WEBVTT - WSJ Coverage Boosted Fed 'Message' on March Hike, Reinhart Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg pm L podcast. I'm pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg pm L podcast on iTunes, 0:00:20.840 --> 0:00:29.479 SoundCloud and at Bloomberg dot com. There's been a lot 0:00:29.520 --> 0:00:32.040 of discussion about the big move that we've seen in 0:00:32.159 --> 0:00:37.640 stocks and hitting new highs today, but there's another move 0:00:37.720 --> 0:00:41.160 that I would argue has potentially even a bigger chance 0:00:41.240 --> 0:00:45.600 to affect markets on a broad level, Fed funds futures. 0:00:45.640 --> 0:00:48.240 This is a way that derivatives traders bet on when 0:00:48.280 --> 0:00:52.559 the Fed will next hike rates. The priced in probability 0:00:52.640 --> 0:00:54.760 of a March rate hike has gone from thirty six 0:00:54.800 --> 0:00:57.880 percent from the end of last week to more than 0:00:58.040 --> 0:01:01.640 eighty percent today. This is getting a lot of people's attention, 0:01:01.680 --> 0:01:06.160 including Vincent Reinhardt. He's chief economist at Standish Melon Asset Management, 0:01:06.200 --> 0:01:08.360 and we are lucky to have Vincent in the studio 0:01:08.600 --> 0:01:12.080 with us in Bloomberg eleven three oh. Vincent, why has 0:01:12.120 --> 0:01:15.120 there been such a huge move and expectations for a 0:01:15.200 --> 0:01:18.720 March rate hike because Federal Reserve officials wanted it to happen, 0:01:19.480 --> 0:01:23.520 i e. At the FED, you never surprise markets. You 0:01:23.560 --> 0:01:26.720 can't act if it isn't priced in. They are sometimes 0:01:26.720 --> 0:01:30.399 willing to disappoint markets, i e. Not act even though 0:01:30.400 --> 0:01:36.080 it's priced in. At of a probability of policy action, 0:01:36.319 --> 0:01:39.160 the March meeting was off the table. That was too 0:01:39.200 --> 0:01:41.280 much of a surprise. If you want the meeting to 0:01:41.319 --> 0:01:44.160 be live, you've got to get that probability a little higher. 0:01:44.200 --> 0:01:47.920 But I just I'm struggling with that interpretation because we 0:01:48.000 --> 0:01:51.360 did not hear definitive language out of the Federal Reserve 0:01:51.360 --> 0:01:56.480 officials who have spoken at least certainly not Friday until yesterday. 0:01:56.560 --> 0:01:59.360 Right that. We did see some yesterday, but before that 0:01:59.640 --> 0:02:01.560 the prob ability was rising. So what was it the 0:02:01.600 --> 0:02:07.480 triggered this? Yesterday? President's Dudley and Williams confirmed the rise specifically, 0:02:07.480 --> 0:02:10.200 did they say that confirmed it? They said that the 0:02:10.320 --> 0:02:13.320 meeting is live, that March is definitely on the table. 0:02:13.400 --> 0:02:19.760 John President Dudley said that the cases uh stronger I believe, 0:02:20.040 --> 0:02:23.000 and President Williams said the argument for acting in March 0:02:23.160 --> 0:02:26.360 is it makes the possibility of three more than free 0:02:26.360 --> 0:02:30.640 tightenings in two thousands seventeen possible, So they ratified the 0:02:31.000 --> 0:02:33.800 pick up in the Fed funds futures and added a 0:02:33.800 --> 0:02:37.040 bit to it. I think the move you had from 0:02:37.040 --> 0:02:39.040 the end of last week into the beginning of this 0:02:39.080 --> 0:02:43.560 week was importantly shaped by the Wall Street Journal's coverage 0:02:44.080 --> 0:02:46.799 of the minutes from the January meeting. UH there was 0:02:46.840 --> 0:02:50.920 a front page headline saying that the Federals RVs minutes 0:02:51.040 --> 0:02:56.160 showed that it was eyeing aggressive rate increases. Nobody else 0:02:56.280 --> 0:03:00.440 covering the minutes characterized it that way, not your porters 0:03:00.440 --> 0:03:03.720 on bloom at Bloomberg. It was a pretty anodyne set 0:03:04.040 --> 0:03:08.600 of descriptions of the economy and even handed. Uh. I 0:03:08.680 --> 0:03:10.560 used to sign the minutes for six or seven years. 