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Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. As

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Speaker 1: I speake, the Mogan Stanley headlines dropped across the Bloomberg terminal.

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Speaker 1: Let's bring in bloombergs. Yellmont on a rand to get

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Speaker 1: the top and bottom line. Yellout him. Well, you know

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Speaker 1: it's just um kind of looking gloom that first look.

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Speaker 1: Net revenues are down, wealth management is on change. Um,

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Speaker 1: that's that's similar to Bank of America's Mary Lynch. You know,

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Speaker 1: they're they're both big and wealth management they didn't they

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Speaker 1: didn't change or grow shrink either. Um. Fixed income and

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Speaker 1: equities revenues are are down pretty pretty big. And equities

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Speaker 1: and you know, Morgan Stanley is the is the market

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Speaker 1: leader in in UH equity trading in the world. And um,

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Speaker 1: you know, but everybody in the last couple of days

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Speaker 1: that's been reporting has been reporting equities down can come down,

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Speaker 1: so that's not surprising. But um, you know, the big

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Speaker 1: the bigger banks, the ones that are universal, like JP

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Speaker 1: Morgan City Group Bank of America, they had net interest

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Speaker 1: income from their consumer and and commercial lending to fall

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Speaker 1: back on, and that kept their their their revenues and

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Speaker 1: and their bottom line up. For banks like Morgan Stanley

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Speaker 1: Golden Sex, they don't. They're more investment banking, and investment

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Speaker 1: banking is down across the board in the first quarter,

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Speaker 1: So Morgan Stanley numbers are are pretty pretty low. Yeah,

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Speaker 1: thank you. Yeah, an a Ram with the latest from

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Speaker 1: Morgan Stanley. I want to get to the Chinese data.

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Speaker 1: If you're waken up this Wednesday morning, I'm sure it's

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Speaker 1: the first thing you reached for for many of you.

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Speaker 1: GDP rising six point four percent for the first three

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Speaker 1: months from a year earlier, matching last quarters pace and

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Speaker 1: beating economists estimates. On the other data points, factory output

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Speaker 1: in March jumping eight point five percent from a year earlier,

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Speaker 1: much higher than the forecast of economists we surveyed, and

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Speaker 1: for retail sales expanding eight point seven percent, investment up

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Speaker 1: six point three percent year to day. So some mild

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Speaker 1: improving risk appetitre would say, cross asset this morning here

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Speaker 1: in New York to discuss, I'm pleased to say, is

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Speaker 1: Jerry Fowler, Aberdeen Standard Investments, Multi Assets strategist. Good morning

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Speaker 1: to Jerry. If you're on the Chinese data, just to start,

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Speaker 1: what's your take, Well, the data certainly looks very impressive.

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Speaker 1: On the surface, it's probably not quite as good as

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Speaker 1: it looks, but nonetheless it's a lot better than people expected,

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Speaker 1: and I think that's really key. You know, people have

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Speaker 1: underestimated the ability of China to get its economy going.

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Speaker 1: We were probably a little early to start getting long

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Speaker 1: China last August when they started stimulating, but you know,

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Speaker 1: as you would expect, six to nine months later, that

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Speaker 1: stimulus is coming through. And really, you know, when they

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Speaker 1: started doing stimulus, they're not the kind of government that

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Speaker 1: sort of starts and then goes, oh, we're giving up,

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Speaker 1: we can't do it. You know, once they started, they

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Speaker 1: were going to make sure it works. We are starting

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Speaker 1: to see that. The big question now is whether that

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Speaker 1: stimulus is, as people expect, only impacting the domestic economy

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Speaker 1: and not so useful for the rest of the world.

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Speaker 1: I am of the opinion it probably will still have

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Speaker 1: relatively significant spillover effects the rest of the world, maybe

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Speaker 1: not as much as two thousand sixteen. But what's interesting

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Speaker 1: about China is because it's such a centrally controlled economy,

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Speaker 1: the private sector takes its lead from the government, and

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Speaker 1: the private sector has been crushed over the last couple

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Speaker 1: of years. Sentiment has been very weak, but there are

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Speaker 1: signs of that private sector sentiment can turn, and if

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Speaker 1: it does, you can actually get an exacerbated acceleration in

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Speaker 1: China that does spill out onto the into the industrial

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Speaker 1: sector that impacts the rest of the world. So Jerry,

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Speaker 1: this is critical because it's not just Chinese markets that

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Speaker 1: have rallied through nineteen European markets the price action there.

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Speaker 1: We've had a really really good start to the year.

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Speaker 1: There are hopes that this does spill over. This morning,

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Speaker 1: the German Finance Ministry, I believe, cut the growth forecaster

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Speaker 1: just zero point five percent for this year. Are you

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Speaker 1: confident that we can get some positive spill over into

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Speaker 1: places like Germany, because it sounds like you are. We are.

