April 19, 2024 • 38 mins
Chuck Zodda and Mike Armstrong discuss the swings the markets have taken over the last 24 hours due to tensions in the Middle East. A Bank of America strategist believes rates jitters are causing the high volume of stock outflows. Tesla's latest issue with the Cybertruck. Netflix password crackdown delivers millions of new customers, yet the stock drops. Will next week's earnings prove the bulls right? Sony is in talks to join the bid to purchase Paramount.
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Boston is presented by Veterans Development Corporation. This is the Financial Exchange with Chuck
Zutta and Mike Armstrong. Chuck,Mike and Tucker with you here. And
the big news that was moving marketsovernight was obviously the Israeli retaliation against Iranian
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attacks from last weekend. And thebest way that I can continue to describe
this is by saying that at everyjuncture, Iran continues again. In the
last you know, two to fourweeks, Iran continues to act like the
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guy Yellen hold me back while noone's holding him back. And what I
mean by this is, first,let's put a few things together. Last
weekend, they send I've seen differentreports. I don't know if we've ever
settled on a final number, anywherefrom three to five hundred drones, ballistic
missiles and other rockets other stuff intoat Israel. Israel almost a They told
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Israel and the United States about it'sseventy two hours in advance that it was
going to be coming, giving thema chance to defend themselves. They told
the United States and everybody that Iwas going at Israel, not going to
be directed at any US military basesor UK or anywhere other than Israel,
which you don't do if you're actuallyserious about Hey, we want to cause
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meaningful damage. As a result,I believe that ninety nine percent plus of
the different drones and missiles were intercepted. The only known casualty that I've seen
was a ten year old girl thathad to get taken to the hospital.
I don't know if she has survivedor not, and that was from debris
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related to one of the missiles beingdestroyed yesterday rather last night, I guess.
And then immediately after, by theway, Iran says, we now
consider the matter concluded, like guys, we're done. We're not doing anything
else. Israel takes about a weekand strikes back. It's unclear exactly what
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they sent. We don't have anyinformation on this because Israel did not publicize
this unlike Iran, and so wedon't know exactly what it was that was
sent. We don't know if itwas drones, missiles, something else.
We don't know, but struck targetsin both Iran and Iraq from what I
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gather as well, Iraq not Iraqitargets, but Iranian ones in Iraq,
and Iran has pretty much said,hey, we were able to, you
know, intercept everything, and everything'sfine here. We consider everything fine and
we're not planning anything else. Soagain, it Ron basically saying, guys,
please, like don't do this again, like we're done, We're sorry.
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They can't say we're sorry, butit's the Iranian government is quite honestly,
it seems somewhat terrified. And partof that is because it does actually
seem like the Israeli attack yesterday mayhave done some damage and that Iran might
not have been able to either detector shoot down what was coming at them.
And so I think Israel was prettymuch sending a reminder, both in
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this and with the consulate attack acouple of weeks ago, saying, guys,
we have really good intelligence on allof this stuff. We know what
you are doing and when you're doingit, and we have the capability to
strike you in ways that you can'tstop. Let's not go down this road
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because it will end badly for you. Is the message that Israel is trying
to send, and it Ron ispretty much saying, yep, we get
it where we had to do somethinglast weekend because we had to do it,
but we're done. That's the messagethat Iran is sending publicly, at
least, so you saw this fascinatingmove in markets yesterday again to tie it
back, We're not, you know, geopolitically, we don't geopolity. No,
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it's not what we do. Butwhat I do is I look at
markets pretty much from the moment Iwake up until the moment I go to
sleep, which is not the healthiestway to live, quite honestly, but
it's a life. And here's whatI saw is when I went to bed
last night, S and P futureswere down one point seventy five percent.
Oil prices, we're at oil prices, We're up three percent. Woke up
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this morning, oil prices down halfpercent. S and P futures down a
quarter percent, almost completely reversed onceIran had announced guys, we're good.
We're not We're not doing anything else. Now. They still may continue to
act through proxies as they have foryears, but this obviously has been the
first direct confrontation between Israel and Iran, I believe since the eye tools came
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to power back in the seventies.So it's this is unfortunately historic stuff that
we are seeing. But Iran alsonow kind of like we're good, please,
We're good. So I think there'sat least in my view. A
few different ways to read this.One would be the one that you're pointing
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out here, which is seems onthe surface as of this morning, which
this can change very quickly, butas of this morning, it certainly seems
like de escalation is the is thegoal between these two countries. The other
piece that I guess just goes inthe back of my mind is from an
investor perspective, if you've been worriedabout geopolitical tensions anywhere in the world of
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the last two decades, what's beenthe right approach, Chuck, When the
bullets start flying, you start buying, ignore them basically, right, Like,
ignore the risk of geo politics becausewhether it's been Iran or North Korea
or tensions with China, like,nothing has bubbled to the surface. And
so the investor lesson has been,Yeah, unless there's actually bullets flying and
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you can prove that there's going tobe an impact to the market that you're
worried about, then don't worry aboutit because everything's de escalated. You know
that? To me, I guessI wonder if that is baked into investor
sentiment investor practice to say, hey, we don't know if there's going to
be anything real here, so justdon't take it seriously until it is very
serious. Even when things do getserious, it's not inherently bad for markets,
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right, I Mean, that's theunfortunate truth is, as as much
as we are human beings, whatwe talk about here on the show is
you know how markets react to theseevents, and ultimately it's not something where
you notice any even intermediate term issuesthat relate to real conflicts that have actually
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occurred. You know, you thinkabout all of the think about the major
draw downs that we have had inthe last couple of decades. I'm going
to go and just pull up achart just so that I can, you
know, actually accurately, so wedo one decade or two decades, you
can go two decades, So twothousand and four through now. Yeah,
let's go two thousand and four throughnow. And I'm going to pull the
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S and P five hundred and let'sgo back to one one two thousand and
four. We're doing this live,so I have no idea what I'm going
to actually find. I'm going todo drawdowns of ten percent or more because
five percent draw downs honestly not worthtalking about. Yeah, they occurred too
frequently. Let's see two thousand andeight. Was that related to any kind
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of international conflict? No, itwas entirely a US banking crisis that sunk
the entire global financial economy. Correct, it was the bankers who were the
problem, not the soldiers. Twentyeleven almost twenty percent draw down. Yeah,
to my European debt crisis, tomy understanding, that was not caused
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by this Syrian civil war which wasongoing in twenty eleven. Correct, nor
tensions. Now I'll give you ahint it was. It was Greece.
Yeah, it was the Greeks hadtoo much debt and Europe didn't know what
to do, and eventually they figuredit out. Let's see twenty fifteen conflict.
India and Bangladesh had a border skirmish. No, this was China devaluing
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the yuan unexpectedly in August, right, twenty sixteen January conflict. No,
No, it was Russia deciding justto flood the market with a bunch of
oil, which in turn crashed oilmarkets and a lot of other you know,
made the high yield debt space fairlytoxic for the next year or two.
