WEBVTT - Netflix Tops Wall Street’s Lofty Expectations, Raises Forecast 0:00:02.520 --> 0:00:10.560 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business 0:00:10.560 --> 0:00:14.440 Week Daily reporting from the magazine that helps global leaders 0:00:14.480 --> 0:00:18.400 stay ahead with insight on the people, companies, and trends 0:00:18.440 --> 0:00:23.440 shaping today's complex economy. Plus global business finance and tech 0:00:23.480 --> 0:00:27.360 news as it happens. The Bloomberg Business Week Daily Podcast 0:00:27.720 --> 0:00:32.080 with Carol Masser and Tim Steneveek. On Bloomberg Radio. 0:00:32.560 --> 0:00:35.080 It is Bloomberg business Week Daily. That's normal. Linda in 0:00:35.360 --> 0:00:38.320 for Carol Master this afternoon, on this Netflix earnings day, 0:00:38.400 --> 0:00:40.960 we are seeing shares of Netflix actually move lower in 0:00:40.960 --> 0:00:43.680 the after hours after an initial mounts higher, down right 0:00:43.760 --> 0:00:47.440 now by one point seven percent. The company did report 0:00:47.560 --> 0:00:52.600 results that exceeded investor expectations in every major metric, revenue 0:00:52.640 --> 0:00:56.680 growing to eleven point one billion dollars, earnings jumping from seven, 0:00:56.800 --> 0:01:00.280 earn is jumping two rather seven dollars, and nineteen sense 0:01:00.400 --> 0:01:03.280 per share. The company also raised its forecast for full 0:01:03.360 --> 0:01:05.840 year sales and profit margins. It expects to generate up 0:01:05.880 --> 0:01:08.480 to forty five point two billion dollars in sales and 0:01:08.560 --> 0:01:12.080 have an operating margin of twenty nine point five percent. 0:01:12.560 --> 0:01:13.559 Let's bring in Mark. 0:01:13.440 --> 0:01:16.520 Douglass, the CEO, of the publicly traded advertising and marketing 0:01:16.560 --> 0:01:21.119 company Mountain ticker MNT, and he joins us from Miami. 0:01:21.400 --> 0:01:23.440 Mark always good to check in with you. I want 0:01:23.480 --> 0:01:27.880 to focus specifically with you on the ads supported element 0:01:27.920 --> 0:01:31.200 of this. I was telling Nora earlier. You know, I'm 0:01:31.240 --> 0:01:33.160 old enough to remember when Netflix said they would never 0:01:33.200 --> 0:01:35.399 do ads, they would never do live content, they would 0:01:35.400 --> 0:01:37.840 never do news, they would never do sports. Now they 0:01:37.840 --> 0:01:40.480 do all of those things, And is the in more? 0:01:40.560 --> 0:01:41.720 Is the ads business working? 0:01:43.400 --> 0:01:46.040 I think the ad business is off to a start. 0:01:46.280 --> 0:01:50.240 It can grow so much bigger, and you know, it's 0:01:50.280 --> 0:01:53.520 obviously growing. I think they're saying that they expect a 0:01:53.560 --> 0:01:57.200 lot more growth, but it's also in a competitive space. 0:01:57.240 --> 0:02:03.200 They're competing with Disney with Peak, with Paramount, Warner Brothers and. 0:02:03.640 --> 0:02:05.080 Those big spenders. 0:02:05.080 --> 0:02:08.120 Those big brands, they don't really increase their budget, so 0:02:08.160 --> 0:02:10.359 if you want to come into that space, you have 0:02:10.480 --> 0:02:13.840 to take market share from someone else. Netflix is what 0:02:13.880 --> 0:02:17.640 I would expect over time, is that whatever percentage of 0:02:17.760 --> 0:02:21.200 viewership they have is what percentage of the ad market 0:02:21.240 --> 0:02:22.799 they can get, So they have a lot of room 0:02:22.840 --> 0:02:27.160 to grow. It is working, but it's still relatively small 0:02:27.240 --> 0:02:28.360 compared to where it can be. 0:02:29.000 --> 0:02:30.080 I find it really interesting. 0:02:30.080 --> 0:02:32.760 We were discussing how people are willing to pay for 0:02:32.960 --> 0:02:35.679 these subscriptions even if they do contain ads. I can 0:02:35.800 --> 0:02:39.000 literally remember when you would watch Netflix all the way through, 0:02:39.120 --> 0:02:41.280 no gaps at all. But it seems as though this 0:02:41.320 --> 0:02:43.880 is a really thriving part of their business here. 0:02:44.680 --> 0:02:45.120 Yeah. 0:02:45.160 --> 0:02:48.040 Well, I mean why did they add the ads Because 0:02:48.200 --> 0:02:51.959 their customers wanted a lower price point, and so it's 0:02:51.960 --> 0:02:54.040 a simple trade off. We'll give you the lower price 0:02:54.120 --> 0:02:58.240 point if you'll let advertisers pay for part of your subscription. 0:02:58.360 --> 0:03:01.959 That's effectively what's happened opening, and so the customer is 0:03:02.000 --> 0:03:05.360 getting what they want and Netflix is getting the revenue 0:03:05.400 --> 0:03:08.400 they need know in order to make that possible. So 0:03:08.800 --> 0:03:11.400 it is a win win. I'm not sure everyone that 0:03:11.480 --> 0:03:13.960 gets ads thinks it's a win, but it's certainly a 0:03:14.000 --> 0:03:16.000 win that they don't have to pay as much to 0:03:16.040 --> 0:03:16.800 get the content. 0:03:17.080 --> 0:03:19.600 So I'm looking at the different plans and pricing for 0:03:19.680 --> 0:03:23.200 Netflix here in the US. There's the standard with ads, 0:03:23.200 --> 0:03:25.960 there's standard, there's premium, so it starts with seven ninety 0:03:26.000 --> 0:03:28.160 nine a month. You can go for premium up to 0:03:28.200 --> 0:03:31.040 twenty five dollars a month. Again, this is here in 0:03:31.080 --> 0:03:34.840 the US. There are different intricacies to this because you 0:03:34.880 --> 0:03:37.040 can pay for extra members and the like. Netflix has 0:03:37.040 --> 0:03:39.680 gotten really good at as my brother likes to remind 0:03:39.680 --> 0:03:42.920 our entire family understanding, if you're sharing an account and 0:03:42.920 --> 0:03:46.760 now everybody kind of needs their own accounts. Is there 0:03:47.080 --> 0:03:50.600 from the perspective of actual growth here in a saturated 0:03:50.640 --> 0:03:54.360 market in the US, is there a concern or is 0:03:54.400 --> 0:03:57.200 this by design that if Netflix raises the premium price 0:03:58.440 --> 0:04:01.080 then there will be a small portion of the folks 0:04:01.120 --> 0:04:03.040 who don't want to pay twenty five dollars a month 0:04:03.080 --> 0:04:06.240 or whatever, and instead they'll drop down to that ad 0:04:06.240 --> 0:04:08.360 supported model. Is that the strategy? 0:04:08.400 --> 0:04:09.440 I think yeah. 0:04:09.480 --> 0:04:15.840 I think worldwide Netflix maybe last quarter the quarter before Essential, 0:04:15.920 --> 0:04:18.880 the last time they were reporting subscriber numbers, they said 0:04:19.400 --> 0:04:23.080 the number one, you know, kind of tier that people 0:04:23.120 --> 0:04:25.719 were buying was the ad supported tier. I think it 0:04:25.760 --> 0:04:29.239 was as much as half of all new subscribers. And 0:04:29.360 --> 0:04:32.320 so people want it. They want that price point. I 0:04:32.320 --> 0:04:34.880 think what's really interesting is the way to think of 0:04:34.920 --> 0:04:38.640 it is Netflix is building a backlog of future revenue, so, 0:04:38.640 --> 0:04:42.120 in other words, they bring on the subscribers that they 0:04:42.120 --> 0:04:45.560 are essentially under monetizing. They're charging them seven ninety nine, 0:04:46.000 --> 0:04:49.840 and they're getting relatively few ads. And as Netflix increases 0:04:49.880 --> 0:04:54.920 the ad load and essentially makes more money, that is 0:04:55.080 --> 0:04:59.400 just like pure like that's going to flow directly bottom line. 0:04:59.440 --> 0:05:03.799 I would Netflix's earnings to outstrip their revenue growth literally 0:05:03.839 --> 0:05:07.359 for years to come. It's somewhat similar to the password backlog, 0:05:07.680 --> 0:05:10.280 where they knew all these people were sharing the passwords 0:05:10.440 --> 0:05:12.880 and at any time they can just kind of kind 0:05:12.920 --> 0:05:15.840 of get more serious about that and all of a 0:05:15.880 --> 0:05:18.720 