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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim

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Speaker 1: Fox along with my co host Lisa Bramowitz. Each day

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Speaker 1: we bring you the most important, noteworthy and useful interviews

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Speaker 1: for you and your money, whether you're at the grocery

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Speaker 1: store or the trading floor. Find the Bloomberg P M

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Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com.

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Speaker 1: Yesterday we were all worried about Italy. Today everyone seems

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Speaker 1: like they're doing just fine. Here to talk about what

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Speaker 1: to look forward to Italy uh and whether the elevated

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Speaker 1: risk continues. As Luke Kickmore, Senior investment manager at Aberdeen

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Speaker 1: Standard Investments, based in Edinburgh, UK, thank you so much

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Speaker 1: for being with us. So what do you make of

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Speaker 1: this right now? I'm looking at the two year Italian yield,

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Speaker 1: which spiked the most to ever yesterday, is down sharply today.

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Speaker 1: The nation was able to auction off debt in an

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Speaker 1: orderly fashion. Is everything back to the way it was

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Speaker 1: last week? No? Not quite. I think the concerns are

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Speaker 1: still very very validly so so the move in the

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Speaker 1: two years is eye watering. And you know we we had,

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Speaker 1: as you said, that biggest move yesterday in the second

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Speaker 1: biggest move today as it went back the other direction.

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Speaker 1: But it's still a very weak economy. It's still unclear

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Speaker 1: what government we're going to have, what the makeup of

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Speaker 1: that government is, and even when the elections will happen.

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Speaker 1: So a little bit less concerned around today may just

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Speaker 1: be short covering. I think we're still quite elevated in

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Speaker 1: terms of spreads over Germany, and around five basis points

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Speaker 1: and three for the ten year yield, more than the

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Speaker 1: US ten year yield, which is a remarkable sticker price

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Speaker 1: in in in Italy and shows you the concerns are

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Speaker 1: still very much there. And actually the auction, as interesting

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Speaker 1: as it was, they reduced the signs of the ten

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Speaker 1: uere to make sure they got it away, so it

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Speaker 1: was good. It was good to see and they did.

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Speaker 1: The five year was pretty strong, but that tenure perhaps

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Speaker 1: not as strong as it first looked. Yeah, so you

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Speaker 1: said it in a story last week. You're quoted as

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Speaker 1: saying that you would think of buying Italian bonds when

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Speaker 1: they were two hundred basis points higher in yield than

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Speaker 1: German bonds of similar maturity. We're past that point by far.

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Speaker 1: So have you been going along Italy. No, no, I

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Speaker 1: did think about it. You thought about it, reversed your

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Speaker 1: position and decided not so much. I think I think

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Speaker 1: I've said it was a sticker price. It's worth revisiting,

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Speaker 1: and I think this two to three hundred area is

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Speaker 1: the right level of risk for Italy, and it could

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Speaker 1: be a very volatile spread from here on out, and

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Speaker 1: it may be just just a reflection. I think that

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Speaker 1: there's a great Bloomberg story this morning over in Europe,

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Speaker 1: by the way, looking at how this is the third

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Speaker 1: volatility event this year, and perhaps we're looking at the

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Speaker 1: wrong thing. It's a bigger systemic issue that the liquidity

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Speaker 1: is being withdrawn around the world, in which case, you know,

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Speaker 1: three hundreds might look attractive, but it could be four

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Speaker 1: hundred tomorrow, it could be two hundred the next day,

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Speaker 1: it could be back to three hundred the day after.

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Speaker 1: I think it's a very difficult contract to get involved

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Speaker 1: with at the moment until you get a little bit

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Speaker 1: more certainty arrayin what's going on with the politics. And

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Speaker 1: if I missed the first thirty forty basis points, I

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Speaker 1: think that's fine, look just to kind of reader it.

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Speaker 1: Lisa's point um previous to the election, Italy really didn't

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Speaker 1: have a government. I believe the last popularly elected Prime

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Speaker 1: Minister of Italy was Sylvia Brellasconi. So it's not as

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Speaker 1: if they ever had a popularly elected government for quite

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Speaker 1: some time. So, really, is it possible to put politics

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Speaker 1: aside and focus just on the government's finances and say,

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Speaker 1: it doesn't matter who's in charge. This is the bill

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Speaker 1: and they still don't have a plan to pay it. Yeah,

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Speaker 1: and they need to pass the budget by the autumn

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Speaker 1: to be able to continue to pay for things. And

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Speaker 1: let's let's look at some of those problems that that

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Speaker 1: GDP ratio is still a hundred, Unemployment still eleven, budget

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Speaker 1: deficits improved by about a half, but it's still a

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Speaker 1: negative two and a half percent of GDP. These are

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Speaker 1: not great numbers for any government to be coming in,

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Speaker 1: but a technocratic one would probably keep it rolling alonger

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Speaker 1: if we got movement, five star and legal all those

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Speaker 1: numbers deteriorate as they try and put in place their

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Speaker 1: fiscal stimulus and try and finance it. And that's the

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Speaker 1: concern that we have. It's it's looked thing as if

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Speaker 1: they may do that, and you know, even if it's

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Speaker 1: July or it's September. You can't. I think you have

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Speaker 1: to sit here and think they are the next people

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Speaker 1: in power in Italy. So I guess, um, just taking

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Speaker 1: a step back looking at what this flash crash or

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Speaker 1: flash spike in yields means for the European bond market.

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Speaker 1: Some people were saying that it was due to a

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Speaker 1: lack of liquidity that the European Central Bank has kind

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Speaker 1: of sucked out so much of the volume from the

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Speaker 1: market that a relatively small group of people are determining prices.

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Speaker 1: Do you think that a lack of liquidity played into

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Speaker 1: what happened yesterday? Almost certainly, um, And it's it's difficult

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Speaker 1: therefore to think about what the right level is if

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Speaker 1: it's been a liquidity driven thing. But it looks a

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Speaker 1: lot of that was at the front end in that

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Speaker 1: two year contract where we've seen the most of the

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Speaker 1: volatility in the ten year space. As I said, I

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Speaker 1: think in the late two hundreds reflects a lot of

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Speaker 1: the risks that we're seeing in Italy that exists already

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Speaker 1: economically and actually could coming down the road. So yes,

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Speaker 1: liquidity is part of part of the question, but fundamentals

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Speaker 1: will reassert and the fundamentals aren't strong. Yeah, what about

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Speaker 1: with banks, because there is so often banks, particularly Italian banks,

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Speaker 1: yesterday and you're seeing a little bit of a recovery

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Speaker 1: today but really quite insignificant. I'm looking at un Credit

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Speaker 1: for example. It's up to touch, but it really had

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Speaker 1: been falling pretty dramatically over the past prior a few days.

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Speaker 1: Are you thinking that this could be an opportunity at

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Speaker 1: this point? Yeah, I think if there's if there's only

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Speaker 1: where i'd write like to go, it would be in banks,

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Speaker 1: perhaps not directly in Italy and maybe actually through places

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Speaker 1: like Spain where good strong domestic banks like Kisher Bank

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Speaker 1: one of our favorite names in the area. Um, they're

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Speaker 1: eight one is down five six points over the last

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Speaker 1: few days. I think that's down to really interesting levels again,

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Speaker 1: and if if we get back involved, I think that's

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Speaker 1: probably a place we do is go almost everywhere else

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Speaker 1: but Italy, because you've still got the same uncertainty if

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Speaker 1: you buy the banks in Italy as if you buy

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Speaker 1: the sovereign. But things like Spain are getting punished in

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Speaker 1: credit lands when they really shouldn't be. Look. I wonder

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Speaker 1: if you could just look a little bit to this

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Speaker 1: to your south, but not so far south. Um. Any

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Speaker 1: thoughts on the Brexit negotiations that are and aren't happening.

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Speaker 1: It's been a breath of fresh air that we've not

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Speaker 1: talked about Brexit for three four days. Yeah right, see,

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Speaker 1: I gave you that was an open up exactly. So

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Speaker 1: you know, I think the UK market's really been pretty

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Speaker 1: much ignoring Brexit. Um Sterling credit has been under performing

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Speaker 1: a little bit, but it's not dramatic. It's so internationally

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Speaker 1: focused anyway. It's one of the biggest markets that've got,

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Speaker 1: you know, non domestic issues in it. Around forty five

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Speaker 1: of the UK market is not UK companies um. And

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Speaker 1: actually things like the foot Sea is heavily dominated by

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Speaker 1: a dollar type companies like EP and Rio Tinto. So

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Speaker 1: the the impact on the UK has not been obvious

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Speaker 1: from a capital markets perspective. You're starting to see it

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Speaker 1: perhaps in the economics, where nervousness is coming out, people's

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Speaker 1: expectations of growth are coming down. UM. And that's where

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Speaker 1: the Bank of England has been flagging up as a concern.

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Speaker 1: And I think all it does it just pushes out

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Speaker 1: the interest rate story. We've got to leave it there,

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Speaker 1: but thanks very much. Luke Hickmore, senior investment manager Aberdeen

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Speaker 1: Standard Investments, joining us from Edinburgh, helping to manage more

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Speaker 1: than eight hundred and fifty billion dollars. Well, we want

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Speaker 1: to visit now with Mike McDonough. Here is the chief

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Speaker 1: on a missed for financial products at Bloomberg, and he

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Speaker 1: joins us here in our eleven three oh studios And

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Speaker 1: you know, Mike, I know we're gonna talk about China,

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Speaker 1: but just a little closer to home, if you don't mind,

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Speaker 1: I'd like to start with what's going on with NAFTA

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Speaker 1: because I understand that there's well, there was a deadline

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Speaker 1: right May seventeenth. Was was one deadline that kind of

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Speaker 1: came and went. There's supposed to be another deadline. I

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Speaker 1: believe it's Friday, in which the exemptions from sanctions from

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Speaker 1: tariffs rather on steel and aluminum, they disappear on on Friday.

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Speaker 1: Uh And then there's this Mexican election which is coming

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Speaker 1: up in July. What is going on with NAFTA? Well,

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Speaker 1: correct me if I'm wrong, but there's been quite a

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Speaker 1: few deadlines that have been postponed, and I think that

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Speaker 1: that is going to be the pattern that we're going

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Speaker 1: to continue seeing. I think that you know, obviously I

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Speaker 1: don't know what's happening in the negotiations, but it sounds

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Speaker 1: like there's some modest progress being made each time, but

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Speaker 1: they're not anywhere near having some sort of holistic conclusion,

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Speaker 1: some analized deal that they could announce, So I suspect

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Speaker 1: they'll kick the can again and hopefully continue working towards

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Speaker 1: a deal everyone could agree on. There's certainly been a

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Speaker 1: lot of and I saw Trudeau yesterday said he'd rather

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Speaker 1: have a no deal than a bad deal, which I

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Speaker 1: thought was interesting. Yeah, and he was speaking today as well.

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Speaker 1: Of course, Uh, A lot of people in the markets

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Speaker 1: have been dismissing trade talks as all noise, and even

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Speaker 1: the increased rhetoric between the U. S And China head

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Speaker 1: of talks this weekend in Beijing didn't really seem to

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Speaker 1: writtle markets that were more focused on Italy. And I'm

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Speaker 1: just wondering, I mean, what do you make of the

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Speaker 1: fact that ahead of this summit in China, President Trump

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Speaker 1: seems to be sort of taking a much harder line

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Speaker 1: and laying out details of tariffs to put on fifty

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Speaker 1: billion dollars of goods from China. Well, I don't think

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Speaker 1: the market has been ignoring what's happening with these trade talks.

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Speaker 1: Right the market is not performing this year like it

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Speaker 1: was performing last year. Uh. And there's a number of

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Speaker 1: reasons for that rates going up, be it what's happening

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Speaker 1: right now with Italy, but I think a lot of

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Speaker 1: that is concerns over what's happening with trade. Uh. You know,

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Speaker 1: I think what we're seeing right now is more of

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Speaker 1: the same we've been seeing. You know, last time I

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Speaker 1: was on the show, I said, you know, in the end,

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Speaker 1: I don't think we're going to see what's actually agreed

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Speaker 1: and put on the table is going to be a

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Speaker 1: shadow of what's being threatened. But I also said Rederick

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Speaker 1: would get worse before it gets better. Yes, although this

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Speaker 1: does have a different feel to it, And the reason

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Speaker 1: why is because it's yet another uh, sort of shift

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Speaker 1: in who's pulling the strings behind the curtain, who is

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Speaker 1: sort of making these decisions, And especially when you've got

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Speaker 1: Senator Marco Rubio trying to take a harder line in Congress,

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Speaker 1: it seems even the more confusing that that was an

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Speaker 1: interesting angle. But I think that what we're seeing right

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Speaker 1: now is positioning ahead of this weekend's talked, right, I

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Speaker 1: think that, um, it's mostly noise what we're hearing right now.

