1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,440 Speaker 1: Along with my co host Lisa A. Brahmowitz. Each day 3 00:00:11,480 --> 00:00:15,000 Speaker 1: we bring you the most important, noteworthy, and useful interviews 4 00:00:15,040 --> 00:00:17,520 Speaker 1: for you and your money, whether you're at the grocery 5 00:00:17,560 --> 00:00:20,560 Speaker 1: store or the trading floor. Find the Bloomberg p and 6 00:00:20,680 --> 00:00:27,560 Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. 7 00:00:27,560 --> 00:00:30,520 Speaker 1: I'm pim Fox, and it is my pleasure to welcome 8 00:00:30,560 --> 00:00:34,280 Speaker 1: our next guest, Joseph Stiglitz. Professor Stiglitz was born in Gary, 9 00:00:34,360 --> 00:00:38,400 Speaker 1: Indiana in nine Of course, he is a Nobel Laureate, 10 00:00:38,440 --> 00:00:41,839 Speaker 1: awarded the Nobel Prize in Economics along with two colleagues 11 00:00:41,840 --> 00:00:44,519 Speaker 1: in the year two thousand and one. He is the 12 00:00:44,560 --> 00:00:49,360 Speaker 1: author of many books, including Globalization and Its Discontents, and 13 00:00:49,440 --> 00:00:52,600 Speaker 1: he joins us here in studio. Professor Stigletz, thank you 14 00:00:52,680 --> 00:00:54,680 Speaker 1: very much for being here, and wonder if we could 15 00:00:54,760 --> 00:00:57,960 Speaker 1: just start with a kind of anecdotal question having to 16 00:00:58,040 --> 00:01:02,920 Speaker 1: do with Gary, Indiana, and we were just talking offline 17 00:01:03,000 --> 00:01:06,160 Speaker 1: just a moment ago. Do you believe that growing up 18 00:01:06,240 --> 00:01:13,479 Speaker 1: in Gary, Indiana influenced your perspective and your ultimate goal 19 00:01:14,200 --> 00:01:17,319 Speaker 1: in learning about the way the world works oh very 20 00:01:17,400 --> 00:01:21,760 Speaker 1: much so, uh, and I've actually written about that. UM. 21 00:01:21,800 --> 00:01:26,240 Speaker 1: I became an economist because of what I saw growing 22 00:01:26,319 --> 00:01:29,360 Speaker 1: up in Gary, Indiana. I had thought I was going 23 00:01:29,400 --> 00:01:35,160 Speaker 1: to be a physicist, uh, theoretical physicist. But as I 24 00:01:36,040 --> 00:01:39,400 Speaker 1: continued in my studies, what I had seen growing up, 25 00:01:39,520 --> 00:01:46,679 Speaker 1: this enormous inequality, discrimination, episodic unemployment, labor strife kept gnawing 26 00:01:46,760 --> 00:01:52,600 Speaker 1: at me, and I finally decided, Uh, I wanted to 27 00:01:52,680 --> 00:01:57,880 Speaker 1: understand that better. I wanted to come to an understanding 28 00:01:57,880 --> 00:02:01,440 Speaker 1: of how we could do better about these problems. And 29 00:02:01,480 --> 00:02:04,680 Speaker 1: so that was really what drove me into economics. And 30 00:02:04,720 --> 00:02:09,359 Speaker 1: I feel, you know, as I've studied economics, the perspectives 31 00:02:09,360 --> 00:02:12,080 Speaker 1: that I bring are so different from those who grow 32 00:02:12,200 --> 00:02:16,360 Speaker 1: up in a more privileged life in a rich suburb. UM. 33 00:02:17,080 --> 00:02:20,639 Speaker 1: One of the standard views and economics is that markets 34 00:02:20,680 --> 00:02:25,800 Speaker 1: work very well, everybody uh is well off, trickle down 35 00:02:25,840 --> 00:02:30,920 Speaker 1: economics para to optimality. Concepts like that and UH sort 36 00:02:30,919 --> 00:02:35,440 Speaker 1: of Pollyonish view of that uh of of the world. 37 00:02:36,320 --> 00:02:40,560 Speaker 1: And I could never share that Pollyanish view because I saw, 38 00:02:41,440 --> 00:02:45,760 Speaker 1: UH it wasn't working for the people that surrounded me. 39 00:02:46,120 --> 00:02:49,760 Speaker 1: When I was growing up in as far as you 40 00:02:49,800 --> 00:02:53,560 Speaker 1: were able to take that experience and then use it 41 00:02:53,600 --> 00:02:59,400 Speaker 1: in your understanding of economics, you helped to pioneer something 42 00:02:59,440 --> 00:03:03,880 Speaker 1: that has been described as asymmetrical information. In other words, 43 00:03:03,880 --> 00:03:08,760 Speaker 1: how do you take information that may produce dissidence or 44 00:03:09,440 --> 00:03:14,480 Speaker 1: a lack of conformity in its result? And I'm wondering 45 00:03:14,520 --> 00:03:17,040 Speaker 1: if you could talk a little bit about how you 46 00:03:17,840 --> 00:03:20,200 Speaker 1: sort of square the circle, so to speak, or or 47 00:03:20,200 --> 00:03:24,000 Speaker 1: how do you reconcile a lot of those uh inconsistencies. 48 00:03:25,919 --> 00:03:28,960 Speaker 1: The key issue that I faced as I began my 49 00:03:29,040 --> 00:03:34,920 Speaker 1: research was too trying to understand, uh, the difference between 50 00:03:35,560 --> 00:03:40,160 Speaker 1: the standard view of economics at that time Adam Smith, 51 00:03:40,320 --> 00:03:46,520 Speaker 1: the market's invisible hand, uh, every pursued of self interested leagues, 52 00:03:46,640 --> 00:03:50,000 Speaker 1: the world to be as if society's well being was 53 00:03:50,040 --> 00:03:55,840 Speaker 1: being maximized, um with what I saw growing up. And 54 00:03:55,920 --> 00:04:00,960 Speaker 1: that led to ideas about situations where artics don't work 55 00:04:01,040 --> 00:04:07,800 Speaker 1: well and uncovering that there had been an implicit assumption 56 00:04:08,000 --> 00:04:12,200 Speaker 1: that economists hadn't really recognized for two hundering some years, 57 00:04:12,280 --> 00:04:18,200 Speaker 1: which was uh the idea that information was perfect and 58 00:04:18,279 --> 00:04:22,760 Speaker 1: that a world in which information is very imperfect, whereas 59 00:04:22,800 --> 00:04:26,960 Speaker 1: some people know things that others don't. Is totally different 60 00:04:27,440 --> 00:04:31,080 Speaker 1: from uh, a world which information is perfect. It's a 61 00:04:31,160 --> 00:04:35,120 Speaker 1: little bit like in physics. Uh. We we talked about 62 00:04:35,160 --> 00:04:39,000 Speaker 1: a frictionless world and then a world with friction. And 63 00:04:39,040 --> 00:04:42,480 Speaker 1: you would never construct an airplane based on a theory 64 00:04:42,480 --> 00:04:47,040 Speaker 1: of a frictionless world. Uh. It just wouldn't make any sense. 