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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market movin news.

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Speaker 1: I'm the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com Slash podcast.

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Speaker 1: When the world of media, major piece of news coming

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Speaker 1: out this morning, Rupert Murdoch is stepping down as chairman

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Speaker 1: of the boards of Fox and News Corp. Following a

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Speaker 1: nearly seven decade career, and we'll become chairman emeritus of

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Speaker 1: each company. His son, Lachlan Murdock will become sole chairman

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Speaker 1: of News Corp and continue as executive chair and chief

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Speaker 1: executive officer of Fox. The company succession, big, big, big

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Speaker 1: time succession. In the real world, you need perspective on

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Speaker 1: a story like this. There's only one person to go

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Speaker 1: to in my opinion, and that is Brian Stelter. He

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Speaker 1: is a Walter Schorenstein Fellow at Harvard University. Most of

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Speaker 1: our audience knows him as a former chief media correspondent

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Speaker 1: at CNN. I also know him as a former media

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Speaker 1: reporter at the New York Time, so he is the

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Speaker 1: voice to go to Brian Rupert Murdoch defines media mogul,

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Speaker 1: So a pretty big move here today it is, and.

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Speaker 3: In some ways it is surprising because Rupert Murdoch always

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Speaker 3: said that he would never retire. That's what son Lachlin

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Speaker 3: said about a decade ago as well. Lachlan was clearly

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Speaker 3: being groomed to be the successor that's been in place

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Speaker 3: for a few years. Today just affirms and confirms that

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Speaker 3: Lachlan is the chosen son. But all along Lachlan had

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Speaker 3: to share power with his father, and the idea was

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Speaker 3: that Rupert would never retire. Well, today is the closest

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Speaker 3: thing to a retirement that we're ever going to see

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Speaker 3: from Rupert. His allies are calling it more of a

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Speaker 3: semi retirement. He is saying he'll be very involved, watching, reading,

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Speaker 3: responding and giving feedback. But this is clearly a turning

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Speaker 3: point moment for both News Corporation and Fox Corporation to

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Speaker 3: have Rupert moving off the board as a chairman, moving

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Speaker 3: into an emeris emeritus role. There is obviously no coming

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Speaker 3: new turning back from this, and now this cements Lachlan

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Speaker 3: as the leader of both companies, for better or worse.

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Speaker 3: And I think there's a grand debate to be had

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Speaker 3: about Lachlan's leadership, the pros and cons and what it

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Speaker 3: means for shareholders.

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Speaker 2: You know, there are a lot of businesses in which

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Speaker 2: it doesn't really matter who's the CEO or the chairman.

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Speaker 2: If you've got somebody holding a big stake in the company,

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Speaker 2: he's still the boss or she's still the boss.

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Speaker 1: Is that the case here?

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Speaker 2: Does Rupert Murdoch have to be chairman and CEO to

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Speaker 2: run the business or is he still in charge of

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Speaker 2: the family.

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Speaker 3: He's still in charge of the family, and he still

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Speaker 3: controls the trust. And that is the part of this

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Speaker 3: that is very much like HBO's succession. You know, the

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Speaker 3: storyline on succession is very much how it works in

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Speaker 3: the Murdoch family. There are a bunch of votes of

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Speaker 3: the trust. The trust controls both Fox and News Corps,

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Speaker 3: and in the event of Ruper Murdoch's death, there will

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Speaker 3: be a battle for control of both companies within the

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Speaker 3: Murdoch family. People who may know that the outlines of

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Speaker 3: this for adult children, two of whom Ruper James and

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Speaker 3: Lachlan have been worrying, have been battling for years. Also

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Speaker 3: to women Elizabeth and Prudence. In the event of Rupert's death,

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Speaker 3: they each get one vote and so there is no tiebreaker.

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Speaker 3: There will be some sort of reorganization of the companies

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Speaker 3: in the event of Rupert's death. But it's important to

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Speaker 3: note in the memo this morning, he says he is

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Speaker 3: in robust health and he's been around the Fox studio

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Speaker 3: a lot in Los Angeles this week, according to my sources.

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Speaker 3: So I think what we're seeing today is a sort

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Speaker 3: of confirmation that Lachlan is the chosen one of the father,

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Speaker 3: but that does not mean that there could not be

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Speaker 3: any number of changes in the years to come.

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Speaker 1: Brian, is there any reason to believe that, with this

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Speaker 1: news today that there could be any change in editorial

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Speaker 1: view strategy at Fox Right.

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Speaker 3: I think that's one of the most interesting questions, And

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Speaker 3: the initial answer is no. Because Lachlan Murdoch is as

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Speaker 3: conservative and in some ways more conservative than his father.

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Speaker 3: They have many of the same political views. They both

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Speaker 3: have some distaste for Donald Trump. Rupert Murdoch much more

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Speaker 3: critical of Trump than Lachlan has been at least as

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Speaker 3: far as we know, but both men, although critical of Trump,

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Speaker 3: are definitely and defiantly conservative. I don't think we're going

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Speaker 3: to see the brands change direction in a dramatic way.

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Speaker 3: What we might see, and this is the question mark,

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Speaker 3: and what I'm really curious about, is what will Lachlan

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Speaker 3: Murdoch may be more free, not entirely freed of his father,

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Speaker 3: but perhaps more free than he has been. Does he

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Speaker 3: have plans he liked to put in place? Does he

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Speaker 3: have business ventures or strategic shifts that he's not been

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Speaker 3: able to pull off because of his dad? You know,

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Speaker 3: we know the general direction is the same, right towards streaming,

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Speaker 3: toward getting Google and Facebook to pay for news corps properties.

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Speaker 3: You know, all of that will continue, but you know

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Speaker 3: we'll I guess are we going to see Lachlan emerge

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Speaker 3: from his dad's shadow?

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Speaker 1: Now?

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Speaker 3: I think is an open question.

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Speaker 1: How do you think when we look back on this, Brian,

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Speaker 1: I know you've got so much history and experience with

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Speaker 1: the Murdoch family in the news corporation, and how do

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Speaker 1: you think Ruppert goes down in history? Certainly when I

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Speaker 1: think about you know, the media moguls sum to Redstone,

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Speaker 1: Ted Turner, you know, a couple of others, John Malone,

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Speaker 1: he's right there at the top of the mountain.

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Speaker 3: Yes, in moving us from a broadcast to a cable

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Speaker 3: and then a digital world. Absolutely, there are some accomplishments

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Speaker 3: that you have to give credit for the creation of

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Speaker 3: the Fox broadcast network. You know, we wouldn't have the Simpsons,

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Speaker 3: you know, in Family Guy. There's there's a lot that

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Speaker 3: is so much that has Ruber Murdock's fingerprints. Of course,

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Speaker 3: that'll all rights.

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Speaker 4: Fox, Bryan.

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Speaker 2: I mean, he's created an entire political movement. Doesn't it

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Speaker 2: feel like.

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Speaker 3: That it does. We would not have a hat of

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Speaker 3: Donald Trump presidency without Ruper Murdoch and Fox News. The

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Speaker 3: polarization of Fox News, but also the diversity of voices.

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Speaker 3: You know, we could argue in any number of directions,

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Speaker 3: but the impact is very clear and spread out all

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Speaker 3: around the world, including in Australia, in the UK and

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Speaker 3: other markets. You know, there's a satellite network. A lot

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Speaker 3: of that is a part of Ruper Murdock's legacy. Now,

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Speaker 3: I would say on the business front, he had impeccable

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Speaker 3: timing selling most of Fox to Disney about five years ago.

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Speaker 3: You know, providing more firepower for Disney in the streaming wars,

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Speaker 3: but also getting out of some declining businesses. If you

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Speaker 3: look at the stock for Fox Corporation in the five

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Speaker 3: years since it was spun out, you know it's down

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Speaker 3: twenty three twenty four percent over five years. News Corporation

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Speaker 3: has fared somewhat better. But if you're an investor in

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Speaker 3: these companies, you are not altogether pleased by Rupert Murdock's

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Speaker 3: performance in recent years as these companies have faced headwinds

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Speaker 3: of the Apples and the Disney's and the Googles, these

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Speaker 3: much bigger giants than now control the media and tech landscape.

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Speaker 1: And Brian that kind of calls into question again. A

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Speaker 1: lot of folks say, maybe Rupert was the smartest person

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Speaker 1: in the room selling to Bob Biger when he did.

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Speaker 1: What does Bob Biger and Disney do now? Because they've said,

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Speaker 1: unlike Rupert, we're staying we're going to try to evolve

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Speaker 1: and compete in this new media world. How do you

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Speaker 1: think that plays out for Bob Biger?

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Speaker 5: Right?

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Speaker 3: And to me, I think about it as a consumer.

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Speaker 3: How attached am I to Disney as a consumer? How

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Speaker 3: invested am I? How much do I have to spend

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Speaker 3: to go to Disney World, Disneyland. How much do I

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Speaker 3: have to pay for Disney Plus? And I think Disney

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Speaker 3: has its hooks in consumers better than any of these

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Speaker 3: other media companies. That's why when I look at this landscape,

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Speaker 3: it's Disney and of course Netflix, that would be the

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Speaker 3: ones that I would be wanting to bet on. That said,

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Speaker 3: the challenges are enormous. He is saddled by assets like

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Speaker 3: the ABC television network that are no longer deemed desirable,

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Speaker 3: and how he's going to navigate out of that, you know,

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Speaker 3: to me, it's a very treacherous one. Two years ahead.

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Speaker 3: To me, in ten years, I'd still rather be Disney

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Speaker 3: because they're still going to have their hooks in so

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Speaker 3: many families that have to go meet Mickey Mouse. But

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Speaker 3: in that short term, that short term is so so murky.

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Speaker 1: Is there a future? What is the future for cable news?

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Speaker 3: Do you think for cable news? Well, Fox News is

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Speaker 3: the strongest of the pack. All of these companies are

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Speaker 3: facing secular challenges. We know about the headwinds, but you know,

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Speaker 3: Fox News, for all of its faults, and I believe

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Speaker 3: there are many, it has a captive and loyal audience

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Speaker 3: almost like anything else in television or in media, and

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Speaker 3: I do see some challenges around the edges. Tucker Carlson's

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Speaker 3: firing did calls a ratings drop, but most of those

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Speaker 3: viewers actually come back to Fox News. So if you

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Speaker 3: were betting on a cable channel out there, you'd probably

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Speaker 3: be betting on Fox News again, for better or worse.

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Speaker 3: Right now, they're getting ready for their next GOP debate.

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Speaker 3: The Republican Party gave Fox the first two debates, not Newsmax,

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Speaker 3: not Rumbled, not some far right internet stream. Republican Party

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Speaker 3: still went back to Fox, so that alliance is still

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Speaker 3: very real and very strong and frankly very profitable for

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Speaker 3: Lachlin and Rupert.

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Speaker 1: Brian, thanks so much for joining us. Really appreciate you

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Speaker 1: giving us a few minutes of your time. Brian Stelter,

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Speaker 1: He's a Walter Schorenstein Fellow at Harvard University and a

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Speaker 1: former chief media correspondent at CNN, also former media reporter

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Speaker 1: with The New York Times, so certainly has the chops

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Speaker 1: to give us his perspective.

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Speaker 5: You're listening to the team. Ken's a live program Bloomberg

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Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com,

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Speaker 5: the iHeartRadio app, and the Bloomberg Business app, or listen

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Speaker 5: on demand where however you get your podcast.

