Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each
Speaker 2: day for insight from the best in markets, economics, and
Speaker 2: geopolitics from our global headquarters in New York City. We
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Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Linc Rosena of
Speaker 2: Goldman Sachs, writing decemberst duration selloff was an opportunity, and
Speaker 2: we continue to think fixed income is a good part
Speaker 2: of the portfolio. Lindsay joins us now for more. Lindzy,
Speaker 2: good morning.
Speaker 3: It's good to see you. Good to see you.
Speaker 2: Let's start with the tariffs and the price of all
Speaker 2: of this uncertainty. Does it raise the hurdle for rain
Speaker 2: cuts at the Federal Reserve.
Speaker 4: It's certainly going to affect the data, and it does
Speaker 4: raise the hurdle. But I think you gotta be honest
Speaker 4: about how very little is priced in. We've got forty
Speaker 4: five basis points priced in between now and the end
Speaker 4: of the year. In terms of cuts, I think there's
Speaker 4: not that much that can happen in the labor market,
Speaker 4: and we can talk about that more. Inflation seems to
Speaker 4: be the question. And it really appears so far that
Speaker 4: tariffs are a tool, and they're a tool for negotiation,
Speaker 4: and they maybe don't have the staying power that people
Speaker 4: were probably worried about. One day into the tariff announcement.
Speaker 2: There's some debate about what the tariffs could mean for
Speaker 2: growth and for inflation. Leasha and I've been talking about
Speaker 2: this through the week. We had a bit of a
Speaker 2: stress test on Monday Monic so we had the prospect
Speaker 2: of twenty five percent tariffs on to the biggest trading
Speaker 2: partners of America and we saw a yields drop initially
Speaker 2: at the long end on a ten year did during
Speaker 2: the team ten county signal from them? What did that
Speaker 2: tell you about where the market was focused in?
Speaker 5: Right?
Speaker 4: Well, you have the twist flattening, right, so you had
Speaker 4: the front end go a little bit higher. The idea
Speaker 4: there is that to your point, the FED wouldn't be
Speaker 4: able to cut, but remember it was just a handful
Speaker 4: of basis points back end yields did go lower, and
Speaker 4: the idea there was the probability of recession had increased.
Speaker 4: Teriffs are deaf and lead growth reducing. But again we're
Speaker 4: talking in general terms of what tariffs do right now.
Speaker 4: They aren't in place, and so I think we need
Speaker 4: to all take a little bit of a breather. And
Speaker 4: I don't disagree. I think it's been a stress test
Speaker 4: for all of our hearts over the past few days.
Speaker 4: But take a little bit of a breather and understand
Speaker 4: that these are tools. And I think you see the
Speaker 4: result of ten thousand troops on the border to help
Speaker 4: shows that they're kind of working.
Speaker 1: From the corporate executives, the CFOs you talk to who
Speaker 1: are looking to finance themselves, how do they take a
Speaker 1: breather at a time where they have to come up
Speaker 1: with plans? How long can they take a breather. Do
Speaker 1: you get a sense that this is filtering into the
Speaker 1: decisions of when to start raising money in twenty twenty
Speaker 1: five or how they can really plan ahead.
Speaker 4: Well, luckily we don't have a wall of maturity, right.
Speaker 4: That's always been the biggest fear on debt since the
Speaker 4: financial crisis. Is there a wall of maturity where these
Speaker 4: companies have to act, and they have to act now
Speaker 4: they've done a really good job. I think this is
Speaker 4: kind of the PTSD of the financial crisis, to never
Speaker 4: put yourself in a position that you are forced to
Speaker 4: come to market at a specific time or else. So
Speaker 4: I think companies have set themselves up in a really
Speaker 4: good way. They have cash balances, they have healthy balance sheets.
Speaker 4: But certainly uncertainty is not a good thing when you're
Speaker 4: a management team trying to predict for the future. We
Speaker 4: get a lot of data right now in terms of
Speaker 4: management speak, and so far we're not seeing from a
Speaker 4: guide perspective, tremendously reduced confidence. Now, all of this stuff
Speaker 4: on tariffs and what's happening is fresh and new, so
Speaker 4: it's hard to completely get that into your philosophy of
Speaker 4: how you want to finance yourself going forward. But the
Speaker 4: markets are wide open for financing. I think you just
Speaker 4: mentioned right before the break that X is upping their
Speaker 4: deal from three to five. There is appetite and the
Speaker 4: markets are wide open. So I think right now it
Speaker 4: is business as usual, but maybe a little bit of
Speaker 4: a bird on the shoulder of uncertainty and concern.
Speaker 1: As an investor, does that bird on the shoulder prompt
Speaker 1: you to say, maybe there's a little bit too priced
Speaker 1: perfection type of valuation in the credit market, especially if
Speaker 1: long term yields are falling for the wrong reasons, the
Speaker 1: idea of reduced long term growth propositions.
