WEBVTT - Russia's a Clear And Present Danger, Ambassador Ereli Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg P L Podcast on iTunes, 0:00:20.840 --> 0:00:29.880 SoundCloud and at Bloomberg dot com. Ukraine has accused of 0:00:29.960 --> 0:00:32.920 Russia of state terrorism. That's coming after a former Russian 0:00:33.000 --> 0:00:36.720 lawmaker and a witness in a treason case against former 0:00:37.040 --> 0:00:40.680 Ukrainian leader Victor Janakovich was shot dead in broad daylight 0:00:40.720 --> 0:00:45.280 outside his hotel in central Kiev, Ukraine. Today, you're gonna 0:00:45.320 --> 0:00:47.720 tell us a little bit more about Russia and it's 0:00:48.400 --> 0:00:52.559 efforts and responsibilities in the international order. Is Adam Arelli. 0:00:53.040 --> 0:00:56.080 He is a former US ambassador to Bahrain and a 0:00:56.280 --> 0:01:00.840 State Department deputy spokesman. Ambassador, Really, thank you for being 0:01:01.040 --> 0:01:03.000 with us. I wonder if we could just get your 0:01:03.200 --> 0:01:09.959 reaction to this, uh, this event in Ukraine today, well disturbing, 0:01:10.000 --> 0:01:14.760 but not surprising. Russia has a has a history and 0:01:14.800 --> 0:01:18.640 a pattern of offering its opponents. Uh. You know, just 0:01:18.720 --> 0:01:22.600 two days ago, um a lawyer who was bringing a 0:01:22.720 --> 0:01:26.880 case against the Russian government for corruption. Accidentally fell out 0:01:26.880 --> 0:01:31.479 of his fourth story apartment in Moscow. Wow, taking a 0:01:31.480 --> 0:01:35.560 bathtub up the stairs. Okay, and the Russians a rule, 0:01:35.640 --> 0:01:39.520 that's not an accident. So look, let's be clear, Russia 0:01:39.760 --> 0:01:42.760 is a clear and present danger to the United States 0:01:43.120 --> 0:01:45.920 and to the rules based international order that was put 0:01:45.920 --> 0:01:51.200 in place after the Cold War. And until and unless 0:01:51.360 --> 0:01:56.240 we recognize that and have a concerted policy with our 0:01:56.280 --> 0:01:59.360 allies to confront it, whether it be in the Baltics, 0:01:59.400 --> 0:02:03.360 in the ball kins Uh or in in in Central 0:02:03.360 --> 0:02:06.400 Europe and the Ukraine, We're going to get our lunch 0:02:06.440 --> 0:02:10.639 eaten by a much more aggressive and opportunistic threat that 0:02:10.800 --> 0:02:12.720 is on that is that is out to get us. 0:02:13.120 --> 0:02:18.120 It's that simple, ambassador. Really, given your comments that are 0:02:18.240 --> 0:02:22.320 very strong about the potential danger that Russia poses to 0:02:22.360 --> 0:02:26.080 the US and too many other nations, how damaging is 0:02:26.160 --> 0:02:31.360 the current administration's approach to that country. And but aside 0:02:31.400 --> 0:02:35.240 from that, to that country, to current alliances like NATO 0:02:35.400 --> 0:02:42.200 and others that have potentially curtailed Russian power. Yeah, well, 0:02:42.240 --> 0:02:44.960 I'd say it's a little early to tell because we 0:02:45.000 --> 0:02:47.600 really don't know what the administration's approach to Russia is 0:02:47.639 --> 0:02:50.440 you hear different things, whether it's from the White House 0:02:50.520 --> 0:02:53.520 or the State Department of the Defense Department. But I 0:02:53.560 --> 0:02:57.440 think you know, look, Russia has an active and aggressive 0:02:57.600 --> 0:03:01.560 campaign to separate the States from its Western allies and 0:03:01.639 --> 0:03:04.600 just so divisions within the Western Alliance. They're doing it 0:03:04.639 --> 0:03:09.040 in the Balkans through countries like Albania and Moldova, UH 0:03:09.080 --> 0:03:14.040 and Hungary, where they've been very effective at um at 0:03:14.080 --> 0:03:18.800 dividing the opposition and creating extreme right wing movements UH 0:03:19.120 --> 0:03:21.680 like they've done in the United States. Well, so you 0:03:21.720 --> 0:03:23.639 know we're gonna see it in elections coming up in 0:03:23.720 --> 0:03:26.760 a number of countries where Russia is just trying to 0:03:26.880 --> 0:03:30.880 royal the waters and