1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,520 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We're 5 00:00:28,560 --> 00:00:31,120 Speaker 1: gonna digressing out of one of our monthly joys, which 6 00:00:31,200 --> 00:00:34,280 Speaker 1: is Foreign Affairs magazine. I don't know how Gideon Rose 7 00:00:34,320 --> 00:00:37,000 Speaker 1: does it. Johnny gets out front of the zeitgeist with 8 00:00:37,080 --> 00:00:40,440 Speaker 1: Trump's Middle East this month. It is a spectacular essay. 9 00:00:40,760 --> 00:00:43,560 Speaker 1: And John, what is so trenchant? Here? Is? A few 10 00:00:43,640 --> 00:00:47,879 Speaker 1: years back, Mr Rose wrote an essay why we always 11 00:00:48,040 --> 00:00:53,760 Speaker 1: fight the last battle? And there's the news. Say, there's 12 00:00:53,800 --> 00:00:57,120 Speaker 1: the news flow of the last few days, including Mr 13 00:00:57,200 --> 00:01:00,200 Speaker 1: Putin and Mr Ari Juan shaking hands, not over an 14 00:01:00,240 --> 00:01:03,000 Speaker 1: Olympic medal in soci So getting this talk about it. 15 00:01:03,040 --> 00:01:06,280 Speaker 1: If there's one take away from this addition, what would 16 00:01:06,319 --> 00:01:09,560 Speaker 1: that be? Uh? Well, that the Middle East is going 17 00:01:09,640 --> 00:01:14,200 Speaker 1: back into its historical mode of a local region in 18 00:01:14,240 --> 00:01:17,679 Speaker 1: which the local power powers play a great game of 19 00:01:17,800 --> 00:01:21,400 Speaker 1: jockeying among each other, with occasional outsiders coming in to 20 00:01:21,520 --> 00:01:25,720 Speaker 1: back them. With the US essentially signaling first with Obama 21 00:01:25,760 --> 00:01:27,959 Speaker 1: and then with Trump that it was going to pull out. 22 00:01:28,560 --> 00:01:32,520 Speaker 1: What we're actually seeing is the local powers adjusting to 23 00:01:32,560 --> 00:01:35,880 Speaker 1: a Middle East without the United States playing a major role. 24 00:01:35,959 --> 00:01:38,560 Speaker 1: And so in America this is couched as oh, the 25 00:01:38,600 --> 00:01:40,680 Speaker 1: Russians are coming in, or we've a been in the 26 00:01:40,720 --> 00:01:43,520 Speaker 1: curves and all that's true. But from the local powers, 27 00:01:43,560 --> 00:01:47,320 Speaker 1: the larger picture is, Okay, the Americans aren't really going 28 00:01:47,360 --> 00:01:49,640 Speaker 1: to be here or be able to be counted on 29 00:01:49,720 --> 00:01:52,600 Speaker 1: to protect us, So we have to make our own 30 00:01:52,680 --> 00:01:55,480 Speaker 1: deals with the locals in the region. And so when 31 00:01:55,640 --> 00:01:59,840 Speaker 1: the Iranians send a signal to the saudiast and Americans 32 00:02:00,320 --> 00:02:04,960 Speaker 1: by arranging the drone bombing of the Saudi oil fields 33 00:02:05,720 --> 00:02:07,720 Speaker 1: as a signal you keep messing with us and we 34 00:02:07,760 --> 00:02:10,680 Speaker 1: will can we can hurt you, then the Americans don't 35 00:02:10,680 --> 00:02:13,360 Speaker 1: do anything one If the Saudis realized from that, we 36 00:02:13,480 --> 00:02:17,040 Speaker 1: cannot afford to anger Iran because they can come and 37 00:02:17,080 --> 00:02:19,800 Speaker 1: blow us up next time. Even worse, so the Saudis 38 00:02:20,160 --> 00:02:23,920 Speaker 1: mute their response and start making an accommodation with Iran. 39 00:02:24,280 --> 00:02:26,840 Speaker 1: Same thing with the Israelis, who are now making deals 40 00:02:26,840 --> 00:02:30,040 Speaker 1: with the Russians to protect their interests in Syria because 41 00:02:30,080 --> 00:02:34,080 Speaker 1: the United States is no longer able to protect the 42 00:02:34,160 --> 00:02:37,359 Speaker 1: Israelis from the problems in Syria. So essentially what you're 43 00:02:37,360 --> 00:02:40,600 Speaker 1: seeing is the emergence of a post American Middle East. Uh, 44 00:02:40,800 --> 00:02:43,359 Speaker 1: even quicker than we thought would happen. Well, let's talk 45 00:02:43,360 --> 00:02:46,520 Speaker 1: about that. The broadest strategy in the region hinged on 46 00:02:46,639 --> 00:02:50,120 Speaker 1: two big alliances, one with the Israelis, another with the Saudis. 47 00:02:50,400 --> 00:02:54,760 Speaker 1: Did the Saudis look a little lonely now, yes, exactly. So. 48 00:02:54,880 --> 00:02:57,680 Speaker 1: The fact is that the Trump administration wanted to have 49 00:02:57,720 --> 00:02:59,480 Speaker 1: its cake and eat it too. It wanted to continue 50 00:02:59,480 --> 00:03:02,120 Speaker 1: to walk away from the region and not get Americans 51 00:03:02,120 --> 00:03:04,959 Speaker 1: trapped in endless wars blah blah blah blah blah. Uh. 52 00:03:05,000 --> 00:03:07,400 Speaker 1: And at the same time, it wanted to confront Iran 53 00:03:07,600 --> 00:03:12,000 Speaker 1: and avoid the consequences of justicely walking away. So it 54 00:03:12,120 --> 00:03:16,040 Speaker 1: tried to essentially contract out US diplomacy in the region 55 00:03:16,040 --> 00:03:19,400 Speaker 1: and US strategy in the region to its two powerful proxies, 56 00:03:19,520 --> 00:03:22,919 Speaker 1: Israel and Saudi Arabia, and said, well, you guys can 57 00:03:22,919 --> 00:03:26,560 Speaker 1: confront Iran, Israel in the Levant and Saudi in the Gulf, 58 00:03:26,600 --> 00:03:28,680 Speaker 1: and we'll back you and we'll give you whatever you 59 00:03:28,760 --> 00:03:31,960 Speaker 1: want to contract out that job. The problem is that 60 00:03:32,040 --> 00:03:36,720 Speaker 1: the locals were very clever, took the American UH offer 61 00:03:37,120 --> 00:03:40,160 Speaker 1: and got whatever they wanted with their local conflicts. But 62 00:03:40,240 --> 00:03:44,240 Speaker 1: they actually can't counter Iran because the Saudis are essentially 63 00:03:44,240 --> 00:03:47,080 Speaker 1: a rich gas station without a strong military, their prey 64 00:03:47,240 --> 00:03:51,160 Speaker 1: not a counterweight. And these and the Israeli's are off 65 00:03:51,160 --> 00:03:53,440 Speaker 1: on the side of the region because no, the Arab 66 00:03:53,480 --> 00:03:57,560 Speaker 1: powers won't allie with them formally because of the Palestinian issue. 67 00:03:57,680 --> 00:04:01,920 Speaker 1: And so essentially what has happened now is the Israelis 68 00:04:01,960 --> 00:04:04,880 Speaker 1: and the Saudis played the Americans got what they wanted 69 00:04:04,920 --> 00:04:07,520 Speaker 1: over the last couple of years, and now see the 70 00:04:07,560 --> 00:04:11,880 Speaker 1: Americans walking away, leaving them with gains they've had. NBS 71 00:04:11,960 --> 00:04:15,920 Speaker 1: is strong and in power and has established authoritarian control. 72 00:04:16,160 --> 00:04:18,640 Speaker 1: Netanyaho has gotten a whole bunch of things that he wanted. 73 00:04:19,240 --> 00:04:21,120 Speaker 1: And yet now the question is will the US be 74 00:04:21,200 --> 00:04:23,360 Speaker 1: there in the long run to protect against the Iranians. 