WEBVTT - Analysts Sour On Apple As China Nationalism Hits iPhone 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor, find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.960 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:24.680 at Bloomberg dot com. Apple driving lower down two point 0:00:24.880 --> 0:00:29.120 four per cent. What's interesting is that Wall Street analysts, 0:00:29.120 --> 0:00:34.400 notorious for their bullishness, have turned bearish largely about Apple 0:00:34.800 --> 0:00:37.360 and haven't been this pessimistic about Apple in a very 0:00:37.360 --> 0:00:40.280 long time, multi decades. Joining us now, John Butler, senior 0:00:40.320 --> 0:00:43.839 Telecom Services and Equipment analysts for Bloomberg Intelligence here in 0:00:43.920 --> 0:00:47.800 our Bloomberg Interactive Broker's Studios to John, why have Wall 0:00:47.880 --> 0:00:53.840 Street cell side analysts gotten so bearish on Apple? Honestly, Lisa, 0:00:53.880 --> 0:00:57.120 I think it's a whole subset of factors at work 0:00:57.280 --> 0:01:00.960 right now. Um, you know, we're still in the midst 0:01:00.960 --> 0:01:06.199 of this trade turmoil with China, and my concern is that, 0:01:07.440 --> 0:01:10.880 you know, some of the tensions we've had with with 0:01:11.000 --> 0:01:14.840 Beijing and some of the issues with Huawei have fueled 0:01:14.959 --> 0:01:20.679 nationalist buying sentiment among the Chinese consumers. And keep in 0:01:20.720 --> 0:01:25.080 mind that China is well over n of Apple sales 0:01:25.120 --> 0:01:28.360 in any given quarters, so it's a big important region 0:01:28.520 --> 0:01:32.640 for them. And I think if we continue to see weakness, 0:01:32.680 --> 0:01:37.200 they're stemming from that nationalist sentiment. Uh, that's an issue. 0:01:37.760 --> 0:01:41.000 And also I think that the departure of chief designer 0:01:41.080 --> 0:01:44.360 Johnny i've Is is a big concern, you know, because 0:01:44.680 --> 0:01:46.880 well he was the face of the brand, you know, 0:01:46.920 --> 0:01:51.240 whenever they launched new iPhones, I this front and center 0:01:51.280 --> 0:01:57.040 in presenting the new product. He is an industrial designer 0:01:57.240 --> 0:02:00.840 with um you know, a real folk us on every 0:02:00.880 --> 0:02:03.920 little detail. And so the question is can the new 0:02:04.000 --> 0:02:08.320 team that's taking over that was trained by him really 0:02:08.760 --> 0:02:11.800 fill those huge shoes? And I think there's a question 0:02:11.960 --> 0:02:16.640 mark around that, and so you know, it's just and 0:02:16.760 --> 0:02:19.760 you couple that with the with the mature status of 0:02:19.840 --> 0:02:23.760 the smartphone market itself. The global market looks like the 0:02:23.800 --> 0:02:26.799 PC market. You know, it's growing low single digit in 0:02:26.840 --> 0:02:30.600 a good year. And so you know the question is 0:02:31.120 --> 0:02:35.160 will Apple and make that pivot to services? I think yes, 0:02:35.880 --> 0:02:39.919 But how quickly is really on people's minds right now. 0:02:40.000 --> 0:02:42.120 So I think it's all those factors. Just to give 0:02:42.120 --> 0:02:44.360 you a sense of the names behind this, rosen Platt 0:02:44.400 --> 0:02:48.480 Securities downgraded the company to sell today, joining New Street 0:02:48.560 --> 0:02:51.359 Research and HSPC, which had previously lowered the ratings in 0:02:51.400 --> 0:02:54.760 this dock to sell uh in April and in January, 0:02:54.800 --> 0:02:56.840 and also on the iPhone, just to give you a sense, 0:02:56.919 --> 0:03:00.679 more than sixty Apple's revenue last year was related to 0:03:00.720 --> 0:03:04.639 the iPhone coming from China. Key question for people who 0:03:04.680 --> 0:03:06.960 want to feel a little bit bullish and Apple after 0:03:07.120 --> 0:03:09.560 a twenty seven and a half percent gain so far 0:03:09.760 --> 0:03:12.760 year to date, what could drive the company higher at 0:03:12.760 --> 0:03:17.640 this point? So a couple of things. Number One, it's 0:03:17.760 --> 0:03:21.239 a cyclical growth story. Now. I think people have been 0:03:21.240 --> 0:03:24.120 sort of slow to realize that those glory days of 0:03:24.320 --> 0:03:28.280 sustained quarter and in quarter out growth for Apple is over. 0:03:29.120 --> 0:03:31.280 They're going to have good years in bad and we're 0:03:31.280 --> 0:03:35.360 currently going through a tough year in terms of iPhone sales. 