Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in
Speaker 1: local communities, economies and a sustainable future. That's a power
Speaker 1: of global connections. Mary Lynch, Pierce Fenner and Smith Incorporated
Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best in economics, finance, investment and international relations.
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com and
Speaker 1: of course on the Bloomberg. This is a joy. David
Speaker 1: Gura and Tom Keene in our radio studios. I'm Finsbury Square,
Speaker 1: north of the city. We're sort of on the edge
Speaker 1: of the city and tomorrow we're gonna go take a
Speaker 1: tour of our new office. We'll put on the hard hats, boots,
Speaker 1: look at those screwts addresses allowed. Yeah, it's very st
Speaker 1: it's like a whole strict thing about like taking a
Speaker 1: tour of it. But it's really coming together. We hope
Speaker 1: within the year to be the largest stone building in London. Well,
Speaker 1: I don't tell Parliament, you know it's gonna be good.
Speaker 1: Near Mansion House in the heart of the city, near
Speaker 1: the look for Twitter phos. Why don't you bring in
Speaker 1: our good guests. Who's dark in the door of mansion house?
Speaker 1: Any number? Very good? Mr Marvin barth here, a head
Speaker 1: of European f ex Strategy Barclays, joins this here in
Speaker 1: our studios in London. As Tom mentioned, and Marvin, let
Speaker 1: me ask you just first of all, we're seeing a
Speaker 1: lot of anxiety play out here in the currency markets.
Speaker 1: Why is this the venue for it? Why why are
Speaker 1: we seeing so much anxiety and currencies right now? Well,
Speaker 1: I think it's one of the UH markets that touches
Speaker 1: every other market, is the key point. In fact, generally
Speaker 1: the way we look at currencies is it is the
Speaker 1: market that clears all other markets, trading goods and services,
Speaker 1: trading financial services, whether it's UH equities, bonds, whichever. So
Speaker 1: it's one of the first ones that reacts um to
Speaker 1: economic news from the trade side. But also financial flows
Speaker 1: clearly are the biggest driver UH and so that you
Speaker 1: can have much more significant reactions there. And then the
Speaker 1: final reason is is that frankly, it's the most liquid
Speaker 1: market out there, so it's the easiest one for people
Speaker 1: to express and hedge themselves. Tom has been playing a
Speaker 1: lepidopter is stall week talking about butterflies. Since we got
Speaker 1: here talking about emerging markets. Let me ask you how
Speaker 1: what we're seeing in Turkey this morning with with the
Speaker 1: Turkish lira we had the central bank they're intervening. What
Speaker 1: has caused that dramatic shift in the lira over these
Speaker 1: last few days. Well, it's a it's a continuation of
Speaker 1: the political uncertainty uh there, and how the government is
Speaker 1: going to look at the banking system and their um
Speaker 1: dollar loans and deposits, by the way, they have both
Speaker 1: um what onshore rents and start going to do with those, uh.
Speaker 1: And the continued political uncertainty as we go into the
Speaker 1: referendum which will probably take place uh in April. So
Speaker 1: all of those things have been sort of percolating for
Speaker 1: a while here, and this is just a further extension that,
Speaker 1: particularly as we come into the central bank meeting later
Speaker 1: this month. How does a strategist like you, how does
Speaker 1: an investor incurrencies react to intervention like the kind we
Speaker 1: saw today? Does it does it cheer you to see it?
Speaker 1: Does it raise more concerns than it delays? Well, you know,
Speaker 1: I have a unique experience and I used to work
Speaker 1: in the Federal Reserve um in the form of exchange
Speaker 1: the global market section. And so I used to see
Speaker 1: intervention as it was happening. All the central banks would
Speaker 1: report to each other. And so I remember back in
Speaker 1: you know, the early two thousand's, watching Japan jump or
Speaker 1: dump several billion dollars at a time into the market
Speaker 1: and watch it just dissipate and evaporate like nothing. And
Speaker 1: so one of the things I've come away with is
Speaker 1: that foreign exchange intervention, unless it's accompanied by a real
Speaker 1: shift in policy, just doesn't work, or you're at extremes.
