WEBVTT - Disney Names PepsiCo’s Hugh Johnston as New CFO 0:00:01.360 --> 0:00:05.720 This is Bloomberg Business. Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.280 --> 0:00:23.520 We'll talk about the Walt Disney Company, my company in 0:00:23.520 --> 0:00:25.439 a Stockmere and dear to my heart, I've covered the 0:00:25.440 --> 0:00:29.520 stock over thirty years. It is at a place in 0:00:29.560 --> 0:00:32.080 time that that they'd never found themselves in. They're really 0:00:32.080 --> 0:00:34.000 trying to figure out they and all the media industry 0:00:34.200 --> 0:00:36.960 trying to figure out how they manage just pivot the 0:00:37.040 --> 0:00:40.440 streaming and away from the traditional media distribution bundle that 0:00:40.560 --> 0:00:43.800 was so lucrative. And then I got some changes at 0:00:43.800 --> 0:00:46.160 the top. Here Chris Palmery joins us. He's entertainment editor 0:00:46.200 --> 0:00:48.400 for Bloomberg News. He joins us on Zoom from our 0:00:48.560 --> 0:00:51.520 LA bureau. And it is a awesome office out there. 0:00:51.680 --> 0:00:51.920 Yeah. 0:00:52.000 --> 0:00:54.160 The last one they had was not great, I have 0:00:54.240 --> 0:00:56.280 to tell you, but this one is smoking. It's in 0:00:56.680 --> 0:00:58.360 What's so great about it? Oh, it's just it's in 0:00:58.360 --> 0:01:00.600 a great part of town, Century City, right, Chris, And 0:01:00.640 --> 0:01:02.800 you got smoking office. I think you overlook the bel 0:01:02.880 --> 0:01:05.120 Air Country Club or something correct. 0:01:05.319 --> 0:01:07.520 Yeah, it's just a Los Angeles Country. 0:01:07.480 --> 0:01:10.520 Los Angeles Country, major upgrade. So when I went out 0:01:10.560 --> 0:01:12.440 there the first time, I kind of talked to somebody 0:01:12.480 --> 0:01:13.600 back here in New York. I said, we need to 0:01:13.640 --> 0:01:16.240 upgrade our friends out in LA. Yeah, and then they did. 0:01:16.319 --> 0:01:18.600 And it sounds like a missed opportunity that I did 0:01:18.600 --> 0:01:20.679 not get there when I was there for forty eight hours. 0:01:20.760 --> 0:01:23.080 Last week, Chris talked to us about Walt Disney here. 0:01:23.080 --> 0:01:25.160 They're getting themselves a new CFO. 0:01:25.200 --> 0:01:30.920 What do we know, very experienced executive in three decades 0:01:31.000 --> 0:01:34.040 at Pepsi, where he's done a lot of businesses, run 0:01:34.040 --> 0:01:36.959 their e commerce business, ran the Quaker Roads business in 0:01:37.000 --> 0:01:40.880 North America's obviously been the CEO as the CFO for 0:01:41.160 --> 0:01:46.199 since twenty ten, done mergers and acquisitions, been the face 0:01:46.920 --> 0:01:50.120 of the company to the finance community. Is known for 0:01:50.160 --> 0:01:53.960 being sort of conservative guidance and over delivering on the 0:01:54.040 --> 0:01:58.760 financial targets. So just a real experienced hand at a 0:01:58.760 --> 0:01:59.840 time of great turmoil. 0:02:00.080 --> 0:02:00.960 She mentioned that Disney. 0:02:01.560 --> 0:02:02.960 Yeah, you know, I'd love for you to tell us 0:02:02.960 --> 0:02:05.560 a little bit more about that. And this is Hugh Johnston, 0:02:05.600 --> 0:02:07.360 who we were talking about. If you didn't get his name, 0:02:07.400 --> 0:02:10.320 that's who the CFO is at PEPSI right now, who's 0:02:10.360 --> 0:02:12.720 coming into Disney. So Chris tell us a little bit 0:02:12.760 --> 0:02:15.960 about the board right now at Disney at the c 0:02:16.120 --> 0:02:20.520 suite level, that we have the CFO who vacated due 0:02:20.560 --> 0:02:23.600 to a medical absence I believe it was. And what's 0:02:23.639 --> 0:02:25.520 going on with Bob Iger. How much longer is he 0:02:25.560 --> 0:02:26.760 going to stick around at the top. 0:02:27.760 --> 0:02:30.600 Well, of