75 00:04:23,360 --> 00:04:25,240 Speaker 1: And I think the answer is now that the Iranians 76 00:04:25,240 --> 00:04:29,159 Speaker 1: and sorry, the Saudis and the Israelis are starting to think, okay, 77 00:04:29,200 --> 00:04:31,560 Speaker 1: we need to make deals with the Russians, with the 78 00:04:31,560 --> 00:04:33,520 Speaker 1: Iranians because we can't count in the Americans. The United 79 00:04:33,520 --> 00:04:36,640 Speaker 1: States is pulling back. Why is this administration sending troops 80 00:04:36,680 --> 00:04:41,720 Speaker 1: to Saudi Arabia Because it can't pull back completely from 81 00:04:41,760 --> 00:04:45,080 Speaker 1: the region. And what Trump would like to do is 82 00:04:45,320 --> 00:04:49,560 Speaker 1: unwind American commitments. But at the heart of those commitments, 83 00:04:49,600 --> 00:04:53,800 Speaker 1: the external ones seem disposable. It doesn't really bother many 84 00:04:53,839 --> 00:04:57,279 Speaker 1: Americans except for the dishonor about what we're doing to 85 00:04:57,320 --> 00:05:00,360 Speaker 1: the Kurds. But the point is the courage, the front 86 00:05:00,440 --> 00:05:02,600 Speaker 1: line of defense. If you keep good northern Syria, if 87 00:05:02,600 --> 00:05:05,360 Speaker 1: you keep going further and further away, eventually you get 88 00:05:05,440 --> 00:05:08,479 Speaker 1: to Saudi Arabia, and that's the world's gas station. You 89 00:05:08,560 --> 00:05:11,160 Speaker 1: have to protect it for the stability of the global economy. 90 00:05:11,360 --> 00:05:13,839 Speaker 1: And so the problem is not the first places you 91 00:05:13,880 --> 00:05:16,960 Speaker 1: withdraw from. It's when you start taking out those things. 92 00:05:16,960 --> 00:05:19,279 Speaker 1: When you play the game of Jenga, when you're left 93 00:05:19,320 --> 00:05:21,320 Speaker 1: at the bottom, if you have no other pieces there, 94 00:05:21,360 --> 00:05:24,640 Speaker 1: you're screwed very quickly. Michael Durant and you're Wonderful Magazine. 95 00:05:24,640 --> 00:05:27,599 Speaker 1: Why seeding land will not bring peace? Are we building 96 00:05:27,600 --> 00:05:30,920 Speaker 1: a twenty mile wide new gaza strip between Syria and Turkey? 97 00:05:31,000 --> 00:05:34,360 Speaker 1: So the most interesting part actually no, because we're essentially 98 00:05:34,400 --> 00:05:37,240 Speaker 1: allowing the locals to deal with it. And the difference 99 00:05:37,279 --> 00:05:40,000 Speaker 1: there is the outside powers aren't going to play. It 100 00:05:40,000 --> 00:05:45,279 Speaker 1: will be the local powers uh Russia, Syria, Turkey. Um. 101 00:05:45,320 --> 00:05:47,760 Speaker 1: The interesting thing about the Palestinian issue is that has 102 00:05:47,760 --> 00:05:52,280 Speaker 1: been kept alive for several decades because of the external 103 00:05:52,320 --> 00:05:56,440 Speaker 1: involvement of other powers and the international system, including Turkey, 104 00:05:56,680 --> 00:06:00,320 Speaker 1: including Turkey and their refugee. The fact is that the 105 00:06:00,320 --> 00:06:03,120 Speaker 1: most interesting thing we've learned from this issue, at least 106 00:06:03,120 --> 00:06:05,760 Speaker 1: for me, is that nobody cares about the Palestinians anymore. 107 00:06:05,839 --> 00:06:09,240 Speaker 1: Because the Trump policy has essentially given Israel everything it 108 00:06:09,320 --> 00:06:11,720 Speaker 1: wanted and nobody has acted to it. We gotta leave 109 00:06:11,720 --> 00:06:13,680 Speaker 1: it there. It is a triumph. Gideon Rose, in his 110 00:06:13,839 --> 00:06:32,160 Speaker 1: team at Foreign Affairs magazine Trump's Middle East. We've been 111 00:06:32,200 --> 00:06:37,520 Speaker 1: following Brexit since the Suez Canal crisis, and I must say, John, 112 00:06:37,600 --> 00:06:39,720 Speaker 1: to cut to the chase. That was actually a good one. 113 00:06:39,839 --> 00:06:42,039 Speaker 1: This is my favor. It's a good one. I watched 114 00:06:42,040 --> 00:06:45,320 Speaker 1: the Crown. Come on, Anthony's a good I know, you 115 00:06:45,360 --> 00:06:47,240 Speaker 1: know there's that scene in Lawrence of Arabia where he's 116 00:06:47,279 --> 00:06:50,200 Speaker 1: out starving in the desert, drying and Boomy comes over. 117 00:06:50,320 --> 00:06:53,279 Speaker 1: There's a screen door and the boom. There's a suisque 118 00:06:53,320 --> 00:06:57,200 Speaker 1: now and then the music. My eyes just thinking of you. 119 00:06:58,760 --> 00:07:01,880 Speaker 1: This is really good. I was twive years or something. UM. 120 00:07:01,920 --> 00:07:06,360 Speaker 1: This is my favorite Brexit guest, my absolute favorite Brexit 121 00:07:06,440 --> 00:07:10,040 Speaker 1: guest from Cambridge University, The Big Financial Launch. Katherine Barnard, 122 00:07:10,040 --> 00:07:13,200 Speaker 1: The UK in a Changing Europe. Senior Fellow, Katherine, Great 123 00:07:13,200 --> 00:07:15,080 Speaker 1: to have you with us on the program. Talk to 124 00:07:15,080 --> 00:07:17,400 Speaker 1: me about what happened in the House of Commons in 125 00:07:17,440 --> 00:07:20,800 Speaker 1: the last twenty four hours and what's happening right now. Well, 126 00:07:20,880 --> 00:07:25,680 Speaker 1: it's remarkable. I mean, this is voice. Johnson became Prime 127 00:07:25,680 --> 00:07:27,280 Speaker 1: Minister in the summer. He said he was going to 128 00:07:27,360 --> 00:07:30,560 Speaker 1: get Brexit done. The only way he gets Brexit done 129 00:07:30,720 --> 00:07:35,160 Speaker 1: was to revise the deal that Treason Maine had entered into. UM. 130 00:07:35,200 --> 00:07:38,920 Speaker 1: He successfully did that last week. In facts it's primarily 131 00:07:38,920 --> 00:07:41,800 Speaker 1: Treason Mains deal but with knobs On and the knobs 132 00:07:41,840 --> 00:07:46,280 Speaker 1: relate to Northern Ireland. Because they have he's changed the 133 00:07:46,320 --> 00:07:49,560 Speaker 1: position on Northern Ireland. It's no longer a backstop, a 134 00:07:49,600 --> 00:07:52,800 Speaker 1: sort of default position, insurance position. What he's done is 135 00:07:52,880 --> 00:07:56,480 Speaker 1: create a special situation for Northern Ireland and he said, right, 136 00:07:56,560 --> 00:08:01,280 Speaker 1: we need to put that to a vote and that 137 00:08:01,880 --> 00:08:06,640 Speaker 1: and then that vote failed. Um. But um. What did 138 00:08:06,800 --> 00:08:10,200 Speaker 1: he was forced to do as a result is right 139 00:08:10,400 --> 00:08:13,320 Speaker 1: to the EU and say we want an extension. He 140 00:08:13,360 --> 00:08:15,880 Speaker 1: did that very grudgingly, as he was obliged to do 141 00:08:15,960 --> 00:08:18,440 Speaker 1: it nder what's called the ben Act. And if you remember, 142 00:08:18,440 --> 00:08:21,840 Speaker 1: he sent three letters on Saturday night to say I'm 143 00:08:21,880 --> 00:08:24,400 Speaker 1: forced to ask an extension. I don't really want it, 144 00:08:24,440 --> 00:08:28,080 Speaker 1: but I'm asking for one anyway. And then this week 145 00:08:28,160 --> 00:08:31,600 Speaker 1: he tabled the WEB now the webs another bit of jargon, 146 00:08:31,680 --> 00:08:35,480 Speaker 1: the web as the Withdrawn Implementation Bill. Um, and we 147 00:08:35,559 --> 00:08:38,000 Speaker 1: got it on late Monday night. It's a hundred and 148 00:08:38,000 --> 00:08:43,080 Speaker 1: ten pages long. It's eiddishly complicated, really difficult legal text. 149 00:08:43,280 --> 00:08:46,760 Speaker 1: And m he said, right, MPs, you've got three days 150 00:08:46,840 --> 00:08:50,000 Speaker 1: to negotiate or to to rule on this. You can 151 00:08:50,040 --> 00:08:53,320 Speaker 1: discuss it for three days, and that is it. MPs 152 00:08:53,360 --> 00:08:56,680 Speaker 1: were very cross and so there was what's called something 153 00:08:56,720 --> 00:09:00,440 Speaker 1: really very dull but a motion on how to actually 154 00:09:00,520 --> 00:09:03,840 Speaker 1: manage this process and he lost that too. But what 155 00:09:03,920 --> 00:09:05,880 Speaker 1: he did win, and he doesn't have a great record 156 00:09:05,880 --> 00:09:07,720 Speaker 1: of winning votes, he did win what was called the 157 00:09:07,760 --> 00:09:12,320 Speaker 1: second reading vote, which basically said grudging we like this deal. 158 00:09:12,800 --> 00:09:15,280 Speaker 1: That's the good news. So now we have this situation 159 00:09:16,040 --> 00:09:19,160 Speaker 1: on whether they can agree on the time to discuss 160 00:09:19,679 --> 00:09:22,040 Speaker 1: the overall bill, and Catherine, I wonder if they can 161 00:09:22,080 --> 00:09:24,920 Speaker 1: do that. There was a suggestion before these votes yesterday 162 00:09:24,920 --> 00:09:27,240 Speaker 1: that perhaps the Prime Minister just withdraws the whole thing 163 00:09:27,320 --> 00:09:30,599 Speaker 1: and calls an election. That hasn't happened. What do you 164 00:09:30,640 --> 00:09:34,240 Speaker 1: think the next steps are, Well, that's the question. So 165 00:09:34,840 --> 00:09:36,719 Speaker 1: at the moment, if you think about this in terms 166 00:09:36,760 --> 00:09:39,120 Speaker 1: of the game of ping pong, the ball is currently 167 00:09:39,320 --> 00:09:41,840 Speaker 1: in the e US court because the eu've got to 168 00:09:41,880 --> 00:09:44,760 Speaker 1: decide whether they'll grant the extension that for as Johnson 169 00:09:44,840 --> 00:09:49,640 Speaker 1: so grudgingly and ungraciously asked for on Saturday night. All 170 00:09:49,720 --> 00:09:52,760 Speaker 1: of the omens look reasonably good that they will do. Remember, 171 00:09:52,800 --> 00:09:58,280 Speaker 1: they've got to act unanimously. President mcron, the a French president, 172 00:09:58,480 --> 00:10:01,000 Speaker 1: is being really quite cross for about this and saying 173 00:10:01,080 --> 00:10:03,880 Speaker 1: not very keen on granting an extension because the Brits 174 00:10:03,920 --> 00:10:06,800 Speaker 1: can't get their house in order. As you've helpfully pointed out, 175 00:10:06,840 --> 00:10:10,160 Speaker 1: that's been going on since the time of Sewers and 176 00:10:10,320 --> 00:10:12,559 Speaker 1: the friendship had enough. But I think it's likely they 177 00:10:12,559 --> 00:10:16,720 Speaker 1: will grant the extension till the thirty one January. Then 178 00:10:16,760 --> 00:10:19,400 Speaker 1: the big question is will be won election and what 179 00:10:19,520 --> 00:10:22,320 Speaker 1: effect might the fact that we haven't left had on 180 00:10:22,360 --> 00:10:25,720 Speaker 1: the Tory prospects in the election. Catherine Bernard with us 181 00:10:25,760 --> 00:10:29,240 Speaker 1: a British legal scholar, which barely describes her accomplishments. She 182 00:10:29,400 --> 00:10:34,319 Speaker 1: is a fellow of Trinity College at Cambridge. Professor Barnard, 183 00:10:34,520 --> 00:10:38,800 Speaker 1: I am looking at the complexities of the parliamentary voting 184 00:10:38,920 --> 00:10:44,240 Speaker 1: system and Constituencies Act of two thousand and eleven. Is 185 00:10:44,360 --> 00:10:49,600 Speaker 1: all of this insanity coming out of this revolutionary change 186 00:10:49,760 --> 00:10:55,760 Speaker 1: in Parliament eight years ago? Well, partly you're right, but 187 00:10:55,840 --> 00:11:00,200 Speaker 1: there's another act that has really changed the dynamics, and 188 00:11:00,280 --> 00:11:04,439 Speaker 1: that's the Sixth Term of Parliament's Act. And that Act says, 189 00:11:04,600 --> 00:11:06,760 Speaker 1: in order to call an election out of sequence that 190 00:11:06,840 --> 00:11:09,199 Speaker 1: we know we have elections every five years, you need 191 00:11:09,240 --> 00:11:12,920 Speaker 1: to have two thirds majority in Parliament. And we're in 192 00:11:12,920 --> 00:11:15,600 Speaker 1: a very unusual situation because usually the Opposition are jumping 193 00:11:15,679 --> 00:11:17,920 Speaker 1: up and down saying, oh, yes, we absolutely want an 194 00:11:17,920 --> 00:11:20,240 Speaker 1: election because we want to replace you lot in government. 195 00:11:20,880 --> 00:11:23,680 Speaker 1: But this time Labor is saying, actually, we're not very keen, 196 00:11:24,000 --> 00:11:26,760 Speaker 1: one because it's good to keep Boris Johnson dangling on 197 00:11:26,760 --> 00:11:29,520 Speaker 1: the string, and secondly because Labors not actually convinced it 198 00:11:29,559 --> 00:11:31,960 Speaker 1: would win the election if there was one. So, Catherine, 199 00:11:32,000 --> 00:11:34,199 Speaker 1: let's talk about where we have actually made some progress 200 00:11:34,320 --> 00:11:37,640 Speaker 1: in the last six weeks. The Prime Minister has gone 201 00:11:37,640 --> 00:11:39,560 Speaker 1: from saying that he would rather be dead in a 202 00:11:39,640 --> 00:11:42,920 Speaker 1: ditch than remain in the EU but loot beyond October 203 00:11:42,960 --> 00:11:46,320 Speaker 1: thirty one with or without a deal, and now he 204 00:11:46,440 --> 00:11:50,120 Speaker 1: is saying that we will leave the EU with this deal. 205 00:11:50,480 --> 00:11:52,240 Speaker 1: I think that's the big takeaway for a lot of people, 206 00:11:52,320 --> 00:11:54,640 Speaker 1: not just for markets, but just more broadly, that the 207 00:11:54,720 --> 00:11:58,800 Speaker 1: chances of a hard Brexit so to speak, may not 208 00:11:58,920 --> 00:12:02,000 Speaker 1: have completely been reserve holved, but they have receded and 209 00:12:02,080 --> 00:12:05,080 Speaker 1: quite marked the Catherine, would you agree with that. I 210 00:12:05,120 --> 00:12:09,760 Speaker 1: agree they receded on the one of October. It's not 211 00:12:09,920 --> 00:12:13,319 Speaker 1: clear when they've receded on the thirty one January, assuming 212 00:12:13,360 --> 00:12:16,240 Speaker 1: that's a date for the extension. It's also not clear 213 00:12:16,400 --> 00:12:18,920 Speaker 1: even if we can overcome those hurdles and the web, 214 00:12:18,960 --> 00:12:22,439 Speaker 1: remember that's the domestic piece of legislation giving effect to 215 00:12:22,520 --> 00:12:26,560 Speaker 1: Boris Johnson, treason may feel that even the web goes through. 216 00:12:26,600 --> 00:12:28,400 Speaker 1: What we do is we go into what's called a 217 00:12:28,440 --> 00:12:32,080 Speaker 1: period of transition, which is essentially status quo, but there 218 00:12:32,160 --> 00:12:34,600 Speaker 1: is a big trap door at the end of that transition, 219 00:12:35,240 --> 00:12:38,360 Speaker 1: and if there's no future deal concluded, that's on what 220 00:12:38,440 --> 00:12:41,720 Speaker 1: the future relationship that we end up with no deal 221 00:12:41,800 --> 00:12:44,840 Speaker 1: at that moment, and that's what some of the remainder 222 00:12:45,120 --> 00:12:48,959 Speaker 1: orban no no deal politicians are really worried about. At 223 00:12:49,000 --> 00:12:53,960 Speaker 1: this moment. Do the other parties, besides a diminished labor 224 00:12:54,160 --> 00:12:57,439 Speaker 1: and the Conservatives, that all the other parties do they 225 00:12:57,480 --> 00:13:00,199 Speaker 1: have quote unquote power? Do they have a a in 226 00:13:00,320 --> 00:13:06,480 Speaker 1: the process forward? Well, they do because until a single 227 00:13:06,520 --> 00:13:10,240 Speaker 1: party gets majority in Parliament, they hold the balance of power. 228 00:13:10,640 --> 00:13:13,679 Speaker 1: And the party you need to watch particularly is the DUP, 229 00:13:13,840 --> 00:13:18,160 Speaker 1: the Democratic Union because they only have ten seats. But 230 00:13:18,280 --> 00:13:21,040 Speaker 1: remember they were in what's called a confidence and supply 231 00:13:21,160 --> 00:13:26,000 Speaker 1: agreement with the Conservatives and that gave the Conservatives of 232 00:13:26,240 --> 00:13:32,600 Speaker 1: their majority before one were thrown out of the Conservative part. 233 00:13:33,280 --> 00:13:37,120 Speaker 1: What's interesting is DUP very cross with Boris Johnpson at 234 00:13:37,120 --> 00:13:41,079 Speaker 1: the moment. They don't like his new deal, and yesterday 235 00:13:41,679 --> 00:13:45,680 Speaker 1: on the motion they voted against to the man the 236 00:13:45,720 --> 00:13:49,400 Speaker 1: Conservative position Catherine Barnard, thank you so much, from Cambridge 237 00:13:49,480 --> 00:14:09,240 Speaker 1: University as well. She has prodigious math chops with black Rock. 238 00:14:09,679 --> 00:14:11,720 Speaker 1: We lee with us right now and John, A lot 239 00:14:11,720 --> 00:14:16,120 Speaker 1: of this is the dynamics in the known unknowns within 240 00:14:16,120 --> 00:14:18,319 Speaker 1: the fixed in com market. Can we agree John before 241 00:14:18,320 --> 00:14:21,200 Speaker 1: we go to Wally, that there's a new belief in 242 00:14:21,320 --> 00:14:24,840 Speaker 1: a lower rate regime over the last ninety days, over 243 00:14:24,840 --> 00:14:27,120 Speaker 1: the last year. I think that's been cemented in a 244 00:14:27,120 --> 00:14:28,840 Speaker 1: lot of people's minds. The other story we've got to 245 00:14:28,840 --> 00:14:31,120 Speaker 1: talk about it is just the amount of flows into 246 00:14:31,160 --> 00:14:34,000 Speaker 1: Europe of all places. Waite joining us now black Rock 247 00:14:34,080 --> 00:14:38,200 Speaker 1: head of Ice shares a mere investment strategy M E 248 00:14:38,320 --> 00:14:41,440 Speaker 1: M E A you know with Mia. Yeah, they're like 249 00:14:41,480 --> 00:14:45,320 Speaker 1: a but but they didn't have that. Yeah, Okay, these 250 00:14:45,320 --> 00:14:48,520 Speaker 1: are conversations we can do in a commercial broke Okay, Wiley, 251 00:14:49,160 --> 00:14:50,920 Speaker 1: that just don't go there. Let's talk about Europe and 252 00:14:50,920 --> 00:14:53,080 Speaker 1: the inflow. Shall we your thoughts on what we have 253 00:14:53,120 --> 00:14:58,880 Speaker 1: seen through September into October? And why? Um? Yeah, wish 254 00:14:58,920 --> 00:15:02,000 Speaker 1: I could join your other conversation during the commercial break. Yes, 255 00:15:02,080 --> 00:15:06,000 Speaker 1: we're starting to speak or maybe not. Um, Yes, we're 256 00:15:06,040 --> 00:15:09,480 Speaker 1: starting to see inflows into European equities. And this is 257 00:15:09,560 --> 00:15:14,280 Speaker 1: really um notable and important because on a year today basis, 258 00:15:14,320 --> 00:15:18,480 Speaker 1: we're still having closed to a hundred billion dollars out 259 00:15:18,520 --> 00:15:20,960 Speaker 1: of European equities and the flows are only starting to 260 00:15:21,080 --> 00:15:23,800 Speaker 1: tentatively come back. In part of that have to do 261 00:15:23,920 --> 00:15:27,800 Speaker 1: with the fact that some of the uh non risks 262 00:15:27,840 --> 00:15:31,840 Speaker 1: to markets incrementally improving. So if you think about the 263 00:15:31,960 --> 00:15:36,000 Speaker 1: US China trade, the escalation, if you think about the Brexit, 264 00:15:36,160 --> 00:15:39,680 Speaker 1: incremental improvements that has boosted sentiments. But we're talking about 265 00:15:39,920 --> 00:15:42,880 Speaker 1: really coming from very very low base because most of 266 00:15:42,880 --> 00:15:45,920 Speaker 1: the investors that we stick to under own Europe under 267 00:15:45,960 --> 00:15:50,880 Speaker 1: on European aquitis, specifically record outflows followed by record inflows. 268 00:15:51,280 --> 00:15:54,000 Speaker 1: Real what does that say about how fragile sentiment is 269 00:15:54,200 --> 00:15:58,520 Speaker 1: at the moment, Well, it's very junky, right, So if 270 00:15:58,560 --> 00:16:02,840 Speaker 1: we have this interview yesterday, this time will be totally 271 00:16:02,880 --> 00:16:06,840 Speaker 1: talking about very very different mood music compared to what 272 00:16:06,880 --> 00:16:09,560 Speaker 1: we are speaking to today. So even this, like a 273 00:16:09,680 --> 00:16:13,480 Speaker 1: matter of twenty four hours, can change sentiments completely, which 274 00:16:13,520 --> 00:16:15,960 Speaker 1: is why we think that it is so important to 275 00:16:16,080 --> 00:16:19,440 Speaker 1: build portfolio resilience no matter how good you feel, no 276 00:16:19,480 --> 00:16:23,960 Speaker 1: matter how good market feel, especially given how much treasury 277 00:16:24,000 --> 00:16:26,800 Speaker 1: and European government bonds have pulled back in recent weeks, 278 00:16:27,040 --> 00:16:30,440 Speaker 1: they actually offer interesting entry point to build that portfolio 279 00:16:30,480 --> 00:16:32,320 Speaker 1: resilience which you're going to need for a long time. 280 00:16:32,480 --> 00:16:34,960 Speaker 1: We should point out a mia folks is a wonderful 281 00:16:35,000 --> 00:16:38,680 Speaker 1: abbreviation actually really works for Europe, the Middle East and Africa. 282 00:16:38,760 --> 00:16:42,600 Speaker 1: That's used across all of global Wall Street and Walie. 283 00:16:42,640 --> 00:16:47,280 Speaker 1: Of course out of I shares that well, we're jogging free. 284 00:16:48,920 --> 00:16:53,480 Speaker 1: I didn't know. That's amazing how Wikipedia can save me. Really, 285 00:16:53,640 --> 00:16:55,040 Speaker 1: when I look at this and I want to go 286 00:16:55,080 --> 00:16:57,840 Speaker 1: back again to this important five pages of the I 287 00:16:58,040 --> 00:17:01,680 Speaker 1: m F. Everybody is a yielder had right now and 288 00:17:01,840 --> 00:17:05,639 Speaker 1: other nations are loading up on US high yield and 289 00:17:06,160 --> 00:17:09,840 Speaker 1: even moderate yield paper. Is that a source of concern 290 00:17:10,040 --> 00:17:13,320 Speaker 1: for you? Do you see just this addiction to I've 291 00:17:13,359 --> 00:17:18,560 Speaker 1: gotta own US paper? Um? Yes, we have seen a 292 00:17:18,640 --> 00:17:24,520 Speaker 1: lot of demand for optically higher ulding US fixed income markets, 293 00:17:24,560 --> 00:17:27,480 Speaker 1: and that applies to high but it applies to government 294 00:17:27,480 --> 00:17:32,080 Speaker 1: bonds as well. Speaking to India investors here based in Europe, 295 00:17:32,440 --> 00:17:36,560 Speaker 1: the level of income that one can get is significantly 296 00:17:36,560 --> 00:17:38,879 Speaker 1: lower than than than than what one can get in 297 00:17:38,880 --> 00:17:44,280 Speaker 1: the US. But the important UH concerned consideration here is 298 00:17:44,320 --> 00:17:46,920 Speaker 1: also haging costs. Right when it comes to fixing income, 299 00:17:47,119 --> 00:17:50,280 Speaker 1: especially when it comes to investing in developed market fix 300 00:17:50,320 --> 00:17:53,919 Speaker 1: income exposures, clients oftentimes have to hatch back into their 301 00:17:53,960 --> 00:17:57,639 Speaker 1: base currency. So the optical you'd pick up then that 302 00:17:57,640 --> 00:18:01,640 Speaker 1: that one gets actually get eroded quite a lot when 303 00:18:01,760 --> 00:18:06,600 Speaker 1: you convert US exposure back to your Euro based currency, 304 00:18:06,760 --> 00:18:13,040 Speaker 1: which is why that the demand is there, but not crazily. 305 00:18:13,480 --> 00:18:18,000 Speaker 1: So now back to US high market UH with we 306 00:18:18,080 --> 00:18:21,120 Speaker 1: have seen actually influenced into the US high old market 307 00:18:21,320 --> 00:18:25,879 Speaker 1: and whilst too much frost should be a source of concern, 308 00:18:25,920 --> 00:18:29,320 Speaker 1: but if you look at the default profile, it's not 309 00:18:29,920 --> 00:18:33,040 Speaker 1: biking even at this point in the in the in 310 00:18:33,080 --> 00:18:36,680 Speaker 1: the late cycle, and given the very the nine founding environments, 311 00:18:37,080 --> 00:18:39,320 Speaker 1: we definitely pay a lot of attention to it, but 312 00:18:39,520 --> 00:18:43,439 Speaker 1: currently not a significant source of stress. What's the foreign 313 00:18:43,440 --> 00:18:47,640 Speaker 1: bid like in European fixed income right now? What what's 314 00:18:47,680 --> 00:18:50,639 Speaker 1: the foreign what's the foreign bid? The foreign demand in 315 00:18:50,680 --> 00:18:55,679 Speaker 1: European fixed income strong? Yeah, absolutely, um. Some of the 316 00:18:55,760 --> 00:18:59,000 Speaker 1: clients that we speak to in APEX, for example, Japanese 317 00:18:59,119 --> 00:19:04,080 Speaker 1: investors have been a consistent source of the deed uh 318 00:19:05,119 --> 00:19:10,560 Speaker 1: a buyer also sovereign Semichael European government bonds. Even when 319 00:19:10,600 --> 00:19:13,520 Speaker 1: you converted back into Japanese, YENNI looks and it looks, 320 00:19:14,000 --> 00:19:19,359 Speaker 1: it still looks attractive. And frankly, domestic investors are also 321 00:19:19,840 --> 00:19:23,200 Speaker 1: buying fixed income. You think about first of November, Quey 322 00:19:23,359 --> 00:19:30,840 Speaker 1: starts again. Um, that should sustain the demand for government bonds. 323 00:19:30,840 --> 00:19:33,000 Speaker 1: But as a corporate bound high grade, well, thank you 324 00:19:33,040 --> 00:19:35,240 Speaker 1: so much. It is with black Rock. We greatly appreciate 325 00:19:35,240 --> 00:19:39,960 Speaker 1: her times this morning. We always inform here at Bloomberg Surveillance. 326 00:19:40,000 --> 00:19:42,400 Speaker 1: As we look at email, we would also note ABA 327 00:19:42,960 --> 00:19:46,360 Speaker 1: is the first names the letter acronymic kind of thing 328 00:19:46,520 --> 00:19:51,840 Speaker 1: of Agnetha, Bjorn, Benny and Annie Freed. Why why I 329 00:19:52,000 --> 00:19:54,960 Speaker 1: just we want to inform we got an email. I'm 330 00:19:54,960 --> 00:19:57,720 Speaker 1: not gonna lie. Actually didn't know that. Actually I didn't 331 00:19:57,760 --> 00:20:13,560 Speaker 1: know that either. Okay, here's what we're gonna do it 332 00:20:13,720 --> 00:20:16,800 Speaker 1: by popular claim, we are thrilled to bring you Mr Galloway, 333 00:20:16,800 --> 00:20:18,600 Speaker 1: Scott Galloway at my book of the Year a couple 334 00:20:18,600 --> 00:20:20,880 Speaker 1: of years ago on before, I still recommend to throw 335 00:20:20,960 --> 00:20:23,480 Speaker 1: it at the nearest smart child you have and say 336 00:20:23,480 --> 00:20:26,679 Speaker 1: shut up and read this on all this technology and 337 00:20:26,720 --> 00:20:28,800 Speaker 1: the way he writes and abruptly hits you over the 338 00:20:28,840 --> 00:20:33,200 Speaker 1: head an Amazon, and he is needless to saying out front, 339 00:20:33,680 --> 00:20:36,199 Speaker 1: what are we calling it? That we disaster, that we 340 00:20:35,680 --> 00:20:38,639 Speaker 1: can do, we work whatever? Can? We give him a 341 00:20:38,640 --> 00:20:41,200 Speaker 1: massive shout out before we bring him in because Scott 342 00:20:41,240 --> 00:20:44,480 Speaker 1: won't say this about himself. Scott has been so so 343 00:20:44,600 --> 00:20:46,639 Speaker 1: critical of this company, and I've seen the amount of 344 00:20:46,680 --> 00:20:49,520 Speaker 1: abuse he's taken from the Silicon Valley guys who have 345 00:20:49,560 --> 00:20:53,040 Speaker 1: tried to push back aggressively. Of the last two Unicorn crew, 346 00:20:53,200 --> 00:20:56,440 Speaker 1: Scott was right, the Union crew with debt the Union, 347 00:20:56,680 --> 00:21:00,000 Speaker 1: the Unicorn with debt wrong. I want to bring its 348 00:21:00,000 --> 00:21:02,560 Speaker 1: got Nascot got away n y U Stone Professor, Good 349 00:21:02,560 --> 00:21:05,800 Speaker 1: morning to Scott, good morning and thanks for the kind words. 350 00:21:05,840 --> 00:21:10,000 Speaker 1: How do you think this ends? Uh? My guess is 351 00:21:10,960 --> 00:21:14,480 Speaker 1: I think this is more a cautionary tale that's historic. 352 00:21:14,560 --> 00:21:16,560 Speaker 1: I think the company will either be a nice little 353 00:21:16,600 --> 00:21:19,720 Speaker 1: coat working space it's worth three to five billion, or 354 00:21:19,880 --> 00:21:22,760 Speaker 1: we have some sort of restructuring in a year to 355 00:21:22,880 --> 00:21:25,440 Speaker 1: eighteen months. It's still a company with forty three billion 356 00:21:25,440 --> 00:21:29,199 Speaker 1: dollars in long term obligations over fifteen years, and it's 357 00:21:29,240 --> 00:21:33,160 Speaker 1: difficult to see how this company survives and cuts cost 358 00:21:33,200 --> 00:21:36,480 Speaker 1: cuts costs as fast as they need to, so either 359 00:21:36,520 --> 00:21:40,960 Speaker 1: as much smaller company or bankruptcy. In two thousand and twenty, 360 00:21:41,240 --> 00:21:43,120 Speaker 1: Scott in the blame game, a lot of people are 361 00:21:43,119 --> 00:21:45,240 Speaker 1: just looking at Adam Newman. How much attention should we 362 00:21:45,280 --> 00:21:47,359 Speaker 1: be paying to the likes of soft bank and the 363 00:21:47,440 --> 00:21:51,800 Speaker 1: Vision Fund. Well, you know, Adam Newman