1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,600 Speaker 1: Podcast on Apple Podcasts, SoundCloud and Bloomberg dot com. Uh. 7 00:00:32,640 --> 00:00:36,720 Speaker 1: The long awaited French election is over and Emmanuel Matt 8 00:00:36,760 --> 00:00:40,479 Speaker 1: Crown has emerged as the victor, the President elect of 9 00:00:40,560 --> 00:00:43,560 Speaker 1: the Republic of France. And to break down what this means, 10 00:00:44,000 --> 00:00:47,200 Speaker 1: I want to bring a Maxim Savaji, Euro Area economist 11 00:00:47,280 --> 00:00:51,479 Speaker 1: for Bloomberg Intelligence coming to us from London and Maxim, 12 00:00:51,760 --> 00:00:54,800 Speaker 1: the first part has been one, which is the presidency. 13 00:00:54,840 --> 00:00:58,000 Speaker 1: But there is a long road ahead for President elect 14 00:00:58,520 --> 00:01:01,080 Speaker 1: Matt Crown and perhaps this is reflected in part by 15 00:01:01,080 --> 00:01:03,000 Speaker 1: the action in the markets that we're seeing today, with 16 00:01:03,000 --> 00:01:05,720 Speaker 1: some of the enthusiasm apparently being tempered. I mean you 17 00:01:05,720 --> 00:01:08,280 Speaker 1: could see that the euro is coming off a little 18 00:01:08,319 --> 00:01:11,280 Speaker 1: bit and declined versus the dollar just to touch. So, Maxium, 19 00:01:11,400 --> 00:01:16,720 Speaker 1: what are the biggest challenges that President Electmacraw faces going forward? Well, 20 00:01:16,760 --> 00:01:19,679 Speaker 1: the first Hello from London the first big challenges actually 21 00:01:19,760 --> 00:01:23,680 Speaker 1: to unify a country that is has been very dissunified 22 00:01:23,720 --> 00:01:26,720 Speaker 1: by this campaign. Um. The first hurdle that he is 23 00:01:26,800 --> 00:01:29,240 Speaker 1: facing is actually the next election. This is not a 24 00:01:29,319 --> 00:01:32,119 Speaker 1: two round election, it's a full round election. The next 25 00:01:32,120 --> 00:01:35,800 Speaker 1: one is the parliamentary election in June eleven and eighteen, 26 00:01:36,160 --> 00:01:39,280 Speaker 1: and there's nothing much a French president can do without 27 00:01:39,600 --> 00:01:42,440 Speaker 1: the parliament, without the National Assembly. So well, it will 28 00:01:42,480 --> 00:01:47,240 Speaker 1: have to secure parliamentary support first in order to implement 29 00:01:47,640 --> 00:01:50,400 Speaker 1: and to deliver on his campaign promises. One, if you 30 00:01:50,400 --> 00:01:52,520 Speaker 1: could just speak a little bit about the current state 31 00:01:52,560 --> 00:01:55,560 Speaker 1: of the French economy, I'll give you the numbers. Mainland 32 00:01:55,920 --> 00:02:00,680 Speaker 1: unemployment is nine point seven percent, total unemployment ten percent. 33 00:02:01,560 --> 00:02:04,040 Speaker 1: You have prices that are increasing. I think the latest 34 00:02:04,040 --> 00:02:07,880 Speaker 1: producer price uh index was up two point nine percent, 35 00:02:08,360 --> 00:02:12,160 Speaker 1: and you also have an economic picture where you have 36 00:02:12,240 --> 00:02:17,359 Speaker 1: a contracting economy. What can be done to forestall these 37 00:02:17,400 --> 00:02:21,080 Speaker 1: problems in the French economy. So, just to me dis 38 00:02:21,080 --> 00:02:23,120 Speaker 1: go the econdo, the French economy is not contracting. It 39 00:02:23,160 --> 00:02:26,120 Speaker 1: is actually growing. Um. It has slowed down a little 40 00:02:26,120 --> 00:02:29,520 Speaker 1: bit in the first quarter, but the growth rate remains positive. 41 00:02:29,560 --> 00:02:31,840 Speaker 1: So it is an economy that is doing better, but 42 00:02:32,040 --> 00:02:34,840 Speaker 1: that is far from being good. As you mentioned, unemployment 43 00:02:34,919 --> 00:02:39,120 Speaker 1: remains high by some measures, the Albo ten percent. The 44 00:02:39,160 --> 00:02:41,640 Speaker 1: economy is actually growing at at the two slow pace 45 00:02:41,800 --> 00:02:44,680 Speaker 1: to bring down unemployment. And that's the challenge for mccon. 46 00:02:44,960 --> 00:02:47,520 Speaker 1: He needs to kick start the economy. He needs to 47 00:02:47,520 --> 00:02:51,120 Speaker 1: make sure that the domestic factors get actually stronger. I'm 48 00:02:51,120 --> 00:02:53,840 Speaker 1: thinking about the investment for example, to make sure that 49 00:02:53,880 --> 00:02:56,079 Speaker 1: the economy is growing at a fast that is a 50 00:02:57,160 --> 00:03:00,799 Speaker 1: pace that is quick enough to finally bring out unemployment. 51 00:03:01,080 --> 00:03:03,440 Speaker 1: That's his first challenge, and he actually promised to bring 52 00:03:03,480 --> 00:03:06,760 Speaker 1: an employment down from ten percent actually to seven percent 53 00:03:06,960 --> 00:03:09,560 Speaker 1: at the end of his mandate in two thousand twenty two. 54 00:03:09,800 --> 00:03:11,400 Speaker 1: I would just look just to mention I just looking, 55 00:03:11,440 --> 00:03:14,680 Speaker 1: I was using the GDP deflator quarter of a quarter 56 00:03:14,760 --> 00:03:19,480 Speaker 1: down zero point one percent. Nominal GDP uh zero point 57 00:03:19,560 --> 00:03:23,400 Speaker 1: six percent, so just to give that context. Yeah, and 58 00:03:23,440 --> 00:03:26,399 Speaker 1: the real GDP obviously by zero point three percent over 59 00:03:26,400 --> 00:03:28,080 Speaker 1: the first quarter, which is a bit slower than than 60 00:03:28,160 --> 00:03:31,040 Speaker 1: the last quarter which was at zero point five percent. 61 00:03:31,639 --> 00:03:34,200 Speaker 1: But it's still an economy that is again growing. It's 62 00:03:34,240 --> 00:03:36,960 Speaker 1: not just because of domestic photos. If you look at 63 00:03:36,960 --> 00:03:39,440 Speaker 1: the euros on economy, it's actually doing pretty well. It 64 00:03:39,560 --> 00:03:42,560 Speaker 1: actually grew at a stronger pace in one queue than 65 00:03:42,600 --> 00:03:46,480 Speaker 1: in the US. So France is benefiting from the outside environment, 66 00:03:46,560 --> 00:03:50,480 Speaker 1: from a good regional momentum. But again what is missing 67 00:03:50,800 --> 00:03:53,200 Speaker 1: is the domestic factors, and it is the fact that 68 00:03:53,280 --> 00:03:57,080 Speaker 1: the recovery is playing in slow motion so far. Well, 69 00:03:57,080 --> 00:03:59,960 Speaker 1: when people were talking about the front elections, they talked 70 00:04:00,040 --> 00:04:05,320 Speaker 1: increasingly about the populist risk to the Euro Area's existence. 