1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: Podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:23,520 Speaker 1: at Bloomberg dot com. Well, it is merger Monday, General Electric. 8 00:00:23,560 --> 00:00:25,840 Speaker 1: The stock is up nine percent after bereing to sell 9 00:00:25,840 --> 00:00:28,440 Speaker 1: It's a bio farma business to Donna Her Donna. He 10 00:00:28,560 --> 00:00:30,840 Speaker 1: is actually up a percent for total consideration of twenty 11 00:00:30,880 --> 00:00:34,080 Speaker 1: one point four billion dollars, providing a major boost for 12 00:00:34,080 --> 00:00:37,400 Speaker 1: the trouble conglomerates. Turnaround. To help us kind of dig 13 00:00:37,440 --> 00:00:40,720 Speaker 1: into the details of this transaction motivations on both sides 14 00:00:40,800 --> 00:00:44,360 Speaker 1: is Brook Sutherland. Brook is a deals and industrial columnist 15 00:00:44,360 --> 00:00:46,839 Speaker 1: for Bloomberg Opinion. She joined us here in our Bloomberg 16 00:00:46,880 --> 00:00:50,080 Speaker 1: Interactive Brooker Studio. So, Brooke, is this just part of 17 00:00:50,159 --> 00:00:53,159 Speaker 1: g s plan to just trim down and focus on 18 00:00:53,159 --> 00:00:55,520 Speaker 1: that balance sheet? It really is. I mean, this deal 19 00:00:55,680 --> 00:00:58,240 Speaker 1: is all about the balance sheet. I mean, I think 20 00:00:58,400 --> 00:01:00,720 Speaker 1: Larry Cole. The first sentence of his quote, and the 21 00:01:00,720 --> 00:01:02,880 Speaker 1: statement was about, you know how this would allow the 22 00:01:02,880 --> 00:01:06,520 Speaker 1: company to reduce leverage, uh twenty, you know, one billion 23 00:01:06,520 --> 00:01:08,680 Speaker 1: dollars coming in the door in cash and then about 24 00:01:08,680 --> 00:01:11,960 Speaker 1: four hundred million of pensions being transferred with this asset, 25 00:01:12,520 --> 00:01:14,600 Speaker 1: which is a big deal given g has a very 26 00:01:14,640 --> 00:01:17,959 Speaker 1: significant unfunded pension balance. Um. You know. But what I 27 00:01:18,000 --> 00:01:22,080 Speaker 1: think is interesting about this is sort of the counter 28 00:01:22,120 --> 00:01:25,520 Speaker 1: balance was what John Flannery promised to do when he 29 00:01:25,560 --> 00:01:28,040 Speaker 1: was running the company. So his plan for the healthcare 30 00:01:28,080 --> 00:01:32,640 Speaker 1: business was to spin off to shareholders and sell via 31 00:01:32,760 --> 00:01:35,440 Speaker 1: an I p O. And the reason why he did 32 00:01:35,480 --> 00:01:36,959 Speaker 1: that and why he did a lot of the things 33 00:01:36,959 --> 00:01:39,280 Speaker 1: that he did, is he was trying to balance the 34 00:01:39,360 --> 00:01:42,920 Speaker 1: need to pay down debt with you know, a desire 35 00:01:43,040 --> 00:01:45,600 Speaker 1: to sort of give something to equity holders, give them 36 00:01:45,640 --> 00:01:48,520 Speaker 1: a chance to participate in the upside opportunities for some 37 00:01:48,600 --> 00:01:50,960 Speaker 1: of these ge businesses. And I think what you've seen 38 00:01:51,040 --> 00:01:54,320 Speaker 1: Larry Colp do time and time again is say, forget 39 00:01:54,360 --> 00:01:56,600 Speaker 1: all of that. We need all the cash we can get, 40 00:01:56,640 --> 00:01:58,640 Speaker 1: and we're going to structure these deals in a way 41 00:01:58,680 --> 00:02:01,520 Speaker 1: that optimizes the amount of cash coming in the door. 42 00:02:01,640 --> 00:02:04,920 Speaker 1: The incredible irony of that is that the shares are 43 00:02:05,040 --> 00:02:08,240 Speaker 1: rallying the most is two thousand nine, So shareholders are 44 00:02:08,280 --> 00:02:12,320 Speaker 1: liking what they see, regardless of any longer term better 45 00:02:12,320 --> 00:02:14,960 Speaker 1: potential from keeping the business on hit right. Well, so 46 00:02:15,000 --> 00:02:17,840 Speaker 1: I think that, um, for the time being, the interests 47 00:02:17,840 --> 00:02:21,320 Speaker 1: of bond holders and shareholders are aligned because obviously the 48 00:02:21,360 --> 00:02:23,760 Speaker 1: balance sheet is the biggest overhang on the stock right now, 49 00:02:23,800 --> 00:02:27,160 Speaker 1: it's the biggest factor driving the stock, and so to 50 00:02:27,240 --> 00:02:29,919 Speaker 1: be able to mitigate that, and this Life Sciences deal 51 00:02:29,960 --> 00:02:32,000 Speaker 1: goes a very long way to doing that, is a 52 00:02:32,080 --> 00:02:33,800 Speaker 1: huge step forward. But I would point out the shares 53 00:02:33,840 --> 00:02:35,639 Speaker 1: are rallying, but they're back to about where they were 54 00:02:35,639 --> 00:02:39,160 Speaker 1: in October. So, yes, your interests are aligned at a 55 00:02:39,200 --> 00:02:41,040 Speaker 1: certain point, but that only lasts for so long and 56 00:02:41,040 --> 00:02:43,400 Speaker 1: as you start thinking about what does the g E 57 00:02:43,480 --> 00:02:47,040 Speaker 1: of the future look like. So they're keeping the core 58 00:02:47,120 --> 00:02:50,520 Speaker 1: healthcare business in the fold right now, they say, you know, 59 00:02:50,520 --> 00:02:52,440 Speaker 1: they're going to look at other options for that. They're 60 00:02:52,480 --> 00:02:54,840 Speaker 1: not going to do the I p O right away. UM. 61 00:02:54,880 --> 00:02:57,200 Speaker 1: I think part of that is the fact that they 62 00:02:57,240 --> 00:03:00,320 Speaker 1: need the cash flow from that healthcare business to set 63 00:03:00,320 --> 00:03:02,239 Speaker 1: the challenges that they have in the power unit in 64 00:03:02,320 --> 00:03:05,240 Speaker 1: G Capital. Healthcare is one of the best cash generating 65 00:03:05,240 --> 00:03:07,960 Speaker 1: assets that G has, and especially as you look at 66 00:03:08,200 --> 00:03:11,040 Speaker 1: the possibility of a recession in one that's going to 67 00:03:11,160 --> 00:03:14,480 Speaker 1: hit the aviation business really hard. So I think just 68 00:03:14,639 --> 00:03:16,760 Speaker 1: given all of those factors, it makes sense to keep 69 00:03:16,800 --> 00:03:19,799 Speaker 1: Healthcare in the fold. But eventually, you know, all signs 70 00:03:19,800 --> 00:03:23,640 Speaker 1: are pointing to that eventually being separate. And clearly this 71 00:03:23,720 --> 00:03:25,760 Speaker 1: is a company with a lot of challenges, and I 72 00:03:25,840 --> 00:03:27,840 Speaker 1: just you know, as you sort of take a step 73 00:03:27,840 --> 00:03:29,760 Speaker 1: back and say where do we go from here? Once 74 00:03:29,800 --> 00:03:31,359 Speaker 1: you play this card and you bring the cash in 75 00:03:31,400 --> 00:03:34,080 Speaker 1: the door, that sort of solves your balance sheet issues 76 00:03:34,120 --> 00:03:36,160 Speaker 1: in the near tour, but you still have to figure out, 77 00:03:36,440 --> 00:03:38,440 Speaker 1: you know, how does this company grow? How do we 78 00:03:38,480 --> 00:03:40,840 Speaker 1: deal with all of the problems that we have. So 79 00:03:40,960 --> 00:03:43,800 Speaker 1: for Donna her the stock is up eight or nine 80 00:03:43,800 --> 00:03:46,880 Speaker 1: percent today, which is unusual for an acquirer, particular cash acquirer. 