0:02

Welcome to the Bloomberg Penel Podcast. I'm

0:04

Paul Swinge you. Along with my co host Lisa Brahmas.

0:07

Each day we bring you the most noteworthy and

0:09

useful interviews for you and your money. Whether

0:11

at the grocery store or the trading floor. Find

0:13

a Bloomberg Penl podcast on Apple podcast

0:16

or wherever you listen to podcasts, as well as at Bloomberg

0:18

dot com.

0:21

All right, here's multiple choice question for you

0:24

on this Monday. Do you want to buy a US

0:26

Steepener gold, US equities

0:28

or we work? If you get a pre I p O.

0:30

Luckily we're gonna have a manage gonna answer that question.

0:32

That's Hans Olsen, chief investment officer

0:35

a Fittisciary Trust with seventy eight million

0:37

dollars in assets under management. So cross

0:40

asked that that was your multiple choice question,

0:42

which would you buy in ranking order? We

0:45

work gold,

0:46

we work pre IPO, A Steepener

0:48

gold or US equities. Well,

0:50

I'd have to do probably can

0:54

I get to pain by the way?

0:56

Yeah? Okay, Well that says

0:59

a lot in then they have seven billion dollars

1:01

of assets under management. He has to buy

1:03

everything out there. So so why

1:05

like it's my way of trying to see, like, where

1:07

is their actual value right now? Yeah? Yeah, it's

1:10

hard to find a lot of value any place right

1:12

now. And perhaps the areas

1:14

that we find it mostly would be in places

1:16

like uh Europe, even

1:18

the UK, which is really a non consensus

1:21

trade for sure. But in the US,

1:23

um you know, the earning scrowthon is there, the multiples

1:25

are expanding. It's been pretty tough. We're

1:28

overweight US equities for sure. We've

1:30

tried to rotate more into the low volatility

1:32

types of names as a way to

1:35

do it responsibly. But but I have

1:37

to say, Alex, the environment right now is

1:39

is not great for people putting new

1:41

money to work. We're speaking with Hans Olsen,

1:43

chief investment officer Fidishary Trust. Hans,

1:45

just let's start maybe just with

1:47

your economic outlook. I mean, the U S seems

1:50

pretty solid, but we see some weird news.

1:52

Alex and I we were talking about earlier out of Germany

1:54

earlier today. So how do you view the kind of the U

1:56

S economy? Yeah, so the US company. If we if

1:58

I were to color code the US economy with

2:01

green being growth, yellow warning

2:03

you know, danger, and red recession I think

2:06

we're probably going from green to light green

2:08

at the moment. So, whether it's the hard data

2:10

the soft data, we see a

2:13

collection of of surveys that

2:15

all point to continued growth in the US

2:17

slower than what it's been, but continuing

2:19

to grow. Is your call

2:21

on say U at UK equities and European equities,

2:24

is that based on a Brexit

2:26

thing? Or is that literally is that a value trade?

2:29

Well, I think in the in the UK,

2:31

both in the UK and Europe, you put

2:33

the politics aside for a moment. If you look at things

2:36

like valuation and earnings growth,

2:38

they're better, They're more compelling than they are here in

2:40

the United States. It just happened to be

2:42

wrapped in the difficult wrapper of the politics.

2:45

You know, our core assumption is that perhaps Brexit won't

2:47

be anywhere near as bad as

2:49

people think. Um, when you look at the statistics

2:52

since the end of UM,

2:54

since the since the vote back in two thousand

2:56

sixteen, the one economy

2:59

that has really defied expectations and the popular

3:01

narrative has been the UK economy, both

3:03

in terms of growth, inflation and

3:05

the like. And uh, I'm

3:07

not so sure about what we couldn't see that continue

3:10

to happen even post Brexit. There

3:12

will be some hiccups for sure, but I'm

3:14

not sure it will be as devastating as

3:17

people are are are postulating. So

3:19

as you think about your global portfolio, where

3:21

are you kind of in the allocation? How

3:23

much risk are you taking these days? Um

3:26

with the portfolio. Yeah, so that's a good question

3:28

because it's really um an exercise

3:30

in nuance increasingly UM

3:33

So when the US equity market, as I've

3:35

said, we've we've been rotating exposures,

3:37

and where we have added exposure has been

3:39

to more of the low volatility names, right, trying

3:42

to stay away from any value biases.

3:44

But but those companies with dividends uh

3:46

and have less of an attachment to

3:48

the overall market, so the data is lower to

3:50

that of the market. On the credit side,

3:53

you know, we have for some time been shorter

3:55

in duration. We're lengthening out the duration

3:58

because I think there is a real possible ability

4:00

that in the next part of the cycle, amazingly

4:03

enough, the US we'll see negative

4:05

interest rates. And the other thing that we've been doing is we've

4:07

been pivoting up into higher

4:10

quality credits to in an attempt

4:12

to get some sort of carry um, So

4:14

it's kind of a belt and suspenders type of

4:16

exercise. So what I would say to that is

4:18

that you're not alone. And what I mean by

4:20

that is that low volatility stocks have

4:22

now inherently become more volatile because there's

4:24

so much ment now money into it for the reasons that you

4:26

said. You can make the same argument for going up

4:29

the safety curve when it comes to an investment

4:31

grade, and many argue

4:33

that we're way overbought when it comes to the

4:35

long end. So how do you deal

4:37

with that? What do you say? Yeah, yeah, I think it all

4:39

depends upon what your benchmark duration is, right.

4:42

So we're we're not going out thirty years

4:44

or twenty years. We're really trying to stay right

4:46

on the benchmark, and for us that's probably

4:48

going to be around four years five years, UM,

4:51

whereas we were two to three years before. So

4:53

we've we've lengked the note. And you're right,

4:55

there's a lot of money in movement. Money

4:57

is trying to find a home. Especially

5:00

we're back to the Tina principle right where

5:02

there is no alternative equities. Um.

5:05

So it's it's not a perfect trade, but I think it's

5:07

a trade and certainly over the

5:09

the the adject that we've seen over the last

5:11

week or so, those low ball names

5:13

that we've invested and have held up quite

5:15

well relatively, you know, they've

5:17

they've outperformed by about three hundred basis points,

5:20

which is not bad in an environment like that. So,

5:22

Hans, what do you what do you expect to hear out of Jackson

5:24

Hole at the end of this week. A lot of market participants

5:27

think it's a very very important time for Chairman

5:29

Pal to articulate kind of

5:31

how he views the FED over the next

5:34

you know, several quarters. Yeah, yeah, I think I

5:36

think the tell is going to be Actually

5:39

what there was a white paper that

5:41

the I m F released and it reads

5:44

something like a guide to deeply

5:46

negative interest rates to fight Recession.

5:48

It's it's sort of it's eighty five page white

5:51

paper that is the that lays

5:53

out the fund the foundations and the fundamentals

5:55

about how to position

5:58

the concept of negative interest rates.

6:00

I think, particularly in the United States,

6:02

and you're already seeing some of the FED governors talk

6:04

about it um that it's not

6:07

so unusual and that zero bound

6:09

is really just a number. I think

6:11

we'll start to see more of that conversation

6:13

tumble out of Jackson

6:16

hole without a doubt, and we're sort of setting

6:18

ourselves up for the next cycle for I

6:20

think higher probability of negative interest

6:23

rates, which when you think about the US

6:25

in the US, when you think about it in the reserve

6:27

currency, never never, but

6:30

but a reserve like currency,

6:32

the Swiss franc they have negative

6:34

interest rates. The entire German sovereign curve

6:36

is below zero um. And

6:39

you know, we have what sixteen seventeen trillion

6:41

dollars worth of negative yielding debt

6:44

of both the sovereign and corporate variety

6:46

in Europe. But does that bring up M M T. And

6:48

I say that because I've been talking about this black Bock paper

6:50

all morning and probably boring Paul at this point, which

6:52

is basically they talked about just that

6:54

helicopter money. You're going to have to have coordinated monetary

6:57

and physical policy in order to get stuff

6:59

done in the next recession. I mean, is that basically

7:02

what you think we're headed for? To sailing and observations

7:04

there. Number one, I think we've come

7:07

to the limits of monetary

7:09

policy, and that's why I think we're hearing

7:11

about you know, the ideas of another

7:13

tax cut being floated this morning. And

7:16

the other thing is that, uh,

7:20

you know, when we're running trillion dollar plus

7:23

uh deficits, which is what we're doing, especially

7:25

at this point in the cycle, when we're talking about more

7:27

tax cuts and we are talking about negative

7:30

interest rates even considering them,

7:32

that is actually you know,

7:34

modern monetary theory, perhaps dressed

7:37

up a little bit differently, but that's effectively

7:39

it. So I think

7:41

we're kind of there in many respects, and

7:44

that's a really uncomfortable um um

7:46

thought to ponder. Interesting.

7:48

Hans Aulsen, thank you so much for joining us. Hans

7:51

is chief investment officer for Fiduciary

7:53

Trust, joining us here on our Bloomberg Interactive Broker

7:55

Studio. Let's

8:11

turn our attention now to gold that come

8:13

out of the commodity is up about year

8:16

to date. So is that just a move by investors

8:19

for a safe haven asthmet asset, is

8:21

there's something else driving the commodity to get

8:23

those answers? We welcome Joe Cavatoni,

8:25

Managing Director of the World Gold Council

8:28

US joints us here in our Bloomberg Interact the Broker

8:30

Studio. So Joe, thanks so much for being here

8:32

give us a sense of what is driving

8:34

gold here. So far, it's

8:37

great to be here. What's driving gold in

8:39

two thousand eighteen into nineteen has

8:41

been pretty much risk and

8:43

uncertainty, market risk and uncertainty,

8:46

a client or an investors inability

8:48

to understand where really the

8:50

direction of the markets is going to go, and

8:53

hearing regular and ongoing updates

8:56

of large systemic issues that give

8:58

them caution and concern. If

9:00

it is talks about implementation

9:03

of potential tariffs, if there's concerns

9:05

around negotiations with China, whether

9:07

there's a hard or soft exit, and Brexit,

9:09

all of these factors are all playing

9:11

in now. Added as of laid has been

9:13

an increased concern, particularly in the

9:16

US market, over negative real rates

9:18

or is that even feasible or possible, so

9:20

the rate moves, the dovish stance

9:22

of the FED all factoring in gold

9:25

as an asset is a global asset. So

9:27

while we're seeing big

9:30

risk factors that are taking place in developed

9:32

markets around the world, maybe even the emerging

9:34

markets, you're also seeing a shift as

9:36

well globally around the dollarization

9:39

and monetary policy that's leading

9:41

central banks to be buyers so we're seeing investors

9:43

taking risk positions that are careful, and

9:45

we're also seeing central banks shifting their

9:47

monetary policy to address it. So

9:49

I was coming gold back in the olden days two

9:52

nine for a few years. So

9:54

I was part of all that conversation of what we see

9:56

gold hit two thousand and if I have thought we'd

9:59

hit negative rates UH in many many

10:01

countries and that we could see it in the US, I

10:03

would expect it easy goal to be what

10:06

does it tell you that we're not? What

10:09

does it tell us that we're not? What I think we need

10:12

to understand is that the

10:14

demand cycle for gold

10:16

is driven and importantly needs

10:18

to be understood and driven by strategic

10:21

factors. So what I think

10:23

we need to be careful and cautious of is

10:25

momentum and short term opportunity

10:28

costs move the price fast and

10:30

actually in large percentage amounts. On a

10:32

given day. We're almost down one percent today.

10:35

Let's not get caught up in that. What I'd

10:37

say is going back to your two thousand nine

10:40

timeline, and actually goal goes

10:42

even further back some five thousand years. I

10:45

was talking about what

10:48

I think is important for people to understand

10:50

is that in this wave of demand

10:53

increasing that we're seeing. This looks to be investors

10:55

taking a strategic position, overweight in

10:58

their commodity bucket and positioning

11:00

for longer term systemic issues. So

11:03

the financial risk the longer term, it's

11:05

going to be a slow, methodical,

11:07

continual increase in demand. Potentially,

11:10

so will we get I'm not entirely

11:12

sure, but what we're seeing today

11:14

are signals telling us that gold as

11:16

a relevant asset is going to continue

11:19

to remain very high. Our conversations,

11:21

again with institutional investors in particular,

11:23

are about how much gold should

11:25

I have in my portfolio, not this question of do

11:28

I have a need for it in my portfolio.

11:30

It's being found more and more

11:32

prevalent in the conversations with institutional investors.

11:35

What are the e t f s doing

11:37

with gold and how are they impacting the gold market?

11:40

The e t f s are proving to

11:42

be exactly what we know them

11:44

to be, an exceptional

11:46

vehicle for investors to make a decision

11:49

to invest in the precious metal itself.

11:52

They can own the gold through the

11:54

exchange traded fund, not only in the US market,

11:56

which we all know a lot about. But what we're

11:58

seeing are you K investors, German

12:01

investors in particular, driving enormous

12:03

amounts of demand. So a year to date, about

12:06

nine percent of net new assets have flown into

12:09

e T s. With price appreciation, that

12:11

pool is up to nearly one thirty billion

12:14

in overall holdings in e TF. So

12:16

we're seeing investors saying I

12:18

need to make a strategic decision. I

12:20

want to own gold as a commodity

12:22

or as a precious metal or in

12:24

a particular investment bucket, divorcing

12:27

themselves from concerning whether it's a commodity

12:30

or it's not, simply saying it's a core

12:32

allocation of my portfolio. So the e T s

12:34

are enabling people to get it done. Volumes

12:37

are transparent, which is helpful

12:39

and actually significant. So if you

12:41

need to buy, as an institution large

12:43

percentages of gold over a course of a day,

12:46

you're going to be able to get it done. Now, one

12:48

last point that I'll make is that

12:50

in the US, while we know that there

12:52

are institutional flows that are going into the exchange

12:54

traded funds, don't overlook the amount

12:56

of retail investment that goes into these

12:59

et s as well. If you're looking at the

13:01

big wires or you're looking at the large platforms

13:03

in the US. They all have available

13:06

on them some mechanism to exchange

13:08

traded funds to get access to gold, and there's

13:10

plenty of choices today too. What happens

13:13

if the dollar doesn't depreciate.

13:15

I think that you need to understand that the

13:18

dollar is one only one factor.

13:20

Remember, gold as a global asset is impacted

13:23

by demand in China and India, which

13:25

makes up nearly It's

13:27

driven by European geo

13:29

political risk or or or economic

13:32

concerns in those markets. So it's

13:34

an important factor, but it's not the

13:36

only factor to take into consideration.

13:39

So the dollar has been kind of flatlining, right,

13:41

But where are we going with gold? We're seeing a noticeable

13:43

appreciation in the price. Why because the

13:45

other factors are kicking in again, stepping

13:48

away from tactical short term

13:50

concerning issues which are important to understand,

13:52

but understanding that financial market

13:54

and the risks that come along with that will be driving

13:57

long term. So just real, real quick,

13:59

Joe, you mentioned central bank buying.

14:01

Just give us a sense of how that works, what and

14:04

just how it plays out. Basically, they're

14:06

buying the bullion outright in the bullying

14:08

market. They go into the OTC markets

14:11

or the dealer market in the European arena,

14:13

for example, and ultimately they're

14:16

they're continuing I think it's now a nineteen

14:18

year trend that we've seen in terms of increased the levels

14:20

of of gold being added to

14:22

the portfolio for monetary policy.

14:24

So they're buying the real stuff. They're buying the real stuff. Absolutely.

14:27

Joe Cavitoni, thanks so much for joining us. Joe's

14:29

a Managing director for the World Council uh

14:32

US talking to us all things about go get

14:34

it, getting us updated on gold and

14:36

it's a nice chart for the year looking at that. Boy

14:38

in. One

14:55

part of the economy that remains very strong is

14:57

the consumer um and let's

15:00

how the consumer is doing, particularly millennials

15:02

and the younger demos in terms of buying homes

15:04

and getting mortgages and all that fun stuff. With

15:07

that, we welcome Vishaal gark. He is a founder

15:09

and CEO Better dot Com. He joins us here in our Bloomberg

15:11

Interactive Broker studio. Rochelle, thanks

15:13

so much for joining us. I wonder if you could

15:15

just give us just a brief description of

15:17

what Better dot Com is what are you guys

15:20

doing. Uh, thanks so much Paul and Lisa

15:22

for having me better. Dot com

15:24

is revolutionizing access to homeownership

15:27

UH for millennials, and

15:29

we're doing it by

15:31

making the entire process better, faster,

15:34

cheaper, so you can get a better mortgage

15:36

and by doing that, you can get a better house.

15:39

Uh. You can save up to three thousand dollars

15:41

or more on a typical three thousand dollar

15:43

house uh in just upfront fees

15:45

because we don't charge any commissions and we don't

15:47

charge any origination fees. And

15:50

on top of that, UH, you can save

15:52

some money on your rate. So an average

15:54

consumer will save as much as a year

15:56

on a three dollar mortgage of

15:58

compared to your tradition mortgage banks

16:01

or mortgage brokers. Because we take

16:03

the commissions out of the process, we've automated

16:05

a huge chunk of the process. We made everything

16:08

much, much, much of it better. How do you

16:10

make money? Uh? We make money mostly

16:12

by uh packaging the loans

16:15

and having investors who

16:17

uh we have thirty two investors on our platform

16:19

with about seven billion dollars of demand. A

16:22

lot of the largest financial institutions in the country

16:24

who actually want to have

16:26

mortgages that are not originated by a

16:28

commission loan officer or mortgage broker,

16:31

because those typically tend to perform much much

16:33

better, and so they pay us a premium for their

16:35

mortgages and that's how we pay the

16:37

bills. UM. You know, today

16:39

we just announced that we raise a hundred

16:41

and sixty million dollars from some great investors

16:43

American Express City Bank, Ally

16:46

Bank UH, the Health Plan

16:48

of Ontario Pinebroke investors, and

16:51

a lot of that. You know, when it comes

16:53

down to is all of those banks and

16:55

major investors are investing in

16:57

us UH for the reason that I started

16:59

the me five years ago. So five

17:02

years ago, my wife was pregnant

17:04

with our second child. We were shopping

17:07

for houses just people do, UH,

17:09

and it was just a really tough process to

17:11

get a mortgage. My wife worked at a big bank

17:13

and even there, it took our sixty

17:15

days to get a mortgage approval,

17:18

and we lost the house that we were going to buy to an

17:20

all cash buyer who actually even paid less than we

17:23

did. And UH, I thought

17:25

that was fundamentally unfair. Like branch

17:27

visits, facts machines

17:30

going at Kinko's, and like

17:33

literally UH sending my Social

17:35

Security number and all these documents over on security

17:37

email had cost us the

17:39

home that we want to buy. So it's like, we're gonna

17:41

make this better. Seventy of Americans

17:44

need a mortgage to buy a home. And

17:46

how is this thing that everywhere

17:51

everyone uses? How

17:53

is this industry that's fifteen trillion dollars

17:55

in size exists as if the Internet was

17:57

never invented. Do millenns

18:00

buy homes? They do? Their home ownership

18:02

rate is half of that of traditional

18:05

UH generations before,

18:07

like the baby movers and like so

18:09

on average, you know of that

18:12

those earlier generations were able to buy a home.

18:14

Right now millennials about thirty five percent

18:17

of them own a home, So there's this massive

18:19

demand for them coming people like that.

18:21

Do you think a lot of it has

18:24

to do with challenges with student loans? Um

18:26

They have a ton of student loans, so instead

18:29

of spending the first fifteen years of their

18:31

working lives saving up money to

18:33

get a down payment to buy a home, they're paying off the

18:35

loans for college. But there are all

18:37

these products that are out there that your

18:40

traditional mortgage broker doesn't know. Products

18:42

by Fannie made that enable first time home

18:44

buyers to put as little as three

18:46

percent down to buy a home. And

18:49

over half of our customer base, particularly

18:52

for those buying a home, is millennials,

18:54

and the average is thirty eight. And a lot of them

18:56

are just they they want, they're

18:59

they're getting, they're having kids,

19:01

they're putting down roots. Um, they

19:03

want to have a play room that they can actually

19:06

paint the way the color they want. And

19:09

so we see a lot

19:11

of millennials entering. They're actually the largest

19:13

group of home buyers this year.

19:16

So as we've seen rates fall, what kind

19:18

of activity have you noticed? We have seen

19:20

demand go through the roof. Our business is

19:22

up over from

19:24

the year before. We're on track to do over

19:27

five billion of mortgages this year and almost

19:29

fifteen billion or so next year. And

19:32

it's an amazing time to buy because

19:34

rates being as low as they are, lower

19:36

than they've ever been in the past, means

19:39

lower rates, higher affordability. Higher

19:41

affordability means you can buy a better house

19:44

for the same amount of money. Remember, a

19:46

lot of people are renting, but when you're renting,

19:48

you're just paying your landlords mortgage. Exactly.

19:52

Homeownership. Homeownership that's kind of been it's

19:54

the issue about the millennials kind of being underrepresented

19:56

in home ownership, but the potentially upside

19:58

there for the housing market. Shall garg founder

20:01

and CEO Better dot Com joining us here in

20:03

our Bloomberg Interactive Broker studio,

20:05

thank you so much better

20:20

rhetor coming out of the White House

20:22

about trade. Let's see where the action is with

20:24

small Stock returned to Bloomberg Stocks editor Dave Wilson,

20:27

Dave, what are you looking at this morning? Well, I'm looking at

20:29

smaller companies doing a bit better

20:31

than larger ones, at least for the moment. The Russell

20:34

two thousand index up one point three

20:36

percent. In the S and P five hundreds up

20:38

one point two percent. Now

20:40

one of the Russell's biggest games belongs to Empire

20:43

Resorts, whose ticker is n Y

20:45

and why the casino

20:47

owner has climbed fifteen percent

20:50

after its Malaysian majority owner

20:52

offered to buy the shares it doesn't

20:54

already hold. Uh

20:57

Saws ticker s O n O is at

20:59

a twelve and half percent. The maker of

21:01

audio equipment was raised that Raymond

21:03

James to the firm's top ratings. Strong

21:05

By and tanker stocks are higher

21:08

after dry Ships chairman and CEO

21:11

Georgia Economu, agreed to

21:13

buy the shares of his company that he doesn't

21:15

already own. Nordic American Tankers

21:17

ticker and A T has risen

21:20

eight percent, and t K Tankers

21:22

ticker t n K has advanced

21:24

six and a half percent. Now

21:27

A one of the Russell's steepest drops belongs to

21:29

Revlon ticker r e V. The

21:31

cosmetics maker has fallen about four and

21:33

a half percent after gaining

21:35

more than fifteen percent on

21:37

Thursday and Friday. The earlier

21:39

advance followed our report that Revlon

21:42

hired Goldman Sachs to look at

21:44

strategic alternatives. Bloomber

21:47

Stocks editor Davals and thank you so much.

21:49

Well, the tech companies are back down

21:52

in Washington. This time they're they're

21:54

testifying in support of a Trump

21:56

administration effort to potentially punish

21:58

France for enacting a three percent

22:00

tax on global tech companies. To get the latest,

22:03

we welcome Laura Davison laaras Congressional

22:05

tax reporter for Bloomberg News, joining us

22:07

on the phone from Washington, d C. Laura, thanks

22:09

so much for joining us. So again, we got

22:11

the big tech companies in front of Washington, but a little

22:13

bit different tack today. What are they trying

22:16

to get across? Yeah, so they're

22:18

really concerned about this, Uh, this tax that

22:20

France, France has passed that would

22:22

target largely large US companies

22:24

Google, Amazon, Facebook, um, and

22:26

and so the Trump administration has said, yes, we

22:29

are concerned about this. And you really see a

22:31

kind of for the first time, h tech companies

22:33

and the Trump administration really being in lockstep

22:35

on an issue. Um what could

22:38

happen from this? Uh? The administration is looking

22:40

at some sort of retaliatory and measure against

22:42

France to sort of set a precedent of look, don't

22:44

go after our tech companies to raise

22:46

revenue for your country. Uh.

22:49

Tech companies concerned that they could be taxed not

22:51

only from France, but that other countries could follow suit

22:53

Spain, New Zealand for example, and they could

22:55

be suddenly hit from for little taxes from

22:58

from countries all over the world. And so I'm calling

23:00

tech versus Tannin's because one of

23:02

the things is wine that Trump has threatened

23:05

to tax of all wine

23:07

coming from France and Europe. But in

23:09

all reality, like, what could we actually

23:12

do to retaliate? So

23:14

there's a couple of different things. One would be tariffs, and

23:16

it could be on French wine or or other sorts of

23:18

French products. Know, the percent tariff on

23:20

wine would be uh, you know, that would

23:23

be a goold measure, but there's lots

23:25

of you know, either smaller tariffs are targeting a

23:27

broad base of French exports. The

23:29

other thing is there is a section in the tax code

23:31

that actually would allow the US government to

23:34

basically double the tax

23:37

on French citizens and French companies

23:39

operating in the US. So there's a several different

23:41

things that are legal within the scope of

23:44

the possible that that the U s could

23:46

do to try to get friends France to back down from

23:48

this. So, Laura, how important

23:50

or how much of a financial

23:53

risk or is this tax to some of these

23:55

big tech companies. So we

23:57

haven't heard any sort of specific

23:59

numbers yet they're saying will cost millions to

24:01

comply. A representative

24:03

from Amazon said that their profit

24:05

margins are usually less than three percent, so this three

24:07

percent tax from France would wipe out

24:10

some of their profit margins on those transactions.

24:12

So it's at least kind of

24:14

on a an anecdotally, it would be both

24:16

expensive to to be able to track all

24:18

this to comply with the tax as well as it could wipe

24:20

out um to profits, profitability, or

24:23

result in higher prices for consumers. So

24:25

play this out for me. So tech goes to the d

24:27

C. They're like, we hate this, this is bad. Everyone

24:29

in the US is like, totally, we don't want France attack

24:31

at taxes. This is terrible. Then what happens.

24:34

So what the US is trying to do is to

24:36

get France to back away from this tax

24:39

and focus more on this big

24:41

global conversation that's happening with a hundred thirty

24:43

companies led by

24:45

you know, G seven, G twenty to come

24:47

up with some way to tax Uh.

24:50

Basically issue is that companies no longer

24:52

you know, makings and earned profits in one

24:54

country. With the digital economy, things

24:56

cross borders all the time and it's really hard to

24:59

to say which come which country can tax

25:01

which profits. So they're trying to have this big

25:03

multilateral discussion UM

25:06

to come up with some rules that everyone in the world

25:08

basically can agree on. That's what the US

25:10

wants, and that's what they're trying to urge France and others

25:12

who want to go off on their own to do. So,

25:15

Laura, what just give us a sense a little bit of backstory

25:17

here. What was France really thinking

25:19

here with this tax? Was it simply a money

25:21

grab for them? Well

25:24

personally that and and there's a lot of anger

25:26

in Europe at American at

25:28

American tech companies who they feel

25:31

are aren't paying taxes, that they

25:33

are using um tax savants to

25:35

to avoid paying what they should

25:37

be owe. And they said, look, you know, if if the you

25:40

know, the U. S. Government isn't gonna address this, if there isn't

25:42

some sort of global consensus, we just want to move

25:44

quickly and make sure that we're uh, you know,

25:46

getting a portion, you know, and being a first

25:48

mover on this, they're able to grab a bigger piece of the

25:50

pie than they would have if they you know, did this

25:52

in coordination with all the other countries. So

25:55

what's the counter to that? I mean, that sounds somewhat

25:57

reasonable. It does,

25:59

though, mean then the then the answer is,

26:01

uh, you know, especially for France where US is

26:04

a close ally, you know, what are the negotiations

26:06

like if you know there are extremes tariffs, you

26:08

know, how long can they can they withstand those?

26:10

Or you know, if if every other country

26:12

has agreed to this other set of principles, you know,

26:14

could that be something that that France uh

26:17

signs onto. This is really uh

26:20

France kind of took a bold step kind

26:22

of, I think, with the other

26:24

countries, assuming that they would be willing to movee back down

26:27

on this if there was a larger consensus on something

26:29

that would be agreeable. Laura Davison,

26:31

thank you so much for joining us. Lars Congressional

26:33

tax reporter for Bloomberg News, joining us on the

26:35

phone from Washington, d C. Thanks for

26:37

listening to the Bloomberg P and L podcast. You

26:39

can subscribe and listen to interviews at Apple Podcasts

26:42

or whatever podcast platform you prefer. M

26:44

Paul Sweeney, I'm on Twitter at pt Sweeney.

26:46

I'm Lisa Bramoy. It's I'm on Twitter at Lisa

26:49

Bramoy. It's one before the podcast. You can

26:51

always catch us worldwide. I'm Bloomberg

26:53

Radio.