1
00:00:05,800 --> 00:00:08,720
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.

2
00:00:08,760 --> 00:00:11,520
Speaker 1: Along with my co host Lisa Bramowitz. Each day we

3
00:00:11,640 --> 00:00:15,120
Speaker 1: bring you the most important, noteworthy, and useful interviews for

4
00:00:15,200 --> 00:00:17,840
Speaker 1: you and your money, whether you're at the grocery store

5
00:00:17,960 --> 00:00:20,720
Speaker 1: or the trading floor. Find the Bloomberg p m L

6
00:00:20,840 --> 00:00:32,720
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. There's

7
00:00:32,720 --> 00:00:35,880
Speaker 1: been a question hovering over markets these days, how much

8
00:00:36,080 --> 00:00:40,640
Speaker 1: political upheaval can there be without any real, substantial and

9
00:00:40,680 --> 00:00:44,879
Speaker 1: prolonged reaction from markets. Chuck Lieberman has perhaps some answers.

10
00:00:44,880 --> 00:00:48,600
Speaker 1: He's chief investment officer and managing partner of Adviser's Capital Management,

11
00:00:48,600 --> 00:00:51,120
Speaker 1: which oversees about one point three billion dollars. Also, he

12
00:00:51,240 --> 00:00:56,560
Speaker 1: is a Bloomberg View columnist through the Bloomberg Profits Group. Charles, Chuck,

13
00:00:56,720 --> 00:00:58,720
Speaker 1: thank you so much for joining us. You raised an

14
00:00:58,760 --> 00:01:02,800
Speaker 1: interesting reality check, basically saying that all of this political

15
00:01:02,840 --> 00:01:07,560
Speaker 1: noise only matters so much as it affects underlying growth.

16
00:01:07,800 --> 00:01:11,840
Speaker 1: Can you explain sure? Um, Well, obviously the news is

17
00:01:11,880 --> 00:01:16,760
Speaker 1: full of politics. Um, this stuff happening seemingly almost every day,

18
00:01:17,120 --> 00:01:21,800
Speaker 1: and Washington is obviously dysfunctional. But how that relates to

19
00:01:21,840 --> 00:01:24,479
Speaker 1: the stock market depends on whether or not it UH

20
00:01:24,720 --> 00:01:28,160
Speaker 1: actually affects corporate profits. If companies are doing well, If

21
00:01:28,160 --> 00:01:31,119
Speaker 1: the economy is growing, and the economy is certainly growing,

22
00:01:31,120 --> 00:01:34,800
Speaker 1: and corporate profits are actually doing quite well, then stock

23
00:01:34,920 --> 00:01:40,200
Speaker 1: valuation should rise over time to reflect that rise in profitability. Um. Yes,

24
00:01:40,680 --> 00:01:44,759
Speaker 1: we pay attention to the politics. It certainly captures our attention,

25
00:01:45,200 --> 00:01:49,080
Speaker 1: but it's a side show to the valuation of stocks. Well, Chuck,

26
00:01:49,120 --> 00:01:51,279
Speaker 1: maybe you could talk a little bit more detail about

27
00:01:51,320 --> 00:01:55,360
Speaker 1: corporate profits in light of shared buy backs and the

28
00:01:55,400 --> 00:01:58,560
Speaker 1: ability to discern what is a real profit and what's

29
00:01:58,600 --> 00:02:00,920
Speaker 1: not a real profit. Since company these use gap and

30
00:02:00,960 --> 00:02:06,200
Speaker 1: non gap results, it's it's just increasingly difficult. Well, look,

31
00:02:06,240 --> 00:02:09,360
Speaker 1: there are different ways to measure profits. UM, we have

32
00:02:09,760 --> 00:02:14,440
Speaker 1: a system in the US gap accounting. International companies use

33
00:02:14,480 --> 00:02:19,359
Speaker 1: a different methodology, but our methodology is what it is, UH,

34
00:02:19,400 --> 00:02:21,840
Speaker 1: and over time, what it has shown is that corporate

35
00:02:21,840 --> 00:02:25,360
Speaker 1: profits rise pretty substantially over time. Uh. There were five

36
00:02:25,400 --> 00:02:30,240
Speaker 1: consecutive quarters in which US corporate profits fell and bears

37
00:02:30,280 --> 00:02:33,400
Speaker 1: on the market use that as a justification to argue

38
00:02:33,760 --> 00:02:36,920
Speaker 1: that stocks were overvalued. But at the same time, if

39
00:02:36,960 --> 00:02:39,560
Speaker 1: you actually look at what was going on. All of

40
00:02:39,600 --> 00:02:43,320
Speaker 1: the decline in profits came about because of the energy sector,

41
00:02:43,360 --> 00:02:46,080
Speaker 1: where oil prices dropped from a hundred ten bucks barrel

42
00:02:46,120 --> 00:02:49,359
Speaker 1: to about twenty five. That was a huge decline in

43
00:02:49,400 --> 00:02:53,320
Speaker 1: the profitability of very large companies like Exxon and Chevron

44
00:02:53,400 --> 00:02:57,400
Speaker 1: and others. Uh. Everyone else, however, on average, was actually

45
00:02:57,440 --> 00:03:01,080
Speaker 1: growing profits and their stocks went down to uh. So

46
00:03:01,520 --> 00:03:04,680
Speaker 1: stock valuations look attractive. And and now we have the

47
00:03:04,760 --> 00:03:08,440
Speaker 1: energy sector actually coming back. Oil prices are still volatile,

48
00:03:08,840 --> 00:03:12,800
Speaker 1: but the underlying profitability of companies is doing fine. You know, Chuck,

49
00:03:12,840 --> 00:03:16,920
Speaker 1: I'm struck by the fact that stocks rallied tremendously after

50
00:03:17,280 --> 00:03:21,240
Speaker 1: the November election of President Donald Trump. Uh. And a

51
00:03:21,240 --> 00:03:23,280
Speaker 1: lot of this was because people were baking in the

52
00:03:23,320 --> 00:03:27,280
Speaker 1: expectation of tax cuts for corporations as well as reduced

53
00:03:27,280 --> 00:03:31,480
Speaker 1: regulations that directly was baked into the prices of stock.

54
00:03:31,560 --> 00:03:35,080
Speaker 1: So this is a fundamental change. Have we washed that out?

55
00:03:35,240 --> 00:03:38,000
Speaker 1: And you know, if we haven't, this goes to something

56
00:03:38,080 --> 00:03:41,120
Speaker 1: more than just you know, people's feelings. This is a

57
00:03:41,160 --> 00:03:45,000
Speaker 1: fundamental issue, and it is driven directly by policy. Uh.

58
00:03:45,040 --> 00:03:48,040
Speaker 1: Fair enough, but keep in mind, a number of things

59
00:03:48,040 --> 00:03:51,360
Speaker 1: have all other things have also happened so yes, I

60
00:03:51,400 --> 00:03:54,920
Speaker 1: think the market is hoping that Trump will get some

61
00:03:55,000 --> 00:03:58,520
Speaker 1: tax cuts through. But that's not the only variable involved.

62
00:03:58,560 --> 00:04:02,760
Speaker 1: It's also less regulation. It's also more spending on infrastructure.

63
00:04:02,840 --> 00:04:05,800
Speaker 1: So there are a lot of ways in which policies

64
00:04:05,880 --> 00:04:09,280
Speaker 1: that he advocates could in fact benefit corporate profits in

65
00:04:09,320 --> 00:04:11,160
Speaker 1: the US. Well, hold on a second, how many of

66
00:04:11,200 --> 00:04:14,320
Speaker 1: those policies have to get through in order to justify

67
00:04:14,320 --> 00:04:18,200
Speaker 1: a current value valuations? Well, I think I would argue

68
00:04:18,279 --> 00:04:21,880
Speaker 1: any at this point, people believe that Trump is going

69
00:04:21,920 --> 00:04:24,920
Speaker 1: to get nothing um, and that's one of the reasons

70
00:04:24,920 --> 00:04:27,760
Speaker 1: why stocks having continued to rise. Uh. In the meantime,

71
00:04:27,800 --> 00:04:31,599
Speaker 1: corporate profits have We just had the strongest quarter since

72
00:04:31,600 --> 00:04:35,640
Speaker 1: two thousand and eleven. So corporate profits continue to march on.

73
00:04:36,200 --> 00:04:39,560
Speaker 1: The politics is just a constant show, Chuck, when do

74
00:04:39,640 --> 00:04:43,599
Speaker 1: you sell? Uh? Well, you sell if you start to

75
00:04:43,640 --> 00:04:47,280
Speaker 1: think that the economy is at risks. Uh. Recessions are

76
00:04:47,400 --> 00:04:50,799
Speaker 1: never good for stock valuation. Corporate profits invariably go down.

77
00:04:51,720 --> 00:04:54,880
Speaker 1: You sell if you think that the government is going

78
00:04:54,920 --> 00:04:59,120
Speaker 1: to somehow inhibit corporate profits. Well, when does Chuck Lieberman sell?

79
00:04:59,279 --> 00:05:01,680
Speaker 1: I guess that I mean to be more pointed about it,

80
00:05:01,720 --> 00:05:04,640
Speaker 1: because all right, you know, when you see a decline,

81
00:05:04,720 --> 00:05:06,840
Speaker 1: let's say in stock prices, you can make the argument

82
00:05:06,839 --> 00:05:08,880
Speaker 1: that that's the time to buy, not when they are

83
00:05:08,960 --> 00:05:12,719
Speaker 1: at records. Fair enough, and uh, what we do is

84
00:05:12,760 --> 00:05:15,279
Speaker 1: we continue to watch what they're doing, what the government

85
00:05:15,360 --> 00:05:18,080
Speaker 1: is doing, because it does matter. And when I say

86
00:05:18,120 --> 00:05:20,480
Speaker 1: the government, I don't mean just the administration. I also

87
00:05:20,480 --> 00:05:23,400
Speaker 1: mean the federal Reserve and foreign governments. All of those

88
00:05:23,440 --> 00:05:26,880
Speaker 1: variables matter as long as the economy continues to grow,

89
00:05:27,279 --> 00:05:30,560
Speaker 1: and right now we see no reason why it shouldn't

90
00:05:30,600 --> 00:05:33,440
Speaker 1: continue to grow at a at a solid clip, not

91
00:05:33,560 --> 00:05:37,440
Speaker 1: a rapid clip. And because of leverage in the corporate

92
00:05:37,440 --> 00:05:40,760
Speaker 1: sector as well as how lean they are, I expect

93
00:05:40,760 --> 00:05:43,359
Speaker 1: corporate profits to continue to grow in the in the

94
00:05:43,400 --> 00:05:47,479
Speaker 1: ballpark of per year. As long as that's happening, I

95
00:05:47,480 --> 00:05:51,080
Speaker 1: don't want to sell unless the economy looks like it's

96
00:05:51,120 --> 00:05:53,680
Speaker 1: really at risk. Chuck. One thing that you pointed to

97
00:05:53,800 --> 00:05:56,159
Speaker 1: in your recent column was that there is so much

98
00:05:56,240 --> 00:05:59,960
Speaker 1: cash still out there that has not been invested yet.

99
00:06:00,080 --> 00:06:03,080
Speaker 1: How much cash are you looking at? Where is it?

100
00:06:03,160 --> 00:06:05,719
Speaker 1: Because if I look at mutual funds, for example, particularly

101
00:06:05,760 --> 00:06:09,200
Speaker 1: equity mutual funds, they're pretty heavily invested, there isn't a

102
00:06:09,200 --> 00:06:12,560
Speaker 1: lot of cash there. Well yeah, well that's one of

103
00:06:12,600 --> 00:06:15,960
Speaker 1: the reasons why I was very vague with that statement, Uh,

104
00:06:16,040 --> 00:06:18,719
Speaker 1: because it is difficult to measure. So start off with

105
00:06:18,800 --> 00:06:21,680
Speaker 1: mutual funds, the amount of cash they hold varies over

106
00:06:21,760 --> 00:06:24,839
Speaker 1: time and fun to fund. On average, they look like

107
00:06:24,880 --> 00:06:27,400
Speaker 1: they're a little bit heavy now. But we're not talking

108
00:06:27,400 --> 00:06:30,760
Speaker 1: about a huge amount of three But then when you

109
00:06:30,800 --> 00:06:34,599
Speaker 1: look at the billions that have flowed into both money

110
00:06:34,600 --> 00:06:38,239
Speaker 1: funds and in the CDs and bank accounts, all because

111
00:06:38,279 --> 00:06:40,920
Speaker 1: people are nervous about the market. There are a lot

112
00:06:41,000 --> 00:06:44,160
Speaker 1: of people who pulled out of equities back in two

113
00:06:44,160 --> 00:06:47,720
Speaker 1: thousand and two thousand nine and still haven't gotten in.

114
00:06:48,080 --> 00:06:51,080
Speaker 1: And I'm still reading about people who are hoping that

115
00:06:51,160 --> 00:06:53,919
Speaker 1: the market sells off in order to give them an

116
00:06:53,960 --> 00:06:56,440
Speaker 1: opportunity to get in. So I think there's a lot

117
00:06:56,480 --> 00:06:59,000
Speaker 1: of money on the sidelines. And you can see that

118
00:06:59,080 --> 00:07:01,640
Speaker 1: I think from the aavior of the market. Uh, the

119
00:07:01,680 --> 00:07:04,960
Speaker 1: market really has not been able to sustain any material

120
00:07:05,040 --> 00:07:08,279
Speaker 1: decline of any size for any prood of time in

121
00:07:08,279 --> 00:07:12,120
Speaker 1: the last several years. Um. And in fact, people look

122
00:07:12,160 --> 00:07:15,320
Speaker 1: at that and comment, how that's a negative. I think

123
00:07:15,360 --> 00:07:17,720
Speaker 1: of it as a reflection of a positive which is

124
00:07:17,800 --> 00:07:20,000
Speaker 1: all of that cash sitting on the sidelines by people

125
00:07:20,040 --> 00:07:22,840
Speaker 1: have missed the market. Chuck, They've been quick question for you.

126
00:07:22,960 --> 00:07:25,160
Speaker 1: What was the biggest mistake you've made? Look and you

127
00:07:25,160 --> 00:07:29,119
Speaker 1: look at the market over the last twelve months, over

128
00:07:29,160 --> 00:07:33,520
Speaker 1: the last twelve months. Thanks for throwing me a curveballpin

129
00:07:34,280 --> 00:07:40,239
Speaker 1: um not being more aggressive? Um. I think this market,

130
00:07:40,480 --> 00:07:44,120
Speaker 1: there's so much fear out there and there's so much caution.

131
00:07:45,000 --> 00:07:48,800
Speaker 1: I think this that creates an environment in which people

132
00:07:48,880 --> 00:07:51,760
Speaker 1: are looking for opportunities to get in if they can.