sudden it produced all this additional revenue. That's what's going 0:05:18.800 --> 0:05:21.800 to happen with Netflix is advertising. And I think I 0:05:22.839 --> 0:05:25.640 have never seen a company this large that I would 0:05:25.720 --> 0:05:29.120 say should be treated as a high growth stock. That's 0:05:29.200 --> 0:05:31.120 the potential in the app business, right Mark. 0:05:31.160 --> 0:05:32.960 One thing that was interesting to me as we're parsing 0:05:32.960 --> 0:05:35.960 through this earnings was the fact that Netflix boosted its 0:05:36.000 --> 0:05:40.560 full year revenue primarily due to US dollar depreciation. What's 0:05:40.600 --> 0:05:41.400 your takeaway from. 0:05:41.320 --> 0:05:46.760 That, Well, I mean, the their global business. I mean, 0:05:47.040 --> 0:05:50.760 I think that's for financial analysts to really to really 0:05:50.800 --> 0:05:53.080 look at. I mean, obviously they don't want to be 0:05:53.120 --> 0:05:57.120 fluctuating their price points based on the way financial markets 0:05:57.120 --> 0:05:58.520 are valuing the dollar. 0:05:58.279 --> 0:05:59.599 And other things. 0:05:59.839 --> 0:06:03.919 But I think the I think most investors are going 0:06:03.960 --> 0:06:07.200 to look at the growth in revenue, growth and earnings, 0:06:07.600 --> 0:06:11.800 continue expansion in national and I think the most important 0:06:12.320 --> 0:06:16.360 value for Netflix, which is not really explicitly measured in numbers, 0:06:16.920 --> 0:06:20.159 is they, through surveys, they are the first place people 0:06:20.240 --> 0:06:22.400 go when they turn on their TV. Is they turn 0:06:22.440 --> 0:06:26.480 on Netflix. And the amount of power that gives this 0:06:26.640 --> 0:06:30.320 company is it's almost hard to state that. That's how 0:06:30.360 --> 0:06:35.599 they can turn you know, like fights into like numbers 0:06:35.640 --> 0:06:38.240 that rival some of the biggest sporting events, or turn 0:06:38.480 --> 0:06:42.560 WWEE into you know, big show on Netflix where one 0:06:42.640 --> 0:06:44.920 has been as big as another channel. And if I'm 0:06:44.920 --> 0:06:48.440 gonna investor, I'm gonna be as long as Netflix is 0:06:48.480 --> 0:06:50.640 the first place people go, It's going to be the 0:06:50.680 --> 0:06:53.080 first stock I want to invest in that. I think 0:06:53.120 --> 0:06:54.400 that's the biggest correlation. 0:06:54.720 --> 0:06:57.560 Hey, hey, Mark, since you are focused on the ads business, 0:06:57.600 --> 0:07:02.560 in your view, what's a more profit subscriber for Netflix? 0:07:02.720 --> 0:07:05.240 Is it the one who's paying seven ninety nine a 0:07:05.240 --> 0:07:07.719 month for the ad supported version, or is it the 0:07:07.760 --> 0:07:11.320 premium subscriber at twenty five bucks or the standard subscriber 0:07:11.320 --> 0:07:12.280 at eighteen bucks. 0:07:12.960 --> 0:07:16.200 I think the premium is probably the most profitable, but 0:07:16.440 --> 0:07:20.360 I think then the AD supported has the potential to 0:07:20.440 --> 0:07:22.880 become the second most profitable. I don't think it's there 0:07:22.960 --> 0:07:27.800 yet because they simply are not monetizing all those entertainment 0:07:27.840 --> 0:07:30.960 consumers at the level they could be. But when they are, 0:07:31.120 --> 0:07:34.080 they're doing seven ninety nine on that price point. Who knows, 0:07:34.400 --> 0:07:36.440 it might be eight ninety nine next year or something 0:07:36.520 --> 0:07:39.160 like that, and they can make probably equal to that 0:07:39.400 --> 0:07:42.480 in terms of AD dollars per user, and maybe even 0:07:42.520 --> 0:07:44.760 a bit more than equal to that in AD dollars 0:07:44.760 --> 0:07:47.120 per user. And you see that's what Amazon did with Prime, 0:07:47.440 --> 0:07:49.720 where they just flipped the entire customer base in the 0:07:49.760 --> 0:07:54.000 AD supported. So that AD supported in terms of volume, 0:07:54.560 --> 0:07:56.840 because most of the subscribers I think will be AD 0:07:56.840 --> 0:08:01.120 supported over time, is the most profitable just share dollars. 0:08:01.200 --> 0:08:04.560 Right now, it's probably the premium twenty five dollars mark. 0:08:04.600 --> 0:08:06.800 I mean, when you think about Netflix historically, they were 0:08:06.840 --> 0:08:08.880 initially felt like the leader, but you're seeing a lot 0:08:08.880 --> 0:08:12.240 of these other companies in here trying to additionally monopolize 0:08:12.240 --> 0:08:14.200 the space. But that being said, we did see some 0:08:14.280 --> 0:08:16.880 news earlier that Comcast is raising the price of its 0:08:16.880 --> 0:08:20.360 Peacock streaming service by three dollars a month. Very fitting 0:08:20.400 --> 0:08:22.559 today when we have Netflix earnings. How are you thinking 0:08:22.560 --> 0:08:25.240 about Netflix as a potential leader right now in this space? 0:08:26.120 --> 0:08:29.200 Yeah, I mean that losing that leadership position is going 0:08:29.240 --> 0:08:30.800 to be hard for them because they just have to 0:08:30.840 --> 0:08:34.960 keep investing in content, and they're profitable and very profitable, 0:08:35.000 --> 0:08:37.240 so they can afford to keep doing that. But I 0:08:37.240 --> 0:08:40.319 think what you're seeing happening is the other networks are 0:08:40.320 --> 0:08:45.200 fighting back. Peacock with Love Island just massive show over 0:08:45.240 --> 0:08:49.960 the last month from what I know, did incredibly well 0:08:50.080 --> 0:08:52.520 advertise in terms of revenue generation. I think it's the 0:08:52.600 --> 0:08:54.960 number one reality show in the world. Plus they have 0:08:55.080 --> 0:08:58.200 Bravo and others. You have Disney with all the children's content, 0:08:58.360 --> 0:09:01.840 Star Wars contentes PN now going in a live sports 0:09:01.880 --> 0:09:05.320 I think all the networks have gone way more serious 0:09:05.440 --> 0:09:09.920 about about competing and they're bringing out their own hit content. 0:09:10.480 --> 0:09:13.400 But as long as Netflix is number one, I think 0:09:13.400 --> 0:09:15.840 it's hard for them to lose that spot. Probably the 0:09:15.960 --> 0:09:19.160 only company that can really truly challenge them is Disney. 0:09:19.960 --> 0:09:23.000 Absolutely, it's interesting. We were just talking about Love Island. 0:09:23.400 --> 0:09:23.640 I am. 0:09:23.840 --> 0:09:26.199 I'm a watcher of Love Island, so I see how 0:09:26.200 --> 0:09:27.560 they were able to skyrocket here. 0:09:27.960 --> 0:09:30.040 Somebody who I'm co anchoring with today went to like 0:09:30.080 --> 0:09:34.160 a Love Island premiere watch party, watch party or one 0:09:35.320 --> 0:09:35.760 you hosted a. 0:09:35.800 --> 0:09:37.400 Watch party of my own two days later. 0:09:37.480 --> 0:09:39.520 Meanwhile, I've never even seen an episode of whatever you 0:09:39.559 --> 0:09:40.360 guys are talking about. 0:09:40.360 --> 0:09:41.199 Mark Douglas. 0:09:41.480 --> 0:09:43.960 Always good to see you fly on up here to 0:09:43.960 --> 0:09:45.720 New York next time so we can hang out in 0:09:45.760 --> 0:09:48.800 the studio. Mark Douglas is CEO of the publicly traded 0:09:48.800 --> 0:09:51.079 advertising and marketing company Mountain. 0:09:52.000 --> 0:09:55.880 You're listening to the Bloomberg Business Week Daily Podcast. Catch 0:09:55.920 --> 0:09:58.600 us live weekday afternoons from two to five e's during 0:09:58.800 --> 0:10:02.040 Listen on Alva, Karpe and Android Otto with the Bloomberg 0:10:02.080 --> 0:10:05.640 Business app, or watch us live on YouTube. 0:10:05.720 --> 0:10:08.520 Well signs at the US economies holding up just lifting 0:10:08.559 --> 0:10:11.000 stocks this afternoon, as we heard from Charlie. This coming 0:10:11.080 --> 0:10:14.440 just a day after speculation about the fedhare. 0:10:14.320 --> 0:10:15.720 Really rattled markets. 0:10:16.040 --> 0:10:19.000 Better than estimated retail sales and a drop in jobless 0:10:19.000 --> 0:10:21.640 claims pointed economic resilience driving the S and P five 0:10:21.720 --> 0:10:25.520 hundred toward fresh all time highs. Let's bring in Molly Smith. 0:10:25.559 --> 0:10:27.920 She's Bloomberg News Economics editor. She joins us here in 0:10:27.920 --> 0:10:30.640 the Bloomberg BusinessWeek Studio. I want to start with retail 0:10:30.679 --> 0:10:34.320 sales because a big rebound in June, a broad advance. 0:10:34.480 --> 0:10:37.760 Ten out of thirteen categories posted an increase. Does this 0:10:38.160 --> 0:10:40.720 answer all questions about the health of the US consumer? 0:10:40.760 --> 0:10:41.319 Are we all good? 0:10:41.640 --> 0:10:41.800 God? 0:10:41.840 --> 0:10:44.000 I wish it was that easy, Tim It's not. I 0:10:44.040 --> 0:10:46.360 wouldn't be here if it were that easy. I explained 0:10:46.360 --> 0:10:50.080 it was, so I like to caveat by saying that, 0:10:50.200 --> 0:10:53.839 like retail sales is, I would say, like a relatively 0:10:53.960 --> 0:10:57.280 narrow look at consumer spending, that this is a report 0:10:57.320 --> 0:11:00.800 that mostly captures just spending on goods like physical stuff, 0:11:01.200 --> 0:11:04.040 but that's really just that's a third of overall consumer 0:11:04.080 --> 0:11:04.959 spending in our economy. 0:11:05.080 --> 0:11:06.520 I think this is a really important point. 0:11:06.720 --> 0:11:09.560 The consumer powers the economy, but services are what they 0:11:09.640 --> 0:11:11.959 spend their money on, bing go, Okay, yes. 0:11:11.840 --> 0:11:14.520 So not to say that a third of consumer spending 0:11:14.640 --> 0:11:17.120 is nothing, but it is not the majority of where 0:11:17.160 --> 0:11:19.880 consumer spending is really directed at. So that's one thing. 0:11:20.320 --> 0:11:23.800 Second thing, these are not inflation adjusted, so when you 0:11:23.840 --> 0:11:26.120 see these increases, you can kind of do a little 0:11:26.160 --> 0:11:27.760 bit of the math, since we did just get the 0:11:27.800 --> 0:11:31.600 CPI to see where prices were rising or not. But generally, 0:11:31.800 --> 0:11:33.719 if you see a number that's up, it could be 0:11:33.840 --> 0:11:37.520 up because prices are up, or because actual spending activity 0:11:37.600 --> 0:11:40.240 is up, or both. So in this case, there's probably 0:11:40.280 --> 0:11:42.600 a bit of a mix of that, and either way, though, 0:11:43.080 --> 0:11:45.960 the takeaway from economists was definitely positive that, you know, 0:11:46.000 --> 0:11:48.840 we just had two months of declines in retail sales 0:11:48.880 --> 0:11:51.559 coming into June, so to see a rebound, especially of 0:11:51.640 --> 0:11:55.160 this magnitude, was definitely reassuring in some ways, you know 0:11:55.200 --> 0:11:59.240 that maybe tariffs are not totally sapping consumer demand at 0:11:59.320 --> 0:12:00.520 least as of yet, but. 0:12:00.440 --> 0:12:02.320 Not the end all be all here, which you've clearly 0:12:02.559 --> 0:12:04.400 spelled out for us here. What were some of the 0:12:04.480 --> 0:12:06.280 highlights that you saw in this print. 0:12:06.480 --> 0:12:08.360 I think I don't know if I would call it 0:12:08.559 --> 0:12:11.440 a highlights so much as a surprise that that motor 0:12:11.520 --> 0:12:14.280 vehicle sales were up as much as they were, especially 0:12:14.320 --> 0:12:18.240 because we saw the administrative data from Ward's Automotive groups 0:12:18.360 --> 0:12:21.880 showed that car sales dropped again in June, and the 0:12:21.880 --> 0:12:25.520 CPI report showed that car prices were down, So that 0:12:25.800 --> 0:12:28.600 to me would spelled, you know, an overall negative for 0:12:28.720 --> 0:12:32.520 car sales a commist you're saying, probably a seasonal adjustment issue, 0:12:32.559 --> 0:12:34.439 because I'm not really sure how else you would get 0:12:34.440 --> 0:12:35.640 a positive number out of that. 0:12:35.840 --> 0:12:37.760 But there was also this pull forward in the earlier 0:12:37.800 --> 0:12:40.520 part of the year because consumers are very worried about 0:12:40.559 --> 0:12:43.400 what tariffs would do to automobiles. Is that part of 0:12:43.400 --> 0:12:45.440 this equation at all? Is that why it's surprising too. 0:12:45.679 --> 0:12:49.200 I think that there's probably still you know, there's been 0:12:49.240 --> 0:12:52.200 so many obviously, as we know, whiplash with tariffs. Are 0:12:52.200 --> 0:12:53.920 they on, are they not? Is it delayed? 0:12:53.960 --> 0:12:54.400 What date? 0:12:54.800 --> 0:12:56.600 So I think, you know. 0:12:56.559 --> 0:12:58.560 There was a bit of a pullback in June when 0:12:58.559 --> 0:13:00.280 like we had, you know, put to rest the idea 0:13:00.320 --> 0:13:03.360 of one hundred plus percent tariffs on China. You know, 0:13:03.400 --> 0:13:05.680 that was like a pact that was reached in early May, 0:13:05.760 --> 0:13:08.000 and that we've had a bit of this pause until 0:13:08.040 --> 0:13:10.640 the now we had this announcement in the past week 0:13:10.679 --> 0:13:13.360 that the real mayly more significant tariffs are going to 0:13:13.440 --> 0:13:15.839 kick in next month. At least that's the plan right now. 0:13:15.880 --> 0:13:18.160 So who knows, we could be going through another one 0:13:18.200 --> 0:13:20.880 of those you know lulls right now with the tariff 0:13:20.920 --> 0:13:25.000 talk that could be boosting spending and sentiment. In the meantime, Well, let's. 0:13:24.760 --> 0:13:27.080 Talk about the job market right now. Of course, we 0:13:27.120 --> 0:13:29.160 got that weekly print that we always get, which is 0:13:29.200 --> 0:13:31.719 jobless claims data that came out today. We saw that 0:13:32.120 --> 0:13:34.760 the estimates were two hundred and thirty three thousand, but 0:13:34.840 --> 0:13:37.200 it actually came in at two hundred and twenty one thousand, 0:13:37.320 --> 0:13:39.880 So a slight miss here. But what are you really 0:13:39.880 --> 0:13:41.960 seeing when we think about the broader economy as it 0:13:42.000 --> 0:13:43.840 relates to jobless claims. 0:13:44.040 --> 0:13:45.640 Well, it's a good thing when we see a miss 0:13:45.679 --> 0:13:48.240 on jobless claims froming a point that how these fewer 0:13:48.280 --> 0:13:52.240 people are filing for unt employment, So that's a good thing. Plus, yeah, 0:13:52.280 --> 0:13:54.440 assuming that we're in the camp of not wanting people 0:13:54.480 --> 0:13:57.600 to lose their jobs, so that's good. And at that 0:13:57.880 --> 0:14:01.360 level of overall claims of where the initial ones have 0:14:01.440 --> 0:14:03.360 been coming in in this like two hundred and twenty 0:14:03.400 --> 0:14:06.440 thousand area, that's very much in line with like the 0:14:06.480 --> 0:14:10.400 pre COVID economy and would suggest like a pretty solid 0:14:10.559 --> 0:14:14.320 labor market overall. Granted, where more of the concern is 0:14:14.320 --> 0:14:17.000 happening is in continuing claims. So these are people who 0:14:17.000 --> 0:14:20.920 are continually receiving unemployment benefits, whereas the other number is 0:14:21.000 --> 0:14:24.680 just new filers. So the continuing claims number has kind 0:14:24.720 --> 0:14:27.400 of been flirting with around like that two million number 0:14:27.480 --> 0:14:30.240 for a while now kind of like up around the 0:14:30.280 --> 0:14:32.680 highest levels. Since the end of twenty twenty one, that 0:14:32.720 --> 0:14:35.240 one has definitely been trending in a worse direction. 0:14:35.560 --> 0:14:37.200 So for a while it used to be bad news 0:14:37.240 --> 0:14:39.280 is good news? Where do we sit now? What are 0:14:39.280 --> 0:14:39.600 we say? 0:14:40.280 --> 0:14:44.080 Oh gosh, I want to say that good news is 0:14:44.080 --> 0:14:48.960 good news. I mean it's I think, well a lot 0:14:48.960 --> 0:14:50.880 of it is because you're thinking from the perspective of, 0:14:51.000 --> 0:14:55.000 like what happens to FED rates? Right, So I mean, 0:14:55.120 --> 0:14:57.120 right now, all of this data is telling you that, 0:14:57.160 --> 0:15:00.000 like the economy is solid and that this is all 0:15:00.000 --> 0:15:02.440 also supporting why we're not expecting to see ray cuts 0:15:02.480 --> 0:15:05.680 in July, at least July for now, who knows. September 0:15:05.840 --> 0:15:07.200 still seems to be a wild guard. 0:15:07.560 --> 0:15:09.600 Okay, So on this I just want to end with 0:15:09.720 --> 0:15:12.240 you on the FED and play some sound from one 0:15:12.240 --> 0:15:14.240 of the Kevins who is a vying to be the 0:15:14.320 --> 0:15:17.440 next chair of the FED. Kevin Walsh, former FED governor, 0:15:17.480 --> 0:15:19.040 was on CNBC earlier today. 0:15:20.280 --> 0:15:22.480 I think the President's language is this could be a 0:15:22.480 --> 0:15:24.280 golden age, and frankly, I think they. 0:15:24.160 --> 0:15:25.000 All could be right. 0:15:25.800 --> 0:15:30.120 Good policies could advance this US economy. What we'd call 0:15:30.280 --> 0:15:32.960 AI in a couple of years will just call business, 0:15:33.680 --> 0:15:36.680 and AI is going to make almost everything costs less 0:15:36.800 --> 0:15:38.800 and the US can be a big winner. If I 0:15:38.840 --> 0:15:41.560 were the president, what I'd be worried about is a 0:15:41.560 --> 0:15:44.080 central bank that doesn't see any of that, a central 0:15:44.080 --> 0:15:47.080 bank that is stuck with models from nineteen seventy eight, 0:15:47.520 --> 0:15:51.080 governance from a prior period and don't recognize we could 0:15:51.080 --> 0:15:53.880 be at the front end of a productivity boom, and 0:15:53.960 --> 0:15:56.080 if I were the president, I'd be worried that they might. 0:15:55.920 --> 0:15:56.480 Not see it. 0:15:57.080 --> 0:16:00.280 Kevin Walsh, a former FED governor, on CNBC earlier today, Molly, 0:16:00.320 --> 0:16:01.720 I want to ask you about this idea that a 0:16:01.760 --> 0:16:06.400 central bank with this dual mandate, in Kevin Warsh's view, 0:16:06.480 --> 0:16:11.040 might be stuck on old models and old priorities. 0:16:11.200 --> 0:16:11.960 What's your view on this. 0:16:12.400 --> 0:16:14.720 I mean, I still think the priority for the FED 0:16:14.800 --> 0:16:17.720 is definitely the dual mandate, as you said, so that's 0:16:17.960 --> 0:16:21.480 ensuring price stability and maximum employment, and I think those 0:16:21.520 --> 0:16:24.160 are still good goals to have, no matter if you're 0:16:24.160 --> 0:16:26.160 in nineteen seventy or if you're in twenty twenty five. 0:16:26.440 --> 0:16:27.880 There are a lot of central banks that don't have 0:16:27.920 --> 0:16:30.120 both of those, you know, they just have an inflation 0:16:30.240 --> 0:16:33.400 mandate or an employment mandate, but not both. So I 0:16:33.440 --> 0:16:35.120 think that, you know, and that's also something that for 0:16:35.200 --> 0:16:38.800 us comes from Congress. That's not the Fed's own idea. 0:16:38.920 --> 0:16:41.040 This is a mandate from Congress as to what they're 0:16:41.080 --> 0:16:44.520 meant to achieve here. That said, I mean, yeah, the 0:16:44.560 --> 0:16:48.520 economy is rapidly evolving. AI certainly has a lot of promises, 0:16:48.760 --> 0:16:52.280 but I don't think that's really had any widespread impact 0:16:52.360 --> 0:16:55.480 yet in terms of like taking out jobs that were 0:16:55.600 --> 0:16:57.720 you know, at a really widespread level here. I think 0:16:57.760 --> 0:17:00.560 it's just so far been like pretty concentrate and we 0:17:00.600 --> 0:17:02.840 haven't yet seen all of that, and of course when 0:17:02.880 --> 0:17:06.440 those things are going to be happening a bit more notably, Yes, 0:17:06.480 --> 0:17:08.719 the FED wants to be acting forward looking, but like 0:17:09.280 --> 0:17:11.720 you can't also be like, you know, acting in advance 0:17:11.760 --> 0:17:14.800 of like if this is still perhaps years or decades 0:17:14.800 --> 0:17:16.520 away from now, who knows our. 0:17:16.440 --> 0:17:17.119 Good place to end it? 0:17:17.160 --> 0:17:19.840 Molly Smith, Bloomberg News Economics editor joining us here in 0:17:19.880 --> 0:17:21.640 the Bloomberg Business Week a studio. 0:17:23.000 --> 0:17:27.160 This is the Bloomberg Business Week Daily Podcast. Listen live 0:17:27.240 --> 0:17:30.320 each weekday starting at two pm Eastern on Apple Cocklay 0:17:30.359 --> 0:17:33.160 and Android Auto with the Bloomberg Business App. You can 0:17:33.200 --> 0:17:36.679 also listen live on Amazon Alexa from our flagship New 0:17:36.760 --> 0:17:40.480 York station. Just say Alexa play Bloomberg eleven thirty. 0:17:41.640 --> 0:17:44.080 Let's talk about commercial real estate today. We had pro 0:17:44.119 --> 0:17:47.399 Lodge's shares that gained in yesterday's session. Those they're down today. 0:17:47.440 --> 0:17:51.080 The industrial real estate investment trust industry and that company 0:17:51.080 --> 0:17:54.120 in particular, that company delivered a beat and raised earnings 0:17:54.119 --> 0:17:57.439 report for the second quarter and beat consensus expectations for 0:17:57.520 --> 0:18:00.960 the second quarter. There, that's industrial commercial real estate and 0:18:01.000 --> 0:18:03.960 that can certainly tell us one thing. For a view 0:18:04.080 --> 0:18:06.800 on the office market, we bring in John Gates, CEO 0:18:06.920 --> 0:18:10.200 of Leasing Advisory America's at JLLL. The offer real estate 0:18:10.200 --> 0:18:13.280 and investment management services around the world, so it's got 0:18:13.280 --> 0:18:16.200 a great view on different economies and if we're indeed 0:18:16.400 --> 0:18:19.720 getting back to the office, talk to us John a 0:18:19.760 --> 0:18:22.320 bit about what the landscape is like right now for 0:18:22.400 --> 0:18:24.960 the office space in the United States. Are people coming 0:18:25.000 --> 0:18:25.840 back to the office. 0:18:26.880 --> 0:18:28.480 They are thank you for having me by the way, 0:18:28.520 --> 0:18:29.200 and good afternoon. 0:18:29.240 --> 0:18:34.240 Yes, unequivocally, we see increasing numbers of organizations ask their 0:18:34.240 --> 0:18:36.040 people to come back and in fact tell them to 0:18:36.080 --> 0:18:38.359 come back to the office an increasing number. 0:18:38.080 --> 0:18:38.760 Of days a year. 0:18:39.280 --> 0:18:41.560 It's been more of a step function, I would say, 0:18:41.640 --> 0:18:43.120 than a leap, if you will. 0:18:43.160 --> 0:18:45.240 That's been happening and building for quite some time. 0:18:45.520 --> 0:18:49.280 John, where are we compared to let's say, January twenty twenty, though. 0:18:50.560 --> 0:18:54.440 You know a year if you said twenty twenty, we're 0:18:54.480 --> 0:18:56.560 getting closer, but we're not in the same place. So 0:18:57.000 --> 0:19:00.000 fifty four percent, I think of the fortune one hundred 0:19:00.160 --> 0:19:02.000 have said you're in the office five days a week, 0:19:02.040 --> 0:19:06.680 and that was probably ninety percent then. But hybrid policies, 0:19:06.960 --> 0:19:09.600 you know, have people in the offices three to four 0:19:09.680 --> 0:19:12.040 days a week. So it's you know, somewhere in between, 0:19:12.040 --> 0:19:14.560 but far closer than we were a year ago. 0:19:14.680 --> 0:19:17.920 What about from the perspective of inventory and how much 0:19:18.000 --> 0:19:20.800 leased inventory you have versus what you had back then. 0:19:22.080 --> 0:19:26.040 There's a lot of ways to segment buildings for that question. 0:19:26.080 --> 0:19:27.800 I think the easiest way to do it is the 0:19:27.920 --> 0:19:33.000 new higher quality product and then everything that's say pre 0:19:33.160 --> 0:19:38.040 twenty fifteen, and the first category is leasing very very 0:19:38.040 --> 0:19:41.560 well at record rents, and occupancy levels are very high, 0:19:41.600 --> 0:19:42.880