Is Amazon's MGM Deal Just Another Whole Foods?

is and talks to acquire the film studio MGM. The reported price tag is up to uh perhaps as high as nine billion dollars. Let's break down this potential deal with Mark Douglas. He's the CEO of Steelhouse. Mark. Thanks so much for joining us here. You know, I look at Amazon and the gajillion dollar you know, almost a two trillion dollar market cap, got tremendous amounts of cash on the balance sheet. Why are they You know, you

can look at MGM. It's a great, great film studio, tremendous history, lots of great content, but it's kind of small in the scheme of things. If if Amazon is really serious about the content business and maybe really compete against Netflix and Disney, why don't they go out and buy something big like maybe even a Netflix or Disney at the very least something like a Viacom CBS. Why are they just kind of dipping their toe here with a nine billion dollar deal for MGM. Yeah, So I

think that's the question that everyone has. And Amazon is in the streaming business with Amazon Prime. But I think if you were to asked, you know, virtually anyone really um to name a streaming service, you would be hard pressed to anyone to actually name Prime as as one of those services. Because people get Prime to get their packages delivered for free, not in order to watch movie content and other content. And so that's the lemmon um Amazon has. And and they're really not um investing in

any huge way with this deal. I think most people expected, but there aren't you know, excited about it. The Prime layout is even worse than the Netflix layout out in terms of, you know, the user interface. I mean, both are pretty bad. I don't know why they can't match Apple, But um, what would be the best way then? Uh, do you think an acquisition is the best way for Amazon to do better in that space? Do you think, um, they is there a specific target that you have in

mind mark. Yeah, well, I think the deal that Discovery did, what's the deal to do because you know, HBO Max is if you want, yeah, if you want to give viewers, it starts with original content. And even that's not enough. Apple spends more money on original content than anyone and and and you know, name a show that you love on on Apple TV Plus. So I think you know, both these companies have, you know, huge amounts of money.

They both spend. Apple is at least spending in the area that they're hoping finally breaks through and get them that big hits that that you know, essentially gets all the viewers to get side. It was like a handmade tale or in the past, the Game of Thrones and things like that. But Amazon is not even doing that. So I think, can I just say ted Lasso is really underrated. I just finished season one based on your recommendation there, managed I just don't think people know how

funny it is. It's smart, but it's also kind of heartwarming. UM. I mean, it's not like a VP or a Silicon Valley, um. But it's really really good. They did they just didn't They don't get the recognition mark for that, do they? Or for Like for All Mankind also was quite good. That just doesn't get the credit. Yeah, well, I mean I agree in some sense, but you know, I'm I'm watching Startup one nextli you know, costs a lot less money. Um, someone, I don't think a lot of people know about the

great show. So Netflix cranked out these shows, yeah literally five weeks that people love, and they have incredible technology to figure out what their users want to see. And meanwhile, Apple has got a fire hose of money they just bring around Hollywood and yeah, and and they're just not getting the same result. And the Amazon is now doing the same and they're not going to get the same

with dot Well. Tera La Chapelle Bloomberg Opinion Columns is out with a great another great column today looking at this potential deal and saying, hey, you know, you think about the Whole Foods business that didn't wasn't really a game changer for for Amazon or even the industry. Um, And she's kind of saying, hey, this deal kind of feels like a Whole Foods where they're not really all in. But boy, you look market some of these other companies, Um, you know what is this Vicom, CBS do what does

the Fox do. I mean, we thought you just wonder with you know, market caps that are seven billion dollars that they just don't seem like they're competitive enough in terms of scale and kind of where the world's going again. You look, you mentioned the the A, T and T and Discovery deal. Yeah, well, I mean it starts with vision. If you ask anyone in Amazon what is this deal going accomplished? I don't think they're going to give you

a visionary or exciting result. But if you ask the head of Discovery what he what he's going to accomplish? What his vision? I think he knows and he's willing to put his solids on the table and the effort

to accomplish it. And so if you want to win in Hollywood, all the biggest players, Netflix, Disney with Disney Plus, now Discovery, what they're doing with HBO, Max and the other assets they bought, they all share one common threat, you know, a thread, which is they have visions, they have original content, and they have huge libraries about the content to go with it. And if you want to be a real player, you need all of those ships on the table. Does the sports aspect help at Amazon?

