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US Stocks Rally After Jobless Claim Data · Bloomberg Intelligence

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Speaker 2: Alex Ci alongside Paul Sweeny, Welcome to Bloomberg Intelligence Radio.
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Speaker 2: We are broadcasting to you live from Interactive Brokers Studio
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Speaker 2: right here in Midtown Manhattan. Also check us out on
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Speaker 2: YouTube as well. What do you do in the market?
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Speaker 2: I mean the Nastak one hundred is up by two percent.
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Speaker 2: It has been an extremely difficult week in the market
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Speaker 2: if you count last Friday, just in terms of understanding
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Speaker 2: where we are, where positioning is and is the market complacent?
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Speaker 2: I mentioned the Vicks at twenty five. Joining us now
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Speaker 2: is Brian Whale and chief investment officer and a generalist
0:53
Speaker 2: portfolio manager over at TCW joins US now. Hey, Brian,
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Speaker 2: are we complacent here at this point or is this
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Speaker 2: a buying opportunity?
1:03
Speaker 3: I think it's a buying opportunity in the bond market.
1:05
Speaker 3: We've had a little bit of a backup. I think
1:07
Speaker 3: everything we saw you know, earlier this week Sunday night
1:10
Speaker 3: into Monday was it was a bit of panic. You know,
1:12
Speaker 3: we've been in the very barished camp with regards to
1:15
Speaker 3: the economy. But even we would were dismissing the notion
1:18
Speaker 3: of some intermeding cut. We thought that was that was
1:22
Speaker 3: a foolish way to think about the world. So I
1:24
Speaker 3: think this is this is kind of calm, This is
1:26
Speaker 3: the market kind of settling in here a little bit.
1:29
Speaker 3: You know, even though we've backed off in bond yields
1:32
Speaker 3: since the lows on Monday morning, if if you just
1:34
Speaker 3: take a step back for a second, you know, the
1:36
Speaker 3: five year as just kind of an indicator of yields
1:39
Speaker 3: has come down fifty basis points since we started the quarter,
1:42
Speaker 3: so since you know, since July one, and that's a
1:44
Speaker 3: big move. And I think that's very much in line
1:47
Speaker 3: with you know, the the notions and everyone in the
1:50
Speaker 3: fairytale camp of no landing kind of being shaken a
1:53
Speaker 3: little bit. We've seen a couple of months of of
1:55
Speaker 3: slowing economic data and the one economic kind of data
1:59
Speaker 3: point that had been holding up that no landing camp,
2:01
Speaker 3: which was the headline payrolls number, you know, that got
2:04
Speaker 3: knocked off a little bit on Friday, and so if
2:06
Speaker 3: you kind of forget the noise early in the week,
2:08
Speaker 3: this looks like a kind of the right place to
2:10
Speaker 3: settle in Brian.
2:12
Speaker 4: When you walked out onto the TCW trading floor on
2:14
Speaker 4: Monday morning, what were your traders telling you?
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Speaker 3: It was, you know that metrics didn't make sense. Things
2:24
Speaker 3: were moving all over the place. Liquidity was very poor.
2:28
Speaker 3: You know, you saw the vicks. You know, I think
2:29
Speaker 3: at one point it was that you know, in toyday
2:31
Speaker 3: was well over fifty, which looked it was in a sixties. Yeah,
2:35
Speaker 3: it looked more like an apple. It looked like it
2:36
Speaker 3: looked like an It looked like a like a stock
2:38
Speaker 3: market crash.
2:40
Speaker 1: It didn't.
2:40
Speaker 3: It did not look like a market where a headline employee.
2:44
Speaker 3: You know, the rate should have been one hundred and
2:46
Speaker 3: seventy five thousand growth on the payrolls number, and it
2:48
Speaker 3: came in one hundred and fourteen thousand, and the unemployment
2:52
Speaker 3: rate went from you know, four point one to four
2:53
Speaker 3: point three. I mean, that's that's that's indi indicative of
2:57
Speaker 3: a slowing economy and a slower labor for worse than
3:00
Speaker 3: maybe one that's weaker than the market was expecting, and
3:02
Speaker 3: it probably will cause the FED to have to cut
3:04
Speaker 3: more aggressively than the market was pricing beforehand. But sure,
3:07
Speaker 3: it sure wasn't panic.
3:09
Speaker 5: Well what did you make of the ten year auction yesterday?
3:12
Speaker 5: It wasn't good.
3:12
Speaker 2: It just was pretty bad again, thirty year coming today?
3:15
Speaker 2: The three year was fine. You know, our jersey tells
3:18
Speaker 2: me I should care about these things.
3:19
Speaker 6: I know, yeah, I know.
3:20
Speaker 5: What did you make that?
3:22
Speaker 3: You know, it's it's it's it's the same thing I
3:24
Speaker 3: make of what I this morning. You know, it's it's
3:26
Speaker 3: gappy price action. It's it's it's a nervous market. I mean,
3:29
Speaker 3: you saw, you know, a little bit of supply. You know,
3:31
Speaker 3: the street pushes it around. You got a higher yield
3:33
Speaker 3: this morning. You know, initial jobless games come in just
3:36
Speaker 3: a hair under expectations. Although the four week moving average
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Speaker 3: keeps moving up, continue it continued claims continues to stay hi.
3:44
Speaker 3: So the fact that we're off ten basis points in
3:46
Speaker 3: the market is just it's a market trying to find
3:48
Speaker 3: its footing, almost trying to you know, almost trying to
3:51
Speaker 3: catch its breath a little bit, which is which is
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Speaker 3: a healthy thing. I think what we would contend is,
3:55
Speaker 3: you know, this is maybe not the breath you take
3:58
Speaker 3: because everything is going to be all right, more like
4:00
Speaker 3: the breath you take before you take the punch. And
4:02
Speaker 3: so you know, over the next few over the next
4:04
Speaker 3: few months, what we're probably going to see, at least
4:06
Speaker 3: we expect is is more of the same, which is
4:08
Speaker 3: the economic data continuing to slow and the FED is
4:11
Speaker 3: going to have to react to that.
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Speaker 4: Brian, where do you see opportunities in the fixing can
4:17
Speaker 4: market here? Given some of the volatility we've seen over
4:19
Speaker 4: the last several days.
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Speaker 3: It's a boring answer. I'd say the opportunities maybe agency
4:25
Speaker 3: mortgages aside, but at a high level of the opportunities
4:27
Speaker 3: is in duration and in liquidity, like keep keep your
4:30
Speaker 3: powder dry, because you know, I'm not saying we're going
4:33
Speaker 3: to have vixed days of you know, of north of
4:35
Speaker 3: sixty again. But if we enter the fall and the
4:39
Speaker 3: narrative and you start reading more about a recession and
4:42
Speaker 3: the job market turns from one of where companies are
4:46
Speaker 3: just not hiring but actually starts to fire, what you're
4:49
Speaker 3: going to see then is concerned about earnings growth and
4:52
Speaker 3: the ability of companies to service their debt, and then
4:54
Speaker 3: there's going to be conversation around downgrades and what happens
4:58
Speaker 3: then in terms of pricing and like our trading floor
5:01
Speaker 3: and the opportunities we're looking for. Corporate bonds are going
5:03
Speaker 3: to get cheaper relative to treasuries, highyield bonds, emerging market bonds,
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Speaker 3: they're all going to get cheaper. And that's the that's
5:09
Speaker 3: a really nice buying opportunity because in the bond world now,
5:12
Speaker 3: not only can you kind of buy cheap credit and
5:15
Speaker 3: get the benefits of spread duration and that's another conversation,
5:19
Speaker 3: but you can also get carry and you can also
5:21
Speaker 3: get the advantage of like diversification into portfolio because you know,
5:24
Speaker 3: with yields across the curve right now at four percent,
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Speaker 3: you know, bonds can be bonds again, so they can
5:28
Speaker 3: act as that hedge of that offset into an environment
5:31
Speaker 3: where we get volatility and equities to cline.
5:33
Speaker 5: So two things with corporates.
5:35
Speaker 2: One, we saw a record amount of issuance yesterday in
5:37
Speaker 2: the investment grade market all year. And then also the
5:40
Speaker 2: spreads have not blown out at all like in the
5:43
Speaker 2: last few days. Yeah, they moved up, but we haven't
5:45
Speaker 2: blown out. And I'm just wondering if there's more priced
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Speaker 2: appreciation here to come.
5:49
Speaker 3: Definitely, it's a trillion dollars a little over a trillion
5:52
Speaker 3: dollars of issuance year to date, which is very high.
5:55
Speaker 3: But yeah, look like just to put things in kind
5:57
Speaker 3: of context for everybody here and watch this stuff day
6:01
Speaker 3: to day. I mean, you know, investment, great corporate bonds
6:04
Speaker 3: kind of on the tight end, meaning like the amount
6:07
Speaker 3: of yield you get over treasuries doesn't get much tighter
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Speaker 3: than about point eight percent, you know, eighty basis points.
6:11
Speaker 3: We're sitting at about one hundred basis points. Historical averages
6:15
Speaker 3: just even excluding like big moves like the Great Financial Crisis,
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Speaker 3: historical averages are about one hundred and twenty one hundred
6:21
Speaker 3: and twenty five basis points. So you know that was
6:23
Speaker 3: kind of us too on Monday when it's like, look
6:25
Speaker 3: the market, everybody's got to calm down a little bit. Like,
6:28
Speaker 3: you know, at one hundred basis points over, corporate bonds
6:30
Speaker 3: still look expensive. So be patient. You know, this this
6:35
Speaker 3: may not be a recession that we kind of jump
6:37
Speaker 3: into in and overnight. This just may be an old
6:40
Speaker 3: fashioned recession where we're just going to have to walk
6:42
Speaker 3: our way into it. So as an investor, you've got
6:44
Speaker 3: to keep that kind of long term perspective in mind
6:47
Speaker 3: and preserve that capital. You know, if you've got that cash,
6:50
Speaker 3: that's worth a lot because you'll be able to spend
6:53
Speaker 3: it in very wise ways, probably throughout the remainder of
6:56
Speaker 3: the year and into early next year.
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Speaker 4: So, Brian, when the phone calls do from Wall Street
7:01
Speaker 4: with these new issues, what kind of calls do you take?
7:04
Speaker 6: Do you take everything?
7:05
Speaker 4: I mean, because you've got capital deploy are you focusing
7:08
Speaker 4: just on the highest quality stuff? What kind of phone
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Speaker 4: calls do you take from Wall Street these days?
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Speaker 3: I think the way I've described is like, don't call
7:16
Speaker 3: us when you think we need you, call us when
7:18
Speaker 3: you need us. You know that that's that is That
7:21
Speaker 3: is like a good way to describe what we call
7:24
Speaker 3: like the liquidity premium, which is and I was talking
7:26
Speaker 3: about cash before, like you know, if you want the
7:29
Speaker 3: opportunities when people are calling you on the phone and
7:31
Speaker 3: saying we've got a problem or somebody needs to sell
7:34
Speaker 3: and et cetera, and it's like, Okay, what you hear
7:37
Speaker 3: seems like going on to like a dealer's like a
7:38
Speaker 3: car lot, you know, somebody's like, look, I got to
7:40
Speaker 3: get rid of this thing, you know, blah blah. Same thing. Like,
7:43
Speaker 3: as an investor, you want to wait for the opportunities
7:45
Speaker 3: where Wall Street calls you and says, look, here's an opportunity.
7:49
Speaker 3: Here's the price. I know, you know where regular market
7:51
Speaker 3: pricing is, and you know, what do you think? And
7:54
Speaker 3: that's that's what you wait for. It It happens kind
7:58
Speaker 3: of infrequently, but that's where you can make the big money.
8:01
Speaker 5: Where do you think we're going to see the most volatility?
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Speaker 3: That's a good question, you know. In the short term,
8:09
Speaker 3: you know, we'll see it uh in uh and obviously
8:11
Speaker 3: in interest rates. I think the next thing that would
8:14
Speaker 3: probably be a your what we call these high data
8:16
Speaker 3: parts of fixed income, like like high yield and emerging markets.
8:19
Speaker 3: I think down the line, you know, so so the
8:22
Speaker 3: public liquid markets will react first, and that's where you
8:26
Speaker 3: will see the vall also throw you know, they'll probably
8:28
Speaker 3: see some some currency volatility in there too. But down
8:31
Speaker 3: the line, if we do get a true recession, there'll
8:34
Speaker 3: be a shake up, you know, in in everybody's favorite
8:36
Speaker 3: market today, which is private credit, and there's there's some
8:39
Speaker 3: you know, private credits here to stay and and you know,
8:41
Speaker 3: there's some some great things about it. However, it's been
8:44
Speaker 3: too easy for too long uh and there's going to
8:47
Speaker 3: have to be a shakeout uh And and that's a
8:49
Speaker 3: healthy thing for the market in the long term. And
8:51
Speaker 3: so in the short term, focus on those kind of
8:53
Speaker 3: liquid markets like like like high yield bonds for instance,
8:56
Speaker 3: UH currencies, and then in the longer term that'll probably
9:01
Speaker 3: roll into less liquid parts of the market.
9:04
Speaker 4: All Right, Brian, thanks so much for joining us. Really
9:05
Speaker 4: appreciate Brian Whalen. He's a chief investment officer. That means
9:08
Speaker 4: he's a big dude and a generalist portfolio manager TCW.
9:11
Speaker 4: I tell you I've worked at TCW when I was
9:14
Speaker 4: on a cell side twenty some odd years.
9:16
Speaker 6: I knew I had like four or five relationships good
9:18
Speaker 6: relationships there.
9:19
Speaker 5: Oh, really smart, super smart.
9:22
Speaker 6: Yeah, I mean like across.
9:23
Speaker 4: The board, like I avoided the fixicing floor, like the plague.
9:26
Speaker 4: I went to the equity floor because that's they were.
9:28
Speaker 7: You know.
9:29
Speaker 2: That's so I think people are really smart when they
9:32
Speaker 2: can break things down in language that I understand. Like
9:34
Speaker 2: that's the pure sign, Like you're so smart you can
9:36
Speaker 2: dumb it down right, And.
9:37
Speaker 3: That's how Brian Wentlest principle was where can I make
9:40
Speaker 3: the most money?
9:41
Speaker 6: Where can I make the most.
9:42
Speaker 5: Money as he should? Exactly as he should.
9:44
Speaker 4: I tell you go to Los Angeles. There's two meetings.
9:46
Speaker 4: You have to get TCW and Capitol Group. Everything else
9:50
Speaker 4: is just gravy.
9:50
Speaker 6: If you get that, that's like.
9:52
Speaker 4: Eighty percent of the votes, eighty percent of the commission
9:54
Speaker 4: dollars out of those two shops.
9:55
Speaker 5: Yeah, duh, Tucker, he didn't know that, Geese.
10:00
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10:19
Speaker 4: All right, let's check in with our good friend Claudia Sam.
10:21
Speaker 4: She's a chief economist, that New Century Advisor's former Federal
10:24
Speaker 4: Reserve economist, and a Bloomberg opinion columnist. And she's got
10:28
Speaker 4: this thing called the Sam Rule. Now, I'm not an economist.
10:30
Speaker 4: I think marginal revenue, marginal cost. That's my extensive knowledge
10:34
Speaker 4: of economics.
10:35
Speaker 6: Claudia, thanks so much, for joining us here.
10:37
Speaker 4: Can you just summarize for our listeners our viewers what
10:40
Speaker 4: the sum rule says and was it triggered on Friday
10:44
Speaker 4: with the job support.
10:46
Speaker 7: So it's a recession indicator. So it uses changes in
10:49
Speaker 7: the unemployment rate over a year to it has a
10:53
Speaker 7: threshold and compares that to historical episodes of recessions. And
10:59
Speaker 7: you know that's when it turns on. It has turned
11:01
Speaker 7: on historically inside in the early months of not a forecast,
11:04
Speaker 7: in the early months of a recession. And with the
11:08
Speaker 7: employment report on July it the som rull crossed the
11:11
Speaker 7: half a percentage point threshold, and so it's indicating a recession.
11:17
Speaker 7: Are we in a recession my expert opinion looking broadly
11:21
Speaker 7: as no, we are not, but that increasing unemployment rate
11:25
Speaker 7: that we have seen over a year plus is very
11:27
Speaker 7: disconcerting and we're not pointed in the right direction in
11:30
Speaker 7: terms of where we're trending.
11:32
Speaker 2: This is why I really loved your Bloomberg opinion piece yesterday,
11:35
Speaker 2: because it feels like a lot of people are coming
11:36
Speaker 2: on talking about your rule and how that is de
11:39
Speaker 2: facto then we're in a recession. As reason for the
11:42
Speaker 2: FED to do something, maybe bigger or an emergency way,
11:45
Speaker 2: and you come out with an article that says US
11:47
Speaker 2: isn't in a recession despite the indicator, my recession rule
11:50
Speaker 2: was meant to be broken.
11:51
Speaker 5: What does that mean.
11:55
Speaker 7: When we think about this cycle from the pandemic on
11:59
Speaker 7: the last four and a half years, the disruptions to
12:01
Speaker 7: the US economy have been in many ways unprecedented, and
12:06
Speaker 7: in particular, we've had some really big disruptions to supply,
12:11
Speaker 7: which are typical boom and bust indicators recession, high inflation,
12:14
Speaker 7: low inflation. Those are about demand and so the some
12:18
Speaker 7: rule I, in my opinion, is getting overstated by some
12:23
Speaker 7: of the really abrupt shifts and labor supply in the
12:26
Speaker 7: last several years. And that's just some of the unployment
12:31
Speaker 7: rate increase is the good kind. It's people who come
12:33
Speaker 7: in want to work, they will get jobs. It'll be growth.
12:37
Speaker 7: But in the interim that looks like the unemployment rate
12:40
Speaker 7: rising in the recession, there's some of the bad unemployment
12:44
Speaker 7: in there too. So that's where it gets really hard,
12:46
Speaker 7: and you know, it's difficult to hear. I'm happy to
12:49
Speaker 7: have sparked a robust conversation. This is really really important
12:53
Speaker 7: to know if we're in or headed towards a recession
12:57
Speaker 7: because our policy actions that can be taken, and so
13:00
Speaker 7: you know, it's it's I'm using the tool and other
13:04
Speaker 7: data just like anybody else.
13:07
Speaker 4: So, Claudia, what do you make of an unemployment rate
13:09
Speaker 4: of four point three percent?
13:11
Speaker 6: To me, in my experience, that's still low.
13:14
Speaker 4: I guess if you want to get concerned about the trend,
13:17
Speaker 4: I e.
13:17
Speaker 6: It's moving higher, that's a concern.
13:19
Speaker 4: But in and of itself four point three percent, how
13:22
Speaker 4: does that kind of stack up for you?
13:25
Speaker 3: Right?
13:25
Speaker 7: So, if if our concern is about the direction we're
13:29
Speaker 7: pointed in, are we headed towards the recession? Are we
13:32
Speaker 7: enter recession? The relevant metric is the change and the
13:36
Speaker 7: unemployment rate. The level is important. Sometimes it's unsustainably low,
13:40
Speaker 7: like earlier when we had the labor shortages, the unemployment
13:43
Speaker 7: rate in the United States, when I got down to
13:44
Speaker 7: three point four percent, that was because we were missing
13:47
Speaker 7: some workers too, right, Like that wasn't going to stick.
13:50
Speaker 7: So sometimes, like you know, within bounds, sometimes the level
13:52
Speaker 7: does tell us something. But at four point three percent,
13:55
Speaker 7: this is very much consistent with the demographics of our
14:00
Speaker 7: We have an older, more experienced workforce four percent unemployment
14:04
Speaker 7: that that's much more like you would expect or predict,
14:08
Speaker 7: So that we're not four point three is not like,
14:11
Speaker 7: oh wow, this is really low. It's not sustainable. And
14:14
Speaker 7: we've gone into recessions in the past with lower unemployment
14:17
Speaker 7: than now and also higher so the level itself is
14:20
Speaker 7: not a protection against a recession.
14:23
Speaker 2: Paul pointing to himself when he said older workforce seasoned,
14:26
Speaker 2: we think season experience, Claudia to that point, how do
14:31
Speaker 2: I understand the fact that you had a huge move
14:33
Speaker 2: in the bond market when initial jobless claims came out.
14:37
Speaker 2: They're volatile, their seasonality, they change, and yet we're still
14:41
Speaker 2: having such market sensitivity to that.
14:44
Speaker 5: Where does that kind of tell you about where we are?
14:47
Speaker 7: Right? Well, this is very much this question about the
14:51
Speaker 7: dynamics the recession, right, It's not this isn't about this
14:56
Speaker 7: hole rule, but it captures it.
14:58
Speaker 8: Right.
14:58
Speaker 7: This is why this almost worked historic is you get
15:01
Speaker 7: periods where the unemployment rate starts coming up gradually, and
15:05
Speaker 7: then it picks up steam, and then it goes up
15:07
Speaker 7: a lot. And we had some signals that were in
15:10
Speaker 7: this stage. It's been going up slowly and gradually, and
15:12
Speaker 7: with the July employment report, things look like they were
15:15
Speaker 7: picking up steam in the wrong way, and so that's
15:19
Speaker 7: the concern. And then then what we're looking for and
15:21
Speaker 7: claims data is is that momentum there or was it
15:26
Speaker 7: just the weather or this that you know? And so
15:28
Speaker 7: I think that's this reaction because we're kind of on this.
15:33
Speaker 7: It's not like we're on the knife's edge, but the
15:35
Speaker 7: dynamics are like it makes a big difference at this
15:39
Speaker 7: point if the increase in the unemployment rates speed up
15:42
Speaker 7: or not, because once they get going, they tend to
15:45
Speaker 7: you have these negative feedback loops and then you're not
15:48
Speaker 7: talking about a half a percentage point increase and then
15:50
Speaker 7: employment you're talking about a three percentage point increase.
15:52
Speaker 4: Claudia talked to us about the migration component to the
15:57
Speaker 4: labor market. How has that impacted the number because again
16:00
Speaker 4: we've had a surge in migration on the southern border.
16:02
Speaker 6: For the last several years. How's that impacted the numbers?
16:05
Speaker 6: Do you think?
16:06
Speaker 3: Right?
16:06
Speaker 7: Well, first thing, having the immigration and we've had other
16:11
Speaker 7: prime age labor force participation that is higher in the
16:14
Speaker 7: US right now than it's been in general. So it's
16:16
Speaker 7: not just about immigrants. But we it was very important
16:19
Speaker 7: to have more labor supply address these labor shortages that
16:23
Speaker 7: we'd had, and this has taken prior pressure off of
16:26
Speaker 7: wages and inflation and so like that's very good. And
16:30
Speaker 7: then we have more supply of workers and that and
16:35
Speaker 7: hiring has moderated, right like, the pace has slow down some.
16:38
Speaker 7: So now we're in the opposite direction of the jobs
16:40
Speaker 7: need to catch up to the workers. So if you
16:43
Speaker 7: think about that, this is all in adjustment right like
16:47
Speaker 7: where it's it's more of a timing issue. And when
16:49
Speaker 7: the reason that the labor supply causing increasing unployment rates
16:53
Speaker 7: a good thing is when they when those new workers
16:56
Speaker 7: do get jobs, they help us expand the economy, which
16:59
Speaker 7: is the exact opposite of this kind of recession watch contracting.
17:04
Speaker 7: But I will say, you know, employers have different margins
17:08
Speaker 7: to adjust labor demand writ large, and we have seen
17:13
Speaker 7: the hiring rates at employers come down to levels that are,
17:19
Speaker 7: you know, line up with much higher unemployment rates than
17:23
Speaker 7: in the past. So it could be just employers are
17:25
Speaker 7: not wanting to lay off as much because they got
17:27
Speaker 7: burned in this crisis, and so we're seeing you know,
17:31
Speaker 7: it's harder if you're coming in labor force to get jobs.
17:34
Speaker 7: So this is really tricky labor market treat and that
17:37
Speaker 7: means every single scrap of data we get on the
17:39
Speaker 7: labor market is a big deal.
17:41
Speaker 2: So Claudia, before I let you go in, but a
17:43
Speaker 2: minute left. I'm looking at WERP WRP on the terminal.
17:46
Speaker 2: It's looking at twenty five basis points of cuts in
17:48
Speaker 2: the next three meetings.
17:49
Speaker 5: Is that fair pricing? Right now?
17:52
Speaker 7: That is my baseline. I think that's fair fair pricing
17:55
Speaker 7: the FED. There is more slowing in the labor market
17:59
Speaker 7: than I think is comfortable. We don't need to get
18:02
Speaker 7: into a recession for the FED to start acting, So
18:04
Speaker 7: I think a little picking up the pace some in
18:07
Speaker 7: like three consecutive cuts makes sense. But they're going to
18:10
Speaker 7: be very attuned to you know, we've got more information
18:13
Speaker 7: on labor market between now in September.
18:16
Speaker 4: All right, Claudia, thank you so much for joining us.
18:19
Speaker 4: Really appreciate getting some of your time. Claudia sam she
18:21
Speaker 4: is the chief economist at New Century Advisors, former Federal
18:24
Speaker 4: Reserve economist, and a Bloomberg Opinion opinion writers. We appreciate
18:29
Speaker 4: getting some of her time. She's a creator of the
18:31
Speaker 4: Psalm rule, a recession indicator, which says, maybe it's not
18:36
Speaker 4: tripped today, but it's certainly suggesting that the risks of
18:39
Speaker 4: a recession or higher certainly.
18:40
Speaker 6: In your term.
18:41
Speaker 2: But I love her candor of like, look, I think
18:43
Speaker 2: some people are taking this and running with us like
18:45
Speaker 2: a little bit too far. There's some more nuances. I
18:47
Speaker 2: love that because you don't get that very often, particularly
18:51
Speaker 2: in a market that for so long appeared so one
18:53
Speaker 2: sided in terms of positioning, that that kind.
18:55
Speaker 5: Of nuance is quite important.
18:57
Speaker 2: And I have to wonder how complacent and are we still?
19:01
Speaker 2: I mean that fade yesterday was not a good sign.
19:03
Speaker 6: No it wasn't.
19:04
Speaker 4: But again we got the SMP, you know, up one
19:06
Speaker 4: point six percent here today, the Russell up one and
19:10
Speaker 4: a half percent, the NASTAC up one point eight percent,
19:12
Speaker 4: so kind of per some broad market moves hired today.
19:15
Speaker 5: Yeah, and the visit twenty five. I remember those days
19:18
Speaker 5: where it was twelve, like two weeks ago.
19:21
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
19:25
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19:28
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19:36
Speaker 2: Alex Steel here alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
19:39
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19:41
Speaker 2: news and economics and finance that you need with our
19:43
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19:46
Speaker 2: one hundred and thirty industries worldwide.
19:48
Speaker 5: We also like to dig deep.
19:50
Speaker 2: Into the amazing reporting here that we have throughout Bloomberg News.
19:55
Speaker 2: And there's a couple of things on that point. One
19:57
Speaker 2: is we're going to go to Madison Mueller, who's going
19:59
Speaker 2: to talk about Eli Lilley earnings, because that was quite interesting.
20:02
Speaker 5: The other is we're going to talk about ozempic town.
20:05
Speaker 5: It's a big take.
20:06
Speaker 2: You can check it out on our podcast, you can
20:08
Speaker 2: check it out in Bloomberg Business Week as well, but
20:11
Speaker 2: it's saying it found the biggest town in the United
20:15
Speaker 2: States that uses ozempic. It was really cool, great anecdotal evidence,
20:18
Speaker 2: and I have lots of questions. Madison joins us now
20:21
Speaker 2: in studio verses. Take us through Eli Lily earnings. Is
20:25
Speaker 2: this a pure like market share grab from Novo to Ali?
20:30
Speaker 9: Not quite yet, So that's what we're We're We've been
20:33
Speaker 9: closely watching. Lily is narrowing the gap with Novo Nordisk.
20:37
Speaker 9: The sales are coming quite close. I mean, Lily had
20:40
Speaker 9: one point two billion in sales of zep Bound, which
20:43
Speaker 9: only launched a few months ago, and Novo Nordists had
20:47
Speaker 9: one point seven billion in sales of its weight loss
20:49
Speaker 9: drugg we Go V, which they reported yesterday. And we
20:52
Speaker 9: Gov's been on the market for several years. So Lily
20:55
Speaker 9: is like really moving fast. Sales are ramping up extremely quickly,
20:59
Speaker 9: and we are watching closely to see what happens.
21:01
Speaker 4: I guess the next step for these drugs is I
21:05
Speaker 4: guess an oral yea, exactly where are we on that?
21:09
Speaker 6: What are the companies saying?
21:10
Speaker 9: Both companies have been working on pills, which obviously they
21:13
Speaker 9: think could help not only expand the market in the US,
21:16
Speaker 9: but expand x US because there are certain markets that
21:19
Speaker 9: research has shown prefer pills over shots.
21:23
Speaker 10: Japan is one of them, interestingly, so that's kind of
21:27
Speaker 10: the next step here. Both of the companies are studying
21:31
Speaker 10: these drugs.
21:32
Speaker 9: Novo, though, has had a lot of trouble with supply
21:36
Speaker 9: and particularly making enough of the active ingredient that's used
21:39
Speaker 9: in their drugs. The pill uses the same active ingredient
21:42
Speaker 9: and it uses more of it, so they're kind of
21:44
Speaker 9: struggling right now. They can't really launch that pill until
21:48
Speaker 9: they get a handle on supply.
21:50
Speaker 2: Let's go to the big philps are about that didn't
21:53
Speaker 2: turn on my mic. Let's go to the big take
21:54
Speaker 2: because that was quite interesting and it feeds into the
21:57
Speaker 2: whole story. And the title is what it's like when
22:00
Speaker 2: o zepic takes over an entire town.
22:04
Speaker 4: Wait, great story, thank you, thank you, because I spent
22:09
Speaker 4: a ton of time in Bowling Green, Kentucky.
22:10
Speaker 10: Really, I know of what you.
22:11
Speaker 4: Speak and I send it to a buddy who lives there.
22:14
Speaker 4: She knows half the people in the article.
22:16
Speaker 10: That's really Oh that's awesome.
22:18
Speaker 3: Wow.
22:19
Speaker 5: I'm just really curious as to how you found this town.
22:22
Speaker 9: So we worked with the data team on this story,
22:25
Speaker 9: and we got data at the three zip code levels,
22:28
Speaker 9: so we're looking at, you know, cities and sort of
22:31
Speaker 9: their surrounding areas, and we were looking all across the country.
22:35
Speaker 9: A few other spots came up, like Huntsville, Alabama, and
22:38
Speaker 9: we kind of were digging around to see just if
22:41
Speaker 9: people were talking about the drugs online. You know if
22:44
Speaker 9: there were doctors in the area that were prescribing them.
22:47
Speaker 9: And we honed in on Bowling Green specifically because Kentucky
22:50
Speaker 9: as a state has the highest concentration of weight loss
22:53
Speaker 9: drug users in the country. So we were like, oh, well,
22:56
Speaker 9: if this city is showing up in our data, this
22:58
Speaker 9: is probably a good a good place to go and
23:01
Speaker 9: see what's happening. And so started talking to people there
23:03
Speaker 9: and like you know, it kind of spreads like wildfire.
23:07
Speaker 9: You talk to one person who's on the drugs and
23:08
Speaker 9: they're like, oh, talk to my friend, talk to my neighbor.
23:10
Speaker 9: They're on the drugs too, And it just kind of
23:13
Speaker 9: was easy to find people after that.
23:15
Speaker 6: Why is that?
23:16
Speaker 4: Why is it the use so concentrated in a place
23:18
Speaker 4: like Kentucky. Is that just simply because there's more people
23:21
Speaker 4: there that qualify from a I guess a weight perspective.
23:24
Speaker 10: Right, I Mean, that's a piece of it, which is
23:26
Speaker 10: actually a good thing.
23:27
Speaker 9: I Mean, we hear so much about the drugs in
23:29
Speaker 9: New York and in Hollywood, but when we're looking at
23:32
Speaker 9: actual obesity rates, those aren't the places that have the
23:35
Speaker 9: highest concentration of people with obesity or diabetes. In Kentucky,
23:40
Speaker 9: there are high rates of obesity and diabetes. There's also
23:44
Speaker 9: there were large employers in the area that were covering
23:47
Speaker 9: the drugs so people could get access to them. Bowling
23:49
Speaker 9: Green in particular is a very middle class area, so
23:53
Speaker 9: when people couldn't get coverage for the drugs, they were
23:56
Speaker 9: willing to pay out of pocket for it. So that
23:58
Speaker 9: kind of made the conditions ripe for these drugs to
24:02
Speaker 9: take off in Bowling Green.
24:04
Speaker 2: When when you write the article, you also talk about
24:07
Speaker 2: compound drugs here, just walk us through what a compound
24:11
Speaker 2: drug is, why it's allowed, and is it legit.
24:15
Speaker 9: Yeah, I mean that has been a really big thing
24:18
Speaker 9: and a really big part of this weight loss drug
24:20
Speaker 9: market as of recently because you know, and that fits
24:23
Speaker 9: in with this supply issue. LILLI and Novo have really
24:26
Speaker 9: been struggling to keep up with supplies. So when drugs
24:29
Speaker 9: are in shortage. Officially, these compounding pharmacies are allowed to
24:33
Speaker 9: make similar versions, copycat versions, we call them, to help,
24:38
Speaker 9: you know, patients who are unable to get prescriptions.
24:40
Speaker 10: For the drugs.
24:41
Speaker 9: But what's happened is, you know, in this gap, it's
24:44
Speaker 9: kind of allowed these compounding pharmacies to proliferate, and not
24:48
Speaker 9: all of them are exactly legitimate. And so there's a
24:52
Speaker 9: lot of medical spas that are using the compounding drugs,
24:55
Speaker 9: telehealth companies that are selling the compounding drugs, like Hymns
24:58
Speaker 9: and hers is one that comes up, and in Bowling
25:01
Speaker 9: Green it's really taken off as well. There's like all
25:04
Speaker 9: of these medical spas popping up, weight loss clinics popping
25:07
Speaker 9: up that are offering compounded or just illegitimate versions of
25:11
Speaker 9: the drugs, and you know, that's become a big thing
25:14
Speaker 9: there as well.
25:15
Speaker 4: Well for the compounded drugs, are they are they as effective?
25:19
Speaker 6: Are they safe? What do we know about them?
25:21
Speaker 9: That's kind of the problem is because you know, pharmaceutical
25:24
Speaker 9: products are so tightly regulated and require so many studies
25:27
Speaker 9: from these drug makers, but the compounded drugs are not
25:30
Speaker 9: studied and they're not regulated in the same way.
25:33
Speaker 10: There's not the same FDA oversight.
25:35
Speaker 9: So when we think about are these drugs as effective,
25:38
Speaker 9: the answer is like, we don't really know because we don't.
25:40
Speaker 10: Have studies that prove that indefinitely, Why would.
25:43
Speaker 5: That ever be allowed?
25:45
Speaker 2: I don't mean understand like it's it's a tight supply
25:47
Speaker 2: shortage YadA YadA. But then why is it like, here's
25:49
Speaker 2: an option take a drug that you don't really know work,
25:51
Speaker 2: So what's in it?
25:52
Speaker 10: Why is that allowed?
25:53
Speaker 9: It's because, I mean, normally, like compounding, the reason that
25:56
Speaker 9: it exists is more on like an individual basis.
25:59
Speaker 10: So if a person is allergic to a certain.
26:02
Speaker 9: Ingredient or like a coloring and a drug, compounding pharmacies
26:05
Speaker 9: can you know, tailor make those drugs for that specific patient.
26:10
Speaker 9: Or if a drug is in shortage and a person
26:11
Speaker 9: can't get access to it. It's not really supposed to be.
26:15
Speaker 9: They're not supposed to be acting like drug makers. But
26:17
Speaker 9: that's kind of what we're seeing happening with these weight
26:19
Speaker 9: loss drugs because of the demand for them.
26:22
Speaker 4: I mean, great stuff, Madison Moeller, your cohorts, co authors
26:27
Speaker 4: Devin Leonard and Tanna's mayor Johnny MCGANI yet mcganni, Okay,
26:32
Speaker 4: that's the big take story today a Bloomberg Business Week,
26:35
Speaker 4: what it's like when ozepic takes over an entire town.
26:38
Speaker 4: In this case, they focused on Bowling Green, Kentucky.
26:42
Speaker 2: I did like in the story, I talked about how
26:43
Speaker 2: there was like a wellness thing, and then you also
26:46
Speaker 2: like Botox next door because it's a zempic.
26:48
Speaker 5: Face everyone talks about.
26:50
Speaker 2: But like you lose all that weight really fast, but
26:51
Speaker 2: then you got all the skin kind of flapping around everywhere.
26:54
Speaker 5: The botox to fix it.
26:56
Speaker 4: Bowling Green, Kentucky. They make Chevrolet Corvette's and they make underwear.
27:02
Speaker 6: Thank you, thanks for the loom Is Baby loom In.
27:06
Speaker 7: Really yeah, so that's what.
27:07
Speaker 5: Let's also go there.
27:08
Speaker 6: That's awesome.
27:08
Speaker 5: Okay, so we have like a working.
27:10
Speaker 6: Scabrola everyone to thanks.
27:14
Speaker 4: Health reporter Bloomberg News, join's life here in a Bloomberg
27:16
Speaker 4: Interactive Brokers studio, doing some great reporting on these weight
27:20
Speaker 4: loss drugs, which are really really becoming a big phenomenon
27:25
Speaker 4: in the healthcare space.
27:28
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
27:32
Speaker 1: weekdays at ten am Eastern on Apple car Play and
27:35
Speaker 1: Android Auto with the Bloomberg Business App. You can also
27:38
Speaker 1: listen live on Amazon Alexa from our flagship New York station.
27:42
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
27:46
Speaker 2: Let's keep going on an under armor here that stock
27:48
Speaker 2: up by twenty percent of quinnam Goyle, a senior US
27:50
Speaker 2: e commerce and retail analyst of Bloomberg Intelligence, She joins us,
27:53
Speaker 2: Now what part of this is like, who if it
27:56
Speaker 2: could have been worse versus we really like the stock
27:59
Speaker 2: and its growth.
28:01
Speaker 11: I think, you know they're executing right. This is the start,
28:04
Speaker 11: but make no mistake, they have a long long way
28:07
Speaker 11: to go. I think the fact that they beat expectations
28:10
Speaker 11: is a good sign that they've stopped the bleeding and
28:13
Speaker 11: it's getting better. But getting to positive sales is still
28:18
Speaker 11: going to be a long while. In fact, before we
28:20
Speaker 11: see actually some meaningful improvement in product, which is a
28:23
Speaker 11: key part of the story, it's not going to be
28:26
Speaker 11: for another nine to twelve months, so there's still a
28:30
Speaker 11: lot of time. The environment is still very fickle, and
28:34
Speaker 11: you know, when you look at their guidance, which they
28:36
Speaker 11: did raise, it doesn't suggest that things are getting materially better.
28:41
Speaker 11: In fact, there's a little bit of caution built into
28:44
Speaker 11: the guidance as they expect Asia Pacific region to get weaker.
28:48
Speaker 11: They're having freight expense pressures and also four X pressures,
28:52
Speaker 11: so it's not all rosy as it seems looking at
28:55
Speaker 11: the share price. But they are making improvement.
28:58
Speaker 4: What do they need to restricture here or do they
29:01
Speaker 4: just need to have more cooler stuff in the stores.
29:05
Speaker 11: I think it's everything. It's definitely product product disking. In retail,
29:10
Speaker 11: they do need to improve their product positioning as well
29:13
Speaker 11: as what they offer. Aside from that, they also have
29:15
Speaker 11: to improve how they market this product. Under Armour has
29:18
Speaker 11: gone through these restructuring efforts multiple times now, so this
29:22
Speaker 11: isn't something new to them. They've overpenetrated in the off
29:26
Speaker 11: price category, they've over discounted, They've become basically a promotional banner,
29:31
Speaker 11: and now they're trying to do what they tried to
29:33
Speaker 11: do again previously, is to restructure themselves as a more
29:36
Speaker 11: premium brand. Can they do it, yes, but it's going
29:40
Speaker 11: to take effort and time and they have the means
29:45
Speaker 11: to do it. They have the expertise. But remember there
29:48
Speaker 11: are much smaller brand than a Nike and Adida, so
29:50
Speaker 11: they don't have those deep pockets to help them. But
29:53
Speaker 11: it will take time for them to actually get this underway.
29:56
Speaker 2: So isn't this like a really rough time to try
29:59
Speaker 2: and like rebe a premium brand.
30:02
Speaker 11: It's tough, but under Armour isn't a dead brand, right.
30:05
Speaker 11: Everyone still recognizes under Armour and it isn't a brand
30:09
Speaker 11: that has kind of died and is not coming back
30:12
Speaker 11: to life. People recognize the name, people still use it
30:14
Speaker 11: in sports. They have seventy athletes across twenty eighteens and
30:18
Speaker 11: the Olympics right now. So it's not dead and yes
30:21
Speaker 11: it can be repositioned, but it will take time.
30:24
Speaker 4: So in this part of the retail space that you cover, Punum,
30:28
Speaker 4: the Nikes, the Underarmers of the world, the Adidas, which
30:31
Speaker 4: is correct way to pronounce.
30:33
Speaker 5: It, Oh, Matt Miller, is that you yes, off, how's.
30:38
Speaker 6: The consumer there in that part of the world.
30:41
Speaker 11: So the consumer isn't in the best place today. We've
30:44
Speaker 11: seen the consumer indicators, whether it's the unemployment rate, which
30:47
Speaker 11: we closely watch is now over four percent. They're lofty.
30:51
Speaker 11: Amazon said it on their call just last week that
30:54
Speaker 11: they do expect consumer volatility and macro pressures to build.
30:58
Speaker 11: There will be more discounting. So you know, the consumer
31:01
Speaker 11: is choosing, they're being picky, they're trading down, they're pulling back.
31:05
Speaker 11: It's not the best consumer environment heading into the back half.
31:08
Speaker 2: So how much time do we need to give, then, say,
31:10
Speaker 2: under armour to fix all of this? Because what is
31:14
Speaker 2: in neusyncratic versus the macro environment. That feels like it's
31:17
Speaker 2: going to draw this process out a bit.
31:19
Speaker 11: It's definitely going to draw it out a little bit,
31:21
Speaker 11: especially if at worsens. We heard them say that promotions
31:24
Speaker 11: will tick up, which was a major driver to better
31:27
Speaker 11: gross margins in the second quarter. That was really a
31:30
Speaker 11: large part of the outperformance there. But that said, you're
31:33
Speaker 11: talking about a ten percent decline in North America, double
31:37
Speaker 11: digit declines in the quarter. Is still expecting double digit
31:41
Speaker 11: declines in the rest of the year, their fiscal year.
31:45
Speaker 11: It's a long way before we can see, you know,
31:47
Speaker 11: continuous positive growth. That's say, you know, definitely well over
31:50
Speaker 11: a year, if not longer.
31:52
Speaker 6: Put them oil. Thank you so much. We appreciate it.
31:53
Speaker 6: Putt them oil.
31:54
Speaker 4: She has our senior anamals covering all the retail stuff
31:56
Speaker 4: for Bloomberg Intelligence. Given the latest here on our good
32:00
Speaker 4: friends at under Armour based in Baltimore, Maryland. Kevin Plank
32:05
Speaker 4: is the founder of that thing. Pretty good story there overall,
32:07
Speaker 4: but as Puna mentioned, a lot of competition.
32:10
Speaker 6: They need to restructure a little bit there.
32:13
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
32:17
Speaker 1: weekdays at ten am Eastern on Applecar Play and Android
32:20
Speaker 1: Auto with the Bloomberg Business app. You can also listen
32:23
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32:27
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.
32:31
Speaker 6: I'll tell you what's not working today, Warner Brothers Discovery.
32:34
Speaker 3: I don't know.
32:34
Speaker 4: When I covered these stocks, they were ripping. But I
32:37
Speaker 4: don't know this new generation of media analysts. I don't
32:39
Speaker 4: know what they're doing here. Kevin here, he joins us here.
32:41
Speaker 4: He's a senior media associate for Bloomberg Intelligence. He works
32:44
Speaker 4: with my good buddy Getha ranganathin covering the media space. Here, Kevin,
32:49
Speaker 4: this is a tough one here. I mean, talk to
32:51
Speaker 4: us about what's happening with Warner Brothers Discovery taking a
32:54
Speaker 4: big write down today.
32:56
Speaker 6: What was the write down for exactly?
32:58
Speaker 8: Exactly?
32:59
Speaker 6: Thanks for me on Paul.
33:01
Speaker 3: It was.
33:01
Speaker 8: It's it's bad, it's not great. Obviously, we're still in
33:04
Speaker 8: a very transitory period and media expectations were certainly tempered
33:09
Speaker 8: coming into the quarter. I think they've been that way
33:11
Speaker 8: for a little while now. Obviously, Warner stopped giving us
33:15
Speaker 8: adjusted ebit a guidance at the beginning of the year,
33:18
Speaker 8: but that said, you know, it was worse than expected,
33:20
Speaker 8: and it's really really I think the headline is on
33:22
Speaker 8: the network side, as you just said, that's where that
33:24
Speaker 8: nine billion dollar write down was coming from. And the
33:27
Speaker 8: visibility isn't great. You know, they're they're going to be
33:29
Speaker 8: losing it's all of it's certain they're gonna be losing
33:30
Speaker 8: the NBA contract in twenty twenty five, twenty six. So
33:34
Speaker 8: it's really been a game for a long time for
33:35
Speaker 8: traditional media. Can they scale up their streaming services while
33:38
Speaker 8: PayTV continues to melt. But it's it's tough, but.
33:42
Speaker 5: They're streaming wasn't terrible.
33:43
Speaker 2: It was really just the traditional ad business and also
33:47
Speaker 2: the movie business like done too fine, Like I'll see it,
33:49
Speaker 2: but please you ain't.
33:50
Speaker 5: A don't pool.
33:52
Speaker 8: It's exactly right, that's exactly right. The ads were really
33:54
Speaker 8: where they're filling a lot of the weakness as you know,
33:56
Speaker 8: those linear ad dollars are moving towards connected TV.
33:59
Speaker 6: Streaming was was pretty good.
34:00
Speaker 8: They had some nice international launches during the quarter, So
34:02
Speaker 8: those net ads came in above expected and they are
34:05
Speaker 8: actually one of the few that are are starting to
34:07
Speaker 8: get to the inflection point where we're starting to see
34:09
Speaker 8: some profit, but again it's so much smaller compared to
34:12
Speaker 8: their legacy TV business that's still.
34:13
Speaker 6: The bread and butter.
34:15
Speaker 8: And on the studio side, you're right, they had some good,
34:17
Speaker 8: good results with Dune. They had a good launch with
34:19
Speaker 8: Godzilla x Kong. They also had some misses. Furiosa was
34:23
Speaker 8: one that didn't quite do as well. And of course
34:25
Speaker 8: on the video game side, that's also been quite weak,
34:27
Speaker 8: especially of some against some difficult comps against last year
34:30
Speaker 8: with the Hogwarts legacy.
34:31
Speaker 4: All right, sixteen point seven billion dollar market cap, that's
34:37
Speaker 4: one thing, but then you look at the balance sheet
34:39
Speaker 4: and they got forty billion dollars of debt. Oh my god,
34:42
Speaker 4: what is this company? I mean, John Malone's a shareholder,
34:46
Speaker 4: an agent of change.
34:47
Speaker 6: If nothing else.
34:47
Speaker 4: Is there an expectation the marketplace, Kevin, that this is
34:50
Speaker 4: a company that needs to.
34:51
Speaker 6: Be restructured, split up, acquired.
34:53
Speaker 8: I mean, it's certainly been speculated on management. Of course,
34:57
Speaker 8: you know, declined to comment on on rumors like that.
35:00
Speaker 8: At they're certainly prioritizing their cash flow to to pay
35:03
Speaker 8: down their debt right now. Certainly a lot of that
35:05
Speaker 8: is going towards their their interest payments. It's it's difficult
35:09
Speaker 8: to say, you know, it's really really difficult. Obviously when
35:11
Speaker 8: you look across kind of the media landscape. They are
35:14
Speaker 8: partnering together with with bundling. Obviously we have Venue Sports
35:17
Speaker 8: coming this fall, so.
35:19
Speaker 5: That again help me understand that one.
35:21
Speaker 8: It's it's the streaming sports JV. Essentially they're going to
35:24
Speaker 8: be it's like a skinny paid TV bundle. So essentially
35:27
Speaker 8: you know you're getting those cable TV channels, but it's
35:30
Speaker 8: all over the internet. Right, So again, that's Warner that's Fox,
35:33
Speaker 8: that's that's Disney's ESPN. But it's not NBC Universal, it's
35:37
Speaker 8: not NBC Universal, it's not Paramount CBS Sports.
35:41
Speaker 6: It's a disaster. It's a digster.
35:43
Speaker 4: We had when I was running this industry, we had
35:45
Speaker 4: people paying their cable operator one hundred bucks a month.
35:48
Speaker 4: The cable operator made money, and the cable operator paid
35:51
Speaker 4: a lot of money to the Viacoms and Warner Brothers
35:53
Speaker 4: Discoveries of the world for their cable networks. They made money,
35:56
Speaker 4: lots of big audiences, advertisers made money.
35:59
Speaker 6: Everything was good.
35:59
Speaker 4: And then the young guy folks come into the industry
36:02
Speaker 4: and they change it. They start the streaming service and
36:04
Speaker 4: now they're scrambling for dollars. Is there an expectation, Kevin,
36:07
Speaker 4: that we're somewhere near a point where it all shakes
36:11
Speaker 4: out or something.
36:12
Speaker 8: Yeah, I think so, And then you make it sound
36:14
Speaker 8: so wonderful fact that money there Again, if you look
36:17
Speaker 8: at a I mean, certainly Netflix is crushing right now,
36:20
Speaker 8: you know. There their their margins are are so great.
36:22
Speaker 8: You know, they just up their margin guidance, cash flow
36:25
Speaker 8: really really strong and certainly seemed to be winning these
36:28
Speaker 8: streaming wars. But again, you know, it's it's evolving, right,
36:32
Speaker 8: it's it's continuing. We're looking at price increases. Obviously, when
36:35
Speaker 8: you're looking at you know, kind of a more mature
36:37
Speaker 8: market like the US, the focus is on urpoop, So
36:39
Speaker 8: how are you going to raise arpoo there? There are
36:41
Speaker 8: a few different levers exactly exactly there it is, uh
36:45
Speaker 8: so you can do that. They're just price raises. Obviously,
36:47
Speaker 8: they're trying to build out their advertising like we were
36:49
Speaker 8: talking about before. And then the other big lever is
36:51
Speaker 8: the password crackdown. So Netflix did that last year. Disney's
36:54
Speaker 8: going to be implementing that in earnest and.
36:56
Speaker 6: Has that been material like did that.
36:58
Speaker 10: Oh no, it really helped, yeah, very much.
37:00
Speaker 4: So yeah, okay, when you offspring, we're upset because they've
37:05
Speaker 4: been skating on my coattails for a long time.
37:07
Speaker 5: I guess also them.
37:08
Speaker 2: The question is, at some point, I don't know if
37:10
Speaker 2: we're here yet, people are just gonna get fed up
37:12
Speaker 2: with all the pricing increases which I cannot keep track,
37:15
Speaker 2: and they're gonna do the thing where they go through
37:16
Speaker 2: and they're like no, no, no, yes, yes, and they're
37:19
Speaker 2: gonna start cutting.
37:19
Speaker 5: Have we seen that yet a little bit?
37:21
Speaker 8: A little bit again. You know, if you look at Netflix,
37:24
Speaker 8: their their turn levels are so low compared to their peers.
37:26
Speaker 8: But you do see a lot of those serial churners.
37:28
Speaker 8: You know, they'll sign up, they'll watch a show that
37:30
Speaker 8: they like, and then they'll cancel. Right, So they're they're
37:32
Speaker 8: trying to combat that. They're still keeping you know, again,
37:35
Speaker 8: they they being you know, most of these streamers, they're
37:37
Speaker 8: still keeping that competitive entry price with their ad supported tires.
37:40
Speaker 8: So what they're trying to do is either you have
37:41
Speaker 8: to pay a lot for a premium product or pay
37:44
Speaker 8: less and watch ads.
37:45
Speaker 6: All right, Kevin, good stuff, you can come back. You
37:47
Speaker 6: passed the test.
37:48
Speaker 4: Kevin Near, senior media associate analysts that Bloomberg can telepressure.
37:51
Speaker 4: I didn't hire them, but Geitha did, so that's good
37:53
Speaker 4: enough for me.
37:54
Speaker 6: That's all I need.
37:54
Speaker 4: He's here at Bloomberg Interactive Broker Studio, and most importantly.
37:57
Speaker 6: He's based in New York City.
37:59
Speaker 4: None this Princeton stuff.
38:00
Speaker 6: You want to be a player, you got to be
38:01
Speaker 6: in big town. That's what I always say. Kevin here,
38:03
Speaker 6: Thanks for joining us here.
38:04
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