WEBVTT - Trump Steering Economy To An Outdated Model: Joe Stiglitz 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg pim L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.440 Along with my co host Lisa A. Brahmowitz. Each day 0:00:11.480 --> 0:00:15.000 we bring you the most important, noteworthy, and useful interviews 0:00:15.040 --> 0:00:17.520 for you and your money, whether you're at the grocery 0:00:17.560 --> 0:00:20.560 store or the trading floor. Find the Bloomberg p and 0:00:20.680 --> 0:00:27.560 L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. 0:00:27.560 --> 0:00:30.520 I'm pim Fox, and it is my pleasure to welcome 0:00:30.560 --> 0:00:34.280 our next guest, Joseph Stiglitz. Professor Stiglitz was born in Gary, 0:00:34.360 --> 0:00:38.400 Indiana in nine Of course, he is a Nobel Laureate, 0:00:38.440 --> 0:00:41.839 awarded the Nobel Prize in Economics along with two colleagues 0:00:41.840 --> 0:00:44.519 in the year two thousand and one. He is the 0:00:44.560 --> 0:00:49.360 author of many books, including Globalization and Its Discontents, and 0:00:49.440 --> 0:00:52.600 he joins us here in studio. Professor Stigletz, thank you 0:00:52.680 --> 0:00:54.680 very much for being here, and wonder if we could 0:00:54.760 --> 0:00:57.960 just start with a kind of anecdotal question having to 0:00:58.040 --> 0:01:02.920 do with Gary, Indiana, and we were just talking offline 0:01:03.000 --> 0:01:06.160 just a moment ago. Do you believe that growing up 0:01:06.240 --> 0:01:13.479 in Gary, Indiana influenced your perspective and your ultimate goal 0:01:14.200 --> 0:01:17.319 in learning about the way the world works oh very 0:01:17.400 --> 0:01:21.760 much so, uh, and I've actually written about that. UM. 0:01:21.800 --> 0:01:26.240 I became an economist because of what I saw growing 0:01:26.319 --> 0:01:29.360 up in Gary, Indiana. I had thought I was going 0:01:29.400 --> 0:01:35.160 to be a physicist, uh, theoretical physicist. But as I 0:01:36.040 --> 0:01:39.400 continued in my studies, what I had seen growing up, 0:01:39.520 --> 0:01:46.679 this enormous inequality, discrimination, episodic unemployment, labor strife kept gnawing 0:01:46.760 --> 0:01:52.600 at me, and I finally decided, Uh, I wanted to 0:01:52.680 --> 0:01:57.880 understand that better. I wanted to come to an understanding 0:01:57.880 --> 0:02:01.440 of how we could do better about these problems. And 0:02:01.480 --> 0:02:04.680 so that was really what drove me into economics. And 0:02:04.720 --> 0:02:09.359 I feel, you know, as I've studied economics, the perspectives 0:02:09.360 --> 0:02:12.080 that I bring are so different from those who grow 0:02:12.200 --> 0:02:16.360 up in a more privileged life in a rich suburb. UM. 0:02:17.080 --> 0:02:20.639 One of the standard views and economics is that markets 0:02:20.680 --> 0:02:25.800 work very well, everybody uh is well off, trickle down 0:02:25.840 --> 0:02:30.920 economics para to optimality. Concepts like that and UH sort 0:02:30.919 --> 0:02:35.440 of Pollyonish view of that uh of of the world. 0:02:36.320 --> 0:02:40.560 And I could never share that Pollyanish view because I saw, 0:02:41.440 --> 0:02:45.760 UH it wasn't working for the people that surrounded me. 0:02:46.120 --> 0:02:49.760 When I was growing up in as far as you 0:02:49.800 --> 0:02:53.560 were able to take that experience and then use it 0:02:53.600 --> 0:02:59.400 in your understanding of economics, you helped to pioneer something 0:02:59.440 --> 0:03:03.880 that has been described as asymmetrical information. In other words, 0:03:03.880 --> 0:03:08.760 how do you take information that may produce dissidence or 0:03:09.440 --> 0:03:14.480 a lack of conformity in its result? And I'm wondering 0:03:14.520 --> 0:03:17.040 if you could talk a little bit about how you 0:03:17.840 --> 0:03:20.200 sort of square the circle, so to speak, or or 0:03:20.200 --> 0:03:24.000 how do you reconcile a lot of those uh inconsistencies. 