Speaker 1: And I don't think you can claim that either of
Speaker 1: those in the case with Turkey right now. I mean
Speaker 1: the headline on Turkey, folks, and this goes to the
Speaker 1: cash spent. I'm going to use a working number that
Speaker 1: I may be wrong on, but I think it was
Speaker 1: six billion uh used by Mexico to support Paso. You're
Speaker 1: a few days ago and the headline is there Turkeys
Speaker 1: urdam sites operation to rapidly depreciate lira. What I that's
Speaker 1: lost in translation for me, David Marvin, help me, what
Speaker 1: what the hell does that headline mean? I think your
Speaker 1: guesses is actually, I'm sure it's accurate. I don't I
Speaker 1: don't you know, I don't mean to. I just you know,
Speaker 1: you see the headlines come across the Bloomberg and you say,
Speaker 1: what Turkish lee or a weaker right now three seventy seven.
Speaker 1: But um, you know it's not blowing out to a
Speaker 1: weaker Turkish lear right now. As you say there's unilateral
Speaker 1: depreciation or management of a currency, I should say, and
Speaker 1: the textbook says it just never never, never works. Who's
Speaker 1: the elephant in the room for Turkey or Malaysia or
Speaker 1: the others right now? Is it the I M F
Speaker 1: Or is it the United States? Well? I think in
Speaker 1: many of those cases, it's actually their own citizens, right um,
Speaker 1: particularly in the case of Turkey, when you think about
Speaker 1: how much um uh Turkish citizens typically keep uh in
Speaker 1: dollar accounts. And you know, one of the interesting things
Speaker 1: about Turkey in the sort of post crisis period relative
Speaker 1: to the pre crisis period is you know, you remember
Speaker 1: the old days when the Turkish lyricist went one direction umu,
Speaker 1: when it even had a different currency code. Um. Those
Speaker 1: in those days, when you had anything like this, the
Speaker 1: locals would immediately shift all their lira into dollars today.
Speaker 1: What you're seeing, or what you have seen in the
Speaker 1: post crisis period is they've shown greater confidence in their
Speaker 1: own policymakers and actually when the lira um dips down
Speaker 1: to low levels like this, they've come back and bought.
Speaker 1: But that is the real question right now, that's the
Speaker 1: elephant in the room here, is in this incredible political uncertainty?
Speaker 1: Is that going to continue to happen? Thank you so much.
Speaker 1: Great to see it with Barclay's giving us perspective today
Speaker 1: on foreign exchange, Let's talk to Paul mort and more
Speaker 1: Lee now he's chief of commis bnp PA about joining
Speaker 1: us at by phone at Paul Morn would lead great
Speaker 1: to speak with you here this morning, joining us here,
Speaker 1: Thanks very much for your time today. Let's pick up
Speaker 1: from what we're talking about a few moments where we're
Speaker 1: talking about trade. Boris Johnson, the Foreign Secretary of visiting
Speaker 1: the US UH, some senators talking about the relationship between
Speaker 1: the U S and the UK. Let's talk about US
Speaker 1: trade policy first year. How big a weight is that
Speaker 1: as you forecast out growth in the US going forward. Oh,
Speaker 1: we don't really know what's going to happen with trade policy.
Speaker 1: I think that's that there's a major uncertainty about whether
Speaker 1: we will see very big moves or whether we'll see
Speaker 1: a more piecemeal, piecemeal approach. I think what we probably
Speaker 1: will see some really negotiation of some trade deal and
Speaker 1: therefore probably not a big surgey in protection is m
Speaker 1: but I think it's a worry and very probably it's
Speaker 1: dampening investment in some parts of the world in emerging
Speaker 1: markets who were thinking about are they going to have
Speaker 1: problems exporting to the US in the future. And I
Speaker 1: think it is an uncertainty that will weigh somewhat on business.
Speaker 1: If we were to see major protectionist moves by the US,
Speaker 1: then we'd have to revise down our US growth forecast,
Speaker 1: and we'd have to revise up our inflation forecast in
Speaker 1: the US because clearly, if we're sourcing it currently from
Speaker 1: outside the US, and we source it, that's because it's cheaper,
Speaker 1: and so if there is protectionism, inflation is going to
Speaker 1: go up, and that will add to the risk that
Speaker 1: the fens titans policy more than it's currently planning. Now,
Speaker 1: what's your growth forecast right now? Well, you know, we
Speaker 1: we think we think growth is going to be pretty
Speaker 1: strong this year, we're going to be up around two
Speaker 1: and a half two and a half market, and it
Speaker 1: depends on how much we get a fiscal boost that
Speaker 1: will more probably affect two thousand and eighteen. What we
Speaker 1: are seeing at the moment, and we saw this this
Speaker 1: morning with the National Federation of Independent Business Optimism Index,
Speaker 1: which surged for the most We're seeing a huge surgery
Speaker 1: and optimism in businesses and in consumers. What's not clear
Speaker 1: is how much that's going to s spilled through to
Speaker 1: spend hother in capex or in consumer spending. The consumer
Speaker 1: credit numbers this morning we're pretty strong, So there seems
Speaker 1: to be some evidence, and so I think there's definitely
Speaker 1: a possibility that we may be surprised on the upside
Speaker 1: by US growth, particularly in the first half of the year.
Speaker 1: Tam Keene and David David Palm momerately with US chief
Speaker 1: economist at BNP at pair about what we're talking about
Speaker 1: trade economic growth in the US. You were mentioning emerging markets,
Speaker 1: and I wonder which are the ones that you see
Speaker 1: most likely to sort of feel pain going forward here.
Speaker 1: I just feel what to feel fling from trade or
Speaker 1: just yes, from from trade in particular from in particular,
Speaker 1: you're gont worry about China and therefore Southeast Asia. I
Speaker 1: mean it's you know, basically, commodity exporters should be fine,
Speaker 1: right because they're complementary to US production. It's people who
Speaker 1: were producing competing with US style production that need to
Speaker 1: be worried. And I think particularly those who got big
Speaker 1: trade surpass, like China. And I think that's where the
Speaker 1: concern is. Because so much of the US empathy is
Speaker 1: with China. It's got to be a focus, and therefore
Speaker 1: all the economies that supply China in the regional linked
Speaker 1: to China have got reason to be concerned where we're going.
Speaker 1: I think when when you look at what this administration
Speaker 1: to pursue, it's been a pretty strong strong dollar policy
Speaker 1: here over the last eight years. Do we have indications
Speaker 1: here that a president Donald Trump is going to pursue
Speaker 1: the same strong dollar policy. No one. I'm not convinced
Speaker 1: he will, because to some extent, the stronger the dollar,
Speaker 1: the more it's going to work against these um the
Speaker 1: impetus to boost manufacturing in the US. And so I
Speaker 1: think that I think that is a concern. I mean,
Speaker 1: that might be one of the things. Why we've seen
Speaker 1: Southern Federal Reserve officials talking about moving the ball because
Speaker 1: the exchange rate seems much more sensitive to short term
Speaker 1: interest rates than to long term rates. So tightening of
Speaker 1: monetary policy switches a little away from raising spot rates
Speaker 1: but redging the FED funtons and towards running off the
Speaker 1: balance sheet. That could allow the Fed to tighten but
Speaker 1: not damage the exchange rate and therefore manufacturing. You Oh,
Speaker 1: go ahead, please, They didn't mean to interrupt. Excuse me, No,
Speaker 1: I was going to say, you know that. I mean
Speaker 1: I think there are a number of other things but
Speaker 1: could push the exchange rate higher. You know, the cash
Speaker 1: based um cash flow based corporate tax change could could
Speaker 1: push the dollar higher. We could see some repatriation by
Speaker 1: corporates to the US that comes about push the dollar higher.
Speaker 1: So I think too strong dollar is a threat to
Speaker 1: President Trum's ambitions to boost manufacturing. Definitely. You have a
Speaker 1: beautiful research headline which captures the emotion of so much
Speaker 1: of our listeners. Body yields burning down the house. There's
Speaker 1: an innate fear price down yield up not good for me?
Speaker 1: Are we going to burn down the house? I don't
Speaker 1: think we're going to burn down the house. But you know,
Speaker 1: we looked back at two thousand and thirteen when we
Speaker 1: had to taper tantrum and long bondul by other hundred
Speaker 1: basis points. It definitely slows the housing market very, very sharply,
Speaker 1: and we've seen not not far off the same backup
Speaker 1: in bonduels, And the question is that going to hurt
Speaker 1: the housing market this time now? I think there are
Speaker 1: quite a lot of differences now between where we are
Speaker 1: and where we were in two thousands and thirteen. The
Speaker 1: unemployment rates three almost three percentage points lower for a start,
Speaker 1: but I think we will see something of a setback.
Speaker 1: The lags back then. We're about six months, and I
Speaker 1: think we will see a slightly slower paced, probably more
Speaker 1: of the existing sales than new home sales. But I
Speaker 1: don't think it's a massive threat to the economy. Might
Speaker 1: not not point one maybe point two off growth as
Speaker 1: bond you go higher, but the consumer is not using
Speaker 1: mortgage finance in the same way as a decade ago
Speaker 1: to the fuel consumption, for example, and so I think
Speaker 1: the economy is going to be pretty resilient for the
Speaker 1: higher bond you and the higher bond deals. The really
Speaker 1: a reflection of good news. Were expecting good news on
Speaker 1: the economy. What is back in thirteen it just like
Speaker 1: looked like the Fed was going to tighten without the
Speaker 1: good news coming. But this time the economy should be
Speaker 1: less sensitive. David, this is fascinating. I mean, you know,
Speaker 1: mortgage Jack, will you withdraw? Was a phrase of the
Speaker 1: ear in the moment. Shout at the young heart seas
Speaker 1: at Goldman Sex was great work back then. But David,
Speaker 1: I just think this is a huge deal where it's
Speaker 1: a new world of rising rates. We just don't know,
Speaker 1: a new world of rising rates and and a big
Speaker 1: opportunity here for potential conflict. Imagine Palm Winimer Lee. If
Speaker 1: you have the Fed going forward raising rates at the
Speaker 1: same time as you have the Congress, expect the Congress
Speaker 1: here to pass a big fiscal stimulus and some tax reform.
Speaker 1: How thorny is this going to be? How difficult is
Speaker 1: it going to be to navigate the economic landscape in
Speaker 1: Washington as you have these two institutions what a mile
Speaker 1: and a half apart from each other in Washington doing
Speaker 1: things they're sort of detrimental to each other. Why I
Speaker 1: think it's going to be very tricky. He's going to
Speaker 1: be very tricky in particular for the FED because I think,
Speaker 1: you know, the administration will say, look, you know, a
Speaker 1: lot of stimulus is not just the manse stimulus, supply stimulus.
Speaker 1: And if you guys raise raised too quickly and stop
Speaker 1: this process, you're going to squeeze out supply. And therefore,
Speaker 1: I think the administration is going to be putting quite
Speaker 1: a lot of pressure on the FED not to overdo
Speaker 1: its tightening, but at the same time, the faise. I
Speaker 1: think that the key thing for the FED therefore will
Speaker 1: be how inflation and costs, including wages evolved. Because strong demand,
Speaker 1: I think, because of the arguments from the Trump administrational supply,
Speaker 1: it makes quite difficult for the THREAD to snuff out demand.
Speaker 1: But if they see inflation move higher, that's a bit easier.
