Latest / Bloomberg Intelligence / Allergan Is A Short-Term Cosmetic Fix For AbbVie: Nisen

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Allergan Is A Short-Term Cosmetic Fix For AbbVie: Nisen · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you
0:05
Speaker 1: along with my co host Lisa Brahma Waits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
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. The big deal of the day
0:22
Speaker 1: AVY agreeing to buy Allergan for sixty three billion dollars.
0:26
Speaker 1: ADVY shares down fourteen point six percent, Algan shares surging.
0:31
Speaker 1: Joining us here in our bloombergant to Active broker Studios
0:34
Speaker 1: Max Neeson. As always, we love having you and biotech,
0:37
Speaker 1: pharma and healthcare calumnists with Bloomberg opinion. Is this a
0:41
Speaker 1: bad deal for AV I? I think so. I see
0:45
Speaker 1: why investors are reacting the way that they are. So
0:48
Speaker 1: the kind of motivation of the steel is that A
0:51
Speaker 1: V's biggest product a Humira. It's a blockbusters for inflammatories
0:57
Speaker 1: these like arthritis. It's already starting to face buy a
1:00
Speaker 1: similar competition in Europe and that's coming in America in
1:04
Speaker 1: three So that's gonna blow just a giant hole in
1:07
Speaker 1: its revenue and you know there there's just not enough
1:10
Speaker 1: and its pipeline to deal with that. So this is
1:12
Speaker 1: a way of kind of getting some replacement for that.
1:14
Speaker 1: The question is whether this is actually going to help
1:17
Speaker 1: in the long term. You have Alegan with the lead
1:20
Speaker 1: product in Botox, where where you know sales are likely
1:23
Speaker 1: to be pretty durable but are starting to level off
1:26
Speaker 1: and there's some competitive threats. So while you get kind
1:29
Speaker 1: of this big you know, cost cutting opportunity and a
1:34
Speaker 1: big EPs boost upfront, the question is what this does
1:38
Speaker 1: for the company in the long run. Yeah, it's interesting.
1:41
Speaker 1: I'm just looking at the five year charge for Elegant.
1:43
Speaker 1: It's not pretty. It's been a kind of a steady
1:44
Speaker 1: decline down from you three change down to where we
1:47
Speaker 1: were today. Um, So obviously the market pricing in the
1:50
Speaker 1: slower growth as you mentioned for the both TX business. Dude,
1:54
Speaker 1: does this combined company are they having any discussions about, Gee,
1:57
Speaker 1: now we're bigger, we've got more resources, we can invest
1:59
Speaker 1: more are in R and D and try to drive
2:01
Speaker 1: our growth that way. Yes, So that this sort of
2:04
Speaker 1: contradictory messaging on this On one hand, you know, in
2:07
Speaker 1: order for this deal to pay off, you're gonna need
2:09
Speaker 1: to have big cost energies, You're gonna have to cut
2:12
Speaker 1: back on R and D. But then at the same time,
2:16
Speaker 1: you know more cash is going to be flowing into
2:18
Speaker 1: R and D. So so the net of that is
2:21
Speaker 1: is a little bit confusing. And you're not buying Allergan
2:25
Speaker 1: for its R and D capability. This is a company
2:27
Speaker 1: that really deliberately had a different model. We go out
2:31
Speaker 1: and we look for the best science out there, and
2:33
Speaker 1: then we we bring it in. They aren't developing drugs
2:35
Speaker 1: on their own, so kind of the fit and the
2:37
Speaker 1: added capability doesn't really come from that. It just theoretically
2:40
Speaker 1: comes from having more cash to spend on everything apart
2:44
Speaker 1: from what they're you know, they spent on the deal
2:46
Speaker 1: and they're gonna be spending on surfacing their debt. Now.
2:48
Speaker 1: So let's zoom out a little bit because this deal
2:50
Speaker 1: comes at a sort of interesting time in the political cycle.
