Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian Curtis and myself for the stories, making news and moving markets in the APAC region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.
Well, Disney shareholders have handed CEO Bob Iger a big vote of confidence. They elected all of Disney's choices for the company's board at a proxy vote, and shareholders rejected dissident investor Nelson Peltz's bid for board seats. Beltz's ally, former Disney finance chief Jay Russulu, was also rejected. The result is a clear cut victory for Iger, who has fought to keep Peltz off the board since returning to
CEO in twenty twenty two. Jamie Lumley, senior analyst at Third Bridge, outlines what's next for Iiger after winning the vote.
Thing that I think investors will really be looking at is streaming profitability. The company's planning on finally driving profits in fiscal year twenty twenty four. This is coming after so many quarters and years of billions and losses in this segment, and we've heard Bob Bayer talk about how important this streaming transition is for the business. Really making sure that they're hitting their mark and achieving their goals.
That's definitely priority number one as they move beyond this proxy fight.
Jamie Lumley at Third Bridge. Disney has reinstated its dividend and has announced plans to invest sixty billion dollars in its parks and resorts over the next ten years. It also deepened its involvement in the video game business via a one point five billion dollar investment in Epic Games. Joining US now to discuss this is Bloomberg Intelligence US media analyst Gita Rong and Athan Geeta. Can we say that this is a victory for both Bob Byer and
Nelson Pelts. I mean, the former is obvious, the latter, Pelts is a billion dollars richer now, and he's also made a point. I guess you could say, hater's gonna hate, Well, this is billionaire's gonna billion.
That's a perfect way to put it. And I think Nlson Pels is definitely kind of spinning this as a win for himself, for his fun triad, and of course for Disney shareholders at large. I mean, the stock is definitely up fifty percent, and I think in many ways he's right. I mean, he is claiming that he has been the instrumental catalyst for kind of accelerating this transformation at Disney, and I think to largest tent, that's definitely true.
Gay to take us inside the drama of this story, I mean, this is the second time in two years that Pelts was trying to get board seats. And the other character that's part of the story is Ike pearl Mutter, the former chairman of Marvel Entertainment. Disney purchased Marvel for a round four billion, and pearl Mutter was able to join the leadership team. He was tossed out last year. And I'm wondering whether a part of the story had to do with a bit of revenge that failed ultimately. Is that fair?
I think that's definitely fair. I mean, we've seen kind of Bob Eiger even chronicle this in his autobiography The Right of a Lifetime, you know, kind of dealing with a very difficult personality like Ike Perlmutter. They always had kind of their creative differences. Bob was was forced to keep him on after the Marvel acquisition. That turned out to be a huge, huge win for of course, for
Iiger and for Disney. You know, the Marvel movies bringing in billions and billions of dollars at the box office, but he had to constantly kind of contend with you know, Pearl Mutter's temper tantrums. Remember, Perlmutter wanted to get rid of Kevin Feige, and Kevin Feigi has kind of been the whole creative genius behind Marvel and so many of the Disney movies. So it's been a very rough and rocky road, you know, between the Disney management team as
well as Ike pul Mutter. Of course, he was forced out, and you know, the way that Eiger and kind of the Disney team have fun at is this has been kind of this vendetta against Disney by Eike Pelmas. I think there's definitely a ring.
Of truth to that.
No matter how we got here, the company has been benefiting from some of what was suggested by Tryan, and you know, we've seen the stock price advance. You mentioned that I'm not sure about the succession planning that's still out there, and at least just with the streaming strategy is something that we probably should discuss. How might the streaming strategy change from here and how might it improve?
Yes, I don't necessarily think that Tryan or pelse offered any constructive advice when it came to any strategic visions around Disney. Yes, they're absolutely right that the succession plan has been botched and botched multiple times, and that is something that I think, you know, they're obviously going to try and fix and do a good job. They have a whole committee just looking into succession right now. James Gorman from Morgan Stanley is kind of leading those efforts.
So I think they definitely do their best there from a same perspective. You know, profitability, of course, is the big metric. Now it's no longer subscribers. They have multiple levers. I think in place to drive streaming profits, they're going to increase prices. They're going to make sure that they have the best content. They're not going to spend money like how they were spending. You know, everybody was spending
money like drunken sailors. Everybody's now rationalizing output. They're rationalizing costs, and they're having many other different initiatives. You know, they have a new ad tier, they're integrating Hulu and Disney Plus and that's going to save them a whole bunch of costs. And then remember they are going to crack down on passwords sharing Alla Netflix. So all of this is going to you know, add to that bottom.