Speaker 1: And so I think the freds reaction functions changing and
Speaker 1: they're going to be more sensitive to inflation signals than
Speaker 1: than growth going forward, which is a kind of reverse
Speaker 1: when we were in the past year. I think that
Speaker 1: we get minutes from the e CB this week on
Speaker 1: on Thursday, from its last meeting, and I think when
Speaker 1: when that happens I'm going to open it up and
Speaker 1: do control f for fine and typing the word taper
Speaker 1: to see if it appears. What do you are you
Speaker 1: going to be looking that? What are you going to
Speaker 1: be looking for those minutes far? I think you've come
Speaker 1: up with a big zero that I think that he's
Speaker 1: not tapering, it's sailing back. I think the really disagreement. Yeah, yeah,
Speaker 1: I think there'd just be some There'll be some disagreement, clearly.
Speaker 1: I think I think the Halts probably wanted to have
Speaker 1: a shorter extension of the QWI, some of the Doves
Speaker 1: wanted a longer extension, and basically we did up with
Speaker 1: something of a compromise. I don't think they're very optimistic
Speaker 1: on growth. I think they think growth is pretty fragile.
Speaker 1: And I think they're underlying picture on core inflation. Although
Speaker 1: headlines moving up, I don't think they have a big
Speaker 1: face in terms of core inflation shifting. But I think
Speaker 1: the message will continue to be to be dove it.
Speaker 1: I mean, I think they did a great job in tapering,
Speaker 1: and that they did taper, they did scale back, and
Speaker 1: yet the market interpreted it as very dumbish, which is
Speaker 1: a huge contract to what happened in two thousand and third,
Speaker 1: if you remember so, I believe I think they handled
Speaker 1: it pretty skillfully. I have to leave it there. Palm
Speaker 1: order relief, thank you so much. With in New York
Speaker 1: is just a great set of opinions, and as usual David,
Speaker 1: it centers around the view of someone an economic growth
Speaker 1: and we haven't had that dovetailing of the housing market
Speaker 1: into into it before. Well the housing market there, but
Speaker 1: just basic g d P. There's two versus. Those were
Speaker 1: optimistic and of course that's what makes for the debate.
Speaker 1: Absolutely brought you by Bank of America, Mary Lynch. Dedicated
Speaker 1: to bringing our clients insights and solutions to meet the
Speaker 1: challenges of a transforming world. That's the power of global connections,
Speaker 1: Mary Lynch, Pierce fennerin Smith Incorporated, Member s I p C.
Speaker 1: What been Charles Dumont Now he's the chairman in chief
Speaker 1: economist at Lambard Street Research, joining us here in this
Speaker 1: he wants join the spect of Enterprise phone line, Spectum
Speaker 1: Enterprise Nationwide fiber based network and I T Infrastructure solutions. Charles,
Speaker 1: Great to speak with you again. Yeah, nice to talk
Speaker 1: to you, very good. Does your optimism persist here? We
Speaker 1: we we. We heard the comments from Theresa a Prime
Speaker 1: Minister over the weekend. Uh she feuding observations that the
Speaker 1: Brexit process is mudeled. What is your sense of of
Speaker 1: how it's going at this point? Well, I think it's
Speaker 1: certainly muddeled, but it was bound to be muddeled. I mean,
Speaker 1: no one mainly plans for Brexit. It was the civil
Speaker 1: services completely side swiped by it, and and and now
Speaker 1: they're having to sort of get themselves together now. The
Speaker 1: other thing is that you can't really have a negotiation
Speaker 1: until the other side is in place. And the other
Speaker 1: side is not in place. I know the Commission is
Speaker 1: supposedly sitting there in Brussels with the negotiators sitting around waiting,
Speaker 1: but the decisions can't really get made until the French
Speaker 1: elections happened and the German elections happened. So Mrs May
Speaker 1: is not going to sort of show her hand in
Speaker 1: any kind of detailed way or even specify what she's
Speaker 1: aiming for until she can get a sense from them
Speaker 1: of what's feasible. And what's feasible is going to depend
Speaker 1: very much on how the sort of people in France
Speaker 1: and Germany who were skeptical about free movement of labor
Speaker 1: um do in these elections. So the whole thing is
Speaker 1: a whole whole sort of nexus of uncertainty, and people
Speaker 1: are just going to have to live with that for
Speaker 1: several months. I think. I just want to like something
Speaker 1: to your term that our colleague friends in Lockwood just
Speaker 1: sent this here. Dollar Mexico foundly with fresh all time
Speaker 1: low six to seven. Yeah, it was sudden and abrupt.
