Russia's a Clear And Present Danger, Ambassador Ereli Says

Russia of state terrorism. That's coming after a former Russian lawmaker and a witness in a treason case against former Ukrainian leader Victor Janakovich was shot dead in broad daylight outside his hotel in central Kiev, Ukraine. Today, you're gonna tell us a little bit more about Russia and it's efforts and responsibilities in the international order. Is Adam Arelli. He is a former US ambassador to Bahrain and a State Department deputy spokesman. Ambassador, Really, thank you for being

with us. I wonder if we could just get your reaction to this, uh, this event in Ukraine today, well disturbing, but not surprising. Russia has a has a history and a pattern of offering its opponents. Uh. You know, just two days ago, um a lawyer who was bringing a case against the Russian government for corruption. Accidentally fell out of his fourth story apartment in Moscow. Wow, taking a bathtub up the stairs. Okay, and the Russians a rule,

that's not an accident. So look, let's be clear, Russia is a clear and present danger to the United States and to the rules based international order that was put

in place after the Cold War. And until and unless we recognize that and have a concerted policy with our allies to confront it, whether it be in the Baltics, in the ball kins Uh or in in in Central Europe and the Ukraine, We're going to get our lunch eaten by a much more aggressive and opportunistic threat that is on that is that is out to get us.

It's that simple, ambassador. Really, given your comments that are very strong about the potential danger that Russia poses to the US and too many other nations, how damaging is the current administration's approach to that country. And but aside from that, to that country, to current alliances like NATO

and others that have potentially curtailed Russian power. Yeah, well, I'd say it's a little early to tell because we really don't know what the administration's approach to Russia is you hear different things, whether it's from the White House or the State Department of the Defense Department. But I think you know, look, Russia has an active and aggressive campaign to separate the States from its Western allies and

just so divisions within the Western Alliance. They're doing it in the Balkans through countries like Albania and Moldova, UH and Hungary, where they've been very effective at um at dividing the opposition and creating extreme right wing movements UH like they've done in the United States. Well, so you know we're gonna see it in elections coming up in a number of countries where Russia is just trying to royal the waters and prevent countries and those governments from

being friendly the United States. Well, what given that perspective, what do you make of Rex Tillerson, the current Secretary of State UH, not attending, deciding not to attend an upcoming NATO meeting and instead later on going to a meeting in Russia. Does that concern Well, I think that decision is under review, and my my understanding from people in the State Department is that they're going to reschedule it so that Tillerson can do it. But to your

question and the it's not what I think. It's the outcry of of our European allies and everybody else said, wait a minute, you can't do this. And it was a miscalculation. It was an unforced error by the by the State Department to decide not to go to a NATO ministerial to meet the Chinese president instead, and then to go to Russia. It just it sent so many wrong signals about US priorities in US commitment to traditional allies. And that's why people are asking questions, is where does

the United States stand on Russia? Uh? And until we actually take some action and make some clear statements by the president, you know, it's like the Sector of State says one thing, Defense Department, Defense Secretary says something, but until it's the president, you know, these are all the you know, number two and three officials is not the

number one and number one that capt Ambassador Elly. You spent twenty four years as a Foreign Service officer, and if in that time you obviously have met with many heads of state, what can maybe you go through some of them and tell us what their reaction is to Russia's involvement in non Russian affairs. Well, it's pretty clear. Yeah, let's go from north to south, Lithuania, Estonia, Latvia, Norway, Finland, Sweden,

all these countries feel very much at risk. UH that Russia has increased the number of troops on their borders U and NATO has slowed forces to defend them. Going south, Poland obviously is a has a history of of of conflict and intimidation for Russia. UM. Germany obviously is the anchor of Europe, the security and political and economic anchor of Europe. Nobody is more UM, nobody is more hawkish

on Russia. I think that Angela Merkel, which is why it's so disturbing frankly, that that that Trump and Merkel don't have the kind of chemistry that you get the two strongest Western powers should have when they're facing a serious threat from the east. Now back to the back to the the the unrest that that Russia is sewing in Europe. Go to the balk and go to Albania, go to Kasta and go to Serbia, and that is

exactly where that is the soft underbelly of Europe. That's where Russia is trying to exploit division and create client regimes. We gotta leave it there. I'm sorry. Ambassador Arelli is the former U S Ambassador to bah Rein. Well, if you're invested in stocks, SMP five hundred is up nearly five so far this year. And if you're taking a look at what's going on in bonds, the thirty years three point two per sent here to help us make

sense of all this is Steven Sarge Gilfoil. He is the founder and the president of Serge six and Serge maybe you could just tell people you were a floor trader for over thirty years, although you don't look at um gosh, that's yet. Well, there you go. That's the nicest thing anyone's gonna say to you all day. Is there a a connection between this health care vote that is scheduled for tonight in the House and what traders and investors are doing with their money today? Oh, certainly,

I assist the cell off on Tuesday. I'm sure you've noticed that. It's almost as if we're skating on thin ice. We're walking on egg shells, however you want to put it. We're waiting to see if we can get to the tax cut to the fiscal spending to further deregulation. This is what traders want to see. We really don't care all that much about our health care, at least not today. When one of our kids get sick, we're gonna care. But today we care about how to propel the financials further,

how to take the growth trade further. You know, I feel like there's been a shifting narrative though in the past week, from this is a booming economy, one that has momentum and is gaining steam to We're not sure what some of these tea leaves mean that it might be giving us, you know, different different types of h views. We were talking offline about how you think that the FED, if they hiked too quickly, could end up derailing the economy.

Do you really think that the economy and that the stock market is built on recovery that is so thin that a an extra or you know, twenty five basis point hike in addition to what is uh perhaps warranted by the economy could potentially derail the stock market. This is the third hike in the cycle, all right, and

we haven't really seen economic progression all that much. We've seen slow and steady economic progression, but the fourth quarter of the economy group one this quarter, if the Atlanta Fed is correct, and they're not usually correct, but if they are correct, it's growing up. Zero point nine c p I isn't really there. Yes, it's all two point seven percent on a year over year base is But in April the comparisons get very tough, and now that oils rolled off a cliff, that headline inflation is not

really going to be there. Well, but how do you then justify being bullish on stocks and then seeing all of these sort of tea leaves that suggest that perhaps the market is the same slow growth uh place that it was in last year. Well, stocks are up because consumer confidence has been higher, home builder confidence has been higher, small business optimism has been higher, and earnings have been

better for two quarters. But that's all based on this growth agenda is pro business agenda that we, at least for some time now thought because the President and the House and the Senate we're all from the same party, at least on a majority basis, that we would it wouldn't be so hard to get things done. As we're learning, you don't really need an opposing party to create problems for yourself. We're going to have a little we'll find out today just how realistic this pro business agenda is.

It sounds like a lot is being based on what people think, not on what is actually happening or what appears to be at least scientifically discernible. Oh, certainly, take a look at valuations. They've been higher, right this is you want to pay twenty one times for the SMP five because that's what it's trading at right now. Well, you know, my coaching gave me a couple of my shirts when I was a kid, and I grew into him, and that's what we're hoping that earnings are gonna do.

We're hoping to earnings. We're not sure. No one's ever sure. Hey, I've lost money probably probably half the time. You gotta know how to play your winners. But that growing into the earnings idea is something that's been batted around Wall Street, and we did believe, or do believe. I'm not going to throw it in the towel just yet to find it. Financials are popping a little bit today, which means they

are working on something very hard in the house. We don't really know what this bill will look like by the time they vote on it, if they vote on it. But if they do vote on it, that's gonna be taken as a positive. You know. I want to ask you something about something that the nominee to be the SEC chair said in his prepared comments he testifying today

in front of the Senate Um. He noted that the US capital markets public capital markets are less competitive than they have been in the past UH and he pointed to the I p O market in particular, uh US listed i p o is by non US companies and talking about how much the volume of those transactions have declined. Do you agree, first of all that the decline in this market UH is a signal of some broader ill

in in U S public capital markets? And second of all, whether you know his assessment is correct that we are less competitive in the US. I think we are somewhat less competitive in the US than we used to be. I I don't really see the the connection they're altogether. I know that the public has been slow to support some of these I p o s. Yes, we see the snapchat that opens above the price. We see a few of these open above the syndicate price, but they

don't run like they used to. Nobody opens or is price that life say forty and runs to one forty anymore. Those days along behind us, So the easy money isn't always there. And maybe maybe firms also just don't want to give up control of the operation just yet if they if they have something they think will be better in the future, and if there are higher evaluations going forward, if there is a pro go growth economy, it finally comes to fruition later on, you'll get a higher evaluation

for that. I p O. Can we talk about some numbers having to do with the US dollar, because I'm looking at it against the euro one oh seven, some people saying if it breaks one oh nine, then you're gonna see some big moves out of the dollar and out of US equities. Dollar also weakening against the pounds, sterling one and one thirty three against the can dollar one eleven against the end. What's the what you know?

How does the how does that play out? Well? In one regard, there's reason for the year to get stronger. Europe is getting a little bit better. The e c B is probably going to have to tighten monetary policy.

They're already gonna start tapering in April, So we're the balls rolling in that regard from a US, from a from a domestic point of view, this to me could mean that the border adjustment might fall apart that it may be used as a weapon, a unit of bilateral weapon in negotiations with say a China or Mexico, rather than a legislative tool which will hurt the retailers on a broader scale. Uh. You manage money for your family? Correct? Correct? How has your cash allocation been recently? Has it been

going up? For going down? I, right after the election went to a very low cash allocation because I did believe that Donald Trump was better for the equity markets than was Hillary Clinton. So that night that night I went into the futures and got after it when it was at the lows. So I the election worked out very well for me for a few months. I can't argue that. Uh. Right now, I've taken some profits, Alright, the last two weeks or so, I've taken profits in

the financial names. I've put some of that into cash. I've rotated into areas, not defensive areas truly, but areas that have been beaten down recently, like the airlines and like the end stocks. I've speculated in some energy names now that energy now that w C I CREWDE is approaching the support level. So basically cash was lower than they were. But I, as a guy who is somewhat conservative, I would suggest any retail investor listening out there, you

need money in case your boiler breaks. Thank you so much. Definitely wise words. Your boiler can break, and especially when it's still so cold in New York in March, it's nice to have a boiler. Stephen Gilfoyle, thank you so much for joining us. He's founder and president of Serge six LLC, and he worked for decades as a New York Stock exchange floor trader. This is Bloomberg. Now, let's go to Paul Sweeney. He's director of North American Research

for Bloomberg Intelligence. Uh. There was news this morning that just recently crossed if Bob Iger Walt Walt Disney's chief executive officer, agreed to a contract UH that would keep him atop the world's largest entertainment company until to Lie two thousand and nineteen. Shares are up almost a percent. Uh, Paul, what does this mean for Disney to have Bob commit to staying for another few years. Yeah, I think this

is very good for the Disney investors. I think, Um, clearly the succession issue did not work as well as the company had hoped over the last several years. UM. You know Tom Staggs, who was the heir apparent um uh left the company. Uh. So you know, Bob has been in a sense of uh staying on until they find a successor here. So this is you know, this is obviously a large company, diverse company. Uh. They've had very strong senior leadership at this company for a very

long time. So I'm sure they want to be very careful about who they identify and ultimately a point as potential air parent to replace Bob Biger. So this, if nothing else, just buys them another year to get that done. Paul Sweeney, why is this such a challenge? UM, you know, the question is, UM, they had spent so long identifying

two very viable candidates this succeed Bob Iger. They set up a race between Tom Staggs and Jay Rossulo, another high ranking and executive really over the last ten years, UM, and they identified Tom stagg as an air parent and then it just didn't work out at the end. So they really didn't have a plan. B uh, So we know why it didn't work out. I mean, is a long time to figure out that something doesn't work exactly right.

And that's what really caught investors by surprise a couple of years ago when the you know, when Tom Staggs did leave the company, it really, you know, raised a question, g I thought, you guys really had a good, strong, healthy succession plan in place that looked to be working until it wasn't. So that kind of put the company

back on its heels a little bit. And I think they're still there, um, and they recognized they need more time to identify somebody to fill in the shoes of Bob Iger, which are arguably very difficult shoes to fill in at a time that is a time of a lot of change for the media industry and for Disney in particular. So Iger is sixty or six years old, he has been with the company for more than a decade.

Why does he want to leave right now? I mean, yes, granted, maybe he just wants to go and spend more time with his family and go to the beach. But is there something else that sort of was encouraging him to leave? Well, I think one thing was is when he initially had his retirement date of a couple of years ago, it was he was going out literally on top day. It was planned to coincide with the opening of Shanghai Disney, which would be the you know, a certainly a crowning

achievement on in a very spectacular career. But then the timing, obviously with a succession, didn't work out. I think the expectation was, you know, he um, if a Democrat had been elected, he may have gone into politics. Uh. He was part of a group that was bidding for a NFL franchise in Los Angeles that that did not win that franchise. So uh. He certainly has a lot of interest outside of Disney that I think most folks felt like at his age there in mid sixties, that he

would be in a great position to pursue. But now obviously he needs to stay on a couple more years, uh and ensure that there is a seamless transition to a new CEO. Does he need to ensure that ESPN and it's high fixed costs are somehow resolved versus the effort on the part of younger subscribers to look for those skinny bundles that may not include ESPN. Yeah. I

think you're absolutely right. I think that's job one for Bob Iger and the management team over the next couple of years, just to figure out a real digital solution for their sports franchise. UM. Right now, they make obviously a tremendous amount of money off of ESPN, but their customers are going more and more online and they need to think about creating a digital online product that works for UM. You know this this this new world we're

living in. They haven't done that yet, and that's job one, Uh, Paul. Some of the headlines coming across now are saying that Walt Disney agree to pay either five million dollars in cash for extending his contract with the company. How does that strike you for with respect to sort of how high or low it is with respect to executive compensation, Yeah, it's it's almost for Bob Biger and for the company, it's a dimendis amount. Media executives, including Bob Biger, are

extraordinarily well compensated. If you take a look every single year at the top ten paid executives in America, there's a very good representation from the media industry Uh, so Bob Buyer's obviously, uh, you know, created a lot of shareholder wall for investors, and I think most investors are very happy for whatever conversation he's able to negotiate the current slate of Disney movies, Beauty and the Beast, for example, what can you tell us about how well it's doing?

And the franchise for Star Wars Beauty and the Beast is came in well above expectations. Looks to be another global hit, a global franchise. UM. And it's this um. There's no studio in the history of Hollywood it's had a on the way that Disney has had over the last ten years. And they could take a look at their slate of films coming up over the next several years,

it looks very solid as well. And it's just you know, they made a big investment in the film business about ten years when they bought Pixar, and then they bought Marvel Studios, and then they bought most recently Lucasfilms, you know, investing well over ten billion dollars in uh, the movie business. And they're now reaping the benefits of that by just hit after hit after hit from a lot of these

proven franchises, including Star Wars. So you said that you started out by saying, this is going to be a good thing for investors. Is there something in particular that Bobyger brings to it, uh, that investors should like? Well, I mean he brings stability, and obviously, investors, he's a proven entity that's been tremendously successful at the company and has created a tremendous amount of shareholder value over his

his tenures. So, as you well know, I'm investors don't like uncertainty, and so there's already is a level of uncertainty about the succession overall. But I think the news today, just you know, again, buys the time, buys the company another year to try to identify a uh successor. I want to thank you very much for joining us. Paul Sweeney is the head of North American Research and media

analyst for Bloomberg Intelligence. Shares of Disney they're higher by about six tenths of a percent after learning that Bob Iger will be remaining with the company July. This is Bloomberger. We have talked a lot about the big healthcare vote that will happen this evening in Congress, but we haven't talked quite as much about the details of how this healthcare bill is being changed at the last minute in

order to accommodate certain conservative views. But to do so, I want to bring in Kevin Whitlaw, Congress editor for Bloomberg News. Kevin, what do you know about these if it changes that are being made currently as we speak to the healthcare bill? Well, straight answers. We don't know yet whether any changes are going to be being or not. But um, some of the House Conservatives who have been holding out on the bill have been negotiating directly with

the White House on these things. They think they have some verbal agreements on the kinds of changes that might um at least start to get them there. But it's not a done deal. How it hasn't yet been signed off on by uh Paul Ryan or or Republican leaders. Um, given that they're not directly involved. Uh so uh And we also don't know whether the kinds of changes that UH that the conservative demanding are going to cause even

more moderates to to flee from the bill. We are seeing a drip drip drip of moderates starting to pull out their support, coming out against the current version of the bill, and the changes that are being discussed, um could could make even more get cold feat Kevin, what about the numbers? I was reading one report that said about thirty Republicans had said that they would either vote against the measure or had not yet made up their minds. You know it, er and sixteen is the magic number,

that's right. They can only afford to lose about one. UM. Losing twenty two or more probably kills the bill. And we we've said a number of firm nose to lean nos is probably somewhere between twenty five and thirty. But it is a fluid number. It keeps changing and and so um. You know, we always have to be a little careful of this. There's also been a thought that you just put the bill on the floor and make people vote on it. And it's gonna be hard for

Republicans to vote against something that actually repeals Obamacare. Um. Having said that, there's obviously a ton of angst surrounding this vote. UM, uh on on on just about every political spectrum. Kevin. How many moderate Republican votes are in contention right now? Well, we know of at least a handful. That list is probably up to somewhere between five or ten who have said no or leaning no hard um

and it only seems to be growing. So you're you're looking at um maybe uh, somewhere around eighteen twenty conservatives, five ten moderates. That's sort of where you get to that sort of thirty number. So you've got people on both ends of the spectrum. As you can imagine, you make the bill more conservative, you're excluding more moderates and vice versas. So they've got a real problem in trying

to strike a balance. And it's just not clear that strong arming um or charming from President Trump is going to get them over the finish line. It might still do it, The vote might still happen today. Uh. Things to keep in mind here is even if they somehow get this thing through the House, it actually faces an even tougher road in the Senate. What does this mean for the future of House Speaker Paul Ryan, who that's

a really good question. Um, you know, I think that that for President Trump, he's actually getting a taste of of how difficult Paul Ryan's job actually is. Um, particularly wrangling the House Freedom Caucus. This group of conservatives, these are people who actually back Trump so in theory, Trump should have a lot of way with these guys, but obviously he hasn't gotten there yet. Is Paul Ryan where does he stand with respect to the conservatives versus and moderates?

I mean, obviously he helped craft the bill, but was he pushing it one way or or another? Well, you know, he crafted a bill, and there has been some grumble about the way he did it, sort of did it in a fair amount of secrecy and and um um, it didn't do a ton of work um to sort of bring everyone in the process. So there's definitely a certain amount of grumbling. The bill is a conservative bill, but it's certainly not as conservative as some people in

the party had wanted. So um, I think that, you know, there's been some minor level grumbling in the process. It's not clear that failure of the bill uh endangers Paul Ryan's job immediately, but it certainly makes it look a lot more difficult um for him to deliver on some of the priorities ahead, because you know, the tax reform debate isn't going to be any easier than than this Obamacare debate. Um. So uh, if you can't get through a priority, that You've spent seven years saying that you're

gonna do not the world's greatest start form Kevin. Large protests against the bill planned for today in Washington and around the country. Have the Republicans really done enough on the ground work to get public opinion behind this change in the bill all such as the kind of ground swell that we heard for the initial crafting of the Affordable Care Act for Obamacare. Yeah, I mean I think that they I think they didn't really have to do

that kind of work. I mean, I think they looked at the election victories and said, you know, hey, we ran on repealing Obamacare and we won, so so people must be with us. But um, it's pretty clear they didn't do um uh enough prep work to try to sell their bill and what it's what it's replacement would do. But you know, here again the opposition split. There are some um, you know who think it doesn't go far enough, and there's obviously now plenty of people who are worried

about uh losing their health care. The problem I think for Paul Ryan is is had this repeal effort gone through a couple of years ago, it would have been probably a little easier and less politically sensitive. But now that people have have a lot of people have gotten insurance through through the system, have been using this and and now rely on it um Now, obviously there's a set Americans who are worried about things being taken away

from them. Thank you very much. Kevin Whitelaw is our congressional editor or for Bloomberg News, giving us the latest on the attempt to repeal and replace the Affordable Care Act. Devotes scheduled for this evening in the House. Thanks for listening to the Bloomberg pian 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.