Latest / Bloomberg Intelligence / WSJ Coverage Boosted Fed 'Message' on March Hike, Reinhart Says

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WSJ Coverage Boosted Fed 'Message' on March Hike, Reinhart Says · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg pm L podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether at the grocery store or
• 0:16
  Speaker 1: the trading floor. Find the Bloomberg pm L podcast on iTunes,
• 0:20
  Speaker 1: SoundCloud and at Bloomberg dot com. There's been a lot
• 0:29
  Speaker 1: of discussion about the big move that we've seen in
• 0:32
  Speaker 1: stocks and hitting new highs today, but there's another move
• 0:37
  Speaker 1: that I would argue has potentially even a bigger chance
• 0:41
  Speaker 1: to affect markets on a broad level, Fed funds futures.
• 0:45
  Speaker 1: This is a way that derivatives traders bet on when
• 0:48
  Speaker 1: the Fed will next hike rates. The priced in probability
• 0:52
  Speaker 1: of a March rate hike has gone from thirty six
• 0:54
  Speaker 1: percent from the end of last week to more than
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  Speaker 1: eighty percent today. This is getting a lot of people's attention,
• 1:01
  Speaker 1: including Vincent Reinhardt. He's chief economist at Standish Melon Asset Management,
• 1:06
  Speaker 1: and we are lucky to have Vincent in the studio
• 1:08
  Speaker 1: with us in Bloomberg eleven three oh. Vincent, why has
• 1:12
  Speaker 1: there been such a huge move and expectations for a
• 1:15
  Speaker 1: March rate hike because Federal Reserve officials wanted it to happen,
• 1:19
  Speaker 1: i e. At the FED, you never surprise markets. You
• 1:23
  Speaker 1: can't act if it isn't priced in. They are sometimes
• 1:26
  Speaker 1: willing to disappoint markets, i e. Not act even though
• 1:30
  Speaker 1: it's priced in. At of a probability of policy action,
• 1:36
  Speaker 1: the March meeting was off the table. That was too
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  Speaker 1: much of a surprise. If you want the meeting to
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  Speaker 1: be live, you've got to get that probability a little higher.
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  Speaker 1: But I just I'm struggling with that interpretation because we
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  Speaker 1: did not hear definitive language out of the Federal Reserve
• 1:51
  Speaker 1: officials who have spoken at least certainly not Friday until yesterday.
• 1:56
  Speaker 1: Right that. We did see some yesterday, but before that
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  Speaker 1: the prob ability was rising. So what was it the
• 2:01
  Speaker 1: triggered this? Yesterday? President's Dudley and Williams confirmed the rise specifically,
• 2:07
  Speaker 1: did they say that confirmed it? They said that the
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  Speaker 1: meeting is live, that March is definitely on the table.
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  Speaker 1: John President Dudley said that the cases uh stronger I believe,
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  Speaker 1: and President Williams said the argument for acting in March
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  Speaker 1: is it makes the possibility of three more than free
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  Speaker 1: tightenings in two thousands seventeen possible, So they ratified the
• 2:31
  Speaker 1: pick up in the Fed funds futures and added a
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  Speaker 1: bit to it. I think the move you had from
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  Speaker 1: the end of last week into the beginning of this
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  Speaker 1: week was importantly shaped by the Wall Street Journal's coverage
• 2:44
  Speaker 1: of the minutes from the January meeting. UH there was
• 2:46
  Speaker 1: a front page headline saying that the Federals RVs minutes
• 2:51
  Speaker 1: showed that it was eyeing aggressive rate increases. Nobody else
• 2:56
  Speaker 1: covering the minutes characterized it that way, not your porters
• 3:00
  Speaker 1: on bloom at Bloomberg. It was a pretty anodyne set
• 3:04
  Speaker 1: of descriptions of the economy and even handed. Uh. I
• 3:08
  Speaker 1: used to sign the minutes for six or seven years.
• 3:10
  Speaker 1: I know when you're not sending you a message, and
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  Speaker 1: there was no message there, But for a Wall Street
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  Speaker 1: Journal reporter to lean that far ahead would suggest to
• 3:20
  Speaker 1: me they had a little help that perhaps some Federal
• 3:23
  Speaker 1: Reserve officials suggested that markets had misinterpreted the minutes. They
• 3:28
  Speaker 1: had to be so anodyne, and in fact, there was
• 3:31
  Speaker 1: a message there. Well. As a professional Fed watcher, and
• 3:35
  Speaker 1: just as you recalled a former employee of the Federal
• 3:40
  Speaker 1: Reserve Bank of New York. You also economists for the
• 3:43
  Speaker 1: Federal Open Market Committee. What do you make of that?
• 3:47
  Speaker 1: How is broaden that out to just give us more
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  Speaker 1: detail based on your experience. So, the Federal Reserve works
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  Speaker 1: with markets, and it is important that uh, there are people, right,
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  Speaker 1: I mean, it's not an amorphous. It's a big marble, yeah,
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  Speaker 1: I know, and there are a lot of people in it,
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  Speaker 1: I would imagine. Yeah, So staff at the Federal Reserve
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  Speaker 1: are desirous not to be out of sync with markets.
• 4:14
  Speaker 1: That if they are trying to convey a particular message
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  Speaker 1: and they don't here received correctly, they may help to
• 4:22
  Speaker 1: nudge the ship back into the appropriate course. The fact
• 4:27
  Speaker 1: that one Wall Street Journal reporter was different than everybody
• 4:31
  Speaker 1: else and subsequent Federal Reserve officials told the story confirming
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  Speaker 1: that view makes me think that he got a little nudged.
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  Speaker 1: How how often did members of the Federal Reserve do
• 4:45
  Speaker 1: this type of thing where they would go to one
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  Speaker 1: reporter often Hills and Wrath was formerly the reporter. How
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  Speaker 1: often do they sort of lean on one person to
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  Speaker 1: kind of get the message right. Um, so there's two
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  Speaker 1: different parts of the story. The one is in normally
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  Speaker 1: just talking with market participants UM Federal Reserve staff, both
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  Speaker 1: the Board and the Reserve Bank presidents would be trying
• 5:15
  Speaker 1: to tell a consistent story, and if it was currently
• 5:17
  Speaker 1: different than what was in markets, then they were revealing
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  Speaker 1: some news. Uh the outright shaping a story by going
• 5:26
  Speaker 1: to a reporter and trying to to nudge things along.
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  Speaker 1: That's usually done at a higher level. All right, So
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  Speaker 1: now we've we've taken that into consideration. Give us your view.
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  Speaker 1: What will happen March? What is it? So now we
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  Speaker 1: got eight and ten chance of policy action priced in UM.
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  Speaker 1: The case isn't closed yet, even though it's a little
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  Speaker 1: stronger in in terms of President Dudley's view. Because Cherry
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  Speaker 1: Yellen speaks at the end of the week. She can
• 5:55
  Speaker 1: take that punch bowl away if she wants. Well, what
• 5:57
  Speaker 1: do you make of the fact that the increase shorter
• 6:00
  Speaker 1: term rates has led to a flattening of the yield curve?
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  Speaker 1: In other words, the bond market seems to be suggesting
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  Speaker 1: that a sooner rate hike will dampen growth and remove
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  Speaker 1: some of the momentum that we've seen. So they're pricing
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  Speaker 1: in a FED mistake it's a little bit like December
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  Speaker 1: of last year when the FED tightening a quarter point,
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  Speaker 1: just a quarter points snuck in at the end of
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  Speaker 1: two thousand sixteen, UH seemed to vow to convey the
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  Speaker 1: view the FED was serious and tightening four times in
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  Speaker 1: two thousand sixteen. UH market participants viewed that as as
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  Speaker 1: inappropriate and there was a big sell off. And over
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  Speaker 1: the course of last year, FED guidance has been coming
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  Speaker 1: down closer to where markets are. Two get the idea
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  Speaker 1: that there may be three or four tightenings this year
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  Speaker 1: is pulling guidance away from where markets are and so
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  Speaker 1: that they're thinking they're a mistake involved. I want to
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  Speaker 1: thank you very much. Vincent Reinhardt joining US at chief
• 6:56
  Speaker 1: economist Standish Melon Asset Management m FOX. I hear there
• 7:13
  Speaker 1: was a speech last night. Did you hear anything about that? Yes,
• 7:15
  Speaker 1: not only did I hear that there was a speech,
• 7:18
  Speaker 1: but I watch I did watch it. Yeah. I think
• 7:21
  Speaker 1: it was our president, President Trump speaking to Joint UH
• 7:25
  Speaker 1: Congress yesterday. And for some impressions. Neil Dwayne is here
• 7:30
  Speaker 1: with US global strategist for Alian's Global Investors, which has
• 7:34
  Speaker 1: four eighty one billion dollars under management. So, Neil, what
• 7:37
  Speaker 1: was your number one takeaway from President Trump speech? While
• 7:41
  Speaker 1: have now watched to his inauguration speech and the one
• 7:44
  Speaker 1: last night. My my takeaway was actually that I was
• 7:48
  Speaker 1: quite impressed with him, maybe for the first time as
• 7:50
  Speaker 1: an orator. I felt he pitched the gravity of the
• 7:55
  Speaker 1: situation very well and came over as very presidential. I
• 7:58
  Speaker 1: think as an investor that we didn't learn anymore. And
• 8:02
  Speaker 1: I think when one saw the body language and the
• 8:04
  Speaker 1: reactions to many of his comments in the in his speech,
• 8:08
  Speaker 1: you could see how divided Congress is. So I think
• 8:11
  Speaker 1: when we come to now the execution of the Trump agenda,
• 8:15
  Speaker 1: we're going to see what gridlock looks like in in
• 8:18
  Speaker 1: in Congress. So do you think that the rally that
• 8:20
  Speaker 1: we're seeing today, particularly in financials, is a head fake? Well,
• 8:25
  Speaker 1: I'm I'm very concerned that we've already had quite a
• 8:27
  Speaker 1: strong rally. I think financials are now up since he
• 8:30
  Speaker 1: was elected. I think we can get too carried away
• 8:33
  Speaker 1: with the opportunities to maybe soften regulation or change the
• 8:38
  Speaker 1: you know, the d O L rules and and and
• 8:40
  Speaker 1: some of the things that Trump has been talking about.
• 8:42
  Speaker 1: I don't necessarily sarily see that they are central to
• 8:45
  Speaker 1: what he wants to achieve in terms of making America
• 8:48
  Speaker 1: grace again. The the US financials are wealth wealth financed,
• 8:51
  Speaker 1: their wealth structured. They work in a very competitive industries.
• 8:54
  Speaker 1: We know with the price competition now between Fidelity and
• 8:57
  Speaker 1: Schwab in the in the brokerage business, and I would
• 8:59
  Speaker 1: are there's overcapacity in the banking industry, so margins are
• 9:02
  Speaker 1: going to remain under pressure. But if people are want
• 9:05
  Speaker 1: to borrow, at least the US banks have the capacity
• 9:08
  Speaker 1: to lend. A lot of banks in Europe are still
• 9:11
  Speaker 1: very financially weak and cannot create the credit that the
• 9:14
  Speaker 1: that the economy isn't it requires. Neil, I'm wondering if
• 9:17
  Speaker 1: you could just give people a little bit of your background,
• 9:18
  Speaker 1: because I know that you previously were at Kleinwood Benson
• 9:21
  Speaker 1: and that may be an old name for people to remember,
• 9:24
  Speaker 1: and then maybe transition into telling us about China. The
• 9:28
  Speaker 1: world isn't just all about one person. It's important. But
• 9:31
  Speaker 1: I just want to get your thoughts because I know
• 9:33
  Speaker 1: you've written a piece about taking advantage perhaps of what
• 9:36
  Speaker 1: we when most people don't know about what's going on
• 9:39
  Speaker 1: in China. Yes, I mean, I I think I've spent
• 9:41
  Speaker 1: fourteen years working in Frankfurt, so I do feel as
• 9:44
  Speaker 1: an Englishman I have a view on Europe which is
• 9:46
  Speaker 1: not necessarily what you get from every Londoner who come
• 9:48
  Speaker 1: comes across. We're going to get that view and a
• 9:50
  Speaker 1: set okay, But I think I think actually the moment
• 9:53
  Speaker 1: that China is very interesting because we're about to get
• 9:55
  Speaker 1: the new government formed for the next five to ten years,
• 9:59
  Speaker 1: and so I think for US two thousand and seventeen
• 10:01
  Speaker 1: is going to be a year of stability, all other
• 10:04
  Speaker 1: things being equal, and I think where President Gjing Ping
• 10:07
  Speaker 1: goes is going to be very important to the rebalancing
• 10:10
  Speaker 1: of China and therefore the growth prospects for for all
• 10:12
  Speaker 1: of US global citizens. But what I would then finish
• 10:16
  Speaker 1: by saying is, of course the unknown at this moment
• 10:18
  Speaker 1: in time. And he was, to your opening question, very
• 10:21
  Speaker 1: elliptical about it last night, was what is his position
• 10:24
  Speaker 1: on China and training? Yes, President Trump, because I think
• 10:28
  Speaker 1: there is a there is a concern that he said
• 10:30
  Speaker 1: on day one in the White House, I'm going to
• 10:32
  Speaker 1: accuse them of currency manipulation, and we're nowhere near that.
