1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you 2 00:00:05,360 --> 00:00:07,760 Speaker 1: along with my co host Lisa Brahmawitz. Each day we 3 00:00:07,880 --> 00:00:10,440 Speaker 1: bring you the most noteworthy and useful interviews for you 4 00:00:10,520 --> 00:00:12,640 Speaker 1: and your money. Whether at the grocery store or the 5 00:00:12,640 --> 00:00:15,960 Speaker 1: trading floor. Find a Bloomberg penl podcast on Apple podcast 6 00:00:16,120 --> 00:00:18,040 Speaker 1: or wherever you listen to podcasts, as well as at 7 00:00:18,079 --> 00:00:23,599 Speaker 1: Bloomberg dot com. I'm joined by Alex Steele here today, 8 00:00:23,840 --> 00:00:26,360 Speaker 1: sitting in for Lisa Brahmowitz. Boy, I'll tell you it 9 00:00:26,480 --> 00:00:29,280 Speaker 1: is good thing to be a healthcare m n a banker. 10 00:00:29,360 --> 00:00:32,440 Speaker 1: There's always a deal in that space. Today Fires are 11 00:00:32,440 --> 00:00:35,920 Speaker 1: announcing that it is acquiring Array bio Farmer for ten 12 00:00:35,960 --> 00:00:38,720 Speaker 1: point six billion dollars. To get the latest, we welcome 13 00:00:38,720 --> 00:00:41,159 Speaker 1: a good friends, Sam Fizzelli. Sam is the director of 14 00:00:41,200 --> 00:00:44,120 Speaker 1: European Research for Bloomberg Intelligence, but his day job is 15 00:00:44,400 --> 00:00:47,159 Speaker 1: he's one of the best pharmaceutical and healthcare analysts on 16 00:00:47,200 --> 00:00:49,680 Speaker 1: the street. He joins us from our London studio. Sam, 17 00:00:49,720 --> 00:00:52,680 Speaker 1: thanks so much for joining us. Um boy, this price 18 00:00:52,760 --> 00:00:55,520 Speaker 1: tag is just monstrous. Does this make sense to you 19 00:00:55,560 --> 00:00:58,840 Speaker 1: this deal that Fires is doing. Thank you, Paul, Yes, 20 00:00:59,040 --> 00:01:02,800 Speaker 1: and good morning to both of you. UM. So you know, 21 00:01:02,920 --> 00:01:07,680 Speaker 1: the visors balance sheets pretty strong. UM. The growth profile 22 00:01:07,680 --> 00:01:11,560 Speaker 1: of the company going past the current patent experty for 23 00:01:11,840 --> 00:01:16,000 Speaker 1: Lyrica is um. You know, they like it to be 24 00:01:16,480 --> 00:01:19,080 Speaker 1: stronger than perhaps some of us think it is. We 25 00:01:19,120 --> 00:01:21,120 Speaker 1: always thought they would do M A and A. What 26 00:01:21,280 --> 00:01:23,200 Speaker 1: the price tag is a billion here, a billion there? 27 00:01:23,280 --> 00:01:26,800 Speaker 1: What's what's that amongst friends? Right? But they're they're buying 28 00:01:27,680 --> 00:01:29,520 Speaker 1: what I would consider to be one of the pre 29 00:01:29,600 --> 00:01:34,080 Speaker 1: eminent UM drug developers amongst the biotechs. If you think 30 00:01:34,120 --> 00:01:37,319 Speaker 1: about the number of drugs that this company is responsible 31 00:01:37,360 --> 00:01:39,559 Speaker 1: for in terms of what's going out there and deals 32 00:01:39,600 --> 00:01:43,759 Speaker 1: they've done, so we calculate about eight point four times 33 00:01:43,800 --> 00:01:47,000 Speaker 1: twenty three sales. There's no profits to talk about just yet. 34 00:01:47,920 --> 00:01:50,760 Speaker 1: Three sales. But but those are those are sales that 35 00:01:50,800 --> 00:01:55,160 Speaker 1: are not the you know, they have reasonable probability of 36 00:01:55,200 --> 00:01:57,480 Speaker 1: actually happening. The products have already on the market, and 37 00:01:57,480 --> 00:01:59,920 Speaker 1: they're they've got some good data in hand. And then 38 00:02:00,200 --> 00:02:02,240 Speaker 1: end um it is at the top end of the 39 00:02:02,360 --> 00:02:04,360 Speaker 1: range that we've looked at, but it's not the most 40 00:02:04,440 --> 00:02:08,600 Speaker 1: expensive UM. But you know, that is what it is. 41 00:02:08,680 --> 00:02:11,480 Speaker 1: My very exam so to that point, though, I feel 42 00:02:11,520 --> 00:02:14,680 Speaker 1: like getting on drugs that will were getting in the 43 00:02:14,720 --> 00:02:17,079 Speaker 1: pattern for drugs that will wind up cutting chemotherapy is 44 00:02:17,080 --> 00:02:18,800 Speaker 1: gonna be super super hot in the market. Do we 45 00:02:18,800 --> 00:02:20,720 Speaker 1: expect in the company to come in and try and 46 00:02:21,200 --> 00:02:23,400 Speaker 1: shot full of fires are out? Yeah? I don't think so. 47 00:02:23,440 --> 00:02:26,040 Speaker 1: This doesn't This kind of thing doesn't usually happen when 48 00:02:26,120 --> 00:02:29,400 Speaker 1: you have two managements that have agreed and there's a 49 00:02:29,440 --> 00:02:32,600 Speaker 1: big price tag out there already, it just doesn't happen. 50 00:02:32,720 --> 00:02:34,880 Speaker 1: You know, I've never really seen it in biotech, So 51 00:02:35,000 --> 00:02:38,160 Speaker 1: I expect not so say what what is so special 52 00:02:38,360 --> 00:02:41,360 Speaker 1: about Array that would cause fires? Or to step up 53 00:02:41,360 --> 00:02:44,960 Speaker 1: and pay this price. So they describe three pillars of 54 00:02:45,080 --> 00:02:49,400 Speaker 1: value and we basically responded to that already, you know, react, 55 00:02:49,480 --> 00:02:52,120 Speaker 1: which is the kind of thing that we've seen. UM. 56 00:02:52,240 --> 00:02:54,519 Speaker 1: The there's a product on the market, or two products 57 00:02:54,560 --> 00:02:58,040 Speaker 1: on the market, and there's ample opportunity for expanding that 58 00:02:58,080 --> 00:03:02,040 Speaker 1: each other's products UM and those revenues, you know, it 59 00:03:02,040 --> 00:03:05,079 Speaker 1: could easily be a billion or plus if they keep 60 00:03:05,120 --> 00:03:07,000 Speaker 1: expanding it and fight as I can, because they have 61 00:03:07,120 --> 00:03:10,840 Speaker 1: very deep pockets. UM. The company has several products that 62 00:03:10,880 --> 00:03:14,480 Speaker 1: have been licensed to other companies where the potential for 63 00:03:14,600 --> 00:03:17,600 Speaker 1: royalties are are meaningful. And then of course they have 64 00:03:17,639 --> 00:03:19,920 Speaker 1: a bunch of scientists who have been creating these drugs 65 00:03:20,040 --> 00:03:22,120 Speaker 1: and and we don't know exactly what they've got