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Speaker 1: So a lot of the European weakness, as people really

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Speaker 1: will know, was one off events in the last quarter

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Speaker 1: of last year, and because it's a big current accounts

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Speaker 1: surplus region, particularly Germany, they rely on the external sector,

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Speaker 1: and the external sector has been very weak, so i'd

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Speaker 1: expect that with that external sector starting to pick up

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Speaker 1: that you will get some of that spill over into

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Speaker 1: into Europe. And what's interesting is that we'd positioned in

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Speaker 1: emerging markets and Chinese equities for the rally. We've got

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Speaker 1: some emerging market local currency bonds. We'd stayed relatively clear

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Speaker 1: of Europe and actually maintained a fairly significant short euro position.

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Speaker 1: A lot of that to do with Italian risks and

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Speaker 1: the we no in the economy. But recently our portfolios

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Speaker 1: have actually been adding call options on European equities. Partly,

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Speaker 1: you know, call options cause we're slightly nervous that it

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Speaker 1: may not come through, but also you've just got such

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Speaker 1: low volatility levels that even though we've had a bit

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Speaker 1: of a market rally matching the rest of the world,

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Speaker 1: Europe is the catch up trade. European equities of the

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Speaker 1: catch up trade for for an improving global trade environment.

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Speaker 1: Can you push that through view through the EFEX market

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Speaker 1: as well, because I'm just wondering how expensive call options

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Speaker 1: would be at the moment on euro dollar when so

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Speaker 1: many people are positioning at the moment for downside protection

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Speaker 1: on the greenback. How do you have that view in effects? Yeah,

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Speaker 1: so Europe, we do still maintain that short euro position,

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Speaker 1: but it is quite crowded. It's not excessive, but basically,

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Speaker 1: you know, everyone with real money invested globally is funding

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Speaker 1: it out of Euros. And I think that while the

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Speaker 1: euro may experience some short term optimism and go up

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Speaker 1: a little bit, it's still at such a structural yield

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Speaker 1: disadvantage to many other markets. So unlike twenty six where

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Speaker 1: the acceleration really caught the phusiasm and a lot of

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Speaker 1: money flowed into Europe and the euro went up nearly

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Speaker 1: ten percent, that's not what we're expecting expecting this time.

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Speaker 1: It will come through inequities. You mentioned enthusiasm. There was

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Speaker 1: a February in that too long ago where there was

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Speaker 1: a lot of enthusiasm in the VIX of the quiet

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Speaker 1: year twelve point zero four with an eleven handle on

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Speaker 1: VIX in the last day. Are we just going to

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Speaker 1: see a redux of that where we unlined all this

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Speaker 1: quiet rapidly. Yeah. The vole is um I think incredibly

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Speaker 1: hard to price in this environment because we are getting

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Speaker 1: late cycle. There is a lot of corporate leverage. At

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Speaker 1: times there can be a lot of investment leverage as well,

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Speaker 1: and you really need to fluctuate from a low ball

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Speaker 1: environment justifiably to a high vaal environment justifiably, so you

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Speaker 1: know you in this type environment, you should have an

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Speaker 1: upward sloping volcurve because longer aided volatility should naturally be

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Speaker 1: a lot higher than it is at the moment. But

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Speaker 1: for the moment, it's still risk on. People can invest

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Speaker 1: that low ball is is justified in the short term,

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Speaker 1: I mean it's justified. What what indicator to do you

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Speaker 1: use to try to get front of a vixed change?

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Speaker 1: We don't specifically, Yeah, swing some crystals across our chest. Yeah,

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Speaker 1: the the We have a short term timing indicator, and

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Speaker 1: that includes the market sentiment where things like rs I

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Speaker 1: go into that, but also investor sentiment and investor positioning.

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Speaker 1: And it's part of the reason why despite this extraordinary rally,

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Speaker 1: we are not yet ready to sell risk. We are

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Speaker 1: reducing risk, but they were not likely to be short

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Speaker 1: anytime soon. Market sentiment has bound back, bounced back very strongly,

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Speaker 1: but investor sentiment and investor positioning have only just come

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Speaker 1: off their lows. Their mid range far from excessive, and

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Speaker 1: under those circumstances you would need an Exogerano shock for

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Speaker 1: vault really resurface at the moment like Barcelona winning. Well,

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Speaker 1: that wasn't a shock for anybody, did you see Ventis

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Speaker 1: I was. I was going to save that for one

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Speaker 1: thing you need to know, we can do that. We

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Speaker 1: can do that later in the program. We can talk

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Speaker 1: about the stock price. If you've entus and down aggressively.

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Speaker 1: Donna Renoldo also publicly traded up aggressively, so we can

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Speaker 1: talk about the financial market aspect of European football a

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Speaker 1: little bit late in the program. If you like another

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Speaker 1: book of the summer. Last year I did two books

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Speaker 1: of the summer, one on the FBI Garrett Grath and

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Speaker 1: also Robert Caplan's Magnificent Treaties on the South China Sea.

