WEBVTT - Allergan Is A Short-Term Cosmetic Fix For AbbVie: Nisen 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.640 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:22.720 at Bloomberg dot com. The big deal of the day 0:00:22.800 --> 0:00:26.320 AVY agreeing to buy Allergan for sixty three billion dollars. 0:00:26.320 --> 0:00:30.639 ADVY shares down fourteen point six percent, Algan shares surging. 0:00:31.920 --> 0:00:34.400 Joining us here in our bloombergant to Active broker Studios 0:00:34.440 --> 0:00:37.040 Max Neeson. As always, we love having you and biotech, 0:00:37.080 --> 0:00:41.040 pharma and healthcare calumnists with Bloomberg opinion. Is this a 0:00:41.120 --> 0:00:45.000 bad deal for AV I? I think so. I see 0:00:45.000 --> 0:00:48.319 why investors are reacting the way that they are. So 0:00:48.440 --> 0:00:50.960 the kind of motivation of the steel is that A 0:00:51.159 --> 0:00:56.920 V's biggest product a Humira. It's a blockbusters for inflammatories 0:00:57.000 --> 0:01:00.200 these like arthritis. It's already starting to face buy a 0:01:00.240 --> 0:01:03.240 similar competition in Europe and that's coming in America in 0:01:04.120 --> 0:01:07.000 three So that's gonna blow just a giant hole in 0:01:07.319 --> 0:01:10.479 its revenue and you know there there's just not enough 0:01:10.520 --> 0:01:12.360 and its pipeline to deal with that. So this is 0:01:12.360 --> 0:01:14.640 a way of kind of getting some replacement for that. 0:01:14.920 --> 0:01:17.280 The question is whether this is actually going to help 0:01:17.360 --> 0:01:20.440 in the long term. You have Alegan with the lead 0:01:20.480 --> 0:01:23.720 product in Botox, where where you know sales are likely 0:01:23.760 --> 0:01:26.920 to be pretty durable but are starting to level off 0:01:26.959 --> 0:01:29.800 and there's some competitive threats. So while you get kind 0:01:29.800 --> 0:01:34.679 of this big you know, cost cutting opportunity and a 0:01:34.720 --> 0:01:38.320 big EPs boost upfront, the question is what this does 0:01:38.440 --> 0:01:41.000 for the company in the long run. Yeah, it's interesting. 0:01:41.000 --> 0:01:43.000 I'm just looking at the five year charge for Elegant. 0:01:43.000 --> 0:01:44.800 It's not pretty. It's been a kind of a steady 0:01:44.880 --> 0:01:47.760 decline down from you three change down to where we 0:01:47.760 --> 0:01:50.680 were today. Um, So obviously the market pricing in the 0:01:50.800 --> 0:01:54.480 slower growth as you mentioned for the both TX business. Dude, 0:01:54.560 --> 0:01:57.440 does this combined company are they having any discussions about, Gee, 0:01:57.480 --> 0:01:59.800 now we're bigger, we've got more resources, we can invest 0:01:59.880 --> 0:02:01.520 more are in R and D and try to drive 0:02:01.560 --> 0:02:04.240 our growth that way. Yes, So that this sort of 0:02:04.320 --> 0:02:07.400 contradictory messaging on this On one hand, you know, in 0:02:07.520 --> 0:02:09.800 order for this deal to pay off, you're gonna need 0:02:09.919 --> 0:02:12.920 to have big cost energies, You're gonna have to cut 0:02:12.960 --> 0:02:16.000 back on R and D. But then at the same time, 0:02:16.800 --> 0:02:18.760 you know more cash is going to be flowing into 0:02:18.880 --> 0:02:21.480 R and D. So so the net of that is 0:02:21.480 --> 0:02:24.840 is a little bit confusing. And you're not buying Allergan 0:02:25.000 --> 0:02:27.880 for its R and D capability. This is a company 0:02:27.919 --> 0:02:31.120 that really deliberately had a different model. We go out 0:02:31.200 --> 0:02:33.120 and we look for the best science out there, and 0:02:33.120 --> 0:02:35.600 then we we bring it in. They aren't developing drugs 0:02:35.600 --> 0:02:37.280 on their own, so kind of the fit and the 0:02:37.280 --> 0:02:40.920 added capability doesn't really come from that. It just theoretically 0:02:40.919 --> 0:02:44.240 comes from having more cash to spend on everything apart 0:02:44.280 --> 0:02:46.040 from what they're you know, they spent on the deal 0:02:46.280 --> 0:02:48.359 and they're gonna be spending on surfacing their debt. Now. 0:02:48.480 --> 0:02:50.600 So let's zoom out a little bit because this deal 0:02:50.680 --> 0:02:53.720 comes at a sort of interesting time in the political cycle. 