WEBVTT - Vogel Expects Fed Plan for Treasury Holdings by Year's End 0:00:00.080 --> 0:00:02.040 P and L is brought to you by proper Cloth, 0:00:02.120 --> 0:00:05.120 a leader in men's custom shirts, with proprietary smart sized 0:00:05.120 --> 0:00:08.720 technology and top rated customer service. Ordering a custom shirt 0:00:08.760 --> 0:00:11.680 has never been easier. Visit proper cloth dot com to 0:00:11.760 --> 0:00:19.960 order your first custom shirt today. Welcome to the Bloomberg 0:00:20.000 --> 0:00:22.599 P and L Podcast. I'm Pim Fox. Along with my 0:00:22.640 --> 0:00:25.759 co host Lisa Abramowitz. Each day we bring you the 0:00:25.800 --> 0:00:29.360 most important, noteworthy, and useful interviews for you and your money, 0:00:29.360 --> 0:00:32.360 whether at the grocery store or the trading floor. Find 0:00:32.400 --> 0:00:35.840 the Bloomberg P and L Podcast on iTunes, SoundCloud and 0:00:36.080 --> 0:00:43.800 at Bloomberg dot com. I want to talk about the 0:00:43.800 --> 0:00:47.239 treasury market and what happened to the foreign buyer. I 0:00:47.240 --> 0:00:49.400 am so happy to bring in Jim Vogel, interest rate 0:00:49.400 --> 0:00:53.400 strategists at ft N Financial, A fantastic analysts. I read 0:00:53.440 --> 0:00:56.760 his reports every day. Jim, I would love to get 0:00:56.760 --> 0:01:00.400 your take first off on whether we're starting to see 0:01:00.600 --> 0:01:03.880 foreign investors come back to the U. S. Treasury market 0:01:03.920 --> 0:01:08.880 after abandoning it in December. Not yet on a large scale. 0:01:08.920 --> 0:01:12.680 What we're really seeing is some buying when we get 0:01:12.680 --> 0:01:16.080 these odd currency fluctuations, but it's not enough necessarily to 0:01:16.120 --> 0:01:19.120 say that the foreign buyers are back. So, in other words, 0:01:19.200 --> 0:01:22.720 even though there is a higher proportion of indirect buyers 0:01:23.000 --> 0:01:24.960 at some of the recent auctions, in other words, that's 0:01:25.000 --> 0:01:27.600 usually a category that includes foreign money, but also that 0:01:27.640 --> 0:01:30.720 includes hedge funds. It's been increasing, but it doesn't necessarily 0:01:30.760 --> 0:01:34.479 represent that China and Japan are coming back. No, not 0:01:34.560 --> 0:01:37.320 yet in the kind of support that the treasury market 0:01:37.319 --> 0:01:40.720 became accustomed to over the last five to six years. Hey, Jim, 0:01:40.760 --> 0:01:42.880 could you just comment on what's going on with the 0:01:42.959 --> 0:01:46.760 US dollar? And and and am I correct in thinking 0:01:46.800 --> 0:01:51.640 that we saw this big searche in dollar since the 0:01:51.720 --> 0:01:56.920 November election and that after the new year we still 0:01:57.000 --> 0:02:00.000 saw some strength. But then they started to be conversation 0:02:00.000 --> 0:02:02.640 aations about you know, how long things would take in 0:02:02.800 --> 0:02:05.960 taxes and interest? Right, what can you tell us about 0:02:06.280 --> 0:02:10.560 the sort of trajectory of the dollar. The dollar is 0:02:10.600 --> 0:02:13.440 still going to regain some of its strength, but it 0:02:13.560 --> 0:02:16.880 was way too strong in December because for a while 0:02:17.040 --> 0:02:20.519 people feared that the Fed was falling behind the potential 0:02:21.120 --> 0:02:24.760 of the Trump slash Republican stimulus that everybody was talking about. 0:02:24.840 --> 0:02:27.120 It became part of the Trump trade, and so on 0:02:27.160 --> 0:02:29.919 that basis, if the FED was behind, then they would 0:02:29.960 --> 0:02:31.920 have to catch up, say with a big increase or 0:02:31.960 --> 0:02:35.600 a quick increase at the March meeting. That thinking from 0:02:35.639 --> 0:02:40.200 December has totally wilted, particularly after we saw average hourly 0:02:40.240 --> 0:02:44.800 earnings growth revisions last week. So there's this debate right 0:02:44.840 --> 0:02:47.880 now that's been going on, which is, are we headed 0:02:47.919 --> 0:02:52.079 toward an inflationary reflationary time period or are you going 0:02:52.120 --> 0:02:55.120 to see treasury yields go back down in the wake 0:02:55.200 --> 0:02:59.399 of disappointing growth. Where are you weigh on this? Uh, 0:02:59.480 --> 0:03:03.520 We're going to stabilize inflation once we move past a 0:03:03.560 --> 0:03:06.359 couple of other uh, the next couple of months that 0:03:06.400 --> 0:03:10.440 are going to see increases in the indexes. And but 0:03:10.720 --> 0:03:13.560 we are not really set for say the ten year 0:03:13.639 --> 0:03:16.799 to go back to the two percent level when people 0:03:16.919 --> 0:03:22.120 were less concerned about inflation. Uh. It's still an early 0:03:22.240 --> 0:03:25.560 days in the Trump administration, and the people that believe 0:03:26.120 --> 0:03:29.080 tips are the right place to be are hurting this week, 0:03:29.680 --> 0:03:31.800 but they have certainly been winning and are ready to 0:03:31.919 --> 0:03:35.120 commit more capital to that market. How much does the 0:03:35.200 --> 0:03:38.320 foreign bid that we were talking about earlier play into 0:03:39.040 --> 0:03:44.000 your thesis? For the most part, do we see the 0:03:44.120 --> 0:03:49.320 overseas UH fixed income investor staying focused primarily in the 0:03:49.320 --> 0:03:51.880 European market. Right now. We do not see them as 0:03:51.920 --> 0:03:55.720 major players in the US, except when there's a risk 0:03:55.800 --> 0:03:59.080 style event that may come over from EU banking or 0:03:59.160 --> 0:04:01.920 other matters such as that. So we're back up for 0:04:01.920 --> 0:04:03.960 a little bit. No, when you say that they're focused 0:04:03.960 --> 0:04:06.080 on on the on the EU, are they looking to 0:04:06.160 --> 0:04:09.080 buy German debt French debt now that yields have risen there? 0:04:09.120 --> 0:04:11.400 I mean where where are they focused? Yeah, for the 0:04:11.400 --> 0:04:14.200 most part, they're focused on Germany and France, and then 0:04:14.280 --> 0:04:18.520 everything else keys off those relationships there. And so the 0:04:18.600 --> 0:04:21.720 big news in addition to the treasury rally this week 0:04:22.440 --> 0:04:26.000 is that both German and French tenure yields have returned 0:04:26.279 --> 0:04:29.080 to roughly their two month average. Do you see the 0:04:29.160 --> 0:04:35.359 rally continuing unfortunately for a bit longer, Yes, because we 0:04:35.480 --> 0:04:39.920 still have to retain firmer footing, and when we have 0:04:40.040 --> 0:04:43.240 the big sell off in December, we totally bypassed this 0:04:43.760 --> 0:04:46.560 area between two thirty and two thirty five. There are 0:04:46.600 --> 0:04:49.760 no technical indicators for traders to go, oh, finally we've 0:04:49.800 --> 0:04:52.640 reached here and now we can start selling again. And 0:04:52.760 --> 0:04:55.080 until we just sort of leach out some of this 0:04:55.200 --> 0:04:58.560 dollar trade and a couple of other points, we can 0:04:58.600 --> 0:05:02.040 stay below to th D seven on tens UH into 0:05:02.120 --> 0:05:05.680 next week. Jim, what do you think is a likely 0:05:06.000 --> 0:05:10.839 outcome for year and ten year treasury yields? We're still 0:05:10.880 --> 0:05:15.520 in the two five to fifty camp. We don't see 0:05:15.960 --> 0:05:18.840 to the extent that rates spike in the at some 0:05:18.920 --> 0:05:22.760 point as we look at FED or possibly UH stimulus 0:05:22.800 --> 0:05:27.279 from the fiscal side in Washington, they could go up to, 0:05:27.320 --> 0:05:31.080 say to sixty, but we believe they'll come back down 0:05:31.160 --> 0:05:36.400 because there's people are looking at the federal UM picture 0:05:36.600 --> 0:05:39.440 on a linear basis and not with all the different 0:05:39.520 --> 0:05:44.000 ramifications that follow any particular Washington UM fiscal move. The 0:05:44.040 --> 0:05:46.479 other really big topic that people have been talking about 0:05:46.520 --> 0:05:48.960 in the bond world is whether the Federal Reserve will 0:05:48.960 --> 0:05:52.159 start to unwind their four point five trillion dollar balance sheet. 0:05:52.560 --> 0:05:54.600 There's been discussion about whether they'll start doing that as 0:05:54.640 --> 0:05:56.839 soon as early later this year. There's also been discussion 0:05:56.839 --> 0:05:59.479 about whether they focus more on their mortgage holdings or 0:06:00.000 --> 0:06:02.440 their treasury holdings. Where do you weigh in on this? 0:06:03.080 --> 0:06:05.520 We believe that we will look far more at their 0:06:05.560 --> 0:06:10.480 treasury holdings. Uh, there are four hundred billion dollars of 0:06:11.160 --> 0:06:14.360 treasuries that have to be reinvested in two thousand and eighteen. 0:06:14.720 --> 0:06:19.640 So that's the far more immediate um UH horizon that 0:06:19.680 --> 0:06:23.560 requires a policy decision, and we think they'll be looking 0:06:23.600 --> 0:06:25.520 at it very closely in the second half of this 0:06:25.600 --> 0:06:29.520 year to at least communicate to the market a fairly 0:06:29.560 --> 0:06:34.520 detailed plan. Kim, is there any plan for if the 0:06:34.560 --> 0:06:38.479 economy is currently at its peak, end will either plateau 0:06:38.960 --> 0:06:44.839 or we will see a slowdown? Uh, there is nothing 0:06:45.120 --> 0:06:48.840 in the broader numbers that indicate that we've peaked. The 0:06:49.520 --> 0:06:52.000 sort of the worst trend that we've got is the 0:06:52.080 --> 0:06:55.359 fourth quarter personal consumption grew at two and a half 0:06:55.480 --> 0:06:58.480 percent versus the six quarter average of two point eight. 0:06:59.120 --> 0:07:02.640 But but that's still quite reasonable given um the FEDS 0:07:02.680 --> 0:07:07.080 goal of continued um solid growth in the US economy. 0:07:07.120 --> 0:07:11.240 That's still ahead of their formal forecast. So you think 0:07:11.240 --> 0:07:12.880 that things are kind of just going to be steady 0:07:12.920 --> 0:07:15.720 throughout the year, What do you think? What's what's the 0:07:16.360 --> 0:07:21.760 biggest potential surprise on the horizon that could change your view? Uh. 0:07:22.000 --> 0:07:27.440 The biggest that would be a more coherent action plan 0:07:27.680 --> 0:07:31.160 from Washington, where the White House and Congress are moving 0:07:31.160 --> 0:07:36.760 together very quickly. Um to say accomplished, say corporate tax 0:07:36.800 --> 0:07:40.600 reform in significant detail, not necessarily pass it, but have 0:07:40.680 --> 0:07:43.760 it out there on a two hundred day calendar, as 0:07:43.800 --> 0:07:46.040 opposed to what people like to talk about in terms 0:07:46.040 --> 0:07:49.520 of the one hundred day calendar. Interesting, very good. Thanks 0:07:49.560 --> 0:07:52.880 for pinpointing that. Jim Vogel. He is interest rate strategist 0:07:52.960 --> 0:08:10.200 for FTN Financial, joining us from Memphis at Tennessee. While 0:08:10.240 --> 0:08:15.760 we want expertise in the world of technology media, well 0:08:15.880 --> 0:08:18.720 turned to only one person, Paul Sweeney, US director of 0:08:18.760 --> 0:08:23.320 Research and senior Media Internet Analyst for Bloomberg Intelligence. I 0:08:23.440 --> 0:08:26.280 urge you to go to b I go on the 0:08:26.320 --> 0:08:31.040 Bloomberg for a variety of detailed reports and insights into 0:08:31.160 --> 0:08:33.679 a variety of industries. Paul Sweeney, where do you want 0:08:33.720 --> 0:08:35.440 to start? You want to do Disney or you want 0:08:35.440 --> 0:08:39.240 to do uh Time Warner and the A. T. T. Combo. 0:08:39.520 --> 0:08:41.640 I think Disney is usually the most fun story to 0:08:41.760 --> 0:08:43.319 talk about. And you know they had a kind of 0:08:43.360 --> 0:08:46.200 a mixed quarter last night. Uh they beat on the 0:08:46.200 --> 0:08:49.560 EPs line, but they missed on revenue and the ESPN numbers. 0:08:49.840 --> 0:08:52.000 You know, we're still a little bit soft and uh, 0:08:52.520 --> 0:08:54.840 and that's kind of a problem because their cost based 0:08:55.040 --> 0:08:57.760 continues to go up. At ESPN, sports rights continue to 0:08:57.760 --> 0:08:59.880 go up. In fact, they are in the first year 0:08:59.880 --> 0:09:02.640 of new NBA contract, which is six million dollars of 0:09:02.679 --> 0:09:06.559 incremental expenditures for them. So the cost of sports rights 0:09:06.760 --> 0:09:09.640 continues to go up. And that's obviously you know, ESPN 0:09:09.679 --> 0:09:12.839 has has the monopoly there, but the revenue trends remain 0:09:13.080 --> 0:09:15.920 challenge at ESPN. They're dealing with chord cutting, they're dealing 0:09:15.960 --> 0:09:18.480 with skinny bundles, and they have to figure out a 0:09:18.480 --> 0:09:21.520 way to kind of tap into the digital growth opportunities 0:09:21.520 --> 0:09:25.120 for ESPN. But ESPN still has a very steady and 0:09:25.720 --> 0:09:29.040 desirable group of viewers. No, I mean, this isn't exactly 0:09:29.120 --> 0:09:31.280 something that's going to go away. I know, it's it's 0:09:31.360 --> 0:09:34.000 by far the most valuable cable network out there, and 0:09:34.040 --> 0:09:36.240 it continues to grow revenue and profits continue to grow, 0:09:36.280 --> 0:09:40.000 just at a slower growth rate um and so again 0:09:40.080 --> 0:09:42.240 some investors at work, certainly, but it's you know, it's 0:09:42.280 --> 0:09:44.920 it's half almost half the operating profit of the Walt 0:09:44.920 --> 0:09:47.960 Disney Company. So it's a major driver of of the company. 0:09:48.000 --> 0:09:50.080 So the question for the Walt Disney Company, like all 0:09:50.200 --> 0:09:52.480 kick cable networks, is you know, how do they bring 0:09:52.520 --> 0:09:55.360 their content direct to consumers? Uh, you know, through some 0:09:55.400 --> 0:09:58.240 type of streaming service. UM. It looks like people are 0:09:58.360 --> 0:10:00.600 on the margin cutting the cord. So you have to 0:10:00.600 --> 0:10:03.360 think about new ways to reach your consumers with your content. 0:10:03.480 --> 0:10:06.679 And you know, we've seen some examples like HBO has 0:10:06.760 --> 0:10:09.680 taken Hbo direct to consumers. It's called HBO now and 0:10:09.679 --> 0:10:11.640 you can subscribe to it directly, and you know, and 0:10:11.720 --> 0:10:13.760 we're off to see, you know what ESPN decides to do. 0:10:13.960 --> 0:10:17.160 You know, Paul, there's been some speculation that Disney might 0:10:17.440 --> 0:10:20.800 spin off ESPN as its own entity. What do you 0:10:20.800 --> 0:10:22.480 think the likelihood of that is. I think in a 0:10:22.559 --> 0:10:25.400 near to intermediate term, that's very unlikely. Um. This is 0:10:25.400 --> 0:10:28.000 still again half of the almost half of the operating 0:10:28.000 --> 0:10:30.400 profit of the company here, so it's a major part 0:10:30.400 --> 0:10:33.920 of the business. UM and it's still a extraordinarily valuable 0:10:33.920 --> 0:10:36.000 part of the business. Throws off tremendous amounts of free 0:10:36.000 --> 0:10:38.280 cash flow. But I think to the extent that they 0:10:38.280 --> 0:10:40.680 ever get to the point where, you know, the growth rate, 0:10:40.840 --> 0:10:43.679 you know, turns materially negative and it ends up being 0:10:43.679 --> 0:10:45.600 a real drag on the valuation, which I don't think 0:10:45.600 --> 0:10:48.840 it is now. Then clearly there will be an opportunity 0:10:48.880 --> 0:10:50.439 to to spin this asset out, and there'll be a 0:10:50.480 --> 0:10:52.000 lot of demand for that, but I don't think that's 0:10:52.040 --> 0:10:55.360 anything in the near term. Paul, I wonder if there's 0:10:55.400 --> 0:10:58.120 anybody that has access to the Internet that doesn't either 0:10:58.160 --> 0:11:01.880 pay a telephone company or a k able company some money. 0:11:02.080 --> 0:11:07.640 We're talking about like cable operators, whether it's Comcast or Charters, Spectrum, Verizon, 0:11:08.080 --> 0:11:10.920 so on. Right. Well, and unless you're a millennial, so 0:11:10.960 --> 0:11:14.080 the younger demos are in fact are kind of corded 0:11:14.160 --> 0:11:16.400 never's if you will. They've never signed up to any 0:11:16.440 --> 0:11:19.280 kind of pay TV service. Um. And so the question is, 0:11:19.320 --> 0:11:21.440 you know, how do you reach those people? Um? And 0:11:21.440 --> 0:11:24.640 there's actually that that percentage of the population is actually growing, 0:11:24.679 --> 0:11:27.800 the folks that do not pay it's a small percentage today, 0:11:27.840 --> 0:11:30.200 but it's growing. Where do they get their service? Where 0:11:30.200 --> 0:11:33.040 do they get their connection to the internet? Just public WiFi? Well, 0:11:33.040 --> 0:11:35.160 they'll get it, yeah, you're right, So they'll they'll either 0:11:35.200 --> 0:11:37.760 get a public WiFi or maybe they'll just subscribe to 0:11:38.000 --> 0:11:41.800 a standalone you know, uh, broadband connection through a cable 0:11:41.800 --> 0:11:43.840 company or through a telephone company. But the question is 0:11:43.840 --> 0:11:45.880 will they pay for a big video product, and that 0:11:46.360 --> 0:11:48.960 you know, on the margin, the millennials tend not to 0:11:49.000 --> 0:11:50.800 be doing that. But again, if you're isn't that what 0:11:50.840 --> 0:11:52.319 T mobile I was gonna say, isn't that what T 0:11:52.440 --> 0:11:54.520 Mobile was trying to do by giving away? We're not 0:11:54.600 --> 0:11:57.240 giving away, but like getting you unlimited video for certain 0:11:57.280 --> 0:12:00.760 types of video. Fair does Disney needed that kind of 0:12:00.960 --> 0:12:03.800 more direct pipe into people's homes? I think they do 0:12:03.960 --> 0:12:06.280 um and I think they're moving, but they're moving more 0:12:06.360 --> 0:12:08.560 slowly than others are. And the reason to moving more 0:12:08.559 --> 0:12:11.079 slowly is because they have more to lose. They get 0:12:11.080 --> 0:12:14.439 almost seven dollars per subscriber per month for ninety millions 0:12:14.440 --> 0:12:17.160 subscribers to ESPN. It's hard to walk away from that 0:12:17.280 --> 0:12:20.200 order even potentially cannibalize that business. So that that's why 0:12:20.240 --> 0:12:23.880 they've been more reluctant to do that versus some other companies. 0:12:23.920 --> 0:12:25.640 But you know, you take a look at a T 0:12:25.760 --> 0:12:27.880 and T. One of the big reasons that they bought 0:12:28.000 --> 0:12:31.160 a Time Warner is because they have you know, so 0:12:31.240 --> 0:12:35.000 many wire line and wireless customer relationships, but they don't 0:12:35.080 --> 0:12:37.320 have any content and so that's why they stepped up 0:12:37.320 --> 0:12:39.520 to pay eighty five billion dollars for Time Warner. Well, 0:12:39.600 --> 0:12:42.600 talking about Time Warner, they have a strategy that perhaps 0:12:42.640 --> 0:12:45.800 others will adopt, squeezing cable and satellite distributors for more 0:12:45.800 --> 0:12:47.240 and more money. And this is one of the reasons 0:12:47.240 --> 0:12:49.920 why they reported better than expected earnings. Correct. Yeah, the 0:12:50.000 --> 0:12:52.520 numbers came in a very very strong for them, a 0:12:52.559 --> 0:12:54.560 good good quarter for them, which is nice for a 0:12:54.640 --> 0:12:58.040 T and t um. The big driver for Time Warner 0:12:58.360 --> 0:13:00.360 was the fact that they did continue you to have 0:13:00.480 --> 0:13:02.760 strong affiliate feed growth in their cable networks and that 0:13:02.880 --> 0:13:05.920 about affiliate feed growth year of a year, which is 0:13:05.960 --> 0:13:08.200 by far the best in the industry. What was driving 0:13:08.240 --> 0:13:10.040 that is they just over the last two to three 0:13:10.120 --> 0:13:14.120 years renegotiated most of their distribution contracts with the cable 0:13:14.160 --> 0:13:16.040 companies and the satellite companies and they were able to 0:13:16.040 --> 0:13:18.480 get big increases. The reason they were able to get 0:13:18.480 --> 0:13:21.640 big increases is because they just invested a ton of 0:13:21.679 --> 0:13:25.040 money in their programming, particularly sports programming, uh the NBA, 0:13:25.160 --> 0:13:27.240 in the n c a A. Uh So they put 0:13:27.240 --> 0:13:28.840 their money where their mouth is. And then they turned 0:13:28.840 --> 0:13:30.840 around the distributors and they're like, Okay, we're giving you 0:13:30.880 --> 0:13:33.520 better content. We want to get paid more, and they did. 0:13:33.640 --> 0:13:36.120 Thank you so much. Paul Sweeney, director of North American 0:13:36.120 --> 0:13:49.880 Research and media analyst for Bloomberg Intelligence. P and L 0:13:50.000 --> 0:13:52.000 is brought to you by proper Cloth, the leader in 0:13:52.040 --> 0:13:55.480 men's custom shirts. At proper cloth dot com, ordering custom 0:13:55.520 --> 0:13:58.679 shirts has never been easier. Create your custom shirt size 0:13:58.720 --> 0:14:02.040 by answering ten easy questions. Select from over five d 0:14:02.160 --> 0:14:05.600 fabrics to suit your personal taste. Surets start from eighty 0:14:05.640 --> 0:14:08.199 five dollars and are delivered in just two weeks with 0:14:08.360 --> 0:14:12.360 proper Clouds Perfect Fit Guarantee. Remakes are completely free and 0:14:12.480 --> 0:14:16.079 expert staff are standing by to help. For premium quality, 0:14:16.160 --> 0:14:20.200 perfect fitting shirts, visit proper cloth dot com Custom shirts 0:14:20.240 --> 0:14:30.800 made Smarter. Pim Fox, I know that you've been looking to, 0:14:31.080 --> 0:14:34.360 uh potentially buy a Jaguar Land Rover. If you want 0:14:34.400 --> 0:14:36.640 to do it, you need to buy it soon because 0:14:36.680 --> 0:14:41.160 it could cost seventeen dollars more than it costs Now. 0:14:41.360 --> 0:14:43.280 I want to bring in somebody knows all about this. 0:14:43.360 --> 0:14:47.680 Alan Baum, principle at Baum and Associates, a Michigan based 0:14:47.720 --> 0:14:49.760 research firm that just did a study looking at how 0:14:49.840 --> 0:14:53.720 much auto prices could increase as a result of the 0:14:53.840 --> 0:14:57.320 border tax. Some pretty big numbers, huh, Allan, yeah, and 0:14:57.560 --> 0:15:01.160 Tim that seventeen thousand may not to pass. That's what 0:15:01.280 --> 0:15:05.680 the numbers say in terms of our analysis. Obviously, companies 0:15:05.720 --> 0:15:07.880 will make their own decisions on what the how they 0:15:07.880 --> 0:15:11.120 would price their product, right, But the point stands that 0:15:11.200 --> 0:15:13.000 basically the border tax will make it a lot more 0:15:13.040 --> 0:15:17.240 expensive for some companies, and more so than than others. 0:15:17.320 --> 0:15:21.680 For example, Volvo or Mitsubishi or Volkswagen would face a 0:15:21.720 --> 0:15:26.240 bigger challenge than say Ford or General Motors, right, And 0:15:26.280 --> 0:15:29.520 it's based upon where they make their product, the price 0:15:29.600 --> 0:15:32.440 of the product, and how much of the product, even 0:15:32.520 --> 0:15:35.760 if it's made in the US, is imported. Um and 0:15:35.840 --> 0:15:38.960 so Jaguars obviously and land Rover obviously on the far 0:15:39.160 --> 0:15:43.760 end there because their products are imported and their high price. Well, Alan, 0:15:43.880 --> 0:15:47.080 for the record, I'm I'm all. I'm a public transport person, 0:15:47.200 --> 0:15:51.120 so I I just gaze into the windows of the showrooms. 0:15:51.200 --> 0:15:54.120 But if I were to gaze under the hood, I 0:15:54.200 --> 0:15:56.960 might find that most of what's in there, at least 0:15:57.840 --> 0:16:00.120 some of it anyway, was be made in Cana the 0:16:00.240 --> 0:16:05.240 in Mexico, right, because GM and other automakers are still 0:16:05.320 --> 0:16:09.760 facing this uncertainty because of the president's vow to institute 0:16:09.800 --> 0:16:13.280 this border tax. And from the Center of Automotive Research, 0:16:13.320 --> 0:16:15.960 they say that's seventies six percent of the seating and 0:16:16.120 --> 0:16:21.080 interior trim come from outside the US. Electronics more than 0:16:21.160 --> 0:16:26.000 six engine. I mean, if you want to break system, 0:16:26.880 --> 0:16:30.160 chances are it's you know, might come from overseas or 0:16:30.240 --> 0:16:32.400 somewhere outside the US. What are they going to do 0:16:32.440 --> 0:16:35.440 to change that? That's a big deal. And of course 0:16:35.440 --> 0:16:39.040 it's based upon labor UH and scale and so you 0:16:39.160 --> 0:16:41.680 want to do UH, you know, for the kind of 0:16:41.680 --> 0:16:44.880 investment that you're gonna be making there, you're gonna make 0:16:45.520 --> 0:16:50.720 large volumes and so yes, that is clearly the the issue. 0:16:50.960 --> 0:16:53.160 The other thing that that our study showed is a 0:16:53.240 --> 0:16:58.160 company like Sword UH that makes small and midsize cars 0:16:58.680 --> 0:17:03.120 UH in Mexico, as opposed to f C A UH 0:17:03.160 --> 0:17:07.399 and UH and GM both make large pickups. A company 0:17:07.480 --> 0:17:10.000 like Ford is better off because the value of the 0:17:10.040 --> 0:17:14.400 products they're shipping from Mexico is less than that of 0:17:14.520 --> 0:17:18.080 f C A UH and UH and GM. So that's 0:17:18.119 --> 0:17:21.040 why you've seen Forward perhaps being a little more supportive 0:17:21.040 --> 0:17:25.040 of this concept, although obviously all auto companies would prefer 0:17:25.440 --> 0:17:30.119 to have their cost reduced um particularly their tax rates, 0:17:30.320 --> 0:17:33.720 which seems to be something that's that's being considered, and 0:17:33.920 --> 0:17:36.560 not have their taxes increased in the form of this 0:17:36.640 --> 0:17:39.560 border tax. You know, I gotta say, on one level, 0:17:39.920 --> 0:17:44.720 your study shows exactly why some people want this border tax, 0:17:44.840 --> 0:17:48.960 because it essentially would incentivize these overseas companies to either 0:17:49.040 --> 0:17:53.639 move jobs here removing the potential tax, or else not 0:17:53.760 --> 0:17:56.240 be competitive in the same way. I mean, isn't that 0:17:56.280 --> 0:18:00.320 exactly the point? Well, yeah, I mean, I'll be slee. 0:18:00.600 --> 0:18:04.240 Mr Trump is is being responsive to the issues in 0:18:04.359 --> 0:18:07.800 his campaign. The companies, of course, are less excited by 0:18:07.840 --> 0:18:11.000 that because this is a global industry. They've been working 0:18:11.040 --> 0:18:14.040 on that premise for years. Uh. And if we talk 0:18:14.080 --> 0:18:17.800 about the Detroit Three, they are in fact making fewer 0:18:17.840 --> 0:18:20.679 and fewer of their vehicles, not just in the US 0:18:20.720 --> 0:18:23.879 but in North America because they're looking at ways to 0:18:24.480 --> 0:18:29.080 improve their position across the globe. And the companies that 0:18:29.119 --> 0:18:31.879 are based in Japan and Germany are in fact coming 0:18:32.040 --> 0:18:35.560 here to produce because they're looking to do the same thing, 0:18:35.640 --> 0:18:38.800 except in reverse, and that is increase their position here 0:18:38.800 --> 0:18:43.000 in North America. Would that be a much more intelligent 0:18:43.080 --> 0:18:46.680 way to move in your in your estimate, Well, those 0:18:46.680 --> 0:18:50.240 have been the rules of the game. That's what automakers 0:18:50.320 --> 0:18:54.639 and for that matter, businesses across the board have been doing, 0:18:55.080 --> 0:18:57.840 uh to to capitalize. I mean, you know, the obvious 0:18:57.920 --> 0:19:01.600 growth in the automotive market in terms of volume is 0:19:01.640 --> 0:19:04.159 not in North America, and for that matter, it's not 0:19:04.240 --> 0:19:07.879 in Western Europe China. It's in China, and it's in 0:19:07.920 --> 0:19:11.760 Eastern Europe, and so that's that's where the development is 0:19:11.800 --> 0:19:15.080 coming now. The difference, of course, is the North American market, 0:19:15.119 --> 0:19:20.640 particularly US, remains incredibly profitable relative to those markets, and 0:19:20.720 --> 0:19:25.919 so obviously companies are very interested and attached to this market, 0:19:25.920 --> 0:19:27.840 which of course is a good thing for us here 0:19:27.840 --> 0:19:30.280 in the US particularly. I was just gonna say, particularly 0:19:30.320 --> 0:19:33.919 if you're making pickup trucks and SUVs, that's correct. On 0:19:33.960 --> 0:19:37.359 the other hand, uh, you uh, you don't want to 0:19:37.400 --> 0:19:40.560 be making one set of products for North America and 0:19:40.680 --> 0:19:42.679 one set of products for the rest of the world. 0:19:42.720 --> 0:19:46.120 I seem to remember a bankruptcy or two that happened 0:19:46.119 --> 0:19:48.359 in a few years back where that was part of 0:19:48.359 --> 0:19:51.639 the problem. Thank you very much. Alan Baum is a 0:19:51.720 --> 0:19:56.240 principle at Baum and Associates based in Michigan, doing a 0:19:56.320 --> 0:19:59.399 lot of research on the automobile industry and visa. It 0:19:59.440 --> 0:20:02.760 will be interest think to see how the Republican tax 0:20:02.880 --> 0:20:06.359 plan actually moves forward, because they're getting a lot of 0:20:06.400 --> 0:20:09.840 pushback from like, for example, automobile dealers. Will be interesting 0:20:09.840 --> 0:20:12.720 also to see how much the foreign automakers have a 0:20:12.840 --> 0:20:27.080 voice into the White House. Well, I'm gonna I'm gonna 0:20:27.119 --> 0:20:29.480 give a round number. I'm going to give a round number, 0:20:29.680 --> 0:20:32.840 well almost round number A hundred and two. That is 0:20:33.000 --> 0:20:36.600 the ranking for company. It's not around number I said. 0:20:36.600 --> 0:20:38.440 It's not around number A hundred and fifty. Maybe it 0:20:38.480 --> 0:20:40.320 would be the round number, but it is okay, a 0:20:40.359 --> 0:20:45.680 hundred fifty second place. Molus ranks in global equity. Tell 0:20:45.720 --> 0:20:50.240 people what right is a boutique firm? And somehow they 0:20:50.280 --> 0:20:55.800 managed to win the assignment to manage the most coveted 0:20:56.160 --> 0:20:59.320 I p O of this century arguably. I want to 0:20:59.359 --> 0:21:02.439 bring in Ruth Avid. She's an IPO and deals reported 0:21:02.680 --> 0:21:06.639 for Bloomberg in London. Ruth, how did Bollas get this. Hi, 0:21:06.880 --> 0:21:10.359 that's a great question, since everyone has been trying their 0:21:10.359 --> 0:21:13.840 hardest to get on this deal. And I think you 0:21:13.840 --> 0:21:16.280 know you've you've heard of banks going and pitching this 0:21:16.440 --> 0:21:18.800 for months, and we had something last month saying that 0:21:19.119 --> 0:21:22.200 ever Cohen Mollis had been shortlisted. But keep in mind 0:21:22.240 --> 0:21:24.600 that these are just the boutique banks that are getting 0:21:24.600 --> 0:21:28.600 on the mandate, right, they're also speaking to the global 0:21:28.640 --> 0:21:31.760 investment banks, so the Goldman Sachs and hsbcs and city 0:21:31.760 --> 0:21:34.239 groups of the world to get more of them in. 0:21:34.359 --> 0:21:36.280 I mean, you're talking about a company that says it's 0:21:36.280 --> 0:21:39.920 going to have a valuation of two trillion dollars, So 0:21:40.119 --> 0:21:43.080 you'd imagine even if they list like a five percent stick, 0:21:43.359 --> 0:21:45.440 that's a hundred billion I p o. And, as you said, 0:21:45.480 --> 0:21:49.280 probably the largest of the century. Um, it's gonna take 0:21:49.320 --> 0:21:51.000 a lot of banks and a lot of people to 0:21:51.000 --> 0:21:53.639 get it over the line. Can you give a little 0:21:53.680 --> 0:21:57.920 detail of the people involved in making this decision and 0:21:58.240 --> 0:22:02.000 how this is going to affect the other investment banks. 0:22:03.920 --> 0:22:06.960 I think investors are taking into account of fact that 0:22:07.040 --> 0:22:09.800 this is a big coup for Mulist and there's going 0:22:09.800 --> 0:22:11.280 to be you know, I mean it is the It 0:22:11.400 --> 0:22:13.800 is the government which will have a big say in 0:22:14.080 --> 0:22:16.720 who gets the mandates and what kind of do we 0:22:16.800 --> 0:22:18.679 know the people? For example, I mean do we know 0:22:18.720 --> 0:22:21.440 the key people involved in making this happen? I mean 0:22:21.480 --> 0:22:27.920 this is a relationship business. Yes. I mean if you're saying, 0:22:28.040 --> 0:22:33.000 is ken Molly's pitching strongly? Yes, and he's doing a 0:22:33.040 --> 0:22:35.080 great job at it, Like I just want to know 0:22:35.400 --> 0:22:37.280 more about him. You want to know, like who did 0:22:37.320 --> 0:22:40.760 he who do you have dinner with? Exactly? Just or well, 0:22:41.080 --> 0:22:42.440 so I know a lot of the people came from 0:22:42.520 --> 0:22:46.080 ups for example originally, Ruth. What I'm curious about is 0:22:46.240 --> 0:22:48.560 what how much are the fees potentially that we're talking 0:22:48.600 --> 0:22:50.880 about here, I mean, just to give a sense of 0:22:51.000 --> 0:22:54.840