Willy Walker: Thank you Susan and good morning everybody. I did last week's Walker Webcast from a shared office space in New York City and this week I’m doing the webcast from my hotel room in San Diego, California where I’m attending the National Multifamily Housing Conference. We've been saying for months that companies will return to the office and travelers will return to work travel quicker than most people have expected and so far, I think we've been more right than wrong. This conference was limited to 2,500 participants, and there are 2,500 people here in San Diego at this conference. We had to show proof of vaccination to register for the conference and once we did that, we could remove our masks indoors.
I attended the San Diego Padres game last night with 15,000 fans. As Dr. Peter Linneman, a frequent guest on the Walker Webcast, said earlier this year watch the sports stadiums when they are full will be back to normal. Ballparks in Houston, Atlanta, Cleveland, and Baltimore all back to allowing 100% capacity today. Any Major League baseball team, like the New York Yankees and Seattle Mariners that don't have a set date open back up to 100% are likely leaving a lot of ticket money lying on the floor.
The theme of this Conference is product, product, product. Every owner in the multifamily space at this conference is a net buyer and nothing else really matters other than price. One of the large private equity sponsor groups has figured out that by having sealed bids, rather than running an auction process, that they get outlier pricing were bidders wildly overpay and, as a result, they have asked sales brokers, to ask for best and final sealed bids and take the winner. It is an exceedingly frothy market today.
On the financing side spreads remain incredibly tight and the 10 year is rallying to about 150. My guest and I are going to discuss inflation and rates but before I turn to David, I just say that much of the market commentary on inflation seems to be changing quite quickly. Lumber has fallen from $1,600 to $1,167 yesterday; that's down 27% over the last month. And while there's no doubt that finding labor is exceedingly difficult due to stimulus spending, government assistance, and a skills mismatch, I think it's important to keep in mind that many companies are making do and doing well with fewer employees. One example I give is there's a McDonalds across the street from the Anschutz Medical Center in Denver, Colorado. That McDonald’s is actually closed, still, but the drive thru is open and staffed by three employees. I have no idea what percentage of the sales that McDonald’s does through its drive through window versus having the restaurant open but what I do know is that, by not opening the restaurant, they need to have fewer employees, nobody needs to clean the tables or service the bathrooms, and if their margins are similar or better operating the drive thru only there's zero labor rate inflation, that will need to be passed on to the consumer in the cost of their Big Mac.
Somewhere between eight and 10 million Americans who are who were employed prior to COVID are still unemployed today and, until that excess labor capacities absorb labor, which is a huge component of inflation will not put upward pressure on the aggregate inflation rate. So, with that as the preamble, let me turn to my guest David Faber.
David Faber went to Trinity School in New York and then Tufts University, where he graduated Cum Laude with a degree in English. He worked for Institutional Investor for seven years before joining CNBC. He is co-host of Squawk on the Street with Jim Cramer and Carl Quintanilla. He has done 10 documentaries on corporations, including The Age of Walmart for which he won a Peabody award. He has also won a Loeb Emmy, and Dupont award. David is the author of three books, the Faber Report, Then the Roof Caved In, and House of Cards.
So, first of all, David, thank you for joining me today, I am a huge fan of yours and watching pretty religiously every morning. Let's start here, you went to Tufts where you studied English. Your father was a lawyer, as was your future Father-in-law. Any pressure to go into the law world and go to Harvard law school like your partner Jim Cramer?
David Faber: An interesting question Willy. It's funny I haven't even thought about it but yeah, I think you know, I was an English major, as you say, and I didn't necessarily have an idea of what I wanted to do, and I think law school and the law was always something I thought might be what I defaulted to, but what I found is that I didn't want to be a lawyer. And you know I was lucky in at least having enough belief that it wasn't worth going to law school if I didn't want to be a lawyer, even if I didn't necessarily know what I wanted to do. And it, you know, took a little searching and luck, of course, it always plays such an important role, I think, in so many people's back stories. But, for me, you know journalism has always been something that I had done, although never the editor in chief of the newspaper, always more of the reporter. At Tufts we launched a magazine I wrote for, you know, I was involved, but I wasn't as involved as some of my classmates were. And my first job out of college I sort of got a look at politics which I’d always thought well maybe that's something that I’d be interested in, and I was like no. And a lot of journalists, I was in D.C. and that's when I finally decided well journalism is something I may want to do. I don't think I ever took the LSATs again to your question, but I certainly thought about law school, yet again, kind of searching. But said okay journalism and I was always assumed it would be political journalism. I applied I remember for a job at the Washington Post, because I had one year of experience working for the Democratic National Committee back then and, obviously, they said no thank you. I moved back to New York answered an ad in the New York Times and started my career in financial journalism for Institutional Investor by covering the corporate banking world on a newsletter. Yes, a newsletter that was sent in the mail once a week called The Bank Letter so that's how I got in.
Willy Walker: And did you stay focused on the banking industry when you were at Institutional Investor? Did you move around in there? And then, as you talk through what you did its Institutional Investor what was it that allowed you to jump across to CNBC?
David Faber: You know, I was very lucky again in getting this job with no experience whatsoever, obviously in the business world or in economics, I was an English major I never even took an economics course, so I really knew nothing, and I was hired to cover a beat that was called corporate lending for this newsletter that was sent out once a week was very high priced called The Bank Letter was owned by Institutional Investor. They owned, a group of these newsletters. And over time, I did come to actually work for a number of them even oversaw a few of them as so-called managing editor. But that initial job, you know, I was very lucky it was a place where a lot of very well-known financial journalists went on or came from to go on to have great careers. You were you're expected to break stories, even though it was a weekly, you're expected to use a corporate card that they gave you, a corporate American express card, and take people out to lunch. And you just had to pick the phone up and obviously it wasn't one of these phones, it was a good old I mean, I think we had touch buttons but it wasn't rotary, but you know, a regular phone and just make outgoing calls and call strangers and get them to talk to you and tell you things. And that was great training, and, over time, you also tended to learn a bit about what you're actually covering thankfully, finance. And so you know, I still amazingly enough have a couple of sources who've gone on to become as you might imagine very senior at their financial institutions who were started when I started, and I would call them at their banks when I was trying to figure out who was going to land the big $2 billion loan. That was our front-page story, you know will Chase beat out Manny Hanny or Chemical, by the way, all one bank now I can keep going all the banks. J.P. Morgan who will actually land the lead position for that $2 billion loan so that was my first job in business rules.