81 00:03:47,080 --> 00:03:48,680 Speaker 1: So what's going on here? Did they get a great 82 00:03:48,720 --> 00:03:51,040 Speaker 1: deal or there's a huge synergies what's driving the upside 83 00:03:51,040 --> 00:03:53,040 Speaker 1: for Donner? Right? I mean, this is a great deal 84 00:03:53,040 --> 00:03:55,080 Speaker 1: for Dannahr. I think you know, this is a business 85 00:03:55,080 --> 00:03:59,520 Speaker 1: that they know well they've been increasingly pivoting into life sciences. 86 00:03:59,560 --> 00:04:02,600 Speaker 1: I think it's, you know, a more attractive multiple than 87 00:04:02,640 --> 00:04:04,800 Speaker 1: what they've paid for some of their past deals, which 88 00:04:04,840 --> 00:04:07,200 Speaker 1: have been on the price yeer side. Obviously in the 89 00:04:07,240 --> 00:04:13,080 Speaker 1: healthcare spaces, they sort of transition away from their industrial past. Um. Yeah, 90 00:04:13,120 --> 00:04:14,960 Speaker 1: I mean, I just think this is a really slam 91 00:04:15,040 --> 00:04:17,120 Speaker 1: dunk deal for Dana Her. And what the company is 92 00:04:17,160 --> 00:04:20,760 Speaker 1: really known for is buying businesses, bringing them in and 93 00:04:20,800 --> 00:04:24,719 Speaker 1: then applying the Dana Her business system to those businesses 94 00:04:24,760 --> 00:04:28,240 Speaker 1: and really improving their profitability. I think clearly what we've 95 00:04:28,279 --> 00:04:30,520 Speaker 1: discovered through this whole ge process is that some of 96 00:04:30,520 --> 00:04:33,600 Speaker 1: these assets are not always managed to their greatest potential. 97 00:04:33,600 --> 00:04:35,560 Speaker 1: And you have to wonder, you know, some of these 98 00:04:35,560 --> 00:04:38,080 Speaker 1: life sciences business at a time when you have so 99 00:04:38,200 --> 00:04:40,719 Speaker 1: many cash calls at the company where they investing to 100 00:04:40,760 --> 00:04:43,080 Speaker 1: the extent that they needed to. Uh. I think there's 101 00:04:43,120 --> 00:04:45,040 Speaker 1: just a lot of opportunity for Dana Her to do 102 00:04:45,080 --> 00:04:49,719 Speaker 1: more with this business. Brook Sutherland are ge correspondent joining 103 00:04:49,800 --> 00:04:52,440 Speaker 1: us here in our eleven three or studios. Brook Sutherland 104 00:04:52,520 --> 00:04:55,520 Speaker 1: is really a Blomberg opinion columnist UH, and she covers 105 00:04:55,520 --> 00:04:59,120 Speaker 1: industrial companies, among many other things here at Bloomberg. We 106 00:04:59,200 --> 00:05:01,760 Speaker 1: thank you for being with us. Really interesting day for 107 00:05:01,880 --> 00:05:21,000 Speaker 1: General Electric. Well. Today President Donald Trump raised the prospect 108 00:05:21,000 --> 00:05:22,800 Speaker 1: that he could sign a new trade deal with the 109 00:05:22,920 --> 00:05:26,960 Speaker 1: Chinese counterpart, gene Ping, as both sides express optimism that 110 00:05:27,080 --> 00:05:30,000 Speaker 1: substantial progress is being made towards ending the trade war 111 00:05:30,480 --> 00:05:33,520 Speaker 1: between the world's two biggest economies. To help us dig 112 00:05:33,560 --> 00:05:36,799 Speaker 1: into that, we bring on Leland. Melvin Leland is CEO 113 00:05:36,920 --> 00:05:39,599 Speaker 1: of the China based book Internaction. I'm sorry, Leland, Millard, 114 00:05:39,920 --> 00:05:42,560 Speaker 1: he's with us in our Bloomberg Interactive Broker studio here 115 00:05:42,560 --> 00:05:45,039 Speaker 1: in New York. So Leland, thanks for being with us. Um, 116 00:05:45,080 --> 00:05:48,400 Speaker 1: what is your sense as to what will actually get 117 00:05:48,440 --> 00:05:51,560 Speaker 1: done between China and the US? Will it be anything material? 118 00:05:51,600 --> 00:05:54,479 Speaker 1: In your opinion? Now, I think that we were set 119 00:05:54,560 --> 00:05:57,240 Speaker 1: up from the very beginning to have a very limited deal. 120 00:05:57,560 --> 00:06:00,120 Speaker 1: It was very clear that the President wanted movement on 121 00:06:00,160 --> 00:06:02,640 Speaker 1: the trade deficit. He wanted to announce a lot of 122 00:06:02,760 --> 00:06:06,320 Speaker 1: big imports, maybe some long term contracts, so it's sounded 123 00:06:06,320 --> 00:06:09,080 Speaker 1: good to the farming base. Uh And and he wanted 124 00:06:09,120 --> 00:06:13,280 Speaker 1: to push on intellectual property uh so, theft and coercion. 125 00:06:13,760 --> 00:06:15,440 Speaker 1: Uh And I think that we'll get we'll get stuff 126 00:06:15,440 --> 00:06:16,680 Speaker 1: on that, We'll get a little bit of stuff on 127 00:06:16,720 --> 00:06:19,800 Speaker 1: market access. In general, this is not something that is 128 00:06:19,800 --> 00:06:22,000 Speaker 1: a broad deal. It's not what they originally sold it 129 00:06:22,000 --> 00:06:24,400 Speaker 1: to be, and it's there's gonna be no structural reform whatsoever. 130 00:06:25,320 --> 00:06:28,280 Speaker 1: Is China in a better negotiating position right now, given 131 00:06:28,320 --> 00:06:30,720 Speaker 1: the fact that they're allowing leverage to creep back up 132 00:06:31,200 --> 00:06:34,560 Speaker 1: UH and potentially juice their economy? You know, I think 133 00:06:34,600 --> 00:06:36,160 Speaker 1: the problem is that people haven't been able to get 134 00:06:36,320 --> 00:06:38,840 Speaker 1: a good UH reading on the Chinese economy for a 135 00:06:38,880 --> 00:06:40,919 Speaker 1: few months. The Chinese economy is not not not in 136 00:06:40,960 --> 00:06:42,640 Speaker 1: great shape right now, So I don't think that they've 137 00:06:42,720 --> 00:06:46,200 Speaker 1: materially improved in the last month or two in terms 138 00:06:46,200 --> 00:06:51,560 Speaker 1: of just letting the credit flow um. Now, overall, they 139 00:06:51,640 --> 00:06:53,760 Speaker 1: want to get this trade stuff out of the way 140 00:06:53,880 --> 00:06:56,359 Speaker 1: so they can batten down the hatches and really focus 141 00:06:56,400 --> 00:06:58,520 Speaker 1: on improving their domestic economy. I don't think that the 142 00:06:58,560 --> 00:07:00,360 Speaker 1: pushed out of the way so that they can get 143 00:07:00,360 --> 00:07:03,640 Speaker 1: down to business domestically. So, Lena, why is it so 144 00:07:03,680 --> 00:07:06,320 Speaker 1: hard to really get some of these big issues on 145 00:07:06,400 --> 00:07:08,720 Speaker 1: the table and to start knocking them off one by one? 146 00:07:08,760 --> 00:07:11,080 Speaker 1: Maybe seems not just the Trump administration, but we've seen 147 00:07:11,440 --> 00:07:14,120 Speaker 1: through history. What is what what are really the tough 148 00:07:14,160 --> 00:07:17,640 Speaker 1: things and why is China playing so uh such such hardball? 