Latest / Bloomberg Intelligence / U.S. Heading Towards A Second Contraction: BE's Riccadonna

Transcript

U.S. Heading Towards A Second Contraction: BE's Riccadonna · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
• 0:06
  Speaker 1: we bring you interviews from CEO, market pros, and Bloomberg experts,
• 0:10
  Speaker 1: along with essential market moving news. Find the Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot Com. Jonathan Farrow. They're speaking with
• 0:20
  Speaker 1: Larry Cudlow, Director of the National Economic Council, ending it
• 0:23
  Speaker 1: with a nice little good luck, I suppose to the
• 0:26
  Speaker 1: incoming administration and people who will be in similar posts,
• 0:29
  Speaker 1: and pole really obviously what we might have expected, Larry
• 0:33
  Speaker 1: downplaying the weak parts of this reward and playing of
• 0:36
  Speaker 1: the stronger parts of this reward. And no one is
• 0:38
  Speaker 1: doubting that there are some you know strength, yes to
• 0:42
  Speaker 1: look at here, Yeah, exactly right. And I think the
• 0:45
  Speaker 1: you know we heard from from Larry Cudlow there, you know,
• 0:48
  Speaker 1: acknowledging that the you know this, this way of coronavirus
• 0:51
  Speaker 1: is impacting the economy, but trying to find, uh, you know,
• 0:54
  Speaker 1: some areas of strengthen economy, whether it's housing, whether it's
• 0:58
  Speaker 1: consumer spending. Looks like the consumer is going to be
• 1:00
  Speaker 1: spending here this holiday season here, But you know, when
• 1:03
  Speaker 1: you take a look at the labor market here, it
• 1:04
  Speaker 1: remains very, very challenging. And I think a lot of
• 1:07
  Speaker 1: the concerns from economists, you know, how much of this is,
• 1:10
  Speaker 1: you know a little bit more on the permanent side
• 1:13
  Speaker 1: versus temporary in terms of the joblessness. Well, let's ask
• 1:16
  Speaker 1: somebody else who we haven't spoken to in Ohile and
• 1:18
  Speaker 1: who were excited to have back. Carl Rickadonna joined us.
• 1:21
  Speaker 1: What a little present for the end of the year.
• 1:23
  Speaker 1: Carl is a chief US economist of course for Bloomberg Economics,
• 1:26
  Speaker 1: and Carl, it is fantastic to have you back. Also,
• 1:29
  Speaker 1: I have to wonder what you're thinking coming back in
• 1:32
  Speaker 1: this kind of environment, with the job market that is very,
• 1:35
  Speaker 1: very different from just a few months ago. Absolutely good
• 1:40
  Speaker 1: morning at you both, and thanks for having me back
• 1:42
  Speaker 1: on You know, I have to draw some real distinctions
• 1:46
  Speaker 1: with what Larry cut Low was suggesting, saying that in
• 1:52
  Speaker 1: the interview he said that the job number was a
• 1:55
  Speaker 1: wee bit below what was expected. That two thousand a
• 2:00
  Speaker 1: pretty big number. So the old expression close enough for
• 2:02
  Speaker 1: government work, I guess applied to something and you thinks there. Uh,
• 2:07
  Speaker 1: and also he said, you know, this is a good
• 2:09
  Speaker 1: report for the holiday season, and whatnot. The only the
• 2:12
  Speaker 1: only person who liked this for the holiday season is
• 2:15
  Speaker 1: the grinch. I mean, we saw a very sharp decline
• 2:18
  Speaker 1: in retail hiring. That's such an important job engine at
• 2:21
  Speaker 1: this time of year, and that is just endemic of
• 2:25
  Speaker 1: or emblematic of, you know, the type of heartbreaking we're
• 2:29
  Speaker 1: seeing in the economy right now. The service sector absolutely
• 2:32
  Speaker 1: clobbered UH in that today's report, a big down shift.
• 2:37
  Speaker 1: We had this reopening boom over the last several months,
• 2:41
  Speaker 1: and as we look at the details of this report,
• 2:43
  Speaker 1: we can see that basically came to an end in
• 2:46
  Speaker 1: today's data. And unfortunately, UH, the November jobs report was
• 2:51
  Speaker 1: talied much the recent surge and case counts and UH
• 2:56
  Speaker 1: lockdown measures. So whatever November looked like, know already that
• 3:01
  Speaker 1: December is going to be far, far weaker. So this
• 3:03
  Speaker 1: is the start of a very chilly winter season four
• 3:08
  Speaker 1: the labor market in general and also for the economy.
• 3:11
  Speaker 1: I don't see holiday cheer in this report, that's to
• 3:14
  Speaker 1: be sure. Yeah. One of the really disconcerting aspects of
• 3:17
  Speaker 1: it is, you know, the really bad news in the
• 3:19
  Speaker 1: unemployment is for those twenty seven weeks or longer. That
• 3:23
  Speaker 1: rose to three point nine four million people, and the
• 3:26
  Speaker 1: average duration in weeks is now at twenty three point
• 3:29
  Speaker 1: two So it really goes to the issue Carl. A
• 3:32
  Speaker 1: lot of this unemployment, which maybe we initially thought might
• 3:36
  Speaker 1: be temporary at the beginning of the pandemic, is looking
• 3:38
  Speaker 1: more and more permanent, and that raises some big issues. Well,
• 3:42
  Speaker 1: I do think that that much of that unemployment is
• 3:44
  Speaker 1: going to be temporary, but the temporary spell is going
• 3:46
  Speaker 1: to last a lot longer. It's going to last until
• 3:49
  Speaker 1: basically the spring saw, until we've had a reopening of
• 3:53
  Speaker 1: the economy and broad distribution of the vaccine. The alarming
• 3:56
  Speaker 1: number there is that twenty six week threshold because as
• 4:00
  Speaker 1: unemployed individuals start to approach the twenty six week mark,
• 4:04
  Speaker 1: then they start to drop out of state unemployment benefits.
• 4:07
  Speaker 1: So there have been some extensions and some special programs,
• 4:11
  Speaker 1: although those are due to expire for the most part
• 4:14
  Speaker 1: at the end of this year unless they get additional
• 4:16
  Speaker 1: fiscal support from Congress and the White House. So there
• 4:20
  Speaker 1: is a very real problem here that we're approaching an
• 4:23
  Speaker 1: income cliff as those who are out of work are
• 4:28
  Speaker 1: facing the expiration of benefits and that will be a
• 4:31
  Speaker 1: real drag on the economy at a time when really,
• 4:34
  Speaker 1: as we look at our models, it's consumer spending that
• 4:37
  Speaker 1: is doing all of the heavy lifting for the economy. So, Carl,
• 4:40
  Speaker 1: you know, we constantly have people on that are actually
• 4:44
  Speaker 1: you know, talking up the economy and and and respected economists.
• 4:47
  Speaker 1: I'm not just talking you know, money managers or what
• 4:50
  Speaker 1: have you, who are looking at the market itself continuing
• 4:51
  Speaker 1: to go up. But very few people are actually sounding
• 4:55
  Speaker 1: the alarm on an economic cliff. They're saying that the
• 4:59
  Speaker 1: economy is bound see back faster than we thought that. Yeah,
• 5:02
  Speaker 1: there may be another short dip into recessionary territory, but
• 5:06
  Speaker 1: really it's a K shaped economy and it's only one
• 5:08
  Speaker 1: part of the labor force or the economy that will
• 5:11
  Speaker 1: feel the worst of this. Do you agree with those sentiments.
• 5:16
  Speaker 1: I think the the the incessant rally in the equity
• 5:21
  Speaker 1: market has created an inpriating haze over the economic outlaw.
• 5:26
  Speaker 1: So the reality is here that we are heading towards
• 5:30
  Speaker 1: a second contraction in the economy. It could be starting
• 5:33
  Speaker 1: in December. It most likely will be concentrated in the
• 5:37
  Speaker 1: first quarter of the year, we are looking for a contraction.
• 5:40
  Speaker 1: I know some other big shops are looking for economic
• 5:43
  Speaker 1: contractions in the first quarter. So there's this optimism that yes,
• 5:47
  Speaker 1: a vaccine is coming, so eventually we'll be out of
• 5:50
  Speaker 1: this uh, this muck, this swoon. But the real question,
• 5:54
  Speaker 1: for the more pressent question, is how deep of a
• 5:57
  Speaker 1: downturn we're going to have in the meantime while we
• 5:59
  Speaker 1: wait for the vaccines to be broadly distributed, while we
• 6:02
  Speaker 1: wait for economic stimulus to help the economy, and also
• 6:06
  Speaker 1: for just the general reopening to happen in the spring.
• 6:09
  Speaker 1: If we're talking about a half a percentage point contraction
• 6:12
  Speaker 1: in the first quarter, which is our current estimate, that's manageable.
• 6:16
  Speaker 1: We can muddle through. But if things go poorly and
• 6:18
  Speaker 1: there's no guarantee that will have a perfect execution here,
• 6:21
  Speaker 1: you can have a much deeper contraction, and that creates
• 6:24
  Speaker 1: a whole additional slew of folks who can't pay rent
• 6:27
  Speaker 1: and mortgages. Of it are missed in the financial contraction
• 6:30
  Speaker 1: and corporate bankruptcies. So Carl, we saw Jonathan Paraoll just
• 6:35
  Speaker 1: minutes ago with UH Larry Cudlow trying to press Mr.
• 6:38
  Speaker 1: Cudlow on um stimulus and kind of where are we
• 6:41
  Speaker 1: in stimulus and what's the White House perspective. Just from
• 6:44
  Speaker 1: my listen, I didn't really get any sense that anything
• 6:48
  Speaker 1: is imminent. What do you guys kind of discounting in
• 6:51
  Speaker 1: your models as to the stimulus size scope and maybe timing, well,
• 6:58
  Speaker 1: the stimulus has to be put in play before the
• 7:00
  Speaker 1: end of the year or there's going to be a
• 7:02
  Speaker 1: real problem with that household finances, especially those of the unemployed.
• 7:07
  Speaker 1: Uh that that's a big issue, but there's also additional
• 7:11
  Speaker 1: problems for small businesses, which are the dominant engine of
• 7:14
  Speaker 1: job growth. Uh. And also the issue that Larry Cutlo
• 7:18
  Speaker 1: really didn't want to address was aid for states and municipalities.
• 7:22
  Speaker 1: And it's easy to say, well, we should punish the
• 7:25
  Speaker 1: Blue states because they have under funded pension plans and whatnot. Nonetheless,
• 7:31
  Speaker 1: the fact of the matter is economic growth over the
• 7:34
  Speaker 1: last several decades is driven by urban centers, by cities
• 7:39
  Speaker 1: the New York's, the Boston's, and Los Angeles. Uh, those
• 7:43
  Speaker 1: cities are are you know, we're moving towards a service sector,
• 7:47
  Speaker 1: service dominated economy, and it's all happening in the cities
• 7:50
  Speaker 1: in the Tech Center San Francisco, for example. If we
• 7:53
  Speaker 1: leave those cities out to drive and their transit systems
• 7:57
  Speaker 1: are are impaired and other infrastruct your issues are unresolved
• 8:01
  Speaker 1: and they can't fully reopen, that is absolutely going to
• 8:04
  Speaker 1: impair the recovery as well. So we have to be
• 8:07
  Speaker 1: very careful that we're not too stingy with stimulus, and
• 8:10
  Speaker 1: we pay the cost as we did back in two
• 8:12
  Speaker 1: thousand in the next couple of years by being too
• 8:16
  Speaker 1: stingy and therefore cramping the extent that the pace of
• 8:20
  Speaker 1: the economic recuple very briefly, Carl, were out of time.