course, brought back now one year ago after 0:02:30.639 --> 0:02:35.200 the tumultuous reign of Bob J. Peck and Bob Iger, 0:02:35.440 --> 0:02:38.760 known historically as the steady hand, has had his own 0:02:39.520 --> 0:02:44.360 shaky first year back. There's been There's really so many 0:02:44.400 --> 0:02:45.840 things in the air, and I think that's one of 0:02:45.880 --> 0:02:48.600 the things he'll have to address on Wednesday when they 0:02:48.600 --> 0:02:52.639 do the earnings call. We've reported they're potentially selling their 0:02:52.800 --> 0:02:56.639 India media business. They've announced they're going to buy back 0:02:56.720 --> 0:02:58.560 the one third of or buy the one third of 0:02:58.800 --> 0:03:03.040 Hulu the Comcast owns, so potentially ten billion dollar deal. 0:03:03.560 --> 0:03:07.240 He's talked I talked about selling their traditional DV channels 0:03:07.240 --> 0:03:10.640 like ABC. He's looking for a strategic partner at ESPN. 0:03:11.080 --> 0:03:14.080 There's so much going on outside of the normal course 0:03:14.080 --> 0:03:18.600 of business there. So you know, they obviously need somebody 0:03:18.600 --> 0:03:21.320 who can talk to the financial community and help raise 0:03:21.360 --> 0:03:23.000 money and all that. 0:03:23.800 --> 0:03:27.120 Hey, so, christ you've covered the Walt Disney Company probably 0:03:27.120 --> 0:03:29.000 as long as I have. You're right out there in 0:03:29.160 --> 0:03:32.440 La You're you're in right the right where the entertainment 0:03:32.480 --> 0:03:34.519 industry really lives here. Talk to us about kind of 0:03:35.240 --> 0:03:37.360 where are they are on the actors strike. That seems 0:03:37.360 --> 0:03:40.680 like something that should be a quick fix relative to 0:03:40.720 --> 0:03:42.360 everything else that this industry is facing. 0:03:43.280 --> 0:03:46.480 It certainly seems like we're very close on settling the 0:03:46.520 --> 0:03:49.080 actors strike. But we've been hearing that for a couple 0:03:49.120 --> 0:03:52.760 of weeks now. Bob Iger's been personally involved in both 0:03:53.320 --> 0:03:54.560 with the actors and the writers. 0:03:54.560 --> 0:03:57.440 He's one of the quote Big four studio. 0:03:57.120 --> 0:03:59.760 Executives that's been in the room or at least on 0:03:59.840 --> 0:04:05.200 Zoo during these negotiations. It seems like the actors are 0:04:05.240 --> 0:04:08.480 going to get a pretty good deal, not everything they wanted. 0:04:08.200 --> 0:04:10.160 But sizeable increases in pay. 0:04:11.440 --> 0:04:14.000 And so we're all just sort of waiting when that 0:04:14.080 --> 0:04:17.560 news comes and if there can now sort of pivot 0:04:17.600 --> 0:04:20.240 to salvage the TV season, which was supposed to start 0:04:20.240 --> 0:04:24.600 in September, and now is earliest maybe in February. 0:04:25.120 --> 0:04:27.360 So tell us then, Chris, given all of these things 0:04:27.360 --> 0:04:30.360 that you just mentioned, we've got the the actors strike, 0:04:30.480 --> 0:04:34.240 We've got the new CFO coming in. There's also you know, 0:04:34.279 --> 0:04:37.720 the potential sales of certain units or buying back some 0:04:37.839 --> 0:04:40.800 other ones. How are how's the analyst community sizing up 0:04:40.839 --> 0:04:44.280 Disney's earnings? You said we've got that coming on Wednesday. 0:04:44.360 --> 0:04:48.120 I believe surprisingly given all we talked about, I think 0:04:48.160 --> 0:04:50.239 it's actually supposed to be a good report. 0:04:50.920 --> 0:04:51.599 That is surprising. 0:04:52.600 --> 0:04:54.520 Yeah, there's been a lot of cost cutting at Disney 0:04:54.600 --> 0:04:59.080 this year, remember seven thousand, you know, layoffs all of 0:04:59.080 --> 0:05:02.920 these media companies have been surprising, both because of cost 0:05:02.960 --> 0:05:05.600 cutting and the fact that there's no production going on. 0:05:06.000 --> 0:05:08.240 They're saving a lot of money on those TV shows 0:05:08.240 --> 0:05:11.719 and movies they would otherwise be spending money on. And 0:05:11.880 --> 0:05:14.560 of course everyone will be looking at the streaming business 0:05:14.720 --> 0:05:18.480 and how big the losses are. If making any progress 0:05:18.480 --> 0:05:21.919 and reducing that. Disney has had said they're going to 0:05:21.920 --> 0:05:24.880 break even by next year in that business, which has 0:05:25.040 --> 0:05:27.680 just lost billions of dollars over the recent years. 0:05:28.200 --> 0:05:30.280 Yeah, Chris, I mean again, you're right out there in 0:05:30.440 --> 0:05:32.760 La you go to all the Cocktait parties with the 0:05:32.800 --> 0:05:37.880 power players, they've got to be really scared, I mean, 0:05:37.920 --> 0:05:40.600 because they just don't know how their business is going 0:05:40.640 --> 0:05:43.640 to evolve. It was such a good business where everybody 0:05:43.640 --> 0:05:47.520 made money. The cable companies made money, the programmers made money, 0:05:47.560 --> 0:05:50.320 the advertisers made money. Now this streaming model has really 0:05:50.400 --> 0:05:53.800 upended all the economics that a whole couple of generations 0:05:54.200 --> 0:05:56.240 of people have kind of grown accustomed. 0:05:55.760 --> 0:05:56.280 To out there. 0:05:56.880 --> 0:05:58.839 What's the feeling out there in terms of angst? 0:06:00.240 --> 0:06:02.320 H It is anxious? You know, it's funny he mentioned 0:06:02.320 --> 0:06:03.000 got two part as. 0:06:03.160 --> 0:06:06.960 I went to an event the La County Museum on 0:06:07.120 --> 0:06:12.280 Saturday night and and Bob Auger's wife Will Bays on 0:06:12.320 --> 0:06:14.600 the board, and we kind of expected. It's literally right 0:06:14.600 --> 0:06:16.960 next door to the SAG. The screen actors build building 0:06:16.960 --> 0:06:19.159 too to put it all in contact. So we just 0:06:19.200 --> 0:06:21.080 assumed he's been there, he was gonna be there, he's 0:06:21.080 --> 0:06:23.359 been there in the past. Did not show up, So 0:06:23.920 --> 0:06:28.479 whether I shouldn't read anything into that, but but but 0:06:28.600 --> 0:06:32.320 definitely everyone was Everyone was talking about the strike. It's 0:06:32.360 --> 0:06:35.760 a big deal, uh, And everybody just really wanting to 0:06:35.800 --> 0:06:38.440 return to work. There are shows that are just you know, 0:06:39.040 --> 0:06:42.120 waiting to get restarted, and uh and and and we're 0:06:42.160 --> 0:06:45.440 seeing it in what we watched too. I mean there's uh, 0:06:45.600 --> 0:06:48.640 there's reruns that are now the hottest shows on Netflix. 0:06:48.880 --> 0:06:48.960 Uh. 0:06:49.440 --> 0:06:53.360 Movies are getting postponed in some cases by years. Uh 0:06:53.400 --> 0:06:57.080 So it's just it's really your beginning to see the impact. 0:06:57.200 --> 0:06:59.480 Chris, I wanted to come back to Hugh Johnston here 0:06:59.520 --> 0:07:04.039 for a minute, the incoming CFO, a longtime executive at PEPSI. 0:07:04.520 --> 0:07:06.520 You know, my first thought, and maybe this is a 0:07:06.520 --> 0:07:09.520 bit elementary, but maybe if I'm thinking it, someone else's too. 0:07:09.880 --> 0:07:11.880 This is a guy who's working out a company who's 0:07:11.880 --> 0:07:15.560 famous for soda and snack food and you know, more 0:07:15.640 --> 0:07:19.080 like consumer discretionary goods of that nature, like what does 0:07:19.520 --> 0:07:23.400 consumer staples rather? But I mean, how does that then 0:07:24.000 --> 0:07:26.960 work for him coming into a company that is so 0:07:27.120 --> 0:07:29.720 vastly different than that obviously still in the consumer space, 0:07:29.760 --> 0:07:32.760 but on the media side of the business. And if 0:07:32.760 --> 0:07:35.600 he could be potentially a CEO candidate down the line, 0:07:35.640 --> 0:07:38.680 does he really have the background that Disney might be 0:07:38.720 --> 0:07:39.240 looking for. 0:07:40.520 --> 0:07:43.840 It's an issue I'm old enough to remember John Scully 0:07:43.880 --> 0:07:47.920 coming from Pepsi Cattle and it was not a great 0:07:48.000 --> 0:07:51.720 run he had there, And you know, there are some 0:07:52.160 --> 0:07:57.320 interesting echoes here at Pepsi. They also faced a sort 0:07:57.360 --> 0:08:01.440 of proxy fight with Nelson Peltz, activist who's now also 0:08:01.760 --> 0:08:04.000 active in trying to get board seats at Disney. So 0:08:04.160 --> 0:08:08.280 that may come in handy. 0:08:07.000 --> 0:08:07.800 If you do some. 0:08:07.720 --> 0:08:11.320 Research, you'll find it. When Hugh Johnson joined the Twitter 0:08:11.360 --> 0:08:13.360 board a few years ago, there was a lot of 0:08:13.880 --> 0:08:16.239 commotion because it was the first time he actually signed 0:08:16.280 --> 0:08:19.720 up for a Twitter account. So, yeah, does he have 0:08:19.760 --> 0:08:23.520 the media experience to lead one of the largest media 0:08:23.520 --> 0:08:26.840 companies in the world. No, it doesn't seem that way, 0:08:27.800 --> 0:08:30.600 but as we were talking about earlier, he is a 0:08:30.800 --> 0:08:33.319 very seasoned corporate executive with a lot of experience in 0:08:33.320 --> 0:08:34.280 consumer products. 0:08:34.400 --> 0:08:36.199 All right, Chris, thanks so much for taking the time. 0:08:36.200 --> 0:08:39.520 Appreciated as always, Chris Palmary. He's the entertainment editor for 0:08:39.520 --> 0:08:43.880 Bloomberg News, joining us on Zoom from our La bureau 0:08:44.120 --> 0:08:48.160 in Century City. Again a great office there, but again Disney, 0:08:48.240 --> 0:08:50.360 it'd be really interesting for their earnings because they have 0:08:50.440 --> 0:08:52.520 so many questions. As Chris was just talking about, so 0:08:52.520 --> 0:08:55.199 many challenges ahead of them, as do most media companies 0:08:55.200 --> 0:08:58.240 and investors are just like, I can't really own your 0:08:58.240 --> 0:08:59.960 stock in size until I get a better sense of 0:09:00.000 --> 0:09:00.960 where your industry is going. 0:09:01.160 --> 0:09:02.880 I mean, you've got to feel for this, Paul, you 0:09:02.920 --> 0:09:05.680 said you covered it for yeah, you know, more than years, 0:09:05.720 --> 0:09:07.160 and maybe you'd want to sail out. 0:09:07.200 --> 0:09:09.199 But I'm glad that I'm not covering it or having 0:09:09.200 --> 0:09:10.560 to come up because I just don't see it. I 0:09:10.559 --> 0:09:12.520 don't see a clear path through this industry, at least 0:09:12.559 --> 0:09:14.360 not right now, so I have to see how it plays. 0:09:14.360 --> 0:09:18.200 App you're listening to the Bloomberg Business Week podcast. Catch 0:09:18.320 --> 0:09:21.679 us live weekday afternoons from three to six Eastern Listen 0:09:21.720 --> 0:09:25.199 on Bloomberg dot com, the iHeartRadio app, and the Bloomberg 0:09:25.240 --> 0:09:39.160 Business app, or watch us live on YouTube. 0:09:41.080 --> 0:09:45.320 All right, said, who is that band? I know that band? 0:09:45.440 --> 0:09:48.000 Steve Miller band, Thank you very much, A great band 0:09:48.000 --> 0:09:52.119 from back in the day. All Right, who releases earnings 0:09:53.160 --> 0:09:56.200 on a Saturday? You know who releases earnings on a Saturday? 0:09:56.480 --> 0:09:59.400 Somebody who can? Yeah, and that's Warren Buffett. He can, 0:09:59.720 --> 0:10:02.480 I mean, and so he does it. And all these 0:10:02.480 --> 0:10:06.400 insurance people Warren Buffett followers that say set it up 0:10:06.559 --> 0:10:08.960 their day to follow it. One of those people is 0:10:08.960 --> 0:10:13.240 Matt Palizola. He covers all the insurance stuff for Bloomberg Intelligence. 