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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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

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

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

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Speaker 1: On the agenda, a slightly hawk is fed and ECB

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Speaker 1: discussing the end of QI and the President of the

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Speaker 1: United States considering slapping on terriffs on China just as

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Speaker 1: signs of weakness emerged in the world second largest economy.

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Speaker 1: Bob Since joins us now and hearst pe upon securities

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Speaker 1: global strategist and Bob, what's the to worry about? Just

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Speaker 1: walk me through it? Well, I think the um, you know,

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Speaker 1: I think the trade issue is going to be the

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Speaker 1: one to to focus on over the say of the

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Speaker 1: next six to nine months. You know, the administration has

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Speaker 1: done a lot to stimulate this economy. Uh, my colleagues,

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Speaker 1: Steve Stanley thinks we we have the potential for a

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Speaker 1: five handle on GDP in the second quarter. We'll see

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Speaker 1: how some of the trade numbers and the like turn

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Speaker 1: inventory numbers turn out over the next the next couple

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Speaker 1: of weeks. Uh, but but certainly a very robust first

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Speaker 1: half of the year. Um. You know, the question is

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Speaker 1: do we do some self and flick a damage through

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Speaker 1: the trade side. It just seems it might be damaged

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Speaker 1: for for other people and not the United States. I

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Speaker 1: lost count the amount of times the champ how referred

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Speaker 1: to strength at a strong economy here in the United States.

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Speaker 1: Bub Yeah, And I think again, the momentum is good,

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Speaker 1: and the and the fit is looking at what is

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Speaker 1: rather than what could be. The markets I think focus

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Speaker 1: on what could be. And uh, you know, I think

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Speaker 1: this is where the trade side comes into play, because

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Speaker 1: we've done a lot in terms of the de regulation

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Speaker 1: side for the US corporate sector. The weaker dollar last year,

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Speaker 1: I think is playing a role in the strength of

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Speaker 1: the US economy this year, operating with a normal lag

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Speaker 1: of say six to twelve months. Um. So I think

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Speaker 1: all cylinders are moving forward. Um. On the U S

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Speaker 1: side right now, the question is do we interrupt that sentiment?

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Speaker 1: You know, you look at a business sentiment, it's extremely strong.

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Speaker 1: Capital spending is picking up. One way to interfere with

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Speaker 1: that is to create uncertainty. And certainly the trade side

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Speaker 1: is where I think we're creating uncertain Do you see

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Speaker 1: that creeping through in the self dates? At the moment

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Speaker 1: in terms of a survey data, the Niflin Basmall Business

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Speaker 1: Confidence Survey was stella. What's happening out swamp up? A

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Speaker 1: small business is stellic. A small businesses domestics, and I

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Speaker 1: think you look at the domestic environment and it is

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Speaker 1: extremely strong. Domestic demand is strong. Wage and salary incomes

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Speaker 1: continue to grow pretty healthy and healthy fashion. So that's

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Speaker 1: uh a supporting consumer demand. Um, I think it's the

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Speaker 1: international it's the global environment. Wherever you get into the

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Speaker 1: larger businesses, there's bigger uncertainty. So not surprising in a

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Speaker 1: domestic oriented economy that these small businesses are showing. Conditions

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Speaker 1: are very robust. The Federal Reserve determined to deliver perhaps

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Speaker 1: a couple more hikes this year, maybe three. Two's tense

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Speaker 1: on the treasury curve. We always talk about this difference.

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Speaker 1: What does the curve look like? Is it flat? Is

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Speaker 1: its steep? Right now it's flattening with south the forty

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Speaker 1: basis points. And at the moment, the difference between a

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Speaker 1: two year note yield him in the United States and

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Speaker 1: a ten year bond yield, it's thirty eight basis points,

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Speaker 1: just below thirty nine basis points. What's the signal you'd

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Speaker 1: take from that. Well, I don't take as much as

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Speaker 1: I used to because I think that there are a

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Speaker 1: number of things affecting the longer end of the yield

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Speaker 1: curves around the world. One is central bank accumulation of

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Speaker 1: assets that's unprecedented, uh. The second is the demographic factors

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Speaker 1: where a lot of a lot of us who are

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Speaker 1: who are getting older are investing at the longer end

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Speaker 1: of the yield curve and fixed income um And I

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Speaker 1: think the third is some pension changes that have created

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Speaker 1: a strong corporate demand for money coming home from overseas

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Speaker 1: and and lining up with their long term liabilities. And

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Speaker 1: so I think a lot of things are depressing longer

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Speaker 1: term yields at a time when short term yields are

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Speaker 1: beginning to normalize. So you know, if you look at

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Speaker 1: the shape of the yield curve, it's been flattening for

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Speaker 1: a year, and based on historic relationships, that should be

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Speaker 1: slowing the economy already, and if anything, the economy is

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Speaker 1: going in the other direction and strengthening. So I don't

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Speaker 1: take as much of an economic signal from the yield

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Speaker 1: curve now as I would have ten years ago, fifteen

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Speaker 1: years ago, thirty years ago. What is the what are

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Speaker 1: the ramifications of seven percent nominal GDP? I'll ask that

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Speaker 1: question in a long time. Yeah, and I think that,

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Speaker 1: you know, we we could get near that number on

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Speaker 1: an annualized basis in the second quarter. What does it mean?

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Speaker 1: It means very robust conditions for domestic UH, for domestic producers.

