Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news.
I'm the Bloomberg Markets podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. We're going to get the latest on what's happening in Israel. Hillary Kalisman, professor at the University.
Of Colorado, Boulder. Oh, she may have been to, could have been where?
Let's ask her before we get into the Middle East situation, Joe, because I don't want to, you know, because it's such a tragic and horrible situation that we don't want to be at all lighthearted.
But before we get there, have you been to Casa I have not.
I've driven past it many times though, and I would like to go, but I think it's hard to get there. Right now, I have another.
Good recommendation for you.
I just went this weekend my son and graduated from INERSH at Colorado. He picked I think the most expensive restaurant in Denver, Fruition. So I recommend fruition if you haven't been there. All right, let's get to Israel here, very very difficult situation here. Do you have a sense of how this might play out? I mean, it's just been on and on and on, and now with the horrific attack from you know, now ten days ago, it's
taken a whole new level here. Do you have any sense of how this might develop over the coming weeks and months.
It's a difficult question, and I would say I would see I don't. I don't necessarily see any kind of long term easing of the conflict either. It's something where you have an Israeli government reeling from intelligence failures, trying to figure out what is the best option while trying to kind of please like trying to reassure their constituents
that they can in fact tech their citizens. On the other hand, their tactics so far have been it seems quite ineffective and causing a lot of civilian deaths within Gaza. So I do think a ground invasion is imminent. I think the part that I worry about in particular is what is the endgame for any of the involved parties here.
So, if you're the Palestinians, can you give us just educase a little bit here to what extent do the Palestinian people in that region support Hamas.
Well? So Hamas was elected in two thousand and six over you know, sort of about fifty percent of the population in Gaza would not have been old enough to elect them. And I would say I don't I haven't heard sort of very many support people supporting Hamas's current
actions and also their fallout. Right. It's something though where Hamas, you know, sort of, so it's been a long time since two thousand and six, right, and you've had Palestinians in Gaza, in particular also in the West Bank protesting sort of demanding that their self determination not continue to be put on the back burner, that their material conditions improve. In twenty eighteen, you had this great March of Return where you had Palestinians protesting daily at the border fence
with Gaza, and it had no effect. Many of them were killed. So it's something where the Palestinians living in those areas, The Palestinians living in Gaza, I don't think, have seen any tangible benefits from hamas as a government, and they're certainly not seeing any tangible benefits from Hamas acting as it has been historically is a terrorist organization.
Have they any have they did they see any tangible benefits from.
The PLO the PLA. Have they seen any.
Tangible benefits from help out of Jordan or Egypt? I mean, has anything been helpful to the Palestinians since like nineteen forty eight.
I would say there have been periods where things have been better. The period you know, sort of so between nineteen forty eight and nineteen sixty seven, the West Bank in particular belonged to Jordan. Right Jordan annexed it, including East Jerusalem, and Palestinians were made citizens. Now again, Palestinians were many were extremely angry. The King of Jordan gets assassinated for agreeing to sort of work with Israel in
nineteen forty eight, and Gaza is occupied by Egypt. But Egypt doesn't want to annex it, It doesn't want to make it part of Egypt. It doesn't want that Palestinian population. That said, during that period you are able to have you know, sort of Palestinian it's beginning to kind of build up a livelihood again. But I want to emphasize they don't have Palestinian sovereignty. They don't have a state.
And one of the other things to remember, right, is that the Palestinian population without a state, without a standing army, without even you know, sort of the ability to collect their own taxes. And again this worsens under Israeli occupation. After the War of nineteen sixty seven, you have essentially against sort of their self determination postponed and one of the and they also have sort of very little bargaining
power visa viv the Israeli state. The periods in which they are able to get bargaining power are periods in which they make it harder for Israel to continue the situation of having Palestinians without of state and continue to occupy them.
Yeah, this is right, Just no, please continue.
Just thirty seconds left, professor. Is there anywhere for Palestinians to go in this world?
I mean, what do they do?
It's so hard? And again it is so many ordinary people who would like to live somewhere in safety with their children. And one of the things I want, I really want to emphasize here is that the future, the future safety of Israel also depends on their being somewhere
for Palestinians to go and be safe. They're entwined, and I think the Hamas terrorist attacks are a horrible, horrible, unjustified wake up call for the Israeli government to sort of say, no, look, you cannot keep your population safe with this Palestinian population without statehood.
