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

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

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

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

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

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. One

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Speaker 1: of the biggest stories of the day is that Nissan

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Speaker 1: is removing Carlos Gone as chairman after he was arrested

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Speaker 1: in Tokyo for violations of financial impropriety uh and this,

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Speaker 1: of course has sent the a d r s down

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Speaker 1: by more than five percent. Of Nissan Johnny us down

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Speaker 1: to talk a little bit more about this is David Welch,

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Speaker 1: Detroit bureau trief for Bloomberg News as well as her

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Speaker 1: own Matthew Miller of Bloomberg Television and Bloomberg Radio, who

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Speaker 1: is in New York in our eleven three oh studios.

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Speaker 1: I want to get to Matt, but David, let's start

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Speaker 1: with you. Can you lay out what the most important

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Speaker 1: details are that have come out so far about the

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Speaker 1: financial improprieties and what it means for Nissan going forward? Sure,

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Speaker 1: so what they've accused him of, actually, there hasn't been

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Speaker 1: an official accusation by Japanese authorities, but what they're saying

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Speaker 1: is basically, he understated how much income he was making

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Speaker 1: by about forty four million dollars. And then in a

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Speaker 1: very old, say damning but also a vague press conference,

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Speaker 1: uh Nissan uh CEO psychois said that he has also

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Speaker 1: misappropriated company resources. And from there you have to think

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Speaker 1: he was, you know, could this be overusing the company plane?

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Speaker 1: Is it uh abusing expense accounts and drafting cash resources

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Speaker 1: out of the company. I mean it sort of couldn't

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Speaker 1: encompass all of those things, and they were moving him immediately.

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Speaker 1: Mitsubishi Motors, which is also part of the three way

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Speaker 1: alliance with these three car companies, have done the same thing.

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Speaker 1: And when I was last looking at that, there were

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Speaker 1: no board was reviewing the whole situation and figuring out

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Speaker 1: what they're going to do. This is huge because going

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Speaker 1: is the guy who saved Nissan back in the late

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Speaker 1: nineties when Renault bought a big chunk of the company

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Speaker 1: for six billion dollars, Nissan was really kind of teetering

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Speaker 1: on bankruptcy and with six billion from Renault and Carlos Goings,

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Speaker 1: cost cutting and product plan and factory turnaround. They came

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Speaker 1: roaring back and he has run these three companies as

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Speaker 1: an icon for almost two decades and for it to

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Speaker 1: end this way is uh catastrophic for him and it's

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Speaker 1: going to bring about massive change for the for all

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Speaker 1: three companies involved. Matt Miller, I want to bring you

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Speaker 1: into the conversation. You've met Carlos Going on a number

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Speaker 1: of times. Tell us a little bit about him, his

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Speaker 1: background and what you take away from your personal meetings

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Speaker 1: with him. Well, I mean, David points out that he

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Speaker 1: is an iconic figure. He is known as the rock

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Speaker 1: star of auto CEO and that title sometimes is used

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Speaker 1: for other people. It has been for Alan Moullally in

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Speaker 1: the past. It should have been for Sergio um Marcion

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Speaker 1: as well, but Going is the longest standing, you know,

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Speaker 1: rock in the auto industry. As far as those three

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Speaker 1: kind of biggest turnaround CEOs go um cut his teeth

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Speaker 1: in Australia, I believe, yeah, absolutely, and he's he's one

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Speaker 1: of these just like Sergio was the sort of multinational

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Speaker 1: citizens as well. I mean, I think the biggest problem

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Speaker 1: right now. UM of the three is Renault. You know,

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Speaker 1: their shares fell the furthest in France, and he's still

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Speaker 1: the CEO over No. Remember, he was kind of stepping

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Speaker 1: back from the alliance. He gave up his title as

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Speaker 1: CEO of Nissan UH. He was chairman of the alliance,

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Speaker 1: but was making UH making arrangements to make it permanent.

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Speaker 1: So a lot of investors UM were expecting. I think

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Speaker 1: it's fair to say that all investors were expecting this

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Speaker 1: was headed towards a merger, if not an official UM

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Speaker 1: tie up, at least something more official than it is now.

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Speaker 1: And that's what's up in the air. I think that's

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Speaker 1: the biggest concern for shareholders right now. Although it's important

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Speaker 1: to mention, as David's said, Japanese prosecutors haven't UM filed

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Speaker 1: official charges yet and he's not considered guilty. Although he

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Speaker 1: has been arrested, he has gone with the prosecutors. It's

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Speaker 1: not clear where he is right now, but he is,

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Speaker 1: let's say, being detained. Yeah, he also was removed his chairman,

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Speaker 1: so there's not changing that. Thank you so much both

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Speaker 1: of you for joining us. Matthew Miller, wonderful to see

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Speaker 1: you in person Happy Thanksgiving. Thanksgiving Bloomberg television and radio

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Speaker 1: host as well. Also thanks to David Welt, Detroit bureau chief,

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Speaker 1: Thank you so much. Afford joining us well, you know, Lisa.

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Speaker 1: Just earlier we got to listen to Ray Daio of

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Speaker 1: Bridgewater give his thoughts about the business cycle, about the

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Speaker 1: money management business. He was speaking with Barry Dholts of

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Speaker 1: Bloomberg Opinion, but on the cover of Bloomberg Markets magazine,

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Speaker 1: I dare say is an interview that is of equal weight,

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Speaker 1: and this is an interview with Abby Johnson of Fidelity,

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Speaker 1: and it also includes Kathleen Murphy, who leads their personal

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Speaker 1: investing unit. One of the quotes out of the story

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Speaker 1: is that we're in the midst of quote a twenty

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Speaker 1: two trillion dollars shift in assets to women. And I

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Speaker 1: thought that was fascinating. And here to tell us more

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Speaker 1: about it and how the company is reacting and dealing

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Speaker 1: with this change is Peggy Collins, our expert when it

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Speaker 1: comes to all things investing, our investing team leader for

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Speaker 1: Bloomberg News, and you can follow Peggy at m k

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Speaker 1: M Collins on Twitter and she joins us here in

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Speaker 1: the Bloomberg Interactive broker's studio. Peggy, a pleasure to have

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Speaker 1: you tell us about this interview and particularly about this

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Speaker 1: shift in assets to women. And it coincides also with

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Speaker 1: Fidelity's effort to make sure that a lot of their

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Speaker 1: new hires, particularly at their branch level, are women's right.

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Speaker 1: So essentially, Abby Johnson is the top woman in fund

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Speaker 1: man management in the US. She runs Fidelity. She's the

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Speaker 1: third generation of the Johnson family to run it, and

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Speaker 1: she looked ahead with Kathleen Murphy, who runs personal investing

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Speaker 1: at Fidelity, a giant business unit for them. And basically

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Speaker 1: what they're seeing is this transfer of money into women's

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Speaker 1: hands for one of the first times in our history

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Speaker 1: for several reasons, one of them being the fact that

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Speaker 1: women are just living longer than men. So a lot

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Speaker 1: of women are finding themselves in a position in their

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Speaker 1: life where maybe they didn't run the money earlier in

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Speaker 1: their lives, but they are getting transferred assets later in

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Speaker 1: their life. You're also seeing more women um stay married,

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Speaker 1: not get married. You're also seeing more women get divorced

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Speaker 1: and have to deal with assets at some point in

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Speaker 1: their life as well. So they're just really seeing the

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Speaker 1: whole demographics of who's investing in controlling the pocketbook change.

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Speaker 1: So I have to think that this is a person

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Speaker 1: who has been at the forefront of the move to

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Speaker 1: index funds and two cheaper funds, And when you talk

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Speaker 1: about expertise, I just wonder how did she sort of

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Speaker 1: reconcile the tention right now between active and passive management,

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Speaker 1: especially given their zero fee UH funds that they just

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Speaker 1: recently launched. It's such a great point, Lisa, because Fidelity

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Speaker 1: under her grandfather and father's leadership, was essentially known for

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Speaker 1: its stock pickers active management. You had people like Peter Lynch,

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Speaker 1: one of the most famous investors of all time, who

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Speaker 1: really draw drew a lot of investors to Fidelity. But

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Speaker 1: what Abby's overseeing the company at a time where millions

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Speaker 1: and billions of dollars are going into passive, low fee

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Speaker 1: index one So she really talked about how they've been

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Speaker 1: somewhat late to the index investing game. She admitted that,

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Speaker 1: but she also says she feels like the company is

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Speaker 1: caught up. One of the things that they did is

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Speaker 1: you said, this summer was decided, you know what, We're

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Speaker 1: going to be the first to offer a free index

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Speaker 1: fund to Actually they came out with in August. They

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Speaker 1: now have four, and Abby Johnson was saying, you know what,

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Speaker 1: she's not really a fan so much anymore of traditional advertising,

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Speaker 1: and she thinks in order to get more people to

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Speaker 1: give Fidelity a chance, they have to do things that

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Speaker 1: are even more surprising and splashy. And essentially they did

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Speaker 1: surprise a lot of their competitors when they came out

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Speaker 1: when they were the ones, given that they're known for

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Speaker 1: active management to come out with the first free index fund.

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Speaker 1: One of the other areas that she spoke about, also

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Speaker 1: Kathleen Murphy speaking about is robot advisors. That's right. Fidelity

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Speaker 1: has a robo advisor called Fidelity Go, and we've seen

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Speaker 1: a lot of the asset managers incorporate robots into their

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Speaker 1: investing process, particularly for people who are of middle wealth.

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Speaker 1: You know, the billionaires are still getting the high time,

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Speaker 1: their wealth is not excessive, and they can't make great

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Speaker 1: fees out of those clients, so this might be the

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Speaker 1: way to get them to that very money. Managed it

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Speaker 1: Fidelity right and get it managed earlier. So back in

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Speaker 1: the day, you would wait until you had maybe tens

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Speaker 1: of thousands of dollars to go to some wealth advisor,

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Speaker 1: but Fidelities now saying, look, we can offer you a

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Speaker 1: six multiple choice questionnaire that you can fill out all online,

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Speaker 1: and then we can help you get in invested. One

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Speaker 1: of the interesting things they also said was their designing

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Speaker 1: products and user user interfaces now for millennials, and then

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Speaker 1: they calibrated up to two older people. So that's who

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Speaker 1: they have in mind nowadays when they're thinking about how

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Speaker 1: do we put this product out there. It's really interesting.

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Speaker 1: You know, you're talking about how traditional advertising ones to

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Speaker 1: certainly be the way to attract investors, it also may

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Speaker 1: not be the way to make money. And I just

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Speaker 1: have to wonder. I mean again, when you start talking about, oh,

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Speaker 1: it's a good gimmick to get people to to like Fidelity. Yeah,

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Speaker 1: but they're making nothing on these fun so how do

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Speaker 1: they plan to make money? Well, they essentially are saying,

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Speaker 1: you know what we need to get get people in

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Speaker 1: the door, and once we get them in the door,

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Speaker 1: we can offer them a lot of different things. Fidelity

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Speaker 1: was talking about it's brokerage platform, for example, in terms

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Speaker 1: of more trading. As you get older and potentially have

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Speaker 1: more money, maybe you're not only using the robo advisor

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Speaker 1: maybe you're not only using Fidelity through your four own

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Speaker 1: K plant, but maybe you're going to open up a

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Speaker 1: broker account. Maybe you're going to offer as you get older,

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Speaker 1: a managed that you're going to be offered a managed

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Speaker 1: to count offering where for people with more money, they

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Speaker 1: may have more high touch a wealth advisor involved. So

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Speaker 1: they essentially see it as a way to get people

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Speaker 1: in the door and then offer them different things. Well,

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Speaker 1: it also is a way to beef up the asset

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Speaker 1: management business, which is the most profitable division of Fidelity.

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Speaker 1: That's right. I did ask Abby about whether or not

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Speaker 1: she thought the asset management industry, the mass asset management

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Speaker 1: part of the business would still be the most profitable

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Speaker 1: five years from now, and she said, you know what,

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Speaker 1: A lot of it is dependent on the markets, but

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Speaker 1: it still is their most profitable business line. You know,

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Speaker 1: they have workplace benefits like I mentioned four in case,

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Speaker 1: they have the brokerage unit. They have a number of

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Speaker 1: different business lines of Fidelity, but stock picking, mutual funds,

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Speaker 1: those are still the big engine for them. Peggy Abby

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Speaker 1: Johnson is not known for being a publicity hound in

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Speaker 1: any way. She performed This is a rare interview. Do

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Speaker 1: you get the sense just lastly here that she's changing

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Speaker 1: her approach. Here, it was interesting she acknowledged that she

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Speaker 1: has been speaking out more. The company had issues with

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Speaker 1: a sexual harassment claim last year, and she was out

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Speaker 1: in front very quickly after that talking about zero tolerance

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Speaker 1: in the workplace. She did acknowledge that it doesn't seem

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Speaker 1: like it's her the thing she wants to do. First,

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Speaker 1: she's not a total fan of being out there in

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Speaker 1: public speaking, in part because it takes up a lot

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Speaker 1: of time and travel. But she did acknowledge that investors

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Speaker 1: want to see their leaders out there and talking more.

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Speaker 1: She did also acknowledge that she's not one to make

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Speaker 1: calls on the market. You know, we see a lot

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Speaker 1: of leaders of investing firms who actually do that a lot,

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Speaker 1: and she said, I'm a leader of this company that

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Speaker 1: has to do well whether the markets are doing well

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Speaker 1: or not, and so she feels like making calls in

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Speaker 1: the market is not something that she wants to do.

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Speaker 1: Petty Collins, thank you so much and great story. Thank

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Speaker 1: you for being with us. A topic now are global

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Speaker 1: rates and a foreign exchange strategy, and here to help

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Speaker 1: us understand what's going on in the World is and

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Speaker 1: Matthias Global Rates FX strategist for Vanguard and Matthias, can

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Speaker 1: you tell us whether you believe there is any fallout

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Speaker 1: from the Apack summit, or should we say the a

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Speaker 1: peck of pick of peppers summit where they could not

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Speaker 1: actually put together a common communicate between the United States

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Speaker 1: and a variety of Asian countries. What does this mean

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Speaker 1: for global currencies? Well, I I to keep going with

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Speaker 1: your analogy. I think they picked a peck of pickled peppers,

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Speaker 1: but they didn't know how many pickled peppers they picked.

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Speaker 1: I love it. You get ten points. Good good. Um.

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Speaker 1: You know as an interest rate strategist here at Vanguard,

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Speaker 1: that is, trade is the top um topic for our

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Speaker 1: teams and for um, you know, all of the people

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Speaker 1: that we talked to in the markets right now. The

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Speaker 1: US Treasury gets pushed around by a lot of different

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Speaker 1: factors at different times, but I would say just for

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Speaker 1: the last few weeks for both equities and fix income,

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Speaker 1: the number one mover has been talk on trade. And

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Speaker 1: it's just too early to say. You know, trade is

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Speaker 1: one of those um topics that takes forever. For those

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Speaker 1: of us whore old enough to remember NAFTA. That seems

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Speaker 1: like it took absolutely forever to move from a concept

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Speaker 1: to an actual trade agreement, So any new trade deals

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Speaker 1: just take forever. So it's hard not to react to headlines,

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Speaker 1: but people should try to keep the big picture in view. Well,

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Speaker 1: and I wanted to say our markets responding to the

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Speaker 1: headlines that we got, because they were pretty negative. I mean,

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Speaker 1: Mike Pats came out with a pretty harsh tone and

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Speaker 1: Margaret's are Yeah, they're risk off a little bit, but

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Speaker 1: you're not really seeing a major move today. You're right,

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Speaker 1: You are absolutely right. It's quite interesting. It seems like

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Speaker 1: just just today UM, and maybe even just in the

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Speaker 1: last couple of maybe week or so, you see more

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Speaker 1: potty market reaction to the trade talk UM, and a

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Speaker 1: little bit less fixed income market, a little less treasury

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Speaker 1: reaction UM treasuries maybe taking a little bit more in stride.

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Speaker 1: Maybe maybe those of us in that part of the

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Speaker 1: market have a little bit longer term perspective. Uh, it's

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Speaker 1: definitely rocking the equity markets and and interestingly rocking UM

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Speaker 1: the growth components of those markets. Then does that mean

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Speaker 1: that there's an opportunity here or should you stay away

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Speaker 1: until the dust clears. You know, it's we're in that

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Speaker 1: point of the economic cycle where we're close to uh,

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Speaker 1: sort of close to the end or you know, are

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Speaker 1: we at the beginning of the end or at the

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Speaker 1: end of the beginning? Um. But I think that we

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Speaker 1: are getting to sort of a late stage in the

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Speaker 1: economic cycle. You know, we can almost see over the

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Speaker 1: hump with the Fed to see when they will probably

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Speaker 1: finish hiking rates, which are economics team here at Vanguard

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Speaker 1: thinks is probably middle of next year, the second half

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Speaker 1: of next year. So you're seeing a bit more diffusion

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Speaker 1: in terms of what people think is going to happen.

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Speaker 1: I think that there are some growth undercurrents that are

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Speaker 1: you know, starting to be a little bit more concerning.

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Speaker 1: And if you have growthy parts of the market uh

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Speaker 1: not doing well with trade concerns, it may not be

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Speaker 1: the perfect time to buy the dip. It's you know,

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Speaker 1: probably better to be a little bit more circumspect. And

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Speaker 1: I want to pick up on what you were saying,

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Speaker 1: which is you expect the FED to stop raising rates

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Speaker 1: somewhere around the middle of next year. Recently, we've seen

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Speaker 1: a lot of traders sort of ratcheting back their expectations

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Speaker 1: for just how much the FED will hike rates. Do

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Speaker 1: you think that they are sort of late to the

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Speaker 1: game that's sort of been the play all along, or

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Speaker 1: do you think that something materially has changed that will

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Speaker 1: now slow the FED down more than than than the

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Speaker 1: previous as you thought. I think they're a little bit

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Speaker 1: late to the game. Um. And I think there probably

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Speaker 1: has been a little bit of an overreaction too far

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Speaker 1: the other direction, you know, underpricing the amount that the

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Speaker 1: FED will raise rates over the next year. You know,

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Speaker 1: we see near certainty of a hike in December and

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Speaker 1: then two and probably perhaps three hikes next year. Um.

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Speaker 1: And not enough has changed in the fundamental economic picture

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Speaker 1: to throw us off that track. I think the market

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Speaker 1: has moved swung a little bit too far toward a

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Speaker 1: dovish tilt. Uh. And we could see probably a bit

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Speaker 1: of a reflattening of the yield curve as the shorter

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Speaker 1: dated treasury um sector starts to kind of get a

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Speaker 1: little bit more realistic about what what's likely to happen

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Speaker 1: next year. We haven't seen enough deterioration in economic data

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Speaker 1: to really I think throw the FED that far off

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Speaker 1: well and Matthias, let's be let's sort of conclude a

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Speaker 1: little bit where we began having to do with that

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Speaker 1: APEC meeting and the disagreement over trade between the United

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Speaker 1: States and China. Do you believe the Chinese government will

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Speaker 1: work to reflate their economy and do you believe that

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Speaker 1: they will also try to lower the value of their currency?

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Speaker 1: You know, I think the currency piece is something that

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Speaker 1: just tends to happen when you have a lot of

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Speaker 1: terrorf activity, because the exported items just have to be

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Speaker 1: repriced to remain competitive. But I do think that there

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Speaker 1: was a bit of probably a bit of positioning going

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Speaker 1: on right now because you have the upcoming meeting between

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Speaker 1: the President uh and and She of China coming up,

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Speaker 1: and I think it's you know, it's too early to

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Speaker 1: say that that was, you know, a truly meaningful change

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Speaker 1: in the trade dialogue. We're positioning for the for the

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Speaker 1: real negotiation between the two principles. A Mathias, thank you

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Speaker 1: so much for being with us. A Mathias is a

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Speaker 1: global rates and f X strategist for Vanguard. Thanks for

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Speaker 1: listening to the Bloomberg p m L podcast. You can

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Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud, or

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Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm on

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Speaker 1: Twitter at pim Fox. I'm on Twitter at Lisa Abramo.

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Speaker 1: It's One before the Podcast. You can always catch us

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Speaker 1: worldwide on Bloomberg Radio