Bloomberg Surveillance: Netflix Earnings; NFL Playoffs

This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always I'm Bloomberg Radio,

Oh that's tough, You're just you know, the poor Cowboys. I couldn't believe that game that we saw. I don't no, it's going to be tough for anyone to beat Baltimore. So I think we'll have to wait and see you again. But we got some good games to watch.

Tom.

And by the way, I grew up watching wrestling. My mother used to go to the Houston Coliseum with Paul Bosh and watch wrestling when I was a kid, so.

Everywhere that helped run the CFA example.

Hey Victoria, I mean, you know, I would love to get your perspective on what did we see in the last two months of twenty twenty three when we had that huge move higher in stocks and bonds, and how does that set us up for twenty twenty four here, how do you think about this year?

Yeah, coming off those October lows that we saw last year, there was just a.

Tremendous amount of momentum.

Most of that led by the fact that the market took a fed pivot full force and just priced in those six rate cuts starting in March. A soft landing was almost a one hundred percent probability from the view of the market.

And you know, look, we all spoke.

During that time period and we said, hey, wait a minute, the market is way ahead of itself, right, It's ahead of its skis here. We've got to have some of this price back out of the market, so we expect to see a pullback. We saw some of that in the first couple weeks of this year, but we're starting to see new highs again, but it's all led by those tech stops, that Magnificent seven.

In our opinion, that's not sustainable for the whole year.

I want to get back to brass tax Victoria Fernandez, Bob Dole, Bob Dole, brass tax Victoria. I type in a mutual fund from a UTE, which is basically a trust like fun like Rebecca Patterson would have known a Bessemer years ago. As conservative Victoria's you get for people scared stiff five year eighty fourth percentile, three year, ninetieth percentile one year, ninety percentile five years delivered twelve point four percent net clean after fees. That's what the market

Yeah, I'm not sure they're gonna want to play catch up at this point. What they want to do is position themselves for the rest of this year and not worry about the part that they missed. But you can't do that by just going all in one area. So there's so much cash flow going into some of these magnificent seven stocks again, like we saw last year, that has to stop and we have to have a broadening out. So you look at those returns that you're just mentioning.

Paul.

This fun Broadcom, Microsoft Cash, United Healthcare are the top four. This is a conservative grandma widow's fund.

Paul.

It is eleven point seven percent in semiconductors.

That's unbelievable. That's a nice place to be, Victoria.

I know you cut your teeth in the fixed income space at Faia's Seraphin one of my favorite clients from back in the day in Houston. Where do I go and fix income. Do I just sit in a two year treasury at four point three percent? Or do I try to take some credit risk here, because again I'm banking on a soft landing, So do I go out there and take some credit risk?

So, Paul, it really depends on what you're trying to do with your fixed income allocation. If that's what you're using to generate cash flow, then yes, do a Barbelle strategy and put some in that short term. The two years actually a little bit overbought right now, So I would go even a little shorter twelve months, eighteen months, skip that two year period, and then go a little bit longer five year, seven year. Lock in some of those rates that we're seeing, especially now with a ten

So on the equity side of Victoria again, I mean, Tom's been in that Magnificent seven all all along, so he's just kind of singing to the choir here.

But how about the rest of us?

What do we do here? Do we chase those names or do we try to find some value?

Yeah, don't chase.

Hopefully you've been in these names all along, right, Even though we've been more conservative and we feel like the soft landing is not a done deal at this point, we've still been fully invested in the market. Microsoft, however, is our only name out of the Magnificent seven that we've actually been overweight?

Is the end? What's a pixie? Does there? Come on?

What's a Bob Dail? I can't believe because he bobbed all overweight? Microsoft? Come on, Victoria, what's the magic about Microsoft?

Well? Look, Microsoft is one of those names.

And you know, when we talk to our clients, we say we want quality of earnings, strength of balance sheet, strong cash flows. Microsoft provides us that. We don't think you're going to see as much volatility in Microsoft as you're going to see in some of the other names that have shot up so significantly and then pulled back.

And now they're back up again.

