Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Masser and Tim stinebec from Bloomberg Radio.
Speaker 1: We're going to stay with the economy. Get to a
Speaker 1: story that is among the most read on the Bloomberg
Speaker 1: about how it's frequently argued that once our economy gets
Speaker 1: past this burst of inflation, interest rates will in fact
Speaker 1: fall back to their pre pandemic lowse kind of just
Speaker 1: talking about that and perhaps go lower in the future.
Speaker 1: What if that is wrong? This is in a new
Speaker 1: Bloomberg opinion column by Alison Schrager. She covers economics. She's
Speaker 1: a senior fellow at the Manhattan Institute, author of An
Speaker 1: Economist Walks Into a Brothel and Other Unexpected Places to
Speaker 1: Understand Risk. She's with us via zoom uh in New
Speaker 1: York City. Alison, I'm so glad you're here. Wanted to
Speaker 1: talk to you. Um, let's get to this assumption we
Speaker 1: were just talking about with Mike and Creed. There is
Speaker 1: a assumption that j you know, j Pal keep saying
Speaker 1: we're gonna get back to two percent um. That's our backdrop,
Speaker 1: but it could be wrong. Yeah, I mean, I think
Speaker 1: there are two assumptions. One that inflation is going to
Speaker 1: go back to two person and to that there was
Speaker 1: this just sort of natural interest rate that was near
Speaker 1: zero and once we get through inflation, that's where interest
Speaker 1: rates are going to go back to. And you know
Speaker 1: that might not be true either. Well, talk to us
Speaker 1: about why you wrote this column and what you know.
Speaker 1: You you sign a couple of different economists or macro economists.
Speaker 1: Olivia Blanchard ken rogue Off talked to us about some
Speaker 1: of the thinking about maybe why uh two percent isn't
Speaker 1: it and you you also write about natural interest rates. Yeah. So,
Speaker 1: I mean I've always been struck that whenever you read
Speaker 1: any big financial institutions reports their outlooks on the economy
Speaker 1: for years, they've been saying that interest rates are trending
Speaker 1: down because of an aging relation. It's always in the methods,
Speaker 1: always in the world. Thank, it's always in every central bank,
Speaker 1: it's and banks, it's everywhere. And you know, I've always
Speaker 1: sort of like never quite understood why. I've understood the
Speaker 1: economic reasoning, but it never seemed quite right to me,
Speaker 1: But everyone would have jumped on this bandwagon because really,
Speaker 1: over the last thirty years, the population did age and
Speaker 1: interest rates went down, and everyone sort of just blamed
Speaker 1: on an aging population. Um. But really, you know, it
Speaker 1: struck me most recently when Illevia Blanchard said, don't worry,
Speaker 1: interest rates will go back because the population is aging,
Speaker 1: and I just, I guess I felt compelled to dig
Speaker 1: a little deeper. And it just so happened that kenn
Speaker 1: roll Goff had sent me this paper where he looked
Speaker 1: at interest rates going back seven hundred years and found
Speaker 1: that while interest rates have been trending down, not as
Speaker 1: much as we think, and actually the last fifteen years
Speaker 1: at least might not have been part of a trend.
Speaker 1: It might have been an anomaly. And also when he
Speaker 1: did sort of more aggressions in a longer period of time,
Speaker 1: he didn't find that an aging population brings down interest
Speaker 1: rates at all, so in fact, the opposite might be true.
Speaker 1: I also think about we talk a lot about and
Speaker 1: I'm assuming this comes on your radar as well, you know,
Speaker 1: just these kind of changing macro ideas, whether it's the
Speaker 1: pushback against globalization, you know, the move towards localization when
Speaker 1: it comes to manufacturing supply chains, you know, maybe continuing
Speaker 1: to be disrupted and being more local and what that
Speaker 1: does for costs, and move towards climate change alternative energy, like,
Speaker 1: all of this has some costs to what we are doing. Um,
Speaker 1: is that part of it? Yeah? I mean, I think
Speaker 1: it's also wishful thinking that we have a lot of
Speaker 1: big physical plans and they rely on us having very
Speaker 1: low costs of borrowing. So I I you know, I
Speaker 1: think all these sort of sort of conventional macro wisdoms
Speaker 1: sort of get tied up together and we get maybe
Speaker 1: a little over invested in them. But you know, I
Speaker 1: think that the struggle for a macro economist is always
Speaker 1: how much can you separate out what cyclical and temporary
Speaker 1: and what's really structurally changing? And that's always a challenge,
Speaker 1: I think for everyone. I also like this thing, you
Speaker 1: know where you talk about the demographics and an older
Speaker 1: population that if it ultimately is a younger is it
Speaker 1: a younger population that ultimately helps keep rates lower? Well, Um,
Speaker 1: we've been thinking that the argument has been for since
Speaker 1: a couple of decades. Now, then older population lowers rates
Speaker 1: and it's partially this idea that, as you like, people
Speaker 1: anticipate this long retirement, so they save a lot, so
Speaker 1: you build up a huge stock of savings. And you know,
Speaker 1: interest rates are ultimately a function of supply and demand
Speaker 1: of savings, so the idea is that there's this huge
Speaker 1: demand for savings and that effectively lowers interest rates. Um.
Speaker 1: Of course, Um, you know, it might not work out
Speaker 1: that way, even the I ME points out that, you know,
Speaker 1: we really haven't saved enough for retirement, and in fact,
Speaker 1: the government is probably gonna have to borrow a lot
Speaker 1: to fund our retirement. I mean, just look at the
Speaker 1: State of the Union the other day where Joe Biden
Speaker 1: was quite strident that we will never cut entitlements, and
Speaker 1: I guess the Republicans agreed with that. So I mean, okay,
Speaker 1: I mean, if that's what we want to do, I mean,
Speaker 1: we're going to have to borrow to pay for people's retirements,
Speaker 1: and that puts more bonds on the market, which you
Speaker 1: think would increase interest rates. So um, I think we've
Speaker 1: just sort of been assuming that we would have this
Speaker 1: huge stock of savings to push down rates. But maybe
Speaker 1: that's not how it's going to work. You know, and
Speaker 1: you also just point out and just got about forty
Speaker 1: seconds left here. I mean it's you say we should
Speaker 1: also be concerned because interest rates are largely function of
Speaker 1: risk in the market, not just some abstract natural rate.