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Speaker 1: This year Rugger roging on this his Scream for Community

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Speaker 1: and a new book Jonathan Gruber, who will talk about

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Speaker 1: in Simon Johnson and Studio with us from M I

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Speaker 1: t jump starting America. Before we get to that, you've

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Speaker 1: got to do the mother of all victory laps. Your

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Speaker 1: book Thirteen Bankers, more than any other book nailed the

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Speaker 1: financial crisis, and it was about one paragraph and I

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Speaker 1: think chapter five where you said this is the point

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Speaker 1: where we leveraged up. Are we doing it again? There's

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Speaker 1: a real danger Tom that we may be doing it again,

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Speaker 1: including the shadows. Last time it was it was a

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Speaker 1: different shadows. I agree with that, But we've undermined the

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Speaker 1: financial stability overside Council. We've taken an eye off what's

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Speaker 1: going on outside the main banking system. It always starts

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Speaker 1: the shadows. It always infects the main bank system. That's

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Speaker 1: where things go wrong. We didn't see thirty people. It's

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Speaker 1: a I G coming, did we so the shadows there's

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Speaker 1: like a shop out there that's gonna get us in

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Speaker 1: derivative trouble. I think that's national shadows. You don't know.

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Speaker 1: It could be in London. That's where I G. Financial

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Speaker 1: products unfair, could could be some could be, could be

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Speaker 1: somewhere else. It's very hard to say. You want to

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Speaker 1: bring it jump starting America, John. I think it's really interesting.

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Speaker 1: I just love how it's your book. The Summer only

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Speaker 1: appeared on my desk this morning. How did you read

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Speaker 1: it so quick? Here's why this is really really important.

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Speaker 1: I lived with Simon Johnson and Jonathan Gruber. Remember which

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Speaker 1: is I g y you know Steely, Dan, Daniel Fagan,

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Speaker 1: I thank you fIF seven spot, Nick and John. It's

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Speaker 1: a primal scream to stop apologizing for science. Simon Johnson,

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Speaker 1: bring this in from M I t those little gray buildings,

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Speaker 1: Harold Edgerton Killion of another time. We've lost that magic

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Speaker 1: in Washington, haven't we. We've lost the magic. I think

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Speaker 1: that's exactly what happened in the fifties. Science was magic

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Speaker 1: and people believed in it, and they realized that you

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Speaker 1: could create really good jobs for investing in science. And

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Speaker 1: we've we've we've taken our eye off that we've forgotten

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Speaker 1: since the nineteen sixties. Need to get it back. John Ferrol,

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Speaker 1: this is so important. There was a little paperback in

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Speaker 1: our living room from a guy named Creek and a

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Speaker 1: guy named Watson. And they were British and they were strange,

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Speaker 1: and they were different by British, and they were strange.

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Speaker 1: And that's what this is about. The double helix. And

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Speaker 1: I read it cover to cover way too young. Say

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Speaker 1: something more broadly, and then we'll sort of take our

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Speaker 1: way a little bit deeper. It's about the success of

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Speaker 1: America and how it hasn't been shared. Can we just

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Speaker 1: talk about that a little bit more, because the numbers

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Speaker 1: for the U. S economy they looked terrific compared to

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Speaker 1: the rest of the developed world, including Europe. For that

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Speaker 1: at what's happening beneath the surface that we need to address?

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Speaker 1: Well that that that's the key question, right, So headline

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Speaker 1: numbers pretty good, definitely better than other other places, including Europe.

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Speaker 1: But across America there's disappointment and this fear about the

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Speaker 1: future work. When Amazon put out as h Q two

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Speaker 1: out forbid two hundred and thirty cities, pretty much everyone

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Speaker 1: in America raised the hen said yeah, we'd like those jobs.

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Speaker 1: Who'd like to be transformed? When you're part of the

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Speaker 1: tech future? What did Amazon do? What's the rest of

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Speaker 1: the project are doing? They're going to places that already

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Speaker 1: have a lot of talent in New York City although

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Speaker 1: they got turned down there and Washington, d C. We

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Speaker 1: need to spread more opportunity around the country and create

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Speaker 1: well creading new hubs. So investing in science. Decide on

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Speaker 1: your science priorities. For example, Senator Lamar Alexander's out this

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Speaker 1: week's saying we should invest in the nuclear future. Fine,

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Speaker 1: if you want to do that, where are you gonna

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Speaker 1: put it, Where are you going to have, where's the

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Speaker 1: land available, where's the talent available. I wouldn't go for

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Speaker 1: the coast, certainly, not with that kind of technology. There

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Speaker 1: are hundred and two candidates that we've proposed in our book,

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Speaker 1: other places, other cities in America that could do really

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Speaker 1: well with tech. So let's talk about how much this

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Speaker 1: could possibly cast. There's always a price to anything we

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Speaker 1: want to do like this, and it sounds incredibly expensive

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Speaker 1: to get these companies to say, you know what, I

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Speaker 1: don't want to go to the coastal cities. We're going

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Speaker 1: to go somewhere else. How do we do that in practice?

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Speaker 1: You're absolutely right. We think it requires scale. You've got

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Speaker 1: to overcome this chicken and egg problem. I don't want

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Speaker 1: to go there because no one else is there. You've

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Speaker 1: got to be big on some new technologies, and that's

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Speaker 1: what China is doing. That's what that's what we should

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Speaker 1: be doing. We propose a hundred billion dollars investment in

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Speaker 1: the book. That's a lot of money. I agree, but

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Speaker 1: think about the rate to return, the social radio return

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Speaker 1: on it. This kind of time investment is fifty Human

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Speaker 1: Genome Project. We put in three billion dollars. We get

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Speaker 1: six billions back every year. Pittsburgh was flat on its back,

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Speaker 1: you know, it was beyond flat on its back. Cargie

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Speaker 1: Mellon in the University of Pittsburgh dragged them out of

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Speaker 1: them arrest. It's led by universities. Those universities are out

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Speaker 1: there right now, they're there. The academics in America is

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Speaker 1: there to support this. Why can't we get the kids

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Speaker 1: to move to name the Midwest city. Well, that's a

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Speaker 1: great question, and you're absolutely right that one of the

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Speaker 1: special features the United States is we have really good

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Speaker 1: universe exactly spread across the tree. What's missing is the jobs.

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Speaker 1: It was missing is the jobs for young people. When

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Speaker 1: I talk to young people pretty much everywhere, they want

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Speaker 1: to move to the East coast or the West coast

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Speaker 1: at least to start their career, to break in, to

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Speaker 1: build a reputation. You need a tech push. You need this.

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Speaker 1: Science is expensive. That's an important point, but it's also

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Speaker 1: a feature of the system. If you build the labs,

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Speaker 1: if you make a big push. Maybe it's on green energy,

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Speaker 1: maybe it's a new green energy builds. Where's this money

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Speaker 1: come from? That's what Donald Trump would say, Where's where's

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Speaker 1: a hundred gazillion dollars going to come from? Well, the

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Speaker 1: big tax cut we did that gave up some revenue.

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Speaker 1: You could have used that revenue there. I look, it's

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Speaker 1: a very high rate of return. What do you do

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Speaker 1: when you see very high rates of return in your

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Speaker 1: private life? You think about borrowing, You think about investing,

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Speaker 1: You think about how you get that camera back. That's

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Speaker 1: what we're proposing here. I mean. The issue is if

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Speaker 1: you're a total rock star, you've got a massive apartment

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Speaker 1: in Sutton Place in Manhattan and you're looking out on

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Speaker 1: Cornell's Island technology thing there, and you're sitting there watching

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Speaker 1: eight football games on Saturday, you really need an incentive

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Speaker 1: to move to Dubuke, right, Yes, you do, and young

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Speaker 1: people will do it. Young people do it, scientists, scientists, sciences. Yes,

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Speaker 1: if other people are going there, what what? What? What

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Speaker 1: the towns people want? They want to work and live

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Speaker 1: around other towns of people. If you build the big

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Speaker 1: science labs, if that's what you're doing, your green energy

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Speaker 1: or that's what you're doing the next phase of syntechnology

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Speaker 1: or that's why you're doing your big push on nuclear technology.

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Speaker 1: The talented, smart scientists, the ambitious people will go there.

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Speaker 1: When your Barcelona, you're looking out at the Cornell Tech Lab,

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Speaker 1: there are can kind of see it a little bit.

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Speaker 1: You were talking about you got eight thousand square feet,

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Speaker 1: know you can see stop seeing them landed seven. Someone.

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Speaker 1: Can we talk about how your work potentially compliments, maybe

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Speaker 1: even contrast with the work of Marianna Masakata of of

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Speaker 1: You See Ow. She also talks about the need for

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Speaker 1: public private partnerships. Why is this different? Why is it similar?

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Speaker 1: Walk me through it? Well, well, we completely agree with

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Speaker 1: Marianna's point, which is the public sectors made big commitments

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Speaker 1: in the past of technology development and a lot of

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Speaker 1: the upside has done well for the private sector follow

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Speaker 1: on investments. Marianna tends to want to go with more

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Speaker 1: government as an investor, more government as an owner of stock.

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Speaker 1: We're not there. We're more about developed the hubs, build

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Speaker 1: the real estate, get some of that appreciation of the

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Speaker 1: value from the real estate, and give that back to

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Speaker 1: all Americans as a cash dividend. That's our view of

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Speaker 1: the opposite. What do you say back to people that

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Speaker 1: say the government is very, very bad at making investments. Oh,

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Speaker 1: I absolutely agree, But don't don't let the government go

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Speaker 1: into the commercial investment business. Bad idea. But what does

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Speaker 1: the government Federal companies already one of the largest owners

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Speaker 1: of real estate in the in the country if you

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Speaker 1: can out the landau West is my father largest. What

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Speaker 1: happens when you do an Amazon type proposal that's about

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Speaker 1: local government partnering with state getting the real estate available.

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Speaker 1: They've gotta build some infrastructure, they've got to think, they

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Speaker 1: think about geography as in hub development. That's what we're

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Speaker 1: proposing it in the time we got left. This is critical.

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Speaker 1: You mentioned President Trump through this, I'm going to make

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Speaker 1: a general statement he's not a fan of science. I

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Speaker 1: think that's a general statement. How do we get away

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Speaker 1: from the modern anti science, the modern anti elite that permeates.

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Speaker 1: I mean, everybody wants their kid to go to M I. T.

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Speaker 1: But the fact is they don't want to support science.

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Speaker 1: Absolutely right, jobs, it's about more good jobs. This is

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Speaker 1: a proposal that will give you more good jobs and

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Speaker 1: spread across America. Millions of Americans will benefit from that.

