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Analysts Sour On Apple As China Nationalism Hits iPhone · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You,
• 0:05
  Speaker 1: along with my co host Lisa Brahma wits each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
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  Speaker 1: you and your money. Whether at the grocery store or
• 0:12
  Speaker 1: the trading floor, find a Bloomberg penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. Apple driving lower down two point
• 0:24
  Speaker 1: four per cent. What's interesting is that Wall Street analysts,
• 0:29
  Speaker 1: notorious for their bullishness, have turned bearish largely about Apple
• 0:34
  Speaker 1: and haven't been this pessimistic about Apple in a very
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  Speaker 1: long time, multi decades. Joining us now, John Butler, senior
• 0:40
  Speaker 1: Telecom Services and Equipment analysts for Bloomberg Intelligence here in
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  Speaker 1: our Bloomberg Interactive Broker's Studios to John, why have Wall
• 0:47
  Speaker 1: Street cell side analysts gotten so bearish on Apple? Honestly, Lisa,
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  Speaker 1: I think it's a whole subset of factors at work
• 0:57
  Speaker 1: right now. Um, you know, we're still in the midst
• 1:00
  Speaker 1: of this trade turmoil with China, and my concern is that,
• 1:07
  Speaker 1: you know, some of the tensions we've had with with
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  Speaker 1: Beijing and some of the issues with Huawei have fueled
• 1:14
  Speaker 1: nationalist buying sentiment among the Chinese consumers. And keep in
• 1:20
  Speaker 1: mind that China is well over n of Apple sales
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  Speaker 1: in any given quarters, so it's a big important region
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  Speaker 1: for them. And I think if we continue to see weakness,
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  Speaker 1: they're stemming from that nationalist sentiment. Uh, that's an issue.
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  Speaker 1: And also I think that the departure of chief designer
• 1:41
  Speaker 1: Johnny i've Is is a big concern, you know, because
• 1:44
  Speaker 1: well he was the face of the brand, you know,
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  Speaker 1: whenever they launched new iPhones, I this front and center
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  Speaker 1: in presenting the new product. He is an industrial designer
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  Speaker 1: with um you know, a real folk us on every
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  Speaker 1: little detail. And so the question is can the new
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  Speaker 1: team that's taking over that was trained by him really
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  Speaker 1: fill those huge shoes? And I think there's a question
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  Speaker 1: mark around that, and so you know, it's just and
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  Speaker 1: you couple that with the with the mature status of
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  Speaker 1: the smartphone market itself. The global market looks like the
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  Speaker 1: PC market. You know, it's growing low single digit in
• 2:26
  Speaker 1: a good year. And so you know the question is
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  Speaker 1: will Apple and make that pivot to services? I think yes,
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  Speaker 1: But how quickly is really on people's minds right now.
• 2:40
  Speaker 1: So I think it's all those factors. Just to give
• 2:42
  Speaker 1: you a sense of the names behind this, rosen Platt
• 2:44
  Speaker 1: Securities downgraded the company to sell today, joining New Street
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  Speaker 1: Research and HSPC, which had previously lowered the ratings in
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  Speaker 1: this dock to sell uh in April and in January,
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  Speaker 1: and also on the iPhone, just to give you a sense,
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  Speaker 1: more than sixty Apple's revenue last year was related to
• 3:00
  Speaker 1: the iPhone coming from China. Key question for people who
• 3:04
  Speaker 1: want to feel a little bit bullish and Apple after
• 3:07
  Speaker 1: a twenty seven and a half percent gain so far
• 3:09
  Speaker 1: year to date, what could drive the company higher at
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  Speaker 1: this point? So a couple of things. Number One, it's
• 3:17
  Speaker 1: a cyclical growth story. Now. I think people have been
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  Speaker 1: sort of slow to realize that those glory days of
• 3:24
  Speaker 1: sustained quarter and in quarter out growth for Apple is over.
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  Speaker 1: They're going to have good years in bad and we're
• 3:31
  Speaker 1: currently going through a tough year in terms of iPhone sales.
