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Speaker 1: member s I p C. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best in economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and
Speaker 1: of course, on the Bloomberg Bomb Formats. Is the vice
Speaker 1: chairman of Kissinger Associate's former Under Secretary of State for
Speaker 1: Economic Growth, Energy, and the Environment. He joins us now
Speaker 1: in Bloomberg eleven three studios. But I'm good to see you,
Speaker 1: good to be here as always. Let's start with this
Speaker 1: meeting in Florida. Uh, we've seen the president try to
Speaker 1: forge priest relationships with world leaders a few times now
Speaker 1: since he took office. What's gonna be particularly different about
Speaker 1: this encounter in Florida. Well, he's going to have to
Speaker 1: take the measure of President Shijin Ping, who's a very formidable,
Speaker 1: very skillful, very authoritative guy. He knows what he's doing.
Speaker 1: He's been in office for quite some time, he has
Speaker 1: a lot of power. He knows that he wants to
Speaker 1: get out of this meeting, and I think Donald Trump
Speaker 1: is going to have to do a lot of listening.
Speaker 1: He doesn't know much about China, and I suspect Hijin
Speaker 1: Ping will make a number of points about Chinese policy
Speaker 1: that may be new to Trump's ears. So I think
Speaker 1: it would be useful. I know Chijin Ping reasonably well.
Speaker 1: I've met him a number of times. He's a very
Speaker 1: impressive person and a very a very strong figure, and
Speaker 1: he will be articulate in explaining China's views. Where China
Speaker 1: can work with the US and where China feel it
Speaker 1: can't work with the US. There are various areas. I
Speaker 1: think they do want to work on North Korea. They
Speaker 1: don't have as much influence as we perhaps think they do,
Speaker 1: but they do have some. They certainly want to work
Speaker 1: in dealing with terrorism. They want to work on climate
Speaker 1: to the extent Trump wants to work on climate, and
Speaker 1: they're now developing this very very ambitious, very I think
Speaker 1: positive generally notion of increasing infrastructure in the region, and
Speaker 1: a lot of American companies would like to participate in this.
Speaker 1: The question is is Trump going to be willing to
Speaker 1: allow that kind of participation to occur. So President Trump
Speaker 1: doesn't know China well. On whom is he relying to
Speaker 1: to to inform him on how the country works today?
Speaker 1: He has some very capable people on the National Security
Speaker 1: Council staff that will do this. Uh he He also
Speaker 1: seems to be relying on his son in law, Jared Kushner.
Speaker 1: I don't know how it is in a rock he'll
Speaker 1: be dealing with China. But there are good people on
Speaker 1: the National Secure Council staff, but the State Department is
Speaker 1: not at full complement. A lot of the China experts
Speaker 1: are there in the State Department among Foreign service officers,
Speaker 1: but there is not an Assistant Secretary for the Far East,
Speaker 1: non assistant secretary for many other functions as well. But
Speaker 1: I suspect he'll get some good advice, but he has
Speaker 1: to listen to the advice. He has to understand the
Speaker 1: history of U. S. China relations, and he has to
Speaker 1: measure his words very carefully because he has to be understood.
Speaker 1: And if he appears not to really understand what's going
Speaker 1: on in China, not to have any sense of Chinese history.
Speaker 1: To make statements like he has in the past, I
Speaker 1: think it will cause a lot of confusion. This is
Speaker 1: a very important meeting because almost nothing constructive will be
Speaker 1: dying internationally in the world over the next four to
Speaker 1: eight to twelve years without a substantial measure of US
Speaker 1: Chinese cooperation. He has to figure out a framework with
Speaker 1: President Shooting Ping four. That kind of cooperation China is
Speaker 1: very important. Americans should understand it. You can't push them
Speaker 1: around there there they have strong nationalistic pressures. Internally in China,
Speaker 1: they won't be pushed around. The way you deal with
Speaker 1: them is to work with them in a constructive fashion.
Speaker 1: Trump's negotiating tactics may work in the real estate area,
Speaker 1: they're probably not going to work, almost certainly not going
Speaker 1: to work in dealing with China if he takes that
Speaker 1: sort of pugnacious approach that he sometimes does. Performance. You've
Speaker 1: been partied to meetings like this before, you say, met
Speaker 1: that the Chinese president several times as well. How do
Speaker 1: they unfold what's what's going to happen here? How much
Speaker 1: is the formality going to eclipse the opportunity here for
Speaker 1: these two leaders to get to know each other on
Speaker 1: any sort of personal level. Well, I suspect this will
Speaker 1: be somewhat less formal than the meetings, given the sets
Speaker 1: they were in Washington, given the setting, But they have
Speaker 1: to get to know one another, and the best way
Speaker 1: of doing that is for President Trump to listen to
Speaker 1: President Hinjin Ping and hear what he has to say
Speaker 1: first before weighing in with his thoughts. He can learn
Speaker 1: uh a lot about China from listening to President She
Speaker 1: and then say what he has to say. But the
Speaker 1: United States has a problem. That is, we really don't
Speaker 1: have an Asian strategy yet, we haven't put it together.
Speaker 1: Is it that we want to be tough on trade?
Speaker 1: What is our position in the on the question of
Speaker 1: the islands and the South China Sea? What is our
Speaker 1: position on Korea? The Chinese will have and do have
Speaker 1: a strategy. We may or may not agree with the strategy,
Speaker 1: but they have developed a strategy over a number of
Speaker 1: years for the region and for the world. President She
Speaker 1: announced a lot of that in Davos. We don't have
Speaker 1: one yet, we haven't taken the time to put one together.
Speaker 1: That puts President Trump at a disadvantage. He'll be making
Speaker 1: a number of statements, But the Chinese are gonna wonder
Speaker 1: are they part of a broader strategy or they ad
Speaker 1: hoc and are they going to be follow it up?
Speaker 1: Are they going to be ad hoc and then change
Speaker 1: the next day or the next week, which creates a
Speaker 1: sense of unreliability and and and misunderstanding. Well, what's the
Speaker 1: worst press conference you ever had? Were you on a
Speaker 1: plane traveling somewhere and you said, geez, I wish the
Speaker 1: press wasn't here. Did that ever happen to Ambassador Worm answer?
Speaker 1: I always like the press being there because I think
Speaker 1: you normally could on planes have good conversations with the
Speaker 1: press on an informal, off the record basis and explain
Speaker 1: not just what the policy is or was, but give background.
Speaker 1: And I think it's important to have background so the
Speaker 1: press can understand not just what the policy is, but
Speaker 1: how you got there, what the basis of the policy. Critically,
Speaker 1: is Secretary Tillison's policy a new policy or do you
Speaker 1: look at it as bombing him back to John Hay
Speaker 1: or do you know Secretary Route or whoever. I think
Speaker 1: he would be far better served by bringing the press
Speaker 1: along on his trips. Every Secretary of State I've traveled with,
Speaker 1: and I've traveled with seven or eight of them have
Speaker 1: always starting with Rogers Vote to Panama. That was a
Speaker 1: lovely trip in those days. But you know, with Secretary
Speaker 1: Kissinger and and many other subsequent Secretary Kissinger, they've always
Speaker 1: found a way of working with the press. Not the
Speaker 1: press always agrees with them or they always agree with
Speaker 1: the press, but they were able to use the fact
Speaker 1: that the press was on the plane to give background information,
Speaker 1: not just the policy, but why the policy was put
Speaker 1: forward the way it was. What are the underlying reasons
Speaker 1: for the policy, what are the underlying facts? To give
Speaker 1: the press background so they can write their stories. They
Speaker 1: may agree or not agree, but at least you can
Speaker 1: give them background, get to know them, and it works
Speaker 1: very well. It always worked for me, it always worked
Speaker 1: for a number of the secretaries I've traveled with, and
Speaker 1: I think that the American people deserve to have a
Speaker 1: press traveling with the Secretary of State so they can
Speaker 1: communicate the policies more clearly and thoughtfully and with sufficient background.
Speaker 1: That's does Rex Taylerson have more of a worldview, world
Speaker 1: outlook than this white as you talked about not having
Speaker 1: the strategy here going into this meeting with China at
Speaker 1: least not knowing it. Where's that Where's that strategy being devised?
Speaker 1: I assume it's being devised primarily in the National Security
Speaker 1: Council among National Security Council staff. But if they're wise,
Speaker 1: they will call on the experts in the State Department
Speaker 1: who know China very well. Many of them have served
Speaker 1: a long time in China, and I think they can
Speaker 1: add a great deal to the thought process that goes
Speaker 1: into putting together what the President says and and putting
Speaker 1: together a strategy. If that's indeed what they intend to do.
Speaker 1: But since you don't have a lot of people at
Speaker 1: higher levels, it's become a very difficult process to put
Speaker 1: a strategy together. Let's come back with Ambassador harm Mats
Speaker 1: of Kissinger Associates. Of course, this public service to the
Speaker 1: Obama administration some important thoughts. They're linking uh State Department
Speaker 1: matters into Treasury and fiscal policy. Maybe coming back, we'll
Speaker 1: talk about some of the constraints that any administration were
Speaker 1: to have with the dynamics of our debt and deficits.
Speaker 1: Let's rip up the script. I mean, come on, David,
Speaker 1: you have no sleep. You know your team, one our
Speaker 1: executive producers gonna achieve sainthood. So let's rip up the
Speaker 1: script of Robert Pimtz Bob the French election. We are
Speaker 1: distant from Shirock Mitterran Valerie just started to staying. I
Speaker 1: just got an email from Anthony from Sparta. He wants
Speaker 1: to hear my French. He loved it on TV this
Speaker 1: morning tonight. There's a debate. There's all people debating exact mole.
Speaker 1: They're becoming American like, but they're not. You know, the
Speaker 1: French are not becoming American like. They are not. But
Speaker 1: there is a very bright star on the French horizon.
Speaker 1: Emmanuel mccron. Macron was the economic minister in the alarmed
Speaker 1: government earlier on. I know him very well. He's a
Speaker 1: very good friend. He used to work for Rothschild. He's
Speaker 1: an internationalist. He's a fresh new face on the horizon.
Speaker 1: He's doing very well in the polls and I do
Speaker 1: believe that if he were elected president of France, it
Speaker 1: would be a very positive boost for France and a
Speaker 1: very positive boost for Europe and for French American relations.
Speaker 1: I think he's a new rising star and a very
Speaker 1: positive force on the French political scene. What's the central
Speaker 1: issue here in this election is it? Is it to
Speaker 1: membership in the EU? Can you paint with his broader
Speaker 1: brushes that I think it's much more the economy and
Speaker 1: how to deal with the economy. How to get the
Speaker 1: economy going on a sustained basis, uh that would be
Speaker 1: number one. The second is how to work with the
Speaker 1: other major EU partners. Assuming Merkel is re elected, or
Speaker 1: at least as the head of a coalition that's reelected
Speaker 1: may be different from the one she has now, she
Speaker 1: would be an important partner. The Dutch have come through
Speaker 1: without moving to this populace right that some people feared.
Speaker 1: So it may well be that the rising tide of
Speaker 1: the populace right is now receding, and it would received
Speaker 1: a lot further if Matt Crown were elected. So I
Speaker 1: think working with the other Europeans is important, and also
Speaker 1: strengthening NATO. The French understand. I believe that a strong NATO,
Speaker 1: a coherent EU, strong relationship with the US all are
Speaker 1: very important to the future of France. And you need
Speaker 1: someone who is pragmatic to do that. So bring about
Speaker 1: Uncle a Merca. We last spoke. I think before she
Speaker 1: went to the White House, and we were talking about
Speaker 1: what you were going to be observing as all of
Speaker 1: that unfolded. Uh, I'm sure you watched it. I'm sure
Speaker 1: you listen to the to the press conference after US
Speaker 1: Ambassador Harmon at the steam was coming out of this
Speaker 1: so much. He was melting ice trying to be diplomatic.
Speaker 1: I was trying to be diplomatic. But where where does
Speaker 1: that relationship go from from what we sought the White House? Well,
Speaker 1: what I don't understand is that Trump does not seem
Speaker 1: to have the background, um, the historical background to really
Speaker 1: understand the origins of Native the origins of the EU,
Speaker 1: and why they're so important to the US. The US
Speaker 1: was a great power after World War Two, impart because
Speaker 1: it had a strong economy and a strong military, but
Speaker 1: it was also great power because it developed strong alliances.
Speaker 1: It worked to strengthen European unity, which was important for
Speaker 1: stability in Europe and also to counter the spread of
Speaker 1: Soviet Communism during the Cold War. Now we need Europe
Speaker 1: as a partner, UH, to deal with a number of
Speaker 1: things that Putin is doing in various parts of Europe.
Speaker 1: He's trying to undermine European cohesion cause fragmentation within European
Speaker 1: countries and among them, and certainly in NATO. We need
Speaker 1: a strong Europe to resist that kind of thing. And
Speaker 1: and that's really what he has to understand, that that
Speaker 1: a strong Europe can be a big asset. If you
Speaker 1: want to make America great again, you need to have
Speaker 1: also great allies, great friendships, great partnerships, and that should
Speaker 1: be part of a make America great strategy if that's
Speaker 1: the strategy he wants to pursue. But you're not going
Speaker 1: to be great if you have only a strong economy
Speaker 1: and a strong military and you have weak allies. That
Speaker 1: will not make America great again. He's got to make
Speaker 1: sure our allies are great again. Working with Merkel, working
Speaker 1: with Macrol if he's elected, working with other European leaders
Speaker 1: is very definitely a part of that process, or at
Speaker 1: least should be in the need of strategy for doing it. Ambassador,
Speaker 1: Thank you so much, kind of you to come into
Speaker 1: just so much to talk about um just an extraordinary
Speaker 1: time and the Crystal much more from our Washington News bureau.
