1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma Wicks. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:22,720 Speaker 1: at Bloomberg dot com. Well, one of the big stories 8 00:00:22,720 --> 00:00:27,360 Speaker 1: in media and entertainment investing is can anybody compete with Netflix? 9 00:00:27,400 --> 00:00:30,200 Speaker 1: And we're seeing some companies make some big moves. We've seen, 10 00:00:30,240 --> 00:00:33,159 Speaker 1: most notably the Walt dis new company by twenty one 11 00:00:33,280 --> 00:00:35,559 Speaker 1: century Fox from more than seventy billion dollars in an 12 00:00:35,600 --> 00:00:38,320 Speaker 1: effort to compete against Netflix. So let's talk media and 13 00:00:38,400 --> 00:00:41,680 Speaker 1: entertainment stocks. We are pleased to welcome Lara Martin. Lar's 14 00:00:41,680 --> 00:00:44,240 Speaker 1: senior analyst for Needham Company. She's based in l a 15 00:00:44,360 --> 00:00:46,479 Speaker 1: but she joins us here in a Bloomberg eleventh three 16 00:00:46,520 --> 00:00:49,320 Speaker 1: oh studio in New York. Laura, thanks for being with us. 17 00:00:49,320 --> 00:00:53,760 Speaker 1: So can anybody compete with Netflix? What is your view 18 00:00:53,800 --> 00:00:55,480 Speaker 1: on Netflix? To begin with? Because you are one of 19 00:00:55,520 --> 00:00:58,200 Speaker 1: the few analysts out there that is not planning the 20 00:00:58,240 --> 00:01:00,680 Speaker 1: table on Netflix. Yeah, right, So I find it's hard 21 00:01:00,680 --> 00:01:02,279 Speaker 1: to make money when you agree with the crowd, So 22 00:01:02,320 --> 00:01:04,520 Speaker 1: I take the hate mail that comes with being negative 23 00:01:04,520 --> 00:01:09,080 Speaker 1: on Netflix. Um. So my concern about Netflix is that, um, 24 00:01:09,120 --> 00:01:11,400 Speaker 1: they're get about to get They've been a monopolist with 25 00:01:11,480 --> 00:01:14,360 Speaker 1: other people's programming for most of the last seven years, 26 00:01:14,760 --> 00:01:16,800 Speaker 1: and now they're going to get companies competing with them 27 00:01:16,800 --> 00:01:19,399 Speaker 1: that not only have deeper pockets, but also have a 28 00:01:19,440 --> 00:01:22,800 Speaker 1: lower marketing cost and a lower content cost because they 29 00:01:22,800 --> 00:01:25,480 Speaker 1: own their own libraries. So in the case of Disney 30 00:01:25,520 --> 00:01:27,480 Speaker 1: and Warner Brothers, which is now owned by A T 31 00:01:27,600 --> 00:01:29,959 Speaker 1: and T, they have fifty years of program and they've 32 00:01:30,000 --> 00:01:32,240 Speaker 1: already paid for an amortized so it's a lower cost 33 00:01:32,280 --> 00:01:34,680 Speaker 1: of content because Netflix has to pay cash for all 34 00:01:34,720 --> 00:01:37,640 Speaker 1: their original content. And then each of those companies has 35 00:01:37,640 --> 00:01:40,720 Speaker 1: sisters subsidiaries that they can advertise for free. So Disney 36 00:01:40,760 --> 00:01:43,039 Speaker 1: owns ABC, they can put their own thirty second spot 37 00:01:43,120 --> 00:01:46,520 Speaker 1: telling you that Disney Entertainment exists. Netflix has to buy 38 00:01:46,560 --> 00:01:50,040 Speaker 1: every single spot of paid media, so it's so they 39 00:01:50,160 --> 00:01:52,360 Speaker 1: so both of those companies have a lower cost of 40 00:01:52,400 --> 00:01:55,120 Speaker 1: content and a lower marketing cost in the case of Apple, 41 00:01:55,160 --> 00:01:57,160 Speaker 1: which spent ninety minutes sort of talking about their news 42 00:01:57,160 --> 00:01:59,760 Speaker 1: streaming service. They do fifty billion dollars a year free 43 00:01:59,760 --> 00:02:02,960 Speaker 1: cash flow. Netflix spends thirteen and has to borrow three 44 00:02:03,000 --> 00:02:06,160 Speaker 1: of it. If actually Apple started spending thirteen billion, you 45 00:02:06,200 --> 00:02:09,320 Speaker 1: wouldn't notice because they still have forty billion to buy 46 00:02:09,360 --> 00:02:12,760 Speaker 1: in shares or paid dividends. Well, which raises a question, 47 00:02:12,880 --> 00:02:15,080 Speaker 1: because this is speculation that we've heard from a number 48 00:02:15,080 --> 00:02:19,680 Speaker 1: of people. Could Apple end up buying Netflix? Could Netflix 49 00:02:19,760 --> 00:02:24,440 Speaker 1: actually get some sort of cash infusion from a third party? Um, 50 00:02:24,480 --> 00:02:26,320 Speaker 1: maybe I think it is. I think it would be 51 00:02:26,360 --> 00:02:28,560 Speaker 1: more likely that in the end, Apple will try to 52 00:02:28,600 --> 00:02:31,359 Speaker 1: do it itself at the highest brand level. And it's 53 00:02:31,440 --> 00:02:33,799 Speaker 1: much more likely that the brand consistency is because of 54 00:02:33,800 --> 00:02:35,840 Speaker 1: the Walt It was would be with the Walt Disney company, 55 00:02:35,880 --> 00:02:38,280 Speaker 1: which it could buy, and they're similar brand strength. And 56 00:02:38,280 --> 00:02:40,079 Speaker 1: as you know, you know, Bob Iger's on the Apple 57 00:02:40,120 --> 00:02:42,160 Speaker 1: board and Steve Jobs was on, So more likely that 58 00:02:42,200 --> 00:02:45,840 Speaker 1: Apple would buy Disney. And the problem with Netflix is 59 00:02:45,960 --> 00:02:48,320 Speaker 1: the day you buy Netflix, you lose read hastings at 60 00:02:48,320 --> 00:02:50,079 Speaker 1: Ted Surranda's So I don't know what you think the 61 00:02:50,120 --> 00:02:52,760 Speaker 1: value of Netflix is without those top five managers that 62 00:02:52,880 --> 00:02:55,359 Speaker 1: founded it twenty five years ago. But it's a lot 63 00:02:55,440 --> 00:02:58,320 Speaker 1: less because those people are extraordinary, and they won't be 64 00:02:58,320 --> 00:03:01,119 Speaker 1: employees because they're gonna be with billions of dollars. So 65 00:03:01,400 --> 00:03:03,120 Speaker 1: let's go back to that Walt Disney deal, probably the 66 00:03:03,160 --> 00:03:05,000 Speaker 1: biggest M and A trade we've seen in the media 67 00:03:05,040 --> 00:03:07,240 Speaker 1: space in a long time. We never thought we'd see 68 00:03:07,280 --> 00:03:09,440 Speaker 1: Rubert Murdoch sell. At least I didn't think we'd ever 69 00:03:09,440 --> 00:03:12,320 Speaker 1: see Rupert Murdoch sell this company. Do you think Disney 70 00:03:12,360 --> 00:03:16,600 Speaker 1: now has the assets to compete against Netflix and the 71 00:03:16,680 --> 00:03:18,960 Speaker 1: Amazons and the facebooks and the Apples of the world. 