Let's see what else do we havehere? Twenty eighteen twice ten percent
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correction, almost a twenty percent oneat the end of the year. Conflict,
Did I have anything? No?No, Jay Powell said, hey,
we're you know, we're staying thecourse on raising interest rates. And
then the market said, no,you're not, and Jay said, oh,
you're right, I'm not going toraise interest rates anymore. Action was
twenty eighteen, around the same timeeveryone thought Brexit was going to end the
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world. Uh no, that waseither twenty sixteen or twenty seventeen, which
which didn't. Did the world stillfunctioning? Unless I'm in the simulation and
my brain is just in the vat, you know, it's we're still here
twenty twenty March conflict kind of butnot any conflict between countries microscopic Okay,
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yeah, not a real thing.Twenty twenty two. You can make a
case that the Russian invasion of Ukraineexacerbated the inflation problem, but wasn't the
root cause. But it was theinflation problem that drove markets down, not
Russia invading Ukraine. Let's see,what else do we have? Oh,
last year we had a ten percentcorrection from July to August or July through
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September. I'm sorry, nothing todo with picture. They were literally I
don't think there was anything new thatthat sprouted up of any kind. Any
note there it was. Hey,the yield on the ten year treasury went
from three and a half to fivepercent. Okay, that didn't feel too
good for markets. So we've lookedat the last twenty years now of ten
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percent plus draw downs, and nota single one of them has been related
to a conflict. Now you mightsay, okay, Chuck, that's just
you know, you know that thatperiod in time. What if we look
at, you know, anything beforethen. So yeah, let's let's take
just a quick look. I won'ttake up too much time because you know,
we got to get to break eventually. And a Tucker's like, come
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on, man, I'm not atthat point yet. Okay, let me
know when you get there, justyou know, give me a oh,
you'll know something I know I alwaysdo. Uh, let's see. Okay,
here we go. Outbreak of OperationDesert Storm in nineteen ninety markets did
see a fifteen percent draw down,which was recovered in a month and a
half nine to eleven. I'm notthere quite yet. Let's see nineteen ninety
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eight, long term capital management blowsup, not because any military force attacked
it, but because of the Asiancurrency crisis, again not militarily related two
thousand through two thousand and three techbubble bursts. Nine to eleven happens in
the middle of there. I don'tknow if things would have if markets would
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have been better or worse, youknow, had that not occurred. I
don't think I can possibly say,quite honestly, probably contributed. But look,
things were set in motion a fullyear before that. The ten percent
correction on the S and P fivehundred was in place by December of two
thousand, a full year before,so I'm not going to ascribe this to
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nine to eleven. And then we'reright into the financial crisis afterwards. So
the only one that you can maybepoint to is, hey, there was
a short term issue because of thiswas Desert Storm in nineteen ninety and that
was partly because a just the scaleoff. I mean, you had five
hundred thousand American troops, and therewere concerns that this was going to be
a massive conflict given the size ofthe Iraqi forces at that time, and
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also what happened to oil prices shortterm was a shock for the market too,
But other than that, in thelast thirty five years, any military
conflict that's happened has not been materialto stock prices in the short term or
long term. Let's take a quickbreak here and when we return, we
will talk a little bit about justhow markets have been moving and where they
(13:39):
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Bloomingberg. Today, the title isBank of America. Strategists say rape jitters
are fueling stock outflows. Maybe Idon't know. I'm sure it probably contributes
to the margin somewhere, but well, actually this is This is an interesting
one to me because frequently I thinkwhen there's a lot going on in the
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world, like there is right now, there's geopolitical tensions in the Middle East,
there's trade tensions with China, andthen there's also interest rates, and
if I were to look at it'sjust literally the last two weeks chuck because
a lot of those tensions have beenbuilt in at the same time. If
I'm gonna pick one driver of maybenot the outflows but market sell off of
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the last two weeks. Sure I'mpointing towards interest rates. You interest rates
been going up all year. Whyreequity's selling off? Now, that's my
counter. I think it would beon the expectation of cuts that has just
been eliminated over the last two weeks. But interest rates have still been going
up all year. You know,we started the year. As an example,
as of December twenty ninth, theten year treasury closed at three point
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eight six six percent. Now there'ssell off in the S and P five
hundred has been going on since wepeaked on March twenty eighth. On March
twenty eighth, the ten year treasuryclosed at hang on four point two oh
six percent. So yields rows zeropoint four percent over the first three months
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of the year and stocks went upwith them. We've now had yields go
up an additional point four percent,so the same amount as the last three
months, and stocks are down fivepercent. So if it were just yields,
in my opinion, I don't knowthat there's any there. There is
kind of where I land. Isit maybe a contributing factor? Sure,
like I can buy that, Butthe counter to it is on April tenth,
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ten yure treasury opened at four pointthree six six percent and closed at
four point five to four almost twentybasis points up. Yep, that was
on April tenth. I'm just cyclingbetween a couple places. April tenth,
the S and P five hundred lostseven points, you know, like yield.
Yields went up almost a quarter percent, and the D SMP kind of
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shrugged and went, eh, I'mgood, that was a nice bump.
We're fine. So I guess theconfluence of factors is the answer. Yeah,
I just if it were yields,you'd be able to point to,
because back in twenty twenty two youliterally could point to the days You'd be
like, yields went up by aquarter percent, SMP was down four percent.
Just whack whack, whack, whackwhack, like that was the story
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all year this Do I buy thehigher yields could be influencing it? Sure
like I do. But it's alsoimportant to note that this selloff really started
April twelfth, which is last Friday. You know, before that the S
ANDP closed it fifty one to ninetynine. It was less than one percent
off. It's high. And ifwe look at what yields have done since
last Friday, they are almost completelyflat, of less than a tenth of
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a percent. So I don't thinkit's yields because yields haven't actually moved since
the bulk of this cell off happened. What is it? I don't know.
People got bored hitting the buy buttonand now they want to hit the
sell button. I try not toattribute markets to anyone. Thing is dangerous.
There's so much that we don't knowbecause we just we can't see it.
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You know, someone is getting blownout of a position in you know
whatever, and so they're having toliquidate a bunch of other stuff as a
result. You know, you rememberthat during the memestock days, the crazy
stuff we were seeing where it waslike, hey, you know, someone's
getting blown out of a short positionin AMC or game stop, and so
they're selling all their long positions andother stuff in order to you know,
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to cover it and not get slammedeverywhere. So I don't know. I
I try to look at Hey,what can you know? What's it?
What's an investible theme for you know, three to six months as to what
happens on you know, a weeklybasis or a daily basis. I'll be
I'll be completely honest. I don'tknow, and I'm not sure how many
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people do. That's fair. Yeah, I think there's been a meaning full
shift in terms of inflation expectations andrates over the last three months, but
it hasn't. You can't look atit to explain the market activity in the
last week and a half, rightbecause it's the four percent out of the
five percent sell off that we've seenhas been since last Friday. And if
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you do want the theme that's beenon everyone's mind since last Friday, it's
the Middle East. It is,that's what everyone's been talking about. So
maybe it's that, I don't know. Let's take a quick break here.
When we come back, we gotWall Street Watch and then we're talking Netflix
earnings after this. Like us onFacebook and follow us on Twitter. Act
(19:45):
TFE show Breaking business news is alwaysfirst right here on the Financial Exchange Radio
Network. Time now for Wall StreetWatch. A complete look at what's moving
markets so far today right here onthe Financial Exchange Radio Network. Well,
markets are mixed territorials. Traders monitordevelopments out of the conflict from the Middle
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to East, as well as anew flurry of first quarter earnings results.
Right now, the Dow is upby half a percent, the SMP five
hundred is down by a quarter percent, and the NASDAC now off by nearly
one percent. Russel two thousand isup by nearly half a percent or eight
points. Ten year treasure Field isdown by two basis points at four point
(20:30):
six two percent, and crude oilup half a percent, trading just above
eighty three dollars a barrel. ProcternGamble reported earnings ahead of the open this
morning, with mixed first quarter results, beating on earnings but falling short of
revenue expectations. However, the consumerproducts giant did lift its full year earnings
outlook and maintained its sales growth forecasts. Proctern Gamble shares down by about two
(20:56):
thirds of a percent. American Expressalso posted first order results this morning,
where the firm saw its revenue jumpeleven percent to fifteen point eight billion dollars,
above street forecast. Amex noted itsaw more consumers off for its premium
credit card offerings and said it anticipatesfull year revenue to grow as much as
eleven percent compared to twenty twenty three. Amex shares are up by about three
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percent. Meanwhile, Tesla Shaer ismostly flat following news that the electric car
maker is recalling three eight hundred andseventy eight cyber trucks to fix an issue
with the accelerator pedal. Paul Monicaof Barons will join us later at the
show at eleven forty five to furtherchat about Tesla elsewhere. Alta stock down
by two and a half percent afterJeffrey's downgraded the beauty chain to hold from
(21:45):
by, citing mounting pressure from competitorSephora as well as a lack of newness
as two reasons for the change,and Morgan Stanley upgraded Shopify to overweight,
noting confidence in the company's growth potentialand opera leverage upside. Shop Offy shares
up by two percent. I'm TuckerSilvan, that's Wall Street watch. I
(22:07):
know that Paul's going to join usin our second hour to uh talk about
Tesla, but you just can't helpyourself. I understand how the problem happens
because when you're on that kind ofcutting edge, things like the gas pedal,
(22:29):
they're hard to do. Right.It gets sticky, you know,
did you guys see what the problemactually is? No, So, the
gas pedal in the cyber truck,it's your normal you know, piece of
rubber, plastic or whatever that sticksup from the floor. It's covered with
a metal, you know, Idon't know if it's aluminium or steel or
(22:49):
whatever. Sheath. The sheath hasbeen breaking loose from the pedal. Oh
and getting stuck in the foot.Well, I could see that such that
the accelerator is stuck down no matterwhat you do, and that's like a
cosmetics look right, It's I getthat that's dumb, but I'm trying to
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think through, Like other really dumbrecalls that have had to occur. Toyota
had another one, remember their EVthe BZ four X or whatever it is,
where they're like, hey, thewheels are falling off. It's like,
guys, you're making a car.You got to make the wheels stay
on. How about airbags that accidentallydeploy shrapnel instead of bags or both.
I guess in some cases like thatwas a pretty bad one. I mean,
(23:34):
look, all these are bad.Steering wheels were falling off GM cars
at some point, I believe dida steering wheel problem. I think,
so, yeah, I'll have togo check my notes on that one.
But yeah, what was the onethat they had before Mary bart took over.
It was they had something else.It wasn't the steering wheel fall.
(23:55):
They had something bad. It waslike one hundred and sixty deaths or something.
Yeah, I think it had todo with a similar gas or brake
issue. What was it, I'llhave to dig around. It was like
ten years ago now, but Iremember it was a huge problem before Mary
Barrett came in and she kind ofturned the company around. The cars were
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like, uh, inappropriately accelerating orsomething was There was something I can't remember
exactly what a scene. There wasan ignition switch recall and that was twenty
fourteen. That was it. Eighthundred thousand of its small cars. So
you turned the car off and itwould continue driving. Well, I can't
remem ignition switches which could shut offthe engine while the vehicle shut them off
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while you were driving. You'd losepower, steering, couldn't steer, breaks
lose power. There were one hundredand twenty four deaths because of it.
Yeah, so again, is thisstupid on Tesla's party? Yeah, you
want to make sure the gas pedalworks. I don't know that it's any
fundamentally dumber than other engineering issues thathave curded of. It's not an engineering
issue. It's something that they puton the gas pedal to make it look
(24:59):
cool, which makes it dumber inmy opinion, Like something being mechanically wrong
is bad, but this is thisis not something that you're doing where you're
here's an example Tesla has on theon the model whatever. It's called the
cyber truck. One of the thingsthat is cool potentially is that the steering
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is all steer by wire. Thesteering wheel does not mechanically connect to the
front axle at all. It isthe only I think there might have been
one other car that's tried this previously, but it's entirely new, and it
potentially has huge savings in the longrun if you can grow this to all
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your other vehicles, because then youdon't need as many moving parts. So
like, this is something that hasthe potential to be revolutionary. If there
were a problem with that, Iwould look at that and say that's bad,
But it's it's also something where yousay, Okay, there's something new
that they're trying, and here's howwe need to build the guardrails on this.
Sure because they're trying to functionally improvethe product. Putting a metal sheath
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on a gas pedal that falls offis not fundamentally improving the product, at
least it's not an expensive fix seeminglyright, No have you without that what
they are literally doing is they're justputting a bolt a rivet through the metal
to secure it to the pedal.So they really want that piece of metal
on the pedal. And then they'resaying that they're saying that they're redesigning it
(26:29):
so that future versions won't have thisissue. But it's literally a rivet that
they will put through the metal tohold it to the pedals. I feel
like I can fix that at home. Yeah, good, screwed, No,
you need a rivet. It's I'mhey, listen, I'm I don't
know. Let's talk to Netflix now. Netflix reported earnings after the bell yesterday.
(26:52):
They beat on both revenue and onearnings pretty significantly, quite honestly.
On the earning side of things,revenue was up fifteen percent year over year,
their profit was up almost eighty percentyear over year, and so you
had again a really nice quarter fromthem. But these shares are currently down
(27:14):
about six and a half percent andhalf now seven and a half now,
Okay, there you go. Andthe big thing that I guess you can
point to is that their guidance forthe upcoming quarter for revenue and profit a
little bit weaker than anticipated, andthey announced that they are no longer going
to be divulging subscriber numbers in theirquarterly reporting. Yeah, so you know,
(27:34):
it was definitely a guidance issue becauseto your point, they grew subscribers
the most recent quarter by nine pointthree to three million. I think they
were expecting to do half of that, So big beat to this most recent
quarter. But if the company thathas, you know, previously been telling
you all about subscriber growth every singlequarter, is telling you as an investor,
we no longer want to highlight that. We are no longer talking about
(27:56):
it. Slober growth is coming.There's only one reason you would do that.
Yes, slower subscriber growth is coming, and we're going to focus on
profitability instead. That's all they're tellingyou, right, is hey, we
are not going to be We alreadyhave half a billion viewers I think is
the total number of subscribers worldwide atNetflix at this stage. We're not going
to be able to meaning for quarterbillion quarter two hundred and sixty nine I
(28:18):
think was the total. Yeah,okay, my mistake. We're not going
to be able to meaningfully grow thaton a percentage basis going forward. So
we're going to do things like starthammering away at advertising to try and grow
profit instead. I'm not sure investorslove that idea, and that seems to
be a lot of the pullback.The question is going to be whether or
not they can deliver on that stuff. It's no different from when remember when
(28:42):
Facebook first went public, I meanback when they were still Facebook and not
Meta. Yeah, and there werethe questions about, hey, are they
going to be able to pivot tomobile? That was the big question for
Facebook back in like twenty twelve,twenty thirteen, is hey, are they
going to be able to do more? And people don't want to look at
Facebook on their phone. You lookback on it now and you're like,
(29:03):
man, we were dumb. Theymark figured it out. Yeah. I
think that when we look at this, the question is going to be can
they figure out the advertising mark right? And I'm not really going to bet
against a company like Netflix on thatbecause they have so much data on what
(29:23):
people watch. They have content forpretty much ever, Like their content runs
the gamut from kids shows up toyou know, realities, to Korea about
people are having to go through ahunger games type stuff. They got sports.
When's the WWE contract start? Isthat this summer? This fall?
(29:45):
Maybe? I don't know, I'lllook for context. By the way,
I know I mentioned Netflix stock today. Over the last twelve months, this
company's gained seventy five percent, Sothis is also part of it. Is
Hey, the stock's been on quitethe run and occasionally you have pullbacks and
things like that. Uh, theyare again you can say right now they're
(30:07):
one of the but they might bethe only pure streaming company that's actually profitable
and they're good. Question, Well, there are no other pure streaming companies,
right if you like broke out thesegments from Disney or Warner brother Discovery.
I don't think any of those wouldbe profitable at this point based on
what those companies have said. Yeah, yeah, probably not. They're cash
(30:29):
flow positive, you know, trailingtwelve month free cash flows seven billion dollars
operating margins or twenty percent. Likethere's a good business with Netflix. The
question is, well, it's apivot, chuck, right, it's been
a pivot from They have done anamazing job of growing users. Yeah,
last I mean when did they starttheir streaming platform decade? Uh, I
(30:49):
was streaming Netflix back in twenty elevenat least, so it's probably goes back
a decade before maybe fifteen years.Yeah, that has been their tremendous focus,
and they've been really good at it, not necessarily at heavily profitable growth,
but really fast growth. This isa pivot and they've been profitable.
That's impressive. Will they be ableto not necessarily, no, necessarily need
(31:11):
to grow those subscribers quite as much, but they need to make sure they're
retaining them and that those subscribers thatdo stay are very, very profitable.
And look, here's the thing,it's a valuation story again. You're thirty
one times forward earnings, you're sevenand a half time sales. Justify it.
That's what the market is going tosay to them, and they're going
to have to answer the bell.We forgot gaming by the way, they're
(31:33):
doing that now too. Oh that'llbe fun bought if you're gaming studios.
So we'll see if they make anytraction there was what was it? The
one that we found that they hadwas like a too hot to handle video
game that they were pairing with theirI mean this is on the mobile side
of thing, Like you can't justboot up Netflix on your TV and play
it at least no, I thinkit's all mobile games and stuff. Like
that. Let's take a quick break, and when we come back, we'll
(31:57):
talk about really how next week kicksoff the earning season in earnest right after
this, there's only one show thatfollows Wall Street's continued volatility. Keep it
here all morning long on the FinancialExchange Radio Network. Text US six one
seven three, six two thirteen eightyfive with your comments and questions about today's
(32:20):
show, and let us know whatyou think about the stories we are covering.
This is the Financial Exchange Radio Networkpiece in Bloomberg. It's time for
earnings to prove the bulls right.And yeah, look, this is the
(32:40):
story. If you're going to betrading at twenty plus times forward earnings,
those earnings better deliver if you don'twant to see your multiple compress. So
since the low's in late October,valuation expansion has accounted for pretty much most
of the SMP's twenty three percent return. I'm not sure when that's as of
that twenty three percent, but prettymuch where we are right now, sure,
(33:01):
And the price to forward pe ratioon the SMP has gone from seventeen
point three at the end of Octoberto twenty point one. So what's happened.
Companies have gotten more expensive. Uh, there's two ways to move that
ratio back down. Prices fall orearnings go up and earnings go up is
(33:21):
the one that people like more.Yeah, generally people aren't in love with
the SMP, you know, fallingdown and then continuing down, So that
would be the one that people wouldlike. And we're just getting started here.
We will see where the rest ofthe S and P reports The US
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information and to reserve your trip today. That's visit USVII dot com. Paramount
two has been involved in merger discussionswith Skideans for I don't know, at
least a few months now, Ithink is apparently being targeted by a joint
(34:52):
joint venture. I guess you wouldcall it yeah bid, joint bid from
Sony Pictures Entertainment and Apollo Global Management, who may try to acquire the media
company as well. Now Skydance.If you're not familiar with them, they
may not be a household name,but they've they've been basically producing a lot
(35:13):
of Paramounts movies for the better partof the last two decades, dating back
to their first one that they everdid with them was with Paramount actually was
the remake of True Grit back intwenty ten, but then the Mission Impossible
series Jack Reacher. Let's see whatelse have they done with them? The
Star Trek movies. Something called Annihilation. I don't know what that is,
(35:38):
but I'm told it's a movie,Yeah, the latest Top Gun movie.
Sky Dance has been heavily involved ina lot of these different movies. They
are also run. Do you knowwho the founder and CEO of Skydance is?
Tell me the minutes? Do eitherof you know? Not? Not
(36:00):
the manouche David Ellison? Do youknow David Elson is? Sounds familiar?
He is Larry Ellison, founder ofOracle's son. Yeah, so when you're
the son of a billionaire, whatdo you do start a movie studio?
Again, it's kind of stereotypical,but like it's how it goes a lot
of times. So you've got this, I know it would be great,
(36:21):
wouldn't it be fantastic? So you'vegot potentially a bidding war for Paramount,
which hasn't really been able to monetizetheir content fantastically. But there's a ton
of intellectual property that's under their umbrella. Again. You you know, you've
got Star Trek that's in there.Star top Gun, as I mentioned,
(36:42):
is under Paramount's umbrella. Mission impossible. Nickelodeon, Comedy Central, and MTV
are all paramount assets, aren't they. Yeah, I mean, well,
so I'm just talking on the paramountpictures side of undern But yeah, if
you're looking at the different stuff thatis under them, Nickelodeon, Showtime,
Comedy Central, TV, Land,CMT, the Smithsonian Channel, which is
(37:07):
always one of my favorites. Idon't know if either of you watch Air
Warriors on the Smithsonian Channel. Eachepisode is about a different air warrior.
I was going to say fighter plane. Uh, and it's just for an
aviation like me. It's it's justthe best. Then obviously they have their
movie group, and then they've gotyou know, CBS News and all CBS
(37:27):
Sports and all that stuff as wellthat is under their umbrella there. But
I think the question is, hey, can you figure out how to you
know, make money on this,because in twenty twenty three, they lost
four hundred and fifty one million dollars, which is a problem. Sony doesn't
have any sort of streaming platform outthere. I know they produce a lot
of movies, but I don't Idon't think they have any sort of dedicated
(37:49):
streaming I'll be completely honest have largelyforgotten about Sony as a company. Yeah,
which is kind of shocking to thecompany that was probably the most relevant
media entertainment and even you know,media hardware company. That's that's all you
know them for. Now, whatelse do they do? The headphones in
your head? How old are they? Pretty old? Yeah? I do
(38:12):
here. Actually, the new SonyTVs are fantastic, but they'd kind of
dropped off for a little while.So we'll see if they can uh make
a run at a quick break here. Hour two coming up in a little bit
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(01:03):
Boston is presented by Veterans Development Corporation. This is the Financial Exchange with Chuck
Zutta and Mike Armstrong. Chuck,Mike and Tucker with you here. And
the big news that was moving marketsovernight was obviously the Israeli retaliation against Iranian
(01:25):
attacks from last weekend. And thebest way that I can continue to describe
this is by saying that at everyjuncture, Iran continues again. In the
last you know, two to fourweeks, Iran continues to act like the
(01:49):
guy Yellen hold me back while noone's holding him back. And what I
mean by this is, first,let's put a few things together. Last
weekend, they send I've seen differentreports. I don't know if we've ever
settled on a final number, anywherefrom three to five hundred drones, ballistic
missiles and other rockets other stuff intoat Israel. Israel almost a They told
(02:16):
Israel and the United States about it'sseventy two hours in advance that it was
going to be coming, giving thema chance to defend themselves. They told
the United States and everybody that Iwas going at Israel, not going to
be directed at any US military basesor UK or anywhere other than Israel,
which you don't do if you're actuallyserious about Hey, we want to cause
(02:38):
meaningful damage. As a result,I believe that ninety nine percent plus of
the different drones and missiles were intercepted. The only known casualty that I've seen
was a ten year old girl thathad to get taken to the hospital.
I don't know if she has survivedor not, and that was from debris
(03:00):
related to one of the missiles beingdestroyed yesterday rather last night, I guess.
And then immediately after, by theway, Iran says, we now
consider the matter concluded, like guys, we're done. We're not doing anything
else. Israel takes about a weekand strikes back. It's unclear exactly what
(03:21):
they sent. We don't have anyinformation on this because Israel did not publicize
this unlike Iran, and so wedon't know exactly what it was that was
sent. We don't know if itwas drones, missiles, something else.
We don't know, but struck targetsin both Iran and Iraq from what I
(03:43):
gather as well, Iraq not Iraqitargets, but Iranian ones in Iraq,
and Iran has pretty much said,hey, we were able to, you
know, intercept everything, and everything'sfine here. We consider everything fine and
we're not planning anything else. Soagain, it Ron basically saying, guys,
please, like don't do this again, like we're done, We're sorry.
(04:08):
They can't say we're sorry, butit's the Iranian government is quite honestly,
it seems somewhat terrified. And partof that is because it does actually
seem like the Israeli attack yesterday mayhave done some damage and that Iran might
not have been able to either detector shoot down what was coming at them.
And so I think Israel was prettymuch sending a reminder, both in
(04:31):
this and with the consulate attack acouple of weeks ago, saying, guys,
we have really good intelligence on allof this stuff. We know what
you are doing and when you're doingit, and we have the capability to
strike you in ways that you can'tstop. Let's not go down this road
(04:54):
because it will end badly for you. Is the message that Israel is trying
to send, and it Ron ispretty much saying, yep, we get
it where we had to do somethinglast weekend because we had to do it,
but we're done. That's the messagethat Iran is sending publicly, at
least, so you saw this fascinatingmove in markets yesterday again to tie it
back, We're not, you know, geopolitically, we don't geopolity. No,
(05:21):
it's not what we do. Butwhat I do is I look at
markets pretty much from the moment Iwake up until the moment I go to
sleep, which is not the healthiestway to live, quite honestly, but
it's a life. And here's whatI saw is when I went to bed
last night, S and P futureswere down one point seventy five percent.
Oil prices, we're at oil prices, We're up three percent. Woke up
(05:42):
this morning, oil prices down halfpercent. S and P futures down a
quarter percent, almost completely reversed onceIran had announced guys, we're good.
We're not We're not doing anything else. Now. They still may continue to
act through proxies as they have foryears, but this obviously has been the
first direct confrontation between Israel and Iran, I believe since the eye tools came
(06:04):
to power back in the seventies.So it's this is unfortunately historic stuff that
we are seeing. But Iran alsonow kind of like we're good, please,
We're good. So I think there'sat least in my view. A
few different ways to read this.One would be the one that you're pointing
(06:25):
out here, which is seems onthe surface as of this morning, which
this can change very quickly, butas of this morning, it certainly seems
like de escalation is the is thegoal between these two countries. The other
piece that I guess just goes inthe back of my mind is from an
investor perspective, if you've been worriedabout geopolitical tensions anywhere in the world of
(06:49):
the last two decades, what's beenthe right approach, Chuck, When the
bullets start flying, you start buying, ignore them basically, right, Like,
ignore the risk of geo politics becausewhether it's been Iran or North Korea
or tensions with China, like,nothing has bubbled to the surface. And
so the investor lesson has been,Yeah, unless there's actually bullets flying and
(07:14):
you can prove that there's going tobe an impact to the market that you're
worried about, then don't worry aboutit because everything's de escalated. You know
that? To me, I guessI wonder if that is baked into investor
sentiment investor practice to say, hey, we don't know if there's going to
be anything real here, so justdon't take it seriously until it is very
serious. Even when things do getserious, it's not inherently bad for markets,
(07:39):
right, I Mean, that's theunfortunate truth is, as as much
as we are human beings, whatwe talk about here on the show is
you know how markets react to theseevents, and ultimately it's not something where
you notice any even intermediate term issuesthat relate to real conflicts that have actually
(08:03):
occurred. You know, you thinkabout all of the think about the major
draw downs that we have had inthe last couple of decades. I'm going
to go and just pull up achart just so that I can, you
know, actually accurately, so wedo one decade or two decades, you
can go two decades, So twothousand and four through now. Yeah,
let's go two thousand and four throughnow. And I'm going to pull the
(08:26):
S and P five hundred and let'sgo back to one one two thousand and
four. We're doing this live,so I have no idea what I'm going
to actually find. I'm going todo drawdowns of ten percent or more because
five percent draw downs honestly not worthtalking about. Yeah, they occurred too
frequently. Let's see two thousand andeight. Was that related to any kind
(08:46):
of international conflict? No, itwas entirely a US banking crisis that sunk
the entire global financial economy. Correct, it was the bankers who were the
problem, not the soldiers. Twentyeleven almost twenty percent draw down. Yeah,
to my European debt crisis, tomy understanding, that was not caused
(09:09):
by this Syrian civil war which wasongoing in twenty eleven. Correct, nor
tensions. Now I'll give you ahint it was. It was Greece.
Yeah, it was the Greeks hadtoo much debt and Europe didn't know what
to do, and eventually they figuredit out. Let's see twenty fifteen conflict.
India and Bangladesh had a border skirmish. No, this was China devaluing
(09:33):
the yuan unexpectedly in August, right, twenty sixteen January conflict. No,
No, it was Russia deciding justto flood the market with a bunch of
oil, which in turn crashed oilmarkets and a lot of other you know,
made the high yield debt space fairlytoxic for the next year or two.
Let's see what else do we havehere? Twenty eighteen twice ten percent
(09:56):
correction, almost a twenty percent oneat the end of the year. Conflict,
Did I have anything? No?No, Jay Powell said, hey,
we're you know, we're staying thecourse on raising interest rates. And
then the market said, no,you're not, and Jay said, oh,
you're right, I'm not going toraise interest rates anymore. Action was
twenty eighteen, around the same timeeveryone thought Brexit was going to end the
(10:16):
world. Uh no, that waseither twenty sixteen or twenty seventeen, which
which didn't. Did the world stillfunctioning? Unless I'm in the simulation and
my brain is just in the vat, you know, it's we're still here
twenty twenty March conflict kind of butnot any conflict between countries microscopic Okay,
(10:39):
yeah, not a real thing.Twenty twenty two. You can make a
case that the Russian invasion of Ukraineexacerbated the inflation problem, but wasn't the
root cause. But it was theinflation problem that drove markets down, not
Russia invading Ukraine. Let's see,what else do we have? Oh,
last year we had a ten percentcorrection from July to August or July through
(11:01):
September. I'm sorry, nothing todo with picture. They were literally I
don't think there was anything new thatthat sprouted up of any kind. Any
note there it was. Hey,the yield on the ten year treasury went
from three and a half to fivepercent. Okay, that didn't feel too
good for markets. So we've lookedat the last twenty years now of ten
(11:22):
percent plus draw downs, and nota single one of them has been related
to a conflict. Now you mightsay, okay, Chuck, that's just
you know, you know that thatperiod in time. What if we look
at, you know, anything beforethen. So yeah, let's let's take
just a quick look. I won'ttake up too much time because you know,
we got to get to break eventually. And a Tucker's like, come
(11:43):
on, man, I'm not atthat point yet. Okay, let me
know when you get there, justyou know, give me a oh,
you'll know something I know I alwaysdo. Uh, let's see. Okay,
here we go. Outbreak of OperationDesert Storm in nineteen ninety markets did
see a fifteen percent draw down,which was recovered in a month and a
half nine to eleven. I'm notthere quite yet. Let's see nineteen ninety
(12:07):
eight, long term capital management blowsup, not because any military force attacked
it, but because of the Asiancurrency crisis, again not militarily related two
thousand through two thousand and three techbubble bursts. Nine to eleven happens in
the middle of there. I don'tknow if things would have if markets would
(12:30):
have been better or worse, youknow, had that not occurred. I
don't think I can possibly say,quite honestly, probably contributed. But look,
things were set in motion a fullyear before that. The ten percent
correction on the S and P fivehundred was in place by December of two
thousand, a full year before,so I'm not going to ascribe this to
(12:52):
nine to eleven. And then we'reright into the financial crisis afterwards. So
the only one that you can maybepoint to is, hey, there was
a short term issue because of thiswas Desert Storm in nineteen ninety and that
was partly because a just the scaleoff. I mean, you had five
hundred thousand American troops, and therewere concerns that this was going to be
a massive conflict given the size ofthe Iraqi forces at that time, and
(13:16):
also what happened to oil prices shortterm was a shock for the market too,
But other than that, in thelast thirty five years, any military
conflict that's happened has not been materialto stock prices in the short term or
long term. Let's take a quickbreak here and when we return, we
will talk a little bit about justhow markets have been moving and where they
(13:39):
go from here miss any of theshow. The Financial Exchange Show podcast is
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(14:01):
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(14:46):
Bloomingberg. Today, the title isBank of America. Strategists say rape jitters
are fueling stock outflows. Maybe Idon't know. I'm sure it probably contributes
to the margin somewhere, but well, actually this is This is an interesting
one to me because frequently I thinkwhen there's a lot going on in the
(15:07):
world, like there is right now, there's geopolitical tensions in the Middle East,
there's trade tensions with China, andthen there's also interest rates, and
if I were to look at it'sjust literally the last two weeks chuck because
a lot of those tensions have beenbuilt in at the same time. If
I'm gonna pick one driver of maybenot the outflows but market sell off of
(15:28):
the last two weeks. Sure I'mpointing towards interest rates. You interest rates
been going up all year. Whyreequity's selling off? Now, that's my
counter. I think it would beon the expectation of cuts that has just
been eliminated over the last two weeks. But interest rates have still been going
up all year. You know,we started the year. As an example,
as of December twenty ninth, theten year treasury closed at three point
(15:50):
eight six six percent. Now there'ssell off in the S and P five
hundred has been going on since wepeaked on March twenty eighth. On March
twenty eighth, the ten year treasuryclosed at hang on four point two oh
six percent. So yields rows zeropoint four percent over the first three months
(16:14):
of the year and stocks went upwith them. We've now had yields go
up an additional point four percent,so the same amount as the last three
months, and stocks are down fivepercent. So if it were just yields,
in my opinion, I don't knowthat there's any there. There is
kind of where I land. Isit maybe a contributing factor? Sure,
like I can buy that, Butthe counter to it is on April tenth,
(16:38):
ten yure treasury opened at four pointthree six six percent and closed at
four point five to four almost twentybasis points up. Yep, that was
on April tenth. I'm just cyclingbetween a couple places. April tenth,
the S and P five hundred lostseven points, you know, like yield.
Yields went up almost a quarter percent, and the D SMP kind of
(17:00):
shrugged and went, eh, I'mgood, that was a nice bump.
We're fine. So I guess theconfluence of factors is the answer. Yeah,
I just if it were yields,you'd be able to point to,
because back in twenty twenty two youliterally could point to the days You'd be
like, yields went up by aquarter percent, SMP was down four percent.
Just whack whack, whack, whackwhack, like that was the story
(17:22):
all year this Do I buy thehigher yields could be influencing it? Sure
like I do. But it's alsoimportant to note that this selloff really started
April twelfth, which is last Friday. You know, before that the S
ANDP closed it fifty one to ninetynine. It was less than one percent
off. It's high. And ifwe look at what yields have done since
last Friday, they are almost completelyflat, of less than a tenth of
(17:48):
a percent. So I don't thinkit's yields because yields haven't actually moved since
the bulk of this cell off happened. What is it? I don't know.
People got bored hitting the buy buttonand now they want to hit the
sell button. I try not toattribute markets to anyone. Thing is dangerous.
There's so much that we don't knowbecause we just we can't see it.
(18:12):
You know, someone is getting blownout of a position in you know
whatever, and so they're having toliquidate a bunch of other stuff as a
result. You know, you rememberthat during the memestock days, the crazy
stuff we were seeing where it waslike, hey, you know, someone's
getting blown out of a short positionin AMC or game stop, and so
they're selling all their long positions andother stuff in order to you know,
(18:34):
to cover it and not get slammedeverywhere. So I don't know. I
I try to look at Hey,what can you know? What's it?
What's an investible theme for you know, three to six months as to what
happens on you know, a weeklybasis or a daily basis. I'll be
I'll be completely honest. I don'tknow, and I'm not sure how many
(18:55):
people do. That's fair. Yeah, I think there's been a meaning full
shift in terms of inflation expectations andrates over the last three months, but
it hasn't. You can't look atit to explain the market activity in the
last week and a half, rightbecause it's the four percent out of the
five percent sell off that we've seenhas been since last Friday. And if
(19:17):
you do want the theme that's beenon everyone's mind since last Friday, it's
the Middle East. It is,that's what everyone's been talking about. So
maybe it's that, I don't know. Let's take a quick break here.
When we come back, we gotWall Street Watch and then we're talking Netflix
earnings after this. Like us onFacebook and follow us on Twitter. Act
(19:45):
TFE show Breaking business news is alwaysfirst right here on the Financial Exchange Radio
Network. Time now for Wall StreetWatch. A complete look at what's moving
markets so far today right here onthe Financial Exchange Radio Network. Well,
markets are mixed territorials. Traders monitordevelopments out of the conflict from the Middle
(20:07):
to East, as well as anew flurry of first quarter earnings results.
Right now, the Dow is upby half a percent, the SMP five
hundred is down by a quarter percent, and the NASDAC now off by nearly
one percent. Russel two thousand isup by nearly half a percent or eight
points. Ten year treasure Field isdown by two basis points at four point
(20:30):
six two percent, and crude oilup half a percent, trading just above
eighty three dollars a barrel. ProcternGamble reported earnings ahead of the open this
morning, with mixed first quarter results, beating on earnings but falling short of
revenue expectations. However, the consumerproducts giant did lift its full year earnings
outlook and maintained its sales growth forecasts. Proctern Gamble shares down by about two
(20:56):
thirds of a percent. American Expressalso posted first order results this morning,
where the firm saw its revenue jumpeleven percent to fifteen point eight billion dollars,
above street forecast. Amex noted itsaw more consumers off for its premium
credit card offerings and said it anticipatesfull year revenue to grow as much as
eleven percent compared to twenty twenty three. Amex shares are up by about three
(21:21):
percent. Meanwhile, Tesla Shaer ismostly flat following news that the electric car
maker is recalling three eight hundred andseventy eight cyber trucks to fix an issue
with the accelerator pedal. Paul Monicaof Barons will join us later at the
show at eleven forty five to furtherchat about Tesla elsewhere. Alta stock down
by two and a half percent afterJeffrey's downgraded the beauty chain to hold from
(21:45):
by, citing mounting pressure from competitorSephora as well as a lack of newness
as two reasons for the change,and Morgan Stanley upgraded Shopify to overweight,
noting confidence in the company's growth potentialand opera leverage upside. Shop Offy shares
up by two percent. I'm TuckerSilvan, that's Wall Street watch. I
(22:07):
know that Paul's going to join usin our second hour to uh talk about
Tesla, but you just can't helpyourself. I understand how the problem happens
because when you're on that kind ofcutting edge, things like the gas pedal,
(22:29):
they're hard to do. Right.It gets sticky, you know,
did you guys see what the problemactually is? No, So, the
gas pedal in the cyber truck,it's your normal you know, piece of
rubber, plastic or whatever that sticksup from the floor. It's covered with
a metal, you know, Idon't know if it's aluminium or steel or
(22:49):
whatever. Sheath. The sheath hasbeen breaking loose from the pedal. Oh
and getting stuck in the foot.Well, I could see that such that
the accelerator is stuck down no matterwhat you do, and that's like a
cosmetics look right, It's I getthat that's dumb, but I'm trying to
(23:11):
think through, Like other really dumbrecalls that have had to occur. Toyota
had another one, remember their EVthe BZ four X or whatever it is,
where they're like, hey, thewheels are falling off. It's like,
guys, you're making a car.You got to make the wheels stay
on. How about airbags that accidentallydeploy shrapnel instead of bags or both.
I guess in some cases like thatwas a pretty bad one. I mean,
(23:34):
look, all these are bad.Steering wheels were falling off GM cars
at some point, I believe dida steering wheel problem. I think,
so, yeah, I'll have togo check my notes on that one.
But yeah, what was the onethat they had before Mary bart took over.
It was they had something else.It wasn't the steering wheel fall.
(23:55):
They had something bad. It waslike one hundred and sixty deaths or something.
Yeah, I think it had todo with a similar gas or brake
issue. What was it, I'llhave to dig around. It was like
ten years ago now, but Iremember it was a huge problem before Mary
Barrett came in and she kind ofturned the company around. The cars were
(24:15):
like, uh, inappropriately accelerating orsomething was There was something I can't remember
exactly what a scene. There wasan ignition switch recall and that was twenty
fourteen. That was it. Eighthundred thousand of its small cars. So
you turned the car off and itwould continue driving. Well, I can't
remem ignition switches which could shut offthe engine while the vehicle shut them off
(24:37):
while you were driving. You'd losepower, steering, couldn't steer, breaks
lose power. There were one hundredand twenty four deaths because of it.
Yeah, so again, is thisstupid on Tesla's party? Yeah, you
want to make sure the gas pedalworks. I don't know that it's any
fundamentally dumber than other engineering issues thathave curded of. It's not an engineering
issue. It's something that they puton the gas pedal to make it look
(24:59):
cool, which makes it dumber inmy opinion, Like something being mechanically wrong
is bad, but this is thisis not something that you're doing where you're
here's an example Tesla has on theon the model whatever. It's called the
cyber truck. One of the thingsthat is cool potentially is that the steering
(25:21):
is all steer by wire. Thesteering wheel does not mechanically connect to the
front axle at all. It isthe only I think there might have been
one other car that's tried this previously, but it's entirely new, and it
potentially has huge savings in the longrun if you can grow this to all
(25:41):
your other vehicles, because then youdon't need as many moving parts. So
like, this is something that hasthe potential to be revolutionary. If there
were a problem with that, Iwould look at that and say that's bad,
But it's it's also something where yousay, Okay, there's something new
that they're trying, and here's howwe need to build the guardrails on this.
Sure because they're trying to functionally improvethe product. Putting a metal sheath
(26:06):
on a gas pedal that falls offis not fundamentally improving the product, at
least it's not an expensive fix seeminglyright, No have you without that what
they are literally doing is they're justputting a bolt a rivet through the metal
to secure it to the pedal.So they really want that piece of metal
on the pedal. And then they'resaying that they're saying that they're redesigning it
(26:29):
so that future versions won't have thisissue. But it's literally a rivet that
they will put through the metal tohold it to the pedals. I feel
like I can fix that at home. Yeah, good, screwed, No,
you need a rivet. It's I'mhey, listen, I'm I don't
know. Let's talk to Netflix now. Netflix reported earnings after the bell yesterday.
(26:52):
They beat on both revenue and onearnings pretty significantly, quite honestly.
On the earning side of things,revenue was up fifteen percent year over year,
their profit was up almost eighty percentyear over year, and so you
had again a really nice quarter fromthem. But these shares are currently down
(27:14):
about six and a half percent andhalf now seven and a half now,
Okay, there you go. Andthe big thing that I guess you can
point to is that their guidance forthe upcoming quarter for revenue and profit a
little bit weaker than anticipated, andthey announced that they are no longer going
to be divulging subscriber numbers in theirquarterly reporting. Yeah, so you know,
(27:34):
it was definitely a guidance issue becauseto your point, they grew subscribers
the most recent quarter by nine pointthree to three million. I think they
were expecting to do half of that, So big beat to this most recent
quarter. But if the company thathas, you know, previously been telling
you all about subscriber growth every singlequarter, is telling you as an investor,
we no longer want to highlight that. We are no longer talking about
(27:56):
it. Slober growth is coming.There's only one reason you would do that.
Yes, slower subscriber growth is coming, and we're going to focus on
profitability instead. That's all they're tellingyou, right, is hey, we
are not going to be We alreadyhave half a billion viewers I think is
the total number of subscribers worldwide atNetflix at this stage. We're not going
to be able to meaning for quarterbillion quarter two hundred and sixty nine I
(28:18):
think was the total. Yeah,okay, my mistake. We're not going
to be able to meaningfully grow thaton a percentage basis going forward. So
we're going to do things like starthammering away at advertising to try and grow
profit instead. I'm not sure investorslove that idea, and that seems to
be a lot of the pullback.The question is going to be whether or
not they can deliver on that stuff. It's no different from when remember when
(28:42):
Facebook first went public, I meanback when they were still Facebook and not
Meta. Yeah, and there werethe questions about, hey, are they
going to be able to pivot tomobile? That was the big question for
Facebook back in like twenty twelve,twenty thirteen, is hey, are they
going to be able to do more? And people don't want to look at
Facebook on their phone. You lookback on it now and you're like,
(29:03):
man, we were dumb. Theymark figured it out. Yeah. I
think that when we look at this, the question is going to be can
they figure out the advertising mark right? And I'm not really going to bet
against a company like Netflix on thatbecause they have so much data on what
(29:23):
people watch. They have content forpretty much ever, Like their content runs
the gamut from kids shows up toyou know, realities, to Korea about
people are having to go through ahunger games type stuff. They got sports.
When's the WWE contract start? Isthat this summer? This fall?
(29:45):
Maybe? I don't know, I'lllook for context. By the way,
I know I mentioned Netflix stock today. Over the last twelve months, this
company's gained seventy five percent, Sothis is also part of it. Is
Hey, the stock's been on quitethe run and occasionally you have pullbacks and
things like that. Uh, theyare again you can say right now they're
(30:07):
one of the but they might bethe only pure streaming company that's actually profitable
and they're good. Question, Well, there are no other pure streaming companies,
right if you like broke out thesegments from Disney or Warner brother Discovery.
I don't think any of those wouldbe profitable at this point based on
what those companies have said. Yeah, yeah, probably not. They're cash
(30:29):
flow positive, you know, trailingtwelve month free cash flows seven billion dollars
operating margins or twenty percent. Likethere's a good business with Netflix. The
question is, well, it's apivot, chuck, right, it's been
a pivot from They have done anamazing job of growing users. Yeah,
last I mean when did they starttheir streaming platform decade? Uh, I
(30:49):
was streaming Netflix back in twenty elevenat least, so it's probably goes back
a decade before maybe fifteen years.Yeah, that has been their tremendous focus,
and they've been really good at it, not necessarily at heavily profitable growth,
but really fast growth. This isa pivot and they've been profitable.
That's impressive. Will they be ableto not necessarily, no, necessarily need
(31:11):
to grow those subscribers quite as much, but they need to make sure they're
retaining them and that those subscribers thatdo stay are very, very profitable.
And look, here's the thing,it's a valuation story again. You're thirty
one times forward earnings, you're sevenand a half time sales. Justify it.
That's what the market is going tosay to them, and they're going
to have to answer the bell.We forgot gaming by the way, they're
(31:33):
doing that now too. Oh that'llbe fun bought if you're gaming studios.
So we'll see if they make anytraction there was what was it? The
one that we found that they hadwas like a too hot to handle video
game that they were pairing with theirI mean this is on the mobile side
of thing, Like you can't justboot up Netflix on your TV and play
it at least no, I thinkit's all mobile games and stuff. Like
that. Let's take a quick break, and when we come back, we'll
(31:57):
talk about really how next week kicksoff the earning season in earnest right after
this, there's only one show thatfollows Wall Street's continued volatility. Keep it
here all morning long on the FinancialExchange Radio Network. Text US six one
seven three, six two thirteen eightyfive with your comments and questions about today's
(32:20):
show, and let us know whatyou think about the stories we are covering.
This is the Financial Exchange Radio Networkpiece in Bloomberg. It's time for
earnings to prove the bulls right.And yeah, look, this is the
(32:40):
story. If you're going to betrading at twenty plus times forward earnings,
those earnings better deliver if you don'twant to see your multiple compress. So
since the low's in late October,valuation expansion has accounted for pretty much most
of the SMP's twenty three percent return. I'm not sure when that's as of
that twenty three percent, but prettymuch where we are right now, sure,
(33:01):
And the price to forward pe ratioon the SMP has gone from seventeen
point three at the end of Octoberto twenty point one. So what's happened.
Companies have gotten more expensive. Uh, there's two ways to move that
ratio back down. Prices fall orearnings go up and earnings go up is
(33:21):
the one that people like more.Yeah, generally people aren't in love with
the SMP, you know, fallingdown and then continuing down, So that
would be the one that people wouldlike. And we're just getting started here.
We will see where the rest ofthe S and P reports The US
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information and to reserve your trip today. That's visit USVII dot com. Paramount
two has been involved in merger discussionswith Skideans for I don't know, at
least a few months now, Ithink is apparently being targeted by a joint
(34:52):
joint venture. I guess you wouldcall it yeah bid, joint bid from
Sony Pictures Entertainment and Apollo Global Management, who may try to acquire the media
company as well. Now Skydance.If you're not familiar with them, they
may not be a household name,but they've they've been basically producing a lot
(35:13):
of Paramounts movies for the better partof the last two decades, dating back
to their first one that they everdid with them was with Paramount actually was
the remake of True Grit back intwenty ten, but then the Mission Impossible
series Jack Reacher. Let's see whatelse have they done with them? The
Star Trek movies. Something called Annihilation. I don't know what that is,
(35:38):
but I'm told it's a movie,Yeah, the latest Top Gun movie.
Sky Dance has been heavily involved ina lot of these different movies. They
are also run. Do you knowwho the founder and CEO of Skydance is?
Tell me the minutes? Do eitherof you know? Not? Not
(36:00):
the manouche David Ellison? Do youknow David Elson is? Sounds familiar?
He is Larry Ellison, founder ofOracle's son. Yeah, so when you're
the son of a billionaire, whatdo you do start a movie studio?
Again, it's kind of stereotypical,but like it's how it goes a lot
of times. So you've got this, I know it would be great,
(36:21):
wouldn't it be fantastic? So you'vegot potentially a bidding war for Paramount,
which hasn't really been able to monetizetheir content fantastically. But there's a ton
of intellectual property that's under their umbrella. Again. You you know, you've
got Star Trek that's in there.Star top Gun, as I mentioned,
(36:42):
is under Paramount's umbrella. Mission impossible. Nickelodeon, Comedy Central, and MTV
are all paramount assets, aren't they. Yeah, I mean, well,
so I'm just talking on the paramountpictures side of undern But yeah, if
you're looking at the different stuff thatis under them, Nickelodeon, Showtime,
Comedy Central, TV, Land,CMT, the Smithsonian Channel, which is
(37:07):
always one of my favorites. Idon't know if either of you watch Air
Warriors on the Smithsonian Channel. Eachepisode is about a different air warrior.
I was going to say fighter plane. Uh, and it's just for an
aviation like me. It's it's justthe best. Then obviously they have their
movie group, and then they've gotyou know, CBS News and all CBS
(37:27):
Sports and all that stuff as wellthat is under their umbrella there. But
I think the question is, hey, can you figure out how to you
know, make money on this,because in twenty twenty three, they lost
four hundred and fifty one million dollars, which is a problem. Sony doesn't
have any sort of streaming platform outthere. I know they produce a lot
of movies, but I don't Idon't think they have any sort of dedicated
(37:49):
streaming I'll be completely honest have largelyforgotten about Sony as a company. Yeah,
which is kind of shocking to thecompany that was probably the most relevant
media entertainment and even you know,media hardware company. That's that's all you
know them for. Now, whatelse do they do? The headphones in
your head? How old are they? Pretty old? Yeah? I do
(38:12):
here. Actually, the new SonyTVs are fantastic, but they'd kind of
dropped off for a little while.So we'll see if they can uh make
a run at a quick break here. Hour two coming up in a little bit
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