1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:24,360 Speaker 1: at Bloomberg dot com. Earnings very strong numbers coming out 8 00:00:24,400 --> 00:00:27,080 Speaker 1: of Target and Lows today, helping push the market up 9 00:00:27,120 --> 00:00:30,120 Speaker 1: close to one percent. Let's get a breakdown on these 10 00:00:30,120 --> 00:00:32,960 Speaker 1: earnings and all things retail. To do that, nobody better 11 00:00:33,159 --> 00:00:35,920 Speaker 1: to talk to than Dana Telsey. Dana is the CEO 12 00:00:36,000 --> 00:00:38,960 Speaker 1: and founder of Tells, the Advisory Group based in New York. Dana, 13 00:00:39,000 --> 00:00:41,520 Speaker 1: thanks so much for joining us. Let's start with those 14 00:00:41,680 --> 00:00:45,200 Speaker 1: earnings that we've got today, Target and Lows, blockbuster numbers, 15 00:00:45,200 --> 00:00:48,920 Speaker 1: stocks really popping. Gives your takeaways, I think overall, what 16 00:00:48,960 --> 00:00:51,760 Speaker 1: you're seeing is value and convenience is working. When you 17 00:00:51,840 --> 00:00:55,760 Speaker 1: see things in open air centers, they definitely are gaining 18 00:00:55,760 --> 00:00:58,800 Speaker 1: the traffic and gaining share. When you think about both 19 00:00:58,800 --> 00:01:01,720 Speaker 1: Target and Low. Of the numbers certainly came in a 20 00:01:01,760 --> 00:01:04,720 Speaker 1: little bit better than expected. I mean, that's better than 21 00:01:04,760 --> 00:01:08,720 Speaker 1: expected same store sales. That target was very impressive. Keep 22 00:01:08,720 --> 00:01:11,760 Speaker 1: in mind that comp of three point four percent better 23 00:01:11,800 --> 00:01:15,479 Speaker 1: than the the consensus number at just around three percent, 24 00:01:15,720 --> 00:01:19,039 Speaker 1: and it's traffic up two point four percent. That certainly 25 00:01:19,120 --> 00:01:22,039 Speaker 1: is is very super impressive, and it comes from the 26 00:01:22,120 --> 00:01:25,840 Speaker 1: merchandise assortment that they've had, the price investment that they've made, 27 00:01:26,040 --> 00:01:29,240 Speaker 1: the new private brands and remodeling stores. And then you 28 00:01:29,280 --> 00:01:32,560 Speaker 1: see Low's also they maintained their guidance but delivered a 29 00:01:32,600 --> 00:01:35,399 Speaker 1: beat on the second quarter, and their US CAMP of 30 00:01:35,480 --> 00:01:38,480 Speaker 1: three point their US CAMP of three point two percent 31 00:01:39,040 --> 00:01:42,840 Speaker 1: was quite solid. It basically mirrored and came in slightly 32 00:01:42,920 --> 00:01:46,280 Speaker 1: better than home depots US CAMP of three point one percent. 33 00:01:46,680 --> 00:01:49,480 Speaker 1: So I think overall, these big companies have been able 34 00:01:49,520 --> 00:01:54,480 Speaker 1: to integrate, certainly omni channel initiatives they're using buy online, 35 00:01:54,480 --> 00:01:58,640 Speaker 1: pickup in store. The product assortment and price investments are working, 36 00:01:59,200 --> 00:02:02,720 Speaker 1: and there delivering on the gross margin, a big difference 37 00:02:02,720 --> 00:02:04,840 Speaker 1: than what we've seen in some of the apparel companies. 38 00:02:05,040 --> 00:02:08,640 Speaker 1: We've seen gross margin headwinds and apparel companies, we've seen 39 00:02:08,680 --> 00:02:13,360 Speaker 1: gross margin improvement at some of the discounters and home retailers, Dana, 40 00:02:13,639 --> 00:02:17,040 Speaker 1: It's interesting to me to see how people are viewing 41 00:02:17,120 --> 00:02:20,519 Speaker 1: these earnings in light of the US economy. In other words, 42 00:02:20,720 --> 00:02:24,360 Speaker 1: people looking at Target, Walmart and Lows and saying, look, 43 00:02:24,400 --> 00:02:27,440 Speaker 1: they beat. The consumer is strong. And on the flip side, 44 00:02:27,600 --> 00:02:31,359 Speaker 1: these are traditionally discount stores, and Lows not a discount store. 45 00:02:31,400 --> 00:02:34,000 Speaker 1: But people usually renovate rather than move if they don't 46 00:02:34,000 --> 00:02:36,639 Speaker 1: want to make an investment in buying a home. Uh So, 47 00:02:36,800 --> 00:02:39,440 Speaker 1: how are you viewing the beats in terms of that 48 00:02:39,480 --> 00:02:42,680 Speaker 1: broader perspective? I think overall, when I think about the 49 00:02:42,760 --> 00:02:44,920 Speaker 1: US consumer, what it tells me is that the consumer 50 00:02:45,000 --> 00:02:47,679 Speaker 1: is healthy. When I have traffic games like up two 51 00:02:47,680 --> 00:02:51,360 Speaker 1: point four percent in traffic games at Walmart, that's encouraging. 52 00:02:51,639 --> 00:02:54,760 Speaker 1: It wasn't done just on price the loan. It was 53 00:02:54,840 --> 00:02:57,880 Speaker 1: done on more consumers walking in the door. When I 54 00:02:57,919 --> 00:03:00,359 Speaker 1: think about what I'm seeing in apparel, it's a different 55 00:03:00,360 --> 00:03:03,920 Speaker 1: worlds and apparel. The head winds of tariffs are definitely 56 00:03:03,919 --> 00:03:06,400 Speaker 1: going to be an issue, and you had Macy CEO 57 00:03:06,600 --> 00:03:09,320 Speaker 1: who basically said that trying to pass on some of 58 00:03:09,360 --> 00:03:12,880 Speaker 1: the price increases, the consumer won't accept the price increases. 59 00:03:13,200 --> 00:03:16,639 Speaker 1: There's needs and there's wants. I think both the home 60 00:03:16,680 --> 00:03:21,160 Speaker 1: improvement retailers the discounters are more need based retailers. I 61 00:03:21,160 --> 00:03:24,639 Speaker 1: think apparel retailers are more want based retailers. And certainly 62 00:03:24,680 --> 00:03:28,000 Speaker 1: an apparel given that you've had a consolidation of wearing 63 00:03:28,040 --> 00:03:32,280 Speaker 1: occasions work weekend, Jim and going to a party work 64 00:03:32,280 --> 00:03:34,960 Speaker 1: weekend in gim er all one, you can basically get 65 00:03:35,080 --> 00:03:38,280 Speaker 1: more value for your money in in apparel in different 66 00:03:38,280 --> 00:03:41,160 Speaker 1: places today than what you have in the past because 67 00:03:41,200 --> 00:03:43,440 Speaker 1: you don't need to buy as many different outfits, so 68 00:03:43,480 --> 00:03:45,880 Speaker 1: you better get it right in order to make the difference. 