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Speaker 1: Had a little bit of economic data today. In addition

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Speaker 1: to the job as claims and Philly fed home sales,

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Speaker 1: we also the leading index came in at zero negative

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Speaker 1: zero point four. Consensus was for negative zero point five,

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Speaker 1: so a little bit better than expected there. Dana Peterson

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Speaker 1: joints as chief econmis for the Conference board. Dana, what

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Speaker 1: did your what did you learn from your index that

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Speaker 1: you released this morning?

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Speaker 6: Well, still telling us that the leading indicators are suggesting

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Speaker 6: that there's going to be a recession at some point

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Speaker 6: over the next twelve months. Certainly when we look at

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Speaker 6: the details, the financial market indicators as well as the

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Speaker 6: expectations gauges for consumers continue to be negative. And also

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Speaker 6: jobless claims ticked down a little bit. But all in all,

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Speaker 6: this measure has been negative for sixteen seventeen months, and

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Speaker 6: it's continuing to tell us the same exact story, is it.

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Speaker 1: I mean, it's been telling us the same story. But

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Speaker 1: the economy is pretty good shape here. How do we

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Speaker 1: kind of put those two together? Sure?

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Speaker 6: I think the thing is that within that measure you

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Speaker 6: don't really have services embedded and you don't have all

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Speaker 6: the labor market indicators in there. We do have labor

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Speaker 6: market indicators in the Current Economic Conditions measure, and that

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Speaker 6: has continued to say that everything's okay, and that's because

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Speaker 6: we continue to see positive payroll gains and real incomes

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Speaker 6: are rising year on year, especially as inflation comes off.

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Speaker 6: And so that's really the current situation. But again we're

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Speaker 6: trying to look ahead, and when we look at what's

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Speaker 6: going to be facing the consumer and businesses going forward,

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Speaker 6: we're looking at very elevated interest rates for longer. Certainly

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Speaker 6: the Fed indicated that it's not going to cut interest

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Speaker 6: rates that much next year. Maybe they have one more

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Speaker 6: hike this year, but then only two cuts next year.

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Speaker 3: And we're also.

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Speaker 6: Looking at a situation where consumers are going to have

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Speaker 6: to pay down their debts, and those debts are going

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Speaker 6: to be much more expensive going forward, including having to

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Speaker 6: pay for student loans. So all these things are going

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Speaker 6: to coalesce into an economy that we think is going

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Speaker 6: to be slower and potentially experiencing a short and shallow recession.

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Speaker 2: How is the consumer looking and I know, Tom always

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Speaker 2: points out the bifurcation, and that is, you know, definitely

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Speaker 2: a thing. You know, if you're the CEO of an automaker,

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Speaker 2: you're getting twenty five million dollars a year, so the

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Speaker 2: consumer from that, that consumer looks great, but if you're

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Speaker 2: one of the UAW workers, not so much. We start

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Speaker 2: to see a build up in credit card debt, We

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Speaker 2: start to see more and more delinquencies we're hearing in

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Speaker 2: terms of credit card and auto loans. As you point out,

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Speaker 2: student loans need to be repaid again, so that debt

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Speaker 2: pile that's getting more expensive is also growing, right it is.

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Speaker 6: When we look at consumer credit card debt, it's back

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Speaker 6: to where we were on the trend before the pandemic.

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Speaker 6: And you're absolutely right, delinquencies are arising. They're back where

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Speaker 6: we were in twenty nineteen.

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Speaker 4: So all the have been wiped out.

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Speaker 6: And when we look at charge offs, especially by banks

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Speaker 6: that are not in the top one hundred ranks, those

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Speaker 6: charge offs are very elevated and even above where we

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Speaker 6: were back in twenty nineteen. So we're looking at a

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Speaker 6: situation where the consumer is coming under pressure. Folks are

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Speaker 6: using credit cards to finance their spending and it certainly

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Speaker 6: isn't coming into a very good picture.

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Speaker 1: We think, how about the labor market here as it

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Speaker 1: relates to this economy. We had the initial jobs claims

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Speaker 1: once again come in, you know, better than expected, better

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Speaker 1: than last month at two hundred and one thousand. It's

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Speaker 1: this labor market, despite you know, all the doom and

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Speaker 1: loom out there, if to the extent there is is

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Speaker 1: still resilient.

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Speaker 6: Well, I think you need to look at the labor

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Speaker 6: market three different ways. So, yes, you do have some

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Speaker 6: companies that are still hiring, and those are mostly the

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Speaker 6: companies where they need people to show up to work,

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Speaker 6: such as healthcare, restaurants, hotels, even public administration, and so

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Speaker 6: we're definitely seeing job gains there, but those gains are

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Speaker 6: getting smaller and smaller and smaller. And then on the

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Speaker 6: other end of the spectrum, you do have layoffs, and

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Speaker 6: those are mainly companies that did very well during the

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Speaker 6: pandemic at not so much this now past the pandemic,

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Speaker 6: certainly tech, finance, transportation, warehousing. But you still have a

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Speaker 6: large group of companies that are hoarding workers and the

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Speaker 6: reason why is they don't want to have to let

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Speaker 6: everybody go especially if they think that the downturn is

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Speaker 6: going to be short, it's going to be mild. But

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Speaker 6: we are seeing them cut back on hours. Hours are

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Speaker 6: back down to where they were a pre pandemic after

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Speaker 6: or surge, and certainly wage growth isn't as aggressive as

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Speaker 6: it used to be, and we're seeing companies pull down

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Speaker 6: job ads and there's less quitting. So there's definitely cooling

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Speaker 6: in the labor market occurring.

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Speaker 2: Yeah, it does seem like the strength is a bit deceptive,

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Speaker 2: you know, but we but you know, I keep thinking that,

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Speaker 2: and then we keep getting these amazing data points so

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Speaker 2: or much better than expected data points.

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Speaker 1: At what point does that turner?

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Speaker 6: Well, I mean the data that I'm looking at seems

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Speaker 6: to be mixed. Certainly, when we look at retail sales,

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Speaker 6: they were negative in terms of month on month games

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Speaker 6: in real terms after adjusting for inflation. When we look

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Speaker 6: at payrolls, yes, one to eighty seven was very good,

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Speaker 6: and in most years that'd be great, but we saw

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Speaker 6: pretty significant downward revisions to prior months. And when you

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Speaker 6: start seeing downwards downward revisions to payrolls, it creates a

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Speaker 6: trend and you have this downward momentum in general, So

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Speaker 6: I think that and also when we look at inflation,

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Speaker 6: headline is going in the wrong direction, hence the FED

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Speaker 6: signal we're not done with interest rate hikes, and certainly

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Speaker 6: there's concerns that the FED will raise interest rates so

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Speaker 6: much and that the cumulative tightening is going to weigh

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Speaker 6: on the economy and cause the more disastrous situation. So

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Speaker 6: I think we need to parse the data very carefully. Yes,

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Speaker 6: there's some things that are surprising to the upside or

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Speaker 6: slightly better, but even our own leading indicators, even though

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Speaker 6: it wasn't minus a half, it was still minas point four.

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Speaker 1: That's it's still negative.

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Speaker 6: So I think we need to look closely at the

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Speaker 6: data and see that, Yes, the US economy is slowing

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Speaker 6: in line with what the FED wants regarding its monetary

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Speaker 6: policy tightening.

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Speaker 1: So again, so just to be clear, Dana, are you

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Speaker 1: guys at the conference board saying maybe a shallow recession

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Speaker 1: next year is possible likely?

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Speaker 3: Yeah, So that's our that's our call.

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Speaker 6: Yes, we do expect recession. We keep having to push

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Speaker 6: it out because consumers have been spending, but again a

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Speaker 6: lot of that's using debt. But yes, we do have

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Speaker 6: a recession call. For the first half next year. Again

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Speaker 6: not very long, not very deep, and we'll get out

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Speaker 6: of it pretty quickly.

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Speaker 2: And then we get hopefully we get straight back to

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Speaker 2: zero and straight policy as quickly as we can right exactly.

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Speaker 1: That's life is good. Dana Peterson, thanks so much for

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Speaker 1: joining us. Dana Peterson, Chief Economists for the Conference Board.

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Speaker 5: You're listening to the tape Cat's a our live program,

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Speaker 5: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,

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Speaker 5: the tune in app, Bloomberg dot Com, and the Bloomberg

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Speaker 5: Bloomberg eleven thirty.

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Speaker 1: Barry Reholtz joined us. He's a host of Masters in

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Speaker 1: Business on Bloomberg Radio. Is also the chairman of Chief

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Speaker 1: Investment Officer Rehults Wealth Management. Barry, your Federal Reserve stay

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Speaker 1: put yesterday. But still talking tough, aren't they?

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Speaker 7: Yeah, they have not been afraid to really communicate what

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Speaker 7: their intentions are.

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Speaker 4: We can disagree with.

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Speaker 7: Them, and we can argue with them, but you can

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Speaker 7: say they haven't worn the street of their views, and

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Speaker 7: they haven't told people this is exactly what we're going

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Speaker 7: to do.

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Speaker 2: So they still have two cuts priced in next year.

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Speaker 2: And I've been asking everybody today about, you know, where

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Speaker 2: the Fed ultimately wants to be, because they have a

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Speaker 2: forecast for three point nine percent at the end of

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Speaker 2: twenty twenty five and two point nine percent at the

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Speaker 2: end of twenty twenty six. It feels to me like,

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Speaker 2: even though higher for longer is the current mantra, they

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Speaker 2: want to be long term?

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Speaker 1: Low? Is that is that the right way to be?

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Speaker 7: They want to be long term? They've said they want

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Speaker 7: to be long term.

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Speaker 2: I No, No, they're forecasting two point nine percent at

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Speaker 2: the end of twenty twenty six. Like, why if they

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Speaker 2: achieve a soft landing and the economy's okay, why would

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Speaker 2: you want rates to be.

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Speaker 1: Two point nine percent? Isn't it healthy to have a solid.

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Speaker 4: Five I'm sorry, did you say twenty twenty six? Yes?

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Speaker 7: All right, So let's let's laugh about that for a moment,

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Speaker 7: and let me point out that the quarterly dot plot

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Speaker 7: has been so wildly wrong for all of the past

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Speaker 7: five years, just looking out four quarters, just looking out

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Speaker 7: a year ahead, to think that anybody on this Federal

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Speaker 7: Reserve or anywhere else has the slightest idea what the

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Speaker 7: state of the economy is going to be, what inflation

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Speaker 7: is going to be, like, what interest rates are going

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Speaker 7: to be like in twenty six. It's not merely laughable.

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Speaker 7: I would call it malpractice because you have to know GDP,

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Speaker 7: whether or not we're in a recession, what's going on

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Speaker 7: with employment, what's going on with inflation. These guys can't

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Speaker 7: forecast a quarter ahead three years.

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Speaker 4: It's hilarious.

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Speaker 1: I get that. I mean, my question is radio here.

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Speaker 2: My question is really just you know, is the bias

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Speaker 2: right now to try and get back down to ZERP,

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Speaker 2: Like is that where we want to be? Because over

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Speaker 2: the last fifty years we've averaged like four point six

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Speaker 2: percent on the Fed funds rates? So isn't that healthy?