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Speaker 1: Science did that for us in the forties fifters and sixties.

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Speaker 1: We need to go okay. You had a great chapter

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Speaker 1: and Lawrence Livermore lab Okay, which was a miracle of

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Speaker 1: our youth. Folks. It's out on the West coast. A

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Speaker 1: lot of you couldn't get in the door without a

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Speaker 1: four oh and a PhD in your back pocket. That's

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Speaker 1: not America. What do you do for the rest of

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Speaker 1: America that doesn't know differential equations? There's a lot of

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Speaker 1: jobs in building the infrastructure for science and running the

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Speaker 1: labs Human Genome Project. Average wage from the hold Armies

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Speaker 1: industry seventy thousand dollars. Three people work in the industry.

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Speaker 1: That was a three billion dollar investment by the Federal guards.

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Speaker 1: Are you a fan of SpaceX and all? You know

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Speaker 1: the astronauts from the private crew? Let them. If the

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Speaker 1: private sex It wants to do things like SpaceX and

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Speaker 1: outficial intelligence, let them go for it. The government should

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Speaker 1: be doing things that private sex It doesn't want to do.

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Speaker 1: The things that aren't so sexy. Things are more fundamental.

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Speaker 1: When do I get fourteen bankers? I just want to

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Speaker 1: see quel to the crisis so you can get out

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Speaker 1: front of the next crisis. Are you in quack on

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Speaker 1: speaking terms. Yes, absolutely, he's my brother in law. Really, yes,

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Speaker 1: he's he's my wife's brother. Very cool business I did.

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Speaker 1: It's a family I'll say it's a family business. When

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Speaker 1: do we get a sequel on instead of after the

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Speaker 1: financial crisis, the before the crisis, Simon Johnson, We're we're

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Speaker 1: working on on that and many other rights. After you

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Speaker 1: saw the movie. Rights to Jump Starting America. Jonathan Gruber,

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Speaker 1: Who's a real deal, folks, Jonathan Gruber. We didn't mention John.

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Speaker 1: He's someone who says I'm actually going to propose Unlike

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Speaker 1: a lot of loudmouth economists. He was knee deep in

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Speaker 1: Affordable Care Act and Romney Care, like actually going to

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Speaker 1: do things with me and read it a lot of

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Speaker 1: them behind my desk in the office. But taking this

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Speaker 1: one time, Sammon Johnson there, I might say, Sloan School

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Speaker 1: of Management globally can almost profess. We're gonna do Netflix now,

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Speaker 1: and John's gonna bring in our esteem. Guest, because John,

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Speaker 1: I avoid Netflix like the plague. To me, it's because

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Speaker 1: it's company. No, I don't watch it because it's it's

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Speaker 1: it's like generational, it's like a young thing. It's a

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Speaker 1: young thing. I don't get it. I just I totally

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Speaker 1: don't think every time it's not because every time I

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Speaker 1: go there, they don't have what I want. That's what

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Speaker 1: I know. What do you want? I go to Apple

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Speaker 1: Movies more more, I go to Amazon Prime some and that.

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Speaker 1: You know, Apple Movies really covers a lot of it.

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Speaker 1: I mean, and there's a new one Criterion Channel, which

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Speaker 1: is it's brand new. Film Struck went out of business

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Speaker 1: all the old movies, so the people are Criterion pony up.

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Speaker 1: Here's what happened. A T and T bought Warner A

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Speaker 1: T and T said we gotta cut costs, so they

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Speaker 1: cut out Casablanca. Essentially a film Struck went under and

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Speaker 1: Barber Streisan and a bunch of other people job owned

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Speaker 1: it to where Criterion launched like eight days ago. Subscribe

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Speaker 1: to the Criterion channel so John Ferrell could watch old

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Speaker 1: World War two British. If I was in the media industry,

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Speaker 1: I don't know if I'd be tailoring the content, curating

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Speaker 1: content to your let's go to Netflix. I'm not sure

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Speaker 1: how much money I can make from that. Joining us

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Speaker 1: now Bloomberg Intelligence sound List, Gaither really surprising. I think

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Speaker 1: if we sat here yes, then I said, you know what,

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Speaker 1: gaither tomorrow, I'm going to predict that forward guidance from

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Speaker 1: this company isn't going to be great. I imagine you'd say,

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Speaker 1: I think the stock is gonna be a whole lot

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Speaker 1: lower off the back of that. Why hasn't that happened? Yes,

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Speaker 1: it was really a mixed report GUARD and it's it's

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Speaker 1: it's UM. It's actually really strange that the that the

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Speaker 1: stock is actually bounced back now even with the lighter

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Speaker 1: than expected subscriber guidance for two You and I think

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Speaker 1: what people once investors really got time to digest the report.

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Speaker 1: I think a couple of key takeaways. One is, you

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Speaker 1: know two Q is seasonally a little bit weak UM.

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Speaker 1: And actually, if you look, you know they management to

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Speaker 1: talk about churn from the price increase at eighteen percent

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Speaker 1: price increase that actually goes into effect for most of

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Speaker 1: its subscribers in this quarter. And actually what you would

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Speaker 1: find is the implicit churn in those subscriber forecasts is

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Speaker 1: actually lower than when they increase prices in two thousand

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Speaker 1: and sixteen by a lower amount UM, so actually demonstrates

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Speaker 1: fairly significant pricing power UM. And the other thing that

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Speaker 1: one has to remember is that the two que content

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Speaker 1: slate is actually a little bit light. It's really in

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Speaker 1: the second half of the year that we see all

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Speaker 1: their big ticket items shows UH coming through the service

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Speaker 1: looking forward. If it's not price then moved to down.

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Speaker 1: Is it competition and does any of this guidance contain

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Speaker 1: new enter into this market? Githa, Yes, so they did. Um,

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Speaker 1: you know, they were obviously asked a lot of questions about,

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Speaker 1: you know, all of the upcoming competition, the Disney plus

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Speaker 1: the A, T and T, the Apple service, and as

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Speaker 1: always they kind of downplayed the tread of new rivals

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Speaker 1: and if anything, they actually read Hastings kind of put

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Speaker 1: a positive spin UM saying that all of this new

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Speaker 1: streaming competition is really a testament to the power of

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Speaker 1: Internet TV, to the power of streaming, and it actually

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Speaker 1: accelerates the move away from linear. So if it all,

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Speaker 1: the streaming pie is growing and necklace Netflix is in

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Speaker 1: a position to grab an even greater market share. Said

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Speaker 1: but what's important here is there a relative piece of

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Speaker 1: the pie. Where is it going to be in five years?

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Speaker 1: They're actually so so one of the metrics that UH

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Speaker 1: that management mentioned was, um, you know, they only have

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Speaker 1: a two percent share of the global Internet traffic market,

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Speaker 1: so they're still significantly under penetrated. And I think what's

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Speaker 1: really ironical is, you know, everybody's kind of been obsessing

427
00:22:03,600 --> 00:22:08,120
Speaker 1: about this Disney Plus versus Netflix narrative. I think what's

428
00:22:08,320 --> 00:22:11,359
Speaker 1: what's going to be really um, you know, ironical in

429
00:22:11,400 --> 00:22:15,239
Speaker 1: a way is um that the Disney Plus service might

430
00:22:15,320 --> 00:22:18,320
Speaker 1: actually end up benefiting Netflix. Um. You know, I think

431
00:22:18,359 --> 00:22:21,520
Speaker 1: it's what's going to happen with a seven dollar price point,

432
00:22:21,600 --> 00:22:24,159
Speaker 1: It's actually going to end up accelerating the demise of

433
00:22:24,320 --> 00:22:26,600
Speaker 1: the pay TV bundle, and more and more people are

434
00:22:26,600 --> 00:22:28,800
Speaker 1: going to realize that, you know, they can just get Netflix,

435
00:22:28,840 --> 00:22:31,920
Speaker 1: Disney Plus and probably Amazon and Hulu um, and a

436
00:22:32,000 --> 00:22:35,040
Speaker 1: thirty dollar bundle and and that kind of um, you know,

437
00:22:35,680 --> 00:22:39,560
Speaker 1: completes the package for them. Thank you, So muche this

438
00:22:40,160 --> 00:22:59,680
Speaker 1: with Bloomberg Intelligence on Netflix right now on Gridlock, actually

439
00:22:59,760 --> 00:23:03,080
Speaker 1: is your vice president Gridlock Analysis PIM called Libby Cantrell

440
00:23:03,800 --> 00:23:07,400
Speaker 1: joins us, sound is there any is there any legislation

441
00:23:07,480 --> 00:23:12,840
Speaker 1: occurring in Washington? Libby, Uh, there is not any legislation

442
00:23:12,920 --> 00:23:15,920
Speaker 1: that's probably going to be market moving from a big

443
00:23:16,040 --> 00:23:19,119
Speaker 1: macro person. But they're but they're actually they're Now there

444
00:23:19,119 --> 00:23:22,680
Speaker 1: are glimmers of bipartisanship that the media has not really

445
00:23:22,760 --> 00:23:26,880
Speaker 1: focused on, such as one of them is the Secure Act,

446
00:23:26,920 --> 00:23:29,000
Speaker 1: which is a retirement bill that's making its way through

447
00:23:29,040 --> 00:23:31,399
Speaker 1: the House, will likely make its way through the Senate

448
00:23:31,440 --> 00:23:33,800
Speaker 1: and could be signed into law in the next few months.

449
00:23:33,880 --> 00:23:35,760
Speaker 1: So it is that there is you know, they're they're

450
00:23:35,760 --> 00:23:39,440
Speaker 1: glimmers of bipartisanship in terms of again market moving legislation.

451
00:23:39,560 --> 00:23:41,680
Speaker 1: No not, I don't. We should not be hopeful. Let's

452
00:23:41,720 --> 00:23:45,000
Speaker 1: rip up the script. Roger Ferguson, the former vice chairman

453
00:23:45,040 --> 00:23:48,280
Speaker 1: of the Federal Reserve System, with t I A. Kraft

454
00:23:48,400 --> 00:23:51,440
Speaker 1: has been heated to me in public and private conversation

455
00:23:51,560 --> 00:23:56,359
Speaker 1: Libby about our need to not only a just tweak

456
00:23:56,520 --> 00:24:01,680
Speaker 1: ARISA of four, but we need to excuse me, we

457
00:24:01,800 --> 00:24:05,760
Speaker 1: need to revolutionize our retirement system. Is that the tone

458
00:24:06,320 --> 00:24:09,000
Speaker 1: in Washington or is it a tweak kind of legislation?

