WEBVTT - Korea Gesture Is A Blink We Should Take Advantage Of: Devine 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 Abramowitz. 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 --> 0:00:33.720 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Diplomatic 0:00:34.040 --> 0:00:37.760 changes a foot on the Korean peninsula, as North Korea's 0:00:37.800 --> 0:00:40.479 leader Kim Jong un says that he will meet with 0:00:40.680 --> 0:00:44.800 President Donald Trump and the President apparently agreeing to that 0:00:44.920 --> 0:00:48.800 meeting sometime later this year, perhaps in early summer. Here 0:00:48.840 --> 0:00:51.400 to help us understand what is going on is Toby Harshaw. 0:00:51.440 --> 0:00:54.280 He is our Bloomberg view editor for all things related 0:00:54.280 --> 0:00:57.600 to national security, and also Jack Divine is the former 0:00:57.640 --> 0:01:02.080 acting director of this Central Intelligence Agency and founding partner 0:01:02.120 --> 0:01:06.720 and the president of the security firm the Arkin Group. Gentlemen, 0:01:06.720 --> 0:01:09.399 thank you very much for being with us that Jack Divine, 0:01:09.440 --> 0:01:11.240 I want you to come in on this and just 0:01:11.680 --> 0:01:15.000 give us your thoughts and reactions to this news. Well, 0:01:15.040 --> 0:01:17.720 I think it's first of all, hit the high note. 0:01:17.760 --> 0:01:20.080 I think it's a very positive development. I do think 0:01:20.160 --> 0:01:23.679 Kim jongan blank. But I want to say blink. It's 0:01:23.720 --> 0:01:27.840 not like a gladiator that kneels down and begs for mercy. 0:01:27.880 --> 0:01:30.560 This is a blink. We should take advantage of it. 0:01:31.040 --> 0:01:32.560 I think it would be one of the more interesting 0:01:33.080 --> 0:01:36.960 meetings of heads of state that we have seen in uh, 0:01:37.200 --> 0:01:41.199 in current memory. I think it will be to the 0:01:41.240 --> 0:01:46.440 matador and the bull trying to size each other up, 0:01:46.720 --> 0:01:51.920 and Uh, it's going to be a terribly important meeting, Toby, 0:01:51.960 --> 0:01:55.280 what are sort of both sides? Where are they in 0:01:55.320 --> 0:01:57.160 this meeting? Where are they lining up? What do they 0:01:57.160 --> 0:01:59.240 want to get? What will be considered a win? Well, 0:01:59.280 --> 0:02:01.240 I'm actually have to tell us which one is the 0:02:01.280 --> 0:02:03.680 bull and which one is the matador? I think, But 0:02:04.360 --> 0:02:08.919 I think um in terms of what they hope to 0:02:08.960 --> 0:02:12.320 gain on the world stage, UM, Kim is sort of 0:02:12.360 --> 0:02:15.040 the evident winner. I think a lot of people worry 0:02:15.360 --> 0:02:18.519 that having an American president come and meet with him 0:02:18.840 --> 0:02:22.880 will sort of legitimize him as a as a world leader, UM, 0:02:22.960 --> 0:02:26.800 will legitimize his government. UM. I don't think that's the case. 0:02:26.919 --> 0:02:28.880 I don't think it's dumb to go and meet with him. 0:02:28.880 --> 0:02:31.640 I don't think it legitimizes him, but I think in 0:02:31.720 --> 0:02:36.800 his mind it's extremely important. Um. There was a notable 0:02:37.200 --> 0:02:40.280 North Korean propaganda film a few years ago, UM that 0:02:40.360 --> 0:02:42.880 was called The Country I Saw and it has this 0:02:43.120 --> 0:02:47.040 huge triumphant ending in which Bill Clinton comes to meet 0:02:47.080 --> 0:02:50.040 with with the Supreme Leader and this was So this 0:02:50.120 --> 0:02:52.440 is just a huge thing and what the Kims have 0:02:52.480 --> 0:02:57.600 built about themselves Jack divine to Toby's point, though, what 0:02:57.800 --> 0:03:00.480 does it matter whether you know someone is a winner 0:03:00.600 --> 0:03:03.760 or a loser on a personal level or a prestige level, 0:03:03.840 --> 0:03:06.360 if indeed they are able to reach some kind of 0:03:06.480 --> 0:03:10.919 de escalation as it comes to the nuclear threat that 0:03:11.080 --> 0:03:14.639 North Korea poses. Well, I think these things are often intertwined. 0:03:15.280 --> 0:03:19.080 First of all, going back to Tobin's point, I I 0:03:19.120 --> 0:03:21.000 think we have to route that Donald Trump is the 0:03:21.040 --> 0:03:26.079 Mata door, okay, and uh, And I think the uh. 0:03:26.200 --> 0:03:28.800 The reason why I would just state that, I think 0:03:28.840 --> 0:03:32.959 Donald Trump, UM, and I think Kim Jong understands this 0:03:33.240 --> 0:03:36.240 is actually having has a stronger hand, the stronger hand 0:03:36.280 --> 0:03:38.800 being the might, the economic and military might of the 0:03:38.880 --> 0:03:41.520 United States, which you know, we can't even say in 0:03:41.520 --> 0:03:45.280 the same breath that North Korea is in the same category. 0:03:45.320 --> 0:03:48.800 So he has the mata to restore it here now 0:03:49.600 --> 0:03:53.240 having said that, we still have a major problem in 0:03:53.280 --> 0:03:56.840 that North Korea is now a nuclear force. And if 0:03:56.880 --> 0:04:00.640 we look back over the arc of the agociations, and 0:04:00.760 --> 0:04:03.560 I've been proposing to negotiations for as long as we've 0:04:03.560 --> 0:04:06.720 been speaking together here on Bloomberg, Um, but if you 0:04:06.760 --> 0:04:09.960 look over the long arc of dealing with North Korea, 0:04:10.440 --> 0:04:13.440 they have a pattern, and it's a very clear pattern. 0:04:14.120 --> 0:04:17.520 And when you're talking about deal making, Kim Jong own 0:04:17.680 --> 0:04:20.159 considers himself a deal maker. So this is why I 0:04:20.160 --> 0:04:22.840 think it's going to be a challenge for the two 0:04:22.920 --> 0:04:25.599 of them, and the national interest and the personal interests 0:04:25.640 --> 0:04:30.440 are are are intertwined. You know. It's interesting. Jack Toby 0:04:30.520 --> 0:04:33.120 was on our show the past few weeks and he 0:04:33.160 --> 0:04:37.480 said something that was very compelling, which is that China 0:04:37.800 --> 0:04:40.760 is really the big wild card here. And I'm wondering, 0:04:40.800 --> 0:04:44.159 from your perspective, Jack, what role is China playing in this? 0:04:44.320 --> 0:04:46.760 Because right now we understand that South Korea is the 0:04:46.760 --> 0:04:50.720 one sort of negotiating this meeting, We understand North Korea's stance, 0:04:50.839 --> 0:04:54.280 now we know President Trump stands, where's China. I think 0:04:54.360 --> 0:04:57.200 China is indeed a critical player, but it's not the 0:04:57.279 --> 0:04:59.280 critical player that it was years ago. There have been 0:04:59.440 --> 0:05:02.360 the distance between China and Korea is quite different than 0:05:02.400 --> 0:05:05.960 it was years ago, so they do have economic points 0:05:05.960 --> 0:05:10.440 of pressure. I was on the show. I've been pessimistic 0:05:10.560 --> 0:05:13.359 that the Chinese were going to lean as heavily on 0:05:13.400 --> 0:05:15.800 North Korea is needed needed to be the case. They've 0:05:15.839 --> 0:05:19.159 actually done more than I thought they would do. I however, 0:05:19.360 --> 0:05:24.120 on this particular occasion, I think going into these talks, 0:05:24.160 --> 0:05:27.480 we have to know what we really want to accomplish, 0:05:27.560 --> 0:05:29.719 because I know what the North Koreans are going to 0:05:29.800 --> 0:05:33.320 want to accomplish. They've reached a plateau, so they want 0:05:33.400 --> 0:05:36.839 to buy. They want to Now my view is to 0:05:37.600 --> 0:05:41.800 say that they'll stop doing um testing and stop doing 0:05:42.680 --> 0:05:46.520 development of additional nuclear weapons. Whether they do or not 0:05:46.680 --> 0:05:50.560 will be the test. Uh and that in exchange the 0:05:50.600 --> 0:05:54.920 one economic concessions. Now, you know, one of the things 0:05:54.920 --> 0:05:56.440 when you go back and look at the NEGO, they 0:05:56.520 --> 0:06:00.000 drag one for years. So I think if something's gonna 0:06:00.040 --> 0:06:03.240 happened here, it has to happen on a different timeline. 0:06:03.279 --> 0:06:07.440 I wouldn't give them only the most minimal concessions during 0:06:08.279 --> 0:06:10.320 the period, and I think the goal and I've been 0:06:10.360 --> 0:06:14.160 thinking about this so more heavily in recent days. I 0:06:14.200 --> 0:06:18.760 do believe the administration's right. It has to be the nuclearization, 0:06:19.040 --> 0:06:23.039 some effort moving in that direction, not just slowing down 0:06:23.600 --> 0:06:26.040 the process. So going into this, he's got the hell 0:06:26.160 --> 0:06:29.520 that sort up high? Toby, come on, do you agree 0:06:29.560 --> 0:06:31.160 on this? And also do you have a sense that 0:06:31.320 --> 0:06:35.720 China and Russia are playing in these negotiations at all? Um? 0:06:36.279 --> 0:06:39.920 I think that while Jack is very right and we're 0:06:39.920 --> 0:06:44.240 gonna look at this primarily right away as trading sanctioned 0:06:44.440 --> 0:06:48.840 relief for concessions on the nuclear program, it's not as 0:06:48.960 --> 0:06:52.640 as simple as even that, um were. There are all 0:06:52.680 --> 0:06:55.920 sorts of issues in play. One is their internet, intercontinental 0:06:55.920 --> 0:06:58.400 ballistic missile systems. Are we going to continue to let 0:06:58.400 --> 0:07:01.840 them develop that? There's they're horrible human rights abuses. Can 0:07:01.880 --> 0:07:06.080 we normalize relations with a country, uh, that that treats 0:07:06.080 --> 0:07:08.400 its people like this just so that we can get 0:07:08.480 --> 0:07:11.640 rid of a nuclear threat? Um? Obviously, as Jack said, 0:07:11.680 --> 0:07:15.800 there's China, UM, there's Russia. UM, there is Japan, and 0:07:15.840 --> 0:07:19.360 there is South Korea. UM. We've got you know, tens 0:07:19.360 --> 0:07:21.960 of thousands of troops. They're they're they're just such a 0:07:22.120 --> 0:07:25.000 huge flood of issues that we cannot look at it 0:07:25.040 --> 0:07:27.800 as just being about their nukes. But but Toby, do 0:07:27.920 --> 0:07:29.400 we just pushed back a little bit. I mean, this 0:07:29.480 --> 0:07:32.000 is a dynamic situation, and one consider that this is 0:07:32.040 --> 0:07:36.880 a positive, positive situation, positive element of this dynamic situation. 0:07:36.960 --> 0:07:38.600 Right now we don't know how it's going to play out, 0:07:38.880 --> 0:07:41.440 but give every chance for for the support to make 0:07:41.480 --> 0:07:43.880 this happen. I couldn't agree more. Pim, this is this 0:07:43.960 --> 0:07:45.880 is a great thing. I'm really glad. I hope it 0:07:45.920 --> 0:07:48.880 comes together. It's just it's it's the first step in 0:07:48.920 --> 0:07:54.840 a big process. And I was just gonna say again 0:07:55.200 --> 0:07:59.120 Toban's right that there's gonna be so much that goes 0:07:59.160 --> 0:08:02.680 in the negotiating and so much expertise on the details. 0:08:02.720 --> 0:08:05.440 The problem is, I'm really recommending that we not get 0:08:05.480 --> 0:08:09.640 bogged down on negotiations, on negotiations, on negotiations, and find 0:08:09.680 --> 0:08:13.320 that we're giving them economic relief and nothing's really happening, 0:08:13.320 --> 0:08:14.920 and then they decide a couple of years from now 0:08:14.920 --> 0:08:18.440 when they're ready to do another UM program to raise 0:08:18.480 --> 0:08:20.680 it to a new platform. We're looking at an empty ball. 0:08:20.760 --> 0:08:23.920 So I think we have to be really tough, and 0:08:23.960 --> 0:08:27.760 I think I think this is the right moment because 0:08:27.800 --> 0:08:33.000 I do think that the Koreans are feeling feeling the pain. Toby, Toby, uh, 0:08:33.280 --> 0:08:36.200 thank you so much and Jack, thank you so much. 0:08:36.240 --> 0:08:39.800 You both really lent some fabulous insight to this very 0:08:39.800 --> 0:08:43.080 complicated and evolving issue. Jack Divine, former acting director of 0:08:43.120 --> 0:08:45.760 the CIA and founding partner and president of the security 0:08:45.760 --> 0:08:48.040 form the ark And Group, And of course our own 0:08:48.240 --> 0:08:54.439 Toby Harshaw, Bloomberg View editor. Always fascinating to hear your insights. Uh, Pam. 0:08:54.600 --> 