72 00:03:19,000 --> 00:03:22,360 Speaker 1: And I'll point out that Disney has an investor meeting 73 00:03:22,440 --> 00:03:25,600 Speaker 1: next week April eleven, world presumably they'll unveil some more 74 00:03:25,919 --> 00:03:28,560 Speaker 1: details about their streaming business. Yes, I do. I do 75 00:03:28,639 --> 00:03:31,320 Speaker 1: think it's large enough because actually content creation is a 76 00:03:31,360 --> 00:03:34,079 Speaker 1: core competence of Disney. I do think you need twenty 77 00:03:34,080 --> 00:03:36,680 Speaker 1: four by seven programming. What we've seen with ww E, 78 00:03:36,840 --> 00:03:39,400 Speaker 1: which went first into the over the top streaming, is 79 00:03:39,440 --> 00:03:41,520 Speaker 1: you have to have ten thousand hours in your library. 80 00:03:41,520 --> 00:03:44,960 Speaker 1: When you launch, Disney had all Triple A titles, but 81 00:03:45,000 --> 00:03:47,160 Speaker 1: it didn't have any ten thousand hours. Now they have 82 00:03:47,240 --> 00:03:49,680 Speaker 1: that ten thousand hours, so I think they have a 83 00:03:49,760 --> 00:03:52,880 Speaker 1: really legitimate streaming service. And a lot of the content 84 00:03:52,960 --> 00:03:56,480 Speaker 1: that you guys everybody's watching on Netflix is coming off 85 00:03:56,480 --> 00:04:00,000 Speaker 1: and moving to the Walt Disney Entertainment channel while Netflix 86 00:04:00,040 --> 00:04:02,520 Speaker 1: is raising their price to you. So the concerns about 87 00:04:02,600 --> 00:04:05,080 Speaker 1: Netflix are legitimate, and there's something that we've heard from 88 00:04:05,120 --> 00:04:08,360 Speaker 1: other people as well. Uh, The question is how does 89 00:04:08,360 --> 00:04:11,720 Speaker 1: an investor value those risks, because right now we're looking 90 00:04:11,720 --> 00:04:15,880 Speaker 1: at Netflix shares uh that are valued at three give 91 00:04:16,000 --> 00:04:19,239 Speaker 1: or take, and I'm just wondering where the correct value 92 00:04:19,360 --> 00:04:21,760 Speaker 1: should be given some of these pressures that really are 93 00:04:21,800 --> 00:04:24,120 Speaker 1: coming more online now in a way that they never 94 00:04:24,160 --> 00:04:26,600 Speaker 1: have before. Right Well, the number that I think is 95 00:04:26,640 --> 00:04:29,800 Speaker 1: the most telling is Netflix trades at ten times revenue. 96 00:04:30,279 --> 00:04:34,280 Speaker 1: Apple trades at sixteen times earnings. So if you had 97 00:04:34,279 --> 00:04:36,840 Speaker 1: to back one of them, anything that goes wrong at 98 00:04:36,880 --> 00:04:39,760 Speaker 1: Netflix and your ten times, the next closest fang is 99 00:04:39,800 --> 00:04:42,919 Speaker 1: eight times, and that's Facebook, so it's gonna stop at eight. 100 00:04:43,000 --> 00:04:46,479 Speaker 1: And then you know, Disney trades at three. Interesting, so 101 00:04:46,680 --> 00:04:48,920 Speaker 1: it's just really overvalue. It's interesting. One of the things 102 00:04:48,960 --> 00:04:52,080 Speaker 1: that you know about Netflix, I think I think it's 103 00:04:52,080 --> 00:04:53,920 Speaker 1: been driving this stock really over the years has been 104 00:04:53,920 --> 00:04:56,039 Speaker 1: the subscriber growth. So the question is they have, you know, 105 00:04:56,120 --> 00:04:59,560 Speaker 1: some hundred fifty millions some subscribers globally. That seems like 106 00:04:59,600 --> 00:05:03,400 Speaker 1: a heads start, even for an Apple, even for a Disney. 107 00:05:03,920 --> 00:05:06,719 Speaker 1: Um do you think there's room in this streaming market 108 00:05:06,880 --> 00:05:10,200 Speaker 1: for multiple streamers? I mean, how many checks are people 109 00:05:10,240 --> 00:05:12,040 Speaker 1: going to be writing every month? Well, so I think 110 00:05:12,040 --> 00:05:14,080 Speaker 1: that actually is the best question in media right now, 111 00:05:14,080 --> 00:05:16,800 Speaker 1: because the average home gets three over the top services, 112 00:05:16,839 --> 00:05:20,160 Speaker 1: including skinny bundles. If you think that number stays at three, 113 00:05:20,680 --> 00:05:23,240 Speaker 1: then what happens is the incumbent Netflix, which has sixty 114 00:05:23,279 --> 00:05:26,120 Speaker 1: million U S subs, must be losing subs to Warner 115 00:05:26,320 --> 00:05:29,080 Speaker 1: or Apple or Disney, which means their U sub growth 116 00:05:29,120 --> 00:05:32,880 Speaker 1: goes negative. Now, can you sustain atten multiple of revenue 117 00:05:32,920 --> 00:05:35,839 Speaker 1: when your U S subs are negative, even if you 118 00:05:35,880 --> 00:05:38,360 Speaker 1: can grow, even if you can grow your international subs 119 00:05:38,839 --> 00:05:41,479 Speaker 1: fasterd offset, which you might not be able to. And 120 00:05:41,520 --> 00:05:43,560 Speaker 1: I don't think a growth investor can take a negative 121 00:05:43,600 --> 00:05:45,479 Speaker 1: sub growth, even if it's just in the US. But 122 00:05:45,520 --> 00:05:47,240 Speaker 1: these are a lot of ifs, right, And there's a 123 00:05:47,360 --> 00:05:50,080 Speaker 1: question of the cost point too. And the fact that 124 00:05:50,120 --> 00:05:53,000 Speaker 1: Netflix has developed a lot of original programming that a 125 00:05:53,040 --> 00:05:54,840 Speaker 1: lot of people really like, right, I mean, it's not 126 00:05:54,880 --> 00:05:58,760 Speaker 1: that they're completely reliant on Disney subscriptions. So what do 127 00:05:58,800 --> 00:06:00,559 Speaker 1: you think I mean, is there any kind of early 128 00:06:00,600 --> 00:06:06,320 Speaker 1: indication of how many individual packages customers are willing to 129 00:06:06,320 --> 00:06:09,520 Speaker 1: pay for? Well, I think here's here's a logical consumer behavior. 130 00:06:09,560 --> 00:06:11,920 Speaker 1: There is no incentive for you to sign up for longer, 131 00:06:12,760 --> 00:06:15,520 Speaker 1: more months for Netflix. So when bird Box comes out 132 00:06:15,560 --> 00:06:17,720 Speaker 1: and it's hit, you can pay ten dollars watch it all, 133 00:06:17,920 --> 00:06:20,479 Speaker 1: turn it off, go to the Walt Disney Company, watch 134 00:06:20,480 --> 00:06:22,040 Speaker 1: all the stuff you want to watch. Turn it off. 135 00:06:22,080 --> 00:06:24,560 Speaker 1: Go to Warner Brothers for ten dollars, watch it turn 136 00:06:24,600 --> 00:06:27,200 Speaker 1: it off. You know that the marketers in the room 137 00:06:27,320 --> 00:06:29,240 Speaker 1: are going to give you a discount if you buy 138 00:06:29,240 --> 00:06:31,400 Speaker 1: a bundle, if you take three months or six months, 139 00:06:31,440 --> 00:06:33,200 Speaker 1: they're going to try to lock you in for longer 140 00:06:33,279 --> 00:06:36,000 Speaker 1: because that's a better business model. Netflix gives you no 141 00:06:36,080 --> 00:06:39,400 