71 00:04:05,360 --> 00:04:07,920 Speaker 1: And while some are possibly saying that that risk has 72 00:04:07,920 --> 00:04:12,240 Speaker 1: been reduced somewhat by this recent election, how much of 73 00:04:12,240 --> 00:04:14,920 Speaker 1: people shifted their concern now to Italy and what is 74 00:04:14,960 --> 00:04:17,440 Speaker 1: going on there and the and the possibility of sort 75 00:04:17,440 --> 00:04:19,240 Speaker 1: of a repeat of some of the concerns that we've 76 00:04:19,240 --> 00:04:23,320 Speaker 1: seen over the past few weeks. So you're right in saying, actually, 77 00:04:23,320 --> 00:04:25,080 Speaker 1: if you look at the top four economy in the 78 00:04:25,160 --> 00:04:29,080 Speaker 1: in the Eurozone, Italy is probably the weakest link. Italy 79 00:04:29,279 --> 00:04:32,640 Speaker 1: is is the country where the economic outlook is the 80 00:04:32,680 --> 00:04:37,080 Speaker 1: weakest and also where euro skepticism is at his highest. 81 00:04:37,400 --> 00:04:39,520 Speaker 1: More than half of the population of Italy, if you 82 00:04:39,520 --> 00:04:42,440 Speaker 1: look at the polls, I think that next it from 83 00:04:42,440 --> 00:04:45,400 Speaker 1: the Eurozone is a good idea, and the growth is 84 00:04:45,520 --> 00:04:48,480 Speaker 1: much much lower than in France. UM and employment is higher, 85 00:04:48,920 --> 00:04:51,440 Speaker 1: debt to GDP ratio is much higher. So if you 86 00:04:51,520 --> 00:04:55,480 Speaker 1: compare France to Italy, actually France looks pretty pretty good. Um. 87 00:04:55,520 --> 00:04:58,760 Speaker 1: The political situation Italy is much more shaky than in France. 88 00:04:59,000 --> 00:05:00,800 Speaker 1: We don't know where the next elections is going to 89 00:05:00,880 --> 00:05:02,560 Speaker 1: take place, probably at the end of the year or 90 00:05:02,600 --> 00:05:06,320 Speaker 1: maybe next year. Um. And again with your skepticism so high, 91 00:05:06,600 --> 00:05:11,000 Speaker 1: combined with very high unemployment, you get actually a political terrorist. 92 00:05:11,200 --> 00:05:13,160 Speaker 1: That is that is more important in my opinion than 93 00:05:13,160 --> 00:05:17,479 Speaker 1: in France, especially now that Macon won the election. The 94 00:05:17,480 --> 00:05:23,200 Speaker 1: French industrial sector obviously competing globally, but as you mentioned, 95 00:05:23,360 --> 00:05:28,520 Speaker 1: within the euro Zone, what about the French competition with Germany. 96 00:05:28,880 --> 00:05:32,160 Speaker 1: Is this going to be a factor for Macro. While 97 00:05:32,160 --> 00:05:35,120 Speaker 1: he hasn't really campaigned on on playing on this, on 98 00:05:35,160 --> 00:05:38,479 Speaker 1: the competition with Germany, obviously, Germany is a country that 99 00:05:38,800 --> 00:05:41,880 Speaker 1: a lot of French politicians are looking at because you 100 00:05:41,960 --> 00:05:45,159 Speaker 1: have this economy that shares the same currency and that 101 00:05:45,279 --> 00:05:48,279 Speaker 1: is yet doing so well compared to France. So we 102 00:05:48,320 --> 00:05:50,359 Speaker 1: know that he's going to travel to Berlin over the 103 00:05:50,400 --> 00:05:52,679 Speaker 1: next days, that he's going to talk to the Chancellor 104 00:05:52,680 --> 00:05:56,400 Speaker 1: mercle that Chancellor Merkel was very happy with with the 105 00:05:56,440 --> 00:05:59,800 Speaker 1: election of Emmanuel mccorn. Now what's at stake is to 106 00:06:00,080 --> 00:06:04,000 Speaker 1: restart the Franco German relationship, what we call the model 107 00:06:04,080 --> 00:06:07,760 Speaker 1: of Europe, which has been been left aside over the 108 00:06:07,839 --> 00:06:11,000 Speaker 1: last year's with under the alarm mandate. So what really 109 00:06:11,040 --> 00:06:13,960 Speaker 1: matters here is how can France and Germany finally come 110 00:06:13,960 --> 00:06:18,120 Speaker 1: together and make Europe work again. I would say, make 111 00:06:18,160 --> 00:06:21,560 Speaker 1: your great again. I would there to say Maxine, that 112 00:06:21,640 --> 00:06:24,440 Speaker 1: was good, make make your upgrade again. I'm wondering how 113 00:06:24,560 --> 00:06:28,279 Speaker 1: much the election of Emmanuel Macron has taken the pressure 114 00:06:28,320 --> 00:06:30,680 Speaker 1: off the e c B, the European Central Bank, and 115 00:06:30,760 --> 00:06:35,159 Speaker 1: sort of allowed them to consider potentially reducing stimulus in 116 00:06:35,160 --> 00:06:36,760 Speaker 1: the near term in a way that they might not 117 00:06:36,880 --> 00:06:40,640 Speaker 1: have should there have been some kind of political upheaval. Yeah. 118 00:06:40,640 --> 00:06:43,520 Speaker 1: Well they suld be surely relieved today to see that 119 00:06:43,520 --> 00:06:47,360 Speaker 1: that Emmanuel Macron won the presidency. That's one tail risk 120 00:06:47,920 --> 00:06:51,560 Speaker 1: less for them. So that means the economic outlook, which 121 00:06:51,600 --> 00:06:53,280 Speaker 1: is improving again in the Euros and if you look 122 00:06:53,320 --> 00:06:55,680 Speaker 1: at the surveys that the soft data is looking very good. 123 00:06:56,240 --> 00:06:58,320 Speaker 1: They can now focus on the economic outlook on the 124 00:06:58,360 --> 00:07:01,560 Speaker 1: short term without this big tical risk. What they're just 125 00:07:01,560 --> 00:07:03,919 Speaker 1: looking at is core inflation, and core inflation is not 126 00:07:04,000 --> 00:07:08,480 Speaker 1: picking up. It's still stable week and until it picks up, 127 00:07:08,600 --> 00:07:12,000 Speaker 1: they aren't likely to move. We are expecting at the 128 00:07:12,040 --> 00:07:14,400 Speaker 1: next meeting in June to them to say that the 129 00:07:14,400 --> 00:07:16,920 Speaker 1: balance of risk on the economic outlook and now balance 130 00:07:17,240 --> 00:07:20,400 Speaker 1: so not anymore tilted on the downside. But they will 131 00:07:20,440 --> 00:07:24,000 Speaker 1: probably have to wait for September or December to start 132 00:07:24,040 --> 00:07:27,960 Speaker 1: signaling a tappering in the quee purchases, and the quie 133 00:07:28,160 --> 00:07:30,760 Speaker 1: is likely to end mid next year at the latest. 134 00:07:31,760 --> 00:07:33,840 Speaker 1: Just give us a look of you can on the 135 00:07:34,560 --> 00:07:37,320 Speaker 1: health of the corporate sector in terms of earning profits 136 00:07:37,320 --> 00:07:40,080 Speaker 1: and taxes in France, because that was always a big 137 00:07:40,120 --> 00:07:43,760 Speaker 1: issue of increasing taxes on corporations. Will that change on 138 00:07:43,840 --> 00:07:46,800 Speaker 1: the macron Well, yeah, he has promised actually to bring 139 00:07:46,840 --> 00:07:50,280 Speaker 1: it down from thirty three percent to over the next 140 00:07:50,280 --> 00:07:53,440 Speaker 1: five years. So that's also why this, uh, his agenda 141 00:07:53,480 --> 00:07:56,280 Speaker 1: has always been a label as pro market, pro business. 142 00:07:56,360 --> 00:07:58,520 Speaker 1: Is that because he has some very big plans on 143 00:07:58,640 --> 00:08:02,720 Speaker 1: corporate tax in France. All right, I want to thank 144 00:08:02,760 --> 00:08:06,240 Speaker 1: you very much, Maxine spat He he is our Euro 145 00:08:06,360 --> 00:08:11,280 Speaker 1: Area economist for Bloomberg Intelligence. He u is speaking also 146 00:08:11,360 --> 00:08:15,280 Speaker 1: speaking with a Lisa Abramowitz, who is enjoying some son 147 00:08:15,800 --> 00:08:18,920 Speaker 1: in Amelia Island at the well, what is it the 148 00:08:18,920 --> 00:08:24,560 Speaker 1: twenty two annual Financial Markets Conference Managing Global financial Risks 149 00:08:24,560 --> 00:08:27,400 Speaker 1: and shifting sands and shock Waves. I wonder if you've 150 00:08:27,400 --> 00:08:29,400 Speaker 1: got shifting sands, does that mean that you're going to 151 00:08:29,480 --> 00:08:32,040 Speaker 1: stand on the beach when you exactly it means taking 152 00:08:32,080 --> 00:08:34,960 Speaker 1: long walks in the beach and contemplating a world policies. 153 00:08:35,280 --> 00:08:37,360 Speaker 1: Well you can do that with all the officials from 154 00:08:37,360 --> 00:08:51,480 Speaker 1: the Federals or Bank of Atlanta, Thanks very much. A 155 00:08:51,559 --> 00:08:53,680 Speaker 1: lot of takeovers and as a result, I want to 156 00:08:53,679 --> 00:08:56,080 Speaker 1: get some expert thoughts on this from Bloomberg gad Fly 157 00:08:56,200 --> 00:08:59,720 Speaker 1: columnst Shelley Banjo shall be speaking about Coach buying Kate's. 158 00:09:00,200 --> 00:09:02,280 Speaker 1: That's a two point four billion dollar deal. But I 159 00:09:02,280 --> 00:09:04,400 Speaker 1: want to begin with Bloomberg gad Fly columns Tara la 160 00:09:04,520 --> 00:09:08,560 Speaker 1: Chappelle on this Straight Path bidding war that seems to 161 00:09:08,600 --> 00:09:12,080 Speaker 1: have erupted. Tara tell us about what is so particularly 162 00:09:12,160 --> 00:09:15,360 Speaker 1: special about Straight Path that the stock is of thirty 163 00:09:15,360 --> 00:09:18,720 Speaker 1: two today and we've got bidders whose name we don't 164 00:09:18,720 --> 00:09:21,560 Speaker 1: officially know yet, right. So straight Path is a company 165 00:09:21,600 --> 00:09:25,319 Speaker 1: that very few people really knew about before April. Um. 166 00:09:25,360 --> 00:09:27,880 Speaker 1: They are one of the largest owners of five of 167 00:09:27,960 --> 00:09:30,920 Speaker 1: Spectrum that's approved for five G use so five G 168 00:09:31,120 --> 00:09:33,280 Speaker 1: is of course going to be the next network that 169 00:09:33,360 --> 00:09:35,400 Speaker 1: all the wireless providers are going to want to have. 170 00:09:35,800 --> 00:09:38,040 Speaker 1: So Verizon and A T and T both really need 171 00:09:38,120 --> 00:09:39,920 Speaker 1: this now. A T and T struck a deal with 172 00:09:40,000 --> 00:09:43,079 Speaker 1: straight Path for I believe one point six billion back 173 00:09:43,120 --> 00:09:45,640 Speaker 1: in April. Fast forward a month later and you have 174 00:09:45,760 --> 00:09:49,280 Speaker 1: this unnamed multinational telecom company which is said to be 175 00:09:49,440 --> 00:09:51,400 Speaker 1: Verizon and makes a lot of sense of it as 176 00:09:51,520 --> 00:09:55,560 Speaker 1: Verizon UM that topped their bid by quite a substantial amount. 177 00:09:55,640 --> 00:09:57,960 Speaker 1: They brought the bidding to two point three billion, and 178 00:09:58,000 --> 00:10:00,560 Speaker 1: then today the same bitter bit against them selves and 179 00:10:00,640 --> 00:10:03,080 Speaker 1: now the price is three point one billion. So clearly 180 00:10:03,520 --> 00:10:06,079 Speaker 1: a lot of scarcity value in this company that very 181 00:10:06,120 --> 00:10:09,280 Speaker 1: few people saw coming. But turned did you say that 182 00:10:09,360 --> 00:10:13,320 Speaker 1: it bid against itself essentially, so strip PA authority hasn't 183 00:10:13,360 --> 00:10:15,839 Speaker 1: agreed upon deal with A T and T, and they 184 00:10:15,840 --> 00:10:18,400 Speaker 1: have to decide whether they drop this deal and go 185 00:10:18,440 --> 00:10:20,400 Speaker 1: at this other bidder, says other bidders trying to make 186 00:10:20,400 --> 00:10:22,160 Speaker 1: it so compelling that they have to do that, and 187 00:10:22,160 --> 00:10:23,760 Speaker 1: the A, T and T won't be able to come 188 00:10:23,760 --> 00:10:25,600 Speaker 1: back and top it. Although if you look at the 189 00:10:25,600 --> 00:10:28,559 Speaker 1: trading today, I believe Straight Path is trading through the 190 00:10:28,600 --> 00:10:31,280 Speaker 1: implied offer price, so traders think this is going to 191 00:10:31,400 --> 00:10:33,559 Speaker 1: keep going on. Well, yeah, I was just gonna say, 192 00:10:33,600 --> 00:10:36,000 Speaker 1: the shares of straight Pet they're up fifty two dollars 193 00:10:36,040 --> 00:10:38,559 Speaker 1: is shared of two and fourteen. That's a gain of 194 00:10:39,760 --> 00:10:41,040 Speaker 1: you know, I have to say, you've got to if 195 00:10:41,080 --> 00:10:42,800 Speaker 1: you're talking about price action, you have to look at 196 00:10:42,800 --> 00:10:46,280 Speaker 1: Coach and Kate's Bade. Co Chairs up almost six percent 197 00:10:46,360 --> 00:10:50,040 Speaker 1: and Kate Spade also up uh more than eight percent. 198 00:10:50,160 --> 00:10:52,520 Speaker 1: And this is on the heels of talks that Coaches 199 00:10:52,559 --> 00:10:56,560 Speaker 1: buying Kate Spade. So Shelly Banjo is also in our 200 00:10:56,559 --> 00:10:59,400 Speaker 1: Bloomberg eleven three oh studios and Shelly, how do you 201 00:10:59,600 --> 00:11:01,640 Speaker 1: how do you make sense of why the market is 202 00:11:01,720 --> 00:11:05,720 Speaker 1: cheering just so much about this deal? Well, the shares 203 00:11:05,800 --> 00:11:07,839 Speaker 1: have gone on quite a roller coaster ride over the 204 00:11:07,880 --> 00:11:09,760 Speaker 1: past couple of years. It was trading at around forty 205 00:11:09,800 --> 00:11:12,360 Speaker 1: dollars at one point forty five dollars at it's all 206 00:11:12,360 --> 00:11:15,599 Speaker 1: time high, went all the way back down during m 207 00:11:15,760 --> 00:11:18,240 Speaker 1: nay months of speculation. December, went all the way up 208 00:11:18,280 --> 00:11:21,079 Speaker 1: to dollars as people were saying, are almost up to 209 00:11:21,120 --> 00:11:23,760 Speaker 1: twenty five dollars as people were saying it could fetch 210 00:11:23,800 --> 00:11:26,720 Speaker 1: around even thirty dollars a share for a deal price, 211 00:11:27,040 --> 00:11:30,719 Speaker 1: and then tumbled back down after earning after a poor 212 00:11:30,800 --> 00:11:33,880 Speaker 1: earnings show from Kate in the end um as actually 213 00:11:33,920 --> 00:11:36,400 Speaker 1: Tara pointed out to me this morning, it ended up 214 00:11:36,679 --> 00:11:39,760 Speaker 1: it's selling for its two hundred day moving average, So 215 00:11:39,840 --> 00:11:42,679 Speaker 1: go figure on that one. Um, But you know this 216 00:11:42,760 --> 00:11:45,680 Speaker 1: is a good thing for Coach. They didn't overpay Kate 217 00:11:45,760 --> 00:11:48,240 Speaker 1: Spade can still kind of save its but um with 218 00:11:48,320 --> 00:11:51,520 Speaker 1: its own shareholders saying it represents the technical term, by 219 00:11:51,559 --> 00:11:57,319 Speaker 1: the way, exactly, representing seven uh five premium from where 220 00:11:57,360 --> 00:12:01,439 Speaker 1: it was training before media specular lation in December. So 221 00:12:01,840 --> 00:12:04,760 Speaker 1: I guess both sides are happy for that one. You 222 00:12:04,760 --> 00:12:06,360 Speaker 1: know what, shall I just want to follow up? Why 223 00:12:06,800 --> 00:12:12,280 Speaker 1: would coach by Kate Spade? Doesn't Coach already make handbags? 224 00:12:12,280 --> 00:12:15,440 Speaker 1: And aren't they just working on a big turnaround? Yeah, 225 00:12:15,480 --> 00:12:17,719 Speaker 1: and so that's the thing they're not buying Kate to 226 00:12:18,360 --> 00:12:20,720 Speaker 1: like any kind of other merger where you'd sweep these 227 00:12:20,760 --> 00:12:24,160 Speaker 1: assets under your under your company umbrella and kind of, 228 00:12:24,360 --> 00:12:28,040 Speaker 1: you know, actually merge these companies. Coaches on a totally 229 00:12:28,160 --> 00:12:31,480 Speaker 1: different trajectory right now, trying to create a kind of 230 00:12:31,520 --> 00:12:34,520 Speaker 1: mini conglomerate what I like to call minil l v 231 00:12:34,720 --> 00:12:37,880 Speaker 1: mh UM, trying to trying to create this kind of 232 00:12:37,920 --> 00:12:40,040 Speaker 1: house of brands where they're going to buy up lots 233 00:12:40,040 --> 00:12:44,600 Speaker 1: of different companies and managed to manage them all. Um. 234 00:12:44,640 --> 00:12:46,720 Speaker 1: We would be remiss if we didn't mention another big 235 00:12:46,760 --> 00:12:50,280 Speaker 1: deal that across the wire this morning. Sinclair is buying 236 00:12:50,360 --> 00:12:54,440 Speaker 1: Tribune Media for three point nine billion dollars UM. Get 237 00:12:54,480 --> 00:12:59,240 Speaker 1: more consolidation in the broadcasting space, terra. Uh. This was 238 00:12:59,360 --> 00:13:02,000 Speaker 1: a long a way to deal made possible by the 239 00:13:02,120 --> 00:13:04,400 Speaker 1: u S FCC voting less months to ease a limit 240 00:13:04,480 --> 00:13:07,240 Speaker 1: on uh some of this consolidation. What do you expect 241 00:13:07,360 --> 00:13:09,400 Speaker 1: the consequence is going to be? And is this a 242 00:13:09,440 --> 00:13:11,800 Speaker 1: good thing for the companies? It's a good thing for 243 00:13:11,840 --> 00:13:14,120 Speaker 1: the TV station owners. It's not such a great thing 244 00:13:14,160 --> 00:13:17,040 Speaker 1: if your Fox or CBS or any of the companies 245 00:13:17,080 --> 00:13:19,680 Speaker 1: whose brands are behind these affiliate stations that it's going 246 00:13:19,720 --> 00:13:23,080 Speaker 1: to make it a lot harder to negotiate the carriage deals. Um, 247 00:13:23,160 --> 00:13:25,160 Speaker 1: but it's great for Sinclair, and I think it's just 248 00:13:25,240 --> 00:13:27,520 Speaker 1: the first of many of these deals. We could see. 249 00:13:27,679 --> 00:13:30,080 Speaker 1: You still have next Star out there, which had looked 250 00:13:30,080 --> 00:13:33,520 Speaker 1: at Tribune stations. Um. I think they could still do 251 00:13:33,600 --> 00:13:35,640 Speaker 1: a deal. I think there's going to be a few 252 00:13:35,679 --> 00:13:38,440 Speaker 1: more of these that follow this FCC decision. For sure, 253 00:13:39,240 --> 00:13:41,520 Speaker 1: speak like Kenna about why you believe this is going 254 00:13:41,559 --> 00:13:45,400 Speaker 1: to be a struggle for the actual network operators, not 255 00:13:45,480 --> 00:13:48,560 Speaker 1: the owners of the station, but the providers of content. Right. So, 256 00:13:48,640 --> 00:13:52,240 Speaker 1: for instance, foxy eight percent of their stations so I 257 00:13:52,240 --> 00:13:55,600 Speaker 1: think it's fourteen of them in total, are actually owned 258 00:13:55,720 --> 00:13:58,960 Speaker 1: by Tribune. So what happens is they have to work 259 00:13:59,000 --> 00:14:02,880 Speaker 1: out deals with True Bune regularly about what the cost 260 00:14:02,920 --> 00:14:05,160 Speaker 1: of carrying their content on these local stations is going 261 00:14:05,200 --> 00:14:08,000 Speaker 1: to be. And so Fox obviously has a ton of 262 00:14:08,000 --> 00:14:11,160 Speaker 1: negotiating power, all these big content companies do. But when 263 00:14:11,200 --> 00:14:14,280 Speaker 1: these TV stations start to get bigger, obviously the pendulum 264 00:14:14,360 --> 00:14:18,000 Speaker 1: swings again. So I think you know, Fox had supposedly 265 00:14:18,000 --> 00:14:20,840 Speaker 1: looked at this deal too, um, in conjunction with Blackstone, 266 00:14:21,080 --> 00:14:24,280 Speaker 1: And it's interesting that they let Sinclair sort of top them, 267 00:14:24,280 --> 00:14:25,920 Speaker 1: because you would think that black Stone and Fox could 268 00:14:26,000 --> 00:14:28,560 Speaker 1: knock out of it if they wanted to. Um, so yeah, 269 00:14:28,600 --> 00:14:30,360 Speaker 1: I mean, I guess they looked at the risk reward 270 00:14:30,400 --> 00:14:32,920 Speaker 1: of letting Sinclair get these stations, and at the very 271 00:14:33,000 --> 00:14:36,440 Speaker 1: least they forced Sinclair to pay up. Thank you so much. 272 00:14:36,480 --> 00:14:39,080 Speaker 1: This is a definitely helpful to get a sense of 273 00:14:39,280 --> 00:14:41,680 Speaker 1: all of these deals and kind of putting them into perspective. 274 00:14:41,720 --> 00:14:44,960 Speaker 1: It's Bloomberg gad Fly columnist Shelley Banjo as well as 275 00:14:45,120 --> 00:14:48,760 Speaker 1: bloombergad Fly columnists Tara lash of Hell talking about all 276 00:14:48,800 --> 00:14:51,120 Speaker 1: of the deals that we are seeing today, and we 277 00:14:51,160 --> 00:14:53,600 Speaker 1: are seeing quite a bit of price action in these 278 00:14:53,720 --> 00:15:04,360 Speaker 1: shares as a result. We want to take a moment 279 00:15:04,400 --> 00:15:07,120 Speaker 1: to let you know about something new from Bloomberg. Starting 280 00:15:07,200 --> 00:15:09,320 Speaker 1: right now, you can use our i O s app 281 00:15:09,440 --> 00:15:12,400 Speaker 1: or our new Google Chrome extension to scan any news 282 00:15:12,480 --> 00:15:15,920 Speaker 1: story on any website, instantly revealing relevant news and market 283 00:15:16,000 --> 00:15:18,800 Speaker 1: data from Bloomberg and other sources related to the companies 284 00:15:18,800 --> 00:15:21,240 Speaker 1: and people you're reading about. So no matter where you're 285 00:15:21,280 --> 00:15:23,680 Speaker 1: reading the news, you can bring the power of Bloomberg's 286 00:15:23,680 --> 00:15:26,720 Speaker 1: news and data with you. It's pretty amazing. Download our 287 00:15:26,760 --> 00:15:29,160 Speaker 1: I o s app or search for the Bloomberg extension 288 00:15:29,160 --> 00:15:31,320 Speaker 1: on the Chrome Store to try it out. Learn more 289 00:15:31,360 --> 00:15:44,160 Speaker 1: at Bloomberg dot com slash lens Well, I'm honored to 290 00:15:44,160 --> 00:15:46,800 Speaker 1: be here with Politicac. She's a vice president and senior 291 00:15:46,840 --> 00:15:50,680 Speaker 1: economist at the Federal Reserve Bank of Atlanta, and her job, 292 00:15:50,800 --> 00:15:52,800 Speaker 1: in a way is to go out and try to 293 00:15:53,080 --> 00:15:55,880 Speaker 1: come up with the worst case scenario that could potentially 294 00:15:55,880 --> 00:15:58,880 Speaker 1: derail markets and then translate that for all of the 295 00:15:58,880 --> 00:16:02,720 Speaker 1: people at the Fed Reserve and Paula, as you are designing, 296 00:16:03,160 --> 00:16:06,200 Speaker 1: are helping to design this particular financial markets conference, the 297 00:16:06,400 --> 00:16:09,800 Speaker 1: Managing Global Financial Risks, Shifting Sands and Shockwaves. What did 298 00:16:09,840 --> 00:16:13,640 Speaker 1: you home in on as the biggest potential risk or 299 00:16:13,720 --> 00:16:15,440 Speaker 1: some of the things that you're hearing from people in 300 00:16:15,480 --> 00:16:18,680 Speaker 1: the market, to the financial system and at the present 301 00:16:19,480 --> 00:16:21,400 Speaker 1: well at least, so let me first say that it's 302 00:16:21,400 --> 00:16:25,400 Speaker 1: probably UH requires an army to do what you suggested, 303 00:16:25,440 --> 00:16:27,960 Speaker 1: which is which is to think of all of the 304 00:16:28,000 --> 00:16:30,880 Speaker 1: things that that might be risks to the global financial 305 00:16:30,920 --> 00:16:33,200 Speaker 1: system or to the U. S economy or or our system. 306 00:16:33,640 --> 00:16:37,520 Speaker 1: UH in Atlanta, the research staff and I financial economists 307 00:16:38,200 --> 00:16:41,920 Speaker 1: UM try to design this conference every year to think 308 00:16:41,960 --> 00:16:46,320 Speaker 1: about topics that are current but also in some way 309 00:16:46,600 --> 00:16:48,960 Speaker 1: different or understudy. So we're trying to bring some things 310 00:16:48,960 --> 00:16:51,520 Speaker 1: to the surface that we think are relevant to market 311 00:16:51,520 --> 00:16:54,640 Speaker 1: participants but may not be talked about in ways that 312 00:16:54,680 --> 00:16:57,880 Speaker 1: combine both a regulatory and a policy making perspective with 313 00:16:57,920 --> 00:17:01,320 Speaker 1: a market perspective. So, as we thought about the topic 314 00:17:01,400 --> 00:17:05,320 Speaker 1: for this year, UM, we've been following, like everyone else 315 00:17:05,880 --> 00:17:08,440 Speaker 1: around the world, all of the events of the last year, 316 00:17:08,520 --> 00:17:11,040 Speaker 1: and many of them are geopolitical, and there were always 317 00:17:11,119 --> 00:17:15,280 Speaker 1: questions around what ramifications those geopolitical events might have in 318 00:17:15,400 --> 00:17:22,320 Speaker 1: terms of UM Brexit, US fiscal policy, tax reform, French elections, 319 00:17:23,040 --> 00:17:25,800 Speaker 1: and so as we started planning the conference last year, 320 00:17:26,040 --> 00:17:28,439 Speaker 1: these events were looming large, and we were starting to 321 00:17:28,480 --> 00:17:32,159 Speaker 1: think about ways to bring UM some different perspectives to 322 00:17:32,200 --> 00:17:36,520 Speaker 1: bear on the issues related to global interconnections in the 323 00:17:36,560 --> 00:17:39,480 Speaker 1: financial system. We all know that the global financial system 324 00:17:39,480 --> 00:17:44,679 Speaker 1: is in fact global, but oftentimes UM I think it 325 00:17:44,720 --> 00:17:46,720 Speaker 1: can seem as though that only comes through a large 326 00:17:46,800 --> 00:17:49,880 Speaker 1: multinational financial institutions. And really, what I think we learned 327 00:17:49,920 --> 00:17:51,840 Speaker 1: from the crisis is it's really much richer than that. 328 00:17:51,880 --> 00:17:53,280 Speaker 1: And so part of what we wanted to do with 329 00:17:53,320 --> 00:17:57,440 Speaker 1: this conference was hit on sort of four main topics 330 00:17:57,440 --> 00:18:01,639 Speaker 1: that we thought were um important to again sort of 331 00:18:01,720 --> 00:18:04,160 Speaker 1: rise up to the circles and give people some new 332 00:18:04,160 --> 00:18:08,760 Speaker 1: perspectives on including the issues of international financial coordination, so 333 00:18:08,880 --> 00:18:13,080 Speaker 1: not just where regulation is, but a more meta look 334 00:18:13,400 --> 00:18:16,359 Speaker 1: at the degree of coordination or lack thereof, and what 335 00:18:16,440 --> 00:18:19,879 Speaker 1: kinds of challenges that because this is really important at 336 00:18:19,920 --> 00:18:23,440 Speaker 1: a time when it seems like it's unclear whether the 337 00:18:23,520 --> 00:18:28,640 Speaker 1: FED as full independence to have international coordination. And I'm 338 00:18:28,640 --> 00:18:31,080 Speaker 1: not going to comment any of that, alright, My my 339 00:18:31,160 --> 00:18:33,520 Speaker 1: co host Pim Fox in New York. Pim, Well, I 340 00:18:33,560 --> 00:18:35,560 Speaker 1: just wanted to ask Paula, You're going to be speaking 341 00:18:35,600 --> 00:18:39,159 Speaker 1: about China's model of managing the financial system, and for 342 00:18:39,200 --> 00:18:40,959 Speaker 1: those that are not going to be able to attend 343 00:18:40,960 --> 00:18:43,479 Speaker 1: the morning, if you could just offer some details and 344 00:18:43,520 --> 00:18:46,800 Speaker 1: what some of the takeaways would be. Okay, So I'm 345 00:18:46,840 --> 00:18:49,159 Speaker 1: I'm actually moderating a session tomorrow. It's it's one of 346 00:18:49,160 --> 00:18:52,359 Speaker 1: our research paper sessions, uh, and that session is going 347 00:18:52,400 --> 00:18:55,040 Speaker 1: to include the presentation of a paper that's going to 348 00:18:55,160 --> 00:19:00,400 Speaker 1: talk about a way to theoretically model um how government 349 00:19:00,520 --> 00:19:04,520 Speaker 1: might intervene when it's concerned about market volatility, and again 350 00:19:04,760 --> 00:19:07,400 Speaker 1: the paper motivates itself the authors of the paper motivated 351 00:19:07,520 --> 00:19:11,120 Speaker 1: as um UM potentially applying to China. We think it's 352 00:19:11,119 --> 00:19:14,159 Speaker 1: a more broad issue in terms of thinking about the 353 00:19:14,240 --> 00:19:17,280 Speaker 1: role that a policy maker or policymaking institution or a 354 00:19:17,359 --> 00:19:21,720 Speaker 1: government might have, UH in sort of understanding the responses 355 00:19:21,760 --> 00:19:24,600 Speaker 1: to any policies that they might put out and any 356 00:19:24,680 --> 00:19:28,360 Speaker 1: potentially activist interventions, and how that might feedback through financial systems, 357 00:19:28,400 --> 00:19:31,440 Speaker 1: and try to get a better understanding of whether UM 358 00:19:31,480 --> 00:19:36,480 Speaker 1: a policymaking objective would actually be successful once we consider 359 00:19:36,520 --> 00:19:39,679 Speaker 1: feedback effects. So I'm not going to speak about the 360 00:19:39,680 --> 00:19:42,320 Speaker 1: paper in particular, but the session UM the both the 361 00:19:42,320 --> 00:19:44,959 Speaker 1: presenter and the discuss it will talk about some issues 362 00:19:45,520 --> 00:19:48,320 Speaker 1: related to how governments might intervene and then again how 363 00:19:48,359 --> 00:19:50,719 Speaker 1: they might sort of um try to understand whether those 364 00:19:50,760 --> 00:19:54,719 Speaker 1: interventions are successful in reducing volatility or in promoting growth. 365 00:19:54,920 --> 00:19:56,959 Speaker 1: When you talk to people in the market, and just 366 00:19:57,000 --> 00:19:59,440 Speaker 1: to be clear, there are people here across the board, 367 00:19:59,440 --> 00:20:03,000 Speaker 1: big money managers, pension fund managers, insurance company managers. I mean, 368 00:20:03,119 --> 00:20:08,600 Speaker 1: this is uh definitely a diverse crowd of of people 369 00:20:08,600 --> 00:20:10,760 Speaker 1: from different parts of the market. When you talk to them. 370 00:20:10,800 --> 00:20:14,800 Speaker 1: Are they more concerned than ever about China and about 371 00:20:14,920 --> 00:20:20,600 Speaker 1: potential unseen risks coming from overseas. I can't speak to 372 00:20:20,600 --> 00:20:24,919 Speaker 1: whether they're more concerned than ever, but certainly I among 373 00:20:24,920 --> 00:20:28,080 Speaker 1: my colleagues, I think we're hearing a lot of concern 374 00:20:28,119 --> 00:20:32,240 Speaker 1: and a lot of UM uncertainty. I suppose UM related 375 00:20:32,280 --> 00:20:39,600 Speaker 1: to UM, what role UM the China sort of plays 376 00:20:39,640 --> 00:20:42,600 Speaker 1: in the US, in the world financial system UH, and 377 00:20:42,720 --> 00:20:45,439 Speaker 1: sort of trying to get better perspectives on how to 378 00:20:45,800 --> 00:20:48,840 Speaker 1: again think about any policy making that would come out 379 00:20:48,840 --> 00:20:51,200 Speaker 1: of the Chinese government and what ramifications it might have. 380 00:20:51,320 --> 00:20:52,520 Speaker 1: And so part of what we want to do with 381 00:20:52,600 --> 00:20:56,000 Speaker 1: this conference was bring in things that that financial economists 382 00:20:56,080 --> 00:20:59,159 Speaker 1: oftentimes don't think about in an academic setting or sometimes 383 00:20:59,160 --> 00:21:01,520 Speaker 1: even the policy making something, and that's geo political events 384 00:21:01,560 --> 00:21:05,280 Speaker 1: and political objectives and motivations and actions. Those are not 385 00:21:05,320 --> 00:21:07,480 Speaker 1: our specialty, and so partly what we wanted to do 386 00:21:07,520 --> 00:21:09,480 Speaker 1: was get people here who could speak to those issues 387 00:21:10,040 --> 00:21:12,480 Speaker 1: and bring it into the world of financial markets and 388 00:21:12,480 --> 00:21:14,840 Speaker 1: financial stability, so that we might have a better understanding 389 00:21:15,080 --> 00:21:18,280 Speaker 1: of whether or not um UM the risks that you 390 00:21:18,320 --> 00:21:22,480 Speaker 1: hear people float all the time are are substantive, are 391 00:21:22,520 --> 00:21:24,560 Speaker 1: they things that you could hedge. Are they things that 392 00:21:24,600 --> 00:21:27,159 Speaker 1: you should think about whether you're a market participant or 393 00:21:27,280 --> 00:21:30,040 Speaker 1: potentially a policymaker, because it's it is important for us 394 00:21:30,600 --> 00:21:32,760 Speaker 1: UM at the staff level in terms of trying to 395 00:21:32,840 --> 00:21:35,040 Speaker 1: understand of the US economy and the financial system, to 396 00:21:35,080 --> 00:21:37,520 Speaker 1: understand how market participants think, as it is to think 397 00:21:37,520 --> 00:21:42,040 Speaker 1: about UM the conceptual underpinnings of any sort of policy 398 00:21:42,600 --> 00:21:46,280 Speaker 1: that we might be discussing politicos. Thank you so much 399 00:21:46,320 --> 00:21:48,720 Speaker 1: for joining us. Truly a pleasure, and this is really 400 00:21:49,040 --> 00:21:52,760 Speaker 1: quite an incredible event, so thank you again. Pauliticoc is 401 00:21:52,760 --> 00:21:55,280 Speaker 1: a vice president and senior economist at their Federal Zero 402 00:21:55,560 --> 00:22:11,280 Speaker 1: Bank of Atlanta here at Amelia Island. Well over the weekend, 403 00:22:11,600 --> 00:22:17,080 Speaker 1: the Capitalist LoveFest was taking place in Omaha, Nebraska, and 404 00:22:17,119 --> 00:22:20,040 Speaker 1: Bloomberg's own Noah bu Hire was there. This is the 405 00:22:20,080 --> 00:22:23,720 Speaker 1: annual meeting of Berkshire Hathaway and in attendance, of course, 406 00:22:24,359 --> 00:22:26,840 Speaker 1: Warren Buffett and Charlie Munger. And this is what he 407 00:22:26,880 --> 00:22:30,400 Speaker 1: had to say about the investment world. Charlie Munger said, 408 00:22:30,440 --> 00:22:33,440 Speaker 1: the investing world is just a morass of wrong incentives, 409 00:22:33,480 --> 00:22:38,439 Speaker 1: crazy reporting, and I'd say a fair amount of delusion Noah, 410 00:22:38,800 --> 00:22:42,640 Speaker 1: was that kind of the theme for the for the day. Well, 411 00:22:42,720 --> 00:22:44,920 Speaker 1: Charlie certainly does have a way with words. I mean, 412 00:22:44,960 --> 00:22:48,600 Speaker 1: he's uh, he's known for his blunt assessments. It was 413 00:22:48,680 --> 00:22:50,879 Speaker 1: it was one of the teams, I mean, that's that's uh. 414 00:22:51,160 --> 00:22:54,720 Speaker 1: That was in response to um a question or there 415 00:22:54,760 --> 00:22:56,840 Speaker 1: was a whole section of the meeting that was talking 416 00:22:56,880 --> 00:23:03,080 Speaker 1: about the seas that active managers charge. And you know, 417 00:23:03,240 --> 00:23:07,960 Speaker 1: Buffett has been talking about this a lot. Um it's 418 00:23:07,960 --> 00:23:10,200 Speaker 1: been he's been doing it for years. But his annual 419 00:23:10,280 --> 00:23:14,959 Speaker 1: letter was had a five page passage on how active 420 00:23:14,960 --> 00:23:18,439 Speaker 1: managers as a whole really aren't delivering any value. And 421 00:23:18,720 --> 00:23:22,000 Speaker 1: um Monger sort of backed him up at the meeting 422 00:23:22,040 --> 00:23:26,480 Speaker 1: and that that that quote was was uh, sort of 423 00:23:26,560 --> 00:23:31,280 Speaker 1: his appraisal of of what the investment management businesses, you know, 424 00:23:31,359 --> 00:23:33,560 Speaker 1: some of the problems they have. You know, it's interesting. 425 00:23:33,600 --> 00:23:36,520 Speaker 1: So Warren Buffett and Charlie Munger have been beating on 426 00:23:36,640 --> 00:23:38,720 Speaker 1: this theme for a while. As you talked about that 427 00:23:39,560 --> 00:23:41,800 Speaker 1: a lot of the asset managers, particularly hedge funds, active 428 00:23:42,160 --> 00:23:46,240 Speaker 1: managers are overpaid um. And they even had Jack Bogle 429 00:23:46,280 --> 00:23:50,359 Speaker 1: there right, who is the founder of Indexing as the 430 00:23:50,440 --> 00:23:53,000 Speaker 1: former head of Vantage and he got understanding. He got 431 00:23:53,000 --> 00:23:55,679 Speaker 1: a standing applis Yeah, he got standing applause, right, And 432 00:23:55,680 --> 00:23:57,320 Speaker 1: he gave some comments and I thought that they were 433 00:23:57,359 --> 00:24:02,160 Speaker 1: fascinating because he said, theoretically, if everybody indexed, it would 434 00:24:02,160 --> 00:24:06,760 Speaker 1: be chaos. Can chuckle. Yeah, Well, I think that's a 435 00:24:06,920 --> 00:24:11,120 Speaker 1: that's a great question. Um, if my recollection is right, 436 00:24:11,160 --> 00:24:14,040 Speaker 1: I think I think we'd have to get to a 437 00:24:14,080 --> 00:24:17,639 Speaker 1: greater level of indexing before we'd see that. And he 438 00:24:17,640 --> 00:24:19,439 Speaker 1: said there was zero percent chance of it, so, like 439 00:24:19,520 --> 00:24:21,919 Speaker 1: to be clear. At the same time, the sort of 440 00:24:21,960 --> 00:24:26,119 Speaker 1: implicit understanding is that, uh, you need some level of 441 00:24:26,160 --> 00:24:30,320 Speaker 1: active management in order to make indexing work right, And 442 00:24:30,400 --> 00:24:33,600 Speaker 1: I think even even Bogel said that he felt that 443 00:24:33,840 --> 00:24:36,840 Speaker 1: in particular in some areas, including municipal bonds for example, 444 00:24:37,080 --> 00:24:39,359 Speaker 1: you need an active management so you know that the 445 00:24:39,359 --> 00:24:41,879 Speaker 1: ball has moved forward, sort of creating more of a 446 00:24:41,960 --> 00:24:45,040 Speaker 1: nuance to look at active versus passive. Yeah, And I 447 00:24:45,040 --> 00:24:48,639 Speaker 1: think Buffett, in fairness has has a nuance perspective on 448 00:24:48,680 --> 00:24:50,480 Speaker 1: this too. I mean a lot of people say, well, 449 00:24:50,520 --> 00:24:52,840 Speaker 1: wait a second, this is a guy who himself is 450 00:24:52,840 --> 00:24:56,040 Speaker 1: an active manager. I mean he's got a stock portfolio 451 00:24:56,160 --> 00:25:00,720 Speaker 1: where he is making decisions on individual security and a 452 00:25:00,720 --> 00:25:03,200 Speaker 1: lot of his track record over over time has been 453 00:25:03,240 --> 00:25:06,679 Speaker 1: because he is an active manager. Um the argument that 454 00:25:06,720 --> 00:25:11,120 Speaker 1: buffets making is a more global one, and he's saying that, yes, 455 00:25:11,280 --> 00:25:15,400 Speaker 1: obviously it's possible for active managers to outperform, but as 456 00:25:15,440 --> 00:25:19,280 Speaker 1: a whole, it really is a zero sum game. And 457 00:25:19,440 --> 00:25:25,800 Speaker 1: as an industry, Uh, investment professionals are not adding any value. Um, 458 00:25:25,840 --> 00:25:28,880 Speaker 1: though it is possible to go find a money manager 459 00:25:28,880 --> 00:25:32,200 Speaker 1: who's gonna do right for you and um deliver more 460 00:25:32,280 --> 00:25:36,080 Speaker 1: value than than their fee. Well. He also gave the comparison, 461 00:25:36,119 --> 00:25:39,679 Speaker 1: I believe of how much the two top stock pickers 462 00:25:39,680 --> 00:25:43,480 Speaker 1: at Berkshire, Ted Wesler and and Todd Combs make. They 463 00:25:43,520 --> 00:25:45,840 Speaker 1: manage about twenty billion dollars between them. They get a 464 00:25:45,880 --> 00:25:49,399 Speaker 1: million dollars a year in salary plus bonuses based on 465 00:25:49,400 --> 00:25:51,800 Speaker 1: whether they beat the SMP five hundred. And he gave 466 00:25:51,840 --> 00:25:54,160 Speaker 1: the example that said, if you have a billion dollar fund, 467 00:25:54,240 --> 00:25:57,160 Speaker 1: you get two percent even for terrible performance, you're gonna 468 00:25:57,160 --> 00:25:59,680 Speaker 1: get twenty million dollars. He said, in any other field 469 00:25:59,680 --> 00:26:03,840 Speaker 1: that which blow your mind, right, right, Yeah, I mean, look, 470 00:26:03,880 --> 00:26:07,040 Speaker 1: Berkshire does things in a different way, and uh, you know, 471 00:26:07,080 --> 00:26:11,240 Speaker 1: one of the one of the things that uh, Wessler 472 00:26:11,320 --> 00:26:13,679 Speaker 1: and Combs get to enjoy by working in Berkshire as 473 00:26:13,680 --> 00:26:15,879 Speaker 1: they you know, they don't have to deal with the 474 00:26:16,600 --> 00:26:21,320 Speaker 1: limited partners. They have a stable source of capital that 475 00:26:21,359 --> 00:26:24,399 Speaker 1: they get to invest and you know they're doing what 476 00:26:24,480 --> 00:26:26,760 Speaker 1: they love to do, which is analyzed securities within the 477 00:26:27,240 --> 00:26:31,120 Speaker 1: context of Berkshire Hathaway. So, Um, there there's a trade 478 00:26:31,160 --> 00:26:34,560 Speaker 1: off there. Even though they're getting paid less uh then 479 00:26:34,600 --> 00:26:36,639 Speaker 1: they could make if they were still running hedge funds, 480 00:26:36,680 --> 00:26:39,760 Speaker 1: they do get a lot of benefits. No, I want 481 00:26:39,800 --> 00:26:43,040 Speaker 1: to talk a little bit about Warren Buffett's comments about 482 00:26:43,160 --> 00:26:45,159 Speaker 1: United as well as well as far Ago. I mean, 483 00:26:45,160 --> 00:26:48,080 Speaker 1: he had some pretty harsh words for both companies, uh, 484 00:26:48,119 --> 00:26:50,920 Speaker 1: saying that for example, United made a quote terrible mistake 485 00:26:51,200 --> 00:26:55,000 Speaker 1: with the clash with the passenger that was videotaped. Um. 486 00:26:55,119 --> 00:26:59,440 Speaker 1: Have you ever heard in recent memory Warren Buffett kind 487 00:26:59,440 --> 00:27:01,800 Speaker 1: of give me couplas like this or talk about the 488 00:27:01,800 --> 00:27:06,640 Speaker 1: shares that he held in the company's with such harsh criticism. Yeah, 489 00:27:06,680 --> 00:27:08,600 Speaker 1: he does it from time to time. I don't I 490 00:27:08,640 --> 00:27:14,080 Speaker 1: don't think he's he's trying to um defend managements when 491 00:27:14,160 --> 00:27:20,320 Speaker 1: when he thinks they mess up. Uh. There's a difference, though, um, 492 00:27:20,560 --> 00:27:25,560 Speaker 1: between saying something and changing his appraisal of the economics 493 00:27:25,600 --> 00:27:28,080 Speaker 1: of a business. I think what we saw over this 494 00:27:28,160 --> 00:27:31,040 Speaker 1: last week because he actually came out and said he 495 00:27:31,200 --> 00:27:35,199 Speaker 1: thinks uh differently about ibm s business model and and 496 00:27:35,240 --> 00:27:39,280 Speaker 1: therefore he actually sold some shares, whereas with with Wells 497 00:27:39,400 --> 00:27:43,399 Speaker 1: UM and with United. Uh, there's really no indication that 498 00:27:43,480 --> 00:27:45,960 Speaker 1: he's like trying to get out of those positions that 499 00:27:46,040 --> 00:27:50,240 Speaker 1: he's He's fundamentally changed his view about the economics of 500 00:27:50,240 --> 00:27:54,960 Speaker 1: of of those businesses. And I think that's an important distinction. Now, 501 00:27:55,880 --> 00:27:58,480 Speaker 1: what were some of the other topics or even in 502 00:27:58,560 --> 00:28:02,680 Speaker 1: your conversations with people attending this annual meeting, was a 503 00:28:02,800 --> 00:28:06,080 Speaker 1: forty people at least? Uh? Yeah, let's there are a 504 00:28:06,080 --> 00:28:07,400 Speaker 1: lot of people there. There are a lot of people. 505 00:28:07,400 --> 00:28:10,399 Speaker 1: Are there just a shop? They don't necessarily make it 506 00:28:10,440 --> 00:28:13,280 Speaker 1: into the arena to listen to Buffet and Monger. But 507 00:28:14,040 --> 00:28:18,359 Speaker 1: one of the other huge themes was the sort of 508 00:28:18,400 --> 00:28:22,240 Speaker 1: maya holpa that Buffett issued about not getting in on 509 00:28:22,240 --> 00:28:26,880 Speaker 1: on tech earlier, which I think is just hugely important. 510 00:28:26,880 --> 00:28:28,680 Speaker 1: If you look at the biggest companies in the world 511 00:28:28,920 --> 00:28:31,640 Speaker 1: by market value. Actually the five that are only five 512 00:28:31,680 --> 00:28:34,800 Speaker 1: that are bigger than Berkshire. They're all tech companies. And 513 00:28:35,760 --> 00:28:37,600 Speaker 1: I think there was a there was a lot of 514 00:28:37,640 --> 00:28:41,960 Speaker 1: conversation over the weekend about what that meant, whether and 515 00:28:41,960 --> 00:28:45,920 Speaker 1: and and and Buffett talked a lot about how, uh 516 00:28:46,240 --> 00:28:49,440 Speaker 1: you know, he had had to change his thinkings, and 517 00:28:49,480 --> 00:28:53,680 Speaker 1: he actually apologized to shareholders. He said he was capable, 518 00:28:53,800 --> 00:28:57,560 Speaker 1: He had the ability to understand Google a lot earlier, um, 519 00:28:57,640 --> 00:29:01,720 Speaker 1: for a variety of reasons, and he just didn't. And um, 520 00:29:01,720 --> 00:29:05,400 Speaker 1: you know, at this point, Buffet's got to find investments. 521 00:29:05,560 --> 00:29:08,800 Speaker 1: He's got to either buy companies or find the companies 522 00:29:08,840 --> 00:29:11,280 Speaker 1: that are going to get really big tomorrow and put 523 00:29:11,320 --> 00:29:14,080 Speaker 1: Berkshire's dollars to work in them. And he really did 524 00:29:14,200 --> 00:29:17,080 Speaker 1: miss the boat on tech. Noah Boire, thank you so 525 00:29:17,160 --> 00:29:20,960 Speaker 1: much for joining us. No Noah is our Warren Buffett 526 00:29:21,040 --> 00:29:26,000 Speaker 1: reporter as well as generally the insurance industry. Uh Noah 527 00:29:26,120 --> 00:29:28,760 Speaker 1: comes to us from Seattle, and he is a reporter 528 00:29:28,840 --> 00:29:34,080 Speaker 1: for Bloomberg. Thanks for listening to the Bloomberg P and 529 00:29:34,160 --> 00:29:37,200 Speaker 1: L podcast. You can subscribe and listen to interviews at 530 00:29:37,280 --> 00:29:41,720 Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer I'm 531 00:29:41,720 --> 00:29:45,200 Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on 532 00:29:45,200 --> 00:29:48,640 Speaker 1: Twitter at Lisa Abramowits one before the podcast. You can 533 00:29:48,680 --> 00:29:51,040 Speaker 1: always catch us worldwide on Bloomberg Radio