Microsoft, out of all of them, has probably been the most steady and just moving slowly up into the right. So we think it's a good labor term holding in your portfolio.

Twenty seconds. That's all the time. I got to Thank god, Lions are forty nine ers. Victoria please, Hey.

I'm going for the forty nine.

My god, it's just too much. I get rich once a year.

Victoria.

Oh, you can't beat that O line in Trent Williams.

Come on, there we go, Victoria for this is real football talk. She's diable Texas. It's like she knows what it's just like. This is an esteemed guest. He's been a huge supporter of Bloomberg Savaniance. Brian Weezer's with Madison Wall, where he writes, writes rights and consults to the advertising industry, think Madmen, think Madison Avenue of Long Ago and far Away. Brian knows. I am a confirmed reader of Lucas Shaw at Bloomberg. I can't say enough about the value of

It is absolutely crazy. And thankfully for us Brian Weezers on top of the Brian Wheezer, he's a principal Madison and Wall. Hey, Brian, thanks so much for joining us here. You know, we got a report from Netflix last night and boy, they're.

Doing it right.

What are they doing right that perhaps the traditional media companies just aren't getting it right now.

Well, first of all, thanks for having me as always, but yeah, it's what they're doing right. I think they're investing in their business. What a crazy idea that you can grow when you invest. But yeah, that's different than a lot of the media industry right now, where they're really talking more in terms of austerity, and what a shocker, they're not really growing as much. I think they've been focused on a global opportunity and the fact that there

Right my reading of this. And of course this has everything to do folks with our new distribution of Apple car Play, and we're absolutely thrilled with the YouTube live response. Look for that Bloomberg podcast. I'll do all that on LinkedIn and Twitter and that. But Brian, to me, it's almost monopsimistic in that there's going to be a few standing. Let me pick on two are Netflix in YouTube the few standing in five years.

No, I think it's much broader than that. I mean to be clear, when it comes to video industry, the three players you could point to who are with fairly certain fair certainty doing it right are Netflix, Amazon and Apple. They're all investing billions of dollars against content. They're focused on global opportunities. You know, they're basically positioning themselves where they can apply scale economics. So they're all in pretty

For lack of a.

Better word, I think it's the others who are in a really really bad place. Cast I should add also, because you know they're not going anywhere with NBCU, They'll be fine, probably, but I think that they also haven't invested as much against the global opportunity outside of Sky really covered just a handful of markets for the most part. Anyways, I think that because you need to invest in content, you need to invest globally, and you need to actually

And it's not just Netflix, so Brian, I mean, there's a whole host of you know, kind of what i'll call traditional media companies, legacy media companies. I just don't know what to do. I mean, you know, I've been in this business as long as you have. If I were an investor, I couldn't put any money to work in that space. I don't know what to do with the traditional media companies, how do you think they adapt?

Well, exactly, And I think that everyone's expecting that there definitely needs to be again more strategic clarity that would that would be helpful, and and a belief that it that you know, it's it is about more than just consolidation because right now, certainly when it comes to Paramount, when it comes to Warner that's certainly where the focus is. And I think the expectation is NBCU and in set

Brian, a major major value investor with huge R squared success in the industry, emails in worships. Everything you talk about, you've just described content, and that describes a train wreck known as Warner Brothers Discovery. We've all got our biases here. I read variety like everybody else. But what I see in a way that the average cost of capital all of the recent radio bankruptcy that we saw is a ton of debt. At WBD, I got them listed out

Again?

I think their focus, unfortunately, has been away from the things that one would need to invest into drive growth at the present time.

Why can't they do that? This is critical? Why can't they do what Netflix does? What Apple TV's what is it? Constellation's coming out? I got scared at the trailer. Yes, but Brian, why can't they do what the others are doing?

They could?

I mean, I think anyone could. I think it's just a matter against strategic clarity?

Is the thing?

Right? Go back to Disney twenty eighteen, right when they announced Disney Plus. Go back to everything that Bob Iger was talking about then. He was absolutely spot on in terms of what they needed to do. Unfortunately, Wall Street and possibly even Disney did not understand that the economics of this were not going to be favorable. But making a bad decision was better than making a worse one. They made the bad decision, and it was the right

And I think.