prevent countries and those governments from 0:03:30.880 --> 0:03:35.680 being friendly the United States. Well, what given that perspective, 0:03:35.840 --> 0:03:38.760 what do you make of Rex Tillerson, the current Secretary 0:03:38.800 --> 0:03:42.680 of State UH, not attending, deciding not to attend an 0:03:42.720 --> 0:03:46.960 upcoming NATO meeting and instead later on going to a 0:03:47.040 --> 0:03:51.240 meeting in Russia. Does that concern Well, I think that 0:03:51.360 --> 0:03:55.320 decision is under review, and my my understanding from people 0:03:55.320 --> 0:03:57.360 in the State Department is that they're going to reschedule 0:03:57.360 --> 0:03:59.600 it so that Tillerson can do it. But to your 0:03:59.680 --> 0:04:02.320 question and the it's not what I think. It's the 0:04:02.360 --> 0:04:07.119 outcry of of our European allies and everybody else said, 0:04:07.120 --> 0:04:10.000 wait a minute, you can't do this. And it was 0:04:10.040 --> 0:04:13.480 a miscalculation. It was an unforced error by the by 0:04:13.520 --> 0:04:16.200 the State Department to decide not to go to a 0:04:16.279 --> 0:04:20.360 NATO ministerial to meet the Chinese president instead, and then 0:04:20.480 --> 0:04:23.000 to go to Russia. It just it sent so many 0:04:23.040 --> 0:04:27.960 wrong signals about US priorities in US commitment to traditional allies. 0:04:28.560 --> 0:04:30.800 And that's why people are asking questions, is where does 0:04:30.800 --> 0:04:33.720 the United States stand on Russia? Uh? And until we 0:04:33.800 --> 0:04:37.320 actually take some action and make some clear statements by 0:04:37.360 --> 0:04:39.279 the president, you know, it's like the Sector of State 0:04:39.279 --> 0:04:43.200 says one thing, Defense Department, Defense Secretary says something, but 0:04:43.360 --> 0:04:47.560 until it's the president, you know, these are all the 0:04:48.279 --> 0:04:50.520 you know, number two and three officials is not the 0:04:50.600 --> 0:04:53.880 number one and number one that capt Ambassador Elly. You 0:04:53.920 --> 0:04:57.799 spent twenty four years as a Foreign Service officer, and 0:04:58.320 --> 0:05:01.160 if in that time you obviously have met with many 0:05:01.640 --> 0:05:04.720 heads of state, what can maybe you go through some 0:05:04.800 --> 0:05:07.080 of them and tell us what their reaction is to 0:05:07.520 --> 0:05:15.000 Russia's involvement in non Russian affairs. Well, it's pretty clear. Yeah, 0:05:16.040 --> 0:05:22.320 let's go from north to south, Lithuania, Estonia, Latvia, Norway, Finland, Sweden, 0:05:22.440 --> 0:05:26.039 all these countries feel very much at risk. UH that 0:05:26.240 --> 0:05:28.799 Russia has increased the number of troops on their borders 0:05:29.480 --> 0:05:34.080 U and NATO has slowed forces to defend them. Going south, 0:05:34.200 --> 0:05:37.359 Poland obviously is a has a history of of of 0:05:38.040 --> 0:05:43.680 conflict and intimidation for Russia. UM. Germany obviously is the 0:05:43.720 --> 0:05:47.080 anchor of Europe, the security and political and economic anchor 0:05:47.120 --> 0:05:52.200 of Europe. Nobody is more UM, nobody is more hawkish 0:05:52.200 --> 0:05:54.680 on Russia. I think that Angela Merkel, which is why 0:05:54.720 --> 0:05:58.880 it's so disturbing frankly, that that that Trump and Merkel 0:05:59.000 --> 0:06:01.480 don't have the kind of chemistry that you get the 0:06:01.680 --> 0:06:06.080 two strongest Western powers should have when they're facing a 0:06:06.200 --> 0:06:09.520 serious threat from the east. Now back to the back 0:06:09.560 --> 0:06:14.680 to the the the unrest that that Russia is sewing 0:06:15.279 --> 0:06:18.719 in Europe. Go to the balk and go to Albania, 0:06:18.839 --> 0:06:22.400 go to Kasta and go to Serbia, and that is 0:06:22.440 --> 0:06:25.720 exactly where that is the soft underbelly of Europe. That's 0:06:25.720 --> 0:06:30.839 where Russia is trying to exploit division and create client regimes. 