There's 'Desired Chaos' in the White House, Rattner Says

and of course on the Bloomberg. He has been generous of his time and joining us this morning. Mario Gabelli for those of you not on Global Wall Street. Um, he is an original in my value investment, and he's an original in patience, and he's an original in shareholders should get their fair share? Are we going to continue to see share buy backs? Mario? As we go up up up? Is that just an easy path? That's a

great question, and it always depends on how you allocate capital. Tom, what is the right Now You've got almost the triple tax on the corporate earnings, the corporate tax, the tax on dividends, and then the surcharge on dividends. That was a snug in at night. But if I'm a steel company, do I want to reinvest in the steel business and open heart? No, the answers business has changed, so keep your powder dry, be flexible and uh obviously changed with the world that's going on over the next ten of

twenty years. And uh, buy backs. If I'm buying back the stock materially below intrinsic value, that helps everyone. If it's buying it back to support the stock, it makes no sense of you know. And so you gotta figure out what when do yields compete with dividen ends again in our lifetime? Well, it depends on a snapshot or

emotion picture. On emotion picture, you really want to own up companies that are good I have corporate earnings and are growing and can maintain purchasing power in real terms. So if inflation picks up, which I'm at the camp that says it will, uh, then you want to earn

a static return, tom, but a return that grows with time. Okay, let's bring into O'Brien, who knows nothing about yours or my world, but he's been talking with Matthew Levina Bloomberg View all night about the Financial Markut Tim O'Brien with Mario Gabelli. Mario is good to have you here today, My privilege to listen to you. Thanks for tolerating me. My actually my Bloomberg gad Fly colleagues. Stephen Gandeli Rope had a nice piece about earnings outlooks for the S ANDP.

We obviously had a great first quarter where earnings across the border up about four It looks in the second quarter like they're gonna slow to about six point four percent, and people are even a little more bearish for earnings in the third quarter at maybe only five percent or so. So what does that mean about valuations? Mario? If for for the bullish out look at the market, that it probably is more than fully valued right now. Corporate earnings

always drive that picture. So what do you think, Well, it's a multiple, it's earnings, and the multiple to earnings. The multiple earnings a function of interest rates and inflation isn't as an underpinning to interest rates and so on. From my point of view, the Euro today is one fourteen, a year ago is one ten. So American companies are going to get the tail wind. Thirty percent of earnings are outside the United States, so you're gonna get a

tail whin it's opposed to the head. When on translations Europe is doing better, Germany you're gonna think is doing better? Is the core Well, I've been not that much earnings in China and the financials are going to do better if the slope of the interest rate curve goes upwards. So those are important parts of the market. So I, you know the macro guys, Steve is probably right. I don't do macro. On the other side, there's always opportunities anywhere in the world, and that's where we try to

ferret out. Jon Tucker, did you see how smart that Tim O'Brien question was? This? Is he's like sitting in or is this an audition? Is there's something I need to know? I should point out to Mario that Tom is approaching the mandatory return. Very good, could have Let's have another mandatory question from Mr O'Brien, tim um Uh, Mario.

The other thing that sort of sneaks in on this is how much energy companies contributed to the first quarter earnings rises That sustainable in that sector from your perspective, Uh, look to make the case that oil at forty five dollars a barrel is a question mark. But if Saudi Arabia is trying to go public with one of their companies, will take trim back. And the other side, American technology and a form of fracking has given us a reservoir

of energy. It is providing at the margin the incremental amount. But at the same time you look at what happened to Adelaide Australia where they ran out of energy because they didn't have the right policy. So we got to do a lot of things together. And as far as Ernie is are concerned, we are buying some of these stocks now. Is President Trump good for the stock market? No, But the policies of a applaud business as opposed to

condemn them is clearly very good. The allocation of money to capitalism as opposed to socialism is always very good. And the free market system, which has functioned effectively since Adam Smith came around and allocated has been one of the great wonders of the world in terms of helping helping mankind. You and I heard Jake Clayton, the Securities and Exchange Commission yesterday at the Economic Club of New York I don't believe he brought up a tea word once.

And it's interesting how government could move on even with all the uproar about the president. Do you have an optimism that can occur? Well if the moment can move on, but not under Bernie Sanders? Well, well, how about on infrastructure or great question and Tim let me go into that. In the December fift two thousand and fifth, we as a government passed the rules saying the fixed American surface transportation and companies did well today inland waterway, inland waterway

things that helped the American farmer move goods Uh. The notion of avionics infrastructure is going to do well. From what I like is case New Holland. I like companies that are involved in infrastructure, like Dana, which sells parts of the Class eight trucks on a global basis, uh and so on. So case New Holland, for example, has farm equipment, it has construction equipment. It has a company that has run by a guy that took Ferrari public because he realized there wasn't a car company. But it

alloxurally good. They're gonna take a Vaco public and take uh and do a lot so there's a lot going on. One final question before he could before you start your day. You were iconic on Steve Ross and Time Warner of a long time ago. Give us an update now on Time Warner in the media business in general. Are you enthused well the notion of the Stevenson a T and T putting his arms around direct TV and now putting around. You've got to allow companies to buy what they want.

If they make mistakes, it is what it is. If they add value, it is what it is. So I like entertainment, I like content, I like connectivity, wireless, cable. What am I buying? I'm buying Millcom because John Malone is going to buy it. He just primed the pump with Lilac a Liberty International by buying stock that he hasn't bought before. So there's a lot going on. Tom and I want to own wireless companies. I want to own cable companies. Millecom is one that will be taken

over within two years. The stocks fifty five owned by a Swedish company called Shinovic. Uh. That's clearly and everyone's radar screen belly. Thank you so much to meet you and use your shop elbow and move them out. Thank you, I said, I said, t okay, belly, thank you so much. This is just a joy this morning, Timthy O'Brien in for us is David Gurrs in Idaho. We'll go to Mr Gura later on and joining us now. Really in the nexus of our nation's political science is Douglas Elmendorf.

To say he's at Kennedy out of Harvard barely describes his public service, particularly his service with a Congressional Budget Office. Uh, Dean Elmendorff? Do you go by Dean du Doug? I mean, is Dean the appropriate title? You can just call me? Do all? I one of knows do you have Red Sox tickets? Because that's the only reason to talk to you. But Doug, Doug, Seriously, within the CBO scoring debate is

the CBO. Mitch McConnell's friend right now, because everybody seems to look at CBO as the evil enemy, is the CBO Senator McConnell's friend. CBOs isn't supposed to be anybody's friend or enemy. Their objective analysts providing their best informed estimate of the effects of proposed policies, and at different points in time, those estimates will turn out to help or her certain Congressional members causes, and that's just the

way the system works. But through that system, you and I, as well as all the members of Congress, learn what the effects of proposals will be before the members have to vote on them. I should point out that Dean Almendorff was need deep been President Clinton's health care efforts of another time in place. Timothy O'Brien with us this

morning from Bloomberg View. Tim A question for Dean Almendorff, Uh, Doug, is do you think that this sort of backlash against the CBO smacks of the previous backlash against the statisticians at the BLS around labor statistics. Have we entered into this sort of moment where people feel comfortable contending with

almost anything that he once considered to be objective facts. Yes, I'm very concerned about that this administration is afraid of facts and evidence and analysis, and OMB Director Mulvaney attacked the Bureau of Labor Statistics for how it calculates the

unemployment rate. He's attacking CBO for its independent analysis. This is very dangerous for our political system and for our country, and I think it's important that Republican Congressional leaders stand up for CBO and its work because this actually isn't a partisan ideological issue. It's just about good government and good data at the end of the day, isn't it. That's exactly right? Um, what do you where do you

think this is springing from it its core? Well, I understand that the administration and some Republicans and Congress are frustrated because CBO's estimates are not helping them pass their health legislation. But that's not cbio's fault. The Republicans are pushing legislation that would health insurance away from tens of millions of Americans. That's going to be a hard sell to the American people if the American people understand it.

So naturally, the sponsors of that sort of legislation don't want that understanding to occur, and they're going to try to stop the people like BBO who are informing Americans. Dinamer's one more question if we could in a brief visit this morning. I know you read all of your working papers at Kennedy the great Danny Roderick on Populism in the Economics of Globalization. Is the American populism. The

same is the population of populism of Europe. There are different strands, of course, in different places and different particular issues. But Danny wrote twenty years ago that the great challenge was whether global economic integration would lead to domestic social disintegration, and he saw that coming decades away, and unfortunately we are now seeing the fruits of that in ways that

are very damaging for our countries. Dinamo or thank you too shut to visit this morning, We greatly appreciate it. Douglas Almondorf is with the Comedy School at Harvard University. We forget Tim O'Brien that these schools have entire industries of bright people really struggling with the topics of the day, and we're in the era where, to some extent, maybe not a great extent, they're basically tarted and feathered on

a daily basis. There's always been an an anti academia, but maybe it's a little harsher now that has been And it's not just academia. It's about data and research and facts. I think we have to be really cautious around all this, and we try. We're working on that as well. Runch you by Bank of America, Mary Lynch. With virtual reality, virtually everything will change. Discover opportunities in a transforming world. VI of a mL dot Com, slash VR,

Mary Lynch, Pierce Uner and Smith Incorporated. Good morning everyone, David Gurr again, and I know Timothy O'Brien and Bloomberg view that with us this morning and joining us now Brian Weezer a pivotal research and really, Brian, I guess what we need to focus rather, Brian, what we need to focus on is is continued dominance of Google and Facebook. It's such a pervasive feeling. My radars up. Do you buy the idea that is dominant as dominant could be? Oh,

it's not just the buying an idea. Any fact out there supports it. There're seventy of the total revenue from digital advertising, their nine percent of the growth depending on when you UH define the period um. Yeah, no, they're dominant, and I think the rest of the industry is looking for a way to prevent their dominance from expanding. Let me bring in someone who lives as Timothy O'Brien. You've lived this advertising change, not only the New York Times

but also at Helfington Post as well. I mean, you've lived what Brian Weezer is talking about. It's you know, monetization of content and platforms is the key industry for anybody who's on the web, or key metric to consider for anyone's on the web right now. Brian, you raised a really interesting and crucial point obviously in your in your in one of your notes that I read, which is this whole issue of you ability and metrics and

weather the duopoly. But really anyone else in the industry who's selling advertising is going to open themselves up to third party analysts who will either validate or or have their own point of view on monetization and advertising revenue. Where do you think we are on the view ability issue? Uh, well, the industry is at least to where that has got

a problem. And I think, like you know, people like me, I'll call myself a digital truth or um that for far too many years there's this shine on digital advertising that it's perfect, it's targetable to dress bullets perfect, and that was never true. Um. And so now at least large bands are fully aware that their problems and their finding solutions. So it's really Facebook and Google in particular where the world garden problem is most pronounced because it's

so important, because it's so big. Um. You know. I think Mark Pritchard from Who's Procter and Gambles chief brand officer, has been one of the most vocal um industry players and really is leading the charge right now by basically indicating there they're going to move their money if Facebook doesn't do what they need them to do. Now that might not be enough for Facebook. Well, and where do they move it to? They increase or spending on TV

pretty significantly, which is why they upfronts went up. So that's part of it, you know. I mean the problem is that Facebook. So the metrics I have seen suggests that video views on Facebook are like two percent viewable. In other words, two percent of the ads delivered on Facebook get actually viewed. Then why do they get money? Uh? That's a really good question. So in all cases, advertising

is at least battle Turner's business. Right, So, if you've got a digital budget to spend, you've allocaed my to spend on digital, where's the least bad place to spend it? If you're a big brand, Facebook's the least bad place. Do you have a single bust buy right now? Before you run out the door. I have exactly one by out of eighteen stocks. Isn't that shocking? Fox Fox? What Fox Fox? Only by I have I have three cells or two cells? Have three cells? White Fox. It's just undervalued.

I think, you know, the market is really you know, doesn't like James Murdoch that much. I think they're concerned about what the Fox News in particular. I think I hear a lot of concerns that so this is a TV Fox. This is all the uproar room. They're not News Corp. But yeah, exactly the studio, the TV station group. Um. I think the Sky transaction, I mean it's going to be a bit of a rocky road to get there, but I think it's gonna be really good if it happens.

Brian Weiser, thank you so much. I believe Tim O'Brien's rumored to take out Seawan handy spot. Brian Weezer with pivol as a joke, folks, Brian Weiser with a pivol research this one. Greatly appreciate that this is a good time and this goes to what Tim O'Brien was talking about earlier. It is a good time and we spoof about the words are, which has always been unfortunate. Czar

Ratner joins us this morning. Stephen Ratner, we should say, uh, he's involved in the investment activities of our principal owner, Michael Bloomberg. But Steve Rattner, I really want to talk to you about what Tim O'Brien was talking about, which is process and procedure in a given institution like the White House. How do we assist our president towards process

and procedure in the White House? And even as Czar could understand, look, I don't think we have a president who's all that interested in advice or suggestions or pretty much any thing else as to how he should operate the White House. I did spend some time in the White House. I've obviously observed this one from afar, as we all have, and it is it is really quite extraordinary to see how this White House operates relative to any other one I've ever been around in my my

time in and out of Washington. You've you is there nobody you could compare him to? Steve? Is he that of of his own? I don't think there's anybody you can compare him to. I think when Jimmy Carter, who's White House I also covered as a reporter. I think the chaos that existed there at the beginning when when Carter announced he wasn't going to have a chief of staff, he was going to have this hub and spoke approach, and all these different people wandering in and out of

the Oval office. You could probably compare the confusion to it. But but the the sort of the the sort of uh, but that was sort of undesired confusion. This seems to be desired chaos on on President Trump's part, And so there's nobody in my lifetime you can compare him to. Do you think it's bleeding into the rest of Washington, the sort of trump lack of managerial focus and I

think a lack of goal orientation. I've been watching Mitch McConnell move this bill through the Congress, and there was this thought, after the House debacle on healthcare, that the Senate was going to step in and be the adult in the room and and craft more thoughtful legislation. And yet here we are with a bill and motion that everyone seems to hate, a process that McConnell is running the dark, and and and and a lot of people seeming to a qu s to the chaos of the

Trump white House. I'd say two things about that. I'd say, first, healthcare bill, as we found during the Obama administration, is very very difficult to pass. McConnell has an extremely difficult job that no matter who is president, it would be hard to bring the two ends of his party together into and get fifty votes. And uh, let Rand Paul and somebody else, Susan Collins go often do their thing. It's really really hard, but it is made much harder

by the lack of leadership from the White House. There's no rama. Manuel, as they're wondering, was during the bombed administration going up to the hill every day talking to people saying, come on, guys, let's just make this tweak. Let's make that tweak. Let's get a deal done. Having a dysfunctional White House does not make things easier for Congress. And you are arguably more qualified than anyone we speak to to ask this question. Does it dampen the animal spirit,

does it bring down nominal GDP? Does it bring down inflation just a d d G d P? And does it filter into our investment world or is the czar world you lived in, Steve Rattner? Is it discreet and separate?

So far? It appears to be discreet and separate so far as you look at, certainly the markets and how they're behaving, as you look at the consumer confidence and consumer and business confidence and business optimism indicase, UH, they still so far seem to be riding along on the so called Trump bump and the belief that Trump will run a very business friendly administration, a lot of deregulation, a lot of tax and are the benefits for the corporate sector that will, at least in the short run

drive the economy upward. But as the dysfunctionality continues, and as and if and when the scandal UH permeates further, I think it certainly could affect the animal spirits. Um are you where do you think this goes? Long term? For the GOP as a party, how are they do they? Are they going to be split permanently between the populist wing and the more moderate wing. If they're not, how does that get cured so that you can have a party in a Congress that actually produces legislation The answers,

I don't know. I write the populist so called populist wing is really more exists at the voting level rather than at the UH senator and representative level. At the senate representative level, it's a pretty it's still a pretty uh conventional group of folks with with as it is in the Democratic Party, with some people far out on the edges of it in terms of their own philosop and the concept of trying to make a have a

big tent. But I think, I think, um, I think the question where the party goes depends a lot on what happens to the president, whether he's able to function as a president Steve Retner very quickly or George Will mentioning it up in tax reform today and senator wide, can we get tax reform under a reconciliation process? Well, that's the only way we're gonna get tax reform is through reconciliation. But I think tax reform is very problematic because the border adjusted tax is not going to happen

without that. There may be some revenue from this tax healthcare build, that's a less than fifty probability in my opinion, So they don't have that much revenue to pay for tax reform. And I think the deficit. Hawks are going to keep them from just spending a lot of money on tax reform that we don't have. Steve Retnor, thank you so much as Willow Advisors this morning on our perspective of Washington and economics, finance and investments as well.

Good morning everyone. Timothy O'Brien and Tom Keene were thrilled of. Timothy O'Brien is our permanent host with Bloomberg surveillance of course here in New York. In a minute, we'll go to our reporter, David Gura, John Daker. David Gura, our reporter out in Idaho, will go to him in a moment. They found nothing but to his hat left his hunter's cat. I know his Pilson red and plaid hunter's cap, which will look perfect on park slope. As he tells people

about the brave tundra of Idaho. Features up to down, features up six with a churn to the market chair yelling speaking to the Senate, Q and A there could be of importance as well. Right now, we go to our reporter, Oh, our David Gura, our guest host or our host or whatever he is. When he gets back. David Gura and Ida David, what have you learned from the people of Sun Valley in your first hours there? Well, you you were talking to me yesterday about the prospect

that there being some snakes on the ground. You are nearly stepped on one yesterday, Tom. But we're not humans, all here with with their Martin's soil. Here the CEO of w PP, he's joined me here on set and it's a beautiful set. Tom. I'm sorry that you can't see it. We're on the side of a mountain overlooking the the resort, obviously painting a tough life for you, David,

I have my sympathy, sir. Let me start by asking you about this conference, in particularly what with the with the participants here, the attendees say about the state of media today, about the media landscape, Well, the obviously there are probably three things that we we think about. The first is what is the role of traditional print, you know,

filling true trees and distributing newsprint. So that's one thing, and whether the investment is at the right level or not, whether the engagement level is higher than people give it credit to, or whether the time spent is the right metric. The second thing is mobile and whether they're sufficient essement. And mobile probably Internet generally or as defined, it's probably

the right investment, but mobile is probably underinvested. And then the third thing is probably linear TV, is whether traditional network television is at the right level of investment, what's going to happen in the future to that, whether it will be maintained, whether it will come under pressure, not to the extent that traditional print has, but that that traditional media generally has come under more pressure. So I think those are the three things that you see in

the US, and you see that obviously increasingly abroad. Now related to that is the sort of pressure that we're seeing in maybe package goods retailing from the growth of e commerce as well. So it's it's in those areas that people are focused time. Ask me what I've I've learned with thus far a lot of people who are talking about content and consolidation and what companies are gonna be doing, how they're going to be creating more, providing more.

How are you watching that? How does that determine what your business it does? Well, there are three things that we're trying to do. We're trying to get our traditional businesses. Are traditional agencies unfair to call them that because they Morphed is not Don Draper anymore. But to become more digital, more global, and more digital, that's one thing. Secondly, when you have digital asses like we do with a Wonderman and Ogilvy one and a k k o A, a

possible VML or a Mirrum, drive them faster globally. And then thirdly, experiment moving into the continent area. So we've made lots of investments. It started, I guess, with our investment in Vice dot Com ten percent of that for about six or seven years ago. But we've gone through Brian Grazer, Ron Howard's film, Weinstein, Weinstein's how Weinstein's Howvy,

Weinstein's company. We've invested in content, Millennial Content with a T eight rising with Refinery twenty nine, Media Rights Capital, which brought you House of Cards, full screen one YouTube channels. Of the investments in the continent, Yeah, sir Martin, I want to go to your wonderful and your report, and folks, I would suggest it's a totally twisted and different in

your report. It's something you throw at a kid in college and say shut up and read this page one eleven Jeremy Bullmore just because you can, doesn't mean you should, Sir Martin. What they don't know is you're the king and know how do you control the modern digital impulse? How do you harness and police all the young Turks that say we gotta do this, we gotta do this, we gotta do that. Uh well, well the answer is with difficulty, Tom, I mean it's not an easy, easy task.

I mean, our business at fifteen years ago was about ten percent in the fast so called fast growth markets of the world. It's now one third. It was virtually negligible in digital. That's now to your to your question, I think you probably have to give those young Turks or those people that push you even more room. You know, there's one thing I regret is it's probably we didn't go faster on the technology side and on the data side. Today s our business is in media, data and digital.

I probably regret that we didn't go harder and faster because one of the things that people are raising, analysts are raising, institutional invased investors are raising his weather traditional businesses can cope with the digital disruption that we're seeing. I mean, we have three forces, Tom, as you well know digital disruption, zero based budgeting, and then last, but not least, activist investors. The digital disruption is something that

affects everybody. There's a BB and the activist investors tend to be focused around consumer staples and f MCG. Not not exclusively, but they tend to be But so that aut much more focused. Digital, however, affects everything. Well, what's so important here in Terroller Chapelle kills it with Max Neeson and Bloomberg gad fly Sir Martin today on the mating of Verizon in Disney? Can those cultures mate in your experience? And this is like a Sun Valley question.

I mean, you've got a grizzly bear and a black bear and they're not supposed to get together. Can Verizon mate with Disney? That's so that's very unfair. I mean, I'm sure you've been peppering all the people from Verizon and Disney or try to hear they they fend you off here, they keep you penned out, thank goodness. But I mean you can make the same comments. You can make the same comments about A T and T I guess and Time Warner. Uh, you know, companies that come

from different ends of the spectrum. But the intent is clear. The question is the implementation. I guess Tom and what you're getting out. And we've seen history listed with examples of companies with different for one of a better word, cultures trying to get together. And it's been increasingly difficult for people to do that. But that doesn't remove the necessa t or the sense of trying to bring these two things or two approaches together. We've seen it in

our own industry, people trying to marry different approaches. They take us, for example, trying to marry marry traditional creativity with digital, with data with media. The big, the big challenge facing us is how do we integrate the efforts of two hundred thousand people in a hundred and thirteen countries for the benefit of our clients. And it's actually very similar to the challenge that you laid out. If Verizon was to do anything with Disney, as you're suggesting,

they might. Let me ask you just one last question here about uncertainty. Of course, we've talked about Brexit over these last many months. How is that affecting your business? How is the uncertainty here in the US about policy affecting your business? Well? On the UK, first of all, the answer is not as much as we thought, but it will do. I think. I think that over the next two years life is going to be very uncertain

in this Brexit negotiation we're in at the moment. So the irony about this is that Britain might be leaving the EU at a time when France, Germany, Italy and Spain are on the up. We'll have to see what happens with the Italian election which will come, which is a really important event I think in the context of EU politics, and also who replaces Mario drug that's an important event from the financial side. As far as the US is concerned, it depends really on whether President Trump

can implement his program. If he can, that's in my view positive for the US economy. Reduction in regulation, which is also always also happening irrespective of what's happening on healthcare and tax but certainly if implement after healthcare, tax reform and regulation reform and infrastructure spending, that must be good for the economy, at least in the short term

medium term. That's what we're waiting for. I have to say that generally the world is a low growth, low inflation, lack of pricing, pal and therefore focus on cost world. It's a tough worldly. We gotta leave it there, Sir Martin, thank you very much to Martin st Tom great to speak with you. David Growth, thank you so much of Sir Martin. Sorrel greatly appreciated as well from Sun Valley. I don't tim O'Brien there there's a real window into this idea of culture in corporations. I guess it's the

same as a political world, is well. I I really wonder about really two separate psychologies mating, whether it's this company or company being the case of terror, it's Verizon and Disney. But you just wonder how those boardroom meetings go. You know, um, I think I can. I can recall a million different instances in which Richard Plepler of HBO he said to me, uh, culture, eat strategy for lunch. That is no matter, you know, how should you are strategically,

how great your product is. If you don't have a strong managerial culture that frees people up to do their best work and guide them appropriately, you're done. And that is well timed for season forty two of Game of Thrones or whatever. Talk about a scary culture. It's you know, it's congratulations to HPO and completely dominating the cultural uh need of people to tune in. It will be what do you throw an you think tip twenty million people something like that. I think it's a Sunday Game of

Thrones Sunday. 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 Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio m H brought you by Bank of America Mery Lynch. With virtual reality,

virtually everything will change. Discover opportunities in a transforming world, be of a mL dot Com, slash vr, Mary Lynch, Pierced Fenner and Smith Incorporated