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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Bill

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Speaker 1: Lee with us now from Washington. William Lee was City

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Speaker 1: Group for years and now at the Milken Institute. Bill.

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Speaker 1: To me, it looks like a trade war. I think

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Speaker 1: there's really no other way to put it, yuh, And

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Speaker 1: it was skirmish, Tom right. The skirmish is to get

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Speaker 1: people's attention so that they can be really attentive at

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Speaker 1: the bargaining table. And I my hope and prayer is

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Speaker 1: that that is where the end game is going. Is

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Speaker 1: what are we going to be negotiating over? I think

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Speaker 1: the media is poorly explaining it. To use John's numbers,

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Speaker 1: hundred bill in but then there's a tariff on that.

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Speaker 1: If it's five percent or one percent or three percent

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Speaker 1: or ten could it really be twenty five percent? Are

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Speaker 1: we are we going back to days of twenty five tariffs?

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Speaker 1: I don't think we'll ever revisit the smooth holidays where

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Speaker 1: it's tariff on tariffs, and you get these huge percentages

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Speaker 1: and and you know when you get a lot of

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Speaker 1: small percentagers together, that's real money we're talking about. And

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Speaker 1: so so I think that's kind of escalation. We've learned

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Speaker 1: the lessons from in history, and everyone has learned them

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Speaker 1: even in high school. But one of the things that

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Speaker 1: we need to keep in mind is we the negotiating

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Speaker 1: strategy is you've got to get the attention of the

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Speaker 1: other side. And and the five agenda of China is

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Speaker 1: bio medicine, robotics, high tech stuff and and the fact

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Speaker 1: that we even touch on their on their prize possessions

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Speaker 1: brings their attention to the table. And I think that's

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Speaker 1: the strategy of the administration going forward. And Bill, just

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Speaker 1: to backdrop to all of this, the U s economy

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Speaker 1: looking rock solid, the Chinese economy looking a little bit

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Speaker 1: self done. So to me about what's happening there, thank you.

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Speaker 1: I think one of the things that we keep we

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Speaker 1: forget is first, China's half the size of the US.

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Speaker 1: And number two, China's growth is based upon massive over investment.

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Speaker 1: The essentially, when when you think about the investment to

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Speaker 1: GDP ratios in China, it's multiples of what the U

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Speaker 1: s has. Now that adds to their productivity. Yes, it

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Speaker 1: gives them the great advantage going forward, but it's deprived

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Speaker 1: the citizens of a lot of consumption. And and the She,

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Speaker 1: the She administration recognizes that they have to address consumption

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Speaker 1: in China. And so so that's where I think the

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Speaker 1: US has got some advantages because we know that they

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Speaker 1: need more consumptions goods and services high tech UH services

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Speaker 1: of the sort of five G type type environment. And

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Speaker 1: and quite frankly, in that race, in the five G

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Speaker 1: world race, China and the US are starting at the

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Speaker 1: same place in the starting line. There's no advantage U

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Speaker 1: has has over them. In fact, I think the Chinese

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Speaker 1: advantages over US. So so they but the domestic market

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Speaker 1: is where the US wants to go, and our domestic

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Speaker 1: market is where the Chinese want to go with their

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Speaker 1: five G services. And now the game is how do

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Speaker 1: we set the rules of trade going forward? So Bill,

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Speaker 1: I want to sort of explore what this means for

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Speaker 1: the macro backdrop. In early the world economy is on

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Speaker 1: the rocks, some people predicting a recession, and the response

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Speaker 1: globally was as follows, the FED completely capitulated on its

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Speaker 1: plans to raise interest rates that year multiple times, and

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Speaker 1: the ECB expanded QWI and did all kinds of things.

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Speaker 1: The Chinese but the foot to the pedal right to

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Speaker 1: the floor to boost credit as well. Now we're starting

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Speaker 1: to see those forces reverse. Twenty seventeen was global synchronized growth.

