WEBVTT - Western Asset Adding Junk Bonds, Local Currency EM: Buchanan 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.240 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. As 0:00:33.440 --> 0:00:38.320 stock traders freaked out and the Dow, SMP and NASDAC 0:00:38.400 --> 0:00:42.559 all plummeted earlier this week, credit markets remained a picture 0:00:42.680 --> 0:00:47.840 of tranquility, or almost so. The big question here is 0:00:47.840 --> 0:00:50.800 is that truly a reflection of not a lot of 0:00:50.920 --> 0:00:54.400 risk and steady as she goes? Or is this something 0:00:54.520 --> 0:00:57.360 else and perhaps the calm before a storm? And here 0:00:57.400 --> 0:01:00.240 to help us understand that is Mike buck And And 0:01:00.280 --> 0:01:03.520 he's Deputy Chief Investment Officer at Western Asset Management Co, 0:01:03.840 --> 0:01:07.240 an independent affiliate of Like Mason, which overseas four hundred 0:01:07.280 --> 0:01:09.839 and thirty three billion dollars uh and he is based 0:01:09.880 --> 0:01:12.600 in Pasadena, California, where he comes to us from. Mike, 0:01:12.600 --> 0:01:14.800 thank you so much for being with us. What's your 0:01:14.800 --> 0:01:17.959 take here? Because we have seen a bit of spread widening, 0:01:18.000 --> 0:01:21.520 particularly in high yield credit UH and yields are rising. 0:01:21.600 --> 0:01:25.120 You are seeing some high yield bond deals getting pulled. 0:01:26.120 --> 0:01:28.520 Are we Is this sort of the precipice before a 0:01:28.560 --> 0:01:34.040 bigger weakness AILSA and thanks for having me on UM. Yeah. 0:01:34.240 --> 0:01:37.399 I think our view is that, no, it's not the 0:01:37.440 --> 0:01:41.160 precipice before some more meaningful fall. In fact, you know, 0:01:41.200 --> 0:01:44.360 as we were watching all this volatility unfolding the equity 0:01:44.440 --> 0:01:49.200 markets UH one, we maintained that it didn't seem like 0:01:49.240 --> 0:01:52.080 this was a fundamental pullback. We couldn't find any real 0:01:52.200 --> 0:01:55.600 evidence that, you know, fundamentals were the catalyst for what 0:01:55.680 --> 0:01:59.040 was happening. It appeared to be technical. I think when 0:01:59.080 --> 0:02:03.600 we got more clarity on the short ball funds and 0:02:03.600 --> 0:02:06.600 how they were playing out in the market, it became 0:02:06.640 --> 0:02:10.040 a little more clear what was driving that volatility. And 0:02:10.080 --> 0:02:13.000 we came in yesterday morning really hoping to put some 0:02:13.040 --> 0:02:16.280 money to work at UH meaningfully cheaper levels, and as 0:02:16.280 --> 0:02:19.160 you pointed out in your introduction, didn't quite see that. 0:02:19.200 --> 0:02:22.000 But we have seen some some weekending in price and 0:02:22.000 --> 0:02:24.600 I think that's just creating a better opportunity in a 0:02:24.600 --> 0:02:27.000 lot of these spread markets. So what are you buying 0:02:27.080 --> 0:02:31.040 right now? Well, we're adding to high yield, and you know, 0:02:31.120 --> 0:02:34.680 high yield still at you know, three d and sixty 0:02:34.760 --> 0:02:37.400 basis points over if you look at just the generic index, 0:02:37.480 --> 0:02:41.720 that's that's almost forty basis points wider UH than where 0:02:41.760 --> 0:02:44.720 we were towards the end of January. And you know, 0:02:45.000 --> 0:02:48.400 as you pointed out with with overall rates moving higher, 0:02:48.720 --> 0:02:51.200 you know, that gets you to north of six percent. 0:02:51.520 --> 0:02:53.720 And you know, as much as we wanted it to 0:02:53.760 --> 0:02:56.160 go a little cheaper to add, we still think that's 0:02:57.040 --> 0:02:59.960 a very good opportunity. We look at the fundamental backdrop 0:03:00.040 --> 0:03:05.000 and seem very supportive credit fundamentals. UH fourth quarter earnings 0:03:05.000 --> 0:03:08.880 are coming in very strong h so just a lot 0:03:08.919 --> 0:03:12.919 of a lot of fundamental support for adding to that position. 0:03:13.240 --> 0:03:18.119 UM also emerging markets. We think the real meaningful opportunity 0:03:18.120 --> 0:03:22.120 and spread markets right now is in local currency emerging markets. 0:03:22.120 --> 0:03:26.119 And again didn't really see you know, a meaningful sell off, 0:03:26.240 --> 0:03:29.160 but UM saw a little bit of a backup, and 0:03:29.600 --> 0:03:32.680 I think that just made it more attractive. Mike. If 0:03:32.760 --> 0:03:37.160 yields increase, if interest rates increase, won't that put even 0:03:37.200 --> 0:03:39.760 greater pressure on companies that have to go to the 0:03:39.840 --> 0:03:44.520 high yield bond market. In order to finance their businesses. Yeah, 0:03:44.560 --> 0:03:47.800 I think at the margin, that's that's accurate. Um. You know, 0:03:47.880 --> 0:03:50.600 you do have a lot of below investment grade companies 0:03:50.640 --> 0:03:53.760 that have accessed the floating rate market, and now that 0:03:54.520 --> 0:03:59.000 short term rates libraar is essentially above all those library floors. 0:03:59.520 --> 0:04:02.640 Every pick up in lieb or translates into you know, 0:04:02.720 --> 0:04:05.920 higher interest costs for these companies. So you do have 0:04:06.000 --> 0:04:09.240 to have a view on ultimately where you think rates 0:04:09.240 --> 0:04:12.680 are going. Our view right now is that, um. You know, 0:04:12.680 --> 0:04:15.040 if you look at what's priced into the market, you know, 0:04:15.120 --> 0:04:18.400 three hikes this year, two hikes next year, that pretty 0:04:18.480 --> 0:04:23.240 much gets you to the FEDS target their their terminal rate. Um. 0:04:23.279 --> 0:04:25.640 So we we look at where rates are currently and 0:04:26.200 --> 0:04:30.839 we think based on growth, based on inflation, Uh, there's 0:04:30.880 --> 0:04:36.479 not a significant risk of meaningfully higher rates. Mike. I 0:04:36.520 --> 0:04:38.760 want to talk about liquidity because you said that you 0:04:38.760 --> 0:04:42.040 were hoping, you came in yesterday morning hoping to buy 0:04:42.160 --> 0:04:47.200 some discounted bonds. Uh, there weren't that many opportunities because 0:04:47.200 --> 0:04:49.719 people weren't necessarily selling them at such a big discounts. 0:04:49.720 --> 0:04:53.240 And I'm wondering, you know, how concerned are you that 0:04:53.320 --> 0:04:56.200 you really cannot move very big blocks of bonds. And 0:04:56.240 --> 0:04:59.279 I know liquidity worries were all in vogue a couple 0:04:59.320 --> 0:05:01.920 of years ago that people stopped caring, but I'm starting 0:05:01.920 --> 0:05:04.080 to hear about it again around the margins. What's your 0:05:04.080 --> 0:05:06.880 take on this, Well, I do think you have to 0:05:06.920 --> 0:05:10.760 be very sensitive to um, you know, liquidity in the market, 0:05:10.920 --> 0:05:14.360 and it's just a byproduct of of one the growth 0:05:14.520 --> 0:05:18.599 in the corporate credit market, uh, combined with the amount 0:05:18.640 --> 0:05:22.479 of risk capital that dealers have to commit to their 0:05:22.520 --> 0:05:25.680 their inventory, and that was typically you know, the first 0:05:25.760 --> 0:05:29.800 layer of of liquidity UM. And and just that dynamic 0:05:29.839 --> 0:05:33.040 alone tells you there's less liquidity in this market, and 0:05:33.080 --> 0:05:36.000 we operate with that assumption. When we're pricing out a bond. 0:05:36.400 --> 0:05:38.400 We want to make sure that that we put a 0:05:38.440 --> 0:05:41.599 little more of a liquidity premium than we did, you know, 0:05:41.680 --> 0:05:45.240 let's say five or or ten years ago. UM. That 0:05:45.360 --> 0:05:48.800 being said, Uh, what we found yesterday, and you know, 0:05:48.839 --> 0:05:50.560 you only know this when you're kind of out in 0:05:50.600 --> 0:05:54.320 the market and you're you're testing levels, is that UM, 0:05:54.360 --> 0:05:58.400 the bids were actually very deep in the credit markets 0:05:58.400 --> 0:06:01.679 and the e M markets. UM. You know, it seemed 0:06:01.720 --> 0:06:04.920 like a lot of people had the same view or 0:06:05.160 --> 0:06:07.080 or or we're trying to do the same thing that 0:06:07.120 --> 0:06:10.440 we were, which