in 66 00:03:22,160 --> 00:03:26,560 Speaker 1: the preclinical hands in Boulder, Colorado, but there was some 67 00:03:26,639 --> 00:03:29,640 Speaker 1: hints that Fiser gave us over the call. We just 68 00:03:29,800 --> 00:03:32,760 Speaker 1: listened to um which makes it sounds as if there's 69 00:03:32,800 --> 00:03:34,800 Speaker 1: other products obviously expected to come along. But they've been 70 00:03:34,800 --> 00:03:38,880 Speaker 1: a very productive team, so they would not split that 71 00:03:39,040 --> 00:03:40,920 Speaker 1: several times they were asked this question. They would not 72 00:03:40,960 --> 00:03:44,600 Speaker 1: split the value that they've ascribed to each other. Those 73 00:03:44,640 --> 00:03:47,960 Speaker 1: three pillars have just told you. So, how does explain 74 00:03:47,960 --> 00:03:50,000 Speaker 1: to me how in the biotech world this works? Because normally, 75 00:03:50,080 --> 00:03:52,640 Speaker 1: in a different industry, if you make an acquisition, there's 76 00:03:52,640 --> 00:03:54,280 Speaker 1: going to be some synergy costs you can get out 77 00:03:54,280 --> 00:03:55,480 Speaker 1: of it that's gonna be a big thing. And then 78 00:03:55,520 --> 00:03:57,200 Speaker 1: sort of when it's gonna be creative to earnings, and 79 00:03:57,240 --> 00:03:59,240 Speaker 1: then how you sort of meld the operations and what 80 00:03:59,400 --> 00:04:01,440 Speaker 1: the cultures at, et cetera. Is it like a different 81 00:04:01,480 --> 00:04:05,080 Speaker 1: scenario in a biotech world. Yeah, I mean, Alex, that's 82 00:04:05,080 --> 00:04:07,200 Speaker 1: a very good question. At the end of the day, here, 83 00:04:07,320 --> 00:04:10,520 Speaker 1: what you're buying is knowledge and the ability and the 84 00:04:10,640 --> 00:04:13,840 Speaker 1: long history of these people developing these sort of drugs. 85 00:04:13,840 --> 00:04:17,080 Speaker 1: Not that Fiser hasn't got them themselves, but here's here's 86 00:04:17,080 --> 00:04:19,440 Speaker 1: a bunch of scientists, they said, about a hundred scientists 87 00:04:19,839 --> 00:04:22,520 Speaker 1: R and D people based in Colorado. They've said they're 88 00:04:22,520 --> 00:04:25,000 Speaker 1: going to keep the current structure of a RAY in 89 00:04:25,080 --> 00:04:28,839 Speaker 1: place to continue allowing it to be innovative and and 90 00:04:28,839 --> 00:04:31,560 Speaker 1: and you know, pump up, pump out these drugs, and 91 00:04:31,560 --> 00:04:34,880 Speaker 1: and they're go into pipers Finders pipeline as opposed to 92 00:04:35,080 --> 00:04:37,280 Speaker 1: having to be licensed out because the company is too 93 00:04:37,279 --> 00:04:40,640 Speaker 1: small develop everything. So in these cases, it's really not 94 00:04:40,720 --> 00:04:44,720 Speaker 1: about cast savings. So say, if I'm a Fiser shareholder, UM, 95 00:04:44,920 --> 00:04:47,960 Speaker 1: am I concern? What do I read into a transaction 96 00:04:48,000 --> 00:04:51,760 Speaker 1: like this that g Fiser doesn't have its own pipeline. 97 00:04:51,800 --> 00:04:54,400 Speaker 1: Maybe it's R and D. Isn't that good or that 98 00:04:54,480 --> 00:04:57,800 Speaker 1: successful that it forces them to go out and buy um, 99 00:04:58,279 --> 00:05:01,440 Speaker 1: you know products. Yeah, No, I don't think that's fair. Um, 100 00:05:01,520 --> 00:05:04,760 Speaker 1: I think I think it's more about um. You know, 101 00:05:04,800 --> 00:05:07,200 Speaker 1: in the pharmaceutical business, it's all about shots on goal 102 00:05:07,320 --> 00:05:10,200 Speaker 1: because once you take that shot, you don't actually know 103 00:05:10,200 --> 00:05:11,800 Speaker 1: whether it's going to go in or not. So you've 104 00:05:11,839 --> 00:05:14,520 Speaker 1: got to have a number of opportunities running at the 105 00:05:14,520 --> 00:05:16,760 Speaker 1: same time to see which one actually comes to fruition. 106 00:05:17,080 --> 00:05:19,080 Speaker 1: They have a number of drugs that are that are 107 00:05:19,120 --> 00:05:22,279 Speaker 1: looking interesting and exciting, and you know, it's two steps forward, 108 00:05:22,360 --> 00:05:24,919 Speaker 1: one step back with pharma. So you've got to expand 109 00:05:24,960 --> 00:05:28,000 Speaker 1: the range that you've got access to and then make 110 00:05:28,040 --> 00:05:30,960 Speaker 1: sure that you have the wherewithal to do it. Which 111 00:05:31,000 --> 00:05:33,680 Speaker 1: fires it does? I just asked the dumb question here, 112 00:05:33,720 --> 00:05:35,760 Speaker 1: so like, literally, is it possible that there's a drug 113 00:05:35,839 --> 00:05:37,960 Speaker 1: that could reduce the need for chemo? Like is that real? 114 00:05:38,080 --> 00:05:41,599 Speaker 1: Because that's amazing. Yeah. No, absolutely, And you know what 115 00:05:41,720 --> 00:05:44,560 Speaker 1: I was told years ago, there's no dumb questions, So 116 00:05:44,800 --> 00:05:49,400 Speaker 1: there are there totally a but and certainly this is 117 00:05:49,400 --> 00:05:52,480 Speaker 1: not dumb at all because there's that's exactly where pharmaceutical 118 00:05:52,480 --> 00:05:55,560 Speaker 1: industry wants to go and cancer patients want to go. 119 00:05:56,080 --> 00:05:59,080 Speaker 1: I mean, it's important to realize that there's a little 120 00:05:59,080 --> 00:06:01,400 Speaker 1: bit of a slogan slogan that's going on there too, 121 00:06:01,480 --> 00:06:05,800 Speaker 1: because these aren't drugs that are that are side effect free. 122 00:06:06,200 --> 00:06:09,040 Speaker 1: It's just a different to chemo. They may not include, 123 00:06:09,040 --> 00:06:11,160 Speaker 1: know the usual things that chemo has got going with 124 00:06:11,200 --> 00:06:13,960 Speaker 1: it is the hair loss and the vomiting, and you 125 00:06:13,960 --> 00:06:17,039 Speaker 1: know none of these things are nice, right uh? And 126 00:06:17,120 --> 00:06:21,400 Speaker 1: you know a blood blood accounts going down and really 127 00:06:21,440 --> 00:06:23,600 Speaker 1: feeling fatigued, and who wants to be fatigued when you're 128 00:06:23,600 --> 00:06:26,560 Speaker 1: trying to get treated? Right? So, but these drugs do 129 00:06:26,640 --> 00:06:28,880 Speaker 1: have their own side effects, let's