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  Speaker 1: But I think we're going to come into a good year,
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  Speaker 1: or the advent of a good year, let's say for
• 3:42
  Speaker 1: iPhone sales starting a year from September, when we see
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  Speaker 1: what I hope will be the first five G I
• 3:48
  Speaker 1: phone hit the market. UM, So iPhone sales are tough
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  Speaker 1: right now. We'll get into next year the comps begin
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  Speaker 1: to ease, because they'll be the growth will be in
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  Speaker 1: compar harrison to this year, which so far has been
• 4:02
  Speaker 1: very difficult. The bar will be lower. The bar will
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  Speaker 1: be lower more easily, and we'll get that new five
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  Speaker 1: G phone hopefully. Talking about five G and talking about networks,
• 4:12
  Speaker 1: there was another bit of tech news that I'd love
• 4:14
  Speaker 1: to get your views on. There was a rumor that
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  Speaker 1: Google was in the running to acquire Dish Network UH
• 4:23
  Speaker 1: possibly part of Dish Network, to create that fourth carrier.
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  Speaker 1: And this comes as T Mobile and Dish we're trying
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  Speaker 1: to have a tie up at the antitrust concerns, they're
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  Speaker 1: Google now denying it. What's the latest. This is interesting
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  Speaker 1: to me because Google has flirted with the wireless market
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  Speaker 1: BEFO with Google five, which is basically their whole saling
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  Speaker 1: UH network UM carriage from a T and T Verizon
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  Speaker 1: sprint from a major carrier, reselling it as Google Fly.
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  Speaker 1: So they have an interest in the business. They've toyed
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  Speaker 1: with it. Could they become a carrier in partnership with
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  Speaker 1: Dish or would they have an interest doing so maybe.
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  Speaker 1: My my first thought when I saw the news was though,
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  Speaker 1: why would they want to become so heavily regulated? Right?
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  Speaker 1: Because Google or Amazon or whoever, they've both been rumored
• 5:21
  Speaker 1: if you get into the wireless business in a big way,
• 5:24
  Speaker 1: you're you're you threatened with regulation by the federal government,
• 5:28
  Speaker 1: right because telecoms a regulated business, wire line more so
• 5:33
  Speaker 1: than wireless. But I think in coming years wireless is
• 5:36
  Speaker 1: going to become more heavily regulated, and so I don't
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  Speaker 1: know why they would want to step into that world,
• 5:42
  Speaker 1: but from from that angle, but then again, they're an
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  Speaker 1: ad company, and if you believe the Internet is going mobile,
• 5:50
  Speaker 1: which I do, internet advertising is going mobile. So if
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  Speaker 1: you actually own the subscribers, you can get a lot
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  Speaker 1: of data from that subscriber base, perform analytics on it,
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  Speaker 1: and get higher rates for your advertising. So I think
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  Speaker 1: from Google standpoint, that would be the rationale to buy
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  Speaker 1: into it. So this, of course, just to give you
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  Speaker 1: some sense of the details. Here, New York Post reporting
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  Speaker 1: uh that Alphabet was recently in talks with Dish Network
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  Speaker 1: about creating a fourth US mobile carrier, and this would
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  Speaker 1: stem from the the whole issue of whether to create
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  Speaker 1: a new network UH stemming from the T Mobile UH
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  Speaker 1: Sprint tie up and Google saying no, this isn't happening. Well,
• 6:37
  Speaker 1: let's clarify for a sex. So Dish has already said
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  Speaker 1: they're going to build a five G wireless network from scratch,
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  Speaker 1: but with the T Mobile Sprint deal under pressure from regulators,
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  Speaker 1: one of the concessions is rumored to be the sale
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  Speaker 1: of Sprints prepaid business and that would open the lane
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  Speaker 1: for Dish and Goal to get into the business. John
• 7:01
  Speaker 1: Butler always a pleasure, so much to talk about. John
• 7:04
  Speaker 1: Butler is senior Telecom Services and Equipment Analyst with the
• 7:07
  Speaker 1: Bloomberg Intelligence. There is a big question as in a
• 7:24
  Speaker 1: number of investors focus on companies and say, hey, we
• 7:27
  Speaker 1: want you to do the right thing. What does it
• 7:29
  Speaker 1: mean to do the right thing? And joining us now
• 7:32
  Speaker 1: in our Bloomberg Interactive Broker Studios is Joey Bergstein, chief
• 7:35
  Speaker 1: executive officer of Seventh Generation. He normally is based in Burlington, Vermont,
• 7:41
  Speaker 1: but here in New York today Seventh Generation. Of course,
• 7:44
  Speaker 1: if you ever have had a child and bought diapers
• 7:46
  Speaker 1: for them and want them to be more environmentally sustainable.
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  Speaker 1: UH seventh Generation has that as well as cleaning products
• 7:51
  Speaker 1: and other household items. Joey, I want to start with
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  Speaker 1: I know that you have been very active in lobbying
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  Speaker 1: for responsible environmental policy is in Washington, d C. What
• 8:01
  Speaker 1: is the most basic step that companies could currently take
• 8:06
  Speaker 1: to make themselves better for the environment. I think the
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  Speaker 1: most important thing is for companies to take accountability for
• 8:13
  Speaker 1: the impact they're having on the world around us. So
• 8:16
  Speaker 1: we as a company, we've got a mission which is
• 8:18
  Speaker 1: about transforming the world into a healthier and more sustainable
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  Speaker 1: and more equitable place for the next seven generations. It's
• 8:24
  Speaker 1: not just about selling more eco friendly home and personal
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  Speaker 1: care products. Of course that's really important, UM, But what
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  Speaker 1: we really want companies to do, and starting with ourselves,
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  Speaker 1: is to take accountability for the impact that we have
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  Speaker 1: on the world. So starting with an internal carbon tax,
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  Speaker 1: taxing yourself on the pollution that you're putting out into
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  Speaker 1: the world around us, taking a stance in the industry,
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  Speaker 1: and trying to have an impact to move to move
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  Speaker 1: all companies to take that kind of a stance. We
• 8:50
  Speaker 1: think that there's what we know that there's a real
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  Speaker 1: consensus today not just around climate change, with climate scientists
• 8:57
  Speaker 1: have a consensus on, but that the economists around us
• 9:01
  Speaker 1: also have reached a consensus that the best way to
• 9:03
  Speaker 1: address climate change is in fact through carbon pricing, which
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  Speaker 1: is very simply just companies being held accountable for the
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  Speaker 1: pollution that they create. How much do you feel like
• 9:12
  Speaker 1: an outlier in terms of a company taking these actions,
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  Speaker 1: because we've heard from a number of big companies, whether
• 9:18
  Speaker 1: it's Nestly or or or Coca Cola, that they're trying
• 9:22
  Speaker 1: to do the same. I mean, do you feel like
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  Speaker 1: there is an earnest effort on behalf of the world's
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  Speaker 1: biggest corporations to do what you're doing. Yeah, Well, rather
• 9:30
  Speaker 1: than outlier, I prefer to think about us as a
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  Speaker 1: pioneer um. But interestingly, we were with the Series, which
• 9:36
  Speaker 1: is a tremendous organization that's pulling the business voice together
• 9:40
  Speaker 1: around the need for climate change. We were together in
• 9:43
  Speaker 1: d C. There's over a hundred CEOs getting together to
• 9:46
  Speaker 1: to talk about the change that we need to create.
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  Speaker 1: It represented over three trillion dollars worth of revenue, over
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  Speaker 1: seven hundred thousand employees represented. So I would say we
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  Speaker 1: are definitely not at the fringe that more and more
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  Speaker 1: businesses are waking up of the need to actually take
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  Speaker 1: these kinds of stances and have an impact on the
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  Speaker 1: world around us. So what are some of the next
• 10:06
  Speaker 1: innovations that you expect with respect to both housing products
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  Speaker 1: as well as how to create them in a sustainable manner. Yeah,
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  Speaker 1: I think, um, there's a lot of innovation around how
• 10:18
  Speaker 1: do we reduce the impact that we're having around in
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  Speaker 1: the world around us, particularly around plastic and eliminating the plastics. UM.
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  Speaker 1: We're doing some work right now in concentrating our laundry
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  Speaker 1: detergent uh into a for the for the same amount
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  Speaker 1: of loads of sixty six loads delivered through twenty three
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  Speaker 1: instead of a hundred ounces, So that means less plastic
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  Speaker 1: less um uh sorry, seventy less weight, sixty less plastic,
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  Speaker 1: fifty less water. All those things reduce the environmental footprint
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  Speaker 1: of the products that we sell. And want to see
• 10:52
  Speaker 1: other companies taking similar conds of stances. Could you see
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  Speaker 1: a realistic scenario in which UH consumer good companies did
• 11:01
  Speaker 1: eliminate plastics in their future? I think so. I think yeah,
• 11:05
  Speaker 1: I think, well, we're seeing it's not going to happen
• 11:07
  Speaker 1: in the in tomorrow. Um, but I think we're seeing
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  Speaker 1: companies across the spectrum looking at how can they eliminate
• 11:14
  Speaker 1: the plastics is the single use plastics associated with the
• 11:17
  Speaker 1: products that they make. The issue, though, is not necessarily
• 11:20
  Speaker 1: just plastic. The issue is plastic waste and really creating
• 11:24
  Speaker 1: systemic solutions to address the waste that we're all faced
• 11:27
  Speaker 1: with today and to take that out of the world
• 11:29
  Speaker 1: around us, meaning basically coming up with innovative ways to recycle.
• 11:32
  Speaker 1: Is that the idea, I think so in making recycling systemic.
• 11:34
  Speaker 1: So today only about thirty percent of plastic gets recycled
• 11:37
  Speaker 1: in this country, if we can move it up to
• 11:40
  Speaker 1: that addresses a huge amount of the issues that we
• 11:42
  Speaker 1: are that we're faced with today. Just real quickly here,
• 11:44
  Speaker 1: I'm wondering, how do you pair the idea of having
• 11:47
  Speaker 1: this important mission while squaring that with making money and
• 11:50
  Speaker 1: offering products that people want to buy and you know,
• 11:53
  Speaker 1: trying to have the highest quality of goods. I think
• 11:57
  Speaker 1: that you go hand in hand. I think people really
• 11:59
  Speaker 1: respect companies that are taking a stance and doing the
• 12:01
  Speaker 1: right thing, that are a champion for their rights, and
• 12:05
  Speaker 1: we see that paying back with with loyalty, with people
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  Speaker 1: really appreciating our brand or products and the difference that
• 12:12
  Speaker 1: we're trying to make in the world. And I think
• 12:13
  Speaker 1: when you stand up for consumers, they stand up for you.
• 12:16
  Speaker 1: Joey Berkstein, thank you so much for being with us.
• 12:18
  Speaker 1: Thank you. Joey Bergstein is chief executive officer of Seventh Generation.
• 12:22
  Speaker 1: Joining us here in New York. We are watching Deutsche
• 12:41
  Speaker 1: Bank shares off earlier lows, which had been down nearly
• 12:44
  Speaker 1: seven percent. I'm looking at the A d R S
• 12:45
  Speaker 1: American Depository receipts right now. Shares in the US trading
• 12:50
  Speaker 1: down five point two percent as those eighteen thousand job
• 12:55
  Speaker 1: cuts begin. Joining us now from London. A Lisa Martin
• 12:59
  Speaker 1: newsy a columnist ring Finance for Bloomberg Opinion. A. Lisa,
• 13:02
  Speaker 1: thank you so much for being with us. Before we
• 13:05
  Speaker 1: get into the details of the plan. What is the
• 13:08
  Speaker 1: mood like that you're hearing about among some of the
• 13:12
  Speaker 1: people who are being told today they will no longer
• 13:15
  Speaker 1: be working at Deutsche Bank. I think it feels a
• 13:17
  Speaker 1: little bit like Deutsche Bank's Lehman moment, where you have
• 13:21
  Speaker 1: hordes of traders and bankers that are being told to
• 13:25
  Speaker 1: go as the bank starts cutting these eighteen thousand jobs,
• 13:28
  Speaker 1: so in total, about twenty of the global workforce. Um. So, yes,
• 13:34
  Speaker 1: that that's kind of how it feels internally at the moment,
• 13:36
  Speaker 1: and it contrasts with a somewhat upbeat tone that the
• 13:40
  Speaker 1: management has tried to convey today. They're keen to show
• 13:44
  Speaker 1: the bankers finding is reinventing itself. It's finding its new
• 13:47
  Speaker 1: north star, so to speak, which is going to be
• 13:50
  Speaker 1: you know, significantly away from the trading floor. So Alisa,
• 13:54
  Speaker 1: why our shareholders not buying this? Why are they? Why
• 13:58
  Speaker 1: are they selling this news? And you're seeing it in
• 14:00
  Speaker 1: the bonds too that were initially higher but now they're lower.
• 14:03
  Speaker 1: Why is everybody so pessimistic about the efficacy of this plan?
• 14:06
  Speaker 1: I think there are a couple of things going on here.
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  Speaker 1: First of all, there has been a drip feed of
• 14:10
  Speaker 1: information for the last three or four weeks about what
• 14:12
  Speaker 1: this plan would look like. So you know, there was
• 14:15
  Speaker 1: a little bit of news um in terms of the
• 14:18
  Speaker 1: magnitude of the bad bank and the the you know,
• 14:22
  Speaker 1: the potential for how much the bank can return to
• 14:25
  Speaker 1: shareholders over time, So that should have provided some obside.
• 14:29
  Speaker 1: But I think a lot of the expectations have already
• 14:32
  Speaker 1: been priced in, and secondly, I think investors are concerned
• 14:36
  Speaker 1: about the credibility of this plan with regards to the
• 14:39
  Speaker 1: execution risk. There's a lot that needs to happen for
• 14:43
  Speaker 1: this to work. The downsizing of the of the bad
• 14:45
  Speaker 1: bank needs to happen um and revenue at the core
• 14:49
  Speaker 1: bank or the bits and pieces that Deutsche Bank can
• 14:51
  Speaker 1: tells to maintain, also needs to grow. And that where
• 14:54
  Speaker 1: you know the bank has failed miserably over the last
• 14:56
  Speaker 1: few years, is to grow revenue. So I think investors
• 14:59
  Speaker 1: are pricing in those concerns as a day progressive. So
• 15:03
  Speaker 1: where does Deutsche Bank plan to increase revenue, especially as
• 15:07
  Speaker 1: they cut their equities unit almost entirely and uh in
• 15:11
  Speaker 1: at least stick with their debt unit that has actually
• 15:14
  Speaker 1: underperformed recently. That's right, I mean, I think one way
• 15:17
  Speaker 1: to describe it will be a sort of pivot away
• 15:19
  Speaker 1: from servicing financial services clients such as hedge funds, to
• 15:23
  Speaker 1: a greater focus on on servicing customers such as German companies.
• 15:29
  Speaker 1: This is basically seeing the bank going back to its
• 15:32
  Speaker 1: routes to where you know, to what it was doing
• 15:34
  Speaker 1: when it was founded in eighteen seventy, which is financing
• 15:37
  Speaker 1: German industry. UM, so it's going to be more of
• 15:40
  Speaker 1: a corporate lender, and equally it's going to be trying
• 15:44
  Speaker 1: to expand existing businesses in private banking, wealth management and
• 15:49
  Speaker 1: asset management. One saving grace, potentially for Deutsche Bank is
• 15:54
  Speaker 1: that reaffirming its mission as a German lender catering to
• 15:59
  Speaker 1: German companies, perhaps they will get increasing backing from the
• 16:03
  Speaker 1: German government and there will be pressure on companies in
• 16:05
  Speaker 1: that nation to really rely more heavily on Deutsche Bank
• 16:09
  Speaker 1: for some of the things that they need done. Do
• 16:12
  Speaker 1: you think that that's a positive for Deutsche Bank going
• 16:15
  Speaker 1: from here? I think, I mean, that's an interesting question.
• 16:18
  Speaker 1: One of the analysts asked on on the call earlier.
• 16:21
  Speaker 1: You know, why is it that they expected to make
• 16:23
  Speaker 1: more money to grow in Germany? How can they possibly
• 16:25
  Speaker 1: beginning market share? But obviously they are, you know, a
• 16:28
  Speaker 1: large German bank to begin with. Um. You know, that
• 16:30
  Speaker 1: might reflect partly the fact that they have been um
• 16:34
  Speaker 1: less focused on some of the clients, particularly the small
• 16:36
  Speaker 1: and medium sized businesses, and also but also some greater
• 16:40
  Speaker 1: confidence from clients that the bank is you know is
• 16:43
  Speaker 1: here to stay, it's stable, and it's going to be
• 16:45
  Speaker 1: looking after them because you know, its effectively shunned those
• 16:48
  Speaker 1: types of customers for ver long time. Just real quick here, Lisa,
• 16:52
  Speaker 1: in twenty seconds, Which banks are gonna be the biggest
• 16:55
  Speaker 1: gainers from Deutsche Bank's exit of certain businesses. Must keep
• 16:59
  Speaker 1: your eyes on bm he, of course, which has a
• 17:01
  Speaker 1: preliminary agreement to take on a part. We don't know
• 17:04
  Speaker 1: how much of the equity business, so we'll definitely want
• 17:06
  Speaker 1: to hear more about that over the coming days. Elsa
• 17:09
  Speaker 1: Martin News, thank you so much for being with us.
• 17:11
  Speaker 1: Alisa Martin News is a columnist covering finance for Bloomberg Opinion.
• 17:14
  Speaker 1: Coming to us from London. Definitely a somber day on
• 17:19
  Speaker 1: Deutsche Bank floors, where people are packing up their things,
• 17:23
  Speaker 1: getting notices saying that they will no longer have a
• 17:26
  Speaker 1: job at the bank as it cuts nearly one fifth
• 17:29
  Speaker 1: of its workforce in an attempt to shore up its
• 17:31
  Speaker 1: profitability and create a leaner and more sustainable UH framework
• 17:36
  Speaker 1: to go forward with. When there's too much gloom and
• 17:52
  Speaker 1: doom among fund managers, some people point to a jobless
• 17:57
  Speaker 1: rate in the United States that is near it's all
• 18:00
  Speaker 1: time lows. The question is do those numbers really reflect reality.
• 18:05
  Speaker 1: Joining us now is Lakshman than He is co founder
• 18:08
  Speaker 1: and chief operating officer of the Economic Cycle Research Institute.
• 18:12
  Speaker 1: He's also a Bloomberg Opinion calumnist who penned a column
• 18:16
  Speaker 1: I found fascinating the myth of the tight US labor market. So, Lakshman,
• 18:21
  Speaker 1: thank you so much for being with us. Can you
• 18:23
  Speaker 1: start by why do you call the tight US labor
• 18:26
  Speaker 1: market a myth? Well, a, Lisa, thanks thanks for having me.
• 18:30
  Speaker 1: And the reason I call it a myth, well, look,
• 18:34
  Speaker 1: it's a it's a ten year long expansion. There's been
• 18:37
  Speaker 1: a lot of jobs growth over those ten years. Uh.
• 18:40
  Speaker 1: And that is all well and good. I'm not taking
• 18:43
  Speaker 1: anything away from that. But at aquery Economic Cycle Research Institute,
• 18:48
  Speaker 1: we're studying cycles, you know, the the acceleration and the
• 18:52
  Speaker 1: deceleration in the economy, and we currently are in a slowdown.
• 18:58
  Speaker 1: We're growth is actually decelerating and and it's possible for
• 19:02
  Speaker 1: that to happen even when you have the unemployment rate
• 19:08
  Speaker 1: near half century lows. And and that's what we were
• 19:12
  Speaker 1: getting at in the op ed that we penned that
• 19:15
  Speaker 1: came out on Friday and right in the in the
• 19:18
  Speaker 1: wake of a of a stronger than expected jobs report.
• 19:22
  Speaker 1: So why do we say that. We say that because
• 19:25
  Speaker 1: we're looking at a lot of different coincident measures of
• 19:31
  Speaker 1: employment activity, and collectively they're actually decelerating. If you look
• 19:36
  Speaker 1: past the headlines of the unemployment rate or even the
• 19:40
  Speaker 1: headline jobs growth numbers, you can see that. And that's
• 19:44
  Speaker 1: what we present, uh in that op ed. So there's
• 19:49
  Speaker 1: a question that I had as I read the piece,
• 19:52
  Speaker 1: which is the labor force and understanding, uh, you know
• 19:57
  Speaker 1: how big it is, the direction of it, and what
• 20:01
  Speaker 1: the underemployed or unemployed population is of people who are
• 20:05
  Speaker 1: of working age who just have bowed out or have
• 20:08
  Speaker 1: gotten discouraged. Do you have a sense of that? Yeah,
• 20:11
  Speaker 1: and so um for listeners and and and for everybody,
• 20:15
  Speaker 1: just a couple of basics. There's all these different types
• 20:18
  Speaker 1: of employment statistics. That non farm payrolls number you hear
• 20:22
  Speaker 1: is from the Establishment Survey. When we get into the
• 20:24
  Speaker 1: labor force, we were looking at the household survey and
• 20:28
  Speaker 1: UM through May, which is the data that we had
• 20:31
  Speaker 1: when we were writing the op ed. The household survey
• 20:35
  Speaker 1: showed the number of unemployed had dropped by over four
• 20:39
  Speaker 1: hundred thousand, or six and a half percent this year.
• 20:43
  Speaker 1: Uh and the number of employed had also fallen by
• 20:46
  Speaker 1: a couple of hundred thousand over the same time frames.
• 20:49
  Speaker 1: So the sum total four hundred and six hundred was
• 20:53
  Speaker 1: showing the labor force had actually dropped by almost six
• 20:56
  Speaker 1: hundred thousand, or a third of one percent this year.
• 21:00
  Speaker 1: Now with the June data in hand, um, we see
• 21:04
  Speaker 1: that it's not quite as large of a drop, but
• 21:08
  Speaker 1: it's still dropping by about a quarter of a million
• 21:11
  Speaker 1: this year. When that is showing weakness. Is that weakness?
• 21:15
  Speaker 1: I mean could that be people retiring? Because there is
• 21:17
  Speaker 1: an aging workforce in population the United States? I mean,
• 21:20
  Speaker 1: how do you determine what that means? Sure? Sure? No, no, no, Well,
• 21:24
  Speaker 1: months and months, there's just gyrations and data. So you
• 21:26
  Speaker 1: are wanting to look at longer term trends with people
• 21:29
  Speaker 1: retiring and other structural shifts in the labor force. That's
• 21:33
  Speaker 1: over many, many years. The timeframe that we're operating with
• 21:38
  Speaker 1: when we're looking at cyclical moves is on the order
• 21:41
  Speaker 1: of a few quarters. And that's why we're saying, hey,
• 21:44
  Speaker 1: if you look at this year in the jobs data,
• 21:48
  Speaker 1: you see deceleration when you look at don't pick on anyone,
• 21:53
  Speaker 1: look at them all together, which is what we do
• 21:56
  Speaker 1: in a coincident employment index. And we see that that's
• 21:59
  Speaker 1: been d ccelerating its growth rate. It's still growing, it's
• 22:02
  Speaker 1: growing slower. And there's there's another statistic out there, UM
• 22:09
  Speaker 1: that I think is almost UM more important, although it
• 22:14
  Speaker 1: gets UM very very little attention. UH. And and that's
• 22:20
  Speaker 1: this UH. It's also from the Labor Department. It's the
• 22:23
  Speaker 1: Quarterly Census of Employment in Wages. And so unlike the
• 22:28
  Speaker 1: Jobs Report, which are surveys right there, you're you're trying
• 22:31
  Speaker 1: to very quickly count UM, how much has happened in
• 22:36
  Speaker 1: the past month. This quarterly census it's it's it's less frequent,
• 22:40
  Speaker 1: so they can actually go out and count rather than
• 22:43
  Speaker 1: surveying UM. And we believe that and it actually shows
• 22:47
  Speaker 1: you a truer trend of what's going on. And and
• 22:50
  Speaker 1: for listeners and for everybody to understand, when they do
• 22:53
  Speaker 1: the benchmark revisions to the establishment survey data, the headline
• 22:59
  Speaker 1: data that everybody he's off of, they revise it to
• 23:02
  Speaker 1: agree with the quarterly census. And you know, I know
• 23:07
  Speaker 1: a lot of guests don't come on and say we
• 23:09
  Speaker 1: should look at this half year old data because everybody
• 23:13
  Speaker 1: is very fixated on the freshest data. What happened with
• 23:15
  Speaker 1: the jobs report? Um, but here it's very very telling.
• 23:19
  Speaker 1: And what you see is that this they call it
• 23:22
  Speaker 1: the qc e W or the Quarterly Census Employment and Wages,
• 23:27
  Speaker 1: and it shows a sharp deceleration in jobs growth. So, um,
• 23:34
  Speaker 1: right now, it's probably it's it's it's it's suggesting that
• 23:37
  Speaker 1: the establishment survey is overstating the real numbers by about
• 23:45
  Speaker 1: So that's again, we're still growing. We're just not growing
• 23:48
  Speaker 1: as fast as these headlines are saying. We're actually decelerating.
• 23:52
  Speaker 1: And it's that rate of change which is super important
• 23:55
  Speaker 1: for business managers or i'd say investors, you know, is
• 24:00
  Speaker 1: that's going to be related to um profits growth. Yeah,
• 24:04
  Speaker 1: so lax one, just just about a minute here, I'm wondering,
• 24:07
  Speaker 1: can you look into your crystal ball. Given the deceleration,
• 24:10
  Speaker 1: it still isn't bad. We're still growing. What does that
• 24:13
  Speaker 1: mean in terms of when the economic cycle will end
• 24:16
  Speaker 1: or you know, whether we're actually running out of steam
• 24:19
  Speaker 1: enough to enter some sort of downturn in the near future. Well, okay,
• 24:23
  Speaker 1: so we're decelerating. This is the fourth growth rate cycle slowdown,
• 24:27
  Speaker 1: which will include slowdowns in jobs since the recession. We
• 24:32
  Speaker 1: had one in eleven sixteen and we're having one now.
• 24:38
  Speaker 1: So right there, you see that it doesn't have to end.
• 24:42
  Speaker 1: The slowdown does not have to end in recession. Although
• 24:45
  Speaker 1: every time you have a slowdown, by definition, your recession
• 24:49
  Speaker 1: risk is starting to rise. So I know a lot
• 24:52
  Speaker 1: of people have said that, you know, they think of
• 24:54
  Speaker 1: recession is this year, next year whenever. We don't see
• 24:58
  Speaker 1: We don't even forecast that way. We look at our
• 25:00
  Speaker 1: leading indexes to see if a window of vulnerability has
• 25:03
  Speaker 1: opened up where any shock can cause a hippis into recession.
• 25:07
  Speaker 1: That hasn't happened yet, but until the leading indicators turned
• 25:11
  Speaker 1: back up, we have to remain super village vigilant and
• 25:14
  Speaker 1: we're doing that. So more bottom line is more slow
• 25:18
  Speaker 1: down ahead, but a recession is not guaranteed yet. Lakshmanatan,
• 25:22
  Speaker 1: thank you so much for being with us. He's co
• 25:24
  Speaker 1: founder and chief operating officer of the Economic Cycle Research Institute,
• 25:29
  Speaker 1: also a Bloomberg Opinion columnist. His latest column, which came
• 25:32
  Speaker 1: out Friday, The myth of the tight US labor market.
• 25:36
  Speaker 1: Thanks for listening to the Bloomberg PANL podcast. You can
• 25:38
  Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
• 25:41
  Speaker 1: podcast platform you prefer. Paul Sweeney, I'm on Twitter at
• 25:44
  Speaker 1: pt Sweeney. I'm Lisa bram Woyds. I'm on Twitter at
• 25:47
  Speaker 1: Lisa bramwo wits one before the podcast, you can always
• 25:50
  Speaker 1: catch us worldwide on Bloomberg Radio