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Speaker 1: And I think that's the small business index that that

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Speaker 1: Jonathan just referred to. Domestic companies UH, ones that are

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Speaker 1: dealing specifically with the domestic environment and the domestic consumer

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Speaker 1: see very robust conditions, very strong sales conditions. What's their

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Speaker 1: biggest problem? They can't find workers. Okay, and that's a

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Speaker 1: good thing. We all agree with that. But we're also

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Speaker 1: told in our textbooks that there's some outcomes here that

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Speaker 1: are harmful. What does it set us towards financial instability

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Speaker 1: down the road? I mean, obviously it's good, I get that,

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Speaker 1: but there's got there's there's gotta be some angst about it.

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Speaker 1: You know. We used to say that the best part

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Speaker 1: of the cycle for asset prices was right at the

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Speaker 1: beginning of the recovery. Why because central banks were still

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Speaker 1: very accommodative. Uh, And at the same time, the economy

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Speaker 1: was not absorbing a lot of capital. Um. We're in

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Speaker 1: a different part of the cycle now. Um, the economy

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Speaker 1: is starting to absorb capital through through business borrowing, consumer barring. Um.

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Speaker 1: The central banks are becoming less accommodative. And what does

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Speaker 1: that give us. It gives us markets that tend to

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Speaker 1: be a little bit more volatile and returns that are

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Speaker 1: a little less robust. And so, you know, we've talked

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Speaker 1: about this before. You know, I call this a bit

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Speaker 1: of a Shakespearean market this year full of sound and

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Speaker 1: fury signifying nothing. Returns year to date have have not

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Speaker 1: been very robust at all, either in bonds or stocks.

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Speaker 1: We've had a lot more volatility, but the net returns

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Speaker 1: really aren't very good. And so I think we're going

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Speaker 1: to go through a year where we get to the

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Speaker 1: end of the year and we sort of say, okay,

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Speaker 1: so returns were pretty lackluster, not surprising given that the

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Speaker 1: economy is absorbing more liquidity and the central banks are

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Speaker 1: supplying less of it. But before we lose you, we've

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Speaker 1: got to get your view on the e c B

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Speaker 1: um and the news conference. Something we can do that

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Speaker 1: a little bit later, Tom, I imagine it's seven thirty eastern.

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Speaker 1: You're gonna have a lovely video for me to listen to,

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Speaker 1: and I can't wait. Something to do with the Simpsons

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Speaker 1: and football mind up? Ye, sure we lined up. I'm

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Speaker 1: sure they are. Can we just get Bobs on the

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Speaker 1: e c P before we go, Bob, the European Central

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Speaker 1: boud the news conference in an hour, in about twenty

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Speaker 1: three minutes time, the decision in about forty minutes time.

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Speaker 1: What are you looking for? You know? I think they've

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Speaker 1: tipped their hand. Um. I think they, like many other

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Speaker 1: central banks, want to start normalizing, and the first step

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Speaker 1: in that process is to to stop digging a bigger

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Speaker 1: hole in terms of accumulating assets. So the program ends

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Speaker 1: right now. The current program is scheduled to end September thirty.

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Speaker 1: Remember this is not a cliff we're jumping off. We

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Speaker 1: went from an eighty billion per month accumulation rate. I

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Speaker 1: think it went to sixty billion a month in April

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Speaker 1: of two thousand and seventeen, went down to thirty billion

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Speaker 1: a month in January of two thousand and eighteen. Um,

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Speaker 1: you know, the time for this program is over. And

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Speaker 1: my guess is they just let it expire at the

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Speaker 1: end of September and they probably tell us that todays

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Speaker 1: thank you so much, greatly appreciative. There has been kurve flattening, certainly,

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Speaker 1: dynamics in the market, real spikes off the announcement and

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Speaker 1: then around Tripper pretty much over an hour on the

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Speaker 1: Pole press conference yesterday. Jane Follyott rubble Bank enjoyed watching

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Speaker 1: around trip We moved, we moved again. Are we gonna

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Speaker 1: get the same action, Jane this morning from Mr Drag

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Speaker 1: where there'll be a statement and then we'll get to

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Speaker 1: the press conference and they'll say, no, everything's fine. Well,

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Speaker 1: to be honest, if it looks like drug has deliberately

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Speaker 1: put out some morning messages to the market, so we

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Speaker 1: can go back a week ago and we can look

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Speaker 1: at the comments that we have then from VCB s

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Speaker 1: Prate and and he of course began to talk about

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Speaker 1: a tightening labor market. He began to prepare the market

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Speaker 1: possibly for the the announcement that we've had divising today.

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Speaker 1: So therefore we didn't have the shock that we would

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Speaker 1: have if he hadn't spoken a week ago, so we've

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Speaker 1: had the news now, and on quandity division, we know

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Speaker 1: it's going to come to an end. Not a huge

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Speaker 1: surprise me. Many people have been saying for a long

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Speaker 1: time that just for supply reasons alone, they may have

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Speaker 1: to end Quintu the easine at the end of this year.

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Speaker 1: But I think what they've done, and what Drag has

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Speaker 1: been very careful to do, is offset any sort of

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Speaker 1: hawking communication from that message with that needs on interest rates.

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Speaker 1: Interest rates low for a very long time still well,

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Speaker 1: but on the degrees of freedom basis the single headline

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Speaker 1: John Fair at se ECB to keep rates unchanged until

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Speaker 1: at least summer of two thousand nineteen Jane, I mean,

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Speaker 1: do you have to show up for work until like

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Speaker 1: August of next year. Well, indeed, it's very very stringent

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Speaker 1: in its guidance. I mean, you know, if you look

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Speaker 1: at many ECB watchers, certainly my my colleagues are watching,

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Speaker 1: needs to be a suggesting and happening for a while

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Speaker 1: that perhaps you won't get that first interest rate hi September.

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Speaker 1: So I don't think this is an enormous surprise, but

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Speaker 1: it does lay it on the line by then at

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Speaker 1: the Federal Reserve will of height interst rates several more times,

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Speaker 1: and yet the ECB with interest rates unchanged towards but

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Speaker 1: for another year. The intersect differentials certainly weigh in favor

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Speaker 1: of the You are stolen. So for our listeners, just

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Speaker 1: tune in, let's go through the decision. Rates remain unchanged.

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Speaker 1: The QUI plan was set to go through September at

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Speaker 1: thirty billion a month. The wind that down to fifteen

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Speaker 1: billion a month through the end of December. Then QUI

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Speaker 1: will finish, and then the guidance after that is rates

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Speaker 1: do not rise until at least the summer. The interesting

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Speaker 1: thing about this, Jane, is that the president of the ECB,

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Speaker 1: Marrio dr steps down at the back end of next year,

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Speaker 1: and I just wonder whether that guidance stays that way.

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Speaker 1: When we get a conversation about who the next president

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Speaker 1: of the e c B will be, they can contain

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Speaker 1: the guidance around drugs tenure. They can say rates won't

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Speaker 1: rise until the summer. But after that, if we get

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Speaker 1: an announcement of a hawk is ECB president, the forward

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Speaker 1: guidance is kind of out of his hands, isn't it. Well,

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Speaker 1: you're you're right. And indeed, as you know, a US

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Speaker 1: can be a long time in an economy, and the

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Speaker 1: same thing could happen if we get significantly weak or

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Speaker 1: significantly stronger economic data. So disguidance is very strong and

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Speaker 1: it but it does potentially put the u c B

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Speaker 1: in the corner in the year's time. So certainly dependent

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Speaker 1: on the speculation as to who that's a ecb um

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Speaker 1: who will take over the reins a year or it

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Speaker 1: dependent on that data, we could look back at this

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Speaker 1: and so actually that was inappropriate, Jane. I'm just suggesting

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Speaker 1: in a zillion years at Bloomberg that this sort of

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Speaker 1: an historic moment. I've never seen that a headline before.

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Speaker 1: We're a given central bank says we were just hunched

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Speaker 1: for a year. I mean, what are the ratifications of

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Speaker 1: any central bank saying we're going to check out for

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Speaker 1: twelve months. I think it could be, you know, as

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Speaker 1: I say, potentially difficult for them. I mean hopefully not,

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Speaker 1: but it certainly could be. I mean, again, I suppose

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Speaker 1: the closest comparison I can come up with a Bank

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Speaker 1: of England fairly recently, I mean, certainly they became very

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Speaker 1: Hawkesha gave a very Hawkesher message and earlier this year,

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Speaker 1: and then they had to backtrack on that, and that

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Speaker 1: can be quite difficult. It can be an issue for

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Speaker 1: its credibility and credibility and trust is is very much.

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Speaker 1: How can you have credible this is important? How can

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Speaker 1: you have credibility and trust if your theory is bankrupt?

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Speaker 1: I mean they're basically saying we're boxed in balance the

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Speaker 1: rest of it that we all know, and so we're

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Speaker 1: telling you in advance we're doing nothing for twelve months. Yeah,

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Speaker 1: it is. I mean it's it's one thing for economists

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Speaker 1: to look at cp I forecasts and make GDP forecasts

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Speaker 1: and come to that conclusion. That's that's what that's what

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Speaker 1: forecasters do. That's what they're paid to do. But it

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Speaker 1: is different to get a central boat to actually makes

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Speaker 1: me that guidance so you know that can put that

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Speaker 1: that can actually read a misdirector that the market say.

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Speaker 1: That is probably going to be something which is going

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Speaker 1: to get some some criticism, I would imagine over the

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Speaker 1: next few exactly. I mean, John, I think this is extraordinary,

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Speaker 1: which ellen Blinder was here right now, but you've picked

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Speaker 1: up on probably the most important point of the guidance.

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Speaker 1: We've moved past the asset purchase program. The focus is

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Speaker 1: on rates and Jaine, because it's such a dovish forward

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Speaker 1: guidance around the rate story. Does that explain why you're

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Speaker 1: adologist drops one eighteen again and you don't see a struggle? Yes,

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Speaker 1: it doesn't that. And I think this is all very

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Speaker 1: deliberate from the e c B. I think they've got

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Speaker 1: the message out on contribub eating last week so that

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Speaker 1: that wouldn't provide a hawkish signal, and that the message

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Speaker 1: on rates was perhaps deliberately there to offset any any

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Speaker 1: hawkish takeaway from this. So the message and rates is

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Speaker 1: is the one which the market is digesting now, and

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Speaker 1: it comes because right on the heels of that FED

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Speaker 1: announcement last night, which is very clear you know, they

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Speaker 1: will be quite a lot between them now and then

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Speaker 1: let's assume you're correct and there is data between now

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Speaker 1: in quote unquote summer of two thousand nineteen. That was

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Speaker 1: a great movie, Um, Jane, if you look at what

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Speaker 1: will change their certitude of unchanged for twelve months, which

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Speaker 1: I still folks can't get used to. Is it just

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Speaker 1: a simple GDP analysis, which upsets the apple cart. Well,

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Speaker 1: probably more like on the inflation front, and I suppose

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Speaker 1: actually we look at inflation data in the Aurizone over

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Speaker 1: the last few years, this does play into their corner. So,

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Speaker 1: for instance, inflation we know has been really quite low

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Speaker 1: and has remained very stubbornly low for quite a long time.

