Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jai Ley.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com and of course on the Bloomberg. Let's
Speaker 1: bringing the end to note fix shall example data founder
Speaker 1: and see good morning to YenS, Good morning. What's the
Speaker 1: message for clients on the last couple of weeks we've
Speaker 1: had What are you telling them? We have to track
Speaker 1: what's going on with this virus. We have to see
Speaker 1: if it's spreading and importantly whether it's spreading outside the
Speaker 1: Whan area, whether it's like is it an international issue
Speaker 1: or is it a regional issue? And the data swings
Speaker 1: from day to day, and the data has distortions in
Speaker 1: it as well, so like they forget to report for
Speaker 1: a couple of days and then it's spikes because they
Speaker 1: catch up for a couple of days. So we really
Speaker 1: have to weed out those things. And then we have
Speaker 1: to look at what is the stimulus that's being put
Speaker 1: in place to counter the effect. So like Chinese interest
Speaker 1: rates didn't move at all last year, and now there's
Speaker 1: suddenly shifting down a gear because the stimulant is expected
Speaker 1: to be very significant, right, so we have to weigh
Speaker 1: those stimulus effects into the equation too. There's just a
Speaker 1: belief ends i think, helped by a lot of people,
Speaker 1: that any risk as a social stability in China is
Speaker 1: viewed as some kind of existential risk to the whole
Speaker 1: system the leadership. The message coming from the leadership urging
Speaker 1: officials Monday to quote achieve the targets of economic and
Speaker 1: social development this year, promote stable consumer spending? Is that
Speaker 1: a cue for this market? The more stimulus is coming,
Speaker 1: and do you think it can be effective in the
Speaker 1: environment with a situation like we have right now? Well,
Speaker 1: I think there's no doubt that Stimilus is coming. So
Speaker 1: we have liquidity injections, we have interest rates cuts. I'm
Speaker 1: sure there'll be all kinds of fiscal steps to make
Speaker 1: sure that whatever discontent is generated by this is counted
Speaker 1: by money in some forms. So there's no doubt that
Speaker 1: this is happening. But on the other hand, we have
Speaker 1: major cities in China in total shutdown, Like, how's that
Speaker 1: gonna last? It's gonna be a couple of days. You're
Speaker 1: gonna be a couple of weeks, a couple of months.
Speaker 1: That I think is the key parameter, right, because if
Speaker 1: we project into global growth, a couple of days is
Speaker 1: clearly not gonna matter. But it's a couple of months
Speaker 1: from major regions, it's a big deal. You have some
Speaker 1: great math in your research note this morning. It was folks,
Speaker 1: literally half a page where you just go to the
Speaker 1: first derivative of the various virus ratios and at least
Speaker 1: we can say they seem to be moving in a
Speaker 1: constructive direction. Yeah. I think the key thing we're looking
Speaker 1: at is how is it's spreading outside the Wuhan area
Speaker 1: right and there the growth rates have been coming down,
Speaker 1: So if we get confirmation that that's the trend, that's
Speaker 1: the important signal. I think it's too early to say
Speaker 1: that they've come down to a level where we can
Speaker 1: be more comfortable. I think if you look at the
Speaker 1: literature from the health specialist, twelve percent is what they
Speaker 1: sort of expect is the natural progression of this thing.
Speaker 1: We get below that, that will show that the polishing
Speaker 1: measures have worked. And we're close to close to that point,
Speaker 1: but not quite there yet. And let's get to the
Speaker 1: nuts and bolts of what you do every single day.
Speaker 1: You how clients understand where positioning is at the moment,
Speaker 1: where the flows are going. You've got together with ep
Speaker 1: F R EPFR data. Talk to me about that partnership
Speaker 1: and what you're seeing together with them at the moment,
Speaker 1: just in terms of the flows, in terms of the
Speaker 1: positioning at the moment. Yes, So we we build as
Speaker 1: new data set together with ep FIRE up in Boston,
Speaker 1: and the idea is that we want to know what
Speaker 1: the real money community, which is really the biggest player
Speaker 1: in the currency market, is up to. So we go
Speaker 1: and measure in a very precise way what their positions are,
Speaker 1: including their derivatives, and that can give a sense of okay,
Speaker 1: where the crowded positions and where are are there some
Speaker 1: unloved places in the market that could potentially have some
Speaker 1: medium term bullish trends. So those are things we look at.
