1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you 2 00:00:05,360 --> 00:00:07,760 Speaker 1: along with my co host Lisa Brahmas. Each day we 3 00:00:07,880 --> 00:00:10,440 Speaker 1: bring you the most noteworthy and useful interviews for you 4 00:00:10,520 --> 00:00:12,640 Speaker 1: and your money, whether at the grocery store or the 5 00:00:12,640 --> 00:00:15,960 Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast 6 00:00:16,120 --> 00:00:18,080 Speaker 1: or wherever you listen to podcasts, as well as at 7 00:00:18,079 --> 00:00:24,680 Speaker 1: Bloomberg dot com. On Wednesday, we heard from the Federal 8 00:00:24,760 --> 00:00:27,720 Speaker 1: Reserve there on holds they are going to be patient. 9 00:00:27,840 --> 00:00:30,880 Speaker 1: Today we get a job's report that on many accounts 10 00:00:31,040 --> 00:00:34,000 Speaker 1: blew all expectations out of the water and port trade. 11 00:00:34,280 --> 00:00:37,839 Speaker 1: A very strong US economy, So go figure try to 12 00:00:37,880 --> 00:00:39,840 Speaker 1: square those two. I know that Mike Collins is trying 13 00:00:39,840 --> 00:00:41,400 Speaker 1: to do that, and he's joining us here in our 14 00:00:41,440 --> 00:00:44,040 Speaker 1: Bloombergetter Active Broker studio as Mike Collins, of course, senior 15 00:00:44,080 --> 00:00:47,720 Speaker 1: investment Officer and senior portfolio manager at PGIM Fixed Income, 16 00:00:47,880 --> 00:00:52,440 Speaker 1: which oversees about seven hundred and thirty billion dollars of assets. Mike, 17 00:00:52,760 --> 00:00:55,960 Speaker 1: thank you so much for being here with us. What 18 00:00:56,120 --> 00:01:00,480 Speaker 1: does today's blockbuster jobs number mean for the Federal Reserve? Yeah, 19 00:01:00,520 --> 00:01:02,920 Speaker 1: good morning at Lisa and Paul it's uh, in our 20 00:01:02,960 --> 00:01:05,080 Speaker 1: mind not to get too esoteric right off the start, 21 00:01:05,080 --> 00:01:07,360 Speaker 1: but it's a it's a curve flattener, right because it 22 00:01:07,480 --> 00:01:11,120 Speaker 1: blew out expectations in terms of the number of jobs, 23 00:01:11,200 --> 00:01:14,600 Speaker 1: but the wage gains were more muted than expect and 24 00:01:14,640 --> 00:01:17,120 Speaker 1: that continues to be the trend. Not to sound like 25 00:01:17,200 --> 00:01:20,360 Speaker 1: Larry Cardlow, but it sounds like we're getting growth without 26 00:01:20,400 --> 00:01:24,040 Speaker 1: the inflation, which is kind of panacea for the Federal Reserve. 27 00:01:24,040 --> 00:01:27,400 Speaker 1: It means that they can continue to be patient um 28 00:01:27,440 --> 00:01:31,360 Speaker 1: and they can continue to um stay on hold, probably 29 00:01:31,400 --> 00:01:36,760 Speaker 1: indefinitely until either the economic data really picks up again 30 00:01:37,440 --> 00:01:40,760 Speaker 1: or the markets continue to take off, right. I mean, 31 00:01:40,800 --> 00:01:43,440 Speaker 1: if the stock markets up another ten percent and spreads 32 00:01:43,440 --> 00:01:47,119 Speaker 1: are snapping tighter, and the Fed is meeting in March, uh, 33 00:01:47,120 --> 00:01:50,000 Speaker 1: they're gonna have to deal with the financial stability issues. 34 00:01:50,080 --> 00:01:53,240 Speaker 1: And I wouldn't be surprised to see them do another 35 00:01:53,320 --> 00:01:56,360 Speaker 1: one eight or start pivoting at some point later this 36 00:01:56,440 --> 00:01:59,400 Speaker 1: year and talking again about maybe trying to get another 37 00:01:59,520 --> 00:02:02,040 Speaker 1: hike or two off before the end of the year. 38 00:02:02,080 --> 00:02:04,480 Speaker 1: And that's not priced in it at all right now. Alright, So, 39 00:02:04,520 --> 00:02:07,360 Speaker 1: given the devish FED, given the good numbers we saw today. 40 00:02:07,440 --> 00:02:10,120 Speaker 1: Does that just give the markets the flashing green light 41 00:02:10,200 --> 00:02:12,960 Speaker 1: to take on risk? Yeah, and that and that's the problem, right. 42 00:02:13,000 --> 00:02:17,000 Speaker 1: I think the Fed has unwittingly given the market this 43 00:02:17,000 --> 00:02:20,160 Speaker 1: this green light by saying we are on hold uh 44 00:02:20,200 --> 00:02:23,560 Speaker 1: indefinitely right now. And they're even talking about, you know, 45 00:02:23,919 --> 00:02:26,840 Speaker 1: slowing the pace of their balance sheet reduction and maybe 46 00:02:26,919 --> 00:02:28,880 Speaker 1: ending you know, by the end of this year. So 47 00:02:28,919 --> 00:02:32,160 Speaker 1: that's kind of a second green light. And that's something 48 00:02:32,200 --> 00:02:35,120 Speaker 1: that UM worried us several years ago when they kept 49 00:02:35,160 --> 00:02:38,080 Speaker 1: monetary policy really easy for a long time, we saw 50 00:02:38,120 --> 00:02:40,880 Speaker 1: some of the speculative excess is starting to build. The 51 00:02:41,000 --> 00:02:44,840 Speaker 1: leverage in the system was building, UM, the construction markets 52 00:02:44,840 --> 00:02:47,919 Speaker 1: were maybe getting overheated in some areas, and and we 53 00:02:47,960 --> 00:02:50,519 Speaker 1: worry that, you know, and maybe six or twelve months 54 00:02:50,520 --> 00:02:53,000 Speaker 1: you could be back in that mode, and then the 55 00:02:53,000 --> 00:02:54,840 Speaker 1: Fed's going to have to have to focus on the 56 00:02:54,840 --> 00:02:58,640 Speaker 1: financial stability mandate uh to try to try to nip 57 00:02:58,720 --> 00:03:02,720 Speaker 1: that in the bud. But now we're now, it's not 58 00:03:02,760 --> 00:03:06,359 Speaker 1: six months from now, and we're long term investors. Okay, well, 59 00:03:06,480 --> 00:03:09,640 Speaker 1: but here's my question, So your long term investors, what 60 00:03:09,680 --> 00:03:12,560 Speaker 1: do you do in response to this? So, so what 61 00:03:12,600 --> 00:03:15,920 Speaker 1: we're doing is we are trying to focus on the 62 00:03:16,000 --> 00:03:20,440 Speaker 1: long term outlook, which is really for probably slowing growth 63 00:03:20,639 --> 00:03:23,280 Speaker 1: over the next two or three years. We really think 64 00:03:23,320 --> 00:03:25,320 Speaker 1: growth is going to go from three to two and 65 00:03:25,320 --> 00:03:27,480 Speaker 1: a half to two to probably one and a half 66 00:03:27,560 --> 00:03:29,720 Speaker 1: over the next few years in the U S. That's 67 00:03:29,720 --> 00:03:33,480 Speaker 1: just the natural trend, I think. Um, so focus on that, 68 00:03:33,520 --> 00:03:37,240 Speaker 1: but take advantage of near term opportunities. So right now 69 00:03:37,320 --> 00:03:40,200 Speaker 1: that the technicals are really good in the credit markets, 70 00:03:40,240 --> 00:03:43,280 Speaker 1: the reach for yield is back in vogue, right with 71 00:03:43,320 --> 00:03:45,600 Speaker 1: the with the ECB and the pank of Japan sitting 72 00:03:45,640 --> 00:03:50,400 Speaker 1: on their hands and and a relatively benign fed people 73 00:03:50,400 --> 00:03:52,320 Speaker 1: are there's a food fight right now for bonds again. 74 00:03:52,360 --> 00:03:56,040 Speaker 1: So we're riding that. We're overweight credit risk, taking advantage 75 00:03:56,040 --> 00:03:59,120 Speaker 1: of those trends, taking advantage of the reasonably robust economy. 76 00:03:59,600 --> 00:04:03,360 Speaker 1: Um Uh, pairing back risk on rallies are our m 77 00:04:03,400 --> 00:04:07,080 Speaker 1: O here is to sell credit risk down on these 78 00:04:07,120 --> 00:04:11,160 Speaker 1: big rallies. And we've seen retracement in the high shield 79 00:04:11,560 --> 00:04:14,600 Speaker 1: Uh index. Okay, I'm sorry, my my head's my head's 80 00:04:14,640 --> 00:04:17,400 Speaker 1: kind of spinning a little bit. So uh build go 81 00:04:17,560 --> 00:04:21,360 Speaker 1: long credit exposure and sell it when it rallies. So 82 00:04:21,600 --> 00:04:27,040 Speaker 1: I guess, uh what, Yes, selling to strength selling. I 83 00:04:27,040 --> 00:04:29,040 Speaker 1: think selling to strength has been our our mode, right. 84 00:04:29,080 --> 00:04:31,719 Speaker 1: But but then when there's any bit of a weakness 85 00:04:31,839 --> 00:04:34,080 Speaker 1: build up more, you know, I mean we took advantage 86 00:04:34,080 --> 00:04:37,680 Speaker 1: of it late last year. I think that was an overreaction. Uh. 87 00:04:37,680 --> 00:04:40,200 Speaker 1: In credit, you saw some dislocations, You saw a lot 88 00:04:40,240 --> 00:04:43,000 Speaker 1: of outflows from places like the bank loan market. There 89 00:04:43,080 --> 00:04:46,000 Speaker 1: was an opportunity to add risk on the margin at 90 00:04:46,040 --> 00:04:49,200 Speaker 1: that time. But I think a lot of that um rally, 91 00:04:49,279 --> 00:04:51,760 Speaker 1: the markets move really fast, right, The markets always moved 92 00:04:51,760 --> 00:04:54,240 Speaker 1: faster than you think. And it feels like the markets 93 00:04:54,240 --> 00:04:57,760 Speaker 1: are pricing in now a fed on hold indefinitely. Um So, 94 00:04:57,760 --> 00:04:59,760 Speaker 1: So if you continue to see spreads tighten in here, 95 00:05:00,000 --> 00:05:02,560 Speaker 1: our our next move would be to cut credit risk alright. 96 00:05:02,600 --> 00:05:05,719 Speaker 1: So it sounds a little bit like a trading mentality 97 00:05:05,720 --> 00:05:08,200 Speaker 1: in this context of Prudential being one of the longest 98 00:05:08,279 --> 00:05:11,920 Speaker 1: term investors I can think of. But have you, maybe 99 00:05:11,920 --> 00:05:14,839 Speaker 1: even just in December, or are you generally rotating some 100 00:05:14,880 --> 00:05:18,120 Speaker 1: of your portfolio out of investment grade into high yield 101 00:05:18,120 --> 00:05:20,760 Speaker 1: for example? So, so the big trade we've done over 102 00:05:20,760 --> 00:05:24,679 Speaker 1: the last year or two is already upgrade the quality 103 00:05:24,720 --> 00:05:28,479 Speaker 1: of the portfolio significantly. All Right, again taking that, putting 104 00:05:28,520 --> 00:05:30,880 Speaker 1: that long term hat on, and knowing that, you know, 105 00:05:30,920 --> 00:05:32,679 Speaker 1: I don't know if it's in a year or five years, 106 00:05:32,800 --> 00:05:34,480 Speaker 1: but you're gonna have a slowdown the economy and you're 107 00:05:34,480 --> 00:05:36,599 Speaker 1: gonna have an increase in default rates. The leverage that 108 00:05:36,640 --> 00:05:39,480 Speaker 1: has built up in the in the corporate sector, investment 109 00:05:39,520 --> 00:05:42,200 Speaker 1: grade high yield to some extent the bank loan markets 110 00:05:42,279 --> 00:05:44,760 Speaker 1: is disconcerting and that will come home to roost and 111 00:05:44,800 --> 00:05:47,720 Speaker 1: result in more defaults. We know that. So what we've 112 00:05:47,760 --> 00:05:51,160 Speaker 1: done is we've we've reduced our high yeld exposure, reduced 113 00:05:51,160 --> 00:05:55,520 Speaker 1: pretty significantly our exposure investment grade industrials, investment grade corporate 114 00:05:55,520 --> 00:05:58,359 Speaker 1: bonds globally, and moved up in the capital structure. We 115 00:05:58,400 --> 00:06:01,520 Speaker 1: have a big position in very high quality, mostly triple 116 00:06:01,520 --> 00:06:03,800 Speaker 1: A rated asset back securities, which gives you as much 117 00:06:03,800 --> 00:06:06,400 Speaker 1: spread as you get in the corporate market without any 118 00:06:06,440 --> 00:06:10,280 Speaker 1: of that idiosyncratic UH credit risk or event risk or 119 00:06:10,320 --> 00:06:13,559 Speaker 1: default risk. And that's a really great opportunistic REALTI value 120 00:06:13,560 --> 00:06:15,839 Speaker 1: trade that we've we've had on for a while now. 121 00:06:15,920 --> 00:06:17,560 Speaker 1: All Right, so I'm going to hand you a crystal 122 00:06:17,600 --> 00:06:19,400 Speaker 1: ball and I want you to look into it and 123 00:06:19,440 --> 00:06:22,080 Speaker 1: tell us in two years or three years or whatever 124 00:06:22,120 --> 00:06:24,960 Speaker 1: you see the next downturn, how bad will it be. 125 00:06:25,440 --> 00:06:27,040 Speaker 1: It's not going to be bad. I mean, that's that's 126 00:06:27,120 --> 00:06:30,320 Speaker 1: the other challenge here, right, This is never easy our 127 00:06:30,400 --> 00:06:33,880 Speaker 1: base case because this cycle has been a lot different. Right. 128 00:06:33,880 --> 00:06:37,160 Speaker 1: The regulatory response to the financial crisis was such that 129 00:06:37,440 --> 00:06:41,000 Speaker 1: a lot of the normal relevering that you see hasn't happened. Right. 130 00:06:41,040 --> 00:06:44,120 Speaker 1: The banks have delevered aggressively. Right. The banks are in 131 00:06:44,160 --> 00:06:46,880 Speaker 1: the best financial condition they've been in our lives, and 132 00:06:46,920 --> 00:06:49,320 Speaker 1: I was a bank analyst many years ago. They've never 133 00:06:49,400 --> 00:06:52,200 Speaker 1: had so much capital and liquidity. Consumers on average in 134 00:06:52,200 --> 00:06:55,560 Speaker 1: good shape, small business on average have not relevered. Right, So, 135 00:06:55,560 --> 00:06:57,760 Speaker 1: so this is not going to be a big downturn. 