Surveillance: Debt Ceiling with Dimon

This is the Bloomberg Surveillance Podcast.

I'm Tom Keen, along with Jonathan Farrow and Lisa Abramowitz. Join us each day for insight from the best and economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business App. Lisa Bramwitz and Tom Keen right now, and what we'd like.

To do is go to Paris. And it is a Paris of.

JP Morgan that is important in World War One. They I'm going to get the pronunciation wrong in Francine. Lacua is gonna correct me. It is Catore's plus vendome and it was the commitment of the JP Morgan bank to France in the heat of World War One. She is joined in Paris with James Steman, Our Francy and Laclosx.

How is like pronunciation?

Fancye Tom full marks for French pronunciation. You're almost French. I'm so excited for you. I am delighted to be joined by Jamie Diamond. JP Morgan Chairman and Chief executive officer, Thank you for joining us. As always, debt ceiling or banking turmoil? What are you most.

Worried about you'd be here?

Well, I think the debt steeling is potentially catastrophic. Yeah, so that's a whole different issue. Hopefully won't happen. You know, the banking crisis I still believe will kind of sort its way through, and it's not anything like eight or nine owing a couple of people off size, with all these various things which you knew about. So hopefully you know it's getting near the tail end of that.

But if you're Janet Yellen right now, what would you do differently?

I don't know. I think we need to finish the bank crisis. I think we've been we've had an uncertain policy on mergers. This first horizon deal. I think we have to assume they'll be a little bit more so, you know, whatever the FDI C, the occ the Fellow Reserve, you know, whatever they need to do to make it better, they should do be thoughtful, be very forward looking. You'll not be surprised constantly because some of these things have

So yes, asking, but I think it's very important.

The regional banks who I've been speaking to like every day for the last week, they're quite strong. You know, they're quite worried because of the you know, run and deposited all that, but their financial results are good. The financial results are gonna be good, okay next quarter. You know, they're earning money. They get a very good clientele, very diversified. Uh uh, and they're they're quite strong.

So Jenny for like a comprehensive solution. So if you're asking Jennet Young to get the job done, what does that look like that solution?

Ask for compreend solution.

Why not just be prepared for problems? There's no, we don't need a comprehend solution.

What do we need right now? Do we regulators to look at short sellers of banks?

Yes, you know, like, look, my folks are telling me that that's not the problem. The short selling ban if you actually analyze stocks and short doesn't seem that big a deal. I think they may partially wrong because, as you know, some people are unscrupulous and they use other means to go short.

I think that if you look at the detail.

The SEC has the enforcement capability to look at what people are doing by name, in options, derivatives, short sales, and they should go if someone's doing anything wrong, people are in collusion, or people going short and then making a tweet about a bank, they should go after them and vigorously, and they should be punished to the full extental law allows it. So I think it's possible to taking place. We have no evidence of it, but you know, my experience in life has been don't assume too much.

Do you think that they're looking into it?

I hope so. I don't know.

When you look at some of the position of JP Morgan, of course you didn't really buy any long dated bonds, and at the time a lot of people said, look stop boarding cash. Do you think regulators and investors had pushed some of these banks to take unwarranted risk.

Yes, I do, but let's be clear the people to blame, or the banks and the bank boards and things like that. Having said that, I think there would be the humility on the part of regulators. That the Federal Reserve itself never forecasts going up. Not one Fed governor forecast it. And whether you forecast it or not, you should be stress testing people for it. Their stress tests always had

So this is what not a regulation problem, it's a supervision problem.

Yeah, it's a.

Little bit of both. They become very related. I mean, supervisors look at are you doing the right thing by regulations and so, and like even the stress tests, I've always thought that you know, when you have one stress test and you have a company completely focused on that for three months, you know, does it lull people have a false sense of security that all these other things aren't gonna happen. And all these other things in history always happen, and so you know, I think it was a little

Do you think? But things will change because of this is just like a catalyst.

We's gonna get worse for banks.

I think that people they're just more regulations and more rules and more requirements. I hope they do it very thoughtfully because you know, if you we love the community banks, the regional banks, we're the biggest banks of those folks. But you know, if you overdo certain rules, requirements, regulations. You know, some of these community banks tell me to have, you know, more compliance people than loan officers, you know, and so at one point you make it harder for

They should.