Speaker 4: So we think from the spread perspective, what's happening in
Speaker 4: credit markets that spreads are supported, and why they're supported
Speaker 4: is because the economy is really strong, and we saw
Speaker 4: that when we got our finalized print on GDP for
Speaker 4: the last quarter. We're seeing in the terms of consumption numbers,
Speaker 4: we are not seeing a dip tremendously in confidence right
Speaker 4: now with everything going on. In particular, we think the
Speaker 4: US economy is really strong, and it's really strong relative
Speaker 4: to the rest of the world. We think that continues
Speaker 4: and that supports spreads even at these really tight valuations.
Speaker 4: On the other side of things, I think the macro
Speaker 4: is really where it's interesting, and that's what's been pingponging
Speaker 4: the most. If you look at credit, credit hasn't moved
Speaker 4: that dramatically this year a basis point or two in
Speaker 4: either direction, and in fact, historically how yields has actually
Speaker 4: outperformed IG in the face of tariffs, So you would think,
Speaker 4: actually the riskier stuff may be in a better position
Speaker 4: given what's happening. But on the macro site, there are
Speaker 4: a lot of opportunities. And what we've done is we've
Speaker 4: used this kind of knee jerk reaction to policies to
Speaker 4: take advantage of getting our positions right size.
Speaker 2: Why did you think the sell off induration was of
Speaker 2: it done in December? Why did you think that backup
Speaker 2: in yields was of it done out of interest?
Speaker 4: It was overdone to us because it started to knock
Speaker 4: on the door of really significant real yields. We lived
Speaker 4: for a really long time, remember ZERP and zero interest rate.
Speaker 4: In that whole world, there really wasn't real yields in
Speaker 4: the curve.
Speaker 3: What happened in.
Speaker 4: December in that backup and part of unwinding of a
Speaker 4: prior trade, was that we started to get real yield
Speaker 4: put into the curve. And we talked to a ton
Speaker 4: of clients daily, particularly pensions, and they're thirsting for real yield.
Speaker 4: And so when real yield's out there, this is a
Speaker 4: great opportunity. And we know that the idea of switching
Speaker 4: also from equities to fixed income really makes sense and
Speaker 4: they'd be happy about this.
Speaker 3: It's so interesting.
Speaker 2: It's not just about this moy becoming self limit because
Speaker 2: it could damage growth. There's just a wall of money
Speaker 2: out there looking for that number.
Speaker 3: Yeah.
Speaker 6: I think that's true.
Speaker 4: And again we all stare at these I feel like
Speaker 4: we're on money market Watch. We're staring at how many
Speaker 4: assets are in money markets and when they are actually
Speaker 4: going to move. I think we're really at a time
Speaker 4: where it's starting to make sense and unlocking real yield
Speaker 4: is really convincing.
Speaker 2: Lindsay always smartys a Clinic, appreciate your time. Thank you,
Speaker 2: Lindsay Rosena There of gold with sancx aass and management.
Speaker 2: The Federal Reserve Bank of President of Richmond. President Tom
Speaker 2: Barkin joins us now for more alongside Bloomberg's Michael McKee,
Speaker 2: President Parking.
Speaker 3: Good to see you, sir, to can't shut once again,
Speaker 3: happy to be back with you.
Speaker 2: The first question we asked Fed officials these days is
Speaker 2: did you include possible tariff changes in your round? Loook,
Speaker 2: so let's start that.
Speaker 3: Did you well, so.
Speaker 5: You're talking about forecasts we did in December?
Speaker 3: Yeah, that seems like a long time ago. Now it
Speaker 3: doesn't a lifetime ago.
Speaker 5: Yeah, No, So I think right now, if you look forward,
Speaker 5: you have to say tariffs are coming or here are
Speaker 5: going to be here. It's just incredibly hard to know
Speaker 5: exactly what it's going to be. So I think the
Speaker 5: concept of tariffs, sure, but the reality of what specific
Speaker 5: tariffs and what specific countries at what Pacific percent and
Speaker 5: what Pacific goods we don't know.
Speaker 1: The market seems to believe that on the margins, this
Speaker 1: just means the Fed is going to take its time,
Speaker 1: that you're going to take your time and assess all
Speaker 1: the data, including all the tariff announcements, and that you're
Speaker 1: not going to be in any rush and potentially may
Speaker 1: not cut it all this year. Do you agree that
Speaker 1: on the margins, the tariffs and the potential rammifications, the
Speaker 1: uncertainty would delay you from cutting rates.
Speaker 5: Well, what I'm hearing from everyone I talk to is
Speaker 5: just elevated policy uncertainty. And you mentioned tariffs, but deregulation,
Speaker 5: where is it going to hit, where's the tax plan
Speaker 5: going to come out, What's going to happen in net migration,
Speaker 5: energy policy, geopolitics. I think there's just a lot of
Speaker 5: uncertainty in the air, and it's very hard to know
Speaker 5: what's happening with growth and employment, what's happening with inflation
Speaker 5: until you get a little more clarity on all of
Speaker 5: these uncertainties.
Speaker 3: So what are companies telling you they're going to do now?
Speaker 6: Is everybody just sitting on their hands?
Speaker 7: What does this imply for the uncertainty imply for the economy.
Speaker 5: So I think it's really interesting to look at these
Speaker 5: optimism indices. And if you go back to November and December,
Speaker 5: the Richmond Fed and the Lanta Fed and Duke do
Speaker 5: a survey of CFOs, what you saw was total optimism
Speaker 5: on the economy went up significantly, new administration, climate for
Speaker 5: business whatever. Optimism about your own company pretty much flatlined.
Speaker 5: And I think that's because people are dealing with this uncertainty.
Speaker 5: We think this will be good, but I don't know
Speaker 5: how it's going to play out in my business. Small
Speaker 5: business uncertainty had the biggest jumping, I mean sorry, optimism
Speaker 5: had the biggest jump in it's forty year history, and
Speaker 5: then went up again last month. And I think small
Speaker 5: businesses are saying climate for business now, they do more
Speaker 5: of the hiring, the big businesses do more of the
Speaker 5: big investments, and so I think it's possible we may
Speaker 5: see another year like twenty nineteen where consumers are spending
Speaker 5: and people are hiring, but investment sentiment is still a
Speaker 5: question mark. And that's what I'm looking to see.
Speaker 7: Well, what's your kind of baseline for how you're going
Speaker 7: to judge the economy? Given all of the uncertainty, You
Speaker 7: go into March nineteenth and you have to make a
Speaker 7: decision one way or the other.
Speaker 6: The default, I guess would be to do nothing.
Speaker 7: But where do you think the economy is going to
Speaker 7: end up over the next six months while this cloud.
Speaker 6: Is over us?
Speaker 5: Well, the case for weight and see is in fact
Speaker 5: that you want to wait and see. I mean, I
Speaker 5: start with a baseline economy that's the data has been
Speaker 5: pretty favorable. I mean, we had a pretty good growth
Speaker 5: in the fourth quarter, a consumer spendings healthy, inflation, especially
Speaker 5: the last two months has come down, and I expect
Speaker 5: the twelve month numbers to come down nicely over the
Speaker 5: next couple months as we lap last year's elevated first
Speaker 5: quarter numbers. Job market seems to have stabilized, So I
Speaker 5: start with a baseline. That's pretty favorable for what we're
Speaker 5: trying to do. And then you have uncertainty and take
Speaker 5: us up.
Speaker 6: It could take us down.
Speaker 1: We'll just have to say, do you still see the
Speaker 1: FED cutting at some point this year?
Speaker 5: I mean, that's certainly the lean, but we'll see what happens.
Speaker 1: Could the FED can potentially see anything that could cause
Speaker 1: you to contemplate hiking rates.
Speaker 5: Well, I never take anything off the table, and so
Speaker 5: if you never take anything off the table, you can't
Speaker 5: take anything off the table. So I'm not able to
Speaker 5: do that. But you'd have to see an economy overheating.
Speaker 5: And I don't see any signs of an economy overheating.
Speaker 5: I see inflation coming down, not going up. I see
Speaker 5: the job stabilizing. But we got the jold steady yesterday.
Speaker 5: It seemed to come down a little bit. It doesn't
Speaker 5: feel like we're overheating, and I think you'd have to
Speaker 5: imagine you're seeing an economy overheating.
Speaker 3: Let me go back to the base case idea.
Speaker 7: At this point, do you think that interest rates are
Speaker 7: suitable for this economy? For a while, the FED was
Speaker 7: saying we need to cut because we're still tight. But
Speaker 7: if you can't. Is that okay? Are you looking for
Speaker 7: data that will tell you to cut or are you
Speaker 7: looking for data that will tell you to hold well.
Speaker 5: So I supported the recalibration we did obviously in the fall,
Speaker 5: and that's because with inflation in the twos and unemployment
Speaker 5: weakening at the time, the one number that seemed out
Speaker 5: of range was having the FED funds rate at five
Speaker 5: point three. So we've brought down one hundred basis point
Speaker 5: sets at four point three. I still think that's moderately restrictive,
Speaker 5: but we'll learn as we go, and if what happens
Speaker 5: is the economy comes back strong, you have to ask
Speaker 5: yourself questions about how restrictive you really are. If the
Speaker 5: economy weakens further, you can adjust appropriately. If inflation continues
Speaker 5: to come down, you could say, yep, I'm having the
Speaker 5: impact I want to have. If it doesn't, you know,
Speaker 5: you ask yourself those questions. And so I think we've
Speaker 5: recalibraated to a place that is more sensible, given you
Speaker 5: know where the economy sits right now, and I think
Speaker 5: it leaves us well positioned on whatever happens.
Speaker 7: But to go back to a very old FED term,
Speaker 7: what would your bias be towards cutting.
Speaker 5: My bias is to see what happens and then react appropriately.
Speaker 5: As I said, I think if you look at the
Speaker 5: last SEP, there's a leaning there, you know, toward cutting.
Speaker 5: But let's see what happens.
Speaker 2: That suggests you might be equally as open to hiking.
Speaker 2: Is that a case?
Speaker 5: That's another good way to ask the exact same question.
Speaker 5: So I go, I think the lean is toward d better.
Speaker 6: Let's see what.
Speaker 3: Happens so you would be open to doing so.
Speaker 6: As I said earlier, I don't.
Speaker 2: Want to make that headline this morning, but I just
Speaker 2: want to understand how open minded you are.
Speaker 3: Oh, I'm open.
Speaker 5: I'm always open minded on what happens with the data.
Speaker 5: If you see an economy that overheats, you'd have to
Speaker 5: respond to it. I don't see an economy yet close
Speaker 5: to overheating.
Speaker 2: There was some questions about whether we are accommodative right
Speaker 2: now restrictive? Can I just finish that the Federal Reserve
Speaker 2: chat shake down. I'm sure you watched the news conference
Speaker 2: set that you were restrictive, then said financial conditions were accommodative.
Speaker 3: Can you square that circle so well?
Speaker 6: So?
Speaker 5: I do think we're somewhat restrictive. I don't think we're
Speaker 5: hugely restrictive. We're a lot less restrictive obviously than we were,
Speaker 5: you know, six months ago. But we'll see as we go.
Speaker 5: And like I said, if inflation continues to come down,
Speaker 5: that would be a positive sign. If the economy continues
Speaker 5: to you know, perform at a decent but not overheated level,
Speaker 5: that's a sign. But if you start seeing an economy
Speaker 5: you know, heat up, yeah, then you'd have to ask
Speaker 5: yourself those questions.
Speaker 3: President Barkin, appreciate your time.
Speaker 2: As always said, thank you the Federal Reserve Bank of Richmond,
Speaker 2: President Tom Barkin. DAT send to the earnings and focus
Speaker 2: on Disney. The company's first quarter earnings topping estimates, fueled
Speaker 2: by success in its movie studios and streaming business. The
Speaker 2: stock is positive and joining us Now's the Disney CFO
Speaker 2: Hugh Johnston, Welcome back to the program sir. We'll talk
Speaker 2: about how solid these numbers aren't just the moment. There's
Speaker 2: one headline the least from me. We're talking about a
Speaker 2: little bit earlier this morning. We'd love an explanation from
Speaker 2: you on it. Just seeing a second quarter modest decline
Speaker 2: in Disney plus subscribers quarter on quarter. Could you explain
Speaker 2: that we testing the limit of price tolerance and consumers.
Speaker 3: What's going on there?
Speaker 8: Good morning, Jonathan, No, I don't think so at all. Actually,
Speaker 8: that's really sort of more seasonal decline than anything else.
Speaker 8: A year over year will will certainly be up, so
Speaker 8: certainly not concerned from that perspective. More broadly, the streaming
Speaker 8: business is doing extremely well. This is a business we
Speaker 8: invested pretty heavily in a couple of years ago, and
Speaker 8: what you're seeing now is the benefit of those investments.
Speaker 8: Our expectation is will continue to grow, subs, will improve margins.
Speaker 8: We should make more than a billion dollars in that
Speaker 8: business this year, and next year we're looking at double
Speaker 8: digit margins in that business. So certainly a ton of
Speaker 8: positive momentum. Now you get into the question of why.
Speaker 8: A lot of it is the great content that's coming
Speaker 8: from the studio side of the house, both on the
Speaker 8: TV and the movie side of.
Speaker 6: Our entertainment business.
Speaker 8: We wanted to inside out to Deadpool all terrific hits,
Speaker 8: and on the TV side, the combination of Abbot, elementary
Speaker 8: Showgun and high potential causing viewership to grow we're seeing
Speaker 8: higher engagement, we're seeing churn ultimately coming down over the
Speaker 8: course of this year. So we feel like the streaming
Speaker 8: business is going to be one of the big drivers
Speaker 8: for our company going forward.
Speaker 2: You know how much I love Showgun and Least so
Speaker 2: I can say love Moana two as well. So the
Speaker 2: content sled is looking pretty good so far. I did
Speaker 2: want to talk about the cost issue though, and clearly
Speaker 2: not an issue from you, so I appreciate the explanation.
Speaker 2: Conversation we've had over the last few days or so
Speaker 2: is if we get tariffs, can companies pass on the costs?
Speaker 2: I'd like to know from your perspective and for the company,
Speaker 2: the additional tariffs that have gone on into China, how
Speaker 2: that could impact your business.
Speaker 3: How are you thinking about things?
Speaker 8: Yeah, right, right now, based on what's been proposed, and
Speaker 8: obviously this is a rapidly evolving environment, so we're going
Speaker 8: to react as we learn things.
Speaker 6: The impact would be a material to us.
Speaker 8: So from that perspective, really, the Walt Disney Company will
Speaker 8: be fine based on what's on the table right now.
Speaker 1: At the same time, there's a question about the American
Speaker 1: brand at a time or when they are increasing tensions
Speaker 1: between the US and China, the US and Europe. Given
Speaker 1: the fact that the experiences side of your business has
Speaker 1: been such a driver of growth for you, are you
Speaker 1: concerned Have you seen any pullback in attendance in some
Speaker 1: of the areas like Shanghai, like France, like Paris that
Speaker 1: could potentially have some feelings around the negotiations.
Speaker 8: Now, broadly speaking, the international parks business did very well.
Speaker 8: Profitability was up twenty eight percent for the quarter. Attendance
Speaker 8: broadly speaking, was up, So from that perspective, we certainly
Speaker 8: feel good. Disneyland Paris actually had a terrific quarter, so
Speaker 8: feeling positive in that regard.
Speaker 6: Candidly, in many.
Speaker 8: Ways, what the Walt Disney Company represents is an opportunity
Speaker 8: to get away from all of the things that are
Speaker 8: happening in the world right Our job is to basically
Speaker 8: bring families joy, bring them together, give them smiles. So
Speaker 8: I think in many ways we're not a part of
Speaker 8: that conversation at the same.
Speaker 1: Time, and it's sort of pulling together the idea of
Speaker 1: experiences and the smiles and the streaming business, the idea
Speaker 1: that how much are people willing to pay for this?
Speaker 1: John was alluding to that with Terras, But just more broadly,
Speaker 1: how much are you seeing consumers push back against some
Speaker 1: of the price increases, whether it's at the parks or
Speaker 1: whether it's at the streaming services, just simply because of
Speaker 1: how much prices have already gone up.
Speaker 8: Yeah, We're not to be perfectly candid, and I think
Speaker 8: it's always important to remember from a consumer perspective, price
Speaker 8: is what you pay and value is what you get,
Speaker 8: and if you deliver sufficient value to the consumer, they
Speaker 8: are willing to pay the price. And I you see
Speaker 8: that going on broadly with companies these days. Companies that
Speaker 8: deliver a lot of value they're pricing is being accepted
Speaker 8: by consumers. And if you look at the value of
Speaker 8: a Disney vacation, if you look at the value of
Speaker 8: all the things that we're able to deliver on the
Speaker 8: streaming service, people are willing to pay to pay the
Speaker 8: price for that because frankly, they're getting a lot for it.
Speaker 8: So we haven't seen pushback really in a material way
Speaker 8: at all in that regard.
Speaker 2: You speak of the streaming business, Can we talk about
Speaker 2: Hulu just a little bit more. Where are we with
Speaker 2: the negotiations with Comcast? And we mightkee any progress.
Speaker 8: We're still in the process and I probably won't kind
Speaker 8: of go any further than that. I'd expect we'll get
Speaker 8: some resolutions sometimes.
Speaker 3: What's holding things up, Hugh? What are the sticking points?
Speaker 8: Oh, it's I think just the usual people have different
Speaker 8: points of view on the value of the asset.
Speaker 6: So nothing more than that.
Speaker 1: There is a content question here, Hugh about what the
Speaker 1: driver of growth is going to be from a streaming perspective,
Speaker 1: whether it's instrumental and getting involved in some of the
Speaker 1: sports world, or whether you can kind of lean into
Speaker 1: existing brands, how you do content creation at a time
Speaker 1: when there is a lot of question around what exactly
Speaker 1: sells other than the legacy brands.
Speaker 8: Yeah, I think when you look at the Walt Disney Company,
Speaker 8: in many ways, we're best positioned from the standpoint of
Speaker 8: streaming because we do generate so much of our own
Speaker 8: content relative to to some of our competitors.
Speaker 6: In many ways. To think about.
Speaker 8: Disney Plus is it really can be the portal into
Speaker 8: all things Disney and something you might want to have
Speaker 8: on twenty four hours a day, seven days a week,
Speaker 8: because if you want news, you'll be able to find
Speaker 8: it through Disney. Disney plus Hulu if you want sports,
Speaker 8: the ESPN tile just went on Disney Plus if you
Speaker 8: want movie entertainment, TV entertainment. Obviously, with all of our studios,
Speaker 8: we generate a tremendous amount of entertainment from our own IP,
Speaker 8: so I think more than most we're actually very well
Speaker 8: positioned to ascertain what the right level of content is
Speaker 8: and to create that content for ourselves, which obviously gives
Speaker 8: us some inherent advantages.
Speaker 1: If we were talking six months ago, we might have
Speaker 1: started the conversation on artificial intelligence and how much you
Speaker 1: were using that in your content creation at a time
Speaker 1: where that's increasingly something that's being done. How much have
Speaker 1: you explored that to lower cost, expedite the process of
Speaker 1: time to get some of the movies and videos online.
Speaker 8: We've got a number of use cases really across the
Speaker 8: entire company, from the ability to create content, to the
Speaker 8: ability to manage the company more efficiently, to the ability
Speaker 8: to manage our guest experiences inside the parks and cruise business.
Speaker 6: So we're in.
Speaker 8: The early days of leveraging all that as our most companies,
Speaker 8: because we really are very much in the early days
Speaker 8: of artificial intelligence generally speaking. But we're experimenting a lot
Speaker 8: to try to understand where can actually best add value
Speaker 8: to the Walt Disney Company.
Speaker 2: H do you see a shift in vibes in this
Speaker 2: country with the kind of content that people want of
Speaker 2: you is changing?
Speaker 8: Not really, you know, it tends to be I think
Speaker 8: more more based on age demographics than anything else. But
Speaker 8: by and large, if you look at what we're able
Speaker 8: to deliver by virtue of the broad base of ip
Speaker 8: that we have, we have sort of the very traditional
Speaker 8: things from the original Walt Disney Company right through to
Speaker 8: things that come out of Marble, that come out of
Speaker 8: Pixar that are sort of very current and contemporary. So
Speaker 8: I don't see dramatic shifts going on by any stretch
Speaker 8: of the imagination. And I do see our assets actually
Speaker 8: appealing to a wide, wide array of consumers.
Speaker 3: And you've got to run.
Speaker 2: We appreciate your time, as I always say, thank you
Speaker 2: be Disney CFO Hugh Johnston. We begin to sound with
Speaker 2: a look at the energy sector, President Donald Trump pledging
Speaker 2: to expand production and lower prices. With the threat of
Speaker 2: tariffs hanging overhead for the next thirty minutes, some places
Speaker 2: say it joining us now is the chefron Ceo might Worth. Mike,
Speaker 2: good morning, It's good to see you. I promised the
Speaker 2: first question earlier on this morning. I mentioned it on air.
Speaker 2: I wanted to know whether you've watched Landman on paramount
Speaker 2: seeing the program I have, Okay, how accurate is it?
Speaker 2: Do you have to deal with cartowns on a daily basis?
Speaker 6: It is?
Speaker 9: It is wonderful entertainment. Really, Bob Thornton is an amazing actor,
Speaker 9: and it's drama, right, and then you need a little
Speaker 9: bit of a storyline, and so you know, there are
Speaker 9: certain aspects of it that are accurate and others that
Speaker 9: are probably just a touch exaggerated.
Speaker 2: It sets up this conversation quite well. Think for one
Speaker 2: specific reason, I think there's been a vibe shift in
Speaker 2: this country, captured by the election in and in November,
Speaker 2: and also basically content that people are consuming right now,
Speaker 2: including Landmann and in Landman, you see a much more
Speaker 2: pragmatic approach to things like fossil fuels, oil and energy
Speaker 2: and the kind of work that your company does. Do
Speaker 2: you think we are seeing that more pragmatic approach the
Speaker 2: energy story now?
Speaker 9: I think there's no question we're seeing that. I mean,
Speaker 9: you know, take a look at this administration that has
Speaker 9: come in and rather than criticizing and almost in some
Speaker 9: ways ostracized oil and gas, it's an It's an administration
Speaker 9: that has talked about American energy abundance and using that
Speaker 9: to the benefit of the American economy, the competitiveness of
Speaker 9: American business, and and but but not just oil and gas.
Speaker 9: It's you know, the grid is a big thing for
Speaker 9: the administration, and power generation, and so I think we
Speaker 9: were seeing a more balanced conversation. Something I've been calling
Speaker 9: for for years is in energy, there are three things
Speaker 9: that manage on affordability because that underpins economic prosperity, reliable
Speaker 9: supply because that relates to security in national security, and
Speaker 9: then environmental impact. And we have to balance those three
Speaker 9: things as we talk about energy. The conversation had become
Speaker 9: very unbalanced and focused on one of the three, uh
Speaker 9: and not the other two. And I think we're seeing
Speaker 9: a move back towards a more balanced and use the
Speaker 9: word pragmatic. I think that's a that's a very good
Speaker 9: word for the shift that we are seeing.
Speaker 1: We definitely are hearing the shift in the conversation. We
Speaker 1: heard that at Davos. Even though you weren't there to you.
Speaker 1: I am curious about how much that translates into actual
Speaker 1: changes that you're making on the ground, with how much
Speaker 1: you're investing, how much you're planning to expand your footprint
Speaker 1: in the United States and elsewhere.
Speaker 9: Yeah, we grew production last year seven percent globally, almost
Speaker 9: twenty percent here in the US, the largest production we've
Speaker 9: ever had in our history, largest cash distribution to our shareholders.
Speaker 6: So we are growing.
Speaker 9: We're also doing it in a more capital efficient way.
Speaker 9: So we've been focused on getting more bang for each
Speaker 9: dollar of capital. You guys are talking a lot about
Speaker 9: capital this morning, and in a capital intensive industry, we
Speaker 9: have to always look for ways to be as capital
Speaker 9: efficient as we can be, in as disciplined as we
Speaker 9: can be, and so we're able to bring new energy
Speaker 9: supplies to the market at a lower capital investment rate
Speaker 9: than ever before. We'll grow again this year in the
Speaker 9: United States another ten percent or so in the Permian,
Speaker 9: so demand for energy is at an all time high
Speaker 9: and it's only going up.
Speaker 1: Last year, you had a record production, even under an
Speaker 1: administration that had very different tone toward the oil and
Speaker 1: gas administration, the oil and grass industry, I just wonder
Speaker 1: how the vibe shift will change what your outlook is
Speaker 1: at a time when the rhetoric has shifted to the positive.
Speaker 1: But some of the proposals like tariffs might be headwinds
Speaker 1: in certain places.
Speaker 9: Yeah, so I think your point's a good one, Lisa.
Speaker 9: The rhetoric kind of sets the mood music, but you
Speaker 9: actually have to see policy, right, and some of that's
Speaker 9: done through executive order these days, a lot of it
Speaker 9: would be best done through legislation, and we would like
Speaker 9: to work with both sides of the aisle to implement durable,
Speaker 9: balanced and pragmatic energy policy, things like permitting reform, which
Speaker 9: you've got a lot of conversation, but we really haven't
Speaker 9: seen action yet on that, and it's difficult to build
Speaker 9: anything in this country, not just pipelines and infrastructure for
Speaker 9: our industry, but new power generation and grid modernization and
Speaker 9: other types of infrastructure. We hope and are certainly willing
Speaker 9: to work with parties from across the spectrum to try
Speaker 9: to turn some of this vibe shift or more balanced
Speaker 9: conversation into what we think is good, durable policy.
Speaker 2: Can you talk to us more about the permitting These
Speaker 2: are things we hear about all the time you're running
Speaker 2: a business, could you help us understand how much that
Speaker 2: has held back your business?
Speaker 6: Oh, it slows things down. It's very difficult.
Speaker 9: I mean the Keystone Pipeline is a good example that
Speaker 9: was well documented where a multi billion dollar investment that
Speaker 9: would have been good for Canada, would have been good
Speaker 9: for the United States, ultimately didn't happen because the permiting
Speaker 9: process can be hijacked by interests that are opposed to
Speaker 9: seeing investment in our economy. And so, look, everybody wants
Speaker 9: to see good protection of the environment and engagement of
Speaker 9: communities are impacted by projects. But we need lead agencies
Speaker 9: that can take responsibility for these processes. We need timelines
Speaker 9: that are reasonable timelines to do the work, and then
Speaker 9: we need reasonable boundaries around the way these things can
Speaker 9: be litigated in the courts. And that needs to you know,
Speaker 9: that needs to be done to enable more investment in
Speaker 9: this country.
Speaker 3: This president clearly wants to change that.
Speaker 2: Users phrases like drill, baby, drill, we're certainly drilling, not
Speaker 2: to thirteen million barers of all to day in this country,
Speaker 2: which is phenomenal. I often sit here, Lisa does too,
Speaker 2: and we'll say things like and we'll hear it from
Speaker 2: Amara as well once she's here. How realistic is it
Speaker 2: to get that number much higher than the thirteen million
Speaker 2: barers we're at right now. You'd know it better than
Speaker 2: we do. How realistic is it?
Speaker 6: Well?
Speaker 9: I think production in the US is going to grow
Speaker 9: again this year. We certainly see in our business. I
Speaker 9: said our permium production will be up ten percent. In
Speaker 9: the deep water golf of America, we're going to go
Speaker 9: from two hundred thousand barrels a day to three hundred
Speaker 9: thousand barrels a day by the end of twenty twenty six.
Speaker 9: So there is production growth coming, but it's really driven
Speaker 9: by economics, a long term view on supply demand, technology,
Speaker 9: and policy.
Speaker 2: Just to jump in that last point, a long term
Speaker 2: view on policy. How difficult is it to make these
Speaker 2: investment decisions? We talk about this five shift now could
Speaker 2: change again.
Speaker 9: For Ye, It's very difficult, John, And so one of
Speaker 9: the things our company was criticized for a few years
Speaker 9: ago is we weren't jumping into some of the renewables
Speaker 9: as fast as others because the policy was unclear, and
Speaker 9: so we were doing basic research. We were investing in
Speaker 9: pilot plants, but multi billion dollar investments that are very
Speaker 9: dependent upon policy that could change quickly are something you
Speaker 9: have to think about when you're looking to deliver strong
Speaker 9: returns to your shareholders. And so we would like to
Speaker 9: see durable, long term balance policy because that does make
Speaker 9: the investment decision a little bit easier for companies to make.
Speaker 1: One test case for this is liquefied natural gas. US
Speaker 1: is a massive producer of it. You're one of the
Speaker 1: biggest producers of it. There was a ban on exporting
Speaker 1: to Europe at a time when Europe is really dependent
Speaker 1: on the US.
Speaker 3: That has been lifted.
Speaker 1: Now there's the potential of tariffs being placed on some
Speaker 1: of those exports. How much can you start to lean
Speaker 1: into exports versus not due to some of this confusion.
Speaker 9: Yeah, you know, the tariff environment is obviously evolving here.
Speaker 9: On a day basis, energy is a globally traded commodity,
Speaker 9: and energy oil petroleum products for.
Speaker 6: The most part.
Speaker 9: Now Canadian oil is a little bit different because it's
Speaker 9: really dependent upon pipelines, but those products can go to
Speaker 9: different markets. We've seen sanctions reorient trade flows. Tariffs are
Speaker 9: another instruments that can change the economics for producers and
Speaker 9: for consumers, and what you'll typically see, whether it's energy
Speaker 9: or oil is flows will move to different markets as
Speaker 9: producers seek the highest price for their production and as
Speaker 9: consumers seek the lowest cost for what they're looking to buy.
Speaker 9: And as long as supply remains in the market, you
Speaker 9: have markets well supplied, you generally start to see costs
Speaker 9: go up a little bit because there's increased transportation and
Speaker 9: some kind of friction in the system, but export decisions
Speaker 9: aren't heavily affected by those prospects.
Speaker 2: I would say, speaking of sanctions, just briefly, you have
Speaker 2: a waiver to operate in Venezuela.
Speaker 3: Is that the case we do? Rubio? Now?
Speaker 2: Secuary Rubio said, maybe the US should reconsider that waiver.
Speaker 2: You in contact with them on that issue.
Speaker 9: We're in contact with the current administration. We've been in
Speaker 9: contact with the first Trump administration and the Biden administration
Speaker 9: because the sanctions on Venezuela have been in place for years,
Speaker 9: and we work closely with the government to understand their objectives,
Speaker 9: to understand the limitations that are being placed through these
Speaker 9: licenses issued by OPHAK, and to stand full compliance with
Speaker 9: the laws.
Speaker 2: Are you anticipate in any changes in the hill or
Speaker 2: too early to say either.
Speaker 9: Recently was a trip down to Venezuela by a special
Speaker 9: envoy who brought back some Americans from Venezuela and arranged
Speaker 9: terms for I think Venezuelan and immigrants to go back
Speaker 9: to Venezuela that are that are here illegally, and that
Speaker 9: seems to be you know, the latest the general license
Speaker 9: that we operate was unchanged. It has been changed over
Speaker 9: the years in different ways, and that still could happen.
Speaker 9: We try to inform the government of the potential ramifications
Speaker 9: of a change like that, so they're well informed before
Speaker 9: they make changes of.
Speaker 3: What would the ramifications be.
Speaker 9: Well, under the initial Trump sanctions, Venezuelan oil was not
Speaker 9: allowed to come to the US. The Biden administration changed that.
Speaker 9: Gulf Coast refiners actually run a lot of the heavy
Speaker 9: grades that come from Venezuela. If you see sanctions on
Speaker 9: Canadian or tariffs on Canadian or Mexican oil, that may
Speaker 9: send some of that oil to other countries, and so
Speaker 9: the Venezuela oil could be even more important. So it's
Speaker 9: things like that, it's how would this work through the
Speaker 9: system that we really try to help the policy makers understand.
Speaker 2: Mike, you're going to stick with us in place to
Speaker 2: say more on that conversation and more just the moment.
Speaker 2: My worth there the chefron CEO. This is the Bloomberg
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