Speaker 1: I mentioned that out of Karen Moscow's data check, and
Speaker 1: we see that in the e M currencies. Let's rip
Speaker 1: up the script. Charles Duma will usually talk G seven,
Speaker 1: G five, G one with you. Do you have a
Speaker 1: concern about erosion in currencies of emerging markets? Not really No,
Speaker 1: I think that the emerging market currencies have well. I
Speaker 1: mean too a year ago they got grossly oversold. A
Speaker 1: lot of these economies are doing quite are doing quite well. Um.
Speaker 1: The biggest issue for them clearly is what happens with
Speaker 1: the Chinese. UM you on, because if that goes done
Speaker 1: a long way, then of course that therese competitive pressure
Speaker 1: and difficulties. Um. But we don't think that that is
Speaker 1: going to happen. Um. Starting from where we are now
Speaker 1: it is in the sort of a low six and
Speaker 1: nineties for the for the Ran dollar, and so I
Speaker 1: don't see any particular reason why the emerging markets should
Speaker 1: fill themselves under particularly heavy pressure. That's going to change
Speaker 1: according to which one you're looking at. I mean, the
Speaker 1: main thing that emerging markets have in common is that
Speaker 1: therefore than us. The other thing that's important is to
Speaker 1: politics matter more than economics, or relatively more visibly economics
Speaker 1: than than in developed markets. But of course, as we're
Speaker 1: seeing nowadays, um, you've got rapidly increasing importance of politics
Speaker 1: in the in Europe and in the United States. You
Speaker 1: talk about the Chinese currency, and I wonder sort of
Speaker 1: what your outlook is for it here in the year ahead.
Speaker 1: You think it's not gonna perhaps weekend as much as
Speaker 1: as as others would. What's your outlook for the the
Speaker 1: after you went this year for the for the Chinese? Yes, yeah, well,
Speaker 1: I think we're expecting it to go down a bit.
Speaker 1: But starting from where we are now, it's gone quite
Speaker 1: a long way. And you're looking at a country where
Speaker 1: the you know, the ruling communist party is most of
Speaker 1: all naturally inclined to try to control things and they've
Speaker 1: particularly started to clamp down and try to control capital
Speaker 1: movements on on a big scale as you probably know,
Speaker 1: um and where, and they're going to want to preserve
Speaker 1: because the the sort of confidence and general feeling of
Speaker 1: good times at least through the Big Congress at the
Speaker 1: end of this year, which is the halfway mark for
Speaker 1: the current leadership in its fire in his tenure, his
Speaker 1: tenure spelling power. The halfway mark is is this autumn
Speaker 1: so so on the whole we think that the Chinese
Speaker 1: currencies is going to go down, not up, but it's
Speaker 1: not going to go down big time. Charles Duma, thank
Speaker 1: you so much. Too short today with Lamber Street Research.
Speaker 1: Much to talk. I will come back with Charles Duma.
Speaker 1: Uh in the coming weeks on the Netherlands in the
Speaker 1: French election as Uh well, I guess it is a
Speaker 1: passing of technological history. Mersa Mayor Alex Yahoo. Brian Weezer
Speaker 1: does detailed reports and usually in the back there's some
Speaker 1: form of discounted cash flow model. Brian Weezer joins us
Speaker 1: from Pivotal Research. Brian in an October note, you slotted
Speaker 1: in one, two, three, four or five, six, seven, eight
Speaker 1: nine lines with a couple of plug ins, and the
Speaker 1: mother law plugins is what Verizon is gonna pay for Yahoo?
