1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,320 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Let's 5 00:00:27,320 --> 00:00:29,840 Speaker 1: start with Greg battle Shower, b MP parable US head 6 00:00:29,840 --> 00:00:32,520 Speaker 1: of Equity and Derivative Strategy. Good money to Greg wove 7 00:00:32,560 --> 00:00:34,600 Speaker 1: on it. Have we seen the wash out, the clean 8 00:00:34,640 --> 00:00:37,400 Speaker 1: out of sentiment or you're still waiting for that big moment? No, 9 00:00:37,479 --> 00:00:39,559 Speaker 1: I don't think so. I mean we've been looking at 10 00:00:39,600 --> 00:00:42,360 Speaker 1: thirty forty on the SMP. The two day moving average 11 00:00:42,400 --> 00:00:43,919 Speaker 1: is something where we may see a little bit more 12 00:00:43,960 --> 00:00:45,800 Speaker 1: of a line in the sand. Drawn We've had a 13 00:00:45,800 --> 00:00:48,120 Speaker 1: massive move in the last couple of days nepoties, but 14 00:00:48,159 --> 00:00:50,360 Speaker 1: it has only been two days of de risking. We 15 00:00:50,440 --> 00:00:53,600 Speaker 1: came into this last week with markets at all time 16 00:00:53,680 --> 00:00:55,920 Speaker 1: highs UM. We wrote a piece at the start of 17 00:00:55,920 --> 00:00:58,360 Speaker 1: this year where we highlighted some of the irrational exuberance, 18 00:00:58,640 --> 00:01:01,720 Speaker 1: some of the stretch grows valuations of growth stocks, the 19 00:01:01,720 --> 00:01:04,640 Speaker 1: stretch valuation of equity markets generally, so a two day 20 00:01:04,680 --> 00:01:06,880 Speaker 1: correction I don't think it's nearly enough to wash out 21 00:01:06,880 --> 00:01:09,600 Speaker 1: some of the positioning consensus has had it all beaten 22 00:01:09,600 --> 00:01:11,520 Speaker 1: out of it over the last week or so with 23 00:01:11,560 --> 00:01:13,959 Speaker 1: the V shaped recovery. Haven't heard much about that in 24 00:01:14,000 --> 00:01:16,000 Speaker 1: the last twenty four hours. Is that dumb dusted? Have 25 00:01:16,080 --> 00:01:18,399 Speaker 1: we moved on from that? UM? I don't know, really. 26 00:01:18,400 --> 00:01:21,520 Speaker 1: It depends how the data unfold. It depends what happens 27 00:01:21,520 --> 00:01:23,640 Speaker 1: with the virus. It depends what happens with the FED. 28 00:01:24,120 --> 00:01:26,280 Speaker 1: If you have if you have a situation where the 29 00:01:26,360 --> 00:01:30,120 Speaker 1: virus does not impact the US consumer, doesn't impact the 30 00:01:30,200 --> 00:01:32,920 Speaker 1: US labor market, and you get a reaction from the FED. 31 00:01:33,040 --> 00:01:35,480 Speaker 1: That's the type of environment that drives a V shaped recovery. 32 00:01:35,680 --> 00:01:38,640 Speaker 1: If the labor market or the U S consumer slow considerably, 33 00:01:38,760 --> 00:01:40,240 Speaker 1: then I think we're in for a much kind of 34 00:01:40,240 --> 00:01:44,160 Speaker 1: more sustained, turbulent time suffering the biggest losses here because 35 00:01:44,160 --> 00:01:46,720 Speaker 1: there was a story about how leverage hedge funds ticked 36 00:01:46,800 --> 00:01:50,320 Speaker 1: up dramatically right before the sell off, I think it's 37 00:01:50,360 --> 00:01:53,440 Speaker 1: not contained just in the hedge fund community. When we 38 00:01:53,480 --> 00:01:57,600 Speaker 1: look at positioning statistics, whether it's kind of retail or 39 00:01:57,840 --> 00:02:01,640 Speaker 1: leverage in terms of systematic strategy these institutional investors. It 40 00:02:01,760 --> 00:02:04,080 Speaker 1: looks like the momentum and the rally that we've had 41 00:02:04,160 --> 00:02:07,200 Speaker 1: over the last um, yeah, ten years, but suddenly the 42 00:02:07,240 --> 00:02:09,320 Speaker 1: last six months or so has drawn a lot of 43 00:02:09,320 --> 00:02:11,040 Speaker 1: people into the equity markets. I think there's a lot 44 00:02:11,080 --> 00:02:13,320 Speaker 1: of leverage, and that's why we've seen such a kind 45 00:02:13,320 --> 00:02:15,560 Speaker 1: of sharp reverse in the last couple of days. What 46 00:02:15,600 --> 00:02:18,960 Speaker 1: are you looking forward to determine catharsis? I think that 47 00:02:19,000 --> 00:02:21,160 Speaker 1: already we have to see what happens in terms of 48 00:02:21,160 --> 00:02:23,679 Speaker 1: the data, what happens in terms of the FED. I 49 00:02:23,680 --> 00:02:26,840 Speaker 1: think it's far too early to expect equity markets to 50 00:02:26,880 --> 00:02:28,400 Speaker 1: find a level. I think we're going to see some 51 00:02:28,480 --> 00:02:30,760 Speaker 1: volatility over next Because that was a public answer, I mean, 52 00:02:30,760 --> 00:02:32,600 Speaker 1: give us the truth here. What are we gonna see 53 00:02:32,600 --> 00:02:35,520 Speaker 1: in terms of catharsis? What's the bet on the street 54 00:02:35,680 --> 00:02:39,080 Speaker 1: right now? I mean, if people position given two difficult 55 00:02:39,160 --> 00:02:42,360 Speaker 1: days down, I don't think two days is enough for 56 00:02:42,480 --> 00:02:44,400 Speaker 1: positioning to wash out. So I think we're going to 57 00:02:44,480 --> 00:02:47,119 Speaker 1: get much more volatility. You know, you mentioned that we're 58 00:02:47,120 --> 00:02:48,959 Speaker 1: seeing the future start to bounce a little bit a 59 00:02:48,960 --> 00:02:51,560 Speaker 1: little bit this morning. We expect volatility. It's not going 60 00:02:51,600 --> 00:02:53,440 Speaker 1: to move in a straight line, we could easily get 61 00:02:53,560 --> 00:02:55,720 Speaker 1: kind of a decent update, but that could easily be 62 00:02:55,760 --> 00:02:57,600 Speaker 1: followed by another couple of down days. So I think 63 00:02:57,639 --> 00:03:00,280 Speaker 1: we're going to see a lot more volatility before pauseing 64 00:03:00,360 --> 00:03:03,400 Speaker 1: washes out. For the final question, really really quickly March eighteen. 65 00:03:03,840 --> 00:03:05,919 Speaker 1: As things stand your view right now, did the FED 66 00:03:06,000 --> 00:03:09,040 Speaker 1: go or do they wait? I think they're more likely 67 00:03:09,080 --> 00:03:10,800 Speaker 1: to wait, But it's going to be data dependent. It's 68 00:03:10,840 --> 00:03:13,000 Speaker 1: going to depend on the evolution of not just what 69 00:03:13,120 --> 00:03:15,040 Speaker 1: happens in terms of the virus the data, but also 70 00:03:15,080 --> 00:03:16,680 Speaker 1: what happens in terms of market You sound like a 71 00:03:16,680 --> 00:03:19,240 Speaker 1: FED official. Great, great catch up with the great battle 72 00:03:19,240 --> 00:03:27,160 Speaker 1: there of BNP Paramo, Johann Sebastian and Jack joytis now 73 00:03:27,240 --> 00:03:30,680 Speaker 1: Rio Tinto CEO. J is fantastic to have you with us. 74 00:03:30,680 --> 00:03:33,280 Speaker 1: So let's just get into the business in China straight away. 75 00:03:33,680 --> 00:03:37,880 Speaker 1: What are the customers talent you right now? Yeah, good morning. First, 76 00:03:38,280 --> 00:03:41,400 Speaker 1: as you said, China consform more than fifty percent of 77 00:03:41,720 --> 00:03:44,120 Speaker 1: the ver so we're spending a lot of time discussing 78 00:03:44,160 --> 00:03:47,080 Speaker 1: to our Chinese customer and suppliers. We discussed with around 79 00:03:47,080 --> 00:03:49,200 Speaker 1: two hundreds of those in the last forty eight hours. 80 00:03:49,840 --> 00:03:53,200 Speaker 1: Where whether situation. Where the situation is today is there 81 00:03:53,280 --> 00:03:56,360 Speaker 1: is clearly uncertainty. However, two things which is important from 82 00:03:56,360 --> 00:03:59,400 Speaker 1: all perspective. One is all the books of which is 83 00:03:59,400 --> 00:04:02,160 Speaker 1: our men coming, are full and we're moving the product 84 00:04:02,520 --> 00:04:06,000 Speaker 1: to China without any issues whatsoever. That's the first point. 85 00:04:06,040 --> 00:04:08,600 Speaker 1: The second point is if I take a more medium 86 00:04:08,680 --> 00:04:10,400 Speaker 1: term view, when I look at the back end of 87 00:04:10,440 --> 00:04:12,560 Speaker 1: this year, we have no doubt and we've got all 88 00:04:12,600 --> 00:04:16,040 Speaker 1: the signals that the Chinese government will implement a similars package. 89 00:04:16,040 --> 00:04:19,040 Speaker 1: I've already started and from past history, when the Chinese 90 00:04:19,080 --> 00:04:21,680 Speaker 1: implement similar package is going to be pre intense in 91 00:04:21,760 --> 00:04:23,800 Speaker 1: terms of communities, which could be a very good piece 92 00:04:23,800 --> 00:04:26,839 Speaker 1: of news. So someone such no issues as we're having 93 00:04:26,880 --> 00:04:29,960 Speaker 1: this conversation, but we acknowledge that could be uncertainty and 94 00:04:30,000 --> 00:04:31,640 Speaker 1: we are prepared for it. John, I want to cut 95 00:04:31,640 --> 00:04:33,719 Speaker 1: to the chase, and there was a terrific Bloomberg opinion 96 00:04:33,760 --> 00:04:36,200 Speaker 1: piece out on this earlier today. You've got a seven 97 00:04:36,240 --> 00:04:39,320 Speaker 1: percent year, You've got massive dividend growth over the last 98 00:04:39,360 --> 00:04:43,440 Speaker 1: five years. What is the elasticity of the responsiveness of 99 00:04:43,480 --> 00:04:45,920 Speaker 1: the board to what you do with the dividend in 100 00:04:45,960 --> 00:04:48,560 Speaker 1: the future. That's a very good question. But as you 101 00:04:48,600 --> 00:04:51,120 Speaker 1: remember in twenty in early twenty sixteents, we have changed 102 00:04:51,160 --> 00:04:54,479 Speaker 1: our policy to move from to move toward the variable policy. 