Speaker 1: Eli Lake, Who's Bloomberg View column last night came out
Speaker 1: in the afternoon percolated in the afternoon. It really blew
Speaker 1: up about four pm UH last night over Susan Rice
Speaker 1: of the Obama administration requesting the names and documents that
Speaker 1: have been blacked out had been redacted. Mr Lake joins
Speaker 1: us right now, I know David's got some important questions. Eli.
Speaker 1: I look at the Google feed and it's just as
Speaker 1: polarized as you would imagine. Susan Rice unmasked Trump team.
Speaker 1: The latest wire tap bombshell turns out to be another
Speaker 1: dud unmasking reporter. This is bigger than Trump that of
Speaker 1: course some Fox News insider, which is it, Eli Lake?
Speaker 1: Who should take comfort from your Bloomberg view piece? At
Speaker 1: this point, I'm really reluctant to right to say, you
Speaker 1: know where the story is going to end, because I'm
Speaker 1: still reporting it. UM. I think it's important for the
Speaker 1: Trump supporters to recognize that this was a unique situation.
Speaker 1: After the election, there were credible allegations that UM that
Speaker 1: there was credible information I should say, an intelligence community
Speaker 1: had concluded the Russians tried to influence the election. There
Speaker 1: was an active FBI investigation that was confirmed last months
Speaker 1: UH into the Trump campaign to see if they UH
Speaker 1: collaborated in some way with the Russians in this influenced operation.
Speaker 1: Susan Rice would have had to have known about that.
Speaker 1: And even though we my my reporting says that she
Speaker 1: was asking for information to be on mass on us,
Speaker 1: the US person, to be on maths that were affiliated
Speaker 1: with the Trump transition that did not have to do
Speaker 1: with Russia. At the same time, this is the environment,
Speaker 1: the backdrop, and it was relevant in that sense of
Speaker 1: a national in the in the national security sense, particularly
Speaker 1: if we were to believe other reports in the New
Speaker 1: York Times and other places that there was a lot
Speaker 1: of intelligence coming in after the election that did show
Speaker 1: that there were more contacts and meetings and so forth
Speaker 1: between Trump World and Russia. On the other hand, none
Speaker 1: of that has amounted to the impeachable offense of collusion. Uh.
Speaker 1: This has been stated by people like James Clapper, who
Speaker 1: was Barack Obama's Director of National Intelligence. And it appears
Speaker 1: that what we're learning now is that the standard for
Speaker 1: a national security advisor to ask who a U S
Speaker 1: person is who is incidentally collected there's no warrant on
Speaker 1: this person, UH in in a in a routine kind
Speaker 1: of wire tap of a foreign target or criminal target
Speaker 1: is so loose that it pretty much you could you
Speaker 1: could you can pretty much look to see anything and
Speaker 1: you would get your request. It appears fulfilled, which is
Speaker 1: what happened in this National Security Council review that started
Speaker 1: under the Trump administration of this policy known as unmaking.
Speaker 1: And that right there is something that ought to wary
Speaker 1: Democrats as well as Republicans, because right now the president
Speaker 1: of Democrat as a president is Sonald Trump. He's a Republican.
Speaker 1: And if indeed, you know, the rules are so laxed
Speaker 1: that you can uh have a back door loophole to
Speaker 1: go around the very strict procedures for surveilling US persons
Speaker 1: by going to a stupid sport known as the FISA court, well,
Speaker 1: then this is something that Trump could then do to
Speaker 1: his domestic opposition. And Democrats should be interested in geting
Speaker 1: the bombo. And I'm actually happy to say that at
Speaker 1: least the ranking Democrats in the Senate and House Intelligence
Speaker 1: committees are now saying that this is something worth looking
Speaker 1: at you. This is great, Uh, the surveillance and friends,
Speaker 1: I guess that's what we'll call it, David, Right, we
Speaker 1: need a new couch Eli Here's what I'm struggling with.
Speaker 1: You've got the credible information, you've got the FBI investigation,
Speaker 1: you've got the independent reporting by a number of journalism organizations.
Speaker 1: Would there be those who say, look, this is a
Speaker 1: national security advisor looking into something that would have been
Speaker 1: of great concern. You could have outlined this in your
Speaker 1: piece as well. There's nothing here to indicate you're kind
Speaker 1: of alluding to this moment to go that that Susan
Speaker 1: Rice did anything wrong. We're illegal? Am I right in
Speaker 1: reading that correctly? Well? Illegal? I think it's I think
Speaker 1: when I've talked to experts about this, you know the
Speaker 1: law and the procedures, I think it's it's it's legal
Speaker 1: for a natural security advisor to make these unmapped requests,
Speaker 1: and the bar is very low. Improper is a different questions.
Speaker 1: And because this is a key point here, I think
Speaker 1: people are missing. This is stuff that is so shrouded
Speaker 1: in state secrecy. We rarely really get much of an
Speaker 1: insight into how this process works. Every few years, when
Speaker 1: the FIE the law is reauthorized in Congress, there are
Speaker 1: hearings and the leaders of the intelligence community make a
Speaker 1: show of saying that there are great that the intelligence
Speaker 1: community takes great pains to redact the names of s
Speaker 1: persons who were incidentally collected in eavesdropping and monitoring in
Speaker 1: that kind of thing. But if it turns out that
Speaker 1: a political appointee can pretty much request to unmask that
Speaker 1: information at any time, well then it's worth finding you know,
Speaker 1: the origins of this policy, how long this has been
Speaker 1: going on, and hopefully a sense to reform it, So
Speaker 1: I would separate the questions of illegal and improper. And
Speaker 1: if it did turn out that in fact, Susan Rice
Speaker 1: was doing more than just asking for the end the information,
Speaker 1: but was spreading that around to Democrats for any kind
Speaker 1: of political advantage, or that she had something to do,
Speaker 1: and I'm not reporting this, I want to make this
Speaker 1: very clear. She had something to do with leaking um,
Speaker 1: the identity of Mike Flynn, who did end up in
Speaker 1: the newspaper in his phone calls with the Russian ambassador,
Speaker 1: and that forced him to resign. That did have a
Speaker 1: huge political effect. Um, then that reason, she really isn't
Speaker 1: a bit of trouble here. So I want to make
Speaker 1: it very clear that the thing that I'm reporting on
Speaker 1: right now is in and of itself it doesn't appear
Speaker 1: to be illegal, but it may very well be improper.
Speaker 1: And I'm starting to think that the real scandal here
Speaker 1: is the fact that it's not illegal, that it may
Speaker 1: be standard operating procedure. And how long has this been
Speaker 1: going on? Is the question? Can you introduce us here
Speaker 1: to a principle you mentioned in the piece. That's Ezra
Speaker 1: co and Wattnick the name that I don't think we'll
Speaker 1: be familiar to many of our of our listeners, but
Speaker 1: is is or was wielding a pretty heavy hand on
Speaker 1: the National Security Council as an advisor to to the president.