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Speaker 2: Or I guess it's you know, it depends on where

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Speaker 2: our start is. But isn't it healthy to have the

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Speaker 2: real rate of return like around five percent?

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Speaker 7: So so Z let's start with ZUP, which is a

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Speaker 7: great place to begin.

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Speaker 1: What is ZERP?

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Speaker 4: What zero interest rate policy?

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Speaker 1: Thank you?

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Speaker 7: Was a actually traces back to nine to eleven, but

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Speaker 7: really it's a post financial crisis emergency footing.

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Speaker 4: So if the FED is at zero, your.

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Speaker 7: Assumption should be, hey, something is either systematically wrong, systemically

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Speaker 7: wrong with the financial system, or we're in the midst

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Speaker 7: of a really really bad crisis or recession, so zero

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Speaker 7: should be off the table. What we want to do

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Speaker 7: is get to neutral, which is the English way of saying,

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Speaker 7: our English way of saying, we're not encouraging inflation. We're

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Speaker 7: not discouraging inflation. We're at to balance. The problem is

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Speaker 7: the economy runs hot and cold. I don't mean recession

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Speaker 7: wise or bubble wise, but some quarters are better than others,

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Speaker 7: and you kind of have to allow a little bit

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Speaker 7: of inflation. You don't want to cause a recession. When

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Speaker 7: we look at CPI now, a lot of this all

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Speaker 7: comes back to the two percent inflation target, which, as

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Speaker 7: former FED Vice Chairman Ferguson showed, is really a made

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Speaker 7: up number that goes back decades and doesn't correlate with anything.

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Speaker 7: So the focus on two percent, I think is misguided.

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Speaker 7: What we want to see is stable prices and as

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Speaker 7: close to full employment as we can get. I think

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Speaker 7: the FED sometimes gets so wrapped up in their models

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Speaker 7: they forget first principles, price is stable, full employment. From there,

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Speaker 7: what the actual FED funds rate is, whether it's four,

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Speaker 7: four and a half five is almost irrelevant.

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Speaker 1: Hey, Barry, I know how you hate throw away terms

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Speaker 1: that people use all the time, like it's different this

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Speaker 1: time and there's cash on the sidelines, things like that.

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Speaker 1: But how about the one discussion I hear a lot

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Speaker 1: of is soft landing, hard landing, no landing. I don't know, true,

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Speaker 1: what the heck does that mean? I don't know. How

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Speaker 1: do you think about just where the economy is heading

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Speaker 1: and how to kind of describe it?

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Speaker 7: I love that question. Listen the first first things. First,

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Speaker 7: do you have a job. If you have a job, okay,

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Speaker 7: so things are pretty okay. Are you getting paid enough?

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Speaker 7: Are you seeing regular raises? Are you keeping up with

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Speaker 7: the cost of living? That that's where we all start

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Speaker 7: when we take it to the next level. We want

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Speaker 7: to know what are consumers spending, how much is the

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Speaker 7: broad economy growing?

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Speaker 4: And are we investing in our future?

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Speaker 7: So it's a little more complicated than just you know,

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Speaker 7: are we in a recession or are we in an expansion.

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Speaker 7: One of the things that I've liked that this administration

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Speaker 7: has done that we haven't seen in a couple of

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Speaker 7: administrations is a little bit of industrial policy and a

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Speaker 7: lot of infrastructure spending. You know, you go back to

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Speaker 7: Eisenhower and the interstate highway system. That was an economic

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Speaker 7: boom that we built on that lasted decades. The same

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Speaker 7: thing with the can be the administration and NASA and

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Speaker 7: space exploration that led to amazing technologies, everything from microwaves

437
00:22:06,200 --> 00:22:10,679
Speaker 7: to semiconductors. Very often the private sector can't make a

438
00:22:10,720 --> 00:22:14,159
Speaker 7: commitment to invest in R and D that doesn't have

439
00:22:14,200 --> 00:22:18,240
Speaker 7: a return for decades. Only Uncle Sam can do that.

440
00:22:18,800 --> 00:22:22,359
Speaker 7: I'm glad to see we've sort of moved a little

441
00:22:22,640 --> 00:22:26,919
Speaker 7: bit back in that direction because just think about the

442
00:22:26,960 --> 00:22:31,880
Speaker 7: benefits of big, bold policy initiatives and how they've manifested

443
00:22:32,040 --> 00:22:37,119
Speaker 7: in a robust economy. So to me, soft landing hard landing,

444
00:22:37,960 --> 00:22:40,560
Speaker 7: is the economy expanding or people working. Are are they

445
00:22:40,640 --> 00:22:43,159
Speaker 7: able to pay their bills? Are they out spending and

446
00:22:43,240 --> 00:22:46,600
Speaker 7: enjoying life? If as long as that trend continues, we're great.

447
00:22:46,760 --> 00:22:50,600
Speaker 7: Occasionally there's a recession, that's the nature of things. You

448
00:22:50,720 --> 00:22:54,040
Speaker 7: just don't want it to be too severe and too damaging.

449
00:22:54,440 --> 00:22:59,840
Speaker 2: Isn't ai another huge impetus for economic growth?

450
00:23:00,520 --> 00:23:01,439
Speaker 4: One hundred percent.

451
00:23:02,000 --> 00:23:08,320
Speaker 7: I've been playing with a software product called Perplexity, and

452
00:23:08,480 --> 00:23:12,600
Speaker 7: I've been using it to every time I have a

453
00:23:12,680 --> 00:23:15,840
Speaker 7: new guest on Masters in Business. I use it to

454
00:23:16,040 --> 00:23:18,439
Speaker 7: as a way to double check and make sure I

455
00:23:18,440 --> 00:23:22,600
Speaker 7: didn't miss anything. And you'd be surprised how often AI

456
00:23:22,760 --> 00:23:27,280
Speaker 7: is going to find stuff that my researcher and myself

457
00:23:27,440 --> 00:23:32,199
Speaker 7: just googling the history of somebody's career misses. And the

458
00:23:32,320 --> 00:23:36,119
Speaker 7: fascinating thing is this product continues to get better.

459
00:23:36,600 --> 00:23:37,840
Speaker 4: Every one of these.

460
00:23:37,680 --> 00:23:43,200
Speaker 7: AI models continues to improve, and I think what we're

461
00:23:43,240 --> 00:23:46,240
Speaker 7: looking at now is twice as good as it was

462
00:23:46,280 --> 00:23:49,359
Speaker 7: a month from that ago. But I can't even guess

463
00:23:49,400 --> 00:23:51,879
Speaker 7: where these things are going to be a year or

464
00:23:51,920 --> 00:23:52,840
Speaker 7: a decade from now.

465
00:23:52,840 --> 00:23:54,280
Speaker 4: They're just getting better and better.

466
00:23:55,800 --> 00:23:58,359
Speaker 7: This is on the same level as the Internet. This

467
00:23:58,440 --> 00:24:02,159
Speaker 7: is going to be a productivity boom, absolutely one.

468
00:24:02,800 --> 00:24:04,720
Speaker 1: All right, Barry, thanks so much for joining us. As always,

469
00:24:04,720 --> 00:24:08,280
Speaker 1: Barry Riderholt's hosts of Masters in Business on Bloomberg Radio.

470
00:24:09,080 --> 00:24:12,480
Speaker 5: You're listening to the team Ken's are Live program Bloomberg

471
00:24:12,520 --> 00:24:15,879
Speaker 5: Markets weekdays at ten am eastering on Bloomberg dot com,

472
00:24:15,960 --> 00:24:19,120
Speaker 5: the iHeartRadio app and the Bloomberg Business app, or listen

473
00:24:19,200 --> 00:24:21,320
Speaker 5: on demand wherever you get your podcasts.

474
00:24:23,040 --> 00:24:26,520
Speaker 1: All right, we had the Bank of England today hold

475
00:24:26,720 --> 00:24:30,320
Speaker 1: interest rates steady. Still, there's concern there and even more

476
00:24:30,359 --> 00:24:32,359
Speaker 1: so in the Conte so much. You had this.

477
00:24:33,760 --> 00:24:37,560
Speaker 2: The Swiss Central Bank holding rates steady. We were expecting

478
00:24:37,560 --> 00:24:40,360
Speaker 2: a raise there. You had the ECV there this winter

479
00:24:40,400 --> 00:24:42,960
Speaker 2: with the ECB coming out and saying well store Narris

480
00:24:43,000 --> 00:24:44,840
Speaker 2: has said they've reached a peak in rates and the

481
00:24:44,880 --> 00:24:46,200
Speaker 2: next move is likely a cut.

482
00:24:46,640 --> 00:24:49,520
Speaker 1: So yeah, let's let's take a turning point. Let's break

483
00:24:49,560 --> 00:24:52,400
Speaker 1: it down. Jay Hatfield, he's the CEO, founder and portfolio

484
00:24:52,440 --> 00:24:55,440
Speaker 1: manager Infrastructure Capital Advisors. Jay, what do you make of

485
00:24:55,440 --> 00:24:58,280
Speaker 1: the economy over there in Europe given what we're seeing

486
00:24:58,400 --> 00:24:59,359
Speaker 1: some of these central banks.

487
00:25:00,480 --> 00:25:03,040
Speaker 8: Thanks to Paul and Matt for having me on. So,

488
00:25:03,240 --> 00:25:05,919
Speaker 8: as we discussed last time I was on, you know,

489
00:25:05,960 --> 00:25:09,600
Speaker 8: we're laser focused on Europe and really really what gave

490
00:25:09,720 --> 00:25:15,080
Speaker 8: rise to that was this huge global bond meltdown, and

491
00:25:15,119 --> 00:25:17,760
Speaker 8: so we started to study the global monetary base and

492
00:25:17,800 --> 00:25:20,800
Speaker 8: notice the ECB had shrunk it by five hundred billion,

493
00:25:21,280 --> 00:25:24,840
Speaker 8: and overall it's dropped by three percent, which we think

494
00:25:24,880 --> 00:25:28,600
Speaker 8: is a critical indicator of both inflation and growth, and

495
00:25:28,640 --> 00:25:31,480
Speaker 8: then we started digging in and I'd recommend you sent

496
00:25:31,600 --> 00:25:37,920
Speaker 8: your ECO default to the Eurozone if you have a terminal,

497
00:25:38,160 --> 00:25:42,280
Speaker 8: which you should, but to track Europe because it's more

498
00:25:42,280 --> 00:25:44,600
Speaker 8: difficult from the US. And if you look at that

499
00:25:44,680 --> 00:25:48,080
Speaker 8: data since I was on last it's really horrific. It

500
00:25:48,200 --> 00:25:50,200
Speaker 8: might melt your face, so be careful when you look

501
00:25:50,240 --> 00:25:55,240
Speaker 8: at it. So both Germany, both retail sales and industrial

502
00:25:55,880 --> 00:25:58,400
Speaker 8: dropped by point eight percent, which doesn't sound like that much,

503
00:25:58,440 --> 00:26:02,199
Speaker 8: but that's for one month, just July. German GDP was

504
00:26:02,680 --> 00:26:05,280
Speaker 8: for the end of the second quarter only it was

505
00:26:05,359 --> 00:26:09,440
Speaker 8: down point six year every year. Italy industrial production was

506
00:26:09,480 --> 00:26:13,600
Speaker 8: down point seven. So it looks like particularly those two

507
00:26:13,640 --> 00:26:17,080
Speaker 8: countries are in an absolute free fall. Now we'll know better,

508
00:26:17,560 --> 00:26:20,280
Speaker 8: So that's why I would set your default when we

509
00:26:20,400 --> 00:26:23,680
Speaker 8: get the August data to see if that validates July.