0:10:13.280 --> 0:10:15.520 He joins his life here in our Bloomberg Interactive Broker studio. 0:10:15.559 --> 0:10:17.960 We appreciate that he got the memo about four days 0:10:18.000 --> 0:10:23.520 a week. What do we learn from Berkshire Hathaway from 0:10:23.600 --> 0:10:25.800 the earnings announcement maybe kind of what we heard from 0:10:25.880 --> 0:10:26.600 mister Buffett. 0:10:26.679 --> 0:10:27.400 Yeah, so. 0:10:28.920 --> 0:10:33.520 Headline big gap loss. Okay, that is because that's accounting convention. 0:10:34.120 --> 0:10:37.520 They run the changes in their equity portfolio through the 0:10:37.559 --> 0:10:40.880 income statement. So Apple had a bad quarter. So you 0:10:40.880 --> 0:10:42.679 see this top line number come through as I think 0:10:42.679 --> 0:10:44.079 it was like twelve billion dollar. 0:10:44.200 --> 0:10:46.079 If I look at the A or the be stock watch, 0:10:46.160 --> 0:10:46.560 I look. 0:10:46.880 --> 0:10:52.319 Either are they move They moved tandem. Okay, so headline 0:10:52.360 --> 0:10:57.640 loss there, but the operating company earnings up like sixty percent, 0:10:57.880 --> 0:11:00.679 and that was mostly on the insurance segments. The insurance 0:11:00.679 --> 0:11:03.000 segment rebounds. It had a beadquarter in the year ago 0:11:03.040 --> 0:11:07.960 because of Hurricane Ian. This quartery saw reinsurance underwriting booming. 0:11:08.120 --> 0:11:12.120 Interesting come booming. You guys were just talking about the consumer. 0:11:12.600 --> 0:11:14.800 Their consumer businesses actually did a little bit better. I'm 0:11:14.800 --> 0:11:17.120 an insurance guy, so you know, it's not exactly my 0:11:17.200 --> 0:11:19.640 forte it was. The top line was down like twenty 0:11:19.679 --> 0:11:22.360 percent for that business in the second quarter, so I 0:11:22.400 --> 0:11:24.480 expected that it to be down again, but it actually wasn't, 0:11:24.600 --> 0:11:26.720 So I was kind of a positive surprise. But maybe 0:11:26.720 --> 0:11:28.720 it might not look so good going into the fourth quarter. 0:11:28.840 --> 0:11:30.600 And just tell us mac because Bruce Year is such 0:11:30.600 --> 0:11:33.640 a massive congloborate of god knows how many businesses. What 0:11:33.800 --> 0:11:35.960 exactly is the consumer business? 0:11:36.040 --> 0:11:39.840 So they manufacture consumer products I don't have them all 0:11:39.880 --> 0:11:42.640 in my head, and then they sell consumer products the 0:11:42.679 --> 0:11:46.520 retail and sales. So you know, one interestingly they just 0:11:46.600 --> 0:11:50.480 acquired with the Allegheny business was Jazzwares, which is a 0:11:50.480 --> 0:11:51.080 toy maker. 0:11:51.280 --> 0:11:52.960 I know that. You know. 0:11:53.640 --> 0:11:57.200 When I told my kids that this company makes squish mellows, 0:11:57.320 --> 0:11:59.440 they were over the moon, like it was the best 0:11:59.440 --> 0:12:02.240 thing ever. So you know, perhaps that'll do bode well 0:12:02.280 --> 0:12:03.440 going into the holiday season. 0:12:03.559 --> 0:12:07.240 All right, cash, they got one hundred and fifty seven 0:12:07.400 --> 0:12:11.400 billion in cash. What are they going to buy? I mean, 0:12:11.480 --> 0:12:12.520 this is we've been asking. 0:12:12.320 --> 0:12:14.280 This question for a long time a while, so. 0:12:14.440 --> 0:12:16.080 But now the indust rates are up, I'm not that 0:12:16.600 --> 0:12:18.920 I'm sure shareholders is like, not as concerned. 0:12:19.040 --> 0:12:21.920 That's exactly right, Paul. So you know they have a 0:12:21.960 --> 0:12:24.400 problem I wish I had. As they generate more money 0:12:24.280 --> 0:12:25.600 they can actually spend. 0:12:25.880 --> 0:12:26.640 It's a good problem. 0:12:26.840 --> 0:12:29.160 Yeah, my wife might test it out on Amazon Prime 0:12:29.200 --> 0:12:32.880 if we did. But yeah, they're just generating more money 0:12:32.920 --> 0:12:35.480 than they than they know what to do with. The 0:12:36.120 --> 0:12:38.640 great thing is the rise in interest rates, especially in 0:12:38.679 --> 0:12:41.520 the short end, has helped them a ton. They were 0:12:41.559 --> 0:12:45.440 earning about fifty million a year an interest income. Now 0:12:45.440 --> 0:12:48.480 they're earning over five billion, wow, just on just on 0:12:48.600 --> 0:12:49.680 interest on their cash. 0:12:50.880 --> 0:12:52.400 So that's that's a model. 0:12:52.520 --> 0:12:53.000 That's great. 0:12:53.080 --> 0:12:55.600 I mean, why is the stock not ripping on rates? 0:12:55.600 --> 0:12:57.480 Then it doesn't, it doesn't last forever. 0:12:57.600 --> 0:12:58.040 I think it was. 0:12:58.160 --> 0:13:00.080 I was honestly a little bit of surprise to me 0:13:00.200 --> 0:13:02.719 that they benefited that much from it. I guess it 0:13:02.760 --> 0:13:05.520 could have seen it. Maybe people expecting them to do 0:13:05.559 --> 0:13:08.880 something with that cash, but you know, they keep it 0:13:09.520 --> 0:13:12.480 liquid and that's been okay, won't be you know if 0:13:12.520 --> 0:13:14.240 we start going the other way obviously yep. 0:13:14.320 --> 0:13:17.600 Have there been whispers of what Burgs Year could possibly buy, 0:13:17.720 --> 0:13:19.480 like what deals might be out there? I mean, like 0:13:19.520 --> 0:13:22.000 we just said, this is a massive company, so many 0:13:22.080 --> 0:13:24.440 businesses they're already involved in, Like, what more do they 0:13:24.440 --> 0:13:25.160 possibly need? 0:13:25.480 --> 0:13:27.920 So my big thing is I really thought they were 0:13:27.920 --> 0:13:30.439 going to buy Occidental. They it was seemed out of 0:13:30.480 --> 0:13:32.959 their playbook the way they were approaching it, taking kind 0:13:32.960 --> 0:13:37.800 of little snips. Buffett was very positive on the management publicly, 0:13:37.880 --> 0:13:40.280 which is things he had done before. Then at the 0:13:40.280 --> 0:13:42.160 annual meeting, they came out and said, we have no 0:13:42.200 --> 0:13:45.800 interest in owning this entire company. Then Chevron became one 0:13:45.840 --> 0:13:47.840 of their biggest holdings, and I thought, okay, so they're 0:13:47.840 --> 0:13:50.920 big energy players. Maybe maybe it's an energy business. They've 0:13:50.960 --> 0:13:54.400 paired their holdings in Chevron. You know, I don't know. 0:13:54.520 --> 0:13:56.000 I think it's going to be something we never heard 0:13:56.040 --> 0:13:57.000 of that they end up buying. 0:13:57.080 --> 0:14:00.000 Did they buy non US companies inside? 0:14:01.520 --> 0:14:02.240 They haven't. 0:14:02.920 --> 0:14:05.360 You know, Buffett made some investments in the Japanese trading 0:14:05.360 --> 0:14:08.080 houses and that was I forget the exact number, but 0:14:08.120 --> 0:14:10.320 it was in the billions of dollars. They didn't acquire them, 0:14:10.400 --> 0:14:11.800 they just put the stocks of them. 0:14:12.280 --> 0:14:12.400 Uh. 0:14:12.520 --> 0:14:16.480 And they have some businesses with foreign operations, but because 0:14:16.480 --> 0:14:17.920 they usually stick to the USA. 0:14:17.800 --> 0:14:19.760 You know, with Tim craik Head, a Bloomberg intelligence you know, 0:14:19.800 --> 0:14:24.280 explained to me years ago about the European stock index 0:14:24.400 --> 0:14:27.400 doesn't have a lot of tech. Okay, what they have 0:14:27.520 --> 0:14:29.720 is like they make stuff over there in your German 0:14:29.760 --> 0:14:32.720 like Semens, and they make big stuff equipment and everything. 0:14:32.920 --> 0:14:36.520 That seems like a play for a warn Buffett, go 0:14:36.680 --> 0:14:39.040 buy a big machine company here. 0:14:39.040 --> 0:14:40.880 I wouldn't be surprised. I mean, one of their biggest 0:14:40.880 --> 0:14:45.560 companies is Precision Cast Parts, which makes precision parts for airplanes, right, 0:14:45.560 --> 0:14:48.000 and it's just not something you know that much about 0:14:48.120 --> 0:14:50.160 or hear about. That actually did pretty well in the 0:14:50.200 --> 0:14:53.840 quarter too, but it's got a monopoly on these kind 0:14:53.840 --> 0:14:56.040 of unique parts that no one else can make. And 0:14:56.000 --> 0:14:57.760 I think those are the companies that they look for. 0:14:58.120 --> 0:15:01.680 So if I'm a stockholder right now in Berkshire, do 0:15:01.760 --> 0:15:04.520 I want to see the company buying backstock or giving 0:15:04.520 --> 0:15:07.200 me a bigger dividend? Like, what do you think when 0:15:07.240 --> 0:15:08.120 you see all this cash? 0:15:08.240 --> 0:15:10.240 I think the market would love a dividends. I don't 0:15:10.240 --> 0:15:11.800 think they're going to do that. As long as Warren 0:15:11.800 --> 0:15:12.560 Buffet's around. 0:15:13.280 --> 0:15:16.440 They were they so just go back. That's a great question. 0:15:16.960 --> 0:15:18.400 Why don't they do a dividend. 0:15:18.800 --> 0:15:21.440 I think, but they the Buffett likes getting dividends. He 0:15:21.480 --> 0:15:24.200 doesn't like paying dividends. He I think he always assumes 0:15:25.040 --> 0:15:26.280 he can do something better with the cash. 0:15:26.400 --> 0:15:28.760 They okay, but that's now been proven beyond a doubt 0:15:28.800 --> 0:15:30.600 that they can't because theres one hundred and fifty seven 0:15:30.600 --> 0:15:32.280 bellion cash. Did they buy backstock? 0:15:32.560 --> 0:15:37.360 So they buy backstock. Historically they were not big repurchasers either. 0:15:38.120 --> 0:15:41.480 What happened in COVID the stock dipped and they really 0:15:41.520 --> 0:15:44.000 started buying, and massive buying, like six billion a quarter 0:15:44.080 --> 0:15:46.960 at one point. There's some limitations with the A and 0:15:47.000 --> 0:15:49.400 B shares, they can only be so much of the volume, 0:15:50.240 --> 0:15:53.080 but the share of purchase has gone down. It was 0:15:53.160 --> 0:15:55.640 like a billion for the past two quarters, which obviously 0:15:55.680 --> 0:15:58.600 has a lot of money, but not for them, and 0:15:58.680 --> 0:16:00.640 it was honestly disappointing. I would have loved to see 0:16:00.640 --> 0:16:01.320 them buy back more. 0:16:01.480 --> 0:16:04.360 All right, let's have a broader insurance conversation. Shadows who 0:16:04.360 --> 0:16:05.080 doesn't want to do that? 0:16:05.160 --> 0:16:05.520 Please do? 0:16:06.280 --> 0:16:09.840 What What are the big drivers A Howard insurance stocks 0:16:09.920 --> 0:16:12.360 doing these days? And B what's kind of driving? What's 0:16:12.400 --> 0:16:14.280 the driving thing that you guys need to get smart on? 0:16:14.440 --> 0:16:17.240 So investors, So I mean interest rates are big things 0:16:17.240 --> 0:16:19.240 that covered the P and C names, specifically, the life 0:16:19.360 --> 0:16:23.840 names are very much interest rate plays and move a 0:16:23.840 --> 0:16:26.960 lot with interest rates. The P and C ones property 0:16:27.000 --> 0:16:32.640 and casualty, as we say in the biz. They they 0:16:32.680 --> 0:16:35.120 were in a play on inflation, so the cost of 0:16:35.160 --> 0:16:38.880 repairing things went up, so that increased their loss costs. 0:16:39.320 --> 0:16:41.920 But their prices having going up as well, that's really 0:16:41.920 --> 0:16:45.160 on the commercial side. It's hurting the personal side as well. 0:16:46.680 --> 0:16:48.440 The thing is, these six Han's done that well this year. 0:16:48.520 --> 0:16:52.360 They did their their defensive plays. The beginning of the year, 0:16:52.400 --> 0:16:56.760 they all took a dive on the regional banking disaster, 0:16:56.920 --> 0:16:59.720 which for no reason, there was absolutely no reason they 0:16:59.720 --> 0:17:02.680 should fell in sympathy with them. We talked about it 0:17:02.720 --> 0:17:05.160 at the time. So they spent all year recovering from 0:17:05.200 --> 0:17:08.320 that just to bring into Berkshire a little bit. Berksher's 0:17:08.320 --> 0:17:10.240 outperformed all of them, so they haven't really moved like 0:17:10.240 --> 0:17:12.320 an insurance company this year. But so you want to 0:17:12.320 --> 0:17:15.320 get small on insurance companies, it its rates, it's loss costs. 0:17:16.080 --> 0:17:18.639 We just came out of the third quarter. Things were 0:17:18.680 --> 0:17:22.720 actually better than I expected, and the stocks underperformed. I 0:17:22.720 --> 0:17:26.200 think they have maybe another year of peak ros evaluations 0:17:26.200 --> 0:17:28.520 can peak before the ROEZ, so there actually is probably 0:17:28.600 --> 0:17:29.320 room in those stocks. 0:17:29.440 --> 0:17:32.760 We haven't had any like big does it the hurricanes 0:17:32.760 --> 0:17:33.080 and stuff? 0:17:33.080 --> 0:17:36.480 That question next, Yeah, because you mentioned the imknock. 0:17:36.240 --> 0:17:36.960 On wood here. 0:17:37.240 --> 0:17:40.080 So we had a bunch of weird stuff happen in 0:17:40.119 --> 0:17:42.640 the quarter, right. We had the Maui wildfires, we had 0:17:42.680 --> 0:17:46.000 the we had the tropical storm hitting California, and these 0:17:46.000 --> 0:17:48.879 were kind of they were odd events. The Mali fires 0:17:49.080 --> 0:17:53.679 were very bad in humanitarian aspect, and the insured losses 0:17:53.680 --> 0:17:57.480 were small for the industry. We haven't had a big event. 0:17:57.520 --> 0:17:59.360 We haven't had like a hurricane e in this year, 0:18:00.240 --> 0:18:03.200 and it's allowed these companies to build capital. But things 0:18:03.200 --> 0:18:07.159 have been worrisome even this There was a big hurricane 0:18:07.240 --> 0:18:10.879 in Mexico Otis, and I looked at it and my 0:18:11.200 --> 0:18:13.600 just kind of very initial blush was, Okay, it's not 0:18:13.640 --> 0:18:15.560 going to be big for the reinsurance community, might be 0:18:15.600 --> 0:18:19.119 big for the domestic market. It's coming out. Maybe it's 0:18:19.160 --> 0:18:24.320 six billion dollars, which is a modest industry loss. Again, 0:18:24.359 --> 0:18:26.600 it's probably going to hit a lot of the Mexican companies, 0:18:26.960 --> 0:18:28.520 but if you look at the damage there, it was 0:18:28.600 --> 0:18:32.680 some of the strongest wins literally ever recorded. So we're 0:18:32.760 --> 0:18:35.600 kind of on the precipice of maybe something big happening. 0:18:35.640 --> 0:18:38.639 All right, Matt Patlozola, thanks so much. We appreciate property 0:18:38.640 --> 0:18:42.520 and Casualty insurance senior analysts for Bloomberg Intelligence joining us 0:18:42.560 --> 0:18:46.000 live here in our Bloomberg Interactive Brokers studio here talking 0:18:46.000 --> 0:18:48.720 about insurance's business, Warren Buffett one hundred and fifty seven 0:18:48.760 --> 0:18:51.960 billion dollars of cash on the balance sheet. What is 0:18:52.000 --> 0:18:54.000 he to do with that? That's kind of the big 0:18:54.080 --> 0:18:57.040 question that investors been asking. A lot more coming up. 0:18:57.200 --> 0:18:58.000 This is Bloomberg. 0:19:00.760 --> 0:19:04.320 You're listening to the Bloomberg Business Week Podcast. 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