not let's not forget that. 130 00:06:29,160 --> 00:06:32,479 Speaker 1: And this is a triple combination they're using for colorectal 131 00:06:32,560 --> 00:06:34,920 Speaker 1: cancer going forward, right, Sam fas Ali, thank you so 132 00:06:35,000 --> 00:06:37,120 Speaker 1: much for breaking down this deal for us. Sam as 133 00:06:37,160 --> 00:06:40,320 Speaker 1: the director of Research European Research for Bloomberg Intelligence, joining 134 00:06:40,400 --> 00:06:58,920 Speaker 1: us from the London studio, we'll trade tensions between China 135 00:06:59,040 --> 00:07:01,159 Speaker 1: and the U. S cant need a summer, putting even 136 00:07:01,360 --> 00:07:04,200 Speaker 1: more focus on the G twenty meeting coming up later 137 00:07:04,240 --> 00:07:07,760 Speaker 1: this month. To get the latest on the trade discussions 138 00:07:07,760 --> 00:07:10,600 Speaker 1: between US and China. We welcome Leland Miller's CEO of 139 00:07:10,640 --> 00:07:13,640 Speaker 1: the China Basebook International, joining us here in our Bloomberg 140 00:07:13,640 --> 00:07:16,120 Speaker 1: Interactive Broker studio. Len and thanks so much for being 141 00:07:16,160 --> 00:07:19,360 Speaker 1: with us. From your perspective, what is the latest with 142 00:07:19,520 --> 00:07:22,440 Speaker 1: the US and China? Are things kind of off again 143 00:07:22,520 --> 00:07:25,200 Speaker 1: on again? Where are we I think that nothing has 144 00:07:25,240 --> 00:07:29,120 Speaker 1: fundamentally changed since President Trump uh levied the last set 145 00:07:29,120 --> 00:07:31,440 Speaker 1: of tariffs a number of weeks ago. Now, if you 146 00:07:31,520 --> 00:07:34,360 Speaker 1: read the headlines, it looks like we're descending into true gloom. 147 00:07:34,560 --> 00:07:38,000 Speaker 1: The Chinese are preparing for the long fight. President Trump 148 00:07:38,080 --> 00:07:40,600 Speaker 1: is getting excited about the idea of going big on 149 00:07:40,640 --> 00:07:44,400 Speaker 1: tariffs into it's a political winner. Uh. Nobody can get along. 150 00:07:44,440 --> 00:07:46,720 Speaker 1: We're attacking their technology companies. So there's a lot of 151 00:07:46,760 --> 00:07:49,600 Speaker 1: reasons why people think that this is disintegrating and that 152 00:07:49,640 --> 00:07:51,840 Speaker 1: the deal is being taken off the table has already 153 00:07:51,840 --> 00:07:53,960 Speaker 1: taken I don't think that's the case. As a matter 154 00:07:54,000 --> 00:07:56,680 Speaker 1: of fact. I think that if President she re engages 155 00:07:56,720 --> 00:07:59,600 Speaker 1: at G twenty, which we expect him to do, then 156 00:07:59,640 --> 00:08:02,680 Speaker 1: the press it and is prepared to punt full tariffs 157 00:08:02,720 --> 00:08:04,800 Speaker 1: and restart the talks. And I think that that's actually 158 00:08:04,800 --> 00:08:07,200 Speaker 1: where we're heading right now. Why would you do that? 159 00:08:07,640 --> 00:08:09,680 Speaker 1: In that Trump said, if you don't do this, I'm 160 00:08:09,680 --> 00:08:11,920 Speaker 1: gonna love you tariffs on you. So why would you 161 00:08:12,080 --> 00:08:14,680 Speaker 1: then look like he's caving. Well, none of this is 162 00:08:14,680 --> 00:08:16,520 Speaker 1: optimal for Shi jun Ping, but you have to look 163 00:08:16,560 --> 00:08:19,080 Speaker 1: at the downside on this. So right now, Uh, they're 164 00:08:19,080 --> 00:08:22,160 Speaker 1: looking at the potential of their being tariffs on all 165 00:08:22,280 --> 00:08:26,040 Speaker 1: five dred billion of Chinese imports. In addition to the 166 00:08:26,080 --> 00:08:29,160 Speaker 1: fact that Huawei, which is arguably the most if not 167 00:08:29,200 --> 00:08:31,560 Speaker 1: one of the most important SSO's in China, is on 168 00:08:31,640 --> 00:08:33,880 Speaker 1: deathwatch because of what the Commerce Department has been doing 169 00:08:33,960 --> 00:08:35,679 Speaker 1: to it and what the White House has been doing 170 00:08:35,720 --> 00:08:38,079 Speaker 1: to it. So right now, none of this is optimal. 171 00:08:38,160 --> 00:08:40,200 Speaker 1: But it was also not optimal to send Leo hu 172 00:08:40,760 --> 00:08:45,480 Speaker 1: uh the night that Trump was was announcing tariffs. It 173 00:08:45,840 --> 00:08:48,080 Speaker 1: was a body blow to the Chinese. It looked bad. 174 00:08:48,120 --> 00:08:51,199 Speaker 1: But at the same time they're measuring the circumstances as 175 00:08:51,240 --> 00:08:53,480 Speaker 1: being you know, what is the best we can get 176 00:08:53,480 --> 00:08:54,959 Speaker 1: out of this, and the best they can get out 177 00:08:54,960 --> 00:08:57,520 Speaker 1: of this is get a deal with Trump on trade 178 00:08:57,640 --> 00:08:59,760 Speaker 1: so that they're not worrying about this for the for 179 00:09:00,000 --> 00:09:03,840 Speaker 1: a twenty So does the what's going on in Hong Kong? 180 00:09:03,880 --> 00:09:06,360 Speaker 1: Does that impact President she and and how he might 181 00:09:06,400 --> 00:09:08,720 Speaker 1: be perceiving these negotiations. That's kind of a body blow 182 00:09:08,760 --> 00:09:12,240 Speaker 1: again or a black guy to President She with what 183 00:09:12,320 --> 00:09:14,680 Speaker 1: happened in Hong Kong. Is that is that cann influence 184 00:09:14,720 --> 00:09:17,640 Speaker 1: the trade discussions. You know, it might Um, all of 185 00:09:17,640 --> 00:09:19,960 Speaker 1: this has to come down to the fact whether she 186 00:09:20,240 --> 00:09:23,920 Speaker 1: can look strong while engaging with President Trump. Now, President 187 00:09:23,920 --> 00:09:27,880 Speaker 1: Trump could have put out the olive branch to President She. Instead, 188 00:09:27,880 --> 00:09:30,160 Speaker 1: he he basically said, if you don't come and meet 189 00:09:30,200 --> 00:09:31,600 Speaker 1: with me, I'm gonna be really mean to you, and 190 00:09:31,600 --> 00:09:34,040 Speaker 1: we're gonna we're gonna crush you. That doesn't make things 191 00:09:34,200 --> 00:09:37,160 Speaker 1: easy for the Chinese. At the same time, there's a 192 00:09:37,200 --> 00:09:39,400 Speaker 1: lot of a lot of hysterics going on right now, 193 00:09:39,800 --> 00:09:41,600 Speaker 1: and she jumping has to look at this. You know, 194 00:09:41,640 --> 00:09:43,480 Speaker 1: how do I not look weak but at the same 195 00:09:43,520 --> 00:09:47,000 Speaker 1: time engage enough to get all these irons off the 196 00:09:47,040 --> 00:09:50,280 Speaker 1: fire so that I can concentrate on the domestic economy. Uh, 197 00:09:50,800 --> 00:09:54,199 Speaker 1: the Chinese economy under the type of tariff pressure we're 198 00:09:54,200 --> 00:09:57,199 Speaker 1: talking about, will have a much harder time later this year. 199 00:09:57,240 --> 00:09:59,080 Speaker 1: And I think President She is balancing the pros and 200 00:09:59,120 --> 00:10:02,360 Speaker 1: cons making sure he has a consensus in the leadership. 201 00:10:02,400 --> 00:10:06,040 Speaker 1: But I think that that they are inclined to go forward. See, 202 00:10:06,040 --> 00:10:07,640 Speaker 1: that's what I don't understand is that I feel like 203 00:10:07,880 --> 00:10:10,719 Speaker 1: a lot of the rhetoric is, uh, it's both. It's 204 00:10:10,760 --> 00:10:13,160 Speaker 1: so important for both of them. Therefore, they're going to 205 00:10:13,200 --> 00:10:17,160 Speaker 1: have to do that. Um in essence, if g accepts 206 00:10:17,160 --> 00:10:19,080 Speaker 1: the fact that they're gonna be tariffs un China no 207 00:10:19,120 --> 00:10:21,040 Speaker 1: matter what, and then President Trump's gonna ramp up the 208 00:10:21,040 --> 00:10:24,839 Speaker 1: tariffs no matter what. He neutralizes Trump. Well, I think 209 00:10:24,880 --> 00:10:27,320 Speaker 1: that in President She's mine if he can get signals 210 00:10:27,320 --> 00:10:29,080 Speaker 1: on the U. S side that the tariffs are going 211 00:10:29,120 --> 00:10:31,000 Speaker 1: to come off in a deal. So, first of all, 212 00:10:31,000 --> 00:10:33,400 Speaker 1: in order to continue the talks, President She would have 213 00:10:33,440 --> 00:10:36,880 Speaker 1: to get some pledges from President Trump. First, is Huawei 214 00:10:37,000 --> 00:10:38,959 Speaker 1: is part of the deal. Second, that we're gonna be 215 00:10:39,000 --> 00:10:40,959 Speaker 1: start peeling these tariffs off and you're not gonna put 216 00:10:41,000 --> 00:10:43,160 Speaker 1: more tariffs on while we continue to talk. So they 217 00:10:43,160 --> 00:10:45,880 Speaker 1: create a new timeline. This is agonizing for for for 218 00:10:45,920 --> 00:10:48,320 Speaker 1: trade and China watchers, but this is the way the 219 00:10:48,320 --> 00:10:51,800 Speaker 1: things work. And if he can get an understanding that 220 00:10:52,000 --> 00:10:54,000 Speaker 1: you know, they were very close before they were nineties 221 00:10:54,000 --> 00:10:55,800 Speaker 1: seven percent of the way there. This idea that they 222 00:10:55,800 --> 00:10:58,120 Speaker 1: had they didn't get most of it finalized is wrong. 223 00:10:58,440 --> 00:11:00,640 Speaker 1: They're very close. They have to back to where they 224 00:11:00,679 --> 00:11:03,160 Speaker 1: were before, and if they do that, then they're very 225 00:11:03,160 --> 00:11:05,800 Speaker 1: close for President She getting a deal that will pull 226 00:11:05,840 --> 00:11:09,560 Speaker 1: off most probably not all, but most of the of 227 00:11:09,600 --> 00:11:12,800 Speaker 1: the terrorists. They have now no more tariffs, a respite 228 00:11:12,840 --> 00:11:16,320 Speaker 1: for for Huawei, a reprieve for Huawei. These are big things. 229 00:11:16,360 --> 00:11:19,080 Speaker 1: So these are things that they cannot underestimate. Uh and 230 00:11:19,080 --> 00:11:21,880 Speaker 1: and and walk away from out of mere pride. So 231 00:11:21,960 --> 00:11:25,040 Speaker 1: Leland just talking about President she how strong is his 232 00:11:25,120 --> 00:11:30,679 Speaker 1: position in China today? It's it has been remarkable that 233 00:11:30,720 --> 00:11:34,000 Speaker 1: there has been pushback against she in the state media, 234 00:11:34,280 --> 00:11:37,440 Speaker 1: among dissidents. I don't think his his position is in 235 00:11:37,520 --> 00:11:41,199 Speaker 1: any way threatened, but it is remarkable that he is 236 00:11:41,240 --> 00:11:43,360 Speaker 1: getting flak for for his handling of the trade, ward 237 00:11:43,400 --> 00:11:46,480 Speaker 1: handling of the economy. Now this makes it even more 238 00:11:46,520 --> 00:11:48,720 Speaker 1: important he doesn't look weak going forward. But I don't 239 00:11:48,760 --> 00:11:51,120 Speaker 1: think there's a question. While while this is not a 240 00:11:51,360 --> 00:11:55,280 Speaker 1: one person to solitary and dictatorship of any kind, he 241 00:11:55,440 --> 00:11:58,880 Speaker 1: is the leader of China. He guides policy. And while 242 00:11:58,960 --> 00:12:01,400 Speaker 1: he needs to make sure that he is not deeply 243 00:12:01,440 --> 00:12:06,440 Speaker 1: offending the this Paulpiro Standing Committee, he still runs the show. 244 00:12:06,679 --> 00:12:09,320 Speaker 1: So this is his this is his show to run 245 00:12:09,400 --> 00:12:11,720 Speaker 1: in terms of trade. And if he thinks he can 246 00:12:11,840 --> 00:12:14,560 Speaker 1: he can negotiate with President Trump, you know they're best 247 00:12:14,559 --> 00:12:17,160 Speaker 1: friends after all, uh, then then he'll move forward on 248 00:12:17,200 --> 00:12:20,560 Speaker 1: this so Um John author's Boomberg Opinion Columnists writes a 249 00:12:20,559 --> 00:12:23,400 Speaker 1: lot about Dorek magnus book Red Flags. I don't know 250 00:12:23,440 --> 00:12:25,000 Speaker 1: if you've if you've read that yet, but he talks 251 00:12:25,000 --> 00:12:27,840 Speaker 1: about why She's China is in jeopardy and a lot 252 00:12:27,880 --> 00:12:30,120 Speaker 1: of the conversations surrounding the book is really interesting in 253 00:12:30,160 --> 00:12:32,200 Speaker 1: that Maw and Deng both had their own models for 254 00:12:32,240 --> 00:12:34,880 Speaker 1: communist China, but that g has a totally different one 255 00:12:35,200 --> 00:12:37,080 Speaker 1: and that that's going to affect all these kind of 256 00:12:37,120 --> 00:12:40,800 Speaker 1: trade decisions and arguments. Um, would you agree in that 257 00:12:40,880 --> 00:12:43,200 Speaker 1: you can't look back at the last hundred years of 258 00:12:43,280 --> 00:12:45,400 Speaker 1: China growth and extrapolate that to the next hundred. Is 259 00:12:45,400 --> 00:12:47,040 Speaker 1: that we're in a whole new growth kind of paradigm. 260 00:12:47,120 --> 00:12:50,280 Speaker 1: Is that true? I think She's challenges are enormous, and 261 00:12:50,280 --> 00:12:52,720 Speaker 1: he made it much more difficult for himself when he 262 00:12:52,800 --> 00:12:56,080 Speaker 1: not only named himself president for life, but then he 263 00:12:56,160 --> 00:12:58,360 Speaker 1: ensconced it formally like this could have been the back 264 00:12:58,480 --> 00:13:01,000 Speaker 1: background of everything. Everyone knows she's not going anywhere, but 265 00:13:01,000 --> 00:13:04,320 Speaker 1: he made sure to make a public public issue of it. 266 00:13:04,360 --> 00:13:06,679 Speaker 1: When he did that, he tied his fortunes in very 267 00:13:06,720 --> 00:13:09,000 Speaker 1: closely with out of the Chinese economy and that of 268 00:13:09,120 --> 00:13:12,280 Speaker 1: China generally, so that anything bad that apps the Chinese economy, 269 00:13:12,280 --> 00:13:13,920 Speaker 1: who do you have to blame Chi Jinping? Who do 270 00:13:13,960 --> 00:13:16,480 Speaker 1: you if if China undergoes problems, who do you have 271 00:13:16,520 --> 00:13:18,480 Speaker 1: to blame? Chi Jinping? So he has made his life 272 00:13:18,559 --> 00:13:21,120 Speaker 1: much more difficult. I don't think he's going anywhere. I 273 00:13:21,160 --> 00:13:23,280 Speaker 1: do think that the pressures on him are going to 274 00:13:23,320 --> 00:13:25,320 Speaker 1: be immense in the next few years, with the with 275 00:13:25,440 --> 00:13:28,480 Speaker 1: the with the economy, even under the best set of circumstances. 276 00:13:28,880 --> 00:13:31,080 Speaker 1: Uh So, this will be tough, and we could emerge 277 00:13:31,120 --> 00:13:33,280 Speaker 1: from this a few years from now with more of 278 00:13:33,320 --> 00:13:36,480 Speaker 1: a consensus based leadership, which she's still there, but not 279 00:13:36,520 --> 00:13:39,720 Speaker 1: with as much control depending on things how things end 280 00:13:39,800 --> 00:13:42,640 Speaker 1: up in the next eighteen months. How how would you 281 00:13:42,679 --> 00:13:44,719 Speaker 1: characterize the Chinese economy right now? Is it a six 282 00:13:44,760 --> 00:13:46,719 Speaker 1: at six and percent grower or something less than that? 283 00:13:47,400 --> 00:13:49,640 Speaker 1: It's not growing at six percent? You know, the GDP 284 00:13:49,800 --> 00:13:55,120 Speaker 1: numbers are always uh political narratives put but put into 285 00:13:55,120 --> 00:13:56,920 Speaker 1: a number. Uh that said, you know, we have we 286 00:13:56,960 --> 00:13:59,160 Speaker 1: have data coming in right now, and we're we're we're 287 00:13:59,160 --> 00:14:01,480 Speaker 1: gonna be announcing next week. But what I would say 288 00:14:01,520 --> 00:14:04,040 Speaker 1: is watch very closely to what the Chinese are saying. 289 00:14:04,240 --> 00:14:06,959 Speaker 1: There's a lot of talk this week from Beijing about 290 00:14:06,960 --> 00:14:09,240 Speaker 1: how they have all these options in terms of stimulus 291 00:14:09,280 --> 00:14:10,960 Speaker 1: if they need them. And one of the things that 292 00:14:11,000 --> 00:14:12,959 Speaker 1: we've made very clear in the past is that when 293 00:14:13,000 --> 00:14:14,800 Speaker 1: the Chinese are talking a lot about all the options 294 00:14:14,840 --> 00:14:19,000 Speaker 1: they have, they typically have already started utilizing. Okay, So 295 00:14:19,120 --> 00:14:20,840 Speaker 1: I think that that's that's where we're going, and we'll 296 00:14:20,840 --> 00:14:22,000 Speaker 1: be able to talk a little bit more of this 297 00:14:22,320 --> 00:14:24,040 Speaker 1: a few days. Good. We'll have you back for that, 298 00:14:24,080 --> 00:14:25,880 Speaker 1: because I think that's one of the underpinnings of the 299 00:14:25,920 --> 00:14:28,880 Speaker 1: negotiations and the assumptions is how strong is China's economy. 300 00:14:29,160 --> 00:14:32,120 Speaker 1: Uh the stronger dis presumably the tough to tougher stance 301 00:14:32,200 --> 00:14:34,080 Speaker 1: they can take with the U S. Well. What I 302 00:14:34,160 --> 00:14:35,800 Speaker 1: find really interesting though, and it's going to go to 303 00:14:35,920 --> 00:14:38,920 Speaker 1: ubs uh and to have them using a bond deal 304 00:14:38,960 --> 00:14:41,600 Speaker 1: over the Chinese pig. Statement from Paul Donovan either Chief 305 00:14:41,600 --> 00:14:45,480 Speaker 1: Economists is that we talk different languages, like the West 306 00:14:45,600 --> 00:14:48,200 Speaker 1: end China are just they talk different languages, they have 307 00:14:48,240 --> 00:14:50,280 Speaker 1: different priorities and like that to me is like a 308 00:14:50,360 --> 00:14:53,320 Speaker 1: whole big rainbow, uh in or not rainbow, but like 309 00:14:53,400 --> 00:14:55,760 Speaker 1: big cloud as to how the conversation must be going 310 00:14:55,800 --> 00:14:58,360 Speaker 1: when it comes to trade exactly. Leland Miller, CEO of 311 00:14:58,360 --> 00:15:00,360 Speaker 1: the China Bag Book International, thank you some much for 312 00:15:00,480 --> 00:15:20,160 Speaker 1: joining us and breaking down the ongoing trade discussions. Well, 313 00:15:20,200 --> 00:15:22,920 Speaker 1: this week is Central bank week. We've got the FED, 314 00:15:23,000 --> 00:15:25,520 Speaker 1: We've got the Bank of Japan, the Bank of England 315 00:15:25,560 --> 00:15:27,640 Speaker 1: all meeting and of course the f O m c 316 00:15:28,040 --> 00:15:32,200 Speaker 1: uh Well, FED Chairman Pal speaking on Wednesday, so clearly 317 00:15:32,240 --> 00:15:34,200 Speaker 1: the markets are focusing on that. To get a sense 318 00:15:34,200 --> 00:15:36,720 Speaker 1: of what we might expect, we welcome our next guest, 319 00:15:36,880 --> 00:15:40,400 Speaker 1: Matt Mailey, Managing director and equity strategist at Miller Tebec 320 00:15:40,720 --> 00:15:43,480 Speaker 1: based in Newton, Massachusetts. Matt, thanks so much for joining us. 321 00:15:43,840 --> 00:15:46,880 Speaker 1: What do you expect to hear from FED Chairman Pal 322 00:15:47,120 --> 00:15:49,760 Speaker 1: this week? Well, to be honest with you, I think 323 00:15:49,960 --> 00:15:51,720 Speaker 1: the market is gonna be a little disappointed. I think 324 00:15:51,760 --> 00:15:54,880 Speaker 1: the FED chairman will be a little less devish than 325 00:15:54,960 --> 00:15:58,080 Speaker 1: people are expecting. Um no, no, no, less dovish and 326 00:15:58,440 --> 00:16:00,480 Speaker 1: it has been. There's no question they've made a a 327 00:16:00,760 --> 00:16:05,200 Speaker 1: change to a more tubbish tone, but their actions I 328 00:16:05,240 --> 00:16:07,640 Speaker 1: just think in the past, especially in the past ten years, 329 00:16:08,000 --> 00:16:10,280 Speaker 1: where you know central bank acuidity has been so important 330 00:16:10,280 --> 00:16:13,360 Speaker 1: to the markets. Uh, they have they haven't acted until 331 00:16:13,360 --> 00:16:17,320 Speaker 1: we've seen a more significant move both in the UH 332 00:16:17,400 --> 00:16:20,240 Speaker 1: in the economy and UH in the economic data and 333 00:16:20,320 --> 00:16:23,000 Speaker 1: in the in the markets. Uh. The Fed's a little 334 00:16:23,000 --> 00:16:27,360 Speaker 1: bit more market dependent than they than they admit to. 335 00:16:27,600 --> 00:16:29,800 Speaker 1: They are very data dependent, but they're also market dependent. 336 00:16:30,240 --> 00:16:33,400 Speaker 1: So how is the market actually position for this because 337 00:16:33,440 --> 00:16:36,360 Speaker 1: a huge run up and utilities evaluation is super high, 338 00:16:36,600 --> 00:16:39,800 Speaker 1: Yet their utilities and defensives for a reason. So like 339 00:16:39,840 --> 00:16:43,600 Speaker 1: what's the positioning resk here? Well, you know, if if 340 00:16:43,640 --> 00:16:49,080 Speaker 1: they do uh uh signal a definitive uh change in 341 00:16:49,120 --> 00:16:52,320 Speaker 1: their in their actions by actually saying that they're going 342 00:16:52,320 --> 00:16:56,240 Speaker 1: to raise cuts pretty much no matter what uh in July. Uh, 343 00:16:56,280 --> 00:16:59,120 Speaker 1: that's gonna have a lot of people uh caught offsides. 344 00:16:59,560 --> 00:17:02,000 Speaker 1: Not only the utility stocks very strong, but you know, 345 00:17:02,280 --> 00:17:05,320 Speaker 1: consumer staples another defensive group has been very strong, and 346 00:17:05,359 --> 00:17:07,120 Speaker 1: I think that the people will start to shift out 347 00:17:07,119 --> 00:17:09,960 Speaker 1: of that and go into some of them uh more 348 00:17:10,000 --> 00:17:12,960 Speaker 1: growthy names. Obviously a technology et cetera. When we've seen 349 00:17:12,960 --> 00:17:15,400 Speaker 1: the semiconductor stock kind of roll over recently, they could 350 00:17:15,440 --> 00:17:18,240 Speaker 1: bounce back. UM, I don't necessarily think that's going to 351 00:17:18,359 --> 00:17:21,880 Speaker 1: happen again. I'm more cautious than I think a lot 352 00:17:21,880 --> 00:17:24,680 Speaker 1: of people are. But the thing that really concerns mean 353 00:17:24,760 --> 00:17:28,120 Speaker 1: most is that the stock market is definitely pricing in 354 00:17:28,520 --> 00:17:31,119 Speaker 1: the a FED move to a much more doublish stance 355 00:17:31,800 --> 00:17:34,760 Speaker 1: because it's not moving higher due to a better economy 356 00:17:34,840 --> 00:17:36,800 Speaker 1: or better earnings. As we've seen that a lot of 357 00:17:37,000 --> 00:17:40,000 Speaker 1: estimates for both economic growth and estimates for the SMP 358 00:17:40,720 --> 00:17:42,679 Speaker 1: have come down in the last two weeks. Not move up. 359 00:17:42,800 --> 00:17:45,080 Speaker 1: Wouldn't be amazing if if the JJ Powell came out 360 00:17:45,080 --> 00:17:47,560 Speaker 1: and he's like, Okay, guys, we're gonna cut this many 361 00:17:47,600 --> 00:17:50,000 Speaker 1: times at this date and that's what we're gonna do. 362 00:17:50,119 --> 00:17:54,760 Speaker 1: Take care of see you later, And was like, so, 363 00:17:54,880 --> 00:17:57,080 Speaker 1: no question, he won't make it that quite that definitive. 364 00:17:57,080 --> 00:18:00,199 Speaker 1: But if he you know, they usually tell you, you know, 365 00:18:00,240 --> 00:18:04,840 Speaker 1: really telegraphic well in advance. So how he portrays, uh, 366 00:18:05,160 --> 00:18:06,920 Speaker 1: how the July meeting is gonna go, it's gonna be 367 00:18:07,000 --> 00:18:10,480 Speaker 1: very important. So Matt, if in fact they FED is 368 00:18:10,520 --> 00:18:13,200 Speaker 1: not quite as dublish as maybe the market is currently discounting, 369 00:18:13,320 --> 00:18:16,359 Speaker 1: how do you play it right here? Well, Uh, you know, 370 00:18:16,440 --> 00:18:19,520 Speaker 1: it's it's hard to number one. I do think like 371 00:18:19,560 --> 00:18:22,560 Speaker 1: I said that that the with earnings estimates coming down, 372 00:18:23,320 --> 00:18:26,840 Speaker 1: the consensus earning as earnings estimates, the economy is slowing 373 00:18:26,880 --> 00:18:29,639 Speaker 1: a little bit. I think raising a little bit of 374 00:18:29,680 --> 00:18:32,200 Speaker 1: cash and and and by and if you want to 375 00:18:32,240 --> 00:18:34,760 Speaker 1: put more more money to work by those defensive groups 376 00:18:34,800 --> 00:18:37,520 Speaker 1: with buy them on weakness. You look at the overbought 377 00:18:37,520 --> 00:18:41,119 Speaker 1: condition of the consumer staples which have been very obviously 378 00:18:41,240 --> 00:18:43,119 Speaker 1: very strong. They've made new all time highs. Same with 379 00:18:43,200 --> 00:18:45,680 Speaker 1: the utilities. But of the consumer staples names, I think 380 00:18:45,680 --> 00:18:47,879 Speaker 1: and it would be the good ones. But most importantly, 381 00:18:48,080 --> 00:18:50,960 Speaker 1: if we do get another leg lower, which would not 382 00:18:51,000 --> 00:18:52,399 Speaker 1: be the worst thing in the world. I mean, you know, 383 00:18:52,480 --> 00:18:54,840 Speaker 1: we're only down seven percent. That's a normal and healthy 384 00:18:54,840 --> 00:18:57,159 Speaker 1: move in any market, much less one that's being evolved 385 00:18:57,160 --> 00:18:59,520 Speaker 1: in a trade war. Uh. When you get that kind 386 00:18:59,520 --> 00:19:02,000 Speaker 1: of down much like we got in December, and I'm 387 00:19:02,000 --> 00:19:04,840 Speaker 1: not calling for decline like we got in the fourth 388 00:19:04,920 --> 00:19:06,760 Speaker 1: quarter of last year. But you get something down in 389 00:19:06,800 --> 00:19:09,200 Speaker 1: the correction terry of ten or twelve, and you've got 390 00:19:09,240 --> 00:19:11,240 Speaker 1: some money on the sidelines. You can put that to 391 00:19:11,280 --> 00:19:14,439 Speaker 1: work in your favorite names at really good prices. But 392 00:19:14,480 --> 00:19:16,679 Speaker 1: if you're prepared in advance, you can take advantage of it. 393 00:19:16,720 --> 00:19:18,159 Speaker 1: If you don't have that cash on the sidelines, you 394 00:19:18,200 --> 00:19:19,800 Speaker 1: won't be able to. How else are you gonna hedge 395 00:19:19,800 --> 00:19:22,720 Speaker 1: looking for derivatives or anything along those lines too, Well, 396 00:19:22,760 --> 00:19:24,840 Speaker 1: people can certainly do that. Uh. The one thing I 397 00:19:25,320 --> 00:19:27,920 Speaker 1: you know, that I worry about that is that the 398 00:19:28,160 --> 00:19:31,040 Speaker 1: VIX is a little high given how much the market 399 00:19:31,119 --> 00:19:33,199 Speaker 1: is rallying, So that makes the hedging a little bit 400 00:19:33,200 --> 00:19:35,080 Speaker 1: more expensive than it was, you know, say a couple 401 00:19:35,119 --> 00:19:38,040 Speaker 1: of weeks, you know, in April um. But you can 402 00:19:38,040 --> 00:19:41,240 Speaker 1: certainly play, you know by especially in the spy the 403 00:19:41,760 --> 00:19:45,000 Speaker 1: SMP five, d uh et F. The options in that 404 00:19:45,040 --> 00:19:47,280 Speaker 1: market are are are very very liquid, and you can 405 00:19:47,320 --> 00:19:49,400 Speaker 1: get in and out of them very quickly. Matt Milly, 406 00:19:49,480 --> 00:19:51,879 Speaker 1: thank you so much. Matt is managing director and equity 407 00:19:51,920 --> 00:20:10,160 Speaker 1: strategist for Miller Tebec based up in Massachusetts. Yeah. Well, 408 00:20:10,160 --> 00:20:13,120 Speaker 1: the troubles continue at Deutsche Bank. The stock is down 409 00:20:13,280 --> 00:20:17,320 Speaker 1: over over the past twelve months. Bloomberg News reported this 410 00:20:17,400 --> 00:20:20,720 Speaker 1: morning that the bank is considering exiting the US equity 411 00:20:20,840 --> 00:20:24,200 Speaker 1: trading business. To get the latest on all things, Deutsche 412 00:20:24,200 --> 00:20:26,720 Speaker 1: Bank returned to y'ellman own Ian y'aman is a senior 413 00:20:26,760 --> 00:20:30,000 Speaker 1: financial writer for Bloomberg News, joining us on the phone. Y'alman, 414 00:20:30,040 --> 00:20:32,840 Speaker 1: thanks so much for joining us. My first question is 415 00:20:32,880 --> 00:20:35,400 Speaker 1: when I saw that news about exiting the US equities 416 00:20:35,400 --> 00:20:38,720 Speaker 1: trading businesses, how can an investment bank be a global 417 00:20:38,760 --> 00:20:41,840 Speaker 1: bank without trading US equities? So what's going on there? 418 00:20:42,840 --> 00:20:46,679 Speaker 1: It cannot us ask the right question. I mean, um, 419 00:20:46,720 --> 00:20:49,520 Speaker 1: this is this is very unusual. And you know, they 420 00:20:49,640 --> 00:20:53,159 Speaker 1: keep coming up with new restructuring plans and at the 421 00:20:53,280 --> 00:20:55,160 Speaker 1: end and none of them work, and they keep coming 422 00:20:55,160 --> 00:20:58,680 Speaker 1: back to new another plan. But um, it's very radical. 423 00:20:59,240 --> 00:21:03,000 Speaker 1: Yet it's it's very it's it's kind of harmful because 424 00:21:03,400 --> 00:21:05,560 Speaker 1: you know, if you are in Messing bank, as you said, 425 00:21:06,000 --> 00:21:07,919 Speaker 1: you have to be in equities, and you have to 426 00:21:07,920 --> 00:21:10,879 Speaker 1: be in the US in equities because you know, the 427 00:21:10,920 --> 00:21:14,600 Speaker 1: most I POS happened here. You know, other kind of 428 00:21:15,720 --> 00:21:19,240 Speaker 1: stuck related in messing banking deals. Even M and A 429 00:21:19,480 --> 00:21:23,120 Speaker 1: is really connected to the ability to sort of connect 430 00:21:23,160 --> 00:21:28,200 Speaker 1: with these companies um in in every way. So it's 431 00:21:28,320 --> 00:21:32,280 Speaker 1: it's very unusual. You know, even after the big financial crisis, 432 00:21:32,400 --> 00:21:34,960 Speaker 1: the European banks that you know a lot of them 433 00:21:34,960 --> 00:21:38,119 Speaker 1: that collapse only Royal Bank of Scotland and and Credit 434 00:21:38,160 --> 00:21:41,680 Speaker 1: act Cole sort of got out of equities business altogether. Um. 435 00:21:41,720 --> 00:21:44,560 Speaker 1: I mean German says, uh, Dogia Bank is going to 436 00:21:44,640 --> 00:21:47,160 Speaker 1: continue maybe in Europe, but still not being in the US. 437 00:21:47,960 --> 00:21:50,880 Speaker 1: That's really gonna hurt their mess banking even further. So 438 00:21:51,000 --> 00:21:54,359 Speaker 1: it doesn't it doesn't look like a very great, amazing 439 00:21:54,520 --> 00:21:59,280 Speaker 1: way out. Nano's reaction was really unimpressed. Also, Endroyte Bank 440 00:21:59,680 --> 00:22:01,840 Speaker 1: h so so such and said that Georgia banks plan 441 00:22:01,920 --> 00:22:05,320 Speaker 1: is not aggressive enough. You also have CMC Markets saying 442 00:22:05,359 --> 00:22:08,000 Speaker 1: that they're well behind the curve, RBC saying that bad 443 00:22:08,000 --> 00:22:10,240 Speaker 1: Bank is not going to do anything to rewrite the company. 444 00:22:10,280 --> 00:22:12,480 Speaker 1: I mean, if doing what they need to do isn't 445 00:22:12,480 --> 00:22:14,600 Speaker 1: good enough, but then doing something that's good enough to 446 00:22:14,640 --> 00:22:18,160 Speaker 1: destroy the company, Like, what is the answer? I mean, 447 00:22:18,600 --> 00:22:21,240 Speaker 1: you know we can talk about bad Bank, but first 448 00:22:21,280 --> 00:22:24,200 Speaker 1: the answer of what why is it not aggressive enough? 449 00:22:24,240 --> 00:22:27,159 Speaker 1: Because every analyst report that I've ever read in the 450 00:22:27,240 --> 00:22:30,360 Speaker 1: last you know, for god two years now, it's basically 451 00:22:30,400 --> 00:22:32,520 Speaker 1: they need to they need to cut costs they have 452 00:22:32,640 --> 00:22:35,720 Speaker 1: they have too much cost and and it's not only 453 00:22:35,760 --> 00:22:38,880 Speaker 1: really getting out of businesses, it's really they have they 454 00:22:38,880 --> 00:22:41,159 Speaker 1: have too many people in the back office, they have 455 00:22:41,240 --> 00:22:44,560 Speaker 1: too many people doing things. Their technologies is out of them, 456 00:22:44,920 --> 00:22:49,000 Speaker 1: so they can do the businesses with fewer people. And 457 00:22:49,000 --> 00:22:52,600 Speaker 1: and the bank has constantly announced job cuts which they 458 00:22:52,600 --> 00:22:55,280 Speaker 1: cannot deliver. I mean, and I've written this many many, 459 00:22:55,320 --> 00:22:58,439 Speaker 1: many many times over the last two or three years, 460 00:22:58,960 --> 00:23:02,560 Speaker 1: is that they keep getting targets for reduction of staff 461 00:23:02,680 --> 00:23:06,359 Speaker 1: levels and they can never hit those targets. Um. Every 462 00:23:06,359 --> 00:23:09,359 Speaker 1: other bank in the world, you know, in their their peers, 463 00:23:09,600 --> 00:23:13,320 Speaker 1: everybody cut a long time ago, and pretty quick, even 464 00:23:13,359 --> 00:23:15,320 Speaker 1: if it's if it took a little longer for some 465 00:23:15,359 --> 00:23:18,199 Speaker 1: of the European banks because they have tougher you know, 466 00:23:18,880 --> 00:23:23,320 Speaker 1: um labor laws. Still they've done it. I mean, Dortge 467 00:23:23,359 --> 00:23:27,160 Speaker 1: Bank has really been bad reducing staff and and thus 468 00:23:27,200 --> 00:23:31,080 Speaker 1: they cannot make a profit. Um so getting rid of 469 00:23:31,080 --> 00:23:35,080 Speaker 1: a business like equities, but you're also cutting the revenue instead. 470 00:23:35,160 --> 00:23:37,399 Speaker 1: If you managed to cut the cost of that business 471 00:23:37,480 --> 00:23:39,920 Speaker 1: and continue to to get the revenue, then you would 472 00:23:39,960 --> 00:23:43,000 Speaker 1: actually start making profit on it. But that's where they 473 00:23:43,040 --> 00:23:45,520 Speaker 1: have really lacked. And that's what the analysts keeps constantly 474 00:23:45,560 --> 00:23:49,040 Speaker 1: saying that they need to cut the slack um in 475 00:23:49,080 --> 00:23:53,400 Speaker 1: their in their employee levels. Also reported this morning that 476 00:23:54,119 --> 00:23:57,320 Speaker 1: Dortchem would consider putting a lot of their troubled assets 477 00:23:57,359 --> 00:24:01,200 Speaker 1: into a bad bank. What are those assets? I mean, 478 00:24:01,320 --> 00:24:04,879 Speaker 1: it's really interesting at this stage because you know, we 479 00:24:04,960 --> 00:24:08,280 Speaker 1: had bad banks after the two thousand eight crisis, UM, 480 00:24:08,440 --> 00:24:10,800 Speaker 1: and then you know Dotcha Bank and a couple other 481 00:24:10,840 --> 00:24:16,320 Speaker 1: Europeans also did them after the European sovereign death crisis. UM. 482 00:24:16,440 --> 00:24:19,879 Speaker 1: These were legacy things that you know, we're really no 483 00:24:19,960 --> 00:24:22,480 Speaker 1: longer good. They sort of you know, they were all 484 00:24:22,480 --> 00:24:25,120 Speaker 1: written down, but to just sort of separate them from 485 00:24:25,160 --> 00:24:30,320 Speaker 1: the the main core business and show that the investors, 486 00:24:30,359 --> 00:24:32,879 Speaker 1: you know, what really was the core business was making 487 00:24:33,520 --> 00:24:38,080 Speaker 1: as profit and revenue. UM. But at this stage banks 488 00:24:38,119 --> 00:24:40,920 Speaker 1: don't have them. So I'm not sure what is gonna 489 00:24:40,960 --> 00:24:44,040 Speaker 1: put in there. Level three assets, which is sort of 490 00:24:44,520 --> 00:24:48,000 Speaker 1: hard to value, UM, things that that they sort of 491 00:24:48,040 --> 00:24:50,200 Speaker 1: have to use their internal models to value. That means 492 00:24:50,240 --> 00:24:53,240 Speaker 1: they're not liquid. That's one place. But even there, they 493 00:24:53,280 --> 00:24:55,920 Speaker 1: only had twenty five billion euros of level three assets 494 00:24:55,960 --> 00:24:57,840 Speaker 1: the last time I looked that was the first quarter 495 00:24:58,200 --> 00:25:00,920 Speaker 1: of this year. UM. Their tongue fifty billion. I don't 496 00:25:00,920 --> 00:25:03,280 Speaker 1: know where they're going to come up with you know, derivatives, 497 00:25:03,320 --> 00:25:07,399 Speaker 1: more derivatives that need to be put there. The issue 498 00:25:07,480 --> 00:25:10,080 Speaker 1: is and I was reading an animal, so just before 499 00:25:10,119 --> 00:25:13,720 Speaker 1: you call it is um. You know, if they if 500 00:25:13,760 --> 00:25:16,960 Speaker 1: these things are not losing money, then it doesn't matter 501 00:25:16,960 --> 00:25:19,600 Speaker 1: whether they're on a bad bank, good bank, it doesn't 502 00:25:19,600 --> 00:25:22,399 Speaker 1: matter what it's called. If they're actually losing money and 503 00:25:22,440 --> 00:25:27,640 Speaker 1: there's still more right down to be made, then that's 504 00:25:27,680 --> 00:25:31,000 Speaker 1: tough because ROACHA doesn't have extra capital to take those 505 00:25:31,080 --> 00:25:33,320 Speaker 1: right so I don't know what they mean how they're 506 00:25:33,320 --> 00:25:36,199 Speaker 1: going to really do the bad bank work. Interesting. Y'amen 507 00:25:36,240 --> 00:25:38,480 Speaker 1: on Iran, Thank you so much for joining us. Thanks 508 00:25:38,520 --> 00:25:40,680 Speaker 1: for listening to the Bloomberg P and L podcast. You 509 00:25:40,720 --> 00:25:43,359 Speaker 1: can subscribe and listen to interviews at Apple Podcasts or 510 00:25:43,400 --> 00:25:46,760 Speaker 1: whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter 511 00:25:46,800 --> 00:25:49,639 Speaker 1: at pt Sweeney, Lisa Bramo. It's I'm on Twitter at 512 00:25:49,680 --> 00:25:52,439 Speaker 1: Lisa Bramo. It's one before the podcast. You can always 513 00:25:52,440 --> 00:25:54,520 Speaker 1: catch us worldwide on Bloomberg Radio