• 8:23
  Speaker 1: But if the incoming administration is much more inclined to
• 8:26
  Speaker 1: do something like this, will they be able to get
• 8:28
  Speaker 1: it through and quickly? Well, I'll answer that question on
• 8:32
  Speaker 1: January Stiff, when we know the results of the Georgia
• 8:34
  Speaker 1: runoff collection we're looking at split Congress. Then it's going
• 8:37
  Speaker 1: to be a very stingy stimulus site here. Isn't that
• 8:41
  Speaker 1: really something else? Carl? Thank you those of reality there
• 8:44
  Speaker 1: from Carl RICKA Donna telling us that we're heading towards
• 8:47
  Speaker 1: a second contraction. We just we just are, and that
• 8:50
  Speaker 1: this inebriating haze is the market which keeps going higher,
• 8:53
  Speaker 1: and we cannot let that impact what we think of
• 8:56
  Speaker 1: the economic fundamentals, which are obvious ball Yeah, they really are.
• 9:00
  Speaker 1: And in the job Stata today kind of just put
• 9:02
  Speaker 1: an underline to that issue, and you know Carl's analysis,
• 9:06
  Speaker 1: you know, suggesting that we really the economy really needs
• 9:09
  Speaker 1: fiscal stumius before the end of this calendar year when
• 9:12
  Speaker 1: some of these programs do are set to expire. It
• 9:14
  Speaker 1: really goes to uh kind of the timing challenge for
• 9:18
  Speaker 1: Congress in the White House, and the fact that economic
• 9:21
  Speaker 1: growth is driven by urban centers really struck with me too.
• 9:24
  Speaker 1: That's what Carl said there, and it's just so true.
• 9:27
  Speaker 1: It's a geographic imperative as much as anything else. Well,
• 9:34
  Speaker 1: now it is time to have a look at e
• 9:36
  Speaker 1: s G Environmental, social and governance investing, and there's so
• 9:41
  Speaker 1: much chatter about e s G going on that we
• 9:43
  Speaker 1: need to sort of orient ourselves within what part of
• 9:46
  Speaker 1: this investment management area we're looking at. Let's bring in
• 9:51
  Speaker 1: Christie Hill, who's head of America's Asset Management and global
• 9:54
  Speaker 1: head of e s G for PGM real Estate one
• 9:57
  Speaker 1: hundred two billion dollars in assets under management. So, Christie,
• 10:01
  Speaker 1: help us here, it's great to speak with you. Help
• 10:03
  Speaker 1: us understand how you can be a real estate investor
• 10:09
  Speaker 1: in the E s G space. What does that mean
• 10:13
  Speaker 1: you for? For us in real estate and E SG,
• 10:15
  Speaker 1: it really is about, I would say, assessing the risks
• 10:19
  Speaker 1: um that we viewed through the through the s G lens.
• 10:22
  Speaker 1: So it's about thinking about climate change and understanding not
• 10:26
  Speaker 1: just your you know, your impacts or the impacts of
• 10:29
  Speaker 1: sea level rise, but really thinking thoughtfully about all of
• 10:32
  Speaker 1: the impacts of climate change, your physical, social transitional and
• 10:36
  Speaker 1: understanding not only you know how they're going to impact
• 10:39
  Speaker 1: you insurance markets and how mass migration is going to
• 10:43
  Speaker 1: be impacting our markets, or how evolving regulatory involving environments
• 10:48
  Speaker 1: are going to change our environment. It's about understanding the
• 10:51
  Speaker 1: impact on the real estate, but also understanding the financial
• 10:54
  Speaker 1: impact on the real estate UM. So I think for
• 10:57
  Speaker 1: us it's about trying to really intensely do due diligence
• 11:01
  Speaker 1: to assess our risk and make sure that we're being
• 11:03
  Speaker 1: thoughtful in our approach so that we can devise strategies
• 11:06
  Speaker 1: to mitigate it. So, Christie, how have you change your
• 11:10
  Speaker 1: investment process as you factor in E s G elements
• 11:15
  Speaker 1: into your analysis. You know, it's it's constantly evolving, and
• 11:19
  Speaker 1: the more we learn UM, the more that investment process
• 11:22
  Speaker 1: evolved with it. So it's about making sure we're you know,
• 11:25
  Speaker 1: kind of a little bit too to my comment before
• 11:28
  Speaker 1: making sure we're considering all of the proper factors and
• 11:32
  Speaker 1: all of the appropriate risks up front UM, so that
• 11:35
  Speaker 1: we can not just quantify them prior to prior to
• 11:39
  Speaker 1: making that investment, but so that we can allow that
• 11:41
  Speaker 1: diligence to inform our strategy operationally moving forward. How has
• 11:46
  Speaker 1: the pandemic changed how you look at investments and what
• 11:49
  Speaker 1: you do? You know, I think the pandemic has impacted
• 11:55
  Speaker 1: the one thing we've been able to see is that
• 11:57
  Speaker 1: this pandemic has impacted different sector is very differently UM,
• 12:01
  Speaker 1: and we can see that there have been clear winners
• 12:04
  Speaker 1: and losers. So I think for us UM, it's it's
• 12:07
  Speaker 1: forced us to take a step back and be thoughtful.
• 12:10
  Speaker 1: The last thing that we want to do from an
• 12:12
  Speaker 1: investment perspective is the reactionary UM. So I think it's
• 12:16
  Speaker 1: caused us to pause UM with the asset classes that
• 12:20
  Speaker 1: we think are going to be more affected by this
• 12:22
  Speaker 1: in the near term, UM. But it's also hasn't It
• 12:25
  Speaker 1: hasn't stopped us from pursuing investments UM where we think
• 12:28
  Speaker 1: there's clarity and opportunity. So Christie, you know, one of
• 12:31
  Speaker 1: the issues that people are thinking about as it relates
• 12:34
  Speaker 1: to real estate resulting from this pandemic is the change
• 12:38
  Speaker 1: in the work home a dynamic more people working from home, uh,
• 12:42
  Speaker 1: suggesting that maybe the need for office space and the
• 12:45
  Speaker 1: big towers and the urban centers is not what it
• 12:47
  Speaker 1: was pre pandemic. How are you guys thinking about that? Well,
• 12:52
  Speaker 1: certainly the office of the future is topic du jur
• 12:56
  Speaker 1: during COVID, and I think it's very much an example
• 12:58
  Speaker 1: of UM as cliche as this may sound, example of
• 13:02
  Speaker 1: COVID accelerating and already existing trend. We've been talking about
• 13:06
  Speaker 1: real remote work dynamics UM for a long time. This
• 13:09
  Speaker 1: technology has enabled that, and certainly, you know COVID now
• 13:12
  Speaker 1: forcing everybody to be remote is really shining a bright
• 13:15
  Speaker 1: light on it. UM. I think it's a little too
• 13:18
  Speaker 1: soon to say what that impact is going to be.
• 13:21
  Speaker 1: I mean, you hear a lot of alternate, alternate scenarios,
• 13:25
  Speaker 1: more more, more square footage with fewer people less square
• 13:28
  Speaker 1: footage altogether. UM. We certainly believe there is going to
• 13:31
  Speaker 1: be demand for office UM long into the future. This
• 13:35
  Speaker 1: is something we're looking into as a tenant as well
• 13:37
  Speaker 1: as an owner. UM. But I think we're trying to
• 13:39
  Speaker 1: be pragmatic in our approach. We know that there's going
• 13:43
  Speaker 1: to be greater flexibility needed in the future. UM, but
• 13:46
  Speaker 1: certainly believe that that demand for for office real estate
• 13:49
  Speaker 1: is not going away. So I presume you're everywhere, right, Christie.
• 13:52
  Speaker 1: You're involved probably all over the world and in most
• 13:56
  Speaker 1: United States. But are there geographies that you're considering being
• 14:01
  Speaker 1: less bullish on now and others that you're considering, you know,
• 14:04
  Speaker 1: moving into UM. You know, for from an E s
• 14:08
  Speaker 1: G perspective, certainly my purview is global. From the asset
• 14:11
  Speaker 1: management perspective, I'm very much focused in the US. But
• 14:14
  Speaker 1: I don't think that, you know, when we think about
• 14:16
  Speaker 1: E s G. The concept, you know, when we think
• 14:19
  Speaker 1: about E s G resiliency isn't necessarily about saying, because
• 14:23
  Speaker 1: there is a challenged area, we're not going to go there.
• 14:26
  Speaker 1: It really is about making sure that if we're identifying
• 14:30
  Speaker 1: that challenge up front, so that we can identify a
• 14:33
  Speaker 1: strategy to mitigate that challenge, and there may be places
• 14:35
  Speaker 1: where that presents opportunity. So Christie has as E s G. Uh,
• 14:41
  Speaker 1: you know the growth of s G in your analysis
• 14:43
  Speaker 1: that caused you to either, uh maybe overweights a sector
• 14:48
  Speaker 1: or underweight a sector. Has it really changed how you've
• 14:51
  Speaker 1: actually put money to work? You know. E s G
• 14:54
  Speaker 1: is something that we think is applicable across all sectors,
• 14:57
  Speaker 1: and we want to look at E s Q factors,
• 15:00
  Speaker 1: factors and risks across each sector. So I don't think
• 15:04
  Speaker 1: it's it's at this point, it's nothing that or nothing
• 15:07
  Speaker 1: has come out of it that said we're going to
• 15:08
  Speaker 1: do this or we're not going to do this. It's
• 15:10
  Speaker 1: about making sure we're applying um kind of that that
• 15:14
  Speaker 1: E s G filter equally across all of our asset
• 15:17
  Speaker 1: classes to make sure that we have a strong s
• 15:19
  Speaker 1: G strategy, despite sector, despite region. Christie Hill, thank you
• 15:23
  Speaker 1: so much for joining us. We appreciate it. Christy Hill
• 15:25
  Speaker 1: is the head of America's asset management and global head
• 15:28
  Speaker 1: of E s G for p JIM Real Estate. They
• 15:31
  Speaker 1: have about one two billion dollars and assets under management,
• 15:35
  Speaker 1: so they certainly have a good feel for the real
• 15:38
  Speaker 1: estate market. And of course as you think about some
• 15:40
  Speaker 1: of this commercial real estate, one of the big issues
• 15:43
  Speaker 1: is what will be retail footprints um for certain retailers.
• 15:47
  Speaker 1: Number one, Number two, what is the work dynamic going
• 15:50
  Speaker 1: to be? What is the office dynamic going to look
• 15:52
  Speaker 1: like going forward? Is as much real square footage really needed? Well,
• 15:58
  Speaker 1: it was a big, big week in the media world.
• 16:02
  Speaker 1: Warner Brothers, one of the biggest media companies, one of
• 16:04
  Speaker 1: the biggest film and television studios, and announced this week
• 16:07
  Speaker 1: that is going to release all of its films on
• 16:11
  Speaker 1: HBO Max streaming service the same day they hit theaters.
• 16:15
  Speaker 1: This is a big, big change for the movie business.
• 16:18
  Speaker 1: Let's get some details. We can do that with Tara
• 16:20
  Speaker 1: La Chapelle, Bloomberg Opinion media columnists. So, Tara, big news
• 16:24
  Speaker 1: from Warner What do you think their strategy is here? Well,
• 16:27
  Speaker 1: you know, I think right now, with theaters still a
• 16:29
  Speaker 1: lot of them being closed because of COVID, they're looking
• 16:32
  Speaker 1: at next year and saying, yes, there's vaccines around the corner,
• 16:35
  Speaker 1: but it's still too students really have any visibilities. So
• 16:39
  Speaker 1: you want people to see these movies that you spend
• 16:40
  Speaker 1: a ton of money on. You want people to subscribe
• 16:43
  Speaker 1: to HBO Max. So if your a T n T
• 16:45
  Speaker 1: and you're looking at that, you're thinking, well, I should
• 16:47
  Speaker 1: just put the movies on HBO Max. And I think
• 16:50
  Speaker 1: that's a really smart decision. It's it's going to be
• 16:52
  Speaker 1: painful for movie theaters because those that are open. I
• 16:55
  Speaker 1: think a lot of people are probably just going to
• 16:57
  Speaker 1: choose to watch from home if they have that option.
• 16:59
  Speaker 1: And HBO Max costs fifteen dollars a month. If you're
• 17:02
  Speaker 1: getting a new movie every few weeks, I mean that
• 17:04
  Speaker 1: starts to look like a pretty good value, you know,
• 17:06
  Speaker 1: from being really expensive to being kind of compelling. So
• 17:10
  Speaker 1: I think what they're doing is smart, but it's just
• 17:12
  Speaker 1: it is going to be painful for the movie theater
• 17:13
  Speaker 1: industry and to be cure of these movies only stay
• 17:16
  Speaker 1: on for a month, so you have a limited viewing window,
• 17:19
  Speaker 1: let's say, and they're also in theaters at the same time.
• 17:22
  Speaker 1: The question I think, Tara is whether this is going
• 17:24
  Speaker 1: to be a permanent move on the part of Warner Brothers,
• 17:27
  Speaker 1: or whether they will revert to having, you know, a
• 17:29
  Speaker 1: theatrical window first once vaccines are available to the whole world.
• 17:34
  Speaker 1: Warner Brothers is saying that this is a unique one
• 17:37
  Speaker 1: year thing. I I just don't see it being bad.
• 17:40
  Speaker 1: I think even if they are planning it that way now,
• 17:43
  Speaker 1: by this time next year, it's going to be pretty
• 17:45
  Speaker 1: clear that streaming is the most important product. It's something
• 17:50
  Speaker 1: they really have to keep pushing with, especially with all
• 17:52
  Speaker 1: the competition they have from Disney, Netflix and others. So
• 17:55
  Speaker 1: I think by this time next year, we're going to
• 17:57
  Speaker 1: be looking at this and saying this is probably going
• 17:59
  Speaker 1: to be permanent. Maybe it doesn't look exactly this way,
• 18:01
  Speaker 1: and maybe they have to bend sousastrical windows a little
• 18:04
  Speaker 1: bit to keep that relationship. But I just I think
• 18:08
  Speaker 1: more and more people want to watch movies from home,
• 18:10
  Speaker 1: and it would just be silly for these companies to
• 18:12
  Speaker 1: ignore that. So Tarrett seems to me. I'm not sure
• 18:16
  Speaker 1: if they've released any the economics here, but it seems
• 18:18
  Speaker 1: to me they're Warner is going to take a big
• 18:20
  Speaker 1: financial hit here, at least in the near term. It
• 18:23
  Speaker 1: seems like if they spend a hundred million dollars on
• 18:25
  Speaker 1: a movie, Okay, I pay fifteen bucks through HBO Max
• 18:28
  Speaker 1: and my family could sit in on the sofa and
• 18:30
  Speaker 1: see it. But if I were taking a family of
• 18:32
  Speaker 1: four to the theater, they'd be fifty in revenue as
• 18:34
  Speaker 1: opposed to fifteen. What are they saying about the profitability
• 18:38
  Speaker 1: impact for the strategy for next year. Well, they're avoiding
• 18:42
  Speaker 1: saying too much of anything about it, but you're right,
• 18:44
  Speaker 1: it's clear that they're going to lose a lot of
• 18:46
  Speaker 1: money on this, but I think they see it as
• 18:48
  Speaker 1: probably worth it. You know, it's very expensive to even
• 18:51
  Speaker 1: just promote these movies, and the box office really helps off.
• 18:55
  Speaker 1: That's that and that's how they make a lot of
• 18:56
  Speaker 1: their money. But if you're putting it on a streaming service,
• 18:58
  Speaker 1: it makes me wonder if you need get to do
• 19:00
  Speaker 1: so much promoting. If if people kind of just get
• 19:02
  Speaker 1: in the habit of knowing there's always going to be
• 19:04
  Speaker 1: a new big movie on HBO Max, maybe you don't
• 19:06
  Speaker 1: need to spend as much. Maybe over time this becomes
• 19:09
  Speaker 1: a little bit more of a feasible, practical strategy. But
• 19:12
  Speaker 1: for next year, certainly this is going to be very
• 19:14
  Speaker 1: costly for the company. I just don't think that shareholders
• 19:17
  Speaker 1: will be so worried about it because Disney is doing
• 19:20
  Speaker 1: similar things. They're really prioritizing streaming, even though it is
• 19:23
  Speaker 1: losing money, and I think it's just because people know
• 19:26
  Speaker 1: over time the goal is get as many subscribers as
• 19:29
  Speaker 1: you can, increase engagement as much as you can, and
• 19:32
  Speaker 1: then eventually the profits will follow. So it's kind of
• 19:35
  Speaker 1: a long term that. Does it force other studios to
• 19:38
  Speaker 1: do the same? MC down twenty now in the last
• 19:41
  Speaker 1: two days. Yeah, I think it's a shot across about
• 19:44
  Speaker 1: at Disney, especially UM. I think that there's definitely something
• 19:49
  Speaker 1: to being first here and first to something inevitable. Uh So,
• 19:53
  Speaker 1: I think that other companies will have to do something similar,
• 19:55
  Speaker 1: and a lot of them were moving in that direction
• 19:57
  Speaker 1: in some ways. You know, Mulan went straight to Disney
• 20:01
  Speaker 1: Plus for a thirty dollar fee. Earlier this year, Comcast
• 20:04
  Speaker 1: shortened it's um NBC universal window with AMC theaters, So
• 20:09
  Speaker 1: I think the theater is probably kind of expected something
• 20:11
  Speaker 1: like this, but it's still it's still painful, and there's
• 20:14
  Speaker 1: not really much they can do right now. Yeah, it's
• 20:17
  Speaker 1: just you know, is pointing out these theater stocks have
• 20:20
  Speaker 1: really been under pressure for a long time now, particularly
• 20:22
  Speaker 1: with some of this most recent news. Is there any
• 20:25
  Speaker 1: scenario I just kind of wonder what the future is
• 20:28
  Speaker 1: for theaters. Does every town need multiplexes throughout town? I mean,
• 20:33
  Speaker 1: what's the expectation. Is this kind of the the death knell,
• 20:36
  Speaker 1: if you will, for I guess the theater footprint in
• 20:40
  Speaker 1: this country as we know it now. Yeah, I think
• 20:43
  Speaker 1: everyone kind of wants some sort of decision made on that,
• 20:46
  Speaker 1: like is this the end of theaters or or are
• 20:48
  Speaker 1: they going to be sign And I think it's somewhere
• 20:50
  Speaker 1: in the middle, Like it's not so black and white.
• 20:52
  Speaker 1: It's that theaters. Probably we don't need forty thousand screens
• 20:57
  Speaker 1: around the country, you know, six thousand theaters. We don't
• 20:59
  Speaker 1: need all of that, But a lot of people do
• 21:02
  Speaker 1: like going to the movies. They probably don't go frequently
• 21:04
  Speaker 1: enough to support the industry at the size of that
• 21:07
  Speaker 1: and the amount of investment that these theater companies have
• 21:09
  Speaker 1: put into their cinemas to upgrade them. So it was
• 21:12
  Speaker 1: kind of a mistake over the years that theaters expanded
• 21:14
  Speaker 1: as rapidly as they did. But I imagine there's always
• 21:17
  Speaker 1: going to be theaters of some kind. They're probably just
• 21:19
  Speaker 1: won't be one in every city and they'll just be
• 21:21
  Speaker 1: fewer and far between. But I think that maybe the
• 21:24
  Speaker 1: way that they survived. Next year is probably going to
• 21:27
  Speaker 1: be a big downsizing for the industry, where a lot
• 21:29
  Speaker 1: of theaters that were closed because of the pandemic will
• 21:32
  Speaker 1: probably be permanently closed because it's because of streaming. I
• 21:36
  Speaker 1: also want to be to ask you about another column
• 21:38
  Speaker 1: that you wrote this week about President Trump's potential future.
• 21:42
  Speaker 1: Where do you see it? There's a lot of speculation
• 21:44
  Speaker 1: that there might be some TV in the works. Oh gosh,
• 21:48
  Speaker 1: it's so fascinating, isn't it. You know, they're saying Trump
• 21:51
  Speaker 1: is looking at doing some sort of streaming service, you know,
• 21:54
  Speaker 1: a monthly subscription, a lot like Fox Nation kind of
• 21:57
  Speaker 1: sticking at the Fox as new enemy, and it's hard
• 22:01
  Speaker 1: to know what's going to happen with that. But I
• 22:03
  Speaker 1: think what we're definitely seeing is some pressure on Fox
• 22:05
  Speaker 1: News because you know, they were so aligned with Trump
• 22:09
  Speaker 1: that with him telling his supporters now to ditch Fox
• 22:12
  Speaker 1: and watch News Max or O A N or potentially
• 22:15
  Speaker 1: some Trump TV service, that they need to kind of
• 22:18
  Speaker 1: shift gears and figure out what they're talking points are
• 22:21
  Speaker 1: going to be. Um. But as I noted this week,
• 22:23
  Speaker 1: Fox is kind of protected because of their affiliate deals
• 22:26
  Speaker 1: that they have with companies like Comcast and Charter that
• 22:28
  Speaker 1: were only recently renewed in those last multiple years, so
• 22:31
  Speaker 1: they've kind of lost in their profits for now. But
• 22:34
  Speaker 1: there's definitely this big, like headline risk that people are
• 22:36
  Speaker 1: looking and saying, wow, Fox has competition for kind of
• 22:39
  Speaker 1: the first time and it's in. It's for real. Is
• 22:42
  Speaker 1: there any sense about thirty seconds left that Fox is
• 22:45
  Speaker 1: concerned about this? Are they seeing erosion in the ratings?
• 22:49
  Speaker 1: They're saying a little bit. I mean it's it's small
• 22:51
  Speaker 1: in the grand scheme of things, but I think they've
• 22:52
  Speaker 1: got to be concerned. You know, you can't ignore that,
• 22:54
  Speaker 1: and they definitely have to think about, you know, what's
• 22:57
  Speaker 1: their narrative now we have a different president office, different party.
• 23:00
  Speaker 1: What are they talk about now? If they can't talk
• 23:03
  Speaker 1: about Trump? Well, if you think about half the voters
• 23:06
  Speaker 1: paying you know, somebody maybe five dollars a month, that's
• 23:09
  Speaker 1: a nice little monthly salary for anybody who who does that.
• 23:11
  Speaker 1: So you have to, you know, you have to consider
• 23:14
  Speaker 1: that to Tara's thank you so much. Tara's columns are
• 23:17
  Speaker 1: so well worth reading, so satisfying and thought provoking. Tara
• 23:20
  Speaker 1: Lasha Palaces, Bloomberg Opinion Hollum is covering the business of
• 23:23
  Speaker 1: entertainment and communications as well as broader deals. Of course,
• 23:27
  Speaker 1: used to write an m Day column for Bloomberg News.
• 23:32
  Speaker 1: All right, where are we at with the election lawsuits?
• 23:36
  Speaker 1: Let's ask somebody who follows them really to a t.
• 23:39
  Speaker 1: Justin levet is, professor of law, Loyola Law School, and Justin,
• 23:43
  Speaker 1: I hope that's correct. I hope you're as glued to
• 23:45
  Speaker 1: all of this as the rest of us. I'm sure
• 23:47
  Speaker 1: you are, because it only happens every four years. Right,
• 23:50
  Speaker 1: what is the current status of all of the lawsuits? Well,
• 23:54
  Speaker 1: there are some that are still lingering, but they're not
• 23:56
  Speaker 1: going much of anywhere. Fact Um, the courts have been
• 24:00
  Speaker 1: at a uniform across the board. They've granted some extremely
• 24:04
  Speaker 1: minor procedural relief in the early going, but since then
• 24:08
  Speaker 1: has pretty much rejected all of the claims that have
• 24:11
  Speaker 1: been made uniformly and in multiple states. There are a
• 24:15
  Speaker 1: few cases that are still less to sort of wease
• 24:19
  Speaker 1: their way out, but that's the way most of them
• 24:21
  Speaker 1: are going is slowly in with a whimper, So Professor.
• 24:26
  Speaker 1: President Trump is also reportedly considering pardons for himself maybe
• 24:30
  Speaker 1: his children. Um. What kind of legal jeopardy could he
• 24:34
  Speaker 1: face from these actions? Well, from the pardons themselves, there's
• 24:40
  Speaker 1: not much unless he dangled the bribe in order to
• 24:45
  Speaker 1: produce these parts. That's something that we received word that
• 24:49
  Speaker 1: the Justice Department had actually been investigating a few weeks ago.
• 24:53
  Speaker 1: And UM, that is not okay. So holding out the
• 24:57
  Speaker 1: prospect of the pardon in exchange for something value is
• 25:00
  Speaker 1: not okay. But beyond that, UM, the president has extremely
• 25:05
  Speaker 1: broad power to pardon for any federal criminal activity. UM.
• 25:10
  Speaker 1: That runs up against two limits. One, it's generally acknowledged
• 25:13
  Speaker 1: that the president can't pardon himself, that you need to
• 25:16
  Speaker 1: be partnering somebody else and not yourself in order referred
• 25:19
  Speaker 1: to be effective. And to the president can't pardon individuals
• 25:23
  Speaker 1: of state criminal activity. UM. There are a number of
• 25:27
  Speaker 1: state investigations that we know of, including a tax frawd
• 25:30
  Speaker 1: another business liability from before the president's time as president. UM.
• 25:34
  Speaker 1: And he can't as president get himself or others out
• 25:38
  Speaker 1: of any trouble they may have run into with the states.
• 25:42
  Speaker 1: What is your prediction for how it goes once you
• 25:46
  Speaker 1: know the president elect is in office and the current
• 25:49
  Speaker 1: president is not. Even though Kenny mcnetnie has just said
• 25:54
  Speaker 1: that he's going to remain leader of the Republican Party.
• 25:56
  Speaker 1: Is it possible that, after investigations and you know, presumably
• 26:00
  Speaker 1: criminal overseedings, that a former president could actually go to prison.
• 26:05
  Speaker 1: It's possible, it's exceedingly unlikely. There are reasons that it
• 26:10
  Speaker 1: hasn't happened before. UM. Of course, this president has found
• 26:15
  Speaker 1: pleasure in breaking a lot of norms, and it would
• 26:17
  Speaker 1: be ironic if that were among the norms that he
• 26:20
  Speaker 1: would have broken. UM. Look, in terms of federal liability,
• 26:25
  Speaker 1: even if the president doesn't affectuate all of the pardoners
• 26:27
  Speaker 1: that he's claimed to UM, there's going to have to
• 26:30
  Speaker 1: be a really hard call on the part of the
• 26:33
  Speaker 1: new administration about what sort of accountability to seek. UM.
• 26:38
  Speaker 1: And we obviously have accountability through the criminal justice system,
• 26:42
  Speaker 1: but that's not the only form of accountability we have UM.
• 26:45
  Speaker 1: And there are lots of reasons why, even if the
• 26:48
  Speaker 1: facts justified it, a new administration might choose to pursue
• 26:52
  Speaker 1: accountability in some other realm outside of criminal justice. So, Professor,
• 26:56
  Speaker 1: it's been I think speculated that the President Trump perhaps
• 27:00
  Speaker 1: the biggest legal liability after he leaves office is from
• 27:03
  Speaker 1: the Southern District of New York. There's a number of
• 27:06
  Speaker 1: investigations on going. Is that you're reading as well. I
• 27:10
  Speaker 1: think it's a combination of the Southern District and the
• 27:13
  Speaker 1: New York Attorney General's Office. So as mentioned, there are
• 27:17
  Speaker 1: different political considerations and their different legal considerations when it
• 27:21
  Speaker 1: comes to the federal government holding somebody to account versus
• 27:24
  Speaker 1: the state government. UM. I'll note that the New York
• 27:28
  Speaker 1: Attorney General's Office has already very publicly come down on
• 27:32
  Speaker 1: the Trump organization charity, the Trump Foundation, UM, and they
• 27:36
  Speaker 1: have been looking into business dealings with the Trump organization
• 27:39
  Speaker 1: elsewhere as well. UM. So I think it's it is
• 27:42
  Speaker 1: certainly true that the activity that might cause him the
• 27:45
  Speaker 1: most concern is happening within the jurisdiction of the Southern
• 27:47
  Speaker 1: District of New York. But there are state actors there
• 27:49
  Speaker 1: as well who also see at least some traces of
• 27:54
  Speaker 1: facts they want to follow up to find out if
• 27:55
  Speaker 1: there's been criminal wrongdoing. But when this is all over
• 27:59
  Speaker 1: an you know, in our memories, I don't just mean
• 28:02
  Speaker 1: the last four years, but also maybe the next eight
• 28:04
  Speaker 1: or twelve years, will there be legal president that would
• 28:08
  Speaker 1: have been created thanks to this period in time, Oh,
• 28:12
  Speaker 1: no question, Um. But even more important, I think there
• 28:15
  Speaker 1: will have been political or normative president UM. So some
• 28:20
  Speaker 1: of the courts have issued opinions on what it is
• 28:23
  Speaker 1: the president Kenner cannot do. They include opinions on what
• 28:28
  Speaker 1: it is the president must or must not turn over
• 28:31
  Speaker 1: when investigative agencies asking. All of that will be precedent
• 28:34
  Speaker 1: for the future. But I think even as important as
• 28:38
  Speaker 1: that are informal rules about how we treat the office
• 28:44
  Speaker 1: of the presidency and what requires or demands a response
• 28:49
  Speaker 1: from other elected officials, um, And those I can see
• 28:53
  Speaker 1: running one of two ways, either learning the lessons in
• 28:55
  Speaker 1: the last four years that we like how we treated
• 28:57
  Speaker 1: this and so should continue to treat further president who
• 29:00
  Speaker 1: might break norms in a similar fashion, or something I
• 29:04
  Speaker 1: actually suspect more likely, UM, that we'll see a backlash
• 29:07
  Speaker 1: that will realize that some of the ways in which
• 29:10
  Speaker 1: norm breaking has been not only tolerated but encouraged in
• 29:14
  Speaker 1: this presidency are more destructive long term to the health
• 29:17
  Speaker 1: of the country, and that will turn a page on
• 29:20
  Speaker 1: this and and sort of suggest I would hope never again.
• 29:24
  Speaker 1: So Professor President Trump, I guess has not conceded. Yet,
• 29:30
  Speaker 1: what are the constitutional laws surrounding this transfer of power?
• 29:34
  Speaker 1: Do we need him to technically concede. No, it's just
• 29:39
  Speaker 1: that every president since the mid nineteenth century has um,
• 29:43
  Speaker 1: so we're not used to a president who doesn't concede.
• 29:46
  Speaker 1: But in short, the president is not in control of
• 29:49
  Speaker 1: whether he acknowledges a loss at all. UM. The state
• 29:55
  Speaker 1: and local governments count up the ballots. That's something that
• 29:58
  Speaker 1: we've seen over the last couple of weeks. A lot
• 30:00
  Speaker 1: of Americans are now more attuned to than ever. UM
• 30:03
  Speaker 1: they announced final results, governors or other executives of the
• 30:07
  Speaker 1: state certify those results. The electors vote on December fourteenth
• 30:11
  Speaker 1: in the electoral college, Congress counts the ballots. Butecial notice,
• 30:14
  Speaker 1: I haven't mentioned the president once in all of that,
• 30:17
  Speaker 1: and that's because he's not in control of whether he
• 30:20
  Speaker 1: remains as president or not, if he chooses to concede,
• 30:23
  Speaker 1: if he chooses not to concede either way around. The
• 30:26
  Speaker 1: other actors in the system who count the ballots that
• 30:29
  Speaker 1: have been cast decide whether on January at twelve oh one,
• 30:34
  Speaker 1: President elect Joe Biden will be sworn in. He will
• 30:38
  Speaker 1: be and if the president hasn't conceded by twelve oh one, Um,
• 30:43
  Speaker 1: then he'd better find a new address, because at twelve
• 30:45
  Speaker 1: o one, the Secret Service will establish the rule of
• 30:49
  Speaker 1: the President elect, and anybody who's not that person will
• 30:52
  Speaker 1: be kindly after the boy house. Very easy. We will
• 30:55
  Speaker 1: follow that clearly, of course. Justin Leavitt, Professor of Law
• 30:58
  Speaker 1: at the Loyal Law School, thank you so much for
• 31:00
  Speaker 1: joining us based in Los Angeles. So again, Vonnie, the
• 31:03
  Speaker 1: next six weeks here I'll be interesting to see, you know.
• 31:06
  Speaker 1: President Biden continues to build out his cabinet and prepare
• 31:10
  Speaker 1: for the transfer of power, so we will obviously watch that.
• 31:14
  Speaker 1: Thanks for listening to Bloomberg Markets podcast. You can subscribe
• 31:17
  Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast
• 31:21
  Speaker 1: platform you prefer. I'm Bonnie Quinn. I'm on Twitter at
• 31:24
  Speaker 1: Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at
• 31:26
  Speaker 1: pt Sweeney. Before the podcast, you can always catch us
• 31:29
  Speaker 1: worldwide at Bloomberg Radio.