• 10:36
  Speaker 1: But clearly for global investors and for the global economy.
• 10:39
  Speaker 1: Any sign of tariffs or trade friction is going to
• 10:43
  Speaker 1: be bad news for US. I want to do get
• 10:45
  Speaker 1: to Europe. There was a story on the Bloomberg today
• 10:49
  Speaker 1: about n HSBC study showing that a good amount of
• 10:54
  Speaker 1: money is flowing out of US equities and into European stocks.
• 10:58
  Speaker 1: Are you seeing this? Was seeing it at the at
• 11:00
  Speaker 1: the margin. But I think when I travel around the world,
• 11:03
  Speaker 1: I think many investors have known they've got it right
• 11:06
  Speaker 1: by being along the US, including many US investors. But
• 11:09
  Speaker 1: when one looks at just the headline valuations of the
• 11:12
  Speaker 1: US against ay Asian or or European markets, I think
• 11:15
  Speaker 1: there's a sense that the opportunities now lie outside the
• 11:18
  Speaker 1: US equity market in general. But I think what we're
• 11:21
  Speaker 1: also seeing and I think that is also driving You
• 11:23
  Speaker 1: know that the rally at the moment in the US
• 11:25
  Speaker 1: is people are now losing money in their bomb bomb portfolios.
• 11:28
  Speaker 1: You know, yields are rising, they've been they've been supported
• 11:32
  Speaker 1: by enormous contents of KIWI and monetary policy which is
• 11:36
  Speaker 1: now waxing. And therefore we're now going to get ourselves
• 11:40
  Speaker 1: into a situation where bond portfolios are generating no return
• 11:43
  Speaker 1: or negative return, and the only prospect for most clients
• 11:47
  Speaker 1: is to invest in the equity market, where we're going
• 11:49
  Speaker 1: to see some reflation and stimulus rather the more austerity,
• 11:52
  Speaker 1: which of course is what we've seen in the last
• 11:54
  Speaker 1: five years. As an expert in putting together portfolios with
• 11:58
  Speaker 1: different assets all over the world, what is it that
• 12:03
  Speaker 1: you would recommend right now to investors? What should they sell?
• 12:09
  Speaker 1: We've got an SMP five hundred at nine and I'm
• 12:14
  Speaker 1: wondering what would they What do you recommend selling in
• 12:16
  Speaker 1: order to rebalance? Well? I think I tend to feel
• 12:19
  Speaker 1: like I have two conversations in my role as a
• 12:21
  Speaker 1: strategist with our clients. Some clients are looking to make
• 12:24
  Speaker 1: money on their capital, and therefore I think you inevitably
• 12:27
  Speaker 1: have to own the equity markets because the bond markets
• 12:30
  Speaker 1: have become so so miss priced through the quant state
• 12:32
  Speaker 1: of vising. But a lot of clients look at the headlines,
• 12:35
  Speaker 1: look at the news you're carrying almost every day about
• 12:37
  Speaker 1: politics somewhere, and go, oh, the world feels a risky place.
• 12:40
  Speaker 1: Maybe I'll just hunt for income. And therefore I think
• 12:43
  Speaker 1: what would I be buying is things like US high yield,
• 12:45
  Speaker 1: where you can get five or six percent returns quite
• 12:48
  Speaker 1: safely in dollars or Asia or emerging market bonds. Thanks
• 12:52
  Speaker 1: very much for joining us. Neil Dwayne is the global
• 12:54
  Speaker 1: strategist for Alliance A Global Investors, giving us a real
• 13:00
  Speaker 1: diverse response to a last night's speech by President of
• 13:03
  Speaker 1: Donald Trump. You know, Lisa Abrama had, some of the
• 13:17
  Speaker 1: wonderful things in the stock market are just expressions of
• 13:21
  Speaker 1: human demand or human want. Because you know that snap
• 13:26
  Speaker 1: the parent company of Snapchat, is hoping to raise three
• 13:29
  Speaker 1: billion dollars with an initial public offering, And I thought,
• 13:32
  Speaker 1: what better way to sort of phrase the conversation about
• 13:36
  Speaker 1: this with Paul Sweeney, our head of director of North
• 13:38
  Speaker 1: American Research media analysts for Bloomberg Intelligence, And he'll tell
• 13:42
  Speaker 1: us whether he uses Snapchat. But is this a silly
• 13:46
  Speaker 1: fun app for people with more time than sense or
• 13:49
  Speaker 1: Paul Sweeney, is it a trailblazing technology company with vending machines. Well,
• 13:55
  Speaker 1: it depends who you ask. I think if you talk
• 13:57
  Speaker 1: to their demographic, which is the younger demographic eighteen to
• 14:00
  Speaker 1: twenty four, eighteen to thirty four, maybe even a little
• 14:03
  Speaker 1: bit younger than that, it is absolutely absolutely a utility
• 14:07
  Speaker 1: for them and and in fact that the engagement, which
• 14:09
  Speaker 1: is something the company talks about a lot, is very
• 14:12
  Speaker 1: high on Snapchat. So it's not a loyal demographic UM
• 14:16
  Speaker 1: historically no UM. So we'll have to see how it
• 14:19
  Speaker 1: ages on this platform. And you know, one of the
• 14:22
  Speaker 1: concerns is um that this younger demographic can you know,
• 14:26
  Speaker 1: not that loyal and that the new next cool thing
• 14:29
  Speaker 1: that comes along, they could just leave Snapchat or Facebook
• 14:32
  Speaker 1: or wherever they are to go to the new cool thing.
• 14:34
  Speaker 1: So that's certainly a risk. But you know, right now
• 14:36
  Speaker 1: snapchats talking about uh we may not be the biggest
• 14:39
  Speaker 1: that would be Facebook with close to two billion monthly users,
• 14:43
  Speaker 1: but our users are younger, which advertisers love, and they're
• 14:48
  Speaker 1: very engaged, which is another thing advertisers like. Uh So
• 14:51
  Speaker 1: that is clearly the pitch that Snapchat makes to Madison
• 14:54
  Speaker 1: Avenue and to advertisers and also to investors. So does
• 14:57
  Speaker 1: just to give a sense of how signtive again this
• 15:00
  Speaker 1: I p O is, are there other technology companies sort
• 15:03
  Speaker 1: of waiting in the wings to see how this snap
• 15:06
  Speaker 1: IPO goes to figure out whether they should also go
• 15:09
  Speaker 1: the same route this year? I think so, I think
• 15:11
  Speaker 1: if you think about some of the unicorns out there.
• 15:14
  Speaker 1: Most notable would probably be uber Um, Airbnb, for example.
• 15:18
  Speaker 1: So there's a lot of companies out there that have
• 15:20
  Speaker 1: been very successful raising capital in the private market, to
• 15:23
  Speaker 1: have been a very liquid and very efficient market for
• 15:25
  Speaker 1: them over the last several years. But at some point
• 15:27
  Speaker 1: they and their initial investors need liquidity, and that typically
• 15:31
  Speaker 1: is achieved through an I P O. So I think
• 15:34
  Speaker 1: this SNAP I PO is going to be not only
• 15:36
  Speaker 1: important for UH SNAP itself and their investors, but really
• 15:39
  Speaker 1: the technology technology sector overall, maybe even the whole new
• 15:43
  Speaker 1: deal calendar overall, but certainly for some of these tech
• 15:45
  Speaker 1: investors to see how far public investors will go in
• 15:49
  Speaker 1: terms of valuation, in terms of going out on the
• 15:51
  Speaker 1: risk curve for some of these newer companies. UM. So,
• 15:55
  Speaker 1: I think that's gonna be that makes this deal important
• 15:57
  Speaker 1: on many levels. You get a chance to anyone about
• 16:00
  Speaker 1: the road show. Yeah, the the road show, about the
• 16:04
  Speaker 1: thirty five minute video, the thirty five minute video which
• 16:07
  Speaker 1: kind of let Evan Spiegel in his twelve million dollar
• 16:09
  Speaker 1: house in Los Angeles, right, and and he didn't show up.
• 16:12
  Speaker 1: I understand that the Boston UH lunch, but so, but
• 16:16
  Speaker 1: it's this is a company that because of this video
• 16:18
  Speaker 1: they can go right to Q and A. And I've
• 16:19
  Speaker 1: heard that. Uh, you know, it's been standing room only
• 16:22
  Speaker 1: at most of these lunch meetings. It's some of the
• 16:24
  Speaker 1: big cities. They've been in London, New York, Boston, San Francisco.
• 16:27
  Speaker 1: So the demand is clearly there. But the the the
• 16:30
  Speaker 1: challenging questions are also there. And some of the common
• 16:33
  Speaker 1: ones obviously are uh the relatively small size of the
• 16:37
  Speaker 1: uh snapchat platform versus say, on Facebook, but also the
• 16:42
  Speaker 1: slowing user growth. It's still growing very quickly, but the
• 16:45
  Speaker 1: growth rate is slowing, and is that a concern? It
• 16:47
  Speaker 1: was almost flat for all of last year. No, No,
• 16:49
  Speaker 1: I mean there's they're still adding a lot of subscribers,
• 16:51
  Speaker 1: but the growth rate is is clearly slowing. And you know,
• 16:54
  Speaker 1: the question for you know, UM investors is ge we've
• 16:57
  Speaker 1: kind of been, uh become accustomed to seeing these billion dollar,
• 17:00
  Speaker 1: billion user platforms like Facebook. Uh and if you don't
• 17:05
  Speaker 1: get there, what does that mean? Fifty million users last
• 17:09
  Speaker 1: year were added and then they said five million in
• 17:12
  Speaker 1: the last quarter of right that that that that's right? Yeah,
• 17:16
  Speaker 1: So again that is clearly a concern and so again,
• 17:19
  Speaker 1: what the snap is lost half a billion last year.
• 17:22
  Speaker 1: They lost half a billion on about four a million
• 17:24
  Speaker 1: of revenue. But exactly, you know, the revenue growth is
• 17:28
  Speaker 1: certainly there again, Yeah, exactly, they had form a million
• 17:31
  Speaker 1: revenue last year. You know street consensus and that estimates
• 17:34
  Speaker 1: are kind of out there for a billion this year,
• 17:36
  Speaker 1: maybe two billion next year and maybe three billion year
• 17:39
  Speaker 1: after that. UM. So clearly the revenue growth story is there.
• 17:42
  Speaker 1: But there's definitely some issues that investors are concerned about,
• 17:45
  Speaker 1: including you know the fact that no shareholders will get
• 17:48
  Speaker 1: any votes whatsoever. It's not that you get a smaller
• 17:51
  Speaker 1: vote than the founders, you get zero votes, and that
• 17:54
  Speaker 1: is very unusual. UM. And that is obviously a concern
• 17:57
  Speaker 1: for some investors. So from from media to old we
• 18:01
  Speaker 1: also are getting news about Time Inc. And how they're
• 18:04
  Speaker 1: looking for potential suitors to to submit formal bids uh
• 18:10
  Speaker 1: for acquiring the company by next week. This is according
• 18:13
  Speaker 1: to a New York Times story that came out on
• 18:16
  Speaker 1: the news. Time shares are up almost seven percent. What
• 18:18
  Speaker 1: do you make of this? Yeah, this is a company
• 18:20
  Speaker 1: that's been arguably up for sale for a long time.