Speaker 1: So this is talking about the price action in security
Speaker 1: is a lot of people are looking at the fundamental
Speaker 1: effect that the shutdowns from the coronavirus will have on
Speaker 1: the economy. I was looking at a number of reports,
Speaker 1: Barclays coming out downgrading their first quarter estimate for China's
Speaker 1: growth by two point two percentage points, and this coming
Speaker 1: out that China's car sales are likely to slump the
Speaker 1: most on record in the first two months, with sales
Speaker 1: set to fall by twenty five tot in the January
Speaker 1: to February period. Is this being priced in? So we
Speaker 1: had one day that looked nasty in the equity market
Speaker 1: last week, and now we're recovering very dramatically today. So
Speaker 1: I think a lot of people are assuming that this
Speaker 1: shock is over, which I think is premature. But the
Speaker 1: for example, I think that the effect that we've been
Speaker 1: the most focused on is tourism. Like Chinese tourists around
Speaker 1: the world play a huge role in many different markets,
Speaker 1: especially in Thailand and so forth. If they don't come
Speaker 1: for several months, it's gonna be major, major hits to
Speaker 1: those economies, like several percentages of of of GDP, And this,
Speaker 1: I think is an effect where even if the factories
Speaker 1: up and up and running quite quickly, people are going
Speaker 1: to be afraid, there's gonna be essentially quarantines and so forth.
Speaker 1: So I think these effects are going to be multi
Speaker 1: month effects, and I don't think they approbably. Let's put
Speaker 1: some of these issues together. Then you talked about identifying
Speaker 1: the positions that were crowded at the moment. Where do
Speaker 1: you see the crowded positioning, what do you think is
Speaker 1: vulnerable like? So, one thing we've seen in this data
Speaker 1: set is that at the end of last year there
Speaker 1: was more optimism about global growth. You saw equity investors
Speaker 1: actually trying to put on bets of a sort of
Speaker 1: global recovery, and they did that bet in Europe as well.
Speaker 1: And we can see that the equity investors were some
Speaker 1: of the ones that actually put on long Euro bets.
Speaker 1: And I think one of the reasons why the Euro
Speaker 1: has traded so poorly this year was that we came
Speaker 1: into the year with that overhang of long Euro positions
Speaker 1: and then we've had all the negative shock come out
Speaker 1: and they've had to take that risk down. So these
Speaker 1: are the sort of tools we use to identify crowd
Speaker 1: of decisions. Take that one step further than are you're
Speaker 1: looking for more downside and euro dollar So I think
Speaker 1: everything is driven by the global growth sentiment. It comes
Speaker 1: back to Lesa's question, Okay, is this shock really fully priced?
Speaker 1: So I will be much more comfortable saying okay, we're
Speaker 1: about to have recovered if we had a proper correction
Speaker 1: the equity market. But we just never got a proper
Speaker 1: correction right because we had one day down and now
Speaker 1: we're sort of recovering already. So we're in a very
Speaker 1: gray song here where risk acids have have really not
Speaker 1: priced very much. There's some very very intimate side and
Speaker 1: improvement fundamentally, but they're not convincing yet. Give me a
Speaker 1: currency pair, because I've been short Tesla and that's worked out.
Speaker 1: Give me, give me a pair Noel with its opportunistic
Speaker 1: over the next ninety days. So I'm very worried about
Speaker 1: Thailand because they have the biggest tourist sector and and
Speaker 1: and em space. I think Mexico is still the most
Speaker 1: constructive story or that I see out there. So that's
Speaker 1: a very we're gonna do that chart. You're going to
Speaker 1: have a triple leverage cash fund with an overlay. I
Speaker 1: don't know. Leslie Vinja Murray John Shadow Mouse, She's expert
Speaker 1: on American politics out of her shop in London. Leslie
Speaker 1: absolutely extraordinary. The major message from Kevin Surilli and Des
Speaker 1: Moines was people are genuinely shocked over this mess. In Iowa,
Speaker 1: summarize it from the distant climbs of London. Well, you know,
Speaker 1: waking up here in London, I think we were all
Speaker 1: shocked because we expected to see, you know, what has
Speaker 1: been a very tight race among with multiple candidates sort
Speaker 1: of coming out at the top, whether it would be
Speaker 1: Biden or Sanders, but it was, you know, unclear, it
Speaker 1: could have been Bude. And we woke up, of course
Speaker 1: to the news that there is no result. We still
Speaker 1: didn't have a result, and and all of this down
Speaker 1: to difficulties you know, with the local with the local
Speaker 1: caucuses and they the Democratic Party, So I think very
Speaker 1: distressing for many people. And of course then there's also
Speaker 1: the news that multiple people seem to have been declaring
Speaker 1: their success, multiple candidates, which is humorous for a lot
Speaker 1: of people, Leslie, because they're declaring success without any results.
Speaker 1: Ready to go on, Leslie. I'm just wondering, once we
Speaker 1: get the results, how much value will there be in
Speaker 1: those results. Well, you know, I think there's there's inevitably
Speaker 1: the narrative surrounding this will be of a botched and
Speaker 1: and and somewhat scale caucus. So regardless of the result,
Speaker 1: I think it's going to cast a bit of a
Speaker 1: shadow over those results, and the delay is very significant.
Speaker 1: People are moving off and going into the State of
Speaker 1: the Union address and New Hampshire is you know, is
Speaker 1: very soon. Lisa Homeland Security offered to test Iowa caucus
Speaker 1: app that was in an interview on Fox moments ago.
Speaker 1: This is actually key. They made a point to come
Speaker 1: out and say that there was no interference, has had
Speaker 1: nothing to do with any sort of major glitch, that
Speaker 1: this didn't have to actually affect anything having to do
Speaker 1: with the underlying vote count. Talking about all of that,
Speaker 1: but still raising questions about the lack of technological sufficiency
Speaker 1: heading into the elections. How concerned are you about that
Speaker 1: at this point given what we saw in the questions
Speaker 1: still surrounding that. Yeah, I mean there's there's clearly you know,
Speaker 1: there are a couple of things here. One is that
Speaker 1: even though that disappears to have a very distinct reason
Speaker 1: behind the behind the debacle, it nonetheless sort of comes
Speaker 1: together with with previous elections where there's been interference or
Speaker 1: where things haven't come come together smoothly, and at a
Speaker 1: time when there's just tremendous uncertainties surrounding the Democratic Party
Speaker 1: of the candidates and and a lot of instability. I
Speaker 1: would say politically in the country. Let's lee, you're in
Speaker 1: the UK right now, and I'm just drawing on my
Speaker 1: experience of the British election this past December. If we
Speaker 1: get a progressive candidate that comes out of the caucuses
Speaker 1: the primaries over the next several months, can they win
Speaker 1: on a national basis and the same way Jeremy Corbyn
Speaker 1: struggled with a national electorate but was really worth supported
Speaker 1: by the party. Do you see any parallels here whatsoever?
Speaker 1: I mean, you know, a very different set of politics.
Speaker 1: People love to draw the U s UK comparison. Sometimes
Speaker 1: that shed some light, but I think the big question
Speaker 1: that un it often doesn't. The big question for the
Speaker 1: US is whether or not those that part of the
Speaker 1: party that doesn't get the candidate they want, if it's
Speaker 1: a progressive candidate, do the moderates turn up, do they
Speaker 1: unite behind that candidate? Do they support the Democratic candidate
Speaker 1: as a mechanism of of moving away from the person
Speaker 1: that they don't want in the office, which is which
Speaker 1: is President Trump? And this is you know, this is
Speaker 1: something we simply can't know. Some of the stories coming
Speaker 1: out of Iowa were interesting though, right that people who
Speaker 1: didn't um with their candidate and didn't make the initial
Speaker 1: bar a few people just went home, you know. Not
Speaker 1: a good sign, very hard to read broader results off that,
Speaker 1: but not a good sign that you wouldn't then turn
Speaker 1: to turn over your vote to another candidate. So I
Speaker 1: think this is, you know, this is the big question.
Speaker 1: Will there be unity around a candidate when when one
Speaker 1: is finally selected. There's also a question of what trade
Speaker 1: uh policies will result from the different Democratic candidates. When
Speaker 1: it comes to China, certainly people have this feeling that
Speaker 1: it really won't be necessarily better for China with a
Speaker 1: Democratic candidate, whoever he or she may be. There's a
Speaker 1: question with Europe now that that's the front center with
Speaker 1: some of the trade discussions, of which democratic candidate seems
Speaker 1: to be the best one to deal with Do you
Speaker 1: have a sense of that? Well, I think there is
Speaker 1: a concern not only in Europe but certainly in China
Speaker 1: that a Democratic candidate could take a much stronger line
Speaker 1: on China actually call for those deeper reforms that President
Speaker 1: Trump has has paid lip service too, but really hasn't
Speaker 1: moved the needle substantially on So a progressive candidate, I
Speaker 1: think uh is more likely to take a much harder line. Uh,
Speaker 1: you know, it's sort of anti free trade position is
Speaker 1: one that has deeper roots in the progressive part of
Speaker 1: the Democratic Party certainly than the Republican Party prior to
Speaker 1: this president. So those are very real, very legitimate concerns.