459
00:24:09,680 --> 00:24:14,320
Speaker 1: I mean, look, I think that expectations about again sort

460
00:24:14,320 --> 00:24:18,840
Speaker 1: of big macro market moving legislation should be tempered, and

461
00:24:18,960 --> 00:24:21,680
Speaker 1: so this is it's an example of more of the

462
00:24:21,760 --> 00:24:26,200
Speaker 1: tweaking side, more incremental um but but but still I

463
00:24:26,240 --> 00:24:27,640
Speaker 1: mean we have to you know, we have to give

464
00:24:27,720 --> 00:24:30,359
Speaker 1: credit where credit is due. They are moving to kind

465
00:24:30,400 --> 00:24:33,280
Speaker 1: of the ball down the goal line. Um. And in

466
00:24:33,520 --> 00:24:36,879
Speaker 1: terms of trying to revolutionize retirement now now, Congress is

467
00:24:36,920 --> 00:24:39,040
Speaker 1: never going to become on the forefront of innovation there.

468
00:24:39,040 --> 00:24:41,719
Speaker 1: I think they're always going to be on the back heels. Um.

469
00:24:42,040 --> 00:24:44,760
Speaker 1: And lots of respects. But but again you have to

470
00:24:44,840 --> 00:24:47,879
Speaker 1: give them credit that things things aren't moving forward on

471
00:24:48,119 --> 00:24:50,840
Speaker 1: this sort of important um, you know the area the

472
00:24:50,880 --> 00:24:52,879
Speaker 1: other thing has come up about eight times in the

473
00:24:53,000 --> 00:24:54,680
Speaker 1: last ten days, folks, I've been on the road. Just

474
00:24:54,760 --> 00:24:57,600
Speaker 1: seems like for I literally woke up Saturday and literally

475
00:24:57,640 --> 00:25:00,600
Speaker 1: didn't know where it was. Libby is the great quality

476
00:25:00,760 --> 00:25:05,200
Speaker 1: infrastructure of the third world nation, the United States of America.

477
00:25:05,520 --> 00:25:08,040
Speaker 1: I don't want to review like the why it's a mess,

478
00:25:08,760 --> 00:25:12,440
Speaker 1: but it's simple. Money solves It is the money out

479
00:25:12,520 --> 00:25:17,240
Speaker 1: there to do infrastructure in Washington. Well, look, I think

480
00:25:17,280 --> 00:25:20,119
Speaker 1: that is an ongoing debate right now. I mean, um,

481
00:25:20,320 --> 00:25:22,600
Speaker 1: you know, the CBO is projecting that we're going to

482
00:25:22,720 --> 00:25:26,240
Speaker 1: have trillion plus deficits UM starting in twenty nineteen and

483
00:25:26,600 --> 00:25:29,960
Speaker 1: going forward. Um, I think that it's the money is

484
00:25:30,600 --> 00:25:33,119
Speaker 1: there um. I think many would argue the money is

485
00:25:33,200 --> 00:25:36,000
Speaker 1: there because rates have continued to be low even in

486
00:25:36,080 --> 00:25:38,840
Speaker 1: spite of these big deficits. I think it's the appetite,

487
00:25:38,960 --> 00:25:41,520
Speaker 1: and this is where there is a big kind of

488
00:25:41,640 --> 00:25:45,760
Speaker 1: disconnect on infrastructure. Even though lots of members of Congress

489
00:25:45,880 --> 00:25:48,960
Speaker 1: like infrastructure kind of brings goodies back to your districts,

490
00:25:48,960 --> 00:25:51,480
Speaker 1: and the President certainly likes to build things, I do

491
00:25:51,640 --> 00:25:55,280
Speaker 1: think Senate Republicans especially are going to be very wary

492
00:25:55,400 --> 00:25:58,680
Speaker 1: of a deficit finance sort of fiscal infrastructure package. So

493
00:25:59,080 --> 00:26:02,920
Speaker 1: even though there is a lot of unanimity among American

494
00:26:03,000 --> 00:26:05,720
Speaker 1: citizens that we need infrastructure improvements, I don't think we

495
00:26:05,800 --> 00:26:08,480
Speaker 1: see infrastructure in the session of Congress. Leby, I want

496
00:26:08,480 --> 00:26:10,720
Speaker 1: to go to one sentence of your recent report for PIMCO.

497
00:26:10,760 --> 00:26:12,720
Speaker 1: If you're just joining us, let me control with Pimco

498
00:26:13,440 --> 00:26:15,800
Speaker 1: with us, and that is this will be a different

499
00:26:15,880 --> 00:26:20,000
Speaker 1: primary season for the Democrats than we've ever seen. In

500
00:26:20,119 --> 00:26:23,640
Speaker 1: what way do you mean that? Well? I think, well,

501
00:26:23,960 --> 00:26:26,360
Speaker 1: a couple of things, and I think that's just important

502
00:26:26,400 --> 00:26:28,919
Speaker 1: to to keep in mind here is that the Democratic

503
00:26:28,960 --> 00:26:32,879
Speaker 1: primary season will look you much more similar to that

504
00:26:33,119 --> 00:26:36,560
Speaker 1: of the Republicans in sixteen than it did for the

505
00:26:36,640 --> 00:26:39,720
Speaker 1: Democrats in sixteen, meaning that obviously it's going to be

506
00:26:40,320 --> 00:26:45,160
Speaker 1: a very crowded field. Um. The the the rule changes

507
00:26:45,240 --> 00:26:49,520
Speaker 1: that the Democratic National Committee have pursued means that the

508
00:26:49,680 --> 00:26:52,960
Speaker 1: kind of the party officials, these so called super delegates,

509
00:26:53,320 --> 00:26:57,639
Speaker 1: will have much less influence over the ultimate nominee. And

510
00:26:57,760 --> 00:26:59,600
Speaker 1: because of the way that delegates are going to be

511
00:26:59,680 --> 00:27:03,280
Speaker 1: a poor shant in the primaries on a proportional basis

512
00:27:03,320 --> 00:27:06,360
Speaker 1: not when to take all means that you know, much disagreed,

513
00:27:06,400 --> 00:27:08,480
Speaker 1: and I'm sure many people listening that it means that

514
00:27:08,520 --> 00:27:11,320
Speaker 1: the Democratic primaries are the last longer, so we probably

515
00:27:11,440 --> 00:27:15,240
Speaker 1: won't see a nominee, you know, until late spring or summer,

516
00:27:15,280 --> 00:27:16,920
Speaker 1: and we may not even see a nominee until you

517
00:27:17,000 --> 00:27:20,200
Speaker 1: actually get to the conduction and right right, like you

518
00:27:20,240 --> 00:27:23,040
Speaker 1: could be like a real convention, yeah, exactly, like a

519
00:27:23,160 --> 00:27:25,240
Speaker 1: like a broken convention. Y. Yeah, I think it's gonna be.

520
00:27:25,280 --> 00:27:28,600
Speaker 1: It's gonna be quite different obviously from sixteen. And from

521
00:27:28,640 --> 00:27:30,800
Speaker 1: a market's perspective, you know, I think that that means

522
00:27:30,880 --> 00:27:33,760
Speaker 1: that things are more susceptible to headline risk, right because

523
00:27:33,800 --> 00:27:38,200
Speaker 1: there's many competing different policies. Um, you know, there's clearly

524
00:27:38,280 --> 00:27:41,080
Speaker 1: the progressive left is maybe going a little bit more left,

525
00:27:41,440 --> 00:27:43,240
Speaker 1: and so I think the market will react and it

526
00:27:43,320 --> 00:27:46,080
Speaker 1: probably will have a little bit more volatility because of it.

527
00:27:46,280 --> 00:27:48,480
Speaker 1: One final question, do you assume then a move by

528
00:27:48,600 --> 00:27:51,560
Speaker 1: Democrats to the middle or do they stay on our

529
00:27:51,680 --> 00:27:55,160
Speaker 1: liberal left tone? You know, I mean it really it's

530
00:27:55,200 --> 00:27:58,240
Speaker 1: gonna be. It's it's hard to predict that we don't

531
00:27:58,280 --> 00:28:00,040
Speaker 1: know way that we're the way that we're character I

532
00:28:00,080 --> 00:28:03,320
Speaker 1: think this with our clients, the hunger Games, I really

533
00:28:03,400 --> 00:28:05,399
Speaker 1: kind of fight for the soul of the Democratic Party.

534
00:28:05,760 --> 00:28:09,200
Speaker 1: I think that objectively to win the general election, a

535
00:28:09,320 --> 00:28:13,200
Speaker 1: Democrat would need to win Wisconsin, Pennsylvania, Ohio, Michigan, and

536
00:28:13,320 --> 00:28:16,840
Speaker 1: probably Florida. And I you know, my own view is

537
00:28:16,960 --> 00:28:20,360
Speaker 1: having a real progressive left um that might be hard

538
00:28:20,440 --> 00:28:22,600
Speaker 1: to do. So I think I think you probably will

539
00:28:22,720 --> 00:28:25,760
Speaker 1: see a more attack to the center just because of

540
00:28:25,840 --> 00:28:28,200
Speaker 1: those how critical those states are in terms of winners

541
00:28:28,240 --> 00:28:30,960
Speaker 1: in general. Very good, Let me cancel. Thank you so much,

542
00:28:31,000 --> 00:28:37,359
Speaker 1: greatly appreciate that. Thanks for listening to the Bloomberg Surveillance podcast.

543
00:28:37,760 --> 00:28:42,680
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

544
00:28:42,840 --> 00:28:47,520
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom Keane.

545
00:28:48,080 --> 00:28:51,760
Speaker 1: Before the podcast, you can always catch us worldwide. I'm

546
00:28:51,800 --> 00:28:52,640
Speaker 1: Bloomberg Radio