1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:34,600 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg with 5 00:00:34,760 --> 00:00:37,320 Speaker 1: Chapman pow Back in a spotlight late today when he 6 00:00:37,360 --> 00:00:39,680 Speaker 1: speaks at the Economic Club of Washington, d C. With 7 00:00:39,840 --> 00:00:43,199 Speaker 1: more and more Fed officials expressing a willingness to do 8 00:00:43,320 --> 00:00:46,840 Speaker 1: nothing until the uncertainty clears. It's been a major topic 9 00:00:46,920 --> 00:00:49,360 Speaker 1: in this market over the last week or so. Mark 10 00:00:49,400 --> 00:00:52,000 Speaker 1: Keisel dropping by our studio here in New York, Pimco 11 00:00:52,159 --> 00:00:55,440 Speaker 1: c IO of Credit Good monitor. Mark, Good morning, So 12 00:00:55,480 --> 00:00:57,480 Speaker 1: let's talk about your big theme for the year ahead, 13 00:00:57,480 --> 00:01:01,560 Speaker 1: the global economy sinking lower. Let's stop by having a 14 00:01:01,560 --> 00:01:03,840 Speaker 1: discussion about how policy MICA is world wanted and to 15 00:01:03,920 --> 00:01:06,840 Speaker 1: respond to that. So, I think we're setting up for 16 00:01:07,000 --> 00:01:11,280 Speaker 1: growth to slow. Um. We benefited significantly from the tax 17 00:01:11,319 --> 00:01:15,320 Speaker 1: cuts in two thousand and eighteen US growth three real GDP. 18 00:01:15,880 --> 00:01:17,600 Speaker 1: We think growth gonna slow to two to two and 19 00:01:17,640 --> 00:01:20,000 Speaker 1: a half percent. It could be even be slower than that. 20 00:01:20,040 --> 00:01:22,679 Speaker 1: With the U S. China trade uncertainty. But I think 21 00:01:22,720 --> 00:01:24,679 Speaker 1: this is gonna allow the FED to to take a 22 00:01:24,720 --> 00:01:28,000 Speaker 1: step back and go more data dependent going forward this year. 23 00:01:28,160 --> 00:01:30,480 Speaker 1: So the date to dependence of the FED says they 24 00:01:30,480 --> 00:01:33,320 Speaker 1: are and a market right now and market participants that says, no, 25 00:01:33,400 --> 00:01:36,000 Speaker 1: it's not about the data. It's about a market. It's 26 00:01:36,000 --> 00:01:38,399 Speaker 1: in a market dependent FED or a data dependent FED. 27 00:01:39,000 --> 00:01:41,240 Speaker 1: I think what the markets are sensing is a lot 28 00:01:41,280 --> 00:01:44,800 Speaker 1: of what you said uncertainty. The global economy actually, we 29 00:01:44,840 --> 00:01:48,640 Speaker 1: think is slowing at a slower rate than most people suspect, 30 00:01:48,680 --> 00:01:53,480 Speaker 1: particularly China. Earnings expectations are too high. Earnings growth is slowing, 31 00:01:53,960 --> 00:01:56,280 Speaker 1: and this uncertainty with the U S. China trade is 32 00:01:56,480 --> 00:01:58,720 Speaker 1: a big deal. It's starting to impact confidence. So I 33 00:01:58,720 --> 00:02:01,720 Speaker 1: think the leading indicators out there suggests that growth isn't 34 00:02:01,720 --> 00:02:05,280 Speaker 1: will infect slow and and that, combined with the fact 35 00:02:05,320 --> 00:02:09,079 Speaker 1: that inflation is low under the fed's target, inflationary expectations 36 00:02:09,080 --> 00:02:10,919 Speaker 1: have come down. This allows the FED to take a 37 00:02:10,960 --> 00:02:13,440 Speaker 1: step back and wait, there's a big difference between recession 38 00:02:13,520 --> 00:02:16,360 Speaker 1: risk and moving back towards what we did consider trend 39 00:02:16,400 --> 00:02:20,480 Speaker 1: growth on the ten months ago mook. That's a good point. 40 00:02:20,600 --> 00:02:23,600 Speaker 1: I think the markets have in some cases, like oil 41 00:02:24,040 --> 00:02:28,919 Speaker 1: and perhaps even equities and bonds, overestimated the likelihood of recession. 42 00:02:28,960 --> 00:02:31,240 Speaker 1: If you look out over the next year, we think 43 00:02:31,280 --> 00:02:35,440 Speaker 1: the chances of recession or maybe fifty. Yet the markets, 44 00:02:35,520 --> 00:02:38,080 Speaker 1: you look at oil prices pricing in a much higher 45 00:02:38,160 --> 00:02:41,680 Speaker 1: chance of recession. Bond market rally recently has been pretty significant, 46 00:02:41,760 --> 00:02:45,240 Speaker 1: So we would not chase bonds here. Uh and in fact, 47 00:02:45,280 --> 00:02:48,799 Speaker 1: we we actually think oil and owning some energy makes sense. 48 00:02:50,280 --> 00:02:53,880 Speaker 1: If you look at the bond market, now, are you 49 00:02:54,000 --> 00:02:57,080 Speaker 1: clipping a coupon or you can? You actually, how do 50 00:02:57,120 --> 00:03:00,799 Speaker 1: you clip a coupon with the yields where they are? Right? Well, 51 00:03:00,840 --> 00:03:03,760 Speaker 1: I think you want to own given what how flat 52 00:03:03,800 --> 00:03:06,239 Speaker 1: the yield curve is, and we were talking about this earlier, 53 00:03:06,480 --> 00:03:08,560 Speaker 1: you're better off at the front end of the yield curve. 54 00:03:08,639 --> 00:03:11,960 Speaker 1: Odds are the Fed will still raise rates and therefore 55 00:03:12,040 --> 00:03:14,880 Speaker 1: we will start to get some some risk premium priced 56 00:03:14,919 --> 00:03:17,800 Speaker 1: into the longer end. So all things equal, if you're 57 00:03:17,800 --> 00:03:20,440 Speaker 1: gonna own bonds, stay stay off front end. Okay, that's 58 00:03:20,480 --> 00:03:22,760 Speaker 1: that's some streets. You see that jargon there, that's West 59 00:03:22,760 --> 00:03:25,320 Speaker 1: Coast jargon. Is that premium and all that it's part 60 00:03:25,360 --> 00:03:29,280 Speaker 1: of the real yield what you can see on yes, Mark, 61 00:03:29,360 --> 00:03:34,280 Speaker 1: if you can come okay, so all the more reasons, Mark, 62 00:03:34,400 --> 00:03:38,600 Speaker 1: thank you for joining us. Have an extra cross song, um. Mark. 63 00:03:38,720 --> 00:03:41,240 Speaker 1: If if I look at bonds and I look at 64 00:03:41,280 --> 00:03:43,920 Speaker 1: the coupon and I want to clip it, I'm just 65 00:03:43,960 --> 00:03:48,200 Speaker 1: a small little guy. What maturity do I look at? 66 00:03:48,480 --> 00:03:51,080 Speaker 1: Is it? Don't tell me it's a T bill. Nobody's 67 00:03:51,080 --> 00:03:53,200 Speaker 1: gonna be able to eat on a T bill, sir. 68 00:03:53,400 --> 00:03:55,680 Speaker 1: And and most people when they refer to bonds are 69 00:03:55,720 --> 00:03:59,280 Speaker 1: talking about ten thirty year bonds. Today the tenure U 70 00:03:59,360 --> 00:04:03,880 Speaker 1: S Treasury who seventy the long bound at three UM. 71 00:04:03,920 --> 00:04:06,280 Speaker 1: There are times when you want to hold more cash. 72 00:04:06,320 --> 00:04:09,720 Speaker 1: If you look at last year cash outperform most asset classes, 73 00:04:10,080 --> 00:04:12,440 Speaker 1: now is actually not a bad time to be sitting 74 00:04:12,440 --> 00:04:15,560 Speaker 1: in more cash, wait four yields to go up and 75 00:04:15,560 --> 00:04:17,800 Speaker 1: and then deploy more money into bands. So I'm really 76 00:04:17,839 --> 00:04:19,640 Speaker 1: interested to see what you think is going to happen 77 00:04:19,640 --> 00:04:21,520 Speaker 1: at the long end, because over the last week we've 78 00:04:21,520 --> 00:04:23,760 Speaker 1: had a massive improvement in risk appetite, and all we've 79 00:04:23,760 --> 00:04:26,159 Speaker 1: seen happen with the treasury curve is money come out 80 00:04:26,160 --> 00:04:29,159 Speaker 1: of short term dead instruments as risk aversion fates. What 81 00:04:29,240 --> 00:04:32,200 Speaker 1: I don't see is real curve stepening. I don't see 82 00:04:32,240 --> 00:04:35,800 Speaker 1: a treasury curve that captures a fundamentally positive story about 83 00:04:35,800 --> 00:04:39,040 Speaker 1: the economy in America. In flact, I think the treasury 84 00:04:39,080 --> 00:04:41,440 Speaker 1: curve is flatter now than it was on Friday, and 85 00:04:41,560 --> 00:04:42,880 Speaker 1: that kind of tells you where we're at in the 86 00:04:42,880 --> 00:04:45,080 Speaker 1: treasury market. When am I going to start to see 87 00:04:45,360 --> 00:04:48,200 Speaker 1: the back end pick up to reflect an economy that 88 00:04:48,240 --> 00:04:50,159 Speaker 1: you say isn't as bad as people think it is. 89 00:04:50,880 --> 00:04:53,160 Speaker 1: So I think if we do get a trade deal 90 00:04:53,200 --> 00:04:55,919 Speaker 1: with China, I think that will start to get the 91 00:04:55,920 --> 00:04:58,360 Speaker 1: economy going again, and you'll start to see that your 92 00:04:58,440 --> 00:05:03,080 Speaker 1: curve steepen. Um. These yields are very low right now, uh, 93 00:05:03,120 --> 00:05:05,320 Speaker 1: and so as long as we do not have a recession, 94 00:05:05,360 --> 00:05:07,280 Speaker 1: if we grow it too and two and a half percent, 95 00:05:07,960 --> 00:05:09,960 Speaker 1: we think that tenure is probably gonna go back up 96 00:05:10,000 --> 00:05:12,560 Speaker 1: to three percent. So you've got more I think yield 97 00:05:12,680 --> 00:05:16,440 Speaker 1: upside right now given the base case scenario where growth 98 00:05:16,800 --> 00:05:19,280 Speaker 1: UH growth goes to two two and a half. So 99 00:05:19,400 --> 00:05:22,280 Speaker 1: just think about your strategy. The year progresses, you sank 100 00:05:22,320 --> 00:05:23,960 Speaker 1: sitting cash and his yield to pick up at the 101 00:05:23,960 --> 00:05:26,240 Speaker 1: longer end at duration as the year progresses, It's not 102 00:05:26,320 --> 00:05:30,440 Speaker 1: the strategy for you, guys. We we like bonds longer term. 103 00:05:30,680 --> 00:05:32,880 Speaker 1: So we are still of the view that rates are 104 00:05:32,880 --> 00:05:35,000 Speaker 1: not going to break out on the on the upside 105 00:05:35,000 --> 00:05:38,279 Speaker 1: because inflation globally will still stay relatively low. At the 106 00:05:38,320 --> 00:05:41,359 Speaker 1: same time, we think the market has near term brought 107 00:05:41,440 --> 00:05:43,920 Speaker 1: yields down too low. Can I get a question in here? 108 00:05:44,000 --> 00:05:50,360 Speaker 1: Even though the real yield the party, there's other things 109 00:05:50,360 --> 00:05:54,640 Speaker 1: besides full faith and credit. Where's the opportunity in better quality, 110 00:05:54,720 --> 00:05:58,640 Speaker 1: high yield and actually quality corporate paper. So overall we're 111 00:05:58,680 --> 00:06:02,480 Speaker 1: favoring securitized products, non agencies, which which are linked more 112 00:06:02,560 --> 00:06:04,840 Speaker 1: to the housing market. We still have a constructive view 113 00:06:04,839 --> 00:06:07,120 Speaker 1: on the consumer and housing, so we're going all Jenny 114 00:06:07,200 --> 00:06:09,320 Speaker 1: May like we did thirty years ago. We like we 115 00:06:09,400 --> 00:06:12,599 Speaker 1: like non agencies, We like agency mortgages. Within corporates, we 116 00:06:12,600 --> 00:06:15,280 Speaker 1: want to stay high quality and investment grade. But what 117 00:06:15,320 --> 00:06:18,000 Speaker 1: the couple areas we like We like bank and financials, 118 00:06:18,000 --> 00:06:20,880 Speaker 1: we like reats, We like the consumer, and we like energy. 119 00:06:20,960 --> 00:06:24,320 Speaker 1: We think energy has has interesting self corrected too low. 120 00:06:24,680 --> 00:06:27,640 Speaker 1: We would own pipelines here. Okay, what kind of yield 121 00:06:27,640 --> 00:06:30,800 Speaker 1: do you get on a debt instrument in the pipeline 122 00:06:30,800 --> 00:06:33,960 Speaker 1: and the beleaguered American energy So you can basically get 123 00:06:34,000 --> 00:06:40,239 Speaker 1: five percent on very high quality pipelines. Companies that are 124 00:06:40,279 --> 00:06:43,719 Speaker 1: are generating free cash flow of five six percent annually 125 00:06:44,000 --> 00:06:46,839 Speaker 1: benefiting from the sale revolution. The United States is the 126 00:06:46,839 --> 00:06:49,640 Speaker 1: biggest producer of energy now in the world. It's a 127 00:06:49,720 --> 00:06:52,640 Speaker 1: huge deal. But hey, what you're playing is the volume 128 00:06:52,720 --> 00:06:56,040 Speaker 1: story of oil in America, not the price exactly. And 129 00:06:56,080 --> 00:06:59,559 Speaker 1: midstream is the best sector and energy right now because 130 00:06:59,600 --> 00:07:03,880 Speaker 1: as SENTE is benefiting from increased volume growth throughout the 131 00:07:03,920 --> 00:07:06,080 Speaker 1: shell regions. So does this mean that after the real 132 00:07:06,200 --> 00:07:09,760 Speaker 1: old sponsored by Pimco, the barrel is that where this 133 00:07:09,800 --> 00:07:13,600 Speaker 1: is you can drop buy for that program? Can I 134 00:07:13,600 --> 00:07:16,280 Speaker 1: get the final question in on leverage lounge place MARP 135 00:07:16,320 --> 00:07:18,360 Speaker 1: because there's been a massive discussion about it and a 136 00:07:18,440 --> 00:07:21,640 Speaker 1: huge turnaround and then a huge turnaround again. Where is 137 00:07:21,680 --> 00:07:24,200 Speaker 1: Pimco as a shop on leverage lines at the moment? 138 00:07:24,600 --> 00:07:29,080 Speaker 1: So we we have been very cautious on credit risk overall. 139 00:07:29,760 --> 00:07:32,360 Speaker 1: Um we have been for the most part avoiding a 140 00:07:32,360 --> 00:07:34,880 Speaker 1: lot of these leverage loans. I will tell you towards 141 00:07:34,920 --> 00:07:39,040 Speaker 1: the second and third and fourth week of December. Uh, 142 00:07:39,280 --> 00:07:42,400 Speaker 1: these loans were liquidated. There was four selling, there were 143 00:07:42,440 --> 00:07:45,080 Speaker 1: hedge fun on wines. We saw selling in Asia. That 144 00:07:45,200 --> 00:07:47,520 Speaker 1: was the first time really where we started to step 145 00:07:47,560 --> 00:07:50,360 Speaker 1: in and take the other side. Where we're buying. We're 146 00:07:50,360 --> 00:07:53,600 Speaker 1: being very selective. We're buying in companies that are non cyclical. 147 00:07:53,640 --> 00:07:57,520 Speaker 1: We're buying relatively unlovered credits. But we were literally getting 148 00:07:57,680 --> 00:08:00,080 Speaker 1: at the end of the year six seven percent on 149 00:08:00,360 --> 00:08:04,080 Speaker 1: some pretty decent credits. So there, you know. The strategy 150 00:08:04,200 --> 00:08:06,640 Speaker 1: is to sit back, wait, there's gonna be more volatility, 151 00:08:06,680 --> 00:08:09,280 Speaker 1: hold a lot of cash, and deploy that cash as 152 00:08:09,320 --> 00:08:12,200 Speaker 1: you see bottom up opportunities which will will be coming. 153 00:08:12,320 --> 00:08:14,760 Speaker 1: Mark Hazel, great to have Mark with us. It is 154 00:08:14,920 --> 00:08:18,200 Speaker 1: Mark doesn't come enough. Anybody else joining next week, I 155 00:08:18,200 --> 00:08:22,560 Speaker 1: don't know. I have credit. Seriously, thank you for your 156 00:08:22,560 --> 00:08:24,800 Speaker 1: support of what we're doing here. Thank you. Thank you 157 00:08:26,440 --> 00:08:43,880 Speaker 1: day as well, John Farrowe and Tim came a terrific 158 00:08:43,960 --> 00:08:48,120 Speaker 1: news flow across economics. Of course, FED speak today Chairman 159 00:08:48,160 --> 00:08:51,720 Speaker 1: Paul speaking with David Rubinstein, the Economic Club of New York. 160 00:08:51,800 --> 00:08:54,400 Speaker 1: And two items this morning before we bring in hard 161 00:08:54,440 --> 00:08:57,319 Speaker 1: bundles of UNI credit, and that is capital economics over 162 00:08:57,360 --> 00:09:01,959 Speaker 1: in London severely marking down their EU outlook john to 163 00:09:02,160 --> 00:09:06,880 Speaker 1: one percent like one point zero percent. And then we 164 00:09:07,000 --> 00:09:10,120 Speaker 1: just heard Marquisol PIMCO, and within the wonderful jokes about 165 00:09:10,559 --> 00:09:14,920 Speaker 1: their support of your product, the real yield is I'm sorry, 166 00:09:14,920 --> 00:09:18,280 Speaker 1: he's got a pretty gloomy view on the American economy 167 00:09:18,640 --> 00:09:21,200 Speaker 1: returning to try and growth and join a big distinction 168 00:09:21,240 --> 00:09:24,520 Speaker 1: between that and recession red Where are we you know, 169 00:09:24,600 --> 00:09:27,520 Speaker 1: with UniCredit, what have you done with your you are 170 00:09:27,520 --> 00:09:30,840 Speaker 1: you marking down your g d P numbers for America? No? 171 00:09:31,040 --> 00:09:33,280 Speaker 1: And I'm afraid we are even more gloomy than than 172 00:09:33,320 --> 00:09:36,200 Speaker 1: pim kois because as you just said and heard so 173 00:09:36,360 --> 00:09:39,160 Speaker 1: PIMPO expect to return towards potential. We think we go 174 00:09:39,280 --> 00:09:41,240 Speaker 1: below potential in the second half of this year and 175 00:09:41,360 --> 00:09:44,360 Speaker 1: even further down in so that we that we could 176 00:09:44,400 --> 00:09:47,480 Speaker 1: see in a recession there. So that that is saying, wait, 177 00:09:47,320 --> 00:09:50,240 Speaker 1: wait when you say we'll see a recession there? Are 178 00:09:50,240 --> 00:09:55,880 Speaker 1: you talking NB er recession? Sure? What's the cantalyst for that? 179 00:09:56,440 --> 00:09:58,640 Speaker 1: The catalyst is, well, I mean we have been hearing 180 00:09:59,600 --> 00:10:02,679 Speaker 1: frequent enough that recoveries don't die of old age, most 181 00:10:02,720 --> 00:10:06,440 Speaker 1: recently by Berninky on Friday but we gotta acknowledge that 182 00:10:06,480 --> 00:10:08,640 Speaker 1: we are towards the later part of the cycle and 183 00:10:08,640 --> 00:10:12,120 Speaker 1: we're seeing I think, closed output gaps. It's getting technical, 184 00:10:12,120 --> 00:10:13,400 Speaker 1: but I know you like it here on this show. 185 00:10:14,080 --> 00:10:16,280 Speaker 1: So we get seeing closed output gaps around the globe, 186 00:10:16,280 --> 00:10:19,000 Speaker 1: we seem grows, slowing down, signs of fatigue in the 187 00:10:19,040 --> 00:10:22,760 Speaker 1: global business cycle. The only economy, well, the only meaningful economy, 188 00:10:22,800 --> 00:10:25,360 Speaker 1: if I could say so, um that has the coupled 189 00:10:25,400 --> 00:10:27,679 Speaker 1: so far was the US. But that's easily explained by 190 00:10:27,720 --> 00:10:30,240 Speaker 1: this huge stimulus program. So that is just mask the 191 00:10:30,320 --> 00:10:32,800 Speaker 1: underlying slowdown that we are going to see here as well. 192 00:10:33,120 --> 00:10:35,760 Speaker 1: Once the impact of a stimulus fates, grows, slows down, 193 00:10:36,040 --> 00:10:39,439 Speaker 1: and that then exposes the underlying weaknesses. And we think 194 00:10:39,440 --> 00:10:41,640 Speaker 1: this time the underlying weakness is in the corporate sector. 195 00:10:42,600 --> 00:10:45,679 Speaker 1: We have too much that we have not good ratings. 196 00:10:46,280 --> 00:10:48,160 Speaker 1: Now we have even lower oil prices, which is not 197 00:10:48,160 --> 00:10:50,800 Speaker 1: good for investment spending. So the recession, we think will 198 00:10:50,800 --> 00:10:52,880 Speaker 1: look similar to what we saw in two thousand one, 199 00:10:53,400 --> 00:10:55,600 Speaker 1: not too bad in terms of real macro and it 200 00:10:55,600 --> 00:10:59,160 Speaker 1: comes mostly from the investment side. Why can't productivity pick up? 201 00:10:59,200 --> 00:11:01,160 Speaker 1: Why can't we have us apply side response in the 202 00:11:01,160 --> 00:11:04,400 Speaker 1: way this administration thinks we will get one. I think 203 00:11:04,400 --> 00:11:06,120 Speaker 1: we do probably see a bit of a pickup in 204 00:11:06,120 --> 00:11:11,120 Speaker 1: productivity just because the supply of labor is being depleted. 205 00:11:11,160 --> 00:11:13,040 Speaker 1: You know, we're going where we are closer to full 206 00:11:13,040 --> 00:11:16,240 Speaker 1: employment and we need actually a pick up in productivity 207 00:11:16,280 --> 00:11:22,640 Speaker 1: to sustain some some growth. But in in response to 208 00:11:22,640 --> 00:11:25,680 Speaker 1: to what the administration has done, I don't think there 209 00:11:25,760 --> 00:11:28,760 Speaker 1: is anything that translates from the lower taxes, less regulation 210 00:11:28,840 --> 00:11:30,800 Speaker 1: to higher prouctivity because I don't think we have seen 211 00:11:30,840 --> 00:11:33,160 Speaker 1: the investment that is the missing link there that would 212 00:11:33,160 --> 00:11:36,280 Speaker 1: translate the politics to the real economy, and that hasn't 213 00:11:36,280 --> 00:11:42,720 Speaker 1: been there. Well. Within capital deepening with the new technology, 214 00:11:42,840 --> 00:11:46,600 Speaker 1: do we have any sense of what capital allocation is 215 00:11:46,640 --> 00:11:49,600 Speaker 1: within our society? No, that is a tricky part. I 216 00:11:49,600 --> 00:11:52,200 Speaker 1: know they have been We're focused on labor, but I'm sorry, 217 00:11:52,200 --> 00:11:54,840 Speaker 1: the capital deployment is a mystery, isn't it? It is? 218 00:11:55,000 --> 00:11:57,200 Speaker 1: It is um So, I mean, to some extent, we 219 00:11:57,280 --> 00:12:02,440 Speaker 1: can offset part of the of the lack of availability 220 00:12:02,440 --> 00:12:06,480 Speaker 1: of labor through artificial intelligence machines. So there's a prouctivity 221 00:12:06,480 --> 00:12:08,960 Speaker 1: increase that we see. But of course you always look 222 00:12:09,000 --> 00:12:11,840 Speaker 1: at growth rates, so you know where we want to 223 00:12:11,840 --> 00:12:15,280 Speaker 1: see higher growth rates. That means that this