That that's the sort of conviction that certainly investors who make multi billion dollar bets when they're able to, usually have a lot of conviction. You do want to see that from the companies putting their capital to work.

Hey, Brian, with all your experience in any advertising space, particularly at Group M, with the biggest TV advertising buyer in the world, talk to us about the TV advertising business. I mean, outside of some NFL games, is there any reason to think that television advertising business, broadcasting cable can ever grow again, because that's critical for these media companies.

Nope, nope, I mean, and this is the thing, at least in the United States television outside of the bumps you see from political advertising and from the Olympics, which you know, it's individual companies on a short term basis, but the long term, transpermanent decline. There's no way around it, and that why the biggest opportunities are for Meta and Alphabet and Amazon and lots of other players, but television no permanent decline.

Ryan thirty seconds here this week without questions, Sports Illustrated at the Kiosk down at the corner of Lexington and fifty eighths would have a cover of the Detroit Lions winning large. It's over, it's gone our SI and magazines and honor of Frank to Ford is it dead?

Yeah, I think magazines in their print form, it's funny. The disinvestment of print, the disinvestment of content, the focus in the case of SI and the Arena Group unfortunately of an original human content is the problem. And yeah, it's.

Brian Weezer Madison will hugely advantaged. Can't say enough about his industry comments. We're gonna get right to it. This conversation is so important, joining us from RBC Capital Markets just really really exceptional in the acuity of the market and looking over what are called the Greek letters and

Good morning Tom. You know, it's funny because the market is really back to its old ways. The kind of things that worked last year are starting to work again, But the option sentiment is actually quite different. So, you know, even though we have this mag seven megacap tech rally again seems familiar, the option sentiment is just not nearly as bold up as it was last year when we had that Nvidia chase and we had that AI frenzy.

Can you can you see if this is cash moving into the market, I mean as cash getting out front of a move, say from five point one five percent yield down to four point eight percent yield.

You know, it's interesting because I actually think it's a function of the fact that cash did move into the market, meaning our positioning is far more long now than it was at this point last year. Because when you think about a lot of that momentum chase up, Tom, it's folks who need to jump into the pool, and to some degree, everyone's already swimming in the pool, so that incremental chase just gets weaker and weaker, which is why I don't think we see that call skew that bold

Over the weekend, Paul and Amy was Silverman's world. I was thunderstruck by the statistical lack of exuberance. I don't want to say I've never seen this before, but I think I've never seen this right exactly.

I know so Amy, I mean, you know, we kind of started first of all, I mean that novembery December last year to write home about. I'm not really sure what drove that, but we started the year kind of I kind of thought, you know, the market was soft the first week or so of the year. I said, Okay, we're going to give back some of the games we had at the end of the year, but it's kind of solidified here. How do you feel about this market? Here,

Yeah, so we are watching these signs really closely. One of the things that we will be watching for is if we continue to see a shift in option dynamics. So we kind of call this spot up wall up. But essentially what we mean is, as the market moves higher, is volatility moving higher or is it moving lower. Historically

The expect tech to be the leader in twenty four as it was in twenty three. I'm not sure if it's a Magnificent seven or in Nvidia, but the expect Tech broady defined to continue to be a market leader.

You know, this is obviously a tough question, but I think it comes down to what happens with rates, as with everything unfortunately, and you know right now it comes down to this debate that we have between those March and June tenors. I can tell you the way the options market is pricing right now is there is like a noticeable tick up on the index level. So when you talk about VIX and SMP, that would tell me that folks aren't nearly as bold up in general as

I mean, you know, Tom keeps us on our toes here in looking at the vics, looking at volatility here, and again of vix it twelve point five. I'm not sure what that tells me here.

It's really tough, and it's given us derivatives folks a little bit of existential dread, you know, because a lot of this, a lot of those has to do with the rise of zero dat to x pre trading. I do think there are these structural concerns right now where you can't really just use VIX alone anymore because it's giving you a thirty day weighted outlook of imply volatility. But half the trading is done on options that expire

What do you say to fear of missing out? I mean, mathematically, how do you describe fear missing out? Other than ong it's two pm, Europe's going to rock tomorrow morning. I got to get on board at the margin. You know.

For the folks with FOMO, I think the fact that you know they've discovered options is a good thing. I'll give you one kind of interesting counterexample. Everyone's really everyone's really bearish on China, but I can tell you in the options market, sentiment has both been going the other way. And actually think that's a function of those who say, you know, China still appears a bit uninvestable for maybe political reasons or structural reasons. But I still got that FOMO.

Amy one final question here, you're juggling here as we try to open the market. It's up up, and we've talked about cash and we've talked about the rest of it as well. Are the Magnificent seven institutionally under owned? Bloomberg has a lot of data on this, and frankly, when I look at it, can I actually believe Apple's under owned?

You know, it's tough because the data that we have seen in terms of fun flows is that a lot has poured into it. That's not a case that it couldn't continue to go higher. You know, AI is one of those where you could argue it's a secular theme that kind of crosses over everything. I do think for a lot of folks, though, it comes down to what happens with growth and if we don't get it, then you know, where do people go back in terms of

Amy with Silverman, thank you for waiting for the Speaker of the House, Former Speaker of the House. She's more important than Kevin mccashu. I mean with Silverman, with RBC Capital Market, when are you going far away? There was a point where our stars each had a certain character. It was manufactured by a marketing combat. I don't think

Thanks tob I've ever been referred to as a piece of meat from New Jersey. No, but this is I got to tell you. You know, here here in Bloomberg, you never know what you're going to hear, and sometimes you hear it for the first time. What's great about this, Joe?

I am?

You're right? You know, a skinny little piece of meat from New Jersey.

What was me?

I had a terrible life in New Jersey. I somehow walked on the field at Notre Dame. Boloney, you were coveted at Notre Dame because you owned everything in southern New Jersey when you walked down the field at Notre Dame your sophomore year. I remember when Brady walked on the field at Michigan. What was it like at the end of that song sophomore season when you have to say, I'm Joe thisman?

You know, it's really funny. I wound up getting into the game just like Tom did. I mean, you know, Drew got hurt. Tom wound up going in Terry handright, he got hurt. I wound up going in for the last three games. And when I finished off my sophomore year, I felt I felt like, you know, I'm validated. I belong And that's been a thing for me all my life. Is when I was in high school, I was always

For those of you who on Carter Bottle Blant, Yeah, I mean you and Carr playing. You know you don't see this on radio on YouTube. You can tell Joe Thaisman there's none of this o zempic garbage.

He's just cutting shizzled.

I mean, he's fifty nine years old and he's cutting shizzled Paul.

Hey, Joe, Yeah, Tom has no respect for us New Jersey people. I'm from Trenton and he's all over me all the time. But South River High School that's near East Brunswick, New Jersey, for the folks listening a great part of the state. Hey, Joe, talk to us about before we get to like the pros and the Super Bowl and stuff. In college, it's not the same college game. When you were at Notre Dame, there's all this name,

It's professional football. Yep, on a minor scale. I mean, they opened Pandora's box with this thing and made an absolute mess of college football. Now you know, the athletes are being paid, some of them being paid a lot of money, and they wind up sitting. What I think it's really doing, it's destroying the infrastructure of competition. You go someplace and you compete for a job, well, not

Yep.

Now it's a question of dollars. Now now the universities are writing checks and it's it's really destroyed what we believe college football was. Hey, I'm all for progress. I understand this. I'm not a dinosaur. That's sister and says, well, it should be this way, it should be that way. I'm willing to accept whatever's out there. But what they're doing right now is basically destroyed college football. How would you like to be a coach today trying to recruit something?

I can't imagine. I don't know how they do it.

I mean I can't either.

Yeah, I don't know how the I mean, you recruiter kid, you coach them up, and then here she leaves. Not that they don't have the prerogative to leave, but boy, that makes it difficult, all right, Joe, So let's get to the to the big boys, the professionals share. We've got four solid teams here getting ready to try to get to this super Bowl.

Here.

I tell you what it's. It's a quarterback driven league, as you well know better than anybody. We got some good quarterbacks here.

Oh yeah, and all four of them have a story. But I'm going to start with my favorite in this particular competition, the Detroit Yeah. Somebody smile there. I know that what they've been able to do. I mean, you're not talking about a football team in Detroit, You're talking about a city. You're talking about a group of people that have been so frustrated for so long. Fans Now all of a sudden they get to celebrate. The difference is they're not going to be at home, They're going

We interrupt this program to bring in Michael Barr of Bloomberg Business of Sports, not an acquaintance with Honolulu Blue, mister Bard and mister thy See.

You know with Tom and Paul and Lisa, they have class. But you know me, I'm like that dog that's happy to see you when you get in. What it is, man, how are you, Michael?

It's it's it's exciting. I mean we used to I never lost to the Detroit Lions. Just so you know when we played all the years, we just had this run in Detroit would get so close and I was fortunate enough to go into the College Football Hall of Fame with Barry Sanders, whom I respect for that it's great that that statue is there to honor him and what his accomplishments were. But I think he just got frustrated and entire to mean sooner or later you just

It's been basically well, now you've got a real owner, so healthy things are on the up move there. Hey, Joe Chiefs, Ravens, I mean, Lamar Jackson, Patrick Mahomes, Does it get any better than that?

Who?

Who would you pick between those two?

You know, well, Baltimore is favored by three, which basically means if the home team is favored by three, it's a pick them, and so they give the home team three points if it's that close. And it is that close, you know, Patrick to me is one of the most the most entertaining quarterback in football and six consecutive AFC champions games with Andy. That's all you need to know. And you can't talk about Patrick Mahomes unless you talk about Andy Reid in the same breath. To be honest

Well, let me ask one more question this. I am being serious about this. Whole past season. There have been let's just call it, a lot of blown calls by the referees. What in the world can we do about this to fix it?

I think one thing we can do and Bill Belichick has pounded the table on this forever. We should be able as coaches. If you're a coach, you still only have two challenges, but you can challenge every play. Right now, there's a menu of things you can and cannot challenge. I think there are the menu you out, start over and do exactly what you need to do. Allow the opportunity to correct the egregious errors that we've seen, and

Yeah, joth Eisman, this is for all of the parents that listen to us. They're worried about economics, finance, and investment, but they got kids at home how to be a champion every day. Tell the parents listening, tell them what they do in the jockocracy of America and every sport where kids are playing twenty four to seven and they're not going to make the big time of Notre Dame in the Washington Redskins. Speak on the chuckocracy that we have in America.

I think, first of all, athletics is such an essential part of the growth of young people. I wrote the book basically based on the fact that the world of sports, the world of business, and our own lives all parallel one another. I know the foundation of what I became as a person started with my Pop Warner football coaches to be able to understand how to rely on somebody else. There's the obviously the nutritional part of it because you have to watch your weight or you have to take

Joe, before we let you go. We're all getting geared up for this big playoff weekend. But it's also the time of year where coaches are flying around all over the place and this year, boy Bill Belichick, where would the all time great coach? Where do you think he's gonna end up?

I don't know anything. People will say I do, but I don't think. I think Arthur Blank wants him in Atlanta. I think Bill Bill's going to look at this football team and say, what do I have? I think it's a pretty good defense. It's got the biggest wide receiving core in football. All those guys are gigantic, and now can the quarterback play? Because that's what he didn't have in New England. Would still be in New England if his quarterback had a chance to play decent football. So

Here, yes, Joeizen, we've got thirty seconds of obviously your super Bowl pick, please, sir.

I like the I like San Francisco and the Ravens to be in the Super Bowl. And I think Lamar Jackson is an MVP, and I think he'll carry the Baltimore Ravens to a jack.

You didn't say the Lions. Next time, it's shortness down. Just just truncate this down.

You know what the Lions were at home, I might think differently.

Thank you, thank you so much. This is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am