69 00:03:46,320 --> 00:03:49,040 Speaker 1: So Dana, give us a sense. Just you've covered the 70 00:03:49,080 --> 00:03:51,360 Speaker 1: broad retail space for such a long time, you've got 71 00:03:51,400 --> 00:03:53,320 Speaker 1: your finger on the pulse of it. You know. One 72 00:03:53,320 --> 00:03:55,480 Speaker 1: of the concerns out there that I hear from investors 73 00:03:55,520 --> 00:03:59,000 Speaker 1: is that the US, despite all the store closings that 74 00:03:59,000 --> 00:04:01,160 Speaker 1: we've seen, whether it's toys, r ust or whatever, the 75 00:04:01,280 --> 00:04:04,000 Speaker 1: US is still way overstored. Can you give us your 76 00:04:04,040 --> 00:04:07,200 Speaker 1: thoughts on that. I think overall, when you're thinking about 77 00:04:07,240 --> 00:04:10,040 Speaker 1: stores today, I think we do have a smaller store 78 00:04:10,080 --> 00:04:12,880 Speaker 1: base that's required for retailers than you had in the past. 79 00:04:13,040 --> 00:04:14,960 Speaker 1: It's got to be the right stores, and it's got 80 00:04:14,960 --> 00:04:18,080 Speaker 1: to be the right centers, and you're seeing transformations happen. 81 00:04:18,440 --> 00:04:21,680 Speaker 1: I call it reinvention for relevancy, and I think you're 82 00:04:21,680 --> 00:04:26,159 Speaker 1: seeing experiential factors being placed in shopping centers. It's being 83 00:04:26,200 --> 00:04:29,680 Speaker 1: placed in retailers too, in order to create that destination. 84 00:04:30,160 --> 00:04:33,520 Speaker 1: And whether it's food, whether it's events, you're seeing every 85 00:04:33,560 --> 00:04:36,200 Speaker 1: type of retailer in order to connect to their customers. 86 00:04:36,320 --> 00:04:38,960 Speaker 1: You have to innovate, you need to offer speed, and 87 00:04:39,000 --> 00:04:40,800 Speaker 1: you need to learn from the data of what to 88 00:04:40,880 --> 00:04:43,560 Speaker 1: offer them. So when I think about the number of stores, 89 00:04:43,720 --> 00:04:46,239 Speaker 1: you're not seeing as many stores open, you're not seeing 90 00:04:46,240 --> 00:04:50,200 Speaker 1: as many shopping centers open. Reinvesting in both the center 91 00:04:50,279 --> 00:04:54,080 Speaker 1: and the store is required to stay relevant. DNA. It's 92 00:04:54,120 --> 00:04:57,000 Speaker 1: so interesting when you talk about investing. It really highlights 93 00:04:57,040 --> 00:05:00,480 Speaker 1: how companies that have money and have scope have such 94 00:05:00,480 --> 00:05:03,279 Speaker 1: an advantage right now over those that are struggling under 95 00:05:03,320 --> 00:05:07,599 Speaker 1: the load of big debts or just a lack of cash. 96 00:05:07,760 --> 00:05:09,839 Speaker 1: Right and so you're seeing sort of a tale of 97 00:05:09,880 --> 00:05:12,680 Speaker 1: two cities within the retail space. But I have to 98 00:05:12,720 --> 00:05:16,440 Speaker 1: wonder size is it a benefit or a detractor? Because 99 00:05:16,440 --> 00:05:18,480 Speaker 1: people were talking about how department stores are trying to 100 00:05:18,520 --> 00:05:21,120 Speaker 1: be everything to all people, and that became a problem. 101 00:05:21,400 --> 00:05:23,960 Speaker 1: On the other hand, Walmart and Target are doing well 102 00:05:24,000 --> 00:05:26,840 Speaker 1: because they are able to sort of leverage all these 103 00:05:26,880 --> 00:05:31,240 Speaker 1: different aspects of their businesses and provide a holistic kind 104 00:05:31,279 --> 00:05:34,600 Speaker 1: of you know, role for for the consumer. I'm just 105 00:05:34,640 --> 00:05:37,359 Speaker 1: wondering where when a size good and when is it not. 106 00:05:38,440 --> 00:05:41,760 Speaker 1: I think, whether you're big or whether you're small, if 107 00:05:41,760 --> 00:05:44,880 Speaker 1: you don't have an innovative products, it won't drive demand. 108 00:05:45,279 --> 00:05:47,640 Speaker 1: When you think of what's happening with the apparel companies, 109 00:05:47,920 --> 00:05:52,560 Speaker 1: the apparel companies, brands, whether it's Levi's reinvented themselves. We 110 00:05:52,600 --> 00:05:55,320 Speaker 1: can look at companies like what BF is doing with 111 00:05:55,480 --> 00:05:58,960 Speaker 1: north Face, with Vans, which has been the collaborations they've had, 112 00:05:59,000 --> 00:06:01,360 Speaker 1: which has been so compelled selling. You're taking a look 113 00:06:01,360 --> 00:06:05,040 Speaker 1: at companies that are in the midst of transformation like Tiffany's, 114 00:06:05,040 --> 00:06:08,840 Speaker 1: who is upgrading their business while you're having Target and Walmart. 115 00:06:09,360 --> 00:06:12,400 Speaker 1: Look at big bought small Target. I mean Walmart has 116 00:06:12,440 --> 00:06:15,760 Speaker 1: bought many smaller companies in order to be able to 117 00:06:15,920 --> 00:06:20,000 Speaker 1: enhance their speed, to identify omni channel and integrate omni 118 00:06:20,120 --> 00:06:23,080 Speaker 1: channel into their business. Look what Greg Bran at Walmart. 119 00:06:23,120 --> 00:06:25,760 Speaker 1: At Walmart did with their U S stores. I think 120 00:06:25,800 --> 00:06:30,120 Speaker 1: investing isn't isn't a just nice to do, It's a 121 00:06:30,240 --> 00:06:33,000 Speaker 1: must do. And I'd rather be small and more profitable 122 00:06:33,240 --> 00:06:36,520 Speaker 1: if you're investing and you're making yourself essential to the consumer, 123 00:06:36,960 --> 00:06:40,159 Speaker 1: rather than just have size for size six steake. Scale 124 00:06:40,240 --> 00:06:42,479 Speaker 1: matters as long as you can drop profits to the 125 00:06:42,480 --> 00:06:47,520 Speaker 1: bottom line. So Dana has Retail America have they weathered 126 00:06:47,720 --> 00:06:50,960 Speaker 1: the Amazon storm? I look at the Target did their 127 00:06:50,960 --> 00:06:55,440 Speaker 1: Their digital sales are kind of really strong. Digital sales 128 00:06:55,520 --> 00:06:58,120 Speaker 1: at Walmart as well as as retail America kind of 129 00:06:58,440 --> 00:07:00,920 Speaker 1: weather that initial on a lot by Amazon over the 130 00:07:01,000 --> 00:07:03,400 Speaker 1: last a dozen years or so. I think they have. 131 00:07:03,640 --> 00:07:06,800 Speaker 1: I think if anything, we've seen every company turned themselves 132 00:07:06,880 --> 00:07:10,880 Speaker 1: inside out and basically having Amazon taught them that we 133 00:07:10,920 --> 00:07:13,760 Speaker 1: need to make the best better and make the best better, 134 00:07:13,800 --> 00:07:18,240 Speaker 1: whether it's data, whether it's logistics, whether it's supply chain. 