WEBVTT - NAFTA Will Happen, But It May Take More Time: Bill Rhodes 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.440 Along with my co host Lisa A. Bramowitz. Each day 0:00:11.480 --> 0:00:15.000 we bring you the most important, noteworthy, and useful interviews 0:00:15.040 --> 0:00:17.520 for you and your money, whether you're at the grocery 0:00:17.560 --> 0:00:20.560 store or the trading floor. Find the Bloomberg p m 0:00:20.680 --> 0:00:33.239 L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. 0:00:33.280 --> 0:00:36.400 This is Bloomberg Markets. I'm Pim Fox. Joining me here 0:00:36.440 --> 0:00:39.360 in the studio right now is William R. Rhodes. Bill 0:00:39.440 --> 0:00:42.560 Rhodes is the author of Banker to the World, Leadership 0:00:42.720 --> 0:00:45.960 Lessons from the front Lines of Global Finance. It also 0:00:46.040 --> 0:00:49.199 happens to be the chief executive and president of William R. 0:00:49.280 --> 0:00:52.640 Rhodes Global Advisors. Bill, thank you very much for being here. 0:00:53.200 --> 0:00:55.560 I gotta say it's almost like a coincidence because, of course, 0:00:55.600 --> 0:01:00.200 today we're awaiting news about the NAFTA renegotiation talks that 0:01:00.240 --> 0:01:03.040 have been taking place over the weekend in Montreal, and 0:01:03.120 --> 0:01:06.840 you have a direct relationship to uh NAFTA as it 0:01:06.920 --> 0:01:08.600 was put together, and what if you could just tell 0:01:08.640 --> 0:01:11.039 people about it. Well, first of all, it's always great 0:01:11.040 --> 0:01:13.240 to be with you here, Pim. I worked on the 0:01:13.240 --> 0:01:18.000 original LAFTA with rod Archefeller, Nelson's oldest son who passed 0:01:18.000 --> 0:01:21.199 away a few years ago. But we worked very hard 0:01:21.240 --> 0:01:23.320 on that because we saw a lot of the synergies 0:01:23.720 --> 0:01:26.800 synergies possible between the three countries. It obviously had to 0:01:26.840 --> 0:01:30.760 be updated. So much has happened in the area of technology, 0:01:30.880 --> 0:01:35.640 UH that the updating is very necessary and the negotiations 0:01:35.640 --> 0:01:39.639 were gonna be tough. We knew because uh the president 0:01:39.640 --> 0:01:42.720 administration announced that they were very unhappy with the trade 0:01:42.720 --> 0:01:46.840 deficit with Mexico and the smaller one with Canada. Although 0:01:46.840 --> 0:01:49.800 there are a lot of pessimistic estimates and what's going 0:01:49.840 --> 0:01:53.560 to happen. I think you have uh, a very good 0:01:53.600 --> 0:01:57.880 group of people negotiating it. Lightheiser has a has a 0:01:57.920 --> 0:02:02.520 record as a negotiaties are tough. Nego chases the US 0:02:02.960 --> 0:02:06.240 the leading US exactly, and Christopher Freelands and old friends 0:02:06.400 --> 0:02:10.840 used to me the uh uh the editor in the 0:02:10.960 --> 0:02:14.560 United States for the Financial Times. It's very smart and 0:02:16.000 --> 0:02:19.120 she knows what she's doing in Gualhardo does it from Mexico, 0:02:19.600 --> 0:02:23.520 although really Vita Garai is the one who's the foreign 0:02:23.560 --> 0:02:25.959 minister who really is on top of that. So you 0:02:26.040 --> 0:02:30.120 have three very tough, smart people negotiating it, UH and UH. 0:02:30.600 --> 0:02:33.000 I think at the end of the day it will happen. 0:02:33.320 --> 0:02:35.160 But I think you'll need a couple of more sessions 0:02:35.600 --> 0:02:38.040 before we get through it. UH. As you know, it's 0:02:38.080 --> 0:02:41.799 a whole content thing on automobiles, etcetera. And this is 0:02:41.840 --> 0:02:44.799 sort of a set piece for the whole trade policy 0:02:45.440 --> 0:02:48.079 of the Trump administration going forward. This is why I 0:02:48.160 --> 0:02:50.560 think it's so important and why the negotiations have been 0:02:50.600 --> 0:02:54.639 so tough. Why why do you think that is it 0:02:54.720 --> 0:02:59.720 because there's nothing that can be offered, because then you 0:02:59.760 --> 0:03:02.600 would look weak or what I mean, if ultimately they're 0:03:02.600 --> 0:03:06.240 going to strike