2:53
Speaker 1: President Trump coming out with an executive order this week
2:56
Speaker 1: talking about trying to make medical pricing more trade it's
3:00
Speaker 1: parent and thus lowering it. I have to wonder whether
3:03
Speaker 1: a deal like this between two big pharmaceutical companies would
3:07
Speaker 1: be viewed pretty negatively by any Trust officials given where
3:10
Speaker 1: we are in the election cycle. So I think that
3:13
Speaker 1: this one is is actually going to be all right,
3:15
Speaker 1: even though, as we saw just yesterday, cell Gene is
3:18
Speaker 1: gonna have to sell off a drug in order to
3:21
Speaker 1: get its deal with with our cyper Stal Myers is
3:24
Speaker 1: selling a cell Gene drug to get that deal to
3:25
Speaker 1: go through this one, there's not a tremendous amount of
3:28
Speaker 1: overlap in the things that the two companies work on
3:31
Speaker 1: in the areas that they focus on. On one hand
3:33
Speaker 1: that that kind of brings the strategic fit into question.
3:36
Speaker 1: It probably does give them an easier time with any
3:39
Speaker 1: Trust officials. And one of the reasons that this does
3:41
Speaker 1: sort of appeal at least a little bit is that
3:43
Speaker 1: Allergan is focused on medical aesthetics, on you know, botox
3:46
Speaker 1: for the face, cool sculpting. Those are things that are
3:49
Speaker 1: are often not really pressured by by you know, drug
3:54
Speaker 1: costs scrutiny in the same way. I just I'm struggling
3:57
Speaker 1: to understand if this doesn't necessarily lead higher costs and
4:00
Speaker 1: better negotiating power for these two big pharmaceutical companies other
4:04
Speaker 1: than just job efficiency. In otherwords, job cuts, what are
4:08
Speaker 1: what's what's the value proposition here? Then, so the this
4:12
Speaker 1: is pretty clearly a financially driven transaction. They just think
4:15
Speaker 1: that they can um you know, benefits from the cash
4:18
Speaker 1: flow and and you know, by cutting eventually drive some
4:21
Speaker 1: kind of return and diversify away from from Humira. But
4:26
Speaker 1: the big question is, you know, by the time that
4:29
Speaker 1: they're really going to need that diversification, how much is
4:31
Speaker 1: gonna be there from from Allergan. You know, Botox has
4:35
Speaker 1: to keep delivering and stay durable, as do a number
4:38
Speaker 1: of other products, and uh, you know, there there there
4:41
Speaker 1: has to be maybe something from the pipeline, and it's
4:44
Speaker 1: a pretty weak roster of drugs for the future that
4:47
Speaker 1: they're getting here. I'm just not sure that you know
4:50
Speaker 1: that the sixteen or so billion in revenue that Allergan
4:53
Speaker 1: has now is going to be there when when Abby
4:56
Speaker 1: really needs it. Yeah, I'm looking at Allergan stock right now,
4:59
Speaker 1: it's about the you thirteen or fourteen percent below the
5:02
Speaker 1: deal price, suggesting that I guess investors don't think, at
5:05
Speaker 1: least in the near term, anybody's going to come in
5:07
Speaker 1: and try to top the bid or anything like that.
5:09
Speaker 1: So it kind of goes to the issue of maybe
5:11
Speaker 1: not a lot of interest in this company, and I
5:14
Speaker 1: think Max's, as you stated, it kind of looks just
5:16
Speaker 1: you know, there aren't a lot of synergy. So maybe
5:18
Speaker 1: this is, as you mentioned, just a diversification move on
5:21
Speaker 1: on the part of Abby. And if the question is
5:23
Speaker 1: is it worth sixty billion dollars to diversify your redness stream?
5:27
Speaker 1: I mean, the size of the revenue hole is just
5:30
Speaker 1: so enormous, it's it's impressment. You know, Humira did nearly
5:35
Speaker 1: twenty billion dollars in sales last year. It's the best
5:37
Speaker 1: selling drug in the world. Replacing that takes a big deal. Uh.
5:42
Speaker 1: The question I think was was this the right one
5:44
Speaker 1: or the right use of that that big pilot capital. Yeah, exactly,
5:47
Speaker 1: Max Neson, thanks so much for joining us. Max's Biotech,
5:49
Speaker 1: Pharma and healthcare calmness for Bloomberg Opinion. Facebook jolted the
6:09
Speaker 1: crypto asset world earlier this month, saying that they were
6:14
Speaker 1: planning to unrule Libra. This was going to be a
6:18
Speaker 1: way to serve underbanked or non banked customers and create
6:22
Speaker 1: some sort of alternative method of payment on its platform.
6:26
Speaker 1: The question is how much is this a game changer
6:30
Speaker 1: for the cryptocurrency world. How much is this giving a
6:32
Speaker 1: boost to bitcoin valuations? Here to answer all of those questions,
6:36
Speaker 1: I'm so pleased to say, Danny Masters joining us in
6:39
Speaker 1: our Bluebrigoda Active Brokers Studios. Danny Masters is chairman of
6:43
Speaker 1: coin Shares Group, which overseas about fifty million dollars in
6:46
Speaker 1: the platform and is based in London. He also you
6:50
Speaker 1: may know him as the former global head of Energy
6:52
Speaker 1: and Trading at Morgan Guarantee Trust now JP Morgan. Danny,
6:56
Speaker 1: thank you so much for being here. So let's start there.
7:00
Speaker 1: Do people understand what libra is if they look at
7:04
Speaker 1: it as a cryptocurrency? I think cryptocurrency comes with certain
7:09
Speaker 1: mystique around it, but I don't think Libra and the
7:12
Speaker 1: calibra will it associated with it really represents a cryptocurrency.
7:17
Speaker 1: I believe it is a representation of fiat value, primarily dollars,
7:21
Speaker 1: but probably also currencies were not quite sure yet but
7:24
Speaker 1: transported on cryptocurrency rails. What do you think Facebook strategy
7:29
Speaker 1: is for getting into the crypto business that kind of
7:32
Speaker 1: came out of no words but an advertising platform effectively, Well,
7:35
Speaker 1: I think if you look at Facebook as a company
7:37
Speaker 1: most of its revenue comes from US advertising, but most
7:40
Speaker 1: of its active users live overseas, and Facebook hasn't come
7:43
Speaker 1: up to date with an effective way monetizing those overseas users.
7:47
Speaker 1: So having what the French would describe as a shadow
7:49
Speaker 1: banking system with with Libra not not a compliment, by
7:52
Speaker 1: the way, is a way to start to monetize their
7:56
Speaker 1: overseas and users. So you said that it was another
8:01
Speaker 1: form of payment using the cryptocurrency rails, in other words,
8:07
Speaker 1: the infrastructure the technology behind cryptocurrencies. Is this why bitcoin
8:13
Speaker 1: has rallied that basically Facebook would be paving the way
8:16
Speaker 1: for people to easily make payments using bitcoin. Well, I
8:21
Speaker 1: think the bitcoin rally itself is rooted in a perception
8:25
Speaker 1: of a week of dollar environment, which is also the
8:27
Speaker 1: catalyst for gold. Currently, it has been rooted in some
8:31
Speaker 1: green shoots post the cryptowinter from early in some coins
8:35
Speaker 1: which represent equity and some crypt winter come into a
8:39
Speaker 1: theater near you, dot um. But but now I think
8:44
Speaker 1: I think as far as bitcoin itself is concerned, our
8:48
Speaker 1: conclusion is that if Libra and it's two and a
8:51
Speaker 1: half billion users can easily switch from fiat money into
8:56
Speaker 1: bitcoin and actually represents the biggest onboard ramp to bit
9:00
Speaker 1: coin as as yet come into existence. So give us
9:03
Speaker 1: a sense of what the regulatory environment has been historically
9:07
Speaker 1: over cryptocurrencies. I don't think it's much, but I may
9:09
Speaker 1: be mistaken, but my senses if an entity like a
9:13
Speaker 1: Facebook gets involved, that could change things very quickly. Yes. Well,
9:18
Speaker 1: Bitcoin as a very new kind of asset has really
9:23
Speaker 1: stretched regulators in terms of their treatment. And the regulatory
9:28
Speaker 1: perimeter as it's called, which by the way, is usually
9:32
Speaker 1: a national perimeter, is challenged by a global currency like bitcoin,
9:37
Speaker 1: and the reaction from regulators around the world has been
9:40
Speaker 1: very mixed, some very positive, some very negative, some somewhat confused. Um,
9:46
Speaker 1: the libra concept, because it is so closely tied to
9:50
Speaker 1: the legacy banking system, is almost a combination of difficult
9:55
Speaker 1: crypto legislation and regulation with difficult banking regulation. So I think,
10:01
Speaker 1: and we have some experience in this. We know ourselves
10:04
Speaker 1: produce some asset backs coins that rail on cryptocuncy infrastructure.
10:09
Speaker 1: We've spent many years trying to solve that regulatory puzzle,
10:12
Speaker 1: and Facebook have that ahead of them. So you also
10:16
Speaker 1: lead the launch of the world's first regulated bitcoin and fund.
10:19
Speaker 1: I believe I'm wondering, as you look at this incredible
10:23
Speaker 1: rally that we've seen in a bitcoin, just absolutely surging,
10:27
Speaker 1: I have to wonder whether there's still is value here
10:30
Speaker 1: or if this is just sort of a knee jerk
10:32
Speaker 1: reaction to the end of the crypto winter that will
10:36
Speaker 1: be reversed. Yeah. I think in the very short term
10:41
Speaker 1: here we have to recognize that it's been a spectacular rally,
10:44
Speaker 1: you know, off of a low, low, low level in
10:47
Speaker 1: terms of the historical range um. And going forward, you know,
10:51
Speaker 1: I think one has to keep in mind the scale
10:53
Speaker 1: of bitcoin, and indeed this has brought into light. When
10:56
Speaker 1: you look at the scale of Facebook, there may be
10:58
Speaker 1: a hundred and fifty million wall it's for bitcoin in
11:00
Speaker 1: existence in the world today, there are two and a
11:03
Speaker 1: half billion Facebook uses. It took Facebook ten years to
11:07
Speaker 1: get from a million users to a billion users. And
11:10
Speaker 1: when you look at those numbers and that timescale, I
11:13
Speaker 1: think you can clearly see there's a long run way
11:16
Speaker 1: at a bitcoin. I have to look at Bitcoin prices
11:19
Speaker 1: have risen from more a little bit more than four
11:22
Speaker 1: thousand dollars April one to eleven thousand, three hundred and
11:26
Speaker 1: sixty three dollars today exactly. It's an interesting chart. You
11:29
Speaker 1: put that chart up there for the last several years,
11:31
Speaker 1: and that's a picture of violatility. So Danny, I know
11:34
Speaker 1: that coin Shares is the largest crypto asset manager in Europe.
11:37
Speaker 1: So I want to ask you, given your perspective, step
11:40
Speaker 1: back a little bit just for our listeners to get
11:42
Speaker 1: a sense of how do you think crypto coins are,
11:45
Speaker 1: cryptocurrencies will develop and what some of the applications might
11:50
Speaker 1: be over the next several years. I think there's you know,
11:54
Speaker 1: one of the one of the really fascinating things about
11:56
Speaker 1: bitcoin is it can be viewed in so many different lights,
12:00
Speaker 1: um and and it is so international. Some people consider
12:03
Speaker 1: it to be a proxy for early state technology, some
12:06
Speaker 1: people consider it to be a currency summer commodity, and
12:10
Speaker 1: and that's what you know. People can find reasons to
12:13
Speaker 1: get to have appeal from bitcoin in many, many different ways. Um.
12:17
Speaker 1: I think underlying that is the concept of some sort
12:20
Speaker 1: of a little bit of financial freedom and this concept
12:23
Speaker 1: of appeer to peer transactions of originally Bitcoin, now Libra
12:28
Speaker 1: and potentially other assets in the future. And I think
12:30
Speaker 1: that's in response to a banking system which is and
12:34
Speaker 1: an asset transfer system which is actually quite dated. Now.
12:37
Speaker 1: So where are we just quickly, Danny, in the evolution
12:40
Speaker 1: of institutions adapting or adapting cryptocurrencies. Well, again, it's a
12:46
Speaker 1: slow it's a slow development. Um. It was interesting to
12:49
Speaker 1: see Fidelity actually did get over the line here in
12:52
Speaker 1: the United States and produced their institutional custody solution which
12:56
Speaker 1: is slowly growing out coin based. Also who in the
12:59
Speaker 1: US are making a big push on the institutional custody
13:03
Speaker 1: side as well. And so, you know, I think we
13:06
Speaker 1: can say that this whole episode with Bitcoin to date
13:10
Speaker 1: has happened in isolation of institutions, and institutions will not
13:14
Speaker 1: arrive until we can say with certainty your assets are
13:17
Speaker 1: not going to disappear or be hacked. That doesn't happen
13:20
Speaker 1: in any other institutional asset class. But that seems to
13:23
Speaker 1: be you know, in the in the immediate future, and
13:26
Speaker 1: I think that's going to be a positive Danny Masters,
13:29
Speaker 1: thank you so much for joining us. Well. The U
13:45
Speaker 1: S consumer confidence fell in June to the lowest level
13:48
Speaker 1: since twenty September. The indext came in at one pot
13:53
Speaker 1: five That was lower than any of the estimates in
13:55
Speaker 1: the Blueberg survey consensus was one, so a big miss there.
14:00
Speaker 1: Help us dig into the numbers a little bit. We
14:01
Speaker 1: welcome back Lynn Franco, Lynna's director of Economic Indicators at
14:05
Speaker 1: the Conference Board. She joins us here in our Bloomberg
14:07
Speaker 1: eleven three oh studios. Lynn, thanks so much for joining us.
14:09
Speaker 1: Surprising miss here for the June period. What was driving it? Well,
14:15
Speaker 1: I think the number one concern was the trade and
14:18
Speaker 1: tariff discussions, and I think heated up quite a bit
14:21
Speaker 1: in early June, both with Mexico and China. Seems to
14:24
Speaker 1: have rattled consumers confidence both in the present term and
14:28
Speaker 1: and the outlook. So it remains to be seen. I
14:30
Speaker 1: mean a little bit of it dissipated in regards with Mexico.
14:33
Speaker 1: We have to see what happens at the G twenty
14:35
Speaker 1: summit um. But hopefully we can recoup some of this
14:39
Speaker 1: lost next month and it doesn't derail spending. So at
14:42
Speaker 1: what point do we care about this? Because basically consumer
14:45
Speaker 1: more than two thirds of the economy in the United States,
14:48
Speaker 1: has been the driver of the recovery. This is the
14:51
Speaker 1: area that Michael McKie of Bloomberg News in television radio
14:55
Speaker 1: has said this morning is what to watch to determine
14:58
Speaker 1: when the cycle will turn. What is it concerning to you.
15:01
Speaker 1: I think if we get you know, sort of back
15:03
Speaker 1: to back declines going forward. Now, if we have another
15:07
Speaker 1: decline in July, another decline in August, um, i'd be
15:11
Speaker 1: I think I'd take volatility as positive news that we
15:14
Speaker 1: can say, well, you know, it was a few events
15:15
Speaker 1: that sort of rattled them for one particular month, and
15:18
Speaker 1: we're back on track. It's still a strong reading. But
15:21
Speaker 1: if we continue on a downward trend, then I would
15:23
Speaker 1: become a little bit concerned. So this index has historically
15:27
Speaker 1: been highly correlated with payrolls and with employment, and still
15:31
Speaker 1: the pictures still generally good. There there any cracks in
15:34
Speaker 1: the employment from from your data. Well, we did see
15:37
Speaker 1: the number of consumers who said jobs are hard to
15:39
Speaker 1: get shot up um and that's at the highest level
15:42
Speaker 1: now since you know, November of and I think that
15:46
Speaker 1: could be related to the employment data that we saw
15:49
Speaker 1: in May, where there seemed to be you know, we're
15:50
Speaker 1: not hiring, but we're not firing either, and there was
15:53
Speaker 1: a pause there. So I think we need to keep
15:55
Speaker 1: an eye on what happens in terms of jobs in
15:57
Speaker 1: the months to come as well, And can you just
15:59
Speaker 1: give us a sense of the read through of the
16:02
Speaker 1: consumer confidence data with potential increase or slow down in
16:06
Speaker 1: the U S economy in other words, with the lag
16:08
Speaker 1: effect here well, generally the we we take a look
16:11
Speaker 1: at the expectations index, so that can have like a
16:13
Speaker 1: six month lead, but again we need to see sort
16:15
Speaker 1: of a persistent downturn that then manifests itself in the
16:19
Speaker 1: present situation as well. So it's it's interesting to, you know,
16:22
Speaker 1: take a look at the two components and see if
16:24
Speaker 1: they're moving in sync, and if they're both heading south,
16:27
Speaker 1: then we could begin to see a weakening and consumer
16:30
Speaker 1: confidence and spending and the economy as a whole. One
16:33
Speaker 1: of the things at least, and I've been hearing more
16:34
Speaker 1: and more over the less several weeks when we talk
16:36
Speaker 1: to economists and fund managers, is that the potential and
16:40
Speaker 1: maybe even likelihood for some type of for a recession,
16:42
Speaker 1: and maybe MIDI or anything in your data suggesting that
16:45
Speaker 1: that is reasonable expectation. As of right now, we're not
16:49
Speaker 1: expecting a recession at least this year. Obviously, you know,
16:52
Speaker 1: the probability could increase if we begin to face you know,
16:56
Speaker 1: encounter more tail winds, so to speak. But for right now,
16:59
Speaker 1: you know, we're more a little bit concerned. I think
17:01
Speaker 1: with a divergence between you know, business confidence and consumer
17:04
Speaker 1: confidence and to see whether or not those two then
17:06
Speaker 1: sort of we can close the gap there, um, because
17:09
Speaker 1: we've got business leaders who are significantly less confident than consumers.
17:14
Speaker 1: I'm just wondering if there is something in particular that
17:18
Speaker 1: we can pinpoint as an issue that's the key one
17:21
Speaker 1: that consumers are watching to get resolved to feel more
17:24
Speaker 1: confident again. Well, we did see a tremendous spike in
17:27
Speaker 1: the mentions of trade and tariff discussions this month. Um,
17:32
Speaker 1: you know, it's maybe three, four or five times the
17:35
Speaker 1: number of mentions that we've seen over the last month.
17:38
Speaker 1: So whatever happened in early June obviously resonated very negatively
17:42
Speaker 1: with consumers. Now, you know, things have dissipated a little bit.
17:46
Speaker 1: I think the situation is probably a little bit more
17:48
Speaker 1: favorable than it was at the beginning of the month.
17:49
Speaker 1: So we'll see if we get a bounce back in
17:51
Speaker 1: early July or not, or if we continue sort of
17:54
Speaker 1: in this you know push and pull with trades and tariffs.
17:57
Speaker 1: It could have a lasting impact on confidence. I don't
18:00
Speaker 1: think that issue is likely going away. We'll see what
18:02
Speaker 1: happens in the G twenty this weekend, but I mean,
18:05
Speaker 1: I think we certainly China. It seems like it might
18:07
Speaker 1: be at best case what we've been here from people's
18:08
Speaker 1: kick the can down the road a little bit. Yeah,
18:10
Speaker 1: but this to me is a fascinating point. And Lynn Franco,
18:13
Speaker 1: this is such a great day for you to be
18:14
Speaker 1: here because the idea that the uncertainty around trade is
18:19
Speaker 1: bleeding into the real economy and consumers willingness to spend,
18:23
Speaker 1: not just big corporation saying oh, it's going to cost
18:26
Speaker 1: us more. This is a very interesting fact and it
18:29
Speaker 1: raises some serious questions. If we don't get some sort
18:32
Speaker 1: of resolution, how regardless of the stock market and their response,
18:36
Speaker 1: the actual economic impact could be significant. That, to me,
18:40
Speaker 1: is is a fascinating point looking at the consumer confidence data.
18:44
Speaker 1: Linn Franco, thank you so much for being with us.
19:00
Speaker 1: As geopolitical risk abounds in a number of corners around
19:04
Speaker 1: the world, this being reported overnight by Bloomberg News that
19:08
Speaker 1: President Trump evidently mused to confidence about withdrawing from a
19:11
Speaker 1: longstanding defense treaty with Japan. This according to people who
19:15
Speaker 1: spoke with Bloomberg who didn't want to be identified. Joining
19:20
Speaker 1: us now to discuss how brands. Henry A. Kissinger, Distinguished
19:23
Speaker 1: Professor at Johns Hopkins University's School of Advanced International Studies,
19:27
Speaker 1: also a Bloomberg opinion. Calumness joining us from Baltimore, Maryland, How,
19:31
Speaker 1: thank you so much for being with us. So let's
19:33
Speaker 1: just start there with this concept of upending this defense
19:38
Speaker 1: treaty with Japan. What would this mean for the U.
19:41
Speaker 1: S And its relationship with that nation. It would mean
19:45
Speaker 1: a pretty significant alteration of U. S relations, not just
19:48
Speaker 1: with Japan, but with the entire Asia Pacific in the
19:51
Speaker 1: sense that the US alliance with Japan has been the
19:54
Speaker 1: cornerstone of America's strategic posture in that part of the
19:57
Speaker 1: world UH for over sixty years at this point. It's
20:01
Speaker 1: been the cornerstone of peace and security in an incredibly
20:04
Speaker 1: dynamic region. And so if the United States were to
20:07
Speaker 1: pull back, if they were to withdraw from that alliance UH,
20:10
Speaker 1: it would fundamentally up end both geopolitical and geoeconomic arrangements
20:14
Speaker 1: of the region. So, professor, would you if if the
20:17
Speaker 1: US were to pull out of this long standing arrangement
20:19
Speaker 1: would have materially weakened the US in that region of
20:22
Speaker 1: the world in your opinion. Certainly, you know, the United
20:25
Speaker 1: States derives an enormous amount of influence because it has
20:29
Speaker 1: security alliances with key countries throughout the region, Japan being
20:32
Speaker 1: the most important, and so if the United States were
20:34
Speaker 1: no longer so closely allied to Japan, or if it
20:38
Speaker 1: went so far as to terminate the alliance, there would
20:41
Speaker 1: be far less reason for Japanese leaders to listen to
20:44
Speaker 1: American leaders on a whole variety of issues. So I
20:47
Speaker 1: guess there's a question of how much President Trump was
20:50
Speaker 1: taking this seriously, how much this was just musing on
20:54
Speaker 1: the heels of some report by President Trump, And we
20:58
Speaker 1: don't have the details on that point. But there is
21:01
Speaker 1: a question how much com President from do unilaterally, both
21:04
Speaker 1: with this as well as some of his other threats
21:06
Speaker 1: with Iran. How much can he do without congressional approval.
21:11
Speaker 1: You would probably get differing opinions on that, in the
21:14
Speaker 1: sense that I would imagine the President would argue that
21:17
Speaker 1: he has the authority to withdraw unilaterally from various treaties
21:23
Speaker 1: that the United States has signed, but I imagine the
21:25
Speaker 1: Congress would have a different opinion, and so that there
21:28
Speaker 1: would be a degree of conflict within the U S
21:31
Speaker 1: system over that question. But but pivoting to the point
21:34
Speaker 1: you raised about whether the president is serious, I think
21:37
Speaker 1: there are a couple of things to keep in mind. One,
21:39
Speaker 1: this is a recurring theme with this president. He's openly
21:42
Speaker 1: or privately mused about withdrawing from a number of American alliances,
21:47
Speaker 1: including NATO and the U S to Panelliance, since becoming
21:50
Speaker 1: president and even before. And I think that the general
21:53
Speaker 1: perception is that this is probably more blowing off steam
21:57
Speaker 1: than anything else. But these reports still have a oncrete
22:00
Speaker 1: effects because they certainly can't do much for the self
22:03
Speaker 1: confidence of US allies in tense parts of the world. So, Professor,
22:07
Speaker 1: one of the backbones of some of these discussions from
22:10
Speaker 1: President Trump about pulling out of some of these alliances
22:12
Speaker 1: is that other countries don't shoulder their fair share economically.
22:17
Speaker 1: So I'm presumably here as it relates to Japan, it's
22:21
Speaker 1: costs the US a lot of money to have our
22:23
Speaker 1: presence in Japan? Is that type of thinking, I e.
22:27
Speaker 1: That we shoulder too much of the economic burden of
22:30
Speaker 1: patrolling the world, is that shared widely within d C.
22:37
Speaker 1: Within d C, I think the answer is probably no,
22:40
Speaker 1: for a variety of reasons. And one reason is that
22:43
Speaker 1: the costs of stationing American forces in Japan and other
22:46
Speaker 1: countries are often exaggerated because Japan, like South Korea, like Germany,
22:50
Speaker 1: provides significant amounts of what's called host nation support for
22:54
Speaker 1: American troops. In other words, of the Japanese government de
22:57
Speaker 1: phrase a significant portion of what it cost the United
23:00
Speaker 1: States to station forces in Japan. The other thing that's
23:03
Speaker 1: worth remembering is that we don't pledge to defend countries
23:07
Speaker 1: like Japan because we think it's in their interest to
23:10
Speaker 1: do so. We do that because we think it's an
23:12
Speaker 1: our interest to do so. We think that it will
23:13
Speaker 1: make for more peaceful and stable Northeast Asia, and that
23:18
Speaker 1: in turn will benefit the United States geopolitically and economically.
23:22
Speaker 1: Now that said, there has been a degree of discomfort
23:24
Speaker 1: stretching back over a number of administrations about whether Japan
23:28
Speaker 1: is bearing as much of the burden as it ought
23:30
Speaker 1: to in terms of providing stability in that region and beyond.
23:33
Speaker 1: And I think that's a fair debate to have. But
23:35
Speaker 1: going a step further and thinking about withdrawing from the
23:38
Speaker 1: alliance would be going too far. Meanwhile, President Trump tweeting
23:42
Speaker 1: this morning about Iran, saying that Iran only understands strength
23:45
Speaker 1: and power, h that Iran put out a quote very
23:49
Speaker 1: ignorant and insulting statement, and talking about how overwhelming force,
23:55
Speaker 1: which would be his response to any attack by Iran,
23:58
Speaker 1: will be meant with obliteration potentially. I'm just wondering, how
24:04
Speaker 1: seriously do people take this. I'm looking again, We've been
24:07
Speaker 1: looking at the price of oil. It's not responding that much.
24:11
Speaker 1: I think people are starting to perceive that there are
24:13
Speaker 1: contradictory tendencies in the President's policy toward Irans. On the
24:17
Speaker 1: one hand, he's very serious about getting tough with Iran
24:20
Speaker 1: and trying to put additional pressure on the regime and
24:23
Speaker 1: forcing the regime to accept some deal that would be
24:27
Speaker 1: more stringent than the one that the Obama administration negotiated.
24:30
Speaker 1: On the other hand, the President made quite clear last
24:33
Speaker 1: week that he really has no interest in taking on
24:36
Speaker 1: another military conflict, particularly in the Middle East. This has
24:39
Speaker 1: been a theme of his campaign rater going back to
24:42
Speaker 1: and there's no reason to think that he has changed
24:45
Speaker 1: his mind, and so I think what what people may
24:47
Speaker 1: be doing is assuming that while the President will talk tough,
24:51
Speaker 1: he will ultimately decide not to pull the trigger on
24:55
Speaker 1: a major military operation visa Iran unless the United States
24:58
Speaker 1: is significantly provoked. Haw Brands, thank you so much. Haw
25:02
Speaker 1: Brands is the Henry A. Kissinger Distinguished Professor, JOHNS. Hopkins
25:05
Speaker 1: University's School of Advanced International Studies. It's also Bloomberg Opinion
25:09
Speaker 1: columnists Sharlenn sharing his views on the US UH Japan
25:14
Speaker 1: Defense pack. Thanks for listening to the Bloomberg P and
25:16
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Speaker 1: I'm on Twitter at pt Sweeney. I'm Lisa abram Woits.
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Speaker 1: I'm on Twitter at Lisa A. Bram Woits. One. Before
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