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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each

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Speaker 2: day for insight from the best in markets, economics, and

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Speaker 2: geopolitics from our global headquarters in New York City. We

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Speaker 2: are live on Bloomberg Television weekday mornings from six to

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Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify

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Speaker 2: or anywhere else you listen, and as always on the

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Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Linc Rosena of

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Speaker 2: Goldman Sachs, writing decemberst duration selloff was an opportunity, and

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Speaker 2: we continue to think fixed income is a good part

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Speaker 2: of the portfolio. Lindsay joins us now for more. Lindzy,

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Speaker 2: good morning.

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Speaker 3: It's good to see you. Good to see you.

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Speaker 2: Let's start with the tariffs and the price of all

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Speaker 2: of this uncertainty. Does it raise the hurdle for rain

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Speaker 2: cuts at the Federal Reserve.

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Speaker 4: It's certainly going to affect the data, and it does

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Speaker 4: raise the hurdle. But I think you gotta be honest

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Speaker 4: about how very little is priced in. We've got forty

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Speaker 4: five basis points priced in between now and the end

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Speaker 4: of the year. In terms of cuts, I think there's

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Speaker 4: not that much that can happen in the labor market,

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Speaker 4: and we can talk about that more. Inflation seems to

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Speaker 4: be the question. And it really appears so far that

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Speaker 4: tariffs are a tool, and they're a tool for negotiation,

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Speaker 4: and they maybe don't have the staying power that people

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Speaker 4: were probably worried about. One day into the tariff announcement.

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Speaker 2: There's some debate about what the tariffs could mean for

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Speaker 2: growth and for inflation. Leasha and I've been talking about

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Speaker 2: this through the week. We had a bit of a

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Speaker 2: stress test on Monday Monic so we had the prospect

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Speaker 2: of twenty five percent tariffs on to the biggest trading

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Speaker 2: partners of America and we saw a yields drop initially

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Speaker 2: at the long end on a ten year did during

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Speaker 2: the team ten county signal from them? What did that

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Speaker 2: tell you about where the market was focused in?

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Speaker 5: Right?

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Speaker 4: Well, you have the twist flattening, right, so you had

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Speaker 4: the front end go a little bit higher. The idea

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Speaker 4: there is that to your point, the FED wouldn't be

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Speaker 4: able to cut, but remember it was just a handful

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Speaker 4: of basis points back end yields did go lower, and

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Speaker 4: the idea there was the probability of recession had increased.

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Speaker 4: Teriffs are deaf and lead growth reducing. But again we're

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Speaker 4: talking in general terms of what tariffs do right now.

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Speaker 4: They aren't in place, and so I think we need

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Speaker 4: to all take a little bit of a breather. And

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Speaker 4: I don't disagree. I think it's been a stress test

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Speaker 4: for all of our hearts over the past few days.

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Speaker 4: But take a little bit of a breather and understand

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Speaker 4: that these are tools. And I think you see the

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Speaker 4: result of ten thousand troops on the border to help

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Speaker 4: shows that they're kind of working.

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Speaker 1: From the corporate executives, the CFOs you talk to who

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Speaker 1: are looking to finance themselves, how do they take a

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Speaker 1: breather at a time where they have to come up

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Speaker 1: with plans? How long can they take a breather. Do

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Speaker 1: you get a sense that this is filtering into the

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Speaker 1: decisions of when to start raising money in twenty twenty

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Speaker 1: five or how they can really plan ahead.

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Speaker 4: Well, luckily we don't have a wall of maturity, right.

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Speaker 4: That's always been the biggest fear on debt since the

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Speaker 4: financial crisis. Is there a wall of maturity where these

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Speaker 4: companies have to act, and they have to act now

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Speaker 4: they've done a really good job. I think this is

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Speaker 4: kind of the PTSD of the financial crisis, to never

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Speaker 4: put yourself in a position that you are forced to

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Speaker 4: come to market at a specific time or else. So

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Speaker 4: I think companies have set themselves up in a really

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Speaker 4: good way. They have cash balances, they have healthy balance sheets.

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Speaker 4: But certainly uncertainty is not a good thing when you're

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Speaker 4: a management team trying to predict for the future. We

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Speaker 4: get a lot of data right now in terms of

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Speaker 4: management speak, and so far we're not seeing from a

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Speaker 4: guide perspective, tremendously reduced confidence. Now, all of this stuff

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Speaker 4: on tariffs and what's happening is fresh and new, so

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Speaker 4: it's hard to completely get that into your philosophy of

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Speaker 4: how you want to finance yourself going forward. But the

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Speaker 4: markets are wide open for financing. I think you just

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Speaker 4: mentioned right before the break that X is upping their

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Speaker 4: deal from three to five. There is appetite and the

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Speaker 4: markets are wide open. So I think right now it

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Speaker 4: is business as usual, but maybe a little bit of

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Speaker 4: a bird on the shoulder of uncertainty and concern.

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Speaker 1: As an investor, does that bird on the shoulder prompt

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Speaker 1: you to say, maybe there's a little bit too priced

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Speaker 1: perfection type of valuation in the credit market, especially if

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Speaker 1: long term yields are falling for the wrong reasons, the

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Speaker 1: idea of reduced long term growth propositions.

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Speaker 4: So we think from the spread perspective, what's happening in

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Speaker 4: credit markets that spreads are supported, and why they're supported

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Speaker 4: is because the economy is really strong, and we saw

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Speaker 4: that when we got our finalized print on GDP for

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Speaker 4: the last quarter. We're seeing in the terms of consumption numbers,

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Speaker 4: we are not seeing a dip tremendously in confidence right

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Speaker 4: now with everything going on. In particular, we think the

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Speaker 4: US economy is really strong, and it's really strong relative

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Speaker 4: to the rest of the world. We think that continues

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Speaker 4: and that supports spreads even at these really tight valuations.

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Speaker 4: On the other side of things, I think the macro

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Speaker 4: is really where it's interesting, and that's what's been pingponging

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Speaker 4: the most. If you look at credit, credit hasn't moved

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Speaker 4: that dramatically this year a basis point or two in

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Speaker 4: either direction, and in fact, historically how yields has actually

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Speaker 4: outperformed IG in the face of tariffs, So you would think,

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Speaker 4: actually the riskier stuff may be in a better position

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Speaker 4: given what's happening. But on the macro site, there are

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Speaker 4: a lot of opportunities. And what we've done is we've

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Speaker 4: used this kind of knee jerk reaction to policies to

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Speaker 4: take advantage of getting our positions right size.

