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DraftKings Going Public As Legalization Fuels Growth · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you,
• 0:05
  Speaker 1: along with my co host Lisa Brahma wits. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
• 0:10
  Speaker 1: you and your money. Whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. Very cool deal today in the
• 0:21
  Speaker 1: betting space, DraftKings is going public in a three way
• 0:25
  Speaker 1: deal with gaming technology provider sp Tech and an acquisition
• 0:29
  Speaker 1: fund founded by former Hollywood executive Jeff Saganski that values
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  Speaker 1: a new firm about three point three billion dollars. We're
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  Speaker 1: very fortunate to today to have Jason Robberts. He is
• 0:37
  Speaker 1: the CEO of draft Kings. He's in a Bloomberg and
• 0:39
  Speaker 1: Director Brooker studio. Jason, thanks so much for joining us.
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  Speaker 1: I know it's a busy day. Describe this deal. You're
• 0:44
  Speaker 1: not doing an I p O, you're not being acquired,
• 0:47
  Speaker 1: tell us kind of how this really works. Well, thank
• 0:49
  Speaker 1: you for having me, and happy holidays to everybody. Um So,
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  Speaker 1: this is a three way merger of DraftKings sp Tech,
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  Speaker 1: which is one of the world's leading technology g risk
• 1:01
  Speaker 1: management and trading operators. Um. They provide services sports books
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  Speaker 1: all over the world. Uh. And then a spack company,
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  Speaker 1: special purpose acquisition company called Diamond Eagle. The way it
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  Speaker 1: works is Diamond Eagle as raised previously four hundred million
• 1:16
  Speaker 1: dollars in cash. And UM. The way they did that
• 1:20
  Speaker 1: as they went around various shareholders and they told them
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  Speaker 1: the types of businesses they would be interested in doing
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  Speaker 1: a deal with, and number one on their list was
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  Speaker 1: a sports betting business. So UM, you know really, Uh,
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  Speaker 1: the shareholders hopefully are are excited about this and um,
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  Speaker 1: once the deal closes, the company will be renamed DraftKings.
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  Speaker 1: It will be publicly traded. And the cash that's there,
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  Speaker 1: as well as the pipe that we raised, which is
• 1:44
  Speaker 1: a little over three million dollar pipe is a private investment. Yeah,
• 1:47
  Speaker 1: so the pipe is exactly it's a it's a private
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  Speaker 1: investment that go it rolls into the public stock. Um.
• 1:54
  Speaker 1: We had great groups participate, UM like Cap Research, Wellington, Franklin, Templeton.
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  Speaker 1: So that'll all roll into the eventual close of the
• 2:03
  Speaker 1: stock ex season closed of the deal, at which point
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  Speaker 1: Draft Kings will become a publicly traded stock. Okay, So
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  Speaker 1: tell me about the sports betting business today. It's rapidly changing.
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  Speaker 1: We're getting states like New Jersey. So I'm seeing all
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  Speaker 1: these folks from New York driving through the Lincoln Tunnel
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  Speaker 1: placing their bets, I guess, and then driving back. Tell
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  Speaker 1: us about what's going on in the sports betting business
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  Speaker 1: right now? Uh? Well, right now, there's tremendous momentum around
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  Speaker 1: legalization and regulation in the states. Uh. So, just in
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  Speaker 1: the last year, several new states have passed legislation, Several
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  Speaker 1: new states have launched products draft Kings ourselves, uh launched
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  Speaker 1: our online sports book UM last year in New Jersey.
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  Speaker 1: But just in the last few months we've launched West Virginia, Indiana, Pennsylvania, UM,
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  Speaker 1: New Hampshire will be hopefully coming soon. So a lot
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  Speaker 1: of great momentum behind states, you know, quickly adopting this.
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  Speaker 1: Now that this Preme Court, Uh, you know, about a
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  Speaker 1: year and a half ago lifted the federal band. So
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  Speaker 1: why isn't there But there isn't a federal legalization of
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  Speaker 1: sports betting? Right? Why isn't there one? There's actually a
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  Speaker 1: very interesting legal history. I'm not a lawyer, but I
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  Speaker 1: find it fascinating. So there's this law called passa Professional
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  Speaker 1: Amateur Sports Protection Act, and it never said sports betting
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  Speaker 1: is illegal. That's why you could always go to Vegas
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  Speaker 1: and other parts of Nevada and bet on sports. It
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  Speaker 1: just said no new states can legalize no new states
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  Speaker 1: can add sports betting to uh make it legal. So, um,
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  Speaker 1: you know, that stood in place for about twenty five
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  Speaker 1: or so years, and um, you know New Jersey tried
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  Speaker 1: to legalize sports betting. That law was used to to
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  Speaker 1: stop them. Uh, they took it all the way up
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  Speaker 1: and eventually one in the Supreme Court with you know, again,
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  Speaker 1: I'm not a lawyer, but my understanding was that, you know,
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  Speaker 1: the ruling was that the federal government could choose to
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  Speaker 1: make anything legal or illegal that they want to, but
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  Speaker 1: they couldn't tell the states what to make their own laws. So, um,
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  Speaker 1: it was kind of a unique law. I don't think
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  Speaker 1: there's anything else out there like it. So not that
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  Speaker 1: I you know, from Supreme Court's perspective, I don't think
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  Speaker 1: they were very interested in sports betting. I think it
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  Speaker 1: was much more of a states versus federal rights question.
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  Speaker 1: Tell us about the business now, as more and more
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  Speaker 1: states legalized sports betting, like when you like when New
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  Speaker 1: Jersey did it. How big of a business has it become?
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  Speaker 1: It seems like it would be big. I hear stories
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  Speaker 1: that's revitalized, you know, some of the casinos down in
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  Speaker 1: Atlantic City and so on, just driving traffic like on
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  Speaker 1: a Sunday morning to watch football. Absolutely, I mean, I
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  Speaker 1: think it's been, you know, by all accounts, a huge
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  Speaker 1: success in New Jersey and you know, other states I
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  Speaker 1: think are seeing promising early results as well. Everything is
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  Speaker 1: kind of up. It's not just sports betting, um, as
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  Speaker 1: you mentioned the whole industry. The brick and mortar casinos
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  Speaker 1: are up, the lottery is up, everything is up. So
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  Speaker 1: I think it's brought a lot of great attention to
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  Speaker 1: the state and hopefully we'll see more states follow. Talk
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  Speaker 1: to us about the competitive landscape, UM, cousender Draft Kings.
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  Speaker 1: You had a competitive fan Duel, I think that was
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  Speaker 1: recently acquired. Talked us about the competitive landscape. Who do
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  Speaker 1: you guys compete against. Well, FanDuel is definitely our chief competitor. UM,
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  Speaker 1: there's several others, mostly UH including FanDuel was bought by
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  Speaker 1: an Irish company, so most most of them come from Europe,
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  Speaker 1: a few from Australia, but really, you know, it's an
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  Speaker 1: interesting industry because, uh, due to obviously not having legal
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  Speaker 1: options in much of the US, there weren't really any
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  Speaker 1: big companies homegrown here. We're kind of the the only
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  Speaker 1: contender for that. Um And you know, obviously we started
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  Speaker 1: with fantasy sports, so it's sort of a back uh
• 5:31
  Speaker 1: you know, a little bit of a sideways way to
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  Speaker 1: get to hear. But most of the traditional companies in
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  Speaker 1: this space, we're built in Europe. A lot of them
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  Speaker 1: are in the UK. UM. So you know, I think
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  Speaker 1: a lot of our competition, at least in the near term,
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  Speaker 1: will be from Europe. And then you know, certainly the
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  Speaker 1: brick and mortar casinos are going to compete, but um,
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  Speaker 1: I think they view it a lot more as a
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  Speaker 1: driver of traffic for the at least the retail side. Uh.
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  Speaker 1: And then there's a handful that are very focused online
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  Speaker 1: as well. Are you surprised that the professional sports leagues
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  Speaker 1: like the NFL have kind of dropped their longstanding you know,
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  Speaker 1: just really trying to keep betting away and gambling away. Uh.
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  Speaker 1: You know, I'm surprised how quickly and how um you know,
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  Speaker 1: it's been all of them, but I'm not surprised this
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  Speaker 1: is where things landed. It's you know, every every everyone
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  Speaker 1: sort of follows the times, and I think, you know,
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  Speaker 1: as years have gone on, sports betting has been something
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  Speaker 1: that's been demystified a lot. I think being able to
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  Speaker 1: do it online and on mobile actually significantly increases, uh
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  Speaker 1: the NFL and other sports league's ability to monitor and
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  Speaker 1: protect against integrity issues. I think, you know, having it
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  Speaker 1: be trackable on mobile makes a huge difference for that. Uh.
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  Speaker 1: And you know, I think they understand that this is
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  Speaker 1: what the fan of future wants and it's going to
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  Speaker 1: be an important engagement tool for them. And uh, you know,
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  Speaker 1: at the end, they're about engaging their fans and that's
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  Speaker 1: what makes them great. Yep. It's interesting to what you know.
• 6:54
  Speaker 1: I know, as you've noticed as well, but you know,
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  Speaker 1: the Mickey Mouse company that also owns ESPN, now every
• 7:00
  Speaker 1: time they give you us a schedule, it's always the
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  Speaker 1: line the over under, and that's something that I just
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  Speaker 1: didn't think we'd see, uh, you know, certainly from some
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  Speaker 1: of the big mainstream sports like ESPN, but everybody's embracing
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  Speaker 1: it's a it's really interesting. Jason Robbins, Uh, CEO of DraftKings,
• 7:16
  Speaker 1: thanks so much for stopping by and now you have
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  Speaker 1: a busy data Congratulations on your transaction. Very interesting to
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  Speaker 1: see the growth of the sports betting UH in this country.
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  Speaker 1: And again there's stories or legion of you know, the
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  Speaker 1: folks in the neighboring states to New Jersey driving in
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  Speaker 1: placing their bets UH and then heading out. Very interesting.
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  Speaker 1: So I have to see how this plays out. Big
• 7:43
  Speaker 1: news at Boeing today management change at the top, the
• 7:45
  Speaker 1: existing CEO out, a new CEO coming from the board
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  Speaker 1: of directors takes charge. Here. This stock is up about
• 7:51
  Speaker 1: two on the news. George Ferguson, senior Aerospace, Defense and
• 7:55
  Speaker 1: Airlines analyst with Bloomberg Intelligence, joins us on the phone
• 7:57
  Speaker 1: from b I headquarters in Princeton, New Jersey. So, George,
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  Speaker 1: the market seems to like this change. Was it expected
• 8:05
  Speaker 1: or is this kind of a shock? I think this
• 8:07
  Speaker 1: is a bit of a shock, at least the timetable
• 8:10
  Speaker 1: was it. Think we all thought Dennis was under pressure,
• 8:14
  Speaker 1: and but I think a lot of people thought them
• 8:16
  Speaker 1: he would get the Max returned to service before he went.