They should sit down and have a very thoughtful conversation about what those things are and what we want the outcome to be. If you look at the present outcome, a lot of things are leaving banks and they should you know, I'm not And if that's what they want, so be it. But that should be done with the forethought. That should not be done because you just putting rules and regulations in place and you don't know the consequences.

The mortgage business, for example, is.

You know, largely not largely, eighty percent out of banks today, and just be careful about what you what you wish for.

So you bought First Republic, you've had I imagine how a good look at what's inside? It's what did you find out?

Yeah, no, we had to go look before we bought it.

Okay, that's reassuring. But anything that you shigned.

Up to eight hundred people working around the clock for a long time to look at something like that.

And and in reality, look, they did some things.

Really well, like if you talk to their customers, I've getten calls and emails and great great culture, great customers and things like that. Their credit is kind of pristine. You know, that's good. So of course we marked all the market and roll in very good shape. And we've had all the in trade exposure together. We've got thousands of people now going out learning about what.

Their best is.

We want the best of both about the kind of company that comes in our highway, our way or the highway, and so there's no surprise there. You know, it's if it had to make sense for shareholders. But you know, this notion, this notion that it was unbelieva in it was a nice thing for shows that's why I have to do that. But we also really did it to assimilate the bank in a way that's very safe for the system and didn't cost uninsured deposits, didn't cost the ft,

But the US, the Americans, should not fear too much finance consolidation in your hands.

No, because you know, most of our size accrues to our clients. So if you look at you know we do most large small banks can't do. We do like banking large corporations of fifty countries around the world to move ten trillion dollars a day. You know, it's hard. So these are these are big, complex things. We're not big and complex. We want to be for big and complex because the Pee we serve a bigger comp We bank countries, the World Bank. You know, we do a

Are you too big to fail.

I don't know what that word means anymore. I mean, we're not gonna fail, and I don't know if that means. But we certainly didn't mean it to be an advantage. Like so, you know, we've asked all our people when this crisis happened, I don't want anyone listing any client or any bank or from any of the any bank's, regional bank or community bank, et cetera.

So is there anything else that you'd that you'd be buying. I mean some of the smaller banks fault, you know, fun that's it.

No, I mean, we're gonna have a lot of blowback and having bought this one, but it was the right thing to do, you know.

But we'll get the blowback.

But again, my job is this people at this thing they always look at like the financial deal. Forget the financial deal. Eight hundred people working around the clock. Ten thousand people deployed now to consolidate systems, risk fraud, credit payments, branches, real estate vendors, technology. It's a lot of work, you know, and it just tracks us from those other things. And so, you know, like I said, we did it. It was marginally benefits for shareholders. It was good for the system.

How worried are you about the dead ceiling? So Donald Trump, Yester the town Halicynna did not seem too worried, and to actually told Republicans to stick to their guns.

Well, it's one more thing he does know very much about. It may be put in two categories. One is actual default. That is potentially catastrophic. And you can go through a million ways, but everyone, anyone's anyone knows that's potentially catastrophic. And I don't think that's gonna happen because it gets catastropericy. And the closer you get to it, you will have panic. And so the closer you get you have markets get volatile.

It's amazing.

You already have certain T bills it's trading three percent and right next to them five percent.

This is not good.

And people just remember the American financial system is the foundation to the to the global economics system. And so and the closer we get more panic, we might get downgraded. The last time we were downgrade. We had like sixty five or seventy percent debt to GDP. Now it's one hundred and five. Now our deficits are two or three times that that we had back then. So you know, we better be very careful. And I wish we didn't

Do you think that it'll be at the end of the day of the markets that will spur a deal that we have to get to the point where there's where there's panic.

It's a really bad idea because panic becomes something that is not good and it could affect other markets around the world. But yes, at the end of the day, if it gets to that panic point, people have to react, and we've seen that before. Another thing about markets is always remember panic is the one thing that scares people like they take irrational decisions. I remember, even in eight people are selling certain securities at forty percent of what they would.

Be worth if we had a great depression.

But they were like, I want out, I want cash. I'm not betting my family's money on this and my company's money. People will panic, and again we got to be very careful about getting close situation that causes that.

Do you get a call from Janet yelling about this?

I'm not gonna talk about personal calls.

I'm getting We've all spoken about that's youlling, I mean everyone's that's.

Everyone's no for big banks, are you ready? Actually, how do you prepare for possible?

Have a group of people who are very smart we're looking at again, it's very unfortunate, it's time consuming. Hopefully won't happen, but it affects contracts, collateral clearing houses, clients, and affect clients differently around the world. You have to then anticipate what people are going to do, which is very different than the legality of it. And you know, and the closer we get, the more those kind of that war room will start. Now it's taking place once a week, but my guess is sometimes.

Call it May twenty.

First it'll be every day, and then it'll be three times a day, and then it'll be much more conversations with clients. But what they need to do to help get them through it and things like that. It's very unfortunate. It should never happen this way.

Fortress Diamond is always about the balance sheet. Should there be a special commission looking at debts in the US that you should run?

Oh?

God, no, why not? I don't want to.

On China, they went after tech, they're looking out at finance. What kind of message does it tell companies that want to do business there.

Well, I think we say they're looking at finance. It's been very limited.

They've been very much more careful about touching the financial system. Who we're outsiders. But look, this is a serious subject and anything that relates to national security. I'm a patriot first, and I'm going to salute my government, So put that. But put that aside. What the government should do and it wants to do, and is now say they are going to do, is have conversations. They're gonna be tough,

We can't take trade.

Off the table every time we talk to Europe or Asian and stuff like that. So I would go back into TPP, I would surround the world. I'd want to keep the world safe for democracy, and I want to have open markets, particularly Europe. And I mean I was here last time is when we passed Iraq. A lot of great things that act, but there are things I don't like, like too much social engineering side of it, but also a pistol off all of.

Our allies put on the China side. So if they if they start doing more noise on finance, does that hurt Chinese growth?

Like probably, I think you've already seen it's not trade, but you've seen investment going both ways coming down. And that's okay in the short run and the long run, we should say what and the government's got to decide this is not gonna be business companies designed, should they? So when Congress criticizes business sometimes there may be truth to that. They have to decide what is okay, what's not okay?

What do they want? What security?

And that's around trade, that's around investment, that's around sharing ipay, I.

Give you a million pounds or maybe you take it, you know, your own million pounds? Where'd you invest.

Organ I wouldn't buy sovereign debt anywhere? Why, I think there's too much The amount of fiscal stimus took place and still surging through the system, the amount of QI. These were extraordinary numbers, and not just in the US, but in Europe and in other parts of the world. Now, when I say extraordinary, I mean extraordinary, And therefore I think there's a chance you have more inflation than people think.

So you're not putting them in suffering.

Where are you putting that million I'm central banks.

For stability. If you look at fragmentation, I mean, the world seems a little bit odd, like equities are doing one thing, but we keep on being told there's a recession. Why is there this massive adusyncrasy.

That's the contradiction.

There's still consumers in America job unemployed three point five percent. Home prizes have gone up for ten to fifteen years. Stock prize has gone in for ten to fifteen years. They have a trillion dollars more in their checking accounts. They're spending that money. You see it in travel, you see it in restaurants, you see it, and you've been around here and you see in hotels, you see it. That's all good, but the excess money is being spent down. So the bite of that is going to happen later

Maybe sometime in the end of the year.

We don't know the effect of that, you know, if there's I mean, I would take a mild recession and happily right now, I am far more concerned about geopolitics, Ukraine, trade, you know, Russia, our relays with China, et cetera. And I always have to mind all of our public America has a seventy five thousand per person GDP, China's is fifteen. We have all the food warn and energy we want.

We have to manage ourselves back. I think we can grow more and more thoughtful.

So you know, a lot of people say it's commercial real estates. I mean we talk about nothing else. Everybody knows that that could break. Is there something that we're not seeing that could break?

I think it's amazing when you talk about Marcus that sometimes it's and the press sometimes like a bunch of birds flocking to one thing with endless comments about it.

Yes, that's an issue.

