Latest / Bloomberg Intelligence / Power Of US Sanctions Is Diminished After Caving On ZTE: Lake

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Power Of US Sanctions Is Diminished After Caving On ZTE: Lake · Bloomberg Intelligence

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  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
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  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg p m L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. North
• 0:34
  Speaker 1: Korea is threatening to call off its summit with President Trump.
• 0:38
  Speaker 1: Iran is wondering about its future as the potential nuclear
• 0:42
  Speaker 1: deal unravels. Here to talk about what the implications of
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  Speaker 1: all this is Eli Lake, a columnist with Bloomberg Opinion
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  Speaker 1: based in Washington, d C. Eli, thank you so much,
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  Speaker 1: as always for joining us. I want to start with
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  Speaker 1: a column that you wrote yesterday that I thought was
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  Speaker 1: really compelling, and the headline is Trump's cave to China's
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  Speaker 1: z T E hurts his Iran strategy. Can you please
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  Speaker 1: explain why? Sure, and thanks so much for having me um.
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  Speaker 1: The issue is that you had a decision and a
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  Speaker 1: fairly standard process for penalizing ZT after it had violated
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  Speaker 1: American export control sanctions by selling, among other too countries,
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  Speaker 1: US technology, and among them were Iran. But more importantly,
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  Speaker 1: after the settlement, UM, it was you know, determined that
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  Speaker 1: vt E had violated its terms by rewarding the employees
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  Speaker 1: you're responsible for that violation. UM. So as a result,
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  Speaker 1: the Commerce Department ruled that US companies could no longer
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  Speaker 1: sell equipment to ZTE, which is a fairly tough penalty,
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  Speaker 1: but it's coming at the end of a process. What
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  Speaker 1: Trump did over the weekend was instruct the Commerce Department
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  Speaker 1: to look into basically reversing that decision or um you know,
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  Speaker 1: saving off those penalties. And the reason that that's important
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  Speaker 1: is that in the context of this, it has been
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  Speaker 1: reported he sort of said that this isn't the context
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  Speaker 1: of my trade agotchass with China UM, which are usually
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  Speaker 1: separated from national security related sanctions like this. And so
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  Speaker 1: the question then becomes, you know, the Europeans, under um
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  Speaker 1: Trump's decision last week to get out of the Iran deal,
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  Speaker 1: would face secondary sanctions that they continued business with Iran's
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  Speaker 1: economy for the most part. And then the whole point
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  Speaker 1: is that you have to choose between doing business with
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  Speaker 1: America or Iran. UM. If the Europeans wanted to play
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  Speaker 1: China hardball. They could take a page from the Chinese
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  Speaker 1: playbook and threatened terroriffs of their own against American exports
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  Speaker 1: and the hopes of basically removing them in exchange for
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  Speaker 1: leniency on the Iran sensions, which is the opposite of
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  Speaker 1: the intended effect of the Iran policy was just to
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  Speaker 1: isolate the Iranian economy at this point. So that's why
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  Speaker 1: I think that, um, it's dangerous, because he's essentially kind
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  Speaker 1: of crossing these streams. And since every you know, and
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  Speaker 1: the Europeans can stead of look at this and say,
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  Speaker 1: all right, well, maybe if we play hardball, um, we
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  Speaker 1: will have a chance to get out of it as well.
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  Speaker 1: Eli is it possible? And I could just play Devil's
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  Speaker 1: advocate and say that what you perceive is inconsistency is
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  Speaker 1: merely trade negotiations, and that as a result of this,
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  Speaker 1: the President is in some way trying to uh balance
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  Speaker 1: the interests of companies that sell to z t E
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  Speaker 1: at the same time reward the Chinese for perhaps their
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  Speaker 1: efforts on behalf of the United States. When it comes
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  Speaker 1: to North Korea nuclear policy, well, I think certainly that
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  Speaker 1: there's probably North Korea is lurking in the background and
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  Speaker 1: the Chinese have been somewhat cooperative in at least trying
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  Speaker 1: to get Kim Jong to the table. UM. But the
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  Speaker 1: downside of that is that the pour of American sanctions
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  Speaker 1: is not just the fact that we have the weld's
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  Speaker 1: reserve currency and the largest economy. It's also the fact
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  Speaker 1: that it's understood that you know, there are procedures, there
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  Speaker 1: are rules that you have to follow, and if you
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  Speaker 1: violate them, eventually you will be peen a lot. Now,
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  Speaker 1: there is a parallel here in the mid The first
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  Speaker 1: Iran sanctions were u introduced by Congress and signed into law,
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  Speaker 1: but there was largely an intention for European companies UM,
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  Speaker 1: in some part because it was worked out, but also
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  Speaker 1: because there was no real enforcement of some of the
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  Speaker 1: banking sings until the two thousands and once you started
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  Speaker 1: seeing cases against major European banks UM. Then at that point, UM,
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  Speaker 1: you you the sanctions really did have more of an effect.
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  Speaker 1: And and it's sort of culminated in two thousand and
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  Speaker 1: ten and two thousand eleven when Congress you know, sort
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  Speaker 1: of forced obamas or imposed where known as the crippling
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  Speaker 1: stenctions on Iran's oil sector, and those have been credited
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  Speaker 1: with bringing the Iranians at least to negotiations. So the
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  Speaker 1: point here is that when you undermine something like this,
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  Speaker 1: particularly after DT had violated its settlement with the US government,
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  Speaker 1: that's the key point here. Then it's almost saying that,
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  Speaker 1: you know, there is everything is always negotiable. It's certainly
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  Speaker 1: within Trump's constitutional authorities to do whatever he wants in
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  Speaker 1: this realm, the president, the chief executive in our in
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  Speaker 1: our system, has a lot of power. But I think
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  Speaker 1: it sends a really bad message and creates a kind
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  Speaker 1: of moral hazard down the road, and it weakens the
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  Speaker 1: efficacy of these kinds of national security stations at a
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  Speaker 1: moment when the US is relying on stuff like this
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  Speaker 1: more and more with you know, kind of rogue states,
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  Speaker 1: whether it's Venezuela, whether it's Iran, Sudan, etcetera. Well, is
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  Speaker 1: there may just ask, I mean, is there is there
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  Speaker 1: any historical president president for a U S president basically
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  Speaker 1: creating these kind of ad hoc situations and deals in
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  Speaker 1: which basically it is at the discretion of the president
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  Speaker 1: to tell everybody, yes, and uh see what happens. I mean,
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  Speaker 1: I think you know, historically you've not to conflate that
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  Speaker 1: too necessarily. But you know, there's a lot of history
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  Speaker 1: about President Roosevelt during the Second World War making these
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  Speaker 1: kinds of agreements in which they were contradictory on the surface. Sure,
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  Speaker 1: in a time of war. I mean, it's hard to
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  Speaker 1: say because in Roosevelt day we really didn't have the
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  Speaker 1: kind of thanks since receiving approach that we do now.
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  Speaker 1: Um But I mean, yeah, the president can kind of
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  Speaker 1: make deals like this, but deals to what end. And
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  Speaker 1: the point is that if he really wants to try
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  Speaker 1: to um pressure the Iranians, the strategy is best and
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  Speaker 1: I can tell and what the administration is said is
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  Speaker 1: to hit them with crippling thinkings yet again, which would
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  Speaker 1: mean that would you would wind down European investments in Iran, which,
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  Speaker 1: by the way, we're not going that's far anyway for
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  Speaker 1: a lot of other reasons. But if that's what you
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  Speaker 1: wanted to do in order to get better terms on
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  Speaker 1: a nuclear agreement, then you know, you should make it
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  Speaker 1: very clear that we mean what we say when we
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  Speaker 1: penalized companies for violating our expert controls lines who are investigators.
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  Speaker 1: And the top of all of this, I should add
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  Speaker 1: that in the case of VTE in another Chinese selicom, Huawei.
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  Speaker 1: He was intelligence community for years has been saying that
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  Speaker 1: these are um that the equipment that is sold by
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  Speaker 1: these companies have a back door for Chinese intelligence to
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  Speaker 1: basically eavesdrop on UH and have a kind of you know,
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  Speaker 1: n s A like capability in countries where they are
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  Speaker 1: part of the UM you know, wireless infrastructure. So that's
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  Speaker 1: another factor in all of this as well. But you know,
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  Speaker 1: I'm just saying that if it's important that the message
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  Speaker 1: is sent, and you know, it doesn't matter friend or
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  Speaker 1: foe when you when you get on the wrong side
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  Speaker 1: of us on these sorts of things, particularly after we
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  Speaker 1: try to, you know, make it possible for you to
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  Speaker 1: continue to do business. You know, there are going to
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  Speaker 1: be consequences, and those consequences are final. I want to
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  Speaker 1: thank you very much, Eli Lake. He is a columnist
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  Speaker 1: for Bloomberg Opinion. You can follow Eli on Twitter at
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  Speaker 1: Eli Lake and interesting columns. The Trump's cave to China
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  Speaker 1: z t E hurts his Iran strategy as well as
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  Speaker 1: the West should beware of the Korean peace trap. Yeah,
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  Speaker 1: you know, it's it's such an interesting time and it's
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  Speaker 1: so difficult to parse out posturing versus policy, versus consistency
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  Speaker 1: versus uh, you know, actual threat. And this seems to
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  Speaker 1: be what's facing the markets that are incredibly blase today
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  Speaker 1: about all of these risks. Indeed, I want to thank
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  Speaker 1: you very much, Eli Lake, once again our Bloomberg Opinion calumnist.
• 9:04
  Speaker 1: When President Donald Trump presented his drug pricing of proposal
• 9:09
  Speaker 1: at the White House Press Conference last week, he spoke
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  Speaker 1: about competition between pharmaceutical companies, bringing generic drugs to consumers
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  Speaker 1: more quickly, and also trying to reduce the discrepancy between
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  Speaker 1: drug prices in the United States and those of our
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  Speaker 1: trading partners. Here to tell us more about the proposal
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  Speaker 1: at about the state of healthcare in the United States
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  Speaker 1: is Jeff smid Root. He is the co founder of
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  Speaker 1: healthcare dot com and also the founder and the chief
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  Speaker 1: executive of Pivot health dot Com. Jeff, thank you very
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  Speaker 1: much for being you know, one of the things I
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  Speaker 1: wanted to sort of just maybe let you offer people
• 9:49
  Speaker 1: as a little bit of your background, because you're an
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  Speaker 1: expert in the world of health insurance. You understand things
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  Speaker 1: like risk pools, fixed indemnity plans. Give people a little background,
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  Speaker 1: so they understand where you're coming from. Well, I've been
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  Speaker 1: in the health insurance business and the consumer directed business
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  Speaker 1: most of my life, most of my career. Actually my
• 10:08
  Speaker 1: father was in that business as well, So I understand
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  Speaker 1: what consumers think about, how they react to what's important
• 10:17
  Speaker 1: to them and and some of the issues that they
• 10:19
  Speaker 1: have to deal with. And the most important thing to
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  Speaker 1: remember is they have a budget. They have to live
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  Speaker 1: within that budget, and we have now a healthcare system
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  Speaker 1: that is increasingly uh straining those budgets, and that leads
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  Speaker 1: to some very difficult choices. Well, so, given your background
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  Speaker 1: with the health insurance business, can you give us a
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  Speaker 1: sense when you were listening to President Trump uh talk
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  Speaker 1: about his healthcare blueprint to reduce pharmaceutical prices, what stood
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  Speaker 1: out to you the most as potentially the most transformative
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  Speaker 1: or most effective. Well, I I think the most transformative
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  Speaker 1: aspect of it is it's finally addressing that big pharma
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  Speaker 1: needs to make some changes, and I think part of
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  Speaker 1: the process of doing that is to really push very
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  Speaker 1: hard for transparency, really push very hard for something consumers
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  Speaker 1: can find and see and search for that helps them
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  Speaker 1: understand what their choices are and what the facy of
• 11:16
  Speaker 1: certain types of drugs will be let's I want to
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  Speaker 1: get your thoughts on something called a risk pool. If
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  Speaker 1: you don't mind, What is a risk pool and how
• 11:25
  Speaker 1: do people what do people really need to know about
• 11:28
  Speaker 1: how they operate well. Risk pools allow insurance companies or
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  Speaker 1: other entities to pool the very sickest and most expensive
• 11:38
  Speaker 1: claims into a larger and larger pool. There's been a
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  Speaker 1: lot of debate in the last year about what is
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  Speaker 1: the role of government in doing that, what is the
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  Speaker 1: role of providers in doing that? But it's difficult for
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  Speaker 1: any one insurance company to deal with claims that are
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  Speaker 1: ten million, fifteen million dollars, and there needs to be
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  Speaker 1: some mechanism to pool all of that so that the
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  Speaker 1: rest of us can have a more affordable insurance option.
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  Speaker 1: You know, Jeff, I guess um. Transparency is is good
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  Speaker 1: and is important, and you've been trying to do that
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  Speaker 1: with your with your site which tries to offer people
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  Speaker 1: a way of comparing healthcare plans. I just want to
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  Speaker 1: push back a little bit because a lot of people
• 12:21
  Speaker 1: in the market, we're saying that the health care plan
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  Speaker 1: that President Trump outlined was pretty much toothless and the
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  Speaker 1: pharmaceutical company shares rallied in the wake of this, not
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  Speaker 1: only that, but also the pharmacy benefit Managers and PBMs. UM.
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  Speaker 1: I'm struck by my colleague Max Neisson's column that he
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  Speaker 1: put out Bloomberg Opinion writers saying, Look, nothing's going to
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  Speaker 1: change until people are willing to say, uh that the
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  Speaker 1: government won't cover certain medications that are just too expensive. Uh,
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  Speaker 1: and use that as a bargaining tool. What's your take
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  Speaker 1: on this? What will it take actually change this? I
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  Speaker 1: think consumers have to be empowered, consumers need to take
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  Speaker 1: more action, consumers need to be more vocal. Uh, and
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  Speaker 1: there needs to be more transparency. Uh. But if consumers
• 13:04
  Speaker 1: push back, and how do they push back if a
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  Speaker 1: lot of this is covered by insurance companies, Well, they
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  Speaker 1: can push back by understanding what lower cost options might exist. Uh.
• 13:15
  Speaker 1: They can push back because increasingly first ten thousand dollars
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  Speaker 1: of expenses are not being covered by the insurance company
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  Speaker 1: is being covered by them. So there's a lot of
• 13:25
  Speaker 1: incentives to push back and to look at different alternatives.
• 13:30
  Speaker 1: Do you believe that we're going to end up with
• 13:31
  Speaker 1: a single payer system. No? I I don't think we
• 13:35
  Speaker 1: will end up there. I think where we need to
• 13:38
  Speaker 1: go is to in a system that rewards consumers for
• 13:43
  Speaker 1: taking steps to improve their health, rewards consumers for being
• 13:48
  Speaker 1: smart about shopping about healthcare and recognizes that they have
• 13:52
  Speaker 1: some responsibility to bear in that, and if they're rewarded
• 13:55
  Speaker 1: economically for that, I think healthcare begins to change in
• 13:59
  Speaker 1: a way for the better. I'm curious, given the fact
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  Speaker 1: that you're really focused on transparency, um, how much divergence
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  Speaker 1: is there between healthcare plans and the value they provide,
• 14:10
  Speaker 1: because that is really at the heart of what your
• 14:12
  Speaker 1: site does. Correct there there can be significant amount of
• 14:16
  Speaker 1: divergence if you look at all of the options and alternatives.
• 14:21
  Speaker 1: If you are only looking at plans available as a
• 14:24
  Speaker 1: result of the Affordable Care Act, there are basically standardization.
• 14:29
  Speaker 1: But if you look at plans that are not part
• 14:31
  Speaker 1: of the Affordable Care Act, non Obamacare plans, short term
• 14:35
  Speaker 1: medical plans, fixed indemnity plans, there are a lot of
• 14:38
  Speaker 1: ways that consumers can tailor plans to meet their needs,
• 14:42
  Speaker 1: and you're seeing more of that. Do you think that
• 14:45
  Speaker 1: Obamacare was a bad thing? I mean, are you glad
• 14:49
  Speaker 1: to see the rollback of aspects of it? I'm not
• 14:51
  Speaker 1: happy to see that it didn't work. I would like
• 14:54
  Speaker 1: to have seen it work better than it did. But
• 14:57
  Speaker 1: one of the things that we've learned from this is
• 14:59
  Speaker 1: that one size doesn't fit all that we have to
• 15:02
  Speaker 1: allow consumers to tailor plans. We have to recognize that
• 15:05
  Speaker 1: they have budgets. And the other change that's happening were
• 15:09
  Speaker 1: increasingly a gig economy. We have fifty three million Americans
• 15:13
  Speaker 1: that are working at a variety of temporary jobs. So
• 15:17
  Speaker 1: the notion of gig insurance is kind of coming along
• 15:21
  Speaker 1: with that. The the the idea of health insurance was
• 15:24
  Speaker 1: built for a workforce that largely doesn't exist anymore. Uh,
• 15:29
  Speaker 1: people had permanent jobs. Now everything is temporary, everything is moving,
• 15:33
  Speaker 1: everything is gig and you're gonna have to see health
• 15:36
  Speaker 1: insurance adapt to that. Would a fixed indemnity type of
• 15:41
  Speaker 1: offering be a useful adjunct or addition to the well
• 15:46
  Speaker 1: it's fixed indemnity can't. Plans can be useful. They aren't
• 15:51
  Speaker 1: a fit for everybody. But the idea of knowing exactly
• 15:55
  Speaker 1: how much you're going to be reimbursed for a certain
• 15:58
  Speaker 1: type of procedure a fixed amount allows the consumer to shop,
• 16:02
  Speaker 1: allows them to use different online services that says, this
• 16:05
  Speaker 1: is what an MRI I cost, this is what a
• 16:07
  Speaker 1: Kolonosky costs, um this is what x rays costs. And
• 16:11
  Speaker 1: find the provider and the resource that provides it within
• 16:15
  Speaker 1: that budget frame. And there is a lot of variants
• 16:18
  Speaker 1: in prices. Jeff Medrid, thank you so much for being
• 16:21
  Speaker 1: with us. Really interesting to hear your thoughts. Jeff Medrid
• 16:24
  Speaker 1: is co founder of Healthcare dot Com, also the founder
• 16:27
  Speaker 1: and chief executive at Pivot health dot com. Such an
• 16:31
  Speaker 1: important issue him. I was struck by a story that
• 16:33
  Speaker 1: I read in Bloomberg a couple of weeks ago talking
• 16:36
  Speaker 1: about how doctors themselves are sometimes going without insurance because
• 16:40
  Speaker 1: it's so expensive, not to mention families and many others
• 16:44
  Speaker 1: exactly as Jeff was talking about, who are part of
• 16:46
  Speaker 1: the gate economy and cannot afford the thousands of dollars
• 16:49
  Speaker 1: per month that it requires to cover a family. Uh,
• 17:08
  Speaker 1: let's talk about something kind of rare in the retail sector.
• 17:12
  Speaker 1: A winner. I'm talking about Macy's shows up almost ten
• 17:15
  Speaker 1: percent after reporting same sort store sales in the first quarter.
• 17:20
  Speaker 1: There were up three point nine percent over your earlier,
• 17:23
  Speaker 1: blowing past analysts expectations. Sarah, how's actoyees now she's a
• 17:27
  Speaker 1: Bloomberg Opinion retail columnist. Sarah, thank you so much for
• 17:30
  Speaker 1: joining us. What happened that was so right for Macy's
• 17:34
  Speaker 1: in this past quarter. It was a combination of things. So,
• 17:37
  Speaker 1: for one, they just benefited from a good Macro backdrop, right,
• 17:40
  Speaker 1: there's healthy consumer spending. And also one thing they called
• 17:43
  Speaker 1: out in their earnings call today was the international tourist
• 17:46
  Speaker 1: spending was really strong. It was up ten percent for
• 17:48
  Speaker 1: them over the same quarter a year earlier. So those
• 17:52
  Speaker 1: are big picture factors that help. And then some of
• 17:54
  Speaker 1: it just really did come down to better execution by Macy's.
• 17:57
  Speaker 1: One thing I think was particularly noteworthy was that their
• 18:00
  Speaker 1: rejunior retail was up to five, which means they did
• 18:02
  Speaker 1: a better job of selling stuff at full price instead
• 18:05
  Speaker 1: of having to bait you with a gazillion coupons. Now, Sarah,
• 18:09
  Speaker 1: also Macy's has acquired something called Story. They've also got
• 18:14
  Speaker 1: backstage shops as well as the expansion of the Blue
• 18:19
  Speaker 1: Mercury unit. Can you talk a little bit about how
• 18:22
  Speaker 1: Macy's is perhaps doing things organically that are benefiting the
• 18:27
  Speaker 1: bottom line. Yeah, I think that backstage is particularly interesting.
• 18:31
  Speaker 1: They're essentially creating an off price store within the Macy store.
• 18:35
  Speaker 1: And Um, the the idea is that the value proposition
• 18:38
  Speaker 1: is most of the off pricers TJ Max Marshalls have
• 18:41
  Speaker 1: been doing really well, but they're not located within malls, right,
• 18:44
  Speaker 1: They're usually in strip centers. And the idea is to
• 18:46
  Speaker 1: bring that concept to the mall and they seem to
• 18:48
  Speaker 1: be having some success with that. The stores that have
• 18:51
  Speaker 1: the backstage area are really seeing a whift in sales,
• 18:54
  Speaker 1: and I think Blue Mercury is a really interesting opportunity
• 18:57
  Speaker 1: for them too. What we've seen for years now is
• 18:59
  Speaker 1: the beauty businesses just booming. Here. We have women are
• 19:02
  Speaker 1: you know, scrimping on clothes, shopping at fast fashion players
• 19:05
  Speaker 1: like h and m rs are, but they're willing to
• 19:07
  Speaker 1: pay eighty five hours for face cream. Why. I don't know,
• 19:10
  Speaker 1: I do doo um. And it's a dynamic we've seen
• 19:14
  Speaker 1: for a long time. UM, and Blue Mercury is a
• 19:17
  Speaker 1: really good way to lean into that. So, Sarah, you know,
• 19:20
  Speaker 1: you were saying that a big aspect of this is
• 19:23
  Speaker 1: a better backrocademic backdrop. You've got people spending more on
• 19:27
  Speaker 1: stuff and given that I'm surprised that retailer is more
• 19:31
  Speaker 1: broadly today aren't doing better. I'm looking at the SP
• 19:33
  Speaker 1: five hundred Retailing Industry Index and it's up half a
• 19:36
  Speaker 1: percentage point, which is surprisingly small given the positive kind
• 19:41
  Speaker 1: of read through on this report. Yeah, and I think
• 19:44
  Speaker 1: maybe what that reflects is that the retail industry has
• 19:47
  Speaker 1: really been proving itself to sort into winners and losers,
• 19:51
  Speaker 1: that these benefits are not necessarily the benefits of a
• 19:53
  Speaker 1: better consumer environment are not necessarily being shared by everyone.
• 19:57
  Speaker 1: And look, we we saw that in the holiday season two.
• 19:59
  Speaker 1: They were some really strong performers. Macy's had a good holiday,
• 20:03
  Speaker 1: j C. Penny had a good holiday, and then there
• 20:05
  Speaker 1: are others like Bonton that we're basically crushed by the
• 20:07
  Speaker 1: holiday season and forced into bankruptcy. So I think there's
• 20:10
  Speaker 1: a knowledge out there that, uh, the rising tide might
• 20:14
  Speaker 1: not lift all both. It might only lift the boats
• 20:16
  Speaker 1: that are executing well. Sarah, is there's still a conversation
• 20:20
  Speaker 1: do you believe that's going on about what to do
• 20:22
  Speaker 1: with the real estate. The Herald Square store estimated, i
• 20:26
  Speaker 1: believe by Starboard value at one point to be worth
• 20:29
  Speaker 1: about four billion dollars. YEP, it definitely seems we didn't
• 20:32
  Speaker 1: get any updates from them on real estate today, but
• 20:35
  Speaker 1: we know it is still an ongoing project for them
• 20:38
  Speaker 1: to spin off some of their crown jewels to free
• 20:41
  Speaker 1: up cash to either pay down debt or support their
• 20:43
  Speaker 1: e commerce transformation. And we know they're still interested in
• 20:46
  Speaker 1: doing these kinds of deals. The most recent one was
• 20:49
  Speaker 1: selling seven floors of their State Street store in Chicago.
• 20:52
  Speaker 1: I think they estimate they're going to get about thirty
• 20:54
  Speaker 1: million in proceeds from that um and so we have
• 20:56
  Speaker 1: every reason to believe they're continuing to look at opportunities
• 20:58
  Speaker 1: for Harold Square and other of their really flagship properties.
• 21:02
  Speaker 1: So Sarah is heating up with respect to retail earning
• 21:06
  Speaker 1: seas and the rest of it might be over, but
• 21:07
  Speaker 1: next week we're gonna get a whole sleve earnings reports.
• 21:10
  Speaker 1: Which one should we most watch for, sort of using
• 21:14
  Speaker 1: as a bellweather of the retail industry. I think Walmart
• 21:17
  Speaker 1: is going to be really important tomorrow, for one. I
• 21:20
  Speaker 1: think that's a good place where we can see. You know,
• 21:22
  Speaker 1: we've seen fuel prices creeping up in recent months, and
• 21:24
  Speaker 1: I think Walmart and Target both will provide good gages
• 21:27
  Speaker 1: of whether or not that matters as people are buying
• 21:30
  Speaker 1: their consumer staples. Um. And also, I think all eyes
• 21:33
  Speaker 1: are going to be on Walmart tomorrow because of their
• 21:36
  Speaker 1: e commerce growth. They clearly had this flip cart acquisition
• 21:39
  Speaker 1: on a couple of weeks ago that investors got a
• 21:42
  Speaker 1: little skittish about in their e commerce growth wasn't so
• 21:44
  Speaker 1: good in the fourth quarter. Um And I think tomorrow
• 21:47
  Speaker 1: will be a good indication of how well they're going
• 21:50
  Speaker 1: to be able to take it to Amazon in the future,
• 21:52
  Speaker 1: and how will any traditional retailer is going to be
• 21:53
  Speaker 1: able to take it to Amazon in the future. And
• 21:55
  Speaker 1: thank you for joining us. Sarah Halzack is Bloomberg Opinion
• 21:59
  Speaker 1: retail columnist giving us her views on Macy's and the
• 22:03
  Speaker 1: shares of Macy's are higher right now by nearly nine
• 22:07
  Speaker 1: and a half per cent. He's an expert in the
• 22:25
  Speaker 1: world of the Jedi. James Bach is our government analyst
• 22:29
  Speaker 1: for federal contracts for Bloomberg Intelligence. He joins us from
• 22:33
  Speaker 1: our studios in Washington. James Bach, thanks very much for
• 22:38
  Speaker 1: being here. Are I tell people what is Jedi? When
• 22:41
  Speaker 1: it comes to the Department of Defense and the companies
• 22:45
  Speaker 1: that may actually be involved in the JEDI program. Yes, So,
• 22:50
  Speaker 1: as part of efforts by the Department of Defense to
• 22:53
  Speaker 1: find a host for its enterprise wide cloud infrastructure and
• 22:58
  Speaker 1: platform on they're starting who it should be sometime this week,
• 23:02
  Speaker 1: they're going to be looking at bids um for this hosting,
• 23:05
  Speaker 1: so we could be seeing you know, obviously the big
• 23:07
  Speaker 1: names like Amazon, Microsoft, UM and then IBM, Google or
• 23:12
  Speaker 1: called all these companies are probably gonna come forward with
• 23:13
  Speaker 1: bids to try to be the d O d s UM,
• 23:16
  Speaker 1: you know, go to cloud hoster for their enterprise wide
• 23:19
  Speaker 1: infrastruction platform. I thought you were going to save me
• 23:22
  Speaker 1: when I said JEDI and you were going to mention
• 23:24
  Speaker 1: that it stands for Joint Enterprise Defense infrastruct Apologize. No, No,
• 23:30
  Speaker 1: the d O you're you live. You live in the
• 23:33
  Speaker 1: world of acronyms, right, I mean the d D loves acronyms, right, yes, absolutely. Well,
• 23:38
  Speaker 1: you know, James, I want to talk a little bit
• 23:40
  Speaker 1: about the significance of the just before we get into
• 23:42
  Speaker 1: the political implications in the back and forth with President
• 23:44
  Speaker 1: Trump and Amazon's Jeff Bezos. I just want to get
• 23:48
  Speaker 1: a sense this is a ten billion dollar contract. You know,
• 23:51
  Speaker 1: how big of a deal is this? I mean, does
• 23:53
  Speaker 1: it lead to additional contracts? And could it make or
• 23:56
  Speaker 1: break a business? In the words yes, So if we're
• 23:58
  Speaker 1: looking at them, maybe the financial implication aations. If we
• 24:00
  Speaker 1: just look at say ten billion over ten years, which
• 24:02
  Speaker 1: are what some of the estimates are, we're looking at
• 24:04
  Speaker 1: at most let's say a billion a year UM, that's
• 24:07
  Speaker 1: not you know, financially significant necessarily for any of these
• 24:10
  Speaker 1: companies that are considering bids UM. But what it does
• 24:13
  Speaker 1: do UM for any company that wins this, it kind
• 24:16
  Speaker 1: of gives you the endorsement of the Department of Defense,
• 24:18
  Speaker 1: who has very rigorous security requirements UM as part of
• 24:22
  Speaker 1: their cloud hosting. So that kind of says a lot
• 24:24
  Speaker 1: about who how your cloud is doing in the market,
• 24:26
  Speaker 1: and that obviously will remeberate through private sector and public sector.
• 24:30
  Speaker 1: That's an excellent point in other words, basically saying, look,
• 24:32
  Speaker 1: if we're secure enough for the Pentagon, we can be
• 24:35
  Speaker 1: secure enough for your business. UM. So let's talk about Amazon,
• 24:39
  Speaker 1: it was the front runner for this contract, and then
• 24:42
  Speaker 1: Jeff Bezos meet President Trump. Please explain. Yeah, So when
• 24:46
  Speaker 1: I look at the political implications of this, obviously you
• 24:49
  Speaker 1: have to consider this sort of animosity that Trump has
• 24:51
  Speaker 1: towards Amazon and UM, Jeff Bezos. UM, I don't think
• 24:55
  Speaker 1: that Trump's uh, you know Trump. There's a big you know,
• 25:00
  Speaker 1: government bureaucracy and acquisition process that governs how this contract
• 25:03
  Speaker 1: gets awarded and it transcends anything. UM. As far as
• 25:06
  Speaker 1: Trump's views of Amazon or Jeff Bezos. What I think
• 25:10
  Speaker 1: is more of a UM. What's what's kind of making
• 25:13
  Speaker 1: this more of Amazon not being the front runner is
• 25:16
  Speaker 1: just the simple fact that they're not the only player
• 25:19
  Speaker 1: in the market anymore. It's not the same as when
• 25:21
  Speaker 1: the CIA awarded Amazon the contract for their cloud hosting. UM.
• 25:25
  Speaker 1: And I think that's probably the biggest threat to Amazon
• 25:27
  Speaker 1: more than say, you know, Trump versus Amazon. Why isn't
• 25:31
  Speaker 1: IBM or Google or Oracle front running? UM, Well, it's
• 25:36
  Speaker 1: a matter of where they kind of sit in the market.
• 25:38
  Speaker 1: You have Amazon as the market leader, below that you
• 25:41
  Speaker 1: have Microsoft, and then there's kind of those three companies. UM,
• 25:44
  Speaker 1: IBM has this has some strength, and that they're in
• 25:48
  Speaker 1: this old school world of traditional data center i T,
• 25:51
  Speaker 1: which is something that would be an asset because the
• 25:53
  Speaker 1: Department of Defense is probably going to move to the
• 25:55
  Speaker 1: cloud and kind of a slower, more deliberate way given
• 25:58
  Speaker 1: all their national security work das UM, but they simply
• 26:01
  Speaker 1: just don't have the scale UM or maybe the capabilities
• 26:04
  Speaker 1: that Microsoft does. Microsoft is much stronger on that side.
• 26:07
  Speaker 1: Then you talk about Oracle, they're kind of in the
• 26:09
  Speaker 1: same boat, just smaller than IBM. And then Google, which
• 26:12
  Speaker 1: has definitely, you know, a large compelling offering around infrastructure UM.
• 26:16
  Speaker 1: They have this issue with UM. They're not really in
• 26:19
  Speaker 1: that old school world of ID. They're more on the
• 26:23
  Speaker 1: you know, cloud native companies like Snapchat and Spotify, not
• 26:26
  Speaker 1: really really you know, maybe philosophically aligned with how the
• 26:29
  Speaker 1: Department of Defense would look to do their UM cloud migration.
• 26:33
  Speaker 1: So UM one thing that instructs me about Amazon dot
• 26:35
  Speaker 1: Com It already has worked with the c I A.
• 26:38
  Speaker 1: I'm just wondering, I mean, how much have we learned
• 26:40
  Speaker 1: about the different sort of security levels of the different
• 26:43
  Speaker 1: cloud providers? And I mean, is there any difference between
• 26:46
  Speaker 1: them that's material or is there something else that's kind
• 26:49
  Speaker 1: of factoring into the bidding process. The CIA is a
• 26:52
  Speaker 1: good I guess um example or past perform, which is
• 26:55
  Speaker 1: always very important in government contracting. It does give the
• 26:57
  Speaker 1: d D something to look at as an example of
• 27:00
  Speaker 1: what they might want to try to replicate. Um if
• 27:03
  Speaker 1: trying to get into kind of a discussion of who
• 27:05
  Speaker 1: has the better security might be a little more difficult. UM,
• 27:08
  Speaker 1: I think that capably, I mean any of these companies
• 27:10
  Speaker 1: are probably could capably host the Microsoft I mean could
• 27:14
  Speaker 1: hold host the cloud, whether that be Microsoft or IBM.
• 27:17
  Speaker 1: It just really comes down to who was mostly aligned
• 27:20
  Speaker 1: with how the d o D wants to do this.
• 27:21
  Speaker 1: Migration James. Other companies that may end up with contracts
• 27:26
  Speaker 1: for consulting and the actual migration and application services related
• 27:32
  Speaker 1: to this contract include what Booze, Allen, c A, c I, Khaki,
• 27:37
  Speaker 1: General Dynamics, and so on. Yeah. Yeah, if you can
• 27:39
  Speaker 1: just kind of go down the line of all those
• 27:41
  Speaker 1: companies that are in this. Obviously, this past week there
• 27:43
  Speaker 1: was an investor day in New York with a new
• 27:46
  Speaker 1: company called Perspective, which is a spinoff and merger from
• 27:51
  Speaker 1: you know, HP's old government business. They're also probably going
• 27:53
  Speaker 1: to be involved in trying to find how they can
• 27:56
  Speaker 1: position for a you know, those cloud consulting contracts or
• 27:59
  Speaker 1: help migration or application rational Asian services. There's a lot
• 28:03
  Speaker 1: of work that will come as a follow into this,
• 28:05
  Speaker 1: as well as potential further contracts that maybe agencies will
• 28:09
  Speaker 1: be prompted to um, you know, bigger cloud migration initiatives
• 28:14
  Speaker 1: that could come out of this after you know, seeing
• 28:15
  Speaker 1: the d D do it. So there's a lot of
• 28:17
  Speaker 1: following work that could come in the services area outside
• 28:20
  Speaker 1: of just the pure commercial cloud hosting. James Boch, thank
• 28:23
  Speaker 1: you so much for being with us and for tracking this.
• 28:25
  Speaker 1: James Bock is a government analyst covering and focusing on
• 28:28
  Speaker 1: federal contracts for Bloomberg Intelligence coming to us from our
• 28:32
  Speaker 1: Bloomberg Councing one studios in Washington, d C. Really interesting
• 28:36
  Speaker 1: and important to put this into perspective. It's a ten
• 28:38
  Speaker 1: billion dollar Pentagon cloud contract, probably a pittance over ten
• 28:43
  Speaker 1: years for a lot of these massive tech companies. I know,
• 28:46
  Speaker 1: it's weird to call ten billion dollars of pittance um,
• 28:49
  Speaker 1: and yet the tentacles of this endorsement to have the
• 28:52
  Speaker 1: Pentagon endorser cloud computing services is quite powerful and there
• 28:57
  Speaker 1: are a lot of other government services that also could
• 28:58
  Speaker 1: come along with that. Thanks for listening to the Bloomberg
• 29:03
  Speaker 1: P and L podcast. You can subscribe and listen to
• 29:06
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 29:11
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 29:15
  Speaker 1: on Twitter at Lisa Abramo. It's One before the Podcast.
• 29:18
  Speaker 1: You can always catch us worldwide on Bloomberg Radio