Next to you, all right, professor, thank you some much. We appreciate that. Hillary Kllisman, she's a professor at the University of Colorado at Boulder.
You're listening to the Team Ken's Are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
Matt Miller, Paul Sweeney live here in our Bloomberg Interactive Brokers studio. What's a fixingcome investor to do? Twenty twenty two was just the worst bait maybe of all time for fixing come investing. This year is it's not much better. If you're not this year bad. If you're in high yield, you've had some positive returns, but that's about it. So let's check in with somebody who does this investing stuff for living Mike Green.
He's a portfolio.
Manager in chief strategist at Simplify Asset Management. Mike, thanks so much for joining us here. How are you guys approaching this market here? I love to get kind of how you entered the year and maybe how you've kind of repositioned, if at all here as we get into the fourth quarter.
Well, fortunately at simplfy we run a nonumber of strategies, so we've had everything ranging from our interest rate hedge product prefix, which looks like it's on track for a second year of a row of just being a phenomenal performer. But simply that's just betting against rates, right, it's betting on higher interest rates. It's worked as a fantastic portfolio hedge.
In terms of my personal exposure in funds that I directly manage, I have been biased towards bonds and duration, and obviously that's been the wrong call for the year. I think the interesting question is why, in the face of much higher interest rates are we not seeing equity markets respond? And I think the most interesting aspect of it is simply that we're not seeing flexing and demand. We're not seeing that marginal player who can say I
think equities are relatively unattractive versus bonds. We hear an awful lot about the very low equity risk premium, but we're not really seeing allocations change in a meaningful way. And that strikes me as one of the most interesting dynamics playing out in markets today. I think it plays into a a bunch of the material and emphasis that I placed on passive investment strategies. Systematic investment strategies for portfolio construction is not really tied to the underlying fundamentals.
It's tied to historical return profiles.
Yeah, well, it seems like everybody, well, it seems like a lot of big names have been burned.
You know.
Stephen Major recently came out and said he was wrong on bonds. He pointed out that debts and deficits hadn't mattered in the past, and now they do. Lacy Hunt over at Hoysington Investment Management has said this is one of the toughest years of his career, and he's eighty one, so he's been in the market for a long time.
And everybody is like, hey, inflation is coming down. In fact, there has been no decline this large in inflation that hasn't been involved with a recession and its immediate aftermath. So I guess I have two main questions, Mike. One do you think inflation is really solved? Has the FED you know, done it?
And two?
Are we headed for a recession or is Paul's soft landing scenario going.
To play out?
So I'm very much in the camp that says that the data is currently misleading us. I agree by the way that the inflatory has played out as many of the transitory infliction as myself included would have argued, we've seen a remarkable deceleration if you go further within the infant data series and you focus on market based measures, and so just very quickly remember that about thirty five percent of the CPI numbers that we see, or what
are called imputed measures. Those would include things like owners equivalent rent, very slow moving adjustments that they make. Even those silly things like the cost of banking services is currently very elevated because of the way we define that right, So crazily enough, the cost of banking services is defined by the spread between the risk free rate and the rate that is being paid on deposits. That means that as the FED has raised interest rates, they've dramatically increased
the imputed costs of banking services. So those are the factors that are actually currently driving or keeping inflation elevated. If you use the market based measures, the ones that you experience on a year over year basis as you go to the grocery store, those are now running below two percent, below the below Powells targets, and would suggest that that's not the problem at all. I think the clear challenge that we're facing is modestly increased supply. Again,
not a crazy increase. I understand people point to higher level of deficits, etc. We haven't seen an unbelievably large increase in the supply of bonds. But the bigger story continues to be the relative challenge of getting people to actually change their allocations and say, should we allocate two equities away? So that's just a structurally very slow process.
What about I saw a story this morning China or Chinese investors have sold more US holding stocks and bonds than they have in the past four years because they're defending the U on and a lot of countries are defending their currency against a stronger dollar. To foreign investors who are.
Huge holders of treasuries. Are they a problem for this market?
Well, they're definitely not helping, right, because we would hope to see an increase in demand.
Now.