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Speaker 1: Eighteen looks a bit more fragile, and the things that

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Speaker 1: boosted things through sixteen starting to reverse. Does that concern

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Speaker 1: you a little bit? Bill, Well, what's concerning is the

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Speaker 1: nature of growth right now and going forward, US is

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Speaker 1: going to be the engine of growth for the global economy.

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Speaker 1: Where that's that that myths of synchronized growth we saw

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Speaker 1: before was Europe trying to get a two handle on growth,

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Speaker 1: right I mean, we're talking about the U s and

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Speaker 1: like being able get three and four handles. The European

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Speaker 1: economy because of the the eurosclerosis that has always had,

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Speaker 1: has never been able to get a two handle or

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Speaker 1: anything better and to sustain a to handle and and

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Speaker 1: and we're seeing evidence that that is not gonna happen

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Speaker 1: yet again. And they can refer back to this subpart

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Speaker 1: Growth Bill. In the time we've got left to do

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Speaker 1: un NAFT. We've got Mexican pace so nearing twenty one.

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Speaker 1: It's been there before, but this has been a real

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Speaker 1: weakening pay so. Is that part of a collapsed naft

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Speaker 1: to debate or is that just about dragging and central

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Speaker 1: bank divergence elements of both. I think that the NAFTY

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Speaker 1: negotiations has gotten a lot of uncertainty in it because

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Speaker 1: now we start to hear about bilateral deals with Canada

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Speaker 1: and in Mexico. But I think the key to the

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Speaker 1: to the pay so is, like every other emerging marketing currency,

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Speaker 1: is when the US magnetouer global capital sucks and everything

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Speaker 1: and that all the strengthens, that means that the emerging

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Speaker 1: market currencies are gonna collapse more than the developed market

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Speaker 1: economies because US continues to be the center for capital

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Speaker 1: markets and capital flows. And every entrepreneur out there knows

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Speaker 1: that you're not gonna go to Argentina to the raised capital.

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Speaker 1: You're gonna come to New York Stock Exchange and lists there.

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Speaker 1: And even as US firms are going to private capital,

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Speaker 1: foreign firms are coming to list more and more in

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Speaker 1: the US. Billy, thank you so much from our Washington

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Speaker 1: vire on one fm. Uh, and of course with the

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Speaker 1: Milk and Institute. Uh, this is a joy. Another exceptionally

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Speaker 1: strong briefing from Foreign Affairs Magazine. Which world are we

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Speaker 1: living in? Is it the world of the Red Sox?

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Speaker 1: Is the world of Yankees? No, it's certainly not the

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Speaker 1: world of the New York Mets for those that follow baseball.

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Speaker 1: It is the foreign policy world that we live in now.

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Speaker 1: Gideon Roses with us with his new Foreign Affairs Magazine.

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Speaker 1: The essay from Graham Allison with his important book A

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Speaker 1: year Ago Destined for War is stunning. We had the

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Speaker 1: Soviet Union. Thus we had a space race because we

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Speaker 1: were competing with the Soviet Union, and we have the

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Speaker 1: development of what we know is our foreign policy because

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Speaker 1: we were competing with the Soviet Union. Then there was

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Speaker 1: an interloade. And your whole issue is about the now? What?

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Speaker 1: What is the now? What? Well, so this is a

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Speaker 1: great question. Over the last couple of years, a lot

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Speaker 1: of the certainties and assumptions that people had on all

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Speaker 1: sides of the spectrum had brought to the debate over

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Speaker 1: American farm policy, the international economy, the future of the

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Speaker 1: global political system had basically been upended by voters in

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Speaker 1: Western countries who have overturned Brexit and UH Trump selection

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Speaker 1: and a bunch of different policies and a bunch of

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Speaker 1: of the rise of populoust nationalism and problems in the

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Speaker 1: liberal international order. Basically, what that means is all bets

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Speaker 1: are off going forward, and everybody is riled up and

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Speaker 1: things are very bull But the question of what actually

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Speaker 1: is driving all the turbulence and where things will go

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Speaker 1: is unknown. And so what we did is we tried

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Speaker 1: to scope out the future by offering six potential narratives

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Speaker 1: of what is the turmoil and change that we're living in,

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Speaker 1: where is it going? And the argument here is some

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Speaker 1: of the people say it's just the return of great

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Speaker 1: power politics, like Graham Allison and we have a wonderful

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Speaker 1: place by Steve Cotkin about look what you thought of

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Speaker 1: as the liberal international order was just the American moment

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Speaker 1: of great power which we organized in our way. UH.

