Surveillance: V-Shaped Recovery Is Nonsense, Roubini Says

out of sentiment or you're still waiting for that big moment? No, I don't think so. I mean we've been looking at thirty forty on the SMP. The two day moving average is something where we may see a little bit more of a line in the sand. Drawn We've had a massive move in the last couple of days nepoties, but it has only been two days of de risking. We came into this last week with markets at all time

highs UM. We wrote a piece at the start of this year where we highlighted some of the irrational exuberance, some of the stretch grows valuations of growth stocks, the stretch valuation of equity markets generally, so a two day correction I don't think it's nearly enough to wash out some of the positioning consensus has had it all beaten out of it over the last week or so with the V shaped recovery. Haven't heard much about that in the last twenty four hours. Is that dumb dusted? Have

we moved on from that? UM? I don't know, really. It depends how the data unfold. It depends what happens with the virus. It depends what happens with the FED. If you have if you have a situation where the virus does not impact the US consumer, doesn't impact the US labor market, and you get a reaction from the FED. That's the type of environment that drives a V shaped recovery.

If the labor market or the U S consumer slow considerably, then I think we're in for a much kind of more sustained, turbulent time suffering the biggest losses here because there was a story about how leverage hedge funds ticked up dramatically right before the sell off, I think it's not contained just in the hedge fund community. When we look at positioning statistics, whether it's kind of retail or

leverage in terms of systematic strategy these institutional investors. It looks like the momentum and the rally that we've had over the last um, yeah, ten years, but suddenly the last six months or so has drawn a lot of people into the equity markets. I think there's a lot of leverage, and that's why we've seen such a kind of sharp reverse in the last couple of days. What are you looking forward to determine catharsis? I think that already we have to see what happens in terms of

the data, what happens in terms of the FED. I think it's far too early to expect equity markets to find a level. I think we're going to see some volatility over next Because that was a public answer, I mean, give us the truth here. What are we gonna see in terms of catharsis? What's the bet on the street right now? I mean, if people position given two difficult days down, I don't think two days is enough for positioning to wash out. So I think we're going to

get much more volatility. You know, you mentioned that we're seeing the future start to bounce a little bit a little bit this morning. We expect volatility. It's not going to move in a straight line, we could easily get kind of a decent update, but that could easily be followed by another couple of down days. So I think we're going to see a lot more volatility before pauseing washes out. For the final question, really really quickly March eighteen.

As things stand your view right now, did the FED go or do they wait? I think they're more likely to wait, But it's going to be data dependent. It's going to depend on the evolution of not just what happens in terms of the virus the data, but also what happens in terms of market You sound like a FED official. Great, great catch up with the great battle there of BNP Paramo, Johann Sebastian and Jack joytis now Rio Tinto CEO. J is fantastic to have you with us.

So let's just get into the business in China straight away. What are the customers talent you right now? Yeah, good morning. First, as you said, China consform more than fifty percent of the ver so we're spending a lot of time discussing to our Chinese customer and suppliers. We discussed with around two hundreds of those in the last forty eight hours. Where whether situation. Where the situation is today is there is clearly uncertainty. However, two things which is important from

all perspective. One is all the books of which is our men coming, are full and we're moving the product to China without any issues whatsoever. That's the first point. The second point is if I take a more medium term view, when I look at the back end of this year, we have no doubt and we've got all the signals that the Chinese government will implement a similars package.

I've already started and from past history, when the Chinese implement similar package is going to be pre intense in terms of communities, which could be a very good piece of news. So someone such no issues as we're having this conversation, but we acknowledge that could be uncertainty and we are prepared for it. John, I want to cut to the chase, and there was a terrific Bloomberg opinion

piece out on this earlier today. You've got a seven percent year, You've got massive dividend growth over the last five years. What is the elasticity of the responsiveness of the board to what you do with the dividend in the future. That's a very good question. But as you remember in twenty in early twenty sixteents, we have changed our policy to move from to move toward the variable policy. And the police is very clear forty two sixty percent

of the underlying earnings through the cycle. In the last few years we were always above the policy. And if you look what we have declared yesterday, it's sixty percent of the earnings aspect the policy plus a special dividend of one billion dollars which was which would take us. So the LS city city is very clear, it's directly linked to the earnings. Okay, but I want to go to your science of years ago and frankly your mining engineering. What's your ex access and the dividend? How many weeks,

how many quarters of this shock the supply shock? Can you stand to keep the dividends strong? As there a point where you do have to change the dividend policy. I don't think we'll have an issue with the dividend policy per se, because it's a valuable policy. That's one aspect. Now.

