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Speaker 1: Who you put your trust in matters. Investors have put

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Speaker 1: their trust and independent registered investment advisors to the two

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Speaker 1: and four trillion dollars. Why learn more and find your

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Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and

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Speaker 1: of course, on the Bloomberg. Hello everybody, David Gura, Tom

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Speaker 1: Keith Throwd. You're with us on a Friday. We're gonna

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Speaker 1: give you lots of smaller interviews today. Richard Greenfield with

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Speaker 1: B T I G here on Time, Warner, A, T

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Speaker 1: and T and the rest of media. Rich Greenfield, what's

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Speaker 1: the level a sweat in your industry? You see the

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Speaker 1: Wall Street Journal doing a huge restructuring. You see other

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Speaker 1: people rationalizing. I mean, the whole media, the whole content

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Speaker 1: business is in chaos right now, isn't it. Well? Tom,

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Speaker 1: You look at the music industry, you know, which went

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Speaker 1: through a major, major disruption really started in the year

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Speaker 1: two thousand and Music is just beginning to get better now.

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Speaker 1: This will probably the first year where you see growth

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Speaker 1: of a much lower level. My point being that, you know,

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Speaker 1: what sixteen seventeen years for the industry to recover from

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Speaker 1: digital disruption. I think the video industry, you know, TV,

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Speaker 1: that whole business is at the very early stages disruption

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Speaker 1: from the Internet. What does Mr Bucus have at Time

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Speaker 1: Warner that everybody seems to want, Well, I think you have.

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Speaker 1: You know, the reality is it's all about content, right,

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Speaker 1: great content, And I think there's lots of distribution platforms

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Speaker 1: in technology platforms that probably look at that high quality

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Speaker 1: content and go, if we could marry the two together,

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Speaker 1: you could create something special. Uh. And you know, when

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Speaker 1: you think about content, not only do you have Warner Brothers,

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Speaker 1: but HBO really creates its own content. HBO doesn't really

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Speaker 1: buy content from other people. They create, you know, when

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Speaker 1: they create Game of Thrones, that's an HBO production. And

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Speaker 1: so you're really looking at you know, obviously you've got Turner,

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Speaker 1: which is um, you know, kind of a programming business.

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Speaker 1: But in terms of HBO and Warner Brothers, you have

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Speaker 1: two of the world's most successful content assets available. If

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Speaker 1: I'm going to buy a pie, if Time Warner Is

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Speaker 1: the pie is the whole thing looking tasty to me?

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Speaker 1: Or is it HBO? Is it these these component parts

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Speaker 1: of Time Warner. There are things that a company like uh,

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Speaker 1: you know that a T T would be interested in.

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Speaker 1: I think you have to believe that they'd be focused

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Speaker 1: on HBO and Warner Brothers and a whole lot less

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Speaker 1: interested in Turner. That being said, you know, you think

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Speaker 1: about um when you think about H and T. Obviously

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Speaker 1: that's a mobile business or the primary part of their

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Speaker 1: business is mobile. You think about what has Time Warner

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Speaker 1: done well and mobile? You would say CNN. I mean,

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Speaker 1: CNN has done a very good job executing in mobile,

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Speaker 1: far better than Fox News has and so you know, look,

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Speaker 1: I think overall, Turner probably is not nearly as interesting

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Speaker 1: to whether we're talking a T and T or Apple

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Speaker 1: or Google. We we could go through a long list

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Speaker 1: of potential other buyers. The reality is the crown jewels.

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Speaker 1: We've always believed our HBO and Warner Brothers. What's been

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Speaker 1: the outcome of that acquisition of Direct TV by by

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Speaker 1: all counts of success, What have the challenge has been

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Speaker 1: of that of that deal? And how could that influence

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Speaker 1: this one? I think they became the largest pay TV companies,

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Speaker 1: so there's more subscribers. They have more video subscribers and

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Speaker 1: even comcasts, so they are the industry leader in the

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Speaker 1: video business through that acquisition, not to mention from a

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Speaker 1: cash standpoint, to generate generated a lot of cash to

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Speaker 1: pay the dividend that's so important to a T and

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Speaker 1: T investors. Do you buy into the argument that we're

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Speaker 1: gonning to a point of saturation when it comes to

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Speaker 1: content that every everyone is trying so desperately to create it,

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Speaker 1: there might be too much of it. You know, Bob

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Speaker 1: Iger spoke a few weeks ago and he was up

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Speaker 1: at the bc CEO Club and he probably gave what

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Speaker 1: I think is the most important comment of the year,

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Speaker 1: maybe even of the decade, where he said, look, we

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Speaker 1: have Pixar, we have Disney, we have Marvel. But in

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Speaker 1: this age um without having a direct relationship with the

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Speaker 1: consumer and data on what consumers are doing, great content

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Speaker 1: may no longer be enough. And so I think when

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Speaker 1: you put it through that lens of great content needs

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Speaker 1: to be married with distribution. I think when you think

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Speaker 1: about Time Warner, it really makes you think that there's

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Speaker 1: lots of possible potential buyers over the course of the

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Speaker 1: next couple of years, Rich, Before I let you go,

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Speaker 1: what's your single best buyer right now? We have two

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Speaker 1: favorite ideas on the long side would be neut X

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Speaker 1: and Viacom. We think Viacom cbs are going to emerge,

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Speaker 1: and we think Netflix is the future of how people

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Speaker 1: watch television. And our favorite short idea right now is Disney,

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Speaker 1: which we've been focused on as a short since last year.

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Speaker 1: Then we'll let you go to Disney World with your family.

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Speaker 1: I understand that with Netflix very quickly here, Rich Greenfield,

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Speaker 1: Netflix is some worry about the cash flow. Those worries

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Speaker 1: go away. Where do they invest less and so they'll

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Speaker 1: be better cash flow? You know, doing something someone's never

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Speaker 1: done before is never easy for Wall Street to get

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Speaker 1: their arms around. No one's ever tried to build out

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Speaker 1: a global platform for content creation and distribution. It takes

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Speaker 1: a lot of money. Uh, there's no doubt they are

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Speaker 1: forward investing something that legacy media companies, as you know, Tom,

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Speaker 1: are not really good at. They're all about hitting numbers

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Speaker 1: and making sure they get to their earnings estimates of

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Speaker 1: the executives get paid tens of millions of dollars. They're

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Speaker 1: not about investing in building businesses and going into you know,

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Speaker 1: basically losing lots of money on the free casual. Gotta go,

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Speaker 1: Rich Greenfield, thank you so much. We learned yesterday from

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Speaker 1: Bloomberg News. Senior executives at A T and ten Time

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Speaker 1: Warner have met in recent weeks to discuss various business strategies,

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Speaker 1: including a possible merger. According to people who are familiar

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Speaker 1: with the matter, those talks are preliminary, very preliminary. At

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Speaker 1: this point, I want to bring in Brian Weezer. He

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Speaker 1: is senior analyst overseeing advertising, media and Internet for Pivotal.

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Speaker 1: He joins us, now appreciate having you here. Brian, help

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Speaker 1: us understand the complimentarity here, uh, and give us your

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Speaker 1: sense of how likely it is we could see a

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Speaker 1: deal on this front. Well, thanks for having me. Um

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Speaker 1: you know, the comimentarity is, Uh, it's not as clear

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Speaker 1: as say the Fox attempt to acquisition previously or some

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Speaker 1: of the other um em andy i is that have

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Speaker 1: been floated. Uh. It's not unlike Comcast owning NBC Universal

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Speaker 1: and owning it's a distribution platform. But it's really a

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Speaker 1: bit more of a stress than that it's covering a

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Speaker 1: lot of telecom assets. So you could argue there's some

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Speaker 1: complimentarity in that in the future more content gets delivered

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Speaker 1: through mobile devices, um and so there's something there, But

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Speaker 1: the reality of these are very different businesses. And you

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Speaker 1: could argue that from an A T and T perspective,

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Speaker 1: at which I don't cover as you clarify, but from

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Speaker 1: let's say, more generically a telecope perspective, it's a hedge

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Speaker 1: UH to have a position both in the infrastructure of

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Speaker 1: content delivery as well as in UH content packaging. Probably speaking,

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Speaker 1: how important is it to have a hedge like that today?

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Speaker 1: It depends who you are. If you're the management of

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Speaker 1: a company that wants to make sure that your enterprise

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Speaker 1: is more likely to be around and growing in five, ten,

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Speaker 1: and twenty years, it's relatively important. If you're an investor,

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Speaker 1: you might for ahead yourself. You mentioned that that that

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Speaker 1: Century Fox over true, the one that was twenty century

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Speaker 1: Fox overture that was rejected by by Time Warner. That was,

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Speaker 1: I mean a big offer sell or. So what what

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Speaker 1: went wrong with that deal? Well, you know, it sounds

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Speaker 1: like it wasn't enough um and and so that does

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Speaker 1: speak to UH the idea that certainly an offer would

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Speaker 1: need to be pretty robust if if there were to

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Speaker 1: be one, UM from an A, T and T. So

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Speaker 1: I think Time Warner is certainly willing seller. I don't

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Speaker 1: think anyone's surprised by that. The question will be whether

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Speaker 1: or not there's math that can make it work. Um.

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Speaker 1: You know, as they said, there's not. There there are

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Speaker 1: far more synergies between a Fox Time Warner absolution, so

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Speaker 1: many more costs to be driven out and re synergies too.

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Speaker 1: I mean, the overlays are very different. Brian Weiser, in

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Speaker 1: your study of media, what is the cultural success of

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Speaker 1: distribution people made with media content? People? Do they take well?

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Speaker 1: Do they take lunch well? Together? They have to really

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Speaker 1: keep themselves pretty separate. I mean, and I think you know,

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Speaker 1: Comcast has I think which also I don't cover my

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Speaker 1: colleague does. But Comcast I think is succeeded in almost

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Speaker 1: in spite of those uh um challenges. Uh. You know,

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Speaker 1: you could certainly argue that. UM. I mean it's very

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Speaker 1: clear that the on the NBCU side, on the Comcast side,

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Speaker 1: I mean, there's a real separation in terms of how

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Speaker 1: they operate. UM. Uh that's the model. Comcast is the

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Speaker 1: model of what everybody's trying to do. Is that the

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Speaker 1: right statement? Not everybody, not everybody, But I think there's certainly,

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Speaker 1: I mean to clarify, there's far more in common between

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Speaker 1: the legacy Comcast or Cable UH company and uh NBC

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Speaker 1: Universal Content Packaging Company, in the same way that Direct

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Speaker 1: TV and Time Warner have far more in common than

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Speaker 1: the legacy A, T and T does with the rest

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Speaker 1: of those two enterprises. And so it's culturally somewhat easier,

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Speaker 1: I would think, because there is so much common interaction

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Speaker 1: and common understanding. But between those two n c so

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Speaker 1: even though they're culturally different and you can kind of

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Speaker 1: move people between them, they still have to operate uh

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Speaker 1: very separately. Um. But when you bring in the much

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Speaker 1: bigger telco business, um, where culturally no, these these entities

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Speaker 1: don't typically live in the same space at all. I mean,

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Speaker 1: just go back to, you know, the the lazy A,

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Speaker 1: T and T broadband effort, which ironically begat what is

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Speaker 1: Comcast now? Um? When they bought T C I, Um,

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Speaker 1: you know, I don't think they owned it long enough

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Speaker 1: to really create an attempt to create any cultural cohesion

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Speaker 1: but I think that it's it's it's there's such a vast,

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Speaker 1: vast companies and frankly being based in Texas doesn't help. Um,

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Speaker 1: you know, Philadelphia is not far away from New York

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Speaker 1: count Yeah, let me ask you a technical question here.

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Speaker 1: You look at what Comcast is doing. They've had the

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Speaker 1: triple play. Now they're talking about a quadruple play. They're

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Speaker 1: they're putting more faith in moving to wireless, having a

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Speaker 1: wireless network. When you look at at where these other

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Speaker 1: companies are going, is is that it? And how long

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Speaker 1: is it going to take to get there to to

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Speaker 1: to bring in that wireless component. Well, you know, I

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Speaker 1: mean content is delivered to all sorts of devices now

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Speaker 1: that when we're talking about video based content, UM, the

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Speaker 1: vast majority of it is still delivered to a traditional

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Speaker 1: TV set. It's something like UM and sure that diminishes

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Speaker 1: as time progresses, but it's um, it's hard to imagine.

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Speaker 1: You know, there's the dream of you know, tenants fifteen

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Speaker 1: years ago, which I fear that some of the telecost

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Speaker 1: may still be rooted in that you're just going to

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Speaker 1: watch your content on your handset, you know, while you're

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Speaker 1: commuting and and that's how everyone's going to consume TV

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Speaker 1: going forward is ridiculous. I mean, the vast majority of

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Speaker 1: TIVA conception will continue to happen in the home, and

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Speaker 1: that can mean it comes across arranging devices which could

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Speaker 1: be connected to WiFi, could be connected through a broadway connection,

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Speaker 1: in even a cable or connection. Brian, you've been a

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Speaker 1: great defender of the success of traditional TV. With all

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Speaker 1: the tumult in the United Kingdom in the US over

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Speaker 1: this shift to digital, what's the truism you would emphasize

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Speaker 1: everybody's restructuring. A Wall Street Journal happens to be the

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Speaker 1: latest in the New York Times, I believe the Daily

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Speaker 1: Mail I can't, and the Independent, the newspapers are all

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Speaker 1: caving in, etcetera. What's the message for our listeners you

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Speaker 1: would give on the great shift to digital? It's evolutionary,

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Speaker 1: That's the main point there. There there are gradual changes,

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Speaker 1: and there rarely is rapid as um it might be

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Speaker 1: believed if one only believe the press release is put

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Speaker 1: out by the companies that have an interest in propagating

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Speaker 1: that future vision. We saw The Times name a new

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Speaker 1: deputy publisher this week, A G. Salzburger, waiting in the wings.

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Speaker 1: Now he of course was. It's a very young man.

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Speaker 1: The author of a digital strategy report for The New

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Speaker 1: York Times, Tom brings up the Times. When you look

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Speaker 1: at the state of newspapers, let's say in this country today,

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Speaker 1: you optimistic. You know, we we have here the infusion

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Speaker 1: of some young blood in the Times as executive ranks.

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Speaker 1: Are you confident the Times is going to be around

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Speaker 1: and healthy here in five fifteen years. Optimism is all relative, um,

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Speaker 1: which is to say, if if you're declined by negative

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Speaker 1: ten percent year of a year, going to a negative

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Speaker 1: seven or eight sounds pretty good. Um. And so when

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Speaker 1: I think of the newspaper industry in general, uh, there's

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Speaker 1: not a lot of reason to be very optimistic. UM.

