Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with
Speaker 1: David Gura. Daily we bring you insight from the best
Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance
Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course
Speaker 1: on the Bloomberg. We're going with Michael Darta. He's the
Speaker 1: chief economist and market strategies at m K m KM
Speaker 1: Partners Trains. This here in our Bloomberg eleven three studios
Speaker 1: that in New York. Great to see you, Great to
Speaker 1: be back. A last Poor York, you write, A last
Speaker 1: fiscal policy in the US looks dead? What role when
Speaker 1: we look at the record numbers that we've seen this week,
Speaker 1: Dow hit in, how much of that do you attribute
Speaker 1: to the to the prospects still that there might be
Speaker 1: somewhere in the quarters of Congress work proceeding on on
Speaker 1: new fiscal policy. Well, not much, David, And that's a
Speaker 1: very controversial, an unpopular view. But consider the fact that
Speaker 1: emerging markets are up what thirty plus percent this year.
Speaker 1: Let's take a look at the Eurozone business cycle. They
Speaker 1: have the same lift in business confidence and p m
Speaker 1: I s that we're seeing in the US. So you know,
Speaker 1: the idea that we can continue to attribute what's happening here,
Speaker 1: whether it's the market or data, to a surprise election
Speaker 1: that happened last fall, just to me seems like a
Speaker 1: real stretch. Now, maybe something minor gets done on the
Speaker 1: fiscal side, but in terms of sweeping reforms or an
Speaker 1: enormous tax cut, which isn't reform in my opinion, I
Speaker 1: think the chances of that are quite slim. So we
Speaker 1: can extrapolate that further. It's not just the prospect of
Speaker 1: an infrastructure package, for instance, it is a tax form
Speaker 1: package as well. Well. Look, look, reform, at least in
Speaker 1: my book, implies that you are streamlining and simplifying that
Speaker 1: you're essentially paying for lower rates with base broadening. So
Speaker 1: it should be revenue neutral if you're doing it right.
Speaker 1: Is the gold standard, bipartisan revenue neutral. President Reagan wouldn't
Speaker 1: accept anything less. This is not what I'm hearing coming
Speaker 1: out of Washington. I mean, they you know, they started
Speaker 1: discussing closing certain loopholes, and there was a violent reaction,
Speaker 1: and there's been a backing off. And now I'm hearing
Speaker 1: that you know, some of the Conservative members want a
Speaker 1: FED chair that runs it hot so they can expand
Speaker 1: the deficit, the same members that wanted a deflationary monetary
Speaker 1: policy under a previous president. I mean, it's just jaw
Speaker 1: dropping when you look at that that list of five names,
Speaker 1: including Cheer Yelling. The president says he's considering those five. Um,
Speaker 1: how much difference is there between them when when you
Speaker 1: look at the effect they might have on the economy,
Speaker 1: effect on on the markets. Um, how satisfied are you
Speaker 1: with the list that that you have in front of you?
Speaker 1: And and do you think that each stands to to
Speaker 1: be different a different type of candidate when it comes
Speaker 1: to the economy in the markets? Well, I think they all,
Speaker 1: you know, have their own particular set of strengths. If
Speaker 1: you know, you want to size the you know, the positive.
Speaker 1: As far as I'm concerned, I have a bias here.
Speaker 1: I mean, I think Yelling is on the list, and
Speaker 1: I think she's the most qualified. I think it's hard
Speaker 1: to take a look around, uh and not you know,
Speaker 1: just assume that she's you know, the best person for
Speaker 1: the job, especially if you're interested in continuity. That said,
Speaker 1: she seems to have fallen out of favor you know,
Speaker 1: with some of the president's closest advisors. So now it
Speaker 1: looks like it's coming down to a tailor or a Powell.
Speaker 1: Powell probably would be the you know, candidate that would
Speaker 1: have the you know, the view would be the most
Speaker 1: continuity tailor. Maybe. I mean, if you if you're just
Speaker 1: looking at his rule, it's as short rates should be
Speaker 1: hundreds of basis points higher than they are now. That
Speaker 1: scares some, but anyone who comes in is going to
Speaker 1: have to govern by consensus. So I don't think with
Speaker 1: any of these particular individuals you'd have an abrupt, radical,
Speaker 1: you change in policy. That's just not how the FED operates.
Speaker 1: You mentioned. Let me take opportunity to ask about seven
Speaker 1: as well as we can, sort of looking back on
Speaker 1: on the events of the week thirty years ago, what
Speaker 1: have we learned since then? What did we not see
Speaker 1: leading into leading into a black Monday. Well, we've certainly
Speaker 1: had a few bad bear markets and significant corrections since then,
Speaker 1: But unfortunately for individual investors, it seems like they forget
Speaker 1: the lessons of the past and the sense that if
Speaker 1: you are you know, if you're not out of the market,
Speaker 1: and then a severe drop takes place or more. The
Speaker 1: best thing you can do is just grit your teeth
Speaker 1: and hang in there. And that really goes against every
Speaker 1: human psychological impulse, right, I mean, you know, psychology makes
Speaker 1: us want to buy at the top and sell everything
Speaker 1: at the bottom. And it's really difficult to lean against
Speaker 1: those impulses. But if we can be unemotional about it,
Speaker 1: look at the history, you know that's it's really you know,
Speaker 1: if you'd stayed in there, well, I mean, look how
Speaker 1: well you did even with two thousand seven and two
Speaker 1: thousand eight, right, I mean, if you weren't able to
Speaker 1: get out of the market before that, you know that
Speaker 1: huge bear trend started. If you just stuck with it,
Speaker 1: you've done extremely well. But few did you mentioned earlier
Speaker 1: Good morning every one time Keenan David girl worldwide getting
Speaker 1: ready for Yankees Astros tonight, among others, say particularly good
Speaker 1: morning on serious Sex. I'm Channel one early morning, Los Angeles,
Speaker 1: coming home from the celebrations of the Dodgers. Michael Darny,
Speaker 1: you said earlier today on this linkage of bonds to equities,
Speaker 1: when do we relink? When do we reattached to normality? Well,
Speaker 1: and so you know, you know that could happen two ways.
Speaker 1: It could happen with bond yields rising, or we could
Speaker 1: continue to enjoy equity price valuation gains. Equity price gains
Speaker 1: that push up valuations and you could relink in that fashion.
Speaker 1: Different models will have, you know, tell you that there's
Speaker 1: a different disparity. But one thing we don't have today
Speaker 1: that we had, you know, was a big divergence in
Speaker 1: favor of bonds. Right, the stock market was very expensive
Speaker 1: relative to the bond market, and we had a big
Speaker 1: increase in long rates that you're with the stock market
Speaker 1: rising up until you know, we were in the late summer,
Speaker 1: I think we peaked. So three basis points surge in
Speaker 1: long rates. If something like that today would clearly cause
Speaker 1: a big stock market upheaval. So if that's your forecast,
Speaker 1: and certainly you'd be negative on equities. But we tell clients, look,
Speaker 1: the Fed is raising short rates and reducing the balance sheet.
Speaker 1: All the things that were supposed to spike long rates
Speaker 1: haven't done it. So you know, maybe it's the new normal,
Speaker 1: Maybe it's debt and demographics, whatever you want to call it.
Speaker 1: The Fed being able, you know, being willing to undershoot
Speaker 1: the inflation target, consistently. You know whatever, these you know,
Speaker 1: these forces are long. Rates don't look like they're headed
Speaker 1: up dramatically anytime soon, so we'll have to leave it there.
