WEBVTT - Amazon Got Whole Foods for Free, Kantor Says 0:00:00.240 --> 0:00:04.040 Runt You by Bank of America Mary Lynch. With virtual reality, 0:00:04.320 --> 0:00:09.719 virtually everything will change. Discover opportunities in a transforming world. 0:00:10.119 --> 0:00:14.440 Be of a, mL dot Com, slash VR, Mary Lynch, 0:00:14.520 --> 0:00:28.120 Pierced Fenner and Smith Incorporated. Ye, Welcome to the Bloomberg 0:00:28.160 --> 0:00:32.360 Surveillance Podcast. I'm Tom Keene with David Gura. Daily we 0:00:32.440 --> 0:00:36.080 bring you insight from the best of economics, finance, investment, 0:00:36.120 --> 0:00:42.120 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:42.280 --> 0:00:50.360 Bloomberg dot Com, and of course on the Bloomberg. We 0:00:50.400 --> 0:00:53.280 have a wonderful guest to brief us through this half hour, 0:00:53.960 --> 0:00:57.960 and it's on Distress Desk. It's about taking opportunity when 0:00:58.040 --> 0:01:01.480 nobody else has the courage. Honsky Rooms out of Williams 0:01:01.480 --> 0:01:06.240 College has made a career of listening to the markets 0:01:06.480 --> 0:01:10.200 and then acting when few have the courage uh to act. 0:01:10.240 --> 0:01:13.679 He is with Greylock and joins us Um this morning. 0:01:13.880 --> 0:01:17.440 Where do you learn to buy distress? You were a 0:01:17.480 --> 0:01:20.880 literature major? You know are you? Are you reading Dickens 0:01:21.000 --> 0:01:23.720 or you know ed Gary Ellen Poe to figure out 0:01:24.319 --> 0:01:27.639 how do you train to buy something for twenty cents 0:01:27.640 --> 0:01:31.880 on the dollar when everybody's running for the theater exit. Um. 0:01:31.920 --> 0:01:33.720 I think I had less to do with my education, 0:01:33.800 --> 0:01:36.160 probably more to do with where I grew up. We 0:01:36.200 --> 0:01:38.480 moved to Nigeria when I was three years old, and 0:01:38.480 --> 0:01:41.920 then from Nigeria to Morocco. And my father likes to 0:01:41.959 --> 0:01:45.040 talk about me haggling with the merchants and the markets 0:01:45.040 --> 0:01:48.720 and Moroccos. So that's really interesting actually. And you know, 0:01:49.040 --> 0:01:51.440 when I was a kid, I used to I realized 0:01:51.480 --> 0:01:54.880 that it was pretty easy to make money every time 0:01:56.000 --> 0:01:58.920 around spring cleaning. So you wait for people to take 0:01:58.920 --> 0:02:01.600 all the garbage out, you run around, take the nice 0:02:01.640 --> 0:02:04.200 things in. Two weeks later, you have a stoop sale. 0:02:04.440 --> 0:02:06.840 Are you an embarrassment at a modern Starbucks? Do you 0:02:06.880 --> 0:02:10.520 go in and bid? Um? You know, I'm probably not 0:02:10.560 --> 0:02:13.160 the best person to go to a Starbucks. I just understand. 0:02:13.200 --> 0:02:15.280 Don't understand why you could spend that much money on 0:02:15.320 --> 0:02:18.519 a cup of coffee. What's the opportunity in distress right now? 0:02:18.680 --> 0:02:20.840 Is it like it wasn't oh seven o eight oh nine? 0:02:20.919 --> 0:02:24.040 Or is it all quiet on the Hans front? No, 0:02:24.560 --> 0:02:27.720 I certainly doesn't. You don't have the opportunities that you had, 0:02:28.160 --> 0:02:31.840 uh two thousand nine? Um, But what's going on currently. 0:02:32.520 --> 0:02:36.480 UM One, we're seeing the sort of the last few 0:02:36.560 --> 0:02:40.720 legs of a trade that came about UM in two 0:02:40.760 --> 0:02:44.600 thousand eleven, two thousand twelve, which was Greece. UM there, 0:02:44.639 --> 0:02:47.679 you know, ended up being a technical default on the 0:02:48.000 --> 0:02:51.640 bonds of restructuring bonds traded down to actually quite a 0:02:51.680 --> 0:02:54.800 bit belower lower than than twenty cents in the doll 0:02:54.880 --> 0:02:59.080 or the trading at the same prices North Korean debt UM. 0:02:59.160 --> 0:03:02.600 And now on a back of Brexit, what you're seeing 0:03:02.680 --> 0:03:07.680 in UM you know, the EU is staying together. UM 0:03:08.160 --> 0:03:10.880 So as soon as the vote happened last year, you 0:03:10.880 --> 0:03:14.400 could really tell that Greece was going to be on 0:03:14.440 --> 0:03:17.800 a one way train. UM. So you've gotten recovery maybe 0:03:17.800 --> 0:03:20.960 two bases points left of tightening on the bonds in Greece, 0:03:21.120 --> 0:03:23.799 and you're probably gonna have a pretty good leg of 0:03:23.960 --> 0:03:26.799 an up trade in the equities we we we within. 0:03:26.919 --> 0:03:31.760 That is the basic idea of a cramdown. I've asked 0:03:31.800 --> 0:03:34.520 this question twice last week. Let me ask it of 0:03:34.639 --> 0:03:38.800 you now. I would suggest any resolution of a distress 0:03:38.880 --> 0:03:43.080 sovereign process is somebody has to take a price loss. 0:03:43.480 --> 0:03:45.560 What I mean hearing out of Europe is we're gonna 0:03:45.560 --> 0:03:48.880 extenderation out until we're all dead, and we're gonna lower 0:03:48.920 --> 0:03:51.320 the interest right down to something I can stomach. Okay, 0:03:51.560 --> 0:03:54.240 that's hans Hume one oh one. But isn't part of 0:03:54.280 --> 0:03:57.320 hans Hume one oh one is the creditors have to 0:03:57.360 --> 0:03:59.840 take a price cut. You know, you coming, you buy 0:03:59.840 --> 0:04:01.960 the piece of twenty and they own it at a 0:04:02.160 --> 0:04:05.280 hundred or eighty or whatever, and the takeout price has 0:04:05.320 --> 0:04:08.560 got to be like forty or fifty, right, Um, you know, 0:04:08.840 --> 0:04:10.760 the takeoff price, it depends on the country. In the 0:04:10.800 --> 0:04:14.280 case of Greece, that what they're talking about now in 0:04:14.360 --> 0:04:17.520 terms of debt relief only is in relation to the 0:04:17.520 --> 0:04:21.720 official sector. Um, you know, we in the two thousand 0:04:21.720 --> 0:04:24.080 twelve deal, the private sector took the haircut. We took 0:04:24.080 --> 0:04:27.279 fifty three and a half cents a principal haircut. So 0:04:28.160 --> 0:04:30.920 we're not gonna be part of any future debt forgiveness. 0:04:31.240 --> 0:04:36.040 And quite honestly, I think the Greeks and their biggest 0:04:36.120 --> 0:04:39.560 creditors have some sense of what they're gonna do. It's 0:04:39.600 --> 0:04:41.960 the I, M F and the EU, so you know, 0:04:42.000 --> 0:04:45.600 to a much broader you know, from much broader perspective. 0:04:45.800 --> 0:04:48.839 You're putting your finger on one of the big drivers 0:04:48.839 --> 0:04:52.080 and how you approach this market, which is what possibility 0:04:52.160 --> 0:04:55.320 do you have of getting crammed down? And it's really 0:04:55.320 --> 0:04:58.280 a case by case situation. That's a beauty. Well let's 0:04:58.279 --> 0:05:01.440 continue that fencing. Laqua joins us off from a francying. 0:05:01.440 --> 0:05:05.240 Good morning, Good morning Tom. What a difficult comment by 0:05:05.279 --> 0:05:08.520 Prime Minister May it it seems to me and I 0:05:08.560 --> 0:05:12.080 can honestly say, Francine, I don't think we've seen the 0:05:12.279 --> 0:05:16.800 set of many events of crisis exhaustion in the United Kingdom. 0:05:17.040 --> 0:05:19.200 We've ever seen that in the United States. I mean, 0:05:20.440 --> 0:05:24.080 is the city just overwhelmed this Monday morning. Well, what 0:05:24.120 --> 0:05:27.640 you're talking about, of course, Tom, is this latest terror incident. 0:05:28.080 --> 0:05:31.200 And we understand from Theresa Made that this is a 0:05:31.320 --> 0:05:33.440 terror attack. It was a van that plowed into a 0:05:33.440 --> 0:05:37.000 crowd outside in North London mosque and it's basically as 0:05:37.080 --> 0:05:39.560 you say, Tom, it's the third terrorist attack on the 0:05:39.600 --> 0:05:42.239 capitol in as many months. I don't know if people 0:05:42.240 --> 0:05:44.760 are exhausted, but there's certainly seems to be a resolve 0:05:45.200 --> 0:05:48.760 in the capital of the UK so that it doesn't 0:05:48.839 --> 0:05:52.920 divide the society and brings people closer together, fighting together. 0:05:53.080 --> 0:05:56.320 But all of this is a distraction because there's also 0:05:56.400 --> 0:05:59.360 breggsit talks, so of course the government trying to deal 0:05:59.400 --> 0:06:01.960 with two things at the same time, whilst the Prime 0:06:02.000 --> 0:06:05.800 Minister is weakened almost by the day. Interesting. I don't know, Frenzy, 0:06:05.800 --> 0:06:08.000 and if you heard Hans comes comments are in Greece, 0:06:08.040 --> 0:06:11.719 but I really thought they were interesting about taking a 0:06:11.760 --> 0:06:15.000 distress piece of looking at a time extension and interest 0:06:15.080 --> 0:06:18.320 rate deduction, reduction, I should say, And as he set 0:06:18.360 --> 0:06:22.440 a selected set of cramdowns where each case is different 0:06:23.000 --> 0:06:25.679 as well, Frenzy, why don't you continue with Hans Comes 0:06:25.760 --> 0:06:28.400 right now? Yeah, Hans, I was really interested in your 0:06:28.400 --> 0:06:30.480 comming out in Greece and whether you actually thought that 0:06:30.520 --> 0:06:33.719 any other European countries would need a bail out in 0:06:33.760 --> 0:06:38.719 the next eighteen months. I think that the answers no. 0:06:39.160 --> 0:06:43.120 I mean what I saw, I think the same as 0:06:43.160 --> 0:06:47.000 that everybody else did post the Brexit vote. Um was 0:06:47.040 --> 0:06:50.159 that there was a sense in the EU, you know, 0:06:51.040 --> 0:06:55.840 the different organizations managing the EU setting up for a 0:06:55.880 --> 0:06:59.760 tough negotiation with the UK, which the UK has made 0:07:00.080 --> 0:07:03.840 for for itself, but basically ring fencing the rest of 0:07:05.080 --> 0:07:07.800 you know, the market. Um so I think that you know, 0:07:07.839 --> 0:07:12.480 there's some been some concerns obviously passed about Spain, but 0:07:12.720 --> 0:07:15.360 currently maybe a little bit about the sovereign on the Portugal, 0:07:15.560 --> 0:07:19.200 you know in Portugal, and maybe the banking system in Italy. 0:07:19.280 --> 0:07:22.600 But these are all situations that the balance sheet of 0:07:22.600 --> 0:07:25.360 the EU can support quite readily. And what you've seen 0:07:25.480 --> 0:07:28.720 is a big change in the rhetoric that's come from 0:07:28.800 --> 0:07:33.080 the deep pockets of the EU. Germany even Scheibla has 0:07:34.120 --> 0:07:36.480 backed off some of the austerity talk and has been 0:07:36.520 --> 0:07:41.240 basically supportive of the entire EU project. So I don't 0:07:41.240 --> 0:07:44.040 see any other countries falling by the wayside. Let's continue 0:07:44.080 --> 0:07:46.520 on this. We'll come back with Hans Hume, gray Lock 0:07:46.600 --> 0:07:49.240 and really a lot to talk about their unpack on 0:07:49.800 --> 0:07:52.680 this strange trace. Cramdown trying to say, like k London 0:07:52.680 --> 0:07:55.600 of time, Mr Girl off off off today with this 0:07:55.680 --> 0:08:00.640 Hans Hume of Garylla, we we opened hours ago and 0:08:01.040 --> 0:08:03.840 on China, and I think we want to wander back 0:08:04.400 --> 0:08:07.720 not only the China, but the the the distress of Asia. 0:08:07.960 --> 0:08:10.480 When you and I study this racket, there was little 0:08:10.560 --> 0:08:14.000 in bonds in Asia. Is that no longer true. Is 0:08:14.000 --> 0:08:16.920 there like almost a mature debt market or guys like 0:08:16.960 --> 0:08:21.080 you can play in Asia? Um, you know, there's clearly 0:08:21.120 --> 0:08:26.040 a fixed income market that's developed. Um, you know, mature, 0:08:26.160 --> 0:08:31.160 it's a bit, Yeah, it's mature. Yes. The issue there 0:08:31.480 --> 0:08:35.560 is the on a relative basis, the opportunities for guys 0:08:35.600 --> 0:08:38.080 like us aren't quite as attractive as in some of 0:08:38.120 --> 0:08:43.800 the other geographical areas like Latin America. It's still well, 0:08:43.880 --> 0:08:47.040 there's just been a lot of money chasing chasing returns, 0:08:47.760 --> 0:08:53.599 so you know you'll get on a credit basis issuers 0:08:53.679 --> 0:08:55.880 from China where you're not going to get a real 0:08:55.920 --> 0:08:58.000 pick up and yield for the kind of risk that 0:08:58.080 --> 0:09:01.200 we think you'll be taking. Um. Yeah, potentially, it's the 0:09:01.200 --> 0:09:04.120 biggest market out there. If there is a major correction 0:09:04.200 --> 0:09:06.640 in China and a major sell off, there'll be a 0:09:06.679 --> 0:09:10.200 lot of money going for the exit. Uh, Hans, are 0:09:10.200 --> 0:09:13.120 you expecting a correction in China or what's a likelihood 0:09:13.120 --> 0:09:14.760 at the moment. I know you're still pretty bullish on 0:09:14.760 --> 0:09:16.959 the country, but even if it's a thirty percent chance 0:09:16.960 --> 0:09:20.200 of a correction, that could be quite ugly. Yeah. No, 0:09:20.280 --> 0:09:23.160 and that's fair. Um, you know, personally I don't see 0:09:23.200 --> 0:09:27.199 anything this year. Um. I'm pretty constructive on the markets 0:09:27.200 --> 0:09:30.480 in general. Um. But you know, as a business, we 0:09:30.520 --> 0:09:34.600 don't we don't like to try to anticipate crisis by 0:09:34.720 --> 0:09:37.560 putting short positions on. We find it's actually easier to 0:09:37.559 --> 0:09:39.280 wait for the sell off and then step in for 0:09:39.400 --> 0:09:43.200 the you know workout. Um, so if it happens, will 0:09:43.200 --> 0:09:45.680 be there. Um. I'm not gonna sit there and set 0:09:45.760 --> 0:09:48.640 up a broad number of short positions and Chinese corporates 0:09:48.920 --> 0:09:52.040 and you know, try to profit on a downturn because one, 0:09:52.280 --> 0:09:55.880 I don't think it's a likely scenario, and to even 0:09:55.920 --> 0:09:58.600 if I did it, the negative carry can knock us 0:09:58.640 --> 0:10:01.120 out of the trade before we realize the timing. If 0:10:01.120 --> 0:10:03.880 there's a downturn on, what is the first signal that 0:10:03.960 --> 0:10:07.200 actually tells you that there's a downturn? Is there a 0:10:07.320 --> 0:10:09.880 concern that it could be like the O A crisis 0:10:10.000 --> 0:10:12.880 where some people saw it but actually no one realized 0:10:12.960 --> 0:10:17.240 until it was too late. Um, yeah, I think you know, 0:10:17.360 --> 0:10:19.360 building up to the O A crisis, you saw a 0:10:19.360 --> 0:10:22.560 lot of cracks, you know, starting two thousand six, two 0:10:22.640 --> 0:10:25.199 thousand seven, So it was one of these things where people, 0:10:25.480 --> 0:10:28.079 you know, the markets were telling you that something was 0:10:28.200 --> 0:10:31.120 going on, and the question was had we found a bottom? 0:10:31.320 --> 0:10:35.880 And then you know, because of yeah, real estate here 0:10:35.880 --> 0:10:39.079 in the US, and you put pressure on financial institutions 0:10:39.360 --> 0:10:41.920 and then you know, bear Sterns and then finally collapse 0:10:41.960 --> 0:10:43.920 a Lehman and then we went off. So I don't 0:10:43.960 --> 0:10:46.280 think we're going to have one thing. You know, a market, 0:10:46.920 --> 0:10:49.880 if China leads a downturn, will get a lot of 0:10:49.960 --> 0:10:54.360 signals before things actually the bottom falls out. But one 0:10:54.360 --> 0:10:57.199 of the things about your assessment there is could have 0:10:57.320 --> 0:10:59.840 happened again. It's francy and I know every Friday afternoon 0:10:59.880 --> 0:11:02.280 the doom in gloom letters come out. It's gonna be 0:11:02.320 --> 0:11:05.240 the same again, etcetera, etcetera. I'm not hearing that from 0:11:05.240 --> 0:11:08.000 you that it's the same frameworkers those seven oh eight. Yeah, 0:11:08.000 --> 0:11:11.680 I don't think there's you know, the markets are very different, 0:11:11.760 --> 0:11:14.520 so I think you know you're not. We don't have 0:11:14.720 --> 0:11:16.920 nearly the amount of leverage in our markets that we 0:11:16.960 --> 0:11:20.960 did in two thousand and eight. Um. So if there 0:11:21.160 --> 0:11:25.120 is a all in risk off you know trade where 0:11:25.120 --> 0:11:27.920 everything correlates to one and we're basically going off a cliff, 0:11:28.280 --> 0:11:30.560 it's going to have to happen for a different reason 0:11:30.679 --> 0:11:34.640 than it did in oh eaight um and but yeah no, 0:11:34.760 --> 0:11:37.440 I I just don't see the circumstances for a similar 0:11:37.440 --> 0:11:40.520 type of you know, turnaround in our market generously. You're 0:11:40.520 --> 0:11:43.120 trying this morning, Thank you so much. Humans with Greylock folks. 0:11:43.120 --> 0:11:45.319 We haven't seen him in the ages, which is my fault. Man. 0:11:45.640 --> 0:12:01.679 It's good to see him this morning, without question. The 0:12:01.720 --> 0:12:06.120 interview of the day on Amazon and on Whole Foods Market. 0:12:06.200 --> 0:12:10.760 Joining us now from Newburger Berman is Charles Cantor, with 0:12:10.880 --> 0:12:14.480 decades of experience and attempting to find value in The 0:12:14.559 --> 0:12:19.199 distinction here is he is a kinder general er uh, 0:12:19.440 --> 0:12:24.559 person of bringing together transactions and combinations. You're not adversarial 0:12:25.160 --> 0:12:29.320 when you dial one hundred Avocado and say you guys 0:12:29.360 --> 0:12:31.320 are too cheap, let's go. You do it a more 0:12:31.360 --> 0:12:35.719 gentle way. What's the Cantor distinction. We're trying to think 0:12:35.760 --> 0:12:39.280 about long term value. Were very active and engaged with 0:12:39.320 --> 0:12:42.599 our companies. We're trying to have a constructive dialogue. We 0:12:42.960 --> 0:12:44.920 think we can add a lot of value in helping 0:12:44.920 --> 0:12:51.480 companies think through financial communication, capitalification, capital structure, and and 0:12:52.240 --> 0:12:54.280 it's all about long term and trying to kind of 0:12:54.360 --> 0:12:58.280 put the noise, put the noise away. The chief executive 0:12:58.320 --> 0:13:00.480 officer of Whole Foods has had to skip around on 0:13:00.559 --> 0:13:05.320 rhetoric recently. You're nodding here. Charles Cantor called another operation 0:13:05.400 --> 0:13:09.920 greedy bastards in this transaction, is Newberger Berman greedy bastards? 0:13:10.600 --> 0:13:13.760 I would hope not. We're trying to get a reasonable 0:13:13.800 --> 0:13:18.000 reward for our effort over time. UM and UM. I 0:13:18.000 --> 0:13:20.199 think it's best for others to comment on that. It's 0:13:20.240 --> 0:13:24.360 but ultimately, UM, when you become a public company, your 0:13:24.360 --> 0:13:28.199 responsibilities are too shareholders. When you remain a private company, 0:13:28.400 --> 0:13:31.360 your responsibilities are those that own you privately. But once 0:13:31.760 --> 0:13:34.560 once you come to the public markets, Um, the game 0:13:34.640 --> 0:13:38.240 changes for many any different ways. Legendarily, you walked into 0:13:38.280 --> 0:13:41.720 the Bryant Park Whole Foods and said this place needs 0:13:41.760 --> 0:13:44.840 to be revalued. Was it the gluten free avocados that 0:13:44.880 --> 0:13:47.920 did it for? You know? I think what Wholefuls has 0:13:47.960 --> 0:13:51.120 done so well is it's it's convinced the millennials that 0:13:51.160 --> 0:13:53.920 it's a very cool place to go shop. And and 0:13:53.960 --> 0:13:56.720 the Brian Park shop is by no means a grocery store. 0:13:56.720 --> 0:14:00.400 It's actually a restaurant with grocery as as a side items. 0:14:00.400 --> 0:14:03.280 So they've been whole foods and and and and and 0:14:03.320 --> 0:14:06.280 the management team they have been very forward thinking in 0:14:05.800 --> 0:14:08.880 in in how they've built out their boxes. Um, And 0:14:09.280 --> 0:14:12.679 what people for a long time didn't appreciate or may 0:14:12.720 --> 0:14:15.200 not have realized, is that a set of Whole Foods 0:14:15.240 --> 0:14:19.360 businesses is prepared foods and restaurants, of course have a 0:14:19.400 --> 0:14:24.320 different margin structure than groceries and Briant Park like like 0:14:24.360 --> 0:14:28.280 many of whole foods boxes around the country has an 0:14:28.280 --> 0:14:33.560 incredible energy and vibe that that you probably don't experience 0:14:33.600 --> 0:14:37.280 in some of your traditional grocery stores. Jeff Bezos of Amazon, 0:14:37.360 --> 0:14:39.640 he needs a bidding work. You have made clear with 0:14:39.720 --> 0:14:42.280 your report from dal Jones and Wall Street Journal that 0:14:42.320 --> 0:14:45.560 one should be had. Who would come in to lift 0:14:45.680 --> 0:14:50.440 this transaction over fourteen billion dollars? Look, I think, um, 0:14:50.880 --> 0:14:55.000 I think I suggested that that Amazon was typically thrifty 0:14:55.080 --> 0:14:58.280 in in how they thought about the value of whole foods. 0:14:58.440 --> 0:15:03.680 We think whole foods is uniquely attractive strategic asset. Um, 0:15:03.760 --> 0:15:05.960 do you have a valuation number that is in mind 0:15:06.000 --> 0:15:09.840 without giving away the secrets, We don't, But but but 0:15:10.080 --> 0:15:14.480 there's there's plenty of room um above. Should should others 0:15:14.720 --> 0:15:18.040 step in? I think what was so remarkable amongst the 0:15:18.120 --> 0:15:21.920 many remarkable things around around thinking about the deal, was 0:15:21.960 --> 0:15:28.280 that Amazon's share value went up UM equal to the 0:15:28.320 --> 0:15:34.280 total transaction value of I mean I kind of candidly 0:15:34.360 --> 0:15:37.360 joked that that Amazon got Whole Foods for free. It's 0:15:37.520 --> 0:15:41.280 I can't remember of another transaction where the entire purchase 0:15:41.360 --> 0:15:46.200 price was covered by bye bye bye by the increase 0:15:46.240 --> 0:15:50.200 in Amazon's value. Look, Walmart, for example, went down twelve 0:15:50.200 --> 0:15:55.000 billion dollars. So I think there are many grocery executives, 0:15:55.040 --> 0:15:58.280 boards of directors, both in the US and globally that 0:15:58.320 --> 0:16:01.440 are probably going to think about the strategic value of 0:16:01.440 --> 0:16:04.800 the sasset very quickly. Here would you suggest any acquirer, 0:16:04.880 --> 0:16:08.640 including Mr Bezos could bring net income in the bottom 0:16:08.680 --> 0:16:11.600 line of the income statement up rapidly? Can they add 0:16:11.920 --> 0:16:14.720 if it's a hundred basis point business making one percent, 0:16:14.960 --> 0:16:17.360 can they get that up to two hundred basis points quickly? 0:16:17.720 --> 0:16:21.840 I think UM as a deal itself, UM, those that 0:16:21.880 --> 0:16:25.160 acquire this asset will make a very very good risk 0:16:25.200 --> 0:16:29.520 adjusted return. I think Amazon specifically, I'm guessing yet, but 0:16:29.600 --> 0:16:32.800 I'm probably not far off. They have about fifty million 0:16:32.840 --> 0:16:36.600 prime members. My guess is Whole Foods has about twelve 0:16:36.680 --> 0:16:41.080 to th million customers. There's a huge opportunity to take 0:16:41.320 --> 0:16:45.200 to take the prime members um into the Whole food store, 0:16:45.240 --> 0:16:49.760 whether that be in person um or through the wire, 0:16:49.840 --> 0:16:51.440 so to speak. Very quickly, and I want to come 0:16:51.480 --> 0:16:54.200 back Charles Cancer. When people go into Whole Foods within 0:16:54.200 --> 0:16:56.560 your research at New Burger Berman, are they buying the 0:16:56.600 --> 0:16:59.640 fancy pants organic stuff or as Whole Foods about the 0:16:59.720 --> 0:17:06.000 more private label three, it's, it's, it's it's probably a 0:17:06.000 --> 0:17:08.359 bit about both. I think people go to Whole Foods 0:17:08.400 --> 0:17:12.040 because the brand resonates with their values and across American, 0:17:12.119 --> 0:17:14.399 across the world, people care about what they eat, and 0:17:15.000 --> 0:17:18.159 Whole Foods has been a pioneer in getting people to 0:17:18.280 --> 0:17:26.840 think through what they put in their body. Brunch you 0:17:26.920 --> 0:17:31.000 by Bank of America, Mary Lynch. With virtual reality, virtually 0:17:31.160 --> 0:17:36.399 everything will change. Discover opportunities in a transforming world, be 0:17:36.560 --> 0:17:41.080 of a mL dot Com, slash VR, Mary Lynch pierced 0:17:41.119 --> 0:17:50.320 Fenner and Smith Incorporated. And now we go to David 0:17:50.359 --> 0:17:53.960 West and his conversation with Robert Ross. What is your 0:17:54.040 --> 0:17:56.520 main argument to them all why they should be investing 0:17:56.520 --> 0:18:00.600 in the United States right now. Mr Secretary, it's the 0:18:00.640 --> 0:18:05.000 same reason as American companies should be and in fact are, 0:18:05.840 --> 0:18:12.040 namely regulatory reform, getting rid of red tape, tax reform, 0:18:12.080 --> 0:18:16.840 getting our rates down to very very competitive levels, unleashing 0:18:16.840 --> 0:18:22.080 our energy resources, fixing our trade agreements, and creating a 0:18:22.200 --> 0:18:27.320 much more healthy environment for businesses and consumers. So all 0:18:27.359 --> 0:18:31.480 of those reasons are the why excuse me? So let's 0:18:31.480 --> 0:18:33.280 talk about fixing those trade agreements. One of the things 0:18:33.320 --> 0:18:37.159 you mentioned, which comes within your purview, um to what extent, 0:18:37.320 --> 0:18:39.560 is fixing the trade agreements. You've been very outspoken you 0:18:39.600 --> 0:18:42.399 want trade, but you want fair trade. To what extent 0:18:42.600 --> 0:18:46.639 to tightening up those trade arrangements encourage US investment in 0:18:46.680 --> 0:18:48.879 the sense that people need to be here to manufacture 0:18:48.920 --> 0:18:53.720 so they're not subject to whatever restrictions there might be. Well, 0:18:53.760 --> 0:18:57.840 I think it's a factor, but probably a relatively small factor. 0:18:58.000 --> 0:19:01.600 I think cutting the tax or it's hugely as we 0:19:01.680 --> 0:19:06.920 have is planned to do, is a very very big benefit. 0:19:07.440 --> 0:19:12.080 Our tax structure used to be a major disadvantage. Similarly, 0:19:12.480 --> 0:19:17.280 our regulatory structure had been a huge disadvantage. We were 0:19:17.440 --> 0:19:22.040 I believe the most overregulated country going well, when you're 0:19:22.040 --> 0:19:24.040 paying a lot of tax and you're having a lot 0:19:24.119 --> 0:19:29.679 of regulatory bread tape, that discourages not only green field investment, 0:19:30.080 --> 0:19:33.919 it discourages any kind of investment in the country. So 0:19:34.040 --> 0:19:38.960 we think it's mostly the question of removing impediments and 0:19:39.000 --> 0:19:42.880 then coupling that with the normal benefits of the US 0:19:42.960 --> 0:19:48.600 A huge population base, wonderful market, open access to it 0:19:48.720 --> 0:19:54.000 once you're here, highly educated workforce. That those are the 0:19:54.080 --> 0:19:58.199 kinds of fundamental factors that were always at work, but 0:19:58.359 --> 0:20:02.840 now we're supplemented with the improvements in business climate created 0:20:02.880 --> 0:20:06.760 by President Trump. As you suggest, Mrs Secretary, you have 0:20:06.920 --> 0:20:09.680 plans to cut taxes as well as reform taxes to 0:20:09.840 --> 0:20:12.560 somewhat different things. You have plans, and there's a lot 0:20:12.600 --> 0:20:15.520 of you worry about that initially during the tramp administration. 0:20:15.880 --> 0:20:17.760 What do you say too, would be investors right now 0:20:17.760 --> 0:20:19.639 and say, let's wait and see if that happens, because 0:20:19.720 --> 0:20:23.160 right now it looks somewhat less likely or certainly delayed 0:20:23.240 --> 0:20:29.280 from what we originally thought last January. Well, the timing 0:20:29.560 --> 0:20:33.960 the administration has very little control over that really requires 0:20:34.040 --> 0:20:37.919 activity by the Congress. But we seem to be making 0:20:38.080 --> 0:20:42.560 very good progress on healthcare reform, and that's really the 0:20:42.880 --> 0:20:48.000 prerequisite to getting the tax reform enacted. So the first 0:20:48.080 --> 0:20:51.280 key to timing on tax will be when we get 0:20:51.280 --> 0:20:56.120 the healthcare reform completed. Uh. Talk about the trade agreements 0:20:56.119 --> 0:20:59.080 again that you raise. Where are we right now? For example, 0:20:59.119 --> 0:21:02.040 let's be specific NAFTA. We've talked about that before when 0:21:02.040 --> 0:21:04.000 you've been on the program. Where are we in the 0:21:04.040 --> 0:21:07.960 process of renegotiating NAFTA and who's responsible? Is it you 0:21:08.119 --> 0:21:12.679 or is it your colleague Bob Lyheiser. Well as to 0:21:12.800 --> 0:21:17.560 where we are, we are right now awaiting the maturation 0:21:17.840 --> 0:21:21.280 of the ninety day letter that we're required under the 0:21:21.320 --> 0:21:25.840 Trade Promotion Act to send to the Congress. That clock 0:21:26.040 --> 0:21:31.280 text on the of August. Thirty days before that, we 0:21:31.359 --> 0:21:34.920 will we will be revealing to the Congress a more 0:21:34.960 --> 0:21:40.240 detailed negotiating strategy than we had discussed with them before. 0:21:40.800 --> 0:21:44.000 So the eighteenth of August is a big red letter 0:21:44.119 --> 0:21:48.359 day for trade. But even short of that, we have 0:21:48.440 --> 0:21:51.680 a big day very soon. In the middle of July 0:21:52.520 --> 0:21:56.840 is our next announcement period, the next meeting session with 0:21:56.960 --> 0:22:00.720 the Chinese. As you know, we've accomplished quite a little 0:22:00.720 --> 0:22:06.199 bit ever since the dayton at the Mara Largo conference, 0:22:06.720 --> 0:22:11.240 and we're hoping to achieve still more deliverable items in 0:22:11.320 --> 0:22:14.200 the very very near future. Okay, we want to welcome 0:22:14.200 --> 0:22:16.960 again our listeners on Bloomberg Radio as well as Bloomberg TV. 0:22:17.000 --> 0:22:19.720 We're talking with Wilbert Ross, the U S. Commerce Secretary. 0:22:19.840 --> 0:22:21.760 So before we get to China, let's go back just 0:22:21.800 --> 0:22:24.840 for moments and AFTA. So you're saying mid July, there's 0:22:24.840 --> 0:22:27.200 supposed to be a more detailed outline of the negotiating 0:22:27.240 --> 0:22:31.400 strategy e commerce than August eighteen, you really start the negotiations. 0:22:31.440 --> 0:22:33.200 Give us a sense after that, what is your hope 0:22:33.200 --> 0:22:35.800 on the timetable when you might have something concluded. With 0:22:35.920 --> 0:22:41.520 the Mexican government and the Canadian well, both governments are 0:22:41.640 --> 0:22:46.600 quite receptive to the idea of a renegotiation. They both 0:22:46.720 --> 0:22:51.080 know that this is at best an outdated agreement, doesn't 0:22:51.119 --> 0:22:55.320 really address the digital economy, that doesn't very much address 0:22:55.400 --> 0:22:59.880 services in general, certainly doesn't do much on financial services. 0:23:00.720 --> 0:23:04.920 Also doesn't do very much unnatural resources. So those are 0:23:04.960 --> 0:23:09.960 some big gaping holes in it. In part because some 0:23:10.080 --> 0:23:15.760 Mexicans have changed their regulations for the better unnatural resources, 0:23:15.840 --> 0:23:19.000 and in part because nobody way back when NAFTA was 0:23:19.080 --> 0:23:23.719 negotiated even knew there would be the digital economy. So 0:23:23.840 --> 0:23:27.359 first of all, it needs updating. Second of all, that 0:23:27.560 --> 0:23:33.840 needs some reprovisioning to adjust to the economic realities of today. 0:23:34.000 --> 0:23:38.919 For example, their rules of origin, namely what percentage of 0:23:38.960 --> 0:23:43.000 the total content of a product will qualify as true 0:23:43.119 --> 0:23:48.360 NAFTA product even though it came from outside NAFTA. In automotive, 0:23:48.760 --> 0:23:54.160 they specified particular parts to which the percentages applied. Well, 0:23:54.200 --> 0:23:58.399 half those parts aren't even used in cars anymore because 0:23:58.440 --> 0:24:02.800 automotive technology has progressed. So there are many things like 0:24:02.880 --> 0:24:07.800 that that need to be fixed, and I think everybody 0:24:07.960 --> 0:24:11.359 is up to the idea of fixing them. Is currency 0:24:11.400 --> 0:24:16.880 manipulation on the agenda and the negotiations with Canada and Mexico, Well, 0:24:16.960 --> 0:24:22.200 neither Canada nor Mexico in my view, is a currency manipulator. 0:24:22.720 --> 0:24:27.720 As you're aware, the Congress has specified that determining whether 0:24:27.880 --> 0:24:32.880 currency is manipulated is the purview of Treasury, and Congress 0:24:32.920 --> 0:24:38.240 has laid out very very specific tests to apply. Those 0:24:38.280 --> 0:24:42.520 tests are applied twice a year, generally in April and October, 0:24:43.119 --> 0:24:48.000 and very recently Treasury Secretary Manuchtion released the results of 0:24:48.080 --> 0:24:52.760 this year and found that there are no currency manipulations. 0:24:52.800 --> 0:24:57.680 That's quite different from the question are there misalignments. I 0:24:57.720 --> 0:25:00.920 think the Mexican pace, so for example, has been very 0:25:01.000 --> 0:25:05.600 weak against the dollar, partly out of concern that the 0:25:05.640 --> 0:25:10.800 trade negotiations might go very badly. That lately has rallied some. 0:25:11.560 --> 0:25:14.480 And my best guess is that once we have the 0:25:14.560 --> 0:25:17.639