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Speaker 2: Why did you think the sell off induration was of

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Speaker 2: it done in December? Why did you think that backup

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Speaker 2: in yields was of it done out of interest?

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Speaker 4: It was overdone to us because it started to knock

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Speaker 4: on the door of really significant real yields. We lived

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Speaker 4: for a really long time, remember ZERP and zero interest rate.

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Speaker 4: In that whole world, there really wasn't real yields in

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Speaker 4: the curve.

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Speaker 3: What happened in.

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Speaker 4: December in that backup and part of unwinding of a

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Speaker 4: prior trade, was that we started to get real yield

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Speaker 4: put into the curve. And we talked to a ton

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Speaker 4: of clients daily, particularly pensions, and they're thirsting for real yield.

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Speaker 4: And so when real yield's out there, this is a

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Speaker 4: great opportunity. And we know that the idea of switching

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Speaker 4: also from equities to fixed income really makes sense and

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Speaker 4: they'd be happy about this.

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Speaker 3: It's so interesting.

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Speaker 2: It's not just about this moy becoming self limit because

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Speaker 2: it could damage growth. There's just a wall of money

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Speaker 2: out there looking for that number.

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Speaker 3: Yeah.

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Speaker 6: I think that's true.

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Speaker 4: And again we all stare at these I feel like

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Speaker 4: we're on money market Watch. We're staring at how many

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Speaker 4: assets are in money markets and when they are actually

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Speaker 4: going to move. I think we're really at a time

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Speaker 4: where it's starting to make sense and unlocking real yield

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Speaker 4: is really convincing.

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Speaker 2: Lindsay always smartys a Clinic, appreciate your time. Thank you,

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Speaker 2: Lindsay Rosena There of gold with sancx aass and management.

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Speaker 2: The Federal Reserve Bank of President of Richmond. President Tom

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Speaker 2: Barkin joins us now for more alongside Bloomberg's Michael McKee,

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Speaker 2: President Parking.

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Speaker 3: Good to see you, sir, to can't shut once again,

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Speaker 3: happy to be back with you.

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Speaker 2: The first question we asked Fed officials these days is

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Speaker 2: did you include possible tariff changes in your round? Loook,

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Speaker 2: so let's start that.

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Speaker 3: Did you well, so.

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Speaker 5: You're talking about forecasts we did in December?

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Speaker 3: Yeah, that seems like a long time ago. Now it

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Speaker 3: doesn't a lifetime ago.

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Speaker 5: Yeah, No, So I think right now, if you look forward,

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Speaker 5: you have to say tariffs are coming or here are

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Speaker 5: going to be here. It's just incredibly hard to know

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Speaker 5: exactly what it's going to be. So I think the

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Speaker 5: concept of tariffs, sure, but the reality of what specific

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Speaker 5: tariffs and what specific countries at what Pacific percent and

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Speaker 5: what Pacific goods we don't know.

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Speaker 1: The market seems to believe that on the margins, this

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Speaker 1: just means the Fed is going to take its time,

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Speaker 1: that you're going to take your time and assess all

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Speaker 1: the data, including all the tariff announcements, and that you're

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Speaker 1: not going to be in any rush and potentially may

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Speaker 1: not cut it all this year. Do you agree that

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Speaker 1: on the margins, the tariffs and the potential rammifications, the

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Speaker 1: uncertainty would delay you from cutting rates.

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Speaker 5: Well, what I'm hearing from everyone I talk to is

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Speaker 5: just elevated policy uncertainty. And you mentioned tariffs, but deregulation,

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Speaker 5: where is it going to hit, where's the tax plan

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Speaker 5: going to come out, What's going to happen in net migration,

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Speaker 5: energy policy, geopolitics. I think there's just a lot of

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Speaker 5: uncertainty in the air, and it's very hard to know

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Speaker 5: what's happening with growth and employment, what's happening with inflation

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Speaker 5: until you get a little more clarity on all of

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Speaker 5: these uncertainties.

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Speaker 3: So what are companies telling you they're going to do now?

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Speaker 6: Is everybody just sitting on their hands?

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Speaker 7: What does this imply for the uncertainty imply for the economy.

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Speaker 5: So I think it's really interesting to look at these

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Speaker 5: optimism indices. And if you go back to November and December,

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Speaker 5: the Richmond Fed and the Lanta Fed and Duke do

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Speaker 5: a survey of CFOs, what you saw was total optimism

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Speaker 5: on the economy went up significantly, new administration, climate for

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Speaker 5: business whatever. Optimism about your own company pretty much flatlined.

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Speaker 5: And I think that's because people are dealing with this uncertainty.

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Speaker 5: We think this will be good, but I don't know

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Speaker 5: how it's going to play out in my business. Small

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Speaker 5: business uncertainty had the biggest jumping, I mean sorry, optimism

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Speaker 5: had the biggest jump in it's forty year history, and

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Speaker 5: then went up again last month. And I think small

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Speaker 5: businesses are saying climate for business now, they do more

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Speaker 5: of the hiring, the big businesses do more of the

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Speaker 5: big investments, and so I think it's possible we may

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Speaker 5: see another year like twenty nineteen where consumers are spending

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Speaker 5: and people are hiring, but investment sentiment is still a

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Speaker 5: question mark. And that's what I'm looking to see.

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Speaker 7: Well, what's your kind of baseline for how you're going

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Speaker 7: to judge the economy? Given all of the uncertainty, You

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Speaker 7: go into March nineteenth and you have to make a

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Speaker 7: decision one way or the other.

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Speaker 6: The default, I guess would be to do nothing.

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Speaker 7: But where do you think the economy is going to

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Speaker 7: end up over the next six months while this cloud.

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Speaker 6: Is over us?

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Speaker 5: Well, the case for weight and see is in fact

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Speaker 5: that you want to wait and see. I mean, I

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Speaker 5: start with a baseline economy that's the data has been

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Speaker 5: pretty favorable. I mean, we had a pretty good growth

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Speaker 5: in the fourth quarter, a consumer spendings healthy, inflation, especially

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Speaker 5: the last two months has come down, and I expect

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Speaker 5: the twelve month numbers to come down nicely over the

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Speaker 5: next couple months as we lap last year's elevated first

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Speaker 5: quarter numbers. Job market seems to have stabilized, So I

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Speaker 5: start with a baseline. That's pretty favorable for what we're

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Speaker 5: trying to do. And then you have uncertainty and take

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Speaker 5: us up.

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Speaker 6: It could take us down.

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Speaker 1: We'll just have to say, do you still see the

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Speaker 1: FED cutting at some point this year?

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Speaker 5: I mean, that's certainly the lean, but we'll see what happens.

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Speaker 1: Could the FED can potentially see anything that could cause

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Speaker 1: you to contemplate hiking rates.

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Speaker 5: Well, I never take anything off the table, and so

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Speaker 5: if you never take anything off the table, you can't

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Speaker 5: take anything off the table. So I'm not able to

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Speaker 5: do that. But you'd have to see an economy overheating.

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Speaker 5: And I don't see any signs of an economy overheating.

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Speaker 5: I see inflation coming down, not going up. I see

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Speaker 5: the job stabilizing. But we got the jold steady yesterday.

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Speaker 5: It seemed to come down a little bit. It doesn't

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Speaker 5: feel like we're overheating, and I think you'd have to

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Speaker 5: imagine you're seeing an economy overheating.

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Speaker 3: Let me go back to the base case idea.

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Speaker 7: At this point, do you think that interest rates are

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Speaker 7: suitable for this economy? For a while, the FED was

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Speaker 7: saying we need to cut because we're still tight. But

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Speaker 7: if you can't. Is that okay? Are you looking for

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Speaker 7: data that will tell you to cut or are you

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Speaker 7: looking for data that will tell you to hold well.

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Speaker 5: So I supported the recalibration we did obviously in the fall,

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Speaker 5: and that's because with inflation in the twos and unemployment

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Speaker 5: weakening at the time, the one number that seemed out

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Speaker 5: of range was having the FED funds rate at five

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Speaker 5: point three. So we've brought down one hundred basis point

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Speaker 5: sets at four point three. I still think that's moderately restrictive,

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Speaker 5: but we'll learn as we go, and if what happens

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Speaker 5: is the economy comes back strong, you have to ask

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Speaker 5: yourself questions about how restrictive you really are. If the

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Speaker 5: economy weakens further, you can adjust appropriately. If inflation continues

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Speaker 5: to come down, you could say, yep, I'm having the

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Speaker 5: impact I want to have. If it doesn't, you know,

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Speaker 5: you ask yourself those questions. And so I think we've

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Speaker 5: recalibraated to a place that is more sensible, given you

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Speaker 5: know where the economy sits right now, and I think

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Speaker 5: it leaves us well positioned on whatever happens.

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Speaker 7: But to go back to a very old FED term,

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Speaker 7: what would your bias be towards cutting.

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Speaker 5: My bias is to see what happens and then react appropriately.

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Speaker 5: As I said, I think if you look at the

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Speaker 5: last SEP, there's a leaning there, you know, toward cutting.

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Speaker 5: But let's see what happens.

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Speaker 2: That suggests you might be equally as open to hiking.

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Speaker 2: Is that a case?

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Speaker 5: That's another good way to ask the exact same question.

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Speaker 5: So I go, I think the lean is toward d better.

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Speaker 6: Let's see what.

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Speaker 3: Happens so you would be open to doing so.

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Speaker 6: As I said earlier, I don't.

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Speaker 2: Want to make that headline this morning, but I just

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Speaker 2: want to understand how open minded you are.

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Speaker 3: Oh, I'm open.

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Speaker 5: I'm always open minded on what happens with the data.

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Speaker 5: If you see an economy that overheats, you'd have to

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Speaker 5: respond to it. I don't see an economy yet close

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Speaker 5: to overheating.

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Speaker 2: There was some questions about whether we are accommodative right

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Speaker 2: now restrictive? Can I just finish that the Federal Reserve

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Speaker 2: chat shake down. I'm sure you watched the news conference

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Speaker 2: set that you were restrictive, then said financial conditions were accommodative.

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Speaker 3: Can you square that circle so well?

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Speaker 6: So?

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Speaker 5: I do think we're somewhat restrictive. I don't think we're

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Speaker 5: hugely restrictive. We're a lot less restrictive obviously than we were,

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Speaker 5: you know, six months ago. But we'll see as we go.

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Speaker 5: And like I said, if inflation continues to come down,

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Speaker 5: that would be a positive sign. If the economy continues

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Speaker 5: to you know, perform at a decent but not overheated level,

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Speaker 5: that's a sign. But if you start seeing an economy

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Speaker 5: you know, heat up, yeah, then you'd have to ask

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Speaker 5: yourself those questions.

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Speaker 3: President Barkin, appreciate your time.

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Speaker 2: As always said, thank you the Federal Reserve Bank of Richmond,

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Speaker 2: President Tom Barkin. DAT send to the earnings and focus

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Speaker 2: on Disney. The company's first quarter earnings topping estimates, fueled

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Speaker 2: by success in its movie studios and streaming business. The

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Speaker 2: stock is positive and joining us Now's the Disney CFO

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Speaker 2: Hugh Johnston, Welcome back to the program sir. We'll talk

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Speaker 2: about how solid these numbers aren't just the moment. There's

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Speaker 2: one headline the least from me. We're talking about a

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Speaker 2: little bit earlier this morning. We'd love an explanation from

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Speaker 2: you on it. Just seeing a second quarter modest decline

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Speaker 2: in Disney plus subscribers quarter on quarter. Could you explain

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Speaker 2: that we testing the limit of price tolerance and consumers.

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Speaker 3: What's going on there?

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Speaker 8: Good morning, Jonathan, No, I don't think so at all. Actually,

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Speaker 8: that's really sort of more seasonal decline than anything else.

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Speaker 8: A year over year will will certainly be up, so

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Speaker 8: certainly not concerned from that perspective. More broadly, the streaming

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Speaker 8: business is doing extremely well. This is a business we

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Speaker 8: invested pretty heavily in a couple of years ago, and

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Speaker 8: what you're seeing now is the benefit of those investments.

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Speaker 8: Our expectation is will continue to grow, subs, will improve margins.

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Speaker 8: We should make more than a billion dollars in that

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Speaker 8: business this year, and next year we're looking at double

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Speaker 8: digit margins in that business. So certainly a ton of

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Speaker 8: positive momentum. Now you get into the question of why.

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Speaker 8: A lot of it is the great content that's coming

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Speaker 8: from the studio side of the house, both on the

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Speaker 8: TV and the movie side of.