135 00:07:18,560 --> 00:07:22,040 Speaker 1: There's speed to markets getting faster, and looked at today, 136 00:07:22,280 --> 00:07:24,760 Speaker 1: whatever goes down the runway today should be able to 137 00:07:24,800 --> 00:07:27,200 Speaker 1: be bought in the same time. So I think that 138 00:07:27,320 --> 00:07:30,520 Speaker 1: the paste of newness is faster than it's ever been before. 139 00:07:31,120 --> 00:07:33,080 Speaker 1: Danta Telsey, thank you so much for spending time with 140 00:07:33,160 --> 00:07:36,560 Speaker 1: us today. Dana Telsey, chief executive officer in chief research 141 00:07:36,680 --> 00:07:54,640 Speaker 1: officer at Telsey Advisory Group, who owns Greenland? Who should 142 00:07:54,720 --> 00:07:57,200 Speaker 1: own Greenland? President Trump says that he would like to 143 00:07:57,520 --> 00:08:02,560 Speaker 1: buy Greenland. Dana's primate chain is Minister Meta Frederickson. Spoke 144 00:08:02,680 --> 00:08:06,120 Speaker 1: on this issue at a press conference at nine Eastern 145 00:08:06,880 --> 00:08:10,200 Speaker 1: talking about Trump and Greenland. She was speaking in Copenhagen. 146 00:08:10,400 --> 00:08:14,440 Speaker 1: Listen to what she had to say. A discussion has, however, 147 00:08:14,520 --> 00:08:20,040 Speaker 1: been very raised about a potential sale of Greenland. Um. 148 00:08:20,040 --> 00:08:25,120 Speaker 1: This has clearly been rejected by Kim Kitchen, a position 149 00:08:25,320 --> 00:08:31,480 Speaker 1: that I share. Of course, this does not change the 150 00:08:31,560 --> 00:08:35,760 Speaker 1: character of our good relations. Well, perhaps it doesn't change 151 00:08:35,760 --> 00:08:40,040 Speaker 1: the character of the good relations between what's going on 152 00:08:40,600 --> 00:08:43,880 Speaker 1: there and the u AS. But President Trump decided to 153 00:08:43,920 --> 00:08:47,520 Speaker 1: cancel our reschedule a meeting with the Prime Minister due 154 00:08:47,559 --> 00:08:49,920 Speaker 1: to the issue over Greenland. Here to give us a 155 00:08:49,960 --> 00:08:52,680 Speaker 1: sense of what this hall is about, Morton Butler, political 156 00:08:52,720 --> 00:08:57,440 Speaker 1: reporter for Bloomberg News, coming to us from Copenhagen in Denmark. Martin, 157 00:08:57,960 --> 00:09:00,320 Speaker 1: why is this even a debate right now? Why are 158 00:09:00,320 --> 00:09:05,080 Speaker 1: we talking about Greenland? Well, Greenland. Um, it's got a 159 00:09:05,120 --> 00:09:10,480 Speaker 1: prominent role in international politics right now. Arctics. The Arctics 160 00:09:10,920 --> 00:09:16,880 Speaker 1: are really dominant in both Russian politics, Chinese politics, US politics, 161 00:09:16,920 --> 00:09:19,520 Speaker 1: and of course in the Nordic region as well because 162 00:09:19,600 --> 00:09:25,040 Speaker 1: their massive resources up their natural gas and oil and sorts, 163 00:09:25,120 --> 00:09:29,480 Speaker 1: and a very important trade route UM by Sea is 164 00:09:29,840 --> 00:09:34,680 Speaker 1: opening up up there. So so this area really compiles 165 00:09:34,760 --> 00:09:38,000 Speaker 1: a lot of attention right now all over the globe. Basically, Yeah, 166 00:09:38,040 --> 00:09:41,480 Speaker 1: but what what gave President Trump the idea that this 167 00:09:41,559 --> 00:09:45,360 Speaker 1: was actually for sale? Well, I mean, he's not the 168 00:09:45,400 --> 00:09:49,319 Speaker 1: first American president to try to purchase this particular island. 169 00:09:50,120 --> 00:09:55,240 Speaker 1: Truman made similar efforts in forty six. I believe it 170 00:09:55,360 --> 00:09:59,240 Speaker 1: was UM. I suppose UM. With the upcoming trip to 171 00:09:59,720 --> 00:10:03,560 Speaker 1: tow to Denmark and with Greenland in the center of 172 00:10:03,559 --> 00:10:07,199 Speaker 1: attention for that trip, perhaps this seems to be um 173 00:10:07,240 --> 00:10:12,840 Speaker 1: an idea that has has emerged somehow in the White House. Okay, 174 00:10:12,960 --> 00:10:15,559 Speaker 1: so Morton, I guess that then there's a question of 175 00:10:15,800 --> 00:10:18,680 Speaker 1: let's put aside the idea that Denmark is going to 176 00:10:18,720 --> 00:10:21,720 Speaker 1: sell at stake in Greenland and just talk about the 177 00:10:21,760 --> 00:10:26,040 Speaker 1: strategic role of Greenland. Is there a sense that Denmark 178 00:10:26,160 --> 00:10:30,560 Speaker 1: is establishing closer ties with say, rivals of the United 179 00:10:30,640 --> 00:10:35,160 Speaker 1: States over America in terms of giving sort of a 180 00:10:35,160 --> 00:10:39,600 Speaker 1: strategic upper hand with the resources you were talking about. No, 181 00:10:39,800 --> 00:10:43,480 Speaker 1: on the contrary, actually, China a few years back made 182 00:10:43,520 --> 00:10:47,000 Speaker 1: efforts I think actually last year made efforts to invest 183 00:10:47,200 --> 00:10:55,400 Speaker 1: in infrastructure, critical airport infrastructure in Greenland that Denmark. I 184 00:10:55,440 --> 00:10:57,560 Speaker 1: don't know if it's a courtesy to the US, because 185 00:10:57,600 --> 00:11:00,480 Speaker 1: Denmark also had interest in this particul going to move, 186 00:11:00,520 --> 00:11:04,560 Speaker 1: but decided to co fund airports in Greenland instead of 187 00:11:05,240 --> 00:11:07,839 Speaker 1: letting China pitch in on this. So so this is 188 00:11:07,920 --> 00:11:12,440 Speaker 1: just one of many examples of Denmark trying to sort 189 00:11:12,440 --> 00:11:15,679 Speaker 1: of allow us to play a role in in Greenland 190 00:11:15,920 --> 00:11:19,280 Speaker 1: domestic and international politics up there. But also there are 191 00:11:19,360 --> 00:11:23,040 Speaker 1: trying to keep other players out of Greenland, of which 192 00:11:23,160 --> 00:11:26,240 Speaker 1: I mean Greenland has an extensive home rule, but Denmark 193 00:11:26,280 --> 00:11:30,480 Speaker 1: has the final say in security, defense and international affairs. 