0:03:25.919 --> 0:03:28.960 The key issue that I faced as I began my 0:03:29.040 --> 0:03:34.920 research was too trying to understand, uh, the difference between 0:03:35.560 --> 0:03:40.160 the standard view of economics at that time Adam Smith, 0:03:40.320 --> 0:03:46.520 the market's invisible hand, uh, every pursued of self interested leagues, 0:03:46.640 --> 0:03:50.000 the world to be as if society's well being was 0:03:50.040 --> 0:03:55.840 being maximized, um with what I saw growing up. And 0:03:55.920 --> 0:04:00.960 that led to ideas about situations where artics don't work 0:04:01.040 --> 0:04:07.800 well and uncovering that there had been an implicit assumption 0:04:08.000 --> 0:04:12.200 that economists hadn't really recognized for two hundering some years, 0:04:12.280 --> 0:04:18.200 which was uh the idea that information was perfect and 0:04:18.279 --> 0:04:22.760 that a world in which information is very imperfect, whereas 0:04:22.800 --> 0:04:26.960 some people know things that others don't. Is totally different 0:04:27.440 --> 0:04:31.080 from uh, a world which information is perfect. It's a 0:04:31.160 --> 0:04:35.120 little bit like in physics. Uh. We we talked about 0:04:35.160 --> 0:04:39.000 a frictionless world and then a world with friction. And 0:04:39.040 --> 0:04:42.480 you would never construct an airplane based on a theory 0:04:42.480 --> 0:04:47.040 of a frictionless world. Uh. It just wouldn't make any sense. 0:04:47.080 --> 0:04:50.919 And yet we were trying to construct an economy based 0:04:51.080 --> 0:04:55.720 on a frictionless world and it wasn't working very well. 0:04:56.800 --> 0:05:00.320 Can you then take that perspective and speak to us 0:05:00.360 --> 0:05:04.159 about the current state of let's say, trade negotiations or 0:05:04.240 --> 0:05:08.760 trade relationship between the United States and the world. I mean, 0:05:08.800 --> 0:05:11.359 we can talk China, you can mention Mexico, Canada, and 0:05:11.360 --> 0:05:13.320 so on. But I wonder if you could use that 0:05:13.800 --> 0:05:18.000 to describe what do you believe is the current feeling 0:05:18.360 --> 0:05:22.880 about these trade negotiations, that they really headed somewhere intelligent 0:05:23.120 --> 0:05:28.360 or is this just a political game? Well, I think 0:05:29.000 --> 0:05:35.240 the trade negotiations are not going well, uh for anybody. 0:05:35.279 --> 0:05:38.760 And the reason that's true is that is really the 0:05:38.800 --> 0:05:41.799 blame is I I put in the United States that 0:05:42.200 --> 0:05:48.680 uh Trump does not have uh any conception about what 0:05:48.760 --> 0:05:52.200 it is that he's trying to do. What is the 0:05:52.279 --> 0:05:55.159 problem facing the United States now? He says the problem 0:05:55.400 --> 0:05:59.440 is that we import more than we export. We have 0:05:59.480 --> 0:06:06.039 a trade deficit, and he attributes that to unfair trade 0:06:06.680 --> 0:06:11.320 UH that are taking advantage of us. But the basic 0:06:11.360 --> 0:06:17.840 inside of economics is that trade deficits are not UH 0:06:18.279 --> 0:06:24.720 based on trade um with any particular country, what we 0:06:24.800 --> 0:06:29.160 call multilateral UM. If we buy a little bit less 0:06:29.200 --> 0:06:32.000 clothes from China, will buy a little bit more from 0:06:32.040 --> 0:06:37.400 Malaysia or Indonesia, and UH it won't make much difference 0:06:37.440 --> 0:06:41.240 for anybody. UH. If we buy from somebody that's not 0:06:41.279 --> 0:06:45.120 the cheapest, our costs will be a little bit higher. UH. 0:06:45.160 --> 0:06:48.280 It will make a difference for Indonesia, but not for 0:06:48.440 --> 0:06:56.120 the American UH producers. UH. What determines the overall trade 0:06:56.200 --> 0:07:01.080 deficit is we call macro economics. That is spirity between 0:07:01.600 --> 0:07:05.680 what we invest inside the United States and what we 0:07:05.800 --> 0:07:10.560 save inside the United States. And if we aren't saving 0:07:10.720 --> 0:07:14.920 enough to finance the investment, we have to borrow from abroad. 0:07:15.040 --> 0:07:19.520 And that borrowing from abroad results in our exchange rate 0:07:19.520 --> 0:07:22.800 going up, and that leads to correspond to that will 0:07:22.840 --> 0:07:26.400 be a trade deficit. So the problem in the United 0:07:26.440 --> 0:07:30.240 States is that we've been borrowing a lot from abroad. 0:07:31.000 --> 0:07:35.320 And the tax bill in December two thousand seventeen and 0:07:35.360 --> 0:07:40.800 the increase in expenditures in January two eighteen, UH really 0:07:41.040 --> 0:07:45.400 blew a hole in our fiscal position. A lot of 0:07:45.440 --> 0:07:48.720 people talked about how we're going to have to borrow 0:07:49.320 --> 0:07:53.040 that much more from abroad and what does that mean? 0:07:53.240 --> 0:07:57.200 That means we will have an even larger trade deficit. 0:07:57.600 --> 0:08:00.880 And that's true. No matter what the outcome of any 0:08:00.920 --> 0:08:05.920 trade negotiations are, those outcomes will determine which countries we 0:08:06.000 --> 0:08:10.960 buy from, but not our overall trade deficit. So no 0:08:11.000 --> 0:08:17.560 matter what his negotiators do, uh, it won't affect that 0:08:17.720 --> 0:08:21.880 basic economics. Now, where the negotiations do make a difference 0:08:23.320 --> 0:08:30.800 is uh particular countries exporting particular goods or importing particularly goods. Now, 0:08:31.320 --> 0:08:37.240 this is another area where Trump is really very misconceived 0:08:37.240 --> 0:08:42.840 in his economics. Modern economics recognize that we are a 0:08:42.840 --> 0:08:48.760 service sector economy. Uh. We are are vibrant sectors are 0:08:48.760 --> 0:08:53.880 financial sector, actucation sector, or health sector. Um. These are 0:08:53.880 --> 0:08:57.439 among the areas where we're making you know, where we're 0:08:57.480 --> 0:09:09.719 really successful. There are other areas where uh, we've moved on. Uh, automobiles, UM, 0:09:09.920 --> 0:09:20.200 natural resources. UH. You know, take the presidents talked about coal. Uh. 0:09:20.320 --> 0:09:26.040 In all of the extractor sectors together, including coal, UH, 0:09:26.080 --> 0:09:29.239 there are about half the number of workers as professional 0:09:29.320 --> 0:09:33.280 sports people. So if you say we want to have 0:09:33.360 --> 0:09:35.040 a cold policy, you ought to say we ought to 0:09:35.080 --> 0:09:37.440 have a sports policy. And you know, if you're talking 0:09:37.480 --> 0:09:42.320 about jobs, there twice as many in those areas. There 0:09:42.320 --> 0:09:48.520 are five times as many jobs in solar install panel 0:09:48.640 --> 0:09:52.760 installation than in the coal industry. So this was not 0:09:52.880 --> 0:09:55.800 the case in nineteen fifty sixties. We didn't have a 0:09:55.840 --> 0:10:00.440 solar panel. He's keeping looking back at the world as 0:10:00.480 --> 0:10:03.920 it was seventy five years ago, next, not where we 0:10:03.920 --> 0:10:07.559 should be going. We should be going towards the century. 0:10:07.600 --> 0:10:13.720 So his focused on the old world, on the industrial 0:10:13.720 --> 0:10:17.800 world of the nineteen fifties, means that we're not reshaping 0:10:17.800 --> 0:10:23.719 our economy towards the century. Is there a political obstacle 0:10:24.600 --> 0:10:28.560 to get these kinds of things done that you describe, 0:10:28.600 --> 0:10:31.600 whether it be the shift from coal and the jobs 0:10:31.640 --> 0:10:34.760 that were in the coal industry to let's say solar 0:10:35.000 --> 0:10:38.040 just as an example of solar industry, Is there a 0:10:38.080 --> 0:10:42.800 political obstacle? Because you've also written about the money that 0:10:42.920 --> 0:10:49.120 influences elections very much. So um. Uh the problem is 0:10:50.320 --> 0:10:55.200 the existing interests. UH don't want to give them up. 0:10:56.440 --> 0:11:01.160 And UH they looked to government for subsident ease, for 0:11:01.520 --> 0:11:08.200 a monopoly power. Uh. We need There is an important 0:11:08.240 --> 0:11:12.040 role for government, but it's for facilitating a transition to 0:11:12.120 --> 0:11:15.440 the new economy. Uh. It's for helping people get the 0:11:15.520 --> 0:11:17.960 skills that they're going to need in the new economy. 0:11:17.960 --> 0:11:20.800 You know. That's the role of the government has traditionally played. 0:11:20.880 --> 0:11:24.720 Back after World War Two, we had to move from 0:11:24.920 --> 0:11:29.720 agriculture to a manufacturing economy. And after World War Two, 0:11:29.960 --> 0:11:33.360 we had the g I Bill, which said that everybody 0:11:33.360 --> 0:11:36.000 who had fought in the war, which was virtually every 0:11:36.040 --> 0:11:38.920 young man and a lot of women, could get as 0:11:39.040 --> 0:11:44.160 much education as they were qualified for. That was essential, 0:11:44.520 --> 0:11:48.240 not only as a basic sense of opportunity, but it 0:11:48.320 --> 0:11:53.280 was actually essential for the transformation from the of the 0:11:53.360 --> 0:11:57.640 United States from agriculture to manufacturing. Today, we need to 0:11:57.679 --> 0:12:03.480 do a similar transformation for manufacturing to a new service sector, innovative, 0:12:03.600 --> 0:12:08.640 non leach based economy, and government isn't there to help us. 0:12:09.240 --> 0:12:12.200 In fact, the trunk government is focusing on back on 0:12:13.120 --> 0:12:16.160 coal and all those other industries that we ought to 0:12:16.200 --> 0:12:20.800 be moving away from. UH. So we need the help 0:12:20.840 --> 0:12:24.320 of the government not to protect the old industries, but 0:12:24.400 --> 0:12:27.280 to help us move into the more dynamics sectors where 0:12:27.679 --> 0:12:32.000 will be a lot more prosperous and a lot healthier. 0:12:32.400 --> 0:12:34.640 I want to give you the opportunity to speak about 0:12:34.760 --> 0:12:39.800 the essential environmental industries that could be created or are 0:12:39.920 --> 0:12:42.640 being created, because this is a topic that you've done 0:12:42.640 --> 0:12:45.680 a lot of work on. Yeah. Well, I, as I mentioned, 0:12:46.080 --> 0:12:52.760 solar panels have the opportunity potential creating so many more 0:12:52.840 --> 0:12:56.080 jobs than the coal industry. And at the same time, 0:12:56.480 --> 0:13:00.000 we know what coal does to our health, the particular 0:13:00.000 --> 0:13:04.240 till it matter, the pollution, UH, not to speak of 0:13:04.640 --> 0:13:08.960 the global warming, and the impacts of global warming we 0:13:09.000 --> 0:13:14.320 are now realizing are much greater than when I began 0:13:14.400 --> 0:13:17.360 studying that matter twenty five years ago. I was on 0:13:17.480 --> 0:13:22.719 the Governmental Panel and Climate change UH and UH we 0:13:22.800 --> 0:13:26.640 looked at the climate change at that point we said 0:13:26.679 --> 0:13:30.720 it's really serious. But we made a mistake. We did 0:13:30.720 --> 0:13:33.720 not anticipate how fast things were going to change and 0:13:33.760 --> 0:13:37.600 how bad they were going to be. The dimensions of 0:13:37.679 --> 0:13:41.559 this the extremes of weather. UM, you know, the United 0:13:41.600 --> 0:13:44.400 States lost about one to two percent of GDP just 0:13:44.520 --> 0:13:48.680 last year in the hurricanes. These are weather related events, 0:13:48.760 --> 0:13:54.560 and there's absolutely no doubt that climate change global warming 0:13:55.360 --> 0:14:00.040 is leading to more severe weather events, whether it's the 0:14:00.120 --> 0:14:05.960 hurricanes or the drawings, the fires that have affected afflicted California. Uh, 0:14:06.160 --> 0:14:09.800 we're already paying an enormous price for that. So if 0:14:09.840 --> 0:14:14.360 we can make a little bit of investment in moving 0:14:14.360 --> 0:14:19.480 to these more dynamic, pro environmental green policies, I think 0:14:19.520 --> 0:14:23.360 it will stimulate our economy, but it will also help 0:14:23.400 --> 0:14:27.040 protect us against the ravages that we are already beginning 0:14:27.040 --> 0:14:30.800 to face. In about thirty seconds, what would you like 0:14:31.000 --> 0:14:35.280 young people to take away from your perspective about economics 0:14:35.320 --> 0:14:41.160 and what they can achieve. I think they should take 0:14:41.160 --> 0:14:45.640 away that, Uh, we can have as prosperous a world 0:14:45.800 --> 0:14:48.720 in the future as we had in the past, but 0:14:48.840 --> 0:14:53.640 it will not be done by the market on its own. 0:14:54.600 --> 0:14:58.600 We are going to have to have an active government policies, 0:14:58.640 --> 0:15:05.560 progressive policy UM and the strategy