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Speaker 6: Our entertainment business.

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Speaker 8: We wanted to inside out to Deadpool all terrific hits,

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Speaker 8: and on the TV side, the combination of Abbot, elementary

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Speaker 8: Showgun and high potential causing viewership to grow we're seeing

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Speaker 8: higher engagement, we're seeing churn ultimately coming down over the

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Speaker 8: course of this year. So we feel like the streaming

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Speaker 8: business is going to be one of the big drivers

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Speaker 8: for our company going forward.

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Speaker 2: You know how much I love Showgun and Least so

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Speaker 2: I can say love Moana two as well. So the

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Speaker 2: content sled is looking pretty good so far. I did

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Speaker 2: want to talk about the cost issue though, and clearly

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Speaker 2: not an issue from you, so I appreciate the explanation.

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Speaker 2: Conversation we've had over the last few days or so

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Speaker 2: is if we get tariffs, can companies pass on the costs?

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Speaker 2: I'd like to know from your perspective and for the company,

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Speaker 2: the additional tariffs that have gone on into China, how

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Speaker 2: that could impact your business.

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Speaker 3: How are you thinking about things?

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Speaker 8: Yeah, right, right now, based on what's been proposed, and

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Speaker 8: obviously this is a rapidly evolving environment, so we're going

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Speaker 8: to react as we learn things.

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Speaker 6: The impact would be a material to us.

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Speaker 8: So from that perspective, really, the Walt Disney Company will

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Speaker 8: be fine based on what's on the table right now.

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Speaker 1: At the same time, there's a question about the American

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Speaker 1: brand at a time or when they are increasing tensions

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Speaker 1: between the US and China, the US and Europe. Given

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Speaker 1: the fact that the experiences side of your business has

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Speaker 1: been such a driver of growth for you, are you

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Speaker 1: concerned Have you seen any pullback in attendance in some

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Speaker 1: of the areas like Shanghai, like France, like Paris that

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Speaker 1: could potentially have some feelings around the negotiations.

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Speaker 8: Now, broadly speaking, the international parks business did very well.

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Speaker 8: Profitability was up twenty eight percent for the quarter. Attendance

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Speaker 8: broadly speaking, was up, So from that perspective, we certainly

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Speaker 8: feel good. Disneyland Paris actually had a terrific quarter, so

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Speaker 8: feeling positive in that regard.

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Speaker 6: Candidly, in many.

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Speaker 8: Ways, what the Walt Disney Company represents is an opportunity

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Speaker 8: to get away from all of the things that are

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Speaker 8: happening in the world right Our job is to basically

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Speaker 8: bring families joy, bring them together, give them smiles. So

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Speaker 8: I think in many ways we're not a part of

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Speaker 8: that conversation at the same.

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Speaker 1: Time, and it's sort of pulling together the idea of

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Speaker 1: experiences and the smiles and the streaming business, the idea

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Speaker 1: that how much are people willing to pay for this?

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Speaker 1: John was alluding to that with Terras, But just more broadly,

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Speaker 1: how much are you seeing consumers push back against some

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Speaker 1: of the price increases, whether it's at the parks or

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Speaker 1: whether it's at the streaming services, just simply because of

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Speaker 1: how much prices have already gone up.

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Speaker 8: Yeah, We're not to be perfectly candid, and I think

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Speaker 8: it's always important to remember from a consumer perspective, price

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Speaker 8: is what you pay and value is what you get,

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Speaker 8: and if you deliver sufficient value to the consumer, they

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Speaker 8: are willing to pay the price. And I you see

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Speaker 8: that going on broadly with companies these days. Companies that

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Speaker 8: deliver a lot of value they're pricing is being accepted

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Speaker 8: by consumers. And if you look at the value of

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Speaker 8: a Disney vacation, if you look at the value of

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Speaker 8: all the things that we're able to deliver on the

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Speaker 8: streaming service, people are willing to pay to pay the

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Speaker 8: price for that because frankly, they're getting a lot for it.

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Speaker 8: So we haven't seen pushback really in a material way

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Speaker 8: at all in that regard.

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Speaker 2: You speak of the streaming business, Can we talk about

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Speaker 2: Hulu just a little bit more. Where are we with

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Speaker 2: the negotiations with Comcast? And we mightkee any progress.

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Speaker 8: We're still in the process and I probably won't kind

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Speaker 8: of go any further than that. I'd expect we'll get

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Speaker 8: some resolutions sometimes.

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Speaker 3: What's holding things up, Hugh? What are the sticking points?

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Speaker 8: Oh, it's I think just the usual people have different

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Speaker 8: points of view on the value of the asset.

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Speaker 6: So nothing more than that.

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Speaker 1: There is a content question here, Hugh about what the

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Speaker 1: driver of growth is going to be from a streaming perspective,

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Speaker 1: whether it's instrumental and getting involved in some of the

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Speaker 1: sports world, or whether you can kind of lean into

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Speaker 1: existing brands, how you do content creation at a time

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Speaker 1: when there is a lot of question around what exactly

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Speaker 1: sells other than the legacy brands.

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Speaker 8: Yeah, I think when you look at the Walt Disney Company,

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Speaker 8: in many ways, we're best positioned from the standpoint of

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Speaker 8: streaming because we do generate so much of our own

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Speaker 8: content relative to to some of our competitors.

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Speaker 6: In many ways. To think about.

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Speaker 8: Disney Plus is it really can be the portal into

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Speaker 8: all things Disney and something you might want to have

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Speaker 8: on twenty four hours a day, seven days a week,

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Speaker 8: because if you want news, you'll be able to find

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Speaker 8: it through Disney. Disney plus Hulu if you want sports,

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Speaker 8: the ESPN tile just went on Disney Plus if you

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Speaker 8: want movie entertainment, TV entertainment. Obviously, with all of our studios,

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Speaker 8: we generate a tremendous amount of entertainment from our own IP,

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Speaker 8: so I think more than most we're actually very well

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Speaker 8: positioned to ascertain what the right level of content is

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Speaker 8: and to create that content for ourselves, which obviously gives

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Speaker 8: us some inherent advantages.

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Speaker 1: If we were talking six months ago, we might have

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Speaker 1: started the conversation on artificial intelligence and how much you

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Speaker 1: were using that in your content creation at a time

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Speaker 1: where that's increasingly something that's being done. How much have

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Speaker 1: you explored that to lower cost, expedite the process of

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Speaker 1: time to get some of the movies and videos online.

