CNBC’s Dominic Chu talks with Opportunist’s Managing Editor Leslie Stone about the Microsoft-LinkedIn deal, why large cap tech companies hoard cash and how the presidential election might affect the economy.
Dominic Chu was working on Wall Street when he heard Bloomberg Television was holding open auditions for traders interested in being on-air. “I submitted my résumé, went to a couple of auditions and got a job offer,” he says. “I guess you could say my path to broadcast journalism was rather roundabout.” He had never been on camera before and credits a “great team” of managers, editors and producers with easing him into his new role. “They kind of nurtured and coached me until I honed the skill to build from smaller to lengthier segments. It’s not something that comes naturally; it requires a good amount of work.”
Chu soon worked his way up to New York-based markets correspondent and spent several years covering the stock, bond, currency and commodities markets for the network. He interviewed leading money managers, entrepreneurs and business executives from around the world, was part of the team that covered Hurricane Sandy and the Boston Marathon bombings, and also handled sports business reporting.
Opportunist: How has your experience as a former Wall Street trader helped your work as a markets reporter, Dominic?
Dominic Chu: I think what it comes down to is the fact that, from a news standpoint, I’m talking about and covering a lot of the same stories I would’ve been interested in had I still been on Wall Street. It’s almost the flipside of the same coin. Earlier in my career, when I was looking for story ideas, I would ask myself what about the news flow on any given day would be of most interest to me if were still a trader or managing money. What I’ve done in both my roles is look at it from the lens of what I would find interesting and important, and what kind of commentary I would like to see and hear based on that.
Opportunist: What are some of the stories you’re currently covering?
Dominic Chu: A lot of the news flow these days is centered on the possibility of the U.K. leaving the European Union. That’s one of the big stories we are covering right now, and it could be huge because it doesn’t just affect Great Britain. Another issue is whether the Federal Reserve is going to do anything with interest rates this summer or by the end of the year. In addition to the company stories that we cover on a daily basis, those are two of the bigger picture, macroeconomic events.
Opportunist: From where you’re standing, does it look like the U.K. will exit the E.U.?
Dominic Chu: It’s tough to say right now. Every single poll indicates they will—not by a huge margin, but slightly better than half say they are going to leave. There are so many voices on both sides of the argument, screaming at the top of their lungs. Policymakers in their nation’s version of a
central bank and treasury department say it’s not a good idea for the U.K. to leave but, at the same time, a strong contingency of people say they don’t need to be embroiled in the E.U. and will be better off without them. Reporting on ‘Brexit’ is quite possibly watching history unfold. Everybody can forecast or try to predict if the U.K. would hypothetically leave but, from a journalistic standpoint, it’s going to be very interesting to watch—especially when I look back 10 to15 years from now and can say I was there for the whole thing.
Opportunist: Do you believe Fed Chair Janet Yellen will announce an interest rate hike in July?
Dominic Chu: That’s an interesting question. Up until recently, there have been those who believe the U.S. economy is no longer in crisis mode and is strong enough to sustain a quarter percent interest rate increase. But we saw what happened last year when the Fed raised rates. The stock market had one of the worst starts in the weeks that ensued. The latest jobs numbers are definitely not up to snuff. I don’t know if that was a one-off or not, but it leaves a lot to consider. I don’t envy the job of a central banker here in the states or anywhere else in the world.
Opportunist: What are your thoughts on Microsoft’s acquisition of LinkedIn for $26.2B in cash? How will this move affect each of the companies?
Dominic Chu: When the headlines broke it was kind of surprising. You often hear about social media companies or those in the new media space getting acquired, but it never occurred to me that Microsoft would be interested in LinkedIn the way it is. Microsoft is obviously a huge mega cap company that is looking to grow and find ways to be relevant in five, 10, 15 or even 20 years. They can capture a user base geared toward office productivity products in networking or connectivity or the relationship management side of things. One M&A attorney told me it wouldn’t be too big of a step to see it being integrated into a client relationship management suite of products for Microsoft.
Opportunist: News of the Microsoft-LinkedIn deal sent Twitter stock soaring. After a dismal year of trading, is Twitter an attractive acquisition candidate? If so, who might potential buyers be?