The irony, of course, is that their source of supply, the reason that they've accumulated those are the very large trade surpluses that they run with the United States, and then their failure to reinvest in any meaningful way, which
historically would have led to their currency appreciating. Now as they face commodity prices, they face a slowing in the Chinese economy, as they face capital flight from within their own economy, You're seeing them effectively have to defend their currencies against the rising US dollar, and you know, yes, they're no longer accumulating in the same manner. But we're not really seeing a wholesale crash, right. The tick type indicators for demand from foreign buyers are muted, but it's
not a crash in demand. The other thing that I would just highlight is is that we're seeing this this is not a US story. We're seeing bond sell off on a global basis, and so we hear an awful lot about the unsustainability of US fiscal policy. The simple reality is, I look at a place like France, which is running almost the same deficit to GDP as the United States and doing so on a much more structural basis, and their bonds are actually trading inside the United States.
That suggests to me there's a combination of diversification and very slow to respond demand.
Hey, Mike, thanks so much for joining us. Always appreciate getting a couple of minutes of your time. That's Mike Green. He's sup portfolio manager and chief strategist at Simplify Asset Management. He's been in the business long time, has seen the various cycles.
Here used to run Peter Thiel's money. Yeah, that's kind of cool.
Which is a lot of money. And we have an amazing story on the terminal today showing that of the two hundred and seventy one people Peter Teal has bribed to drop out of college, yeah, you know, he pays kids one hundred thousand dollars to drop out of college, eleven have founded billion dollar plus businesses, almost twelve because one guy just sold out with nine hundred and seventy five for here.
That's a good return on that investment.
You're listening to the tape kets are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Here's I think one of the most fascinating stories on the Bloomberg terminal today. A Bloomberg News and Morning Console poll provides one of the most detailed looks yet at how the twenty twenty four presidential race is playing out in the seven swing states that could decide who wins. The title of the reporter on this story, Gregory Courty joins us. He's a White House and political corresponding with Bloomberg News. Gregory, what's the poll telling us here?
Well, what this poll does Unlike a lot of the other polls you see out there, which are national polls, this just looks at the seven swing states that are most likely to matter next year, and they are Arizona, Georgia, North Carolina, Pennsylvania, Michigan, Wisconsin, and Nevada. And what we see in this poll is that president former President Trump is up in five of those seven states, Biden is
up in only one. President Biden is leading in Nevada, and then Michigan is a dead tie according to our poll. But across these if you look across the swing states, president former president Trump is overperforming what you see in the national polls. And obviously that's a good sign for him because these are the states that are actually going to matter.
So we're, you know, thirteen months before the election. If I were the Biden reelection campaign, how would I interpret these numbers? How concerned would I be?
Oh?
I think they're concerned, and they're very likely seeing similar kinds of things in their own internal polling. But they would also say, look, it's thirteen months before the election. Certainly we've had some economic challenges coming out of the pandemic. Inflation is ebbing somewhat, but people still feel it absolutely. What we see in this poll is it's those kitchen table issues. It's those bread and butter household economics that
is really killing the president right now. There's a huge trust deficit people voters in these swing states are trusting former President Trump on the issue of the economy and all the sub issues that we look at the economy, we really delve deep to look at Okay, when you talk about the economy, are you're talking about inflation, are you talking about the stock market? Are you talking about taxes or spending? And across all of those economic issues.
President Trump had the advantage in these swing state voters. What President Biden is hoping is that as the economy and if we're able to have that soft landing and avoid the recession, if people are looking up by this time next year more optimistic about where the economy is going and not just where it has been, there is an opportunity for present Biden to be reelected.
The problem is, I think pretty clearly inflation, Like, even if inflation got down to zero today, you've still seen prices run up at an unbelievable pace and they're not turning around.
Plus wages have not kept up even nearly with inflation. Wages is not going ahead of No, no, no, no no no.
I mean, I look obviously very closely at cars, and I just see Hannah was right. Hannah Elliott wrote a story about the Jeep three ninety two two years ago going for seventy four thousand dollars, and she thought that was way too expensive. I wrote about it or I'm looking at it this week and I see it at ninety two to five, So that's a huge jump. It's
up twenty three percent. And I guess my question, Gregory, is this a lot of this is very clearly inflation is very clearly being fueled by excess spending, which was understandable during COVID. But we're still running one and a
half trillion dollar deficits. And President Biden is like all in favor of spending as much as possible, or at least that's how it appears, right, So how does he turn that narrative around, you know, while we're while we're while we're looking at these huge deficits in debt.
Yeah, so what you've seen is and I think you exactly nailed it, right, So even if there's a little bit of disinflation, that's not the same as deflation.