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Speaker 8: We've got a number of use cases really across the

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Speaker 8: entire company, from the ability to create content, to the

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Speaker 8: ability to manage the company more efficiently, to the ability

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Speaker 8: to manage our guest experiences inside the parks and cruise business.

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Speaker 6: So we're in.

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Speaker 8: The early days of leveraging all that as our most companies,

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Speaker 8: because we really are very much in the early days

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Speaker 8: of artificial intelligence generally speaking. But we're experimenting a lot

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Speaker 8: to try to understand where can actually best add value

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Speaker 8: to the Walt Disney Company.

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Speaker 2: H do you see a shift in vibes in this

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Speaker 2: country with the kind of content that people want of

442
00:20:42,560 --> 00:20:44,040
Speaker 2: you is changing?

443
00:20:46,280 --> 00:20:49,880
Speaker 8: Not really, you know, it tends to be I think

444
00:20:50,040 --> 00:20:54,879
Speaker 8: more more based on age demographics than anything else. But

445
00:20:54,920 --> 00:20:57,800
Speaker 8: by and large, if you look at what we're able

446
00:20:57,840 --> 00:21:00,800
Speaker 8: to deliver by virtue of the broad base of ip

447
00:21:01,000 --> 00:21:04,359
Speaker 8: that we have, we have sort of the very traditional

448
00:21:04,359 --> 00:21:07,920
Speaker 8: things from the original Walt Disney Company right through to

449
00:21:08,119 --> 00:21:10,560
Speaker 8: things that come out of Marble, that come out of

450
00:21:10,600 --> 00:21:14,760
Speaker 8: Pixar that are sort of very current and contemporary. So

451
00:21:15,160 --> 00:21:17,720
Speaker 8: I don't see dramatic shifts going on by any stretch

452
00:21:17,720 --> 00:21:21,520
Speaker 8: of the imagination. And I do see our assets actually

453
00:21:21,520 --> 00:21:24,200
Speaker 8: appealing to a wide, wide array of consumers.

454
00:21:24,520 --> 00:21:25,240
Speaker 3: And you've got to run.

455
00:21:25,280 --> 00:21:27,239
Speaker 2: We appreciate your time, as I always say, thank you

456
00:21:27,359 --> 00:21:40,159
Speaker 2: be Disney CFO Hugh Johnston. We begin to sound with

457
00:21:40,240 --> 00:21:42,840
Speaker 2: a look at the energy sector, President Donald Trump pledging

458
00:21:42,880 --> 00:21:45,919
Speaker 2: to expand production and lower prices. With the threat of

459
00:21:46,000 --> 00:21:49,000
Speaker 2: tariffs hanging overhead for the next thirty minutes, some places

460
00:21:49,000 --> 00:21:52,239
Speaker 2: say it joining us now is the chefron Ceo might Worth. Mike,

461
00:21:52,280 --> 00:21:54,359
Speaker 2: good morning, It's good to see you. I promised the

462
00:21:54,359 --> 00:21:56,520
Speaker 2: first question earlier on this morning. I mentioned it on air.

463
00:21:56,720 --> 00:21:59,840
Speaker 2: I wanted to know whether you've watched Landman on paramount

464
00:22:00,160 --> 00:22:02,760
Speaker 2: seeing the program I have, Okay, how accurate is it?

465
00:22:02,800 --> 00:22:04,800
Speaker 2: Do you have to deal with cartowns on a daily basis?

466
00:22:05,560 --> 00:22:05,960
Speaker 6: It is?

467
00:22:06,320 --> 00:22:10,760
Speaker 9: It is wonderful entertainment. Really, Bob Thornton is an amazing actor,

468
00:22:11,000 --> 00:22:15,040
Speaker 9: and it's drama, right, and then you need a little

469
00:22:15,040 --> 00:22:17,520
Speaker 9: bit of a storyline, and so you know, there are

470
00:22:17,560 --> 00:22:20,119
Speaker 9: certain aspects of it that are accurate and others that

471
00:22:20,160 --> 00:22:21,920
Speaker 9: are probably just a touch exaggerated.

472
00:22:22,040 --> 00:22:24,760
Speaker 2: It sets up this conversation quite well. Think for one

473
00:22:24,760 --> 00:22:26,919
Speaker 2: specific reason, I think there's been a vibe shift in

474
00:22:26,960 --> 00:22:30,240
Speaker 2: this country, captured by the election in and in November,

475
00:22:30,640 --> 00:22:33,600
Speaker 2: and also basically content that people are consuming right now,

476
00:22:33,680 --> 00:22:36,520
Speaker 2: including Landmann and in Landman, you see a much more

477
00:22:36,640 --> 00:22:40,800
Speaker 2: pragmatic approach to things like fossil fuels, oil and energy

478
00:22:40,880 --> 00:22:43,560
Speaker 2: and the kind of work that your company does. Do

479
00:22:43,600 --> 00:22:45,639
Speaker 2: you think we are seeing that more pragmatic approach the

480
00:22:45,720 --> 00:22:46,600
Speaker 2: energy story now?

481
00:22:46,880 --> 00:22:49,440
Speaker 9: I think there's no question we're seeing that. I mean,

482
00:22:49,480 --> 00:22:52,680
Speaker 9: you know, take a look at this administration that has

483
00:22:52,720 --> 00:22:59,119
Speaker 9: come in and rather than criticizing and almost in some

484
00:22:59,160 --> 00:23:03,399
Speaker 9: ways ostracized oil and gas, it's an It's an administration

485
00:23:03,440 --> 00:23:07,040
Speaker 9: that has talked about American energy abundance and using that

486
00:23:07,480 --> 00:23:10,439
Speaker 9: to the benefit of the American economy, the competitiveness of

487
00:23:10,560 --> 00:23:15,439
Speaker 9: American business, and and but but not just oil and gas.

488
00:23:15,440 --> 00:23:18,119
Speaker 9: It's you know, the grid is a big thing for

489
00:23:18,240 --> 00:23:21,840
Speaker 9: the administration, and power generation, and so I think we

490
00:23:21,840 --> 00:23:24,359
Speaker 9: were seeing a more balanced conversation. Something I've been calling

491
00:23:24,440 --> 00:23:28,240
Speaker 9: for for years is in energy, there are three things

492
00:23:28,280 --> 00:23:33,960
Speaker 9: that manage on affordability because that underpins economic prosperity, reliable

493
00:23:34,000 --> 00:23:38,040
Speaker 9: supply because that relates to security in national security, and

494
00:23:38,080 --> 00:23:41,520
Speaker 9: then environmental impact. And we have to balance those three

495
00:23:41,560 --> 00:23:44,240
Speaker 9: things as we talk about energy. The conversation had become

496
00:23:44,320 --> 00:23:47,760
Speaker 9: very unbalanced and focused on one of the three, uh

497
00:23:47,840 --> 00:23:49,520
Speaker 9: and not the other two. And I think we're seeing

498
00:23:49,560 --> 00:23:51,480
Speaker 9: a move back towards a more balanced and use the

499
00:23:51,520 --> 00:23:53,560
Speaker 9: word pragmatic. I think that's a that's a very good

500
00:23:53,560 --> 00:23:55,560
Speaker 9: word for the shift that we are seeing.

501
00:23:55,760 --> 00:23:58,040
Speaker 1: We definitely are hearing the shift in the conversation. We

502
00:23:58,080 --> 00:24:00,439
Speaker 1: heard that at Davos. Even though you weren't there to you.

503
00:24:01,119 --> 00:24:04,360
Speaker 1: I am curious about how much that translates into actual

504
00:24:04,880 --> 00:24:07,760
Speaker 1: changes that you're making on the ground, with how much

505
00:24:07,760 --> 00:24:10,320
Speaker 1: you're investing, how much you're planning to expand your footprint

506
00:24:10,520 --> 00:24:12,040
Speaker 1: in the United States and elsewhere.

507
00:24:12,560 --> 00:24:17,800
Speaker 9: Yeah, we grew production last year seven percent globally, almost

508
00:24:17,800 --> 00:24:20,720
Speaker 9: twenty percent here in the US, the largest production we've

509
00:24:20,760 --> 00:24:25,440
Speaker 9: ever had in our history, largest cash distribution to our shareholders.

510
00:24:25,480 --> 00:24:27,240
Speaker 6: So we are growing.

511
00:24:27,520 --> 00:24:29,560
Speaker 9: We're also doing it in a more capital efficient way.

512
00:24:29,600 --> 00:24:31,760
Speaker 9: So we've been focused on getting more bang for each

513
00:24:31,840 --> 00:24:33,760
Speaker 9: dollar of capital. You guys are talking a lot about

514
00:24:33,800 --> 00:24:37,439
Speaker 9: capital this morning, and in a capital intensive industry, we

515
00:24:37,520 --> 00:24:40,080
Speaker 9: have to always look for ways to be as capital

516
00:24:40,240 --> 00:24:42,240
Speaker 9: efficient as we can be, in as disciplined as we

517
00:24:42,280 --> 00:24:44,520
Speaker 9: can be, and so we're able to bring new energy

518
00:24:44,520 --> 00:24:47,119
Speaker 9: supplies to the market at a lower capital investment rate

519
00:24:47,160 --> 00:24:49,280
Speaker 9: than ever before. We'll grow again this year in the

520
00:24:49,359 --> 00:24:51,840
Speaker 9: United States another ten percent or so in the Permian,

521
00:24:52,280 --> 00:24:54,760
Speaker 9: so demand for energy is at an all time high

522
00:24:54,800 --> 00:24:55,800
Speaker 9: and it's only going up.

523
00:24:56,160 --> 00:24:58,679
Speaker 1: Last year, you had a record production, even under an

524
00:24:58,680 --> 00:25:01,800
Speaker 1: administration that had very different tone toward the oil and

525
00:25:01,880 --> 00:25:05,919
Speaker 1: gas administration, the oil and grass industry, I just wonder

526
00:25:06,160 --> 00:25:10,440
Speaker 1: how the vibe shift will change what your outlook is

527
00:25:10,520 --> 00:25:14,119
Speaker 1: at a time when the rhetoric has shifted to the positive.

528
00:25:14,720 --> 00:25:18,639
Speaker 1: But some of the proposals like tariffs might be headwinds

529
00:25:18,640 --> 00:25:19,800
Speaker 1: in certain places.

530
00:25:20,480 --> 00:25:23,959
Speaker 9: Yeah, so I think your point's a good one, Lisa.

531
00:25:24,160 --> 00:25:26,720
Speaker 9: The rhetoric kind of sets the mood music, but you

532
00:25:26,760 --> 00:25:29,600
Speaker 9: actually have to see policy, right, and some of that's

533
00:25:29,640 --> 00:25:32,160
Speaker 9: done through executive order these days, a lot of it

534
00:25:32,359 --> 00:25:36,600
Speaker 9: would be best done through legislation, and we would like

535
00:25:36,640 --> 00:25:40,440
Speaker 9: to work with both sides of the aisle to implement durable,

536
00:25:40,960 --> 00:25:44,440
Speaker 9: balanced and pragmatic energy policy, things like permitting reform, which

537
00:25:44,440 --> 00:25:47,000
Speaker 9: you've got a lot of conversation, but we really haven't

538
00:25:47,000 --> 00:25:49,720
Speaker 9: seen action yet on that, and it's difficult to build

539
00:25:49,760 --> 00:25:52,480
Speaker 9: anything in this country, not just pipelines and infrastructure for

540
00:25:52,520 --> 00:25:57,120
Speaker 9: our industry, but new power generation and grid modernization and

541
00:25:57,359 --> 00:26:02,560
Speaker 9: other types of infrastructure. We hope and are certainly willing

542
00:26:02,600 --> 00:26:06,080
Speaker 9: to work with parties from across the spectrum to try

543
00:26:06,080 --> 00:26:09,159
Speaker 9: to turn some of this vibe shift or more balanced

544
00:26:09,200 --> 00:26:12,080
Speaker 9: conversation into what we think is good, durable policy.

545
00:26:12,400 --> 00:26:14,280
Speaker 2: Can you talk to us more about the permitting These

546
00:26:14,280 --> 00:26:16,040
Speaker 2: are things we hear about all the time you're running

547
00:26:16,040 --> 00:26:18,159
Speaker 2: a business, could you help us understand how much that

548
00:26:18,200 --> 00:26:19,960
Speaker 2: has held back your business?

549
00:26:20,119 --> 00:26:22,600
Speaker 6: Oh, it slows things down. It's very difficult.

550
00:26:22,600 --> 00:26:25,119
Speaker 9: I mean the Keystone Pipeline is a good example that

551
00:26:25,280 --> 00:26:29,720
Speaker 9: was well documented where a multi billion dollar investment that

552
00:26:29,720 --> 00:26:31,560
Speaker 9: would have been good for Canada, would have been good

553
00:26:31,560 --> 00:26:35,199
Speaker 9: for the United States, ultimately didn't happen because the permiting

554
00:26:35,240 --> 00:26:39,040
Speaker 9: process can be hijacked by interests that are opposed to

555
00:26:39,320 --> 00:26:43,360
Speaker 9: seeing investment in our economy. And so, look, everybody wants

556
00:26:43,400 --> 00:26:46,560
Speaker 9: to see good protection of the environment and engagement of

557
00:26:46,600 --> 00:26:49,920
Speaker 9: communities are impacted by projects. But we need lead agencies

558
00:26:49,920 --> 00:26:52,960
Speaker 9: that can take responsibility for these processes. We need timelines

559
00:26:53,200 --> 00:26:55,359
Speaker 9: that are reasonable timelines to do the work, and then

560
00:26:55,400 --> 00:26:57,719
Speaker 9: we need reasonable boundaries around the way these things can

561
00:26:57,760 --> 00:27:00,399
Speaker 9: be litigated in the courts. And that needs to you know,

562
00:27:00,440 --> 00:27:02,399
Speaker 9: that needs to be done to enable more investment in

563
00:27:02,440 --> 00:27:02,840
Speaker 9: this country.

564
00:27:02,960 --> 00:27:04,399
Speaker 3: This president clearly wants to change that.

565
00:27:04,600 --> 00:27:08,119
Speaker 2: Users phrases like drill, baby, drill, we're certainly drilling, not

566
00:27:08,240 --> 00:27:11,159
Speaker 2: to thirteen million barers of all to day in this country,

567
00:27:11,200 --> 00:27:14,240
Speaker 2: which is phenomenal. I often sit here, Lisa does too,

568
00:27:14,280 --> 00:27:15,800
Speaker 2: and we'll say things like and we'll hear it from

569
00:27:15,800 --> 00:27:18,399
Speaker 2: Amara as well once she's here. How realistic is it

570
00:27:18,440 --> 00:27:20,359
Speaker 2: to get that number much higher than the thirteen million

571
00:27:20,400 --> 00:27:22,840
Speaker 2: barers we're at right now. You'd know it better than

572
00:27:22,880 --> 00:27:24,440
Speaker 2: we do. How realistic is it?

573
00:27:24,880 --> 00:27:25,000
Speaker 6: Well?

574
00:27:25,040 --> 00:27:26,520
Speaker 9: I think production in the US is going to grow

575
00:27:26,560 --> 00:27:29,919
Speaker 9: again this year. We certainly see in our business. I

576
00:27:29,920 --> 00:27:32,240
Speaker 9: said our permium production will be up ten percent. In

577
00:27:32,280 --> 00:27:34,119
Speaker 9: the deep water golf of America, we're going to go

578
00:27:34,160 --> 00:27:36,080
Speaker 9: from two hundred thousand barrels a day to three hundred

579
00:27:36,119 --> 00:27:38,920
Speaker 9: thousand barrels a day by the end of twenty twenty six.

580
00:27:39,280 --> 00:27:41,840
Speaker 9: So there is production growth coming, but it's really driven

581
00:27:41,880 --> 00:27:46,240
Speaker 9: by economics, a long term view on supply demand, technology,

582
00:27:46,320 --> 00:27:47,080
Speaker 9: and policy.

583
00:27:47,280 --> 00:27:49,840
Speaker 2: Just to jump in that last point, a long term

584
00:27:49,920 --> 00:27:52,760
Speaker 2: view on policy. How difficult is it to make these

585
00:27:52,760 --> 00:27:56,000
Speaker 2: investment decisions? We talk about this five shift now could

586
00:27:56,080 --> 00:27:56,879
Speaker 2: change again.

587
00:27:56,880 --> 00:28:00,240
Speaker 9: For Ye, It's very difficult, John, And so one of

588
00:28:00,280 --> 00:28:02,880
Speaker 9: the things our company was criticized for a few years

589
00:28:02,880 --> 00:28:05,320
Speaker 9: ago is we weren't jumping into some of the renewables

590
00:28:05,359 --> 00:28:08,439
Speaker 9: as fast as others because the policy was unclear, and

591
00:28:08,520 --> 00:28:11,119
Speaker 9: so we were doing basic research. We were investing in

592
00:28:11,160 --> 00:28:15,280
Speaker 9: pilot plants, but multi billion dollar investments that are very

593
00:28:15,280 --> 00:28:19,240
Speaker 9: dependent upon policy that could change quickly are something you

594
00:28:19,280 --> 00:28:21,560
Speaker 9: have to think about when you're looking to deliver strong

595
00:28:21,600 --> 00:28:24,720
Speaker 9: returns to your shareholders. And so we would like to

596
00:28:24,720 --> 00:28:27,840
Speaker 9: see durable, long term balance policy because that does make

597
00:28:27,880 --> 00:28:31,280
Speaker 9: the investment decision a little bit easier for companies to make.

598
00:28:31,440 --> 00:28:33,920
Speaker 1: One test case for this is liquefied natural gas. US

599
00:28:34,040 --> 00:28:35,720
Speaker 1: is a massive producer of it. You're one of the

600
00:28:35,760 --> 00:28:39,560
Speaker 1: biggest producers of it. There was a ban on exporting

601
00:28:39,600 --> 00:28:41,400
Speaker 1: to Europe at a time when Europe is really dependent

602
00:28:41,440 --> 00:28:42,040
Speaker 1: on the US.

603
00:28:42,480 --> 00:28:43,560
Speaker 3: That has been lifted.

604
00:28:44,160 --> 00:28:46,840
Speaker 1: Now there's the potential of tariffs being placed on some

605
00:28:46,960 --> 00:28:50,760
Speaker 1: of those exports. How much can you start to lean

606
00:28:50,840 --> 00:28:54,560
Speaker 1: into exports versus not due to some of this confusion.

607
00:28:55,200 --> 00:28:59,240
Speaker 9: Yeah, you know, the tariff environment is obviously evolving here.

608
00:28:59,520 --> 00:29:04,240
Speaker 9: On a day basis, energy is a globally traded commodity,

609
00:29:04,320 --> 00:29:08,440
Speaker 9: and energy oil petroleum products for.

610
00:29:08,400 --> 00:29:08,920
Speaker 6: The most part.

611
00:29:08,960 --> 00:29:11,040
Speaker 9: Now Canadian oil is a little bit different because it's

612
00:29:11,040 --> 00:29:14,400
Speaker 9: really dependent upon pipelines, but those products can go to

613
00:29:14,440 --> 00:29:18,760
Speaker 9: different markets. We've seen sanctions reorient trade flows. Tariffs are

614
00:29:18,760 --> 00:29:24,160
Speaker 9: another instruments that can change the economics for producers and

615
00:29:24,200 --> 00:29:27,240
Speaker 9: for consumers, and what you'll typically see, whether it's energy

616
00:29:27,440 --> 00:29:30,320
Speaker 9: or oil is flows will move to different markets as

617
00:29:30,360 --> 00:29:33,360
Speaker 9: producers seek the highest price for their production and as

618
00:29:33,400 --> 00:29:36,880
Speaker 9: consumers seek the lowest cost for what they're looking to buy.

619
00:29:37,480 --> 00:29:40,840
Speaker 9: And as long as supply remains in the market, you

620
00:29:40,920 --> 00:29:43,600
Speaker 9: have markets well supplied, you generally start to see costs

621
00:29:43,600 --> 00:29:46,360
Speaker 9: go up a little bit because there's increased transportation and

622
00:29:46,360 --> 00:29:49,800
Speaker 9: some kind of friction in the system, but export decisions

623
00:29:50,320 --> 00:29:52,800
Speaker 9: aren't heavily affected by those prospects.

624
00:29:52,800 --> 00:29:55,520
Speaker 2: I would say, speaking of sanctions, just briefly, you have

625
00:29:55,560 --> 00:29:57,080
Speaker 2: a waiver to operate in Venezuela.

626
00:29:57,160 --> 00:30:00,920
Speaker 3: Is that the case we do? Rubio? Now?

627
00:30:00,960 --> 00:30:04,520
Speaker 2: Secuary Rubio said, maybe the US should reconsider that waiver.

628
00:30:04,680 --> 00:30:06,760
Speaker 2: You in contact with them on that issue.

629
00:30:07,080 --> 00:30:10,920
Speaker 9: We're in contact with the current administration. We've been in

630
00:30:10,960 --> 00:30:14,480
Speaker 9: contact with the first Trump administration and the Biden administration

631
00:30:14,560 --> 00:30:17,160
Speaker 9: because the sanctions on Venezuela have been in place for years,

632
00:30:17,680 --> 00:30:21,560
Speaker 9: and we work closely with the government to understand their objectives,

633
00:30:21,600 --> 00:30:24,680
Speaker 9: to understand the limitations that are being placed through these

634
00:30:24,720 --> 00:30:27,960
Speaker 9: licenses issued by OPHAK, and to stand full compliance with

635
00:30:28,000 --> 00:30:28,360
Speaker 9: the laws.

636
00:30:28,400 --> 00:30:30,280
Speaker 2: Are you anticipate in any changes in the hill or

637
00:30:30,360 --> 00:30:32,400
Speaker 2: too early to say either.

638
00:30:32,440 --> 00:30:35,320
Speaker 9: Recently was a trip down to Venezuela by a special

639
00:30:35,480 --> 00:30:40,680
Speaker 9: envoy who brought back some Americans from Venezuela and arranged

640
00:30:41,520 --> 00:30:44,120
Speaker 9: terms for I think Venezuelan and immigrants to go back

641
00:30:44,120 --> 00:30:49,280
Speaker 9: to Venezuela that are that are here illegally, and that

642
00:30:49,440 --> 00:30:53,640
Speaker 9: seems to be you know, the latest the general license

643
00:30:53,680 --> 00:30:57,000
Speaker 9: that we operate was unchanged. It has been changed over

644
00:30:57,040 --> 00:30:59,720
Speaker 9: the years in different ways, and that still could happen.

645
00:31:00,120 --> 00:31:02,400
Speaker 9: We try to inform the government of the potential ramifications

646
00:31:02,400 --> 00:31:05,400
Speaker 9: of a change like that, so they're well informed before

647
00:31:05,440 --> 00:31:06,320
Speaker 9: they make changes of.

648
00:31:06,320 --> 00:31:07,600
Speaker 3: What would the ramifications be.

649
00:31:08,520 --> 00:31:12,640
Speaker 9: Well, under the initial Trump sanctions, Venezuelan oil was not

650
00:31:12,640 --> 00:31:16,160
Speaker 9: allowed to come to the US. The Biden administration changed that.

651
00:31:16,600 --> 00:31:19,720
Speaker 9: Gulf Coast refiners actually run a lot of the heavy

652
00:31:19,760 --> 00:31:22,720
Speaker 9: grades that come from Venezuela. If you see sanctions on

653
00:31:22,800 --> 00:31:25,440
Speaker 9: Canadian or tariffs on Canadian or Mexican oil, that may

654
00:31:25,560 --> 00:31:27,720
Speaker 9: send some of that oil to other countries, and so

655
00:31:27,760 --> 00:31:30,360
Speaker 9: the Venezuela oil could be even more important. So it's

656
00:31:30,480 --> 00:31:32,640
Speaker 9: things like that, it's how would this work through the

657
00:31:32,680 --> 00:31:36,360
Speaker 9: system that we really try to help the policy makers understand.

658
00:31:36,120 --> 00:31:37,440
Speaker 2: Mike, you're going to stick with us in place to

659
00:31:37,480 --> 00:31:39,440
Speaker 2: say more on that conversation and more just the moment.

660
00:31:39,520 --> 00:31:43,000
Speaker 2: My worth there the chefron CEO. This is the Bloomberg

661
00:31:43,040 --> 00:31:46,840
Speaker 2: Sevenants podcast, bringing you the best in markets, economics, an

662
00:31:46,880 --> 00:31:49,680
Speaker 2: gie politics. You can watch the show live on Bloomberg

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Speaker 2: TV weekday mornings from six am to nine am Eastern.

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Speaker 2: Subscribe to the podcast on Apple, Spotify, or anywhere else

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Speaker 2: you listen, and as always on the Bloomberg Terminal and

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Speaker 2: the Bloomberg Bus.

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Speaker 3: This outam