Dominic Chu: Twitter is an interesting phenomenon. It has a huge loyal user base—maybe not as big as some of the other major social media networks—and, for journalists especially, it’s a great way to get a quick glimpse into what’s happening at any time. Whether Twitter becomes an attractive takeover target comes down to who would want to buy it. It’s fair to say lots of folks out there in the technology and media world have thought about what it would be like to own Twitter. Lots of rumors are swirling but none have panned out. After the IPO, the stock was nearly $74 a share. Earlier this month, the stock got down to $14. It’s fallen a long way.
Opportunist: Why has the stock done so poorly? Does Twitter need to find more ways to monetize itself?
Opportunist: You recently reported that large cap tech companies—Apple, Microsoft, Alphabet, Cisco and Oracle—are among America’s biggest cash hoarders, and that each one has a credit rating of double A- or greater. What does cash hoarding of this magnitude mean for these companies and their credit ratings, and what effect does it have on the U.S. economy?
Dominic Chu: It’s a huge debate. So I want to put it like this: many of these very large cap companies generally have large amounts of cash because they sell lots of products, subscriptions or services. The issue is where that cash is actually located. Many are totally global businesses like Google, for example, which is owned by Alphabet and sells to businesses and consumers all over the world—meaning they generate cash all over the world. It’s not that all of that cash is right here in the United States. Right now there’s a huge debate about whether the tax code needs to be changed. Bringing back cash from abroad would cause these companies to incur a rather large tax bill. That almost encourages companies to keep cash outside our borders. The debate is whether they would be able to bring cash home and deploy it in capital investment here for the benefit of the overall economy and to create jobs.
Opportunist: How do you feel about the U.S. economy overall?
Dominic Chu: I would say that I’m an optimist by nature. I feel America is the greatest country on earth and the economy is doing OK. I say OK, not great, because we know millions of Americans are unemployed and countless millions are underemployed and working jobs they didn’t want to due to their financial situation. There’s no doubt the economy could do better, but I hesitate to say it’s doing poorly. Things are looking a heckuva lot better here in the United States than in other parts of the world. As an optimist and a history buff, that tells me things are going to get better.
Opportunist: Will the presidential election impact the economy?
Dominic Chu: Part of me wants to believe this nation and its economy is strong enough to go on regardless of who’s at the helm. Many camps believe one candidate is better for certain industries and sectors, but my personal belief is the U.S. economy is going to continue to do great thing regardless who the president is. It’s too early to tell if things will be markedly better or worse if a Democrat or Republican is elected. Whether we have Trump, Hillary or Bernie in the White House, I feel the U.S. economy is going to be just fine.
Opportunist: Which market sectors are you bullish on and why?
Dominic Chu: If I knew that I would be making a lot more money right now. [Laughs] We’ve talked a lot about tech already. That’s a huge part of our economy and market. The most fascinating thing for me over the last couple of years is definitely the energy sector. Some of the big thematic stories over the last few years have been about the aspects of both supply and demand. The economy drives demand. Are people using as much gas and oil as before? Hydraulic fracking changed the dynamic of world markets. The U.S. is now a huge producer of fossil fuels. It will be fascinating to see what happens if oil goes back to $80.
Opportunist: Which financial news stories do you foresee dominating the second half of the year?
Dominic Chu: The first half of the year was certainly about ‘Brexit,’ and if the Fed raises interest rates. The second half will be about profit pictures and whether companies actually make more money in the profit side of things. This might be a huge catalyst for the markets. The presidential election is one of the bigger picture drivers, as people jockey for position and speculate about which companies and industry sectors will hypothetically fare better under one administration or another.
Opportunist: What do you enjoy most about your work?
Dominic Chu: Let me count the ways! [Laughs] Being a journalist covering the news gives you something new to talk about every day. I never come into work really knowing what’s going to happen. I never get bored. Also, being able to sit here with almost a front-row seat to major world events and see how they affect people and companies is priceless. Also, I’m around a lot of very bright people with different viewpoints. I get to have a dialogue on a daily basis not only with the people in this building but with competing news outlets as well. You can’t put a price tag on having such a great, diverse group to share things with.
Leslie Stone is an award-winning writer, editor and journalist with more than two decades of experience covering business, finance, real estate and lifestyle issues for newspapers, magazines and online publications. Originally from Virginia, she currently resides between Florida and Michigan. Follow Leslie on Twitter: @lescstone.
Follow Dominic Chu on Twitter: @TheDomino
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