WEBVTT - Loomis' Fuss Sees Two More Fed Hikes, But Uncertainty Prevails 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:34.600 podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. My 0:00:34.760 --> 0:00:38.960 co host and colleague Lisa Bramowitz is on vacation. But 0:00:39.080 --> 0:00:41.839 he's not on vacation. Dan Fuss is the vice chairman 0:00:41.880 --> 0:00:46.000 of Loomas Sales and Company based in Boston, and Dan 0:00:46.080 --> 0:00:49.800 Fuss has been called by many the Warren Buffett of bonds. 0:00:50.320 --> 0:00:52.280 He's an expert in the world of fixed income and 0:00:52.360 --> 0:00:54.400 he joins us now, Dan Fuss, thank you very much 0:00:54.400 --> 0:00:56.640 for being with us. I want to start off by 0:00:56.680 --> 0:01:00.640 asking you about the federal reserves program to let debt 0:01:01.160 --> 0:01:05.520 run off their books, and I'm wondering, if you combine 0:01:05.600 --> 0:01:12.119 that with today's inflation report, do you believe that individuals 0:01:12.120 --> 0:01:15.600 and consumers will still have money to spend to keep 0:01:15.640 --> 0:01:24.240 the economy roaring? Um The quick answer is yes. The um. 0:01:24.920 --> 0:01:29.320 The fet is PIM. The fet is very very early 0:01:29.920 --> 0:01:34.400 in this process, and they are tiptoeing through it. And 0:01:34.520 --> 0:01:41.600 as they gradually bring down the balance sheet and start 0:01:41.720 --> 0:01:46.360 or continue to move up feed funds rate. Uh, they're 0:01:46.560 --> 0:01:49.840 keeping a careful line. Now. I'll be the first to say, hey, 0:01:49.880 --> 0:01:53.240 that inflation report and thinks along what I would call 0:01:53.320 --> 0:01:57.320 the periphery of it, the advanced indicators. They say, okay, 0:01:57.480 --> 0:02:01.040 here comes more inflation. But there's so much more to 0:02:01.200 --> 0:02:05.600 it now. The basic readings on the economy unemployment are 0:02:05.640 --> 0:02:11.440 also strong, so that's good. So from my domestic viewpoint, Uh, 0:02:11.480 --> 0:02:14.840 it looks like they're on track to gradually take rates 0:02:14.919 --> 0:02:19.160 up at a steady pace. Um. After a while, you 0:02:19.240 --> 0:02:22.280 and I will feel that a bit, but only really 0:02:22.320 --> 0:02:27.519 if we're gonna borrow, if we're asset holders and are 0:02:27.639 --> 0:02:32.880 thinking of selling them depending on the asset housing for example, 0:02:33.520 --> 0:02:35.760 things like that, then we would say, well, this is 0:02:35.840 --> 0:02:40.200 good news because I'll probably get a higher nominal rate 0:02:40.600 --> 0:02:45.280 as we go forward. Um. If on the other hand, 0:02:45.360 --> 0:02:49.480 we want to borrow to buy something, that we're gonna say, oh, 0:02:49.560 --> 0:02:53.360 and at some point you start to lose the buyers 0:02:53.480 --> 0:02:56.880 for things again like real estate. So that's the net 0:02:56.919 --> 0:02:59.480 note of it. Well, I'm glad you mentioned real estates 0:02:59.560 --> 0:03:02.160 because example, let's say you take a thirty year mortgage 0:03:02.240 --> 0:03:04.320 rate of three percent. Let's see it goes to five. 0:03:05.760 --> 0:03:12.400 That means your monthly payment increases. Uh, it means you've 0:03:12.440 --> 0:03:17.200 got a headache for sure. Now, bim um, if you've 0:03:17.200 --> 0:03:21.760 got adjustable rate mortgages, he got a problem in this environment. 0:03:22.560 --> 0:03:28.120 And so, by the way, does the lender if the 0:03:28.280 --> 0:03:32.560 lender has lent at a fixed rate. So it's the 0:03:32.639 --> 0:03:37.040 borrows problem if it's adjustable rate, and the lenders problem 0:03:37.080 --> 0:03:41.000 if he's lending at a fixed rate. So this is uh, 0:03:41.200 --> 0:03:44.720 this is really not a good thing, um, And you're 0:03:44.760 --> 0:03:49.800 gonna run into some natural constraints on the economy at 0:03:49.920 --> 0:03:54.520 some point. Where that point is, I don't know. Because 0:03:54.560 --> 0:03:58.680 we're at basically full employment. If you say, if you 0:03:58.760 --> 0:04:01.800 use the standard in the heaters, or even if you 0:04:01.880 --> 0:04:06.760 go