Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you
Speaker 1: along with my co host Lisa Brahmawitz. Each day we
Speaker 1: bring you the most noteworthy and useful interviews for you
Speaker 1: and your money. Whether at the grocery store or the
Speaker 1: trading floor. Find a Bloomberg penl podcast on Apple podcast
Speaker 1: or wherever you listen to podcasts, as well as at
Speaker 1: Bloomberg dot com. I'm joined by Alex Steele here today,
Speaker 1: sitting in for Lisa Brahmowitz. Boy, I'll tell you it
Speaker 1: is good thing to be a healthcare m n a banker.
Speaker 1: There's always a deal in that space. Today Fires are
Speaker 1: announcing that it is acquiring Array bio Farmer for ten
Speaker 1: point six billion dollars. To get the latest, we welcome
Speaker 1: a good friends, Sam Fizzelli. Sam is the director of
Speaker 1: European Research for Bloomberg Intelligence, but his day job is
Speaker 1: he's one of the best pharmaceutical and healthcare analysts on
Speaker 1: the street. He joins us from our London studio. Sam,
Speaker 1: thanks so much for joining us. Um boy, this price
Speaker 1: tag is just monstrous. Does this make sense to you
Speaker 1: this deal that Fires is doing. Thank you, Paul, Yes,
Speaker 1: and good morning to both of you. UM. So you know,
Speaker 1: the visors balance sheets pretty strong. UM. The growth profile
Speaker 1: of the company going past the current patent experty for
Speaker 1: Lyrica is um. You know, they like it to be
Speaker 1: stronger than perhaps some of us think it is. We
Speaker 1: always thought they would do M A and A. What
Speaker 1: the price tag is a billion here, a billion there?
Speaker 1: What's what's that amongst friends? Right? But they're they're buying
Speaker 1: what I would consider to be one of the pre
Speaker 1: eminent UM drug developers amongst the biotechs. If you think
Speaker 1: about the number of drugs that this company is responsible
Speaker 1: for in terms of what's going out there and deals
Speaker 1: they've done, so we calculate about eight point four times
Speaker 1: twenty three sales. There's no profits to talk about just yet.
Speaker 1: Three sales. But but those are those are sales that
Speaker 1: are not the you know, they have reasonable probability of
Speaker 1: actually happening. The products have already on the market, and
Speaker 1: they're they've got some good data in hand. And then
Speaker 1: end um it is at the top end of the
Speaker 1: range that we've looked at, but it's not the most
Speaker 1: expensive UM. But you know, that is what it is.
Speaker 1: My very exam so to that point, though, I feel
Speaker 1: like getting on drugs that will were getting in the
Speaker 1: pattern for drugs that will wind up cutting chemotherapy is
Speaker 1: gonna be super super hot in the market. Do we
Speaker 1: expect in the company to come in and try and
Speaker 1: shot full of fires are out? Yeah? I don't think so.
Speaker 1: This doesn't This kind of thing doesn't usually happen when
Speaker 1: you have two managements that have agreed and there's a
Speaker 1: big price tag out there already, it just doesn't happen.
Speaker 1: You know, I've never really seen it in biotech, So
Speaker 1: I expect not so say what what is so special
Speaker 1: about Array that would cause fires? Or to step up
Speaker 1: and pay this price. So they describe three pillars of
Speaker 1: value and we basically responded to that already, you know, react,
Speaker 1: which is the kind of thing that we've seen. UM.
Speaker 1: The there's a product on the market, or two products
Speaker 1: on the market, and there's ample opportunity for expanding that
Speaker 1: each other's products UM and those revenues, you know, it
Speaker 1: could easily be a billion or plus if they keep
Speaker 1: expanding it and fight as I can, because they have
Speaker 1: very deep pockets. UM. The company has several products that
Speaker 1: have been licensed to other companies where the potential for
Speaker 1: royalties are are meaningful. And then of course they have
Speaker 1: a bunch of scientists who have been creating these drugs
Speaker 1: and and we don't know exactly what they've got in
Speaker 1: the preclinical hands in Boulder, Colorado, but there was some
Speaker 1: hints that Fiser gave us over the call. We just
Speaker 1: listened to um which makes it sounds as if there's
Speaker 1: other products obviously expected to come along. But they've been
Speaker 1: a very productive team, so they would not split that
Speaker 1: several times they were asked this question. They would not
Speaker 1: split the value that they've ascribed to each other. Those
Speaker 1: three pillars have just told you. So, how does explain
Speaker 1: to me how in the biotech world this works? Because normally,
Speaker 1: in a different industry, if you make an acquisition, there's
Speaker 1: going to be some synergy costs you can get out
Speaker 1: of it that's gonna be a big thing. And then
Speaker 1: sort of when it's gonna be creative to earnings, and
Speaker 1: then how you sort of meld the operations and what
Speaker 1: the cultures at, et cetera. Is it like a different
Speaker 1: scenario in a biotech world. Yeah, I mean, Alex, that's
Speaker 1: a very good question. At the end of the day, here,
Speaker 1: what you're buying is knowledge and the ability and the
Speaker 1: long history of these people developing these sort of drugs.
Speaker 1: Not that Fiser hasn't got them themselves, but here's here's
Speaker 1: a bunch of scientists, they said, about a hundred scientists
Speaker 1: R and D people based in Colorado. They've said they're
Speaker 1: going to keep the current structure of a RAY in
Speaker 1: place to continue allowing it to be innovative and and
Speaker 1: and you know, pump up, pump out these drugs, and
Speaker 1: and they're go into pipers Finders pipeline as opposed to
Speaker 1: having to be licensed out because the company is too
Speaker 1: small develop everything. So in these cases, it's really not
Speaker 1: about cast savings. So say, if I'm a Fiser shareholder, UM,
Speaker 1: am I concern? What do I read into a transaction
Speaker 1: like this that g Fiser doesn't have its own pipeline.
Speaker 1: Maybe it's R and D. Isn't that good or that
Speaker 1: successful that it forces them to go out and buy um,
Speaker 1: you know products. Yeah, No, I don't think that's fair. Um,
Speaker 1: I think I think it's more about um. You know,
Speaker 1: in the pharmaceutical business, it's all about shots on goal
Speaker 1: because once you take that shot, you don't actually know
Speaker 1: whether it's going to go in or not. So you've
Speaker 1: got to have a number of opportunities running at the
Speaker 1: same time to see which one actually comes to fruition.
Speaker 1: They have a number of drugs that are that are
Speaker 1: looking interesting and exciting, and you know, it's two steps forward,
Speaker 1: one step back with pharma. So you've got to expand
Speaker 1: the range that you've got access to and then make
Speaker 1: sure that you have the wherewithal to do it. Which
Speaker 1: fires it does? I just asked the dumb question here,
Speaker 1: so like, literally, is it possible that there's a drug
Speaker 1: that could reduce the need for chemo? Like is that real?
Speaker 1: Because that's amazing. Yeah. No, absolutely, And you know what
Speaker 1: I was told years ago, there's no dumb questions, So
Speaker 1: there are there totally a but and certainly this is
Speaker 1: not dumb at all because there's that's exactly where pharmaceutical
Speaker 1: industry wants to go and cancer patients want to go.
Speaker 1: I mean, it's important to realize that there's a little
Speaker 1: bit of a slogan slogan that's going on there too,
Speaker 1: because these aren't drugs that are that are side effect free.
Speaker 1: It's just a different to chemo. They may not include,
Speaker 1: know the usual things that chemo has got going with
Speaker 1: it is the hair loss and the vomiting, and you
Speaker 1: know none of these things are nice, right uh? And
Speaker 1: you know a blood blood accounts going down and really
Speaker 1: feeling fatigued, and who wants to be fatigued when you're
Speaker 1: trying to get treated? Right? So, but these drugs do
Speaker 1: have their own side effects, let's not let's not forget that.
Speaker 1: And this is a triple combination they're using for colorectal
Speaker 1: cancer going forward, right, Sam fas Ali, thank you so
Speaker 1: much for breaking down this deal for us. Sam as
Speaker 1: the director of Research European Research for Bloomberg Intelligence, joining
Speaker 1: us from the London studio, we'll trade tensions between China
Speaker 1: and the U. S cant need a summer, putting even
Speaker 1: more focus on the G twenty meeting coming up later
Speaker 1: this month. To get the latest on the trade discussions
Speaker 1: between US and China. We welcome Leland Miller's CEO of
Speaker 1: the China Basebook International, joining us here in our Bloomberg
Speaker 1: Interactive Broker studio. Len and thanks so much for being
Speaker 1: with us. From your perspective, what is the latest with
Speaker 1: the US and China? Are things kind of off again
Speaker 1: on again? Where are we I think that nothing has
Speaker 1: fundamentally changed since President Trump uh levied the last set
Speaker 1: of tariffs a number of weeks ago. Now, if you
Speaker 1: read the headlines, it looks like we're descending into true gloom.
Speaker 1: The Chinese are preparing for the long fight. President Trump
Speaker 1: is getting excited about the idea of going big on
Speaker 1: tariffs into it's a political winner. Uh. Nobody can get along.
Speaker 1: We're attacking their technology companies. So there's a lot of
Speaker 1: reasons why people think that this is disintegrating and that
Speaker 1: the deal is being taken off the table has already
Speaker 1: taken I don't think that's the case. As a matter
Speaker 1: of fact. I think that if President she re engages
Speaker 1: at G twenty, which we expect him to do, then
Speaker 1: the press it and is prepared to punt full tariffs
Speaker 1: and restart the talks. And I think that that's actually
Speaker 1: where we're heading right now. Why would you do that?
Speaker 1: In that Trump said, if you don't do this, I'm
Speaker 1: gonna love you tariffs on you. So why would you
Speaker 1: then look like he's caving. Well, none of this is
Speaker 1: optimal for Shi jun Ping, but you have to look
Speaker 1: at the downside on this. So right now, Uh, they're
Speaker 1: looking at the potential of their being tariffs on all
Speaker 1: five dred billion of Chinese imports. In addition to the
Speaker 1: fact that Huawei, which is arguably the most if not
Speaker 1: one of the most important SSO's in China, is on
Speaker 1: deathwatch because of what the Commerce Department has been doing
Speaker 1: to it and what the White House has been doing
Speaker 1: to it. So right now, none of this is optimal.
Speaker 1: But it was also not optimal to send Leo hu
Speaker 1: uh the night that Trump was was announcing tariffs. It
Speaker 1: was a body blow to the Chinese. It looked bad.
Speaker 1: But at the same time they're measuring the circumstances as
Speaker 1: being you know, what is the best we can get
Speaker 1: out of this, and the best they can get out
Speaker 1: of this is get a deal with Trump on trade
Speaker 1: so that they're not worrying about this for the for
Speaker 1: a twenty So does the what's going on in Hong Kong?
Speaker 1: Does that impact President she and and how he might
Speaker 1: be perceiving these negotiations. That's kind of a body blow
Speaker 1: again or a black guy to President She with what
Speaker 1: happened in Hong Kong. Is that is that cann influence
Speaker 1: the trade discussions. You know, it might Um, all of
Speaker 1: this has to come down to the fact whether she
Speaker 1: can look strong while engaging with President Trump. Now, President
Speaker 1: Trump could have put out the olive branch to President She. Instead,
Speaker 1: he he basically said, if you don't come and meet
Speaker 1: with me, I'm gonna be really mean to you, and
Speaker 1: we're gonna we're gonna crush you. That doesn't make things
Speaker 1: easy for the Chinese. At the same time, there's a
Speaker 1: lot of a lot of hysterics going on right now,
Speaker 1: and she jumping has to look at this. You know,
Speaker 1: how do I not look weak but at the same
Speaker 1: time engage enough to get all these irons off the
Speaker 1: fire so that I can concentrate on the domestic economy. Uh,
Speaker 1: the Chinese economy under the type of tariff pressure we're
Speaker 1: talking about, will have a much harder time later this year.
Speaker 1: And I think President She is balancing the pros and
Speaker 1: cons making sure he has a consensus in the leadership.
Speaker 1: But I think that that they are inclined to go forward. See,
Speaker 1: that's what I don't understand is that I feel like
Speaker 1: a lot of the rhetoric is, uh, it's both. It's
Speaker 1: so important for both of them. Therefore, they're going to
Speaker 1: have to do that. Um in essence, if g accepts
Speaker 1: the fact that they're gonna be tariffs un China no
Speaker 1: matter what, and then President Trump's gonna ramp up the
Speaker 1: tariffs no matter what. He neutralizes Trump. Well, I think
Speaker 1: that in President She's mine if he can get signals
Speaker 1: on the U. S side that the tariffs are going
Speaker 1: to come off in a deal. So, first of all,
Speaker 1: in order to continue the talks, President She would have
Speaker 1: to get some pledges from President Trump. First, is Huawei
Speaker 1: is part of the deal. Second, that we're gonna be
Speaker 1: start peeling these tariffs off and you're not gonna put
Speaker 1: more tariffs on while we continue to talk. So they
Speaker 1: create a new timeline. This is agonizing for for for
Speaker 1: trade and China watchers, but this is the way the
Speaker 1: things work. And if he can get an understanding that
Speaker 1: you know, they were very close before they were nineties
Speaker 1: seven percent of the way there. This idea that they
Speaker 1: had they didn't get most of it finalized is wrong.
Speaker 1: They're very close. They have to back to where they
Speaker 1: were before, and if they do that, then they're very
Speaker 1: close for President She getting a deal that will pull
Speaker 1: off most probably not all, but most of the of
Speaker 1: the terrorists. They have now no more tariffs, a respite
Speaker 1: for for Huawei, a reprieve for Huawei. These are big things.
Speaker 1: So these are things that they cannot underestimate. Uh and
Speaker 1: and and walk away from out of mere pride. So
Speaker 1: Leland just talking about President she how strong is his
Speaker 1: position in China today? It's it has been remarkable that
Speaker 1: there has been pushback against she in the state media,
Speaker 1: among dissidents. I don't think his his position is in
Speaker 1: any way threatened, but it is remarkable that he is
Speaker 1: getting flak for for his handling of the trade, ward
Speaker 1: handling of the economy. Now this makes it even more
Speaker 1: important he doesn't look weak going forward. But I don't
Speaker 1: think there's a question. While while this is not a
Speaker 1: one person to solitary and dictatorship of any kind, he
Speaker 1: is the leader of China. He guides policy. And while
Speaker 1: he needs to make sure that he is not deeply
Speaker 1: offending the this Paulpiro Standing Committee, he still runs the show.
Speaker 1: So this is his this is his show to run
Speaker 1: in terms of trade. And if he thinks he can
Speaker 1: he can negotiate with President Trump, you know they're best
Speaker 1: friends after all, uh, then then he'll move forward on
Speaker 1: this so Um John author's Boomberg Opinion Columnists writes a
Speaker 1: lot about Dorek magnus book Red Flags. I don't know
Speaker 1: if you've if you've read that yet, but he talks
Speaker 1: about why She's China is in jeopardy and a lot
Speaker 1: of the conversations surrounding the book is really interesting in
Speaker 1: that Maw and Deng both had their own models for
Speaker 1: communist China, but that g has a totally different one
Speaker 1: and that that's going to affect all these kind of
Speaker 1: trade decisions and arguments. Um, would you agree in that
Speaker 1: you can't look back at the last hundred years of
Speaker 1: China growth and extrapolate that to the next hundred. Is
Speaker 1: that we're in a whole new growth kind of paradigm.
