WEBVTT - Disney Had the Upper Hand All Along, Hartman Says 0:00:00.080 --> 0:00:12.960 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.720 Bloomberg dot Com, and of course, on the Bloomberg The 0:00:33.840 --> 0:00:38.040 PBOC Weekend. It's fixing below beyond six point seven today 0:00:38.120 --> 0:00:41.320 for the first time since the currency began tumbling in June. 0:00:41.680 --> 0:00:44.080 Joining me to discuss, I pleased to say as Joseph Quinland, 0:00:44.080 --> 0:00:47.240 Bank of America, head of Market Strategy for US Trust 0:00:47.240 --> 0:00:49.120 and he joins us here in New York. Joseph, good 0:00:49.120 --> 0:00:51.199 morning to you. Your thoughts on what is happening with 0:00:51.200 --> 0:00:55.120 the Chinese currency. Well, I think there's some weakness there, Jonathan, 0:00:55.120 --> 0:00:58.200 in the sense at the central banks trying to buffer growth. 0:00:58.360 --> 0:01:01.080 We saw six point seven percent for a second quarter 0:01:01.560 --> 0:01:03.400 UM but when I don't think there's gonna be too 0:01:03.520 --> 0:01:06.680 dramatic a decline in the currency because remember, Chinese exports 0:01:06.680 --> 0:01:08.440 as a percentage GDP are not as large as it 0:01:08.560 --> 0:01:11.319 used to be. China's more consumption led growth. So I 0:01:11.319 --> 0:01:13.720 think maybe it's a signal to the US administration that 0:01:13.720 --> 0:01:15.640 there's ways to play the trade game, and this might 0:01:15.640 --> 0:01:17.080 be one of them. But I'm not looking for any 0:01:17.480 --> 0:01:20.880 serious breakdown of the FX market with China. I was 0:01:20.920 --> 0:01:23.760 just Dum corresponding with Bob sin Chavamhurst Pipon who are 0:01:23.880 --> 0:01:26.640 pointed out that perhaps this move in dolly uan is 0:01:26.720 --> 0:01:30.200 much stronger than justified by general dollar strength. More broadly, Um, 0:01:30.280 --> 0:01:32.400 is that something you would agree with? Um? And so 0:01:32.520 --> 0:01:36.000 it's it's it's he's suggesting that it's more about China weakness. Yeah, 0:01:36.000 --> 0:01:37.520 I mean, I think that's part of the story, but 0:01:38.560 --> 0:01:41.600 that I think it's weighing on what the Chinese are thinking. 0:01:42.040 --> 0:01:44.200 But at the end of the day, what money investors 0:01:44.240 --> 0:01:48.200 don't realize is that the consumer is driving the Chinese economy, 0:01:48.240 --> 0:01:50.760 not exports and investments. So it's part and part of 0:01:50.800 --> 0:01:53.120 the easy but it's not gonna be overdone. What seems 0:01:53.120 --> 0:01:56.360 to be driving the Chinese economy more consistently, whether it's 0:01:56.440 --> 0:02:00.240 the consumer or exports, it's the credit impulse of China. Um. 0:02:00.320 --> 0:02:03.040 China's credit impulse has rolled over quite dramatically in the 0:02:03.160 --> 0:02:06.000 last twelve months. Do you see that turning around? No, 0:02:06.200 --> 0:02:08.840 I mean maybe alleviating, pulling back a little bit here 0:02:08.840 --> 0:02:11.240 because you're right there, there's been a huge push by 0:02:11.280 --> 0:02:14.800 the by the administration, the officials in China to tighten 0:02:14.840 --> 0:02:16.679 up the credit conditions. There's a lot of bad loans 0:02:16.680 --> 0:02:19.400 I've got to deal with, So maybe modest easy, but 0:02:19.440 --> 0:02:21.840 nothing going back to like you know, say, double digit 0:02:21.880 --> 0:02:24.320 credit expansion. This morning was saying some mod risk aversion 0:02:24.320 --> 0:02:26.040 futures are lower. Where you see the paintings in the 0:02:26.040 --> 0:02:28.480 commodity market, we had copper stath of six thouns and 0:02:28.720 --> 0:02:31.440 dollars a ton um. We see brent and w T 0:02:31.600 --> 0:02:35.079 and depressure once again this morning. Why is twenty eighteen 0:02:35.400 --> 0:02:37.480 and the weakness that we see in the Chinese currency 0:02:37.639 --> 0:02:42.320 different to what we saw in the summer and early well. 0:02:42.440 --> 0:02:45.120 One reason why because we think we're longer in the cycle, 0:02:45.280 --> 0:02:47.480 that we're going closer to the end of the business 0:02:47.480 --> 0:02:49.800 cycle globally, as opposed to two thousand and fifteen, there 0:02:49.840 --> 0:02:52.200 was still a lot of monetary expansion. The FED was 0:02:52.200 --> 0:02:54.840 still blowing out the balance sheet back then. So we're 0:02:54.840 --> 0:02:56.880 in an error now in a world where there's more 0:02:56.880 --> 0:02:59.320 central big tightening. Although I think we're going alleviated here. 0:02:59.400 --> 0:03:01.880 That makes it the print this time. So when you 0:03:01.919 --> 0:03:04.800 look at dollar denominated risk overseas and emergent markets in 0:03:04.800 --> 0:03:08.600 particular to trillion dollars in debt, and that has investors concerned. 0:03:09.000 --> 0:03:10.519 What's really cool here is I get to work with 0:03:10.600 --> 0:03:12.799 John Farrell, who, like you, mentioned copper. I haven't looked 0:03:12.840 --> 0:03:16.600 at copper since time began. And the answer is it's 0:03:16.639 --> 0:03:18.960 off a cliff. Now. Is it doing a soybean? No, 0:03:19.800 --> 0:03:22.880 and we call it dr copper. Each of these commodities 0:03:23.200 --> 0:03:26.400 tells us a different thing. How does a grizzled veteran 0:03:26.480 --> 0:03:31.359 like you use copper is a measurement of the global economy? Well, 0:03:31.440 --> 0:03:33.880 I use it time to look out, say, twelve months 0:03:33.919 --> 0:03:37.200 from exactly longer longer. So I think, you know, I 0:03:37.240 --> 0:03:40.000 think we're I think what copper maybe may be suggesting 0:03:40.040 --> 0:03:43.320 is that we're at the peak of global growth right now, 0:03:43.400 --> 0:03:45.320 and when you look out twelve months, it's gonna be 0:03:45.560 --> 0:03:48.720 at least three and a half, maybe closer to three 0:03:48.760 --> 0:03:50.520 as opposed to four where we are now. John, I'm 0:03:50.520 --> 0:03:52.200 gonna do a ballet here and get the chart out 0:03:52.240 --> 0:03:54.400 on Twitter, Bluebird Radio you'll see it first. But John, 0:03:54.400 --> 0:03:57.720 it's really simple. There's been a declining copper from two 0:03:57.760 --> 0:04:01.200 thousand eleven to Trump. I mean, it's just that simple. 0:04:01.600 --> 0:04:04.440 And then we got the Trump pop and boy have 0:04:04.520 --> 0:04:06.680 we adjusted. I mean, you know, can we use a 0:04:06.680 --> 0:04:10.640 fancy word, it's Italian go on on a Fibonaci basis 0:04:10.760 --> 0:04:13.920 here we go. We're like not halfway back? Should I 0:04:13.920 --> 0:04:16.680 put it in English? Fibonacci had coached the Italian team 0:04:16.680 --> 0:04:19.200 that would have made the world done. But the answer 0:04:19.279 --> 0:04:22.400 is we're not back. But I'm sorry, John, You're bringing 0:04:22.440 --> 0:04:24.400 up copper is a big deal. And I would say 0:04:24.640 --> 0:04:27.040 just the magnitude of the move and the space of 0:04:27.120 --> 0:04:29.880 time has happened in um. This is since early June, 0:04:30.120 --> 0:04:33.560 we've had an eighteen percent move in copper. That is brutal. 0:04:33.800 --> 0:04:37.000 That's brutal, and maybe and it is suggesting that out 0:04:37.000 --> 0:04:40.080 of the European Union, you know, a big economy, you're 0:04:40.080 --> 0:04:42.760 seeing more of a slowdown than what we expected. I 0:04:42.760 --> 0:04:44.880 think that could be the big story related commandities, is 0:04:44.920 --> 0:04:48.040 a significant pullback in your European growth. What's gonna put 0:04:48.080 --> 0:04:50.320 d c B back and play and what they do next? 0:04:50.360 --> 0:04:52.440 So for US based investors, I think listening to this 0:04:52.480 --> 0:04:55.960 program right now, they're wondering how insulated are we in 0:04:56.279 --> 0:04:59.400 dollars denominating assets at home domestically from all of these 0:04:59.400 --> 0:05:02.839 pressures that are emerging abroad. We've got some were insulated 0:05:02.839 --> 0:05:05.400 to a degree, particularly small cap stocks, but you're gonna 0:05:05.400 --> 0:05:07.200 see a lot of You're already seeing the guidance from 0:05:07.200 --> 0:05:12.520 the big multinationals. There's pressures building, worker shortages, material costs 0:05:12.560 --> 0:05:15.120 are rising. The best thing a US investor could do 0:05:15.160 --> 0:05:19.200 if they want to feel create that insulated portfolio, just 0:05:19.240 --> 0:05:22.359 stay mid small caps. Noise news in the earning cycle. 