1
00:00:00,080 --> 00:00:12,960
Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane

2
00:00:13,480 --> 00:00:17,560
Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment,

3
00:00:18,000 --> 00:00:23,480
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

4
00:00:23,600 --> 00:00:32,640
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Finally,

5
00:00:32,840 --> 00:00:35,480
Speaker 1: there is the one volume on the India you need

6
00:00:35,520 --> 00:00:38,040
Speaker 1: to read. You may wait through your Go, your Rushdie

7
00:00:38,080 --> 00:00:40,720
Speaker 1: and all the rest of Indian authors as we all

8
00:00:40,720 --> 00:00:44,320
Speaker 1: try to understand India Russia. Charma has done a public

9
00:00:44,360 --> 00:00:48,120
Speaker 1: service for most of the West by writing a wonderful

10
00:00:48,320 --> 00:00:52,640
Speaker 1: one volume book of his childhood and India's future. It

11
00:00:52,760 --> 00:00:56,800
Speaker 1: is a fabulous exercise democracy on the road. Can't say

12
00:00:56,880 --> 00:00:59,840
Speaker 1: enough about it. We're sharing You begin in the mid

13
00:01:00,360 --> 00:01:04,120
Speaker 1: of nowhere in beige Nor tell us about your childhood

14
00:01:04,480 --> 00:01:07,440
Speaker 1: when you would go the fancy pants child of a

15
00:01:07,560 --> 00:01:11,280
Speaker 1: naval officer, naval at Tosche whatever, and you go to

16
00:01:11,480 --> 00:01:15,240
Speaker 1: your grandfather in the middle of the Indian nowhere. What

17
00:01:15,319 --> 00:01:19,120
Speaker 1: was that like? You know, Tom, this is a personal memoir,

18
00:01:19,319 --> 00:01:22,360
Speaker 1: and uh, what I try and capture here was that

19
00:01:22,440 --> 00:01:25,120
Speaker 1: what was childhood like back in India growing up in

20
00:01:25,160 --> 00:01:29,200
Speaker 1: the nineteen seventies and the nineteen eighties, and so like

21
00:01:29,200 --> 00:01:31,839
Speaker 1: this town that you mentioned was you know, like about

22
00:01:31,840 --> 00:01:34,759
Speaker 1: a hundred and sixtys from Delhi. But what was remarkable

23
00:01:34,840 --> 00:01:37,399
Speaker 1: those days was this that we'd go to this sort

24
00:01:37,440 --> 00:01:40,720
Speaker 1: of uh back of beyond town there and we had

25
00:01:40,720 --> 00:01:44,039
Speaker 1: no choice if not like as if our parents asked

26
00:01:44,080 --> 00:01:46,920
Speaker 1: us that where do you want to go on summer vacation,

27
00:01:47,000 --> 00:01:49,680
Speaker 1: you just went, you know, we're taken to your grandparents

28
00:01:49,800 --> 00:01:53,200
Speaker 1: place and to go out this place in Bison or

29
00:01:53,840 --> 00:01:57,720
Speaker 1: there were there was hardly any electricity out there, you

30
00:01:57,760 --> 00:02:01,360
Speaker 1: didn't have running water all the time, and you had

31
00:02:01,400 --> 00:02:05,040
Speaker 1: the sort of raw discrimination that you would think of

32
00:02:05,120 --> 00:02:08,880
Speaker 1: in America a century ago. So you know, like the

33
00:02:09,680 --> 00:02:12,720
Speaker 1: class system in India is very sort of deep. And

34
00:02:12,960 --> 00:02:15,240
Speaker 1: that's what we got to see as kids growing up

35
00:02:15,280 --> 00:02:18,680
Speaker 1: out the claim it forward to the President Modi fighting

36
00:02:18,720 --> 00:02:21,200
Speaker 1: for his political life, and I want you to do

37
00:02:21,280 --> 00:02:24,240
Speaker 1: that across the arc of the book and your wonderful quote.

38
00:02:24,600 --> 00:02:26,959
Speaker 1: Let me first do my caul gate. I mean, it

39
00:02:27,080 --> 00:02:29,960
Speaker 1: is about an India we don't know. Tell us about

40
00:02:30,000 --> 00:02:33,840
Speaker 1: the India right now that Mr Moody confronts, Well, the

41
00:02:33,919 --> 00:02:36,200
Speaker 1: leader that you're talking about is a very big regional

42
00:02:36,320 --> 00:02:39,600
Speaker 1: leader from the largest state of India of Pradation, and

43
00:02:39,639 --> 00:02:43,080
Speaker 1: that's what he really confronts that we like here in

44
00:02:43,120 --> 00:02:46,840
Speaker 1: the international media, like to think of India in a

45
00:02:46,919 --> 00:02:51,040
Speaker 1: single narrative, which is mode versus the opposition. But the

46
00:02:51,120 --> 00:02:54,400
Speaker 1: real challenge to Moody is coming from a host of

47
00:02:54,440 --> 00:02:56,840
Speaker 1: regional leaders. And that's what I try and capture in

48
00:02:56,840 --> 00:03:00,800
Speaker 1: this book that this is a country of many sort

49
00:03:00,800 --> 00:03:04,280
Speaker 1: of states. It's more like the European Union then it

50
00:03:04,440 --> 00:03:07,760
Speaker 1: is like a homogeneous entity, and each state has its

51
00:03:07,760 --> 00:03:10,560
Speaker 1: own narrative, and that narrative is what we need to

52
00:03:10,639 --> 00:03:13,080
Speaker 1: understand what this election is going to be about. It's

53
00:03:13,080 --> 00:03:16,000
Speaker 1: going to be Moody versus a bunch of regional leaders.

54
00:03:16,040 --> 00:03:20,280
Speaker 1: Because like in India, some national identities are much stronger

55
00:03:20,320 --> 00:03:24,400
Speaker 1: than a national identity. Each state believes in their own language,

56
00:03:25,000 --> 00:03:27,480
Speaker 1: in their own culture, and that is something which I

57
00:03:27,480 --> 00:03:29,920
Speaker 1: think we don't appreciate as we try and look India

58
00:03:30,400 --> 00:03:33,799
Speaker 1: as a monolithic entity. And this is a very complex

59
00:03:34,000 --> 00:03:39,000
Speaker 1: society and as you put it with you know, family, cast, community, economics, development, money,

60
00:03:39,040 --> 00:03:41,320
Speaker 1: and corruption. What will the election actually focus on? Is

61
00:03:41,320 --> 00:03:44,480
Speaker 1: it economics, is it terrorism, is it something else well,

62
00:03:44,560 --> 00:03:47,240
Speaker 1: a whole bunch of factors, because to win an election

63
00:03:47,240 --> 00:03:50,040
Speaker 1: in India is a massive secret in terms of what

64
00:03:50,200 --> 00:03:52,160
Speaker 1: really sort of helps you win an election in India.

