P&L: Trump Has an Uphill Climb to 270 Electoral Votes

with Jim Bianco. He is the president and the founder of Bianco Research, and he joins us now, Jim, great to have you with us. As always, I wonder if you could just comment on an interview that Bloomberg's Eric Schatzka just did with the Ben Melkman Uh formerly of Brevan Howard is speaking about the the slope of the yield curve and how he sees that that is going to increase. Uh. Great conviction, Great conviction. I beg your pardon, great conviction that you're going to see this big slope

we move higher in the yeeld curve. Yeah, not really. I I understand why you would think that if you thought that inflation was going to come back, and you'd say and even if the FED was going to raise rates, the long end of the Yelk curve would go up a lot faster. But I'm not fully into the inflation

camp just yet. I know that that's been the popular idea for a lot of people, that inflation is going to return, and if not, and we see more weakness, you're going to see the long end of the yeel curve fallen yields relative to the front end of the Yelk curve. They're not gonna go down in the front end. They might still go up at the FED races rates, and you might see still see the curve stay words at right now, if not flatten a little bit more. But it really comes down to what your view of

inflation is. That it's it's not here yet. I understand that everybody's looking for it. I get the idea that wages are percolating a little bit, but they have been for about eighteen months. Uh. I also see the idea that you know, in the forward measures of inflation, like inflation expectations are starting to move a little bit higher.

But I've seen this movie since two thousand nine, at least four or five other times, and it always seems to peter her out because at the end of the day, you still have way too weak a growth I think to create the um the type of inflation demand pull that I think most people are looking for, because I don't see that. I don't think we're going to get

the inflation that everybody's hoping for. See, you had Morgan Stanley coming out earlier today and talking about how he had they expect uh the ten your treasury yield to go to two percent by your end. It's currently at one point eight percent. What do you think where do you think it will end up? You know, two percent? It's probably a ceiling. Because I'm a lot more bullish

than people think I'm. My my view going into next year is still going to be that inflation is not going to be there, the growth is gonna stay low. We still have the potential of a shock maybe in financial markets that could push financial markets down, something similar to a Brexit. Maybe it's next week in the election, or maybe it's in December with the Italian referendum, which I think could be Blexit one point five that the Italian referendum is that big. So there's a lot of

things I see that could push rates lower. As opposed to pushing them higher. So yeah, we hit one yesterday. Two percent might be an absolute ceiling on the market, But I do think that the next big moving rates would be lower. All right, next big moving rates lower? Chimpianco. Tell me about commodity prices. Are commodity prices at their

bottom or are we going to see a continued increase? Well, you know the thing about commodities right now is you almost have to separate them out, you know, Like my favorite line about them is carn copper, cocoa, crude oil, um, and coffee. I'll start with the letter C. But they're not all necessarily commodities in a aggregate because they all do very different things. The agricultural markets look very bullish right now. They could continue to move higher. The precious

metals are struggling. I still think that oil is topping or the energy complex is topping as well too. And you're kind of going sideways with the industrial metals. So they're all over the lot. But if you wanted to look at it in a big picture, there is no strong breakout of the commodity indexes right now. They're probably trending sideways to slightly lower and that strong breakout, which would suggest world growth is coming. I don't think that indicator is going to give it to us right now.

So you know, you're saying that you think there's the next move in rates is going to be lower. Uh, it seems like the consensus from well, it seems like the consensus is kind of splintering. What do you think the big consensus trade is right now? You know, that's a good question because it depends on who you talk to. If if you ask somebody who's got the title economist, they've embarrassed on rates since about two thousand three, and you know, don't let a hundred and fifty months of

being wrong getting away. Their rates are still going to keep going up. If you ask a grater, they're much more bultless on the market right now, and portfolio managers

are a little bit in the middle. I would still argue to you, though, that the bigger surprise in the marketplace would be a move down to one thirty on the tenure yield, which was the early July low and the all time low, as opposed to a move back to the January one high of to So I think that the surprise move given all of that would probably be a revisit of the All Time Lows, which was set just in early July. So we're gonna see this movie for another like seven or eight, maybe nine more times.

Jim Bianco, thank you so much for coming and joining us. Jim Bianco of Bianco Research in Chicago. I want to learn more about Suicide Squad. I want to learn more about Suicide Squad from Paul Sweeney, the director of North American Research and Media UH for Bloomberg Intelligence. Paul, did you see it? I did not, but fortunately a lot of other people did. And that was one of the contributors to a pretty strong quarter from Time Warner this morning.

You know, their movie Studio did did did well as expected. The cable networks actually did a little bit better than expected, and that those are the real cash flow drivers for the company. UH and HBO, the third leg of that stool. At that the company also had a pretty good quarter. So the company beat expectations here in the quarter. They were able to raise their guidance for the year a little bit in terms of profitability, so I'm sure they feel pretty good about it. I'm sure A T and

T does as well. Well. Yeah, so this is this is what surprises me. Right, Time Warner should feel good, A T and T should feel good. Both stocks down. Yeah, I think the you know, it's interesting about this deal, the A T. T and Time Warner deal. The marketplace is very dubious about this deal getting approved. I mean, it's it's a transaction that's not scheduled closing to the

end of twenty seventeen. But even if you kind of do the arbitrage math, that suggests that, I think the market is dis kind of a less than fifty fifty chance that this deal gets approved by by the regulators. And so you know, we're gonna have to see how things play out with the election and then see how the things play out with the regulators. But a lot

of uncertainty around this deal. Hey, Paul, can we just go through the three areas that Time Warner is on involving because you mentioned the cable channels, right, the cable broadcast monthly subscription fees higher, right, So it's you know, the monthly subscription fees. Those those are the fees that the cable companies like Comcast and pay to the media owners like Time Warner and by via com to carry the channels. Those have typically have been growing a revenue

stream for the media companies in the high single digit range. Uh. Time Warner actually did a little bit better. Um, they were able to renegotiate some of their contracts recently. That took advantage that we're that priced in the NBA UH contract, which they were able to charge them higher fees because they're now carrying some NBA games. So UH, that was a pretty strong driver for them. Advertising UH is still relatively strong in the marketplace, and Time Warners cable networks

are big beneficiary of that as well. Is is the HBO now that stand alone streaming service they give any indication or how that's performing, Uh, it's performing pretty well. There's there's north of one million new subscribers or stand alone subscribers to HBO. Now, UM, you know, the real question that I think investors have is are these new subscribers to HBO or they cannabalizing some of their existing

subscribers that get it through a cable system. Time Warners suggesting that the vast majority of these are our new subscribers, UH, younger demos, people that were not subscribing to HBO in the future. But that's clearly I think where the industry is going, which is to make your programming available not just on the traditional cable systems, but also direct to consumers,

very similar to help people get their Netflix. So at the end of the day, we're going to know everything that we need to know about media, the current state of media in the world. We're gonna get some earnings from twenty first century Fox as well as Facebook. So when you wake up tomorrow morning, what's the narrative going

to be. Well, the narrative is going to be that the traditional media companies like twenty one century Fox are in pretty good shape, but the real growth, the real ad dollars are shifting continuing to shift to the media to the online media companies like Facebook. So Facebook is going to put up a revenue growth north of fifty percent um, and you compare that to some of the high single digit revenue we've seen from the traditional media companies and just shows you the way of the world.

I'm just gonna say, take a look at the annual revenue growth of Facebook. We're going I know we're going to get quarterly after the close of trading, but you're talking going from five billion to seven point eight billion to twelve to seventeen. The estimate now twenty two billion, and this is in four years. A company goes from five billion to twenty two billion. Yeah, it's just amazing.

And if you think about online uh, you know, internet advertising, two companies take more than fifty of it, and that is Facebook and Google. If you're a big brand advertiser like a Ford Motor Company or a Coca Cola and you want to advertise digitally, only two places you can really spend your money, and that's Google and Facebook. And they also integrate the advertising and marketing. They actually have

employees from both companies. The advertisers plus Facebook and Google actually get together on a regular basis, uh, to make those kinds of decisions. Yeah, it's it's it's really been been amazing kind of what what they're doing, and it's kind of frozen out a lot of the other players. So you see like a Twitter sitting there with three and twenty million uh subscribers are users onto their platform.

They are really finding it hard to really get the attention at Madison Avenue and a big advertisers, so it's really become a dual woppily from the perspective of uh, you know, the big online advertisers. So you know that's one of the things A T and T says, A T and T says, we are going to create a big advertising alternative to the Google and facebooks of the world. Well, as Lisa just mentioned, shares of A T and T there down about a quarter of a percent today. Thank

you very much for joining us. Paul Sweeney, head of Research, Director of Research for Bloomberg Intelligence. Well, he's a human and he's been tracking human feelings about the election. Mark Niquette is our politics and national government reporter for Bloomberg News. He can be followed on Twitter at m Niquette. All right, Mark, we got a pole and then there's something from President

Obama having to do with the FBI. Let's start with the independent of the Poll of Independence by Bloomberg Politics. What what does it show. It's actually a bit of good news for Hillary Clinton after several days here of bad news related to the release of the FBI letter showing there is more scrutiny on emails. The Poll of Independence folks who say they haven't decided yet showed her

with a slight advantage over Donald Trump. About that's important because this is a group of swing voters that can often decide an election in particularly in key battleground states. And it's a group that Republican met Romney won by five percentage points in twelve. So it shows that Donald Trump is still having some trouble sort of building the coalition of of Republicans and independence that you know helped

Romney and twelve and even then he lost. So it shows he still has some work to do to get these folks to build a coalition that wins. It seems like, just based on market action, that a lot of traders certainly think that Trump is that Mr Trump is is positioning in a better position right now to become our next president than Secretary Clinton. And you know, from the people you speak with, the analysts, do you do, they seem to suggest that Trump has seriously improved his odds

of becoming president in the past couple of days. Now there are signs and suggestions that you know, he has better position today than he was a last week. I mean, certainly before the news that fb FBI letter broke, you know, the sense was we were headed towards a pretty solid Clinton victory and that the race has tightened now significantly now, you know, we always expected the race to get closer as Republican voters sort of came home in the final

days before the election. Um, but the FBI revelation seemed to have sort of shifted the thinking and feeling about this race. I mean, it's still I think gonna be an uphill climb for Trump to get to electoral votes. I mean, his campaign has essentially laid out that he needs to win Florida, North Carolina, Ohio, and Iowa and then another battleground state to really have a good shot at two torn it to the in seventy electoral votes.

So Clinton can stop him in any one of those states, you know, she would still be the favorite, I think. But you know, as it has been through this entire election, people are weary now of making predictions, and it's been so unpredictable. You know, we're gonna have to see what

happens on election day for sure. Another big question are certainly among the people who I speak with, is will Congress back Donald Trump's proposals, Particularly is economic proposals, which are rather expansive and don't really kind of cohere with traditional uh sort of fiscal conservatism. Uh So you know, what's your sense, do you use your sense that that the House and Senate will back his proposals as is, well a lot will be turned down. What the composition

of Congress looks like after this election. I mean, we're still waiting to see, you know what, who controls the Senate. You know, there's a there's a chance at least for the Democrats to regain control there and with the mix of sort of very conservative members versus you know, more moderate Republicans in the House will be assuming they continue

controlling that chamber. Um, And you're right, I mean, there's there's Trump's proposals have kind of a mix of sort of more traditional Reaganesque kind of elements, like his tax proposals I think would would have more broadest acceptance there. But you know there's other things that I think he would have trouble getting through Congress. But you know, a lot of variables there to be determined before we can sort of guess on how you know, anything specific might

play out. Mark the President. President Barack Obama has said he was giving a interview and online he describes He said that the FBI Director James Comby's decision to renew a probe of Hillary Clinton's emails had become a political controversy. Yeah, I think there's no question about that. I mean, President Obama is in a tough position, and as much as this is his appointed right and he can't sort of be out there publicly, you know, sort of questioning him

or or undermining him. Um, but you know there's no question that you know, having the FBI director, you know, send this letter to Congress eleven days before election sort of raises the question of whether you know, the FBI is you know, interfering or at least you know, influencing election by doing this so close to the voting, and

you know, whether that was the intent or not. Sort the practical outlook impact of that could be that this ways you know, votes in the race, which is something that you know, the Justice Department and FBI you know, sort of a rule that right to avoid you know, pretty fastidiously. I mean, this is basically like Obama saying we breathe there. I mean, of course, has become a

political controversy. I mean every poll has kind of showed that it's certainly being taken to some degree, uh like that whether or not it's justified or not is a whole other question. It certainly has become a political story. Mark going forward, what is the one thing that you're looking at today that you think that is sort of the underreported story. I think the underreported story, UM is what's happening with early vote among key elements of the

Obama coalition. This is the sort of African Americans, young voters in particular Latinos who supported Barack Obama and are they UM is going to go with with Hillary Clinton in the numbers that she needs to UM to win. And we're seeing a little bit of that insight with the early voting totals that are coming out suggest that there might be less enthusiasm among African Americans, for example,

for Hillary Clinton and there was for Obama. And I think diving into those numbers and how that coalition votes will a little long wait or to turning whether Hillary Clinton wins. Mark Niqette, thank you so much for being with us. Mark Niquette, politics and national government reporter for Bloomberg News breaking down all things related to this presidential election. I'm Lisa Bramo. It's here with pim Fox. This is Bloomberg. The Shares of te connectivity. They are higher by about

one and a half percent. Many people may not know about t E Connectivity. It has a former name, Tycho Electronics. And here to tell us more about t E Connectivity and its future is Tom Lynch. He is the chairman of the Connectivity. He's also the outgoing chief executive. Also with us is the president and the incoming chief executive, Terrence Curtain. Thank you, gentlemen for being here here. I was gonna say that must be some kind of special ceremony,

you know, a secret password or something. But I'm wondering if you could just describe Tom, what kind of company are you? I know you're gonna remain chairman, but what kind of company do you feel you're handing over to Terrence to to take charge of a very good company. We have lots of opportunity to get better detailed. Give I know, but give us the d because I was reading there's a lot of cool stuff you've been You work with companies like Google and Facebook. People may not

know this. Tell us what what is t E Connectivity. T Connectivity is a twelve billion dollar global company with seventy of our revenue outside the US, and we're right in the middle of the connected world phenomena. So automotive, aircraft, machinery, communications equipment, sent medic a lot of sensors, a lot of connectors, and a lot of connectors, uh twelve billion plus of them. So we're in a great a great industry, say multiple industries. Everybody's our customers, we like to say, well,

and it's a very competitive industry. So, Terrence, I wanted to talk with you a little bit about going forward. Yes, this is the future as far as is everything under the sun being connected, but there is everyone also wanting to get in that from Google to Amazon to who knows whoever h So what's the competitive landscape like and how big do you think the business could grow when when we look at the business day, like Tom says, about twelve billion dollars, and when we look at the landscape,

it's a pretty diverse landscape. The customers that you mentioned are more of our customers and competitors to Googles and the Facebook's. Our engineers were fortunate. We have over seven thousand engineers that actually enable some of the customers that you talked about, as well as the automotive companies that Tom talked about. So what's great is how we're globally deployed, and I think we get the benefit of the trends of the connected world as well as the various industries

we have so that can be automotive, medical. From a competitive standpoint, it's many different type of competitors. There isn't one single competitor we go up against. It really depends upon the applications we play into, and that's one of the things that we think we excel at bringing that engineering to our customers to really enable where they want to take the connected world. Terrence, I got to mention a couple of projects this kind of give some flesh

to all of this Pacific Light cable network. You have just chosen, I believe to be a contractor there for this is a Facebook Google project. You've also got the new Cross Pacific and Maria and I wonder if you could just tell us about each of those and and

how that defines the company. Yeah, him, great questions are projects we've had in our SubCom business, which is a little bit less than temporary to tell people's SubCom, SubCom, SUBM, submarine communications, and really what we do in our SubCom business is really build out the long haul oceanic systems for the world, and they actually support the cloud. So anytime you think about a cloud application, really, where do

you get to the data senators support? And that's where the Facebook's, the Google's, the Microsoft that are building the cloud applications. We support them by building systems that they actually own and use to make sure they can bring their services down to their customers. And that's what's great about what t E does is we enable our customers to bring that great connected world tour. Tom, You've been the CEO since two thousand and six. The world has

changed a lot in the ten years. What's been the biggest change in your industry? Well, the trends have accelerated for connectivity, that's the biggest thing. You know, it has been a big shift. It's just been no it's it's just it's acceleration. So maybe the best way to think about it, I think of what a car was like ten years ago versus today. It's it's incredibly different inside, right, you still have four tires and an engine, but the

connectivity throughout it, the safety systems throughout it. Every time, you know, the UH you have to improve emissions, more and more technology going into the car. So that's the great thing about this business. It's this acceleration of smarts into virtually every aspect of the world, and it requires more sensors and more connectivity. For us as a business, the big changes. We weren't in the censor business ten years ago. Now we're one of the world's leading sensor suppliers.

We weren't in the minimally invasive medical device business selling uh, the subsystems into that. Now we're one of the biggest players in that area. So for us, you know, we've jumped on those big trends in the last five years. Margins tell us a little bit about margins. Who wants to handle that? You want to take that? Go ahead. Our margins today are pre tax operating margins run north of six or after tax margins run about twelve. So

a very healthy business. And the reason for that is is, as Terrence mentioned, in these harsh environments where of our business is very hard to you know, to to get these solutions and get them right. So if we design something in that has to go onto the engine of a car, it's and that car is on the road for twenty years, it has to last for twenty years and all, you know, the in the environment, whether it's hot, cold, wet, dry, So you get paid for that because your customers rely.

We're very deep in the architecture of our customers and products, and you get paid for that. So it's it's a good business and it's a good cash flow business. Thank you so much for being with us. Uh Tom Lynch, the outgoing CEO of t E Connectivity, and Terrence Curtain, the incoming CEO of the company. Thank you so much for being with 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.