WEBVTT - Amazon is a Great Competitor, Langone Says 0:00:00.080 --> 0:00:12.960 Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jai Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.120 Bloomberg dot Com, and of course on the Bloomberg He 0:00:33.280 --> 0:00:35.840 is Home on arranged John Sylvia with us from Wells Fargo, 0:00:35.880 --> 0:00:38.960 and we're thrilled not to bring them in right now. John. 0:00:39.000 --> 0:00:41.840 It's not that there's a complacency right now, but we're 0:00:41.840 --> 0:00:44.680 all enjoying three and a half four whatever the percent 0:00:45.280 --> 0:00:48.680 g d P is nominal GDP of six make America 0:00:48.760 --> 0:00:53.360 great again? Seven percent nominal GDP. What's the Wells Fargo 0:00:53.479 --> 0:00:57.440 forecast for the next six or eight quarters? What's the 0:00:57.520 --> 0:01:01.760 glide path of economic growth? The live plats for us 0:01:01.800 --> 0:01:04.160 are slower. I agree with you very much on the 0:01:04.200 --> 0:01:07.440 complacency of you know, the foreign four percent plus that 0:01:07.520 --> 0:01:09.880 we're going to see on Friday, the three percent we've 0:01:09.880 --> 0:01:13.080 probably seen in a third quarter. But to sustain that 0:01:13.200 --> 0:01:16.000 over time, you still need the gains and productivity which 0:01:16.000 --> 0:01:19.319 are yet to appear, and you still need significant improvement 0:01:19.360 --> 0:01:22.600 in labor force participation rates. What we are seeing some 0:01:22.800 --> 0:01:27.560 improvement there, but again to sustain that three percent growth. Um, 0:01:27.600 --> 0:01:29.440 I think the market is a little bit well, I 0:01:29.440 --> 0:01:31.000 think the market a general is a little bit too 0:01:31.000 --> 0:01:35.199 complacent given what I see as conflicts. And you've already 0:01:35.200 --> 0:01:39.120 talked about this this morning, Tom Oil with respect Iran, 0:01:39.200 --> 0:01:43.120 the trade tensions that go on, and then the coming 0:01:43.800 --> 0:01:46.959 shrinking of the Fed's balanche and raising short term interest rates, 0:01:47.720 --> 0:01:52.120 John Sylvia. On Friday, while other people may have been 0:01:52.160 --> 0:01:54.880 looking in one direction, we were looking at a report 0:01:54.920 --> 0:01:59.200 from the Congressional Budget Office, this is the nonpartisan CBO. 0:02:00.360 --> 0:02:04.760 They said that new legislation enacted since the release of 0:02:04.800 --> 0:02:08.960 the February budget would add more than a hundred billion 0:02:09.040 --> 0:02:12.880 dollars to the deficit. Now this would push it over 0:02:13.040 --> 0:02:19.640 a trillion dollars. Can you connect economic performance as measured 0:02:19.639 --> 0:02:23.600 by g d P and how that connects to estimates 0:02:24.160 --> 0:02:28.360 about what will happen to the deficit if we don't 0:02:28.400 --> 0:02:32.000 reach that four Well, I mean that that is Indeed, 0:02:32.040 --> 0:02:36.000 what the CBO was saying is that the deficit rises. 0:02:36.040 --> 0:02:38.480 Now that surprises people in the sense that, well, wait 0:02:38.520 --> 0:02:42.120 a minute, we're seeing a better economy. Shouldn't we have 0:02:42.200 --> 0:02:45.040 better tax revenue as well in part that that certainly 0:02:45.120 --> 0:02:48.280 is true. Um, but when you're looking at that differsit 0:02:48.360 --> 0:02:51.240 it does suggest two things. Interest rates are rising, so 0:02:51.280 --> 0:02:54.160 the interest expense that goes along with all that federal 0:02:54.200 --> 0:02:57.400 debt um is going to continue to increase. In second, 0:02:57.760 --> 0:03:01.800 for CBO, their long run economic objections, uh talk about 0:03:01.800 --> 0:03:04.200 economic growth more like two two and a half and 0:03:04.240 --> 0:03:07.880 certainly not three. So those two problems, the interest expense 0:03:07.919 --> 0:03:11.840 and the slower growth over time are again combined with 0:03:11.919 --> 0:03:14.960 the Fed shrinking its balary sheet going to create problems. 0:03:15.240 --> 0:03:17.720 What do real rates do within this dynamic? I mean, 0:03:17.720 --> 0:03:20.960 if we've got nominal GDP squeezing down and you're looking 0:03:21.000 --> 0:03:25.680 for a slow down in inflation adjusted economic growth is well, 0:03:25.880 --> 0:03:28.000 what do real rates do? And then within that, John 0:03:28.040 --> 0:03:33.440 your expertise at real wages, Well, again, a real rates rise. Again, 0:03:33.520 --> 0:03:36.320 the cost of capital starts to rise. It sets a 0:03:36.400 --> 0:03:40.280 higher barrier for business investment going forward. And it's not 0:03:40.440 --> 0:03:42.600 you just not you know, going to be the end 0:03:42.640 --> 0:03:44.800 of the world, but it does mean the real rates rise, 0:03:45.200 --> 0:03:47.880 it's going to put a higher bar for anybody trying 0:03:47.920 --> 0:03:50.760 to invest in terms of expected rate of return. And 0:03:50.880 --> 0:03:54.440 once again Tom, when you're talking about a slower nominal 0:03:54.520 --> 0:03:59.600 GDP number. You're talking about the lower returns to what 0:04:00.040 --> 0:04:05.120 to labor and capital going forward, John, I want to 0:04:05.160 --> 0:04:08.080 connect a couple of pieces. One is the g d P, 0:04:09.080 --> 0:04:12.400 One is tax revenue in the deficit, and then the 0:04:12.480 --> 0:04:15.600 way the government actually puts its budget together. There's the 0:04:15.640 --> 0:04:20.800 mandatory spending and then there's the discretionary spending. Just as 0:04:20.839 --> 0:04:25.720 an example, some portion of the Veterans Affairs budget is 0:04:25.760 --> 0:04:29.120 going to be moved to discretionary, but they've said, the 0:04:29.200 --> 0:04:31.479 Republicans have said that they're going to have to find 0:04:31.520 --> 0:04:36.000 cuts somewhere else in order to balance payments to veterans 0:04:36.240 --> 0:04:40.520 who want to take private insurance. Do you see that 0:04:40.600 --> 0:04:44.760 happening in more categories because of the deficits. Well, I 0:04:44.760 --> 0:04:48.640 appreciate the government trying to do that, but you know, 0:04:48.720 --> 0:04:51.920 mandatory is mandatory as far as I understand, And so 0:04:52.040 --> 0:04:54.599 the challenges when you look at the US budget and 0:04:54.640 --> 0:05:00.200 again looking at the CBO reports, increasingly most federal and 0:05:00.320 --> 0:05:06.119 spending now is entitlements plus net interest expense, meaning that 0:05:06.120 --> 0:05:10.039 that discretionary portion is shrinking and is going to continue 0:05:10.080 --> 0:05:13.279 to shrink over time. It's gonna be extremely difficult, you know, 0:05:13.360 --> 0:05:17.280 to to really cut anything with respecting mandatory spending because 0:05:17.320 --> 0:05:22.960 those come under the entitlements, federal pensions, disability payments, UM, Medicaid, 0:05:23.640 --> 0:05:26.440 all those other issues. So again, uh, you know, I 0:05:26.440 --> 0:05:30.480 would say that you've got a challenge ahead of us again, complacency. 0:05:30.560 --> 0:05:34.400 Going back to Tom's first point. Uh, yeah, you can 0:05:34.520 --> 0:05:37.560 enjoy what's going on today, but you cannot be complacent 0:05:37.960 --> 0:05:40.080 on the outlook for the next two to five years. 0:05:40.480 --> 0:05:42.400 What have we learned from the Tax Act? I mean, 0:05:42.440 --> 0:05:45.040 it's getting to be almost on the edge of ancient history. 0:05:45.040 --> 0:05:47.839 Although I'm struck John by how many people are running 0:05:47.800 --> 0:05:51.000 in your don't trust their worthholding right now. They're really 0:05:51.000 --> 0:05:53.719 not sure what happens next spring. But what have we 0:05:53.800 --> 0:05:58.400 learned about the tax active months ago? Well, go back 0:05:58.400 --> 0:06:01.800 to your own statement, Tom, if you're not sure about 0:06:01.839 --> 0:06:04.440 your withholding six months or a year from now, or 0:06:04.440 --> 0:06:07.640 two years from now, if some of these provisions are 0:06:07.680 --> 0:06:10.400 more temporary than permanent, you're not going to change your 0:06:10.480 --> 0:06:14.680 permanent behavior. Yes, you'll enjoy fund right now. It will 0:06:14.720 --> 0:06:17.279 be a good time and the economy is moving ahead, 0:06:17.640 --> 0:06:19.720 and that's what the Tax Act was supposed to do. 0:06:20.360 --> 0:06:26.000 But can that tax program alter the productivity and labor 0:06:26.040 --> 0:06:29.360 force participation rate over the long run to make a 0:06:29.440 --> 0:06:33.680 significant difference. So our estimates is probably zero point two 0:06:33.680 --> 0:06:37.839 to zero point three percent change in potential GDP going forward. 