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Speaker 1: So if we project that forward, then we can probably

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Speaker 1: make the conclusion while there's no real reason for them

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Speaker 1: to be hiking interest rates, However, things do change and

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Speaker 1: what we are likely to see over the next few

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Speaker 1: months is higher cp I. Now, the higher c p

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Speaker 1: I probably not going to be so much from wage inflation,

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Speaker 1: which is what they would like to see. It's probably

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Speaker 1: going to be on the back of old price rises

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Speaker 1: that might start to peter otte at the end of

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Speaker 1: this year into into next year, suggesting actually that they

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Speaker 1: don't really need to hike interustrates because of that, because

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Speaker 1: it's price push inflation, not to marm Paul So and

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Speaker 1: the way things are allaying right now, well, you know,

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Speaker 1: I think it's reasonable to we've seen that they probably

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Speaker 1: wouldn't want to hike interest rates in that period. But

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Speaker 1: you're quite right, it is It is quite exceptional for

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Speaker 1: them to make such a forceful forward guidance, particularly in

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Speaker 1: in a in a period of time, which isn't in

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Speaker 1: the crisis. That's when forward of guidance really came into

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Speaker 1: its own during the crisis years, and many central bankers,

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Speaker 1: many economists would argue that actually, when you go into

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Speaker 1: better years of growth, that's when you start reining in

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Speaker 1: on the forward guide. And here's a question. Can this

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Speaker 1: Federal Reserve continue to go it alone? The Federal Reserve

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Speaker 1: a set to deliver I don't know, at least a

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Speaker 1: hundred basis points of hikes before the ECB even pulls

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Speaker 1: the trigger, and then still the depot rate in Europe

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Speaker 1: will be negative. What's thirty basis points, maybe twenty, it

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Speaker 1: will still be negative. I imagine they won't remove a

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Speaker 1: full fourty basis points in the first rate hike. How

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Speaker 1: much further can the Fed go alone? Well, you know,

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Speaker 1: I think that's an interesting question, and I think the

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Speaker 1: answer probably will be provided by perhaps a dollar And

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Speaker 1: the reason I say that is because obviously interstrct differentials,

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Speaker 1: if they do carry on feeding dollar strength, well that's

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Speaker 1: the monetary tightening in its own right, and that's going

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Speaker 1: to be something which could slow down the growth rates

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Speaker 1: of the US economy. So if the dollar just rises moderately,

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Speaker 1: well they can probably carry on ongoing. If not, they won't.

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Speaker 1: But I mean the other question, or the other answer

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Speaker 1: I should say, will be the Phillips curve. I think,

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Speaker 1: I think many such a brankers are assuming that wage

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Speaker 1: inflation will rise. But actually it's been extremely stubborn as well.

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Speaker 1: Wage wage inflation and most of the g turn is

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Speaker 1: still very very low. Further siety of different reasons. And

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Speaker 1: if we don't get the wage inflation will affect doesn't

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Speaker 1: need to rise either. Amazing story. Imagine robber Bank's senior

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Speaker 1: currency analyst joining us from London. The Interview of the

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Speaker 1: day on comcass Disney and on Fox Richard Greenfield bt

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Speaker 1: I G. Richard, what is the quality of the cash

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Speaker 1: flows of Fox? We understand that Comcast has a persistency

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Speaker 1: of cash flow bordering on an electric utility. What are

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Speaker 1: they buying if they layer on a hundred and fifty

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Speaker 1: billion in debt? Do they have the cash flow from

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Speaker 1: the Fox assets to make this transaction work? This is

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Speaker 1: a really strong free cash flow acquisition. You know, when

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Speaker 1: especially you're using cash the Comcast is actually gonna level

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Speaker 1: up meaningfully in order to acquire these assets. But they

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Speaker 1: absolutely do. I mean they deliver you know, probably more

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Speaker 1: than half a turn a year, uh from the amount

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Speaker 1: of free cash flow at these assets generated. Remember, most

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Speaker 1: of the assets you're buying, you know, you're buying it

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Speaker 1: most when you look at Fox, those are assets that

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Speaker 1: have really strong free cash flow dynamics. You know, you're

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Speaker 1: buying the you know, a kind of a wide array

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Speaker 1: of cable networks all over the world, not a lot

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Speaker 1: of capex. You're buying, you know, a very profitable film studio.

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Speaker 1: You know, if you look at the Sky business, what's

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Speaker 1: interesting is, you know, Fox on its own doesn't get

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Speaker 1: a lot of Castle out of Sky, but when you

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Speaker 1: buy the rest of Sky, all of that free cash flow,

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Speaker 1: because growth is obviously slowed in the UK for Sky,

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Speaker 1: that has become a very strong free cash flow growth engine.

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Speaker 1: So you know, this this is about Comcast expanding its

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Speaker 1: wings globally and using you know, using the cash flows

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Speaker 1: and these two assets to fund the expansion. And I

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Speaker 1: think that's the really important point, Tom. You need both

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Speaker 1: assets to make this financially compelling. You need to own

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Speaker 1: both Fox and Sky, not one or the other within

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Speaker 1: this rich greenfield. And you've touched on this as your

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Speaker 1: colleague in crime, Craig Moffatt. Over at Moffett, Nathan said,

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Speaker 1: is this about the behavior in the tenaciousness of Brian

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Speaker 1: Roberts explained to our global audience. Why the double negative

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Speaker 1: Brian Roberts is saying, I can't not not do this transaction.

