WEBVTT - A Collapsing Venezuela Could Jolt Oil Market, Denning Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.560 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg P and L 0:00:20.840 --> 0:00:32.360 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Let's 0:00:32.360 --> 0:00:35.920 talk about another portfolio. Oil, The portfolio that exists in 0:00:36.040 --> 0:00:38.760 Venezuela is hurting, and here to tell us more about 0:00:38.760 --> 0:00:41.760 it is Liam Denning. He is our energy, mining and 0:00:41.920 --> 0:00:45.800 commodities calumnist for Bloomberg Gadfly. Liam, thank you very much 0:00:45.840 --> 0:00:49.680 for being here. Um, all right, we know Venezuela's economy 0:00:49.760 --> 0:00:52.839 is a mess. We know the politics is a mess. Uh. 0:00:53.280 --> 0:00:57.200 What is the likelihood that they will find a friendly nation, 0:00:57.440 --> 0:01:01.120 whether it be Russia or China or somebody to loan 0:01:01.200 --> 0:01:05.959 them more money, uh and perhaps help them stave off 0:01:06.040 --> 0:01:10.800 that day of reckoning? Um? Well defined friendly? I mean 0:01:10.840 --> 0:01:14.400 I think that non hostile, because I mean the United 0:01:14.440 --> 0:01:18.480 States is even talking about more sanctions on Venezuela. Yeah, 0:01:18.560 --> 0:01:23.280 I think so. The situation right now is they've got 0:01:23.400 --> 0:01:26.640 declining all production Um. The economy is in a tailspin, 0:01:27.480 --> 0:01:30.319 and they've got at least five billion dollars or so 0:01:30.680 --> 0:01:35.640 of both sovereign debt and debt that resides at the 0:01:35.680 --> 0:01:37.920 state or company coming due by the end of the year. 0:01:38.840 --> 0:01:44.400 So one possible route for them is to get more 0:01:44.840 --> 0:01:49.000 money from China and Russia. My senses, China may be 0:01:49.120 --> 0:01:52.840 reluctant to put more into this, since it may be 0:01:52.960 --> 0:01:57.640 just throwing, you know, good money after bad um. I 0:01:57.680 --> 0:02:00.920 think with Russia it's it's more interesting because as there 0:02:00.960 --> 0:02:07.120 are reports that the Russians are attempting to renegotiate some 0:02:07.120 --> 0:02:11.720 some clauses around collateral with existing I mean, right, the 0:02:11.760 --> 0:02:18.320 Russia isn't and they already have a stake in No, 0:02:18.639 --> 0:02:21.840 they lent money to collateral I beg your pardon, and 0:02:21.880 --> 0:02:27.280 it's collateralized with a roughly half steak in Sitgo, which 0:02:27.360 --> 0:02:32.359 is the the Venezuelan refiner. Now, quite sensibly, they may 0:02:32.400 --> 0:02:35.839 be the Russians maybe trying to renegotiate that because it's 0:02:35.840 --> 0:02:38.640 it's unclear that if that ever came to pass, they 0:02:38.639 --> 0:02:41.600 could actually take possession of those assets. So Leon, let's 0:02:41.639 --> 0:02:45.000 zoom out a little bit, because Venezuela is a hotspot 0:02:45.080 --> 0:02:47.840 right now of difficulties on a number of levels, and 0:02:47.960 --> 0:02:51.960 it's sort of re introduces this idea of political risk 0:02:51.960 --> 0:02:54.760 in the oil market that really has been sort of absent. 0:02:54.919 --> 0:02:59.799 And I'm wondering, let's say Venezuela does become the for 0:03:00.040 --> 0:03:02.440 us to big oil producer to withdraw from the market 0:03:02.520 --> 0:03:05.200 due to political risk or to pull back. Would that 0:03:05.280 --> 0:03:08.399 actually cause oil prices to rally? Would that be a 0:03:08.400 --> 0:03:12.080 positive factor or would that possibly be a negative with 0:03:12.160 --> 0:03:18.200 people wondering what will happen? Uh? I think, you know, 0:03:19.440 --> 0:03:21.680 if if there is some sort of general generalized collapse 0:03:21.720 --> 0:03:24.799 in Venezuela and it takes barrels off the market, that 0:03:24.960 --> 0:03:29.040 is generally going to be seen as bullish for prices. 0:03:29.880 --> 0:03:32.920 I think the thing to watch out for though, is, 0:03:33.680 --> 0:03:36.680 you know, we have seen this happened before. I mean, 0:03:36.720 --> 0:03:39.120 you look at a country like Libya, where the country 0:03:39.200 --> 0:03:44.240 literally fell apart. It's being run by three different competing governments. 