Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Ley. 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 The
Speaker 1: Discipline to maintain discipline the message from David Kelly at
Speaker 1: JP Morgan Asset Management, the chief global strategist he joined us. Now, David,
Speaker 1: build on that. What do you mean by that? Well,
Speaker 1: I think that we were in a recovery, but this
Speaker 1: recovery is about it slow down. I mean the sound
Speaker 1: that you hear outside is screeching breaks because this V
Speaker 1: shaped recovery is going to slow a lot in the
Speaker 1: fourth quarter and and um early next year. I think
Speaker 1: it's important not to just, you know, to pile into
Speaker 1: momentum stocks. We've seen, we've seen, you know, the stock
Speaker 1: marker do wonderfully well this year, but there are parts
Speaker 1: of the the stock markets which are frankly done too well,
Speaker 1: giving the amount of uncertainty out there, and given the
Speaker 1: fact that down the road we are looking at higher
Speaker 1: taxes and higher interest rates. So I think it's very
Speaker 1: important for investors in this stage to be disciplined realized
Speaker 1: that just because we've seen some good economic numbers, because
Speaker 1: the marketers seem to be okay here, you know, don't
Speaker 1: don't take your eye off the bull. Recognize that we've
Speaker 1: still got a long way to go before this pandemic
Speaker 1: is really over. Within it is the idea of what
Speaker 1: the return will be. All the actual assumptions David Kelly
Speaker 1: has been we're supposed to invest for single digit return.
Speaker 1: Nobody believes that that's on these high flyers. Do we
Speaker 1: go back to a single digit world? We have to eventually,
Speaker 1: because in the end, it's about nominal GDP growth and
Speaker 1: what's happened for a long time, actually for decades now,
Speaker 1: as we've seen the value of financial assets um in
Speaker 1: the US rise much faster than overall nominal GDP. But
Speaker 1: ultimately it's about the growth and goods and services produced
Speaker 1: by the U S economy. And so there is gonna
Speaker 1: be some correctional long the way here and there are
Speaker 1: and we are going to see a return to single
Speaker 1: digit returns. And so it's very important for people, you know,
Speaker 1: look at valuations carefully because the things that are most
Speaker 1: overvalued are the things that are going to get hurt
Speaker 1: the worst when there is a more significant correction. Well, David,
Speaker 1: when you talk about how we could see a correction
Speaker 1: in what in tech stocks? Because right now we're seeing
Speaker 1: an ongoing performance at least for today. A return to
Speaker 1: the underperformance in small caps in financials and tech is
Speaker 1: what's recovering. Well, yeah, and and and because this market
Speaker 1: is very momentum driven. I mean, I think this year
Speaker 1: has been so difficult for fundamental analytics. I mean, how
Speaker 1: do you figure out, you know, what these companies are
Speaker 1: really worth and the sort of world we're looking at
Speaker 1: post pandemic. So I think investors are just jumping into
Speaker 1: the momentum trade here. But when we get through this,
Speaker 1: when we have a more normal economy, as that begins
Speaker 1: to shape, you know, shape as we have a sense
Speaker 1: of it. In two, I do think that value stocks
Speaker 1: should do better than growth. Growth is very expensive RealD
Speaker 1: of the value. You know, it's most expensive its means
Speaker 1: since the tech bubble. I also think that international ought
Speaker 1: to do better than the US a very similar story.
Speaker 1: Both em and developed country international are cheaper out in
Speaker 1: the US, So I think you need to think about
Speaker 1: the boring middle of the market here and try not
Speaker 1: to be too enticed or enamored of of high tech
Speaker 1: um large cap megacap growth stalks. David, fold your economics
Speaker 1: in your Castman and Farola. Your economists make very clear
Speaker 1: they have a very cautious view out. Is that conscious
Speaker 1: view folded in the fourth quarter or is that a
Speaker 1: conscious view for next year? It should be in the
Speaker 1: fourth quarter. If we're looking at quarterly GDP, we saw
Speaker 1: a GDP full by two percent in the second quarter.
Speaker 1: We think would rise by as much as thirty percent
Speaker 1: in the third annualize. But then when you rise by
Speaker 1: about three percent annualized in the fourth, so there's a
Speaker 1: very sharp deceleration growth. And you're gonna see that in jobs.
Speaker 1: I mean if you look sequentially, Okay, we saw we
Speaker 1: added one point four million jobs last month. That's good,
Speaker 1: but we think that job growth will now decelerate about
Speaker 1: less than a million per month, which sounds okay, except
Speaker 1: we're still eleven million jobs shorter where we were in February,
Speaker 1: So again a deceleration there. So I think in the
Speaker 1: monthly numbers it's upon us. In the quartine numbers, we're
Speaker 1: gonna have to wait for the fourth quarter to see
Speaker 1: that deceleration. What's the run rate of nominal GDP that
Speaker 1: you then fold into your forecasting of the equity markets. Um, well,
Speaker 1: it's it's hard to talk about a run rate in
Speaker 1: either twenty one when you get but once you get
Speaker 1: into two, we're looking at something in the order of
Speaker 1: four to five percent once we get back to close
Speaker 1: to full employment. But yeah, you're gonna be you know,
Speaker 1: we'll have to bring that unemployment rate rate down for
Speaker 1: for a while here. But you know, we've got another problem,
Speaker 1: which is that we've got a demographic crash going on
Speaker 1: right now, which is also going to take something out
Speaker 1: of GDP growth for this pandemic is Oh, it's what
Speaker 1: you make if. What's happening in Washington at the moment,
Speaker 1: it's all politics. I mean, I think that they I
Speaker 1: was hoping we'd see some sort of new support package,
Speaker 1: a Phase four deal before the conventions, because honestly, there
Speaker 1: are a lot of unemployed people in this country who
Speaker 1: need that. A lot of people are going to suffer
Speaker 1: through this winter. But nobody wants to make a deal
Speaker 1: at this stage, it seems to me before the election.
Speaker 1: So hopefully after the election, however, it goes in that
Speaker 1: lame duct session of Congress, we'll have something to support
Speaker 1: people who just can't get back to work until a
Speaker 1: pandemic is tamed, and hopefully we'll tame the pandemic in
Speaker 1: twenty twenty one. But right now it's just partisan posturing
Speaker 1: because everybody is focused on the election. David, is no
Speaker 1: deal or a very skinny deal priced into the market currently.
Speaker 1: I think it probably is. And remember we're talking about
Speaker 1: eight weeks. I mean we're talking about that there are
Speaker 1: perhaps ten weeks. But once the election is over, I
Speaker 1: think there is a majority probably in Congress for some
Speaker 1: sort of skinny deal because after all, and things like
Speaker 1: state and local government, you can come back in January
Speaker 1: with a new Congress and if you know, if, if,
Speaker 1: depending on how that that shapes, that you could you
Speaker 1: could do something then So you just need to do
Speaker 1: something about the unemployment support. You need to do something
Speaker 1: to try and help these small businesses. But it's you
Speaker 1: don't need to spend a fortune right now, because you
Speaker 1: can always come back next January and do something bigger.
Speaker 1: It's even just a comment on the language that we're
Speaker 1: using at the moment. A skinny deal is now something
Speaker 1: between five hundred and seven hundred billion dollars down in Washington.
Speaker 1: What are your thoughts on that there are no fiscal
Speaker 1: hawks left. There's no monetary hawks left either, and the
Speaker 1: hawks have all left Washington, which is a little worrying.
Speaker 1: We do need to do this right now, but I
Speaker 1: am very concerned that as the economy cover is particularly
Speaker 1: get a good vaccine and it begins to move forward fast.
Speaker 1: Later next year, We've got a lot of government debt,
Speaker 1: and this is going to be a time when we
Speaker 1: need to be really disciplined in terms of policy, just
Speaker 1: to maintain the credibility of you know, of our you
Speaker 1: know of treasury bonds and credibility of the currency. So
Speaker 1: we're going to need to have some discipline down the road.
Speaker 1: But you know, I have no problem with spending money
Speaker 1: right now because there are a lot of people who
Speaker 1: are really in some stress and you're not going to
Speaker 1: create inflation in the middle of a of an economy
Speaker 1: with the almost ten percent unemployment. David Ran to catch
Speaker 1: up as always, stay well, send out records to the team.
Speaker 1: David Kelly there of JP Morgan Asset Management. Let's stagger
Speaker 1: to our guests as we can Omar regular shrub chief Investment.
Speaker 1: You know, I can't, I can't come out after Quinneth
Speaker 1: Peltrow Good Morning on Bloomberg Radio and Bloomberg Television. Thrilled
Speaker 1: you with us under simulcast and Mr Aguilar will give
Speaker 1: us some brilliance right now. What is the character of
Speaker 1: this pullback? You have the advantage of Kathy and Lisianne
Speaker 1: to give you perspective as well. What is the nature
Speaker 1: of the pullback we've seen? Omar Well, good morning Town.
Speaker 1: Definitely is that out of my range of understanding A
Speaker 1: lot of the discussion of reline and celebrities. But I
Speaker 1: can tell you though that um big part of what
Speaker 1: the more it is going through now is something that
Speaker 1: in a way, it shouldn't be coming as a surprise.
Speaker 1: As we come out of this summer and such an
Speaker 1: amazing run in the market, we clearly speculated what would
Speaker 1: could be the fault look like. And if you actually
Speaker 1: see all the sources of uncertainty we had and the
Speaker 1: gap between the market and the economy getting bigger and bigger,
Speaker 1: that all of a sudden created that the environment for
Speaker 1: a you know, a potential volatility and what we're observing
Speaker 1: right here you put it into the context of the
Speaker 1: size of the rally that we have seen since April,
Speaker 1: we're just seeing volatility. The size of the correction, even
Speaker 1: though in the NASDAK has significant, is still, you know,
Speaker 1: very small relative to the size of the bold market
Speaker 1: we saw earlier in the year. Our really serious question,
Speaker 1: and I don't want you to speak for the executives
Speaker 1: A Swab and Mr Schwab as well, you can do
Speaker 1: that firm self. Swab and others in retail electronic brokerage
Speaker 1: have been pinatas about the sizeable retail trading we're seeing.
Speaker 1: Do you buy that idea that there's something ill about
Speaker 1: all that retail trading? Well, you know, the the our
Speaker 1: job a CHUAB is always to guide retail investors to
Speaker 1: find their best way to trade and in many cases
Speaker 1: to find, you know, the opportunities they find in the
Speaker 1: market so that they can use their capital in the
Speaker 1: wise way. Of course, there's a lot of players in
Speaker 1: the market, there's a lot of activity in the market,
Speaker 1: and the size of the retail trading, especially the high
Speaker 1: frequency retail trading, has had an impact in the market,
Speaker 1: no question about it. Now. I think a big part
Speaker 1: of the discussion of what we do at investment management
Speaker 1: part of CHUAB, it also involves, you know, trying to
Speaker 1: guide them in through the behavioral aspects of the market.
Speaker 1: If you actually see a lot of the retail activity
Speaker 1: usually tends to be very short term in age nature,
Speaker 1: and in many cases tends to be fairly related to
Speaker 1: behavior of economics. Um So we do a lot of
Speaker 1: research and we provide a lot of advice to our
Speaker 1: retail clients to try to guide them to understand what
Speaker 1: is really the motivation be find a lot of the trading.
Speaker 1: Is it really more for a short term trade? Is
Speaker 1: it really more consistent with their investment objectives? Well, I am.
Speaker 1: You mentioned two things. They're one on side the volume
Speaker 1: clearly increased over the last six months on the retail side.
Speaker 1: The other on the character of the trading. Can you
Speaker 1: talk a little bit more about that, Whether you've seen
Speaker 1: a shift to more short term than perhaps it was
Speaker 1: twelve months ago, Whether you've seen a shift from just
Speaker 1: the underlying stock to more options activity, which is a
Speaker 1: big discussion in the last week or so. Can you
Speaker 1: give us some color some clarity there. I'm a well,
Speaker 1: you know, the the I think the market environment has
Speaker 1: actually put you know, clients and in generally investors in
Speaker 1: like two camps, and you can actually barely clearly see
Speaker 1: through the activity that we see in the market. On
Speaker 1: one hand, we have what is called in behavioral finance,
Speaker 1: the overconfident crowd, the over confident crowd, that is a
Speaker 1: cognitive bias that basically feels that clearly, short term trading
Speaker 1: it is the place to go, mostly because central banks
Speaker 1: provide that extra liquidity and backstop for the market to
Speaker 1: continue to follow that trade. You can actually see that
Speaker 1: more in options, you can see that more in just
Speaker 1: the momentum trade. You can actually see it. You can
Speaker 1: obviously think about all the different participants that are trading
Speaker 1: on on and off regarding those short term you know
Speaker 1: components on the other hand, and we see that more
Speaker 1: and more often, we actually see more of the other
Speaker 1: side of the trade, which is some of those you
Speaker 1: know investors that tend to be more risk averse were
Speaker 1: loss a version, which is more of an emotional bias
Speaker 1: in behavioral economics, that tend to actually drive more and
Speaker 1: trying to be more safe and try to put more
Speaker 1: cash on the sidelines and looking for protections. So when
Speaker 1: you think about options, it's it's both ways. It basically
Speaker 1: allows for you to put money to work in the
Speaker 1: market to try to put you know, your views, but
Speaker 1: also to try to seek protection. So we actually see,
Speaker 1: you know, basically a bifurcation in terms of the the
Speaker 1: way that activity goes. One is more short term in nature,
Speaker 1: the other one tends to be more long term in nature.
Speaker 1: So does this all balance itself out and keep the
Speaker 1: rotation into cyclicles intact despite the textile off or we're
Speaker 1: gonna be basically be set back and it's not going
Speaker 1: to regain the helm and everything else going to kind
Speaker 1: of limp along for a while. Well, you know, I've
Speaker 1: I've always you know, described this induced the theory of
Speaker 1: economics that basically say, when you look at history of recessions,
Speaker 1: normally the market takes off before the recession is finally completed.
Speaker 1: But in one thing that has been common in all
Speaker 1: the prior recessions is that the source of the recession
Speaker 1: gets resolved before you start seeing the rotation from growth
Speaker 1: to value. Even though the market can continue to go up,
Speaker 1: you actually see the rotation you know, into value from growth,
Speaker 1: and that's very typical and most of the recessions what
Speaker 1: we what is unique about this one is that these
Speaker 1: looks more as a recession that comes for a nashural
Speaker 1: disaster more than an economic you know, driven recession, and
Speaker 1: the reality those and the majority of the natural disaster recessions,
Speaker 1: they are actually solved because the natural acester has gone.
Speaker 1: In this particular one, we have not solved the source
Speaker 1: of the recession. We're still trying to figure it out,
Speaker 1: and therefore it's going to be very hardly to basically
Speaker 1: think about a series of rotation until we actually have
Speaker 1: our kids to the source of that you know, solution
Speaker 1: for the recession source. I'm a time on time, just
Speaker 1: a quick one from May. Clearly there's many people that
Speaker 1: still haven't come back to the office. Have you got
Speaker 1: any basic assumptions of what happens to volume with guys
Speaker 1: like yourself right now once people start going back to
Speaker 1: the office again. Well, it's actually quite interesting, you know, John,
Speaker 1: because what we actually think is that there is a
Speaker 1: significant amount of people that are actually more comfortable trading
Speaker 1: from home, and in fact, a lot of the activity
Speaker 1: in terms of day trading tends to be more often
Speaker 1: or people that are now have more time to actually
Speaker 1: be training at home, so we we don't necessarily anticipate
Speaker 1: to see any significant change in terms of how the
Speaker 1: different um you know, activity within trading will actually happen.
Speaker 1: Of course, it's solid speculation, you know what we think
Speaker 1: about the bigger players people obviously, like on the asset
Speaker 1: management side, you know, we obviously all are working from
Speaker 1: home and therefore for that is not going to make
Speaker 1: any difference in terms of how we operate now in
Speaker 1: terms of retail clients and in terms of others. Clearly,
Speaker 1: you know, the advantage that they have in terms of
Speaker 1: their technology that is provided by different providers is there.
Speaker 1: So it is it is unclear to me that there
Speaker 1: will be a significant change in the volume that we see,
Speaker 1: and we see a significant pick up invalume already. I'm
Speaker 1: not great to catch up as always, I'm Aguila from
Speaker 1: shaf Thank you right now. In oil, we really ignored
Speaker 1: this since it's been my fault, and we to send
Speaker 1: join us with energy aspects, terrific micro economic analysis of
Speaker 1: what's going on in oil, but also the broader picture
Speaker 1: as well. How do you respond, Emriata to the certitude
Speaker 1: of the pundits that this is just a bad and
Speaker 1: weaker global demand a weaker global economy. Do you buy it? Well, Tom,
Speaker 1: I said that we really never were talking about a
Speaker 1: strong global economy, right. I think, if anything, the price
Speaker 1: of oil is finally catching up with fundamentals. We talked
Speaker 1: about it not that long ago. The kintango in the market,
Speaker 1: so the futures prices was telling us that, you know,
Speaker 1: prices in the future will be higher, um. And that
Speaker 1: was already showing the kintango had widened. It was showing
Speaker 1: the physical market was oversupplied when opek had started to
Speaker 1: ease their carts and US production was coming back a
Speaker 1: little bit. Um. But the price isn't move and that
Speaker 1: was to do with the fact that you know, Fed's
Speaker 1: kept the interest rate so low, sas so much money around,
Speaker 1: and the dollar was extremely weak. Finally those factors changed,
Speaker 1: and that's essentially what dragged price as well. This was
Speaker 1: long over you, um. And I think what this should
Speaker 1: help is accelerate some of those inventory drawdowns which we're
Speaker 1: already seen. But it should get better bigger, um. And
Speaker 1: that's the only way we will rebalance this market. Well, Okay,
Speaker 1: I'm gonna draw the ire of some my co hosts, perhaps,
Speaker 1: but trying to come up with a narrative to understand
Speaker 1: whether the moves in the equity market have been consistent
Speaker 1: with what we're seeing in oil. Oil seemed to be
Speaker 1: moving somewhat independently of the stock cell off that we saw,
Speaker 1: the nastac cell off in particular over the past three sessions,
Speaker 1: particularly having to do with OPEC cutting prices and people
Speaker 1: not increasing their orders all that much. Do you find
Speaker 1: the price action in oil, the weak demand in oil
Speaker 1: to be consistent with the large to the large degree
Speaker 1: the recovery and equity prices. I would say that what
Speaker 1: is the problematic thing with oil? Of course right now
Speaker 1: the headwinds really is that demand is recovering, like you'd say,
Speaker 1: I think, and you can see that in the equity market,
Speaker 1: but also whether it be home sales data and just
Speaker 1: generally even you know, broader mac data in China. Are
Speaker 1: the parts of the world recovering for sure, But it's
Speaker 1: transportation that's the weakness, right and unless and until there's
Speaker 1: a vaccine, it is going to be hard to get
Speaker 1: people moving in the same way. Yes, traffic data is
Speaker 1: picking up, but you know, flying check field demands remains
Speaker 1: at record low still and that is the issue over here,
Speaker 1: and that that's why I think it is correct for
Speaker 1: oil to diverge from equity is broadly. But once you
Speaker 1: have run down the infantry, and once you do get
Speaker 1: the demand recovery, which by the way is a good
Speaker 1: year if not too away, then things will probably correl
Speaker 1: it a lot better. This is crucial, this idea that
Speaker 1: perhaps the economy can recover without keep a flying around
Speaker 1: and traveling around to the degree that they did in
Speaker 1: the past. How low could oil prices go in your view,
Speaker 1: I don't think that when you're talking about the recovery
Speaker 1: in the man we're not saying that the recovery is
Speaker 1: going to go take us back to pre COVID levels. Right.
Speaker 1: We should be very clear on that we are recovering.
Speaker 1: But it's just that unlessen unt that last bit, which
Speaker 1: is going to be very all intensive recovers, we're really
Speaker 1: not going to be able to go back to I
Speaker 1: don't think there's much more than a two dollar you know,
Speaker 1: left in the corrections. We it's been very, very violent.
Speaker 1: I think at around thirty five dollars we should find
Speaker 1: the floor. I think us production, the recovery we were
Speaker 1: seeing very gradual. That's going to go back down again
Speaker 1: um and I think as a result of that, you
Speaker 1: will probably start to see more pressure generally um on
Speaker 1: on those supplies, which again helps in the rebalancing. Is
Speaker 1: this pullback advantageous for Saudi Arabia to provide new discipline
Speaker 1: to OPEC plus? I think it's not going to do
Speaker 1: them any harm, especially given they've been trying to get
Speaker 1: compliance up, and to be honest, Iraq and Nigerian compliance
Speaker 1: has been picking up. It's been more of the other
Speaker 1: GCC countries, some of them that their compliance has been
Speaker 1: slipping off late. But yes, I think that's very much
Speaker 1: the focused and while Saldi Arabia would of course light
Speaker 1: pricing to be around forty dollars, they all have very
Speaker 1: high budgetory requirements. I think this does play to their
Speaker 1: advantage in the short term. What do you see next?
Speaker 1: And Lisa's point, I mean on the date calendar here,
Speaker 1: what does oil do next? I think for now it
Speaker 1: has to consolidate, and unfortunately it's going to be pretty
Speaker 1: boring because unless anounder, the billion barrels we built gets
Speaker 1: kind of absorbed, um, it's really not going to get
Speaker 1: exciting and prices can't really move higher. I think the
Speaker 1: next big thing has to really come from the winter
Speaker 1: demand side. So you know, that's what I think a
Speaker 1: lot of people are focusing on because the macro picture
Speaker 1: is gradually improving, right, but that's very gradual that are
Speaker 1: risked around the second wave and second lockdowns around the world.
Speaker 1: So it's really going to be about the winter demand next.
Speaker 1: I'm rata right to catch up with you this morning.
Speaker 1: I'm ready sad ad Energy aspects. Thank you. This is
Speaker 1: a conversation of the day within the selection season with
Speaker 1: question over what the wealthy the haves are doing with
Speaker 1: their money. Providing leadership on this, including his wonderful new
Speaker 1: book is David Rubinstein, of course, of the Carlisle Group
Speaker 1: and his peer to peer conversations. One of them has
Speaker 1: been with Read Hastings. David, I want to cut to
Speaker 1: the chase Mark benny Off of Salesforce, that doubt component
Speaker 1: in a recent conversation with Bloomberg was scathing about the
Speaker 1: lack of philanthropy, the clumsiness of the new rich of California,
Speaker 1: the new rich of technology. Read Hastings seems to be
Speaker 1: providing real leadership. Here is his gift to black universities
Speaker 1: is that enough to be a game changer, to teach
Speaker 1: the younger crew how to give away the millions. Well,
Speaker 1: it was a twenty million dollar gift and it got
Speaker 1: a lot of attention, as it should have gotten. When
Speaker 1: I asked him about it, he said, he's actually made
Speaker 1: very other large gifts. Actually some are larger, but they
Speaker 1: just haven't been publicized. So I think he will have
Speaker 1: an impact. But I think Mark makes a good point.
Speaker 1: You have people that are now worth tens and twenties
Speaker 1: and thirties and billions of dollars, and you wonder what
Speaker 1: they're gonna do with all that money. I'm just piling
Speaker 1: it up. Well, what do you do with it? I mean,
Speaker 1: this is something you with your successive face and you
Speaker 1: know full disclosure, folks. Mr Bloomberg, the founder of Bloomberg LP,
Speaker 1: in this radio and TV property, his face the same conundrum.
Speaker 1: Why is it so hard for some and particularly these
Speaker 1: young technology types to give money away. Well, typically throughout
Speaker 1: the history of the world, people tended to give away
Speaker 1: money towards the end of their life and they would
Speaker 1: live at the sixties, seventies, eighties. Now a lot of
Speaker 1: people making money in their twenties thirties and forties, and
Speaker 1: they haven't really expected to make this much money, and
Speaker 1: it takes a while for them to give it away.
Speaker 1: I guess hopefully they will do some things. A number
Speaker 1: of these people have signed a giving pledge, as Mike
Speaker 1: Bloomberg has and as I have, But I think it
Speaker 1: will take a while because the amount of money that
Speaker 1: people accumulated quickly is just unbelievable. For example, the founder
Speaker 1: of Tesla, He's now has a net worth of let's
Speaker 1: say seventy billion or hundred billion dollars. He made it
Speaker 1: so quickly. It just takes a while to give it
Speaker 1: away and figure out what you want to do with it.
Speaker 1: But more philanthropy should be done, for sure by all
Speaker 1: the wealthy people that now have it money. So, David,
Speaker 1: there are those who are looking to give away money,
Speaker 1: and then there are other people who are counting on
Speaker 1: continuing to work until they are very old because they
Speaker 1: need to support themselves. For those individuals, uh And speaking
Speaker 1: to your interview with read Hastings, can they expect to
Speaker 1: go back to the office. Can you tell us what
Speaker 1: Netflix is CEO had to say about that? Um? Well,
Speaker 1: I think read Hastings would like people to come back
Speaker 1: to the office, but they want to make certain that
Speaker 1: it's safe and so forth. He's been working remotely and
Speaker 1: actually from uh, you know, his house in California. Many
Speaker 1: CEOs like Read Hastings recognize that people are not coming
Speaker 1: back to work really until there's a vaccine, until there's
Speaker 1: there's safe public transportation, and until there's a lot of
Speaker 1: childcare for you for you people have young children. So
Speaker 1: I think it's gonna take a while. I think you
Speaker 1: probably aren't going to see people back to work in
Speaker 1: full man for another six to nine months. So he
Speaker 1: didn't ask you whether you have a Netflix subscription. And
Speaker 1: we've learned some private information about that, David, which you
Speaker 1: can or cannot share on this program. It's just us,
Speaker 1: but I do want to hear what he expects going forward.
Speaker 1: Was this a blip giving him a boon during this
Speaker 1: work from home era or does he see the success
Speaker 1: par laid into a longer term establishment of streaming as
Speaker 1: the entertainment of choice. Well, when he started Netflix, people
Speaker 1: remember he basically had a system where you you rented
Speaker 1: a DVD and he mailed it to you overnight, you
Speaker 1: mailed it back to him and then he eventually got
Speaker 1: into the streaming business ahead of everybody else and caught
Speaker 1: the rest of Hollywood by a flat footed He built
Speaker 1: the biggest streaming business now with the market value about
Speaker 1: two and twenty three billion dollars, And at one point
Speaker 1: he wanted to sell the company for fifty million dollars
Speaker 1: to then the biggest company doing this blockbuster, and they
Speaker 1: said no, they didn't want to pay fifty million dollars
Speaker 1: for it. That's the best thing that ever happened to
Speaker 1: him financially, David, how do you parse the Netflix is
Speaker 1: and how did Mr Hastings speak about the idea of
Speaker 1: spending spending, spending spending and not really generating profits. How
Speaker 1: do you partition companies that clearly make an income statement
Speaker 1: profit in those where it's not smoke in mirrors but
Speaker 1: it's a little bit mysterious. Well, people made fun of
Speaker 1: Jeff Bezos for a while he was just building market share.
Speaker 1: They said he'd never gonna earn any money. People made
Speaker 1: fun of Elon Musk that that Tesla would never get anywhere,
Speaker 1: and people made fun of Netflix spending a lot of
Speaker 1: money on original content. Turns out that these entrepreneurs have
Speaker 1: had the last laugh so far. Clearly, when you can
Speaker 1: build market share, you can really get a lot of
Speaker 1: customers and they get addicted to what you're what you're producing,
Speaker 1: and ultimately that's what happened to Netflix. People are now
Speaker 1: I want to say, addicted, but people really love it
Speaker 1: and it's really unique. Nobody else is really competing with
Speaker 1: them at the scale they're able to produce and show
Speaker 1: their their their content. David Rubinstein one final question. This
Speaker 1: is quite a security over to soft Bank and the
Speaker 1: latest derivative uproar that we've seen. Could soft Bank do
Speaker 1: what they did in investment management out of Abu Dhabi
Speaker 1: with the ex Deutsche Bank crew. Could they have generated
Speaker 1: these derivative strategies with call options if they were simply
Speaker 1: registered in the United States. I think it would be tougher,
Speaker 1: and I think a lot of people in the investment
Speaker 1: world we're surprised by this because that's a staggering amount
Speaker 1: of money. It appears about twenty billion dollars of call
Speaker 1: options right now. It may be profitable, but it's a
Speaker 1: fairly risky thing to do. David. Let's leave it there.
Speaker 1: Thank you so much, greatly appreciate it, and this is
Speaker 1: wonderful David Rubinstein, peer to peer conversations. This with Read
Speaker 1: Hastings of Netflix. Look for that tonight at nine pm.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg
Speaker 1: Radio