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Speaker 1: Others saying no, all the critics of the American order

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Speaker 1: in the post war system have been wrong in the past,

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Speaker 1: This too shall pass. Others saying no, it's tribalism the

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Speaker 1: dominant now. Amy Chua from Yale has a good argument no.

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Speaker 1: Others say Marx was actually not wrong, but just early

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Speaker 1: what did you expect from capitalism? You know, the richer

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Speaker 1: getting richer, the poorer getting screwed, and everybody's rising up

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Speaker 1: in protests. So it's an attempt to scope out what

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Speaker 1: is the future that we're living in, and we know

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Speaker 1: there's the real answer right now is we don't no,

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Speaker 1: And that's why this is an interesting moment in general.

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Speaker 1: What's so interesting were the week that you and I

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Speaker 1: have had? It really the two weeks we've had. Yeah,

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Speaker 1: is we're sort of jumping from moment to moment. Well,

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Speaker 1: let's hope the future is not socialism, Gideon. Well, you

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Speaker 1: look at Corbin and uh, you know Sanders and a

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Speaker 1: bunch of people in the US. Uh, there are ideas.

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Speaker 1: Everybody seems to agree that the old conxisting ideas haven't worked,

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Speaker 1: and people are searching for new ideas, but no one

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Speaker 1: has good new ideas yet. So we hope that the

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Speaker 1: mistakes don't get repeats. Socialism suddenly isn't a new idea,

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Speaker 1: it's a felt experiment. But I would have thought smooth

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Speaker 1: holly and and international tariffs and a trade war were

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Speaker 1: old ideas that we rejected as well, and so both

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Speaker 1: right and left seemed to be going back to the

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Speaker 1: bad old ideas of the past rather than coming up

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Speaker 1: with new ones for the twenty one century. Do you

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Speaker 1: really think we're going back towards smooth holy question. So

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Speaker 1: the big question on trade policy now is is trade

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Speaker 1: policy is going to follow the Iran model or the

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Speaker 1: Korean model. A year ago, the Trump administration made the

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Speaker 1: entire world thing that it was on the brink of

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Speaker 1: a nuclear war in Korea, and it turns out that

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Speaker 1: they were responding to a real problem just by generating

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Speaker 1: a lot of hoopla and then walked away with a

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Speaker 1: photo op and no actual deal and some headlines. If

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Speaker 1: that ultimately is what happens on trade, then you'll end

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Speaker 1: up with a compromise, just like you ended up with

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Speaker 1: the compromising Korea. It's fine on Iran, however, he actually

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Speaker 1: lived up to his promises, is starting to rip up

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Speaker 1: the Iran deal and causing real problems. And so we

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Speaker 1: just don't know whether these guys are screwing around with

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Speaker 1: the mobile trading system for short term by that oural

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Speaker 1: advantage to achieve a point, or are they actually really

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Speaker 1: going to risk destroying the whole edifice. But do you

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Speaker 1: think it's helpful using the words smoot holy when the

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Speaker 1: average tariff I think was about forty percent. I mean,

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Speaker 1: the average tariff right now is mid single single, mid digits.

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Speaker 1: The whole point is where we're going. And what made

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Speaker 1: smooth Holly bad was not just the size, it was

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Speaker 1: the theory behind it. And yes, what we're doing now

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Speaker 1: is very small and absolute terms, but it's the same

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Speaker 1: damn theory. But the theory is behind it right now.