0:03:44.800 --> 0:03:48.920 Their production has actually been coming back recently to the 0:03:48.960 --> 0:03:52.480 extent that it's You've now got Opec and the countries 0:03:52.480 --> 0:03:54.840 that are trying to limit supply actually trying to nudge 0:03:54.880 --> 0:03:59.640 Libya towards limiting its output, which is kind of crazy 0:03:59.800 --> 0:04:04.040 for a country that really needs the revenue. UM. I 0:04:04.080 --> 0:04:06.920 think what I take away from Venezuela is if we 0:04:06.960 --> 0:04:09.000 if we really step back and we look at what's 0:04:09.000 --> 0:04:12.200 happened in the last few years, UM, what people have 0:04:12.240 --> 0:04:14.680 been waiting for is some kind of big pullback in 0:04:14.840 --> 0:04:18.600 US shale are either money runs out, companies go bankrupt, 0:04:18.680 --> 0:04:21.480 people get laid off, production goes down. Now, it did 0:04:21.520 --> 0:04:24.920 go down, but then it rebounded quite quickly, and I 0:04:24.960 --> 0:04:29.080 think if we're looking for barrels coming off the market, 0:04:29.160 --> 0:04:33.520 it's not going to be the more flexible UM companies 0:04:33.520 --> 0:04:37.440 that are operating in places like Texas, because you know, 0:04:37.520 --> 0:04:40.279 even if those companies go bankrupt, someone else just takes 0:04:40.279 --> 0:04:42.560 over the assets and starts running it. I think it's 0:04:42.640 --> 0:04:45.760 much more likely that we see problems on the supply 0:04:45.880 --> 0:04:49.599 side in these economies which are very beholden to the 0:04:49.600 --> 0:04:54.159 old price, which haven't restructured, and where there's really very 0:04:54.240 --> 0:04:57.400 little flexibility on both the economic and the political side 0:04:57.400 --> 0:04:59.680 to deal with the pressure that they're under. Liam are 0:04:59.720 --> 0:05:02.240 really interesting point and one that I hadn't really thought about. 0:05:02.240 --> 0:05:04.800 Another word, stopped looking for shell producers to cut production. 0:05:05.080 --> 0:05:07.039 It's really going to be some kind of crisis in 0:05:07.120 --> 0:05:09.920 one of these other producers, like a venezuela that's going 0:05:09.960 --> 0:05:13.320 to take barrels off the market. Liam Denning, Energy Mining 0:05:13.360 --> 0:05:17.360 and commodities columnist for Bloomberg Gadfly. His work is tremendous. 0:05:17.520 --> 0:05:21.320 Check it out bloomberg dot com, slash gadfly or on 0:05:21.520 --> 0:05:37.240 Bloomberg and I gadfly. Plastic surgery is a huge business, Phim. 0:05:37.320 --> 0:05:41.359 I didn't realize that Americans spent more than sixteen billion 0:05:41.440 --> 0:05:45.560 dollars on cosmetic plastic surgeries minimally invasive procedures last year. 0:05:45.720 --> 0:05:47.599 It's the most on record. And give us a sense 0:05:47.600 --> 0:05:50.600 of how much uh this business is growing. I want 0:05:50.600 --> 0:05:53.719 to bring in Dr Stafford brumand he's a plastic surgeon 0:05:53.760 --> 0:05:57.040 at seven forty Park Plastic Surgery on the Upper East 0:05:57.080 --> 0:06:00.359 Side of New York City. And Dr Bruman, thank you 0:06:00.400 --> 0:06:02.320 so much for joining us. I'd love to get a 0:06:02.360 --> 0:06:05.159 sense from you in the growth of the industry in 0:06:05.200 --> 0:06:08.680 the past few years. What procedures have been the absolute 0:06:08.760 --> 0:06:12.240 most popular? Well, there are a slew of procedures which 0:06:12.320 --> 0:06:17.880 people come in for from non invasive injectables and surgery. 0:06:18.240 --> 0:06:22.800 So in the injectables realm. It's grown a lot in 0:06:22.839 --> 0:06:26.560 our practice. It's grown almost year over year and keeps growing. 0:06:27.200 --> 0:06:31.560 Are you talking about fillers and botox? Fillers? Botox and fillers, 0:06:32.040 --> 0:06:34.760 and then the other ones are noninvasive treatments like skin 0:06:34.839 --> 0:06:39.400 tightening and fat freezing which is cool sculpt and all therapy. 