They're getting Are they getting Thursday night football? I think they are getting Thursday at football in Prime? Right? Does that help a lot or um? I mean it forces me to go use the you know, they go to the website of that content I want to watch. So in that sense it does help, But I don't see anyone can say that immeasurably increases put print of Amazon or anyone is leaving watching you know that that that NFL content and is now you know, basically going to

consume more hours on Prime Menu? Are so? So it helps, it helps, you know, in terms of some awareness, but I don't think it really moves them up the food chain in terms of their position in the strands market. Hey, Mark, you you know as Steelhouse. You guys work with a lot of advertisers, a lot of brands. What are the advertisers? What is Madison Avenue saying about all those consolidation in the media spaces a good thing? Is it something to

be concerned about? What are you hearing? Yeah? I think I mean remember for the advertisers, what they want is good at supported content. Right, So you have streaming subscription supported content that's Netflix, and then you have ad supported content, which is what Discovery and other a number of other

companies are doing. And so those advertisers, I think they like these deals, you know, because there's a lot of revenue has to be generating that keeps these studios and everything firmly seeded and ad supported content, which the brands need in order to reach them doing. Baseball is dying. I wonder you're not a huge fan, right, but I wonder what you think about the Major League Baseball if you just ask quickly, because it's like every game is a no hitter and um, the average is down to

two thirties or something. Um, is is this in your in your window at all? Here? Mark, I wouldn't say I'm not a huge fan. I actually loved the game and love a really good game. So I think what you're articulating is it's getting harder and harder to find. And so I think, you know, baseball is always going to be part of Americana, and I think the league just has to, you know, really, um, make bringing the

players and and and have the rules and everything. Give us short, exciting games and they will get all the viewers they need, all right, Mark, Thanks very much, Mark Douglas. They are he is the CEO of Steelhouse. I always bring up baseball with him because I know he grew up right across the street from Yankee Stadium and became a Mets, became a Mets fan. All right, this is Bloomberg.

Let's bring in Mark roberts Is Um Paul was saying, he's a co founder and owner of eleven eleven hotel and residences in Miami, and Mark, let me first ask you a question. We've talked to a lot of hotel and restaurant owners and operators throughout UM the Southeast to have told us it's very difficult to hire people right

now if you had the same experience. Yes, we've had a little little issue with the hiring at the beginning, but because our strong brand, our strong name, and our recognition and people understand when they worked for us to be very lucrative, We've had a lot of people showing up in the last couple of weeks and we're gonna have a full staff probably another week or two, will be fully staffed. With the first Yeah, I have to hire them, then you have to some culture, and then

you have to train them. But will have a full staff ready and rare and to go very shortly. So market there's I know you have here. An eleven eleven brand in Miami talked us about the Miami market. It's just gotta be one of the hottest markets in the country. Talk to us about how it's kind of evolved over the course of the last fourteen months. Sure, well eleven Hotel and Residents of course is leading the charge, but we sold out basically almost uh million dollars in real

estate just under a month. And Miami has become such a hot market for a bunch of reasons. I think people first started moving to Miami because of the tax situation, get always from high pastes. I think they also like the political atmosphere, pro business uh. And then they get to Miami and they understand the quality of light is unbelievable. All of a sudden, they're boating around the water, the weather has been fantastic. Stick All they see is uh people,

you know, feeling good, working out. And then they get there and they start seeing that business is booming. The restaurant like almost every restaurant you can name that there's lines to get in, there's you know, everybody's selling the condo, U interest selling things, are renting houses are selling it's crazy prices on multiples of what they want for just

a year, a year and a half ago. And I really believe that New York and these other areas like San Francisco, l A, Chicago, the major stages are losing all these people. Uh, people are coming to Miami and understand of Miami's much more than just the tourist place. Now, Miami's coming the most major city there is probably in the world, and it's really grown up to be what's gonna be the epicenter of business. I mean, all the text that's coming in there now is just incredible. And

and you know it's restaurants as restaurants. See all the other restaurants are being successful. Um for instance, like Carbone came down from New York. They're opening up twenty new restaurants. All it's like a stampede. It's like it's like a herd mentality, and everybody sees the numbers, and the numbers per square foot is just incredible, and I do everybody is shattering records. And and you know, as you know, the restaurant guys follow the restaurant guys, So there's an

influx of top top top restaurants. I'm surely been called a col in every center of the universe. So so what have you done too? Because it's not a hotel in residents just the beginning for eleven and eleven, you've got UM one of the most famous, I guess nightclub spots in the US. Everybody wants to go and see. You've got shows with DJ's rappers. But you've got burlesque, You've got trapeeze acts. You've got also other UM products like your own vodka brand. How how are you branching

out into into this economy. Well, we're doing is we've become such a strong name recognition amongst really almost to all sectors. Uh, the lifestyle, you live your life, live a better life. So what we're doing is we've now form to separate I P Division Intellectual Property Division, and we're stamping that up and we're going to create a multi multibillion dollar brand. How are we going to do that? Eleven hotel and residences. When we open them up all

over the world, we're gonna be Uh, we're branding. The vodka is unbelievable. We just launched it this year and Nicky Simptons is my partner's wife is a CEO, is doing a tremendous job, and we literally and all over Florida. We're dominating Florida and we're gonna be taking that vodka national soon. And you know, for first year, I think we're breaking rectors there everybody. The vodka, by the way, won the Double Gold Award in San Francisco last month.

It's the top award for a spirit. So the taste is unbelievable. So you always have to have the quality. People know that eleven stands for quality. When you're dealing with eleven, you're gonna first class, first not top quality. It's could be the best, and that's really what will

relate to it. And of course all ips are built on the brand and brand awareness, which we have incredible brand awareness and per square foot, but the most profitable nightclub in the world by far, I don't think anybody's even close for only thirteen thousand square feet, even though people think it's huge. Um, but like you said, the lines have been around the block. I mean we literally have five hundred to a thousand people waiting to get

in now uh charges sometimes and people paying no problem. Well, no, no, we've we've believe it or not, we've been having like two hundred covered charges just because we've been having great acts, the aerial acts, and we would spend a lot of money to make sure the experience inside is people leave there thinking they've got value. So we spent a lot of money, you know, putting on the shows and making sure we have a great service and staff feel very professional.

It looks easy, but it it takes a lot of work. Work. Hey, Mark, thank you so much for joining us. We really appreciate you. Take in the time. Mark Roberts, co founder and owner of an eleven eleven hotel and residents in Miami. Uh, certainly the Miami has been just an incredibly hot market, really accelerated during this pandemic. Well, it seems like over the last several days inflation concerns in the market place

are waning just a little bit. I'm looking at the ten year here here one point five seven seven percent. That's off a couple of basis basis points today. Uh, let's see how things are going in the municipal bond market, which which has been one of one of the hottest markets out there. Michael Jay's chief US Public Policy and

municipal strategies from Morgan Stanley joins us. Michael talked to us about the bond market has had such a great run, Um, there are some inflation fears out there in the market place, maybe ebbing a little bit over the past several days. How's the municipal bond market reacted to that? Yeah, I think the municipal bond market is not really reflecting any

meaningful concern about inflation at the moment. Actually think the place to start here is at credit quality in the market, unabashedly, year over years, substantially improved and probably will continue to improve meaningfully. But the challenge now is that a lot

of that good news is already in the price. You've got saluations no matter how you slice it, UH yield ratios versus treasuries, quality spreads, all kind of pre COVID tights, and so what that means is that if you've got good fundamentals and they're going to continue to improve, but relative valuations are pretty tight, it's probably something outside the municipal bond market that would have to make things cheapen up. And this is why we say we don't think there

really particularly price for inflation. If you've got some meaningful um upside inflation or the said had to start talking about tapering sooner. Our concern would be in that scenario that you could get a bear steepening of the treasury curve. Mini market historically is not done well in those situations. It tends to lead to outflows. And because it's a long only market UM dominated by long only sters, you tend to get cheapness on the back end of that.

So in some ways we think the real wistom uni market is some of these inflation prints. Even though it wouldn't tell you much about credit quality. It wouldn't tell you that credit quality is getting any worse. Sorry, my microphone is off. Okay, so credit quality um. And we kind of all braced ourselves for a difficult time here pre pandemic or during the pandemic, and it hasn't happened. Do you expect any changes throughout the next quarter or two?

Not particularly, And I mean you know I traveled the same journey you did. We put out an initial estimate around this time last year of what the cumulative fifty state budget shortfall is going to be versus the revenue estimate in our base case was about two hundred and seventy billion dollars um. That number appears to be on

paper now we're still counting things substantially lower. And then, of course, on top of that, in the COVID released bill earlier this year, the federal government appropriated three hundred and fifty billion dollars of AIDS. So in the state and local sector, you've got plenty of money to cover potential shortfalls. The money that was appropriated via UM the other A packages put plenty of money to the hospital system,

the airport system, So this is a sector. Broadly speaking, most municipal sectors are not just writing the v shaped economic recovery. They were also given plenty of cash by the federal government, and so you wouldn't expect to see anything directionally negative show up on income statements or balance sheets over the course of this year. Michael, where are you guys seeing value here in a bond market? Where

are you guys spending some time? You know, it's tough because a lot of the value has been squeezed out here. On a relative basis. The sectors that we still like here are airports and higher education. So certainly that the relative yield you can get here is not nearly as much as it was during the pandemic or the high of the pandemic. Of these are sectors where there's a lot of concern about their economic model relies on population density, on people being together. Um So in some ways you

saw their fundamentals decrease the most. Uh. And here we think the trajectory out of the pandemic is going to benefit the fundamentals. They're the most. So there's a little bit of extra yeld breast there. And frankly, we just think that when there isn't the market's not giving you a lot of spread to go credit picking, you might as well put things in your portfolio you think have the sharpest positive fundamental trajectory. I'm curious to know about

your your career, Michael Um. I don't want to get too personal, but I think it's fascinating. You studied um political economy at Georgetown, public affairs at Austin. Then you want you're a chloral fellow, went to Fitch. Then you're on the by side, And how do you get from there to here? Yeah? I don't know. Actually, I mean a little at a little bit of luck, a little

bit of accident, happenstance. I mean, I think for me, UM municipal market was always fascinating because it was about taking the numbers that are in financial statements and seeing through to what the actual policy choices that were being made were. And then really, I think to be any to be a good municipal credit analysts, you really have to have a forecasting ability about national policy, tax policy,

healthcare policy, etcetera. And that's a skill set that that then translated into broader public policy forecasting for other markets. So unconventional path as supposed but have worked out well. I just think it's fascinating because you have that public policy background and now we're in a situation where we're looking at you know, trillions of dollars in fiscal spending and even more in Fed assistance. And I mean really, um, really a paradigm shift in the way on the US

economy is operated from a government level. Right, we went from the Reagan years making smaller government, deregulating, and and now forty years later we're just turning a correer here. Does that inform your investment strategy? Well, I mean absolutely.

I think as an investor you sort of learn to if you if you want to track these things correctly, to take your personal views about what you want to happen in Washington, d C. Or any other state capital out of it, and you focus on what will happen. And right now, we have a very polarized electorate in the US and therefore a disincentive to bipartisanship. And what it tells you is that the when one party or the other has control, that's the only are sort of

likely the best time to get any legislation done. And legislation tends to get done only in the way that all members of a party can agree upon. So when you overlay on what you're talking about on fiscal policy, uh, it means that when Republicans have been in power, they can all agree on tax cuts, you tend to get fiscal expansion that way. When Democrats are empower, they can all agree on the spending side, less so on the

tax side. And until the electorate is going to punish someone for deficit spending, maybe because you actually see inflation impacting people's disposable income, well then the incentives is just kind of keep pushing the deficit wider. So that's what sets up for the for the spending that you've seen so far this year and that we think is going to continue. All right, Michael, thanks very much for joining us pleasure having on the program. Michael jesus their chief

US public policy and unique strategist at Morgan Stanley. I remember he did a great podcast with Ritholts Masters in Business Podcasts a few years ago that that I loved, So I'm glad we got to get him on This is Bloomberg. You know, since the beginning of this pandemic, you know, when the markets across the board just created one market showed incredible resiliency, it just amazed me. That's the real estate market, whether it's existing homes, new homes,

housing starts. You know, the numbers were generally really strong throughout the pandemic, and we got some more data today, but it's just an amazing market. Let's kind of dig into it. We can do that with Craig Gimmona. He's a real estate reporter for Bloomberg News. He actually joins us again live in this Bloomberg Interactive broken studio. The first guest I've had in this studio in fourteen months, so it's you're the first Craig thanks so much for coming in here. Talk to us about some of the

data we saw today. I know the US no new home sales fell by more than forecast, but I mean the demand still out there, right, The demand is definitely still out there, and I think in the two reports that we got today Case Shiller plus home sales, you're seeing kind of the way the trend is playing out. As you said back last April, things froze, you know,

there was not much transactions. People thought real estate prices were gonna fall, but as soon as people started moving again a little bit, home prices have just been on a steady climb. I mean, there's demographic tail winds. The millennial generation is at home buying age, they're having that second kid. There's demand for extra space for offices for remote learning. So the suburbs are about as hot as they've been in fifteen or twenty years, and there's nothing

to buy. There's a severe inventory shortage. Basically every home that hits the market moves and record speed. There's cash offers, bidding wars, so incredible demand for houses in the United States. The question is are the prices going to run out ahead of the demand and keep those first time buyers, the millennial couple that's looking for something in that three hundred thousand, four hundred thousand dollar range. It's very very tough out there right now. And I do think that's

what you're seeing in new home sales. I know my brother is looking for a place in the Try State area, and every time they put in an offer, they are instantly overbid by like five or six different people. I know somebody who just bought a place in the DC area without even having seen it. Very very common. Yeah, that's just to me, that seems crazy like buying a used car without test driving, and it's just absolutely nuts.

But I guess you've got to do that. Um. Why why aren't we seeing a ton of new supply come online in the market where you see prices going up ten or per month? Um? Doesn't that make construction workers want to go out and build spec houses? Um? It does?

And I think two things on that. I mean, I think as far as existing homes, I think some of the older people that own those bigger homes in the suburbs have not sold them because maybe the kid from college moved back in in the pandemic suddenly they like that big place in Granwage or Westchester because they have room for the entire family. So people have been on the sidelines, the people that typically would be downsizing at

this life stage. And you know, we went into this with a severe shortage, and I think the builders have ramped up as fast as they can. But you've also seen a situation where it's so hot and lumber is going up so much that the builders are kind of deliberately slowing things down because they don't want to lock in a price right now because in two months the price could be up ten percent. So you know, a

lot of factors. But we went into this with a huge supply shortage, and I do think the millennial sort of demographic tailwind, it's a big factor here. So Craig, when we talk about new housing, one of the areas that had been problematic, I think from just the market's perspective is builders were building a lot of new entry homes. They're buying, you know, building the McMansions and things like that.

The trade up homes are have they've sensed that there is a market for that move in early first buyer kind of house. I think they know that that market exists, and some of them at least pay lip service to that.

But I think what you're seeing there also is that you know it costs about the same to build that eight hundred thousand dollar home, you know, with the with the way lumber is, with land labor that you know told brothers are one of these other guys is looking at it and saying, I could build a house for four fifty there. I could certainly sell that. But I could sell this home for eight hundred two. So why don't I build that when the margins are better? So

it's a it's a massive problem. I think, Um, there's an affordability crisis that's looming here where you have a generation of people that you know are going to have a very very hard time buying that first home when if things day like this. I've always thought, I wish I could do this job broadcasting for Bloomberg Radio, Bloomberg Television, UM remotely and get a place in like rural Montana. So for me, that's not going to be a possibility. I'll talk to Al from Jersey about that one. But

but for others, Um Craig, that's become a real possibility. Uh. In the pandemic and now it looks like post pandemic. Are you seeing things spread out a little bit due to that? I mean, I think places like the Hampton's, places like Aspen Tahoe, those are those are places that went crazy in the pandemic because people said, Okay, I don't have to go into my office in midtown anymore. You know, now I can live wherever I want. I mean, we'll see. I think the narrative that you know, midtown

offices are dead was way overblown a year ago. Obviously, we're seeing people start to trickle back. I think there's a lot of people waking up in the cats skills. You know, now the boss is saying you have to come back, wondering, you know, why did we buy this place that's two and a half hours from midtown Manhattan. So it'll be interesting to see, you know what flex

work means. I think in a world where you have to be in the office three days a week, you know, it's still you don't want to go so far out and you know something. Houses near transit in New Jersey have remained pretty hot. Long Island where Chester, So I think some people did leave the city. They wanted to get bigger properties, a lot of that was life stage demographics. But you know, office as offices reopen, it'll be interesting to see if things stay so frothy in these more

remote locations. I mean Kingston, New York has led the home price gains I think for two quarters in a row. You know, that's people that's a lot of vacation homes, but that's also people that figured they would never have to go back to the office. All right, interesting stuff. Obviously everyone cares um because everyone's on one side of

the trade or the other in the US, right. I mean, either your site because your house is appreciating like crazy, and it's probably for a lot of people, for most people their biggest asset, or you're bummed because you want to buy a house and you can't afford it. That's right, um, and that's why the market seems to have come to a standstill. Standstill. Great to have Craig gi Amona there, Bloomberg real estate reporter in the studio with Paul Wow. The times they are a change in But I'm guessing

you're fully vaxed. We're fully vaxed. It's all good to go. That's awesome, This is Bloomberg. Thanks for listening. To the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Put on fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast. You can always catch us worldwide at Bloomberg Radio