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Speaker 1: The double negative here is so important, isn't it. He's

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Speaker 1: got to get this done. Look, if you looked at

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Speaker 1: early two thousand and seventeen, I think Comcast saw really

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Speaker 1: strong trends in its video distribution business, so people signing

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Speaker 1: up for cable TV via Comcast. That was they were

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Speaker 1: taking market here, they were growing, they were increasing the

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Speaker 1: amount people were spending per month. That things looked great

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Speaker 1: in early seventeen. You know, twelve months later, the outlook

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Speaker 1: has really changed. Video subscribers are declining, our poo is

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Speaker 1: flat to declining. The you know, the need to get

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Speaker 1: into wireless is growing. You know, I think the outlook

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Speaker 1: in the US has shifted dramatically. You know, we've talked

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Speaker 1: about Netflix on your show before, Tom, Like, I think

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Speaker 1: everyone's been surprised. I think part of the reason why

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Speaker 1: the rapid consolidation we're seeing in the sector as an

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Speaker 1: outgrowth of how fast consumer behavior is changing. And I

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Speaker 1: think if you're Comcast, you're looking at this going God,

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Speaker 1: the US markets mature, we have expertise in building a

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Speaker 1: vertically into a company. We've created lots of shareholder value.

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Speaker 1: Let's try to replicate this overseas and take advantage of

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Speaker 1: more nascent or earlier growth stage markets in the US.

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Speaker 1: And so, you know, getting to your question on like

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Speaker 1: why they have to do this, there's no alternative. There's

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Speaker 1: nothing else that looks like Fox and Sky. There's no

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Speaker 1: fallback number two or Plan B per se option. So

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Speaker 1: given that who needs the Fox assets more Disney or Comcast?

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Speaker 1: I actually believe it's Comcast because if you look at

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Speaker 1: Disney interesting, you look at the well, if you look

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Speaker 1: at the Disney pitch when they made the acquisition and

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Speaker 1: how they talked to investor those over the last seven months,

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Speaker 1: the conversation has really been we need this to compete

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Speaker 1: with Netflix. We need to be a direct to consumer company.

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Speaker 1: In order for us to shift from being a middleman

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Speaker 1: to actually having a direct relationship with the consumer, we

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Speaker 1: need more content, and we need the European and Asian

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Speaker 1: distribution footprints of Fox Sky. But that doesn't really make

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Speaker 1: a lot of sense. Think of Netflix, They've never made

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Speaker 1: an acquisition of a studio, They've never made an acquisition

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Speaker 1: of a European or Asian distribution platform. All they've done

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Speaker 1: is spend money. If Disney wants to compete with Netflix,

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Speaker 1: they actually just have to spend more money. They're unwilling

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Speaker 1: to do that. And I think big companies like making

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Speaker 1: big acquisitions. We got one minute Leftrid Greenfield, you've been

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Speaker 1: one of the harshest critics, a constructive critic, a respectful

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Speaker 1: critic of Mr Igor and Disney. What do you need

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Speaker 1: Mr to do do now to benefit his shareholders? Look,

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Speaker 1: I think the right decision is to invest aggressively to

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Speaker 1: build and draft off of Netflix's success. My fear is,

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Speaker 1: you know, he only stays past mid en If he

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Speaker 1: closes this transaction, he gets a seventy million dollar one

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Speaker 1: time award. If he closes this transaction, he seems set

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Speaker 1: on making this acquisition. I think the fear is going

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Speaker 1: to be he overspends and goes too far on a

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Speaker 1: on a strategy that doesn't make a lot of sense.

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Speaker 1: So you know, I don't know if you were asking

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Speaker 1: me what should he do, he should exercise restraint. I'm

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Speaker 1: not sure that's possible. And so in that case, the

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Speaker 1: winner is going to be Fox in the Murdochs, Fox

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Speaker 1: shareholders in the Murdocks, because someone's gonna end up overpaying

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Speaker 1: Rich Greenfield. Thank you so much on short note, it's

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Speaker 1: greatly appreciated this morning, Mr Greenfields with bt I G

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Speaker 1: we protect the copyright of all our guests. We're not

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Speaker 1: going to send you out Rich Greenfields. Import notes on

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Speaker 1: these transactions. It has become a substantial part of our

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Speaker 1: Bloomberg Media properties and that is important. And different conversations

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Speaker 1: with investor David Rubinstein. Obviously his leadership position and ownership

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Speaker 1: of Carlisle well known. David Rubinstein, and it is peer

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Speaker 1: to peer. Uh with a season two starting with Tim

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Speaker 1: Cook and you'll hear that tonight on Bloomberg Radio at

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Speaker 1: five pm and again at ten pm. These are different

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Speaker 1: interviews David. And with Mr Cook, I know you did

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Speaker 1: this at his and your Duke university. How does Tim

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Speaker 1: Cook do leadership? How does he delegate responsibility? Well, Tim,

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Speaker 1: here isn't a difficult or wasn't a difficult position. You

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Speaker 1: might say he was succeeding one of the great business

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Speaker 1: legends of our generation, if not longer. And um he

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Speaker 1: was a low key personality, but he was very close

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Speaker 1: to Steve Jobs and and learned a lot from him.

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00:23:12,680 --> 00:23:15,479
Speaker 1: And when he took over the position, many people thought, well,

430
00:23:15,480 --> 00:23:18,960
Speaker 1: how can anybody replace Steve Jobs? But as it turned out,

431
00:23:19,080 --> 00:23:21,400
Speaker 1: while Steve did a wonderful job, Tim has also done

432
00:23:21,400 --> 00:23:24,040
Speaker 1: a wonderful job. The market value of the company has

433
00:23:24,080 --> 00:23:27,119
Speaker 1: more than doubled um since Tim Cook has been leading it.

434
00:23:27,440 --> 00:23:30,359
Speaker 1: And he tried to explain how he tries to involve people.