Speaker 1: Is that true? I think She's challenges are enormous, and
Speaker 1: he made it much more difficult for himself when he
Speaker 1: not only named himself president for life, but then he
Speaker 1: ensconced it formally like this could have been the back
Speaker 1: background of everything. Everyone knows she's not going anywhere, but
Speaker 1: he made sure to make a public public issue of it.
Speaker 1: When he did that, he tied his fortunes in very
Speaker 1: closely with out of the Chinese economy and that of
Speaker 1: China generally, so that anything bad that apps the Chinese economy,
Speaker 1: who do you have to blame Chi Jinping? Who do
Speaker 1: you if if China undergoes problems, who do you have
Speaker 1: to blame? Chi Jinping? So he has made his life
Speaker 1: much more difficult. I don't think he's going anywhere. I
Speaker 1: do think that the pressures on him are going to
Speaker 1: be immense in the next few years, with the with
Speaker 1: the with the economy, even under the best set of circumstances.
Speaker 1: Uh So, this will be tough, and we could emerge
Speaker 1: from this a few years from now with more of
Speaker 1: a consensus based leadership, which she's still there, but not
Speaker 1: with as much control depending on things how things end
Speaker 1: up in the next eighteen months. How how would you
Speaker 1: characterize the Chinese economy right now? Is it a six
Speaker 1: at six and percent grower or something less than that?
Speaker 1: It's not growing at six percent? You know, the GDP
Speaker 1: numbers are always uh political narratives put but put into
Speaker 1: a number. Uh that said, you know, we have we
Speaker 1: have data coming in right now, and we're we're we're
Speaker 1: gonna be announcing next week. But what I would say
Speaker 1: is watch very closely to what the Chinese are saying.
Speaker 1: There's a lot of talk this week from Beijing about
Speaker 1: how they have all these options in terms of stimulus
Speaker 1: if they need them. And one of the things that
Speaker 1: we've made very clear in the past is that when
Speaker 1: the Chinese are talking a lot about all the options
Speaker 1: they have, they typically have already started utilizing. Okay, So
Speaker 1: I think that that's that's where we're going, and we'll
Speaker 1: be able to talk a little bit more of this
Speaker 1: a few days. Good. We'll have you back for that,
Speaker 1: because I think that's one of the underpinnings of the
Speaker 1: negotiations and the assumptions is how strong is China's economy.
Speaker 1: Uh the stronger dis presumably the tough to tougher stance
Speaker 1: they can take with the U S. Well. What I
Speaker 1: find really interesting though, and it's going to go to
Speaker 1: ubs uh and to have them using a bond deal
Speaker 1: over the Chinese pig. Statement from Paul Donovan either Chief
Speaker 1: Economists is that we talk different languages, like the West
Speaker 1: end China are just they talk different languages, they have
Speaker 1: different priorities and like that to me is like a
Speaker 1: whole big rainbow, uh in or not rainbow, but like
Speaker 1: big cloud as to how the conversation must be going
Speaker 1: when it comes to trade exactly. Leland Miller, CEO of
Speaker 1: the China Bag Book International, thank you some much for
Speaker 1: joining us and breaking down the ongoing trade discussions. Well,
Speaker 1: this week is Central bank week. We've got the FED,
Speaker 1: We've got the Bank of Japan, the Bank of England
Speaker 1: all meeting and of course the f O m c
Speaker 1: uh Well, FED Chairman Pal speaking on Wednesday, so clearly
Speaker 1: the markets are focusing on that. To get a sense
Speaker 1: of what we might expect, we welcome our next guest,
Speaker 1: Matt Mailey, Managing director and equity strategist at Miller Tebec
Speaker 1: based in Newton, Massachusetts. Matt, thanks so much for joining us.
Speaker 1: What do you expect to hear from FED Chairman Pal
Speaker 1: this week? Well, to be honest with you, I think
Speaker 1: the market is gonna be a little disappointed. I think
Speaker 1: the FED chairman will be a little less devish than
Speaker 1: people are expecting. Um no, no, no, less dovish and
Speaker 1: it has been. There's no question they've made a a
Speaker 1: change to a more tubbish tone, but their actions I
Speaker 1: just think in the past, especially in the past ten years,
Speaker 1: where you know central bank acuidity has been so important
Speaker 1: to the markets. Uh, they have they haven't acted until
Speaker 1: we've seen a more significant move both in the UH
Speaker 1: in the economy and UH in the economic data and
Speaker 1: in the in the markets. Uh. The Fed's a little
Speaker 1: bit more market dependent than they than they admit to.
Speaker 1: They are very data dependent, but they're also market dependent.
Speaker 1: So how is the market actually position for this because
Speaker 1: a huge run up and utilities evaluation is super high,
Speaker 1: Yet their utilities and defensives for a reason. So like
Speaker 1: what's the positioning resk here? Well, you know, if if
Speaker 1: they do uh uh signal a definitive uh change in
Speaker 1: their in their actions by actually saying that they're going
Speaker 1: to raise cuts pretty much no matter what uh in July. Uh,
Speaker 1: that's gonna have a lot of people uh caught offsides.
Speaker 1: Not only the utility stocks very strong, but you know,
Speaker 1: consumer staples another defensive group has been very strong, and
Speaker 1: I think that the people will start to shift out
Speaker 1: of that and go into some of them uh more
Speaker 1: growthy names. Obviously a technology et cetera. When we've seen
Speaker 1: the semiconductor stock kind of roll over recently, they could
Speaker 1: bounce back. UM, I don't necessarily think that's going to
Speaker 1: happen again. I'm more cautious than I think a lot
Speaker 1: of people are. But the thing that really concerns mean
Speaker 1: most is that the stock market is definitely pricing in
Speaker 1: the a FED move to a much more doublish stance
Speaker 1: because it's not moving higher due to a better economy
Speaker 1: or better earnings. As we've seen that a lot of
Speaker 1: estimates for both economic growth and estimates for the SMP
Speaker 1: have come down in the last two weeks. Not move up.
Speaker 1: Wouldn't be amazing if if the JJ Powell came out
Speaker 1: and he's like, Okay, guys, we're gonna cut this many
Speaker 1: times at this date and that's what we're gonna do.
Speaker 1: Take care of see you later, And was like, so,
Speaker 1: no question, he won't make it that quite that definitive.
Speaker 1: But if he you know, they usually tell you, you know,
Speaker 1: really telegraphic well in advance. So how he portrays, uh,
Speaker 1: how the July meeting is gonna go, it's gonna be
Speaker 1: very important. So Matt, if in fact they FED is
Speaker 1: not quite as dublish as maybe the market is currently discounting,
Speaker 1: how do you play it right here? Well, Uh, you know,
Speaker 1: it's it's hard to number one. I do think like
Speaker 1: I said that that the with earnings estimates coming down,
Speaker 1: the consensus earning as earnings estimates, the economy is slowing
Speaker 1: a little bit. I think raising a little bit of
Speaker 1: cash and and and by and if you want to
Speaker 1: put more more money to work by those defensive groups
Speaker 1: with buy them on weakness. You look at the overbought
Speaker 1: condition of the consumer staples which have been very obviously
Speaker 1: very strong. They've made new all time highs. Same with
Speaker 1: the utilities. But of the consumer staples names, I think
Speaker 1: and it would be the good ones. But most importantly,
Speaker 1: if we do get another leg lower, which would not
Speaker 1: be the worst thing in the world. I mean, you know,
Speaker 1: we're only down seven percent. That's a normal and healthy
Speaker 1: move in any market, much less one that's being evolved
Speaker 1: in a trade war. Uh. When you get that kind
Speaker 1: of down much like we got in December, and I'm
Speaker 1: not calling for decline like we got in the fourth
Speaker 1: quarter of last year. But you get something down in
Speaker 1: the correction terry of ten or twelve, and you've got
Speaker 1: some money on the sidelines. You can put that to
Speaker 1: work in your favorite names at really good prices. But
Speaker 1: if you're prepared in advance, you can take advantage of it.
Speaker 1: If you don't have that cash on the sidelines, you
Speaker 1: won't be able to. How else are you gonna hedge
Speaker 1: looking for derivatives or anything along those lines too, Well,
Speaker 1: people can certainly do that. Uh. The one thing I
Speaker 1: you know, that I worry about that is that the
Speaker 1: VIX is a little high given how much the market
Speaker 1: is rallying, So that makes the hedging a little bit
Speaker 1: more expensive than it was, you know, say a couple
Speaker 1: of weeks, you know, in April um. But you can
Speaker 1: certainly play, you know by especially in the spy the
Speaker 1: SMP five, d uh et F. The options in that
Speaker 1: market are are are very very liquid, and you can
Speaker 1: get in and out of them very quickly. Matt Milly,
Speaker 1: thank you so much. Matt is managing director and equity
Speaker 1: strategist for Miller Tebec based up in Massachusetts. Yeah. Well,
Speaker 1: the troubles continue at Deutsche Bank. The stock is down
Speaker 1: over over the past twelve months. Bloomberg News reported this
Speaker 1: morning that the bank is considering exiting the US equity
Speaker 1: trading business. To get the latest on all things, Deutsche
Speaker 1: Bank returned to y'ellman own Ian y'aman is a senior
Speaker 1: financial writer for Bloomberg News, joining us on the phone. Y'alman,
Speaker 1: thanks so much for joining us. My first question is
Speaker 1: when I saw that news about exiting the US equities
Speaker 1: trading businesses, how can an investment bank be a global
Speaker 1: bank without trading US equities? So what's going on there?
Speaker 1: It cannot us ask the right question. I mean, um,
Speaker 1: this is this is very unusual. And you know, they
Speaker 1: keep coming up with new restructuring plans and at the
Speaker 1: end and none of them work, and they keep coming
Speaker 1: back to new another plan. But um, it's very radical.
Speaker 1: Yet it's it's very it's it's kind of harmful because
Speaker 1: you know, if you are in Messing bank, as you said,
Speaker 1: you have to be in equities, and you have to
Speaker 1: be in the US in equities because you know, the
Speaker 1: most I POS happened here. You know, other kind of
Speaker 1: stuck related in messing banking deals. Even M and A
Speaker 1: is really connected to the ability to sort of connect
Speaker 1: with these companies um in in every way. So it's
Speaker 1: it's very unusual. You know, even after the big financial crisis,
Speaker 1: the European banks that you know a lot of them
Speaker 1: that collapse only Royal Bank of Scotland and and Credit
Speaker 1: act Cole sort of got out of equities business altogether. Um.
Speaker 1: I mean German says, uh, Dogia Bank is going to
Speaker 1: continue maybe in Europe, but still not being in the US.
Speaker 1: That's really gonna hurt their mess banking even further. So
Speaker 1: it doesn't it doesn't look like a very great, amazing
Speaker 1: way out. Nano's reaction was really unimpressed. Also, Endroyte Bank
Speaker 1: h so so such and said that Georgia banks plan
Speaker 1: is not aggressive enough. You also have CMC Markets saying
Speaker 1: that they're well behind the curve, RBC saying that bad
Speaker 1: Bank is not going to do anything to rewrite the company.
Speaker 1: I mean, if doing what they need to do isn't
Speaker 1: good enough, but then doing something that's good enough to
Speaker 1: destroy the company, Like, what is the answer? I mean,
Speaker 1: you know we can talk about bad Bank, but first
Speaker 1: the answer of what why is it not aggressive enough?
Speaker 1: Because every analyst report that I've ever read in the
Speaker 1: last you know, for god two years now, it's basically
Speaker 1: they need to they need to cut costs they have
Speaker 1: they have too much cost and and it's not only
Speaker 1: really getting out of businesses, it's really they have they
Speaker 1: have too many people in the back office, they have
Speaker 1: too many people doing things. Their technologies is out of them,
Speaker 1: so they can do the businesses with fewer people. And
Speaker 1: and the bank has constantly announced job cuts which they
Speaker 1: cannot deliver. I mean, and I've written this many many,
Speaker 1: many many times over the last two or three years,
Speaker 1: is that they keep getting targets for reduction of staff
Speaker 1: levels and they can never hit those targets. Um. Every
Speaker 1: other bank in the world, you know, in their their peers,
Speaker 1: everybody cut a long time ago, and pretty quick, even
Speaker 1: if it's if it took a little longer for some
Speaker 1: of the European banks because they have tougher you know,
Speaker 1: um labor laws. Still they've done it. I mean, Dortge
Speaker 1: Bank has really been bad reducing staff and and thus
Speaker 1: they cannot make a profit. Um so getting rid of
Speaker 1: a business like equities, but you're also cutting the revenue instead.
Speaker 1: If you managed to cut the cost of that business
Speaker 1: and continue to to get the revenue, then you would
Speaker 1: actually start making profit on it. But that's where they
Speaker 1: have really lacked. And that's what the analysts keeps constantly
Speaker 1: saying that they need to cut the slack um in
Speaker 1: their in their employee levels. Also reported this morning that
Speaker 1: Dortchem would consider putting a lot of their troubled assets
Speaker 1: into a bad bank. What are those assets? I mean,
Speaker 1: it's really interesting at this stage because you know, we
Speaker 1: had bad banks after the two thousand eight crisis, UM,
Speaker 1: and then you know Dotcha Bank and a couple other
Speaker 1: Europeans also did them after the European sovereign death crisis. UM.
Speaker 1: These were legacy things that you know, we're really no
Speaker 1: longer good. They sort of you know, they were all
Speaker 1: written down, but to just sort of separate them from
Speaker 1: the the main core business and show that the investors,
Speaker 1: you know, what really was the core business was making
Speaker 1: as profit and revenue. UM. But at this stage banks
Speaker 1: don't have them. So I'm not sure what is gonna
Speaker 1: put in there. Level three assets, which is sort of
Speaker 1: hard to value, UM, things that that they sort of
Speaker 1: have to use their internal models to value. That means
Speaker 1: they're not liquid. That's one place. But even there, they
Speaker 1: only had twenty five billion euros of level three assets
Speaker 1: the last time I looked that was the first quarter
Speaker 1: of this year. UM. Their tongue fifty billion. I don't
Speaker 1: know where they're going to come up with you know, derivatives,
Speaker 1: more derivatives that need to be put there. The issue
Speaker 1: is and I was reading an animal, so just before
Speaker 1: you call it is um. You know, if they if
Speaker 1: these things are not losing money, then it doesn't matter
Speaker 1: whether they're on a bad bank, good bank, it doesn't
Speaker 1: matter what it's called. If they're actually losing money and
Speaker 1: there's still more right down to be made, then that's
Speaker 1: tough because ROACHA doesn't have extra capital to take those
Speaker 1: right so I don't know what they mean how they're
Speaker 1: going to really do the bad bank work. Interesting. Y'amen
Speaker 1: on Iran, Thank you so much for joining us. Thanks
Speaker 1: for listening to the Bloomberg P and L podcast. You
Speaker 1: can subscribe and listen to interviews at Apple Podcasts or
Speaker 1: whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter
Speaker 1: at pt Sweeney, Lisa Bramo. It's I'm on Twitter at
Speaker 1: Lisa Bramo. It's one before the podcast. You can always
Speaker 1: catch us worldwide on Bloomberg Radio