133
00:07:52,280 --> 00:07:55,920
Speaker 1: And I think you have to be aggressive until conditions

134
00:07:55,920 --> 00:07:58,240
Speaker 1: turn less favorable. All right, I'm gonna leave it there,

135
00:07:58,320 --> 00:08:00,800
Speaker 1: Thanks very much, Chuck Lieberman. He is that investment officer

136
00:08:00,920 --> 00:08:06,280
Speaker 1: managing Partner Advisors, a capital management He helps manage more

137
00:08:06,320 --> 00:08:21,440
Speaker 1: than a billion dollars of assets under management. But we

138
00:08:21,520 --> 00:08:24,320
Speaker 1: have a massive trade deficit with Germany. Plus they pay

139
00:08:24,560 --> 00:08:27,320
Speaker 1: they pay far less than they should on NATO and

140
00:08:27,440 --> 00:08:31,520
Speaker 1: the military. This is according to President Donald Trump posting

141
00:08:31,560 --> 00:08:34,079
Speaker 1: this message on Twitter and here to tell us. Morris

142
00:08:34,120 --> 00:08:37,240
Speaker 1: Patrick donohue. He is a government reporter for Bloomberg and

143
00:08:37,280 --> 00:08:40,000
Speaker 1: he joined us from ber Lynn Patrick thanks for being

144
00:08:40,080 --> 00:08:42,559
Speaker 1: with us. Maybe you could just set out for us

145
00:08:42,760 --> 00:08:46,240
Speaker 1: what is the fact and what is the rhetoric when

146
00:08:46,280 --> 00:08:49,959
Speaker 1: it comes to trade between the United States and Germany. Well,

147
00:08:50,000 --> 00:08:53,400
Speaker 1: there's definitely a big trade UH surplus that Germany has,

148
00:08:54,280 --> 00:08:58,360
Speaker 1: not just with the US, but with most European countries.

149
00:08:58,400 --> 00:09:02,800
Speaker 1: It's it's sort of in the euro Zone and so UM.

150
00:09:02,880 --> 00:09:04,480
Speaker 1: And if you look, if you look back at the

151
00:09:04,520 --> 00:09:07,280
Speaker 1: imbalances that were triggered through the creation of the euro

152
00:09:07,480 --> 00:09:10,719
Speaker 1: and the succession the crisis, UH, these are imbalances that

153
00:09:10,760 --> 00:09:15,120
Speaker 1: are sort of built in. UM. It's true that there

154
00:09:15,280 --> 00:09:20,640
Speaker 1: is a pretty staggering surplus. And it's not just Trump

155
00:09:20,679 --> 00:09:22,720
Speaker 1: the U. S administration who who like to talk about this,

156
00:09:22,720 --> 00:09:26,600
Speaker 1: but also the European Commission, UH, the O E C D,

157
00:09:26,760 --> 00:09:29,960
Speaker 1: the I m F have criticized Germany for doing too

158
00:09:29,960 --> 00:09:34,199
Speaker 1: little to address the surplus. Patrick, how new is this conversation?

159
00:09:34,320 --> 00:09:36,600
Speaker 1: I mean, is this something that has been discussed in

160
00:09:36,760 --> 00:09:40,320
Speaker 1: back rooms for years and now we're just seeing it

161
00:09:40,320 --> 00:09:43,839
Speaker 1: in a very different light sort of aired through uh.

162
00:09:44,800 --> 00:09:49,880
Speaker 1: I guess campaign speeches and Twitter. Uh. The trade issue

163
00:09:49,920 --> 00:09:53,000
Speaker 1: is not new. I think even in the Obama administration

164
00:09:53,000 --> 00:09:57,079
Speaker 1: there was plenty of criticism about Germany's deficit, I think

165
00:09:57,480 --> 00:10:01,400
Speaker 1: a surplus sorry UM. With the tru administration, it's taken

166
00:10:01,400 --> 00:10:04,080
Speaker 1: a completely different tack. If you listen to somebody like

167
00:10:04,840 --> 00:10:08,960
Speaker 1: um Trump's top trade advisor, Peter Navarro, uh the way

168
00:10:08,960 --> 00:10:14,520
Speaker 1: he discussed his trade um, he lays blame to Germany

169
00:10:14,520 --> 00:10:17,079
Speaker 1: for most of it and says that Germany's hiding behind

170
00:10:17,080 --> 00:10:20,839
Speaker 1: its membership in the euro to take advantage of its

171
00:10:20,880 --> 00:10:24,920
Speaker 1: position UM, which sounds strange to German ears because it's

172
00:10:24,920 --> 00:10:29,400
Speaker 1: not something you can really undo. Patrick. The automobile industry

173
00:10:29,480 --> 00:10:32,120
Speaker 1: and automobile exports money. If you could just speak about

174
00:10:32,160 --> 00:10:34,679
Speaker 1: the German role there and also about their role in

175
00:10:34,760 --> 00:10:39,280
Speaker 1: manufacturing in the United States. Auto exports are the backbone

176
00:10:39,280 --> 00:10:44,480
Speaker 1: of German of Germany's export economy, it's export might um.

177
00:10:44,520 --> 00:10:46,680
Speaker 1: And when Donald Trump, for example, talks about all of

178
00:10:46,800 --> 00:10:50,319
Speaker 1: the Mercedes and BMW's on history in New York, UM,

179
00:10:50,360 --> 00:10:53,439
Speaker 1: it's true, Americans by a lot of German cars. Americans

180
00:10:53,480 --> 00:10:55,840
Speaker 1: like German cars. But at the same time, a lot

181
00:10:55,880 --> 00:10:58,280
Speaker 1: of those German cars are built in the US, and

182
00:10:58,360 --> 00:11:02,040
Speaker 1: so it's not simply a matter of Americans buying German

183
00:11:02,080 --> 00:11:05,800
Speaker 1: cars that are shipped overseas from Germany. It's more complicated

184
00:11:05,800 --> 00:11:09,360
Speaker 1: than that, You know, Patrick, I'm really struck by what

185
00:11:09,480 --> 00:11:12,520
Speaker 1: Angela Merkel said over the weekend where she said, you know,

186
00:11:12,880 --> 00:11:16,400
Speaker 1: we Europeans cannot rely on the US the way that

187
00:11:16,440 --> 00:11:18,160
Speaker 1: we have. I was struck. Two. I was in the

188
00:11:18,160 --> 00:11:20,559
Speaker 1: beer tent with her. Did not expect her to talk

189
00:11:20,600 --> 00:11:23,960
Speaker 1: about geopolitics at a campaign rally. So you were there,

190
00:11:23,960 --> 00:11:26,240
Speaker 1: What was the response like, What was the mood like

191
00:11:26,360 --> 00:11:30,560
Speaker 1: when she uttered those words? Um, those words were uttered

192
00:11:30,600 --> 00:11:33,160
Speaker 1: at the beginning of a little long sentence that continued

193
00:11:33,200 --> 00:11:35,160
Speaker 1: with this idea that well, we Europeans have to go

194
00:11:35,200 --> 00:11:37,320
Speaker 1: our own way, we have to take our destiny in

195
00:11:37,360 --> 00:11:41,120
Speaker 1: our own hands. That sort of rhetoric coming from America

196
00:11:41,200 --> 00:11:46,400
Speaker 1: was not entirely new. Uh. This reliability comment is rather new,

197
00:11:46,720 --> 00:11:50,200
Speaker 1: and in the context of the the breakdown at the

198
00:11:50,240 --> 00:11:55,120
Speaker 1: G seven summit, when the administrative US administration Trump would

199
00:11:55,120 --> 00:11:59,240
Speaker 1: not commit to remaining in the Paris Climate Accord, it

200
00:11:59,280 --> 00:12:01,880
Speaker 1: took a whole new meaning. And so when you when

201
00:12:01,880 --> 00:12:06,480
Speaker 1: you place the reliability of your closest post World War

202
00:12:06,559 --> 00:12:10,760
Speaker 1: two ally in doubt, then that's a big deal. The

203
00:12:10,840 --> 00:12:14,920
Speaker 1: question here is did she mean to cause such a

204
00:12:14,960 --> 00:12:22,280
Speaker 1: stir was she's delivering this to the German electorate. Um,

205
00:12:22,360 --> 00:12:25,480
Speaker 1: I don't know, we haven't. We have a Twitter response

206
00:12:25,520 --> 00:12:30,920
Speaker 1: from President Trump today. Uh, clearly this is royal things

207
00:12:30,960 --> 00:12:34,439
Speaker 1: across the Atlantic. Patrick. When I look at the exports

208
00:12:34,440 --> 00:12:37,400
Speaker 1: as a percentage of GDP and you look at various countries,

209
00:12:37,400 --> 00:12:39,840
Speaker 1: Germany comes out as a really top of the list.

210
00:12:40,040 --> 00:12:45,240
Speaker 1: Forty more than fort of GDP is accounted for as exports.

211
00:12:45,280 --> 00:12:48,520
Speaker 1: What does Germany do that the other countries in Europe

212
00:12:48,600 --> 00:12:50,439
Speaker 1: or even in the United States, which is just around

213
00:12:50,480 --> 00:12:54,320
Speaker 1: ten percent, don't do well. One thing Germany does it

214
00:12:54,760 --> 00:12:59,640
Speaker 1: manufactures um quality products and exports them, and it has

215
00:12:59,679 --> 00:13:02,160
Speaker 1: done that very well for a long time. On the

216
00:13:02,160 --> 00:13:05,520
Speaker 1: other side, it's a question of what Germany has not done.

217
00:13:05,880 --> 00:13:11,240
Speaker 1: Um An export surplus is you know what Germany exports

218
00:13:11,240 --> 00:13:14,600
Speaker 1: minus what it's what it's not importing. So the criticism

219
00:13:14,640 --> 00:13:18,400
Speaker 1: for Germany, obviously it's impossible to say stop making such

220
00:13:18,440 --> 00:13:23,440
Speaker 1: great cars. It's rather Germany should do more to um

221
00:13:23,600 --> 00:13:28,840
Speaker 1: boost domestic demand domestic spending to raise imports. This has

222
00:13:28,880 --> 00:13:32,520
Speaker 1: been a classic criticism of German policy, and there's a

223
00:13:32,520 --> 00:13:37,599
Speaker 1: back and forth about that. The Germans say they're doing plenty. Um,

224
00:13:37,640 --> 00:13:39,760
Speaker 1: I mean, leave aside Trump, but as I said, the

225
00:13:39,760 --> 00:13:42,480
Speaker 1: European Commission i m F have come down pretty hard

226
00:13:42,480 --> 00:13:46,640
Speaker 1: on Germany for not addressing the issue and creating imbalances

227
00:13:46,679 --> 00:13:49,720
Speaker 1: within the Eurozone and globally. You know, Patrick, I'm struck

228
00:13:49,760 --> 00:13:52,600
Speaker 1: by what you're saying that there are Europeans that agree

229
00:13:52,600 --> 00:13:56,559
Speaker 1: with President Trump at least on with respect to Germans

230
00:13:57,000 --> 00:14:01,000
Speaker 1: role in trade and their trade surplus. That might be

231
00:14:01,040 --> 00:14:02,560
Speaker 1: taking it too far. Okay, Well that was what I

232
00:14:02,600 --> 00:14:04,400
Speaker 1: was going to ask. Is that taking it too far?

233
00:14:04,840 --> 00:14:07,040
Speaker 1: You know, because it really has been created as sort

234
00:14:07,040 --> 00:14:10,400
Speaker 1: of a Trump versus Merkel kind of a kind of

235
00:14:10,400 --> 00:14:12,800
Speaker 1: situation right now. Well, I mean, when you talk about

236
00:14:13,240 --> 00:14:17,000
Speaker 1: trade policy and trade arrangements, things get complicated, as with

237
00:14:17,080 --> 00:14:23,480
Speaker 1: lots of other things. Trump's um view of the problem

238
00:14:23,680 --> 00:14:27,560
Speaker 1: is somewhat crude compared to how, you know, the chief

239
00:14:27,560 --> 00:14:31,440
Speaker 1: economist at the i m F might criticize Germany's UH surplus.

240
00:14:31,640 --> 00:14:35,240
Speaker 1: So that is just to say that when Donald Trump

241
00:14:35,360 --> 00:14:37,280
Speaker 1: or Peter Navarro or somebody else I don't know, Steve

242
00:14:37,280 --> 00:14:40,840
Speaker 1: benn And starts talking about the German exports, it's it's

243
00:14:40,880 --> 00:14:45,360
Speaker 1: not the same thing, but it's all it's there's addressing

244
00:14:45,960 --> 00:14:48,520
Speaker 1: an issue that has been on the table for a while,

245
00:14:48,880 --> 00:14:52,800
Speaker 1: but there's a there's something else going on there. Patrick Donahue,

246
00:14:52,880 --> 00:14:54,600
Speaker 1: thank you so much for joining us. Patrick donahue is

247
00:14:54,640 --> 00:14:57,040
Speaker 1: a Berlin reporter for a Bloomberg News and he comes

248
00:14:57,080 --> 00:15:01,160
Speaker 1: to us from Berlin, Germany, very diplomatically, saying that the

249
00:15:01,200 --> 00:15:03,920
Speaker 1: tone of President Trump's comments perhaps does not jibe in

250
00:15:03,960 --> 00:15:06,160
Speaker 1: any way, shape or form with the Europeans, regardless of

251
00:15:06,160 --> 00:15:22,480
Speaker 1: their views on Germany's policies. A collective ignorance, a mistrust

252
00:15:22,560 --> 00:15:26,000
Speaker 1: of finance today, it's detrimental to our personal and national

253
00:15:26,080 --> 00:15:29,120
Speaker 1: financial security. And here to help us reimagine what the

254
00:15:29,160 --> 00:15:32,920
Speaker 1: finance industry could be is me here Decide. He is

255
00:15:32,960 --> 00:15:36,680
Speaker 1: the Miszooho Financial Group Professor of Finance at the Harvard

256
00:15:36,680 --> 00:15:39,000
Speaker 1: Business School, and he's also a professor of Law at

257
00:15:39,120 --> 00:15:41,440
Speaker 1: Harvard Law School and the author of a new book

258
00:15:41,560 --> 00:15:45,520
Speaker 1: entitled The Wisdom of Finance, Discovering Humanity in the World

259
00:15:45,600 --> 00:15:48,920
Speaker 1: of Risk and Return. Professor Decide, thanks very much for

260
00:15:48,960 --> 00:15:51,160
Speaker 1: being here. It's a pleasure. Thanks for having me. What

261
00:15:51,160 --> 00:15:54,800
Speaker 1: what prompted you to write this book? Well, it got

262
00:15:54,840 --> 00:15:56,840
Speaker 1: started by accident, which I was asked to give a

263
00:15:56,880 --> 00:16:00,400
Speaker 1: talk to graduating students, and I realized that what I

264
00:16:00,400 --> 00:16:03,240
Speaker 1: wanted to do was take finance and both humanize it

265
00:16:03,320 --> 00:16:06,120
Speaker 1: and demystify it. I think finance is broken in some ways,

266
00:16:06,120 --> 00:16:08,160
Speaker 1: and certainly it's perceived as broken, and so I think

267
00:16:08,200 --> 00:16:10,600
Speaker 1: the path forward is first to make it accessible to

268
00:16:10,760 --> 00:16:14,440
Speaker 1: people everywhere. Finance kind of cloaks itself in complexity, and

269
00:16:14,480 --> 00:16:16,280
Speaker 1: we need to demystify it. So the book does that

270
00:16:16,360 --> 00:16:18,760
Speaker 1: by telling stories. And then the second piece is to

271
00:16:18,840 --> 00:16:21,200
Speaker 1: humanize it, which is to tell the stories that make

272
00:16:21,240 --> 00:16:24,680
Speaker 1: people realize that underlying ideas of finance are humanistic, they're

273
00:16:24,680 --> 00:16:27,000
Speaker 1: not crass, and they actually can be used in a

274
00:16:27,120 --> 00:16:32,320
Speaker 1: humanistic way. You know, when you talk about demystifying financial concepts,

275
00:16:32,400 --> 00:16:36,400
Speaker 1: part of the problem is that finance can be complicated.

276
00:16:36,440 --> 00:16:39,880
Speaker 1: It's not just jargon. It's when you're talking about derivative

277
00:16:39,920 --> 00:16:43,120
Speaker 1: concepts and you're talking about, you know, high theory that

278
00:16:43,320 --> 00:16:45,680
Speaker 1: is based on the transfer of money that a lot

279
00:16:45,680 --> 00:16:47,640
Speaker 1: of people just simply don't even understand to begin with.

280
00:16:48,200 --> 00:16:50,320
Speaker 1: How do you go about doing that? Well, So there's

281
00:16:50,320 --> 00:16:52,600
Speaker 1: no doubt that you know, the intricacies of the c

282
00:16:52,680 --> 00:16:55,680
Speaker 1: d O are fairly complex. But the underlying ideas of

283
00:16:55,680 --> 00:16:58,480
Speaker 1: what a derivative instrument, for example, are UM. The way

284
00:16:58,520 --> 00:17:00,120
Speaker 1: I try to explain it is by going back to

285
00:17:00,160 --> 00:17:02,360
Speaker 1: the first person who pioneered the use of options, which

286
00:17:02,400 --> 00:17:05,080
Speaker 1: is Bailey's the father of Greek philosophy. He's the first

287
00:17:05,080 --> 00:17:08,120
Speaker 1: option contract writer. He put down a deposit to rent

288
00:17:08,119 --> 00:17:10,399
Speaker 1: out all of presses, and so you can tell the

289
00:17:10,480 --> 00:17:13,640
Speaker 1: stories that actually undergird a lot of these financial technologies

290
00:17:14,000 --> 00:17:15,800
Speaker 1: UM in a way that makes it a lot more

291
00:17:15,840 --> 00:17:18,560
Speaker 1: easy to understand. Why do you think that finance has

292
00:17:18,600 --> 00:17:21,320
Speaker 1: such a bad reputation, Well, I think partly because it's

293
00:17:21,400 --> 00:17:23,199
Speaker 1: well learned, and I think there's been problems, and I

294
00:17:23,240 --> 00:17:26,119
Speaker 1: think there are areas where finance has become somewhat extractive

295
00:17:26,240 --> 00:17:29,120
Speaker 1: rather than value creating. But the larger point is that

296
00:17:29,200 --> 00:17:32,560
Speaker 1: people are looking for something to blame today. They're upset

297
00:17:32,600 --> 00:17:35,000
Speaker 1: with their economic prospects, and finance is an easy and

298
00:17:35,359 --> 00:17:38,480
Speaker 1: um attractive target to them. And as a consequence, we

299
00:17:38,600 --> 00:17:41,600
Speaker 1: have a profession which has gotten demonized, which has really

300
00:17:41,640 --> 00:17:45,639
Speaker 1: bad consequences. It's bad because people within the profession actually

301
00:17:45,640 --> 00:17:47,640
Speaker 1: don't have as much to aspire to. So in the book,

302
00:17:47,680 --> 00:17:50,240
Speaker 1: I wanted to say, look the underlying ideas are actually

303
00:17:50,320 --> 00:17:53,520
Speaker 1: quite noble. We should make finance aspirational, as opposed to

304
00:17:53,520 --> 00:17:57,160
Speaker 1: defining it downward and expecting less and less. I wonder

305
00:17:57,200 --> 00:17:59,639
Speaker 1: if you could tell us what does Jane Austen have

306
00:17:59,760 --> 00:18:02,640
Speaker 1: to with risk management? Well, it turns out everything. So

307
00:18:03,040 --> 00:18:05,399
Speaker 1: in the second chapter on risk management, I try to

308
00:18:06,080 --> 00:18:08,879
Speaker 1: use Anthony Trollop and Jane Austin Pride and Prejudice to

309
00:18:08,920 --> 00:18:12,040
Speaker 1: talk about risk management because underneath most of those novels

310
00:18:12,200 --> 00:18:14,520
Speaker 1: is the problem of a young woman in the marriage

311
00:18:14,560 --> 00:18:17,200
Speaker 1: market who has to manage risks. Right, So if you

312
00:18:17,240 --> 00:18:20,760
Speaker 1: think about Mr Collins's proposal to Lizzie, he's playing off

313
00:18:20,800 --> 00:18:23,760
Speaker 1: her risk aversion. It's one of the worst proposals ever. Basically,

314
00:18:24,160 --> 00:18:26,120
Speaker 1: you know, you're not that attractive, you're not that rich.

315
00:18:26,160 --> 00:18:28,760
Speaker 1: You better take my bid before you kind of become

316
00:18:28,800 --> 00:18:31,200
Speaker 1: too old and she has to kind of gamble by

317
00:18:31,200 --> 00:18:34,280
Speaker 1: waiting for Mr Darcy. And the really interesting part about

318
00:18:34,280 --> 00:18:37,320
Speaker 1: that risk managing problem. In Phineas Finn by Anthony Trollop,

319
00:18:38,000 --> 00:18:42,200
Speaker 1: the character Violet Effingham actually divines both diversification and options.

320
00:18:42,359 --> 00:18:44,840
Speaker 1: She doesn't call it that, but she uses it. So

321
00:18:44,920 --> 00:18:47,240
Speaker 1: she says, for example, you know she's bemoaning the lack

322
00:18:47,280 --> 00:18:50,320
Speaker 1: of being able to unable to pick among suitors, and

323
00:18:50,359 --> 00:18:52,120
Speaker 1: she says, you know, if one, I could marry ten,

324
00:18:52,520 --> 00:18:54,919
Speaker 1: which is the way of saying diversification. And then she

325
00:18:54,960 --> 00:18:57,480
Speaker 1: finally says, um, you know what I'm gonna do. She's

326
00:18:57,520 --> 00:18:59,840
Speaker 1: not a fan of romantic love. She basically says, I'm

327
00:18:59,880 --> 00:19:02,200
Speaker 1: just gonna sort. I'm going to pile up a few

328
00:19:02,240 --> 00:19:04,840
Speaker 1: different possibilities, and then when I'm ready, I'm going to

329
00:19:04,920 --> 00:19:07,879
Speaker 1: get married, which is kind of acquiring a portfolio of

330
00:19:07,920 --> 00:19:10,840
Speaker 1: options and then exercising one when you're ready. So she

331
00:19:10,880 --> 00:19:13,520
Speaker 1: actually got risk management in a deep way before you know,

332
00:19:13,560 --> 00:19:16,879
Speaker 1: we had the equations to prove it. Mayor, you teach

333
00:19:17,080 --> 00:19:20,600
Speaker 1: finance at Harvard, and I imagine that you have seen

334
00:19:20,760 --> 00:19:23,879
Speaker 1: many students and you've seen, uh, perhaps a change in

335
00:19:23,920 --> 00:19:27,000
Speaker 1: them and and concern, especially since the two thousand and

336
00:19:27,040 --> 00:19:31,000
Speaker 1: eight financial crisis, about the reputation that finance has had.

337
00:19:31,119 --> 00:19:34,280
Speaker 1: Can you explain, Yeah, No, I think it's been um,

338
00:19:34,320 --> 00:19:36,560
Speaker 1: you know, really problematic. So finance has become less and

339
00:19:36,680 --> 00:19:40,520
Speaker 1: less viewed as an aspirational profession. Recently, I was speaking

340
00:19:40,560 --> 00:19:42,880
Speaker 1: to about forty or fifty of them, and I asked

341
00:19:42,920 --> 00:19:44,520
Speaker 1: them how many of them were going into finance. A

342
00:19:44,520 --> 00:19:46,560
Speaker 1: whole bunch raised their hand, and I said, how many

343
00:19:46,600 --> 00:19:48,280
Speaker 1: of you expect to be in finance in ten years?

344
00:19:48,359 --> 00:19:50,359
Speaker 1: And the number was a quarter of that, which is

345
00:19:50,359 --> 00:19:52,760
Speaker 1: a way of saying they kind of did it for now,

346
00:19:52,800 --> 00:19:55,080
Speaker 1: but they don't feel it's part of their identity. In

347
00:19:55,119 --> 00:19:56,520
Speaker 1: other words, are doing it for the money so they

348
00:19:56,520 --> 00:19:57,960
Speaker 1: can go on and do it they really believe And no,

349
00:19:58,080 --> 00:19:59,679
Speaker 1: I think if they're doing it because they like it

350
00:19:59,720 --> 00:20:02,040
Speaker 1: and then are ashamed of it because it's looked at

351
00:20:02,119 --> 00:20:05,640
Speaker 1: in a way, that is problematic. UM, and that's terrible. Why,

352
00:20:05,720 --> 00:20:08,440
Speaker 1: because you know, finance is hugely important to the economy.

353
00:20:08,480 --> 00:20:10,840
Speaker 1: If we don't get finance right, we've seen what happens,

354
00:20:11,200 --> 00:20:13,119
Speaker 1: and so we want really good people going into it,

355
00:20:13,200 --> 00:20:15,840
Speaker 1: who who aspire to be doing great things. And so

356
00:20:15,880 --> 00:20:18,480
Speaker 1: what the book says is actually finance is central. If

357
00:20:18,520 --> 00:20:21,639
Speaker 1: you think about the two big solutions to the world's

358
00:20:21,640 --> 00:20:24,679
Speaker 1: problems today in finance, one is regulation and the second

359
00:20:24,720 --> 00:20:27,919
Speaker 1: is outrage, you know, just occupy. I think both of

360
00:20:27,920 --> 00:20:31,960
Speaker 1: those are unproductive. UM. Outrage isn't going anywhere, and regulation,

361
00:20:32,000 --> 00:20:35,760
Speaker 1: we know has counterproductive consequences. So the idea in the

362
00:20:35,800 --> 00:20:37,639
Speaker 1: book is to say, let's really just get back to

363
00:20:37,680 --> 00:20:39,520
Speaker 1: the nobility of the ideas, because if we get back

364
00:20:39,560 --> 00:20:41,639
Speaker 1: to the nobility of the idea, is that, in the

365
00:20:41,720 --> 00:20:45,240
Speaker 1: long run, is the way people start behaving better? Is

366
00:20:45,240 --> 00:20:48,679
Speaker 1: the nobility Uh, your referenced nobility of ideas? Does that

367
00:20:48,720 --> 00:20:52,800
Speaker 1: include personal accountability? Because it's one thing if you're playing

368
00:20:52,800 --> 00:20:55,560
Speaker 1: with other people's money, and it's another one you're playing

369
00:20:55,560 --> 00:20:58,280
Speaker 1: with your own reputation and your own money. Absolutely, So

370
00:20:58,320 --> 00:21:00,239
Speaker 1: there are several times in the book where I use

371
00:21:00,320 --> 00:21:03,800
Speaker 1: the ideas of for example, leverage UM to talk about

372
00:21:03,840 --> 00:21:06,760
Speaker 1: reputation and to talk about personal accountability. So leverage is

373
00:21:06,760 --> 00:21:09,880
Speaker 1: a good example. UM. Of course, I use a variety

374
00:21:09,880 --> 00:21:11,480
Speaker 1: ways to talk about it, but one of them is

375
00:21:11,520 --> 00:21:13,159
Speaker 1: The Merchant of Venice, you know, which is just a

376
00:21:13,160 --> 00:21:15,520
Speaker 1: way of saying people think that's a play about debt,

377
00:21:15,880 --> 00:21:19,159
Speaker 1: there's a debt contract between Antonio and and Shylock. And

378
00:21:19,160 --> 00:21:20,840
Speaker 1: the answer, of course is if you look at the text,

379
00:21:20,880 --> 00:21:24,240
Speaker 1: it's actually about commitments, right, It's all about commitments between people.

380
00:21:24,560 --> 00:21:26,679
Speaker 1: That's what most scholars think that play is about. So

381
00:21:26,720 --> 00:21:28,720
Speaker 1: I try to use that to kind of say that's

382
00:21:28,720 --> 00:21:32,159
Speaker 1: what leverages it's a commitment and leverages fantastic. People in

383
00:21:32,160 --> 00:21:34,080
Speaker 1: finance know that you get to do things you have

384
00:21:34,119 --> 00:21:36,200
Speaker 1: no right to do. That's why people in financial get

385
00:21:36,200 --> 00:21:38,240
Speaker 1: to create money. You get to create money. And the

386
00:21:38,320 --> 00:21:40,760
Speaker 1: same thing is true, um if you think about it

387
00:21:40,800 --> 00:21:42,639
Speaker 1: in a variety of other ways. So the great quote

388
00:21:42,640 --> 00:21:46,480
Speaker 1: from Jefferson is that you know, your reputation is the

389
00:21:46,520 --> 00:21:48,760
Speaker 1: most important lever because people will allow you to do

390
00:21:48,840 --> 00:21:50,960
Speaker 1: things you have no right to do, and protecting that

391
00:21:51,000 --> 00:21:53,520
Speaker 1: reputation and behaving in that way is really really critical.

392
00:21:53,680 --> 00:21:56,679
Speaker 1: So you started out by saying that finance used to

393
00:21:56,680 --> 00:21:59,399
Speaker 1: be thought of as a noble profession. But I can

394
00:21:59,440 --> 00:22:02,560
Speaker 1: think of a lot of times during history where finance

395
00:22:02,680 --> 00:22:05,119
Speaker 1: or debt was considered somewhat dirty and people wanted to

396
00:22:05,160 --> 00:22:07,840
Speaker 1: have it somewhat removed from themselves. What's the golden era

397
00:22:07,960 --> 00:22:11,119
Speaker 1: that you would like to see some kind of resurrection

398
00:22:11,200 --> 00:22:13,360
Speaker 1: of Well, you know, that's a great question. I think

399
00:22:13,359 --> 00:22:16,480
Speaker 1: there's always been problematic because debt has always been problematic,

400
00:22:16,640 --> 00:22:18,760
Speaker 1: but that was born of real ignorance, right, you know,

401
00:22:18,800 --> 00:22:21,680
Speaker 1: money is barren? How can you do these things? Um?

402
00:22:22,000 --> 00:22:25,560
Speaker 1: And also sometimes anti Semitism was associate with that as well. Um, so,

403
00:22:25,600 --> 00:22:27,400
Speaker 1: I don't know if there really has been a golden era.

404
00:22:27,480 --> 00:22:29,639
Speaker 1: What I'm trying to just suggest is let's get back

405
00:22:29,680 --> 00:22:32,320
Speaker 1: to the ideas, because we are so far removed from them.

406
00:22:32,560 --> 00:22:34,520
Speaker 1: And this is why the practice of finance has got

407
00:22:34,520 --> 00:22:37,560
Speaker 1: to wake up. They can't just say, you know, I'm

408
00:22:37,600 --> 00:22:39,399
Speaker 1: doing God's work and I'm great. You've got to be

409
00:22:39,480 --> 00:22:42,320
Speaker 1: able to say, we have problems, but we can actually

410
00:22:42,320 --> 00:22:44,280
Speaker 1: do something really important, and we can get back to

411
00:22:44,359 --> 00:22:47,440
Speaker 1: things that are actually really value creating. Ma Here, Decai,

412
00:22:47,560 --> 00:22:49,359
Speaker 1: thank you so much for joining us. But here Desai

413
00:22:49,560 --> 00:22:53,800
Speaker 1: is Missouho Financial Group, Professor of Finance at Harvard Business

414
00:22:53,800 --> 00:22:55,840
Speaker 1: School as well as a professor of law at Harvard

415
00:22:55,920 --> 00:22:58,440
Speaker 1: Law School, and he joins us here in our Bloomberg

416
00:22:58,480 --> 00:23:01,800
Speaker 1: eleven three oh studios. You just wrote a new book,

417
00:23:01,800 --> 00:23:04,719
Speaker 1: The Wisdom of Finance, Discovering Humanity in the World of

418
00:23:04,840 --> 00:23:19,840
Speaker 1: Risk and Return, really fascinating. Up until now, Intel has

419
00:23:19,840 --> 00:23:22,760
Speaker 1: really been the only game in town when it comes

420
00:23:22,800 --> 00:23:24,640
Speaker 1: to computer chips. It's in a league of its own.

421
00:23:24,680 --> 00:23:27,920
Speaker 1: It has dominated the industry. But suddenly it finds itself

422
00:23:28,359 --> 00:23:31,200
Speaker 1: fending off competition, a non stream of us and is

423
00:23:31,240 --> 00:23:34,240
Speaker 1: here with us. He is the senior semiconductor and hardware

424
00:23:34,280 --> 00:23:37,639
Speaker 1: analyst for Bloomberg Intelligence, and he comes to us in

425
00:23:37,640 --> 00:23:40,080
Speaker 1: our Bloomberg eleven three studios in New York City, and

426
00:23:40,119 --> 00:23:43,280
Speaker 1: then you know, I'm struck by, uh, sort of the

427
00:23:43,320 --> 00:23:47,800
Speaker 1: idea that somebody who is so so in the in

428
00:23:47,840 --> 00:23:50,320
Speaker 1: the lead all of a sudden finding that that someone

429
00:23:50,359 --> 00:23:52,040
Speaker 1: else is catching up to them. Can you explain how

430
00:23:52,040 --> 00:23:54,000
Speaker 1: this is sort of the situation with Intel right now? Sure?

431
00:23:54,119 --> 00:23:57,040
Speaker 1: I mean m D has lagged from both the performance

432
00:23:57,320 --> 00:24:00,480
Speaker 1: perspective and the market share perspective over time in the

433
00:24:00,520 --> 00:24:03,960
Speaker 1: CPU business, in the in the computer projects being advanced

434
00:24:04,000 --> 00:24:07,040
Speaker 1: micro devices, and that's the new competitor that's kind of

435
00:24:07,080 --> 00:24:09,960
Speaker 1: coming up for the newly dominant competitor. It's coming on right.

436
00:24:10,320 --> 00:24:12,720
Speaker 1: M D does go through some cycles. It's been around

437
00:24:12,720 --> 00:24:16,359
Speaker 1: in the business for a long time, but it's market share,

438
00:24:16,400 --> 00:24:18,240
Speaker 1: both on the PC side as well as in the

439
00:24:18,280 --> 00:24:23,919
Speaker 1: server chip side, has wayne pretty substantially. And over the

440
00:24:24,040 --> 00:24:27,480
Speaker 1: last two years, m D has sort of reinvented itself,

441
00:24:27,520 --> 00:24:32,240
Speaker 1: refocused itself, um cleaned up its act both literally from

442
00:24:32,280 --> 00:24:35,040
Speaker 1: a product perspective as well as from a financial perspective.

443
00:24:35,560 --> 00:24:40,240
Speaker 1: And at its Handalyst Day launched several chips over there.

444
00:24:40,240 --> 00:24:42,000
Speaker 1: In the first part of the year, they launched their

445
00:24:42,000 --> 00:24:45,760
Speaker 1: desktop chips uh and they will be launching UM notebook

446
00:24:45,800 --> 00:24:49,760
Speaker 1: chips and server chips now. The interesting thing is that

447
00:24:49,880 --> 00:24:53,000
Speaker 1: these chips are built off of a new architecture are

448
00:24:53,080 --> 00:24:57,080
Speaker 1: meant to UM compete with Intel all the way from

449
00:24:57,080 --> 00:25:00,280
Speaker 1: the low end to the high end. Historically, m D

450
00:25:00,400 --> 00:25:02,800
Speaker 1: has been pretty competitive at the lower end of the

451
00:25:02,840 --> 00:25:06,400
Speaker 1: product spectrum, so low end notebooks, low end desktops, low

452
00:25:06,480 --> 00:25:10,280
Speaker 1: end servers. It has had a product that has been

453
00:25:10,320 --> 00:25:14,200
Speaker 1: competitive with Intel predominantly on price with a performance match.

454
00:25:14,640 --> 00:25:18,120
Speaker 1: Right now it's coming out with products that are suddenly

455
00:25:18,520 --> 00:25:23,240
Speaker 1: performance competitive, right and they still retain their price edge,

456
00:25:23,240 --> 00:25:27,679
Speaker 1: which is priced lower than Intel. So Intel finds itself

457
00:25:27,680 --> 00:25:31,600
Speaker 1: in an unusual position of having to either seed UM

458
00:25:31,880 --> 00:25:36,560
Speaker 1: price dominance UM or um We'll give up some share. Now,

459
00:25:36,920 --> 00:25:39,160
Speaker 1: if you're a customer of Intel, you're going to definitely

460
00:25:39,280 --> 00:25:41,240
Speaker 1: use this as a bargaining chip to try and lower

461
00:25:41,280 --> 00:25:44,440
Speaker 1: the price for Intel's chips, for sure. But you're you're

462
00:25:44,440 --> 00:25:47,840
Speaker 1: going to be looking at m D chips more closely.

463
00:25:48,200 --> 00:25:52,320
Speaker 1: Now that's the product starg am D versus Intel. What's

464
00:25:52,359 --> 00:25:55,000
Speaker 1: been happening with the PC market is the PC market

465
00:25:55,480 --> 00:25:59,480
Speaker 1: doesn't suck as badly as it did before, so well said,

466
00:25:59,560 --> 00:26:04,200
Speaker 1: Well said down, thank you. So it is um low

467
00:26:04,320 --> 00:26:07,320
Speaker 1: single digit decline. So we could have a year potentially

468
00:26:07,359 --> 00:26:10,239
Speaker 1: in the minus two plus two percent range, and we

469
00:26:10,280 --> 00:26:16,560
Speaker 1: could have this sort of um less badness continue for

470
00:26:16,560 --> 00:26:19,120
Speaker 1: for an extended period of time. So PCs are going

471
00:26:19,160 --> 00:26:21,600
Speaker 1: to be an okay place to be and in that

472
00:26:21,760 --> 00:26:24,200
Speaker 1: unit volume environment. One of the things one of the

473
00:26:24,240 --> 00:26:27,720
Speaker 1: segments that has emerged is the gaming market. The gaming

474
00:26:27,760 --> 00:26:31,439
Speaker 1: market is a particular breed of devices that sell for

475
00:26:32,040 --> 00:26:35,719
Speaker 1: anywhere between two thousand and five thousand dollars per PC.

476
00:26:35,880 --> 00:26:37,560
Speaker 1: I thought you were going to say a different breed

477
00:26:37,640 --> 00:26:41,080
Speaker 1: of customer because they're willing to pay this kind of money. Absolutely,

478
00:26:41,080 --> 00:26:43,400
Speaker 1: and these are you talk about these with the same

479
00:26:43,440 --> 00:26:46,080
Speaker 1: sort of reverence that you talk about with autos. You

480
00:26:46,200 --> 00:26:49,159
Speaker 1: sort of use liquid cooled, you use air cooled. You

481
00:26:49,400 --> 00:26:54,280
Speaker 1: use um high end CPUs from Mentel and now or

482
00:26:54,560 --> 00:26:56,680
Speaker 1: m D and I almost looked like cockpits of of

483
00:26:57,040 --> 00:27:00,480
Speaker 1: advanced fighter jets. Now, I mean gaming paraphernale that has

484
00:27:01,160 --> 00:27:04,520
Speaker 1: emerged is much greater than just the steering wheel for

485
00:27:04,800 --> 00:27:08,600
Speaker 1: let's say Xbox and you know driving you certainly wan't

486
00:27:09,000 --> 00:27:11,440
Speaker 1: Hemmy or two that drives your engine for sure. Well,

487
00:27:11,480 --> 00:27:13,159
Speaker 1: so this means that if you want to play games

488
00:27:13,200 --> 00:27:18,639
Speaker 1: like Galactic Civilizations or you want to play Halo, right,

489
00:27:18,800 --> 00:27:21,399
Speaker 1: I just want to point out him. I somehow do

490
00:27:21,440 --> 00:27:23,760
Speaker 1: not think that this is like at a personal knowledge

491
00:27:23,760 --> 00:27:25,679
Speaker 1: that you're I have a feeling you looked out some

492
00:27:25,760 --> 00:27:28,200
Speaker 1: of the popular games. Actually, actually, I have to have

493
00:27:28,320 --> 00:27:30,840
Speaker 1: to say that I come from the generation that's put

494
00:27:30,920 --> 00:27:35,000
Speaker 1: quarters into video game machines, so I've kind of lived

495
00:27:35,040 --> 00:27:37,040
Speaker 1: with this. You need a lot of quarters for this

496
00:27:37,119 --> 00:27:39,560
Speaker 1: kind of system. This is where I wanted to go

497
00:27:39,680 --> 00:27:41,440
Speaker 1: with this, which is that what kind of price point

498
00:27:41,440 --> 00:27:44,000
Speaker 1: are we talking about? I mean, we're talking about the

499
00:27:44,160 --> 00:27:47,160
Speaker 1: recent Intel chips that have been launched vary in range

500
00:27:47,200 --> 00:27:52,560
Speaker 1: between the thirteen for the CPU alone at the at

501
00:27:52,600 --> 00:27:55,240
Speaker 1: the high end two thous dollars just for the CPS

502
00:27:55,320 --> 00:27:57,560
Speaker 1: for the CPU, and at the low end could range

503
00:27:58,640 --> 00:28:02,679
Speaker 1: between the three ninety nine Torice points. So these are

504
00:28:02,840 --> 00:28:06,720
Speaker 1: very very high end chips meant to do a few

505
00:28:06,760 --> 00:28:09,640
Speaker 1: things really really well. Now you're not you're not convincing

506
00:28:09,720 --> 00:28:11,480
Speaker 1: Lisa though, by the way, just to go out and

507
00:28:11,520 --> 00:28:14,040
Speaker 1: spend you know, five grand on a computer. Here. Look,

508
00:28:14,040 --> 00:28:16,359
Speaker 1: I look, I'm the mom of two boys, right, so

509
00:28:16,520 --> 00:28:18,879
Speaker 1: if one of them came to me and said, Mommy, mommy,

510
00:28:19,000 --> 00:28:20,960
Speaker 1: can I have some pocket change so I can buy

511
00:28:20,960 --> 00:28:24,720
Speaker 1: a two thousand dollar cpu? I would laugh at them, right, So,

512
00:28:24,760 --> 00:28:26,920
Speaker 1: I mean, I'm just thinking, who is the customer here?

513
00:28:27,160 --> 00:28:31,280
Speaker 1: These are high end gamers in China is a particularly

514
00:28:31,720 --> 00:28:34,680
Speaker 1: interesting country in so far as from a gaming experience

515
00:28:34,760 --> 00:28:37,840
Speaker 1: part of the world that they've there's a lot of

516
00:28:37,840 --> 00:28:41,880
Speaker 1: gamers there um. And also the e gaming has helped

517
00:28:42,000 --> 00:28:45,640
Speaker 1: drive this gaming phenomenon where e sports where you watch

518
00:28:45,680 --> 00:28:48,720
Speaker 1: other people compete and go to arenas and you actually

519
00:28:48,760 --> 00:28:53,040
Speaker 1: watch other people play video games there. There there is

520
00:28:53,080 --> 00:28:56,120
Speaker 1: a substantial demographic out there, and this is part of

521
00:28:56,160 --> 00:28:58,959
Speaker 1: the reason why the PC market there's also a divergence

522
00:28:59,000 --> 00:29:03,640
Speaker 1: between a small divergence between PC revenues and PC units.

523
00:29:03,720 --> 00:29:06,320
Speaker 1: The units may still be in the minus two to

524
00:29:06,400 --> 00:29:10,320
Speaker 1: plus two percent range, but the revenues could be slightly

525
00:29:10,360 --> 00:29:13,640
Speaker 1: better if the gaming segment does well. All right, so

526
00:29:13,720 --> 00:29:16,560
Speaker 1: just quickly, Intel going into this market, they're going to

527
00:29:16,600 --> 00:29:18,280
Speaker 1: make a big splash, is just gonna work for them,

528
00:29:18,280 --> 00:29:20,600
Speaker 1: help the stock. This is going to be this. This

529
00:29:20,680 --> 00:29:23,280
Speaker 1: is in part a defensive strategy against m D. They

530
00:29:23,280 --> 00:29:25,360
Speaker 1: want to show that we are the best game in

531
00:29:25,440 --> 00:29:27,600
Speaker 1: town at the high end and at the low end

532
00:29:28,080 --> 00:29:30,239
Speaker 1: um and they want to relegate a m D as

533
00:29:30,280 --> 00:29:32,280
Speaker 1: much as possible to the lower end, where's where it's

534
00:29:32,280 --> 00:29:34,400
Speaker 1: always been. All Right, well, thank you very You know.

535
00:29:34,440 --> 00:29:37,400
Speaker 1: I want to know maybe Brian Crecentage, the chief executive officer,

536
00:29:37,440 --> 00:29:39,520
Speaker 1: maybe he's a PC gamer and that's why they're also

537
00:29:39,640 --> 00:29:44,520
Speaker 1: interested in this. Thanks for listening to the Bloomberg P

538
00:29:44,640 --> 00:29:47,600
Speaker 1: and L podcast. You can subscribe and listen to interviews

539
00:29:47,640 --> 00:29:51,680
Speaker 1: at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

540
00:29:52,120 --> 00:29:55,680
Speaker 1: I'm Pim Fox. I'm on Twitter at pim Fox. I'm

541
00:29:55,680 --> 00:29:59,000
Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.

542
00:29:59,040 --> 00:30:06,840
Speaker 1: You can always catch us worldwide on Bloomberg radioh