Willy Walker: And what gave you the jump over to CNBC? How did that go down you got to sort of go from not even behind the camera but from doing print journalism to all of sudden being in front of the camera?
David Faber: I always sort of harbored this interest and ambition to potentially be on television. I thought, maybe you know more to become the announcer of the Mets you know that would be, my hometown team. But again, you learn that really if you don't have any experience, you're not going to have a chance of doing anything; but I had always had an interest in in television. I had done a couple of internships during my time at Tufts as well at the local CBS affiliate in Boston. And so, I you know started a conversation with them, so to speak, sending a letter, it was a fledgling network. CNBC started I think in 1989. CNBC had, and then it merged with F&N not too long after, but I started a conversation with them, and they hired me to come, I mean again you go back so many years ago, to sort of where we weren't technologically. There was a network they had called the Private Financial Network that was a closed-circuit network for money managers who could watch investment conferences that we had taped. We had actually taped the sessions, and then they would play them back on this on this network, so to speak, to people would obviously pay a subscription fee for. I was hired to become like the anchor of this network. To interview some of the CEOs who might have been at the conference and things of that nature and to host it. And I got to CNBC under that guise and I immediately just did what I had learned how to do now over the last seven plus years that Institutional Investor, which was to pick the phone up, make phone calls, try to find things out. I was lucky in that nobody else had CNBC had ever actually done that before and it wasn't really part of what we did yet at CNBC. You know we were kind of just “Oh, this is a headline from the Wall Street Journal or Dow Jones or on the Wires you know let's put it on TV.” I’ll never forget the first time I found something out I turned to sort of on the assignment desk or something and I told them what I had, and I said I should go on TV with this and he said, well what do you mean it's not on the Wires. It was not even an understanding that you could actually find things out without listening, watching somebody else's work. So, watching, reading somebody else's work. So wide-open territory for reporting, which was great.
Willy Walker: It's when you first went on in front of the camera, David, you wore glasses and you also look like you are about 12 years old and by the way you still look like you're about 12 years.
David Faber: Oh, please yeah.
Willy Walker: So, two questions for you on that. First of all, contacts are Lasik on the eye? And then do you go; I have this image of you and Andrew Ross Sorkin meeting in the gym after you guys are done taping your morning shows. Is there some gym where all the morning TV personalities go and like hang out and have a good time with each other? Or does everyone go off it just get back to work?
David Faber: People just go off and go back to work. Andrew and I are good friends and strangely enough we live in the same building. So, our lives are intertwined in different ways. We're only six floors apart, so I do see a good amount of him. Although we don't have a gym, so I don't see him there. But Willy actually now I’m forgetting what the main question was.
Willy Walker: The main question was Lasik or contacts.
David Faber: Oh yeah. Right.
Willy Walker: Need an answer to that one.
David Faber: Neither.
Willy Walker: Neither really?
David Faber: You know, I guess, this happens sometimes, I really didn't have to necessarily wear glasses, but I was nervous that I wouldn't be able to see, but I have 20/20. I don't know what's going on, I can read without reading glasses, and I can still see far away, I do wear glasses to drive at night. And that's about it but yeah, I’m not sure I went through this period where I thought I needed glasses, I guess, I did, but my eyes kind of corrected back somehow. I don’t know.
Willy Walker: One other question on your on-camera appearance. Your mother-in-law, Mary Masters played Dr. Susan Stewart on the CBS soap opera As the World Turns. I’m just curious does she ever give you tips on how to look or act on camera.
David Faber: You know I don't know, and I don't know that she's ever even watched me. Financial journalism in business TV is not her thing so no. Yes, she did have a great career as a soap actress. There was one funny moment years ago many years ago Leslie Moonves, of course, who ran CBS. would interview somewhat regularly. He canceled the show you know he canceled As the World Turns. I didn't say why'd you put my mother-in-law out of a job, but I did ask him why he why he canceled it and a couple of people who knew the soap industry wrote “David Faber asked the CEO of CBS why he put his mother-in-law out of a job.” It was kind of funny.
Willy Walker: So, you get to the studio at about 7:30 in the morning, every day, and I believe you make a number of phone calls to several friends at prominent hedge funds to kind of get a sense of what's going on. Is it the same group every day? And then the other question I have for you is, is it always a phone call or do you ever just email and chat?
David Faber: Almost always a phone call. it's not the same group; I shouldn't say that. I call the same people every morning. But then there are other people that I will call during the course of reporting and yeah, you're right again around 7:30 or so. In that hour and a half, I have before the show. If there's a story in particular that I need more context or insight on. And so that could be any number of different people. That could be a CEO who I have a good relationship with, but I don't talk to every day. It could be a banker or a lawyer or another senior executive at a company. What I do in terms of sort of the uniform nature of the people I call every day are more people who are in the market, who help me understand at least what they're thinking about in a given day, what corporate news is important to them, what macro news, whatever it might be. That group has stayed relatively constant through the years. I mean it's changed a bit, but there are people now that I've been having a conversation with every morning for, for over 20 odd years and they do tend to run hedge funds, because you know they're thinking about everything, and so it's helpful to me because it helps me think about what they're thinking about.
Willy Walker: I find it… you mentioned voice and phone calls several times. You talk about when you were back at Institutional Investor. You talk about when you come into the set each morning, so many of us me included, have gotten very accustomed to just emailing and texting and that that's the mode of communication, because it's so easy, and you can exchange so much information. And yet here you are really having voice conversations. What is it that you find about being in the news industry and having to go to voice, rather than text or email to get your information?
David Faber: Well, so much of it is, I mean there's still so much you pick up in a conversation. Listen it depends, if somebody you know extraordinarily well and it's one quick bite of information that you're looking for or an answer, you can text them. But for any call of any sort of substance or any conversation of substance, I just don't see how you can do it via text or email. You can potentially (air quotes) get an answer to a question, but it doesn't give you an opportunity to understand how that answer was or even how it sounded. The information, that was presented around it and it doesn't give you the key ability, which is to ask that follow up question or question after question after question so it's no way to report. I think that younger reporters can fall into the habit of that because they're so accustomed to using their phones in all different ways, but many of them not actually involving a voice call. You know I know for my kids it’s the way they communicate they don't really talk on the phone very much they communicate via various snap or text or whatever. But for me and for reporting I just don't see how you can do that, I don't. You know it's hard enough to get things right but to rely on trying to text or email somebody to me you know unless it's one very specific question that sort of could be either yes or no, that's not reporting and that's not going to get you where you want to be in terms of at least effectively communicating a story.
Willy Walker: I’d imagine that you get inundated with texts and emails if you're on the set and something is, you know, significant news and that it's happening and it's very fluid and you get it. Do you ever report off of that or do you just take that as kind of background? Where's that line? Because I can only imagine you’re kind of filtering stuff where you clearly have known sources you trust inherently they've given you data and information throughout your career and trust what they're saying, but will you go with what they've just texted you or do you have to have that phone call to back it up.
David Faber: That's a great question, by the way, and it depends. I mean you know it's, I can't say there was a hard and fast rule, because that does happen, and you know, in particular the time that we're on from six to eight in the morning California time. A lot of CEOs are at home and a lot of them are people, I know, and if we come into a subject where they have, either it's about their company or it's something they know well; the phone will start to light up with some texts. And it really depends., Sometimes it can be something that's just giving context to something so it can be a fact and I’m very comfortable with that fact and sharing it on air. And so, it will depend. Other times it's something that will require a phone call and if there's an opportunity for me to make the call during the show I’ll do it. During a break or whatever it might be, even if it's quick. It'll help aid my understanding and then I’ll go with whatever it might be. But Willy, there's no hard and fast rule for me it's sort of depends on who the person, how deep the relationship is, and what the information is in terms of its value and or context that it's bringing in that particular situation in that moment.
Willy Walker: You mentioned something that I’ve never thought about before, and that is that it's 6am on the west coast, when you will come on and when Squawk comes on at 6am on the east coast is there a distinction between appealing to the finance community in Squawk and the tech community in Squawk on the Street, given that time zone difference?
David Faber: I think there is, to a certain extent, I mean I don't want to overstate it because it's not as though we uhm. We talk obviously you know from watching our show a lot about stocks. We’re in the market, the market is open for most of the show. It's only that first half hour beforehand. So, it's different in approach to a certain extent and it's different just in terms of how much time we really have, as opposed to Squawk Box, but yeah, I think that is part of it. You know, we get the at home audience on the west coast, whereas when we're on, here on the east coast, its people are already in the office if they're watching us there or some of them are some of them have left and they're not watching you know. But yeah, we get the exercise crowd on the west coast.
Willy Walker: So, you came back to the studio on Monday, for the first time since the pandemic. First of all, to those of us who have watched you from your living room. Thank you for inviting us into your living room over the last 14 months. I had a number of people this week say to me tell David I really think his house is really well decorated so from those people who came up to me and said they were they were pleased to be invited into your home and how nicely was decorated, well done on that to you and your wife. But what was it like coming back to post nine being back in the studio with Jim and Carl?
David Faber: Yeah, a clarification. I actually went back to our studio in New Jersey after Labor Day. So, I’ve been working from there in Englewood Cliffs, our headquarters, since Labor Day. And so, and Jim Cramer, has been there as well. Carl just came back. And it was great. So, we were all together here at the NYC. But Jim and I have been together in Englewood Cliffs for the last whatever its been, nine months, and I was home for six months in our house and yeah, we got a lot of nice comments on our home decorating, which is nice, you know appreciated it.
Willy Walker: Did you change it, did you change anything around put any books in the background that you wanted people to know that you'd read or anything like that?
David Faber: I didn't do that. We have a lot of books there, thankfully, a nice shelves sort of has a depth to it, that shot, I’m hoping that it won't be the last time. I’m hoping to you know its summertime if I can, if I can squeeze a Monday or Friday in here and there, I’m hoping to be able to do that.
Willy Walker: Do you have that all set up? Is the equipment still there?
David Faber: It's still there. You know it's funny, the other day on Monday, when we were here, they ran tape from March 19 which was that first day where we were all in different places, Jim, Carl and I. And we're kind of trying to adjust to it. But we saved the network. This thing called a padcaster, basically it's an iPad with the lens on it, that hooks into your home Wi-Fi and that's, they bought about 30 or 40 of them, thankfully. It really did kind of save CNBC. I mean it's hard you know again, you're saying in the outset, some of your comments, it'll be interesting to see the things that stay with us to the point of the McDonalds that you were talking about. In terms of some changes, you know, I’ll maybe work from home, occasionally, because I can. That technology enabled us to actually continue. I could never have imagined that would have been the case even a year ago, two years ago, to say okay every business will be broadcasting from their home for six months, a year, even more. It was really amazing, and it was yeah, this thing called a padcaster, which I still have, and I’m never giving it back I don't have it in New York, so there, which I usually am, when I’m here in New York, I’m coming into the studio or coming down here to the NYC. Back to your original point yeah Monday was great it was great. You know to be here, but even more so, Willy, to be together to have the three of us actually in the same physical space again was really great.
Willy Walker: And with the three of you there is there anything that either makes the show easier or harder being back in the studio? So, for instance, like if I was doing this interview with you live. My notes to run through right now or sitting on an iPhone up against my screen and I can read through them. If I was live with you, I wouldn't have notes, and I would have to have all this in my mind, which I try and do a memorize it. On the set is there anything from having the production staff around whether it's just you know getting a cup of coffee or actually communicating either on camera or off camera that makes it significantly easier or harder being back at the studio from when you were home?
David Faber: My view is there's nothing harder about being back in the studio. That's one of the reasons why I came back after Labor Day. I did not love the work at home thing. As much flexibility, as it gives you, as nice as it was to be in the country, even during the summer, I like being with all my colleagues, not just the ones I’m on air with, but the ones that are behind the scenes. I just enjoy that that's important to me. It's actually interesting because I’ve spent so much time coming down here, and you know we have colleagues. I’m looking at Mike Santoli’s back right now. But it was nice to be in New Jersey actually and see people I hadn't seen in a while, you know. People who are part of CNBC and I’ve been there for so long and being able to be with them again. So, from my perspective, there's no downside to being together in the studio. To being off camera and near colleagues with my colleagues to being on camera with my colleagues. I much prefer it, except on those occasional Fridays in Summer when it would be nice to be the country those, those would be okay.
Willy Walker: it's great. So, media and the telecom industry and media industries are two industries that you have broken story after story in. I was, you already answered, for me, one of my questions was does that emanate from your time at Institutional Investor covering those industries and it sounds like it doesn't because you started in the banking industry. But is it, how is it been that you have created sort of what I would call an ecosystem inside those two industries that give you access to information and relationships? You know you were very close to Sumner Redstone and I’m sorry for the loss of Sumner Redstone during the... he died in February, and I know you were very close to him. But how did you build up that ecosystem, if you will, that's made you so insightful to be able to break news, particularly in the media and telecom space?
David Faber: You know time and effort. As you well know, from your business one relationship leads to another, a certain level of knowledge enables you to talk to people who feel as though they can benefit from doing so and it builds, and it doesn't happen right away. It happens over years. It's funny, you mentioned Sumner, this goes back to sort of CNBC and the road we've taken and the one I personally have. The first thing I covered at CNBC was the battle for Paramount. It was Sumner Redstone and Barry Diller were battling for this asset right this iconic asset worth about $10 billion at the time, by the way its value hasn’t changed very much-- since 93. So, I got in there and it was kind of a first thing that got me on air at CNBC and frankly I didn't know my way around an M&A situation. I didn't understand the nuances of that. So much, I had to learn. But I did have some risk arbiters who are sources because of my covering banking because financing is very important to deals and used to be really important back in the day. Would it happen, would it not. So, I had a handful of these guys and they sent me sort of down that road of covering M&A in a way, where the action is, right. Whereby making a couple of phone calls, you can advance the story, sometimes. You can provide information that the market cares about. But to the to the overall point of how we've kind of evolved and how my relationships evolved, Sumner Redstone and Barry Diller would not take my phone. I called them. I don't even know that they may have vaguely heard of CNBC. They certainly never heard of David Faber, and they had no interest in talking to me. You know, back then, it was the Wall Street Journal. Maybe you talk to the New York Times, maybe returned a handful of other phone calls from some other journalists in the, you know, Variety, or something like that. So, it just took a lot of time. But over time, as our network became more influential, as I became somebody that they were at least somewhat familiar with, maybe from having watched, I was able to develop those relationships. And so, you know, I don't know how many years later it was that I was having lunch with Mr. Diller sort of somewhat regularly, and or getting to know Sumner, as you point out, over time very well. You know, I went to his wedding, which I’ll never forget, but you know it builds and it builds. Then, once you have relationships obviously other people also feel as though well, maybe there's something you understand, or you can share that will be of value to them and it sort of all helps put the pieces together for you. So, it's just been 25-28 or so years of sort of doing that. A lot of my sources now, I mean, Sumner’s obviously past, some are aging out, some are getting older, some are retiring as CEOs, so that's interesting and you've got to constantly replenish.
Willy Walker: So, you talked about the Barry Diller’s and the Sumner Redstones of the world not returning your phone calls in the early 90s. Let's fast forward 10 years to 2003 and someone who would have answered your phone call normally but wasn't because of the scrutiny he was under, Bernie Ebbers, the CEO and founder of WorldCom, and you were down in Brookhaven, Mississippi his hometown in September of 2003 filming the end of a documentary on the meltdown of MCI WorldCom when all of a sudden Bernie shows up. Talk about that moment, literally where you're there thinking he's somewhere, but he isn’t in his hometown. You're finishing up and all of a sudden, he just appears. Then you asked him to talk to you, and he says, “I can't do that,” but then he does! What was it that turned that moment, where he basically was at first saying, “No, David you know I can't talk to you,” and then the next moment you're walking along with the camera running and the boom Mic in his face?
David Faber: Yeah, it is one of, I mean, from my entire career in journalism, you certainly have hit on one of the memories that I will have and remember most deeply. I mean, I can give you the blow by blow, as you probably know, I broke the story of fraud at WorldCom, so that was obviously a big moment for a lot of people, and I followed it closely. We had done one documentary already on the failure of the AOL Time Warner deal, and so sometime later I said, “I think we should focus, because I know this company well, and I had a relationship with Ebbers.” I wouldn’t say it was a close relationship, but I interviewed him, I would see him occasionally, I would call him, so we should do a documentary on the fall of WorldCom. What happened. You know these documentaries take a long time. It was a nine-month process I think, something along those lines. We had asked his lawyer Reid Weingarten, I think, any number of times, we want to sit down with Bernie, we want to sit down with Bernie. We're doing this documentary, we're talking to a lot of his old colleagues, the people who started LDDS, that was the original name, long distance-whatever service. But LDDS back down there in Mississippi and you know re-protecting his client, as you expected. “You know, there's no way I’m ever letting you talk to Bernie.” And I tried to get to Bernie, and I couldn't. But we were down there filming the conclusion of the documentary. I’ve been down there before, but we just went down there to basically do the big summation. And it's me in this small town at the railroad tracks that run through the town. We actually had a boom camera you know, one of those cameras that's operated by Jib operator, so it goes up high in the air. We had another of our great cameraman there as well, and my producers there, or one of my producers Glen Rochkind, and sure as hell if Bernie doesn't pull into town. You know, he knew we were there and we're all like, “Wait! Is that Bernie? Wait, it is him! So, what do we do? What do I do?” and obviously we stopped shooting whatever we were doing and I walk over to him and I say, “Look, Bernie, I’d love to talk to you,” and he said, “How are you, David? Welcome to Brookhaven!” That's what he said! He's a big guy, you know, and I said, “Hi Bernie I’d love to talk to you and...”
Willy Walker: He was with the Chief of Police, wasn't he? I think he was with the Chief of Police.
David Faber: Yes! He said, “This is Chief whatever,” and I said hello to him, and I said, “I’d love to talk to you,” he’s like, “You know I can't do that Dave. You know I can't do that. Just want to say hello, and I know you've been around, wanted to say hello,” and it was my producer Glen Rochkind who said, I said, you know “What can we do?” Why don’t you ask him to take a walk? Okay, so I said, “Well okay Bernie, you can't talk to me, but can we just take a walk?” and he said okay! And then we took this walk through this town, I mean it looked like a Hollywood set almost, sort of small-town Mississippi, and we had this camera that I’d mentioned, high up that was able to capture it from a distance us walking, and then I had a cameraman in front of me with this boom MIC. Bernie knew what was going on. We're walking, a camera is walking backwards, we take this five-minute walk, seven-minute walk through town where I try and ask him every question that we brought up in the documentary over that last hour, basically, that the viewer would have seen, thinking, what do I need an answer to? What do I need an answer to? What's funny is, I finished it, and one of my other producers Laurie Gordon was back, she was editing already back in New Jersey and I called her and I said, “You're not going to believe it. Bernie! I got an interview with Bernie!”, and she said, “Oh my God! Did you ask him if he was behind the fraud,” and then I go, “No. I forgot that one!” I forgot the one key question, even though I asked all these other I was like, “Oh my God!”
Willy Walker: That's great. So, at the end of the interview, you say to him, “Well, it was one hell of a ride,” and you he turned wistfully to you and said, “It was.” Was that the end of the conversation David? Or did you, then the cameras come down, and you have something else? Or was that literally the end of it? Because honestly, that was the end of his, ride? He went to jail for 25 years. And he just died in jail!
David Faber: It was the end of it. It was the end of our conversation. It was quite a moment and to your point they used that interview in his trial. His lawyer was right not to have allowed it to occur. I always thought that you know, that sentence he got was way more. I don't know what Bernie knew or didn't know. Scott Sullivan, the CFO obviously knew a lot. It was never clear to me exactly what Bernie did know or didn't know about what really went on there. But 25 years seem to be egregious in my mind. And as you point out, he just passed away. They let him out, I think, and he spent his last few months at home.
Willy Walker: So, another what I view is an iconic interview that you've done, and I don't know whether anyone has ever said this, but as I think about the great financial crisis, you can almost trace it back to your interview with Alan Schwartz, the CEO of Bear Stearns, in March of 2008. I went back and looked at that and, just to set the table for those listening in, it's the Wednesday before Bear Stearns get sold to JP Morgan. On that, I went back and look at the tape and their stock when you're doing that interview was trading at $64.30 on Wednesday and by Sunday, they were sold to JP Morgan for $2 a share. Now, we can get into what ended up happening after that and actually being a $10 a share price. So here is Schwartz coming on, he's in Palm Beach, he's at the Bear Stearns media conference, per him afterwards, he actually had really good earnings in the bag that they couldn’t come out and talk about ahead of the time, but felt like he wanted to come on your show to sort of show confidence in the company and that they were going to do well, and you can actually watch him at the beginning of the interview before you go into him and he's looking kind of, you know, he's got a shit eating grin sort of on his face like, “I know more than he knows and I can't wait to kind of tell-all these naysayers in Bear Stearns that we've got really good earnings next week.” Then you ask him about counterparty risk and he looks back at you in this sort of “we're fine, it's all good” and then you say you have spoken to a hedge fund who said that Goldman Sachs the night before had tried to close a trade and they wouldn't take the trade with Bear Stearns being the low bidder on it because of the counterparty risk, and Alan Schwartz’s face goes blank. Take it from there.
David Faber: Yeah, he was not prepared, and you know listen, there's been a good amount written about that interview. And Alan by the way, is doing great.
Willy Walker: Talk yeah, talk about a second chance!
David Faber: Yeah, he's at Guggenheim. You know, I think he always tried to be fair in terms of thinking about people's careers and he's had a great one. I’ll come back to that in a moment. To answer your question, I knew that this was a very important question that he needed to answer well, and I would never, ever give somebody a question ahead of time, but understanding the gravity of the question Willy, I did in certain ways make it clear to him, prior to the interview, that this might be something that would come up. I felt, and it was the only time in my entire career that I ever remember having even given a hint of sort of, “Listen, you've got to be ready to.”
Willy Walker: Right.
David Faber: or he's got to be ready to deal with this and he still didn't do it. I guess what I’m saying is it wasn't a complete surprise to him that I was hitting him with this question. And, by the way, it was a question that everybody in the marketplace at that moment had and he did not effectively answer. I think it was other things, too. He was saying, you know as you point out. He was at a media conference that he used to host because he was one of the biggest media bankers of all time, and he sort of was still doing his old job, while he was CEO, which made no sense. So, he was down there at this conference, while the world's blowing up or at least his world. Probably not the best place for him to have been. Probably not a great way to send a message of confidence to investors in some way. Not sure that in retrospect, was there anything they really could have done? Probably not Willy. I mean, they were way over levered, you know, if they didn't get him in March, they would have they would have gotten him later so, it's not clear what Bear could have potentially done. Obviously, you always think raise as much capital as you can or sell yourself, not for two bucks a share but, yeah, it was a moment, and you know Alan who again has had a great career, and I will still occasionally talk to, you know, it just didn't go well.
Willy Walker: Yeah, it's fascinating to me because, in an interview, I watched him do subsequently 10 years afterwards, so in 2018, he was talking to David Rubenstein and going through the play by play of it all, and David asked him, “When did you know that you had a liquidity crisis?” and he said, “I did that interview in the morning and I flew back to New York that afternoon, and when I landed in New York, that's when everything blew apart. And the repo market seized up on them, and they got marks on all their repos, and they basically had all the collateral put back to them, and so, they were asset-rich and cash-poor, and the next day Hank Paulson is calling them and saying, “You got till Sunday to figure this thing out or you're going to go out of business.”
David Faber: Yeah, alright so, it was the loss of confidence as a result of his performance during that interview that morning, or was it already in process, I mean I don't, you know, I think a lot of it was already in process, but I don't think it helped. I certainly don't think it helped. It would have had been an incredible performance on his part in some way, I mean you know this, confidence is everything. The minute it's gone, that's it. That's what this still with the financial business is all about, and that was it for them, and as you say two bucks to share, I think up to 10. But a long-storied firm gone in a heartbeat. Obviously, a prelude of what was to come only six months later, as we then we're dealing with things that we never could have imagined. Lehman, and potentially Merrill, and well the entire financial system was on the brink.
Willy Walker: And when you have news that is really breaking news, market-moving news, David, I mean, you just told us that you tried to give Alan a little bit of heads up of what was coming in the interview, and it was one of the few times, where you sort of said, “Get ready because the fast ball is coming down.” Beyond doing something like that, which it doesn't sound like you do very often, how do you sort through the implications of it? In the sense that I mean, you can say things on air that move markets and move billions of dollars in value from one side to another side. And that's not a that's not a minor responsibility. I mean that's far more than just reporting that the Senate is going to vote tomorrow on some new bill. How do you filter that, in the sense that that is a huge responsibility and also, I’m assuming has some liability to it as well, and so, how do you sort through all that?
David Faber: Well, the main thing I try to do is make sure I’m right. And so, what it really results in is holding back and not doing a lot of stories that I otherwise might or perhaps some other reporters or news organizations might because I’m just not 100% certain or something doesn't make sense to me. But otherwise you know, you do it. Listen there are a handful of fun phone calls, I mean breaking news is fun. It's not nearly as much fun as it once was and maybe that's just an excuse because I frankly don't do it as much, it's really hard, it's really painstaking. Especially when you're committed to making sure you're right. So, I unfortunately don't do it as much. I still get very upset about stories that I should have had, the Discovery Warner Media Deal is still haunting me because I absolutely had it, should have done it, didn't do it, or didn't push hard enough to really find out exactly what was going on. But the fun calls are when you know it and nobody else does. There's this moment, where you know, okay I got it. Disney Fox, I know it, now I’m sealed, I’m going to be going and doing the story. But then you get to make those kind of last phone calls to each of the companies and say, now is your last chance, I’m doing it, so it doesn't matter but if you want to share anything now, that you think I should know or that everybody should know out there in the public, now's your chance. And those are always fun because I don't really care if you do or not, but this is it and you got five minutes and then you go. But you're always nervous, you're still always nervous. Like did I hear somebody wrong? Is it Fox buying Disney? I mean like you always have these last-minute things. Even though I had 20 phone calls, did I hear it all right? But thankfully I haven't had a lot of mistakes through the years. I mean we all make them occasionally and mine have been hopefully on the big stories relatively minor but there's a lot that I let get away because I wasn't tied up on it enough, even though it ended up being true or right I just didn't feel comfortable.
Willy Walker: Your reporting style is not one of sort of gotcha or trying to you know, you're not Mike Wallace in my book. Trying to kind of figure out some saying X and trying to catch him on something in the 60 minutes interview that Mike Wallace used to do so capably. But in one of your Sumner Redstone interviews you're talking to him about his short-term focus of stock buybacks and he's sitting there talking about it and your kind of ripping into him and sort of saying why would you be so short-term focus and he says wait, wait, wait and you keep pushing at him. He's saying hold on hold on, does that happen very often? I haven't seen it in many more than Sumner.
David Faber: That was fun, I mean again, this goes back to having relationship with somebody and sort of feeling very comfortable to yell at them and obviously for him to yell at me, that was funny. You wait, I think he said, and I said you wait, you wait, and he will, of course, like everything else he got the last word. But it doesn't happen too often, you know I obviously had any number of important and serious interviews. You mentioned one of the key ones with Alan Schwartz where I try to ask, certainly the tough questions, but I never, raising your voice, there's just no point in that.
Willy Walker: Yeah.
David Faber: That's not a good experience for anybody and the back and forth you're referencing was sort of jovial in nature because that was kind of the relationship we had.
Willy Walker: Yeah, that conversation you're basically kind of saying you watch your stock price every day. I don't even watch our stock price. I look at it two days after the quarter ends and we announce earnings and then I put it away for the next quarter and don't even look at it. And the concept that Sumner would wake up every day and look at his stock price and think that's something he was doing at that moment was going to have some impact on that stock price seems, and you're in the interview, you're talking about sort of saying isn't that very short term focus rather than long term value creation focus and look he made huge value. He was one of the great media executives ever, but I just found that to be fascinating kind of approach.
David Faber: I agree with you, I think he was, he was endless. He would call Marty, his cousin at Bear Stearns because he would run the buyback too, you know, that's what he did. I mean he was like looking and watching the fish and where’s the stock price. It was kind of ridiculous that he was doing that, but, by the way some big decisions were made, I think. As a result of his frustration, one of the key ones, splitting up the company had sort of a succession thing between Freston and Moonves wanted Freston, but a lot of it was just, they don't get the value, they don't get the value, I’m going to split the company up and they should never have done that. Of course, the company's back together again but to your point, it wasn't the right way.
Willy Walker: When Summer died, you and Kramer we're talking about his passing and in it Kramer mentions to you, I remember when you and I sat on the set watching Netflix pass the value in market cap of the mainline media companies and how at that time we were like wow, how can Netflix be worth more than Viacom or Disney. And in hindsight, it ended up the market was right. As you watch AMC and GameStop today, any thoughts that AMC the market might be right on AMC and GameStop like it was on Netflix?
David Faber: No, none, none. How about you, I mean, you know, no. There’s not even a chance.
Willy Walker: What's Adam Aaron do with all this capital? I mean, I think he's done a masterful job of saying look while I’ve got the markets, I’m going to raise a lot of capital, I’m gonna pay down debt. I mean he's doing everything you can and at the same time, I mean you know, you've covered it for decades. M&A opportunities don't just, companies aren't bought companies are sold. Right, that's it. Companies are sold they're not bought. I can sit there and say, I want to buy every commercial real estate mortgage company in the United States but they're not for sale today, and if I tried to buy them, they’d be asking for a price that I couldn't pay in a rational way. So, the fact that Adam’s gone out and raised all this capital, hats off to him, but I don't know what he's gonna do with it. And you said on the air the other day that you've talked to some of the other people who won't take his stock, which I thought was interesting you put that in there and I was like David’s talked to someone who says that they won't take their stock.
David Faber: Nobody's going to take his stock, Willy. I mean, how could you possibly, as you know, you're going to sell your business to a company whose stock price has gone up 1600 percent in the last whatever it is. Never, I mean the risk is enormous. You would never do that and so nobody's going to take that as currency. He does have some cash, but most of it's been raised to help to help fund losses and to help steady the balance sheet, which obviously was awash in debt. I agree with you, he's done a great job navigating this. I’m sure he goes home every night, well he's probably home anyway, but I guess nobody actually…by the way, did you see him, I assume you're wearing pants, did you see him on a Zoom where he wasn't wearing pants? That's not a good look, not a good look. But you know I bet he's trying to figure out how do I sell my own stock? I mean I went from having $8 million to $250 million worth of stock.
Willy Walker: yeah.
David Faber: It's kind of what the numbers are for him, something like that, something crazy. I’m sure he's thinking, I can't really sell it like that'll be a real lack of confidence. He’s got to gift some to his son’s, I’m not sure.
Willy Walker: Right.
David Faber: But I’m watching it closely. I take nothing away from AMC as a company. I think it will, certainly it's not going bankrupt. You can make an argument that it's going to have a reasonable amount of EBITDA the second half of this year, and certainly in 2022. But how you can argue that it's worth $25 or $30 billion before debt, let’s call it $4 billion in debt, you want to add in their net because they do have a good amount of cash now as well, it is beyond me given those numbers. And so, it'll be very interesting to watch. This meme thing, you know when it gets to that, we cover it now every morning. I don't know what to make of it, it's the gamification to a certain extent, I do think of investing. I think the cohort, many of them are fairly young. And it's you know, it's names and numbers on a screen and it's really easy to do it and thank you very much and I’m going to buy this, I’m going to buy some bitcoin, I’m going to sell. It's worth keeping a close eye on but to make an argument from our fundamental basis that somehow these companies are worth their market value is almost impossible at this point. And it does remind me, and I’ve said this on air of the late 90s were in a different way, you had a lot of business models being funded that we're not going to ever succeed, that we're not going to do anything but generate a lot of losses, but you had incredible speculation. Here it's really been kept to a pocket, there it got completely out of hand, I think so many companies were sort of part of that hope and dream kind of thing. But I remember getting criticized then too. Because some of them are going to be like, how could you possibly say that about AMC and GameStop. You know, I used to get hate, actual hate mail, now it's all obviously tweets and things like that.
Willy Walker: So, the other day you were talking about Etsy and you made the comment and one of the things I mean, I know you've been at CNBC for 25 years and you've covered everything, but your knowledge of the markets workings. When I started doing research on you, I was like, he must have done like an analyst training program at JP Morgan sometime because you just know so much about how all this works it's just fascinating to me that you haven't actually been a banker in your life. But you are sitting there saying Etsy just bought this company, Etsy’s trading at 20 times revenue why wouldn't they use stock? And I think it was Santoli who said, but David cash is also free today. And you're like you know what, you're right. The stock is basically free, and the cash is free at the same time. And I guess that's a broader question of like what concerns you as it relates to when the music stops?
David Faber: Yeah, I mean Mike's point was a really good one in terms of cost of capital. And so, you can get, you don't suffer a great deal of dilution even then, you can be accretive. You know, listen, here I will reflect because this is what I do. The concerns of the people that I speak to, and you know, and you may hear it as well. Overall, I think what the real concern is not necessarily about these pockets of speculation. You and I can have an argument about it, or we can discuss the stuff that went on in SPACS and obviously these meme stocks and some of the speculation taking place in crypto and I can point to any number of different things. But broadly speaking, this does not feel to me the same way that the late 90s did. When you had just a broad section of the market going to incredibly, in retrospect, we kind of knew it at the time inflated valuations. It's not quite the same here, and so I think the real concern out there is the one that we talk about a lot and I’m sure you hear about a lot as well Willy, which is inflation and whether the Fed is putting us in a really bad spot, whether they're going to end up being right and whether this really is transitory and we're going to be okay. Or if we're not and whether we're going to have suddenly some huge backup in rates that’s just going to bring everything to a halt when it comes to at least the market.
Willy Walker: Yeah well, I will tell you that if I had to bet a month ago that the 10 year would be at 150 today, I would have lost a lot of money and I’m in the debt business so I mean these markets are very interesting and what the answer to your question right there is, obviously has markets in a lot of money pinned on it right now.
David Faber: Yeah, without a doubt. And every day we can give each other different data points that say different things. Well lumber prices have come down dramatically, yeah but look how many job openings there are, wage inflation. You were talking about it in your opening remarks. So maybe that can be offset by not opening the restaurant, I mean who knows. But it's the key question because there, it has broad ramifications. You know what these meme stocks, I mean, at the end of the day, $20 billion here, $20 billion there, you know, Apple's market CAP is $2.1 trillion, it's 100 of those you know, so.
Willy Walker: Yeah, as a $3.5 billion market CAP company, I’d love to have some of that $20 billion come my way, but then, at the same time I also don't want to be Adam Aarons sitting there going like what do I do from here, so you know it's best to stay away from that stuff and just keep on making money.
Two final questions for you David, you've been really generous with your time. First one is, you have all these experts come on, you've got you know, Bill Ackman comes on, Mario Gabelli, Leon Cooperman and all the great minds of Wall Street. Who’s and without in any way saying that the others aren't all really valuable guests, who's that one guest who, when they come on it's like when Becky goes out and does her interviews with Warren and everyone sort of like sitting there with bated breath to hear Warren. Who's the one guest that you and Jim sit there and say, this is the person we got to listen to?
David Faber: I can't give you one, I could give you a handful of names. You know, I like is somebody who you obviously you know is very thoughtful. But also, there's two things. The people who aren’t afraid and so, they speak their mind. And you know this, a lot of CEOs are overly coached. Their last meeting before they come on is with their general counsel who's like basically saying don't say anything, don't say this, don’t say that. I mean they've got that reverberate and knocking them off of their talking points is very difficult. Particularly when you know you only have a six-minute interview and so frankly I think sometimes you know there's this, it's almost not worth it, some of our guests to bring on even though it’s a good name and so there's different categories here. You know CEOs like when you bring Barry Diller on, at least you know you're going to get whatever the hell he's thinking. You may disagree with it, but you’re going to get it. When I do my interview with John Malone, you're going to get it. You know, he may have a sort of an underlying agenda in some way, but you know basically he’s unafraid. Mark Cuban, unafraid. I enjoy that, I may not agree with them, sometimes I think they get out over their ski so to speak, or perhaps are talking in areas that they may not know as much about as you think. And so, from an investment perspective, I think there’s some people like that too. Again, I'm not going to go through a lot of names.
Willy Walker: It's great you, that’s really the answer. I didn’t expect you to be like, that’s our favorite guest because then everyone is going to be like how do I get to that level. So, I’m not going to push you on that. So, then the final one is this, you hosted jeopardy and we're going to see it in August. First of all, congratulations on being selected as one of the hosts. There’re two things on that. First of all, describe what it was like because you filmed all of them in one day and it's a super challenging thing. And then the other question I have for you is, you mentioned in the beginning being the Mets announcer, are we going to lose you to replacing Alex Trebek in doing the Daily Double from the CNBC set?
David Faber: Well, listen if they offered me the job which I’d say is incredibly unlikely, incredibly, I probably would do it, but I wouldn’t miss them. They tape 46, 48 days a year, I think there'd be a way. You know, I built too much over too long to just say see you later, but at the same time it would be fun, it would be a fun job. I don't think I have to worry about that, so to speak, because I just don't think that's going to happen. Aaron Rodgers is a different story. I think that's it and I think there might be a lot of interest in him doing it. I think his ratings were very strong, but I don't know you know we'll hear something on that I guess within a month or two. Probably even before my episodes air as you said the first week of August, but it was great, it was challenging. You know it's funny, it's a 30-minute show, but every show has its own peculiarities, every show has its own momentum. It's hard, you could watch it all you want, as I did. I watched Trebek a lot to prepare but until you're in it, you sort of don't appreciate everything. And so, there was a level of difficulty to it, not that I didn't expect, but that I certainly appreciate coming out of it. I think it went pretty well. I was pretty happy with my performance but certain things I found frustrating, because I am a perfectionist. But hey, you know, I think they had 15 guest hosts and Trebek so I’m one of 16 people who was ever gonna have hosted that show because they’ll probably pick the next hosts from the people who just did it, so I got that going for me, right Willy.
Willy Walker: It's so great. Well, you have been fantastic, and I am wildly appreciative you spending an hour with me. I could keep going. I’ve got more notes and hopefully when I see you in New York next I can ask the other questions we didn’t get to today. But thank you David, so much it's been great. And everyone who joined us today, hope you have a great Wednesday and we'll be back in two weeks.
I'm taking next week off, but we’ll be back in two weeks with another Walker Webcast. Thank you, David, very much and have a great day.
David Faber: Awesome, thank you Willy.
Willy Walker: Appreciate it, take care, see ya.