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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa A. Bramowitz. Each day

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Speaker 1: we bring you the most important, noteworthy, and useful interviews

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Speaker 1: for you and your money, whether you're at the grocery

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Speaker 1: store or the trading floor. Find the Bloomberg p m

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Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com.

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Speaker 1: There's a story that caught my eye, how the American

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Speaker 1: Dream turned into greed and inequality. It was authored by

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Speaker 1: Alberto Gallo, portfolio manager and head of macro Strategies at

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Speaker 1: Algebra's Investments Limited in London, and he joins us now. Alberto,

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Speaker 1: I thought this was a fascinating piece that you authored.

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Speaker 1: The main point was that monetary policies have sort of

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Speaker 1: patched over a lot of sort of policy deficits and

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Speaker 1: have allowed the weakest links to just hack on credit

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Speaker 1: at the expense of actually improving their place in society.

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Speaker 1: Can you give us a sense of what has caused

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Speaker 1: us and what has allowed this and what the potential

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Speaker 1: consequences are. Good morning, Lisa. We have seen as investors

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Speaker 1: in the market every day every month in the last

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Speaker 1: nine years, markets rising, but our struggle is that this wealth,

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Speaker 1: this benefit hasn't reached the real economy. There's a big

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Speaker 1: divide between Wall Street and Main Street. And in the

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Speaker 1: end it's negative for everyone because we have seen that

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Speaker 1: countries become more and more split as they have and

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Speaker 1: they have not followed different political directions. Um. And also geographically,

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Speaker 1: you have areas which are very rich versus areas that

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Speaker 1: are very poor, like the West and East Coast versus

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Speaker 1: the Midwest, or in the in the UK, London versus

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Speaker 1: the rest of the country. So you have a very

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Speaker 1: usset rich but wage poor recovery. You have countries that

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Speaker 1: look very good in GDP terms, but look very bad

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Speaker 1: in the distribution of this wealth. The trickle down is

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Speaker 1: is some is an illusion, uh, and it generates political instability, Alberto,

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Speaker 1: Is this any different than it's always been? No, because

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Speaker 1: we are at the endpoint of a very long dead supercycle.

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Speaker 1: We started using credit to boost wealth with Nixon, with

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Speaker 1: Freddie May Fanny mac being created and privatized, with the

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Speaker 1: idea that you could replace productivity with a loan. The

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Speaker 1: American dream would be possible. You could go to university,

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Speaker 1: you can get a student loan, you could get a

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Speaker 1: mortgage just because Uncle Sam would help you to get that.

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Speaker 1: But then what happened is that all the tuition fees

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Speaker 1: started to go up, all the house prices started to

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Speaker 1: go up, and then you needed even more credit. So

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Speaker 1: they started really with the baby boomer generation, which and

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Speaker 1: with the government subsidy to private debt, which generated a

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Speaker 1: growth in debt to GDP private debt to GDP from

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Speaker 1: four So we used four dollars of debt private debt

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Speaker 1: to generate to to grow GDP GDP group, but private

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Speaker 1: debt outgrew GDP by four times between the sixties and

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Speaker 1: the two eight crisis. The US did it first, then

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Speaker 1: it was Europe done China in the last ten years.

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Speaker 1: The question is now you're at the end of the game.

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Speaker 1: Because interest rates are records low. You can't lower interest

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Speaker 1: rates even more so central banks have bought twenty three

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Speaker 1: dollars of assets around the world, but this is effectively

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Speaker 1: a debasement of money. Remember money is credit and credit

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Speaker 1: means faith in the system. When you depreciate money by

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Speaker 1: increasing the value of all the assets that money can buy,

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Speaker 1: you implicitly depreciate faith in the financial system, which is

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Speaker 1: why people today are looking at buying bitcoin and buying

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Speaker 1: gold or buying alternatives because they think that will be

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Speaker 1: even more q E and their money will be less

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Speaker 1: worth in the future. Uh. These are all shortcuts, um

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Speaker 1: for what politicians should have done, investing in productivity, investing

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Speaker 1: in education, giving everyone an opportunity, and we are I'm

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Speaker 1: sad today to see that politicians are cutting taxes for

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Speaker 1: the rich rather than investing in productivity. Alberto, is this

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Speaker 1: something you see as just a phenomenon of the last

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Speaker 1: fifty years, because you know, post a pre World War Two,

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Speaker 1: there were very few opportunities for financial assistance from the

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Speaker 1: government for just about anything. So I don't understand exactly

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Speaker 1: where this American dream that you're describing comes from, except

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Speaker 1: if you agree that it is an anomaly as a

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Speaker 1: result of the victory of the United States after the

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Speaker 1: Second World War, Because I mean, if you go back

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Speaker 1: a hundred years, hardly anybody owned their own home, and

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Speaker 1: now homeownership is let's say six However, we got here

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Speaker 1: and previously you had to put down a down payment

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Speaker 1: of about fifty So whatever the financial rigamarole, I'm wondering,

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Speaker 1: is it better now because we've appreciated people's lives and

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Speaker 1: maybe depreciated the value of money at the same time.

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Speaker 1: I in my view, we need to think about what's

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Speaker 1: the dream that we want? Is it about home ownership?

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Speaker 1: Does ome ownership make you happy? And today many young

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Speaker 1: people can't afford to buy a house um for example. Um,

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Speaker 1: but maybe we have substituted the idea of a dream,

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Speaker 1: the idea of home ownership, UM with with happiness. While

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Speaker 1: happiness is really linked to social mobility, to the chances

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Speaker 1: you have in life to end up in a better

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Speaker 1: position than your parents. And data today shows that social

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Speaker 1: mobility is actually lower in the US than it is

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Speaker 1: in Scandinavia for example, or in some other European countries

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Speaker 1: that have a much less dynamic economy. And more importantly, um,

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Speaker 1: even if you think that you may make it to

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Speaker 1: get to the one percent regardless of where you're born, Um,

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Speaker 1: do you want to be in a society where, in

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Speaker 1: particular the bottom cannot afford uh food? You know? Or

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Speaker 1: in the UK one third of children living poverty. Do

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Speaker 1: you want to be the successful person in a society

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Speaker 1: which is deeply divided and where nurses are on food banks?

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Speaker 1: So this this is I think the question we need

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Speaker 1: to ask all there too, just real quick, do you

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Speaker 1: think they were close to the breaking point at this

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Speaker 1: at this at this juncture. I think the question we

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Speaker 1: are increasing economists are asking themselves is about, you know,

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Speaker 1: some of the assumptions that we use in the last

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Speaker 1: twenty thirty years, and politicians, on the other hand, are

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Speaker 1: capitalizing on this inequality and this anger. Paradoxically, the irony

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Speaker 1: is that in the UK and the U S, which

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Speaker 1: are the most flexible economic systems, we have seen more

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Speaker 1: political protest vote, more anti establishment votes with you know,

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Speaker 1: the Trump administration and Brexit. But these um political moves,

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Speaker 1: the movements sometimes are associated with policies that are are

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Speaker 1: long term. We have been waiting for general electrics, grand

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Speaker 1: vision for how to proceed going forward after a pretty

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Speaker 1: horrible year. And here to explain to us, just to

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Speaker 1: give us a review of what this plan looks like,

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Speaker 1: is Brook Sutherland, an m and a columnist for Bloomberg

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Speaker 1: Goad Fly. Brooke, thank you so much for joining us.

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Speaker 1: I know today has been a crazy day for you.

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Speaker 1: The stock market is responding to ges plan, with the

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Speaker 1: shares down more than five cent. You had written long

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Speaker 1: ago GE needs to cut its dividend and it will.

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Speaker 1: Is this plan still not enough? It's not. And I

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Speaker 1: think you know, when we initially saw the dividend cut

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Speaker 1: this morning, I was thinking, Okay, well this is good.

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Speaker 1: They're being dramatic about it. It It was a fifty cut.

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Speaker 1: That was what people were facting and what they sort

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Speaker 1: of needed to do. And then they came out with

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Speaker 1: their slide deck with their numbers. And when you sort

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Speaker 1: of drill down into what those numbers are, I think

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Speaker 1: you have to wonder if they did go far enough

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Speaker 1: or if maybe they should have cut the divid in more.

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Speaker 1: And you know, I think that's raising questions for people.

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Speaker 1: I think the other thing is that Flannery promised this

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Speaker 1: comprehensive review and we didn't. Yeah. Sorry, um. And if

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Speaker 1: you know, he I believe him when he says he

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Speaker 1: really drilled down through these businesses and looked at you know,

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Speaker 1: units within businesses and everything. But what we got is

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Speaker 1: kind of I mean, like, you know, they're talking about

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Speaker 1: getting rid of the industrial solutions business, which is great

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Speaker 1: because they've already sold that, so then you know it's

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Speaker 1: not new. And they're talking about lighting and transportation and

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Speaker 1: these are all sort of ancillary businesses that people were

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Speaker 1: already expecting them to divest. There's no real new surprising,

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Speaker 1: you know, grab your attention at AGY here, and I

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Speaker 1: think you know what that means is that we're just

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Speaker 1: basically looking at a few years of a really tough

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Speaker 1: slog at GE. They're committed to staying in markets like power,

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Speaker 1: and power is not going to get better for at

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Speaker 1: least a few years, even by g s own admission,

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Speaker 1: and you know, some analysts worry it might not ever

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Speaker 1: get better. It might just sort of trend down to

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Speaker 1: this new normal of lower profitability. And I think you know,

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Speaker 1: if you were looking for radical change, this this is

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Speaker 1: not it. What about the sell off of the majority

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Speaker 1: stake in Baker Hughes. That's new ish, But gees prior

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Speaker 1: management had communicated that a spinoff of that or some

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Speaker 1: sort of investor was possible when they announced this deal,

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Speaker 1: and that's something that investors have been speculating about basically

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Speaker 1: ever since they decided that they were going to buy

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Speaker 1: the Baker Hughes business and emerge it in this combined entity.

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Speaker 1: So this is the first time ge has publicly said, yes,

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Speaker 1: we're looking at that, but they've sort of indicated it's possible,

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Speaker 1: and people have been expecting that to come, so, you know,

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Speaker 1: I think that is a good step, but that's also

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Speaker 1: not the kind of thing that they're going to be

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Speaker 1: able to do tomorrow. They own, you know, nearly six

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Speaker 1: of this business. If you sold that all right now,

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Speaker 1: you're not going to get a great price for it.

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Speaker 1: Um They're going to have to do it in stages.

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Speaker 1: They probably have to wait a while for some of

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Speaker 1: these commodity markets to recover. I'm wondering about whether they're

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Speaker 1: gonna have to cut the divid in more. I think

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Speaker 1: that that is sort of the question, and I you know,

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Speaker 1: I don't think we would expect anything, you know, in

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Speaker 1: the coming months or anything like that. I think a

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Speaker 1: lot of it's going to depend on how team plays out.

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Speaker 1: But when you look at those numbers, I think it

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Speaker 1: does make you nervous. And even after they cut it,

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Speaker 1: they're still going to have one of the highest dividend

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Speaker 1: payout ratios among high grade industrials. Talking about high grade,

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Speaker 1: I know that g E is on watch for downgrade,

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Speaker 1: and you know that I'm obsessed with bonds, so I

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Speaker 1: was looking at their von price action and in fact,

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Speaker 1: the market is treating them as though they have already

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Speaker 1: been downgraded to the lowest rung of investment grade. I

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Speaker 1: have to think that's also a headwind because that raises

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Speaker 1: their borrowing costs going forward. No, absolutely, and you know

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Speaker 1: they're borrowing about six billion to front pay their pension

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Speaker 1: um and you know, but you can't just keep going

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Speaker 1: to the vond market to keep your business going so

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Speaker 1: well fair enough, but um, yeah, you know. I I

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Speaker 1: just think that there was so much hype for this event,

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Speaker 1: and part of that is g s own fault. I mean,

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Speaker 1: the way that they set this up. This November date

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Speaker 1: has been on the calendar since September, and then we

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Speaker 1: had that horrible earnings report and they kept promising to wait,

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Speaker 1: wait with us until we get to November. We're gonna

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Speaker 1: tell you this grand plan. And it's basically a reiteration

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Speaker 1: with maybe a little bit more details here and there

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Speaker 1: of what they said on that third quarter earnings call.

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Speaker 1: And so you know, they sort of set themselves up

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Speaker 1: for this where they really sort of promised something grand

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Speaker 1: and this is not This is not it. I mean,

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Speaker 1: this is maybe the best that they can do, and

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Speaker 1: maybe this is the what they think is right, But

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Speaker 1: this is not the kind of thing that's going to

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Speaker 1: be a magic fix for g stock. Is there a

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Speaker 1: is there a thought you have about the compensation plan

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Speaker 1: that has been announced because they seem to at least

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Speaker 1: be putting their own money where their mouth is in

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Speaker 1: terms of compensation. Is going to be in stock? No

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Speaker 1: more of these long term performance awards, well, some of

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Speaker 1: it's going to be in stock, more of it than

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Speaker 1: it was before. I think, you know, that's certainly going

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Speaker 1: to be a good step. UM. A lot of investors

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Speaker 1: were looking at these big payouts that that former executives

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Speaker 1: got in cash at times when the company was struggling,

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Speaker 1: when you know, what's stock price was not delivering for investors. UM.

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Speaker 1: So I think that certainly was a watch item. I

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Speaker 1: think this is a good step. I do think you

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Speaker 1: have to wonder if down the road there's going to

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Speaker 1: be any sort of clawbacks of what was paid to

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Speaker 1: former executives UM and if that should be including perhaps

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Speaker 1: I mean, you know, I don't think anything has been

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Speaker 1: proposed yet, but I know this is something that investors

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Speaker 1: I've talked to are wondering about and whether there's any

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Speaker 1: grounds there. UM or you know, the head of the

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Speaker 1: power business, Steve Bowles. He ran that business for a

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Speaker 1: very long time, and John Flannery is basically saying it

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Speaker 1: was his fault. It was poor execution. You know, power

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Speaker 1: is a troubled market, but we were worse off than

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Speaker 1: other people in the power market because of the way

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Speaker 1: we handled that business. Well, investors seem to agree with you.

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Speaker 1: The shares of Gear down more than five percent right now.

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Speaker 1: Thanks very much for being with us. Brook Sutherland is

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Speaker 1: m and A. Thomas Bloomberg Gadfly. All things mergers and

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Speaker 1: acquisitions much appreciated. Not shopping on Ali Baba Group holding site,

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Speaker 1: well you were one of the few, not one of

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Speaker 1: the many. The site generated more than twenty five billion

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Speaker 1: dollars in sales in China's Singles Day, the perhaps largest

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Speaker 1: retail shopping day in the world. Here to tell us

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Speaker 1: more about it is Shura over Day. Our technology columnist

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Speaker 1: are Bloomberg gad Fly and you can follow Shira on

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Speaker 1: Twitter at Shira over Day. Of course, shar thanks for

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Speaker 1: coming into the studio. What is why is this so important?

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Speaker 1: So Ali Baba essentially created this fake shopping holiday which

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Speaker 1: they hold on November eleven every year, and it is

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Speaker 1: basically sort of a celebration of shopping and frankly, it's

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Speaker 1: a marketing event for Ali Blab, but it's a way

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Speaker 1: to draw attention to themselves from all across the globe

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Speaker 1: from these enormous sums of sales that they do every year. Yeah, well,

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Speaker 1: I mean they're not alone, right, because Amazon also has

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Speaker 1: Cyber Monday. I mean, why not create an artificial holiday

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Speaker 1: to to have people spend money on your site. The

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Speaker 1: fact though, that people spent twenty five point three billion

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Speaker 1: dollars in sales is remarkable now, I mean, can you

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Speaker 1: put this in a perspective and is this just sort

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Speaker 1: of a blow away as far as what people were expecting.

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Speaker 1: It is a staggering number. And we should remember that

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Speaker 1: China is the largest um market in the in the world,

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Speaker 1: both for or electronic commerce and for a number of

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Speaker 1: people on the internet, so the numbers in China are

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Speaker 1: always going to be big. But billion is roughly equivalent

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Speaker 1: to the total quarterly sales on eBay, so and that

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Speaker 1: was done in a single day, So it's a lot.