0:05:22.400 --> 0:05:25.240 In the earnings quarter is is always really really difficult 0:05:25.279 --> 0:05:28.560 to get through. Is it a convenient scapegoat or something 0:05:28.560 --> 0:05:30.640 that's actually hitting the bottom line. I get what it 0:05:30.720 --> 0:05:34.719 hits Alcoa. We see it in the outcome of Alcoa projections. 0:05:34.720 --> 0:05:37.440 That's obvious to me. But for the others, no, I 0:05:37.480 --> 0:05:39.159 think it's too early. I mean, they're using and I 0:05:39.200 --> 0:05:41.359 won't see is using an excuse. They're using as a 0:05:41.400 --> 0:05:44.760 red red flag. They're signaling their costs are going up. 0:05:44.800 --> 0:05:46.800 They're going to pass it on the consumers if they can. 0:05:46.880 --> 0:05:49.440 We'll see that's not a given. So I think really 0:05:49.480 --> 0:05:52.080 here early stay in the middle of the summer. There 0:05:52.480 --> 0:05:54.960 we could see some bigger problems, bigger issues in the 0:05:54.960 --> 0:05:57.040 fall in the fourth course, So how is chair Hower 0:05:57.080 --> 0:05:59.080 meant to respond to all of this? Because the Federal 0:05:59.080 --> 0:06:00.919 Reserve at the out of the year set us up 0:06:00.960 --> 0:06:03.159 for three hikes, and as the year progress, they set 0:06:03.200 --> 0:06:05.480 us up for full Um. I'm wondering whether it was 0:06:05.520 --> 0:06:08.320 the right ideas, sat right, the right path as these 0:06:08.400 --> 0:06:10.400 risks of building in the background. Well, I would agree 0:06:10.440 --> 0:06:12.040 with that because you can always extend it in two 0:06:12.080 --> 0:06:14.760 thousand nineteen. You can let the cycle run. And that's 0:06:14.800 --> 0:06:16.560 the key issue. You don't you don't have to numerically 0:06:16.560 --> 0:06:18.320 put down a market if they have to do x 0:06:18.360 --> 0:06:21.280 amount per calendar year. Let the cycle run. If we're 0:06:21.279 --> 0:06:23.440 got to do more in two thousand nineteen, that's gonna 0:06:23.440 --> 0:06:25.640 be key. We saw Johnson and Johnson with I guess 0:06:25.680 --> 0:06:28.160 they did, okay, make make up band aids, great again, 0:06:28.240 --> 0:06:30.920 economy and then a little bit of a Ford view 0:06:30.960 --> 0:06:34.440 that was self, where where's your working revenue number in 0:06:34.480 --> 0:06:37.120 your head? I mean as a blended nominal GDP number 0:06:37.480 --> 0:06:41.640 seven percent was so Q two wasn't and I think 0:06:41.680 --> 0:06:43.800 you know time that could have been the peak. But 0:06:43.800 --> 0:06:46.200 but where do how do but once you're at the peak. 0:06:46.360 --> 0:06:48.880 Where's the plateau? Do we stay above three and a 0:06:48.960 --> 0:06:51.640 quarter percent of growth? Add on some inflation? So I 0:06:51.640 --> 0:06:54.040 think the revenue growth is still going to run, say 0:06:54.080 --> 0:06:57.120 six for a lot for a lot of sectors. But 0:06:57.360 --> 0:06:59.360 the key is what investors are worried about, like, Okay, 0:06:59.400 --> 0:07:01.200 this is as good as it gets. Where do we 0:07:01.240 --> 0:07:02.800 go from here? And do I want to sell or 0:07:02.839 --> 0:07:05.279 want to reallocate? John what do they call band aids 0:07:05.320 --> 0:07:07.440 in the United Kingdom? I mean they call it wrench. 0:07:07.600 --> 0:07:10.880 They call them plasteras plasters. I didn't know that. You 0:07:10.960 --> 0:07:14.880 didn't plasters? Yeah, plastic Johnson and Johnson makes plastics by 0:07:14.920 --> 0:07:18.679 a plastic. Yeah, I did not, folks, I learned John Tucker. 0:07:18.800 --> 0:07:22.480 Isn't it amazing what we learned every day from young Pharrell? 0:07:22.760 --> 0:07:25.360 I tell you what plasters? You're really throwing some sh 0:07:25.600 --> 0:07:28.920 at me this morning? You deserve? Why do I deserve it? Well? 0:07:29.120 --> 0:07:31.160 I don't know. I mean I'm in a twelve step 0:07:31.200 --> 0:07:34.280 process to leave the World Cup. When are you getting 0:07:34.280 --> 0:07:38.200 to step twelve? We want how is this going to take? 0:07:38.480 --> 0:07:40.160 I don't know step three? As when we ran out 0:07:40.160 --> 0:07:42.760 of beer? You know, so I'm getting I can help 0:07:42.800 --> 0:07:45.760 you out with the beer. Yeah, I'm Simpsons free get good. 0:07:46.640 --> 0:07:50.800 It's like music to my ears. Okay, and um you 0:07:50.840 --> 0:07:53.160 know like I mean, Fiberacci could look good working for 0:07:53.200 --> 0:07:56.920 the Italians to get them to Okay, what does it 0:07:57.040 --> 0:08:00.880 win four years from now? And the cutter because right, yeah, 0:08:00.920 --> 0:08:02.640 it'll be in the wind. What about the heat, it's 0:08:02.640 --> 0:08:06.160 going to be in the winter still, what about Yeah, 0:08:06.200 --> 0:08:08.960 well we were promised their conditioned stadiums. I don't know 0:08:08.960 --> 0:08:11.800 if they're following through on that, John Tucker, do you 0:08:11.840 --> 0:08:14.800 see that we're doing the World Cup right now? Air 0:08:14.880 --> 0:08:18.640 conditioned stadiums and it's over though, right? Oh you Rich 0:08:18.680 --> 0:08:21.480 Truman ways and it says there may be less scoring. 0:08:21.880 --> 0:08:24.440 What if I done to you today? Why? Why are 0:08:24.440 --> 0:08:26.640 we doing this again? Why are we doing the World 0:08:26.640 --> 0:08:31.960 Cup again? We're not We're just a dancing Joe Quillan, 0:08:32.040 --> 0:08:34.360 Thank you so much for Joe. I want to repeat 0:08:34.360 --> 0:08:37.400 this on radio. Can you acquire shares this morning? Yes, 0:08:37.480 --> 0:08:40.560 we're buyers. What we're seeing opportunities in the market here, 0:08:40.920 --> 0:08:45.319 whether it's a healthcare, energy, there's some good values out there. Aerospace. 0:08:45.400 --> 0:08:49.600 We like cybersecurity. If you're worried about Russia, cybersecurity Joe, 0:08:49.840 --> 0:08:55.440 Joe Quillan long plasters this morning? Is that okay? Very much? 0:08:55.720 --> 0:08:57.719 Thank you Joe, thanks for tolerating us. Do you know 0:08:57.720 --> 0:09:14.040 how many times have said that this year John fare 0:09:14.120 --> 0:09:16.760 and are looking at stronger dollar and it started out like, yeah, 0:09:16.800 --> 0:09:19.840 a lift, And this morning it's a real lift. And 0:09:19.880 --> 0:09:23.120 it's not yen yen one thirteen oh four. I think 0:09:23.200 --> 0:09:26.320 yen would be like one thirteen forty. No, it's it's 0:09:26.360 --> 0:09:28.760 it's more like a e m field with a real 0:09:28.840 --> 0:09:32.600 euro weakness as well. It's a careful concoction, which means 0:09:32.600 --> 0:09:34.360 we need we need to go to London and Queen 0:09:34.440 --> 0:09:37.960 Victoria Station. Justina Lee joins us working for Bloomberg in 0:09:38.000 --> 0:09:42.440 the area of foreign exchange. Justina, the red men By 0:09:42.679 --> 0:09:47.079 has been weaker and weaker and weaker. Do we know why? 0:09:47.440 --> 0:09:51.160 Is it? Speculation? Is a covering of the stronger red 0:09:51.240 --> 0:09:55.520 men by? Bet? Is it flows? What is it? Right? 0:09:55.600 --> 0:09:58.920 Of course, overnight we got a stronger dollar, but that's 0:09:58.920 --> 0:10:02.360 not just it. This morning we saw the People's Bank 0:10:02.440 --> 0:10:06.280 of China weekend it's fixing beyond six point seven, and 0:10:06.520 --> 0:10:08.800 earlier people kind of saw that as a line in 0:10:08.840 --> 0:10:12.480 the sand. So now investors are wondering whether China is 0:10:12.480 --> 0:10:16.160 actually tolerating more you in weakness, you know, to boost 0:10:16.240 --> 0:10:19.520 the boost the economy. And of course there's also news 0:10:19.559 --> 0:10:23.120 that Chinese banks are being offered cash and given instructions 0:10:23.120 --> 0:10:25.760 to boost lending. So it seems like there are signs 0:10:25.800 --> 0:10:29.040 that maybe China is willing to ease monetary conditions a 0:10:29.040 --> 0:10:31.760 little bit. What I love that phrase, and you say 0:10:31.800 --> 0:10:34.240 it with the glow that you learn from New York 0:10:34.320 --> 0:10:40.439 University being given instructions? What actually happens? Who's who's giving 0:10:40.480 --> 0:10:44.160 instructions to who? Right? I mean, it's coming from the 0:10:44.200 --> 0:10:47.080 Banking and insurance regulator and it's just one of those 0:10:47.120 --> 0:10:50.040 things that you only get in China. Well, the statement 0:10:50.040 --> 0:10:52.679 they said that they said was that you know, they 0:10:52.720 --> 0:10:57.320 want Chinese banks to earnestly lower financing costs for smaller banks. 0:10:57.600 --> 0:11:00.520 And so we don't necessarily know what goes on the scenes, 0:11:00.800 --> 0:11:03.520 but you know, if you're a Chinese bank and you're 0:11:03.600 --> 0:11:06.480 getting this instruction from your regulator, I think you should 0:11:06.559 --> 0:11:08.960 know what to do. And of course, can we conclude 0:11:09.000 --> 0:11:11.240 can we conclude now, Justina, just to jump in that 0:11:11.360 --> 0:11:13.760 we are we're moving to a PBOC that has an 0:11:13.760 --> 0:11:17.120 easing bias. Now, well, I think it's kind of hard 0:11:17.160 --> 0:11:19.360 to say, because in recent years we've seen that the 0:11:19.400 --> 0:11:22.719 PBOC doesn't exactly like to use headline tools like the 0:11:22.800 --> 0:11:25.680 interest rate cut or deposit rate cuts anymore. But it 0:11:25.679 --> 0:11:29.319 seems like it's moving slightly towards an easing bias, if 0:11:29.320 --> 0:11:31.600 I can, If I can even say that, So the 0:11:31.640 --> 0:11:34.080 credit impulse of China is something we discussed out of 0:11:34.080 --> 0:11:36.480 in the program. What we've seen over the last couple 0:11:36.480 --> 0:11:39.960 of years is this big deleveraging effort. Is that starting 0:11:39.960 --> 0:11:41.800 to bottom out? Do they have to put from in 0:11:41.840 --> 0:11:45.040 the town on that Justina to some extent, Well, it 0:11:45.080 --> 0:11:48.400 seems like relative to you know, last year, they are 0:11:48.559 --> 0:11:53.040 sacrificing some of their leveraging objectives in order to cushion 0:11:53.320 --> 0:11:56.040 the rest of their economy from this trade war. But 0:11:56.120 --> 0:11:59.160 I think they still seem kind of cautious about sending 0:11:59.280 --> 0:12:02.240 a very strong easing signal. What does the streets say? 0:12:02.280 --> 0:12:04.600 I mean, John and I have noticed not only the 0:12:04.640 --> 0:12:08.559 polarity of of yen call say uh Nomura and Jordan 0:12:08.679 --> 0:12:12.640 Rochester with a polar opposite view from some of the 0:12:12.679 --> 0:12:15.480 you know, X number of handle moves to weaker young 0:12:15.559 --> 0:12:18.240 that we've seen. What does the cell side say about 0:12:18.280 --> 0:12:22.280 red Memby? Is there a one way bet here? Well, 0:12:22.480 --> 0:12:25.840 I think opinions are still quite divergent. You know. It 0:12:25.840 --> 0:12:28.040 also depends a lot on what you think of the dollar, 0:12:28.280 --> 0:12:30.280 because I think what a lot of analysts would point 0:12:30.280 --> 0:12:32.400 out is that if you look at the past patterns 0:12:32.440 --> 0:12:35.840 of what the PBOC does, they never really want un 0:12:35.920 --> 0:12:38.640 weakness to get out of hand. You know, we've seen 0:12:38.760 --> 0:12:41.400 in the years after the unit evaluation in two thousand 0:12:41.400 --> 0:12:45.360 and fifteen that they were very wary of capital outflows. 