Speaker 1: incentive not to come watch what's hot and leave after 142 00:06:39,440 --> 00:06:42,360 Speaker 1: thirty days. Laura Martin, thank you so much for joining us. 143 00:06:42,400 --> 00:06:44,200 Speaker 1: We will not be setting you hate mail. We think 144 00:06:44,240 --> 00:06:46,760 Speaker 1: your views are really compelling. Thank you, Laura Martin is 145 00:06:46,760 --> 00:06:49,520 Speaker 1: senior analystic need Um and Company, joining us here in 146 00:06:49,560 --> 00:07:08,360 Speaker 1: our Bloomberg Interactive Broker's studios. Let's talk oil. W t 147 00:07:08,560 --> 00:07:11,560 Speaker 1: I is up nearly from its December load to over 148 00:07:11,600 --> 00:07:14,920 Speaker 1: sixty two a barrel. What's driving this rise and how 149 00:07:15,000 --> 00:07:17,440 Speaker 1: high can it go? Fortunately, our next guest has an 150 00:07:17,440 --> 00:07:21,280 Speaker 1: opinion on that. We welcome Jason Shanker. Jason as president 151 00:07:21,280 --> 00:07:25,040 Speaker 1: of Prestige Economics, also chairman of the Futurist Institute and 152 00:07:25,120 --> 00:07:29,120 Speaker 1: a Bloomberg Opinion contributor contributor. He's based in Austin, Texas, 153 00:07:29,320 --> 00:07:31,480 Speaker 1: Keep it weird, but he joins us in our Bloomberg 154 00:07:31,480 --> 00:07:34,840 Speaker 1: eleventh three Yoh studios. Jason, welcome. So again we've had 155 00:07:34,880 --> 00:07:38,960 Speaker 1: this big roller coaster for oil, you know, crashing there 156 00:07:39,000 --> 00:07:41,160 Speaker 1: in the fourth quarter last year, but then staging is 157 00:07:41,320 --> 00:07:44,760 Speaker 1: really strong rally here. What's driving it? Well, I think 158 00:07:44,760 --> 00:07:46,720 Speaker 1: there's a couple of fundamental things we need to look 159 00:07:46,760 --> 00:07:50,120 Speaker 1: at with oil, and the first is really important. Here's 160 00:07:50,160 --> 00:07:52,400 Speaker 1: what's going on with Chinese growth. China's the biggest net 161 00:07:52,400 --> 00:07:54,560 Speaker 1: importer in the world at grood Oil. Uh there were 162 00:07:54,560 --> 00:07:58,679 Speaker 1: a few months of consecutive monthly contractions in Chinese manufacturing. 163 00:07:58,920 --> 00:08:01,680 Speaker 1: If you look at the private compiled Session Manufacturing Index, 164 00:08:01,880 --> 00:08:05,040 Speaker 1: and we actually closed in November sort of mid November, 165 00:08:05,680 --> 00:08:09,760 Speaker 1: below levels that we hadn't seen on the downside uh 166 00:08:09,960 --> 00:08:12,720 Speaker 1: in terms of a down trend since the last Chinese 167 00:08:12,800 --> 00:08:17,960 Speaker 1: manufacturing recession started in December. So crossing below those technicals 168 00:08:18,000 --> 00:08:22,000 Speaker 1: in the middle of November of and really important, we 169 00:08:22,160 --> 00:08:25,840 Speaker 1: rose above those levels just this past week because that 170 00:08:26,200 --> 00:08:28,560 Speaker 1: Chinese manufacturing p m I number that came out on 171 00:08:28,600 --> 00:08:33,040 Speaker 1: Sunday night surprising number back above fifty after three contractions, 172 00:08:33,120 --> 00:08:35,679 Speaker 1: So should be no surprise. Biggest net importer in the 173 00:08:35,720 --> 00:08:38,760 Speaker 1: world of crude oil is expanding again and crude oil 174 00:08:38,800 --> 00:08:42,800 Speaker 1: prices close above those recessionary type prices. So how much 175 00:08:42,960 --> 00:08:46,400 Speaker 1: upside does oil have from here, given the fact that 176 00:08:46,480 --> 00:08:50,760 Speaker 1: China does seem to be at least stopping the slowdown 177 00:08:50,800 --> 00:08:52,760 Speaker 1: if you will, well, I think there's a little bit 178 00:08:52,760 --> 00:08:55,079 Speaker 1: more upside here. We actually saw upside for price during 179 00:08:55,080 --> 00:08:57,520 Speaker 1: the year, even though this Chinese manufacturing recession was going 180 00:08:57,559 --> 00:09:01,199 Speaker 1: on all the all the brief a quarter long. We 181 00:09:01,280 --> 00:09:03,400 Speaker 1: think that the really most important thing people need to 182 00:09:03,440 --> 00:09:05,839 Speaker 1: know is that the U S summer driving season is 183 00:09:05,880 --> 00:09:07,920 Speaker 1: one of the most critical things that drives oil prices 184 00:09:08,200 --> 00:09:10,240 Speaker 1: presented was always presenting upside risk. I you want to 185 00:09:10,280 --> 00:09:11,960 Speaker 1: qu two. We now see a little more upside risk. 186 00:09:12,120 --> 00:09:14,600 Speaker 1: So before we would have set prices maybe sixties sixty five, 187 00:09:14,640 --> 00:09:18,080 Speaker 1: now sixty five to seventy just reference, we're talking w 188 00:09:18,200 --> 00:09:20,040 Speaker 1: T I, which is currently sixty two and a half 189 00:09:20,600 --> 00:09:23,560 Speaker 1: sixty two fifty in terms of price prepared. So you 190 00:09:23,600 --> 00:09:26,280 Speaker 1: see that going up to a range of six to seventy. Yeah, 191 00:09:26,280 --> 00:09:28,920 Speaker 1: we could easily see that because this summer's driving season 192 00:09:29,040 --> 00:09:31,800 Speaker 1: is likely to be the biggest summer driving season in history. 193 00:09:32,000 --> 00:09:33,720 Speaker 1: Last year was the biggest. This year is gonna be 194 00:09:33,760 --> 00:09:36,559 Speaker 1: even bigger. Right, we think wage inflation most recent job 195 00:09:36,559 --> 00:09:39,280 Speaker 1: report up three point four percent year on year, unemployment 196 00:09:39,360 --> 00:09:42,280 Speaker 1: rate three percent. Everybody's got jobs, everybody's got money. They're 197 00:09:42,320 --> 00:09:45,040 Speaker 1: gonna be going places this summer with their families. So 198 00:09:45,160 --> 00:09:47,240 Speaker 1: no matter what happens with China, you were always going 199 00:09:47,280 --> 00:09:50,120 Speaker 1: to get some support at least until the September contract 200 00:09:50,200 --> 00:09:52,640 Speaker 1: role in the middle of July. All right, So that's demand. 201 00:09:52,880 --> 00:09:55,320 Speaker 1: Very bullish on the demand from your perspective, But isn't 202 00:09:55,320 --> 00:09:57,160 Speaker 1: there a lot of supply? Aren't they pumping up this 203 00:09:57,280 --> 00:09:59,320 Speaker 1: shale oil faster and they can even get it to 204 00:09:59,360 --> 00:10:01,840 Speaker 1: the terminal. Right, So there's a lot of supply for oil, 205 00:10:01,880 --> 00:10:03,880 Speaker 1: which is why oil was slower to recover than a 206 00:10:03,920 --> 00:10:06,839 Speaker 1: number of industrial medals after the Chinese manufacturing recession that 207 00:10:06,920 --> 00:10:11,920 Speaker 1: lasted from December until June. Other things rose faster because 208 00:10:11,960 --> 00:10:13,920 Speaker 1: there was a lot more supply of oil, but it's 209 00:10:13,920 --> 00:10:18,080 Speaker 1: still rose on trend from mid until uh we saw 210 00:10:18,120 --> 00:10:21,280 Speaker 1: that pull back then and significantly in October and the November. 