Right.
So, so people have seen this cumulative inflation over the course of the Biden years. Again, we're coming out of a pandemic. You know, this is a lot of the spending happened, and the tail and the Trump administration, those arguments are falling on deaf years. Republicans have have branded this economy is Bidenomics, right, that all this inflation.
That peoples branded this economy is biden.
Well, what President Biden has tried to do is rebrand it as this package of social spending and investment in green energy technologies, infrastructure, all of these things. But people are looking the outputs and not the policy inputs, and so I think you're absolutely right, it's the economic indicators. But even more than that, just what people are feeling that that perception, and it's going to take a while to change perceptions because the cumulative inflation during the Biden
years is more than sixteen percent. People, it takes a while for people to digest that prices are now stabilizing a little bit. They still are comparing what they're spending now to what they were spending pre pandemic.
Yeah, what I'm feeling is I can barely afford like groceries, childcare, and housing at a time when you know, if you want to buy a car, get ready for eight or nine percent interest rates on that. If you want to buy a house, ditto with the mortgage. So it's like and we're still going to say, hey, let's do a one trillion dollar additional spending bill, right, exactly.
What so Gregory the president.
We had some more news on some of his legal challenges today regarding one of his former aides pleading guilty. He still has a lot of legal challenges ahead of him. That doesn't seem to be hurting him at all, does it.
Yeah?
I just saw the headline crossing the Bloomberg terminal as I was coming on here. What we saw in this poll was one of the interesting things is one of the questions we asked is what have you seen, read, or heard about these candidates in the past few days or weeks, And it called for an open ended response. We got to see actually what they were hearing, how they were viewing these candidates, and what you heard a lot about President Biden about his age, and what you
heard overwhelmingly about President Trump is about his legal troubles. Interestingly, we heard it both from Democrats and Republicans. Trump supporters are talking a lot about his legal troubles. Of course they're doing in a different context. They're saying, all I hear about is President Trump's legal troubles. I wish I would hear less about it. Everybody's fixated on it. This is all sort of a witch hunt. But it's certainly
that news is permeating. People are reading it, and they're reading it on a more granular level than I expected. When when the former President Trump is hit with a gag order, people mentioned that gag order. They're they're they're following some of the the micro developments of this. So
it really is capturing people's attention. But the partisanship is just so entrenched that it's not moving those numbers, and the economic issues, as we're seeing in this sing state's poll, are dwarfing everything else that people know about these candidates.
Doesn't the Democratic Party, doesn't the DNC need to do more to boost Kamala Harris's profile, because if you're worried about President Biden's age, you know, without discussing saying whether or not that's a valid concern, you've got to feel comfortable with the vice president because in that case, you're casting.
A vote not just for President Biden.
But it's I guess you're saying, if you're worried about his age, it's likely that you must think Kamala Harris could eventually take that spot over.
Yeah, we asked this question in this swing state's poll, and a majority of voters said that the vice presidential pick is more important this year than it has been in the past. For Democrats, thirty percent said it was much more important who the vice president is because of the age of these candidates. A little bit less, maybe twenty four percent for Republican voters said the vice presidential
pick is more important. Of course, we don't know who President Trump, assuming he's a nominee, we don't know who his running mate will be. It will be almost certainly someone other than Mike Pence, who is vice president his first term. But yes, voters in both parties are more fixated on the vice presidency just because of the age of these two candidates.
All right, Gregory, thank you so much for joining us fascinating reporting here today.
Gregory Cordey Corti.
He is the White House and Politics correspondent with Bloomberg News and Bloomberg News along with Morning Consult, did a pretty deep dive poll focusing on seven swing states that could decide who wins the White House.
You're listening to the Team Ken's Are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business app or listen on demand wherever you get your podcasts.
Matt Miller Paul Sweeney live here in on our Bloomberg Interactive Broker Studio or streaming live on YouTube's to go over and check that out. Little roundtable here on some earnings. Dan Ives, senior equity analysts at Whatbush Securities. He joins us live here in his Bloomberg Interactive Broker Studio. I'm not sure if he's going to State College this week. I'm not sure about that or they are They?
Yes, Yeah, we'll be going to Columbus Friday.
Oh you're going to Columbus. Oh nice, very good.
I got a bar for you there. Uh, you go in there, order whatever you want food and drink. If Penn State wins, they will pick up the tab. I'm gonna hook you up all right.