103 00:04:54,480 --> 00:04:57,240 Speaker 1: And the police is very clear forty two sixty percent 104 00:04:57,360 --> 00:05:00,640 Speaker 1: of the underlying earnings through the cycle. In the last 105 00:05:00,640 --> 00:05:03,160 Speaker 1: few years we were always above the policy. And if 106 00:05:03,160 --> 00:05:06,920 Speaker 1: you look what we have declared yesterday, it's sixty percent 107 00:05:06,960 --> 00:05:09,640 Speaker 1: of the earnings aspect the policy plus a special dividend 108 00:05:10,000 --> 00:05:13,279 Speaker 1: of one billion dollars which was which would take us. 109 00:05:13,279 --> 00:05:16,039 Speaker 1: So the LS city city is very clear, it's directly 110 00:05:16,080 --> 00:05:17,840 Speaker 1: linked to the earnings. Okay, but I want to go 111 00:05:17,960 --> 00:05:21,280 Speaker 1: to your science of years ago and frankly your mining engineering. 112 00:05:21,320 --> 00:05:24,679 Speaker 1: What's your ex access and the dividend? How many weeks, 113 00:05:24,680 --> 00:05:28,640 Speaker 1: how many quarters of this shock the supply shock? Can 114 00:05:28,680 --> 00:05:31,640 Speaker 1: you stand to keep the dividends strong? As there a 115 00:05:31,720 --> 00:05:34,880 Speaker 1: point where you do have to change the dividend policy. 116 00:05:35,120 --> 00:05:37,039 Speaker 1: I don't think we'll have an issue with the dividend 117 00:05:37,040 --> 00:05:39,960 Speaker 1: policy per se, because it's a valuable policy. That's one aspect. Now. 118 00:05:40,000 --> 00:05:41,800 Speaker 1: The second point, which is more important from a real 119 00:05:41,800 --> 00:05:43,920 Speaker 1: stone point, is if I look at the quality of 120 00:05:43,960 --> 00:05:46,240 Speaker 1: my assets, which are low costs, which are the lowest 121 00:05:46,800 --> 00:05:48,320 Speaker 1: in the in the in the in the industry, plus 122 00:05:48,360 --> 00:05:50,599 Speaker 1: the quality of malin balance sheet is I've got no 123 00:05:50,680 --> 00:05:54,240 Speaker 1: issue whatsoever to continue the reverse supervalue for shoulders as 124 00:05:54,279 --> 00:05:56,080 Speaker 1: we've done for us four years, because in the last 125 00:05:56,120 --> 00:05:58,640 Speaker 1: four years we have deriverse thirty three six billion dollars 126 00:05:58,680 --> 00:06:00,839 Speaker 1: of cash return to our shoulders. Right now, I'm looking 127 00:06:01,000 --> 00:06:04,000 Speaker 1: at the inventories in China and China steal inventorious have 128 00:06:04,040 --> 00:06:07,440 Speaker 1: expanded to a record high due to the disruption from 129 00:06:07,440 --> 00:06:10,719 Speaker 1: the coronavirus and the halt in building. How much more 130 00:06:10,760 --> 00:06:13,239 Speaker 1: do you think that iron ore prices have to drop 131 00:06:13,320 --> 00:06:16,120 Speaker 1: here if the coronavirus is not contained in the near term. 132 00:06:16,440 --> 00:06:18,440 Speaker 1: That's a very good question. I can't answer on prices 133 00:06:18,440 --> 00:06:20,440 Speaker 1: otherwise the lawyers would kill me as always, so I 134 00:06:20,440 --> 00:06:22,840 Speaker 1: can't do that. However, what is very interesting in the 135 00:06:22,920 --> 00:06:25,440 Speaker 1: last few weeks, whe the government or wh this steal 136 00:06:25,440 --> 00:06:27,760 Speaker 1: industry has done, they have shut down most of the 137 00:06:27,960 --> 00:06:31,039 Speaker 1: e F converters which are primarily scraped based in other 138 00:06:31,120 --> 00:06:34,200 Speaker 1: produced steel. But the blast furnaces which are using I know, 139 00:06:34,520 --> 00:06:36,440 Speaker 1: have not. I've only slowed down. And if you look 140 00:06:36,480 --> 00:06:38,560 Speaker 1: at the volumes going into China, if you look at 141 00:06:38,760 --> 00:06:41,039 Speaker 1: the inventory of I know at the post they have 142 00:06:41,120 --> 00:06:42,800 Speaker 1: not moved and as I said to them, my other 143 00:06:42,839 --> 00:06:45,680 Speaker 1: books on I know are absolutely sold out, and I'm 144 00:06:45,680 --> 00:06:48,120 Speaker 1: moving everything to China ches I think everyone but to see. 145 00:06:48,120 --> 00:06:50,680 Speaker 1: And that's going in one place, stock piles inventories, and 146 00:06:50,680 --> 00:06:52,680 Speaker 1: it's not going to get deployed anytime. So so let's 147 00:06:52,680 --> 00:06:54,760 Speaker 1: talk about that. You're saying you're gonna get stimulus out 148 00:06:54,760 --> 00:06:56,919 Speaker 1: of China. What kind of stimulus? Where is it going 149 00:06:56,960 --> 00:06:59,560 Speaker 1: to go? I think the stimulus will may be slightly 150 00:06:59,560 --> 00:07:01,560 Speaker 1: different from the past because, as I said, so far, 151 00:07:01,680 --> 00:07:05,679 Speaker 1: the crisis in China is about services, about construction, about 152 00:07:05,680 --> 00:07:08,440 Speaker 1: the back end of the matter, factoring that they're gonna 153 00:07:08,440 --> 00:07:11,120 Speaker 1: have to support all those aspects of the economy. But 154 00:07:11,800 --> 00:07:13,880 Speaker 1: I've got to know that they will invest a little 155 00:07:13,920 --> 00:07:16,600 Speaker 1: more or even more on the infrastructure as they've done 156 00:07:16,600 --> 00:07:18,280 Speaker 1: in the past, because that's the best way for them 157 00:07:18,320 --> 00:07:21,880 Speaker 1: to stimulus, to stimulate the economy, and it's commutely rich. 158 00:07:22,160 --> 00:07:25,440 Speaker 1: So second half of this year, I'm not too concern. JS. 159 00:07:25,520 --> 00:07:27,400 Speaker 1: Always great to get your your fantastic to have you 160 00:07:27,400 --> 00:07:30,120 Speaker 1: with us on the program this morning. That's Jane Sebastian Jacques. 161 00:07:30,280 --> 00:07:33,560 Speaker 1: They re outIn so CEO joining us on the LCES 162 00:07:33,640 --> 00:07:40,040 Speaker 1: in China. We've got them on the phone, so we've 163 00:07:40,080 --> 00:07:41,960 Speaker 1: got to go there. Folks. There are people that do 164 00:07:42,040 --> 00:07:45,600 Speaker 1: medicine from a distance, and then there's someone like Mr Whitworth, James. 165 00:07:45,680 --> 00:07:49,040 Speaker 1: Jimmy Whitworth is with the London School of Hygiene and 166 00:07:49,080 --> 00:07:53,760 Speaker 1: Tropical Medicine and John, without question, he has done the 167 00:07:53,800 --> 00:07:57,240 Speaker 1: most in Africa. You can talk about it. You can 168 00:07:57,240 --> 00:07:59,440 Speaker 1: put a piece of chalk in your hand and run 169 00:07:59,440 --> 00:08:02,280 Speaker 1: a course on a lecture, and then there is the 170 00:08:02,440 --> 00:08:05,600 Speaker 1: going and doing of it. And Jimmy Witworth has done 171 00:08:05,680 --> 00:08:08,720 Speaker 1: viruses like nobody else on a plan. Fantastic to have 172 00:08:08,800 --> 00:08:11,400 Speaker 1: Jimmy with us now, London School a higiena Tropical medicine, 173 00:08:11,520 --> 00:08:15,720 Speaker 1: professor of International Public health, professor, fantastic to have you 174 00:08:15,760 --> 00:08:17,840 Speaker 1: with us. From the market's perspective, and I asked this 175 00:08:17,920 --> 00:08:21,400 Speaker 1: question exclusively from the perspective of investors right now, there 176 00:08:21,480 --> 00:08:23,720 Speaker 1: is a lack of faith in the ability to contain 177 00:08:23,800 --> 00:08:26,400 Speaker 1: this virus, that perhaps this is broken out to Europe 178 00:08:26,400 --> 00:08:29,440 Speaker 1: and beyond the United States, maybe it's already here. Professor, 179 00:08:29,480 --> 00:08:31,320 Speaker 1: put that into some context from your point of view, 180 00:08:31,320 --> 00:08:34,840 Speaker 1: where are we? Well? Thank you for that and thank 181 00:08:34,880 --> 00:08:40,439 Speaker 1: you further at fulsome introduction, Very appreciative. I think we're 182 00:08:40,480 --> 00:08:46,240 Speaker 1: in a very worrying situation at the moment. We have 183 00:08:46,320 --> 00:08:50,800 Speaker 1: a situation I think where in China, with very heroic 184 00:08:50,880 --> 00:08:55,200 Speaker 1: and strong public health measures, they have been able to 185 00:08:55,320 --> 00:09:00,160 Speaker 1: get the outbreak. They're more or less contained. It's all 186 00:09:00,200 --> 00:09:03,200 Speaker 1: going on, but it's not expanding at anything like the 187 00:09:03,280 --> 00:09:05,880 Speaker 1: rate that it was, which is good. But the worry 188 00:09:06,040 --> 00:09:10,200 Speaker 1: is that it has now spilled over into a number 189 00:09:10,360 --> 00:09:14,440 Speaker 1: of other countries and regions in the world. So in 190 00:09:14,480 --> 00:09:19,720 Speaker 1: the Middle East we have this focus in Iran, which 191 00:09:20,040 --> 00:09:24,000 Speaker 1: is worrying because that's getting into countries which have very 192 00:09:24,080 --> 00:09:30,360 Speaker 1: poor health systems, places like Afghanistan and Pakistan. And we've 193 00:09:30,400 --> 00:09:34,560 Speaker 1: got an expansion of cases in Italy, which is also 194 00:09:34,960 --> 00:09:40,080 Speaker 1: crossing borders and I think threatens Western Europe more more generally. 