194 00:11:31,200 --> 00:11:33,880 Speaker 1: So more than you're in Copenhagen right now. What's the 195 00:11:33,960 --> 00:11:37,520 Speaker 1: sense on the street in Copenhagen, the folks in Denmark, 196 00:11:37,559 --> 00:11:41,880 Speaker 1: what do they think about this issue? Well, um, I 197 00:11:41,920 --> 00:11:44,320 Speaker 1: think most people and you could tell by the trader 198 00:11:44,440 --> 00:11:49,040 Speaker 1: reaction this morning, because obviously, Trump tweeted last night and 199 00:11:49,760 --> 00:11:51,959 Speaker 1: a local US time, which was in the middle of 200 00:11:52,000 --> 00:11:55,040 Speaker 1: a night here in Denmark. So most people woke up 201 00:11:55,200 --> 00:11:59,200 Speaker 1: to sort of a big surprise that this visit who 202 00:11:59,320 --> 00:12:02,000 Speaker 1: remember another only to visit the prime minister, but also 203 00:12:02,080 --> 00:12:06,160 Speaker 1: to visit the Queen of Denmark. Um was like a 204 00:12:06,200 --> 00:12:08,920 Speaker 1: big surprise to a lot of people. Remarks on Twitter 205 00:12:09,160 --> 00:12:14,800 Speaker 1: thing like sort of dismay thing that it's incomprehensible, that 206 00:12:14,880 --> 00:12:19,600 Speaker 1: it's um disrespectful. Some are even talking about the potential 207 00:12:19,640 --> 00:12:23,240 Speaker 1: diplomatic crisis between Denmark and the US. I remember, Denmark 208 00:12:23,360 --> 00:12:27,000 Speaker 1: is not just any Scandinavian or European country here. Denmark 209 00:12:27,080 --> 00:12:30,880 Speaker 1: is a founding member of NATO, is a US ally 210 00:12:31,000 --> 00:12:37,440 Speaker 1: in the Iraq War, um longstanding trading partner, as the 211 00:12:37,520 --> 00:12:41,200 Speaker 1: US is Denmark's second biggest export nation, so there are 212 00:12:41,240 --> 00:12:44,480 Speaker 1: strong ties between the two countries historically. So so this 213 00:12:44,600 --> 00:12:47,280 Speaker 1: of course took a lot of Dames by surprise, Martin, 214 00:12:47,360 --> 00:12:49,520 Speaker 1: It took a lot of people by surprise. I mean, 215 00:12:49,840 --> 00:12:52,240 Speaker 1: let's just be completely honest, a cost space spade. I mean, 216 00:12:52,280 --> 00:12:54,680 Speaker 1: when this happened, I think a lot of people destruct 217 00:12:54,760 --> 00:12:57,240 Speaker 1: and said Greenland like, I mean, why why are why 218 00:12:57,240 --> 00:13:00,199 Speaker 1: are we talking about this now and when we with 219 00:13:00,240 --> 00:13:02,559 Speaker 1: the sale etcetera. It just seems a little bit out 220 00:13:02,559 --> 00:13:06,480 Speaker 1: of left field. Are there any ways to explain this, uh, 221 00:13:06,520 --> 00:13:09,200 Speaker 1: you know, perhaps under the cover or just something some 222 00:13:09,320 --> 00:13:12,600 Speaker 1: other motivation that could be behind this that we're not 223 00:13:12,720 --> 00:13:18,680 Speaker 1: really understanding. From a Danish perspective, I haven't heard any 224 00:13:18,880 --> 00:13:22,200 Speaker 1: other speculation than the fact that this, of course would 225 00:13:22,240 --> 00:13:25,599 Speaker 1: be a central part of the meeting between p M 226 00:13:25,679 --> 00:13:32,920 Speaker 1: Frederickson and Greenland PM King Keelson and of course Donald Trump. Um. Obviously, 227 00:13:33,080 --> 00:13:36,120 Speaker 1: when this is supposed to be on the table at 228 00:13:36,160 --> 00:13:39,560 Speaker 1: a meeting, the President gets some sort of of of 229 00:13:39,679 --> 00:13:43,000 Speaker 1: intel and Evans get some meeting preparations, and I mean 230 00:13:43,559 --> 00:13:47,800 Speaker 1: this seems to be the situation where the President then 231 00:13:48,679 --> 00:13:53,320 Speaker 1: decided to to to to talk about potentially purchasing Greenland. 232 00:13:53,320 --> 00:13:56,080 Speaker 1: This is not something that has been mentioned in Danish 233 00:13:56,120 --> 00:13:59,840 Speaker 1: media or in the local media and Greenland recently recently. 234 00:14:00,080 --> 00:14:01,760 Speaker 1: This took a lot of people by surprise when it 235 00:14:01,840 --> 00:14:05,640 Speaker 1: was initially reported last week. UM, and it was also 236 00:14:05,679 --> 00:14:08,840 Speaker 1: debated when the Danish Prime Minister Frederickson actually went to 237 00:14:08,880 --> 00:14:14,720 Speaker 1: Greenland an other assignment on Sunday. So this was clearly 238 00:14:14,800 --> 00:14:17,160 Speaker 1: coming as a surprise as well for the for the 239 00:14:17,240 --> 00:14:20,320 Speaker 1: Danish PM interesting a lot of as elately so mentioned, 240 00:14:20,320 --> 00:14:22,560 Speaker 1: a surprise to a lot of people uh in around 241 00:14:22,560 --> 00:14:25,360 Speaker 1: the world. I think that Morton Butler, political reporter for 242 00:14:25,360 --> 00:14:27,400 Speaker 1: Bloomberg News, thank you so much for joining us and 243 00:14:27,400 --> 00:14:30,920 Speaker 1: giving us some local color. Morgan's based in Copenhagen, Denmark, 244 00:14:31,040 --> 00:14:33,760 Speaker 1: so giving a sense that it was certainly this discussion 245 00:14:33,840 --> 00:14:37,720 Speaker 1: about the US possibly purchasing Greenland came certainly as a 246 00:14:37,760 --> 00:14:41,120 Speaker 1: surprise to the Danes who woke up to the tweets 247 00:14:41,120 --> 00:15:00,600 Speaker 1: this morning from President Trump about Greenland. A hundred and 248 00:15:00,600 --> 00:15:05,120 Speaker 1: eighty one chief executive officers gathered together and discussed their 249 00:15:05,280 --> 00:15:08,440 Speaker 1: role in this world. Their result