0:06:38.200 --> 0:06:41.360 UM still doesn't still doesn't get us percent. We're a 0:06:41.360 --> 0:06:43.880 little bit short at three percent time, John Sylvia, thank 0:06:43.880 --> 0:06:45.719 you so much. John. I'm gonna say this folks for 0:06:45.720 --> 0:06:48.400 the first time today, but I'll repeat it throughout the 0:06:48.520 --> 0:06:54.479 day tonight, PBS American Masters, Ted Williams. I believe Pim Fox, 0:06:54.560 --> 0:06:58.120 John Sylvia, we'll be tuning into that. I think somehow 0:06:58.120 --> 0:07:01.200 know that to be in case. John Sylvia, fall River 0:07:01.320 --> 0:07:20.600 and Wells Fargo with us today. Goldner Montevali joined us 0:07:20.640 --> 0:07:24.280 reporting for Bloomberg from Tehran. Goldner, let me start with 0:07:24.400 --> 0:07:28.200 you as well. Who has Mr Rohani's back? Who has 0:07:28.800 --> 0:07:32.920 his political support? Is it domestic or is it so 0:07:33.000 --> 0:07:40.040 important that it's Beijing? Um, that's as It's a good question. 0:07:40.160 --> 0:07:44.760 I think it's unclear right now what China's position is 0:07:44.760 --> 0:07:47.440 going to be. I think Uranians have been very interested, 0:07:48.280 --> 0:07:50.880 UM to see what Beijing will do in the in 0:07:50.920 --> 0:07:53.920 the coming months, particularly with the deadlines for the sanctions 0:07:54.120 --> 0:07:57.080 coming up, because they're very aware here. I think both 0:07:57.280 --> 0:08:01.680 officials and ordinary Iranians, those who at least keep tabs 0:08:01.720 --> 0:08:06.240 on the news, are aware of this, this trade war 0:08:06.400 --> 0:08:09.520 that that Trump and Trump has engaged Beijing, and they're 0:08:09.560 --> 0:08:11.720 aware of that, and I think they're waiting to see 0:08:11.960 --> 0:08:14.800 what China will do. I know that China has already 0:08:14.880 --> 0:08:18.400 come out and said that you know it, it wants 0:08:18.440 --> 0:08:22.080 to support the nuclear deal UM and I think it's 0:08:22.080 --> 0:08:24.440 even gone further than that to say that Trump can't 0:08:24.480 --> 0:08:29.000 force it from not buying Iranian um oil. But I 0:08:29.040 --> 0:08:35.320 think in terms of Rahani's domestic constituents and his support here, 0:08:36.000 --> 0:08:39.240 he's right now under a huge amount of pressure domestically. 0:08:39.840 --> 0:08:44.040 People are frustrated with the government here. But I think 0:08:44.320 --> 0:08:49.800 that their sense that the US and Trump specifically is 0:08:49.840 --> 0:08:52.960 waging an economic war on the country which will affect 0:08:52.960 --> 0:08:58.319 their livelihoods, will trump any kind of um you know, 0:08:59.360 --> 0:09:01.840 any kind of frustration that they do have with the government, 0:09:01.920 --> 0:09:06.520 which which is pretty high at the momentum gonor. Of course, 0:09:06.760 --> 0:09:09.960 the tweeter President Trump came hours after President Rohani warned 0:09:09.960 --> 0:09:13.880 the US against threatening the nation's oil exports. He also 0:09:13.960 --> 0:09:17.160 called it the time actually for improved relations with its neighbor, 0:09:17.480 --> 0:09:21.319 including its arch rival Saudi Arabia. Does this get escalated 0:09:21.400 --> 0:09:23.200 and if it does, we find out this week or 0:09:23.200 --> 0:09:27.040 could it escalate in the next couple of months. I 0:09:27.679 --> 0:09:31.360 don't know, I think again, because of those sanctions deadlines, 0:09:31.480 --> 0:09:33.839 there are quite a lot of unanswered questions. And one 0:09:33.880 --> 0:09:35.839 of the big things that we don't know yet is 0:09:35.880 --> 0:09:38.680 what the Europeans have managed to do and the kind 0:09:38.679 --> 0:09:42.360 of rescue package and those mechanisms that they've been trying 0:09:42.400 --> 0:09:46.280 to secure and to find in order to salvage and 0:09:46.880 --> 0:09:50.840 save the nuclear deal. That remains the big question mark here. 0:09:51.120 --> 0:09:53.200 We have to see what happens with that, whether Iran 0:09:53.320 --> 0:09:56.120 is going to accept it, whether it's going to be enough, 0:09:56.679 --> 0:10:00.439 and then I think the escalation will posted we start 0:10:00.480 --> 0:10:03.840 from there. I have the feeling because Rawhani's comments yesterday 0:10:03.880 --> 0:10:07.400 were very we were quite strong, and they've been terts 0:10:07.400 --> 0:10:10.800 recently anywhere because of trumpsactions, but they were stronger than 0:10:11.120 --> 0:10:15.880 than usual perhaps, and so my prediction is is that 0:10:15.920 --> 0:10:18.600 Iran is going to take what it will see as 0:10:18.920 --> 0:10:22.400 the moral high ground in its next response to this tweet, well, 0:10:22.679 --> 0:10:38.560 thank you so much for your importing from Tehran in 0:10:38.679 --> 0:10:42.880 Banking PM. There's Keith Briette in Woods, which is out 0:10:42.880 --> 0:10:46.959 there far more than just sell side and analysis. They 0:10:46.960 --> 0:10:52.199 were acclaimed for decades ago. Uh, it is about transactions, 0:10:52.240 --> 0:10:56.560 about mergers, about acquisitions, combinations as well. And that's a 0:10:56.559 --> 0:10:59.920 good introduction for the gentleman from Middlebury. Yes, indeed, well, 0:11:00.040 --> 0:11:03.040 let's bring in Tom Michel. He is, of course with 0:11:03.080 --> 0:11:07.840 the KBW, a Stephal company. He is well, as you mentioned, 0:11:07.880 --> 0:11:10.160 really a veteran of the industry, and he is the 0:11:10.160 --> 0:11:14.640 president and chief executive officer and he directs all business 0:11:14.679 --> 0:11:18.200 lines there. Tom, thanks very much for being with us. 0:11:18.240 --> 0:11:21.200 Just a couple of questions having to do with that 0:11:21.320 --> 0:11:24.800 idea of acquisitions and mergers. Last week we got State 0:11:24.880 --> 0:11:30.120 Street and Charles River Systems, People's United acquiring vend Lease, 0:11:31.160 --> 0:11:34.160 and then you've got a world in which Venmo and 0:11:34.320 --> 0:11:39.720 Square participate. What's the future for big bank like Bank 0:11:39.840 --> 0:11:42.720 of America when you see these other kind of tucking acquisitions, 0:11:42.720 --> 0:11:45.719 there doesn't seem to be a lot of big acquisition, 0:11:45.760 --> 0:11:48.520 big takeovers. What's the future for bank like b of 0:11:48.600 --> 0:11:51.480 A in this context. Well, first of all, good morning 0:11:51.520 --> 0:11:53.280 Tim and Tom, and it's great to be with you 0:11:53.320 --> 0:11:56.880 and thank you for having me join you. Uh well, 0:11:57.000 --> 0:12:00.400 Bank America, being one of the big four, has a 0:12:00.480 --> 0:12:05.160 deposit market share that is right around ten percent, and 0:12:05.200 --> 0:12:09.040 as you may recall, Congress past to law that said 0:12:09.080 --> 0:12:13.520 that no bank can go above ten percent during normal times. 0:12:13.520 --> 0:12:15.760 I mean, my sense is in a crisis that could 0:12:15.800 --> 0:12:18.839 be changed, but in normal times, no big bank can 0:12:18.880 --> 0:12:22.839 go over ten percent via acquisition. So really the way 0:12:22.880 --> 0:12:26.760 they need to grow now is organically. And what we're 0:12:26.800 --> 0:12:30.400 seeing happen at Bank America in particular and the other 0:12:30.480 --> 0:12:34.360 big banks is their profitability is ramping. And it's ramping 0:12:34.440 --> 0:12:37.960 because a tax reform. It's ramping because they've really put 0:12:38.200 --> 0:12:41.960 um the crisis behind them. Uh. The environment is a 0:12:42.000 --> 0:12:45.040 good environment. Uh. The in other words, the economy is 0:12:45.080 --> 0:12:49.360 doing well, and we're seeing them investing a lot into 0:12:49.559 --> 0:12:53.920 tuck in acquisitions as well of non bank