435
00:23:30,440 --> 00:23:33,679
Speaker 1: He's more low key than than many CEOs. And I

436
00:23:33,720 --> 00:23:36,200
Speaker 1: pointed out in the interview that I know very few

437
00:23:36,320 --> 00:23:38,800
Speaker 1: CEOs of major companies who as low key, modest and

438
00:23:39,080 --> 00:23:41,560
Speaker 1: self effacing as he is. So there's a different style

439
00:23:41,560 --> 00:23:44,800
Speaker 1: than other CEOs, but clearly it works. David, I'm wondering,

440
00:23:44,800 --> 00:23:46,480
Speaker 1: before we get into the substance of the interview, which

441
00:23:46,480 --> 00:23:49,879
Speaker 1: aired on Bloomer Television last night, was there anything that

442
00:23:49,920 --> 00:23:53,560
Speaker 1: really surprised you about Tim Cook. I've known Tim a

443
00:23:53,640 --> 00:23:56,439
Speaker 1: little bit before. Um I was the chairman of the

444
00:23:56,520 --> 00:23:58,879
Speaker 1: two University board, and I asked him to serve on

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00:23:58,920 --> 00:24:01,120
Speaker 1: the board. Uh we she degreed to do. And I'd

446
00:24:01,119 --> 00:24:03,320
Speaker 1: interviewed him once before in a private setting for Duke,

447
00:24:03,560 --> 00:24:05,720
Speaker 1: so I knew him a little bit um. But I

448
00:24:05,720 --> 00:24:08,320
Speaker 1: would say I'm most surprised by the fact that he's

449
00:24:08,359 --> 00:24:12,080
Speaker 1: just so um low key relative to what you expect. Clearly,

450
00:24:12,119 --> 00:24:14,879
Speaker 1: he's making very difficult decisions and he's grown the company

451
00:24:14,920 --> 00:24:17,520
Speaker 1: in many ways that may not have been expected. But

452
00:24:18,080 --> 00:24:21,200
Speaker 1: him just very unassuming. And you know, if you were

453
00:24:21,240 --> 00:24:24,159
Speaker 1: to line him up with ten other potential CEOs, you

454
00:24:24,240 --> 00:24:28,320
Speaker 1: might say, well, he's the least um um ego in

455
00:24:28,400 --> 00:24:31,680
Speaker 1: terms of all the typical CEOs that you tend to meet.

456
00:24:31,720 --> 00:24:35,720
Speaker 1: So very likable person. I can see why he's succeeded. Um.

457
00:24:35,760 --> 00:24:37,400
Speaker 1: He shares the credit, which is one of the most

458
00:24:37,400 --> 00:24:40,040
Speaker 1: important things I CEEO should do in my view. So

459
00:24:40,200 --> 00:24:42,000
Speaker 1: I I you know, I think he comes across in

460
00:24:42,040 --> 00:24:45,440
Speaker 1: the interview that he's a very likable person. David. One

461
00:24:45,440 --> 00:24:49,040
Speaker 1: thing that he talked about was spending thirty billion dollars

462
00:24:49,080 --> 00:24:53,320
Speaker 1: on uh expanding both the plants that APRA has as

463
00:24:53,359 --> 00:24:57,000
Speaker 1: well as hiring twenty thousand workers. Did you get a

464
00:24:57,000 --> 00:24:59,560
Speaker 1: sense of the focus of the spending in terms of

465
00:24:59,680 --> 00:25:03,720
Speaker 1: what exactly the company plans to expand in. The company

466
00:25:03,840 --> 00:25:07,200
Speaker 1: is having a different approach to its expansion than say Amazon.

467
00:25:07,400 --> 00:25:09,480
Speaker 1: They are, in effect, I believe, going to have a

468
00:25:09,560 --> 00:25:14,000
Speaker 1: second per Semisecond headquarters city, not unlike Amazon, but they

469
00:25:14,000 --> 00:25:15,880
Speaker 1: didn't want to do it in quite the way Amazon

470
00:25:16,200 --> 00:25:18,440
Speaker 1: doing it, so they're doing a more low key way.

471
00:25:18,480 --> 00:25:20,680
Speaker 1: But I suspect in the not too distant future, based

472
00:25:20,680 --> 00:25:23,600
Speaker 1: on what he implied, they'll announce another city that they're

473
00:25:23,640 --> 00:25:26,280
Speaker 1: going to expand dramatically in and higher a fair number

474
00:25:26,280 --> 00:25:29,639
Speaker 1: of people. Remember, they have the most popular consumer product

475
00:25:29,680 --> 00:25:32,520
Speaker 1: in the history of consumer products, the iPhone, over a

476
00:25:32,560 --> 00:25:35,399
Speaker 1: billion of them been sold, and people kind of seemed

477
00:25:35,440 --> 00:25:38,080
Speaker 1: to buy new ones every one and a half or

478
00:25:38,080 --> 00:25:40,439
Speaker 1: two years, and so that that product will continue to

479
00:25:40,440 --> 00:25:42,639
Speaker 1: be very popular for quite some time. But these have

480
00:25:42,680 --> 00:25:44,679
Speaker 1: expanded past that. And one of the products that he

481
00:25:44,800 --> 00:25:47,000
Speaker 1: kind of helped develop was the watch, and while it

482
00:25:47,080 --> 00:25:48,560
Speaker 1: may have had a slow star at the beginning, it

483
00:25:48,560 --> 00:25:51,119
Speaker 1: seems to have taken off now and increasingly everybody I

484
00:25:51,119 --> 00:25:54,080
Speaker 1: see seems to me wearing an Apple Watch. That would

485
00:25:54,119 --> 00:25:57,399
Speaker 1: be true. David with the news Flow we must ask

486
00:25:57,440 --> 00:26:01,960
Speaker 1: you about the consolidation of the media business. And I

487
00:26:01,960 --> 00:26:04,159
Speaker 1: want to go to a Craig Moffitt comment today in

488
00:26:04,160 --> 00:26:08,320
Speaker 1: The New York Times and Moffatt Nathanson, which was basically,

489
00:26:08,680 --> 00:26:12,480
Speaker 1: Brian Roberts wants this property really really bad. Where it

490
00:26:12,520 --> 00:26:19,119
Speaker 1: becomes behavioral or motivational. Is you advise CEOs about transactions

491
00:26:19,280 --> 00:26:22,679
Speaker 1: large and smaller. How do you try to keep the

492
00:26:22,800 --> 00:26:29,000
Speaker 1: emotion out of it and make it still analytical, sensible

493
00:26:29,080 --> 00:26:34,080
Speaker 1: and intelligent. Well, that's a difficult thing to do. But clearly,

494
00:26:34,440 --> 00:26:37,240
Speaker 1: when you have the gap that you currently have between

495
00:26:37,280 --> 00:26:41,760
Speaker 1: the Disney price and the price that Comcast is offering,

496
00:26:41,840 --> 00:26:45,480
Speaker 1: and it's an all cash transaction, I think the emotion

497
00:26:45,560 --> 00:26:48,919
Speaker 1: may be swept aside. Clearly an arrangement has worked out

498
00:26:49,000 --> 00:26:51,720
Speaker 1: and worked out between Fox and Disney which seems to

499
00:26:51,760 --> 00:26:54,080
Speaker 1: be compatible to both of them, but the amount of

500
00:26:54,080 --> 00:26:56,399
Speaker 1: money that Comcast is putting on the table may be

501
00:26:56,480 --> 00:26:58,760
Speaker 1: difficult to resist. And of course we don't know whether

502
00:26:58,760 --> 00:27:00,720
Speaker 1: there's other offers that are coming from Disney. So I

503
00:27:00,720 --> 00:27:02,960
Speaker 1: think it will play out over the next few weeks

504
00:27:03,040 --> 00:27:04,600
Speaker 1: or so, and I think it will be in very

505
00:27:04,640 --> 00:27:07,440
Speaker 1: interesting transaction. And however plays out I think you'll see

506
00:27:07,480 --> 00:27:10,680
Speaker 1: more media transactions up size getting done quickly. That's right

507
00:27:10,680 --> 00:27:13,280
Speaker 1: where I wanted to go. And I don't need to

508
00:27:13,320 --> 00:27:15,679
Speaker 1: know the inside Baseball and Carlisle unless you'd like to

509
00:27:15,720 --> 00:27:19,560
Speaker 1: make some news today. How does this open up the

510
00:27:19,680 --> 00:27:24,719
Speaker 1: broader media business large cap, visible, giant, MidCap and even

511
00:27:24,960 --> 00:27:29,720
Speaker 1: more entrepreneurial properties. How does this change the media world? Right?

512
00:27:30,040 --> 00:27:33,200
Speaker 1: In the deal's world? Do you often have a land

513
00:27:33,320 --> 00:27:36,560
Speaker 1: rush kind of thing where all of a sudden the

514
00:27:36,640 --> 00:27:39,399
Speaker 1: market says the regulators are going to leave you alone

515
00:27:39,440 --> 00:27:42,320
Speaker 1: a bit. There's plenty of financing there, the markets are

516
00:27:42,400 --> 00:27:45,320
Speaker 1: very a brilliant and there's a willingness by the media

517
00:27:45,600 --> 00:27:47,720
Speaker 1: or the press generally to not look at these things

518
00:27:47,800 --> 00:27:51,040
Speaker 1: as being unfavorable, and therefore people tend to do a

519
00:27:51,040 --> 00:27:53,160
Speaker 1: lot of deals in these land rush kind of environments.

520
00:27:53,200 --> 00:27:55,200
Speaker 1: I think that's what you're going to see now, where

521
00:27:55,240 --> 00:27:57,600
Speaker 1: people feel that regulators are gonna leave them alone, they'll

522
00:27:57,680 --> 00:27:59,520
Speaker 1: let them do most things that they want to do,

523
00:28:00,040 --> 00:28:01,320
Speaker 1: and there's a lot of cash. There's a lot of

524
00:28:01,320 --> 00:28:04,040
Speaker 1: money out there. Think about this. In the Comcast transaction,

525
00:28:04,400 --> 00:28:09,080
Speaker 1: they have lined up billion dollars in cash, cash, not

526
00:28:09,080 --> 00:28:12,160
Speaker 1: not not equity, and clearly there's a lot of cash

527
00:28:12,160 --> 00:28:13,840
Speaker 1: out there. So I suspect you'll see a lot of

528
00:28:14,320 --> 00:28:18,080
Speaker 1: large media and telecommunication deals being done, and I suspect

529
00:28:18,119 --> 00:28:20,840
Speaker 1: some of them will be done by the non media players,

530
00:28:20,840 --> 00:28:23,280
Speaker 1: in other words, the large companies that we now know

531
00:28:23,560 --> 00:28:28,879
Speaker 1: like UH, UM, Amazon and Apple, UM and UM and

532
00:28:29,080 --> 00:28:31,879
Speaker 1: Facebook and Google. While I don't have any inside information,

533
00:28:32,200 --> 00:28:34,920
Speaker 1: I would be surprised if they sat on the sidelines

534
00:28:34,960 --> 00:28:37,520
Speaker 1: and some of these crown jewels went up for sale.