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Speaker 1: I think, you know, my concern would be, I think,

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Speaker 1: you know, there's an advanced team in Beijing right now

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Speaker 1: preparing for a meeting Wilbert Ross is going to be

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Speaker 1: having there this weekend. If for some reason he doesn't

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Speaker 1: end up going, or that meeting gets canceled for the

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Speaker 1: next step of these negotiations, that would be that would

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Speaker 1: be a bit of a red flag. But right now,

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Speaker 1: what we're seeing I don't think is is that alarming.

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Speaker 1: I think it's just posturing ahead of these talks. Well,

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Speaker 1: I understand that they're going to release a list of

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Speaker 1: affected goods for the Chinese tariffs June, with some implementation

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Speaker 1: at some point in the future. So I mean, it's

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Speaker 1: not as if they're going to do this tomorrow. Yeah,

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Speaker 1: and that's after the weekend, right So, you know, the

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Speaker 1: odd thing that we've had happened was we had Steve

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Speaker 1: Manusian come out and say the trade wars on hold. Uh.

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Speaker 1: Now we've had Peter Navarro come out and say, you know,

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Speaker 1: we we I regret that he made those comments and

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Speaker 1: then these threats of these new fifty billion in tariffs,

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Speaker 1: which again I think, you know, it's it's hard to

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Speaker 1: know who's in control of these negotiations from time to time. Well,

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Speaker 1: and just to just to throw this out there, I mean,

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Speaker 1: there's been bipartisan concern uh and frankly probably more support

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Speaker 1: from Democrats and Republicans UH saying that perhaps President Trump

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Speaker 1: eagerness to try to get some resolution with North Korea.

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Speaker 1: That is sort of one sort of narrative that's out there,

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Speaker 1: that's being put out there by Congress saying, look, he

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Speaker 1: wants a deal done with North Korea, so he is

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Speaker 1: willing to perhaps give up a little bit more, and

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Speaker 1: they want to ensure that that doesn't happen. Do you

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Speaker 1: think that's that's that's legitimate. No. I think that certainly

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Speaker 1: the North Korean negotiations are playing a role in how

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Speaker 1: we're negotiating trade with China. I do agree that you

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Speaker 1: could potentially have that that type of risk is is real.

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Speaker 1: But you know, at the end of the day, I

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Speaker 1: think that you most you know, as you pointed out,

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Speaker 1: both sides agree that there are some unfair trade practices

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Speaker 1: that China is perpetrating. But what's interesting is, you know,

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Speaker 1: a lot of our Western European developed market allies would

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Speaker 1: agree with the same. Uh. You know, I think it's

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Speaker 1: probably too late for this, but the best course of

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Speaker 1: action would have been some sort of multilateral, unified confrontation

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Speaker 1: with China, rather than the US going it alone and

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Speaker 1: almost looking uh, kind of looking like a bad guy

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Speaker 1: in terms of protectionists, you know, the protectionist policies. So

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Speaker 1: it's too late for that, but hopefully maybe somehow we

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Speaker 1: could move towards that direction. I think that would be better.

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Speaker 1: I think we have a better likelihood of winning because

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Speaker 1: instead of US just confronting China by ourselves, we're going

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Speaker 1: in with all of its major trading partners and saying, hey,

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Speaker 1: we believe X, Y and Z is unfair. We'd like

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Speaker 1: you to change this, and um, this becomes less of

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Speaker 1: a concern for markets. Yeah, but real quick, that doesn't

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Speaker 1: seem like that's going to happen, is it all right? Well?

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Speaker 1: Words of optimism and hope that our that He quickly

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Speaker 1: dashes us with Mike mcdonog, chief economist at for Financial

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Speaker 1: Products for Bloomberg LP. He has been prescient when it

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Speaker 1: comes to everything from z T E to that the

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Speaker 1: fact that rhetoric will probably get worse before it gets better.

