P&L: AT&T-Time Warner Will Merge, But Will Be Dwarfed by Rivals

Are we at least heard that according to sources, as reported by Bloomberg, that he has told people he still opposes it. So can this deal still get done? I want to bring in Porter bib managing partner at Media Tech Capital Partners in New York. Porter, what do you think is going on here? I mean, Ken Ken, President Trump even way in on this deal in any practical way. Actually he can't, but that's not going to stop him.

And the one thing we have learned about President elect Trump is that whatever he says is always reversible, uh, in a millisecond, because he's been doing it every day. He's he's got a very interesting meeting in an hour and a half with the senior US intelligent the community leaders. And my guess is he's going to reverse his uh love affair that he's had with Julian Ensage when not

meeting is over. But regarding Time Warner, A T and T, the two new UH Trump appointees to the SEC have both come out very strongly in favor of proving the deal. There's been no problem, uh surface that that the Obama Justice Department, UM, and I don't that that Trump's team is going to see this as anything but a very

positive Jeff says Zebuscus UH and Randall Stevens. And when they came to Congress and UM testified about this deal, really pointed out the the fact that most people in Washington hadn't yet realized that the competition is not are the cable or telecom companies, It's the Frightful five, It's the Google's, the Amazon's, the Microsoft's. Uh. Those companies are

on Facebook. They're going to rule the media market going forward, and A T and T and Time Warner are going to be rather rather small competitors compared to the tech companies. Porter if anyone doubts that this merger is going to happen. You're saying, don't doubt it. It will happen, at least not because of government interference. That's what I'm saying. And

Jeff Mucas came out last week and chief executive Time Warner. Yes, then there he said, there is no Plan B. Plan A is what we're planning to do, and uh, um, it's going to go through and if it doesn't, uh, that's it. We're going to stay standalone. But that that had a hollow ring to it because he's as vulnerable

as the other linear media content providers. They have to expand they have to go digital, and the huge consumer facing aspect of a T and T UM is going to elevate Time Warner into a very significant competitive position against the tech giants, where you know, there are going to be a lot of changes on in the media landscape next year. This year. Uh, two of the biggest moves that if it in the news recently are making Kelly and credit on suster and moving to and B

see from Fox. Do you think that Fox is going to suffer from this? And conversely, do you think the

NBC really will benefit well? The loss of Roger Ales has really put the pressure on James and Rockland Murdoch, who are who are essentially running the company right now with with Rupert taking a much less dominant role, and they have been both very adamant, but James and Laughlin saying they want to keep Fox the way it is positioned as a partisan network, partisan leading network, but emphasize the hard news and what they call the fair and

balanced aspect. And I think having having lost Megan Kelly, especially because she was really a departure from the heavily partisan prime time lineup that Fox has, that that is going to be a very interesting situation to see whether Fox continues down the road that they have traveled for for the last twenty years. And the most important thing, however, that Fox is facing is the the very serious demographic situation.

Almost sixty percent of their audience is over sixty years old, and they're very very weak and the key demographic eighteen to forty nine, which advertisers want. And despite the fact that they are the market leader in cable news right now, the demographics are very poor. And if you start looking at the ads that are running on Fox, there's more

pharmaceutical and reverse mortgage advertising. Uh than anything else. You don't see the cars and the soft drinks and the other major advertising categories that the other networks are caring. So I think Fox has to do a lot of thinking about what kind of image and format they want to go with going forward. And losing Megan Kelly was a very serious loss to them. She is going to be replaced by we Gotta we gotta leave it there. I want to thank you very much, Porter bib He

is managing partner Media Tech Capital Partners. Well more than two hundred thousand people are at the Consumer Electronics Show in Las Vegas, and one of them is our guest, Dr Alex Leedo. He is the chief executive and the co founder of Efficient Power Conversion. Dr Leado, thank you

very much for being with us. Thank you. You know, I can't figure out whether we should start with you telling us what it's like to be at c e S with all of the new things and great televisions and everything, where maybe start with something totally complicated light light detection and ranging systems. The show you want to shake, you know, he's the coolest thing that what's the coolest

thing that you've seen at the show did well. You know, look, I think that the coolest things all revolve around autonomous cars and augmented reality. There's all sorts of displays on that right now, and uh, it's just amazing. You know, our lives are going to change quite a bit from both of those, uh, those developments. So how do you envision our life being changed by some of these developments? Well, you know, I think the autonomous vehicle really takes away

the need for individual car ownership. So you know, that redefines how cities will be defined, how we'll get around. And really, there hasn't been a major change in transportation since the jet engine was developed sixty seventy years ago. So this is really going to be a revolution. But it'll take time. It'll take you five years, and everybody's gonna expect it tomorrow. So um, dr Leader, this brings us back to, uh, the substances that Pim was trying

to it out. Um, your company produces a substance that you're hoping will be instrumental in this revolution in the way that we transu we we get around, correct, that's correct. Yeah, we we make products out of the gallium nitride. Uh, and uh, these products are really the successor to silicon, which is the foundation of all of our computer chips and semiconductors. And it's it's a whole lot faster and its lower cost, so it enables things like these light

detection and ranging systems and augmented reality systems. And in the next few years you'll start seeing power chords disappearing. And I don't know about you, but I don't know anybody who likes power chords. I think you've just you just made it made a convert here. I mean honestly, you said power chords are going away, and I almost jumped up and down in my seat. I see how easy it is to make people happy, you know, we were.

I want you to just describe the actual thing, because right now it kind of looks like a hockey puck that sits on top of an automobile and it spins around to get that three hundred and sixty degree image. It's a hockey puck type, it's a lighter, it's a it's a lighter technology, and it spins around and it creates uh almost instantaneous map of whatever it is that you're around, and it's done with lasers. Now you've partnered with Veladine to do something else and it's much much smaller.

Tell us about it. So you know, these lighter systems have been around since the Google mapping cars several years ago. They were one of the first users of it, and they really paint an immediate picture of the you know, all the objects and three dimensions around you in in in and they give you three dimensions. The problem has been they've been very expensive, so getting them less expensive so that they can get on cars that are driven

by you and me has been the goal. So we partnered with Veladine and we developed some uh some more advanced integrated circuits with our gallium nitride devices that are are allowing shrink and make these things smaller so you can't see them, and also make them a whole lot cheaper so we can put them on everyday cars. Dr leto Do you expect that in the future when we're all sort of just being driven around by our computers.

Do you think that we're going to have to update the programs, the systems and we go to bring our cars to sort of techys to to get them fixed. Me I'm just trying to think about the realities of having one of these. So first of all, you probably won't own the car, you know somebody. It will be a you know, transportation as a service kind of thing.

A car will arrive with no driver, you'll get in it, you'll arrive at your destination, kind of like an Uber without a driver, which is why Uber's experimenting with these things. Um So in terms of service and all that, you know, the software updates will be over the air. I think Tesla has already pioneered that very successfully. And in terms of service, electric vehicles are are fundamentally simpler than than

gasoline and diesel vehicle. So I think that the amount of service has been proved to be a lot less on an electric car. Thank you so much. Really really fascinating to hear what you're seeing and what you're doing

over there. Dr Alex LIEDO CEO and co founder of Efficient Power Conversion talking about the future of our lives in cars that drive us around that we don't own, that have all sorts of cool little gadget you know, next week with no power courts, with no power courts, I mean, I am converted, and to get smarter on China, I want to focus right now on trade we have Dan Moss. He is executive editor on Global Economics for Bloomberg News and he can be followed on Twitter at

moss underscore Eco. Seems appropriate, Dan, thanks for being with us. Tell us the what's going on now with China and President elected Don Trump and the back and forth of words him. The two sides are really figuring out how they're going to dance with each other after January. The Chinese are probably wondering which Donald Trump walks into the

Oval Office that afternoon after the ceremony. Is it Donald Trump the deal maker advised by Rex Tillison and Gary Cohn, or is it Donald Trump the populist hitting all the bases for the white working class in the manufacturing hard land. While the Chinese appear to be unsure of that, they're thinking, let's take out some insurance while we're at it and say look. Earlier in the week, there was the line that there's a great lot of flowers outside key government

ministries in Beijing, but inside there are also sticks. Now we're learning, we'll look. American companies have a lot invested in China. We all knew that the China his government is reminding the incoming administration of that saying, by the way, there are some things that we can do. We hope it won't come to that. We don't expect it will come to that. But hey, we're here and we're watching, and we're waiting, and we're not necessarily going to allow

ourselves to be mulanova. You know, I was struck by this story that was on the terminal this morning, and I was struck in particular was talking about how China is preparing to step up the scrutiny of its US companies, just sort of what you were exactly talking about, dan Uh in a sort of way to retaliate. But there was a quote here, Um that was really crucial to me.

When you have a country with a large trade deficit that retaliates against a country with a large trade surplus with it, it's the country with the trade deficit, i e. The US that wins. The country with the surplus loses every time. And America has had this trade deficit um with China has been narrowing somewhat um and yet you know, there is this feeling, you know, who has more to lose here? They both do. And let's just take a step back. This didn't get any scrutiny at all during

the course of the campaign. But the nature of the Chinese economy and what's driving it is changing significantly, and the nature of the US as economic relationship with China as a result is changing as well. This image we all have of people going to Guangdong to set up T shirt factories, no one does that anymore because it's

simply too expensive. That's gone elsewhere. When people think about trade with China, they think of that sort of thing which is completely out murdered, or they think of stuff being loaded onto a ship and brought to Mexico for assembly and end of the US. The Chinese economy is increasingly driven by services. When people talk about the trade surplus and the trade deficit, they're talking about merchandise, goods, services exports from the United States to China growing significantly.

The Chinese current account surplus will basically disappear by twenty According to the IMF, The most interesting US company in China right now arguably is Starbucks. It's a services economy. The Chinese population is getting richer. Low cost manufacturing doesn't make sense there anymore. Services and consumption now account for

more than half of GDP. You know. So Earlier this week, President elect Trump tweeted, China has been taking out massive amounts of money and wealth from the US in totally one sided trade, but won't help with North Korea. Nice exclamation point. Um. You know, with a tweet like this, there you have a lot of people saying, look, we all have a lot to lose. Uh. International trade has really helped the economy. You know, is there something to

what President elect Trump is saying? Well, look, leaving aside the North Korea question, I don't want to get into. Um, not a lot of FDI going on there. Look, but they both have a lot to lose. So yeah, China has become wealthy from the opening the economy that began under Dung Shooping in the late seventies. By the way, it's not just US corporations that have gone in their Japanese corporations, European corporations. US corporations have also done well

out of China. I mean, GM makes a huge amount of money out of China. Starbucks again, services economy, big expansion plans within China. Hello, last time I checked, these were US companies. So it really is a two way thing. In fact, you could argue that they aren't really the first and second largest economies on the planet, they are actually one economy. Well, then I was just gonna try to get in. Can you do fifteen seconds on them

buying US treasuries in the currency? Well, they buy US treasuries, as do many governments. The question is really whether they're going to keep selling them at a pretty fast clip in order to support the u n UM And I think that's sort of the jury is still out whether they're going to have to do that um and whether they're going to continue and whether they've they've even put in certain capital controls and they've made it more difficult for people to take money out of the country and

to even have foreign investors in the country. But it seems like some of those measures are starting to stick and the economy is is solidified to some degree. Dams. Unfortunately, we're gonna have to leave it there. We can talk about this for the rest of the show, and I would love to, actually, because I feel like this is the big backdrop for a lot of what happens next. Dan Moss, executive editor for Global Economics for Bloomer. Well, when we want to learn more about the world economy

one place to look as the shipping industry. And here to help us his urs dir. He is the chief financial officer of t b S Ocean Logistics. Or maybe just give a quick recap of your breadth of experience and tell us what's going on in the shipping industry right now that we can take away and use in our understanding of the world economy. Hey Pimm, and good morning Lisa, and thanks for having me on UM and happy New Year. I think that this is a good subject matter to start the year off and looking a

little bit macro and global shipping. My background just very briefly, I was on the street for eight years as an equity analyst prior to this role. But also I love that people here say on the street and it doesn't mean you know, on a corner. I was in Canon waving my hands, hanging by the stocks all the stock no no, working at de Lazard and Clarkson's uh and UM, I'm proud of that. I was a lender and a

banker and working another shipping companies UM. Right now in the in the dry bak shipping markets where we compete, we have twenty six ships under our control we have no debt, a good balance sheet, but the industry itself is very much oversupplied, so there's too many ships. Overall, demand was fairly weak in sixteen, but didn't prove in the second half of the year significantly as a dollar stabilized,

UH and UM. They outlook for next year on the demand side is for demand to slightly exceed fleet growth, So we do expect freight rates to stabilize four ships, UM. But we have high iron ore inventories I think you mentioned in one of the breaks, UM. We also have prices coming up. We have UM coking coal inventories in China moving up again but also prices coming high. And then we also have Chinese New York coming So I expect the first quarter of this year freight weight rate

wise to be weak. I would also expect commodity prices to stabilize and possibly soften, and the rest of the year actually to be much better than which was a historic worst. Gil I wanted to talk about that. I mean, I was last year a lot of people were talking about the Baltic Dry and how it was plunging and the problem behind that and how it sort of indicate

did that the global economy was slowing. This is what a lot of people were looking at for edification about their slow growth or no growth forever type of theces. All of a sudden you are seeing a little bit of pickup, but not really that gangbusters growth that backs up with a lot of people are talking about now, which is sudden global reflation. I mean, where is the

optimism coming from suddenly? Now? At the beginning of last year, there was a couple of things that are going on a ship against great question um there were far too many ships. There are a lot of ships being delivered in the first quarter as well, but you also had a weakening dollar, and you had again a first quarter that is typically saw for commodity demand growth. So you have the freight rates really coming off into a deep

historic low as a dollar stabilized. Everyone noticed the particularly in Asia, particularly in China, which is of the dry boat demand market seaborn demand that their inventories were low and the price was extremely attractive, much cheaper than their domestic sources of iron ore and coal. UH imports then improved very significantly, so year on year, Chinese iron or import import demands seaboard imports were up nine percent. Domestic production was off seven UM. Steel production is moving up.

There's been good stimulus in China. China has also been rationalizing it's coal mines. Um. Part of that is clean air. Part of that is that many of the coal mines were losing money at those prices and they don't want to subsidize them any longer. And there's cheap coal available, particularly from Australia coming in, so that demand has been good. There's been good stimulus in China. Second half of the year was rather strong or as I just want to put some numbers to all of this, because in the

dry bulk sector you've got maybe four groups. Right, You've got your cape size, Panamax, super Max, handy size. I was looking at the year to the comparisons. You're in your comparisons a cape size twelve thousand, three hundred today, right, That's that's how much it will cost me per day, right all Right? Last year, same time thirty eight hundred bucks. So from thirty eight hundred over twelve thousand, what do we need to take away from that? Overall demand has

improved in the second half of the year. There was very good dust scrapping of ships. Also in the early part of last year. There has been no ordering of dry bull ships now for two years. A year ago was one year, right, so there's there has been a rebalancing. But also then this is very very macro. But if you look at the commodity prices coming off as the dollar was collapsing, dollar stabilizing and strengthening. Um typically we think of the dollar strengthens, then it would be the

commodities are cheaper. They are, yes for the United States, but they're not for everyone else who buying, and they have to buy the dollars to buy the commodities. Then you end up having pricing in contango. People build inventories. Now inventories are high, looks like the dollar not the dollar. Excuse me that that's about as high as they're going to get due to their physical constraint. Uh, they're probably going to be some inventory eating over the course of

the first quarter, so rays come down. But year on year, the overall conditions of the dry bull markets are are better. Or in two thousand fifteen, I believe hedge funds that had piled into the shipping industry in various ways got yeah you you laugh. I mean it was like a blood bath, right, and when they got hammered, it was, uh, the source of a lot of pain both at hedge funds as well as at some banks that had a lot of shipping investments globally. Um, from an investment standpoint,

are you seeing investors coming back? Well, I don't necessarily want to comment on other competing companies, but I think that the interest level now in shipping remains as um as strong as it was back then. Is that what you basically mainly do is just make a shipping investment. No, No, we were We own and control ships, so we're shipping company, but we do have investors who are part of that group that you mentioned. Um and uh, there was some time ago, back in some time ago, but in there

was a very strong story about eco ships. So there was a technological advantage of the new ships being built and this was going to be a boom and make other ships obsolete, So there was quite a bit of ship ordering. Now their ships are delivering and is keeping the market down right now, the interest is fundamental. The banks are worn out from this industry that's been in a bad shape for a solid almost decade, but it's

call it eight years. Banks are worn out traditional sources of funding a worn out Even the public markets seem rather weary and worn out. Uh So it's going to take some rather creative and smart investors that come in and buy assets at a price that that makes sense and put them into commercial managers such as ourselves, um that can beat the market for them. And so I think the interest today fundamentally makes more sense than it

did even two years ago. Thank you so much. This is definitely a fascinating sector and really important one to watch. Often used as a bell weather for global growth. Generally, the Baltic Dry is a classic index that a lot of people keep an eye on. Or Sdr CFO of BBS Ocean Logistics talking about the global bulk and shipping industry of this year. Thank you so much for joining us. Thanks for listening to the Bloomberg P and L podcast.

You can subscribe and listen to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox. I'm out there on Twitter at pim Fox. I'm out there on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio