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So the SMP closed around six thousand on Friday. We are above barely that level now, but nonetheless, I mean we are now officially in a bowl market. So now our eyes turned to the trade talks in London between US and China representatives, and that's going to be enough to start moving the needle for the equity market higher. Joining us now is Brendan Murray. He is Bloomberg Global Trade Editor. What's a win for both sides.
A win for both sides is going back to the Geneva agreement from a month ago and saying here are the clear goalposts that we set for each other and that we're going to try to meet going four forward, and then setting the setting the stage for future rounds of talks that they have enough in common and the tone in the room is good. Remember, these are two sides that sat sat together a month ago and came away and didn't really understand what they had agreed to.
So so here we are again. They just started the discussions a couple of hours ago here in London. It's expected to go well into the into the early evening, maybe even into Tuesday if if they get hung up tonight. So the the real goal here is to re establish the framework for some talks were two months from the the end of the ninety day reprieve that that both both sides agreed to when they brought their tariffs down.
So time is ticking and these are complicated talks and they can't They're not going to be done in just a few meetings.
So the real the real.
Goal here is momentum and maintaining the forward momentum.
I know, my strategy would be just walking down to the local pub, you know, have a couple of pints, work this thing out. I mean not tough, going to.
Be Brendan, where are we on terrrifts?
Are here?
I can't keep track of where we are on tariffs? Could you just remind us kind of what the current status is?
Yeah, So part of that ninety day reprieve was to bring the very high tariffs down one hundred and forty five percent on Chinese imports into the US. Extremely high tariffs for US goods going to China. They brought those down. The US is at about thirty percent on Chinese goods now China brought theirs down to ten. So those are by no means low tariffs. Those are still having an effect.
They're diminishing the share of trade that's moving between the two countries, So tariffs are going to be there for a while. Those are Those aren't the kinds of things you start taking off this early in a negotiation. Those are leverage that you take off later on down the road, once you can accomplish some of the other things that
you accomplish. And for the moment, the US is focused on seeing the those rare earth elements, those key magnets and other things that are needed to make batteries and high tech medical equipment come start flowing back to the US so American companies don't have to shut down their production lines. And China wants some of the export restrictions that the US put on it's high tech exports to China some of those lifted. It seems like the two sides came into these talks willing to give up some
of those. So we'll we'll have to wait and see where it goes from here, but we're expecting that they they'll come away from these discussions with some sort of basis to continue the negotiations on a whole host of other things. Tariffs, like I said, not going to be addressed today, those are further down the road.
What who is the leverage? This is my favorite question in a minute, who's the leverage?
Well, you could argue that both sides have leverage. Look, President Trump has said he'll just take he'll take terriffs back up, and he'll cut off the US trade with with China as he did. You know initially China would say, yeah, well we'll just starveview of rare earth elements and see how well your auto industry survives a couple of months of that. So both sides have a fair amount of leverage. This is a game of pain thresholds. How much pain can your economy take? How much backlash can you take
from the general public, from lawmakers. So we're at the very early stage of the leverage that's being applied, and you could argue that both sides have a fair amount of it. It's just who can withstand it the longest.
Right, Very good.
Brenda Murray, global Trade editor for wear Bloomberg News, joining us from London, where there's talks are taking place between the Chinese and the American trade debt delegations. And again it just feels like if they're having dialogue, that's a good thing to me. I don't think anything, I don't know, necessarily bad, but you got to keep talking and kind of pushing the ball down the road.
I guess.
Well.
That's my question too, is like what's going to be good news for the market. Do you just need no bad news news?
I think that might be it, or do you.
Start to need some trade deals where the ink assigned not necessarily with China, but with somebody kind of lets go yeah.
I don't know, we'll see.
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YouTube in DC. There's still stuff going on as well.
Nathan Dean, Bloomberg Intelligence Senior policy analyst, joins us now. Nathan, obviously the headline over the weekend is the riots in LA and then the National Guard being sent in without the governor having.
Asked for it. What is how is that unfurling in DC right now?
So I would say, you know, it was one of those things where President Trump wanted this fight because it plays to one of his key messages that won him the election, and that.
Was on immigration.
But you know, in terms of how it plays in terms of things like the one big beautiful bill or to tariffs or to the you know that's really not happening just yet. You know, there was a lot of discussions about medicaid cuts and snap reductions and inflation reduction acts, and those messages are very difficult for Republicans, but they're
still moving forward. So when it comes to Los Angeles and this idea of troops, I think President Trump certainly wants that to try and deflect some that messages away from medicaid cuts. For example, the question is, you know, we anticipate the one big beautiful build going into July. You know, will California go into July? Time will only tell.
So where are we on either I don't know, cuts too expenses like medicaid or new revenue like taxes. Where are we in that discussion these days?
