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Why The U.S. Wouldn’t Want The IMF To Bail Out Turkey: Rhodes · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P M 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 you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg P and L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. My
• 0:28
  Speaker 1: next guest is William R. Rhodes, better known as Bill
• 0:31
  Speaker 1: Rhodes to listeners of this program. He is the author
• 0:35
  Speaker 1: of Banker to the World, Leadership Lessons from the front
• 0:38
  Speaker 1: Lines of Global of Finance. He has held a variety
• 0:42
  Speaker 1: of senior and executive positions at a City Group and
• 0:46
  Speaker 1: City bank from ninety seven until his retirement in but
• 0:51
  Speaker 1: he's been busy in retirement, writing books and serving on
• 0:54
  Speaker 1: a variety of boards. And he joins us here in
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  Speaker 1: our eleven Trio Studios. Bill, it's pleasure to have you here,
• 1:01
  Speaker 1: and I want to do something slightly different because you know,
• 1:04
  Speaker 1: normally it's a back and forth thing, but I think
• 1:06
  Speaker 1: in this context you actually have met and spend time
• 1:11
  Speaker 1: with the world leaders of the countries we're going to
• 1:14
  Speaker 1: talk about. So I'm just gonna give you a topic,
• 1:17
  Speaker 1: and I want you to offer the detail that you have, because,
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  Speaker 1: as I said, you've sat with people who are in
• 1:24
  Speaker 1: charge in the room, and you know them, you know
• 1:27
  Speaker 1: how they think. I want to begin with China trade
• 1:31
  Speaker 1: and tariffs in the United States. Tell us about what's
• 1:34
  Speaker 1: going on you believe behind the scenes. Well, first of all,
• 1:37
  Speaker 1: it's always great to be on with you, Pim. I
• 1:39
  Speaker 1: think the so called skirmish that we're on with China
• 1:43
  Speaker 1: and trade is starting to harden into what could be
• 1:48
  Speaker 1: a difficult trade war, and both sides think they have
• 1:52
  Speaker 1: an advantage. I think the United States under Trump feels
• 1:55
  Speaker 1: that with our economy growing so strongly, as I always
• 1:59
  Speaker 1: tell you, I think we're in the goldilocks period here.
• 2:02
  Speaker 1: A year from now, I don't think we are, we
• 2:04
  Speaker 1: will be, and so they they in the administration feel
• 2:08
  Speaker 1: they have an advantage, and particularly since the Chinese export
• 2:13
  Speaker 1: about five billion dollars to US, and you know we
• 2:16
  Speaker 1: do a hundred and thirty or forty with them. The
• 2:19
  Speaker 1: problem is there are so many other things that are
• 2:21
  Speaker 1: tied into into this, and of course we need China
• 2:25
  Speaker 1: with our discussions with North Korea. So it's not all
• 2:28
  Speaker 1: one sided. At the same time, the Chinese have problems
• 2:31
  Speaker 1: with their own economy. They have a very high debt
• 2:34
  Speaker 1: to GDP level, reaching almost three percent of debt to
• 2:37
  Speaker 1: g g P. UH. They still haven't controlled the shadow
• 2:40
  Speaker 1: banking situation. There are a lot of weak smaller banks,
• 2:43
  Speaker 1: particularly in north Northeast China. UH. They're still tied in
• 2:47
  Speaker 1: with the old steelmaking and things like that. UH and
• 2:50
  Speaker 1: the state owned enterprises still have not been properly I
• 2:54
  Speaker 1: think dealt with UH and and a good portion of
• 2:57
  Speaker 1: the economy is still dependent in China on those things.
• 2:59
  Speaker 1: So the Chinese have to get to economic reform or
• 3:03
  Speaker 1: they're going to have a problem with their own economy.
• 3:05
  Speaker 1: And at the same time they now have to face
• 3:07
  Speaker 1: off with the United States on trade. So I think
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  Speaker 1: it is a it's a difficult situation. Of course, we
• 3:14
  Speaker 1: have the all powerful if you want to call him,
• 3:16
  Speaker 1: Emperor chi Jinping, but he still has to deliver to
• 3:20
  Speaker 1: his people UH. And there's sligns, their signs now that
• 3:24
  Speaker 1: growth are slowing down in China UH, and this makes
• 3:27
  Speaker 1: it all the more difficult. So the question is are
• 3:30
  Speaker 1: we going to sit down eventually with China and work
• 3:32
  Speaker 1: something out. It looks like for the moment that doesn't
• 3:36
  Speaker 1: seem to be what's in the cards. I think UH,
• 3:39
  Speaker 1: medium term, we're going to have to do so because
• 3:42
  Speaker 1: the world economy will be affected, not just UH China's
• 3:45
  Speaker 1: and our own, but I think the world economy, because
• 3:48
  Speaker 1: we're talking about the world's too largest economies. Tell us
• 3:51
  Speaker 1: about the link between China, the International Monetary Fund and
• 3:57
  Speaker 1: the debts that other countries have incurred because they have
• 4:01
  Speaker 1: borrowed money from China and now can't pay it back. Well,
• 4:06
  Speaker 1: I think what you're referring to is the One Belt,
• 4:09
  Speaker 1: One Road UM, which stretches now to depending on what
• 4:13
  Speaker 1: list of countries you look at. Some people say fifty
• 4:16
  Speaker 1: sixty seventy countries starting in Asia but now into Africa,
• 4:21
  Speaker 1: UH and UH in the Middle East and even now
• 4:24
  Speaker 1: in parts of South America. And the problem there is
• 4:29
  Speaker 1: that UH these projects supposedly are funded by the Chinese
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  Speaker 1: Development Bank, the Chinese x In Bank, and UH and
• 4:37
  Speaker 1: private UH public s O type banks, but they're running
• 4:42
  Speaker 1: up tremendous debt. Pakistan, for instance, is in U has