0:06:31.120 --> 0:06:33.920 We gotta leave it there. I'm sorry. Ambassador Arelli is 0:06:33.960 --> 0:06:49.120 the former U S Ambassador to bah Rein. Well, if 0:06:49.160 --> 0:06:52.760 you're invested in stocks, SMP five hundred is up nearly 0:06:52.880 --> 0:06:56.520 five so far this year. And if you're taking a 0:06:56.560 --> 0:06:58.760 look at what's going on in bonds, the thirty years 0:06:58.800 --> 0:07:01.240 three point two per sent here to help us make 0:07:01.320 --> 0:07:04.320 sense of all this is Steven Sarge Gilfoil. He is 0:07:04.320 --> 0:07:08.479 the founder and the president of Serge six and Serge 0:07:08.560 --> 0:07:10.120 maybe you could just tell people you were a floor 0:07:10.160 --> 0:07:12.840 trader for over thirty years, although you don't look at 0:07:13.320 --> 0:07:16.280 um gosh, that's yet. Well, there you go. That's the 0:07:16.360 --> 0:07:18.920 nicest thing anyone's gonna say to you all day. Is 0:07:19.000 --> 0:07:23.360 there a a connection between this health care vote that 0:07:23.520 --> 0:07:27.720 is scheduled for tonight in the House and what traders 0:07:27.760 --> 0:07:31.280 and investors are doing with their money today? Oh, certainly, 0:07:31.320 --> 0:07:33.440 I assist the cell off on Tuesday. I'm sure you've 0:07:33.480 --> 0:07:35.920 noticed that. It's almost as if we're skating on thin ice. 0:07:35.960 --> 0:07:38.000 We're walking on egg shells, however you want to put it. 0:07:38.760 --> 0:07:41.600 We're waiting to see if we can get to the 0:07:41.720 --> 0:07:45.720 tax cut to the fiscal spending to further deregulation. This 0:07:45.800 --> 0:07:48.720 is what traders want to see. We really don't care 0:07:48.760 --> 0:07:51.320 all that much about our health care, at least not today. 0:07:51.480 --> 0:07:53.240 When one of our kids get sick, we're gonna care. 0:07:53.760 --> 0:07:57.880 But today we care about how to propel the financials further, 0:07:57.920 --> 0:08:00.120 how to take the growth trade further. You know, I 0:08:00.160 --> 0:08:01.960 feel like there's been a shifting narrative though in the 0:08:02.000 --> 0:08:05.960 past week, from this is a booming economy, one that 0:08:06.080 --> 0:08:09.880 has momentum and is gaining steam to We're not sure 0:08:10.280 --> 0:08:12.600 what some of these tea leaves mean that it might 0:08:12.680 --> 0:08:16.880 be giving us, you know, different different types of h views. 0:08:17.200 --> 0:08:19.680 We were talking offline about how you think that the FED, 0:08:19.760 --> 0:08:22.960 if they hiked too quickly, could end up derailing the economy. 0:08:23.120 --> 0:08:24.840 Do you really think that the economy and that the 0:08:24.880 --> 0:08:27.480 stock market is built on recovery that is so thin 0:08:28.360 --> 0:08:31.880 that a an extra or you know, twenty five basis 0:08:31.920 --> 0:08:36.040 point hike in addition to what is uh perhaps warranted 0:08:36.040 --> 0:08:39.320 by the economy could potentially derail the stock market. This 0:08:39.400 --> 0:08:41.240 is the third hike in the cycle, all right, and 0:08:41.320 --> 0:08:44.400 we haven't really seen economic progression all that much. We've 0:08:44.400 --> 0:08:46.920 seen slow and steady economic progression, but the fourth quarter 0:08:46.920 --> 0:08:50.160 of the economy group one this quarter, if the Atlanta 0:08:50.200 --> 0:08:51.960 Fed is correct, and they're not usually correct, but if 0:08:51.960 --> 0:08:55.280 they are correct, it's growing up. Zero point nine c 0:08:55.480 --> 0:08:58.400 p I isn't really there. Yes, it's all two point 0:08:58.440 --> 0:09:00.600 seven percent on a year over year base is But 0:09:01.000 --> 0:09:04.200 in April the comparisons get very tough, and now that 0:09:04.240 --> 0:09:07.560 oils rolled off a cliff, that headline inflation is not 0:09:07.640 --> 0:09:09.200 really going to be there. Well, but how do you 0:09:09.240 --> 0:09:11.960 then justify being bullish on stocks and then seeing all 0:09:11.960 --> 0:09:14.280 of these sort of tea leaves that suggest that perhaps 0:09:14.280 --> 0:09:17.080 the market is the same slow growth uh place that 0:09:17.120 --> 0:09:19.319 it was in last year. Well, stocks are up because 0:09:19.320 --> 0:09:22.600 consumer confidence has been higher, home builder confidence has been higher, 0:09:22.640 --> 0:09:26.440 small business optimism has been higher, and earnings have been 0:09:26.480 --> 0:09:30.000 better for two quarters. But that's all based on this 0:09:30.080 --> 0:09:33.559 growth agenda is pro business agenda that we, at least 0:09:33.559 --> 0:09:36.840 for some time now thought because the President and the 0:09:36.880 --> 0:09:38.600 House and the Senate we're all from the same party, 0:09:38.640 --> 0:09:40.840 at least on a majority basis, that we would it 0:09:40.840 --> 0:09:43.640 wouldn't be so hard to get things done. As we're learning, 0:09:43.800 --> 0:09:46.720 you don't really need an opposing party to create problems 0:09:46.720 --> 0:09:49.439 for yourself. We're going to have a little we'll find 0:09:49.480 --> 0:09:52.520 out today just how realistic this pro business agenda is. 0:09:53.040 --> 0:09:54.959 It sounds like a lot is being based on what 0:09:55.000 --> 0:09:57.720 people think, not on what is actually happening or what 0:09:57.800 --> 0:10:01.840 appears to be at least scientifically discernible. Oh, certainly, take 0:10:01.840 --> 0:10:04.160 a look at valuations. They've been higher, right this is 0:10:04.480 --> 0:10:06.480 you want to pay twenty one times for the SMP 0:10:06.600 --> 0:10:08.880 five because that's what it's trading at right now. Well, 0:10:08.880 --> 0:10:10.559 you know, my coaching gave me a couple of my 0:10:10.679 --> 0:10:12.600 shirts when I was a kid, and I grew into him, 0:10:12.679 --> 0:10:14.840 and that's what we're hoping that earnings are gonna do. 0:10:14.920 --> 0:10:18.600 We're hoping to earnings. We're not sure. No one's ever sure. Hey, 0:10:18.640 --> 0:10:21.400 I've lost money probably probably half the time. You gotta 0:10:21.400 --> 0:10:24.680 know how to play your winners. But that growing into 0:10:24.720 --> 0:10:28.080 the earnings idea is something that's been batted around Wall Street, 0:10:28.679 --> 0:10:30.760 and we did believe, or do believe. I'm not going 0:10:30.800 --> 0:10:32.360 to throw it in the towel just yet to find it. 0:10:32.440 --> 0:10:34.400 Financials are popping a little bit today, which means they 0:10:34.400 --> 0:10:37.200 are working on something very hard in the house. We 0:10:37.240 --> 0:10:39.079 don't really know what this bill will look like by 0:10:39.080 --> 0:10:40.960 the time they vote on it, if they vote on it. 0:10:41.000 --> 0:10:43.600 But if they do vote on it, that's gonna be 0:10:43.640 --> 0:10:45.480 taken as a positive. You know. I want to ask 0:10:45.520 --> 0:10:48.880 you something about something that the nominee to be the 0:10:49.040 --> 0:10:52.200 SEC chair said in his prepared comments he testifying today 0:10:52.400 --> 0:10:55.319 in front of the Senate Um. He noted that the 0:10:55.440 --> 0:10:58.679 US capital markets public capital markets are less competitive than 0:10:58.679 --> 0:11:01.400 they have been in the past UH and he pointed 0:11:01.480 --> 0:11:05.920 to the I p O market in particular, uh US 0:11:06.040 --> 0:11:08.640 listed i p o is by non US companies and 0:11:08.720 --> 0:11:12.880 talking about how much the volume of those transactions have declined. 0:11:12.920 --> 0:11:15.440 Do you agree, first of all that the decline in 0:11:15.440 --> 0:11:18.600 this market UH is a signal of some broader ill 0:11:18.760 --> 0:11:21.079 in in U S public capital markets? And second of all, 0:11:21.320 --> 0:11:23.560 whether you know his assessment is correct that we are 0:11:23.640 --> 0:11:26.400 less competitive in the US. I think we are somewhat 0:11:26.440 --> 0:11:28.400 less competitive in the US than we used to be. 0:11:28.600 --> 0:11:32.479 I I don't really see the the connection they're altogether. 0:11:33.040 --> 0:11:35.840 I know that the public has been slow to support 0:11:35.920 --> 0:11:38.480 some of these I p o s. Yes, we see 0:11:38.520 --> 0:11:41.520 the snapchat that opens above the price. We see a 0:11:41.559 --> 0:11:43.840 few of these open above the syndicate price, but they 0:11:43.840 --> 0:11:47.199 don't run like they used to. Nobody opens or is 0:11:47.240 --> 0:11:50.040 price that life say forty and runs to one forty anymore. 0:11:50.040 --> 0:11:54.280 Those days along behind us, So the easy money isn't 0:11:54.280 --> 0:11:57.000 always there. And maybe maybe firms also just don't want 0:11:57.040 --> 0:11:59.840 to give up control of the operation just yet if 0:11:59.840 --> 0:12:02.920 they if they have something they think will be better 0:12:02.920 --> 0:12:05.400 in the future, and if there are higher evaluations going forward, 0:12:05.400 --> 0:12:07.600 if there is a pro go growth economy, it finally 0:12:07.640 --> 0:12:11.880 comes to fruition later on, you'll get a higher evaluation 0:12:11.880 --> 0:12:14.080 for that. I p O. Can we talk about some 0:12:14.160 --> 0:12:16.160 numbers having to do with the US dollar, because I'm 0:12:16.200 --> 0:12:18.520 looking at it against the euro one oh seven, some 0:12:18.559 --> 0:12:21.160 people saying if it breaks one oh nine, then you're 0:12:21.200 --> 0:12:24.000 gonna see some big moves out of the dollar and 0:12:24.080 --> 0:12:28.560 out of US equities. Dollar also weakening against the pounds, 0:12:28.559 --> 0:12:32.800 sterling one and one thirty three against the can dollar 0:12:33.200 --> 0:12:36.560 one eleven against the end. What's the what you know? 0:12:36.920 --> 0:12:40.320 How does the how does that play out? Well? In 0:12:40.640 --> 0:12:43.800 one regard, there's reason for the year to get stronger. 0:12:44.600 --> 0:12:46.920 Europe is getting a little bit better. The e c 0:12:47.040 --> 0:12:49.240 B is probably going to have to tighten monetary policy. 0:12:49.240 --> 0:12:52.200 They're already gonna start tapering in April, So we're the 0:12:52.200 --> 0:12:55.440 balls rolling in that regard from a US, from a 0:12:55.640 --> 0:12:58.000 from a domestic point of view, this to me could 0:12:58.000 --> 0:13:01.840 mean that the border adjustment might fall apart that it 0:13:01.920 --> 0:13:04.319 may be used as a weapon, a unit of bilateral 0:13:04.360 --> 0:13:07.360 weapon in negotiations with say a China or Mexico, rather 0:13:07.440 --> 0:13:10.920 than a legislative tool which will hurt the retailers on 0:13:10.960 --> 0:13:15.880 a broader scale. Uh. You manage money for your family? Correct? Correct? 0:13:16.240 --> 0:13:18.960 How has your cash allocation been recently? Has it been 0:13:18.960 --> 0:13:23.480 going up? For going down? I, right after the election 0:13:23.520 --> 0:13:27.640 went to a very low cash allocation because I did 0:13:27.679 --> 0:13:31.959 believe that Donald Trump was better for the equity markets 0:13:32.040 --> 0:13:35.600 than was Hillary Clinton. So that night that night I 0:13:35.640 --> 0:13:37.520 went into the futures and got after it when it 0:13:37.559 --> 0:13:40.000 was at the lows. So I the election worked out 0:13:40.200 --> 0:13:42.240 very well for me for a few months. I can't 0:13:42.280 --> 0:13:46.320 argue that. Uh. Right now, I've taken some profits, Alright, 0:13:46.360 --> 0:13:49.160 the last two weeks or so, I've taken profits in 0:13:49.160 --> 0:13:52.000 the financial names. I've put some of that into cash. 0:13:52.120 --> 0:13:56.400 I've rotated into areas, not defensive areas truly, but areas 0:13:56.559 --> 0:13:59.520 that have been beaten down recently, like the airlines and 0:13:59.600 --> 0:14:02.040 like the end stocks. I've speculated in some energy names 0:14:02.040 --> 0:14:04.760 now that energy now that w C I CREWDE is 0:14:04.840 --> 0:14:10.679 approaching the support level. So basically cash was lower than 0:14:10.720 --> 0:14:14.480 they were. But I, as a guy who is somewhat conservative, 0:14:14.960 --> 0:14:18.280 I would suggest any retail investor listening out there, you 0:14:18.360 --> 0:14:21.520 need money in case your boiler breaks. Thank you so much. 0:14:22.000 --> 0:14:25.080 Definitely wise words. Your boiler can break, and especially when 0:14:25.120 --> 0:14:28.920 it's still so