1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,199 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. I 7 00:00:32,320 --> 00:00:34,960 Speaker 1: am very pleased to welcome to the eleven three oh 8 00:00:35,000 --> 00:00:38,360 Speaker 1: Studios Banker to the World, Bill Rhodes, President, chief executive 9 00:00:38,360 --> 00:00:42,559 Speaker 1: Officer of william Our Rhodes Global Advisors, also author of 10 00:00:42,760 --> 00:00:45,400 Speaker 1: a book, Banker to the World's Leadership Lessons from the 11 00:00:45,400 --> 00:00:49,519 Speaker 1: front Lines of Global Finance, with a forward by Paul Volker. 12 00:00:49,760 --> 00:00:53,800 Speaker 1: Vocal Bill, I would love to get started with the 13 00:00:53,960 --> 00:00:56,760 Speaker 1: big question about China and North Korea right now in 14 00:00:56,800 --> 00:01:01,520 Speaker 1: markets UH, there is a perception that in general, traders 15 00:01:01,640 --> 00:01:08,000 Speaker 1: are underestimating the degree of risk with respect to North Korea, 16 00:01:08,080 --> 00:01:10,679 Speaker 1: the prospect of a conflict there, as well as with 17 00:01:10,840 --> 00:01:13,720 Speaker 1: China its response to that, as well as its ability 18 00:01:13,720 --> 00:01:17,080 Speaker 1: to rein in its own UH situation with an inflated 19 00:01:17,120 --> 00:01:20,959 Speaker 1: credit market. From your perspective, how dire is this situation 20 00:01:21,000 --> 00:01:24,280 Speaker 1: that's sort of developing in the region, and what's the 21 00:01:24,360 --> 00:01:26,600 Speaker 1: what's the best path forward here? Well, I think it's 22 00:01:26,640 --> 00:01:30,400 Speaker 1: the biggest single problem we face in the world today, UH, 23 00:01:30,440 --> 00:01:33,120 Speaker 1: and the only one that really can can help us 24 00:01:33,160 --> 00:01:37,520 Speaker 1: solve this UH is China, and China is right on 25 00:01:37,959 --> 00:01:43,280 Speaker 1: the cusp of the biggest conference, the biggest political event 26 00:01:43,760 --> 00:01:47,000 Speaker 1: in the last five years, which is their nineteenth Party Congress, 27 00:01:47,000 --> 00:01:52,080 Speaker 1: which begins on the eighteenth of October. Because the President 28 00:01:52,280 --> 00:01:54,840 Speaker 1: of China, Hi Jinping, who is as strong as leader 29 00:01:54,880 --> 00:02:00,560 Speaker 1: of China since Dong Jo Ping, UH, is planning to 30 00:02:00,680 --> 00:02:03,480 Speaker 1: make a number of announcements, including who is going to 31 00:02:03,560 --> 00:02:05,840 Speaker 1: be on the Polar Bureau of the Standing Committee of 32 00:02:05,880 --> 00:02:08,919 Speaker 1: the Polar Buro which runs the country, and there's a 33 00:02:09,000 --> 00:02:12,560 Speaker 1: lot of speculation that he may make some changes there 34 00:02:12,960 --> 00:02:16,120 Speaker 1: even to the premiership of Li Kao Chong, not clear 35 00:02:16,160 --> 00:02:19,320 Speaker 1: the rumors to that effect. And the person that's closest 36 00:02:19,320 --> 00:02:21,919 Speaker 1: to him is Once sh Shan, who I know well 37 00:02:22,000 --> 00:02:25,160 Speaker 1: from over the years, who is now leading in a 38 00:02:25,200 --> 00:02:29,440 Speaker 1: corruption campaign and people are watching that very closely. So 39 00:02:30,040 --> 00:02:33,320 Speaker 1: she Jumping does not want any problems to disturb this, 40 00:02:33,440 --> 00:02:36,080 Speaker 1: so he is very unhappy with what Kim jong un 41 00:02:36,200 --> 00:02:39,399 Speaker 1: is doing in Korea because this is making it very 42 00:02:39,400 --> 00:02:43,960 Speaker 1: difficult for China because people are leaning on China, mostly 43 00:02:44,000 --> 00:02:47,160 Speaker 1: the United States and President Trump to do something about 44 00:02:47,200 --> 00:02:52,440 Speaker 1: stopping Kim Jong un from continuing to conduct nuclear tests 45 00:02:52,919 --> 00:02:56,119 Speaker 1: and ballistic missile test because what he wants to do 46 00:02:56,720 --> 00:03:00,640 Speaker 1: is to marry the ballistic missile UH at the nuclear 47 00:03:00,639 --> 00:03:05,359 Speaker 1: warhead and threatened the United States, Japan, whatever, And so 48 00:03:05,400 --> 00:03:07,960 Speaker 1: the question is how do you stop them? And in 49 00:03:08,000 --> 00:03:10,640 Speaker 1: my mind, the sanctions that have been agreed upon at 50 00:03:10,680 --> 00:03:14,160 Speaker 1: the United Nations are helpful, but they're not a solution 51 00:03:14,240 --> 00:03:16,880 Speaker 1: and they take time. We know that from what happened 52 00:03:16,880 --> 00:03:20,240 Speaker 1: in Iran, South Africa, they don't happen overnight. So what 53 00:03:20,600 --> 00:03:23,799 Speaker 1: is necessary and what can stop Kim Jong un from 54 00:03:23,800 --> 00:03:26,560 Speaker 1: this and bring him to the table to negotiate, which 55 00:03:26,600 --> 00:03:29,960 Speaker 1: is what we would like to do, is to cut 56 00:03:30,000 --> 00:03:33,480 Speaker 1: off all his oil and gas supplies because the primary 57 00:03:33,600 --> 00:03:37,640 Speaker 1: user of oil and gas in North Korea or the 58 00:03:37,760 --> 00:03:41,040 Speaker 1: armed forces, and I think if we cut, if China 59 00:03:41,080 --> 00:03:44,920 Speaker 1: cuts off, which is gives them eight of their oil 60 00:03:44,960 --> 00:03:49,080 Speaker 1: and gas UH at any particular moment, they will come 61 00:03:49,120 --> 00:03:51,640 Speaker 1: to the table within a couple of weeks. The only 62 00:03:51,680 --> 00:03:54,160 Speaker 1: other oil and gas are getting is from Russia, maybe 63 00:03:54,160 --> 00:03:59,040 Speaker 1: ten through brokers in Southeast Asia. Other than that, I 64 00:03:59,160 --> 00:04:03,520 Speaker 1: do not think that the banking uh you know, the 65 00:04:03,560 --> 00:04:07,440 Speaker 1: banking measures taken on sanctions or any of the others 66 00:04:07,480 --> 00:04:10,120 Speaker 1: are going to work. I think the only thing that 67 00:04:10,160 --> 00:04:12,800 Speaker 1: will work is to cut off the oil supplies, and 68 00:04:12,880 --> 00:04:16,720 Speaker 1: China is the key to doing that. I think that 69 00:04:16,760 --> 00:04:19,159 Speaker 1: if we don't badger them too much, and you know, 70 00:04:19,400 --> 00:04:22,360 Speaker 1: do quiet diplomacy with him, I think, uh, you know, 71 00:04:22,400 --> 00:04:25,240 Speaker 1: all these statements going back and forth are not helpful. 