WEBVTT - Biggest Risk Is Downside Jobs Surprise: JPM's Kennedy 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penil podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:22.960 at Bloomberg dot com. We are amidst the longest economic 0:00:23.040 --> 0:00:26.440 cycle on record. The FED is certainly in the dobish mode. 0:00:26.880 --> 0:00:29.120 Trade risk appears to be on the back burner, at 0:00:29.160 --> 0:00:31.560 least for now. So the question is what do investors 0:00:31.600 --> 0:00:34.120 do after that phenomenal first half of the year. To 0:00:34.120 --> 0:00:36.720 help us guide us for the second half, we welcome 0:00:36.720 --> 0:00:39.320 our good friend Tom Kennedy Thomas, Global head of Macro 0:00:39.520 --> 0:00:42.800 and fixed Income Strategy at JP Morgan Private Bank. They 0:00:42.840 --> 0:00:46.000 have lots of money under management. Uh. Tom joins us 0:00:46.040 --> 0:00:48.400 here on our Bloomberg Interactive Brokers studio. Trust me, they 0:00:48.400 --> 0:00:52.160 have lots of money, the tech tech tons good jillions Jullian. 0:00:52.280 --> 0:00:54.960 So Tom, what do we do here? Again? A great 0:00:55.040 --> 0:00:58.480 first half of the year, Probably a tendency for a 0:00:58.480 --> 0:01:01.160 lot of investors is to protect act what they made. 0:01:01.240 --> 0:01:04.120 If that's what somebody comes to, what do you tell them, Yeah, 0:01:04.400 --> 0:01:05.480 come to me a lot to ask that. I think 0:01:05.480 --> 0:01:08.520 it's all right. Question you get. Protection can come in 0:01:08.560 --> 0:01:10.920 lots of shapes and sizes, right, I want to protect 0:01:10.959 --> 0:01:14.319 myself by still staying invested. I think adding longer maturity 0:01:14.319 --> 0:01:17.800 bonds UH is a great port portfolio hedge. Common pushback 0:01:18.319 --> 0:01:20.960 eels are so low, Tom, why would I do that? Well, 0:01:21.160 --> 0:01:22.920 they could go lower and maybe we want to talk 0:01:22.959 --> 0:01:25.880 about that. The other pieces are gold. I think historically 0:01:25.920 --> 0:01:28.640 has been a great late cycle play and it protects you. 0:01:29.040 --> 0:01:31.119 My My only pushback there is it doesn't have any 0:01:31.240 --> 0:01:34.080 yield to it, so it's a pure protection play. And 0:01:34.080 --> 0:01:36.360 then what we have seen most on the first half 0:01:36.400 --> 0:01:39.039 of the of the year was forward steep in their trades, 0:01:39.200 --> 0:01:41.560 the place where the spread between a two year treasury 0:01:41.600 --> 0:01:43.959 and a tenure treasury would would steep in a down 0:01:44.240 --> 0:01:47.040 down draft scenario, but the forward market was relatively flat, 0:01:47.200 --> 0:01:50.280 so we had people positioning to protect their portfolio for 0:01:50.400 --> 0:01:52.080 a world where the Fed had to cut aggressively and 0:01:52.080 --> 0:01:53.880 steep in the curve. They were using that as a 0:01:53.920 --> 0:01:57.400 portfolio hedge could get lots of leverage in that trade. Um, 0:01:57.480 --> 0:01:59.160 that trade I think has largely played out. The forward 0:01:59.160 --> 0:02:01.360 market is steepening already, so I think this is still 0:02:01.360 --> 0:02:02.800 a good trade, but it's not going to protect your 0:02:02.800 --> 0:02:04.680 portfolio the same way we thought it would earlier in 0:02:04.680 --> 0:02:07.360 the year. So you're not recommending bitcoin, No, we're not. 0:02:07.440 --> 0:02:09.680 That's not part of our two kit at the moment. 0:02:09.800 --> 0:02:13.480 And I'll pause there alright, seem might become want to 0:02:13.919 --> 0:02:15.880 want to look for I do have to wonder what 0:02:15.919 --> 0:02:18.120 you're expecting for Friday. We do get that payrolls number, 0:02:18.120 --> 0:02:21.440 and the market certainly is positioned for three basis point 0:02:21.520 --> 0:02:24.360 rate cuts by December. What do we need to see 0:02:24.360 --> 0:02:28.040 in order to maintain calm on Friday? Yeah, the calm 0:02:28.120 --> 0:02:32.480 number I think is north of to one fifty, roughly 0:02:32.480 --> 0:02:35.960 around consensus. Um. I think you see anything under a hundred, 0:02:36.000 --> 0:02:37.320 and I think you have to start to think, well, 0:02:37.360 --> 0:02:39.160 what does the Fed do in July? Is it? Do 0:02:39.200 --> 0:02:41.119 we have to start the price twenty five basis point 0:02:41.120 --> 0:02:45.000 cut in July? This conversation, I think gets gets very 0:02:45.080 --> 0:02:47.880 myopically focused. What does the Fed do in July? The 0:02:47.919 --> 0:02:49.480 base case, I think at this point has to be 0:02:49.560 --> 0:02:52.959 that they cut twenty five basis points. Inflation expectations are low. 0:02:53.000 --> 0:02:56.200 Growth is rolling over. But most importantly, the Fed hasn't 0:02:56.240 --> 0:02:58.280 pushed back on this. They have not pushed back on 0:02:58.320 --> 0:03:01.040 financial market pricing, So that should tell us that they 0:03:01.040 --> 0:03:03.080 are relatively comfortable with the way the market is pricing 0:03:03.120 --> 0:03:06.120 at this point. Um between now and then Power will 0:03:06.160 --> 0:03:09.560 speak one more time, and assuming Friday's job job report 0:03:09.639 --> 0:03:11.760 is okay, I think you'll have actually Powell lean into 0:03:11.800 --> 0:03:16.320 and say, you know, what is okay with fifty is unlikely? Okay? 0:03:16.480 --> 0:03:19.960 So what's the big risk on Friday? Oh? I think 0:03:19.960 --> 0:03:22.239 the risk is that we start to see a crack 0:03:22.360 --> 0:03:25.320 in the in the labor market. This has been the 0:03:25.400 --> 0:03:29.919 foundation of the argument that there's no emergency happening right now. 0:03:30.720 --> 0:03:32.800 The Fed's gonna cut, but it's doing it because it's 0:03:32.800 --> 0:03:34.920 a recognition maybe that they hiked one or two times 0:03:35.000 --> 0:03:37.120 too many last year. They're gonna get get down towards 0:03:37.120 --> 0:03:40.640 a lower neutral rate. If the consumers cracks, which it 0:03:40.680 --> 0:03:43.920 tends to be the last piece to crack um that 0:03:44.040 --> 0:03:47.360 argument that they're they're they're only gonna hike sorry, excuse me, 0:03:47.400 --> 0:03:50.280 only gonna cut one or two times looks less likely, 0:03:50.280 --> 0:03:52.640 and it's more likely they'll have to cut aggressively. UM 0:03:52.680 --> 0:03:54.840 So I think that's the real risk scenario. All right, 0:03:54.880 --> 0:03:56.400 that's a good, good some ready for the FED. Let's 0:03:56.440 --> 0:03:59.520 go across to Europe. We have a new ECB president, 0:03:59.640 --> 0:04:01.640 Christine the Guard. What does that mean for you and 0:04:01.640 --> 0:04:03.760 for markets? Do you think I think we just priced 0:04:03.760 --> 0:04:07.200 out a hawkish leadership from the e c B. That's 0:04:07.200 --> 0:04:10.760 got to be step number one recognition. Um. From what 0:04:10.800 --> 0:04:13.160 we can deduce from her is that she's likely to 0:04:13.200 --> 0:04:15.920 be supportive of accommodation for from the ECB going forward, 0:04:16.640 --> 0:04:19.919 given the limited impact we've we've seen in her past statements. 0:04:20.600 --> 0:04:24.440 Kind Of an interesting fact if we remember before ECB 0:04:24.839 --> 0:04:28.479 instituted QUI the I m F report that year, six 0:04:28.560 --> 0:04:31.360 months before QUWEE came out, she suggested in there that 0:04:31.440 --> 0:04:34.160 que was warranted if inflation remained low for a long time. 0:04:34.440 --> 0:04:38.880 So she even favored unconventional tools back in. I don't 0:04:38.880 --> 0:04:40.560 see anything and what she said since then that would 0:04:40.560 --> 0:04:45.920 suggest otherwise. So that's definitely encouraging the doves over in Europe. 0:04:45.960 --> 0:04:47.600 I do want to just bring me this headline at 0:04:47.600 --> 0:04:50.599 President Trump just tweeting that China and Europe are playing 0:04:50.680 --> 0:04:53.760 a big currency manipulation game. You are seeing the dollar 0:04:53.839 --> 0:04:56.680 move a bit on this UH weaketting a touch against 0:04:56.760 --> 0:04:59.480 its major peers. I'm wondering how the dollar plays in here. 0:04:59.520 --> 0:05:02.960 If the dollar does continue to weaken, is that supportive 0:05:03.360 --> 0:05:07.680 for US bonds or not? Considering the fact that a 0:05:07.720 --> 0:05:11.040 lot of Japanese investors are coming in an unhedged basis. Yeah, 0:05:11.200 --> 0:05:15.839 this question gets tough that the monetary policy accommodation is 0:05:16.720 --> 0:05:19.560 globally competitive at this point. So I think you have 0:05:19.600 --> 0:05:22.360 to answer the where will currency go question with who 0:05:22.440 --> 0:05:26.000 has more ammunition? Who has more ability to ease financial conditions? 0:05:26.400 --> 0:05:29.160 Is it Japan? Probably not? In the developed world? Is 0:05:29.200 --> 0:05:33.000 it Europe? Probably not, It's probably the FED. So between 0:05:34.080 --> 0:05:37.720 your your timing, now, where does flight to quality come 0:05:37.720 --> 0:05:40.920 into play? If you hit a downdrafting growth that's substantial 0:05:41.400 --> 0:05:44.039 versus a FED that's trying to ease financial conditions to 0:05:44.240 --> 0:05:46.200 prevent that from happening. So I think we're in a 0:05:46.240 --> 0:05:49.040 period now where the dollar is likely to be um 0:05:49.080 --> 0:05:52.520 biased to depreciate. But you're you're you're talking about a 0:05:52.560 --> 0:05:55.159 timing game now, I think, and to be very clear, 0:05:55.360 --> 0:05:58.120 my base case is not that we hit UH substantial 0:05:58.200 --> 0:06:01.640 downdrafting growth over the next six to twelve months, but 0:06:01.760 --> 0:06:03.440 we do. We do place a one and three chance 0:06:03.440 --> 0:06:05.560 of that happening UH in the next six to twelve months. 0:06:05.560 --> 0:06:08.000 It's quite high. Tom Kennedy, You'll have to come back 0:06:08.120 --> 0:06:11.800 after July four holiday and elucidate more of your opinions, 0:06:11.800 --> 0:06:14.200 because I've got a lot more questions. Tom Kennedy, Global 0:06:14.200 --> 0:06:31.680 head of Macro and Fixing Strategy at JP Morgan Private Bank. Well, 0:06:31.760 --> 0:06:34.719 Christine Lagarde, head of the i m F, is poised 0:06:34.760 --> 0:06:36.599 to take the home of the European Central Bank after 0:06:36.680 --> 0:06:40.120 Mario dragging leaves in October with us to help us 0:06:40.120 --> 0:06:43.000 break this down. As Irene Finelle Higman, she is an 0:06:43.000 --> 0:06:46.200 adjunct professor of International Affairs at Columbia University in New 0:06:46.320 --> 0:06:49.160 York City. I mean, thanks so much for having us 0:06:49.400 --> 0:06:55.240 to what extent was this announcement of miss Laguard a surprise? UM? 0:06:55.279 --> 0:06:57.000 I think it was, first of all, thank you for 0:06:57.160 --> 0:07:00.520 letting me come back on Bloomberg to discuss this. UM. 0:07:00.560 --> 0:07:05.200 I think that this was a surprise, But at the 0:07:05.279 --> 0:07:09.640 same time, everyone thinks it's a very smart choice. It 0:07:09.760 --> 0:07:12.040 was a surprise because it was assumed that this would 0:07:12.080 --> 0:07:16.160 go to a more conventional or traditional high level economist 0:07:16.280 --> 0:07:19.200 or other head of a central bank. However, I want 0:07:19.240 --> 0:07:22.680 to make one point because one of the comments has 0:07:22.720 --> 0:07:26.640 centered that Madame Lagat would bring more political expertise rather 0:07:26.680 --> 0:07:30.720 than economic central bank expertise. However, it's important to remember 0:07:31.080 --> 0:07:34.640 that following the sovereign debt crisis in Europe from two 0:07:34.680 --> 0:07:38.240 thousand ten to two thousand and fourteen, this was a 0:07:38.360 --> 0:07:41.160 very unique time where for the first time, the I 0:07:41.400 --> 0:07:45.440 m F under before that DSK and Lagoud, the e 0:07:45.560 --> 0:07:48.720 c B under Tricia and and Hagi and the EU 0:07:48.800 --> 0:07:53.080 Commission had to work extremely closely together for the famous 0:07:53.120 --> 0:07:56.400 Troika to try to bail out these countries, both on 0:07:56.440 --> 0:08:00.240 the sovereign nation basis and on the banking sector. So 0:08:00.440 --> 0:08:05.000 the relationship and knowledge and connectivity between the I m 0:08:05.080 --> 0:08:07.800 F and the e c B is far deeper than 0:08:07.840 --> 0:08:10.480 it would have been in other circumstances. I mean, this 0:08:10.560 --> 0:08:12.800 is a really interesting point, and I have to wonder 0:08:12.880 --> 0:08:15.480 there have been a lot of comments about her nomination, 0:08:15.520 --> 0:08:18.760 about Christine Lagard's nomination saying in general, being the head 0:08:18.760 --> 0:08:21.880 of a central bank is becoming increasingly a political role 0:08:21.960 --> 0:08:25.480 in less of an economics role. I'm wondering, given the 0:08:25.520 --> 0:08:28.000 backdrop that is unique to the European Union, do you 0:08:28.000 --> 0:08:30.280 think that is a leap too far and that this 0:08:30.400 --> 0:08:35.320 really is an ECB specific necessity for a political kind 0:08:35.360 --> 0:08:39.560 of figure rather than simply an economics one. I think 0:08:39.600 --> 0:08:43.640 it's a combination. Um. I think clearly the e c 0:08:43.880 --> 0:08:47.840 B right now has had marvelous leadership under Draggy, but 0:08:48.000 --> 0:08:51.360 even more important, the e c B has taken on 0:08:51.520 --> 0:08:55.680 a mandate and an expanded scope of functions far beyond 0:08:55.720 --> 0:09:00.480 its original mandate pure price stability and monetary policy. Under 0:09:00.520 --> 0:09:04.760 the new banking Union in Europe. The ECB today is 0:09:04.920 --> 0:09:07.760 very much in the same position as the said on 0:09:07.960 --> 0:09:13.120 having both extensive and expansive supervisory and monitoring power over 0:09:13.280 --> 0:09:17.600 the major banks in the Eurozone area and in of 0:09:17.640 --> 0:09:22.080 course all European banking sectors. So this already puts it 0:09:22.120 --> 0:09:26.119 in a different position where clearly inter relationship between governments 0:09:26.640 --> 0:09:29.880 and between the banks and the national central banks is 0:09:29.960 --> 0:09:32.559 much tighter, is much greater than it would have been. 0:09:33.240 --> 0:09:37.199 Whether this supplies more to the e c B uh 0:09:37.240 --> 0:09:40.599 than elsewhere, that may be the case because of the 0:09:40.720 --> 0:09:45.160 unique structure of the Eurozone, and also because a brand 0:09:45.200 --> 0:09:49.120 new new commission is now also coming into play post crisis. 0:09:49.440 --> 0:09:52.960 So I think all of these factors played together that 0:09:53.040 --> 0:09:56.800 there is no longer a way to nicely compartmentalize the 0:09:56.880 --> 0:10:00.520 economic side on the political side. So, Professor, what do 0:10:00.600 --> 0:10:04.920 you think Madame Lagar's goals and strategy will be when she, 0:10:05.440 --> 0:10:10.040 assuming she assumes this position. I think she will probably 0:10:10.240 --> 0:10:16.440 follow very closely uh the Druggy both methodology and policy. Uh. 0:10:16.480 --> 0:10:20.120 There seems to be very much a continuation UH. She 0:10:20.360 --> 0:10:24.360 herself has uh seems to have had an expansive you 0:10:24.960 --> 0:10:28.640 of the role of major both multilateral and central banks 0:10:29.320 --> 0:10:34.720 in helping UH to stabilize economies maintaining stability, taking a 0:10:35.000 --> 0:10:39.319 very cautious approach, not to assume that economies are, particularly 0:10:39.360 --> 0:10:43.080 in Europe, suddenly doing well enough for anything dramatic to occur. 0:10:43.520 --> 0:10:45.720 Yet at the same time, she will have to be 0:10:45.840 --> 0:10:49.080 very careful because they're not that many tools left in 0:10:49.120 --> 0:10:53.160 a sense, uh for the ECB to play with. UH. 0:10:53.280 --> 0:10:56.959 So there I think she will need expert economic advice 0:10:57.000 --> 0:11:00.720 on the technical side, But what will be very important 0:11:00.960 --> 0:11:04.599 is to first of all established prestige and total credibility 0:11:04.600 --> 0:11:07.240 in the markets, particularly in Europe, which I think she 0:11:07.360 --> 0:11:11.440 has because of her contact, because of her connection with 0:11:11.520 --> 0:11:14.480 the different governments and what she accomplished at the I M. S. 0:11:15.000 --> 0:11:18.000 I think also she will be in a very interesting 0:11:18.000 --> 0:11:22.199 position along with the new heads at the EU Commission 0:11:22.480 --> 0:11:25.960 and Council, of dealing with Brexit, because Brexit is not 0:11:26.040 --> 0:11:29.160 only the political set of issues, but it's very much 0:11:29.200 --> 0:11:31.559 also the set of issues or what policy will the 0:11:31.600 --> 0:11:34.240 Bank of England take, What will be the into relationship 0:11:34.320 --> 0:11:37.560 between the ECB and the Bank of England, what maybe 0:11:37.600 --> 0:11:41.000 the impact, So she will immediately be thrown much more 0:11:41.080 --> 0:11:45.000 into that, and it will also be a question of 0:11:45.120 --> 0:11:52.400 basically very carefully and slowly monitoring growth in Europe. So 0:11:52.840 --> 0:11:55.480 I guess as you're talking about the need for the 0:11:55.520 --> 0:11:59.120 sort of political savvy, I'm struck by the counter argument 0:11:59.160 --> 0:12:03.280 to this, the idea the more political essential bankhead gets, 0:12:03.800 --> 0:12:06.560 the less economic focus it will become in the more 0:12:06.760 --> 0:12:11.200 frankly arbitrary policy will become more hinged on the popular 0:12:11.320 --> 0:12:14.720 sentiment of the time. And I'm just wondering, you know, 0:12:15.120 --> 0:12:18.720 is that a concern of yours? Is there a historical 0:12:18.840 --> 0:12:22.720 precedent in terms of an increasingly political central bank that 0:12:22.880 --> 0:12:27.600 gives you comfort rather than pause. I'm not sure that 0:12:27.800 --> 0:12:32.359 the central bank or any central bank will necessarily respond 0:12:32.720 --> 0:12:36.320 to more popular sentiment. And in fact, if anything we've 0:12:36.320 --> 0:12:39.840 seen with the said with your own power really the 0:12:39.920 --> 0:12:44.680 ability to push back on sudden and acute political pressure. 0:12:45.400 --> 0:12:48.920 So I think that if it's an issue of suddenly 0:12:49.000 --> 0:12:52.360 seeing the central Bank the e c B is functioning 0:12:52.400 --> 0:12:55.400 as an arm of German policy, I don't think that 0:12:55.440 --> 0:12:58.640 will be the case. Um. I think right now what 0:12:58.760 --> 0:13:02.720 it does show is a tighter German French partnership which 0:13:02.760 --> 0:13:07.320 clearly brilliantly orchestrated, bringing in a German woman now as 0:13:07.320 --> 0:13:11.800 a new Urslabander Lean as a new EU Commissioner president 0:13:11.840 --> 0:13:17.920 and Christine Lagat at the ECB. That's one element, which yes, 0:13:18.080 --> 0:13:21.960 is more political, but fundamentally what we saw with Droggy, 0:13:22.160 --> 0:13:24.360 what we seem to have seen all along with the FED, 0:13:24.840 --> 0:13:28.320 they seem to be very cautious and more responding to 0:13:28.440 --> 0:13:33.840 in fact all of the economic facts, rather than responding 0:13:33.840 --> 0:13:38.880 more at hoc to any particular sentiment. Irene Finelnigman, thank 0:13:38.880 --> 0:13:41.840 you so much for joining us today. Irene finel Hanigman. 0:13:42.000 --> 0:13:45.520 Is an adject professor of International Affairs at Columbia University 0:13:45.640 --> 0:13:49.280 in New York, talking about Christine Lagarde's nomination to head 0:13:49.640 --> 0:14:09.120 the ECB. Initially, when we talked about blockchain, it was 0:14:09.120 --> 0:14:11.360 a sort of sexy, unknown thing that was going to 0:14:11.480 --> 0:14:15.280 lead to the disruption of traditional currencies. Now it has 0:14:15.320 --> 0:14:17.440 actually got a little bit more on the back burner, 0:14:17.480 --> 0:14:20.720 and yet it has been increasingly adopted as a mainstay 0:14:21.240 --> 0:14:24.120 for a lot of industries, and here to talk about it. 0:14:24.200 --> 0:14:27.680 I'm so glad to say, as Bridget of Redlagon, she 0:14:27.760 --> 0:14:31.880 is Senior vice president of Global Industries, Clients, Platforms and 0:14:32.000 --> 0:14:35.280 Blockchain for IBM. Bridget, thank you so much for being 0:14:35.360 --> 0:14:37.960 with us. Can you first just talk a little bit 0:14:38.120 --> 0:14:42.160 about the adoption of blockchain across a variety of industries 0:14:42.200 --> 0:14:46.360 so far? Yes, thanks Lisa for having me on the show. 0:14:46.400 --> 0:14:49.200 Stem so happy to talk about it. So Yes, there's 0:14:49.240 --> 0:14:52.040 been a lot of hype, as you said, around the 0:14:52.120 --> 0:14:56.720 crypto and elements on the currency elements of blockchain, but 0:14:56.880 --> 0:15:01.760 the real aspect of blockchain allows is very complex. Um 0:15:02.080 --> 0:15:09.520 multi party processes or workflows between customers, competitors and industries 0:15:09.920 --> 0:15:14.800 can be safely stored and exchanged in a way that 0:15:14.840 --> 0:15:19.520 they can be shared between all participants and once something 0:15:19.560 --> 0:15:22.600 is put on a blockchain, it can't be changed. We 0:15:22.600 --> 0:15:25.840 could talk about it being immutable, which means that anything 0:15:25.880 --> 0:15:30.640 that needs to show provenance will actually work fantastically on 0:15:30.680 --> 0:15:35.000 a blockchain. So um, we are working with many enterprise 0:15:35.000 --> 0:15:38.840 blockchains across diverse industries like shipping, which we've got some 0:15:38.840 --> 0:15:41.200 big news I'll talk to you about later, but also 0:15:41.320 --> 0:15:45.880 trust and provenance for food and food safety, diamonds and jewelry, 0:15:46.520 --> 0:15:51.520 commodities trading UM and energy trading off a grid, UM, 0:15:51.760 --> 0:15:57.200 carbon credits, plastic recycling. Um. So it's really in real 0:15:57.280 --> 0:16:02.040 life aspects for big, big industries like food and and shipping, 0:16:02.360 --> 0:16:05.640 but also small industries like microfinance in Kenya where we 0:16:05.640 --> 0:16:09.760 actually have a microfinance blockchain. So particularly excited to see 0:16:09.760 --> 0:16:12.760 the real work, so particulous a sense of how blockchain 0:16:12.880 --> 0:16:16.600 is being used in the global shipping supply chain. Yes, 0:16:16.680 --> 0:16:20.240 so so that that that poll so so Actually, just 0:16:20.640 --> 0:16:26.880 yesterday we announced that our trade lanes are shipping blockchain 0:16:27.040 --> 0:16:31.000 for the shipping industry has An. We've announced that we 0:16:31.080 --> 0:16:34.200 have two new members, Huppuck Lloyd and O N. E. 0:16:34.400 --> 0:16:38.040 And this follows the news in May that CMA, CGM 0:16:38.120 --> 0:16:41.080 and Mediterranean Shipping Company would be on the platform. We 0:16:41.160 --> 0:16:43.880 started this a couple of years ago with MIRSK and 0:16:44.040 --> 0:16:47.840 we are now in a situation where fifteen ocean carrier 0:16:47.880 --> 0:16:51.800 lines are on the blockchain called trade lens Are blockchain, 0:16:52.240 --> 0:16:55.840 and more than half of the world's ocean container cargo 0:16:56.240 --> 0:16:59.560 will be available on this block chain. So so with 0:16:59.600 --> 0:17:02.880 a users already, a hundred participants already. So why is 0:17:02.920 --> 0:17:05.919 this important and what's the blockchain impact? Well, if you 0:17:05.920 --> 0:17:09.760 think about it, nine of everything we use every day 0:17:09.960 --> 0:17:12.560 is shipped over the oceans. It is the most primary 0:17:13.200 --> 0:17:17.600 area of transport. And there's an estimate that around twenty 0:17:17.680 --> 0:17:22.800 pc of the cost of shipping an item is in documents, 0:17:23.240 --> 0:17:27.120 um and time wasted because of poor documentation. So an average, 0:17:27.359 --> 0:17:31.320 an average simple shipment will have around two hundred documents exchange, 0:17:31.680 --> 0:17:35.240 around three hundred different people involved, all on paper, all 0:17:35.280 --> 0:17:38.480 on different systems. And so what we are able to 0:17:38.520 --> 0:17:43.040 do is we've created an integrated, trusted blockchain platform where 0:17:43.119 --> 0:17:46.399 every participant in the shipping cycle to think about a 0:17:46.440 --> 0:17:49.680 freight forwarder, the person who's shipping the goods, the carriers 0:17:49.760 --> 0:17:54.679 the customs, the ports, the the carrier, the land carrier 0:17:54.960 --> 0:17:59.120 will all share that data on the block blockchain and 0:17:59.480 --> 0:18:02.720 be able to instantly and there's kind of like one 0:18:02.880 --> 0:18:06.040 version of the truths. So what that allows you to do, right, 0:18:06.600 --> 0:18:10.159 is that anyone can quickly pinpoint where their cargo is 0:18:10.160 --> 0:18:15.840 located the state of its availability. That reduces portant terminal congestion, 0:18:15.920 --> 0:18:20.399 reduces time for truckers, reduces customs and inspections delays um 0:18:20.440 --> 0:18:23.919 and ultimately shortens the lead time. So then so we 0:18:23.920 --> 0:18:26.119 go ahead. I really wanted to just pick up on 0:18:26.320 --> 0:18:29.960 one point. You said that twenty of shipping costs stem 0:18:30.040 --> 0:18:33.560 from the documentation process, and I'm just wondering if you 0:18:33.600 --> 0:18:37.320 could address how much you expect using the blockchain for 0:18:37.480 --> 0:18:41.959 the shipping industry could reduce the cost. So so we 0:18:42.200 --> 0:18:45.159 we we We are using data actually supplied by the 0:18:45.200 --> 0:18:48.639 World Economic Forum, and the World Economic Forum believes that 0:18:48.720 --> 0:18:52.920 reducing barriers within the international supply chain, which means really 0:18:52.960 --> 0:18:55.720 the things I've talked about, you know, speeding speeding up, 0:18:55.720 --> 0:19:01.000 reducing documentation, improving lead times, reducing delays, using spoilage because 0:19:01.040 --> 0:19:03.640 things are sitting there. There's a view that that could 0:19:03.880 --> 0:19:09.639 um increase GDP worldwide GDP by five and total trade 0:19:09.720 --> 0:19:13.200 volume by fifteen percent. So those are those are those 0:19:13.240 --> 0:19:18.040 are significant. Um if you think about economic impact factors, 0:19:18.080 --> 0:19:22.040 both in terms of reducing costs but also um increasing 0:19:22.080 --> 0:19:24.800 inclusion for people to be able to actually ship globally 0:19:25.200 --> 0:19:28.720 and to export um so so again, using the World 0:19:28.720 --> 0:19:32.119 Economic Forum, there's an estimate that improved these kinds of 0:19:32.160 --> 0:19:37.680 improvements would improve by around fifteen percent. So we were 0:19:37.760 --> 0:19:40.040 were we are, we are, we are we are. One 0:19:40.040 --> 0:19:42.800 of the reasons I think that the whole industry is 0:19:43.400 --> 0:19:46.080 is really stepping up and getting involved in this blockchain 0:19:46.520 --> 0:19:50.480 is because it does benefit every participant in this ecosystem 0:19:50.520 --> 0:19:52.600 to solve a problem it couldn't be solved in another way. 0:19:52.760 --> 0:19:55.120 That is fascinating. I mean, the five percent GDP left 0:19:55.160 --> 0:19:58.280 would be uh, you know, monumental. What the see how 0:19:58.280 --> 0:20:00.480 that plays our Bridget Vancrology and think you so much. 0:20:00.560 --> 0:20:04.080 Bridget is senior vice president of Global Industries, Clients, Platforms, 0:20:04.119 --> 0:20:22.560 and Blockchain for IBM. Broadcom tries again after the debacle 0:20:22.600 --> 0:20:27.119 with Qualcom. Broadcom now in advanced talks to buy cybersecurity 0:20:27.160 --> 0:20:32.440 from Symantec Corporation. Cybersecurity obviously a very hot field right now, 0:20:32.520 --> 0:20:35.520 given how many threats there are from hackers. Joining us 0:20:35.520 --> 0:20:37.440 now to talk about the deal, Man Deep Sing, senior 0:20:37.480 --> 0:20:40.760 tech industry analyst for Bloomberg Intelligence, very much in the 0:20:40.840 --> 0:20:43.719 office and present and analyzing this deal onto this pre 0:20:43.880 --> 0:20:47.120 July four day in New York City. So, uh, Man Deep, 0:20:47.440 --> 0:20:49.040 what can you tell us about this deal that you 0:20:49.080 --> 0:20:52.639 find most interesting? Well, this steal is very similar to 0:20:52.680 --> 0:20:55.960 what Broadcom did with c A last year, and Water 0:20:56.119 --> 0:20:59.240 tells you is the company is trying to diversify from 0:20:59.280 --> 0:21:02.439 hardware to software. It's fairly obvious this deal has the 0:21:02.480 --> 0:21:06.840 exact same characteristics. Four billion dollars in revenue from Semantic 0:21:07.280 --> 0:21:11.359 and the company Semantic has been, you know, under performing 0:21:11.400 --> 0:21:13.080 for the last three years. When you look at the 0:21:13.080 --> 0:21:17.880 cybersecurity market, which is extremely fragmented, Semantic hasn't been able 0:21:17.920 --> 0:21:21.560 to turn itself around. They have had four CEO changes 0:21:22.240 --> 0:21:24.919 and now you know they don't even have a permanent CEO. 0:21:25.160 --> 0:21:28.320 So it looks like it's right in the playbook of 0:21:28.440 --> 0:21:32.600 hawkt Hand, the CEO of Broadcam. He really could execute 0:21:32.600 --> 0:21:36.200 on this one. And there are some synergies that obviously 0:21:36.240 --> 0:21:38.680 will come about when this deal gets announced or these 0:21:38.680 --> 0:21:41.600 Broadcom folks are really active on the M and A front. 0:21:41.600 --> 0:21:44.119 I mean, is Lisa mentioned Qualcom that deal was blocked 0:21:44.160 --> 0:21:47.160 by President Trump, but they bought ce A last year. 0:21:48.040 --> 0:21:50.760 Is the street backing up this management in this board 0:21:50.800 --> 0:21:53.480 in terms of this aggressive acquisition policy? They are and 0:21:53.640 --> 0:21:56.679 Broadcom is a serial acquirer. You can see that. You know, 0:21:56.960 --> 0:21:59.600 It's something that I feel it's in the DNA of 0:21:59.640 --> 0:22:01.960 the company, and they execute very well. So if this 0:22:02.359 --> 0:22:04.480 anybody out there, you know, and when it comes to 0:22:04.600 --> 0:22:08.600 large tech that can really turn around Semantic and fix it, 0:22:08.600 --> 0:22:11.800 it's going to be Broadcom. And and so from that perspective, 0:22:11.840 --> 0:22:13.720 it makes a lot of sense when you talk about 0:22:13.760 --> 0:22:16.520 synergies what are they because I do think of Broadcom 0:22:16.520 --> 0:22:19.040 as being a hardware story and I think of Semantic 0:22:19.119 --> 0:22:22.440 as being a software company. Sure, so what Broadcom has 0:22:22.440 --> 0:22:26.520 showed with CIA integration is obviously there are some revenue 0:22:26.520 --> 0:22:30.000 synergies because they cater to an enterprise customer base. So 0:22:30.080 --> 0:22:35.400 Semantex's revenue half of it comes from enterprise. So over 0:22:35.440 --> 0:22:38.480 there you could see now that Broadcom has a footprint 0:22:38.480 --> 0:22:42.719 and infrastructure software with CIA integration, they can really leverage 0:22:42.720 --> 0:22:45.920 Semantic on the enterprise side. On the consumer side, which 0:22:45.960 --> 0:22:50.480 is Semantec's flagship Norton product and the Lifelog business, I'm 0:22:50.520 --> 0:22:52.960 not sure if there are any imminent synergies, especially on 0:22:53.000 --> 0:22:56.800 the revenue side. On the cost side, yes, there are 0:22:56.960 --> 0:23:00.640 some synergies that will come about simply because this company 0:23:00.720 --> 0:23:03.199 is too big. Their skills in marketing expenses are very 0:23:03.280 --> 0:23:06.080 high for Semantic, and you can see there are some 0:23:06.119 --> 0:23:08.479 cost synergies over there. So obviously this deal has not 0:23:08.560 --> 0:23:12.480 been announced. Speculating that it will occur any senses to evaluation. 0:23:12.560 --> 0:23:16.520 I'm just looking at Broadcom stockdown about almost four percent today. Um, 0:23:16.880 --> 0:23:19.520 is there a risk here that they might overpay? Well, 0:23:20.280 --> 0:23:22.879 one thing is they're more likely to go for a 0:23:23.000 --> 0:23:27.359 stock deal simply because Broadcom trads at about five to 0:23:27.440 --> 0:23:30.480 six time sales. Semantech trads at about three to four 0:23:30.520 --> 0:23:33.359 time sales. So I can see, you know, why a 0:23:33.400 --> 0:23:36.280 Broadcom may be interested in using their stock more. And 0:23:36.320 --> 0:23:39.359 we've seen that salesforce, you know, buying tablet with an 0:23:39.400 --> 0:23:44.200 all stock offer. So given the leverage situation with Broadcom, 0:23:44.320 --> 0:23:48.639 they're more likely to use some stock here. One thing 0:23:48.680 --> 0:23:51.760 I'm curious about is why is Broadcom so aggressive. Why 0:23:51.960 --> 0:23:56.240 is their playbook acquisitions to such a degree. Well, look 0:23:56.280 --> 0:24:00.440 at it this way. Broadcom's DNA at the company is 0:24:00.480 --> 0:24:04.960