Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. I'm
Speaker 1: Taylor Regg's I'm filling in for Lisa Abramowitz today. Of course, Pim,
Speaker 1: the big news this week is tech earnings. We're wrapping
Speaker 1: up tech earnings here on this Friday morning. I'm looking
Speaker 1: at the big a's Apple, Amazon alphabet and to help
Speaker 1: break down some of these earnings with me, we have
Speaker 1: in studio with us Colin Gillis. He's the director of
Speaker 1: research at s Our Partners. Colin, I want to start
Speaker 1: with alphabet. Of course, that's Google's parents. I was reading
Speaker 1: a few of the analyst notes this morning and it's
Speaker 1: just incredible. You have a company in the twentie year
Speaker 1: still posting top line revenue growth of twenty percent. Where
Speaker 1: do you see Google still continuing to grow in the future.
Speaker 1: Is it in the Google Cloud or is there something
Speaker 1: else Hi, Taylor. So, you know, a remarkable two thousand
Speaker 1: and seventeen for Google. This is the first year at
Speaker 1: the company cracked one billion dollars in total revenue and
Speaker 1: to still be growing north is an incredible feat. Now
Speaker 1: as an investment, the thing we love most about Google
Speaker 1: is that you can see where the immediate near term
Speaker 1: revenue is gonna come from, right, it's core search business.
Speaker 1: But you can also see where future growth is going
Speaker 1: to come from, right whether it's their Android platform, whether
Speaker 1: it's YouTube, whether it's their YouTube TV platform, whether it's UM,
Speaker 1: their way Mo driverless cars. So there's multiple areas including,
Speaker 1: like you mentioned, their cloud business, which cracked one billion
Speaker 1: dollars in revenue for the December quarter. Tell people what
Speaker 1: is the cloud business? And why does it matter whether
Speaker 1: I use Amazon's Web services, which is their cloud business,
Speaker 1: or whether I use Google's cloud business or someone else's
Speaker 1: cloud business like Microsoft. Sure, And that's a fantastic question, pain,
Speaker 1: because you know, the the leader in the cloud is
Speaker 1: Amazon and it's AWS. And you know, if you want
Speaker 1: to put in perspective, they do more business in the
Speaker 1: cloud then all the other competitors combined, right through the
Speaker 1: north of five billion dollars. Plus it grew tremendously for
Speaker 1: Amazon on the fourth quarter. Growth actually picked back up
Speaker 1: again north of you over a year. So it's computing cycles.
Speaker 1: Why do you need to have local resources when you
Speaker 1: can have massive computing cycles available to you that you
Speaker 1: can tap into as needed. So it's just like why
Speaker 1: own a car then leave it parked in a garage,
Speaker 1: right when you could just have a car whenever you
Speaker 1: want to drive one, and the resources get shared among
Speaker 1: different customers, right, And that's the concept of the public cloud. Now,
Speaker 1: the lip side is that even though this is going
Speaker 1: to be a massive business, that it may become a
Speaker 1: commodity like a utility, and that there will be price
Speaker 1: compression coming in over time. But suffice to say, the
Speaker 1: book of business is going to be so large that
Speaker 1: whoever captures the majority of it, it's going to be lucrative,
Speaker 1: no matter what the margin. So saying that even if
Speaker 1: it becomes a commodity, it's gonna be a ways before
Speaker 1: that happens, and the amount of money that they can
Speaker 1: make on that road is so big and so consistent
Speaker 1: that the competitive issues don't really come into play. Correct,
Speaker 1: That's right, I mean, you know, competitive issues always come
Speaker 1: into a play to a certain degree. But but again,
Speaker 1: you know, even a I mean, it's not like Microsoft's
Speaker 1: cloud is that much more expensive or that much better
Speaker 1: than the cloud that you would use if you were
Speaker 1: going to go to Amazon. Ultimately, you know that there
Speaker 1: are some pains to switching, but the switching barriers will
Speaker 1: continue to be reduced. Let me think about you know,
Speaker 1: when you use your search engine, right, most people use Google, right,
Speaker 1: but the actual switching costs to move to bing is
Speaker 1: relatively low, right and and but yet people don't really
Speaker 1: switch yet. Um, but that may happen in the future
Speaker 1: down the road. So again it's a area of growth.
Speaker 1: But I would also focus more on what's happening at YouTube.
Speaker 1: There's been a little concern about some of the videos
Speaker 1: that you just tell this story about, because we were
Speaker 1: talking just before you came in here about younger people.
Speaker 1: And when I mean younger people, these are the consumers
Speaker 1: of the future. They do not seem to know what NBC,
Speaker 1: ABC and CBS are, correct, They know all about YouTube
Speaker 1: and they just watch those videos all day long. That's right.
Speaker 1: So when we sit down my ten year old son,
Speaker 1: you know, we try to figure out what program you
Speaker 1: know is where, right, it's either Netflix or it's Amazon,
Speaker 1: or it's on YouTube. And we also use YouTube TV
Speaker 1: to get our live TV. And it has the unlimited
Speaker 1: DVR storage cloud storage, so you can record any programs. Right.
Speaker 1: So it's really it's a fantastic offering. And if they
Speaker 1: can start to if Google can start to monetize television
Speaker 1: to the same degree that they've monetized YouTube to, right,
Speaker 1: that's a could be a very lucrative driver for them
Speaker 1: and the idea of content consumption. It's completely changed. The
Speaker 1: brands have completely moved in. The company that's nowhere to
Speaker 1: be seen in any of this, of course, is Apple. Right,
Speaker 1: You've got Amazon in there, You've got Google in there,
Speaker 1: You've got Netflix in there, but Apples zero. You mentioned Amazon.
Speaker 1: I want to touch on that quickly. Why you have
Speaker 1: why we have you here? You talked about it's the
Speaker 1: first time the companies generated over a billion dollars in
Speaker 1: quarterly profit. I've been asking this question. You're part of
Speaker 1: my poll. Is Amazon getting too big? Where they're starting
Speaker 1: to enter into a lot of different industries. We have
Speaker 1: whole foods. Now, at what point did they start to dry? Uh?
Speaker 1: You know, attract regulators perhaps, sure. I mean, you know
Speaker 1: what's interesting is we used to talk about the competition
Speaker 1: between Apple and Google, and back when Android was first launching,
Speaker 1: and Eric Schmidt, who was the CEO of Google, used
Speaker 1: to be on Apple's board. And but now the battle
Speaker 1: that's much more interesting is Alphabet versus Amazon, because these
Speaker 1: two companies are colliding on multiple points, including advertising, including
Speaker 1: smart homes. You see Amazon pushing into many facets of technology, right,
Speaker 1: and the purchase of whole foods is a great example
Speaker 1: that they're trying to get into groceries. They want to
Speaker 1: get into medicine. Um, they're in your house with Alexa,
Speaker 1: in our house with Alexa exactly right, And so you
Speaker 1: know that's always a concern, but in terms of government regulation,
Speaker 1: but that's a concern for any of these companies that
Speaker 1: we're discussing in technology. These are major forces and what
Speaker 1: Jeff Bezos is chasing after is a very big picture
Speaker 1: in terms of how much of your consumer dollars he
Speaker 1: wants to capture, which is basically all of it. Okay,
Speaker 1: if you got the chance to sit down with Tim Cook,
Speaker 1: the chief executive of Apple, and he said, look, I'm
Speaker 1: interested in your thoughts about what do you think we
Speaker 1: ought to be doing so that five years from now
Speaker 1: we're still part of the conversation. What would you suggest?
Speaker 1: I would just uh that Mr Cook consider taking more risks,
Speaker 1: and he's been a very um careful steward of Apple,
Speaker 1: but I think that that may wind up catching up
Speaker 1: to them. So when we sit down and we have
Speaker 1: the various you know, home assistants, right, we've got Google Home,
Speaker 1: We've got Alexa devices, Uh, Apple is just so far
Speaker 1: behind an AI and I would have them focus more
Speaker 1: in that area. And I would also consider apples software
Speaker 1: skills and prowess. Um. I think they're fantastic hardware company,
Speaker 1: but I think the software you know is not innovative
Speaker 1: and frequently is lackluster. And so right now, right as
Speaker 1: you know, concerned of the iPhone supercycle is sort of
Speaker 1: you know, storry that thesis is falling apart. All that's
Speaker 1: really left is you know, cap structure and and and
Speaker 1: debt you know share every purchasing right uh, and dividends
Speaker 1: and so a cap structure play is not necessarily a
Speaker 1: fantastic investment thesis is an investment thesis. But if the
Speaker 1: iPhone cycle, you know, falls apart. Then Apple, that's so
Speaker 1: many sound of revenue. Apple is not in a position
Speaker 1: to replace that easily. Yeah, does that mean going out
Speaker 1: and making acquisitions? And take a look at our f
Speaker 1: a function free cash flow fifty billion dollars. What do
Speaker 1: they do with the cash? Yeah, I mean it's a
Speaker 1: great question. And you know they're returning it to shareholders, right,
Speaker 1: and that the excitement. The biggest piece of news that
Speaker 1: came from the Ernis call was net cash zero. Right.
Speaker 1: Apple has pledged to return all of its cash or
Speaker 1: to deploy all of its cash, right, whether that's stock
Speaker 1: we purchases or dividends. Thanks very much, Colin gillis a pleasure,
Speaker 1: Director of research for Chatham Road Partners see our partners.
Speaker 1: Congratulations on your new venture. Much appreciate it, and we
Speaker 1: appreciate your coming in and sharing your knowledge with us.
Speaker 1: Good morning. This is Bloomberg Radio. I'm Taylor Riggs filling
Speaker 1: in for Lisa abrama Witz. You know, Pim, like you
Speaker 1: were mentioning, We've got a lot of news this week
Speaker 1: concerning more developments in the investigation of Russian meddling in
Speaker 1: the presidential election. To walk us through all of this,
Speaker 1: where we stand. Where we go from here is Clint Watts.
Speaker 1: He's a senior fellow at the Foreign Policy Research Institute. Clint,
Speaker 1: you know, broadly speaking here, just to start us off,
Speaker 1: do tech companies need to do more to prevent more
Speaker 1: Russian meddling in our election? Have they done enough? Yeah? So,
Speaker 1: they've made some drastic improvements over the last year. I
Speaker 1: think Facebook has been quite transparent. They brought out a
Speaker 1: lot of the issues they seem to have tracted down
Speaker 1: fairly quickly, and they've moved more aggressively in other elections
Speaker 1: around the world. But the biggest thing that all the
Speaker 1: social media companies should be required to do by law
Speaker 1: is to say what the sources of political and social
Speaker 1: issue advertising. It's standard for radio like this, it's standard
Speaker 1: for television, print, And because this layer of of attribution
Speaker 1: is not there in social media, it makes it much
Speaker 1: easier for foreign power to influence the US audiences. All right,
Speaker 1: let's just move on to what is going to be
Speaker 1: perhaps a most watched memo at least of the weekend.
Speaker 1: And this has to do with the memo that was
Speaker 1: put together by GOP staffers on the House Intelligence Committee
Speaker 1: having to do with the FBI's investigation into Russian meddling
Speaker 1: in the U S elections. What is your thoughts? But
Speaker 1: what do you believe is in that memo? I imagine
Speaker 1: what they're trying to do is selectively pull information out
Speaker 1: of the authorization the application for a Foreign Intelligence Surveillance
Speaker 1: Act warrant, which connects the dossier to justifications for that application.
Speaker 1: You're gonna have to tell people, remind them that dossier
Speaker 1: and the people involved, because when you said to use
Speaker 1: selective information, it has to do with eavesdropping on a
Speaker 1: Trump campaign foreign policy aid Carter Page. Right, So the
Speaker 1: target of the application for the search war was Carter Page,
Speaker 1: who was named by the Trump team as one of
Speaker 1: his foreign policy advisors and who had shown up actually
Speaker 1: in Moscow, you know, doing a talk during the run
Speaker 1: up to the election. What this application did was it
Speaker 1: asked for surveillance on him. And in that application, what
Speaker 1: I think will probably come out is that they cited
Speaker 1: the dossier. This is the x m I six UH
Speaker 1: Steal dossier, which brought forth lots of raw reporting and
Speaker 1: was put up on buzzbeed and essentially it asserted that
Speaker 1: Russia was trying to you know, win the election for
Speaker 1: Trump and to suppress Clinton. Uh. In the run up,
Speaker 1: that dossier has been under great contention in the House
Speaker 1: Intelligence Committee. They have really fought it the rasci of
Speaker 1: it because the Clinton campaign funded it at one point
Speaker 1: was also refunded, initially funded by a traditionally Republican opposition
Speaker 1: research group. And so they're trying to steer this into
Speaker 1: a conspiracy that the FBI and the spies application. We're
Speaker 1: trying to push Clinton forward and suppress Trump going into
Speaker 1: the election, and this this plays the president's narrative of
Speaker 1: a witch hunt Clinton. I want to ask this week,
Speaker 1: President Trump said he may authorize a release of the
Speaker 1: memo that's not redacted. Are there any risk to national
Speaker 1: security if the memo is released it doesn't have redactions
Speaker 1: to it. Yeah. I think there's risk in two ways.
Speaker 1: So with regards to redactions, if it discloses sources or methods,
Speaker 1: this really hurts us in terms of our intelligence capability
Speaker 1: around the world. Will it will disclose how we went
Speaker 1: or how we use that information or where we get
Speaker 1: it from. Even broader than that, this has never happened
Speaker 1: before in our history. It would be the selective leaking
Speaker 1: out of classified information. From you know, surveillance applications. So
Speaker 1: just imagine the tidal wave of disclosures that could be
Speaker 1: used for political purposes by either party moving forward. Uh,
Speaker 1: somebody could go and dig into any application written by
Speaker 1: any agent going back many years, pull a piece of
Speaker 1: information out for political purposes, and then either use it
Speaker 1: to attack that investigation the investigator, or to try and
Speaker 1: undermine uh, you know, judicial processes writ large. So it's
Speaker 1: very dangerous for the country in the sense that we
Speaker 1: just saw a fight for FIS a reauthorization a few
Speaker 1: weeks ago, so we could use this tool in the
Speaker 1: pursuit of terrorists, you know, and uh, foreign intelligence efforts.
Speaker 1: So it's pretty damaging to the institutions of democracy, and
Speaker 1: it seems like a very short run political plan for
Speaker 1: would ultimately be a long run disaster for the country. Okay,
Speaker 1: but let me just play Devil's advocate here in the
Speaker 1: world in which there is wiki leaks, in the world
Speaker 1: in which everything that you commit to any kind of
Speaker 1: digital repository is pretty much available to a hacker. Who
Speaker 1: on the other side, who's the who's the on the
Speaker 1: other side that doesn't already know all this? It's isn't
Speaker 1: it the public, the American people that don't know. I
Speaker 1: don't really think that's the case. I mean, this goes
Speaker 1: through a very rigorous process. The FIZER process just internally
Speaker 1: to the FBI or any investigator gative agency is exhausting,
Speaker 1: so it usually takes weeks or months to even put
Speaker 1: that package together. It then goes to a series of
Speaker 1: judges who then review it and and explore it and
Speaker 1: see if there's validity to it. So we have processes
Speaker 1: in place. The public giving a snippet out of what
Speaker 1: might be a sixty page or one page application even
Speaker 1: uh probably doesn't have the context to understand it, or
Speaker 1: has any context around the FIA process and what's trying
Speaker 1: to be done. So I put it in the same
Speaker 1: as wiki leaks, which is these disclosures are selective. They
Speaker 1: often omit tons of context. I don't think the public
Speaker 1: is informed. I really think they're confused in the end. Alright,
Speaker 1: So if they're if they're confusing two things, what do
Speaker 1: you think the ramifications are going to be if the
Speaker 1: memo is actually released, which their GOP seems to think
Speaker 1: it's going to happen, You know, ultimately it will lead
Speaker 1: to outcry by one side or the other. You know,
Speaker 1: we've seen this with both political group But what would happen?
Speaker 1: I mean, I'm just curious, like what physically will happen.
Speaker 1: I understand that there will be a lot of shouting uh,
Speaker 1: and you know the Sunday talk shows will be all
Speaker 1: full of this, But is there anything that will happen?
Speaker 1: Just give you about ten seconds. Anything happened to the
Speaker 1: U S Intelligence agencies? Yeah, you're going to see a withdrawal,
Speaker 1: retraction of investigations and the fact that investigators can't trust
Speaker 1: the systems which they're using to bring their cases forward.
Speaker 1: They'll feel ambushed from both sides politically, and they're going
Speaker 1: to have a hard time moving forward with investigations, particularly
Speaker 1: in political corruption cases on the criminal side and foreign
Speaker 1: counter intelligence cases on the national security side. Thank you
Speaker 1: very much. Clint Watts is a senior fellow at the
Speaker 1: Farm Policy Research Institute. I'm Taylor Riggs filling in for
Speaker 1: Lisa Abramowitz. I'm also sitting next to him. We are
Speaker 1: eagerly awaiting Sunday the Super Bowl. Pim do you watch
Speaker 1: the Super Bowl? You're watching for the game for the ads.
Speaker 1: I probably will watch the ads more than I will
Speaker 1: watch the game. But that's just because well, our next
Speaker 1: guest might like that answer. Let's bring him in now,
Speaker 1: nat Ives, he's the ad Age executive editor. He is
Speaker 1: joining this now. Uh Na, okay, you have to help
Speaker 1: me out here. Are super Bowl ads still as expensive
Speaker 1: as they are even with all the cord cutters and
Speaker 1: the millennials who are seemingly not uh not watching? Absolutely,
Speaker 1: the Super Bowl ad prices can fluctuate a little bit,
Speaker 1: but they're basically on and upward, grind to plateau. You're
Speaker 1: not going to see anything commensurate with the drops in
Speaker 1: regular TV ratings in super Bowl prices because of super
Speaker 1: Bowl ratings don't drop the way the rest of td
Speaker 1: TV does. Super Bowl doesn't drop the way the rest
Speaker 1: of the NFL does. Even super Bowl defies gravity, and
Speaker 1: the ad presses stay there too. Not What can I
Speaker 1: get for five million dollars if I happen to have
Speaker 1: some spare cash and I'd like to use it during
Speaker 1: the Super Bowl, That'll buy you thirty seconds. But remember
Speaker 1: that five million is not actually going to be enough
Speaker 1: in most cases. NBC is going to say thirty thirty
Speaker 1: seconds will cost you five million, But the cost to
Speaker 1: do that deal. Will let you do that deal only
Speaker 1: if you also agree to spend a lot of money
Speaker 1: with us during the Olympics and the rest of the year.
Speaker 1: How much, I don't know. It depends these You know,
Speaker 1: anasor bush In for example, has been a sponsor for
Speaker 1: so long that it's got all kinds of deals that
Speaker 1: are grandfathered in. That's going to be a different situation
Speaker 1: than somebody who walks up for the first time, knocks
Speaker 1: on NBC's door and says, hey, can I buy an ad? Now?
Speaker 1: I always wonder this if the ad sales depend on
Speaker 1: who is playing? For example, do I want to buy
Speaker 1: this year because the Patriots made it into the Super Bowl?
Speaker 1: For example? It's fascinating. We always look at how the
Speaker 1: matchups are shaking out to see how the ratings are
Speaker 1: going to do during the playoffs, but it stops there.
Speaker 1: I mean, it's not great news for anybody. If too
Speaker 1: small market teams that never got national attention during the
Speaker 1: season and don't have wide followings meet in the Super Bowl,
Speaker 1: that doesn't help. But it also doesn't seem to hurt
Speaker 1: that much. It's really more about the quality of the game,
Speaker 1: and um that's unpredictable, and for the most part in
Speaker 1: recent years the games have been pretty close. Last year
Speaker 1: we had our first overtime game, so again, the ratings
Speaker 1: don't depend on factors that ordinarily would lift or tank
Speaker 1: an ordinary football game or TV broadcast. Have you seen
Speaker 1: many of the ads that are scheduled to be broadcast
Speaker 1: during the Super Bowl? I have, and for better or worse,
Speaker 1: so have many Americans. These are pre released, of course,
Speaker 1: as they have been for many years. Doubt that, not
Speaker 1: to say they all have, but a significant portion of
Speaker 1: them have. So I've seen some funny ads. I've seen
Speaker 1: more funny ads. It's been interesting to try to infer
Speaker 1: what the trends are going to be this year and
Speaker 1: compare them to last year. We don't have a complete
Speaker 1: picture yet. There will be surprises on game day, but
Speaker 1: we know a lot already now. And I wonder about
Speaker 1: the motivation for these companies. I mean, what's different about
Speaker 1: the Super Bowl is people actually look forward to watching them.
Speaker 1: I don't want to fast forward through them. So if
Speaker 1: I'm a company and I'm thinking about buying ad space,
Speaker 1: do I actually expect more people to buy my product
Speaker 1: or do I just want to be in the hype
Speaker 1: and be in the know and what's being talked about
Speaker 1: the next day. There's a couple of goals, and one
Speaker 1: is probably your legit business goal. I need to sell
Speaker 1: more of my widgets or cars or printers or what
Speaker 1: have you. Or I need to drive awareness of a
Speaker 1: product that nobody knows exists, or I need to speak
Speaker 1: to a very specific audience. And this is, for whatever reason,
Speaker 1: a good way to do it, real business goals. The
Speaker 1: other part of it, though, is the pr game, where
Speaker 1: everybody wants to polish their halo, get their company's name
Speaker 1: or their product name on the tip of the tongue.
Speaker 1: You want to become something closer to a household dame
Speaker 1: if you're in the Super Bowl. That's why you've seen
Speaker 1: from time to time a superglue company show up at
Speaker 1: the Super Bowl. You know they did it once. It
Speaker 1: was their entire year's ad budget, and uh they say
Speaker 1: it worked okay, but they didn't come back. Others are
Speaker 1: playing the twofold game. Really. They want to get the
Speaker 1: buzz of being discussed in the press the way that
Speaker 1: we had Adage and everybody else in the business press
Speaker 1: are are doing right now. Um and then hopefully also
Speaker 1: sell some product. You know, it's funny. The pre release
Speaker 1: strategy is slightly controversial because it takes some of the
Speaker 1: surprise out of the game. But in the case of
Speaker 1: one this year, pringles you know people people buy snacks
Speaker 1: for the Super Bowl. Pre rereleasing their ad might have
Speaker 1: literally increased sales for Super Bowl Sunday. Let's go to
Speaker 1: just some of the ads. Quickly, give me your thoughts
Speaker 1: about them. The eminem spot. It's the first and three years.
Speaker 1: It stars Danny DeVito. Give me about ten seconds on that.
Speaker 1: I mean, I like it, okay, uh, I can see
Speaker 1: how Danny DeVito is a funny way to say, you know,
Speaker 1: don't eat me. Um, it's just a it's a weird
Speaker 1: gimmick the Eminem's have where the spokes candies are all
Speaker 1: edible and are mildly concerned about it, but not totally concerned. Alright.
Speaker 1: Ten seconds on Kiano reeves with square space. This is
Speaker 1: controversial in our office. I like it better than some others.
Speaker 1: This is Kiano just standing on a motorcycle and appearing
Speaker 1: to kind of take off at the end. What can
Speaker 1: I say. I think it's a little bit different. Um.
Speaker 1: Others here disagree. All right, and finally let me get
Speaker 1: your thoughts on avocados. Avocados from Mexico is consistently funny.
Speaker 1: Each year they bring you a little inn yet that
Speaker 1: makes you laugh, and they do it again this year,
Speaker 1: and they work in a selling proposition or at least
Speaker 1: a serving suggestion, which might do the same job. All right,
Speaker 1: thanks very much. By the way, who do you think
Speaker 1: is gonna win? Probably the pets? Oh sorry, Mark, Well
Speaker 1: careful there Na, all right, thanks very much. Natives as
Speaker 1: executive editor at Age and he can be followed on
Speaker 1: Twitter at nat I get ready for a Super Bowl
Speaker 1: fifty two. Joining us now to tell us all about
Speaker 1: Deutsche Bank, is y'aman owneran. He's our senior writer when
Speaker 1: it comes to banks. And yeahmen, I know that you
Speaker 1: are the author of the book about Zombie Banks, which
Speaker 1: is a great read. Is Deutsche Bank going to become
Speaker 1: a zombie bank? That's an interesting point you just raised.
Speaker 1: Was not among the zombies that I wrote about in
Speaker 1: in two thousand eleven when my book was published, Um
Speaker 1: German banks had a chapter in there and and commerced
Speaker 1: by was was the biggest zombie all the landest bunks
Speaker 1: that that collapsed during the crisis were but but not
Speaker 1: Dotsche Bank. Now Dotche Bank is looking much worse than
Speaker 1: all these other guys who finally really nursed all their
Speaker 1: wounds and and recovered. But Dotches crisis came much later,
Speaker 1: right in the European crisis two thousand and ten eleven,
Speaker 1: all the different uh uh you know, government government debt
Speaker 1: crisis that rapped one after another. So Europe euro fell
Speaker 1: apart much later than than US did, and and it
Speaker 1: it was its second crisis, but that hurt touch him
Speaker 1: more and now does still struggling and that and that's
Speaker 1: why you know, earnings constantly upset, you know, quarter after quarter,
Speaker 1: and turnaround plans are not really you know, going anywhere.
Speaker 1: So that I mean, so in a way it's become
Speaker 1: a zombie. It's not as zombie as the as the
Speaker 1: other German banks war because it didn't lose the big
Speaker 1: numbers that really brought them down during the ISIS. But
Speaker 1: it's been losing money and and what's worse, it's not
Speaker 1: making money and and that doesn't really that doesn't really
Speaker 1: work when you're such a big bank globally and your
Speaker 1: competitors are doing much better. Yeah, you talk about the
Speaker 1: turnaround plan. We note that the shares are down about
Speaker 1: five point three percent this morning. I wonder how impatient
Speaker 1: are investors getting with the CEO? John crying does he
Speaker 1: even have the time left that he needs to enact
Speaker 1: the turnaround plan. Well, you know, just a quarter ago,
Speaker 1: there were there were actually lots of rumors that the
Speaker 1: crime was on the way out because the turnaround wasn't working.
Speaker 1: Things weren't going well. Then they reported, you know, third
Speaker 1: quarter numbers that weren't that bad there it looked a
Speaker 1: little more promising, so the rumors died down, but the
Speaker 1: fourth quarter is bad again. So every time, you know,
Speaker 1: people are disappointed. These these rumors come around because the
Speaker 1: rumors are based on some kind of unease among the
Speaker 1: biggest investors you know, and some of them you know,
Speaker 1: then go on the record saying, well, now he's okay,
Speaker 1: we're we're okay with the CEO, but clearly some aren't,
Speaker 1: and on behind the scenes they are raising those concerns
Speaker 1: and saying when are we going to see the depositive results?
Speaker 1: So what are the division? Maybe you could break break
Speaker 1: down the details force and and share like, okay, so
Speaker 1: what are they really great at? What do they need
Speaker 1: to improve and what should they get rid of? Well,
Speaker 1: you know what dotsche Bank has been great at historically
Speaker 1: traditionally is trading. There are a big training powerhouse just
Speaker 1: like Goldman, sax Now and and Goldman. As we've talked
Speaker 1: during US earnings trading what though everything fixed income most
Speaker 1: but but everything really but equity stood fixed income and equities.
Speaker 1: They're they're training powerhouse there, you know, like Goldman, and
Speaker 1: Goldman has also suffered in trading. But when you looked
Speaker 1: at for example, last year's and last quarters Goldman figures
Speaker 1: and everybody talked about this, their investment banking side, non
Speaker 1: trading side was doing great. They were writing, underwriting dead
Speaker 1: underwriting equity thirty per an up and everybody was like,
Speaker 1: how can you not translate into this into trading as well?
Speaker 1: And they you know, they were struggling the CFO CEO.
Speaker 1: But with trading is down constantly and on the writing
Speaker 1: is down and m n A is unchanged. I mean,
Speaker 1: like you want to see something good and it's not
Speaker 1: there and mean, and this has been happening for for
Speaker 1: several years now, which means they've been losing market share.
Speaker 1: You know, everybody's fick trading numbers are bad this year,
Speaker 1: but last year US banks especially you know, and even
Speaker 1: the French banks so great thick improvement now didn't. So
Speaker 1: what happens is when everybody else has a good year
Speaker 1: and has so so year, they're losing market share. So
Speaker 1: they've lost market share constantly in trading. Now, they've lost
Speaker 1: market share in in in other investment banking activities, underwriting,
Speaker 1: uh stock spots. So so all the things they were
Speaker 1: really good at, which is really their investment bank, they
Speaker 1: have been bleeding. And that's that's not good. Uh. Quickly,
Speaker 1: just to wrap it up, I want to talk about
Speaker 1: if they're still able to attract and retain talent. We
Speaker 1: heard from the CEO this morning. They said he was
Speaker 1: more on the generous side with bonuses. Is that to
Speaker 1: retain talent, right, I mean? And that that's what they
Speaker 1: had to do. Um. You know, they didn't paid bonuses
Speaker 1: last year, which means they had to. They couldn't keep
Speaker 1: doing that because you lose a lot of people. So
Speaker 1: that's why expenses didn't come down as they targeted. UM,
Speaker 1: which also hurts the bottom line. But you know, they
Speaker 1: have to keep their traders and their investment bankers. Then
Speaker 1: they had to play bonuses. Thank you very much. Yeah,
Speaker 1: I'm an owner on He is our senior writer when
Speaker 1: it comes to banks and wrote a great book on
Speaker 1: zombie banks. I urge you to check it out. Thanks
Speaker 1: for listening to the Bloomberg P and L podcast. You
Speaker 1: can subscribe and listen to interviews at Apple Podcasts, sound Cloud,
Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
Speaker 1: abramowits one before the podcast. You can always catch us
Speaker 1: worldwide on Blueberg Radio