Markets Haven't Reacted to the Shutdown, Lee Says

and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course on the Bloomberg Joining us now, I'm pleased to say as a man whose work has taken him from the Federal Reserve, to the International Monetary Fund, to city and now to the Milken Institute, where he joins us from it's Bill Lee, the chief economist of the Milken Institute. Its great to catch up with you, Mr Bill Lee. Um, can we just begin

with the government shutdown? And how much longer does this need to go on before you start having to to revise your first quarter GDP estimate in the United States? Well, I think this is a lot of noise, and I think the mark It's treating it like a lot of noise.

So I don't think we'll do anything to our GDP numbers because, let's face it, the government workers get paid regardless, and and the thing that's disruptive right now is the supply of government services, which on average really has been relatively smooth so as far as our GDP forecast is concerned, absolutely no effect. One of the things that we should be worried about is what this means for the prospect of further policies like infrastructure and the rest of the

Trump agenda. If we have children arguing about politics, the best thing I think the president can do right now is get himself out of here, which is done. He's gonna go to dapost and talk about globalism and internationalism and how the world is going to have have this world in transition, how we're going to manage policy in that world, and to be an adult in a playground

of children in here in Washington. Well, let's some use your phrasing the playground of children in Washington before we get to Dabo, Swissland with Tom Kane bill Um, what is this mean for the potential agreement if there could be one around the dead sailing which is set to come around in the next couple of months. Yeah, that's but that's key, Jonathan. I mean the act that we have a couple of months and and that we know the churchy can do something extraordinary measures to manage their

cash flow. Uh markets as and as you know, just have not reacted to this. And if you look at past experience, the one thing that we always prioritize are the interest payments on the debt and and and not to go to technical default. So one of the things that that we should worry about then would be how it is that the politics starts to come into play here and whether or not the political capital is being used up on the part of the Republicans and Democrats,

because neither side shows any sign of life. But then the policy, Remember the policy that worried about is immigration policy. This is a global problem. That's why we had Brexit, right because part of the reason is because the immigration policy was was threatening a national sovereignty. So so this is a big issue of global issue and and I

think they have to address it. And I think right now Congress has passed the book for so long, it's about time the President says, look, do something about it. Building the Milk institu Chief Economists, you want to us to down Bloombecks advantage. I'm Jonathan Farall in New York City. Tom Kane over in Davos, Switzerland. Tom, good morning to you, sir.

Good morning John Farrell, a snowy DeVos record snow and DeVos, I haven't seen a really detailed history of the January snow here, but I am certain it is record back fifteen and even twenty five years, easily a hockey goal of snow on the ground all the way up and

down the mountain. And John, as you know, getting here can be a challenge, and you know, I think there'll be some real challenges and getting the warm bodies up the mountain here in the next twenty four hours, warm bodies not your south Tom, can you have to get the train all the way out the mountain. I suspect that the President the United States is going to take around a different route up to the mountains that I'm

that you took. Tom, Well, that's true. I think I think the President's visit is clearly a high point here, but of many high points. And William Lee, what was so interesting this morning? And I guess it's not that I expected this, but it's the surprise of this Monday folks at the at the meetings is the talk of Mr McCraw. He is Ben Billy on an international mission for France and for a certain McCraw macrown international economics define that for our audience. What is the economics of

the president of France. You know, Tom, we have both joked in the past about how France is sort of like the the hub of regulatory impass and policy impass, and how France really has seen it's better day in the past. Macrown is trying to change all that and trying to say our policies are gonna put France back into the center of the dynamic of capitalism again. Now I think we both are sort of chuckle and saying, well, good luck on that, because you have a lot of

bureaucracy to overcome, a lot of historical regulation overcome. One of the things that that we need to make sure of is that the political leaders would come to Davos talk a good story, but let's see the action. Last year, the president of jen Pain came from China and said, I am a globalist. And what's happened since then, One Belt, one road is falling apart, trying to say TRYA is just too dominant here and we just can't lease our

sovereignty to China. I think this this year, we need to watch out for what the political leaders say because it has to be backed by action. I've got to say, Bill, the point you make that, Tom, the idea that the president of China was able to go to Davil Switzon and claimed to be a globalist is something that's still still makes me shake my head to this day. I agree, and I will say this in folks, this is my

fourteenth year up Happy Valley. I will say that this valley came to a total stop when the President of China spoke last year. I wonder if that's gonna happen on Friday with a scheduled speech of the President, Bill Ye, what kind of economy is a president bringing with us he wants to take a victory lab I'm now twenty six thousand. Is it a three percent GDP economy? Tom? It took Nixon to go to China, is going to

take Trump to talk about globalism. And I think one of the things that we're gonna see is a new sense of globalism that includes national priorities. And I hope he makes that speech. I hope it makes that transition

because it's so important. One of the things that we're going to worry about in our own milk and conference in in later April early May is navigating a world in transition, and I think one of the things that that that differs from what you guys are addressing is that you see, the world is fractured right now, and

how do you deal with that fractured nous? Navigating that transition is part of that fractured nous, and I think one of the things that that that has to be done is to have policies in place that take into account the realities of the world. We have political fractured nous, we have economic fracturedness, and financial fractured nous. But now how do you navigate that? And I think that's one of the themes that we'll be discussing in Los Angeles.

So come to the warm weather. It's on. But this doesn't have to be a difference between globalism and nationalism. When the President the United States goes to DAVL. Switzer and I go back to the idea that the Chinese president was able to go to Davos and claim to be a globalist, why is this administration failing to deliver what is quite a simple message that the current framework for global trade is not there, It is not a

level playing field. The Chinese still have significant barriers to entry at the same time they are leveraging the open door to markets in Europe and to markets in the United States as well. Why is this administration really failing to deliver what is at his core quite a simple and basic message that I think many economists might agree with that there needs to be a leveling of the

playing field here. Absolutely, And I think it's unfortunate that the election placed Trump in this in this box that characterized him as some wild man who's gonna shut down trade and shut down all the borders and shut down all of the entry into the US and make it

an isolated or target economy. One that that is the image that he's got to get rid of and say, look, we're part of the global economy and we're trying to develop internationalism into a bilaber set of bilateral deals instead of this big, massive multilateral deal that nobody's happy with. And so so the essence is the new shaping of policy initiatives has got to be to deal more with the reality is the world and how to address them. Finally, Bill,

can he do that? This week? Boy fingers crossed. I think the talk among the globalists and internationalist is the guy isn't smart enough to really pull this off. And I hope he's going to surprise him on the upside on that, because right now the British obleek crowd are writing it off and say he's just going to make a fool of himself. Let's see if he does. Bill Ye Milkin Institute Chief Economist. He joins us to discuss

the global economy. This is Bloomberg Surveillance with myself, Jonathan Pharaoh in New York City and Tom Keane in Davos, Switzerland, all week on Bloomberg Radio. What better time to bring in a guest who has created and produced high profile platforms including the World Economic Forum and You're meeting at Davos, the Clinton Global Initiative, and the Noble Laureates Conferences, just to name a few you. His name is Richard Attias of Richard Attias and Associates. Richard, it's always great to

have you with us on the program. Thank you for having me. Let's imagine you're putting together a big event. It's in the Mountains of Devils, Switzerland, and then all of a sudden, the President of the United States decides that he's going to attend just a couple of weeks before it kicks off. How much trouble does that cause? Oh you know, it happened in two thousand when President Clinton decided to come. I think it was the last

one who came. Of course, it's a logistic nimer, usually Air Force one just landing Zurich when you have to probably take helicopters to go to Davos, and we don't know what would be the weather on Friday, which is the second potential nightmare with the snow, because if the snow do not allow helicopters to land, if they have to take cars, which is another backstory. And then definitely the city is much looked than any any other day, and usually when the room is backed, everyone wants to

attend the station. Definitely, the president of your night state, whoever he is, is by definition or rock star, so it's definitely a nightmare, and the city is people are making big lines, so you can guess how it is when the President of the United States of America is going somewhere. So it's even worse than a very small ski resort with snow and and three thousand delegates, including big global CEOs, who do not understand why they should wait to to give room to the President of the

United States of American. Kane also hates waiting, Richard, And it's a group of big egos, so you have to manage these egos, Rachel, I guess a big question and logistical nightmare. But surely this is a pr dream. Yes, no, definitely. You know, I think President Trump if he goes, because, to be honest, I would not be surprised depending on what happened with the government shutdown, if we suddenly learned that he's not going anymore. But I think it doesn't care.

To be honest, he wants to go there. He wants to talk to this elite. I'm sure he wants to be a little bit provocative. And as you know better than me, his way of communication is direct communication. He cannot just continue to talk through Twitter. He doesn't want to make big interviews. So who will go and he

will be on stage. What will be interesting to see and to watch is which format the Print of the United States will adopt, will be only a speech between behind the lecturing with no questions, or if he will accept to maybe take two three question, probably not from the floor from the audience, but president probably from the founder of the World Economic Farm, which probably will be

with him on stage. I hope that this question, if they happen, will be very direct and it will help to learn what is happening and what is in the mind of the President Trump. That's a terrific summary. And of course, as comes from your your decades of experience for chard, well, when I look at the options that the president has, which would you would I will do?

I would definitely do both. Which is delivering a twenty minute speech followed by probably a ten fifteen minute Q n A station Why because people need to understand really what President Trump has in mind, especially with all these reforms. We know that he would probably talk for twenty minutes about how America is great, the best place to invest,

because he will be competing with many other destinations. You know, each single world leaders who are in divorce from President Macrie of Argentina, President mccron France, and probably even Theresa May in the big paradox of the Brexit, are going to divorce to explain to world leaders that their country

is the best place to invest today. And at the time is now President mccron is hosting the minute We're talking in Paris a pre divorce forum at Versailles in the Castle of Oversailles with one d and fifty global CEO who accepted his invitation, which was sent on the end of December. So this is showing you how world leaders are in permanent now connection with global CEOs and how global CEOs wants to be connected to world leaders. So back to President Trump, I think definitely he should

explain what he's doing. You know, everybody is watching the great stock markets in America, so people have to understand if it is a bubble or if it is solid, and why I should put my money in the American industries. And when I look at the list of potential members of cabinet coming with him, definitely they will have bilateral meetings talking about transportation, health, scare, energy. These are definitely the sectors where people wants to probably see opportunities in

the country. Richards of Richard ass and Associates great catch up with you to kind of lean on your experience of putting up events like the World Economic Forum in Dallas Switzen together. As the President of the United States is sent to descend on Switzerland, John, the snow is so great here and it is not funny. It is very serious in Switzerland, and that of course is avalanches. I have never seen the warnings out. There's Zermont I believe is closed again, down to the south and um,

it's just everywhere. It's here. Here's the report at five pm last night. John, you'll love this site. Psalms to go ben schnee gafallen as Edward teddy Off Montaugs invite there Stark schniffal voras gagnd. That's very helpful. That's about it. That is about as clear as a government shutdown language Washington. Which is a good way to migrate in German or fractured German, I should say to the fractured nation and is shut down, Greg Valier, where this is German is

is better than anybody's. German is better than mine. Greg, good morning. You have seen you've seen many shutdowns. The one that's so different here is this White House response. What will you listen for or look for from the White House in the next forty eight hours? Well, Tom, something explicit, something coherent from the President. I mean, so far it's very unclear. Just what do you want? I I look at it, Greg, and I think all of us have read the obligatory articles, and we've looked at

the obligatory things and open question. What sticks out to Greg Valier about what went down? What? What? What made you scratch your head at two am? All beyond any question, Tom, the fact that Schumer put the wall on the tape. Boy, he is willing to negotiate on the wall. Very unclear as to how much money. They're talking about different versions, but he did put that on the table, and I think that's important. Greg alone wants you a question about the term the white House. Tom asked you where the

White House stands on this issue. It's not clear to me that the view of the say White House is necessarily the view of the President of the United States. That doesn't seem to be one coherent view within the White House. Is something that Tom's asked me about this morning. Do you see a coherent White House here? Greg, Well, when you look at two important aids, the chief is past John Kelly and this fellow Miller. I mean, they

both are very hard line on immigration. They don't want consul citizenship, they want a wall, they don't want chain immigration, all this stuff, so that they are taking a hard line. The problem is when the president gets into a negotiating session, he spens he wants to be conciliatory, and then these advisors yanked him right back. So what leads to reconciliation here is that the polls went against one party versus

the other. What leads to a break here? That could be it, But frankly, I think this is going to go on for a very long time. Even if there's a deal today to keep the government open until February eight, that just means we have another crisis on February eighth, and we could go that right back into a shutdown again. Here's the problem. Both parties have activists on the right and on the left who will not agree to a centrist deal, and these activists could preclude a deal quite

a while. You do this, Greg, in your report this morning, you say the center may not hold. I get that, but there has to be a catalyst to common sense. What's the catalyst? Well, I think Ms McConnell plays a big role here. He he's very conscious that they could have big losses in the November elections. I think he also was a gas at this idea of changing the filibuster rule. I think he feels that many people do. Schumer overplayed his hand. So I think McConnell could play

actually a very constructive role. Okay, So so he can play a constructive role, and I guess we need leadership. Let me circle back to my first question. If we all assume, whether we support Mr Trump or not, that this president is a political neophyte, where's the person to teach him what to do in these unusual circumstances. I I Lindsey Graham is clearly front and center, is a unique kind of Southern always intriguing Republican. But where's the helper of the president in this mess? It could be

in McConnell. I think Graham is a bit tainted at the White House. You know another thing that could maybe chasing this president, since he's so obsessed with the markets. If the dollar in the market start to weaken based on a seer of utter chaos in this city, that's something that would get Trump's attention. Well, Greg, that's not

gonna work because it's not happening yet. And I remember when the president, not his states she used to be called barracabam in President Obama came out and said things like the market should be worried, and it was the odd dead seating debate. And guess what, the market wasn't worried, so it wouldn't be the first one that try to

lean on the market to move things along. Give framed this as an activist Democrats versus activists Republican story, and within the core of those parties, within the electorate remains those activists on either side. But are those activists willing to shut down the government for their cause? Does that support remain? Yes, I do. I think for now they are, and as we as we discussed earlier, maybe if the polls turn, it would change attitudes, but right now they're

dug in pretty good. And again I would caution everyone if there's a deal in the next day or two or three, that does not mean we get anything by February eight. And this we could go right back into a crisis in two and a half week. So, Greg, what does a crisis actually look like? It's a strong word. What's the crisis in the nation's council? Yeah, I think a crisis is eight or nine hundred thousand people out

of work and that eventually have an impact on consumer spending. Uh, it certainly has an impact on defense contractors who already are confused. We're four months into a new fiscal year and they don't know what their budgets are going to be. So this does become a confidence issue. We're not there yet, but at three or four or five weeks shutdown and I think confidence starts to erode. So correct, Let's get

to the bigger issue. The markets looking the other way as far as the governments shutdown is concerned, at least for now, might change, but it isn't at the moment. Let's get to the debt ceiling debate. What's the read across from this to the debt ceiling debate and how ugly that could be in the coming months. Yeah, this is just like the order. This is like the appetizer. The death failing story probably will peak in early April.

And here's here's the bottom line. There are not enough votes to raise the death failing, certainly not enough votes among Republicans who won't do it. Will Democrats go along and cooperate? I'm not so sure. Oh yeah, thank you so much. Greatly appreciate the briefing. After what has been and exhausted, we can we can. It's say enough about his Horizon investment effort to greet our morning with his perspective on capital. I have really been looking forward to

this discussion. It's away from Davos, I guess, it's away from economics, I guess, And maybe it's just about where we're all heading in our homes. Yes, in our businesses, but in our homes with this thing called media. Craig Moffatt and Michael Nathanson have a shingle out of excellence on media and telephonic analysis at Moffatt Nathanson. They worked for years at Sanford Bernstein, and Michael Nathanson joins us

right now. Michael, I could start with eight topics, but I'm going to give you an open question of the cliche of a decade ago, which is content is king? Is content still king? The morning? Tom Um? I think I think we're moving to something called platform is king. I think it's about getting massive aggregation, scale and content. Your Your content doesn't have to be the best content in the world, but if you have enough connected homes, enough subscribers, it's good enough. And I think that's what

Netflix has proven. They've got some good content, but they also have a hundred million subscribers. So better content maybe squeezed out on smaller platforms. So I think we're now moving into an era where scale, maybe it's astitution scale, maybe it's a platform scale. Scales are gonna matter, Michael. For a moment, we thought that could be only one winner,

and many people identified that one winner as Netflix. We're now seeing Netflix become less dependent compared to where they were, say a couple of years ago, on other people's content. Can there be more than one winner in this space? Oh, John, without a doubt. And since they've last seen you about a month ago, we've had that Fox Disney merger. Right, if you look at the content that they're going to a mass, they're in pretty good shade. Now they have

to build their platform. But I think what the market to maybe missing here is that it is not a winner take all business. You see it in broadcasts with three or four networks, to see it on premium channels with HBO Showtime, you're gonna have more than one s FOD winner. Netflix is definitely one. Disney Fox could be the second. Amazon is going to be a third. Uh So yeah, I think it'll be a much more competitive landscape. And finally, Disney has woken up and said, you know,

we should be in this business. Am I buying Fox? They've bought more long tail library content to put on that platform, so that's where they're moving towards. So it's gonna be interesting, Michael, to see what they do with the content they have acquired from Fox and how they treat Netflix with some of the content that runs on Netflix. They've already said on the Disney side of things that they're going to sever any license agreement with Netflix going forward.

Are they going to do the same thing with the Century Fox assets? Do you think? Michael? Oh, without a doubt that we did a note about this a couple of months ago, and we went through Netflix's catalog and we said that Fox very quietly had supplied Netflix with some of their best shows a Family Guy or the f X shows, Um, It's always sunny in phil They

basically gave them a lot of great content. They've been saying very quietly that they're pulling content off on Netflix and they've gotta put it on Hulu, which is now owned by Disney. So I think both Fox and Disney's content will not be on Netflix a year and a year and a half from now. I mean all this copyrighted material in the argument over writes it, does it make the valuations just go up up up? If there's I mean, there's too much stuff, Michael for me to

watch or anybody in my family to watch. But does the glut of content just continue? Tom, It's funny. I was talking to my wife bat this morning. There's five dred new scripted shows on the air in in Countyr seventeen. Five scripted shows. There's no way that any family can stay on top of that, right, So you default to a couple of shows that you've heard of, But you also go back to cattle, you know, for comedies, you watch Scifel, Friends, Family Guy, it's you know, big bang theory.

So there's definitely gonna be more and more content produced, but you'll have less time to consider that content. You'll stick to some of the long tail, big, big name content, and then you will probably go back to things that you're comproble with. So buying a library is gonna go up in value, you know, it really will be. It's gonna be. You don't want to be in the business of having small, you know, unknown shows like some of

our cable networks, where you basically don't get traction. You keep investing in more and more shows, being you're getting no attraction. So that's a tough place to be. And we think a lot of cable networks are going to have to consolidate or basically stop spending because they can't make the money work anymore. So, Michael is a Giants fan.

I won't ask you about the Super Bowl. Tom Kane might, that's up to him, but since we're sitting across from each other, I'll protect myself and will avoid that topic. But I do want to talk to you about the price of sports content. It's getting more and more expensive, whether it's over the Premier league rights in the United Kingdom and soccer rights there, or whether it's in the United States and in the NFL, etcetera. The price of

sport and the content is getting more expensive. But as an asset, the eyes on that particular asset falling away, they're not increasing. So I don't see the growth in the viewership alongside the growth in the value that people are paying for these assets. That doesn't make sense to me. Michael,

why are we still doing this? Okay, great question. We're doing this job because when when you turn on the TV set on a given night and there's a sporting event, you want that game to be on to last night's let's say last night's first game, because the second game is not good. But the first game Patriots, right, Pagriot Jacksonville. That's a game that you want to watch. And if you're distributor, if you're a cable operator, doesn't have that game,

you're gonna switch cable operators. So I think what we're missing is the rate. Yes, ratings are coming down, with a passion for the people who remain to watch that is incredibly high. And therefore, if you don't have that as a strict you'll lose a customer. So unfortunately it's it's a shrinking contributor to the ecosystem, But as a as a passion play, it's nothing better, you know, to

dry people. What's your passion for? By hold cell? I mean, what's where's the value in this crazy bowl market and the Michael Nathan's and space? Yeah, Tom, you know it's interesting. The past couple of months have been really um surprising. We've seen we've seen it. So we have buys on Disney and Fox that's been consistently our buys because both those companies own a ton of life sports proprietary, proprietary content. So we're always been Disney Bowls, as you know, and

we've been Fox Bowls absent that. In traditional media, we have a really hard time with all the changing um, you know, the changing landscape. And again we come back to we're a fang. We cover the fangs. Facebook and Google get seem to us as the place to go, and they are not that expensive relative to the growth they deliver, So our remain pretty barished on tradial media. You and I can't help but look at those fangs and say, you know, two of the three recover a

really good value for the growth they deliver. We're gonna come back on that, I know, John Farrow and I want to talk about Facebook and the video. John one more question squeezing and when Mr Nations thank you. So I appreciate that, Micho, this conversation based on the assumption that the actual Disney Folksdale closes um could take a while, It might not happen. It's so where do you stand

on that right now? What's the vice case for you? Guys? Well, let's say our our base our base case here is we were surprised that Disney, you know, that this deal included all the regional sports networks, because when Disney is going to own, if this deal goes through, will be ESPN, ABC and your local regional sports network. That seems like too much concentration or power. We're assuming that they're gonna have to divest the rs NS, the regional sports network.

So we assume the deal goes through, but that Disney is going to have to divest an asset to get it through. And I don't think that that's not out of mainstream thinking. So that's not why they're buying Fox, and buying Fox for that TV and a film library and for FX, which is those three properties have a ton of content for the long, long run. Michael Nathanson with US thrilled, Davin with us with Mofatt Nathanson. Thanks

for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio