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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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

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

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. I'm

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Speaker 1: Taylor Regg's I'm filling in for Lisa Abramowitz today. Of course, Pim,

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Speaker 1: the big news this week is tech earnings. We're wrapping

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Speaker 1: up tech earnings here on this Friday morning. I'm looking

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Speaker 1: at the big a's Apple, Amazon alphabet and to help

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Speaker 1: break down some of these earnings with me, we have

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Speaker 1: in studio with us Colin Gillis. He's the director of

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Speaker 1: research at s Our Partners. Colin, I want to start

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Speaker 1: with alphabet. Of course, that's Google's parents. I was reading

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Speaker 1: a few of the analyst notes this morning and it's

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Speaker 1: just incredible. You have a company in the twentie year

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Speaker 1: still posting top line revenue growth of twenty percent. Where

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Speaker 1: do you see Google still continuing to grow in the future.

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Speaker 1: Is it in the Google Cloud or is there something

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Speaker 1: else Hi, Taylor. So, you know, a remarkable two thousand

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Speaker 1: and seventeen for Google. This is the first year at

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Speaker 1: the company cracked one billion dollars in total revenue and

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Speaker 1: to still be growing north is an incredible feat. Now

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Speaker 1: as an investment, the thing we love most about Google

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Speaker 1: is that you can see where the immediate near term

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Speaker 1: revenue is gonna come from, right, it's core search business.

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Speaker 1: But you can also see where future growth is going

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Speaker 1: to come from, right whether it's their Android platform, whether

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Speaker 1: it's YouTube, whether it's their YouTube TV platform, whether it's UM,

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Speaker 1: their way Mo driverless cars. So there's multiple areas including,

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Speaker 1: like you mentioned, their cloud business, which cracked one billion

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Speaker 1: dollars in revenue for the December quarter. Tell people what

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Speaker 1: is the cloud business? And why does it matter whether

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Speaker 1: I use Amazon's Web services, which is their cloud business,

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Speaker 1: or whether I use Google's cloud business or someone else's

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Speaker 1: cloud business like Microsoft. Sure, And that's a fantastic question, pain,

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Speaker 1: because you know, the the leader in the cloud is

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Speaker 1: Amazon and it's AWS. And you know, if you want

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Speaker 1: to put in perspective, they do more business in the

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Speaker 1: cloud then all the other competitors combined, right through the

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Speaker 1: north of five billion dollars. Plus it grew tremendously for

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Speaker 1: Amazon on the fourth quarter. Growth actually picked back up

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Speaker 1: again north of you over a year. So it's computing cycles.

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Speaker 1: Why do you need to have local resources when you

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Speaker 1: can have massive computing cycles available to you that you

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Speaker 1: can tap into as needed. So it's just like why

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Speaker 1: own a car then leave it parked in a garage,

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Speaker 1: right when you could just have a car whenever you

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Speaker 1: want to drive one, and the resources get shared among

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Speaker 1: different customers, right, And that's the concept of the public cloud. Now,

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Speaker 1: the lip side is that even though this is going

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Speaker 1: to be a massive business, that it may become a

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Speaker 1: commodity like a utility, and that there will be price

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Speaker 1: compression coming in over time. But suffice to say, the

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Speaker 1: book of business is going to be so large that

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Speaker 1: whoever captures the majority of it, it's going to be lucrative,

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Speaker 1: no matter what the margin. So saying that even if

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Speaker 1: it becomes a commodity, it's gonna be a ways before

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Speaker 1: that happens, and the amount of money that they can

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Speaker 1: make on that road is so big and so consistent

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Speaker 1: that the competitive issues don't really come into play. Correct,

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Speaker 1: That's right, I mean, you know, competitive issues always come

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Speaker 1: into a play to a certain degree. But but again,

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Speaker 1: you know, even a I mean, it's not like Microsoft's

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Speaker 1: cloud is that much more expensive or that much better

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Speaker 1: than the cloud that you would use if you were

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Speaker 1: going to go to Amazon. Ultimately, you know that there

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Speaker 1: are some pains to switching, but the switching barriers will

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Speaker 1: continue to be reduced. Let me think about you know,

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Speaker 1: when you use your search engine, right, most people use Google, right,

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Speaker 1: but the actual switching costs to move to bing is

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Speaker 1: relatively low, right and and but yet people don't really

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Speaker 1: switch yet. Um, but that may happen in the future

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Speaker 1: down the road. So again it's a area of growth.

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Speaker 1: But I would also focus more on what's happening at YouTube.

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Speaker 1: There's been a little concern about some of the videos

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Speaker 1: that you just tell this story about, because we were

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Speaker 1: talking just before you came in here about younger people.

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Speaker 1: And when I mean younger people, these are the consumers

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Speaker 1: of the future. They do not seem to know what NBC,

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Speaker 1: ABC and CBS are, correct, They know all about YouTube

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Speaker 1: and they just watch those videos all day long. That's right.

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Speaker 1: So when we sit down my ten year old son,

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Speaker 1: you know, we try to figure out what program you

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Speaker 1: know is where, right, it's either Netflix or it's Amazon,

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Speaker 1: or it's on YouTube. And we also use YouTube TV

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Speaker 1: to get our live TV. And it has the unlimited

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Speaker 1: DVR storage cloud storage, so you can record any programs. Right.

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Speaker 1: So it's really it's a fantastic offering. And if they

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Speaker 1: can start to if Google can start to monetize television

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Speaker 1: to the same degree that they've monetized YouTube to, right,

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Speaker 1: that's a could be a very lucrative driver for them

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Speaker 1: and the idea of content consumption. It's completely changed. The

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Speaker 1: brands have completely moved in. The company that's nowhere to

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Speaker 1: be seen in any of this, of course, is Apple. Right,

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Speaker 1: You've got Amazon in there, You've got Google in there,

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Speaker 1: You've got Netflix in there, but Apples zero. You mentioned Amazon.

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Speaker 1: I want to touch on that quickly. Why you have

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Speaker 1: why we have you here? You talked about it's the

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Speaker 1: first time the companies generated over a billion dollars in

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Speaker 1: quarterly profit. I've been asking this question. You're part of

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Speaker 1: my poll. Is Amazon getting too big? Where they're starting

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Speaker 1: to enter into a lot of different industries. We have

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Speaker 1: whole foods. Now, at what point did they start to dry? Uh?

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Speaker 1: You know, attract regulators perhaps, sure. I mean, you know

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Speaker 1: what's interesting is we used to talk about the competition

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Speaker 1: between Apple and Google, and back when Android was first launching,

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Speaker 1: and Eric Schmidt, who was the CEO of Google, used

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Speaker 1: to be on Apple's board. And but now the battle

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Speaker 1: that's much more interesting is Alphabet versus Amazon, because these

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Speaker 1: two companies are colliding on multiple points, including advertising, including

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Speaker 1: smart homes. You see Amazon pushing into many facets of technology, right,

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Speaker 1: and the purchase of whole foods is a great example

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Speaker 1: that they're trying to get into groceries. They want to

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Speaker 1: get into medicine. Um, they're in your house with Alexa,

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Speaker 1: in our house with Alexa exactly right, And so you

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Speaker 1: know that's always a concern, but in terms of government regulation,

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Speaker 1: but that's a concern for any of these companies that

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Speaker 1: we're discussing in technology. These are major forces and what

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Speaker 1: Jeff Bezos is chasing after is a very big picture

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Speaker 1: in terms of how much of your consumer dollars he

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Speaker 1: wants to capture, which is basically all of it. Okay,

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Speaker 1: if you got the chance to sit down with Tim Cook,

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Speaker 1: the chief executive of Apple, and he said, look, I'm

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Speaker 1: interested in your thoughts about what do you think we

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Speaker 1: ought to be doing so that five years from now

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Speaker 1: we're still part of the conversation. What would you suggest?

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Speaker 1: I would just uh that Mr Cook consider taking more risks,

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Speaker 1: and he's been a very um careful steward of Apple,

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Speaker 1: but I think that that may wind up catching up

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Speaker 1: to them. So when we sit down and we have

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Speaker 1: the various you know, home assistants, right, we've got Google Home,

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Speaker 1: We've got Alexa devices, Uh, Apple is just so far

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Speaker 1: behind an AI and I would have them focus more

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Speaker 1: in that area. And I would also consider apples software

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Speaker 1: skills and prowess. Um. I think they're fantastic hardware company,

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Speaker 1: but I think the software you know is not innovative

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Speaker 1: and frequently is lackluster. And so right now, right as

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Speaker 1: you know, concerned of the iPhone supercycle is sort of

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Speaker 1: you know, storry that thesis is falling apart. All that's

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Speaker 1: really left is you know, cap structure and and and

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Speaker 1: debt you know share every purchasing right uh, and dividends

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Speaker 1: and so a cap structure play is not necessarily a

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Speaker 1: fantastic investment thesis is an investment thesis. But if the

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Speaker 1: iPhone cycle, you know, falls apart. Then Apple, that's so

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Speaker 1: many sound of revenue. Apple is not in a position

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Speaker 1: to replace that easily. Yeah, does that mean going out

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Speaker 1: and making acquisitions? And take a look at our f

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Speaker 1: a function free cash flow fifty billion dollars. What do

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Speaker 1: they do with the cash? Yeah, I mean it's a

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Speaker 1: great question. And you know they're returning it to shareholders, right,

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Speaker 1: and that the excitement. The biggest piece of news that

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Speaker 1: came from the Ernis call was net cash zero. Right.

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Speaker 1: Apple has pledged to return all of its cash or

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Speaker 1: to deploy all of its cash, right, whether that's stock

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Speaker 1: we purchases or dividends. Thanks very much, Colin gillis a pleasure,

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Speaker 1: Director of research for Chatham Road Partners see our partners.

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Speaker 1: Congratulations on your new venture. Much appreciate it, and we

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Speaker 1: appreciate your coming in and sharing your knowledge with us.

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Speaker 1: Good morning. This is Bloomberg Radio. I'm Taylor Riggs filling

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Speaker 1: in for Lisa abrama Witz. You know, Pim, like you

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Speaker 1: were mentioning, We've got a lot of news this week

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Speaker 1: concerning more developments in the investigation of Russian meddling in

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Speaker 1: the presidential election. To walk us through all of this,

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Speaker 1: where we stand. Where we go from here is Clint Watts.

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Speaker 1: He's a senior fellow at the Foreign Policy Research Institute. Clint,

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Speaker 1: you know, broadly speaking here, just to start us off,

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Speaker 1: do tech companies need to do more to prevent more

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Speaker 1: Russian meddling in our election? Have they done enough? Yeah? So,

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Speaker 1: they've made some drastic improvements over the last year. I

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Speaker 1: think Facebook has been quite transparent. They brought out a

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Speaker 1: lot of the issues they seem to have tracted down

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Speaker 1: fairly quickly, and they've moved more aggressively in other elections

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Speaker 1: around the world. But the biggest thing that all the

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Speaker 1: social media companies should be required to do by law

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Speaker 1: is to say what the sources of political and social

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Speaker 1: issue advertising. It's standard for radio like this, it's standard

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Speaker 1: for television, print, And because this layer of of attribution

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Speaker 1: is not there in social media, it makes it much

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Speaker 1: easier for foreign power to influence the US audiences. All right,

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Speaker 1: let's just move on to what is going to be

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Speaker 1: perhaps a most watched memo at least of the weekend.

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Speaker 1: And this has to do with the memo that was

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Speaker 1: put together by GOP staffers on the House Intelligence Committee

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Speaker 1: having to do with the FBI's investigation into Russian meddling

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Speaker 1: in the U S elections. What is your thoughts? But

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Speaker 1: what do you believe is in that memo? I imagine

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Speaker 1: what they're trying to do is selectively pull information out

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Speaker 1: of the authorization the application for a Foreign Intelligence Surveillance

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Speaker 1: Act warrant, which connects the dossier to justifications for that application.

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Speaker 1: You're gonna have to tell people, remind them that dossier

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Speaker 1: and the people involved, because when you said to use

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Speaker 1: selective information, it has to do with eavesdropping on a

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Speaker 1: Trump campaign foreign policy aid Carter Page. Right, So the

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Speaker 1: target of the application for the search war was Carter Page,

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Speaker 1: who was named by the Trump team as one of

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Speaker 1: his foreign policy advisors and who had shown up actually

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Speaker 1: in Moscow, you know, doing a talk during the run

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Speaker 1: up to the election. What this application did was it

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Speaker 1: asked for surveillance on him. And in that application, what

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Speaker 1: I think will probably come out is that they cited

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Speaker 1: the dossier. This is the x m I six UH

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Speaker 1: Steal dossier, which brought forth lots of raw reporting and

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Speaker 1: was put up on buzzbeed and essentially it asserted that

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Speaker 1: Russia was trying to you know, win the election for

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Speaker 1: Trump and to suppress Clinton. Uh. In the run up,

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Speaker 1: that dossier has been under great contention in the House

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Speaker 1: Intelligence Committee. They have really fought it the rasci of

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Speaker 1: it because the Clinton campaign funded it at one point

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Speaker 1: was also refunded, initially funded by a traditionally Republican opposition

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Speaker 1: research group. And so they're trying to steer this into

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Speaker 1: a conspiracy that the FBI and the spies application. We're

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Speaker 1: trying to push Clinton forward and suppress Trump going into

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Speaker 1: the election, and this this plays the president's narrative of

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Speaker 1: a witch hunt Clinton. I want to ask this week,

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Speaker 1: President Trump said he may authorize a release of the

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Speaker 1: memo that's not redacted. Are there any risk to national

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Speaker 1: security if the memo is released it doesn't have redactions

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Speaker 1: to it. Yeah. I think there's risk in two ways.

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Speaker 1: So with regards to redactions, if it discloses sources or methods,

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Speaker 1: this really hurts us in terms of our intelligence capability

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Speaker 1: around the world. Will it will disclose how we went

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Speaker 1: or how we use that information or where we get

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Speaker 1: it from. Even broader than that, this has never happened

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Speaker 1: before in our history. It would be the selective leaking

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Speaker 1: out of classified information. From you know, surveillance applications. So

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Speaker 1: just imagine the tidal wave of disclosures that could be

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Speaker 1: used for political purposes by either party moving forward. Uh,

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Speaker 1: somebody could go and dig into any application written by

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Speaker 1: any agent going back many years, pull a piece of

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Speaker 1: information out for political purposes, and then either use it

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Speaker 1: to attack that investigation the investigator, or to try and

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Speaker 1: undermine uh, you know, judicial processes writ large. So it's

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Speaker 1: very dangerous for the country in the sense that we

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Speaker 1: just saw a fight for FIS a reauthorization a few

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Speaker 1: weeks ago, so we could use this tool in the

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Speaker 1: pursuit of terrorists, you know, and uh, foreign intelligence efforts.

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Speaker 1: So it's pretty damaging to the institutions of democracy, and

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Speaker 1: it seems like a very short run political plan for

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Speaker 1: would ultimately be a long run disaster for the country. Okay,

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Speaker 1: but let me just play Devil's advocate here in the

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Speaker 1: world in which there is wiki leaks, in the world

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Speaker 1: in which everything that you commit to any kind of

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Speaker 1: digital repository is pretty much available to a hacker. Who

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Speaker 1: on the other side, who's the who's the on the

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Speaker 1: other side that doesn't already know all this? It's isn't

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Speaker 1: it the public, the American people that don't know. I

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Speaker 1: don't really think that's the case. I mean, this goes

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Speaker 1: through a very rigorous process. The FIZER process just internally

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Speaker 1: to the FBI or any investigator gative agency is exhausting,

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Speaker 1: so it usually takes weeks or months to even put

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Speaker 1: that package together. It then goes to a series of

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Speaker 1: judges who then review it and and explore it and

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Speaker 1: see if there's validity to it. So we have processes

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Speaker 1: in place. The public giving a snippet out of what

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Speaker 1: might be a sixty page or one page application even

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Speaker 1: uh probably doesn't have the context to understand it, or

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Speaker 1: has any context around the FIA process and what's trying

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Speaker 1: to be done. So I put it in the same

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Speaker 1: as wiki leaks, which is these disclosures are selective. They

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Speaker 1: often omit tons of context. I don't think the public

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Speaker 1: is informed. I really think they're confused in the end. Alright,

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Speaker 1: So if they're if they're confusing two things, what do

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Speaker 1: you think the ramifications are going to be if the

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Speaker 1: memo is actually released, which their GOP seems to think

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Speaker 1: it's going to happen, You know, ultimately it will lead

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Speaker 1: to outcry by one side or the other. You know,

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Speaker 1: we've seen this with both political group But what would happen?

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Speaker 1: I mean, I'm just curious, like what physically will happen.

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Speaker 1: I understand that there will be a lot of shouting uh,

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Speaker 1: and you know the Sunday talk shows will be all

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Speaker 1: full of this, But is there anything that will happen?

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Speaker 1: Just give you about ten seconds. Anything happened to the

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Speaker 1: U S Intelligence agencies? Yeah, you're going to see a withdrawal,

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Speaker 1: retraction of investigations and the fact that investigators can't trust

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Speaker 1: the systems which they're using to bring their cases forward.

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Speaker 1: They'll feel ambushed from both sides politically, and they're going

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Speaker 1: to have a hard time moving forward with investigations, particularly

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Speaker 1: in political corruption cases on the criminal side and foreign

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Speaker 1: counter intelligence cases on the national security side. Thank you

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Speaker 1: very much. Clint Watts is a senior fellow at the

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Speaker 1: Farm Policy Research Institute. I'm Taylor Riggs filling in for

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Speaker 1: Lisa Abramowitz. I'm also sitting next to him. We are

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Speaker 1: eagerly awaiting Sunday the Super Bowl. Pim do you watch

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Speaker 1: the Super Bowl? You're watching for the game for the ads.

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Speaker 1: I probably will watch the ads more than I will

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Speaker 1: watch the game. But that's just because well, our next

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Speaker 1: guest might like that answer. Let's bring him in now,

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Speaker 1: nat Ives, he's the ad Age executive editor. He is

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Speaker 1: joining this now. Uh Na, okay, you have to help

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Speaker 1: me out here. Are super Bowl ads still as expensive

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Speaker 1: as they are even with all the cord cutters and

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Speaker 1: the millennials who are seemingly not uh not watching? Absolutely,

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Speaker 1: the Super Bowl ad prices can fluctuate a little bit,

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Speaker 1: but they're basically on and upward, grind to plateau. You're

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Speaker 1: not going to see anything commensurate with the drops in

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Speaker 1: regular TV ratings in super Bowl prices because of super

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Speaker 1: Bowl ratings don't drop the way the rest of td

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Speaker 1: TV does. Super Bowl doesn't drop the way the rest

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Speaker 1: of the NFL does. Even super Bowl defies gravity, and

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Speaker 1: the ad presses stay there too. Not What can I

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Speaker 1: get for five million dollars if I happen to have

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Speaker 1: some spare cash and I'd like to use it during

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Speaker 1: the Super Bowl, That'll buy you thirty seconds. But remember

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Speaker 1: that five million is not actually going to be enough

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Speaker 1: in most cases. NBC is going to say thirty thirty

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Speaker 1: seconds will cost you five million, But the cost to

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Speaker 1: do that deal. Will let you do that deal only

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Speaker 1: if you also agree to spend a lot of money

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Speaker 1: with us during the Olympics and the rest of the year.

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Speaker 1: How much, I don't know. It depends these You know,

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Speaker 1: anasor bush In for example, has been a sponsor for

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Speaker 1: so long that it's got all kinds of deals that

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Speaker 1: are grandfathered in. That's going to be a different situation

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Speaker 1: than somebody who walks up for the first time, knocks

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Speaker 1: on NBC's door and says, hey, can I buy an ad? Now?

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Speaker 1: I always wonder this if the ad sales depend on

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Speaker 1: who is playing? For example, do I want to buy

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Speaker 1: this year because the Patriots made it into the Super Bowl?

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Speaker 1: For example? It's fascinating. We always look at how the

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Speaker 1: matchups are shaking out to see how the ratings are

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Speaker 1: going to do during the playoffs, but it stops there.

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Speaker 1: I mean, it's not great news for anybody. If too

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Speaker 1: small market teams that never got national attention during the

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Speaker 1: season and don't have wide followings meet in the Super Bowl,

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Speaker 1: that doesn't help. But it also doesn't seem to hurt

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Speaker 1: that much. It's really more about the quality of the game,

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Speaker 1: and um that's unpredictable, and for the most part in

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Speaker 1: recent years the games have been pretty close. Last year

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Speaker 1: we had our first overtime game, so again, the ratings

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Speaker 1: don't depend on factors that ordinarily would lift or tank

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Speaker 1: an ordinary football game or TV broadcast. Have you seen

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Speaker 1: many of the ads that are scheduled to be broadcast

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Speaker 1: during the Super Bowl? I have, and for better or worse,

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Speaker 1: so have many Americans. These are pre released, of course,

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Speaker 1: as they have been for many years. Doubt that, not

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Speaker 1: to say they all have, but a significant portion of

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Speaker 1: them have. So I've seen some funny ads. I've seen

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Speaker 1: more funny ads. It's been interesting to try to infer

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Speaker 1: what the trends are going to be this year and

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Speaker 1: compare them to last year. We don't have a complete

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Speaker 1: picture yet. There will be surprises on game day, but

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Speaker 1: we know a lot already now. And I wonder about

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Speaker 1: the motivation for these companies. I mean, what's different about

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Speaker 1: the Super Bowl is people actually look forward to watching them.

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Speaker 1: I don't want to fast forward through them. So if

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Speaker 1: I'm a company and I'm thinking about buying ad space,

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Speaker 1: do I actually expect more people to buy my product

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Speaker 1: or do I just want to be in the hype

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Speaker 1: and be in the know and what's being talked about

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Speaker 1: the next day. There's a couple of goals, and one

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Speaker 1: is probably your legit business goal. I need to sell

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Speaker 1: more of my widgets or cars or printers or what

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Speaker 1: have you. Or I need to drive awareness of a

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Speaker 1: product that nobody knows exists, or I need to speak

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Speaker 1: to a very specific audience. And this is, for whatever reason,

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Speaker 1: a good way to do it, real business goals. The

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Speaker 1: other part of it, though, is the pr game, where

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Speaker 1: everybody wants to polish their halo, get their company's name

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Speaker 1: or their product name on the tip of the tongue.

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Speaker 1: You want to become something closer to a household dame

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Speaker 1: if you're in the Super Bowl. That's why you've seen

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Speaker 1: from time to time a superglue company show up at

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Speaker 1: the Super Bowl. You know they did it once. It

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Speaker 1: was their entire year's ad budget, and uh they say

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Speaker 1: it worked okay, but they didn't come back. Others are

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Speaker 1: playing the twofold game. Really. They want to get the

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Speaker 1: buzz of being discussed in the press the way that

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Speaker 1: we had Adage and everybody else in the business press

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Speaker 1: are are doing right now. Um and then hopefully also

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Speaker 1: sell some product. You know, it's funny. The pre release

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Speaker 1: strategy is slightly controversial because it takes some of the

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Speaker 1: surprise out of the game. But in the case of

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Speaker 1: one this year, pringles you know people people buy snacks

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Speaker 1: for the Super Bowl. Pre rereleasing their ad might have

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Speaker 1: literally increased sales for Super Bowl Sunday. Let's go to

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Speaker 1: just some of the ads. Quickly, give me your thoughts

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Speaker 1: about them. The eminem spot. It's the first and three years.

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Speaker 1: It stars Danny DeVito. Give me about ten seconds on that.

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Speaker 1: I mean, I like it, okay, uh, I can see

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Speaker 1: how Danny DeVito is a funny way to say, you know,

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Speaker 1: don't eat me. Um, it's just a it's a weird

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Speaker 1: gimmick the Eminem's have where the spokes candies are all

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Speaker 1: edible and are mildly concerned about it, but not totally concerned. Alright.

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Speaker 1: Ten seconds on Kiano reeves with square space. This is

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Speaker 1: controversial in our office. I like it better than some others.

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Speaker 1: This is Kiano just standing on a motorcycle and appearing

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Speaker 1: to kind of take off at the end. What can

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Speaker 1: I say. I think it's a little bit different. Um.

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Speaker 1: Others here disagree. All right, and finally let me get

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Speaker 1: your thoughts on avocados. Avocados from Mexico is consistently funny.

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Speaker 1: Each year they bring you a little inn yet that

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Speaker 1: makes you laugh, and they do it again this year,

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Speaker 1: and they work in a selling proposition or at least

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Speaker 1: a serving suggestion, which might do the same job. All right,

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Speaker 1: thanks very much. By the way, who do you think

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Speaker 1: is gonna win? Probably the pets? Oh sorry, Mark, Well

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Speaker 1: careful there Na, all right, thanks very much. Natives as

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Speaker 1: executive editor at Age and he can be followed on

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Speaker 1: Twitter at nat I get ready for a Super Bowl

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Speaker 1: fifty two. Joining us now to tell us all about

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Speaker 1: Deutsche Bank, is y'aman owneran. He's our senior writer when

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Speaker 1: it comes to banks. And yeahmen, I know that you

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Speaker 1: are the author of the book about Zombie Banks, which

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Speaker 1: is a great read. Is Deutsche Bank going to become

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Speaker 1: a zombie bank? That's an interesting point you just raised.

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Speaker 1: Was not among the zombies that I wrote about in

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Speaker 1: in two thousand eleven when my book was published, Um

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Speaker 1: German banks had a chapter in there and and commerced

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Speaker 1: by was was the biggest zombie all the landest bunks

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Speaker 1: that that collapsed during the crisis were but but not

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Speaker 1: Dotsche Bank. Now Dotche Bank is looking much worse than

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Speaker 1: all these other guys who finally really nursed all their

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Speaker 1: wounds and and recovered. But Dotches crisis came much later,

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Speaker 1: right in the European crisis two thousand and ten eleven,

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Speaker 1: all the different uh uh you know, government government debt

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Speaker 1: crisis that rapped one after another. So Europe euro fell

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Speaker 1: apart much later than than US did, and and it

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Speaker 1: it was its second crisis, but that hurt touch him

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Speaker 1: more and now does still struggling and that and that's

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Speaker 1: why you know, earnings constantly upset, you know, quarter after quarter,

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Speaker 1: and turnaround plans are not really you know, going anywhere.

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Speaker 1: So that I mean, so in a way it's become

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Speaker 1: a zombie. It's not as zombie as the as the

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Speaker 1: other German banks war because it didn't lose the big

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Speaker 1: numbers that really brought them down during the ISIS. But

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Speaker 1: it's been losing money and and what's worse, it's not

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Speaker 1: making money and and that doesn't really that doesn't really

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00:24:06,960 --> 00:24:09,600
Speaker 1: work when you're such a big bank globally and your

430
00:24:09,640 --> 00:24:12,680
Speaker 1: competitors are doing much better. Yeah, you talk about the

431
00:24:12,720 --> 00:24:15,439
Speaker 1: turnaround plan. We note that the shares are down about

432
00:24:15,720 --> 00:24:19,800
Speaker 1: five point three percent this morning. I wonder how impatient

433
00:24:19,840 --> 00:24:23,080
Speaker 1: are investors getting with the CEO? John crying does he

434
00:24:23,080 --> 00:24:25,679
Speaker 1: even have the time left that he needs to enact

435
00:24:26,000 --> 00:24:29,320
Speaker 1: the turnaround plan. Well, you know, just a quarter ago,

436
00:24:29,520 --> 00:24:32,000
Speaker 1: there were there were actually lots of rumors that the

437
00:24:32,160 --> 00:24:35,120
Speaker 1: crime was on the way out because the turnaround wasn't working.

438
00:24:35,240 --> 00:24:38,640
Speaker 1: Things weren't going well. Then they reported, you know, third

439
00:24:38,760 --> 00:24:41,359
Speaker 1: quarter numbers that weren't that bad there it looked a

440
00:24:41,359 --> 00:24:45,040
Speaker 1: little more promising, so the rumors died down, but the

441
00:24:45,040 --> 00:24:48,520
Speaker 1: fourth quarter is bad again. So every time, you know,

442
00:24:49,119 --> 00:24:52,159
Speaker 1: people are disappointed. These these rumors come around because the

443
00:24:52,440 --> 00:24:55,800
Speaker 1: rumors are based on some kind of unease among the

444
00:24:55,800 --> 00:24:58,719
Speaker 1: biggest investors you know, and some of them you know,

445
00:24:58,760 --> 00:25:01,080
Speaker 1: then go on the record saying, well, now he's okay,

446
00:25:01,119 --> 00:25:04,560
Speaker 1: we're we're okay with the CEO, but clearly some aren't,

447
00:25:04,840 --> 00:25:07,919
Speaker 1: and on behind the scenes they are raising those concerns

448
00:25:07,920 --> 00:25:11,159
Speaker 1: and saying when are we going to see the depositive results?

449
00:25:11,160 --> 00:25:13,200
Speaker 1: So what are the division? Maybe you could break break

450
00:25:13,200 --> 00:25:15,920
Speaker 1: down the details force and and share like, okay, so

451
00:25:16,000 --> 00:25:17,840
Speaker 1: what are they really great at? What do they need

452
00:25:17,920 --> 00:25:20,320
Speaker 1: to improve and what should they get rid of? Well,

453
00:25:20,359 --> 00:25:24,240
Speaker 1: you know what dotsche Bank has been great at historically

454
00:25:24,359 --> 00:25:27,960
Speaker 1: traditionally is trading. There are a big training powerhouse just

455
00:25:28,000 --> 00:25:31,760
Speaker 1: like Goldman, sax Now and and Goldman. As we've talked

456
00:25:31,840 --> 00:25:35,800
Speaker 1: during US earnings trading what though everything fixed income most

457
00:25:35,880 --> 00:25:39,520
Speaker 1: but but everything really but equity stood fixed income and equities.

458
00:25:39,520 --> 00:25:43,600
Speaker 1: They're they're training powerhouse there, you know, like Goldman, and

459
00:25:43,680 --> 00:25:46,920
Speaker 1: Goldman has also suffered in trading. But when you looked

460
00:25:46,920 --> 00:25:50,160
Speaker 1: at for example, last year's and last quarters Goldman figures

461
00:25:50,359 --> 00:25:53,480
Speaker 1: and everybody talked about this, their investment banking side, non

462
00:25:53,560 --> 00:25:58,040
Speaker 1: trading side was doing great. They were writing, underwriting dead

463
00:25:58,200 --> 00:26:02,320
Speaker 1: underwriting equity thirty per an up and everybody was like,

464
00:26:02,440 --> 00:26:05,359
Speaker 1: how can you not translate into this into trading as well?

465
00:26:05,440 --> 00:26:08,400
Speaker 1: And they you know, they were struggling the CFO CEO.

466
00:26:08,840 --> 00:26:15,600
Speaker 1: But with trading is down constantly and on the writing

467
00:26:15,720 --> 00:26:20,160
Speaker 1: is down and m n A is unchanged. I mean,

468
00:26:20,760 --> 00:26:23,680
Speaker 1: like you want to see something good and it's not

469
00:26:23,800 --> 00:26:26,760
Speaker 1: there and mean, and this has been happening for for

470
00:26:26,800 --> 00:26:30,200
Speaker 1: several years now, which means they've been losing market share.

471
00:26:30,440 --> 00:26:33,320
Speaker 1: You know, everybody's fick trading numbers are bad this year,

472
00:26:33,920 --> 00:26:38,160
Speaker 1: but last year US banks especially you know, and even

473
00:26:38,160 --> 00:26:42,679
Speaker 1: the French banks so great thick improvement now didn't. So

474
00:26:42,720 --> 00:26:45,200
Speaker 1: what happens is when everybody else has a good year

475
00:26:45,640 --> 00:26:48,960
Speaker 1: and has so so year, they're losing market share. So

476
00:26:49,000 --> 00:26:52,600
Speaker 1: they've lost market share constantly in trading. Now, they've lost

477
00:26:52,640 --> 00:26:56,520
Speaker 1: market share in in in other investment banking activities, underwriting,

478
00:26:57,000 --> 00:26:59,640
Speaker 1: uh stock spots. So so all the things they were

479
00:26:59,680 --> 00:27:03,240
Speaker 1: really good at, which is really their investment bank, they

480
00:27:03,320 --> 00:27:08,520
Speaker 1: have been bleeding. And that's that's not good. Uh. Quickly,

481
00:27:08,560 --> 00:27:10,000
Speaker 1: just to wrap it up, I want to talk about

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00:27:10,040 --> 00:27:13,199
Speaker 1: if they're still able to attract and retain talent. We

483
00:27:13,280 --> 00:27:15,119
Speaker 1: heard from the CEO this morning. They said he was

484
00:27:15,200 --> 00:27:18,520
Speaker 1: more on the generous side with bonuses. Is that to

485
00:27:18,680 --> 00:27:21,000
Speaker 1: retain talent, right, I mean? And that that's what they

486
00:27:21,040 --> 00:27:24,200
Speaker 1: had to do. Um. You know, they didn't paid bonuses

487
00:27:24,280 --> 00:27:27,320
Speaker 1: last year, which means they had to. They couldn't keep

488
00:27:27,359 --> 00:27:29,560
Speaker 1: doing that because you lose a lot of people. So

489
00:27:29,600 --> 00:27:33,280
Speaker 1: that's why expenses didn't come down as they targeted. UM,

490
00:27:33,320 --> 00:27:36,400
Speaker 1: which also hurts the bottom line. But you know, they

491
00:27:36,640 --> 00:27:39,360
Speaker 1: have to keep their traders and their investment bankers. Then

492
00:27:39,440 --> 00:27:42,080
Speaker 1: they had to play bonuses. Thank you very much. Yeah,

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Speaker 1: I'm an owner on He is our senior writer when

494
00:27:43,880 --> 00:27:45,840
Speaker 1: it comes to banks and wrote a great book on

495
00:27:46,119 --> 00:27:53,840
Speaker 1: zombie banks. I urge you to check it out. Thanks

496
00:27:53,840 --> 00:27:56,480
Speaker 1: for listening to the Bloomberg P and L podcast. You

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00:27:56,480 --> 00:28:00,320
Speaker 1: can subscribe and listen to interviews at Apple Podcasts, sound Cloud,

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00:28:00,400 --> 00:28:03,880
Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm

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00:28:03,880 --> 00:28:07,439
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa

500
00:28:07,480 --> 00:28:10,639
Speaker 1: abramowits one before the podcast. You can always catch us

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00:28:10,640 --> 00:28:12,240
Speaker 1: worldwide on Blueberg Radio