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UBS's Harford: We're In 4th Inning of Consolidation · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul Swinge. 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. Well, the asset management business is
• 0:22
  Speaker 1: certainly facing meaningful headwinds to its business, including the move
• 0:25
  Speaker 1: the passive management and pressure on fees as it looks
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  Speaker 1: for additional areas of growth. To help us get up
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  Speaker 1: to speed on what is going on with the asset
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  Speaker 1: management business, we're pleased to welcome Sunny Hartford. She has
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  Speaker 1: a head of Investments for UBS Asset Management. She joins
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  Speaker 1: us here live in New York. Sonny, thanks so much
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  Speaker 1: for joining us. Thanks for having me so we know
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  Speaker 1: about fee pressures, we know about to move the pass it.
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  Speaker 1: What are the big challenges that are you're facing right
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  Speaker 1: now at UBS, Well, I think they're not unique to
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  Speaker 1: u BS. I think the entire industry, as you say, Paul,
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  Speaker 1: is going through a massive shift and change and how
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  Speaker 1: we deliver value to our clients, the transparent see that
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  Speaker 1: is apparent and delivering that value UM and the opportunities
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  Speaker 1: so fortunately, demographics and some of the world UM tail winds,
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  Speaker 1: if you will, in terms of the number of retirees,
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  Speaker 1: the fact that sixty of UM retirees say that they
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  Speaker 1: will have to invest and live on their investment proceeds
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  Speaker 1: as opposed to their portfolios themselves. Going forward, there's a
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  Speaker 1: tremendous amount of money that will need to be managed
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  Speaker 1: UM and opportunities for us that managers to add value
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  Speaker 1: to their clients. Headwinds against us, of course, are the
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  Speaker 1: transparency and the passive products that are there delivering what
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  Speaker 1: in the last decade has been really terrific returns. But
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  Speaker 1: I would suggest that the volatility that we're seeing now UM,
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  Speaker 1: the change in the demand for alternative products, for example,
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  Speaker 1: the interest in markets like China where passive doesn't do
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  Speaker 1: nearly as well, where you need some real expertise, provide
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  Speaker 1: opportunities for those Asset managers are going to be prepared
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  Speaker 1: to take advantage and bring those skills to bear. How
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  Speaker 1: far along in this consolidation are we that's a great question, UM.
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  Speaker 1: I probably in the fourth inning. If I use a
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  Speaker 1: baseball analogy, right, I think we've got a ways to go.
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  Speaker 1: But I think who is going to survive and who
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  Speaker 1: the winners are is not as simple as the assets
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  Speaker 1: under management. Okay, so that's my question. What will the
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  Speaker 1: asset management industry look like, say ten years from now,
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  Speaker 1: for in the fourth inning of investment firms consolidating. I
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  Speaker 1: think those that change to go with the market uh
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  Speaker 1: and can affect real change in their technology in their
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  Speaker 1: use of data overstated statement, but it's still a true
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  Speaker 1: one um I think will survive. But those that really
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  Speaker 1: don't think they need to change and they can stick
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  Speaker 1: with the status quote might not be here. I don't
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  Speaker 1: think it's as simple as saying a trillion dollars assets
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  Speaker 1: under management. Is that scalability and that level that you
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  Speaker 1: need to be at. I think you can have a
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  Speaker 1: boutique firm that focuses saying on alternatives or focuses on
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  Speaker 1: the liquid products that so many are demanding right now.
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  Speaker 1: I think if you can deliver solutions multi asset where
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  Speaker 1: you can pull out beta, do that very cost effectively
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  Speaker 1: for a client so they don't go elsewhere for that,
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  Speaker 1: and then add an active overlayer, drivetive overlays something too
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  Speaker 1: specific to their outcome demands or where their solution for
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  Speaker 1: their problem happens to be. Those are going to survive.
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  Speaker 1: But that's very, very different than what the traditional lasset
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  Speaker 1: manager is doing today. So what is in your mind
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  Speaker 1: what the traditional asset manager is doing today, presuming that
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  Speaker 1: their money can come in and stay, that they don't
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  Speaker 1: have to be competitive on fees, that they don't have
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  Speaker 1: to do anything different than what a passive can do
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  Speaker 1: for them. UM, I think it's problematic because at some
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  Speaker 1: point when the fees are as high as they have
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  Speaker 1: been historically. UM, if you can get close to that,
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  Speaker 1: you don't have to worry just about out performance. You're
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  Speaker 1: not just trying to beat the passive index. You've got
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  Speaker 1: to do more than that too, you know, make sure
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  Speaker 1: that you're getting your fee and you're earning your fee
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  Speaker 1: if you will. And I think the the onselte of
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  Speaker 1: technology where so many individual investors, even institutional investors, can
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  Speaker 1: do a lot of this stuff on their computer, and
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  Speaker 1: they can play with e t f s and they
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  Speaker 1: can play with passive products to build portfolios themselves. There's
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  Speaker 1: a lot of uh intelligence if you will available to
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  Speaker 1: these folks. Now you have to do something different, and
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  Speaker 1: it has to be the unique brain power maybe of
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  Speaker 1: your investment teams to deliver something they can't do on
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  Speaker 1: their own. Just to stick with some of the things
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  Speaker 1: that have been in the news recently, talked about some
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  Speaker 1: of the big tech companies that have come under a
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  Speaker 1: scrutiny both by regulators and individuals worried about privacy concerns.
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  Speaker 1: As head of investments overseeing six hundred and thirty four
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  Speaker 1: billion dollars, have you personally pressured anyone or would you
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  Speaker 1: change allocations as the results of some of these regulatory issues.
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  Speaker 1: I have not. I have a really good team and
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  Speaker 1: I'm going to let them allocate as they see fit.
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  Speaker 1: But I will suggest there's a short term view on tech,
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  Speaker 1: which would be around things like the regulation and whatnot,
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  Speaker 1: and then there's a long term view. Technology is where
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  Speaker 1: the world is going. Everything that isn't tech driven is
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  Speaker 1: going to be. I have three children heading into college.
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  Speaker 1: I hope they all study computer science and math and programming.
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  Speaker 1: Glad my son played well at Minecraft. Right, we need
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  Speaker 1: to be focused on tech so um that the long
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  Speaker 1: term play is to be to be into that sector
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  Speaker 1: and into it big. But you have to pick and choose,
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  Speaker 1: and I think there's timing and that is one of
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  Speaker 1: the dynamic natures of what you do. An active management
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  Speaker 1: is figuring out how to play mean Google. No one
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  Speaker 1: would have seen that coming necessarily long term. Would you
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  Speaker 1: be a a Google buyer? Of course you would, But
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  Speaker 1: should you be coming in and out based on the
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  Speaker 1: things that are hitting it as an industry in the meantime? Absolutely,
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  Speaker 1: Sunny Harford, I wish we had an hour with you.
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  Speaker 1: Thank you so much for being Thanks for having me.
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  Speaker 1: It's great to talk to you guys. Sunny Harvard has
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  Speaker 1: head of Investments at UBS Asset Management, over seeing six
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  Speaker 1: and thirty four billion dollars, talking about some of the
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  Speaker 1: massive changes underway in the investment management industry. We are
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  Speaker 1: broadcasting live from the Bloomberg Investor New York conference at
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  Speaker 1: the company's headquarters here at seven thirty one, lexing to
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  Speaker 1: in a big question hanging over all of the attendees
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  Speaker 1: here is what is going on with trade? Why are
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  Speaker 1: we seeing such tensions rising at this point in escalating
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  Speaker 1: at this moment in time. I am so pleased to
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  Speaker 1: welcome somebody who worked with the World Bank for many years.
• 6:16
  Speaker 1: Somebody who worked at JP Morgan UH and founded her
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  Speaker 1: own firm. We're talking about Asfana best Loss and she
• 6:22
  Speaker 1: is founder and chief executive officer of Rock Creek Group.
