Speaker 1: Brunch you by Bank of America Mary Lynch with virtual reality,
Speaker 1: virtually everything will change. Discover opportunities in a transforming world
Speaker 1: be of a mL dot Com, slash VR, Mary Lynch,
Speaker 1: Pierced Fenner and Smith Incorporated. Ye, Welcome to the Bloomberg
Speaker 1: Surveillance Podcast. I'm Tom Keene with David Gura. Daily we
Speaker 1: bring you insight from the best of economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg with
Speaker 1: Us Edward S. Hyman, who is a rumored to actually
Speaker 1: watch every once in a while. He's with ever Corps.
Speaker 1: I s I and I want to get back to
Speaker 1: the economy into what you many would say invented, and
Speaker 1: that is the linkage of the economy into the equity markets.
Speaker 1: This is a chart you and I know from Yale Management.
Speaker 1: I've put it in terms of the Dow and not
Speaker 1: the SMP on radio, folks, It's a gorgeous shot of
Speaker 1: the depression in nine percent change log chart and up
Speaker 1: we go and we just seem to prosper along the way.
Speaker 1: Do you still have a belief in American exceptionalism and
Speaker 1: in American capitalism way over my head. I'm I'm a practitioner,
Speaker 1: and right now it looks like it's continuing to prosper. Uh.
Speaker 1: This is a very important chart in that, uh, we're
Speaker 1: learning more and more that the more the stock market
Speaker 1: goes up, the more it helps uh optimism and consumer spending,
Speaker 1: capital spending, and that's what's been going on. Also, house
Speaker 1: prices have been going up, and the two together lift
Speaker 1: consumer net worth and that's been driving the economy. But
Speaker 1: that is an exceptional chart, and uh, well, I'd love
Speaker 1: to take credit for it, but I think Mr Ibbotson
Speaker 1: over at Yelle Management maybe would want to take credit
Speaker 1: for this iconic log chart pick really years ed Hyman.
Speaker 1: Within that, though, what's changed is the belief that there
Speaker 1: are John Edwards to America's can we prosper and can
Speaker 1: we all do better? Given the polarities that we see
Speaker 1: in our society like in the healthcare debate today. So uh,
Speaker 1: I think that if the economy keeps growing, uh, those
Speaker 1: disparities will uh dissipate a little bit. But the main
Speaker 1: thing I'm focused on is for the bottom of the
Speaker 1: economy to get better. The top is doing fine. Uh.
Speaker 1: And the main thing that needs to happen to get
Speaker 1: that to work is for wages to accelerate. And I've
Speaker 1: been disappointed in that. I thought wages by now would
Speaker 1: be over three and there's still about two and a
Speaker 1: half p uh at the unemployment rate today is four
Speaker 1: point three, as you know, and I think it will
Speaker 1: be three and a half a year from now. And uh,
Speaker 1: it's just you know, continue to press on that. And
Speaker 1: if that's true, Uh, then the odds are pretty good
Speaker 1: that wages will pick up and that will help the
Speaker 1: bottom of the economy. But how do you explain actually
Speaker 1: that there was almost no wage growth? Is it the
Speaker 1: quality of jobs being created in the US? Or is
Speaker 1: it that CEO still don't feel very bright about the future,
Speaker 1: that the animal spirits that we were talking about just
Speaker 1: having really fully taken shape, fransty And I was, I was.
Speaker 1: I was scared you would ask about that, because I
Speaker 1: really I can't figure it out. When I travel around,
Speaker 1: I don't hear about wages going up. Unemployment, like you know,
Speaker 1: is really low. Unemployment claims are really low. Uh. So
Speaker 1: my best guess is I just have to be patient
Speaker 1: and maybe in two thousand eighteen, wages will finally start
Speaker 1: to really pick up. But as your question alludes to,
Speaker 1: wages are not picking up in where they're not picking
Speaker 1: up in the UK and not picking up in Australia
Speaker 1: and Canada the other Anglo Saxon English speaking countries, all
Speaker 1: of which have low unemployment rates. But uh, I think
Speaker 1: it will happen later on in this cycle. But do
Speaker 1: you think it's and I know this is the impossible
Speaker 1: question because actually we we've been asking so many people
Speaker 1: and no one has the answer, which it goes back
Speaker 1: also to the productivity puzzle. But do you think it's
Speaker 1: psychological if central banks, for example, suddenly started raising rates
Speaker 1: when that shocks CEOs into thinking that their world was
Speaker 1: becoming harder, but but that the picture was rosier? No,
Speaker 1: I think I think francying what will make wages go
Speaker 1: up is that eventually you just won't have enough labor. Uh,
Speaker 1: And whether it's in the energy space or in educational space,
Speaker 1: people will start paying up or they'll start losing workers.
Speaker 1: I do think that technology has been playing a role
Speaker 1: were uh, technology has been replacing workers. And I think
Speaker 1: that you're still, as you've mentioned, an overhang where we
Speaker 1: they'll remember a little bit the O eight oh nine. Uh,
Speaker 1: you know, big depression and uh. People are scared about that,
Speaker 1: both in terms of asking for a pay increase and
Speaker 1: for managers giving a big pay increase. Him and I
Speaker 1: think the comments on the jobs are so important that
Speaker 1: I want to go to this chart. We give Dean
Speaker 1: macke formerly Barclay's point seven to a lot of credit
Speaker 1: for a four percent view on unemployment. Here's the recent
Speaker 1: leg down to a better unemployment and had to recapitulate
Speaker 1: this out a year or so. You see as a
Speaker 1: three and a half percent, which is better than we
Speaker 1: were in the glory times of two thousand. Do we
Speaker 1: get growth with that great unemployment rate? We get the
Speaker 1: same we've been having. You get something like two maybe
Speaker 1: three percent growth. But all during that big drop in
Speaker 1: on the unemployment rate from tan down to four point three,
Speaker 1: growth has been just about two. My view on unemployment
Speaker 1: going to feint appercent was inspired by Dean Mackie. That's so,
Speaker 1: that's funny you bring him up three and a half
Speaker 1: unemployment by next year. Tom, this took me by surprise.
Speaker 1: I know it took you by surprise. I just want
Speaker 1: to hear a little bit more from from ed where
Speaker 1: where are the industries that will lose the most jobs? Frency.
Speaker 1: Let me explain how I get there. Earlier we looked
Speaker 1: at the unemployment claims if you remember that chart down
Speaker 1: so much, and the unemployment rate and unemployment claims stack
Speaker 1: up pretty closely. And so the unemployment claims are the
Speaker 1: ticket to why I think unemployment is going to come
Speaker 1: down to three and a half percent. Uh. The places
Speaker 1: that jobs are being created, as I mentioned earlier, in
Speaker 1: the healthcare, higher education, the tech space, the new tech space,
Speaker 1: and then sports and entertainment. Those are the places where
Speaker 1: local economies are being driven. I mean, he claims Charter
Speaker 1: her Francine is extraordinary. Again, this is claims adjusted for
Speaker 1: population growth in America, and and it really talks about
Speaker 1: one part of America you mentioned earlier, bringing the bottom
Speaker 1: up as well. Is that done by policy or within
Speaker 1: a locky in society? Is it done by the corporations
Speaker 1: and investment? Has that become organic? We're in a self
Speaker 1: feeding expansion. Uh, and that's the end for the end
Speaker 1: of it. It It becomes pulling in. But right now these
Speaker 1: sectors that I mentioned are coming together, and you also
Speaker 1: have the millennials, and they're driving things. They're giving an
Speaker 1: energy to local economies like Denver is just sort of
Speaker 1: booming in the time we got left. I want to
Speaker 1: know your thoughts in the future of global Wall Street
Speaker 1: in New York, in London, and for that matter, in
Speaker 1: our other geographies like Hong Kong and Dubai. It's pretty tough,
Speaker 1: you know, the whole financial services business on the by side,
Speaker 1: on the South side, it's a tough industry. I'm not
Speaker 1: sure it's gonna get any better within the by side.
Speaker 1: Are they still gonna buy ed Hyman research than I hope?
Speaker 1: So this is important, but at a at a lower scale,
Speaker 1: at a lower scale, Roger Altman in Bonus, Roger Edheim
Speaker 1: is with us and the Red Sox are in first play.
Speaker 1: Fred Seed, Yeah, te him. I like that. We need
Speaker 1: to thank ed Edwards Great ed Hyman of eb CRIS.
Speaker 1: I sincerely hope you come back very soon. I don't
Speaker 1: want to start you with Mark Felli. He's the global
Speaker 1: Chief investment Officer at ubs A Wealth Management. Mark great
Speaker 1: to speak with you. As I mentioned, joining us from
Speaker 1: Zurich today, you look at the FT one and you
Speaker 1: look at it in dollar terms, it's back to where
Speaker 1: it was before that Brexit vote one year ago. Today.
Speaker 1: What does it tell us? What is what is this
Speaker 1: crazy journey of the last year. Say to you about
Speaker 1: about the market? Well, of course the uh, you know,
Speaker 1: the foot seats done okay, but the the tound has
Speaker 1: been whacked against the dollar or something like. And I
Speaker 1: think you know what we've seen post the Great Financial
Speaker 1: Crisis is just how much these currencies are the shock
Speaker 1: absorber for some of the more political geopolitical move what's
Speaker 1: your your outlook for sterling? How much has that changed
Speaker 1: here in recent months? As we had that speech that
Speaker 1: Theresa May gave before Parliament, as of course she had
Speaker 1: the snap elections. Are the results of that? Now she
Speaker 1: heads to Brussels for this EU as someone, how much
Speaker 1: has it changed? Yeah, So we think that a lot
Speaker 1: of the negative uh for the pound versus David dollar
Speaker 1: have been priced in as Terrason May had signaled she'd
Speaker 1: be willing to go for a hard Brexit. So we've
Speaker 1: got it at one spot thirty over the six months.
Speaker 1: And I think that what I would say though, is
Speaker 1: we do sort of think that this Brexit will be
Speaker 1: a ticking time bomb where you know, much like these
Speaker 1: grease negotiations, they kind of go along and go along,
Speaker 1: but nothing really gets done until you get down to
Speaker 1: the wire. So it's it's going to be interesting to trade,
Speaker 1: to trade around the UK assets for the next two years.
Speaker 1: What do you make of of what she had to
Speaker 1: say at this semit, ensuring the rights of those in
Speaker 1: the European Union who have been living in Britain for
Speaker 1: more than five years, providing a plan for those who
Speaker 1: have been there for less than five beginning to develop
Speaker 1: some of the strictures she'd like to see in place.
Speaker 1: I believe with the hopes here of appeasing those in
Speaker 1: the European Union and those who are from the European
Speaker 1: Union living in the UK who are worried about their
Speaker 1: their status there, does that provide more certainty just getting
Speaker 1: those broad contours of a plan that she outlined over
Speaker 1: the over the last couple of days. Yeah, I don't
Speaker 1: think it does. I think that what is I think
Speaker 1: that the UK is trying to uh awfer or negotiate.
Speaker 1: But you know that if you listen to what Europe saying,
Speaker 1: you know it's not a supermarket. You can't pick and choose.
Speaker 1: We're listening. They they have their own views, particularly around
Speaker 1: the free movement of people. Um and and I think
Speaker 1: they're going to end up dictating more of the terms
Speaker 1: than than the UK. Good morning, David Garra. Where were
Speaker 1: you a year ago? Watch all of the sunfold? I
Speaker 1: was actually at it. There was a British pub near
Speaker 1: murray Hill the early evening and why isn't a shocked
Speaker 1: girl was in a Brooklyn bar, probably having some overprice
Speaker 1: British Mark Mark Hafway with us with ubus Mark. Where
Speaker 1: were you a year ago? I remember it very well.
Speaker 1: I was on the shores of Lake Como meeting with
Speaker 1: fun managers, all watching the tape and and I remember
Speaker 1: we all went to bed very late, feeling rather sanguine,
Speaker 1: and we all started texting each other at four am.
Speaker 1: What you know? What is going on exactly? And that
Speaker 1: you know? First of all, let me commented, girls in
Speaker 1: a bar in Afway's in Lake Como and I'm stuck
Speaker 1: in I'm stuck at his studio in London with John Farrow.
Speaker 1: I don't know what that's about. Um. It was really
Speaker 1: remarkable to see that late night, David. And really there
Speaker 1: was a whisper at ten pm London time, and then
Speaker 1: the whole next day was just real. I remember folks
Speaker 1: having dinner exhausted after literally no sleep for thirty hours
Speaker 1: in Brown's Hotel over on the edge of Mayfair, and
Speaker 1: the quiet on the streets. David Gerrow, I will never
Speaker 1: forget the rest of my life. It was absolutely surreal. Mark.
Speaker 1: Let me ask you about what we learned about the
Speaker 1: euro Area today, recording its fastest expansion in six years
Speaker 1: in the second and second quarter. How optimistic are you
Speaker 1: about Europe right now? Where do you see opportunity in
Speaker 1: the Eurozone? Yeah, so we do like Europe. We are
Speaker 1: overweight the Euro versus the dollar, and we're overweight European
Speaker 1: equities versus UK equities. Uh and and and when you
Speaker 1: when you look more glad. We're gonna talk about emerging
Speaker 1: markets here in just a little while on the show.
Speaker 1: But where do you see opportunity in the emerging markets?
Speaker 1: Are you? Are you of the camp here saying that
Speaker 1: amid all of the concern over the central banking and
Speaker 1: the prospects of fiscal reform, tax reform here in the
Speaker 1: US developed markets, are emerging markets are more attractive. We're
Speaker 1: not saying that emerging markets are more attracts it currently
Speaker 1: as a group, I think for the emerging markets to
Speaker 1: do well, uh, we think they'll they'll do Okay, you
Speaker 1: need that base. We believe of the certainly the United
Speaker 1: States doing well, and I think, um, you know, we
Speaker 1: prefer to stay in developed markets, but certainly within within
Speaker 1: the emerging markets, uh, places like China should continue to
Speaker 1: do well. What do people do that aren't in the market.
Speaker 1: They look at the valuations. They keep it simple in
Speaker 1: their analysis. They look at price to earnings. How do
Speaker 1: you rationalize the acquisition of shares right now? Mark? Yeah,
Speaker 1: I think that the key sense the financial crisis has
Speaker 1: remained central bank policy as a driver. That's what's taken
Speaker 1: so much volatility out of this system. And to me,
Speaker 1: I don't want to over the over reductivist here, but
Speaker 1: with that inflation low, the central banks continue to have
Speaker 1: room to maintain this oversized stimulus and that has been
Speaker 1: supportive for markets and supportive of very low interest rates.
Speaker 1: So I think what's new that people have to somewhat
Speaker 1: new is people need to weigh that against when they
Speaker 1: want to call the end of this cycle. How do
Speaker 1: you counsel clients to to navigate the low volatility that
Speaker 1: we have seen and continue to see, how how do
Speaker 1: you deal with that particular challenge. Well, it uh. It
Speaker 1: has created an opportunity for investors who are concerned about
Speaker 1: draw downs to add some relatively cheap protection uh for
Speaker 1: you know, for equity industry. So that's a popular way
Speaker 1: of dealing with it um. And then you know the
Speaker 1: the other one. I think what we found is we
Speaker 1: actually just surveyed our clients and over them think that
Speaker 1: this is the most uncertain period in history. And and
Speaker 1: it's very interesting when you compare that what the markets
Speaker 1: are telling us new highs uh and very low volatility.
Speaker 1: And I think it I think it gets to this
Speaker 1: dynamic of forces that are extraordinary today, such as central
Speaker 1: bank polity, which we we know eventually will end, and
Speaker 1: our look out on a future which is much more uncertain,
Speaker 1: where governments are in play, national debt is high, and
Speaker 1: population changes are are moving demographics all over the world.
Speaker 1: And I think part of what we have the Council
Speaker 1: Investors on is to take those two separate buckets and
Speaker 1: separate them a little bit. Cubs at with a new
Speaker 1: white paper. Millennials, the global guardians of capital mark let
Speaker 1: me ask you, first of all, how millennials regard wealth,
Speaker 1: wealth creation, accruing wealth, and what they intend to do
Speaker 1: with them. It's a great question. What I think we
Speaker 1: found is so interesting is that there are a lot
Speaker 1: of stereotypes about millennials, this generation born between two and
Speaker 1: that they're very selfish and me centered, and actually we've
Speaker 1: found kind of the opposite. Uh. The majority of them
Speaker 1: are willing to forego, for example, some upshuntder turn in
Speaker 1: their investments if those investments are more sustainable or have
Speaker 1: a better impact on society. So that that is one
Speaker 1: of the trends that I think is very important for
Speaker 1: us to look at. And of course, millennials are increasingly
Speaker 1: inheriting from the baby boomer generation and soon are going
Speaker 1: to have twenty four trillion in wealth in their command.
Speaker 1: Do they have a different inclination of what they'd like
Speaker 1: to invest in? Uh? When it comes to the types
Speaker 1: of companies, the types of sectors they're interested in the
Speaker 1: social responsibility of those those companies in particular, how do
Speaker 1: you how do you adjust to deal with that? Well,
Speaker 1: it has forced us to adjust in in some ways,
Speaker 1: but I think in very positive ways of kind of
Speaker 1: helped us to be emboldened to make a commitment of
Speaker 1: investing five billion dollars over the next five years in
Speaker 1: impact investing too, to open that up investments that not
Speaker 1: just have a financial return but also help help society,
Speaker 1: and that I think for us is one of the
Speaker 1: key differences. But actually on some of these things like
Speaker 1: digital uptake and like sustainability, millennials may lead the way,
Speaker 1: but it's something that we see as a water shift
Speaker 1: for our entire investing. Really to me, folks, just so
Speaker 1: you know, the twenty four trillion dollar wealth transfer that's
Speaker 1: happening at the keen household, that's most of that most
Speaker 1: John Tucker, that's most of the transferrees are many many
Speaker 1: were their all their middle names or tuition um mark.
Speaker 1: When you when you look at the millennials, and I'm
Speaker 1: not sure the age bracket, to me, the distinctive feature,
Speaker 1: seriously is their lack of economic growth. We have so
Speaker 1: many kids in their twenties even in their thirties who
Speaker 1: have never known what we call normal g d P.
Speaker 1: Are they ever going to see the normal economic growth
Speaker 1: we all enjoyed? Well, you know, I think that this
Speaker 1: this view of what is normal, you know, three three
Speaker 1: percent growth plus in in the United States. We're all
Speaker 1: we're all waiting for the comeback of that. I think
Speaker 1: I think it's still possible if some of what the
Speaker 1: millennials are doing around connectivity uh starts to trickle out
Speaker 1: of our Look look just looking at social media and
Speaker 1: into things like more productivity in the health care sector
Speaker 1: for example, that that would be one of my one
Speaker 1: of my hopes, or more productivity and connected transportation systems
Speaker 1: and more automation there So that I do believe the
Speaker 1: still hope to get some of those millennials out of
Speaker 1: their parents basement, right, Mark Cafley, thank you so much,
Speaker 1: out of their parents based maybe with them paying their
Speaker 1: own phone bill. Well, Mark Cathley's with u BIS brought
Speaker 1: you by Bank of America. Mary Lynch with virtual reality
Speaker 1: virtually everything will change, Discover opportunities in a transforming world.
Speaker 1: B of a, mL dot Com, slash VR, Mary Lynch,
Speaker 1: Pierced Fenner and Smith Incorporated. We had a great conversation
Speaker 1: this morning with Edward Hyman of evercreps I S I
Speaker 1: Two things. First of all, he said he really cares
Speaker 1: about p M I S, Like when Bloomberg has a
Speaker 1: p M I S Hyman lean sorre. He really I
Speaker 1: was surprised. He really emphasized the value he gets out
Speaker 1: of p m I, purchasing managers, Indexes, and of course
Speaker 1: the other thing which I think will make global headlines
Speaker 1: this weekend. He believes in a three and a half
Speaker 1: percent unemployment. Right, we're not at full full full employment. Listen,
Speaker 1: very good, very good, closing the right now, closing. We
Speaker 1: wanted to get Craig Moffett in with Moffatt Nathanson, Uh,
Speaker 1: just just to talk about the chaos of the Michael
Speaker 1: Nathanson Craig Moffatt world. Craig, sort of an open discussion
Speaker 1: this morning, wonderful day. Have you with us? What part
Speaker 1: of your world is most chaotic? Now? Um? Well, I
Speaker 1: I can speak from my distribution side better than than Michael's, right,
Speaker 1: but we want both both, but both are pretty chaotic.
Speaker 1: Um And in some ways I think you know the
Speaker 1: real action is going on right at the intersection between
Speaker 1: the two, in that the launch of all of these
Speaker 1: new virtual um M v p d s as they're called,
Speaker 1: or or virtual cable operators, the the YouTube TVs and
Speaker 1: you lose and what have you. UM is a fascinating
Speaker 1: thing to watch, and there's you know, one of the
Speaker 1: simplest observations out of all of this is you've got
Speaker 1: all of these people that are in ring the business
Speaker 1: for seemingly some other reason besides that pedestrian objective of
Speaker 1: actually making money. Um. You know, you've got Google and
Speaker 1: YouTube that seemed to be entering it because they want
Speaker 1: to eventually leverage it for advertising revenue, so they don't
Speaker 1: care whether they make any money on the product itself.
Speaker 1: And you've got Hulu that's trying to do it, um
Speaker 1: to support distribution of the network, so they aren't interested
Speaker 1: in actually making any money on the distribution business. Um.
Speaker 1: You've got direct TV that's using it as a way
Speaker 1: now to help sell wireless subscriptions. And so you're getting
Speaker 1: products that used to be sold at a hundred dollars
Speaker 1: in the market for thirty five dollars and nobody's makes
Speaker 1: any money and it's driving down. Okay, this is exactly
Speaker 1: who I wanted to go. And and the dovetail of this,
Speaker 1: folks is I really look, I look like everybody else.
Speaker 1: I look at the ratings in the industry, and Craig
Speaker 1: I would suggest Mr Trump has been good for cable
Speaker 1: TV news like you know, good morning at MSNBC to
Speaker 1: Laurence O'Donnell, who's just killing it behind Rachel Maddow with
Speaker 1: his work. I mean, Larry's just killing it in TV.
Speaker 1: Can you subscribe, Craig to the idea that cable TV
Speaker 1: is done? Well, No, cable tv is not done. But
Speaker 1: remember when you say cable tv, cable tv is not
Speaker 1: a single business. It's really a whole value chain. It's
Speaker 1: a whole bunch of businesses, right. Um. When some people
Speaker 1: mean cable TV, they mean the video distribution coming from
Speaker 1: people like Comcast and Charter and Direct TV. Other people.
Speaker 1: When they say k the cable tv, they mean the
Speaker 1: networks themselves, Um, whether it's CNN or or UM or
Speaker 1: the smaller ones Bravo or the integrated ones like Turner
Speaker 1: in USA. Other people. When they say cable tv they
Speaker 1: mean the production of the shows, so HBO or what
Speaker 1: have you. Those are all part of a big ecosystem,
Speaker 1: and there's some strengths in there, some weaknesses in that ecosystem. Think,
Speaker 1: generally speaking, the production of content, so the studio side
Speaker 1: is actually quite healthy these days. There's a lot of
Speaker 1: good content being produced and they're still finding lots of
Speaker 1: places to sell it and make money. The the aggregation
Speaker 1: function of content, that is the concept of a cable
Speaker 1: network is less healthy. Um. The concept of taking a
Speaker 1: bunch of different shows and creating a schedule out of
Speaker 1: them that runs twenty four hours a day, is starting
Speaker 1: to be a pretty anachronistic concept, right, So, so the
Speaker 1: value of the of the network piece is not that hot.
Speaker 1: The value of the distribution sides falling apart. The physical
Speaker 1: layer of distributions great broadband and and if you're a
Speaker 1: physical infrastructure provider like a cable operator, that's fine. But
Speaker 1: if you're aggregating those networks and selling them to consumers
Speaker 1: like direct TV or addition network um, and you don't
Speaker 1: have a broadband business, well, that's not a good place
Speaker 1: to be. Where are we in terms of experimentation? In
Speaker 1: other words, you have a lot of these these cable
Speaker 1: networks and providers trying any number of ways to distribute content.
Speaker 1: Are we still just trying to figure out what works,
Speaker 1: throwing something at the wall to see what sticks? Or
Speaker 1: is there a company? Are there companies who have figured
Speaker 1: this out? We're now seeing others emulate them. It's a
Speaker 1: great question. I think I would say we're in sort
Speaker 1: of iteration one dotto, which is to say, we're still
Speaker 1: in the phase where the old media companies UM, that is,
Speaker 1: the media companies that we think of today as the
Speaker 1: big media companies, the Disneys and the Viacoms and the
Speaker 1: Foxes and what have you, are trying all of these
Speaker 1: new combinations of the old content UM to try to
Speaker 1: make the perfect skinny bundle, so to speak of is
Speaker 1: it that customers want Discovery but they don't want t
Speaker 1: N T Or is it that they want UM ESPN
Speaker 1: but they don't want Fox Regional Sports or whatever it is.
Speaker 1: And people are trying all these different combinations. But that's
Speaker 1: what I mean by one dotto. UM. In some ways,
Speaker 1: that's sort of a it's it's sort of a training
Speaker 1: wheels type ified to say that what we're really looking
Speaker 1: for is just a reaggregation of the old content. What's
Speaker 1: much more revolutionary is going on in the background UM
Speaker 1: with probably a lot less attention, but but ultimately they
Speaker 1: may be more important that whole types of consumption are
Speaker 1: are crowding out the concept of traditional Well, let's let's
Speaker 1: come back, Craig. We're gonna have to come back on
Speaker 1: this right now. This is really important conversation Craig Moffett
Speaker 1: on how we consume all this media and can anybody
Speaker 1: make any money out of down the road will continue
Speaker 1: with Craig Moffatt of Moffatt Nathanson. Craig, you know spectrum
Speaker 1: enterprises all these phone lines out there. What I see
Speaker 1: are two major players, Verizon as an example, with a
Speaker 1: too good to be true five dividend. What thinketh you
Speaker 1: a Verizon's dividend? Is it a legit utility dividend? Well,
Speaker 1: you know, it's a great question, and the I think, yeah,
Speaker 1: Look then in the short term is Verizon's dividend is fined? Um?
Speaker 1: But but the there is a fair um point you raise.
Speaker 1: And when you mentioned Spectrum Business Services your sponsor, um,
Speaker 1: that's a big segment for Verizon and A T and T.
Speaker 1: And where Spectrum Business Services getting its customers from from
Speaker 1: Verizon and A T and t. Um. We just published
Speaker 1: a note earlier this week that points out the end
Speaker 1: of last week that points out so the let's take
Speaker 1: A T and T for a second, their commercial wire
Speaker 1: line services business, something that nobody spends any time talking about.
Speaker 1: You hardly ever get a question about if people all
Speaker 1: want to talk about wireless, postpaid net ads and r
Speaker 1: poos and things like that. The wire line business services
Speaker 1: at a T and T is larger than the entire
Speaker 1: company of Time Warner that they're buying. It's bigger than
Speaker 1: the studio, the cable networks, HBO, um Warner Brothers, the
Speaker 1: whole thing combined, and it's shrinking now at seven percent
Speaker 1: a year because of the rate that cable is taking
Speaker 1: market share UM in the enterprise segment and the business
Speaker 1: services segment UM. It makes it incredibly hard for A
Speaker 1: T and T UM and Verizon um to actually grow
Speaker 1: as companies because there's so many places where they face
Speaker 1: competition um. That and and as the so called incumbents
Speaker 1: in those businesses, they have nowhere to go but down.
Speaker 1: Let me ask you about the so called triple bundle,
Speaker 1: the triple play. Now, looking at a quad play, are
Speaker 1: we likely to have that four things coming together as
Speaker 1: one you you'll be able to get I mean, help
Speaker 1: me help me with what just the fourth thing would be?
Speaker 1: That would be mobile services as well. Yes, yeah, the
Speaker 1: quad play has historically meant uh meant adding mobile to
Speaker 1: the mix, although you do have to wonder how much
Speaker 1: longer UM the one of the other legs of the stool,
Speaker 1: the wired voice business, UM is really all that relevant
Speaker 1: business UM. And now, as we were talking about in
Speaker 1: the last segment, there are there are questions about the
Speaker 1: linear delivery of video. Is video really a separate business anymore?
Speaker 1: Or is video just a different stream of ones and
Speaker 1: zeros delivered over the broadband pipe that somebody else, whether
Speaker 1: it's Hulu or Amazon or Google, is ultimately selling UM
Speaker 1: and so the cloud play may collapse back down. That said,
Speaker 1: there's there is clearly a convergence coming between wired infrastructure
Speaker 1: and wireless infrastructure. Those two infrastructures are starting to look
Speaker 1: more and more like each other. If you take wireless
Speaker 1: networks and you make them denser and denser and denser
Speaker 1: to support more and more and more users and more
Speaker 1: and more data, well those networks start to look more
Speaker 1: and more like wired networks. They start to look like
Speaker 1: a wired network with lots of small wireless endpoints on
Speaker 1: the end. And in some ways that's what a wired
Speaker 1: network is today. To right, you're you don't connect to
Speaker 1: your cable system via either net cable anymore. You connect
Speaker 1: to your cable via wireless, hidpoint case WiFi. We've we've
Speaker 1: seen Apple sort of dip its toe into the creation
Speaker 1: of content recently. Here. Do you think that we're going
Speaker 1: to see here in the near term of the medium
Speaker 1: term a Silicon Valley company getting into production in a
Speaker 1: in a bigger way. Well, already Amazon is doing that.
Speaker 1: Um and Uh, there are a lot of people who
Speaker 1: would say that Netflix is a Silicon Valley company. Um
Speaker 1: and so yeah, I think that's that's clear. Whether we'll
Speaker 1: see Apple do that, I don't know. I wouldn't. I
Speaker 1: wouldn't pretend to have any particular insight into what Apple
Speaker 1: strategic plans are with respect to content creation. Um. You'll
Speaker 1: certainly see um more and more activity around bidding for rights,
Speaker 1: and in some ways those two things are quite analogous.
Speaker 1: You know, there's always talk about will the NFL, um well,
Speaker 1: will alternative distribution player bit for the NFL, And eventually
Speaker 1: the answer is probably yes. Kraig Moffatt where this will
Speaker 1: be with them in a second here Moffatt Nathanson. This morning,
Speaker 1: there's a really interesting headline out of Europe. Mr McCraw
Speaker 1: of France and Chancellor Miracle of Germany are holding a
Speaker 1: joint news conference after the EU summit. Friends in Aqua
Speaker 1: made clear to me this morning this is a big
Speaker 1: deal that they will hold. Basically the briefing is a
Speaker 1: joint summit. Will have much more on that. Mr Macrosse.
Speaker 1: As Europe needs France Germany working together. I guess no
Speaker 1: surprise they're separately in Brussels. Mr Tusk of the European
Speaker 1: Union says Prime Minister Mayz citizens offer is below our expectations.
Speaker 1: That as a prelude to maybe hearing from Prime Minister
Speaker 1: may Mr Younger speaking right now as well, David Gura, Yeah,
Speaker 1: you know, I I wonder where you see Craig likely
Speaker 1: combinations in the future. What's going to drive consolidation for
Speaker 1: their consolidation in the distribution space. UM. My guess is
Speaker 1: UM that you'll see less of it than than people think.
Speaker 1: UM the one that everybody talks about, and for good reason,
Speaker 1: because it's the one that is truly likely. It's eventually
Speaker 1: sprint in t mobile. UM will will make a real
Speaker 1: effort to come together. How quickly that will happen, I
Speaker 1: don't know, because there's lots of complicated questions about valuation
Speaker 1: and complicated questions about regulatory and that sort of thing.
Speaker 1: But I think they both come to the conclusion that
Speaker 1: all these other alternatives for each of them weren't really
Speaker 1: all that real to begin with, and so they're going
Speaker 1: to end up end up with each other. Outside of that,
Speaker 1: it's harder to say. And all Teeth is talking about
Speaker 1: they'd love to own Cox. There was an article earlier
Speaker 1: this week UM that so would Charter. But I don't
Speaker 1: think Cox is for email um and so I don't
Speaker 1: see a lot of more consolidation coming in cable. I
Speaker 1: don't see Cable buying a wireless operator, even though people
Speaker 1: like to talk about that all the time. UM. And
Speaker 1: and so most of the this stuff is really just
Speaker 1: arm waving at this point. I think the big deals
Speaker 1: are probably going to be fewer and further between the
Speaker 1: people things very quickly. When you and Michael Nathanson are
Speaker 1: in speaking terms and you're talking about where the value
Speaker 1: is in the market, where is the value within the
Speaker 1: Moffatt Nathanson space. Um. It's hard to sound creative and
Speaker 1: surprising about this, but right now, the businesses that are
Speaker 1: gaining the most share and have the most value are
Speaker 1: probably still the Googles and facebooks and the ones that
Speaker 1: continue to gain UM the advertising dollars at the fastest pace. UM.
Speaker 1: So Michael likes those stocks. UM. There are some value plays,
Speaker 1: some rebounds. I like, for example, Verizon. I think Verizon
Speaker 1: is is oversold and is is a better business than
Speaker 1: most people give it credit for. But it's not a
Speaker 1: structurally great business. UM. Cable is a structurally great business.
Speaker 1: But the valuations are right reflected. So there's fewer there's
Speaker 1: fewer real opportunities on my side of the coverage, the
Speaker 1: distribution side, probably than there are in Michael's in the
Speaker 1: internet and content. We gotta cut you off. Craig Moffatt,
Speaker 1: Thank you so much generous of you to join us
Speaker 1: on a Friday away from your clients. Mr Moffatt works
Speaker 1: with Michael Nathanson. Moffatt Nathanson. We protect their copyright. I'm
Speaker 1: not going to send you out. They're gorgeous. Hulu charts
Speaker 1: about Hulus. I don't even know what Hulu is, David,
Speaker 1: Hula hl It's like you get TV, you get t
Speaker 1: I'm too old for this. I want to zee us
Speaker 1: with rabbit ears, David girl. Why don't you have the
Speaker 1: privilege of bringing in the gentleman from Bose. Yes, that
Speaker 1: would be Max boch is, former US Ambassador to China,
Speaker 1: former US Senator from Montana. Of course, he was the
Speaker 1: chairman of the Senate Committee on Financing. In that capacity
Speaker 1: had a big role in getting the Affordable Care Act
Speaker 1: through the Senate through Congress. I wonder, first of all,
Speaker 1: what you would counsel your Democratic colleagues at this point.
Speaker 1: It seems like there were plenty of Republicans who were
Speaker 1: upset with how this process unfolded, the secret secrecy surrounded
Speaker 1: the drafting of this piece of legislation. What should Democrats
Speaker 1: do now allow all of this to play out, Allow
Speaker 1: Republicans to hash out what this bill looks like, what
Speaker 1: the what's gonna turn what what the draft is going
Speaker 1: to turn into? Or should they take a more active
Speaker 1: role here? Well, hope springs eternal um and if I
Speaker 1: were in the Senate Council, let's try that's sit down
Speaker 1: with Mr for coonell Um. Let's see if they can
Speaker 1: work something out here that's um or both parties are
Speaker 1: talking to each other. I think that's a bit difficult
Speaker 1: to achieve. That's probably a bridge too far. Alternatively, I
Speaker 1: would just explain what's in the bill. I would expose
Speaker 1: what's in the bill. It is an outrage. Frankly, it
Speaker 1: is a huge transfer of wealth from lower income people
Speaker 1: to upper income people. That is cutting healthcare benefits for
Speaker 1: the lower income people in the Medicaid and transfer that
Speaker 1: to a big tax cut for the most wealthy. You know,
Speaker 1: that's just it's just a mean spirited bill. And it's
Speaker 1: more that's exposed. The more that's known, the more I
Speaker 1: think buying a good service to American people. Next question
Speaker 1: is do you stand up and Philiposter and tried to stop.
Speaker 1: I don't know the Republicans will be able to use
Speaker 1: procedural tactics to get the bill up and vote on it.
Speaker 1: After all, there are other majorities so they control the rules. Um.
Speaker 1: So I would explain more why this is a bad idea.
Speaker 1: Help us understand the way the majority leader works. I
Speaker 1: know that you've worked along aside him for for many years.
Speaker 1: Uh is he is he going to resist taking a
Speaker 1: bill to the floor if he doesn't have the votes?
Speaker 1: Give us give us a sense of sort of his
Speaker 1: his his ability to get get a bill from draft
Speaker 1: to the to the center floor. He's gonna sales take
Speaker 1: to the or even though he doesn't have the votes.
Speaker 1: But I think that's a bit of a bluff. Um.
Speaker 1: He's trying to bluff conservatives, mostly because if he says
Speaker 1: he takes the bill of the floor, and then the
Speaker 1: Conservatives have to, oh, gosh, maybe have to go along
Speaker 1: with this thing after all, even though a lot of
Speaker 1: the Conservatives don't like it. Um. In the end, I
Speaker 1: don't know. Mitch is a very smart man. He's he's
Speaker 1: he's probably one of the best politicians in the political sense.
Speaker 1: Knows how to count votes better than anybody else I've
Speaker 1: ever met. My doubts he'll take it to the floor
Speaker 1: unless he has the votes. But having said that, having
Speaker 1: said that, he will probably find a way that you
Speaker 1: have to vote. The magic number here is fifty. Squeeze
Speaker 1: the arms, the Conservatives, squeeze arms are some moderates until
Speaker 1: he gets fifty. Let me ask you lastly, hear what
Speaker 1: the Democrats message should be. We heard from the former
Speaker 1: president saying this was a mean bill. You're you're echoing
Speaker 1: some of the comments that that he made. What should
Speaker 1: the Democratic Party's message be here? As you do have
Speaker 1: Americans across this country who were wondering about the future,
Speaker 1: about the integrity of the Affordable Care Act. Well, that's
Speaker 1: a very deep question. When we worked on Affordable Care
Speaker 1: Act back in two thousand and ten, we addressed a
Speaker 1: very basic question, that is, should healthcare be determined by
Speaker 1: the marketplace, you know, free for all, or should healthcare
Speaker 1: be rights that all Americans should enjoy. And there are
Speaker 1: two provisions in the bill that get at that. One
Speaker 1: is the individual mandate, the other's employer mandate. Now we
Speaker 1: put those in because we felt at the time that
Speaker 1: we're all in this together. All Americans are in this
Speaker 1: together when it comes to healthcare, and other countries have
Speaker 1: solved that question. All other countries have individual mandates or
Speaker 1: employer mandates. They have a system where they've decided that
Speaker 1: they are one country and the healthcare is not something
Speaker 1: that's determined by the market. We have to decide that question,
Speaker 1: all right, Mr Ambassador, Thank you ver much. As always,
Speaker 1: that's Max Bochus, the former US Ambassador to China, former
Speaker 1: U S Senator from Montana. Of course, long it's any
Speaker 1: chairman of the Senate Committee on Finance joining us from
Speaker 1: Montana on our phone lines. Earlier this morning, the acclaimed
Speaker 1: economist Justin Wolfers of Michigan tweeted out a brutal tweet
Speaker 1: which basically said, this is what I think about healthcare.
Speaker 1: Look at the Cato Institute even they want Obamacare. He
Speaker 1: joined us yesterday. Thank you so much for your huge
Speaker 1: response to Michael Cannon's appearance, both pro and con. Michael
Speaker 1: Cannon joining us briefly here this morning. Michael, you wrote
Speaker 1: a scathing note this morning, late last night, and within
Speaker 1: it you say, uh, it would be better if they
Speaker 1: did nothing. Why do you say that? I'm shocked at
Speaker 1: the Cato Institute is going against any flavor of Republican
Speaker 1: inciding with President Obama. You know, Max Baca said a
Speaker 1: lot about how other nations have solved healthcare, about how
Speaker 1: he took lots of money from some people to give
Speaker 1: it to other people. And you know, if that improved healthcare,
Speaker 1: I might be for that sort of thing. But it
Speaker 1: just does it whether you look at this country or
Speaker 1: other countries. And uh, what Obamacare has done is increased
Speaker 1: the cost of health insurance, reduced the quality of health insurance,
Speaker 1: cause markets to collapse. Why he wants to build on
Speaker 1: that failure? I don't know why Republicans. Why Republicans are
Speaker 1: trying to preserve that. Well, I guess we can figure
Speaker 1: out why. But it's not what they promised to do.
Speaker 1: It's not what um, it's not what voters elected them
Speaker 1: to do, and it's not going to improve healthcare. Do
Speaker 1: you presume there will be a vote that will test
Speaker 1: the medal of moderates and conservative Republicans well as Max
Speaker 1: Bauchus said, Mr McConnell will not bring this bill to
Speaker 1: the floor unless he has the votes. So if so,
Speaker 1: it all depends on whether he can get those four
Speaker 1: conservatives who said they cannot support the bill in its
Speaker 1: current form. Uh to to to get on board and
Speaker 1: uh and right now, as as I said in that
Speaker 1: piece that you mentioned, we posted a kid to at
Speaker 1: Liberty the Cato blogged, Uh, this bill is not a
Speaker 1: step in the right direction, and it would take something
Speaker 1: substantial to make this a step in the right direction.
Speaker 1: They would have to expand health savings accounts dramatically compared
Speaker 1: to what they do in in this bill. They would
Speaker 1: have to repeal community rating, which is the heart of
Speaker 1: Obamacare and is causing all the higher premiums, low quality coverage,
Speaker 1: and instability. You you gave us your five questions yesterday
Speaker 1: what you're gonna be looking for when that bill came
Speaker 1: out at hundred forty plus pages, imagine you're you're waiting
Speaker 1: through with trying to see what's in it. Libertarians read
Speaker 1: the footnotes, they read the go to the books. Uh, Michael,
Speaker 1: what stood out to you? What you what are you
Speaker 1: most concerned about in this? In this legislation, the Straft legislation,
Speaker 1: what's most concerning is that it actually expands Obamacare in
Speaker 1: significant respects. You know, Max Bauchus and his colleagues when
Speaker 1: they passed to Obamacare, they authorized something called cost sharing
Speaker 1: reduction payments. This is a bailout to insurance companies who
Speaker 1: participate in Obamacare's exchanges. They authorize that spending, but they
Speaker 1: never actually funded those subsidies. And Republicans are proposing to
Speaker 1: do that. So they're proposing to expand expand Obamacare beyond
Speaker 1: what Democrats created. They are also proposing to expand the
Speaker 1: another subsidiy available through the exchanges, the Premium Assistance tax
Speaker 1: credits to people below the poverty level in states that
Speaker 1: did not expand Medicaid, which is just not only expands
Speaker 1: the exchange subsidies, so it expands one Obamacare entitlement, but
Speaker 1: it's in effect a medicaid expansion by another means. So
Speaker 1: Republican Republicans and Congress are saying to Republicans in the
Speaker 1: nineteen states that did not implement Obamacare's medicaid expansion, We're
Speaker 1: going to override your decision. Michael Cannon, thank you on
Speaker 1: short notice for joining us. We greatly appreciate your commitment
Speaker 1: to the show here and yesterday as well. Mr Cannon
Speaker 1: is with a Cato Institute, a libertarian think tank in Washington.
Speaker 1: I think his opinions are very well known, and we
Speaker 1: do think all of our listeners, those pro Obamacare, those
Speaker 1: pro Trump Care, those pro trying to get the kids
Speaker 1: camp physical in because everybody is books solid and every doctor,
Speaker 1: any of you, We greatly appreciate it. Thanks for listening
Speaker 1: to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews
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