65 00:04:47,080 --> 00:04:50,919 Speaker 1: And yet we were trying to construct an economy based 66 00:04:51,080 --> 00:04:55,720 Speaker 1: on a frictionless world and it wasn't working very well. 67 00:04:56,800 --> 00:05:00,320 Speaker 1: Can you then take that perspective and speak to us 68 00:05:00,360 --> 00:05:04,159 Speaker 1: about the current state of let's say, trade negotiations or 69 00:05:04,240 --> 00:05:08,760 Speaker 1: trade relationship between the United States and the world. I mean, 70 00:05:08,800 --> 00:05:11,359 Speaker 1: we can talk China, you can mention Mexico, Canada, and 71 00:05:11,360 --> 00:05:13,320 Speaker 1: so on. But I wonder if you could use that 72 00:05:13,800 --> 00:05:18,000 Speaker 1: to describe what do you believe is the current feeling 73 00:05:18,360 --> 00:05:22,880 Speaker 1: about these trade negotiations, that they really headed somewhere intelligent 74 00:05:23,120 --> 00:05:28,360 Speaker 1: or is this just a political game? Well, I think 75 00:05:29,000 --> 00:05:35,240 Speaker 1: the trade negotiations are not going well, uh for anybody. 76 00:05:35,279 --> 00:05:38,760 Speaker 1: And the reason that's true is that is really the 77 00:05:38,800 --> 00:05:41,799 Speaker 1: blame is I I put in the United States that 78 00:05:42,200 --> 00:05:48,680 Speaker 1: uh Trump does not have uh any conception about what 79 00:05:48,760 --> 00:05:52,200 Speaker 1: it is that he's trying to do. What is the 80 00:05:52,279 --> 00:05:55,159 Speaker 1: problem facing the United States now? He says the problem 81 00:05:55,400 --> 00:05:59,440 Speaker 1: is that we import more than we export. We have 82 00:05:59,480 --> 00:06:06,039 Speaker 1: a trade deficit, and he attributes that to unfair trade 83 00:06:06,680 --> 00:06:11,320 Speaker 1: UH that are taking advantage of us. But the basic 84 00:06:11,360 --> 00:06:17,840 Speaker 1: inside of economics is that trade deficits are not UH 85 00:06:18,279 --> 00:06:24,720 Speaker 1: based on trade um with any particular country, what we 86 00:06:24,800 --> 00:06:29,160 Speaker 1: call multilateral UM. If we buy a little bit less 87 00:06:29,200 --> 00:06:32,000 Speaker 1: clothes from China, will buy a little bit more from 88 00:06:32,040 --> 00:06:37,400 Speaker 1: Malaysia or Indonesia, and UH it won't make much difference 89 00:06:37,440 --> 00:06:41,240 Speaker 1: for anybody. UH. If we buy from somebody that's not 90 00:06:41,279 --> 00:06:45,120 Speaker 1: the cheapest, our costs will be a little bit higher. UH. 91 00:06:45,160 --> 00:06:48,280 Speaker 1: It will make a difference for Indonesia, but not for 92 00:06:48,440 --> 00:06:56,120 Speaker 1: the American UH producers. UH. What determines the overall trade 93 00:06:56,200 --> 00:07:01,080 Speaker 1: deficit is we call macro economics. That is spirity between 94 00:07:01,600 --> 00:07:05,680 Speaker 1: what we invest inside the United States and what we 95 00:07:05,800 --> 00:07:10,560 Speaker 1: save inside the United States. And if we aren't saving 96 00:07:10,720 --> 00:07:14,920 Speaker 1: enough to finance the investment, we have to borrow from abroad. 97 00:07:15,040 --> 00:07:19,520 Speaker 1: And that borrowing from abroad results in our exchange rate 98 00:07:19,520 --> 00:07:22,800 Speaker 1: going up, and that leads to correspond to that will 99 00:07:22,840 --> 00:07:26,400 Speaker 1: be a trade deficit. So the problem in the United 100 00:07:26,440 --> 00:07:30,240 Speaker 1: States is that we've been borrowing a lot from abroad. 101 00:07:31,000 --> 00:07:35,320 Speaker 1: And the tax bill in December two thousand seventeen and 102 00:07:35,360 --> 00:07:40,800 Speaker 1: the increase in expenditures in January two eighteen, UH really 103 00:07:41,040 --> 00:07:45,400 Speaker 1: blew a hole in our fiscal position. A lot of 104 00:07:45,440 --> 00:07:48,720 Speaker 1: people talked about how we're going to have to borrow 105 00:07:49,320 --> 00:07:53,040 Speaker 1: that much more from abroad and what does that mean? 106 00:07:53,240 --> 00:07:57,200 Speaker 1: That means we will have an even larger trade deficit. 107 00:07:57,600 --> 00:08:00,880 Speaker 1: And that's true. No matter what the outcome of any 108 00:08:00,920 --> 00:08:05,920 Speaker 1: trade negotiations are, those outcomes will determine which countries we 109 00:08:06,000 --> 00:08:10,960 Speaker 1: buy from, but not our overall trade deficit. So no 110 00:08:11,000 --> 00:08:17,560 Speaker 1: matter what his negotiators do, uh, it won't affect that 111 00:08:17,720 --> 00:08:21,880 Speaker 1: basic economics. Now, where the negotiations do make a difference 112 00:08:23,320 --> 00:08:30,800 Speaker 1: is uh particular countries exporting particular goods or importing particularly goods. Now, 113 00:08:31,320 --> 00:08:37,240 Speaker 1: this is another area where Trump is really very misconceived 114 00:08:37,240 --> 00:08:42,840 Speaker 1: in his economics. Modern economics recognize that we are a 115 00:08:42,840 --> 00:08:48,760 Speaker 1: service sector economy. Uh. We are are vibrant sectors are 116 00:08:48,760 --> 00:08:53,880 Speaker 1: financial sector, actucation sector, or health sector. Um. These are 117 00:08:53,880 --> 00:08:57,439 Speaker 1: among the areas where we're making you know, where we're 118 00:08:57,480 --> 00:09:09,719 Speaker 1: really successful. There are other areas where uh, we've moved on. Uh, automobiles, UM, 119 00:09:09,920 --> 00:09:20,200 Speaker 1: natural resources. UH. You know, take the presidents talked about coal. Uh. 120 00:09:20,320 --> 00:09:26,040 Speaker 1: In all of the extractor sectors together, including coal, UH, 121 00:09:26,080 --> 00:09:29,239 Speaker 1: there are about half the number of workers as professional 122 00:09:29,320 --> 00:09:33,280 Speaker 1: sports people. So if you say we want to have 123 00:09:33,360 --> 00:09:35,040 Speaker 1: a cold policy, you ought to say we ought to 124 00:09:35,080 --> 00:09:37,440 Speaker 1: have a sports policy. And you know, if you're talking 125 00:09:37,480 --> 00:09:42,320 Speaker 1: about jobs, there twice as many in those areas. There 126 00:09:42,320 --> 00:09:48,520 Speaker 1: are five times as many jobs in solar install panel 127 00:09:48,640 --> 00:09:52,760 Speaker 1: installation than in the coal industry. So this was not 128 00:09:52,880 --> 00:09:55,800 Speaker 1: the case in nineteen fifty sixties. We didn't have a 129 00:09:55,840 --> 00:10:00,440 Speaker 1: solar panel. He's keeping looking back at the world as 130 00:10:00,480 --> 00:10:03,920 Speaker 1: it was seventy five years ago, next, not where we 131 00:10:03,920 --> 00:10:07,559 Speaker 1: should be going. We should be going towards the century. 132 00:10:07,600 --> 00:10:13,720 Speaker 1: So his focused on the old world, on the industrial 133 00:10:13,720 --> 00:10:17,800 Speaker 1: world of the nineteen fifties, means that we're not reshaping 134 00:10:17,800 --> 00:10:23,719 Speaker 1: our economy towards the century. Is there a political obstacle 135 00:10:24,600 --> 00:10:28,560 Speaker 1: to get these kinds of things done that you describe, 136 00:10:28,600 --> 00:10:31,600 Speaker 1: whether it be the shift from coal and the jobs 137 00:10:31,640 --> 00:10:34,760 Speaker 1: that were in the coal industry to let's say solar 138 00:10:35,000 --> 00:10:38,040 Speaker 1: just as an example of solar industry, Is there a 139 00:10:38,080 --> 00:10:42,800 Speaker 1: political obstacle? Because you've also written about the money that 140 00:10:42,920 --> 00:10:49,120 Speaker 1: influences elections very much. So um. Uh the problem is 141 00:10:50,320 --> 00:10:55,200 Speaker 1: the existing interests. UH don't want to give them up. 142 00:10:56,440 --> 00:11:01,160 Speaker 1: And UH they looked to government for subsident ease, for 143 00:11:01,520 --> 00:11:08,200 Speaker 1: a monopoly power. Uh. We need There is an important 144 00:11:08,240 --> 00:11:12,040 Speaker 1: role for government, but it's for facilitating a transition to 145 00:11:12,120 --> 00:11:15,440 Speaker 1: the new economy. Uh. It's for helping people get the 146 00:11:15,520 --> 00:11:17,960 Speaker 1: skills that they're going to need in the new economy. 147 00:11:17,960 --> 00:11:20,800 Speaker 1: You know. That's the role of the government has traditionally played. 148 00:11:20,880 --> 00:11:24,720 Speaker 1: Back after World War Two, we had to move from 149 00:11:24,920 --> 00:11:29,720 Speaker 1: agriculture to a manufacturing economy. And after World War Two, 150 00:11:29,960 --> 00:11:33,360 Speaker 1: we had the g I Bill, which said that everybody 151 00:11:33,360 --> 00:11:36,000 Speaker 1: who had fought in the war, which was virtually every 152 00:11:36,040 --> 00:11:38,920 Speaker 1: young man and a lot of women, could get as 153 00:11:39,040 --> 00:11:44,160 Speaker 1: much education as they were qualified for. That was essential, 154 00:11:44,520 --> 00:11:48,240 Speaker 1: not only as a basic sense of opportunity, but it 155 00:11:48,320 --> 00:11:53,280 Speaker 1: was actually essential for the transformation from the of the 156 00:11:53,360 --> 00:11:57,640 Speaker 1: United States from agriculture to manufacturing. Today, we need to 157 00:11:57,679 --> 00:12:03,480 Speaker 1: do a similar transformation for manufacturing to a new service sector, innovative, 158 00:12:03,600 --> 00:12:08,640 Speaker 1: non leach based economy, and government isn't there to help us. 159 00:12:09,240 --> 00:12:12,200 Speaker 1: In fact, the trunk government is focusing on back on 160 00:12:13,120 --> 00:12:16,160 Speaker 1: coal and all those other industries that we ought to 161 00:12:16,200 --> 00:12:20,800 Speaker 1: be moving away from. UH. So we need the help 162 00:12:20,840 --> 00:12:24,320 Speaker 1: of the government not to protect the old industries, but 163 00:12:24,400 --> 00:12:27,280 Speaker 1: to help us move into the more dynamics sectors where 164 00:12:27,679 --> 00:12:32,000 Speaker 1: will be a lot more prosperous and a lot healthier. 165 00:12:32,400 --> 00:12:34,640 Speaker 1: I want to give you the opportunity to speak about 166 00:12:34,760 --> 00:12:39,800 Speaker 1: the essential environmental industries that could be created or are 167 00:12:39,920 --> 00:12:42,640 Speaker 1: being created, because this is a topic that you've done 168 00:12:42,640 --> 00:12:45,680 Speaker 1: a lot of work on. Yeah. Well, I, as I mentioned, 169 00:12:46,080 --> 00:12:52,760 Speaker 1: solar panels have the opportunity potential creating so many more 170 00:12:52,840 --> 00:12:56,080 Speaker 1: jobs than the coal industry. And at the same time, 171 00:12:56,480 --> 00:13:00,000 Speaker 1: we know what coal does to our health, the particular 172 00:13:00,000 --> 00:13:04,240 Speaker 1: till it matter, the pollution, UH, not to speak of 173 00:13:04,640 --> 00:13:08,960 Speaker 1: the global warming, and the impacts of global warming we 174 00:13:09,000 --> 00:13:14,320 Speaker 1: are now realizing are much greater than when I began 175 00:13:14,400 --> 00:13:17,360 Speaker 1: studying that matter twenty five years ago. I was on 176 00:13:17,480 --> 00:13:22,719 Speaker 1: the Governmental Panel and Climate change UH and UH we 177 00:13:22,800 --> 00:13:26,640 Speaker 1: looked at the climate change at that point we said 178 00:13:26,679 --> 00:13:30,720 Speaker 1: it's really serious. But we made a mistake. We did 179 00:13:30,720 --> 00:13:33,720 Speaker 1: not anticipate how fast things were going to change and 180 00:13:33,760 --> 00:13:37,600 Speaker 1: how bad they were going to be. The dimensions of 181 00:13:37,679 --> 00:13:41,559 Speaker 1: this the extremes of weather. UM, you know, the United 182 00:13:41,600 --> 00:13:44,400 Speaker 1: States lost about one to two percent of GDP just 183 00:13:44,520 --> 00:13:48,680 Speaker 1: last year in the hurricanes. These are weather related events, 184 00:13:48,760 --> 00:13:54,560 Speaker 1: and there's absolutely no doubt that climate change global warming 185 00:13:55,360 --> 00:14:00,040 Speaker 1: is leading to more severe weather events, whether it's the 186 00:14:00,120 --> 00:14:05,960 Speaker 1: hurricanes or the drawings, the fires that have affected afflicted California. Uh, 187 00:14:06,160 --> 00:14:09,800 Speaker 1: we're already paying an enormous price for that. So if 188 00:14:09,840 --> 00:14:14,360 Speaker 1: we can make a little bit of investment in moving 189 00:14:14,360 --> 00:14:19,480 Speaker 1: to these more dynamic, pro environmental green policies, I think 190 00:14:19,520 --> 00:14:23,360 Speaker 1: it will stimulate our economy, but it will also help 191 00:14:23,400 --> 00:14:27,040 Speaker 1: protect us against the ravages that we are already beginning 192 00:14:27,040 --> 00:14:30,800 Speaker 1: to face. In about thirty seconds, what would you like 193 00:14:31,000 --> 00:14:35,280 Speaker 1: young people to take away from your perspective about economics 194 00:14:35,320 --> 00:14:41,160 Speaker 1: and what they can achieve. I think they should take 195 00:14:41,160 --> 00:14:45,640 Speaker 1: away that, Uh, we can have as prosperous a world 196 00:14:45,800 --> 00:14:48,720 Speaker 1: in the future as we had in the past, but 197 00:14:48,840 --> 00:14:53,640 Speaker 1: it will not be done by the market on its own. 198 00:14:54,600 --> 00:14:58,600 Speaker 1: We are going to have to have an active government policies, 199 00:14:58,640 --> 00:15:05,560 Speaker 1: progressive policy UM and the strategy of blaming others, whether 200 00:15:05,640 --> 00:15:10,360 Speaker 1: it's immigrants or foreign trade or UH, that is not 201 00:15:10,360 --> 00:15:13,440 Speaker 1: going to bring America prosperity. What is going to bring 202 00:15:13,480 --> 00:15:16,920 Speaker 1: American prosperity is investing in our future, not our past, 203 00:15:17,200 --> 00:15:23,600 Speaker 1: but our future, and UH creating the kind of progressive 204 00:15:23,720 --> 00:15:30,040 Speaker 1: environment that says, UH what we tried to achieve seventy 205 00:15:30,120 --> 00:15:38,160 Speaker 1: years ago. UH. Secure retirement, housing for all, healthcare, education 206 00:15:38,200 --> 00:15:41,400 Speaker 1: for our children, jobs for all. These are all things 207 00:15:41,440 --> 00:15:45,760 Speaker 1: that are within our grasp. We are a much wealthier 208 00:15:45,760 --> 00:15:49,800 Speaker 1: country than we were seventy five years ago. The question 209 00:15:49,880 --> 00:15:53,280 Speaker 1: is can we deploy that wealth in ways that will 210 00:15:53,320 --> 00:15:56,200 Speaker 1: benefit all of us? Thank you very much, Thank you 211 00:15:56,280 --> 00:15:59,600 Speaker 1: very much for being with us. UH. Professor Joseph Stiglets, 212 00:15:59,640 --> 00:16:03,520 Speaker 1: Nobel Lauria, Professor of economics at Columbia University and the 213 00:16:03,600 --> 00:16:07,600 Speaker 1: author of Globalization and Its Discontent. Thank you very much 214 00:16:07,640 --> 00:16:14,680 Speaker 1: for your time. Thank you. The topic now is Sears. 215 00:16:14,720 --> 00:16:19,400 Speaker 1: Sears Holdings, hundred and twenty five year old retailer filed 216 00:16:19,480 --> 00:16:23,680 Speaker 1: for bankruptcy protection. It has been settled with billions of 217 00:16:23,720 --> 00:16:27,520 Speaker 1: dollars in debt, this as it struggled to adjust to 218 00:16:27,960 --> 00:16:32,280 Speaker 1: shifts in online consumption. Noel Hibbert, our director of credit 219 00:16:32,360 --> 00:16:36,760 Speaker 1: research for Bloomberg Intelligence, joins us now to tell us 220 00:16:37,000 --> 00:16:41,520 Speaker 1: how did this happen and what's next? Alright, No, I 221 00:16:41,560 --> 00:16:44,000 Speaker 1: have an idea how it happened. But I want you 222 00:16:44,040 --> 00:16:47,840 Speaker 1: to explain how did it happen that Sears ended up 223 00:16:48,480 --> 00:16:52,560 Speaker 1: saddled with all this debt, never mind the strategic issues 224 00:16:52,640 --> 00:16:56,320 Speaker 1: having to do with competition in the retail world. How 225 00:16:56,360 --> 00:17:00,160 Speaker 1: did it end up financially in this position? Boy, I 226 00:17:00,200 --> 00:17:04,000 Speaker 1: think those two items are definitely not mutually exclusive, right, 227 00:17:04,000 --> 00:17:07,680 Speaker 1: So I think you know when not to go too 228 00:17:07,680 --> 00:17:09,840 Speaker 1: far back into the way back time machine. But when 229 00:17:09,960 --> 00:17:12,159 Speaker 1: Eddie had kind of brought Kmart out of bankrupt you're 230 00:17:12,160 --> 00:17:16,119 Speaker 1: talking about Eddie Lampert, the fund manager who basically owns 231 00:17:16,320 --> 00:17:20,199 Speaker 1: Sirius correct so vias e s L investment fund. He 232 00:17:20,200 --> 00:17:22,720 Speaker 1: had brought Kmart out of bankruptcy and then leverage that 233 00:17:23,160 --> 00:17:26,080 Speaker 1: series back in oh five, and back then he had 234 00:17:26,080 --> 00:17:28,679 Speaker 1: a new way to run retail, which was basically to 235 00:17:28,720 --> 00:17:32,000 Speaker 1: not invest in it, right, So, don't invest in capital expenditures, 236 00:17:32,040 --> 00:17:34,280 Speaker 1: try and cut back on employees, and do all these 237 00:17:34,320 --> 00:17:37,680 Speaker 1: things to basically maximize cash flow, which is a great 238 00:17:37,720 --> 00:17:41,040 Speaker 1: short term strategy, but it's not how retail works. Uh. 239 00:17:41,080 --> 00:17:43,200 Speaker 1: And so through the accrual of that over years, they 240 00:17:43,240 --> 00:17:45,119 Speaker 1: just you know, it worked for the first four or 241 00:17:45,119 --> 00:17:47,120 Speaker 1: five years, and then they started lose money. And lose 242 00:17:47,160 --> 00:17:49,960 Speaker 1: more money and lose more money, and the way that 243 00:17:50,040 --> 00:17:54,840 Speaker 1: they funded that loss was to basically borrow money. What 244 00:17:54,960 --> 00:17:59,280 Speaker 1: does Eddie Lampert want to do now with his holdings 245 00:17:59,280 --> 00:18:03,240 Speaker 1: in sears given that they are in bankruptcy protection, because 246 00:18:03,480 --> 00:18:07,000 Speaker 1: there's a discussion about buying a large portion of the 247 00:18:07,040 --> 00:18:10,359 Speaker 1: company's store base. Yea, and I think, you know, for 248 00:18:11,320 --> 00:18:13,879 Speaker 1: if I'm in Eddie Shoes, I think that that makes 249 00:18:13,920 --> 00:18:16,480 Speaker 1: the most sense, right. I mean, to the degree that 250 00:18:16,560 --> 00:18:19,159 Speaker 1: you've got four or five stores somewhere in this you know, 251 00:18:19,240 --> 00:18:22,639 Speaker 1: nine plus store portfolio that are actually profitable and that 252 00:18:22,760 --> 00:18:25,280 Speaker 1: you can build around, you start to think sort of 253 00:18:25,400 --> 00:18:29,240 Speaker 1: the adjacent pockets of value that you're trying to maximize 254 00:18:29,359 --> 00:18:31,800 Speaker 1: any credits trying to maximize here, right, which is stuff 255 00:18:31,840 --> 00:18:34,960 Speaker 1: like Ken Moore or the services business, or the autoparts business, 256 00:18:35,560 --> 00:18:38,879 Speaker 1: or speaking specifically to Eddie Lamport and his DSLF fund, 257 00:18:39,040 --> 00:18:42,920 Speaker 1: the Sritage real estate spinoff that they had a few 258 00:18:43,000 --> 00:18:46,159 Speaker 1: years back, Like, those are all things that you need 259 00:18:46,200 --> 00:18:48,360 Speaker 1: to try and preserve the value of. And if you 260 00:18:48,400 --> 00:18:50,440 Speaker 1: just let this thing sort of wind its way down 261 00:18:50,440 --> 00:18:53,760 Speaker 1: into a liquidation, you lose that. So in order to 262 00:18:53,840 --> 00:18:56,480 Speaker 1: kind of keep the value attached to some of those assets. 263 00:18:56,560 --> 00:18:58,440 Speaker 1: The thing you need to do is sort of find 264 00:18:58,440 --> 00:19:01,480 Speaker 1: a store base that you can build around. No, given 265 00:19:01,720 --> 00:19:05,680 Speaker 1: the attempts in the past to revive Sears, is this 266 00:19:05,800 --> 00:19:10,240 Speaker 1: an attempt to just get through this holiday shopping season 267 00:19:10,520 --> 00:19:15,120 Speaker 1: rather than a big strategic rethink about what they do 268 00:19:15,200 --> 00:19:18,040 Speaker 1: and how they do it. So, I think that's really 269 00:19:18,040 --> 00:19:23,439 Speaker 1: going to come down to how contentious the court proceedings get. Right. So, 270 00:19:23,680 --> 00:19:26,560 Speaker 1: I think if if he can't get enough creditors to 271 00:19:26,760 --> 00:19:29,640 Speaker 1: sort of play along, uh, then it will be very, 272 00:19:29,720 --> 00:19:32,600 Speaker 1: very difficult to sort of rebuild anything out of this, 273 00:19:32,920 --> 00:19:34,440 Speaker 1: and you end up sort of in a Toys Rus 274 00:19:34,480 --> 00:19:36,800 Speaker 1: situation where you've just got too many conflicting interests in 275 00:19:36,840 --> 00:19:39,360 Speaker 1: the courts. No longer it drags on the heart it 276 00:19:39,400 --> 00:19:42,520 Speaker 1: is to resuscitate whatever is left of the retail business. 277 00:19:42,920 --> 00:19:46,119 Speaker 1: I think if he can leverage his position as the 278 00:19:46,240 --> 00:19:49,280 Speaker 1: largest creditors, so of the five billion dollars in change 279 00:19:49,280 --> 00:19:51,080 Speaker 1: of debt that the company has, he's half of that. 280 00:19:51,760 --> 00:19:55,919 Speaker 1: If he can leverage that position somehow into buying or 281 00:19:56,160 --> 00:20:00,800 Speaker 1: securing I guess, uh, you know, sort of relie from 282 00:20:01,160 --> 00:20:04,080 Speaker 1: other creditors. And I think there's something he can do here, 283 00:20:04,080 --> 00:20:07,160 Speaker 1: because again I think it's not just about SEARS itself, 284 00:20:07,200 --> 00:20:10,080 Speaker 1: but it's about sort of how do you preserve uh, 285 00:20:10,440 --> 00:20:12,600 Speaker 1: you know, value. So ken Moore would be a great example, 286 00:20:12,600 --> 00:20:15,520 Speaker 1: whereas you know, there's some value attached to ken Moore 287 00:20:15,520 --> 00:20:18,240 Speaker 1: if you have a still solvent SEARS, but if you're 288 00:20:18,240 --> 00:20:23,000 Speaker 1: in insolvency, you're only bidding for intellectual property that maybe 289 00:20:23,000 --> 00:20:27,760 Speaker 1: worth very very little to third parties without a SEARS. No, 290 00:20:28,160 --> 00:20:32,640 Speaker 1: based on what you know from these kinds of negotiations 291 00:20:32,680 --> 00:20:37,679 Speaker 1: between creditors and debtors in chapter eleven bankruptcy, can you 292 00:20:37,760 --> 00:20:42,800 Speaker 1: tell us what the tone or indeed what kind of relationship, 293 00:20:43,240 --> 00:20:46,120 Speaker 1: if any, do you believe would exist between those two 294 00:20:46,200 --> 00:20:50,359 Speaker 1: groups at this point. Well, that's going to be an 295 00:20:50,400 --> 00:20:54,080 Speaker 1: interesting dynamic because I think the only real big third 296 00:20:54,080 --> 00:20:56,720 Speaker 1: party creditor that we know about right now is fair Home, 297 00:20:57,560 --> 00:21:00,640 Speaker 1: who is involved with Eddie and e S. In terms 298 00:21:00,640 --> 00:21:02,600 Speaker 1: of both on the equity side and on the credit side. 299 00:21:02,640 --> 00:21:04,840 Speaker 1: They're going to be one of the largest creditors going in, 300 00:21:05,000 --> 00:21:08,399 Speaker 1: and they obviously got hurt pretty substantially, not only on 301 00:21:08,480 --> 00:21:14,480 Speaker 1: their equity exposure, which they've largely ex exited excuse me, um, 302 00:21:14,480 --> 00:21:16,400 Speaker 1: but also in the eight percent notes, which is their 303 00:21:16,440 --> 00:21:19,720 Speaker 1: biggest piece, which are trading you know, call it low teens. 304 00:21:19,800 --> 00:21:23,320 Speaker 1: And that's obviously paper that they owned at par right, 305 00:21:23,440 --> 00:21:28,360 Speaker 1: So they're pretty substantially impaired. So figuring out where they're 306 00:21:28,359 --> 00:21:29,480 Speaker 1: going to be in this is going to be a 307 00:21:29,480 --> 00:21:32,760 Speaker 1: big part of it. If they choose to make it contentious, um, 308 00:21:33,040 --> 00:21:37,080 Speaker 1: then this this will probably have a pretty challenged ND. 309 00:21:38,359 --> 00:21:44,880 Speaker 1: Is this why they couldn't reach a resolution out of court? Well? 310 00:21:44,920 --> 00:21:48,560 Speaker 1: I think, uh, I guess there's probably a different number 311 00:21:48,560 --> 00:21:50,640 Speaker 1: of different ways to sort of play that one my 312 00:21:51,080 --> 00:21:55,360 Speaker 1: you know, tea leaves or you want to phrase it, 313 00:21:55,400 --> 00:21:58,240 Speaker 1: would be that it more came down to you need 314 00:21:58,400 --> 00:22:01,280 Speaker 1: assets to restructure around. So if you think back to E. 315 00:22:01,480 --> 00:22:04,960 Speaker 1: S L's proposal from a few weeks back, which basically 316 00:22:05,080 --> 00:22:08,920 Speaker 1: envisioned recapitalizing the entire balance sheet, um, but it also 317 00:22:08,960 --> 00:22:11,160 Speaker 1: meant moving a lot of the assets that remain off 318 00:22:11,160 --> 00:22:14,040 Speaker 1: the balance sheet. Uh. You know, the board is probably 319 00:22:14,040 --> 00:22:16,080 Speaker 1: looking at that and saying, if we're going to restructure 320 00:22:16,080 --> 00:22:18,639 Speaker 1: around anything, we can't do it without ken More, we 321 00:22:18,680 --> 00:22:21,960 Speaker 1: can't do it without the real estate, etcetera. Uh. And 322 00:22:22,040 --> 00:22:24,120 Speaker 1: so you know they might have been having a half 323 00:22:24,119 --> 00:22:26,560 Speaker 1: an eye towards their own liability if this thing went 324 00:22:26,560 --> 00:22:29,040 Speaker 1: into a chapter eleven and what happened if they had 325 00:22:29,080 --> 00:22:31,480 Speaker 1: just pretty much shipped all the valuable assets off the 326 00:22:31,520 --> 00:22:35,679 Speaker 1: balance sheet and into E S l um so. So 327 00:22:35,720 --> 00:22:37,640 Speaker 1: I think there's a couple of dynamics that play there. 328 00:22:37,960 --> 00:22:39,840 Speaker 1: I want to thank you very much for sharing your 329 00:22:39,840 --> 00:22:43,320 Speaker 1: information and experience with us. Noel Hebert is our director 330 00:22:43,440 --> 00:22:49,400 Speaker 1: of credit research for Bloomberg Intelligence. Speaking about Sears Holdings 331 00:22:50,000 --> 00:22:56,600 Speaker 1: filing for bankruptcy, President Donald Trump said that he is 332 00:22:56,640 --> 00:22:59,760 Speaker 1: sending U S. Secretary of State Mike Pompeo to meet 333 00:22:59,840 --> 00:23:03,159 Speaker 1: with Saudi King Salmon to discuss the fate of a 334 00:23:03,240 --> 00:23:08,840 Speaker 1: Saudi dissident journalist who disappeared after entering the Saudi consulate 335 00:23:09,240 --> 00:23:12,760 Speaker 1: in Istanbul. Here to tell us more about the situation 336 00:23:13,080 --> 00:23:16,160 Speaker 1: is Ali al Ahmed. He is the founder and director 337 00:23:16,200 --> 00:23:20,080 Speaker 1: of the Institute for Gulf Affairs based in Washington, d C. 338 00:23:20,640 --> 00:23:24,399 Speaker 1: And joining me here in studio is Toby Harshaw, Bloomberg 339 00:23:24,480 --> 00:23:27,520 Speaker 1: Opinion editor. Gentlemen, thank you very much for being here. 340 00:23:27,760 --> 00:23:30,919 Speaker 1: Ali al Ahmed. Maybe you could just describe what do 341 00:23:31,000 --> 00:23:34,240 Speaker 1: we know at the moment, what we know the moment 342 00:23:34,320 --> 00:23:38,200 Speaker 1: is that the Turkish government has the fault proof that 343 00:23:38,320 --> 00:23:42,240 Speaker 1: Mr was killed inside the consulate, and we know the 344 00:23:42,320 --> 00:23:46,280 Speaker 1: identity of the killers H. And it's absolute no doubt 345 00:23:46,400 --> 00:23:50,440 Speaker 1: that the Saudi team, the fifteen member team, including two 346 00:23:50,520 --> 00:23:56,439 Speaker 1: members of the conference bodyguards, were involved in the crime. UH. 347 00:23:56,720 --> 00:24:00,480 Speaker 1: And the Turks are waiting to negotiate some kind of 348 00:24:00,480 --> 00:24:03,320 Speaker 1: a deal between them and the Saudis. And I think 349 00:24:03,320 --> 00:24:05,679 Speaker 1: you meet the Americans because this is now becoming an 350 00:24:05,720 --> 00:24:12,000 Speaker 1: international incident and the King's nephew and governor of Mecca 351 00:24:12,119 --> 00:24:15,679 Speaker 1: is an Ancora beating with President Arregon to come to 352 00:24:15,800 --> 00:24:19,280 Speaker 1: a solution or two an exit out of this UH, 353 00:24:21,800 --> 00:24:26,800 Speaker 1: out of this crisis. MR is dead and he was 354 00:24:26,880 --> 00:24:29,240 Speaker 1: killed in a very horrifle commander, I would say, is 355 00:24:29,400 --> 00:24:34,119 Speaker 1: the style murder. So we'll see what happens. Hang on 356 00:24:34,200 --> 00:24:36,280 Speaker 1: just a second because I want to bring in Toby Harshaw, 357 00:24:36,359 --> 00:24:40,240 Speaker 1: Bloomberg Opinion editor, to comment on this. Toby, why should 358 00:24:40,280 --> 00:24:48,600 Speaker 1: Americans pay attention to the disappearance of a Saudi dissident journalist? Well, 359 00:24:48,640 --> 00:24:51,399 Speaker 1: I think we should pay attention to the disappearance of 360 00:24:51,400 --> 00:24:57,720 Speaker 1: all journalists. UM. I think that given the tremendous support 361 00:24:58,080 --> 00:25:02,760 Speaker 1: that the Trump administration, particularly the President and Jared Kushner, 362 00:25:02,840 --> 00:25:06,280 Speaker 1: have given to the Saudis, which UH many people saw 363 00:25:06,280 --> 00:25:08,760 Speaker 1: as them giving the green light, for example, to their 364 00:25:08,760 --> 00:25:14,200 Speaker 1: attempts to isolate Cutter, Um to continue prosecuting this disaster 365 00:25:14,320 --> 00:25:18,600 Speaker 1: of a war in Yemen. Um that you know and 366 00:25:18,600 --> 00:25:22,480 Speaker 1: and support for for Mohammed bin Salman, the Prime Prince 367 00:25:22,560 --> 00:25:25,880 Speaker 1: really runs the country. UM that we need to look 368 00:25:26,040 --> 00:25:29,600 Speaker 1: at that policy and think about whether we have to 369 00:25:29,600 --> 00:25:34,400 Speaker 1: be more critical. Well Ali al Ahmed, the President said 370 00:25:34,440 --> 00:25:38,120 Speaker 1: that he spoke earlier with the King of Saudi Arabia 371 00:25:38,359 --> 00:25:43,200 Speaker 1: and described the conversation that the king denied any knowledge 372 00:25:43,320 --> 00:25:46,520 Speaker 1: of whatever may have happened to us. He says, quote 373 00:25:46,680 --> 00:25:52,520 Speaker 1: our Saudi Arabian citizen, Do you believe that that is 374 00:25:52,600 --> 00:25:57,280 Speaker 1: the contact content of that conversation? But I'm not sure. 375 00:25:57,320 --> 00:25:59,680 Speaker 1: Obviously I was not listening in. But I would want 376 00:25:59,720 --> 00:26:02,720 Speaker 1: to say that this is the greatest involved with him 377 00:26:02,720 --> 00:26:07,280 Speaker 1: and of an American president ever in any issue relating 378 00:26:07,320 --> 00:26:12,320 Speaker 1: to Saudi human rights violation. So you give Mr Trump 379 00:26:12,400 --> 00:26:15,639 Speaker 1: his his due. He has been the most spokes UH. 380 00:26:15,760 --> 00:26:17,960 Speaker 1: You might not like his position, but he has spoken 381 00:26:18,000 --> 00:26:20,720 Speaker 1: about it more than any American president all the Americans 382 00:26:20,720 --> 00:26:23,400 Speaker 1: in fact combined that that's the reality. I followed all 383 00:26:23,440 --> 00:26:27,639 Speaker 1: the Americans. The President the States was on Saudiast, So 384 00:26:27,840 --> 00:26:34,240 Speaker 1: this is surprising and maybe refreshingly. So I of course 385 00:26:34,359 --> 00:26:36,840 Speaker 1: King Salmon might not have been aware of it because 386 00:26:37,080 --> 