was put money to work at more 0:06:10.440 --> 0:06:13.640 attractive levels. So I do think if if, if we 0:06:13.680 --> 0:06:16.840 had wanted to sell that, um, the bids were there, 0:06:16.960 --> 0:06:19.040 albeit at maybe at lower prices, and we would have 0:06:19.080 --> 0:06:22.000 been able to move substantial size. But to me, it 0:06:22.080 --> 0:06:27.159 seemed like more more investment professionals were lining up on 0:06:27.200 --> 0:06:29.760 the bidside, wanting to be buyers at lower levels as 0:06:29.760 --> 0:06:33.039 opposed to wanting to sell it at higher levels. Where's 0:06:33.040 --> 0:06:35.839 the biggest opportunity left in credit? I mean specific sectors 0:06:35.920 --> 0:06:40.200 or even companies. Yeah, I mean I think there's there's 0:06:40.240 --> 0:06:43.560 still a few within developed market credit. We do like 0:06:43.600 --> 0:06:45.400 the high yield space, and I know that maybe a 0:06:45.400 --> 0:06:49.679 little bit of a contrarian view, but our assessment really 0:06:49.720 --> 0:06:55.760 is that ultimately fundamentals drive valuations, and fundamentals we see improving, 0:06:55.839 --> 0:07:01.080 we see UH leverage metrics going lower, we see UH, 0:07:01.560 --> 0:07:04.599 we see cash flow generation improving. We think tax reform 0:07:04.680 --> 0:07:06.760 is going to be a little bit of an added 0:07:06.760 --> 0:07:09.520 tail wind. And like I said earlier, at three sixty 0:07:09.560 --> 0:07:13.120 basis points over treasuries, I think, um, that's that's that's 0:07:13.120 --> 0:07:15.640 a reasonable. I mean not not a table pounder, but 0:07:15.720 --> 0:07:20.120 a reasonable relative value anomaly. UM, I do think in 0:07:20.480 --> 0:07:23.240 it within high yield. Uh. You know, you can focus 0:07:23.280 --> 0:07:27.960 on some of the strong double bees that have a 0:07:27.960 --> 0:07:30.600 a reasonable chance to move to investment grade. I think 0:07:30.720 --> 0:07:34.880 in names like Freeport, McMoRan, H. Williams. You know, those 0:07:34.880 --> 0:07:37.280 are names that UM, we think can definitely get to 0:07:37.360 --> 0:07:39.280 I G. And if they do, you've you've got probably 0:07:39.320 --> 0:07:42.040 another thirty to forty basis points of spread tightening there. 0:07:42.280 --> 0:07:44.120 I just want to give you about twenty seconds that 0:07:44.160 --> 0:07:47.400 you talked about emerging markets. What about Argentina, the Republic 0:07:47.400 --> 0:07:52.160 of Argentina. We like Argentina. We think that UM, you 0:07:52.200 --> 0:07:54.960 know that you're just you're starting with such a high 0:07:55.040 --> 0:07:59.760 nominal rate almost fifteen percent on their local currency tenure. 0:08:00.440 --> 0:08:03.760 UM that even when you factor in the inflation, and 0:08:03.800 --> 0:08:07.400 by the way, we think inflation is trending lower there. UM, 0:08:07.520 --> 0:08:10.280 you look at the real yield and that looks very 0:08:10.320 --> 0:08:12.720 compelling when you compare it to the real yields that 0:08:12.720 --> 0:08:16.160 you're getting in most developed markets. Thanks very much for 0:08:16.200 --> 0:08:19.600 being with us. Mike Buchanan is Deputy Chief Investment Officer 0:08:19.920 --> 0:08:23.560 for Western Asset Management. They are an independent affiliate of 0:08:23.800 --> 0:08:26.760 leg Mason helping to manage more than four hundred and 0:08:26.840 --> 0:08:45.640 thirty billion dollars. Joining us from Pasadena, California. Tesla a 0:08:45.720 --> 0:08:50.400 company to surely draw some passionate responses, whether people are 0:08:50.480 --> 0:08:52.760 afford it or against it. Here to talk about what 0:08:52.800 --> 0:08:55.720 to expect for the earnings which we should get after 0:08:55.800 --> 0:09:00.000 the bell. Today's Alan Boum Auto Analysts and principle Aboum 0:09:00.040 --> 0:09:02.719 and Associates. Alan, thank you so much for being with us. 0:09:03.400 --> 0:09:05.880 How much are we really going to learn about? The 0:09:05.920 --> 0:09:08.680 burning question? And no, it is not the space rocket 0:09:08.720 --> 0:09:12.959 that was launched