535
00:28:37,400 --> 00:28:40,000
Speaker 1: You know one thing that I find interesting, uh, certainly

536
00:28:40,440 --> 00:28:43,720
Speaker 1: that the world of business and the world of politics

537
00:28:44,200 --> 00:28:47,600
Speaker 1: is increasingly converging in a lot of people's minds and UH,

538
00:28:47,640 --> 00:28:49,920
Speaker 1: there have been a number of big business personalities that

539
00:28:49,960 --> 00:28:54,080
Speaker 1: have been pegged for potential presidential candidacies. For example, UH,

540
00:28:54,240 --> 00:28:56,920
Speaker 1: Jamie Diamond, who just shot that down. You asked Tim

541
00:28:56,920 --> 00:29:00,200
Speaker 1: Cook though, if you would consider running for president? Did

542
00:29:00,200 --> 00:29:04,120
Speaker 1: he say? He didn't say that's the most ridiculous thing

543
00:29:04,160 --> 00:29:07,760
Speaker 1: I've ever heard, which is what sometimes business people say.

544
00:29:07,840 --> 00:29:10,200
Speaker 1: He gave a very thoughtful answer, which is, I'd like

545
00:29:10,280 --> 00:29:12,240
Speaker 1: to be president. It would be a good job, but

546
00:29:12,400 --> 00:29:16,200
Speaker 1: getting to be president the two year UH campaign is

547
00:29:16,280 --> 00:29:18,960
Speaker 1: very difficult. But I think he gave a thoughtful answer

548
00:29:18,960 --> 00:29:20,640
Speaker 1: and thinking that he probably could do a good job.

549
00:29:20,680 --> 00:29:22,680
Speaker 1: He knows he's a good manager, but I think he

550
00:29:22,760 --> 00:29:24,440
Speaker 1: didn't think he want to put himself through the two

551
00:29:24,520 --> 00:29:26,600
Speaker 1: years of campaigning. And that's one of the things that

552
00:29:26,600 --> 00:29:28,800
Speaker 1: anybody who's looking at this has to do. When you're

553
00:29:28,840 --> 00:29:31,360
Speaker 1: a business leader, you're a little bit isolated. You have

554
00:29:31,480 --> 00:29:34,880
Speaker 1: shareholders and you have critics. But it's not like running

555
00:29:35,240 --> 00:29:38,160
Speaker 1: going to Iowa, New Hampshire and being exposed every hour

556
00:29:38,240 --> 00:29:40,280
Speaker 1: on the hour. So it's not easy to do. And

557
00:29:40,320 --> 00:29:43,080
Speaker 1: whatever one might think of President Trump doing that for

558
00:29:43,160 --> 00:29:45,480
Speaker 1: two years is not an easy thing to do for anybody.

559
00:29:45,720 --> 00:29:48,360
Speaker 1: David Rubins sign in our final minute with you the

560
00:29:48,440 --> 00:29:50,320
Speaker 1: many names you're going to speak to this year on

561
00:29:50,400 --> 00:29:54,360
Speaker 1: peer to peer, which is the one your most anticipating, Well,

562
00:29:54,400 --> 00:29:56,560
Speaker 1: I I we've already lined up a number and I've

563
00:29:56,560 --> 00:29:58,720
Speaker 1: already taped the number them and the ones that I

564
00:29:58,720 --> 00:30:01,240
Speaker 1: think will be interesting, and that ones that have already

565
00:30:01,240 --> 00:30:04,280
Speaker 1: done our Renee Fleming, who was a brilliant opera singer

566
00:30:04,280 --> 00:30:07,080
Speaker 1: and a friend of mine. Um Oscar Munez who is

567
00:30:07,160 --> 00:30:11,000
Speaker 1: the CEO of United Airlines and and he had a

568
00:30:11,040 --> 00:30:13,240
Speaker 1: heart transplant just a few months here he took over

569
00:30:13,240 --> 00:30:16,160
Speaker 1: the job still running the company. Steve Baumber who ran

570
00:30:16,400 --> 00:30:20,040
Speaker 1: UH Microsoft for about ten years, right before the current CEO,

571
00:30:20,640 --> 00:30:24,840
Speaker 1: Dennis Muhlenberg, who's the CEO of Boeing UH cal June

572
00:30:24,880 --> 00:30:26,960
Speaker 1: Al Mubarik, who runs and Bottle and one of the

573
00:30:27,040 --> 00:30:29,360
Speaker 1: largest sovereign wealth funds in the world. And then I

574
00:30:29,400 --> 00:30:32,160
Speaker 1: just did want at the Giving Pledge UH session that

575
00:30:32,520 --> 00:30:34,880
Speaker 1: in California where one of the other people would signed

576
00:30:34,880 --> 00:30:38,200
Speaker 1: the giving pledge was there, Richard Branson and his life

577
00:30:38,240 --> 00:30:40,880
Speaker 1: is quite interesting and it's a very interesting interview and

578
00:30:41,040 --> 00:30:43,920
Speaker 1: some business up and business towns as well. David Rubinstein,

579
00:30:43,960 --> 00:30:46,400
Speaker 1: thank you so much. To thank much, Tim Cook and

580
00:30:46,480 --> 00:30:50,120
Speaker 1: David Rubinstein peered to Pierre looked for that UH five

581
00:30:50,200 --> 00:30:53,920
Speaker 1: pm and ten pm worldwide on Bloomberg Radio. Mr Rubinstein,

582
00:30:53,960 --> 00:31:05,160
Speaker 1: of course, a group you. Thanks for listening to the

583
00:31:05,160 --> 00:31:11,640
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

584
00:31:12,040 --> 00:31:16,240
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

585
00:31:16,280 --> 00:31:20,560
Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.

586
00:31:21,000 --> 00:31:22,080
Speaker 1: I'm Bloomberg Radio