510
00:26:23,840 --> 00:26:26,200
Speaker 8: But if this isn't happening in the US, it would

511
00:26:26,240 --> 00:26:28,480
Speaker 8: be all of this will be all we're talking about.

512
00:26:28,600 --> 00:26:30,840
Speaker 1: Well, I mean, I'm looking at the ec FC the

513
00:26:30,880 --> 00:26:34,800
Speaker 1: economic forecast, and for the Eurozone, I don't see recession

514
00:26:34,960 --> 00:26:38,640
Speaker 1: out there in forecasts. But you think there is real.

515
00:26:38,520 --> 00:26:42,760
Speaker 8: Risk, Well, I think that's the ECB's forecast and they

516
00:26:43,480 --> 00:26:45,639
Speaker 8: have a little bit in common with our FED and

517
00:26:45,680 --> 00:26:48,320
Speaker 8: that they may not be the greatest forecasters ever created.

518
00:26:48,720 --> 00:26:51,480
Speaker 8: So we just look at the real time data and

519
00:26:52,280 --> 00:26:55,000
Speaker 8: like I said, if you know, if US we tell

520
00:26:55,040 --> 00:26:57,639
Speaker 8: sales are down point eight and industrials downpoint eight, like

521
00:26:57,760 --> 00:27:00,320
Speaker 8: we would be yep, we would say, oh my god, odd,

522
00:27:00,359 --> 00:27:05,159
Speaker 8: this is horrific. So I just would urge everybody to

523
00:27:05,160 --> 00:27:08,040
Speaker 8: look at not just that data, but also the monetary

524
00:27:08,080 --> 00:27:12,320
Speaker 8: base and really look at how Italy responded to that hike.

525
00:27:12,800 --> 00:27:16,920
Speaker 8: That they were just excoriated the ECB for good reason

526
00:27:16,960 --> 00:27:20,400
Speaker 8: because they're going into a significant recession. So we think

527
00:27:20,440 --> 00:27:23,000
Speaker 8: this is the key risk. But on the other hand,

528
00:27:23,119 --> 00:27:25,200
Speaker 8: that could be very bullish for the US because if

529
00:27:25,680 --> 00:27:29,400
Speaker 8: Europe starts to go into a recession, then global rates

530
00:27:29,440 --> 00:27:31,480
Speaker 8: should calm down. And that's really I would argue the

531
00:27:31,560 --> 00:27:34,600
Speaker 8: key overhang on today's market is just we have a

532
00:27:34,640 --> 00:27:36,240
Speaker 8: big global sell off in bonds.

533
00:27:36,680 --> 00:27:40,159
Speaker 1: So if Europe is going through a recession, how are

534
00:27:40,200 --> 00:27:41,280
Speaker 1: you positioning for that?

535
00:27:42,160 --> 00:27:46,440
Speaker 8: Well, we're we do as you know, we're always cautious

536
00:27:47,040 --> 00:27:50,439
Speaker 8: in August and September, in early October, so we do

537
00:27:50,680 --> 00:27:52,639
Speaker 8: think I mean we're sort of fortunate in that we

538
00:27:52,680 --> 00:28:00,719
Speaker 8: have conservative dividend type stocks, defensive dividend stocks, preferred stocks, allpes,

539
00:28:01,080 --> 00:28:04,000
Speaker 8: and large cap dividends, and they've all outperformed the market

540
00:28:04,080 --> 00:28:06,520
Speaker 8: during this time, which makes sense because they have lower

541
00:28:06,600 --> 00:28:10,160
Speaker 8: betas and they're more defensive, and even within those portfolios,

542
00:28:10,240 --> 00:28:14,359
Speaker 8: we've positioned them to be more defensive. For instance, with preferreds,

543
00:28:14,359 --> 00:28:17,639
Speaker 8: we actually benefit in our main fund PFFA because we

544
00:28:17,680 --> 00:28:20,159
Speaker 8: have a fixed to floating fifty two percent, so longer

545
00:28:20,200 --> 00:28:22,359
Speaker 8: for hire is actually good for that the income of

546
00:28:22,359 --> 00:28:26,560
Speaker 8: that fund. So we think it's a good time to

547
00:28:26,600 --> 00:28:28,520
Speaker 8: either be in those type of stocks or it's okay

548
00:28:28,560 --> 00:28:32,439
Speaker 8: to be in cash. Although we're sticking for now to

549
00:28:32,560 --> 00:28:35,040
Speaker 8: our forty three hundred to forty six hundred call on

550
00:28:35,119 --> 00:28:37,719
Speaker 8: the S and P. If rates keep selling off, then

551
00:28:37,720 --> 00:28:40,280
Speaker 8: we could easily get to forty two hundred. But we

552
00:28:40,320 --> 00:28:43,840
Speaker 8: do think that this global growth story declining is going

553
00:28:43,880 --> 00:28:49,080
Speaker 8: to get out there. Tomorrow is the European PMI, and

554
00:28:49,120 --> 00:28:52,240
Speaker 8: we think that'll be weak, although it is really Germany

555
00:28:52,240 --> 00:28:55,239
Speaker 8: and Italy that in the UK they're the weakest, so

556
00:28:55,280 --> 00:28:56,760
Speaker 8: there are other parts of Europe they're okay.

557
00:28:57,280 --> 00:29:00,360
Speaker 2: So we continue to see dollar strength right now, the

558
00:29:00,400 --> 00:29:03,160
Speaker 2: Bloomberg Dollar Index. So the way I track it is

559
00:29:03,200 --> 00:29:05,400
Speaker 2: it twelve fifty six. I saw it this morning, right

560
00:29:05,440 --> 00:29:09,200
Speaker 2: around twelve sixty, which is punchy.

561
00:29:09,280 --> 00:29:09,480
Speaker 9: You know.

562
00:29:09,720 --> 00:29:11,680
Speaker 2: I walked in Paul Common a, Wow, Gold's taking another

563
00:29:11,760 --> 00:29:15,320
Speaker 2: chan and that's part of that trade. Obviously, does that continue?

564
00:29:15,400 --> 00:29:18,400
Speaker 2: Do we see europarity, do we see Japanese yen at

565
00:29:18,400 --> 00:29:21,440
Speaker 2: one fifty, and then do we start to see intervention?

566
00:29:22,560 --> 00:29:25,800
Speaker 8: Well, if our scenario plays out, absolutely so. We think

567
00:29:25,840 --> 00:29:30,840
Speaker 8: the US is resilient because of the resilient auto sector

568
00:29:31,000 --> 00:29:35,440
Speaker 8: and housing, which usually crack during recession. In fact, we

569
00:29:35,520 --> 00:29:38,840
Speaker 8: have some new data the average recession. You have a

570
00:29:38,880 --> 00:29:43,760
Speaker 8: thirteen point four percent decline and investment, but consumption is flat.

571
00:29:44,520 --> 00:29:46,280
Speaker 8: Normally grows at three to three, so it comes down,

572
00:29:46,360 --> 00:29:49,800
Speaker 8: but it's really the driver of recession is investment. So

573
00:29:49,840 --> 00:29:52,440
Speaker 8: if we're right about the US that we're resilient and

574
00:29:52,520 --> 00:29:55,960
Speaker 8: Europe is plunging, then that trend should continue. And that

575
00:29:56,120 --> 00:30:00,360
Speaker 8: is bearish for commodities. And one reason why we think

576
00:30:00,400 --> 00:30:04,000
Speaker 8: oil will cool down because it's really not just rallied,

577
00:30:04,440 --> 00:30:07,320
Speaker 8: it's rallied plus another five percent. Because the dollar is appreciate,

578
00:30:07,360 --> 00:30:10,640
Speaker 8: it so that's a headwind and would validate our seventy

579
00:30:10,640 --> 00:30:12,640
Speaker 8: five to ninety five dollars range on oil, which would

580
00:30:12,640 --> 00:30:15,040
Speaker 8: be bullish for inflation. So, but we do think the

581
00:30:15,080 --> 00:30:18,400
Speaker 8: dollar will continue if we're correct about the US economy

582
00:30:18,600 --> 00:30:21,080
Speaker 8: dramatically outperforming China and Europe.

583
00:30:22,560 --> 00:30:25,840
Speaker 1: Are we going to if we have a US government shutdown?

584
00:30:26,560 --> 00:30:28,760
Speaker 1: What's your view on that? Is there any way to

585
00:30:28,800 --> 00:30:30,400
Speaker 1: be in a prolonged UAW strike?

586
00:30:30,480 --> 00:30:31,640
Speaker 10: I mean both of those things.

587
00:30:31,720 --> 00:30:34,800
Speaker 3: Yes, Well, we callary right.

588
00:30:35,120 --> 00:30:37,560
Speaker 8: We called the refer to the government shutdown as the

589
00:30:37,600 --> 00:30:40,520
Speaker 8: government vacation because you know, if you look at it,

590
00:30:40,560 --> 00:30:43,240
Speaker 8: they furlough the employees, but they still pay them. So

591
00:30:43,280 --> 00:30:47,040
Speaker 8: it's actually a good rationale for Fitch to downgrade the

592
00:30:47,160 --> 00:30:50,160
Speaker 8: US because we have the most ridiculous budget process ever

593
00:30:50,560 --> 00:30:54,320
Speaker 8: where you quote shut down the government, but you don't

594
00:30:54,360 --> 00:30:56,560
Speaker 8: save any money. So and if you look, the market

595
00:30:56,600 --> 00:30:58,280
Speaker 8: actually trades up. Now I'm not sure it's going to

596
00:30:58,280 --> 00:31:00,280
Speaker 8: trade up this time of the year, but we think

597
00:31:00,320 --> 00:31:03,000
Speaker 8: that's irrelevant. I'm good for the media to report on,

598
00:31:03,040 --> 00:31:06,960
Speaker 8: but not critical for investment. The DW strike I think

599
00:31:07,040 --> 00:31:10,360
Speaker 8: is critical. Full disclosure. My daughter is a member of

600
00:31:10,360 --> 00:31:13,840
Speaker 8: the UAW, so you could take this a grain of salt.

601
00:31:14,320 --> 00:31:19,240
Speaker 8: And she's in the Berkeley division of the UAW, she's

602
00:31:19,280 --> 00:31:23,600
Speaker 8: covered by them. But we do think that autos like

603
00:31:23,680 --> 00:31:28,440
Speaker 8: we don't really believe in persistent inflation except for auto services.

604
00:31:28,480 --> 00:31:31,920
Speaker 8: If you look at auto services, they are ridiculously high,

605
00:31:31,960 --> 00:31:35,920
Speaker 8: like nineteen percent on insurance, fifteen percent on repair. Hasn't

606
00:31:35,920 --> 00:31:37,960
Speaker 8: even started coming down. So if we have the strike,

607
00:31:38,000 --> 00:31:40,720
Speaker 8: that's just going to get extended out, and so that

608
00:31:40,800 --> 00:31:45,720
Speaker 8: may give the FED more reason to not cut rates

609
00:31:46,280 --> 00:31:49,000
Speaker 8: or pause. So I would focus more on that. I

610
00:31:49,000 --> 00:31:51,640
Speaker 8: don't think it's a big issue for the overall economy

611
00:31:52,120 --> 00:31:55,320
Speaker 8: some degree. If you have less less inventories on these

612
00:31:55,400 --> 00:31:58,120
Speaker 8: sort of wildcat strikes, then you have less chance of

613
00:31:58,200 --> 00:32:00,000
Speaker 8: massive layoffs because we have a shortage.

614
00:32:00,080 --> 00:32:01,600
Speaker 1: Let's rip up the script for a second.

615
00:32:01,800 --> 00:32:06,800
Speaker 2: Yeah, I mean she's in the Berkeley unit of the

616
00:32:06,880 --> 00:32:09,640
Speaker 2: u a W. So it's the United Autoworkers Union. And

617
00:32:09,720 --> 00:32:12,440
Speaker 2: I mean, having seen Oppenheimer recently, I know that these

618
00:32:13,200 --> 00:32:18,120
Speaker 2: higher places of higher education get very involved with with unions.

619
00:32:18,600 --> 00:32:21,760
Speaker 2: What is she's clearly not putting cars together at Berkeley.

620
00:32:21,760 --> 00:32:24,000
Speaker 8: Well, I'm very proud of her, and I think it's

621
00:32:24,000 --> 00:32:27,240
Speaker 8: a good backup career to move to Detroit and assemble cars.

622
00:32:27,240 --> 00:32:31,520
Speaker 8: But the teachers, the tas are members of the ua W,

623
00:32:31,520 --> 00:32:35,760
Speaker 8: which I find fascinating. Not a successful strike, so I

624
00:32:35,880 --> 00:32:39,080
Speaker 8: indirectly benefited from that because they had a pretty substantial

625
00:32:39,080 --> 00:32:40,720
Speaker 8: pay race. I don't think they're going to do any

626
00:32:40,720 --> 00:32:44,760
Speaker 8: wildcat strikes, but they're definitely getting emails and they're supporting

627
00:32:44,800 --> 00:32:46,040
Speaker 8: their brethren.

628
00:32:45,640 --> 00:32:49,360
Speaker 2: And that I had no Ideah, you better unionize those.

629
00:32:50,720 --> 00:32:53,320
Speaker 2: But in the United Auto Workers, surely there's a teachers union.

630
00:32:53,640 --> 00:32:54,680
Speaker 10: Yeah, exactly.

631
00:32:54,720 --> 00:32:57,560
Speaker 1: But the uaw is good on these strikes things. I mean,

632
00:32:57,560 --> 00:32:58,760
Speaker 1: they know what they're doing well.

633
00:32:58,880 --> 00:33:01,720
Speaker 2: The last couple of presents the UAWR in prison, Yes,

634
00:33:02,040 --> 00:33:04,440
Speaker 2: so they weren't very good that right.

635
00:33:04,600 --> 00:33:07,960
Speaker 1: All right, Jay, thanks so much for joining us. Jay Hatfield, CEO,

636
00:33:08,320 --> 00:33:13,040
Speaker 1: founder and portfolio manager Infrastructure Capital Management, looking at these

637
00:33:13,040 --> 00:33:15,600
Speaker 1: markets again, kind of taking them breather here, no question

638
00:33:15,640 --> 00:33:15,920
Speaker 1: about it.

639
00:33:16,320 --> 00:33:16,440
Speaker 5: Uh.

640
00:33:16,480 --> 00:33:18,600
Speaker 1: The S and P five hundred off one point one

641
00:33:18,640 --> 00:33:21,720
Speaker 1: percent of the NASTAC off one point three percent of

642
00:33:21,800 --> 00:33:24,720
Speaker 1: definitely some concern out there. And on the yields two

643
00:33:24,760 --> 00:33:27,200
Speaker 1: years off three percent, five point one five percent on

644
00:33:27,240 --> 00:33:30,320
Speaker 1: your two year treasury yield, that seems pretty attractive.

645
00:33:31,080 --> 00:33:34,680
Speaker 5: You're listening to the tape cansur live program Bloomberg Markets

646
00:33:34,760 --> 00:33:38,120
Speaker 5: weekdays at ten am Eastern on Bloomberg Radio, the tune

647
00:33:38,200 --> 00:33:41,160
Speaker 5: in app, Bloomberg dot Com, and the Bloomberg Business app.

648
00:33:41,200 --> 00:33:44,000
Speaker 5: You can also listen live on Amazon Alexa from our

649
00:33:44,040 --> 00:33:50,040
Speaker 5: flagship New York station, Just say Alexa Play. Bloomberg eleven thirty.

650
00:33:50,560 --> 00:33:54,360
Speaker 1: Had a nice MNA trade in the technology space. Today,

651
00:33:54,760 --> 00:33:57,880
Speaker 1: Cisco intends to acquire Splunk for one hundred and fifty

652
00:33:57,920 --> 00:34:01,600
Speaker 1: seven dollars per sharing cash is anding approximately twenty eight

653
00:34:01,680 --> 00:34:05,600
Speaker 1: billion dollars in equity value. Let's get a sense of

654
00:34:05,640 --> 00:34:07,640
Speaker 1: what this deal really means in the tech space. We

655
00:34:07,640 --> 00:34:11,600
Speaker 1: welcome Oojino, senior hardware analysts for Bloomberg Intelligence. All right,

656
00:34:11,640 --> 00:34:15,040
Speaker 1: wouch in this space here. First of all, just tell

657
00:34:15,080 --> 00:34:16,960
Speaker 1: us what Splunk is. What do they do?

658
00:34:17,760 --> 00:34:22,560
Speaker 9: Sure, Splunk is a company that does infrastructure software. They

659
00:34:22,560 --> 00:34:27,920
Speaker 9: provide observability or and help monitor the hardware and the

660
00:34:27,960 --> 00:34:33,760
Speaker 9: networking components that's within a coporate it. As more things

661
00:34:33,880 --> 00:34:37,120
Speaker 9: move to the cloud, companies are trying to better understand

662
00:34:37,400 --> 00:34:39,920
Speaker 9: how data traffic is moving inside the cloud. So Splunk

663
00:34:39,920 --> 00:34:41,080
Speaker 9: plays a very critical role.

664
00:34:42,320 --> 00:34:45,160
Speaker 2: That makes sense then yeah, so they're like going into

665
00:34:45,239 --> 00:34:50,120
Speaker 2: the cave, into the dark recesses of the Internet and

666
00:34:50,239 --> 00:34:52,680
Speaker 2: checking things out to make sure all the gear is good.

667
00:34:52,760 --> 00:34:56,439
Speaker 9: Right, Well, let's think of it this way, Cisco to think,

668
00:34:56,520 --> 00:35:00,360
Speaker 9: if we use the cave analogy, Cisco is the pipes

669
00:35:00,400 --> 00:35:05,840
Speaker 9: in that cave, and then splunk Is is the scope

670
00:35:05,880 --> 00:35:07,280
Speaker 9: that goes through the pipes.

671
00:35:07,640 --> 00:35:09,480
Speaker 1: Interesting, all right, So so splunk is.

672
00:35:10,920 --> 00:35:13,319
Speaker 2: I guess the best name they could come up with

673
00:35:13,560 --> 00:35:13,839
Speaker 2: for that.

674
00:35:14,160 --> 00:35:19,160
Speaker 1: Yeah, because if you think about it's blunking right exactly. Yeah,

675
00:35:20,160 --> 00:35:24,399
Speaker 1: all right, So what's Cisco's strategy here? What's the kind

676
00:35:24,400 --> 00:35:26,840
Speaker 1: of the takeaway from you in the street.

677
00:35:27,640 --> 00:35:31,880
Speaker 9: Yeah, so it's fairly straightforward, right if long followers Cisco

678
00:35:32,400 --> 00:35:35,440
Speaker 9: know this, They've been trying to move to this harbor

679
00:35:35,640 --> 00:35:39,080
Speaker 9: only model to a perpetual software and model. Everyone loves

680
00:35:39,080 --> 00:35:43,560
Speaker 9: recurring revenue, and you know, if for for Cisco, it's

681
00:35:43,880 --> 00:35:46,200
Speaker 9: really tough for road for you know, given that they

682
00:35:46,360 --> 00:35:48,760
Speaker 9: used to be a book and ship type of company

683
00:35:48,760 --> 00:35:51,880
Speaker 9: from from a revenue generation standpoint. H they've been acquiring

684
00:35:51,920 --> 00:35:56,440
Speaker 9: software companies and they've also been developing their own software

685
00:35:56,719 --> 00:35:58,960
Speaker 9: for sale. And what we've seen over the past couple

686
00:35:59,000 --> 00:36:02,399
Speaker 9: of years through M and A, that software is going

687
00:36:02,400 --> 00:36:05,520
Speaker 9: to be about twenty five percent of total sales and

688
00:36:05,760 --> 00:36:09,920
Speaker 9: about forty five percent of product sales, and Splunk is

689
00:36:10,560 --> 00:36:14,319
Speaker 9: going to help them augment that software component as well

690
00:36:14,320 --> 00:36:15,720
Speaker 9: as every current revenue component.

691
00:36:16,200 --> 00:36:19,160
Speaker 2: So Cisco, I mean, is a giant company, right, Splunk

692
00:36:19,200 --> 00:36:22,399
Speaker 2: is the deal is what twenty five billion or so

693
00:36:23,080 --> 00:36:27,840
Speaker 2: and Cisco is a two hundred and sixteen billion dollar company.

694
00:36:27,960 --> 00:36:31,279
Speaker 2: Are they very inquisitive? Is this how they build rather

695
00:36:31,280 --> 00:36:34,560
Speaker 2: than organic growth? And do you think they have any

696
00:36:34,560 --> 00:36:35,520
Speaker 2: more coming up?

697
00:36:36,120 --> 00:36:39,520
Speaker 9: Yeah? So great question. I mean, Cisco, among all the

698
00:36:39,520 --> 00:36:41,000
Speaker 9: companies that I cover, is probably one of the more

699
00:36:41,000 --> 00:36:47,040
Speaker 9: inquisitive companies that I cover. However, they don't typically do

700
00:36:47,200 --> 00:36:51,000
Speaker 9: deals of this size. They go for smaller, tucking technology

701
00:36:51,000 --> 00:36:53,920
Speaker 9: deals and hope to grow it from the inside. Twenty

702
00:36:53,920 --> 00:36:56,879
Speaker 9: eight billion will probably is the largest deal that they've

703
00:36:56,960 --> 00:37:02,040
Speaker 9: ever done, and it's going to drain all of that

704
00:37:02,080 --> 00:37:05,440
Speaker 9: excess cash that they have. But given that they degenerate

705
00:37:05,480 --> 00:37:08,640
Speaker 9: about fifteen billion dollars in cash flow annually, they really

706
00:37:08,680 --> 00:37:12,279
Speaker 9: should be able to do more deals if they want to.

707
00:37:12,320 --> 00:37:14,400
Speaker 9: But I think large deals going forward are going to

708
00:37:14,400 --> 00:37:15,839
Speaker 9: be off the table for the time being.

709
00:37:16,680 --> 00:37:19,680
Speaker 1: So how about from a valuation perspective, I'm looking at

710
00:37:19,840 --> 00:37:22,000
Speaker 1: Cisco stock off a little bit here today. What's the

711
00:37:22,480 --> 00:37:23,880
Speaker 1: valuation pencil out to.

712
00:37:24,040 --> 00:37:28,239
Speaker 9: Yeah, well, you know, Splunk. From a valuation perspective, it's

713
00:37:28,239 --> 00:37:32,640
Speaker 9: about six times forward sales. If we talk about the

714
00:37:32,680 --> 00:37:37,160
Speaker 9: fast growing software guys, they typically run anywhere between eight

715
00:37:37,280 --> 00:37:40,760
Speaker 9: to twelve times. Some of the slower growth where Plunk

716
00:37:40,840 --> 00:37:43,640
Speaker 9: can fall into are in the five to six times.

717
00:37:43,680 --> 00:37:47,759
Speaker 9: So this is from a valuation standpoint, it's right, it's

718
00:37:47,800 --> 00:37:50,280
Speaker 9: a good valuation, but it is on you know, Cisco

719
00:37:50,719 --> 00:37:55,520
Speaker 9: tends to buy slower, more mature companies, so this is

720
00:37:55,600 --> 00:38:01,000
Speaker 9: high on the Cisco perspective, but right right size from

721
00:38:01,080 --> 00:38:02,400
Speaker 9: a software perspective.

722
00:38:02,520 --> 00:38:05,479
Speaker 1: All right, So I'm looking at the comp function Matt

723
00:38:05,480 --> 00:38:08,680
Speaker 1: Miller's favorite function comp for Cisco, and I see, you know,

724
00:38:08,680 --> 00:38:10,520
Speaker 1: over the last five years this has had a compoundent

725
00:38:10,560 --> 00:38:13,680
Speaker 1: and a return of about five percent has Cisco versus

726
00:38:14,560 --> 00:38:16,080
Speaker 1: you know, the S and P five hundred about ten

727
00:38:16,120 --> 00:38:20,480
Speaker 1: and then the information technology S and P five hundred

728
00:38:20,480 --> 00:38:24,080
Speaker 1: information Technology sector index about eighteen or nineteen times. So

729
00:38:24,440 --> 00:38:27,960
Speaker 1: Cisco really underperforming from stock price perspective. What's the story

730
00:38:27,960 --> 00:38:28,360
Speaker 1: behind that?

731
00:38:29,200 --> 00:38:29,399
Speaker 5: Yeah?

732
00:38:29,960 --> 00:38:31,720
Speaker 9: You know, if you look at it from the past

733
00:38:31,840 --> 00:38:36,040
Speaker 9: couple of years, I think people were very concerned about

734
00:38:36,320 --> 00:38:41,080
Speaker 9: sustainable or sustained order activity because of the macro backdrop. Look,

735
00:38:41,120 --> 00:38:44,839
Speaker 9: if you look at the revenue growth, it shows ten

736
00:38:44,880 --> 00:38:48,520
Speaker 9: to twelve percent for fiscal twenty twenty three. But if

737
00:38:48,560 --> 00:38:50,800
Speaker 9: you look at fiscal twenty four, we're seeing that revenue

738
00:38:50,800 --> 00:38:54,080
Speaker 9: growth fall off to about one percent next year. That's

739
00:38:54,120 --> 00:38:56,720
Speaker 9: actually a good thing. I think heading into the print

740
00:38:57,160 --> 00:39:00,719
Speaker 9: last quarter, people were thinking that sales would climb because

741
00:39:00,760 --> 00:39:05,960
Speaker 9: of the drop off in orders. But the ability to

742
00:39:06,000 --> 00:39:08,480
Speaker 9: deliver revenue growth for the year shows that, you know,

743
00:39:08,520 --> 00:39:10,399
Speaker 9: it's not going to drop off that much. Now. Now

744
00:39:10,440 --> 00:39:13,759
Speaker 9: that being said, that's one of the reasons why are

745
00:39:13,760 --> 00:39:17,720
Speaker 9: they going after companies with more recurring revenue likes Blunk

746
00:39:18,320 --> 00:39:20,560
Speaker 9: And over the long term, it's going to help with

747
00:39:20,600 --> 00:39:21,239
Speaker 9: the business model.

748
00:39:21,280 --> 00:39:26,560
Speaker 2: In my mind, are these companies you know, destined to

749
00:39:26,600 --> 00:39:27,880
Speaker 2: be changed by AI?

750
00:39:28,360 --> 00:39:28,920
Speaker 1: I mean are they?

751
00:39:28,920 --> 00:39:32,880
Speaker 2: Are they already being Uh? Is there already dramatic upheaval

752
00:39:32,960 --> 00:39:35,800
Speaker 2: due to the AI kind of stock market revolution? Is

753
00:39:35,840 --> 00:39:38,640
Speaker 2: it hitting the ground in corporate culture?

754
00:39:39,520 --> 00:39:42,520
Speaker 9: Yeah? Well, for for let's just say Cisco and the

755
00:39:42,560 --> 00:39:47,200
Speaker 9: networking guys of that ILK right, They've already been using

756
00:39:47,880 --> 00:39:51,040
Speaker 9: AI and automation for for quite some time now. There

757
00:39:51,080 --> 00:39:53,440
Speaker 9: are other companies that have utilized it a lot better.

758
00:39:54,280 --> 00:39:59,960
Speaker 9: But as more of the hardware and software become disaggregate,

759
00:40:00,080 --> 00:40:03,000
Speaker 9: that you can actually a lot automate a lot of functions,

760
00:40:04,040 --> 00:40:08,080
Speaker 9: you know, and and for for example, let me give

761
00:40:08,120 --> 00:40:12,359
Speaker 9: you whenever our PCs go down, uh, the network would

762
00:40:12,400 --> 00:40:16,960
Speaker 9: be able to know automatically where which PC it is

763
00:40:17,000 --> 00:40:20,080
Speaker 9: down and and how to fix it right away, right,

764
00:40:20,120 --> 00:40:22,320
Speaker 9: and and that could save a lot of manpower hours.

765
00:40:23,360 --> 00:40:25,839
Speaker 9: There's a lot of coding that's involved. So the whole

766
00:40:25,880 --> 00:40:29,200
Speaker 9: space is destined to go AI. The question is is

767
00:40:29,239 --> 00:40:32,920
Speaker 9: that what does that mean for from from a network

768
00:40:32,960 --> 00:40:35,799
Speaker 9: management operations standpoint? And at the end of the day,

769
00:40:35,840 --> 00:40:38,479
Speaker 9: it's all about saving costs on AI, right Yeah?

770
00:40:38,600 --> 00:40:41,640
Speaker 1: Uh? Wohild out of your you know, hardware coverage, your

771
00:40:41,680 --> 00:40:44,440
Speaker 1: networking coverage. What what are the names you're most excited

772
00:40:44,480 --> 00:40:46,120
Speaker 1: about when you when you when you talk to investors?

773
00:40:46,120 --> 00:40:47,560
Speaker 1: Wor's kind of the most interest?

774
00:40:48,480 --> 00:40:51,640
Speaker 9: Well, the most interest is right now is is Dell

775
00:40:51,800 --> 00:40:55,239
Speaker 9: and Hpe quite quite frankly, uh and and the other

776
00:40:55,719 --> 00:40:57,680
Speaker 9: name is Arista. So those are the three names that

777
00:40:57,719 --> 00:41:02,240
Speaker 9: most people are interested on. Uh A Arista is mainly

778
00:41:02,280 --> 00:41:07,480
Speaker 9: on cloud AI data center infrastructure, and that's that's where

779
00:41:07,920 --> 00:41:11,680
Speaker 9: they see phenomenal growth. But the other area is the

780
00:41:11,760 --> 00:41:17,480
Speaker 9: revival of Dell and how AI servers can potentially drive

781
00:41:17,520 --> 00:41:20,240
Speaker 9: a faster revenue growth profile versus three to four percent

782
00:41:20,280 --> 00:41:23,040
Speaker 9: that they usually have to maybe another point or two

783
00:41:23,080 --> 00:41:24,880
Speaker 9: and growth and better margins going forward.

784
00:41:25,600 --> 00:41:28,480
Speaker 1: So I guess the question is within the tech stack,

785
00:41:28,600 --> 00:41:31,400
Speaker 1: is it what's the big theme that that's kind of

786
00:41:31,440 --> 00:41:33,840
Speaker 1: driving your your your space these days.

787
00:41:34,280 --> 00:41:37,319
Speaker 9: Yeah, look, it's it's like everybody else in tech, it's

788
00:41:37,360 --> 00:41:41,600
Speaker 9: it's AI AI AI, right, And I think I mentioned

789
00:41:41,600 --> 00:41:45,239
Speaker 9: it to you once before on other shows. AI has

790
00:41:45,280 --> 00:41:49,680
Speaker 9: turned into a drinking game on conference calls. So now

791
00:41:50,080 --> 00:41:52,400
Speaker 9: it really is. If you don't have an AI growth

792
00:41:52,440 --> 00:41:56,919
Speaker 9: story as part of the long term thesis, you're really

793
00:41:56,960 --> 00:42:00,279
Speaker 9: not going to see the valuation expand, right we.

794
00:42:00,239 --> 00:42:02,440
Speaker 1: Wich, thanks so much for joining us. Appreciate getting a

795
00:42:02,440 --> 00:42:05,280
Speaker 1: few minutes of your time. Wujinhoe, Senior Harder analys Bloomberg

796
00:42:05,280 --> 00:42:11,400
Speaker 1: Intelligence via zoom from the Bloomberg Intelligence Global HQ in Princeton,

797
00:42:11,480 --> 00:42:14,239
Speaker 1: New Jersey. I saw John Butler in the background Keith

798
00:42:14,239 --> 00:42:16,399
Speaker 1: the Wrong on Nothing in the background. There so good,

799
00:42:16,440 --> 00:42:17,120
Speaker 1: good stuff.

800
00:42:17,120 --> 00:42:20,720
Speaker 5: You're listening to the tape cansur live program Bloomberg Markets

801
00:42:20,760 --> 00:42:24,160
Speaker 5: weekdays at ten am Eastern on Bloomberg Radio, the tune

802
00:42:24,200 --> 00:42:27,160
Speaker 5: in app, Bloomberg dot Com, and the Bloomberg Business App.

803
00:42:27,200 --> 00:42:30,000
Speaker 5: You can also listen live on Amazon Alexa from our

804
00:42:30,040 --> 00:42:35,080
Speaker 5: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

805
00:42:35,680 --> 00:42:38,480
Speaker 1: Big news in the world of media, I mean really

806
00:42:38,520 --> 00:42:40,920
Speaker 1: big news. When you think about media mobiles, there's a

807
00:42:40,920 --> 00:42:44,080
Speaker 1: bunch of them. Sumner Redstone, John Malone, I mean you

808
00:42:44,080 --> 00:42:46,960
Speaker 1: think about Ted Turner, but certainly at the appolute top

809
00:42:47,000 --> 00:42:48,880
Speaker 1: of that list, you got to put Rupert Murdock in.

810
00:42:49,120 --> 00:42:50,880
Speaker 1: It was announced by the company today that he was

811
00:42:50,880 --> 00:42:54,080
Speaker 1: stepping down from his role as chairman at Fox and

812
00:42:54,080 --> 00:42:57,160
Speaker 1: and News Corporations. We want to get some perspective on that,

813
00:42:57,200 --> 00:42:59,839
Speaker 1: and nobody better than Laura Martin. She's a senior media

814
00:43:00,120 --> 00:43:03,799
Speaker 1: list at Needham. She's covered this industry, this company, and

815
00:43:03,920 --> 00:43:07,759
Speaker 1: this man for decades. So Lauren, thanks for joining us here.