149 00:07:17,720 --> 00:07:20,280 Speaker 1: Because these are not preferences. So we talk about structural reform, 150 00:07:20,280 --> 00:07:22,960 Speaker 1: we're not talking about preferences that the leadership has. We're 151 00:07:23,000 --> 00:07:26,280 Speaker 1: talking about the absolute foundation of the way the Chinese 152 00:07:26,320 --> 00:07:30,080 Speaker 1: economy runs. So when you're talking about favoring state companies 153 00:07:30,080 --> 00:07:33,760 Speaker 1: which stayed on enterprises, when you're talking about subsidies and 154 00:07:33,760 --> 00:07:36,400 Speaker 1: and repressing households in order to boost the state, and 155 00:07:36,440 --> 00:07:39,200 Speaker 1: you're talking about non tariff bearriers, this is the way 156 00:07:39,240 --> 00:07:41,720 Speaker 1: that the Chinese economy is able to run. It's a 157 00:07:41,880 --> 00:07:44,520 Speaker 1: very different than the market economy. It's not a commercial 158 00:07:44,520 --> 00:07:47,320 Speaker 1: financial system. This is the way the Chinese economy is 159 00:07:47,400 --> 00:07:49,640 Speaker 1: run and one of the ways that the Chinese Communist 160 00:07:49,680 --> 00:07:52,600 Speaker 1: Party is able to maintain control of the country. So 161 00:07:52,640 --> 00:07:55,040 Speaker 1: the idea that they're simply going to say, okay, well, 162 00:07:55,080 --> 00:07:56,760 Speaker 1: you know, it's it's about time that we got with 163 00:07:56,800 --> 00:07:59,520 Speaker 1: the program and became a market economy, and we we 164 00:07:59,520 --> 00:08:01,880 Speaker 1: we ran our economy the same way the US. That 165 00:08:01,960 --> 00:08:03,880 Speaker 1: was never going to happen, and it certainly was never 166 00:08:03,880 --> 00:08:07,360 Speaker 1: going to happen after a ninety negotiation where very little 167 00:08:07,400 --> 00:08:11,600 Speaker 1: pain was threatened. All right, just taking a step back, 168 00:08:11,640 --> 00:08:14,440 Speaker 1: you nailed it when you just said back last year. 169 00:08:14,800 --> 00:08:17,120 Speaker 1: There's going to be a deal. President Trump wants a deal. 170 00:08:17,160 --> 00:08:19,160 Speaker 1: It's going to be a narrowly crafted deal. This is 171 00:08:19,200 --> 00:08:21,320 Speaker 1: not going to deal with the thorn near issues. Both 172 00:08:21,320 --> 00:08:23,560 Speaker 1: sides can declare some sort of victory and move on. 173 00:08:23,680 --> 00:08:27,560 Speaker 1: Nothing really will change. Lightheiser, however, wants something different, and 174 00:08:27,720 --> 00:08:31,080 Speaker 1: he and President Trump are increasingly, at least appeared to 175 00:08:31,120 --> 00:08:35,200 Speaker 1: be increasingly pitted against each other. How will that tension 176 00:08:35,679 --> 00:08:39,320 Speaker 1: factor into these negotiations. Well, I think the first and foremost, 177 00:08:39,600 --> 00:08:42,000 Speaker 1: Robert Leightheiser is a is a good soldier, So he 178 00:08:42,120 --> 00:08:44,000 Speaker 1: is he knows he's not the president. He's doing what 179 00:08:44,040 --> 00:08:47,200 Speaker 1: the president wants. At the same time, he entered this 180 00:08:47,280 --> 00:08:49,880 Speaker 1: administration to get something done, and that was he saw 181 00:08:49,880 --> 00:08:52,360 Speaker 1: an inequity in the relationship and he wanted to be 182 00:08:52,440 --> 00:08:55,040 Speaker 1: one of the guys who helped make it right. And 183 00:08:55,080 --> 00:08:57,280 Speaker 1: I think this is very frustrating for him and quite frankly, 184 00:08:57,320 --> 00:09:00,559 Speaker 1: a lot of people in this administration who thought that 185 00:09:00,600 --> 00:09:02,560 Speaker 1: they were on the verge of summoning up leverage that 186 00:09:02,600 --> 00:09:04,640 Speaker 1: no one had been willing to do for many, many 187 00:09:04,720 --> 00:09:08,520 Speaker 1: years ever, truly uh, and and to push something on 188 00:09:08,640 --> 00:09:10,680 Speaker 1: China that would really make a difference to to to 189 00:09:10,880 --> 00:09:14,600 Speaker 1: change the basically the ground floor of the relationship. And 190 00:09:14,640 --> 00:09:16,680 Speaker 1: then as we get to a deadline, everyone sort of 191 00:09:16,679 --> 00:09:19,160 Speaker 1: loses their nerves. So this has to be extremely frustrating 192 00:09:19,160 --> 00:09:21,800 Speaker 1: for Lightheiser. So I'm just trying to understand this because 193 00:09:21,840 --> 00:09:23,640 Speaker 1: if if they were thinking that there was more on 194 00:09:23,640 --> 00:09:26,480 Speaker 1: the table then say, uh, something having to do the 195 00:09:26,480 --> 00:09:30,480 Speaker 1: trade deficit, then was President Trump ever trying to do that? 196 00:09:30,520 --> 00:09:32,200 Speaker 1: I mean, is is that could that be back on 197 00:09:32,240 --> 00:09:34,280 Speaker 1: the table? I don't think it was ever on the 198 00:09:34,280 --> 00:09:36,880 Speaker 1: table when we when we spoke to two administration officials 199 00:09:36,880 --> 00:09:38,560 Speaker 1: of this, it was very clear that there were there 200 00:09:38,600 --> 00:09:41,559 Speaker 1: were priorities, most of them were political priorities involving the 201 00:09:41,600 --> 00:09:46,080 Speaker 1: trade deficit. Intellectual property, to their credit, was a major 202 00:09:46,160 --> 00:09:48,680 Speaker 1: issue that they wanted to to make progress on theft 203 00:09:48,679 --> 00:09:51,000 Speaker 1: and coercion of intellectual properties a major issue, and I 204 00:09:51,040 --> 00:09:54,240 Speaker 1: think that we will see UH some some major announcements 205 00:09:54,240 --> 00:09:56,480 Speaker 1: on that now. The key, of course, is not whether 206 00:09:56,480 --> 00:09:59,040 Speaker 1: the Chinese make announcements on on IP theft and then 207 00:09:59,160 --> 00:10:02,920 Speaker 1: create a regimed protect intellectual property. It's whether they're actually 208 00:10:02,960 --> 00:10:04,920 Speaker 1: enforce it. And this is something that light Higher himself 209 00:10:04,920 --> 00:10:07,120 Speaker 1: has been saying over and over. If the Chinese can 210 00:10:07,120 --> 00:10:10,040 Speaker 1: simply flip a switch the next time that there's a 211 00:10:10,080 --> 00:10:13,440 Speaker 1: problem in the relationship and all this beautiful enforcement, all 212 00:10:13,480 --> 00:10:15,720 Speaker 1: this these i P laws and i P courts and 213 00:10:15,720 --> 00:10:18,560 Speaker 1: everything else that they've promised to do just suddenly go away, 214 00:10:18,960 --> 00:10:21,720 Speaker 1: then what has this entire process been. And that's why 215 00:10:21,760 --> 00:10:23,560 Speaker 1: there has been so much of a push by some 216 00:10:23,920 --> 00:10:27,040 Speaker 1: people for structural reform, because the opposite of structural reform 217 00:10:27,280 --> 00:10:30,560 Speaker 1: is transitory transitory reform, which will just go away as 218 00:10:30,600 --> 00:10:32,560 Speaker 1: soon as the relationship changes. And I think that's what 219 00:10:32,600 --> 00:10:35,280 Speaker 1: people are fearing we're walking into. So is that fear 220 00:10:35,320 --> 00:10:37,400 Speaker 1: crystallized in the sense that maybe we just have one 221 00:10:37,400 --> 00:10:39,480 Speaker 1: bite at the apple here and we've if we lose 222 00:10:39,520 --> 00:10:41,880 Speaker 1: this opportunity now, or if we do pass on the 223 00:10:41,880 --> 00:10:44,480 Speaker 1: big structural issues, that we may not be able to 224 00:10:44,480 --> 00:10:46,520 Speaker 1: revisit them for some period of time. Yeah, I mean 225 00:10:46,559 --> 00:10:48,600 Speaker 1: that's the fear. So, so we don't know how many 226 00:10:48,880 --> 00:10:51,080 Speaker 1: bites the apple will get, but we do know that 227 00:10:51,800 --> 00:10:55,200 Speaker 1: an enormous amount of leverage was summoned in order to 228 00:10:55,240 --> 00:10:57,560 Speaker 1: push the Chinese into this negotiation, And is that that 229 00:10:57,640 --> 00:11:00,160 Speaker 1: leverage the tariffs per se? It was the tariffs, It 230 00:11:00,200 --> 00:11:02,280 Speaker 1: was threatening some other things, but yeah, principally the tariffs. 231 00:11:02,360 --> 00:11:05,640 Speaker 1: And you can agree or not, but but this summon leverage, 232 00:11:05,640 --> 00:11:07,600 Speaker 1: it's very hard to summon, and the Chinese aren't going 233 00:11:07,640 --> 00:11:09,360 Speaker 1: to be as open to doing this a year from 234 00:11:09,400 --> 00:11:11,360 Speaker 1: now or three years from now. So maybe this is 235 00:11:11,360 --> 00:11:13,800 Speaker 1: the last by the apple. But either way, every year 236 00:11:13,840 --> 00:11:16,400 Speaker 1: that goes by, the Chinese getting crementally stronger and more 237 00:11:16,440 --> 00:11:18,680 Speaker 1: able to to push back on this and are now 238 00:11:18,720 --> 00:11:22,320 Speaker 1: more knowledgeable. I'm more in recognition of the fact that 239 00:11:22,400 --> 00:11:25,920 Speaker 1: this unequal trade relationship has caused the US to have 240 00:11:25,960 --> 00:11:28,080 Speaker 1: more leverage, and so they're doing things to alter the 241 00:11:28,080 --> 00:11:31,559 Speaker 1: relationship as well. Meanwhile, a lot of people are wagering 242 00:11:31,720 --> 00:11:36,280 Speaker 1: that China will succeed in keeping up its economy and 243 00:11:36,400 --> 00:11:40,640 Speaker 1: keeping its growth great high by engaging and more stimulus, 244 00:11:40,679 --> 00:11:43,160 Speaker 1: which has already begun to do. Do you think that 245 00:11:43,200 --> 00:11:46,760 Speaker 1: the market is mistaken with their optimism around that? Uh? 246 00:11:46,760 --> 00:11:48,719 Speaker 1: In terms of medium and long term I think they are. 247 00:11:48,880 --> 00:11:50,839 Speaker 1: And and there's there's you know, we we have flash 248 00:11:50,960 --> 00:11:52,440 Speaker 1: data coming out this week, so we're gonna have a 249 00:11:52,440 --> 00:11:55,280 Speaker 1: new reading of the economy later this week and the 250 00:11:55,280 --> 00:11:57,760 Speaker 1: first one in twenty nineteen that actually shows what's happening. 251 00:11:57,760 --> 00:12:00,079 Speaker 1: But I think if you look at the ryh is 252 00:12:00,080 --> 00:12:02,920 Speaker 1: in line, then there's something that people aren't paying enough 253 00:12:02,960 --> 00:12:06,679 Speaker 1: attention to, and that is the Chinese economy is going 254 00:12:06,720 --> 00:12:10,400 Speaker 1: to slow no matter what happens. Best case scenario, worst 255 00:12:10,440 --> 00:12:14,200 Speaker 1: case scenario, the Chinese economy, because of slowing returns on 256 00:12:14,240 --> 00:12:16,800 Speaker 1: investment and debt accumulation, is going to slow quite dramatically 257 00:12:16,800 --> 00:12:20,120 Speaker 1: over the coming years. So the Chinese have to build 258 00:12:20,160 --> 00:12:23,080 Speaker 1: this into their narrative. Why is their economy slowing down? Well, 259 00:12:23,120 --> 00:12:26,960 Speaker 1: they just have a beautiful excuse. Now, Donald Trump launched 260 00:12:26,960 --> 00:12:29,800 Speaker 1: a trade war, the world is being mean. So President 261 00:12:29,880 --> 00:12:32,560 Speaker 1: she and and and and the rulers in Beijing are 262 00:12:32,640 --> 00:12:34,800 Speaker 1: able to look at this and say, you know, we 263 00:12:34,920 --> 00:12:37,959 Speaker 1: have an excuse now for why our economy slowing. They 264 00:12:38,040 --> 00:12:39,760 Speaker 1: might run with this, So you may be looking at 265 00:12:39,800 --> 00:12:41,960 Speaker 1: a different paradigm then you've looked in different years. They 266 00:12:42,000 --> 00:12:44,120 Speaker 1: may be willing to accept slower growth because they can 267 00:12:44,160 --> 00:12:46,920 Speaker 1: blame it on somebody else. At this point, that's fascinating. 268 00:12:46,960 --> 00:12:50,720 Speaker 1: From a political standpoint, China may allow its economy to 269 00:12:50,760 --> 00:12:54,080 Speaker 1: slow even more, especially if President Trump continues to ramp 270 00:12:54,120 --> 00:12:56,320 Speaker 1: up pressure. Leland Miller, thank you so much for being 271 00:12:56,320 --> 00:12:58,920 Speaker 1: with us. Leland Miller is chief executive officer of China 272 00:12:58,960 --> 00:13:01,360 Speaker 1: Beije Book International in New York, joining us here in 273 00:13:01,400 --> 00:13:20,559 Speaker 1: our Bloomberger Active Proper Studios. Right now we are looking 274 00:13:20,640 --> 00:13:23,600 Speaker 1: at oil prices that are sharply lower. So they're taking 275 00:13:23,600 --> 00:13:26,360 Speaker 1: a queue from President Trump's twitter feed with the biggest 276 00:13:26,360 --> 00:13:29,760 Speaker 1: decline in w t I that is traded on the 277 00:13:29,840 --> 00:13:32,720 Speaker 1: nimax in a number of months. Joining us down to 278 00:13:32,760 --> 00:13:35,600 Speaker 1: talk about this, uh is John killed off? Actually I'll 279 00:13:35,640 --> 00:13:39,120 Speaker 1: give you exact date since December. Joining us now, John 280 00:13:39,200 --> 00:13:42,320 Speaker 1: killed a founding partner at again at Capital John. I 281 00:13:42,440 --> 00:13:45,480 Speaker 1: was actually really surprised that the oil markets responded so 282 00:13:45,559 --> 00:13:49,760 Speaker 1: much to President Trump's tweet, because honestly, hasn't OPEC lost 283 00:13:49,800 --> 00:13:53,319 Speaker 1: a lot of the control over this. Well, if everybody 284 00:13:53,360 --> 00:13:55,280 Speaker 1: heard the way you read the tweet just now would 285 00:13:55,400 --> 00:13:57,440 Speaker 1: be I think we beat you off more. Lisa, Just 286 00:13:57,440 --> 00:14:02,160 Speaker 1: just for the record, thank you. I think the emotion 287 00:14:02,200 --> 00:14:04,280 Speaker 1: you brought to that, the emotion you brought to that 288 00:14:04,320 --> 00:14:07,760 Speaker 1: was terrific. Um. No, the uh, I mean the the 289 00:14:08,440 --> 00:14:11,400 Speaker 1: initial reaction to it was actually fairly muted, but it 290 00:14:11,480 --> 00:14:14,720 Speaker 1: really started to pick up steam. Um. I think when 291 00:14:14,840 --> 00:14:17,400 Speaker 1: when you sort of thought it threw from a market 292 00:14:17,440 --> 00:14:21,200 Speaker 1: perspective in that a, the Saudis have a track record 293 00:14:21,360 --> 00:14:25,320 Speaker 1: of placating President Trump and responding to him when he 294 00:14:25,360 --> 00:14:27,880 Speaker 1: makes these demands. That's what got the market into trouble 295 00:14:27,920 --> 00:14:30,200 Speaker 1: at the latter part of last year to the downside 296 00:14:30,520 --> 00:14:33,560 Speaker 1: in a big way. And too um. There has been 297 00:14:33,600 --> 00:14:36,400 Speaker 1: some speculation about what the state of affairs will be 298 00:14:36,440 --> 00:14:39,920 Speaker 1: surrounding the waivers that had been granted to various countries 299 00:14:39,920 --> 00:14:43,160 Speaker 1: and companies to continue to buy Iranian oil. Um, you 300 00:14:43,200 --> 00:14:45,240 Speaker 1: know late last year as well, which is also part 301 00:14:45,240 --> 00:14:47,680 Speaker 1: of that that sell off, that dynamic. Um. You have 302 00:14:47,760 --> 00:14:50,840 Speaker 1: to believe that those waivers are probably going to get 303 00:14:50,880 --> 00:14:54,360 Speaker 1: renewed to a great degree, given President Trump's concern about 304 00:14:54,360 --> 00:14:58,680 Speaker 1: where oil prices are presently. So um, as you sort 305 00:14:58,760 --> 00:15:01,760 Speaker 1: of got over the uh, the shock value of him 306 00:15:01,840 --> 00:15:05,600 Speaker 1: weighing in yet again on the oil market. Um Uh, 307 00:15:05,840 --> 00:15:09,920 Speaker 1: it was you know, a pretty bearish tweet, so so John, 308 00:15:10,400 --> 00:15:12,760 Speaker 1: prior to today's market action that you know, oil had 309 00:15:12,760 --> 00:15:16,360 Speaker 1: been grinding higher every day up about off it's December 310 00:15:16,400 --> 00:15:19,720 Speaker 1: low and WEXT test West Texas intermediate crude. What was 311 00:15:19,760 --> 00:15:24,480 Speaker 1: the bull case for driving oil higher? Well, a couple 312 00:15:24,520 --> 00:15:27,480 Speaker 1: of things. I mean, there's obviously a lot of irritants 313 00:15:27,480 --> 00:15:29,320 Speaker 1: in the market. I mean that the Venice, the tragic 314 00:15:29,320 --> 00:15:31,640 Speaker 1: men as well in situation. We had elections over the 315 00:15:31,680 --> 00:15:34,840 Speaker 1: weekend in Nigeria that could have could have devolved again 316 00:15:34,960 --> 00:15:38,160 Speaker 1: and not some of their oil offline. That still may happen, 317 00:15:38,240 --> 00:15:42,320 Speaker 1: and we're watching it Libya too. But really the Saudis 318 00:15:42,360 --> 00:15:44,520 Speaker 1: have really put their shoulder to the wheel in terms 319 00:15:44,560 --> 00:15:48,360 Speaker 1: of cutting their output, cutting their exports. Uh. And they 320 00:15:48,360 --> 00:15:51,120 Speaker 1: also had a problem with one of their large offshore 321 00:15:51,200 --> 00:15:54,960 Speaker 1: fields of power cable got cut somehow and um that 322 00:15:55,000 --> 00:15:57,400 Speaker 1: had knocked a good deal of their production offline. So 323 00:15:57,680 --> 00:15:59,480 Speaker 1: a lot of things were adding up here to tighten 324 00:15:59,560 --> 00:16:02,520 Speaker 1: the market, um you know, particularly as it relates to 325 00:16:02,560 --> 00:16:05,040 Speaker 1: the type of crude oil at that Venezuela has pretty 326 00:16:05,080 --> 00:16:08,520 Speaker 1: much ceased putting on the market um so. And and 327 00:16:08,520 --> 00:16:13,240 Speaker 1: and really the the renewed prospects for for for the 328 00:16:13,320 --> 00:16:15,440 Speaker 1: for the U S. China trade talks that have you know, 329 00:16:15,520 --> 00:16:18,040 Speaker 1: got the stock market to where it is also fed 330 00:16:18,080 --> 00:16:20,760 Speaker 1: into the to the oil story. So right now I'm 331 00:16:20,760 --> 00:16:23,760 Speaker 1: looking at w t I fifty five dollars and thirty 332 00:16:23,800 --> 00:16:27,240 Speaker 1: six cents a barrel, looking at Brent UH sixty four 333 00:16:27,240 --> 00:16:31,120 Speaker 1: dollars and ninety cents. What's the sweet spot for US 334 00:16:31,200 --> 00:16:35,800 Speaker 1: shell producers to continue to produce, be profitable, UH, and 335 00:16:35,880 --> 00:16:40,400 Speaker 1: yet still have demand where it is right now, closer 336 00:16:40,440 --> 00:16:43,440 Speaker 1: to closer to sixty dollars a barrel plus is really 337 00:16:43,480 --> 00:16:46,360 Speaker 1: ideal with w t I or with Brent. Oh yes, 338 00:16:46,400 --> 00:16:48,640 Speaker 1: I'm sorry for w t I. UH. That would be 339 00:16:48,680 --> 00:16:51,920 Speaker 1: a Brent price of about seventy dollars. I mean, President 340 00:16:51,960 --> 00:16:54,360 Speaker 1: Trump cur only did the US oil industry no favors 341 00:16:54,360 --> 00:16:56,800 Speaker 1: this morning with that tweet. And you know it's kind 342 00:16:56,800 --> 00:16:58,640 Speaker 1: of curious because I know he wants us to be 343 00:16:58,760 --> 00:17:02,880 Speaker 1: energy dominant. Um, this doesn't help that. And you know 344 00:17:02,960 --> 00:17:05,480 Speaker 1: we've spoken before. You know, these oil prices w t 345 00:17:05,560 --> 00:17:09,040 Speaker 1: I O prices fifty and below. You can talk about 346 00:17:09,080 --> 00:17:12,159 Speaker 1: how they've worked. The shall players have worked break evens 347 00:17:12,200 --> 00:17:15,560 Speaker 1: down to thirty a barrel, but the aill in costs 348 00:17:16,200 --> 00:17:19,120 Speaker 1: UH below fifty bucks for w t I. They are 349 00:17:19,560 --> 00:17:23,359 Speaker 1: feeling it. And we did see um recounts come down. 350 00:17:23,440 --> 00:17:25,800 Speaker 1: We did see drilling activity come down in response to 351 00:17:25,840 --> 00:17:28,520 Speaker 1: the sell off again late last year. That culminated in 352 00:17:28,560 --> 00:17:31,800 Speaker 1: the in the December low um and they're only starting 353 00:17:31,800 --> 00:17:34,600 Speaker 1: to come back now. So uh, we're starting to get 354 00:17:34,600 --> 00:17:36,439 Speaker 1: into the red zone. Are ready for them with prices 355 00:17:36,480 --> 00:17:39,040 Speaker 1: even here at fifty five. So, John, whenever we have 356 00:17:39,119 --> 00:17:41,199 Speaker 1: you on we're talking global oil, I can't help but 357 00:17:41,760 --> 00:17:44,400 Speaker 1: always raise a question of Russia. What is Russia doing 358 00:17:44,440 --> 00:17:46,440 Speaker 1: in the market place in terms of supply right now? 359 00:17:46,440 --> 00:17:51,080 Speaker 1: How disruptive are they VVSA, the OPEC. Well, you know 360 00:17:51,119 --> 00:17:54,479 Speaker 1: they leadership talks a good game. You know, President putin 361 00:17:54,760 --> 00:17:57,640 Speaker 1: their energy minister Novak. You know that they they'll sit there, 362 00:17:57,640 --> 00:17:59,879 Speaker 1: it'll sign everything and and and you know, hug this 363 00:18:00,000 --> 00:18:02,320 Speaker 1: Autias and say we're with you. And then the numbers 364 00:18:02,359 --> 00:18:04,680 Speaker 1: just don't pan out in terms of production because their 365 00:18:04,720 --> 00:18:08,119 Speaker 1: companies don't want to be part of these production cutbacks. 366 00:18:08,440 --> 00:18:10,800 Speaker 1: You know, they see shale as a threat. They want 367 00:18:10,840 --> 00:18:13,840 Speaker 1: markets here. They actually operate in a much more commercially 368 00:18:14,480 --> 00:18:17,800 Speaker 1: appropriate way than sort of cartel ish, so they don't 369 00:18:17,840 --> 00:18:20,480 Speaker 1: particularly care for these these antics and see themselves being 370 00:18:20,520 --> 00:18:23,600 Speaker 1: set up ultimately for failure. As the US production now 371 00:18:23,720 --> 00:18:26,119 Speaker 1: goes over twelve million barrels a day. They're seeing this 372 00:18:26,240 --> 00:18:29,560 Speaker 1: so um, they're not actually being as that helpful to 373 00:18:29,600 --> 00:18:31,960 Speaker 1: the Satties, and the Saddies have remarked about this. So 374 00:18:32,240 --> 00:18:34,520 Speaker 1: I'm not sure how much longer the little coalition they've 375 00:18:34,560 --> 00:18:37,720 Speaker 1: strung together holes and that's going to be another negative 376 00:18:37,720 --> 00:18:41,480 Speaker 1: for prices, I think ultimately, John this the tweet from 377 00:18:41,480 --> 00:18:45,480 Speaker 1: President Trump raises a question what price of oil does 378 00:18:45,520 --> 00:18:48,680 Speaker 1: he want? Because we're still way below where we saw 379 00:18:48,680 --> 00:18:52,120 Speaker 1: it at its peak back in two thousand fourteen. What's 380 00:18:52,119 --> 00:18:54,880 Speaker 1: he looking for? If I had a guess, he wants 381 00:18:54,920 --> 00:18:57,000 Speaker 1: to see w T I below fifty dollars of barrel, 382 00:18:57,040 --> 00:19:00,880 Speaker 1: down around forty five, which would translate into about two 383 00:19:00,960 --> 00:19:02,680 Speaker 1: dollars a gallon or so at the pump of the 384 00:19:02,720 --> 00:19:05,240 Speaker 1: gas a lead pump. I think he's very uh A 385 00:19:05,320 --> 00:19:08,359 Speaker 1: sensitive to that if he could deliver I think on 386 00:19:08,440 --> 00:19:11,840 Speaker 1: that um and and he's right too, because when prices 387 00:19:11,840 --> 00:19:14,120 Speaker 1: get north much north to stay to fifty or start 388 00:19:14,119 --> 00:19:15,960 Speaker 1: to reproach that three dollar a gallon, will you start 389 00:19:15,960 --> 00:19:19,320 Speaker 1: to see hits to consumer confidence uh and other um, 390 00:19:19,520 --> 00:19:22,640 Speaker 1: you know, measures of of just confidence in the economy generally. 391 00:19:23,080 --> 00:19:26,360 Speaker 1: Uh so we're obviously on re election watching a big way, 392 00:19:26,400 --> 00:19:28,119 Speaker 1: and I think he wants to see a four handle. 393 00:19:28,800 --> 00:19:30,280 Speaker 1: So John, if you take a look at the global 394 00:19:30,320 --> 00:19:33,000 Speaker 1: supply demand out there, is there a model out there 395 00:19:33,000 --> 00:19:35,840 Speaker 1: that gets you to that fore handle? Yeah? Pretty easy, 396 00:19:36,040 --> 00:19:40,240 Speaker 1: Pretty easily. Actually, I was very distrustful of this, of 397 00:19:40,359 --> 00:19:42,760 Speaker 1: this reality. Now, I didn't see President Trump's tweet coming 398 00:19:42,800 --> 00:19:45,840 Speaker 1: into to be a factor. But um, you know, as 399 00:19:45,840 --> 00:19:48,720 Speaker 1: we start to get into the latter part of the 400 00:19:48,720 --> 00:19:51,560 Speaker 1: winter early spring, there's a lot of refinery maintenance that 401 00:19:51,640 --> 00:19:53,639 Speaker 1: gets done that's going to cause a big dent in 402 00:19:53,720 --> 00:19:56,040 Speaker 1: crude to all demand at least for a while. Um. 403 00:19:56,359 --> 00:19:59,879 Speaker 1: The situation in China, their economy is really hurting, and 404 00:20:00,040 --> 00:20:02,240 Speaker 1: I guess partly from the trade war, but I think 405 00:20:02,240 --> 00:20:06,080 Speaker 1: it goes beyond that. Um, certain measures of their economic 406 00:20:06,400 --> 00:20:09,840 Speaker 1: manufacturing activities, factory orders, everything that goes to their sort 407 00:20:09,840 --> 00:20:14,520 Speaker 1: of energy intensity usage is has turned over, has rolled over, 408 00:20:14,760 --> 00:20:16,880 Speaker 1: and that's a big part of the de band equation here. 409 00:20:17,200 --> 00:20:19,840 Speaker 1: And I think that, coupled with just a lack of 410 00:20:19,880 --> 00:20:24,400 Speaker 1: will by everyone else except Saddy, we're able to curtail supplies. Max. 411 00:20:24,480 --> 00:20:27,160 Speaker 1: The argument for lower prices. You know, it's so interesting Paul, 412 00:20:27,160 --> 00:20:30,679 Speaker 1: because as John talks mid forties, uh for oil, I 413 00:20:30,720 --> 00:20:33,280 Speaker 1: wonder how many shell producers go out of business with that. Yeah, 414 00:20:33,280 --> 00:20:35,639 Speaker 1: exactly along your line of thinking, exactly right. I think 415 00:20:35,640 --> 00:20:38,400 Speaker 1: they'd like it at that to sixty plus kind of range. 416 00:20:38,880 --> 00:20:42,879 Speaker 1: John killed off, founding partner again Capital on All Things Energy, 417 00:20:43,000 --> 00:20:59,720 Speaker 1: joining us on the phone from New York. The Oracle 418 00:20:59,760 --> 00:21:03,800 Speaker 1: of Omaha is looking for an elephant sized acquisition. One 419 00:21:03,800 --> 00:21:07,480 Speaker 1: of the takeaways from this weekend's investor meeting with of 420 00:21:07,520 --> 00:21:11,000 Speaker 1: course Berkshire Hathaways that founder we're talking, of course, Warren 421 00:21:11,160 --> 00:21:14,400 Speaker 1: Buffett catch Glinsky joining us here in our Bloomberg Interactive 422 00:21:14,400 --> 00:21:19,200 Speaker 1: Broker studios. She covers finance for us at Bloomberg News. So, Kat, 423 00:21:19,600 --> 00:21:22,640 Speaker 1: what about this big acquisition? I feel like Warren Buffett 424 00:21:22,640 --> 00:21:25,639 Speaker 1: has been holding this out for a long time, given 425 00:21:25,760 --> 00:21:28,840 Speaker 1: his hundred and twelve billion dollar cash pile. Is this 426 00:21:28,920 --> 00:21:34,399 Speaker 1: year different? No, And he quite and I mean he 427 00:21:34,440 --> 00:21:37,040 Speaker 1: said in his letter, he was like, you know, they 428 00:21:37,080 --> 00:21:39,440 Speaker 1: didn't find a big deal, and that might not change 429 00:21:39,440 --> 00:21:41,680 Speaker 1: in twenty nineteen. It might be another year in which 430 00:21:41,680 --> 00:21:44,879 Speaker 1: she just actually spends a lot more money on common stocks. 