0:03:10.639 --> 0:03:12.200 I know when you're not sending you a message, and 0:03:12.200 --> 0:03:15.160 there was no message there, But for a Wall Street 0:03:15.240 --> 0:03:20.120 Journal reporter to lean that far ahead would suggest to 0:03:20.200 --> 0:03:23.600 me they had a little help that perhaps some Federal 0:03:23.600 --> 0:03:28.240 Reserve officials suggested that markets had misinterpreted the minutes. They 0:03:28.240 --> 0:03:31.160 had to be so anodyne, and in fact, there was 0:03:31.160 --> 0:03:34.960 a message there. Well. As a professional Fed watcher, and 0:03:35.120 --> 0:03:40.680 just as you recalled a former employee of the Federal 0:03:40.680 --> 0:03:43.440 Reserve Bank of New York. You also economists for the 0:03:43.440 --> 0:03:47.120 Federal Open Market Committee. What do you make of that? 0:03:47.160 --> 0:03:50.680 How is broaden that out to just give us more 0:03:50.720 --> 0:03:54.880 detail based on your experience. So, the Federal Reserve works 0:03:54.920 --> 0:03:59.720 with markets, and it is important that uh, there are people, right, 0:03:59.760 --> 0:04:04.880 I mean, it's not an amorphous. It's a big marble, yeah, 0:04:04.920 --> 0:04:06.320 I know, and there are a lot of people in it, 0:04:06.400 --> 0:04:09.720 I would imagine. Yeah, So staff at the Federal Reserve 0:04:10.120 --> 0:04:14.000 are desirous not to be out of sync with markets. 0:04:14.000 --> 0:04:17.560 That if they are trying to convey a particular message 0:04:18.240 --> 0:04:22.400 and they don't here received correctly, they may help to 0:04:22.680 --> 0:04:26.880 nudge the ship back into the appropriate course. The fact 0:04:27.000 --> 0:04:31.279 that one Wall Street Journal reporter was different than everybody 0:04:31.320 --> 0:04:37.320 else and subsequent Federal Reserve officials told the story confirming 0:04:37.360 --> 0:04:41.159 that view makes me think that he got a little nudged. 0:04:41.800 --> 0:04:45.080 How how often did members of the Federal Reserve do 0:04:45.160 --> 0:04:48.720 this type of thing where they would go to one 0:04:48.760 --> 0:04:54.560 reporter often Hills and Wrath was formerly the reporter. How 0:04:54.600 --> 0:04:56.400 often do they sort of lean on one person to 0:04:56.480 --> 0:05:01.279 kind of get the message right. Um, so there's two 0:05:01.320 --> 0:05:04.440 different parts of the story. The one is in normally 0:05:04.480 --> 0:05:11.080 just talking with market participants UM Federal Reserve staff, both 0:05:11.120 --> 0:05:15.040 the Board and the Reserve Bank presidents would be trying 0:05:15.080 --> 0:05:17.760 to tell a consistent story, and if it was currently 0:05:17.880 --> 0:05:21.240 different than what was in markets, then they were revealing 0:05:21.279 --> 0:05:26.360 some news. Uh the outright shaping a story by going 0:05:26.400 --> 0:05:29.800 to a reporter and trying to to nudge things along. 0:05:30.000 --> 0:05:33.200 That's usually done at a higher level. All right, So 0:05:33.279 --> 0:05:36.240 now we've we've taken that into consideration. Give us your view. 0:05:36.279 --> 0:05:40.000 What will happen March? What is it? So now we 0:05:40.080 --> 0:05:45.360 got eight and ten chance of policy action priced in UM. 0:05:46.160 --> 0:05:48.720 The case isn't closed yet, even though it's a little 0:05:48.760 --> 0:05:52.919 stronger in in terms of President Dudley's view. Because Cherry 0:05:52.960 --> 0:05:55.120 Yellen speaks at the end of the week. She can 0:05:55.160 --> 0:05:57.520 take that punch bowl away if she wants. Well, what 0:05:57.560 --> 0:06:00.320 do you make of the fact that the increase shorter 0:06:00.440 --> 0:06:02.479 term rates has led to a flattening of the yield curve? 0:06:02.480 --> 0:06:04.839 In other words, the bond market seems to be suggesting 0:06:05.080 --> 0:06:07.880 that a sooner rate hike will dampen growth and remove 0:06:07.960 --> 0:06:10.359 some of the momentum that we've seen. So they're pricing 0:06:10.400 --> 0:06:13.360 in a FED mistake it's a little bit like December 0:06:13.400 --> 0:06:16.440 of last year when the FED tightening a quarter point, 0:06:16.640 --> 0:06:18.680 just a quarter points snuck in at the end of 0:06:18.680 --> 0:06:23.080 two thousand sixteen, UH seemed to vow to convey the 0:06:23.200 --> 0:06:26.320 view the FED was serious and tightening four times in 0:06:26.360 --> 0:06:30.760 two thousand sixteen. UH market participants viewed that as as 0:06:30.800 --> 0:06:35.240 inappropriate and there was a big sell off. And over 0:06:35.279 --> 0:06:39.560 the course of last year, FED guidance has been coming 0:06:39.640 --> 0:06:43.960 down closer to where markets are. Two get the idea 0:06:44.080 --> 0:06:47.000 that there may be three or four tightenings this year 0:06:47.720 --> 0:06:51.360 is pulling guidance away from where markets are and so 0:06:51.400 --> 0:06:53.760 that they're thinking they're a mistake involved. I want to 0:06:53.800 --> 0:06:56.600 thank you very much. Vincent Reinhardt joining US at chief 0:06:56.640 --> 0:07:13.240 economist Standish Melon Asset Management m FOX. I hear there 0:07:13.320 --> 0:07:15.760 was a speech last night. Did you hear anything about that? Yes, 0:07:15.800 --> 0:07:18.040 not only did I hear that there was a speech, 0:07:18.080 --> 0:07:21.160 but I watch I did watch it. Yeah. I think 0:07:21.160 --> 0:07:25.600 it was our president, President Trump speaking to Joint UH 0:07:25.760 --> 0:07:30.280 Congress yesterday. And for some impressions. Neil Dwayne is here 0:07:30.320 --> 0:07:34.000 with US global strategist for Alian's Global Investors, which has 0:07:34.040 --> 0:07:37.200 four eighty one billion dollars under management. So, Neil, what 0:07:37.240 --> 0:07:41.280 was your number one takeaway from President Trump speech? While 0:07:41.280 --> 0:07:44.640 have now watched to his inauguration speech and the one 0:07:44.720 --> 0:07:48.040 last night. My my takeaway was actually that I was 0:07:48.120 --> 0:07:50.640 quite impressed with him, maybe for the first time as 0:07:50.680 --> 0:07:55.040 an orator. I felt he pitched the gravity of the 0:07:55.080 --> 0:07:58.760 situation very well and came over as very presidential. I 0:07:58.800 --> 0:08:02.160 think as an investor that we didn't learn anymore. And 0:08:02.200 --> 0:08:04.800 I think when one saw the body language and the 0:08:04.840 --> 0:08:08.200 reactions to many of his comments in the in his speech, 0:08:08.600 --> 0:08:11.720 you could see how divided Congress is. So I think 0:08:11.760 --> 0:08:15.160 when we come to now the execution of the Trump agenda, 0:08:15.560 --> 0:08:18.440 we're going to see what gridlock looks like in in 0:08:18.720 --> 0:08:20.560 in Congress. So do you think that the rally that 0:08:20.560 --> 0:08:25.000 we're seeing today, particularly in financials, is a head fake? Well, 0:08:25.040 --> 0:08:27.200 I'm I'm very concerned that we've already had quite a 0:08:27.200 --> 0:08:30.040 strong rally. I think financials are now up since he 0:08:30.120 --> 0:08:32.960 was elected. I think we can get too carried away 0:08:33.000 --> 0:08:38.520 with the opportunities to maybe soften regulation or change the 0:08:38.720 --> 0:08:40.520 you know, the d O L rules and and and 0:08:40.559 --> 0:08:42.480 some of the things that Trump has been talking about. 0:08:42.720 --> 0:08:45.360 I don't necessarily sarily see that they are central to 0:08:45.440 --> 0:08:48.079 what he wants to achieve in terms of making America 0:08:48.160 --> 0:08:51.800 grace again. The the US financials are wealth wealth financed, 0:08:51.840 --> 0:08:54.800 their wealth structured. They work in a very competitive industries. 0:08:54.880 --> 0:08:57.240 We know with the price competition now between Fidelity and 0:08:57.240 --> 0:08:59.840 Schwab in the in the brokerage business, and I would 0:08:59.840 --> 0:09:02.480 are there's overcapacity in the banking industry, so margins are 0:09:02.480 --> 0:09:05.920 going to remain under pressure. But if people are want 0:09:05.920 --> 0:09:08.720 to borrow, at least the US banks have the capacity 0:09:08.760 --> 0:09:10.920 to lend. A lot of banks in Europe are still 0:09:11.240 --> 0:09:13.880 very financially weak and cannot create the credit that the 0:09:14.200 --> 0:09:17.080 that the economy isn't it requires. Neil, I'm wondering if 0:09:17.120 --> 0:09:18.840 you could just give people a little bit of your background, 0:09:18.920 --> 0:09:21.439 because I know that you previously were at Kleinwood Benson 0:09:21.600 --> 0:09:23.800 and that may be an old name for people to remember, 0:09:24.320 --> 0:09:28.000 and then maybe transition into telling us about China. The 0:09:28.040 --> 0:09:31.880 world isn't just all about one person. It's important. But 0:09:31.920 --> 0:09:33.160 I just want to get your thoughts because I know 0:09:33.200 --> 0:09:36.840 you've written a piece about taking advantage perhaps of what 0:09:36.960 --> 0:09:39.360 we when most people don't know about what's going on 0:09:39.400 --> 0:09:41.760 in China. Yes, I mean, I I think I've spent 0:09:41.840 --> 0:09:44.000 fourteen years working in Frankfurt, so I do feel as 0:09:44.000 --> 0:09:46.480 an Englishman I have a view on Europe which is 0:09:46.480 --> 0:09:48.800 not necessarily what you get from every Londoner who come 0:09:48.960 --> 0:09:50.559 comes across. We're going to get that view and a 0:09:50.600 --> 0:09:53.320 set okay, But I think I think actually the moment 0:09:53.320 --> 0:09:55.560 that China is very interesting because we're about to get 0:09:55.600 --> 0:09:58.800 the new government formed for the next five to ten years, 0:09:59.200 --> 0:10:01.640 and so I think for US two thousand and seventeen 0:10:01.679 --> 0:10:04.040 is going to be a year of stability, all other 0:10:04.120 --> 0:10:07.520 things being equal, and I think where President Gjing Ping 0:10:07.679 --> 0:10:10.040 goes is going to be very important to the rebalancing 0:10:10.120 --> 0:10:12.480 of China and therefore the growth prospects for for all 0:10:12.520 --> 0:10:16.080 of US global citizens. But what I would then finish 0:10:16.120 --> 0:10:18.000 by saying is, of course the unknown at this moment 0:10:18.000 --> 0:10:21.040 in time. And he was, to your opening question, very 0:10:21.120 --> 0:10:24.080 elliptical about it last night, was what is his position 0:10:24.200 --> 0:10:28.319 on China and training? Yes, President Trump, because I think 0:10:28.360 --> 0:10:30.440 there is a there is a concern that he said 0:10:30.480 --> 0:10:32.199 on day one in the White House, I'm going to 0:10:32.760 --> 0:10:36.480 accuse them of currency manipulation, and we're nowhere near that. 0:10:36.640 --> 0:10:39.840 But clearly for global investors and for the global economy. 0:10:39.920 --> 0:10:43.520 Any sign of tariffs or trade friction is going to 0:10:43.559 --> 0:10:45.800 be bad news for US. I want to do get 0:10:45.880 --> 0:10:49.120 to Europe. There was a story on the Bloomberg today 0:10:49.200 --> 0:10:54.200 about n HSBC study showing that a good amount of 0:10:54.240 --> 0:10:58.360 money is flowing out of US equities and into European stocks. 0:10:58.400 --> 0:11:00.760 Are you seeing this? Was seeing it at the at 0:11:00.800 --> 0:11:03.400 the margin. But I think when I travel around the world, 0:11:03.400 --> 0:11:06.200 I think many investors have known they've got it right 0:11:06.240 --> 0:11:09.400 by being along the US, including many US investors. But 0:11:09.440 --> 0:11:12.160 when one looks at just the headline valuations of the 0:11:12.240 --> 0:11:15.400 US against ay Asian or or European markets, I think 0:11:15.440 --> 0:11:18.720 there's a sense that the opportunities now lie outside the 0:11:18.800 --> 0:11:21.439 US equity market in general. But I think what we're 0:11:21.440 --> 0:11:23.560 also seeing and I think that is also driving You 0:11:23.600 --> 0:11:25.439 know that the rally at the moment in the US 0:11:25.760 --> 0:11:28.760 is people are now losing money in their bomb bomb portfolios. 0:11:28.800 --> 0:11:32.640 You know, yields are rising, they've been they've been supported 0:11:32.640 --> 0:11:36.080 by enormous contents of KIWI and monetary policy which is 0:11:36.120 --> 0:11:40.280 now waxing. And therefore we're now going to get ourselves 0:11:40.280 --> 0:11:43.600 into a situation where bond portfolios are generating no return 0:11:43.679 --> 0:11:47.240 or negative return, and the only prospect for most clients 0:11:47.320 --> 0:11:49.440 is to invest in the equity market, where we're going 0:11:49.480 --> 0:11:52.760 to see some reflation and stimulus rather the more austerity, 0:11:52.800 --> 0:11:54.280 which of course is what we've seen in the last 0:11:54.320 --> 0:11:58.640 five years. As an expert in putting together portfolios with 0:11:58.760 --> 0:12:03.760 different assets all over the world, what is it that 0:12:03.840 --> 0:12:08.839 you would recommend right now to investors? What should they sell? 0:12:09.040 --> 0:12:14.280 We've got an SMP five hundred at nine and I'm 0:12:14.280 --> 0:12:16.400 wondering what would they What do you recommend selling in 0:12:16.520 --> 0:12:18.960 order to rebalance? Well? I think I tend to feel 0:12:19.000 --> 0:12:21.199 like I have two conversations in my role as a 0:12:21.240 --> 0:12:24.520 strategist with our clients. Some clients are looking to make 0:12:24.600 --> 0:12:27.600 money on their capital, and therefore I think you inevitably 0:12:27.880 --> 0:12:30.400 have to own the equity markets because the bond markets 0:12:30.400 --> 0:12:32.920 have become so so miss priced through the quant state 0:12:32.920 --> 0:12:35.200 of vising. But a lot of clients look at the headlines, 0:12:35.240 --> 0:12:37.520 look at the news you're carrying almost every day about 0:12:37.520 --> 0:12:40.600 politics somewhere, and go, oh, the world feels a risky place. 0:12:40.640 --> 0:12:43.080 Maybe I'll just hunt for income. And therefore I think 0:12:43.280 --> 0:12:45.920 what would I be buying is things like US high yield, 0:12:45.920 --> 0:12:48.199 where you can get five or six percent returns quite 0:12:48.240 --> 0:12:52.480 safely in dollars or Asia or emerging market bonds. Thanks 0:12:52.600 --> 0:12:54.800 very much for joining us. Neil Dwayne is the global 0:12:54.800 --> 0:12:59.320 strategist for Alliance A Global Investors, giving us a real 0:13:00.160 --> 0:13:03.880 diverse response to a last night's speech by President of 0:13:03.920 --> 0:13:17.679 Donald Trump. You know, Lisa Abrama had, some of the 0:13:17.720 --> 0:13:20.800 wonderful things in the stock market are just expressions of 0:13:21.000 --> 0:13:25.640 human demand or human want. Because you know that snap 0:13:26.160 --> 0:13:29.480 the parent company of Snapchat, is hoping to raise three 0:13:29.679 --> 0:13:32.920 billion dollars with an initial public offering, And I thought, 0:13:32.920 --> 0:13:36.280 what better way to sort of phrase the conversation about 0:13:36.320 --> 0:13:38.960 this with Paul Sweeney, our head of director of North 0:13:38.960 --> 0:13:42.880 American Research media analysts for Bloomberg Intelligence, And he'll tell 0:13:42.920 --> 0:13:45.920 us whether he uses Snapchat. But is this a silly 0:13:46.000 --> 0:13:49.000 fun app for people with more time than sense or 0:13:49.160 --> 0:13:55.120 Paul Sweeney, is it a trailblazing technology company with vending machines. Well, 0:13:55.160 --> 0:13:57.000 it depends who you ask. I think if you talk 0:13:57.080 --> 0:14:00.480 to their demographic, which is the younger demographic eighteen to 0:14:00.600 --> 0:14:03.840 twenty four, eighteen to thirty four, maybe even a little 0:14:03.880 --> 0:14:06.760 bit younger than that, it is absolutely absolutely a utility 0:14:07.000 --> 0:14:09.480 for them and and in fact that the engagement, which 0:14:09.520 --> 0:14:12.079 is something the company talks about a lot, is very 0:14:12.160 --> 0:14:16.320 high on Snapchat. So it's not a loyal demographic UM 0:14:16.360 --> 0:14:19.360 historically no UM. So we'll have to see how it 0:14:19.480 --> 0:14:22.480 ages on this platform. And you know, one of the 0:14:22.520 --> 0:14:26.480 concerns is um that this younger demographic can you know, 0:14:26.920 --> 0:14:29.160 not that loyal and that the new next cool thing 0:14:29.240 --> 0:14:32.280 that comes along, they could just leave Snapchat or Facebook 0:14:32.320 --> 0:14:34.040 or wherever they are to go to the new cool thing. 0:14:34.160 --> 0:14:36.360 So that's certainly a risk. But you know, right now 0:14:36.400 --> 0:14:39.720 snapchats talking about uh we may not be the biggest 0:14:39.920 --> 0:14:43.320 that would be Facebook with close to two billion monthly users, 0:14:43.920 --> 0:14:48.280 but our users are younger, which advertisers love, and they're 0:14:48.360 --> 0:14:51.520 very engaged, which is another thing advertisers like. Uh So 0:14:51.560 --> 0:14:54.280 that is clearly the pitch that Snapchat makes to Madison 0:14:54.320 --> 0:14:57.400 Avenue and to advertisers and also to investors. So does 0:14:57.880 --> 0:15:00.640 just to give a sense of how signtive again this 0:15:00.800 --> 0:15:03.840 I p O is, are there other technology companies sort 0:15:03.880 --> 0:15:06.200 of waiting in the wings to see how this snap 0:15:06.240 --> 0:15:09.400 IPO goes to figure out whether they should also go 0:15:09.560 --> 0:15:11.400 the same route this year? I think so, I think 0:15:11.400 --> 0:15:13.960 if you think about some of the unicorns out there. 0:15:14.000 --> 0:15:18.640 Most notable would probably be uber Um, Airbnb, for example. 0:15:18.640 --> 0:15:20.080 So there's a lot of companies out there that have 0:15:20.160 --> 0:15:23.080 been very successful raising capital in the private market, to 0:15:23.120 --> 0:15:25.480 have been a very liquid and very efficient market for 0:15:25.520 --> 0:15:27.840 them over the last several years. But at some point 0:15:27.960 --> 0:15:31.800 they and their initial investors need liquidity, and that typically 0:15:31.840 --> 0:15:34.400 is achieved through an I P O. So I think 0:15:34.440 --> 0:15:36.320 this SNAP I PO is going to be not only 0:15:36.360 --> 0:15:39.440 important for UH SNAP itself and their investors, but really 0:15:39.640 --> 0:15:43.160 the technology technology sector overall, maybe even the whole new 0:15:43.200 --> 0:15:45.800 deal calendar overall, but certainly for some of these tech 0:15:45.880 --> 0:15:48.920 investors to see how far public investors will go in 0:15:49.040 --> 0:15:51.400 terms of valuation, in terms of going out on the 0:15:51.520 --> 0:15:55.200 risk curve for some of these newer companies. UM. So, 0:15:55.240 --> 0:15:57.920 I think that's gonna be that makes this deal important 0:15:57.920 --> 0:16:00.760 on many levels. You get a chance to anyone about 0:16:00.760 --> 0:16:04.680 the road show. Yeah, the the road show, about the 0:16:04.720 --> 0:16:07.520 thirty five minute video, the thirty five minute video which 0:16:07.560 --> 0:16:09.760 kind of let Evan Spiegel in his twelve million dollar 0:16:09.800 --> 0:16:12.160 house in Los Angeles, right, and and he didn't show up. 0:16:12.160 --> 0:16:16.040 I understand that the Boston UH lunch, but so, but 0:16:16.200 --> 0:16:18.200 it's this is a company that because of this video 0:16:18.200 --> 0:16:19.680 they can go right to Q and A. And I've 0:16:19.720 --> 0:16:22.360 heard that. Uh, you know, it's been standing room only 0:16:22.360 --> 0:16:24.280 at most of these lunch meetings. It's some of the 0:16:24.280 --> 0:16:27.280 big cities. They've been in London, New York, Boston, San Francisco. 0:16:27.640 --> 0:16:30.480 So the demand is clearly there. But the the the 0:16:30.560 --> 0:16:32.960 challenging questions are also there. And some of the common 0:16:33.000 --> 0:16:38.120 ones obviously are uh the relatively small size of the 0:16:37.720 --> 0:16:41.880 uh snapchat platform versus say, on Facebook, but also the 0:16:42.000 --> 0:16:45.040 slowing user growth. It's still growing very quickly, but the 0:16:45.040 --> 0:16:46.880 growth rate is slowing, and is that a concern? It 0:16:47.000 --> 0:16:49.720 was almost flat for all of last year. No, No, 0:16:49.760 --> 0:16:51.640 I mean there's they're still adding a lot of subscribers, 0:16:51.640 --> 0:16:53.960 but the growth rate is is clearly slowing. And you know, 0:16:54.040 --> 0:16:57.160 the question for you know, UM investors is ge we've 0:16:57.240 --> 0:17:00.520 kind of been, uh become accustomed to seeing these billion dollar, 0:17:00.720 --> 0:17:05.200 billion user platforms like Facebook. Uh and if you don't 0:17:05.200 --> 0:17:09.000 get there, what does that mean? Fifty million users last 0:17:09.080 --> 0:17:12.520 year were added and then they said five million in 0:17:12.560 --> 0:17:16.280 the last quarter of right that that that that's right? Yeah, 0:17:16.520 --> 0:17:19.440 So again that is clearly a concern and so again, 0:17:19.480 --> 0:17:22.440 what the snap is lost half a billion last year. 0:17:22.520 --> 0:17:24.240 They lost half a billion on about four a million 0:17:24.240 --> 0:17:28.000 of revenue. But exactly, you know, the revenue growth is 0:17:28.000 --> 0:17:31.800 certainly there again, Yeah, exactly, they had form a million 0:17:31.840 --> 0:17:34.960 revenue last year. You know street consensus and that estimates 0:17:34.960 --> 0:17:36.560 are kind of out there for a billion this year, 0:17:36.640 --> 0:17:39.040 maybe two billion next year and maybe three billion year 0:17:39.040 --> 0:17:42.200 after that. UM. So clearly the revenue growth story is there. 0:17:42.240 --> 0:17:45.440 But there's definitely some issues that investors are concerned about, 0:17:45.760 --> 0:17:48.680 including you know the fact that no shareholders will get 0:17:48.720 --> 0:17:51.760 any votes whatsoever. It's not that you get a smaller 0:17:51.840 --> 0:17:53.960 vote than the founders, you get zero votes, and that 0:17:54.119 --> 0:17:57.720 is very unusual. UM. And that is obviously a concern 0:17:57.800 --> 0:18:01.480 for some investors. So from from media to old we 0:18:01.600 --> 0:18:04.960 also are getting news about Time Inc. And how they're 0:18:04.960 --> 0:18:10.600 looking for potential suitors to to submit formal bids uh 0:18:10.800 --> 0:18:13.920 for acquiring the company by next week. This is according 0:18:13.960 --> 0:18:16.199 to a New York Times story that came out on 0:18:16.280 --> 0:18:18.879 the news. Time shares are up almost seven percent. What 0:18:18.920 --> 0:18:20.639 do you make of this? Yeah, this is a company 0:18:20.680 --> 0:18:23.520 that's been arguably up for sale for a long time. 0:18:23.560 --> 0:18:26.199 Alex Sherman of OM any reporter. Bloomberg News has been 0:18:26.200 --> 0:18:28.399 all over the story for for many months, and uh, 0:18:28.480 --> 0:18:30.280 you know, I think the issue here is there's um 0:18:30.480 --> 0:18:33.640 even though that the magazine business, like all publishing businesses, 0:18:33.640 --> 0:18:38.400 are greatly challenged in terms of advertising growth and subscription growth. Um, 0:18:38.480 --> 0:18:41.160 it is a you know, the vervirtually very little growth 0:18:41.200 --> 0:18:44.160 if any in the magazine business. However, some of these 0:18:44.200 --> 0:18:47.080 brands are still very relevant in the market place, and 0:18:47.240 --> 0:18:51.160 Time Ink clearly has with with People Magazine and Sports 0:18:51.200 --> 0:18:52.879 illustrat at some of the you know, the best brands 0:18:52.880 --> 0:18:55.920 in the magazine business. So clearly there's interest from from 0:18:55.960 --> 0:18:59.240 certain players, whether it's private equity UM or even some 0:18:59.320 --> 0:19:01.919 strategic are such as A Meredith for example, who's been 0:19:01.920 --> 0:19:05.040 in talk. So there's clearly some interesting that Edgar Bronfman 0:19:05.119 --> 0:19:07.159 absolutely who's got a lot of experience in media, and 0:19:07.200 --> 0:19:09.280 I just want to correct myself, Alex Sherman actually did 0:19:09.359 --> 0:19:13.359 break this. Yeah, So it's uh, you know, so surprisingly 0:19:13.359 --> 0:19:15.720 that there's a lot of interest in these marquee properties 0:19:15.720 --> 0:19:17.840 because um, you know a lot of people feel like 0:19:17.880 --> 0:19:21.800 magazines can in fact live in a digital world. Um 0:19:21.840 --> 0:19:25.520 that advertise them. But we're talking about maybe we need 0:19:25.600 --> 0:19:27.920 to think of new terms for it, because magazine obviously 0:19:27.920 --> 0:19:30.199 refers to some paper product that you hold, which they 0:19:30.200 --> 0:19:32.280 may or may not continue to print. But when you 0:19:32.359 --> 0:19:34.720 take a look at everything that they publish, whether it 0:19:34.920 --> 0:19:40.640 is Health Magazine, Travel and Leisure, Entertainment, Weekly, Coastal, I mean, departure, 0:19:40.680 --> 0:19:43.000 it just goes on and on. There's that's content and 0:19:43.520 --> 0:19:45.320 last time I check, you gotta have something to put 0:19:45.359 --> 0:19:48.080 on the Internet. That's right, and that's right. And so 0:19:48.359 --> 0:19:50.480 it all comes down to brands. The value of brands, 0:19:50.480 --> 0:19:52.840 whether it's in an analog world inc on paper or 0:19:52.880 --> 0:19:54.879 in a digital world. You'll you'll hear even all the 0:19:54.880 --> 0:19:57.520 big media companies, whether it's the commer Time owner not 0:19:57.560 --> 0:20:00.399 talk about their cable networks. They talk about their brands. 0:20:00.680 --> 0:20:03.560 ESPN is a brand, UM CNN is a brand and 0:20:03.600 --> 0:20:05.800 things like that. Fox News is a brand. And so 0:20:05.840 --> 0:20:07.960 the question is can you monetize those brands in a 0:20:08.000 --> 0:20:10.520 digital world. And that's very true for the magazine company 0:20:11.000 --> 0:20:12.840 UM as well, and they've really spent a lot of 0:20:12.840 --> 0:20:15.720 money kind of pruning their brands and their their portfolio 0:20:15.760 --> 0:20:17.680 and trying to, you know, make sure that they can 0:20:17.720 --> 0:20:19.639 live in a digital world and get paid whether it's 0:20:19.640 --> 0:20:23.080 through advertising or subscriptions. Paul Sweeney, thank you so much 0:20:23.119 --> 0:20:24.760 for joining us. A lot to talk about and a 0:20:24.800 --> 0:20:27.040 lot to keep track of going forward, Director of North 0:20:27.040 --> 0:20:45.240 American Research and media analyst for Bloomberg Intelligence. I want 0:20:45.240 --> 0:20:48.000 to bring in Bloomberg's own Eric Schatzker now to give 0:20:48.080 --> 0:20:51.600 us more detail about Ray Dahlio stepping down as the 0:20:51.720 --> 0:20:56.359 co chief executive of Chief Executive Office. Getting that I 0:20:56.440 --> 0:20:58.960 can't keep the titles in check a much easier way 0:20:59.000 --> 0:21:04.840 to think about this. Another management shake up at Bridgewater. Yes, 0:21:04.920 --> 0:21:09.520 how one constant at Bridgewater is Ray Dalio. He runs 0:21:09.560 --> 0:21:12.800 the world's largest hedge fund manager. Bridgewater has an excess 0:21:12.840 --> 0:21:16.320 of a hundred and fifty billion dollars under management. It's 0:21:16.359 --> 0:21:20.200 pure alpha fund has historically been one of the most successful. 0:21:20.480 --> 0:21:23.919 Bridgewater also was at the forefront the vanguard of the 0:21:23.960 --> 0:21:27.399 creation of risk parity funds. The All Weather Fund is 0:21:27.440 --> 0:21:30.760 the risk parody fund Bridgewater runs and advanced eleven point 0:21:30.840 --> 0:21:35.200 six last year parody funds. You know what I'm going 0:21:35.280 --> 0:21:37.920 to say, that's a bit of a diversion and suggest 0:21:37.960 --> 0:21:42.679 that we get back to what happened. John Rubinstein, the 0:21:42.720 --> 0:21:47.040 former Apple executive sixteen years at Apple job. Ray Dalio, 0:21:47.160 --> 0:21:50.320 brought in last year to be co CEO, is leaving 0:21:50.520 --> 0:21:55.600 after only ten months. Why Ray Dalio himself says in 0:21:55.600 --> 0:21:59.679 his statement, we mutually agree that he, meaning Rubinstein, is 0:21:59.720 --> 0:22:03.880 not a cultural fit for Bridgewater. Bridgewater is an unusual place. 0:22:03.920 --> 0:22:06.400 Some people would go so far as to say it's 0:22:06.440 --> 0:22:10.400 an odd place. John Rubinstein was an odd hire. He 0:22:10.440 --> 0:22:14.679 was brought in as a leader and also as a 0:22:14.720 --> 0:22:19.359 technology pioneer. Ray says he was successful in creating a 0:22:19.359 --> 0:22:24.120 new technology architecture for Bridgewater, but clearly as a co CEO, 0:22:24.320 --> 0:22:28.520 it really didn't work out. The big issue here is 0:22:28.560 --> 0:22:31.680 that it hasn't worked out for Bridgewater on a management 0:22:31.760 --> 0:22:35.560 level in a long time. Eileen Murray, who remains a 0:22:35.640 --> 0:22:38.680