0:12:45.360 --> 0:12:47.800 So maybe if things get out of hand, the PBFC 0:12:47.920 --> 0:12:50.640 will step in and of course bake out the firepower. John, 0:12:50.679 --> 0:12:53.000 I know that re Memby is out about two point 0:12:53.040 --> 0:12:56.280 two standard deviations, so maybe we're on the edge of 0:12:56.360 --> 0:12:58.319 out of hand. We've we've had a big move. But 0:12:58.360 --> 0:13:00.160 I just wanted to Bob sinch bolt this up to 0:13:00.240 --> 0:13:02.720 me earlier on an email from MPST Pierpont and just 0:13:02.840 --> 0:13:05.400 in a place way in whether the move we've seen 0:13:05.880 --> 0:13:09.319 is more than justified by the general dollar strength that 0:13:09.320 --> 0:13:11.280 we've seen. More broadly, and what I mean by that is, 0:13:11.320 --> 0:13:14.120 are we seeing anything abnormal in the Chinese currency against 0:13:14.160 --> 0:13:16.559 the backdrop of dollar strength. More broadly, is Dolly went 0:13:16.679 --> 0:13:21.960 higher than otherwise would be well. Of course overnight you 0:13:22.000 --> 0:13:25.000 could say the dollar strength has had a big impact 0:13:25.080 --> 0:13:28.680 on what the un UM did this morning. But I 0:13:28.720 --> 0:13:31.800 mean it's not like the dollar has really been surging. 0:13:31.920 --> 0:13:34.840 But you know, if you put the dollar spot chart 0:13:35.000 --> 0:13:37.840 next to the un chart, it's quite obvious that you know, 0:13:37.920 --> 0:13:40.440 the un is rekening on its own regardless of what 0:13:40.480 --> 0:13:43.360 the dollar is doing. Brilli interesting only thank you so much, 0:13:43.360 --> 0:13:59.360 greatly appreciated off for London desk on for Change. Kurt 0:13:59.400 --> 0:14:02.559 Hartman was us with Wells Fargo and of course with 0:14:02.640 --> 0:14:06.199 the years with Wells Capital Management, their global chief investment officer, 0:14:06.640 --> 0:14:08.840 and and it's wonderful to have you here as an 0:14:08.840 --> 0:14:13.319 institutional guy. When we look at this transaction, do you 0:14:13.360 --> 0:14:16.520 suggest do you suggest that it was just a silly 0:14:16.600 --> 0:14:21.800 valuation where guys like you say to Comcast to shareholders, 0:14:22.160 --> 0:14:24.720 this is dumb, don't do it. I don't think it's 0:14:24.720 --> 0:14:27.240 a silly valuation. I think that Disney had the upper 0:14:27.240 --> 0:14:31.320 handle along, but obviously asset prices were getting pretty high, 0:14:31.360 --> 0:14:34.000 so I think everyone on a ratio price to even time, 0:14:34.000 --> 0:14:35.920 I mean, it was getting silly. Right, Well, it's getting 0:14:36.000 --> 0:14:38.200 very high. But I think it also shows you the 0:14:38.240 --> 0:14:40.840 tremendous value a lot of these media assets. Right, do 0:14:40.960 --> 0:14:45.200 these people? Do you have the power? You you're good competitors, 0:14:45.240 --> 0:14:49.040 black Rock Fidelity. Do you have the power to tell 0:14:49.120 --> 0:14:51.760 corporate titans what to do? Well, we have the power 0:14:51.800 --> 0:14:53.600 in terms of what we buy and sell and also 0:14:53.640 --> 0:14:55.920 in terms of our proxy voting. So I think that 0:14:56.280 --> 0:14:58.880 obviously that plays in. But um, you know, I think 0:14:58.920 --> 0:15:02.560 this was a very rational decision by all sides. Come 0:15:02.640 --> 0:15:08.720 kissed up, um, twenty century Fox negative is well, you 0:15:08.840 --> 0:15:13.040 folded this off air into a discussion of Telephone and 0:15:13.600 --> 0:15:16.120 Time Warner, which I think is going to become Warner Media. 0:15:16.160 --> 0:15:18.640 I haven't figured out the naming. It's like alphabet google. 0:15:18.640 --> 0:15:21.000 I can't figure it out. But the answer is I'm 0:15:21.040 --> 0:15:24.480 enjoying a six percent dividend with Telephone. I mean, the 0:15:24.560 --> 0:15:28.240 media game right now. The capitalization of it and the 0:15:28.400 --> 0:15:31.800 valuation of it is odd, isn't it? It is? And uh, 0:15:31.880 --> 0:15:34.280 you know we own obviously own this stocks in the index. 0:15:34.320 --> 0:15:35.880 But you look at something like a T and T, 0:15:36.400 --> 0:15:39.240 you know, six and a quarter dividend yield nine p 0:15:39.640 --> 0:15:41.840 you know, yere over a year free cash flow and 0:15:41.920 --> 0:15:45.480 you say this is cheap. Obviously it's got integration risk 0:15:45.560 --> 0:15:49.000 with Time Warner, and it's got litigration risk in terms 0:15:49.040 --> 0:15:52.640 of the adjustice apartment challenging the merger. But I think look, 0:15:53.000 --> 0:15:56.480 mergers are in vogue again and vertical integration, especially in 0:15:56.480 --> 0:15:59.200 the media, is going to continue. But did discipline rain here? 0:15:59.280 --> 0:16:02.280 This is really important and that it's visible. It's in 0:16:02.320 --> 0:16:04.720 the media. We talked to all these great annalys major 0:16:04.800 --> 0:16:08.520 shout out, might I add, folks to Craig Moffatt of 0:16:08.640 --> 0:16:11.640 Moffatt Nathans and Pim jump in here as you can. 0:16:11.800 --> 0:16:14.640 You and I were sitting here with Mr Moffatt and 0:16:14.760 --> 0:16:18.720 he was the first one as an expert on Comcast 0:16:18.960 --> 0:16:22.760 who said, you know what the stocks down for a reason. 0:16:23.200 --> 0:16:26.480 I mean Craig was way out front. Oh yes, absolutely, 0:16:26.520 --> 0:16:28.680 I mean he was. He was very clear about it 0:16:28.680 --> 0:16:31.440 and so with the investors. Um. But just the point 0:16:31.480 --> 0:16:33.240 if you if you don't mind about a T and T, 0:16:33.520 --> 0:16:36.080 but the stock has taken a huge hit. I mean 0:16:36.120 --> 0:16:38.480 the stock mean six and a quarter percent is great, 0:16:38.880 --> 0:16:42.640 but the stock your capital has declined. But kirk on 0:16:42.880 --> 0:16:45.480 a T and T with a six percent dividend. Are 0:16:45.480 --> 0:16:48.880 you buying it strategically for a bounce or is an 0:16:49.000 --> 0:16:53.400 underlying value as they morphed into a meeting whatever they're 0:16:53.400 --> 0:16:55.840 gonna morph into nobody, nobody really knows do well. To 0:16:55.920 --> 0:16:57.800 Pim's point, I mean, look, it's got hit pretty hard. 0:16:57.840 --> 0:16:59.600 I think a lot of that is the litigation risk 0:16:59.640 --> 0:17:02.360 and secution risk on Time Warner. But you know, you've 0:17:02.360 --> 0:17:04.480 got to be a contrarian investing, So I just look 0:17:04.520 --> 0:17:07.280 at the fundamental assets and the other thing that it's 0:17:07.359 --> 0:17:09.919 it's shown me is that a Time Warner obviously a 0:17:09.960 --> 0:17:12.600 great franchise, And um, look at the as you were 0:17:12.600 --> 0:17:14.760 talking earlier, look at the valuations and how they're being 0:17:14.800 --> 0:17:17.040 bit up. I made a joke in my TV script 0:17:17.160 --> 0:17:20.080 yesterday the opening when we're doing all this double negative 0:17:20.080 --> 0:17:24.399 malarchy about gap accounting and going over to that word adjusted, 0:17:24.640 --> 0:17:27.720 which maybe is like the late nineties ProForma. Do we 0:17:27.840 --> 0:17:31.200 know the goodwill or bad will on media balance sheets? 0:17:31.440 --> 0:17:36.160 On the balance sheet, folks, is it's intangible fiction called goodwill? Media? People? 0:17:36.160 --> 0:17:38.399 When I talked about this, they get upset because they 0:17:38.440 --> 0:17:41.680 say it's a tangible asset? Is it? Look? I am 0:17:41.760 --> 0:17:44.880 am not a specifically expert on media, but I think that. Yeah, 0:17:45.040 --> 0:17:48.560 but I think look goodwill is always somewhat of a guess. 0:17:48.800 --> 0:17:51.399 So I think again, what's hard about this is, you know, 0:17:51.560 --> 0:17:54.879 it's very difficult to anticipate the future value. But one 0:17:54.920 --> 0:17:56.960 thing that's clear to me, whatever your good will, these 0:17:56.960 --> 0:18:01.520 franchises have tremendous value. And looking again at Comcast with 0:18:01.600 --> 0:18:05.879 a dividend two point and sprightly, Brian Roberts like fo 0:18:06.720 --> 0:18:10.800 five year dividend growth rate, with yields up and with 0:18:11.000 --> 0:18:13.320 cash tangible. I think it was a New York Times 0:18:13.320 --> 0:18:16.919 today with a killer article on libor that world's back. 0:18:17.640 --> 0:18:20.240 Are we looking at dividends and dividend growth to the 0:18:20.280 --> 0:18:23.080 correct