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  Speaker 1: So I think we're a little bit surprised to see
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  Speaker 1: it happened here right at the end of the year,
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  Speaker 1: although this is the classic time to make big moves
• 8:27
  Speaker 1: like this. So George the new CEO, David Calhoun, who
• 8:30
  Speaker 1: had served as chairman since October, where we place Muhlenberg
• 8:34
  Speaker 1: as CEO and president on January. Um, what do we
• 8:38
  Speaker 1: know about this new CEO, David Calhoun? Well, I think interestingly,
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  Speaker 1: he has been very much on the sidelines and quiet
• 8:48
  Speaker 1: until a few you know, like a month ago, a
• 8:50
  Speaker 1: month and a half ago, when he came forward and
• 8:52
  Speaker 1: started giving interviews, so you could kind of see him
• 8:55
  Speaker 1: at that point warming up in the wings. He comes
• 8:57
  Speaker 1: out a ge comes at a catapill or, he comes
• 9:01
  Speaker 1: out of the investment world. So I think he's got
• 9:03
  Speaker 1: a lot of strong experience. The interviews I've seen with him,
• 9:06
  Speaker 1: he's a he's a pretty good communicator, and I think
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  Speaker 1: a lot of what he needs to do here though,
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  Speaker 1: is put a fresh face on this and approach the constituencies,
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  Speaker 1: you know, with with sort of clarity, um and cooperation.
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  Speaker 1: So I think, you know, even just getting a new
• 9:23
  Speaker 1: face here Alps as well. But he looks very well,
• 9:26
  Speaker 1: you know, very well prepared for this. So George, let's
• 9:30
  Speaker 1: try to put his to do list together for January
• 9:34
  Speaker 1: first day. What do you think the first phone call
• 9:36
  Speaker 1: he makes, for the first visit he makes. I think
• 9:38
  Speaker 1: he's going to the f a A. Okay, possible. I
• 9:41
  Speaker 1: think it's set gates to do is just get the
• 9:44
  Speaker 1: MAX back in the air. Get the MAX back in
• 9:45
  Speaker 1: the air, Get the MAX back in the air. So
• 9:47
  Speaker 1: I mean, give us a sense of where we are
• 9:49
  Speaker 1: in the process. Um, you know, my understanding is there
• 9:52
  Speaker 1: is a software fix that has been delivered I think
• 9:55
  Speaker 1: to some extent, maybe tested to some extent. So where
• 9:58
  Speaker 1: are we in the process and what what do you
• 10:00
  Speaker 1: thing is kind of holding things up? I think the
• 10:02
  Speaker 1: I think the ball is um in the f a
• 10:04
  Speaker 1: a's court. But I mean that's probably not the right
• 10:06
  Speaker 1: way to say, given Boeing wants to be involved all
• 10:09
  Speaker 1: along the process. But I think the MAX software is fixed.
• 10:13
  Speaker 1: We hear reports in the field of pilots testing it
• 10:16
  Speaker 1: in simulators and they seem they say it behaves as
• 10:19
  Speaker 1: they would expect. So I think where we are now
• 10:23
  Speaker 1: is we have to the f a A has to
• 10:26
  Speaker 1: approve the changes to that MAX software, to that MCAST software.
• 10:29
  Speaker 1: Anti stall software as well as approve whatever training regime
• 10:35
  Speaker 1: needs to be put in place for this new for
• 10:38
  Speaker 1: this change to the software. And I think that's what
• 10:41
  Speaker 1: we heard from the FA administrator a couple of weeks
• 10:43
  Speaker 1: ago where he said, Hey, it's going to take us
• 10:45
  Speaker 1: to at least mid February UM to finish up our
• 10:49
  Speaker 1: review of the airplane. And I think this is about
• 10:52
  Speaker 1: engaging the f a A A making sure they have everything
• 10:54
  Speaker 1: they need to get that review done, as you know,
• 10:57
  Speaker 1: as as simply as possible. Let's him um, which I
• 11:01
  Speaker 1: know is not a good safe assumption always, but let's
• 11:04
  Speaker 1: assume they do get f a A approval sometime in
• 11:06
  Speaker 1: the first quarter. My senses, planes are scattered all over
• 11:11
  Speaker 1: the country. They're in storage all over the country. I've
• 11:13
  Speaker 1: seen them park and employee parking lots. What's the time
• 11:16
  Speaker 1: frame do you think from approval to really getting this
• 11:19
  Speaker 1: thing in commercial? Uh? You know rotation with the airlines yea,
• 11:23
  Speaker 1: so definitely the scarier thing that the more challenging thing
• 11:26
  Speaker 1: is that the longer the max is delayed in, the
• 11:28
  Speaker 1: longer airplanes sit, the harder it is to get them
• 11:31
  Speaker 1: back into the into the fleets and flying the longer takes,
• 11:35
  Speaker 1: and so you know, we already saw United push everything
• 11:38
  Speaker 1: out to June. Right. The challenge of the airlines too
• 11:40
  Speaker 1: is they have to put a schedule out and then
• 11:42
  Speaker 1: start to sell tickets for the schedule. They don't want
• 11:45
  Speaker 1: to significantly count in an airplane before they know it's
• 11:47
  Speaker 1: going to be ready to fly. So the way we
• 11:50
  Speaker 1: really see it right now is it looks like, um,
• 11:53
  Speaker 1: there'll be at least some flow starting to move to
• 11:55
  Speaker 1: US airlines by by the very beginning of summer flying
• 12:00
  Speaker 1: season right needs to flow to the airline, and the
• 12:03
  Speaker 1: airline needs to get the pilots trained and into the
• 12:05
  Speaker 1: cockpit too, so that it doesn't the airplane doesn't go
• 12:08
  Speaker 1: back into service on day one. We think there's going
• 12:10
  Speaker 1: to be some flow back to the US airlines by summer,
• 12:14
  Speaker 1: but we don't think it's going to be all the
• 12:16
  Speaker 1: airplanes that they originally thought they were going to get delivered.