Speaker 1: I mean, this is something we talk about about what
Speaker 1: the markets and what the traders are saying about kind
Speaker 1: of where rates land versus what we keep hearing from J. Powell,
Speaker 1: and that certainly plays a partner thinking. Yeah, I mean,
Speaker 1: the risk premium is super important, and I think risk
Speaker 1: premium has got very low because inflation have been so stable.
Speaker 1: But you know if that cuts out of the bag
Speaker 1: now and you know we have a more volatile inflation environment,
Speaker 1: then there's a higher risk premium, certainly on bonds that
Speaker 1: are longer term, and that will mean rates are higher
Speaker 1: for a long time too. Well, it's certainly something that's
Speaker 1: so relevant to the conversation right now, especially if you
Speaker 1: watch I'm looking at yields certainly take a little bit
Speaker 1: higher on this Thursday. Alison, thank you as always. Alison Schreeger.
Speaker 1: She's senior Fellow at the Manhattan Institute. She's a Bloomberg
Speaker 1: Opinion columnist. You can check her out on Twitter at
Speaker 1: Allison Schreeger. She's also, as we've mentioned, an author of
Speaker 1: an economist walks into a brothel, So UH love her
Speaker 1: take on this. And this is, as I said, such
Speaker 1: a relevant conversation right now as we try to figure
Speaker 1: out ultimately where rates land. This is Bloomberg business Week
Speaker 1: Inside from the reporters and editors who bring you America's
Speaker 1: most trusted business magazine, plus Blombo Business Finance and tech news.
Speaker 1: The Bloomberg Business Week Podcast with Carol Masser and Tim
Speaker 1: stinebec from Bloomberg Radio. So what does it take for
Speaker 1: a big billionaire to see about a hundred billion dollars
Speaker 1: in counting be lost from his empire? Help out a
Speaker 1: little research firm? Will That big billionaire we're talking about
Speaker 1: is Guanta Madonni, head of the Adani Group conglomerate in India.
Speaker 1: The little research firm is Nate Anderson's Hindburg Research. Well,
Speaker 1: with more on that little research firm that came up
Speaker 1: with a big short on a donny, we got Bloomberg
Speaker 1: Business Week editor um Pat regne Or he's actually Finance
Speaker 1: editor Pat Regneer and Bloomberg News Wealth for Port and
Speaker 1: as unders Mill, and we caught up with them earlier
Speaker 1: and Papigan by setting the stage about who is exactly
Speaker 1: guantam Annady. He may not be a household name in
Speaker 1: the United States, but he is absolutely a household name
Speaker 1: in India. Um. He's probably one of the most important
Speaker 1: businessmen in modern India. Um uh. Unders can talk about
Speaker 1: this a little bit, but almost anything that you might
Speaker 1: do in India, his businesses will touch your life. So
Speaker 1: he's built this enormous empire. UM. But a lot of
Speaker 1: the the the growth in its value really came during
Speaker 1: the global everything rally that began with the snap back
Speaker 1: from the COVID crash. But it just kept going even
Speaker 1: through two You just like when you when you do
Speaker 1: a chart, you just see it just going like hockey stick.
Speaker 1: You know, this, this, this, this, this, so many right
Speaker 1: during the pandemic. Yeah. Um, but then but then also
Speaker 1: just two is like global markets were falling, this one's
Speaker 1: still just going up, up, up and up. So uh,
Speaker 1: you know, he's he's become sort of this like very
Speaker 1: visible global success story, you know, and he starts, you know,
Speaker 1: you know, he starts coming on the radar of even people,
Speaker 1: you know outside of India. He may not be a
Speaker 1: consumer household name. But if you're like watching as Andrews does, uh,
Speaker 1: who's who's wealthy? Uh? He is now beginning to like,
Speaker 1: you know, top every league table that you can see.
Speaker 1: I mean, this was Asia's richest man, India's richest man.
Speaker 1: He was one of the richest people in the world.
Speaker 1: Anders come on in on it because he was also
Speaker 1: a man who seemed to like his privacy and kind
Speaker 1: of stay out of the limelight. Talk to us a
Speaker 1: little bit more about his empire and then the allegations
Speaker 1: by Hindenburg. Yeah, he definitely has tended to stable of
Speaker 1: the radar until recent years. Um, and his empire really is,
Speaker 1: like that said, it's it's one that touches a lot
Speaker 1: of citizens in India every day. He owns a series
Speaker 1: of infrastructure companies that that all hang together in when
Speaker 1: one conglomerate. So everything from coal mines to power plants,
Speaker 1: to power lines to um cements, production facilities and data
Speaker 1: storage centers. And he's getting into media and he owns
Speaker 1: food companies. So it's things that touch lots of Indian
Speaker 1: citizens every day. And he sort of came onto the
Speaker 1: scene internationally. For those who don't necessarily watch India that
Speaker 1: closely really, like pet said, two and during the covid
Speaker 1: rally and in two and things started falling. He just
Speaker 1: really went off the church that shares of his companies
Speaker 1: just went up, up, up, and all of a sudden,
Speaker 1: he was the second richest man in the world in
Speaker 1: September last year, which was just quite surprising to see.
Speaker 1: The as the rise was was so incredibly it was
Speaker 1: just so incredibly baffling, especially for infrastructure companies, which don't
Speaker 1: really tend to have those kinds of rich valuations. And
Speaker 1: that piqued a lot of interest among people who said,
Speaker 1: this just doesn't make sense. It's too good to be true.