some kind of deal, why wouldn't they 0:03:06.320 --> 0:03:08.400 just do this rather than putting everyone through all this 0:03:08.680 --> 0:03:12.200 storman drown well. I think each side UH wants to 0:03:12.280 --> 0:03:14.679 show that they are negotiating in a tough fashion, and 0:03:14.760 --> 0:03:19.320 the Canadians just agreed to I think a major concession 0:03:19.400 --> 0:03:22.720 on the content side, which I think the Mexicans UH 0:03:22.880 --> 0:03:25.919 said they'd look at and buy on automobiles, which I 0:03:25.960 --> 0:03:29.000 think is is one of the key problems. So at 0:03:29.040 --> 0:03:30.919 the end of the day, in spite of all the 0:03:31.000 --> 0:03:34.560 bluster and threats and everything, like that. I think you 0:03:34.560 --> 0:03:36.560 will eventually get a deal bill go right up to 0:03:36.560 --> 0:03:39.280 the last minute. I think you probably need another couple 0:03:39.320 --> 0:03:43.400 of sessions before it occurs, because I think you need 0:03:43.520 --> 0:03:46.160 to take a look at what President Trump said at 0:03:46.200 --> 0:03:48.360 the World Economic Form, which is you know, I went 0:03:48.440 --> 0:03:52.960 to for twenty five years, and he basically said that 0:03:53.240 --> 0:03:56.760 he wanted to do that deal, but obviously on his terms. 0:03:57.320 --> 0:03:58.880 But then he brought up for the first time that 0:03:58.960 --> 0:04:00.760 he might even be opened and taking a look at 0:04:00.840 --> 0:04:03.920 t p P again, which surprised everyone, which in my 0:04:04.080 --> 0:04:06.920 mind is the correct thing to do. Alright, So having 0:04:07.080 --> 0:04:09.560 learned this and uh, well, maybe just give us your 0:04:09.640 --> 0:04:13.520 thoughts on the president's uh speech in Davos. Well, I 0:04:13.560 --> 0:04:16.920 think he handled himself very well. I wasn't there, but 0:04:17.160 --> 0:04:20.880 what I read about it, and he used the teleprompter 0:04:21.240 --> 0:04:24.160 and he was very careful to say that in the 0:04:24.320 --> 0:04:30.040 United States is uh uh, you know, first America first, 0:04:30.120 --> 0:04:33.440 but not alone, which I think was the point that 0:04:33.520 --> 0:04:35.560 he wanted to get through to them that we're not 0:04:35.680 --> 0:04:38.239 trying to isolate ourselves from the rest of the world. 0:04:38.680 --> 0:04:40.840 So I think as far as the speech goes, it 0:04:41.000 --> 0:04:43.120 was well accepted. I understand the law. I was not 0:04:43.279 --> 0:04:47.320 there uh in DeVos. What's very important is what he's 0:04:47.360 --> 0:04:50.119 going to say on the state of the Union. That'll 0:04:50.160 --> 0:04:54.040 be tomorrow night exactly be covering that live, all right. 0:04:54.120 --> 0:04:57.279 So we we talked about NAFTA and we are awaiting 0:04:57.360 --> 0:05:00.240 a press conference in perhaps in the next hour coming 0:05:00.360 --> 0:05:06.400 from Montreal about that. Does this trade almost public negotiation 0:05:06.640 --> 0:05:09.320 that the president is conducting, is that also sending a 0:05:09.400 --> 0:05:13.400 message to the Chinese? Well, I think with China we've 0:05:13.440 --> 0:05:17.239 got some real problems, not just on the trade side. 0:05:17.720 --> 0:05:20.880 I think we have we have problems with them on 0:05:21.040 --> 0:05:24.840 North Korea because, as I've said on your program before, 0:05:24.920 --> 0:05:26.560 the only way we're going to get an agreement out 0:05:26.600 --> 0:05:29.480 of Kim Jong Un is if we get the Chinese 0:05:29.640 --> 0:05:32.000 and the Russians to a small park imminately the Chinese 0:05:32.080 --> 0:05:34.920 to cut off all oil and gas uh and to 0:05:35.080 --> 0:05:37.520 implement it, because they've agreed to do a lot of things, 0:05:37.600 --> 0:05:40.200 but it's not clear they're implementing it. So that's a 0:05:40.320 --> 0:05:43.240 major issue we have with China. And then we have 0:05:43.400 --> 0:05:47.320 the South China Sea issue, which is also very very important. 0:05:47.640 --> 0:05:50.040 And then of course we have this whole question of 0:05:50.400 --> 0:05:55.000 of trade, and I think it's going to be very 0:05:55.120 --> 0:05:57.960 difficult in the sense to achieve everything we want with 0:05:58.040 --> 0:06:00.320 the Chinese. So I think think we're gonna have some 0:06:00.520 --> 0:06:04.200 very tough years ahead of us dealing with China. Because 0:06:04.240 --> 0:06:07.000 you think that this is going to unleash a trade 0:06:07.080 --> 0:06:10.280 war between the United States and China. Well, I think 0:06:10.320 --> 0:06:16.080 it depends on how China reacts with Kim Jongoon on Korea. Uh, 0:06:16.520 --> 0:06:19.559 they have to show some more flexibility in the sense 0:06:19.680 --> 0:06:23.560 of being willing to really push Kim Jongoon to negotiating 0:06:23.640 --> 0:06:27.480 table um. And there are a number of problems that 0:06:27.680 --> 0:06:30.600 China has in addition to what we're discussing. As you know, 0:06:30.760 --> 0:06:32.520 I've been advocating and I just did it in my 0:06:33.200 --> 0:06:38.960 recent up ed on the Markets that UM China needs 0:06:39.240 --> 0:06:42.440 to take some very tough steps to rain in shadow 0:06:42.520 --> 0:06:45.400 banking in China, to clean up the bed debts at 0:06:45.480 --> 0:06:49.000 the state owned banks, and to start moving on closing 0:06:49.080 --> 0:06:52.960 down the zombie companies and in areas like steel, coal 0:06:53.560 --> 0:06:58.400 and shipbuilding, because if they don't uh start doing that, 0:06:59.160 --> 0:07:01.400 you could have a main your financial problem in China 0:07:01.400 --> 0:07:03.400 in the next couple of years. Bill Rhodes, he is 0:07:03.440 --> 0:07:21.560 the President chief executive William R. Rhodes Global Advisors. Let's 0:07:21.560 --> 0:07:23.640 turn our attention out to the world of technology with 0:07:23.880 --> 0:07:27.120 Mark German. He is our technology reporter for Bloomberg and 0:07:27.240 --> 0:07:30.840 the topic is Apple and Mark, you know, many people 0:07:30.880 --> 0:07:34.280 don't recognize that Apple is really in the chip business 0:07:34.360 --> 0:07:36.760 as much as it is in the phone business. Can 0:07:36.800 --> 0:07:40.960 you explain? Yeah, that's exactly right. And speaking of chips, 0:07:41.240 --> 0:07:43.960 the last guest mentioned they had a settlement with Emersion 0:07:44.040 --> 0:07:46.680 on chips for the Force touch screens and whatnot. But 0:07:46.920 --> 0:07:50.400 this story that we have today bloomber Technology is focusing 0:07:50.440 --> 0:07:53.960 on the main processing engines, the system on the chips, 0:07:54.240 --> 0:07:58.800 the wireless components used in products like the iPhone, the iPad, 0:07:59.400 --> 0:08:01.760 the Apple t V, the home pod, and the air pods. 0:08:01.800 --> 0:08:03.840 And it's it's a growing part of the company's overall 0:08:03.920 --> 0:08:07.240 long term strategy. Why did they decide to do this? What? What? 0:08:07.520 --> 0:08:09.480 What is it about the chips made by let's say 0:08:09.600 --> 0:08:12.600 Intel or arm Holdings or a m D. What about 0:08:12.640 --> 0:08:16.880 those chips? Are they not good enough? They are good enough? 0:08:16.960 --> 0:08:18.960 But what Apple wants to do is sort of control 0:08:19.000 --> 0:08:21.120 the whole set. So if they don't have to work 0:08:21.200 --> 0:08:24.240 with third party developers of chips, they can keep their 0:08:24.280 --> 0:08:26.760 plans closer to the vest. They can work on things 0:08:27.040 --> 0:08:29.440 years before they would be able to work on them 0:08:29.680 --> 0:08:32.480 with Intel and whatnot. Right now, Apple still uses Intel 0:08:32.559 --> 0:08:35.480 chips for the main processors and Max and Apple sort 0:08:35.520 --> 0:08:38.160 of stuck to Intel's roadmaps and whenever Intel has a 0:08:38.240 --> 0:08:40.679 new chip coming out, then Apple is able to use it. 0:08:40.760 --> 0:08:43.520 At this rate, they get to control their own pace 0:08:43.640 --> 0:08:46.199 if they're building the chips themselves for their own hardware. 0:08:46.640 --> 0:08:50.120 And the result is what that they get their custom 0:08:50.240 --> 0:08:56.280 components that process tasks that are specific to Apple products, 0:08:56.400 --> 0:09:00.200 right track your steps, power game graphics, the fa Ace 0:09:00.360 --> 0:09:03.679 i D, also the Touch i D data and the 0:09:03.880 --> 0:09:07.439 Apple Watch. Yeah, that's right. So they made components to 0:09:07.520 --> 0:09:10.320 go along with new features. And there are some cases 0:09:10.360 --> 0:09:13.559 where a third party hardware developer for chips doesn't make 0:09:13.600 --> 0:09:16.280 components that support features that Apple wants to come out with. 0:09:16.760 --> 0:09:18.520 For example, the Touch i D and Pace i D 0:09:18.640 --> 0:09:22.199 examples the step tracking and whatnot. There there weren't chips 0:09:22.280 --> 0:09:24.440 on the market from other chip developers that were able 0:09:24.480 --> 0:09:27.200 to be optimized for the iPhone to support those new features. 0:09:27.320 --> 0:09:29.040 So it gives an Apple a leg up to build 0:09:29.080 --> 0:09:32.160 their own stuff. Okay, but this depends then on Apple's 0:09:32.240 --> 0:09:36.200 ability to keep selling these hundreds of millions of devices 0:09:36.400 --> 0:09:40.959 every year because they're the customer, right. So chip making 0:09:41.200 --> 0:09:43.760 is a very very expensive game, and a lot of 0:09:43.800 --> 0:09:45.600 people ask what is Apple doing with all this cash 0:09:45.679 --> 0:09:47.320 that they have? Well, a lot of it goes into 0:09:47.400 --> 0:09:50.360 this research and development necessary to build these chips. It's 0:09:50.400 --> 0:09:54.120 an extraordinarily expensive and long term proposition. They work for 0:09:54.400 --> 0:09:57.080 upwards of three to four years on a specific component 0:09:57.200 --> 0:09:59.720 for a future iPhone. They're already working on the internal 0:09:59.800 --> 0:10:05.079 chip apps for the iPhones of two even three in 0:10:05.280 --> 0:10:07.640 order to get those features working popular by the time 0:10:07.679 --> 0:10:10.000 the phone ship. And so it's a very time consuming 0:10:10.080 --> 0:10:14.360 and a very expensive and a very resource intensive process. 0:10:14.559 --> 0:10:16.720 So as long as they're selling two d three hundred 0:10:16.760 --> 0:10:19.440 million devices a year, it's worth it. If not, if 0:10:19.480 --> 0:10:21.480 they're not selling that many devices, and you know, there 0:10:21.720 --> 0:10:23.640 could become a point where it's like why why are 0:10:23.679 --> 0:10:25.160 they building all these chips? But I don't see that 0:10:25.240 --> 0:10:28.720 happening anytime soon. Mark tell us about a gentleman named 0:10:29.160 --> 0:10:34.040 Ronnie SHRUGI. Yeah, so he's the person in charge of 0:10:34.160 --> 0:10:38.160 Apple's chip making efforts. He's the senior VP of Hardware technologies. 0:10:38.520 --> 0:10:41.079 They have offices in Israel and the United States and 0:10:41.160 --> 0:10:43.640 other countries to build these processors, and he's really in 0:10:43.760 --> 0:10:46.640 charge of this endeavor to build chips. We did a 0:10:46.760 --> 0:10:50.480 nice profile of him back in I would encourage anyone 0:10:50.880 --> 0:10:53.640 interested in him or the or the chip making abilities 0:10:53.679 --> 0:10:55.600 of Apple to take a look at that article as well. 0:10:56.240 --> 0:10:58.319 And if you were to purchase, let's say, a new 0:10:58.440 --> 0:11:00.679 iPad that will maybe come out by the end of 0:11:00.720 --> 0:11:02.559 the year, what are you going to see in there 0:11:02.600 --> 0:11:06.199 that Apple designs. So the current iPads they don't have 0:11:06.240 --> 0:11:09.480 a ton of internal Apple custom chips, but we're expecting 0:11:09.559 --> 0:11:11.600 this new iPad model that comes down in the fall 0:11:11.679 --> 0:11:14.479 to have at least the pair of new Apple processors, 0:11:14.600 --> 0:11:18.640 one for artificial intelligence tasks, the neural engine, which works 0:11:18.679 --> 0:11:20.439 with face i D, So we're expecting the iPad to 0:11:20.480 --> 0:11:24.200 get face i D, but also an Apple custom graphics processor. 0:11:24.240 --> 0:11:27.160 It's called the GPU that's in the iPhone eight eight 0:11:27.240 --> 0:11:29.199 plus in the iPhone ten, and so they bring it 0:11:29.280 --> 0:11:31.319 to the iPad for the first time this year, and 0:11:31.440 --> 0:11:34.120 it makes sense as a natural progression of pushing the 0:11:34.200 --> 0:11:37.559 chips to more Apple devices and just quickly if you're 0:11:37.600 --> 0:11:40.120 wanting to buy like a Mac, will you be getting 0:11:40.160 --> 0:11:44.160 those special processors made by Apple. So right now there's 0:11:44.280 --> 0:11:47.839 two Macs with special processors made from Apple their coprocessors. 0:11:47.840 --> 0:11:50.240 In addition to the Intel chip. They're going to come 0:11:50.280 --> 0:11:53.280 out with at least three updated Mac models with those 0:11:53.360 --> 0:11:56.719 chips as well. Across we reported today. I want to 0:11:56.760 --> 0:11:59.400 thank you very much for joining us. Mark Erman is 0:11:59.440 --> 0:12:01.400 our expert when it comes to all things related to 0:12:01.520 --> 0:12:06.120 technology for a Bloomberg News talking about Apple and its 0:12:06.480 --> 0:12:23.760 chip building desires for my attention now to two different economies, 0:12:23.800 --> 0:12:27.040 the economy for urban America and rural America. And here 0:12:27.080 --> 0:12:29.959 to help us understand this is Tom Halverson. He is 0:12:30.000 --> 0:12:33.240 the president and the chief executive of co Bank Assets 0:12:33.320 --> 0:12:35.880 under management about a hundred and twenty five billion dollars, 0:12:35.960 --> 0:12:39.280 joining us from Denver. Tom, thanks very much for being 0:12:39.400 --> 0:12:43.600 on tell us about this new report about what influences 0:12:44.360 --> 0:12:47.880 rural America's economy. Well, thank you, a pleasure to be 0:12:47.960 --> 0:12:50.400 with you. You know, there's a there's a great deal 0:12:50.440 --> 0:12:52.560 of things that influence the royal economy and it obviously 0:12:52.640 --> 0:12:55.000 has a tremendous impact on the rest of the economy 0:12:55.040 --> 0:12:57.600 as a whole. We've found trying to do a lot 0:12:57.640 --> 0:13:01.559 of research that is particularly difficult all to gather appropriate 0:13:01.720 --> 0:13:05.959 timely data and economic indications about what is in fact 0:13:06.720 --> 0:13:09.760 going on in rural America. But we've done a lot 0:13:09.840 --> 0:13:12.439 of research in that regard, published some some of it 0:13:12.559 --> 0:13:15.520 that's available to you, and what you can see is, uh, 0:13:15.600 --> 0:13:18.800 there's quite a meaningful divergence on a variety of different 0:13:18.840 --> 0:13:22.319 indicators between what's happening in rural America, which hasn't been 0:13:22.320 --> 0:13:24.319 a strong over the last five to ten years, is 0:13:24.360 --> 0:13:27.400 what's been happening in UH in UH, in the urban 0:13:27.480 --> 0:13:30.400 economy as a whole, is it? I mean, maybe start 0:13:30.480 --> 0:13:32.920 with misconceptions. I mean, you know, if you mentioned the 0:13:33.040 --> 0:13:36.760 rural economy of the United States, you may get people saying, well, 0:13:36.840 --> 0:13:40.360 it's all agriculture and mining. Not so, No, it's not so. 0:13:40.600 --> 0:13:44.400 There's actually a lot going on in in rural America. 0:13:44.480 --> 0:13:48.200 In fact, the predominant portion of the population obviously lives 0:13:48.240 --> 0:13:51.520 in in urban America, but they often don't understand fully 0:13:51.640 --> 0:13:55.640 or perhaps potentially take for granted, just how reliant their 0:13:55.720 --> 0:13:59.679 quality of life in their economic well being depends on 0:13:59.800 --> 0:14:01.800 what goes on in rural America. Whether it be the 0:14:01.880 --> 0:14:05.560 agricultural economy. But food and fiber that we all rely 0:14:05.720 --> 0:14:09.000 on comes from rural America, as does our water other 0:14:09.160 --> 0:14:13.439 natural resources UH and predominantly a lot of the electricity 0:14:13.520 --> 0:14:16.880 and other things that are ubiquitous needs of of our 0:14:17.040 --> 0:14:19.400 quality of life these days, as well as our economic 0:14:19.480 --> 0:14:23.640 activity is also predominantly coming from from rural America. Well, 0:14:23.760 --> 0:14:28.840 you mentioned in the report that in Iowa, agricultural products 0:14:29.040 --> 0:14:32.640 only account for about ten percent of the state economy, 0:14:33.240 --> 0:14:35.200 But then you have to figure in things like the 0:14:35.320 --> 0:14:42.000 equipment manufacturers, agricultural lending. That changes the picture. It does. Indeed, 0:14:42.080 --> 0:14:45.880 there is a wide array and diversity of economic activity 0:14:46.320 --> 0:14:50.000 in rural America, and obviously they're all very highly correlated 0:14:50.280 --> 0:14:55.080 UH and interdependent, but it's much more diverse than the 0:14:55.160 --> 0:15:00.920 ability with modern telecommunications capabilities, for example, to and visage 0:15:01.320 --> 0:15:06.520 economic activity occurring in rural America that couldn't have happened ten, fifteen, 0:15:06.560 --> 0:15:09.520 twenty years ago, whether it be uh in in the 0:15:09.600 --> 0:15:12.520 communications industry itself, or in the health care industry or 0:15:12.560 --> 0:15:16.040 other things where where distance has a lot more a 0:15:16.120 --> 0:15:20.160 lot less impact on cost as a result of communications innovation. 0:15:20.520 --> 0:15:25.240 What about wages in rural America, albeit it's different for 0:15:25.760 --> 0:15:28.240 you know, whether you're in the agriculture sector or an 0:15:28.440 --> 0:15:32.080 education and health. But we'll give us an update on wages. Well, 0:15:32.080 --> 0:15:34.320 it's it's it's interesting to note that they are in 0:15:34.440 --> 0:15:40.239 addition to technological UH differences between you know, broadband penetration 0:15:40.360 --> 0:15:42.640 or any other sort of indicators you want to look at, 0:15:43.320 --> 0:15:47.440 diverging between urban and rural, there's also a significant diversion 0:15:47.680 --> 0:15:53.640 in in wage growth, appreciation, unemployment levels, basic labor market 0:15:53.680 --> 0:15:56.160 conditions in rural America over the last five to ten 0:15:56.240 --> 0:16:01.320 years have significantly diverged from what's happening UH in UH 0:16:01.440 --> 0:16:05.040 in urban America. Substantially more jobs have been created in 0:16:05.200 --> 0:16:08.320 urban America than in rural America since the financial crisis 0:16:08.400 --> 0:16:11.320 nearly a decade ago, and there's been much more wage 0:16:11.360 --> 0:16:16.440 appreciation as a result, UH as well in in in 0:16:16.600 --> 0:16:20.440 urban America. So in certain respects, the rural parts of 0:16:20.480 --> 0:16:25.560 the country, in rural job creation, job opportunities, wage opportunities, 0:16:25.600 --> 0:16:28.440 and the like have been have been less robust than 0:16:28.520 --> 0:16:31.320 has been so in in the populous parts of the country. 0:16:31.680 --> 0:16:33.960 What's your thought. I mean, we've been talking about NAFTA 0:16:34.600 --> 0:16:38.760 today because of the negotiations and the recent press conference 0:16:38.800 --> 0:16:44.040 in Montreal. Based on your customer base and your experience, 0:16:44.400 --> 0:16:48.360 what's your take on the renegotiation of NAFTA. Well, it's 0:16:48.360 --> 0:16:50.560 a it's a big issue. It's a big issue for 0:16:50.680 --> 0:16:53.360 rural America in general. It's a big issue for agricultural 0:16:53.600 --> 0:16:57.160 America in particular. If you if you look at the 0:16:57.400 --> 0:17:01.360 changing trade patterns between our sols and our NAFTA partners 0:17:01.720 --> 0:17:05.120 since that agreement was put in place, the agricultural economy 0:17:05.200 --> 0:17:08.920 has been one of the predominant beneficiaries. We've substantially grown 0:17:08.960 --> 0:17:14.280 our agricultural exports, who are particularly to Mexico and therefore 0:17:14.480 --> 0:17:17.959 among our customers in the rural parts of the country. 0:17:18.400 --> 0:17:22.600 There's a fair amount of apprehension about about the potential 0:17:22.760 --> 0:17:28.880 risks associated with losing the access that our agricultural producers 0:17:28.960 --> 0:17:31.080 have gained through you know, a lot of hard work 0:17:31.160 --> 0:17:34.560 over a long period of time, as well as as 0:17:34.600 --> 0:17:37.560 some concerned about what that might mean for the for 0:17:37.680 --> 0:17:41.600 the future, because there obviously continues to be good growth 0:17:42.119 --> 0:17:45.919 upside opportunities for the agricultural economy if we can maintain 0:17:46.920 --> 0:17:50.840 these advantageous trading relationships. Thank you very much for being 0:17:50.920 --> 0:17:53.200 with us. Tom Halverson as the president and the chief 0:17:53.280 --> 0:17:57.080 executive of co Bank, based in Denver, helping to manage 0:17:57.080 --> 0:17:59.880 more than a hundred and twenty five billion dollars in assets. 0:18:08.320 --> 0:18:11.840 All right, let's turn our attention now to the deal 0:18:11.920 --> 0:18:13.480 of the day. I guess you could call it over 0:18:13.560 --> 0:18:17.560 eighteen billion dollars dr Pepper Snapple being snapped up by 0:18:17.720 --> 0:18:21.320 A J. A b. The holding company of the Rheyman family, 0:18:21.720 --> 0:18:24.320 and Ed Hammond, our deal's reporter is here to tell 0:18:24.400 --> 0:18:26.240 us all about it, and Ed can be followed on 0:18:26.400 --> 0:18:31.000 Twitter at Ed Hammond and why alright Ed Hammond and 0:18:31.119 --> 0:18:33.000 why they got you up early out of bed to 0:18:33.080 --> 0:18:37.879 do this one? Uh? Why is this deal so important 0:18:37.960 --> 0:18:42.000 for the industry. It's important for the industry because it's 0:18:42.600 --> 0:18:45.080 counter trend, which is always kind of a nice thing 0:18:45.119 --> 0:18:47.480 to get us going. So the thing we've seen in 0:18:47.800 --> 0:18:49.720 food and beverage M and A, particularly food M and 0:18:49.800 --> 0:18:51.200 A in the last few years, has been in this 0:18:51.320 --> 0:18:54.520 real pivot towards health and wellness. So every big deal 0:18:54.600 --> 0:18:57.440 you've seen done, indeed a lot of small deals, the 0:18:57.880 --> 0:19:01.440 real characteristic has been when moving food into a space 0:19:01.520 --> 0:19:04.600 where you have, you know, much more attention on sort 0:19:04.640 --> 0:19:07.080 of healthy consumers people not wanting to have tons of 0:19:07.160 --> 0:19:10.080 sugar and sort of high fructo stuff in their diet. 0:19:10.440 --> 0:19:12.720 This kind of isn't that. This is more what we 0:19:12.800 --> 0:19:16.040 think of a traditional sort of sugary drinks, stuff that 0:19:16.560 --> 0:19:17.840 you would go in a store and you would buy 0:19:17.880 --> 0:19:20.080 and maybe feel a little bit guilty about afterwards. You're 0:19:20.080 --> 0:19:22.880 going to buy them in a Crispy Cream store, You're 0:19:22.880 --> 0:19:25.399 gonna buy them in a Panera bread store, in a 0:19:25.600 --> 0:19:28.680 Noah in an Einstein Noah store, right exactly. So the 0:19:28.800 --> 0:19:30.680 idea now is that you'll probably get some kind of 0:19:31.080 --> 0:19:32.600 some kind of deal where you're going to get cheaper 0:19:32.640 --> 0:19:35.639 doctor Pepper's in your in your Panera at store, or 0:19:35.720 --> 0:19:37.840 maybe you're gonna get free Dr Pepper or free snapper 0:19:37.880 --> 0:19:40.080 with your Crispy cream. Either way, it's not exactly a 0:19:40.119 --> 0:19:42.320 move towards health, and so from that point of view, 0:19:42.359 --> 0:19:44.320 it's interesting. The other thing that's really interesting here, and 0:19:44.400 --> 0:19:47.040 this is a huge thing for JB in in kind 0:19:47.080 --> 0:19:49.680 of moving to do the deal, is they have a 0:19:49.800 --> 0:19:52.639 big coldbrew coffee business. At the moment, they're entirely dependent 0:19:52.680 --> 0:19:54.600 on their coffee stores really for selling that or they 0:19:54.680 --> 0:19:58.159 get held up by the retailers. This immediately opens a 0:19:58.240 --> 0:20:01.600 channel for them to distribute their cold brew straight two stores, 0:20:01.640 --> 0:20:03.600 which is a huge market for them and something that 0:20:03.720 --> 0:20:07.520 will I think provide kind of instant um instant uplift 0:20:07.600 --> 0:20:10.320 for them. Can you just explain to people this cold 0:20:10.600 --> 0:20:13.879 brew coffee. Uh, I don't want to say that it's 0:20:13.920 --> 0:20:16.320 a fat yet, but I'll let's just say it's a trend. 0:20:16.400 --> 0:20:18.600 There are kind of fans within it, So like within 0:20:18.720 --> 0:20:21.040 Colboro you have like nitro coffee, which is kind of 0:20:21.119 --> 0:20:23.800 Cobrew on steroids, and that's that seems to be a 0:20:23.840 --> 0:20:26.359 bit of a New York fans. So Cobrew is you know, 0:20:26.520 --> 0:20:28.959 it's it's as far as I understand, it's it's different 0:20:29.040 --> 0:20:31.879 from just iced coffee because it's actually brewed cold. It 0:20:32.000 --> 0:20:34.320 takes like twelve to fifteen hours. You sit it on 0:20:34.440 --> 0:20:37.920 the grains the ground story, which is slightly coarser, and 0:20:38.000 --> 0:20:39.640 it brews in a different way. It means it's it's 0:20:39.680 --> 0:20:43.680 slightly lower in acids, and it tastes slightly nicer, and 0:20:43.800 --> 0:20:46.520 it's not just like you know, a drip coffee poured 0:20:46.560 --> 0:20:49.560 over rice that was quite good, wasn't that was really good? Yes? Indeed, 0:20:49.600 --> 0:20:52.560 and so the idea being that now, because of this acquisition, 0:20:53.160 --> 0:20:55.000 every place that you were able to go and buy 0:20:55.400 --> 0:20:59.280 Dr Pepper or Snapple products like big grocery store chain, 0:20:59.680 --> 0:21:01.560 you're are going to be able to get your cold 0:21:01.640 --> 0:21:04.800 brew coffee onto those same shells exactly. So when you 0:21:04.880 --> 0:21:06.480 go to Walmart to pick up your Dr Pepper, you 0:21:06.520 --> 0:21:08.560 were able to buy like a can of Pete's Cold Brew, 0:21:09.040 --> 0:21:11.119 which is that's a huge part of their business and 0:21:11.160 --> 0:21:13.200 obviously that's a big part of this proposition for JB. 0:21:13.320 --> 0:21:16.000 Why merged these businesses together. Well, they've certainly got a 0:21:16.080 --> 0:21:19.600 nice portfolio, the Rieman family of Austria, and they're adding 0:21:19.640 --> 0:21:21.560 it to it, correct because they own thirty eight percent 0:21:21.640 --> 0:21:25.280 of COTI and five percent of Record Bank US. Yeah, 0:21:25.320 --> 0:21:27.560 I think it's important thing to disentangle here. Yes, the 0:21:27.640 --> 0:21:30.800 Rhyman family will be big investors in this proform of 0:21:30.800 --> 0:21:32.800 business when the merger has done. But this is also 0:21:32.920 --> 0:21:35.040 j a B Consumer Funds, which is a kind of 0:21:35.200 --> 0:21:38.520 non Rieman family vehicle that's all outside money. So it's 0:21:38.640 --> 0:21:40.440 it's two bits of j B. It's the it's the 0:21:40.520 --> 0:21:42.960 holding code which is predominantly Rhyman family, but it's also 0:21:43.040 --> 0:21:45.440 the consumer business which is not Roman family, so you're 0:21:45.440 --> 0:21:49.560 seeing both of those investing together into this new code. Interestingly, 0:21:49.560 --> 0:21:51.679 you also have money coming in from Byron Trott, who 0:21:51.840 --> 0:21:53.800 is advising on the deal, also investing in a deal. 0:21:53.920 --> 0:21:56.600 This is a very unusual structure, something only he seems 0:21:56.640 --> 0:21:57.960 to be able to do. He did it recently with 0:21:58.000 --> 0:21:59.959 Warren Buffett on the Pilot Flying Jay's deal as well. 0:22:00.280 --> 0:22:02.680 Thanks very much for being with us and explaining it. 0:22:02.720 --> 0:22:04.119 I have a feeling we're going to be calling on 0:22:04.200 --> 0:22:07.280 your expertise more to learn more about this. Ed Hamming, 0:22:07.320 --> 0:22:14.240 our deal's reporter for Bloomberg. Thanks for listening to the 0:22:14.280 --> 0:22:17.360 Bloomberg P and L podcast. You can subscribe and listen 0:22:17.400 --> 0:22:21.560 to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform 0:22:21.640 --> 0:22:25.480 you prefer. I'm pim Fox. I'm on Twitter at pim Fox. 0:22:25.840 --> 0:22:29.320 I'm on Twitter at Lisa Abramo. It's one before the podcast. 0:22:29.400 --> 0:22:32.000 You can always catch us worldwide on Bloomberg Radio.