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Speaker 1: I think that, uh, there is some sort of what's

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Speaker 1: the reverse of a plateau, or I guess it's still

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Speaker 1: a plateau, it's just on the valley. Yes, there's a

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Speaker 1: valley that eventually, I think some of the premium and

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Speaker 1: really differentiated titles can eventually get to UM. And so

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Speaker 1: you think of at the Times, the Wall Street Journal,

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Speaker 1: and they f tier probably relatively protected um, primarily because

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Speaker 1: there and I would argue Bloomberg Media as well. Um

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Speaker 1: from a from a outside the terminal business, but from

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Speaker 1: a just because the consumer bases is just very different

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Speaker 1: and who's paying for the content, it's different. Um. But

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Speaker 1: when you start to look at a more general interest content,

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Speaker 1: so in New York Times, Western Post um, those guys

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Speaker 1: are really differentiating or investing heavily in their journalism are

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Speaker 1: going to have a business in the future. It may

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Speaker 1: not be as lucrative as it once was, but they'll

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Speaker 1: be around. The risk is that you know, titles that

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Speaker 1: are uh featuring relatively commoditized content um, or which are

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Speaker 1: not investing heavily in journalism or don't have a big

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Speaker 1: market um are not likely to you know, be around

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Speaker 1: for very long. Brian, thank you so much. Brand we'se

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Speaker 1: or pivotal research on the negotiations, the discussion. Our news

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Speaker 1: are Alex Sherman and the team. Uh, it's not like

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Speaker 1: a merger discuss might be just lunch at this it's

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Speaker 1: picking up the check. But yeah, early early days here.

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Speaker 1: The culture, the culture wars, if you will, the culture

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Speaker 1: battles and media as well in AT and T and

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Speaker 1: Time Warning of course they're a little bit on other

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Speaker 1: sporting areas of media. Who you put your trust in matters.

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Speaker 1: Investors have put their trust in independent registered investment advisors

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Speaker 1: to the two and of four trillion dollars. Why they

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Speaker 1: see their roles to serve, not sell. That's why Charles

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Speaker 1: Schwab is committed to the success over seven thousand independent

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Speaker 1: financial advisors who passionately dedicate themselves to helping people achieve

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Speaker 1: their financial goals. Learn more and find your independent advisor

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Speaker 1: dot com um. It is an honor to have Nick

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Speaker 1: Haman with us today, who has followed Generous Electric for

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Speaker 1: more than a few years. Nick I was thunderstruck at

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Speaker 1: the organic sales zero to two percent. To see a

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Speaker 1: zero figure come across the Bloomberg to me is something

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Speaker 1: Is that a big deal to use the word, you know,

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Speaker 1: because we had this big skew lined up for the

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Speaker 1: fourth quarter and here to date the organic sales on

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Speaker 1: the industrial are flat. So you know you're looking basically

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Speaker 1: at flat to uh, you know, resumably up some in

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Speaker 1: the fourth quarter. We've been thinking the fourth quarter was

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Speaker 1: gonna be up five to six percent, so we've got

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Speaker 1: to see what they goes say today. But bringing that down,

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Speaker 1: they they mentioned that they'd be moving towards the lower

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Speaker 1: end of that two to four, you know, after the

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Speaker 1: second year, so it was something slipped. Well are they

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Speaker 1: are they even if they're as ginormous as they are

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Speaker 1: at the end of the quarter, of the end of

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Speaker 1: the month, they got to bring in the orders, right, Well,

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Speaker 1: the orders are actually pretty decent, right they were, you know,

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Speaker 1: I mean less adverse. I guess they'd call it organically

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Speaker 1: down six instead of sixteen in the prior quarter. Overall,

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Speaker 1: um they were up sixteen and the industrial was up

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Speaker 1: twenty four. So you know, you're starting to get a

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Speaker 1: little traction certainly on the order side. And your backlog

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Speaker 1: organically year of a year is uh over the last

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Speaker 1: twelve months is up six percent. But you know, one

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Speaker 1: of the things we're trying to do here, Tom, is

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Speaker 1: they're trying to take and develop this market for project

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Speaker 1: finance with the new ge capital. And what that allows

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Speaker 1: is in essence, um, if you want to call it

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Speaker 1: the global junk bond for base infrastructure, it allows um,

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Speaker 1: you know, non developed and emerging countries to be able

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Speaker 1: to afford now they've all has had need, but to

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Speaker 1: be able to afford um, you know, power and obviously

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Speaker 1: transportation and this is this is a big new market

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Speaker 1: across the world for institutional investors, and g E and

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Speaker 1: Siemens and Mitchebese and others are at the forefront of

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Speaker 1: developing it. And it helps reduce than ges reliance on

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Speaker 1: global GDP, which we all know is is very tepid, uh,

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Speaker 1: particularly the industrial sector of the global economy, and that's

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Speaker 1: really the key breakaway to get that developed. Nick, Now

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Speaker 1: that GE Capital is no longer a Ciffy the Treasury