Yeah, So you know, there's really three things that came out of the House bill. It's the Medicaid, it's the Snap benefits, and it's the Inflation Reduction Act. Now, each one of those was given a certain timeframe of when those tax you know, tax credits, and then the Medicaid cuts an example, when they would actually take into effect.
Now, the House Conservatives insist if.
Medicaid, for example, that would start in December twenty twenty six, the Inflation Reduction Act twenty twenty eight. All this being said, now, what the Senate is doing at the moment is looking how to mod moderate it. And so Senator John Thune gave a statement just last week saying that we're going
to anticipate a lot of that pushing back. So what we're telling our clients is is that go back to the original House in ways and means text where for a lot of these tax cuts and a lot of these tax extensions they would start taking place in like twenty twenty eight or twenty twenty nine, beyond Trump's the rest of his administration. That's where we think the Senate
goes now when it comes to Medicaid in particular. Obviously it's a very difficult vote for a lot of Republicans that have either constituencies or states that are heavily development or heavily reliant on Medicaid. You know, we think that most likely that those ultimate decisions, if you will, are going to be votes to kick the can and push those cuts off, so that if a future president wants to come back and revisit it, that person would have flexibility.
Right.
Interesting in terms of the few between Elon Musk and President Trump, I guess it's a twofer like one.
Where are we with that?
But then more importantly, kind of what is dose doing within the government without Elon Musk?
So it seems like we're sort of at a truce at the moment.
Now I say that obviously it could change almost instantly. But in terms of where we are with that, well, the White House sent what is known as a recissions package trying to codify around nine billion dollars in cuts. Now this is mostly USAAD State and PR We looked at it from an investment point of view, and we actually don't think there's much their market moving. But the reason why it's important to talk about is that this is the first of many recisions packages that will come
probably throughout the rest of this year. Now the White House can literally say, essentially say, look, Doges, identify these billion dollars number of cuts. Now we need Congress to go in there and actually approve this. Now, you don't need a filibuster. It's just a majority vote in the House, majority vote in the Senate. But obviously there are differences between what Doge wants to do and what Senators want
to do. This happened one time in twenty eighteen, and the Republicans just said, look, I can't vote to cut these.
Things that are ultimately going to impact my districts.
So we are going to continue to see things like clean energy tax I'm sorry, loans grants, and so forth like that. Those recisions packages are most likely coming later this year.
Last week, Alex and I were broadcasting remotely from Washington, DC area. One afternoon, I was walking around town, walking past a Department of Agriculture, which is a massive building taken up like a whole square block, and it was quit in time and people were coming out by the thousands. I mean, I don't you know, it goes back to I don't know what we don't know what these people do, and I'm sure they're doing good work. But now that Elon Musk is out of the picture, is dose still
a thing? Are people just going to come back into the federal workforce now?
Well, anecdotally, I would say yes, DOUGH is still a thing. Just talking to my friends and family around the region, they certainly are still ACQUI and there are DOGE employees at pretty much all these agencies. And what I would say is is that rather than being the bully pulpit of Elon Musk, now each agency leader is the one that actually has to make that decision. For example, over at the Federal Reserve, DOGE isn't there yet are as much as I can tell, they're not there yet.
But FEDWCE Chair for Supervision.
If you look at Michelle Boumanever's speech for last week, it had a lot of Doughe elements to it in terms of saying, look, we need to get cut, we need to actually become more streamlined, and so.
Forth like that.
So the idea of DOJ is certainly going through the agencies, but the bully pulpit of Elon Musk isn't there, so you will see cuts and you will see streamline efforts continuing throughout the rest of this year.
A Nathan, thanks a lot, super appreciate Nathan, Dean Bloomberg Intelligence and your policy analyst, joining us from Washington, DC.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple Corplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Alex youel here alongside Paul Sweeney. This is Bloomberg Intelligence Radio. We bring you all the top news and business, teconomics and finance. There are lends of our Bloomberg Intelligence folks. They cover two thousand companies and one hundred and thirty industries all around the world. Split up, that's not a surprise at all for anyone on Wall Street. Is Warner Brothers Discovery splitting into two publicly traded companies, one with HBO Max film and TV business, the.
Other with its cable business.
The stock is up over seven percent and for more Keitha Mrangana than Bloomberg Intelligence analysts on US media is with us.
Githa do we like this plan was what in it?
Was?
It all surprising?
We liked the plan, Alex. This has been many months in the making, so last December they had actually reorganized the existing business into these two separate units, the TV business and then the streaming and the studio business, kind of eventually paving the way for exactly the announcement today. I think the surprising part and this is a little bit of a pleasant surprise for Warner Brothers, Discovery has
really been on the debt side. So as you well know, well the linear TV business is challenged, but the bigger problem for WBT has really been a huge amount of debt. And this debt was really as part of the combination of Warner Brothers and Discovery, which happened a few years ago. At that point the company had over fifty five billion dollars in debt. They've paid about nineteen billion down, but
they still have thirty five billion. But what they're doing now as part of this transaction is they have a tender offer out there, really kind of looking to streamline the capital structure. So when you have these two new public companies, there's going to be a much more manageable debt load. At both of those companies, and I think investors are really reacting positively to that news Keetha.
When they put the companies together, one of the arguments was to create scale to compete against Netflix and Disney. What happened to that argument.
Yeah, exactly, Paul. You know, yes, they did create scale as far as the TV networks part of the business was concerned. You know, you have Discovery, which is really the leader when it comes to nonfiction. You have you know, the Warner Networks and HBO, which is the leader when it comes to fiction and quality dramas and scripted series.
And they thought that that would do well. But unfortunately what happened is, you know, and all media companies, as you will know, Paul, have this conundrum because they have the TV business, which brings in a lot of the cash, but is literally a no growth business. In fact, it doesn't decline. Both advertising as well as affiliate fees are
in decline. But then you had the streaming business, which initially kind of had a little bit of trouble because you know, in that whole game of subscribers and that land graph for subscribers, they actually ended up incurring a huge amount of losses. But there is this whole wave of content cost rationalization. We've seen a turnaround and all of the streaming businesses and Warner Brothers Discovery actually has
kind of led the charge there. So they were actually the first to get profitable in terms of streaming, and so now we're seeing this huge disconnect, or at least they are saying that there is this huge disconnect between the TV network's business and the streaming the studios business, which should arguably get a much higher multiple, and that's kind of the reason for this split. So we're seeing how multiple companies do this. Actually, so Comcast, which has
the NBC division, they're splitting out their cable networks. We had Live Skate and Stars, where you have Lion Skate as a movie independent movie studio, Stars of the media networks, and now you have Warner Brothers Discovery. So there's this whole big movement now towards you know, this vertical kind of separation if you will, I mean, do.
They all come together then and create kind of one less great TV network thing?
Yeah, that's kind of the plan. So the most logical combination, and this has been floated around for for months now, is that with this news of the Comcast, you know,
the NBC cable network separation. Who would have would that become like this kind of roll up vehicle, And that's kind of what you know, a lot of the industry experts are thinking, they're expecting now that you have this news today with Warner Brothers Discovery, everybody's kind of expecting down the road, some combination of maybe that Warner Brothers Discovery TV assets along with the Comcast assets and who knows who else kind of spins off their networks and
then that becomes this giant kind of TV network umbrella. Going back to Paul's point about scale, because scale really matters now at this business.
All right, how about Paramount, the other sick child in your coverage, what's going on there?
Yeah, so we really don't know what's going on there. So there's been a lot of ups and downs, Paul, with the whole closing of the deal. So the Paramount sky Dance transaction, it was announced last year sometime in July. It was supposed to close by the first half, by the end of the first half of twenty twenty five, but there's just been so many different press reports. They've had to do different things to appease the current administration to a peace President Trump, I'm not sure he is
yielding so easily. So we're actually it's still kind of fifty to fifty Paul, whether that transaction actually, yeah, actually closes. So there's just too many things up in the air. And then again there's the lingering question because we know that sky Dance is really was really only interested in the Paramount's studio business. So again what they kind of do with the TV network's business they do with the
streaming business, that's all a huge question mark. So visibility very very limited right now for Paramount.
I guess I just wonder if you stick all the cable networks together, how does that actually generate real income? I mean, I know that's a cash cow to some extent, right, but then you have a lot of debt and there's no growth. Like, what kind of asset is that?
Yeah, it's definitely a melting ice cube kind of an asset, which is exactly what you know, the TV networks have been the argument that all of these media companies making are making alex is that somehow by kind of banding together, you know, because each one of them will have one or two networks that is kind of a must have networks. If you're looking at Warner you have CNN. You know, if you're looking at again, if you're looking at the
NBC networks, you have USAU have MSNBC. So you know, there are definitely always going to be some must have networks in each portfolio and kind of putting them all together will stem that rate of decline, or at least that is the argument that they're making. But again we've seen that couret cutting has actually been far worse than what it was initially projected, So again it remains to be seen. But the idea is they want to milk it till it kind of runs dry.
Can do we have any any early feedback from Orlando with the new Universal Park? John Tucker's asking it's fun?
Yeah, so it is.
It is awesome, and we you know the initial so this actually only opened about ten to fifteen days ago, Paul, And so far everything seems to be going in the right direction for Epic Universe and for Comcast, and we know that they are really kind of doubling down on their parks business. They actually have a new park coming out just out of London, and they have all these other attractions that are opening in the US as well, but so far from Orlando, the signs are pretty pretty strong.
So my daughter's ten, she's never once asked to go to Disney and she has asked to go to this thing.
Really.
Yes see, it's interesting, isn't it. But now you're going to go to Orlando, you go to the universal thing. You say, since we're here, let's do a couple at Disney World, And that's kind of the plan.
There, right, Yeah, No, we're not doing either of those things.
I'm just saying more just on like the buzz for the actual kids who are going to make their parents do that.
Go figure. All right, Keith. Always good to catch up.
Keith running off on Boomberg Intelligence Analyst on US media.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
All right, Alex de Oli, Paulsweeni, this is Boomberg Intelligence Rady. We bring you all the top news in business, economics and finance. There are a lens of our Bloomberg intelligence folks. They cover two thousand companies and one hundred and thirty industries all around the world. So the SMP is treating a six thousand and eight now what Ann Berry is founding.
A managing partner at Thread Needle joins us now. And the question I was asking before break is do we need actual good news for a sustained move higher to all time highs or is it less bad news going to be enough?
Unfortunately, it feels like less bad news is going to be enough. Alex and I continue to be perplexed as to how the market level can be higher today than it was before we started down this Liberation Day tariff regime. So I think the market sentiment is such like, don't shock us with something terrible, and we're just going to keep on humming on up. That's how it feels at the moment.
Technology, and give us your thoughts on just the tech sector in general. Is that still a leading sector for this market overall?
So I think tech has been extremely highly valued for two years at this point. But what's been really interesting to me about this earning season is a lot of these businesses, those that have been giving out and increased guidance have been rewarded with increased investor support, and I think there are some areas of tech that continue to be interesting. A lot of these software companies that are becoming one stop shop for enterprises both large and small.
So it does feel like there are certain pockets of opportunity. But I do think that the market's becoming slightly more disciplined around which are providing more guide guidance to walk to the upside and not hiding behind this you know, macro uncertainty narrative.
Well to that point, does the macro uncertainty still touch these specific areas of tech?
Well, I'll sort of answer that alex from two different perspectives, and one is from the actual client perspective, the customer perspective.
And so when I think about the boardrooms that I'm sitting in, the conversation we're having is, you know, whether we're manufacturing business or consumer businesses, we are concerned about the macro outlook despite what I think is a euphoric equity market, and as a result, when it comes to hiring decisions, when it comes to capex capital expenditure decisions, we're being more thoughtful and more conservative but the one space that is still getting allocation of dollars is productivity
enhancing software and so places like into it that I look at, places like Salesforce that I look at, you know, their share prices. Crm's been down into it, it's been up, It's been awarded for a great, great post tax season.
You know.
I do see spend continuing to go there. It's about sorting through to try and find the places where valuation looks reasonable.
And what's the state of play of AI? I mean, prior to all this tariff talking of twenty twenty five, all the market talked about cared about valued was AI. We've kind of stepped away from that a little bit. What's your view today about AI and maybe how investors should have exposure to it.
I'm not sure that we have stepped away from AI, but I think instead of it being this sort of novelty that's grabbed headlines, it's something that instead is woven into all the depths of the earnings narrative. So if you look back at the earnings called transcripts, the vast majority of business was talking about the ways in which they were currently or planning to incorporate AI into their own product development, into enhancing efficiency, into using it for
marketing and for sales, and to reaching out consumers. So I think it's actually now becomes something that's become table stakes. We've moved past AI as a headline grammar into if it's a headline, it may be maybe for the downside, because you know, it's a surprise to the market. So I I think it's now here, and I think it's where a place where we're looking more watchfully to see evidence of return on investment, and we're starting to see it.
We're starting to see some businesses come out and talk about specific ways it added to the top line and of the bottom line. I think those who aren't coming out seeing that are going to suffer in the second half of this year. So the question what do you like, Well, there's a couple start with the US on that theme. I do like into it they had. It was sort of a surprising one to me because I'd had in the back of my mind this bias when you looked at what had happened to H and R block over time.
But when it came to the core tax product they do TurboTax that was set for complete AI disruption. It was going to be fully automated in the irs has been talked about for two years now, issuing their own software, and I thought that's going to be really difficult for folks like TurboTax. They knocked it out of the park there on the path for forty seven percent growth this year.
And what they figured out is that yes, the consumer, yes the small business wants to have AI to improve the efficacy of their tax file and get their refunds faster, but they also want human beings they pick up the phone and talk to. People are now, I think, sufficiently spooked by the pace of change and the complexity of change in the tax system that they're wanting a human being to talk to and to walk them through what it is they should be doing instead of filing themselves
or relying on just technology. So to me, that marriage of human and artificial intelligence is one of the reasons I like into it, and there are others.
Like it, And thanks so much for joining us. Really appreciate it and very founder managing partner Threadneedle from New York City.
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