over and you loose you use participation rates, um, 0:04:06.800 --> 0:04:12.240 you know things are are coming along just fine. The 0:04:12.400 --> 0:04:15.800 one caution in this I forgot which one of those 0:04:16.120 --> 0:04:19.760 fat speakers was speaking yesterday, but he said, you know, 0:04:19.960 --> 0:04:24.000 all systems goal according to the dot plots and things 0:04:24.080 --> 0:04:28.039 like that, inflation is rising, economy strong. They ought to 0:04:28.080 --> 0:04:32.720 be shrinking the balance sheet a bit and taking short 0:04:32.880 --> 0:04:36.560 rates up. Okay, that's that's well and good. But he 0:04:36.640 --> 0:04:40.320 also put in the provisal that I think is in 0:04:40.400 --> 0:04:44.480 all of our minds now saying this is all subject 0:04:44.520 --> 0:04:49.080 to or bear in mind that we have some changes 0:04:49.160 --> 0:04:54.680 on the trade front that might lead to surprises in here. 0:04:54.800 --> 0:04:59.280 That's to beg uncertainty. You really don't know what's coming. Uh. 0:04:59.720 --> 0:05:05.880 My analogy on that because I I it's like raising teenagers. 0:05:06.200 --> 0:05:11.040 You're all ready to proceed on a certain basis, but 0:05:11.200 --> 0:05:15.320 then you know you've got a huge uncertainty here. Same 0:05:15.440 --> 0:05:19.720 thing in the forecasting business right now? Well is this 0:05:20.120 --> 0:05:22.480 is this? Is this more like uh, you know a 0:05:22.560 --> 0:05:26.000 movie Ferris Bueller Days Off? Or or or is it 0:05:26.160 --> 0:05:30.760 more like Jack Nicholson in as good as it gets? Well, 0:05:31.440 --> 0:05:35.520 you see more movies than I do. But it's uh, 0:05:35.760 --> 0:05:39.280 this is not as good as it gets. So you 0:05:39.320 --> 0:05:44.039 believe the economy will continue on this path. I think 0:05:44.120 --> 0:05:47.840 the economy is strong. Now here's where the worry comes in. 0:05:49.000 --> 0:05:51.520 You know, just from reading the papers a G. I 0:05:51.560 --> 0:05:54.840 wonder what impacts the terroffs. And it's more than the 0:05:54.920 --> 0:05:59.560 impact of the teriffs. It's the geopolitical impact of some 0:05:59.760 --> 0:06:01.720 of the things that are going on. How will they 0:06:01.800 --> 0:06:06.200 affect various aspects of the financial markets and other things. 0:06:07.120 --> 0:06:11.440 So you've got that, um, But it also says, you know, 0:06:11.600 --> 0:06:17.040 if we model this out based on past experience, Um, 0:06:17.680 --> 0:06:21.240 what happens in a setting like this, what does the 0:06:21.400 --> 0:06:25.320 models say? Well, the models say you get st inflation out. 0:06:26.720 --> 0:06:29.080 Now what do you do then? And the other thing 0:06:29.920 --> 0:06:34.279 pim uh is uh. You and I have talked about 0:06:34.400 --> 0:06:39.480 this before, going back in our memories, we remember, Um, 0:06:41.760 --> 0:06:46.000 so does the FED. They've mentioned this when the money 0:06:46.120 --> 0:06:50.600 went sailing out of Southeast Asia to come here. Um. 0:06:51.040 --> 0:06:56.239 We are, as the FED raiss rates. We attract money 0:06:56.320 --> 0:06:59.880 from other parts of the world, and to the degree 0:07:00.080 --> 0:07:03.280 the other parts of the world become a little less 0:07:03.320 --> 0:07:08.720 certain because of trade restriction, restrictions of some sort, and 0:07:08.960 --> 0:07:13.400 the subsequent chief political pressures that come with that. It's 0:07:13.480 --> 0:07:16.880 broader than trade. Um. Then they say, well, I want 0:07:16.920 --> 0:07:19.160 to be in a safe place, and the safe place 0:07:19.240 --> 0:07:21.720 has the highest rates all the more reasons. So I'm 0:07:21.760 --> 0:07:26.760 going Uh, the capital can do that. Not so easy 0:07:26.880 --> 0:07:30.440 for the people, but they'll do that with their capital. 