Speaker 1: But at the same time, you know, we're not seeing
Speaker 1: a very serious articulation of what the strategy would be
Speaker 1: um on China coming out of coming out of the
Speaker 1: progressive I just translate from the English that progressive is
Speaker 1: another word for liberals. We've just changed it a couple
Speaker 1: of years ago. Well, I think it's aggressively liberal when
Speaker 1: you're looking at the likes of Bernie Sanders, and let's
Speaker 1: talk about let's talk about the elephant in the room,
Speaker 1: showy Leslie, Let's talk about Bernie Sanders. Can he unify
Speaker 1: his own party? Never mind the country? You know, it
Speaker 1: is another one of those one million dollar questions that
Speaker 1: nobody actually which is where test is going to be
Speaker 1: a lot of skepticism, you know, I when when we
Speaker 1: moved forward towards Super Tuesday, we'll have a lot, We'll
Speaker 1: have a lot more answer them. But I guess I am.
Speaker 1: I am let us know when you get eye words results.
Speaker 1: Let's say, Benjaburi, thank you so much with Chadow Mouse
Speaker 1: children with us for an incredibly important discussion now on
Speaker 1: the state of what we do all day, which is
Speaker 1: the media we're plugged into. Michael Nathanson is with MafA Nathanson. Michael,
Speaker 1: I've got to go first year colleague, Craig manfat on
Speaker 1: Comcast hugely interesting this morning. You go to a buy
Speaker 1: on Comcast, and am I right to say that the
Speaker 1: part of Comcast that's Nathanson like, which is the valuation
Speaker 1: of their news and entertainment assets, is worth zero? Is
Speaker 1: NBCUniversal barely valued within the valuation of Comcast? Right, good
Speaker 1: morning time. That that's our call. Craig has been rightly
Speaker 1: negative on the media side of NBC Comcast, but at
Speaker 1: some point you just got ridiculous and at this level rethink.
Speaker 1: Given the value of cable cable assets, the entertainment assets
Speaker 1: are literally trading for free. So we switched, We switched
Speaker 1: courses and upgraded it to a buy. After a couple
Speaker 1: of years of really being negative on them posts, you know,
Speaker 1: post a bunch of deals that we didn't like forty
Speaker 1: two dollars a share, forty three dollars a share on Comcast.
Speaker 1: I'm sure you'll lift the stock. What's the value of
Speaker 1: NBC Universal and the all in price target? Moffett Nathan Snaz, Well,
Speaker 1: you know, if you look at where you know, it's
Speaker 1: not Disney, because Disney Disney, we'll talk about fit has
Speaker 1: really changed their narrative. But if you said, you know, seven, eight,
Speaker 1: nine times eba doll you probably have another, you know,
Speaker 1: ten a box of value at Comcast just by getting
Speaker 1: NBCU at a fair value. So it's if you look
Speaker 1: at where Charters traded two, which is a pretty good
Speaker 1: proxy for cable, you do you have a free pass
Speaker 1: for NBC And it's a very I think it's very straightforward,
Speaker 1: makes a ton of sense. And people are looking for
Speaker 1: things to buy, as you all know, and this is
Speaker 1: a pretty good name for Michael. We talk about price
Speaker 1: just quickly at an email from Hulu a couple of
Speaker 1: months back, hike in the price of my monthly Hulu power.
Speaker 1: Here we go quite aggressively. Always got to make it
Speaker 1: about Megan early and at what point, at what point
Speaker 1: do we meet meet an inflection point where I just
Speaker 1: sit there and think, you know what, I'm just going
Speaker 1: back to cable. What's this about? Yeah, John, you know
Speaker 1: what that this past year, that inflection point has come.
Speaker 1: I always said, you and Tom had asked me this
Speaker 1: for years. What's the what's the tudor of court cutting?
Speaker 1: We'd say it's a drip drip drip, negative one of
Speaker 1: two percent court cutting rates. This year it's going to
Speaker 1: negative four, negative five because people are now seeing their
Speaker 1: bill rise and on the margin, they're either kind of
Speaker 1: chord or they're they're going back to their traditional ways
Speaker 1: to watch the TV. But the mistake the industry is
Speaker 1: made is that they've just taken pricing up on bundles
Speaker 1: to the level that's just too high. So, you know,
Speaker 1: we're saying that you're we're worried play out, We're brawled
Speaker 1: across the ecosystem. With court cunning really accelerating into twenty Michael,
Speaker 1: there's then a question sort of implicit in that is
Speaker 1: the model going to continue to be purely on subscription
Speaker 1: fees or will there be a shift to an advertising
Speaker 1: supported model. And I'm thinking on the heels of the
Speaker 1: Super Bowl with a record five point six million dollars
Speaker 1: commanded for a thirty second spot. At what point will
Speaker 1: streaming command similar types of prices uh to sort of
Speaker 1: support these Okay, so so there's a ton in that
Speaker 1: answer you. So what I would say to you to
Speaker 1: John's first question, We're gonna have a lot a lot
Speaker 1: of your people subscribing to pay TV. The PayTV core
Speaker 1: user is going to be a sports and news fan
Speaker 1: who you know, will be a bit indifferent to pricing.
Speaker 1: Then there's going to be a layer of people who
Speaker 1: buy things on demand. And that's your question about advertising
Speaker 1: support video. That's a growing field. It's called a VOD
Speaker 1: and seeing more companies pushing advertising video on demand supported
Speaker 1: business model. You won't for many years. There's no way
Speaker 1: you'll ever built the reach that you have in TV,
Speaker 1: but it's a way to a buying consumers to add
Speaker 1: back that that decline of line your viewing in a
Speaker 1: new model called a VOD. Where's your value, Michael Nathanson
Speaker 1: Right now? I mean Disney has had the IGOR run
Speaker 1: off their streaming pricing and Disney Plus, But which is
Speaker 1: the security that's an uncommon value now other than off
Speaker 1: it's Comcast call today. Well, you know Tom. I mean
Speaker 1: it's last week I spoke to John about that. Facebook.
Speaker 1: I'll say the same with Google. I think those fang
Speaker 1: stocks have reached level. It's really hard to have a
Speaker 1: table on the fang stocks. You know, we have Disney
Speaker 1: with another fifteen fifteen bucks or so, and so you'd
Speaker 1: say you're running out a room there. The problem we
Speaker 1: have when we look at my sector is that there's
Speaker 1: there's a lot of value means b M, CBS, which
Speaker 1: you pull up the chart has been decimated, Discovery UM.
Speaker 1: But the problem we see is that those businesses are
Speaker 1: under so much structural pressure that feels like a value trap.
Speaker 1: So we're having a really hard time finding great value
Speaker 1: in businesses that we think are sustainable. That's why Comcast
Speaker 1: makes so much sense for investors. There's so so few
Speaker 1: places you can point to the sustainable growth and evaluation
Speaker 1: and evaluation that's attractive. Michael, just to turn to the
Speaker 1: issue at the moment, just to wrap this conversation up quickly.
Speaker 1: If I made the Walt Disney Company the theme park
Speaker 1: in China, what is happening right now and how material
Speaker 1: is it for the company. It's not fair material. You know,
Speaker 1: they already warned on Hong Kong when the year started
Speaker 1: because of the rioting. You know, Shanghai as a new
Speaker 1: park is not it's not a meaningful contributor to the company. Um,
Speaker 1: it's it's it's not a major issue. If they had
Speaker 1: a better box office late this year, you'd be concerned
Speaker 1: about their inability to have people attend Chinese cinema. At
Speaker 1: this point, this is not a major issue because the
Speaker 1: parks are so small. The broader question though, is US
Speaker 1: parks and will there'll be a slowdown to US parks
Speaker 1: so we're spending Yeah, that's that's something that we we
Speaker 1: haven't put into our molley yet. But that doesn't concerned
Speaker 1: with Disney. Is just the cycle and how many more
Speaker 1: dollars will people spending us theme parks. Michael Nathanson this morning,
Speaker 1: is he and Craig Moffatt put a buy on Comcast
Speaker 1: on some of the parts, uh model, get that researcher
Speaker 1: of course from Moffatt Nathanson. We now try to drive
Speaker 1: forward an intelligent conversation on this virus with Dr Faucci.
Speaker 1: Anthony Fauci is out of Brooklyn. He's out of the
Speaker 1: College of the Holy Cross in Worcester and Cornell, and
Speaker 1: he is definitive on immunology and definitive on how the
Speaker 1: body reacts to these bad things called viruses. Were thrilled
Speaker 1: he could join us right now, Dr Frauci, What is
Speaker 1: your knowledge of how people get sick from this terrible virus?
