1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,720 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg The 5 00:00:33,840 --> 00:00:38,040 Speaker 1: PBOC Weekend. It's fixing below beyond six point seven today 6 00:00:38,120 --> 00:00:41,320 Speaker 1: for the first time since the currency began tumbling in June. 7 00:00:41,680 --> 00:00:44,080 Speaker 1: Joining me to discuss, I pleased to say as Joseph Quinland, 8 00:00:44,080 --> 00:00:47,240 Speaker 1: Bank of America, head of Market Strategy for US Trust 9 00:00:47,240 --> 00:00:49,120 Speaker 1: and he joins us here in New York. Joseph, good 10 00:00:49,120 --> 00:00:51,199 Speaker 1: morning to you. Your thoughts on what is happening with 11 00:00:51,200 --> 00:00:55,120 Speaker 1: the Chinese currency. Well, I think there's some weakness there, Jonathan, 12 00:00:55,120 --> 00:00:58,200 Speaker 1: in the sense at the central banks trying to buffer growth. 13 00:00:58,360 --> 00:01:01,080 Speaker 1: We saw six point seven percent for a second quarter 14 00:01:01,560 --> 00:01:03,400 Speaker 1: UM but when I don't think there's gonna be too 15 00:01:03,520 --> 00:01:06,680 Speaker 1: dramatic a decline in the currency because remember, Chinese exports 16 00:01:06,680 --> 00:01:08,440 Speaker 1: as a percentage GDP are not as large as it 17 00:01:08,560 --> 00:01:11,319 Speaker 1: used to be. China's more consumption led growth. So I 18 00:01:11,319 --> 00:01:13,720 Speaker 1: think maybe it's a signal to the US administration that 19 00:01:13,720 --> 00:01:15,640 Speaker 1: there's ways to play the trade game, and this might 20 00:01:15,640 --> 00:01:17,080 Speaker 1: be one of them. But I'm not looking for any 21 00:01:17,480 --> 00:01:20,880 Speaker 1: serious breakdown of the FX market with China. I was 22 00:01:20,920 --> 00:01:23,760 Speaker 1: just Dum corresponding with Bob sin Chavamhurst Pipon who are 23 00:01:23,880 --> 00:01:26,640 Speaker 1: pointed out that perhaps this move in dolly uan is 24 00:01:26,720 --> 00:01:30,200 Speaker 1: much stronger than justified by general dollar strength. More broadly, Um, 25 00:01:30,280 --> 00:01:32,400 Speaker 1: is that something you would agree with? Um? And so 26 00:01:32,520 --> 00:01:36,000 Speaker 1: it's it's it's he's suggesting that it's more about China weakness. Yeah, 27 00:01:36,000 --> 00:01:37,520 Speaker 1: I mean, I think that's part of the story, but 28 00:01:38,560 --> 00:01:41,600 Speaker 1: that I think it's weighing on what the Chinese are thinking. 29 00:01:42,040 --> 00:01:44,200 Speaker 1: But at the end of the day, what money investors 30 00:01:44,240 --> 00:01:48,200 Speaker 1: don't realize is that the consumer is driving the Chinese economy, 31 00:01:48,240 --> 00:01:50,760 Speaker 1: not exports and investments. So it's part and part of 32 00:01:50,800 --> 00:01:53,120 Speaker 1: the easy but it's not gonna be overdone. What seems 33 00:01:53,120 --> 00:01:56,360 Speaker 1: to be driving the Chinese economy more consistently, whether it's 34 00:01:56,440 --> 00:02:00,240 Speaker 1: the consumer or exports, it's the credit impulse of China. Um. 35 00:02:00,320 --> 00:02:03,040 Speaker 1: China's credit impulse has rolled over quite dramatically in the 36 00:02:03,160 --> 00:02:06,000 Speaker 1: last twelve months. Do you see that turning around? No, 37 00:02:06,200 --> 00:02:08,840 Speaker 1: I mean maybe alleviating, pulling back a little bit here 38 00:02:08,840 --> 00:02:11,240 Speaker 1: because you're right there, there's been a huge push by 39 00:02:11,280 --> 00:02:14,800 Speaker 1: the by the administration, the officials in China to tighten 40 00:02:14,840 --> 00:02:16,679 Speaker 1: up the credit conditions. There's a lot of bad loans 41 00:02:16,680 --> 00:02:19,400 Speaker 1: I've got to deal with, So maybe modest easy, but 42 00:02:19,440 --> 00:02:21,840 Speaker 1: nothing going back to like you know, say, double digit 43 00:02:21,880 --> 00:02:24,320 Speaker 1: credit expansion. This morning was saying some mod risk aversion 44 00:02:24,320 --> 00:02:26,040 Speaker 1: futures are lower. Where you see the paintings in the 45 00:02:26,040 --> 00:02:28,480 Speaker 1: commodity market, we had copper stath of six thouns and 46 00:02:28,720 --> 00:02:31,440 Speaker 1: dollars a ton um. We see brent and w T 47 00:02:31,600 --> 00:02:35,079 Speaker 1: and depressure once again this morning. Why is twenty eighteen 48 00:02:35,400 --> 00:02:37,480 Speaker 1: and the weakness that we see in the Chinese currency 49 00:02:37,639 --> 00:02:42,320 Speaker 1: different to what we saw in the summer and early well. 50 00:02:42,440 --> 00:02:45,120 Speaker 1: One reason why because we think we're longer in the cycle, 51 00:02:45,280 --> 00:02:47,480 Speaker 1: that we're going closer to the end of the business 52 00:02:47,480 --> 00:02:49,800 Speaker 1: cycle globally, as opposed to two thousand and fifteen, there 53 00:02:49,840 --> 00:02:52,200 Speaker 1: was still a lot of monetary expansion. The FED was 54 00:02:52,200 --> 00:02:54,840 Speaker 1: still blowing out the balance sheet back then. So we're 55 00:02:54,840 --> 00:02:56,880 Speaker 1: in an error now in a world where there's more 56 00:02:56,880 --> 00:02:59,320 Speaker 1: central big tightening. Although I think we're going alleviated here. 57 00:02:59,400 --> 00:03:01,880 Speaker 1: That makes it the print this time. So when you 58 00:03:01,919 --> 00:03:04,800 Speaker 1: look at dollar denominated risk overseas and emergent markets in 59 00:03:04,800 --> 00:03:08,600 Speaker 1: particular to trillion dollars in debt, and that has investors concerned. 60 00:03:09,000 --> 00:03:10,519 Speaker 1: What's really cool here is I get to work with 61 00:03:10,600 --> 00:03:12,799 Speaker 1: John Farrell, who, like you, mentioned copper. I haven't looked 62 00:03:12,840 --> 00:03:16,600 Speaker 1: at copper since time began. And the answer is it's 63 00:03:16,639 --> 00:03:18,960 Speaker 1: off a cliff. Now. Is it doing a soybean? No, 64 00:03:19,800 --> 00:03:22,880 Speaker 1: and we call it dr copper. Each of these commodities 65 00:03:23,200 --> 00:03:26,400 Speaker 1: tells us a different thing. How does a grizzled veteran 66 00:03:26,480 --> 00:03:31,359 Speaker 1: like you use copper is a measurement of the global economy? Well, 67 00:03:31,440 --> 00:03:33,880 Speaker 1: I use it time to look out, say, twelve months 68 00:03:33,919 --> 00:03:37,200 Speaker 1: from exactly longer longer. So I think, you know, I 69 00:03:37,240 --> 00:03:40,000 Speaker 1: think we're I think what copper maybe may be suggesting 70 00:03:40,040 --> 00:03:43,320 Speaker 1: is that we're at the peak of global growth right now, 71 00:03:43,400 --> 00:03:45,320 Speaker 1: and when you look out twelve months, it's gonna be 72 00:03:45,560 --> 00:03:48,720 Speaker 1: at least three and a half, maybe closer to three 73 00:03:48,760 --> 00:03:50,520 Speaker 1: as opposed to four where we are now. John, I'm 74 00:03:50,520 --> 00:03:52,200 Speaker 1: gonna do a ballet here and get the chart out 75 00:03:52,240 --> 00:03:54,400 Speaker 1: on Twitter, Bluebird Radio you'll see it first. But John, 76 00:03:54,400 --> 00:03:57,720 Speaker 1: it's really simple. There's been a declining copper from two 77 00:03:57,760 --> 00:04:01,200 Speaker 1: thousand eleven to Trump. I mean, it's just that simple. 78 00:04:01,600 --> 00:04:04,440 Speaker 1: And then we got the Trump pop and boy have 79 00:04:04,520 --> 00:04:06,680 Speaker 1: we adjusted. I mean, you know, can we use a 80 00:04:06,680 --> 00:04:10,640 Speaker 1: fancy word, it's Italian go on on a Fibonaci basis 81 00:04:10,760 --> 00:04:13,920 Speaker 1: here we go. We're like not halfway back? Should I 82 00:04:13,920 --> 00:04:16,680 Speaker 1: put it in English? Fibonacci had coached the Italian team 83 00:04:16,680 --> 00:04:19,200 Speaker 1: that would have made the world done. But the answer 84 00:04:19,279 --> 00:04:22,400 Speaker 1: is we're not back. But I'm sorry, John, You're bringing 85 00:04:22,440 --> 00:04:24,400 Speaker 1: up copper is a big deal. And I would say 86 00:04:24,640 --> 00:04:27,040 Speaker 1: just the magnitude of the move and the space of 87 00:04:27,120 --> 00:04:29,880 Speaker 1: time has happened in um. This is since early June, 88 00:04:30,120 --> 00:04:33,560 Speaker 1: we've had an eighteen percent move in copper. That is brutal. 89 00:04:33,800 --> 00:04:37,000 Speaker 1: That's brutal, and maybe and it is suggesting that out 90 00:04:37,000 --> 00:04:40,080 Speaker 1: of the European Union, you know, a big economy, you're 91 00:04:40,080 --> 00:04:42,760 Speaker 1: seeing more of a slowdown than what we expected. I 92 00:04:42,760 --> 00:04:44,880 Speaker 1: think that could be the big story related commandities, is 93 00:04:44,920 --> 00:04:48,040 Speaker 1: a significant pullback in your European growth. What's gonna put 94 00:04:48,080 --> 00:04:50,320 Speaker 1: d c B back and play and what they do next? 95 00:04:50,360 --> 00:04:52,440 Speaker 1: So for US based investors, I think listening to this 96 00:04:52,480 --> 00:04:55,960 Speaker 1: program right now, they're wondering how insulated are we in 97 00:04:56,279 --> 00:04:59,400 Speaker 1: dollars denominating assets at home domestically from all of these 98 00:04:59,400 --> 00:05:02,839 Speaker 1: pressures that are emerging abroad. We've got some were insulated 99 00:05:02,839 --> 00:05:05,400 Speaker 1: to a degree, particularly small cap stocks, but you're gonna 100 00:05:05,400 --> 00:05:07,200 Speaker 1: see a lot of You're already seeing the guidance from 101 00:05:07,200 --> 00:05:12,520 Speaker 1: the big multinationals. There's pressures building, worker shortages, material costs 102 00:05:12,560 --> 00:05:15,120 Speaker 1: are rising. The best thing a US investor could do 103 00:05:15,160 --> 00:05:19,200 Speaker 1: if they want to feel create that insulated portfolio, just 104 00:05:19,240 --> 00:05:22,359 Speaker 1: stay mid small caps. Noise news in the earning cycle. 105 00:05:22,400 --> 00:05:25,240 Speaker 1: In the earnings quarter is is always really really difficult 106 00:05:25,279 --> 00:05:28,560 Speaker 1: to get through. Is it a convenient scapegoat or something 107 00:05:28,560 --> 00:05:30,640 Speaker 1: that's actually hitting the bottom line. I get what it 108 00:05:30,720 --> 00:05:34,719 Speaker 1: hits Alcoa. We see it in the outcome of Alcoa projections. 109 00:05:34,720 --> 00:05:37,440 Speaker 1: That's obvious to me. But for the others, no, I 110 00:05:37,480 --> 00:05:39,159 Speaker 1: think it's too early. I mean, they're using and I 111 00:05:39,200 --> 00:05:41,359 Speaker 1: won't see is using an excuse. They're using as a 112 00:05:41,400 --> 00:05:44,760 Speaker 1: red red flag. They're signaling their costs are going up. 113 00:05:44,800 --> 00:05:46,800 Speaker 1: They're going to pass it on the consumers if they can. 114 00:05:46,880 --> 00:05:49,440 Speaker 1: We'll see that's not a given. So I think really 115 00:05:49,480 --> 00:05:52,080 Speaker 1: here early stay in the middle of the summer. There 116 00:05:52,480 --> 00:05:54,960 Speaker 1: we could see some bigger problems, bigger issues in the 117 00:05:54,960 --> 00:05:57,040 Speaker 1: fall in the fourth course, So how is chair Hower 118 00:05:57,080 --> 00:05:59,080 Speaker 1: meant to respond to all of this? Because the Federal 119 00:05:59,080 --> 00:06:00,919 Speaker 1: Reserve at the out of the year set us up 120 00:06:00,960 --> 00:06:03,159 Speaker 1: for three hikes, and as the year progress, they set 121 00:06:03,200 --> 00:06:05,480 Speaker 1: us up for full Um. I'm wondering whether it was 122 00:06:05,520 --> 00:06:08,320 Speaker 1: the right ideas, sat right, the right path as these 123 00:06:08,400 --> 00:06:10,400 Speaker 1: risks of building in the background. Well, I would agree 124 00:06:10,440 --> 00:06:12,040 Speaker 1: with that because you can always extend it in two 125 00:06:12,080 --> 00:06:14,760 Speaker 1: thousand nineteen. You can let the cycle run. And that's 126 00:06:14,800 --> 00:06:16,560 Speaker 1: the key issue. You don't you don't have to numerically 127 00:06:16,560 --> 00:06:18,320 Speaker 1: put down a market if they have to do x 128 00:06:18,360 --> 00:06:21,280 Speaker 1: amount per calendar year. Let the cycle run. If we're 129 00:06:21,279 --> 00:06:23,440 Speaker 1: got to do more in two thousand nineteen, that's gonna 130 00:06:23,440 --> 00:06:25,640 Speaker 1: be key. We saw Johnson and Johnson with I guess 131 00:06:25,680 --> 00:06:28,160 Speaker 1: they did, okay, make make up band aids, great again, 132 00:06:28,240 --> 00:06:30,920 Speaker 1: economy and then a little bit of a Ford view 133 00:06:30,960 --> 00:06:34,440 Speaker 1: that was self, where where's your working revenue number in 134 00:06:34,480 --> 00:06:37,120 Speaker 1: your head? I mean as a blended nominal GDP number 135 00:06:37,480 --> 00:06:41,640 Speaker 1: seven percent was so Q two wasn't and I think 136 00:06:41,680 --> 00:06:43,800 Speaker 1: you know time that could have been the peak. But 137 00:06:43,800 --> 00:06:46,200 Speaker 1: but where do how do but once you're at the peak. 138 00:06:46,360 --> 00:06:48,880 Speaker 1: Where's the plateau? Do we stay above three and a 139 00:06:48,960 --> 00:06:51,640 Speaker 1: quarter percent of growth? Add on some inflation? So I 140 00:06:51,640 --> 00:06:54,040 Speaker 1: think the revenue growth is still going to run, say 141 00:06:54,080 --> 00:06:57,120 Speaker 1: six for a lot for a lot of sectors. But 142 00:06:57,360 --> 00:06:59,360 Speaker 1: the key is what investors are worried about, like, Okay, 143 00:06:59,400 --> 00:07:01,200 Speaker 1: this is as good as it gets. Where do we 144 00:07:01,240 --> 00:07:02,800 Speaker 1: go from here? And do I want to sell or 145 00:07:02,839 --> 00:07:05,279 Speaker 1: want to reallocate? John what do they call band aids 146 00:07:05,320 --> 00:07:07,440 Speaker 1: in the United Kingdom? I mean they call it wrench. 