211 00:10:22,640 --> 00:10:24,880 Speaker 1: So yeah, it's gonna be a bit more dampen than 212 00:10:24,960 --> 00:10:28,000 Speaker 1: other commodities because we have a higher supply situation, but 213 00:10:28,040 --> 00:10:30,800 Speaker 1: commodities are bought and not sold, and so big summer 214 00:10:30,880 --> 00:10:34,160 Speaker 1: driving season means refineries are going to be consuming a 215 00:10:34,160 --> 00:10:36,560 Speaker 1: lot of oil to meet that demand. And of course, 216 00:10:36,600 --> 00:10:39,559 Speaker 1: if China can even remain just above fifty, we're gonna 217 00:10:39,559 --> 00:10:42,880 Speaker 1: be in in this uh all arranging Q two Why 218 00:10:42,880 --> 00:10:46,760 Speaker 1: not higher than well? This is right? So could we 219 00:10:46,840 --> 00:10:50,080 Speaker 1: in spike to see things higher. Yeah, it's possible, but 220 00:10:50,240 --> 00:10:52,440 Speaker 1: part of the reason we we may not see it 221 00:10:52,520 --> 00:10:56,400 Speaker 1: higher is because we still have China in a um 222 00:10:57,240 --> 00:10:59,680 Speaker 1: right in still tepid growth. There's still questions what's gonna 223 00:10:59,720 --> 00:11:02,439 Speaker 1: happen and trade ward things still going on, right, that's 224 00:11:02,480 --> 00:11:05,479 Speaker 1: a deal. And of course in Europe, right, Eurozone manufacturing 225 00:11:05,520 --> 00:11:09,200 Speaker 1: contracted significantly for a second consecutive month. This is a 226 00:11:09,240 --> 00:11:11,880 Speaker 1: bigger concern. This is obviously outside the Brexit stuff, but 227 00:11:11,920 --> 00:11:15,000 Speaker 1: this is Eurozone manufacturing was an all time recording. Because 228 00:11:15,040 --> 00:11:17,360 Speaker 1: you know that we don't necessarily want to talk about Brexit, right, 229 00:11:17,400 --> 00:11:19,480 Speaker 1: well yeah, you know, but but but what's going into 230 00:11:19,520 --> 00:11:22,240 Speaker 1: the Eurozone is is much more than than what's going 231 00:11:22,240 --> 00:11:24,280 Speaker 1: on with Brexit, right, you're being monetary union kind of 232 00:11:24,559 --> 00:11:27,560 Speaker 1: a separate deal. But euros of manufacturing was an all 233 00:11:27,600 --> 00:11:32,120 Speaker 1: time record high in December, slid all last year, and 234 00:11:32,160 --> 00:11:34,800 Speaker 1: that wasn't because of bregit concerns. So that was the 235 00:11:34,920 --> 00:11:37,920 Speaker 1: end of quantitative ease incoming and the Europeans couldn't do it. 236 00:11:37,960 --> 00:11:40,880 Speaker 1: And they still have negative deposit rates. And so now 237 00:11:40,960 --> 00:11:43,839 Speaker 1: we see the ECB going more devish. They're gonna kick 238 00:11:43,880 --> 00:11:46,520 Speaker 1: it back up later in the year. And but but 239 00:11:46,600 --> 00:11:49,280 Speaker 1: between now and then, um, you know, there's some risk 240 00:11:49,360 --> 00:11:50,880 Speaker 1: and that's something that kind of limits some of the 241 00:11:51,000 --> 00:11:54,560 Speaker 1: upside for say commodities that are consumed on a global basis. Yes, 242 00:11:54,640 --> 00:11:56,440 Speaker 1: sounds I'm glad you brought up Europe because you know, 243 00:11:56,480 --> 00:11:59,800 Speaker 1: obviously that looks like China is stabilizing and maybe getting 244 00:11:59,840 --> 00:12:02,000 Speaker 1: some green shoots of growth there. But Europe, as you 245 00:12:02,080 --> 00:12:07,160 Speaker 1: just mentioned, very weak across your being, including Germany. So 246 00:12:07,400 --> 00:12:10,200 Speaker 1: to what extent, what's the risk in your opinion that 247 00:12:10,480 --> 00:12:14,080 Speaker 1: European growth could weaken even further? Yeah, so there there 248 00:12:14,200 --> 00:12:16,680 Speaker 1: is the potential for this. We saw this a few 249 00:12:16,760 --> 00:12:19,840 Speaker 1: years ago when the European Central Bank tried to reduce 250 00:12:19,920 --> 00:12:22,839 Speaker 1: the central bank balance sheet from around three point one 251 00:12:22,880 --> 00:12:25,360 Speaker 1: trilling euros to two and as we know now it's 252 00:12:25,360 --> 00:12:28,200 Speaker 1: closer to four and a half because that failed miserably. 253 00:12:28,240 --> 00:12:31,360 Speaker 1: Even apparently trying to slow the expansion of the balance 254 00:12:31,360 --> 00:12:35,480 Speaker 1: sheet or stopping it is failing miserably. So this means 255 00:12:35,559 --> 00:12:40,040 Speaker 1: that more quantitative ease in coming. Until, though that happens, 256 00:12:40,600 --> 00:12:44,640 Speaker 1: you could see a bit more downside, very responsive economy 257 00:12:44,640 --> 00:12:48,480 Speaker 1: to that stimulus. Very What's interesting to me is everyone 258 00:12:48,559 --> 00:12:51,439 Speaker 1: sort of just expects the US economy as a given 259 00:12:51,800 --> 00:12:55,280 Speaker 1: to continue chugging along and accelerating this year. And I 260 00:12:55,360 --> 00:12:59,040 Speaker 1: actually I was looking this morning at the City US 261 00:12:59,120 --> 00:13:02,160 Speaker 1: Economic Surprise Index, which is at its lowest level since 262 00:13:02,160 --> 00:13:04,920 Speaker 1: two thousand seventeen, which sort of, uh, to put this 263 00:13:04,960 --> 00:13:10,160 Speaker 1: into English, means that the greatest proportion of economic reports 264 00:13:10,160 --> 00:13:15,160 Speaker 1: are coming out below analysts expectation in the United States, UH, 265 00:13:15,240 --> 00:13:18,760 Speaker 1: since two thousand and seventeen. And I'm just wondering, you know, 266 00:13:18,880 --> 00:13:23,280 Speaker 1: especially given the FEDS reluctance to make any move whatsoever, 267 00:13:23,960 --> 00:13:26,160 Speaker 1: is the U s economy weaker than people expect or 268 00:13:26,280 --> 00:13:29,960 Speaker 1: think right now? So I think there are some concerns 269 00:13:30,000 --> 00:13:33,960 Speaker 1: people need to be aware of. I would hearken back 270 00:13:34,000 --> 00:13:36,640 Speaker 1: to Ben Bernanke's quote at beginning of January that business 271 00:13:36,640 --> 00:13:39,400 Speaker 1: cycles don't die, they get murdered or don't have old age, 272 00:13:39,440 --> 00:13:43,000 Speaker 1: they get murdered. And if we were to um, like inspector, 273 00:13:43,040 --> 00:13:46,400 