136 00:06:57,800 --> 00:07:00,440 Speaker 1: If we get when you're probably asset price correction, maybe 137 00:07:00,480 --> 00:07:03,599 Speaker 1: growth slows to one percent or kind of bounces between 138 00:07:03,720 --> 00:07:06,520 Speaker 1: zero and two percent for a few years um. But 139 00:07:06,600 --> 00:07:09,440 Speaker 1: it's it's hard to really envision a big collapse in 140 00:07:09,520 --> 00:07:12,720 Speaker 1: economic activity, at least in the US. Interesting. So I 141 00:07:12,760 --> 00:07:15,000 Speaker 1: guess if I were to just summarize where you guys are, 142 00:07:15,200 --> 00:07:17,480 Speaker 1: that's it's a and when I think a potential you 143 00:07:17,480 --> 00:07:19,760 Speaker 1: guys are monstrous and you're thinking about long term your 144 00:07:19,840 --> 00:07:22,840 Speaker 1: your policy holders. You're using this rally here to kind 145 00:07:22,880 --> 00:07:25,480 Speaker 1: of just trade up in quality get position for what 146 00:07:25,520 --> 00:07:27,320 Speaker 1: could be a software two or three year view. Is 147 00:07:27,360 --> 00:07:29,320 Speaker 1: that a fair assessment? That that's fair? I mean the 148 00:07:29,600 --> 00:07:32,640 Speaker 1: markets are actually giving us the opportunity right now, which 149 00:07:32,640 --> 00:07:36,600 Speaker 1: is very unusual, to buy really high quality defensive assets 150 00:07:36,640 --> 00:07:38,560 Speaker 1: like senior debt of banks and like these triple A 151 00:07:38,520 --> 00:07:42,320 Speaker 1: asset BacT securities at really attractive spreads. So the markets 152 00:07:42,320 --> 00:07:46,560 Speaker 1: are mispricing the limited amount of credit risk in those securities. 153 00:07:47,120 --> 00:07:50,840 Speaker 1: Um and there there's probably overpricing or underpricing the credit 154 00:07:50,920 --> 00:07:53,280 Speaker 1: risk in the corporate sector. So so you don't have 155 00:07:53,360 --> 00:07:56,080 Speaker 1: to give up yield today to actually do this up 156 00:07:56,080 --> 00:07:58,440 Speaker 1: in quality rotation. So that's a that's that trade is 157 00:07:58,480 --> 00:08:01,040 Speaker 1: gonna work in the near term and in the term. 158 00:08:01,080 --> 00:08:03,240 Speaker 1: Michael Collins, thank you very much for joining us. I 159 00:08:03,280 --> 00:08:04,680 Speaker 1: think I learned a lot here about and if I 160 00:08:04,760 --> 00:08:07,040 Speaker 1: were a prudential policy holder, I think I'd be feeling 161 00:08:07,040 --> 00:08:10,160 Speaker 1: pretty comfortable. Mike Collins is a senior investment officer and 162 00:08:10,280 --> 00:08:13,400 Speaker 1: senior portfolio manager at p G I M fixed income 163 00:08:30,120 --> 00:08:33,720 Speaker 1: well over at Deutsche Bank, Christians saving the CEO chairman 164 00:08:34,040 --> 00:08:37,520 Speaker 1: has very few options, it seems, for turning around Deutsche Bank. 165 00:08:37,720 --> 00:08:40,760 Speaker 1: After an eighth straight quarter of declining revenue, reaction from 166 00:08:40,760 --> 00:08:43,680 Speaker 1: investors and analysts suggested that the cost cutting at the 167 00:08:43,720 --> 00:08:46,319 Speaker 1: heart of the CEO strategy won't be enough to keep 168 00:08:46,360 --> 00:08:48,839 Speaker 1: markets at bay. To help us kind of dive a 169 00:08:48,880 --> 00:08:52,640 Speaker 1: little bit deeper into this once Beheamoth of Global Banking 170 00:08:52,720 --> 00:08:55,640 Speaker 1: is Jonathan Tyson. Jonathan is a senior banks analyst at 171 00:08:55,640 --> 00:08:58,080 Speaker 1: Bloomberg Intelligence. He's on the phone with us from London. 172 00:08:58,520 --> 00:09:01,600 Speaker 1: So Jonathan, thanks very much for joys. What do you 173 00:09:01,720 --> 00:09:04,280 Speaker 1: think is the future of Deutsche Bank? Can it survive 174 00:09:04,360 --> 00:09:10,599 Speaker 1: as a standalone entity? Um morning, not in his current form. No. 175 00:09:10,920 --> 00:09:13,120 Speaker 1: I mean to put this very simply. If you go 176 00:09:13,200 --> 00:09:16,600 Speaker 1: back a year, let's say um Consensus was expecting about 177 00:09:16,640 --> 00:09:20,240 Speaker 1: thirty billion of revenue for the bank in twenties and 178 00:09:20,600 --> 00:09:25,679 Speaker 1: about twenty billion of costs. Consensus is now expecting the 179 00:09:25,679 --> 00:09:29,240 Speaker 1: same for costs, but twenty six billion of revenue. UM. 180 00:09:29,600 --> 00:09:32,640 Speaker 1: The bank is targeting a returnal equity of four percent 181 00:09:32,800 --> 00:09:35,400 Speaker 1: next year, and for that it is acknowledged that it's 182 00:09:35,440 --> 00:09:38,160 Speaker 1: actually hoping that client activity picks up the market gets 183 00:09:38,160 --> 00:09:42,959 Speaker 1: a bit better. So it's just unsustainable in the current form. 184 00:09:43,000 --> 00:09:46,679 Speaker 1: And unfortunately, the damage to the franchise and the revenue 185 00:09:46,679 --> 00:09:49,839 Speaker 1: outlook the more you cut costs and the growth in 186 00:09:49,920 --> 00:09:53,559 Speaker 1: things like customer and all of the investment and expenses 187 00:09:53,600 --> 00:09:56,959 Speaker 1: for things like anti money laundering means that there's very 188 00:09:57,040 --> 00:09:59,640 Speaker 1: very little they can do in the current form. Okay, 189 00:09:59,640 --> 00:10:01,560 Speaker 1: So give and that given the fact that Deutsche Bank 190 00:10:01,760 --> 00:10:06,320 Speaker 1: probably will not remain independent according to your assessment, what's 191 00:10:06,360 --> 00:10:11,280 Speaker 1: the likelihood that Commerce Bank is the likely merger candidate here? 192 00:10:11,440 --> 00:10:14,240 Speaker 1: And is that a good thing? Well, when you look 193 00:10:14,240 --> 00:10:17,240 Speaker 1: at Europe, I mean, it's understandable why European Commission, the 194 00:10:17,240 --> 00:10:20,520 Speaker 1: ECB um, they're saying we need some champions over here, 195 00:10:20,760 --> 00:10:24,120 Speaker 1: sort of supernational to take on the JP, Morgan's, etcetera. 196 00:10:24,320 --> 00:10:26,600 Speaker 1: But just putting a Deutsch amount together with I don't 197 00:10:26,600 --> 00:10:30,040 Speaker 1: know what Barclays or a new credit in itself doesn't 198 00:10:30,080 --> 00:10:33,040 Speaker 1: really solve anything. So to start with, you do need 199 00:10:33,120 --> 00:10:36,240 Speaker 1: to write size, you do need to get efficiencies, and 200 00:10:36,720 --> 00:10:40,120 Speaker 1: for that reason you are looking at further domestic consolidation 201 00:10:40,160 --> 00:10:42,640 Speaker 1: in Germany. So the reason that people keep coming out 202 00:10:42,640 --> 00:10:45,560 Speaker 1: of the commerce Bank is again that's trading at points 203 00:10:45,559 --> 00:10:48,880 Speaker 1: three times tangible. Just like Deutsche. They need to take 204 00:10:49,120 --> 00:10:51,760 Speaker 1: an awful of cost base and out close more branches, 205 00:10:52,320 --> 00:10:55,840 Speaker 1: get more synergies. So yes, I think the reason we 206 00:10:55,920 --> 00:10:58,080 Speaker 1: keep arriving at the same conclusion is there's nothing that 207 00:10:58,120 --> 00:11:00,600 Speaker 1: either bank can do top line. They've done it all 208 00:11:00,679 --> 00:11:02,880 Speaker 1: that they can independently. So you need to create the 209 00:11:02,920 --> 00:11:05,880 Speaker 1: bad will. Deutsch is the acquirer. They need to raise 210 00:11:05,920 --> 00:11:09,160 Speaker 1: some capitals to do a deal. Then you need, for example, 211 00:11:09,200 --> 00:11:11,679 Speaker 1: another couple of billion of synergies. When you put the 212 00:11:11,720 --> 00:11:14,280 Speaker 1: two together, bear in mind that they're already targeting nine 213 00:11:14,679 --> 00:11:19,160 Speaker 1: million for folding their domestic mortgage banks together would past 214 00:11:19,200 --> 00:11:22,640 Speaker 1: bank in Deutsche. So yes, Unfortunately you've got to start 215 00:11:22,679 --> 00:11:26,400 Speaker 1: domestically and then you can then have a sensible conversation 216 00:11:26,400 --> 00:11:31,720 Speaker 1: about creating a big international merger. So where elsked Jonathan, 217 00:11:31,840 --> 00:11:34,640 Speaker 1: would you expect to see consolidation besides Germany? Is it 218 00:11:34,679 --> 00:11:38,080 Speaker 1: required in France for example, or the UK? What is 219 00:11:38,120 --> 00:11:39,800 Speaker 1: just kind of the overall m and a outlook and 220 00:11:39,800 --> 00:11:44,440 Speaker 1: consolidation outlook for European banking. Well, in the UK we've 221 00:11:44,480 --> 00:11:48,280 Speaker 1: had a few of the smaller Challenger Banks UM coming together, 222 00:11:48,800 --> 00:11:52,319 Speaker 1: CYBG and Metro's in trouble at the moment, so I 223 00:11:52,320 --> 00:11:54,080 Speaker 1: think we'll see a little bit more over here in 224 00:11:54,120 --> 00:11:57,360 Speaker 1: the UK. Italy you'll definitely see further consolidation, and a 225 00:11:57,400 --> 00:12:00,760 Speaker 1: little bit more in Spain. But to to be honest, 226 00:12:00,920 --> 00:12:03,959 Speaker 1: Germany is a pretty special market because it has a 227 00:12:04,000 --> 00:12:07,160 Speaker 1: lot of spark Caster and Lander's Bank unlisted banks, and 228 00:12:07,200 --> 00:12:09,320 Speaker 1: the reason that it's so unprofitable in Germany is because 229 00:12:09,360 --> 00:12:12,360 Speaker 1: of these banks. So there can be there will be 230 00:12:12,360 --> 00:12:16,040 Speaker 1: more consolidation in names that you've probably never heard of UM. 231 00:12:16,080 --> 00:12:18,640 Speaker 1: And I think overall we will we have one or 232 00:12:18,640 --> 00:12:21,400 Speaker 1: two big deals within the next eighteen months. Yes, I 233 00:12:21,440 --> 00:12:23,679 Speaker 1: mean for us things like UNI credit to see at 234 00:12:24,200 --> 00:12:26,520 Speaker 1: L makes an awful lot of sense. Maybe a bar 235 00:12:26,640 --> 00:12:29,400 Speaker 1: plays and something like a BMP that could make sense 236 00:12:29,400 --> 00:12:31,760 Speaker 1: as well. But I don't think, um, we're going to 237 00:12:31,800 --> 00:12:35,319 Speaker 1: see anything big quite yet. But I do think over 238 00:12:35,400 --> 00:12:37,600 Speaker 1: the next two to three years, in the absence of 239 00:12:37,640 --> 00:12:40,280 Speaker 1: anything that's sort of exciting top line for these banks 240 00:12:40,480 --> 00:12:43,520 Speaker 1: and they can't keep cutting costs, you need the mergers 241 00:12:43,600 --> 00:12:47,440 Speaker 1: to create proper synergies. So here's a question, and this 242 00:12:47,520 --> 00:12:49,920 Speaker 1: is kind of in the weeds a little bit. But 243 00:12:50,480 --> 00:12:53,079 Speaker 1: one thing that I do when I look at Deutsche 244 00:12:53,080 --> 00:12:56,400 Speaker 1: Bank's future is I look at their contingent capital bonds 245 00:12:56,400 --> 00:12:59,719 Speaker 1: are convertible capital bonds, basically their tier one capital that 246 00:13:00,280 --> 00:13:04,679 Speaker 1: is dead until they don't have enough capital raised to 247 00:13:04,720 --> 00:13:07,439 Speaker 1: meet with regulations. So then all of a sudden they 248 00:13:07,440 --> 00:13:11,040 Speaker 1: could potentially not pay interest on these bonds, or even 249 00:13:11,080 --> 00:13:13,800 Speaker 1: these bonds could get wiped out in a worst case scenario. 250 00:13:14,400 --> 00:13:16,600 Speaker 1: They're kind of all over the place today. Some are up, 251 00:13:16,640 --> 00:13:19,080 Speaker 1: some are down. That is surprising to me. I would 252 00:13:19,080 --> 00:13:21,319 Speaker 1: think that they would be plunging given the fact that 253 00:13:21,360 --> 00:13:25,120 Speaker 1: Deutsche Bank got bad results essentially and that there's talk 254 00:13:25,200 --> 00:13:27,760 Speaker 1: that it will not be existing as they standalone bank 255 00:13:28,000 --> 00:13:31,480 Speaker 1: within the next three months. Can you explain the two 256 00:13:31,480 --> 00:13:33,280 Speaker 1: things they're one, don't forget that a lot of these 257 00:13:33,280 --> 00:13:36,040 Speaker 1: things are trading in a fair discounter face. And also 258 00:13:36,120 --> 00:13:38,520 Speaker 1: if you go back to early two thousands and sixteen, 259 00:13:38,559 --> 00:13:41,920 Speaker 1: that's when the eight ones plunged to about seventy something 260 00:13:42,000 --> 00:13:45,720 Speaker 1: sent in in the euro Uh, it's all about your MDA, 261 00:13:45,760 --> 00:13:48,520 Speaker 1: your maximum just description of the amount and can you 262 00:13:48,520 --> 00:13:53,040 Speaker 1: honor coupons, can you pay um your bonuses et cetera. 263 00:13:53,360 --> 00:13:55,319 Speaker 1: They talked about that on the care They've got a 264 00:13:55,360 --> 00:13:58,120 Speaker 1: little bit of headroom. So I don't think anybody thinks 265 00:13:58,160 --> 00:14:01,160 Speaker 1: because capital is still about thirteen and these things aren't 266 00:14:01,160 --> 00:14:03,959 Speaker 1: going to get triggered um and at the moment because 267 00:14:03,960 --> 00:14:06,319 Speaker 1: they've pretty much got a handle on cost now, I 268 00:14:06,360 --> 00:14:09,160 Speaker 1: think we've got enough visibility that they can honor the coupons. 269 00:14:09,559 --> 00:14:12,120 Speaker 1: It isn't really an issue. I mean, a lot of 270 00:14:12,120 --> 00:14:15,080 Speaker 1: the European at ones are trading at a discount now, 271 00:14:15,200 --> 00:14:17,200 Speaker 1: and we're seeing clients talking to us saying, well, why 272 00:14:17,240 --> 00:14:19,880 Speaker 1: don't we just go short the equity along the eighty 273 00:14:19,960 --> 00:14:21,960 Speaker 1: one because we know that we're going to get paid. 274 00:14:22,360 --> 00:14:24,200 Speaker 1: I would sort of be in that camp in so 275 00:14:24,360 --> 00:14:27,560 Speaker 1: much as I think the Deutsche and a lot of 276 00:14:27,560 --> 00:14:30,280 Speaker 1: other banks will pay the coupon. We have seen one bank, 277 00:14:30,640 --> 00:14:32,640 Speaker 1: a Greek bank, so that it's not paying the coupon 278 00:14:32,680 --> 00:14:34,880 Speaker 1: this Yeah, but that's Greece, all right. Jonathan Tyson, thank 279 00:14:34,920 --> 00:14:37,680 Speaker 1: you so much, really interesting analysis. Jonathan Tyes, senior banks 280 00:14:37,840 --> 00:15:00,600 Speaker 1: analysts for Bloomberg Intelligence, joining us from London. Meanwhile, a 281 00:15:00,600 --> 00:15:03,800 Speaker 1: big wild card for markets is also the price of oil, 282 00:15:03,880 --> 00:15:06,880 Speaker 1: which plunged in the last three months of last year 283 00:15:07,120 --> 00:15:10,000 Speaker 1: by forty percent by my measure, and has had an 284 00:15:10,040 --> 00:15:13,320 Speaker 1: amazing rally so far year to date. What is going on? 285 00:15:13,360 --> 00:15:16,360 Speaker 1: How much more does there is there for this uh, 286 00:15:16,440 --> 00:15:19,280 Speaker 1: this commodity to rally? John Kilduff joining US now founding 287 00:15:19,320 --> 00:15:22,480 Speaker 1: partner of Again Capital based in New York. John, you 288 00:15:22,520 --> 00:15:25,160 Speaker 1: have been prescient when it comes to the price of oil. 289 00:15:25,480 --> 00:15:28,480 Speaker 1: Where are we in this crude rally? Does it have 290 00:15:28,640 --> 00:15:31,160 Speaker 1: more upside? Or is this basically the peak for a while? 291 00:15:32,520 --> 00:15:35,840 Speaker 1: You guys are too kind with that. I have to say, um, 292 00:15:35,880 --> 00:15:40,640 Speaker 1: at this point, if given the really the lack of 293 00:15:40,640 --> 00:15:44,560 Speaker 1: a rally on the chaos that's going on in Venezuela here, 294 00:15:45,160 --> 00:15:49,320 Speaker 1: and you know the continued uh negative data points coming 295 00:15:49,320 --> 00:15:51,560 Speaker 1: out of Asia in particular in terms of the economy, 296 00:15:51,960 --> 00:15:55,560 Speaker 1: it is my sense that prices appear to be peaking here. 297 00:15:56,880 --> 00:16:00,280 Speaker 1: So peaking oil? What so? What is really so you're 298 00:16:00,280 --> 00:16:03,920 Speaker 1: supplying demand? Are you suggesting there that generally in balance 299 00:16:03,960 --> 00:16:08,600 Speaker 1: here at the moment. I think the Saudi Arabian particular 300 00:16:08,800 --> 00:16:12,680 Speaker 1: is struggling and working hard to try to get it 301 00:16:12,720 --> 00:16:15,040 Speaker 1: into balance. But we got a data point out of 302 00:16:15,040 --> 00:16:17,680 Speaker 1: the US government yesterday. Now it's backward looking it's it's 303 00:16:17,760 --> 00:16:21,440 Speaker 1: from November, but US production in November hit eleven point 304 00:16:21,560 --> 00:16:24,280 Speaker 1: nine million barrels a day, a record. I have to 305 00:16:24,280 --> 00:16:26,560 Speaker 1: believe we got higher than that in December, and it 306 00:16:26,560 --> 00:16:28,680 Speaker 1: will be even higher number here for January when it 307 00:16:28,760 --> 00:16:33,160 Speaker 1: finally gets uh tallied up. So the wave of oil 308 00:16:33,240 --> 00:16:35,920 Speaker 1: keeps coming at this market. Uh. You saw x on 309 00:16:36,000 --> 00:16:41,080 Speaker 1: Mobiles earnings this morning reference their own increase UH in production, 310 00:16:41,560 --> 00:16:43,440 Speaker 1: and that's a trend that's going to continue this. The 311 00:16:43,480 --> 00:16:46,080 Speaker 1: saddis really have their work cut out for them. It's 312 00:16:46,240 --> 00:16:49,360 Speaker 1: really becoming harder for them with the slowdown that we're 313 00:16:49,360 --> 00:16:51,560 Speaker 1: seeing in China. Well, John, I guess that. Then it 314 00:16:51,680 --> 00:16:54,640 Speaker 1: raises a question if oil prices are peaking here, are 315 00:16:54,680 --> 00:16:56,520 Speaker 1: they kind of kind of remain range bound or we 316 00:16:56,640 --> 00:17:03,200 Speaker 1: headed for another oil plunge. I remind myself that in 317 00:17:03,200 --> 00:17:05,640 Speaker 1: the bond market, the guys and gals keep always say 318 00:17:05,680 --> 00:17:07,439 Speaker 1: don't fight the FED, and in the oil market you 319 00:17:07,480 --> 00:17:09,840 Speaker 1: have to say, don't fight Saudi Arabia because they do 320 00:17:09,920 --> 00:17:13,679 Speaker 1: have a lot of hefft still and power. So I 321 00:17:13,720 --> 00:17:16,600 Speaker 1: do think we're gonna be uh somewhat range bound. But 322 00:17:16,600 --> 00:17:20,120 Speaker 1: it returned back down to sub fifty dollar a barrel oil, Uh, 323 00:17:20,280 --> 00:17:23,200 Speaker 1: you know isn't out of the question. And another interesting 324 00:17:23,240 --> 00:17:25,720 Speaker 1: point that x On made today is that they're profitable 325 00:17:25,720 --> 00:17:28,920 Speaker 1: in their Permian operations. That at thirty five dollars a 326 00:17:28,960 --> 00:17:32,480 Speaker 1: barrel is remarkable revelation by them. So it shows you 327 00:17:32,520 --> 00:17:35,720 Speaker 1: how sticky that that production is going to be. So 328 00:17:35,800 --> 00:17:38,119 Speaker 1: that's part of the problem here for the for the 329 00:17:38,160 --> 00:17:41,600 Speaker 1: oil market. So, John, you mentioned earnings Royal Dutch Shell 330 00:17:41,680 --> 00:17:45,160 Speaker 1: reported last night. Uh, x On mobile this morning, Chevron 331 00:17:45,200 --> 00:17:48,560 Speaker 1: this morning. Anything in those numbers that really stood out 332 00:17:48,600 --> 00:17:50,680 Speaker 1: for you as it relates to your call for kind 333 00:17:50,720 --> 00:17:54,800 Speaker 1: of you know, range bound oil, Well, I need that 334 00:17:54,840 --> 00:17:58,359 Speaker 1: they did remarkably well. Um, I think surprised most folks 335 00:17:58,400 --> 00:18:01,520 Speaker 1: because the headline, of course was that oil rightly crashed 336 00:18:01,600 --> 00:18:03,800 Speaker 1: during the quarter. But the fact of the matter is 337 00:18:03,840 --> 00:18:07,439 Speaker 1: oil prices actually you know, maintain themselves above fifty dollars 338 00:18:07,480 --> 00:18:10,840 Speaker 1: a barrel right up until mid December. They were above 339 00:18:11,280 --> 00:18:15,320 Speaker 1: sixty bucks of barrel through October, and we're you know, 340 00:18:15,600 --> 00:18:18,720 Speaker 1: pushing sixty bucks through most of November. So it was 341 00:18:18,760 --> 00:18:21,800 Speaker 1: a pretty good quarter price wise for the majors on 342 00:18:21,840 --> 00:18:24,479 Speaker 1: that basis, and particularly the exposure a lot of them 343 00:18:24,480 --> 00:18:27,360 Speaker 1: have to the international market and attack another ten dollars 344 00:18:27,359 --> 00:18:29,320 Speaker 1: on top of that for the for the Brent uh 345 00:18:29,400 --> 00:18:32,800 Speaker 1: mark or the international marker. So I think what I've 346 00:18:32,840 --> 00:18:35,160 Speaker 1: been talking about when I've been on with you guys previously, 347 00:18:35,920 --> 00:18:38,280 Speaker 1: you should get an exposure to these companies. Make sure 348 00:18:38,320 --> 00:18:43,160 Speaker 1: there's an international aspect to them, because the relative tightness 349 00:18:43,200 --> 00:18:47,239 Speaker 1: in the market and other issues that don't affect um 350 00:18:47,400 --> 00:18:51,600 Speaker 1: them is that obviously in the U s there's a 351 00:18:51,680 --> 00:18:55,720 Speaker 1: surfeed of production, there's bottlenecks, there's there's localized downward pressure 352 00:18:55,760 --> 00:18:58,000 Speaker 1: on prices. You don't have that internationally, So you want 353 00:18:58,000 --> 00:19:01,720 Speaker 1: to have that portfolio. UH Refining did great demand all 354 00:19:01,800 --> 00:19:05,239 Speaker 1: quarter for refined products, jet fuel, diesel fuel, gasoline here 355 00:19:05,320 --> 00:19:09,240 Speaker 1: United States remarkably strong. So they all seem to capitalize 356 00:19:09,240 --> 00:19:11,640 Speaker 1: on that. The big guys that is, so we're talking 357 00:19:11,640 --> 00:19:13,159 Speaker 1: about the big guys, let's talk about some of the 358 00:19:13,200 --> 00:19:17,480 Speaker 1: little guys. Yesterday, Blackstones g s O unit reported a 359 00:19:17,520 --> 00:19:21,919 Speaker 1: really poor earning, particularly tied to some distressed companies in 360 00:19:21,960 --> 00:19:24,240 Speaker 1: the oil patch. And I'm wondering, if we do get 361 00:19:24,320 --> 00:19:27,760 Speaker 1: sub fifty dollar oil for any sort of prolonged period, 362 00:19:27,760 --> 00:19:30,800 Speaker 1: do you expect the insolvencies to sort of return in 363 00:19:30,880 --> 00:19:35,880 Speaker 1: that industry. I do they for the most part, despite 364 00:19:35,920 --> 00:19:38,760 Speaker 1: what Exambo said about thirty five dollar barrel oil, uh, 365 00:19:38,840 --> 00:19:41,320 Speaker 1: the oil in costs for most of these companies, they 366 00:19:41,359 --> 00:19:45,720 Speaker 1: start to struggle when we're under fifty dollars um. The banks, 367 00:19:45,840 --> 00:19:48,399 Speaker 1: you know, the last go around on this, the banks 368 00:19:48,440 --> 00:19:50,399 Speaker 1: didn't necessarily force a lot of them as many of 369 00:19:50,480 --> 00:19:52,600 Speaker 1: them out of business as I thought they would. That 370 00:19:52,720 --> 00:19:56,560 Speaker 1: sort of pretend and extent type of uh you know 371 00:19:56,760 --> 00:19:59,960 Speaker 1: actions went on. I think this time, though, the gig 372 00:20:00,119 --> 00:20:01,880 Speaker 1: be up and you will see a lot of consolidation. 373 00:20:02,080 --> 00:20:04,760 Speaker 1: The thing to remember is that though that that oil 374 00:20:04,800 --> 00:20:07,520 Speaker 1: production and that infrastructure doesn't go away, it just gets 375 00:20:07,800 --> 00:20:13,959 Speaker 1: sold to somebody at a at a firesale price. So um. 376 00:20:14,080 --> 00:20:17,280 Speaker 1: What what interesting thing I saw is that for Excen Mobile, 377 00:20:17,320 --> 00:20:19,480 Speaker 1: the CEO will be on the earnings call for the 378 00:20:19,520 --> 00:20:24,600 Speaker 1: first time in fifteen years. What's going on there? I 379 00:20:24,600 --> 00:20:26,239 Speaker 1: think they've had a real wake up call there at 380 00:20:26,240 --> 00:20:28,840 Speaker 1: Exon Mobile, you know, for so long, you know, they 381 00:20:28,840 --> 00:20:33,240 Speaker 1: were considered sort of the you know class of the industry, 382 00:20:33,280 --> 00:20:36,800 Speaker 1: and they stumbled. They brought a natural gas company at 383 00:20:37,119 --> 00:20:41,640 Speaker 1: the heights of the natural gas uh you know, price structure. Um. 384 00:20:41,720 --> 00:20:43,560 Speaker 1: And you know, they've been criticized for a lot of 385 00:20:43,600 --> 00:20:46,760 Speaker 1: other different things and they're finally getting their act together. Um. 386 00:20:46,800 --> 00:20:48,800 Speaker 1: And it's could finally be I think, returning to the 387 00:20:48,880 --> 00:20:51,000 Speaker 1: kind of company that we all admired and it was 388 00:20:51,040 --> 00:20:53,359 Speaker 1: so fantastic and still is to a large degree, don't 389 00:20:53,359 --> 00:20:55,159 Speaker 1: get me wrong, but I think they realized that they 390 00:20:55,200 --> 00:20:57,560 Speaker 1: can't hide in the shell anymore and they have to 391 00:20:57,600 --> 00:21:01,200 Speaker 1: be more uh out there and and pressing their case. 392 00:21:01,240 --> 00:21:02,800 Speaker 1: I mean, I saw a couple of interviews with the 393 00:21:02,840 --> 00:21:05,960 Speaker 1: gentleman already this morning, and he was fantastic. It was 394 00:21:06,160 --> 00:21:08,600 Speaker 1: shed a lot of light on the operations. Wasn't cag 395 00:21:08,800 --> 00:21:11,200 Speaker 1: like they had been historically. It's it's a new company 396 00:21:11,240 --> 00:21:14,720 Speaker 1: and I think there it's worth a look at this 397 00:21:14,760 --> 00:21:18,120 Speaker 1: point for sure for investors. John Kildoff, thanks so much. 398 00:21:18,200 --> 00:21:21,240 Speaker 1: John killed Off as a founding partner of Again Capital, 399 00:21:21,440 --> 00:21:23,400 Speaker 1: joining us on the phone here in our bloombog leven 400 00:21:23,400 --> 00:21:41,560 Speaker 1: three oh studios. Boy, we are right smack in the 401 00:21:41,600 --> 00:21:44,840 Speaker 1: middle of tech earnings. We had blowout numbers from Google, 402 00:21:45,320 --> 00:21:46,920 Speaker 1: but last night we had some numbers coming out of 403 00:21:46,960 --> 00:21:49,679 Speaker 1: Amazon that were a little weaker than expected, particularly as 404 00:21:49,720 --> 00:21:52,560 Speaker 1: it relates to their forward growth. So let's dig into 405 00:21:52,600 --> 00:21:54,919 Speaker 1: some tech here today. As we like to do that, 406 00:21:55,160 --> 00:21:56,920 Speaker 1: we always like to turn to our good friend Shira 407 00:21:57,040 --> 00:22:00,880 Speaker 1: overy day. Shira is a technology calmness for Boomberg Opinion, 408 00:22:01,160 --> 00:22:03,480 Speaker 1: and she joins us once again in our Bloomberg Interactive 409 00:22:03,560 --> 00:22:06,160 Speaker 1: studio and shere came out with a really cool column 410 00:22:06,160 --> 00:22:10,960 Speaker 1: today entitled Amazon Mystery, Where did all the growth go higher? 411 00:22:11,000 --> 00:22:13,280 Speaker 1: Margins are great, but it's not exactly what investors have 412 00:22:13,359 --> 00:22:15,679 Speaker 1: been paying for, which is I think a great take 413 00:22:15,800 --> 00:22:19,520 Speaker 1: on what's happening at Amazon. It appears to be that 414 00:22:19,640 --> 00:22:21,879 Speaker 1: after years and years and years and years of no 415 00:22:22,080 --> 00:22:25,720 Speaker 1: profit and just focusing on top line revenue growth, Jeff 416 00:22:25,760 --> 00:22:30,080 Speaker 1: Bezos company is actually starting to provide some significant profits. 417 00:22:30,080 --> 00:22:33,320 Speaker 1: Pretty interesting. It is pretty interesting, you're right, Although I 418 00:22:33,359 --> 00:22:37,359 Speaker 1: think the thing that really freaked out investors was that 419 00:22:37,480 --> 00:22:41,359 Speaker 1: Amazon said this year nineteen would be another year of 420 00:22:41,440 --> 00:22:45,600 Speaker 1: significant investment, at least compared to eighteen. We're spending growth 421 00:22:45,720 --> 00:22:48,439 Speaker 1: kind of slowed, and as a result you saw profit 422 00:22:48,480 --> 00:22:53,880 Speaker 1: margins getting um plumper, at least by Amazon's relatively modest standards. 423 00:22:53,920 --> 00:22:57,200 Speaker 1: But the issue, of course is the top line appears 424 00:22:57,240 --> 00:23:01,399 Speaker 1: to be the top line growth seems to be slowing considerably. 425 00:23:02,040 --> 00:23:05,440 Speaker 1: And it's a little bit confounding how that's happening, honestly, 426 00:23:05,520 --> 00:23:08,920 Speaker 1: because it does seem like US retail sales are going great. 427 00:23:09,040 --> 00:23:12,919 Speaker 1: The US economy, where Amazon generates the vast majority of 428 00:23:12,920 --> 00:23:16,600 Speaker 1: its revenue, is going great. Amazon seems to be gaining share, 429 00:23:16,640 --> 00:23:19,840 Speaker 1: and yet the growth is slowing there. This is sort 430 00:23:19,840 --> 00:23:22,240 Speaker 1: of the conundrum that you and I have talked about 431 00:23:22,240 --> 00:23:25,760 Speaker 1: for years, which is that nobody looks at the profit 432 00:23:25,800 --> 00:23:28,679 Speaker 1: margins of the Amazon. They never have. Is this the 433 00:23:28,720 --> 00:23:31,760 Speaker 1: beginning of actually looking at the profit margins? I think 434 00:23:31,760 --> 00:23:35,000 Speaker 1: it is, and I think that story started to change 435 00:23:35,600 --> 00:23:37,920 Speaker 1: a year or so ago. And and look, you can 436 00:23:37,960 --> 00:23:42,160 Speaker 1: see what's happening at Amazon to to grow that bottom line, 437 00:23:42,240 --> 00:23:45,880 Speaker 1: which is they're getting an increasing share of revenue from 438 00:23:45,880 --> 00:23:50,640 Speaker 1: businesses that are relatively higher profit margins. So Amazon Web Services, 439 00:23:50,640 --> 00:23:54,600 Speaker 1: their cloud computing division. The revenue growth there continues at 440 00:23:54,600 --> 00:23:59,399 Speaker 1: a really significant rate or so in in the quarter 441 00:24:00,240 --> 00:24:04,240 Speaker 1: that has much higher margins than Amazon's e commerce business, 442 00:24:04,359 --> 00:24:08,199 Speaker 1: something like thirty compared to five percent in their e 443 00:24:08,280 --> 00:24:12,400 Speaker 1: commerce business. So as more of Amazon's overall revenue comes 444 00:24:12,400 --> 00:24:15,360 Speaker 1: from AWS, you see the total company margins go up. 445 00:24:15,600 --> 00:24:19,480 Speaker 1: Same for their digital advertising business. Same for Amazon is 446 00:24:19,520 --> 00:24:24,199 Speaker 1: now selling more than half of the merchandise online is 447 00:24:24,240 --> 00:24:27,560 Speaker 1: coming not from Amazon itself but from the outside companies 448 00:24:27,560 --> 00:24:31,200 Speaker 1: that are using Amazon as a sales channel, and those 449 00:24:31,240 --> 00:24:35,320 Speaker 1: sales are significantly more profitable for Amazon because they're just 450 00:24:35,720 --> 00:24:38,640 Speaker 1: kind of taking a commission basically. So the stocks down 451 00:24:38,960 --> 00:24:41,679 Speaker 1: almost four percent today, and I think that's primarily on 452 00:24:41,880 --> 00:24:45,240 Speaker 1: the weaker than expected revenue guidance that you highlighted. The 453 00:24:45,320 --> 00:24:47,800 Speaker 1: company called out in on their call last night that 454 00:24:47,960 --> 00:24:51,480 Speaker 1: part of the reason for the more cautious revenue outlook 455 00:24:51,640 --> 00:24:54,640 Speaker 1: was India. That is a big growth driver for them, 456 00:24:54,680 --> 00:24:57,600 Speaker 1: but apparently there's been some regulatory changes there that are 457 00:24:57,640 --> 00:25:00,399 Speaker 1: impacting their business. What's going on there, Yeah, India has 458 00:25:00,440 --> 00:25:05,880 Speaker 1: been a really significant investment market for Amazon and Walmart two, 459 00:25:05,880 --> 00:25:09,000 Speaker 1: which bought flip Card, a kind of large e commerce 460 00:25:09,000 --> 00:25:12,240 Speaker 1: operation in India. India is basically now the new gold 461 00:25:12,320 --> 00:25:14,960 Speaker 1: rush for a lot of tech companies around the world, 462 00:25:14,960 --> 00:25:18,560 Speaker 1: including e commerce companies. But what the Indian government did 463 00:25:18,640 --> 00:25:23,560 Speaker 1: is it it tightens some regulations that essentially prohibit companies 464 00:25:23,600 --> 00:25:28,560 Speaker 1: like Amazon and Walmart, foreign companies from us selling goods 465 00:25:28,600 --> 00:25:33,400 Speaker 1: on their own or having kind of their affiliated companies 466 00:25:33,400 --> 00:25:35,720 Speaker 1: selling goods on their own as opposed to just being 467 00:25:35,720 --> 00:25:40,119 Speaker 1: a middleman for sales by by local companies. And so 468 00:25:40,160 --> 00:25:42,800 Speaker 1: that has meant that both Walmart and Amazon have had 469 00:25:42,840 --> 00:25:47,359 Speaker 1: to remove a lot of items um from their India websites, 470 00:25:47,400 --> 00:25:51,439 Speaker 1: which I think is is worrying investors. I want to 471 00:25:51,480 --> 00:25:54,639 Speaker 1: shift gears a little bit because we also have been 472 00:25:54,640 --> 00:25:57,640 Speaker 1: getting other tech earnings and Facebook, really, I gotta say, 473 00:25:57,760 --> 00:25:59,440 Speaker 1: is the one that stands out the most to me 474 00:25:59,600 --> 00:26:03,359 Speaker 1: of this hire earning season. Yesterday shares rose eleven percent. 475 00:26:03,440 --> 00:26:06,399 Speaker 1: Today they're basically flat. I do also want to just 476 00:26:06,440 --> 00:26:09,960 Speaker 1: give an update because yesterday we spoke about Facebook with 477 00:26:10,119 --> 00:26:14,120 Speaker 1: David Garrity and he was saying that that that that 478 00:26:14,200 --> 00:26:17,240 Speaker 1: Facebook had been removed from some Apple apps. It wasn't 479 00:26:17,400 --> 00:26:20,240 Speaker 1: entirely accurate the way that we had originally framed it 480 00:26:20,640 --> 00:26:23,760 Speaker 1: um and a Facebook spokesman just noted that we have 481 00:26:24,000 --> 00:26:27,119 Speaker 1: our we have had our enterprise certification which enables our 482 00:26:27,160 --> 00:26:29,639 Speaker 1: internal employee applications restored. We are in the process of 483 00:26:29,640 --> 00:26:31,760 Speaker 1: getting our internal apps up and running. To be clear, 484 00:26:31,800 --> 00:26:34,400 Speaker 1: this didn't have an impact on our consumer facing services, 485 00:26:34,480 --> 00:26:37,840 Speaker 1: so there was never any kind of breach in a 486 00:26:37,840 --> 00:26:40,840 Speaker 1: consumer's ability to download Facebook from their Apple products. But 487 00:26:40,840 --> 00:26:43,479 Speaker 1: I'm just wondering shia in the light of some of 488 00:26:43,520 --> 00:26:48,840 Speaker 1: the privacy crackdowns from other companies like Apple, etcetera. With Facebook, 489 00:26:50,200 --> 00:26:52,080 Speaker 1: is Facebook really in the clear the way that the 490 00:26:52,119 --> 00:26:54,879 Speaker 1: share price seems to suggest, or are they going to 491 00:26:54,960 --> 00:26:57,840 Speaker 1: face more backlash year? So I think what's going to 492 00:26:57,920 --> 00:27:02,480 Speaker 1: happen to Facebook is pretty similar to what's happened at 493 00:27:02,600 --> 00:27:06,680 Speaker 1: Google over the last decade. So at Google too, that's 494 00:27:06,680 --> 00:27:10,280 Speaker 1: a company that has faced a lot of regulatory and 495 00:27:10,359 --> 00:27:14,680 Speaker 1: privacy questions UM for for many years, including if you remember, 496 00:27:14,800 --> 00:27:19,879 Speaker 1: the Federal Trade Commission in the US UM launched a 497 00:27:20,000 --> 00:27:23,520 Speaker 1: significant investigation into whether Google was abusing its monopoly on 498 00:27:23,600 --> 00:27:27,280 Speaker 1: search and eventually came out that said said no. But 499 00:27:27,320 --> 00:27:30,000 Speaker 1: it was a close call at the FTC, and and 500 00:27:30,080 --> 00:27:33,119 Speaker 1: Google's face regulatory headaches in Europe and so on. So 501 00:27:33,160 --> 00:27:35,560 Speaker 1: I think basically this is the new cost of doing 502 00:27:35,600 --> 00:27:38,560 Speaker 1: business for for Google for a long time and now 503 00:27:38,600 --> 00:27:40,520 Speaker 1: for Facebook, that it is just going to be a 504 00:27:40,560 --> 00:27:45,720 Speaker 1: regular drumbeat of questions and pressure on that company around 505 00:27:46,000 --> 00:27:51,200 Speaker 1: data privacy security. The way that they used the enormous 506 00:27:51,840 --> 00:27:55,800 Speaker 1: databases of data they have on on billions of people, 507 00:27:56,359 --> 00:27:59,040 Speaker 1: And no, I don't think it's going to affect business, 508 00:27:59,080 --> 00:28:01,640 Speaker 1: but I think there will be questions for the rest 509 00:28:01,640 --> 00:28:05,200 Speaker 1: of that company's life about whether they're kind of one 510 00:28:05,280 --> 00:28:09,520 Speaker 1: regulatory investigation away from having a crippling business impact. So 511 00:28:09,680 --> 00:28:12,159 Speaker 1: just following up on on Google. The company does report 512 00:28:12,200 --> 00:28:16,280 Speaker 1: earnings Monday after the closed conference called four thirty Eastern time. 513 00:28:16,280 --> 00:28:19,760 Speaker 1: What are you looking for in the results? So one 514 00:28:19,760 --> 00:28:22,320 Speaker 1: thing I'm looking for is we saw this week from 515 00:28:22,359 --> 00:28:26,480 Speaker 1: the big tech earnings that they're now significant questions around 516 00:28:26,720 --> 00:28:29,640 Speaker 1: growth UM. And we started to see that last year, 517 00:28:29,640 --> 00:28:31,920 Speaker 1: and I think all of the big tech companies now 518 00:28:31,960 --> 00:28:35,280 Speaker 1: to a different degree have questions about where is the 519 00:28:35,320 --> 00:28:39,760 Speaker 1: growth going to come from? And and Google faces that 520 00:28:39,800 --> 00:28:42,000 Speaker 1: as well. So I think I'm going to focus a 521 00:28:42,000 --> 00:28:44,520 Speaker 1: lot on the top line. UM. Google has made a 522 00:28:44,560 --> 00:28:48,080 Speaker 1: lot of investments all over its business trying to find 523 00:28:48,600 --> 00:28:53,880 Speaker 1: the next big business beyond digital advertising, and uh, it 524 00:28:53,920 --> 00:28:56,000 Speaker 1: hasn't yet founded. But boy, you know, if you're gonna 525 00:28:56,000 --> 00:28:58,760 Speaker 1: be a one trick pony, that is a really good pony. 526 00:28:58,920 --> 00:29:01,520 Speaker 1: But their devices there's old, not kind of no, I 527 00:29:01,520 --> 00:29:07,400 Speaker 1: mean for the basically everything Google invests in is just 528 00:29:07,520 --> 00:29:10,360 Speaker 1: kind of a drop in the ocean compared to their 529 00:29:10,360 --> 00:29:12,600 Speaker 1: core advertising business. But the good thing is that the 530 00:29:12,640 --> 00:29:17,360 Speaker 1: core advertising business is so successful and remains successful and 531 00:29:17,400 --> 00:29:20,000 Speaker 1: growing fast that they have a long leash to figure 532 00:29:20,000 --> 00:29:23,200 Speaker 1: out whatever might come next. Shara Overday, thank you so 533 00:29:23,280 --> 00:29:25,040 Speaker 1: much for being with us and taking time out of 534 00:29:25,040 --> 00:29:28,000 Speaker 1: this incredibly busy week for you. Shara Oviday is technology 535 00:29:28,000 --> 00:29:34,000 Speaker 1: columnist for US at Bloomberg Opinion. Thanks for listening to 536 00:29:34,040 --> 00:29:36,480 Speaker 1: the Bloomberg P and L podcast. You can subscribe and 537 00:29:36,480 --> 00:29:39,640 Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform 538 00:29:39,680 --> 00:29:42,760 Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. 539 00:29:42,840 --> 00:29:45,080 Speaker 1: I'm Lisa abram Woyds. I'm on Twitter at Lisa A. 540 00:29:45,120 --> 00:29:48,640 Speaker 1: Bramwoit's one before the podcast. You can always catch us worldwide. 541 00:29:48,600 --> 00:29:49,600 Speaker 1: I'm Bloomberg Radio.