Speaker 1: Who is he? What do we know about his background
Speaker 1: and why was he the one conducting this investigation? Well,
Speaker 1: he's a Defense intelligence I mean he's a he's a
Speaker 1: former Defense Intelligence Agency officer. UM. He was brought in
Speaker 1: originally by Mike flann and I have to say that,
Speaker 1: you know, what he was doing was well within his
Speaker 1: remit as the UM National Security Council's Director for Intelligence,
Speaker 1: which is to review policies like this, which is when
Speaker 1: the White House, you know, what is the procedure for
Speaker 1: unmasking US persons in these reports? And that's when he
Speaker 1: discovered the what the kinds of phenomenal anomalies and then
Speaker 1: and made this available to the General Council. Um, he's
Speaker 1: somebody who has gotten recently, you know, there's been some
Speaker 1: interest to him among you know, sort of the progressive
Speaker 1: and liberal media. Um. Although I have to say at
Speaker 1: this point, Um, the argument that you know, what he
Speaker 1: was doing is improper, I have not seen it. I'm
Speaker 1: you know, we're all reporting his story out. But you know,
Speaker 1: eventually he hands the information over, the General Council says,
Speaker 1: all right, we want you to stop the investigation. At
Speaker 1: this point he complied with that as I've I can,
Speaker 1: I can report and you know, and kind of continued on.
Speaker 1: But the idea that it was improper to review this
Speaker 1: stuff for a policy like this, I mean, that's exactly
Speaker 1: what the Director for Intelligence or what I think it's called,
Speaker 1: the classified Executive Secretariat, it is supposed to do. As
Speaker 1: an asshole security Council. It's not it's not really out
Speaker 1: of the ordinary. And you know, and for that job
Speaker 1: he was qualified. What happens here next day lie with
Speaker 1: with the Chairman of the House Intelligence Committe, Devin Nonez.
Speaker 1: We've seen what you sort of characterizes as bizarre behavior
Speaker 1: him going back and forth to the White House. Obviously
Speaker 1: this could be all tied up into that, but he's
Speaker 1: lost the confidence of some of his colleagues on the hill.
Speaker 1: What are the next steps do you think for the
Speaker 1: for the chairman of the House Intelligence Committee. Well, I
Speaker 1: wrote a very tough column last week because I thought that,
Speaker 1: you know, the story that he had told the press,
Speaker 1: and specifically in an interview with me, it was very
Speaker 1: misleading because he made it appear that he was in
Speaker 1: forming President Trump of new information when you know, his
Speaker 1: own White House had been uh you know, knew about
Speaker 1: it and discovered it and so forth. That said, I
Speaker 1: also understand that the Chairman had his own independent sources
Speaker 1: before all of this, that we're telling him that there
Speaker 1: was you know, improper in mass unmasking going on, and
Speaker 1: that there um were a number of kind of intelligence
Speaker 1: reports that were making their way to the White House
Speaker 1: setting that that that had improper details about the Trump transition.
Speaker 1: But that said, you know, the fact that it was
Speaker 1: he made it appear that he was forming the president
Speaker 1: of something he didn't know. Um, I thought was uh
Speaker 1: count miss leading and deceptive, and I did burn him
Speaker 1: on noting my diet I criticized him very harshly a
Speaker 1: column last week on that said, the fact that now
Speaker 1: it's come out, um that Susan Rice had requested in
Speaker 1: dozens of the cases. You know, this kind of unmasking
Speaker 1: in some ways vindicates is initial concerns about this, which
Speaker 1: because it's very classified and because it's a really complex
Speaker 1: issue and most people covering it our political orders. Yeah,
Speaker 1: we're gonna have to leave it there, Eli, Thank you
Speaker 1: so much. Really appreciate the sequence of Bloomberg View columns
Speaker 1: that we've seen from Mr Like Eli like writing for
Speaker 1: Bloomberg View, making national news brought you by Bank of America,
Speaker 1: Mary Lynch, dedicated to bringing our clients insights and solutions
Speaker 1: to meet the challenges of a transforming world. That's the
Speaker 1: power of global connections. Mary Lynch, Pierce Federan Smith Incorporated,
Speaker 1: Member s I p C. So I'm gonna make this
Speaker 1: very quick because David Girl has got to get to
Speaker 1: her esteem. Guest here who's taken an oath to be
Speaker 1: brief with us, uh today, here's the deal. Many of
Speaker 1: you know that I consider the Verizon a o L
Speaker 1: transaction to be one of the great transactions of this
Speaker 1: Era by Tim Armstrong. I put it in a class
Speaker 1: with Pete Peterson's Blackstone transaction. It's just an amazing deal
Speaker 1: to bring a O l over to Verizon. Forget about that.
Speaker 1: What you need to know, David Gura is Kelly Potter
Speaker 1: is out of Lawrence Academy playing hockey for Connecticut College.
Speaker 1: And the uproar is, Tim, nothing has changed from when
Speaker 1: you were coaching hockey at CC. North Dakota is gonna
Speaker 1: get rid of women's hockey. Nothing's changed in the women's sports,
Speaker 1: of this women's sports milieu in twenty years. Tom, let
Speaker 1: me tell you something. First, great to be back here
Speaker 1: and the Lawrence Academy, Connecticut College, but more importantly women's
Speaker 1: ice hockey. You know, I coach women's ice hockey during
Speaker 1: played lacrosse there, but also in the winter, I used
Speaker 1: to coach the women's ice hockey team. And look, the
Speaker 1: bottom line is, uh, you know, women's sports is an
Speaker 1: amazing uh since Title nine, but there's a lot more
Speaker 1: work to be done. Said, well, it's funny we own
Speaker 1: makers dot Com, which is number one women's leadership brand
Speaker 1: in the world. And uh, I just think that the
Speaker 1: women's leadership movement right now has a lot of energy
Speaker 1: behind it. And the North Dakota situation you just brought
Speaker 1: up is exactly the type of thing that needs to
Speaker 1: get addressed. Things David flabbergast. Could you see them take
Speaker 1: men's basketball away from U n C. David, Would that happen?
Speaker 1: It wouldn't happen. Let's take an old thing get started.
Speaker 1: All right, this is the rebranding. You've gotten some flag
Speaker 1: for this, Uh, the rebranding of the company of Yahoo
Speaker 1: and AO. I'll tell us a bit about the branding.
Speaker 1: What this company is gonna look like a lot of
Speaker 1: people wondering what shape it's gonna take. Sure, So David,
Speaker 1: good to see you again. And Uh. One thing that
Speaker 1: we're talking about today is the launch of a new
Speaker 1: B two B name, which is essentially House of Brands supporter.
Speaker 1: We uh, we'll touch about over a billion consumers once
Speaker 1: the Yahoo deal closes. Where we have a house of
Speaker 1: brand strategy, which is we have about twenty major brands,
Speaker 1: which include a O L, Yahoo, Tech, Crunch, uh On, Gadget,
Speaker 1: Movie Phone. So we have a really big digital portfolio.
Speaker 1: And like a Berkshire Hathaway or Procter and Gamble, oath
Speaker 1: is the name that we're taking that basically supports those brands.
Speaker 1: As a consumer, you probably won't see Oath a lot um.
Speaker 1: You'll see our brand. So if you are a sports fan,
Speaker 1: you'll see Yahoo Sports. If your finance fan, you'll see
Speaker 1: Yahoo Finance. If you're into tech, you'll see tech Crunch.
Speaker 1: So we wanted to have a values based brand that
Speaker 1: holds everything together. It's really the Oath is the soil
Speaker 1: that great brands grow out of. And our mission statement
Speaker 1: is build brands people love, and that's a long term commitment.
Speaker 1: Oath is a commitment word, and that's why we decided
Speaker 1: to name the company from a B two B standpoint Oath.
Speaker 1: How much did this blueprint change? Is you're building this
Speaker 1: house of brands over these last many months. Of course,
Speaker 1: you had the the Yahoo hacking, you were going through
Speaker 1: all of that, the deal was being reevaluated and changed.
Speaker 1: How was your vision for this this combined company changed?
Speaker 1: You know, the vision stayed basically the same, which is
Speaker 1: we're betting on two simple principles. One is that the
Speaker 1: world is going to get connected by software and by
Speaker 1: mobile phones, and the second is that brands are gonna
Speaker 1: matter even more when that happens because the level of
Speaker 1: noise in the world that brands are going to continue
Speaker 1: to pop out and there's a chance to grow global brands.
Speaker 1: The Yahoo data breach that happened, I think is something
Speaker 1: that's happened a lot to a lot of companies. It's
Speaker 1: something that yeah, Who's done a great job working through
Speaker 1: and we're focused now on basically, you know, launching the
Speaker 1: next series of great brands for the world. Facebook, I
Speaker 1: believe the other day did a Snapchat equivalent. Not that
Speaker 1: I'm in Tim, I'm sorry, I'm not a snap I'm sorry,
Speaker 1: but but help me here with how you compete with Facebook,
Speaker 1: compete with Google and the other juggernauts. Yeah, so our
Speaker 1: strategy is interesting. So we we have a different strategy
Speaker 1: than competing head on with them. We're partners with them.
Speaker 1: So Huffing a Post, which we own, is the largest
Speaker 1: distributed news source on Facebook. We have big deals with Google,
Speaker 1: with Amazon, uh, with Apple. So we look at those
Speaker 1: and be honest with you, I look at them as uh,
Speaker 1: really a distribution source for our business. So we basically
Speaker 1: both put content all over those distributions sources and we
Speaker 1: monetize with them also. So I love those companies and
Speaker 1: our content people love those companies, and we're going to
Speaker 1: work in that ecosystem. We partner with everyone in that
Speaker 1: in the space, So we're we're not looking to compete,
Speaker 1: We're looking to differentiate. Kim, how are you processing what
Speaker 1: we're seeing with YouTube right now? Obviously you care a
Speaker 1: lot about ad revenue as well as you look to
Speaker 1: this new to this new brand, But you see the
Speaker 1: difficulty that YouTube and Google is facing, uh, you know,
Speaker 1: monitoring what's being put out on YouTube. Talk about the
Speaker 1: complexity there and how you make sure that what happens
Speaker 1: there isn't happening with your brands as well. So I
Speaker 1: think you know, we're we're a brand company. We're building
Speaker 1: brands people love. So from our standpoint, we want to
Speaker 1: be in a brand safe environment and really scaled. I
Speaker 1: think the tension point you're saying at the YouTube's and
Speaker 1: and Facebook is you know that they're they're dealing with
Speaker 1: billions of humors and trying to connect you know, millions
Speaker 1: or hundreds of millions of videos at the same time
Speaker 1: and try to monetize them. To be honest with you,
Speaker 1: the things that have been happening recently are probably a
Speaker 1: natural outcome of the scale we face it, um, you know. Also,
Speaker 1: but the flip side of it, the silver lining is
Speaker 1: it is if we can solve those issues as an
Speaker 1: industry and all the companies can solve them. You know,
Speaker 1: you can either have smaller scale and not have all
Speaker 1: those problems, or you can have big scale and be
Speaker 1: connected to billions of consumers and fix that and then
Speaker 1: having a wonderful business. And I think we're heading towards
Speaker 1: the wonderful business side. Um. But I think the advertisers
Speaker 1: are speaking. They want brand, trusted environments. Who's gonna put
Speaker 1: Twitter out of their misery? I think I'm I'm a
Speaker 1: big believer in Twitter and big believer in the management
Speaker 1: team at Twitter and very close with them. So I'm
Speaker 1: guessing that their their misery is going to turn to
Speaker 1: joy at some point, and it's going to be self
Speaker 1: resurrected from how those guys are doing and girls are
Speaker 1: doing their work. Did you notice, David, he didn't answer
Speaker 1: that question. If you want to follow timbarks drinking, Thank
Speaker 1: you so much for the oath discussion a year particularly
Speaker 1: after inside, I'm gonna tweet this out. Good morning Serious
Speaker 1: sex TEMN Channel one nineteen in North Dakota as we
Speaker 1: looked at women's North Dakota hockey David, why don't you
Speaker 1: bring him in? All and Ruskins over on the phone
Speaker 1: with a Queen of England trying to explain to the
Speaker 1: week sterlink tour. Yeah, we'll get to that in just
Speaker 1: a month. Let me ask you about the South African
Speaker 1: rand first, if I could. We saw a piece of
Speaker 1: breaking news here Bloomberg breaking uh in exclusive this morning.
Speaker 1: The head of South Africa's treasury has asked to leave
Speaker 1: his post at the end of this month, a year
Speaker 1: before his contract runs out. So it seems like we're
Speaker 1: getting compounding bad news out of South Africa. We've seen
Speaker 1: the weakening of the rand here over these last seven
Speaker 1: days and down eleven precent. I think, what's your sense
Speaker 1: of where things are going here? And I mentioned the compounding?
Speaker 1: Is there there more yet to happen? It's definitely yes, absolutely, yeah.
Speaker 1: I think we're at a little bit of pivot point here.
Speaker 1: You know, the market I guess is talking about is
Speaker 1: there some sort of Dilma moment as it were, whereby
Speaker 1: you know, you'd have a change in leadership and you know,
Speaker 1: change in philosophy to some extential perhaps even some of
Speaker 1: the old god coming back in, the old Finance minister
Speaker 1: coming back in seen as relatively credible, and the rand
Speaker 1: could perhaps rally substantially from here. We alternatively, we continue
Speaker 1: on the path we've just set over the last few days,
Speaker 1: in which case, you know, dollar rand I think will
Speaker 1: be up well into the four teens before we know it.
Speaker 1: I imagine you've looked at with the reading agencies have
Speaker 1: had to say here. Of course they're putting it, putting
Speaker 1: South Africa unnoticed. What stood out to you from from
Speaker 1: from those commentaries, Well, the actions have been pretty quick,
Speaker 1: so you know, look, you know, to some extent to
Speaker 1: your earlier question, there's a lot up in the air
Speaker 1: in terms of the political direction where as to where
Speaker 1: South Africa goes. And in some sense, I don't think,
Speaker 1: you know, it makes a lot of sense to change
Speaker 1: ratings right at this very moment when you can wait
Speaker 1: a few weeks and perhaps have much more information, so
Speaker 1: that that is a bit of a stand up. But
Speaker 1: at the same time, of course you've got you know
Speaker 1: what the smp S actions already, You've got let's see
Speaker 1: where Moodies go. Is it one notch two notches. Um,
Speaker 1: you know it. It is substantial. Of course, if South
Speaker 1: Africa uses its investment grade. Okay, help our rookie ffects
Speaker 1: traders listening worldwide. Where does a guy like you enter
Speaker 1: the trade long South African rand strong ran week US dollar?
Speaker 1: Does Allen Ruskin wait for a press release, a Bloomberg headline?
Speaker 1: Do you do it technically? How do you do this? Tom?
Speaker 1: I think the South African rand is not a currency
Speaker 1: for rookies. I would say that as a warning point,
Speaker 1: you know, because this thing flies around. Really we've seen
Speaker 1: you know, seven eight percent move in in roughly a week,
Speaker 1: So that tells you that. Um, certainly, if you're thinking
Speaker 1: in terms of yield and carry, you don't really want
Speaker 1: to just have your all your eggs in one basket
Speaker 1: and in a currency like the South African rand. So
Speaker 1: that's a starting point right now. It's unfortunately much more
Speaker 1: of a political story than an economic story. So you know,
Speaker 1: typically I like it more when we're reacting to data,
Speaker 1: when we're looking at the broader macro environment, which I
Speaker 1: think is still actually slightly friendly for carry. We've had
Speaker 1: a very good run for carry, but it's still I
Speaker 1: think slightly friendly in the South African rand naturally lends
Speaker 1: itself to be in that basket. But right now I'd
Speaker 1: be very cautious because, as I said, we're at a pivoct. Really,
Speaker 1: we could be at thirteen on good political news or
Speaker 1: so called good political news, and we could be at
Speaker 1: fourteen and a half quite easily in a heartbeat. I
Speaker 1: thought there was a good piece of the Wall Street
Speaker 1: Journal this mooeting looking at the Chinese currency. I want
Speaker 1: to ask you a bit about that as we had
Speaker 1: to these meetings on on Friday. In the lead of
Speaker 1: that piece was there's a new twist in the persistent
Speaker 1: argument that China is keeping its currency artificially low against
Speaker 1: the dollar, the un has actually been rising. As again,
Speaker 1: as we head to those meetings this Friday, what are
Speaker 1: we seeing with the currency and sort of what would
Speaker 1: the nsequences be if the US does in fact label
Speaker 1: a trying out currency manipulator. Well, I think the U
Speaker 1: s has been in a tricky situation because the old
Speaker 1: story where you saw a lot of pressure for dollar
Speaker 1: Chinese to go down and the Chinese were resistant of that,
Speaker 1: they were resistant of Chinese currency strength kind of flipped
Speaker 1: on its head and has flipped on his head for
Speaker 1: quite a while, whereby the currencies, if anything, too weak
Speaker 1: and was weakening faster than they would have wanted, and
Speaker 1: they were trying to resist it that way around, in
Speaker 1: which case that was pretty much consistent with what the
Speaker 1: U S would want anyway. So the US has found
Speaker 1: itself in a in a somewhat difficult position. And I think,
Speaker 1: you know, even people who said, okay, you know the currency,
Speaker 1: the Chinese currency is misvalued, have had to rethink. And
Speaker 1: you know, people like the I m F, I think,
Speaker 1: said okay, you know we're closer to fair value here,
Speaker 1: don't you, Brink has led. I'll give you a just
Speaker 1: BC credit on a weak sterling call. If anything, you've
Speaker 1: been more aggressive about it our suggestion than he just BC.
Speaker 1: You're getting to have some more company right now. Is
Speaker 1: it about weak sterling or is it about strong dollar?
Speaker 1: A little bit of both really, but I'd say, actually,
Speaker 1: you know, if you had to put more weight, it
Speaker 1: was at least as much really on a stronger dollars story,
Speaker 1: and that is not panning out quite according to plan,
Speaker 1: of course. But I think you know, the good news Tim,
Speaker 1: just to interrupt there was was that it's nice when
Speaker 1: you forecast currencies and you like both legs really, so
Speaker 1: in that sense, we like both. This is really important, David, currencies.
Speaker 1: You don't talk about one currency. You've heard me scream
Speaker 1: about this. It's about a pair. And if you get
Speaker 1: them both going in the right direction, that's where you
Speaker 1: make the alpha. That's a that's a cardinal rule. That's
Speaker 1: not said enough exactly, Tim. So I think, look, I
Speaker 1: think both are gonna work in that direction. I e.
Speaker 1: Sterling will be somewhat weaker in and of itself really
Speaker 1: and the dollars should be somewhat stronger. But it's a
Speaker 1: case of somewhat right. I think we're you know, looking
Speaker 1: now at a dollar moves which are more contained than
Speaker 1: we would have anticipated at this point in time. And
Speaker 1: given what the Feds actually the catalyst to get strong dollar,
Speaker 1: to get the February dollar we're supposed to have be
Speaker 1: a mayor junior or September dollar, well, I think a
Speaker 1: couple of things time. I think firstly, the Fed hopefully
Speaker 1: you know, still more in play than the market that projects.
Speaker 1: And I think that that that's a pretty comfortable call
Speaker 1: at this point. So we're talking, uh, you know, Ray
Speaker 1: takes in June and September and then a balance sheet
Speaker 1: action towards the end of the year. So that is
Speaker 1: all consistent with the stronger dollar story. But we need
Speaker 1: the back end in general to play to play ball
Speaker 1: in all of this, right, we have to keep in
Speaker 1: mind that the tenure has been incredibly well behaved, really
Speaker 1: and I think if tenure heels and the broader heeled
Speaker 1: curve backs up, then you know the story kicks into
Speaker 1: gear and with with more gusta with the euro with Strala,
Speaker 1: we had the speech by to reason, We've got to
Speaker 1: EU meeting tomorrow again hammering out what the price is
Speaker 1: going to be here for for brexit. How how long
Speaker 1: terms can you be on currency amidst all of the
Speaker 1: much nations that we're going to see here over these
Speaker 1: next two years. Yeah, I think you know, some people
Speaker 1: would say, look in this respect, when you're looking at
Speaker 1: a to your political profile, you can actually be quite
Speaker 1: long term. But you're still reading the tea leaves. You're
Speaker 1: still trying to get a sense of, you know, is
Speaker 1: the EU twenty seven which is looking for the UK
Speaker 1: to first set up some sort of divorce rules before
Speaker 1: we actually come up with a new set of trade rules,
Speaker 1: or you know, is the UK winning and we're actually
Speaker 1: doing this all in parallel kind of thing. So I
Speaker 1: think you're constantly kind of making some sort of judgment
Speaker 1: about who's got the upper hand as far as the
Speaker 1: politics is concerned. It McAuley of City good bit, take
Speaker 1: good morning, good morning, time, get to be with you.
Speaker 1: Did you change your auto recommendations yesterday off of one
Speaker 1: month's auto sales? Now? You know, our our views, you know,
Speaker 1: has been pretty consistent of mid seventeen million auto sales
Speaker 1: with a peak coming in eighteen and sixteen million is
Speaker 1: our nineteen estimate. Um, you know last year in March,
Speaker 1: in March sixteen we also had about a sixteen and
Speaker 1: a half million SAR. The full year ended up at
Speaker 1: seventeen and a half. Of these fluctuations are not that uncommon.
Speaker 1: Um you know on February we were seventeen and a
Speaker 1: half a million. We do see a bit more downside
Speaker 1: now is we're approaching the peak based on our latest work.
Speaker 1: But um, yes, they's number did not call us to
Speaker 1: change our Our opinion is you know, there's a partial
Speaker 1: differentiation of revenue units is compared to price and then
Speaker 1: in the auto world, there's also size of car. How
Speaker 1: critical is it that they can't sell the big cars,
Speaker 1: so they're starting to give away a lot of incentives.
Speaker 1: What does that do down the income statement? Sure? So,
Speaker 1: so the companies recover, like four and GM, we think
Speaker 1: the majority of profits in North America come from the
Speaker 1: pickup truck segments, and pickups we think has actually a
Speaker 1: very unique supplied demand imbalance. We have seen com pricing
Speaker 1: pressure in sedan segments even crossover segments now since last year.
Speaker 1: So some of this incentives rising affordability head to win
Speaker 1: our natural later cycle pressure points that we see. Why
Speaker 1: did GM confirm their twenty seventeen guidance last week instead
Speaker 1: of all the negativity that we read about them on
Speaker 1: the auto sector Because the pickup trucks have a unique
Speaker 1: supply demand in balance, and we think that continues. And
Speaker 1: that's why despite costs for peak auto for the past
Speaker 1: three years, right three years um, your profits in North
Speaker 1: America from domestic O e m's like GM and Ford
Speaker 1: have been strong. So I think the pickup trucks story
Speaker 1: is frankly highly overlooked. In his whole debate about the cycle,
Speaker 1: how weird are you about the glut. You've got a
Speaker 1: glat of new vehicles, a glat of old vehicles, and
Speaker 1: you've got companies here who are trying to reinvent their
Speaker 1: product lines. It seems like that's a recipe for for
Speaker 1: a lot of trouble. Yeah, I mean, you are seeing
Speaker 1: awf leaves of volume again pret now fill this later
Speaker 1: point in the cycle, and some affordability had warned the
Speaker 1: report we published actually last night, we're kind of making
Speaker 1: the argument that if you look at affordability historically, even
Speaker 1: if you account, you know, for some of the pressures
Speaker 1: that are incrementally occurring, we don't think we're in some
Speaker 1: sort of unshottered territory in terms of monthly payments and
Speaker 1: auto sales and how they relate to the current macro economy.
Speaker 1: They have consumer confidence, disposable income, So we don't think
Speaker 1: we're in some sort of unshotted territory. But at this
Speaker 1: kind of seventh eighth ending of the cycle, you should
Speaker 1: start to see some you know, pressure points in select segments,
Speaker 1: and and kind of our point is all that's happening
Speaker 1: and all that's been absorbed. Um, But the pickup truck story,
Speaker 1: which is the anchor for earnings. Again, the majority we
Speaker 1: think of GM and Ford um had does not get
Speaker 1: the attention in public. There's a lot of times people
Speaker 1: equated to housing or oil, and we think it's a
Speaker 1: much bigger story than than that. With this, we continue
Speaker 1: each I did a chart of US car inflation price change,
Speaker 1: if you will, really real to see some real price
Speaker 1: erosion year over year in used cars. How linked are
Speaker 1: the equity shares of the big auto companies to use
Speaker 1: card dynamics. There's certainly some some exposure from a lending perspective.
Speaker 1: We saw, you know, Ford had an impact late last year. Well,
Speaker 1: I need to interrupt because this is so important. I'm
Speaker 1: sorry didn't get into my puny brain. It's do you
Speaker 1: agree with Steve Iceman that there is a subprime auto
Speaker 1: challenge in the markets? I mean, we have seen delinquencies
Speaker 1: generally rise. I mean we don't think that we haven't
Speaker 1: seen data on subprime deminquency that seems um kind of
Speaker 1: again as an outlying relative to the past. And there's
Speaker 1: been a lot of articles written about subprime lending being
Speaker 1: pulled back in the fourth quarter, which is fine, and
Speaker 1: we want to see rational lending behavior. So what we're
Speaker 1: looking for is, if there is a problem, if there
Speaker 1: is a higher delinquency rate in subprime, we want to
Speaker 1: see the industry kind of pulled back on that. Has
Speaker 1: been a lot of reports that that did occur in
Speaker 1: the fourth quarter because what the market want, the equat
Speaker 1: prices of these companies want to see, Tom is they
Speaker 1: want to see different behavior than prior cycles. They want
Speaker 1: to see, you know, production cutsift sales are weaker, reduction
Speaker 1: cuts are okay to maintain the inventory. They want to
Speaker 1: see you start pint lending, to your question, kind of
Speaker 1: get pulled back if that becomes an issue. And that's
Speaker 1: what we think is the bigger story, UM, because you
Speaker 1: know these docks, you know, like if you look at
Speaker 1: GM earnings going from three dollars to over six dollars,
Speaker 1: they only have an earnings problem. They have a multiple
Speaker 1: problem on their equity prices. And I think part of
Speaker 1: it is how will these companies react in a post
Speaker 1: peak environment to someone these kind of natural pressure points
Speaker 1: for the curve. But now we have not been in
Speaker 1: the view that there's some sort of an auto bubble
Speaker 1: there for lending. UM, although at this point in the cycle,
Speaker 1: you are you know, you do type of cities, pressure points.
Speaker 1: What's the financing picture look like to you? Quickly? We'll
Speaker 1: come back and talk more in a moment. In the
Speaker 1: last thirty seconds we got here before the break. Has
Speaker 1: the financing picture look yeah, it's okay. I mean we
Speaker 1: think we're seeing the linquent is kind of you know,
Speaker 1: move up a little bit to use car pricing pressures
Speaker 1: having a bit of an impact. If you're you know,
Speaker 1: long pick off the trucks which has a lot less
Speaker 1: leasing than sedance, we think you're in better shape, which
Speaker 1: is why in our selectivity we prefer the max pick
Speaker 1: up exposure that you can find. But generally we're seeing
Speaker 1: what you typically see you know at this stage later
Speaker 1: on in the cycle. Um. But you know, as the
Speaker 1: last cycle proved um, you know, use vehicle prices strengthen
Speaker 1: very quickly after the last procession because you know, card
Speaker 1: density came down quickly, so some there's some natural hedges
Speaker 1: here in terms of the cyclical exposure reentertainment Colley, So
Speaker 1: do you go thrill to have them on today? After
Speaker 1: the shock yesterday of the auto report will continue with
Speaker 1: Mr mccaulley and talk about individual securities here in a
Speaker 1: moment any time. I want to ask you about what
Speaker 1: we heard from David Einhorn if green Light Capital last
Speaker 1: week at proposal that he made for a new share
Speaker 1: of structure for GM. How did you react to what
Speaker 1: he's proposed on the heels of that announcement. What more
Speaker 1: information do we have about how that might play out
Speaker 1: and what management thinks of it. Rating agency said that
Speaker 1: there will be a risk of of GM's credit ratings
Speaker 1: falling below investment grade, which would be a serious issue
Speaker 1: at this stage of the cycle for any company. So
Speaker 1: we don't really have a formal view, but what we
Speaker 1: wrote in a note is that the root of the
Speaker 1: GM problem is a perception problem tied to pick up
Speaker 1: trucks and believe it or not, technology and the real
Speaker 1: opportunity have to take their loss making card business, we
Speaker 1: think into something that's much better um in the past,
Speaker 1: you know, buy backs and dividends and certain things that
Speaker 1: we're not really helpful to the stock. And with all
Speaker 1: the view on the last proposal, but well, I think
Speaker 1: the rating agencies with a key voice here, we have
Speaker 1: to kind of see how this play is out. But
Speaker 1: what we really want to focus on was the root
Speaker 1: of the problem, which is a perception problem that we
Speaker 1: think is really the cause of of you know, where
Speaker 1: valuations stand today. Help me with with some fact checking here.
Speaker 1: We've heard from the CEOs of GM and Ford. They've
Speaker 1: you know, made some moves, perhaps not in light of
Speaker 1: what the President has said or asked them to do,
Speaker 1: but they've decided to keep some factories here, move some
Speaker 1: production here to the US, and that's been in the
Speaker 1: works for for a long time. Something that struck me
Speaker 1: when I heard Mark Fields talk after one of these
Speaker 1: one of these news items, was this is something that
Speaker 1: made financial sense, didn't have anything to do with with politics.
Speaker 1: Is there truth to that is? And if that's the case,
Speaker 1: why did it take the company so long to do
Speaker 1: what it's done? Sure? Yeah, no, absolutely. And there's something
Speaker 1: we wrote about even last night that well, we're watching
Speaker 1: for how does the industry react as auto sales plateau?
Speaker 1: And I mean to be talking last segments about some
Speaker 1: of the pressure points that you're seeing. And certainly, you know,
Speaker 1: one of the questions we've gotten for an investors of
Speaker 1: the past few years is why are automakers adding capacity
Speaker 1: when auto sales are plaque coming? You see companies take
Speaker 1: that back, Yeah, you kind of score point for rational
Speaker 1: behavior whause exactly what you want to see um at
Speaker 1: this point of the cycle. So there's a lot of
Speaker 1: capacity coming in and we have to watch that very carefully. Yeah,
Speaker 1: I gotta look at a chart, and if I want
Speaker 1: to look at a long term chart to get forward,
Speaker 1: because they're the only ones that didn't go out of business,
Speaker 1: I guess I could look at the Europeans as well.
Speaker 1: Sell me here, and why is an institution or a
Speaker 1: long term retail investor I want to own these dogs?
Speaker 1: I mean they're cyclical, six percent total return for four
Speaker 1: in the last ten years. Help me? Or are they
Speaker 1: going to become like the airline stocks where they grow
Speaker 1: up and finally deliver massive cash flow or is it
Speaker 1: the same old cyclical story of metal benders in Detroit? Short?
Speaker 1: So clear, you know we we don't recommend Ford where
Speaker 1: neutral on Ford have been for the last few years,
Speaker 1: but the GM we we do recommend sisty one dollar
Speaker 1: price target. And here's the thing that most of the
Speaker 1: profits here come from a segment that is bigger than
Speaker 1: it's been in many many years. Pick up trucks. Three
Speaker 1: players have over market share. Think about how fragmented the
Speaker 1: global automotive industry is, and you have these companies and
Speaker 1: this is why we're seeing earnies confirmations in spite of
Speaker 1: all the pressure points that we talked about in the
Speaker 1: last segment. Um At the same time, you have, I think,
Speaker 1: but what is an overlooked that's call a self help
Speaker 1: story over the longer term where you know a lot
Speaker 1: of talk to me about autonomous and shared mobility connected cards.
Speaker 1: We do a lot of work on this, and a
Speaker 1: lot of investors tend to you rightfully focus on the
Speaker 1: suppliers who will provide content on these more advanced vehicles,
Speaker 1: but there's not as much attention on who the future
Speaker 1: mobility providers and specifically the mobility networks of tomorrow are
Speaker 1: going to be. And we think that that in the
Speaker 1: automaker space, there's gonna be some select opportunities, winners and losers,
Speaker 1: and we think GM is one of those opportunities. Me
Speaker 1: here though with their GM dividend payout ratio, they got
Speaker 1: five six seven gazillion dollars in free cash flow. They're
Speaker 1: running it like they did thirty years ago. When do
Speaker 1: I get a real dividend payout from these people? Yeah?
Speaker 1: I mean they're paying on a pretty healthy dividend of
Speaker 1: about two and a half billion per year, they're buying backstops,
Speaker 1: they've got a pretty um tight capital allocation policy from
Speaker 1: all free cash flow going to shareholders and either investing
Speaker 1: in UM this year incremental six and fimillion dollars just
Speaker 1: an autonomous UM technology alone. So we actually we're seeing
Speaker 1: investment and we're seeing some pretty decent kind of capital returns.
Speaker 1: Thank you so much it Tay mcaulley with US was
Speaker 1: sitting greatly appreciate it. Any auto. This is what we
Speaker 1: love to do. This is what this is what surveillance
Speaker 1: is about. Jamie Butters one day, who's a genius on
Speaker 1: the whole Detroit thing, and then an expert like Mr mccaulley.
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