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Speaker 1: Department did away with that designation here a couple of

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Speaker 1: months ago. What's what's changed in terms of its strategy,

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Speaker 1: in terms of how it's approaching its line of business. Yeah,

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Speaker 1: we're going to have a dinner actually with the new

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Speaker 1: GE Capital senior management here in New York and not

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Speaker 1: early December. And what the idea is is to help

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Speaker 1: ring now um investors awareness to project finance. So when

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Speaker 1: I started at Drexel Milking had figured out the junk

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Speaker 1: bond market was really a lot less you know, you know,

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Speaker 1: embedded risk than the rating agencies. Here you have project

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Speaker 1: finance and the idea of investing in a hydro electric

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Speaker 1: project in Chad sounds pretty scary, actually, that's a huge

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Speaker 1: new market, which we think will be a fifteen to

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Speaker 1: twenty trillion dollars in financing UM opportunity through two thousand

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Speaker 1: and forty. So they're going to come in and explain

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Speaker 1: how by being able to not lend on their balance sheet,

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Speaker 1: but coordinate from sovereign wealth funds, from insurance companies and

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Speaker 1: institution investors, and have strong oversight and transparency, this is

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Speaker 1: gonna be a big deal. When when when when you

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Speaker 1: listen Nick came into President Trump or President Clinton talk

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Speaker 1: about we're going to build infrastructure. Take that to a

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Speaker 1: global basis, is that ge are they the ones that

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Speaker 1: are going to benefit from all the talk about quote

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Speaker 1: unquote infrastructure. That's a great question because we just had

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Speaker 1: one of our long time associates who is one of

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Speaker 1: the lead normanners at c JO Infrastructure leads at understanding

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Speaker 1: where infrastructure stands on all continents around the world, and

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Speaker 1: he told us Tom that the biggest fallacy right now

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Speaker 1: is we're going to move from monetary to physical stimulus

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Speaker 1: with big public works infrastructures. And the reason he said

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Speaker 1: is there's no shovel ready UM studies that have been

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Speaker 1: put in place so that you can immediately launch, you know,

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Speaker 1: and direct the capital. This is the same thing that

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Speaker 1: happened to John. Should we tell Nick came in about

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Speaker 1: street in Manhattan is being shovel ready? You know? The

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Speaker 1: good news is I just this is true? The port

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Speaker 1: Authority is going to finally fix the portal draw bridge. Oh,

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Speaker 1: I don't know if this is also the draw bitch

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Speaker 1: by blooming deals in the middle of Manhattan to get

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Speaker 1: across the room. David's safest bick. Let me ask you

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Speaker 1: about about g E as an I T company for

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Speaker 1: Jeffy Melt say this over and over again. We've all

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Speaker 1: seen seen the ads touting this. We've seen this transition

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Speaker 1: begun in earnest We had mrs today by Power and Aviation,

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Speaker 1: a beat by healthcare. Is that just a sign that

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Speaker 1: this transition is proceeding a pace that that we have

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Speaker 1: a company here that is more focused on computers and technology. Yeah. No,

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Speaker 1: they're moving along in this very well. They got two

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Speaker 1: nine Predicts Alliance Partners. They originally thought they'd have fifty

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Speaker 1: and then seventy this year. They had thirty seven back

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Speaker 1: at the end of June, so that's really growing. They've

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Speaker 1: got sixteen dollars and independent software developers writing apps for predicts.

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Speaker 1: That's up from ten thousand late June and none at

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Speaker 1: the start of this year. They're on track for twenty

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Speaker 1: by the end of this year. They've achieved half a

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Speaker 1: billion dollars of internal productivity from h GE Digitals UM

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Speaker 1: Productivity Enhancement UM and and in turn they're going to

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Speaker 1: see their target of five for the year. So yeah, there,

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Speaker 1: this is a business is gonna do six and a

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Speaker 1: half billion at external revenues this year, next year ten

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Speaker 1: billion and a very very significant contributer. Nick. We know

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Speaker 1: you've got it on a meeting to go to. We're

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Speaker 1: gonna let you go here and get on with your day,

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Speaker 1: Nick Ahman to help us uh so much. On the

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Speaker 1: general selected Dave David Gura. It is absolutely remarkable, and

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Speaker 1: I say this after seeing John Rice at one of

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Speaker 1: our Bloomberg events their vice chairman UM with Keith Sharon.

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Speaker 1: It is remarkable to look at the Bloomberg and folks

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Speaker 1: the screens GE Equity d s. It's a famous core

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Speaker 1: original screen of the Bloomberg GE Boston, Massachusetts. I've heard

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Speaker 1: Karen Moscow say that a few minutes ago. And you

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Speaker 1: you still still do a devil take when you hear it.

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Speaker 1: But the company moving its headquarters there, uh dig Jeff

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Speaker 1: animalt initiative and certainly encouraged by the current mayor of Boston.

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Speaker 1: And it was a hard fought fight. But we see

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Speaker 1: the company moving there. I'm gonna do a TV shoot

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Speaker 1: down Lexington Avenue to day already, shoot shoot, I gotta

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Speaker 1: get there. I'm taking the surveillance Dakorski of course. Uh.

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Speaker 1: With the old g E Building, John Tucker, the Old

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Speaker 1: g it's gorgeous building. It's like you walk in and

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Speaker 1: it's like a movie set. What is that our deco

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Speaker 1: for lease sign? You know? I saw some for lease

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Speaker 1: signs there on the ground level. If you need an office, John, So,

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Speaker 1: if you need an autograph, also show up today look

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Speaker 1: for Tom. Just don't get too closed with the with

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Speaker 1: the plague. I'm doing a little bit of Bloomberg mathematics

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Speaker 1: here on the I'm trying to get for you folks,

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Speaker 1: how miserable the mystery stock is the mystery stock? Would

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Speaker 1: you like to make fourteen point four six percent per

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Speaker 1: year for the last ten years? Would you like to

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Speaker 1: make fourteen point four or six percent per year? The

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Speaker 1: stock is in a crushing bear market. Of David, You're

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Speaker 1: you're not going to believe these numbers that there I

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Speaker 1: go the numbers. It's a terrible bear market of eleven

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Speaker 1: Sarah Senator on McDonald's actually does to help us out

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Speaker 1: here with Sanford bursting? Sarah, how grimmer things for McDonald's

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Speaker 1: if over the last ten years they've made fourteen point

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Speaker 1: five Um, well, I think you know, the where that

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Speaker 1: UM performance has been concentrated might tell a slightly different story, right, So,

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Speaker 1: uh yeah, we had a really good run from two

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Speaker 1: thousand and three to two thousand and eleven, and then

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Speaker 1: a bit of a trickier time up until this past year,

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Speaker 1: which has gotten better but maybe not uh not as

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Speaker 1: much better as people had hoped. Within this and if

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Speaker 1: I say to you, is McDonald a blue chip stuck?

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Speaker 1: That has to do with revenue persistency and then down

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Speaker 1: the income statement the persistency to deliver cash flow? Is

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Speaker 1: it the same as it used to be? UM? So,

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Speaker 1: I think the answer is no, both for both good

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Speaker 1: and bad. It is not the same as it was.

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Speaker 1: You know in the last two or three years where

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Speaker 1: you had negative revisions on the top line EPs we're

427
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Speaker 1: actually declining, but nor is it as good as it

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Speaker 1: was in sort of the halcyon days of that I

429
00:25:34,080 --> 00:25:37,280
Speaker 1: mentioned where every year those numbers were growing. So I

430
00:25:37,320 --> 00:25:39,560
Speaker 1: think what we're seeing is sort of stable. You know,

431
00:25:39,640 --> 00:25:42,960
Speaker 1: it's a it's a good, solid company which should be

432
00:25:43,000 --> 00:25:45,720
Speaker 1: able to grow with its industry, but maybe not a

433
00:25:45,720 --> 00:25:49,840
Speaker 1: whole lot faster. Help me understand the staying power of

434
00:25:49,880 --> 00:25:53,160
Speaker 1: the mcgriddle. We have this new new push for all

435
00:25:53,240 --> 00:25:57,080
Speaker 1: day I'm sorry, sir, I can't get These are like

436
00:25:57,280 --> 00:26:02,960
Speaker 1: cf A level questions, No apology, thank you, thank you,

437
00:26:03,119 --> 00:26:06,480
Speaker 1: I appreciate it. I am personally a fan, and clearly

438
00:26:06,760 --> 00:26:09,160
Speaker 1: I'm not alone there you go. I wonder if you're

439
00:26:09,200 --> 00:26:11,760
Speaker 1: a fan of having mcgriddle though for dinner, we have

440
00:26:11,840 --> 00:26:14,680
Speaker 1: this new impulse for for for all day breakfast. Is

441
00:26:14,720 --> 00:26:16,760
Speaker 1: that something that's little more than than a trend. Do

442
00:26:16,760 --> 00:26:18,600
Speaker 1: you think it's gonna last or people going to continue

443
00:26:18,600 --> 00:26:20,400
Speaker 1: doing this or or is this going to wear off

444
00:26:20,440 --> 00:26:23,199
Speaker 1: here in the next couple quarters? Well, you know, I mean,

445
00:26:23,240 --> 00:26:25,800
Speaker 1: I was just reading about the breakfast terry in movement,

446
00:26:25,960 --> 00:26:28,760
Speaker 1: So there's there's some staying power to this, right. There

447
00:26:28,760 --> 00:26:32,160
Speaker 1: are people who want to eat breakfast all day long,

448
00:26:32,280 --> 00:26:35,320
Speaker 1: and frankly, that's what we've seen over time. It's just, um,

449
00:26:35,359 --> 00:26:37,399
Speaker 1: you know, the way people eat, when they eat, what

450
00:26:37,440 --> 00:26:39,679
Speaker 1: they eat has become much more fluid. You know, the

451
00:26:39,720 --> 00:26:43,200
Speaker 1: idea of like three meals a day has disappeared. Um,

452
00:26:43,240 --> 00:26:47,000
Speaker 1: I would say for McDonald's purposes, Um, it's certainly been

453
00:26:47,600 --> 00:26:50,280
Speaker 1: uh incremental. There are certainly people who are who are

454
00:26:50,280 --> 00:26:52,960
Speaker 1: going to McDonald's who would not have other ones on

455
00:26:53,080 --> 00:26:56,040
Speaker 1: if they couldn't get their mcgriddle or their biscuit sandwich

456
00:26:56,080 --> 00:26:58,720
Speaker 1: or what your hash browns at four o'clock in the

457
00:26:58,760 --> 00:27:01,840
Speaker 1: afternoon or you know, And I think we're seeing that,

458
00:27:01,920 --> 00:27:04,320
Speaker 1: but it's it's it's it seems pretty small. Well, we

459
00:27:04,359 --> 00:27:07,919
Speaker 1: are fact based journalism and we need to fact check this. David,

460
00:27:07,960 --> 00:27:10,919
Speaker 1: I'd be pleased to let you know that one of

461
00:27:10,960 --> 00:27:17,760
Speaker 1: these puppies creates four calories of your saturated fat diet,

462
00:27:19,280 --> 00:27:23,800
Speaker 1: of your cholesterol diet, and it weighs in with sodium

463
00:27:23,840 --> 00:27:27,840
Speaker 1: of it admits to having some protein. There you go.

464
00:27:29,840 --> 00:27:32,120
Speaker 1: I have one stuff between the seats of my car.

465
00:27:32,880 --> 00:27:38,400
Speaker 1: It's not petrified Sarah. On that note, On that note,

466
00:27:38,440 --> 00:27:42,600
Speaker 1: we've had Steve Easterbrook talking more about moving McDonald's toward

467
00:27:42,720 --> 00:27:48,040
Speaker 1: healthier fair is it gonna happen? Look, you know I

468
00:27:48,040 --> 00:27:51,400
Speaker 1: think you have to you have to give some credence

469
00:27:51,440 --> 00:27:53,960
Speaker 1: to that right over time. You know, we do think

470
00:27:54,000 --> 00:27:57,119
Speaker 1: people care a little bit more about healthy eating. I

471
00:27:57,160 --> 00:27:59,680
Speaker 1: will say the definition of what healthy is has nothing

472
00:27:59,720 --> 00:28:02,040
Speaker 1: to do with any of the metrics that you just mentioned,

473
00:28:02,040 --> 00:28:04,560
Speaker 1: you know, calorie, sodium, any of that goodness. Right now,

474
00:28:04,800 --> 00:28:08,600
Speaker 1: it's about clean ingredients. It's about knowing you know that

475
00:28:08,720 --> 00:28:11,639
Speaker 1: the chicken is antibotic free, or the eggs or k

476
00:28:11,840 --> 00:28:14,720
Speaker 1: tree you know, the Dairius hormone free. It's it's about

477
00:28:15,200 --> 00:28:18,240
Speaker 1: people care a lot about problems. They don't care quite

478
00:28:18,280 --> 00:28:20,400
Speaker 1: so much about the fact that, you know, you get

479
00:28:20,400 --> 00:28:22,880
Speaker 1: a third of a day's galleries in the sandwich, right So,

480
00:28:22,880 --> 00:28:26,000
Speaker 1: so I think that's that's the attack that he's taking

481
00:28:26,600 --> 00:28:29,600
Speaker 1: all of these initiatives around supply chain. You know, we know,

482
00:28:30,160 --> 00:28:31,840
Speaker 1: you know, we know it doesn't matter how much you

483
00:28:31,880 --> 00:28:34,000
Speaker 1: market salads, they're never going to be more than two

484
00:28:34,040 --> 00:28:36,400
Speaker 1: percent of sales mix. They just aren't. People just don't

485
00:28:36,400 --> 00:28:39,280
Speaker 1: eat salads like that. So, um, it's really much more

486
00:28:39,320 --> 00:28:43,520
Speaker 1: about the supply chain and talking to those um, you know,

487
00:28:44,320 --> 00:28:47,120
Speaker 1: those characteristics. Let's move from the dietary metrics to the

488
00:28:47,120 --> 00:28:50,400
Speaker 1: financial ones. He has proposed your refranchising a bunch of

489
00:28:50,400 --> 00:28:55,040
Speaker 1: of restaurants and and cutting costs. Uh. Does that show

490
00:28:55,080 --> 00:29:00,000
Speaker 1: promise to you restructuring the way this company is right now? Yeah,

491
00:28:59,840 --> 00:29:03,040
Speaker 1: I think it's it's the it's it's it's a necessary

492
00:29:03,560 --> 00:29:06,160
Speaker 1: UM change in strategy. Again. You know, if you look

493
00:29:06,200 --> 00:29:09,400
Speaker 1: back over the last couple of years prior to this year, UM,

494
00:29:09,400 --> 00:29:12,360
Speaker 1: you know, really prior to the to the latter part

495
00:29:12,400 --> 00:29:17,160
Speaker 1: of UM, you had three years of pretty um, you know,

496
00:29:17,280 --> 00:29:21,640
Speaker 1: pretty anemic growth or even declines. UM. And I think

497
00:29:21,680 --> 00:29:23,400
Speaker 1: you know what what that told us is this is

498
00:29:23,400 --> 00:29:26,800
Speaker 1: a pretty mature business. It is probably best run in

499
00:29:26,840 --> 00:29:30,560
Speaker 1: the hands of franchise e s UM with McDonald's focusing

500
00:29:30,560 --> 00:29:33,760
Speaker 1: on being less capital intensive, more on those cash flow metrics,

501
00:29:33,800 --> 00:29:36,960
Speaker 1: more on your very consistent performance, which is something that's

502
00:29:37,000 --> 00:29:40,400
Speaker 1: easier to attain when you're not actually operating a lot

503
00:29:40,400 --> 00:29:43,840
Speaker 1: of restaurants. Very quickly, sir, before let you go an

504
00:29:43,920 --> 00:29:46,880
Speaker 1: update on the train wreck of the decade Chipotle. If

505
00:29:46,920 --> 00:29:51,000
Speaker 1: they turned it around, UM, they're you know, they're trying,

506
00:29:51,400 --> 00:29:53,480
Speaker 1: just trying very hard to claw their way out of

507
00:29:53,520 --> 00:29:56,400
Speaker 1: that hole that that e coal I put them in. Um,

508
00:29:56,440 --> 00:29:59,600
Speaker 1: it's it's it's happening, but it's happening more slowly than

509
00:29:59,640 --> 00:30:03,960
Speaker 1: I think. You know, most people, including management, would have liked. Yeah.

510
00:30:04,240 --> 00:30:07,720
Speaker 1: I rarely say negative things about companies. It's just not

511
00:30:07,800 --> 00:30:11,000
Speaker 1: my style, folks. David Gerrow and Sarah. I wasn't in

512
00:30:11,080 --> 00:30:15,400
Speaker 1: Chipotle the other day. I was stunned at how unclean

513
00:30:16,320 --> 00:30:21,720
Speaker 1: it was. I was thunderstruck and it was. There's never

514
00:30:21,840 --> 00:30:28,520
Speaker 1: been a McDonald's in my life, even approaching. Just stunned, Sarah,

515
00:30:28,520 --> 00:30:31,600
Speaker 1: Thank you so much. Never on enough, Sarah Senator with

516
00:30:31,760 --> 00:30:42,600
Speaker 1: her incredibly important report on the McDonald's sponsorship mc mcgriddle.

517
00:30:43,440 --> 00:30:46,600
Speaker 1: If you'd like to learn if you like, I couldn't

518
00:30:46,640 --> 00:30:49,040
Speaker 1: tell you what's on it, but I remember eating one one.

519
00:30:49,160 --> 00:30:51,160
Speaker 1: If you'd like to learn more about the mcgriddle, I

520
00:30:51,240 --> 00:30:57,000
Speaker 1: recommend the important Pulitzer Prise research a Hollis Johnson Business Insider.

521
00:30:57,240 --> 00:31:00,920
Speaker 1: This is the headline, David, I've tested nearly every fast

522
00:31:01,000 --> 00:31:05,840
Speaker 1: food breakfast item. In one sandwich is clearly better than

523
00:31:05,880 --> 00:31:09,920
Speaker 1: the rest. There you go, the the venerable mcgriddle, which

524
00:31:09,960 --> 00:31:12,120
Speaker 1: I remember from family road trips. It was a treat

525
00:31:12,240 --> 00:31:15,120
Speaker 1: to stop on I forty headed West at the McDonald's

526
00:31:15,120 --> 00:31:19,000
Speaker 1: outside Hillsboro, North Carolina. Absolutely. I love how Sarah Senator

527
00:31:19,160 --> 00:31:22,560
Speaker 1: makes sense of this. Uh industry. Sara Senator, thank you

528
00:31:22,600 --> 00:31:26,640
Speaker 1: so much. With Sanford BERSI and McDonald's up nicely today

529
00:31:26,720 --> 00:31:39,360
Speaker 1: up three points. Uh good good results from McDonald's. Thanks

530
00:31:39,360 --> 00:31:43,760
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

531
00:31:43,880 --> 00:31:49,200
Speaker 1: to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer.

532
00:31:49,960 --> 00:31:52,840
Speaker 1: I'm out on Twitter at Tom Keene. David Gura is

533
00:31:52,920 --> 00:31:56,680
Speaker 1: at David Gura. Before the podcast, you can always catch

534
00:31:56,800 --> 00:32:12,160
Speaker 1: us worldwide. I'm Bloomberg Radio m H. Who you put

535
00:32:12,200 --> 00:32:15,120
Speaker 1: your trust in? Matters? Investors have put their trust and

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