431 00:21:44,920 --> 00:21:47,159 Speaker 1: So what about was there anything in the letter? I 432 00:21:47,160 --> 00:21:49,240 Speaker 1: know you've you've read these letters before. Was there anything 433 00:21:49,240 --> 00:21:51,280 Speaker 1: in this letter that was new or different or interesting 434 00:21:51,359 --> 00:21:53,359 Speaker 1: or what were some of your key takeaways? Well, one 435 00:21:53,440 --> 00:21:55,679 Speaker 1: key takeaways kind of a won key Berkshire thing, but 436 00:21:55,680 --> 00:21:58,760 Speaker 1: they removed the use of book value as kind of 437 00:21:58,760 --> 00:22:01,120 Speaker 1: a measuring of intrinsic value. And it's a it's a 438 00:22:01,160 --> 00:22:04,639 Speaker 1: really wonky type of kind of Berkshire nugget. But but 439 00:22:05,160 --> 00:22:07,439 Speaker 1: but it's good because it really shows how Buffet has 440 00:22:07,440 --> 00:22:10,199 Speaker 1: taken this company from you know, an investment that was 441 00:22:10,440 --> 00:22:13,879 Speaker 1: normally just mostly full of common stocks to a company 442 00:22:13,920 --> 00:22:17,560 Speaker 1: that now spans like BNSF, Dairy, Queen Geico. It's kind 443 00:22:17,560 --> 00:22:20,680 Speaker 1: of all over the range, and that's crucially important. Well, 444 00:22:20,800 --> 00:22:24,080 Speaker 1: is this why they posted billion dollar loss? That was 445 00:22:24,119 --> 00:22:26,720 Speaker 1: because of the stock investments. That's kind of still still 446 00:22:26,760 --> 00:22:29,560 Speaker 1: an important as he mentioned in the Berkshire Force, it's 447 00:22:29,560 --> 00:22:32,679 Speaker 1: still an important grove for them. Um. They post posted 448 00:22:32,720 --> 00:22:35,080 Speaker 1: that partially because of Kraft Hinns and partially because of 449 00:22:35,119 --> 00:22:38,359 Speaker 1: this accounting change that requires them to post unrealized gains 450 00:22:38,359 --> 00:22:41,159 Speaker 1: and losses in there um net income. He says, to 451 00:22:41,200 --> 00:22:43,159 Speaker 1: look through that a bit because he's a long term investor, 452 00:22:43,200 --> 00:22:45,000 Speaker 1: he'll stick with the stocks for a while, So even 453 00:22:45,040 --> 00:22:47,919 Speaker 1: if it's a quarter they're down a lot, he's probably 454 00:22:47,920 --> 00:22:50,199 Speaker 1: going to hold on until it's a little more positive. Well, 455 00:22:50,200 --> 00:22:53,679 Speaker 1: how about Apple Stock that's the largest shareholding holding up 456 00:22:53,680 --> 00:22:55,920 Speaker 1: Berkshire Hathaway, that the Apple stock is up ten percent 457 00:22:56,000 --> 00:22:58,080 Speaker 1: this year, any sense of what he wants to do 458 00:22:58,080 --> 00:23:00,600 Speaker 1: with that position. He's still favorable with it. So they 459 00:23:00,600 --> 00:23:02,199 Speaker 1: trimmed it a bit in the fourth quarter. But he 460 00:23:02,280 --> 00:23:05,440 Speaker 1: clarified today that was not him, that was an investing deputy. 461 00:23:05,480 --> 00:23:07,600 Speaker 1: He didn't name which one, And I think that's really 462 00:23:07,640 --> 00:23:09,920 Speaker 1: important to give a sort of sign of faith that 463 00:23:10,040 --> 00:23:12,040 Speaker 1: that he still likes the company. He said he would 464 00:23:12,119 --> 00:23:14,280 Speaker 1: buy more of it, but frankly, it's a little too 465 00:23:14,320 --> 00:23:16,800 Speaker 1: expensive right now. I thought it was interesting some of 466 00:23:16,840 --> 00:23:20,800 Speaker 1: his comments this morning on CNBC about Kraft HIGs, basically 467 00:23:20,840 --> 00:23:24,680 Speaker 1: saying that he's not selling yeah, considering he's a very 468 00:23:24,720 --> 00:23:31,520 Speaker 1: big investor, but basically that the craft was overvalued purchase uh, 469 00:23:31,560 --> 00:23:35,040 Speaker 1: and that he wouldn't buy any shares if he didn't 470 00:23:35,080 --> 00:23:37,480 Speaker 1: have such a big holding. Not great shares of Craft 471 00:23:37,520 --> 00:23:40,400 Speaker 1: HIGs down nine tents of one percent, Yeah, I don't 472 00:23:40,440 --> 00:23:42,840 Speaker 1: think it was a positive take on the company. I 473 00:23:42,920 --> 00:23:45,439 Speaker 1: mean he did, to be fair, he did say, you know, 474 00:23:45,480 --> 00:23:49,320 Speaker 1: they're still value in the brands they you know, wouldn't 475 00:23:49,400 --> 00:23:51,840 Speaker 1: he wh owns so much of it. He does have 476 00:23:51,880 --> 00:23:54,040 Speaker 1: to be positive to an extent, of course. Um, But 477 00:23:54,080 --> 00:23:55,840 Speaker 1: I do think it took a bit of a negative turn. 478 00:23:55,880 --> 00:23:58,560 Speaker 1: I mean the fact that he won't consider buying the 479 00:23:58,600 --> 00:24:01,240 Speaker 1: rest of the company even though their stock hit a 480 00:24:01,240 --> 00:24:04,479 Speaker 1: record low Friday. I think sort of says a sign that, like, 481 00:24:05,119 --> 00:24:07,520 Speaker 1: it's really hard to beat on these consumer companies when 482 00:24:07,520 --> 00:24:10,199 Speaker 1: the coodsumer preferences are changing just as fast as they 483 00:24:10,200 --> 00:24:13,280 Speaker 1: are these days. So cat um, I think Warren Buffets 484 00:24:13,320 --> 00:24:15,680 Speaker 1: eighty eight? Is that right? Correct? Okay? So in the letter, 485 00:24:15,760 --> 00:24:18,640 Speaker 1: was there anything about success or potentially so if you're 486 00:24:18,640 --> 00:24:21,760 Speaker 1: looking for explicit sort of directives. No, he did praise 487 00:24:21,920 --> 00:24:24,760 Speaker 1: greg Able, and he praised Jane. But the important parts 488 00:24:24,800 --> 00:24:27,440 Speaker 1: I think that he touched on with a succession are 489 00:24:27,560 --> 00:24:30,320 Speaker 1: he spent a chunk of the letter describing Berkshire as 490 00:24:30,320 --> 00:24:32,280 Speaker 1: a forest and the different groves that make up it. 491 00:24:32,480 --> 00:24:35,520 Speaker 1: And he said, you know, Berkshire is better together rather 492 00:24:35,560 --> 00:24:37,679 Speaker 1: than some of its parts. And I think that was 493 00:24:37,720 --> 00:24:41,040 Speaker 1: actually really crucial because he's you know, there's probably gonna 494 00:24:41,040 --> 00:24:43,920 Speaker 1: be calls to break up Berkshire once he leaves, because 495 00:24:43,960 --> 00:24:46,240 Speaker 1: it's kind of a weird mix of businesses. But in 496 00:24:46,320 --> 00:24:49,000 Speaker 1: it in essence, him saying don't break it up makes 497 00:24:49,000 --> 00:24:52,680 Speaker 1: it easier for successor to say, hey, look, Buffett himself 498 00:24:52,800 --> 00:24:56,840 Speaker 1: said it's better together. Cat is the Oracle of Omaha 499 00:24:57,800 --> 00:25:00,560 Speaker 1: kind of out of new ideas and tired out. The 500 00:25:00,640 --> 00:25:02,880 Speaker 1: reason why I asked is because I was looking at 501 00:25:03,320 --> 00:25:05,879 Speaker 1: the list of high points from everything that was said 502 00:25:06,000 --> 00:25:10,479 Speaker 1: yesterday or just over the weekend in general on Saturday. Um, 503 00:25:10,480 --> 00:25:12,840 Speaker 1: it was the same stuff said last year. The cash 504 00:25:12,880 --> 00:25:16,360 Speaker 1: position is about the same relative to book. What's your take? 505 00:25:16,800 --> 00:25:19,280 Speaker 1: I think he's struggling and uh, and he sort of 506 00:25:19,320 --> 00:25:22,080 Speaker 1: clarifies this too. Right. So one of the most more 507 00:25:22,160 --> 00:25:24,640 Speaker 1: interesting things he said this morning was he got into 508 00:25:24,680 --> 00:25:27,400 Speaker 1: oracle in the third quarter and then he completely got 509 00:25:27,440 --> 00:25:28,919 Speaker 1: out of it in the fourth quarter. And that's just 510 00:25:29,720 --> 00:25:31,680 Speaker 1: very odd for Berkshire to do. They like to hold 511 00:25:31,720 --> 00:25:33,440 Speaker 1: it for a long time for so for him to 512 00:25:33,480 --> 00:25:35,840 Speaker 1: get out and get in and get out is um 513 00:25:36,000 --> 00:25:38,399 Speaker 1: is strange. And he he clarified it was because he 514 00:25:38,440 --> 00:25:41,359 Speaker 1: thought he knew more about the business, but he realized 515 00:25:41,400 --> 00:25:43,880 Speaker 1: he didn't actually understand it. And I think that's sort 516 00:25:43,880 --> 00:25:46,080 Speaker 1: of the problem these days, is that, you know, he's 517 00:25:46,080 --> 00:25:49,160 Speaker 1: really trying to sort of adjust to the whether it's 518 00:25:49,160 --> 00:25:53,679 Speaker 1: the new consumer environment or the new investing landscape, but 519 00:25:53,760 --> 00:25:55,720 Speaker 1: it's changing a lot. And I think that's why he's 520 00:25:55,760 --> 00:25:58,360 Speaker 1: relying on like his investing deputies, Todd Combs and Ted 521 00:25:58,400 --> 00:26:00,480 Speaker 1: Wessler as well. And I think why he's you know, 522 00:26:00,960 --> 00:26:03,440 Speaker 1: Jane and Greg Able are running some of the operating businesses. 523 00:26:03,480 --> 00:26:05,600 Speaker 1: I think it's just sort of build up sort of 524 00:26:05,600 --> 00:26:08,160 Speaker 1: this breadth of people who can also look at different ideas. 525 00:26:08,200 --> 00:26:11,200 Speaker 1: And he mentioned Todd Combs and Ted Wesler help him 526 00:26:11,200 --> 00:26:14,560 Speaker 1: with acquisitions, which I think is also incredibly important, you know, 527 00:26:14,680 --> 00:26:17,720 Speaker 1: in this kind of dearth of emine. So if if 528 00:26:18,720 --> 00:26:21,639 Speaker 1: new ideas, exciting ideas you know that that hit his 529 00:26:21,720 --> 00:26:24,600 Speaker 1: screen are a fewer and farther between. Is pressure building 530 00:26:24,600 --> 00:26:27,760 Speaker 1: from shareholders to redeploy that hundred billion dollars. Okay, I 531 00:26:27,760 --> 00:26:30,840 Speaker 1: should start by back stock. I think it's it's nuance 532 00:26:30,920 --> 00:26:33,520 Speaker 1: because you know, you so he bought back one point 533 00:26:33,520 --> 00:26:35,359 Speaker 1: three billion dollars in shares last year, and that was 534 00:26:35,359 --> 00:26:38,080 Speaker 1: a change. I mean, he normally sort of doesn't favor 535 00:26:38,200 --> 00:26:41,119 Speaker 1: capital return. He'd rather buy businesses, he rather spend it 536 00:26:41,119 --> 00:26:44,200 Speaker 1: on common stocks. Um, so I think there is sort 537 00:26:44,200 --> 00:26:46,400 Speaker 1: of a change, and I do agree that I think 538 00:26:46,680 --> 00:26:48,600 Speaker 1: a lot of investors would love to see him buy 539 00:26:48,600 --> 00:26:50,960 Speaker 1: back more stock. But then again, you know, as many 540 00:26:51,000 --> 00:26:53,800 Speaker 1: investors point out to me, Buffett made his money and 541 00:26:53,880 --> 00:26:57,080 Speaker 1: made his name and times of market turmoil, so some 542 00:26:57,080 --> 00:26:59,600 Speaker 1: people are saying, hey, buddy, a hundred twelve billion, not 543 00:26:59,640 --> 00:27:01,840 Speaker 1: too bad to sit on it, wait on it when 544 00:27:01,840 --> 00:27:06,800 Speaker 1: the market turns, then swooping. Interesting. So the company repeat 545 00:27:07,000 --> 00:27:10,480 Speaker 1: reported earnings this weekend, very disappointing numbers. The annual letter 546 00:27:10,520 --> 00:27:12,879 Speaker 1: came out, really not a lot of new stuff in 547 00:27:12,920 --> 00:27:14,800 Speaker 1: the annual letter. And the shares are up, and the 548 00:27:14,880 --> 00:27:18,680 Speaker 1: shares are up, that's right. So it's uh, I think, 549 00:27:18,920 --> 00:27:21,320 Speaker 1: you know, I think the market is still according Warren 550 00:27:21,359 --> 00:27:23,680 Speaker 1: Buffett and Berkshire Hathway the benefit of the doubt here, 551 00:27:23,720 --> 00:27:26,480 Speaker 1: it seems like, uh, you know, whether it's you know, 552 00:27:26,560 --> 00:27:29,159 Speaker 1: returning cash or looking for the next big whale, or 553 00:27:29,240 --> 00:27:32,000 Speaker 1: just adding or trading around existing positions, I think the 554 00:27:32,040 --> 00:27:36,160 Speaker 1: market seems to be giving Warren Buffet a pass here, 555 00:27:37,240 --> 00:27:41,760 Speaker 1: so in fairness, given his track record of returns, I 556 00:27:41,880 --> 00:27:44,679 Speaker 1: kind of understand it, and operating earnings were up to 557 00:27:44,720 --> 00:27:48,959 Speaker 1: be fair exactly right, Thanks so much, could J Lynkski, 558 00:27:49,080 --> 00:27:51,879 Speaker 1: us financial reporter from Bloomberg News. Thank you. Thanks for 559 00:27:51,920 --> 00:27:54,119 Speaker 1: listening to the Bloomberg P and L podcast. You can 560 00:27:54,160 --> 00:27:57,000 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 561 00:27:57,040 --> 00:28:00,239 Speaker 1: podcast platform you prefer. Paul Sweeney, I'm on Twitter at 562 00:28:00,240 --> 00:28:02,919 Speaker 1: pt Sweeney. I'm Lisa Abram Wohits. I'm on Twitter at 563 00:28:02,960 --> 00:28:05,760 Speaker 1: Lisa Abram Wohits. One before the podcast. You can always 564 00:28:05,760 --> 00:28:07,840 Speaker 1: catch us worldwide on Bloomberg Radio