Speaker 1: Michael darda just terrific news flow this morning. Thank you
Speaker 1: so much for coming in my pleasure. Can you try
Speaker 1: to come in on a quieter fight. I'm glad it's
Speaker 1: it's great. I'd love to talk to you the day
Speaker 1: we hear about a fed sherman. Be happy to come
Speaker 1: back then, you know, pick up the MKM phone he
Speaker 1: has in his car. He's got a red phone on
Speaker 1: the dashboard which is the the surveillance issue surveillance issue phone.
Speaker 1: Michael Darter, thank you so much to that. Further Ado,
Speaker 1: Nicholas Hayman joins us on our phone lines. Mr Hayman,
Speaker 1: I'm among the mix of people we talked to on
Speaker 1: general Electric has been more constructive. Uh, and we're thrilled
Speaker 1: that he can join us this morning. Nick, I want
Speaker 1: to cut to the chase which is in ge power.
Speaker 1: Not so much as there a sense of fraud, but
Speaker 1: was there a sense of deception of how business would
Speaker 1: slow Well, certainly that was one of the biggest holes
Speaker 1: in the quarter. Oil and gas was also pretty challenged,
Speaker 1: but they took some raw right ounds in power um
Speaker 1: had conversion and I will have to see here, you know,
Speaker 1: I think that that uh UM, the business you know,
Speaker 1: is facing a challenge where it you know, shifts from
Speaker 1: developed countries too more, you know, emerging and non developed countries.
Speaker 1: Gas servants are still going to be a functional part
Speaker 1: of the power solution on the planet. And GE's got
Speaker 1: the best product in the market. But as we just
Speaker 1: saw yesterday, Semans is closing eleven out of twenty three plans.
Speaker 1: What's your timeline for the magic of a new CEO.
Speaker 1: Is this going to be a hockey stick or a
Speaker 1: v I should say, where we go down and come
Speaker 1: right back? Or is this going to be quarters of agony? Well,
Speaker 1: I you know, right now, I would have thought time
Speaker 1: that the market might have been thinking that dollar fifteen
Speaker 1: or dollar twenty was where we were headed this year.
Speaker 1: Obviously they suggested a dollar five to a dollar ten,
Speaker 1: so that would indicate uh still much larger structuring actions
Speaker 1: are to come in the fourth quarter, and presume only
Speaker 1: that will begin to set the path for next year
Speaker 1: on a stronger footing. So instead of this year being
Speaker 1: you know part way down in eighteen at the bottom.
Speaker 1: We'll have to see, but my sense is obviously, uh
Speaker 1: at one, five, one ten, we're at the bottom this year.
Speaker 1: The question is where do you go back to next year?
Speaker 1: David Nick? How large does it does Jeff himiltloom in
Speaker 1: this in this quarterly report? Do you see evidence of
Speaker 1: his tenure yet? And and how quickly do you think
Speaker 1: of the new CEO? John Flannery is proceeding with the transformation. Oh,
Speaker 1: he's proceeding at light speed. You know, there's no question
Speaker 1: about it. You know that he's changing the board, he's
Speaker 1: changing the senior management, he's changing the culture, he's changing
Speaker 1: the cost structure radically. And I think we're going to
Speaker 1: see a lot more of pruning of the portfolio. Not
Speaker 1: big things, but you know, Perwiphul, things that don't earn
Speaker 1: their costic capital. Help an amateur like me. I print
Speaker 1: out this press release it's very easy to read with
Speaker 1: a lot of big font and blue text, and then
Speaker 1: attached to it, I've got I've got recast a G
Speaker 1: Industrials Finance tools and then as originally reported, G Industrial Financials.
Speaker 1: Help me understand the difference between those two spreadsheets. Um,
Speaker 1: there have been four different sets of earnings from them
Speaker 1: over the last several years, and this has been one
Speaker 1: of the issues that um, you know, the company has
Speaker 1: taken a slant on earnings to exclude pension expands, to
Speaker 1: exclude contract assets, which in essence are deferred revenues that
Speaker 1: are realized upfront. And um, you know, I think that
Speaker 1: uh as John goes forward, we're going to move back
Speaker 1: a lot closer to a gap number you know that's
Speaker 1: adjusted for games and or you know, one time costs
Speaker 1: or restructuring items. Do you load the boat this morning?
Speaker 1: I mean, if you love, are gonna love it here? Yeah?
Speaker 1: I didn't that. This is I don't believe a broken company.
Speaker 1: Remember that doesn't look like one of my screen nick,
Speaker 1: It doesn't. This is the heart of the matter, folks.
Speaker 1: I'm looking at the financials on my screen, orders, backlog,
Speaker 1: the sum total. It's pretty darn good. The nick. Why
Speaker 1: is it start getting beaten up? Well, it's getting beaten
Speaker 1: up because people obviously, you know, I don't have much
Speaker 1: of a forward visibility right now, not only about the earnings,
Speaker 1: but people, you know, the questions are around the dividend
Speaker 1: and um, you know, is the dividend that right now
Speaker 1: the markets discounting something in the neighborhood of reduction in
Speaker 1: that dividend. And the question is, you know, is that
Speaker 1: a good decision to make um? You know, given the
Speaker 1: company has certainly got playing of liquidity, the debt trades
Speaker 1: all above par um. They're ahead of plan on cost
Speaker 1: out at one point two billion. We thought they might
Speaker 1: get to one four. They promised in April to do
Speaker 1: a billion. So there, you know, things are are, you know,
Speaker 1: and they've they've brought out, you know, you know, all
Speaker 1: brand new products in the last two or three years
Speaker 1: across all their businesses that are state of the heart.
Speaker 1: I believe it's November. What's Nick Hayman's number one question
Speaker 1: November at the analyst meeting where you animals go up
Speaker 1: against these guys and you really get nasty. What's the nasty?
Speaker 1: What is the what is tom what's the pathway forward
Speaker 1: for you know, revitalizing the cash flow from operating activities?
Speaker 1: We need fifteen to sixteen to sustain the current level
Speaker 1: of eight billion in dividends and a normalized level of
Speaker 1: you know, capital spending it two and a half to
Speaker 1: three billion, and you know, if you can get to
Speaker 1: fifteen or sixteen next year, which obviously this year they
Speaker 1: now project seven instead of twelve to fourteen. And you
Speaker 1: know we thought maybe it'd be eleven with a lot
Speaker 1: more restructuring. Well there's more restructuring and write downs to come.
Speaker 1: Thank you for the very greatly appreciated and it came
Speaker 1: into the heart of this most historic day with general
Speaker 1: elector just an ugly statement in the stock down. Stay
Speaker 1: with us, this is Bloomberg, David, why do you bring
Speaker 1: in our steam guest? We got Jeff Sprague coming up
Speaker 1: on g I should say, after Nick came and thrilled.
Speaker 1: This is what we do on surveillance. Give you a
Speaker 1: set of opinions on general Electric and we'll do that
Speaker 1: with Mr Sprague in a bit, David, why don't you
Speaker 1: bring in our steam guests? The former basketball player who
Speaker 1: shot hoops with the President Obama one of many items
Speaker 1: on the CV. That's a Bob Hornet's vice Chaircassinger associates
Speaker 1: from we're Under Secretary State for Economic Growth, Energy and
Speaker 1: the Environment here with us, As Tom says in our
Speaker 1: Bloombick eleven three oh studios. You missed it earlier in
Speaker 1: the week Tom was practicing the president. She clap on
Speaker 1: air the constant clap that we are during the address
Speaker 1: that he gave to the People's Congress. There's this one
Speaker 1: helping us. Well, that's one tradition in China that the
Speaker 1: audience claps for you, and you clap for the audience
Speaker 1: you go. So it's part of the way Chinese culture works. There.
Speaker 1: We got a very nice thing. But they're good at it.
Speaker 1: They're very good at and they have a lot of
Speaker 1: time to do it. Three hours to start. It's just
Speaker 1: what's called the work program or the work report, and
Speaker 1: it's traditionally very long. It's who start, who do we blame? Now?
Speaker 1: It goes way back. I mean, the work report is
Speaker 1: provided by the current UM Party secretary, who is now
Speaker 1: shipging ping about the last five years under his tootledge,
Speaker 1: under his domain, and then about the next five years.
Speaker 1: So it's really a long report. And it's good actually
Speaker 1: that it's long, because it really represents a consensus of
Speaker 1: freaking in the party. I actually, come on, President Trump
Speaker 1: is looking at that, going, David, He's going, I could
Speaker 1: do that, he could do that. But the fact is
Speaker 1: it's filled with a lot of interesting stuff. That there's
Speaker 1: a lot of general language in it, but almost every
Speaker 1: time this report comes out, very specific things occur afterwards,
Speaker 1: even though the language itself seems very general. For instance,
Speaker 1: just an interesting number. President John Zaman mentioned the market
Speaker 1: fifty four times when he gave his report. Party Congress
Speaker 1: President she mentioned it eighteen times. So it shows you,
Speaker 1: when you look at it and you do your sort
Speaker 1: of analysis, where the emphasis is and how it's changed.
Speaker 1: Those things they don't seem to be useful, but in
Speaker 1: effect they do reflect a consensus on the party. Harman's
Speaker 1: just looking at the way the white smoke blows when
Speaker 1: they when he also has uh, there is such a
Speaker 1: heavy brid of expectations leading to this event. What do
Speaker 1: we learn from this? The speech itself, it had a
Speaker 1: long time horizon. He's looking at many decades out. What
Speaker 1: what does China look like in his vision here twenty
Speaker 1: three years out. He sees this as a new era
Speaker 1: in China, where China has gone through some economic difficulties
Speaker 1: and is now particularly as a result of how well
Speaker 1: it survived the financial crisis of two thousand and eight
Speaker 1: and the difficulties and had a couple of years ago,
Speaker 1: feels a lot more self confidence about its economy. It's
Speaker 1: growing at six point seven six point eight per cent,
Speaker 1: so the economy is moving ahead. He's positive about that.
Speaker 1: He's also very assertive about China's role in the world.
Speaker 1: That China wants to be at he put as he
Speaker 1: put its center stage, and that is it wants to
Speaker 1: play a greater role globally. It certainly wants to play
Speaker 1: a greater role in the region. The US has obliged
Speaker 1: him by pulling out of t p P, giving the
Speaker 1: Chinese trade negotiations that are going on the RCP more
Speaker 1: opportunity to reflect China's point of view. One Belt, one
Speaker 1: Road is going to link China to the rest of
Speaker 1: Asia and Europe and other parts of the world. They
Speaker 1: have a new base in Djibouti. They're playing a stronger
Speaker 1: role in Southeast in South China. See. So he sees
Speaker 1: a more confident China economically at home, a more confident China,
Speaker 1: broad and more assertive China, and China is going to
Speaker 1: play a greater role. And this is the hijin Ping era.
Speaker 1: Mao started the new China after the revolution, Don got
Speaker 1: the reforms underway. Shijin Ping will lead China and to
Speaker 1: a new are of greater economic prosperity and greater certain
Speaker 1: rests abroad. It's a new era in his view, and
Speaker 1: China will be center stage at the world meetings of
Speaker 1: various swords like the G twenty and elsewhere, and that
Speaker 1: will give China greater prestige, which Chinese want. There there's
Speaker 1: a strong feeling of nationalism and that we have a
Speaker 1: role in the world to play now as we did
Speaker 1: a couple of hundred years ago. Here's dumb question. Tom's
Speaker 1: gonna allow me a couple of them here on this
Speaker 1: this Friday. What's the role of the party in China today?
Speaker 1: How much has that changed over these generations. Role of
Speaker 1: the party is stronger today under shi jin Ping uh
Speaker 1: in part because Shi Jinping is a strong leader. He's
Speaker 1: the leader of the party. He believes in the party.
Speaker 1: The other is that they have established in order to
Speaker 1: get things done, what they call these small leading groups.
Speaker 1: The leading groups are led by Shi Jinping, he's the chair,
Speaker 1: and they bring in party leaders and other government leaders.
Speaker 1: But the point to make about this is their groups
Speaker 1: under the government, under the leadership of the Prime Minister,
Speaker 1: and then they're smaller groups that are led by the
Speaker 1: head of the party Si Jinping, also of course out
Speaker 1: of the government, but also involve members of the Standing
Speaker 1: Committee of the polit Bureau and other senior leaders. We
Speaker 1: haven't found out how that's going to change, who's going
Speaker 1: to see that. We haven't found out what the Standing
Speaker 1: Committee is going to look like, but they'll be probably
Speaker 1: as the world last time, seven, although it could be
Speaker 1: reduced to five. One of the key questions is Wang
Speaker 1: shi Shan, who is now the leader of the Anti
Speaker 1: Corruption Group but also very knowledge about the economy. I
Speaker 1: work with him a lot because he was the economic
Speaker 1: guy at the strategic any kind of dialogue with the US,
Speaker 1: so I've gotten to know him quite well. It may
Speaker 1: well be that he retains his role in the Standing Committee.
Speaker 1: Wang Yang who is the current economic guy, the Vice
Speaker 1: Minister for Economics, as a candidate for the job of
Speaker 1: a member of the Standing Committee, another guy I've worked with.
Speaker 1: So I'm actually fairly comfortable that at least I've had
Speaker 1: a chance to meet and work with some of these people,
Speaker 1: and they're basically knowledgeable about the global economy. They want
Speaker 1: China to play a greater role in the global economy.
Speaker 1: They're used to working with Americans and foreigners. These are
Speaker 1: very sophisticated people, um who are going to be at
Speaker 1: least candidates for this What are they going to say
Speaker 1: to their counterparts from the U S when they get
Speaker 1: there in a couple of weeks time. When you talked
Speaker 1: about the Strategic Economic DIALOGE, they were these formalized meetings
Speaker 1: over the years under these past administrations. That's changing someone
Speaker 1: under this administration. How robust is that relationship now? How
Speaker 1: essential is this first meeting going to be For a
Speaker 1: lot of them, it will be very important because of
Speaker 1: course President Trump is going there in November. But I
Speaker 1: think what China is saying, what President she is saying,
Speaker 1: is we're going to assert our interests. We're not going
Speaker 1: to be pushed around. He didn't mention in any detailed
Speaker 1: relations with the United States, but it's clear that he
Speaker 1: understands he has to work with the United States. He
Speaker 1: it's not that he wants a confrontation with US, he
Speaker 1: does not, but he wants to assert Chinese use and
Speaker 1: he's saying, our economic model actually is working. So if
Speaker 1: your country is around the world thinking about what your
Speaker 1: econ model ought to be, take a look at how
Speaker 1: well we've done, but I'm gonna get this question and
Speaker 1: then we'll come back with you and continuous Is there
Speaker 1: just a brilliant discussion in ken Burns Vietnam video the
Speaker 1: ten episodes, our relationship with China is one of the
Speaker 1: constant changing events throughout Do you see continuity here? Are
Speaker 1: we just going to continue to change and evolve our
Speaker 1: relationship with China? I think it will change and evolve.
Speaker 1: In part, they'll be continuity because there's a lot of
Speaker 1: business relationships and financial relationships we work with him, many
Speaker 1: of which he established, And that was really one of
Speaker 1: my roles. I thought that the history of the next
Speaker 1: ten twenty years would be written in part by how
Speaker 1: effectively we work with China, not that we're always going
Speaker 1: to agree that we would embed our relationship. Is that
Speaker 1: going to change? I mean, are you going to be
Speaker 1: in a ken Burton's video? I think. I think that
Speaker 1: the Chinese are gonna want enter in a position to
Speaker 1: assert their interests to a much greater degree in global institutions,
Speaker 1: certainly in regional institutions, and they were in the past.
Speaker 1: We don't seem to have a strategy. We don't have
Speaker 1: a TV precisely where I seem to have a don't
Speaker 1: with them, and unless we did commercial, I got to
Speaker 1: go to commercial spot, commercial ambassador. Right, We're gonna come
Speaker 1: back and continue this important discussion, was Elliott Kissinger associate.
Speaker 1: David's better at this than I am. I' gonna let
Speaker 1: him pick it up. But I got one issue, you say,
Speaker 1: a key guy, because we're all Hong Kong and the Brain,
Speaker 1: Shanghai and the Brain. Some of us have been to Beijing.
Speaker 1: There's a whole another China out there, and one of
Speaker 1: them is is it Chung Ching is at the right
Speaker 1: production which is in southwest China South and it's where
Speaker 1: Shang Kai shek was in World War Two. It's one
Speaker 1: of the four big cities that are governed by a
Speaker 1: senior party secretary. UM And why are you looking at
Speaker 1: Chong because Wang Yang, who I think could be he's
Speaker 1: now the Vice Premier for Economic issues and someone I've
Speaker 1: worked with variable guy, he used to be party secretary
Speaker 1: in Chung Ching. And there's another person we haven't heard
Speaker 1: much about, but we will, I expect, because I think
Speaker 1: he'll be on the standing committee. Is a guy named
Speaker 1: Chen Manair who is currently Party Secretary of Chung Ching.
Speaker 1: So it's what's what's interesting about China is when an
Speaker 1: American president comes to office, he's a senator or a
Speaker 1: governor from unless he's a businessman from a certain area
Speaker 1: like Illinois or New York for California. Virtually every one
Speaker 1: who goes to the Standing Committee of China, of the
Speaker 1: Standing Paunit of the Polar Borrow has served in several
Speaker 1: provinces as party secretary, so they know the country. They
Speaker 1: know the country very well. And many of them have served,
Speaker 1: including uh President Hi Jin Pain in some very rural
Speaker 1: areas and some urban areas, so they know the country well. There.
Speaker 1: It's a very different perspective that they bring to this job.
Speaker 1: They've been party secretaries, They've been proved to be successful elsewhere,
Speaker 1: create jobs, create growth. But they know the whole country.
Speaker 1: They don't just know one part of it. And that's
Speaker 1: a very interesting difference in the governance process of China.
Speaker 1: They also, at sixty eight are supposed to the part office,
Speaker 1: or at least not be reconfirmed. This time. We may
Speaker 1: see a surprise. Wang Shi Shun is sixty eight. Now
Speaker 1: he is a very able guy. He may be retained
Speaker 1: to stay on even though he's now reached the tradition
Speaker 1: a time frame. David, Bob, your your enthusiasm for this country,
Speaker 1: this region is is palpable, and I wonder why you
Speaker 1: think it is. This administration doesn't seem to to share it.
Speaker 1: I know that the Assistant Secretary of State for East
Speaker 1: Asian Pacific Affairs is somebody feeling that they have not
Speaker 1: nominated something that I've seen. There's an acting Assistant Secretary
Speaker 1: m Rex to listen spend there a couple of times.
Speaker 1: I was speaking with Secretary Albright yesterday and she said
Speaker 1: her first trip to China was I think less than
Speaker 1: a month after she was named Secretary of State. Is
Speaker 1: the level of engagement enough? And what would you say
Speaker 1: to this administration about how engaged they have to be
Speaker 1: with China going forward? Well, the level engagements definitely not enough.
Speaker 1: I started going to China in the early seventies when
Speaker 1: Mao was Party secretary and Joe and I was premier,
Speaker 1: and so I've seen it change. And the one thing
Speaker 1: about it is we will find many issues where we
Speaker 1: agree and many issues where we disagree with China. The
Speaker 1: critical element is, first of all, to understand it and
Speaker 1: understand the people who are leading it, understand the people
Speaker 1: who are leading it, and the fact that they have
Speaker 1: to be responsive to public opinion. It's not a democracy,
Speaker 1: but they have to be responsive to public opinion, and
Speaker 1: understanding that public opinion is very important. Also, understanding how
Speaker 1: China perceives its interests is very important. You can't do
Speaker 1: that sitting in Washington or New York or anywhere else.
Speaker 1: You've got to go to China talk to China, and
Speaker 1: not just go Thomas mentioning a moment ago to Shanghai
Speaker 1: or Beijing. You've got to go to these middle levels
Speaker 1: or inner cities. And these are big cities. Chung Chang
Speaker 1: is a very big city, chung Do, Western China, very
Speaker 1: big city. So you've got to really see China, understand
Speaker 1: that there's China, and then there are various provinces. The
Speaker 1: provinces have different points of view, but virtually anything of
Speaker 1: consequence in the world over the next several years, certainly
Speaker 1: in the economic area and almost every part of the
Speaker 1: security world, is going to depend to some degree on
Speaker 1: how the United States and China work together. So it's
Speaker 1: not something we can dismiss or or take lightly. But
Speaker 1: we also have to make sure that we have good
Speaker 1: relations with our allies, our friends UM, Japan, South Korea,
Speaker 1: the EU, because in fact we're stronger in dealing with
Speaker 1: China if we have strong friendships and alliances of other
Speaker 1: countries as well. The Chinese have the same idea. They're
Speaker 1: trying to develop strong partnerships and alliances with other countries,
Speaker 1: so they understand this is one to one, but it's
Speaker 1: also groups visa v groups, Bob, I believe if I
Speaker 1: saw Kenra, you know, I had Ken. I had a
Speaker 1: beverage of my choice in my hand through most of
Speaker 1: ken Burns Vietnam. But I believe a Republican president quote
Speaker 1: unquote open China. Is this administration now anti China? I
Speaker 1: think this administration's probably not anti China, but some of
Speaker 1: the things they're doing are going to make our relationship
Speaker 1: with China very difficult unless they understand. And perhaps this
Speaker 1: trip by President Trump will help this understanding. Understanding that
Speaker 1: China is going to be a more assertive player, and
Speaker 1: while we might not agree with China and won't agree
Speaker 1: with China on a lot of issues, we have to
Speaker 1: work with it. Nixon understood that, he understood that there,
Speaker 1: and he was a traditional, very conservative Guy've been interested,
Speaker 1: you had to work with China on key issues. President
Speaker 1: Trump has to come to understand you have to work
Speaker 1: with China and you're not going to push them around.