• 4:46
  Speaker 1: borrowed or is planning to borrow up to sixty billion
• 4:49
  Speaker 1: from the Chinese for infrastructure. And the question is, here's
• 4:53
  Speaker 1: an economy that's in deep trouble. They have a new UH,
• 4:56
  Speaker 1: they have a new elected government UH him were in
• 5:00
  Speaker 1: Khan and he's facing the idea of how he's going
• 5:03
  Speaker 1: to be able to deal with his economy, which is
• 5:06
  Speaker 1: basically run out of reserves. The logical things you go
• 5:08
  Speaker 1: to the International Monetary FONT, which we're the largest shareholder,
• 5:11
  Speaker 1: and you ask for a bailout, just like Argentina got
• 5:14
  Speaker 1: a fifty billion dollar bailout a couple of months ago,
• 5:18
  Speaker 1: and Turkey may have to get one going forward. And
• 5:20
  Speaker 1: the question is does the United States want the I
• 5:23
  Speaker 1: m F and other institutions, the World Bank, the Breton
• 5:27
  Speaker 1: Woods institutions to be bailing out these clients of the
• 5:31
  Speaker 1: One Belt, One Road for China. And the answer is
• 5:34
  Speaker 1: I don't think so. Bill Rhodes, let's continue. Let you
• 5:38
  Speaker 1: continue on China because you want to make note of
• 5:40
  Speaker 1: a change in the disposition of the Chinese economy. Right.
• 5:45
  Speaker 1: I think most people grew up with the idea that
• 5:47
  Speaker 1: China was was really very dependent on their exports. But
• 5:52
  Speaker 1: the truth is five years ago, fifty percent of the
• 5:54
  Speaker 1: economy was based on exports. Today, the latest figures I
• 5:59
  Speaker 1: saw a couple of months go. Uh at seventy seven
• 6:02
  Speaker 1: point eight percent is domestic consumption. So they feel that
• 6:06
  Speaker 1: they are in a stronger position than they would have
• 6:08
  Speaker 1: been a few years ago. Uh, we'll see what happens,
• 6:11
  Speaker 1: because as I mentioned, they still have those problems with
• 6:14
  Speaker 1: their domestic economy in the sense of debt to GDP
• 6:17
  Speaker 1: and reorganizing state owned enterprise at etcetera. Let's hope this
• 6:21
  Speaker 1: thing gets settled in the next six months or so,
• 6:24
  Speaker 1: because we're already talking you know, figures that get into
• 6:28
  Speaker 1: uh fifty billion, we're talking then we're talking about a
• 6:31
  Speaker 1: hundred billion, and then two billion and etcetera. And President
• 6:36
  Speaker 1: Trump said the other day that necessary, he'll go to
• 6:38
  Speaker 1: five hundred billion, which means we won't we won't take
• 6:40
  Speaker 1: any Chinese exports. So we'll see how that works itself out.
• 6:45
  Speaker 1: I want you to just continue your thought that links
• 6:48
  Speaker 1: China the International Monetary Fund and countries that request money
• 6:54
  Speaker 1: from the International Monetary Fund, and I want to bring
• 6:58
  Speaker 1: in Turkey. Tell us what you believe is going on. Well,
• 7:02
  Speaker 1: Ankin In the case of Turkey, Uh, they are in
• 7:06
  Speaker 1: a very difficult spot, which they've been in before. I
• 7:09
  Speaker 1: helped them work their way out of problems when they
• 7:14
  Speaker 1: had their first and only female premier, Gennesu Chili. UH
• 7:19
  Speaker 1: to get an agreement with the International Monetary Fund, because
• 7:23
  Speaker 1: in the case of Turkey, the tendency is they borrow
• 7:27
  Speaker 1: short term in dollars, both the banking system and the
• 7:31
  Speaker 1: private sector. It's not so much the sovereign. And any
• 7:35
  Speaker 1: time they there's a problem of confidence, UH, these lines
• 7:39
  Speaker 1: are withdrawn and they leave them high and dry. The
• 7:42
  Speaker 1: worst crisis was two thousand one. Uh and UH. They
• 7:47
  Speaker 1: were very fortunate because Turkey at the time put in
• 7:50
  Speaker 1: Kamal Dervish, who had been a vice president of the
• 7:52
  Speaker 1: World Bank, who was a first rate economist and knew
• 7:55
  Speaker 1: how to get things done. But we had a new
• 7:59
  Speaker 1: government with the Bush administration. Uh and uh. We had
• 8:05
  Speaker 1: a new Secretary of the Treasury O'Neill, who felt that
• 8:12
  Speaker 1: countries that had problems to just go bankrupt and they
• 8:16
  Speaker 1: should not be bailed out. And he uh in discussions
• 8:20
  Speaker 1: I had when he said, you know, Bill, if if
• 8:21
  Speaker 1: I were there when Mexico and Argentina had their problems,
• 8:25
  Speaker 1: I would have just told him to go get to
• 8:27
  Speaker 1: go into bankruptcy like we have to in the in
• 8:30
  Speaker 1: the business sector. He was from Alcoa O'Neill exactly into
• 8:34
  Speaker 1: the UH as we do in the private sector. Anyway,
• 8:40
  Speaker 1: the the head of the International Monetary Fund at the time,
• 8:44
  Speaker 1: Horse Kohler, came to me because he couldn't get a
• 8:48
  Speaker 1: meeting with with O'Neill with Paul, because Paul said, you know,
• 8:54
  Speaker 1: he's just gonna come here and ask for us to
• 8:56
  Speaker 1: support these bailouts. And UH. What I pointed out uh
• 9:02
  Speaker 1: to UH to Paul was I thought in Turkey who
• 9:04
  Speaker 1: had a new government, a new UH finance minister, World
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  Speaker 1: Bank trained, and he was prepared to take the tough
• 9:11
  Speaker 1: steps to rationalize the economy before the I m F
• 9:15
  Speaker 1: put one diamond there. And so the point was if
• 9:18
  Speaker 1: they didn't carry forth the reforms that were promised by
• 9:22
  Speaker 1: the government at the time, the Yes of It government
• 9:25
  Speaker 1: and particularly Kamal Dervish, then the Fund promised it wouldn't
• 9:29
  Speaker 1: it wouldn't give any money. So this has worked up
• 9:32
  Speaker 1: to bring these reforms forward before any money was dispersed.
• 9:36
  Speaker 1: And so I acted as a Meeka's korey I entry
• 9:40
  Speaker 1: between Turkey, the International Monetary Fund and the U. S. Treasury.
• 9:45
  Speaker 1: Fortunately it worked out and for many years Turkey had
• 9:48
  Speaker 1: a booming economy. But the one thing they didn't resolve
• 9:51
  Speaker 1: when she is getting at them again is all of
• 9:53
  Speaker 1: this borrowing in foreign currency by the private sector and
• 9:57
  Speaker 1: a lot of a short term and the banking sect there.
• 10:00
  Speaker 1: And so when you have a loss of confidences what
• 10:02
  Speaker 1: you have now because uh, the financial community uh both
• 10:08
  Speaker 1: I think, primarily internationally but even somewhat domestically, is very
• 10:12
  Speaker 1: concerned about the economic policies of President Urvan, who was
• 10:17
  Speaker 1: just re elected as the strongest head of state since
• 10:20
  Speaker 1: Kamal out of Turk when the when the modern Turkish
• 10:22
  Speaker 1: Republic was founded. Do you believe that Turkey will get
• 10:25
  Speaker 1: money from the International Monetary Fund? Uh? First of all,
• 10:30
  Speaker 1: I have to ask for it what they may be
• 10:32
  Speaker 1: forced to, just like Argentina, because just take a look,
• 10:35
  Speaker 1: they announced, uh, three three or four months ago to
• 10:38
  Speaker 1: inflation wouldn't get more than seven or eight percent. It's
• 10:41
  Speaker 1: already the sixteen percent run and growing. Uh. And Uh,
• 10:45
  Speaker 1: the the currency has depreciated almost thirty percent in the
• 10:50
  Speaker 1: since since May, and so I think the uh, the
• 10:54
  Speaker 1: whole economy is under siege. And of course President Van
• 10:58
  Speaker 1: says the way to cure inflation and is to just
• 11:01
  Speaker 1: keep interest rate slow. Well, you keep interest rate slow
• 11:04
  Speaker 1: and the central bank doesn't intervene to support the currency
• 11:07
  Speaker 1: or wit or raise its rates. Uh, people are just
• 11:10
  Speaker 1: gonna pull even more. And so I think they're caught
• 11:13
  Speaker 1: in a real bind. And so there are two possibilities.
• 11:16
  Speaker 1: One they put on capital controls, which I think would
• 11:20
  Speaker 1: be the wrong signal. Second, they start pushing through the reforms,
• 11:26
  Speaker 1: including let letting the central bank raise interest rates, uh,
• 11:31
  Speaker 1: you know, to kill this inflationary spiral they're in. Or
• 11:35
  Speaker 1: the third thing is they go to the International Monetary Fund,
• 11:39
  Speaker 1: which would you know, insist that they that they start
• 11:43
  Speaker 1: fighting inflation and make other reforms they're necessary. Fortunately or unfortunately,
• 11:48
  Speaker 1: Van has put his son in law as the Treasury
• 11:52
  Speaker 1: and Economic Minister, and so people are concerned that you
• 11:55
  Speaker 1: won't have an independent authority running the economics out of
• 12:00
  Speaker 1: his administration. So there's a lot of lack of confidence.
• 12:03
  Speaker 1: So I think what you need to do is to
• 12:04
  Speaker 1: have this government do what the past two governments that
• 12:07
  Speaker 1: I met when they were last under crisis where I
• 12:10
  Speaker 1: worked in two thousand one, to take these reforms and
• 12:14
  Speaker 1: if necessary, go to the I m F for a
• 12:17
  Speaker 1: standby line. What they should not do U would be
• 12:21
  Speaker 1: to slap on capital controls because I think that would
• 12:24
  Speaker 1: just exacerbate the lack of confidence that already is existing.