Keithan Ron Gonnatin, She's definitely not going to Columbus, Ohio because she's a professional. She covers the media sector for Bloomberg Intelligence. And we want to talk about Netflix and ESPN, Dan Knives, Let's start with you. Tesla Stoka not liking what they're hearing from Elon Musk.
What was your takeaway? From the quarter for Tesla.
It goes to a disaster conference call, I mean, because it was the street wanted to hear about pricing. Have the price cuts ended? What does the outlook like going forward?
You know?
Instead, this just really must be more of an economist, you know, obviously much more somber, and I think investors leave with just more questions and answers in terms of this price where that you know, we've talked about here a lot, you know, how long does it continue? And obviously on the cyber truck, that's gonna be a huge vehicle relative to demand, but definitely gonna be a uphill battle from production per.
So, I got a million questions after that conference call, but my first one is on the cyber truck. He contends that this is like a special project and that makes it extra difficult to produce.
Why is that?
Why isn't it just a normal truck. I mean, this could be like an F one fifty competitor. It's so cool, everybody wants it, so many people put in pre orders.
Why is it so hard to make?
From an engineering perspective, it's very difficult.
So it's one one are because it's a special shape.
Because of the sheep because of the materials in there as well as what they're trying to do from a technology perspective. That's why you talk about getting mass production. They look, that's essentially why they built out Austin in terms of giga. But I do think must caution of course, not the demand side, but the production. And to Math's point, look, that's always been the issue with Tesla. It's about not
about the demand story, it's about the production. Ironically, now for the first time, demand sort of hit so equalibrium when it comes to the supply.
All right, so we've got Tesla down about eight nine percent. On the other side, we got Netflix up fifteen percent. Monster quarter, Geitha, What did you hear on the conference call last night? What did investors here on the conference call last night that got them all hot and lathered here for Netflix?
Yeah?
Absolutely, I mean it was a blockbuster quarter on all fronts, Paul. So absolutely, the beat was it was not just a beat, it was the magnitude of the beat and the story. The narrative is really clean now, it's getting much much clearer, you know, as far as the margin trajectory is concerned. They promised about twenty two to twenty three percent margins
going out in twenty twenty four. They promised, you know, subscriber momentum kind of extending into twenty twenty four, so really kind of firing on all cylinders, if you will.
So getha.
It seems like, I mean, you follow the whole media space, It seems like Tesla's really pulling away from everybody else in Netflix, right netfls thank you that Netflix is just pulling away from all the competitors, maybe including Disney.
Oh absolutely, there's no doubt about it. We already know that Netflix is way ahead of its rivals, not only when it comes to subscriber scale, but also in terms of profitability. Remember, this is the only company that is generating profits today, Paul on its streaming business. The rest of the space, this company is going to generate about
seven eight billion dollars in profits this year. The rest of the space, including Disney, Warner Brothers, you know, a paramount, all of them collectively will throw out about eight to nine billion dollars in streaming losses. So obviously, when it comes to profitability, when it comes to operating leverage, there is no doubt that Netflix is the clear winner. They are the dominant player. But what was the biggest surprise was the fact that they're just throwing out tons of
free cash flow. So this was, you know, a stock that we used to kind of almost mock and ridicule talking about you know, you know, three and a half billion dollars in cash burn this year, They're putting out six and a half billion dollars of free cash flow. So this is yeah, yeah, this is a freak cash flow machine. And not just that, they committed to ten billion dollars in buy back. So as you kind of look, you know at them shrinking that float, look at EPs growth.
I mean, it's going to be in the thirty percent range for the next few years, and that is really huge in kind of this media landscape right now.
I mean, my takeaway from our stream Time conference last week was that Netflix is the boss of everything. I mean, if I were buying stocks, I would have loaded up after I saw did you watch Harry Styles interviewing Ted Saranda's, I mean, Lucas Shaw interviewing Ted Saranda's I.
Did last week?
I thought it was that guy came off like an absolute boss.
They're doing everything right.
They are looking you know, I think the thing here it's all not just about content. You think about the competition, what was coming from Disney. They've now taken a step back, and you look at that conference with that was a flex the muscles, especially when you look at free cash flow. If you look at Netflix versus Tesla, just to take
does last night, it's not necessarily the result. It's also if you look at the communication the street ones to understand what the path looks like in a very uncertain quality marketkeetha.
What's the headwind?
What's the biggest risk for Ted and Flicks?
Right now? They seem to be getting everything right. So the one concern I think that kind of is still kind of lingering a little bit, is this whole revenue growth re acceleration. I mean, they've got all the levers in place, but ARPU has been under pressure a little bit. We saw ARPU decline a little bit in the third quarter.
Average revenue per user, revenue per.
View, yes, yes, average revenue per user. So that has become like the really big metric now to kind of gauge the success and the streaming world. They did, of course, caution to that. They said it's going to be a little bit flat. But then again, we have price increases that are going into effect. We have the ad business that's going to take off. So as we kind of look to twenty twenty four, you know everything is in place for that that metric to kind of ramp Upretty
significantly as well. So right now they're getting everything right.
Hey Dan, My big question on EV's in general, and I just purchased a.
Movie going back to Tesla. Now you're going back to Tesla.
It's kind of hard to keep tracked. That's why I'm there are two very different companies, I know, but this is very They're both ripping stocks.
People. These are the ones that are most rich.
Testa is getting killed today right Netflix is up fifteen percent, Tesla is down eight point seven.
But for me, the big issue having just purchased a new car BMW X three.
He loves the X three. We love the X three.
Although I have like twelve miles on it. I'm just walking back and forth to the train every day.
Is and demand.
I really have questions about what is the real demand out there in America for EV's, Like I'm thinking.
Beyond the rich, beyond like a second or third car, like is you at a political angle here, like I think half the country will never buy an EV.
Look, I mean you're starting to get into a debate around with the demand curb books. Like ultimately, price is so important if you look go back to traditionally Tesla seventy five eighty eighty five thousand, now even with the the tax credits thirty five forty thousand depending on when state living. But it does also talk about the battle from the Beltway and what's happening here even with UAW and what's tapping Detroit with jam and Ford. It's all
price driven. Three percent of automobiles in the US for EV's today, so we believe that goes ten to twelve percent. There's me massive winners. But it also comes down to price, especially in this macro.
I mean, as long as you know President Biden is gonna pay me, He's basically he's gonna borrow money from my kids and my grandkids to pay me to buy an EV. I'm interested, But I want the cyber truck, that's what That's the one I want.
Exactly, and MILLI vehicle and Miller's gonna have the cyber truck. While watching Netflix in full self driving in three four years.
Hey, Githa, another big day in the world of media.
Yesterday was, or in the past couple of days, Disney for the first time ever released financial results for ESPN, and my takeaway was two things. One, their profit margins are well, there's still a lot of cash loot, almost three billion dollars of EBITA, but it declined big time and it's nowhere near the number used to be. What is ESPN or what is Walt Disney Company could do with ESPN?
Yeah, that's the big, big question, Paul, And I mean one of the reasons that they kind of broke this out as a standalone unit was because they really kind of wanted to show, you know, potentially future investors if they're planning to sell a steak or if they're planning to spin it off, you know what the financials kind of look like. But obviously, you know, the top line actually looks pretty stable at sixteen billion dollars. It's really
the profit margins, as you rightly pointed out. I mean, you look at the traditional cable business, it's about thirty thirty five percent margins. You look at ESPN's margins, it's fifteen percent this year. So that is a little bit concerning, and obviously it is only going to go lower given that, you know, sports rights fees are increasing astronomically, so they really need to do something with this asset. We know that they need to do it fast. The question is
do they sell it? Do they do they actually sell it to Apples? Has kind of been set all and you know, or do they you know, spin it out again. We'll we'll have to wait and watch. Buteah, Definitely.
I kind of feel like I have to apologize to GETHA because the twenty five years I had covered the media industry were the golden years.
Everybody made money.
What I've left to GETHA is just a hodgepodge. I don't know what's going on out there, Githa. What's the I mean, can you get any investor out there to say I want to overweight media?
No, not at all. I mean everything is down in the dumbs right now, other than of course Netflix. But we'll have to wait and watch what happens with Disney. I think they have a great collection of assets. They're trying to do everything that they can. But Bob Iger obviously has a lot of challenges ahead of him.
All Right, I mean a success or maybe. Yeah, it seems like that.
Is one of his worries, but others are just as pressing. I'll be interested to see if the league's come in and get a piece of ESPN. Is that still on the table, Dan, What do you think could could like the NFL and some other professional sports leagues come in and take a big chunk of it.
Look, we believe this is ultimately going to lead Apple to acquiring ESPN. Oh you think that's it's Martin. Our thesis has been and Laura has talked about so War talks about Disney, which you know obviously makes sense there too, But we believe it's really about ESPN, the live streaming ASCID. If you look at happen with you know, MLS and MESSI I think they recognize in terms of cook and Creup Patino, even though M and A is obviously not their sweet spot, ESPN is a unique asset.
It'll be a better buy than Beats.
Right, and that was three and a half billion.
How much is ESPN gonna cost?
I mean we think forty to forty five billion is probably what would be the price tag. But then when you look at Disney, you know, it's this conversation talking about some of the parts you sell, and that's why there's more more pressure on Eiger in the board.
What's Disney worth like one hundred and fifty let me pull it up here. Yes, Disney is currently in market cap terms worth one hundred and fifty three point seven billion.
We think about third of that value.
So if they get rid of say they let's say they get fifty billion dollars for ESPN, GITA, what is Disney then worth If they sell ESPN for fifty billion dollars.
That is actually a really really high multiple. So you know, if you kind of look where cable stocks are trading right now, they're trading at about seven and a half times EBITDA. At seven and a half times EBITDA, ESPN would be worth about anywhere from about twenty two to twenty five billion. So it'll be interesting, it'll be interesting if they can get that fifty x multiple that that would actually be awesome.
But again, you have to kind of kind of look at at Disney's you know, really bread and butter of the business, that is the park's business that is going to you know, just a few years ago, parks used to bring in only about thirty thirty five percent of operating income. This year, it's bringing in about seventy five percent of operating income at ten billion dollars. So you know, Disney really is Parks right now, and Parks itself should be worth I think two hundred billion.
Nice. I want to I just want to Dan finally get back to Tesla.
In terms of production in the gigafactory, there was a lot of talk on the call, yeah, yesterday about whether Musk could do a lot of his production in Texas. Where are they gonna build the most of their you know, expansion or does their expansion not look as fruitful as it did you know before this call.
Expansion is gonna be in Austin, broader Texas as well as in China. I mean, they're they're focusing more and more away from California obviously their course and away from away from mon Yeah, and look and fundamentally just speaks to mathematically economically speaking against Texas. Go about the Mexico plan that they're gonna, you know, ultimately start to build out. But it's really China capacity right now is not the issue. It's about the price cuts. Keep cutting prices. That's a bad spiral.
Yep, all right, Dan, I've senior analyst web Bush Security is covering all that fun stuff and tech and githa rang and nothing.
Uh.
She is an immedia analyst at Bloomberg Intelligence based down in Princeton and Dan heading off to Columbus, Ohio to see undefeated the party State of Ohio take on undefeated the Ohio State University.
Ohio State huge.
And look, I think it's gonna be a battle. It's gonna be a great game. I think Penn State comes out of the shoe with the W.
Nice.
There you go. I mean I have no idea about sports.
Let's put a public sale on your Ohio State.
I'm in. I'm in for Ohio State. Let's put twenty bucks on it.
All right, here we go. This is Bloomberg.
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It's Thursday, Max So that means we talked to one b Roodholts.
Oh yeah, the big.
Host masters in business. He's a chairman, chief investment officer Wolts Wealth Management. I'll give let you run with this mat.
I don't know.
Well.
I love the I love his blog, The Big Picture, which you can see on the web at Ritholts dot com. Oh, by the way, kicking off, there's a banner ad Barry at the top of your page for the Jeep Wrangler. And right now I'm driving a Jeep Wrangler Rubicon three ninety two. So basically it's the Jeep Wrangler that everybody knows and loves, Like every high school kid wants this car.
But they've shoehorned in a gigantic six point four liter V eight and I'm here to tell you it is loud and terrifying and I'm loving every minute of it. I had no idea, Barry, you still have to crank the steering wheel like three or four rotations before the tires find out about it on a Jeep.
Yeah, I don't think they've changed a whole lot there. They just dropped a big engine and off to the races. You know, it's a that seems to be a successful formula, especially for American autumn.
I wish somebody would tell the people at Ford, because you know, they still they won't make a Bronco as anything bigger than the V six in it and this three ninety two expensive as it is. And I'll get to that, but it's it's electrifying in its intent, exactly in its analog nature, like it's such a great fun.