195 00:09:40,280 --> 00:09:44,319 Speaker 1: And the thing is, this is an infectious disease. It 196 00:09:44,400 --> 00:09:49,680 Speaker 1: does not recognize international borders and will spread wherever people move. 197 00:09:49,880 --> 00:09:57,520 Speaker 1: What's the worst case scenario that you see as somewhat likely, um, 198 00:09:57,559 --> 00:10:01,880 Speaker 1: I think that there is sustained transmission that occurs all 199 00:10:01,960 --> 00:10:07,080 Speaker 1: over the globe. I'm worried particularly about what might happen 200 00:10:07,280 --> 00:10:11,160 Speaker 1: in Sub Saharan Africa, where not only have we got 201 00:10:11,760 --> 00:10:16,400 Speaker 1: um weak health systems and surveillance systems and the like, 202 00:10:16,760 --> 00:10:18,960 Speaker 1: but we also have people who have a lot of 203 00:10:19,600 --> 00:10:24,960 Speaker 1: other infectious diseases HIV and tuberculosis and so on, and 204 00:10:25,040 --> 00:10:28,000 Speaker 1: it might well spread there. So it's really important that 205 00:10:28,040 --> 00:10:31,199 Speaker 1: we put in the facilities that we can there. The 206 00:10:31,320 --> 00:10:34,880 Speaker 1: stereotypes that we have, Professor Whitworth, they're so strong, I 207 00:10:34,880 --> 00:10:37,640 Speaker 1: mean it goes back to seventy one and Stanley and 208 00:10:37,679 --> 00:10:40,520 Speaker 1: Livingston in Africa, and you know some of us watched 209 00:10:40,520 --> 00:10:44,640 Speaker 1: the Spencer Spencer Tracy movie long ago. Those stereotypes are 210 00:10:44,640 --> 00:10:48,960 Speaker 1: embedded in. One is those viruses over there are more 211 00:10:49,080 --> 00:10:53,880 Speaker 1: virulent than what we face. Do you know the virulency 212 00:10:53,920 --> 00:10:57,520 Speaker 1: of this virus. Is it equivalent to what you've seen 213 00:10:57,520 --> 00:11:03,080 Speaker 1: in Africa or is it a more common virus. I 214 00:11:03,120 --> 00:11:05,200 Speaker 1: think there are two things to look at here. One 215 00:11:05,400 --> 00:11:09,400 Speaker 1: is how transmissible it is, and secondly is how virulent 216 00:11:09,520 --> 00:11:12,480 Speaker 1: it is. And those things sometimes go in parallel, but 217 00:11:12,600 --> 00:11:15,760 Speaker 1: sometimes don't, and this is a virus where they don't. 218 00:11:16,160 --> 00:11:20,680 Speaker 1: So I'd say this is pretty highly transmissible. For every 219 00:11:20,720 --> 00:11:25,240 Speaker 1: person who's infected, on average, between two and three other 220 00:11:25,320 --> 00:11:28,839 Speaker 1: people will get infected from that person if nothing is done. 221 00:11:29,320 --> 00:11:33,600 Speaker 1: So that's that's the challenge for public health authorities. In 222 00:11:33,760 --> 00:11:39,880 Speaker 1: terms of its virulence, it isn't as bad as many 223 00:11:40,000 --> 00:11:44,800 Speaker 1: other diseases. So something like eighty or more percent of 224 00:11:45,040 --> 00:11:48,520 Speaker 1: people who are infected will have mild illness and will 225 00:11:48,520 --> 00:11:51,720 Speaker 1: recover and it will be no problem. But we have 226 00:11:52,679 --> 00:11:55,880 Speaker 1: fifteen or twent of people who are infected who get 227 00:11:55,960 --> 00:11:59,920 Speaker 1: severe disease. These are people who need to be hospitalized 228 00:12:00,440 --> 00:12:03,719 Speaker 1: and on average they're staying in hospital for something like 229 00:12:03,880 --> 00:12:07,160 Speaker 1: ten to fourteen days, which is a long time and 230 00:12:07,200 --> 00:12:10,960 Speaker 1: puts a big strain on health services. And of of 231 00:12:11,080 --> 00:12:13,840 Speaker 1: all the people who are infected, one or two percent 232 00:12:14,040 --> 00:12:17,840 Speaker 1: may die. Professor, it sounds absolutely tragic. And forgive me 233 00:12:17,880 --> 00:12:20,400 Speaker 1: because we only have thirty seconds left. But why the 234 00:12:20,559 --> 00:12:26,360 Speaker 1: wh not calling this a pandemic um They say that 235 00:12:26,360 --> 00:12:29,000 Speaker 1: that's an informal term. If people want to use it, 236 00:12:29,040 --> 00:12:32,960 Speaker 1: that's fine. They do not formally declare pandemics. They've called 237 00:12:32,960 --> 00:12:36,800 Speaker 1: it a public health emergency of international concern, and that's 238 00:12:36,840 --> 00:12:40,960 Speaker 1: as high a level of severity as they go, professor, 239 00:12:41,000 --> 00:12:43,520 Speaker 1: Thank you so much. Jimmy Whitworth was We're just thrilled 240 00:12:43,520 --> 00:12:46,559 Speaker 1: with the team's ability to bring in these true experts 241 00:12:46,640 --> 00:12:49,880 Speaker 1: of Professor Whitworth with the London School of Hygiene and 242 00:12:49,880 --> 00:12:53,800 Speaker 1: Tropical Medicine and professor of International Public Health. But he 243 00:12:53,960 --> 00:12:56,240 Speaker 1: is really one of the world's access and not just 244 00:12:56,320 --> 00:12:58,880 Speaker 1: a bowl up but like four and five and six 245 00:12:59,160 --> 00:13:06,640 Speaker 1: things that camp notes from Africa. He needs no introduction. 246 00:13:06,679 --> 00:13:08,880 Speaker 1: Of course, is my work at Davos for years has 247 00:13:08,920 --> 00:13:13,160 Speaker 1: been important to Bloomberg Surveillance. It is Rubini Macro associated 248 00:13:13,400 --> 00:13:16,560 Speaker 1: is New York University, and we're through the professor Rubini 249 00:13:16,600 --> 00:13:19,360 Speaker 1: could join us this morning. Noria, I'm gonna cut to 250 00:13:19,400 --> 00:13:21,480 Speaker 1: the chase. You are one of the great old World 251 00:13:21,559 --> 00:13:25,280 Speaker 1: voices out there, your heritage of the Middle Eastern of course, 252 00:13:25,320 --> 00:13:27,960 Speaker 1: coming over to all your work in Italy years ago. 253 00:13:28,000 --> 00:13:31,400 Speaker 1: Would you travel to Italy today? Oh yeah, I would 254 00:13:31,400 --> 00:13:33,760 Speaker 1: travel to Italy today, but I think that that would 255 00:13:33,800 --> 00:13:37,680 Speaker 1: take with me a mask, because of course, this is 256 00:13:37,720 --> 00:13:40,959 Speaker 1: a global pandemic I spread to Italy. And by the way, 257 00:13:40,960 --> 00:13:43,319 Speaker 1: I worry about the fact that today the help ministers 258 00:13:43,320 --> 00:13:46,400 Speaker 1: of Italy Germany, Francis you said that the borders of 259 00:13:46,440 --> 00:13:48,560 Speaker 1: Europe are gonna remain open if you think about in 260 00:13:48,640 --> 00:13:52,160 Speaker 1: thousand fifteen when those the wave of refugees, the sh 261 00:13:52,480 --> 00:13:55,840 Speaker 1: Treaty was effectively blocked. You couldn't go from county country 262 00:13:55,880 --> 00:13:58,520 Speaker 1: without checks. Today we have a much more serious problem. 263 00:13:58,600 --> 00:14:01,360 Speaker 1: There is that it's gonna spread from Italy parts of Europe, 264 00:14:01,360 --> 00:14:03,800 Speaker 1: and they say everything is fine. It's a bit of 265 00:14:03,840 --> 00:14:06,840 Speaker 1: a paradox. I want to pass between what all of 266 00:14:06,840 --> 00:14:10,199 Speaker 1: our listeners and viewers know. It just supply side economics, 267 00:14:10,200 --> 00:14:12,800 Speaker 1: which is almost a theology. I don't want to get 268 00:14:12,840 --> 00:14:16,080 Speaker 1: into the theory now, you've always pushed against that theory 269 00:14:16,320 --> 00:14:22,040 Speaker 1: and a supply shock within the geometry of basic economics. 