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  Speaker 1: Joining us here, Assana, it's really interesting to me that
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  Speaker 1: these trade tensions are ramping up now why. I think
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  Speaker 1: it's very interesting what you said. Just historically, I was
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  Speaker 1: teaching international trade a long time ago at Talksford many
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  Speaker 1: many years ago, and I was still a student, and
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  Speaker 1: it's the theory of trade was about comparative advantage. That
• 6:47
  Speaker 1: we all sell goods to each other based on comparative
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  Speaker 1: advantage in the world will be a better place. Where
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  Speaker 1: we are in a very different place today. And I
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  Speaker 1: think what has been really interesting is how in the
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  Speaker 1: last twenty years China has um basically been incredibly smart
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  Speaker 1: in taking advantage of trade laws to grow its economy
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  Speaker 1: and it's trade with the rest of the world. Now
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  Speaker 1: where we are today is a world where UM China
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  Speaker 1: has a lot of unilateral advantages one way UH. And therefore,
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  Speaker 1: I think we look at the US right now and
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  Speaker 1: a lot of the presses about the US China trade war,
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  Speaker 1: but if you look at it that same sort of
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  Speaker 1: quiet wars going on in Europe, it's going on in
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  Speaker 1: emerging markets where really the same issues are in existence,
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  Speaker 1: and so U it's the one topic that seems to
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  Speaker 1: be unifying the world against China. What do you think
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  Speaker 1: China is really looking for as they sit down with
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  Speaker 1: the United States or not sit down right right right
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  Speaker 1: now in terms of trade, um, what do you think
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  Speaker 1: is realistic from Chinese perspective that they want to get
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  Speaker 1: from the US. I think China would, in an ideal world,
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  Speaker 1: do things the way they have been doing for a
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  Speaker 1: long time, which is make the right sounds, make the
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  Speaker 1: right noises, imply that they're going to agree, but continue
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  Speaker 1: with the way they have always done things, which is
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  Speaker 1: their way. And it doesn't appear that that's that is
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  Speaker 1: that can be the status quot aly longer, it's exactly.
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  Speaker 1: I think they tried that in the last meeting and
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  Speaker 1: that did not work. I think also trade seems to
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  Speaker 1: be covering also intellectual property rights, which is sort of
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  Speaker 1: a huge topic obviously for the US UH, but it's
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  Speaker 1: kind of subsumed when we talk about trade. I think
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  Speaker 1: that a lot of the discussions that are going on
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  Speaker 1: between the leaders in China and the US is about
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  Speaker 1: that topic as well. So your background is fascinating because
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  Speaker 1: if you advised central bankers and for administers, you've invested
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  Speaker 1: assets on behalf of the World Bank. And I'm wondering
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  Speaker 1: if there's an irony baked in to these trade tensions
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  Speaker 1: that the more they heat up, the more likely it
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  Speaker 1: is the central banks will cut rates, and that will
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  Speaker 1: be great for emerging markets, It'll be great for riskier
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  Speaker 1: assets on a longer period of time. What do you
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  Speaker 1: say to that argument, um, I think we are now
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  Speaker 1: at the point in the um in the U s
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  Speaker 1: economy where it might be too early to to start
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  Speaker 1: cutting rates. Um. Given where we are with employment and
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  Speaker 1: given where we are with the rest of our economic growth,
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  Speaker 1: recession is a possibility. We're starting to slow down. But
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  Speaker 1: as we heard also this morning from Governor Powell, he's
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  Speaker 1: being very careful. He's watching the same thing everybody else
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  Speaker 1: is watching. And he did not, at least I didn't
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  Speaker 1: hear him commit one way or another. He was very
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  Speaker 1: careful in what he said. I think a lot of
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  Speaker 1: what the market is thinking is that to rate cuts
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  Speaker 1: in the US are baked in, and uh, it seems
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  Speaker 1: to a lot of people. Uh, you know, there is
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  Speaker 1: sort of a theory being floated out there. Why are
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  Speaker 1: we having these discussions about trade UM and having the
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  Speaker 1: tweets on Mexico having having the trade war with Europe
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  Speaker 1: going on at the same time as with UM with China,
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  Speaker 1: And would that be something that the president might be
• 9:59
  Speaker 1: trying to get interest rates down a little faster because
• 10:02
  Speaker 1: since the Fed is an independent decision maker, but would
• 10:06
  Speaker 1: lower rates? If the Fed does cut rate, will that
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  Speaker 1: be supportive of equities at this point in the credit cycle.
• 10:12
  Speaker 1: It could in the very very short run, But it's
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  Speaker 1: I think if you're looking at UM, why UM? Why UM?
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  Speaker 1: If you are a presidential candidate, you would want the
• 10:21
  Speaker 1: rates to be lower? Is that Obviously it will impact
• 10:24
  Speaker 1: equity markets, but also it's a very big positive marks
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  Speaker 1: for other things in industry and people who are hiring UM.
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  Speaker 1: So it helps UM hiring policies, It helps the broader
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  Speaker 1: investment income by companies, and of course UM equity markets
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  Speaker 1: which are all interconnected, one on the one with the other.