0:08:57.280 Definitely an evolving issue, a lot of questions. One of 0:08:57.320 --> 0:09:00.520 the biggest right now is who will be preparing President 0:09:00.559 --> 0:09:02.559 Trump for this meeting and who will be going with 0:09:02.640 --> 0:09:04.920 him to it, and not to mention where it will 0:09:04.920 --> 0:09:23.680 be held. Well, Jeffrey the Giraffe maybe calling it a day. 0:09:24.240 --> 0:09:26.480 Nol he read is our director of credit research for 0:09:26.480 --> 0:09:28.720 Bloomberg Intelligence, and Nol, I want you to come in 0:09:28.720 --> 0:09:30.880 on what's going on with toys r US and is 0:09:30.880 --> 0:09:34.200 it likely that we can just say goodbye to Jeffrey. 0:09:35.200 --> 0:09:37.640 It looks like domestically, at least in the current form 0:09:37.679 --> 0:09:40.040 in terms of the bricks and mortar stores, that does 0:09:40.160 --> 0:09:43.040 look like it's increasingly going to be the case. Uh, 0:09:43.080 --> 0:09:44.880 it didn't seem like that needed to be the case 0:09:44.880 --> 0:09:48.440 when they filed last October or so. But given the 0:09:48.440 --> 0:09:50.920 fact that they went into bankruptcy without a plan, and 0:09:51.000 --> 0:09:53.640 the way things kind of rolled through retail and change 0:09:53.720 --> 0:09:57.040 very quickly, and how contentious sort of the the bankruptcy 0:09:57.120 --> 0:10:00.400 has been between all the different stakeholders, that is looking 0:10:00.440 --> 0:10:02.800 like where we're going as we speak, you know, no, 0:10:02.960 --> 0:10:05.960 can you just elaborate a little bit on exactly what 0:10:06.160 --> 0:10:09.160 happened here? Why this fell apart? We are seeing, uh 0:10:09.320 --> 0:10:13.000 the shares of toymakers fall today, So there are broader 0:10:13.040 --> 0:10:16.120 consequences to the concept that Jeffrey the draft will go 0:10:16.600 --> 0:10:21.079 by the way of retired conception. So what happened here? 0:10:21.120 --> 0:10:24.200 What broke down? Well, I think, you know, I guess 0:10:24.240 --> 0:10:26.800 to go back to to part of what I just said, 0:10:26.800 --> 0:10:28.160 which is to say that they kind of went in 0:10:28.240 --> 0:10:30.880 without a plan. So when they filed, you know, unlike 0:10:30.920 --> 0:10:33.160 a lot of the deals, you know, when you file, 0:10:33.200 --> 0:10:34.720 you kind of go with plans, so you kind of 0:10:34.720 --> 0:10:36.079 know how long you're going to be in and how 0:10:36.080 --> 0:10:38.560 long you might take to get out here. Because they 0:10:38.600 --> 0:10:41.080 were kind of put into bankruptcy because you had a 0:10:41.120 --> 0:10:45.280 situation where the vendors basically just shut off for them. 0:10:45.320 --> 0:10:47.760 They were forced to file prematurely so they could at 0:10:47.800 --> 0:10:52.120 least get through the holiday, So nobody really anticipated them filing. 0:10:52.120 --> 0:10:54.680 And if you recollects, sort of the short term bonds 0:10:54.720 --> 0:10:56.520 went from like you know, in the nineties into the 0:10:56.559 --> 0:10:59.719 twenties like effectively overnight, so it was kind of a 0:10:59.720 --> 0:11:02.640 surp lies filing. And then as they've gotten into bankruptcy, 0:11:02.720 --> 0:11:06.560 had a very weak holiday. Uh, and you have a 0:11:06.559 --> 0:11:09.000 lot of operational dynamics that need to happen here for 0:11:09.040 --> 0:11:12.439 them to be solvent. But you have a lot of 0:11:12.480 --> 0:11:15.800 competing interests in terms of you know, you have the 0:11:15.800 --> 0:11:19.160 property companies that are very interested in preserving the value 0:11:19.160 --> 0:11:21.920 of the real estate, whereas the operational side of it 0:11:22.040 --> 0:11:25.040 really needs to get changes to the least terms in 0:11:25.120 --> 0:11:28.200 order to be profitable. So I think, you know, as 0:11:28.320 --> 0:11:32.240 the bankruptcy and folded, just given the competitive nature of 0:11:32.240 --> 0:11:35.600 the different creditor groups made it very difficult for them 0:11:35.640 --> 0:11:38.040 to sort of come to a consensus of what should 0:11:38.120 --> 0:11:41.800 a pro form Toys r US look like. And the 0:11:41.840 --> 0:11:45.600 toys are us not the only retailer facing some headwinds 0:11:45.640 --> 0:11:49.560 here Claires tell us about what's going on. So clears 0:11:49.640 --> 0:11:52.520 is it looks like it's gonna be better in the 0:11:52.559 --> 0:11:55.680 sense that you could have better in bankruptcy. Um, you know, 0:11:56.000 --> 0:11:57.760 it's going to be more along the lines of maybe 0:11:57.760 --> 0:11:59.839 what we saw with Quicksilver a couple of years ago 0:12:00.080 --> 0:12:03.520 Jimboury a year ago, where creditors are kind of it's 0:12:03.559 --> 0:12:06.280 going in with a plan. Right, So you had another 0:12:06.440 --> 0:12:09.680 LBO story severely over leveled, but you have a company 0:12:09.720 --> 0:12:12.600 that generates decent cash flow, has a decent little business, 0:12:13.080 --> 0:12:15.560 and creditors sort of have a plan of what this 0:12:15.679 --> 0:12:18.880 thing should look like on the other side. So this one, 0:12:19.280 --> 0:12:21.560 at least, you know, from the looks of it right now, 0:12:21.640 --> 0:12:24.120 probably is you know, it could go in maybe being 0:12:24.240 --> 0:12:27.440 bankruptcy for six months, get quickly turned around, they hand 0:12:27.480 --> 0:12:30.000 the keys over to the creditors, uh, and then it 0:12:30.080 --> 0:12:32.440 emerges on the other side, maybe a little bit smaller 0:12:32.440 --> 0:12:36.439 than what it is right now, but still a functioning operation. No, 0:12:36.920 --> 0:12:43.599 who's next on this retail death Well, how long is 0:12:43.640 --> 0:12:47.760 the list? I don't know so well, I mean, so 0:12:47.880 --> 0:12:49.440 I guess you know one of the companies that have 0:12:49.600 --> 0:12:51.720 been on the list that isn't anymore would have been 0:12:51.800 --> 0:12:55.120 Nemon Marcus right, so they had a reasonably good quarter 0:12:55.160 --> 0:12:58.920 that they reported today. Bonti has already gone. In Sears 0:12:59.040 --> 0:13:03.320 is is you know, the living dead of sorts. Um 0:13:03.360 --> 0:13:06.480 they're they're you know, they're definitely there, right, I mean, 0:13:06.559 --> 0:13:10.480 liquidity wise, operational wise, they're there. I think, um, you know, 0:13:10.559 --> 0:13:13.280 you also have names like Jake Crewe, but I think 0:13:13.320 --> 0:13:16.040 Jay Cruise get liquidity to navigate the intermediate terms. So 0:13:16.080 --> 0:13:18.120 if you just had to pick one out of out 0:13:18.120 --> 0:13:19.800 of the group, I think Sears is the one that 0:13:19.880 --> 0:13:24.440 obviously faces the you know, a very very weak operating climate, 0:13:24.800 --> 0:13:27.080 and they're running out of assets to sell to sort 0:13:27.120 --> 0:13:30.960 of stave off at next stage. Um So, so I 0:13:31.120 --> 0:13:33.840 think they're They're probably at the front of the queue 0:13:33.840 --> 0:13:36.000 at this point. No Hubert, thank you so much for 0:13:36.080 --> 0:13:38.640 joining us. Always a pleasure. No Hubert is director of 0:13:38.679 --> 0:13:44.239 credit research for Bloomberg Intelligence, The Walking Dead of retailers. 0:13:59.120 --> 0:14:02.320 Just In Woyd blank find is preparing to step down 0:14:02.360 --> 0:14:05.800 as Goldman Sachs Chief executive as soon as the end 0:14:05.960 --> 0:14:08.440 of the year. This according to The Wall Street Journal. 0:14:08.559 --> 0:14:11.720 Just crossing moments ago to get some perspective on what 0:14:11.800 --> 0:14:14.080 this would mean for the bank. I want to bring 0:14:14.080 --> 0:14:17.880 in Michael Moore, US finance team leader. Michael, what's your 0:14:17.920 --> 0:14:22.040 reaction to this and who is the likely successor to 0:14:22.120 --> 0:14:27.240 Lloyd Blank? Find sure? I think UM not hugely shocking, 0:14:27.360 --> 0:14:31.480 and you know, Lloyd's UM exit has been kind of 0:14:31.520 --> 0:14:33.440 forecast for a few years now, and if this is 0:14:33.520 --> 0:14:37.200 indeed the year, it would make some sense. He's been 0:14:37.240 --> 0:14:40.840 in the top job for a dozen years now and UH, 0:14:41.000 --> 0:14:44.040 at the end of twenty sixteen they named two uh 0:14:44.160 --> 0:14:48.320 CO presidents below him, Harvey Shortz and David Solomon. UH 0:14:48.360 --> 0:14:51.240 those are seen as the two likely successors, and now 0:14:51.280 --> 0:14:54.240 they've had UM a little more than a year in 0:14:54.360 --> 0:14:58.520 those UM top jobs kind of overseeing the firm with Lloyd, 0:14:59.240 --> 0:15:01.920 So I think UM this would be seen as a 0:15:02.000 --> 0:15:06.760 fairly UM you know, smooth handoff to one of them. 0:15:06.800 --> 0:15:10.200 Although Michael, this does raise some questions about the timing 0:15:10.360 --> 0:15:13.040 of this because Goldman Sachs has had some pretty big plans, 0:15:13.080 --> 0:15:16.120 but reviving it's bond trading unit has been pretty aggressive 0:15:16.200 --> 0:15:19.040 with consumer lending through its Marcus platform that it started 0:15:19.040 --> 0:15:21.640 a couple of years ago. UH, do you have any 0:15:21.680 --> 0:15:27.720 insights on why now UM you know, I think, Um, 0:15:27.800 --> 0:15:29.640 you know, I think, as you mentioned, they are kind 0:15:29.640 --> 0:15:35.720 of having this pivot um they um into more of 0:15:35.720 --> 0:15:38.960 the consumer business. The trading business has struggled. But if 0:15:39.000 --> 0:15:41.800 they you see the return of volatility this year, that 0:15:41.880 --> 0:15:44.680 may help them kind of get on firmer footing in 0:15:44.720 --> 0:15:50.440 their main business. Um. So um that that could be 0:15:50.520 --> 0:15:54.080 seen as a time to step down. Michael, just hang 0:15:54.120 --> 0:15:55.880 on because I want to bring in Tad Ravel. He 0:15:56.000 --> 0:15:58.920 is the chief investment officer for tc W based in 0:15:59.000 --> 0:16:01.640 Los Angeles, helping you manage more than a d eighty 0:16:01.640 --> 0:16:04.800 billion dollars. Tad, thanks very much for being with us. 0:16:05.080 --> 0:16:07.800 What are your what's your reaction to this breaking news 0:16:07.840 --> 0:16:11.360 that we might see Lloyd blank find stepped down as 0:16:11.400 --> 0:16:16.240 the head of Golden Sacks by the end of the year. Well, Um, 0:16:16.280 --> 0:16:18.560 I don't think that it is all that surprising in 0:16:18.640 --> 0:16:22.640 light of the naming of the two com uh CO 0:16:22.800 --> 0:16:25.880 presidents that occurred a year or so ago. Um. At 0:16:25.880 --> 0:16:29.360 a personal level, I've met Lloyd in a a smaller 0:16:29.600 --> 0:16:33.520 intimate type of setting. Always found him to be very amiable, 0:16:33.680 --> 0:16:37.160 very humble. Um. There's probably some background about him actually 0:16:37.480 --> 0:16:39.640 that many of the listeners might not be aware of 0:16:39.720 --> 0:16:44.000 his father was was a postman, and he initially, uh, 0:16:44.040 --> 0:16:47.480 as he described it, sort of bumbled into his role 0:16:47.640 --> 0:16:50.120 at Goldman Sachs by virtue of the fact that he 0:16:50.120 --> 0:16:54.720 had he had worked in a commodities firm um sometime prior, 0:16:54.760 --> 0:16:58.200 but actually started his career as an attorney. But he's 0:16:58.200 --> 0:17:00.720 had a really good run, and he's obviously built a 0:17:01.080 --> 0:17:05.600 incredible powerhouse of an operation. Well he as you mentioned, 0:17:06.000 --> 0:17:10.359 he has spent thirty six years at Goldman Sachs and 0:17:10.720 --> 0:17:15.200 as you mentioned, previously a gold salesman in the commodity division, 0:17:15.200 --> 0:17:18.679 then ran the firm's trading of business. Named chief executive 0:17:19.320 --> 0:17:22.679 in two thousand and six when Hank Paulson became the 0:17:22.680 --> 0:17:27.919 Treasury Secretary. Yeah, exactly so, Dad, I'm wondering your perspective 0:17:28.160 --> 0:17:32.200 on sort of the fixed income trading environment since Goldman 0:17:32.280 --> 0:17:34.560 Sachs was one of the leaders, has been one of 0:17:34.560 --> 0:17:36.880 the leaders in that area and has actually doubled down 0:17:37.040 --> 0:17:40.399 on their debt trading unit, even as revenues have flagged 0:17:40.440 --> 0:17:43.160 over the years on a year over year basis. I'm 0:17:43.200 --> 0:17:46.040 wondering going forward, do you think that we are heading 0:17:46.080 --> 0:17:49.959 into a better environment for trading revenues and that Goldman 0:17:49.960 --> 0:17:52.560 Sachs stands to benefit from that, or do you think 0:17:52.600 --> 0:17:55.080 that we're going to be in a very different environment 0:17:55.160 --> 0:17:59.840 due to electronification other kinds of streamlining. Well, I think 0:18:00.040 --> 0:18:03.320 at in the recent past, the issue with respect to 0:18:03.880 --> 0:18:08.080 poor trading revenues across the entirety of the industry has 0:18:08.119 --> 0:18:11.800 really been reflective of to UH two dynamics. One has 0:18:11.840 --> 0:18:15.800 been the incredibly low level of volatility that has persisted 0:18:15.840 --> 0:18:18.880 in financial markets to low for longer, and the engineering 0:18:19.200 --> 0:18:21.320 of this low volatility on the part of the central 0:18:21.359 --> 0:18:27.040 banks and the DoD Frank legislation that essentially drove large 0:18:27.040 --> 0:18:29.800 financial firms more or less out of the role of 0:18:29.840 --> 0:18:34.520 proprietary trading, and have they have been forced to over 0:18:34.560 --> 0:18:37.520 the course of this cycle to agent risk, but not 0:18:37.560 --> 0:18:41.440 to principal risk. And as a consequence of these two dynamics, 0:18:41.440 --> 0:18:44.479 we've had a very low level of transaction volumes for 0:18:44.520 --> 0:18:47.359 a long time. Going forward, I think that we can 0:18:47.400 --> 0:18:50.760 see several things happening. There seems to be some movement 0:18:50.800 --> 0:18:54.480 in the direction of relaxation of the financial regulations, particularly 0:18:54.480 --> 0:18:57.399 the vocal rule, which ought to help um. Secondly, we 0:18:57.480 --> 0:19:00.359 are seemed to be transitioning to a higher volic atility 0:19:00.359 --> 0:19:04.399 type of environment, and the the thrust as it relates 0:19:04.440 --> 0:19:07.520 to electronic trading. That's a process that's been around for 0:19:07.560 --> 0:19:10.320 a very long period of time, and the Wall Street 0:19:10.359 --> 0:19:14.280 firms have demonstrated almost an endless ability to adapt and 0:19:14.359 --> 0:19:16.560 the inventive and to make money as long as there's 0:19:16.600 --> 0:19:20.280 actually an opportunity for them to do that. Ted, tell 0:19:20.359 --> 0:19:23.360 us your thoughts right now on investing in fixed income. 0:19:23.440 --> 0:19:25.080 Do you think we're going to get a repricing of 0:19:25.119 --> 0:19:29.320 corporate bonds? Are there things that are worth buying right now? Well, 0:19:29.440 --> 0:19:31.359 we've been thinking that there ought to have been a 0:19:31.440 --> 0:19:35.680 repricing of corporate bonds for quite some time. UM where 0:19:35.720 --> 0:19:38.920 we continue to exist in this environment in which risk 0:19:38.960 --> 0:19:43.920 appetites are, in our opinion, exuberantly large. UM. The when 0:19:43.960 --> 0:19:47.119 you examine, for instance, the corporate asset class, several of 0:19:47.119 --> 0:19:50.879 your takeaways will be the observation of very high levels 0:19:50.880 --> 0:19:53.959 of leverage. So when you look at the total stock 0:19:54.080 --> 0:19:57.200 of debt, for instance, on the part of investment grade companies, 0:19:57.600 --> 0:20:01.200 and look at the relationship between that totality of debt 0:20:01.240 --> 0:20:04.400 as compared with their actual earnings, what one will take 0:20:04.400 --> 0:20:06.760 away is that you are at the highest levels of 0:20:06.840 --> 0:20:10.600 leverage of debt to EBA DHAH, since at least two 0:20:10.640 --> 0:20:13.280 thousand and two, you are above where we were back 0:20:13.320 --> 0:20:15.440 in two thousand and seven. If you want to look 0:20:15.440 --> 0:20:17.679 at it through other metrics, for instance, the amount of 0:20:17.760 --> 0:20:22.240 compensation that the investor earns per turn of leverage on 0:20:22.280 --> 0:20:25.320 the underlying business, you've come away with the same observation. 0:20:25.760 --> 0:20:27.879 If you look at what's happening in the M and 0:20:27.920 --> 0:20:30.359 A market, you can see that private equity has been 0:20:30.359 --> 0:20:34.520 pushing the envelope in terms of looking for um uh 0:20:34.720 --> 0:20:38.880 loose looseness in terms of covenant quality, protections for the investor, 0:20:39.119 --> 0:20:42.960 and obviously discretion for the equity sponsor. So the list 0:20:43.040 --> 0:20:45.000 kind of goes on and on. The there are plenty 0:20:45.040 --> 0:20:47.760 of yellow flags and maybe the beginning of some red 0:20:47.760 --> 0:20:50.359 flags that have been out there for some time. So 0:20:50.400 --> 0:20:53.760 you're supposed to be, I think, quite cautious about moving 0:20:53.840 --> 0:20:59.480 into the more cyclically exposed areas of the corporate as 0:20:59.760 --> 0:21:03.920 UM asset class, and particularly those areas that also evince 0:21:04.040 --> 0:21:07.359 financial leverage as well. All right, just real quick, which 0:21:07.359 --> 0:21:11.359 asset class and fixed income are your most bullish on? Well, 0:21:11.440 --> 0:21:13.440 I don't know that there's any asset class out there 0:21:13.480 --> 0:21:16.560 actually that you should be actually bullish on. I think 0:21:16.640 --> 0:21:19.520 that where you're supposed to focus your attention is to 0:21:19.600 --> 0:21:22.840 be disciplined, say short term in terms of maturity, and 0:21:22.880 --> 0:21:26.800 focus on higher quality type of asset classes, um the 0:21:27.440 --> 0:21:29.879 kind that we would describe as bendable and not breakable. 0:21:30.040 --> 0:21:33.880 Tadra Val, chief investment officer at TCW focused unfixed income 0:21:33.920 --> 0:21:37.400 TCW managing about hundred eighty billion dollars. Just to reiterate, 0:21:37.680 --> 0:21:40.840 Goldman Sachs chief executive Lloyd blank Find preparing to step 0:21:40.920 --> 0:21:46.280 down as soon as later this year, capping twelve years 0:21:46.400 --> 0:22:03.240 at the home of one of the biggest US banks. Indeed, well, 0:22:03.280 --> 0:22:06.320 it might not be that quick for Signa to acquire 0:22:06.400 --> 0:22:11.720 express Script as it has proposed. Evidently, antitrust regulators are 0:22:13.119 --> 0:22:15.840 very interested in seeing what this deal would actually look like. 0:22:15.880 --> 0:22:17.960 Here to join us as Max Nissan, biotech, pharma and 0:22:18.040 --> 0:22:22.440 healthcare columnist for Bloomberg gad Fly. Max, let's just start 0:22:22.440 --> 0:22:24.520 with how realistic is it that this deal is going 0:22:24.560 --> 0:22:27.119 to go through? Uh? You know, I I think it 0:22:27.200 --> 0:22:30.080 has a pretty decent shot, although it'll be the kind 0:22:30.080 --> 0:22:32.679 of one of the first real big tests of what 0:22:33.280 --> 0:22:36.960 any trust looks like under the Trump administration. UM, you 0:22:37.000 --> 0:22:41.000 know it's it's not a horizontal consolidation. Really, it's you know, 0:22:41.040 --> 0:22:43.520 an insurer teaming up with the PBM. Signa has a 0:22:43.520 --> 0:22:47.960 PBM pharmacy benefits pharmacy benefit manager, but a relatively small one. 0:22:48.480 --> 0:22:50.639 I guess the question is if you are you're concentrating 0:22:50.680 --> 0:22:54.119 too much general healthcare market power in the hands of 0:22:54.160 --> 0:22:56.639 just a few companies, especially when you add in the 0:22:56.640 --> 0:22:58.600 fact that this will be the second of two very 0:22:58.680 --> 0:23:02.680 large ensure PBN mergers are the first being at non CBS, 0:23:02.840 --> 0:23:04.400 So the fact that both of these are arriving at 0:23:04.400 --> 0:23:08.200 the same time might increase the level of scrutiny from 0:23:08.240 --> 0:23:11.800 an industry point of view. Max How do PBMs make money? 0:23:11.840 --> 0:23:16.040 How to physician pharmacy benefit management companies earned their keep? 0:23:16.760 --> 0:23:20.080 There are a couple of different ways. UM. The first 0:23:20.160 --> 0:23:22.720