0:03:35.960 --> 0:03:38.360 But I think we're going to come into a good year, 0:03:39.080 --> 0:03:41.920 or the advent of a good year, let's say for 0:03:42.040 --> 0:03:46.160 iPhone sales starting a year from September, when we see 0:03:46.160 --> 0:03:48.560 what I hope will be the first five G I 0:03:48.720 --> 0:03:52.840 phone hit the market. UM, So iPhone sales are tough 0:03:52.960 --> 0:03:55.800 right now. We'll get into next year the comps begin 0:03:55.880 --> 0:03:59.640 to ease, because they'll be the growth will be in 0:03:59.680 --> 0:04:02.720 compar harrison to this year, which so far has been 0:04:02.840 --> 0:04:05.720 very difficult. The bar will be lower. The bar will 0:04:05.760 --> 0:04:09.120 be lower more easily, and we'll get that new five 0:04:09.200 --> 0:04:12.760 G phone hopefully. Talking about five G and talking about networks, 0:04:12.760 --> 0:04:14.240 there was another bit of tech news that I'd love 0:04:14.280 --> 0:04:17.800 to get your views on. There was a rumor that 0:04:18.040 --> 0:04:22.560 Google was in the running to acquire Dish Network UH 0:04:23.680 --> 0:04:27.159 possibly part of Dish Network, to create that fourth carrier. 0:04:27.680 --> 0:04:32.000 And this comes as T Mobile and Dish we're trying 0:04:32.000 --> 0:04:34.479 to have a tie up at the antitrust concerns, they're 0:04:35.000 --> 0:04:39.240 Google now denying it. What's the latest. This is interesting 0:04:39.279 --> 0:04:43.400 to me because Google has flirted with the wireless market 0:04:43.480 --> 0:04:48.200 BEFO with Google five, which is basically their whole saling 0:04:48.760 --> 0:04:54.000 UH network UM carriage from a T and T Verizon 0:04:54.080 --> 0:04:57.880 sprint from a major carrier, reselling it as Google Fly. 0:04:58.600 --> 0:05:01.040 So they have an interest in the business. They've toyed 0:05:01.080 --> 0:05:04.640 with it. Could they become a carrier in partnership with 0:05:04.760 --> 0:05:08.760 Dish or would they have an interest doing so maybe. 0:05:09.080 --> 0:05:12.520 My my first thought when I saw the news was though, 0:05:12.560 --> 0:05:15.640 why would they want to become so heavily regulated? Right? 0:05:15.680 --> 0:05:20.320 Because Google or Amazon or whoever, they've both been rumored 0:05:21.160 --> 0:05:24.120 if you get into the wireless business in a big way, 0:05:24.200 --> 0:05:28.520 you're you're you threatened with regulation by the federal government, 0:05:28.600 --> 0:05:32.960 right because telecoms a regulated business, wire line more so 0:05:33.080 --> 0:05:36.159 than wireless. But I think in coming years wireless is 0:05:36.160 --> 0:05:40.000 going to become more heavily regulated, and so I don't 0:05:40.000 --> 0:05:42.320 know why they would want to step into that world, 0:05:42.440 --> 0:05:46.760 but from from that angle, but then again, they're an 0:05:46.760 --> 0:05:50.120 ad company, and if you believe the Internet is going mobile, 0:05:50.200 --> 0:05:54.000 which I do, internet advertising is going mobile. So if 0:05:54.040 --> 0:05:57.719 you actually own the subscribers, you can get a lot 0:05:57.760 --> 0:06:01.880 of data from that subscriber base, perform analytics on it, 0:06:01.960 --> 0:06:05.000 and get higher rates for your advertising. So I think 0:06:05.440 --> 0:06:09.520 from Google standpoint, that would be the rationale to buy 0:06:09.600 --> 0:06:12.919 into it. So this, of course, just to give you 0:06:12.960 --> 0:06:15.400 some sense of the details. Here, New York Post reporting 0:06:15.839 --> 0:06:19.240 uh that Alphabet was recently in talks with Dish Network 0:06:19.279 --> 0:06:23.320 about creating a fourth US mobile carrier, and this would 0:06:23.320 --> 0:06:27.920 stem from the the whole issue of whether to create 0:06:28.240 --> 0:06:32.680 a new network UH