• 12:18
  Speaker 1: So we think that if you're a flyer this summer,
• 12:21
  Speaker 1: you may end up paying more than you'd We always
• 12:24
  Speaker 1: pay more than we hope for, but more than you
• 12:26
  Speaker 1: would have had the MAX been back into fleets. And
• 12:29
  Speaker 1: it looks to us like it's starting to slip for
• 12:32
  Speaker 1: getting much of anything back to the European carriers account
• 12:35
  Speaker 1: in the MAX by summer flying seasons. So Europe may
• 12:39
  Speaker 1: have even better fair uh fairs than we expected for
• 12:43
  Speaker 1: this summer, which would which would be a positive for
• 12:45
  Speaker 1: airlines in both the US and in Europe. Yeah, when
• 12:48
  Speaker 1: you say better, you're doing it from the perspective of
• 12:50
  Speaker 1: the airlines, not the consumer. All right, George Ferguson, thanks
• 12:54
  Speaker 1: very much. We appreciate your comments here. George is a
• 12:56
  Speaker 1: senior Airspace, Defense and Airlines ANNALYSOM Bloomberg intellientis joining us
• 13:00
  Speaker 1: on the phone. Uh. He always has great color on
• 13:02
  Speaker 1: the aerospace companies and the airlines that whole supply chain.
• 13:06
  Speaker 1: George covers and gives us a good sense here in
• 13:08
  Speaker 1: Boeing here. Um, probably a change that you know a
• 13:11
  Speaker 1: lot of investors are just judging by the pop in
• 13:14
  Speaker 1: the stock here saying had to be made. You had
• 13:16
  Speaker 1: to get a new face of the company here, particularly
• 13:19
  Speaker 1: as you are dealing with the f A A, which
• 13:22
  Speaker 1: is George Ferguson suggested, it's kind of the critical lynchpin
• 13:26
  Speaker 1: to getting the MAX up in the air. You've got
• 13:28
  Speaker 1: to get the f A A on board. You've got
• 13:30
  Speaker 1: to work closely with the FA and perhaps this new
• 13:32
  Speaker 1: CEO can get that done well. As we've been talking
• 13:43
  Speaker 1: about this morning, nineteen has been a heck of a
• 13:46
  Speaker 1: year for financial markets. Returns really stellar, particularly when you
• 13:49
  Speaker 1: consider the depths. We were back almost a year ago
• 13:53
  Speaker 1: today Christmas Eve last year, when the market was down
• 13:55
  Speaker 1: about of course, the question is now it's what have
• 13:58
  Speaker 1: you done for me lately? So what are we gonna
• 14:01
  Speaker 1: do next year? David Garrety, chief market strategist from Laidlaw
• 14:04
  Speaker 1: and Company, also a partner bat Block. You join us
• 14:06
  Speaker 1: here in a Bloomberg Interactive broker studio. David, So again,
• 14:09
  Speaker 1: twenty nineteen. I think snuck up on some people in
• 14:12
  Speaker 1: terms of the performance, even here in the last you know,
• 14:15
  Speaker 1: several weeks, several months. Uh, the upside is really I
• 14:17
  Speaker 1: think snuck up on some people. How do you think
• 14:20
  Speaker 1: that we should be positioned for next year in terms
• 14:23
  Speaker 1: of maybe our expectations for returns. While in the markets
• 14:28
  Speaker 1: markets people like to focus on the economics. I think
• 14:31
  Speaker 1: is a year of politics, given the U S general election,
• 14:34
  Speaker 1: given obviously the impeachment and trial which is going to
• 14:37
  Speaker 1: be in the offering, Uh, and our expectation is that,
• 14:40
  Speaker 1: you know, the politics and the uncertainties associated with that,
• 14:43
  Speaker 1: coupled with the fact of a you know, perhaps six
• 14:46
  Speaker 1: tenths of a percentage point hit to US GDP growth
• 14:50
  Speaker 1: from the shutdown on the seven thirty seven max, probably
• 14:52
  Speaker 1: give us the first half of the year, which is
• 14:55
  Speaker 1: probably flat to possibly down, And we think that more
• 14:58
  Speaker 1: of the returns for the year are going to be
• 14:59
  Speaker 1: constant rated in the back half of the year, most
• 15:01
  Speaker 1: likely in the form of a relief rally around the
• 15:04
  Speaker 1: US presidential election November. So in this respect, coming out
• 15:08
  Speaker 1: of two thousand nineteen, our advice to investors is to
• 15:12
  Speaker 1: certainly be very very selective. We do think that we're
• 15:15
  Speaker 1: still in an environment here where the long end of
• 15:17
  Speaker 1: the treasury curve is going to come in probably from
• 15:20
  Speaker 1: about the one point nine to level on the tenure
• 15:22
  Speaker 1: maybe to about one and a quarter one and a half.