270 00:14:22,280 --> 00:14:24,720 Speaker 1: Have we ever seen in a modern day of supply 271 00:14:24,920 --> 00:14:28,520 Speaker 1: shock like we're living right now. Well, there were supply 272 00:14:28,600 --> 00:14:31,080 Speaker 1: shocks in the seventies, when you had the Ald shocks 273 00:14:31,440 --> 00:14:34,960 Speaker 1: in seventy three after you Ki Poor War, seventeen revolution, 274 00:14:36,480 --> 00:14:39,360 Speaker 1: and Iraqi manson of Kuwait. Those were the shocks that 275 00:14:39,400 --> 00:14:42,600 Speaker 1: reduce growth and increased inflation. So we had supply shocks 276 00:14:42,640 --> 00:14:45,720 Speaker 1: were negative, But we're related to geopolitical shocks in the 277 00:14:45,720 --> 00:14:48,200 Speaker 1: Middle East. This is a different type of a supply shock, 278 00:14:48,520 --> 00:14:51,600 Speaker 1: is still staculation. It reduces growth, increases cost and inflation, 279 00:14:52,160 --> 00:14:54,960 Speaker 1: but it is a supply shock is negative. So Professor, 280 00:14:55,000 --> 00:14:57,120 Speaker 1: up until two days ago, one could argue that the 281 00:14:57,120 --> 00:15:00,720 Speaker 1: equity markets were kind of just shrugging off this coronavirus, 282 00:15:00,720 --> 00:15:02,560 Speaker 1: where if you look at the commodity markets, we had 283 00:15:02,600 --> 00:15:04,960 Speaker 1: some pretty significant pullbacks. You look at the bond market, 284 00:15:05,000 --> 00:15:08,920 Speaker 1: yields of plunging to new loads even after the two days. 285 00:15:08,920 --> 00:15:10,720 Speaker 1: So if you've had any equity markets over the last 286 00:15:10,720 --> 00:15:12,760 Speaker 1: two days, how do you think financial markets are they 287 00:15:12,840 --> 00:15:16,880 Speaker 1: properly discounting the risk associated the global GDP growth from 288 00:15:16,880 --> 00:15:19,840 Speaker 1: this virus? Potentially? Um No, I don't think so, for 289 00:15:20,240 --> 00:15:22,760 Speaker 1: at least four reasons. Reason number one, this is a 290 00:15:22,840 --> 00:15:25,560 Speaker 1: global pandemics. You're gonna spread not only to Europe, but 291 00:15:25,640 --> 00:15:28,280 Speaker 1: to Asia and even to the United States. Like the 292 00:15:28,360 --> 00:15:31,880 Speaker 1: CDC warrant, that's going to be massive. Second, the idea 293 00:15:31,920 --> 00:15:34,560 Speaker 1: there's going to be a peak of the shock to 294 00:15:34,640 --> 00:15:36,760 Speaker 1: the global economy being by the end of the first 295 00:15:36,800 --> 00:15:40,440 Speaker 1: quarter doesn't make sense if you think about supply chain shocks, 296 00:15:40,760 --> 00:15:45,080 Speaker 1: trade channels, confidence, what's gonna happen to capacts, to consumer confidence? 297 00:15:45,320 --> 00:15:48,200 Speaker 1: The impact is going to be into second quarter three. 298 00:15:48,480 --> 00:15:54,320 Speaker 1: Everybody said we shape recovery that's also also total utter nonsense. Uh, 299 00:15:54,560 --> 00:15:57,960 Speaker 1: the Chinese economy is gonna contract the analyzed rate of 300 00:15:58,040 --> 00:16:02,000 Speaker 1: at least two percent analyze of eight but within the 301 00:16:02,080 --> 00:16:04,760 Speaker 1: quarter of two percent, even if there is a V shap, 302 00:16:04,840 --> 00:16:08,000 Speaker 1: recovering grows eight percent, that is well above the six 303 00:16:08,080 --> 00:16:10,960 Speaker 1: of before the crisis. You're gonna have growth in China 304 00:16:11,000 --> 00:16:13,640 Speaker 1: going this year from six to four. If the V 305 00:16:13,720 --> 00:16:16,080 Speaker 1: shape means that in the second and turn and fourth 306 00:16:16,120 --> 00:16:19,280 Speaker 1: quarter grows goes back to six percent. With a shock 307 00:16:19,320 --> 00:16:21,600 Speaker 1: to the first quarter, Chinese growth is gonna be two 308 00:16:21,640 --> 00:16:24,120 Speaker 1: point five percent. So the best we can expect from 309 00:16:24,200 --> 00:16:28,280 Speaker 1: China is four at the most likely two point five percent. 310 00:16:28,480 --> 00:16:31,040 Speaker 1: When now markets are estimating the Chinese gods are gonna 311 00:16:31,080 --> 00:16:33,080 Speaker 1: go from six to five and a half. So markets 312 00:16:33,120 --> 00:16:36,200 Speaker 1: are delusional first about the impact on Chinese growth and 313 00:16:36,240 --> 00:16:39,120 Speaker 1: the impact on the global calling. Final point, people hope 314 00:16:39,160 --> 00:16:41,400 Speaker 1: that central banks of physical police is going to come 315 00:16:41,440 --> 00:16:43,960 Speaker 1: to the rescue physical policy. That is not much space 316 00:16:44,000 --> 00:16:47,280 Speaker 1: that are lags and central banks are running out of bullets. 317 00:16:47,320 --> 00:16:51,080 Speaker 1: Certainly BJ centrally, the e c B centrally, what's happening 318 00:16:51,160 --> 00:16:53,720 Speaker 1: right now in Japan Italy implies that not much that 319 00:16:54,440 --> 00:16:57,200 Speaker 1: I can do. I know you're shortlisted for governor the FED. 320 00:16:57,240 --> 00:16:59,440 Speaker 1: Here when the person gets through his next ranch of 321 00:16:59,480 --> 00:17:02,040 Speaker 1: a point all the cut. I would never take the 322 00:17:02,160 --> 00:17:05,240 Speaker 1: job from Trump, or any job from Trump none ever, 323 00:17:05,640 --> 00:17:08,639 Speaker 1: nor the cut to the chase cultul a code a 324 00:17:08,800 --> 00:17:13,840 Speaker 1: legit front level mathematics economists, so cut rates now, and 325 00:17:13,920 --> 00:17:16,920 Speaker 1: a lot of other people, including the vice chairman, say not. 326 00:17:17,560 --> 00:17:21,680 Speaker 1: What's the efficacy of a rate cut right now? Whenever 327 00:17:21,720 --> 00:17:25,399 Speaker 1: you have a negative supply shock, the damages global supply chains, 328 00:17:25,760 --> 00:17:28,040 Speaker 1: cutting interest rates is not going to make much of 329 00:17:28,080 --> 00:17:31,120 Speaker 1: a difference. Of course, the market is going to rarey 330 00:17:31,280 --> 00:17:33,720 Speaker 1: on news of that cut or news that the cut 331 00:17:33,840 --> 00:17:36,520 Speaker 1: is coming. But once then the economics pill over, the 332 00:17:36,560 --> 00:17:40,919 Speaker 1: financials plovers, and the other spillovers become severe. Doing twenty 333 00:17:40,920 --> 00:17:43,880 Speaker 1: five business points even fifty business points, but the fact 334 00:17:43,960 --> 00:17:45,520 Speaker 1: is not going to make any difference. And the problem 335 00:17:45,600 --> 00:17:48,399 Speaker 1: right now is that the contagion the pandemics already in Japan, 336 00:17:48,640 --> 00:17:50,920 Speaker 1: is already in Italy, in Europe. And what's the room 337 00:17:50,960 --> 00:17:53,159 Speaker 1: that b o J and e CB have going to 338 00:17:53,280 --> 00:17:56,280 Speaker 1: minus sixty for the ECB, minus twenty for the b 339 00:17:56,400 --> 00:17:59,439 Speaker 1: o J, and what ten business points even twenty business 340 00:17:59,440 --> 00:18:01,480 Speaker 1: points of more getting rate is going to make in 341 00:18:01,520 --> 00:18:05,000 Speaker 1: the face of a massive negative supply shock close to nothing. 342 00:18:05,720 --> 00:18:09,760 Speaker 1: So what do you think China needs to do should 343 00:18:09,800 --> 00:18:14,000 Speaker 1: do to support its economy given what's happened there. Well, 344 00:18:14,040 --> 00:18:17,639 Speaker 1: you know, the intelligent Chinese economist say, we already that 345 00:18:17,680 --> 00:18:20,639 Speaker 1: this major shock. The worst thing we could do is 346 00:18:20,680 --> 00:18:25,040 Speaker 1: another round of massive monetary, physical and credit stimulus. Because 347 00:18:25,320 --> 00:18:27,600 Speaker 1: every time there is a growth shock, they do another 348 00:18:27,680 --> 00:18:30,200 Speaker 1: round of that. There is more that more leverage, more 349 00:18:30,200 --> 00:18:33,760 Speaker 1: over capacity, and more economic damage that eventually leads to 350 00:18:33,800 --> 00:18:36,119 Speaker 1: the risk of a financial crisis in China. So the 351 00:18:36,240 --> 00:18:40,720 Speaker 1: sensible Chinese economies say, unfortunately, there's a growth chok. Yes, 352 00:18:40,800 --> 00:18:43,960 Speaker 1: we have to backstop those that are been heard, provide 353 00:18:43,960 --> 00:18:47,359 Speaker 1: maybe income relief, make sure that most firms, especially the 354 00:18:47,359 --> 00:18:49,800 Speaker 1: smaller ones, don't go bankrupt. But that's the extent of 355 00:18:49,840 --> 00:18:51,879 Speaker 1: the support we will we want to give. This is 356 00:18:51,920 --> 00:18:54,400 Speaker 1: a negative supply shock. We'll have to accept the shock 357 00:18:54,480 --> 00:18:56,879 Speaker 1: and the consequences of it and try to admild the 358 00:18:57,000 --> 00:18:59,520 Speaker 1: economic response. If you do more of that, then the 359 00:18:59,640 --> 00:19:03,160 Speaker 1: risk that that that becomes unsustainable. Even what's the risk 360 00:19:03,200 --> 00:19:05,680 Speaker 1: of helicopter money, I mean, Hong Kong today is gonna 361 00:19:05,800 --> 00:19:08,159 Speaker 1: try it out ten Tho, Hong Kong, which you know 362 00:19:08,400 --> 00:19:11,040 Speaker 1: enough to get three drinks at the embark demandering. Great, 363 00:19:11,400 --> 00:19:14,399 Speaker 1: but what what is there efficacy to helicopter money, the 364 00:19:14,440 --> 00:19:18,840 Speaker 1: true cash stimulus. Well, whenever there's going to be the 365 00:19:18,880 --> 00:19:23,080 Speaker 1: global and the next global recession, I'm sure that monetary 366 00:19:23,080 --> 00:19:26,159 Speaker 1: policy and physical is gonna become more unconventional invariant of 367 00:19:26,560 --> 00:19:30,520 Speaker 1: helicopter drop of money m M T. People's qui or 368 00:19:30,560 --> 00:19:34,640 Speaker 1: what bernankei or star fish and the folks that black 369 00:19:34,720 --> 00:19:37,840 Speaker 1: Cluck suggests that is essential variance of helicopter drop is 370 00:19:37,880 --> 00:19:40,320 Speaker 1: going to be implemented. My point is that if there's 371 00:19:40,320 --> 00:19:44,280 Speaker 1: a demand shock, monitoring physical stimulus outs you. If you 372 00:19:44,280 --> 00:19:47,160 Speaker 1: have a negative supply shock like the seventhies, we did 373 00:19:47,200 --> 00:19:49,680 Speaker 1: the monitor is stimulus. We did the physical stimulus and 374 00:19:49,840 --> 00:19:53,080 Speaker 1: ended up with high that and e inflation. So even 375 00:19:53,119 --> 00:19:56,000 Speaker 1: if you do the helicopter drop, it may not as 376 00:19:56,080 --> 00:19:58,200 Speaker 1: much of an impact in a situation which the shock 377 00:19:58,320 --> 00:20:02,359 Speaker 1: is a negative supply Rather than seconds you have in 378 00:20:02,400 --> 00:20:04,159 Speaker 1: the f T today, I haven't had time to read it. 379 00:20:04,200 --> 00:20:06,000 Speaker 1: What do you say, cut, you know, save me some 380 00:20:06,040 --> 00:20:08,480 Speaker 1: time here in our well, you know four points that 381 00:20:08,520 --> 00:20:12,000 Speaker 1: I briefly made that one with the global point right now, 382 00:20:12,200 --> 00:20:15,240 Speaker 1: it's a pandemic. It's a global pandemic. The economic game 383 00:20:15,240 --> 00:20:17,520 Speaker 1: pact is gonna be much more severe. Is not gonna 384 00:20:17,560 --> 00:20:20,199 Speaker 1: be a V shaped recovery. Chinese Girl's gonna be at 385 00:20:20,200 --> 00:20:24,440 Speaker 1: best two point five percent, the global economisharply, and the 386 00:20:24,440 --> 00:20:26,400 Speaker 1: policy of response is not going to make the difference. 387 00:20:26,480 --> 00:20:32,920 Speaker 1: You looked hand arrested. I'm always travel I just came 388 00:20:32,960 --> 00:20:35,040 Speaker 1: back from five weeks all over the world, but not 389 00:20:35,200 --> 00:20:38,000 Speaker 1: in China. Very good nor being stay away from me 390 00:20:38,800 --> 00:20:45,600 Speaker 1: with Rebedia associates greatly appreciate it. Where we're gonna do 391 00:20:45,720 --> 00:20:48,080 Speaker 1: right now, folks, is do politics, but try to do 392 00:20:48,119 --> 00:20:50,480 Speaker 1: it in a different way. We're all exhausted by the 393 00:20:50,920 --> 00:20:55,560 Speaker 1: what is pundentry and that we see there, the gaming 394 00:20:55,560 --> 00:20:58,199 Speaker 1: of the polls, etcetera. And we thought we'd haul in 395 00:20:58,240 --> 00:21:01,280 Speaker 1: here an academic that's not only spent time looking at 396 00:21:01,280 --> 00:21:04,440 Speaker 1: the broader picture of the American political fabric, but actually 397 00:21:04,560 --> 00:21:09,399 Speaker 1: has really delved into the machinery of politics. One of 398 00:21:09,400 --> 00:21:12,760 Speaker 1: her great efforts as core concepts in American government. It 399 00:21:12,880 --> 00:21:16,119 Speaker 1: is real basic look at the basic process of what 400 00:21:16,160 --> 00:21:19,199 Speaker 1: we do in politics, Uh. Jenny's Ano joins us right 401 00:21:19,200 --> 00:21:21,040 Speaker 1: now from my own in college and of course a 402 00:21:21,080 --> 00:21:25,040 Speaker 1: Bloomberg contributor here this political season. Wonderful to have you here, 403 00:21:25,440 --> 00:21:27,440 Speaker 1: so good to be here wearing blue? Was that for 404 00:21:27,480 --> 00:21:30,760 Speaker 1: the debate last night? Did Red take the victory off 405 00:21:30,760 --> 00:21:33,359 Speaker 1: the blue debate last night? No, you're right, I should 406 00:21:33,359 --> 00:21:36,120 Speaker 1: be wearing purple or something that doesn't indicate some kind 407 00:21:36,200 --> 00:21:38,880 Speaker 1: of partisanship. No, it was just the dress I found. 408 00:21:38,880 --> 00:21:42,400 Speaker 1: How much did Mr Trump uh win the debate last night? 409 00:21:43,080 --> 00:21:45,520 Speaker 1: I ranked him as as one of the big winners 410 00:21:45,640 --> 00:21:48,840 Speaker 1: last night. Um, the Democrats, you know, and this is 411 00:21:48,880 --> 00:21:52,640 Speaker 1: not about the candidates necessarily, but this process does not 412 00:21:52,800 --> 00:21:55,440 Speaker 1: work to the benefit of the Democratic Party or any 413 00:21:55,440 --> 00:21:58,320 Speaker 1: of those candidates up there, and as a result, he 414 00:21:58,400 --> 00:22:02,040 Speaker 1: continues to win. Is this salvation for everybody against the 415 00:22:02,080 --> 00:22:05,119 Speaker 1: senator from Vermont? Just what you mentioned, which is the 416 00:22:05,160 --> 00:22:10,040 Speaker 1: purpleness of Texas, the purpleness of California. I mean, is 417 00:22:10,080 --> 00:22:12,320 Speaker 1: they go to Super Tuesday? Is that really the heart 418 00:22:12,359 --> 00:22:15,400 Speaker 1: of the matters. The moderates have to find a way 419 00:22:15,400 --> 00:22:19,560 Speaker 1: to actually get tangible votes. Well, the moderates have to 420 00:22:19,600 --> 00:22:22,359 Speaker 1: get votes. There are moderates in the Democratic Party they 421 00:22:22,400 --> 00:22:25,120 Speaker 1: are the biggest contingent of the party. But what has 422 00:22:25,160 --> 00:22:28,200 Speaker 1: to happen is you can't have five moderates running against 423 00:22:28,240 --> 00:22:30,920 Speaker 1: Bernie Sanders because he will come away even with the 424 00:22:30,960 --> 00:22:33,240 Speaker 1: plurality every time. Ny what are they going to do? 425 00:22:33,280 --> 00:22:35,439 Speaker 1: Get into a room at asside who drops out? I mean, 426 00:22:35,480 --> 00:22:37,720 Speaker 1: let's get real, how does this work? Well? I think 427 00:22:37,800 --> 00:22:40,280 Speaker 1: you know, there's gonna have to be pressure from the 428 00:22:40,320 --> 00:22:43,200 Speaker 1: party that those moderates who are polling in the single 429 00:22:43,280 --> 00:22:47,280 Speaker 1: digits leave the race. So I think Amy Klobisher, Pete Buddha, 430 00:22:47,560 --> 00:22:50,880 Speaker 1: I mean, people I like enormously, but you can't keep 431 00:22:50,920 --> 00:22:54,280 Speaker 1: doing this because what they're doing is they are they 432 00:22:54,359 --> 00:22:57,800 Speaker 1: care about the moderates winning this thing. They've got to 433 00:22:57,800 --> 00:22:59,720 Speaker 1: get out of the race. Right. You're not pulling your 434 00:22:59,720 --> 00:23:02,280 Speaker 1: blame the process. You don't think that there's anything that 435 00:23:02,320 --> 00:23:05,400 Speaker 1: the candidates themselves could do at the debate to turn 436 00:23:05,440 --> 00:23:08,000 Speaker 1: the attention in a positive way towards the Democrats. Is 437 00:23:08,040 --> 00:23:10,800 Speaker 1: that the implication here, I think it's very, very tough 438 00:23:10,920 --> 00:23:14,400 Speaker 1: given this process. You know, if if we think about, 439 00:23:14,440 --> 00:23:17,119 Speaker 1: you know, in a business, if you're hiring somebody for 440 00:23:17,160 --> 00:23:19,080 Speaker 1: a job, and I always say to students, if you're 441 00:23:19,160 --> 00:23:21,520 Speaker 1: hiring an accountant and you say, I'm going to hire 442 00:23:21,560 --> 00:23:24,680 Speaker 1: you if you run the fastest mile. That's essentially what 443 00:23:24,720 --> 00:23:27,520 Speaker 1: we're doing. We're asking you to be president, but we're 444 00:23:27,600 --> 00:23:30,200 Speaker 1: judging you on things that won't make you a good president. 445 00:23:30,320 --> 00:23:33,840 Speaker 1: So there's a huge fissure within the way we hire 446 00:23:33,920 --> 00:23:36,399 Speaker 1: for this job. But this has been the process for 447 00:23:36,600 --> 00:23:39,880 Speaker 1: time and Memoriam, why is this time different? Um, it's 448 00:23:39,920 --> 00:23:42,359 Speaker 1: not different. It's been the process ins about the early 449 00:23:42,440 --> 00:23:45,760 Speaker 1: nineteen seventies, and we've long had for academics. This has 450 00:23:45,800 --> 00:23:47,760 Speaker 1: long been the bane of our existence, that the way 451 00:23:47,760 --> 00:23:50,919 Speaker 1: that we elect presidents. But it's gotten worse as we 452 00:23:50,960 --> 00:23:54,680 Speaker 1: have moved towards in democratizing this process quite frankly and 453 00:23:54,800 --> 00:23:57,600 Speaker 1: giving this thing over to primaries. People say, oh, primaries 454 00:23:57,600 --> 00:24:01,399 Speaker 1: are democratic. Turnout is incredibly low in these primaries. You 455 00:24:01,440 --> 00:24:04,600 Speaker 1: get the most extreme voters out there, they vote, and 456 00:24:04,640 --> 00:24:07,159 Speaker 1: you get the kind of chaos that we're seeing, and 457 00:24:07,200 --> 00:24:10,120 Speaker 1: then you ask these people to do the impossible, which 458 00:24:10,160 --> 00:24:12,920 Speaker 1: is get out on this stage and battle this thing out. Jenny, 459 00:24:12,960 --> 00:24:14,480 Speaker 1: to what degrade, do you think this party is really 460 00:24:14,480 --> 00:24:18,200 Speaker 1: failing to display a real showing of humility to understand 461 00:24:18,200 --> 00:24:19,920 Speaker 1: what is actually going on here in the same way 462 00:24:19,920 --> 00:24:22,520 Speaker 1: that the Republican Party did four years ago. That it's 463 00:24:22,560 --> 00:24:24,879 Speaker 1: easy to sit here and say that Senator Sanders wouldn't 464 00:24:24,880 --> 00:24:27,040 Speaker 1: make a good candidate for a whole variety of reasons, 465 00:24:27,040 --> 00:24:30,280 Speaker 1: but failing to understand ultimately what he's tapping into here. 466 00:24:30,600 --> 00:24:33,320 Speaker 1: It's tapping into a broader and broader base as this 467 00:24:33,400 --> 00:24:36,160 Speaker 1: campaign goes on. Are we failing to do that? I 468 00:24:36,200 --> 00:24:39,560 Speaker 1: think the Democratic Party. Yeah, Like like any party has 469 00:24:39,680 --> 00:24:41,720 Speaker 1: a lot of different components to it, and one of 470 00:24:41,760 --> 00:24:44,119 Speaker 1: those is the base that Bernie Sanders is speaking to. 471 00:24:44,520 --> 00:24:46,199 Speaker 1: But I would say the party has to look at 472 00:24:46,200 --> 00:24:48,800 Speaker 1: the reality. The reality is this race will be decided 473 00:24:48,800 --> 00:24:52,080 Speaker 1: and about six moderate states. You go to Florida and 474 00:24:52,200 --> 00:24:55,120 Speaker 1: praising Fidel Castro is not a winning message to beat 475 00:24:55,160 --> 00:24:59,000 Speaker 1: Donald Trump in twenty twenty. It's simply not. So he 476 00:24:59,080 --> 00:25:01,679 Speaker 1: does have a base. The Democrats need to understand what 477 00:25:01,800 --> 00:25:04,119 Speaker 1: is activating that base, But they also need to be 478 00:25:04,160 --> 00:25:07,280 Speaker 1: realistic about how you win this thing in November. Everyone 479 00:25:07,280 --> 00:25:09,760 Speaker 1: who's voting should know that. They should know that. And 480 00:25:09,800 --> 00:25:11,560 Speaker 1: I don't want to insult the base that I want 481 00:25:11,560 --> 00:25:14,719 Speaker 1: to insult the electorate of any kind Democrats more Republican, 482 00:25:15,440 --> 00:25:18,679 Speaker 1: but they understand that they're not idiots. They should know 483 00:25:18,720 --> 00:25:21,080 Speaker 1: that already. But they're still voting for him. And by 484 00:25:21,119 --> 00:25:22,520 Speaker 1: the way, if you look at the polls, as you know, 485 00:25:23,000 --> 00:25:24,919 Speaker 1: they still think he's one of the better candidates to 486 00:25:24,960 --> 00:25:27,359 Speaker 1: take on the President of the United States in November. 487 00:25:27,720 --> 00:25:29,760 Speaker 1: So the question is we keep doing this, we keep 488 00:25:29,800 --> 00:25:32,760 Speaker 1: failing to understand what is actually going on here. These 489 00:25:32,800 --> 00:25:35,960 Speaker 1: are educated people voting for this man. I imagine many 490 00:25:36,000 --> 00:25:38,760 Speaker 1: of them have college degrees. They know the situation in Florida, 491 00:25:38,800 --> 00:25:41,399 Speaker 1: the relationship with Cuba, and yet they go to the 492 00:25:41,440 --> 00:25:44,560 Speaker 1: poll in Nevada, they go to the polls at South Carolina, 493 00:25:44,800 --> 00:25:47,240 Speaker 1: and they vote for him. Yeah, but let's keep in 494 00:25:47,320 --> 00:25:50,760 Speaker 1: mind again when you're looking at the primary vote, this 495 00:25:50,880 --> 00:25:53,879 Speaker 1: is the most extreme members of both parties. So you 496 00:25:53,920 --> 00:25:57,480 Speaker 1: get Canadida. Let's be clear, Bernie Sanders is an independent. 497 00:25:57,560 --> 00:26:01,239 Speaker 1: He's not even a Democrat similar to Donald Trump. And 498 00:26:01,320 --> 00:26:04,800 Speaker 1: so the party has lost control of this process long before, 499 00:26:05,560 --> 00:26:07,680 Speaker 1: by the way, and that will continue to do they 500 00:26:07,720 --> 00:26:11,199 Speaker 1: get back control once they get to an adult, hi, 501 00:26:11,280 --> 00:26:14,600 Speaker 1: high money process like Super Tuesday. I mean, is it 502 00:26:14,800 --> 00:26:17,360 Speaker 1: literally a jump condition out of the vote in the 503 00:26:17,400 --> 00:26:21,400 Speaker 1: next day, everything is different for the party. I don't 504 00:26:21,440 --> 00:26:23,960 Speaker 1: think so. I mean, you know, at this point, I 505 00:26:24,000 --> 00:26:26,040 Speaker 1: think if you're going to look at the numbers, Bernie 506 00:26:26,040 --> 00:26:29,840 Speaker 1: Sanders has the greatest chance to get the delegate count. 507 00:26:29,920 --> 00:26:32,600 Speaker 1: He needs to wrap this up without a contested convention. 508 00:26:32,640 --> 00:26:35,159 Speaker 1: I think that's the reality. But let's be clear, this 509 00:26:35,240 --> 00:26:37,240 Speaker 1: is not just about the presidency. It's about the House, 510 00:26:37,240 --> 00:26:39,200 Speaker 1: it's about the Senate, and it's about the If you're 511 00:26:39,200 --> 00:26:41,600 Speaker 1: a Democrat, it should be about the future of the party, 512 00:26:41,640 --> 00:26:43,920 Speaker 1: and this is where they have the John. I didn't 513 00:26:43,960 --> 00:26:46,560 Speaker 1: think that there was a feeling of disrespect of Bernie 514 00:26:46,600 --> 00:26:48,600 Speaker 1: Sanders last night. It was more just saying he didn't 515 00:26:48,600 --> 00:26:50,280 Speaker 1: get anything done. I don't think that there was a 516 00:26:50,320 --> 00:26:53,240 Speaker 1: sense of a lack of I'm talking about the coverage. 517 00:26:53,240 --> 00:26:55,640 Speaker 1: I'm talking about the pundits that reflect on all of this. 518 00:26:55,640 --> 00:26:58,679 Speaker 1: This party has had four years to prepare for this moment. 519 00:26:59,000 --> 00:27:01,760 Speaker 1: They squandered most of at four years chasing the president, 520 00:27:01,800 --> 00:27:04,359 Speaker 1: trying to impeach him, and criticizing him every day. You 521 00:27:04,400 --> 00:27:06,360 Speaker 1: watch the same channels as I do. The left wing 522 00:27:06,359 --> 00:27:09,080 Speaker 1: brigade go out there day after day after the president, 523 00:27:09,200 --> 00:27:10,640 Speaker 1: and yet here we are and let me tell you, 524 00:27:10,800 --> 00:27:14,119 Speaker 1: if Vice President Joe Biden was leading in Nevada, in 525 00:27:14,160 --> 00:27:16,840 Speaker 1: New Hampshire, in Iowa, we wouldn't be talking about the process. 526 00:27:16,880 --> 00:27:18,960 Speaker 1: There's the problem. I would say this, this is it, Tom, 527 00:27:19,000 --> 00:27:21,119 Speaker 1: And I'm looking at this as what it marges from 528 00:27:21,160 --> 00:27:23,040 Speaker 1: this debate, and it's the idea that you have, on 529 00:27:23,119 --> 00:27:25,720 Speaker 1: one hand electability and on the other hand, the fact 530 00:27:25,720 --> 00:27:28,720 Speaker 1: that people want change and trying to reflect that zeitguys 531 00:27:28,800 --> 00:27:31,560 Speaker 1: that you're talking about and those two things are appealing 532 00:27:31,560 --> 00:27:35,000 Speaker 1: to two very bifurcated segments of the population. And that's 533 00:27:35,000 --> 00:27:37,960 Speaker 1: what we're feeling coming out of these debates. When we 534 00:27:38,040 --> 00:27:40,440 Speaker 1: look at this, I guess we've got to get past 535 00:27:40,480 --> 00:27:43,920 Speaker 1: the South Carolina vote. What do you predict on Monday, 536 00:27:44,000 --> 00:27:47,920 Speaker 1: or for that matter, on Sunday next. I think the 537 00:27:48,000 --> 00:27:51,639 Speaker 1: numbers show that probably Bernie Sanders has about a forty 538 00:27:52,560 --> 00:27:55,159 Speaker 1: shot at this point of getting what he needs. He 539 00:27:55,320 --> 00:27:58,240 Speaker 1: did so well with the Latino vote, for instance, in Nevada. 540 00:27:58,520 --> 00:28:02,040 Speaker 1: If he can replicate that aaces like California and Texas, 541 00:28:02,440 --> 00:28:06,359 Speaker 1: he can keep racking up the delicate lead. Obviously, Super 542 00:28:06,359 --> 00:28:08,960 Speaker 1: Tuesday has about one third of the delegates up now. 543 00:28:09,000 --> 00:28:11,040 Speaker 1: I would not predict what's going to happen, but I 544 00:28:11,040 --> 00:28:14,600 Speaker 1: would say the probability is narrow that he is going 545 00:28:14,640 --> 00:28:17,640 Speaker 1: to do okay, But again it depends. Jennie Sano, thank 546 00:28:17,680 --> 00:28:20,080 Speaker 1: you so much with Bloomberg Politics of course helping us 547 00:28:20,119 --> 00:28:30,160 Speaker 1: here ione ecology. Right now nationwide, the wonderful Congressman from 548 00:28:30,160 --> 00:28:34,800 Speaker 1: South Carolina, Mr. Clyburne is setting up his endorsement off 549 00:28:34,800 --> 00:28:36,680 Speaker 1: of last night's debate, and of course he is a 550 00:28:36,760 --> 00:28:40,240 Speaker 1: huge influence with the African American vote in the state 551 00:28:40,280 --> 00:28:42,440 Speaker 1: of South Carolina. Will bring that to you when we 552 00:28:42,480 --> 00:28:47,080 Speaker 1: see it. He's now introducing people with smiles around one 553 00:28:47,080 --> 00:28:48,880 Speaker 1: of the things that's going to change at the Walt 554 00:28:48,920 --> 00:28:52,600 Speaker 1: Disney Company, Paul is where they do the conference call 555 00:28:53,000 --> 00:28:55,880 Speaker 1: with the cell side, and I just want to say 556 00:28:56,040 --> 00:28:59,640 Speaker 1: it's gonna be great to see Michael Nathanson taking that 557 00:28:59,720 --> 00:29:04,240 Speaker 1: call with the Parks guy on Splash Mountain. I can 558 00:29:04,280 --> 00:29:08,240 Speaker 1: see going down that log too on Splash Mountain by 559 00:29:08,320 --> 00:29:12,440 Speaker 1: holder Michael Nathan said Moffat Nansenson, founding partner and senior 560 00:29:12,480 --> 00:29:14,959 Speaker 1: research anelist. Michael, thanks so much for joining us on 561 00:29:15,000 --> 00:29:17,840 Speaker 1: the phone here boy the news last night. I'll to 562 00:29:17,880 --> 00:29:20,720 Speaker 1: speak for myself. Took me by surprise. What do you 563 00:29:20,800 --> 00:29:24,760 Speaker 1: make of the news we heard? Yeah, Paul Tom good morning. Um, 564 00:29:25,040 --> 00:29:27,280 Speaker 1: you're not alone. It took us all by surprise, right, 565 00:29:27,320 --> 00:29:29,120 Speaker 1: you had to earning this call two weeks ago, that 566 00:29:29,280 --> 00:29:30,640 Speaker 1: I was on the radio with you guys two weeks 567 00:29:30,640 --> 00:29:33,800 Speaker 1: ago talking about and there's not another bit of news 568 00:29:33,880 --> 00:29:36,080 Speaker 1: for a couple of weeks or months. So it's just weird. 569 00:29:36,160 --> 00:29:39,440 Speaker 1: Then the middle of February they decided to announce that change, 570 00:29:40,320 --> 00:29:42,880 Speaker 1: and everyone's trying to figure out, like why, what, what 571 00:29:43,000 --> 00:29:45,479 Speaker 1: is significant about this timing? So we were surprised by 572 00:29:45,480 --> 00:29:48,200 Speaker 1: the timing. But you know, Bob had been very clear 573 00:29:48,280 --> 00:29:50,719 Speaker 1: that his time was coming, was coming up, that he 574 00:29:50,800 --> 00:29:54,600 Speaker 1: was done with with this with his job, his last contract. 575 00:29:55,160 --> 00:29:57,080 Speaker 1: We thought there would be a change, but probably later 576 00:29:57,120 --> 00:29:59,240 Speaker 1: in the year. So it's really about the timing of 577 00:29:59,120 --> 00:30:01,280 Speaker 1: the of the change, anouncement, the timing, but wasn't the 578 00:30:01,400 --> 00:30:05,320 Speaker 1: change itself. So Michael tell us a little bit about Bob. 579 00:30:06,000 --> 00:30:08,880 Speaker 1: What do you know about him? Okay, So Bob cha 580 00:30:09,040 --> 00:30:11,240 Speaker 1: Peck is someone who has a long career at the 581 00:30:11,240 --> 00:30:13,760 Speaker 1: Walt Disney Company. He worked at home video when home 582 00:30:13,840 --> 00:30:16,200 Speaker 1: video was really important to home to Walt Disney. He 583 00:30:16,280 --> 00:30:19,160 Speaker 1: worked in sumer products. Uh and some product is a 584 00:30:19,280 --> 00:30:22,880 Speaker 1: very very important sect segment. It's highly profitable. And then 585 00:30:22,880 --> 00:30:24,880 Speaker 1: he moved over to the parks business. And the parks 586 00:30:24,920 --> 00:30:27,640 Speaker 1: business for all the focus on ESPN and the parks 587 00:30:27,680 --> 00:30:31,160 Speaker 1: business is the single biggest driver of Walt disney earnings growth. Right, 588 00:30:31,200 --> 00:30:33,160 Speaker 1: so the U S parks are about three percent of 589 00:30:33,160 --> 00:30:36,280 Speaker 1: profitability and the parks business. What Chapick did is he 590 00:30:36,360 --> 00:30:40,240 Speaker 1: put through a surge pricing like Uber, where they raised 591 00:30:40,240 --> 00:30:44,800 Speaker 1: pricing during peak times and lower pricing dynamically during slow times. 592 00:30:44,840 --> 00:30:46,920 Speaker 1: That never was the case they would have one price 593 00:30:46,960 --> 00:30:49,719 Speaker 1: for all seasons. Uh. So they put out of capital 594 00:30:49,880 --> 00:30:52,240 Speaker 1: on the in the ground, they built new new rides 595 00:30:52,280 --> 00:30:55,080 Speaker 1: and new exhibits, and they really drove price. So he 596 00:30:55,200 --> 00:30:57,480 Speaker 1: has a very long background there, and I think it's 597 00:30:57,480 --> 00:30:59,880 Speaker 1: it's it's a good choice. It's it's a natural choice 598 00:31:00,320 --> 00:31:02,840 Speaker 1: for me to see happen here. Is this a partition 599 00:31:03,360 --> 00:31:07,800 Speaker 1: that it's this August company is comfortable with Walt Disney. 600 00:31:08,000 --> 00:31:10,920 Speaker 1: Is the Bob iger in Roy Disney will be the 601 00:31:10,960 --> 00:31:15,360 Speaker 1: new gentleman. Yeah, that's a that's a great question. Um. 602 00:31:15,440 --> 00:31:17,960 Speaker 1: You know when when ire Tom and Ira was putting 603 00:31:18,000 --> 00:31:20,520 Speaker 1: that role. No one really knew what tooks about from 604 00:31:20,560 --> 00:31:23,680 Speaker 1: from Bob Iyer, right, there was a lot of chatter 605 00:31:23,720 --> 00:31:26,240 Speaker 1: about he was the wrong guy. You know, there's a 606 00:31:26,240 --> 00:31:28,640 Speaker 1: book written. There's a book written all about Sweeney. Sweeney 607 00:31:28,640 --> 00:31:32,120 Speaker 1: wrote a four page research report along report at that time. Yeah, 608 00:31:32,160 --> 00:31:34,480 Speaker 1: I think he downgraded it on on the Bob Iger 609 00:31:34,720 --> 00:31:39,760 Speaker 1: higher right. You know, um so Tom, we don't know. 610 00:31:40,120 --> 00:31:43,080 Speaker 1: I think what Disney has become is there are these 611 00:31:43,120 --> 00:31:46,920 Speaker 1: centers of content excellence that you know, we'll live on. 612 00:31:47,240 --> 00:31:49,440 Speaker 1: You know when when bob Iger has gone right, you've 613 00:31:49,480 --> 00:31:54,480 Speaker 1: got Pixar mass It's incredible, right, And and the question is, 614 00:31:54,600 --> 00:31:57,280 Speaker 1: you know, does every vertical have a leader with the 615 00:31:57,400 --> 00:32:00,520 Speaker 1: right vision game plan? And I and I kind of 616 00:32:00,560 --> 00:32:02,680 Speaker 1: think that that where they are now is they made 617 00:32:02,720 --> 00:32:06,520 Speaker 1: a lot of tough decisions. They moved into digital distribution. 618 00:32:06,800 --> 00:32:09,680 Speaker 1: It took profitability down. I almost think like they gas 619 00:32:09,800 --> 00:32:13,120 Speaker 1: need to pretty much be able to pivot and adjust 620 00:32:13,200 --> 00:32:17,920 Speaker 1: their models when they see things change, so that content creation, 621 00:32:18,000 --> 00:32:21,600 Speaker 1: to me is now pushed out to the brand themselves. 622 00:32:22,160 --> 00:32:24,560 Speaker 1: And Bob bob Iger was a great capital allocator and 623 00:32:24,600 --> 00:32:27,160 Speaker 1: deciding where to go. But I don't think one person 624 00:32:27,240 --> 00:32:31,040 Speaker 1: could actually run this company the way you Yeah, that's 625 00:32:31,040 --> 00:32:33,640 Speaker 1: why I think. So, Michael, let's talk about what the 626 00:32:33,680 --> 00:32:35,600 Speaker 1: big pivot for the Walt Disney Company really over the 627 00:32:35,680 --> 00:32:37,800 Speaker 1: last couple of years has been towards streaming. That's kind 628 00:32:37,800 --> 00:32:40,720 Speaker 1: of the future of the company. And that got a 629 00:32:40,720 --> 00:32:43,280 Speaker 1: lot of investors and just watchers thinking that the guy 630 00:32:43,320 --> 00:32:46,920 Speaker 1: who runs that business, Kevin Mayor would be probably the 631 00:32:46,960 --> 00:32:48,960 Speaker 1: most likely to get the NOD. What do you think 632 00:32:49,120 --> 00:32:51,240 Speaker 1: happened there and what kind of signal does this send 633 00:32:51,360 --> 00:32:52,880 Speaker 1: and what do you think of what Kevin's future might 634 00:32:52,920 --> 00:32:54,960 Speaker 1: be within the company? Yeah, Paul, that's a really good, 635 00:32:55,080 --> 00:32:58,239 Speaker 1: good question. Um. After the last quarter where they put 636 00:32:58,280 --> 00:33:03,000 Speaker 1: up millions saw in one quarter, roughly half of Netflix 637 00:33:03,040 --> 00:33:07,240 Speaker 1: in a quarter, the speculation was like, hey, Kevin is 638 00:33:07,320 --> 00:33:10,800 Speaker 1: now in pull position. But you know, the parks and 639 00:33:11,000 --> 00:33:13,719 Speaker 1: to products are a big driver of this company. Kevin's 640 00:33:13,800 --> 00:33:17,880 Speaker 1: just started operationally for the past one or two years. Um, 641 00:33:18,280 --> 00:33:21,600 Speaker 1: I think Japook represents more of the legacy Disney business. 642 00:33:21,880 --> 00:33:25,240 Speaker 1: And you know the parks business is at DTC business, right. 643 00:33:25,320 --> 00:33:28,160 Speaker 1: You know, Parks is the only business at Disney before 644 00:33:28,240 --> 00:33:30,920 Speaker 1: DTC was built. They actually knew the customers you know, 645 00:33:30,920 --> 00:33:34,120 Speaker 1: they had credit cards on on on Thoma's family, right 646 00:33:34,160 --> 00:33:37,200 Speaker 1: like that, that is that's the only business I actually 647 00:33:37,280 --> 00:33:39,160 Speaker 1: knew who was walking in the door. So I think 648 00:33:39,160 --> 00:33:46,200 Speaker 1: he has more DTC than meets the eye direct a consumer. Yeah, 649 00:33:46,280 --> 00:33:49,040 Speaker 1: so Tom, it's it's it's the ability to to identify 650 00:33:49,200 --> 00:33:52,280 Speaker 1: you and your family and then market and up sell 651 00:33:52,360 --> 00:33:54,600 Speaker 1: you and the parks. You know, it has proven that 652 00:33:54,720 --> 00:33:56,800 Speaker 1: year and year out they can take money out of 653 00:33:56,840 --> 00:34:00,200 Speaker 1: your pocketbook better than anybody. Here's my experience on Disney. 654 00:34:00,560 --> 00:34:03,160 Speaker 1: One of the middle child used to go to Lacrosse 655 00:34:03,200 --> 00:34:06,520 Speaker 1: camp down there for a quote unquote week and then 656 00:34:06,520 --> 00:34:08,800 Speaker 1: I figured out a week was four and a half days. 657 00:34:09,360 --> 00:34:14,200 Speaker 1: That's a Disney that's a Disney model. Paul Michael, what 658 00:34:14,239 --> 00:34:17,520 Speaker 1: do you think the legacy will be for Bob Iger? Well, 659 00:34:17,520 --> 00:34:19,560 Speaker 1: it's funny. Years ago, a couple of years ago, I 660 00:34:19,920 --> 00:34:21,840 Speaker 1: time I sat down and he's like, Tom said me, 661 00:34:22,239 --> 00:34:25,160 Speaker 1: is this a Jack Welch legacy? Right? Does he does? 662 00:34:25,160 --> 00:34:29,400 Speaker 1: Whoever gets this hand after Bob just never rise. You know, 663 00:34:29,960 --> 00:34:34,200 Speaker 1: the legacy of of Welch just shadowed everyone. I think 664 00:34:34,239 --> 00:34:37,880 Speaker 1: the legacy of Iger, you know, is and will be 665 00:34:38,239 --> 00:34:41,200 Speaker 1: incredibly strong. Right for a person who basically was courageous 666 00:34:41,560 --> 00:34:43,360 Speaker 1: in doing the right thing for the company, not for 667 00:34:43,480 --> 00:34:46,719 Speaker 1: the short term, but for the long term. His his acquisitions, 668 00:34:46,719 --> 00:34:49,200 Speaker 1: which you could go out Ham and Paul, I'm on 669 00:34:49,239 --> 00:34:51,880 Speaker 1: the record when he bought Pixar and Marvel stretched our 670 00:34:51,960 --> 00:34:54,799 Speaker 1: head were like the r O I doesn't work. So 671 00:34:55,040 --> 00:34:56,680 Speaker 1: I think the legacy of this is a guy who 672 00:34:56,719 --> 00:35:00,080 Speaker 1: courageously built a company into what it is today. He 673 00:35:00,200 --> 00:35:03,360 Speaker 1: took down earnings to pretty much build it going forward 674 00:35:03,560 --> 00:35:07,360 Speaker 1: by investing in director consumer businesses. I think his legacy 675 00:35:07,440 --> 00:35:09,640 Speaker 1: is gonna be great. I really do. I think, you know, 676 00:35:09,719 --> 00:35:12,680 Speaker 1: And I'm sad because it's one of the true legends 677 00:35:12,680 --> 00:35:15,600 Speaker 1: in our industry. And he was a spokesperson for all 678 00:35:15,640 --> 00:35:17,759 Speaker 1: of media and that spokesperson is gone. How much work 679 00:35:17,840 --> 00:35:20,520 Speaker 1: do they have on the integration with the Fox properties. 680 00:35:21,080 --> 00:35:23,680 Speaker 1: A lot of work, Tom, and that's that's why the 681 00:35:23,719 --> 00:35:26,680 Speaker 1: time is interesting, because that integration needs to get done. 682 00:35:27,360 --> 00:35:29,880 Speaker 1: The Fox assets on the studio side, the film studio 683 00:35:29,880 --> 00:35:32,880 Speaker 1: have been very disappointing. They have a business in India. 684 00:35:32,920 --> 00:35:35,120 Speaker 1: Star are very important and they want to roll out 685 00:35:35,160 --> 00:35:37,960 Speaker 1: Disney in Disney Plus in India. There's a lot of 686 00:35:38,000 --> 00:35:40,080 Speaker 1: integration to be done, and that deals less than a 687 00:35:40,160 --> 00:35:42,160 Speaker 1: year old. So that's why the timing to Paul's first 688 00:35:42,239 --> 00:35:45,320 Speaker 1: question is surprising, because integration is key. Right now for 689 00:35:45,400 --> 00:35:47,680 Speaker 1: that Fox, I'm confused. I mean, like, I get the 690 00:35:47,719 --> 00:35:50,040 Speaker 1: idea of movies don't matter, but then you just said 691 00:35:50,080 --> 00:35:54,239 Speaker 1: they do matter because Fox has been disappointing. Our movies profitable. 692 00:35:55,120 --> 00:35:58,600 Speaker 1: Oh for all, Disney Company. Disney has three billion dollars 693 00:35:59,000 --> 00:36:01,719 Speaker 1: of EBITDA. They were, you know, in a in the 694 00:36:01,719 --> 00:36:04,719 Speaker 1: studio business. They had eleven billion of box last year. 695 00:36:05,239 --> 00:36:07,800 Speaker 1: You know, they are the only company that actually prints 696 00:36:07,840 --> 00:36:09,680 Speaker 1: money consistently in the film business. So if you asked 697 00:36:09,680 --> 00:36:13,200 Speaker 1: me about the film studios, they don't matter. But at Disney, 698 00:36:13,520 --> 00:36:16,760 Speaker 1: the film studios then spin out consumer products, they spend rides, 699 00:36:16,880 --> 00:36:20,399 Speaker 1: they spin out businesses. They do matter for Disney. I mean, 700 00:36:20,480 --> 00:36:22,440 Speaker 1: I mean people like they got they got Vet Bill 701 00:36:22,520 --> 00:36:24,880 Speaker 1: at home, his hair done up like baby Yoda, and 702 00:36:25,360 --> 00:36:27,719 Speaker 1: you know, like Mandalorian or whatever it's called. What is 703 00:36:27,719 --> 00:36:30,799 Speaker 1: that property actually worth? I mean, if that's Iger Swansong 704 00:36:30,920 --> 00:36:34,640 Speaker 1: here and creative, that's been a home run, hasn't it. Yeah, 705 00:36:34,719 --> 00:36:36,960 Speaker 1: without a dad, I mean, we don't know how many 706 00:36:36,960 --> 00:36:39,279 Speaker 1: of those subs that signed up for Disney. Plus we're 707 00:36:39,320 --> 00:36:41,799 Speaker 1: there for the Mandalorian. Right. But but if you think 708 00:36:41,840 --> 00:36:45,400 Speaker 1: about they paid four billion for Star Wars, for for Lucasfilm, 709 00:36:45,480 --> 00:36:49,239 Speaker 1: four billion for marvel Um, you know the Mandalorian is 710 00:36:49,239 --> 00:36:51,600 Speaker 1: gonna be a subset of four billion. But those assets 711 00:36:51,719 --> 00:36:55,640 Speaker 1: drive engagement, right, That's they realized in a cluttered media world, 712 00:36:55,719 --> 00:36:59,720 Speaker 1: having those brands stand out didn't drive engagement. They change 713 00:36:59,719 --> 00:37:02,840 Speaker 1: the hair or in the damn dog's and Michael last question, 714 00:37:03,120 --> 00:37:04,840 Speaker 1: just you know, the stock has been under pressure. I 715 00:37:04,840 --> 00:37:07,759 Speaker 1: think coronavirus getting a lot of uh play there at 716 00:37:07,760 --> 00:37:09,880 Speaker 1: the Walt Dassy company frame out how you viewing it? 717 00:37:10,280 --> 00:37:13,960 Speaker 1: Uh the impact on their theme parks and their other businesses. Well, Paul, 718 00:37:13,960 --> 00:37:15,319 Speaker 1: A couple of weeks ago in the More in the 719 00:37:15,320 --> 00:37:18,440 Speaker 1: early morning hours, I spoke to to Tom and John 720 00:37:18,520 --> 00:37:20,759 Speaker 1: and we talked about coronavirus and that point it was 721 00:37:20,800 --> 00:37:23,960 Speaker 1: restricted to China. So I made the maybe the two 722 00:37:24,239 --> 00:37:26,640 Speaker 1: you know too quick remarketing. Look, you know those theme 723 00:37:26,640 --> 00:37:29,960 Speaker 1: parks don't represent more than of the profitability of Walt 724 00:37:29,960 --> 00:37:33,440 Speaker 1: Disney companies. I'm not worried about Chinese parks. Well, Japan 725 00:37:33,520 --> 00:37:36,839 Speaker 1: is another park that creates you know, earnings growth, and 726 00:37:36,880 --> 00:37:38,600 Speaker 1: so does the US business, which is the biggest you 727 00:37:38,600 --> 00:37:41,760 Speaker 1: know when the biggest drivers. So as the fear spread, 728 00:37:42,120 --> 00:37:44,200 Speaker 1: I do worry. Then the short run you're gonna have 729 00:37:44,760 --> 00:37:48,320 Speaker 1: earnings revisions in the US, people not wanting to travel, 730 00:37:48,400 --> 00:37:50,800 Speaker 1: and so you know, my first rule of thumb and 731 00:37:51,200 --> 00:37:54,239 Speaker 1: media is earnings revisions drive stock. So in the short run, 732 00:37:54,320 --> 00:37:58,000 Speaker 1: this coronavirusphere is a is a huge headline risk for 733 00:37:58,040 --> 00:38:00,319 Speaker 1: this company. They're the only one in media and have 734 00:38:00,440 --> 00:38:03,480 Speaker 1: that risk unfortunately, Michael, thank you so much. Michael Nathanson. 735 00:38:03,480 --> 00:38:05,799 Speaker 1: Where us the MOFA Nathan's and wonderful v mind. Again, 736 00:38:05,840 --> 00:38:08,360 Speaker 1: we protect the copyright of all of our guests. You 737 00:38:08,360 --> 00:38:12,120 Speaker 1: can get this important report on Disney through Matha Nathanson. 738 00:38:12,520 --> 00:38:16,719 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 739 00:38:16,760 --> 00:38:22,080 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 740 00:38:22,120 --> 00:38:26,360 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane Before 741 00:38:26,400 --> 00:38:30,239 Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg 742 00:38:30,320 --> 00:38:30,640 Speaker 1: Radio