WEBVTT - China's Private Sector Pressuring Xi For Open Economy (Podcast) 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg P and L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg P M L 0:00:20.840 --> 0:00:32.959 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Right now, 0:00:33.000 --> 0:00:36.200 we want to turn our focus to China. Ongoing discussions 0:00:36.240 --> 0:00:40.160 between the US and the world's second biggest economy as 0:00:40.200 --> 0:00:43.040 to how they are going to deal with trade going forward. 0:00:43.120 --> 0:00:46.320 Joining us now, Andy Brown, editorial director for the Bloomberg 0:00:46.400 --> 0:00:49.559 New Economy Forum, Joining us here in the Bloomberg Interactive 0:00:49.560 --> 0:00:52.320 Broker's Studios. Andy, thank you so much for being here. 0:00:52.680 --> 0:00:55.800 You want a really compelling piece about how the US 0:00:56.120 --> 0:01:00.520 may have some allies behind China lines, who are these 0:01:00.520 --> 0:01:04.360 people and why? Yeah? Well, thanks, Lesa's great to be here. Um. 0:01:04.400 --> 0:01:06.839 The the argument is a is A is a pretty simple. 0:01:06.920 --> 0:01:11.240 What China should throw open its economy. It should level 0:01:11.360 --> 0:01:15.920 the playing field. It should dismantle state monopolies. It should 0:01:16.080 --> 0:01:19.800 stop giving preference to state players in terms of subsidies, 0:01:19.880 --> 0:01:24.920 cheap loans, policy advantages, in terms of licensing, standards setting 0:01:24.920 --> 0:01:28.080 and so on. And it should do all this not 0:01:28.319 --> 0:01:31.240 because Donald Trump is asking for it, but because the 0:01:31.280 --> 0:01:35.559 private sector in China is demanding it, and in acceding 0:01:35.640 --> 0:01:40.080 to that internal pressure rather than external pressure, China can 0:01:40.120 --> 0:01:42.959 get its economy out of the funk that it's now in. 0:01:43.040 --> 0:01:45.479 And it's actually in a much much worse funk than 0:01:45.520 --> 0:01:49.000 people imagine. So you don't buy the six GDP growth. 0:01:49.160 --> 0:01:52.000 I don't care what the numbers say. I mean, China's 0:01:52.040 --> 0:01:56.160 economy is slowing, and I think it's stunning the Chinese leadership. 0:01:56.200 --> 0:01:59.080 I think they've been surprised at the extent to which 0:01:59.240 --> 0:02:03.000 Trump's pressure are on trade has exacerbated all of these 0:02:03.040 --> 0:02:07.080 issues structural issues in the Chinese economy. But any some 0:02:07.160 --> 0:02:10.680 of what you're talking about is adopting more Western values 0:02:10.720 --> 0:02:14.239 when it comes to markets in China. And how much 0:02:14.240 --> 0:02:17.680 of that is actually on the table with these trade negotiations, 0:02:17.680 --> 0:02:19.400 I mean, how much is this ultimately going to come 0:02:19.400 --> 0:02:22.040 down to bushels of soybeans? Well, you see, I don't 0:02:22.120 --> 0:02:25.320 really see it as a clash of values between China 0:02:25.400 --> 0:02:28.080 and the United States. You have to remember that all 0:02:28.120 --> 0:02:30.400 of the things that Trump as many of the things 0:02:30.440 --> 0:02:32.840 that Trump is pushing for and the private sector in 0:02:32.960 --> 0:02:37.000 China were promised by C. Jim Ping himself. Don't forget 0:02:37.040 --> 0:02:39.360 he came in five years ago, right he came. He 0:02:39.440 --> 0:02:42.280 had a long career as a bureaucrat in coastal provinces, 0:02:42.320 --> 0:02:45.560 which is really where the private sector in China is 0:02:45.560 --> 0:02:49.480 is concentrated. He comes in, he calls a big has buddies, 0:02:50.000 --> 0:02:52.400 Jack mar you know who runs Ali Baba. He's on 0:02:52.440 --> 0:02:55.000 first name terms with Hank Polson. You know, the business 0:02:55.000 --> 0:02:58.120 community know him. He throws this big Communist party meeting 0:02:58.360 --> 0:03:02.120 Third Planet, and he says we're moving towards markets, and 0:03:02.120 --> 0:03:05.440 he lays it all out, sixty point agenda for opening 0:03:05.520 --> 0:03:09.359 up the economy. And basically this whole plan has been 0:03:09.440 --> 0:03:12.480 gathering dust ever since. Not just that the economy has 0:03:12.520 --> 0:03:15.000 flipped backwards. All of the trade and trends that were 0:03:15.040 --> 0:03:18.760 pointing in it towards markets have gone in the opposite direction. 0:03:18.800 --> 0:03:21.000 He's doubled down on the state. That's right, That's what 0:03:21.040 --> 0:03:22.320 it might The point I was gonna make you. You 0:03:22.600 --> 0:03:25.520 lay at a very intelligent argument in your piece about 0:03:25.560 --> 0:03:28.600 what the Chinese economy should do, what the states should do. 0:03:29.000 --> 0:03:31.560 It appears just from my perspective that they're actually, as 0:03:31.560 --> 0:03:34.800 you said, going the opposite way over the last several years. 0:03:34.840 --> 0:03:38.920 So does the private sector have any influence to really 0:03:38.960 --> 0:03:42.320 push for these reforms? Well, to the extent that these 0:03:42.560 --> 0:03:48.400 status reforms, which are ideologically politically driven, not driven by economics, 0:03:48.400 --> 0:03:51.160 are killing the economy. I mean, the facts are very 0:03:51.280 --> 0:03:54.839 very clear. The state enterprise is not just bad, it's 0:03:54.880 --> 0:03:59.040 shockingly bad. I mean, private businesses on average have a 0:03:59.320 --> 0:04:04.720 three time is the return on assets as their state competitors, right, 0:04:04.760 --> 0:04:07.680 and yet they suck up fift of all the credit 0:04:07.720 --> 0:04:10.000 in the economy. I don't understand what the problem is then, 0:04:10.160 --> 0:04:12.760 I mean, if there's a pressure and if understands the 0:04:13.200 --> 0:04:15.640 need for some of these reforms, and this could actually 0:04:15.640 --> 0:04:18.000 play into what the U S is arguing for why 0:04:18.040 --> 0:04:22.360 hasn't there been an agreement? Well, well, you know, I 0:04:23.000 --> 0:04:28.479 mean the key here is id is ideology, and that 0:04:28.560 --> 0:04:32.560 she Jimping simply can't bring himself to dismantle a system 0:04:32.600 --> 0:04:36.000 which he believes is going to protect the Communist Party 0:04:36.000 --> 0:04:38.280 and keep it in power. Don't forget the Chinese are 0:04:38.320 --> 0:04:41.080 constantly looking for lessons to the collapse of the Soviet 0:04:41.200 --> 0:04:44.480 Union and then what happened after the Soviet Union collapsed. 0:04:45.320 --> 0:04:48.479 Isn't the same kind of communism as Russia. It's a 0:04:48.560 --> 0:04:53.000 very different one now it's not. But they are very determined. 0:04:53.080 --> 0:04:55.600 The Communist Party of China will not go the same 0:04:55.600 --> 0:04:59.000 way as the Communist Party and Russia, which essentially gave up. 0:04:59.040 --> 0:05:02.080 And they see stay it own enterprises being a bullwark 0:05:02.880 --> 0:05:06.880 uh to communist party rule. So is there any scenario 0:05:07.160 --> 0:05:09.159 let's go to let's go to the trade negotiations. Do 0:05:09.160 --> 0:05:12.400 you have how optimistic, if at all, are you about 0:05:12.400 --> 0:05:15.479 the U. S And China reaching any kind of meaningful 0:05:15.520 --> 0:05:20.280 trade agreement. Um, let's just go there and start there. Look, 0:05:21.000 --> 0:05:23.320 I think it's really it's gonna be relatively simple to 0:05:23.360 --> 0:05:26.840 get an agreement which does something about the trade deficits. 0:05:26.880 --> 0:05:29.600 I mean, China can instructed state companies to buy more 0:05:29.680 --> 0:05:33.600 soy beings by US natural gas. Um. You know, we 0:05:33.640 --> 0:05:37.640 saw this big import expo in Shanghai and November see 0:05:37.680 --> 0:05:41.400 jumping instructs. You know, state on ENTERBRASO out. But by 0:05:41.480 --> 0:05:43.280 bye for this type of But this is kind of 0:05:43.400 --> 0:05:46.240 nibbling around, this playing around at the edges there talking 0:05:46.240 --> 0:05:49.520 about structural Now, the incentive, the real incentive for him 0:05:49.560 --> 0:05:52.160 to give ground is this slowing economy. He's got to 0:05:52.200 --> 0:05:56.760 pick the economy up and and so just going forward 0:05:56.880 --> 0:06:00.560 in thirty seconds, how bad will this be the landing 0:06:00.560 --> 0:06:05.279 that people have feared for China. Well, we were already 0:06:05.320 --> 0:06:09.160 looking at something that looks a bit like a hard landing. 0:06:09.240 --> 0:06:14.359 Growth is growth has come off very badly. Um. The 0:06:13.680 --> 0:06:17.600 the the real key is going to be whether she 0:06:17.880 --> 0:06:22.520 Jimping can use the pressure from the United States uh 0:06:22.640 --> 0:06:25.680 in or rather use the pressure that's coming from his 0:06:25.800 --> 0:06:29.560 private sector as an excuse as cover to implement the 0:06:29.600 --> 0:06:32.279 type of reforms that are needed to get the economy 0:06:32.320 --> 0:06:34.680 back on track. Andy Brown, thank you so much for 0:06:34.720 --> 0:06:37.360 being with us and your insights. A great article, uh 0:06:37.400 --> 0:06:40.760 and create comments. Andy Brown is editorial director for The 0:06:40.760 --> 0:06:44.839 Bloom New Economy. For him, he was formerly China editor 0:06:44.880 --> 0:07:03.680 senior corresponding a columnist for The Wall Street Journal. The 0:07:03.720 --> 0:07:08.120 swing has been notable This morning before markets open, City 0:07:08.120 --> 0:07:11.800 Group shares were down two percent immediately after reporting earnings. 0:07:11.840 --> 0:07:15.480 Now shares up by more than three percent as an 0:07:15.480 --> 0:07:19.400 earnings call seems to bolster optimism among investors joining us 0:07:19.400 --> 0:07:21.800 now in our Bloomberg Interactive Broker Studios to discuss is 0:07:21.880 --> 0:07:25.960 Yellmen Iran. He's senior finance writer for Bloomberg News. So, y'ellmen, 0:07:26.040 --> 0:07:28.840 what happened here on the earnings call? Um, Well, you know, 0:07:29.080 --> 0:07:32.480 the earnings numbers aren't aren't bad either. There's there there's 0:07:32.520 --> 0:07:35.400 good stuff to to see in cities earnings. Um. You know, 0:07:35.840 --> 0:07:39.560 fixed income numbers are bad, and everybody initially focused on that, 0:07:39.680 --> 0:07:42.640 but you look at other stuff. Actually it's okay. Um, 0:07:42.800 --> 0:07:46.000 loans are up, deposits are up, NIM, the net interest 0:07:46.040 --> 0:07:48.960 margin is up. So on the banking side, the bank 0:07:49.120 --> 0:07:53.480 is still really doing fine. Markets, as we know, have 0:07:53.600 --> 0:07:55.640 been all over the place and and they have they 0:07:55.680 --> 0:07:58.880 have heard um and so that has hurt the investment 0:07:58.920 --> 0:08:01.440 banking side, the trading side. But the other part of 0:08:01.480 --> 0:08:03.400 the banking is doing well. So the numbers are good. 0:08:03.600 --> 0:08:05.840 And and on the calls, there was a media call 0:08:05.920 --> 0:08:08.840 with the CFO, the outgoing CFO GARSPAC and then the 0:08:08.880 --> 0:08:12.240 annals call is continuing with with CEO started to make 0:08:12.280 --> 0:08:16.240 comments and the CFO is talking now and and there's there. 0:08:16.240 --> 0:08:19.880 They kept saying, both of them kept saying the economy 0:08:19.920 --> 0:08:23.480 in the US and worldwide is not doing bad. The 0:08:23.520 --> 0:08:26.760 real economy has not been impacted. Everything is still on 0:08:26.880 --> 0:08:30.320 four cylinders. It's all really chugging along, and we're not 0:08:30.400 --> 0:08:33.240 seeing client demand go down. So I think that all 0:08:33.520 --> 0:08:37.360 those things maybe you know, people are more optimistic that 0:08:37.520 --> 0:08:40.000 banks are are continuing to do the business for a 0:08:40.000 --> 0:08:42.360 few more quarters. I mean there was one point where 0:08:42.360 --> 0:08:44.960 where the outgoing CFO said, well, you know, if we 0:08:45.040 --> 0:08:47.760 start seeing impact of this, only real economy might be 0:08:47.800 --> 0:08:50.600 towards the end of two thousand nineteen. Okay, so that's 0:08:50.600 --> 0:08:54.080 a few quarters away. You know, there's still time until then. 0:08:54.120 --> 0:08:56.560 Maybe we should be happy. And it's probably what's going on. Well, 0:08:56.600 --> 0:08:59.760 you know, we can't really push that fixed income performance 0:08:59.800 --> 0:09:01.680 under the rug as much as I'm sure management would 0:09:01.679 --> 0:09:03.160 like to. I mean, it's a it's a huge part 0:09:03.160 --> 0:09:05.520 of their capital markets business, and it was the you know, 0:09:05.559 --> 0:09:09.280 the worst quarter they've had in fixed for several years. 0:09:09.760 --> 0:09:13.480 What did they claim as the drivers of that underperformance 0:09:13.520 --> 0:09:15.640 and what is their outlook for twenty nineteen? Like I 0:09:15.800 --> 0:09:18.600 you know, having been on a trading desk, volatilities, my friend, 0:09:18.840 --> 0:09:21.440 that's how I can generate alpha. That clearly wasn't the 0:09:21.480 --> 0:09:24.560 case for city here in the fourth quarter. Well, you know, 0:09:24.640 --> 0:09:30.199 the the commentary on whether volatility is good or bad 0:09:30.559 --> 0:09:33.559 changes according to the numbers they were quarter by every 0:09:33.559 --> 0:09:38.760 bank official. Um so when when volatility helps the bottom line, 0:09:38.800 --> 0:09:41.360 everybody loves it and it's a friend, but but it 0:09:41.440 --> 0:09:44.800 doesn't always and and actually in the same quarter, Uh, 0:09:45.000 --> 0:09:47.920 some banks are aided by it and some aren't. Which 0:09:47.960 --> 0:09:51.440 is part of the game of fixed income market making. 0:09:51.559 --> 0:09:54.200 When you're when you're really buying and selling and the 0:09:54.240 --> 0:09:56.640 spread is where you're making the money, you know you 0:09:56.679 --> 0:09:59.840 can you can get caught in the wrong positions so easily. 0:10:00.000 --> 0:10:02.559 And markets are going down for three days and then 0:10:02.559 --> 0:10:04.400 going up for three days, so you think it's going 0:10:04.440 --> 0:10:06.120 to go down for three more days and it and 0:10:06.200 --> 0:10:09.080 it doesn't. So it's it's tough for these banks. And 0:10:09.120 --> 0:10:12.400 even even if clients and and the typical commentary they 0:10:12.400 --> 0:10:15.360 give is while clients stayed on the sidelines because of 0:10:15.360 --> 0:10:17.800 a lottilty, I don't know if that's really the case. 0:10:17.840 --> 0:10:21.400 It's just again market making in fixed income you and 0:10:21.480 --> 0:10:24.520 you can lose money as well as make bray and 0:10:24.559 --> 0:10:27.400 you just add up those days where you lost sources gain. 0:10:27.600 --> 0:10:29.720 One thing that I'm struck by the Okay, so putting 0:10:29.760 --> 0:10:32.920 market making aside, I'm struck in the first quarter that 0:10:33.000 --> 0:10:36.839 trading volumes are down in credit markets, particularly the risk 0:10:36.920 --> 0:10:40.839 your credit markets, and debt issuance is also way down, 0:10:40.960 --> 0:10:43.600 especially on the risk your tiers, which is actually where 0:10:43.640 --> 0:10:46.120 these banks make a lot of the money, right, I mean, 0:10:46.320 --> 0:10:49.440 risk your deals tend to offer bigger premiums. I'm just 0:10:49.480 --> 0:10:53.600 wondering what gives them confidence that things are turning up, since, 0:10:53.840 --> 0:10:56.840 I mean, from all other empirical data, things are slower 0:10:56.880 --> 0:10:59.400 than the first quarter. The issues is going down, and 0:10:59.559 --> 0:11:02.439 that actually comes to hur r trading as well as 0:11:02.440 --> 0:11:05.240 you said, so so it's normal. I mean, trading can 0:11:05.320 --> 0:11:08.680 be can be better while issuance starts slowing down, but 0:11:08.760 --> 0:11:11.280 eventually the issuance will make a difference. And they do 0:11:11.360 --> 0:11:13.000 make a lot of money on the issuance as well, 0:11:13.040 --> 0:11:16.600 and the issuance um debt and equity are down, so 0:11:16.600 --> 0:11:21.439 so that's being reflected and um so so they kept 0:11:21.760 --> 0:11:24.600 I mean they they're talking about the financial economy not 0:11:24.720 --> 0:11:28.000 doing as well. That's what markets are reflecting, but the 0:11:28.040 --> 0:11:32.920 real economy still going well. Um. But those cannot be 0:11:33.080 --> 0:11:36.320 in in diverging paths. For too long, right, they catch up. 0:11:36.320 --> 0:11:38.840 I mean, the real economy does get impacted by what 0:11:39.080 --> 0:11:41.560 the financial economy is doing. Um and and it's a 0:11:41.600 --> 0:11:44.600 sign too. I mean, as as companies are selling less dead, 0:11:44.960 --> 0:11:47.000 that means they're they're not going to invest in new things, 0:11:47.040 --> 0:11:49.240 and they're not. The economy is not going in a 0:11:49.280 --> 0:11:52.280 great direction. So it's maybe a matter of time. But 0:11:52.360 --> 0:11:55.200 this is you know, markets can be very short term oriented, 0:11:55.240 --> 0:11:57.040 so you know, they could be looking for the next 0:11:57.240 --> 0:11:59.440 couple of weeks instead of a couple of months. Right, 0:11:59.559 --> 0:12:02.160 just real, quickly fifteen seconds. When I think City Bank, 0:12:02.200 --> 0:12:04.880 I think a huge consumer franchise. Did they have any 0:12:04.880 --> 0:12:07.840 commentary about how the consumers doing both here in US 0:12:07.880 --> 0:12:11.160 and outside? They were pretty positive. They said they have 0:12:11.320 --> 0:12:14.040 not felt the consumers pulling back at all in the 0:12:14.120 --> 0:12:17.920 US or other places. Interesting. That is interesting. We'll see 0:12:17.920 --> 0:12:20.240 whether the rest of the banks say this, yeah, exactly, 0:12:20.280 --> 0:12:24.120 and honestly, in very early trading, the rest of the 0:12:24.120 --> 0:12:27.320 banks were declining in sympathy with City Group. It'll be 0:12:27.360 --> 0:12:30.760 interesting to see whether city groups sets odd momentum after 0:12:30.880 --> 0:12:34.559 disappointing earnings. Go figure, and it's rare that City Bank 0:12:34.679 --> 0:12:36.839 leads off the bank earnings week. Usually that's left for 0:12:36.920 --> 0:12:40.520 JP Morgan. That's right, Well, let's see how they do. Yalman, owner, 0:12:40.559 --> 0:12:42.839 and so far they're doing okay. Y'alman, owner and senior 0:12:42.840 --> 0:12:45.320 finance writer for Bloomberg. Thank you so much for being 0:12:45.360 --> 0:13:06.800 with us. Well, the world of sports has transformed from 0:13:06.880 --> 0:13:10.120 hitting a ball to directing a ball on a computer screen. 0:13:10.200 --> 0:13:12.280 Joining us now, Chris Russo, managing director and ahead of 0:13:12.320 --> 0:13:15.080 sports practice at Hula. He and Loki joining us here 0:13:15.120 --> 0:13:17.920 in our Bloomberg directive broker's studios. Chris, let's get a 0:13:18.000 --> 0:13:21.839 lay of the land for as you prepare for mergers 0:13:21.960 --> 0:13:24.319 and as you try to get a sense of where 0:13:24.360 --> 0:13:28.720 the eyeballs are going. Has ears e sports peaked or 0:13:28.800 --> 0:13:31.280 are we just getting started with the adoption of this trend. 0:13:31.800 --> 0:13:33.920 I think we're just getting started with the sports, in 0:13:34.040 --> 0:13:37.559 part because the amount of people playing e sports games, 0:13:37.600 --> 0:13:42.280 attending events, watching and streaming on Twitch has just continued 0:13:42.320 --> 0:13:45.040 to grow. And so over the past eighteen to twenty 0:13:45.040 --> 0:13:47.720 four months, you've seen these new e sports teams created 0:13:48.040 --> 0:13:50.880 by the big publishers like Riot and Activision, and those 0:13:50.880 --> 0:13:53.760 teams have been bought by professional sports team owners and 0:13:53.800 --> 0:13:56.560 some of those valuations are now a hundred and fifty million, 0:13:56.600 --> 0:13:59.120 two hundred million dollars for these teams, and I see 0:13:59.160 --> 0:14:02.040 them continuing to grow because of the audience, passion and 0:14:02.040 --> 0:14:05.160 the great demographics we have any sports. I just can't 0:14:05.280 --> 0:14:09.600 imagine a sport watching other people play games. But I've 0:14:09.600 --> 0:14:11.600 been told time and time again, and I've seen the numbers, 0:14:11.600 --> 0:14:14.040 and I've seen Jeff Wilson, as you mentioned, to make 0:14:14.080 --> 0:14:17.480 an investment. But let's go back to maybe you know, 0:14:17.520 --> 0:14:19.800 the next big m and a trade involving sports might 0:14:19.840 --> 0:14:22.840 just be the regional sports networks that the Walt Disney 0:14:22.840 --> 0:14:28.080 Company acquired from twenty one century Fox. Big numbers, big markets, 0:14:28.560 --> 0:14:31.640 big companies involved. What do you expect that to happen 0:14:31.640 --> 0:14:32.840 and what do you how do you expect that to 0:14:32.840 --> 0:14:34.600 play out? Well, I think there's kind of two ways 0:14:34.640 --> 0:14:37.600 of looking at that opportunity, and these are twenty two 0:14:37.640 --> 0:14:41.160 regional sports networks with great teams that they broadcast and 0:14:41.480 --> 0:14:44.680 great rights. The sort of negative view would be Cable 0:14:44.760 --> 0:14:47.360 going forward is going to be a diminishing place because 0:14:47.360 --> 0:14:51.520 of cord cutting and challenges on subscribers. The positive outlook 0:14:51.520 --> 0:14:54.280 would be there's gonna be streaming opportunities. There's going to 0:14:54.320 --> 0:14:58.240 be gambling potentially incorporated into these broadcasts. So I'm actually 0:14:58.240 --> 0:15:01.360 more bullish on the rs AN opportunity than some other 0:15:01.400 --> 0:15:04.000 folks are. Where the bidding ends up may depend upon 0:15:04.000 --> 0:15:06.160 how many finalists are there and how they drive the price, 0:15:06.400 --> 0:15:09.440 but actually this is a quite uh interesting asset and 0:15:09.480 --> 0:15:11.800 I think ultimately will be be a good one. You know, 0:15:11.920 --> 0:15:13.760 let's see about a little bit, because what you're just 0:15:13.800 --> 0:15:16.880 talking about, and Paul's really good question, and the concept 0:15:16.880 --> 0:15:18.800 of the sports kind of comes together with this idea 0:15:18.880 --> 0:15:21.760 that more people are cutting the cord and that big 0:15:21.760 --> 0:15:25.160 sports companies aren't going with them. They're staying in cable 0:15:25.160 --> 0:15:27.920 and as a result, they're losing some viewers. And perhaps 0:15:27.920 --> 0:15:31.000 this is allowing the sports to take off more because 0:15:31.080 --> 0:15:34.760 that's what's available to people can use. To foresee a 0:15:34.800 --> 0:15:38.760 time in the near future where big teams move to 0:15:39.080 --> 0:15:42.880 online streaming services as well. I do believe that teams 0:15:42.920 --> 0:15:46.600 and leagues will rely more on streaming rights over time 0:15:46.640 --> 0:15:48.400 than they are today. I think you see some of 0:15:48.400 --> 0:15:51.720 that happening now with Amazon having a Thursday Night package 0:15:51.760 --> 0:15:54.960 from the NFL. Other leagues have licensed parts of their 0:15:55.400 --> 0:15:59.600 their packages to the major streaming companies and video companies. 0:15:59.720 --> 0:16:01.920 But I think until the big rights are available, which 0:16:01.920 --> 0:16:04.280 will happen in the next three to five years, you're 0:16:04.280 --> 0:16:06.800 still seeing things around the edges. But with the younger 0:16:06.880 --> 0:16:10.320 viewers spending more time online with mobile devices, I think 0:16:10.320 --> 0:16:12.040 the league's will have to go there and have to 0:16:12.040 --> 0:16:14.600 be robust in those offerings. Let's you know. I know 0:16:14.920 --> 0:16:17.960 Joe Uh Chris worked at the NFL prior to Landlogate 0:16:18.040 --> 0:16:22.360 and nobody uh slices and dices broadcast rites better than 0:16:22.400 --> 0:16:25.000 the NFL. So I suspect, as you mentioned in one 0:16:25.080 --> 0:16:28.280 or whenever that is um that the NFL that I'm 0:16:28.320 --> 0:16:30.280 sure the technology companies will be at the table. Is 0:16:30.320 --> 0:16:32.320 that your thought, it is my thought, And I think 0:16:32.320 --> 0:16:34.280 at the end of the day, people that have our 0:16:34.280 --> 0:16:37.040 companies that have great content will still do well. They 0:16:37.080 --> 0:16:39.640 will just find new ways to exploit the content through 0:16:39.880 --> 0:16:42.880 new platforms doing digital media, and I think it will 0:16:42.920 --> 0:16:45.520 be an opportunity to reach new audiences as this next 0:16:45.560 --> 0:16:49.520 generation of fans evolves. So what do you expect in 0:16:49.640 --> 0:16:53.480 terms of the overall M and A volumes in sports 0:16:53.520 --> 0:16:56.120 media this year? Well, I think that we there will 0:16:56.120 --> 0:16:57.600 be a lot of m and A this year in 0:16:57.640 --> 0:17:01.560 the sports space, in part because warts gambling has emerged 0:17:01.600 --> 0:17:04.400 and that creates a disruption, and that creates new kinds 0:17:04.440 --> 0:17:06.800 of opportunity. We already saw a lot of them and 0:17:06.840 --> 0:17:09.560 a last year around the sports gambling space, fan Duel 0:17:09.840 --> 0:17:12.760 did a transaction, sport Radar, a sport data company, did 0:17:12.800 --> 0:17:16.600 a transaction Genus Sports and other sports data company. You 0:17:16.640 --> 0:17:19.320 see a lot of companies getting prepared for the advent 0:17:19.400 --> 0:17:22.879 of gambling, and as a result, you'll see combinations, new investments, 0:17:22.920 --> 0:17:26.360 and new configurations of companies. So we've seen the league's 0:17:26.880 --> 0:17:29.680 most notably Major League Baseball, but all the professional leagues 0:17:29.760 --> 0:17:32.520 really really kept the gambling at a a you know, 0:17:32.680 --> 0:17:35.600 more than an arms length for generations. Now they seem 0:17:35.640 --> 0:17:37.560 to be embracing it. So can you give us a 0:17:37.600 --> 0:17:41.359 sense of where gambling is in this country? Now? I 0:17:41.359 --> 0:17:43.840 know I live in New Jersey and it's legal linew 0:17:43.920 --> 0:17:45.720 Jersey sports books. Where are we and how do you 0:17:45.720 --> 0:17:48.840 think that's gonna play out? Right now, sports gambling is 0:17:48.840 --> 0:17:52.160 only legal in six or seven states, but many experts 0:17:52.200 --> 0:17:55.520 believe that will increase to twenty to twenty five states 0:17:55.560 --> 0:17:58.040 over the next couple of years. I think initially, as 0:17:58.119 --> 0:18:01.119 you mentioned, the sports leagues were very hesitant and reluctant 0:18:01.320 --> 0:18:03.760 about sports gambling. But now that it is going to 0:18:03.840 --> 0:18:06.560 be legal, they are trying to figure out how they 0:18:06.560 --> 0:18:09.119 can make money but be keep the integrity of the 0:18:09.119 --> 0:18:11.560 games and make sure that gambling is done in a 0:18:11.600 --> 0:18:15.399 responsible way so they preserve the authenticity and integrity of 0:18:15.400 --> 0:18:18.399 these sports. Do either of you gamble to sports gambling? 0:18:19.040 --> 0:18:22.760 Do you actually have occasion? When I'm in Las Vegas? Occasion? Yeah? 0:18:22.880 --> 0:18:24.719 Would you? I mean, but my question is, you know, 0:18:24.840 --> 0:18:28.320 how much would this with the appetite widen or is 0:18:28.359 --> 0:18:31.600 the field already there? Well? You know, in my opinion, 0:18:31.640 --> 0:18:33.120 there are there are a lot of reports out there 0:18:33.119 --> 0:18:36.760 that say the offshore the illegal amount of gambling is 0:18:36.800 --> 0:18:38.920 about a hundred and fifty billion dollars. No one knows 0:18:38.960 --> 0:18:41.880 if that's really true. I think what could happen over 0:18:41.960 --> 0:18:45.040 time is that number gets even bigger because people who 0:18:45.040 --> 0:18:47.040 didn't want to bet on an offshore book or go 0:18:47.080 --> 0:18:48.760 to some website, they didn't know if their money was 0:18:48.760 --> 0:18:51.360 going to come back, now feel it's safe, it's comfortable. 0:18:51.400 --> 0:18:53.920 You've got brands like Fando on DraftKings which people now 0:18:54.000 --> 0:18:56.720 trust and and understand, I think you have potential to 0:18:56.760 --> 0:18:59.600 have this thing get get even bigger than anticipated. And 0:18:59.640 --> 0:19:02.159 what did the um? The ratings I guess for the 0:19:02.240 --> 0:19:04.640 NFL were up a little bit this year so far, 0:19:04.680 --> 0:19:07.000 but they've been a you know, kind of a downward trend. 0:19:07.800 --> 0:19:11.640 How concerned is the NFL in particular about their ratings 0:19:11.760 --> 0:19:14.240 or do they feel like there there are incillary businesses, 0:19:14.240 --> 0:19:16.879 whether it's red zone and other things that might be 0:19:16.960 --> 0:19:20.040 making up for it. Yeah, you know, in my view, um, 0:19:20.160 --> 0:19:23.359 the NFL is doing just fine. Uh. Again, they had 0:19:23.359 --> 0:19:25.719 a good year in terms of ratings, but as you 0:19:25.760 --> 0:19:29.560 mentioned earlier, they're continuing to experiment and look at new platforms, 0:19:29.800 --> 0:19:32.640 new ways to distribute content, and I think they'll continue 0:19:32.640 --> 0:19:35.080 to be very shrewd about how they slice and dice 0:19:35.200 --> 0:19:37.920 rights to let them maximize the opportunity. I think the key, though, 0:19:38.160 --> 0:19:40.359 for the NFL and all of these sort of major 0:19:40.440 --> 0:19:42.800 leagues is to make sure they're serving the next generation 0:19:42.840 --> 0:19:45.000 of fans with the kind of content and on the 0:19:45.040 --> 0:19:47.600 platforms that that those fans want to want to consume it. 0:19:47.720 --> 0:19:49.520 All Right, Chris, I'm gonna put you on the spot 0:19:50.119 --> 0:19:54.040 fifteen seconds. What's the one surprise deal that you think 0:19:54.080 --> 0:19:57.000 will get done in this space this year. Oh boy, 0:19:57.080 --> 0:20:00.000 the one surprise deal. I don't have necessarily one surprise 0:20:00.000 --> 0:20:01.520 a deal. I do think you're going to see a 0:20:01.560 --> 0:20:04.520 lot more sports team activity this year. The last three 0:20:04.560 --> 0:20:07.000 or four years that activity has been pretty slow, only 0:20:07.160 --> 0:20:09.359 two WISH deals a year. I think this year you 0:20:09.359 --> 0:20:11.679 could see four or five deals, in part because I 0:20:11.680 --> 0:20:13.439 think some owners want to take some chips off the 0:20:13.480 --> 0:20:15.760 table with the markets being as strong as they are. 0:20:15.880 --> 0:20:19.320 All right, so so Hedge fun billionaires, get your purses 0:20:19.320 --> 0:20:22.680 ready because you can go buy a sports team. Thank 0:20:22.720 --> 0:20:24.639 you so much for being with us. Chris Russo at 0:20:24.840 --> 0:20:42.320 Hula and Loki's Sports practice. Here with us, we are 0:20:42.440 --> 0:20:45.360 in New York City in our cozy when we're gonna 0:20:45.400 --> 0:20:48.680 active Broker's studios. David Coudla is in a brisk in 0:20:48.760 --> 0:20:52.640 Detroit where it's twenty six degrees and sunny at the 0:20:52.720 --> 0:20:55.720 auto show. And this is the last North American International 0:20:55.720 --> 0:20:58.720 Auto Show that's going to be held in January. They're 0:20:58.760 --> 0:21:00.880 kind of upping their game move thing to a warmer 0:21:01.119 --> 0:21:04.320 month in June. David, thank you so much for being 0:21:04.320 --> 0:21:06.800 with us. David Coudla is founder and chief executive officer 0:21:06.840 --> 0:21:10.320 of Mainstay Capital Management. Before we get into what is 0:21:10.359 --> 0:21:13.359 actually being announced and discussed at the auto show, can 0:21:13.400 --> 0:21:16.360 you just set the tone for us, how how pessimistic 0:21:16.480 --> 0:21:20.879 are different automakers given the overall sort of bleak sales 0:21:20.920 --> 0:21:24.480 picture for for the car industry. Well, there had been 0:21:25.280 --> 0:21:30.280 a lot of pessimism coming into with the slowing global 0:21:30.320 --> 0:21:34.880 economy and fears by some of a recession and a 0:21:34.920 --> 0:21:38.239 possible recession in the US in twenty nineteen, or at 0:21:38.280 --> 0:21:42.960 least a slowing economy in the auto industry is as 0:21:43.000 --> 0:21:45.639 cyclical as they come, and that's sent a lot of 0:21:45.640 --> 0:21:49.240 fears for slowing sales in twenty nineteen, which which we 0:21:49.280 --> 0:21:52.120 do expect UH in the U s and globally. We've 0:21:52.119 --> 0:21:55.560 already seen that slowing sales in China. China had their 0:21:56.240 --> 0:22:00.320 UH first sales decline in over two decades, falling six 0:22:00.359 --> 0:22:03.600 percent last year. We expected to slow this year. That's 0:22:03.600 --> 0:22:06.440