Speaker 1: we know around up the usual suspects, what would they be, Well, 274 00:13:46,400 --> 00:13:49,440 Speaker 1: the usual suspects might be. Um, you know the fact 275 00:13:49,440 --> 00:13:50,839 Speaker 1: that in twenty eight team we had more I p 276 00:13:50,960 --> 00:13:52,920 Speaker 1: o s of companies with negative earnings than in in 277 00:13:52,960 --> 00:13:56,120 Speaker 1: the history of ever. Right, So that's you know that 278 00:13:56,240 --> 00:13:59,000 Speaker 1: that's something right, So so these these you know, that's 279 00:13:59,040 --> 00:14:00,960 Speaker 1: maybe a thing. Right. If we were to say, okay, 280 00:14:01,000 --> 00:14:03,319 Speaker 1: we learned our lesson in the housing bubble, right, and 281 00:14:03,600 --> 00:14:06,120 Speaker 1: the financial crisis, but maybe we forgot the lessons of 282 00:14:06,160 --> 00:14:08,720 Speaker 1: two thousand, two thousand one. It was a long time ago, 283 00:14:09,360 --> 00:14:12,120 Speaker 1: times ago. A lot of folks on the street, we're 284 00:14:12,200 --> 00:14:15,560 Speaker 1: not working time right, So that that's the thing. The 285 00:14:15,559 --> 00:14:17,120 Speaker 1: other thing, of course, is if we look at some 286 00:14:17,120 --> 00:14:19,840 Speaker 1: of the economic data, we we also do see slower 287 00:14:19,880 --> 00:14:23,320 Speaker 1: growth in October. You know, we have seen these higher 288 00:14:23,320 --> 00:14:25,720 Speaker 1: interest rates. We were expecting four rate hikes last year 289 00:14:25,760 --> 00:14:27,520 Speaker 1: because of a year and year base effect for inflation. 290 00:14:27,920 --> 00:14:30,560 Speaker 1: This year we were expecting zero. We're not gonna get 291 00:14:30,560 --> 00:14:33,280 Speaker 1: any of this year. And that's also a base on 292 00:14:33,400 --> 00:14:35,760 Speaker 1: a year on year effective inflation. That the other usual 293 00:14:35,800 --> 00:14:38,440 Speaker 1: suspect than there is the FED where they behind the curve, 294 00:14:38,560 --> 00:14:41,000 Speaker 1: now they ahead of the curve. Are they responding to 295 00:14:41,080 --> 00:14:44,480 Speaker 1: slowly to inflation risk? You know that that's also a thing. 296 00:14:44,560 --> 00:14:47,120 Speaker 1: But I think business investment is at risk this year, 297 00:14:47,520 --> 00:14:50,240 Speaker 1: and we saw a recession in business investment. Most people forget, 298 00:14:50,240 --> 00:14:54,560 Speaker 1: and we could see a US business investment investment recession 299 00:14:54,640 --> 00:14:57,240 Speaker 1: sometime this year. But we still spec one potent GDP 300 00:14:57,360 --> 00:15:01,200 Speaker 1: overall for the year, far below some of the higher 301 00:15:01,200 --> 00:15:05,720 Speaker 1: expectations of economists. But growth nonetheless, that's fairly solid. Jason Shanko, 302 00:15:05,800 --> 00:15:09,480 Speaker 1: president of Prestige Economics, also the chairman of the Futurist 303 00:15:09,480 --> 00:15:28,240 Speaker 1: Institute and a Bloomberg Opinion contributor. In June of two 304 00:15:28,240 --> 00:15:31,760 Speaker 1: thousand twelve, Roja Gupta, a former CEO of McKinsey, was 305 00:15:31,800 --> 00:15:35,120 Speaker 1: convicted of insider trading associated with a Galleon hedge fund 306 00:15:35,160 --> 00:15:38,600 Speaker 1: scandal and sentenced to two years in prison. The Galleon 307 00:15:38,720 --> 00:15:42,120 Speaker 1: founder was also convicted and sent to prison. Mr Gupta 308 00:15:42,200 --> 00:15:45,200 Speaker 1: was released in two thousand sixteen and has since published 309 00:15:45,240 --> 00:15:48,960 Speaker 1: his new memoir, Untiled Mind Without Fear. We sat down 310 00:15:48,960 --> 00:15:51,680 Speaker 1: with Mr Gupta earlier this week to discuss his conviction 311 00:15:51,960 --> 00:15:54,600 Speaker 1: and time in prison, and started things off by asking 312 00:15:54,680 --> 00:15:57,480 Speaker 1: him why write the book? Well, let me first say 313 00:15:57,520 --> 00:16:01,000 Speaker 1: why is not written? Which is not try to relitigate 314 00:16:01,080 --> 00:16:04,720 Speaker 1: the case or to convince lots of people. I'm innocent. 315 00:16:05,040 --> 00:16:07,840 Speaker 1: I just wanted to present my viewpoint which I had 316 00:16:08,560 --> 00:16:12,480 Speaker 1: steadfastly maintained my silence because the matter was sub judice 317 00:16:12,680 --> 00:16:15,240 Speaker 1: till the beginning of this year, and I wanted to 318 00:16:15,240 --> 00:16:19,080 Speaker 1: honor the tradition of not saying anything while my appeals 319 00:16:19,080 --> 00:16:22,480 Speaker 1: were going on. So I decided to write my story, 320 00:16:23,120 --> 00:16:27,920 Speaker 1: uh one to you know, get my story out in 321 00:16:27,960 --> 00:16:32,120 Speaker 1: my own words. Second, I actually wanted to write a 322 00:16:32,200 --> 00:16:37,480 Speaker 1: broader story than just the trial, because in many ways, 323 00:16:37,520 --> 00:16:40,800 Speaker 1: I've had an interesting life. Everybody has an interesting life, 324 00:16:40,800 --> 00:16:44,000 Speaker 1: but I also had an interesting life, and there many 325 00:16:44,440 --> 00:16:46,800 Speaker 1: lessons learned from it. There were many ups and downs, 326 00:16:47,720 --> 00:16:50,440 Speaker 1: and I wanted to write it for young people who 327 00:16:50,480 --> 00:16:53,800 Speaker 1: could relate to pieces of it, you know. And I 328 00:16:53,840 --> 00:16:58,120 Speaker 1: wanted to write in a very direct, you know, personal style, 329 00:16:58,240 --> 00:17:02,200 Speaker 1: giving what I was feeling and going through these experiences, 330 00:17:02,800 --> 00:17:06,159 Speaker 1: and hopefully some lessons will come out of that, not 331 00:17:06,280 --> 00:17:09,160 Speaker 1: only in terms of this last few years, but also 332 00:17:09,760 --> 00:17:14,600 Speaker 1: my own professional career and my childhood, my my life philosophy. 333 00:17:14,880 --> 00:17:17,400 Speaker 1: And you did have a dramatic rise to the top 334 00:17:17,480 --> 00:17:21,720 Speaker 1: of the corporate world until this, uh, this conviction one 335 00:17:21,720 --> 00:17:24,800 Speaker 1: of the largest insider trading cases in the United States. 336 00:17:24,840 --> 00:17:27,160 Speaker 1: Who you say in the book that you felt wronged 337 00:17:27,760 --> 00:17:30,360 Speaker 1: by what happened and that you feel like the true 338 00:17:31,320 --> 00:17:35,000 Speaker 1: villains of the crisis and of financial markets have not 339 00:17:35,200 --> 00:17:39,520 Speaker 1: been prosecuted. Who are the real villains? I mean, those 340 00:17:39,560 --> 00:17:42,040 Speaker 1: of your report on the financial markets would know better. 341 00:17:42,200 --> 00:17:45,119 Speaker 1: I mean I can say one simple fact. You know, 342 00:17:46,240 --> 00:17:49,920 Speaker 1: all we did in the aftermath of the financial crisis 343 00:17:50,080 --> 00:17:55,120 Speaker 1: is h make big fines for banks, which of course 344 00:17:55,160 --> 00:17:59,480 Speaker 1: the shareholders ended up paying for, and the executives kept 345 00:17:59,520 --> 00:18:03,159 Speaker 1: all the abovenesses and all their money they made. And 346 00:18:03,200 --> 00:18:06,840 Speaker 1: this was the biggest crisis in American history for a 347 00:18:06,880 --> 00:18:11,520 Speaker 1: long time. Thousands and thousands of people lost their jobs, 348 00:18:12,160 --> 00:18:16,960 Speaker 1: they lost their pensions, they lost their homes, and banks 349 00:18:17,000 --> 00:18:23,200 Speaker 1: were held accountable for misdeeds fraud even and yet no 350 00:18:23,240 --> 00:18:26,800 Speaker 1: one in the senior management of any of the banks 351 00:18:27,040 --> 00:18:31,040 Speaker 1: who found accountable. Do you think that senior bank executive, 352 00:18:31,040 --> 00:18:36,000 Speaker 1: senior financial executives should in fact going to jail. You 353 00:18:36,080 --> 00:18:38,600 Speaker 1: tell me when when a bank is find billions of 354 00:18:38,640 --> 00:18:41,960 Speaker 1: dollars in admits to fraud human beings? Do that right? 355 00:18:42,000 --> 00:18:46,359 Speaker 1: No machines are doing this fraud or this bad practices. 356 00:18:46,480 --> 00:18:51,080 Speaker 1: So yes, of course I don't think we've held the 357 00:18:51,080 --> 00:18:54,960 Speaker 1: executives at that time had been held accountable to this day, 358 00:18:55,000 --> 00:18:57,679 Speaker 1: you maintain your innocence. What do you believe the courts 359 00:18:57,720 --> 00:19:03,879 Speaker 1: got wrong? What? As you know, well, insider trading implies 360 00:19:03,960 --> 00:19:09,119 Speaker 1: that actual insider information was passed, second, that there was 361 00:19:09,119 --> 00:19:15,600 Speaker 1: criminal intent, Third, that there was consequential benefit and they 362 00:19:15,640 --> 00:19:19,640 Speaker 1: couldn't prove any of it. There was only some circumstantial 363 00:19:19,720 --> 00:19:23,800 Speaker 1: evidence in timing of calls, but there was They recorded 364 00:19:23,920 --> 00:19:27,040 Speaker 1: rather Rutnam for eighteen months. There was not a single 365 00:19:27,080 --> 00:19:32,359 Speaker 1: conversation between us that passed any insider information. There was 366 00:19:32,400 --> 00:19:37,719 Speaker 1: no emails, there were no witnesses, so there was Yet 367 00:19:37,760 --> 00:19:41,080 Speaker 1: they convicted you, you appealed. I'm saying, you're saying, you 368 00:19:41,119 --> 00:19:43,760 Speaker 1: know what they got wrong. They didn't meet any of 369 00:19:43,800 --> 00:19:48,280 Speaker 1: the criteria right. And second, there were twenty two people 370 00:19:48,280 --> 00:19:50,679 Speaker 1: convicted in the Galleon case or related I don't know 371 00:19:50,760 --> 00:19:52,720 Speaker 1: what the exact number is. Every one of them had 372 00:19:52,800 --> 00:19:56,399 Speaker 1: a quid pro co arrangement with raj. How is it 373 00:19:56,480 --> 00:19:59,760 Speaker 1: that I'm the only person who had no benefit, no arrangement, nothing. 374 00:20:00,000 --> 00:20:04,960 Speaker 1: It was jail like jail by and large was okay, 375 00:20:05,000 --> 00:20:09,200 Speaker 1: except for the fact that you know, as they say, 376 00:20:09,560 --> 00:20:14,399 Speaker 1: power corrups and absolute power cerrups absolutely, and the prison 377 00:20:14,440 --> 00:20:17,760 Speaker 1: system is run as if they have absolute power. And 378 00:20:17,840 --> 00:20:24,200 Speaker 1: they sent me to solitary confinement three times, one time 379 00:20:24,240 --> 00:20:30,479 Speaker 1: for seven weeks with no severn wis why, uh, you 380 00:20:30,480 --> 00:20:34,159 Speaker 1: can buy towels in the commissary in prison? Right? I 381 00:20:34,160 --> 00:20:36,359 Speaker 1: had a bad back, So when you sit in chairs. 382 00:20:36,400 --> 00:20:40,760 Speaker 1: I rolled up two towels and stitched them for a 383 00:20:40,800 --> 00:20:45,600 Speaker 1: little pillow support pillow. And they came and searched my 384 00:20:45,600 --> 00:20:50,640 Speaker 1: my little bunk area, and they found nothing except that pillow. 385 00:20:50,960 --> 00:20:53,040 Speaker 1: The towel rolled up was sitting on the bottom of 386 00:20:53,040 --> 00:20:58,240 Speaker 1: my bed. And the guy said, well, this is tampering 387 00:20:58,280 --> 00:21:02,320 Speaker 1: with government property. And so they sent me to salitary 388 00:21:02,359 --> 00:21:08,240 Speaker 1: confinement for seven weeks. And you know, if there is 389 00:21:08,320 --> 00:21:12,480 Speaker 1: anything I would say, please get that out to the 390 00:21:12,480 --> 00:21:15,280 Speaker 1: world that this the prison system is run like that. 391 00:21:16,200 --> 00:21:19,959 Speaker 1: It's terrible. They want you to, you know, go and 392 00:21:20,040 --> 00:21:22,719 Speaker 1: hang your head and be repentant, and you know, they 393 00:21:22,760 --> 00:21:26,160 Speaker 1: don't treat you like human beings. In many of the time, 394 00:21:26,920 --> 00:21:30,000 Speaker 1: solity confinement you would think is a very quiet kind 395 00:21:30,040 --> 00:21:33,840 Speaker 1: of place. Everybody is in a single cell and so on. No, 396 00:21:34,040 --> 00:21:37,760 Speaker 1: it's absolutely the noisiest place in prison because there are 397 00:21:38,359 --> 00:21:41,640 Speaker 1: steel doors and walls, and people are going crazy. They're 398 00:21:41,680 --> 00:21:45,920 Speaker 1: banging streel doors, they're shouting there right now. It's it's 399 00:21:46,119 --> 00:21:50,639 Speaker 1: u and defines more than two weeks a solitary confinement 400 00:21:50,760 --> 00:21:55,080 Speaker 1: as severe torture and had seven at seven and this 401 00:21:55,200 --> 00:21:57,840 Speaker 1: goes on. This does not not just me as a 402 00:21:57,880 --> 00:22:00,520 Speaker 1: CEO of Mackenzie. You had every CEO and speed out. 403 00:22:00,800 --> 00:22:04,520 Speaker 1: What's it like now? What happened to your friends? No, 404 00:22:04,720 --> 00:22:07,320 Speaker 1: there's many no, no, no, many people have stayed by me. 405 00:22:07,520 --> 00:22:13,600 Speaker 1: I mean, you know, no, vast majority of people have 406 00:22:13,640 --> 00:22:17,040 Speaker 1: stayed by me. Some have turned away. But you know, 407 00:22:17,080 --> 00:22:20,480 Speaker 1: also I was, you know, in a retirement mode. I 408 00:22:20,520 --> 00:22:23,280 Speaker 1: was spending most of my time in philanthropic things. So 409 00:22:23,320 --> 00:22:27,280 Speaker 1: when I came out after this seven years, I have 410 00:22:27,320 --> 00:22:31,840 Speaker 1: no particular desire to go back into the commercial world 411 00:22:31,880 --> 00:22:35,359 Speaker 1: and in the way I was before or way back 412 00:22:35,440 --> 00:22:37,879 Speaker 1: when I was fully engaged in the commercial world. So 413 00:22:37,920 --> 00:22:40,400 Speaker 1: I had no particular reason. And many of the CEOs 414 00:22:40,400 --> 00:22:45,400 Speaker 1: have honestly retired. It's been now seven nine years. That 415 00:22:45,440 --> 00:22:49,080 Speaker 1: was Jacque Groupta, a former chief executive officer of Mackenzie 416 00:22:49,200 --> 00:22:52,919 Speaker 1: who spent two years in prison for insider treating. His 417 00:22:53,000 --> 00:22:56,560 Speaker 1: new memoir, Mind Without Fear, is available now and one 418 00:22:56,640 --> 00:22:59,360 Speaker 1: of the things that he is committing himself to, as 419 00:22:59,359 --> 00:23:03,040 Speaker 1: we discussed to in that interview and afterwards, was to 420 00:23:03,240 --> 00:23:21,960 Speaker 1: prison reform because of his experience in solitary confine them well, 421 00:23:22,000 --> 00:23:25,240 Speaker 1: for many executives, the global economic outlook became more clouded 422 00:23:25,280 --> 00:23:27,760 Speaker 1: in the first quarter in the U S. A disappointing 423 00:23:27,760 --> 00:23:31,120 Speaker 1: February jobs reports still concerns over the stability and sustainability 424 00:23:31,160 --> 00:23:34,080 Speaker 1: of a strong economy, and key foreign markets like China 425 00:23:34,119 --> 00:23:37,200 Speaker 1: and Germany continued to struggle. So how are companies reacting 426 00:23:37,200 --> 00:23:40,040 Speaker 1: to these uncertain conditions. Our next guest has some very 427 00:23:40,119 --> 00:23:43,560 Speaker 1: interesting data to answer that question. We welcome Sandy Cockrell, 428 00:23:43,880 --> 00:23:47,240 Speaker 1: Global CFO program leader for Deloitte. He joins us in 429 00:23:47,280 --> 00:23:50,520 Speaker 1: our Bloomberg Interactive Broker Studio. Sandy, thanks so much for 430 00:23:50,640 --> 00:23:54,160 Speaker 1: joining us. I know Deloitte does our quarterly CFO survey 431 00:23:54,200 --> 00:23:57,240 Speaker 1: where you survey a hundred and fifty So CFOs, what's 432 00:23:57,280 --> 00:24:00,520 Speaker 1: the survey telling you? Now? Very interesting? Uh? You start 433 00:24:00,560 --> 00:24:03,160 Speaker 1: off with the view of the macro economies. Uh. Eight 434 00:24:03,320 --> 00:24:05,919 Speaker 1: percent of the survey CFO said that the North American 435 00:24:05,960 --> 00:24:08,520 Speaker 1: economy was actually good today, but when you look out 436 00:24:08,520 --> 00:24:11,479 Speaker 1: a year, only eight percent expected it to approve. So 437 00:24:11,560 --> 00:24:13,680 Speaker 1: that really lines up with some of the findings around 438 00:24:13,720 --> 00:24:16,560 Speaker 1: what we're thinking about where the economy goes. About eight 439 00:24:16,920 --> 00:24:19,439 Speaker 1: percent of the CFOs said that we would either have 440 00:24:19,480 --> 00:24:23,280 Speaker 1: a slowdown or a recession by the end of Now. 441 00:24:23,280 --> 00:24:25,879 Speaker 1: The interesting thing that we found when you compare that 442 00:24:25,920 --> 00:24:29,520 Speaker 1: to other surveys and especially what economists are saying. Only 443 00:24:29,600 --> 00:24:32,720 Speaker 1: fifteen percent of those said we would actually have a recession, 444 00:24:33,320 --> 00:24:35,560 Speaker 1: So most of the CFOs are expecting to slow down. 445 00:24:35,600 --> 00:24:38,440 Speaker 1: We thought that was pretty important. When you look at Europe, 446 00:24:38,920 --> 00:24:42,200 Speaker 1: only sixteen percent of the survey CFO said your condy 447 00:24:42,280 --> 00:24:45,800 Speaker 1: is good right now and only eight percent expected to 448 00:24:45,840 --> 00:24:48,440 Speaker 1: approve in a year. Now, if Brexit works out, we 449 00:24:48,440 --> 00:24:50,600 Speaker 1: would expect those numbers to move up a little bit, 450 00:24:50,840 --> 00:24:53,880 Speaker 1: but still very very low. With respect to China, only 451 00:24:55,400 --> 00:24:58,760 Speaker 1: see that see see that that economy is basically performing 452 00:24:58,800 --> 00:25:02,560 Speaker 1: well today and and when six better in a year. 453 00:25:02,600 --> 00:25:04,840 Speaker 1: So those are really low numbers when you think about 454 00:25:04,840 --> 00:25:07,280 Speaker 1: projecting into that. Okay, so can you go into the 455 00:25:07,320 --> 00:25:10,160 Speaker 1: mind of a chief financial officer right now? This sort 456 00:25:10,160 --> 00:25:15,440 Speaker 1: of archetypical typical uh CFO. Are they a pessimistic bunch? No, 457 00:25:15,520 --> 00:25:17,920 Speaker 1: not really, but I think what what the backdrop think 458 00:25:17,960 --> 00:25:20,000 Speaker 1: about what they're having to deal with. The number one 459 00:25:20,080 --> 00:25:24,160 Speaker 1: concern is around trade and tears. Uh. This this survey 460 00:25:24,240 --> 00:25:28,159 Speaker 1: really does capture multinational companies who has supply chains all 461 00:25:28,160 --> 00:25:30,760 Speaker 1: over the world, who are trading in foreign markets. So 462 00:25:30,840 --> 00:25:33,959 Speaker 1: trade and tariff is incredibly important. So if you go 463 00:25:34,000 --> 00:25:35,800 Speaker 1: back through or four months ago when they put their 464 00:25:35,800 --> 00:25:39,680 Speaker 1: fiscal year twenty nineteen budgets in place, now they're having 465 00:25:39,680 --> 00:25:42,639 Speaker 1: to execute against those, and there's still this cloud of 466 00:25:42,720 --> 00:25:45,520 Speaker 1: uncertainty that they've got to deal with. Okay, So then 467 00:25:45,600 --> 00:25:49,120 Speaker 1: here's my question. Are they actually acting on their pessimism 468 00:25:49,200 --> 00:25:52,800 Speaker 1: by pulling back some of the potential investments? In other words, 469 00:25:53,160 --> 00:25:57,720 Speaker 1: is is actually the sort of uncertainty directly affecting the 470 00:25:57,760 --> 00:26:00,199 Speaker 1: economy and you're seeing that through this service. Well, one 471 00:26:00,200 --> 00:26:01,919 Speaker 1: of the things that we ask is is it a 472 00:26:01,920 --> 00:26:05,240 Speaker 1: good time to take on risk? And only of the 473 00:26:05,280 --> 00:26:07,440 Speaker 1: survey age CFO says now would be a good time 474 00:26:07,480 --> 00:26:10,000 Speaker 1: to take on risk. That's a relatively low number in 475 00:26:10,040 --> 00:26:12,439 Speaker 1: the context of the history of our survey, So that 476 00:26:12,520 --> 00:26:14,840 Speaker 1: really kind of makes your point. Second, when you think 477 00:26:14,880 --> 00:26:18,520 Speaker 1: about own company optimism, we ask a question about compared 478 00:26:18,560 --> 00:26:20,840 Speaker 1: to three months ago, are you more optimistic about the 479 00:26:20,880 --> 00:26:24,119 Speaker 1: next twelve months or less optimistic? That stands at a 480 00:26:24,200 --> 00:26:28,720 Speaker 1: net sixteen percentage points, which again is pretty low. So yes, 481 00:26:28,800 --> 00:26:32,160 Speaker 1: those things are certainly affected. They're thinking, um, they're having 482 00:26:32,160 --> 00:26:35,040 Speaker 1: to make decisions without clarity, without all information. They would 483 00:26:35,040 --> 00:26:38,520 Speaker 1: like Secondly, they cited a numbers concerns that drive this 484 00:26:38,640 --> 00:26:41,480 Speaker 1: thinking just the natural kind of flow of business and 485 00:26:41,840 --> 00:26:45,600 Speaker 1: credit cycles where we are right there. Um. And then 486 00:26:45,720 --> 00:26:49,120 Speaker 1: last they cited the slowing growth in China and Europe 487 00:26:49,480 --> 00:26:51,720 Speaker 1: is something that they're very concerned about. Well, say, how 488 00:26:51,720 --> 00:26:54,440 Speaker 1: about internal to their own companies. One of the things 489 00:26:54,520 --> 00:26:56,040 Speaker 1: that you know where the good news we've seen over 490 00:26:56,040 --> 00:26:58,200 Speaker 1: the last several years is the economy is approaching or 491 00:26:58,280 --> 00:27:01,399 Speaker 1: at full employment, some waging increase. Are the CFO is 492 00:27:01,440 --> 00:27:04,600 Speaker 1: concerned that they just can't find good people? Yes, that 493 00:27:04,600 --> 00:27:07,520 Speaker 1: that parenthical quarter to quarter for the last three years. 494 00:27:07,600 --> 00:27:11,720 Speaker 1: The number one internal concern is basically the acquisition retention 495 00:27:11,760 --> 00:27:14,840 Speaker 1: of talent. And it's not just in the financial organization, 496 00:27:14,920 --> 00:27:18,240 Speaker 1: it's across the enterprise. And it's really exacerbated by the 497 00:27:18,280 --> 00:27:22,520 Speaker 1: fact that moving to digital technologies and tools, um having 498 00:27:22,560 --> 00:27:25,600 Speaker 1: the people that actually utilize those things. So you're seeing 499 00:27:25,600 --> 00:27:28,080 Speaker 1: a really a transformation in the workforce and it's a 500 00:27:28,200 --> 00:27:30,919 Speaker 1: huge concern to CFOs because they're really the ones that 501 00:27:30,960 --> 00:27:36,159 Speaker 1: watch productivity. Were you surprised by these results? No? No, 502 00:27:36,320 --> 00:27:38,879 Speaker 1: not really. The thing I was surprised about was was 503 00:27:39,080 --> 00:27:41,479 Speaker 1: on the recession, I would have expected more of the 504 00:27:41,520 --> 00:27:44,520 Speaker 1: CFOs in line with what we hear from leading economists 505 00:27:44,640 --> 00:27:47,040 Speaker 1: to expect a true technical recession by the end of 506 00:27:48,240 --> 00:27:50,280 Speaker 1: that surprised us a little bit. And and with respect 507 00:27:50,440 --> 00:27:53,760 Speaker 1: just sort of putting some historical perspective, Is there sort 508 00:27:53,760 --> 00:27:56,760 Speaker 1: of a size and scope and how pessimistic CFOs are 509 00:27:56,800 --> 00:27:59,480 Speaker 1: about one year out? I mean, it's like the most pessimistic. 510 00:27:59,800 --> 00:28:02,080 Speaker 1: These These are very low numbers. I'm compared. These are 511 00:28:02,119 --> 00:28:04,720 Speaker 1: well below our two your averages in terms of that index, 512 00:28:04,760 --> 00:28:09,080 Speaker 1: that optimism index UM with respect to business metrics, forecast 513 00:28:09,160 --> 00:28:13,800 Speaker 1: of revenue growth, earnings growth, capex, hiring, and dividends, all 514 00:28:13,840 --> 00:28:16,159 Speaker 1: those are below their two your two your averages in 515 00:28:16,240 --> 00:28:18,800 Speaker 1: terms of twelve month projections. So city, how are the 516 00:28:19,000 --> 00:28:22,080 Speaker 1: CFOs as a group in terms of kind of projecting 517 00:28:22,160 --> 00:28:24,120 Speaker 1: the future if they're calling for a slow down, maybe 518 00:28:24,119 --> 00:28:26,760 Speaker 1: a recession, are they any good at predicting this stuff? Well, 519 00:28:26,800 --> 00:28:29,400 Speaker 1: what I'd say is over well over half about six 520 00:28:29,920 --> 00:28:33,800 Speaker 1: of the CFOs actually have created downturn plans, which is good. 521 00:28:33,840 --> 00:28:36,280 Speaker 1: So they've got scenarios they can pull off the to 522 00:28:36,480 --> 00:28:38,920 Speaker 1: pull levers in those things, the two levers that they'll 523 00:28:38,960 --> 00:28:41,760 Speaker 1: pull if we get further into this year and things 524 00:28:41,840 --> 00:28:44,680 Speaker 1: don't begin to turn around or or deteriorate, are gonna 525 00:28:44,680 --> 00:28:48,400 Speaker 1: be number one moving to cost reduction programs and second, 526 00:28:48,440 --> 00:28:50,480 Speaker 1: look at a headcount. Those will be the two levers 527 00:28:50,520 --> 00:28:52,520 Speaker 1: as you start seeing pulled, which is going to be 528 00:28:52,560 --> 00:28:54,720 Speaker 1: concerning when we talk about the strength and the jobs 529 00:28:54,760 --> 00:28:58,920 Speaker 1: market that could weaken materially if there is some sort 530 00:28:59,000 --> 00:29:03,040 Speaker 1: of downturn learn or perceived downturn in the relatively near future. 531 00:29:03,080 --> 00:29:04,920 Speaker 1: Sandy Cockroll, thank you so much for being with us. 532 00:29:05,160 --> 00:29:08,640 Speaker 1: Fabulous having you here. Sandy Cockroll is Global CFO program 533 00:29:08,720 --> 00:29:12,680 Speaker 1: leader for Detroit, joining us here in studio. Thanks for 534 00:29:12,720 --> 00:29:14,920 Speaker 1: listening to the Bloomberg P and L podcast. You can 535 00:29:14,920 --> 00:29:17,760 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 536 00:29:17,800 --> 00:29:20,840 Speaker 1: podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter 537 00:29:20,880 --> 00:29:23,480 Speaker 1: at pt Sweeney. I'm Lisa Abram Woods. I'm on Twitter 538 00:29:23,560 --> 00:29:26,200 Speaker 1: at Lisa abram woits one before the podcast, you can 539 00:29:26,240 --> 00:29:28,640 Speaker 1: always catch us worldwide. I'm Bloomberg Radio