Speaker 1: These financials just can't be they can't be real. And
Speaker 1: there's been whispers and news reports in India for quite
Speaker 1: a few years about various aspects of the finances of
Speaker 1: his companies, um but nothing really had happened. But that
Speaker 1: obviously changed a couple of weeks ago when Hindenberg Research
Speaker 1: put out their honor Page note sort of aggregating a
Speaker 1: lot of what I've been out there already and then
Speaker 1: dove deeper into certain aspects. And most people in India,
Speaker 1: i think it's safe to say, expected that nothing would
Speaker 1: really happen. But the shares of his companies started falling,
Speaker 1: and then they just fell and fell and fell, and
Speaker 1: the company is look at Lunia value has been about
Speaker 1: cut in half since in the Birst report came out.
Speaker 1: Andrews we uh as we were preparing this story and
Speaker 1: it comes it comes through so well. In your piece,
Speaker 1: UM talked a lot about kind of a culture clash
Speaker 1: between UM Corporate India and UM sort of it's suddenly
Speaker 1: it got big enough that it met the markets and
Speaker 1: the end of the way that people operate in uh
Speaker 1: New York and London and other financial markets, and it
Speaker 1: suddenly met this kind of brass knuckles culture of shorts UM,
Speaker 1: And Uh, can you just talk a little bit about
Speaker 1: sort of like how how that, how that, how that's
Speaker 1: played out. Yeah. So one of the unique aspects with
Speaker 1: kut Madonni's group of companies is that it's it's built
Speaker 1: sort of like a traditional Indian family conglomerate, which is
Speaker 1: a series of businesses that a family that it's sort
Speaker 1: of a a group of businesses that a family builds
Speaker 1: over time, and they tied together sometimes in some ways,
Speaker 1: and and you can help support each other financially when needed,
Speaker 1: and you can move personnel between them. Um And this
Speaker 1: has been it has a long storied history in the
Speaker 1: Indian business culture. In the United States, they used to
Speaker 1: be common back in the day. They are much less
Speaker 1: so now. And one thing that people that I talked
Speaker 1: to ahead of writing the story pointed out to me
Speaker 1: was that within these conglomerates, historically there has tended to
Speaker 1: be quite a bit of really related party transactions and
Speaker 1: money being moved between different parts of of the conglomerate.
Speaker 1: And sometimes that might have been done in ways that
Speaker 1: others would not pick up on, or that security lawyers
Speaker 1: maybe would frown upon because it was sort of a
Speaker 1: family affair. And um and that's something that some people
Speaker 1: are told to stressed that here you have a certain
Speaker 1: culture of doing business, a certain way of doing business
Speaker 1: that has worked extremely well for the country over a
Speaker 1: really long time that is now clashing with how things
Speaker 1: are done in the financial centers of capital like New
Speaker 1: York and London, where the culture is very different. Most
Speaker 1: companies tend to have a really broad shareholder base and
Speaker 1: not be controlled by a family. Boards tend to not
Speaker 1: be stacked by family members, Executive roles tend to not
Speaker 1: be stacked by family members UM and a lot of
Speaker 1: people in India are feeling a sense of frustration, I
Speaker 1: think because they feel like people in the West just
Speaker 1: look at this kind of corporate structure and think that
Speaker 1: there's something inherently suspicious with it, when in reality it's
Speaker 1: it's just a it's a slightly different way of just
Speaker 1: looking at how business is done and how priorities are set.
Speaker 1: The other thing I just want to us, and we
Speaker 1: just have about a minute left here is I think
Speaker 1: another layer that you do so well when you're reporting
Speaker 1: is the connection between India, the country, India, the Prime
Speaker 1: Minister and a Donnie Right, the relationship just seems very close. Yes,
Speaker 1: Donnie and Prime Minister and Rundromody have known each other
Speaker 1: for twenty years and people that knowing me a well,
Speaker 1: they say that these two are are quite close and
Speaker 1: their goals are aligned and they have benefited from each other.
Speaker 1: And in that vein, Donnie has especially in recent years
Speaker 1: taking on a really strong UM profile of trying to
Speaker 1: link himself and his company with the future UM and
Speaker 1: the success of India. And that's also something that he's
Speaker 1: pushed really hard on. Now that the company is under
Speaker 1: attacked by the New York short seller that last voice
Speaker 1: Bloomberg News Wealth reporter on under Melon along with Bloomberg
Speaker 1: Business Week Markets and Finance editor Pat Ragneer. Now, this
Speaker 1: story is the cover story of Bloomberg Business Week. We
Speaker 1: caught up with them a little bit earlier for our
Speaker 1: weekend broadcast. UM, but really gets into what Gautamadanni the
Speaker 1: tough year he's certainly having. And we continuen to see
Speaker 1: the pressure in UH shares of the Donni empire overnight again,
Speaker 1: so it continues to be certainly on investors radar. UM.
Speaker 1: Coming up, we're gonna more on the story, including the
Speaker 1: little research company that came up with that big short
Speaker 1: on a Donnie. That's coming up next with our Joel
Speaker 1: Weber and Ed Ludlow. We're talking about the research firm
Speaker 1: that is run by Nate Anderson and his Hindenburg Research.
Speaker 1: You might remember Nicola when he ran after that company. UM,
Speaker 1: so it's interesting to hear about the fourner pages plus
Speaker 1: if you will, that he put together on a Donnie.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 1: live week days from two to five pm Eastern on
Speaker 1: Bloomberg Radio, The Bloomberg Business A B and you too.
Speaker 1: You can also listen live to our flagship New York
Speaker 1: station Just Say Alexa play Bloomberg, E Love and Dierdi
Speaker 1: well As. We just heard from pat Rick near Bloomberg
Speaker 1: and Under's Melon his cover stories about billionaire Guatamadnni having
Speaker 1: a rough start to three. The Indian industrial tycoon's empire
Speaker 1: has taken a roughly a hundred billion dollar hit in
Speaker 1: a matter of days following accusations of financial wrongdoing from
Speaker 1: an American activist short seller. We wanted to share more
Speaker 1: on that activist short seller, and that is Nate Anderson
Speaker 1: and as Hindenburg Research with more on that in a
Speaker 1: story in the upcoming new issue of Bloomberg Business Week
Speaker 1: magazine out on newsstands. On the Bloomberg and Bloomberg dot
Speaker 1: COM's last Business Business Week, Let's bring in Bloomberg Business
Speaker 1: Week editor Joel Webber and Bloomberg Technology co host ed
Speaker 1: Ludlow Joel here in our Bloomberg Into Factor Broker studio
Speaker 1: ed in our nine sixties studio in San Francisco. All right, Joel,
Speaker 1: so we did hear from Patton Andrews. We just played
Speaker 1: that for our audience. Um, but this story, it's an
Speaker 1: interesting one. Yes, So we had that that main bar
Speaker 1: sort of in motion, and you know, the other big
Speaker 1: question and all of this was more about the short,
Speaker 1: and so we reached out to ed because well, you know,
Speaker 1: as ed knows, um, you know very well Nicola story, um,
Speaker 1: which was a huge one. And when that he was
Speaker 1: instrumental in in our coverage of uh, Nate Anderson figured
Speaker 1: into that, and you know, everything was kind of quiet,
Speaker 1: and then everybody was like, oh my gosh, Nate Anderson
Speaker 1: and Hindburg is suddenly became the story of the moment
Speaker 1: with this short on the Donning group. Um, there's still
Speaker 1: kind of shrouded in mystery, but are tasked at Edwards
Speaker 1: sort of figure out as much as you can figure out. So, Edward,
Speaker 1: what were you able to figure out? Yeah? You know,
Speaker 1: I'm hesitant to call it a David and Goliath story, right,
Speaker 1: but that's kind of what it's like. You know, Hindenberg
Speaker 1: researches this sort of merry how about I do it?
Speaker 1: And then you don't have to do it. So this
Speaker 1: is a great Devid Glaire's story, right, go ahead, Well,
Speaker 1: it's just gonna say you know, it's this merry band
Speaker 1: of fewer than a dozen analysts journalists, and we know
Speaker 1: very little about them, and yet they take on Asia's
Speaker 1: what was Asia's richest man at the time, in this
Speaker 1: massive conglomerate, and you know, to the outside world, they're
Speaker 1: short sellers right there in it to make a profit,
Speaker 1: as all short sellers are when the value of a
Speaker 1: security tied to the company they targets declined. But you
Speaker 1: know it's more than that, you know, they see themselves
Speaker 1: as being this kind of really important function of a
Speaker 1: healthy financial market, which is to make investors and regulators
Speaker 1: aware of what they allege is a fraud. And then
Speaker 1: once they've done their report and the market's done its thing,
Speaker 1: they leave us in the media to cover the story
Speaker 1: and leave the market to make their own conclusion, because
Speaker 1: that is what an activist short seller is to their mind. Well,
Speaker 1: and you know, it's not just about unveiling you know,
Speaker 1: possible fraud or what have you. In you know, various
Speaker 1: situations are various companies, and again these are allegations because
Speaker 1: the company has come out and said very differently and
Speaker 1: come out with its own I think four hundred page
Speaker 1: report as a take that um. Having said that, tell
Speaker 1: us about the dynamics in terms of who trades on
Speaker 1: this ultimately, because people do make money off of this. Yeah,
Speaker 1: so I think the mechanics of Hindenburg are interesting. You know,
Speaker 1: put the sort of loftier goals to one side. Their
Speaker 1: business model is based on making profit from a short
Speaker 1: and actually another part of their business model is eventually
Speaker 1: making money from whistleblower payouts. But my understanding is they've
Speaker 1: never actually been paid one. Um. But what's so interesting
Speaker 1: here is that in the past Hindenberg basically makes deal
Speaker 1: with a group of passive investors or one single big
Speaker 1: passive investor and says, hey, if you take on the
Speaker 1: short position on our behalf, we will let you look
Speaker 1: at the research before we publish it, and in exchange,
Speaker 1: you give us Hindenburg a share of the profits. That way,
Speaker 1: Hindenburg doesn't have to kind of reach into its own pockets,
Speaker 1: and it's kind of a small group anyway. Right. But again,
Speaker 1: this is the biggest question, and you know, these stories
Speaker 1: are actually some of the most fascinating where you don't
Speaker 1: find the answer. What the market wants to know right
Speaker 1: now is is this short position closed or is it
Speaker 1: still open. We don't know the answer to that. And
Speaker 1: the reason it's important is because if they ride the
Speaker 1: shot or the way to a lower value, there will
Speaker 1: be more profitable. But now the markets trading on uncertainty
Speaker 1: in both directions, and that's not just in equities markets.
Speaker 1: But as we've learned in this case, all we know
Speaker 1: about the short is that it was in dollar bonds
Speaker 1: and non Indian listed derivatives tied to those companies within
Speaker 1: the Adane group. So it's a fascinating market dynamic where
Speaker 1: the market doesn't know so and you know, obviously will
Speaker 1: be choosing everything that we can to figure out you know, when,
Speaker 1: when and if it if it's open or a closure
Speaker 1: or whatever. It's just ongoing mystery, what other what other
Speaker 1: kind of mysteries remain here? Ed that that's your way
Speaker 1: boss of saying, nudge, nudge, get on with it. We
Speaker 1: can wrap. Yeah, yeah, yeah. Look. So so core to
Speaker 1: the Danny story was like, what is the goal here?
Speaker 1: You know, India is a very different market to the
Speaker 1: ones that Hindenberg's targeted in the past. They've largely been
Speaker 1: small US listed companies that Hindenberg has gone after the
Speaker 1: regulatory situation in India is completely different. It's not clear
Speaker 1: what kind of action could or hypothetically will be taken
Speaker 1: against a DANI. So what is it that Hindenberg's trying
Speaker 1: to achieve the FPO or that the follow on primary
Speaker 1: offering was scrapped, their their activity in the bond market
Speaker 1: or debt markets has been scrapped. Is that satisfaction enough
Speaker 1: for Hindenberg? When it goes back to the core question
Speaker 1: in the story, why is it that Hindenberg does what
Speaker 1: it does? And the answer you get and again is
Speaker 1: a very lofty goal. We expose fraud because it's the
Speaker 1: right thing to do and it's part of the healthy
Speaker 1: functioning financial market globally. So alright, so these activists, short sellers, researchers,
Speaker 1: they bring attention to companies that might not necessarily beyond
Speaker 1: anybody's radar. At the same time, sometimes the short sellers
Speaker 1: are these activists um that are doing the research, they
Speaker 1: actually become the target. And I'm thinking about Carson Block
Speaker 1: like it's I always feel like there's a love hate
Speaker 1: relationship with anybody who's looking to either talk down or
Speaker 1: short a name. Yes, so there has been a large
Speaker 1: body of academic research in this area. And there is
Speaker 1: an active d J investigation which looks at some short sellers,
Speaker 1: some of them well known, such as Muddy Waters and
Speaker 1: Carson Block. What I would say is a they declined
Speaker 1: to comment for this story, and and that investigation is
Speaker 1: one that Bloomberg has previously reported. A source has told
Speaker 1: me that Hindenberg have never been approached by US regulators
Speaker 1: or agencies, at least with regards to that existing UH
Speaker 1: investing gaistion. And again I go back to the other
Speaker 1: part of the business model. Longer term, Hindenberg really hope
Speaker 1: that actually these agencies pay them whistleblower rewards for the
Speaker 1: work that they're doing. So it's a strange paradox that
Speaker 1: we discussed in the story. But the accusation broadly from
Speaker 1: academia through to to the investigations pending, is that some
Speaker 1: of these short sellers hypothetically could be engaged in market manipulation.
Speaker 1: And that's the negative side of the story. That there's
Speaker 1: more to be reported. On the positive side is if
Speaker 1: you do this right, it makes you a lot of money.
Speaker 1: There is always do sides. Alright, Lovela, thank you so much,
Speaker 1: co host of Bloomberg Technology at Bloomberg News, in our
Speaker 1: nine sixties studio in San Francisco. Thanks to the editor
Speaker 1: of Bloomberg Business Week magazine, Joel Webber, this story Anadani
Speaker 1: the cover story this week. This is Bloomberg business Week
Speaker 1: Inside from the reporters and editors who bring you America's
Speaker 1: most trusted business magazine, plus bloom or Business finance and
Speaker 1: tech news. The bloom Bird Business Week Podcast with Carol
Speaker 1: Messer and Tim Stinevic from Bloomberg Radio. Well, we've definitely
Speaker 1: seen shares of the Walt Disney Company take a little
Speaker 1: bit of a round trip, if you will, because they
Speaker 1: definitely rallied big time in the after hours last night,
Speaker 1: falling their earnings and falling news of a restructuring and
Speaker 1: five and a half billion dollars in costs. And then,
Speaker 1: of course today we had the news that the activist
Speaker 1: investor who's been kind of pushing for some changes at
Speaker 1: Disney come out and say, I'm done with my proxy fight.
Speaker 1: So let's make sense of it, because we've got the
Speaker 1: perfect voice. Lucas Shaw is entertainment reporter here at Bloomberg News.
Speaker 1: He joins us from Los Angeles. Lucas, good to have
Speaker 1: you here with us. A lot going on when it
Speaker 1: comes to Disney. I feel like in the last month
Speaker 1: or so, and certainly in the last day or so, Um,
Speaker 1: what jumps out for you? I mean, to me, the
Speaker 1: biggest thing was was igers comments on the company's earnings
Speaker 1: called yesterday, just because he threw so many different things
Speaker 1: at people in terms of his plans for Disney, and
Speaker 1: he talked about having to to fire about seven thousand workers.
Speaker 1: He restructured the company to put kind of his his
Speaker 1: content people in charge of their businesses, reversing a decision
Speaker 1: by Bob Jpeck, who is both his predecessor and was
Speaker 1: his successor because remember Bob Iker was with CEO for
Speaker 1: a long time before him. Um, and then talked about
Speaker 1: you know everything from them maybe offering too many promotions
Speaker 1: and not charging enough to cutting back on general entertainment spending.
Speaker 1: I mean, there was I looked at the transcript yesterday
Speaker 1: and there was a paragraph whereas a reporter, I'm I'm
Speaker 1: sort of overwhelmed, but also drooling because there's like six
Speaker 1: different things he's talking about that are clear strategy shifts
Speaker 1: at the company. So that's what jumps out, Because look,
Speaker 1: the Pelts thing, I always thought it was a weird
Speaker 1: timing for for for Peltz's move, and a lot of
Speaker 1: the things that I did today, which Pelts is treating
Speaker 1: sort of as some grand victory, I think are things
Speaker 1: that he would have done whether or not Pelts was agitating. Interesting. Um,
Speaker 1: were you surprised that Pelts backed off? I? Um, I
Speaker 1: guess I'm a little. I'm a little surprised at how
Speaker 1: how little it took. Um. But I was, look, he
Speaker 1: Pelts started to, you know, get involved here when when
Speaker 1: Shapeck was the leader. Um, and you know some of
Speaker 1: it as I think he saw a clear business opportunity.
Speaker 1: While Disney Company one of the great companies in the world,
Speaker 1: you know, the biggest entertainment company. Uh, it's stock is down.
Speaker 1: People are just are sort of worried about it. But
Speaker 1: I think most people felt like long term, Disney would
Speaker 1: figure it out and be fine. And so if you're
Speaker 1: a savvy investor, which Nelson Pelts obviously is, you get
Speaker 1: in when the stocks low, you make a bunch of noise,
Speaker 1: the stock goes back up, and you gotta win. Um.
Speaker 1: He He also seemed there seemed to be some personal
Speaker 1: motivations He's close with, like Pearl Mutter, who who uh
Speaker 1: you know, is very involved and sold Marvel to Disney.
Speaker 1: Uh and then kind of got pushed to the side.
Speaker 1: So he doesn't like Bob. Iger doesn't really like Bob Shapeck.
Speaker 1: There's a political dynamic to it because Nelson Peltz has
Speaker 1: been is sort of involved in conservative politics, and people
Speaker 1: were seeing Disney as as kin of to quote unquote
Speaker 1: woke after this this kind of fight with the state
Speaker 1: in Florida. Um. And so I guess the fact that
Speaker 1: all he needed was to come in and say, hey,
Speaker 1: this is what I'm doing and it's uh and and
Speaker 1: back down. Um. But he had chosen to wage this
Speaker 1: fight like right as the power changed, which is why
Speaker 1: I thought it was weird timing because it's like, shouldn't
Speaker 1: you wait to see what Iger's plan is before you
Speaker 1: say you don't agree with it? So we look at Disney,
Speaker 1: I mean, what's the what's the weak part of the company,
Speaker 1: what's the strength? Because I know years ago it was
Speaker 1: all about ESPN, right, and then it went through like
Speaker 1: oh everybody kind of had a hate on for ESPN. Uh,
Speaker 1: and yet that is going to be one of the
Speaker 1: one of the three main units. So where the strengths
Speaker 1: in Disney. What really matters to the top and bottom lines.
Speaker 1: Where the weakness, I mean the strength is one of
Speaker 1: the strengths right now is certainly the theme parks. That's
Speaker 1: the big reason that they had good numbers his most
Speaker 1: recent quarter. The attendance at the parks is really solid. Um.
Speaker 1: The weakness and strength beyond that are I have an
Speaker 1: open question, right you know, we know that the cable
Speaker 1: networks are in decline, and so the answer to that
Speaker 1: is supposed to be the streaming services Disney Plus, Hulu,
Speaker 1: ESPN plus. But those those streaming services right now lose
Speaker 1: a bunch of money, um, and so our Hulu doesn't.
Speaker 1: But but Disney Plus does, I assume ESPN Plus depending
Speaker 1: on how Disney chooses to account it does. Disney is
Speaker 1: having to figure out how to manage that transition from
Speaker 1: cable to streaming. They've done so more effectively than most
Speaker 1: of the other media companies, but now they have to
Speaker 1: prove there's a good business in it. What do you
Speaker 1: make of and you guys, your story, uh that you
Speaker 1: put out about Disney exploring more licensing of films TV
Speaker 1: series to arrivals. Is this a smart idea? Is this
Speaker 1: like something that actually moves the needle when it comes
Speaker 1: to revenue generation profits. Yeah. Look, I think these companies
Speaker 1: in trying to replicate Netflix, um, you know, went a
Speaker 1: little too far where they said, if we're going to
Speaker 1: be like Netflix, we should do everything like them. Um.
Speaker 1: But what they didn't realize is, you know, well, Netflix
Speaker 1: doesn't release movies in beat is because Netflix doesn't have
Speaker 1: big franchises that will guarantee that people come to theaters.
Speaker 1: Netflix doesn't license its titles out to competitors in part
Speaker 1: because it doesn't have this deep catalog that is as
Speaker 1: valuable and can can give to others. And so I
Speaker 1: think it does make sense if you're Disney and you're
Speaker 1: looking at you know, they bought the TV studio from
Speaker 1: Fox that's got tons of shows in the library. Some
Speaker 1: of those may be useful to Disney Plus or to Hulu.
Speaker 1: But if they can get some other company to pay
Speaker 1: them for shows that people probably aren't gonna watch very much,
Speaker 1: you know, that's good business. Bob Iger knows his company
Speaker 1: so well, right, really helped build it out, you know,
Speaker 1: whether it's the Pixar side, the Marvel side, A lot
Speaker 1: of different things here. Um, I wonder how you think
Speaker 1: about how long he might be at the company, how
Speaker 1: much time investors will give him. I mean, Pelts is
Speaker 1: backed off, but investors are gonna be watching very closely. Yeah,
Speaker 1: I mean I think investors are are are they've bought
Speaker 1: in right, you know when when I came back, the
Speaker 1: stock went up. Generally there's a lot of faith in him.
Speaker 1: Some of it all the hand on the performance of
Speaker 1: the company. Of course, if if if the company's doesn't
Speaker 1: do well in the next few quarters, then people will agitate.
Speaker 1: But look, Iger has has delineated a very a relatively
Speaker 1: clear strategy. I would say he still has to fill
Speaker 1: in a lot of particulars um and it's a pretty seat.
Speaker 1: There's some pretty significant changes, So I think he's you
Speaker 1: got to give him at least the the rest of
Speaker 1: the year to figure it out. But the truth is
Speaker 1: is there's still some very big questions hanging over the company.
Speaker 1: Do that what do they do with THEESPN? You know,
Speaker 1: they're not going to break it out in reporting. That
Speaker 1: leads some to believe that they're going to want to
Speaker 1: spin it out or sell it to someone. What do
Speaker 1: they do about the thirty percent stake in Hulu that
Speaker 1: Comcast has. Bob Iger was on TV this morning saying,
Speaker 1: you know, I haven't committed to keeping it or buying Comcast.
Speaker 1: They're clearly in this negotiation with them where they're going
Speaker 1: to sort of have this staring contest, and so, you know,
Speaker 1: I think he's he's certainly got the confidence of investors
Speaker 1: right now, but he needs to provide some some additional
Speaker 1: clarity to what his big picture strategic plans are Lucas.
Speaker 1: As you know, Disney has said it has no plans
Speaker 1: to spin off ESPN, but you're right, like separating it
Speaker 1: out really is going to give us a clear picture
Speaker 1: of what this business is all about. Having said that,
Speaker 1: I mean, what is a Disney without ESPN? Just fine?
Speaker 1: I think it's a general entertainment company. If they do
Speaker 1: that right, the calculation would be sports right now is
Speaker 1: sports is a rental business. You don't own it like
Speaker 1: you do you own a Marvel or lucasfilm. The cost
Speaker 1: of sports keeps going way up, and while it seems
Speaker 1: like companies have sort of figured out how to make
Speaker 1: kind of transfer the entertainment part of the cable bundle
Speaker 1: to the Internet, the sports part is much more difficult.
Speaker 1: Because sports always you made money by having everybody pay
Speaker 1: for it, even though only a certain subset of the
Speaker 1: people care, and the fees on a per per cable
Speaker 1: customer basis are incredibly high. And so does that that
Speaker 1: business model and a streaming landscape mean that you you
Speaker 1: charge a ton more? Doesn't mean that you sell individual games.
Speaker 1: Nobody's quite cracked that. So I look, I personally think
Speaker 1: that sports is incredibly valuable, and Disney may want to
Speaker 1: keep ESPN, but there's a kind of a loud and
Speaker 1: growing chorus that thinks if Disney could could sell it,
Speaker 1: get a bunch of money, used that to invest in
Speaker 1: a general entertainment streaming service that can kind of compete
Speaker 1: head to head with Netflix, they'd be better off. I
Speaker 1: was gonna say, there's some other streaming services that might
Speaker 1: be interested in sports in general. Having said that, lucause
Speaker 1: if you were sitting down with Bob Biger right now,
Speaker 1: what would be the two top questions you'd want to
Speaker 1: ask him? Um am I assuming that he's that he's
Speaker 1: gonna be like totally honest, because if I think if
Speaker 1: if he's gonna if he's gonna give me, I would
Speaker 1: never say he's dishonest. No, But like, look, I can
Speaker 1: ask him, what is your plan for Hulu? Right That's
Speaker 1: one of the biggest questions I have. But I don't
Speaker 1: think he's gonna tell me that right now. Fair enough,
Speaker 1: so I don't know. But but like to that end,
Speaker 1: I might say, you know, do you you talk a
Speaker 1: lot about general entertainment? Do you see Disney as a
Speaker 1: general entertainment company or sports an integral part of your future?
Speaker 1: And you know, I'm sure he'll find a very delicate
Speaker 1: way to say, we love sports, but you know, we're
Speaker 1: not taking anything off the table something like that. Yeah, okay,
Speaker 1: that's fair. That sounds like a good idea. Um, Lucas,
Speaker 1: thank you so much, really appreciate it. U our Lucas
Speaker 1: Shaw giving us the lowdown on Disney a lot of
Speaker 1: news in the last twenty four hours. Lucas, of course,
Speaker 1: is entertainment reporter here at Bloomberg News, joining us from
Speaker 1: Los Angeles. Find him on Twitter at Lucas Underscore Shaw.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: the Bloomberg Business Band. You too. You can also listen
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Speaker 1: play Bloomberg E, Love and Dirty. I'm room journal. Yeah,
Speaker 1: but you let me drive? Oh no, no, nor leave,
Speaker 1: I'll revels. I want to dry. Good question, which is
Speaker 1: the Drive to the Clothes on Bloomberg Radio? All right, everybody,
Speaker 1: just about seventeen minutes left in today's trading session, and
Speaker 1: it's definitely a risk off tradel though as you heard
Speaker 1: from Gina Martin Adams a little bit earlier, it's not
Speaker 1: like you're seeing investors, certainly on the equity side of things,
Speaker 1: run into kind of all of those safer plays, if
Speaker 1: you will. So that's kind of an interesting take on it.
Speaker 1: Having said that, we are just off our loads, as
Speaker 1: you just heard from Charlie, but still down about one
Speaker 1: point one percent on the NAS dec and in particular,
Speaker 1: it's what's going on when it comes to yields. We've
Speaker 1: got that to you're just rolling over, but still at
Speaker 1: four point forty nine. So let's see what our Drive
Speaker 1: to the Closed guest has to say about it all.
Speaker 1: Sylvia Jablonski is back with us. She's CEO and Chief
Speaker 1: Investment Officer at Defiance E T f She joins us
Speaker 1: once again on the phone in New York City, Sylvia.
Speaker 1: Nice to have you back here on Bloomberg on a
Speaker 1: day where the tone is a little bit from what
Speaker 1: we've seen so far here in three. How do you
Speaker 1: explain the trade today where we're seeing equities lower and
Speaker 1: we're seeing bonds lower and yields moving up. Hi, Carol,
Speaker 1: great to speak with you again. Well, I think, yeah,
Speaker 1: I think I think a lot of this just has
Speaker 1: to do with the FED and the different UM FED
Speaker 1: chairs out there, you know, sort of singing their song
Speaker 1: about higher for longer UM. I think the market came
Speaker 1: out with a strong start. Investors were really starting to
Speaker 1: think about the idea of a look through that the
Speaker 1: FED would be close to finished raising rates. And you know,
Speaker 1: once they sort of hit that that terminal rate around
Speaker 1: five percent, Okay, we're there. It's going to be higher
Speaker 1: for longer, but it's sort of priced in and and
Speaker 1: you know, it seems like some confidence came back into
Speaker 1: the hands of UM investors when they when they sort
Speaker 1: of purchased their equities. But you know, we see stocks
Speaker 1: sort of retreating, and I think that now there's this
Speaker 1: sense of worry about recession signals kind of flash in
Speaker 1: because hawk ish feds speak from you know, the various
Speaker 1: presidents are talking about not being done, perhaps having to
Speaker 1: go even higher. And then you know, you see all
Speaker 1: these options bets and things like that targeting six percent
Speaker 1: and higher peak rates, and I think that that's really
Speaker 1: what's spooking the market now and and impacting both equities
Speaker 1: and six may come. Does the market have it right?
Speaker 1: You know? I think that if we if we look
Speaker 1: at the data and the bigger macro pictures, there's a
Speaker 1: lot of news in favor of thinking that what Jerome
Speaker 1: Pale sort of said in the message that he gave
Speaker 1: in terms of being a little bit more balanced, that
Speaker 1: there has been some progress. It's probably more true than
Speaker 1: than sort of the fearmongering. I think that we're hearing
Speaker 1: over the last day or two, we're seeing good news
Speaker 1: and good data around inflation falling. Um we are starting
Speaker 1: to see a lot of layoffs and things like that.
Speaker 1: I know the job number was particularly hot, but when
Speaker 1: you see these, you know, constant reminders that jobs are
Speaker 1: starting to fall off, that's eventually going to play out.
Speaker 1: Paine Sumer state things have sort of um loosened a
Speaker 1: little bit. You're starting to see UM earnings fall about
Speaker 1: ten percent, you know, sort of year over years, you
Speaker 1: kind of had dots you dropped there. So I do
Speaker 1: think that last year the market got hit. I think
Speaker 1: that there's been a rolling recession in various sectors, and
Speaker 1: I think we're probably closer to the end of this
Speaker 1: than we are to the beginning of a profession. That's
Speaker 1: my take on it. Hey, what do you make of
Speaker 1: indicators like UM The latest survey from the American Association
Speaker 1: of Individual Investors which showed that US retail investors turned
Speaker 1: bullish for the first time since April. So that's pretty significant,
Speaker 1: with the bull bear spread rising to twelve point five
Speaker 1: from negative four point seven a week earlier, and the
Speaker 1: percentage of investors with a bearish view over the next
Speaker 1: six months falling to the lowest in November. Markets often
Speaker 1: see that as a contrarian indicator and saying, well, wait
Speaker 1: a minute, we're too We're too all in at this point.
Speaker 1: But having said that, that sentiment is that tell you
Speaker 1: that there is, though possibly the opportunity that investors will
Speaker 1: see pullbacks as an opportunity need to come in the market.
Speaker 1: That is a trade that we have seen, you know,
Speaker 1: certainly over the last couple of years. Yeah, and that's
Speaker 1: a great point, you know, I I definitely take to
Speaker 1: the point about that being a contririor indicator. But if
Speaker 1: you think about, you know, just five minutes ago, that
Speaker 1: report was absolutely flipped, right, everybody was just an absolute
Speaker 1: bear and you were sort of crazy by equities. But
Speaker 1: I think for those of us who have investment here beyond,
Speaker 1: you want to dollar class average in And the truth
Speaker 1: is the market may pull back a little bit, it
Speaker 1: may not. I expect to see this rangebound activity until
Speaker 1: we have more clarity on what the what the FED
Speaker 1: will do and you know, sort of how long I'll
Speaker 1: stay there. But I do think that it's worth looking
Speaker 1: through at this point because I don't think it's going
Speaker 1: to be you know, a significantly higher amount of reduction
Speaker 1: to the liquidity and the markets that is coming our way.
Speaker 1: I think it's mostly done. I think earnings are probably
Speaker 1: close to their their their worst this time around, and
Speaker 1: actually they haven't you know, sort of been that bad. Right,
Speaker 1: It's been ho hum, but it hasn't been the complete
Speaker 1: distatch we're expecting. So to answer your question more specifically,
Speaker 1: the one thing about that survey that is sort of
Speaker 1: in line with what we see in the market is
Speaker 1: that people are actually starting to come in and buy
Speaker 1: the dip again. So buying the dip might just be
Speaker 1: a theme again for finally. All right, So if you're
Speaker 1: going to come in and buy the dip, what do
Speaker 1: you buy? What would you buy? Yeah, I mean I
Speaker 1: think it's it's great to diversify portfolios, But all of
Speaker 1: the tech socks, of the semiconductor stocks stack up just
Speaker 1: absolutely hammered last year. You know, they've they've caught some
Speaker 1: of their returns back, but not even not even to
Speaker 1: the half of the point at this stage. It is
Speaker 1: really remarkable. You know. I have to say every time
Speaker 1: I pull up a name that is rallied, I was
Speaker 1: looking at some of the names that are going to report,
Speaker 1: you know, after the closing bell. Expedia is up thirty
Speaker 1: four percent year to day. It's still down from its
Speaker 1: high back in early two So you have to have
Speaker 1: that perspective. But anyway, go ahead, what would you buy? Yeah? No, absolutely,
Speaker 1: And that's that's exactly my perspective. Right. So, although they've
Speaker 1: brought up into the year a little bit, you know,
Speaker 1: AI is the biggest theme of the year for example,
Speaker 1: and it's actually becoming a practical, practical, investable technology. So
Speaker 1: I think if you look at you know, on the
Speaker 1: computing related stocks, if you look at the AI related stocks,
Speaker 1: you have names like na VideA, A and D the
Speaker 1: tops that my conductors that power this stuff, um, IBM, Google, Microsoft,
Speaker 1: the companies that will have the supercomputers that can you know,
Speaker 1: process data and make it more efficient for AI to
Speaker 1: actually work. And So even though Google stumble this week,
Speaker 1: um with because because they pulled that dramatically over the
Speaker 1: last couple of days, they did, but I think that
Speaker 1: they're you know, their biggest fail was that they didn't
Speaker 1: ask the right question that they knew, you know, was
Speaker 1: sort of superior to the other chatbots, right, and there's
Speaker 1: there's slabs with all of these things, and I think that, um,
Speaker 1: you know, Google just kind of put themselves in a
Speaker 1: bad spot. But what you'll see, I think with the
Speaker 1: development of machine learning and quantum computing, which Google is
Speaker 1: you know, sort of by far one of the leaders
Speaker 1: in once they source that technology to improve their a
Speaker 1: I bought, you know, I think that they're going to
Speaker 1: be leaders in this space. I mean, they got some
Speaker 1: bad press on this. I would actually look to buy
Speaker 1: Google on that a percent pullback. I just think that
Speaker 1: they're really going to day with this. They're sort of
Speaker 1: known for, um, you know, being leaders in this type
Speaker 1: of technology and development. We're really leave it on that note.
Speaker 1: What a great conversation, Sylvia. Thank you so much, Sylvia Jablonsky.
Speaker 1: Love that we can talk to names chief executive officer
Speaker 1: and Chief investment Officer Defiance et F joining us on
Speaker 1: the phone in New York City. This is the Bloomberg
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