0:07:30.520 --> 0:07:34.200 Then we've got a real mess in our hands. So, um, 0:07:35.440 --> 0:07:38.080 that's a fear, and the Fed's got all this in 0:07:38.200 --> 0:07:42.840 front of them, and um, it's an uncertain time right now. 0:07:43.080 --> 0:07:45.880 They're they're sticking with the script, which is we're gonna 0:07:45.960 --> 0:07:49.840 bump rates once or twice this year and another three 0:07:49.960 --> 0:07:53.720 times next year. And some of them are saying again 0:07:54.200 --> 0:07:58.960 in two thousand, um, and I I don't know how 0:07:59.120 --> 0:08:03.400 hi they're gonna do. Goal. My own guests guestimate is 0:08:03.520 --> 0:08:06.960 about three and the pit punts rate by then they'll 0:08:07.040 --> 0:08:10.320 have something or the rest of the old curve will 0:08:10.480 --> 0:08:14.240 normalize to some degree, not along it long and it 0:08:14.360 --> 0:08:18.200 is different, but to ten years will sort of normalize that. 0:08:18.440 --> 0:08:22.840 That's that's the wild guest Pim, Thanks very much, Dan Fuss, 0:08:23.480 --> 0:08:28.120 Vice chairman, Loomis Sales and Company. He's been called by 0:08:28.280 --> 0:08:45.800 some Warren Buffett of bonds. The shares of right Aid 0:08:45.920 --> 0:08:49.679 they are lower by more than twenty percent since the 0:08:49.800 --> 0:08:53.640 beginning of the year. And we know that right Aid 0:08:53.880 --> 0:08:57.600 and the combination with Albertson's not necessarily going to make 0:08:57.640 --> 0:09:00.720 it to the checkout counter. In fact, it's been a return. 0:09:00.800 --> 0:09:03.079 It's back on the shelf here to tell us more 0:09:03.280 --> 0:09:08.120 about this potential combination and why it didn't work is 0:09:08.240 --> 0:09:12.559 none other than Bird Flickinger, managing director for Strategic Resource 0:09:12.760 --> 0:09:17.200 Group Bert Why didn't the Right Aid Albertson's deal go through. 0:09:17.880 --> 0:09:23.319 It didn't go through because large institutional shareholders in their idiocracy, 0:09:23.559 --> 0:09:27.040 got greedy and they wanted more money. When the crazy 0:09:27.120 --> 0:09:30.560 company was trading at about a box before the Albertson's bid, 0:09:31.240 --> 0:09:34.679 and they wanted more than two dollars, Albertson s to 0:09:34.800 --> 0:09:37.600 its credit, walked away as twenty four billion to buy 0:09:37.800 --> 0:09:44.520 better things, and Right Aid faces a potential cataclysmic collapse. Okay, 0:09:44.600 --> 0:09:48.400 but if you're so clear about this, what advice do 0:09:48.520 --> 0:09:52.319 you believe the right AIG shareholders are getting. What's the 0:09:52.480 --> 0:09:55.360 story that they're hearing. They're hearing from I S s 0:09:55.480 --> 0:09:58.120 or institutional shareholders who they have a lot of respect for. 0:09:58.320 --> 0:10:02.080 Typically it's right, but increasingly you have Baker scholars from 0:10:02.120 --> 0:10:06.240 Harvard Business School and UH the the institutional arrogance of 0:10:06.320 --> 0:10:10.120 the nine ivy schools from Penn to Princeton, uh to 0:10:10.480 --> 0:10:14.280 to to Yale to Cambridge UH in Colombia, and they're 0:10:14.320 --> 0:10:17.120 just looking at spreadsheets. They don't understand the rhythm of retail. 0:10:17.120 --> 0:10:19.679 They don't understand the detail of retail. They don't understand 0:10:19.720 --> 0:10:23.319 the synergies. They don't understand Bob Miller, CEO of Albertson's 0:10:23.440 --> 0:10:27.160 Humble country Boy from Mississippi, but the best turnaround artist 0:10:27.240 --> 0:10:29.840 in retail for the last forty years. Bob saved right 0:10:29.880 --> 0:10:33.000 A the first time when Right eight CEO Marty Grass 0:10:33.040 --> 0:10:37.319 committed the financial fraud. Said uh to the government. Bob Miller. Yeah, 0:10:37.400 --> 0:10:41.439 Bob Mill, save real, save right the first time with 0:10:41.720 --> 0:10:45.760 with Mary Sammons when it was unsavable after massive financial 0:10:45.840 --> 0:10:49.760 fraud and the executive officers, Uh did did eight months 0:10:49.840 --> 0:10:53.040 in or eight years in a federal facility. Miller comes 0:10:53.120 --> 0:10:55.160 to save it the second time. It should be prefera 0:10:55.200 --> 0:10:59.880 real manner from heaven. UH. For for for the Mensa Canada, 0:11:00.080 --> 0:11:04.160 Mensa men running these institutional funds, but they act like 0:11:04.320 --> 0:11:08.120 Mensis society morons and and turn Albertson's down and and 0:11:08.400 --> 0:11:11.959 and now they're stuck holding a bad credit. Uh. And 0:11:12.160 --> 0:11:15.000 they don't have the capital to reinvest and compete effectively 0:11:15.080 --> 0:11:18.600 and connect with consumers. Whether retailers the number one seller 0:11:18.600 --> 0:11:22.280 of tobacco in the industry and can invest in beauty 0:11:22.400 --> 0:11:25.800 and health and solar and all the things that Albertson, Zosco, 0:11:25.920 --> 0:11:28.640 Savan Drug and others are doing so well. How much 0:11:28.679 --> 0:11:30.719 money do you believe that right AID needs or is 0:11:30.760 --> 0:11:33.240 there no estimate yet for what they need in order 0:11:33.320 --> 0:11:36.839 to fix what is going on in their stores? Uh? 0:11:37.400 --> 0:11:41.320 In my professional view and followed the followed the company 0:11:41.400 --> 0:11:43.960 for nearly thirty years about five billion dollars. So if 0:11:44.000 --> 0:11:47.319 you look at what Chris Baldwin did successfully with his 0:11:47.440 --> 0:11:49.880 I p O invested in solar, being the leader in 0:11:49.960 --> 0:11:53.559 New Jersey, New England, institutional funds shift from being with 0:11:53.720 --> 0:11:58.679 proverbial Mr Burns from the Simpsons and nuclear UH two solar. UH. 0:11:59.240 --> 0:12:03.040 We've done out side research up to or more of 0:12:03.120 --> 0:12:09.480 consumers switch UH to places like BJ's, Albertson's solar flagship 0:12:09.559 --> 0:12:13.200 and d C with Safeway Solar Maze landing everybody. Anybody 0:12:13.280 --> 0:12:15.880 going to Jury City Shore this weekend, we'll see it. Right. 0:12:15.920 --> 0:12:19.040 AID can't do solar for their warehouses to convert customers. 0:12:19.080 --> 0:12:21.280 They can't do it for the stores. They can't do 0:12:21.440 --> 0:12:25.920 the beauty like CVS, Target, Walgreen's Boots in store, UH 0:12:26.200 --> 0:12:30.360 and Albertson's with the late Great Doug Sagan, whose funeral 0:12:30.440 --> 0:12:33.360 I went to in Chicago, tragically died at fifty five. 0:12:33.800 --> 0:12:36.360 But what Doug and his brothers and Bob Miller have 0:12:36.480 --> 0:12:39.880 done at Albertson's in Chicago and across America with their 0:12:40.520 --> 0:12:43.760 eight different banners, it's transformational and would have would have 0:12:43.840 --> 0:12:48.720 saved right eight And what Susquohannah Highlands and Alberta Investment 0:12:48.800 --> 0:12:51.920 Management are thinking about. In my professional view, it's like 0:12:52.040 --> 0:12:55.439 Oprah White with tops friendly markets. UH you you you 0:12:55.880 --> 0:12:59.040 could wind up buying bonds at a hundred cents on 0:12:59.120 --> 0:13:02.160 the dollar or pocket a buck fifty on it on 0:13:02.280 --> 0:13:04.680 its way down to next to nothing. As we talked before, 0:13:05.440 --> 0:13:09.400 the toys are US bonds on the Bloomberg terminal uh, 0:13:09.679 --> 0:13:12.520 and the unsecured debt that was supposed to get a 0:13:12.640 --> 0:13:16.840 hundred cents on the dollar recovery PIM is getting three 0:13:16.960 --> 0:13:21.360 tents of one cent. That could be the catastrophic consequences 0:13:21.640 --> 0:13:25.560 for these crazy investors and I s S and made 0:13:25.600 --> 0:13:27.959 the wrong move on on the guidance and rejecting the 0:13:28.080 --> 0:13:31.760 right aid offer. Turn your attention now to another acquisition 0:13:31.880 --> 0:13:36.200 that didn't happen, And this is important because it relates 0:13:36.360 --> 0:13:44.880 to advertising revenues. Sinclair Broadcasting and Tribune Media, the Tribune stations. 0:13:45.400 --> 0:13:48.199 What do you know about that, Pim. We as you know, 0:13:48.320 --> 0:13:51.319 we've done a lot of Federal Trade Commission work with 0:13:51.559 --> 0:13:56.600 all all the commissioners, all the all the chairmen and women, 0:13:57.120 --> 0:14:00.920 and the f FTC staff is a little too officious 0:14:01.000 --> 0:14:05.160 and vigilant and not looking at digital and consumer communication. 0:14:05.720 --> 0:14:09.280 So with to your point, Sinclair and Tribute, that would 0:14:09.320 --> 0:14:13.280 have been the perfect combination to create more competition, particularly 0:14:13.360 --> 0:14:17.960 in an election year where whether it's Bloomberg or other networks, 0:14:18.040 --> 0:14:20.360 the cost of media is at an all time high 0:14:20.360 --> 0:14:22.760 and we'll get even higher going to the presidential election. 0:14:22.800 --> 0:14:27.720 And Sinclair and Tribune could have customized uh separately, they'll 0:14:27.720 --> 0:14:30.760 be okay, But the old janis Joplin. The combination of 0:14:30.800 --> 0:14:34.360 the two is better. Uh. And it's too too bad. 0:14:34.600 --> 0:14:37.160 Uh the f FTC didn't let them combine. Think it 0:14:37.320 --> 0:14:43.440 was too much of a horizontal concentration of competition. Let's 0:14:43.560 --> 0:14:46.320 turn to something that might be more positive. Who's doing 0:14:46.480 --> 0:14:51.000 really well in this current retail environment? We uh, we 0:14:51.160 --> 0:14:54.960 love Amazon full disclosure shareholder for a long time. People 0:14:55.040 --> 0:14:58.720 go to his or her Bloomberg can see this stock 0:14:58.800 --> 0:15:02.120 price essentially troubled and in a little over three years, 0:15:03.120 --> 0:15:05.920 and uh, you look, you look at it. You look 0:15:05.960 --> 0:15:10.080 at Chris Baldwin, who I didn't keep him from going 0:15:10.160 --> 0:15:14.280 from the priests going into the priesthood when he disappointed 0:15:14.360 --> 0:15:18.080 his mother and grandmother at Siena College, didn't go into 0:15:18.120 --> 0:15:20.880 the seminary. I was part of the team that hired 0:15:20.960 --> 0:15:24.680 him for Procter and Gamble, turned Hess retail around, turned 0:15:24.720 --> 0:15:27.160 BJ's retail around, one of the most successful I p 0:15:27.320 --> 0:15:29.760 O s on the Bloomberg terminal this year. Uh b 0:15:30.000 --> 0:15:33.960 J's is hitting on all cylinders. Uh. You're also seeing 0:15:34.320 --> 0:15:40.480 Macy's under uh Jeff Ginnett and Tony Spring at Bloomingdale's 0:15:40.520 --> 0:15:43.800 with Frank Blake on the board really start to gain 0:15:44.560 --> 0:15:49.480 tremendous momentum too. And uh talking to Bloomberg's Charlie Pellett, 0:15:49.640 --> 0:15:53.520 uh c v c v assl uh and Walgreen's boots 0:15:54.040 --> 0:15:57.600 capitalize on on this right aid catastrophe as well. So 0:15:58.360 --> 0:16:00.800 while there's an accelerating retail I stage in bricks and 0:16:00.840 --> 0:16:05.160 mortar retail, a lot of opportunities and bonds with the 0:16:05.200 --> 0:16:09.440 Bloomberg terminals as well as the equities, but as your 0:16:09.480 --> 0:16:16.200 friend Lazlo Berni says, and Dan Sullivan uh and Kurt Wolf, 0:16:16.600 --> 0:16:19.040 you have to be selective in what you pick and 0:16:19.160 --> 0:16:22.280 really go through the terminal and find the best situations 0:16:22.280 --> 0:16:25.400 because as you mentioned before the broadcast, you can't just 0:16:25.560 --> 0:16:27.560 buy the market. You can't just buy the A T 0:16:27.760 --> 0:16:29.960 F S. You have to be like you said Peter 0:16:30.160 --> 0:16:33.120 Lynch and and and really focus on the right situations. 0:16:33.360 --> 0:16:37.520 Bert flickincher many things. Bert Flickinger is Managing director of 0:16:37.640 --> 0:16:41.960 Strategic Resource Group. You can follow Bert on Twitter at 0:16:42.280 --> 0:17:04.240 Bert Underscore Flickinger. Earlier today, President Donald Trump said that 0:17:04.320 --> 0:17:07.720 he has authorized doubling some of the medals tariffs have 0:17:07.840 --> 0:17:11.879 been placed on Turkey. He sided poor relations with Turkey, 0:17:11.920 --> 0:17:15.600 which is a NATO ally. This is also over a 0:17:15.880 --> 0:17:19.680 conflict having to do with the detention of an American pastor. 0:17:20.080 --> 0:17:22.480 Here to help us understand what's going on in Turkey 0:17:22.480 --> 0:17:25.320 and whether this is a full blown crisis is Midge Raman. 0:17:25.680 --> 0:17:28.400 He is the managing director of Europe for Eurasia Group, 0:17:28.480 --> 0:17:31.480 joining us from London. Thanks very much for being with us, Midge. 0:17:31.680 --> 0:17:34.840 What do you make of this crisis? Is itself inflicted 0:17:35.040 --> 0:17:39.000 or was it a long time coming. To some extent, 0:17:39.119 --> 0:17:41.960 it was a long time coming, but it's been handled 0:17:42.000 --> 0:17:46.359 in a very knucklehead way by the Turkish administration. Essentially, 0:17:46.440 --> 0:17:51.120 what Turkey has done is misinterpret the recent situation around 0:17:51.800 --> 0:17:56.680 the US. Pastor Andrew Brunson, I think Marian's perspective, the 0:17:56.880 --> 0:18:00.639 US is extremely eager to have the past the release, 0:18:00.720 --> 0:18:04.879 and a such anchor is now playing hardball regarding the 0:18:05.080 --> 0:18:09.679 kinds of demands it is hoping to extract in exchange 0:18:10.080 --> 0:18:12.200 for this release. And I'll give you an example of 0:18:12.280 --> 0:18:15.280 some of the things that are hoping for. There's a 0:18:15.400 --> 0:18:19.400 probe against Houp Bank. They're hoping that any signs against 0:18:19.560 --> 0:18:22.880 that bank or sanctions would be would be limited. They're 0:18:22.880 --> 0:18:26.960 hoping the chief executive of that bank and Attila will 0:18:27.080 --> 0:18:29.720 also be released as well as as well as a 0:18:29.800 --> 0:18:31.600 number of other concessions. And I think this is a 0:18:31.680 --> 0:18:34.879 big misinterpretation by the Turkish side of where the US 0:18:35.040 --> 0:18:39.159 is in this standoffs. Based on what you've seen happen 0:18:39.320 --> 0:18:42.440 to the Turkish lira today, do you believe the sell 0:18:42.480 --> 0:18:46.040 off will continue? I do, and I think I mean 0:18:46.320 --> 0:18:49.520 that the comment from our douan Um and the new 0:18:49.600 --> 0:18:54.840 Treasury and Finance minister or Birack essentially suggest that what 0:18:55.200 --> 0:18:57.360 they're hoping to do is let this crisis run into 0:18:57.520 --> 0:19:00.880 local elections next year. They're very poor for the AKP, 0:19:01.359 --> 0:19:04.800 for Adan and his team to assess the AKP's popularity. 0:19:05.040 --> 0:19:07.879 I think they want the crisis to essentially to manage 0:19:07.960 --> 0:19:09.840 it through until that time. I don't think markets are 0:19:09.840 --> 0:19:11.720 going to give them that much time. So I think 0:19:11.760 --> 0:19:14.840 what you will see as more conventional policy action by 0:19:14.920 --> 0:19:18.119 the government interest rate rises. But it's a really open 0:19:18.200 --> 0:19:19.920 question at this stage is to whether or not that 0:19:20.040 --> 0:19:23.160 will suffice to stem the bleeding that we've been seeing 0:19:23.400 --> 0:19:28.960 in the Lira. Will steelmakers, particularly in Turkey, be able 0:19:29.040 --> 0:19:34.359 to survive until those elections. So I think the broader 0:19:34.480 --> 0:19:38.200 question is whether the crisis can can run that long, 0:19:38.280 --> 0:19:40.639 and I think that's highly unlikely. I think unless you 0:19:40.720 --> 0:19:42.920 get a move by arid And in the fairly near 0:19:43.040 --> 0:19:46.800 future to release this pastor, we're going to continue to 0:19:46.840 --> 0:19:50.240 see pressure from the U S administrations. I'm thinking perhaps 0:19:50.320 --> 0:19:54.000 more sanctions against high level Turkish officials. If there is 0:19:54.119 --> 0:19:56.920 that standoff, of course, that's going to bleed into the market. 0:19:56.960 --> 0:19:59.359 We're likely to see more capital flight, more pressure on 0:19:59.440 --> 0:20:02.240 the current and it's at that stage I think, you know, 0:20:02.320 --> 0:20:05.760 everyone will essentially be faced with with two very tough choices, 0:20:05.880 --> 0:20:09.120 either an I m F program or capital controls because 0:20:09.160 --> 0:20:12.600 this is a country that has large external vulnerabilities. They 0:20:12.640 --> 0:20:15.400 have a large current account deficit that needs financing, which 0:20:15.480 --> 0:20:19.240 means they are dependent on external capital. So ultimately, I 0:20:19.320 --> 0:20:22.520 think everyone is going to concede and we will see 0:20:22.560 --> 0:20:26.480 this past or at least more quickly as opposed to uh, 0:20:26.720 --> 0:20:29.600 you know, after a long delay. But at the moment, 0:20:29.800 --> 0:20:31.960 I think, as I say, I think the Turks believe 0:20:32.000 --> 0:20:34.640 they have more bargaining power and they're trying to extract 0:20:34.760 --> 0:20:37.280 more concessions from the US, and I think that's unlikely. 0:20:38.520 --> 0:20:42.480 Banks in Europe are exposed to what's going on in Turkey, 0:20:42.600 --> 0:20:46.159 specifically b b v A, UNI Credit in Italy, BNP 0:20:46.280 --> 0:20:49.840 Party bar in France. If they called mid Raman and 0:20:49.920 --> 0:20:53.160 asked for his advice, what would you say, I mean 0:20:53.200 --> 0:20:56.040 at this at this point, I don't think the lights 0:20:56.080 --> 0:20:59.920 to slashing red. I think the ECB Single Supervisory Mecha 0:21:00.000 --> 0:21:03.159 there's in the eas send the regulator is aware of 0:21:03.400 --> 0:21:07.440 exposure to the Turkish economy into the banking system. So 0:21:08.080 --> 0:21:11.960 you know, there's there's there's there's some active monitoring going on, 0:21:12.080 --> 0:21:14.920 but I don't think at this stage where near a crisis. 0:21:15.000 --> 0:21:18.320 If if Turkey really wore to enter a full blown 0:21:18.400 --> 0:21:21.080 balance of payments crisis, and I think there would be 0:21:21.200 --> 0:21:24.200 some hit on the respective banking systems you've just outlined, 0:21:24.400 --> 0:21:26.080 I don't think that would flow to become a larger 0:21:26.119 --> 0:21:29.280 political crisis in any of these countries because in countries 0:21:29.359 --> 0:21:32.080 like Spain and indeed France, a lot of work has 0:21:32.160 --> 0:21:35.359 been done on the banking system through their respective crisis 0:21:35.800 --> 0:21:38.440 since two thousand and eight. So you know, I think 0:21:38.480 --> 0:21:41.480 there is exposure. The ECB is keeping an eye on that, 0:21:41.600 --> 0:21:45.040 but I don't think this will necessarily precipitate or trigger 0:21:45.080 --> 0:21:47.840 a crisis in any of these markets or with respect 0:21:47.920 --> 0:21:50.960 of their banking systems. Do you believe that Turkey will 0:21:51.000 --> 0:21:54.480 make an application to the International Monetary Fund for funds? 0:21:55.720 --> 0:21:57.640 So this is the problem for air do one. I mean, 0:21:57.760 --> 0:22:01.440 since he came to power, he has built a political 0:22:01.640 --> 0:22:05.240 narrative on the back of having free Turkey from the 0:22:05.400 --> 0:22:08.480 clutches of the I M S. So do you think 0:22:08.560 --> 0:22:12.199 about the the recent elections, the fact and has now 0:22:12.280 --> 0:22:17.320 instituted a presidential system that gives him a huge amount 0:22:17.400 --> 0:22:21.639 of power and plain influence over the country's institutions. Accepting 0:22:21.680 --> 0:22:24.400 the risk of the I m F would massively constrain 0:22:24.560 --> 0:22:28.600 his ambitious, mega political project. So this isn't easy. However, 0:22:29.040 --> 0:22:31.560 I do think it's the more likely outcome via the 0:22:31.680 --> 0:22:35.960 capital controls, which I think would be extremely damaging economically 0:22:36.000 --> 0:22:38.440 and and and and broadly, I think thanks to the 0:22:38.840 --> 0:22:42.520 economic reputation of the country. So this is why I 0:22:42.640 --> 0:22:46.159 think you will see today the government will announce an 0:22:46.160 --> 0:22:50.359 economic reform plan. I don't think the idea of fiscal 0:22:50.440 --> 0:22:53.800 consolidation or meaningful structural reforms will be apparent. I think 0:22:53.840 --> 0:22:57.439 the market will be unconvinced. I think this pressure will continue, 0:22:57.480 --> 0:22:59.840 and as I say, we'll see conventional policy action in 0:23:00.000 --> 0:23:04.040 the street risers, probably an emergency hike in August, and 0:23:04.200 --> 0:23:06.440 then I think it's really for us to see whether 0:23:06.560 --> 0:23:07.840 or not we have to head down the route. And 0:23:07.840 --> 0:23:10.960 I'm at program or compital control. Midd Ramen, thank you 0:23:11.119 --> 0:23:15.399 very much, Managing Director Europe for Eurasia Group, joining us 0:23:15.600 --> 0:23:36.240 from London. Not content with its success on the small screen, 0:23:37.000 --> 0:23:41.920 Google is looking to the big screen. Billboards in railway stations, 0:23:42.320 --> 0:23:47.200 shopping centers and shop windows in Germany, the company could 0:23:47.240 --> 0:23:51.120 be branching out as it uses data from its user 0:23:51.240 --> 0:23:55.959 database in order to display advertisements targeted to specific audiences. 0:23:56.200 --> 0:23:58.560 Here to tell us more about this is Alex Webb, 0:23:58.680 --> 0:24:02.879 the Bloomberg Innion calmness covering all things technology when it 0:24:02.960 --> 0:24:06.280 comes to Europe, and he joins us from London. Alex, 0:24:06.320 --> 0:24:08.800 a pleasure to have you here explain exactly what you 0:24:08.920 --> 0:24:12.119 believe Google is looking to do. So this story is 0:24:12.200 --> 0:24:15.000 really coming from Virtus Voco, which is in some ways 0:24:15.040 --> 0:24:16.800 the closer to thing that Germany has to Business Week. 0:24:16.840 --> 0:24:20.760 It literally is the translation. And they have reported the 0:24:20.800 --> 0:24:24.120 Germany as that the Google is in talks in Germany 0:24:24.200 --> 0:24:27.360 to get into out of home advertising, which is billboards 0:24:27.440 --> 0:24:31.440 essentially and increasingly digital billboards, you know, screens which you 0:24:31.480 --> 0:24:33.760 see it, as you say, at train stations and and 0:24:34.080 --> 0:24:37.800 you know around the place in town centers. Now the 0:24:37.920 --> 0:24:39.800 thing that Google, where Google can bring an edge to 0:24:39.840 --> 0:24:42.240 this is at the moment those screens are kind of 0:24:42.520 --> 0:24:45.040 bid for in a fairly classic way where someone says, 0:24:45.040 --> 0:24:47.000 I would like to have twenty minutes over the course 0:24:47.040 --> 0:24:49.439 of the day of my ad being displayed at these sites. 0:24:49.800 --> 0:24:53.560 What Google does with its ads online is called programmatic advertising, 0:24:53.600 --> 0:24:57.320 where essentially you have a live bidding process that every 0:24:57.359 --> 0:24:59.959 time someone who kind of matches the demography you want 0:25:00.119 --> 0:25:03.920 target visits a website, algorithms bid against each other to 0:25:04.119 --> 0:25:07.080 show now to that person. Now, it's unlikely that they'll 0:25:07.080 --> 0:25:09.320 be able to do that on such a specific person 0:25:09.400 --> 0:25:11.359 to person basis, but they might be able to do 0:25:11.400 --> 0:25:14.359 it more demographically. So if it can tell from the 0:25:14.440 --> 0:25:16.720 number of mobile phones in the area that there are 0:25:17.280 --> 0:25:20.919 males aged between twenty five and thirty with an average 0:25:20.960 --> 0:25:24.200 income income of X, then it can decide to push 0:25:24.240 --> 0:25:27.719 a particular kind of add to that billboard. Well, Alex, 0:25:27.920 --> 0:25:30.960 let's use an example of a train station and you 0:25:31.200 --> 0:25:36.760 have people arriving from different locations, perhaps for different events. 0:25:37.240 --> 0:25:41.680 In your column you speak about a potential soccer match. 0:25:42.640 --> 0:25:44.879 Give us an example of how you could be on 0:25:45.119 --> 0:25:51.600 different platforms of a railway station and see different digital ads. Yeah, 0:25:51.640 --> 0:25:56.560 exactly so, particularly as more train stations introduced WiFi, for instance, 0:25:56.600 --> 0:25:59.960 which can tell within quite a concentrated area which phone 0:26:00.160 --> 0:26:04.160 are there. It can then probably you know, automatically identify 0:26:04.640 --> 0:26:08.480 that the people on that platform overwhelmingly have an interest 0:26:08.560 --> 0:26:12.240 in sports, and um, therefore it's better perhaps to push 0:26:12.280 --> 0:26:15.720 them ads for beer or soccer cleats or something like that. 0:26:16.119 --> 0:26:19.640 Whereas if it's on a different platform, there are commuters 0:26:19.720 --> 0:26:22.760 heading home from work, um, that could probably work out 0:26:22.840 --> 0:26:24.359 that it might be better to sell them an AD 0:26:24.520 --> 0:26:26.960