65
00:03:52,240 --> 00:03:54,080
Speaker 1: Like one thing I mentioned in the book is that

66
00:03:54,320 --> 00:03:56,800
Speaker 1: there is a very curious term which has been popularized

67
00:03:56,800 --> 00:03:59,960
Speaker 1: in India. It's called anti incumbency. What it basically say

68
00:04:00,080 --> 00:04:02,480
Speaker 1: just says that most leaders in India tend to lose

69
00:04:02,920 --> 00:04:06,440
Speaker 1: their election. This is very different from even the US

70
00:04:06,560 --> 00:04:09,080
Speaker 1: or the UK, where most politicians tend to get re

71
00:04:09,160 --> 00:04:12,040
Speaker 1: elected when they try for it. In India, two thirds

72
00:04:12,040 --> 00:04:16,320
Speaker 1: of governments have lost their election ever since the India

73
00:04:16,360 --> 00:04:18,840
Speaker 1: became a multiparty democracy. So that tells you there's a

74
00:04:18,920 --> 00:04:22,440
Speaker 1: deep frustration amongst the people about what their leaders end

75
00:04:22,520 --> 00:04:25,599
Speaker 1: up delivering because the state is so broken. And that's

76
00:04:25,640 --> 00:04:28,120
Speaker 1: the challenge which really Moody faces as he heads to

77
00:04:28,240 --> 00:04:31,320
Speaker 1: the polls. How to buck this trend of anti incumbency,

78
00:04:31,360 --> 00:04:34,160
Speaker 1: how to sort of deal with these regional leaders, how

79
00:04:34,200 --> 00:04:36,120
Speaker 1: to sort of deal with the fact that when he

80
00:04:36,160 --> 00:04:38,400
Speaker 1: goes to the south of India, and that's something we

81
00:04:38,440 --> 00:04:41,920
Speaker 1: don't cover enough, the language he speaks, Hindi, is sort

82
00:04:41,920 --> 00:04:45,359
Speaker 1: of not understood or even detested by many parts in

83
00:04:45,400 --> 00:04:47,400
Speaker 1: the south of India. It's like you, uh, you know,

84
00:04:47,640 --> 00:04:49,840
Speaker 1: I captured in this travelogue of mine that if you

85
00:04:49,920 --> 00:04:51,640
Speaker 1: go to places like in the south of India and

86
00:04:51,680 --> 00:04:54,000
Speaker 1: you speak to them in Hindi, it's like going to

87
00:04:54,040 --> 00:04:56,839
Speaker 1: the French countryside and speaking to the French in English.

88
00:04:57,200 --> 00:04:59,320
Speaker 1: That's how they sort of consider it to be offensive.

89
00:04:59,560 --> 00:05:02,880
Speaker 1: As continued Russia scharmer democracy on the road. I really

90
00:05:02,880 --> 00:05:05,479
Speaker 1: can't say enough about it. Is the new definitive one

91
00:05:05,560 --> 00:05:08,640
Speaker 1: volume and the fabric of an India not covered by

92
00:05:08,680 --> 00:05:23,400
Speaker 1: me or anybody else in the media. I read you

93
00:05:23,440 --> 00:05:27,080
Speaker 1: the start of David Kelly's weekly note, Oh Please, A

94
00:05:27,120 --> 00:05:30,320
Speaker 1: beautiful movie out of Africa. Two lions gather on the

95
00:05:30,320 --> 00:05:32,120
Speaker 1: hero's grave and look out at the cattle on the

96
00:05:32,120 --> 00:05:35,240
Speaker 1: plane below. It is a princely scene, an assumption that

97
00:05:35,279 --> 00:05:37,920
Speaker 1: the animals below was somehow the property of the lions

98
00:05:37,960 --> 00:05:41,880
Speaker 1: to consume whenever they feel hungry for some reason. Great

99
00:05:41,920 --> 00:05:44,520
Speaker 1: sound effects. I was reminded of this scene this week

100
00:05:44,560 --> 00:05:47,720
Speaker 1: as politicians from both parties decried what they saw as

101
00:05:47,800 --> 00:05:52,479
Speaker 1: corporate bad behavior and proposed measures to fix it. David,

102
00:05:52,600 --> 00:05:56,159
Speaker 1: does the presidential election play into any of this yes,

103
00:05:56,440 --> 00:05:58,920
Speaker 1: I'm afraid it does. I mean, one of the things

104
00:05:58,960 --> 00:06:00,480
Speaker 1: that I worry about, do you see the some places

105
00:06:00,480 --> 00:06:03,280
Speaker 1: like Italy, is that populism from the left and populism

106
00:06:03,320 --> 00:06:05,760
Speaker 1: from the right, both of them need a bad guy

107
00:06:06,400 --> 00:06:09,800
Speaker 1: and uh and a rich bad guys even better. And

108
00:06:09,920 --> 00:06:13,039
Speaker 1: so I do think that corporate profits are very high,

109
00:06:13,080 --> 00:06:15,440
Speaker 1: corporate margins are high. I think there is some threat

110
00:06:16,200 --> 00:06:18,200
Speaker 1: from both the left and the right the things that

111
00:06:18,240 --> 00:06:22,440
Speaker 1: we've done to reduce corporate profits in terms of regulations,

112
00:06:22,440 --> 00:06:26,159
Speaker 1: in terms of taxation, in terms of restrictions, and that

113
00:06:26,279 --> 00:06:28,400
Speaker 1: is something of a threat to the stock market. When

114
00:06:28,400 --> 00:06:30,320
Speaker 1: you look for a band guy, you often end up

115
00:06:30,320 --> 00:06:34,000
Speaker 1: with bad policy as a consequence. So let's talk about

116
00:06:34,040 --> 00:06:36,480
Speaker 1: the policy more specifically. Do you have a base case

117
00:06:36,520 --> 00:06:40,600
Speaker 1: what you expect to happen in the next couple of years. Well, yeah,

118
00:06:40,600 --> 00:06:42,480
Speaker 1: I think that. First of all, I think the I

119
00:06:42,560 --> 00:06:45,360
Speaker 1: think the the economy will probably just move forward. I

120
00:06:45,440 --> 00:06:49,200
Speaker 1: think the real threat does come after when we have

121
00:06:49,920 --> 00:06:52,240
Speaker 1: an election. It'll be it'll be interesting to see if

122
00:06:52,240 --> 00:06:55,520
Speaker 1: we get policy change. You will need one party to

123
00:06:55,600 --> 00:06:57,240
Speaker 1: sweep or the or the other, I think to have

124
00:06:57,320 --> 00:07:00,640
Speaker 1: that happen. But there does seem to be a consensus

125
00:07:00,040 --> 00:07:04,960
Speaker 1: us that things like stock buybacks are a bad thing

126
00:07:05,320 --> 00:07:07,080
Speaker 1: at least and the pleas now, I don't think they

127
00:07:07,120 --> 00:07:09,039
Speaker 1: are personally. I actually think, you know, if you can't

128
00:07:09,120 --> 00:07:11,600
Speaker 1: use the money just you know, distributed to something, you

129
00:07:11,600 --> 00:07:14,360
Speaker 1: can Pharaohs fly into d C three, you know, four

130
00:07:14,400 --> 00:07:16,720
Speaker 1: thousand feet. Let's go up to forty three thousand feet

131
00:07:16,800 --> 00:07:19,600
Speaker 1: right now and look at the broader picture, which is

132
00:07:19,600 --> 00:07:23,960
Speaker 1: the debt is expanding, the deficit is expanding. I believe

133
00:07:24,040 --> 00:07:26,600
Speaker 1: we can state the twin the twin deficits will stay

134
00:07:26,640 --> 00:07:30,239
Speaker 1: with us and meet German etcetera. Doesn't all this run

135
00:07:30,320 --> 00:07:36,760
Speaker 1: into not austerity, but at least some form of budget responsibility.

136
00:07:37,160 --> 00:07:39,280
Speaker 1: I don't think so. I think the problem the problem

137
00:07:39,400 --> 00:07:41,680
Speaker 1: is can you say that? I mean, well, well, the

138
00:07:41,720 --> 00:07:45,400
Speaker 1: problem I don't think it happens for years unfortunately, because

139
00:07:45,400 --> 00:07:48,280
Speaker 1: the problem is nobody ever does anything about a crisis

140
00:07:48,360 --> 00:07:51,360
Speaker 1: until it becomes a crisis. And the what we're seeing

141
00:07:51,600 --> 00:07:54,720
Speaker 1: a crisis right now, but but there won't be any

142
00:07:54,720 --> 00:07:57,000
Speaker 1: political incentive to do anything about it. And that the

143
00:07:57,080 --> 00:07:59,960
Speaker 1: natural constituency for prudence when it comes to the budget,

144
00:08:00,320 --> 00:08:03,080
Speaker 1: or indeed prudence when it comes to trade. Those deficiencies

145
00:08:03,680 --> 00:08:08,680
Speaker 1: are in retreat. Let's say democratic president, let's say Democratic House.

146
00:08:08,920 --> 00:08:11,960
Speaker 1: Maybe it's a Republican Senate. Five. I think we can

147
00:08:12,000 --> 00:08:14,520
Speaker 1: all stay that certain Beth John Tucker helped me here

148
00:08:14,600 --> 00:08:17,280
Speaker 1: is they're going to spend more money, right when do

149
00:08:17,400 --> 00:08:20,160
Speaker 1: they run into the I mean, David you, I mean,

150
00:08:20,200 --> 00:08:22,320
Speaker 1: I've got great respect for how you've been doing this

151
00:08:23,080 --> 00:08:27,560
Speaker 1: for for years. I don't I don't think that we

152
00:08:27,720 --> 00:08:30,040
Speaker 1: may see some more spending. I don't think that we'll

153
00:08:30,040 --> 00:08:32,200
Speaker 1: see a serious attempt to deal with a nine hundred

154
00:08:32,240 --> 00:08:34,560
Speaker 1: billion dollar depths because frankly, it's too big. You can't

155
00:08:34,600 --> 00:08:35,640
Speaker 1: you know, how do you how are you ever going

156
00:08:35,679 --> 00:08:37,920
Speaker 1: to get that down to zero? So they won't try

157
00:08:37,960 --> 00:08:40,200
Speaker 1: because they can't make much headway. And so I think

158
00:08:40,240 --> 00:08:42,880
Speaker 1: it I think it does expand and eventually it just

159
00:08:42,960 --> 00:08:45,480
Speaker 1: makes us poor because you know, if if we spend

160
00:08:45,480 --> 00:08:47,720
Speaker 1: beyond our means today, we will have to spend beneath

161
00:08:47,760 --> 00:08:49,160
Speaker 1: our means of the future. And in the main town,

162
00:08:49,160 --> 00:08:51,120
Speaker 1: there's always something to worry about. Yet the market is

163
00:08:51,160 --> 00:08:54,600
Speaker 1: up nicely through and what if I'm really fascinating actually

164
00:08:54,679 --> 00:08:56,719
Speaker 1: just taking a broader view of the global economy and

165
00:08:56,720 --> 00:09:00,480
Speaker 1: global markets, right Now, if you asked a rank have invested,

166
00:09:00,559 --> 00:09:03,400
Speaker 1: is what their biggest concern, biggest regional concern was, it

167
00:09:03,520 --> 00:09:07,480
Speaker 1: is pivoted away from China somewhat and towards Europe. And

168
00:09:07,520 --> 00:09:09,600
Speaker 1: then if I asked those same individuals just to guess

169
00:09:09,640 --> 00:09:12,400
Speaker 1: whether European equity market was this year, I don't think

170
00:09:12,440 --> 00:09:14,080
Speaker 1: many of them would have guessed that we're up nine

171
00:09:14,559 --> 00:09:16,600
Speaker 1: on the stock six hundred in Europe. So we're just

172
00:09:16,679 --> 00:09:20,160
Speaker 1: climbing a wall of worry. More broadly, well, European stocks

173
00:09:20,160 --> 00:09:22,520
Speaker 1: are pretty cheap. I mean, it's I admit that we

174
00:09:22,559 --> 00:09:25,280
Speaker 1: need you know, we do need a higher interest rates

175
00:09:25,320 --> 00:09:27,240
Speaker 1: in Europe at some stage to help out the banking sector.

176
00:09:27,280 --> 00:09:29,800
Speaker 1: And it's it's extraordinary to me that that the CV

177
00:09:29,960 --> 00:09:33,199
Speaker 1: doesn't do something about that. But overall European stocks are

178
00:09:33,200 --> 00:09:36,240
Speaker 1: pretty cheep. Europe is still recovering despite you know, there's

179
00:09:36,280 --> 00:09:39,880
Speaker 1: weakness in final demand, but you're seeing unemployment continue to

180
00:09:39,920 --> 00:09:42,199
Speaker 1: trek down. And you know, the unemployment does one of

181
00:09:42,240 --> 00:09:44,400
Speaker 1: two things that either goes up sharpier comes down slowly.

182
00:09:44,400 --> 00:09:46,719
Speaker 1: It's still coming down slowly in Europe. So I think

183
00:09:46,720 --> 00:09:50,720
Speaker 1: that Europe is still recovering more slowly. And um I

184
00:09:50,760 --> 00:09:54,319
Speaker 1: think it is reasonable therefore to invest in European stocks. Remember,

185
00:09:54,440 --> 00:09:56,280
Speaker 1: nothing in the world is that cheap in terms of

186
00:09:56,360 --> 00:09:58,800
Speaker 1: risk assets, because money has been cheap for so long,

187
00:09:58,920 --> 00:10:00,480
Speaker 1: and let's push up the price of of it. So

188
00:10:00,520 --> 00:10:03,560
Speaker 1: we've heard from three key ECV policymakers in the last week,

189
00:10:03,600 --> 00:10:06,120
Speaker 1: Executive Board member Benoit Kure, we've heard from the chief

190
00:10:06,160 --> 00:10:08,120
Speaker 1: economists in the last twenty four hours in the Bank

191
00:10:08,120 --> 00:10:10,840
Speaker 1: of France governor as well, all of them singing from

192
00:10:10,880 --> 00:10:13,600
Speaker 1: the same hymnshets seemingly that they need to take note

193
00:10:13,600 --> 00:10:15,719
Speaker 1: of the slowing growth. What we all fail to get

194
00:10:15,720 --> 00:10:17,920
Speaker 1: our hands around is what they can actually do to

195
00:10:18,080 --> 00:10:20,559
Speaker 1: offset the weakness we've seen so far, David, what can

196
00:10:20,600 --> 00:10:23,480
Speaker 1: they do? What they can do is throughout the playbook.

197
00:10:23,520 --> 00:10:25,840
Speaker 1: The playbook has not worked for the ECB for years.

198
00:10:26,360 --> 00:10:30,480
Speaker 1: UM running negative interest rates stimulates absolutely nothing. It acts

199
00:10:30,480 --> 00:10:32,640
Speaker 1: as a drag. In fact, they all admit that what

200
00:10:32,679 --> 00:10:36,520
Speaker 1: they need to do is, I believe UM is abandoned,

201
00:10:36,520 --> 00:10:38,840
Speaker 1: that policy tried to get back to it, you know,

202
00:10:38,880 --> 00:10:42,000
Speaker 1: to recognize that the European economy may have some legs

203
00:10:42,000 --> 00:10:45,720
Speaker 1: on its own UM and UH and normalize interest rates.

204
00:10:45,720 --> 00:10:47,240
Speaker 1: That I think if they do that. That would actually

205
00:10:47,280 --> 00:10:49,760
Speaker 1: help European terms of confidence. I think would help the

206
00:10:49,760 --> 00:10:52,959
Speaker 1: European banking system and that would, you know, I think,

207
00:10:53,000 --> 00:10:57,640
Speaker 1: actually help Europe established better growth. That's the classics should

208
00:10:57,840 --> 00:11:00,319
Speaker 1: shouldn't debate. I mean, it's the will won't that counts.

209
00:11:00,320 --> 00:11:02,120
Speaker 1: I mean, they're not going to do that, are they? No?

210
00:11:02,320 --> 00:11:04,120
Speaker 1: And so so Europe is going to have to wait

211
00:11:04,240 --> 00:11:07,640
Speaker 1: for I think a trade piece would certainly help. I

212
00:11:07,640 --> 00:11:10,320
Speaker 1: think Europe, you know, Europe getting hurt as much as

213
00:11:10,360 --> 00:11:14,000
Speaker 1: Asia by the trade conflict, but it is actually getting hurt. Um.

214
00:11:14,080 --> 00:11:16,520
Speaker 1: Europe does trade much more than the United States does

215
00:11:16,559 --> 00:11:19,719
Speaker 1: as a block. Um, So I think trade piece or

216
00:11:19,760 --> 00:11:22,079
Speaker 1: more trade certainty would certain would would help. That's how

217
00:11:22,080 --> 00:11:23,920
Speaker 1: the story has changed in the last week or so,

218
00:11:24,480 --> 00:11:28,240
Speaker 1: the American administration, the U. S administration turning his attention

219
00:11:28,280 --> 00:11:31,680
Speaker 1: towards the Europeans now, and the European officials spending the

220
00:11:31,720 --> 00:11:34,240
Speaker 1: weekend saying, if you slap all out tariffs on us,

221
00:11:34,360 --> 00:11:37,240
Speaker 1: We're going to retaliate. Is this the next battleground the

222
00:11:37,280 --> 00:11:40,160
Speaker 1: continent for tride disputing? I don't think so. I think

223
00:11:40,160 --> 00:11:42,640
Speaker 1: I think that the I think that the administration has

224
00:11:42,679 --> 00:11:45,400
Speaker 1: gotten more than it can handle with with the Chinese

225
00:11:45,440 --> 00:11:47,640
Speaker 1: trade dispute. I know that that's how they started with.

226
00:11:47,800 --> 00:11:49,600
Speaker 1: You know, we're gonna we're gonna do somebod in Mexico

227
00:11:49,640 --> 00:11:52,719
Speaker 1: and China and Canada and Korean and Europe. But I

228
00:11:52,760 --> 00:11:55,280
Speaker 1: think I think that the next act of this is

229
00:11:55,320 --> 00:11:57,600
Speaker 1: going to be really focused on China. So I expect

230
00:11:57,640 --> 00:12:01,600
Speaker 1: them to to um come come to a deal or

231
00:12:01,679 --> 00:12:03,640
Speaker 1: back off from this. I mean to to talk about

232
00:12:03,679 --> 00:12:06,400
Speaker 1: American orders being some sort of an hour sort, European

233
00:12:06,440 --> 00:12:10,680
Speaker 1: olds being a national security threat. Um, you know, defies

234
00:12:10,720 --> 00:12:13,559
Speaker 1: the Oxford English Dictionary, to be honest. David Kelly, thank

235
00:12:13,600 --> 00:12:18,480
Speaker 1: you so much. Thanks management on the political economy of

236
00:12:18,520 --> 00:12:20,520
Speaker 1: the moment and how it folds into all that we're

237
00:12:20,520 --> 00:12:35,600
Speaker 1: doing right now in Washington. Are Kevin surreally on this

238
00:12:35,720 --> 00:12:38,600
Speaker 1: day where Bernie Sanders says I will do it again?

239
00:12:39,440 --> 00:12:42,920
Speaker 1: Kevin remind us who Bernie Sanders was in two thousand

240
00:12:42,960 --> 00:12:46,760
Speaker 1: and fourteen and two thousand and fifteen before he attempted

241
00:12:46,760 --> 00:12:50,760
Speaker 1: to defeat Hillary Clinton. Well, he was a political independent,

242
00:12:50,880 --> 00:12:55,360
Speaker 1: but he he associated with more of the progressive socialist

243
00:12:55,440 --> 00:13:00,520
Speaker 1: democratic socialist and largely was was there before former the

244
00:13:00,600 --> 00:13:05,959
Speaker 1: likes of Senator Elizabeth Warren, the congresswoman Alexandria Accosta Cortez.

245
00:13:06,120 --> 00:13:11,160
Speaker 1: Did he use the words socialists four years ago? No? Uh?

246
00:13:11,200 --> 00:13:15,320
Speaker 1: And and if he didn't, he tried to. But but

247
00:13:15,400 --> 00:13:18,520
Speaker 1: now you have politicians who are embracing it and Republicans

248
00:13:18,520 --> 00:13:21,080
Speaker 1: who quite frankly, are trying to frame the less in

249
00:13:21,080 --> 00:13:23,760
Speaker 1: that regard. The difference between last time and this time

250
00:13:24,320 --> 00:13:27,880
Speaker 1: is that now he faces a crowded Republicans. And remember

251
00:13:27,920 --> 00:13:31,240
Speaker 1: some of the vulnerabilities of his campaign, particularly on Second

252
00:13:31,280 --> 00:13:35,760
Speaker 1: Amendment gun rights, he was much more uh he was.

253
00:13:36,160 --> 00:13:39,440
Speaker 1: The Clinton campaign criticized him on that. Uh. And he

254
00:13:39,480 --> 00:13:42,240
Speaker 1: was also criticized for not being a Democrat and not

255
00:13:42,360 --> 00:13:45,760
Speaker 1: joining the Democratic Party. Okay, is he a Democrat? Is

256
00:13:45,760 --> 00:13:49,959
Speaker 1: he a Democrat? Now? Uh? Well, I mean he's running

257
00:13:49,960 --> 00:13:52,839
Speaker 1: as a Democrat. But but I think that he will be.

258
00:13:53,120 --> 00:13:56,000
Speaker 1: He will the same lines of attack. Last time, he

259
00:13:56,080 --> 00:13:58,360
Speaker 1: was really the only game in town. No offense to

260
00:13:58,480 --> 00:14:02,720
Speaker 1: Martin O'Malley. But but but but this is an important point, folks.

261
00:14:02,760 --> 00:14:04,360
Speaker 1: I went back and looked, and I had forgotten how

262
00:14:04,400 --> 00:14:07,840
Speaker 1: will Senator Sanders had done against the Secretary of State

263
00:14:08,440 --> 00:14:11,640
Speaker 1: at the time. As you point out, Kevin's really what

264
00:14:11,760 --> 00:14:15,640
Speaker 1: a difference this time because it was Clinton alone essentially,

265
00:14:16,280 --> 00:14:19,920
Speaker 1: and now it's not how will Bernie Sanders change because

266
00:14:20,000 --> 00:14:23,720
Speaker 1: and now it's not, Well, he's He's definitely a top

267
00:14:23,760 --> 00:14:27,160
Speaker 1: tier candidate simply because of name recognition. Uh. And he

268
00:14:28,000 --> 00:14:30,720
Speaker 1: along with Joe Biden should Biden enter into the race,

269
00:14:31,400 --> 00:14:34,040
Speaker 1: as well as the likes of Elizabeth Warren. They have

270
00:14:34,160 --> 00:14:37,720
Speaker 1: name idea, they have name recognition. Uh. And that's really

271
00:14:37,760 --> 00:14:40,760
Speaker 1: the the biggest telling point as of now. Kevin, I

272
00:14:40,800 --> 00:14:43,760
Speaker 1: wonder how the White House forew Bernie Sanders running again

273
00:14:44,040 --> 00:14:47,760
Speaker 1: as President Trump smiling this morning as this news breaks. Yes,

274
00:14:47,840 --> 00:14:51,480
Speaker 1: he's grinning ear to ear anecdotally speaking. Look, I mean

275
00:14:51,800 --> 00:14:54,600
Speaker 1: crazy Bernie. Crazy Bernie was how he referred to him

276
00:14:54,680 --> 00:14:57,440
Speaker 1: during the last campaign. And and any time you have

277
00:14:57,480 --> 00:15:01,760
Speaker 1: a socialist or someone who was embracing at AOC type

278
00:15:01,760 --> 00:15:05,960
Speaker 1: of ideology, the Republicans right now feel that that's a win. Uh.

279
00:15:05,960 --> 00:15:08,560
Speaker 1: And and they are, you know, burning ear to ear

280
00:15:08,600 --> 00:15:12,200
Speaker 1: because every Republican that I talked to argues that that's

281
00:15:12,240 --> 00:15:14,680
Speaker 1: going to help them in the long run. And Kevin

282
00:15:14,840 --> 00:15:18,800
Speaker 1: reminds me of Jeremy Corbyn. This does tom In the UK,

283
00:15:19,520 --> 00:15:22,600
Speaker 1: you have a candidate that seems to be in opposition

284
00:15:22,840 --> 00:15:25,240
Speaker 1: with his own party as much as he is with

285
00:15:25,360 --> 00:15:29,720
Speaker 1: the opposition themselves. And I just wonder, Kevin, is this

286
00:15:29,760 --> 00:15:34,000
Speaker 1: an individual that enjoys being in opposition? Yes, But I

287
00:15:34,080 --> 00:15:38,280
Speaker 1: also think that he would argue that he successfully pulled

288
00:15:38,320 --> 00:15:40,760
Speaker 1: his party to the left. I mean, it was in

289
00:15:40,800 --> 00:15:43,480
Speaker 1: many ways. There is a comparison to make between Trump

290
00:15:43,840 --> 00:15:46,960
Speaker 1: and Standers in the sense that Trump campaigned on the

291
00:15:47,000 --> 00:15:50,520
Speaker 1: wall that everyone thought was you know, like when it

292
00:15:50,640 --> 00:15:52,840
Speaker 1: first came out, was a was a far fetched, far

293
00:15:52,920 --> 00:15:57,040
Speaker 1: flung idea. And you know, he made that issue part

294
00:15:57,120 --> 00:15:59,960
Speaker 1: of Republican ideology in the same way that he recreate

295
00:16:00,000 --> 00:16:04,160
Speaker 1: it at trade policies and republic now Medicare for all

296
00:16:04,600 --> 00:16:08,960
Speaker 1: Green new deals. These are things in in the within

297
00:16:09,240 --> 00:16:11,760
Speaker 1: the zeitgeist. If he did pretty darn go to the

298
00:16:11,800 --> 00:16:16,040
Speaker 1: Democratic primary of two thousand and sixteen, did his people

299
00:16:16,200 --> 00:16:21,000
Speaker 1: vote for Secretary Clinton against President Trump? And there's a

300
00:16:21,040 --> 00:16:25,000
Speaker 1: feeling that if Senator Sanders runs now, he provides strength

301
00:16:25,080 --> 00:16:29,440
Speaker 1: to whoever the Democratic Party candidate is in November of

302
00:16:29,440 --> 00:16:32,440
Speaker 1: two thousand twenty. Well, that's a that's a hard question

303
00:16:32,480 --> 00:16:36,000
Speaker 1: answer because it's it also gets to the notion of

304
00:16:36,040 --> 00:16:39,200
Speaker 1: American politics where if you get out of the Beltway,

305
00:16:39,240 --> 00:16:41,440
Speaker 1: if you get out of New York City and you

306
00:16:41,560 --> 00:16:46,320
Speaker 1: talk to voters there, there are I know this personally,

307
00:16:46,800 --> 00:16:50,000
Speaker 1: there is a part of voters who were deciding between

308
00:16:50,440 --> 00:16:54,240
Speaker 1: a Senator Sanders or a Donald Trump. And those voters

309
00:16:54,280 --> 00:16:57,920
Speaker 1: exist and not streak of populism and now to some

310
00:16:58,000 --> 00:17:02,640
Speaker 1: extent democratic socialism that very much exists. And those are

311
00:17:02,800 --> 00:17:06,600
Speaker 1: key independent voters, voters who went for Obama and then

312
00:17:06,600 --> 00:17:10,200
Speaker 1: went for Trump. Those are key independent voters that I

313
00:17:10,240 --> 00:17:13,200
Speaker 1: think are so difficult for pollsters to keep track of,

314
00:17:13,720 --> 00:17:15,960
Speaker 1: but they are out there, and they're out there more

315
00:17:15,960 --> 00:17:18,840
Speaker 1: frequently than I think. For me and in the mainstream

316
00:17:18,880 --> 00:17:22,080
Speaker 1: press realized. We will discuss this further as well. Kevin Surlier,

317
00:17:22,240 --> 00:17:26,320
Speaker 1: Chief Washington corresponding, of course, look for his important conversation

318
00:17:39,720 --> 00:17:43,879
Speaker 1: Sarah Halseck with us. There's absolutely thrilled issues with us today.

319
00:17:43,960 --> 00:17:46,640
Speaker 1: First on Walmart, and then we'll talk about the effect

320
00:17:46,640 --> 00:17:50,199
Speaker 1: of fashion, the effect of Karl Lagerfeld across all of

321
00:17:50,480 --> 00:17:55,000
Speaker 1: her world. Sarah Halseck does fashion and retail for Bloomberg Opinion.

322
00:17:55,040 --> 00:17:58,000
Speaker 1: Sarah on Walmart, what is the Walmart distinction right now?

323
00:17:58,080 --> 00:18:00,919
Speaker 1: Up three? What are they doing dear certainly than others.

324
00:18:02,080 --> 00:18:04,400
Speaker 1: So some of it is just retail one on one

325
00:18:04,480 --> 00:18:07,919
Speaker 1: that they're they're doing really well. Um So, for example,

326
00:18:08,000 --> 00:18:11,159
Speaker 1: during the holiday season, they did things like have folks

327
00:18:11,160 --> 00:18:14,359
Speaker 1: stationed in aisles to check people out without having to

328
00:18:14,400 --> 00:18:16,639
Speaker 1: go to those cash registers up at the front. That

329
00:18:16,680 --> 00:18:18,719
Speaker 1: does a lot to improve throughput, That does a lot

330
00:18:18,760 --> 00:18:21,480
Speaker 1: to keep customers happy. Um. So they've also done a

331
00:18:21,520 --> 00:18:23,359
Speaker 1: lot of work on main sure they're in stock on

332
00:18:23,480 --> 00:18:26,639
Speaker 1: key items, and they really made a big play for

333
00:18:26,680 --> 00:18:29,040
Speaker 1: those toys or rust dollars. This is the first Christmas

334
00:18:29,240 --> 00:18:32,040
Speaker 1: without doing for us, and they dramatically expanded their toy

335
00:18:32,080 --> 00:18:34,480
Speaker 1: assortment and that paid off. This is a huge deal.

336
00:18:34,680 --> 00:18:37,480
Speaker 1: I'm sorry, but who's going to replace the psyche absolute

337
00:18:37,520 --> 00:18:39,399
Speaker 1: of us? Yeah? Absolutely, And it looks like, you know,

338
00:18:39,400 --> 00:18:41,520
Speaker 1: it's not just the online players Amazon, but it's also

339
00:18:41,560 --> 00:18:44,679
Speaker 1: Walmart and lots of other people going for those dollars. So, Sarah,

340
00:18:44,960 --> 00:18:47,280
Speaker 1: you know, this is a very good news coming out

341
00:18:47,280 --> 00:18:49,119
Speaker 1: of Walmart. I think it bodes well obviously for the

342
00:18:49,160 --> 00:18:52,560
Speaker 1: retail sector, especially after the week retail sales number we

343
00:18:52,680 --> 00:18:56,000
Speaker 1: got for December last week. How does the you know,

344
00:18:56,200 --> 00:18:59,159
Speaker 1: how did these two square in your mind. That's the

345
00:18:59,160 --> 00:19:01,760
Speaker 1: thing they kind of don't, right, Um. So, I think

346
00:19:01,840 --> 00:19:05,040
Speaker 1: Walmart's result is more consistent with what we saw from

347
00:19:05,080 --> 00:19:08,600
Speaker 1: other company reports about the holiday season. So Target, another

348
00:19:08,680 --> 00:19:12,760
Speaker 1: general merchant, had a really strong UH November and December,

349
00:19:12,840 --> 00:19:16,600
Speaker 1: and other retailers like Five Below, Urban Outfitters, Lulu Lemon

350
00:19:16,720 --> 00:19:19,359
Speaker 1: all had good holiday seasons. And these are companies that

351
00:19:19,359 --> 00:19:22,960
Speaker 1: have threatened pretty consistently executing in a you know, time

352
00:19:23,000 --> 00:19:26,400
Speaker 1: of retail turmoil and tumult. The retailers that had tough

353
00:19:26,440 --> 00:19:29,000
Speaker 1: holiday seasons were the ones that have been struggling all along,

354
00:19:29,600 --> 00:19:32,280
Speaker 1: like Macy's and J. C. Penny for example. And so

355
00:19:32,520 --> 00:19:35,040
Speaker 1: I think that commerce department number remains a bit of

356
00:19:35,080 --> 00:19:37,800
Speaker 1: a puzzle, and I will certainly be watching the revisions

357
00:19:37,840 --> 00:19:41,040
Speaker 1: closely when we get them next month. So, Sarah, the

358
00:19:41,160 --> 00:19:42,680
Speaker 1: one of the numbers that jumped out of me was

359
00:19:42,720 --> 00:19:47,240
Speaker 1: the e commerce sales for Walmart up in the quarter.

360
00:19:47,680 --> 00:19:50,520
Speaker 1: What are they doing right there? Yeah? So, I think

361
00:19:50,600 --> 00:19:52,720
Speaker 1: one of the key things has been to expand the

362
00:19:52,760 --> 00:19:56,239
Speaker 1: assortment dramatically. They have really worked hard to get more

363
00:19:56,400 --> 00:19:58,680
Speaker 1: third party merchants on their site to have a more

364
00:19:58,800 --> 00:20:01,679
Speaker 1: robust market place ace um. And they also did an

365
00:20:01,680 --> 00:20:05,560
Speaker 1: important step this year of including those marketplace sellers in

366
00:20:05,600 --> 00:20:08,160
Speaker 1: their free to day shipping offer, and so I think

367
00:20:08,200 --> 00:20:12,600
Speaker 1: that just made their offer more attractive overall in comparison

368
00:20:12,680 --> 00:20:15,080
Speaker 1: to Amazon. UM. They've also been working a lot to

369
00:20:15,520 --> 00:20:19,400
Speaker 1: have some interesting private labeled brands, to have home furnishing

370
00:20:19,440 --> 00:20:22,040
Speaker 1: brands that you can't get anywhere else but Walmart and

371
00:20:22,040 --> 00:20:24,240
Speaker 1: have really been trying to work on the design and

372
00:20:24,320 --> 00:20:27,159
Speaker 1: aesthetic of those items to be more competitive to what

373
00:20:27,240 --> 00:20:29,600
Speaker 1: you see from Target. We all know that tar j

374
00:20:29,880 --> 00:20:32,679
Speaker 1: nickname that they have um for their ability to deliver

375
00:20:32,880 --> 00:20:35,800
Speaker 1: very cheap, sheek stuff at good prices. Walmart has been

376
00:20:35,800 --> 00:20:37,760
Speaker 1: trying to encroach on that territory and I think that

377
00:20:37,800 --> 00:20:40,280
Speaker 1: helped them in the holiday court would be basically online

378
00:20:40,480 --> 00:20:43,160
Speaker 1: that would be Volmar or something. I'm trying to come

379
00:20:43,240 --> 00:20:48,640
Speaker 1: up with a sheet name for Volvomar, continue, Paul. Yeah,

380
00:20:48,640 --> 00:20:50,800
Speaker 1: so so, sir, it's interesting and you know, again another

381
00:20:50,800 --> 00:20:53,960
Speaker 1: shot in the arm positively for the retailers. What is

382
00:20:54,000 --> 00:20:56,960
Speaker 1: the company saying about from their perspective the health of

383
00:20:56,960 --> 00:20:59,240
Speaker 1: the consumer. Nobody has their finger on the pulse of

384
00:20:59,320 --> 00:21:02,240
Speaker 1: the consumer, like like Walmart, what are they seeing? Yeah,

385
00:21:02,240 --> 00:21:04,600
Speaker 1: so they did say that they expect to see uncertainty

386
00:21:04,800 --> 00:21:07,119
Speaker 1: in the year ahead. And look, that makes sense, right.

387
00:21:07,160 --> 00:21:10,720
Speaker 1: We have these increased tariffs from China on goods coming

388
00:21:10,760 --> 00:21:13,199
Speaker 1: in from China looming that may or may not go

389
00:21:13,280 --> 00:21:15,440
Speaker 1: into effect, and it's really hard to know how consumers

390
00:21:15,480 --> 00:21:18,000
Speaker 1: are going to react to that. Uh. Similarly, we have

391
00:21:18,040 --> 00:21:21,119
Speaker 1: a lot of the consumer stable companies raising prices right

392
00:21:21,160 --> 00:21:24,720
Speaker 1: now on things like diapers, paper towels, tissues that have

393
00:21:24,800 --> 00:21:27,080
Speaker 1: nothing really to do with the China dynamics, that have

394
00:21:27,160 --> 00:21:29,359
Speaker 1: more to do with commodity prices, the prices of pulp,

395
00:21:29,680 --> 00:21:32,800
Speaker 1: and so as consumers start feeling higher prices for all

396
00:21:32,800 --> 00:21:34,800
Speaker 1: those everyday goods, it's sort of hard to know how

397
00:21:34,840 --> 00:21:37,280
Speaker 1: that's going to ripple through the rest of their spending.

398
00:21:37,280 --> 00:21:39,360
Speaker 1: And so Walmart is keenly aware of that and knows

399
00:21:39,400 --> 00:21:41,280
Speaker 1: that products them uncertainty for them in the year I

400
00:21:41,280 --> 00:21:43,800
Speaker 1: had Sarah Holsick with us and we are thrilled that

401
00:21:43,840 --> 00:21:48,639
Speaker 1: shoes with us today. A true giant of European, of French,

402
00:21:48,800 --> 00:21:53,520
Speaker 1: indeed of American fashions, dyed Karl Lagerfeld at five years old. Sarah,

403
00:21:53,520 --> 00:21:56,600
Speaker 1: as you will know, for you to get this morning

404
00:21:56,640 --> 00:22:00,720
Speaker 1: into the Chanel look is twelve thousand, eight d fifty

405
00:22:00,720 --> 00:22:03,720
Speaker 1: dollars just to get one of their summer looks of

406
00:22:03,760 --> 00:22:07,000
Speaker 1: the classics Chanel Code and a little Dressed Thing going

407
00:22:07,160 --> 00:22:11,280
Speaker 1: as well six thousand and six thousand together. How does

408
00:22:11,359 --> 00:22:16,240
Speaker 1: that filter down two mere mortals? How does Karl Lagerfeld

409
00:22:16,680 --> 00:22:20,800
Speaker 1: and Chanel end up at Zara, end up at Walmart,

410
00:22:21,000 --> 00:22:25,160
Speaker 1: end up at Sacks whatever? How does it filter down? Yeah,

411
00:22:25,720 --> 00:22:29,520
Speaker 1: largely through the work of skilled merchants. UM. So basically,

412
00:22:29,560 --> 00:22:31,800
Speaker 1: I think for a long time this dynamic has existed

413
00:22:31,880 --> 00:22:35,600
Speaker 1: where the runway shows kind of set the tone for

414
00:22:35,800 --> 00:22:38,080
Speaker 1: what's going to be sold elsewhere, and the merchants of

415
00:22:38,160 --> 00:22:43,439
Speaker 1: these mid priced or even more accessible luxury uh go

416
00:22:43,520 --> 00:22:46,159
Speaker 1: to those runway shows, see what the dynamics are and

417
00:22:46,200 --> 00:22:48,680
Speaker 1: try to adapt to them accordingly. And Karl Lagerfeld was

418
00:22:48,720 --> 00:22:53,040
Speaker 1: certainly a tastemaker, UM who's uh sort of taste in

419
00:22:53,080 --> 00:22:56,760
Speaker 1: profiles were felt throughout the for many decades. I will

420
00:22:56,800 --> 00:22:59,159
Speaker 1: say that, you know, the dynamics are changing because of

421
00:22:59,160 --> 00:23:01,800
Speaker 1: the Internet. Um, we do have these street style stars

422
00:23:01,840 --> 00:23:05,600
Speaker 1: who are able to kind of create trends without in

423
00:23:05,640 --> 00:23:07,560
Speaker 1: a more bottom up way as opposed to a top

424
00:23:07,600 --> 00:23:10,280
Speaker 1: down way, and that's something that luxury giants the world

425
00:23:10,280 --> 00:23:12,520
Speaker 1: over are grappling with and try to figure out who

426
00:23:12,680 --> 00:23:14,480
Speaker 1: was doing. I mean, I mean, Gucci is the winner

427
00:23:14,600 --> 00:23:17,240
Speaker 1: right now. I think they were up and revenue and

428
00:23:17,280 --> 00:23:21,040
Speaker 1: then they failed up only year over year the next

429
00:23:21,080 --> 00:23:24,359
Speaker 1: time around, and kidding folks have been doing phenomenal as well.

430
00:23:25,040 --> 00:23:28,520
Speaker 1: I mean, is Gucci out Lagerfeld Lagerfeld? I mean, is

431
00:23:28,520 --> 00:23:32,119
Speaker 1: that essentially what's happened? And again, Gucci filters down into

432
00:23:32,160 --> 00:23:34,960
Speaker 1: everything that you report on, don't they They sure do.

433
00:23:35,119 --> 00:23:38,520
Speaker 1: And yeah, recently, um, Gucci under the leadership of Alessandro Michelle,

434
00:23:38,560 --> 00:23:41,639
Speaker 1: under his creative direction, has been on a really strong

435
00:23:41,800 --> 00:23:45,600
Speaker 1: run with things like their fur lined low fer mules

436
00:23:45,640 --> 00:23:48,560
Speaker 1: really sort of setting the trend and this logo trend

437
00:23:48,640 --> 00:23:50,560
Speaker 1: that has been so strong. Remember it was only five

438
00:23:50,640 --> 00:23:53,359
Speaker 1: years we were talking about how the logo was dead

439
00:23:53,840 --> 00:23:55,280
Speaker 1: um and that no one was going to want to

440
00:23:55,280 --> 00:23:58,320
Speaker 1: be wearing flashy things like that anymore. And Gucci with

441
00:23:58,359 --> 00:24:02,000
Speaker 1: the catalyzing a turn to that look and Soucci, has

442
00:24:02,000 --> 00:24:04,680
Speaker 1: been a real trend center, real pace center for the

443
00:24:04,760 --> 00:24:07,480
Speaker 1: luxury industry overall. This is amazing, Sarah. It's like, thank

444
00:24:07,520 --> 00:24:22,480
Speaker 1: you so much. It's always a joy to have James

445
00:24:22,520 --> 00:24:25,080
Speaker 1: Suva and he's out of San Francisco, a city group,

446
00:24:25,480 --> 00:24:28,240
Speaker 1: or he looks at things I don't understand, but it's

447
00:24:28,280 --> 00:24:32,640
Speaker 1: always a joy when you understand that. Paul Sweeney and myself,

448
00:24:32,680 --> 00:24:34,840
Speaker 1: we get in somewhere in the vicinity of four and

449
00:24:34,920 --> 00:24:39,760
Speaker 1: twelve research reports a day in every once in a while,

450
00:24:39,960 --> 00:24:42,640
Speaker 1: like once Paul, what every ten days, every eight days

451
00:24:42,720 --> 00:24:47,120
Speaker 1: or whatever, one just stands out and says, hey, stupid,

452
00:24:47,200 --> 00:24:50,080
Speaker 1: shut up and read this. That would be five G

453
00:24:51,040 --> 00:24:53,919
Speaker 1: not a game changer. Jim Suva was City Group Research

454
00:24:54,040 --> 00:24:56,320
Speaker 1: joins us. All right, now, Paul, why don't you start

455
00:24:56,320 --> 00:24:58,080
Speaker 1: out on five G because you know way more than

456
00:24:58,119 --> 00:25:00,200
Speaker 1: I do. Yeah, Jim, thanks so much for joining. Is

457
00:25:00,359 --> 00:25:02,800
Speaker 1: you know, one of the hot topics certainly around all

458
00:25:02,800 --> 00:25:05,679
Speaker 1: the technology is five G. We've got phone companies spending

459
00:25:05,680 --> 00:25:08,760
Speaker 1: billions of dollars on spectrum. We've got technology companies saying

460
00:25:08,800 --> 00:25:11,439
Speaker 1: we're going to fit out a new network across the country.

461
00:25:11,440 --> 00:25:14,160
Speaker 1: But Jim, you're saying, maybe let's step back and take

462
00:25:14,200 --> 00:25:16,919
Speaker 1: a look. What do you think are the opportunities for

463
00:25:17,000 --> 00:25:20,320
Speaker 1: five G? Well, thanks for having me on, and I

464
00:25:20,359 --> 00:25:23,119
Speaker 1: want to say five G is very exciting. Now for

465
00:25:23,200 --> 00:25:25,399
Speaker 1: the common person out there, they think that more G

466
00:25:25,760 --> 00:25:28,840
Speaker 1: is better than less G. So five G is better

467
00:25:28,880 --> 00:25:31,040
Speaker 1: than four G. You just describe me. See how Jim

468
00:25:31,119 --> 00:25:36,680
Speaker 1: Sumpa did that. Ace, I've covered it out, continued Jim. Well,

469
00:25:36,680 --> 00:25:38,720
Speaker 1: I'm sure Tom and Paul you want more than to

470
00:25:38,800 --> 00:25:41,159
Speaker 1: simply five gs better than four G. But when we

471
00:25:41,200 --> 00:25:43,440
Speaker 1: take a look at it, and we think about smartphones

472
00:25:43,880 --> 00:25:46,399
Speaker 1: like your iPhone or your various phones that you hold

473
00:25:46,400 --> 00:25:49,119
Speaker 1: and use on a daily basis, will this be a

474
00:25:49,280 --> 00:25:52,639
Speaker 1: wow gotta have a big upgrade, need to run and

475
00:25:52,680 --> 00:25:55,280
Speaker 1: spend a lot of money to replace your new phone.

476
00:25:55,680 --> 00:25:58,800
Speaker 1: And we believe the answer is no, that I's not

477
00:25:58,920 --> 00:26:01,560
Speaker 1: a game changer. What we do believe is that all

478
00:26:01,600 --> 00:26:04,639
Speaker 1: the networks are investing in it. It's a very expensive

479
00:26:04,880 --> 00:26:08,320
Speaker 1: um investment. They have to have it, and eventually it

480
00:26:08,320 --> 00:26:11,560
Speaker 1: will roll out to allow like machines to talk to machines,

481
00:26:11,720 --> 00:26:16,240
Speaker 1: or more um commonly commonly known cars to talk to cars,

482
00:26:16,359 --> 00:26:19,040
Speaker 1: or to get your weather and traffic a lot better

483
00:26:19,560 --> 00:26:22,359
Speaker 1: and better information. But they need to go out and

484
00:26:22,440 --> 00:26:25,560
Speaker 1: buy a new smartphone. We do not think five G

485
00:26:25,720 --> 00:26:27,960
Speaker 1: is going to be a big game changer, And in fact,

486
00:26:28,040 --> 00:26:31,600
Speaker 1: the first companies that roll out these newer technologies a

487
00:26:31,640 --> 00:26:35,280
Speaker 1: lot of times have suboptimal battery life, and most people

488
00:26:35,320 --> 00:26:37,800
Speaker 1: want their smartphone to last all day long. So we

489
00:26:37,880 --> 00:26:41,320
Speaker 1: actually ironically do not think Apple will be one of

490
00:26:41,320 --> 00:26:45,520
Speaker 1: the first five G smartphones out there. So, Jim, given

491
00:26:45,560 --> 00:26:48,080
Speaker 1: that that, maybe it's not the game changer for the

492
00:26:48,119 --> 00:26:50,640
Speaker 1: phone business. Um, and you know some of these were

493
00:26:50,800 --> 00:26:54,000
Speaker 1: very early days in five G. What is your sense

494
00:26:54,080 --> 00:26:56,400
Speaker 1: of the return on investment that a lot of these

495
00:26:56,400 --> 00:26:59,960
Speaker 1: companies can make on these billions of dollars are spending. Well,

496
00:27:00,040 --> 00:27:03,480
Speaker 1: you correctly identified it correctly that it is indeed billions

497
00:27:03,520 --> 00:27:06,800
Speaker 1: of dollars that companies are investing in this network called

498
00:27:06,880 --> 00:27:10,160
Speaker 1: five G, and it is very important. But the thing

499
00:27:10,280 --> 00:27:13,520
Speaker 1: is is if you don't invest it, you will be

500
00:27:13,680 --> 00:27:17,040
Speaker 1: left behind. So whether you're a telecom operator in the

501
00:27:17,119 --> 00:27:21,200
Speaker 1: United States or Europe or Asia, everyone else is investing

502
00:27:21,240 --> 00:27:25,000
Speaker 1: in it. It simply becomes the basically table stakes of

503
00:27:25,080 --> 00:27:27,680
Speaker 1: what you have to have to be in the game.

504
00:27:27,960 --> 00:27:30,720
Speaker 1: If you don't invest it, you simply get left behind.

505
00:27:31,119 --> 00:27:33,720
Speaker 1: So what is the return investment that has left to

506
00:27:33,760 --> 00:27:37,040
Speaker 1: be seen? Because here's the important thing. Most people today

507
00:27:37,280 --> 00:27:39,760
Speaker 1: don't want to spend a lot more money to their

508
00:27:39,760 --> 00:27:43,120
Speaker 1: cell phone provider or their cable option. They're simply pushing

509
00:27:43,119 --> 00:27:46,919
Speaker 1: back another bill of an additional ten a month. A

510
00:27:46,920 --> 00:27:50,320
Speaker 1: lot of people are shying that additional payment. Jim Sylvie,

511
00:27:50,560 --> 00:27:53,080
Speaker 1: in your lengthy report, you've got a wonderful thing that

512
00:27:53,160 --> 00:27:55,359
Speaker 1: even a dummy like I can understand. Let's go all

513
00:27:55,480 --> 00:27:58,439
Speaker 1: Roy g BIV. Right now, you've got the color span

514
00:27:58,680 --> 00:28:03,960
Speaker 1: of four G versus five G millimeter waves. And obviously

515
00:28:04,040 --> 00:28:07,040
Speaker 1: even I can see that five G is way way

516
00:28:07,119 --> 00:28:11,200
Speaker 1: better than four G. For what bring it to the smartphone?

517
00:28:11,240 --> 00:28:14,000
Speaker 1: Whatever it is you mean you mentioned I'm going to

518
00:28:14,080 --> 00:28:17,040
Speaker 1: get weather better. Right now, I can get weather in

519
00:28:17,240 --> 00:28:21,600
Speaker 1: Venice in like two seconds. I mean, I don't understand

520
00:28:21,760 --> 00:28:27,560
Speaker 1: how this massive wavefront helps anybody better other than business

521
00:28:27,560 --> 00:28:30,960
Speaker 1: to businesses. You state so in your example of getting

522
00:28:31,000 --> 00:28:36,760
Speaker 1: weather in two seconds, it simply could be in faster

523
00:28:36,840 --> 00:28:39,560
Speaker 1: than that. Now, that making a material for checking weather.

524
00:28:39,920 --> 00:28:42,440
Speaker 1: But if you start thinking about a car that's going

525
00:28:42,480 --> 00:28:44,960
Speaker 1: to talk to another car in front of it before

526
00:28:45,000 --> 00:28:48,320
Speaker 1: it stops or gets into accident, and more so than

527
00:28:48,360 --> 00:28:51,480
Speaker 1: just sensing b B B bee, our minivan is you know,

528
00:28:51,520 --> 00:28:54,520
Speaker 1: getting close to the wall. My children say stop daddy stop.

529
00:28:54,800 --> 00:28:58,120
Speaker 1: It's more than just talking amongst the censor. It's also

530
00:28:58,200 --> 00:29:02,280
Speaker 1: communicating further ahead ach um crashes in the road, on

531
00:29:02,360 --> 00:29:06,120
Speaker 1: the bridges and in the tunnels. It's communicating also about

532
00:29:06,200 --> 00:29:09,000
Speaker 1: the way that traffic lights should be times to have

533
00:29:09,080 --> 00:29:12,400
Speaker 1: on a three minute cycle during rush hour. They should

534
00:29:12,440 --> 00:29:15,320
Speaker 1: be longer greens and less reds. And so that's what

535
00:29:15,360 --> 00:29:17,840
Speaker 1: it's allowing you to do is information that process. Fact

536
00:29:18,120 --> 00:29:21,160
Speaker 1: Q and I with our cell phones, you know, changing

537
00:29:21,200 --> 00:29:24,120
Speaker 1: the weather from two seconds to point few seconds doesn't

538
00:29:24,120 --> 00:29:26,640
Speaker 1: matter for our New York audience who all knows this,

539
00:29:26,720 --> 00:29:31,120
Speaker 1: and I'll tell you nationwide, six G is Fifth Avenues lights.

540
00:29:31,120 --> 00:29:34,160
Speaker 1: They've got them time on Fifth Avenue. So you can

541
00:29:34,200 --> 00:29:36,840
Speaker 1: only drive it like twenty three miles an hour to

542
00:29:37,000 --> 00:29:40,760
Speaker 1: not hit every like that's called six G exactly. So, Jim,

543
00:29:40,960 --> 00:29:43,440
Speaker 1: you know, I remained very dubious as to the returns

544
00:29:43,440 --> 00:29:45,640
Speaker 1: that could be generated here. What are some of the

545
00:29:45,640 --> 00:29:49,840
Speaker 1: ways that investors are positioning themselves for this five GRE wave? Well,

546
00:29:50,000 --> 00:29:52,720
Speaker 1: simply put, right now, I think it's early in the

547
00:29:52,760 --> 00:29:55,480
Speaker 1: game and people are a little confused about even will

548
00:29:55,520 --> 00:29:58,680
Speaker 1: this be a big upgrade cycle to smartphones or to

549
00:29:58,920 --> 00:30:03,080
Speaker 1: base station or things like that. We do not believe

550
00:30:03,280 --> 00:30:06,280
Speaker 1: it's a big catalyst for Apple. That being said, we

551
00:30:06,320 --> 00:30:09,240
Speaker 1: have a BYE rating on Apple for different reasons including

552
00:30:09,400 --> 00:30:13,720
Speaker 1: the stock is valuation attractive as well as a dividend yield,

553
00:30:14,200 --> 00:30:17,840
Speaker 1: and right now expectations for Apple are quite low. But

554
00:30:17,960 --> 00:30:19,680
Speaker 1: another way to do this is a kind of a

555
00:30:19,680 --> 00:30:22,640
Speaker 1: technical company that does all the testing. Please all these

556
00:30:22,680 --> 00:30:25,520
Speaker 1: base stations and thinking as a company called key Sites.

557
00:30:25,720 --> 00:30:28,800
Speaker 1: Pick your k e y s okay, Jim Suva, thank

558
00:30:28,800 --> 00:30:32,520
Speaker 1: you so much. A City Group with a wonderful essay. Thoughtful,

559
00:30:32,560 --> 00:30:35,840
Speaker 1: thoughtful essay on five GN again, as they said earlier,

560
00:30:36,120 --> 00:30:38,840
Speaker 1: get that from City Group affiliates. We we protect a

561
00:30:38,840 --> 00:30:47,960
Speaker 1: copyright of all of our guests as well. Thanks for

562
00:30:48,080 --> 00:30:52,440
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

563
00:30:52,600 --> 00:30:58,360
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

564
00:30:58,880 --> 00:31:02,240
Speaker 1: I'm on Twitter at I'm keen before the podcast, you

565
00:31:02,280 --> 00:31:05,680
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio