1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,720 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Diplomatic 7 00:00:34,040 --> 00:00:37,760 Speaker 1: changes a foot on the Korean peninsula, as North Korea's 8 00:00:37,800 --> 00:00:40,479 Speaker 1: leader Kim Jong un says that he will meet with 9 00:00:40,680 --> 00:00:44,800 Speaker 1: President Donald Trump and the President apparently agreeing to that 10 00:00:44,920 --> 00:00:48,800 Speaker 1: meeting sometime later this year, perhaps in early summer. Here 11 00:00:48,840 --> 00:00:51,400 Speaker 1: to help us understand what is going on is Toby Harshaw. 12 00:00:51,440 --> 00:00:54,280 Speaker 1: He is our Bloomberg view editor for all things related 13 00:00:54,280 --> 00:00:57,600 Speaker 1: to national security, and also Jack Divine is the former 14 00:00:57,640 --> 00:01:02,080 Speaker 1: acting director of this Central Intelligence Agency and founding partner 15 00:01:02,120 --> 00:01:06,720 Speaker 1: and the president of the security firm the Arkin Group. Gentlemen, 16 00:01:06,720 --> 00:01:09,399 Speaker 1: thank you very much for being with us that Jack Divine, 17 00:01:09,440 --> 00:01:11,240 Speaker 1: I want you to come in on this and just 18 00:01:11,680 --> 00:01:15,000 Speaker 1: give us your thoughts and reactions to this news. Well, 19 00:01:15,040 --> 00:01:17,720 Speaker 1: I think it's first of all, hit the high note. 20 00:01:17,760 --> 00:01:20,080 Speaker 1: I think it's a very positive development. I do think 21 00:01:20,160 --> 00:01:23,679 Speaker 1: Kim jongan blank. But I want to say blink. It's 22 00:01:23,720 --> 00:01:27,840 Speaker 1: not like a gladiator that kneels down and begs for mercy. 23 00:01:27,880 --> 00:01:30,560 Speaker 1: This is a blink. We should take advantage of it. 24 00:01:31,040 --> 00:01:32,560 Speaker 1: I think it would be one of the more interesting 25 00:01:33,080 --> 00:01:36,960 Speaker 1: meetings of heads of state that we have seen in uh, 26 00:01:37,200 --> 00:01:41,199 Speaker 1: in current memory. I think it will be to the 27 00:01:41,240 --> 00:01:46,440 Speaker 1: matador and the bull trying to size each other up, 28 00:01:46,720 --> 00:01:51,920 Speaker 1: and Uh, it's going to be a terribly important meeting, Toby, 29 00:01:51,960 --> 00:01:55,280 Speaker 1: what are sort of both sides? Where are they in 30 00:01:55,320 --> 00:01:57,160 Speaker 1: this meeting? Where are they lining up? What do they 31 00:01:57,160 --> 00:01:59,240 Speaker 1: want to get? What will be considered a win? Well, 32 00:01:59,280 --> 00:02:01,240 Speaker 1: I'm actually have to tell us which one is the 33 00:02:01,280 --> 00:02:03,680 Speaker 1: bull and which one is the matador? I think, But 34 00:02:04,360 --> 00:02:08,919 Speaker 1: I think um in terms of what they hope to 35 00:02:08,960 --> 00:02:12,320 Speaker 1: gain on the world stage, UM, Kim is sort of 36 00:02:12,360 --> 00:02:15,040 Speaker 1: the evident winner. I think a lot of people worry 37 00:02:15,360 --> 00:02:18,519 Speaker 1: that having an American president come and meet with him 38 00:02:18,840 --> 00:02:22,880 Speaker 1: will sort of legitimize him as a as a world leader, UM, 39 00:02:22,960 --> 00:02:26,800 Speaker 1: will legitimize his government. UM. I don't think that's the case. 40 00:02:26,919 --> 00:02:28,880 Speaker 1: I don't think it's dumb to go and meet with him. 41 00:02:28,880 --> 00:02:31,640 Speaker 1: I don't think it legitimizes him, but I think in 42 00:02:31,720 --> 00:02:36,800 Speaker 1: his mind it's extremely important. Um. There was a notable 43 00:02:37,200 --> 00:02:40,280 Speaker 1: North Korean propaganda film a few years ago, UM that 44 00:02:40,360 --> 00:02:42,880 Speaker 1: was called The Country I Saw and it has this 45 00:02:43,120 --> 00:02:47,040 Speaker 1: huge triumphant ending in which Bill Clinton comes to meet 46 00:02:47,080 --> 00:02:50,040 Speaker 1: with with the Supreme Leader and this was So this 47 00:02:50,120 --> 00:02:52,440 Speaker 1: is just a huge thing and what the Kims have 48 00:02:52,480 --> 00:02:57,600 Speaker 1: built about themselves Jack divine to Toby's point, though, what 49 00:02:57,800 --> 00:03:00,480 Speaker 1: does it matter whether you know someone is a winner 50 00:03:00,600 --> 00:03:03,760 Speaker 1: or a loser on a personal level or a prestige level, 51 00:03:03,840 --> 00:03:06,360 Speaker 1: if indeed they are able to reach some kind of 52 00:03:06,480 --> 00:03:10,919 Speaker 1: de escalation as it comes to the nuclear threat that 53 00:03:11,080 --> 00:03:14,639 Speaker 1: North Korea poses. Well, I think these things are often intertwined. 54 00:03:15,280 --> 00:03:19,080 Speaker 1: First of all, going back to Tobin's point, I I 55 00:03:19,120 --> 00:03:21,000 Speaker 1: think we have to route that Donald Trump is the 56 00:03:21,040 --> 00:03:26,079 Speaker 1: Mata door, okay, and uh, And I think the uh. 57 00:03:26,200 --> 00:03:28,800 Speaker 1: The reason why I would just state that, I think 58 00:03:28,840 --> 00:03:32,959 Speaker 1: Donald Trump, UM, and I think Kim Jong understands this 59 00:03:33,240 --> 00:03:36,240 Speaker 1: is actually having has a stronger hand, the stronger hand 60 00:03:36,280 --> 00:03:38,800 Speaker 1: being the might, the economic and military might of the 61 00:03:38,880 --> 00:03:41,520 Speaker 1: United States, which you know, we can't even say in 62 00:03:41,520 --> 00:03:45,280 Speaker 1: the same breath that North Korea is in the same category. 63 00:03:45,320 --> 00:03:48,800 Speaker 1: So he has the mata to restore it here now 64 00:03:49,600 --> 00:03:53,240 Speaker 1: having said that, we still have a major problem in 65 00:03:53,280 --> 00:03:56,840 Speaker 1: that North Korea is now a nuclear force. And if 66 00:03:56,880 --> 00:04:00,640 Speaker 1: we look back over the arc of the agociations, and 67 00:04:00,760 --> 00:04:03,560 Speaker 1: I've been proposing to negotiations for as long as we've 68 00:04:03,560 --> 00:04:06,720 Speaker 1: been speaking together here on Bloomberg, Um, but if you 69 00:04:06,760 --> 00:04:09,960 Speaker 1: look over the long arc of dealing with North Korea, 70 00:04:10,440 --> 00:04:13,440 Speaker 1: they have a pattern, and it's a very clear pattern. 71 00:04:14,120 --> 00:04:17,520 Speaker 1: And when you're talking about deal making, Kim Jong own 72 00:04:17,680 --> 00:04:20,159 Speaker 1: considers himself a deal maker. So this is why I 73 00:04:20,160 --> 00:04:22,840 Speaker 1: think it's going to be a challenge for the two 74 00:04:22,920 --> 00:04:25,599 Speaker 1: of them, and the national interest and the personal interests 75 00:04:25,640 --> 00:04:30,440 Speaker 1: are are are intertwined. You know. It's interesting. Jack Toby 76 00:04:30,520 --> 00:04:33,120 Speaker 1: was on our show the past few weeks and he 77 00:04:33,160 --> 00:04:37,480 Speaker 1: said something that was very compelling, which is that China 78 00:04:37,800 --> 00:04:40,760 Speaker 1: is really the big wild card here. And I'm wondering, 79 00:04:40,800 --> 00:04:44,159 Speaker 1: from your perspective, Jack, what role is China playing in this? 80 00:04:44,320 --> 00:04:46,760 Speaker 1: Because right now we understand that South Korea is the 81 00:04:46,760 --> 00:04:50,720 Speaker 1: one sort of negotiating this meeting, We understand North Korea's stance, 82 00:04:50,839 --> 00:04:54,280 Speaker 1: now we know President Trump stands, where's China. I think 83 00:04:54,360 --> 00:04:57,200 Speaker 1: China is indeed a critical player, but it's not the 84 00:04:57,279 --> 00:04:59,280 Speaker 1: critical player that it was years ago. There have been 85 00:04:59,440 --> 00:05:02,360 Speaker 1: the distance between China and Korea is quite different than 86 00:05:02,400 --> 00:05:05,960 Speaker 1: it was years ago, so they do have economic points 87 00:05:05,960 --> 00:05:10,440 Speaker 1: of pressure. I was on the show. I've been pessimistic 88 00:05:10,560 --> 00:05:13,359 Speaker 1: that the Chinese were going to lean as heavily on 89 00:05:13,400 --> 00:05:15,800 Speaker 1: North Korea is needed needed to be the case. They've 90 00:05:15,839 --> 00:05:19,159 Speaker 1: actually done more than I thought they would do. I however, 91 00:05:19,360 --> 00:05:24,120 Speaker 1: on this particular occasion, I think going into these talks, 92 00:05:24,160 --> 00:05:27,480 Speaker 1: we have to know what we really want to accomplish, 93 00:05:27,560 --> 00:05:29,719 Speaker 1: because I know what the North Koreans are going to 94 00:05:29,800 --> 00:05:33,320 Speaker 1: want to accomplish. They've reached a plateau, so they want 95 00:05:33,400 --> 00:05:36,839 Speaker 1: to buy. They want to Now my view is to 96 00:05:37,600 --> 00:05:41,800 Speaker 1: say that they'll stop doing um testing and stop doing 97 00:05:42,680 --> 00:05:46,520 Speaker 1: development of additional nuclear weapons. Whether they do or not 98 00:05:46,680 --> 00:05:50,560 Speaker 1: will be the test. Uh and that in exchange the 99 00:05:50,600 --> 00:05:54,920 Speaker 1: one economic concessions. Now, you know, one of the things 100 00:05:54,920 --> 00:05:56,440 Speaker 1: when you go back and look at the NEGO, they 101 00:05:56,520 --> 00:06:00,000 Speaker 1: drag one for years. So I think if something's gonna 102 00:06:00,040 --> 00:06:03,240 Speaker 1: happened here, it has to happen on a different timeline. 103 00:06:03,279 --> 00:06:07,440 Speaker 1: I wouldn't give them only the most minimal concessions during 104 00:06:08,279 --> 00:06:10,320 Speaker 1: the period, and I think the goal and I've been 105 00:06:10,360 --> 00:06:14,160 Speaker 1: thinking about this so more heavily in recent days. I 106 00:06:14,200 --> 00:06:18,760 Speaker 1: do believe the administration's right. It has to be the nuclearization, 107 00:06:19,040 --> 00:06:23,039 Speaker 1: some effort moving in that direction, not just slowing down 108 00:06:23,600 --> 00:06:26,040 Speaker 1: the process. So going into this, he's got the hell 109 00:06:26,160 --> 00:06:29,520 Speaker 1: that sort up high? Toby, come on, do you agree 110 00:06:29,560 --> 00:06:31,160 Speaker 1: on this? And also do you have a sense that 111 00:06:31,320 --> 00:06:35,720 Speaker 1: China and Russia are playing in these negotiations at all? Um? 112 00:06:36,279 --> 00:06:39,920 Speaker 1: I think that while Jack is very right and we're 113 00:06:39,920 --> 00:06:44,240 Speaker 1: gonna look at this primarily right away as trading sanctioned 114 00:06:44,440 --> 00:06:48,840 Speaker 1: relief for concessions on the nuclear program, it's not as 115 00:06:48,960 --> 00:06:52,640 Speaker 1: as simple as even that, um were. There are all 116 00:06:52,680 --> 00:06:55,920 Speaker 1: sorts of issues in play. One is their internet, intercontinental 117 00:06:55,920 --> 00:06:58,400 Speaker 1: ballistic missile systems. Are we going to continue to let 118 00:06:58,400 --> 00:07:01,840 Speaker 1: them develop that? There's they're horrible human rights abuses. Can 119 00:07:01,880 --> 00:07:06,080 Speaker 1: we normalize relations with a country, uh, that that treats 120 00:07:06,080 --> 00:07:08,400 Speaker 1: its people like this just so that we can get 121 00:07:08,480 --> 00:07:11,640 Speaker 1: rid of a nuclear threat? Um? Obviously, as Jack said, 122 00:07:11,680 --> 00:07:15,800 Speaker 1: there's China, UM, there's Russia. UM, there is Japan, and 123 00:07:15,840 --> 00:07:19,360 Speaker 1: there is South Korea. UM. We've got you know, tens 124 00:07:19,360 --> 00:07:21,960 Speaker 1: of thousands of troops. They're they're they're just such a 125 00:07:22,120 --> 00:07:25,000 Speaker 1: huge flood of issues that we cannot look at it 126 00:07:25,040 --> 00:07:27,800 Speaker 1: as just being about their nukes. But but Toby, do 127 00:07:27,920 --> 00:07:29,400 Speaker 1: we just pushed back a little bit. I mean, this 128 00:07:29,480 --> 00:07:32,000 Speaker 1: is a dynamic situation, and one consider that this is 129 00:07:32,040 --> 00:07:36,880 Speaker 1: a positive, positive situation, positive element of this dynamic situation. 130 00:07:36,960 --> 00:07:38,600 Speaker 1: Right now we don't know how it's going to play out, 131 00:07:38,880 --> 00:07:41,440 Speaker 1: but give every chance for for the support to make 132 00:07:41,480 --> 00:07:43,880 Speaker 1: this happen. I couldn't agree more. Pim, this is this 133 00:07:43,960 --> 00:07:45,880 Speaker 1: is a great thing. I'm really glad. I hope it 134 00:07:45,920 --> 00:07:48,880 Speaker 1: comes together. It's just it's it's the first step in 135 00:07:48,920 --> 00:07:54,840 Speaker 1: a big process. And I was just gonna say again 136 00:07:55,200 --> 00:07:59,120 Speaker 1: Toban's right that there's gonna be so much that goes 137 00:07:59,160 --> 00:08:02,680 Speaker 1: in the negotiating and so much expertise on the details. 138 00:08:02,720 --> 00:08:05,440 Speaker 1: The problem is, I'm really recommending that we not get 139 00:08:05,480 --> 00:08:09,640 Speaker 1: bogged down on negotiations, on negotiations, on negotiations, and find 140 00:08:09,680 --> 00:08:13,320 Speaker 1: that we're giving them economic relief and nothing's really happening, 141 00:08:13,320 --> 00:08:14,920 Speaker 1: and then they decide a couple of years from now 142 00:08:14,920 --> 00:08:18,440 Speaker 1: when they're ready to do another UM program to raise 143 00:08:18,480 --> 00:08:20,680 Speaker 1: it to a new platform. We're looking at an empty ball. 144 00:08:20,760 --> 00:08:23,920 Speaker 1: So I think we have to be really tough, and 145 00:08:23,960 --> 00:08:27,760 Speaker 1: I think I think this is the right moment because 146 00:08:27,800 --> 00:08:33,000 Speaker 1: I do think that the Koreans are feeling feeling the pain. Toby, Toby, uh, 147 00:08:33,280 --> 00:08:36,200 Speaker 1: thank you so much and Jack, thank you so much. 148 00:08:36,240 --> 00:08:39,800 Speaker 1: You both really lent some fabulous insight to this very 149 00:08:39,800 --> 00:08:43,080 Speaker 1: complicated and evolving issue. Jack Divine, former acting director of 150 00:08:43,120 --> 00:08:45,760 Speaker 1: the CIA and founding partner and president of the security 151 00:08:45,760 --> 00:08:48,040 Speaker 1: form the ark And Group, And of course our own 152 00:08:48,240 --> 00:08:54,439 Speaker 1: Toby Harshaw, Bloomberg View editor. Always fascinating to hear your insights. Uh, Pam. 153 00:08:54,600 --> 00:08:57,280 Speaker 1: Definitely an evolving issue, a lot of questions. One of 154 00:08:57,320 --> 00:09:00,520 Speaker 1: the biggest right now is who will be preparing President 155 00:09:00,559 --> 00:09:02,559 Speaker 1: Trump for this meeting and who will be going with 156 00:09:02,640 --> 00:09:04,920 Speaker 1: him to it, and not to mention where it will 157 00:09:04,920 --> 00:09:23,680 Speaker 1: be held. Well, Jeffrey the Giraffe maybe calling it a day. 158 00:09:24,240 --> 00:09:26,480 Speaker 1: Nol he read is our director of credit research for 159 00:09:26,480 --> 00:09:28,720 Speaker 1: Bloomberg Intelligence, and Nol, I want you to come in 160 00:09:28,720 --> 00:09:30,880 Speaker 1: on what's going on with toys r US and is 161 00:09:30,880 --> 00:09:34,200 Speaker 1: it likely that we can just say goodbye to Jeffrey. 162 00:09:35,200 --> 00:09:37,640 Speaker 1: It looks like domestically, at least in the current form 163 00:09:37,679 --> 00:09:40,040 Speaker 1: in terms of the bricks and mortar stores, that does 164 00:09:40,160 --> 00:09:43,040 Speaker 1: look like it's increasingly going to be the case. Uh, 165 00:09:43,080 --> 00:09:44,880 Speaker 1: it didn't seem like that needed to be the case 166 00:09:44,880 --> 00:09:48,440 Speaker 1: when they filed last October or so. But given the 167 00:09:48,440 --> 00:09:50,920 Speaker 1: fact that they went into bankruptcy without a plan, and 168 00:09:51,000 --> 00:09:53,640 Speaker 1: the way things kind of rolled through retail and change 169 00:09:53,720 --> 00:09:57,040 Speaker 1: very quickly, and how contentious sort of the the bankruptcy 170 00:09:57,120 --> 00:10:00,400 Speaker 1: has been between all the different stakeholders, that is looking 171 00:10:00,440 --> 00:10:02,800 Speaker 1: like where we're going as we speak, you know, no, 172 00:10:02,960 --> 00:10:05,960 Speaker 1: can you just elaborate a little bit on exactly what 173 00:10:06,160 --> 00:10:09,160 Speaker 1: happened here? Why this fell apart? We are seeing, uh 174 00:10:09,320 --> 00:10:13,000 Speaker 1: the shares of toymakers fall today, So there are broader 175 00:10:13,040 --> 00:10:16,120 Speaker 1: consequences to the concept that Jeffrey the draft will go 176 00:10:16,600 --> 00:10:21,079 Speaker 1: by the way of retired conception. So what happened here? 177 00:10:21,120 --> 00:10:24,200 Speaker 1: What broke down? Well, I think, you know, I guess 178 00:10:24,240 --> 00:10:26,800 Speaker 1: to go back to to part of what I just said, 179 00:10:26,800 --> 00:10:28,160 Speaker 1: which is to say that they kind of went in 180 00:10:28,240 --> 00:10:30,880 Speaker 1: without a plan. So when they filed, you know, unlike 181 00:10:30,920 --> 00:10:33,160 Speaker 1: a lot of the deals, you know, when you file, 182 00:10:33,200 --> 00:10:34,720 Speaker 1: you kind of go with plans, so you kind of 183 00:10:34,720 --> 00:10:36,079 Speaker 1: know how long you're going to be in and how 184 00:10:36,080 --> 00:10:38,560 Speaker 1: long you might take to get out here. Because they 185 00:10:38,600 --> 00:10:41,080 Speaker 1: were kind of put into bankruptcy because you had a 186 00:10:41,120 --> 00:10:45,280 Speaker 1: situation where the vendors basically just shut off for them. 187 00:10:45,320 --> 00:10:47,760 Speaker 1: They were forced to file prematurely so they could at 188 00:10:47,800 --> 00:10:52,120 Speaker 1: least get through the holiday, So nobody really anticipated them filing. 