Speaker 1: You're not going to push them around because they feel
Speaker 1: a sense of confidence, they feel they've been quite successful
Speaker 1: on their economics. They feel they're in a stronger position,
Speaker 1: certainly in East Asia than they were five years ago.
Speaker 1: And we have to figure out a way of what
Speaker 1: the Chinese called win win situations, which essentially are situations
Speaker 1: or solutions that enable us and the Chinese to come
Speaker 1: away feeling we have each made progress. That takes a
Speaker 1: lot of engagement, a lot of engagement at senior levels.
Speaker 1: And you know Tillerson has going there a couple of
Speaker 1: times and has tried to do this. We have to
Speaker 1: do it across the board. But it has to be
Speaker 1: done because the world will not work well. The global
Speaker 1: economy won't work well, global security will not be stable
Speaker 1: unless we find some way of working with China, even
Speaker 1: if we don't agree, at least figure out a way
Speaker 1: of managing our differences. That the j c POA and
Speaker 1: what we saw from a President Trump a couple of
Speaker 1: weeks back, he essentially punting a decision over to to
Speaker 1: Congress to figure out what to do with that run
Speaker 1: a nuclear deal. You mentioned Nixon in China, he seemed
Speaker 1: to own that part of that foreign policy portfolio. I
Speaker 1: think of President Obama doing the same thing with with Iran.
Speaker 1: It became something that was squarely centered in the executive branch.
Speaker 1: Do you understand his motivations for moving it over to
Speaker 1: to Congress? Did that makes sense to you what he
Speaker 1: elected to do last week? Well, it made sense, um
Speaker 1: if you look at it from a domestic political point
Speaker 1: of view. He didn't want to have to re certify
Speaker 1: the graded teeth, the sanctions lifting every ninety days. Um.
Speaker 1: But what troubles me about it is that if the
Speaker 1: Congress decides whatever it decides, if it decides to reimpose
Speaker 1: sanctions or or or the President said, unless we can
Speaker 1: change the agreement to comply with the kind of criteria
Speaker 1: he put into his speech, like eliminating these sunsets or
Speaker 1: doing a number of other things, Uh, then he's going
Speaker 1: to reimpose sanctions himself. The Congress if they can't reach
Speaker 1: an agreement, or we can't reach an agreement with their
Speaker 1: allies and the Iranians to change the agreement, he said
Speaker 1: he would reimpose sanctions and get out of the agreement.
Speaker 1: The problem with that is, what's the strategy getting out
Speaker 1: of an agreement UM and tearing it up and reimposing sanctions.
Speaker 1: You can you can predict what's gonna happen. One will
Speaker 1: have a big confrontation with their allies because our allies
Speaker 1: understand that the Iranians are complying with the agreement, So
Speaker 1: they're going to continue to trade, if and invest in
Speaker 1: Iran unless the United States takes very tough actions against
Speaker 1: our allies to try to prevent them from doing that,
Speaker 1: which requires UM we will lead to a split, will
Speaker 1: lead to friction between the US and its allies. And second,
Speaker 1: if the Iranians say the Americans are violating the agreement,
Speaker 1: we're going to start a more advanced, more intensive enrichment
Speaker 1: program because we now feel free to do that, Then
Speaker 1: what do we do in the region. I think we're
Speaker 1: in a much better position with this agreement than without it.
Speaker 1: Is it perfect, no, but we're in a much stronger position.
Speaker 1: If the Iranians cut back as they have on their
Speaker 1: enrichment program and their reactors UM, then then at least
Speaker 1: we have more transparency and we have a state belie ambassador.
Speaker 1: Thank you so much. Robert Hormance with us this morning,
Speaker 1: coming up on General Electric. This is Bloomberg. I'm going
Speaker 1: to get it right to it. I think it's it's
Speaker 1: really important to uh to do that uh this morning,
Speaker 1: and we'll do it. Uh what what What's important to me,
Speaker 1: David is there's like crossroads states or you know, states
Speaker 1: that are so diverse and odd and strange. Illinois, Florida,
Speaker 1: Maryland is like a mini Illinois, mini Florida. It's a
Speaker 1: hugely diverse state. It's it's really cool and and one
Speaker 1: of two representing that state in the U. S. Senate
Speaker 1: is our next guest, and there Chris van Holland, former
Speaker 1: cocusman from the eighth District in Maryland, now in the Senate.
Speaker 1: Among the committees he sits on is the Budget Committee.
Speaker 1: And let's start there as we look at the what
Speaker 1: comes next year after the debate over the debate and
Speaker 1: the vote over the budget last night in the Senate.
Speaker 1: Give us your reaction. First of all, I've been scrolling
Speaker 1: through your Twitter profile this morning, center Fan Hall. I
Speaker 1: think your your your distaste for this piece of legislation
Speaker 1: there is is pretty apparent. Give us just a quick
Speaker 1: quick sense here of of of why you didn't like
Speaker 1: this piece of legislation. Absolutely, And first you're right about Maryland.
Speaker 1: We call it America in miniature because that's geographically endemocratically diverse.
Speaker 1: But look, and that's a good place to start on
Speaker 1: this tax plan. This tax plan would really hit uh,
Speaker 1: Maryland hard as it would the other forty nine states. Unlast,
Speaker 1: you're at the very top of the income stale. If
Speaker 1: you're a millionaire, a billionaire, this is a great tax
Speaker 1: plan for you. You will get a walking big tax break,
Speaker 1: but a lot of that tax break is going to
Speaker 1: be paid for and two sources. One, a lot of
Speaker 1: middle class taxpayers are going to be hit hard in
Speaker 1: large part because of their removal of the deduction for
Speaker 1: state and local taxes, but also other elements. And then
Speaker 1: their budget sets it up so they could also cut
Speaker 1: things like a Medicaid by close to a trillion dollar,
Speaker 1: or's Medicare by close to five billion dollars, cut education.
Speaker 1: So at the end of the day, between middle class
Speaker 1: taxpayers are going to be paid more and folks who
Speaker 1: are going to see less services, whether it's Medicare education.
Speaker 1: This is a tax break for very wealthy people, paid
Speaker 1: for by pretty much everybody else. I look at the
Speaker 1: present statement from last night. In previous statements, there's been
Speaker 1: some semblance of an olive branch. You're hoping to work
Speaker 1: on things in the bipartisan fashion. I don't see that
Speaker 1: with with this statement from last night on the budget
Speaker 1: and tax reform. From your vantage, how much bi partisanship
Speaker 1: is there on the issue of of tax reform. We
Speaker 1: know that Senator or in Hatch, the chairman of the
Speaker 1: Finance Committee, is working away on on legislation on the
Speaker 1: Senate side. Have you seen all of branches? Have you
Speaker 1: been invited to participate? What what role are you and
Speaker 1: your Democratic colleagues playing at this point when it comes
Speaker 1: to the tax reform process. Look, I think it's been minimal, unfortunately,
Speaker 1: because we would like to participate fully. I believe we
Speaker 1: do need to simplify our tax code. We need to
Speaker 1: make reforms to our tax code. We should do it
Speaker 1: in an open and transparent way. We should make sure
Speaker 1: they're hearings where everybody can weigh in on the impact
Speaker 1: these proposals will make. But so far, we've seen this
Speaker 1: proposal put together behind closed doors, little pieces of it
Speaker 1: trickling out. What we have seen has not been a
Speaker 1: good We all know that when they actually did successful
Speaker 1: tax reform back in it was done in a bipartisan way.
Speaker 1: And the reason this budget vote is so troubling is
Speaker 1: because the only reason for this vote is to set
Speaker 1: up the fast track so called reconciliation process in the Senate,
Speaker 1: which allows them to jam it through on a purely
Speaker 1: partisan basis. So we need a bipartisan built You know
Speaker 1: your your caucus well. And I want to go back
Speaker 1: to a line from the President from earlier this week,
Speaker 1: he met with members of the Senate Finance Committee at
Speaker 1: the White House, and the marks to the press, he
Speaker 1: raised the spectru of there being bipartisan support for tax
Speaker 1: refor him, he said, he's not going to name names,
Speaker 1: but there are those who said that they are willing
Speaker 1: to support it. Does that job with what you're seeing
Speaker 1: on the hill, what you're hearing from Democratic colleagues, do
Speaker 1: you think that there is, maybe hidden from site, a
Speaker 1: number of Democrats here who are in favor of the
Speaker 1: framework that's been offered by the Big Six. I think
Speaker 1: that there are Democrats that would support what the President
Speaker 1: has publicly claiming about this tax plan, but which does
Speaker 1: not reflected in the tax plans that they put forward
Speaker 1: in the Senate. So I think you're gonna you would
Speaker 1: find road support for a tax plan which really focused
Speaker 1: on providing uh, some tax release to folks in the
Speaker 1: middle class, uh, and a tax plan that met what
Speaker 1: was dubbed the Steve Manutin rule when he announced in
Speaker 1: November two thousand sixteen, which is there'd be no net
Speaker 1: tax breaks for the very wealthy, and one that did
Speaker 1: not explode our debt by another one point five trillion dollars.
Speaker 1: So you know, the President has been saying he likes
Speaker 1: those principles, but they are not reflected in the plan
Speaker 1: that he's been touting around the country. If you're just
Speaker 1: joining us right now, Senator Van Hollen with us of
Speaker 1: Maryland Democrats from Maryland, uh. Fourteen years in the House,
Speaker 1: Senator Schumer has put him on a couple of prestigious committees,
Speaker 1: and also he's on the sub Committee to Save the
Speaker 1: Baltimore Orioles, which is a Senate committee of very great
Speaker 1: special Caucus Save the Baltimoreals as we can. Sen Holland
Speaker 1: long ago and far away in another life, Congressman Emmanuel
Speaker 1: said to you, you got to go out and recruit Democrats,
Speaker 1: and you've got five star accolades for doing that. After
Speaker 1: what you witnessed in the last election, are you gonna
Speaker 1: be able to go out and recruit Democrats that can
Speaker 1: shift from an east coast west coast mindset to the
Speaker 1: middle of the nation where some would argue you lost
Speaker 1: the presidential election. Can there be a new recruitment process
Speaker 1: in your Democrat Party? So I'm focused right now on
Speaker 1: the two thousand eighteen mid term elections, right the Senate elections.
Speaker 1: I think you're referring to the fact that chair the
Speaker 1: Democratic Senatorial Campaign Committee, UH, and in this particular cycle,
Speaker 1: of the thirty three senators are up, twenty five of
Speaker 1: them are Democratic incumbents. UH. There are eight Republican UH
Speaker 1: seats that are up, and in fact, we've recruited some
Speaker 1: very good candidates from those states. For example, UH, in
Speaker 1: the Vata, Jackie Rosen is our candidate. In Arizona, Kirsten
Speaker 1: Cinema is our candidate. Both of them are currently House members.
Speaker 1: And we've got other candidates that have been recruited in
Speaker 1: a really good candidates in places like Nebraska and other places. However,
Speaker 1: the Senate map this time around, Uh, it's just tougher
Speaker 1: for Democrats in terms of the number of number of
Speaker 1: seats to where you have Republican incumbents versus Democratic incumbents.
Speaker 1: But I agree with you that, look, we need to
Speaker 1: we need to focus on a broad and deep economic
Speaker 1: message focused on jobs and wages. These are things that
Speaker 1: everybody cares about. That doesn't mean we do it to
Speaker 1: the exclusion of important questions of social justice. The Democratic
Speaker 1: Party will always be the party of inclusion. But inclusion
Speaker 1: also means, you know, making sure that everybody can benefit
Speaker 1: from growing prosperity, and we need to we need to
Speaker 1: drive economic growth, but do it in a way where
Speaker 1: more people benefit. Center Van Hollan. In the last couple
Speaker 1: of minutes we have with you, I know that you'll
Speaker 1: you'll recognize that the issue who is going to be
Speaker 1: the next FED chair is important to those who are
Speaker 1: listening to to the show here on on Bloomberg Radio.
Speaker 1: You sit on the Senate Banking Committee as well. Give
Speaker 1: us a sense or your sense of of how you
Speaker 1: think those hearings are going to proceed. Once we get
Speaker 1: a nominee from the President to to get to head
Speaker 1: the FED. Come two, what are those hearings going to be? Like,
Speaker 1: what do you want to hear from the next nominee
Speaker 1: to be the chair of the Federal Reserve? Well, I
Speaker 1: would want a nominee the Chair of the Federal Reserve
Speaker 1: to UH be focused on both prongs of the Federal
Speaker 1: Reserves mandate. So yes, UH, they've obviously got to keep
Speaker 1: an eye on inflation, but they've also got to make
Speaker 1: sure that they're focused on UH employment and making sure
Speaker 1: that we have a strong economy with high levels of employment.
Speaker 1: So you know, in my view, the current chair has
Speaker 1: done a good job of that. But obviously we're watching
Speaker 1: the series of interviews that the President's undertaking, UH, and
Speaker 1: they'll have a nominee. But from my perspective, you know,
Speaker 1: I want somebody who is going to be UH focused
Speaker 1: on making sure that we put America to work. You
Speaker 1: look at those those five nominees, does does any stand
Speaker 1: out to you? Is not qualified? Somebody that you don't
Speaker 1: think you could support. You know, I have not had
Speaker 1: a chance to really look into the background through all
Speaker 1: of the nominees right now, and so we're kind of
Speaker 1: waiting for the President to make his choice, and then
Speaker 1: we'll have an opportunity to really scrub the records. Cal
Speaker 1: Ripkins on the show, someone you can go as a senator,
Speaker 1: Senator Van Holland, thank you so much from the great
Speaker 1: space of pleasure. Thank you. Just love talking to uh,
Speaker 1: these senators and these congress men and women about the
Speaker 1: geography the culture that they encompass. Maryland is extraordinarily underrated
Speaker 1: for diversity. We just look at his balmore and you
Speaker 1: know the train goes through on the way to Washington,
Speaker 1: and that is David beyond silly. It's much much more
Speaker 1: there To say the least, this is a joy. He's
Speaker 1: put out three missiles in the last couple of days,
Speaker 1: one of them on Snapchat. We'll try to get to
Speaker 1: that in the second block. But as usual, Rich Greenfield,
Speaker 1: total class actor said, I guess I got step Chat wrong,
Speaker 1: and we'll talk about that. Maybe nobody cares B T
Speaker 1: I G. And of course, wonderful work on media. What
Speaker 1: stopped me in my tracks, Rich, was your legacy media
Speaker 1: memo of a few days ago, which was a clarion
Speaker 1: call stop screwing around with stock by backs in short
Speaker 1: termism and start thinking long term. What's the shift in
Speaker 1: the autumn of two thousand seventeen for legacy media. Look,
Speaker 1: these these companies are really focused on, you know, trying
Speaker 1: to maintain earnings, achieve Wall Street expectations, to make sure
Speaker 1: the executives get their compensation, which is usually tied to
Speaker 1: earnings growth targets. And they're all failing to to miss
Speaker 1: that the consumer behavior is shifting rapidly. The whole world
Speaker 1: is kind of rotating around the mobile phone, and they're
Speaker 1: nowhere to be found. And rather than investing aggressively, either
Speaker 1: through acquisition or through kind of organic um investment, what
Speaker 1: they're all doing, or so many of them are doing,
Speaker 1: they're gunning their share by back. And Look, we can
Speaker 1: debate how fast the media sector, legacy sector is falling
Speaker 1: apart bundle, you know, kind of the fall up and
Speaker 1: subscribers and cord cutting, advertising, things that you and I
Speaker 1: have talked about before. We can debate it, and there's
Speaker 1: so only different rates of the climb. But what I
Speaker 1: think is incredible, Tom, is how can any board of
Speaker 1: director look at this space and go, God, I am
Speaker 1: confident that the future looks good. I'm gonna buy my
Speaker 1: own stock that's the best place to put capital. That
Speaker 1: just seems to irresponsible. I mean, Disney's bought more stock
Speaker 1: than any company in the space over the last Okay,
Speaker 1: is Disney? Is Disney? The next is Disney the next
Speaker 1: General Electric? Now the folks, folks, we can talk about
Speaker 1: ge with oir, NBC, universal ownership, etcetera. Now over to
Speaker 1: Comcast in such but is Disney and other legacy media
Speaker 1: are they the next General Electric? I think it's a
Speaker 1: real fear that you have to have looking at this space.
Speaker 1: When when management teams focus on share buy back, it
Speaker 1: usually means the industry is mature, and you know, I
Speaker 1: think there has to be far better places for Disney
Speaker 1: to put capital than reinvesting essentially in what is a
Speaker 1: meaningful chunk of ESPN right now, not to mention movies
Speaker 1: that kind of a pinnacle of success over the last
Speaker 1: few years. The odds of continuing that success are low,
Speaker 1: and so look, I just think it's it's really hard
Speaker 1: for me to imagine how the boards get sign off
Speaker 1: on buying back lots of stock. I mean, it's one
Speaker 1: thing if it's a small part of your capital. You know,
Speaker 1: you look at Facebook, they buy a little bit or Google,
Speaker 1: they buy a little bit, but for the level of
Speaker 1: investment that some of these legacy media companies have done,
Speaker 1: it really just looks irresponsible. Uh. I pick up the
Speaker 1: New York Times this morning another horrifying tale about Harvey Weinstein,
Speaker 1: this one written by Lapide and the Ango, and we're
Speaker 1: left to wonder what happens to the Weinstein Company. We
Speaker 1: had a conversation a little bit earlier in the week
Speaker 1: when we learned that College Capital was taking a big
Speaker 1: stake in the company. What happens to this, to this,
Speaker 1: to this company? Rich? I mean, it's been around for
Speaker 1: a while now, Dimension is reportedly still doing well and
Speaker 1: making money. Uh. Is it going to be sold off
Speaker 1: in pieces? What do you think the future of it's
Speaker 1: going to be? Honestly, I think that's really difficult to
Speaker 1: tell right now. Look, film libraries or film and television
Speaker 1: libraries have lots of value, But how you extricate the
Speaker 1: assets from all of the issues, and you know, without
Speaker 1: knowing how long the issues go on for, it's just
Speaker 1: not clear. I mean, there's absolutely value in the properties.
Speaker 1: I mean, we've you know, over twenty three years of
Speaker 1: analyzing this space, we've seen lots of film libry worries
Speaker 1: and TV libraries change hands. Uh, they're pretty scarce resources,
Speaker 1: so there's certainly value there. But but when you know, look,
Speaker 1: I assume most companies in the space would have interest
Speaker 1: in a film and TV library. The question is is
Speaker 1: you know, when are you able to buy it without
Speaker 1: hair on it? And how long do you think that's
Speaker 1: going to be? I mean that that is the that
Speaker 1: is the ten question. I mean the company, the company
Speaker 1: is gonna change his name. Bob Weinstein says, that does
Speaker 1: does that make it more palatable? Do you think to
Speaker 1: perspective buyer, Yeah, I don't know. I really don't know.
Speaker 1: All I'd say is that the asset isn't big enough
Speaker 1: where it moves the needle, you know, for any of
Speaker 1: the an agers. And I'm sure everyone would have interest.
Speaker 1: But I don't think you know, this is um you know,
Speaker 1: I think there's far bigger implications in the story than
Speaker 1: who ends up owing the asset rich. What is the
Speaker 1: implication of all the money that's going to be thrown
Speaker 1: at content, everybody piling into make you finding the next
Speaker 1: Game of Thrones, et cetera. What's going to be the
Speaker 1: outcome of the wall of money coming into l A
Speaker 1: and New York. I think it's very simple, Uh, in
Speaker 1: very severe pressure on linear TV ratings. You know, there's
Speaker 1: only so much time that you and your listeners to
Speaker 1: this show have. There's great content. You know, Apple's investing
Speaker 1: five million an episode named Steven Spielberg Show. You know,
Speaker 1: Amazon is taking a much more you know, much different
Speaker 1: approach now, going for kind of higher end comedies and dramas.
Speaker 1: Netflix is going to do eighty movies next year on
Speaker 1: their service that you don't have to go to the
Speaker 1: theaters to see, let alone all the TV series. There's
Speaker 1: so much competition for your time that though, why turn
Speaker 1: on TV and start watching the show tonight that has
Speaker 1: eighteen minutes of commercials and you have to wait to
Speaker 1: work between episodes? That, um, that is in deep trouble.
Speaker 1: And so I think that's the biggest takeaway is that
Speaker 1: TV is in trouble. Well, let's do this, Rich Greenfield
Speaker 1: thrilled to have them with us. We're going to continue
Speaker 1: with Mr Greenfield of bt I G yes, we'll speak
Speaker 1: of Disney, David Gerr and Tom Keene stay with us.
Speaker 1: This is Bloomberg Rich Greenfield with us in media. Rich,
Speaker 1: would you acquire shares of Generous Electric this morning, I
Speaker 1: have no idea way outside of my category of knowledge.
Speaker 1: I focused on media companies, which g hasn't been for
Speaker 1: many years now. But but they tried to do it
Speaker 1: all maybe and there was a conglomertus, which is the
Speaker 1: conglomerate in your world that is most apt to deconglometorize. Well,
Speaker 1: look the I think the company that's done the best
Speaker 1: job and probably be remembered in the history books as
Speaker 1: being the smartest CEO that's ever lived in the media
Speaker 1: space d Time Warner and Jeff Bucas. Not only did
Speaker 1: he de conglomertized, you know, basically split apart a O. L. Warner, Music,
Speaker 1: Time Warner, Cable, Time Life, you know, publishing, but to
Speaker 1: finish it all off, not only did it break it
Speaker 1: into all these little pieces and get smaller and digestible.
Speaker 1: He ended up just as the industry is starting to
Speaker 1: um think literally think Tom. He sells the company and
Speaker 1: gets out for fift cash. And so while the whole
Speaker 1: sector has underperformed, look at the success of Time Warner
Speaker 1: for shareholders. You know, it's pretty amazing. If you look
Speaker 1: at you go back to when Bob Iger got up
Speaker 1: on a conference call in August of he basically signaled
Speaker 1: a big inflection point for the sector where he talked
Speaker 1: about cord cutting starting to affect ESPN. Since that point,
Speaker 1: Disney's lost fifty billion dollars of value. Kind of all
Speaker 1: of the big cable network driven companies collectively have lost
Speaker 1: ninety billion. But Time Warner is actually up over that
Speaker 1: period of time because they sold. And so that's the
Speaker 1: key thing is is selling has been the only way
Speaker 1: you've created value for shareholders in this sector over the
Speaker 1: last couple of years. And David Garrel, We're gonna do
Speaker 1: what we do best, which is steal ideas from our guests.
Speaker 1: I'll do a chart of that. We'll call it the
Speaker 1: rich Greenfield chart. But it is not remarkable to see
Speaker 1: the differential between t w X and d I S.
Speaker 1: It's a little shameless left here on plimpic surveillance. Let
Speaker 1: me ask you about your sense of the regulatory landscape
Speaker 1: and watched in d C as we see more regulators
Speaker 1: being appointed and confirmed. Uh, and you mentioned Time Warner.
Speaker 1: Of course, is the A T and T Time Warner
Speaker 1: deal is still sitting on the back burner. Do we
Speaker 1: have a better sense here of what this regulatory landscape
Speaker 1: looks like and and and what that's going to mean
Speaker 1: for for conglomerates and for for dealmaking. You know, unfortunately,
Speaker 1: I don't think we do. I think we're gonna learn
Speaker 1: a lot over the next few months. You've got a
Speaker 1: couple of very big deals, and I wouldn't say they're
Speaker 1: back burner. I'd say they're actually, you know, finally kind
Speaker 1: of sitting on that front burner. And we're gonna get
Speaker 1: a real sense of whether how the Trump administration thinks
Speaker 1: about deals, you know, in terms of big one in
Speaker 1: my world obviously the Time Warner a T and T deal,
Speaker 1: which appears like it's going to be pushed through. The
Speaker 1: one that's a little less clear, although seems likely is
Speaker 1: Sinclair Tribune uh. And obviously that's a huge consolidation of
Speaker 1: a broadcast industry merger that we should find out about
Speaker 1: over the next several months. And then obviously, in Walt's world,
Speaker 1: Walt ty sink, I'm talking about B T I G
Speaker 1: telecom analyst. You're obviously, you know, have the question marks
Speaker 1: around whether or not we see a Sprint Team Mobile deal.
Speaker 1: But you know, all of that will probably give you
Speaker 1: a better sense of what isn't is impossible from an
Speaker 1: antitrust standpoint in this administration. Just while we're we're in Washington,
Speaker 1: let me ask you a couple of questions about the
Speaker 1: social media companies that you follow. We we're looking ahead
Speaker 1: in November first, when maybe not the heads of those companies,
Speaker 1: we've learned, but high ranking members of those companies are
Speaker 1: gonna come to the Hill to testify. How much does
Speaker 1: the weight of Washington scrutiny weigh on on companies like
Speaker 1: Twitter and Facebook right now? Look, I think everyone is
Speaker 1: you know, every social or every Internet company should be
Speaker 1: concerned about greater regulation. I mean, there's no doubt that
Speaker 1: the lack of regulation has certainly allowed these companies to
Speaker 1: flourish and the Internet to flourish more generally, over the
Speaker 1: course of the last several years. You know, we were
Speaker 1: talking about the loss in market cap of Disney and
Speaker 1: the larger meet A sector over the last couple of years. Well,
Speaker 1: in just the last two years, it's worth pointing out
Speaker 1: that Facebook and Google have added five hundred and fifty
Speaker 1: billion dollars together of market cap, and so you know,
Speaker 1: there is huge, huge growth coming out of the Internet,
Speaker 1: any kind of fear increased regulation, and not just regulation,
Speaker 1: but how do you actually you know, how do you
Speaker 1: actually regulate the sector isn't clear to us, but that
Speaker 1: certainly should be a concern to any investor looking at
Speaker 1: the space. I'm making a chart. Just keep asking. I'm
Speaker 1: still I'm stealing as we go. Let me ask you
Speaker 1: about streaming and where things stand. Is there a company
Speaker 1: that you look to is an example of a company
Speaker 1: that's doing going about streaming the right way? I know
Speaker 1: you've been critical of of Disney's approaches. Is there a
Speaker 1: company that's approaching streaming in a way that's novel, that's
Speaker 1: working that I'm actually not critical of disneys approach. I
Speaker 1: think they waited too long, h you know, I think
Speaker 1: that's the key issue, is that they've waited so long.
Speaker 1: They're not launching their streaming service until the end when
Speaker 1: Netflix will probably have by then a hundred and fifty
Speaker 1: or a hundred and sixty million subscribers. So it's just
Speaker 1: hard to start from a standing part when the piers
Speaker 1: are so big, let alone Amazon, and we could go
Speaker 1: on and on. Um I think probably the company that
Speaker 1: has done the best job in the legacy spasis. Probably CBS.
Speaker 1: You know, they got out, they have CBS All Access,
Speaker 1: They've got a couple of million subscribers CBS. This problem
Speaker 1: is not the product. Their problem is they just don't
Speaker 1: have a wide enough palette of content to throw at it.
Speaker 1: You know, they really need to be part of a
Speaker 1: larger company. It's why we've been arguing for a CBS
Speaker 1: Viacom merger, because it would give them the ability to
Speaker 1: make a much more robust CBS Viacom All Access versus
Speaker 1: still a fairly limited niche or CBS All Access. I
Speaker 1: want them to build a new bundle. One final question,
Speaker 1: I'm gonna put your chat out in a few minutes,
Speaker 1: and I maybe we'll give credit to rich Greenfield within
Speaker 1: this is Amazon. I said this on Telivito earlier today.
Speaker 1: Every conversation now seems to have Amazon, uh in it?
Speaker 1: Are you long Amazon? From a strategic standpoint in the
Speaker 1: Greenfield media world? Look, Amazon is someone everyone in so
Speaker 1: many industries should be scared about. I think, you know,
Speaker 1: the reality is they've spent a tremendous amount of money
Speaker 1: in the media space already, both meet you know, video
Speaker 1: and music. I think they're gonna be a major player
Speaker 1: in music over the next few years. And I think
Speaker 1: from a video standpoint, while their investment of four to
Speaker 1: five billion dollars over the last year probably hasn't translated
Speaker 1: into the critical and consumer kind of viewership success they
Speaker 1: would have liked, I definitely would not count Amazon out.
Speaker 1: I think they're gonna be a major player for video.
Speaker 1: And I think the real thing, you know, if you're
Speaker 1: if you're listening to this right now, the major thing
Speaker 1: your listeners should be thinking about is what are the
Speaker 1: odds at Amazon buys Monday night football rights? Because I
Speaker 1: think that is the that that's what the real prize
Speaker 1: that they're looking at is they're warming up with Thursday
Speaker 1: night football simulcast. But I think Amazon has much much
Speaker 1: bigger ambitions. And if you want to disrupt the media space,
Speaker 1: the way to disrupt all of legacy media and TV
Speaker 1: is to take sports away from legacy media and from TV,
Speaker 1: and I think Amazon is preparing to do that. Brilliant
Speaker 1: Rich Greenfield greatly appreciate the time he is with b
Speaker 1: T I G. Thanks for listening to the Bloomberg Surveillance Podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keene David Gura. Is that David Gura? Before the podcast?
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio