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 Bramowitz. Each day we 3 00:00:11,600 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,800 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 --> 00:00:27,240 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. We're 7 00:00:27,320 --> 00:00:29,200 Speaker 1: very lucky right now to be joined by Eric Fine, 8 00:00:29,200 --> 00:00:33,080 Speaker 1: portfolio manager and Emerging markets fixed income at Strategy at 9 00:00:33,240 --> 00:00:37,519 Speaker 1: van Eck Global. He just returned from I MF meetings 10 00:00:37,560 --> 00:00:40,680 Speaker 1: in Bali. He got back Sunday night. He's been going 11 00:00:40,720 --> 00:00:45,479 Speaker 1: to these meetings for twenty years. This one, this one 12 00:00:45,560 --> 00:00:49,080 Speaker 1: was different for you. How so um this Well, first, 13 00:00:49,120 --> 00:00:51,800 Speaker 1: what's different is they're crowded, um, and there are a 14 00:00:51,840 --> 00:00:53,400 Speaker 1: lot of people and it speaks to the amount of 15 00:00:53,400 --> 00:00:55,400 Speaker 1: investment that's going into the e M and e M 16 00:00:55,480 --> 00:00:58,800 Speaker 1: bonds and and that's a good thing. Um. But uh, 17 00:00:59,080 --> 00:01:01,560 Speaker 1: I think the biggest thing is, uh, this is one 18 00:01:01,600 --> 00:01:04,080 Speaker 1: of the most if not the most you know, uh 19 00:01:04,200 --> 00:01:06,440 Speaker 1: worried meetings in the sense of, you know, I go 20 00:01:06,480 --> 00:01:08,240 Speaker 1: to the meetings and then I spend time with the 21 00:01:08,240 --> 00:01:10,200 Speaker 1: old timers afterwards and see you know you are you 22 00:01:10,280 --> 00:01:11,959 Speaker 1: leaving here as more of a seller or more of 23 00:01:11,959 --> 00:01:13,760 Speaker 1: a buyer because you have to have a bottom line 24 00:01:13,800 --> 00:01:16,479 Speaker 1: on everything obviously, and uh um and and and and 25 00:01:16,560 --> 00:01:20,000 Speaker 1: a seller, but uh much more concerned about China. That's 26 00:01:20,080 --> 00:01:22,280 Speaker 1: really the thing China set up is. Though you could 27 00:01:22,319 --> 00:01:23,560 Speaker 1: have said a lot of the things that are being 28 00:01:23,600 --> 00:01:25,880 Speaker 1: said now a year ago, two years ago, five years ago, 29 00:01:26,400 --> 00:01:28,920 Speaker 1: um um and uh and I think that's fair. The 30 00:01:28,920 --> 00:01:31,120 Speaker 1: issue is when is it relevant? Wise it matter? And 31 00:01:31,160 --> 00:01:33,400 Speaker 1: that's why I care. Is it now for reasons I 32 00:01:33,440 --> 00:01:36,360 Speaker 1: can get into. But now it's elevated as a concern. Well, 33 00:01:36,360 --> 00:01:38,280 Speaker 1: that's where I wanted to go. Is this matter of 34 00:01:38,360 --> 00:01:41,200 Speaker 1: China's economy accelerating it slowdown? Or does this have to 35 00:01:41,200 --> 00:01:43,880 Speaker 1: do with trade tensions with the US? Um? I think 36 00:01:44,120 --> 00:01:47,720 Speaker 1: I think you can't disentangle the issues, um um, even 37 00:01:47,760 --> 00:01:51,480 Speaker 1: though uh you know it's trade is a big jobs 38 00:01:51,640 --> 00:01:55,640 Speaker 1: generator in uh in China and the current account uh 39 00:01:55,640 --> 00:02:00,840 Speaker 1: surplus is declining and uh that's a that's an important 40 00:02:01,200 --> 00:02:03,480 Speaker 1: uh as I said, poor generator jobs, which it's important 41 00:02:03,480 --> 00:02:06,520 Speaker 1: generative confidence. Why do I say that the set up 42 00:02:06,600 --> 00:02:08,880 Speaker 1: for China, I don't. I think China is a country 43 00:02:08,880 --> 00:02:11,560 Speaker 1: that has for twenty years been disciplined by equity investors. 44 00:02:11,560 --> 00:02:15,320 Speaker 1: What do equity investors want? Growth growth, growth, growth, growth growth. 45 00:02:15,800 --> 00:02:19,240 Speaker 1: Bond investors are very different. They're happy with recessions, they 46 00:02:19,280 --> 00:02:22,519 Speaker 1: welcome recessions. They worry about over leverage. Right, so they've 47 00:02:22,520 --> 00:02:25,440 Speaker 1: gotten the growth. But with the growth, they've gotten the growth. 48 00:02:25,520 --> 00:02:28,080 Speaker 1: With with with the growth came immense leverage. So the set up, 49 00:02:28,120 --> 00:02:30,680 Speaker 1: the initial conditions are bad. They're not bad in the 50 00:02:30,720 --> 00:02:32,720 Speaker 1: traditional sense of oh my gosh, they owe a lot 51 00:02:32,760 --> 00:02:35,079 Speaker 1: of dollars and they don't have them. It's a very 52 00:02:35,080 --> 00:02:37,440 Speaker 1: different setup, and that's why people have been calm, and 53 00:02:37,480 --> 00:02:39,480 Speaker 1: that's also essentially why I think the market has been 54 00:02:39,520 --> 00:02:41,040 Speaker 1: right to sort of say, you know, it's not really 55 00:02:41,400 --> 00:02:43,280 Speaker 1: it's a problem, but not really a problem for today 56 00:02:43,280 --> 00:02:45,960 Speaker 1: and not something here. The issue there is domestic claims. 57 00:02:46,040 --> 00:02:49,200 Speaker 1: The most acute phase of EM crisis, in my experience, 58 00:02:49,360 --> 00:02:53,280 Speaker 1: is when locals lose confidence and all the money M zero, 59 00:02:53,320 --> 00:02:55,160 Speaker 1: the money in your pocket, M want a short term 60 00:02:55,160 --> 00:02:57,440 Speaker 1: claim like a demand deposit or M two, something like 61 00:02:57,600 --> 00:03:01,120 Speaker 1: include savings accounts UM. When that when people start closing 62 00:03:01,160 --> 00:03:03,880 Speaker 1: that and saying I want the dollars. I want the reserves. 63 00:03:04,040 --> 00:03:06,440 Speaker 1: And that ratio in China is basically the worst in 64 00:03:06,480 --> 00:03:09,160 Speaker 1: the world. Um, the amount of domestic claims on dollars 65 00:03:09,320 --> 00:03:11,680 Speaker 1: and you know what you're getting for a tenure bond 66 00:03:11,720 --> 00:03:14,000 Speaker 1: in China and the local currency three and a half 67 00:03:14,000 --> 00:03:17,440 Speaker 1: percent in a tenure Do I need to say anything else? Right? 68 00:03:17,480 --> 00:03:20,000 Speaker 1: That's the issue. And oh if the argumacy, Oh they 69 00:03:20,000 --> 00:03:22,000 Speaker 1: can hike interest rates, high interest rates, what is that 70 00:03:22,040 --> 00:03:24,680 Speaker 1: going to do to growth? Right? And and if the 71 00:03:24,720 --> 00:03:26,760 Speaker 1: growth gets hit, this is an economy that depends on 72 00:03:26,960 --> 00:03:30,280 Speaker 1: significant investment, almost half of GDPs and investment. So those, 73 00:03:30,360 --> 00:03:32,320 Speaker 1: I think are the issues that are coming to the fore. 74 00:03:32,360 --> 00:03:36,920 Speaker 1: But they're coming. The trigger is, as you're suggesting, is trade. Um. 75 00:03:37,120 --> 00:03:40,280 Speaker 1: But this broadening of this tense of the relationship with China, 76 00:03:40,360 --> 00:03:42,760 Speaker 1: or the tense points on to beyond trade, I think 77 00:03:42,840 --> 00:03:46,120 Speaker 1: is is settling it in people's minds. And there and 78 00:03:46,120 --> 00:03:48,720 Speaker 1: and uh, it's a new big risk. When you talk 79 00:03:48,800 --> 00:03:51,880 Speaker 1: about a new big risk. There is a headline in 80 00:03:52,000 --> 00:03:56,760 Speaker 1: the South China Morning Post several weeks ago six trillion 81 00:03:56,920 --> 00:04:03,640 Speaker 1: dollar debt bubble which Chinese local authorities have built up. 82 00:04:05,240 --> 00:04:09,560 Speaker 1: Go ahead, you know everything unwind that without a lot 83 00:04:09,600 --> 00:04:13,880 Speaker 1: of pain. Yeah. Look, I I and and today's announcement 84 00:04:13,960 --> 00:04:15,720 Speaker 1: is more sort of new products, right, more and more 85 00:04:15,720 --> 00:04:18,680 Speaker 1: and more leverage. And I was struck by how more 86 00:04:18,800 --> 00:04:23,240 Speaker 1: leverage and stimulation is seems to be. My sense is 87 00:04:23,279 --> 00:04:26,920 Speaker 1: that it's viewed as a legitimate policy option. More stimulation, 88 00:04:27,360 --> 00:04:30,520 Speaker 1: stimulating and then having your currency weakend is not stimulating, right, 89 00:04:30,560 --> 00:04:33,280 Speaker 1: that that's that's spinning your wheels, right, and trying to 90 00:04:33,279 --> 00:04:35,880 Speaker 1: get out of something. Um. Every time we've looked at 91 00:04:35,920 --> 00:04:39,880 Speaker 1: the Chinese financial system um um. And when we seem 92 00:04:39,920 --> 00:04:42,240 Speaker 1: that we feel like we get a handle on it, um, 93 00:04:42,320 --> 00:04:45,480 Speaker 1: some new balance sheet with leverage comes up, and so 94 00:04:45,520 --> 00:04:49,120 Speaker 1: that's a real problem. The one thing that we've consistently said, though, 95 00:04:49,120 --> 00:04:51,880 Speaker 1: and that is probably still the case, is the Chinese 96 00:04:51,920 --> 00:04:55,599 Speaker 1: authorities are extremely impressive when you bring up these problems. 97 00:04:55,640 --> 00:04:58,200 Speaker 1: If you brought up that problem, they are not denying it. 98 00:04:58,480 --> 00:05:00,880 Speaker 1: That's the other thing that characterizes free crisis. They know 99 00:05:00,960 --> 00:05:03,520 Speaker 1: these they have tools to do. They come up with 100 00:05:03,520 --> 00:05:06,320 Speaker 1: tools to deal with it. Um. It's just that what 101 00:05:06,400 --> 00:05:09,440 Speaker 1: they need to do might be bigger than what they've fought. 102 00:05:09,520 --> 00:05:11,360 Speaker 1: So you know, you've got to give them the benefit 103 00:05:11,360 --> 00:05:14,360 Speaker 1: of the doubt. But these issues are are are come 104 00:05:14,440 --> 00:05:17,599 Speaker 1: up and they're real, and so far the government's had 105 00:05:17,640 --> 00:05:20,000 Speaker 1: the credibility to say, look, don't worry about it, We're 106 00:05:20,000 --> 00:05:21,800 Speaker 1: doing something. So I want to go back to those 107 00:05:21,880 --> 00:05:23,880 Speaker 1: I m F meetings that you had with the old 108 00:05:23,880 --> 00:05:27,600 Speaker 1: time ers, as you said, how much are they considering 109 00:05:28,000 --> 00:05:31,640 Speaker 1: that a possible disruption in China? How much of an 110 00:05:31,680 --> 00:05:33,360 Speaker 1: impact would that have on the rest of the emerging 111 00:05:33,400 --> 00:05:36,960 Speaker 1: markets complex in which countries would get hit the hardest? 112 00:05:37,080 --> 00:05:39,080 Speaker 1: And are they staying away from as a result of 113 00:05:39,120 --> 00:05:44,840 Speaker 1: this uncertainty. Short answer, profound impact and all right, um now, yeah, 114 00:05:44,880 --> 00:05:47,960 Speaker 1: but but I don't think that means run for the hills, right, 115 00:05:48,080 --> 00:05:50,080 Speaker 1: Argentina has already been through a lot. Right, you can 116 00:05:50,080 --> 00:05:53,120 Speaker 1: find short dated bonds with high yields where right or 117 00:05:53,120 --> 00:05:55,039 Speaker 1: wrong in the world. If they mature and they pay 118 00:05:55,080 --> 00:05:58,000 Speaker 1: their care, you're going to be fine. So kudos to you, 119 00:05:58,000 --> 00:05:59,960 Speaker 1: because when you came in here you basically called the 120 00:06:00,000 --> 00:06:02,680 Speaker 1: bottom of the Argentinian bonds sell offs to carry on. 121 00:06:02,920 --> 00:06:05,040 Speaker 1: Thanks thanks, notice So, but there are there are a 122 00:06:05,080 --> 00:06:07,279 Speaker 1: lot of countries that are being stressed out by tougher 123 00:06:07,279 --> 00:06:11,599 Speaker 1: financial conditions and the trade trade conflict UM and UH UM. 124 00:06:11,720 --> 00:06:14,599 Speaker 1: And so one one straightforward answer is there's you know, 125 00:06:14,640 --> 00:06:17,320 Speaker 1: there's there's some cheap things to do in UH in 126 00:06:17,320 --> 00:06:20,240 Speaker 1: in emerging markets, UM and and and those are those 127 00:06:20,279 --> 00:06:23,680 Speaker 1: of them. But China has been opening for forty years. UM. 128 00:06:23,680 --> 00:06:25,960 Speaker 1: For the last forty maybe the thirty plus years, you've 129 00:06:25,960 --> 00:06:31,680 Speaker 1: had declining inflation and inflation expectations and rising trade. UM, 130 00:06:31,720 --> 00:06:34,560 Speaker 1: they've been related, right. I mean, it's, you know, the 131 00:06:34,560 --> 00:06:39,560 Speaker 1: the economic logic of globalization, optimizing global outcomes and reducing 132 00:06:39,560 --> 00:06:43,440 Speaker 1: inflation and is correct. UM doesn't mean it's right, but 133 00:06:43,560 --> 00:06:47,240 Speaker 1: it's it's certainly correct UM and UM. I think that's 134 00:06:47,240 --> 00:06:49,800 Speaker 1: at risk this thirty year trend. Thanks very much for 135 00:06:49,880 --> 00:06:52,080 Speaker 1: being with us, and we look forward to having you 136 00:06:52,440 --> 00:06:55,440 Speaker 1: in the future. Eric Fine lots to talk about portfolio 137 00:06:55,520 --> 00:07:00,440 Speaker 1: manager emerging markets fixed income strategy for van eck Loobal. 138 00:07:03,360 --> 00:07:06,479 Speaker 1: For much of this week, the news in Washington, d 139 00:07:06,560 --> 00:07:09,760 Speaker 1: C was dominated by Saudi Arabia and US relations and 140 00:07:09,800 --> 00:07:13,440 Speaker 1: what would happen now that there was a disappearance that 141 00:07:13,560 --> 00:07:16,840 Speaker 1: resulted in the most likely death of a journalist who 142 00:07:16,840 --> 00:07:19,080 Speaker 1: worked for the Washington Post. But is that the big 143 00:07:19,120 --> 00:07:21,559 Speaker 1: takeaway from this week? Marty Schanker joins US now chief 144 00:07:21,560 --> 00:07:25,120 Speaker 1: content officer for Bloomberg News. Definitely, Uh, the news out 145 00:07:25,120 --> 00:07:27,080 Speaker 1: of Washington, d C. Is moving so quickly that you 146 00:07:27,120 --> 00:07:30,240 Speaker 1: blink you miss it. How much lasting power will the 147 00:07:30,280 --> 00:07:34,119 Speaker 1: Saudi Arabia US story have going forward or will people 148 00:07:34,160 --> 00:07:36,720 Speaker 1: just sort of forget about this doesn't have legs. It 149 00:07:36,760 --> 00:07:39,960 Speaker 1: definitely does have legs, and uh, you know, it continues 150 00:07:40,040 --> 00:07:44,440 Speaker 1: even today. There's somewhat of a lull. It's a it's 151 00:07:44,040 --> 00:07:47,360 Speaker 1: the Sabbath in the region, in the Mid East, so 152 00:07:47,440 --> 00:07:51,400 Speaker 1: there isn't a lot of news. But in the the 153 00:07:51,560 --> 00:07:54,600 Speaker 1: issue as it relates to Donald Trump's response is still 154 00:07:54,760 --> 00:07:58,680 Speaker 1: very top of mind. Um in the politics of Washington. 155 00:07:59,120 --> 00:08:02,760 Speaker 1: Whether or not at actually resonates into the mid term 156 00:08:02,880 --> 00:08:07,240 Speaker 1: elections is another question. Why because I think that mid 157 00:08:07,400 --> 00:08:12,760 Speaker 1: term Why Why is it resonating so strongly politically? Because 158 00:08:13,480 --> 00:08:17,360 Speaker 1: it in some ways, and I think the news channels 159 00:08:17,600 --> 00:08:23,160 Speaker 1: reflect this. It speaks to Donald Trump's unconventional way of 160 00:08:23,200 --> 00:08:27,600 Speaker 1: conducting foreign policy and the transactional nature of his presidency. 161 00:08:28,720 --> 00:08:31,240 Speaker 1: You know, immediately people have gone to the whole issue 162 00:08:31,320 --> 00:08:34,160 Speaker 1: of what kind of business relationship does Donald Trump have? 163 00:08:35,160 --> 00:08:38,920 Speaker 1: Why isn't there a sense of complete outrage. Why aren't 164 00:08:38,960 --> 00:08:44,480 Speaker 1: we taking very concrete steps to sever our close relationship 165 00:08:44,520 --> 00:08:48,640 Speaker 1: with Saudi Arabia? And in Donald Trump's defense, it is 166 00:08:48,640 --> 00:08:54,439 Speaker 1: a much It is a very complicated issue. And many 167 00:08:54,480 --> 00:08:58,559 Speaker 1: people have commented on the fact that, uh, because o 168 00:08:58,720 --> 00:09:02,800 Speaker 1: Ji's death, will try magic hundreds of thousands of people 169 00:09:02,840 --> 00:09:04,880 Speaker 1: being killed in Yemen, and no one says a word 170 00:09:04,920 --> 00:09:08,040 Speaker 1: about that. Indeed, And just to kind of add a 171 00:09:08,080 --> 00:09:12,160 Speaker 1: little bit more to the story, there was a report 172 00:09:12,280 --> 00:09:17,040 Speaker 1: that Secretary of State Mike Pompeo initially did hear the 173 00:09:17,120 --> 00:09:21,440 Speaker 1: audio that the Turkish government claims they have, when in fact, 174 00:09:21,520 --> 00:09:25,319 Speaker 1: a State Department spokeswoman came out yesterday and said noe 175 00:09:25,640 --> 00:09:30,080 Speaker 1: had neither heard the audio nor the transcript. So my 176 00:09:30,200 --> 00:09:34,079 Speaker 1: question then is what do you think Secretary of State 177 00:09:34,120 --> 00:09:39,280 Speaker 1: Mike Pompeo was doing in Saudi Arabia and is there 178 00:09:39,320 --> 00:09:45,640 Speaker 1: a potential for conversations about succession planning in Saudi Arabia. Well, 179 00:09:45,720 --> 00:09:49,360 Speaker 1: I can't speculate about what mom Mike Pompeo was thinking, 180 00:09:49,400 --> 00:09:54,120 Speaker 1: but clearly all the participants in this controversy are trying 181 00:09:54,120 --> 00:09:58,480 Speaker 1: to figure a way out um that includes Donald Trump, 182 00:09:58,520 --> 00:10:04,280 Speaker 1: that includes this the Saudi government UM in a way 183 00:10:04,320 --> 00:10:08,280 Speaker 1: that provides some accountability for what happened in the in 184 00:10:08,400 --> 00:10:13,959 Speaker 1: the Saudi embassy and Anchora, while still having repercussions. And 185 00:10:14,360 --> 00:10:18,000 Speaker 1: Donald Trump did hint at that that there would be 186 00:10:18,080 --> 00:10:21,320 Speaker 1: severe consequences if it was determined that there was a 187 00:10:21,440 --> 00:10:25,800 Speaker 1: murder uh in some way connected to the Saudi government. 188 00:10:26,679 --> 00:10:31,200 Speaker 1: But it is true that the Saudi the Saudis are 189 00:10:31,320 --> 00:10:34,800 Speaker 1: critically important to the strategic interests of the United States, 190 00:10:35,360 --> 00:10:38,840 Speaker 1: and you have to balance that against you know, this 191 00:10:39,080 --> 00:10:43,800 Speaker 1: obviously outrageous action, UM, and they're all trying to figure 192 00:10:43,760 --> 00:10:47,040 Speaker 1: a way out. So let's talk about the political fallout. 193 00:10:47,160 --> 00:10:51,200 Speaker 1: There definitely has been vocal criticism from fellow Republicans in 194 00:10:51,240 --> 00:10:55,760 Speaker 1: the Senate and elsewhere. There are reports that Nicki Haley 195 00:10:55,880 --> 00:10:59,000 Speaker 1: may have resigned from the u N Post as a 196 00:10:59,040 --> 00:11:01,160 Speaker 1: result of this. Is there any truth to that? Well, 197 00:11:01,160 --> 00:11:05,400 Speaker 1: we're you know, that is the big question. No one, 198 00:11:06,520 --> 00:11:09,439 Speaker 1: as far as I can tell, have definitively said why 199 00:11:09,520 --> 00:11:12,120 Speaker 1: Nikki Halley decided to resign and why she decided to 200 00:11:12,120 --> 00:11:17,680 Speaker 1: resign now, UM. None other than Steve Bannon, who's not 201 00:11:18,720 --> 00:11:22,600 Speaker 1: should not be underestimated in terms political acumen, said that 202 00:11:22,640 --> 00:11:28,160 Speaker 1: this was a horrible thing to do, terrible timing, you know, 203 00:11:28,440 --> 00:11:31,320 Speaker 1: like less than a month before mid terms. She was 204 00:11:31,360 --> 00:11:33,920 Speaker 1: at the Al Smith dinner last night and actually joked 205 00:11:33,960 --> 00:11:37,240 Speaker 1: a little bit about it. Um, but it could have 206 00:11:37,240 --> 00:11:39,760 Speaker 1: been a factor. But then there are you know, multiple 207 00:11:39,840 --> 00:11:42,560 Speaker 1: things that could also. There was also a report that 208 00:11:42,640 --> 00:11:46,560 Speaker 1: it was Kavanaugh, which she denied. Anyway, she has her 209 00:11:46,600 --> 00:11:51,200 Speaker 1: reasons and maybe ultimately we'll find them out. So let's 210 00:11:51,280 --> 00:11:53,480 Speaker 1: shift gears a little bit because we are heading into 211 00:11:53,520 --> 00:11:57,120 Speaker 1: the midterm elections and I'm just wondering how important it 212 00:11:57,200 --> 00:11:59,200 Speaker 1: is to sort of watch what comes out of President 213 00:11:59,240 --> 00:12:02,360 Speaker 1: Trump's Twitter feed to figure out his agenda over the 214 00:12:02,400 --> 00:12:05,200 Speaker 1: next couple of months or next couple of weeks ahead 215 00:12:05,200 --> 00:12:06,920 Speaker 1: of the midterm elections. Right, and we've already got a 216 00:12:06,960 --> 00:12:11,120 Speaker 1: lot of discussion about UH, immigration and the and the margin. 217 00:12:11,800 --> 00:12:14,080 Speaker 1: What should we pay attention to him? Well, I think 218 00:12:14,120 --> 00:12:16,520 Speaker 1: if you looked at his uh, if you listen to 219 00:12:16,600 --> 00:12:19,400 Speaker 1: his rally speech last night, he sort of outlined what 220 00:12:19,480 --> 00:12:22,840 Speaker 1: his strategy is for the mid terms, it's you know 221 00:12:22,920 --> 00:12:26,960 Speaker 1: that the economy is great, We're going for safe boarders. 222 00:12:27,240 --> 00:12:30,280 Speaker 1: I think he used the slogan that the Democrats are 223 00:12:30,360 --> 00:12:33,880 Speaker 1: mobs and the Republicans are about jobs, and that's pretty 224 00:12:33,880 --> 00:12:38,000 Speaker 1: effective argument whether it and there are there is polling 225 00:12:38,040 --> 00:12:41,959 Speaker 1: that shows that, you know, there is a narrowing of 226 00:12:42,000 --> 00:12:46,240 Speaker 1: this race, that the blue tide is actually could be 227 00:12:46,360 --> 00:12:49,400 Speaker 1: questioned um, and that the poll numbers are moving in 228 00:12:49,440 --> 00:12:53,800 Speaker 1: the GOP's direction. So that kind of messaging may quite 229 00:12:53,960 --> 00:12:57,079 Speaker 1: maybe quite effective. As we run down to the final 230 00:12:57,160 --> 00:13:00,000 Speaker 1: days of the Smith term campaign, just a little bit 231 00:13:00,080 --> 00:13:05,000 Speaker 1: more on Saudi Arabia, Marty is it uh? Is it 232 00:13:05,040 --> 00:13:11,640 Speaker 1: a situation where business interests are colliding with strategic interests? Actually, 233 00:13:11,679 --> 00:13:15,959 Speaker 1: I would say that they're similar their blind uh and 234 00:13:16,000 --> 00:13:20,600 Speaker 1: we and others have written stories while the headline people 235 00:13:20,640 --> 00:13:24,360 Speaker 1: like Jamie Diamond about out of the investor conference next week, 236 00:13:25,200 --> 00:13:30,160 Speaker 1: a lot of the underlings are going to be in 237 00:13:30,200 --> 00:13:34,679 Speaker 1: the region and attending that conference because there are such 238 00:13:34,760 --> 00:13:40,559 Speaker 1: financial there is such financial importance to the Saudi Arabia 239 00:13:41,000 --> 00:13:46,440 Speaker 1: UM wealth that no one can afford to kind of ostracized. 240 00:13:46,520 --> 00:13:52,240 Speaker 1: So there are deep historical financial connections that will underpin 241 00:13:52,360 --> 00:13:57,360 Speaker 1: that relationship, just as there are deep political uh strategic 242 00:13:57,400 --> 00:14:01,199 Speaker 1: relationships on the government side that will continue that relationship. 243 00:14:01,640 --> 00:14:03,880 Speaker 1: Thanks very much for being with us, Always a pleasure 244 00:14:04,000 --> 00:14:07,040 Speaker 1: Marty Schenker. He is our chief content officer here at 245 00:14:07,080 --> 00:14:11,080 Speaker 1: the Bloomberg News. Much appreciated talking about Saudi Arabia and 246 00:14:11,240 --> 00:14:16,319 Speaker 1: US relations in light of the disappearance and alleged murder 247 00:14:16,360 --> 00:14:21,480 Speaker 1: of the Jamal Kashogi, a contributing journalist to The Washington Post. 248 00:14:24,760 --> 00:14:29,280 Speaker 1: It's time to talk about Brazil and Brazil's largest airline group. 249 00:14:29,800 --> 00:14:34,840 Speaker 1: Well in English, it's called Goal Intelligent Airlines. It carries 250 00:14:34,880 --> 00:14:37,720 Speaker 1: more than thirty three million passengers each year on more 251 00:14:37,720 --> 00:14:42,080 Speaker 1: than seven daily flights more than sixty destinations. The chief 252 00:14:42,120 --> 00:14:45,120 Speaker 1: financial officer is Richard Larkin. He joins us here in 253 00:14:45,160 --> 00:14:48,480 Speaker 1: our Bloomberg Interactive Broker's studios. Richard Lark, thank you very 254 00:14:48,560 --> 00:14:51,320 Speaker 1: much for being here. Thank you a good morning. Start 255 00:14:51,360 --> 00:14:54,320 Speaker 1: by just describing for people that may not be familiar 256 00:14:54,760 --> 00:14:59,120 Speaker 1: with your airline how it came to be and how 257 00:14:59,160 --> 00:15:04,800 Speaker 1: it has come to really be the premier airline in Brazil. Yeah, 258 00:15:04,840 --> 00:15:07,840 Speaker 1: we started in two thousand one, which is about one 259 00:15:07,920 --> 00:15:12,400 Speaker 1: year after we had uh deregulation in Brazil UH. And 260 00:15:12,480 --> 00:15:17,320 Speaker 1: we started with a traditional low cost carrier based on 261 00:15:17,400 --> 00:15:19,440 Speaker 1: a single fleet type, which for US was the Boing 262 00:15:19,440 --> 00:15:24,880 Speaker 1: seven thirty seven high operating efficiency, high utilization, and we 263 00:15:24,920 --> 00:15:28,280 Speaker 1: started with four aircraft in two thousand one, and a 264 00:15:28,280 --> 00:15:32,320 Speaker 1: combination of the cost advantage of the company plus the 265 00:15:32,640 --> 00:15:35,480 Speaker 1: fair dynamic allowed us to over a ten year period, 266 00:15:36,600 --> 00:15:40,280 Speaker 1: UH become the largest airline in Brazil. That was also 267 00:15:40,360 --> 00:15:42,880 Speaker 1: helped by two acquisitions that we did. And over the 268 00:15:42,920 --> 00:15:45,680 Speaker 1: last couple of years we've we've been investing heavily in 269 00:15:45,760 --> 00:15:51,360 Speaker 1: our product, UH technology and the onboard customer experience, which 270 00:15:51,400 --> 00:15:55,240 Speaker 1: has allowed us today to become the number one business 271 00:15:55,280 --> 00:15:59,400 Speaker 1: airline in Brazil. All right, so let's fast forward to now. 272 00:15:59,520 --> 00:16:02,880 Speaker 1: We have a situation where the Brazilian economy has been 273 00:16:03,080 --> 00:16:06,320 Speaker 1: mired in a deep recession, the worse in its history. UH. 274 00:16:06,560 --> 00:16:08,440 Speaker 1: Things are starting to look up a little bit, at 275 00:16:08,480 --> 00:16:11,200 Speaker 1: least when you look at bond and stock markets, possibly 276 00:16:11,280 --> 00:16:13,840 Speaker 1: because of the candidate Bosonaro that looks like the front 277 00:16:13,880 --> 00:16:17,400 Speaker 1: runner who has a much more conservative view towards cutting 278 00:16:17,600 --> 00:16:21,400 Speaker 1: the deficit and rearranging some of the pension the pensions. 279 00:16:21,640 --> 00:16:24,360 Speaker 1: I'm just wondering, from your perspective, how much will this 280 00:16:24,520 --> 00:16:28,720 Speaker 1: give a boost to your company should this go through 281 00:16:29,320 --> 00:16:33,000 Speaker 1: and there is some measure of reform that gets enacted 282 00:16:33,000 --> 00:16:36,800 Speaker 1: on the governmental level. Yeah, Obviously we can't predict the 283 00:16:36,840 --> 00:16:40,280 Speaker 1: outcome of the elections, but assuming UH we see that, UH, 284 00:16:40,320 --> 00:16:43,160 Speaker 1: you know, we see well adjust to the outcome. UH, 285 00:16:43,360 --> 00:16:47,600 Speaker 1: you know, we see UM. A lot of components in 286 00:16:48,000 --> 00:16:50,440 Speaker 1: bolson Oars platform are very clear in terms of the 287 00:16:50,440 --> 00:16:52,560 Speaker 1: impact that they're going to have on our sectors, such as, 288 00:16:53,680 --> 00:16:58,040 Speaker 1: in addition to the reforms you mentioned, you know, pension 289 00:16:58,640 --> 00:17:02,560 Speaker 1: tax reform, we're also UH in his platform seeing some 290 00:17:02,600 --> 00:17:04,800 Speaker 1: things will be positive for the airline sectors, such as 291 00:17:05,280 --> 00:17:09,879 Speaker 1: increasing airport privalizations. We have a dire need for improvement 292 00:17:09,880 --> 00:17:14,199 Speaker 1: and infrastructure and airports and airspace in Brazil, and a 293 00:17:14,240 --> 00:17:16,639 Speaker 1: general liberalization of a lot of the other regulations that 294 00:17:16,680 --> 00:17:23,160 Speaker 1: affect our sectors, such as bilateral agreements UH on international 295 00:17:23,200 --> 00:17:28,080 Speaker 1: travel for on capital rules UM and UH. We also 296 00:17:28,200 --> 00:17:31,280 Speaker 1: think that UM the policies are gonna have a positive 297 00:17:31,280 --> 00:17:34,080 Speaker 1: impact on demand, particularly in the corporate space and within 298 00:17:34,119 --> 00:17:37,959 Speaker 1: that particularly the agro UH, the agro sector in Brazil, 299 00:17:38,080 --> 00:17:41,359 Speaker 1: which is a big portion of our air travel base. Also, 300 00:17:42,040 --> 00:17:46,360 Speaker 1: just to get specific on goal for a moment, ratings upgrade, 301 00:17:46,400 --> 00:17:51,720 Speaker 1: when it comes to your credit tender offers, redemptions, improved 302 00:17:51,920 --> 00:17:57,879 Speaker 1: cash liquidity. This is all giving you greater financial flexibility, 303 00:17:58,600 --> 00:18:02,199 Speaker 1: any idea what you're gonna do with the money. Well, 304 00:18:02,320 --> 00:18:05,120 Speaker 1: in the short term, we're continuing deleveraging over the next 305 00:18:05,119 --> 00:18:08,720 Speaker 1: two years. UH. We expected delever by another two billion eyes, 306 00:18:08,800 --> 00:18:13,160 Speaker 1: which is uh, you know, call it five six million dollars. UH, 307 00:18:13,200 --> 00:18:16,840 Speaker 1: and that that's the main focus of this this additional 308 00:18:17,400 --> 00:18:21,600 Speaker 1: cash flower generating. In the short term is continued deleveraging. UH. 309 00:18:21,680 --> 00:18:24,600 Speaker 1: We were upgraded back to a single B, but our 310 00:18:24,600 --> 00:18:26,800 Speaker 1: our target is to get back to double B minus 311 00:18:26,880 --> 00:18:30,240 Speaker 1: entity within the next two years. I'm curious about the 312 00:18:30,359 --> 00:18:34,480 Speaker 1: mix of your travelers. How much is domestic versus international 313 00:18:34,800 --> 00:18:38,240 Speaker 1: and how has that shifted. Yeah, today we're about eighty 314 00:18:38,320 --> 00:18:43,600 Speaker 1: five percent domestic international. We have been globalizing our business 315 00:18:43,600 --> 00:18:46,960 Speaker 1: constantly over the over the years, pretty much since our founding. 316 00:18:46,960 --> 00:18:50,840 Speaker 1: Today we have over ninety code shares and interlines. You know, 317 00:18:50,880 --> 00:18:53,040 Speaker 1: we sell tickets in over a hundred forty countries around 318 00:18:53,040 --> 00:18:55,960 Speaker 1: the world. And in fact, one of the reasons that 319 00:18:56,040 --> 00:18:58,840 Speaker 1: we're up in New York today is we're UH talking 320 00:18:58,880 --> 00:19:03,040 Speaker 1: about our our direct service that we're adding to Miami 321 00:19:03,040 --> 00:19:07,320 Speaker 1: and Orlando. In two weeks we launch uh service, and 322 00:19:07,520 --> 00:19:11,600 Speaker 1: that's gonna allow us to expand our non Brazilian o 323 00:19:11,680 --> 00:19:14,080 Speaker 1: in these non Brazilian revenues from the current fifteen to 324 00:19:14,119 --> 00:19:16,679 Speaker 1: around over the next three or five years. So how 325 00:19:16,720 --> 00:19:20,560 Speaker 1: does the backdrop of increased trade tensions and tariffs, etcetera 326 00:19:20,640 --> 00:19:22,640 Speaker 1: affect your business if at all, especially as you try 327 00:19:22,640 --> 00:19:26,560 Speaker 1: to globalize. Well, we we have a platform that has 328 00:19:26,600 --> 00:19:29,240 Speaker 1: been developed over a period of time based on a 329 00:19:29,280 --> 00:19:32,240 Speaker 1: lot of global partnerships. Uh. You know, Uh, we have 330 00:19:32,280 --> 00:19:36,760 Speaker 1: a very strong relationship with Delta Airlines, with Air France KLM, 331 00:19:36,880 --> 00:19:41,760 Speaker 1: and UH what really drives these flows is the demand. Uh. 332 00:19:42,560 --> 00:19:45,520 Speaker 1: On the Brazilian side of the equation. For example, we 333 00:19:45,560 --> 00:19:48,840 Speaker 1: take our what we're adding service to to South Florida. 334 00:19:48,920 --> 00:19:51,080 Speaker 1: Part of it is leisure, but there's a very large 335 00:19:51,560 --> 00:19:54,600 Speaker 1: uh small business uh component in South Florida. A lot 336 00:19:54,640 --> 00:19:58,359 Speaker 1: of Brazilians have small businesses there, and we don't see 337 00:19:58,400 --> 00:20:01,760 Speaker 1: that very much affected by anything on the trade side. Obviously, 338 00:20:01,880 --> 00:20:05,280 Speaker 1: it is affected by on the currency side, which affects 339 00:20:05,280 --> 00:20:08,960 Speaker 1: purchasing power, which affects our business. Uh, but we're expecting 340 00:20:08,960 --> 00:20:11,760 Speaker 1: improvements on that. Well, that's where I was gonna go. 341 00:20:11,840 --> 00:20:14,960 Speaker 1: Was the idea that if you have a devaluing currency, 342 00:20:15,040 --> 00:20:17,879 Speaker 1: that makes it just that much more challenging to buy 343 00:20:17,960 --> 00:20:22,320 Speaker 1: the twenty Boeing seven three seven Max aircraft. Tell us 344 00:20:22,359 --> 00:20:25,240 Speaker 1: about why you decided on the seven three seven Max 345 00:20:25,280 --> 00:20:29,280 Speaker 1: and how that's going to change the operating efficiency of 346 00:20:29,280 --> 00:20:33,560 Speaker 1: the company. Yeah, the main reason is the fuel economy. 347 00:20:33,600 --> 00:20:35,800 Speaker 1: The seven thirty seven Max eight, which is the model 348 00:20:35,840 --> 00:20:38,000 Speaker 1: war operating we are have already have three operating in 349 00:20:38,000 --> 00:20:40,960 Speaker 1: the fleet. UH is already achieving for us a fifteen 350 00:20:41,040 --> 00:20:44,600 Speaker 1: percent fuel economy and about a third of our costs 351 00:20:44,680 --> 00:20:47,639 Speaker 1: are our jet fuel. That hasn't a significant impact on 352 00:20:47,640 --> 00:20:50,560 Speaker 1: our margins. So that's been the main driver UH to 353 00:20:50,640 --> 00:20:54,399 Speaker 1: have that absolute cost reduction. Secondarily, you know, Brazil is 354 00:20:54,440 --> 00:20:58,280 Speaker 1: a very dynamic competitive market and our competitors are also 355 00:20:58,320 --> 00:21:02,720 Speaker 1: investing in in proved aircraft on the airbow side of 356 00:21:02,760 --> 00:21:05,359 Speaker 1: the equation. We're the only Boeing operator in Brazil. But 357 00:21:05,400 --> 00:21:10,280 Speaker 1: the second reason is the larger, slightly larger configuration of 358 00:21:10,280 --> 00:21:13,560 Speaker 1: the Max. UH will be configured with a hundred and 359 00:21:13,600 --> 00:21:16,680 Speaker 1: eighties six seats as opposed to our current hundred seventy seven. 360 00:21:17,080 --> 00:21:20,880 Speaker 1: That gives us a greater revenue productivity. But the final reason, 361 00:21:20,920 --> 00:21:24,359 Speaker 1: which is important, which is facilitating these flights that were 362 00:21:24,440 --> 00:21:27,000 Speaker 1: launching in two weeks to mamor Orlando. Is the additional 363 00:21:27,160 --> 00:21:31,480 Speaker 1: range of about uh kilometers on the max that allows 364 00:21:31,560 --> 00:21:34,840 Speaker 1: us to do direct flights to Miami Orlando. Richard Lark, 365 00:21:34,920 --> 00:21:36,480 Speaker 1: thank you so much for being with us. Thank you, 366 00:21:36,760 --> 00:21:40,040 Speaker 1: Richard Larcas, chief financial officer of Goal Airlines based in 367 00:21:40,119 --> 00:21:42,600 Speaker 1: South Howlo, Brazil, but joining us here in our eleven 368 00:21:42,600 --> 00:21:49,560 Speaker 1: three oh studios. Among all stocks, Procter and Gamble really 369 00:21:49,600 --> 00:21:52,880 Speaker 1: stands out posting a game today that is the biggest 370 00:21:52,880 --> 00:21:58,040 Speaker 1: since October two thousand and eight, more than eight percent climb. Well, 371 00:21:58,119 --> 00:22:01,800 Speaker 1: they beat earnings, they posted great expectations. Joining us now 372 00:22:01,880 --> 00:22:05,800 Speaker 1: to talk about this, Sarah how Zach Bloomberg Opinion, consumer calumnists, Sarah, 373 00:22:05,840 --> 00:22:07,639 Speaker 1: come on in here. Is this just that we like 374 00:22:07,720 --> 00:22:10,199 Speaker 1: to buy really expensive creams and we just keep on 375 00:22:10,280 --> 00:22:13,000 Speaker 1: buying them and Procter and Gamble cashed in on that. 376 00:22:13,840 --> 00:22:16,159 Speaker 1: So that's certainly a part of it. Beauty was a 377 00:22:16,160 --> 00:22:19,480 Speaker 1: particularly strong division with seven percent organic sales growth in 378 00:22:19,520 --> 00:22:22,080 Speaker 1: the quarter, and they definitely have been having success with 379 00:22:22,119 --> 00:22:25,640 Speaker 1: their premium lines within Beauty, so s K two, which 380 00:22:25,680 --> 00:22:28,440 Speaker 1: has very high price tags, has been leading the growth 381 00:22:28,440 --> 00:22:31,120 Speaker 1: in that division for some time now. But that said, 382 00:22:31,520 --> 00:22:34,119 Speaker 1: that's not the whole picture. They really had strength in 383 00:22:34,160 --> 00:22:36,720 Speaker 1: their uh they grew sales and their grooming division, their 384 00:22:36,720 --> 00:22:40,479 Speaker 1: healthcare division, their fabric divisions. So um a broad based 385 00:22:41,480 --> 00:22:44,600 Speaker 1: series of categories fueling this gain this quarter. Sara, this 386 00:22:44,680 --> 00:22:49,400 Speaker 1: has to do also with organic sales growth, correct, it does. 387 00:22:49,440 --> 00:22:52,600 Speaker 1: So organic sales growth, what they mean with that number 388 00:22:52,680 --> 00:22:57,000 Speaker 1: is sort of excluding M and A activity and currency fluctuations, 389 00:22:57,040 --> 00:23:00,520 Speaker 1: and so that's a closely watched metric for the particular 390 00:23:00,560 --> 00:23:04,000 Speaker 1: company given its global reach. But if you're talking about organics, UM, 391 00:23:04,000 --> 00:23:06,040 Speaker 1: that is definitely an area that they're focused on in 392 00:23:06,119 --> 00:23:09,639 Speaker 1: naturals um, understanding that the consumer is kind of moving 393 00:23:09,680 --> 00:23:12,679 Speaker 1: in this direction and considering that more of a priority. So, 394 00:23:12,760 --> 00:23:14,720 Speaker 1: for example, in the diaper's division, they now have this 395 00:23:15,080 --> 00:23:17,520 Speaker 1: Pampers natural lines that's supposed to be made in a 396 00:23:17,520 --> 00:23:20,560 Speaker 1: more sustainable way, and that helps drive growth in the quarter. 397 00:23:20,800 --> 00:23:24,320 Speaker 1: I love this sort of organic growth versus organics. And 398 00:23:24,320 --> 00:23:27,119 Speaker 1: then I have to wonder, what is organic face cream? 399 00:23:27,160 --> 00:23:29,000 Speaker 1: I mean, how is that organic? I don't I just 400 00:23:29,480 --> 00:23:32,200 Speaker 1: boggles of mind. I do want to ask you, though, Sarah. 401 00:23:32,400 --> 00:23:34,560 Speaker 1: They also said that they were gaining market share at 402 00:23:34,560 --> 00:23:37,360 Speaker 1: a number of different divisions. Who's the loser here? Who 403 00:23:37,359 --> 00:23:40,960 Speaker 1: are they grabbing market share from? Yeah, it's it's not. 404 00:23:41,560 --> 00:23:44,880 Speaker 1: I think it varies widely across the globe. So for example, 405 00:23:45,200 --> 00:23:47,240 Speaker 1: I think one interesting place to look is in their 406 00:23:47,320 --> 00:23:49,560 Speaker 1: loves diaper division. That's a place where they had been 407 00:23:49,560 --> 00:23:53,040 Speaker 1: getting smacked by the private label diapers makers because they 408 00:23:53,080 --> 00:23:56,399 Speaker 1: had so underpriced. So you can assume that's from the 409 00:23:56,480 --> 00:23:59,280 Speaker 1: likes of Walmart, from Target, from Amazon who have strong 410 00:23:59,320 --> 00:24:02,280 Speaker 1: private label offerings. There. They slash prices in the Love's 411 00:24:02,320 --> 00:24:04,600 Speaker 1: division this quarter to try to get some of that 412 00:24:04,680 --> 00:24:08,120 Speaker 1: market share back, and so presumably that's sort of where 413 00:24:08,160 --> 00:24:11,000 Speaker 1: that push and pole is taking place. Have they been 414 00:24:11,080 --> 00:24:14,320 Speaker 1: able to raise prices or is that still a challenge. 415 00:24:15,240 --> 00:24:17,600 Speaker 1: That's a really good question. So they have announced they're 416 00:24:17,600 --> 00:24:21,439 Speaker 1: going to be raising prices on some key brands like Bounty, Sharman, 417 00:24:21,600 --> 00:24:25,080 Speaker 1: and Pops because of commodity costs, right, pulp costs, paper 418 00:24:25,080 --> 00:24:27,560 Speaker 1: costs are increasing, and so they're going to be taking 419 00:24:27,560 --> 00:24:31,280 Speaker 1: those price increases starting October thirties one. We don't know 420 00:24:31,400 --> 00:24:34,000 Speaker 1: yet how consumers are going to respond to that, and 421 00:24:34,040 --> 00:24:35,680 Speaker 1: I think that's a really important thing when you look 422 00:24:35,680 --> 00:24:39,400 Speaker 1: at how sustainable as this growth that they deliver this quarter. Uh, 423 00:24:39,440 --> 00:24:42,000 Speaker 1: that's a real X factor. Executives were cautioning on the 424 00:24:42,040 --> 00:24:45,600 Speaker 1: conference call today that trying to take these price increases 425 00:24:45,600 --> 00:24:48,120 Speaker 1: could result in some volatility because they don't know how 426 00:24:48,200 --> 00:24:51,040 Speaker 1: much Kimberly Clark or Colgate pal Mama is going to 427 00:24:51,119 --> 00:24:53,320 Speaker 1: move in the same direction, and they could end up 428 00:24:53,359 --> 00:24:56,040 Speaker 1: losing shoppers when they take that that action. I am 429 00:24:56,200 --> 00:24:59,000 Speaker 1: the strange person that actually pays attention to the price 430 00:24:59,040 --> 00:25:02,840 Speaker 1: of my toilet paper or my paper towels. Do you 431 00:25:02,960 --> 00:25:07,080 Speaker 1: phim No to you, Sarah, I I pay attention to that. 432 00:25:07,119 --> 00:25:10,080 Speaker 1: I mean the differential can be dollars, like entire dollars 433 00:25:10,080 --> 00:25:13,280 Speaker 1: in one package. I don't. I'm definitely a person who's 434 00:25:13,359 --> 00:25:17,480 Speaker 1: just on autopilot. You know, I'm revealing too much about myself. 435 00:25:19,680 --> 00:25:21,600 Speaker 1: I want to get your sense on how much Procter 436 00:25:21,680 --> 00:25:24,120 Speaker 1: and Gamble is just doing things right itself, and how 437 00:25:24,200 --> 00:25:27,439 Speaker 1: much it's indicative of the strong consumer the people have 438 00:25:27,560 --> 00:25:29,760 Speaker 1: really been rejecting so far this year. I mean, Procter 439 00:25:29,840 --> 00:25:32,480 Speaker 1: Gamble shares are still down nearly two percent year to date, 440 00:25:32,760 --> 00:25:34,879 Speaker 1: so you know, is the consumer a lot stronger than 441 00:25:34,920 --> 00:25:37,560 Speaker 1: people think, and does this give wind to other consumer 442 00:25:37,560 --> 00:25:40,919 Speaker 1: product companies. I do think this is an indicator of 443 00:25:41,640 --> 00:25:43,760 Speaker 1: the fact that the consumer environment is strong, and we 444 00:25:43,800 --> 00:25:45,919 Speaker 1: see this in so many different ways. We've got this 445 00:25:45,960 --> 00:25:50,560 Speaker 1: in strong quarters from major retailers into two and I 446 00:25:50,600 --> 00:25:53,040 Speaker 1: think this is an additional reflection of that. That said, 447 00:25:53,480 --> 00:25:55,720 Speaker 1: I do think that the consumer has been strong for 448 00:25:55,720 --> 00:25:58,479 Speaker 1: a while now, right, so the fact that PNG is 449 00:25:58,680 --> 00:26:01,400 Speaker 1: seeing this inflection point speak to some of the things 450 00:26:01,400 --> 00:26:04,119 Speaker 1: they're doing right. I think, particularly in the grooming category, 451 00:26:04,680 --> 00:26:07,520 Speaker 1: that is a business where they were just assaulted by 452 00:26:07,560 --> 00:26:10,520 Speaker 1: these newcomers like Dollar Shave Club and Harry's UM. They 453 00:26:10,520 --> 00:26:13,199 Speaker 1: were offering these sort of disruptive subscription models and they 454 00:26:13,200 --> 00:26:15,960 Speaker 1: finally returned to growth there this quarter, and so that 455 00:26:16,119 --> 00:26:18,880 Speaker 1: suggests that, you know, they on the one hand, did 456 00:26:18,880 --> 00:26:21,480 Speaker 1: some smart things in terms of adjusting their price structure 457 00:26:21,520 --> 00:26:24,840 Speaker 1: to be more competitive with those guys UM, and also 458 00:26:24,960 --> 00:26:27,320 Speaker 1: just got their mix of products in the right places 459 00:26:27,400 --> 00:26:30,040 Speaker 1: in front of the right shoppers. I got to imagine though, 460 00:26:30,040 --> 00:26:33,919 Speaker 1: that whatever happens in China is also important to Proctor 461 00:26:34,040 --> 00:26:37,199 Speaker 1: and Gamble. They cited double digit growth in some of 462 00:26:37,240 --> 00:26:41,320 Speaker 1: their skin care lines in China, yes, and and China 463 00:26:41,440 --> 00:26:43,760 Speaker 1: isn't very so China is very important to their future. 464 00:26:43,840 --> 00:26:46,160 Speaker 1: Right now, it's actually only nine percent of their total 465 00:26:46,200 --> 00:26:49,679 Speaker 1: annual sales, but certainly that that will change over time 466 00:26:49,800 --> 00:26:52,920 Speaker 1: as the middle class grows there. But China is definitely 467 00:26:52,960 --> 00:26:54,959 Speaker 1: a real success story for PNG. It was only two 468 00:26:55,040 --> 00:26:57,640 Speaker 1: years ago that they were posting declining sales in that 469 00:26:57,680 --> 00:26:59,919 Speaker 1: market overall, and they've just been doing a lot of 470 00:27:00,000 --> 00:27:02,600 Speaker 1: consumer product one oh one type work there. I think 471 00:27:02,600 --> 00:27:04,679 Speaker 1: the l A brand is a great example of that. 472 00:27:04,800 --> 00:27:08,200 Speaker 1: So in China, they really wanted to make that brand stronger, 473 00:27:08,240 --> 00:27:11,960 Speaker 1: so they change the packaging of their ol A face product. Um. 474 00:27:12,000 --> 00:27:14,920 Speaker 1: That's a place where in the Chinese market you might 475 00:27:14,960 --> 00:27:18,240 Speaker 1: have an actual like over the counter service with a 476 00:27:18,280 --> 00:27:22,080 Speaker 1: customer representative there. So they sort of change the training 477 00:27:22,160 --> 00:27:25,520 Speaker 1: and the approach to that kind of service. It's really worked, 478 00:27:25,640 --> 00:27:28,120 Speaker 1: not as pim. She doesn't say change the cream, it's 479 00:27:28,200 --> 00:27:31,600 Speaker 1: changed the packaging. Change the way people talk about where 480 00:27:31,600 --> 00:27:34,119 Speaker 1: most of the marketing, it really is the one that 481 00:27:34,160 --> 00:27:36,760 Speaker 1: grabs most of the money. We're so gullible. It's true 482 00:27:36,880 --> 00:27:39,080 Speaker 1: when something is more expensive and packaged in a prettier 483 00:27:39,080 --> 00:27:43,000 Speaker 1: package can be as gross margins they could be over. 484 00:27:44,400 --> 00:27:47,680 Speaker 1: Thanks very much, Sarah hall Zack, an expert in all 485 00:27:47,800 --> 00:27:53,119 Speaker 1: things retail our Bloomberg Opinion consumer columnist, telling us about 486 00:27:53,119 --> 00:27:56,399 Speaker 1: Procter and Gamble. Thanks for listening to the Bloomberg P 487 00:27:56,520 --> 00:27:59,480 Speaker 1: and L podcast. You can subscribe and listen to interviews 488 00:27:59,520 --> 00:28:03,560 Speaker 1: that app, podcasts, SoundCloud, or whatever podcast platform you prefer. 489 00:28:03,960 --> 00:28:07,520 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 490 00:28:07,560 --> 00:28:10,879 Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast, 491 00:28:10,920 --> 00:28:13,520 Speaker 1: you can always catch us worldwide on Bloomberg Radio