The second point, which is more important from a real stone point, is if I look at the quality of my assets, which are low costs, which are the lowest in the in the in the in the industry, plus the quality of malin balance sheet is I've got no issue whatsoever to continue the reverse supervalue for shoulders as we've done for us four years, because in the last four years we have deriverse thirty three six billion dollars

of cash return to our shoulders. Right now, I'm looking at the inventories in China and China steal inventorious have expanded to a record high due to the disruption from the coronavirus and the halt in building. How much more do you think that iron ore prices have to drop here if the coronavirus is not contained in the near term. That's a very good question. I can't answer on prices otherwise the lawyers would kill me as always, so I

can't do that. However, what is very interesting in the last few weeks, whe the government or wh this steal industry has done, they have shut down most of the e F converters which are primarily scraped based in other produced steel. But the blast furnaces which are using I know,

have not. I've only slowed down. And if you look at the volumes going into China, if you look at the inventory of I know at the post they have not moved and as I said to them, my other books on I know are absolutely sold out, and I'm moving everything to China ches I think everyone but to see. And that's going in one place, stock piles inventories, and it's not going to get deployed anytime. So so let's talk about that. You're saying you're gonna get stimulus out

of China. What kind of stimulus? Where is it going to go? I think the stimulus will may be slightly different from the past because, as I said, so far, the crisis in China is about services, about construction, about the back end of the matter, factoring that they're gonna

have to support all those aspects of the economy. But I've got to know that they will invest a little more or even more on the infrastructure as they've done in the past, because that's the best way for them to stimulus, to stimulate the economy, and it's commutely rich. So second half of this year, I'm not too concern. JS. Always great to get your your fantastic to have you with us on the program this morning. That's Jane Sebastian Jacques. They re outIn so CEO joining us on the LCES

in China. We've got them on the phone, so we've got to go there. Folks. There are people that do medicine from a distance, and then there's someone like Mr Whitworth, James. Jimmy Whitworth is with the London School of Hygiene and Tropical Medicine and John, without question, he has done the most in Africa. You can talk about it. You can put a piece of chalk in your hand and run a course on a lecture, and then there is the going and doing of it. And Jimmy Witworth has done

viruses like nobody else on a plan. Fantastic to have Jimmy with us now, London School a higiena Tropical medicine, professor of International Public health, professor, fantastic to have you with us. From the market's perspective, and I asked this question exclusively from the perspective of investors right now, there is a lack of faith in the ability to contain this virus, that perhaps this is broken out to Europe

and beyond the United States, maybe it's already here. Professor, put that into some context from your point of view, where are we? Well? Thank you for that and thank you further at fulsome introduction, Very appreciative. I think we're in a very worrying situation at the moment. We have a situation I think where in China, with very heroic and strong public health measures, they have been able to

get the outbreak. They're more or less contained. It's all going on, but it's not expanding at anything like the rate that it was, which is good. But the worry is that it has now spilled over into a number of other countries and regions in the world. So in the Middle East we have this focus in Iran, which is worrying because that's getting into countries which have very

poor health systems, places like Afghanistan and Pakistan. And we've got an expansion of cases in Italy, which is also crossing borders and I think threatens Western Europe more more generally. And the thing is, this is an infectious disease. It does not recognize international borders and will spread wherever people move. What's the worst case scenario that you see as somewhat likely, um, I think that there is sustained transmission that occurs all

over the globe. I'm worried particularly about what might happen in Sub Saharan Africa, where not only have we got um weak health systems and surveillance systems and the like, but we also have people who have a lot of other infectious diseases HIV and tuberculosis and so on, and it might well spread there. So it's really important that

we put in the facilities that we can there. The stereotypes that we have, Professor Whitworth, they're so strong, I mean it goes back to seventy one and Stanley and Livingston in Africa, and you know some of us watched the Spencer Spencer Tracy movie long ago. Those stereotypes are embedded in. One is those viruses over there are more virulent than what we face. Do you know the virulency of this virus. Is it equivalent to what you've seen in Africa or is it a more common virus. I

think there are two things to look at here. One is how transmissible it is, and secondly is how virulent it is. And those things sometimes go in parallel, but sometimes don't, and this is a virus where they don't. So I'd say this is pretty highly transmissible. For every person who's infected, on average, between two and three other people will get infected from that person if nothing is done.

So that's that's the challenge for public health authorities. In terms of its virulence, it isn't as bad as many other diseases. So something like eighty or more percent of people who are infected will have mild illness and will recover and it will be no problem. But we have fifteen or twent of people who are infected who get severe disease. These are people who need to be hospitalized and on average they're staying in hospital for something like ten to fourteen days, which is a long time and

puts a big strain on health services. And of of all the people who are infected, one or two percent may die. Professor, it sounds absolutely tragic. And forgive me because we only have thirty seconds left. But why the wh not calling this a pandemic um They say that that's an informal term. If people want to use it,

that's fine. They do not formally declare pandemics. They've called it a public health emergency of international concern, and that's as high a level of severity as they go, professor, Thank you so much. Jimmy Whitworth was We're just thrilled with the team's ability to bring in these true experts of Professor Whitworth with the London School of Hygiene and

Tropical Medicine and professor of International Public Health. But he is really one of the world's access and not just a bowl up but like four and five and six things that camp notes from Africa. He needs no introduction. Of course, is my work at Davos for years has been important to Bloomberg Surveillance. It is Rubini Macro associated is New York University, and we're through the professor Rubini could join us this morning. Noria, I'm gonna cut to

the chase. You are one of the great old World voices out there, your heritage of the Middle Eastern of course, coming over to all your work in Italy years ago. Would you travel to Italy today? Oh yeah, I would travel to Italy today, but I think that that would take with me a mask, because of course, this is

a global pandemic I spread to Italy. And by the way, I worry about the fact that today the help ministers of Italy Germany, Francis you said that the borders of Europe are gonna remain open if you think about in thousand fifteen when those the wave of refugees, the sh Treaty was effectively blocked. You couldn't go from county country without checks. Today we have a much more serious problem. There is that it's gonna spread from Italy parts of Europe,

and they say everything is fine. It's a bit of a paradox. I want to pass between what all of our listeners and viewers know. It just supply side economics, which is almost a theology. I don't want to get into the theory now, you've always pushed against that theory and a supply shock within the geometry of basic economics. Have we ever seen in a modern day of supply

shock like we're living right now. Well, there were supply shocks in the seventies, when you had the Ald shocks in seventy three after you Ki Poor War, seventeen revolution, and Iraqi manson of Kuwait. Those were the shocks that reduce growth and increased inflation. So we had supply shocks were negative, But we're related to geopolitical shocks in the Middle East. This is a different type of a supply shock, is still staculation. It reduces growth, increases cost and inflation,

but it is a supply shock is negative. So Professor, up until two days ago, one could argue that the equity markets were kind of just shrugging off this coronavirus, where if you look at the commodity markets, we had some pretty significant pullbacks. You look at the bond market, yields of plunging to new loads even after the two days.

So if you've had any equity markets over the last two days, how do you think financial markets are they properly discounting the risk associated the global GDP growth from this virus? Potentially? Um No, I don't think so, for at least four reasons. Reason number one, this is a global pandemics. You're gonna spread not only to Europe, but to Asia and even to the United States. Like the

CDC warrant, that's going to be massive. Second, the idea there's going to be a peak of the shock to the global economy being by the end of the first quarter doesn't make sense if you think about supply chain shocks, trade channels, confidence, what's gonna happen to capacts, to consumer confidence? The impact is going to be into second quarter three.

Everybody said we shape recovery that's also also total utter nonsense. Uh, the Chinese economy is gonna contract the analyzed rate of at least two percent analyze of eight but within the quarter of two percent, even if there is a V shap, recovering grows eight percent, that is well above the six of before the crisis. You're gonna have growth in China going this year from six to four. If the V shape means that in the second and turn and fourth

quarter grows goes back to six percent. With a shock to the first quarter, Chinese growth is gonna be two point five percent. So the best we can expect from China is four at the most likely two point five percent. When now markets are estimating the Chinese gods are gonna go from six to five and a half. So markets are delusional first about the impact on Chinese growth and the impact on the global calling. Final point, people hope that central banks of physical police is going to come

to the rescue physical policy. That is not much space that are lags and central banks are running out of bullets. Certainly BJ centrally, the e c B centrally, what's happening right now in Japan Italy implies that not much that I can do. I know you're shortlisted for governor the FED. Here when the person gets through his next ranch of

a point all the cut. I would never take the job from Trump, or any job from Trump none ever, nor the cut to the chase cultul a code a legit front level mathematics economists, so cut rates now, and a lot of other people, including the vice chairman, say not. What's the efficacy of a rate cut right now? Whenever you have a negative supply shock, the damages global supply chains, cutting interest rates is not going to make much of

a difference. Of course, the market is going to rarey on news of that cut or news that the cut is coming. But once then the economics pill over, the financials plovers, and the other spillovers become severe. Doing twenty five business points even fifty business points, but the fact is not going to make any difference. And the problem right now is that the contagion the pandemics already in Japan,

is already in Italy, in Europe. And what's the room that b o J and e CB have going to minus sixty for the ECB, minus twenty for the b o J, and what ten business points even twenty business points of more getting rate is going to make in the face of a massive negative supply shock close to nothing. So what do you think China needs to do should do to support its economy given what's happened there. Well, you know, the intelligent Chinese economist say, we already that

this major shock. The worst thing we could do is another round of massive monetary, physical and credit stimulus. Because every time there is a growth shock, they do another round of that. There is more that more leverage, more over capacity, and more economic damage that eventually leads to the risk of a financial crisis in China. So the

sensible Chinese economies say, unfortunately, there's a growth chok. Yes, we have to backstop those that are been heard, provide maybe income relief, make sure that most firms, especially the smaller ones, don't go bankrupt. But that's the extent of the support we will we want to give. This is a negative supply shock. We'll have to accept the shock and the consequences of it and try to admild the economic response. If you do more of that, then the

risk that that that becomes unsustainable. Even what's the risk of helicopter money, I mean, Hong Kong today is gonna try it out ten Tho, Hong Kong, which you know enough to get three drinks at the embark demandering. Great, but what what is there efficacy to helicopter money, the

true cash stimulus. Well, whenever there's going to be the global and the next global recession, I'm sure that monetary policy and physical is gonna become more unconventional invariant of helicopter drop of money m M T. People's qui or what bernankei or star fish and the folks that black Cluck suggests that is essential variance of helicopter drop is going to be implemented. My point is that if there's

a demand shock, monitoring physical stimulus outs you. If you have a negative supply shock like the seventhies, we did the monitor is stimulus. We did the physical stimulus and ended up with high that and e inflation. So even if you do the helicopter drop, it may not as much of an impact in a situation which the shock is a negative supply Rather than seconds you have in the f T today, I haven't had time to read it.

What do you say, cut, you know, save me some time here in our well, you know four points that I briefly made that one with the global point right now, it's a pandemic. It's a global pandemic. The economic game pact is gonna be much more severe. Is not gonna be a V shaped recovery. Chinese Girl's gonna be at best two point five percent, the global economisharply, and the policy of response is not going to make the difference.

You looked hand arrested. I'm always travel I just came back from five weeks all over the world, but not in China. Very good nor being stay away from me with Rebedia associates greatly appreciate it. Where we're gonna do right now, folks, is do politics, but try to do it in a different way. We're all exhausted by the what is pundentry and that we see there, the gaming

of the polls, etcetera. And we thought we'd haul in here an academic that's not only spent time looking at the broader picture of the American political fabric, but actually has really delved into the machinery of politics. One of her great efforts as core concepts in American government. It is real basic look at the basic process of what we do in politics, Uh. Jenny's Ano joins us right now from my own in college and of course a

Bloomberg contributor here this political season. Wonderful to have you here, so good to be here wearing blue? Was that for the debate last night? Did Red take the victory off the blue debate last night? No, you're right, I should be wearing purple or something that doesn't indicate some kind of partisanship. No, it was just the dress I found. How much did Mr Trump uh win the debate last night? I ranked him as as one of the big winners

last night. Um, the Democrats, you know, and this is not about the candidates necessarily, but this process does not work to the benefit of the Democratic Party or any of those candidates up there, and as a result, he continues to win. Is this salvation for everybody against the senator from Vermont? Just what you mentioned, which is the purpleness of Texas, the purpleness of California. I mean, is they go to Super Tuesday? Is that really the heart

of the matters. The moderates have to find a way to actually get tangible votes. Well, the moderates have to get votes. There are moderates in the Democratic Party they are the biggest contingent of the party. But what has to happen is you can't have five moderates running against Bernie Sanders because he will come away even with the plurality every time. Ny what are they going to do? Get into a room at asside who drops out? I mean,

let's get real, how does this work? Well? I think you know, there's gonna have to be pressure from the party that those moderates who are polling in the single digits leave the race. So I think Amy Klobisher, Pete Buddha, I mean, people I like enormously, but you can't keep doing this because what they're doing is they are they care about the moderates winning this thing. They've got to get out of the race. Right. You're not pulling your

blame the process. You don't think that there's anything that the candidates themselves could do at the debate to turn the attention in a positive way towards the Democrats. Is that the implication here, I think it's very, very tough given this process. You know, if if we think about, you know, in a business, if you're hiring somebody for a job, and I always say to students, if you're hiring an accountant and you say, I'm going to hire you if you run the fastest mile. That's essentially what

we're doing. We're asking you to be president, but we're judging you on things that won't make you a good president. So there's a huge fissure within the way we hire for this job. But this has been the process for time and Memoriam, why is this time different? Um, it's not different. It's been the process ins about the early nineteen seventies, and we've long had for academics. This has long been the bane of our existence, that the way

that we elect presidents. But it's gotten worse as we have moved towards in democratizing this process quite frankly and giving this thing over to primaries. People say, oh, primaries are democratic. Turnout is incredibly low in these primaries. You get the most extreme voters out there, they vote, and you get the kind of chaos that we're seeing, and then you ask these people to do the impossible, which

is get out on this stage and battle this thing out. Jenny, to what degrade, do you think this party is really failing to display a real showing of humility to understand what is actually going on here in the same way that the Republican Party did four years ago. That it's easy to sit here and say that Senator Sanders wouldn't make a good candidate for a whole variety of reasons, but failing to understand ultimately what he's tapping into here. It's tapping into a broader and broader base as this

campaign goes on. Are we failing to do that? I think the Democratic Party. Yeah, Like like any party has a lot of different components to it, and one of those is the base that Bernie Sanders is speaking to. But I would say the party has to look at the reality. The reality is this race will be decided and about six moderate states. You go to Florida and praising Fidel Castro is not a winning message to beat Donald Trump in twenty twenty. It's simply not. So he

does have a base. The Democrats need to understand what is activating that base, But they also need to be realistic about how you win this thing in November. Everyone who's voting should know that. They should know that. And I don't want to insult the base that I want to insult the electorate of any kind Democrats more Republican, but they understand that they're not idiots. They should know

that already. But they're still voting for him. And by the way, if you look at the polls, as you know, they still think he's one of the better candidates to take on the President of the United States in November. So the question is we keep doing this, we keep failing to understand what is actually going on here. These are educated people voting for this man. I imagine many

of them have college degrees. They know the situation in Florida, the relationship with Cuba, and yet they go to the poll in Nevada, they go to the polls at South Carolina, and they vote for him. Yeah, but let's keep in mind again when you're looking at the primary vote, this is the most extreme members of both parties. So you get Canadida. Let's be clear, Bernie Sanders is an independent.

He's not even a Democrat similar to Donald Trump. And so the party has lost control of this process long before, by the way, and that will continue to do they get back control once they get to an adult, hi, high money process like Super Tuesday. I mean, is it literally a jump condition out of the vote in the next day, everything is different for the party. I don't

think so. I mean, you know, at this point, I think if you're going to look at the numbers, Bernie Sanders has the greatest chance to get the delegate count. He needs to wrap this up without a contested convention. I think that's the reality. But let's be clear, this is not just about the presidency. It's about the House, it's about the Senate, and it's about the If you're a Democrat, it should be about the future of the party,

and this is where they have the John. I didn't think that there was a feeling of disrespect of Bernie Sanders last night. It was more just saying he didn't get anything done. I don't think that there was a sense of a lack of I'm talking about the coverage. I'm talking about the pundits that reflect on all of this. This party has had four years to prepare for this moment. They squandered most of at four years chasing the president, trying to impeach him, and criticizing him every day. You

watch the same channels as I do. The left wing brigade go out there day after day after the president, and yet here we are and let me tell you, if Vice President Joe Biden was leading in Nevada, in New Hampshire, in Iowa, we wouldn't be talking about the process.

There's the problem. I would say this, this is it, Tom, And I'm looking at this as what it marges from this debate, and it's the idea that you have, on one hand electability and on the other hand, the fact that people want change and trying to reflect that zeitguys that you're talking about and those two things are appealing to two very bifurcated segments of the population. And that's what we're feeling coming out of these debates. When we look at this, I guess we've got to get past

the South Carolina vote. What do you predict on Monday, or for that matter, on Sunday next. I think the numbers show that probably Bernie Sanders has about a forty shot at this point of getting what he needs. He did so well with the Latino vote, for instance, in Nevada. If he can replicate that aaces like California and Texas, he can keep racking up the delicate lead. Obviously, Super Tuesday has about one third of the delegates up now.

I would not predict what's going to happen, but I would say the probability is narrow that he is going to do okay, But again it depends. Jennie Sano, thank you so much with Bloomberg Politics of course helping us here ione ecology. Right now nationwide, the wonderful Congressman from South Carolina, Mr. Clyburne is setting up his endorsement off of last night's debate, and of course he is a huge influence with the African American vote in the state

of South Carolina. Will bring that to you when we see it. He's now introducing people with smiles around one of the things that's going to change at the Walt Disney Company, Paul is where they do the conference call with the cell side, and I just want to say it's gonna be great to see Michael Nathanson taking that call with the Parks guy on Splash Mountain. I can see going down that log too on Splash Mountain by holder Michael Nathan said Moffat Nansenson, founding partner and senior

research anelist. Michael, thanks so much for joining us on the phone here boy the news last night. I'll to speak for myself. Took me by surprise. What do you make of the news we heard? Yeah, Paul Tom good morning. Um, you're not alone. It took us all by surprise, right, you had to earning this call two weeks ago, that I was on the radio with you guys two weeks ago talking about and there's not another bit of news for a couple of weeks or months. So it's just weird.

Then the middle of February they decided to announce that change, and everyone's trying to figure out, like why, what, what is significant about this timing? So we were surprised by the timing. But you know, Bob had been very clear that his time was coming, was coming up, that he was done with with this with his job, his last contract. We thought there would be a change, but probably later in the year. So it's really about the timing of the of the change, anouncement, the timing, but wasn't the

change itself. So Michael tell us a little bit about Bob. What do you know about him? Okay, So Bob cha Peck is someone who has a long career at the Walt Disney Company. He worked at home video when home video was really important to home to Walt Disney. He worked in sumer products. Uh and some product is a very very important sect segment. It's highly profitable. And then he moved over to the parks business. And the parks business for all the focus on ESPN and the parks

business is the single biggest driver of Walt disney earnings growth. Right, so the U S parks are about three percent of profitability and the parks business. What Chapick did is he put through a surge pricing like Uber, where they raised pricing during peak times and lower pricing dynamically during slow times. That never was the case they would have one price for all seasons. Uh. So they put out of capital on the in the ground, they built new new rides

and new exhibits, and they really drove price. So he has a very long background there, and I think it's it's it's a good choice. It's it's a natural choice for me to see happen here. Is this a partition that it's this August company is comfortable with Walt Disney. Is the Bob iger in Roy Disney will be the new gentleman. Yeah, that's a that's a great question. Um. You know when when ire Tom and Ira was putting

that role. No one really knew what tooks about from from Bob Iyer, right, there was a lot of chatter about he was the wrong guy. You know, there's a book written. There's a book written all about Sweeney. Sweeney wrote a four page research report along report at that time. Yeah, I think he downgraded it on on the Bob Iger higher right. You know, um so Tom, we don't know. I think what Disney has become is there are these centers of content excellence that you know, we'll live on.

You know when when bob Iger has gone right, you've got Pixar mass It's incredible, right, And and the question is, you know, does every vertical have a leader with the right vision game plan? And I and I kind of think that that where they are now is they made a lot of tough decisions. They moved into digital distribution.

It took profitability down. I almost think like they gas need to pretty much be able to pivot and adjust their models when they see things change, so that content creation, to me is now pushed out to the brand themselves. And Bob bob Iger was a great capital allocator and deciding where to go. But I don't think one person could actually run this company the way you Yeah, that's why I think. So, Michael, let's talk about what the big pivot for the Walt Disney Company really over the

last couple of years has been towards streaming. That's kind of the future of the company. And that got a lot of investors and just watchers thinking that the guy who runs that business, Kevin Mayor would be probably the most likely to get the NOD. What do you think happened there and what kind of signal does this send and what do you think of what Kevin's future might be within the company? Yeah, Paul, that's a really good,

good question. Um. After the last quarter where they put up millions saw in one quarter, roughly half of Netflix in a quarter, the speculation was like, hey, Kevin is now in pull position. But you know, the parks and to products are a big driver of this company. Kevin's just started operationally for the past one or two years. Um, I think Japook represents more of the legacy Disney business. And you know the parks business is at DTC business, right.

You know, Parks is the only business at Disney before DTC was built. They actually knew the customers you know, they had credit cards on on on Thoma's family, right like that, that is that's the only business I actually knew who was walking in the door. So I think he has more DTC than meets the eye direct a consumer. Yeah, so Tom, it's it's it's the ability to to identify you and your family and then market and up sell

you and the parks. You know, it has proven that year and year out they can take money out of your pocketbook better than anybody. Here's my experience on Disney. One of the middle child used to go to Lacrosse camp down there for a quote unquote week and then I figured out a week was four and a half days. That's a Disney that's a Disney model. Paul Michael, what do you think the legacy will be for Bob Iger? Well,

it's funny. Years ago, a couple of years ago, I time I sat down and he's like, Tom said me, is this a Jack Welch legacy? Right? Does he does? Whoever gets this hand after Bob just never rise. You know, the legacy of of Welch just shadowed everyone. I think the legacy of Iger, you know, is and will be incredibly strong. Right for a person who basically was courageous in doing the right thing for the company, not for

the short term, but for the long term. His his acquisitions, which you could go out Ham and Paul, I'm on the record when he bought Pixar and Marvel stretched our head were like the r O I doesn't work. So I think the legacy of this is a guy who courageously built a company into what it is today. He took down earnings to pretty much build it going forward by investing in director consumer businesses. I think his legacy

is gonna be great. I really do. I think, you know, And I'm sad because it's one of the true legends in our industry. And he was a spokesperson for all of media and that spokesperson is gone. How much work do they have on the integration with the Fox properties. A lot of work, Tom, and that's that's why the time is interesting, because that integration needs to get done. The Fox assets on the studio side, the film studio have been very disappointing. They have a business in India.

Star are very important and they want to roll out Disney in Disney Plus in India. There's a lot of integration to be done, and that deals less than a year old. So that's why the timing to Paul's first question is surprising, because integration is key. Right now for that Fox, I'm confused. I mean, like, I get the idea of movies don't matter, but then you just said they do matter because Fox has been disappointing. Our movies profitable.

Oh for all, Disney Company. Disney has three billion dollars of EBITDA. They were, you know, in a in the studio business. They had eleven billion of box last year. You know, they are the only company that actually prints money consistently in the film business. So if you asked me about the film studios, they don't matter. But at Disney, the film studios then spin out consumer products, they spend rides,

they spin out businesses. They do matter for Disney. I mean, I mean people like they got they got Vet Bill at home, his hair done up like baby Yoda, and you know, like Mandalorian or whatever it's called. What is that property actually worth? I mean, if that's Iger Swansong here and creative, that's been a home run, hasn't it. Yeah, without a dad, I mean, we don't know how many of those subs that signed up for Disney. Plus we're

there for the Mandalorian. Right. But but if you think about they paid four billion for Star Wars, for for Lucasfilm, four billion for marvel Um, you know the Mandalorian is gonna be a subset of four billion. But those assets drive engagement, right, That's they realized in a cluttered media world, having those brands stand out didn't drive engagement. They change the hair or in the damn dog's and Michael last question,

just you know, the stock has been under pressure. I think coronavirus getting a lot of uh play there at the Walt Dassy company frame out how you viewing it? Uh the impact on their theme parks and their other businesses. Well, Paul, A couple of weeks ago in the More in the early morning hours, I spoke to to Tom and John and we talked about coronavirus and that point it was restricted to China. So I made the maybe the two

you know too quick remarketing. Look, you know those theme parks don't represent more than of the profitability of Walt Disney companies. I'm not worried about Chinese parks. Well, Japan is another park that creates you know, earnings growth, and so does the US business, which is the biggest you know when the biggest drivers. So as the fear spread,

I do worry. Then the short run you're gonna have earnings revisions in the US, people not wanting to travel, and so you know, my first rule of thumb and media is earnings revisions drive stock. So in the short run, this coronavirusphere is a is a huge headline risk for this company. They're the only one in media and have that risk unfortunately, Michael, thank you so much. Michael Nathanson. Where us the MOFA Nathan's and wonderful v mind. Again,

we protect the copyright of all of our guests. You can get this important report on Disney through Matha 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