WEBVTT - Oath Increased Its Users By More Than 10% In Q4: CEO Armstrong 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.919 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. I'm 0:00:33.000 --> 0:00:37.160 very pleased to introduce Tim Armstrong, chief executive officer of Oath, 0:00:37.400 --> 0:00:40.720 which is a subsidiary of Verizon follow following their acquisition 0:00:40.800 --> 0:00:44.199 of Yahoo ao L. He comes to us from the 0:00:44.240 --> 0:00:48.440 Consumer Electronics Show in Las Vegas. Tim, thank you so 0:00:48.520 --> 0:00:50.760 much for being with us. I want to start by 0:00:50.800 --> 0:00:54.160 asking what exactly does Oath want to be? Does it 0:00:54.200 --> 0:00:57.200 want to be a content provider, a major search engine, 0:00:57.600 --> 0:01:02.880 or a media distribution platform. So, Lisa, thanks for having 0:01:02.920 --> 0:01:06.200 me on. Uh, let's take a giant step back and 0:01:06.240 --> 0:01:08.959 I'll explain Oath in the context of where the world's 0:01:09.000 --> 0:01:13.680 going from a consumer standpoint. UH, there's one really significant 0:01:13.720 --> 0:01:16.640 trend that we're seeing across all types of media right now, 0:01:16.680 --> 0:01:21.240 which is the acceleration of consumers adopting mobile as their 0:01:22.040 --> 0:01:26.280 content medium of choice. Verizon is a company that has 0:01:26.520 --> 0:01:31.199 is a global leader in network technology, broadband and wireless, 0:01:31.360 --> 0:01:34.119 and is now on the forefront and and the leader 0:01:34.160 --> 0:01:36.480 in five G which is going to bring even more 0:01:36.520 --> 0:01:40.720 connectivity and bandwidth the consumers. Verizon acquired ao L and 0:01:40.840 --> 0:01:46.400 Yahoo informed Oath to essentially bring what is the linear 0:01:46.440 --> 0:01:50.040 transition of content into the mobile world. And we are 0:01:50.160 --> 0:01:52.440 one of the leaders in the world right now of 0:01:52.520 --> 0:01:56.000 mobile content and distribution for consumers. So when you ask 0:01:56.320 --> 0:02:02.000 what Oath is, Oath is a moble media company that's 0:02:02.000 --> 0:02:04.480 attached to one of the best mobile companies in the world, Verizon, 0:02:05.000 --> 0:02:09.640 and our goal is to superserve consumers and things like sports, news, 0:02:10.000 --> 0:02:14.639 finance video. We just announced yesterday that we're going to 0:02:14.760 --> 0:02:19.040 be broadcasting on mobile live video the four NFL games 0:02:19.440 --> 0:02:22.960 and the United States UH this weekend, the playoff games. 0:02:23.000 --> 0:02:26.040 So as a consumer, you can download the Yahoo Sports 0:02:26.080 --> 0:02:30.800 app and instantaneously watch the NFL games the playoff games 0:02:30.800 --> 0:02:34.040 this weekend. And for consumer who loves mobile and who's 0:02:34.040 --> 0:02:37.840 on mobile UH, that is an unbelievably great experience and 0:02:37.880 --> 0:02:41.000 a real, real visionary on Verizon's part to think about 0:02:41.040 --> 0:02:45.079 the mobile consumers not just a wirelessly connected UH network connection, 0:02:45.440 --> 0:02:48.000 But what's the service and what's the content love that 0:02:48.080 --> 0:02:50.480 consumers have? And that's really what Verizon's goal is is 0:02:50.520 --> 0:02:53.600 to bring a lot more great services to the mobile consumer. 0:02:53.840 --> 0:02:58.000 Is the idea here that the mobile consumer looks at 0:02:58.040 --> 0:03:01.959 different information or uses media in a different way than 0:03:02.040 --> 0:03:05.560 just streaming UH and any device or is it that 0:03:06.120 --> 0:03:09.880 you can get different ad AD dollars for for mobile 0:03:09.880 --> 0:03:15.639 specific streaming? Yeah, the you know the mobile consumer. First 0:03:15.639 --> 0:03:18.639 of all, the mobile consumers we see at the high end, 0:03:18.720 --> 0:03:21.480 meaning the consumers that consume the most un mobile have 0:03:21.680 --> 0:03:24.760 crossed over the TV amount of time per day. So 0:03:24.800 --> 0:03:27.560 the high end mobile consumers right now are consuming about 0:03:27.560 --> 0:03:32.040 four hours of content a day on their phones. And 0:03:32.160 --> 0:03:36.400 that's important because basically those the phones become a personalized 0:03:36.440 --> 0:03:40.160 cable box to a large degree, and the experiences that 0:03:40.240 --> 0:03:42.800 consumers have are able to get more and more personal 0:03:42.800 --> 0:03:45.320 and more and more targeted. So if you think in 0:03:45.360 --> 0:03:47.600 the future whether or not a consumer would want to 0:03:47.600 --> 0:03:52.640 trade off their their mobile personalized content consumption and go 0:03:52.720 --> 0:03:55.119 back to more of a linear consumption, I think most 0:03:55.120 --> 0:03:57.920 consumers would say no. So the business model is to 0:03:58.200 --> 0:04:03.000 superserve consumers on moble with content and services. The revenue 0:04:03.040 --> 0:04:06.240 part of Verizon's business in our business is to also 0:04:06.360 --> 0:04:09.520 super serve the advertisers with mobile, and I think if 0:04:09.520 --> 0:04:13.000 you look at the ad market today, most customers are trump. 0:04:13.160 --> 0:04:15.119 Most of our ad customers are trying to figure out. 0:04:15.160 --> 0:04:16.359 First of all, they were trying to figure out how 0:04:16.400 --> 0:04:19.400 to go from linear to the internet. Mobile came out 0:04:19.400 --> 0:04:22.960 of nowhere and surpassed just about every usage metric you 0:04:22.960 --> 0:04:24.720 can see on the Internet. So now they're trying to 0:04:24.760 --> 0:04:27.359 figure out how to go from linear to internet to mobile. 0:04:27.480 --> 0:04:30.040 And we have one of the most significant ad platforms 0:04:30.040 --> 0:04:33.599 and networks between Verizon and Oath, So we're able to 0:04:34.400 --> 0:04:37.159 super serve what the next generation of advertising is going 0:04:37.200 --> 0:04:39.599 to be. And we have a great program, great product, 0:04:39.920 --> 0:04:42.039 and great platform to do that in a lot of 0:04:42.120 --> 0:04:45.520 data to help customers target. So that that's the simple 0:04:45.560 --> 0:04:48.480 business model, but very powerful in terms of how we're 0:04:48.480 --> 0:04:51.720 thinking about the future. Tim Marmstrong, how do you respond 0:04:51.760 --> 0:04:56.920 to questions about the price tag? Verizon spent more than 0:04:57.080 --> 0:05:00.440 nine billion dollars on a o L and yeah, who 0:05:00.720 --> 0:05:03.560 I understand that it's going to cost about a billion 0:05:03.600 --> 0:05:07.000 and a half for these NFL the four NFL games 0:05:07.040 --> 0:05:12.359 that you mentioned, when do shareholders get to see a 0:05:12.480 --> 0:05:15.960 return on that more than ten billion dollars on what 0:05:16.080 --> 0:05:20.320 seems like now a content deal rather than a tech deal. 0:05:22.560 --> 0:05:25.200 So PIM, I would say, you know, basically, one of 0:05:25.200 --> 0:05:27.159 the things that just to take a step back on 0:05:27.240 --> 0:05:30.280 that on that question is, um there's only three or 0:05:30.320 --> 0:05:33.760 four companies on the planet that have a billion consumers 0:05:33.800 --> 0:05:37.320 on digital and mobile. Oath is one of them. If 0:05:37.360 --> 0:05:39.800 I told you today was your first day on planet Earth, 0:05:40.279 --> 0:05:45.400 and you had Amazon, Ali Baba, Facebook, Google, Apple and 0:05:45.400 --> 0:05:48.320 those companies, and what those valuations were, and then there's 0:05:48.360 --> 0:05:52.040 a company that is purely based on mobile and purely 0:05:52.080 --> 0:05:55.919 based on internet technology that had a billion users, and 0:05:55.960 --> 0:05:58.800 I said that a company was able to acquire that 0:05:58.880 --> 0:06:03.200 company for billion dollars, you'd for one time's revenue. For 0:06:03.240 --> 0:06:06.080 what those companies do, I would say, singularly, it might 0:06:06.120 --> 0:06:08.960 be the best M and a transaction for the future 0:06:09.360 --> 0:06:12.440 ever done. The second thing I would say is when 0:06:12.480 --> 0:06:14.400 you look at the M and a landscape of what's 0:06:14.400 --> 0:06:16.640 happened in the media landscape and how much people have 0:06:16.800 --> 0:06:20.240 paid for media acquisitions, and then I told you we 0:06:20.279 --> 0:06:23.359 did the NFL deal, which is probably the most powerful 0:06:23.839 --> 0:06:26.719 content and sports and live sports which people are really 0:06:26.760 --> 0:06:29.600 competing for. And it was on mobile and it was 0:06:29.640 --> 0:06:32.280 a five year deal and we had a billion users 0:06:32.279 --> 0:06:35.760 show two in a hundred millions members have Verizon. Again, 0:06:35.800 --> 0:06:37.760 I think you'd say, in comparison to the other m 0:06:37.760 --> 0:06:41.480 and a content deals, smart deal, smartly done at the 0:06:41.560 --> 0:06:45.640 smart at smart prices. So I I would uh, I'd 0:06:45.640 --> 0:06:49.400 put a totally opposite look on your question, which is, 0:06:50.240 --> 0:06:52.479 if I describe the assets we have, the fact that 0:06:52.520 --> 0:06:54.560 we're mobile and the fact that we have great content 0:06:54.600 --> 0:06:57.600 and great brands, what would that be worth in comparison 0:06:57.640 --> 0:07:01.000 to the other valuations at other companies? Um, I think 0:07:01.040 --> 0:07:05.480 it's an unbelievably great opportunity for Verizon shareholders to play 0:07:05.560 --> 0:07:09.240 in the new economy. And Verizon is investing in five G, 0:07:09.400 --> 0:07:11.800 so we we feel really good about like the future 0:07:11.840 --> 0:07:15.400 strategy and where things are going. Tim Uh, you say 0:07:15.400 --> 0:07:19.200 that oath has more than one billion users now, and 0:07:19.240 --> 0:07:23.120 I'm just wondering how much that has grown over the 0:07:23.200 --> 0:07:29.560 past year and whether it's been accelerating decelerating. What's the trend? Like? Yeah, 0:07:29.600 --> 0:07:33.080 so our our trend is basically our business basically a 0:07:33.120 --> 0:07:37.360 mobile Uh, you know, grew double digit percent in Q 0:07:37.640 --> 0:07:40.320 four overall, and even in comparison to some of the 0:07:40.360 --> 0:07:45.040 other UH social platforms and mobile platforms, we had what 0:07:45.080 --> 0:07:48.080 i'd say is probably top quartile growth UH in Q 0:07:48.360 --> 0:07:51.440 four overall. And then as a service level, I'll give 0:07:51.440 --> 0:07:54.440 you another example in mail for instance, which is a 0:07:54.480 --> 0:07:56.400 major product for US, where we have hundreds of millions 0:07:56.400 --> 0:08:00.400 of people that use our email products. Emails surpassed mobiles 0:08:00.440 --> 0:08:03.800 are passed desktop there so I think we're seeing the 0:08:03.880 --> 0:08:06.840 exact growth we want, which is the transition from desktop 0:08:07.400 --> 0:08:11.800 to mobile, and our overall consumer usage base has been 0:08:11.800 --> 0:08:15.240 growing and we expect that to continue to happen with 0:08:15.360 --> 0:08:18.440 mobile for for two reasons. One is our services are 0:08:18.440 --> 0:08:22.520 getting better targeted and getting on more mobile phone tops. 0:08:22.280 --> 0:08:25.080 The second reason is there's another three billion people that 0:08:25.120 --> 0:08:27.600 are going to be connecting to mobile and skipping the 0:08:27.600 --> 0:08:30.480 Internet and going directly to mobile. And because we have 0:08:30.640 --> 0:08:33.440 very good mobile products, we expect to get growth not 0:08:33.600 --> 0:08:36.680 just in the US, but also globally on our brands 0:08:37.080 --> 0:08:40.559 and services and our ad business from that that new 0:08:40.600 --> 0:08:43.280 adoption of mobile that's happening globally. I want to thank 0:08:43.280 --> 0:08:46.599 you very much, Tim Armstrong. He is the chief executive 0:08:46.800 --> 0:08:51.120 of Oath, a subsidiary of Verizon. He's speaking to us 0:08:51.440 --> 0:09:12.199 from the Consumer Electronics Show in Las Vegas earlier this year. January, 0:09:12.520 --> 0:09:16.439 California State Teachers Retirement System one hundred and ninety billion 0:09:16.480 --> 0:09:21.000 dollar pension, joined with Jana Partners to issue a letter 0:09:21.120 --> 0:09:25.320 to Apple. Uh. Calisters is actually a pretty big shareholder 0:09:25.400 --> 0:09:27.480 in Apple as well as Jana Partners, and they were 0:09:27.559 --> 0:09:31.640 asking for a study to look at how using iPhones 0:09:32.200 --> 0:09:35.320 would affect children in particular. I want to spring in 0:09:35.520 --> 0:09:38.840 and she hand. She's director of corporate Governance for Calisters. 0:09:39.040 --> 0:09:42.160 Joining us from Sacramento, California, and thank you so much 0:09:42.200 --> 0:09:44.559 for joining us. I just want to start with how 0:09:44.679 --> 0:09:50.080 this letter came about. Did Calisters reach out to Jana Partners? Uh, 0:09:50.160 --> 0:09:53.319 did Jana come to you? And what was sort of 0:09:53.320 --> 0:09:57.120 the motivation behind it? Thanks and thanks for having me well. 0:09:57.320 --> 0:10:00.640 I've had a long standing relationship with Jana Partners. UM. 0:10:00.679 --> 0:10:03.679 They are one of the activist investors, as you know, 0:10:03.920 --> 0:10:07.160 out in the market, and we have a relationship with 0:10:07.200 --> 0:10:09.679 all the activists we employ. Some Janna is not one 0:10:09.720 --> 0:10:12.320 of our managers, but I've known those folks, I've worked 0:10:12.320 --> 0:10:15.280 with them and collaborated with them on some other issues 0:10:15.440 --> 0:10:18.679 on their whole foods. We were um talking to them 0:10:18.720 --> 0:10:20.440 about that and some of the work that they did 0:10:20.520 --> 0:10:22.720 in Falcom. So I've had a long standing relationship with 0:10:22.760 --> 0:10:26.520 Barry Rosenstein and Charlie Penn are from them, and so 0:10:26.600 --> 0:10:30.199 we are frequently talking about issues of mutual interest to 0:10:30.240 --> 0:10:33.079 both of us. With regard to companies, Janna knows that 0:10:33.240 --> 0:10:38.840 Calsters is a long time s G focused investor. We 0:10:38.920 --> 0:10:40.560 spent a lot of time here in the corporate governance 0:10:40.600 --> 0:10:43.040 program on talking to companies about issues that we think 0:10:43.120 --> 0:10:46.200 are concerns and risks to the portfolio and to the 0:10:46.240 --> 0:10:48.800 performance of the company in the long run. So as 0:10:48.800 --> 0:10:50.560 I've talked to Janna about some of our E s 0:10:50.600 --> 0:10:53.200 G issues and they had talked to me about beginning 0:10:53.240 --> 0:10:55.680 to think about putting an E s G type of 0:10:55.720 --> 0:11:00.120 fund together, UM we came up with the idea of 0:11:00.120 --> 0:11:04.120 of combining and talking to Apple about this issue. So 0:11:04.200 --> 0:11:07.240 it made sense. Apple is a our single largest holding 0:11:07.280 --> 0:11:09.840 in our global equity portfolio. I have a very good 0:11:09.840 --> 0:11:12.760 relationship with the Apple folks. They've always been very responsive 0:11:13.160 --> 0:11:15.319 and we felt that this was a good important issue 0:11:15.360 --> 0:11:19.439 as we've seen the compelling research about the impact and 0:11:19.480 --> 0:11:21.680 the more research that's coming about about the impact of 0:11:21.760 --> 0:11:25.200 some of these products, not just the social media issues 0:11:25.200 --> 0:11:27.960 of Facebook and all, but also the impact of the 0:11:27.960 --> 0:11:31.280 iPhones on kids. And so we thought this is an 0:11:31.280 --> 0:11:33.640 issue that we showed raise with the company, see what 0:11:33.679 --> 0:11:36.280 they're doing, See if they could do more, because for 0:11:36.400 --> 0:11:40.680 us a counselors, it represents a potential risk to the performance, 0:11:40.679 --> 0:11:43.160 the long term performance of the company, and so our 0:11:43.200 --> 0:11:45.280 goal was to bring this to the attention Apple, see 0:11:45.320 --> 0:11:47.560 what they're doing, See what more could be done to 0:11:47.679 --> 0:11:51.520 prevent any diminution of our value in our investment with Apple. 0:11:51.800 --> 0:11:56.040 Can you connect the dots for why uh? A lack 0:11:56.280 --> 0:11:59.000 of addressing this issue would cause a long term decline 0:11:59.000 --> 0:12:01.040 and Apple service. I think the issue is a lot 0:12:01.080 --> 0:12:05.240 of parents are very concerned about the impact of these 0:12:05.240 --> 0:12:08.480 devices with their children. We've seen the research more we 0:12:08.480 --> 0:12:11.120 we as a teacher's fund, we hear from teachers and 0:12:11.160 --> 0:12:13.360 I've we've got a lot of response back about the 0:12:13.440 --> 0:12:15.600 letter that we have sent from teachers who have seen 0:12:15.840 --> 0:12:18.160 what is going on in the classroom with these and 0:12:18.200 --> 0:12:20.920 so we see this as potentially reputational risk for Apple, 0:12:21.559 --> 0:12:25.240 and so it's an opportunity to create more choices and options, 0:12:25.400 --> 0:12:28.199 which we think is good business for them, which could 0:12:28.200 --> 0:12:30.920 help their share price in the long run. When we 0:12:30.920 --> 0:12:32.960 look at some of these issues, they're very long term 0:12:33.000 --> 0:12:34.480 because we're going to be in these stocks for a 0:12:34.480 --> 0:12:38.400 long time, So we see reputational risk as a potential 0:12:38.440 --> 0:12:42.040 to hurting the performance of these portfolio companies. Now, you've 0:12:42.040 --> 0:12:45.760 got more than two hundred and fifteen billion dollars of 0:12:45.880 --> 0:12:50.120 assets under management. If you're let me just put it 0:12:50.120 --> 0:12:51.720 to you this way. If you don't like what the 0:12:51.800 --> 0:12:54.800 company is doing, or you wish they would do something else, 0:12:54.920 --> 0:12:57.599 why not just sell the stock and buy a company 0:12:57.640 --> 0:13:00.959 that you do support. So you're right. We actually have 0:13:01.040 --> 0:13:04.960 about two hundred and twenty seven billion assets under management. 0:13:05.320 --> 0:13:08.480 Over half of that is in public equities and two 0:13:08.520 --> 0:13:10.800 thirds of that the overwhelming majority of that is in 0:13:10.840 --> 0:13:14.200 the index. So we own the entire market, and as 0:13:14.280 --> 0:13:16.920 Chris Aleman our Cio likes to say, we will own 0:13:16.960 --> 0:13:18.719 the market as long as there are teachers in the 0:13:18.760 --> 0:13:22.559 state of California. So we do not believe in selling 0:13:22.720 --> 0:13:24.760 as a way to address an issue. We believe in 0:13:24.880 --> 0:13:28.599 engagement because we're going to be in the stock today, tomorrow, 0:13:28.640 --> 0:13:31.559 in ten years, and twenty years, and in fifty years. 0:13:31.600 --> 0:13:34.640 So our approach here at Counsels is to engage the 0:13:34.720 --> 0:13:38.559 companies on issues like this another risk. We've talked to 0:13:38.559 --> 0:13:41.880 a lot of companies about these types of issues. Human capital, diversity, 0:13:42.040 --> 0:13:45.680 capital allocation, whatever the issue is, is the best way 0:13:45.679 --> 0:13:49.040 to address this because we are the ultimate universal long 0:13:49.160 --> 0:13:52.720 term shareholder. And have you noticed that other big public 0:13:52.760 --> 0:13:59.079 pensions have joined you in being increasingly activist. Yes, many 0:13:59.200 --> 0:14:04.080 public funds. New York City is very active, New York State, UM, 0:14:04.160 --> 0:14:07.000 the Canadian Public Pension Fund has been active. I mean, 0:14:07.000 --> 0:14:09.840 there are many pension funds around the world that are 0:14:09.960 --> 0:14:13.640 very active in their engagements with companies. What we like 0:14:13.760 --> 0:14:17.679 to say is we're passive investors and active owners, so 0:14:17.720 --> 0:14:21.320 we engage the companies in our portfolio. Would you take 0:14:21.360 --> 0:14:25.600 the same position for the lack of women as CEOs 0:14:25.680 --> 0:14:30.760 of s I mean, I believe we have. Yes, The 0:14:30.840 --> 0:14:34.520 answer is yes. Diversity is one of our key corporate 0:14:34.520 --> 0:14:38.280 governance issues here at Calsters. We have for the past 0:14:38.480 --> 0:14:41.280 eight or ten years engage boards on the lack of 0:14:41.480 --> 0:14:44.400 women on their corporate boards, the lack of women in 0:14:44.480 --> 0:14:49.520 senior leadership, including CEOs, and so that is another issue 0:14:49.560 --> 0:14:53.080 that we cared deeply about because the research shows that 0:14:53.120 --> 0:14:55.680 if you have greater diversity inside the boardroom as well 0:14:55.720 --> 0:14:58.040 as in the workforce, including in the CEO, you get 0:14:58.120 --> 0:15:00.880 better performance in the companies. The with credit, Sweet and 0:15:01.000 --> 0:15:06.440 McKenzie have shown that diversity creates better shareholder value in 0:15:06.480 --> 0:15:08.680 the long run. So that's another issue that we have 0:15:08.760 --> 0:15:11.320 spent a great deal of time and as you can appreciate, 0:15:11.400 --> 0:15:13.720 and with a teacher's son like us, two thirds of 0:15:13.720 --> 0:15:16.600 our members are female. So it's an issue that resonates. 0:15:16.600 --> 0:15:19.160 And here in California, we're a very diverse state. We 0:15:19.240 --> 0:15:21.320 gotta leave it there, but thank you very much. And 0:15:21.480 --> 0:15:24.400 she and is director of corporate governance for a California 0:15:24.440 --> 0:15:45.320 state teachers retirement system that's Calisters and they're based in Sacramento, California. 0:15:46.160 --> 0:15:49.560 How will US public policy affect your investments? Well, one 0:15:49.600 --> 0:15:52.200 person to ask is Michael Jesus. He is the chief 0:15:52.320 --> 0:15:56.520 US public Policy and municipal Strategists for Morgan Stanley. He 0:15:56.600 --> 0:15:59.120 joins us in our eleven three oh studios. Michael, thank 0:15:59.160 --> 0:16:01.080 you for being here, thanks for having so maybe just 0:16:01.200 --> 0:16:04.040 outline I know that You've got three policy channels that 0:16:04.080 --> 0:16:07.560 you say investors ought to pay attention to. What are they? Well, 0:16:07.600 --> 0:16:12.120 it's regulatory, legislative, and trade. Um. The legislative one is 0:16:12.160 --> 0:16:15.400 fairly simple. Uh, if you look at what's on the agenda. Uh. 0:16:15.520 --> 0:16:17.680 The only thing that we think really kind of matters 0:16:17.680 --> 0:16:19.840 to market in the macro economy is whether or not 0:16:19.840 --> 0:16:22.760 to get an infrastructure deal done. Um. In our view, 0:16:22.840 --> 0:16:25.080 the politics of getting that deal done before the midterm 0:16:25.080 --> 0:16:26.760 are really tough. And then we've got a lot of 0:16:26.800 --> 0:16:29.880 questions about the efficacy of the policy itself, right, which 0:16:29.880 --> 0:16:31.480 I could go into detail too if you want, But 0:16:31.800 --> 0:16:34.400 where it's basically telling investors is this is something you 0:16:34.400 --> 0:16:36.880 need to educate yourselves on and maybe the midterms is 0:16:36.920 --> 0:16:39.360 going to open up a channel to an infrastructure spend. 0:16:39.480 --> 0:16:42.080 That's uh. That that's a boost to the economy, but 0:16:42.440 --> 0:16:44.160 it's not as near term risk as some of these 0:16:44.160 --> 0:16:46.720 other channels, namely the trade channel, where you actually have 0:16:46.760 --> 0:16:49.400 some hard deadlines in the next six weeks or so, 0:16:49.720 --> 0:16:51.800 where the administration is going to make some decisions that 0:16:51.800 --> 0:16:53.960 are going to tell us whether or not we're actually 0:16:53.960 --> 0:16:56.920 moving in a somewhat more protection this direction. I want 0:16:56.920 --> 0:17:00.400 to home in on the trade issue, because we haven't 0:17:00.440 --> 0:17:03.160 talked as much about that and that has the greatest 0:17:03.200 --> 0:17:07.879 potential in the short term to cause some serious market disruption. 0:17:08.119 --> 0:17:10.560 So can you walk us through the deadlines that we're 0:17:10.600 --> 0:17:15.760 facing and what the potential market response would be. Yeah, So, 0:17:15.880 --> 0:17:20.000 I mean, just quick background. The President has the authority 0:17:20.040 --> 0:17:23.040 under a number of different US laws to issue tariffs, right, 0:17:23.520 --> 0:17:26.280 and whether or not those tariffs are in compliance with 0:17:26.440 --> 0:17:28.280 w t O rules a sort of a moot point. 0:17:28.280 --> 0:17:31.480 The administration can do it if they want to. UM. 0:17:31.520 --> 0:17:34.159 There are a number of actions that were started last 0:17:34.240 --> 0:17:36.480 year under a couple of different trade laws, the most 0:17:36.520 --> 0:17:40.200 notable one in the nine four Trade Act UM, which 0:17:41.000 --> 0:17:43.560 have now moved past kind of the study period, and 0:17:43.680 --> 0:17:46.480 the administration has to decide whether or not the institute tariffs, 0:17:46.480 --> 0:17:51.520 so on January twenty six in February two respectively, UM, 0:17:51.640 --> 0:17:53.840 the administration has to decide whether or not it's going 0:17:53.920 --> 0:17:59.320 to put tariff on solar panels and on washing machines. Right, 0:17:59.359 --> 0:18:01.679 and you seem a little narrow, but these would be 0:18:01.720 --> 0:18:04.920 the first hypothetical actions, UM, which could be a signaling 0:18:04.920 --> 0:18:07.920 of a more protection that's bent. On January fifteenth January 0:18:07.920 --> 0:18:09.960 twenty one. There are reports do so they don't trigger 0:18:10.000 --> 0:18:12.280 actions per se, but there are reports do on steel 0:18:12.359 --> 0:18:15.000 and aluminum that are supposed to recommend whether or not 0:18:15.040 --> 0:18:17.560 the administration that's supposed to begin a tariffing regime on 0:18:17.600 --> 0:18:23.160 those products. So the possible market response is that washing 0:18:23.200 --> 0:18:27.760 machines and solar panels get more expensive or is it? What? What? What? 0:18:27.760 --> 0:18:29.320 What are we looking for here? Yeah, well, you know, 0:18:29.359 --> 0:18:32.440 it's interesting that there's a lot of data about how 0:18:32.480 --> 0:18:35.600 at the end of the year overseas manufacturers of washing 0:18:35.640 --> 0:18:39.400 machines actually up their exports into the US and anticipation 0:18:39.520 --> 0:18:42.040 of some of these risk kind of coming to fruition. 0:18:42.119 --> 0:18:44.440 So whether or not you're washing machines about to cost 0:18:44.480 --> 0:18:47.720 more or less, it's kind of an open question. But um, 0:18:47.760 --> 0:18:50.760 I mean, I think obviously we're we're studying this pretty carefully. 0:18:51.119 --> 0:18:54.240 FX markets are going to be an obvious potential kind 0:18:54.240 --> 0:18:57.560 of shock absorber for this. Uh. The easiest thing to 0:18:57.560 --> 0:19:01.359 say on this is that when there were general fears 0:19:01.400 --> 0:19:03.640 about the US being a little more protectionist, it showed 0:19:03.680 --> 0:19:08.640 up in dollar PASO UM and hero meeting declined against 0:19:08.640 --> 0:19:11.159 the dolls. Yeah, I would, I would expect that you 0:19:11.160 --> 0:19:15.440 would see that be kind of a similar signaling mechanism, because, UM, 0:19:15.480 --> 0:19:18.280 certainly the Trump administration would not be the first administration 0:19:18.720 --> 0:19:20.960 to pursue kind of a single product terror if the 0:19:20.960 --> 0:19:24.440 Bush administration did this temporarily in the early two thousands. 0:19:24.440 --> 0:19:27.400 But given that they were talking about a broader, more 0:19:27.440 --> 0:19:31.560 protectionist regime like exiting NAFTA, UM, any kind of single 0:19:31.600 --> 0:19:34.840 product action might be a signal that they're going to 0:19:34.920 --> 0:19:37.440 take a harder stance on NAFTA. I'm glad you brought 0:19:37.480 --> 0:19:41.000 up NAFTA because Tom Donohue, who was the president of 0:19:41.000 --> 0:19:45.679 the US Chamber of Commerce, in a speech today, said 0:19:46.040 --> 0:19:50.040 that withdrawal from NAFTA by the Trump administration would be 0:19:50.080 --> 0:19:53.720 a quote grave mistake. He says, the bottom line is 0:19:53.840 --> 0:19:57.639 growth will be weakened, not strengthened or sustained if we 0:19:57.760 --> 0:20:02.399 pulled back from trade. So, if indeed that were to happen, 0:20:02.480 --> 0:20:07.480 would that just offset whatever economic gains are being predicted 0:20:07.560 --> 0:20:11.920 or estimated because of the tax overhaul bill. Yeah. I 0:20:11.960 --> 0:20:14.600 mean here we rely on kind of the studies from 0:20:14.680 --> 0:20:17.719 various third parties, and I think the economic consensus is, 0:20:18.200 --> 0:20:20.119 you know, I don't know, it's a one for one offset. 0:20:20.240 --> 0:20:23.440 But in the near term, there's there there's some you know, 0:20:23.560 --> 0:20:27.080 there's definitely some contraction that offsets the stimulus that you're 0:20:27.240 --> 0:20:30.440 that you're getting in here. Um, you know, how it's 0:20:30.440 --> 0:20:33.320 executed obviously, is there's a lot of devils in the 0:20:33.400 --> 0:20:35.640 details there. But I think yeah, I mean, it's fair 0:20:35.680 --> 0:20:38.880 to say that the market is going to consume this 0:20:38.960 --> 0:20:42.560 as not growth friendly for lack of bear's room. Michael, 0:20:42.600 --> 0:20:45.440 have you ever in your career gotten more calls from 0:20:45.480 --> 0:20:50.800 clients wondering what is going on? Um? Probably on election night, 0:20:50.960 --> 0:20:56.800 but yes, no, no, no, I mean the fourth quarter 0:20:56.880 --> 0:20:59.760 of last year was just a sort of barrage of 0:21:00.119 --> 0:21:03.240 tax questions, right and unfortunately have some colleagues are really 0:21:03.240 --> 0:21:05.399 good on the minutia of tax policy to help us 0:21:05.400 --> 0:21:09.800 out on that, and um, you know, now we're onto Obviously, 0:21:10.320 --> 0:21:13.080 infrastructure is still a big incoming question. But trade is 0:21:13.119 --> 0:21:16.200 definitely picking up now because a lot of these things 0:21:16.240 --> 0:21:19.399 were a little little minutia aspects of the law and 0:21:19.480 --> 0:21:22.320 vote counting and process that didn't matter, and they matter 0:21:22.440 --> 0:21:24.800 a lot right now. Michael Jesus, thank you so much 0:21:24.920 --> 0:21:28.119 for joining us. Michael Jesus, Chief US Public Policy and 0:21:28.200 --> 0:21:32.280 municipal strategist for Morgan Stanley. So if you see an 0:21:32.320 --> 0:21:47.880 increase in the price of a washing machine, you'll know why. 0:21:50.880 --> 0:21:52.920 Right now, I want to bring in Vincent Piazza, senior 0:21:52.920 --> 0:21:57.000 equity energy analysts and global sector leader for Bloomberg Intelligence. Vincent, 0:21:57.760 --> 0:22:01.239 I feel like there is an increase seeing amount of 0:22:01.680 --> 0:22:04.399 disagreement when it comes to the price of crude. You 0:22:04.440 --> 0:22:07.639 have some saying that OPEC will try to talk down 0:22:07.720 --> 0:22:10.480 prices if oil top seventy dollars a barrel, where a 0:22:10.600 --> 0:22:14.040 city group sees the price of crude climbing towards eighty 0:22:14.040 --> 0:22:17.160 dollars a barrel, which we be paying most attention to here. 0:22:17.400 --> 0:22:20.960 I think we always have this type of vociferous debate 0:22:21.040 --> 0:22:24.679 around New Year, right Uh. A new year starts, we 0:22:24.720 --> 0:22:27.320 look ahead and try and read all of the tea leaves. 0:22:27.920 --> 0:22:31.800 Um conclusion is no one really knows, right um. What 0:22:31.840 --> 0:22:35.760 we have today is a a two pronged attack. Right 0:22:35.840 --> 0:22:41.600 You have OPEC trying to control capacity to really control 0:22:41.680 --> 0:22:45.199 that price, and you have prices now bleeding into the 0:22:45.400 --> 0:22:49.800 sixty dollar range, which allows US operators to turn on 0:22:49.840 --> 0:22:52.840 to spigot again. Right uh. And we we've talked about 0:22:52.840 --> 0:22:56.840 this from time to time. The resilient output, the shorter 0:22:57.000 --> 0:23:02.520 cycle response of US and U shale to this UH 0:23:02.800 --> 0:23:09.520 price signal and production has been extremely resilient. We're marching 0:23:09.560 --> 0:23:12.760 towards UH nine point seven nine point eight million barrels 0:23:12.800 --> 0:23:18.119 per day. We were looking at output over ten million 0:23:18.119 --> 0:23:21.960 barrels per day estimates we've seen for twenty nine point 0:23:22.040 --> 0:23:24.879 to roughly eleven million barrels per day for the US. 0:23:25.119 --> 0:23:30.240 So the resiliency of output continues to press forward, and 0:23:30.359 --> 0:23:33.680 that does concern um OPEC because what tends to happen 0:23:33.760 --> 0:23:38.080 is as that price bleeds higher, compliance with output curbs 0:23:38.680 --> 0:23:41.640