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P&L: O'Brien on "Trump, the Conflicts-of-Interest President" · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:14
  Speaker 1: you and your money, whether you at the grocery store
• 0:16
  Speaker 1: or the trading floor. Find the Bloomberg p L Podcast
• 0:20
  Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. Pim I
• 0:30
  Speaker 1: was reading a story this morning. I want to read
• 0:32
  Speaker 1: the lead to you when Donald Trump starts work in
• 0:34
  Speaker 1: the Oval Office in January. In January, he will have
• 0:38
  Speaker 1: more potential business and financial conflicts of interest than any
• 0:42
  Speaker 1: other president in US history. The author of that is
• 0:45
  Speaker 1: Timothy O'Brien, the head of Bloomberg Gadfly, Bloomberg Editor, Bloomberg View,
• 0:52
  Speaker 1: UH publisher. Tell us, what are some of those conflicts? Well,
• 0:57
  Speaker 1: they're myriad, Lisa. You know, he's he's coming into the
• 1:00
  Speaker 1: b office having sat a top a boutique branding organization,
• 1:05
  Speaker 1: the Trump Organization. It has a small clutch of lucrative buildings,
• 1:09
  Speaker 1: hotel operations and um UH and his basically a licensing operation. UH.
• 1:17
  Speaker 1: He's been a human shingle for about the last ten
• 1:20
  Speaker 1: years or so of his business life. He licenses his
• 1:23
  Speaker 1: name on everything from mattresses and underwear to other people's
• 1:26
  Speaker 1: building buildings, etcetera, etcetera, and um, his kids run it.
• 1:32
  Speaker 1: He's got a small clutch of family of close associates
• 1:36
  Speaker 1: who have helped him in that business for a long time.
• 1:38
  Speaker 1: Now he's going into the White House and as president,
• 1:41
  Speaker 1: there are very few conflict of interest laws that apply
• 1:44
  Speaker 1: to him, basically none. What kinds of disclosures does he
• 1:47
  Speaker 1: have to do as far as the business because it's
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  Speaker 1: a private, private business. Yeah. I mean, he's said throughout
• 1:52
  Speaker 1: the campaign that he didn't need to release his tax
• 1:54
  Speaker 1: returns because he had already given the FEC documents about
• 1:59
  Speaker 1: his business operation. But the reality is all of that
• 2:01
  Speaker 1: stuff is self reported. There are no meaningful numbers associated
• 2:05
  Speaker 1: with any of it. We have a guy coming into
• 2:08
  Speaker 1: the White House who has substantial financial and business connections
• 2:13
  Speaker 1: and we don't really know the full excent of what
• 2:15
  Speaker 1: they are, and he's free to make a number of
• 2:17
  Speaker 1: policy decisions that could essentially feather his own nest. Timothy O'Brien,
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  Speaker 1: I want to also mention that you were the author
• 2:23
  Speaker 1: of Trump Nation, so you have some detailed history about
• 2:29
  Speaker 1: Mr Trump. The president elect. If you could characterize what
• 2:34
  Speaker 1: are the most potentially the most confrontational uh, conflicts of interest,
• 2:39
  Speaker 1: what would they be. Well, he's a real estate developer,
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  Speaker 1: so he has a lot of leverage. He's got a
• 2:45
  Speaker 1: lot of loans. In particular, Deutsche Bank, the big German bank,
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  Speaker 1: is one of his primary lenders. Deutsche is currently under
• 2:52
  Speaker 1: investigation by the Justice Department. Uh. The Trump's you know,
• 2:57
  Speaker 1: the Trump cabinet, will have influence over the course of
• 3:00
  Speaker 1: that investigation. UM. Deutsche is very close to the German government.
• 3:06
  Speaker 1: So of course any foreign policy or trade agreements that
• 3:09
  Speaker 1: Trump engages in overseas comes to bear on that. UM.
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  Speaker 1: He he campaigned on being against lobbying and entrenched lobbyists,
• 3:19
  Speaker 1: but he's got lobbyists throughout his transition team. UM. Policy
• 3:24
  Speaker 1: domestically on taxes is going to affect his real estate operations. UM.
• 3:30
  Speaker 1: He's got I think currently about seventy five lawsuits outstanding,
• 3:34
  Speaker 1: either being filed against him or that he's followed against others,
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  Speaker 1: including quite prominently the Trump University case. UM. He gets
• 3:42
  Speaker 1: immunity from having to appear on the witness stand in
• 3:44
  Speaker 1: those case is, but he's not immune from the consequences
• 3:48
  Speaker 1: of that litigation, So that's going to play out as well.
• 3:51
  Speaker 1: And there was a story today that Berkeley's analysts expect
• 3:53
  Speaker 1: that the potential Deutsche Bank find by the Department of
• 3:57
  Speaker 1: Justice will probably be much lower in a Trump presidency.
• 4:00
  Speaker 1: To your point about Dutch Bank being his major lender,
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  Speaker 1: I don't know how much that's gonna play into it.
• 4:05
  Speaker 1: Um is there or who will play the biggest watchdog
• 4:09
  Speaker 1: within the government. Who can play that role? Well, it's
• 4:12
  Speaker 1: it really the chief executive of the United States has
• 4:16
  Speaker 1: a lot of latitude. There is by design not a watchdog.
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  Speaker 1: The almost all of the conflict of interest laws at
• 4:23
  Speaker 1: the federal level UM and at the executive branch don't
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  Speaker 1: apply to the president. UM. We've relied on presidents in
• 4:31
  Speaker 1: the past creating blind trusts to store their assets so
• 4:34
  Speaker 1: someone else can manage them. But those tend to be
• 4:37
  Speaker 1: security stocks and bonds. They don't It doesn't include things
• 4:40
  Speaker 1: like a real estate operation and golf courses. Trump has
• 4:44
  Speaker 1: said that he will distance himself from those operations by
• 4:47
  Speaker 1: letting his three children run them, but in fact that's
• 4:50
  Speaker 1: really not a prophylactic. He'll be talking. One would assume
• 4:53
  Speaker 1: about those businesses with his kids every day, so right
• 4:56
  Speaker 1: now we lack a watchdog. Well, coming up, we're gonna
• 4:59
  Speaker 1: be speaking with the Thin Dean, our government analyst for
• 5:01
  Speaker 1: Bloomberg Intelligence. We're gonna talking about the defense rather the
• 5:04
  Speaker 1: Dodd Frank legislation and any attempts to change that. But
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  Speaker 1: it's just your point about lobbyists and people who are
• 5:11
  Speaker 1: veterans in Washington understand that a former representative, Mike Rogers,
• 5:15
  Speaker 1: he was a former Reagan attorney general and Heritage Foundation
• 5:19
  Speaker 1: fellow Edwin Meees also, so both of them. Uh, don't
• 5:23
  Speaker 1: don't forget about Rudy Giuliani himself, the firm that he
• 5:25
  Speaker 1: has been with until recently. Greenberg Um did lobby and
• 5:29
  Speaker 1: work for the Trump organization over the years on casino issues.
• 5:32
  Speaker 1: So all of this stuff is fairly deep and deeply
• 5:35
  Speaker 1: embedded in his portfolio and his transition team. Yeah, you're
• 5:39
  Speaker 1: saying that I Trump currently has owes as much as
• 5:42
  Speaker 1: six hundred and fifty million dollars. So that's a lot
• 5:44
  Speaker 1: of money that he has. Be's a lot of money
• 5:46
  Speaker 1: that he has at stake here potential for just a
• 5:48
  Speaker 1: quickly potential for reinstituting a glass Stiegel as a replacement
• 5:53
  Speaker 1: for Dodd Frank. You know, Trump has said all sorts
• 5:56
  Speaker 1: of varying things about bank regulation, regulatory reform, Elizabeth Warren
• 6:01
  Speaker 1: of all people today, so that she'd love to allie
• 6:03
  Speaker 1: with him on some of this. So who would have
• 6:05
  Speaker 1: ever thought that Donald Trump and Elizabeth Warren would wind
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  Speaker 1: up as strange bedfellows. So we're gonna have a lot
• 6:10
  Speaker 1: of wait and see on him in public policy. Thank
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  Speaker 1: you very much. Timothy O'Brien, Executive editor Bloomberg, Gadfly and
• 6:16
  Speaker 1: Bloomberg View. He is also the author of the book
• 6:19
  Speaker 1: Trump Nation. I'm Pim Fox along with Lisa Abramowitz. This
• 6:23
  Speaker 1: is Bloomberg. I want to turn our attention now to
• 6:35
  Speaker 1: Dodd Frank legislation. Nathan Dean is our government analyst for
• 6:38
  Speaker 1: Bloomberg Intelligence. He joins us, Now, bank stocks have had
• 6:43
  Speaker 1: a great run over the last five days. A city
• 6:45
  Speaker 1: group up seven and a half percent, Golden Sacks of fourteen,
• 6:49
  Speaker 1: Morgan Stanley up fifteen, JP Morgan up twelve. Tell us
• 6:52
  Speaker 1: about the future of Dodd Frank, Nathan Dean, So, the
• 6:56
  Speaker 1: future of Dodd Frank is that it's going to get weakened. Uh.
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  Speaker 1: You know now that we have President elect Donald Trump,
• 7:02
  Speaker 1: a Republican Senate and a Republican House. UH, Congress is
• 7:06
  Speaker 1: going to be able to push forth many of the
• 7:07
  Speaker 1: changes that they wanted to do for the last couple
• 7:09
  Speaker 1: of years on dot frank. And they're going to weaken it. Well,
• 7:12
  Speaker 1: but what are the changes that they want to make?
• 7:15
  Speaker 1: So they can't repeal it and they can't get rid
• 7:17
  Speaker 1: of anything material, so vocal rule, for example, they can't
• 7:20
  Speaker 1: do that because you need sixty votes in the Senate
• 7:22
  Speaker 1: to overcome a Democratic filibuster. But what they're gonna do
• 7:25
  Speaker 1: is there's a plan out in Congress right now called
• 7:26
  Speaker 1: the Financial Choice Act. You pay ten percent of the LIBERATORYTIO,
• 7:29
  Speaker 1: so increased capital requirements buy the out of dot frank. UH.
• 7:33
  Speaker 1: And another rule that we're going to see, the fiduciary
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  Speaker 1: duty rule at the Department of Labor. We expect that
• 7:38
  Speaker 1: to get weakened. Uh. And so you're gonna see targeted
• 7:41
  Speaker 1: relief to certain sectors of the financial services industry small
• 7:45
  Speaker 1: mid sized banks round two or fifty billion in assets
• 7:47
  Speaker 1: and below, asset managers, insurers, But you're not going to
• 7:51
  Speaker 1: see like a global repeal of dot frank. Nathan, just
• 7:54
  Speaker 1: go back for just a second. I want to want
• 7:55
  Speaker 1: you to recast maybe just offer that detail about if
• 7:58
  Speaker 1: you pay the ten percent at and if you have
• 8:00
  Speaker 1: that that capital cushion, then you get to opt out.
• 8:03
  Speaker 1: You can in a sense, you're pain to get out
• 8:05
  Speaker 1: of Dodd Frank exactly. So there's this idea for higher
• 8:08
  Speaker 1: requiring coup requirements, less regulation. The planets out in Congress
• 8:12
  Speaker 1: right now, and it has to be reintroduced next year,
• 8:14
  Speaker 1: so it may look a little bit different. Requires the
• 8:17
  Speaker 1: big eight g cs, Bank America, JP, Morgan, etcetera. To
• 8:20
  Speaker 1: have a ten percent leverage ratio right now, they're around
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  Speaker 1: six now. Chairman Henseling estimates that in order to get
• 8:26
  Speaker 1: from six to eight a six to ten, those eight
• 8:29
  Speaker 1: banks would have to pony up about three D five
• 8:31
  Speaker 1: hundred billion in new capital. Now that's a pretty high
• 8:34
  Speaker 1: price to pay. But if you go further down the line,
• 8:37
  Speaker 1: you start looking at the banks that are around fifty
• 8:39
  Speaker 1: billion in assets, ten billion assets, many of them are
• 8:41
  Speaker 1: already at that leverage ratio. So, uh, this Financial Choice
• 8:45
  Speaker 1: Act really does favor the small and community sized banks.
• 8:49
  Speaker 1: So it's you know, it's sort of interesting. I think
• 8:52
  Speaker 1: when I talk to people. Their impression is that UH
• 8:55
  Speaker 1: and Mr Trump will roll back the majority of the
• 8:58
  Speaker 1: Dodd Frank Act, and that include dudes much more risk
• 9:01
  Speaker 1: taking at the big banks, and that's one reason why
• 9:05
  Speaker 1: people are expecting profitability to go up. And yet it
• 9:09
  Speaker 1: sounds like that's not necessarily the case. Well, there are
• 9:13
  Speaker 1: many ways that they can do this. So for two
• 9:15
  Speaker 1: things to point out. One, the Republicans have tried over
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  Speaker 1: a times since two thousand ten to amend dot Frank.
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  Speaker 1: They haven't succeeded because they've never been able to get
• 9:24
  Speaker 1: that sixty vote in the Senate. Elizabeth warrened she's going
• 9:27
  Speaker 1: to be able to cause a lot of problems in
• 9:28
  Speaker 1: the Senate and block a lot of that big regulation. However,
• 9:32
  Speaker 1: Donald Trump now controls the financial regulators, and so he
• 9:35
  Speaker 1: can instruct the new heads of the SEC, se IFDC, UH,
• 9:39
  Speaker 1: you know the Photo Reserve, when if Janet Yen leaves
• 9:42
  Speaker 1: into thousand eighteen to start looking at rolling back regulation
• 9:46
  Speaker 1: and so UH, they can do things like putting out
• 9:48
  Speaker 1: notices saying that we're not going to enforce certain regulations,
• 9:51
  Speaker 1: We're not going to hold you accountable. So I think
• 9:54
  Speaker 1: if you see in the short term, you're not going
• 9:55
  Speaker 1: to see a lot of change, but in the long
• 9:57
  Speaker 1: term you're gonna see a lot more. Is there a
• 9:59
  Speaker 1: particular regular lation that you're thinking they could sort of
• 10:02
  Speaker 1: ignore or pushed to the side. The fiduciary duty is
• 10:05
  Speaker 1: the perfect example. So this rule came up from the
• 10:07
  Speaker 1: Labor Department. Uh. It caused a lot of problems with
• 10:10
  Speaker 1: the life insurance industry, the broker dealers, the retirement investment advisors,
• 10:15
  Speaker 1: lots of pushback both from the Democrats, some Democrats and Republicans.
• 10:19
  Speaker 1: Rule went into forest compliances in April. So what we
• 10:23
  Speaker 1: could see there is, uh, the new administration come out
• 10:26
  Speaker 1: put out a notice in March saying you don't have
• 10:28
  Speaker 1: to comply, and then they'll have to repropose the rule. Uh.
• 10:31
  Speaker 1: You know, any regulation, it's not like Donald Trump can
• 10:34
  Speaker 1: come in on day one, just sign an executive order
• 10:36
  Speaker 1: and it goes away. They have to repropose it. And
• 10:38
  Speaker 1: so the quickest way to overturn a regulation is to
• 10:41
  Speaker 1: have Congress passidents law. But if they can't do it
• 10:44
  Speaker 1: and they turn to the regulatory agencies, they have to
• 10:46
  Speaker 1: do a rulemaking process, which could take up the eighteen
• 10:48
  Speaker 1: months to two years Nathan non bank financial institutions such
• 10:52
  Speaker 1: as A I G, Met Life, Prudential Financial what can
• 10:57
  Speaker 1: we expect there? So, the Financial Stability or Recite Council
• 11:00
  Speaker 1: is the one that controls the designation for A I
• 11:03
  Speaker 1: G and Prudential and met UH. And they serve at
• 11:06
  Speaker 1: the pleasure of the Secretary of the Treasury. They can't
• 11:08
  Speaker 1: do anything unless the Treasury Secretary signs off on it.
• 11:11
  Speaker 1: And now the Secretary Treasury is going to serve at
• 11:13
  Speaker 1: the pleasure of Donald Trump. And so when A I
• 11:16
  Speaker 1: G and Prudential have their annual reviews over their city status,
• 11:21
  Speaker 1: which which will take place sometime in the September of
• 11:23
  Speaker 1: October of two thousand seventeen, UH, it's not unlikely to
• 11:26
  Speaker 1: see at that time the f stocks say we're just
• 11:28
  Speaker 1: going to d designate you. You know, there's a lot
• 11:30
  Speaker 1: of talk about town. Is the f stock going to
• 11:32
  Speaker 1: be finished or not? Uh? And one of the easiest
• 11:35
  Speaker 1: ways to get rid of that that designation for AI
• 11:38
  Speaker 1: G and Prudential is to have the f stock do
• 11:39
  Speaker 1: it in you know, later next year. Have the Republicans
• 11:42
  Speaker 1: been against the city a designation just real quick, yes, absolutely,
• 11:46
  Speaker 1: across the board, really really interesting Nathan dean government analyst
• 11:50
  Speaker 1: at Bloomberg Intelligence in Washington, d C, talking about the
• 11:53
  Speaker 1: implications UH in a Donald Trump administration. Well, our benchmark.
• 12:06
  Speaker 1: When we want to know anything about the retail industries,
• 12:08
  Speaker 1: we call Bert Flickinger. He's the managing director a Strategic
• 12:12
  Speaker 1: Resource Group. He can be followed on Twitter at Bert
• 12:16
  Speaker 1: underscore Flickinger. Alright, Bert underscore Flickinger, tell me about the
• 12:20
  Speaker 1: retail ice age that you've most recently witnessed. There's an
• 12:24
  Speaker 1: accelerating retail ice age, PIM and Lisa, and you're going
• 12:27
  Speaker 1: to see a record number of bankruptcies UH for retailers.
• 12:32
  Speaker 1: You're seeing the corporate bond debt trade down for everyone
• 12:35
  Speaker 1: from Neiman Marcus trading at eight year below most of
• 12:39
  Speaker 1: your listeners know issued in a hundred jay cruise trading
• 12:43
  Speaker 1: below forty searies is really struggling. And even today you
• 12:48
  Speaker 1: and Lisa talked about the Southsayer of South Korea and
• 12:51
  Speaker 1: the magic purses. The rasputant of retail is in the
• 12:55
  Speaker 1: headlines today and Bill Ackman, as he left j C
• 12:58
  Speaker 1: Penney on death store step dropped the stock from forty
• 13:01
  Speaker 1: three to about a dollar twenty and then Steve sat off,
• 13:05
  Speaker 1: the pride of Hamilton's College and sex fifth Avenue came back,
• 13:08
  Speaker 1: brought Penny back from the dead. They missed today, but
• 13:11
  Speaker 1: they're gonna make it where a lot of their competitors
• 13:14
  Speaker 1: like the Bonton Uh as well as Sears Holdings which
• 13:17
  Speaker 1: still has softer side of Sears, are struggling, and even
• 13:21
  Speaker 1: Neiman Marcus Group with Jones Barney their bonds are trading
• 13:24
  Speaker 1: at eighty year below. So there's gonna be a real
• 13:27
  Speaker 1: rationalization whether companies are impaired by RASP mutants like Bill
• 13:31
  Speaker 1: Ackman or just poor consulting and financial advice. Well, and
• 13:35
  Speaker 1: you noted that will be the most troubling year for
• 13:39
  Speaker 1: retail in a decade, and not to be outdone, eighteen
• 13:43
  Speaker 1: will be worth Why well, Lisa, and you you, you
• 13:47
  Speaker 1: and PIM already reported declining oil prices. So so for us,
• 13:51
  Speaker 1: the Harbinger is really Kazakhstan where Hudson Bay Company opener
• 13:55
  Speaker 1: Brand was not expecting that the Harbingers her list to travel.
• 14:00
  Speaker 1: But go ahead, but tell us this story because Hudson
• 14:02
  Speaker 1: Bay owns a fifth SAX with SAX with the Avenue
• 14:05
  Speaker 1: put their latest Crown Crown jewel license store uh in Kazakhstan.
• 14:12
  Speaker 1: I know from our work with the State Department in USA.
• 14:15
  Speaker 1: It was only a few years ago where people were
• 14:17
  Speaker 1: showing up on Saturdays with livestock and butcher butchering cattle
• 14:21
  Speaker 1: on their cars and selling pieces of meat, and State
• 14:24
  Speaker 1: Department was asking us to come up with basic retail.
• 14:27
  Speaker 1: How you get to that luxury goods is beyond me.
• 14:30
  Speaker 1: But Sachs did at Harvey Nichols did at Harvey Nichols
• 14:33
  Speaker 1: closed their Kazakhstan store in less than a hundred days.
• 14:36
  Speaker 1: What's what's the barometer? The petro dollars aren't there. We
• 14:40
  Speaker 1: were in Paris for Fashion Week as well as Golden Week.
• 14:44
  Speaker 1: All the people from their maz to Le um Le
• 14:48
  Speaker 1: Bon Marche. Printon told us the Sinoa, which your listeners
• 14:52
  Speaker 1: know as the Chinese, are there with cameras or calculators,
• 14:55
  Speaker 1: just snapping pictures and looking for a lower price. And
• 14:58
  Speaker 1: his pen reference in the b break. You can go
• 15:00
  Speaker 1: to every luxury offline retailer. And that's why Neiman Marcus,
• 15:04
  Speaker 1: with its mountain of debt with Bergdorf, is in a
• 15:07
  Speaker 1: bad position for for maybe eighteen but Barney's is an
• 15:12
  Speaker 1: even worse position for seventeen and Jay Crew possibly for
• 15:16
  Speaker 1: this Christmas, Hanka and Kansas. How do you square the
• 15:20
  Speaker 1: sudden surgeon optimism about growth in the US and the
• 15:24
  Speaker 1: possibility of inflation. And frankly, the more that markets gain,
• 15:27
  Speaker 1: the more that the wealthiest people will will gain money
• 15:31
  Speaker 1: that they can spend at these at these retailers. So
• 15:34
  Speaker 1: why isn't this a positive? It's it's a positive in
• 15:38
  Speaker 1: terms of the stock market. The wealth effect is your
• 15:41
  Speaker 1: referenced well, Lisa, but but but at the end, uh,
• 15:45
  Speaker 1: you also have political problems. Mayor Michael Bloomberg under understood
• 15:49
  Speaker 1: the balance of the public and private sector. Average family
• 15:54
  Speaker 1: takes four hours and forty minutes to come from the
• 15:56
  Speaker 1: suburbs the shop in Midtown Manhattan and Los Angeles, Mischigan
• 15:59
  Speaker 1: have Chicago with the traffic density, and the major cities
• 16:03
  Speaker 1: in the US, UH, sevent of that time's lofts and traffic,
• 16:07
  Speaker 1: So people don't come anymore. So footfalls way down for
• 16:11
  Speaker 1: leading department stores and and luxury stores and all of
• 16:14
  Speaker 1: what we call the gateway cities. And it's not unique
• 16:17
  Speaker 1: to Los Angeles or Vancouver, New York, or Miami at
• 16:22
  Speaker 1: Aventure Mall. It's something we're seeing in Singapore and and
• 16:26
  Speaker 1: uh we're seeing in in Tokyo and and worldwide. And
• 16:29
  Speaker 1: also people have expenses coming up, So it's the aspirational
• 16:33
  Speaker 1: middle class. It's the middle upper UH that is has
• 16:38
  Speaker 1: everything from higher healthcare to tuition. So they're cutting back
• 16:42
  Speaker 1: on retail spending UH spending spending in other areas. And
• 16:45
  Speaker 1: then you have the millennials who even if they have
• 16:48
  Speaker 1: good jobs and have the money, UH, there are nesting
• 16:51
  Speaker 1: or what we call thrift ng and going to UH
• 16:53
  Speaker 1: savers or good wealth thrift stores or ladies ladies village
• 16:58
  Speaker 1: home improvement stores. So you could out to towns like
• 17:01
  Speaker 1: East Hampton and luxury retails not just boarded up. In
• 17:05
  Speaker 1: the faller of the Winner, it's largely boarded up. In
• 17:08
  Speaker 1: part of the summer, Tiffany had to close their store
• 17:10
  Speaker 1: um uh and a number of others closer stores. So
• 17:14
  Speaker 1: there'll be a great retail rationalization in the next few years.
• 17:17
  Speaker 1: To your point, but there'll be a real retail renaissance
• 17:20
  Speaker 1: starting in and really well capitalized capable retailers are win
• 17:25
  Speaker 1: particularly the ones with great merchant leaders. So who's that
• 17:28
  Speaker 1: who's it going to be? Who are the winners? Uh?
• 17:31
  Speaker 1: We we see, we see the winners across sector. Uh,
• 17:35
  Speaker 1: multi multi tier. It'll be Kroger, off Price, dollar dollar General,
• 17:41
  Speaker 1: t J t J, t j X, Cross stores early.
• 17:45
  Speaker 1: If you look at your point him the best leader
• 17:47
  Speaker 1: in retailer retailers Ben Camorados, a seminal genius founder of
• 17:52
  Speaker 1: t j X, with Carol Meyer, Woods and Ernie Herman. Uh,
• 17:55
  Speaker 1: their margins are twice as biggest Amazon. Their inventory turns
• 17:59
  Speaker 1: or six times. The rest of the department stores are
• 18:02
  Speaker 1: turning inventory two point three to two point seven times.
• 18:05
  Speaker 1: It's cash flow. The department stores are paying Uh, many
• 18:10
  Speaker 1: of them are paying their vendors late. So the vendors
• 18:13
  Speaker 1: need cash to give to Lean fong in their factors,
• 18:16
  Speaker 1: less credit available exactly, Well, right, Bert, So then I'll
• 18:19
  Speaker 1: ho about on the flip side. I mean you said
• 18:21
  Speaker 1: that there could be, was it correct? A record number
• 18:23
  Speaker 1: of bankruptcies and retail in the upcoming years. So which
• 18:26
  Speaker 1: companies do you expect to go bankrupt? It's uh, you
• 18:29
  Speaker 1: never you never want to say it's it's all the
• 18:32
  Speaker 1: way over. But it looks like vulnerable. You could just
• 18:34
  Speaker 1: say which ones are vulnerably vulnerable to the curtain coming down?
• 18:37
  Speaker 1: So when the day Dumas stage. For lease day Dumas
• 18:41
  Speaker 1: stage is everybody from Jay Crew to Sears holding UH
• 18:46
  Speaker 1: Bontan's trade traded way down, uh Neiman, Marcus Berg Door's
• 18:52
  Speaker 1: credit worthy now, but but see issues for them going forward.
• 18:57
  Speaker 1: And then UM yeah, even even undercapitalized on the on
• 19:01
  Speaker 1: the low end, UH Fred's seems seems to be struggling
• 19:06
  Speaker 1: quite a bit. And and then UM chain drug discount
• 19:10
  Speaker 1: shop COO. Wherever you see private equity getting greedy and
• 19:14
  Speaker 1: up streaming money to themselves, UH and big fees and
• 19:17
  Speaker 1: and that's that's my professional view of Bill Ackman UH
• 19:21
  Speaker 1: in retail and won't comment on what he's done more
• 19:24
  Speaker 1: recently at Valiant. But when you have a great turnaround
• 19:28
  Speaker 1: leader like UM our mutual friend Frank Blake at Home
• 19:32
  Speaker 1: Depot Bob near Delhi half killed the company, the UH
• 19:35
  Speaker 1: three founders Marcus blank Et Cetera brought Blake in and
• 19:40
  Speaker 1: UH complete upside Bert Clicking Share managing director at Strategic
• 19:45
  Speaker 1: Resource Group on all things retail. This is Bloomberg Einstein's
• 19:59
  Speaker 1: The Greatest miss Stake, The Life of a Flawed Genius.
• 20:02
  Speaker 1: It was published in September and the author of the
• 20:05
  Speaker 1: book David bodenis it joins us now from London. David,
• 20:09
  Speaker 1: thank you very much for being with us. Thank you sir. Now.
• 20:13
  Speaker 1: Your previous books have included such titles as E equals
• 20:18
  Speaker 1: MC squared. You've also written about computer generated fascism. What
• 20:22
  Speaker 1: inspired you to write this latest book, Einstein's Greatest Mistake?
• 20:28
  Speaker 1: I thought, you know, if you write a book called
• 20:29
  Speaker 1: Einstein is smarter than us and we're a bunch of
• 20:31
  Speaker 1: dumb schmunks, nobody's interested in that. But if you have
• 20:34
  Speaker 1: a book that's like, oh, Paul Einstein, he had something
• 20:36
  Speaker 1: wrong because there was a psychological aspect of him that
• 20:39
  Speaker 1: we could understand when everybody's interested, including this author. I
• 20:44
  Speaker 1: loved um turning him into a human being and really
• 20:47
  Speaker 1: seeing not just his great strength, which were magnificent, but
• 20:51
  Speaker 1: also what happened when he stumbled? How did he get stuck?
• 20:53
  Speaker 1: And what lessons does it give us? So what was
• 20:56
  Speaker 1: his biggest mistake? Because because stake, it was a psychologic
• 21:01
  Speaker 1: most it was a psychological mistake. He he believed that
• 21:04
  Speaker 1: the universe was like a beautiful, clear book, that everything
• 21:07
  Speaker 1: was crisp and clear, that there was an order. It
• 21:09
  Speaker 1: wasn't like a random magazine with a bit of this
• 21:11
  Speaker 1: and a bit of that. Um, And then he had
• 21:14
  Speaker 1: had so much reason for believing this. It made all
• 21:16
  Speaker 1: sorts of sense about outer space. It led to notions
• 21:19
  Speaker 1: of the expanding universe, just terrific insights that later when
• 21:22
  Speaker 1: people started studying things on the microscual on the micro
• 21:25
  Speaker 1: small level and quantum mechanics, which seem to be just
• 21:28
  Speaker 1: that the universe isn't orderly, that it isn't super clear
• 21:31
  Speaker 1: and crisp when you analyze. He just couldn't accept it.
• 21:35
  Speaker 1: You know. He he had this comment, God does not
• 21:37
  Speaker 1: play dice. Was he a religious person? Um? If you
• 21:43
  Speaker 1: if you make a sort of just I could to
• 21:45
  Speaker 1: say about that comment. So yeah, so Einstein said God
• 21:47
  Speaker 1: does not play dice with the universe. Everything's orderly and clear,
• 21:50
  Speaker 1: there's a pattern set up in advance. And this good
• 21:53
  Speaker 1: friend Nell's boy used to say, Einstein, stop telling God
• 21:56
  Speaker 1: what to do, Like, how do you know it's great? Um?
• 22:01
  Speaker 1: So for religion. If Einstein he wasn't an atheist, He
• 22:04
  Speaker 1: thought atheism was very unscientific it um, you know, like
• 22:08
  Speaker 1: you're presuming to know too much. At the other hand,
• 22:09
  Speaker 1: he wasn't a believer in traditional like the details of
• 22:12
  Speaker 1: revealed religion. So he would think that Moses was very wise,
• 22:15
  Speaker 1: But he didn't think that Moses got the commandments from
• 22:18
  Speaker 1: gathering on Sinai. But there's a big space in between.
• 22:21
  Speaker 1: And uh, Einstein loves the seventeenth century death Jewish philosopher Spinoza.
• 22:26
  Speaker 1: He thought, Spinoza, what what wrote about this? These waiting
• 22:29
  Speaker 1: patterns in the universe, not presuming to say where they
• 22:32
  Speaker 1: came from, but just thinking, how magnificent is it that
• 22:35
  Speaker 1: there's instead of chaos and disorder around us, there's this harmony.
• 22:39
  Speaker 1: There's these patterns. Where do they come from? Maybe maybe
• 22:42
  Speaker 1: really floatful human beings can just discern that pattern, take
• 22:46
  Speaker 1: away the veil between us and deepest reality and see
• 22:49
  Speaker 1: what's there. And Einstein really wanted to do that. Can
• 22:53
  Speaker 1: you maybe draw some connection to the way people look
• 22:56
  Speaker 1: at the markets and and money because you talk about
• 23:00
  Speaker 1: patterns and being able to understand the patterns and the
• 23:04
  Speaker 1: and the moves is there. Can you define the difference
• 23:07
  Speaker 1: between a psychological mistake and a technical mistake that might
• 23:10
  Speaker 1: be applied to looking at the world of business and finance? Sure,
• 23:15
  Speaker 1: very much. The reason Einstein got stuck in his psychological
• 23:18
  Speaker 1: mistake was because his particular approach had been really successful before.
• 23:23
  Speaker 1: And if something's worked really well, if your company has
• 23:26
  Speaker 1: done well, you tend to think it's because of my approach,
• 23:28
  Speaker 1: my approach to the markets, my insight. Well, it might
• 23:32
  Speaker 1: actually just be chats, right, I mean, that's why tracker
• 23:35
  Speaker 1: funds on a simple level have done so well. So
• 23:37
  Speaker 1: very often people get not just so much a ruther
• 23:40
  Speaker 1: of failure, but a rut of success. You're doing something
• 23:43
  Speaker 1: well and it's really hard to change it because it's
• 23:46
  Speaker 1: been very successful. The other thing that comes from Einstein
• 23:50
  Speaker 1: which might apply to the markets is he developed his
• 23:52
  Speaker 1: own tools, which is a great thing to do for him.
• 23:55
  Speaker 1: It was certain tools and mathematics. Within the markets, it
• 23:58
  Speaker 1: might be I don't know, certain quantitative people would brings
• 24:00
  Speaker 1: in or certain analytic approaches, and you become really proud
• 24:03
  Speaker 1: of your tools. You get good at using your tools,
• 24:06
  Speaker 1: and you find it hard to imagine what would be
• 24:08
  Speaker 1: like using very very different tools. And then of course
• 24:11
  Speaker 1: behind it all is maybe what was your your first question?
• 24:14
  Speaker 1: If you believe, like Spinoza and Einstein, there's a deep
• 24:16
  Speaker 1: patterns waiting in the universe, you're not going to give
• 24:19
  Speaker 1: up till you find them. And some people, you know,
• 24:21
  Speaker 1: it always comes up. Somebody has this guaranteed way to understand,
• 24:24
  Speaker 1: which appears to be turbulence in the market actually follows
• 24:27
  Speaker 1: such and such deep patterns, and we're very often disappointed.
• 24:30
  Speaker 1: Those those in tights tend not to hold for more
• 24:33
  Speaker 1: than than temporary intervals. But just that belief is there,
• 24:37
  Speaker 1: and that belief, well, you can move a lot of
• 24:39
  Speaker 1: money on that belief. Well, you know, one sort of
• 24:42
  Speaker 1: cliche about Einstein is that he took a long time
• 24:45
  Speaker 1: to read and didn't do so well in school and um,
• 24:48
  Speaker 1: and so what can we learn from where he was
• 24:50
  Speaker 1: a genius? And is that true? Oh, it turns out
• 24:54
  Speaker 1: that the story that Einstein was a bad students I've
• 24:56
  Speaker 1: managed to trace it back to Rocky one and written
• 24:58
  Speaker 1: by Sylvester Stallone. And although Mr Stallone had magnificent biceps
• 25:03
  Speaker 1: and um, other muscles, he's not noted as an Einstein scholar.
• 25:07
  Speaker 1: And it turns out Einstein was actually einesteme was a
• 25:09
  Speaker 1: perfectly good student. Um, he was a good beat plus
• 25:12
  Speaker 1: or a minor students. He went to the Polytechnic in Zurich.
• 25:15
  Speaker 1: He did fail to get in on his first tribe.
• 25:17
  Speaker 1: But he's only sixteen, he hadn't even finished high school,
• 25:19
  Speaker 1: and his scores and math and physics were strong, but
• 25:22
  Speaker 1: his his Latin and some of his friend led him down.
• 25:24
  Speaker 1: And he did quite well after a year of media
• 25:27
  Speaker 1: high school. So he was a strong student. But it's
• 25:29
  Speaker 1: nice is that he wasn't a perfect student. He wasn't
• 25:32
  Speaker 1: like oh an a plus student from Harvard or Columbia
• 25:35
  Speaker 1: who's always had the things easy. So Einstein got used
• 25:37
  Speaker 1: to looking at things with a bit of a struggle.
• 25:40
  Speaker 1: So he was I don't want to call him a
• 25:41
  Speaker 1: total outsider. He was a moderate outsider. And there's a
• 25:44
  Speaker 1: great advantage as being a moderate outsider. You know what's
• 25:47
  Speaker 1: going on, but you're kind of willing that, you're kind
• 25:50
  Speaker 1: of willing to take a fresh perspective. David bodanis author
• 25:52
  Speaker 1: of Einstein's Greatest Mistake. Joining us from London. Thank you
• 25:55
  Speaker 1: so much. Thanks for listening to the Bloomberg pien L podcast.
• 26:04
  Speaker 1: You can subscribe and listen to interviews at iTunes, SoundCloud,
• 26:08
  Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm
• 26:13
  Speaker 1: out there on Twitter at pim Fox. I'm out there
• 26:15
  Speaker 1: on Twitter, at Lisa Abramo. It's one before the podcast.
• 26:19
  Speaker 1: You can always catch us worldwide on Bloomberg Radio