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The Commercial Real Estate Market is in Good Shape · 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 wits each day
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  Speaker 1: we bring you the most noteworthy and useful interviews for
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  Speaker 1: you and your money. Whether at the grocery store or
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  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. We want to switch gears a
• 0:22
  Speaker 1: little bit and talk about a T and T talk
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  Speaker 1: about direct TV, the pay TV business. There's lots going
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  Speaker 1: on there. Something that came out a little bit strange.
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  Speaker 1: I think in this world of court cutting is a
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  Speaker 1: T and T s direct TV business is actually raising rates.
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  Speaker 1: So to help us kind of walk through the strategy there,
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  Speaker 1: we welcome John Butler. John and John is a senior
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  Speaker 1: Telecom services and Equipment analyst at Bloomberg Intelligence. He joins
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  Speaker 1: us in our Bloomberg Interactive Broker studio. John. Thanks for
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  Speaker 1: joining us. Uh in a world of court cutting, a
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  Speaker 1: price increase seemed a little strange. What do you read
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  Speaker 1: into it? It does, But I don't think they're making
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  Speaker 1: money in the business. I think that's part of what's
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  Speaker 1: behind this move. If you hear them defend it, they say,
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  Speaker 1: we want to get towards that break even Ibada in
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  Speaker 1: this business. And I think also advertising plays into it.
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  Speaker 1: So they ran promotions to get subscribers into direct tv Now.
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  Speaker 1: In the beginning, it's a video PayTV video streaming service,
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  Speaker 1: they're up against a lot of competition. They offered low
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  Speaker 1: rates to scale up quick quickly, but ultimately you want
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  Speaker 1: to shake out those people that really are using the
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  Speaker 1: product or are just there because of low price. So
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  Speaker 1: does this suggest that they're really having problems competing with
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  Speaker 1: Netflix and other streamers that are out there, because that
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  Speaker 1: would be a a real concern for a T T
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  Speaker 1: and Sherilds. That's that's what's that's one of the pillars
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  Speaker 1: of the growth story. Yeah, I think it's a concern. Look,
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  Speaker 1: a lot of people are asking what's on Netflix tonight,
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  Speaker 1: what's on Amazon tonight, as opposed to turning to traditional
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  Speaker 1: pay TV packages, whether it's Direct tv Now or it's
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  Speaker 1: delivered via Comcast. So there is some churn there and
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  Speaker 1: they're trying to stabilize that, and I think by sort
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  Speaker 1: of culling the service down to the most loyal user
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  Speaker 1: base they can then rebuild from there, if you will.
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  Speaker 1: So just real quickly here, I'm wondering from an antitrust
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  Speaker 1: perspective whether this will lead to fears that this consolidation
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  Speaker 1: that we've seen among the big cable companies will lead
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  Speaker 1: to higher prices for consumers. You know, I think it's
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  Speaker 1: a risk, but it's so competitive at their LISA that
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  Speaker 1: if anything, that's the competition is the best way to
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  Speaker 1: police price. And and really there's no lack of competition
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  Speaker 1: in the streaming space or in traditional pay TV. All right,
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  Speaker 1: thank you so much for being with us. Really really interesting, uh,
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  Speaker 1: that A T and T is hiking its prices amid
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  Speaker 1: all of that fierce competition. John Butler is Bloomberg and
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  Speaker 1: North American telecoms UH Bloomberg, analyst for Bloomberg in intelligence. Well,
• 3:12
  Speaker 1: Amazon dot Com poll has been transforming the retail landscape
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  Speaker 1: in many ways. It's also been absolutely transforming the world
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  Speaker 1: of shipping and delivery. Joining us now, UH, to talk
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  Speaker 1: about that as well as just broadly the business backdrop
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  Speaker 1: for shipping is John Pearson. He is the new chief
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  Speaker 1: executive officer of DHL Express, joining us from our San
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  Speaker 1: Francisco studio John, you are there to celebrate the fiftieth
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  Speaker 1: year of d h L Express, Is that correct? Yeah,
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  Speaker 1: that's correct. We're celebrating many things, celebrating some of our
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  Speaker 1: employee awards, um, the graduation of our supervisors, d h
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  Speaker 1: l's Got Heart program, and definitely our fiftieth anniversary of
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  Speaker 1: d h L Express and in fact, massively pleasingly to
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  Speaker 1: us all we were presented with the certificate of honor
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  Speaker 1: by a representative Alex Lazar from the Mayor's office, So
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  Speaker 1: that was quite something given this is our hometown. So
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  Speaker 1: so fifty years a lot has happened, and in the
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  Speaker 1: past few years in particular, at the rate of of
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  Speaker 1: change has been dramatic. I'm just wondering, what is your
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  Speaker 1: biggest challenge right now as you try to adapt to
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  Speaker 1: the Amazon era. Well, I think the rate of change
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  Speaker 1: has been phenomenal since nineteen sine setting up a cross
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  Speaker 1: border time definite international express business wasn't easy and in
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  Speaker 1: those early years when we're pioneering all the countries. But
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  Speaker 1: to Amazon, yes, I mean Amazon has been a fantastic
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  Speaker 1: partner and customer for I'm guessing a little bit, but
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  Speaker 1: somewhere between ten and thirteen years, So um, I think
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  Speaker 1: that's the most important thing. We do work with them,
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  Speaker 1: we do work for them. And the way I see
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  Speaker 1: it a little bit, it is that the size of
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  Speaker 1: the e commerce opportunity is such, whether it be B
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  Speaker 1: two C or B two B or even B two
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  Speaker 1: B marketplaces, the sizes as such that we're perhaps sharing
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  Speaker 1: the pizza or the cake, if you can take that analogy,
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  Speaker 1: rather than competing for it. Um, I think there's a
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  Speaker 1: lot out there. I think that all organizations, and definitely
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  Speaker 1: this is our own focus, need to be focused on
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  Speaker 1: playing in e commerce profitably. As I say, when there's
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  Speaker 1: so much of something about, you can grab bits of
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  Speaker 1: something that may not be right for your organization. So
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  Speaker 1: we play in the the sort of top end of
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  Speaker 1: the of the time definite cross border e commerce market,
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  Speaker 1: whether that's luxury fashion and apparel, which a lot of
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  Speaker 1: it is, by the way, but also consumer electronics and
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  Speaker 1: all sorts of other things that people are producing and
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  Speaker 1: putting on the world stage. So that's how I would
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  Speaker 1: summarize a little bit of an e commerce comment as
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  Speaker 1: a little bit of an Amazon comment. But as I say,
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  Speaker 1: are relationship with Amazon has been very strong for well
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  Speaker 1: over a decade, and so John, with with the growth
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  Speaker 1: of e commerce, which you know no signs of slowing down.
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  Speaker 1: That one of the concerns is about the global logistics backbone,
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  Speaker 1: the global shipping backbone. Is it enough, Is it, I guess,
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  Speaker 1: vibrant enough to support the growth of e commerce. What
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  Speaker 1: is your thought that they're globally well that and that's
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  Speaker 1: a great question. It relates a little bit to the
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  Speaker 1: question on Amazon. And my answer on Amazon is the
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  Speaker 1: volumes and the growth of that um is such that
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  Speaker 1: there needs to be a lot of people in the
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  Speaker 1: in the market to facilitate it. I think the complexity
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  Speaker 1: comes at last mile UM. I think the movement of
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  Speaker 1: goods on aircraft through hubs, our air our aviation capacity
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  Speaker 1: and our airline partners and as you know, as you
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  Speaker 1: may know, we just extended our Triple seven fleet by
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  Speaker 1: fourteen aircraft last year, which will come in a phase
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  Speaker 1: time so from aviation capacity and a hub processing capacity.
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  Speaker 1: I don't see any issues whatsoever. I think the complexity
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  Speaker 1: comes in last mile and satisfying rather uniquely in this
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  Speaker 1: case of the e commerce vertical, the consumer demand when
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  Speaker 1: you're moving things between a bank and a bank or
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  Speaker 1: a textile company and a textile company on a B
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  Speaker 1: two B basis, the whole thing works fairly traditionally and
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  Speaker 1: people receive their packages exactly as they expected. With e
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  Speaker 1: commerce is very much you know, I bought it, and
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  Speaker 1: then within five minutes where is it? When will I
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  Speaker 1: get it? And that track and trace sort of situation
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  Speaker 1: is very different to what we experienced in B two B.
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  Speaker 1: And there point comes when someone is not at home
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  Speaker 1: on the day of delivery. So I think we've developed
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  Speaker 1: a tool which is now in certainly of our countries
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  Speaker 1: a hundred more than a hundred and fifty of our
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  Speaker 1: revenue and a hundred and fifty countries called on Delivery Demand,
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  Speaker 1: where we give due notification their airhead that someone's receiving something,
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  Speaker 1: and give them a range and it varies a little
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  Speaker 1: bit by country, give them a range of options of
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  Speaker 1: how they would like to receive that. If they're going
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  Speaker 1: to be at home, they will certainly elect at home.
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  Speaker 1: I will receive it at home, but it could be
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  Speaker 1: leave with neighbor, it could be leave at pack station,
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  Speaker 1: it could be leave at one of our service partners offices,
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  Speaker 1: and that facilitates that last mile. And I think that's
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  Speaker 1: where the complexity comes. But e commerce, as you said,
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  Speaker 1: is growing so fast that you know, in my street
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  Speaker 1: in London you might see one d h L van
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  Speaker 1: a day delivering to two houses. Will now absolutely you
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  Speaker 1: see one delivery, one DHL delivery van delivering to most
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  Speaker 1: So the density, if you will, at destination becomes a
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  Speaker 1: little bit similar to a business in business to business environment.
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  Speaker 1: Now in the US, you were familiar with that a
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  Speaker 1: decade ago. John, I'm wondering how much are you counting
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  Speaker 1: on your future to include drones and self driving vehicles.
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  Speaker 1: I think the thing there is it's about R and D,
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  Speaker 1: R and D and piloting. So, you know, honestly, in
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  Speaker 1: my corporate lifetime, I don't expect that you know, many
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  Speaker 1: e commerce deliveries will be facilitated by drones on any
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  Speaker 1: on any scale really, because they have shipping companies have
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  Speaker 1: actually tried a little bit. We absolutely are trying, and
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  Speaker 1: we're doing pilots, and I think they give opportunity to
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  Speaker 1: test in remote areas how this application. So I think
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  Speaker 1: the pilot is perhaps less so how it will fly
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  Speaker 1: above the streets of London, but more how applicable it
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  Speaker 1: can be in more remote areas. You know, there's a
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  Speaker 1: lot of regulations around, particularly from aviation regulatory bodies, regulations
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  Speaker 1: around dr ownes. So I think we we have to
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  Speaker 1: see how it plays out. I think driverless vehicles will
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  Speaker 1: probably be more meaningful um as as time goes by,
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  Speaker 1: and there's got a lot of good research and piloting
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  Speaker 1: going on in companies outside of our own there, and
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  Speaker 1: as some of these megacities develop over time, UM, I
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  Speaker 1: think there may well be opportunity for more utility of
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  Speaker 1: that particular type of vehicle. So, John, how have the
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  Speaker 1: trade negotiations with China, the on again, off again negotiatings,
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  Speaker 1: how they impacted your business at obvious sense that in
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  Speaker 1: your Asia Pacific region. Well, I think when you're in
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  Speaker 1: two hundred and twenty countries and you have a widely
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  Speaker 1: distributed revenue base, UM, it's hard to actually see what's
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  Speaker 1: impacting what. Let me let me extend upon that, I think, um,
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  Speaker 1: Chinese New Year year on year comps are difficult to
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  Speaker 1: make typically in any year, and this year is no exception.
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  Speaker 1: So our little phrase in expresses that we take January
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  Speaker 1: and February, bang them together and wait for March. So
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  Speaker 1: I don't think we can say it's too early to
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  Speaker 1: say how those affected things, but what I absolutely would
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  Speaker 1: say is that whilst Brexit or China US talks, you know,
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  Speaker 1: have this sort of air and flavor of protectionism or
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  Speaker 1: or you know, putting some barriers up to trade, for
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  Speaker 1: every two of those type of examples, there's at least
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  Speaker 1: three or four or five examples of trade deals that
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  Speaker 1: are liberal, liberalizing trade corridors. And you know, I think
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  Speaker 1: these as an agreement between Europe and Japan being read
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  Speaker 1: to find now, the Trans Pacific Partnership has has great
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  Speaker 1: hopes which will come into place this year, as the
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  Speaker 1: AN is a great example of a trade partnership for
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  Speaker 1: seven or eight countries that was created fifty years ago
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  Speaker 1: and is still understanding the test of time. So I think,
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  Speaker 1: let me just say the trade policy calendar is full
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  Speaker 1: of opportunistic um scenarios to to open corridors to trade
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  Speaker 1: rather than shut them down. Okay, John, thanks so much.
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  Speaker 1: We have to leave it there. We appreciate your time.
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  Speaker 1: John Pearson, new CEO of d h L Express, joining
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  Speaker 1: us from our San Francisco A studio. John, thanks very much. Well,
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  Speaker 1: what a start of the year we've had. Both in
• 11:56
  Speaker 1: equity markets and fixed income markets. And I think investors
• 12:00
  Speaker 1: you're sitting back saying what are the catalyst to move
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  Speaker 1: this market higher? To try to answer that and other questions,
• 12:05
  Speaker 1: we welcome Christina Hooper. Uh. Christina is a chief market
• 12:09
  Speaker 1: strategist at INVESTCA. We welcome Christina and our Bloomberg Interactive
• 12:12
  Speaker 1: Brokers studio. Christina, thanks for being here. So I think
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  Speaker 1: again a lot of people are looking back and saying, gee,
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  Speaker 1: we're had a nice move here this first part of nineteen. Uh,
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  Speaker 1: we're done with earnings, We're done with the Fed. The
• 12:25
  Speaker 1: feed seems to be on the sidelines. What should we
• 12:27
  Speaker 1: look for next to get a gauge or where these
• 12:29
  Speaker 1: markets are going? Well, I think it's all going to
• 12:31
  Speaker 1: be about economic data, global economic data, because if we
• 12:34
  Speaker 1: look at the ten year, the yield on the ten
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  Speaker 1: year has been really in sort of a very small
• 12:41
  Speaker 1: trading range, and if you factor in inflation, it's actually
• 12:44
  Speaker 1: gone down a bit this year, um, which suggests to
• 12:47
  Speaker 1: me that there are concerns about global growth. And so
• 12:49
  Speaker 1: what's going to be critical and what will likely move
• 12:52
  Speaker 1: stocks higher is if we do get more positive data,
• 12:56
  Speaker 1: particularly from places like China. We haven't seen much of
• 12:59
  Speaker 1: that yet, but perhaps that could be in the offing,
• 13:01
  Speaker 1: given how much stimulus is in the system and going
• 13:04
  Speaker 1: into the system. If that does happen, does that mean
• 13:07
  Speaker 1: that we get a real sell off in debt markets. Well,
• 13:11
  Speaker 1: I don't know if we're going to get a real
• 13:13
  Speaker 1: sell off in debt markets, but I do expect that
• 13:16
  Speaker 1: we will see cash on the sidelines moving into stocks incrementally.
• 13:20
  Speaker 1: Certainly investors are more cautious than they were before, but
• 13:24
  Speaker 1: I would imagine that we we wouldn't see any kind
• 13:26
  Speaker 1: of big sell off. It's more about a move in
• 13:29
  Speaker 1: as people look for signs of of more positive sentiment inequities.
• 13:34
  Speaker 1: You mentioned China, and maybe are you in the camp
• 13:37
  Speaker 1: that there are some green shoots that this fiscal stimulus
• 13:39
  Speaker 1: will be supportive and will drive some some maybe greater
• 13:42
  Speaker 1: than anticipated growth in China. I am uh. Fiscal stimulus
• 13:46
  Speaker 1: has been really significant, so has monetary stimulus, and I
• 13:50
  Speaker 1: expect that to continue. The tax cuts should be very stimulative,
• 13:55
  Speaker 1: and so it should be a matter of time before
• 13:57
  Speaker 1: that funnels into the system. It also helps that China
• 14:00
  Speaker 1: has downwardly revised everyone's expectations, and it should be easy
• 14:05
  Speaker 1: to meet those lower expectations, if not exceed them. Christina,
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  Speaker 1: I'm looking right now, US high old bonds have returned
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  Speaker 1: almost six and a half percent so far this year,
• 14:15
  Speaker 1: or not even three months into twenty nineteen. I'm just wondering,
• 14:20
  Speaker 1: especially as we are in this eleventh year of a
• 14:23
  Speaker 1: bowl market. I'm just wondering. You know, we're seeing excess
• 14:27
  Speaker 1: is starting to you know, continue to build. I'm just wondering,
• 14:31
  Speaker 1: from your perspective, what do you think will cause the
• 14:33
  Speaker 1: next debt crisis? That's a great question, and I think
• 14:36
  Speaker 1: the one significant catalyst would be quickly rising rights. Uh,
• 14:42
  Speaker 1: and I don't see that happening UM anytime soon. In fact,
• 14:46
  Speaker 1: if anything, what we've seen is central bank after central bank,
• 14:50
  Speaker 1: except the fact that they need to get more devish,
• 14:54
  Speaker 1: even though they're very much interested in normalizing to be
• 14:58
  Speaker 1: prepared for the next crisis. Okay, where would it be
• 15:01
  Speaker 1: manifested though the most where the excess is most substantial. Well,
• 15:05
  Speaker 1: I think we all worry about the triple B space
• 15:08
  Speaker 1: just because there has been such an an increase in
• 15:11
  Speaker 1: that space, and because it hangs on that precipice of
• 15:15
  Speaker 1: being knocked over UM. And of course there's a lot
• 15:19
  Speaker 1: in the way of UM refinancings to expect not this year,
• 15:24
  Speaker 1: but really UM next year, we should see about ten
• 15:29
  Speaker 1: of those bonds needing to be UM refinanced essentially UM,
• 15:34
  Speaker 1: and so that is where probably the first area that
• 15:37
  Speaker 1: we would want to look to UM. I also worry
• 15:40
  Speaker 1: about specific places like auto loans, where we've just seen
• 15:44
  Speaker 1: defaults go up quite significantly. Is it going to cause
• 15:47
  Speaker 1: the kind of crisis we saw during the g f C. No,
• 15:51
  Speaker 1: but that suggests weakness in pockets, and we want to
• 15:54
  Speaker 1: follow that closely. So Christina, looking at the US equity markets,
• 15:58
  Speaker 1: where areas again we've had a SMP move up about
• 16:01
  Speaker 1: eleven year to date. Where's invest go looking for outperformance?
• 16:04
  Speaker 1: Where you overweight here, trying to find some performance for
• 16:08
  Speaker 1: the remainder of the year. Well, it's all about being
• 16:10
  Speaker 1: actually very well diversified and having enough exposure to alternatives.
• 16:14
  Speaker 1: This is an environment where we're unlikely to see dramatic
• 16:17
  Speaker 1: gains in equities or for that matter, fixed income. So
• 16:22
  Speaker 1: what we're gonna need to do is be well diversified,
• 16:24
  Speaker 1: be concerned about volatility, but also use it as an
• 16:28
  Speaker 1: opportunity UM to take advantage for example of UM stock picking,
• 16:33
  Speaker 1: and also have exposure to lower or very low correlating
• 16:39
  Speaker 1: asset classes such as real estate, UM such as commodities
• 16:44
  Speaker 1: such as market neutral portfolios, ones that can soften some
• 16:48
  Speaker 1: of the volatility we might experience in areas like equities.
• 16:50
  Speaker 1: So you say that real estate is a good sort
• 16:53
  Speaker 1: of potential ballast, how does that figure in or how
• 16:56
  Speaker 1: does that pair with this idea that the US housing
• 16:59
  Speaker 1: market has been slow down and we got another round
• 17:03
  Speaker 1: of disappointing economic data this morning having to do with
• 17:05
  Speaker 1: US housing market. Well, that's absolutely true, but the housing
• 17:09
  Speaker 1: market is a mosaic again, so there are some areas
• 17:12
  Speaker 1: with great strength, some areas that don't have as much strength.
• 17:15
  Speaker 1: And of course we also see a commercial real estate
• 17:18
  Speaker 1: market that is in relatively good shape. So it's all
• 17:21
  Speaker 1: about being well diversified, and that would include real estate
• 17:23
  Speaker 1: actually outside the US. Well, how about in terms of
• 17:26
  Speaker 1: looking for a performance outside maybe the core equity fixed
• 17:29
  Speaker 1: income markets? How about emerging markets? Is that a place
• 17:33
  Speaker 1: where you would think we can get performance for their
• 17:35
  Speaker 1: main do the year. I'm happy you brought that up,
• 17:36
  Speaker 1: because that's what I neglected to talk about. E M
• 17:39
  Speaker 1: is very attractive right now. Now, that doesn't mean index
• 17:42
  Speaker 1: investing in the emerging market space, but being very selective
• 17:45
  Speaker 1: and actually I see opportunities in areas like China and
• 17:48
  Speaker 1: India and other Asian equities. Um. This is an environment
• 17:53
  Speaker 1: where um, it's positive for equities because emerging markets equities,
• 17:58
  Speaker 1: because the FED has taken foot off the accelerator, and
• 18:02
  Speaker 1: that should that should create some nice tail winds in
• 18:05
  Speaker 1: this space. How long do people have to stay invested
• 18:08
  Speaker 1: in this market and expect, you know, pretty pretty steady returns. Well,
• 18:13
  Speaker 1: we strongly recommend taking a very long view because we
• 18:16
  Speaker 1: don't know what the shorter term holds. And in fact,
• 18:19
  Speaker 1: perfect example of that is the kind of geopolitical risks
• 18:21
  Speaker 1: we've experienced in recent months. Uh, it's important to have
• 18:26
  Speaker 1: that long term view because we could see some pretty
• 18:28
  Speaker 1: significant hiccups in the shorter term. Are there any places
• 18:31
  Speaker 1: asset classes that you folks are just avoiding like the
• 18:34
  Speaker 1: plague right at the moment. Well, I would say I'm
• 18:37
  Speaker 1: very cautious on European equities. I wouldn't say avoid them,
• 18:40
  Speaker 1: but we need to be very selective and we may
• 18:42
  Speaker 1: want to underweigh them at this point. I see a
• 18:44
  Speaker 1: very big risk coming later this year, uh in that
• 18:48
  Speaker 1: Mario Draggy term ends at the end of October. Not
• 18:51
  Speaker 1: many people are talking about this, but it looks increasingly
• 18:54
  Speaker 1: likely that he will be replaced by someone who's more
• 18:56
  Speaker 1: hawkish and so so much of what the e c
• 18:59
  Speaker 1: B maybe doing in the coming months to instill confidence
• 19:02
  Speaker 1: may may fall on deaf ears because we have someone,
• 19:08
  Speaker 1: a new person coming in in just a few months
• 19:10
  Speaker 1: who could change policy quite dramatically. Amara Droggy has had
• 19:14
  Speaker 1: a very very powerful force in terms of calming markets
• 19:18
  Speaker 1: and taking down systemic stress. That's a really interesting point
• 19:22
  Speaker 1: and something that people don't talk about that much, but
• 19:25
  Speaker 1: it could potentially be a risk to European markets. Christina Hooper,
• 19:28
  Speaker 1: thank you so much for being here. Thanks for having me.
• 19:30
  Speaker 1: Christina Hooper is chief market strategist at Investco. Joining us
• 19:34
  Speaker 1: here in our Bloomberg Interactive Broker's Studios. Thanks for listening
• 19:37
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 19:40
  Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast
• 19:42
  Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.
• 19:46
  Speaker 1: I'm Lisa abram Woids. I'm on Twitter at Lisa Abram
• 19:49
  Speaker 1: Woods one before the podcast. You can always catch us
• 19:51
  Speaker 1: worldwide on Bloomberg Radio