cold in New York in March, it's 0:14:29.000 --> 0:14:31.880 nice to have a boiler. Stephen Gilfoyle, thank you so 0:14:31.960 --> 0:14:35.360 much for joining us. He's founder and president of Serge 0:14:35.880 --> 0:14:40.520 six LLC, and he worked for decades as a New 0:14:40.560 --> 0:14:57.360 York Stock exchange floor trader. This is Bloomberg. Now, let's 0:14:57.800 --> 0:15:00.800 go to Paul Sweeney. He's director of North American Research 0:15:00.880 --> 0:15:04.200 for Bloomberg Intelligence. Uh. There was news this morning that 0:15:04.360 --> 0:15:08.200 just recently crossed if Bob Iger Walt Walt Disney's chief 0:15:08.240 --> 0:15:11.760 executive officer, agreed to a contract UH that would keep 0:15:11.840 --> 0:15:15.360 him atop the world's largest entertainment company until to Lie 0:15:15.520 --> 0:15:21.000 two thousand and nineteen. Shares are up almost a percent. Uh, Paul, 0:15:21.080 --> 0:15:23.880 what does this mean for Disney to have Bob commit 0:15:24.080 --> 0:15:26.800 to staying for another few years. Yeah, I think this 0:15:26.960 --> 0:15:29.560 is very good for the Disney investors. I think, Um, 0:15:29.960 --> 0:15:32.680 clearly the succession issue did not work as well as 0:15:33.000 --> 0:15:35.800 the company had hoped over the last several years. UM. 0:15:35.840 --> 0:15:38.480 You know Tom Staggs, who was the heir apparent um 0:15:38.720 --> 0:15:41.920 uh left the company. Uh. So you know, Bob has 0:15:41.960 --> 0:15:45.040 been in a sense of uh staying on until they 0:15:45.080 --> 0:15:47.400 find a successor here. So this is you know, this 0:15:47.480 --> 0:15:50.280 is obviously a large company, diverse company. Uh. They've had 0:15:50.480 --> 0:15:53.240 very strong senior leadership at this company for a very 0:15:53.240 --> 0:15:55.400 long time. So I'm sure they want to be very 0:15:55.440 --> 0:15:59.800 careful about who they identify and ultimately a point as 0:16:00.040 --> 0:16:02.840 potential air parent to replace Bob Biger. So this, if 0:16:02.840 --> 0:16:05.240 nothing else, just buys them another year to get that done. 0:16:05.800 --> 0:16:09.440 Paul Sweeney, why is this such a challenge? UM, you know, 0:16:09.600 --> 0:16:14.239 the question is, UM, they had spent so long identifying 0:16:14.640 --> 0:16:18.240 two very viable candidates this succeed Bob Iger. They set 0:16:18.280 --> 0:16:21.840 up a race between Tom Staggs and Jay Rossulo, another 0:16:21.920 --> 0:16:25.240 high ranking and executive really over the last ten years, UM, 0:16:25.320 --> 0:16:28.560 and they identified Tom stagg as an air parent and 0:16:28.600 --> 0:16:30.160 then it just didn't work out at the end. So 0:16:30.200 --> 0:16:32.960 they really didn't have a plan. B uh, So we 0:16:33.000 --> 0:16:35.840 know why it didn't work out. I mean, is a 0:16:35.840 --> 0:16:38.840 long time to figure out that something doesn't work exactly right. 0:16:38.880 --> 0:16:41.200 And that's what really caught investors by surprise a couple 0:16:41.240 --> 0:16:43.040 of years ago when the you know, when Tom Staggs 0:16:43.240 --> 0:16:45.840 did leave the company, it really, you know, raised a question, 0:16:45.880 --> 0:16:48.560 g I thought, you guys really had a good, strong, 0:16:49.040 --> 0:16:51.800 healthy succession plan in place that looked to be working 0:16:51.880 --> 0:16:54.880 until it wasn't. So that kind of put the company 0:16:54.880 --> 0:16:56.760 back on its heels a little bit. And I think 0:16:56.760 --> 0:17:00.640 they're still there, um, and they recognized they need more 0:17:00.640 --> 0:17:03.520 time to identify somebody to fill in the shoes of 0:17:03.560 --> 0:17:06.080 Bob Iger, which are arguably very difficult shoes to fill 0:17:06.119 --> 0:17:08.919 in at a time that is a time of a 0:17:08.960 --> 0:17:11.639 lot of change for the media industry and for Disney 0:17:11.640 --> 0:17:14.800 in particular. So Iger is sixty or six years old, 0:17:14.960 --> 0:17:17.560 he has been with the company for more than a decade. 0:17:18.080 --> 0:17:20.359 Why does he want to leave right now? I mean, yes, granted, 0:17:20.560 --> 0:17:22.120 maybe he just wants to go and spend more time 0:17:22.119 --> 0:17:23.960 with his family and go to the beach. But is 0:17:24.000 --> 0:17:26.920 there something else that sort of was encouraging him to leave? Well, 0:17:26.960 --> 0:17:29.600 I think one thing was is when he initially had 0:17:29.680 --> 0:17:31.840 his retirement date of a couple of years ago, it 0:17:31.960 --> 0:17:34.760 was he was going out literally on top day. It 0:17:34.840 --> 0:17:37.800 was planned to coincide with the opening of Shanghai Disney, 0:17:37.800 --> 0:17:40.040 which would be the you know, a certainly a crowning 0:17:40.040 --> 0:17:43.760 achievement on in a very spectacular career. But then the timing, 0:17:43.800 --> 0:17:46.280 obviously with a succession, didn't work out. I think the 0:17:46.320 --> 0:17:49.199 expectation was, you know, he um, if a Democrat had 0:17:49.200 --> 0:17:52.880 been elected, he may have gone into politics. Uh. He 0:17:53.359 --> 0:17:55.200 was part of a group that was bidding for a 0:17:55.400 --> 0:17:57.880 NFL franchise in Los Angeles that that did not win 0:17:57.960 --> 0:18:00.439 that franchise. So uh. He certainly has a lot of 0:18:00.480 --> 0:18:04.080 interest outside of Disney that I think most folks felt 0:18:04.080 --> 0:18:05.919 like at his age there in mid sixties, that he 0:18:05.920 --> 0:18:08.159 would be in a great position to pursue. But now 0:18:08.200 --> 0:18:10.160 obviously he needs to stay on a couple more years, 0:18:10.359 --> 0:18:13.280 uh and ensure that there is a seamless transition to 0:18:13.280 --> 0:18:17.120 a new CEO. Does he need to ensure that ESPN 0:18:17.400 --> 0:18:22.639 and it's high fixed costs are somehow resolved versus the 0:18:22.680 --> 0:18:25.639 effort on the part of younger subscribers to look for 0:18:25.640 --> 0:18:29.320 those skinny bundles that may not include ESPN. Yeah. I 0:18:29.400 --> 0:18:31.639 think you're absolutely right. I think that's job one for 0:18:31.840 --> 0:18:33.960 Bob Iger and the management team over the next couple 0:18:33.960 --> 0:18:37.000 of years, just to figure out a real digital solution 0:18:37.560 --> 0:18:40.280 for their sports franchise. UM. Right now, they make obviously 0:18:40.320 --> 0:18:43.080 a tremendous amount of money off of ESPN, but their 0:18:43.080 --> 0:18:45.360 customers are going more and more online and they need 0:18:45.400 --> 0:18:50.119 to think about creating a digital online product that works 0:18:50.160 --> 0:18:52.640 for UM. You know this this this new world we're 0:18:52.640 --> 0:18:56.000 living in. They haven't done that yet, and that's job one, Uh, Paul. 0:18:56.680 --> 0:18:59.160 Some of the headlines coming across now are saying that 0:18:59.160 --> 0:19:02.119 Walt Disney agree to pay either five million dollars in 0:19:02.200 --> 0:19:06.600 cash for extending his contract with the company. How does 0:19:06.600 --> 0:19:09.239 that strike you for with respect to sort of how 0:19:09.359 --> 0:19:12.560 high or low it is with respect to executive compensation, Yeah, 0:19:12.560 --> 0:19:15.080 it's it's almost for Bob Biger and for the company, 0:19:15.080 --> 0:19:19.760 it's a dimendis amount. Media executives, including Bob Biger, are 0:19:19.840 --> 0:19:22.920 extraordinarily well compensated. If you take a look every single 0:19:23.000 --> 0:19:25.760 year at the top ten paid executives in America, there's 0:19:26.320 --> 0:19:29.719 a very good representation from the media industry Uh, so 0:19:29.880 --> 0:19:32.720 Bob Buyer's obviously, uh, you know, created a lot of 0:19:32.760 --> 0:19:36.120 shareholder wall for investors, and I think most investors are 0:19:36.200 --> 0:19:39.520 very happy for whatever conversation he's able to negotiate the 0:19:39.640 --> 0:19:43.879 current slate of Disney movies, Beauty and the Beast, for example, 0:19:43.920 --> 0:19:46.560 what can you tell us about how well it's doing? 0:19:46.640 --> 0:19:49.879 And the franchise for Star Wars Beauty and the Beast 0:19:50.080 --> 0:19:53.320 is came in well above expectations. Looks to be another 0:19:53.359 --> 0:19:57.320 global hit, a global franchise. UM. And it's this um. 0:19:57.359 --> 0:19:59.760 There's no studio in the history of Hollywood it's had 0:19:59.800 --> 0:20:01.720 a on the way that Disney has had over the 0:20:01.760 --> 0:20:03.600 last ten years. And they could take a look at 0:20:03.600 --> 0:20:06.240 their slate of films coming up over the next several years, 0:20:06.240 --> 0:20:08.960 it looks very solid as well. And it's just you know, 0:20:09.040 --> 0:20:11.359 they made a big investment in the film business about 0:20:11.400 --> 0:20:13.840 ten years when they bought Pixar, and then they bought 0:20:13.880 --> 0:20:17.280 Marvel Studios, and then they bought most recently Lucasfilms, you know, 0:20:17.320 --> 0:20:21.400 investing well over ten billion dollars in uh, the movie business. 0:20:21.480 --> 0:20:23.399 And they're now reaping the benefits of that by just 0:20:23.520 --> 0:20:25.720 hit after hit after hit from a lot of these 0:20:26.200 --> 0:20:29.840 proven franchises, including Star Wars. So you said that you 0:20:29.840 --> 0:20:31.480 started out by saying, this is going to be a 0:20:31.520 --> 0:20:34.600 good thing for investors. Is there something in particular that 0:20:34.640 --> 0:20:38.200 Bobyger brings to it, uh, that investors should like? Well, 0:20:38.240 --> 0:20:40.879 I mean he brings stability, and obviously, investors, he's a 0:20:40.920 --> 0:20:44.639 proven entity that's been tremendously successful at the company and 0:20:44.640 --> 0:20:48.160 has created a tremendous amount of shareholder value over his 0:20:48.160 --> 0:20:50.880 his tenures. So, as you well know, I'm investors don't 0:20:50.920 --> 0:20:53.359 like uncertainty, and so there's already is a level of 0:20:53.440 --> 0:20:56.920 uncertainty about the succession overall. But I think the news today, 0:20:57.000 --> 0:20:59.639 just you know, again, buys the time, buys the company 0:20:59.640 --> 0:21:04.439 another year to try to identify a uh successor. I 0:21:04.440 --> 0:21:06.200 want to thank you very much for joining us. Paul 0:21:06.240 --> 0:21:09.760 Sweeney is the head of North American Research and media 0:21:10.000 --> 0:21:13.840 analyst for Bloomberg Intelligence. Shares of Disney they're higher by 0:21:13.840 --> 0:21:16.800 about six tenths of a percent after learning that Bob 0:21:16.840 --> 0:21:22.520 Iger will be remaining with the company July. This is Bloomberger. 0:21:36.280 --> 0:21:39.560 We have talked a lot about the big healthcare vote 0:21:39.640 --> 0:21:43.680 that will happen this evening in Congress, but we haven't 0:21:43.680 --> 0:21:46.480 talked quite as much about the details of how this 0:21:46.680 --> 0:21:50.240 healthcare bill is being changed at the last minute in 0:21:50.359 --> 0:21:52.959 order to accommodate certain conservative views. But to do so, 0:21:53.680 --> 0:21:56.800 I want to bring in Kevin Whitlaw, Congress editor for 0:21:56.960 --> 0:22:00.200 Bloomberg News. Kevin, what do you know about these if 0:22:00.200 --> 0:22:03.000 it changes that are being made currently as we speak 0:22:03.040 --> 0:22:06.159 to the healthcare bill? Well, straight answers. We don't know 0:22:06.359 --> 0:22:08.359 yet whether any changes are going to be being or not. 0:22:08.480 --> 0:22:10.520 But um, some of the House Conservatives who have been 0:22:10.560 --> 0:22:12.800 holding out on the bill have been negotiating directly with 0:22:12.840 --> 0:22:14.840 the White House on these things. They think they have 0:22:14.880 --> 0:22:17.160 some verbal agreements on the kinds of changes that might 0:22:17.600 --> 0:22:19.480 um at least start to get them there. But it's 0:22:19.520 --> 0:22:22.760 not a done deal. How it hasn't yet been signed 0:22:22.760 --> 0:22:27.160 off on by uh Paul Ryan or or Republican leaders. Um, 0:22:27.200 --> 0:22:30.159 given that they're not directly involved. Uh so uh And 0:22:30.200 --> 0:22:32.119 we also don't know whether the kinds of changes that 0:22:32.440 --> 0:22:35.680