Speaker 1: Is that the bombshell to come that Verizon is going
Speaker 1: to say, no, this is the new price. I think
Speaker 1: that's entirely plausible. I mean it's it's difficult to know
Speaker 1: with any precision whatsoever. Um, we don't know how much
Speaker 1: a goal flexibility they have. Um, you know, but the
Speaker 1: thing from a Yahoo perspective and from a materiality perspective,
Speaker 1: it doesn't really matter very much. I mean, a billion here,
Speaker 1: a billion there. Of course, pretty soon we're talking real money.
Speaker 1: But um, for the purposes of how one looks at
Speaker 1: the stock still presently knows Yahoo. It's pretty irrelevant. Okay,
Speaker 1: I'll go with that. And David, these numbers are important, David,
Speaker 1: I want want to jump in here. Weezer has the
Speaker 1: core business at three point eight billion, and the value
Speaker 1: of Japan is in the vicinity of six point eight billion.
Speaker 1: I mean that gives you an idea of the the
Speaker 1: stub you the Ali Baba group is a ginormous so
Speaker 1: what four seven? Yeah, by what happens to that company?
Speaker 1: You have this spinoff largely charged with caring for those
Speaker 1: shares of of Ali Baba and the Yahoo Japan holdings.
Speaker 1: What's that company going to do? In other words, what
Speaker 1: would a director on that board be charged with doing
Speaker 1: here going forward? Good? Yeah, well, this is why it's
Speaker 1: been almost more surprising that anyone's been surprised or that
Speaker 1: there's been so much suppress about you know, the the
Speaker 1: AK filet yesterday. The future entity is all about tax optimization,
Speaker 1: and that's where the value is created. It's not about
Speaker 1: operating anything. It's about UM being able to identify advisors
Speaker 1: and assess a different UH advice that they might provide
Speaker 1: in terms of different ways to structure the assets UM
Speaker 1: and involves a lot of waiting around. I think that's
Speaker 1: probably the best way to characterize it. UM anticipating you know,
Speaker 1: all the research that one could do around what tax
Speaker 1: policies will be I mean, which are obviously thrown up
Speaker 1: in greater flux. Now UM is probably some of the
Speaker 1: most important work that anyone can theoretically do. UM. It's
Speaker 1: not it's it's not a company anymore. It's not operating business.
Speaker 1: I wonder sort of what the verdict is going to
Speaker 1: be here on Marissa Meyer. Remember hearing Mark Benny Off
Speaker 1: of salesforce on Bloomberg Television, really praising her as an
Speaker 1: executive and as a leader. I wonder what her future
Speaker 1: looks like once she is extricated from this company, where
Speaker 1: these companies, after this sale is complete, once the deal
Speaker 1: is done, what happens to Marissa Meyer. That's a great question. Um,
Speaker 1: you know, I mean, I think there's a lot of
Speaker 1: people who try to be public company CEOs and it
Speaker 1: doesn't always work out. And uh, um, here was a
Speaker 1: situation where had someone elevated who wasn't particularly well prepared
Speaker 1: to run a large company. Um and um, you know
Speaker 1: that that that this person one will be very wealthy
Speaker 1: and able to do a lot of different things with
Speaker 1: you know, her own or possibly other people's money. But um,
Speaker 1: it's hard to imagine, you know what, wall Street would
Speaker 1: not be supportive, I would say, Um, it's hard to
Speaker 1: imagine wall Street being supportive of her future public company.
Speaker 1: Um role Um. I don't think that they might have
Speaker 1: been support when this when she put into this world
Speaker 1: because there's something of a star or placed around her. Um.
Speaker 1: At the time, Um, and I don't know if you
Speaker 1: remember my notes at the time, I was just baffled
Speaker 1: that they put her in the job. You've got a
Speaker 1: Star War two. Uh, Brian, Brian, this is outside your watch,
Speaker 1: but I'm gonna try it anyways because I think it's
Speaker 1: something of interest to our listeners. Bloomberg Intelligence and John Butler,
Speaker 1: with their great work, have the eb dom margin the
Speaker 1: profit folks down the income statement, but before net income,
Speaker 1: it's fifty cents on the dollar for a T and
Speaker 1: T wire excuse me, Verizon Wireless forty seven cents on
Speaker 1: the dollar for a T and T. And the other
Speaker 1: two trail are the cell phone bills that we pay
Speaker 1: every month. Are they just basically organized theft of a
Speaker 1: monopoly or do appoly or twoperly? I mean, those are
Speaker 1: stunning margins that Bloomberg Intelligence is calculating. Well, I'll of
Speaker 1: this out. You do need to be mindful of the
Speaker 1: capital expenditures. Uh. For starters, um knowing what the VADA
Speaker 1: of any given company is without knowing the CAPEX is,
Speaker 1: it's not a useful number, um. And in the capex
Speaker 1: intensive business. And this is true whether we're talking about
Speaker 1: the you know, m v p d s or the
Speaker 1: cable operators, or we're talking about wireless players infrastructure providers.
Speaker 1: I mean how are we counting for the capital investment
Speaker 1: in in towers and all starts of equipment, UM subsidies
Speaker 1: that go into our UM handsets, etcetera. I don't cover
Speaker 1: the telco space, so I don't kind of pine uts
Speaker 1: to whether they're high or low relative to where they
Speaker 1: should be. But um, but no, it's not a particularly
Speaker 1: meaningful number by itself. Let's just ask you here, returning
Speaker 1: to Yahoo, UM, just sort of who will be on
Speaker 1: this board? I said, six members are leaving, none of
Speaker 1: them that well known to me. Who's going to remain here? Uh?
Speaker 1: And then also just a question of attention to that, Uh,
Speaker 1: what's kind of due diligence? Is Verizon doing it this point?
Speaker 1: We've had these two big breaches. Where do these two
Speaker 1: big breaches? What is Verizon doing at this point? Yeah? Well,
Speaker 1: I actually I'm not particularly familiar with the board members either. UM.
Speaker 1: I mean we do have I believe the former CFO
Speaker 1: of I sees there. But it really is optimally a
Speaker 1: board of of of financial UH and tax professionals, because
Speaker 1: ultimately that's the skill set, if you will, that's required
Speaker 1: to assess UM the direction of the corporate entity. So
Speaker 1: there's that UM, you know, to to rise in UM.
Speaker 1: You know, actually interestingly I should I should note that
Speaker 1: going back to your question on the BADA, I mean
Speaker 1: there's concerns around topline growth in general for telto's because
Speaker 1: their legacy businesses of wireline phones is declining. UM that
Speaker 1: wireless services are not growing at a particularly to bus
Speaker 1: to pace if at all. UM, And I think there's
Speaker 1: been this view that that advertising can be a growth
Speaker 1: driver given the data that exists and which isn't really
Speaker 1: being monetized, so they degree that I think the terriers
Speaker 1: think it can be can can make the advertising more valuable. Now,
Speaker 1: to be clear, this is a very optimistic view, willfully optimistic.
Speaker 1: One could even argue UM. Telcos around the world, from
Speaker 1: sin Tell to Telenor to Orange UM have all adhered
Speaker 1: to this strategy in one form or another, baby steps,
Speaker 1: mostly veries and arguably making the biggest steps with the
Speaker 1: push to buy first day well and technically the operating
Speaker 1: business of Yahoo. UM. Now, will they be able to
Speaker 1: negotiate some kind of price reduction? Probably how much hard
Speaker 1: to say, UM, But ultimately you know, will will they
Speaker 1: build a better business inside of a well than a
Speaker 1: O L would have been on its own. I think
Speaker 1: almost certainly it doesn't necessarily change the broader narrative or
Speaker 1: necessarily reduce your phone bill. Okay, we have to believe
Speaker 1: it their prime Wiser. Thank you for the update, particularly
Speaker 1: there on who Mr Weezer is with Pivotal Research Group.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
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Speaker 1: you prefer. I'm out on Twitter at Tom Keene. David
Speaker 1: Gura is at David Gura. Before the podcast, you can
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