So you know, if you look at office real estate in be and C real estate with private problem Chicago, New York, Partland, Seattle, but probably not Nashville, Tampa, Orlando, Miami, et cetera. So you got to you gotta be a little more thoughtful about it. And I think if I'm the number, banks have six hundred billion of office commercial real estate. You know, they had a cushion even dropped

Markets trade that.

Right.

If there's a big geopolitics, there's there's how do the markets talk them do that?

Okay?

Look, if I was a what's cautious, I remind you of I'm not. Businesses aren't there to trade its. Sometimes they do serve our clients, okay, and so we're gonna serve our clients no.

Matter what happens.

Very quickly, final question, how are you feeling about the Epstein deposition this month?

I am so sad that we had any relays with that man whatsoever. You know, we had top lawyers of value in this, from the SEC, Enforcement, the DOJ. You know obviously have we known them, we know today we would have done things differently. But it's very unfortunate and I have deep respect.

For these women.

That doesn't mean reliable for the action of an individual, but I do have deep respect for them.

My heart goes out to them and.

Jimmy daviond thank you so much for your time today.

Thank you, thank you, Francy Lacua, thank you so much.

It's the conversation with the chairman and the chief executive officer of JP Morgan. I would really underscore off of his annual letter, his focus on geopolitics, and as he says in his letter in his Wall Street Journal essay of a number of months ago, he is very concerned of the Western alliances, including France. Lacroix from Paris this morning, I'm joining us now, John writing on his Bank of England City Group come out. They say we got it wrong.

The UK is a small, open economy and what happens in the rest of the world is going to be very important for the UK. I'm still a bit skeptical on that. I think the full impact of adjustments post breaks it. That's still out there for the UK. But what I'm more skeptical about is the decline in inflation, where the inflation rates in the UK is currently ten point one percent and within a couple of years they're

You are the single best person I know in the world qualified for this delicate question. I began this morning with Jeffrey U on this I was thunderstruck by what the PhD from Stanford, Hugh Pill said this morning about begging United Kingdom people to spend less money. It reminded me back to the thirties Clement Attlee the elites telling

Well, I think it's a very I create, but I think it was a very interesting that dun com. I think it was brought up just the other day about you. There's too many Keynesians, there's too much group think. Inflation is a product in the end of too much money chasing too few goods of services. And it's not about, in my opinion, how much consumers spend. You know, that's part of the transmission mechanism of rate hikes soften the

So just because of time, John, I want to bring this over and you know we're talking here, folks about a middle twentieth century theory of theology. If you will, in the United Kingdom, do youse censor Kinesi and tilt at the federal system of the United States, do they have illusions of a demand side ordering of people to spend less money here, or are we do a new regime in America?

Well, this exact actly what the Fed's trying to do. But what has prevented monetary policy from biting on the economy was all of the fiscal injections, the income support provided during the pandemic, which ended up in people's bank accounts. So at the peak, people had two and a half trillion dollars more in aggregat in their bank accounts than they would have had had there not been a pandemic. So it's very hard to slow the economy down on the consumer side. It's much easier on the house.

And Olivia Bonchari calls the Biden stimulus do you? And Conrad to Quadro suggests we've run out the stimulus and now we're back to some form of normal American economy.

I don't think we've run out all the stimulus. It's probably close to a trillion dollars still of excess savings, but we have seen an adjustment in the savings rate, which is still lower than one would expect given more inflation is given where interest rates are, people are still spending more than you would expect given fundamentals. Because of this, these excess savings that have got thirty seconds.

Do you have a recession call?

I think that in both the UK and the US it's inevitable but not imminent. The inversion of the three months T bill to the tenure yield has invariably correctly predicted recession a year or so out. Now we may have a rolling recession, the housing markets in recession, the manufacturing sectors in recession. The service sector is still going relatively speaking strongly. So maybe it's a rolling recession, but I think it's inevitable.

John Rny think you're just bringing up there with his experience with the Bank of England, the federal reserve system. He is with breing a capital. We have to get the bank at Horneman. But but Lisa, I'm sorry to for just three point eight five seven eight percent. We are now fifteen full basis points in on the two year yield. In a long cup of SANCA. I mean, it's amazing how we moved.

Yes, And at the same time, the volatility in the two year really is what gets my attention, let alone which direction it's going. In the fact that a whipsaws back and forth, how do you get any stability given some sort of risk appetite without that joining us now to discuss as we head into a really important our.

Yeah.

I think that there is some inconsistency in what we're seeing in from whether it's the labor market showing showing strength, but then there's really that's the only thing from an economic standpoint in the US that's showing strength. Whether you look at manufacturing or you look at housing, all of these things are that we're headed towards a downturn. And then you take into into account the federal reserve tightening

Megan, I want to go to your heritage, leg Mason in Baltimore. All the great value house action of leg Mason non de Deutsche Bank is a substantial East Coast competitor to JP Morgan. We're going to talk to Jamie Diamond here in about nine minutes. He's salvaging our banking crisis as it is. Is he going to have to do more from where Verden sits?

Yeah?

Unfortunately, I don't think the regional side of the banking crisis is over. I do think that the bigger banks are going to have to step in and do more. What's changed If you look at over the past couple of weeks since he came in and rescued the last bank, nothing's changed from a regulatory standpoint, nothing's changed from the Federal Reserve. In fact, the only thing that's changed is that the Federal Reserve has said, hey, we're not going

You have the advantage of not being Manhattan based. How does commercial real estate look like for Verdun's capital. I mean, I know it's off your remit, but what is all the analysis you see that you listen to on CIRE.

It's something that we're concerned about. I don't think that it's being talked about enough. Obviously we're concerned just because of a slowing economy and higher vacancies, but then you kind of the double effect on that is that we have higher interest rates and then you throw on top of that that we have this maturity wall. That's where the big concern comes in. So between twenty three, twenty four and twenty five, these are big years where there's

That's an area of concern, an area of strength that we may get a better sense of at about twenty minutes time as we get the PPI, the factory input prices that comes out in the US, it's expected to be significantly below CPI, that sort of headline consumer figure which is being captured as profits at a lot of companies that are actually increasing their profit margins at a time when people expected them to shrink for them to absorb some of the inflation against some pushback by consumers.

No, Unfortunately, at this time, I think that that's probably short lived. The consumer is weak. We've seen that in some of the recent data, and we've also seen that with the fact that they're relying a lot more on credit card debt, they're not spending the way that they

So are you basically in the camp that there is going to be this inflation that will accompany the weakness that we see as it accelerates throughout the end of the year. Basically, what's been pushing everybody to keep going into bonds.

Yeah, I do think that we are going to be looking at again slowing inflation, a slow down the economy, most likely a recession. The inflation situation has been improving and we can't deny that.

But there still is a lot of work to go.

The biggest inconsistency, and you mentioned that people are going into bonds, The biggest inconsistency that we see is that investors are pricing in rate cuts, and that's not something that we see. The FED is not there. They don't have the ability to do that with inflation where it is. They can't come in with a stop and go approach, which is what they did in the seventies and eighties, which proved to be not the right thing to do. I think they're going to stay on hold. Interest rates

And then on equity markets, do you deploy that cash here or do you just wait, wait, wait.

It depends on what we see from an equity standpoint. I think equities are similar to bonds to the equity market. Specifically, some of the high growth technology names. These are I think still too high from a price to earnings multiple. I think they have room to decline and kind of realize the fact that the Fed's not going to come in and save the day. They've been able to do that in the past, They're not able to do it

Megan, thank you so much.

Megan Horneman there with Vernon's Capital Advisors.

Thomas A.

Taurus has had a fixed income research it's Chigus, a bird company and joins us this morning. You have the advantage of down the hall is one. J Trnard Jason Trennard looking at the equity market, folding in the JP Morgans of the world into your fixed income analysis. What is a strateigous view on the length of this banking crisis? Does it get fixed?

What's your definition of fixed? Do we have more bank failures along the way, probably. Does it become systemic risk, particularly to Ciffy's, Probably not. Does it become a risk to super regional banks, probably not as well. But is there incremental credit tightening to the US economy from.

This ahead of US?

Absolutely?

And with monetary policy acting with the lag we have to assume there are more shoes to drop here and more banks to fail.

Which spread a comparison of two yields is most valid to you to get the temperature of PacWest and other banks. I'm looking at three months tenure, but there's debt sealing issues in that as well. Which spread tells the best story?

Well, three months tenure might be a better measure for banks because you're looking at funding cost relative on the front end of the curve versus there. Essentially, what are they they potentially getting for yield for new assets they might be purchasing. But I don't think anything really gives you a good picture of how much their net interest

This is a really important point that we have moved from just simply deposits being there too. Even the deposits staying are going to be a problem, given how much they're going to have to pay to keep them. From your vantage point, what are you expecting in terms of the number of failures and the ramifications for monetary policy in broader market conditions.

Well, probably low double digits, maybe high single digits, So maybe not many more to come, and fairly small in size. But you got to remember, though, that's the norm over any given two three year period in the past. Keep in mind, from nineteen eighty to about nineteen ninety two we had over a thousand bank failures. In the last dozen years we've had about a dozen failures. Sore, you can say we're overdue. So the norm might be two to three per year on average.

Well, but this is the question, right, if it is just the norm, is it not? Setting any alarm bells doesn't change anything with respect to the rate hiking cycle. It doesn't change anything with respect to your approach to what you invest in.

Well, let me answer this. From our Fed's perspective, this absolutely should change their perspective and what they do going forward. You have monetary policy acting with the lag, you have multiple bank failures, and you have at best multiple banks are going to be a negative net interest margin for at least the next twelve months. That's a reason to

Briefest on James Diamond coming up here in forty five minutes as well, This conversation is frankly just as important because you're in the trenches looking at the ramifications of a trust in the JP Morgan Company or from a frankly Bank of America to save the day. Are they going to come in and have to save the day again?

I don't think they're going to have to.

Whether they do come in and make additional plays here that I can't speak to, but I don't think they're going to need to. I think that this is a system that essentially your super regionals are in good standing right now, your cities are in good standing. You're talking about smaller banks going forward, There's going to have to be consolidation in the regional banks. Some of them may be boring.

I don't mean to interrupt, but this is an important nuance within a bidding process where the government's forced to take a little bitter or just in a normal m and A context.

Both could have could have additional failures where there are essentially negative net asset values there that government is forced to take the lowest bidder. But you should also be expecting going forward to see a typical m and A where some regional banks consolidate and become superregionals going forward, and even some superregionals may grow themselves to become to breach that Siffy threshold. That should be the expectation going forward.

Let's toff tail this question about financial stability and to what we're going to get in about fifteen minutes, which is the latest reat on inflation as well as the labor market. There is a question about whether there is more strength and whether what we've seen in the banking sector is more of the normalcy, as you point out, rather than a sign of some sort of massive fissure.

Yeah, well, I think you had mentioned earlier discussion on sales from places like Proder luxury goods. The US economy still continues to be driven by a consumer, which whether they're spending more than they can afford, it's irrelevant. They're still spending more and the labor market is not yet rolling over, So there's still strength to the consumer side. There's still strength to the labor market, and in particular in the retail space and in in luxury space, in

How do you play this, because it's really against consensus at least as it's being played out in market pricing.

Well, that's a tough question because right now you look at equity valuations, they don't reflect a recession risk, and they also don't reflect the fact that there's credit tightening to come later on. Same thing for corporate credit markets, spreads are a little bit too tight at these levels. So I think you play this by being very cautious. You continue to hold cash at elevated or above average levels, and you wait for something to break to the downside.

Two part question.

We got to be quick because of the time we're trenderd on the equity market. Is he called a bottom of the bear market in October or does he have a more cautious few more cautious.

We're expecting equity prices equity valuations to dip lower again.

So you had a ten yere yield four point two zero percent, The ten year yield is crater down. What are the ramifications to you if the ten year breaks down to a new lower yield below three point three zero percent.

Well, so we're our forecast is about three to two for a bottom this cycle. We could easily on intery day get down close to three. If we get down two or below three, it tells us that something is breaking on the credit side. That's bigger than a regional bank. That would be my takeaway from that.

Qus you valuable, Tom, Thank you so much. Tom. Stores is where this was Strateigua.

It's a bird company, Brian Weezer, isn't we just got one out? In terms of Disney, he is a principal at madisone and Wall covering all things media for decades. There is a question here about why this is surprising, given that this transition was going to be awkward from a cable to streaming, and it's a rocky process amid a lot of economic uncertainty.

Yeah, I don't think it's that surprising. I mean, this was never going to be a better business than the one that it's replacing. They had a fort nearly forty percent margin business in the Media Network's division back in ten years ago. And you're getting in care, more costs for marketing, more costs for streaming, physically delivering content, and then you need way more content to make this whole thing work, and you can't force sleep. This is the right thing to do. It's the right way to make

Brian.

There's this concern as we try to grow subscriber bases, or as different people, different streaming companies try to expand their user base, do you continue to raise prices, what do you prioritize either increasing subscribers or increasing revenues. How is does he doing on that front, given that they came in with a pretty disappointing projection of just growth.

Well, here's the thing. They can continue to raise prices and still grow subscribers on a earier basis.

I think they'll continue to do so, as other services will when they raise prices. The problem is that that money is coming out of traditional PATV. I publish something on my sub stack this past week pointing out there there is about one hundred billion dollars of spending in the United States at least by consumers on PATV services now declining in terms of actual spending.

That's one hundred billion dollars of money that can go into these streaming services still, but it's going to come out of PATV.

Where are sports in five years? Brian Disney has a huge effect on sports with the ESPN, I get it, But where is the Brian Weezer view on sports entertainment in five years?

Yeah, it will still be super important.

I mean, but Bob Iger, at least, why is enough to point out that there is an inevitability to ESPN in particular eventually.

Having a slagship services and streaming service.

The reality is that not everyone needs to watch everything that's on ESPN or on traditional TV sports, so it may end up being a little bit more niche maybe not as ubiquitous as it has a historical United States.

I look at Disney and I look at a creative guy as well. Is there a lot of cost coding to do? Is Disney and for that matter, other companies like it. Is there a lot of fat there to cut? Or are they bear bones right now?

You know, they talk certainly about containing their increases in spending on content, and it's hard to say what's that is.

I mean, certainly there's a great story.

In the journal about what's happening for a paramount on content spending on Yellowstone and other related shows, and that's a good example. Maybe a bit extreme in terms of spending, but I think in general that the thing is if you spend more money on programming, you will get more viewers. Right, they will continue to grow the platform, the streaming platform, as long as they continue.

To increase their spending overall on programming. Obviously, they need good editorial choices and good content.

We used to say content is king and today, we're talking about cost cutting and a lot of these different platforms. If anyone goes anywhere near social media, they'll see a discussion of the writer strike in Hollywood. That's affecting a whole host of different streaming networks. And I wonder how dovetailed these ideas. Are this idea so that writers want to get paid, that content wants to get rewarded given the years of large s and the networks just aren't

Yeah, I worry about that because I'm not sure how First of all, both sides on the strike might be too optimistic in their expectations where the industry's going to evolve.

Again.

I've rolled up all spending on video, including theatrical spending, DVDs, whatever the left of that streaming atv ette, and basically I calculate about a one percent growth rate over the last fifteen years every year on average.

Maybe that's about right.

Going forward, it's all shifting towards the far less profitable businesses streaming, so there's less money to divide up.

Whatever the outcome is Brian.

There was also discussion just to finish up here with Disney about declining revenues on their cable networks from advertisers.

How much of this is.

Companies not necessarily having the extra money to advertise. How much of this is just all of the advertising moving to Google, to Facebook or Meta to all of these other social media platforms.

That's been a big factor for sure.

I mean, we're seeing television has probably declined by high school digits at this point. I don't think I'll say that bad all year long. It'll probably get less bad as your progress is.

The typical advertiser is absolutely shifting their spending primarily.

I think package goods companies are shifting spending into retail media networks. We're just doing possibly well. TikTok for now is at least still doing really well. There's a lot of new places that are seeing a lot of growth. And Uber is an ad platform. Walmart selling ad that's.

Where Brian, Thank you Brian Weiser from Madison and Wall with an update there and streaming and.

A lack of profit out there.

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