Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg pm L podcast
Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. Here to
Speaker 1: tell us what's going to happen in seventeen, or at
Speaker 1: least what might happen is liz Ane Saunders, chief investment
Speaker 1: strategist for Charles Schwab and Company, joining us from San Francisco.
Speaker 1: Lizen always a pleasure tell us your outlook for the
Speaker 1: SMP five harder. Let's start with earnings and then we
Speaker 1: can talk about valuations. So um well, both in earnings
Speaker 1: and in terms of market performance, we don't publish targets.
Speaker 1: I actually think that that's a bit of a silly exercise.
Speaker 1: But if you look at the consensus right now for
Speaker 1: corporate earnings, it's about growth every year for calendar year seventeen.
Speaker 1: What's interesting about that number is most analysts that do
Speaker 1: publish forecasts have it yet incorporated in the potential benefit
Speaker 1: either from regulatory reform or tax reform, infrastructure spending, or
Speaker 1: maybe the combin combination of all of those. So I
Speaker 1: think there's potentially upside um. There's also some downside because
Speaker 1: analysts naturally get a little bit too too optimistic, But
Speaker 1: I think the net is going to be fairly positive
Speaker 1: in terms of economic growth. Clearly, we saw a lift
Speaker 1: up and economic activity in the second half of ten,
Speaker 1: so I actually think the rally that we got in
Speaker 1: the stock market had as much to do with that,
Speaker 1: and much of that predated the election, so I don't
Speaker 1: think it's pure election related, and I think we are
Speaker 1: looking at a pro growth administration. My concern, and I
Speaker 1: think it was exacerbated by the press conference yesterday, is
Speaker 1: that the protectionist part of the policy platform is starting
Speaker 1: to move up the spectrum in terms of likely action
Speaker 1: in seen, and I think that would be an offset
Speaker 1: to some of the more positive components of the of
Speaker 1: the plan. You know, we hear a lot about the
Speaker 1: rotation out of bonds and into stocks. Do you believe
Speaker 1: that this is happening and what are you looking for
Speaker 1: to sort of indicate whether there is sort of more
Speaker 1: upside in stocks at the behest or at the detriment
Speaker 1: to the detriment of bonds. I think it's it's too
Speaker 1: soon to suggest that a new trend is in place.
Speaker 1: I e. The great rotation has kicked in. Uh you
Speaker 1: shaw about three weeks of pretty steady and flows into
Speaker 1: the US equity market, combining both neutral funds and exchange
Speaker 1: traded funds. But in the last week that's actually falter
Speaker 1: and you've gone back into negative territory. So it's a
Speaker 1: you know, it's a nascent shift, and I think too
Speaker 1: soon to suggest that this is going to be a
Speaker 1: big story in two seen. The good news is is
Speaker 1: that if you look further back, if you look through
Speaker 1: that this entireble market, not a single net new dollar
Speaker 1: of money has come into the US equity market, even
Speaker 1: if you include e t f s into the funds category.
Speaker 1: So there's still a lot of runway ahead of us
Speaker 1: for that to be a lift for the market. I I.
Speaker 1: You know, the fact we got three weeks of infloz
Speaker 1: is a good thing, but it also shows you how
Speaker 1: quickly sentiment can shift. Given that in just the last week,
Speaker 1: during this period of consolidation for equities, kind of investors
Speaker 1: turntail again. So it has the potential to be a
Speaker 1: positive story. It's I think it's a little early. Well,
Speaker 1: how attractive do equities have to be in order to
Speaker 1: attract that money. I was just taking a look at
Speaker 1: the price to earnings ratio for the SMP five D.
Speaker 1: If you bought it today, you're paying a twenty one multiple. Well,
Speaker 1: that's on trailing earnings. And nothing wrong with looking at
Speaker 1: trailing yeah, because you don't know what's going to happen
Speaker 1: in the future. But when you are at an inflection
Speaker 1: point in earnings and your trailing earnings incorporates a couple
Speaker 1: of quarters of an earnings recession, I think that artificially
Speaker 1: deflates the E and the PE equation, and I think
Speaker 1: it is important to look in conjunction with trailing valuations,
Speaker 1: look at forward valuations, and on a forward PE basis,
Speaker 1: you're more like seventeen. That's a little bit north of
Speaker 1: the long term median. But in the current inflation environment
Speaker 1: we're in, assuming it doesn't really kick in from here,
Speaker 1: multiples have actually typically traded above where we are right now.
Speaker 1: So I also think valuation is the eye of the beholder.
Speaker 1: We're talking about traditional PE ratios. You can look at
Speaker 1: price to book. You can look at inflation adjusted measures
Speaker 1: like the rule of twenty two FED model. You can
Speaker 1: look at even further trailing numbers like Schiller Cape, and
Speaker 1: I promise you that no matter what your view is
Speaker 1: on the market, I can find you a valuation metric
Speaker 1: that perfectly supports that view. And that view could be
Speaker 1: anything from extreme embarishness to extreme abolishness. Liz, you know
Speaker 1: the flip side of where what's a good entry point
Speaker 1: for stocks is at what point is it does it
Speaker 1: make sense to get back into bonds. I'm looking at
Speaker 1: a ten ure yield at two point uh. Some asset
Speaker 1: managers have called for three ten yurared yields by the
Speaker 1: end of this year. I mean at that level, do
Speaker 1: you think that that would be a buy? I don't
Speaker 1: think it should ever be a level. I don't think
Speaker 1: investing should ever be about get in and get out.
Speaker 1: That those are those are gambling on a moment in time,
Speaker 1: and investing should always be a process over time. So
Speaker 1: I would use the tried and true rules around rebalancing.
Speaker 1: And what rebalancing does is it let your portfolio tell
Speaker 1: you when it's time to do something. If your bond
Speaker 1: allocation has gotten out of whack relative to what your
Speaker 1: normal targets should be. And that's a function of your
Speaker 1: risk tolerance and time arizing a need for income, etcetera, etcetera.
Speaker 1: Then your portfolio tells you want to make that adjustment
Speaker 1: to pick some arbitrary level on the yield to say
Speaker 1: time to get back in and bonds. Again, that's gambling
Speaker 1: on a moment in time, and investing should never be
Speaker 1: about that. Where is this money going to come from
Speaker 1: central banks or from actual investors? Oh? I think from
Speaker 1: from actual investors. Keep in mind that if you look
Speaker 1: over this entire Bowl market, retail investors have not been
Speaker 1: very active. We talked about that as it relates to
Speaker 1: fund flows. Hedge funds net long exposure never got much
Speaker 1: above the low fifties in this entire Bowl market and
Speaker 1: pass Bowl markets. You would expect that to get up
Speaker 1: into the mid sixties. Pension funds have not Traditional pension
Speaker 1: funds have not been big buyers. So really the only
Speaker 1: game in town has been come. He's buying back their
Speaker 1: own stock. In an environment where you haven't had a
Speaker 1: robust I p O market, it's a simple supply demand.
Speaker 1: So I think there's a lot of room for investors
Speaker 1: of every variety of different cohorts of investors two up
Speaker 1: their equity exposure. I wouldn't expect in a straight line,
Speaker 1: nor what I wanted to be. I think, you know,
Speaker 1: we started to get a sense of a melt up
Speaker 1: until this recent consolidation phase, and is as lovely as
Speaker 1: melt ups feel while they're happening, assuming you're long, they
Speaker 1: don't tend to end well. So this kind of two
Speaker 1: steps forward half a step back is actually a pattern
Speaker 1: I would love to see continue in As you mentioned
Speaker 1: petch funds and what they may do. Yesterday, Cowper's c
Speaker 1: I O. Is on Bloomberg Television and he was talking
Speaker 1: about how he was hoping to rotate about thirty billion
Speaker 1: dollars of money that's currently managed by external managers private
Speaker 1: equity firms, hedge funds, and make it internally managed. Do
Speaker 1: you think that that's a good idea or and also
Speaker 1: do you think that that's going to be a trend
Speaker 1: that takes hold? Well, Yeah, I think it's a trend
Speaker 1: that that has already occurred. I think you already hit
Speaker 1: the inflection point for endowments, foundations, institutions, pension funds, that
Speaker 1: um shifted uh for for many years over the past
Speaker 1: decade or so, shifted significantly away from the public markets
Speaker 1: towards the private markets, whether it was you know, hedge
Speaker 1: funds or venture capito a private equity or or real
Speaker 1: estate funds. But that pendulum has already started to swing back.