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Speaker 1: And as you know, Giddon is the end goal. The

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Speaker 1: end game is that ultimately they want the Chinese to

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Speaker 1: to open up. They want to tried barry us down,

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Speaker 1: don't they. Yes, But here's the question, do they Well,

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Speaker 1: actually you say you know what they want, We don't

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Speaker 1: actually know what they want because a lot of it

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Speaker 1: about it, haven't they what? I've been quite clear about

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Speaker 1: what they want. They want the Chinese to open up,

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Speaker 1: they want the tried barriers down. Yes, but that's a

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Speaker 1: short term goal. The question is cannot be achieved without

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Speaker 1: destroying the entire long term system. The US has a

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Speaker 1: major power in the system that has refused to use

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Speaker 1: because it didn't want to use its power to extract

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Speaker 1: bilateral rents from everybody else. It wanted to have a

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Speaker 1: system that actually worked. What this administration is doing, whether

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Speaker 1: it's dispute resolution procedures of the w t O, whether

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Speaker 1: it's the trade things, whether it's trying to bring in

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Speaker 1: national security, what they're basically doing is using every bit

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Speaker 1: of leverage the United States can to extract gains from

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Speaker 1: everybody else. And that is maybe a short term tactic

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Speaker 1: that might work to achieve some pause that have goals

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Speaker 1: for the United States, but it comes at the cost

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Speaker 1: of the entire system being undermined going forward. Gideon, thank

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Speaker 1: you so much, Gideon Rose. Congratulations. Which world are we

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Speaker 1: living in again? Folks? And you've heard me say this

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Speaker 1: before Foreign Affairs Magazine, and Bill Lee was raving about

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Speaker 1: it earlier with the Milk and Institute. It's kind I'm

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Speaker 1: gonna call it fifteen essays, and it's the kind of

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Speaker 1: thing where you find three or four which are just

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Speaker 1: jewels that really framed for you the debate. And your

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Speaker 1: three or four essays can be different than John Farrow's,

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Speaker 1: can be different than mine, But the answer is you

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Speaker 1: find a set of ideas in each issue. And John

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Speaker 1: Ferre I know you don't care with your Ronaldo vision,

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Speaker 1: but actually the fonts almost big enough where you can

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Speaker 1: mortals like me can actually read it. Ijsa we glosses tongue. Jonathan.

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Speaker 1: I've never been up there, but I am told you

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Speaker 1: go up past Admiralty Island and it is spectacular and

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Speaker 1: it's southern Alaska above Vancouver. Juno, Juno, Alaska. Would you

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Speaker 1: like to go? I I yeah, I sort of would.

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Speaker 1: I mean, I don't you know, have any like I

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Speaker 1: don't have to be there tomorrow or anything like that.

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Speaker 1: But very cool, you know, joining us now from Juno, Alaska,

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Speaker 1: PRIAMR with TV Security. Why are you in Juno? Is

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Speaker 1: that where the rate conundrum comes together? It's beautiful here,

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Speaker 1: but you know, I'm here to meet investors a huge

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Speaker 1: macro week with the ft in d cb um, so

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Speaker 1: investors want to talk. But I have to say it's

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Speaker 1: a very good place. It's light here twenty yeah, I'm

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Speaker 1: actually outside. That's the way it is in the surveillance

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Speaker 1: world for me and John Farrell. The sun comes up

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Speaker 1: early as well, always dark first. We're right, we're done

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Speaker 1: off Argentina there. Well, you look at the volatility of

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Speaker 1: the Argentinian Pasa Mexico out of twenty one and such.

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Speaker 1: I would suggest much of this comes across as druggy

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Speaker 1: yesterday and waiting until the summer of two thousand nineteen

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Speaker 1: to do anything. But it's really the combination of what

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Speaker 1: we saw from Powell and drag, isn't it It is? Yeah.

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Speaker 1: I think EM is sort of having this one I

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Speaker 1: would say, almost triple Vanny here. So they've had the

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Speaker 1: high reel rate in the US. Uh, then they've had

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Speaker 1: e CB ending QUEI and you know, all the idiots

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Speaker 1: and credit issues as well. And and the dollar doesn't

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Speaker 1: help because if the dollar continues to strengthen in US

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Speaker 1: rates continue to write, you know, I think money is

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Speaker 1: going to come out of risk cassettes everywhere, and so

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Speaker 1: e M is one of those. Italy was another one.