189 00:10:52,120 --> 00:10:54,680 Speaker 1: And if you recollects, sort of the short term bonds 190 00:10:54,720 --> 00:10:56,520 Speaker 1: went from like you know, in the nineties into the 191 00:10:56,559 --> 00:10:59,719 Speaker 1: twenties like effectively overnight, so it was kind of a 192 00:10:59,720 --> 00:11:02,640 Speaker 1: surp lies filing. And then as they've gotten into bankruptcy, 193 00:11:02,720 --> 00:11:06,560 Speaker 1: had a very weak holiday. Uh, and you have a 194 00:11:06,559 --> 00:11:09,000 Speaker 1: lot of operational dynamics that need to happen here for 195 00:11:09,040 --> 00:11:12,439 Speaker 1: them to be solvent. But you have a lot of 196 00:11:12,480 --> 00:11:15,800 Speaker 1: competing interests in terms of you know, you have the 197 00:11:15,800 --> 00:11:19,160 Speaker 1: property companies that are very interested in preserving the value 198 00:11:19,160 --> 00:11:21,920 Speaker 1: of the real estate, whereas the operational side of it 199 00:11:22,040 --> 00:11:25,040 Speaker 1: really needs to get changes to the least terms in 200 00:11:25,120 --> 00:11:28,200 Speaker 1: order to be profitable. So I think, you know, as 201 00:11:28,320 --> 00:11:32,240 Speaker 1: the bankruptcy and folded, just given the competitive nature of 202 00:11:32,240 --> 00:11:35,600 Speaker 1: the different creditor groups made it very difficult for them 203 00:11:35,640 --> 00:11:38,040 Speaker 1: to sort of come to a consensus of what should 204 00:11:38,120 --> 00:11:41,800 Speaker 1: a pro form Toys r US look like. And the 205 00:11:41,840 --> 00:11:45,600 Speaker 1: toys are us not the only retailer facing some headwinds 206 00:11:45,640 --> 00:11:49,560 Speaker 1: here Claires tell us about what's going on. So clears 207 00:11:49,640 --> 00:11:52,520 Speaker 1: is it looks like it's gonna be better in the 208 00:11:52,559 --> 00:11:55,680 Speaker 1: sense that you could have better in bankruptcy. Um, you know, 209 00:11:56,000 --> 00:11:57,760 Speaker 1: it's going to be more along the lines of maybe 210 00:11:57,760 --> 00:11:59,839 Speaker 1: what we saw with Quicksilver a couple of years ago 211 00:12:00,080 --> 00:12:03,520 Speaker 1: Jimboury a year ago, where creditors are kind of it's 212 00:12:03,559 --> 00:12:06,280 Speaker 1: going in with a plan. Right, So you had another 213 00:12:06,440 --> 00:12:09,680 Speaker 1: LBO story severely over leveled, but you have a company 214 00:12:09,720 --> 00:12:12,600 Speaker 1: that generates decent cash flow, has a decent little business, 215 00:12:13,080 --> 00:12:15,560 Speaker 1: and creditors sort of have a plan of what this 216 00:12:15,679 --> 00:12:18,880 Speaker 1: thing should look like on the other side. So this one, 217 00:12:19,280 --> 00:12:21,560 Speaker 1: at least, you know, from the looks of it right now, 218 00:12:21,640 --> 00:12:24,120 Speaker 1: probably is you know, it could go in maybe being 219 00:12:24,240 --> 00:12:27,440 Speaker 1: bankruptcy for six months, get quickly turned around, they hand 220 00:12:27,480 --> 00:12:30,000 Speaker 1: the keys over to the creditors, uh, and then it 221 00:12:30,080 --> 00:12:32,440 Speaker 1: emerges on the other side, maybe a little bit smaller 222 00:12:32,440 --> 00:12:36,439 Speaker 1: than what it is right now, but still a functioning operation. No, 223 00:12:36,920 --> 00:12:43,599 Speaker 1: who's next on this retail death Well, how long is 224 00:12:43,640 --> 00:12:47,760 Speaker 1: the list? I don't know so well, I mean, so 225 00:12:47,880 --> 00:12:49,440 Speaker 1: I guess you know one of the companies that have 226 00:12:49,600 --> 00:12:51,720 Speaker 1: been on the list that isn't anymore would have been 227 00:12:51,800 --> 00:12:55,120 Speaker 1: Nemon Marcus right, so they had a reasonably good quarter 228 00:12:55,160 --> 00:12:58,920 Speaker 1: that they reported today. Bonti has already gone. In Sears 229 00:12:59,040 --> 00:13:03,320 Speaker 1: is is you know, the living dead of sorts. Um 230 00:13:03,360 --> 00:13:06,480 Speaker 1: they're they're you know, they're definitely there, right, I mean, 231 00:13:06,559 --> 00:13:10,480 Speaker 1: liquidity wise, operational wise, they're there. I think, um, you know, 232 00:13:10,559 --> 00:13:13,280 Speaker 1: you also have names like Jake Crewe, but I think 233 00:13:13,320 --> 00:13:16,040 Speaker 1: Jay Cruise get liquidity to navigate the intermediate terms. So 234 00:13:16,080 --> 00:13:18,120 Speaker 1: if you just had to pick one out of out 235 00:13:18,120 --> 00:13:19,800 Speaker 1: of the group, I think Sears is the one that 236 00:13:19,880 --> 00:13:24,440 Speaker 1: obviously faces the you know, a very very weak operating climate, 237 00:13:24,800 --> 00:13:27,080 Speaker 1: and they're running out of assets to sell to sort 238 00:13:27,120 --> 00:13:30,960 Speaker 1: of stave off at next stage. Um So, so I 239 00:13:31,120 --> 00:13:33,840 Speaker 1: think they're They're probably at the front of the queue 240 00:13:33,840 --> 00:13:36,000 Speaker 1: at this point. No Hubert, thank you so much for 241 00:13:36,080 --> 00:13:38,640 Speaker 1: joining us. Always a pleasure. No Hubert is director of 242 00:13:38,679 --> 00:13:44,239 Speaker 1: credit research for Bloomberg Intelligence, The Walking Dead of retailers. 243 00:13:59,120 --> 00:14:02,320 Speaker 1: Just In Woyd blank find is preparing to step down 244 00:14:02,360 --> 00:14:05,800 Speaker 1: as Goldman Sachs Chief executive as soon as the end 245 00:14:05,960 --> 00:14:08,440 Speaker 1: of the year. This according to The Wall Street Journal. 246 00:14:08,559 --> 00:14:11,720 Speaker 1: Just crossing moments ago to get some perspective on what 247 00:14:11,800 --> 00:14:14,080 Speaker 1: this would mean for the bank. I want to bring 248 00:14:14,080 --> 00:14:17,880 Speaker 1: in Michael Moore, US finance team leader. Michael, what's your 249 00:14:17,920 --> 00:14:22,040 Speaker 1: reaction to this and who is the likely successor to 250 00:14:22,120 --> 00:14:27,240 Speaker 1: Lloyd Blank? Find sure? I think UM not hugely shocking, 251 00:14:27,360 --> 00:14:31,480 Speaker 1: and you know, Lloyd's UM exit has been kind of 252 00:14:31,520 --> 00:14:33,440 Speaker 1: forecast for a few years now, and if this is 253 00:14:33,520 --> 00:14:37,200 Speaker 1: indeed the year, it would make some sense. He's been 254 00:14:37,240 --> 00:14:40,840 Speaker 1: in the top job for a dozen years now and UH, 255 00:14:41,000 --> 00:14:44,040 Speaker 1: at the end of twenty sixteen they named two uh 256 00:14:44,160 --> 00:14:48,320 Speaker 1: CO presidents below him, Harvey Shortz and David Solomon. UH 257 00:14:48,360 --> 00:14:51,240 Speaker 1: those are seen as the two likely successors, and now 258 00:14:51,280 --> 00:14:54,240 Speaker 1: they've had UM a little more than a year in 259 00:14:54,360 --> 00:14:58,520 Speaker 1: those UM top jobs kind of overseeing the firm with Lloyd, 260 00:14:59,240 --> 00:15:01,920 Speaker 1: So I think UM this would be seen as a 261 00:15:02,000 --> 00:15:06,760 Speaker 1: fairly UM you know, smooth handoff to one of them. 262 00:15:06,800 --> 00:15:10,200 Speaker 1: Although Michael, this does raise some questions about the timing 263 00:15:10,360 --> 00:15:13,040 Speaker 1: of this because Goldman Sachs has had some pretty big plans, 264 00:15:13,080 --> 00:15:16,120 Speaker 1: but reviving it's bond trading unit has been pretty aggressive 265 00:15:16,200 --> 00:15:19,040 Speaker 1: with consumer lending through its Marcus platform that it started 266 00:15:19,040 --> 00:15:21,640 Speaker 1: a couple of years ago. UH, do you have any 267 00:15:21,680 --> 00:15:27,720 Speaker 1: insights on why now UM you know, I think, Um, 268 00:15:27,800 --> 00:15:29,640 Speaker 1: you know, I think, as you mentioned, they are kind 269 00:15:29,640 --> 00:15:35,720 Speaker 1: of having this pivot um they um into more of 270 00:15:35,720 --> 00:15:38,960 Speaker 1: the consumer business. The trading business has struggled. But if 271 00:15:39,000 --> 00:15:41,800 Speaker 1: they you see the return of volatility this year, that 272 00:15:41,880 --> 00:15:44,680 Speaker 1: may help them kind of get on firmer footing in 273 00:15:44,720 --> 00:15:50,440 Speaker 1: their main business. Um. So um that that could be 274 00:15:50,520 --> 00:15:54,080 Speaker 1: seen as a time to step down. Michael, just hang 275 00:15:54,120 --> 00:15:55,880 Speaker 1: on because I want to bring in Tad Ravel. He 276 00:15:56,000 --> 00:15:58,920 Speaker 1: is the chief investment officer for tc W based in 277 00:15:59,000 --> 00:16:01,640 Speaker 1: Los Angeles, helping you manage more than a d eighty 278 00:16:01,640 --> 00:16:04,800 Speaker 1: billion dollars. Tad, thanks very much for being with us. 279 00:16:05,080 --> 00:16:07,800 Speaker 1: What are your what's your reaction to this breaking news 280 00:16:07,840 --> 00:16:11,360 Speaker 1: that we might see Lloyd blank find stepped down as 281 00:16:11,400 --> 00:16:16,240 Speaker 1: the head of Golden Sacks by the end of the year. Well, Um, 282 00:16:16,280 --> 00:16:18,560 Speaker 1: I don't think that it is all that surprising in 283 00:16:18,640 --> 00:16:22,640 Speaker 1: light of the naming of the two com uh CO 284 00:16:22,800 --> 00:16:25,880 Speaker 1: presidents that occurred a year or so ago. Um. At 285 00:16:25,880 --> 00:16:29,360 Speaker 1: a personal level, I've met Lloyd in a a smaller 286 00:16:29,600 --> 00:16:33,520 Speaker 1: intimate type of setting. Always found him to be very amiable, 287 00:16:33,680 --> 00:16:37,160 Speaker 1: very humble. Um. There's probably some background about him actually 288 00:16:37,480 --> 00:16:39,640 Speaker 1: that many of the listeners might not be aware of 289 00:16:39,720 --> 00:16:44,000 Speaker 1: his father was was a postman, and he initially, uh, 290 00:16:44,040 --> 00:16:47,480 Speaker 1: as he described it, sort of bumbled into his role 291 00:16:47,640 --> 00:16:50,120 Speaker 1: at Goldman Sachs by virtue of the fact that he 292 00:16:50,120 --> 00:16:54,720 Speaker 1: had he had worked in a commodities firm um sometime prior, 293 00:16:54,760 --> 00:16:58,200 Speaker 1: but actually started his career as an attorney. But he's 294 00:16:58,200 --> 00:17:00,720 Speaker 1: had a really good run, and he's obviously built a 295 00:17:01,080 --> 00:17:05,600 Speaker 1: incredible powerhouse of an operation. Well he as you mentioned, 296 00:17:06,000 --> 00:17:10,359 Speaker 1: he has spent thirty six years at Goldman Sachs and 297 00:17:10,720 --> 00:17:15,200 Speaker 1: as you mentioned, previously a gold salesman in the commodity division, 298 00:17:15,200 --> 00:17:18,679 Speaker 1: then ran the firm's trading of business. Named chief executive 299 00:17:19,320 --> 00:17:22,679 Speaker 1: in two thousand and six when Hank Paulson became the 300 00:17:22,680 --> 00:17:27,919 Speaker 1: Treasury Secretary. Yeah, exactly so, Dad, I'm wondering your perspective 301 00:17:28,160 --> 00:17:32,200 Speaker 1: on sort of the fixed income trading environment since Goldman 302 00:17:32,280 --> 00:17:34,560 Speaker 1: Sachs was one of the leaders, has been one of 303 00:17:34,560 --> 00:17:36,880 Speaker 1: the leaders in that area and has actually doubled down 304 00:17:37,040 --> 00:17:40,399 Speaker 1: on their debt trading unit, even as revenues have flagged 305 00:17:40,440 --> 00:17:43,160 Speaker 1: over the years on a year over year basis. I'm 306 00:17:43,200 --> 00:17:46,040 Speaker 1: wondering going forward, do you think that we are heading 307 00:17:46,080 --> 00:17:49,959 Speaker 1: into a better environment for trading revenues and that Goldman 308 00:17:49,960 --> 00:17:52,560 Speaker 1: Sachs stands to benefit from that, or do you think 309 00:17:52,600 --> 00:17:55,080 Speaker 1: that we're going to be in a very different environment 310 00:17:55,160 --> 00:17:59,840 Speaker 1: due to electronification other kinds of streamlining. Well, I think 311 00:18:00,040 --> 00:18:03,320 Speaker 1: at in the recent past, the issue with respect to 312 00:18:03,880 --> 00:18:08,080 Speaker 1: poor trading revenues across the entirety of the industry has 313 00:18:08,119 --> 00:18:11,800 Speaker 1: really been reflective of to UH two dynamics. One has 314 00:18:11,840 --> 00:18:15,800 Speaker 1: been the incredibly low level of volatility that has persisted 315 00:18:15,840 --> 00:18:18,880 Speaker 1: in financial markets to low for longer, and the engineering 316 00:18:19,200 --> 00:18:21,320 Speaker 1: of this low volatility on the part of the central 317 00:18:21,359 --> 00:18:27,040 Speaker 1: banks and the DoD Frank legislation that essentially drove large 318 00:18:27,040 --> 00:18:29,800 Speaker 1: financial firms more or less out of the role of 319 00:18:29,840 --> 00:18:34,520 Speaker 1: proprietary trading, and have they have been forced to over 320 00:18:34,560 --> 00:18:37,520 Speaker 1: the course of this cycle to agent risk, but not 321 00:18:37,560 --> 00:18:41,440 Speaker 1: to principal risk. And as a consequence of these two dynamics, 322 00:18:41,440 --> 00:18:44,479 Speaker 1: we've had a very low level of transaction volumes for 323 00:18:44,520 --> 00:18:47,359 Speaker 1: a long time. Going forward, I think that we can 324 00:18:47,400 --> 00:18:50,760 Speaker 1: see several things happening. There seems to be some movement 325 00:18:50,800 --> 00:18:54,480 Speaker 1: in the direction of relaxation of the financial regulations, particularly 326 00:18:54,480 --> 00:18:57,399 Speaker 1: the vocal rule, which ought to help um. Secondly, we 327 00:18:57,480 --> 00:19:00,359 Speaker 1: are seemed to be transitioning to a higher volic atility 328 00:19:00,359 --> 00:19:04,399 Speaker 1: type of environment, and the the thrust as it relates 329 00:19:04,440 --> 00:19:07,520 Speaker 1: to electronic trading. That's a process that's been around for 330 00:19:07,560 --> 00:19:10,320 Speaker 1: a very long period of time, and the Wall Street 331 00:19:10,359 --> 00:19:14,280 Speaker 1: firms have demonstrated almost an endless ability to adapt and 332 00:19:14,359 --> 00:19:16,560 Speaker 1: the inventive and to make money as long as there's 333 00:19:16,600 --> 00:19:20,280 Speaker 1: actually an opportunity for them to do that. Ted, tell 334 00:19:20,359 --> 00:19:23,360 Speaker 1: us your thoughts right now on investing in fixed income. 335 00:19:23,440 --> 00:19:25,080 Speaker 1: Do you think we're going to get a repricing of 336 00:19:25,119 --> 00:19:29,320 Speaker 1: corporate bonds? Are there things that are worth buying right now? Well, 337 00:19:29,440 --> 00:19:31,359 Speaker 1: we've been thinking that there ought to have been a 338 00:19:31,440 --> 00:19:35,680 Speaker 1: repricing of corporate bonds for quite some time. UM where 339 00:19:35,720 --> 00:19:38,920 Speaker 1: we continue to exist in this environment in which risk 340 00:19:38,960 --> 00:19:43,920 Speaker 1: appetites are, in our opinion, exuberantly large. UM. The when 341 00:19:43,960 --> 00:19:47,119 Speaker 1: you examine, for instance, the corporate asset class, several of 342 00:19:47,119 --> 00:19:50,879 Speaker 1: your takeaways will be the observation of very high levels 343 00:19:50,880 --> 00:19:53,959 Speaker 1: of leverage. So when you look at the total stock 344 00:19:54,080 --> 00:19:57,200 Speaker 1: of debt, for instance, on the part of investment grade companies, 345 00:19:57,600 --> 00:20:01,200 Speaker 1: and look at the relationship between that totality of debt 346 00:20:01,240 --> 00:20:04,400 Speaker 1: as compared with their actual earnings, what one will take 347 00:20:04,400 --> 00:20:06,760 Speaker 1: away is that you are at the highest levels of 348 00:20:06,840 --> 00:20:10,600 Speaker 1: leverage of debt to EBA DHAH, since at least two 349 00:20:10,640 --> 00:20:13,280 Speaker 1: thousand and two, you are above where we were back 350 00:20:13,320 --> 00:20:15,440 Speaker 1: in two thousand and seven. If you want to look 351 00:20:15,440 --> 00:20:17,679 Speaker 1: at it through other metrics, for instance, the amount of 352 00:20:17,760 --> 00:20:22,240 Speaker 1: compensation that the investor earns per turn of leverage on 353 00:20:22,280 --> 00:20:25,320 Speaker 1: the underlying business, you've come away with the same observation. 354 00:20:25,760 --> 00:20:27,879 Speaker 1: If you look at what's happening in the M and 355 00:20:27,920 --> 00:20:30,359 Speaker 1: A market, you can see that private equity has been 356 00:20:30,359 --> 00:20:34,520 Speaker 1: pushing the envelope in terms of looking for um uh 357 00:20:34,720 --> 00:20:38,880 Speaker 1: loose looseness in terms of covenant quality, protections for the investor, 358 00:20:39,119 --> 00:20:42,960 Speaker 1: and obviously discretion for the equity sponsor. So the list 359 00:20:43,040 --> 00:20:45,000 Speaker 1: kind of goes on and on. The there are plenty 360 00:20:45,040 --> 00:20:47,760 Speaker 1: of yellow flags and maybe the beginning of some red 361 00:20:47,760 --> 00:20:50,359 Speaker 1: flags that have been out there for some time. So 362 00:20:50,400 --> 00:20:53,760 Speaker 1: you're supposed to be, I think, quite cautious about moving 363 00:20:53,840 --> 00:20:59,480 Speaker 1: into the more cyclically exposed areas of the corporate as 364 00:20:59,760 --> 00:21:03,920 Speaker 1: UM asset class, and particularly those areas that also evince 365 00:21:04,040 --> 00:21:07,359 Speaker 1: financial leverage as well. All right, just real quick, which 366 00:21:07,359 --> 00:21:11,359 Speaker 1: asset class and fixed income are your most bullish on? Well, 367 00:21:11,440 --> 00:21:13,440 Speaker 1: I don't know that there's any asset class out there 368 00:21:13,480 --> 00:21:16,560 Speaker 1: actually that you should be actually bullish on. I think 369 00:21:16,640 --> 00:21:19,520 Speaker 1: that where you're supposed to focus your attention is to 370 00:21:19,600 --> 00:21:22,840 Speaker 1: be disciplined, say short term in terms of maturity, and 371 00:21:22,880 --> 00:21:26,800 Speaker 1: focus on higher quality type of asset classes, um the 372 00:21:27,440 --> 00:21:29,879 Speaker 1: kind that we would describe as bendable and not breakable. 373 00:21:30,040 --> 00:21:33,880 Speaker 1: Tadra Val, chief investment officer at TCW focused unfixed income 374 00:21:33,920 --> 00:21:37,400 Speaker 1: TCW managing about hundred eighty billion dollars. Just to reiterate, 375 00:21:37,680 --> 00:21:40,840 Speaker 1: Goldman Sachs chief executive Lloyd blank Find preparing to step 376 00:21:40,920 --> 00:21:46,280 Speaker 1: down as soon as later this year, capping twelve years 377 00:21:46,400 --> 00:22:03,240 Speaker 1: at the home of one of the biggest US banks. Indeed, well, 378 00:22:03,280 --> 00:22:06,320 Speaker 1: it might not be that quick for Signa to acquire 379 00:22:06,400 --> 00:22:11,720 Speaker 1: express Script as it has proposed. Evidently, antitrust regulators are 380 00:22:13,119 --> 00:22:15,840 Speaker 1: very interested in seeing what this deal would actually look like. 381 00:22:15,880 --> 00:22:17,960 Speaker 1: Here to join us as Max Nissan, biotech, pharma and 382 00:22:18,040 --> 00:22:22,440 Speaker 1: healthcare columnist for Bloomberg gad Fly. Max, let's just start 383 00:22:22,440 --> 00:22:24,520 Speaker 1: with how realistic is it that this deal is going 384 00:22:24,560 --> 00:22:27,119 Speaker 1: to go through? Uh? You know, I I think it 385 00:22:27,200 --> 00:22:30,080 Speaker 1: has a pretty decent shot, although it'll be the kind 386 00:22:30,080 --> 00:22:32,679 Speaker 1: of one of the first real big tests of what 387 00:22:33,280 --> 00:22:36,960 Speaker 1: any trust looks like under the Trump administration. UM, you 388 00:22:37,000 --> 00:22:41,000 Speaker 1: know it's it's not a horizontal consolidation. Really, it's you know, 389 00:22:41,040 --> 00:22:43,520 Speaker 1: an insurer teaming up with the PBM. Signa has a 390 00:22:43,520 --> 00:22:47,960 Speaker 1: PBM pharmacy benefits pharmacy benefit manager, but a relatively small one. 391 00:22:48,480 --> 00:22:50,639 Speaker 1: I guess the question is if you are you're concentrating 392 00:22:50,680 --> 00:22:54,119 Speaker 1: too much general healthcare market power in the hands of 393 00:22:54,160 --> 00:22:56,639 Speaker 1: just a few companies, especially when you add in the 394 00:22:56,640 --> 00:22:58,600 Speaker 1: fact that this will be the second of two very 395 00:22:58,680 --> 00:23:02,680 Speaker 1: large ensure PBN mergers are the first being at non CBS, 396 00:23:02,840 --> 00:23:04,400 Speaker 1: So the fact that both of these are arriving at 397 00:23:04,400 --> 00:23:08,200 Speaker 1: the same time might increase the level of scrutiny from 398 00:23:08,240 --> 00:23:11,800 Speaker 1: an industry point of view. Max How do PBMs make money? 399 00:23:11,840 --> 00:23:16,040 Speaker 1: How to physician pharmacy benefit management companies earned their keep? 400 00:23:16,760 --> 00:23:20,080 Speaker 1: There are a couple of different ways. UM. The first 401 00:23:20,160 --> 00:23:22,720 Speaker 1: is that they take a cut of the rebates that 402 00:23:22,720 --> 00:23:26,800 Speaker 1: they negotiate on behalf of their clients. So example, for example, 403 00:23:26,800 --> 00:23:29,480 Speaker 1: if you have two diabetes drugs, you pick one of 404 00:23:29,520 --> 00:23:31,640 Speaker 1: them because they give you a bigger discount. They take 405 00:23:31,640 --> 00:23:33,720 Speaker 1: a slice of that discount and send the rest onto 406 00:23:33,720 --> 00:23:36,359 Speaker 1: their client. UM. They also take a piece of the 407 00:23:36,440 --> 00:23:40,960 Speaker 1: spread between the manufacturer's price and what a pharmacy pays. 408 00:23:41,080 --> 00:23:45,640 Speaker 1: And they also collect fees for for certain services um 409 00:23:45,800 --> 00:23:48,240 Speaker 1: that they provide for clients, which is basically trying to 410 00:23:48,280 --> 00:23:50,800 Speaker 1: manage drug spend in other ways. So if you use 411 00:23:50,880 --> 00:23:54,120 Speaker 1: their prefer drug list, you pay a higher fee for example. 412 00:23:54,200 --> 00:23:58,000 Speaker 1: So it's all those things. So the theory here, at least, 413 00:23:58,080 --> 00:24:01,920 Speaker 1: this is what's being proposed to clients, is that mergers 414 00:24:01,960 --> 00:24:07,040 Speaker 1: of this type will lead to signia, for example, passing 415 00:24:07,160 --> 00:24:12,320 Speaker 1: along any savings to customers. You're laughing, I see, um, 416 00:24:12,400 --> 00:24:15,639 Speaker 1: but you know, could that be true? I mean, could 417 00:24:15,640 --> 00:24:18,800 Speaker 1: they have a certain negotiating power to get down pricing 418 00:24:19,080 --> 00:24:23,600 Speaker 1: and strip out any sort of excess roles that get 419 00:24:23,720 --> 00:24:26,879 Speaker 1: sort of uh lost in the shuffle and make it 420 00:24:26,960 --> 00:24:30,399 Speaker 1: cheaper you know, at least theoretically anytime that you add 421 00:24:30,400 --> 00:24:32,320 Speaker 1: scale um. And in this case, you have you know, 422 00:24:32,359 --> 00:24:35,840 Speaker 1: a single company managing kind of the totality of a 423 00:24:35,840 --> 00:24:39,320 Speaker 1: person's medical care both you know, the medical part which 424 00:24:39,320 --> 00:24:43,119 Speaker 1: nets and the drug benefit. So um, theoretically, now that 425 00:24:43,160 --> 00:24:45,760 Speaker 1: you don't have two different companies taking a slice of 426 00:24:45,760 --> 00:24:49,840 Speaker 1: that profit, perhaps you'll see some savings and more passed 427 00:24:49,880 --> 00:24:54,840 Speaker 1: on to the customer, to clients or two consumers. But um, 428 00:24:54,960 --> 00:24:57,040 Speaker 1: I think kind of the arc of the health care 429 00:24:57,119 --> 00:25:01,639 Speaker 1: universe is generally towards more inflation and taking the pretty 430 00:25:01,640 --> 00:25:04,280 Speaker 1: close to the same amount. We'll see. Maybe maybe I'm 431 00:25:04,320 --> 00:25:08,119 Speaker 1: just a bit of a skeptic, but I don't imagine 432 00:25:08,119 --> 00:25:12,800 Speaker 1: that that there will be a tremendous amount of savings inaggregate. Okay, 433 00:25:12,880 --> 00:25:16,320 Speaker 1: let's play Devil's advocate. If there are savings to be had, 434 00:25:16,560 --> 00:25:19,760 Speaker 1: they have to come from someone or I mean a person, 435 00:25:19,840 --> 00:25:23,280 Speaker 1: but some company or some industry group that is currently 436 00:25:23,440 --> 00:25:29,600 Speaker 1: enjoying that money. Who is going to get hurt by this? Uh, 437 00:25:29,760 --> 00:25:35,520 Speaker 1: probably drug makers on one side, and then potentially people 438 00:25:35,520 --> 00:25:38,680 Speaker 1: who contract with insurers and PBMs on the other because 439 00:25:39,000 --> 00:25:42,240 Speaker 1: there's even potentially less competition. Now you have just a 440 00:25:42,280 --> 00:25:45,199 Speaker 1: couple of very large vendors, and um, you know, all 441 00:25:45,240 --> 00:25:48,240 Speaker 1: will certainly be price competitive with each other in areas 442 00:25:48,680 --> 00:25:52,400 Speaker 1: where they intersect. Um, when there are fewer there's less 443 00:25:52,400 --> 00:25:54,960 Speaker 1: of a large so large corporations, for example, that use 444 00:25:55,040 --> 00:25:58,080 Speaker 1: a pharmacy benefit manager in order to manage part of 445 00:25:58,119 --> 00:26:03,800 Speaker 1: the healthcare costs of their workforce potentially and that's why 446 00:26:03,840 --> 00:26:08,120 Speaker 1: you see you know, the the Amazon Berkshire JP Morgan thing, UM, 447 00:26:08,200 --> 00:26:10,320 Speaker 1: them taking to attempting to take a little bit of 448 00:26:10,359 --> 00:26:13,359 Speaker 1: that power back by running some of these things themselves 449 00:26:13,400 --> 00:26:16,520 Speaker 1: instead of contracting out to one of these new giant companies. 450 00:26:16,640 --> 00:26:18,119 Speaker 1: You know, one question that I have a lot of 451 00:26:18,160 --> 00:26:20,639 Speaker 1: people say, there's gonna be plenty more consolidation in the 452 00:26:20,640 --> 00:26:23,639 Speaker 1: healthcare space. Uh. The consolidations that we have seen are 453 00:26:23,680 --> 00:26:27,320 Speaker 1: the proposed ones are somewhat different in each case. CVS 454 00:26:27,359 --> 00:26:29,760 Speaker 1: for example, and now that is a healthcare company and 455 00:26:29,800 --> 00:26:32,760 Speaker 1: a drug store operator. And then here you have a PBM, 456 00:26:32,760 --> 00:26:37,320 Speaker 1: aformacy benefit manager getting acquired uh by signa a healthcare company. 457 00:26:37,359 --> 00:26:41,520 Speaker 1: What's the optimal combination for cost savings? UM, you know, 458 00:26:41,800 --> 00:26:44,000 Speaker 1: I think the one that I would point to is 459 00:26:44,080 --> 00:26:46,480 Speaker 1: is having the most potential And we'll see if this 460 00:26:46,560 --> 00:26:49,800 Speaker 1: is actually realized. Because I'm talking about CVS at and 461 00:26:49,880 --> 00:26:52,040 Speaker 1: up because they are raising so much debt that's going 462 00:26:52,080 --> 00:26:55,000 Speaker 1: to constrain their buildOn to actually spend to get the 463 00:26:55,040 --> 00:26:57,760 Speaker 1: most out of it. But since they're combining UM, you know, 464 00:26:57,800 --> 00:27:01,040 Speaker 1: and and insure uh, CVS all so owns the largest 465 00:27:01,040 --> 00:27:05,000 Speaker 1: pharmacy benefit manager in the country, and the drug store, 466 00:27:05,080 --> 00:27:08,399 Speaker 1: the physical location where they have clinics. Um, they control 467 00:27:08,520 --> 00:27:12,560 Speaker 1: kind of the potentially broadest swath of healthcare. And how 468 00:27:12,560 --> 00:27:15,640 Speaker 1: important is it that they're actually getting data on the 469 00:27:15,680 --> 00:27:19,199 Speaker 1: health of their clients in real time as they go 470 00:27:19,240 --> 00:27:21,359 Speaker 1: to clinics and managing their drugs. I mean, is that 471 00:27:21,440 --> 00:27:25,040 Speaker 1: sort of the understated benefit as well? Yeah, I think 472 00:27:25,080 --> 00:27:27,840 Speaker 1: that's hugely important. I mean, the more data that you have, 473 00:27:28,280 --> 00:27:31,480 Speaker 1: the more effectively you can design plans and price them 474 00:27:31,800 --> 00:27:35,320 Speaker 1: and interventions. Um, you know, all of these things can 475 00:27:35,400 --> 00:27:38,520 Speaker 1: can contribute to controlling costs over time. I will see 476 00:27:38,560 --> 00:27:41,800 Speaker 1: if that actually, you know, manifests as uh, you know, 477 00:27:41,840 --> 00:27:44,520 Speaker 1: cost savings to the healthcare system as opposed to cost 478 00:27:44,520 --> 00:27:49,040 Speaker 1: savings for CVS and better margin. But um, there's definitely 479 00:27:49,080 --> 00:27:51,160 Speaker 1: potential for that. I want to thank you very much 480 00:27:51,160 --> 00:27:54,880 Speaker 1: for joining us, Max Neeson as always illuminating and thoughtful. 481 00:27:55,080 --> 00:27:57,959 Speaker 1: Max Neeson is our Bloomberg Dad Fly columnists for all 482 00:27:58,040 --> 00:28:00,840 Speaker 1: things related to healthcare, and of course this is a 483 00:28:00,920 --> 00:28:03,600 Speaker 1: topic that is of interest not only to people who 484 00:28:03,920 --> 00:28:06,880 Speaker 1: access to healthcare system, but to those who are investing 485 00:28:06,880 --> 00:28:13,040 Speaker 1: in it. Thanks very much. Thanks for listening to the 486 00:28:13,080 --> 00:28:16,200 Speaker 1: Bloomberg P and L podcast. You can subscribe and listen 487 00:28:16,200 --> 00:28:20,360 Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform 488 00:28:20,440 --> 00:28:24,320 Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox. 489 00:28:24,640 --> 00:28:28,160 Speaker 1: I'm on Twitter at Lisa Abramo. It's one before the podcast. 490 00:28:28,200 --> 00:28:30,800 Speaker 1: You can always catch us worldwide on Bloomberg Radio