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  Speaker 1: So I've sound is there any call here? I know
• 10:46
  Speaker 1: you're from new firm. Rock Crey Group has an interest
• 10:49
  Speaker 1: in emerging markets, but given all the trade uncertainty, is
• 10:53
  Speaker 1: it too risky to kind of go to emerging markets
• 10:55
  Speaker 1: these days? I think emerging markets still are among the
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  Speaker 1: best places for value you and for investing. The reason
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  Speaker 1: for that is that two things. One is growth is
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  Speaker 1: fastest in emerging markets right now, whether we're looking at
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  Speaker 1: financial sector, energy sector, technology, etcetera. And a lot of
• 11:12
  Speaker 1: the things that are holding us back here, you know,
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  Speaker 1: whether it's our infrastructure, whether it's our banking system, whether
• 11:17
  Speaker 1: it's our payment systems that are very rigid and very old,
• 11:21
  Speaker 1: um and very underdeveloped. When you go to emerging markets,
• 11:25
  Speaker 1: they're setting all these things up there, not just building roads,
• 11:27
  Speaker 1: they're also setting up payment systems. So if their banks
• 11:31
  Speaker 1: can be um leap frogging and jump ahead, UH, they
• 11:35
  Speaker 1: will be very interesting. And there are actually very interesting
• 11:38
  Speaker 1: places to invest, whether it is an education company in India, UH,
• 11:43
  Speaker 1: serving the rural poor by the way and making returns um. So,
• 11:48
  Speaker 1: I think what you will see in emerging market is
• 11:51
  Speaker 1: a move away from just sort of a flow of
• 11:53
  Speaker 1: assets into ETFs and much more looking for really good
• 11:57
  Speaker 1: local companies UH that have potential growth outstanding Asana bush Laws,
• 12:02
  Speaker 1: thank you so much for joining us. We really appreciate
• 12:05
  Speaker 1: you taking the time here. Asana is a founder in
• 12:07
  Speaker 1: chief executive officer of Rock Creek Group. Joining us here
• 12:10
  Speaker 1: live in Bloomberg. Well. Earlier today, FED Chair Jerome Powell spoke,
• 12:31
  Speaker 1: and traders heard what they wanted to hear. He said, uh,
• 12:34
  Speaker 1: that he remained open to anything that was necessary to
• 12:38
  Speaker 1: support the economy. People took that as either a rate
• 12:41
  Speaker 1: cut or holding steady. Basically, Marcus had a little blip
• 12:44
  Speaker 1: and then went back to where they were before. Here.
• 12:46
  Speaker 1: Did it pass through all of the Fed speak we've
• 12:48
  Speaker 1: been hearing and what that means for federate cuts? Chris Low,
• 12:51
  Speaker 1: chief economist for FTN Financial, joining us from New York. Chris,
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  Speaker 1: you have almost three decades of experience watching them markets
• 13:00
  Speaker 1: and listening to FED officials. What do you take from
• 13:03
  Speaker 1: Fed chaired room palace comments today That they remain open,
• 13:07
  Speaker 1: that they're they're watching, that they're paying attention, that they're
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  Speaker 1: listening to markets. But ultimately the economic data is what's
• 13:13
  Speaker 1: going to drive their decisions. Yeah. I think that nails it. Really. Uh.
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  Speaker 1: Most important thing is that the door at least is
• 13:23
  Speaker 1: open to a discussion. I think the FED has gotten
• 13:26
  Speaker 1: into a funny place in the last couple of years
• 13:30
  Speaker 1: where they feel constrained in what they can do in
• 13:34
  Speaker 1: these meetings based on their own commentary, which you know,
• 13:39
  Speaker 1: establish as expectations for the meeting in advance. Uh, we're
• 13:45
  Speaker 1: not expecting a rate cut in June, because no one
• 13:48
  Speaker 1: other than Jim Bullard is talking about the possibility. But
• 13:52
  Speaker 1: you know, if you look at the yield curve, they're
• 13:54
  Speaker 1: way behind the curve like I've never seen in the
• 13:59
  Speaker 1: thirty years been doing this behind the curve, which means
• 14:03
  Speaker 1: if they don't cut at this meeting, they'll have to
• 14:05
  Speaker 1: cut it one of the next couple of meetings. And
• 14:08
  Speaker 1: in the meantime, we heard from Jim from Charles Evans
• 14:12
  Speaker 1: this morning, he's the Chicago FED president, told CNBC, I
• 14:17
  Speaker 1: just don't see what the market sees, and you know,
• 14:23
  Speaker 1: I think that pretty well sums it up. Although in fairness, Chris,
• 14:28
  Speaker 1: I'm sorry, but it's really interesting going because this is
• 14:30
  Speaker 1: another instance where you can hear what you want to hear,
• 14:32
  Speaker 1: because Charles Evans, Charlie Evans, he came out and he said,
• 14:36
  Speaker 1: we're not seeing what the market seeing, but the market
• 14:39
  Speaker 1: may be signaling something important to us. We're paying attention.
• 14:41
  Speaker 1: I mean again, you can take what you want to
• 14:43
  Speaker 1: take from all of these comments. No one that that's
• 14:46
  Speaker 1: exactly right. But at the same time, how can they
• 14:50
  Speaker 1: not see it? You know, one and a half percent
• 14:52
  Speaker 1: inflation here, inflation falling in China, falling through Asia, falling
• 14:57
  Speaker 1: in Europe. UH. Of Australia cutting rates this morning because
• 15:04
  Speaker 1: of fallout from the China slowdown. The global p m I,
• 15:08
  Speaker 1: according to Bloomberg this morning, fell below fifty for the
• 15:12
  Speaker 1: first time in years. Uh. You know that there is
• 15:15
  Speaker 1: a hard slowdown, partly because of you know, the trade
• 15:21
  Speaker 1: fight that's been ongoing for a couple of years. It's
• 15:24
  Speaker 1: very unlikely we're going to get a resolution at the
• 15:27
  Speaker 1: G twenty UH. And the Fed has sort of raised
• 15:30
  Speaker 1: the bar right low inflation is no longer enough reason
• 15:36
  Speaker 1: to cut rates. Mary Daily, San Francisco FED President, suggesting
• 15:41
  Speaker 1: yesterday the bar is preventing recession and she doesn't see
• 15:45
  Speaker 1: a recession yet, so no need to cut. So you
• 15:51
  Speaker 1: wonder this happened to the two percent inflation target, right? So,
• 15:56
  Speaker 1: I mean so one of the criticisms on this FED
• 15:58
  Speaker 1: is that it has been beholden to the markets are
• 16:01
  Speaker 1: being led by the markets. Do you think that's a
• 16:02
  Speaker 1: fair criticism. Uh? No, I think what what's going on
• 16:09
  Speaker 1: is there behind the markets. So, for example, when Evans said, hey,
• 16:14
  Speaker 1: you know, consumers are still in great shape. We had
• 16:19
  Speaker 1: real income growth X transfers in the first quarter of
• 16:22
  Speaker 1: point one percent at an annual rate. We had the
• 16:25
  Speaker 1: weakest consumption since April, retail sales for negative what's great
• 16:31
  Speaker 1: about that? I think unfortunately they're just not really paying attention. Uh.
• 16:39
  Speaker 1: And as a result, they're not being led by the
• 16:41
  Speaker 1: markets so much as that the markets beating them over
• 16:45
  Speaker 1: the head until they pay attention to the data. So, Chris,
• 16:49
  Speaker 1: you know you've been an incredibly accurate forecaster of where
• 16:52
  Speaker 1: industrates are going to go. And right now we're looking
• 16:55
  Speaker 1: at the market pricing in an eighty eight percent chance
• 16:58
  Speaker 1: at the Federal Reserve will cut by their September eight meeting.
• 17:01
  Speaker 1: I'm looking right now at a two year yield at
• 17:03
  Speaker 1: one Where do you see that two year olds going
• 17:07
  Speaker 1: by your end? Well, you know what's what's really interesting
• 17:11
  Speaker 1: is the move today when uh Powell opened the door,
• 17:16
  Speaker 1: as you said, to a discussion of the possibility of
• 17:19
  Speaker 1: maybe thinking about right uh And and we see the
• 17:24
  Speaker 1: two year yield is eight basis points higher today. Um. Now,
• 17:29
  Speaker 1: that's that's partly reflecting, you know, a four hundred and
• 17:32
  Speaker 1: twenty five point rise in the Dow. But both of
• 17:36
  Speaker 1: those together, along with the move that you see in
• 17:39
  Speaker 1: oil in gold, is the market saying okay, at least
• 17:43
  Speaker 1: they're thinking about it. That means recession risk is a
• 17:46
  Speaker 1: little bit lower. Uh. I think if they do actually cut,
• 17:50
  Speaker 1: than what we'll see is that market interest rates will
• 17:54
  Speaker 1: start to rise. They probably have to cut fifty to
• 17:57
  Speaker 1: effectively move move the market in a significant way. Um,
• 18:03
  Speaker 1: But I think fifty basis points this year now is
• 18:06
  Speaker 1: is a pretty reasonable expectation. Paul. It's so incredible the
• 18:11
  Speaker 1: cut rates, which will lead to higher rates. That's right. Well,
• 18:16
  Speaker 1: and think about it. The refusal to cut is why
• 18:18
  Speaker 1: rates are false. Right? Rates so so so, Chris. I mean,
• 18:22
  Speaker 1: you know they've been talking about that, the low inflation
• 18:24
  Speaker 1: that you mentioned earlier, the fet is insisting that it's
• 18:26
  Speaker 1: not real, that it's transitory. What do you think forms
• 18:30
  Speaker 1: the basis of that argument? Well, I think it's actually,
• 18:35
  Speaker 1: on the face of it, it's kind of reasonable. What
• 18:37
  Speaker 1: they do is they divide up all the thousands of
• 18:41
  Speaker 1: components that go into the price measure into cyclical and
• 18:45
  Speaker 1: a cyclical things. Uh, the price declines this year are
• 18:49
  Speaker 1: mostly a cyclical. The problem with the logic is it
• 18:52
  Speaker 1: falls apart if you look back. We've got seven years
• 18:56
  Speaker 1: now with only one month at two per sent Everything
• 19:00
  Speaker 1: else is below. And last year the cyclical components fell
• 19:06
  Speaker 1: while the acyclical components rose. The average is running at
• 19:10
  Speaker 1: about one seventy five. The target is supposed to be
• 19:13
  Speaker 1: symmetrical at two. So I understand where Powell is coming from,
• 19:18
  Speaker 1: but I think it's it's kind of a short, uh
• 19:21
  Speaker 1: decided argument, right, Chris Low, thank you so much for
• 19:25
  Speaker 1: joining us. Chris is the chief economist for FT and
• 19:27
  Speaker 1: Financial based in York, joining us on on the phone. Yesterday.
• 19:45
  Speaker 1: The NASDAC in particular was tumbling, and it wasn't because
• 19:48
  Speaker 1: of trade concerns. It was because US regulators were said
• 19:51
  Speaker 1: to be setting their sights on a big tech for
• 19:54
  Speaker 1: possible antitrust lawsuits. Join us now to discuss what those
• 19:58
  Speaker 1: could potentially look like. Is US or Chris Sakers? He
• 20:01
  Speaker 1: is the professor at Cleveland State University focusing on the law.
• 20:06
  Speaker 1: Professor Sakers, thank you so much for joining us. You know,
• 20:08
  Speaker 1: given your experience, what would a potential antitrust suit against
• 20:13
  Speaker 1: Google or Facebook look like? Yeah, Hi, thank you. Um So, Uh,
• 20:19
  Speaker 1: let me just say, first of all, I think everything
• 20:21
  Speaker 1: is so hard to predict uh in this news that's
• 20:24
  Speaker 1: come out over the weekend. Um. You know, I've been
• 20:27
  Speaker 1: watching this law for a long time, and it used
• 20:29
  Speaker 1: to feel like the agencies were at least a little
• 20:32
  Speaker 1: bit predictable. After the last couple of years with the
• 20:35
  Speaker 1: Trump administration, I have found the agencies uh pretty inscrutable,
• 20:39
  Speaker 1: pretty hard to say exactly what they're gonna do or
• 20:42
  Speaker 1: where they're heading. Um, on these cases, let's just say
• 20:45
  Speaker 1: they do bring an antitrust case. I mean, I presume
• 20:48
  Speaker 1: we're looking at what in in u s antitrust law
• 20:51
  Speaker 1: we call monopolization case, meaning, uh, the government would sue
• 20:56
  Speaker 1: Facebook or Google or another platform claim that through unilateral conduct,
• 21:01
  Speaker 1: just through its own, uh deliberate conduct to exclude other competitors,
• 21:06
  Speaker 1: it's gotten a monopoly position. Um. You know. The uh
• 21:12
  Speaker 1: so far as I'm where, nobody knows exactly what the
• 21:14
  Speaker 1: government's theory against say, Google would be, but everybody's presuming
• 21:19
  Speaker 1: it's the same theory that the FTC wants looked at
• 21:22
  Speaker 1: with respect to Google, that the European Commission UH looked
• 21:26
  Speaker 1: at and actually found found a violation on UM, and
• 21:30
  Speaker 1: that is that Google tweaks its search results to disadvantage
• 21:34
  Speaker 1: its own competitors. So I think that's what it's going
• 21:38
  Speaker 1: to look like. UM. I don't think anybody could really
• 21:41
  Speaker 1: say right now whether a lawsuit like that could win,
• 21:45
  Speaker 1: but probably most people agree that it's UH somewhat unorthodox.
• 21:49
  Speaker 1: Would be a pretty pretty tough road to home. So, Professor,
• 21:53
  Speaker 1: one of the issues that I know investors are are
• 21:54
  Speaker 1: asking is just one of timing. It seems historically the
• 21:57
  Speaker 1: U s regulars have taken a very light touch to
• 22:01
  Speaker 1: US technology, whereas maybe some of the European counterparts have
• 22:04
  Speaker 1: been more aggressive. Why do you think we're getting so
• 22:07
  Speaker 1: many calls from so many different areas within the the
• 22:10
  Speaker 1: US to take a look at some of these big
• 22:12
  Speaker 1: tech companies. Yeah it, UM, I mean again, it's it's
• 22:15
  Speaker 1: kind of a mystery to me. I don't know what's
• 22:17
  Speaker 1: going on. UM. I humbly believe that there may be
• 22:21
  Speaker 1: a bit of an overreaction to news over the weekend. UM.
• 22:25
  Speaker 1: You know, the government itself has not said that it's
• 22:27
  Speaker 1: investigating anybody, that it's even begun an investigation. Um, And
• 22:32
  Speaker 1: I'm just not sure what's going to happen. But there's
• 22:35
  Speaker 1: no obvious reason that it should be these suits, uh now,
• 22:40
  Speaker 1: particularly given that this administration really hasn't brought much anti
• 22:44
  Speaker 1: trust enforcement against anybody else. So, Professor Sagers, you've testified
• 22:50
  Speaker 1: extensively about anti trust cases in front of Congress and
• 22:54
  Speaker 1: different regulatory authorities. What would you recommend? I mean, do
• 22:57
  Speaker 1: you think there is a legitimate anti trust case that
• 23:01
  Speaker 1: could be made, in particular against Facebook or Google. I'm
• 23:05
  Speaker 1: looking at Facebook shares today down an additional one after
• 23:08
  Speaker 1: a seven and a half percent plunge yesterday. Yeah, excellent questions. Um,
• 23:13
  Speaker 1: I mean I personally first, I mean, the real answer
• 23:18
  Speaker 1: to your question, I think depends so much on what
• 23:21
  Speaker 1: the evidence actually shows. Um. You know, it's it's easy
• 23:24
  Speaker 1: for all of us to look at news reports and
• 23:27
  Speaker 1: to uh, you know, uh judge these companies on what
• 23:32
  Speaker 1: we think we know from reading the papers. But a
• 23:35
  Speaker 1: case against these companies is going to depend so much
• 23:39
  Speaker 1: on what's found in the details. Um. So, I I
• 23:42
  Speaker 1: just don't know if if these lawsuits should win or not. UM.
• 23:45
  Speaker 1: I personally applaud the government if if it really is
• 23:48
  Speaker 1: serious about doing this, which I think is still an
• 23:52
  Speaker 1: open question. UM. But assuming the government is is UM serious,
• 23:57
  Speaker 1: I applaud them for trying to bring life back to
• 24:00
  Speaker 1: our monopolization law, our law against unilateral conduct, which is
• 24:04
  Speaker 1: almost completely unused in American law. UM. I think that UM.
• 24:10
  Speaker 1: If I had a criticism of the agencies, it would
• 24:13
  Speaker 1: just be that, UM, if they're serious about enforce in
• 24:15
  Speaker 1: the antitrust laws. There are a lot of targets out
• 24:18
  Speaker 1: there that would have been easier cases and the government
• 24:21
  Speaker 1: government didn't take them. UM. Again, I think the Google
• 24:24
  Speaker 1: search theory is going to be a tough road to hoe.
• 24:27
  Speaker 1: Any kind of claim against Facebook on US antitrust law
• 24:30
  Speaker 1: is probably going to be fairly challenging. UM. So I
• 24:33
  Speaker 1: applaud them, and I hope they go for it. I
• 24:35
  Speaker 1: hope they find good stuff. At the very least, they
• 24:37
  Speaker 1: ought to be investigating these companies and if they find something,
• 24:40
  Speaker 1: they should sue. UM. I'm not exactly sure why they
• 24:43
  Speaker 1: picked these companies now, so Professor Sakers, one of the
• 24:46
  Speaker 1: Internet things that I noticed was that it seems to
• 24:48
  Speaker 1: be the Department of Justice and the Federal Trade Commissioner
• 24:51
  Speaker 1: kind of divvying up big tech. You take this company,
• 24:53
  Speaker 1: I'll take that company to look at. How common is that?
• 24:57
  Speaker 1: Uh So it's uh, it's I mean, you know, deciding
• 25:02
  Speaker 1: who's going to do what, um is very common and
• 25:05
  Speaker 1: it's it's kind of necessary, but it comes up most
• 25:08
  Speaker 1: often in the so called merger review process, uh for
• 25:11
  Speaker 1: for technical reasons. It's a little unusual to see this
• 25:15
  Speaker 1: negotiation where uh they're slicing up a whole bunch of
• 25:18
  Speaker 1: different companies that they're not even investigating yet or apparently aren't,
• 25:22
  Speaker 1: so nobody knows exactly what's going on there. Um. My
• 25:26
  Speaker 1: personal guess is that the news that's been leaking um
• 25:32
  Speaker 1: and again I think it may be a little bit overblown.
• 25:35
  Speaker 1: Um actually really just has to do with with this
• 25:38
  Speaker 1: initial turf turf division negotiation over over who's going to
• 25:43
  Speaker 1: wear the badge um, and that really maybe all that's
• 25:46
  Speaker 1: happening here. It may have been necessary for the agencies
• 25:49
  Speaker 1: to do this because they happen to have been getting
• 25:51
  Speaker 1: a lot of complaints. UM. Uh so. Um. Well, but Professor,
• 25:58
  Speaker 1: it's interesting to me because, on one hand, it's going
• 26:00
  Speaker 1: to take a long time for these regulators to actually
• 26:03
  Speaker 1: push out any antitrust cases. On the other we did
• 26:06
  Speaker 1: see out of Apple, they already are making some changes
• 26:08
  Speaker 1: to their iTunes platform and saying that they're going to
• 26:11
  Speaker 1: do other privacy measures, take other privacy measures in order
• 26:15
  Speaker 1: to sort of get ahead of these So how much
• 26:17
  Speaker 1: will this shift business just in general because of the
• 26:20
  Speaker 1: threat of regulatory action. Yeah, it could be serious. I mean,
• 26:24
  Speaker 1: you know Apple's move it's I mean, it sounds like
• 26:29
  Speaker 1: Apple may have changed Instagram, I apologize it iTunes, um,
• 26:35
  Speaker 1: mainly just because that business is kind of petering out.
• 26:37
  Speaker 1: I mean, music is going to streaming video. There have
• 26:40
  Speaker 1: been a lot of complaints about um iTunes over the years. Um.
• 26:44
  Speaker 1: But but who knows. I mean, I think that your
• 26:46
  Speaker 1: suggestion is a good and correct one that these companies
• 26:50
  Speaker 1: are probably being pretty careful. Um. They and they will
• 26:54
  Speaker 1: be more careful perhaps now that there apparently is serious
• 26:58
  Speaker 1: government interest. Um. And what that will mean, I think
• 27:03
  Speaker 1: is that they're going to talk to Anni trust lawyer.
• 27:05
  Speaker 1: Is kind of a lot like whenever they're doing uh,
• 27:08
  Speaker 1: significant new business policy changes, introducing new products or changing
• 27:13
  Speaker 1: the ways their products interact with other people's products, that
• 27:16
  Speaker 1: sort of thing, anything that could be the basis of
• 27:18
  Speaker 1: a claim of exclusion. Probably they're gonna get an anti
• 27:22
  Speaker 1: trust lawyer to look at it, so you know, more
• 27:26
  Speaker 1: caution is is likely, and I personally think that seems great.
• 27:30
  Speaker 1: Chris Sakers, thank you so much. Chris is A. James A. Thomas,
• 27:33
  Speaker 1: Professor of Law at Cleveland State University, Lovely, Cleveland, Ohio.
• 27:38
  Speaker 1: Thank you so much for being with Thanks for listening
• 27:40
  Speaker 1: to the Bloomberg PANL podcast. You can subscribe and listen
• 27:43
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• 27:47
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• 27:50
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• 27:52
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• 27:55
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