Speaker 1: What does it actually do to people? Well, it's a
Speaker 1: respiratory born virus, you know, in some respects similar to
Speaker 1: other respiratory born viruses, but it's of a different broad family.
Speaker 1: It's called a coronavirus. And what it does it has
Speaker 1: the capability of binding to a receptor on cells that
Speaker 1: are in your lung and your lower airway. And that's
Speaker 1: the reason why the disease is primarily a disease of pneumonia.
Speaker 1: So the people that you're hearing about who are getting
Speaker 1: seriously ill in China fundamentally a people who are winding
Speaker 1: up with pneumonia, very very serious. Yes, so that's the mechanism.
Speaker 1: Do you do you have any optimism? Dr Fauci's antibiotics
Speaker 1: against the bacterium pneumonia can help staunch the deaths. Are
Speaker 1: we fighting just virology? Are we fighting also the bacteriology
Speaker 1: that follows on from it? That's a good question, and
Speaker 1: talking to our Chinese colleagues and seeing the case reports,
Speaker 1: it looks like this is primary viral pneumonia. I'm sure
Speaker 1: that every once in a while you're gonna see people
Speaker 1: who are seriously ill in the hospital who get a
Speaker 1: secondary complicating bacterial pneumonia. But the driving force of this
Speaker 1: outbreak is virus and viral pneumonia and not bacterial pneumonia.
Speaker 1: The CDC came out yesterday awarding saying that they were
Speaker 1: preparing for a pandemic. It's not there yet, but saying
Speaker 1: as if it will come to the United States, what's
Speaker 1: the tipping point in terms of people, in terms of
Speaker 1: countries that qualifies it as pandemic. Yeah. One of the
Speaker 1: things that I think it's the easiest to understand is
Speaker 1: what we call persistent or sustained transmilty, transmissibility from one
Speaker 1: person to another to another. Like, for example, in the
Speaker 1: United States, we have eleven total cases, nine of which
Speaker 1: are travel related coming in from Muhan, but two were
Speaker 1: individuals who were close contacts of these individuals who came in.
Speaker 1: But it isn't sustained. In other words, it went from
Speaker 1: a person who was infected to another, but didn't go
Speaker 1: beyond that. In the second, third, and fourth generation, we're
Speaker 1: seeing that in China. So China clearly has an epidemic,
Speaker 1: but the countries to which have received people from China
Speaker 1: with travel related cases, we don't yet have widespread multi
Speaker 1: country sustained transmission. When that occurs, then you're going to
Speaker 1: see the official declaration of this being a pandemic, since
Speaker 1: we don't have that yet, Doctor, I just wandered to
Speaker 1: what degree travel curbs and the kind of travel bands
Speaker 1: that we're seeing coming from various countries at the moment
Speaker 1: can be effect What do you think of them? You know,
Speaker 1: it's really controversial. In the past, it has been clear
Speaker 1: that if you do those kinds of things, there is
Speaker 1: the possibility that there may be deleterious, unintended consequences. However,
Speaker 1: this is such an unprecedented situation that it really is
Speaker 1: too early to call. But I can tell you that
Speaker 1: if you have a conversation with health officials, there'll be
Speaker 1: people on either side of that. Dr Fraucci, When you
Speaker 1: joined nig nineteen, uh, I guess in the eighties, I
Speaker 1: want to see, okay, so that was the time of
Speaker 1: the home I forgot how aged you are. You're well
Speaker 1: preserved for your age, Dr Faucci. When you go back
Speaker 1: to the Hong Kong flu of nineteen sixty eight, are
Speaker 1: we reacting to this influenza this virus because of our
Speaker 1: modern newsflow communication transfer of information totally different than we
Speaker 1: did in nineteen sixty eight when it was a quieter
Speaker 1: news time. You know, there is some validity to that
Speaker 1: uh statement that you made, but it isn't completely explained
Speaker 1: by that. I think it's better to explain to the
Speaker 1: listeners that when you're dealing with influenza, influenza is something
Speaker 1: we have some familiarity with, whether it's a severe influenza year,
Speaker 1: a light year, or what have you. But when you're
Speaker 1: dealing with the virus to which you have absolutely no
Speaker 1: precedent to figure out what this coronavirus might do, then
Speaker 1: you have the added uh, you know, fear and anxiety
Speaker 1: of the unknown. I mean, a question that I get
Speaker 1: asked more often than the nineteen pandemic, which you're right,
Speaker 1: was truly a pandemic, and there was clearly much less
Speaker 1: of the kind of global concern that's expressed in the media.
Speaker 1: I mean, there was concern on the part of public
Speaker 1: health officials. But it wasn't the kind of daily twenty
Speaker 1: four hour news cycle that we saw. But people ask,
Speaker 1: you know, we're in the middle of a flu season
Speaker 1: right now. They're about ten thousand people who have died
Speaker 1: this year from flu, which was a plain old flu,
Speaker 1: about a hundred thousand hospitalization. So why are we paying
Speaker 1: so much attention to this coronavirus? And the reason is
Speaker 1: most people have a greater fear of the unknown. And
Speaker 1: the fact is we know that in March and April
Speaker 1: of this year the flu will go down dramatically and
Speaker 1: there'll be very few cases. We don't have any guarantee
Speaker 1: of where this coronavirus is going to go, and that's
Speaker 1: the thing that's frightening people, the unknown. Here's valuable Anthony Focci,
Speaker 1: thank you so much. That FACCI, of course, with the
Speaker 1: National Institute of Allergy and Infectious Diseases fall Scoeny came
Speaker 1: in and threw me the gene Monster research report. He said, Tom,
Speaker 1: read this one sentence, So I'm going to read this
Speaker 1: with full punctuation to get everybody going. We see the
Speaker 1: logical tech comp is apple. We believe there's merit to
Speaker 1: that view. And the company's valuation should be viewed in
Speaker 1: that context. Period Apple period. Why is Tesla like Apple,
Speaker 1: O Wise one Gene Munster with Loop ventures with us Gene.
Speaker 1: Why is it the next Apple? Because it's a combination
Speaker 1: of hardware, software, and services. If you think about the
Speaker 1: large tech companies, Apple is the only one that offers
Speaker 1: those three long time for the last decade has been
Speaker 1: largely penalized for that hardware piece, and the last year
Speaker 1: Apples multiple has moved up as investors have gotten more
Speaker 1: confident that doing those three pieces hardware, software and services
Speaker 1: together creates a sustainability and that Tesla it's the same
Speaker 1: business model. It's not just building cars, it's a computer
Speaker 1: on wheels. That's the hardware piece. Then of course that
Speaker 1: there is the there's the the software piece around for
Speaker 1: example of full self driving and just advanced autopilots that
Speaker 1: you pay seven thousand dollars for. And then there's a
Speaker 1: services element that they're building into anything from insurance to
Speaker 1: their charging network. And so I think that there is
Speaker 1: a similar piece to it, and I think what it
Speaker 1: really represents that view is a shift. And you know,
Speaker 1: we can talk about what's happened with the stock and
Speaker 1: where it's going. But this general shift of thinking about
Speaker 1: this is a car company and using comps of Ford
Speaker 1: and GM to a complex apple. So, Gene, let's go
Speaker 1: to spend a minute or two just on kind of
Speaker 1: the recent price action. Stocks up, you know, almost double
Speaker 1: just in the month of January yesterday indicating another strong
Speaker 1: surge this morning. How much of this do you think
Speaker 1: is kind of technical short interest covering versus people just
Speaker 1: kind of opening their eyes and saying, this is a
Speaker 1: tech company. I think it's seventy of the ladder of
Speaker 1: this is a tech company and short short covering. There
Speaker 1: is uh still about fourteen percent of the float that's
Speaker 1: short that those numbers actually understate the percentage slightly. It's
Speaker 1: probably like sevent because Ellen owens of the company and
Speaker 1: he doesn't offer those shares for borrow. So uh it's
Speaker 1: but that short interest really hasn't gone down much over
Speaker 1: the past few months, and so I think it's more
Speaker 1: about the fundamental piece. I would think about this when
Speaker 1: you look at uh, this view that the fundamental pieces
Speaker 1: the biggest driver of the stock is in some ways
Speaker 1: this is historical what's happened with the stock in the
Speaker 1: last few months. Um, I've been doing this for a
Speaker 1: while and I can't remember a story like it. In
Speaker 1: other ways, the presence the lead up to this over
Speaker 1: the last few years was also historical, the the amount
Speaker 1: of um of batter banter between the bulls and the bears.
Speaker 1: I think there was a lot of positive advancement that
Speaker 1: Tesla had made that was really not being reflected in
Speaker 1: the stock. And so in some ways, the move that
Speaker 1: we've had up to where it is going to open today,
Speaker 1: this is just kind of catching up for I think
Speaker 1: probably what should have happened over the past few years,
Speaker 1: and then there's a question where do we go from here.
Speaker 1: But in some ways this parabolic move is somewhat understandable. Hey, Geane,
Speaker 1: I'm looking at the a n R function on the
Speaker 1: Bloomberg terminal that tracks analyst recommendations eight buys eleven holds
Speaker 1: eighteen cells. Is this a case where the tech analysts
Speaker 1: are on board with the story, but the auto analysts
Speaker 1: just can't get couple of evaluation. I think it's the
Speaker 1: auto analysts that are opening up to this view that
Speaker 1: it's a tech company. I think it's still largely covered
Speaker 1: by auto analysts. You don't see Apple analysts for example, Well,
Speaker 1: there's a few of them, but for the most parts
Speaker 1: aren't covering Tesla. But I think that that I think
Speaker 1: that the traditional analysts that cover it will have to
Speaker 1: make a decision here whether they want to continue to
Speaker 1: cover it or generally think about this as a tech company. Jane, Okay,
Speaker 1: you're selling me on a tech company. But the fact
Speaker 1: is it's automobiles driving down the road on a ninety
Speaker 1: day conference called Basis. Is a number of units sold
Speaker 1: of their cars still the demonstrable statistic. Yes, that's critical,
Speaker 1: that would be the critical piece. But uh, you have
Speaker 1: to look at it not just in the context of
Speaker 1: a quarter. I'm not trying to build some uh some
Speaker 1: cushion for them in any given quarter. But you need
Speaker 1: to think about these trends. Uh. There, these are massive trends.
Speaker 1: We're talking about the car. The automotive industry really hasn't
Speaker 1: changed largely for the last hundred years, and we're talking
Speaker 1: about a total shift out to autonomous vehicles. Is where
Speaker 1: we're ultimately going, but that it takes time to get there.
Speaker 1: Do you have a model of what unit sales are
Speaker 1: going to be in the next eight days or if
Speaker 1: you don't what happens if they stumble, Well, if they stumble, Uh,
Speaker 1: let's maybe just focusing on the March quarter. A as
Speaker 1: far as the model for the full year, they've talked
Speaker 1: about doing greater than five hundred thousand. Previously they had
Speaker 1: said greater than four hundred sixties five thousand, So they
Speaker 1: had kind of inched that target up when they reported
Speaker 1: their quarter last week, but the they didn't give a
Speaker 1: ton of context to how to think about this quarter
Speaker 1: to quarter, and so, uh, the analysts could be ahead
Speaker 1: of themselves. The numbers are still kind of figuring themselves
Speaker 1: out shaking out for the March quarter. But let's take
Speaker 1: the case where the company misses the March quarter and
Speaker 1: then talks about still confidence in that five hundred thousand number.
Speaker 1: That miss would be a negative. The stock even what
Speaker 1: it's done, would be down. But conversely, if you they
Speaker 1: you come back to the June quarter and then they
Speaker 1: beat on that number, uh, then the stock would would
Speaker 1: regain that So I think what we're we're getting into is, uh,
Speaker 1: it's still going to be a controversial story, and I
Speaker 1: would I think that a miss would still be viewed negative,
Speaker 1: but I think it misses the bigger ark of what's
Speaker 1: going on. So Gene, just real quickly, what's the competitive
Speaker 1: landscape for them? Is that Apple or is it General Motors?
Speaker 1: On neither probably probably more Apple than General Motors. Unclear
Speaker 1: what Apple's ambitions are in cars, and just for a
Speaker 1: long time prophesied that Apple would do a TV that
Speaker 1: never happened. I want to be careful about what they're
Speaker 1: going to do in automotive. I think they will have
Speaker 1: some playing automotive, but General Motors is structurally uh in
Speaker 1: a in a tight spot. And another thing I would
Speaker 1: add is I think if you think of the automotive
Speaker 1: industry over the next ten twenty years, there are large
Speaker 1: companies that have been around for a long time that
Speaker 1: will be on their way on a clear path to
Speaker 1: not being around, if even around at all. Hey, Gene,
Speaker 1: thanks so much for joining us. We really appreciate your thoughts.
Speaker 1: Jean Munster Luke Ventures managing partner analyst giving us his
Speaker 1: very informed thoughts. Thanks for listening to the Bloomberg Surveillance podcast.
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