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Loomis' Fuss Sees Two More Fed Hikes, But Uncertainty Prevails · Bloomberg Intelligence

• 0:05
  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
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. My
• 0:34
  Speaker 1: co host and colleague Lisa Bramowitz is on vacation. But
• 0:39
  Speaker 1: he's not on vacation. Dan Fuss is the vice chairman
• 0:41
  Speaker 1: of Loomas Sales and Company based in Boston, and Dan
• 0:46
  Speaker 1: Fuss has been called by many the Warren Buffett of bonds.
• 0:50
  Speaker 1: He's an expert in the world of fixed income and
• 0:52
  Speaker 1: he joins us now, Dan Fuss, thank you very much
• 0:54
  Speaker 1: for being with us. I want to start off by
• 0:56
  Speaker 1: asking you about the federal reserves program to let debt
• 1:01
  Speaker 1: run off their books, and I'm wondering, if you combine
• 1:05
  Speaker 1: that with today's inflation report, do you believe that individuals
• 1:12
  Speaker 1: and consumers will still have money to spend to keep
• 1:15
  Speaker 1: the economy roaring? Um The quick answer is yes. The um.
• 1:24
  Speaker 1: The fet is PIM. The fet is very very early
• 1:29
  Speaker 1: in this process, and they are tiptoeing through it. And
• 1:34
  Speaker 1: as they gradually bring down the balance sheet and start
• 1:41
  Speaker 1: or continue to move up feed funds rate. Uh, they're
• 1:46
  Speaker 1: keeping a careful line. Now. I'll be the first to say, hey,
• 1:49
  Speaker 1: that inflation report and thinks along what I would call
• 1:53
  Speaker 1: the periphery of it, the advanced indicators. They say, okay,
• 1:57
  Speaker 1: here comes more inflation. But there's so much more to
• 2:01
  Speaker 1: it now. The basic readings on the economy unemployment are
• 2:05
  Speaker 1: also strong, so that's good. So from my domestic viewpoint, Uh,
• 2:11
  Speaker 1: it looks like they're on track to gradually take rates
• 2:14
  Speaker 1: up at a steady pace. Um. After a while, you
• 2:19
  Speaker 1: and I will feel that a bit, but only really
• 2:22
  Speaker 1: if we're gonna borrow, if we're asset holders and are
• 2:27
  Speaker 1: thinking of selling them depending on the asset housing for example,
• 2:33
  Speaker 1: things like that, then we would say, well, this is
• 2:35
  Speaker 1: good news because I'll probably get a higher nominal rate
• 2:40
  Speaker 1: as we go forward. Um. If on the other hand,
• 2:45
  Speaker 1: we want to borrow to buy something, that we're gonna say, oh,
• 2:49
  Speaker 1: and at some point you start to lose the buyers
• 2:53
  Speaker 1: for things again like real estate. So that's the net
• 2:56
  Speaker 1: note of it. Well, I'm glad you mentioned real estates
• 2:59
  Speaker 1: because example, let's say you take a thirty year mortgage
• 3:02
  Speaker 1: rate of three percent. Let's see it goes to five.
• 3:05
  Speaker 1: That means your monthly payment increases. Uh, it means you've
• 3:12
  Speaker 1: got a headache for sure. Now, bim um, if you've
• 3:17
  Speaker 1: got adjustable rate mortgages, he got a problem in this environment.
• 3:22
  Speaker 1: And so, by the way, does the lender if the
• 3:28
  Speaker 1: lender has lent at a fixed rate. So it's the
• 3:32
  Speaker 1: borrows problem if it's adjustable rate, and the lenders problem
• 3:37
  Speaker 1: if he's lending at a fixed rate. So this is uh,
• 3:41
  Speaker 1: this is really not a good thing, um, And you're
• 3:44
  Speaker 1: gonna run into some natural constraints on the economy at
• 3:49
  Speaker 1: some point. Where that point is, I don't know. Because
• 3:54
  Speaker 1: we're at basically full employment. If you say, if you
• 3:58
  Speaker 1: use the standard in the heaters, or even if you
• 4:01
  Speaker 1: go over and you loose you use participation rates, um,
• 4:06
  Speaker 1: you know things are are coming along just fine. The
• 4:12
  Speaker 1: one caution in this I forgot which one of those
• 4:16
  Speaker 1: fat speakers was speaking yesterday, but he said, you know,
• 4:19
  Speaker 1: all systems goal according to the dot plots and things
• 4:24
  Speaker 1: like that, inflation is rising, economy strong. They ought to
• 4:28
  Speaker 1: be shrinking the balance sheet a bit and taking short
• 4:32
  Speaker 1: rates up. Okay, that's that's well and good. But he
• 4:36
  Speaker 1: also put in the provisal that I think is in
• 4:40
  Speaker 1: all of our minds now saying this is all subject
• 4:44
  Speaker 1: to or bear in mind that we have some changes
• 4:49
  Speaker 1: on the trade front that might lead to surprises in here.
• 4:54
  Speaker 1: That's to beg uncertainty. You really don't know what's coming. Uh.
• 4:59
  Speaker 1: My analogy on that because I I it's like raising teenagers.
• 5:06
  Speaker 1: You're all ready to proceed on a certain basis, but
• 5:11
  Speaker 1: then you know you've got a huge uncertainty here. Same
• 5:15
  Speaker 1: thing in the forecasting business right now? Well is this
• 5:20
  Speaker 1: is this? Is this more like uh, you know a
• 5:22
  Speaker 1: movie Ferris Bueller Days Off? Or or or is it
• 5:26
  Speaker 1: more like Jack Nicholson in as good as it gets? Well,
• 5:31
  Speaker 1: you see more movies than I do. But it's uh,
• 5:35
  Speaker 1: this is not as good as it gets. So you
• 5:39
  Speaker 1: believe the economy will continue on this path. I think
• 5:44
  Speaker 1: the economy is strong. Now here's where the worry comes in.
• 5:49
  Speaker 1: You know, just from reading the papers a G. I
• 5:51
  Speaker 1: wonder what impacts the terroffs. And it's more than the
• 5:54
  Speaker 1: impact of the teriffs. It's the geopolitical impact of some
• 5:59
  Speaker 1: of the things that are going on. How will they
• 6:01
  Speaker 1: affect various aspects of the financial markets and other things.
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  Speaker 1: So you've got that, um, But it also says, you know,
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  Speaker 1: if we model this out based on past experience, Um,
• 6:17
  Speaker 1: what happens in a setting like this, what does the
• 6:21
  Speaker 1: models say? Well, the models say you get st inflation out.
• 6:26
  Speaker 1: Now what do you do then? And the other thing
• 6:29
  Speaker 1: pim uh is uh. You and I have talked about
• 6:34
  Speaker 1: this before, going back in our memories, we remember, Um,
• 6:41
  Speaker 1: so does the FED. They've mentioned this when the money
• 6:46
  Speaker 1: went sailing out of Southeast Asia to come here. Um.
• 6:51
  Speaker 1: We are, as the FED raiss rates. We attract money
• 6:56
  Speaker 1: from other parts of the world, and to the degree
• 7:00
  Speaker 1: the other parts of the world become a little less
• 7:03
  Speaker 1: certain because of trade restriction, restrictions of some sort, and
• 7:08
  Speaker 1: the subsequent chief political pressures that come with that. It's
• 7:13
  Speaker 1: broader than trade. Um. Then they say, well, I want
• 7:16
  Speaker 1: to be in a safe place, and the safe place
• 7:19
  Speaker 1: has the highest rates all the more reasons. So I'm
• 7:21
  Speaker 1: going Uh, the capital can do that. Not so easy
• 7:26
  Speaker 1: for the people, but they'll do that with their capital.
• 7:30
  Speaker 1: Then we've got a real mess in our hands. So, um,
• 7:35
  Speaker 1: that's a fear, and the Fed's got all this in
• 7:38
  Speaker 1: front of them, and um, it's an uncertain time right now.
• 7:43
  Speaker 1: They're they're sticking with the script, which is we're gonna
• 7:45
  Speaker 1: bump rates once or twice this year and another three
• 7:49
  Speaker 1: times next year. And some of them are saying again
• 7:54
  Speaker 1: in two thousand, um, and I I don't know how
• 7:59
  Speaker 1: hi they're gonna do. Goal. My own guests guestimate is
• 8:03
  Speaker 1: about three and the pit punts rate by then they'll
• 8:07
  Speaker 1: have something or the rest of the old curve will
• 8:10
  Speaker 1: normalize to some degree, not along it long and it
• 8:14
  Speaker 1: is different, but to ten years will sort of normalize that.
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  Speaker 1: That's that's the wild guest Pim, Thanks very much, Dan Fuss,
• 8:23
  Speaker 1: Vice chairman, Loomis Sales and Company. He's been called by
• 8:28
  Speaker 1: some Warren Buffett of bonds. The shares of right Aid
• 8:45
  Speaker 1: they are lower by more than twenty percent since the
• 8:49
  Speaker 1: beginning of the year. And we know that right Aid
• 8:53
  Speaker 1: and the combination with Albertson's not necessarily going to make
• 8:57
  Speaker 1: it to the checkout counter. In fact, it's been a return.
• 9:00
  Speaker 1: It's back on the shelf here to tell us more
• 9:03
  Speaker 1: about this potential combination and why it didn't work is
• 9:08
  Speaker 1: none other than Bird Flickinger, managing director for Strategic Resource
• 9:12
  Speaker 1: Group Bert Why didn't the Right Aid Albertson's deal go through.
• 9:17
  Speaker 1: It didn't go through because large institutional shareholders in their idiocracy,
• 9:23
  Speaker 1: got greedy and they wanted more money. When the crazy
• 9:27
  Speaker 1: company was trading at about a box before the Albertson's bid,
• 9:31
  Speaker 1: and they wanted more than two dollars, Albertson s to
• 9:34
  Speaker 1: its credit, walked away as twenty four billion to buy
• 9:37
  Speaker 1: better things, and Right Aid faces a potential cataclysmic collapse. Okay,
• 9:44
  Speaker 1: but if you're so clear about this, what advice do
• 9:48
  Speaker 1: you believe the right AIG shareholders are getting. What's the
• 9:52
  Speaker 1: story that they're hearing. They're hearing from I S s
• 9:55
  Speaker 1: or institutional shareholders who they have a lot of respect for.
• 9:58
  Speaker 1: Typically it's right, but increasingly you have Baker scholars from
• 10:02
  Speaker 1: Harvard Business School and UH the the institutional arrogance of
• 10:06
  Speaker 1: the nine ivy schools from Penn to Princeton, uh to
• 10:10
  Speaker 1: to to Yale to Cambridge UH in Colombia, and they're
• 10:14
  Speaker 1: just looking at spreadsheets. They don't understand the rhythm of retail.
• 10:17
  Speaker 1: They don't understand the detail of retail. They don't understand
• 10:19
  Speaker 1: the synergies. They don't understand Bob Miller, CEO of Albertson's
• 10:23
  Speaker 1: Humble country Boy from Mississippi, but the best turnaround artist
• 10:27
  Speaker 1: in retail for the last forty years. Bob saved right
• 10:29
  Speaker 1: A the first time when Right eight CEO Marty Grass
• 10:33
  Speaker 1: committed the financial fraud. Said uh to the government. Bob Miller. Yeah,
• 10:37
  Speaker 1: Bob Mill, save real, save right the first time with
• 10:41
  Speaker 1: with Mary Sammons when it was unsavable after massive financial
• 10:45
  Speaker 1: fraud and the executive officers, Uh did did eight months
• 10:49
  Speaker 1: in or eight years in a federal facility. Miller comes
• 10:53
  Speaker 1: to save it the second time. It should be prefera
• 10:55
  Speaker 1: real manner from heaven. UH. For for for the Mensa Canada,
• 11:00
  Speaker 1: Mensa men running these institutional funds, but they act like
• 11:04
  Speaker 1: Mensis society morons and and turn Albertson's down and and
• 11:08
  Speaker 1: and now they're stuck holding a bad credit. Uh. And
• 11:12
  Speaker 1: they don't have the capital to reinvest and compete effectively
• 11:15
  Speaker 1: and connect with consumers. Whether retailers the number one seller
• 11:18
  Speaker 1: of tobacco in the industry and can invest in beauty
• 11:22
  Speaker 1: and health and solar and all the things that Albertson, Zosco,
• 11:25
  Speaker 1: Savan Drug and others are doing so well. How much
• 11:28
  Speaker 1: money do you believe that right AID needs or is
• 11:30
  Speaker 1: there no estimate yet for what they need in order
• 11:33
  Speaker 1: to fix what is going on in their stores? Uh?
• 11:37
  Speaker 1: In my professional view and followed the followed the company
• 11:41
  Speaker 1: for nearly thirty years about five billion dollars. So if
• 11:44
  Speaker 1: you look at what Chris Baldwin did successfully with his
• 11:47
  Speaker 1: I p O invested in solar, being the leader in
• 11:49
  Speaker 1: New Jersey, New England, institutional funds shift from being with
• 11:53
  Speaker 1: proverbial Mr Burns from the Simpsons and nuclear UH two solar. UH.
• 11:59
  Speaker 1: We've done out side research up to or more of
• 12:03
  Speaker 1: consumers switch UH to places like BJ's, Albertson's solar flagship
• 12:09
  Speaker 1: and d C with Safeway Solar Maze landing everybody. Anybody
• 12:13
  Speaker 1: going to Jury City Shore this weekend, we'll see it. Right.
• 12:15
  Speaker 1: AID can't do solar for their warehouses to convert customers.
• 12:19
  Speaker 1: They can't do it for the stores. They can't do
• 12:21
  Speaker 1: the beauty like CVS, Target, Walgreen's Boots in store, UH
• 12:26
  Speaker 1: and Albertson's with the late Great Doug Sagan, whose funeral
• 12:30
  Speaker 1: I went to in Chicago, tragically died at fifty five.
• 12:33
  Speaker 1: But what Doug and his brothers and Bob Miller have
• 12:36
  Speaker 1: done at Albertson's in Chicago and across America with their
• 12:40
  Speaker 1: eight different banners, it's transformational and would have would have
• 12:43
  Speaker 1: saved right eight And what Susquohannah Highlands and Alberta Investment
• 12:48
  Speaker 1: Management are thinking about. In my professional view, it's like
• 12:52
  Speaker 1: Oprah White with tops friendly markets. UH you you you
• 12:55
  Speaker 1: could wind up buying bonds at a hundred cents on
• 12:59
  Speaker 1: the dollar or pocket a buck fifty on it on
• 13:02
  Speaker 1: its way down to next to nothing. As we talked before,
• 13:05
  Speaker 1: the toys are US bonds on the Bloomberg terminal uh,
• 13:09
  Speaker 1: and the unsecured debt that was supposed to get a
• 13:12
  Speaker 1: hundred cents on the dollar recovery PIM is getting three
• 13:16
  Speaker 1: tents of one cent. That could be the catastrophic consequences
• 13:21
  Speaker 1: for these crazy investors and I s S and made
• 13:25
  Speaker 1: the wrong move on on the guidance and rejecting the
• 13:28
  Speaker 1: right aid offer. Turn your attention now to another acquisition
• 13:31
  Speaker 1: that didn't happen, And this is important because it relates
• 13:36
  Speaker 1: to advertising revenues. Sinclair Broadcasting and Tribune Media, the Tribune stations.
• 13:45
  Speaker 1: What do you know about that, Pim. We as you know,
• 13:48
  Speaker 1: we've done a lot of Federal Trade Commission work with
• 13:51
  Speaker 1: all all the commissioners, all the all the chairmen and women,
• 13:57
  Speaker 1: and the f FTC staff is a little too officious
• 14:01
  Speaker 1: and vigilant and not looking at digital and consumer communication.
• 14:05
  Speaker 1: So with to your point, Sinclair and Tribute, that would
• 14:09
  Speaker 1: have been the perfect combination to create more competition, particularly
• 14:13
  Speaker 1: in an election year where whether it's Bloomberg or other networks,
• 14:18
  Speaker 1: the cost of media is at an all time high
• 14:20
  Speaker 1: and we'll get even higher going to the presidential election.
• 14:22
  Speaker 1: And Sinclair and Tribune could have customized uh separately, they'll
• 14:27
  Speaker 1: be okay, But the old janis Joplin. The combination of
• 14:30
  Speaker 1: the two is better. Uh. And it's too too bad.
• 14:34
  Speaker 1: Uh the f FTC didn't let them combine. Think it
• 14:37
  Speaker 1: was too much of a horizontal concentration of competition. Let's
• 14:43
  Speaker 1: turn to something that might be more positive. Who's doing
• 14:46
  Speaker 1: really well in this current retail environment? We uh, we
• 14:51
  Speaker 1: love Amazon full disclosure shareholder for a long time. People
• 14:55
  Speaker 1: go to his or her Bloomberg can see this stock
• 14:58
  Speaker 1: price essentially troubled and in a little over three years,
• 15:03
  Speaker 1: and uh, you look, you look at it. You look
• 15:05
  Speaker 1: at Chris Baldwin, who I didn't keep him from going
• 15:10
  Speaker 1: from the priests going into the priesthood when he disappointed
• 15:14
  Speaker 1: his mother and grandmother at Siena College, didn't go into
• 15:18
  Speaker 1: the seminary. I was part of the team that hired
• 15:20
  Speaker 1: him for Procter and Gamble, turned Hess retail around, turned
• 15:24
  Speaker 1: BJ's retail around, one of the most successful I p
• 15:27
  Speaker 1: O s on the Bloomberg terminal this year. Uh b
• 15:30
  Speaker 1: J's is hitting on all cylinders. Uh. You're also seeing
• 15:34
  Speaker 1: Macy's under uh Jeff Ginnett and Tony Spring at Bloomingdale's
• 15:40
  Speaker 1: with Frank Blake on the board really start to gain
• 15:44
  Speaker 1: tremendous momentum too. And uh talking to Bloomberg's Charlie Pellett,
• 15:49
  Speaker 1: uh c v c v assl uh and Walgreen's boots
• 15:54
  Speaker 1: capitalize on on this right aid catastrophe as well. So
• 15:58
  Speaker 1: while there's an accelerating retail I stage in bricks and
• 16:00
  Speaker 1: mortar retail, a lot of opportunities and bonds with the
• 16:05
  Speaker 1: Bloomberg terminals as well as the equities, but as your
• 16:09
  Speaker 1: friend Lazlo Berni says, and Dan Sullivan uh and Kurt Wolf,
• 16:16
  Speaker 1: you have to be selective in what you pick and
• 16:19
  Speaker 1: really go through the terminal and find the best situations
• 16:22
  Speaker 1: because as you mentioned before the broadcast, you can't just
• 16:25
  Speaker 1: buy the market. You can't just buy the A T
• 16:27
  Speaker 1: F S. You have to be like you said Peter
• 16:30
  Speaker 1: Lynch and and and really focus on the right situations.
• 16:33
  Speaker 1: Bert flickincher many things. Bert Flickinger is Managing director of
• 16:37
  Speaker 1: Strategic Resource Group. You can follow Bert on Twitter at
• 16:42
  Speaker 1: Bert Underscore Flickinger. Earlier today, President Donald Trump said that
• 17:04
  Speaker 1: he has authorized doubling some of the medals tariffs have
• 17:07
  Speaker 1: been placed on Turkey. He sided poor relations with Turkey,
• 17:11
  Speaker 1: which is a NATO ally. This is also over a
• 17:15
  Speaker 1: conflict having to do with the detention of an American pastor.
• 17:20
  Speaker 1: Here to help us understand what's going on in Turkey
• 17:22
  Speaker 1: and whether this is a full blown crisis is Midge Raman.
• 17:25
  Speaker 1: He is the managing director of Europe for Eurasia Group,
• 17:28
  Speaker 1: joining us from London. Thanks very much for being with us, Midge.
• 17:31
  Speaker 1: What do you make of this crisis? Is itself inflicted
• 17:35
  Speaker 1: or was it a long time coming. To some extent,
• 17:39
  Speaker 1: it was a long time coming, but it's been handled
• 17:42
  Speaker 1: in a very knucklehead way by the Turkish administration. Essentially,
• 17:46
  Speaker 1: what Turkey has done is misinterpret the recent situation around
• 17:51
  Speaker 1: the US. Pastor Andrew Brunson, I think Marian's perspective, the
• 17:56
  Speaker 1: US is extremely eager to have the past the release,
• 18:00
  Speaker 1: and a such anchor is now playing hardball regarding the
• 18:05
  Speaker 1: kinds of demands it is hoping to extract in exchange
• 18:10
  Speaker 1: for this release. And I'll give you an example of
• 18:12
  Speaker 1: some of the things that are hoping for. There's a
• 18:15
  Speaker 1: probe against Houp Bank. They're hoping that any signs against
• 18:19
  Speaker 1: that bank or sanctions would be would be limited. They're
• 18:22
  Speaker 1: hoping the chief executive of that bank and Attila will
• 18:27
  Speaker 1: also be released as well as as well as a
• 18:29
  Speaker 1: number of other concessions. And I think this is a
• 18:31
  Speaker 1: big misinterpretation by the Turkish side of where the US
• 18:35
  Speaker 1: is in this standoffs. Based on what you've seen happen
• 18:39
  Speaker 1: to the Turkish lira today, do you believe the sell
• 18:42
  Speaker 1: off will continue? I do, and I think I mean
• 18:46
  Speaker 1: that the comment from our douan Um and the new
• 18:49
  Speaker 1: Treasury and Finance minister or Birack essentially suggest that what
• 18:55
  Speaker 1: they're hoping to do is let this crisis run into
• 18:57
  Speaker 1: local elections next year. They're very poor for the AKP,
• 19:01
  Speaker 1: for Adan and his team to assess the AKP's popularity.
• 19:05
  Speaker 1: I think they want the crisis to essentially to manage
• 19:07
  Speaker 1: it through until that time. I don't think markets are
• 19:09
  Speaker 1: going to give them that much time. So I think
• 19:11
  Speaker 1: what you will see as more conventional policy action by
• 19:14
  Speaker 1: the government interest rate rises. But it's a really open
• 19:18
  Speaker 1: question at this stage is to whether or not that
• 19:20
  Speaker 1: will suffice to stem the bleeding that we've been seeing
• 19:23
  Speaker 1: in the Lira. Will steelmakers, particularly in Turkey, be able
• 19:29
  Speaker 1: to survive until those elections. So I think the broader
• 19:34
  Speaker 1: question is whether the crisis can can run that long,
• 19:38
  Speaker 1: and I think that's highly unlikely. I think unless you
• 19:40
  Speaker 1: get a move by arid And in the fairly near
• 19:43
  Speaker 1: future to release this pastor, we're going to continue to
• 19:46
  Speaker 1: see pressure from the U S administrations. I'm thinking perhaps
• 19:50
  Speaker 1: more sanctions against high level Turkish officials. If there is
• 19:54
  Speaker 1: that standoff, of course, that's going to bleed into the market.
• 19:56
  Speaker 1: We're likely to see more capital flight, more pressure on
• 19:59
  Speaker 1: the current and it's at that stage I think, you know,
• 20:02
  Speaker 1: everyone will essentially be faced with with two very tough choices,
• 20:05
  Speaker 1: either an I m F program or capital controls because
• 20:09
  Speaker 1: this is a country that has large external vulnerabilities. They
• 20:12
  Speaker 1: have a large current account deficit that needs financing, which
• 20:15
  Speaker 1: means they are dependent on external capital. So ultimately, I
• 20:19
  Speaker 1: think everyone is going to concede and we will see
• 20:22
  Speaker 1: this past or at least more quickly as opposed to uh,
• 20:26
  Speaker 1: you know, after a long delay. But at the moment,
• 20:29
  Speaker 1: I think, as I say, I think the Turks believe
• 20:32
  Speaker 1: they have more bargaining power and they're trying to extract
• 20:34
  Speaker 1: more concessions from the US, and I think that's unlikely.
• 20:38
  Speaker 1: Banks in Europe are exposed to what's going on in Turkey,
• 20:42
  Speaker 1: specifically b b v A, UNI Credit in Italy, BNP
• 20:46
  Speaker 1: Party bar in France. If they called mid Raman and
• 20:49
  Speaker 1: asked for his advice, what would you say, I mean
• 20:53
  Speaker 1: at this at this point, I don't think the lights
• 20:56
  Speaker 1: to slashing red. I think the ECB Single Supervisory Mecha
• 21:00
  Speaker 1: there's in the eas send the regulator is aware of
• 21:03
  Speaker 1: exposure to the Turkish economy into the banking system. So
• 21:08
  Speaker 1: you know, there's there's there's there's some active monitoring going on,
• 21:12
  Speaker 1: but I don't think at this stage where near a crisis.
• 21:15
  Speaker 1: If if Turkey really wore to enter a full blown
• 21:18
  Speaker 1: balance of payments crisis, and I think there would be
• 21:21
  Speaker 1: some hit on the respective banking systems you've just outlined,
• 21:24
  Speaker 1: I don't think that would flow to become a larger
• 21:26
  Speaker 1: political crisis in any of these countries because in countries
• 21:29
  Speaker 1: like Spain and indeed France, a lot of work has
• 21:32
  Speaker 1: been done on the banking system through their respective crisis
• 21:35
  Speaker 1: since two thousand and eight. So you know, I think
• 21:38
  Speaker 1: there is exposure. The ECB is keeping an eye on that,
• 21:41
  Speaker 1: but I don't think this will necessarily precipitate or trigger
• 21:45
  Speaker 1: a crisis in any of these markets or with respect
• 21:47
  Speaker 1: of their banking systems. Do you believe that Turkey will
• 21:51
  Speaker 1: make an application to the International Monetary Fund for funds?
• 21:55
  Speaker 1: So this is the problem for air do one. I mean,
• 21:57
  Speaker 1: since he came to power, he has built a political
• 22:01
  Speaker 1: narrative on the back of having free Turkey from the
• 22:05
  Speaker 1: clutches of the I M S. So do you think
• 22:08
  Speaker 1: about the the recent elections, the fact and has now
• 22:12
  Speaker 1: instituted a presidential system that gives him a huge amount
• 22:17
  Speaker 1: of power and plain influence over the country's institutions. Accepting
• 22:21
  Speaker 1: the risk of the I m F would massively constrain
• 22:24
  Speaker 1: his ambitious, mega political project. So this isn't easy. However,
• 22:29
  Speaker 1: I do think it's the more likely outcome via the
• 22:31
  Speaker 1: capital controls, which I think would be extremely damaging economically
• 22:36
  Speaker 1: and and and and broadly, I think thanks to the
• 22:38
  Speaker 1: economic reputation of the country. So this is why I
• 22:42
  Speaker 1: think you will see today the government will announce an
• 22:46
  Speaker 1: economic reform plan. I don't think the idea of fiscal
• 22:50
  Speaker 1: consolidation or meaningful structural reforms will be apparent. I think
• 22:53
  Speaker 1: the market will be unconvinced. I think this pressure will continue,
• 22:57
  Speaker 1: and as I say, we'll see conventional policy action in
• 23:00
  Speaker 1: the street risers, probably an emergency hike in August, and
• 23:04
  Speaker 1: then I think it's really for us to see whether
• 23:06
  Speaker 1: or not we have to head down the route. And
• 23:07
  Speaker 1: I'm at program or compital control. Midd Ramen, thank you
• 23:11
  Speaker 1: very much, Managing Director Europe for Eurasia Group, joining us
• 23:15
  Speaker 1: from London. Not content with its success on the small screen,
• 23:37
  Speaker 1: Google is looking to the big screen. Billboards in railway stations,
• 23:42
  Speaker 1: shopping centers and shop windows in Germany, the company could
• 23:47
  Speaker 1: be branching out as it uses data from its user
• 23:51
  Speaker 1: database in order to display advertisements targeted to specific audiences.
• 23:56
  Speaker 1: Here to tell us more about this is Alex Webb,
• 23:58
  Speaker 1: the Bloomberg Innion calmness covering all things technology when it
• 24:02
  Speaker 1: comes to Europe, and he joins us from London. Alex,
• 24:06
  Speaker 1: a pleasure to have you here explain exactly what you
• 24:08
  Speaker 1: believe Google is looking to do. So this story is
• 24:12
  Speaker 1: really coming from Virtus Voco, which is in some ways
• 24:15
  Speaker 1: the closer to thing that Germany has to Business Week.
• 24:16
  Speaker 1: It literally is the translation. And they have reported the
• 24:20
  Speaker 1: Germany as that the Google is in talks in Germany
• 24:24
  Speaker 1: to get into out of home advertising, which is billboards
• 24:27
  Speaker 1: essentially and increasingly digital billboards, you know, screens which you
• 24:31
  Speaker 1: see it, as you say, at train stations and and
• 24:34
  Speaker 1: you know around the place in town centers. Now the
• 24:37
  Speaker 1: thing that Google, where Google can bring an edge to
• 24:39
  Speaker 1: this is at the moment those screens are kind of
• 24:42
  Speaker 1: bid for in a fairly classic way where someone says,
• 24:45
  Speaker 1: I would like to have twenty minutes over the course
• 24:47
  Speaker 1: of the day of my ad being displayed at these sites.
• 24:49
  Speaker 1: What Google does with its ads online is called programmatic advertising,
• 24:53
  Speaker 1: where essentially you have a live bidding process that every
• 24:57
  Speaker 1: time someone who kind of matches the demography you want
• 25:00
  Speaker 1: target visits a website, algorithms bid against each other to
• 25:04
  Speaker 1: show now to that person. Now, it's unlikely that they'll
• 25:07
  Speaker 1: be able to do that on such a specific person
• 25:09
  Speaker 1: to person basis, but they might be able to do
• 25:11
  Speaker 1: it more demographically. So if it can tell from the
• 25:14
  Speaker 1: number of mobile phones in the area that there are
• 25:17
  Speaker 1: males aged between twenty five and thirty with an average
• 25:20
  Speaker 1: income income of X, then it can decide to push
• 25:24
  Speaker 1: a particular kind of add to that billboard. Well, Alex,
• 25:27
  Speaker 1: let's use an example of a train station and you
• 25:31
  Speaker 1: have people arriving from different locations, perhaps for different events.
• 25:37
  Speaker 1: In your column you speak about a potential soccer match.
• 25:42
  Speaker 1: Give us an example of how you could be on
• 25:45
  Speaker 1: different platforms of a railway station and see different digital ads. Yeah,
• 25:51
  Speaker 1: exactly so, particularly as more train stations introduced WiFi, for instance,
• 25:56
  Speaker 1: which can tell within quite a concentrated area which phone
• 26:00
  Speaker 1: are there. It can then probably you know, automatically identify
• 26:04
  Speaker 1: that the people on that platform overwhelmingly have an interest
• 26:08
  Speaker 1: in sports, and um, therefore it's better perhaps to push
• 26:12
  Speaker 1: them ads for beer or soccer cleats or something like that.
• 26:16
  Speaker 1: Whereas if it's on a different platform, there are commuters
• 26:19
  Speaker 1: heading home from work, um, that could probably work out
• 26:22
  Speaker 1: that it might be better to sell them an AD
• 26:24
  Speaker 1: or push them an AD for a car for instance. Um,
• 26:27
  Speaker 1: and is that sort of specificity which can enable a
• 26:30
  Speaker 1: better return on the investment in ads. Therefore they might
• 26:33
  Speaker 1: be able to charge more and generate more value from
• 26:35
  Speaker 1: that kind of billboard real estate? What is the market
• 26:39
  Speaker 1: for this billboard real estate? This digital billboard? So it's
• 26:45
  Speaker 1: proportionately as a as a proportion of global ad spend.
• 26:49
  Speaker 1: Depending on where you are, it's something between five and
• 26:51
  Speaker 1: nine percent, And people tend to estimate the global ad
• 26:54
  Speaker 1: market is somewhere around five fifty billion dollars. So, um,
• 26:58
  Speaker 1: you know, it's not as valuable right now as digital
• 27:02
  Speaker 1: ads on the web or indeed on television. It's a
• 27:05
  Speaker 1: small part of that, but it is also everywhere, and
• 27:08
  Speaker 1: it has been slower to catch up with the ads
• 27:11
  Speaker 1: revolution than other parts of the ecosystem. Now, the one
• 27:15
  Speaker 1: thing I should add is that you know, digital ads
• 27:16
  Speaker 1: and and ad targeting based on user data or cell
• 27:20
  Speaker 1: phone data is already something that happens in a lot
• 27:22
  Speaker 1: of places. It's just not as sophisticated as it might be.
• 27:25
  Speaker 1: And Google clearly has a lot of expertise in really
• 27:29
  Speaker 1: highly sophisticated ad targeting. Now there's highly sophisticated ad targeting
• 27:34
  Speaker 1: depends on location based mobile data. Correct, Yes, it would
• 27:39
  Speaker 1: be ultimately. You know Google in Europe for instance, it
• 27:42
  Speaker 1: has sev of um cell phones using Android. That means
• 27:47
  Speaker 1: that it's got a pretty good sense of what sort
• 27:50
  Speaker 1: of people are in any given area at any given time. Um. Now,
• 27:55
  Speaker 1: I when I was at the can Ads Festival last month,
• 27:58
  Speaker 1: I spoke to some people about this and they said,
• 28:00
  Speaker 1: for instance that they you know, they have they already
• 28:02
  Speaker 1: buy data from mobile phone carriers and that helps them,
• 28:07
  Speaker 1: um workout who is there. But as I said, like
• 28:11
  Speaker 1: the ability to automate that process and therefore, um, you
• 28:16
  Speaker 1: reduce some of the overheads where Google can really innovate
• 28:19
  Speaker 1: and drive this forward. Alex If, for example, you are
• 28:22
  Speaker 1: taking a train in the London Underground and you're waiting
• 28:27
  Speaker 1: on the platform with your mobile phone and it's connected
• 28:31
  Speaker 1: to the free WiFi in the London underground. Can they
• 28:35
  Speaker 1: then use that information to then push adds to you. Well,
• 28:40
  Speaker 1: this is where there's something of a gray era, and
• 28:42
  Speaker 1: there's not much legislation right now, but I think at
• 28:45
  Speaker 1: the moment it would seem unlikely that they will be
• 28:48
  Speaker 1: able to do it specifically to me, you know, be
• 28:50
  Speaker 1: quite creepy. If, for instance, I'll give you an example,
• 28:54
  Speaker 1: when I visit Amazon, for some reason I don't smoke,
• 28:56
  Speaker 1: I get ads for Nicorette constantly. Now I think it's
• 28:58
  Speaker 1: because I bought a a French liqueur, which a lot
• 29:01
  Speaker 1: of smokers drink, and so therefore it assumes that I'm
• 29:03
  Speaker 1: a smoker. Now that sort of every time I went
• 29:06
  Speaker 1: on a platform, if I were to get an ad
• 29:08
  Speaker 1: for nicarette, I think that that might feel like an intrusion.
• 29:12
  Speaker 1: And also I don't want to have some sort of
• 29:14
  Speaker 1: reflected judgment from the friends who might be on the
• 29:16
  Speaker 1: platform with me. So you know, that sort of public
• 29:19
  Speaker 1: specific advertising, I think is something which will not happen
• 29:22
  Speaker 1: anytime soon. But this sort of broader demographic targeting is
• 29:27
  Speaker 1: something which is developing. I want to thank you very
• 29:30
  Speaker 1: much for enlightening us a fascinating topic. Alex web our
• 29:34
  Speaker 1: Bloomberg Opinion columnists for all Things Technology based in London,
• 29:39
  Speaker 1: and I encourage you to read his piece on Bloomberg
• 29:42
  Speaker 1: dot com slash Opinion all about how Google Ads will
• 29:47
  Speaker 1: be targeting a billboard near you. Thanks for listening to
• 29:54
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 29:57
  Speaker 1: listen to interviews at Apple Podcast, sound Cloud, or whatever
• 30:00
  Speaker 1: podcast platform you prefer. I'm pim Fox, I'm on Twitter
• 30:04
  Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo. It's
• 30:08
  Speaker 1: one before the podcast. You can always catch us worldwide
• 30:11
  Speaker 1: on Bloomberg Radio