type not 0:12:53.920 --> 0:12:58.960 not non depositories, as well as making acquisitions and investments 0:12:59.000 --> 0:13:04.160 in fintech and digital banking. I think digital banking is 0:13:04.320 --> 0:13:06.400 really going to be one of the themes that's going 0:13:06.440 --> 0:13:09.480 to be talked about much more over the course of 0:13:09.520 --> 0:13:12.040 the next couple of years in banking. Do you expect 0:13:12.120 --> 0:13:16.040 Bank of America to make an acquisition similar to a 0:13:16.120 --> 0:13:20.920 square of Venmo. You know, I'm not aware of their 0:13:21.040 --> 0:13:25.360 specific acquisition plans, but my sense is that they have 0:13:25.520 --> 0:13:29.760 the wherewithal to certainly do something like that. UM. You 0:13:29.840 --> 0:13:33.719 mentioned Square and you mentioned Venmo. Those are both terrific companies. 0:13:34.000 --> 0:13:37.840 UM Bank America, I believe, is one of the seven 0:13:37.880 --> 0:13:41.520 investors in Zel, which is a competitor to Venmo, Which 0:13:42.280 --> 0:13:45.200 leads me to believe that that's probably not a likely 0:13:46.160 --> 0:13:49.160 candidate for them. Doesn't mean it's impossible, but I think 0:13:49.160 --> 0:13:52.839 probably unlikely. UM. So they're headed down that path, but 0:13:53.000 --> 0:13:56.280 just with a different provider. It's their own company. Scale 0:13:56.360 --> 0:13:58.560 is the word of the day. It's it's you know, 0:13:58.600 --> 0:14:01.960 if you go to an NBA act, your scale scale, scale, scale, scale, 0:14:01.960 --> 0:14:05.280 scale scale. Are the regional's going to scale up to 0:14:05.440 --> 0:14:08.280 join the two big defails? I mean, are we going 0:14:08.360 --> 0:14:13.560 to have more too big defails size banks? I I 0:14:13.600 --> 0:14:15.600 don't think we're going to have more too big to 0:14:15.640 --> 0:14:19.800 fail banks because those banks are so enormous as they 0:14:19.920 --> 0:14:23.480 approach a trillion dollars or more in assets. Uh, it 0:14:23.520 --> 0:14:27.080 would be a lot of consolidation to get there. I 0:14:27.120 --> 0:14:29.040 think the way the rest of the industry is going 0:14:29.080 --> 0:14:31.680 to think about it is how do they get enough 0:14:31.720 --> 0:14:36.040 scale to compete and what business are there regional competitors 0:14:36.120 --> 0:14:40.080 going to look to be in. Uh, the retail business 0:14:40.280 --> 0:14:43.600 is going to be one of a business of high 0:14:43.840 --> 0:14:49.840 benefits of scale, especially as digital banking is being more 0:14:49.880 --> 0:14:54.360 and more received by consumers. So you're gonna see over time, 0:14:54.400 --> 0:14:58.680 I think the retail banking move somewhat away from the 0:14:58.720 --> 0:15:03.680 branch and more towards the phone and mobile applications. UH. 0:15:03.720 --> 0:15:06.240 With commercial banking, I think that's a little bit different. 0:15:06.280 --> 0:15:09.320 That hasn't moved as much and probably would move a 0:15:09.360 --> 0:15:12.440 little bit more slowly. But I think these regional banks 0:15:12.800 --> 0:15:16.200 need to stand up and get more efficiencies to compete 0:15:16.240 --> 0:15:19.280 with the biggest banks. And now there's going to be 0:15:19.320 --> 0:15:22.440 an opportunity to do that because of the legislative reform 0:15:22.480 --> 0:15:25.560 of a few weeks ago, where that fifty billion dollar 0:15:25.640 --> 0:15:29.200 barrier for heightened regulation has been moved upwards to a 0:15:29.320 --> 0:15:33.680 hundred or two hundred and fifty billion, depending upon your company. 0:15:34.000 --> 0:15:39.600 So investing companies like Capital One pm C, I think 0:15:39.640 --> 0:15:42.680 you know those are fine banks. Um, I'm not. You know, 0:15:42.720 --> 0:15:46.320 they have I think plenty of they have plenty of scale. 0:15:46.360 --> 0:15:49.560 I don't think they necessarily have to need to have 0:15:49.680 --> 0:15:53.880 to do something. But um, But nonetheless, I'm sure they're 0:15:53.880 --> 0:15:57.120 always eager to find areas for more efficiency. But I 0:15:57.480 --> 0:16:01.640 think the super regional banks generally have the wherewithal to 0:16:01.680 --> 0:16:04.280 compete with the bigger banks. Um. I think it's the 0:16:04.320 --> 0:16:06.720 smaller banks below them that are going to feel more 0:16:06.760 --> 0:16:09.400 pressure to get more efficiency. Well, okay, that's come on, 0:16:09.440 --> 0:16:12.680 that's Keith Fett. We'll talk for mergers. When the merg 0:16:13.840 --> 0:16:16.640 do you see always said that more efficiency is more 0:16:16.760 --> 0:16:23.000 synery synergies? You use that synergies? When does the merger 0:16:23.120 --> 0:16:26.280 frenzy start timing me? Rates are coming up? When does 0:16:26.280 --> 0:16:31.360 it click in? Well, unfortunately, you may be seeing it 0:16:31.520 --> 0:16:35.840 because uh, it's happening slower this cycle than in the past. 0:16:36.120 --> 0:16:38.800 We went back and checked and I think the most 0:16:38.880 --> 0:16:43.280 prolific company we found in our analysis was Norwest did 0:16:43.840 --> 0:16:47.160 more than fifteen acquisitions in one year. If you went 0:16:47.200 --> 0:16:49.360 back to the boom years, I don't know exactly what 0:16:49.480 --> 0:16:53.200 year that was in. But today, if you want the 0:16:53.200 --> 0:16:56.080 most prolific bank in America, you may do two or 0:16:56.200 --> 0:17:00.520 possibly three mergers in a year. It is just down 0:17:00.640 --> 0:17:05.800 because of the regulatory um apparatus that's more stringent than 0:17:05.840 --> 0:17:08.880 it has been in the past. So so and then 0:17:08.920 --> 0:17:11.560 also there are just fewer banks, So you could come 0:17:11.600 --> 0:17:14.040 in on a Monday and see a merger Monday in 0:17:14.080 --> 0:17:16.480 the past and there'd be a series of bank acquisitions. 0:17:16.840 --> 0:17:18.960 There are a quarter fewer banks in there were during 0:17:19.000 --> 0:17:23.399 the crisis. So so it's gonna happen, but at a 0:17:23.480 --> 0:17:27.160 more deliberate pace in my opinion. Uh. And I think 0:17:27.200 --> 0:17:30.800 the big big bank mergers are going to probably happen 0:17:31.000 --> 0:17:33.359 very slowly. I don't think there's going to be a 0:17:33.400 --> 0:17:36.159 sudden boom um. I think you're going to see it 0:17:36.200 --> 0:17:38.720 more in the regional banking space where probably the need 0:17:38.800 --> 0:17:42.960 for efficiency is is greater and scale is greater. You 0:17:43.040 --> 0:17:46.520 said need for efficiency. That leads me to Deutsche Bank. 0:17:47.240 --> 0:17:50.920 What do you believe is going to happen at dB? Well, 0:17:51.080 --> 0:17:56.280 you're really getting him in trouble this morning. Well help 0:17:56.359 --> 0:17:59.160 us of Deutsche Bank and particularly Deutsche Bank New York, 0:17:59.280 --> 0:18:03.120 Mr Michell. I think if you look at the valuation 0:18:03.160 --> 0:18:06.159 of the stock, you'd see a trades um at a 0:18:06.160 --> 0:18:09.560 at a big discount to books um and and it 0:18:09.680 --> 0:18:13.120 is below its peers, um and I and I think 0:18:13.160 --> 0:18:16.840 that that tells you that greater changes ahead. UM. I 0:18:16.880 --> 0:18:19.680 don't have any particular insights as to what I think 0:18:19.720 --> 0:18:22.680 is could happen, other than the fact that the bank 0:18:23.040 --> 0:18:27.040 needs to do something. The current status isn't working. Uh. 0:18:27.080 --> 0:18:30.760 And I think it's very hard to be a national 0:18:30.800 --> 0:18:34.400 and a global champion if if your stock is trading 0:18:34.440 --> 0:18:37.320 like that, So there's going to be a need to 0:18:37.359 --> 0:18:41.120 take strategic actions. Um. I Also one thing I will 0:18:41.200 --> 0:18:44.160 comment on just generally, not not just for Deutsche Bank, 0:18:44.280 --> 0:18:49.520 but the the American banking regulators responded to the oh 0:18:49.680 --> 0:18:54.960 seven o nine crisis by selling troubled big banks to 0:18:55.119 --> 0:18:58.560 even bigger banks. I don't think that's going to happen 0:18:58.640 --> 0:19:02.320 next time. Uh. I think that, and that's partly how 0:19:02.520 --> 0:19:04.840 the big global cities in the US got to be 0:19:04.960 --> 0:19:09.400 so big. Washington Mutual, bear Stearns ended up in JP 0:19:09.520 --> 0:19:13.760 Morgan's hands, wakovi A Wells Fargo's hands. So I think, 0:19:13.800 --> 0:19:16.479 what's gonna happen and those banks. It might have been 0:19:16.520 --> 0:19:18.520 the right thing to do at that time, But I 0:19:18.520 --> 0:19:21.840 think as as I've heard the policy discussion, I think 0:19:21.840 --> 0:19:24.480 that someone like Deutsche Bank, if there is a combination. 0:19:24.960 --> 0:19:26.760 I don't think the idea is going to be, let's 0:19:26.800 --> 0:19:29.040 find a single buyer for the whole thing. I just 0:19:29.080 --> 0:19:31.480 don't think that's gonna happen. To Michel, thank you so much, 0:19:31.480 --> 0:19:35.080 greatly appreciated. Chief Executive Officer, K B. W. Keith Branton. 0:19:35.080 --> 0:19:53.359 Wood's a stiff a company we're celebrating. I love capitalism. 0:19:53.359 --> 0:19:56.040 An American story. Ken Lan Going, co founder of home 0:19:56.119 --> 0:20:00.160 g built on the cover PIM A nostalgic photograph, a 0:20:00.160 --> 0:20:05.240 well Ian, a wreck Wellian photograph. I would say, kenn 0:20:05.320 --> 0:20:09.560 is that is that you with a shovel that kids 0:20:09.560 --> 0:20:13.600 better looking than I was? Okay, and I think they 0:20:13.640 --> 0:20:16.240 has a little eyes to have dark here well not 0:20:16.320 --> 0:20:19.040 now now I have no here. But that was my physique. 0:20:19.080 --> 0:20:21.040 That was pretty much it. The only thing about that 0:20:21.160 --> 0:20:25.040 picture and I lost the argument was we didn't use 0:20:25.119 --> 0:20:28.800 long handles shovels, shovels and construction. We use short handles 0:20:29.960 --> 0:20:33.119 for the handle, yes, yes, yes, exactly, but they for 0:20:33.520 --> 0:20:36.240 the for the layout, for having the kids standing and 0:20:36.280 --> 0:20:39.480 putting his foot on a shovel and having the babelhold 0:20:39.480 --> 0:20:41.679 a long handle, That's why they did it. But but 0:20:41.800 --> 0:20:44.080 other than that, it's it's exactly what I was. I 0:20:44.080 --> 0:20:46.120 have to go to work with a pair of jeans 0:20:46.160 --> 0:20:50.560 and work shoes and a T shirt. Yeah about now, 0:20:53.440 --> 0:20:55.000 I want to I want I want you to talk 0:20:55.040 --> 0:20:58.520 a little bit if you can, about walking away from 0:20:58.600 --> 0:21:01.480 deals and walking away from people that you do not 0:21:01.600 --> 0:21:05.040 feel you can do business with, because sometimes it seems 0:21:05.480 --> 0:21:10.080 those are the best decisions, and yet they go unsung. 0:21:10.880 --> 0:21:13.919 Tell us about walking away from deals. I have an expression, 0:21:15.080 --> 0:21:16.960 the best deals I ever did were the ones I 0:21:16.960 --> 0:21:24.760 didn't do. Okay, my bet on deals is essentially a people. 0:21:26.600 --> 0:21:31.919 When when I my nose tells me that I'm getting 0:21:32.359 --> 0:21:34.240 in with a group of people that I might wish 0:21:34.280 --> 0:21:40.240 I hadn't, I walk away. I walk away because when 0:21:40.240 --> 0:21:43.160 I look back at at the opportunities I've had, whether 0:21:43.200 --> 0:21:45.560 it was Bernie and Author and Pat Barrett Home Depot 0:21:45.640 --> 0:21:48.879 or Ross Perow and Mitch Hart, Tom Marcus, Tom Walter, 0:21:48.960 --> 0:21:51.960 all those guys at the d S, Derek Smith and 0:21:52.000 --> 0:21:55.240 Doug Curland at choice point, when I look at all 0:21:55.280 --> 0:22:00.840 of these deals that became usually successful of Pat Lexico, ration, Garriyer, 0:22:00.920 --> 0:22:04.960 Olbraham's brother Stephen, his brother Michael, these are people that 0:22:04.960 --> 0:22:08.720 that every time I've gotten near them. We've certainly had 0:22:08.760 --> 0:22:13.400 business problems at every case, but the culture and the 0:22:13.520 --> 0:22:16.919 character and the integrity the people allowed us to be 0:22:17.000 --> 0:22:21.199 objective in addressing challenges and problems we had. So I, 0:22:21.320 --> 0:22:23.639 you know, every time I looked back at a deal 0:22:24.400 --> 0:22:27.520 where it didn't work out very well, it was always 0:22:27.640 --> 0:22:31.760 me overriding my judgment about the people in the business. 0:22:32.200 --> 0:22:35.520 For example, we have a textile company called Unify, and 0:22:35.520 --> 0:22:38.240 the guy that ran at allan Mevin. I made my 0:22:38.359 --> 0:22:40.000 mind it before I met him. I wasn't going to 0:22:40.080 --> 0:22:42.199 do the deal, and then when I met him, I 0:22:42.320 --> 0:22:44.480 changed my mind because I knew this guy would move 0:22:44.480 --> 0:22:47.480 heaven and earth, and that's exactly what he's done. He 0:22:47.560 --> 0:22:50.280 built a fabulous company and it's still in business today. 0:22:50.320 --> 0:22:53.520 Every all of its its competitives, for the most part gone, 0:22:53.560 --> 0:22:58.000 Cone Mills, Brownington Industries, you name it, they're all gone. 0:22:58.760 --> 0:23:01.399 And and here's all Unifi. I just chuck it alof 0:23:01.640 --> 0:23:05.960 And so I can't stress enough the importance of the 0:23:06.080 --> 0:23:09.879 values and character and integrity of people you're in business with. 0:23:11.119 --> 0:23:13.280 There's one example in the book. I'm just wondering if 0:23:13.280 --> 0:23:15.760 you would expand on the name that a lot of 0:23:15.760 --> 0:23:21.000 people may have forgotten Sandy Sigloff. Yeah, no, Sandy Sigaloff 0:23:21.760 --> 0:23:24.080 was a man. He's now dead. May a soul rest 0:23:24.119 --> 0:23:26.200 in peace. I'm not sure I really mean that, but anyway, 0:23:26.280 --> 0:23:30.080 may a soul rest in peace. Sandy sigalaw few people. 0:23:30.720 --> 0:23:34.440 I'll give you a simple philosophy. Yet, if he determined 0:23:34.480 --> 0:23:37.399 that he wanted to let you go, whether he fired 0:23:37.440 --> 0:23:39.720 you or he just said, look, we don't need you anymore, 0:23:40.840 --> 0:23:43.520 he would tell people that it wasn't just enough to 0:23:43.560 --> 0:23:45.600 fire them, you had to destroy them, because if you 0:23:45.640 --> 0:23:48.399 didn't destroy them, they might come back one day and 0:23:48.480 --> 0:23:53.160 hurt you. And uh and you know that that told 0:23:53.200 --> 0:23:56.639 me a lot. That told me a lot about his 0:23:56.720 --> 0:24:02.119 emotional attachment to people. I I have been blessed my success. 0:24:02.840 --> 0:24:06.720 It's largely because of the talent and abilities of people 0:24:06.760 --> 0:24:09.320 I was in business with. I had something to do 0:24:09.400 --> 0:24:11.600 with it. But I'm saying to you, and I meant 0:24:11.600 --> 0:24:13.200 what I said in the book, I'm not a self 0:24:13.200 --> 0:24:15.600 made man. I am not a self made man. I 0:24:15.720 --> 0:24:18.040 say that not with any degree humility, but I say 0:24:18.080 --> 0:24:20.919 it in candor and honestly. Ken, what does retail do 0:24:20.960 --> 0:24:23.440 about Jeff Bezos and Amazon. I mean the time we've 0:24:23.480 --> 0:24:27.200 got left with you and I love Amazon is game changing? 0:24:27.280 --> 0:24:30.119 What what? What does? How does retail respond in a 0:24:30.119 --> 0:24:34.280 constructive way within capitalism? To Mr Bezos, Well, first of all, 0:24:34.320 --> 0:24:37.400 remember this, and there are two things that Jeff has 0:24:37.440 --> 0:24:42.280 got that to me make him a player. Number one, 0:24:42.359 --> 0:24:47.680 he's brilliant and number two he's humble. And boy, that's 0:24:47.680 --> 0:24:52.840 a winning combination. Of my book. Amazon is making Home 0:24:52.920 --> 0:24:57.760 Depot a better company, Believe it or not. Why because 0:24:57.880 --> 0:25:01.360 maybe we might have offered our custom is the alternative 0:25:01.560 --> 0:25:04.879 sitting on their butts and the houses and shopping, But 0:25:04.960 --> 0:25:07.240 I don't think we would have the intensity that we 0:25:07.320 --> 0:25:12.760 have now in making the online experience an opportunity for 0:25:12.800 --> 0:25:15.560 those people who want to shop from their home or 0:25:15.600 --> 0:25:19.280 who want flexibility and how they shop. And what are 0:25:19.280 --> 0:25:22.000