of blaming others, whether 0:15:05.640 --> 0:15:10.360 it's immigrants or foreign trade or UH, that is not 0:15:10.360 --> 0:15:13.440 going to bring America prosperity. What is going to bring 0:15:13.480 --> 0:15:16.920 American prosperity is investing in our future, not our past, 0:15:17.200 --> 0:15:23.600 but our future, and UH creating the kind of progressive 0:15:23.720 --> 0:15:30.040 environment that says, UH what we tried to achieve seventy 0:15:30.120 --> 0:15:38.160 years ago. UH. Secure retirement, housing for all, healthcare, education 0:15:38.200 --> 0:15:41.400 for our children, jobs for all. These are all things 0:15:41.440 --> 0:15:45.760 that are within our grasp. We are a much wealthier 0:15:45.760 --> 0:15:49.800 country than we were seventy five years ago. The question 0:15:49.880 --> 0:15:53.280 is can we deploy that wealth in ways that will 0:15:53.320 --> 0:15:56.200 benefit all of us? Thank you very much, Thank you 0:15:56.280 --> 0:15:59.600 very much for being with us. UH. Professor Joseph Stiglets, 0:15:59.640 --> 0:16:03.520 Nobel Lauria, Professor of economics at Columbia University and the 0:16:03.600 --> 0:16:07.600 author of Globalization and Its Discontent. Thank you very much 0:16:07.640 --> 0:16:14.680 for your time. Thank you. The topic now is Sears. 0:16:14.720 --> 0:16:19.400 Sears Holdings, hundred and twenty five year old retailer filed 0:16:19.480 --> 0:16:23.680 for bankruptcy protection. It has been settled with billions of 0:16:23.720 --> 0:16:27.520 dollars in debt, this as it struggled to adjust to 0:16:27.960 --> 0:16:32.280 shifts in online consumption. Noel Hibbert, our director of credit 0:16:32.360 --> 0:16:36.760 research for Bloomberg Intelligence, joins us now to tell us 0:16:37.000 --> 0:16:41.520 how did this happen and what's next? Alright, No, I 0:16:41.560 --> 0:16:44.000 have an idea how it happened. But I want you 0:16:44.040 --> 0:16:47.840 to explain how did it happen that Sears ended up 0:16:48.480 --> 0:16:52.560 saddled with all this debt, never mind the strategic issues 0:16:52.640 --> 0:16:56.320 having to do with competition in the retail world. How 0:16:56.360 --> 0:17:00.160 did it end up financially in this position? Boy, I 0:17:00.200 --> 0:17:04.000 think those two items are definitely not mutually exclusive, right, 0:17:04.000 --> 0:17:07.680 So I think you know when not to go too 0:17:07.680 --> 0:17:09.840 far back into the way back time machine. But when 0:17:09.960 --> 0:17:12.159 Eddie had kind of brought Kmart out of bankrupt you're 0:17:12.160 --> 0:17:16.119 talking about Eddie Lampert, the fund manager who basically owns 0:17:16.320 --> 0:17:20.199 Sirius correct so vias e s L investment fund. He 0:17:20.200 --> 0:17:22.720 had brought Kmart out of bankruptcy and then leverage that 0:17:23.160 --> 0:17:26.080 series back in oh five, and back then he had 0:17:26.080 --> 0:17:28.679 a new way to run retail, which was basically to 0:17:28.720 --> 0:17:32.000 not invest in it, right, So, don't invest in capital expenditures, 0:17:32.040 --> 0:17:34.280 try and cut back on employees, and do all these 0:17:34.320 --> 0:17:37.680 things to basically maximize cash flow, which is a great 0:17:37.720 --> 0:17:41.040 short term strategy, but it's not how retail works. Uh. 0:17:41.080 --> 0:17:43.200 And so through the accrual of that over years, they 0:17:43.240 --> 0:17:45.119 just you know, it worked for the first four or 0:17:45.119 --> 0:17:47.120 five years, and then they started lose money. And lose 0:17:47.160 --> 0:17:49.960 more money and lose more money, and the way that 0:17:50.040 --> 0:17:54.840 they funded that loss was to basically borrow money. What 0:17:54.960 --> 0:17:59.280 does Eddie Lampert want to do now with his holdings 0:17:59.280 --> 0:18:03.240 in sears given that they are in bankruptcy protection, because 0:18:03.480 --> 0:18:07.000 there's a discussion about buying a large portion of the 0:18:07.040 --> 0:18:10.359 company's store base. Yea, and I think, you know, for 0:18:11.320 --> 0:18:13.879 if I'm in Eddie Shoes, I think that that makes 0:18:13.920 --> 0:18:16.480 the most sense, right. I mean, to the degree that 0:18:16.560 --> 0:18:19.159 you've got four or five stores somewhere in this you know, 0:18:19.240 --> 0:18:22.639 nine plus store portfolio that are actually profitable and that 0:18:22.760 --> 0:18:25.280 you can build around, you start to think sort of 0:18:25.400 --> 0:18:29.240 the adjacent pockets of value that you're trying to maximize 0:18:29.359 --> 0:18:31.800 any credits trying to maximize here, right, which is stuff 0:18:31.840 --> 0:18:34.960 like Ken Moore or the services business, or the autoparts business, 0:18:35.560 --> 0:18:38.879 or speaking specifically to Eddie Lamport and his DSLF fund, 0:18:39.040 --> 0:18:42.920 the Sritage real estate spinoff that they had a few 0:18:43.000 --> 0:18:46.159 years back, Like, those are all things that you need 0:18:46.200 --> 0:18:48.360 to try and preserve the value of. And if you 0:18:48.400 --> 0:18:50.440 just let this thing sort of wind its way down 0:18:50.440 --> 0:18:53.760 into a liquidation, you lose that. So in order to 0:18:53.840 --> 0:18:56.480 kind of keep the value attached to some of those assets. 0:18:56.560 --> 0:18:58.440 The thing you need to do is sort of find 0:18:58.440 --> 0:19:01.480 a store base that you can build around. No, given 0:19:01.720 --> 0:19:05.680 the attempts in the past to revive Sears, is this 0:19:05.800 --> 0:19:10.240 an attempt to just get through this holiday shopping season 0:19:10.520 --> 0:19:15.120 rather than a big strategic rethink about what they do 0:19:15.200 --> 0:19:18.040 and how they do it. So, I think that's really 0:19:18.040 --> 0:19:23.439 going to come down to how contentious the court proceedings get. Right. So, 0:19:23.680 --> 0:19:26.560 I think if if he can't get enough creditors to 0:19:26.760 --> 0:19:29.640 sort of play along, uh, then it will be very, 0:19:29.720 --> 0:19:32.600 very difficult to sort of rebuild anything out of this, 0:19:32.920 --> 0:19:34.440 and you end up sort of in a Toys Rus 0:19:34.480 --> 0:19:36.800 situation where you've just got too many conflicting interests in 0:19:36.840 --> 0:19:39.360 the courts. No longer it drags on the heart it 0:19:39.400 --> 0:19:42.520 is to resuscitate whatever is left of the retail business. 0:19:42.920 --> 0:19:46.119 I think if he can leverage his position as the 0:19:46.240 --> 0:19:49.280 largest creditors, so of the five billion dollars in change 0:19:49.280 --> 0:19:51.080 of debt that the company has, he's half of that. 0:19:51.760 --> 0:19:55.919 If he can leverage that position somehow into buying or 0:19:56.160 --> 0:20:00.800 securing I guess, uh, you know, sort of relie from 0:20:01.160 --> 0:20:04.080 other creditors. And I think there's something he can do here, 0:20:04.080 --> 0:20:07.160 because again I think it's not just about SEARS itself, 0:20:07.200 --> 0:20:10.080 but it's about sort of how do you preserve uh, 0:20:10.440 --> 0:20:12.600 you know, value. So ken Moore would be a great example, 0:20:12.600 --> 0:20:15.520 whereas you know, there's some value attached to ken Moore 0:20:15.520 --> 0:20:18.240 if you have a still solvent SEARS, but if you're 0:20:18.240 --> 0:20:23.000 in insolvency, you're only bidding for intellectual property that maybe 0:20:23.000 --> 0:20:27.760 worth very very little to third parties without a SEARS. No, 0:20:28.160 --> 0:20:32.640 based on what you know from these kinds of negotiations 0:20:32.680 --> 0:20:37.679 between creditors and debtors in chapter eleven bankruptcy, can you 0:20:37.760 --> 0:20:42.800 tell us what the tone or indeed what kind of relationship, 0:20:43.240 --> 0:20:46.120 if any, do you believe would exist between those two 0:20:46.200 --> 0:20:50.359 groups at this point. Well, that's going to be an 0:20:50.400 --> 0:20:54.080 interesting dynamic because I think the only real big third 0:20:54.080 --> 0:20:56.720 party creditor that we know about right now is fair Home, 0:20:57.560 --> 0:21:00.640 who is involved with Eddie and e S. In terms 0:21:00.640 --> 0:21:02.600 of both on the equity side and on the credit side. 0:21:02.640 --> 0:21:04.840 They're going to be one of the largest creditors going in, 0:21:05.000 --> 0:21:08.399 and they obviously got hurt pretty substantially, not only on 0:21:08.480 --> 0:21:14.480 their equity exposure, which they've largely ex exited excuse me, um, 0:21:14.480 --> 0:21:16.400 but also in the eight percent notes, which is their 0:21:16.440 --> 0:21:19.720 biggest piece, which are trading you know, call it low teens. 0:21:19.800 --> 0:21:23.320 And that's obviously paper that they owned at par right, 0:21:23.440 --> 0:21:28.360 So they're pretty substantially impaired. So figuring out where they're 0:21:28.359 --> 0:21:29.480 going to be in this is going to be a 0:21:29.480 --> 0:21:32.760 big part of it. If they choose to make it contentious, um, 0:21:33.040 --> 0:21:37.080 then this this will probably have a pretty challenged ND. 0:21:38.359 --> 0:21:44.880 Is this why they couldn't reach a resolution out of court? Well? 0:21:44.920 --> 0:21:48.560 I think, uh, I guess there's probably a different number 0:21:48.560 --> 0:21:50.640 of different ways to sort of play that one my 0:21:51.080 --> 0:21:55.360 you know, tea leaves or you want to phrase it, 0:21:55.400 --> 0:21:58.240 would be that it more came down to you need 0:21:58.400 --> 0:22:01.280 assets to restructure around. So if you think back to E. 0:22:01.480 --> 0:22:04.960 S L's proposal from a few weeks back, which basically 0:22:05.080 --> 0:22:08.920 envisioned recapitalizing the entire balance sheet, um, but it also 0:22:08.960 --> 0:22:11.160 meant moving a lot of the assets that remain off 0:22:11.160 --> 0:22:14.040 the balance sheet. Uh. You know, the board is probably 0:22:14.040 --> 0:22:16.080 looking at that and saying, if we're going to restructure 0:22:16.080 --> 0:22:18.639 around anything, we can't do it without ken More, we 0:22:18.680 --> 0:22:21.960 can't do it without the real estate, etcetera. Uh. And 0:22:22.040 --> 0:22:24.120 so you know they might have been having a half 0:22:24.119 --> 0:22:26.560 an eye towards their own liability if this thing went 0:22:26.560 --> 0:22:29.040 into a chapter eleven and what happened if they had 0:22:29.080 --> 0:22:31.480 just pretty much shipped all the valuable assets off the 0:22:31.520 --> 0:22:35.679 balance sheet and into E S l um so. So 0:22:35.720 --> 0:22:37.640 I think there's a couple of dynamics that play there. 0:22:37.960 --> 0:22:39.840 I want to thank you very much for sharing your 0:22:39.840 --> 0:22:43.320 information and experience with us. Noel Hebert is our director 0:22:43.440 --> 0:22:49.400 of credit research for Bloomberg Intelligence. Speaking about Sears Holdings 0:22:50.000 --> 0:22:56.600 filing for bankruptcy, President Donald Trump said that he is 0:22:56.640 --> 0:22:59.760 sending U S. Secretary of State Mike Pompeo to meet 0:22:59.840 --> 0:23:03.159 with Saudi King Salmon to discuss the fate of a 0:23:03.240 --> 0:23:08.840 Saudi dissident journalist who disappeared after entering the Saudi consulate 0:23:09.240 --> 0:23:12.760 in Istanbul. Here to tell us more about the situation 0:23:13.080 --> 0:23:16.160 is Ali al Ahmed. He is the founder and director 0:23:16.200 --> 0:23:20.080 of the Institute for Gulf Affairs based in Washington, d C. 0:23:20.640 --> 0:23:24.399 And joining me here in studio is Toby Harshaw, Bloomberg 0:23:24.480 --> 0:23:27.520 Opinion editor. Gentlemen, thank you very much for being here. 0:23:27.760 --> 0:23:30.919 Ali al Ahmed. Maybe you could just describe what do 0:23:31.000 --> 0:23:34.240 we know at the moment, what we know the moment 0:23:34.320 --> 0:23:38.200 is that the Turkish government has the fault proof that 0:23:38.320 --> 0:23:42.240 Mr was killed inside the consulate, and we know the 0:23:42.320 --> 0:23:46.280 identity of the killers H. And it's absolute no doubt 0:23:46.400 --> 0:23:50.440 that the Saudi team, the fifteen member team, including two 0:23:50.520 --> 0:23:56.439 members of the conference bodyguards, were involved in the crime. UH. 0:23:56.720 --> 0:24:00.480 And the Turks are waiting to negotiate some kind of 0:24:00.480 --> 0:24:03.320 a deal between them and the Saudis. And I think 0:24:03.320 --> 0:24:05.679 you meet the Americans because this is now becoming an 0:24:05.720 --> 0:24:12.000 international incident and the King's nephew and governor of Mecca 0:24:12.119 --> 0:24:15.679 is an Ancora beating with President Arregon to come to 0:24:15.800 --> 0:24:19.280 a solution or two an exit out of this UH, 0:24:21.800 --> 0:24:26.800 out of this crisis. MR is dead and he was 0:24:26.880 --> 0:24:29.240 killed in a very horrifle commander, I would say, is 0:24:29.400 --> 0:24:34.119 the style murder. So we'll see what happens. Hang on 0:24:34.200 --> 0:24:36.280 just a second because I want to bring in Toby Harshaw, 0:24:36.359 --> 0:24:40.240 Bloomberg Opinion editor, to comment on this. Toby, why should 0:24:40.280 --> 0:24:48.600 Americans pay attention to the disappearance of a Saudi dissident journalist? Well, 0:24:48.640 --> 0:24:51.399 I think we should pay attention to the disappearance of 0:24:51.400 --> 0:24:57.720 all journalists. UM. I think that given the tremendous support 0:24:58.080 --> 0:25:02.760 that the Trump administration, particularly the President and Jared Kushner, 0:25:02.840 --> 0:25:06.280 have given to the Saudis, which UH many people saw 0:25:06.280 --> 0:25:08.760 as them giving the green light, for example, to their 0:25:08.760 --> 0:25:14.200 attempts to isolate Cutter, Um to continue prosecuting this disaster 0:25:14.320 --> 0:25:18.600 of a war in Yemen. Um that you know and 0:25:18.600 --> 0:25:22.480 and support for for Mohammed bin Salman, the Prime Prince 0:25:22.560 --> 0:25:25.880 really runs the country. UM that we need to look 0:25:26.040 --> 0:25:29.600 at that policy and think about whether we have to 0:25:29.600 --> 0:25:34.400 be more critical. Well Ali al Ahmed, the President said 0:25:34.440 --> 0:25:38.120 that he spoke earlier with the King of Saudi Arabia 0:25:38.359 --> 0:25:43.200 and described the conversation that the king denied any knowledge 0:25:43.320 --> 0:25:46.520 of whatever may have happened to us. He says, quote 0:25:46.680 --> 0:25:52.520 our Saudi Arabian citizen, Do you believe that that is 0:25:52.600 --> 0:25:57.280 the contact content of that conversation? But I'm not sure. 0:25:57.320 --> 0:25:59.680 Obviously I was not listening in. But I would want 0:25:59.720 --> 0:26:02.720 to say that this is the greatest involved with him 0:26:02.720 --> 0:26:07.280 and of an American president ever in any issue relating 0:26:07.320 --> 0:26:12.320 to Saudi human rights violation. So you give Mr Trump 0:26:12.400 --> 0:26:15.639 his his due. He has been the most spokes UH. 0:26:15.760 --> 0:26:17.960 You might not like his position, but he has spoken 0:26:18.000 --> 0:26:20.720 about it more than any American president all the Americans 0:26:20.720 --> 0:26:23.400 in fact combined that that's the reality. I followed all 0:26:23.440 --> 0:26:27.639 the Americans. The President the States was on Saudiast, So 0:26:27.840 --> 0:26:34.240 this is surprising and maybe refreshingly. So I of course 0:26:34.359 --> 0:26:36.840 King Salmon might not have been aware of it because 0:26:37.080 --> 0:26:40.879 he's he's not he's not that healthy, especially because he 0:26:40.960 --> 0:26:46.040 has a publement with his you know, amnesia son. But 0:26:46.320 --> 0:26:50.280 definitely it is done by people in the Royal Palace 0:26:51.280 --> 0:26:53.840 close to him. He doesn't know, he doesn't know, but 0:26:54.280 --> 0:26:59.800 you cannot believe the politicians in general, especially the partic one. Uh. 0:27:00.080 --> 0:27:03.760 The reality is Mr Trump, I think also will use 0:27:03.840 --> 0:27:07.520 this to gain some some some favors with the Drawing 0:27:07.560 --> 0:27:10.960 family and and or maybe in terms of having mb 0:27:11.119 --> 0:27:15.000 as the conference deliver on his promises that he he 0:27:15.080 --> 0:27:19.240 failed to do in terms of investing in certain projects 0:27:19.320 --> 0:27:23.639 or delivering certain policies in the region. So I really 0:27:23.720 --> 0:27:28.120 think this is going to continue because it's not about 0:27:28.480 --> 0:27:32.040 the killing of jamaatoc Alon, which is deserving obviously, but 0:27:32.119 --> 0:27:35.360 it has to do with other policies that the Mohammed 0:27:35.600 --> 0:27:38.879 Salman is carrying out. And I think Mohammed Salman is 0:27:39.119 --> 0:27:42.000