yesterday. It is can Tesla actually produce 0:09:13.080 --> 0:09:16.960 the cars they have promised? Yeah, I mean the answer 0:09:17.080 --> 0:09:20.960 is they can. The obvious question is when, uh and 0:09:21.080 --> 0:09:24.400 so uh you know, the the idea of are they 0:09:24.400 --> 0:09:26.400 going to hit their goals at the end of this 0:09:26.600 --> 0:09:29.679 quarter and at the end of the next quarter. Each 0:09:29.679 --> 0:09:33.280 of those have been put off several times and obviously 0:09:33.320 --> 0:09:37.160 that's the burning question as you as you mentioned for 0:09:37.360 --> 0:09:43.280 the earnings called this afternoon because this is obviously a 0:09:43.360 --> 0:09:46.439 future stock, you know, it's based on where this company 0:09:46.559 --> 0:09:51.120 is going. Um, and so that's the issue, ar if, 0:09:51.160 --> 0:09:53.679 that's the issue. Is it likely that they're going to 0:09:53.760 --> 0:09:57.079 announce any management changes at Tesla because there has been 0:09:57.080 --> 0:10:00.720 a rotating senior executive panel when it comes to actually 0:10:00.800 --> 0:10:04.520 producing this model three. Yeah, there have been a lot 0:10:04.520 --> 0:10:07.520 of changes, and actually I'm more interested in this probably 0:10:07.520 --> 0:10:11.120 wouldn't get much coverage in the in the call today. 0:10:11.760 --> 0:10:15.679 On the operational side. Uh, you know if some quarters 0:10:15.720 --> 0:10:18.880 there even a year or two ago. Uh, Tesla brought 0:10:18.920 --> 0:10:23.959 in some manufacturing experts. Uh that got them uh some 0:10:24.120 --> 0:10:28.120 progress obviously, but those are the kinds of things that 0:10:28.120 --> 0:10:31.560 that they need to do. UM. I've always said that 0:10:31.640 --> 0:10:36.520 Tesla understood, unlike a lot of it startup EV competitors, UH, 0:10:36.640 --> 0:10:40.080 that it was an auto company. UM. And it has 0:10:40.640 --> 0:10:43.880 over a long period of time for AUDI in key 0:10:43.920 --> 0:10:47.560 technical professionals. Uh, there's obviously been a fair amount of 0:10:47.600 --> 0:10:51.319 churn there. Um. And uh what they're trying to do 0:10:51.480 --> 0:10:54.760 is obviously very difficult. So they need that kind of 0:10:54.800 --> 0:10:59.920 help and uh those kind of questions need to be answered. Allan, 0:11:00.120 --> 0:11:05.440 I don't understand how anyone tries to actually value these shares. 0:11:05.760 --> 0:11:09.360 I should just point out that the broad SMP index 0:11:09.480 --> 0:11:12.760 is up lesson two percent, Tesla shares up about ten 0:11:12.800 --> 0:11:15.280 and a half percent just so far this year, following 0:11:15.280 --> 0:11:21.560 a forty game last year. How are you evaluating this company? Well, 0:11:21.720 --> 0:11:25.959 clearly you can't do it on the fundamental This is 0:11:26.000 --> 0:11:30.440 a momentum stock. This is an emotional stock. I'm not 0:11:30.480 --> 0:11:35.200 gonna sit here and say, well, based on the expectation 0:11:35.280 --> 0:11:40.160 of failed production profits, we're gonna see this. Um. The 0:11:40.240 --> 0:11:43.960 market is determining this stock. And obviously that's the ridiculous 0:11:44.040 --> 0:11:49.160 and true statement. Um. But the point being is how 0:11:49.760 --> 0:11:54.040 can they move forward? As obviously they continue to miss 0:11:54.679 --> 0:11:57.600 the targets. Now, the flip side of that is the 0:11:57.760 --> 0:12:01.400 Model three is different, um. And what I mean by 0:12:01.480 --> 0:12:04.839 that is, Um, you know, the bolt is out there, 0:12:05.120 --> 0:12:07.520 the leaf has been redone and we're gonna have a 0:12:07.520 --> 0:12:10.360 second version of it later this year. And I would 0:12:10.480 --> 0:12:14.960 argue that just doesn't matter because the Model three, the 0:12:15.040 --> 0:12:18.240 Model Esque, the Model X, they are viewed in a 0:12:18.320 --> 0:12:23.400 different spectrum than those vehicles. Now, what does matter, perhaps 0:12:23.880 --> 0:12:29.040 is as Audi as Poors, as BMW, uh as uh 0:12:29.080 --> 0:12:33.440 as Daimler start