makes for a 364 00:21:51,880 --> 00:21:54,120 Speaker 1: more interesting story, but the reality is if you tell 365 00:21:54,160 --> 00:21:56,440 Speaker 1: a thirty year old male that he's Jesus Christ, who's 366 00:21:56,440 --> 00:21:58,920 Speaker 1: inclined to believe you the fiducia wait wait, wait, wait, 367 00:21:58,920 --> 00:22:02,560 Speaker 1: wait do we do that? Was Pharaoh? Every day? Every day? 368 00:22:03,160 --> 00:22:08,680 Speaker 1: Ignore and Scott carry on place. Yeah, look, the fiduciaries here, 369 00:22:08,760 --> 00:22:10,879 Speaker 1: we're not acting as fiduciaries. And at some point the 370 00:22:10,920 --> 00:22:15,399 Speaker 1: limited partners are going to ask uh Massioshi san, you know, 371 00:22:15,480 --> 00:22:19,840 Speaker 1: how can you give somebody one point seven billion dollars 372 00:22:19,960 --> 00:22:22,560 Speaker 1: which is more than eBay paid for PayPal to get 373 00:22:22,600 --> 00:22:24,160 Speaker 1: out of the way. So that's what you could pay 374 00:22:24,240 --> 00:22:29,080 Speaker 1: severance two employees. This is the big learning here will 375 00:22:29,119 --> 00:22:32,760 Speaker 1: be the dual class shareholder structures combined with the idolatry 376 00:22:32,800 --> 00:22:36,520 Speaker 1: of innovators needs more scrutiny that power corrupts, and they 377 00:22:36,560 --> 00:22:39,000 Speaker 1: put too much power in the hands of one individual 378 00:22:39,080 --> 00:22:41,119 Speaker 1: and that was out of him. Tim Colpin and Shuley 379 00:22:41,200 --> 00:22:43,560 Speaker 1: Ran have a brilliant essay. Washington Post picked it up 380 00:22:43,560 --> 00:22:46,680 Speaker 1: as well off Bloomberg Opinion and and and it goes 381 00:22:46,720 --> 00:22:49,400 Speaker 1: to Galloway one on one, which is we work will 382 00:22:49,440 --> 00:22:54,080 Speaker 1: be an associate of soft Bank. The accounting is really suspect. 383 00:22:54,160 --> 00:22:57,480 Speaker 1: And the announcements of the last number of hours, including 384 00:22:57,480 --> 00:23:01,399 Speaker 1: a five million dollar consultant fee, could that happen to 385 00:23:01,480 --> 00:23:06,040 Speaker 1: an American corporation if soft Bank was American, given their 386 00:23:06,119 --> 00:23:10,280 Speaker 1: general counsel, given their outside council, and given any kind 387 00:23:10,320 --> 00:23:14,640 Speaker 1: of accountancy and regulation. You know, I don't, I don't 388 00:23:14,640 --> 00:23:17,000 Speaker 1: know the accounting. This is definitely gonna be one of 389 00:23:17,040 --> 00:23:18,919 Speaker 1: the history books and we'll be teaching about this in 390 00:23:18,960 --> 00:23:21,400 Speaker 1: accounting classes for a long time because they figured out 391 00:23:21,400 --> 00:23:24,960 Speaker 1: a way to give commissions to fill up their office 392 00:23:25,000 --> 00:23:27,440 Speaker 1: and then figured out a way to turn those commissions 393 00:23:27,440 --> 00:23:30,760 Speaker 1: from expenses into revenues. So the accountant here has just 394 00:23:30,880 --> 00:23:34,760 Speaker 1: gotten crazy. That the cultural divider. The most interesting thing 395 00:23:34,800 --> 00:23:37,280 Speaker 1: here in terms of it contrast and cultures is I 396 00:23:37,320 --> 00:23:40,000 Speaker 1: do believe This will go down as the most expensive 397 00:23:40,200 --> 00:23:44,080 Speaker 1: or costly exercise and saving face in the history of 398 00:23:44,080 --> 00:23:48,280 Speaker 1: the private markets, because there really isn't a bowl case 399 00:23:48,520 --> 00:23:50,840 Speaker 1: or an economic case for putting seven or eight billion 400 00:23:50,840 --> 00:23:53,640 Speaker 1: dollars in good capital after bad here. And the reason 401 00:23:54,400 --> 00:23:56,600 Speaker 1: that soft Bank did it is this isn't as an 402 00:23:56,640 --> 00:23:58,920 Speaker 1: investment as much, and we work as it is an 403 00:23:58,920 --> 00:24:03,280 Speaker 1: investment in trying to safe base, or repair or buttress 404 00:24:03,280 --> 00:24:05,919 Speaker 1: the reputation of soft Bank and Vision one fund. This 405 00:24:06,200 --> 00:24:09,800 Speaker 1: economically makes no sense, Scott. We were weeks away from 406 00:24:09,920 --> 00:24:13,879 Speaker 1: retail getting absolutely host and getting caught picking up all 407 00:24:13,920 --> 00:24:15,960 Speaker 1: of this mess for themselves. In an I p O. 408 00:24:16,720 --> 00:24:18,800 Speaker 1: Some people asking as to whether there is more than 409 00:24:18,880 --> 00:24:21,840 Speaker 1: one we work Scott, you called out, we work quite 410 00:24:21,880 --> 00:24:24,119 Speaker 1: correctly given the events of the last month. As you 411 00:24:24,119 --> 00:24:26,520 Speaker 1: look around yourself right now, do you see any more 412 00:24:26,640 --> 00:24:31,120 Speaker 1: any more big issues brewing ousewhere well the place to look, 413 00:24:31,200 --> 00:24:34,960 Speaker 1: quite frankly, is the same judgment, the same algorithms for 414 00:24:35,080 --> 00:24:38,760 Speaker 1: decision making around we work in that as a disaster 415 00:24:38,800 --> 00:24:42,240 Speaker 1: that went from forty eight billion dollars to eight generously 416 00:24:42,359 --> 00:24:44,200 Speaker 1: in about forty five days, and that is still look 417 00:24:44,200 --> 00:24:46,240 Speaker 1: at softbanks other investments I Think. If you were to 418 00:24:46,800 --> 00:24:49,880 Speaker 1: try and sniff out other real estate soft bank backed 419 00:24:49,920 --> 00:24:53,240 Speaker 1: real estate companies, you would find Oil, the Indian based 420 00:24:53,240 --> 00:24:57,080 Speaker 1: company that is trying to roll up budget hotels that 421 00:24:57,119 --> 00:25:00,160 Speaker 1: has a twenty five year old founder who had it's 422 00:25:00,160 --> 00:25:03,560 Speaker 1: borrowed money against his own stock to be part of 423 00:25:03,640 --> 00:25:05,480 Speaker 1: a one and a half billion dollars round that no 424 00:25:05,520 --> 00:25:07,359 Speaker 1: one else but the founder, and of course soft Think 425 00:25:07,359 --> 00:25:11,520 Speaker 1: would invest in. I think the I buying space, specifically 426 00:25:11,560 --> 00:25:14,760 Speaker 1: open Door, that is using algorithms to buy real estate 427 00:25:14,800 --> 00:25:18,600 Speaker 1: and what is typically a very nuanced local market, deserves 428 00:25:18,640 --> 00:25:21,879 Speaker 1: more scrutiny. And then there's the crazy three million dollars 429 00:25:21,920 --> 00:25:23,959 Speaker 1: into a company called wag so you can have an 430 00:25:23,960 --> 00:25:27,320 Speaker 1: AFT to get somebody walk your dog. There's definitely Scott 431 00:25:27,320 --> 00:25:32,080 Speaker 1: Galloway twenty seconds Airbnb, How unicorny is Airbnb this morning? 432 00:25:33,600 --> 00:25:36,040 Speaker 1: I actually think Airbnb is one of the winners. Tom 433 00:25:36,080 --> 00:25:40,600 Speaker 1: Cargons is strong hair, positive, positive margins, very strong modes 434 00:25:40,680 --> 00:25:44,679 Speaker 1: both global global demands and global supply. I do not 435 00:25:44,840 --> 00:25:48,000 Speaker 1: think Airbnb is no we work. This is wonderful. Scott Galloway, 436 00:25:48,160 --> 00:25:51,480 Speaker 1: thank you so much, congratulations on a driving for the 437 00:25:51,520 --> 00:26:09,920 Speaker 1: global Wall Street Conversation. This is important, and it usually 438 00:26:10,040 --> 00:26:13,480 Speaker 1: comes into a stack of world class researcher Michael Nathanson 439 00:26:14,080 --> 00:26:16,800 Speaker 1: with us writing with MOFA. Nathanson, it's just first glass. 440 00:26:16,840 --> 00:26:19,600 Speaker 1: Paul Sweeney has lined up with all sorts of intelligent questions. 441 00:26:20,119 --> 00:26:24,720 Speaker 1: Michael Nathanson, you are such a stud Mrs Keane said, 442 00:26:24,760 --> 00:26:27,960 Speaker 1: can you just start the interview today with one question? 443 00:26:28,640 --> 00:26:32,280 Speaker 1: She wants to know? Is kemball Roy for real? In Succession? 444 00:26:32,920 --> 00:26:38,159 Speaker 1: Do you watch this showever? Is it accurate? Is Kendall 445 00:26:38,280 --> 00:26:41,800 Speaker 1: that big of a tool? I think it's you know, 446 00:26:43,000 --> 00:26:45,080 Speaker 1: I think it's a bit of exaggeration. But you know, 447 00:26:46,200 --> 00:26:48,880 Speaker 1: someone said to me, Michael Jordan's was a great basketball player, 448 00:26:48,880 --> 00:26:50,879 Speaker 1: doesn't mean his sounds a great basketball player, right? So 449 00:26:51,400 --> 00:26:54,080 Speaker 1: really yeah, So this whole idea of like legacy and 450 00:26:54,160 --> 00:26:57,239 Speaker 1: succession in media, unfortunately that's part of the industry, right, 451 00:26:57,280 --> 00:27:00,960 Speaker 1: It's passed on down. There's no guarantee that year. So 452 00:27:00,960 --> 00:27:04,240 Speaker 1: when you was a the mother of all content, King's 453 00:27:04,240 --> 00:27:09,040 Speaker 1: grizzled pros, when you watch Succession, it rings true. It 454 00:27:09,200 --> 00:27:12,600 Speaker 1: rings true. The whole pivot of old media new media. 455 00:27:12,720 --> 00:27:15,600 Speaker 1: You have to consolidate quickly. It's like this past season 456 00:27:15,680 --> 00:27:19,639 Speaker 1: was really wait quickly here, well, because you know the 457 00:27:19,680 --> 00:27:22,199 Speaker 1: walls are closing and media needs to consolidate, right, and 458 00:27:22,200 --> 00:27:24,520 Speaker 1: do you want to buy new old TV stations? Do 459 00:27:24,520 --> 00:27:25,639 Speaker 1: you want to get at it? Like? How do you 460 00:27:25,720 --> 00:27:29,240 Speaker 1: fix your empire to get ready for Have you been 461 00:27:29,280 --> 00:27:34,119 Speaker 1: on a yacht that big? I think he has several times. So, Michael, 462 00:27:34,160 --> 00:27:35,879 Speaker 1: you know the big thing you've been covering. You've been 463 00:27:35,880 --> 00:27:38,360 Speaker 1: covering to media sector for such a long time, and 464 00:27:38,480 --> 00:27:41,280 Speaker 1: you know it's really at a pivotal time for the 465 00:27:41,320 --> 00:27:45,880 Speaker 1: media companies as they try to pivot towards technology and streaming, 466 00:27:45,920 --> 00:27:48,639 Speaker 1: and probably no greater example as Walt Disney Company what 467 00:27:48,680 --> 00:27:50,800 Speaker 1: they're trying to do. Give us your sense of how 468 00:27:50,920 --> 00:27:54,680 Speaker 1: you think media will make that transition. Yeah, it's going 469 00:27:54,720 --> 00:27:56,440 Speaker 1: to be really, really lumpy. So it starts with the 470 00:27:56,520 --> 00:27:59,440 Speaker 1: question Tom always asked us, which is what does court 471 00:27:59,440 --> 00:28:01,840 Speaker 1: cutting look like? What's the future for the bundle? So 472 00:28:02,000 --> 00:28:04,240 Speaker 1: right now, let's call it about eight million people who 473 00:28:04,240 --> 00:28:07,000 Speaker 1: pay for a monthly video subscription. We think that falls 474 00:28:07,000 --> 00:28:10,720 Speaker 1: the sixty million subs. Okay, the sixty million subscribers were there. 475 00:28:10,840 --> 00:28:12,600 Speaker 1: They care about the Toronto Maple Leafs, they care about 476 00:28:12,600 --> 00:28:15,000 Speaker 1: Premier League soccer, They care about the NHL, the NFL, 477 00:28:15,680 --> 00:28:18,040 Speaker 1: Bloomberg News. They'll be there for sports and news, right. 478 00:28:18,080 --> 00:28:20,440 Speaker 1: So that means you'll lose a ton of subscribers you 479 00:28:20,520 --> 00:28:23,359 Speaker 1: have now, if you have assets that play in the 480 00:28:23,359 --> 00:28:26,159 Speaker 1: live sports and news business, you'll be fine. So Disney 481 00:28:26,160 --> 00:28:29,720 Speaker 1: has ESPN, Fox which we like, has Fox News, Fox Sports, 482 00:28:29,760 --> 00:28:32,359 Speaker 1: the long tail of entertainment networks. Anything you're gonna watch 483 00:28:32,400 --> 00:28:36,320 Speaker 1: that's entertainment based will be on demand, right. So then 484 00:28:36,720 --> 00:28:39,920 Speaker 1: the world's gonna shrink for kale networks. At the same time, 485 00:28:39,960 --> 00:28:42,960 Speaker 1: there's gonna be this war we're watching now to play 486 00:28:42,960 --> 00:28:45,160 Speaker 1: in the on demand space. Right. So Netflix was the 487 00:28:45,200 --> 00:28:49,920 Speaker 1: first mover than Hulu and Amazon. Now at Disney, Apple, right, 488 00:28:50,080 --> 00:28:52,680 Speaker 1: cbsl access just more and more pressure to fight for 489 00:28:52,760 --> 00:28:56,160 Speaker 1: that spot opportunity, right, Does that makes sense? Yeah? Yeah. 490 00:28:56,200 --> 00:28:57,720 Speaker 1: So one of the things Tom and I, you know, 491 00:28:57,720 --> 00:29:00,760 Speaker 1: always talk about because Tom is afraid he's he's spending. 492 00:29:00,800 --> 00:29:03,040 Speaker 1: He pays so many bills every month and he's got 493 00:29:03,080 --> 00:29:04,920 Speaker 1: so many streaming bills. He doesn't know what's going on 494 00:29:05,280 --> 00:29:07,600 Speaker 1: in his bank accounts all direct you know, payment, he 495 00:29:07,640 --> 00:29:10,120 Speaker 1: doesn't know what's going on. So how many payments will 496 00:29:10,120 --> 00:29:13,560 Speaker 1: people make for streaming services. Do you think rethink on 497 00:29:13,600 --> 00:29:15,760 Speaker 1: average U be four to five streaming services, right, there 498 00:29:15,840 --> 00:29:17,920 Speaker 1: be four to five products, maybe three to four. But 499 00:29:17,960 --> 00:29:21,000 Speaker 1: what's gonna happen is in homes have given up the bundle, 500 00:29:21,480 --> 00:29:25,040 Speaker 1: they'll have surplus surplus spending, right because basically they've traded 501 00:29:25,040 --> 00:29:27,160 Speaker 1: down from a hundred dollar bundle and to maybe four 502 00:29:27,240 --> 00:29:31,080 Speaker 1: or five products that will costs, right, So you're gonna 503 00:29:31,200 --> 00:29:34,960 Speaker 1: have extra opportunities to spend from households that have spun 504 00:29:35,040 --> 00:29:38,200 Speaker 1: down spun out right. At the same time, what's gonna 505 00:29:38,240 --> 00:29:40,160 Speaker 1: happen is Tom's not gonna go to the movies as much. 506 00:29:40,520 --> 00:29:43,000 Speaker 1: He's definitely not buying home videos anymore. He's not gonna 507 00:29:43,000 --> 00:29:46,680 Speaker 1: buy you know, he's gonna stream his music. So there's 508 00:29:46,720 --> 00:29:49,640 Speaker 1: beginning to see an erosion and consumer spending in categories 509 00:29:49,720 --> 00:29:53,000 Speaker 1: where technology is disrupted. So he'll find excess, you know, 510 00:29:53,080 --> 00:29:56,280 Speaker 1: savings from things that he no longer does. So the 511 00:29:56,280 --> 00:29:58,400 Speaker 1: long history media is I would have said to you 512 00:29:58,760 --> 00:30:00,640 Speaker 1: five ten years ago you have said how much more 513 00:30:00,640 --> 00:30:02,120 Speaker 1: can the bundle price and go up? And we would 514 00:30:02,160 --> 00:30:04,200 Speaker 1: have said it goes up five percent every year because 515 00:30:04,240 --> 00:30:08,600 Speaker 1: you can't find succession away from the bundle, right, So 516 00:30:08,920 --> 00:30:11,200 Speaker 1: I I p is very very you know, it's got 517 00:30:11,200 --> 00:30:14,240 Speaker 1: pricing power. Give it to me. The entire hinge here 518 00:30:14,760 --> 00:30:18,560 Speaker 1: is the belief by well meaning executives the younger people 519 00:30:18,600 --> 00:30:23,280 Speaker 1: who don't use this stuff will shift and use it 520 00:30:23,840 --> 00:30:28,840 Speaker 1: when they get older. How certain is that foundational gospel 521 00:30:29,160 --> 00:30:32,040 Speaker 1: that's no longer a foundational gospel? That's not certainty. I 522 00:30:32,080 --> 00:30:36,520 Speaker 1: think twenty three year old will or will not shifty years. 523 00:30:36,680 --> 00:30:39,960 Speaker 1: They will not become us when they become our age. 524 00:30:40,000 --> 00:30:42,640 Speaker 1: They just will not. Right, You go to anyone who's 525 00:30:42,680 --> 00:30:45,720 Speaker 1: a college kid, look at their dorm structure versus ten 526 00:30:45,800 --> 00:30:48,320 Speaker 1: years ago dorms. There's no TV sets anywhere, right, it's 527 00:30:48,400 --> 00:30:52,000 Speaker 1: all it's all laptop, it's iPad. They're just going to 528 00:30:52,040 --> 00:30:54,960 Speaker 1: basically hang a connected TV set on the wall, not 529 00:30:55,120 --> 00:30:58,440 Speaker 1: paid for cable or satellite, and use apps, use apps 530 00:30:58,440 --> 00:31:00,920 Speaker 1: to watch what they want. Maybe they'll use the parents apps. Right, 531 00:31:00,920 --> 00:31:05,320 Speaker 1: they just basically share passwords and put it on. Really yeah, 532 00:31:05,600 --> 00:31:07,680 Speaker 1: Like the whole point Tom is like we we're gonna 533 00:31:07,720 --> 00:31:11,240 Speaker 1: see basically a race to the bottom. Like your point 534 00:31:11,320 --> 00:31:14,760 Speaker 1: of there has been life cycles and people usually follow 535 00:31:14,800 --> 00:31:19,360 Speaker 1: their previous generation's behavior. That's broken down that's not going 536 00:31:19,360 --> 00:31:22,880 Speaker 1: to Is there a profit for anyone on the race 537 00:31:23,040 --> 00:31:25,840 Speaker 1: to the bottom? I think no, you know, the next 538 00:31:25,880 --> 00:31:28,240 Speaker 1: three or four or five years. That is my big 539 00:31:28,280 --> 00:31:31,000 Speaker 1: worry that we don't have a profit here. You know, 540 00:31:31,040 --> 00:31:33,760 Speaker 1: Netflix has never actually created free cash flow. You know 541 00:31:33,840 --> 00:31:37,040 Speaker 1: that there's never been free cash generation. But the bond 542 00:31:37,080 --> 00:31:40,360 Speaker 1: market is there for Netflix. Why is the bond market 543 00:31:40,400 --> 00:31:43,000 Speaker 1: there for Netflix if they've never developed free cash flow? 544 00:31:43,000 --> 00:31:45,440 Speaker 1: It's on the edge of weak company, right, because there's 545 00:31:45,480 --> 00:31:50,480 Speaker 1: the belief embedded in the equity that cash flow positives 546 00:31:50,480 --> 00:31:53,040 Speaker 1: around the corner. Okay, like Comcast flipped the switch and 547 00:31:53,080 --> 00:31:56,000 Speaker 1: they did that. The Roberts family executed that on the 548 00:31:56,080 --> 00:31:58,440 Speaker 1: edge of brilliant, right, do you have the same confidence 549 00:31:58,480 --> 00:32:02,080 Speaker 1: that content greaders can do a Comcast? They will have 550 00:32:02,200 --> 00:32:06,480 Speaker 1: to be slowing top line growth and slowing content spending. Right. 551 00:32:06,480 --> 00:32:08,480 Speaker 1: It's you've got the decision is going to have to 552 00:32:08,520 --> 00:32:11,080 Speaker 1: be when the top land starts to slow, you have 553 00:32:11,240 --> 00:32:14,560 Speaker 1: to basically hit the brakes on content spending. But we 554 00:32:14,600 --> 00:32:16,960 Speaker 1: don't see that anywhere at the moment. Obviously, it just 555 00:32:17,320 --> 00:32:20,080 Speaker 1: continuing to go up like crazy, and uh, you know 556 00:32:20,080 --> 00:32:21,920 Speaker 1: it's gonna get it even worse. Now with Disney coming 557 00:32:21,960 --> 00:32:24,239 Speaker 1: to Marketplace and all these other streaming services. So just 558 00:32:24,760 --> 00:32:27,400 Speaker 1: before I know, so Disney, you to let you know 559 00:32:27,440 --> 00:32:29,600 Speaker 1: with what we have in our model, we think Disney 560 00:32:29,640 --> 00:32:33,000 Speaker 1: is gonna lose in this current year four point six 561 00:32:33,000 --> 00:32:36,000 Speaker 1: billion dollars in FIST year twenty on streaming and that's 562 00:32:36,040 --> 00:32:39,080 Speaker 1: part of their guys six billion dollars. Yes, she just 563 00:32:39,120 --> 00:32:42,600 Speaker 1: figured it out. You're dressed like Connor Roy. I mean 564 00:32:43,200 --> 00:32:46,760 Speaker 1: he is you set the casual thing going. Yeah, you know, 565 00:32:46,960 --> 00:32:50,840 Speaker 1: since they left Sanford Bernstein, they just the whole mode 566 00:32:50,920 --> 00:32:53,200 Speaker 1: is changed. I mean he and Craig used to be 567 00:32:53,240 --> 00:32:56,080 Speaker 1: buttoned down, sharp, you could be here presentable, you know. 568 00:32:56,320 --> 00:33:00,360 Speaker 1: Now it's like succession like that's in Senior Ann's joining 569 00:33:00,440 --> 00:33:02,960 Speaker 1: us here in studio. We appreciate him coming in and 570 00:33:02,960 --> 00:33:05,400 Speaker 1: giving us his time. Lots to talk about in this 571 00:33:05,480 --> 00:33:09,040 Speaker 1: media space. Lots of convergence, lots of consolidation, lots of 572 00:33:09,120 --> 00:33:12,960 Speaker 1: big companies getting even bigger, lots of bills that Tom 573 00:33:13,080 --> 00:33:15,680 Speaker 1: is paying for various kids around the world. He does 574 00:33:15,720 --> 00:33:18,120 Speaker 1: not even sure what he's paying for, but he's writing 575 00:33:18,120 --> 00:33:23,320 Speaker 1: the checks. Nonetheless, Thanks for listening to the Bloomberg Surveillance Podcast. 576 00:33:23,680 --> 00:33:28,720 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 577 00:33:28,760 --> 00:33:33,080 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 578 00:33:33,200 --> 00:33:37,080 Speaker 1: Keene before the podcast. You can always catch us worldwide. 579 00:33:37,520 --> 00:33:38,600 Speaker 1: I'm Bloomberg Radio