Piece of gear to drive.
In fact, I wish you were here because I would give you the keys and we take it out right now.
It's so you have a jeep, right, I.
Have a twenty thirteen Rubicon, which I use basically that that's my post apocalypse vehicle because it's just a hamster wheel inside and it goes everywhere. It's pretty much and anywhere. It's kind of unstoppable. That's the appeal of those old analog cejs are that they're just great fun cars.
So, but I need to go to the inflation picture with that. That's exactly what I wanted to do.
Let's go, because I mean, I can't get in the seat and behind the wheel of almost anything that you'd want to.
Well, I'll tell you the numbers that you're quote.
Exactly, so you know what, Hannah Elliott from Bloomberg pers suits, she drove the same car that I'm driving now two years ago, the Jeep Wrangler Rubicon three ninety two.
And back then she.
Was like, awesome car, but unbelievably expensive because they wanted seventy four thousand dollars for it to start, right, and that was twenty twenty one. Fast forward two years, the base price ninety two thousand, five hundred dollars. It's gone
up more than twenty three percent. And to me, this ties in to the political story we have on the Bloomberg today, the fact that Donald Trump is leading President Biden in several key swing states because America just has had it up to here with this inflation.
Yeah. So, first of all, I'm skeptical of all of these surveys. Generally we've spoken about this in the past, not just political surveys a year and change before the election that are notoriously unreliable, but generally speaking, when you ask people, hey, how much you're going to spend on Christmas? What do you think is happening with inflation? What is what is the state of the economy? Uh, you know, I kind of blame the American education system and the
emphasis on testing. Nobody is willing to say, how the hell do I know where inflation is going to be a year from now? Instead, Hey, there's no penalties for taking a guess, and so they take a guess. So we end up with these surveys that are rarely accurate and very often tremendously misleading. Just a perfect example, a recent survey on inflation said how's inflation, and something like two thirds of the respondents said, inflation is going up
the past quarter. Hey, inflator of the past year. From the past year, inflation fell from nine percent down to three percent.
So that's because they look at the cumulative It doesn't matter if inflation they don't know. How you know, we talk about this, We see the data day in and day out, but your average American doesn't care if it's still gone up by so much. No, what I'm getting as the economic sentiment, right, how you know, Biden can be behind five point four percent economic growth in Q three, but the fact that prices have gone up by so much is what everyone cares about. And it doesn't matter
if the Fed stops it. They've got to somehow bring it back down to where it was. Right, if they want to average two percent, That's what Neil Grossman goes on about all the time. Right, if they want to average two percent, they've got to hold it there for like the next four decades.
I disagree with that assessment. I'll tell you why. So we've talked about labor shortage and how wages are going up. We've talked about housing prices and how those have gone up, and now we're talking about automobiles.
All three of these.
Higher priced entities are not rising in price because the monetary circumstances are too loose. They're rising in price because we have shortages. We didn't build enough houses for fifteen years following the financial About is that? So That's exactly where I was going. The primary driver of the twenty one to twenty two inflationary surge was a massive, massive increase in fiscal stimulus starting with Cares Act one. Hey, it was ten percent of GDP. That that's a number
we haven't seen since the Great Depression. Arguably it was the greatest fiscal stimulus in American history relative to GDP. But it was CARES Act one. It was Kars Act two behind that was the Tax Cuts and Job Act, which was about three trillion dollars over over ten years. Then you have the Chips Act, and you have the Infrastructure Bill under this president and Cares Act three under this president. So the combination of Trump and Biden.
The Inflation Reduction Act, by the way, what an ironic name.
Also right, it's also a ton of money. Now, some of these are spread out over ten years. The Infrastructure Act, the Chips Act, the Tax Cuts and Jobs Act are spread out over a decade. So it's not five percent this year, it's half a percent a year for ten years. But here's the fascinating thing, and this is what I'm so intrigued by.
When we just ask Teat for twenty seconds.
Where is cinnamon? I just don't find sentiments. I just don't find the economy worse than the financial crisis, the dot com implosion, or the eighty seven crash. And that's what people are saying.
It is all right, Barry, thanks so much for joining us.
We've covered a lot there, everything from GDP to the jeep rubicon with the six point something on on the displaced engine. Barry Ridholt's Host of Masters in Business Chairman and Chief investment Officer Ridtholt's Wealth Management joining us here.
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