to put out models. Um. And yes 0:12:33.640 --> 0:12:37.080 those are luxury brands, and Tesla is trying to move 0:12:37.520 --> 0:12:40.720 down market, if you will, But it's still viewed in 0:12:40.880 --> 0:12:44.480 that luxury mill you and so the that has the 0:12:44.520 --> 0:12:47.560 potential to be a problem. I just don't see the 0:12:47.600 --> 0:12:51.480 bolts or the leaf uh as as a competitor. Really, 0:12:51.480 --> 0:12:56.320 why not, because it's because of the way the product 0:12:56.440 --> 0:12:59.959 is viewed. What Tesla has done is not only did 0:13:00.040 --> 0:13:03.920 they create an electric car, obviously and and but they 0:13:04.040 --> 0:13:10.360 created a good car from a from a non uh, 0:13:10.520 --> 0:13:14.720 environmental perspective. It was is fun to drive the S 0:13:14.760 --> 0:13:17.920 and the X, the three. It's obviously going to be different, 0:13:18.480 --> 0:13:23.040 but it is still viewed within that that genre of 0:13:23.080 --> 0:13:27.160 being Okay, this is something special and uh. Of course, 0:13:27.200 --> 0:13:29.199 you know, if you can't make the car, or if 0:13:29.200 --> 0:13:32.480 the quality isn't awful, then you're gonna lose some of 0:13:32.480 --> 0:13:35.960 that specialness if you will. But I just see it 0:13:35.960 --> 0:13:40.280 as still being has the opportunity to be viewed in 0:13:40.360 --> 0:13:43.800 that positive light. Thank you very much. Alan Boum, auto 0:13:43.840 --> 0:13:47.240 analyst and a principle at Boum and Associates, giving us 0:13:47.280 --> 0:14:04.840 a preview of Testa the shares of trunk they are 0:14:04.920 --> 0:14:07.960 higher right now by more than twenty six percent. After 0:14:08.040 --> 0:14:11.680 agreeing to sell the Los Angeles Times for five hundred 0:14:11.720 --> 0:14:15.120 million dollars, this begins a new chapter in the newspapers 0:14:15.160 --> 0:14:18.120 one hundred and thirty six year old history. Here to 0:14:18.160 --> 0:14:20.920 tell us about this another media events his Porter bib 0:14:20.960 --> 0:14:24.040 managing partner Media Tech Capital Partners, and he can be 0:14:24.080 --> 0:14:28.200 followed on Twitter at Porter three. Al Right, Porter, what 0:14:28.240 --> 0:14:32.600 do you make of this sale to a local investor? And? Um, 0:14:32.640 --> 0:14:35.760 the future of the San Diego Union Tribune and the 0:14:35.880 --> 0:14:38.440 l A Times, Well, the l A Times and and 0:14:38.480 --> 0:14:42.320 perhaps the San Diego Tribune, We're both going to implode 0:14:42.480 --> 0:14:46.080 over the dysfunctional Trunk management. And so this is a 0:14:46.160 --> 0:14:49.720 lifesaver for the papers and for the community, and having 0:14:49.760 --> 0:14:54.280 a local owner is a huge benefit. The real issue, though, 0:14:54.480 --> 0:14:58.480 is the price. Half of half a billion dollars is 0:14:58.520 --> 0:15:01.520 twice what Jeff Be's was paid for the Washington Post. 0:15:01.600 --> 0:15:06.760 This is cash twenty in cash and pension liabilities. Yeah, 0:15:06.840 --> 0:15:11.560 but he's a the buyer is a shareholder, major shareholder 0:15:11.600 --> 0:15:15.240 in Trunk. So, Uh, he had to have some insight 0:15:15.360 --> 0:15:18.360 into what he was doing. Um, I think if he, 0:15:18.560 --> 0:15:21.760 if he is smart, and he lets the editorial and 0:15:22.160 --> 0:15:26.960 management staff of the two papers, uh do their thing. Uh, 0:15:27.000 --> 0:15:30.320 there's a great opportunity because clearly the l A Times 0:15:30.400 --> 0:15:33.120 is one of the three great newspapers along with the 0:15:33.120 --> 0:15:35.640 Washington Post in the New York Times that will survive 0:15:35.720 --> 0:15:38.320 in the United States and globally. I think there's a 0:15:38.320 --> 0:15:40.760 big question. And we've actually seen the Washington Post in 0:15:40.760 --> 0:15:44.880 New York Times gain traction with getting subscribers actually pay 0:15:45.920 --> 0:15:48.800 digital subscribed. That's what I'm saying, digital subscribers. I should 0:15:48.800 --> 0:15:51.080 have said the digital parks. But but you know, the 0:15:51.120 --> 0:15:53.800 actually pay for the content and the l a times 0:15:54.120 --> 0:15:57.800 UH needs to provide. Yeah, they're they're offering a dollar 0:15:57.880 --> 0:16:01.920 ninety nine for six months subscription. It's not that's not 0:16:02.000 --> 0:16:07.800 one but one dollar nine. But with respect to subscriptions, 0:16:07.800 --> 0:16:09.840 we also got results from Disney last night, and I 0:16:09.840 --> 0:16:12.120 thought that it was interesting what they're doing with ESPN, 0:16:12.920 --> 0:16:18.080 looking to create some kind of UH special service that 0:16:18.200 --> 0:16:22.040 you can pay for almost five dollars a month for. 0:16:22.320 --> 0:16:25.680 What is this and does that make ESPN more valuable 0:16:25.800 --> 0:16:29.520 or is this just more noise? Well, ESPN, like everything 0:16:29.560 --> 0:16:35.360 else on cable UH and and traditional television distribution UM, 0:16:36.600 --> 0:16:41.120 the legendary media that we used to know UM, has 0:16:41.160 --> 0:16:44.480 been losing customers. And when they lose customers or viewers 0:16:44.600 --> 0:16:48.560 in this case, they lose advertising revenue. So the Disney 0:16:48.800 --> 0:16:52.680 is adopting over the top two revenue stream. They want 0:16:53.240 --> 0:16:56.520 subscription money and they want advertising, and they will do 0:16:56.560 --> 0:16:59.880 that because an awful lot of people subscribe to cable 0:17:00.160 --> 0:17:04.080 right now for two reasons. HBO and ESPN and all 0:17:04.080 --> 0:17:07.679 the live sports that ESPN can provide on cable. And 0:17:07.720 --> 0:17:12.520 if if you can save eight ninety d plus dollars 0:17:13.080 --> 0:17:15.520 on your cable subscription and spend only five or ten 0:17:15.600 --> 0:17:20.520 or fifteen for HBO and for ESPN, your way ahead 0:17:20.520 --> 0:17:22.879 of the game. And that they're targeting the millennials who 0:17:22.920 --> 0:17:27.760 are already over the top and not they're not cord cutters, 0:17:27.800 --> 0:17:31.120 their cord nevers. And that's the future. Tell me about 0:17:31.119 --> 0:17:33.440 the future of Viacom. They're going to be releasing their 0:17:33.440 --> 0:17:37.960 results tomorrow before the market opens. Uh, tell me about 0:17:38.000 --> 0:17:42.200 the challenges that Viacom faces and the h I guess 0:17:42.240 --> 0:17:44.439 it's a maybe they could even make it into a movie. 0:17:44.560 --> 0:17:49.000 Viacom and CBS and the red Stone Family that that 0:17:49.000 --> 0:17:52.680 that's something Viacom could do, because Paramount could use some 0:17:52.680 --> 0:17:56.200 some new down in their their film side. I think 0:17:56.280 --> 0:17:58.800 we're not in an apocalypse, but we're in a sea 0:17:58.920 --> 0:18:02.560 change train in sition period two thousand and eighteen is 0:18:02.560 --> 0:18:05.800 going to go down as as the end of legacy 0:18:05.880 --> 0:18:10.240 media and the real beginning of digital media. And Vehicom 0:18:10.440 --> 0:18:14.480 has to combine with CBS. Not for any other reason 0:18:14.520 --> 0:18:17.920 than that's what Sherry Redstone really wants to do. She's 0:18:17.920 --> 0:18:22.240 put her foot down. Less moonves is is the stumbling 0:18:22.280 --> 0:18:26.160 block because he wants unfettered, absolute control of the combined 0:18:26.160 --> 0:18:28.920 companies or he won't play. He did try to buy 0:18:29.000 --> 0:18:32.920 CBS three years ago and he couldn't persuade the Ridstones 0:18:33.000 --> 0:18:36.080 to sell it to him. So he may or may 0:18:36.080 --> 0:18:38.719 not be part of the picture going forward. But what 0:18:38.920 --> 0:18:42.760 is is the next shoe to drop is Verizon steps 0:18:42.760 --> 0:18:46.960 in and buys the combined Vehcom and CBS. And Sherry 0:18:47.000 --> 0:18:52.320 knows that if CBS, which is Verizon's real target, um doesn't. 0:18:53.119 --> 0:18:57.000 If CBS gets bought by Verizon, she'll never get rid 0:18:57.040 --> 0:19:00.480 of Vehicom and it'll just die. I want to I 0:19:00.520 --> 0:19:02.560 want to pick up on something that you said digital 0:19:02.680 --> 0:19:05.440 media they need to transform to that. What is that 0:19:05.520 --> 0:19:08.240 and what is the uh sort of premier model of 0:19:08.240 --> 0:19:12.600 who's doing it right? Well, Disney has a good start, 0:19:12.760 --> 0:19:16.440 but you have to give Netflix as the pioneer. They 0:19:16.520 --> 0:19:19.200 have done it better than anybody. They've got a ninety 0:19:19.240 --> 0:19:22.520 million subscribers in the United States right now. They've kept 0:19:22.560 --> 0:19:26.320 the price low. If you remember three or four years ago, 0:19:26.680 --> 0:19:31.199 Netflix tried to increase the monthly subscription and the bottom 0:19:31.240 --> 0:19:36.119 fell out of their subscriber base. So keeping the price low. Uh, 0:19:36.160 --> 0:19:39.320 That's that's half the secret. The other secret is having 0:19:39.640 --> 0:19:42.800 terrific content and lots of it and refreshing the content. 0:19:42.840 --> 0:19:46.480 That's why Netflix is spending eight billion dollars creating new 0:19:46.560 --> 0:19:50.760 content this year. Twenty one century. Fox is going to 0:19:50.840 --> 0:19:53.840 report their results after the market closes today. What are 0:19:53.840 --> 0:19:58.600 your thoughts about the Murdoch empire. Well, Uh, Rupert has 0:19:58.680 --> 0:20:02.560 one last team and that's to be the largest shareholder 0:20:02.560 --> 0:20:06.359 in Disney, which he will be um he and his 0:20:06.440 --> 0:20:09.800 family and his and his family trust when the Disney 0:20:10.080 --> 0:20:15.040 Fox deal billion dollar deal, that's right, and and what 0:20:15.160 --> 0:20:17.080 he will be left with is what he what he 0:20:17.119 --> 0:20:20.560 knows and loves, which is news and sports. And by 0:20:20.600 --> 0:20:24.720 the way, he's still trying to get control of Sky 0:20:24.840 --> 0:20:28.960 in the UK and the government that the parliamentary regulators 0:20:28.960 --> 0:20:31.960 have said there's no way, Jose. They want Disney to 0:20:32.000 --> 0:20:35.160 buy those assets and to own all of Sky, which 0:20:35.200 --> 0:20:37.600 Disney wants to do as well. Bob Iger mentioned that 0:20:37.680 --> 0:20:41.359 in his earning school yesterday, So just a real quick 0:20:41.560 --> 0:20:44.760 what's the m and a deal that hasn't happened yet 0:20:45.000 --> 0:20:47.520 that we're going to be talking about later this year. 0:20:47.840 --> 0:20:52.600 The real issue is what happens to the cable companies, 0:20:53.600 --> 0:20:57.159 because they're going to lose the cable business over the 0:20:57.200 --> 0:21:01.560 next five years. The flips eye of that whole story, though, 0:21:01.760 --> 0:21:04.840 is that they are the largest Internet service providers and 0:21:04.880 --> 0:21:09.960 they will get more and more entrenched in providing a faster, better, 0:21:10.240 --> 0:21:15.679 and unfortunately more expensive access to the Internet. So in 0:21:15.720 --> 0:21:19.199 other words, Verizon and others other Verizon already has that 0:21:19.320 --> 0:21:24.080 Comcast Charter spectrum. The uh look, look what all Tiss 0:21:24.119 --> 0:21:25.960 has come up with. This is the future of the 0:21:26.000 --> 0:21:30.920 cable industry. They have eliminated the cable box. They've got 0:21:32.000 --> 0:21:35.679 voice controlled. It've eliminated the remote control, so that you 0:21:35.720 --> 0:21:39.120 can just say channel five verbally the way you would 0:21:39.119 --> 0:21:42.840 to Alexa or Google Assistant, and that changes the channel 0:21:42.840 --> 0:21:46.040 on your TV. That's the future of of the cable industry. 0:21:46.040 --> 0:21:49.879 But it's really all targeted at Internet and over the top. Porter, 0:21:49.920 --> 0:21:51.560 bb thank you so much for being with us. Always 0:21:51.560 --> 0:21:55.280 a pleasure. Porter, managing partner at Media Tech Capital Partners 0:21:55.320 --> 0:21:58.040 in New York, joining us here in our eleven three 0:21:58.080 --> 0:22:14.879 oh studios. The shares of Win Resorts are hired by 0:22:14.920 --> 0:22:20.040 nearly ten percent. The former chief executive of the company, 0:22:20.160 --> 0:22:23.359 Steven Wynn, he owns a little bit more than eleven 0:22:23.359 --> 0:22:27.560 and a half percent. Former wife Lane Win owning about 0:22:27.640 --> 0:22:30.240 nine and a quarter percent. What's next for the company 0:22:30.240 --> 0:22:33.040 that has his name on the door? Here to tell 0:22:33.080 --> 0:22:36.159 us more? Brian Eggar are senior Gaming and Lodging analyst 0:22:36.359 --> 0:22:40.200 for a Bloomberg Intelligence Brian, thanks very much for being 0:22:40.520 --> 0:22:42.800 with us in coming in so all right, give us 0:22:42.800 --> 0:22:46.359 the details about Win Resorts. When you've got someone whose 0:22:46.400 --> 0:22:51.280 name is literally on the door uh and owns almost 0:22:51.320 --> 0:22:54.639 twelve percent of the company, and he's no longer going 0:22:54.680 --> 0:22:58.520 to be running it's next. So the successor CEO, a 0:22:58.520 --> 0:23:01.320 guy named Matt Maddox, had previously been president. He was 0:23:01.440 --> 0:23:04.960 chief financial officer before that. UH, fairly well known and 0:23:05.000 --> 0:23:08.840 well respected by the street. Clearly not known for the 0:23:08.880 --> 0:23:12.840 developing of all the UH of all the famous casinos 0:23:12.880 --> 0:23:14.840 for which Win is known going back to the days 0:23:14.880 --> 0:23:18.000 of the gold Nugget and mirage. Nevertheless, I think there 0:23:18.080 --> 0:23:20.639 was some expectation that we'd see a succession here, given 0:23:21.080 --> 0:23:25.159 the allegations that came out on February and the subsequent 0:23:25.400 --> 0:23:28.360 scrutiny by both the Bord of Directors and Win itself 0:23:28.480 --> 0:23:33.800 and several gaming regulators. So not entirely unexpected. Not expected, 0:23:33.880 --> 0:23:36.200 but a lot of people were talking about the cult 0:23:36.200 --> 0:23:39.679 of personality amid a lot of the allegations, and you 0:23:39.680 --> 0:23:42.920 know he had that, so you know, will there be 0:23:43.000 --> 0:23:47.440 something lost without that? I think you could argue there 0:23:47.560 --> 0:23:50.520 is a win premium associated with the valuation and with 0:23:50.560 --> 0:23:53.800 the stock having retreated from the low two hundreds before 0:23:53.840 --> 0:23:57.240 this scandal broke two more recently mid one sixties today 0:23:57.480 --> 0:24:00.480 back to the one seventies um much of at has 0:24:00.480 --> 0:24:02.400 been taken to account of the way we do the math. 0:24:02.840 --> 0:24:06.399 If you lob one multiple point off of the valuation 0:24:06.480 --> 0:24:09.800 of the Ibadat cash flow in either Vegas or Macau, 0:24:09.880 --> 0:24:12.640 it reduces the value of when by anywhere from three 0:24:12.640 --> 0:24:15.080 percent to five percent. Much of that has happened. The 0:24:15.119 --> 0:24:19.320 reason the stock is up today is with the resolution 0:24:19.640 --> 0:24:24.040 of succession. Uh it does away some concerns that regulators 0:24:24.080 --> 0:24:27.560 might have had about suitability of Mr Wynn himself and 0:24:27.720 --> 0:24:31.480 perhaps reduces the risk associated with them pursuing their midnightteen, 0:24:31.560 --> 0:24:35.119 mid twenty nineteen opening of a casino in Boston Harbor, 0:24:35.200 --> 0:24:38.520 which is a really important project for the company. Brian, 0:24:39.040 --> 0:24:44.080 why didn't the boards suspend Steve Win prior to this? Uh? 0:24:44.160 --> 0:24:46.560 This announcement? I mean, you know, when the investigation was 0:24:46.600 --> 0:24:49.520 going on, So basically the day this news broken was 0:24:50.440 --> 0:24:53.560 originally discussed in the media when Resorts set up a 0:24:53.600 --> 0:24:58.040 special committee of outside directors to investigate the allegations, parallel 0:24:58.080 --> 0:25:02.159 to the investigations being done by gaming regulators in Massachusetts 0:25:02.200 --> 0:25:04.840 as well as Nevada. Uh. And this is really the 0:25:04.880 --> 0:25:08.840 outcome of of that that process of reviewing the allegations 0:25:08.840 --> 0:25:10.719 and coming to them. But it wasn't made. If it 0:25:10.720 --> 0:25:14.520