Line gata in a moment. I want to get your take on this Paramount Global deal with Sherry Redstone and sky Dance. We can talk about that in a moment. Obviously, Paramount is a company with legacy assets like CBS and MTV and to get back to Disney, Disney is still holding on to ABC. Do you have a sense of what Disney is going to do with the network?
I think Disney, you know, so there's been a lot of on again off against speculation about what they want to do with their TV networks.
You know.
The Eiger famously last year said that, you know, everything is on the table. You know, maybe we don't really want to hold on to our TV ass and then he kind of walked it back and I think he realized that, you know, yes, the TV ascids are in secular decline, but at the same token. I mean, they do bring in a fair amount of cash and they all respond and you know they're going to be instrumental for him kind of crafting a digital strategy as well,
which is exactly what he's doing with ESPN. Remember, he's again putting a lot of the linear TV networks into this new sports app that they're creating, and ABC is going to be part of that as well, comes out a little bit later this year along with Warner Brothers, Discovery, and Foxy. So they have that in the works. You know, they have the new ESPN digital strategy in the works.
So I think they're really kind of trying to orchestrate this transition from linear to digital in as painless and as smooth way as possible.
And just that one other area that we had raised a few moments ago, succession. What's the latest there.
So they do have their four internal candidates who are all seen as possible successors. Again, remember each of these candidates, whether you know it's from Parks or from the film division, or the TV division or even ESPN, they all have specialized expertise. The problem for you know, the Disney succession plan is that you need somebody who has not just specialized expertise, but also broad expertise. And that's really going
to be the challenge here. So I think they're going to have to have multiple successors kind of groom them and see who really kind of is up for the challenge.
So let's get to Paramount Global, because we had some breaking news later in New York today Sherry Redstone apparently with a tentative deal to sell her stake in Paramount Global. She is the controlling interest in National Amusements. In National has about seventy seven percent of voting shares for Paramount. Skydance Media looks to be the buyer take on this.
I mean again, this has been going on now for almost four or five months. Uh so they've been engaged in some kind of discussions with really all different types of buyers. Of course, sky Dance has been the one that's been there from the very beginning. Remember Skydance Media is this film studio that is controlled by David Ellison, who is the son of Larry Ellison, and sky Dancer has had a lot of you know, collaboration with par around in the past. They almost have this ten year relationship.
They worked on movies together like you know, top Gun Maverick. So so there has been you know, a lot of exchange from on both sides, and so they feel like, you know, it would be it would be kind of the perfect fit. And I think in many ways Sharry Redstone wants to deal with sky Dance because again this is, you know, a known devil better than an unknown angel kind of thing.
So does this does this sort of signal uh, the exit of Sherry Redstone.
Ultimately, it's still going to be very, very complex and very messy. She does have, as you pointed out, a close to eighty percent voting interest, about a ten percent economic interest. We're not yet clear exactly what Skydance has offered her for both her economic stake as well as her controlling voting stake in the company. So all of that has to be worked out. And then at the end of all of this, the ultimate goal is that sky Dance has not just to control National Amusements, but
then has to somehow get complete control of paramounts. It's kind of this very very messy, complex two step process.
Gita, thanks so much for joining us as Bloomberg Intelligence is Gita, Rang and hast.
Let's take a closer look at what's going on in markets at the moment with our own Mark Cranfield is Bloomberg's m Live strategist. He joins us from our studios and singer hard to believe. At the end of last year, the market was looking at one hundred and fifty basis points in cuts from the Fed in calendar twenty four. I mean that was super aggressive, well beyond double in fact what the Fed was predicting. And here we are now wondering whether we're going to get one rate cut.
What the heck is going on here?
Mark, Well, what you can really see here is a disconnect between Jerme Power and the rest of the Federal Reserve to some extent. So back in late November early December, Drone Power appeared to be really optimistic that the FED was on the path, that the inflation was going to hear his targets, everything was going to go right, and there'll be early rate cuts. And then the data came
in and set everybody back. And you've heard a whole variety of Federal Reserve speakers who pushed back against the idea that not only three intra rate cuts is too many, but maybe we only need one this year, As you were saying, mister Bostic is the clear front runner in the In the one case.
I don't really worry too much about this kind of stuff because to me, the economy is leading. Really the FED, you know, it was talking about possibly doing more rate cuts, but it's stipulated three in the coming year. And no matter what they're saying, they're they're they're saying that they will follow the economy. They will be waiting on the data. And if you think about it, normally we think of the FED leading, but the Fed is really following, and
the market's not really leading either. The market is also following the economy. The economy is surprising all of us.
Well, they've said before that their data dependent finally looks as though investors are believing it, having having lost money by being too aggressive on the rate cuts in the first place, that they finally can conclude you that, okay, maybe we really should watch the data and react accordingly to that. But obviously different asset classes are viewing this
in different ways. So the bond market is getting used to the idea that it's in a bit of a trading range, not really going anywhere for the time being. And yet the equity market is in a much stronger position where it knows that interest rate cuts are coming eventually, it's very confident that interest rates won't go up again, so that's much more important. And earnings are in a
good situation. The underlying economy is doing very well, so all of that is favorable for the US cor and the US dollars fairly firm as well, which again helps as well. So different asset classes will respond in different ways, But the bond market for now is going to have to get used to probably sideways trading for quite a while.
Yet you were talking about the dollar there. Year we pulled back a little bit in New York trading, we weakened against the majors. But I think that to the tune that we were singing at the end of last year with much lower interest rates, I think guys in the foreign exchange really had to reverse their bets that we're going to see a great deal of dollar weakness. That hasn't happened so far this year. But when you look at some of the important crosses, and I'm thinking
particularly dollar yen. Brian was referencing a commentary from a former member of the boj board talking about the fact that now the heavy lifting has been done at the March meeting, where we've moved away from the massive stimulus program on the part of what the Bank of Japan had been doing, maybe there's no longer an urgent need to adjust further. Would you say that's a fair statement, and you know we're going to see maybe stasis from the Bank of Japan.
I suspect they have more interest rate hikes to come this year from the Bank of Japan. But in terms of the US dollar, next week is probably going to be a pretty big moment for the dollar. If we get past non farm payrolls at the end of this week and DOLLI yen still hasn't risen above one hundred and fifty two, it may well be that they will just start the beginning of a down trend for the
dollar because people will lose patients. There are very very big short positions against the yen, which have also prompted strong dollar positions elsewhere. If people don't see satisfaction quickly in achieving what they want in a strong dollar, will they will go the other way. They will start cutting those positions and they'll look for the next trend. It's a very big time coming up for the dollar.
Yeah, I think a lot of investors would look forward to that dollar weekening a little. Another currency besides the en that's been weak against the greenback is the Chinese you want, So let's switch the discussion to China briefly. Doug sent me a story which is quite interesting. Ray Dalio says he's sticking with China. What do you think, Mark, Is that a political call or is that a smart business and finance call.
I think if you're a good equity picker and you're looking at China, I'm sure your bounds will be able to find ways to invest and to make decent returns because the Chinese government is all the measures it's doing art to support Chinese based companies to improve the Chinese economy. So most likely there will be decent returns to be found among good companies in China itself. The tricky part for a lot of investors is the Hong Kong side of it, because a lot of people like to use
Hong Kong as a way to play China. That might be much more complicated because of the way in which the hate shares are very cheap compared to the on shore and they may stay that way for a long time.
Yeah, the big numbers in the week ahead for China will be the inflation numbers. And one of the things I think for the market right now is whether or not we're going to see a prolonged period of deflation in the mainland economy. Market. It's always a pleasure. Thanks for making time to chat with us from the Lion City. It's Mark Cranfield, Bloomberg m Live Strategistic.
Well, let's take a look at markets now with Belita own, chairman at Dalton Investments. Blita, thanks very much for joining you. I want to start with Jay Powell and I want to play a clip from his speech a little bit earlier and then get your response to it. Powell did note the pickup in jobs and inflation, but he reaffirmed that the Fed wants to stay patient and watch the data, and, while perhaps not intending to pal laid out the bulls base case.
But these recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward two percent on a sometimes bumpy path.
So the point is that he makes the point sort of the bulls point, which is, look, don't overthink this. Things are pretty good. The economy is doing well, profits have been increasing, and inflation is coming down, while agnolaging that it did pop up a little bit in January and Febry. Do you support that view or do you think he's all wet?
I think pal is right on track.
It's very much the case that the US economy is strong and that we have seen substantial improvement in the inflation numbers. My only caution is that I believe it's much harder to get it much further down than where it is currently, because we live in a world where there are hot wars going on and unforeseen events of the unforeseen events that could disrupt supply chains.
So you've got that to worry.
About, and that's you know, in recent memory, and even further back from that, in recent memory, we've already seen the disruption of the Red Sea, and then we've also seen, you know, the impact going further back two years or so of Russia's invasion on the grain market. So with these tensions running so high, it's difficult to be truly confident that the US and the numbers are insulated from
you know, adverse surprises. But the points that he makes, I think is that the economy is strong, and so there seems to be, know, Harry, whatsoever to ease at this point. Why stoke an economy that's already strong and increase the odds that inflation will research?
You know, I'm listening to you, and I'm wondering whether or not there are people around the globe that feel the same way. And that's one reason to favor the US. Brian has been talking a lot about how well the market's been holding up as being kind of a response to the performance of the overall American economy. I get that. I don't disagree, but I'm wondering, given everything that you just laid out in terms of uncertainty and risk, whether you want to kind of be defensive and put you know,
risk assets to work only in the United States. Maybe the expense of other markets. Is that a fair statement? Maybe Japan? You would include Japan in that.
I would definitely include Japan.
Japan is cheap, and Japan is at a point in time where many things are going right and it looks like it's about to take off. So Japan spent the last nine years working on corporate governance reform. We're finally seeing the results of that through companies giving back returns
to shareholders, either through dividends or share buybacks. Also, we're seeing an increase in unsolicited bids for companies, which is very unusual in Japan, and I can't remember when the first one was, but it was just no more than to say, two three years ago. And the pressure from the TSE is quite heavy on managements to respond response responsibly to these take up of bids. In the past,
it wasn't uncommon to just simply ignore them. But now there is a list, if you like, of companies that are doing the right thing according to TSSE reforms, and that includes being responsible in terms of taking seriously bids from you know, investors or other companies to buy a company at a much higher price. These events and the
encouragement of the TSE is really propelling valuations upwards. So even though we've just seen finally a new high in Japan after the nineteen eighty nine you know peak and then collapse TACON thirty what is it, thirty four years? Is it to get back there, and we've just passed forty thousand on the nick A, and I think even betadtes are ahead.
Yeah, it's great to be diversified, and Japan's offering US investors, for instance, great opportunities. Europe has done pretty well too. The AI companies involved in that have rallied a lot, and just here in the last say three or four months, we've seen a lot of ketchup being done by cyclical oriented companies, and so industrials and materials and financials have
rallied pretty well. And the other thing that's kind of great about the environment is that you can make some bets on equities, which are obviously more risky assets, all the while collecting five percent coupon and the bonds that you hold. No, that wasn't always the case. You were forced into the equity market because you're getting nothing on bond deals one percent or so. And that remains the
case in Japan. So you know, yeah, I'm curious how you are sort of diversified big picture, So we are, frankly.
We're not particularly bullish about the US simply because the valuations are so high. Being value investors, we invest one company at a time and you know, for US, it's easier to focus on companies in Asia because they are a lot cheaper, so they provide you a margin of safety. So in addition to Japan, there are other parts of Asia that we think are quite attractive.
One of them, you know, clearly.
Being India, and Indian valuations are not cheap even by US standards, but the growth of earnings among Indian companies is extremely high. I was looking at a recent table that showed that the earnings growth is something like two and a half times that in the US. So that's the case, surely you would want to accord a higher multiple.
To that growth in earnings.
And then also if you look at some other countries like Korea for instance, where you have fantastic companies, and the problem with Korea, what's been called the Korean discount, is one of governance. They've been so poor in terms of treating minority shareholders.
You know fairly that we've come to a point where.
The Korean government sees what's happened in Japan that's successful this long period of corporate governance reform, and they want to do the same thing in Korea because they have the same exact problems which is an Asian population, and not enough returns on their stock market. So I think there are you know, good opportunities in Korea as well.
Believed to before we let you go thirty seconds on China, yes or no.
Not for us.
China's cheap, but it's a difficult place for us because we don't see entrepreneurs taking care of minority shareholders.
All right, Belita, thanks very much for your insights. To own chairman of Dalton Investments.
This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.