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Speaker 1: But it's also important to remember that Ali Baba, unlike Amazon,

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Speaker 1: to which it's frequently compared doesn't make money directly from

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Speaker 1: merchandise sales, or doesn't make the majority of its money

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Speaker 1: from merchandise sales. It makes money from the merchants who

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Speaker 1: advertise to make those sales on ali Baba. So the

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Speaker 1: actual total daily sales, even on a marketing day, are

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Speaker 1: not really that material to Ali Baba. Do they make

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Speaker 1: money in terms of margin on this kind of stuff?

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Speaker 1: I mean because that you can have a artificial shopping day,

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Speaker 1: cut the prices, you get great sales, and then you

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Speaker 1: go back to the other three something days of the

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Speaker 1: year and you realize, although you gotta make up for

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Speaker 1: that one bad day we had. Well, I think the

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Speaker 1: better question is do the merchants who sell their stuff

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Speaker 1: through ali Baba make money? And I don't know, and

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Speaker 1: I think it probably varies a lot by merchant um. Again,

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Speaker 1: because ali Baba is not selling products directly, it's more

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Speaker 1: of a middleman. For companies that are selling directly to consumers,

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Speaker 1: their sales tend to be pretty profitable because they're they're

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Speaker 1: essentially making money from advertising, which is a high margin

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Speaker 1: business for most digital media companies are digital advertising companies.

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Speaker 1: So Shara, you know me really well, and I imagine

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Speaker 1: you were expecting me to ask about bonds because Ali

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Speaker 1: Baba is selling some and the US asking me about

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Speaker 1: flow flow your mind. Um, but you know Ali Baba

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Speaker 1: selling seven billion dollars in US dollar denominated bonds pricing

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Speaker 1: at some point this week. This is the first sale

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Speaker 1: of the company in the U S Why they just

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Speaker 1: sold all this like material? They? I mean they why

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Speaker 1: do they need money? I mean, I think the answer

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Speaker 1: to any tech companies selling debt these days is because

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Speaker 1: they can. Um that we've seen the the last few years. Um.

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Speaker 1: Now seven the top seven companies in the public companies

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Speaker 1: in the world by stock market value or all tech companies, um.

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Speaker 1: And you know investors see that and are willing to

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Speaker 1: loan money to these companies because of their enormous size, profitability,

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Speaker 1: and market power. Right. But you know, if I could

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Speaker 1: borrow money at a four percent rate or four and

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Speaker 1: a half percent rate, unless I'm going to use it

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Speaker 1: for something, it's a drag, right, I mean, is it

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Speaker 1: going to be for refinancing debt? Is it that they're

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Speaker 1: going to build out operations in the US. Is there

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Speaker 1: a sense of what it's going to be going toward? Right,

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Speaker 1: whether it's true that Ali Baba does have debt that

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Speaker 1: they're trying to refinance, so certainly that's part of it,

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Speaker 1: and they weren't very explicit about what they will do

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Speaker 1: with the money. But it's also true that Ali Baba

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Speaker 1: has been an acquisitive company. They invest a lot, both

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Speaker 1: in startups and in other companies around the world, not

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Speaker 1: so much in the United States, but um certainly in

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Speaker 1: their home country and in places like the Middle East.

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Speaker 1: And this is a company that has global ambitions. Again,

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Speaker 1: maybe not US ambitions, but um global US ambitions. You know.

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Speaker 1: One of the things I noted about this particular Singles

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Speaker 1: Day is that Ali Baba has rolled out a kind

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Speaker 1: of artificial intelligence fashion aid as well as an artificial

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Speaker 1: reality game. So in a variety of restaurants, and I

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Speaker 1: believe in some select malls, you can go online, you

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Speaker 1: play an artificial reality game, you earn coupons that are

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Speaker 1: then valid for shopping on Ali Baba's site. I'm wondering

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Speaker 1: is that something of a strategy that could be adopted

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Speaker 1: in the United States. I mean, we don't see anything

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Speaker 1: like that, this merging of online shopping, but with online

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Speaker 1: game playing in the real world. So I think two things.

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Speaker 1: One is that artificial intelligence and virtual reality, these are

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Speaker 1: sort of buzzwords that every company is going to dabble

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Speaker 1: in UM and TBD whether that will be an effective

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Speaker 1: sales strategy. But the second point is that I think

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Speaker 1: ali Baba to the extent that we have not really

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Speaker 1: seen here in the US. They have been very savvy

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Speaker 1: about uniting online and physical commerce, and again in a

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Speaker 1: way that even a company like a smart company like

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Speaker 1: Amazon has not really done, including in groceries by the way,

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Speaker 1: where Ali Baba is trying to sort of do that

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Speaker 1: merging that Amazon is also trying to do a physical

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Speaker 1: grocery shopping and digital grocery shopping. Of course, ali Baba

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Speaker 1: also has the benefit of not having to deal with

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Speaker 1: different security and privacy rules, and they can use all

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Speaker 1: of their data to monopolize their client customer. The Chinese

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Speaker 1: technology giants have certain advantages that US tech giants don't have. True,

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Speaker 1: that's the diplomatic way of putting it. Shira Day, thank

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Speaker 1: you so much for joining us. As always, Shira Ovidate,

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Speaker 1: technology columnist for Bloomberg gad Flyer. Stuff is great. Read

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Speaker 1: it Bloomberg dot com, slash goad fly shares of Mattel

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Speaker 1: soaring up more than the stock of Hasbro, up about

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Speaker 1: six and a half percent. Will these two toymakers come together, Well,

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Speaker 1: let's bring in Sarah Halzac, our retail columnist our Bloomberg

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Speaker 1: gad Fly, and she joins us from our Bloomberg studios

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Speaker 1: in Washington, d C. Sarah, what can you tell us

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Speaker 1: about this potential merger? We're gonna see hot wheels driving

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Speaker 1: around the monopoly board soon. Yeah, I think there's a

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Speaker 1: good chance of it. And here's why. The toy industry

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Speaker 1: is really in a place of big change right now,

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Speaker 1: and I think Hasbro and Mattel could confront it better together.

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Speaker 1: So one thing is that these companies are having to

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Speaker 1: develop new core competencies. As we all know, play is

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Speaker 1: getting more digital. They can't just make molded plastic blocks anymore. Um.

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Speaker 1: They have to learn how to make YouTube videos, apps,

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Speaker 1: and even get onto the big screen, as Hasbro has

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Speaker 1: done with My Little Pony movie. So they have to

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Speaker 1: learn how to do new things and they can probably

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Speaker 1: do that better together. Well, I'm just wondering, Sarah, why

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Speaker 1: this didn't happen earlier, because the retail industry and even

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Speaker 1: the toy industry has been under pressure for a while. Yeah,

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Speaker 1: it's a good question, Um, but I think one thing

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Speaker 1: we can consider is how the toy industry in particular

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Speaker 1: has been looking, and in fact, were blockbuster years for

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Speaker 1: the industry. I think was its best year in over

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Speaker 1: a decade. And you had a number of different things

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Speaker 1: fueling that. It's a really strong year for movies. For example,

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Speaker 1: that was when Star Wars first came back after about

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Speaker 1: ten years of no new films. You had properties like shopkins,

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Speaker 1: You had all sorts of things that were sort of

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Speaker 1: a rising tide lifting all boats in the toy industry,

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Speaker 1: sort of making things look good and making tough decisions

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Speaker 1: like this look less urgent. Is this going. Is this

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Speaker 1: potential combination going to affect companies that the license their

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Speaker 1: products and their brands to the toy makers in order

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Speaker 1: to make their products, whether it is a Disney or

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Speaker 1: a movie maker. Yeah, I think that's still kind of

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Speaker 1: clarifying itself, to be honest, because, um, it is true

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Speaker 1: that they'll have some competing licenses. One will have a

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Speaker 1: license for d C comics, one will have a license

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Speaker 1: for Marvel comics, and sort of what challenges that presents

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Speaker 1: or what weakal issues that presents that they were to

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Speaker 1: get together, I think is still clarifying at this point.

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Speaker 1: Do you have a sense of whether the Toys r

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Speaker 1: US bankruptcy kind of pushed this into high gear. I

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Speaker 1: think it's fair to say that it probably did in

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Speaker 1: the sense that, you know, Mittel really took a bath

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Speaker 1: after its latest earnings report, um, when sales just plummeted,

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Speaker 1: and they attributed about half of that decline in North America.

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Speaker 1: Eleven percent of that eleven line was because of the

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Speaker 1: Toys r US bankruptcy, and uh, you know, Mitchel just

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Speaker 1: lost so much market value after that that I think

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Speaker 1: it suddenly became a much more attractive takeover target. What

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Speaker 1: are some of the potential obstacles from an antitrust perspective

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Speaker 1: other than those license deals? Yeah, simply just that, Um,

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Speaker 1: these companies are so huge, right Um, them and Lego

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Speaker 1: are clearly the titans of the toy industry. Uh. So

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Speaker 1: that's said, though, the toy industry is more fragmented than

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Speaker 1: we sometimes think, and I think even if you look

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Speaker 1: at what's going to be hot this holiday season, you

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Speaker 1: can see that so hatch moles are projected to be

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Speaker 1: a huge seller. Well, those are made by spin Master.

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Speaker 1: They're not made by Hasbro or Mattel. Fingerlings are flying

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Speaker 1: off shelves and around eBay for much higher prices. Those

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Speaker 1: are made by a small company called Wowie. So shopkins

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Speaker 1: are made by Moose Toys, a small company based in Australia.

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Speaker 1: So there definitely will be some hurdles there since it

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Speaker 1: has Brown Mattel are so large. But the market is

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Speaker 1: a bit more broken up than you might expect. I'm

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Speaker 1: feeling this pit of doom in my stomach because I

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Speaker 1: haven't heard of some of those things that I know

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Speaker 1: my children will be asking for them. So I'm concerned.

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Speaker 1: I'm looking at hate you don't you don't know hatchem

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Speaker 1: I like. I like giving them a brown, brown paper

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Speaker 1: bag and telling them to make a puppet. But just

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Speaker 1: just lastly, you know, I'm just wondering. You know, yes,

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Speaker 1: a combination makes sense given the pressures, but will this

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Speaker 1: materially change the dynamic at all? With the competent competition

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Speaker 1: from Amazon and other sources. It might give them more

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Speaker 1: power frankly in dealing with Amazon to you know, dictate

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Speaker 1: pricing and that kind of thing. So it could be

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Speaker 1: helpful in that way, and then I think the other

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Speaker 1: thing to think about is just what this does for

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Speaker 1: them in emerging markets. What we know is that the growth,

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Speaker 1: the majority of growth in the toy industry over the

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Speaker 1: next five years is absolutely going to come not from

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Speaker 1: North America but from emerging markets, and the power that

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Speaker 1: these companies combined would have in dealing with Ali Baba,

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Speaker 1: for example, might be helpful to them in their growth

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Speaker 1: mission as well. Sarah Hawzac, thank you so much for

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Speaker 1: joining us. Sarah Howzac is a retail columnist with Bloomberg Godfly,

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Speaker 1: and she joins us from our studio in Washington, d C.

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Speaker 1: Just to give you a sense of how the shares

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Speaker 1: are responding to this potential combination. Mattel shares up more

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Speaker 1: than twenty percent, Hasbro shares up more than six and

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Speaker 1: a half percent, So certainly it's being cheered on the street.

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Speaker 1: It's still unclear to me whether they could compete with

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Speaker 1: an Amazon or even some local kinds of alliances with

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Speaker 1: some of these upstart uh you know, toymakers that have

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Speaker 1: less overhead and just saying wow, we fingerlings and hatch themles.

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Speaker 1: You're gonna hear a lot about Thanks for listening. To

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Speaker 1: the Bloomberg P and L podcast. You can subscribe and

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Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast

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Speaker 1: platform you prefer. I'm pim Fox. I'm on Twitter at

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Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo. It's one

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Speaker 1: before the podcast. You can always catch us worldwide on

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Speaker 1: Bloomberg Radio