• 12:28
  Speaker 1: I want to give you twenty seconds, and I know
• 12:30
  Speaker 1: it's tough. Pick one thing that you're doing now that
• 12:35
  Speaker 1: you're supporting that is outside of the banking arena. Well, unfortunately,
• 12:42
  Speaker 1: my beautiful wife Louise died two years ago of khalio blastoma.
• 12:47
  Speaker 1: Uh and uh, you know Louise, and we battled it
• 12:50
  Speaker 1: for two years. And so I've set up a center
• 12:54
  Speaker 1: a New York Presbyterian Hospital to fight this terrible disease,
• 12:57
  Speaker 1: the first in the world. There are many the many
• 13:01
  Speaker 1: hospitals that have centers for neurology, but not one for
• 13:04
  Speaker 1: just glob blostoma. So I spend a lot of time
• 13:06
  Speaker 1: on that. Thanks very much. Bill Rhodes, President, Chief Executive,
• 13:11
  Speaker 1: William R. Rhodes, Global Advisors, author of Banker to the World.
• 13:18
  Speaker 1: One of the deals today that has gone bad is
• 13:20
  Speaker 1: Sinclair Broadcasting's bid to become a nationwide operators collapsed as
• 13:26
  Speaker 1: Tribune Media withdrew from the plan merger, and it's actually
• 13:29
  Speaker 1: suing for a billion dollars in Delaware courts here to
• 13:33
  Speaker 1: tell us more about these two media giants. As Porter
• 13:36
  Speaker 1: bib managing partner for Media Tech Capital Partners, he joins
• 13:40
  Speaker 1: us here in our eleven Trio Studios, Porter, a pleasure
• 13:43
  Speaker 1: as always to have you. I'm just gonna let you
• 13:45
  Speaker 1: run on these topics because there are so many of them.
• 13:48
  Speaker 1: We've got to get through Sinclair Broadcasting and Tribune Media.
• 13:52
  Speaker 1: What happened and why? Well, there there are two levels
• 13:56
  Speaker 1: to this story, or at least to the explanation of
• 13:59
  Speaker 1: why Tribune pulled out. Basically, the FCC under Agit Pay
• 14:05
  Speaker 1: wasn't going to approve the consolidation of Tribune and Trip
• 14:08
  Speaker 1: in Sinclair to which would have created the nation's largest
• 14:13
  Speaker 1: television station network, primarily because Sinclair had been very open
• 14:19
  Speaker 1: about wanting to compete as a radical conservative network going
• 14:26
  Speaker 1: head to head with Fox News m Nobody knows why
• 14:31
  Speaker 1: Mr Pay changed his mind, because he's been very pro
• 14:35
  Speaker 1: business and no interference from all of the other major
• 14:40
  Speaker 1: consolidations that he's had to oversee in his tenure as
• 14:43
  Speaker 1: a chairman of the FCC. It's possible that somebody at
• 14:47
  Speaker 1: the Justice Department persuaded him to look hard at the
• 14:51
  Speaker 1: Sinclair consolidation. Uh, since they are appealing the Time owner
• 14:56
  Speaker 1: a T and T combination and I don't think are
• 15:00
  Speaker 1: going to get anywhere. But that seems to be the
• 15:02
  Speaker 1: sense that the government is taking on large media combinations.
• 15:06
  Speaker 1: Is print media dead? Print media is another story altogether,
• 15:11
  Speaker 1: because we've had another broken deal. Uh this morning. UH Trunk,
• 15:17
  Speaker 1: which owns the major tribune newspapers in UH seven major
• 15:22
  Speaker 1: metropolitan areas walked away from a deal that would have
• 15:27
  Speaker 1: put uh those newspapers in the hands of a private
• 15:31
  Speaker 1: equity company. Um. There there really is no explanation other
• 15:36
  Speaker 1: than the fact that financing for that for that transaction
• 15:39
  Speaker 1: was that the statement was that it was impossible to complete.
• 15:42
  Speaker 1: So they both parties walked away. Um, somebody is going
• 15:46
  Speaker 1: to get those newspapers because, Uh, the l A Times
• 15:50
  Speaker 1: new owner has shown what can happen when you put
• 15:53
  Speaker 1: an enlightened management and and get the community behind the
• 15:57
  Speaker 1: paper and respect the fact that journalists, whether they're in
• 16:00
  Speaker 1: print or on the Internet, are vital asset to the
• 16:04
  Speaker 1: community and hardly the enemy of the people. Uh. He's
• 16:07
  Speaker 1: making a real goal of the l A. Times. He
• 16:11
  Speaker 1: brought Norman Pearlstein in one of the most UH experienced
• 16:15
  Speaker 1: and capable and proven UH newspaper and editorial managers in
• 16:19
  Speaker 1: the country. Um, and he's going to start making profit
• 16:22
  Speaker 1: in the next twelve eighteen months from a paid paper.
• 16:26
  Speaker 1: That Trunk when they owned it, had decimated both the
• 16:30
  Speaker 1: newsroom and the business side of UH that that company. Um,
• 16:35
  Speaker 1: you're going to see more and more enlightened ownership. The
• 16:39
  Speaker 1: New York Times today reported twenty four million dollars profit,
• 16:43
  Speaker 1: but primarily from their digital side. Um. Jeff Bezos owns
• 16:48
  Speaker 1: The Washington Post and he's had eight consecutive quarters of profitability,
• 16:52
  Speaker 1: and those demonstrate that print is not dead. But it
• 16:56
  Speaker 1: depends on who is owning the print to keep alive.
• 17:01
  Speaker 1: Fox and Disney cy Fox and the Walt Disney Company.
• 17:05
  Speaker 1: And then you've got to mix in, of course, Comcast
• 17:08
  Speaker 1: and Sky Broadcasting. Well, that's right now. Fox owns thirty
• 17:14
  Speaker 1: nine percent of Sky. Sky is the holy Grail, according
• 17:18
  Speaker 1: to Bob Iger, he needs it to finish taking ESPN globally.
• 17:25
  Speaker 1: ESPN has lost its franchise in or let's say it's
• 17:28
  Speaker 1: losing it rapidly in the cable industry. Domestically, it has
• 17:32
  Speaker 1: virtually no revenue generation outside the US. If he can
• 17:37
  Speaker 1: acquire the rest of Sky for Disney, he can take
• 17:42
  Speaker 1: ESPN global, and he can add Sky Sports rights. They
• 17:45
  Speaker 1: own the rights to the Premier League soccer, the Formula
• 17:49
  Speaker 1: One racing, and a whole slew of other European major
• 17:52
  Speaker 1: sports right so it's really important for him to do it. Yesterday,
• 17:57
  Speaker 1: the UK regulators gave bob Iger a big step forward
• 18:01
  Speaker 1: to complete the transaction of taking control of Sky. They
• 18:05
  Speaker 1: said Fox does not have to go for a percent.
• 18:09
  Speaker 1: They they have thirty nine and all they have to
• 18:11
  Speaker 1: do is get to fifty one and bid for that.
• 18:14
  Speaker 1: And if they do, which they will, they will have
• 18:17
  Speaker 1: to pay up a little bit, but not anything like
• 18:20
  Speaker 1: the thirty five or thirty six billion dollars that it
• 18:22
  Speaker 1: would cost them if they had to buy the whole
• 18:24
  Speaker 1: of Sky. Then Disney gets it and puts ESPN around
• 18:29
  Speaker 1: the world. The odd irony of that whole situation is
• 18:34
  Speaker 1: that Brian Roberts keeps getting whacked by Bob Iger. Uh
• 18:40
  Speaker 1: eight ten years ago when he tried to take over Disney,
• 18:43
  Speaker 1: Bob Iger was not happy. They've been at each other's
• 18:46
  Speaker 1: throats ever since, and Sky is going to be another
• 18:50
  Speaker 1: loss for Roberts. But there's one more yet to come,
• 18:53
  Speaker 1: and that's Hulu. Uh. Disney now owned sixty of Hulu.
• 18:57
  Speaker 1: Comcast hast uh isn he can squeeze them out if
• 19:01
  Speaker 1: they want. And it's going to be a sad day
• 19:03
  Speaker 1: for Mr. Roberts because there's not much he can do
• 19:06
  Speaker 1: about that. Another topic, Viacom and CBS. UH. I think
• 19:14
  Speaker 1: the easiest way to summarize that situation is Sherry wins Um.
• 19:19
  Speaker 1: It's going to be a long bitter struggle for less Moonviz.
• 19:23
  Speaker 1: But uh, he is suing her in the Delaware Chance record.
• 19:27
  Speaker 1: He's going to lose that battle. He's trying to reduce
• 19:30
  Speaker 1: her control of eighty percent of devoting shares to twenty
• 19:34
  Speaker 1: or less. Uh. He's not gonna prevail there. But more importantly,
• 19:38
  Speaker 1: I don't think he's going to prevail at CBS. I
• 19:41
  Speaker 1: think less Moonvius Uh, at some point when the outside
• 19:46
  Speaker 1: legal investigations are concluded. Uh, First, Jeff Figure is going
• 19:50
  Speaker 1: to go from CBS News. He's actually already said he's
• 19:53
  Speaker 1: not returning from his vacation quite yet. I think less
• 19:58
  Speaker 1: Moonvius will take the money in and then Sherry will
• 20:01
  Speaker 1: combine veh COOM and CBS seldom probably the Verizon, which
• 20:05
  Speaker 1: is very interested, and be done with it all right.
• 20:10
  Speaker 1: This is not necessarily media, but it's sure has grabbed
• 20:14
  Speaker 1: media attention around the world. Elon Muska, how can you
• 20:21
  Speaker 1: do what Elon Musk did and stay out of jail
• 20:24
  Speaker 1: or at least stay out of being banned from the
• 20:27
  Speaker 1: securities industry by the SEC. The toothless sec has done nothing.
• 20:33
  Speaker 1: They're already a half dozen class action suits being organized
• 20:38
  Speaker 1: by some of the aggressive litigators against Elon and Tesla
• 20:42
  Speaker 1: for his failure to identify the financing source that he
• 20:46
  Speaker 1: said he had lined up to take Tesla private. It's
• 20:50
  Speaker 1: outrageous that he can play the stock market that way.
• 20:53
  Speaker 1: But my senses, he was so moved by the shorts
• 20:58
  Speaker 1: that he had to take vengeance and he got it.
• 21:01
  Speaker 1: As always, Thank you very much. Porter bib managing partner
• 21:05
  Speaker 1: Media Tech Capital Partners on the swirl of media and
• 21:10
  Speaker 1: headlines in the news A confrontation between Canada and not
• 21:19
  Speaker 1: the United States, between Canada and Saudi Arabia. Here to
• 21:23
  Speaker 1: tell us about this feud and its implications is Paul
• 21:27
  Speaker 1: we Be. He is a research fellow at the Daniel
• 21:30
  Speaker 1: Morgan Graduate School of National Security in Washington, d C.
• 21:34
  Speaker 1: He is also the former vice president of the Liberal
• 21:37
  Speaker 1: Party of Canada under the Prime ministership of Pierre Elliott Trudeau.
• 21:42
  Speaker 1: Paul we Be, thank you very much for being here.
• 21:44
  Speaker 1: Can you outline for us what you believe to be
• 21:47
  Speaker 1: the ultimate issue that exists between Canada and Saudi Arabia
• 21:52
  Speaker 1: and why good morning, Pin And you're absolutely correct. It's
• 21:57
  Speaker 1: high noon between Saudi Arabia and Canada. Totally unexpected, but
• 22:03
  Speaker 1: high drama indeed, and one of the two is going
• 22:07
  Speaker 1: to have to blink. So the genesis of all this is,
• 22:12
  Speaker 1: I'm sure much of your audience knows, is a tweet
• 22:15
  Speaker 1: that was sent out UH at the end of last
• 22:17
  Speaker 1: week by the Canadian Foreign Minister demanding that human rights
• 22:22
  Speaker 1: activists in Saudi Arabia who were recently arrested be released.
• 22:26
  Speaker 1: So the Saaluadis reacted and reacted in a way that
• 22:30
  Speaker 1: was totally unanticipated by the markets or or by the
• 22:34
  Speaker 1: government's Canada. And I've taken a whole series of actions,
• 22:38
  Speaker 1: really Druyconian measures in fact and um and they've placed
• 22:42
  Speaker 1: in jeopardy a some major major trade UM agreements between
• 22:49
  Speaker 1: Canada and Saudi Arabia. So where do we stand right now?
• 22:55
  Speaker 1: We stand um, We're looking at a Canadian government that
• 23:01
  Speaker 1: does not have any support from its traditional allies like
• 23:05
  Speaker 1: the US, the UK, and the EU. The Canadians are
• 23:09
  Speaker 1: up there twisting in the wind, and they've taken a
• 23:13
  Speaker 1: lot of body blows from the Saudis, including UH, the
• 23:17
  Speaker 1: Sally's selling off of assets, stopping airline flights between two countries,
• 23:22
  Speaker 1: pulling out twelve thousand students from Canada, UH, cessation of
• 23:30
  Speaker 1: the sale of wheat and barley, large volumes of those
• 23:33
  Speaker 1: commodities being shut down. And the major issue here is
• 23:39
  Speaker 1: a fourteen billion dollar arms deal between Canada and Saudi Arabia,
• 23:45
  Speaker 1: which I believe is in jeopardy because yesterday my Saudi
• 23:49
  Speaker 1: foreign minister, Minister Al Jebar said there's nothing to mediate.
• 23:55
  Speaker 1: A mistake has been made and should be corrected, and
• 23:58
  Speaker 1: if it's not corrected, the Kingdom will consider additional measures
• 24:04
  Speaker 1: against Canada. That's pretty ominous, you know. So I think
• 24:08
  Speaker 1: there's a lot here between the two countries, and I
• 24:12
  Speaker 1: think the Canadians may have blinked this morning because they're
• 24:16
  Speaker 1: reaching out to the Emiratis. You a to try and
• 24:20
  Speaker 1: back channel into suth Arabian and find a way to
• 24:24
  Speaker 1: cool things down. Do you believe that the leadership of
• 24:28
  Speaker 1: Canada in the Prime Minister Trudeau, do you believe that
• 24:32
  Speaker 1: he expected this to happen? No, I don't believe it.
• 24:36
  Speaker 1: And here here is where I think there is criticism
• 24:40
  Speaker 1: warranted of the tweet that the foreign ministers sent on
• 24:46
  Speaker 1: uh Friday. Um what she was the Foreign minister of Canada,
• 24:53
  Speaker 1: none of the foreign minister I beg your pardon, right, Okay, Yes,
• 24:57
  Speaker 1: the foreign ministers sent out the tweet. And here's the issue, Uh,
• 25:00
  Speaker 1: the tweet. It was a clear manifestation or expression of
• 25:04
  Speaker 1: an overt values driven foreign policy, which when you're dealing
• 25:10
  Speaker 1: with the Kingdom of Saudi Arabia, could lead to disaster.
• 25:13
  Speaker 1: In this case, it has led to the disaster. The
• 25:16
  Speaker 1: the operational word is over it. You can have a
• 25:20
  Speaker 1: value of driven foreign policy, but when dealing with sau
• 25:24
  Speaker 1: Arabia in particular, one has to be discreete. One has
• 25:28
  Speaker 1: to engage in diplomatic dialogue work behind the scenes. In
• 25:31
  Speaker 1: this case that wasn't done. So I think you know,
• 25:34
  Speaker 1: why do you have any idea why why the tweet
• 25:38
  Speaker 1: was sent out? Yeah, why was this done in public?
• 25:40
  Speaker 1: I mean, isn't there a tradition of back channel, behind
• 25:44
  Speaker 1: the scenes foreign policy discussion If you have a problem, absolutely,
• 25:49
  Speaker 1: Uh then I worked with the Canadian embassy in Beirut.
• 25:53
  Speaker 1: These guys are, you know, uh, top tier professionals. They
• 25:57
  Speaker 1: know how to back channel and they know how to
• 25:59
  Speaker 1: engage quiet and effective diplomas. You have the utmost regard
• 26:03
  Speaker 1: for the Canayan Foreign ministry um and their diplomat um.
• 26:08
  Speaker 1: But in this case, I think the Foreign Minister, possibly
• 26:11
  Speaker 1: because of a lack of experience, uh in that part
• 26:14
  Speaker 1: of the world, sent out this this tweet and the
• 26:17
  Speaker 1: Saladia's reacted and you could have predicted that reaction in fact.
• 26:22
  Speaker 1: Uh So, having this sort of overt foreign policy using tweets, now,
• 26:26
  Speaker 1: you can get away with it if you're Donald Trump,
• 26:28
  Speaker 1: if you're in the United States, or if you're a
• 26:30
  Speaker 1: major power like Russia or China. But when you're a
• 26:34
  Speaker 1: middle range power like Canada, no, you cannot be as
• 26:37
  Speaker 1: an overt and in your face with values driven type
• 26:41
  Speaker 1: of foreign policy. All right, So if the Foreign Ministry,
• 26:44
  Speaker 1: the Foreign Minister of Canada, if you get a call
• 26:47
  Speaker 1: from maybe even the Prime Minister's office, and they say,
• 26:50
  Speaker 1: Paul we Be, what should we do now? What would
• 26:53
  Speaker 1: you say? Well, Uh, I would I would engage in
• 26:59
  Speaker 1: uh media discussions between the Prime Minister and the Crown
• 27:03
  Speaker 1: Prince Mohammed bin Salmon, who's decision maker in in this
• 27:08
  Speaker 1: particular area, and I would indicate to the Crown Prince
• 27:14
  Speaker 1: that we Canadians. You know, we believe in our values.
• 27:16
  Speaker 1: We believe in the release of human rights activists. But
• 27:19
  Speaker 1: we're not going to embarrass you publicly. We're not going
• 27:22
  Speaker 1: to uh dictate how you run your own domestic issues,
• 27:27
  Speaker 1: and UH we're going to look for a way to
• 27:30
  Speaker 1: climb down from from this uh confrontation. We cherish a
• 27:35
  Speaker 1: good relationship with Saudi Arabia, but we also cherished democratic values.
• 27:39
  Speaker 1: But this sort of thing, UH diplomacy by tweet will
• 27:42
  Speaker 1: not continue. Thanks very much for being with us, Paul
• 27:45
  Speaker 1: we Be, Research Fellow, Daniel Morgan, Graduate School of National
• 27:50
  Speaker 1: Security in Washington, d C. Coming up, we'll be talking
• 27:55
  Speaker 1: about China trade disputes and the United States. This is
• 27:59
  Speaker 1: bloom Work. Joining me now is Brooks Sutherland are Bloomberg
• 28:07
  Speaker 1: Opinion Deals and Industrials columnists and Brook you've been busy,
• 28:10
  Speaker 1: because today's the day. I guess we'll where old deals
• 28:15
  Speaker 1: go to die. I mean really, right Tribune in Sinclair, no,
• 28:20
  Speaker 1: Right Aid and Albertson's No, although we got a couple
• 28:24
  Speaker 1: of others that might be a yes, maybe done in Bradstreet,
• 28:27
  Speaker 1: but go ahead, what is going on? No? I mean
• 28:29
  Speaker 1: there has been a lot of deals that have died lately, um,
• 28:32
  Speaker 1: and you know, they're all sort of for different reasons.
• 28:35
  Speaker 1: You know, in the case of Tribune Sinclair, the issue
• 28:39
  Speaker 1: is regulatory or rather mismanagement of the regulatory process. And
• 28:44
  Speaker 1: in the case of Right Aid Albertson's, you know, I
• 28:47
  Speaker 1: think shareholders just felt like they weren't getting that great
• 28:50
  Speaker 1: of the deal. Now, the question in Right Aid's cases
• 28:52
  Speaker 1: whether there's really any winning Has right A tried repeatedly
• 28:58
  Speaker 1: to combine with me Boots with Walgreens, Yes, and that
• 29:02
  Speaker 1: deal was was blocked on regulatory ground, So Walgreens ultimately
• 29:06
  Speaker 1: ended up buying a smaller package of Right Aid stores.
• 29:09
  Speaker 1: So alright, so the Right Aid deal is off because
• 29:14
  Speaker 1: the shareholders really just want more money. Yes, And now
• 29:17
  Speaker 1: the question is whether or not going to get it? Yes,
• 29:20
  Speaker 1: And what the company's standalone prospects are because at this point,
• 29:23
  Speaker 1: you know, right, it is a significantly smaller drug store
• 29:27
  Speaker 1: competitor at a time when a lot of its biggest
• 29:29
  Speaker 1: rivals are diversifying into other areas buying pharmacy benefit managers,
• 29:33
  Speaker 1: for example, or insurers or different things like that, and
• 29:36
  Speaker 1: it's just not really clear how right it is going
• 29:39
  Speaker 1: to compete with that. Okay, now let's do Tribune and
• 29:43
  Speaker 1: Sinclair Broadcasting. What happened? You know, all of the reporting
• 29:48
  Speaker 1: that I've seen on this is the FCC really bent
• 29:51
  Speaker 1: over backwards here to try to make this deal possible.
• 29:54
  Speaker 1: They revived this old regulatory loophole that would allow Sinclair
• 29:58
  Speaker 1: to buy more stations with out bumping up over the
• 30:01
  Speaker 1: national ownership limits. But even with that modification, that sort
• 30:06
  Speaker 1: of loosening of the rules, Sinclair still had to sell
• 30:08
  Speaker 1: some station and the proposals that it made for divestitures
• 30:13
  Speaker 1: were just unworkable. A lot of times it was trying
• 30:16
  Speaker 1: to sell you know, TV stations to people who were
• 30:19
  Speaker 1: affiliated with this chairman but didn't have any experience running
• 30:22
  Speaker 1: a TV station, or they were selling it to people
• 30:24
  Speaker 1: who add ties to his family and family companies, and
• 30:27
  Speaker 1: so I mean, this is just really sort of a
• 30:29
  Speaker 1: blatant disregard for the regulatory process and the and the
• 30:34
  Speaker 1: rules that we have in place here. And so it
• 30:35
  Speaker 1: got to the point that the FCC said, we can't
• 30:38
  Speaker 1: sanction this, we feel like we've been misled. They sent
• 30:41
  Speaker 1: it to an administrative hearing, which historically has been tantamount
• 30:45
  Speaker 1: to a death sentence for deals because that just tends
• 30:47
  Speaker 1: to drag on for a very long time. So Tribune
• 30:50
  Speaker 1: is saying, we've had enough. We feel like you, you know,
• 30:53
  Speaker 1: did not follow through on your end of the merger agreement.
• 30:56
  Speaker 1: You did not take every reasonable effort to win regulatory support,
• 30:59
  Speaker 1: and I sort of took, you know, harmful efforts to
• 31:02
  Speaker 1: try to win regulator approval. So they're backing out and
• 31:05
  Speaker 1: suing Sinclair. They want they want a billion dollars? Do
• 31:09
  Speaker 1: they want a lot of damages? And I, you know, frankly,
• 31:12
  Speaker 1: they seem to have an argument here just given how
• 31:14
  Speaker 1: this all played out. What kind of assets does Tribune
• 31:18
  Speaker 1: have that are going to be worth money to somebody else?
• 31:22
  Speaker 1: So they have TV stations, And it was interesting because
• 31:25
  Speaker 1: at the time that the Sinclair deal was agreed to,
• 31:28
  Speaker 1: there were a number of different companies that were interested
• 31:30
  Speaker 1: in Tribune. Next Star is one of those. Fox and
• 31:33
  Speaker 1: Blackstone were contemplating a joint bid. There were a number
• 31:36
  Speaker 1: of private equity firms in the mix, So I think
• 31:38
  Speaker 1: there's definitely a distinct possibility that now this asset is
• 31:41
  Speaker 1: back on the market, you could see other buyers come
• 31:44
  Speaker 1: forward who are willing to be a little bit more
• 31:46
  Speaker 1: reasonable and going through the regulatory process and possibly getting
• 31:49
  Speaker 1: a deal done. What happens at Sinclair Broadcasting, you know,
• 31:53
  Speaker 1: I don't think they're done either as far as M
• 31:56
  Speaker 1: and A, And maybe they've learned some lessons from this
• 31:58
  Speaker 1: experience and can get back to it. But I'm not
• 32:01
  Speaker 1: really sure what assets are out there that would make
• 32:03
  Speaker 1: as big of a difference for them as Tribune. I
• 32:06
  Speaker 1: don't really see them buying next Star. I'm not That
• 32:08
  Speaker 1: deal just doesn't seem feasible at all. You'd have to
• 32:10
  Speaker 1: divest so many stations that that just that doesn't make sense.
• 32:14
  Speaker 1: So you're talking about probably a lot smaller deals versus
• 32:17
  Speaker 1: one big bite. Just quickly, is it is there any
• 32:20
  Speaker 1: lingering animosity? Does that linger? In Washington, d C. At
• 32:24
  Speaker 1: the Department of Justice, in the Trade Commission I think so.
• 32:27
  Speaker 1: And you know, some of the reporting has pointed to
• 32:29
  Speaker 1: there was a different issue that the FCC find Sinclair
• 32:33
  Speaker 1: for something, and rather than just taking what was a
• 32:35
  Speaker 1: relatively small fine over sort of a bureaucratic issue, they
• 32:40
  Speaker 1: fought that really aggressively and they were really pushy on that,
• 32:43
  Speaker 1: and I think that, you know, made people at the
• 32:45
  Speaker 1: FCC feel uncomfortable, and I think those feelings do linger
• 32:48
  Speaker 1: for a while. Thanks very much, Always a pleasure. Brooks Southerland,
• 32:52
  Speaker 1: Bloomberg Opinion, Deals and Industrials columnist, always expert on the
• 32:56
  Speaker 1: world of combinations and in this case, bust combinations. Thanks
• 33:02
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 33:05
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 33:09
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 33:12
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
• 33:16
  Speaker 1: Abramo wits one. Before the podcast, you can always catch
• 33:19
  Speaker 1: us worldwide on Bloomberg Radio.