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Speaker 1: So definitely a voice that is very important to listen to. Yeah,

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Speaker 1: a c change in the way that we look at

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Speaker 1: data protection and data privacy occurred last week in Europe

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Speaker 1: and frankly globally, and that is the implementation of Europe's

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Speaker 1: g d p R. And give us more of an

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Speaker 1: insight into what this means. I want to bring in

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Speaker 1: Scott Vernick. He's a partner at Fox Rothschild in Philadelphia. Scott,

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Speaker 1: before we dig in, just give us a brief overview

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Speaker 1: of the g d p R and how it has

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Speaker 1: been going since its implementation. I believe on Friday, sure,

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Speaker 1: so good morning Friday was the first date that g

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Speaker 1: d p R, or the General Data Protection Regulation coming

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Speaker 1: out of the European Union went into effect. UH. It's

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Speaker 1: been underway UH for about two years, which was the

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Speaker 1: lead time that the European Union and its member states

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Speaker 1: gave both companies in the European Union and companies in

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Speaker 1: the United States UH that have operations either directly in

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Speaker 1: the European Union UM or do business with the European

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Speaker 1: Union to get their house in order from a compliance

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Speaker 1: uh standpoint. And so what we're told is, you know,

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Speaker 1: roughly between you know, somewhere between sixteen eighty five percent

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Speaker 1: of American companies are at least somewhat compliant. UM. I'd

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Speaker 1: say there's a smaller percentage of those that are fully compliant. So, Scott,

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Speaker 1: has it gone pretty seamlessly so far? Is it really uh,

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Speaker 1: you know, are we're talking about full compliance here? Is

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Speaker 1: this going to be a phased in kind of approach well?

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Speaker 1: With the law demands? Is that you were supposed to

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Speaker 1: be fully compliant on May UM, and I think that

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Speaker 1: there will probably be fewer companies that can claim that

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Speaker 1: they are fully compliant, although I'm sure that everybody tried

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Speaker 1: to be fully compliant. Now. What we saw on May twenty,

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Speaker 1: for example, is that a number of media companies based

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Speaker 1: in the US went dark UM and did not enable

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Speaker 1: European residents or European citizens to access their news websites anymore.

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Speaker 1: So this would be true of the Chicago Tribune, for example,

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Speaker 1: and other media websites UM. And that was largely because

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Speaker 1: either they simply didn't want the headache of trying to

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Speaker 1: become gdb R compliant or they didn't want to spend

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Speaker 1: the money associated with it, and they didn't want to

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Speaker 1: risk potentially large fines for companies that are not compliant,

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Speaker 1: and other kinds of businesses as well, um that sell

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Speaker 1: you know, consumer goods and other kinds of products simply

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Speaker 1: went dark because again, the cost of compliance seemed to

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Speaker 1: outweigh the amount of business they might be doing with

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Speaker 1: those in the European Union accessing their websites. It's a

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Speaker 1: bit of a Hobson's choice though, right, because I mean

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Speaker 1: I've been receiving emails from a variety of sources in Europe,

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Speaker 1: in the European Union saying that if you want to

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Speaker 1: continue to receive information or emails from them, that you've

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Speaker 1: got to opt in and you click a box and

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Speaker 1: say I accept the new privacy rules and so on,

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Speaker 1: and then you just stay on with the same list, right.

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Speaker 1: I mean, it's not as if you're going to have

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Speaker 1: to physically do anything other than accept what they've already

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Speaker 1: told you to accept. That's right. I mean, from from

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Speaker 1: the individual consumer's perspective, from someone living in the EU

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Speaker 1: or one of its member states, it's really just a

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Speaker 1: question of giving the service provider UH a hard consent,

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Speaker 1: meaning that you have to click a box as opposed

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Speaker 1: to with default, and so that may seem relatively easy

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Speaker 1: from the standpoint of an individual consumer, although if you're

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Speaker 1: like most of us, you've been getting, you know, dozens

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Speaker 1: of emails saying, hey, can you consent so that we

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Speaker 1: can continue to give you access to our services. But

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Speaker 1: from the standpoint of the company, particularly a company that

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Speaker 1: does not have operations in the EU, the compliance obligations

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Speaker 1: are fairly extensive and fairly expensive. I mean, I think

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Speaker 1: that on average, for example, on average now companies in

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Speaker 1: the American companies have spent something like sixteen million dollars

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Speaker 1: to get compliant. Microsoft had something like fifteen hundred or

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Speaker 1: sixteen hundred engineers working full time to get it compliant.

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Speaker 1: So you know, you those are examples that perhaps it

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Speaker 1: at one end of the spectrum or the other. But

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Speaker 1: as you can see, a burden on a small business

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Speaker 1: could be substantial. So one thing that I'm struck by,

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Speaker 1: Scott is the idea that people are going to get

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Speaker 1: insight into just how valuable their data is and just

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Speaker 1: how much of their data they have out there and

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Speaker 1: I'm wondering, you know, what the progress is on companies

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Speaker 1: or services that allow individuals to sell access to their

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Speaker 1: own data basically profit from their own data, rather than

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Speaker 1: allowing a Facebook or Google to profit by by selling

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Speaker 1: their data to advertisers. Well, I mean that's exactly right.

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Speaker 1: I mean, so this is this is sort of what

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Speaker 1: I would call, uh, you know, this is what I

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Speaker 1: would call it the data security or the privacy sort

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Speaker 1: of paradox. I mean, in this country, essentially the bargain

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Speaker 1: is you give up your information in return you get

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Speaker 1: free products and services, um. And the default has always

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Speaker 1: been that the information doesn't really belong to you, It

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Speaker 1: belongs to whomever you're doing business with, Facebook, Google, you know,

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Speaker 1: you name it. UM. The default now in the in

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Speaker 1: the in the European Union and elsewhere is really something different,

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Speaker 1: and that is it's really about consumer control over the information.

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Speaker 1: Meaning it's my information, and if you want to use it,

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Speaker 1: you're gonna have to tell me exactly how you're using it, um,

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Speaker 1: And you're gonna have to get my consent for every

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Speaker 1: which way you are using it. If I want to

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Speaker 1: correct it, you're gonna have to let me correct it.

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Speaker 1: And if I want to take it with me because

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Speaker 1: I want to change telecom providers. You're gonna have to

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Speaker 1: let me do that. And so you're right that the

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Speaker 1: information then becomes much more valuable and then you know,

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Speaker 1: if you want to do something else with it, perhaps

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Speaker 1: you have to pay me for it. And if you

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Speaker 1: understand the historical underpinnings, particularly in the European Union, that

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Speaker 1: as that uh fear if you will, over aggregating data

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Speaker 1: on individuals is understandable. Thanks very much for being with us.

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Speaker 1: Scott Vernick is a partner at Fox Rothschild in Philadelphia,

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Speaker 1: talking about the new changes to data security rules as

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Speaker 1: a result of European Union regulations and how US companies

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Speaker 1: are and are not complying, which is increasing the cost

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Speaker 1: but also is offering consumers more protection over their individual data. Well,

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Speaker 1: we want to get some insight into what companies have

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Speaker 1: been doing with excess cash and indeed they have it

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Speaker 1: as a result of the tax overhaul plan that was

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Speaker 1: put into effect by the US Congress and signed by

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Speaker 1: President Donald Trump. And here to tell us more is

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Speaker 1: Matt Townsend, our global business reporter for Bloomberg News. And

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Speaker 1: you can follow Matt as we all do on Twitter

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Speaker 1: at Matt underscore Townsend on Twitter. All right, Matt, what

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Speaker 1: are companies doing? And I have a feeling that maybe

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Speaker 1: there isn't just one answer. You're right, um, I think

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Speaker 1: the best way to think about this is obviously the

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Speaker 1: tax cut, corporate tax cut, a lot more money flowing

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Speaker 1: to companies now. And basically we crunch the numbers on

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Speaker 1: the first quarter for the SMP five, basically all the

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Speaker 1: companies that have reported so far, and the big takeaway

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Speaker 1: is they have more money. They're spending more money, but

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Speaker 1: in similar ways. So if you think about a pie,

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Speaker 1: so the pie is getting bigger, but the proportions of

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Speaker 1: each piece are the same. And the way that's played

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Speaker 1: out is, you know, our buybacks of record highs, yes,

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Speaker 1: but as if you look at them as a ratio

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Speaker 1: of the market cap of the SMP space, the same

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Speaker 1: as it has been. And on each thing we looked

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Speaker 1: at capital expenditures, cash holdings, UM, dividends, buy backs, and

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Speaker 1: then you know some wage game data. It basically paints

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Speaker 1: the same picture of they're spending more on everything. Right, Well,

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Speaker 1: I guess that then the question becomes isn't this still

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Speaker 1: a win? Because that would mean that they are spending

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Speaker 1: more for hiring and compensation, and they are you know,

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Speaker 1: spending more are on research and development. So yeah, I

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Speaker 1: mean it's a political football. So you know, if you're

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Speaker 1: the Republicans and you're done the President Trump, I mean

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Speaker 1: you could say, yeah, you know, the tax cuts have

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Speaker 1: spurred more spending on these things that we wanted them to.

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Speaker 1: But the bottom line is corporate behavior and the SMP

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Speaker 1: five hundred hasn't changed. And that was one of the

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Speaker 1: things that you know, the Republicans pushed as as what

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Speaker 1: this might do is pushed companies to invest more in America,

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Speaker 1: to open their pocketbooks and in ways that they had before,

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Speaker 1: and to shift resources towards things that you know, are

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Speaker 1: supposed to help American workers. And we're not seeing that

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Speaker 1: they're spending more on everything. And it's not some sort

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Speaker 1: of big shift. Granted, this is only the first quarter,

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Speaker 1: and it takes a while for companies to sort of

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Speaker 1: react to such a thing so well, but but this

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Speaker 1: is an important point. In other words, people were arguing

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Speaker 1: that companies were holding back some of their investments because

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Speaker 1: tax policies weren't beneficial to them. Now that they've changed,

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Speaker 1: they're not necessarily allocating a greater proportion of their money

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Speaker 1: to those projects that were sort of one of the

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Speaker 1: things that was discussed. I just have to I just

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Speaker 1: have to ask, though, you know, is there a time

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Speaker 1: limit for which we can judge this because there was

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Speaker 1: some kind of benefit to investing in your operations earlier?

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00:24:47,520 --> 00:24:53,680
Speaker 1: Correct after this tax law was passed? Right? Um, the

433
00:24:53,760 --> 00:24:55,480
Speaker 1: easy It was not an easy answer to that, but

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00:24:56,440 --> 00:24:58,240
Speaker 1: it could take a lot of really look back and

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00:24:58,320 --> 00:25:01,480
Speaker 1: say this had this profound effect or have an effect. Um.

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00:25:02,400 --> 00:25:04,879
Speaker 1: But you know, even then, you know, the Chamber of

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00:25:04,960 --> 00:25:06,879
Speaker 1: Commerce has basically come out and said one of the

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00:25:07,000 --> 00:25:09,800
Speaker 1: pieces recently, we may never know if these tax cards

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00:25:09,800 --> 00:25:13,280
Speaker 1: actually worked because there's so many variables and with the

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00:25:13,359 --> 00:25:16,720
Speaker 1: economy and where where the economic cycle is. Um. So

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00:25:16,800 --> 00:25:18,760
Speaker 1: it's not a great answer your question, but you know,

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00:25:19,720 --> 00:25:21,360
Speaker 1: it could take a while. You know that. The early

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00:25:21,480 --> 00:25:25,240
Speaker 1: read though is though nothing has changed matt uh on

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00:25:25,400 --> 00:25:27,440
Speaker 1: a sight, Well it is on this topic, but it

445
00:25:27,680 --> 00:25:30,119
Speaker 1: kind of takes it from a different perspective because before,

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00:25:30,960 --> 00:25:34,080
Speaker 1: just off the line, we were talking about the previous

447
00:25:34,240 --> 00:25:38,359
Speaker 1: reporting that had been done by variety of news agencies

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00:25:39,080 --> 00:25:43,399
Speaker 1: organizations about this. While you may not be able to

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00:25:43,520 --> 00:25:48,960
Speaker 1: really tell whether the tax reform worked in quotes, you

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00:25:49,080 --> 00:25:52,000
Speaker 1: aren't able to tell a little bit about the perspective

451
00:25:52,080 --> 00:25:54,840
Speaker 1: of the news organizations that have been reporting this, right

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00:25:54,920 --> 00:25:57,760
Speaker 1: because you know, you've kind of set it out. You said,

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00:25:58,160 --> 00:26:00,920
Speaker 1: they're doing more of exactly the same they've all they've

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Speaker 1: been doing. But that's not the way it's been painted, right.

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00:26:04,680 --> 00:26:08,240
Speaker 1: I mean, you our buy backs set and all time high, yes,

456
00:26:09,640 --> 00:26:12,280
Speaker 1: but so it's almost everything else. So if you wanted

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00:26:12,320 --> 00:26:15,280
Speaker 1: to look at buy backs and say the tax cuts

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00:26:15,320 --> 00:26:17,800
Speaker 1: not working, companies are just spending on buy backs, which

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00:26:18,000 --> 00:26:21,040
Speaker 1: was you know, the sort of democratic talking points. Some

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00:26:21,240 --> 00:26:23,680
Speaker 1: new news organizations have jumped on that sort of train.

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00:26:24,280 --> 00:26:27,680
Speaker 1: You know thought, um, you could, and if you just

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00:26:27,760 --> 00:26:30,440
Speaker 1: wanted to write about buy backs, you could. But you know,

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00:26:30,480 --> 00:26:32,480
Speaker 1: here at Bloomberg, we focus a lot on how you

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00:26:32,520 --> 00:26:36,880
Speaker 1: actually analyze data. And you know, any big number sounds big.

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00:26:37,119 --> 00:26:39,320
Speaker 1: But if you look at the ratio which we're looking

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00:26:39,400 --> 00:26:42,960
Speaker 1: at trailing twelve month cash flows, which basically is the

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00:26:43,000 --> 00:26:45,760
Speaker 1: amount of money companies would have generated in cash over

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00:26:45,840 --> 00:26:49,320
Speaker 1: the previous year, the ratio of buy backs to cash

469
00:26:49,440 --> 00:26:52,400
Speaker 1: flow is not an outlier. It went up a little

470
00:26:52,400 --> 00:26:55,000
Speaker 1: bit in the first quarter, But it's basically in line

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00:26:55,040 --> 00:26:57,200
Speaker 1: with the average over the past five years. That ratio

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00:26:57,359 --> 00:27:00,600
Speaker 1: was much higher during the Obama years and some quarters

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00:27:00,720 --> 00:27:04,119
Speaker 1: so and then other news organizations have jumped on the

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00:27:04,160 --> 00:27:08,439
Speaker 1: capital expenditures. Yes, they're up. Uh. You know a lot

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00:27:08,440 --> 00:27:11,240
Speaker 1: of people expected capex to be up anyway this year

476
00:27:11,280 --> 00:27:14,320
Speaker 1: because of where we are in economic cycle. Um. But

477
00:27:14,400 --> 00:27:16,840
Speaker 1: if you look again at a ratio of capex versus

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00:27:17,160 --> 00:27:19,680
Speaker 1: cash flow, it's not a big outlier. It's it's basically

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00:27:19,760 --> 00:27:23,119
Speaker 1: in line with previous quarters in previous years. Really interesting.

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Speaker 1: Thank you so much of writing the story and for

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00:27:25,680 --> 00:27:28,280
Speaker 1: bringing it to us. Matt Townsend is a global business

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00:27:28,359 --> 00:27:31,879
Speaker 1: reporter for Bloomberg News. I recommend you read the story

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00:27:32,440 --> 00:27:35,960
Speaker 1: the title I handed thirty billion dollars Corporate Americas splurging

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00:27:36,400 --> 00:27:39,879
Speaker 1: on everything um and definitely an insightful look at the

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00:27:39,960 --> 00:27:43,200
Speaker 1: big picture and not just the slice that you want

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00:27:43,240 --> 00:27:48,119
Speaker 1: to focus on. Thanks for listening to the Bloomberg P

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00:27:48,240 --> 00:27:51,200
Speaker 1: and L podcast. You can subscribe and listen to interviews

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00:27:51,240 --> 00:27:55,240
Speaker 1: at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

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00:27:55,720 --> 00:27:59,240
Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm

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00:27:59,280 --> 00:28:02,560
Speaker 1: on Twitter to Lisa Abramo. It's one before the podcast.

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Speaker 1: You can always catch us worldwide on Bloomberg Radio