• 15:25
  Speaker 1: But we don't think necessarily that the Feds in the
• 15:28
  Speaker 1: position yet to cut rates, although I think that that's
• 15:30
  Speaker 1: still going to be something to possibly support the market
• 15:34
  Speaker 1: going into the election to the extent that things slow
• 15:37
  Speaker 1: even if the data and you know, at least and
• 15:40
  Speaker 1: I we argue about this all the time. She rejects
• 15:42
  Speaker 1: to use her word, uh my contention that maybe the
• 15:45
  Speaker 1: data is coming economic data is coming in better than expected,
• 15:48
  Speaker 1: the consumer continues to be strong. We see stabilization in
• 15:51
  Speaker 1: manufacturing and business investment. The trade deal gets cleaned up,
• 15:54
  Speaker 1: there might be an argument to be made that this
• 15:56
  Speaker 1: FED could actually hike in any to that or is
• 16:01
  Speaker 1: it just because it's an election year you're just not
• 16:02
  Speaker 1: going to see that. Well, I mean, I think that's
• 16:04
  Speaker 1: a strange set of dynamics here in terms of how
• 16:06
  Speaker 1: the current administration is doing trade policy, and the focus
• 16:09
  Speaker 1: for trade policy with the current administration wasn't just China.
• 16:13
  Speaker 1: I mean, there's been more of a drum beating with
• 16:15
  Speaker 1: respect to the European Union the EU, and if we
• 16:18
  Speaker 1: look at monetary policy and the EU, they really are
• 16:21
  Speaker 1: sort of the locusts globally with regards to negative interest rates.
• 16:25
  Speaker 1: And you've seen the Swedish Central Bank the ricks bank
• 16:28
  Speaker 1: pull back within the recent two weeks, moving off of
• 16:32
  Speaker 1: a five year experiment with negative interest rates. You know,
• 16:35
  Speaker 1: obviously we may see this start to replicate itself more
• 16:37
  Speaker 1: broadly across the EU. And much as the EU and
• 16:41
  Speaker 1: our view lad the FED to cut rates in the
• 16:45
  Speaker 1: second half of two thousand nineteen, to the extent that
• 16:48
  Speaker 1: the EU under Christian Legard of the e c B
• 16:50
  Speaker 1: under Christian Leguard decides to raise rates, I think the
• 16:54
  Speaker 1: FED is left in a situation where they have to
• 16:56
  Speaker 1: follow yet and that was that is not discounted. Would
• 16:59
  Speaker 1: you agree? I mean, I don't think it's discounted. But
• 17:02
  Speaker 1: I also think at the same time that the ECB
• 17:04
  Speaker 1: is going to have a difficult time based on the
• 17:06
  Speaker 1: economics of what's going on within the EU around breggsit
• 17:10
  Speaker 1: uh in in having an environment where they could consider
• 17:13
  Speaker 1: actually tightening monetary policy. And maybe it only might be
• 17:16
  Speaker 1: because the US administration says that negative interest rates are
• 17:20
  Speaker 1: a way of basically propping up an unfair trade advantage.
• 17:24
  Speaker 1: But you know, there hasn't been a trade situation where
• 17:27
  Speaker 1: the current administration has not seen an unfair advanta. Exactly
• 17:31
  Speaker 1: do you anticipate a Phase one deal getting signed actually
• 17:34
  Speaker 1: on a piece of paper at some point uh in
• 17:37
  Speaker 1: a near to intermediate term the off rumored but seldom
• 17:41
  Speaker 1: seen UH And our view is possibly not until sometime
• 17:44
  Speaker 1: in But that doesn't mean that certain persons who are
• 17:48
  Speaker 1: running for re election. Won't be running around throwing out
• 17:51
  Speaker 1: tweets and rumors about it, but the substance I think
• 17:54
  Speaker 1: is going to be uh somewhat short. So alright, we're
• 17:57
  Speaker 1: thinking about you know, people a lot have their twenty
• 18:01
  Speaker 1: twenty outlooks and sectors and so on and so forth.
• 18:04
  Speaker 1: It seems to me as if we look back onto
• 18:06
  Speaker 1: have periods where we were the market sing to be,
• 18:09
  Speaker 1: you know, kind of rotating out of the cyclicals, maybe
• 18:11
  Speaker 1: into the more defensive utilities consumer staples. But then it
• 18:14
  Speaker 1: seems like maybe we've kind of rotated back to a
• 18:17
  Speaker 1: little bit more growth, a little bit more risk. What
• 18:19
  Speaker 1: are the sectors that you think people should be focusing
• 18:21
  Speaker 1: on for well, I think, on the one hand, I mean,
• 18:24
  Speaker 1: one of the major themes in terms of this market
• 18:26
  Speaker 1: um from the bottoms back in March of two thousand
• 18:29
  Speaker 1: nine had been tech, tech and more tech, and if
• 18:31
  Speaker 1: you wanted to build wealth, you basically bought large cap
• 18:34
  Speaker 1: us tech um. The question is, as we look at
• 18:37
  Speaker 1: the election process, as we look at how things have evolved,
• 18:40
  Speaker 1: not just on the federal level but also on the
• 18:42
  Speaker 1: state level, and also oversees greater rise in terms of regulation,
• 18:46
  Speaker 1: which is going to impose more in the way of
• 18:49
  Speaker 1: costs UH and possibly have slower revenue growth for these names.