Speaker 1: And in the case of hedge funds. The interesting thing
Speaker 1: about hedge funds, there is a lot of people put
Speaker 1: them in a category of alternative investments. Yet if if
Speaker 1: you have an investment in a hedge fund and that
Speaker 1: hedge fund is buying equities either on the longer short side,
Speaker 1: that's your exposure. That's not an alternative asset. It's a
Speaker 1: an alternative way to get exposure to the equity asset class.
Speaker 1: So I think there's also a rethinking of how we
Speaker 1: categorize hedge funds, and if they're purely equity, that's how
Speaker 1: you you have to incorporate that into your equity exposure.
Speaker 1: I think it's the fee problem, limited performance, higher fees.
Speaker 1: That's been the real rub. Thank you so much, We're
Speaker 1: gonna have to leave it there, unfortunately. Liz Ane Saunders,
Speaker 1: chief investment strategies strategist at Charles Schwab and Company talking
Speaker 1: about her outlook for this year. Well, another sort of
Speaker 1: sad stories in the biotech industry. There's a story on
Speaker 1: the Bloomber terminal this morning talking about the mood of
Speaker 1: shock and disbelief at the JP Morgan Healthcare conference in
Speaker 1: San Francisco as they listened to President elect Trump talk
Speaker 1: about how he's going to take a hard line with
Speaker 1: his negotiations with the pharmaceutical companies. I want to bring
Speaker 1: in Max Neeson bloombergad Fly columnists to sort of shed
Speaker 1: some light on why perhaps this shouldn't have come as
Speaker 1: a surprise to these pharmaceutical executives. Max, I mean, this
Speaker 1: is not unexpected, right, I mean you're to calumn about this, uh,
Speaker 1: several of them in fact, Uh, it really it does
Speaker 1: bewilder me the extent of the surprise. During the campaign,
Speaker 1: Trump repeatedly mentioned that he wanted Medicare to be able
Speaker 1: to negotiate drug prices and push them down. Back in December,
Speaker 1: he made another comment about how he didn't like the
Speaker 1: way that drug prices were going. What's really worrying for
Speaker 1: the sector. I think I think that kind of explained
Speaker 1: some of the extent of the reaction is the fact
Speaker 1: that he really seems to be escalating both his rhetoric
Speaker 1: and um to some degree, the specificity going from just
Speaker 1: I don't like drug prices to we're gonna change the
Speaker 1: bidding process a policy than in fact many fear that
Speaker 1: Hillary Clinton would actually try to bring about it if
Speaker 1: she had been elected. We're just looking at some of
Speaker 1: the stocks today other than Mark, and we're gonna get
Speaker 1: to that in a in a second. But Fires are
Speaker 1: down one percent, Bristol Maris Squib down about three quarters
Speaker 1: of a percent, Abvy is down about a quarter of
Speaker 1: although yesterday the clients were much more severe with so
Speaker 1: much deed, I would just like to see whether anyone said, oh,
Speaker 1: these are bargains. Johnson and Johnson down about half, right,
Speaker 1: of course, the Nazac Biotechnology and that's which I'm looking
Speaker 1: at right now, down six tents of repercent, which considering
Speaker 1: how much stocks are down today and basically in line
Speaker 1: with the market. And that's after a three percent decline yesterday.
Speaker 1: Although Max, how much does that due to Mark? Because
Speaker 1: Mark shares are up. Um. Yeah, Murk is kind of
Speaker 1: the soul out performer on the kind of a specific
Speaker 1: piece of drug data that was so good that it
Speaker 1: seemed to overweigh the kind of broader industry. Yeah, lung cancer,
Speaker 1: it's actually a really huge deal for them. Um. They
Speaker 1: have a so called immune oncology drug sort of unlawshed, unleaked,
Speaker 1: unleashes the immune system against lung cancer. And the news
Speaker 1: they got is that it might be approved in combination
Speaker 1: with chemotherapy in a far broader subset of patients. Right now,
Speaker 1: it can only be used in about of them whose
Speaker 1: tumor as a specific mutation. If they get disapproval by May,
Speaker 1: which is well ahead of anything competitors can hope for,
Speaker 1: it'll be about a year ahead of expectations and massively
Speaker 1: increase their market size. Can I just ask you a
Speaker 1: little bit about this because you mentioned the approval process
Speaker 1: and we have yet to hear who is going to
Speaker 1: be the head of the Food and Drug Administration? Does
Speaker 1: anybody that you talk to expect big changes in the
Speaker 1: way that drugs are approved now that there's going to
Speaker 1: be a new president. Um, there there can be a
Speaker 1: kind of a really big swing on that depending on
Speaker 1: who gets put in charge. There have been sort of
Speaker 1: two names, two very different names put up. One of
Speaker 1: whom is a former kind of Peter Theeal associate who
Speaker 1: has some pretty I mean, I would describe them as
Speaker 1: just wacky ideas that he's dispoused in the past on
Speaker 1: drug development, that you should approve drugs just based on safety.
Speaker 1: If they're saying if they don't hurt people, if they
Speaker 1: don't hurt people, you know, is this um, you know,
Speaker 1: we'll find that before the second who is also being concerned. Um,
Speaker 1: it's kind of a more doctrinaire x f DA official
Speaker 1: who just you know, he's he's a little bit more conservative,
Speaker 1: but he's not going to dramatically shake up the kind
Speaker 1: of way things are done. I'd imagine if he replaces
Speaker 1: Mr Califf. How much do you think that there are
Speaker 1: conversations going on in the back office is of pharmaceutical
Speaker 1: companies right now about how to take back the news
Speaker 1: cycle from President elect Trump. I mean, it seems like
Speaker 1: all he has to say is we're going to negotiate
Speaker 1: really hard, and and their their share is just plummet.
Speaker 1: I mean, can they do anything to kind of take charge?
Speaker 1: I think they absolutely can. I think you've already seen
Speaker 1: some of these moves from a couple of companies kind
Speaker 1: of advocating self policing self restriction on drug price increases,
Speaker 1: notably Novo nordisk Al organ and then just yesterday ABVY
Speaker 1: pledge to not take take only a single drug price
Speaker 1: set of drug price increase this year and limited to
Speaker 1: less than ten percent, which is kind of, you know,
Speaker 1: not exactly altruistic, but definitely a step down from what
Speaker 1: had become the industry, or of kind of bi annual
Speaker 1: price increases in excess of ten percent. The name you're
Speaker 1: the name you're looking for was Jim O'Neill. Jim O'Neill,
Speaker 1: who is at the event at the capital management firm
Speaker 1: a Mithral Capital, which was founded by, as you said,
Speaker 1: Peter Tildy, once a founder of PayPal and one of
Speaker 1: the backers of Facebook. Yeah, that's the name. And and
Speaker 1: also another tick on his resumes he's a member of
Speaker 1: the board of the C Studying Institute, which are libertarians
Speaker 1: C platforms, which kind of dovetails with his view on
Speaker 1: the approvability of drugs and liberty libertarian fashion. And just
Speaker 1: to close the loop on Murk and their lung cancer drug.
Speaker 1: Lung cancer is the leading cause of cancer death in
Speaker 1: both men and women in the United States and worldwide
Speaker 1: specifically China. China has got a very big problem well
Speaker 1: and in the United In the United States, lung cancer
Speaker 1: is responsible for thirty percent of cancer deaths. This is
Speaker 1: more than breast cancer, colon cancer, and prostact cancer combined.
Speaker 1: About a hundred and fifty five thousand people die each
Speaker 1: year from lung cancer, So that would be a big
Speaker 1: breakthrough from Mark really well be huge market. Thanks very much, mcknean,
Speaker 1: gad Fly expert in pharma. We've been hearing a lot
Speaker 1: about how the Senate is currently talking about repealing and
Speaker 1: voting to repeal Obamacare, but what exactly is going to
Speaker 1: replace it? I want to bring in. Brian Ry, senior
Speaker 1: healthcare policy analyst for Bloomberg Intelligence, has been closely following
Speaker 1: the proceedings in Congress. Brian, I hear a lot about
Speaker 1: the repeal of Obamacare. What exactly is Congress can replace
Speaker 1: it with. I guess that's the key question that everyone's
Speaker 1: grappling with, and the fact that they haven't come forward
Speaker 1: with a single plan that everyone supported underscores how difficult
Speaker 1: the question that is. I think you know, broadly speaking,
Speaker 1: what Republicans want to do is what a lot of
Speaker 1: politicians want to do, and that's keep the parts of
Speaker 1: the plan that are popular and eliminate those that aren't.
Speaker 1: Of course, that's easier said than done. So what I
Speaker 1: think they want to replace it with is a system
Speaker 1: that allows for more choice. I think they want to
Speaker 1: combine a combination of uh, some plans that are have
Speaker 1: lower premiums but higher deductible, sort of the catastrophic plans
Speaker 1: that right now don't meet a lot of the essential
Speaker 1: benefit requirements under the c A or under Obamacare, but
Speaker 1: are lower premium And they want to do that to
Speaker 1: try and draw in a lot of the younger, healthier
Speaker 1: people that right now are aren't enrolling in sufficient numbers
Speaker 1: to make the risk pools profitable for insurers. You've seen
Speaker 1: a lot of insurers they're going to pull out of
Speaker 1: the exchanges. I think that's the trend that the Republicans
Speaker 1: are trying to reverse. Brian, I'm gonna ask you about
Speaker 1: something much more sort of day to day. You know
Speaker 1: those signs that are posted in restaurants showing the calorie count.
Speaker 1: I believe restaurants that have more than twenty locations they
Speaker 1: were required under the A c I to post this
Speaker 1: nutritional information. Are things like that going to go away? Uh?
Speaker 1: If they are, it's probably not going to be as
Speaker 1: part of this process, um and uh. And so that
Speaker 1: that's something that again, you know, they may direct uh
Speaker 1: there the new administration under the FDA, for example, to
Speaker 1: either withdraw that guid insto issue updated guidance that that
Speaker 1: does that. But that's probably not going to be part
Speaker 1: of what Congress is doing right now. And that's simply
Speaker 1: because to avoid a Senate filibuster, recognizing the math problem
Speaker 1: that Republicans have fifty two votes and not sixty. Um,
Speaker 1: they're using this budget reconciliation process, and that restricts the
Speaker 1: things that they can really target under this repeal effort,
Speaker 1: the things that are only budget related, so taxes, penalties,
Speaker 1: and medicaid expansion, anything involving federal funding. But a lot
Speaker 1: of those regulations, such as the one you just referenced,
Speaker 1: uh with the menu menus and calories, that's something that
Speaker 1: would have to be addressed separately. Brian. Let's say this
Speaker 1: repeal of Obamacare does pass the Senate. What happens then,
Speaker 1: So where we are now is they've last night they
Speaker 1: Senate essentially passed UM. What would be a blueprint that
Speaker 1: would authorize various committees to then come up and craft
Speaker 1: a repeal bill that has to go to the House. Now,
Speaker 1: they're going to probably address that either tomorrow or over
Speaker 1: the weekend, and then a couple of committees in each
Speaker 1: the sent it in the House would then go to
Speaker 1: work and craft language saying, Okay, we're going to repeal
Speaker 1: these taxes, were going to repeal these mandates, repeal the
Speaker 1: penalties for not buying A c A compliant insurance, those things,
Speaker 1: and then in a matter of weeks come back with that.
Speaker 1: But back to the original question. At the same time,
Speaker 1: you know, President elect Trump and a growing number of
Speaker 1: Republicans said, what, we also want to have a bill
Speaker 1: specifying what we would replace it with in place at
Speaker 1: the same time to make this simultaneous. If they're going
Speaker 1: to try and do that, then this process will probably
Speaker 1: bog down and they'll have to delay the repeal effort
Speaker 1: while they wait for the replace effort to catch up.
Speaker 1: This is maybe tangential to the issue of the A
Speaker 1: c A. But haven't the lawmakers in Washington taken aim
Speaker 1: at the use of human fetal tissue cells for scientific research?
Speaker 1: They have, and you know there there are a few
Speaker 1: different things and sort of tangential to that is part
Speaker 1: of this repeal process. Speaker Paul Ryan has said that, UM,
Speaker 1: they'd like to include, you know, removing federal funding for
Speaker 1: planned parenthood for example, and UM and that could potentially
Speaker 1: complicates their efforts to pass the repeal BI Also, you know,
Speaker 1: lots of moving parts. But you're right, and I think
Speaker 1: Republicans who have been targeting UH those type of provisions
Speaker 1: for a while feel like that would say Republican in
Speaker 1: the White House and Republicans retain a control of both chambers,
Speaker 1: that this is their best chance to advance provisions like that.
Speaker 1: And it'sn't one of the ideas with the repeal of
Speaker 1: Obamacare that states would get less federal funding for medicaid
Speaker 1: as part of this UH and would compel them to
Speaker 1: negotiate take a harder line with drug companies. Is that
Speaker 1: sort of the idea? You know, it could, So there's
Speaker 1: two different things there. You know, they could repeal the
Speaker 1: medicaid expansion that was part of the A C A
Speaker 1: or you know, maybe have a compromise and leave it
Speaker 1: up to the states saying if you want to keep it,
Speaker 1: you can if not you don't necessarily have to, um,
Speaker 1: but what they like to do. I think Paul Ryan's
Speaker 1: vision is to essentially convert medicaid in the block grant program,
Speaker 1: where we the federal government will give each state pool
Speaker 1: of money UM to do with as they see fit
Speaker 1: and uh and designed to own medicaid plans with that.
Speaker 1: That's a harder sell on the drug pricing front. UM.
Speaker 1: You know, we'll see what Trump's pick a for HHS
Speaker 1: Secretary Tom Prices next weekend. We gotta run. Thanks very much,
Speaker 1: Brian Ryan. Are you gonna be following this for us?
Speaker 1: Our senior healthcare policy analyst for the Bloomberg Intelligence Government team.
Speaker 1: Will Apple become the next HBO? Well, it looks like
Speaker 1: they're gonna try. I want to bring in John Petreats,
Speaker 1: managing director and portfolio manager at Point View Wealth Management,
Speaker 1: to give some context to the news that we got
Speaker 1: uh this morning by the Wall Street Journal that Apple
Speaker 1: is planning to create new original television content for its
Speaker 1: music subscribers. So John, Uh, first of all, what's your
Speaker 1: take on what their plan is to do as far
Speaker 1: as creating original content? Well, first of all, thanks for
Speaker 1: having me on. I gives my first point would be, well,
Speaker 1: it's about time. Um, when you're a six hundred and
Speaker 1: fifty billion dollar company, it's really hard to sell a
Speaker 1: lot of cool widgets to grow the top line, you
Speaker 1: have to move into some sort of subscription type of
Speaker 1: business model in order to grow, because it's just, you know,
Speaker 1: you just can't. The margins on the hardware business just
Speaker 1: get compressed, and it's just it's very difficult to reinvent
Speaker 1: and sell new items. So the fact that they're finally
Speaker 1: catching up or going after Amazon, Netflix, Hulu, understanding that
Speaker 1: through the Apple TV, which is a portal for them,
Speaker 1: they can create this original content or with the cash
Speaker 1: where they have buy content and set up some sort
Speaker 1: of scription subscription model where you and I pay Apple
Speaker 1: you know, ten nine a month and get all this content.
Speaker 1: So I think it's it's it's a great move for
Speaker 1: a huge company that needs to change their business model.
Speaker 1: You know, it's interesting that you talked about, you highlighted
Speaker 1: that they might buy content, and I mean the content
Speaker 1: world right now is incredibly crowded. You've got you know,
Speaker 1: you mentioned yourself, Netflix, Hulu, Hbo, itself. I mean everyone
Speaker 1: is sort of focusing on content. Are you expecting some
Speaker 1: kind of consolidation and if so, who might Apple look
Speaker 1: to purchase. Yeah, it's a good idea, it's a it's
Speaker 1: a good question. I think they're going to go along
Speaker 1: the route of building out their own original content. They
Speaker 1: may not acquire companies, but they may acquire a very
Speaker 1: creative smart people. Look what they did with Beats by
Speaker 1: bringing on Jimmy Iovine and Dr dre Um to build
Speaker 1: out on the music platform. So maybe they bring on
Speaker 1: board really smart people to who are very creative to
Speaker 1: do their original content. You know, a Viacom is a
Speaker 1: company out there that has a tremendous amount of content
Speaker 1: that's being undervalued. They have paramount studios, they own MTV, Nickelodeon,
Speaker 1: and all the other sorts that that that the market
Speaker 1: is thinking traditional TV and a cable model is dead.
Speaker 1: So you know, maybe there's someone like that where they
Speaker 1: can go up and pick up on the cheap. But
Speaker 1: I think Apple's first route is going to be um
Speaker 1: doing it on their own and maybe hiring and spending
Speaker 1: a lot of money on really smart people that come
Speaker 1: out and build it on their own. But John, isn't
Speaker 1: the Walk of Fame littered with those efforts to become
Speaker 1: a content producer, whether it is in the movie industry,
Speaker 1: television industry. Is there an example of a company that
Speaker 1: formally was not in the business that just flipped the
Speaker 1: switch and was successful at it. I mean Amazon is
Speaker 1: a perfect example, right. I mean, Amazon, who build this
Speaker 1: entire bread and butter off the e commerce distribution platform
Speaker 1: and then through the fire Stick, has decided to build
Speaker 1: out its own content. And now as prime members, you
Speaker 1: get access to all that through the through the fire Stick,
Speaker 1: and you get X to all of Amazon's original content
Speaker 1: within But do we know about that Amazon actually makes
Speaker 1: a profit on all that content. If you take away
Speaker 1: that prime subscriber, well that's a different story. Well, I
Speaker 1: mean the goal supposedly is to actually make money, right, Yeah,
Speaker 1: if there's ways to do it though, I mean Apple,
Speaker 1: if the Apple can bundle right a a content subscription
Speaker 1: with its music and then add in features of hey,
Speaker 1: you know, we'll throw in extra storage on iCloud. I mean,
Speaker 1: there's a lot of other ways to bundle in content
Speaker 1: where a user, um, where maybe Apple is not maximizing
Speaker 1: each individual user of an iPhone or an eye watch
Speaker 1: effectively um to get more juice from the Lemon, so
Speaker 1: I think and again, this is not a very capital
Speaker 1: intensive type of build out. Think about the other projects
Speaker 1: that have been thrown out that Apple may get into it,
Speaker 1: such as cars, and I was never a believer into
Speaker 1: the car model. But good luck in terms of building
Speaker 1: on manufacturing facilities dealing with unions for auto workers. I
Speaker 1: mean that was a capital intensive venture that people are
Speaker 1: trying to throw out there. If Apple would compete with Tesla,
Speaker 1: that I just didn't think make it any sense at all.
Speaker 1: What's the key audience do you think that they're going
Speaker 1: to try to target here? Well? I think clearly the
Speaker 1: millennials are changing the way the way they view TV.
Speaker 1: I mean, my kids are nine and a half and
Speaker 1: six and a half and they probably watch more YouTube
Speaker 1: and Netflix than when they're allowed to watch TV than
Speaker 1: anything else. Um, they don't even know. They don't have
Speaker 1: any uh you know, they're not they're not tied to
Speaker 1: the traditional TV model that say you and I were
Speaker 1: all brought up with. So the idea of you can
Speaker 1: watch what you want when you want. An Apple has
Speaker 1: the key here is Apple has the I t V platform, right,
Speaker 1: you have that portal where you could download apps and
Speaker 1: it could work seamlessly with all of your other Apple
Speaker 1: devices and have your pictures on there in your music.
Speaker 1: So by doing this, I think it's one of the
Speaker 1: key ingredients to capturing UM The entire UH end users
Speaker 1: UH media have Thanks very much for being with us.
Speaker 1: John Patritis is a Managing director portfolio manager Point of
Speaker 1: View Wealth Management based in Summit, New Jersey, speaking about
Speaker 1: Apple and its potential to get into the content business.
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
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