was that we have 250 00:15:08,640 --> 00:15:12,160 Speaker 1: a purpose beyond just that of shareholders shorting us down 251 00:15:12,200 --> 00:15:15,960 Speaker 1: to discuss Brian Stafford's CEO of Diligent. He also is 252 00:15:16,000 --> 00:15:19,400 Speaker 1: the co author of Corporate Governance in the Digital Age. 253 00:15:19,960 --> 00:15:22,880 Speaker 1: So Brian, let's just start there. What did you make 254 00:15:23,080 --> 00:15:26,680 Speaker 1: of this sort of I guess resolution coming out of 255 00:15:26,720 --> 00:15:30,680 Speaker 1: the business round table that had signatories such as Black Rocks, 256 00:15:30,760 --> 00:15:35,560 Speaker 1: Larry Fink as well as JP Morgan's Jamie Diamond. Yeah, 257 00:15:35,560 --> 00:15:39,400 Speaker 1: it's super interesting. Um, conclusion coming out of the Business Roundtable, 258 00:15:39,680 --> 00:15:42,360 Speaker 1: I guess not unexpected in the grand scheme of things. 259 00:15:42,440 --> 00:15:44,760 Speaker 1: Larry Think has been writing about this for a while 260 00:15:45,200 --> 00:15:49,160 Speaker 1: State Street as well, that the expectation should be for 261 00:15:49,240 --> 00:15:52,080 Speaker 1: business leaders to actually serve a broader purpose rather than 262 00:15:52,120 --> 00:15:55,600 Speaker 1: just profits and only profits. And it is a realization 263 00:15:55,680 --> 00:15:58,600 Speaker 1: that other stakeholders matter. And then if you really take 264 00:15:59,120 --> 00:16:02,400 Speaker 1: a long term interest in um in the role that 265 00:16:02,880 --> 00:16:06,120 Speaker 1: your business plays, and in communities, in the um UH 266 00:16:06,160 --> 00:16:09,440 Speaker 1: and with your employees, it's actually it's actually good for business. 267 00:16:09,480 --> 00:16:11,600 Speaker 1: So one of the issues some of the pushback that 268 00:16:11,640 --> 00:16:14,560 Speaker 1: I've read is that if some of these CEOs were 269 00:16:14,560 --> 00:16:19,560 Speaker 1: so concerned about the inequality UM in income, wouldn't it 270 00:16:19,600 --> 00:16:21,880 Speaker 1: be better for them to raise wages for their employees 271 00:16:21,880 --> 00:16:25,560 Speaker 1: and maybe lower executive pay. Well, I mean you do 272 00:16:25,640 --> 00:16:27,960 Speaker 1: see this in many places, with some companies actually raising 273 00:16:28,080 --> 00:16:31,440 Speaker 1: kind of um the average um UH income level or 274 00:16:31,480 --> 00:16:33,960 Speaker 1: the average wage of entry level employees. So I think 275 00:16:34,000 --> 00:16:36,680 Speaker 1: you will see more of that um. Of course, Walmart 276 00:16:36,680 --> 00:16:39,160 Speaker 1: did that a few years ago, and you saw actually 277 00:16:39,160 --> 00:16:41,960 Speaker 1: an increase in UH in the net promoter scores of 278 00:16:41,960 --> 00:16:44,640 Speaker 1: of Walmart stores because actually people who are happier treated 279 00:16:44,640 --> 00:16:46,880 Speaker 1: customers in a better way, and that should translate into 280 00:16:46,920 --> 00:16:50,360 Speaker 1: ideally customers buying more. So you will see that I 281 00:16:50,560 --> 00:16:53,200 Speaker 1: be interesting challenges them to being that actually hasn't really 282 00:16:53,240 --> 00:16:56,680 Speaker 1: been reported in this is you know, the average tenure 283 00:16:56,720 --> 00:16:58,760 Speaker 1: for a board director is close to eight years of 284 00:16:58,760 --> 00:17:01,680 Speaker 1: a public company. The average tenure for CEO is only 285 00:17:01,760 --> 00:17:04,120 Speaker 1: five years, and so I think the reason why that's 286 00:17:04,160 --> 00:17:07,280 Speaker 1: important is the board can take a longer term view 287 00:17:07,320 --> 00:17:10,359 Speaker 1: of governance and the corporation existing over longer period of time. 288 00:17:10,760 --> 00:17:13,840 Speaker 1: I think it can be challenging for the individual CEO, 289 00:17:13,920 --> 00:17:16,879 Speaker 1: who typically has a shorter time horizon or window, to 290 00:17:17,440 --> 00:17:20,800 Speaker 1: not focus more on profit and and change the focus 291 00:17:20,800 --> 00:17:23,080 Speaker 1: more on broader stakeholders. And I think that's a little 292 00:17:23,080 --> 00:17:25,520 Speaker 1: bit of the shift that you've seen the business roundtable, 293 00:17:25,560 --> 00:17:29,960 Speaker 1: which end up being unbelievably tenured CEOs kind of steering organizations. 294 00:17:29,960 --> 00:17:33,920 Speaker 1: And you know, brand a cynic might say CEOs are 295 00:17:33,960 --> 00:17:37,720 Speaker 1: doing this as the cycle turns and want to make 296 00:17:37,760 --> 00:17:41,520 Speaker 1: an excuse for why they may underperform because they're catering 297 00:17:41,560 --> 00:17:43,840 Speaker 1: to the greater good and not their shareholders. What would 298 00:17:43,880 --> 00:17:47,639 Speaker 1: you say to that, I think it's a fair comment 299 00:17:47,680 --> 00:17:50,719 Speaker 1: to actually say, you know, how how is the climate 300 00:17:50,760 --> 00:17:53,560 Speaker 1: evolving and how it is the climate changing? And is 301 00:17:53,600 --> 00:17:56,840 Speaker 1: this in in um? Uh? Is this in response to 302 00:17:56,840 --> 00:17:59,719 Speaker 1: the changing climate? Um? We do have a rise of populism, 303 00:18:00,119 --> 00:18:02,199 Speaker 1: it's in every story that we hear kind of on 304 00:18:02,240 --> 00:18:05,200 Speaker 1: a day to day basis on on your program. Uh. 305 00:18:05,200 --> 00:18:08,040 Speaker 1: And we do have a rise in next generation buyers 306 00:18:08,600 --> 00:18:13,080 Speaker 1: UM in gen Z buyers who actually care more about 307 00:18:13,080 --> 00:18:16,639 Speaker 1: an organization. And it's it's culturalate sense of good in 308 00:18:16,680 --> 00:18:18,560 Speaker 1: the world. So I think it is it is in 309 00:18:18,720 --> 00:18:21,200 Speaker 1: partial response to the environment that we're in today, which 310 00:18:21,240 --> 00:18:23,240 Speaker 1: is less of an end of the cycle comment, but 311 00:18:23,359 --> 00:18:26,320 Speaker 1: more of the different environment that we operate and live in. 312 00:18:26,880 --> 00:18:30,400 Speaker 1: So the CEO stated that the rising cost of healthcare 313 00:18:30,520 --> 00:18:33,760 Speaker 1: and and and all the student debt associated with higher 314 00:18:33,840 --> 00:18:37,560 Speaker 1: education is certainly a motivation for some of their plans. 315 00:18:37,560 --> 00:18:41,960 Speaker 1: Do you anticipate Corporate America ever trying to tackle meaningfully 316 00:18:42,359 --> 00:18:45,840 Speaker 1: either of these two issues? Are both? Uh? You know 317 00:18:46,160 --> 00:18:47,840 Speaker 1: what I see and what I thought was an interest 318 00:18:47,880 --> 00:18:49,840 Speaker 1: in going to come out of the business round table? 319 00:18:49,960 --> 00:18:52,600 Speaker 1: Was um actually a slightly different angle on that? And 320 00:18:52,600 --> 00:18:56,000 Speaker 1: and diligent. We recently published the Place on on the 321 00:18:56,119 --> 00:18:59,840 Speaker 1: increasing tone and conversation around political uncertainty and boards that 322 00:19:00,000 --> 00:19:03,199 Speaker 1: at organizations and corporations are having to deal with in 323 00:19:03,280 --> 00:19:07,639 Speaker 1: many cases, which is a lack of leadership coming from 324 00:19:07,840 --> 00:19:11,880 Speaker 1: UM countries and CEOs and boards actually having to take 325 00:19:11,920 --> 00:19:14,520 Speaker 1: more of a leadership role. And to what I expect 326 00:19:14,760 --> 00:19:18,320 Speaker 1: leading organizations to take more of a role around societal issues. 327 00:19:18,359 --> 00:19:21,399 Speaker 1: You brought up student debt, healthcare, etcetera. Um, yes, I 328 00:19:21,400 --> 00:19:25,760 Speaker 1: think you will see UM CEOs taking incorporations taking increasing 329 00:19:25,840 --> 00:19:29,160 Speaker 1: role in that because maybe that leadership doesn't exist within 330 00:19:29,200 --> 00:19:31,479 Speaker 1: the public sector. You know, Brian, it's an interesting, uh, 331 00:19:32,160 --> 00:19:35,080 Speaker 1: it's an interesting sort of conflict here. How do you lead? 332 00:19:35,200 --> 00:19:38,280 Speaker 1: How do you sort of have a role in these debates? 333 00:19:38,400 --> 00:19:41,600 Speaker 1: Is it sort of a verbal political injection into the 334 00:19:41,640 --> 00:19:45,760 Speaker 1: conversation or is it something just leading by example? Right? 335 00:19:45,800 --> 00:19:48,439 Speaker 1: I mean, so, how do you expect these executives to 336 00:19:48,520 --> 00:19:54,520 Speaker 1: engage beyond just their obligations to their shareholders. It's a 337 00:19:54,560 --> 00:19:57,000 Speaker 1: great question, and I think you've seen that evolve in 338 00:19:57,040 --> 00:20:00,320 Speaker 1: the last few years where I think see those and 339 00:20:00,520 --> 00:20:03,560 Speaker 1: organizations used to fall into more of a lead by 340 00:20:03,640 --> 00:20:07,840 Speaker 1: example kind of silent approach and what you've seen more 341 00:20:07,960 --> 00:20:11,520 Speaker 1: now and Jamie Diamond is increasingly vocal about it UM, 342 00:20:11,560 --> 00:20:14,119 Speaker 1: but actually CEO as having a perspective and a point 343 00:20:14,119 --> 00:20:18,359 Speaker 1: of view around UM different issues. And you know, ultimately 344 00:20:19,040 --> 00:20:25,560 Speaker 1: UM organizations, consumers, employees actually follow authentic leaders and also 345 00:20:25,600 --> 00:20:29,120 Speaker 1: authentic organizations. So an organization taking a stand for something 346 00:20:29,160 --> 00:20:32,159 Speaker 1: they believe in. You've seen this on issues of immigration, 347 00:20:32,480 --> 00:20:35,000 Speaker 1: You've seen this on increasingly number of issues. So I 348 00:20:35,240 --> 00:20:38,000 Speaker 1: don't think that's going going away. What we hear often 349 00:20:38,080 --> 00:20:40,159 Speaker 1: from boards is how does the CEO do it in 350 00:20:40,200 --> 00:20:43,639 Speaker 1: the right way? Maybe maybe not going off on social media, 351 00:20:43,680 --> 00:20:46,199 Speaker 1: but how do people use the right forum and use 352 00:20:46,240 --> 00:20:48,720 Speaker 1: their standing to actually have a point of view, to 353 00:20:48,760 --> 00:20:51,760 Speaker 1: be an authentic leader and do it in the right way. So, Brian, 354 00:20:51,800 --> 00:20:54,960 Speaker 1: do you expect to see changes in any executive compensation? 355 00:20:55,040 --> 00:20:57,320 Speaker 1: I know, you know the biggest a lot of executive 356 00:20:57,320 --> 00:20:59,919 Speaker 1: conversation is tied to stock frice performance with through option 357 00:21:00,080 --> 00:21:03,000 Speaker 1: and stock grants, and uh is that now going and 358 00:21:03,040 --> 00:21:05,840 Speaker 1: that's tied to shareholder you know, stock price performance? Is 359 00:21:05,840 --> 00:21:07,960 Speaker 1: that going to be now include maybe E s G 360 00:21:08,200 --> 00:21:11,720 Speaker 1: scores or employee morale or any other kind of metrics 361 00:21:11,720 --> 00:21:15,200 Speaker 1: to kind of measure some of these stakeholder issues. Yeah, 362 00:21:15,200 --> 00:21:17,199 Speaker 1: I think you saw a proposal for that even with UM, 363 00:21:17,280 --> 00:21:20,080 Speaker 1: with Uber and their board and Dara's compensation being tied 364 00:21:20,119 --> 00:21:23,520 Speaker 1: to diversity metrics. So I think you're seeing elements of 365 00:21:23,560 --> 00:21:27,639 Speaker 1: this rollout into CEO compensation and I would expect that 366 00:21:27,720 --> 00:21:30,600 Speaker 1: to continue. How much of that is driven by specific 367 00:21:30,680 --> 00:21:33,720 Speaker 1: CEO targets and how much it is driven by UM 368 00:21:34,240 --> 00:21:37,720 Speaker 1: the board behind closed doors, and maybe with the CEO 369 00:21:37,840 --> 00:21:41,560 Speaker 1: vocally saying we care about our environment, we care about 370 00:21:41,760 --> 00:21:46,160 Speaker 1: the quality of of living of our employees, and so 371 00:21:46,400 --> 00:21:49,760 Speaker 1: how much is specifically tied to compensation versus just comes 372 00:21:49,760 --> 00:21:52,040 Speaker 1: down the tone