• 18:53
  Speaker 1: So you know, while this clearly has been the major
• 18:57
  Speaker 1: wealth generator over the past, deck aid, the question is
• 19:01
  Speaker 1: can we rely upon tech to continue to provide the
• 19:03
  Speaker 1: same type of returns going into and I would argue
• 19:06
  Speaker 1: it may be time to pull back. Um. Granted, there
• 19:09
  Speaker 1: have been concerns looking at a sector basis as to
• 19:11
  Speaker 1: what's going to happen around healthcare policy, but we may
• 19:14
  Speaker 1: actually end up as we get greater clarity around the
• 19:17
  Speaker 1: political situation to see UM the underlying secular dynamics in
• 19:22
  Speaker 1: terms of demographic profile changes, aging UH driving greater demand
• 19:27
  Speaker 1: in the healthcare sector, and then as a result, healthcare
• 19:29
  Speaker 1: may not be a bad place to consider as things
• 19:33
  Speaker 1: become clearer. Right, So, I guess obviously the issue with
• 19:36
  Speaker 1: healthcare has historically been really over the last several years,
• 19:39
  Speaker 1: but certainly going into this election cycle is just kind
• 19:41
  Speaker 1: of the headline risk. The policy risk that you know,
• 19:44
  Speaker 1: the Elizabeth Warren that you know, the Metacare for All
• 19:46
  Speaker 1: type of thing. Is that something that the valuations they're
• 19:50
  Speaker 1: they're paying you for that risk you're taking anything I
• 19:52
  Speaker 1: think in some respects we've already had some of those
• 19:54
  Speaker 1: risks discounted in the market. But I would say simply
• 19:57
  Speaker 1: if we look at twenty it's a year when technolo ology,
• 20:00
  Speaker 1: where the tech sector goes into the regulatory woodshed and
• 20:03
  Speaker 1: possibly the healthcare sector comes out. It's interesting looking at
• 20:06
  Speaker 1: the ny s C Fang Index up about this year alone,
• 20:11
  Speaker 1: up about forty seven percent on a trailing twelve month basis,
• 20:14
  Speaker 1: And you're right, I think the big issue for a
• 20:16
  Speaker 1: lot of investors is the story is great, the tech
• 20:19
  Speaker 1: story written large is great, but that regulatory risk hasn't
• 20:23
  Speaker 1: really been with the u S tex Stox ever arguably,
• 20:25
  Speaker 1: but maybe it's starting to raise its head. Going to
• 20:29
  Speaker 1: see more federal regulation of some of the tech sector.
• 20:32
  Speaker 1: That is the big, I think issue for tech investors.
• 20:35
  Speaker 1: And I think the pressure is is that, as Bloomberg
• 20:37
  Speaker 1: is highlighted in some of its stories, as the federal
• 20:40
  Speaker 1: authorities are moving because they don't necessary they want to
• 20:43
  Speaker 1: get ahead of what's going on a state level, particularly
• 20:45
  Speaker 1: in California. They don't want state regulation to suddenly open
• 20:48
  Speaker 1: up a situation where you have a balkanized regulatory environment.
• 20:52
  Speaker 1: They want to assert Federal Authority real quick energy Well
• 20:58
  Speaker 1: in terms of about a high risk I returned potential.
• 21:01
  Speaker 1: The favorite exogenous shock scenario for any procession has always
• 21:06
  Speaker 1: been a spike in oil prices. And given the dynamics
• 21:09
  Speaker 1: unfolding in the Mid East, we've already had trouble in
• 21:11
  Speaker 1: the straighter horn moves earlier this year with Iran and
• 21:15
  Speaker 1: the Persian Gulf states in Saudi Arabia. UM. I think
• 21:19
  Speaker 1: going into an election sometimes there's nothing better for people
• 21:22
  Speaker 1: to do than to declare a war. But I don't
• 21:25
  Speaker 1: necessarily want to want to call you know, those in
• 21:27
  Speaker 1: the office now as war mongers. But things don't look good, yep,
• 21:30
  Speaker 1: exactly all right? Energy always it's not for the fan
• 21:33
  Speaker 1: of heart, certainly. David Garrety, chief market Strategies for laid
• 21:35
  Speaker 1: Long Company and partner at bt block im us his
• 21:38
  Speaker 1: thoughts on the market after what's been a fantastic year
• 21:41
  Speaker 1: for most asset classes in both equity fixed income, several
• 21:46
  Speaker 1: of the commodities also posting strong gains. A question is
• 21:49
  Speaker 1: how are you position for Another edition of the Star
• 22:02
  Speaker 1: Wars series is out. Star Wars The Rise of Skywalker dropped.
• 22:06
  Speaker 1: I guess last week took in a hundred seventy five
• 22:09
  Speaker 1: billion dollars and it's opening weekend. That's a big number,
• 22:12
  Speaker 1: but it's lower than what they had done previously. So
• 22:14
  Speaker 1: the question is what's going on with the Star Wars
• 22:17
  Speaker 1: saga and for the Walt Disney Company to do that.
• 22:20
  Speaker 1: We went out and found a couple of local fanboys
• 22:23
  Speaker 1: that we all know. Eric Baltunas, Senior et F analyst
• 22:26
  Speaker 1: for Bloomberg Intelligence. He joins us here in our Bloomberg
• 22:28
  Speaker 1: Interactive Broker studio and Ira Jersey, Chief US Interest rate
• 22:31
  Speaker 1: Strategist for Bloomberg Intelligence. He's actually our man on the
• 22:35
  Speaker 1: scene at a local theater getting ready to go in
• 22:37
  Speaker 1: and see the show. So I let's start with you.
• 22:41
  Speaker 1: What are your expectations for the Rise of Skywalker. Yeah, so,
• 22:45
  Speaker 1: just from some people that I've talked to you coming
• 22:47
  Speaker 1: out of the theater here in Gardner, North Carolina, at
• 22:49
  Speaker 1: Legal Theater, Um, they were they were saying that that,
• 22:53
  Speaker 1: you know, kids like it, so so people who didn't
• 22:55
  Speaker 1: grow up in the seventies and eighties on Star Wars
• 22:59
  Speaker 1: teams to have really enjoyed this show. The parents seem
• 23:02
  Speaker 1: to be a little bit more sanguine about his thing
• 23:04
  Speaker 1: is okay. So um, So I think I'm gonna go
• 23:07
  Speaker 1: in with an open mind and hopefully I'll think it's
• 23:08
  Speaker 1: better than than the last film, which Eric and I
• 23:11
  Speaker 1: I know, neither of us particularly enjoyed. All right, so Eric,
• 23:14
  Speaker 1: let let's let's go to that. This is a long
• 23:15
  Speaker 1: running series. I don't even know how many episodes were
• 23:18
  Speaker 1: up to yet. There was one to three, then there
• 23:19
  Speaker 1: was four, three, two. I don't know how they did
• 23:21
  Speaker 1: it all, but give us a sense of kind of
• 23:24
  Speaker 1: as a fanboy, how is Star Wars resoning with you? Right?
• 23:29
  Speaker 1: So when I went to see Force Awakens, I liked it.
• 23:31
  Speaker 1: I liked the new characters Po and Finn and Ray.
• 23:34
  Speaker 1: I thought it was great the ending where she goes
• 23:37
  Speaker 1: to give the lightsaber to Luke Skywalker and you see
• 23:40
  Speaker 1: Mark Hamill there and he's very serious and it ends
• 23:43
  Speaker 1: and I was jazz for the next one. And then
• 23:46
  Speaker 1: to think he just throws it over his shoulder like
• 23:48
  Speaker 1: he doesn't care. And Luke Skywalker has turned into some
• 23:50
  Speaker 1: like cranky reck loose um. You know, even Mark Hamill said,
• 23:54
  Speaker 1: that's not my Luke Skywalker. So the biggest problem with
• 23:57
  Speaker 1: the last Jedi is they ripped the heart out of
• 24:00
  Speaker 1: the whole franchise, which is Luke Skywalker and stomped on
• 24:03
  Speaker 1: it right in front of you and then expected you
• 24:06
  Speaker 1: to like it. I mean, that's the biggest problem. Plus
• 24:08
  Speaker 1: there were all kind of plot holes. They really um
• 24:11
  Speaker 1: the Ray uh Po and Finn storylines. I thought they
• 24:15
  Speaker 1: did worse in the Last Jedi. So I thought J. J.
• 24:18
  Speaker 1: Abrams Abrams was handed a pretty crappy hand from the
• 24:22
  Speaker 1: Last Jedi, and I'm I'm guessing he probably did the
• 24:24
  Speaker 1: best he could with it, and so I also am
• 24:26
  Speaker 1: looking forward to seeing it. But again, I I'm just
• 24:29
  Speaker 1: a little down on the whole franchise after Last Jedi
• 24:32
  Speaker 1: ripped the heart out so interesting, So Ira, hopefully your
• 24:36
  Speaker 1: heart wasn't ripped out by the last uh episode. Give
• 24:39
  Speaker 1: us your sense of again, among the fanboys, the passions
• 24:43
  Speaker 1: run really high here. What is your sense of you
• 24:46
  Speaker 1: know what Disney has done with this franchise? Well, I
• 24:51
  Speaker 1: think among the frond of the O G Star Wars
• 24:53
  Speaker 1: folks like Eric and I, I think there is a
• 24:56
  Speaker 1: lot of disappointment. I think the you know, episode eight,
• 24:58
  Speaker 1: the last that I was disappointing me. I was as
• 25:01
  Speaker 1: disappointed as anyone um, but I think I think that
• 25:05
  Speaker 1: the thing that Disney is trying to go for, it
• 25:07
  Speaker 1: seems to me, is more of the superhero type of vibe.
• 25:11
  Speaker 1: And and you know that doesn't necessarily work with Star Wars.
• 25:14
  Speaker 1: And if you know, this particular movie I think resonates
• 25:18
  Speaker 1: with maybe younger kids who you know, didn't look up
• 25:20
  Speaker 1: to Luke Skywalker as the epitome of the good guy
• 25:23
  Speaker 1: in their movies. And and you know, he always expected
• 25:26
  Speaker 1: him to stay the day. Um. So I think that
• 25:29
  Speaker 1: that that might not hurt Disney all that much if
• 25:33
  Speaker 1: they can get all the merchandizing and um and and
• 25:35
  Speaker 1: a lot of video games. So it it was just in
• 25:37
  Speaker 1: the theater actually getting my seat, talking to someone and
• 25:40
  Speaker 1: and the boy said that he liked the new video games.
• 25:43
  Speaker 1: So maybe it's not the merchandise like the you know,
• 25:46
  Speaker 1: dolls and stuff like that that that you're gonna see
• 25:49
  Speaker 1: this time, but it's going to be things like the
• 25:50
  Speaker 1: video games and those other offshoots and and maybe some
• 25:53
  Speaker 1: of the Disney Plus characters, because the Mandalorian, for example,
• 25:58
  Speaker 1: even among the O G Star Wars people that I've talked,
• 26:00
  Speaker 1: you really enjoy that particular show. Um and uh and
• 26:04
  Speaker 1: so so perhaps it's it's the franchise as a whole
• 26:07
  Speaker 1: isn't gonna be uh, isn't gonna be drawn down. But
• 26:10
  Speaker 1: even if you know, the end of the Skywalker series
• 26:12
  Speaker 1: is a little bit of a dud. So Eric, give
• 26:15
  Speaker 1: us a sense of do you think Disney can successfully
• 26:19
  Speaker 1: from your perspective, you know, kind of make that balance
• 26:22
  Speaker 1: between the hardcore old school Star Wars fan and maybe
• 26:27
  Speaker 1: the newer fan. Yeah, it probably can be done. I
• 26:30
  Speaker 1: like Ira. I just think the Skywalker, that whole line
• 26:34
  Speaker 1: of movies is just been a little roughed up. The
• 26:37
  Speaker 1: merchandise just I can see it in Walmart. It's on clearance.
• 26:39
  Speaker 1: Nobody wants to buy it. My eight year old, um,
• 26:42
  Speaker 1: he doesn't really want it. But back when I showed
• 26:45
  Speaker 1: him the original three, he was into it. He wanted
• 26:47
  Speaker 1: a lightsaber, just like every other kid. Um. So I
• 26:50
  Speaker 1: don't know how to get that magic back. I'm sure
• 26:53
  Speaker 1: with a lot of money, they're still gonna make money
• 26:54
  Speaker 1: because they're gonna get a lot of good actors and
• 26:56
  Speaker 1: a lot of special effects. Um. But I would just
• 26:59
  Speaker 1: try something new. I would go to some new area,
• 27:02
  Speaker 1: some new Star Wars, UM Paradigm and UM you know,
• 27:05
  Speaker 1: try to make it work. But the Luke Skywalker UH series,
• 27:09
  Speaker 1: I think was just um brutalized by Rhan Johnson. Yeah,
• 27:16
  Speaker 1: I agree with that, and I think, you know, one
• 27:17
  Speaker 1: of the other big issues that I think that movie
• 27:19
  Speaker 1: had um was was obviously story and plot, like Eric said,
• 27:23
  Speaker 1: but it also came off of one of the best
• 27:25
  Speaker 1: movies in the franchise in my opinion, and Broke One.
• 27:27
  Speaker 1: Broke One was a super solid movie. It had no
• 27:30
  Speaker 1: loose ends. It you know, introduced the character of Doris
• 27:33
  Speaker 1: Vader in a brand new way that you really always
• 27:36
  Speaker 1: wanted to see. And then you had the and then
• 27:38
  Speaker 1: you had episode eight, the Last Jedi, and it just,
• 27:40
  Speaker 1: you know, compared to Rogue One, it just didn't compare.
• 27:43
  Speaker 1: And I think that that was also a big disappointment
• 27:45
  Speaker 1: because everyone went in, like I went in with these
• 27:47
  Speaker 1: massive expectations given how great Rogue One was, and then
• 27:51
  Speaker 1: you know, you see this this really you know, bomb
• 27:53
  Speaker 1: of a movie and a lot of our opinion, and
• 27:56
  Speaker 1: then you know, and then Solo, which was a good movie,
• 27:58
  Speaker 1: followed and it didn't do well, uh in in the theaters,
• 28:01
  Speaker 1: and I think primarily because not because you know, Star
• 28:04
  Speaker 1: Wars fans would go see a new Star Wars movie
• 28:05
  Speaker 1: once a month, no problem if they were good movies.
• 28:08
  Speaker 1: And and so Solo I think had a lot of
• 28:10
  Speaker 1: the backlash from the from episode eight, um, you know,
• 28:14
  Speaker 1: And and that's where I think Disney has to kind of,
• 28:17
  Speaker 1: you know, rejuvenate itself. And and I think, you know,
• 28:20
  Speaker 1: hopefully this movie, I'm I'm gonna see it in three hours,
• 28:22
  Speaker 1: I'll know, uh, you know, is this movie kind of
• 28:24
  Speaker 1: worked it and the ending that the Star Wars franchise deserves.
• 28:27
  Speaker 1: All right, Well, maybe we'll chat with you when you're
• 28:29
  Speaker 1: done seeing it. Eric. Just one more point, which is
• 28:32
  Speaker 1: after the Last Jedi, a lot of fans reacted and
• 28:35
  Speaker 1: Disney kind of came out and said, you guys are
• 28:38
  Speaker 1: just not woke enough. You don't understand where we're going
• 28:40
  Speaker 1: with this. And I didn't like that they insulted the
• 28:42
  Speaker 1: fans for not liking it. But like Ira said, Rogue
• 28:45
  Speaker 1: One has a female lead. We all loved it. That
• 28:48
  Speaker 1: was a great movie. It just has to be a
• 28:49
  Speaker 1: good movie, and you have to care about the characters
• 28:51
  Speaker 1: and and the storylines have to make sense. That's all.
• 28:54
  Speaker 1: It's not that rocket science, all right, are we had
• 28:56
  Speaker 1: the fanboys, Ira Jersey enjoy the show. I hope you
• 28:59
  Speaker 1: have a good time. We'll look forward to hearing your
• 29:01
  Speaker 1: review afterwards. Iris the chief US interest rate strategist for
• 29:04
  Speaker 1: Bloomberg Intelligence, Eric Balchun, a senior et F analyst and
• 29:07
  Speaker 1: Star Wars fanboy, joining us here in our Bloomberg Interactive
• 29:10
  Speaker 1: Broker studio. A couple of numbers here for you, UM
• 29:13
  Speaker 1: hundred seventy five million dollars in box office. That's ahead
• 29:16
  Speaker 1: of Disney's hundred sixty million dollar projection, but it's below
• 29:19
  Speaker 1: what the consensus was for about a hundred eighty three million,
• 29:23
  Speaker 1: and I guess for a lot of people looking at
• 29:25
  Speaker 1: the series and looking at the franchise from Disney's perspective,
• 29:28
  Speaker 1: it was one of the lower openings of the recent
• 29:30
  Speaker 1: So the question is is there a little bit of
• 29:32
  Speaker 1: Star Wars fatigue sitting in We'll have to see. Thanks
• 29:36
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 29:38
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts or
• 29:41
  Speaker 1: whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter
• 29:44
  Speaker 1: at pt Sweeney. I'm Lisa Abram Woyds. I'm on Twitter
• 29:47
  Speaker 1: at Lisa A. Bram woit's one before the podcast. You
• 29:50
  Speaker 1: can always catch us worldwide on Bloomberg Radio