0:06:39.760 --> 0:06:43.600 So they can have treatments which are not surgical, uh, 0:06:43.880 --> 0:06:47.680 either injectables or superficial treatments that make them look better, 0:06:47.880 --> 0:06:51.320 and those have grown immensely. They're more popular. It delays 0:06:51.720 --> 0:06:56.400 plastic surgery, h surgery itself, but doesn't eliminate the need 0:06:56.440 --> 0:06:59.520 for surgery. Can you speak about some of the individual 0:06:59.600 --> 0:07:04.000 company ease that have maybe pioneered or producing new types 0:07:04.080 --> 0:07:07.200 of therapies or services that you didn't have let's say 0:07:07.200 --> 0:07:10.040 five years ago. Well, Botox now is a brand name 0:07:10.080 --> 0:07:13.040 and everyone knows Botox and is really not afraid of it, 0:07:13.360 --> 0:07:16.360 and that's owned by Allergan, and Allergan I think was 0:07:16.440 --> 0:07:20.080 recently bought by activists. So it's a whole range of companies. 0:07:20.080 --> 0:07:24.200 But they have brought along Botox, which has many uses 0:07:24.680 --> 0:07:28.880 as well as cosmetic uses. It's Botox cosmetica or cosmetic, 0:07:29.560 --> 0:07:31.960 but they also have cool sculpt which was fat freezing, 0:07:31.960 --> 0:07:34.600 which was a technology where you did not have to 0:07:34.640 --> 0:07:38.000 have surgery, just had a cooling device sort of strapped 0:07:38.040 --> 0:07:40.040 to you and that area lost the fat that it 0:07:40.120 --> 0:07:43.680 was treating. It froze it basically, And they just recently 0:07:43.720 --> 0:07:46.400 bought that as well. Uh So, and there are other 0:07:46.440 --> 0:07:50.920 companies that still have other botox or botulism talks and products, 0:07:51.520 --> 0:07:55.000 uh Like Valiant bought Medicis a while back, so there 0:07:55.000 --> 0:07:57.520 are other companies that do that. There's another one traded Revance, 0:07:57.560 --> 0:08:00.600 which is a small company which has another uh Bauchlism 0:08:00.840 --> 0:08:04.200 talks and product. Is this like all the effect of 0:08:05.120 --> 0:08:09.480 Instagram and selfies where people an increasing number of people 0:08:09.680 --> 0:08:14.280 are obsessed with the way that they look, or is 0:08:14.320 --> 0:08:18.520 this uh simply the normalizing of an ongoing trend where 0:08:18.520 --> 0:08:20.160 people just want to look their best and if they 0:08:20.160 --> 0:08:22.640 can find a procedure to help them do that, they'll 0:08:22.680 --> 0:08:25.200 do that. I mean, how much excessive surgery did see? 0:08:25.400 --> 0:08:28.480 It's really a matter of function of both. I think 0:08:28.560 --> 0:08:32.000 that uh, social media has propelled this to a new level. 0:08:32.360 --> 0:08:35.480 And I also think that people really are working harder 0:08:35.520 --> 0:08:38.200 and longer and want to be relevant and they have 0:08:38.320 --> 0:08:41.240 to look the part. So they come in seeing how 0:08:41.240 --> 0:08:44.560 they can still be relevant in the workforce. Uh, and 0:08:44.640 --> 0:08:47.880 so it's a matter, it really is. Bifurcates that way. 0:08:47.920 --> 0:08:50.240 It's the young person coming in knowing that they've seen 0:08:50.280 --> 0:08:53.719 selfies and they are on social media and Facebook, and 0:08:54.120 --> 0:08:58.040 more middle aged or older group wanting to have plastic 0:08:58.080 --> 0:09:01.400 surgery to stay in the workforce. That's that's fascinating point. 0:09:01.440 --> 0:09:04.040 In other words, people who are older knowing that they 0:09:04.120 --> 0:09:08.760 might be replaced more quickly if they don't look young well, 0:09:08.840 --> 0:09:10.160 or they'll come in they say, you know what, I 0:09:10.200 --> 0:09:12.679 work with all these young people. I can't look like 0:09:12.760 --> 0:09:17.280 someone's uncle or grandmother. I've got to look younger. So 0:09:17.360 --> 0:09:20.440 they want to do something that will transform them but 0:09:20.520 --> 0:09:22.880 not change them, so that they can be still relevant 0:09:22.880 --> 0:09:25.160 in the workforce. You notice he keeps looking at me 0:09:25.160 --> 0:09:32.679 whenever he says those yeah, I saw those eyes. Dr Broman, 0:09:32.800 --> 0:09:37.320 I'm when I ask you about the practice that you 0:09:37.360 --> 0:09:39.240 know you happen to be a plastic surgeon, but I 0:09:39.280 --> 0:09:41.679 mean you're a medical doctor, so you've got to practice. 