and tenor UM. We'll have to see, 373 00:21:52,080 --> 00:21:55,560 Speaker 1: but you do see it creeping its way into executive compensation. Brian, 374 00:21:55,600 --> 00:21:57,639 Speaker 1: just real quick here, I'm wondering, do you think that 375 00:21:57,760 --> 00:22:00,520 Speaker 1: this meeting is sort of the outcome from the business roundtable, 376 00:22:00,520 --> 00:22:04,840 Speaker 1: will actually affect change in anyway. I think you've been 377 00:22:04,880 --> 00:22:08,679 Speaker 1: seeing organizations in the tone of organizations begin to change 378 00:22:09,000 --> 00:22:13,120 Speaker 1: and focus not just on UH each individual dollar of profit, 379 00:22:13,240 --> 00:22:16,640 Speaker 1: but more on the broader set of stakeholders being customers, 380 00:22:16,720 --> 00:22:20,040 Speaker 1: being UM, the environments we live in, being employees. So 381 00:22:20,240 --> 00:22:22,600 Speaker 1: I think this was a more formal announcement of it, 382 00:22:22,640 --> 00:22:25,000 Speaker 1: But like you mentioned. You know, Larry Fink and Black 383 00:22:25,119 --> 00:22:26,800 Speaker 1: Rock have been talking about this for a while, and 384 00:22:26,840 --> 00:22:29,520 Speaker 1: you're also as you see a trend in ownership moving 385 00:22:29,560 --> 00:22:33,560 Speaker 1: away from kind of active managed funds to more index 386 00:22:33,600 --> 00:22:35,879 Speaker 1: fund in the state streets the world, and the Black 387 00:22:36,000 --> 00:22:40,280 Speaker 1: Rocks owning more and more of the stock of these organizations, 388 00:22:40,320 --> 00:22:42,760 Speaker 1: that ends up having a broader role. So I think 389 00:22:42,800 --> 00:22:45,639 Speaker 1: we're still in the early innings of that evolution. How 390 00:22:45,720 --> 00:22:49,520 Speaker 1: much of it is hard targets versus um changing in tone, 391 00:22:49,560 --> 00:22:51,919 Speaker 1: we'll have to see. Bryan Stafford, thanks so much for 392 00:22:52,040 --> 00:22:55,000 Speaker 1: joining us. Brian as the CEO of Diligent UH is 393 00:22:55,040 --> 00:22:58,120 Speaker 1: also the co author of the book of Corporate Governance 394 00:22:58,119 --> 00:23:01,720 Speaker 1: in the Digital Age of very interesting discussion on the 395 00:23:01,800 --> 00:23:05,720 Speaker 1: changing role of CEOs, branching a little bit more from 396 00:23:05,760 --> 00:23:25,160 Speaker 1: just returns to shareholders to maybe more for stakeholders. It 397 00:23:25,280 --> 00:23:29,560 Speaker 1: was the auction heard around the world. Germany sold thirty 398 00:23:29,640 --> 00:23:34,040 Speaker 1: year bonds with a coupon of zero, an effective yield 399 00:23:34,119 --> 00:23:39,520 Speaker 1: of negative eleven basis points, mind boggling data reaching records. 400 00:23:39,680 --> 00:23:42,760 Speaker 1: The question is who wanted to buy it, and it 401 00:23:42,800 --> 00:23:44,960 Speaker 1: turns out not that many people did. Joining us now 402 00:23:45,400 --> 00:23:48,160 Speaker 1: to talk about it. Marcus Ashworth, a columnists covering European 403 00:23:48,200 --> 00:23:51,679 Speaker 1: markets for Bloomberg Opinion in London. Marcus, thank you so 404 00:23:51,760 --> 00:23:53,600 Speaker 1: much for being with us. First, just give us a 405 00:23:53,640 --> 00:23:58,720 Speaker 1: sense of how lackluster the demand was for this auction. Well, 406 00:23:58,920 --> 00:24:04,520 Speaker 1: often German auctions don't get the full allotment. It's a 407 00:24:04,520 --> 00:24:06,919 Speaker 1: weird thing seeing how low they are in yield. You 408 00:24:06,920 --> 00:24:09,760 Speaker 1: think they'll be huge scrambles for them, but it's such 409 00:24:09,760 --> 00:24:13,680 Speaker 1: a tightly control market. The ECB had told us well 410 00:24:13,800 --> 00:24:15,879 Speaker 1: a year and a half ago that an essence is 411 00:24:15,920 --> 00:24:19,400 Speaker 1: only about a ten or fift free float. Uh, we're reality. 412 00:24:19,560 --> 00:24:22,280 Speaker 1: It's all going both by the ECB and by other 413 00:24:22,400 --> 00:24:27,520 Speaker 1: foreign central banks, the majority of of German governments. Nonetheless, 414 00:24:27,560 --> 00:24:30,679 Speaker 1: these things trade and they got auctioned and a regular schedule. 415 00:24:30,680 --> 00:24:32,800 Speaker 1: And what the Bunner's Bank, the German Central Bank does 416 00:24:32,920 --> 00:24:35,200 Speaker 1: is it is it takes the rough of the smooth. 417 00:24:35,680 --> 00:24:40,199 Speaker 1: It allows them to be not taken up fully. In 418 00:24:40,320 --> 00:24:47,040 Speaker 1: July only was taken down. This time only um so 419 00:24:47,280 --> 00:24:50,400 Speaker 1: eight hundred and twenty yard million was sold. The balance 420 00:24:50,440 --> 00:24:53,360 Speaker 1: of a one point nearly one point two billion will 421 00:24:53,400 --> 00:24:55,880 Speaker 1: be taken by the Bunner's Bank and will be drip 422 00:24:55,920 --> 00:24:58,879 Speaker 1: fed out over the course of the next few years 423 00:24:58,880 --> 00:25:02,119 Speaker 1: and months, but months using But the reality is is 424 00:25:02,160 --> 00:25:05,040 Speaker 1: that everyone I had thought this was going to be 425 00:25:05,040 --> 00:25:07,320 Speaker 1: a challenge, because we know this is the first ever 426 00:25:07,640 --> 00:25:11,520 Speaker 1: globally in the history of mankind that a thirty year 427 00:25:11,520 --> 00:25:14,119 Speaker 1: bond would have been sold with a zero coupon and 428 00:25:14,200 --> 00:25:17,920 Speaker 1: effect actually sold below that zero yield level. It would 429 00:25:17,920 --> 00:25:21,640 Speaker 1: be a struggle. But on a relative value basis, it's 430 00:25:21,720 --> 00:25:26,120 Speaker 1: actually quite cheap because the tenure is near the negative 431 00:25:26,160 --> 00:25:29,240 Speaker 1: seventy basis points, so the spread between tens and thirties 432 00:25:29,240 --> 00:25:31,359 Speaker 1: as we follow I'm sure you know in the States, 433 00:25:31,400 --> 00:25:34,600 Speaker 1: so actively um, it's something which you're looking on our 434 00:25:34,600 --> 00:25:37,920 Speaker 1: relative value basis actually, and it gone below zero yield. 435 00:25:37,960 --> 00:25:42,840 Speaker 1: The previous thirty year Germany had gone below zero yield 436 00:25:43,320 --> 00:25:46,959 Speaker 1: in the second third of August and dropped as far 437 00:25:46,960 --> 00:25:50,320 Speaker 1: as near the negative thirty so negative ten it's almost 438 00:25:50,320 --> 00:25:53,720 Speaker 1: the bargain, but it seems not. So what does this 439 00:25:53,800 --> 00:25:55,640 Speaker 1: mean going forward? I mean, is this just a case 440 00:25:55,720 --> 00:25:58,520 Speaker 1: of investors just saying we're not going to take it anymore? 441 00:25:58,760 --> 00:26:01,480 Speaker 1: And I mean, is this potentially sitting at signaling some 442 00:26:01,640 --> 00:26:04,400 Speaker 1: higher rates in Germany? Well, I think you should look 443 00:26:04,400 --> 00:26:07,280 Speaker 1: at it this way. There was a five year bond 444 00:26:07,480 --> 00:26:10,720 Speaker 1: sold by a triple B rated entity called Eon E 445 00:26:11,000 --> 00:26:13,480 Speaker 1: dot O N you can look at on Bloomberg. It's 446 00:26:13,640 --> 00:26:17,040 Speaker 1: it's the German Unsility Electricity Unit utility. They sold a 447 00:26:17,200 --> 00:26:22,679 Speaker 1: five year bond basically the same negative ten, negative fifteen 448 00:26:22,680 --> 00:26:24,920 Speaker 1: basis points. You know, why on earth would you buy 449 00:26:24,920 --> 00:26:29,639 Speaker 1: a credit bond triple B at negative fifteen basis points 450 00:26:29,640 --> 00:26:33,080 Speaker 1: of five years is beyond me? And then you compare 451 00:26:33,119 --> 00:26:36,760 Speaker 1: it to a triple A the best quality of all 452 00:26:36,960 --> 00:26:42,480 Speaker 1: in Europe, German thirty year at actually four basis points more. 453 00:26:43,000 --> 00:26:46,600 Speaker 1: It almost makes that third year look cheap. So you know, 454 00:26:46,720 --> 00:26:49,159 Speaker 1: this is the choice which I think you have to 455 00:26:49,200 --> 00:26:52,200 Speaker 1: appreciate is left to people in Europe. There is nothing. 456 00:26:52,240 --> 00:26:57,160 Speaker 1: You can't even get a triple B credit utility giving 457 00:26:57,200 --> 00:27:00,520 Speaker 1: you for five years any year either. So Morgats just 458 00:27:00,520 --> 00:27:03,400 Speaker 1: sort of taking a step back and and tying this together. 459 00:27:04,240 --> 00:27:07,560 Speaker 1: Should we view this German thirty year auction sort of 460 00:27:07,600 --> 00:27:10,840 Speaker 1: shot across the bow that investors will protest and say 461 00:27:10,920 --> 00:27:14,120 Speaker 1: enough is enough at a certain level? Or is this 462 00:27:14,440 --> 00:27:18,560 Speaker 1: just an idiosyncrasy of German bond auctions paired with the 463 00:27:18,600 --> 00:27:21,800 Speaker 1: idea that you know, they're just you know, there is 464 00:27:21,880 --> 00:27:25,680 Speaker 1: tepid demand, but that you know this is not going 465 00:27:25,720 --> 00:27:29,400 Speaker 1: to change anytime soon. I think I think you've got 466 00:27:29,440 --> 00:27:32,880 Speaker 1: the tone there. On the latter point, I think this 467 00:27:33,000 --> 00:27:35,479 Speaker 1: is a little bit of rejection, a little bit of 468 00:27:36,200 --> 00:27:39,520 Speaker 1: yield gag and the sense of indigestion coming here that 469 00:27:39,520 --> 00:27:41,280 Speaker 1: they know maybe they don't want to pay up and 470 00:27:41,320 --> 00:27:46,159 Speaker 1: look stupid paying uh this little level. Nonetheless, they'll be 471 00:27:46,200 --> 00:27:50,040 Speaker 1: back in for it. And it is, you know, intrinsically 472 00:27:50,040 --> 00:27:52,239 Speaker 1: linked to the fact that that in September twenty five 473 00:27:52,440 --> 00:27:57,560 Speaker 1: European Central Bank will be announcing yet more quey for 474 00:27:58,080 --> 00:28:01,960 Speaker 1: the rest of Europe and including particularly increasingly longer dated 475 00:28:02,000 --> 00:28:04,960 Speaker 1: bonds in Germany. These things will get snappled up slowly. 476 00:28:05,040 --> 00:28:08,639 Speaker 1: But surely this wasn't a great auction. Um it was. 477 00:28:08,720 --> 00:28:11,040 Speaker 1: It was a step too far just here right now. 478 00:28:11,440 --> 00:28:15,520 Speaker 1: But you've got problems in Italy, you've got a recession 479 00:28:15,560 --> 00:28:19,600 Speaker 1: in Germany almost certainly, and they could well spill out 480 00:28:19,640 --> 00:28:21,919 Speaker 1: the rest of Europe. And you've got a European Central 481 00:28:21,920 --> 00:28:24,920 Speaker 1: Bank he wants to not only cut rates but at 482 00:28:25,000 --> 00:28:27,960 Speaker 1: again something they stopped then the last year, back to 483 00:28:28,040 --> 00:28:31,680 Speaker 1: restarting que Look this is a train of events which 484 00:28:31,720 --> 00:28:33,679 Speaker 1: I'm almos. Certainly he's going to leave to you yields 485 00:28:33,680 --> 00:28:35,600 Speaker 1: at some point, and I think these these bonds will 486 00:28:35,600 --> 00:28:38,720 Speaker 1: get swallowed up quite happy. Mark Sashworth, thank you so much. 487 00:28:38,840 --> 00:28:42,880 Speaker 1: Marcus is a calmness covering European markets for Bloomberg Opinion. 488 00:28:42,880 --> 00:28:44,800 Speaker 1: You can read more on this and other stories from 489 00:28:44,840 --> 00:28:48,320 Speaker 1: Bloomberg Opinion at Bloomberg dot com, slash Opinion and on 490 00:28:48,360 --> 00:28:51,920 Speaker 1: the terminal by typing O p I n go. Thanks 491 00:28:51,920 --> 00:28:54,760 Speaker 1: for listening to the Bloomberg PIML podcast. You can subscribe 492 00:28:54,760 --> 00:28:57,600 Speaker 1: and listen to interviews at Apple Podcast or whatever podcast 493 00:28:57,600 --> 00:29:00,400 Speaker 1: platform you prefer it. Paul Sweeney, I'm on Twitter at 494 00:29:00,400 --> 00:29:03,040 Speaker 1: pt Sweeney. I'm Lisa Abram Woods. I'm on Twitter at 495 00:29:03,080 --> 00:29:05,880 Speaker 1: Lisa abram woits one before the podcast. You can always 496 00:29:05,880 --> 00:29:07,960 Speaker 1: catch us worldwide on Bloomberg Radio.