WEBVTT - Putin Is Doubling Down on Support of Assad, Ariel Cohen Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg P L Podcast on iTunes, 0:00:20.840 --> 0:00:30.080 SoundCloud and at Bloomberg dot com. Secretary of State Rex 0:00:30.200 --> 0:00:34.880 Tillerson meeting with Sergei Lavrov, the Russian foreign minister, meeting 0:00:34.920 --> 0:00:38.440 in the Kremlin today to talk about, among other things, Syria. 0:00:38.800 --> 0:00:41.360 Here to tell us about Syria is Dr Ariel Cohen, 0:00:41.440 --> 0:00:44.519 Senior Fellow of the Atlantic Council. He is also the 0:00:44.560 --> 0:00:47.519 director of the Center for Energy and Natural Resources and 0:00:47.600 --> 0:00:51.919 Geopolitics at the Institute for Analysis of Global Security, and 0:00:52.080 --> 0:00:56.360 Dr Cohen joins us from Washington. Dr Cohen, in the 0:00:56.440 --> 0:01:01.480 context of your sort of dual roles energy natural resources 0:01:01.520 --> 0:01:04.360 as well as politics, or if you could speak to 0:01:04.600 --> 0:01:08.520 the issue of natural resource as a strategic issue for 0:01:08.600 --> 0:01:13.240 the Russians, Is there anything that Rex Tillerson, he's formally 0:01:13.240 --> 0:01:15.720 of course chief executive X on mobile. Is there anything 0:01:15.760 --> 0:01:20.959 that he can say or do that would soften Vladimir 0:01:21.040 --> 0:01:26.120 Putin's position when it comes to Russia and Syria. I 0:01:26.200 --> 0:01:29.399 doubt it because putting his doubling down on his support 0:01:29.480 --> 0:01:33.720 of Bashar Assad, he probably did not expect Donald Trump 0:01:33.760 --> 0:01:41.080 to turn against Russia and against Russian alliance with assad. Um. 0:01:41.120 --> 0:01:44.200 As you know, Trump called us At an animal. He 0:01:44.240 --> 0:01:49.480 has written him off just after the administration said maybe, uh, 0:01:49.680 --> 0:01:52.240 pushing as Adat was not a priority, and then of 0:01:52.280 --> 0:01:56.760 course assad went and did something so horrible as guessing children. Uh. 0:01:56.920 --> 0:02:03.760 Tillerson is in Moscow. He is um actually decorated Russian um, 0:02:03.920 --> 0:02:07.360 beneficiary of the Order of Friendship given to him by 0:02:07.400 --> 0:02:11.079 Putting himself several years ago for the X on Russia 0:02:11.600 --> 0:02:16.400 X and ross neft Um big oil deal. He understands 0:02:16.480 --> 0:02:22.200 Russian predicament um. Russia is pretty much a one uh 0:02:22.360 --> 0:02:26.240 one pony trick, one p show with oil and gas 0:02:26.280 --> 0:02:32.440 and some of other um raw materials. Russia exports lumbert timber, 0:02:33.120 --> 0:02:36.799 some metals, and of course weapons and nuclear reactors. Of course, 0:02:37.440 --> 0:02:42.760 as you saw with the bankruptcy of Westinghouse, Russian Rossatom 0:02:43.120 --> 0:02:44.840 is going to be in a better position to sell 0:02:45.160 --> 0:02:47.880 reactors around the world. But basically Russia is a bad 0:02:47.880 --> 0:02:51.919 economic situation and what it's doing in Syria is making 0:02:52.200 --> 0:02:55.280 that situation much much worse. Wait, well to that point, 0:02:55.360 --> 0:02:58.760 Dr Colm, what I don't fully understand is why Russia 0:02:58.880 --> 0:03:01.480 is so loyal to the shar Asad and why they 0:03:01.520 --> 0:03:07.120 are so committed to being involved in the Syria Civil war. Uh. 0:03:07.160 --> 0:03:12.760 They want to support uh their ally UH, not just Bashar, 0:03:13.040 --> 0:03:16.600 his father Hafez was Russian ally going all the way 0:03:16.639 --> 0:03:20.320 back to the nineties seventies. UH. They have a strategic 0:03:20.360 --> 0:03:25.680 relationship with the Allawi's, with a sect that Bashar and 0:03:25.840 --> 0:03:30.680 his father came from. It's essential in Alloite Ala White regime, 0:03:30.800 --> 0:03:34.000 and also Russia in Iran are in a strategic alliance 0:03:34.080 --> 0:03:39.440 as well as the terrorists Iranian offshoot called Kisbala in Lebanon. 0:03:39.840 --> 0:03:43.920 So this is the anti Western, anti Sunni Arab bloc 0:03:44.160 --> 0:03:47.560 in the Middle East. It is the Iranian Crescent going 0:03:47.600 --> 0:03:50.560 all the way from Tehran to the Mediterranean, and Russia 0:03:50.720 --> 0:03:53.960 is a very very important part of that. Is there 0:03:54.000 --> 0:03:58.040 any possibility that the Saudis will come in and maybe 0:03:58.720 --> 0:04:03.119 change the agreement to curtail the increase of oil because 0:04:03.240 --> 0:04:07.560 if Russia is dependent on revenue from oil production, why 0:04:07.600 --> 0:04:11.120 would the Saudis as Sunni state that is really in 0:04:11.200 --> 0:04:15.400 confrontation with Iran and with bush are Al Assad. Why 0:04:15.400 --> 0:04:19.920 would the Saudis continue behavior that in a sense offers 0:04:19.960 --> 0:04:24.480 the Russians a financial incentive to keep doing what they're doing. Well, 0:04:24.560 --> 0:04:26.719 Russians are not happy with the oil at fifty, They 0:04:26.760 --> 0:04:28.800 would much of it have an oil at seventy five 0:04:28.920 --> 0:04:33.159 or But for the Sauties it's also a challenge. They five. 0:04:33.720 --> 0:04:36.839 They try to cut a deal with Puchin, in with 0:04:36.920 --> 0:04:40.920 Iran and limit the production. But guess what, every time 0:04:40.960 --> 0:04:45.720 the production the price because of the production cut goes 0:04:45.760 --> 0:04:51.880 to sixty. Our shale producers in the United States, in 0:04:52.120 --> 0:04:55.600 the oil sands in Canada and other shale producers can 0:04:55.640 --> 0:05:00.200 pump more and the price almost automatically drives down back 0:05:00.240 --> 0:05:03.320 to fifty or even below fifty. The Salis have their 0:05:03.360 --> 0:05:08.680 own huge um economic problem with cheap oil. They are 0:05:08.760 --> 0:05:13.840 in deficit. Uh, they are preparing Saudi Aramco for an 0:05:13.880 --> 0:05:16.599 I p O that's always going to be the largest 0:05:16.640 --> 0:05:19.760 I p O in the world. So Satis don't have 0:05:19.880 --> 0:05:24.880 a lot of margin. But we'll see if the Russians 0:05:24.880 --> 0:05:28.760 are really are not playing ball. Is Iranians are still threatening. Yes, 0:05:28.800 --> 0:05:32.599 the versalities still have the spare capacity to flood the 0:05:32.640 --> 0:05:37.080 market and drive oil to Let's say, at which point 0:05:37.120 --> 0:05:41.640 it's not good news for our domestic shell producers. Real quick, 0:05:41.720 --> 0:05:44.680 At what point do you think that the economic issues 0:05:44.720 --> 0:05:47.640 that Russia is facing with lower oil prices and sanctions 0:05:47.880 --> 0:05:53.800 will feed into their willingness to compete continue supporting Syria. Well, 0:05:53.839 --> 0:05:57.279 there two or three challenges here. Number one, Uh, the 0:05:57.360 --> 0:06:00.560 Russians are very careful how they intervene in Syria. It's 0:06:00.760 --> 0:06:04.159 a relatively small force. It's not alone a lot of 0:06:04.200 --> 0:06:08.480 ground troops. It's more air force. But uh, the first 0:06:08.600 --> 0:06:10.960 sort of ringer for the Russians was at the G 0:06:11.160 --> 0:06:16.440 seven meeting where us uk um and maybe Germany. I know, 0:06:16.560 --> 0:06:20.640 actually Germany was against it. They tried uh to impose 0:06:20.760 --> 0:06:26.159 additional sanctions against Russia because of the Syrian chemical attack. 0:06:26.240 --> 0:06:30.760 Italy and Germany where against it. But the Russians continue, 0:06:31.440 --> 0:06:33.159 then we might have to say, maybe they will do 0:06:33.240 --> 0:06:35.120 more sanctions. I'm so sorry, We're gonna have to leave 0:06:35.120 --> 0:06:37.200 it there. We can talk all afternoon. Dr Ariel Cohen, 0:06:37.440 --> 0:06:40.080 Senior Fellow at the Atlantic Council, also director of the 0:06:40.120 --> 0:06:44.240 Center for Energy Natural Resources, and geopolitics at the Institute 0:06:44.279 --> 0:06:58.640 for Analysis of Global Security. We want to get the 0:06:58.680 --> 0:07:01.800 voice of an executive from the automobile industry joining us 0:07:01.800 --> 0:07:03.720 now as Ian Robertson. He is a member of the 0:07:03.760 --> 0:07:08.120 Board of Management and Global Sales and Marketing director for BMW. 0:07:08.360 --> 0:07:11.800 He joins us today from the New York International Auto Show, 0:07:11.840 --> 0:07:14.720 taking place at the Jacob Javits Center in New York. 0:07:15.000 --> 0:07:17.320 Ian Robertson, thank you very much for being with us. 0:07:19.000 --> 0:07:20.360 Good to be with you. All right. I want to 0:07:20.360 --> 0:07:21.880 give you the chance, first of all, just to give 0:07:21.960 --> 0:07:25.640 us an update on some sales reports that you've just released, 0:07:25.640 --> 0:07:28.520 and then we'll get into the details of what you're unveiling, 0:07:28.560 --> 0:07:31.680 what you're showing off at the New York International Auto Show. 0:07:33.520 --> 0:07:36.440 You know, we just announced quality results. They're up around 0:07:36.440 --> 0:07:39.040 five and a half percent. But I think a notable 0:07:39.080 --> 0:07:42.800 achievement was we did two fifty four thousand sales in 0:07:42.880 --> 0:07:45.520 March alone, and it wouldn't have been that long ago 0:07:45.600 --> 0:07:47.560 where that sort of number would have been almost an 0:07:47.600 --> 0:07:50.480 impossible dreams. So I'm delighted with the performance. Right around 0:07:50.480 --> 0:07:53.720 the world during Q one, we've heard a lot, particularly 0:07:53.800 --> 0:07:58.200 in the US, about lower resale values of cars and 0:07:58.520 --> 0:08:01.720 that you know, frankly, people have been saturated, They borrowed 0:08:01.800 --> 0:08:04.120 so much that they aren't going to buy that much 0:08:04.200 --> 0:08:08.040 more in the near future. How come BMW isn't reflecting 0:08:08.120 --> 0:08:12.920 that in their March sales. You know, I'm on the 0:08:13.000 --> 0:08:16.720 record of saying at the start of that I thought 0:08:16.720 --> 0:08:19.200 the US market had pete. I thought it was being 0:08:19.240 --> 0:08:21.120 over pushed. I thought there was a lot of inventory 0:08:21.160 --> 0:08:23.000 on the ground, and you know that proved to be 0:08:23.080 --> 0:08:25.800 the case. We we cut our inventory a lot last year. 0:08:26.680 --> 0:08:29.480 We didn't chase the last volume, which I think was 0:08:29.520 --> 0:08:32.120 an important step because at the end of the day, 0:08:32.240 --> 0:08:35.319 you know, we're driving for a profitability position as well. 0:08:35.800 --> 0:08:40.240 Um So from that perspective, you know, our results actually 0:08:40.360 --> 0:08:43.959 underscore that. As we come into this year, GDP numbers 0:08:43.960 --> 0:08:47.480 are good, the unemployment figures are also good, and I think, 0:08:47.679 --> 0:08:50.199 you know, there are some encouraging signs on Wall Street. 0:08:50.360 --> 0:08:52.679 Having said all of that, I don't expect a lot 0:08:52.760 --> 0:08:55.480 of upside in the in the US market this year 0:08:55.880 --> 0:08:59.480 as well. So I'm very much in the position of 0:08:59.520 --> 0:09:02.959 we're going to a flat maybe single digit growth. We 0:09:03.040 --> 0:09:05.720 saw that in Q one. Let's see how it develops. 0:09:05.800 --> 0:09:07.679 During the rest of the year, But I don't think 0:09:07.679 --> 0:09:09.719 there's a big upside in the US market this year. 0:09:10.160 --> 0:09:14.040 Ian Robertson, you almost didn't make it into the automobile industry. 0:09:14.320 --> 0:09:19.840 You studied marine science at I guess the University of Whales, right, 0:09:19.880 --> 0:09:21.960 and you were not going to be in a desert 0:09:22.120 --> 0:09:23.880 or in the North Sea. You wanted to be in 0:09:24.000 --> 0:09:26.439 something that you were passionate about when you when you 0:09:26.640 --> 0:09:29.120 joined the Rover at the age of seventeen, did you 0:09:29.160 --> 0:09:32.440 ever think you'd be talking about electric and electric hybrid cars? 0:09:32.520 --> 0:09:34.760 I think what BMW sold twenty thousand of them, or 0:09:34.760 --> 0:09:39.040 at least delivered more than twenty thousand so far. That's true. 0:09:39.080 --> 0:09:41.280 I actually joined the car industry straight from university when 0:09:41.320 --> 0:09:43.600 I was twenty one, but that's a long time ago 0:09:43.640 --> 0:09:47.360 as well. Now it's thirty eight years uh this this year, 0:09:47.520 --> 0:09:50.839 so you know, from that perspective, the industry has changed 0:09:50.880 --> 0:09:53.840 a lot. But you know, I'm also of the opinion 0:09:53.920 --> 0:09:55.480 that what we're going to see in the next five 0:09:55.640 --> 0:09:58.319 or seven years will probably be more changed than we've 0:09:58.360 --> 0:10:00.360 seen in the past hundred and the car the street 0:10:00.360 --> 0:10:04.199 BMW included is just over a hundred years old and 0:10:04.320 --> 0:10:07.679 that's because we're seeing new path trains, we're seeing new materials, 0:10:07.760 --> 0:10:11.319 were saying new ways of designing cars. We're seeing the 0:10:11.480 --> 0:10:13.880 customer behaving in a way which they haven't done in 0:10:13.920 --> 0:10:16.520 the past. Because you know, we're at the moment, for example, 0:10:16.880 --> 0:10:19.720 renting cars by the minute in many, many cities around 0:10:19.720 --> 0:10:23.599 the world. So all of these changes brought about by digitalization, 0:10:23.720 --> 0:10:27.120 brought about by the new way of thinking with autonomous 0:10:27.240 --> 0:10:31.439 driving and electro mobility are actually changing the whole perspective 0:10:31.480 --> 0:10:34.920 of the industry. It's really really exciting times. Which market 0:10:35.080 --> 0:10:38.240 around the world is the one that has the greatest 0:10:38.280 --> 0:10:42.760 demand for electric cars right now? You know, it very 0:10:42.840 --> 0:10:45.640 much depends at this stage in the development what governments 0:10:45.679 --> 0:10:47.760 are doing. And you know the example I always use 0:10:47.840 --> 0:10:50.880 is Norway. You know, around about six seven years ago 0:10:51.080 --> 0:10:55.520 Northern Norwegian government, by the way, about the Norwegian economy 0:10:55.640 --> 0:10:58.640 is based on oil, they decided that they wanted to 0:10:58.679 --> 0:11:02.200 go for electromobility. As such, they put a big incentive 0:11:02.240 --> 0:11:04.440 in place, no v A T on the cars. They 0:11:04.480 --> 0:11:06.720 allowed people to drive in the bus lane. So if 0:11:06.840 --> 0:11:10.040 you work downtown in Oslo, you can say forty five 0:11:10.040 --> 0:11:12.120 minutes in the morning, forty five minutes in the afternoon, 0:11:12.559 --> 0:11:17.079 free charging, free infrastructure. Last year, over twenty of the 0:11:17.240 --> 0:11:20.600 total market was electric. If you look at other governments 0:11:20.640 --> 0:11:23.920 who've done similar things, that's where it really works well. 0:11:24.080 --> 0:11:27.280 And I think we are seeing now an acceleration of 0:11:27.360 --> 0:11:30.560 this right around the world. You know, I'm struck by 0:11:30.960 --> 0:11:33.400 the US and how different it is in the U 0:11:33.559 --> 0:11:36.400 s which is the biggest car market. Correct or is 0:11:36.600 --> 0:11:38.199 China Ano the biggest car up market or is it 0:11:38.320 --> 0:11:41.160 still the US? It's still the US right now. China 0:11:41.240 --> 0:11:43.040 is now the biggest car market in the world. China 0:11:43.600 --> 0:11:46.079 overtook the US three or four years ago. Wow, and 0:11:46.160 --> 0:11:48.360 way behind the times. Thank you for that clarification. So 0:11:48.720 --> 0:11:51.400 in the US, which is a massive car market, you 0:11:51.480 --> 0:11:54.959 have people going to trucks, uh, and you have you know, 0:11:55.160 --> 0:11:57.880 this sort of move back toward fossil fuel vehicles. Is 0:11:57.920 --> 0:12:00.679 there any concern or downside risk that this move to 0:12:00.760 --> 0:12:04.880 electric won't go quickly enough to justify the investments that 0:12:05.000 --> 0:12:10.199 BMW is making in the technology. You know, we we 0:12:10.360 --> 0:12:13.360 look at every market individually, and as I said, government 0:12:13.440 --> 0:12:16.800 policy plays a big part in the actual takeup of 0:12:16.880 --> 0:12:20.720 electronome ability. But over time, you know, we are always 0:12:20.840 --> 0:12:24.439 seeing the reduction in emission levels. It's a very very 0:12:24.480 --> 0:12:27.360 important topic for US and the industry in total. So 0:12:27.960 --> 0:12:33.040 overall this is a progressive position around the world. So, yes, 0:12:33.360 --> 0:12:36.120 trucks are important here. By the way, trucks are important 0:12:36.200 --> 0:12:38.040 or s A V s are important in many many 0:12:38.120 --> 0:12:40.520 markets around the world. In our Q one here in 0:12:40.559 --> 0:12:44.079 the US, we did around trucks, um. But at the 0:12:44.160 --> 0:12:47.160 same time that also tells you that the market is 0:12:47.240 --> 0:12:51.120 non trucks. So from that perspective, it's a good balance. Now, 0:12:51.480 --> 0:12:53.679 Ian Robertson, are you're going to be in Coachella this 0:12:53.920 --> 0:12:59.160 uh this weekend? I'm not. I'm I'm back in Europe 0:12:59.200 --> 0:13:01.560 and I'm under Shane High Alright. The reason I asked 0:13:01.840 --> 0:13:04.640 exactly twelve hours of time delay? Well, the reason I 0:13:04.720 --> 0:13:08.199 asked us because of course BMW is debuting a variety 0:13:08.240 --> 0:13:10.719 of models, the BMW I three Electric. It will be 0:13:10.760 --> 0:13:14.040 at the Music Festival, uh this coming weekend. Tell us 0:13:14.040 --> 0:13:19.120 about the I performance line. You know, I performance is 0:13:19.160 --> 0:13:22.600 in good shape. And this morning in the World Car Awards, 0:13:22.679 --> 0:13:24.760 the I three picked up the Urban Car of the Year, 0:13:24.840 --> 0:13:27.840 so another accolade. And you know last year we did 0:13:27.880 --> 0:13:30.240 sixty two thousand electric cars. We're aiming to do a 0:13:30.360 --> 0:13:33.320 hundred thousand this year. Q one would tell us where 0:13:33.559 --> 0:13:36.079 on target to achieve that, and that tells you this 0:13:36.320 --> 0:13:40.000 momentum is building. So you know, another addition to the 0:13:40.120 --> 0:13:42.559 range is the five thirty can be used in the 0:13:42.640 --> 0:13:45.839 multiple occupancy lanes in California. That's the first as well. 0:13:46.240 --> 0:13:48.719 There are more cars in the pipeline, so we have 0:13:49.080 --> 0:13:52.280 an I eight roadster that's coming, and of course we've 0:13:52.280 --> 0:13:55.679 announced an electric I three, an electric Mini, and what 0:13:55.840 --> 0:13:59.079 we're calling the I Next vehicles. So the trend is 0:13:59.320 --> 0:14:02.760 is very very clear all around the world. Thank you 0:14:02.880 --> 0:14:05.880 so much. Fascinating to hear the new developments. Ian Robertson, 0:14:06.000 --> 0:14:09.200 member of the board of Management and a global sales 0:14:09.280 --> 0:14:13.000 and marketing director for BMW. He was speaking from the 0:14:13.120 --> 0:14:15.920 Javit Center where the New York International Auto Show is. 0:14:16.080 --> 0:14:19.720 Right now and tomorrow we will be broadcasting live from 0:14:19.880 --> 0:14:22.480 the New York International Auto Show at the Javit Center 0:14:22.680 --> 0:14:25.640 to bring you the newest models, the latest automative trends 0:14:25.680 --> 0:14:27.480 and sales outlook. So I'm sure we'll be talking a 0:14:27.560 --> 0:14:31.920 lot more about electric and the push into more varieties 0:14:32.160 --> 0:14:34.960 of such vehicles. I'm Lisa Baram Away's here with pim Fox. 0:14:35.080 --> 0:14:50.360 This is Bloomberg. We are about to get earnings starting 0:14:50.440 --> 0:14:53.800 tomorrow from the biggest bank starting with JP Morgan City 0:14:53.840 --> 0:14:56.480 Group and Wells Fargo, and there are a lot of questions. 0:14:56.520 --> 0:14:59.400 I mean, we know that bond trading revenues are supposed 0:14:59.400 --> 0:15:01.040 to be us and if it, we also know that 0:15:01.160 --> 0:15:03.840 some of the loan loss provisions that they've been setting 0:15:03.840 --> 0:15:06.200 aside are expected to increase. To make sense of all 0:15:06.240 --> 0:15:09.480 of this and give a better vision into what we 0:15:09.520 --> 0:15:11.680 should look for, I want to bring in Michael Scanlon, 0:15:11.680 --> 0:15:15.440 who's a portfolio manager for Menu Life Asset Management. Michael, 0:15:15.760 --> 0:15:17.640 what are you looking for? What do you want to 0:15:17.840 --> 0:15:21.560 know from tomorrow's earnings results? Well, good morning and thanks 0:15:21.560 --> 0:15:24.360 for having me. So there'll be a number of key 0:15:24.480 --> 0:15:26.960 things that people will be focused on with this round 0:15:27.000 --> 0:15:30.040 of earnings. You know, it looks like the market related earnings. 0:15:30.280 --> 0:15:32.720 Market related revenues are going to be up year over year, 0:15:33.800 --> 0:15:38.880 largely largely driven by fixed trading, fixed income currencies and commodities. 0:15:39.960 --> 0:15:42.360 On the net interest margin side, you know, they'll be 0:15:43.040 --> 0:15:45.920 people will be more focused on what the commentary is 0:15:45.960 --> 0:15:47.920 in light of the fact that the yield on the 0:15:48.000 --> 0:15:51.520 tenure has gone down, uh thus far this quarter. And 0:15:51.720 --> 0:15:53.720 the other thing to really keep a focus on is credit. 0:15:53.840 --> 0:15:56.200 You know, there's been obviously a lot written, a lot 0:15:56.240 --> 0:15:58.520 in the press the last handful of weeks here on credit, 0:15:58.600 --> 0:16:02.040 whether it's subprime auto or the credit card companies. Uh So, 0:16:02.240 --> 0:16:04.520 just that there's any change there in terms of realized 0:16:04.560 --> 0:16:08.680 charge off rates are commentary around future expectations. Michael, is 0:16:08.800 --> 0:16:11.440 JP more get expensive if you believe that they're going 0:16:11.480 --> 0:16:15.320 to earn eight bucks a year? Uh So, the well, 0:16:15.360 --> 0:16:17.680 the eight dollar year number is even a little above 0:16:17.680 --> 0:16:19.680 where the street is for next year. But you know 0:16:19.760 --> 0:16:22.720 when you look at that company, um, you know, just 0:16:22.880 --> 0:16:25.880 looking at on a multiple basis, you know, near term, uh, 0:16:25.960 --> 0:16:27.920 it might be a little bit stretched, but obviously this 0:16:28.080 --> 0:16:30.680 is a franchise that has tremendous earnings power going forward. 0:16:31.240 --> 0:16:34.960 And when you think about the potential lightning for the 0:16:35.040 --> 0:16:39.800 regulatory environment or potentially a lighter ce car touch, uh, 0:16:39.960 --> 0:16:43.400 you know, your capital return story could really increase materially there, 0:16:43.440 --> 0:16:47.160 which obviously drives a much better total return for shareholders. Well, Michael, 0:16:47.200 --> 0:16:50.480 talking about the regulatory regime, do you expect that any 0:16:50.520 --> 0:16:53.520 of the banks will address some of the optimism that 0:16:53.600 --> 0:16:56.280 we've seen from investors that there will be sort of 0:16:56.320 --> 0:16:59.800 a pullback with respect particularly to capital requirements that that 0:17:00.240 --> 0:17:02.640 force these banks to hold chillions of dollars of h 0:17:02.840 --> 0:17:07.040 safe assets. Well, maybe you get some commentary around that 0:17:07.160 --> 0:17:10.840 and some optimistic views, but I mean, frankly, nobody has 0:17:10.920 --> 0:17:13.040 insight into exactly what's going to go on there in 0:17:13.200 --> 0:17:16.399 terms of lightning the touch. Uh So it would all 0:17:16.480 --> 0:17:19.920 be very subjective comments, uh, and nothing that you could 0:17:20.000 --> 0:17:23.719 objectively measure at this point. Although Michael, as a portfolio manager, 0:17:23.840 --> 0:17:27.200 when do you have to see something concrete in order 0:17:27.320 --> 0:17:30.320 to decide whether or not to buy into this idea 0:17:30.480 --> 0:17:34.879 of less regulation and perhaps lower capital buffers. Yeah, so 0:17:35.000 --> 0:17:36.439 right now, I think when you look at the stocks, 0:17:36.480 --> 0:17:39.240 that's still sort of uh, you know, not really priced 0:17:39.280 --> 0:17:41.240 into the stocks. It's still somewhat of a free call 0:17:41.320 --> 0:17:43.399 option on the future. I think when you look at 0:17:43.400 --> 0:17:45.360 a lot of these franchises, and you know, we've talked 0:17:45.359 --> 0:17:48.920 about GP Morgan specifically, I mean that's a company where, um, 0:17:49.160 --> 0:17:51.080 you know, they've still got a lot of earnings leverage 0:17:51.119 --> 0:17:53.760 going forward, and then if you're talking about taking their 0:17:53.800 --> 0:17:57.439 payout ratio between buy back and dividends, you know, somewhere 0:17:57.520 --> 0:18:00.360 closer to a full return of earn is on an 0:18:00.400 --> 0:18:03.200 annual basis. Um. You know, at this point, I don't 0:18:03.200 --> 0:18:05.200 think the market is pricing that in it all. So 0:18:05.280 --> 0:18:08.680 if we do get positive, um, you know, concrete details 0:18:08.720 --> 0:18:11.879 on exactly what's going on there, that could drive further upside. Michael, 0:18:11.880 --> 0:18:15.040 I want to get your thoughts on Wells Fargo and 0:18:15.200 --> 0:18:17.479 the performance that Tim Sloan is doing. Stock is down 0:18:17.520 --> 0:18:19.520 about two and three quarters of our percent so far 0:18:19.640 --> 0:18:22.880 this year, pays nearly a three percent dividend. How's Tim 0:18:22.960 --> 0:18:29.080 Sloan reviving Wells Fargo? Yeah, so obviously Wells fargoes and 0:18:29.200 --> 0:18:32.359 the crosshairs right now in terms of the fact that 0:18:32.480 --> 0:18:35.679 this this issue from late last year is still lingering. Uh, 0:18:35.800 --> 0:18:38.480 that's not a stock that we currently have in our portfolio. 0:18:38.800 --> 0:18:41.199 The issue, I'm sorry, Michael, the issue that you're referencing 0:18:41.400 --> 0:18:44.920 has to do with the opening of fraudulent accounts by 0:18:45.400 --> 0:18:48.600 members of the workforce at Wells Fargo in order to 0:18:48.640 --> 0:18:52.120 meet sales goals. At least that's the allegations, correct, correct, Yeah, 0:18:52.160 --> 0:18:55.040 just the aggressive sales tactics. And you know what ultimately 0:18:55.119 --> 0:18:59.080 looks like some fraud um and clawback executive pay clawbacks 0:19:00.000 --> 0:19:02.639 actly two and the cloud back executive compensation in light 0:19:02.720 --> 0:19:05.000 of the discoveries there. You know, I think when you 0:19:05.080 --> 0:19:08.280 look at Wells, obviously still a great franchise. Uh, you know, 0:19:08.480 --> 0:19:10.760 right now, we don't own the stock in the portfolio. 0:19:10.920 --> 0:19:12.960 We think there's still a bit of an overhang with 0:19:13.040 --> 0:19:15.800 this ongoing investigation. Maybe the news even gets a little 0:19:15.840 --> 0:19:18.560 bit worse from here. Um. But frankly, when we look 0:19:18.600 --> 0:19:21.080 at our portfolio, we like some of these names that 0:19:21.160 --> 0:19:23.840 have more capital markets exposure because we think there's more 0:19:24.000 --> 0:19:26.720 upside there. So some of our bigger holdings in the 0:19:26.800 --> 0:19:29.920 portfolio GP Oregon City Group, which is got to bias 0:19:29.960 --> 0:19:32.560 towards that side of the market. Michael, where do you 0:19:32.720 --> 0:19:37.320 think the positive momentum is coming from within the credit side? 0:19:37.400 --> 0:19:41.119 Is it coming from the incredible amount of investment rate 0:19:41.200 --> 0:19:44.000 bond issuance? Is it coming from uncertainty around the FED? 0:19:44.480 --> 0:19:46.960 What's your view on this? Yeah, I would say it's 0:19:46.960 --> 0:19:48.960 a combination of both those things. Actually. I mean, you 0:19:49.000 --> 0:19:51.360 think about what everything is going on around the world 0:19:51.400 --> 0:19:54.359 in terms of central bank activity right now. You know, 0:19:54.440 --> 0:19:57.240 the Fed's already increased rates, are going to continue increasing 0:19:57.359 --> 0:20:00.840 rates this year. Obviously, recently we've gotten some updates in 0:20:01.000 --> 0:20:03.520 terms of the expectation that the FED might be shrinking 0:20:03.560 --> 0:20:05.520 the balance sheet come the end of the year. The 0:20:05.600 --> 0:20:09.159 ECB is contemplating doing a rate hike and potentially lightening 0:20:09.200 --> 0:20:11.960 their balance sheet as well, So that should induce some 0:20:12.040 --> 0:20:16.040 more volatility into rates, which is ultimately good for these uh, 0:20:16.280 --> 0:20:18.320 these banks which are sensitive to that part of the 0:20:18.400 --> 0:20:21.320 market and their earnings. Uh. And then you know you 0:20:21.400 --> 0:20:24.160 also spoke about issuance, right, I mean, whether it's hie 0:20:24.240 --> 0:20:27.320 yield investment grade that the bond markets are definitely still 0:20:27.400 --> 0:20:31.320 open for business. All these deals are multiple times over subscribe, 0:20:31.400 --> 0:20:33.879 so um, you know that's that side of the business 0:20:33.960 --> 0:20:35.960 for these folks is very strong right now. So that 0:20:36.080 --> 0:20:38.560 means that you like JP Morgan and City Group to 0:20:38.800 --> 0:20:43.280 the top fixed income trading revenue shops by by revenue globally. 0:20:44.200 --> 0:20:45.680 I think that's a fair comment. Yeah, and then we 0:20:45.760 --> 0:20:48.800 also own uh Goldman Sacks as well, which would have 0:20:48.800 --> 0:20:51.639 exposed to that part of the market. Michael Scalon, we 0:20:51.960 --> 0:20:54.720 just quickly your thoughts on the re emergence of Glass 0:20:55.000 --> 0:20:58.399 Stiegel at least coming from Washington and several proposals that 0:20:58.520 --> 0:21:02.480 we expect from the Treasury secret To Stephen Manuchin. Yes, 0:21:02.640 --> 0:21:06.000 I can't say, um, I have any terribly unique ins 0:21:06.480 --> 0:21:08.760 into the expectations there. What I would say is, you know, 0:21:08.840 --> 0:21:11.240 we live in a very different world today from the 0:21:11.280 --> 0:21:14.600 structure of the capital markets perspective, UM, and it's going 0:21:14.640 --> 0:21:16.800 to take a pretty unique proposal. I'm not sure they 0:21:16.840 --> 0:21:18.280 could go back to what was in place in the 0:21:18.359 --> 0:21:20.359 late nineties. That probably have to do something which is 0:21:20.400 --> 0:21:23.280 pretty materially different. UM. So we'll have to wait and 0:21:23.320 --> 0:21:25.520 see what the structure of the proposals will look like. 0:21:25.840 --> 0:21:27.200 Al Right, I want to thank you very much for 0:21:27.320 --> 0:21:30.640 joining us. Michael Scanlon his portfolio manager from Manual Life 0:21:30.720 --> 0:21:34.320 Asset Management. He joins us from Boston, home to Bloomberg 0:21:34.520 --> 0:21:37.440 twelve hundred and of course, so we're talking about bank stocks, 0:21:37.480 --> 0:21:40.280 and banks will be releasing their earnings, beginning with JP Morgan. 0:21:40.400 --> 0:21:42.600 They will release their earnings tomorrow. We will cover them 0:21:42.680 --> 0:21:46.160 right here on Bloomberg Live. And also city groups they'll 0:21:46.160 --> 0:21:47.720 be coming out with their earnings as well. We also 0:21:47.760 --> 0:21:49.440 look forward to Wells Fargo and then I guess the 0:21:49.840 --> 0:21:52.600 next week put it on your calendar. We've got black 0:21:52.680 --> 0:22:08.320 Rock Reports, right, biggest ETF house. There you go while 0:22:08.440 --> 0:22:10.760 coming up, you know, Lisa brahma Witz, I think of 0:22:10.920 --> 0:22:12.440 May and I think of Memorial Day. You know what 0:22:12.520 --> 0:22:19.000 I think of the Indianapolis five race. Yes, you don't 0:22:19.040 --> 0:22:21.760 think about that? No? Al right, well you are going 0:22:21.800 --> 0:22:24.000 to think about it, because not only is the Indianapolis 0:22:24.040 --> 0:22:27.080 five taking place, but the weekend, I believe the weekend 0:22:27.119 --> 0:22:29.639 before that, two weekends before that, there's gonna be a 0:22:29.800 --> 0:22:34.480 major auction of classic automobiles in Indianapolis. And we're lucky 0:22:34.520 --> 0:22:37.159 to have Dave Majors. He's the chief executive officer of 0:22:37.280 --> 0:22:40.320 Meekam Auctions, joining us along with Frank Meekam. He's the 0:22:40.400 --> 0:22:45.119 director of Consignment also obviously of Mekam Auctions. Gentlemen, thank 0:22:45.160 --> 0:22:47.439 you very much for being here in the studio. Um, 0:22:47.600 --> 0:22:49.600 you know, I want to start off with you, Dave, 0:22:49.720 --> 0:22:52.960 maybe just give us an overview of the market, because boy, 0:22:53.000 --> 0:22:55.879 you know, if you look at the prices of muscle 0:22:56.000 --> 0:22:59.840 cars and we'll define that or you'll help us define 0:23:00.040 --> 0:23:04.919 uh uh, they are just skyrocketed. What is the reason 0:23:05.040 --> 0:23:08.680