0:09:42.120 --> 0:09:46.640 The software that you use, the management systems that you use. Uh. 0:09:46.720 --> 0:09:49.520 That is big business. Athena Health, for example, one of 0:09:49.520 --> 0:09:54.000 the big software practice providers. Can you give us some 0:09:54.080 --> 0:09:56.720 insight into what has changed there? And this whole idea 0:09:56.760 --> 0:10:00.200 of trying to digitize people's medical records so it it 0:10:00.240 --> 0:10:04.240 becomes a more efficient service, because not all places are 0:10:04.280 --> 0:10:07.440 as efficient. To some the trend is to go to 0:10:07.600 --> 0:10:12.839 electronic medical records. In plastic surgery practices, you don't necessarily 0:10:12.840 --> 0:10:15.040 have to do that because it's a smaller practice, but 0:10:15.040 --> 0:10:17.679 when you're affiliated with a hospital as we are at 0:10:17.679 --> 0:10:21.080 seven forty part plastic surgery, you can get the software 0:10:21.559 --> 0:10:24.760 UH and the electronic records through the hospital system, which 0:10:24.800 --> 0:10:28.360 is Mount Sinai Hospital, or you can get your own system, 0:10:28.360 --> 0:10:30.520 which is what we have. And they're smaller players in 0:10:30.559 --> 0:10:33.520 that field. So it's not only in plastic surgeries at 0:10:33.520 --> 0:10:39.400 botox and fillers, but it's UH medical records, it's information technology, UH, 0:10:39.520 --> 0:10:42.800 it's devices. So there's a whole different slew of things 0:10:42.840 --> 0:10:46.000 to to look at in the medical space. But they're 0:10:46.040 --> 0:10:49.200 smaller players. Ours as next Tech, which is a privately 0:10:49.200 --> 0:10:53.080 held company which is really on the forefront of dermatology 0:10:53.120 --> 0:10:56.439 and plastic surgery and ophthalmology, and that's the system we 0:10:56.520 --> 0:10:59.000 use and it's specialized, right I mean, that's what's so 0:10:59.080 --> 0:11:01.120 interesting is that the the market in a sense is 0:11:01.160 --> 0:11:05.080 fragmented because the software has been built for specific types 0:11:05.160 --> 0:11:09.240 of practice. A specialties every specially has its own needs, 0:11:09.320 --> 0:11:11.520 and we have our needs where we need to show 0:11:11.559 --> 0:11:16.680 photographs and file photographs and uh interact with the hospital 0:11:16.960 --> 0:11:19.320 and keep our own records sort of in shape so 0:11:19.360 --> 0:11:23.000 that our office can work more efficiently. You know, before 0:11:23.040 --> 0:11:26.000 the segment, we were talking about how in your view, 0:11:26.120 --> 0:11:29.800 sometimes your role is as much a physician and a 0:11:29.880 --> 0:11:33.560 surgeon as it is a psychiatrist or a psychologist and 0:11:33.679 --> 0:11:36.360 a therapist, and that when people come to you, it's 0:11:37.120 --> 0:11:40.079 really part of your job to let them know if 0:11:40.120 --> 0:11:42.960 you think that perhaps they ought to go a different route, 0:11:43.040 --> 0:11:46.120 if perhaps it's not a responsible surgery. Can you talk 0:11:46.240 --> 0:11:49.880 a little bit about that. A plastic surgery is a 0:11:49.920 --> 0:11:52.000 two way street. So we have to listen to our 0:11:52.040 --> 0:11:55.800 patients to see what brings them in and what concerns 0:11:55.840 --> 0:11:57.760 them and what we can do to help them. But 0:11:57.840 --> 0:12:01.720 then we have to project and help them figure out 0:12:01.760 --> 0:12:05.400 what works and what we can do legitimately and rightly. 0:12:05.480 --> 0:12:07.960 So we've got to sort of figure out where they're 0:12:08.000 --> 0:12:11.480 coming from, whether it's the right indications, whether it's the 0:12:11.600 --> 0:12:15.560 right requirements, whether they're medically in the right place to 0:12:15.600 --> 0:12:17.599 have this sort of surgery, and then we have to 0:12:17.640 --> 0:12:21.480 discuss with them the options. What's a bad reason to 0:12:21.600 --> 0:12:24.880 want to get There are many bad reasons and so 0:12:25.000 --> 0:12:28.800 each person has their own take on it. But whether 0:12:28.960 --> 0:12:34.000 it's a relationship issue, whether it is trying to look 0:12:34.040 --> 0:12:37.560 like someone that they shouldn't be trying to look like. Uh, 0:12:37.600 --> 0:12:40.160 there are a lot of reasons for it, or peer pressure. 0:12:40.640 --> 0:12:43.800 So there are some reasons not to do surgery. And 0:12:44.200 --> 0:12:47.320 we as a as a body, as plastic surgeons, are 0:12:47.400 --> 0:12:50.480 offering our services to help them. We're here to help people. 0:12:50.520 --> 0:12:53.560 We want people happy. We're and then make people happy business. 0:12:54.080 --> 0:12:57.320 So if we can't do that and we think that 0:12:57.400 --> 0:13:01.559 their objectives are not legitimate it, then we'll tell them 0:13:01.559 --> 0:13:03.400 we talked to them. I want to thank you for 0:13:03.480 --> 0:13:07.000 talking with us. Dr Stafford Boumant is a plastic surgeon 0:13:07.040 --> 0:13:12.600 with seven forty park plastic surgery and very interesting, very 0:13:12.640 --> 0:13:28.520 interesting conversation about the nature of plastic surgery. Well, we'll 0:13:28.520 --> 0:13:31.080 be looking forward to earnings from the Walt Disney Company 0:13:31.080 --> 0:13:34.080 plus Alphabet the parent company of Google, and here to 0:13:34.080 --> 0:13:36.480 help us understand what to look for is Paul Sweeney, 0:13:36.559 --> 0:13:39.720 US Director of Research and Senior Media Internet Analyst for 0:13:39.840 --> 0:13:46.000 Bloomberg Intelligence. He can be followed on Twitter at pt Sweeney. Alright, 0:13:46.000 --> 0:13:50.320 pt Sweeney, this report today. I want to focus on 0:13:50.640 --> 0:13:55.640 the combination perhaps of Alphabet and Walt Disney because when 0:13:55.640 --> 0:13:59.280 I look at the dashboard, which I compliment you one 0:13:59.320 --> 0:14:01.679 on Bloomberg and Intelligence because it gives you every piece 0:14:01.679 --> 0:14:04.079 of data. As if I didn't know that Don Kirk 0:14:04.240 --> 0:14:07.959 was the big movie of the weekend, Uh, I find 0:14:07.960 --> 0:14:12.199 that it's Facebook and Alphabet those are the ones that 0:14:12.240 --> 0:14:16.000 are really competing for the ad dollars for companies such 0:14:16.080 --> 0:14:19.640 as the Walt Disney Company and ESPN. Is there an overlap? 0:14:19.680 --> 0:14:21.720 Is there? Because it seems as though there's a bleed 0:14:22.160 --> 0:14:24.880 between one kind of company and another. Content is a 0:14:24.960 --> 0:14:27.800 very fuzzy thing. Now, yes, I think you know, we've 0:14:27.800 --> 0:14:29.960 seen something that we've been talking about in the t 0:14:30.160 --> 0:14:33.320 MT technology, media and telecom space for the last twenty years. 0:14:33.360 --> 0:14:37.520 Is this convergence of technology and media and content and uh, 0:14:37.840 --> 0:14:40.360 and we're really really are seeing it really over the 0:14:40.400 --> 0:14:43.160 last five to six seven years really accelerate and so 0:14:43.240 --> 0:14:46.800 examples would be a traditional technology companies such as Google 0:14:47.000 --> 0:14:49.680 as actually, through their ownership of YouTube, one of the 0:14:49.680 --> 0:14:53.560 biggest television platforms in the business on a global basis, uh, 0:14:53.600 --> 0:14:56.040 and part of their you know, they're probably generating you know, 0:14:56.160 --> 0:15:00.520 several billion dollars of advertising revenue on YouTube. So there's 0:15:00.640 --> 0:15:02.960 a classic example. And then another would be you know, 0:15:03.320 --> 0:15:06.720 a T and T, the largest telecommunications companies spending eighty 0:15:06.760 --> 0:15:09.520 five billion dollars to buy Time Warner to get those 0:15:09.560 --> 0:15:13.520 assets to put that content over their wireless network here. 0:15:13.520 --> 0:15:16.440 So we really are seeing the convergence here as consumers 0:15:16.440 --> 0:15:19.320 spend more and more of their time online, if you will, 0:15:19.320 --> 0:15:23.280 on outside of the traditional media ecosystem. Yeah, Paul, you 0:15:23.320 --> 0:15:28.040 were saying before the segment that seventy percent of display ads. 0:15:28.040 --> 0:15:30.120 I just I can't believe the seventy percent of display 0:15:30.160 --> 0:15:34.080 ads are going to Google and Facebook, and that proportion 0:15:34.200 --> 0:15:36.840 has been going up, and that's been taking away from 0:15:37.120 --> 0:15:42.320 platforms such as Disneys and other more traditional media companies. 0:15:42.400 --> 0:15:45.840 I'm trying to understand how effective some of these ads are. 0:15:45.880 --> 0:15:48.320 I mean, I think about, for example, the Google search 0:15:48.440 --> 0:15:50.960 ads and how often do people really click on them? 0:15:51.000 --> 0:15:54.760 How valuable is that to retailers and others that are 0:15:54.760 --> 0:15:57.480 doing the advertising. Well, what's interesting when you when if 0:15:57.480 --> 0:15:59.880 you went to the television up from presentations and may 0:16:00.000 --> 0:16:02.040 all the big broadcast networks, they would tell you that 0:16:02.080 --> 0:16:05.840 digital advertising is not nearly as effective as some people believe. 0:16:06.280 --> 0:16:08.560 There is a lot of audience fraud. You can't even 0:16:08.600 --> 0:16:11.320 really measure accurately the audience that is seen your ad 0:16:11.440 --> 0:16:14.000 number one, number two, You don't know where your ad 0:16:14.080 --> 0:16:17.440 is actually being placed in many instances on the internet. Uh, 0:16:17.480 --> 0:16:21.120 and they're obviously those famous examples where an advertiser would 0:16:21.120 --> 0:16:23.120 have its message you know, next to some type of 0:16:23.120 --> 0:16:26.520 isis you know, video or certainly content that you don't 0:16:26.520 --> 0:16:28.800 want to be associated with. Whereas on a broadcasting cable 0:16:28.840 --> 0:16:30.880 networks you know exactly where your ad will be. It 0:16:30.960 --> 0:16:34.840 is a advertiser safe environment. That being said, the dollars 0:16:34.880 --> 0:16:37.880 the numbers tell a different story. TV ad spending this 0:16:37.960 --> 0:16:41.880 year will be up probably low single digits, whereas digital 0:16:41.920 --> 0:16:44.880 advertising across the Internet will probably be up fifteen to 0:16:45.040 --> 0:16:48.880 seventeen percent. So advertisers continue to allocate more and more 0:16:48.920 --> 0:16:53.160 of their budgets to digital advertising platforms, and as you mentioned, um, 0:16:53.240 --> 0:16:56.160 it really is a d wopply for big brand advertisers. 0:16:56.160 --> 0:16:58.840 If they want to allocate their dollars onto the Internet 0:16:58.880 --> 0:17:01.760 broadly defined, they really only have to two choices, and 0:17:01.800 --> 0:17:06.280 that is Facebook, UH and Google. So UM and everybody 0:17:06.280 --> 0:17:08.200 else is kind of fighting for the scraps, which are 0:17:08.280 --> 0:17:11.159 big scraps and they're growing, but Google and Facebook are 0:17:11.160 --> 0:17:14.000 really the dominant players here. UM, and I think a 0:17:14.040 --> 0:17:17.240 lot of advertisers are saying, yes, we have issues about measurement, 0:17:17.320 --> 0:17:20.600 Yes we have issues about accountability and context, but at 0:17:20.600 --> 0:17:23.280 the end of the day, we know that our consumers 0:17:23.280 --> 0:17:26.440 are audiences are spending more line and more time online 0:17:26.440 --> 0:17:28.760 and therefore we need to be there as well talking 0:17:28.760 --> 0:17:31.840 about spending spending more money for live sports and when 0:17:31.960 --> 0:17:35.160 if you could talk to the issue of ESPN some 0:17:35.440 --> 0:17:38.480 comparisons to a year ago, so that we understand what's 0:17:38.480 --> 0:17:40.680 going to happen this afternoon when they tell us about 0:17:40.720 --> 0:17:43.399 the operations of ESPN and so on. Yes, so the 0:17:43.520 --> 0:17:46.440 challenge UH for ESPN. In the space of probably two 0:17:46.520 --> 0:17:49.159 years to maybe three years, ESPN has gone from the 0:17:49.160 --> 0:17:52.320 crown jewel of the Walt Disney investment story UH to 0:17:52.440 --> 0:17:55.800 being really the big question mark. And that is because Uh, 0:17:55.880 --> 0:17:58.720 I'm very similar to what we're seeing across the entire 0:17:58.800 --> 0:18:03.080 television ecosystem. Even the mighty ESPN is losing subscribers to 0:18:03.320 --> 0:18:07.280 chord cutting and chord shaving as people try to pair back. Uh, 0:18:07.359 --> 0:18:10.560 they're spending on the traditional pay TV packages. Even ESPN 0:18:10.640 --> 0:18:12.920 is filling it. So they have lost you know, several 0:18:13.080 --> 0:18:15.880 probably four to five million subscribers over the last four 0:18:15.960 --> 0:18:18.920 or five years um. And that is impacting their ability 0:18:19.000 --> 0:18:22.080 to charge for advertising and as well as it impacts 0:18:22.080 --> 0:18:25.280 their affiliate fees that they can charge to their distributors. 0:18:25.280 --> 0:18:28.879 So they have revenue challenges at ESPN. And that's a 0:18:28.920 --> 0:18:32.399 problem because their costs, their costs are primarily programming, and 0:18:32.440 --> 0:18:36.280 those programming rights fees to the NFL into Major League Baseball, 0:18:36.280 --> 0:18:40.199 into the NBA, those are very big numbers. And that's right, 0:18:40.320 --> 0:18:43.160 isn't that right for the For the NBA. Uh, yeah, 0:18:43.240 --> 0:18:46.400 it was actually an additional for dollars above their last contracts, 0:18:46.440 --> 0:18:49.480 So they have billions of dollars of rights fees that 0:18:49.520 --> 0:18:53.080 are long term, multi year contracts that are fixed at 0:18:53.080 --> 0:18:55.240 a time when their revenue is being pressured. That's the 0:18:55.800 --> 0:18:59.280 challenge for ESPN. Well, and it's not just ESPN for Disney, right, 0:18:59.320 --> 0:19:02.560 because we also have gotten news that thirty eight thou 0:19:02.760 --> 0:19:07.080 Florida union workers are looking for higher wages and are 0:19:07.119 --> 0:19:10.359 prepared to be pretty aggressive with that. How realistic is 0:19:10.359 --> 0:19:13.200 it that their wages could be increased enough to make 0:19:13.200 --> 0:19:17.200 a material dent in disneys earnings and potentially hurt them. Yeah, 0:19:17.240 --> 0:19:19.040 that's it's gonna be an interesting question to see how 0:19:19.040 --> 0:19:21.080 they talk about it on the call coming up on 0:19:21.119 --> 0:19:24.159 their earnings. UM. That is the parks and resorts business 0:19:24.160 --> 0:19:26.600 has actually been a great story for the Walt Disney 0:19:26.600 --> 0:19:28.320 Company over the last four or five years. This is 0:19:28.520 --> 0:19:31.600 a business that, um, you know, is a minta high 0:19:31.600 --> 0:19:34.600 single digit revenue growth business, a low double digit profit 0:19:34.680 --> 0:19:37.640 growth business. So this is a business that they need 0:19:37.720 --> 0:19:41.040 to really manage their costs well. Um So that and 0:19:41.080 --> 0:19:43.680 they're one of the largest costs obviously is their personnel costs. 0:19:43.680 --> 0:19:45.600 And to the extent that they have a material impact 0:19:46.080 --> 0:19:48.840 uh to the cost in Florida, which is their biggest 0:19:48.880 --> 0:19:52.440 market globally, that will have an impact marginally, I think 0:19:52.480 --> 0:19:54.760 on the profitability of that business. But I think investors 0:19:55.119 --> 0:19:57.600 still view that business is a very good business as 0:19:57.640 --> 0:20:00.680 a business that is worthy of more investment. And in fact, 0:20:00.960 --> 0:20:03.640 we see the Walt Disney Company investing, you know, every 0:20:03.720 --> 0:20:05.840 year more and more in their parks and resorts businesses 0:20:05.880 --> 0:20:09.440 around the world, from Shanghai to Orlando to California, to 0:20:09.640 --> 0:20:12.560 additional cruise ships. Uh. So that's a business they like. 0:20:12.760 --> 0:20:17.000 That's a business. Actually, the Comcast, through its acquisition of Universal, uh, 0:20:17.160 --> 0:20:19.280 got all the parks and resorts from Universal. That's a 0:20:19.320 --> 0:20:22.840 business Comcast like. So the theme park business globally is 0:20:22.880 --> 0:20:24.919 a very good business. And of course the Disney as 0:20:24.920 --> 0:20:27.320 a world leader, aren't they just about to celebrate something 0:20:27.359 --> 0:20:32.840 like their ten million visitor Torobabling park in China and uh, well, China, China. 0:20:32.880 --> 0:20:35.520 The first year they had I guess, I guess it 0:20:35.560 --> 0:20:37.879 was about ten million, and that was kind of their goal. 0:20:37.960 --> 0:20:39.680 And then now that now they're in year two. So 0:20:39.920 --> 0:20:42.600 Shanghai has generally been very successful for them, and in fact, 0:20:42.600 --> 0:20:47.719 they've announced additional expansion of Shanghai uh to fuel what 0:20:47.760 --> 0:20:50.000 they believe will be future growths there. So I think 0:20:50.040 --> 0:20:51.960 that was a I think most investors view that is 0:20:51.960 --> 0:20:54.560 a very good investment. Thank you so much for joining us. 0:20:54.560 --> 0:20:58.040 Paul Sweeney, US Director of Research and senior Media and 0:20:58.160 --> 0:21:01.879 Internet analyst for Bloomberg Intelligence. He is now off to 0:21:02.160 --> 0:21:05.560 a trip to Disney World with his family while he 0:21:05.640 --> 0:21:19.720 checks out Disney earnings. We want to turn now to 0:21:19.760 --> 0:21:23.480 Ira Jersey, are interest rate strategist for Bloomberg Intelligence, to 0:21:23.480 --> 0:21:25.080 give us a little bit of a preview of this 0:21:25.119 --> 0:21:28.520 week's f O m C meeting. Ira, what can we 0:21:28.560 --> 0:21:32.399 expect to learn? Hey, pim, UM, So the Federal Reserve 0:21:32.480 --> 0:21:33.919 is not going to hike this week. You know, the 0:21:33.920 --> 0:21:36.280 markets pricing for a zero percent chance of a hike 0:21:36.359 --> 0:21:38.440 this week, So that would certainly be the biggest shock 0:21:38.560 --> 0:21:40.480 to the market, and I think you'd wind up seeing 0:21:40.800 --> 0:21:43.800 to your notes sell off quite significantly if if they 0:21:43.800 --> 0:21:47.280 were to do that. UM. But there is the possibility 0:21:47.280 --> 0:21:49.960 that they can announce runoff this week, which UM I 0:21:50.000 --> 0:21:54.400 think has caused some confusion and consternation around different market 0:21:54.480 --> 0:21:56.720 segments about you know, exactly what does that mean? What 0:21:56.760 --> 0:21:58.920 does it mean when the Federal Reserve starts to run 0:21:58.920 --> 0:22:03.359 off um it's treasury and mortgage portfolio. So so they're 0:22:03.359 --> 0:22:08.520 expected to start allowing some of their treasury mortgage backed 0:22:08.560 --> 0:22:12.520 securities holdings to pay down starting as soon as what 0:22:12.680 --> 0:22:17.480 October or September even UM, and the biggest question, according 0:22:17.520 --> 0:22:21.240 to your latest research note is around mortgage backed securities, right, 0:22:21.280 --> 0:22:24.600 that's where people are sort of girding for the most 0:22:24.680 --> 0:22:28.040 potential volatility. Am I writing that? Yeah? I think that 0:22:28.040 --> 0:22:31.399 that's that's where the biggest risk comes is really what 0:22:31.400 --> 0:22:33.600 what what comes from that? And the reason is because 0:22:33.880 --> 0:22:37.760 that can't be managed by the UM, by any bureaucracy. 0:22:37.880 --> 0:22:40.959 So when the treasury portfolio runs off, even though some 0:22:41.000 --> 0:22:43.720 months are going to run off significantly more treasuries than 0:22:44.040 --> 0:22:47.760 than mortgage backed securities UM, the Treasury Department can determine 0:22:47.880 --> 0:22:50.000 how that's going to come into the market. Is that 0:22:50.040 --> 0:22:52.360 going to come into the market with them issuing more 0:22:52.400 --> 0:22:54.879 ten year notes or thirty year thirty year bonds? The 0:22:54.880 --> 0:22:57.640 answer is probably not. They'll end up issuing a lot 0:22:57.680 --> 0:22:59.960 more TEA bills and two year and three year Now 0:23:00.040 --> 0:23:03.400 it's a very short maturity, short duration, not a lot 0:23:03.440 --> 0:23:07.280 of market risk instruments, whereas mortgages that it will have 0:23:07.359 --> 0:23:10.040 to just be absorbed by the market based on how 0:23:10.160 --> 0:23:15.199 much UM, how much people actually refinance our houses and 0:23:15.200 --> 0:23:18.320 how much mortgage activity there is. So so so that's 0:23:18.359 --> 0:23:20.680 something that's that can't be controlled as well. So that's 0:23:20.760 --> 0:23:24.160 one of the reasons why we think that there could 0:23:24.160 --> 0:23:26.720