00:26:40,879 Speaker 1: he's he's not he's not that healthy, especially because he 387 00:26:40,960 --> 00:26:46,040 Speaker 1: has a publement with his you know, amnesia son. But 388 00:26:46,320 --> 00:26:50,280 Speaker 1: definitely it is done by people in the Royal Palace 389 00:26:51,280 --> 00:26:53,840 Speaker 1: close to him. He doesn't know, he doesn't know, but 390 00:26:54,280 --> 00:26:59,800 Speaker 1: you cannot believe the politicians in general, especially the partic one. Uh. 391 00:27:00,080 --> 00:27:03,760 Speaker 1: The reality is Mr Trump, I think also will use 392 00:27:03,840 --> 00:27:07,520 Speaker 1: this to gain some some some favors with the Drawing 393 00:27:07,560 --> 00:27:10,960 Speaker 1: family and and or maybe in terms of having mb 394 00:27:11,119 --> 00:27:15,000 Speaker 1: as the conference deliver on his promises that he he 395 00:27:15,080 --> 00:27:19,240 Speaker 1: failed to do in terms of investing in certain projects 396 00:27:19,320 --> 00:27:23,639 Speaker 1: or delivering certain policies in the region. So I really 397 00:27:23,720 --> 00:27:28,120 Speaker 1: think this is going to continue because it's not about 398 00:27:28,480 --> 00:27:32,040 Speaker 1: the killing of jamaatoc Alon, which is deserving obviously, but 399 00:27:32,119 --> 00:27:35,360 Speaker 1: it has to do with other policies that the Mohammed 400 00:27:35,600 --> 00:27:38,879 Speaker 1: Salman is carrying out. And I think Mohammed Salman is 401 00:27:39,119 --> 00:27:42,000 Speaker 1: what I call is growing his own wings. He wants 402 00:27:42,040 --> 00:27:46,239 Speaker 1: to be more independent. He's carrying his own vision. He 403 00:27:46,320 --> 00:27:50,960 Speaker 1: wants to do things without America's support or approval. And 404 00:27:51,000 --> 00:27:54,119 Speaker 1: I think that you will see that coming uh in 405 00:27:54,160 --> 00:27:57,120 Speaker 1: the next few weeks, with maybe changing into oil production 406 00:27:57,800 --> 00:28:02,399 Speaker 1: and realigning his position in the region. There's ira is 407 00:28:02,400 --> 00:28:04,960 Speaker 1: a bit of warnum in which the US supported from 408 00:28:04,960 --> 00:28:09,639 Speaker 1: the Obama administration time. Mr al Ahmed, just quickly, do 409 00:28:09,720 --> 00:28:16,119 Speaker 1: you have separate intelligence information other than what the Turkish 410 00:28:16,200 --> 00:28:21,040 Speaker 1: government has released or said in concerning the fate of 411 00:28:21,480 --> 00:28:26,000 Speaker 1: Mr Kashogi. My my sources in Turkey, and he heard 412 00:28:26,080 --> 00:28:28,920 Speaker 1: the video, he heard the audio of the killing, and 413 00:28:29,000 --> 00:28:32,880 Speaker 1: so the collaborating videos that that puts the killers in 414 00:28:32,880 --> 00:28:35,119 Speaker 1: in in that space of time, in the council that 415 00:28:35,920 --> 00:28:40,360 Speaker 1: during the form Mr Kashov entered and after he was killed, 416 00:28:40,760 --> 00:28:44,120 Speaker 1: So everything there. I I know the individual who who 417 00:28:44,160 --> 00:28:46,960 Speaker 1: actually watched it. He is close to the government, but 418 00:28:47,200 --> 00:28:49,640 Speaker 1: he's a friend of Jamal Kaso and somebody I know, 419 00:28:49,960 --> 00:28:51,680 Speaker 1: so he actually saw it. So I'm not I have 420 00:28:51,760 --> 00:28:56,560 Speaker 1: no doubt my additional information separately, and I hope the 421 00:28:56,880 --> 00:29:00,960 Speaker 1: US government will contacts us. We have information on the 422 00:29:01,000 --> 00:29:03,840 Speaker 1: team that we have obtained through our own sources in 423 00:29:03,880 --> 00:29:07,120 Speaker 1: the country through the Palace. We have more information that 424 00:29:07,320 --> 00:29:10,720 Speaker 1: we we have we we owned right now, Toby Harshaw, 425 00:29:10,840 --> 00:29:13,280 Speaker 1: just to come to you for thirty seconds, what would 426 00:29:13,720 --> 00:29:20,440 Speaker 1: this issue due to US Saudi relationships visa v arms sales? Well, 427 00:29:20,480 --> 00:29:23,640 Speaker 1: as you know, the Congress has been tossing around the 428 00:29:23,680 --> 00:29:27,560 Speaker 1: idea of boycotting or putting limits on arms sales to 429 00:29:27,600 --> 00:29:30,480 Speaker 1: study Arabia based on the civilian casual Louis and Yemen. 430 00:29:30,720 --> 00:29:33,480 Speaker 1: I think this could you know, obviously put to give 431 00:29:33,520 --> 00:29:36,320 Speaker 1: more support to that and put a lot of pressure 432 00:29:36,560 --> 00:29:39,320 Speaker 1: on the White House to actually join in. Thanks very 433 00:29:39,400 --> 00:29:43,240 Speaker 1: much for being with us, gentlemen, Toby Harshaw, Bloomberg Opinion 434 00:29:43,440 --> 00:29:47,920 Speaker 1: editor and Ali Al Ahmed, founder and director of the 435 00:29:48,000 --> 00:29:53,720 Speaker 1: Institute for Gulf Affairs in Washington, d C. Thanks for 436 00:29:53,800 --> 00:29:56,440 Speaker 1: listening to the Bloomberg P and L podcast. You can 437 00:29:56,480 --> 00:30:00,320 Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud, or 438 00:30:00,360 --> 00:30:03,840 Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm on 439 00:30:03,880 --> 00:30:07,720 Speaker 1: Twitter at pim Fox. I'm on Twitter at Lisa Abramo 440 00:30:07,720 --> 00:30:10,400 Speaker 1: wits one. Before the podcast, you can always catch us 441 00:30:10,480 --> 00:30:12,040 Speaker 1: worldwide on Bloomberg Radio.