0:02:53.760 --> 0:02:56.440 President Trump coming out with an executive order this week 0:02:56.800 --> 0:03:00.200 talking about trying to make medical pricing more trade it's 0:03:00.280 --> 0:03:03.720 parent and thus lowering it. I have to wonder whether 0:03:03.760 --> 0:03:07.160 a deal like this between two big pharmaceutical companies would 0:03:07.160 --> 0:03:10.440 be viewed pretty negatively by any Trust officials given where 0:03:10.480 --> 0:03:13.600 we are in the election cycle. So I think that 0:03:13.639 --> 0:03:15.840 this one is is actually going to be all right, 0:03:15.880 --> 0:03:18.720 even though, as we saw just yesterday, cell Gene is 0:03:18.720 --> 0:03:21.520 gonna have to sell off a drug in order to 0:03:21.560 --> 0:03:24.040 get its deal with with our cyper Stal Myers is 0:03:24.080 --> 0:03:25.600 selling a cell Gene drug to get that deal to 0:03:25.639 --> 0:03:28.000 go through this one, there's not a tremendous amount of 0:03:28.040 --> 0:03:31.480 overlap in the things that the two companies work on 0:03:31.520 --> 0:03:33.640 in the areas that they focus on. On one hand 0:03:33.680 --> 0:03:35.800 that that kind of brings the strategic fit into question. 0:03:36.040 --> 0:03:39.680 It probably does give them an easier time with any 0:03:39.680 --> 0:03:41.800 Trust officials. And one of the reasons that this does 0:03:41.920 --> 0:03:43.400 sort of appeal at least a little bit is that 0:03:43.440 --> 0:03:46.880 Allergan is focused on medical aesthetics, on you know, botox 0:03:46.920 --> 0:03:49.400 for the face, cool sculpting. Those are things that are 0:03:49.440 --> 0:03:54.120 are often not really pressured by by you know, drug 0:03:54.200 --> 0:03:57.600 costs scrutiny in the same way. I just I'm struggling 0:03:57.640 --> 0:04:00.840 to understand if this doesn't necessarily lead higher costs and 0:04:00.880 --> 0:04:04.840 better negotiating power for these two big pharmaceutical companies other 0:04:04.920 --> 0:04:08.600 than just job efficiency. In otherwords, job cuts, what are 0:04:08.640 --> 0:04:12.360 what's what's the value proposition here? Then, so the this 0:04:12.440 --> 0:04:15.720 is pretty clearly a financially driven transaction. They just think 0:04:15.760 --> 0:04:18.160 that they can um you know, benefits from the cash 0:04:18.160 --> 0:04:21.320 flow and and you know, by cutting eventually drive some 0:04:21.360 --> 0:04:26.359 kind of return and diversify away from from Humira. But 0:04:26.480 --> 0:04:29.120 the big question is, you know, by the time that 0:04:29.200 --> 0:04:31.880 they're really going to need that diversification, how much is 0:04:31.880 --> 0:04:35.240 gonna be there from from Allergan. You know, Botox has 0:04:35.279 --> 0:04:38.159 to keep delivering and stay durable, as do a number 0:04:38.200 --> 0:04:41.800 of other products, and uh, you know, there there there 0:04:41.839 --> 0:04:44.280 has to be maybe something from the pipeline, and it's 0:04:44.320 --> 0:04:47.719 a pretty weak roster of drugs for the future that 0:04:47.720 --> 0:04:50.120 they're getting here. I'm just not sure that you know 0:04:50.160 --> 0:04:53.320 that the sixteen or so billion in revenue that Allergan 0:04:53.400 --> 0:04:56.159 has now is going to be there when when Abby 0:04:56.279 --> 0:04:59.480 really needs it. Yeah, I'm looking at Allergan stock right now, 0:04:59.480 --> 0:05:02.040 it's about the you thirteen or fourteen percent below the 0:05:02.040 --> 0:05:04.960 deal price, suggesting that I guess investors don't think, at 0:05:05.000 --> 0:05:07.400 least in the near term, anybody's going to come in 0:05:07.440 --> 0:05:09.320 and try to top the bid or anything like that. 0:05:09.360 --> 0:05:11.320 So it kind of goes to the issue of maybe 0:05:11.360 --> 0:05:14.000 not a lot of interest in this company, and I 0:05:14.000 --> 0:05:16.359 think Max's, as you stated, it kind of looks just 0:05:16.800 --> 0:05:18.599 you know, there aren't a lot of synergy. So maybe 0:05:18.600 --> 0:05:21.640 this is, as you mentioned, just a diversification move on 0:05:21.640 --> 0:05:23.920 on the part of Abby. And if the question is 0:05:23.920 --> 0:05:27.240 is it worth sixty billion dollars to diversify your redness stream? 