816
00:43:08,400 --> 00:43:10,640
Speaker 1: You know, I guess it's not unexpected. I mean, given

817
00:43:10,640 --> 00:43:12,759
Speaker 1: that he's ninety two years of old, ninety two years

818
00:43:12,800 --> 00:43:14,759
Speaker 1: of age, but still a big day in the world

819
00:43:14,800 --> 00:43:15,879
Speaker 1: of media and for news corp.

820
00:43:16,880 --> 00:43:18,600
Speaker 11: I agree with you one hundred percent. I think you

821
00:43:18,640 --> 00:43:21,160
Speaker 11: and I both Paul thought that Sumner Redstone would outlive

822
00:43:21,200 --> 00:43:23,359
Speaker 11: this guy, but it just wasn't true in the end.

823
00:43:23,800 --> 00:43:26,320
Speaker 11: It was like Out versus Fox. I guess Fox one.

824
00:43:26,600 --> 00:43:28,840
Speaker 11: But yeah, I think I think Wall Street's been expecting

825
00:43:28,840 --> 00:43:30,759
Speaker 11: this guy to step down for the last decade, and

826
00:43:30,800 --> 00:43:32,759
Speaker 11: here he is finally stepping down at ninety two.

827
00:43:33,360 --> 00:43:36,360
Speaker 10: It's unclear how heavy a hand.

828
00:43:36,160 --> 00:43:38,279
Speaker 11: He's had in the you know, in the business of

829
00:43:38,360 --> 00:43:41,439
Speaker 11: the company for the last four years, so I don't

830
00:43:41,440 --> 00:43:43,440
Speaker 11: know how much will actually change with him stepping down,

831
00:43:43,480 --> 00:43:46,640
Speaker 11: but certainly the last of an era. I think John

832
00:43:46,680 --> 00:43:48,719
Speaker 11: Malone's the only one left that's sort of still on

833
00:43:48,760 --> 00:43:51,759
Speaker 11: the board of her brothers of that old guard. I

834
00:43:51,760 --> 00:43:53,759
Speaker 11: don't know if that's a positive or negative, but it's

835
00:43:53,760 --> 00:43:55,040
Speaker 11: certainly about time for.

836
00:43:55,160 --> 00:43:55,959
Speaker 10: Changing of the guard.

837
00:43:56,480 --> 00:44:00,320
Speaker 1: Yeah, absolutely. And you know, Ruper Murdock and the Reginal

838
00:44:00,320 --> 00:44:04,280
Speaker 1: News News Corporation now split into Fox and others certainly

839
00:44:04,320 --> 00:44:06,760
Speaker 1: had a huge impact in Australia initially where he initially

840
00:44:06,760 --> 00:44:10,160
Speaker 1: started the company, and then in Europe, particularly in the

841
00:44:10,280 --> 00:44:13,520
Speaker 1: UK and then ultimately here in the United States. Talk

842
00:44:13,520 --> 00:44:15,720
Speaker 1: to us about kind of the legacy you think Rupert

843
00:44:15,800 --> 00:44:18,280
Speaker 1: Murdoch has in the world of kind of global media.

844
00:44:20,200 --> 00:44:22,400
Speaker 11: You know, I think he was Remember he invented that

845
00:44:22,440 --> 00:44:25,600
Speaker 11: fourth network. Everybody set a fourth network wouldn't work at Fox,

846
00:44:25,640 --> 00:44:27,919
Speaker 11: and so he created a fourth network, proved it could

847
00:44:27,920 --> 00:44:30,480
Speaker 11: be done the help of Barry Diller and Michael Eisner,

848
00:44:31,320 --> 00:44:33,680
Speaker 11: and I think he proved to the world that the

849
00:44:34,120 --> 00:44:36,080
Speaker 11: you know, member, he only had prime time program he

850
00:44:36,120 --> 00:44:38,719
Speaker 11: didn't have all full day programming on time was one

851
00:44:38,760 --> 00:44:42,400
Speaker 11: hour less. He really innovated Fox News, huge innovation. When

852
00:44:42,480 --> 00:44:45,120
Speaker 11: you and I were covering these companies pulled together. You know,

853
00:44:45,239 --> 00:44:47,840
Speaker 11: remember he paid Everyone thought he was crazy. He paid

854
00:44:47,880 --> 00:44:50,200
Speaker 11: a dollar a month to get Fox News carried on

855
00:44:50,280 --> 00:44:53,360
Speaker 11: Comcast because they didn't need another news program they had CNN,

856
00:44:53,760 --> 00:44:54,480
Speaker 11: and he built that.

857
00:44:54,520 --> 00:44:55,919
Speaker 10: I think he paid him for five years.

858
00:44:55,960 --> 00:44:59,400
Speaker 11: And it became by buying that shelf space on cable television,

859
00:44:59,440 --> 00:45:02,360
Speaker 11: which at the time, I'm was sort of shelf capacity

860
00:45:02,400 --> 00:45:05,799
Speaker 11: constrained before they did their new buildouts for modems. You know,

861
00:45:05,920 --> 00:45:08,919
Speaker 11: he basically made Fox News. He put them on the

862
00:45:08,960 --> 00:45:11,680
Speaker 11: shelf and now it became probably the number one news

863
00:45:11,719 --> 00:45:13,719
Speaker 11: for the last decade, it's become the number one news

864
00:45:13,760 --> 00:45:16,600
Speaker 11: ratings channel. So thank good thank goodness, the linear bundle

865
00:45:16,640 --> 00:45:18,960
Speaker 11: house Fox News. But Rupert paid to get it on

866
00:45:19,520 --> 00:45:22,040
Speaker 11: and so literally he innovated a lot in media. He

867
00:45:22,080 --> 00:45:24,840
Speaker 11: really sort of changed how we see media today. Was

868
00:45:24,960 --> 00:45:28,960
Speaker 11: in large part influenced by Rupert Murdoch's decisions early on

869
00:45:29,160 --> 00:45:30,440
Speaker 11: in the ecosystem.

870
00:45:30,840 --> 00:45:35,280
Speaker 1: Yeah. Absolutely. And then about five years ago, Laura, he

871
00:45:35,440 --> 00:45:40,200
Speaker 1: sold the majority of his company to, you know, to

872
00:45:40,280 --> 00:45:43,960
Speaker 1: Walt Disney Company. And I guess in hindsight, that's a

873
00:45:44,000 --> 00:45:46,319
Speaker 1: pretty smart move. How do you think that deal is

874
00:45:46,320 --> 00:45:47,120
Speaker 1: going to be remembered?

875
00:45:48,719 --> 00:45:49,560
Speaker 10: Yeah, good question.

876
00:45:49,719 --> 00:45:51,919
Speaker 11: I mean, he basically doubled down on the linear TV

877
00:45:52,040 --> 00:45:54,400
Speaker 11: ecosystem and he sold all of his streaming rights in

878
00:45:54,440 --> 00:45:57,399
Speaker 11: all of his and all of his and he gave

879
00:45:57,400 --> 00:45:58,680
Speaker 11: it to the Walt Disney Company.

880
00:45:59,080 --> 00:46:02,120
Speaker 10: You know, seven billion is what he sold it for.

881
00:46:02,880 --> 00:46:03,960
Speaker 10: You know, it's unclear.

882
00:46:04,160 --> 00:46:06,760
Speaker 11: Maybe that deal looks expensive today, but is that Disney

883
00:46:06,760 --> 00:46:09,799
Speaker 11: mismanaging it or is that really the value.

884
00:46:10,200 --> 00:46:11,479
Speaker 10: I do think it's worth more.

885
00:46:11,520 --> 00:46:13,040
Speaker 11: Those assets are worth more in the hands of the

886
00:46:13,040 --> 00:46:14,759
Speaker 11: Walt Disney Company than they would have been in the

887
00:46:14,760 --> 00:46:15,760
Speaker 11: hands of Fox alone.

888
00:46:15,800 --> 00:46:17,360
Speaker 10: I think that to me is clear.

889
00:46:17,880 --> 00:46:21,920
Speaker 11: But the linear TV ecosystem is maybe more troubled than

890
00:46:22,160 --> 00:46:25,040
Speaker 11: they be new even at the time. I think it

891
00:46:25,080 --> 00:46:27,839
Speaker 11: will go down in history that time Warner sold out

892
00:46:27,880 --> 00:46:30,520
Speaker 11: at the peak, right that yuks seld out at the peak,

893
00:46:30,560 --> 00:46:31,719
Speaker 11: and that's the brilliant move.

894
00:46:32,160 --> 00:46:33,760
Speaker 10: I think it's a little less clear.

895
00:46:33,600 --> 00:46:37,520
Speaker 11: Yet on Fox whether he sold out at the right price,

896
00:46:37,560 --> 00:46:38,560
Speaker 11: too early or too late.

897
00:46:39,040 --> 00:46:41,480
Speaker 1: Do you think there might be any change in strategy

898
00:46:41,160 --> 00:46:44,840
Speaker 1: at the you know, Fox, or in any of the

899
00:46:44,840 --> 00:46:48,080
Speaker 1: companies now that he's stepped on officially as a chairman.

900
00:46:48,080 --> 00:46:49,719
Speaker 1: Do you think there of any change in strategy there?

901
00:46:50,960 --> 00:46:51,360
Speaker 10: I do.

902
00:46:51,520 --> 00:46:54,520
Speaker 11: I think youngsters are a little more inclusive, a little

903
00:46:54,600 --> 00:46:58,000
Speaker 11: less twenty. I think some of this Fox News controversy

904
00:46:58,080 --> 00:47:01,680
Speaker 11: is much more likely to come back, to my opinion,

905
00:47:01,800 --> 00:47:06,759
Speaker 11: back to moderate with youngsters running it without Rupert's sort

906
00:47:06,800 --> 00:47:09,160
Speaker 11: of sharp edge, because I think, you know, Rupert at

907
00:47:09,200 --> 00:47:12,920
Speaker 11: ninety two probably had a different view of you know,

908
00:47:13,080 --> 00:47:16,239
Speaker 11: entertainment versus news. I think Rupert always thought he was

909
00:47:16,239 --> 00:47:20,040
Speaker 11: making entertainment, not news, and I think Fox.

910
00:47:20,120 --> 00:47:21,279
Speaker 10: News has been criticized for that.

911
00:47:21,360 --> 00:47:24,840
Speaker 11: I wouldn't be surprised to see the son who's younger,

912
00:47:24,960 --> 00:47:30,160
Speaker 11: bring it back more towards news and less about entertainment.

913
00:47:31,200 --> 00:47:33,719
Speaker 1: Laurie, I know you were, you know, at the Walt

914
00:47:33,760 --> 00:47:36,560
Speaker 1: Disney had an investor day a couple of days earlier

915
00:47:36,680 --> 00:47:40,319
Speaker 1: this week here. What were your takeaways there? Because one

916
00:47:40,320 --> 00:47:42,880
Speaker 1: could argue, Bob Iger, boy, this is as tough as

917
00:47:42,920 --> 00:47:44,960
Speaker 1: it's ever been to run a media company.

918
00:47:46,880 --> 00:47:47,040
Speaker 3: You know.

919
00:47:47,160 --> 00:47:47,760
Speaker 10: I agree.

920
00:47:47,880 --> 00:47:51,319
Speaker 11: I think the skill that people underestimate that Bob Iger has,

921
00:47:51,400 --> 00:47:53,600
Speaker 11: like he said twice, I'm going to quiet the noise.

922
00:47:53,960 --> 00:47:57,120
Speaker 11: I think that is Bob Iger's core value skill, which

923
00:47:57,200 --> 00:48:01,960
Speaker 11: is he put back the organ So content is first.

924
00:48:02,360 --> 00:48:04,880
Speaker 11: He's going to quiet the noise with DeSantis, He's going

925
00:48:04,920 --> 00:48:08,080
Speaker 11: to quiet the noise with regulators and all the local communities.

926
00:48:08,080 --> 00:48:10,839
Speaker 11: He has one hundred and seventy thousand park employees. Ye,

927
00:48:11,120 --> 00:48:13,560
Speaker 11: he's going to quiet the noise. And he says, we're

928
00:48:13,560 --> 00:48:16,400
Speaker 11: going back. Our job is to entertain, not to be

929
00:48:16,480 --> 00:48:20,920
Speaker 11: issues focused. So that's an easier task and it's safer

930
00:48:21,000 --> 00:48:22,200
Speaker 11: for the Walt Disney company.

931
00:48:22,560 --> 00:48:24,440
Speaker 10: So I think he's going to go back and create

932
00:48:24,480 --> 00:48:27,560
Speaker 10: sort of this cone of silence that let's creative people

933
00:48:27,640 --> 00:48:28,720
Speaker 10: do creative things.

934
00:48:29,280 --> 00:48:31,759
Speaker 11: And I think the reason that Disney has been the

935
00:48:31,800 --> 00:48:35,160
Speaker 11: Disney content has been so poorly received at box office

936
00:48:35,400 --> 00:48:37,759
Speaker 11: is because of all the noise. And he's going to

937
00:48:37,800 --> 00:48:39,960
Speaker 11: go back and say, look, our job is to entertain.

938
00:48:40,040 --> 00:48:42,319
Speaker 11: Let's keep our eye on the ball, and let's make

939
00:48:42,360 --> 00:48:45,680
Speaker 11: great stories that have nothing to do with the issues

940
00:48:45,880 --> 00:48:47,480
Speaker 11: surrounding us in the real world.

941
00:48:47,640 --> 00:48:49,320
Speaker 10: And I think that's good for content creation.

942
00:48:49,840 --> 00:48:52,719
Speaker 1: How do you think was there any I guess to

943
00:48:52,760 --> 00:48:55,560
Speaker 1: what extent did they frame the whole move towards streaming.

944
00:48:55,600 --> 00:48:58,640
Speaker 1: I know this was an investor event focused on the

945
00:48:58,640 --> 00:49:00,960
Speaker 1: theme parks, but obviously the big issue for Disney and

946
00:49:01,000 --> 00:49:02,480
Speaker 1: for all the media companies is how they're going to

947
00:49:02,480 --> 00:49:06,280
Speaker 1: effectively evolve into streamers. What's what's the current thinking at Disney.

948
00:49:07,680 --> 00:49:09,799
Speaker 11: So, Paul, it was so interesting, I mean, and that

949
00:49:09,960 --> 00:49:11,480
Speaker 11: was one if you've been in the audience with me,

950
00:49:11,520 --> 00:49:12,880
Speaker 11: that was one of the big silences.

951
00:49:13,080 --> 00:49:14,800
Speaker 10: They did not mention streaming.

952
00:49:15,080 --> 00:49:17,719
Speaker 11: They did have the ESPN CEO on stage, you know,

953
00:49:17,760 --> 00:49:19,920
Speaker 11: and that has to do with streaming, because he's eventually

954
00:49:19,920 --> 00:49:23,160
Speaker 11: going to launch a core ESPN app, but totally unclear

955
00:49:23,200 --> 00:49:25,560
Speaker 11: on timing the things he was saying he wants to

956
00:49:25,600 --> 00:49:27,640
Speaker 11: integrate into this app sound to me like they're going

957
00:49:27,680 --> 00:49:30,200
Speaker 11: to take three years to execute, which just doesn't even

958
00:49:30,239 --> 00:49:33,040
Speaker 11: mean it's in an investment timeframe. So really a lot

959
00:49:33,080 --> 00:49:37,280
Speaker 11: of silence around the strikes, around the streaming business, around

960
00:49:37,320 --> 00:49:40,120
Speaker 11: the linear TV economics, which was super top of mind

961
00:49:40,120 --> 00:49:42,600
Speaker 11: because of the Charter Resolute deal resolution.

962
00:49:43,360 --> 00:49:45,000
Speaker 10: Really real silence is on that.

963
00:49:45,120 --> 00:49:47,360
Speaker 11: The main focus was they're going to double CAPEX to

964
00:49:47,440 --> 00:49:49,880
Speaker 11: sixty billion over the next ten years, and they're going

965
00:49:49,920 --> 00:49:52,480
Speaker 11: to sync it into parks and cruise ships and Disney

966
00:49:52,520 --> 00:49:55,960
Speaker 11: vacation villages, and they're going to try some management contracts

967
00:49:55,960 --> 00:49:58,759
Speaker 11: out here in Palm Springs near me. So that was

968
00:49:58,800 --> 00:50:01,640
Speaker 11: really I would say three hours of the total five

969
00:50:01,680 --> 00:50:03,480
Speaker 11: hour day, and then there was an hour Q and

970
00:50:03,520 --> 00:50:06,120
Speaker 11: A and an hour of you know, ESPN the Core

971
00:50:06,239 --> 00:50:08,640
Speaker 11: app launch and what it's going to entail. But they

972
00:50:08,640 --> 00:50:11,160
Speaker 11: didn't talk pricing and they didn't talk timing, and that

973
00:50:11,280 --> 00:50:12,400
Speaker 11: was the only time they touched.

974
00:50:12,280 --> 00:50:12,919
Speaker 10: Streaming at all.

975
00:50:12,920 --> 00:50:16,880
Speaker 1: Interesting. What's the feeling that I get your opinion about

976
00:50:16,880 --> 00:50:20,120
Speaker 1: this Capex and the focus on the parks and the cruises.

977
00:50:20,520 --> 00:50:21,920
Speaker 1: Is that a good strategy in your opinion?

978
00:50:23,880 --> 00:50:24,759
Speaker 10: You know, I think the.

979
00:50:24,719 --> 00:50:27,000
Speaker 11: Most interesting thing to meet Paul I think you were

980
00:50:27,000 --> 00:50:29,480
Speaker 11: in the room when five years ago I spend this

981
00:50:29,520 --> 00:50:31,840
Speaker 11: big and in twenty eighteen when they said big shift

982
00:50:31,880 --> 00:50:34,520
Speaker 11: to streaming and the stock ran way up, and it

983
00:50:34,600 --> 00:50:36,160
Speaker 11: was like streaming is our growth driver.

984
00:50:36,320 --> 00:50:37,880
Speaker 10: And I felt exactly.

985
00:50:37,400 --> 00:50:40,680
Speaker 11: At that moment again, but with theme parks and so

986
00:50:41,040 --> 00:50:43,719
Speaker 11: theme parks, as you know, Paul, have much more capital intensity.

987
00:50:44,000 --> 00:50:46,120
Speaker 11: So whatever, if this is going to be their growth driver,

988
00:50:46,719 --> 00:50:49,840
Speaker 11: the valuation multiple of Disney should come down compared to

989
00:50:49,880 --> 00:50:51,960
Speaker 11: what we thought growth was going to be driven by streaming,

990
00:50:51,960 --> 00:50:53,319
Speaker 11: which is much more capital light.

991
00:50:53,560 --> 00:50:55,560
Speaker 1: In theory, yep, And yeah, I know you focus a

992
00:50:55,560 --> 00:50:58,120
Speaker 1: lot on return on invested capital, but it seems like

993
00:50:58,160 --> 00:51:01,319
Speaker 1: Disney gets the best out of that, you know, theme

994
00:51:01,360 --> 00:51:03,560
Speaker 1: park kpex relative to anybody else out there.

995
00:51:04,880 --> 00:51:05,279
Speaker 10: They do.

996
00:51:05,320 --> 00:51:09,440
Speaker 11: Their returns are absolutely fabulous compared to other people. Compared

997
00:51:09,440 --> 00:51:12,640
Speaker 11: to other people, but compared to the virtual world, real

998
00:51:12,680 --> 00:51:16,319
Speaker 11: life assets. They have regulatory risk, they have COVID disease risks,

999
00:51:16,320 --> 00:51:18,799
Speaker 11: they have shutdown risks. You've got parks in Shanghai and

1000
00:51:18,840 --> 00:51:22,120
Speaker 11: Hong Kong. So a decent question is, look, the Chinese

1001
00:51:22,160 --> 00:51:25,200
Speaker 11: government is using Apple as a pawn because we're us,

1002
00:51:25,280 --> 00:51:26,360
Speaker 11: is trying to kick out TikTok.

1003
00:51:26,360 --> 00:51:27,200
Speaker 10: They're like, well, we're not.

1004
00:51:27,160 --> 00:51:30,320
Speaker 11: Going to let employees of the government use Apple phones.

1005
00:51:30,520 --> 00:51:33,279
Speaker 11: At what point do they suddenly have used Disney in

1006
00:51:33,360 --> 00:51:36,279
Speaker 11: Shanghai Disney as a pond too. Right, So there's risk

1007
00:51:36,320 --> 00:51:39,760
Speaker 11: and real assets that don't exist in the global virtual

1008
00:51:39,800 --> 00:51:41,759
Speaker 11: world because if they kick you out, it's okay, you

1009
00:51:41,800 --> 00:51:44,319
Speaker 11: can go make money in France or Argentina.

1010
00:51:44,480 --> 00:51:46,680
Speaker 1: Right, all right, Laura, thank you so much for joining

1011
00:51:46,760 --> 00:51:48,759
Speaker 1: us the absolute go to voice when we want to

1012
00:51:48,800 --> 00:51:51,920
Speaker 1: talk about the big media stories of the day. In

1013
00:51:51,960 --> 00:51:54,880
Speaker 1: Rupert Murdock stepping down as chairman at News Corporation in

1014
00:51:54,920 --> 00:51:57,360
Speaker 1: Fox certainly one of those, Laura Martin. She is a

1015
00:51:57,400 --> 00:52:00,120
Speaker 1: senior media analyst at Needham and Company. She's based at

1016
00:52:00,120 --> 00:52:02,520
Speaker 1: in La, so certainly a feet on the ground.

1017
00:52:02,640 --> 00:52:05,719
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

1018
00:52:05,760 --> 00:52:09,520
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1019
00:52:09,600 --> 00:52:13,320
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

1020
00:52:13,560 --> 00:52:15,719
Speaker 2: at Matt Miller nineteen seventy three.

1021
00:52:15,920 --> 00:52:18,280
Speaker 1: And I'm Faull Sweeney I'm on Twitter at pt Sweeney.

1022
00:52:18,400 --> 00:52:21,080
Speaker 1: Before the podcast, you can always catch us worldwide at

1023
00:52:21,080 --> 00:52:22,839
Speaker 1: Bloomberg Radio