• 18:23
  Speaker 1: Alex Sherman of OM any reporter. Bloomberg News has been
• 18:26
  Speaker 1: all over the story for for many months, and uh,
• 18:28
  Speaker 1: you know, I think the issue here is there's um
• 18:30
  Speaker 1: even though that the magazine business, like all publishing businesses,
• 18:33
  Speaker 1: are greatly challenged in terms of advertising growth and subscription growth. Um,
• 18:38
  Speaker 1: it is a you know, the vervirtually very little growth
• 18:41
  Speaker 1: if any in the magazine business. However, some of these
• 18:44
  Speaker 1: brands are still very relevant in the market place, and
• 18:47
  Speaker 1: Time Ink clearly has with with People Magazine and Sports
• 18:51
  Speaker 1: illustrat at some of the you know, the best brands
• 18:52
  Speaker 1: in the magazine business. So clearly there's interest from from
• 18:55
  Speaker 1: certain players, whether it's private equity UM or even some
• 18:59
  Speaker 1: strategic are such as A Meredith for example, who's been
• 19:01
  Speaker 1: in talk. So there's clearly some interesting that Edgar Bronfman
• 19:05
  Speaker 1: absolutely who's got a lot of experience in media, and
• 19:07
  Speaker 1: I just want to correct myself, Alex Sherman actually did
• 19:09
  Speaker 1: break this. Yeah, So it's uh, you know, so surprisingly
• 19:13
  Speaker 1: that there's a lot of interest in these marquee properties
• 19:15
  Speaker 1: because um, you know a lot of people feel like
• 19:17
  Speaker 1: magazines can in fact live in a digital world. Um
• 19:21
  Speaker 1: that advertise them. But we're talking about maybe we need
• 19:25
  Speaker 1: to think of new terms for it, because magazine obviously
• 19:27
  Speaker 1: refers to some paper product that you hold, which they
• 19:30
  Speaker 1: may or may not continue to print. But when you
• 19:32
  Speaker 1: take a look at everything that they publish, whether it
• 19:34
  Speaker 1: is Health Magazine, Travel and Leisure, Entertainment, Weekly, Coastal, I mean, departure,
• 19:40
  Speaker 1: it just goes on and on. There's that's content and
• 19:43
  Speaker 1: last time I check, you gotta have something to put
• 19:45
  Speaker 1: on the Internet. That's right, and that's right. And so
• 19:48
  Speaker 1: it all comes down to brands. The value of brands,
• 19:50
  Speaker 1: whether it's in an analog world inc on paper or
• 19:52
  Speaker 1: in a digital world. You'll you'll hear even all the
• 19:54
  Speaker 1: big media companies, whether it's the commer Time owner not
• 19:57
  Speaker 1: talk about their cable networks. They talk about their brands.
• 20:00
  Speaker 1: ESPN is a brand, UM CNN is a brand and
• 20:03
  Speaker 1: things like that. Fox News is a brand. And so
• 20:05
  Speaker 1: the question is can you monetize those brands in a
• 20:08
  Speaker 1: digital world. And that's very true for the magazine company
• 20:11
  Speaker 1: UM as well, and they've really spent a lot of
• 20:12
  Speaker 1: money kind of pruning their brands and their their portfolio
• 20:15
  Speaker 1: and trying to, you know, make sure that they can
• 20:17
  Speaker 1: live in a digital world and get paid whether it's
• 20:19
  Speaker 1: through advertising or subscriptions. Paul Sweeney, thank you so much
• 20:23
  Speaker 1: for joining us. A lot to talk about and a
• 20:24
  Speaker 1: lot to keep track of going forward, Director of North
• 20:27
  Speaker 1: American Research and media analyst for Bloomberg Intelligence. I want
• 20:45
  Speaker 1: to bring in Bloomberg's own Eric Schatzker now to give
• 20:48
  Speaker 1: us more detail about Ray Dahlio stepping down as the
• 20:51
  Speaker 1: co chief executive of Chief Executive Office. Getting that I
• 20:56
  Speaker 1: can't keep the titles in check a much easier way
• 20:59
  Speaker 1: to think about this. Another management shake up at Bridgewater. Yes,
• 21:04
  Speaker 1: how one constant at Bridgewater is Ray Dalio. He runs
• 21:09
  Speaker 1: the world's largest hedge fund manager. Bridgewater has an excess
• 21:12
  Speaker 1: of a hundred and fifty billion dollars under management. It's
• 21:16
  Speaker 1: pure alpha fund has historically been one of the most successful.
• 21:20
  Speaker 1: Bridgewater also was at the forefront the vanguard of the
• 21:23
  Speaker 1: creation of risk parity funds. The All Weather Fund is
• 21:27
  Speaker 1: the risk parody fund Bridgewater runs and advanced eleven point
• 21:30
  Speaker 1: six last year parody funds. You know what I'm going
• 21:35
  Speaker 1: to say, that's a bit of a diversion and suggest
• 21:37
  Speaker 1: that we get back to what happened. John Rubinstein, the
• 21:42
  Speaker 1: former Apple executive sixteen years at Apple job. Ray Dalio,
• 21:47
  Speaker 1: brought in last year to be co CEO, is leaving
• 21:50
  Speaker 1: after only ten months. Why Ray Dalio himself says in
• 21:55
  Speaker 1: his statement, we mutually agree that he, meaning Rubinstein, is
• 21:59
  Speaker 1: not a cultural fit for Bridgewater. Bridgewater is an unusual place.
• 22:03
  Speaker 1: Some people would go so far as to say it's
• 22:06
  Speaker 1: an odd place. John Rubinstein was an odd hire. He
• 22:10
  Speaker 1: was brought in as a leader and also as a
• 22:14
  Speaker 1: technology pioneer. Ray says he was successful in creating a
• 22:19
  Speaker 1: new technology architecture for Bridgewater, but clearly as a co CEO,
• 22:24
  Speaker 1: it really didn't work out. The big issue here is
• 22:28
  Speaker 1: that it hasn't worked out for Bridgewater on a management
• 22:31
  Speaker 1: level in a long time. Eileen Murray, who remains a
• 22:35
  Speaker 1: co CEO, was brought in back in two thousand nine.
• 22:39
  Speaker 1: She's still there. But Bridgewater has experimented now with Rubinstein,
• 22:45
  Speaker 1: with Greg Jensen, who was once a co CEO and
• 22:48
  Speaker 1: remains a co c i O, with Dalio himself as
• 22:52
  Speaker 1: a co CEO, nothing seems to work okay. So so yes,
• 22:55
  Speaker 1: we have known that it is an odd place and
• 22:57
  Speaker 1: has an idiosyncratic way uh of managing its culture. Beyond
• 23:03
  Speaker 1: the gossip factor. What's the practical implication of the turnover here?
• 23:06
  Speaker 1: I mean, Bridgewater is, as you pointed out, Eric, the
• 23:09
  Speaker 1: biggest hedge fund firm in the world, at least believed
• 23:11
  Speaker 1: to be. And uh, yet they've continued to see inflows
• 23:16
  Speaker 1: despite the fact that their hedge funds have seen outflows,
• 23:18
  Speaker 1: They've continued to do deliver performance. So what's the implication, Well,
• 23:21
  Speaker 1: the big practical question is how is it going to
• 23:24
  Speaker 1: affect investment performance? If you believe Ray Dalio, this is
• 23:28
  Speaker 1: going to help the co chief investment officers remain focused
• 23:33
  Speaker 1: on managing the one and fifty billion dollar pile. That's
• 23:36
  Speaker 1: what the limited partners, the LPs, the investors in Bridgewaters
• 23:40
  Speaker 1: funds should care about. The problem is that this creates
• 23:44
  Speaker 1: a diversion. These constant this constant management turnover has been
• 23:49
  Speaker 1: a distraction and a diversion for Ray, the founder, the chairman,
• 23:54
  Speaker 1: and until now the interim chief executive co chief executive officer.
• 23:59
  Speaker 1: So if this works, if Eileen and David McCormick, who's
• 24:04
  Speaker 1: been at Bridgewater for eight years as a former Treasury
• 24:06
  Speaker 1: under secretary, can together run this firm in a way
• 24:11
  Speaker 1: that Ray approves of, that will allow him and Bob
• 24:15
  Speaker 1: Prince and Greg Jensen, together the three co chief investment officers,
• 24:19
  Speaker 1: to worry about generating returns. There were macro fund Pure Alpha.
• 24:24
  Speaker 1: Pure Alpha two is a macro fund. We know how
• 24:27
  Speaker 1: challenge the macro strategy has been. Pure Alpha two generated
• 24:31
  Speaker 1: a two point six percent excuse me, two point four
• 24:34
  Speaker 1: percent return last year. Not great, but better than a
• 24:37
  Speaker 1: lot of other macro funds. The investors want more. Bloombergs
• 24:42
  Speaker 1: Eric Shatska, thank you so much for joining us. We'll
• 24:44
  Speaker 1: be following this as we learn more. And this is
• 24:47
  Speaker 1: a story that does have implications about for the broader market,
• 24:50
  Speaker 1: given just the size of it and it's importance to
• 24:54
  Speaker 1: the hedge fund world. Thanks for listening to the Bloomberg
• 25:01
  Speaker 1: pien L podcast. You can subscribe and listen to interviews
• 25:05
  Speaker 1: at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm
• 25:10
  Speaker 1: Pim Fox. I'm out there on Twitter at pim Fox.
• 25:13
  Speaker 1: I'm out there on Twitter at Lisa Abramo. It's one
• 25:16
  Speaker 1: before the podcast. You can always catch us worldwide on
• 25:19
  Speaker 1: Bloomberg Radio.