0:05:27.279 --> 0:05:30.200 I mean, the size of the revenue hole is just 0:05:30.320 --> 0:05:35.280 so enormous, it's it's impressment. You know, Humira did nearly 0:05:35.320 --> 0:05:37.800 twenty billion dollars in sales last year. It's the best 0:05:37.800 --> 0:05:42.080 selling drug in the world. Replacing that takes a big deal. Uh. 0:05:42.160 --> 0:05:44.280 The question I think was was this the right one 0:05:44.400 --> 0:05:47.440 or the right use of that that big pilot capital. Yeah, exactly, 0:05:47.600 --> 0:05:49.839 Max Neson, thanks so much for joining us. Max's Biotech, 0:05:49.880 --> 0:06:09.760 Pharma and healthcare calmness for Bloomberg Opinion. Facebook jolted the 0:06:09.800 --> 0:06:14.000 crypto asset world earlier this month, saying that they were 0:06:14.040 --> 0:06:17.960 planning to unrule Libra. This was going to be a 0:06:18.000 --> 0:06:22.440 way to serve underbanked or non banked customers and create 0:06:22.560 --> 0:06:26.640 some sort of alternative method of payment on its platform. 0:06:26.720 --> 0:06:30.159 The question is how much is this a game changer 0:06:30.240 --> 0:06:32.800 for the cryptocurrency world. How much is this giving a 0:06:32.839 --> 0:06:36.680 boost to bitcoin valuations? Here to answer all of those questions, 0:06:36.760 --> 0:06:39.200 I'm so pleased to say, Danny Masters joining us in 0:06:39.200 --> 0:06:42.800 our Bluebrigoda Active Brokers Studios. Danny Masters is chairman of 0:06:43.040 --> 0:06:46.680 coin Shares Group, which overseas about fifty million dollars in 0:06:46.720 --> 0:06:50.000 the platform and is based in London. He also you 0:06:50.040 --> 0:06:52.400 may know him as the former global head of Energy 0:06:52.640 --> 0:06:56.039 and Trading at Morgan Guarantee Trust now JP Morgan. Danny, 0:06:56.080 --> 0:06:59.559 thank you so much for being here. So let's start there. 0:07:00.040 --> 0:07:04.080 Do people understand what libra is if they look at 0:07:04.080 --> 0:07:09.080 it as a cryptocurrency? I think cryptocurrency comes with certain 0:07:09.120 --> 0:07:12.440 mystique around it, but I don't think Libra and the 0:07:12.560 --> 0:07:17.160 calibra will it associated with it really represents a cryptocurrency. 0:07:17.200 --> 0:07:21.200 I believe it is a representation of fiat value, primarily dollars, 0:07:21.200 --> 0:07:24.600 but probably also currencies were not quite sure yet but 0:07:24.680 --> 0:07:29.280 transported on cryptocurrency rails. What do you think Facebook strategy 0:07:29.400 --> 0:07:31.960 is for getting into the crypto business that kind of 0:07:32.000 --> 0:07:35.280 came out of no words but an advertising platform effectively, Well, 0:07:35.320 --> 0:07:37.200 I think if you look at Facebook as a company 0:07:37.800 --> 0:07:40.320 most of its revenue comes from US advertising, but most 0:07:40.360 --> 0:07:43.560 of its active users live overseas, and Facebook hasn't come 0:07:43.640 --> 0:07:47.280 up to date with an effective way monetizing those overseas users. 0:07:47.320 --> 0:07:49.520 So having what the French would describe as a shadow 0:07:49.520 --> 0:07:52.600 banking system with with Libra not not a compliment, by 0:07:52.600 --> 0:07:56.640 the way, is a way to start to monetize their 0:07:56.760 --> 0:08:01.320 overseas and users. So you said that it was another 0:08:01.720 --> 0:08:07.440 form of payment using the cryptocurrency rails, in other words, 0:08:07.680 --> 0:08:13.560 the infrastructure the technology behind cryptocurrencies. Is this why bitcoin 0:08:13.640 --> 0:08:16.600 has rallied that basically Facebook would be paving the way 0:08:16.840 --> 0:08:21.440 for people to easily make payments using bitcoin. Well, I 0:08:21.480 --> 0:08:25.480 think the bitcoin rally itself is rooted in a perception 0:08:25.480 --> 0:08:27.320 of a week of dollar environment, which is also the 0:08:27.360 --> 0:08:31.080 catalyst for gold. Currently, it has been rooted in some 0:08:31.360 --> 0:08:35.880 green shoots post the cryptowinter from early in some coins 0:08:35.880 --> 0:08:39.360 which represent equity and some crypt winter come into a 0:08:39.440 --> 0:08:44.240 theater near you, dot um. But but now I think 0:08:44.800 --> 0:08:48.200 I think as far as bitcoin itself is concerned, our 0:08:48.280 --> 0:08:51.599 conclusion is that if Libra and it's two and a 0:08:51.640 --> 0:08:56.439 half billion users can easily switch from fiat money into 0:08:56.520 --> 0:08:59.959 bitcoin and actually represents the biggest onboard ramp to bit 0:09:00.080 --> 0:09:03.600 coin as as yet come into existence. So give us 0:09:03.600 --> 0:09:07.520 a sense of what the regulatory environment has been historically 0:09:07.520 --> 0:09:09.960 over cryptocurrencies. I don't think it's much, but I may 0:09:09.960 --> 0:09:13.200 be mistaken, but my senses if an entity like a 0:09:13.240 --> 0:09:17.960 Facebook gets involved, that could change things very quickly. Yes. Well, 0:09:18.320 --> 0:09:23.720 Bitcoin as a very new kind of asset has really 0:09:23.760 --> 0:09:28.120 stretched regulators in terms of their treatment. And the regulatory 0:09:28.200 --> 0:09:31.960 perimeter as it's called, which by the way, is usually 0:09:32.000 --> 0:09:37.079 a national perimeter, is challenged by a global currency like bitcoin, 0:09:37.520 --> 0:09:40.480 and the reaction from regulators around the world has been 0:09:40.600 --> 0:09:46.160 very mixed, some very positive, some very negative, some somewhat confused. Um, 0:09:46.280 --> 0:09:50.440 the libra concept, because it is so closely tied to 0:09:50.480 --> 0:09:55.640 the legacy banking system, is almost a combination of difficult 0:09:55.679 --> 0:10:00.960 crypto legislation and regulation with difficult banking regulation. So I think, 0:10:01.080 --> 0:10:03.480 and we have some experience in this. We know ourselves 0:10:04.120 --> 0:10:09.160 produce some asset backs coins that rail on cryptocuncy infrastructure. 0:10:09.840 --> 0:10:12.720 We've spent many years trying to solve that regulatory puzzle, 0:10:12.760 --> 0:10:16.080 and Facebook have that ahead of them. So you also 0:10:16.160 --> 0:10:19.200 lead the launch of the world's first regulated bitcoin and fund. 0:10:19.240 --> 0:10:23.640 I believe I'm wondering, as you look at this incredible 0:10:23.760 --> 0:10:26.840 rally that we've seen in a bitcoin, just absolutely surging, 0:10:27.520 --> 0:10:30.720 I have to wonder whether there's still is value here 0:10:30.960 --> 0:10:32.920 or if this is just sort of a knee jerk 0:10:32.960 --> 0:10:36.880 reaction to the end of the crypto winter that will 0:10:36.920 --> 0:10:41.080 be reversed. Yeah. I think in the very short term 0:10:41.120 --> 0:10:44.559 here we have to recognize that it's been a spectacular rally, 0:10:44.640 --> 0:10:47.080 you know, off of a low, low, low level in 0:10:47.200 --> 0:10:51.040 terms of the historical range um. And going forward, you know, 0:10:51.080 --> 0:10:53.520 I think one has to keep in mind the scale 0:10:53.559 --> 0:10:56.079 of bitcoin, and indeed this has brought into light. When 0:10:56.080 --> 0:10:58.319 you look at the scale of Facebook, there may be 0:10:58.440 --> 0:11:00.840 a hundred and fifty million wall it's for bitcoin in 0:11:00.880 --> 0:11:03.199 existence in the world today, there are two and a 0:11:03.240 --> 0:11:07.200 half billion Facebook uses. It took Facebook ten years to 0:11:07.240 --> 0:11:10.240 get from a million users to a billion users. And 0:11:10.280 --> 0:11:13.160 when you look at those numbers and that timescale, I 0:11:13.200 --> 0:11:16.400 think you can clearly see there's a long run way 0:11:16.440 --> 0:11:19.240 at a bitcoin. I have to look at Bitcoin prices 0:11:19.800 --> 0:11:22.560 have risen from more a little bit more than four 0:11:22.559 --> 0:11:26.800 thousand dollars April one to eleven thousand, three hundred and 0:11:26.840 --> 0:11:29.240 sixty three dollars today exactly. It's an interesting chart. You 0:11:29.240 --> 0:11:31.200 put that chart up there for the last several years, 0:11:31.200 --> 0:11:33.920 and that's a picture of violatility. So Danny, I know 0:11:34.160 --> 0:11:37.280 that coin Shares is the largest crypto asset manager in Europe. 0:11:37.280 --> 0:11:40.000 So I want to ask you, given your perspective, step 0:11:40.000 --> 0:11:42.800 back a little bit just for our listeners to get 0:11:42.800 --> 0:11:45.520 a sense of how do you think crypto coins are, 0:11:45.520 --> 0:11:49.760 cryptocurrencies will develop and what some of the applications might 0:11:50.040 --> 0:11:53.720 be over the next several years. I think there's you know, 0:11:54.000 --> 0:11:56.880 one of the one of the really fascinating things about 0:11:56.920 --> 0:11:59.640 bitcoin is it can be viewed in so many different lights, 0:12:00.120 --> 0:12:03.480 um and and it is so international. Some people consider 0:12:03.480 --> 0:12:06.120 it to be a proxy for early state technology, some 0:12:06.160 --> 0:12:10.400 people consider it to be a currency summer commodity, and 0:12:10.400 --> 0:12:12.719 and that's what you know. People can find reasons to 0:12:13.160 --> 0:12:17.600 get to have appeal from bitcoin in many, many different ways. Um. 0:12:17.640 --> 0:12:20.560 I think underlying that is the concept of some sort 0:12:20.559 --> 0:12:23.679 of a little bit of financial freedom and this concept 0:12:23.720 --> 0:12:28.120 of appeer to peer transactions of originally Bitcoin, now Libra 0:12:28.240 --> 0:12:30.960 and potentially other assets in the future. And I think 0:12:30.960 --> 0:12:34.520 that's in response to a banking system which is and 0:12:34.559 --> 0:12:37.439 an asset transfer system which is actually quite dated. Now. 0:12:37.679 --> 0:12:40.520 So where are we just quickly, Danny, in the evolution 0:12:40.800 --> 0:12:46.400 of institutions adapting or adapting cryptocurrencies. Well, again, it's a 0:12:46.480 --> 0:12:49.920 slow it's a slow development. Um. It was interesting to 0:12:49.920 --> 0:12:52.120 see Fidelity actually did get over the line here in 0:12:52.120 --> 0:12:56.400 the United States and produced their institutional custody solution which 0:12:56.440 --> 0:12:59.600 is slowly growing out coin based. Also who in the 0:12:59.679 --> 0:13:03.200 US are making a big push on the institutional custody 0:13:03.240 --> 0:13:06.080 side as well. And so, you know, I think we 0:13:06.120 --> 0:13:10.560 can say that this whole episode with Bitcoin to date 0:13:10.760 --> 0:13:14.440 has happened in isolation of institutions, and institutions will not 0:13:14.559 --> 0:13:17.640 arrive until we can say with certainty your assets are 0:13:17.640 --> 0:13:20.480 not going to disappear or be hacked. That doesn't happen 0:13:20.480 --> 0:13:23.720 in any other institutional asset class. But that seems to 0:13:23.760 --> 0:13:26.280 be you know, in the in the immediate future, and 0:13:26.320 --> 0:13:29.040 I think that's going to be a positive Danny Masters, 0:13:29.040 --> 0:13:45.640 thank you so much for joining us. Well. The U 0:13:45.679 --> 0:13:48.160 S consumer confidence fell in June to the lowest level 0:13:48.200 --> 0:13:53.000 since twenty September. The indext came in at one pot 0:13:53.080 --> 0:13:55.599 five That was lower than any of the estimates in 0:13:55.640 --> 0:13:59.640 the Blueberg survey consensus was one, so a big miss there. 0:14:00.000 --> 0:14:01.520 Help us dig into the numbers a little bit. We 0:14:01.520 --> 0:14:05.000 welcome back Lynn Franco, Lynna's director of Economic Indicators at 0:14:05.000 --> 0:14:07.360 the Conference Board. She joins us here in our Bloomberg 0:14:07.360 --> 0:14:09.959 eleven three oh studios. Lynn, thanks so much for joining us. 0:14:09.960 --> 0:14:15.800 Surprising miss here for the June period. What was driving it? Well, 0:14:15.840 --> 0:14:18.599 I think the number one concern was the trade and 0:14:18.720 --> 0:14:21.640 tariff discussions, and I think heated up quite a bit 0:14:21.680 --> 0:14:24.400 in early June, both with Mexico and China. Seems to 0:14:24.440 --> 0:14:28.960 have rattled consumers confidence both in the present term and 0:14:28.960 --> 0:14:30.800 and the outlook. So it remains to be seen. I 0:14:30.800 --> 0:14:33.280 mean a little bit of it dissipated in regards with Mexico. 0:14:33.360 --> 0:14:35.120 We have to see what happens at the G twenty 0:14:35.200 --> 0:14:39.240 summit um. But hopefully we can recoup some of this 0:14:39.320 --> 0:14:42.480 lost next month and it doesn't derail spending. So at 0:14:42.520 --> 0:14:45.440 what point do we care about this? Because basically consumer 0:14:45.560 --> 0:14:48.720 more than two thirds of the economy in the United States, 0:14:48.720 --> 0:14:51.360 has been the driver of the recovery. This is the 0:14:51.440 --> 0:14:55.840 area that Michael McKie of Bloomberg News in television radio 0:14:55.920 --> 0:14:58.600 has said this morning is what to watch to determine 0:14:58.600 --> 0:15:01.240 when the cycle will turn. What is it concerning to you. 0:15:01.680 --> 0:15:03.600 I think if we get you know, sort of back 0:15:03.600 --> 0:15:07.200 to back declines going forward. Now, if we have another 0:15:07.240 --> 0:15:11.240 decline in July, another decline in August, um, i'd be 0:15:11.400 --> 0:15:14.000 I think I'd take volatility as positive news that we 0:15:14.040 --> 0:15:15.720 can say, well, you know, it was a few events 0:15:15.720 --> 0:15:18.080 that sort of rattled them for one particular month, and 0:15:18.120 --> 0:15:21.120 we're back on track. It's still a strong reading. But 0:15:21.160 --> 0:15:23.800 if we continue on a downward trend, then I would 0:15:23.840 --> 0:15:27.600 become a little bit concerned. So this index has historically 0:15:27.680 --> 0:15:31.000 been highly correlated with payrolls and with employment, and still 0:15:31.000 --> 0:15:34.000 the pictures still generally good. There there any cracks in 0:15:34.040 --> 0:15:37.600 the employment from from your data. Well, we did see 0:15:37.640 --> 0:15:39.720 the number of consumers who said jobs are hard to 0:15:39.760 --> 0:15:42.560 get shot up um and that's at the highest level 0:15:42.600 --> 0:15:46.680 now since you know, November of and I think that 0:15:46.720 --> 0:15:49.320 could be related to the employment data that we saw 0:15:49.320 --> 0:15:50.880 in May, where there seemed to be you know, we're 0:15:50.920 --> 0:15:53.160 not hiring, but we're not firing either, and there was 0:15:53.160 --> 0:15:55.360 a pause there. So I think we need to keep 0:15:55.400 --> 0:15:57.680 an eye on what happens in terms of jobs in 0:15:57.720 --> 0:15:59.720 the months to come as well, And can you just 0:15:59.720 --> 0:16:02.000 give us a sense of the read through of the 0:16:02.040 --> 0:16:06.480 consumer confidence data with potential increase or slow down in 0:16:06.520 --> 0:16:08.320 the U S economy in other words, with the lag 0:16:08.360 --> 0:16:11.400 effect here well, generally the we we take a look 0:16:11.400 --> 0:16:13.520 at the expectations index, so that can have like a 0:16:13.560 --> 0:16:15.560 six month lead, but again we need to see sort 0:16:15.560 --> 0:16:19.000 of a persistent downturn that then manifests itself in the 0:16:19.000 --> 0:16:22.320 present situation as well. So it's it's interesting to, you know, 0:16:22.520 --> 0:16:24.800 take a look at the two components and see if 0:16:24.800 --> 0:16:27.200 they're moving in sync, and if they're both heading south, 0:16:27.560 --> 0:16:30.040 then we could begin to see a weakening and consumer 0:16:30.080 --> 0:16:33.040 confidence and spending and the economy as a whole. One 0:16:33.080 --> 0:16:34.440 of the things at least, and I've been hearing more 0:16:34.440 --> 0:16:36.240 and more over the less several weeks when we talk 0:16:36.320 --> 0:16:40.120 to economists and fund managers, is that the potential and 0:16:40.160 --> 0:16:42.640 maybe even likelihood for some type of for a recession, 0:16:42.640 --> 0:16:45.720 and maybe MIDI or anything in your data suggesting that 0:16:45.720 --> 0:16:49.800 that is reasonable expectation. As of right now, we're not 0:16:49.880 --> 0:16:52.800 expecting a recession at least this year. Obviously, you know, 0:16:52.840 --> 0:16:56.040 the probability could increase if we begin to face you know, 0:16:56.640 --> 0:16:59.240 encounter more tail winds, so to speak. But for right now, 0:16:59.320 --> 0:17:01.080 you know, we're more a little bit concerned. I think 0:17:01.080 --> 0:17:04.000 with a divergence between you know, business confidence and consumer 0:17:04.080 --> 0:17:06.880 confidence and to see whether or not those two then 0:17:06.920 --> 0:17:09.639 sort of we can close the gap there, um, because 0:17:09.640 --> 0:17:14.320 we've got business leaders who are significantly less confident than consumers. 0:17:14.920 --> 0:17:18.760 I'm just wondering if there is something in particular that 0:17:18.800 --> 0:17:21.360 we can pinpoint as an issue that's the key one 0:17:21.400 --> 0:17:24.480 that consumers are watching to get resolved to feel more 0:17:24.520 --> 0:17:27.439 confident again. Well, we did see a tremendous spike in 0:17:27.440 --> 0:17:31.760 the mentions of trade and tariff discussions this month. Um, 0:17:32.040 --> 0:17:35.639 you know, it's maybe three, four or five times the 0:17:35.760 --> 0:17:37.920 number of mentions that we've seen over the last month. 0:17:38.000 --> 0:17:42.480 So whatever happened in early June obviously resonated very negatively 0:17:42.600 --> 0:17:46.240 with consumers. Now, you know, things have dissipated a little bit. 0:17:46.320 --> 0:17:48.240 I think the situation is probably a little bit more 0:17:48.240 --> 0:17:49.920 favorable than it was at the beginning of the month. 0:17:49.960 --> 0:17:51.320 So we'll see if we get a bounce back in 0:17:51.560 --> 0:17:54.399 early July or not, or if we continue sort of 0:17:54.400 --> 0:17:57.160 in this you know push and pull with trades and tariffs. 0:17:57.160 --> 0:17:59.960 It could have a lasting impact on confidence. I don't 0:18:00.000 --> 0:18:02.679 think that issue is likely going away. We'll see what 0:18:02.680 --> 0:18:05.159 happens in the G twenty this weekend, but I mean, 0:18:05.200 --> 0:18:07.040 I think we certainly China. It seems like it might 0:18:07.040 --> 0:18:08.600 be at best case what we've been here from people's 0:18:08.640 --> 0:18:10.240 kick the can down the road a little bit. Yeah, 0:18:10.240 --> 0:18:13.119 but this to me is a fascinating point. And Lynn Franco, 0:18:13.200 --> 0:18:14.679 this is such a great day for you to be 0:18:14.760 --> 0:18:19.600 here because the idea that the uncertainty around trade is 0:18:19.640 --> 0:18:23.320 bleeding into the real economy and consumers willingness to spend, 0:18:23.680 --> 0:18:26.680 not just big corporation saying oh, it's going to cost 0:18:26.760 --> 0:18:29.679 us more. This is a very interesting fact and it 0:18:29.760 --> 0:18:32.760 raises some serious questions. If we don't get some sort 0:18:32.800 --> 0:18:36.280 of resolution, how regardless of the stock market and their response, 0:18:36.480 --> 0:18:40.720 the actual economic impact could be significant. That, to me, 0:18:40.880 --> 0:18:44.320 is is a fascinating point looking at the consumer confidence data. 0:18:44.440 --> 0:18:46.320 Linn Franco, thank you so much for being with us. 0:19:00.200 --> 0:19:04.000 As geopolitical risk abounds in a number of corners around 0:19:04.040 --> 0:19:07.960 the world, this being reported overnight by Bloomberg News that 0:19:08.040 --> 0:19:11.840 President Trump evidently mused to confidence about withdrawing from a 0:19:11.960 --> 0:19:15.640 longstanding defense treaty with Japan. This according to people who 0:19:15.680 --> 0:19:20.240 spoke with Bloomberg who didn't want to be identified. Joining 0:19:20.280 --> 0:19:23.520 us now to discuss how brands. Henry A. Kissinger, Distinguished 0:19:23.520 --> 0:19:27.480 Professor at Johns Hopkins University's School of Advanced International Studies, 0:19:27.720 --> 0:19:31.760 also a Bloomberg opinion. Calumness joining us from Baltimore, Maryland, How, 0:19:31.800 --> 0:19:33.920 thank you so much for being with us. So let's 0:19:33.920 --> 0:19:38.199 just start there with this concept of upending this defense 0:19:38.240 --> 0:19:41.000 treaty with Japan. What would this mean for the U. 0:19:41.080 --> 0:19:45.080 S And its relationship with that nation. It would mean 0:19:45.080 --> 0:19:48.520 a pretty significant alteration of U. S relations, not just 0:19:48.520 --> 0:19:51.240 with Japan, but with the entire Asia Pacific in the 0:19:51.280 --> 0:19:54.320 sense that the US alliance with Japan has been the 0:19:54.400 --> 0:19:57.520 cornerstone of America's strategic posture in that part of the 0:19:57.560 --> 0:20:01.440 world UH for over sixty years at this point. It's 0:20:01.440 --> 0:20:04.760 been the cornerstone of peace and security in an incredibly 0:20:04.840 --> 0:20:07.199 dynamic region. And so if the United States were to 0:20:07.200 --> 0:20:10.320 pull back, if they were to withdraw from that alliance UH, 0:20:10.520 --> 0:20:14.720 it would fundamentally up end both geopolitical and geoeconomic arrangements 0:20:14.720 --> 0:20:17.399 of the region. So, professor, would you if if the 0:20:17.480 --> 0:20:19.760 US were to pull out of this long standing arrangement 0:20:19.800 --> 0:20:22.000 would have materially weakened the US in that region of 0:20:22.000 --> 0:20:25.920 the world in your opinion. Certainly, you know, the United 0:20:25.960 --> 0:20:28.960 States derives an enormous amount of influence because it has 0:20:29.040 --> 0:20:32.320 security alliances with key countries throughout the region, Japan being 0:20:32.359 --> 0:20:34.720 the most important, and so if the United States were 0:20:34.760 --> 0:20:38.159 no longer so closely allied to Japan, or if it 0:20:38.200 --> 0:20:41.400 went so far as to terminate the alliance, there would 0:20:41.400 --> 0:20:44.119 be far less reason for Japanese leaders to listen to 0:20:44.160 --> 0:20:47.439 American leaders on a whole variety of issues. So I 0:20:47.440 --> 0:20:50.840 guess there's a question of how much President Trump was 0:20:50.880 --> 0:20:54.240 taking this seriously, how much this was just musing on 0:20:54.359 --> 0:20:58.439 the heels of some report by President Trump, And we 0:20:58.520 --> 0:21:01.600 don't have the details on that point. But there is 0:21:01.600 --> 0:21:04.800 a question how much com President from do unilaterally, both 0:21:04.840 --> 0:21:06.920 with this as well as some of his other threats 0:21:06.920 --> 0:21:10.280 with Iran. How much can he do without congressional approval. 0:21:11.800 --> 0:21:14.159 You would probably get differing opinions on that, in the 0:21:14.200 --> 0:21:17.800 sense that I would imagine the President would argue that 0:21:17.880 --> 0:21:23.560 he has the authority to withdraw unilaterally from various treaties 0:21:23.560 --> 0:21:25.560 that the United States has signed, but I imagine the 0:21:25.560 --> 0:21:28.679 Congress would have a different opinion, and so that there 0:21:28.720 --> 0:21:31.439 would be a degree of conflict within the U S 0:21:31.440 --> 0:21:34.440 system over that question. But but pivoting to the point 0:21:34.440 --> 0:21:36.800 you raised about whether the president is serious, I think 0:21:37.359 --> 0:21:39.400 there are a couple of things to keep in mind. One, 0:21:39.600 --> 0:21:42.760 this is a recurring theme with this president. He's openly 0:21:42.960 --> 0:21:47.240 or privately mused about withdrawing from a number of American alliances, 0:21:47.280 --> 0:21:50.399 including NATO and the U S to Panelliance, since becoming 0:21:50.440 --> 0:21:53.320 president and even before. And I think that the general 0:21:53.359 --> 0:21:57.200 perception is that this is probably more blowing off steam 0:21:57.200 --> 0:22:00.320 than anything else. But these reports still have a oncrete 0:22:00.320 --> 0:22:03.280 effects because they certainly can't do much for the self 0:22:03.320 --> 0:22:07.800 confidence of US allies in tense parts of the world. So, Professor, 0:22:07.840 --> 0:22:10.479 one of the backbones of some of these discussions from 0:22:10.480 --> 0:22:12.840 President Trump about pulling out of some of these alliances 0:22:12.960 --> 0:22:17.400