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Speaker 1: Who knows, you know, what's next. But I think that's

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Speaker 1: the problem with them here. Even the solid fundamental EM

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Speaker 1: economies I think are potentially going to struggle because in

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Speaker 1: a less liquid market, if you don't want to get

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Speaker 1: out of EM, you sort of sell everything. It's hard

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Speaker 1: to see why the Federal Reserve should back off anytime soon,

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Speaker 1: especially when they telegraphed what they were going to do

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Speaker 1: very very well and from a mile away. And what

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Speaker 1: was the response from Argentina to raise their inflation target,

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Speaker 1: the response from Turkey the president Dwan saying he wanted

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Speaker 1: lower rates the factly help themselves? Have they right now?

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Speaker 1: I think, um, you know e M has to deal

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Speaker 1: with you know, what do they do without flows? So

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Speaker 1: as as you start getting this risk of outflows picking up,

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Speaker 1: I think they have to start reading interest rates. But

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Speaker 1: it actually hurts the economy. So there is in a

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Speaker 1: in a little bit of a bind. I think with

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Speaker 1: the fact that global queue is ending this and I

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Speaker 1: think that's you know when when you talk about Powell,

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Speaker 1: I think the FED absolutely wants to keep hiking. From

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Speaker 1: a domestic standpoint, have to look at global spillovers and

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Speaker 1: a financial condition statement e M. At some point it

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Speaker 1: is going to spill over into the US as well.

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Speaker 1: Within this is what inflation adjusted rates do. What is

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Speaker 1: the TV call on what American real rates will do

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Speaker 1: given this massive transatlantic divergence? Right so, I think we're

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Speaker 1: a little bit out of consensus. I am long tenure

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Speaker 1: real rates. I think US tenure rates above one per

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Speaker 1: cent or a problem even for the domestic economy because

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Speaker 1: if you look at real wages, we've had no real uh,

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Speaker 1: you know, growth in real wages. I think that's the problem.

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Speaker 1: So if mortgage rates rise, um, you know, even if

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Speaker 1: the economy is strong, I'm not sure the consumer can

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Speaker 1: actually keep paying up I a mortgage rate. So we've

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Speaker 1: had a decent rise in real rates. I think at

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Speaker 1: some point it's it's going to be self limiting. I

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Speaker 1: think one per cent tenure real rates is that level

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Speaker 1: beyond which I think the economy is going to struggle

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Speaker 1: to handle further increases. And we've talked to you about

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Speaker 1: the curve in the past two s tens is now

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Speaker 1: broken down to about thirty six basis points. We just

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Speaker 1: keep grinding lower. And I have a lot of investors

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Speaker 1: and a lot of our listeners will always write and

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Speaker 1: so it's different this time. It's different. This time. You

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Speaker 1: don't get an economic signal from the curve in the

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Speaker 1: way that you did, say a decade ago, and Change

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Speaker 1: taught to me about the signal you take from the

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Speaker 1: difference between a two year note yield and a ten

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Speaker 1: year yield of thirty six basis points, right, So I

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Speaker 1: think there are some special factors this time around the

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Speaker 1: fact that the U S surgeries is largely issuing in

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Speaker 1: the front end. That's a big difference. Um. The other

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Speaker 1: thing is that it's all the pension demand, so there

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Speaker 1: aren't some idios and radic factors. But I would say

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Speaker 1: still the curve is the single best indicator that if

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Speaker 1: you looked at any one market indicator, the best indicator

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Speaker 1: of a recession has been the curve um and and

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Speaker 1: and then I would just say that it's the markets

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Speaker 1: sort of lack of conviction around how much can the

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Speaker 1: FED go above neutral and what exactly is neutral. So

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Speaker 1: I think what was interesting was even though Draggy actually

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Speaker 1: potentially increase for guidance, the FACT took a lot of

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Speaker 1: that for guidance out. So what the market saying is

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Speaker 1: sure the fact can hide two more times this year,

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Speaker 1: a couple more next year. Beyond that, if the bet

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Speaker 1: continues to sort of jam on the brakes, I think

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Speaker 1: the economy is going to slow down. Therefore the curve

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Speaker 1: will continue to flatten. So that's why I think there

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Speaker 1: is a macro segnal here the curve gets to zero,

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Speaker 1: I think we're working at the market sting don't go further.

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Speaker 1: What does all this mean for something? Is is fundamental

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Speaker 1: is real estate in the mortgage rate because I and

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Speaker 1: I get the curve dynamics and the ten years not

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Speaker 1: going to move that much. But does it mean that

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Speaker 1: mortgage rates stay lower than we normally think? I think

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Speaker 1: lower on a historical basis, but I do think mortgage

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Speaker 1: spreads are going to widen. The FED is letting the

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Speaker 1: mortgage portfolio run off, so that is going to put

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Speaker 1: some put question on mortgage rate. Mortgage rates have already

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Speaker 1: this in a pretty big amount, so I think. And

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Speaker 1: along with the salt thing, It's still too early to

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Speaker 1: tell what does soul due to home prices um, but

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Speaker 1: that plus higher morge dates, I think it starts becoming

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Speaker 1: a pretty big headwind for the housing market pretty much.

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Speaker 1: Gregg cant Shall with thee T Security's head of Global

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Speaker 1: Interest from June to Alaska, Meeting investors or interview with

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Speaker 1: The Day on Corporate Finance, on corporate Transactions, Craig Moffatt,

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Speaker 1: Moffatt Nathanson. We were honored that Michael Nathanson would brief

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Speaker 1: us forty eight hours ago, and Craig Moffatt does as well.

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Speaker 1: Craig lex in the Ft today had a price to

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Speaker 1: EBADT seventeen times for this transaction. Comcast is trading at

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Speaker 1: seven times uh ead uh. This trade goes at seventeen

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Speaker 1: times right now. Are either of these parties going to

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Speaker 1: overpay for Fox? Well, it's a great question, Tom, and

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Speaker 1: I'll tell you you know what what The Comcast stock

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Speaker 1: is has rebounded a bit in the last few days.

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Speaker 1: I think in part because people are at least gratified

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Speaker 1: that they didn't open with too crazy a bit to

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Speaker 1: start this process. Um. But look, let's face it, Comcast

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Speaker 1: stock has been select over the last couple of months,

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Speaker 1: and it's precisely because of that valuation disparity, and you

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Speaker 1: talked about it. Investors are frustrated it. Why didn't they

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Speaker 1: just buy back their own stock? If they're going to

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Speaker 1: lever up, why didn't they bibar stock, which would have

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Speaker 1: been vastly more creative than this transaction within your wonderful

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Speaker 1: six patient note this morning, we protect the copyright folks

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Speaker 1: of our client. Our guests were not going to send

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Speaker 1: it out to you call Monfatt, Nathanson, Craig, you made

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Speaker 1: very clear that the way this is a creative is

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Speaker 1: to eat but uh an operating income growth. It's revenue growth, yes,

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Speaker 1: but it's really about two billion dollars synergies and keeping

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Speaker 1: the operating income line going. How does Mr Roberts do

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Speaker 1: that if he wins? Well, look, let's first to put

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Speaker 1: a finer point on it. The biggest reason it's a

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Speaker 1: creative is because borrowing costs, although they've come up a

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Speaker 1: little bit, are still so low, and so almost anything

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Speaker 1: is a creative if you're willing to really lever your

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Speaker 1: balance sheet. And again that's why I say, while it's

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Speaker 1: a creative, it would have been vastly more creative to

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Speaker 1: lever up and buy back stock if that's what you

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Speaker 1: wanted to do because of that big valuation disparity. Now

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Speaker 1: that said, what do you do with this asset? I

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Speaker 1: think what what Brian Roberts and Comcast is looking at is.

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Speaker 1: Remember this is in the context of also having made

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Speaker 1: a bit for the global distribution assets of Sky, which

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Speaker 1: are connected but also somewhat separate. I think he sees

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Speaker 1: them both as necessary but insufficient, independently um pieces of

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Speaker 1: a strategy that that is about trying to global with

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Speaker 1: distribution and then dramatically ramping up proprietary content production in

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Speaker 1: the hope that you can create a model very much

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Speaker 1: like Netflix, where you produce your own content in your

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Speaker 1: own studio and distribute it to your customers via your

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Speaker 1: own distribution platform. To do that, you need a lot

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Speaker 1: of scale, And I think that's what he's looking at

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Speaker 1: with both of these pieces. Craig I was looking at

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Speaker 1: the numbers and uh, Comcast would become the second most

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Speaker 1: indebted non financial company in the US if it goes

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Speaker 1: through with this transaction, boosting its debt from sixty billion

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Speaker 1: dollars to a hundred and sixty billion dollars. It just

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Speaker 1: raises a question, especially at a time when the media

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Speaker 1: outlook is so uncertain, what's the likelihood that Comcast gets

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Speaker 1: downgraded substantially and ends up as an over leveraged company

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Speaker 1: that has to split up and is struggling. Well, it's

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Speaker 1: it's certainly a legitimate risk. You know. It's funny I

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Speaker 1: downgraded a T and T um on the Time Warner

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Speaker 1: transaction a couple of days ago for exactly that same reason.

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Speaker 1: Now there is a pretty stark difference here. A T

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Speaker 1: and T is shrinking revenues and it's shrinking. But uh,

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Speaker 1: even after you add um time Warner and and in

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Speaker 1: that case you're levering to a similar leverage point of

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Speaker 1: a close to four times, even if if you counted

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Speaker 1: the right way at a T and T UM. But again,

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Speaker 1: it's a shrinking asset. So that's a much more precarious

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Speaker 1: situation than Comcast. But look, Comcast would be in an

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Speaker 1: at least in a similar conversation of taking a business

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Speaker 1: that is somewhat cyclical and now much more exposed to advertising,

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Speaker 1: so more cyclical um. And therefore obviously cyclical businesses tend

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Speaker 1: to warrant lower levels of leverage because you have to

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Speaker 1: be able to manage through recessions UM. But also um,

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Speaker 1: where you have a lot of secular challenges and uncertainties

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Speaker 1: about the outlook of the core business, which in this case,

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Speaker 1: the core business for Comcast would no longer be the

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Speaker 1: cable business. It would just as much be a media business.

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Speaker 1: And that's a business with real question mark. I guess

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Speaker 1: that the sort of flipway of asking this is Comcast

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Speaker 1: leadership has said that they will pay down debt pretty quickly.

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Speaker 1: Do you buy that? Yeah? I do. Um, the Comcast

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Speaker 1: is not a company that historically has been comfortable with

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Speaker 1: extremely high levels of debt, and they have levered up

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Speaker 1: in the past to make acquisitions. UM it's a business

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Speaker 1: that generates a lot of cash and while they do

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Speaker 1: pay a dividend again throughout the contrast to a T

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Speaker 1: and T, the challenge for a T and T is

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Speaker 1: that the dividend is so high that it gives them

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Speaker 1: a lot less flexibility to pay down debt. In the

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Speaker 1: early years after the transaction, Comcast would at least have

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Speaker 1: more cash flow to pay down debt. And that's why

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Speaker 1: I think on balance UM you probably could persuade the

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Speaker 1: rating agencies that a temporary trip to four times leverage

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Speaker 1: day UM would be just that it would be temporary,

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Speaker 1: and that with a clear path to using those cash

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Speaker 1: for to to pay down debt, you could probably maintain

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Speaker 1: even after a downgrade, maintain that grade D. We've got

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Speaker 1: ten more questions, we can't do them right now. Craig Moffatt,

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Speaker 1: look forward to speaking to you soon, and again thank

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Speaker 1: you to Mr Moffatt and Michael Nathanson Moffatt Nathanson for

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Speaker 1: their perspective in conversation this week on this historic transaction.

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Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

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Speaker 1: Radio