147 00:07:07,600 --> 00:07:10,880 Speaker 1: They call them plasteras plasters. I didn't know that. You 148 00:07:10,960 --> 00:07:14,880 Speaker 1: didn't plasters? Yeah, plastic Johnson and Johnson makes plastics by 149 00:07:14,920 --> 00:07:18,679 Speaker 1: a plastic. Yeah, I did not, folks, I learned John Tucker. 150 00:07:18,800 --> 00:07:22,480 Speaker 1: Isn't it amazing what we learned every day from young Pharrell? 151 00:07:22,760 --> 00:07:25,360 Speaker 1: I tell you what plasters? You're really throwing some sh 152 00:07:25,600 --> 00:07:28,920 Speaker 1: at me this morning? You deserve? Why do I deserve it? Well? 153 00:07:29,120 --> 00:07:31,160 Speaker 1: I don't know. I mean I'm in a twelve step 154 00:07:31,200 --> 00:07:34,280 Speaker 1: process to leave the World Cup. When are you getting 155 00:07:34,280 --> 00:07:38,200 Speaker 1: to step twelve? We want how is this going to take? 156 00:07:38,480 --> 00:07:40,160 Speaker 1: I don't know step three? As when we ran out 157 00:07:40,160 --> 00:07:42,760 Speaker 1: of beer? You know, so I'm getting I can help 158 00:07:42,800 --> 00:07:45,760 Speaker 1: you out with the beer. Yeah, I'm Simpsons free get good. 159 00:07:46,640 --> 00:07:50,800 Speaker 1: It's like music to my ears. Okay, and um you 160 00:07:50,840 --> 00:07:53,160 Speaker 1: know like I mean, Fiberacci could look good working for 161 00:07:53,200 --> 00:07:56,920 Speaker 1: the Italians to get them to Okay, what does it 162 00:07:57,040 --> 00:08:00,880 Speaker 1: win four years from now? And the cutter because right, yeah, 163 00:08:00,920 --> 00:08:02,640 Speaker 1: it'll be in the wind. What about the heat, it's 164 00:08:02,640 --> 00:08:06,160 Speaker 1: going to be in the winter still, what about Yeah, 165 00:08:06,200 --> 00:08:08,960 Speaker 1: well we were promised their conditioned stadiums. I don't know 166 00:08:08,960 --> 00:08:11,800 Speaker 1: if they're following through on that, John Tucker, do you 167 00:08:11,840 --> 00:08:14,800 Speaker 1: see that we're doing the World Cup right now? Air 168 00:08:14,880 --> 00:08:18,640 Speaker 1: conditioned stadiums and it's over though, right? Oh you Rich 169 00:08:18,680 --> 00:08:21,480 Speaker 1: Truman ways and it says there may be less scoring. 170 00:08:21,880 --> 00:08:24,440 Speaker 1: What if I done to you today? Why? Why are 171 00:08:24,440 --> 00:08:26,640 Speaker 1: we doing this again? Why are we doing the World 172 00:08:26,640 --> 00:08:31,960 Speaker 1: Cup again? We're not We're just a dancing Joe Quillan, 173 00:08:32,040 --> 00:08:34,360 Speaker 1: Thank you so much for Joe. I want to repeat 174 00:08:34,360 --> 00:08:37,400 Speaker 1: this on radio. Can you acquire shares this morning? Yes, 175 00:08:37,480 --> 00:08:40,560 Speaker 1: we're buyers. What we're seeing opportunities in the market here, 176 00:08:40,920 --> 00:08:45,319 Speaker 1: whether it's a healthcare, energy, there's some good values out there. Aerospace. 177 00:08:45,400 --> 00:08:49,600 Speaker 1: We like cybersecurity. If you're worried about Russia, cybersecurity Joe, 178 00:08:49,840 --> 00:08:55,440 Speaker 1: Joe Quillan long plasters this morning? Is that okay? Very much? 179 00:08:55,720 --> 00:08:57,719 Speaker 1: Thank you Joe, thanks for tolerating us. Do you know 180 00:08:57,720 --> 00:09:14,040 Speaker 1: how many times have said that this year John fare 181 00:09:14,120 --> 00:09:16,760 Speaker 1: and are looking at stronger dollar and it started out like, yeah, 182 00:09:16,800 --> 00:09:19,840 Speaker 1: a lift, And this morning it's a real lift. And 183 00:09:19,880 --> 00:09:23,120 Speaker 1: it's not yen yen one thirteen oh four. I think 184 00:09:23,200 --> 00:09:26,320 Speaker 1: yen would be like one thirteen forty. No, it's it's 185 00:09:26,360 --> 00:09:28,760 Speaker 1: it's more like a e m field with a real 186 00:09:28,840 --> 00:09:32,600 Speaker 1: euro weakness as well. It's a careful concoction, which means 187 00:09:32,600 --> 00:09:34,360 Speaker 1: we need we need to go to London and Queen 188 00:09:34,440 --> 00:09:37,960 Speaker 1: Victoria Station. Justina Lee joins us working for Bloomberg in 189 00:09:38,000 --> 00:09:42,440 Speaker 1: the area of foreign exchange. Justina, the red men By 190 00:09:42,679 --> 00:09:47,079 Speaker 1: has been weaker and weaker and weaker. Do we know why? 191 00:09:47,440 --> 00:09:51,160 Speaker 1: Is it? Speculation? Is a covering of the stronger red 192 00:09:51,240 --> 00:09:55,520 Speaker 1: men by? Bet? Is it flows? What is it? Right? 193 00:09:55,600 --> 00:09:58,920 Speaker 1: Of course, overnight we got a stronger dollar, but that's 194 00:09:58,920 --> 00:10:02,360 Speaker 1: not just it. This morning we saw the People's Bank 195 00:10:02,440 --> 00:10:06,280 Speaker 1: of China weekend it's fixing beyond six point seven, and 196 00:10:06,520 --> 00:10:08,800 Speaker 1: earlier people kind of saw that as a line in 197 00:10:08,840 --> 00:10:12,480 Speaker 1: the sand. So now investors are wondering whether China is 198 00:10:12,480 --> 00:10:16,160 Speaker 1: actually tolerating more you in weakness, you know, to boost 199 00:10:16,240 --> 00:10:19,520 Speaker 1: the boost the economy. And of course there's also news 200 00:10:19,559 --> 00:10:23,120 Speaker 1: that Chinese banks are being offered cash and given instructions 201 00:10:23,120 --> 00:10:25,760 Speaker 1: to boost lending. So it seems like there are signs 202 00:10:25,800 --> 00:10:29,040 Speaker 1: that maybe China is willing to ease monetary conditions a 203 00:10:29,040 --> 00:10:31,760 Speaker 1: little bit. What I love that phrase, and you say 204 00:10:31,800 --> 00:10:34,240 Speaker 1: it with the glow that you learn from New York 205 00:10:34,320 --> 00:10:40,439 Speaker 1: University being given instructions? What actually happens? Who's who's giving 206 00:10:40,480 --> 00:10:44,160 Speaker 1: instructions to who? Right? I mean, it's coming from the 207 00:10:44,200 --> 00:10:47,080 Speaker 1: Banking and insurance regulator and it's just one of those 208 00:10:47,120 --> 00:10:50,040 Speaker 1: things that you only get in China. Well, the statement 209 00:10:50,040 --> 00:10:52,679 Speaker 1: they said that they said was that you know, they 210 00:10:52,720 --> 00:10:57,320 Speaker 1: want Chinese banks to earnestly lower financing costs for smaller banks. 211 00:10:57,600 --> 00:11:00,520 Speaker 1: And so we don't necessarily know what goes on the scenes, 212 00:11:00,800 --> 00:11:03,520 Speaker 1: but you know, if you're a Chinese bank and you're 213 00:11:03,600 --> 00:11:06,480 Speaker 1: getting this instruction from your regulator, I think you should 214 00:11:06,559 --> 00:11:08,960 Speaker 1: know what to do. And of course, can we conclude 215 00:11:09,000 --> 00:11:11,240 Speaker 1: can we conclude now, Justina, just to jump in that 216 00:11:11,360 --> 00:11:13,760 Speaker 1: we are we're moving to a PBOC that has an 217 00:11:13,760 --> 00:11:17,120 Speaker 1: easing bias. Now, well, I think it's kind of hard 218 00:11:17,160 --> 00:11:19,360 Speaker 1: to say, because in recent years we've seen that the 219 00:11:19,400 --> 00:11:22,719 Speaker 1: PBOC doesn't exactly like to use headline tools like the 220 00:11:22,800 --> 00:11:25,680 Speaker 1: interest rate cut or deposit rate cuts anymore. But it 221 00:11:25,679 --> 00:11:29,319 Speaker 1: seems like it's moving slightly towards an easing bias, if 222 00:11:29,320 --> 00:11:31,600 Speaker 1: I can, If I can even say that, So the 223 00:11:31,640 --> 00:11:34,080 Speaker 1: credit impulse of China is something we discussed out of 224 00:11:34,080 --> 00:11:36,480 Speaker 1: in the program. What we've seen over the last couple 225 00:11:36,480 --> 00:11:39,960 Speaker 1: of years is this big deleveraging effort. Is that starting 226 00:11:39,960 --> 00:11:41,800 Speaker 1: to bottom out? Do they have to put from in 227 00:11:41,840 --> 00:11:45,040 Speaker 1: the town on that Justina to some extent, Well, it 228 00:11:45,080 --> 00:11:48,400 Speaker 1: seems like relative to you know, last year, they are 229 00:11:48,559 --> 00:11:53,040 Speaker 1: sacrificing some of their leveraging objectives in order to cushion 230 00:11:53,320 --> 00:11:56,040 Speaker 1: the rest of their economy from this trade war. But 231 00:11:56,120 --> 00:11:59,160 Speaker 1: I think they still seem kind of cautious about sending 232 00:11:59,280 --> 00:12:02,240 Speaker 1: a very strong easing signal. What does the streets say? 233 00:12:02,280 --> 00:12:04,600 Speaker 1: I mean, John and I have noticed not only the 234 00:12:04,640 --> 00:12:08,559 Speaker 1: polarity of of yen call say uh Nomura and Jordan 235 00:12:08,679 --> 00:12:12,640 Speaker 1: Rochester with a polar opposite view from some of the 236 00:12:12,679 --> 00:12:15,480 Speaker 1: you know, X number of handle moves to weaker young 237 00:12:15,559 --> 00:12:18,240 Speaker 1: that we've seen. What does the cell side say about 238 00:12:18,280 --> 00:12:22,280 Speaker 1: red Memby? Is there a one way bet here? Well, 239 00:12:22,480 --> 00:12:25,840 Speaker 1: I think opinions are still quite divergent. You know. It 240 00:12:25,840 --> 00:12:28,040 Speaker 1: also depends a lot on what you think of the dollar, 241 00:12:28,280 --> 00:12:30,280 Speaker 1: because I think what a lot of analysts would point 242 00:12:30,280 --> 00:12:32,400 Speaker 1: out is that if you look at the past patterns 243 00:12:32,440 --> 00:12:35,840 Speaker 1: of what the PBOC does, they never really want un 244 00:12:35,920 --> 00:12:38,640 Speaker 1: weakness to get out of hand. You know, we've seen 245 00:12:38,760 --> 00:12:41,400 Speaker 1: in the years after the unit evaluation in two thousand 246 00:12:41,400 --> 00:12:45,360 Speaker 1: and fifteen that they were very wary of capital outflows. 247 00:12:45,360 --> 00:12:47,800 Speaker 1: So maybe if things get out of hand, the PBFC 248 00:12:47,920 --> 00:12:50,640 Speaker 1: will step in and of course bake out the firepower. John, 249 00:12:50,679 --> 00:12:53,000 Speaker 1: I know that re Memby is out about two point 250 00:12:53,040 --> 00:12:56,280 Speaker 1: two standard deviations, so maybe we're on the edge of 251 00:12:56,360 --> 00:12:58,319 Speaker 1: out of hand. We've we've had a big move. But 252 00:12:58,360 --> 00:13:00,160 Speaker 1: I just wanted to Bob sinch bolt this up to 253 00:13:00,240 --> 00:13:02,720 Speaker 1: me earlier on an email from MPST Pierpont and just 254 00:13:02,840 --> 00:13:05,400 Speaker 1: in a place way in whether the move we've seen 255 00:13:05,880 --> 00:13:09,319 Speaker 1: is more than justified by the general dollar strength that 256 00:13:09,320 --> 00:13:11,280 Speaker 1: we've seen. More broadly, and what I mean by that is, 257 00:13:11,320 --> 00:13:14,120 Speaker 1: are we seeing anything abnormal in the Chinese currency against 258 00:13:14,160 --> 00:13:16,559 Speaker 1: the backdrop of dollar strength. More broadly, is Dolly went 259 00:13:16,679 --> 00:13:21,960 Speaker 1: higher than otherwise would be well. Of course overnight you 260 00:13:22,000 --> 00:13:25,000 Speaker 1: could say the dollar strength has had a big impact 261 00:13:25,080 --> 00:13:28,680 Speaker 1: on what the un UM did this morning. But I 262 00:13:28,720 --> 00:13:31,800 Speaker 1: mean it's not like the dollar has really been surging. 263 00:13:31,920 --> 00:13:34,840 Speaker 1: But you know, if you put the dollar spot chart 264 00:13:35,000 --> 00:13:37,840 Speaker 1: next to the un chart, it's quite obvious that you know, 265 00:13:37,920 --> 00:13:40,440 Speaker 1: the un is rekening on its own regardless of what 266 00:13:40,480 --> 00:13:43,360 Speaker 1: the dollar is doing. Brilli interesting only thank you so much, 267 00:13:43,360 --> 00:13:59,360 Speaker 1: greatly appreciated off for London desk on for Change. Kurt 268 00:13:59,400 --> 00:14:02,559 Speaker 1: Hartman was us with Wells Fargo and of course with 269 00:14:02,640 --> 00:14:06,199 Speaker 1: the years with Wells Capital Management, their global chief investment officer, 270 00:14:06,640 --> 00:14:08,840 Speaker 1: and and it's wonderful to have you here as an 271 00:14:08,840 --> 00:14:13,319 Speaker 1: institutional guy. When we look at this transaction, do you 272 00:14:13,360 --> 00:14:16,520 Speaker 1: suggest do you suggest that it was just a silly 273 00:14:16,600 --> 00:14:21,800 Speaker 1: valuation where guys like you say to Comcast to shareholders, 274 00:14:22,160 --> 00:14:24,720 Speaker 1: this is dumb, don't do it. I don't think it's 275 00:14:24,720 --> 00:14:27,240 Speaker 1: a silly valuation. I think that Disney had the upper 276 00:14:27,240 --> 00:14:31,320 Speaker 1: handle along, but obviously asset prices were getting pretty high, 277 00:14:31,360 --> 00:14:34,000 Speaker 1: so I think everyone on a ratio price to even time, 278 00:14:34,000 --> 00:14:35,920 Speaker 1: I mean, it was getting silly. Right, Well, it's getting 279 00:14:36,000 --> 00:14:38,200 Speaker 1: very high. But I think it also shows you the 280 00:14:38,240 --> 00:14:40,840 Speaker 1: tremendous value a lot of these media assets. Right, do 281 00:14:40,960 --> 00:14:45,200 Speaker 1: these people? Do you have the power? You you're good competitors, 282 00:14:45,240 --> 00:14:49,040 Speaker 1: black Rock Fidelity. Do you have the power to tell 283 00:14:49,120 --> 00:14:51,760 Speaker 1: corporate titans what to do? Well, we have the power 284 00:14:51,800 --> 00:14:53,600 Speaker 1: in terms of what we buy and sell and also 285 00:14:53,640 --> 00:14:55,920 Speaker 1: in terms of our proxy voting. So I think that 286 00:14:56,280 --> 00:14:58,880 Speaker 1: obviously that plays in. But um, you know, I think 287 00:14:58,920 --> 00:15:02,560 Speaker 1: this was a very rational decision by all sides. Come 288 00:15:02,640 --> 00:15:08,720 Speaker 1: kissed up, um, twenty century Fox negative is well, you 289 00:15:08,840 --> 00:15:13,040 Speaker 1: folded this off air into a discussion of Telephone and 290 00:15:13,600 --> 00:15:16,120 Speaker 1: Time Warner, which I think is going to become Warner Media. 291 00:15:16,160 --> 00:15:18,640 Speaker 1: I haven't figured out the naming. It's like alphabet google. 292 00:15:18,640 --> 00:15:21,000 Speaker 1: I can't figure it out. But the answer is I'm 293 00:15:21,040 --> 00:15:24,480 Speaker 1: enjoying a six percent dividend with Telephone. I mean, the 294 00:15:24,560 --> 00:15:28,240 Speaker 1: media game right now. The capitalization of it and the 295 00:15:28,400 --> 00:15:31,800 Speaker 1: valuation of it is odd, isn't it? It is? And uh, 296 00:15:31,880 --> 00:15:34,280 Speaker 1: you know we own obviously own this stocks in the index. 297 00:15:34,320 --> 00:15:35,880 Speaker 1: But you look at something like a T and T, 298 00:15:36,400 --> 00:15:39,240 Speaker 1: you know, six and a quarter dividend yield nine p 299 00:15:39,640 --> 00:15:41,840 Speaker 1: you know, yere over a year free cash flow and 300 00:15:41,920 --> 00:15:45,480 Speaker 1: you say this is cheap. Obviously it's got integration risk 301 00:15:45,560 --> 00:15:49,000 Speaker 1: with Time Warner, and it's got litigration risk in terms 302 00:15:49,040 --> 00:15:52,640 Speaker 1: of the adjustice apartment challenging the merger. But I think look, 303 00:15:53,000 --> 00:15:56,480 Speaker 1: mergers are in vogue again and vertical integration, especially in 304 00:15:56,480 --> 00:15:59,200 Speaker 1: the media, is going to continue. But did discipline rain here? 305 00:15:59,280 --> 00:16:02,280 Speaker 1: This is really important and that it's visible. It's in 306 00:16:02,320 --> 00:16:04,720 Speaker 1: the media. We talked to all these great annalys major 307 00:16:04,800 --> 00:16:08,520 Speaker 1: shout out, might I add, folks to Craig Moffatt of 308 00:16:08,640 --> 00:16:11,640 Speaker 1: Moffatt Nathans and Pim jump in here as you can. 309 00:16:11,800 --> 00:16:14,640 Speaker 1: You and I were sitting here with Mr Moffatt and 310 00:16:14,760 --> 00:16:18,720 Speaker 1: he was the first one as an expert on Comcast 311 00:16:18,960 --> 00:16:22,760 Speaker 1: who said, you know what the stocks down for a reason. 312 00:16:23,200 --> 00:16:26,480 Speaker 1: I mean Craig was way out front. Oh yes, absolutely, 313 00:16:26,520 --> 00:16:28,680 Speaker 1: I mean he was. He was very clear about it 314 00:16:28,680 --> 00:16:31,440 Speaker 1: and so with the investors. Um. But just the point 315 00:16:31,480 --> 00:16:33,240 Speaker 1: if you if you don't mind about a T and T, 316 00:16:33,520 --> 00:16:36,080 Speaker 1: but the stock has taken a huge hit. I mean 317 00:16:36,120 --> 00:16:38,480 Speaker 1: the stock mean six and a quarter percent is great, 318 00:16:38,880 --> 00:16:42,640 Speaker 1: but the stock your capital has declined. But kirk on 319 00:16:42,880 --> 00:16:45,480 Speaker 1: a T and T with a six percent dividend. Are 320 00:16:45,480 --> 00:16:48,880 Speaker 1: you buying it strategically for a bounce or is an 321 00:16:49,000 --> 00:16:53,400 Speaker 1: underlying value as they morphed into a meeting whatever they're 322 00:16:53,400 --> 00:16:55,840 Speaker 1: gonna morph into nobody, nobody really knows do well. To 323 00:16:55,920 --> 00:16:57,800 Speaker 1: Pim's point, I mean, look, it's got hit pretty hard. 324 00:16:57,840 --> 00:16:59,600 Speaker 1: I think a lot of that is the litigation risk 325 00:16:59,640 --> 00:17:02,360 Speaker 1: and secution risk on Time Warner. But you know, you've 326 00:17:02,360 --> 00:17:04,480 Speaker 1: got to be a contrarian investing, So I just look 327 00:17:04,520 --> 00:17:07,280 Speaker 1: at the fundamental assets and the other thing that it's 328 00:17:07,359 --> 00:17:09,919 Speaker 1: it's shown me is that a Time Warner obviously a 329 00:17:09,960 --> 00:17:12,600 Speaker 1: great franchise, And um, look at the as you were 330 00:17:12,600 --> 00:17:14,760 Speaker 1: talking earlier, look at the valuations and how they're being 331 00:17:14,800 --> 00:17:17,040 Speaker 1: bit up. I made a joke in my TV script 332 00:17:17,160 --> 00:17:20,080 Speaker 1: yesterday the opening when we're doing all this double negative 333 00:17:20,080 --> 00:17:24,399 Speaker 1: malarchy about gap accounting and going over to that word adjusted, 334 00:17:24,640 --> 00:17:27,720 Speaker 1: which maybe is like the late nineties ProForma. Do we 335 00:17:27,840 --> 00:17:31,200 Speaker 1: know the goodwill or bad will on media balance sheets? 336 00:17:31,440 --> 00:17:36,160 Speaker 1: On the balance sheet, folks, is it's intangible fiction called goodwill? Media? People? 337 00:17:36,160 --> 00:17:38,399 Speaker 1: When I talked about this, they get upset because they 338 00:17:38,440 --> 00:17:41,680 Speaker 1: say it's a tangible asset? Is it? Look? I am 339 00:17:41,760 --> 00:17:44,880 Speaker 1: am not a specifically expert on media, but I think that. Yeah, 340 00:17:45,040 --> 00:17:48,560 Speaker 1: but I think look goodwill is always somewhat of a guess. 341 00:17:48,800 --> 00:17:51,399 Speaker 1: So I think again, what's hard about this is, you know, 342 00:17:51,560 --> 00:17:54,879 Speaker 1: it's very difficult to anticipate the future value. But one 343 00:17:54,920 --> 00:17:56,960 Speaker 1: thing that's clear to me, whatever your good will, these 344 00:17:56,960 --> 00:18:01,520 Speaker 1: franchises have tremendous value. And looking again at Comcast with 345 00:18:01,600 --> 00:18:05,879 Speaker 1: a dividend two point and sprightly, Brian Roberts like fo 346 00:18:06,720 --> 00:18:10,800 Speaker 1: five year dividend growth rate, with yields up and with 347 00:18:11,000 --> 00:18:13,320 Speaker 1: cash tangible. I think it was a New York Times 348 00:18:13,320 --> 00:18:16,919 Speaker 1: today with a killer article on libor that world's back. 349 00:18:17,640 --> 00:18:20,240 Speaker 1: Are we looking at dividends and dividend growth to the 350 00:18:20,280 --> 00:18:23,080 Speaker 1: correct prism right now? Or do we need to adjust 351 00:18:23,119 --> 00:18:26,439 Speaker 1: back to something where it competes with yield? Well, I 352 00:18:26,440 --> 00:18:28,360 Speaker 1: think you have to look at value stocks right now. 353 00:18:28,359 --> 00:18:29,679 Speaker 1: In other words, I think you have to look at 354 00:18:29,680 --> 00:18:32,960 Speaker 1: things like free cash flow and what do how strange 355 00:18:33,160 --> 00:18:39,639 Speaker 1: pim how how strange look at free cash flow? Oh? Yes, century, 356 00:18:40,800 --> 00:18:43,159 Speaker 1: I mean you have to remember what's very interesting to 357 00:18:43,200 --> 00:18:46,560 Speaker 1: me in terms of dislocations. Growth has beaten value for 358 00:18:46,680 --> 00:18:49,480 Speaker 1: ten straight Yeah, I love that. And I'll tell you 359 00:18:49,520 --> 00:18:52,040 Speaker 1: what's interesting the last time this happened, this is a 360 00:18:52,040 --> 00:18:54,800 Speaker 1: little bit of a scary thought, was the ten years 361 00:18:54,800 --> 00:18:57,040 Speaker 1: before the Great Depression and the ten years before the 362 00:18:57,080 --> 00:18:59,720 Speaker 1: tech bubble. That's a quote of the months where half 363 00:18:59,720 --> 00:19:01,639 Speaker 1: of it's what you say it again, this is so 364 00:19:01,720 --> 00:19:04,280 Speaker 1: in the last time this happened was the ten year 365 00:19:05,040 --> 00:19:08,399 Speaker 1: period before the Great Depression and the ten year period 366 00:19:08,440 --> 00:19:11,200 Speaker 1: before the tech bubble in the early two thousand era. 367 00:19:11,600 --> 00:19:14,280 Speaker 1: So look, if you're a contrarian again, you've got to 368 00:19:14,280 --> 00:19:16,679 Speaker 1: go to mean reversion. You've got to say value stocks 369 00:19:16,680 --> 00:19:18,960 Speaker 1: are cheap here and value is going to mean revert. 370 00:19:19,119 --> 00:19:22,040 Speaker 1: Should I can I go to a Boston shout out here? 371 00:19:22,359 --> 00:19:24,159 Speaker 1: I mean, it's not Margie patell who's you know, one 372 00:19:24,200 --> 00:19:27,640 Speaker 1: of your giants. You know Margaie knows David Tripple, who 373 00:19:27,720 --> 00:19:31,359 Speaker 1: was a force of Pioneer Group. I had this conversation 374 00:19:31,520 --> 00:19:33,960 Speaker 1: over a cup of coffee and a coffee shop with 375 00:19:34,080 --> 00:19:38,800 Speaker 1: Dave Tripple a million years ago about that sustainability of 376 00:19:38,840 --> 00:19:41,959 Speaker 1: growth being value. So say it a third time, folks, 377 00:19:42,160 --> 00:19:44,880 Speaker 1: This is a real clinic with Kirk Hartman. You get 378 00:19:44,880 --> 00:19:48,560 Speaker 1: a run of growth being beating value, and you've least 379 00:19:48,600 --> 00:19:51,080 Speaker 1: got to be aware of it right, Oh absolutely, And look, 380 00:19:51,119 --> 00:19:53,440 Speaker 1: these things go in cycles. If you look at factors 381 00:19:53,480 --> 00:19:57,080 Speaker 1: in terms of momentum growth value, they certainly go in cycles. 382 00:19:57,080 --> 00:20:00,320 Speaker 1: And we have had a tremendous growth run. And you know, 383 00:20:00,359 --> 00:20:01,760 Speaker 1: at some point you have to think it's going to 384 00:20:01,840 --> 00:20:04,840 Speaker 1: mean revert to to Man Winkler's great column on Amazon 385 00:20:04,880 --> 00:20:07,080 Speaker 1: the other day. Is the Amazon avail, You're a growth stuck. 386 00:20:07,600 --> 00:20:09,080 Speaker 1: It's hard to say, but I can tell you it's 387 00:20:09,080 --> 00:20:12,160 Speaker 1: a long duration asset. Right. It's very hard because you're 388 00:20:12,160 --> 00:20:14,199 Speaker 1: buying the business model in my mind, I mean at 389 00:20:14,240 --> 00:20:17,800 Speaker 1: a hundred fifty or whatever it's. You know, obviously you're 390 00:20:17,800 --> 00:20:20,160 Speaker 1: buying it for the uh, you know, the underlying value 391 00:20:20,200 --> 00:20:22,400 Speaker 1: of the franchise. But it's hard on a on a 392 00:20:22,440 --> 00:20:25,720 Speaker 1: metric basis to look at these One final question, Kirk Hartman, 393 00:20:25,760 --> 00:20:28,680 Speaker 1: did you buy anything on Prime Day? I bought dog 394 00:20:28,720 --> 00:20:32,440 Speaker 1: biscuits for I was traveling. So I got home and 395 00:20:32,440 --> 00:20:34,160 Speaker 1: I said, I gotta do a Prime Day because everybody 396 00:20:34,160 --> 00:20:36,560 Speaker 1: else is doing it. So I bought little, you know, 397 00:20:36,920 --> 00:20:39,440 Speaker 1: dog tasty kind of thing, you know what. Nothing I'm 398 00:20:39,440 --> 00:20:43,040 Speaker 1: proud they taste. I don't please. Yeah, we're going there, 399 00:20:43,560 --> 00:20:45,880 Speaker 1: you know. And Pim and I we have the same 400 00:20:45,920 --> 00:20:48,200 Speaker 1: camp bills for a children, so we're down to eating 401 00:20:48,240 --> 00:20:51,080 Speaker 1: dog biscuits. You didn't buy anything in Prime Day? I didn't. 402 00:20:51,320 --> 00:20:54,359 Speaker 1: It's American, I know, but I was traveling, so you know, 403 00:20:54,400 --> 00:20:56,480 Speaker 1: it's hard to buy things when you're traveling. Kirk Carbon, 404 00:20:56,560 --> 00:20:59,200 Speaker 1: thank you so much. Really appreciate this. Is he's not 405 00:20:59,240 --> 00:21:02,639 Speaker 1: supposed to comment on individual stocks, so I greatly appreciate 406 00:21:02,640 --> 00:21:19,199 Speaker 1: the media comments with a stock. Craig Moffatt of Moffatt 407 00:21:19,320 --> 00:21:24,080 Speaker 1: Nathans and Craig, congratulations on absolutely nailing the game theory. 408 00:21:24,119 --> 00:21:26,800 Speaker 1: If you would of what Mr Roberts would do. You 409 00:21:26,840 --> 00:21:30,800 Speaker 1: have always said you were suspect about this transaction. Let's 410 00:21:30,840 --> 00:21:34,600 Speaker 1: immediate drive it forward. Can you acquire shares of Comcast 411 00:21:34,920 --> 00:21:40,240 Speaker 1: this morning? Well? Thanks thanks for saying that, but I 412 00:21:40,359 --> 00:21:42,120 Speaker 1: don't think I was the only one to figure out 413 00:21:42,160 --> 00:21:46,080 Speaker 1: that trunk hast had gotten itself wrong footed on this UM. 414 00:21:46,080 --> 00:21:49,040 Speaker 1: But but you know, look, I would like to say 415 00:21:49,080 --> 00:21:52,200 Speaker 1: this is a green light to go and acquire Comcast shares, 416 00:21:52,280 --> 00:21:56,680 Speaker 1: but um, but this was at this point reasonably widely 417 00:21:56,720 --> 00:21:59,680 Speaker 1: expected And the real question now is you still don't 418 00:21:59,680 --> 00:22:03,240 Speaker 1: know UM whether they are going to win or lose. 419 00:22:03,320 --> 00:22:06,440 Speaker 1: Sky Um. Investors are going to be very happy that 420 00:22:06,600 --> 00:22:10,160 Speaker 1: there they've lost fox Um, but investors would be even 421 00:22:10,160 --> 00:22:13,040 Speaker 1: happier if they lost both and would go back to 422 00:22:13,080 --> 00:22:15,520 Speaker 1: being a cable company, which is what investors always wanted 423 00:22:15,560 --> 00:22:17,560 Speaker 1: them to be in the first place. And we just 424 00:22:17,640 --> 00:22:20,040 Speaker 1: don't know the answer to that. Today's press release from 425 00:22:20,040 --> 00:22:22,960 Speaker 1: Comcast says they still want Sky, but whether they can 426 00:22:23,000 --> 00:22:27,320 Speaker 1: win it versus Disney is unclear. Within that is going 427 00:22:27,440 --> 00:22:31,080 Speaker 1: after Sky, and do I understand that's a two part transaction. 428 00:22:31,600 --> 00:22:35,680 Speaker 1: They've got to take the Disney part and the Sky part. Well, 429 00:22:36,240 --> 00:22:39,400 Speaker 1: it's a little more complicated. Disney in this case, Fox 430 00:22:39,720 --> 00:22:42,800 Speaker 1: has it Foxes bidding for the rest of Sky that 431 00:22:42,880 --> 00:22:46,040 Speaker 1: it doesn't own, but is effectively bidding as a proxy 432 00:22:46,160 --> 00:22:49,640 Speaker 1: for Disney because Disney within by the whole thing. Um 433 00:22:49,720 --> 00:22:54,639 Speaker 1: they already correct, that's right. Comcast is now the leading 434 00:22:54,680 --> 00:22:59,120 Speaker 1: bidder though for Um they've got technically got an offer 435 00:22:59,160 --> 00:23:01,440 Speaker 1: for the whole thing. But they would buy the minority steak, 436 00:23:01,480 --> 00:23:03,480 Speaker 1: and you would end up with an ownership steak in 437 00:23:03,520 --> 00:23:06,560 Speaker 1: that scenario. That's the same as what you have today. 438 00:23:06,640 --> 00:23:10,040 Speaker 1: It's just that now Comcast would own the majority and 439 00:23:10,119 --> 00:23:13,240 Speaker 1: Disney would end up being a minority investor. Now there's 440 00:23:13,280 --> 00:23:16,320 Speaker 1: been some speculation that if that's the way things turn out, 441 00:23:16,720 --> 00:23:18,879 Speaker 1: that you might see some kind of a of a 442 00:23:19,000 --> 00:23:24,600 Speaker 1: swap of Comcast ownership in UH in Hulu, which would 443 00:23:24,760 --> 00:23:29,399 Speaker 1: then be a minority interest UM for plus plus uh 444 00:23:30,160 --> 00:23:35,720 Speaker 1: uh some cash for UM for the rest of Sky UM. 445 00:23:35,760 --> 00:23:38,240 Speaker 1: But again that's all It's still all speculation because we 446 00:23:38,280 --> 00:23:42,400 Speaker 1: don't really know whether Disney is going to increase its 447 00:23:42,400 --> 00:23:44,720 Speaker 1: bid for Sky for the rest of Sky or not. 448 00:23:45,600 --> 00:23:48,720 Speaker 1: Craig moffatt from a strategic point of view, what makes 449 00:23:48,760 --> 00:23:52,639 Speaker 1: the most sense for Comcast. Well, I guess it depends 450 00:23:52,680 --> 00:23:55,520 Speaker 1: on who you ask, because obviously my answer is different 451 00:23:55,560 --> 00:23:58,840 Speaker 1: than Brian Roberts. Bryan Robert's answer is they really want 452 00:23:58,880 --> 00:24:01,280 Speaker 1: to get Sky. My to would be you're better off 453 00:24:01,320 --> 00:24:06,919 Speaker 1: without Sky. You know. The problem for me is my 454 00:24:07,000 --> 00:24:10,560 Speaker 1: suspicion is Comcast is trying to convince itself that Sky 455 00:24:10,720 --> 00:24:14,000 Speaker 1: is something that it isn't um. Sky is a global 456 00:24:14,040 --> 00:24:18,720 Speaker 1: distribution platform that, if you look at it from Comcast 457 00:24:18,800 --> 00:24:21,320 Speaker 1: point of view, has a lot of proprietary content, things 458 00:24:21,400 --> 00:24:26,600 Speaker 1: like HBO and Showtime and Disney and the Premier League soccer. UM. 459 00:24:26,640 --> 00:24:31,000 Speaker 1: That is that is the basis of of becoming something 460 00:24:31,040 --> 00:24:36,600 Speaker 1: like a global O T T provider like Netflix. What 461 00:24:36,600 --> 00:24:40,520 Speaker 1: what Sky really is though, is a satellite TV company. 462 00:24:40,560 --> 00:24:43,480 Speaker 1: And we've seen what happens to satellite TV companies because 463 00:24:43,520 --> 00:24:47,480 Speaker 1: fundamentally their distribution technology is obsolete, and so the tension 464 00:24:47,520 --> 00:24:52,920 Speaker 1: between those two things. Can you transition from being uh 465 00:24:53,040 --> 00:24:58,560 Speaker 1: rapidly obsolescing satellite TV platform to being a next generation 466 00:24:58,680 --> 00:25:05,600 Speaker 1: OTT provider fast enough that you can beat the expiration 467 00:25:05,680 --> 00:25:08,520 Speaker 1: date on a lot of that proprietary contract is the 468 00:25:08,600 --> 00:25:11,639 Speaker 1: challenge that Comcast would face, and I don't think investors 469 00:25:11,640 --> 00:25:15,000 Speaker 1: at Comcast are particularly enthusiastic about taking on that challenge. 470 00:25:15,040 --> 00:25:17,560 Speaker 1: Do you and your colleague Michael Nathanson have a price 471 00:25:17,600 --> 00:25:21,679 Speaker 1: to ebitda Mr Iger ponied up after Comcast a bit 472 00:25:21,760 --> 00:25:24,159 Speaker 1: up the price? I mean, folks, this is the comparison 473 00:25:24,200 --> 00:25:28,280 Speaker 1: of the value of the transaction down the income as 474 00:25:28,320 --> 00:25:30,600 Speaker 1: compared to down the income statement with a little bit 475 00:25:30,640 --> 00:25:34,960 Speaker 1: of balance sheet ballet. What's the price to Mr Iger 476 00:25:35,040 --> 00:25:39,880 Speaker 1: will enjoy in acquiring these assets. Well, remember that there 477 00:25:39,880 --> 00:25:43,680 Speaker 1: will be synergies, but there will also be some divestitures. Okay, 478 00:25:43,680 --> 00:25:47,960 Speaker 1: So to give me two numbers, presynergy excuse me, folks, 479 00:25:47,960 --> 00:25:52,399 Speaker 1: we don't use the word synergy, Bloomberg surveillance. After cost 480 00:25:52,440 --> 00:25:56,560 Speaker 1: cuts and slashing, what will be the two ratios? Well, 481 00:25:56,920 --> 00:25:59,600 Speaker 1: it's going to depend on on what he can get 482 00:25:59,720 --> 00:26:02,639 Speaker 1: for or the regional sports networks that are going to 483 00:26:02,720 --> 00:26:05,840 Speaker 1: have to be divested, But I think it's it's likely 484 00:26:05,960 --> 00:26:09,200 Speaker 1: that the multiple will come out to be something like 485 00:26:09,760 --> 00:26:15,440 Speaker 1: twelve to thirteen times net of all of that. Not stupid. Yeah, high, 486 00:26:15,440 --> 00:26:17,919 Speaker 1: but not stupid Comcast, you know. And that was the 487 00:26:17,960 --> 00:26:21,639 Speaker 1: problem for Comcast is Comcast because of because it had 488 00:26:21,680 --> 00:26:24,679 Speaker 1: gotten footed, would have had to end because of the 489 00:26:24,680 --> 00:26:27,639 Speaker 1: regulatory challenges, probably would have had to bid at least 490 00:26:27,640 --> 00:26:30,560 Speaker 1: into the low forties. If Disney had matched it, that 491 00:26:30,560 --> 00:26:33,119 Speaker 1: would have put Comcast in order to win into the 492 00:26:33,760 --> 00:26:36,640 Speaker 1: mid to high forties. And then you're talking about fourteen 493 00:26:36,800 --> 00:26:39,879 Speaker 1: times after synergies. That's crazy. Quickly, pim because I know 494 00:26:39,880 --> 00:26:43,960 Speaker 1: you want to get a question two years ago, see 495 00:26:43,960 --> 00:26:47,560 Speaker 1: if a level two they are so influenced by Moffatt, 496 00:26:47,680 --> 00:26:50,800 Speaker 1: they had a question on price to Ibada, a cheap, 497 00:26:51,280 --> 00:26:54,440 Speaker 1: be expensive, and a third choice was high but not high, 498 00:26:54,520 --> 00:27:00,280 Speaker 1: but not stupid. I'm gonna copyright that one. That's Yeah, 499 00:27:00,400 --> 00:27:04,600 Speaker 1: be careful there, um, Craig. While all this is going on, 500 00:27:04,680 --> 00:27:07,000 Speaker 1: I do assume that there are other companies that are 501 00:27:07,720 --> 00:27:12,560 Speaker 1: going about their business, such as Netflix. Any thoughts on 502 00:27:12,600 --> 00:27:15,320 Speaker 1: anybody else who maybe is taking advantage of all the 503 00:27:15,359 --> 00:27:18,119 Speaker 1: focus on takeover an acquisition to actually just run their 504 00:27:18,160 --> 00:27:21,199 Speaker 1: business and make a lot of money. Well, you know, 505 00:27:21,240 --> 00:27:24,720 Speaker 1: I'm always a little suspicious of those arguments about X, 506 00:27:24,840 --> 00:27:28,919 Speaker 1: Y or Z company was quote unquote distracted because of 507 00:27:29,040 --> 00:27:32,119 Speaker 1: m and am the CFO and the CEO may be 508 00:27:32,240 --> 00:27:37,000 Speaker 1: worried about the distraction, but generally speaking to people who 509 00:27:37,080 --> 00:27:39,800 Speaker 1: run the business on a day to day basis, are 510 00:27:40,000 --> 00:27:43,840 Speaker 1: are probably not all that distracted. So I'm never all 511 00:27:43,920 --> 00:27:47,200 Speaker 1: that sympathetic to those kinds of arguments. Um, you know, 512 00:27:47,280 --> 00:27:51,280 Speaker 1: the real question for for Netflix, I think, um, and 513 00:27:51,359 --> 00:27:53,600 Speaker 1: it's covered by my partner Michael, But Michael and I 514 00:27:53,640 --> 00:27:57,080 Speaker 1: have I think very similar views on Netflix that the 515 00:27:57,119 --> 00:28:00,720 Speaker 1: real tension here is just Netflix is clearly going to 516 00:28:00,760 --> 00:28:04,119 Speaker 1: be very, very big, But there's a debate about how 517 00:28:04,119 --> 00:28:08,280 Speaker 1: how secure is the mode around Netflix's business. Is sheer 518 00:28:08,359 --> 00:28:12,320 Speaker 1: size in the media business going to create an impenetrable 519 00:28:12,400 --> 00:28:14,680 Speaker 1: mode or is it just going to create a big 520 00:28:14,680 --> 00:28:17,440 Speaker 1: business and they're going to be potentially other big businesses 521 00:28:17,480 --> 00:28:20,399 Speaker 1: as well, And those are two very different outcomes, because 522 00:28:20,400 --> 00:28:23,240 Speaker 1: if it is the latter, there's no reason to believe 523 00:28:23,359 --> 00:28:27,320 Speaker 1: that the returns on capital in just another big business 524 00:28:27,359 --> 00:28:30,879 Speaker 1: without an impenetrable mode will be exceptionally high. And right 525 00:28:30,880 --> 00:28:35,040 Speaker 1: now Netflix is priced for exceptionally high returns. And so 526 00:28:35,359 --> 00:28:37,400 Speaker 1: that it's a worthy debate, and you're going to find 527 00:28:37,400 --> 00:28:40,360 Speaker 1: out a lot based on now that Disney is getting 528 00:28:40,400 --> 00:28:44,960 Speaker 1: foxed and Disney effectively pursues something like a similar strategy 529 00:28:46,000 --> 00:28:48,080 Speaker 1: just quickly. This is not like doing an A O 530 00:28:48,240 --> 00:28:50,320 Speaker 1: L is it. I mean? You know we're not talking 531 00:28:50,400 --> 00:28:54,600 Speaker 1: Time Warner a world quality here are we? No? No, no, no, 532 00:28:54,680 --> 00:28:57,600 Speaker 1: these are Disney, you know has to be. And again 533 00:28:57,640 --> 00:29:01,040 Speaker 1: it's Michael's company to cover. But but Disney has to 534 00:29:01,040 --> 00:29:04,360 Speaker 1: be given a lot of credit for having put the 535 00:29:04,480 --> 00:29:11,000 Speaker 1: strategy in place and having executed very deliberately around during 536 00:29:11,040 --> 00:29:13,880 Speaker 1: the assets to pursue the strategy that want to pursue. Craig, 537 00:29:13,920 --> 00:29:15,720 Speaker 1: thank you, thank you for coming on with us. We'll 538 00:29:15,720 --> 00:29:18,520 Speaker 1: look for notes from off at Nathanson to their clients 539 00:29:19,080 --> 00:29:28,760 Speaker 1: coming up. Thanks for listening to the Bloomberg surveillance podcast. 540 00:29:29,160 --> 00:29:34,080 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 541 00:29:34,240 --> 00:29:38,560 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 542 00:29:38,640 --> 00:29:42,520 Speaker 1: Keane before the podcast. You can always catch us worldwide. 543 00:29:43,000 --> 00:29:44,040 Speaker 1: I'm Bloomberg Radio