72 00:04:25,600 --> 00:04:28,760 Speaker 1: I think some quiet diplomacy will do it because Shi 73 00:04:28,839 --> 00:04:32,160 Speaker 1: Jin Pain does not want his great moment of glory 74 00:04:32,760 --> 00:04:35,960 Speaker 1: to be affected by what's going on by Kim Jong oon. 75 00:04:36,080 --> 00:04:38,120 Speaker 1: I've been with him at one occasion four or five 76 00:04:38,200 --> 00:04:40,000 Speaker 1: years ago, and he made it very plain to me 77 00:04:40,480 --> 00:04:43,040 Speaker 1: that and the Chinese think this in general, that Kim 78 00:04:43,120 --> 00:04:45,520 Speaker 1: Jong un is a pain in the neck. But the 79 00:04:45,560 --> 00:04:48,600 Speaker 1: reason they haven't intervened and done anything earlier is they 80 00:04:48,600 --> 00:04:52,120 Speaker 1: do not want American influence on the Yellow That's why, uh, 81 00:04:52,160 --> 00:04:57,160 Speaker 1: you know, the Chinese invaded North Korea to support uh 82 00:04:57,560 --> 00:05:01,880 Speaker 1: the then government of Kim Il sung was because we 83 00:05:01,920 --> 00:05:04,040 Speaker 1: had we had sent troops in the Korean War right 84 00:05:04,080 --> 00:05:06,919 Speaker 1: to the Yallow River. It was one of McArthur's mistakes. 85 00:05:07,000 --> 00:05:09,599 Speaker 1: He underestimated the Chinese would go in. And the other 86 00:05:09,680 --> 00:05:14,120 Speaker 1: thing is if the regime collapses overnight, they're concerned about 87 00:05:14,160 --> 00:05:17,000 Speaker 1: all the refugees that may go into Manchuria Northern China. 88 00:05:17,440 --> 00:05:20,800 Speaker 1: But the Chinese do not like Kim jongun. They think 89 00:05:20,800 --> 00:05:24,719 Speaker 1: he's difficult, he's causing a problem, and particularly at this 90 00:05:24,839 --> 00:05:28,000 Speaker 1: great moment of importance for Shi Jin Pain. That's why 91 00:05:28,040 --> 00:05:30,400 Speaker 1: he's gone along with the earlier sanctions. But the only 92 00:05:30,440 --> 00:05:34,640 Speaker 1: one that will bring Uh Kim Jong un to the 93 00:05:34,720 --> 00:05:37,760 Speaker 1: table is to cut off all oil and gas supplies 94 00:05:38,160 --> 00:05:43,000 Speaker 1: to the country, and that will completely destabilize the military 95 00:05:43,040 --> 00:05:46,359 Speaker 1: because they can't function without oil and gas. We're speaking 96 00:05:46,400 --> 00:05:48,720 Speaker 1: with Bill Rhodes. He is the author of Banker to 97 00:05:48,760 --> 00:05:52,600 Speaker 1: the World, Leadership Lessons from the front Lines of Global Finance. 98 00:05:53,000 --> 00:05:55,520 Speaker 1: And Bill, I want to turn your attention now to 99 00:05:56,400 --> 00:05:59,479 Speaker 1: the Caribbean and Venezuela and Puerto Rico, because I know 100 00:05:59,520 --> 00:06:02,280 Speaker 1: that you are died your distinguished career at City Bank 101 00:06:02,680 --> 00:06:08,960 Speaker 1: in Venezuela. You know the Caribbean region very well. You 102 00:06:09,040 --> 00:06:12,279 Speaker 1: can vice Chairman of of City corps. What can you 103 00:06:12,360 --> 00:06:15,320 Speaker 1: tell us about the region as a result of these hurricanes, 104 00:06:15,320 --> 00:06:19,560 Speaker 1: and specifically what is necessary or what is possible rather 105 00:06:20,160 --> 00:06:25,320 Speaker 1: to fix the horrendous and catastrophic conditions that currently exist, 106 00:06:25,400 --> 00:06:27,279 Speaker 1: not only in Puerto Rico, but in many of these 107 00:06:27,760 --> 00:06:30,560 Speaker 1: live in Jamaica for a while also, so I remember it. 108 00:06:31,040 --> 00:06:34,679 Speaker 1: But I think the situation Puerto Rico's is particularly dire. 109 00:06:34,800 --> 00:06:38,240 Speaker 1: You have to remember that this is an island or 110 00:06:38,320 --> 00:06:41,719 Speaker 1: country because it's part of the United States. Uh, that 111 00:06:42,240 --> 00:06:45,760 Speaker 1: is basically in bankruptcy. That's a starter. When you take 112 00:06:45,760 --> 00:06:50,360 Speaker 1: a look at Florida and Texas, say booming economies. Second 113 00:06:50,400 --> 00:06:52,719 Speaker 1: of all, they're isolated because they're an island, so you 114 00:06:52,760 --> 00:06:55,440 Speaker 1: can't take the railroads down like you were even in 115 00:06:55,520 --> 00:06:59,680 Speaker 1: Katrina or or you know, or Texas or Florida. Everything 116 00:06:59,720 --> 00:07:03,040 Speaker 1: has to be flown in or sent in by ship. Uh. 117 00:07:03,120 --> 00:07:06,800 Speaker 1: They also have had a terrible zekea epidemic there, and 118 00:07:06,800 --> 00:07:09,320 Speaker 1: of course with all this water laying down, the mesqu 119 00:07:09,520 --> 00:07:10,920 Speaker 1: is going to go wild. A lot of people are 120 00:07:10,920 --> 00:07:13,560 Speaker 1: concerned about Colra. I think it is a dire situation. 121 00:07:14,000 --> 00:07:16,040 Speaker 1: I think to try and compare it to the earlier 122 00:07:16,120 --> 00:07:19,600 Speaker 1: hurricanes is a big mistake. Uh, And we have to 123 00:07:19,680 --> 00:07:23,000 Speaker 1: move fast, very fast there or I think it's going 124 00:07:23,040 --> 00:07:25,200 Speaker 1: to be a complete debacle. In addition to all of this, 125 00:07:26,200 --> 00:07:29,400 Speaker 1: some of the leading talent of Puerto Rico has migrated 126 00:07:29,760 --> 00:07:32,840 Speaker 1: to Florida in the last seven or eight years because 127 00:07:32,840 --> 00:07:35,880 Speaker 1: of the dire economic situation. You have four hundred thousand 128 00:07:36,640 --> 00:07:40,520 Speaker 1: uh Puerto Ricans living in Florida, most of have come 129 00:07:40,560 --> 00:07:45,200 Speaker 1: in the last decade. And what are the teachers? Uh, Doctors, lawyers, 130 00:07:45,400 --> 00:07:48,160 Speaker 1: architects are the cream of the crop that have left. 131 00:07:48,680 --> 00:07:51,360 Speaker 1: And so uh, you know, the island has been just 132 00:07:51,480 --> 00:07:54,480 Speaker 1: neuted of all of these of all of this expertise. 133 00:07:55,200 --> 00:07:57,840 Speaker 1: And so I think that what we need to do 134 00:07:57,920 --> 00:08:00,240 Speaker 1: is put a czar down there, so like we did 135 00:08:00,320 --> 00:08:03,560 Speaker 1: the general in in you know, in New Orleans, to 136 00:08:03,680 --> 00:08:06,400 Speaker 1: make sure that the aid gets there and it gets 137 00:08:06,400 --> 00:08:09,840 Speaker 1: there quickly. Who would you recommend to do that? And 138 00:08:09,880 --> 00:08:13,000 Speaker 1: what's the likelihood that we get a person who then 139 00:08:13,080 --> 00:08:18,680 Speaker 1: becomes responsible for making sure that these plans are carried 140 00:08:18,720 --> 00:08:20,480 Speaker 1: out and that people get the healthy Well, you see 141 00:08:20,520 --> 00:08:22,240 Speaker 1: the problem. You have a governor. But the problem with 142 00:08:22,280 --> 00:08:24,480 Speaker 1: the governor is he doesn't control what's going in All 143 00:08:24,480 --> 00:08:26,360 Speaker 1: he can do is control the island, so you need 144 00:08:26,440 --> 00:08:29,280 Speaker 1: someone who's there for the supplies. We can do it. 145 00:08:29,320 --> 00:08:31,280 Speaker 1: We should have learned that with Haiti. You gotta put 146 00:08:32,040 --> 00:08:34,080 Speaker 1: you know, Bush may have screwed up at the beginning 147 00:08:34,640 --> 00:08:36,960 Speaker 1: uh in New Orleans, but he least he put in 148 00:08:37,000 --> 00:08:39,280 Speaker 1: a three star general got the thing moving well. I 149 00:08:39,320 --> 00:08:41,839 Speaker 1: feel like you're talking about the flight of talent, and 150 00:08:41,840 --> 00:08:43,800 Speaker 1: they're about three and a half million people who currently 151 00:08:43,800 --> 00:08:46,680 Speaker 1: live on the island. The population has been shrinking rapidly. 152 00:08:47,400 --> 00:08:50,080 Speaker 1: How much more do you expect the population to shrink 153 00:08:50,120 --> 00:08:53,120 Speaker 1: in light of this humanitarian disaster? And how will that 154 00:08:53,200 --> 00:08:56,520 Speaker 1: affect the current negotiations of over the seventy four billion 155 00:08:56,559 --> 00:08:59,280 Speaker 1: dollars of death. The latest senses down there says three 156 00:08:59,280 --> 00:09:02,320 Speaker 1: point four million. I think it's less than that because 157 00:09:02,360 --> 00:09:04,760 Speaker 1: they're not taking into account the number of people that 158 00:09:04,840 --> 00:09:07,240 Speaker 1: already left gone to Florida, you know, the talent pool. 159 00:09:07,280 --> 00:09:10,679 Speaker 1: I said, so, uh, I think that you're going to 160 00:09:10,760 --> 00:09:12,959 Speaker 1: have additional people leave, and you have all these small 161 00:09:13,840 --> 00:09:17,840 Speaker 1: towns through the mountains that that are cut off. I've 162 00:09:17,840 --> 00:09:21,280 Speaker 1: been talking to people down there, and really it's it's terrible. 163 00:09:21,360 --> 00:09:26,800 Speaker 1: Hospitals don't have electricity to function. Um, and so we 164 00:09:26,880 --> 00:09:29,600 Speaker 1: have to make a much more massive effort I think 165 00:09:29,600 --> 00:09:31,600 Speaker 1: that we've ever had to before in any of these 166 00:09:31,679 --> 00:09:34,480 Speaker 1: hurricanes because of the situation of the island. It would 167 00:09:34,480 --> 00:09:37,520 Speaker 1: be great if they were a booming economy. Uh and 168 00:09:37,720 --> 00:09:40,320 Speaker 1: uh uh you know they have been able to plan 169 00:09:40,480 --> 00:09:43,720 Speaker 1: for this, etcetera. So I think it's a very dire situation. 170 00:09:43,800 --> 00:09:47,080 Speaker 1: And I think everything uh that can be done on 171 00:09:47,160 --> 00:09:49,840 Speaker 1: a federal level by the United States, but also on 172 00:09:49,600 --> 00:09:54,000 Speaker 1: a private level of companies that operate there, do whatever. 173 00:09:55,040 --> 00:09:58,960 Speaker 1: Because people have to remember these are United States citizens. 174 00:10:00,120 --> 00:10:03,280 Speaker 1: Their their soldiers for in World War One, World War two, 175 00:10:03,280 --> 00:10:07,080 Speaker 1: the Korean War, in Vietnam, and you know some of 176 00:10:07,120 --> 00:10:10,560 Speaker 1: them also fighting in Iraq Afghanistan. So we owe it 177 00:10:10,600 --> 00:10:14,200 Speaker 1: to these people. And it's not like some far off place, 178 00:10:14,559 --> 00:10:17,640 Speaker 1: you know. And and sometimes I get upset with some 179 00:10:17,760 --> 00:10:20,520 Speaker 1: members of depressed obviously not Bloomberg because you know the 180 00:10:20,559 --> 00:10:23,800 Speaker 1: importance of this, but others who kind of don't make 181 00:10:23,840 --> 00:10:25,760 Speaker 1: a big thing of this. They say, well, it's just 182 00:10:25,800 --> 00:10:28,600 Speaker 1: another hurricane, and you know, that's some island off there, 183 00:10:28,640 --> 00:10:31,080 Speaker 1: and they're not a state and all of this, which 184 00:10:31,120 --> 00:10:33,600 Speaker 1: is one of the ultimate solutions. I think statehood at 185 00:10:33,600 --> 00:10:36,200 Speaker 1: some point in time has to come there so they 186 00:10:36,240 --> 00:10:41,320 Speaker 1: can basically integrate themselves more and get more in, you know, 187 00:10:41,480 --> 00:10:44,880 Speaker 1: in the way of help that the states are able 188 00:10:44,920 --> 00:10:50,000 Speaker 1: to get. Uh. So uh, hopefully these issues will be forced. 189 00:10:50,200 --> 00:10:53,960 Speaker 1: Hopefully we will do what's necessary here because otherwise, you know, 190 00:10:54,160 --> 00:10:56,640 Speaker 1: when we talk about all of these problems around the 191 00:10:56,679 --> 00:10:58,560 Speaker 1: world and stuff, we've got to think that we have 192 00:10:58,600 --> 00:11:01,680 Speaker 1: a tremendous problem on our front door with Puerto Rico. 193 00:11:01,920 --> 00:11:04,520 Speaker 1: I was gonna say, what what about would would Jeb Bush? 194 00:11:04,640 --> 00:11:06,560 Speaker 1: Do you think would he be a good person to 195 00:11:06,679 --> 00:11:10,120 Speaker 1: lead the reconstruction and revitalization of of Puerto Rico? I mean, 196 00:11:10,240 --> 00:11:16,760 Speaker 1: former governor of Florida, speaks fluent Spanish. I mean you 197 00:11:16,800 --> 00:11:19,200 Speaker 1: need somebody like that who's getting to get down there. 198 00:11:19,200 --> 00:11:21,520 Speaker 1: I had mentioned a military man just because we had 199 00:11:21,559 --> 00:11:25,240 Speaker 1: that in in New Orleans. But someone who can mobilize 200 00:11:25,600 --> 00:11:29,040 Speaker 1: the administration and mobilize the whole government on the federal level, 201 00:11:29,400 --> 00:11:32,240 Speaker 1: but also you know, work closely with the governor on 202 00:11:32,400 --> 00:11:35,360 Speaker 1: domestic side, and also get the private sector, you know, 203 00:11:35,760 --> 00:11:39,920 Speaker 1: to be involved there. I think it's a critical must. 204 00:11:39,960 --> 00:11:43,880 Speaker 1: And hopefully when the President gets down there, he's gonna 205 00:11:43,960 --> 00:11:47,200 Speaker 1: see this. But you know time is passing. Bill Rhodes, 206 00:11:47,240 --> 00:11:49,679 Speaker 1: thank you so much for joining us. Really a pleasure 207 00:11:49,720 --> 00:11:52,360 Speaker 1: to hear your thoughts, very insightful. Bill Rhodes is President, 208 00:11:52,480 --> 00:11:56,079 Speaker 1: chief executive officer of William R. Rhodes Global Advisors, also 209 00:11:56,400 --> 00:11:59,560 Speaker 1: author of Banker to the World's Leadership Lessons from the 210 00:11:59,600 --> 00:12:15,120 Speaker 1: front Lines of Global finance. As the Federal Reserve talks 211 00:12:15,160 --> 00:12:18,840 Speaker 1: about reducing its balance sheet and as people look around markets, 212 00:12:19,280 --> 00:12:23,440 Speaker 1: some are getting increasingly concerned about financial stability, saying that 213 00:12:23,520 --> 00:12:26,559 Speaker 1: all of the extra liquidity in markets set it up 214 00:12:26,880 --> 00:12:29,080 Speaker 1: for a massive fall. Here to weigh in on that, 215 00:12:29,120 --> 00:12:32,719 Speaker 1: as Sheila Bear, former chairman of the Federal Deposit Insurance Corporation. 216 00:12:33,400 --> 00:12:37,320 Speaker 1: Also currently she is the president of Washington College, and 217 00:12:37,320 --> 00:12:40,600 Speaker 1: she joined us from our Washington, d C studio. Sheila, 218 00:12:40,720 --> 00:12:43,640 Speaker 1: thank you so much for joining us. I'd love to 219 00:12:43,679 --> 00:12:47,200 Speaker 1: get your take on the state of financial stability right 220 00:12:47,280 --> 00:12:51,400 Speaker 1: now and how concerned you are about the excessive liquidity 221 00:12:51,640 --> 00:12:55,360 Speaker 1: and what can be done about that. Well, yes, it's 222 00:12:55,400 --> 00:12:59,560 Speaker 1: it's it's a global problem. I mean financial assets. I 223 00:12:59,600 --> 00:13:04,640 Speaker 1: think about now of global GDP. There's a lot of 224 00:13:04,679 --> 00:13:07,960 Speaker 1: stocks and bonds out there, many multiples of what real 225 00:13:08,120 --> 00:13:12,000 Speaker 1: the real economy would represent and it is de stabilizing it. 226 00:13:12,080 --> 00:13:16,079 Speaker 1: It's looking for return, it's looking for a place to invest, 227 00:13:16,320 --> 00:13:20,400 Speaker 1: and that creates asset bubbles. Uh and UH. The very 228 00:13:20,400 --> 00:13:23,600 Speaker 1: low interest rates also create obviously incentives to to borrow 229 00:13:23,760 --> 00:13:25,480 Speaker 1: and taking a lot of leverage. That's one of the 230 00:13:25,520 --> 00:13:28,280 Speaker 1: reasons why we have so many financial assets now. So 231 00:13:29,040 --> 00:13:31,720 Speaker 1: it's the globe eclonomy really is a washing investment dollars 232 00:13:32,040 --> 00:13:36,960 Speaker 1: far greater than the opportunity for real economic investments. And 233 00:13:37,000 --> 00:13:41,199 Speaker 1: that's why I'm so amused by this tax reform I think, 234 00:13:41,200 --> 00:13:45,400 Speaker 1: I hope it's tax reform uh debate, because the suggestion 235 00:13:45,440 --> 00:13:47,959 Speaker 1: that we need to incentivize even more investment dollars by 236 00:13:47,960 --> 00:13:51,600 Speaker 1: giving investor at tax breaks is something that I really 237 00:13:51,600 --> 00:13:54,719 Speaker 1: just think is is counterintuitive, given as you say, we're 238 00:13:54,760 --> 00:13:57,760 Speaker 1: a washing liquidity right now already. Well, maybe you could 239 00:13:57,760 --> 00:14:00,520 Speaker 1: just give us your thoughts on at least this specifics 240 00:14:00,559 --> 00:14:02,800 Speaker 1: as we know them. That the rate on corporations would 241 00:14:02,800 --> 00:14:06,600 Speaker 1: be set at that's down from the current thirty five, 242 00:14:07,160 --> 00:14:11,440 Speaker 1: and that corporations would be allowed to immediately right off 243 00:14:11,679 --> 00:14:16,000 Speaker 1: their capital spending for at least five years. Yeah. Yeah, Well, 244 00:14:16,040 --> 00:14:19,560 Speaker 1: I think there is some basis in terms of competitiveness 245 00:14:19,640 --> 00:14:22,200 Speaker 1: of doing the business in the US, our corporate rates 246 00:14:22,240 --> 00:14:25,040 Speaker 1: are are not competitive, so I and I think there's 247 00:14:25,080 --> 00:14:28,960 Speaker 1: bipartisan support for that. So that doesn't bother me so much. 248 00:14:29,000 --> 00:14:31,560 Speaker 1: What really does bother me is the discussion of reducing 249 00:14:31,560 --> 00:14:35,960 Speaker 1: the past through rate. That would be a huge well 250 00:14:35,960 --> 00:14:37,840 Speaker 1: we haven't seen the details. That would be a huge 251 00:14:37,840 --> 00:14:41,680 Speaker 1: benefit to private equity funds and hedge funds, which have 252 00:14:41,760 --> 00:14:45,120 Speaker 1: already uh, you know, really been able to cash in 253 00:14:45,120 --> 00:14:48,280 Speaker 1: in uh this uh so called recovery that's been heavily 254 00:14:48,320 --> 00:14:51,560 Speaker 1: driven by monetary policy, which has made it very cheap 255 00:14:51,600 --> 00:14:54,880 Speaker 1: for them to borrow and invest. It's also because safe 256 00:14:54,920 --> 00:14:59,400 Speaker 1: assets return provide such a low return. A lot of 257 00:14:59,600 --> 00:15:03,520 Speaker 1: people and and funds have endowment, college endowments, pensions, what 258 00:15:03,680 --> 00:15:06,840 Speaker 1: have you have piled into alternative investments the kind that 259 00:15:07,080 --> 00:15:12,200 Speaker 1: p funds and hedge funds offer, which is also benefited them. 260 00:15:12,360 --> 00:15:15,280 Speaker 1: So this idea that somehow we need to give them 261 00:15:15,320 --> 00:15:19,760 Speaker 1: more breaks, I don't I really don't understand that. And 262 00:15:19,960 --> 00:15:22,520 Speaker 1: uh to the extent we're talking about, you know, I 263 00:15:22,800 --> 00:15:24,400 Speaker 1: think people are saying, well, we don't want to give 264 00:15:24,440 --> 00:15:26,320 Speaker 1: more tax picts to the rich, but the rich seemed 265 00:15:26,360 --> 00:15:29,480 Speaker 1: to be defined as wage earners, not those who make 266 00:15:29,520 --> 00:15:32,480 Speaker 1: their money from investment income. And that's really where the 267 00:15:32,560 --> 00:15:36,400 Speaker 1: super wealthy reside. That that top point one percent that's 268 00:15:36,440 --> 00:15:39,480 Speaker 1: done so well and this more been the recovery is 269 00:15:40,240 --> 00:15:43,080 Speaker 1: in that sweet spot. And to to give them this idea, 270 00:15:43,200 --> 00:15:44,960 Speaker 1: you know, reducing the pass through rate is going to 271 00:15:45,080 --> 00:15:47,600 Speaker 1: benefit small business. Yes, there will be some small businesses 272 00:15:47,600 --> 00:15:49,600 Speaker 1: that benefit, and we haven't seen the numbers yet, but 273 00:15:49,640 --> 00:15:51,440 Speaker 1: my guess as a line share, the benefit will go 274 00:15:51,480 --> 00:15:54,480 Speaker 1: to the hedge funds and p funds, and that's just counterintuitive. 275 00:15:54,680 --> 00:15:57,280 Speaker 1: So she from from what it sounds like to me, 276 00:15:57,560 --> 00:16:00,720 Speaker 1: you don't think that any kind of tax reformer, tax 277 00:16:00,720 --> 00:16:06,680 Speaker 1: plan that's currently being proposed will substantially boost economic growth 278 00:16:06,760 --> 00:16:09,360 Speaker 1: in a way that will help the entire economy. Well, 279 00:16:09,560 --> 00:16:11,280 Speaker 1: I think I think there's an argument for lowering the 280 00:16:11,280 --> 00:16:14,080 Speaker 1: corporate rate. We need to pay for it. We are 281 00:16:14,120 --> 00:16:17,520 Speaker 1: not overtaxed as a country. I get, Actually, the percentage 282 00:16:17,520 --> 00:16:22,480 Speaker 1: of taxes as are you know, all in federal, state, 283 00:16:22,520 --> 00:16:24,800 Speaker 1: local tax as a percentage of GDP is actually pretty 284 00:16:24,840 --> 00:16:28,040 Speaker 1: low compared to other developed countries. The problem here is 285 00:16:28,040 --> 00:16:31,960 Speaker 1: the distribution and UH and UH the you know, the 286 00:16:32,160 --> 00:16:36,200 Speaker 1: highly inefficient favoritism and tax breaks and loopholes that the 287 00:16:36,240 --> 00:16:39,160 Speaker 1: code provides. So I think anything should be revenue neutral. 288 00:16:39,200 --> 00:16:42,480 Speaker 1: I think taking the top rate down, which typically for corporations, 289 00:16:42,480 --> 00:16:44,880 Speaker 1: which typically is paid by the smaller companies. They don't 290 00:16:44,880 --> 00:16:47,760 Speaker 1: have the you know, the ability to move stuff overseas 291 00:16:47,960 --> 00:16:51,040 Speaker 1: or or have armies of tax lawyers to write special 292 00:16:51,080 --> 00:16:53,840 Speaker 1: breaks for them the tax code. That makes sense, but 293 00:16:53,880 --> 00:16:56,920 Speaker 1: you should broaden the base by paying for it. And yeah, 294 00:16:56,960 --> 00:16:59,240 Speaker 1: I absolutely think that makes sense. Going to a territorial 295 00:16:59,280 --> 00:17:02,720 Speaker 1: system makes the tax code. The corporate code does give 296 00:17:02,760 --> 00:17:07,080 Speaker 1: affirmative obligations to move to move business and rep income overseas. 297 00:17:07,160 --> 00:17:09,920 Speaker 1: So going to a territorial system, getting the top right 298 00:17:09,920 --> 00:17:11,680 Speaker 1: down to be more competitive, and finding a way to 299 00:17:11,720 --> 00:17:13,800 Speaker 1: pay for that through broadening the brace, I think that 300 00:17:13,880 --> 00:17:16,720 Speaker 1: could help the economy. Won't you won't take it up 301 00:17:16,720 --> 00:17:18,359 Speaker 1: to six percent, probably wouldn't even take it up with 302 00:17:18,359 --> 00:17:21,520 Speaker 1: a three percent, but it certainly could help. And then 303 00:17:21,520 --> 00:17:23,800 Speaker 1: a middle a true middle class tax cut would make 304 00:17:23,800 --> 00:17:26,399 Speaker 1: a lot of sense. Again, there's so much investment dollars, 305 00:17:26,440 --> 00:17:29,240 Speaker 1: somebody investment dollars slashing around already, the problems on the 306 00:17:29,240 --> 00:17:32,760 Speaker 1: demand side. This hasn't trickled down middle income and lower 307 00:17:32,800 --> 00:17:36,040 Speaker 1: income families, which growth has been very sluggish, and the 308 00:17:36,080 --> 00:17:38,879 Speaker 1: bottom tier they're still losing ground. You see that, particularly 309 00:17:39,200 --> 00:17:42,760 Speaker 1: with minority families, And you know, it's the right thing 310 00:17:42,800 --> 00:17:45,200 Speaker 1: to do, but it's also the economically smart thing to do, 311 00:17:45,280 --> 00:17:49,680 Speaker 1: because that's you know, they spend their income and they've 312 00:17:49,680 --> 00:17:53,080 Speaker 1: been struggling, and that hurts the broader economy too. So 313 00:17:53,480 --> 00:17:56,240 Speaker 1: providing real relief and additional spending power for the true 314 00:17:56,240 --> 00:17:58,679 Speaker 1: middle class and lower middle class makes a lot of sense. 315 00:17:59,240 --> 00:18:01,680 Speaker 1: But giving more tax breaks to very wealthy people that 316 00:18:01,720 --> 00:18:05,239 Speaker 1: already paying rates already through cured interest or what have you, 317 00:18:05,680 --> 00:18:08,399 Speaker 1: this makes no sense at all. Thanks very much. Sheila 318 00:18:08,440 --> 00:18:23,720 Speaker 1: Bear is the former chairman of the Federal Deposit Insurance Corporation. Well, 319 00:18:23,760 --> 00:18:27,760 Speaker 1: if you're an investor in Bombardier, the Canadian maker of 320 00:18:27,800 --> 00:18:31,000 Speaker 1: aircraft and trains, you're having a very bad day because 321 00:18:31,040 --> 00:18:32,880 Speaker 1: the stock is down more than eight and a half 322 00:18:32,960 --> 00:18:36,760 Speaker 1: percented open down more than six and this has to 323 00:18:36,840 --> 00:18:40,560 Speaker 1: do with its C series jet and a tariff of 324 00:18:40,640 --> 00:18:43,160 Speaker 1: two hundred and twenty percent that the United States has 325 00:18:43,240 --> 00:18:48,040 Speaker 1: leveled against Bombardier to sell those planes into the United States. 326 00:18:48,040 --> 00:18:50,719 Speaker 1: Here to tell us more is Andrew Mayetta. He's our 327 00:18:50,720 --> 00:18:54,160 Speaker 1: Bloomberg trade reporter. He joins US from Washington, and joining 328 00:18:54,240 --> 00:18:57,959 Speaker 1: us from Edinburgh, Scotland is George Ferguson. He's our senior Aerospace, 329 00:18:58,000 --> 00:19:02,080 Speaker 1: Defense and Airlines analyst for Bloomberg Intelligence. Andrew, let's begin 330 00:19:02,160 --> 00:19:04,399 Speaker 1: with you if you could just lay out exactly what 331 00:19:04,680 --> 00:19:10,119 Speaker 1: happened and why. Sure, So, Boeing brought a complaint in 332 00:19:10,160 --> 00:19:14,399 Speaker 1: the US against the Bardier on two fronts. Basically, they 333 00:19:14,480 --> 00:19:20,280 Speaker 1: alleged that the Bardier has been receiving unfair government subsidies 334 00:19:20,320 --> 00:19:23,920 Speaker 1: for years from the Canadian government, from the Quebec government, 335 00:19:24,720 --> 00:19:28,240 Speaker 1: and also that they've been trying to sell their C 336 00:19:28,560 --> 00:19:34,840 Speaker 1: series small passenger jet into the US at less than 337 00:19:35,480 --> 00:19:38,959 Speaker 1: fair market value. And so this was the first ruling 338 00:19:39,720 --> 00:19:44,240 Speaker 1: by the Commerce Department. It's preliminary, as you said, it's 339 00:19:44,359 --> 00:19:48,840 Speaker 1: levi dad or rate of two UH. Customs will will 340 00:19:48,880 --> 00:19:54,320 Speaker 1: begin to collect those um. The final ruling will probably 341 00:19:54,400 --> 00:19:58,119 Speaker 1: come from the International Trade Commission next year when it 342 00:19:58,160 --> 00:20:03,520 Speaker 1: determines how much harm Boeing suffered. So, George, come on 343 00:20:03,600 --> 00:20:07,320 Speaker 1: in here. We see the Bombardier shares are down massively today, 344 00:20:07,359 --> 00:20:13,080 Speaker 1: nearly ten. How long lasting could this potential hit be 345 00:20:13,320 --> 00:20:17,720 Speaker 1: four Bombardier, So I think it could last quite a while. 346 00:20:17,840 --> 00:20:20,199 Speaker 1: So that I think the challenge here really is that 347 00:20:21,359 --> 00:20:23,639 Speaker 1: Delta was a good portion of the order book, and 348 00:20:23,680 --> 00:20:27,040 Speaker 1: I think a very important order because along with Left 349 00:20:27,080 --> 00:20:31,640 Speaker 1: Hans and there's two large, well respected airlines operating the airplane. 350 00:20:32,160 --> 00:20:33,760 Speaker 1: I think given this ruling, I think it's going to 351 00:20:33,840 --> 00:20:36,119 Speaker 1: be hard to sell to any other US airlines. I 352 00:20:36,119 --> 00:20:37,960 Speaker 1: think it's gonna be hard to deliver to Delta and 353 00:20:38,000 --> 00:20:41,320 Speaker 1: pay the pay the duty um. And I think that 354 00:20:41,400 --> 00:20:43,879 Speaker 1: really puts a big portion of the order book in 355 00:20:44,040 --> 00:20:47,880 Speaker 1: question here. So I think without Bombardier bringing more orders 356 00:20:47,920 --> 00:20:50,520 Speaker 1: to the table in the near term, I think it's 357 00:20:50,520 --> 00:20:53,679 Speaker 1: going to hurt the hurt the stocks and significantly here George, 358 00:20:53,720 --> 00:20:56,960 Speaker 1: that's the seventy five jet order for Delta, right, Yeah, 359 00:20:57,000 --> 00:21:00,680 Speaker 1: they have a seventy order with a fifty option. Uh 360 00:21:00,720 --> 00:21:02,359 Speaker 1: you know, so so they could be up to a 361 00:21:03,160 --> 00:21:08,480 Speaker 1: five about three fifty orders. But there's other challenges in 362 00:21:08,480 --> 00:21:10,159 Speaker 1: the order book as well that we could talk to, 363 00:21:10,320 --> 00:21:13,320 Speaker 1: but maybe not enough time in this car. Well, I well, 364 00:21:13,359 --> 00:21:14,719 Speaker 1: I was just gonna go on and say that, you know, 365 00:21:14,760 --> 00:21:18,200 Speaker 1: it's not only workers in Canada that may suffer as 366 00:21:18,200 --> 00:21:22,000 Speaker 1: a result of this. Bombardier has a plan to Northern Ireland, correct, 367 00:21:22,359 --> 00:21:24,920 Speaker 1: but they do, they do. You Know. The thing is, though, 368 00:21:24,960 --> 00:21:28,240 Speaker 1: if I think if we start getting into the ripple 369 00:21:28,359 --> 00:21:31,080 Speaker 1: ramifications here, you're going to find that Boeing has plenty 370 00:21:31,080 --> 00:21:34,199 Speaker 1: of plants around the world, and they're definitely suppliers in 371 00:21:34,200 --> 00:21:37,119 Speaker 1: the UK that they could point to as well to 372 00:21:37,200 --> 00:21:39,119 Speaker 1: say that there'd be a ripple effect on them. So 373 00:21:39,160 --> 00:21:41,800 Speaker 1: I think that that's not going to go as far 374 00:21:42,680 --> 00:21:46,760 Speaker 1: as Bombardier may may may want. Canada probably has more 375 00:21:46,840 --> 00:21:49,280 Speaker 1: pulled given their you know, they purchased defense U S 376 00:21:49,320 --> 00:21:53,159 Speaker 1: Defense equipment as well, so the Canadian discussion might be 377 00:21:53,200 --> 00:21:55,400 Speaker 1: a little bit better. But I think the global global 378 00:21:56,400 --> 00:21:58,800 Speaker 1: parts supply stream is not going to help them that 379 00:21:58,880 --> 00:22:02,520 Speaker 1: much here. Andrew, how long has this action by the 380 00:22:02,640 --> 00:22:06,200 Speaker 1: U S. Commerce Department been in the works and was 381 00:22:06,240 --> 00:22:11,760 Speaker 1: this expected? Yeah, they brought the complaint in April, and 382 00:22:11,800 --> 00:22:15,040 Speaker 1: I would say that this is h This was expected 383 00:22:15,480 --> 00:22:21,119 Speaker 1: generally speaking, when the International Trade Commission finds on a 384 00:22:21,160 --> 00:22:26,880 Speaker 1: preliminary basis that a company probably suffered injury, UH Commerce 385 00:22:26,960 --> 00:22:29,919 Speaker 1: usually just applies a formula to determine what the preliminary 386 00:22:29,960 --> 00:22:32,159 Speaker 1: duties are going to be. Again, the key decision is 387 00:22:32,200 --> 00:22:36,920 Speaker 1: going to come next year when the International Trade Commission. 388 00:22:37,560 --> 00:22:40,720 Speaker 1: Besides whether Boeing is really injured here and you know 389 00:22:40,840 --> 00:22:43,800 Speaker 1: they're gonna way Bombardi's argument, a Bartier's argument is that 390 00:22:44,560 --> 00:22:47,600 Speaker 1: Boeing wasn't even really competing for these for these uh 391 00:22:47,960 --> 00:22:51,080 Speaker 1: for this this uh this delta order. They're saying that, 392 00:22:51,200 --> 00:22:54,080 Speaker 1: you know, Boeing kind of the facto excited that segment, 393 00:22:54,200 --> 00:22:57,240 Speaker 1: So how could they have suffered harm? So here's my question. 394 00:22:57,280 --> 00:23:00,119 Speaker 1: I mean, just on the surface, it seems like is 395 00:23:00,520 --> 00:23:03,359 Speaker 1: connected or will be connected to some of the NAFTA 396 00:23:03,480 --> 00:23:08,359 Speaker 1: renegotiations and just the ongoing tension between the US and 397 00:23:08,480 --> 00:23:12,280 Speaker 1: Canada and the trade partnership. There is that a misreading 398 00:23:12,280 --> 00:23:15,679 Speaker 1: of this. No, I think that that's bang on. Actually, 399 00:23:15,680 --> 00:23:17,760 Speaker 1: you mentioned that I was in d C. I'm actually 400 00:23:17,800 --> 00:23:21,040 Speaker 1: an Ottawa Act the NAFTA talks now, so this is 401 00:23:21,119 --> 00:23:23,359 Speaker 1: kind of landing like a grenade in the middle of 402 00:23:23,400 --> 00:23:27,760 Speaker 1: the talks. And you know, as George alluded to, UH, 403 00:23:27,960 --> 00:23:31,399 Speaker 1: Prime Minister Trudeau has threatened not to buy Boeing c 404 00:23:32,160 --> 00:23:36,040 Speaker 1: c F E teens UH if if if it doesn't 405 00:23:36,160 --> 00:23:38,480 Speaker 1: drop the Bombardia case. So, I mean we've talked a 406 00:23:38,480 --> 00:23:41,320 Speaker 1: little bit about what a trade war looks like. I mean, 407 00:23:41,400 --> 00:23:44,440 Speaker 1: this is kind of what a low level trade war 408 00:23:44,560 --> 00:23:49,080 Speaker 1: looks like. You know, company brings a complaint in in 409 00:23:49,160 --> 00:23:52,919 Speaker 1: an established forum, and then you know, the politicians come 410 00:23:53,000 --> 00:23:55,879 Speaker 1: under a lot of pressure, like Prime Ministerture though is 411 00:23:55,920 --> 00:23:57,960 Speaker 1: going to be under a lot of pressure right now 412 00:23:58,040 --> 00:24:01,240 Speaker 1: to deliver something of a Bartia. George in ten seconds, 413 00:24:01,280 --> 00:24:03,760 Speaker 1: do you agree that this is what a low grade 414 00:24:03,840 --> 00:24:10,120 Speaker 1: trade war looks like? Sure? Andrewmeda, thank you so much 415 00:24:10,160 --> 00:24:12,560 Speaker 1: for joining us. He's a trade reporter for Bloomberg News. 416 00:24:13,160 --> 00:24:17,000 Speaker 1: Also George Ferguson, Senior Aerospace, Defense and Airlines analyst for 417 00:24:17,119 --> 00:24:22,760 Speaker 1: Bloomberg Intelligence. Definitely a fascinating issue and a salvo opened 418 00:24:22,880 --> 00:24:27,880 Speaker 1: up amidst the ongoing NAFTA discussions. This will not be 419 00:24:28,080 --> 00:24:32,320 Speaker 1: received particularly well by the Canadians, certainly, and we will 420 00:24:32,359 --> 00:24:48,040 Speaker 1: wait for a response there well. Nike shares are down 421 00:24:48,119 --> 00:24:52,760 Speaker 1: nearly four percent today after earnings that were highly disappointing 422 00:24:52,840 --> 00:24:55,960 Speaker 1: to to investors pretty broadly. To get him more details 423 00:24:56,200 --> 00:24:59,040 Speaker 1: and why they were so disappointing, is Matt Townsend. He's 424 00:24:59,080 --> 00:25:01,560 Speaker 1: global business reporter for Bloomberg News and joins us in 425 00:25:01,600 --> 00:25:04,239 Speaker 1: our eleven three oh studios. Mat. Uh, So, let's just 426 00:25:04,280 --> 00:25:08,120 Speaker 1: talk about what the problem here is. As Nike laid out, 427 00:25:08,880 --> 00:25:12,280 Speaker 1: the problem is the United States of America h Nike's 428 00:25:12,280 --> 00:25:17,119 Speaker 1: biggest market, Nike's biggest market. UM. If they're not growing 429 00:25:17,160 --> 00:25:20,879 Speaker 1: sales in the US, they're not basically growing overall, and 430 00:25:21,080 --> 00:25:23,720 Speaker 1: sales fail three in North America, which is most of 431 00:25:23,760 --> 00:25:27,840 Speaker 1: the US. They said next quarter UM sales likely to 432 00:25:27,880 --> 00:25:30,719 Speaker 1: fall again in the US or North America. So if 433 00:25:30,720 --> 00:25:34,760 Speaker 1: you're a Nike investor, yes, overseas Asia is growing pretty well, 434 00:25:34,840 --> 00:25:37,520 Speaker 1: but if you don't get the home country growing, you're 435 00:25:37,720 --> 00:25:40,080 Speaker 1: it's not you know, it's a struggle to invest in them. 436 00:25:40,119 --> 00:25:43,160 Speaker 1: At this point. Is someone taking share from Nike? Of course, Yeah, 437 00:25:43,160 --> 00:25:46,720 Speaker 1: it's it's you know, Adidas. Uh, for the past two 438 00:25:46,760 --> 00:25:51,040 Speaker 1: years really has just been growing market share. Uh. Is 439 00:25:51,040 --> 00:25:53,680 Speaker 1: that all the strength of all of their retro lots 440 00:25:53,720 --> 00:25:55,840 Speaker 1: of the retro is really strong because it is not 441 00:25:55,920 --> 00:25:58,240 Speaker 1: just athletic ware anymore, and this is you know, it's 442 00:25:58,320 --> 00:26:01,960 Speaker 1: casual where seven Yeah, I mean, sneakers are a fashion 443 00:26:02,400 --> 00:26:04,680 Speaker 1: sort of staple nowadays people wear them to work. So 444 00:26:04,880 --> 00:26:07,400 Speaker 1: you know, this idea that sneakers are just for people 445 00:26:07,520 --> 00:26:10,240 Speaker 1: doing sports, that's not true. And yes, so it's the 446 00:26:10,320 --> 00:26:12,399 Speaker 1: retro stuff, but it's also you know, they've had this 447 00:26:12,520 --> 00:26:15,560 Speaker 1: great success with a brand called Boost, which has gone 448 00:26:15,560 --> 00:26:18,080 Speaker 1: into many different forms. You know, Kanye West has a 449 00:26:18,080 --> 00:26:21,360 Speaker 1: big Boost part of his business with Adidas, and they're 450 00:26:21,400 --> 00:26:23,600 Speaker 1: just there. If there's a if there's a war of 451 00:26:23,720 --> 00:26:26,320 Speaker 1: or coolness, Adidas is winning it right now, which is 452 00:26:26,359 --> 00:26:28,960 Speaker 1: kind of surprising because Nike had that mantle for so 453 00:26:29,160 --> 00:26:32,159 Speaker 1: long well, and it was because of the Air Jordan's, right, 454 00:26:32,200 --> 00:26:34,680 Speaker 1: I mean, that was one big part of it, Air Jordan's. 455 00:26:34,720 --> 00:26:37,040 Speaker 1: But even even you know, some of their running shoes 456 00:26:37,040 --> 00:26:39,680 Speaker 1: were immensely popular. It's just a regular shoe. I mean, 457 00:26:39,720 --> 00:26:42,399 Speaker 1: it's it's it's pretty striking. I mean, Nike did not 458 00:26:42,520 --> 00:26:46,040 Speaker 1: grow sales last quarter. They were flat, and they're basically 459 00:26:46,080 --> 00:26:48,920 Speaker 1: saying we hope to revive growth in the second half. 460 00:26:48,960 --> 00:26:51,679 Speaker 1: And when investors Investors Nailis asked them about this yesterday 461 00:26:51,680 --> 00:26:55,040 Speaker 1: on their call, they basically just said, the innovation pipeline, 462 00:26:55,240 --> 00:26:57,800 Speaker 1: it's great trust us. The things that are coming are 463 00:26:57,840 --> 00:27:01,200 Speaker 1: great trust trust. So that's the I mean, it's basically 464 00:27:01,320 --> 00:27:04,320 Speaker 1: you have to buy into the executives and their confidence. 465 00:27:04,440 --> 00:27:09,000 Speaker 1: And again Nike and all sort of their public interactions 466 00:27:09,000 --> 00:27:11,560 Speaker 1: are very confident still in the business. So you know, 467 00:27:11,600 --> 00:27:13,879 Speaker 1: we'll see the second half is gonna be big. You know, 468 00:27:14,160 --> 00:27:18,560 Speaker 1: you mentioned Adidas, or as Matt Miller of Bloomberg News 469 00:27:18,640 --> 00:27:22,560 Speaker 1: would say, uh, you know, it's it's sort of under 470 00:27:22,960 --> 00:27:26,760 Speaker 1: some pretty heavy scrutiny right now, just because the U. S. 471 00:27:26,800 --> 00:27:29,200 Speaker 1: Attorney's Office in the Southern District of New York went 472 00:27:29,240 --> 00:27:33,040 Speaker 1: after the n c C Double A as well as Adidas, saying, 473 00:27:33,359 --> 00:27:38,639 Speaker 1: you guys colluded to basically bribe coaches and schools to 474 00:27:39,240 --> 00:27:41,840 Speaker 1: use our products. I mean, could this potentially eat into 475 00:27:41,920 --> 00:27:46,800 Speaker 1: Adidas's appeal and uh and frankly their bottom line potentially. 476 00:27:46,960 --> 00:27:51,240 Speaker 1: Right now, analysts are not putting too much weight into it. Um. 477 00:27:51,280 --> 00:27:53,639 Speaker 1: You know, there's been tons of scandals in college sports 478 00:27:53,680 --> 00:27:59,000 Speaker 1: involving brands that you know and who the effect on 479 00:27:59,000 --> 00:28:02,680 Speaker 1: the bottom line was pretty minimal. But again, in this investigation, 480 00:28:02,680 --> 00:28:05,480 Speaker 1: there's definitely gonna be more shoes to drop, probably more 481 00:28:05,520 --> 00:28:10,600 Speaker 1: schools more. That's where you did that understated more schools. 482 00:28:10,640 --> 00:28:13,080 Speaker 1: You know, the big question is do eventually the other 483 00:28:13,119 --> 00:28:15,919 Speaker 1: brands get pulled into this because you know, Adidas was 484 00:28:15,960 --> 00:28:21,360 Speaker 1: not the biggest player in signing American basketball players to contracts. 485 00:28:21,400 --> 00:28:24,520 Speaker 1: That's by far Nike is the biggest. Can you tell 486 00:28:24,560 --> 00:28:28,680 Speaker 1: me about the possibility that Nike would actually buy something else? 487 00:28:28,840 --> 00:28:30,800 Speaker 1: I mean, is it possible? Because I mean, you've got 488 00:28:30,800 --> 00:28:32,800 Speaker 1: a lot of competition at the high end, You've got 489 00:28:32,800 --> 00:28:36,360 Speaker 1: a lot of competition in the low end. Nike has 490 00:28:36,400 --> 00:28:41,000 Speaker 1: the whole customizable, uh sort of franchise. But why don't 491 00:28:41,040 --> 00:28:42,640 Speaker 1: they go out and buy someone? I mean, you know, 492 00:28:42,720 --> 00:28:44,959 Speaker 1: you look at what they've done in the past. That 493 00:28:45,040 --> 00:28:48,280 Speaker 1: was you know, for a while Converse worked, right, Chuck Taylor. 494 00:28:48,640 --> 00:28:52,200 Speaker 1: You've also got brands such as Jack Purcell. This is 495 00:28:52,240 --> 00:28:54,840 Speaker 1: a proliferation. Why don't they go out and buy somebody. 496 00:28:55,160 --> 00:28:57,880 Speaker 1: They decided a couple of years ago to double down 497 00:28:57,920 --> 00:29:00,240 Speaker 1: on the Nike brand. They sold off some of their 498 00:29:00,240 --> 00:29:02,440 Speaker 1: other brands, like they had a hockey band brand called 499 00:29:02,440 --> 00:29:05,840 Speaker 1: Bauer Um. They had Khan actually several years ago that 500 00:29:05,840 --> 00:29:09,720 Speaker 1: they sat a private equity deal. Yeah, and but they're 501 00:29:09,720 --> 00:29:13,360 Speaker 1: basically saying the Nike brands are best brand has most 502 00:29:13,400 --> 00:29:16,280 Speaker 1: growth potential, So we're gonna focus on that now. You know, 503 00:29:16,280 --> 00:29:17,920 Speaker 1: maybe things could change. Me, I haven't heard anything, am 504 00:29:17,920 --> 00:29:20,680 Speaker 1: I reporting or you know that this could potentially be happening. 505 00:29:20,720 --> 00:29:23,920 Speaker 1: But the Nike brand is not as strong as it was, 506 00:29:24,440 --> 00:29:26,160 Speaker 1: and that's part of the reason why the stock has 507 00:29:26,200 --> 00:29:28,080 Speaker 1: been depressed. You know, it is the worst performing stock 508 00:29:28,120 --> 00:29:30,560 Speaker 1: in the Dow last year for example. Well, Matt, how 509 00:29:30,600 --> 00:29:33,200 Speaker 1: much is this the death of fth leisure and them 510 00:29:33,400 --> 00:29:37,000 Speaker 1: kind of suffering from that? Yeah, the death of ath leisure? 511 00:29:38,560 --> 00:29:41,880 Speaker 1: Maybe that's part of it. Um. You know, you think 512 00:29:42,280 --> 00:29:45,880 Speaker 1: I'm just thinking that we've heard about it, but there's 513 00:29:45,880 --> 00:29:48,400 Speaker 1: a bubble for sure. Okay, But but I think for example, 514 00:29:48,480 --> 00:29:51,920 Speaker 1: Lulu Lemon, I think of athletic, the Gap brand. In fact, 515 00:29:51,920 --> 00:29:53,760 Speaker 1: they're going to be concentrating on that and getting rid 516 00:29:53,760 --> 00:29:56,600 Speaker 1: of some Gap stores because that's what's selling. Yeah, I mean, 517 00:29:56,600 --> 00:29:59,480 Speaker 1: the people have been speculating about this. ATHLETs are trend 518 00:29:59,560 --> 00:30:02,160 Speaker 1: dying down and a sort of cooling off. But for 519 00:30:02,160 --> 00:30:04,400 Speaker 1: sure that's hurtin Nike. And you know under arm or 520 00:30:04,440 --> 00:30:07,520 Speaker 1: two that more and more brands, non athletic brands, are 521 00:30:07,560 --> 00:30:11,840 Speaker 1: making athletic gear, So that's definitely a problem. Um. But 522 00:30:12,320 --> 00:30:14,760 Speaker 1: you know, I mean Nike, Nike's big issue is that 523 00:30:14,920 --> 00:30:17,960 Speaker 1: like I'm saying before, they were the coolest brand in 524 00:30:18,000 --> 00:30:21,479 Speaker 1: the world forever, and now they've been challenged directly by 525 00:30:21,480 --> 00:30:24,640 Speaker 1: Adidas on this and they need to respond. All right, 526 00:30:24,680 --> 00:30:26,400 Speaker 1: I'm not going to tell people about your collection of 527 00:30:26,440 --> 00:30:29,480 Speaker 1: Stan smith sneakers there. I just want to point out 528 00:30:29,520 --> 00:30:32,040 Speaker 1: maybe everybody's wearing sneakers to work, but nobody in this 529 00:30:32,160 --> 00:30:33,760 Speaker 1: office right now is wearing sneakers. I just want to 530 00:30:33,800 --> 00:30:36,000 Speaker 1: point that up, but go up. Thank you, well done. 531 00:30:36,280 --> 00:30:40,080 Speaker 1: All right, our sartorial guide right there. Lisa Braunwait's all right, 532 00:30:40,080 --> 00:30:42,640 Speaker 1: Thanks very much. Matt Townsend, he's our global business reporter 533 00:30:42,920 --> 00:30:46,800 Speaker 1: for Bloomberg News talking about Nike two shares down about 534 00:30:46,800 --> 00:30:52,480 Speaker 1: two percent right now. Thanks for listening to the Bloomberg 535 00:30:52,520 --> 00:30:55,160 Speaker 1: P and L podcast. You can subscribe and listen to 536 00:30:55,200 --> 00:30:59,720 Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 537 00:31:00,120 --> 00:31:03,720 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 538 00:31:03,720 --> 00:31:07,120 Speaker 1: on Twitter at Lisa abramoits one before the podcast. You 539 00:31:07,160 --> 00:31:09,680 Speaker 1: can always catch us worldwide on Bloomberg Radio.