18:16.679 Q three is going to be much much better. How 0:18:16.760 --> 0:18:18.840 much fight do you have in that? I think that's 0:18:18.880 --> 0:18:20.840 a fair question. I mean, you know, Netflix is fond 0:18:20.880 --> 0:18:24.600 of saying that sometimes they miss guidance higher, sometimes they 0:18:24.640 --> 0:18:28.680 miss guidance lower. Generally the trend is up into the right. 0:18:29.040 --> 0:18:30.840 But I think that's a very fair point that if 0:18:30.880 --> 0:18:34.480 Netflix now says things will return back to normal in 0:18:34.520 --> 0:18:37.040 the third quarter, can you really believe that? Are you 0:18:37.080 --> 0:18:40.080 doing level four? Level five? Which is I can't remember 0:18:40.119 --> 0:18:42.520 none of the levels? Okay, if you look at the 0:18:42.520 --> 0:18:45.560 glide path of revenue is a wise one. They're killing 0:18:45.600 --> 0:18:50.480 it with a revenue growth and it's coming down with 0:18:50.680 --> 0:18:54.639 all the competition in a Shia over day, perfectly competitive world, 0:18:55.359 --> 0:18:59.240 where does revenue growth glide to It's gotta really come in, 0:18:59.320 --> 0:19:01.959 doesn't it. It's it's a little bit hard to figure right, 0:19:02.000 --> 0:19:06.160 because on the one hand, yes, they're increasing prices, which 0:19:06.240 --> 0:19:09.840 investors like, right because you want them to have the ability. 0:19:11.640 --> 0:19:15.679 There is a right. The pricing power obviously has a limit. 0:19:15.960 --> 0:19:19.879 That Netflix lost customers in the United States, maybe for 0:19:19.920 --> 0:19:22.080 the first time ever. I mean I I was trying 0:19:22.119 --> 0:19:24.560 really hard last night to go through the numbers going 0:19:24.560 --> 0:19:28.560 back to and I couldn't find any evidence of prayer 0:19:28.640 --> 0:19:32.320 quarters where they had lost customers in the United States. Um. 0:19:32.400 --> 0:19:35.000 But I think that's an open question about how fast 0:19:35.040 --> 0:19:38.280 can revenue grow if they're relying on price increases and 0:19:38.320 --> 0:19:41.840 not subscriber increases. What is their best practice all these 0:19:41.840 --> 0:19:45.360 other competitors want to do. Isn't it just about content? 0:19:45.840 --> 0:19:50.120 Give me a game of Thrones, give me it? What's orange? Oranges? 0:19:50.280 --> 0:19:52.280 You know whatever stranger thing. You seem to know a 0:19:52.280 --> 0:19:55.159 lot about this stuff. I just go work in the 0:19:55.240 --> 0:19:58.400 room and say, is this appropriate? Act on here? I 0:19:58.440 --> 0:20:03.560 think you might what the I'll watch these programs. When 0:20:03.560 --> 0:20:06.560 I watched Love, I give read a book quickly and 0:20:06.560 --> 0:20:10.000 then sit down, get comfortable, relax, put on Oranges the 0:20:10.080 --> 0:20:14.399 New Black, I Know your Friday. The last time I 0:20:14.440 --> 0:20:16.600 logged on a Netflix was a Crown did they do 0:20:16.680 --> 0:20:20.760 the Crown are mown? I mean, there are more seasons 0:20:20.760 --> 0:20:22.640 of the Crown coming. I don't know how to start 0:20:22.680 --> 0:20:26.720 into a Netflix promo, no, but I just that's the 0:20:26.760 --> 0:20:29.240 heart of it is content. Well, I think that's a 0:20:29.520 --> 0:20:34.520 that's a very good question. I actually think for Netflix 0:20:34.920 --> 0:20:38.640 content is maybe less important than it is for other 0:20:39.200 --> 0:20:43.880 entertainment services. And the reason is the the implicit promise 0:20:43.920 --> 0:20:47.800 of Netflix is you give us your ten or thirteen 0:20:47.840 --> 0:20:50.879 dollars a month, and when you have an hour to 0:20:50.960 --> 0:20:53.879 kill when you're born on a Saturday afternoon, turn on 0:20:53.960 --> 0:20:57.840 Netflix and we will have something that you'll want to watch. Now, look, 0:20:57.880 --> 0:21:01.480 they're losing programming because people like A T and T, 0:21:01.800 --> 0:21:04.840 which which owns Friends, they're pulling it back to run 0:21:04.880 --> 0:21:08.840 Friends on their own service. Disney Movies are leaving Netflix 0:21:08.880 --> 0:21:11.240 so that so that Disney can run those movies in 0:21:11.240 --> 0:21:14.399 its own service. But the implicit promises we will have 0:21:14.600 --> 0:21:18.440 just about anything you can possibly imagine to kill an 0:21:18.440 --> 0:21:22.200 hour or two. And I wonder if they're that everything 0:21:22.320 --> 0:21:25.479 store for video promises kind of losing some steam. One 0:21:25.560 --> 0:21:28.640 Apple question back to school, mac book, Are everybody's got 0:21:28.640 --> 0:21:30.760 a walls out? And by the cherubs stuff. Does it 0:21:30.840 --> 0:21:33.960 really matter? Does it move the needle? For Apple? The 0:21:34.000 --> 0:21:37.320 only thing that matters at Apple is the size of 0:21:37.320 --> 0:21:39.919 iPhone sales. Size of iPhone sales, and what they're doing 0:21:39.960 --> 0:21:42.399 in China right and what they're yes, which are related 0:21:42.440 --> 0:21:45.439 obviously um and and their ability to grow at a 0:21:45.480 --> 0:21:48.159 time when the smartphone industry is not growing. Thank you 0:21:48.200 --> 0:21:50.400 for coming and share over. They always brilliant on all 0:21:50.440 --> 0:22:09.199 this tech stuff. Thank you, huge value. Uh there the 0:22:09.200 --> 0:22:12.040 interview of the day for you in your house where 0:22:12.119 --> 0:22:15.480 content is king for me, Michael Nathanson as I walk 0:22:15.560 --> 0:22:18.800 into the children's room and goes disappropriate because that's usually 0:22:18.840 --> 0:22:21.680