prism right now? Or do we need to adjust 0:18:23.119 --> 0:18:26.439 back to something where it competes with yield? Well, I 0:18:26.440 --> 0:18:28.360 think you have to look at value stocks right now. 0:18:28.359 --> 0:18:29.679 In other words, I think you have to look at 0:18:29.680 --> 0:18:32.960 things like free cash flow and what do how strange 0:18:33.160 --> 0:18:39.639 pim how how strange look at free cash flow? Oh? Yes, century, 0:18:40.800 --> 0:18:43.159 I mean you have to remember what's very interesting to 0:18:43.200 --> 0:18:46.560 me in terms of dislocations. Growth has beaten value for 0:18:46.680 --> 0:18:49.480 ten straight Yeah, I love that. And I'll tell you 0:18:49.520 --> 0:18:52.040 what's interesting the last time this happened, this is a 0:18:52.040 --> 0:18:54.800 little bit of a scary thought, was the ten years 0:18:54.800 --> 0:18:57.040 before the Great Depression and the ten years before the 0:18:57.080 --> 0:18:59.720 tech bubble. That's a quote of the months where half 0:18:59.720 --> 0:19:01.639 of it's what you say it again, this is so 0:19:01.720 --> 0:19:04.280 in the last time this happened was the ten year 0:19:05.040 --> 0:19:08.399 period before the Great Depression and the ten year period 0:19:08.440 --> 0:19:11.200 before the tech bubble in the early two thousand era. 0:19:11.600 --> 0:19:14.280 So look, if you're a contrarian again, you've got to 0:19:14.280 --> 0:19:16.679 go to mean reversion. You've got to say value stocks 0:19:16.680 --> 0:19:18.960 are cheap here and value is going to mean revert. 0:19:19.119 --> 0:19:22.040 Should I can I go to a Boston shout out here? 0:19:22.359 --> 0:19:24.159 I mean, it's not Margie patell who's you know, one 0:19:24.200 --> 0:19:27.640 of your giants. You know Margaie knows David Tripple, who 0:19:27.720 --> 0:19:31.359 was a force of Pioneer Group. I had this conversation 0:19:31.520 --> 0:19:33.960 over a cup of coffee and a coffee shop with 0:19:34.080 --> 0:19:38.800 Dave Tripple a million years ago about that sustainability of 0:19:38.840 --> 0:19:41.959 growth being value. So say it a third time, folks, 0:19:42.160 --> 0:19:44.880 This is a real clinic with Kirk Hartman. You get 0:19:44.880 --> 0:19:48.560 a run of growth being beating value, and you've least 0:19:48.600 --> 0:19:51.080 got to be aware of it right, Oh absolutely, And look, 0:19:51.119 --> 0:19:53.440 these things go in cycles. If you look at factors 0:19:53.480 --> 0:19:57.080 in terms of momentum growth value, they certainly go in cycles. 0:19:57.080 --> 0:20:00.320 And we have had a tremendous growth run. And you know, 0:20:00.359 --> 0:20:01.760 at some point you have to think it's going to 0:20:01.840 --> 0:20:04.840 mean revert to to Man Winkler's great column on Amazon 0:20:04.880 --> 0:20:07.080 the other day. Is the Amazon avail, You're a growth stuck. 0:20:07.600 --> 0:20:09.080 It's hard to say, but I can tell you it's 0:20:09.080 --> 0:20:12.160 a long duration asset. Right. It's very hard because you're 0:20:12.160 --> 0:20:14.199 buying the business model in my mind, I mean at 0:20:14.240 --> 0:20:17.800 a hundred fifty or whatever it's. You know, obviously you're 0:20:17.800 --> 0:20:20.160 buying it for the uh, you know, the underlying value 0:20:20.200 --> 0:20:22.400 of the franchise. But it's hard on a on a 0:20:22.440 --> 0:20:25.720 metric basis to look at these One final question, Kirk Hartman, 0:20:25.760 --> 0:20:28.680 did you buy anything on Prime Day? I bought dog 0:20:28.720 --> 0:20:32.440 biscuits for I was traveling. So I got home and 0:20:32.440 --> 0:20:34.160 I said, I gotta do a Prime Day because everybody 0:20:34.160 --> 0:20:36.560 else is doing it. So I bought little, you know, 0:20:36.920 --> 0:20:39.440 dog tasty kind of thing, you know what. Nothing I'm 0:20:39.440 --> 0:20:43.040 proud they taste. I don't please. Yeah, we're going there, 0:20:43.560 --> 0:20:45.880 you know. And Pim and I we have the same 0:20:45.920 --> 0:20:48.200 camp bills for a children, so we're down to eating 0:20:48.240 --> 0:20:51.080