stemming from the T Mobile UH 0:06:32.960 --> 0:06:37.320 Sprint tie up and Google saying no, this isn't happening. Well, 0:06:37.400 --> 0:06:41.400 let's clarify for a sex. So Dish has already said 0:06:41.440 --> 0:06:45.159 they're going to build a five G wireless network from scratch, 0:06:46.160 --> 0:06:50.479 but with the T Mobile Sprint deal under pressure from regulators, 0:06:50.720 --> 0:06:54.320 one of the concessions is rumored to be the sale 0:06:54.320 --> 0:06:58.000 of Sprints prepaid business and that would open the lane 0:06:58.120 --> 0:07:01.920 for Dish and Goal to get into the business. John 0:07:01.960 --> 0:07:04.640 Butler always a pleasure, so much to talk about. John 0:07:04.640 --> 0:07:07.360 Butler is senior Telecom Services and Equipment Analyst with the 0:07:07.400 --> 0:07:24.280 Bloomberg Intelligence. There is a big question as in a 0:07:24.440 --> 0:07:27.480 number of investors focus on companies and say, hey, we 0:07:27.520 --> 0:07:29.680 want you to do the right thing. What does it 0:07:29.800 --> 0:07:32.000 mean to do the right thing? And joining us now 0:07:32.120 --> 0:07:35.440 in our Bloomberg Interactive Broker Studios is Joey Bergstein, chief 0:07:35.480 --> 0:07:41.160 executive officer of Seventh Generation. He normally is based in Burlington, Vermont, 0:07:41.200 --> 0:07:43.960 but here in New York today Seventh Generation. Of course, 0:07:44.080 --> 0:07:46.480 if you ever have had a child and bought diapers 0:07:46.520 --> 0:07:49.080 for them and want them to be more environmentally sustainable. 0:07:49.520 --> 0:07:51.880 UH seventh Generation has that as well as cleaning products 0:07:51.920 --> 0:07:54.560 and other household items. Joey, I want to start with 0:07:54.640 --> 0:07:57.480 I know that you have been very active in lobbying 0:07:57.600 --> 0:08:01.640 for responsible environmental policy is in Washington, d C. What 0:08:01.960 --> 0:08:06.520 is the most basic step that companies could currently take 0:08:06.600 --> 0:08:10.160 to make themselves better for the environment. I think the 0:08:10.160 --> 0:08:13.600 most important thing is for companies to take accountability for 0:08:13.680 --> 0:08:15.920 the impact they're having on the world around us. So 0:08:16.320 --> 0:08:18.120 we as a company, we've got a mission which is 0:08:18.160 --> 0:08:21.320 about transforming the world into a healthier and more sustainable 0:08:21.320 --> 0:08:24.120 and more equitable place for the next seven generations. It's 0:08:24.160 --> 0:08:26.920 not just about selling more eco friendly home and personal 0:08:26.960 --> 0:08:30.120 care products. Of course that's really important, UM, But what 0:08:30.200 --> 0:08:33.199 we really want companies to do, and starting with ourselves, 0:08:33.240 --> 0:08:35.200 is to take accountability for the impact that we have 0:08:35.280 --> 0:08:38.360 on the world. So starting with an internal carbon tax, 0:08:38.440 --> 0:08:41.080 taxing yourself on the pollution that you're putting out into 0:08:41.200 --> 0:08:44.199 the world around us, taking a stance in the industry, 0:08:44.400 --> 0:08:47.800 and trying to have an impact to move to move 0:08:47.880 --> 0:08:50.480 all companies to take that kind of a stance. We 0:08:50.600 --> 0:08:52.760 think that there's what we know that there's a real 0:08:52.800 --> 0:08:57.040 consensus today not just around climate change, with climate scientists 0:08:57.040 --> 0:09:00.960 have a consensus on, but that the economists around us 0:09:01.000 --> 0:09:03.120 also have reached a consensus that the best way to 0:09:03.120 --> 0:09:06.640 address climate change is in fact through carbon pricing, which 0:09:06.640 --> 0:09:10.480 is very simply just companies being held accountable for the 0:09:10.480 --> 0:09:12.880 pollution that they create. How much do you feel like 0:09:12.920 --> 0:09:16.760 an outlier in terms of a company taking these actions, 0:09:16.760 --> 0:09:18.960 because we've heard from a number of big companies, whether 0:09:18.960 --> 0:09:22.240 it's Nestly or or or Coca Cola, that they're trying 0:09:22.280 --> 0:09:23.599 to do the same. I mean, do you feel like 0:09:23.640 --> 0:09:27.120 there is an earnest effort on behalf of the world's 0:09:27.120 --> 0:09:30.040 biggest corporations to do what you're doing. Yeah, Well, rather 0:09:30.080 --> 0:09:31.800 than outlier, I prefer to think about us as a 0:09:31.840 --> 0:09:36.280 pioneer um. But interestingly, we were with the Series, which 0:09:36.320 --> 0:09:40.319 is a tremendous organization that's pulling the business voice together 0:09:40.480 --> 0:09:43.200 around the need for climate change. We were together in 0:09:43.280 --> 0:09:46.839 d C. There's over a hundred CEOs getting together to 0:09:46.840 --> 0:09:48.959 to talk about the change that we need to create. 0:09:49.200 --> 0:09:52.720 It represented over three trillion dollars worth of revenue, over 0:09:52.760 --> 0:09:56.160 seven hundred thousand employees represented. So I would say we 0:09:56.200 --> 0:09:58.760 are definitely not at the fringe that more and more 0:09:58.800 --> 0:10:01.720 businesses are waking up of the need to actually take 0:10:01.760 --> 0:10:04.000 these kinds of stances and have an impact on the 0:10:04.040 --> 0:10:06.079 world around us. So what are some of the next 0:10:06.480 --> 0:10:11.079 innovations that you expect with respect to both housing products 0:10:11.120 --> 0:10:15.280 as well as how to create them in a sustainable manner. Yeah, 0:10:15.320 --> 0:10:18.280 I think, um, there's a lot of innovation around how 0:10:18.280 --> 0:10:21.360 do we reduce the impact that we're having around in 0:10:21.400 --> 0:10:25.600 the world around us, particularly around plastic and eliminating the plastics. UM. 0:10:25.679 --> 0:10:28.360 We're doing some work right now in concentrating our laundry 0:10:28.360 --> 0:10:32.760 detergent uh into a for the for the same amount 0:10:32.760 --> 0:10:35.320 of loads of sixty six loads delivered through twenty three 0:10:35.800 --> 0:10:40.280 instead of a hundred ounces, So that means less plastic 0:10:41.280 --> 0:10:45.800 less um uh sorry, seventy less weight, sixty less plastic, 0:10:45.800 --> 0:10:50.040 fifty less water. All those things reduce the environmental footprint 0:10:50.360 --> 0:10:52.720 of the products that we sell. And want to see 0:10:52.720 --> 0:10:55.480 other companies taking similar conds of stances. Could you see 0:10:55.520 --> 0:11:01.400 a realistic scenario in which UH consumer good companies did 0:11:01.400 --> 0:11:05.480 eliminate plastics in their future? I think so. I think yeah, 0:11:05.480 --> 0:11:07.880 I think, well, we're seeing it's not going to happen 0:11:07.920 --> 0:11:11.160 in the in tomorrow. Um, but I think we're seeing 0:11:11.200 --> 0:11:14.280 companies across the spectrum looking at how can they eliminate 0:11:14.320 --> 0:11:17.680 the plastics is the single use plastics associated with the 0:11:17.679 --> 0:11:20.599 products that they make. The issue, though, is not necessarily 0:11:20.640 --> 0:11:24.480 just plastic. The issue is plastic waste and really creating 0:11:24.520 --> 0:11:27.480 systemic solutions to address the waste that we're all faced 0:11:27.480 --> 0:11:29.160 with today and to take that out of the world 0:11:29.200 --> 0:11:32.120 around us, meaning basically coming up with innovative ways to recycle. 0:11:32.200 --> 0:11:34.800 Is that the idea, I think so in making recycling systemic. 0:11:34.880 --> 0:11:37.520 So today only about thirty percent of plastic gets recycled 0:11:37.559 --> 0:11:39.200 in this country, if we can move it up to 0:11:40.200 --> 0:11:42.240 that addresses a huge amount of the issues that we 0:11:42.280 --> 0:11:44.719 are that we're faced with today. Just real quickly here, 0:11:44.760 --> 0:11:47.000 I'm wondering, how do you pair the idea of having 0:11:47.040 --> 0:11:50.560 this important mission while squaring that with making money and 0:11:50.600 --> 0:11:53.200 offering products that people want to buy and you know, 0:11:53.520 --> 0:11:57.640 trying to have the highest quality of goods. I think 0:11:57.640 --> 0:11:59.560 that you go hand in hand. I think people really 0:11:59.600 --> 0:12:01.800 respect companies that are taking a stance and doing the 0:12:01.880 --> 0:12:05.120 right thing, that are a champion for their rights, and 0:12:05.320 --> 0:12:09.120 we see that paying back with with loyalty, with people 0:12:09.640 --> 0:12:12.040 really appreciating our brand or products and the difference that 0:12:12.080 --> 0:12:13.679 we're trying to make in the world. And I think 0:12:13.679 --> 0:12:15.640 when you stand up for consumers, they stand up for you. 0:12:16.080 --> 0:12:18.040 Joey Berkstein, thank you so much for being with us. 0:12:18.200 --> 0:12:22.040 Thank you. Joey Bergstein is chief executive officer of Seventh Generation. 0:12:22.559 --> 0:12:41.440 Joining us here in New York. We are watching Deutsche 0:12:41.440 --> 0:12:44.240 Bank shares off earlier lows, which had been down nearly 0:12:44.280 --> 0:12:45.880 seven percent. I'm looking at the A d R S 0:12:45.960 --> 0:12:50.240 American Depository receipts right now. Shares in the US trading 0:12:50.280 --> 0:12:55.240 down five point two percent as those eighteen thousand job 0:12:55.320 --> 0:12:59.000 cuts begin. Joining us now from London. A Lisa Martin 0:12:59.040 --> 0:13:02.600 newsy a columnist ring Finance for Bloomberg Opinion. A. Lisa, 0:13:02.640 --> 0:13:05.120 thank you so much for being with us. Before we 0:13:05.160 --> 0:13:08.560 get into the details of the plan. What is the 0:13:08.720 --> 0:13:12.160 mood like that you're hearing about among some of the 0:13:12.200 --> 0:13:14.959 people who are being told today they will no longer 0:13:15.000 --> 0:13:17.640 be working at Deutsche Bank. I think it feels a 0:13:17.720 --> 0:13:20.520 little bit like Deutsche Bank's Lehman moment, where you have 0:13:21.160 --> 0:13:25.079 hordes of traders and bankers that are being told to 0:13:25.200 --> 0:13:28.840 go as the bank starts cutting these eighteen thousand jobs, 0:13:28.840 --> 0:13:33.959 so in total, about twenty of the global workforce. Um. So, yes, 0:13:34.040 --> 0:13:36.319 that that's kind of how it feels internally at the moment, 0:13:36.920 --> 0:13:40.400 and it contrasts with a somewhat upbeat tone that the 0:13:40.440 --> 0:13:44.240 management has tried to convey today. They're keen to show 0:13:44.280 --> 0:13:47.480 the bankers finding is reinventing itself. It's finding its new 0:13:47.520 --> 0:13:50.880 north star, so to speak, which is going to be 0:13:50.920 --> 0:13:54.560 you know, significantly away from the trading floor. So Alisa, 0:13:54.600 --> 0:13:58.520 why our shareholders not buying this? Why are they? Why 0:13:58.559 --> 0:14:00.480 are they selling this news? And you're seeing it in 0:14:00.520 --> 0:14:02.880 the bonds too that were initially higher but now they're lower. 0:14:03.120 --> 0:14:06.320 Why is everybody so pessimistic about the efficacy of this plan? 0:14:06.720 --> 0:14:08.320 I think there are a couple of things going on here. 0:14:08.360 --> 0:14:10.240 First of all, there has been a drip feed of 0:14:10.280 --> 0:14:12.560 information for the last three or four weeks about what 0:14:12.600 --> 0:14:15.640 this plan would look like. So you know, there was 0:14:15.679 --> 0:14:17.640 a little bit of news um in terms of the 0:14:18.160 --> 0:14:22.400 magnitude of the bad bank and the the you know, 0:14:22.480 --> 0:14:25.680 the potential for how much the bank can return to 0:14:25.760 --> 0:14:29.200 shareholders over time, So that should have provided some obside. 0:14:29.760 --> 0:14:32.160 But I think a lot of the expectations have already 0:14:32.160 --> 0:14:36.080 been priced in, and secondly, I think investors are concerned 0:14:36.120 --> 0:14:39.720 about the credibility of this plan with regards to the 0:14:39.720 --> 0:14:42.960 execution risk. There's a lot that needs to happen for 0:14:43.000 --> 0:14:45.720 this to work. The downsizing of the of the bad 0:14:45.760 --> 0:14:49.640 bank needs to happen um and revenue at the core 0:14:49.680 --> 0:14:51.640 bank or the bits and pieces that Deutsche Bank can 0:14:51.640 --> 0:14:54.560 tells to maintain, also needs to grow. And that where 0:14:54.720 --> 0:14:56.560 you know the bank has failed miserably over the last 0:14:56.560 --> 0:14:59.080 few years, is to grow revenue. So I think investors 0:14:59.120 --> 0:15:02.880 are pricing in those concerns as a day progressive. So 0:15:03.000 --> 0:15:07.080 where does Deutsche Bank plan to increase revenue, especially as 0:15:07.120 --> 0:15:11.400 they cut their equities unit almost entirely and uh in 0:15:11.560 --> 0:15:14.440 at least stick with their debt unit that has actually 0:15:14.520 --> 0:15:17.280 underperformed recently. That's right, I mean, I think one way 0:15:17.320 --> 0:15:19.680 to describe it will be a sort of pivot away 0:15:19.760 --> 0:15:23.440 from servicing financial services clients such as hedge funds, to 0:15:23.680 --> 0:15:29.200 a greater focus on on servicing customers such as German companies. 0:15:29.240 --> 0:15:32.040 This is basically seeing the bank going back to its 0:15:32.120 --> 0:15:34.200 routes to where you know, to what it was doing 0:15:34.200 --> 0:15:36.920 when it was founded in eighteen seventy, which is financing 0:15:37.000 --> 0:15:40.400 German industry. UM, so it's going to be more of 0:15:40.400 --> 0:15:44.840 a corporate lender, and equally it's going to be trying 0:15:44.880 --> 0:15:49.880 to expand existing businesses in private banking, wealth management and 0:15:49.960 --> 0:15:54.400 asset management. One saving grace, potentially for Deutsche Bank is 0:15:54.480 --> 0:15:59.360 that reaffirming its mission as a German lender catering to 0:15:59.480 --> 0:16:03.360 German companies, perhaps they will get increasing backing from the 0:16:03.360 --> 0:16:05.880 German government and there will be pressure on companies in 0:16:05.880 --> 0:16:09.360 that nation to really rely more heavily on Deutsche Bank 0:16:09.480 --> 0:16:12.440 for some of the things that they need done. Do 0:16:12.480 --> 0:16:15.360 you think that that's a positive for Deutsche Bank going 0:16:15.400 --> 0:16:18.120 from here? I think, I mean, that's an interesting question. 0:16:18.200 --> 0:16:21.320 One of the analysts asked on on the call earlier. 0:16:21.360 --> 0:16:23.240 You know, why is it that they expected to make 0:16:23.280 --> 0:16:25.840 more money to grow in Germany? How can they possibly 0:16:25.840 --> 0:16:28.040 beginning market share? But obviously they are, you know, a 0:16:28.120 --> 0:16:30.800 large German bank to begin with. Um. You know, that 0:16:30.920 --> 0:16:33.800 might reflect partly the fact that they have been um 0:16:34.120 --> 0:16:36.600 less focused on some of the clients, particularly the small 0:16:36.640 --> 0:16:40.200 and medium sized businesses, and also but also some greater 0:16:40.280 --> 0:16:43.320 confidence from clients that the bank is you know is 0:16:43.320 --> 0:16:45.200 here to stay, it's stable, and it's going to be 0:16:45.240 --> 0:16:48.320 looking after them because you know, its effectively shunned those 0:16:48.360 --> 0:16:52.360 types of customers for ver long time. Just real quick here, Lisa, 0:16:52.680 --> 0:16:55.040 in twenty seconds, Which banks are gonna be the biggest 0:16:55.080 --> 0:16:59.200 gainers from Deutsche Bank's exit of certain businesses. Must keep 0:16:59.200 --> 0:17:01.080 your eyes on bm he, of course, which has a 0:17:01.080 --> 0:17:04.200 preliminary agreement to take on a part. We don't know 0:17:04.240 --> 0:17:06.720 how much of the equity business, so we'll definitely want 0:17:06.760 --> 0:17:09.240 to hear more about that over the coming days. Elsa 0:17:09.280 --> 0:17:11.000 Martin News, thank you so much for being with us. 0:17:11.240 --> 0:17:14.879 Alisa Martin News is a columnist covering finance for Bloomberg Opinion. 0:17:14.920 --> 0:17:19.359 Coming to us from London. Definitely a somber day on 0:17:19.760 --> 0:17:23.159 Deutsche Bank floors, where people are packing up their things, 0:17:23.720 --> 0:17:26.320 getting notices saying that they will no longer have a 0:17:26.440 --> 0:17:29.080 job at the bank as it cuts nearly one fifth 0:17:29.160 --> 0:17:31.679 of its workforce in an attempt to shore up its 0:17:31.720 --> 0:17:35.919 profitability and create a leaner and more sustainable UH framework 0:17:36.119 --> 0:17:52.760 to go forward with. When there's too much gloom and 0:17:52.880 --> 0:17:56.960 doom among fund managers, some people point to a jobless 0:17:57.040 --> 0:17:59.800 rate in the United States that is near it's all 0:18:00.040 --> 0:18:05.280 time lows. The question is do those numbers really reflect reality. 0:18:05.560 --> 0:18:08.760 Joining us now is Lakshman than He is co founder 0:18:08.800 --> 0:18:12.440 and chief operating officer of the Economic Cycle Research Institute. 0:18:12.640 --> 0:18:16.520 He's also a Bloomberg Opinion calumnist who penned a column 0:18:16.600 --> 0:18:21.240 I found fascinating the myth of the tight US labor market. So, Lakshman, 0:18:21.280 --> 0:18:23.119 thank you so much for being with us. Can you 0:18:23.160 --> 0:18:26.160 start by why do you call the tight US labor 0:18:26.200 --> 0:18:30.399 market a myth? Well, a, Lisa, thanks thanks for having me. 0:18:30.440 --> 0:18:34.040 And the reason I call it a myth, well, look, 0:18:34.320 --> 0:18:37.000 it's a it's a ten year long expansion. There's been 0:18:37.040 --> 0:18:40.200 a lot of jobs growth over those ten years. Uh. 0:18:40.240 --> 0:18:43.040 And that is all well and good. I'm not taking 0:18:43.119 --> 0:18:48.520 anything away from that. But at aquery Economic Cycle Research Institute, 0:18:48.520 --> 0:18:52.040 we're studying cycles, you know, the the acceleration and the 0:18:52.160 --> 0:18:57.960 deceleration in the economy, and we currently are in a slowdown. 0:18:58.000 --> 0:19:02.919 We're growth is actually decelerating and and it's possible for 0:19:02.960 --> 0:19:07.800 that to happen even when you have the unemployment rate 0:19:08.280 --> 0:19:12.080 near half century lows. And and that's what we were 0:19:12.119 --> 0:19:15.119 getting at in the op ed that we penned that 0:19:15.240 --> 0:19:18.439 came out on Friday and right in the in the 0:19:18.480 --> 0:19:21.760 wake of a of a stronger than expected jobs report. 0:19:22.280 --> 0:19:25.040 So why do we say that. We say that because 0:19:25.080 --> 0:19:30.879 we're looking at a lot of different coincident measures of 0:19:31.280 --> 0:19:36.920 employment activity, and collectively they're actually decelerating. If you look 0:19:36.960 --> 0:19:40.359 past the headlines of the unemployment rate or even the 0:19:40.800 --> 0:19:44.760 headline jobs growth numbers, you can see that. And that's 0:19:44.760 --> 0:19:49.520 what we present, uh in that op ed. So there's 0:19:49.560 --> 0:19:52.159 a question that I had as I read the piece, 0:19:52.200 --> 0:19:56.959 which is the labor force and understanding, uh, you know 0:19:57.520 --> 0:20:01.439 how big it is, the direction of it, and what 0:20:01.640 --> 0:20:05.920 the underemployed or unemployed population is of people who are 0:20:05.960 --> 0:20:08.320 of working age who just have bowed out or have 0:20:08.400 --> 0:20:11.560 gotten discouraged. Do you have a sense of that? Yeah, 0:20:11.600 --> 0:20:14.600 and so um for listeners and and and for everybody, 0:20:15.200 --> 0:20:17.960 just a couple of basics. There's all these different types 0:20:18.000 --> 0:20:22.200 of employment statistics. That non farm payrolls number you hear 0:20:22.280 --> 0:20:24.800 is from the Establishment Survey. When we get into the 0:20:24.880 --> 0:20:28.400 labor force, we were looking at the household survey and 0:20:28.600 --> 0:20:31.320 UM through May, which is the data that we had 0:20:31.359 --> 0:20:35.040 when we were writing the op ed. The household survey 0:20:35.119 --> 0:20:39.200 showed the number of unemployed had dropped by over four 0:20:39.280 --> 0:20:42.560 hundred thousand, or six and a half percent this year. 0:20:43.359 --> 0:20:46.560 Uh and the number of employed had also fallen by 0:20:46.640 --> 0:20:49.280 a couple of hundred thousand over the same time frames. 0:20:49.280 --> 0:20:52.720 So the sum total four hundred and six hundred was 0:20:53.680 --> 0:20:56.400 showing the labor force had actually dropped by almost six 0:20:56.480 --> 0:20:59.920 hundred thousand, or a third of one percent this year. 0:21:00.480 --> 0:21:04.800 Now with the June data in hand, um, we see 0:21:04.880 --> 0:21:08.119 that it's not quite as large of a drop, but 0:21:08.200 --> 0:21:11.080 it's still dropping by about a quarter of a million 0:21:11.160 --> 0:21:15.240 this year. When that is showing weakness. Is that weakness? 0:21:15.280 --> 0:21:17.680 I mean could that be people retiring? Because there is 0:21:17.720 --> 0:21:20.679 an aging workforce in population the United States? I mean, 0:21:20.680 --> 0:21:23.960 how do you determine what that means? Sure? Sure? No, no, no, Well, 0:21:24.080 --> 0:21:26.480 months and months, there's just gyrations and data. So you 0:21:26.800 --> 0:21:29.800 are wanting to look at longer term trends with people 0:21:29.880 --> 0:21:33.920 retiring and other structural shifts in the labor force. That's 0:21:33.920 --> 0:21:37.840 over many, many years. The timeframe that we're operating with 0:21:38.080 --> 0:21:41.280 when we're looking at cyclical moves is on the order 0:21:41.280 --> 0:21:44.160 of a few quarters. And that's why we're saying, hey, 0:21:44.200 --> 0:21:47.760 if you look at this year in the jobs data, 0:21:48.520 --> 0:21:53.560 you see deceleration when you look at don't pick on anyone, 0:21:53.760 --> 0:21:56.040 look at them all together, which is what we do 0:21:56.080 --> 0:21:59.000 in a coincident employment index. And we see that that's 0:21:59.000 --> 0:22:02.880 been d ccelerating its growth rate. It's still growing, it's 0:22:02.920 --> 0:22:09.320 growing slower. And there's there's another statistic out there, UM 0:22:09.480 --> 0:22:14.720 that I think is almost UM more important, although it 0:22:14.800 --> 0:22:20.000 gets UM very very little attention. UH. And and that's 0:22:20.080 --> 0:22:23.480 this UH. It's also from the Labor Department. It's the 0:22:23.600 --> 0:22:28.720 Quarterly Census of Employment in Wages. And so unlike the 0:22:28.840 --> 0:22:31.640 Jobs Report, which are surveys right there, you're you're trying 0:22:31.680 --> 0:22:36.119 to very quickly count UM, how much has happened in 0:22:36.160 --> 0:22:40.480 the past month. This quarterly census it's it's it's less frequent, 0:22:40.560 --> 0:22:43.200 so they can actually go out and count rather than 0:22:43.240 --> 0:22:47.679 surveying UM. And we believe that and it actually shows 0:22:47.720 --> 0:22:50.720 you a truer trend of what's going on. And and 0:22:50.800 --> 0:22:53.920 for listeners and for everybody to understand, when they do 0:22:53.960 --> 0:22:59.120 the benchmark revisions to the establishment survey data, the headline 0:22:59.200 --> 0:23:02.399 data that everybody he's off of, they revise it to 0:23:02.560 --> 0:23:07.639 agree with the quarterly census. And you know, I know 0:23:07.680 --> 0:23:09.520 a lot of guests don't come on and say we 0:23:09.560 --> 0:23:13.080 should look at this half year old data because everybody 0:23:13.160 --> 0:23:15.359 is very fixated on the freshest data. What happened with 0:23:15.400 --> 0:23:19.520 the jobs report? Um, but here it's very very telling. 0:23:19.760 --> 0:23:22.520 And what you see is that this they call it 0:23:22.560 --> 0:23:26.320 the qc e W or the Quarterly Census Employment and Wages, 0:23:27.119 --> 0:23:33.920 and it shows a sharp deceleration in jobs growth. So, um, 0:23:34.040 --> 0:23:37.880 right now, it's probably it's it's it's it's suggesting that 0:23:37.920 --> 0:23:43.080 the establishment survey is overstating the real numbers by about 0:23:45.480 --> 0:23:48.800 So that's again, we're still growing. We're just not growing 0:23:48.880 --> 0:23:52.040 as fast as these headlines are saying. We're actually decelerating. 0:23:52.280 --> 0:23:55.240 And it's that rate of change which is super important 0:23:55.840 --> 0:24:00.159 for business managers or i'd say investors, you know, is 0:24:00.200 --> 0:24:04.160 that's going to be related to um profits growth. Yeah, 0:24:04.320 --> 0:24:07.280 so lax one, just just about a minute here, I'm wondering, 0:24:07.480 --> 0:24:10.400 can you look into your crystal ball. Given the deceleration, 0:24:10.440 --> 0:24:13.200