substitution of 224 00:12:15,360 --> 00:12:18,760 Speaker 1: labor by capital, if you want, is happening at an 225 00:12:18,760 --> 00:12:21,560 Speaker 1: accelerating pace. Right, It's not enough if it continues to 226 00:12:21,559 --> 00:12:23,680 Speaker 1: grow at the same pace because there is no pickup 227 00:12:23,720 --> 00:12:25,560 Speaker 1: in the growth rate. The pick up in the growth 228 00:12:25,600 --> 00:12:29,040 Speaker 1: rate only happens when we haven't we have a further acceleration, 229 00:12:29,400 --> 00:12:31,200 Speaker 1: and I don't think this is going to happen. What 230 00:12:31,240 --> 00:12:33,800 Speaker 1: are you looking for from the chairman like to tonight, Well, 231 00:12:33,840 --> 00:12:35,800 Speaker 1: there's a lot of copy and paste, I think so. 232 00:12:36,120 --> 00:12:37,440 Speaker 1: I mean the tone has been said. I think the 233 00:12:37,440 --> 00:12:39,520 Speaker 1: tone has been said. At the December meeting, markets didn't 234 00:12:39,559 --> 00:12:41,280 Speaker 1: understand what the Fat was telling them. I think it 235 00:12:41,320 --> 00:12:43,360 Speaker 1: was very obvious at that point already that the Fat 236 00:12:43,440 --> 00:12:47,200 Speaker 1: got rattled. Markets didn't hear exactly the words they wanted 237 00:12:47,200 --> 00:12:49,320 Speaker 1: to hear. That they threw a tantrum, and then we 238 00:12:49,360 --> 00:12:52,640 Speaker 1: had John Williams and then lastly the chair coming out 239 00:12:52,679 --> 00:12:54,480 Speaker 1: and saying, all right, guys, we got it. We will 240 00:12:54,520 --> 00:12:57,720 Speaker 1: be very careful and do everything you want. So given 241 00:12:57,720 --> 00:12:59,920 Speaker 1: Shamman Pal a bit of a free pass. His perfor 242 00:13:00,000 --> 00:13:03,000 Speaker 1: almost of the news conference was let's just say, disappointing 243 00:13:03,320 --> 00:13:05,439 Speaker 1: relative to what he followed up with. It was totally 244 00:13:05,480 --> 00:13:09,079 Speaker 1: inconsistent with what I saw in the minutes yesterday. Well, 245 00:13:09,160 --> 00:13:11,640 Speaker 1: just in terms of the emphasis. The emphasis in the 246 00:13:11,679 --> 00:13:14,080 Speaker 1: minutes is completely different to the emphasis that he delivered 247 00:13:14,080 --> 00:13:16,440 Speaker 1: in the news conference in December. Well, I mean I 248 00:13:16,480 --> 00:13:19,480 Speaker 1: wrote a flash after the FOMC statement and said basically 249 00:13:19,520 --> 00:13:22,120 Speaker 1: exactly what was in the in the minutes, that the 250 00:13:22,160 --> 00:13:24,760 Speaker 1: FAT confidence was rattled, and they have a look at it. 251 00:13:24,800 --> 00:13:26,760 Speaker 1: I mean, they just changed a few words in the statement, 252 00:13:26,880 --> 00:13:29,200 Speaker 1: they changed the dots, and from that on it was 253 00:13:29,400 --> 00:13:33,120 Speaker 1: very obvious how they thought and what the debate was. Yeah, Powe, 254 00:13:33,480 --> 00:13:35,520 Speaker 1: he said, well, our plan is our baseline is that. 255 00:13:35,880 --> 00:13:38,040 Speaker 1: And the one thing that markets really hated was that 256 00:13:38,080 --> 00:13:40,040 Speaker 1: he talked about the rundown of the balance sheet and 257 00:13:40,080 --> 00:13:42,160 Speaker 1: he shouldn't have used the word autopilot or whatever when 258 00:13:42,160 --> 00:13:45,720 Speaker 1: he didn't emphasize flexibility. But subsequently he has. But the 259 00:13:45,760 --> 00:13:49,079 Speaker 1: FAT is always flexible, right, That's what I think. Richard 260 00:13:49,080 --> 00:13:50,959 Speaker 1: Fisher said it a couple of days ago. When I 261 00:13:50,960 --> 00:13:54,200 Speaker 1: don't know what the market has. That is normal fat communication, 262 00:13:54,600 --> 00:13:57,640 Speaker 1: and the FAT always takes changing developments into acoun They 263 00:13:57,640 --> 00:13:59,600 Speaker 1: always do that, and I think it's a bit almost 264 00:13:59,640 --> 00:14:02,400 Speaker 1: a bit ery. Um if this goes out to people 265 00:14:02,400 --> 00:14:06,720 Speaker 1: who would trust professionals in the sector, that professionals in 266 00:14:06,760 --> 00:14:10,800 Speaker 1: the market do not know what FAT communication is, that 267 00:14:10,880 --> 00:14:14,880 Speaker 1: they have a baseline, but they if if the circumstances change, 268 00:14:14,960 --> 00:14:16,960 Speaker 1: the FAT changes, that then have to say, Um, if 269 00:14:17,040 --> 00:14:19,440 Speaker 1: enough people don't understand, then the problem is with the messenger, 270 00:14:20,040 --> 00:14:22,600 Speaker 1: not with the individuals receiving the message. There's a real 271 00:14:22,680 --> 00:14:25,800 Speaker 1: question about chairman powers delivery over the last several months, 272 00:14:25,840 --> 00:14:27,960 Speaker 1: never mind just the last month alone. I could continue 273 00:14:27,960 --> 00:14:31,400 Speaker 1: this conversational day harm BANDHLTS joining us from ARNI Credit 274 00:14:31,440 --> 00:14:46,800 Speaker 1: great to catch up with you and China and really 275 00:14:46,840 --> 00:14:50,320 Speaker 1: the attendant not kind of effects to China and they're 276 00:14:50,360 --> 00:14:53,240 Speaker 1: not kind of effects back to us. Miranda car joins 277 00:14:53,280 --> 00:14:55,720 Speaker 1: now from High Time. Miranda, one of our themes this 278 00:14:55,800 --> 00:14:58,960 Speaker 1: morning is a lot of fancy people we talked to 279 00:14:59,120 --> 00:15:03,760 Speaker 1: marking down their economic growth estimates. We all understand that's 280 00:15:03,880 --> 00:15:08,280 Speaker 1: got to affect China directly. Do you and your team 281 00:15:08,360 --> 00:15:14,680 Speaker 1: have any gues estimate of china real GDP growth? Well, 282 00:15:14,800 --> 00:15:18,360 Speaker 1: the real GDP growth is obviously slowed significantly in in 283 00:15:18,480 --> 00:15:21,400 Speaker 1: Q four and particularly in December. UM, and hence why 284 00:15:21,440 --> 00:15:23,640 Speaker 1: you've got all the You're we're not going to see 285 00:15:23,720 --> 00:15:26,080 Speaker 1: UH the numbers come out next week. We're not going 286 00:15:26,120 --> 00:15:29,960 Speaker 1: to see a real number reported. UM. But the but 287 00:15:30,000 --> 00:15:33,360 Speaker 1: the real interesting thing about the UM the inflation numbers 288 00:15:33,360 --> 00:15:37,360 Speaker 1: out today is you've got UM. The market is reading 289 00:15:37,360 --> 00:15:40,880 Speaker 1: that as a big drag on sort of economic big 290 00:15:40,920 --> 00:15:44,080 Speaker 1: sign of an economic slowdown UM, Whereas they're missing one 291 00:15:44,160 --> 00:15:49,240 Speaker 1: key part of the equation UM, which is that UM, 292 00:15:49,320 --> 00:15:51,920 Speaker 1: the a lot of the price falls were due to 293 00:15:52,000 --> 00:15:54,960 Speaker 1: the capacity that they didn't shut all capacity over the 294 00:15:54,960 --> 00:15:58,360 Speaker 1: winter season, which is something they normally do ever since 295 00:15:58,400 --> 00:16:01,720 Speaker 1: two thousand and fifteen. So you've had price falls owing 296 00:16:01,760 --> 00:16:05,280 Speaker 1: to the slowdown, but also due to the due to 297 00:16:05,320 --> 00:16:09,040 Speaker 1: the lack of capacity closures. So it's not entirely reflective 298 00:16:09,120 --> 00:16:13,160 Speaker 1: of a huge slump in in all of the upstream pricing. 299 00:16:13,400 --> 00:16:16,640 Speaker 1: So you're saying the base effects of effectively been sort 300 00:16:16,640 --> 00:16:20,440 Speaker 1: of distorted somewhat here. Miranda, Yeah, I mean, if you 301 00:16:20,440 --> 00:16:22,520 Speaker 1: look at two thousands fifteen, when the last time you're 302 00:16:22,520 --> 00:16:26,800 Speaker 1: facing really big global deflationary pressures from China, UM. What 303 00:16:27,000 --> 00:16:29,960 Speaker 1: China came out was with the supply fat reform where 304 00:16:30,000 --> 00:16:32,760 Speaker 1: they cut capacity and prices then shot up, and then 305 00:16:32,800 --> 00:16:35,640 Speaker 1: suddenly there was there was no longer a deflationary There 306 00:16:35,680 --> 00:16:39,240 Speaker 1: was inflation rethreat from China into two thousands and sixteen. 307 00:16:39,600 --> 00:16:42,560 Speaker 1: Now this time we're facing the same issue deflation respect 308 00:16:42,640 --> 00:16:45,400 Speaker 1: coming out into global markets UM and so the question 309 00:16:45,480 --> 00:16:48,600 Speaker 1: is do they then start shutting capacity again. There's a 310 00:16:48,680 --> 00:16:51,920 Speaker 1: lot less room to do that this time around UM 311 00:16:52,080 --> 00:16:57,600 Speaker 1: and so the deflationary pressures could could become significant as 312 00:16:57,600 --> 00:17:00,280 Speaker 1: we come into into each one. So what's your case 313 00:17:00,400 --> 00:17:02,440 Speaker 1: right now, Miranda, Because it's pretty easy at the moment 314 00:17:02,440 --> 00:17:04,320 Speaker 1: to paint a very barest picture of what is happening 315 00:17:04,320 --> 00:17:06,560 Speaker 1: in terms of the deceleration of the Chinese economy. If 316 00:17:06,560 --> 00:17:08,479 Speaker 1: you want to corporate, you can pick out Apple. If 317 00:17:08,480 --> 00:17:10,120 Speaker 1: you want a data point, you can pick out many. 318 00:17:10,160 --> 00:17:11,800 Speaker 1: You can pick out a p m I that came 319 00:17:11,840 --> 00:17:13,760 Speaker 1: out over the last couple of weeks. You can pick 320 00:17:13,800 --> 00:17:16,920 Speaker 1: out the latest PPI data as well, And for that matter, 321 00:17:17,000 --> 00:17:18,600 Speaker 1: you can go on and on and on for China 322 00:17:18,600 --> 00:17:20,960 Speaker 1: at the moment, including the auto sales picture we got 323 00:17:21,119 --> 00:17:23,800 Speaker 1: painted early earlier this week. For us, what is your 324 00:17:23,800 --> 00:17:25,640 Speaker 1: base case? Is it as bad as some of those 325 00:17:25,720 --> 00:17:29,560 Speaker 1: data points tell US. It is UM. Some of those 326 00:17:29,640 --> 00:17:32,480 Speaker 1: data points have other factors involved, but yes, China is 327 00:17:32,560 --> 00:17:36,000 Speaker 1: facing a significant slow down as we come into come 328 00:17:36,040 --> 00:17:40,399 Speaker 1: into January. But the key thing is the monetary shift 329 00:17:40,440 --> 00:17:43,560 Speaker 1: has already happened. I mean, the monetary easing, sort of 330 00:17:43,640 --> 00:17:47,000 Speaker 1: quite large scale Mountrey using already started in October and 331 00:17:47,040 --> 00:17:49,359 Speaker 1: that's when you start seeing the sort of turnaround in 332 00:17:49,440 --> 00:17:53,200 Speaker 1: China's economy. So you've had already several months and now 333 00:17:53,240 --> 00:17:55,600 Speaker 1: they're talking about, you know, going back into sort of, 334 00:17:55,640 --> 00:17:59,359 Speaker 1: if you like, some of the old school subsidies and 335 00:17:59,600 --> 00:18:02,000 Speaker 1: tax cuts in order to try to stimulate the economy. 336 00:18:02,240 --> 00:18:05,240 Speaker 1: So this means although so janj February is always tricky 337 00:18:05,240 --> 00:18:07,880 Speaker 1: because it's a spring festival, it's really hard to get 338 00:18:07,880 --> 00:18:10,600 Speaker 1: a good read across on the data UM. But as 339 00:18:10,600 --> 00:18:13,720 Speaker 1: we come into Q two, a lot of the really 340 00:18:13,760 --> 00:18:17,160 Speaker 1: sort of classic stimulus measures they're going to put, infrastructure investment, 341 00:18:17,160 --> 00:18:21,280 Speaker 1: monetary easing, tax cuts, support for the auto market, support 342 00:18:21,320 --> 00:18:25,280 Speaker 1: for consumer spending should start coming through and leveling things off, because, 343 00:18:25,280 --> 00:18:27,560 Speaker 1: if you like, they've already taken the measures because they 344 00:18:27,600 --> 00:18:30,520 Speaker 1: know how bad things are, Because things are, you know 345 00:18:30,640 --> 00:18:34,160 Speaker 1: that across the board have been very very weak. One 346 00:18:34,200 --> 00:18:36,520 Speaker 1: thing that I've struggled with them are Andrew is understanding 347 00:18:36,600 --> 00:18:39,719 Speaker 1: what is sort of marginal and what is substantial. So 348 00:18:39,840 --> 00:18:42,880 Speaker 1: we're looking at the latest Finance Ministry proposal for a 349 00:18:42,880 --> 00:18:46,840 Speaker 1: a bigger budget deficit, but only incrementally. It doesn't seem 350 00:18:46,840 --> 00:18:49,240 Speaker 1: to me that China is firing everything call guns blazing 351 00:18:49,240 --> 00:18:51,879 Speaker 1: at this slow down just yet. What is the magnitude 352 00:18:51,880 --> 00:18:53,879 Speaker 1: of the policy shift at the moment? Is it incremental 353 00:18:54,000 --> 00:18:56,879 Speaker 1: or is it substantial enough? Well, the thing is that 354 00:18:56,920 --> 00:18:59,439 Speaker 1: they've managed to create a special, a new class of 355 00:18:59,480 --> 00:19:01,520 Speaker 1: debt which is going to fund a lot of the 356 00:19:01,520 --> 00:19:06,240 Speaker 1: infrastructure projects. The fiscal deficit does not increase significantly, but 357 00:19:06,320 --> 00:19:08,400 Speaker 1: what does increases. They have a new class of debt 358 00:19:08,400 --> 00:19:11,639 Speaker 1: called special local government bonds. Now these don't sit on 359 00:19:11,680 --> 00:19:13,760 Speaker 1: the fiscal balance sheet, they don't sit on the corporate 360 00:19:13,760 --> 00:19:16,399 Speaker 1: balance sheet. It's almost like a new, a new debt 361 00:19:16,400 --> 00:19:19,240 Speaker 1: class that China is invented um And we're going to 362 00:19:19,280 --> 00:19:23,040 Speaker 1: see about two trillion of that um of the bonds 363 00:19:23,240 --> 00:19:27,119 Speaker 1: issues to support infrastructure investment in two thousand and nineteen, 364 00:19:27,480 --> 00:19:30,200 Speaker 1: up from about one point three trillion last year. So 365 00:19:30,400 --> 00:19:33,679 Speaker 1: the debt comes in but not in the not the 366 00:19:33,680 --> 00:19:37,480 Speaker 1: fiscal deficit still looks quite responsible. If we get IF 367 00:19:37,680 --> 00:19:41,199 Speaker 1: IF if, if, if we get the capital economics Europe 368 00:19:41,240 --> 00:19:45,000 Speaker 1: and one percent GDP growth sack Jen looking at America 369 00:19:45,160 --> 00:19:48,760 Speaker 1: run rate of one point eight Pimco's two wish and 370 00:19:48,840 --> 00:19:51,879 Speaker 1: even to the low side with China challenges. If the 371 00:19:51,880 --> 00:19:56,840 Speaker 1: rest of the world slows down, what does China do? Yeah, well, 372 00:19:56,880 --> 00:20:00,320 Speaker 1: I mean China is is flowing as well. The I 373 00:20:00,359 --> 00:20:04,000 Speaker 1: mean we expect that the growth target under the Central 374 00:20:04,000 --> 00:20:07,600 Speaker 1: Economic Work Conference in December that everyone now expects the 375 00:20:07,600 --> 00:20:09,600 Speaker 1: growth target for this year to be lowered to six 376 00:20:09,640 --> 00:20:12,520 Speaker 1: to six point five rather than trying to keep up 377 00:20:12,560 --> 00:20:15,720 Speaker 1: at the six point five level full of last year. Now, 378 00:20:15,800 --> 00:20:20,440 Speaker 1: obviously that's still a a sort of government target which 379 00:20:20,720 --> 00:20:22,720 Speaker 1: is not a reflection of what's going on at the 380 00:20:22,760 --> 00:20:27,080 Speaker 1: moment um. So you're likely to see a much um 381 00:20:27,280 --> 00:20:30,000 Speaker 1: sharper slow down in in each one. But yeah, I mean, 382 00:20:30,000 --> 00:20:33,040 Speaker 1: I think there's an exception expectation that China's growth will 383 00:20:33,080 --> 00:20:35,639 Speaker 1: So the key question is obviously how much is the 384 00:20:36,040 --> 00:20:39,560 Speaker 1: government can step into trying to you know, ease off 385 00:20:39,600 --> 00:20:43,400 Speaker 1: some of the pain um and then you know, because 386 00:20:43,400 --> 00:20:45,200 Speaker 1: because one of the question marks I think for this 387 00:20:45,280 --> 00:20:48,280 Speaker 1: year is really how much they boost the property markets, 388 00:20:48,320 --> 00:20:50,280 Speaker 1: because that, if you like, is the is a big 389 00:20:50,320 --> 00:20:53,760 Speaker 1: swing factor. If we go into another um sort of 390 00:20:53,760 --> 00:20:57,480 Speaker 1: real estate boom, then suddenly instead of looking at a 391 00:20:57,480 --> 00:21:00,520 Speaker 1: at a sort of China slow down deflation, new picture, 392 00:21:00,560 --> 00:21:04,240 Speaker 1: you look at another sort of real estate sort of boom, 393 00:21:04,280 --> 00:21:06,560 Speaker 1: which is not maybe helpful in the short term, but 394 00:21:06,600 --> 00:21:09,400 Speaker 1: obviously then just creates much bigger problems in the longer term. 395 00:21:09,560 --> 00:21:11,040 Speaker 1: It's really interesting to me that we've just had a 396 00:21:11,040 --> 00:21:13,960 Speaker 1: conversation of about six seven minutes on China and hardly 397 00:21:14,000 --> 00:21:16,919 Speaker 1: ever at all touched on the trade discussion. Miranda. Some 398 00:21:17,000 --> 00:21:19,920 Speaker 1: people assign a lot of importance to the trade negotiations 399 00:21:19,960 --> 00:21:23,480 Speaker 1: as to what happens next with China and the Chinese economy, 400 00:21:23,640 --> 00:21:28,680 Speaker 1: do you well, of course, yeah. I mean the stopping 401 00:21:28,680 --> 00:21:32,600 Speaker 1: the escalation of the trade dispute and not taking all 402 00:21:32,640 --> 00:21:36,680 Speaker 1: the production out of China and stopping the the export 403 00:21:36,680 --> 00:21:39,480 Speaker 1: growth is a is a big factor that seems to 404 00:21:39,520 --> 00:21:43,800 Speaker 1: be much more likely now the trade the escalation of 405 00:21:43,800 --> 00:21:46,200 Speaker 1: the trade dispute seems to have stopped, but I think 406 00:21:46,200 --> 00:21:48,399 Speaker 1: it's going to shift. It's going to shift them into 407 00:21:48,760 --> 00:21:52,479 Speaker 1: much more targeted, much more so the US will target 408 00:21:52,560 --> 00:21:56,000 Speaker 1: some of China's technologies or China's companies, and so there's 409 00:21:56,240 --> 00:22:00,600 Speaker 1: going to be continued escalation, not in not in the 410 00:22:00,680 --> 00:22:03,000 Speaker 1: trade in general, but you know there's still going to 411 00:22:03,080 --> 00:22:06,919 Speaker 1: be conflict between the two sides. Randa Carr, thank you 412 00:22:06,960 --> 00:22:09,080 Speaker 1: so much. A briefing on China this morning, with high 413 00:22:09,080 --> 00:22:28,879 Speaker 1: tongue securities. Greatly appreciate that as well. We are advantaged 414 00:22:29,480 --> 00:22:33,480 Speaker 1: in certain divisions to have outstanding ability. One of the 415 00:22:33,520 --> 00:22:38,120 Speaker 1: heritage items for Bloomberg has been auto analysis. I think 416 00:22:38,119 --> 00:22:41,320 Speaker 1: of Kevin Tynan and Bloomberg intelligence and over in the 417 00:22:41,320 --> 00:22:44,560 Speaker 1: Bloomberg opinion aside for years at the Financial time. Christopher 418 00:22:44,560 --> 00:22:48,280 Speaker 1: Bryant Chris Bryant joins us from Berlin this morning. I'm 419 00:22:48,400 --> 00:22:52,359 Speaker 1: Ford and on a general auto industry as well, Chris, 420 00:22:52,440 --> 00:22:56,600 Speaker 1: you have a stunning statistic from Credit Suites that eight 421 00:22:57,000 --> 00:22:59,439 Speaker 1: percent of the bodies are going to go out the 422 00:22:59,480 --> 00:23:03,879 Speaker 1: door in the coming years. Is that global? Does that 423 00:23:03,920 --> 00:23:08,040 Speaker 1: include America as well? Well? I mean, Thomas, I think 424 00:23:08,119 --> 00:23:12,119 Speaker 1: that was a European figure. But to be honest, the 425 00:23:12,160 --> 00:23:15,960 Speaker 1: exact same trends are affecting American car industry to affect 426 00:23:16,000 --> 00:23:20,160 Speaker 1: the European car industry clearly in Europe probably you could 427 00:23:20,200 --> 00:23:23,280 Speaker 1: say moving faster towards an electric future due to the 428 00:23:23,720 --> 00:23:26,440 Speaker 1: much stronger emission rules that we have here, and so 429 00:23:26,760 --> 00:23:29,160 Speaker 1: they have been I think more reflection on the kind 430 00:23:29,160 --> 00:23:31,960 Speaker 1: of job losses that we could see. But fundamentally, yes, 431 00:23:32,280 --> 00:23:35,520 Speaker 1: electric vehicles are simpler to produce, a lot of the 432 00:23:35,520 --> 00:23:38,080 Speaker 1: work can be outsourced too, so it is reasonable to 433 00:23:38,119 --> 00:23:40,679 Speaker 1: assume that all the people are building combustion engines and 434 00:23:40,720 --> 00:23:43,520 Speaker 1: related technology right now, we have to find something else 435 00:23:43,560 --> 00:23:45,960 Speaker 1: to do in the future or lose their jobs. You 436 00:23:46,080 --> 00:23:48,760 Speaker 1: use a beautiful British phrase, the pim fox, and I 437 00:23:48,800 --> 00:23:53,800 Speaker 1: would never use leaden footed. Nah, they have been leaden footed. 438 00:23:54,080 --> 00:24:00,520 Speaker 1: How leaden footed his American automobile manufacturers been in Europe? Well, 439 00:24:01,160 --> 00:24:03,479 Speaker 1: I would grade them to be honest. I mean General 440 00:24:03,520 --> 00:24:06,720 Speaker 1: Motors was criticized for taking a long time to pull 441 00:24:06,760 --> 00:24:09,280 Speaker 1: out of Europe, but it did eventually pull the plug, 442 00:24:09,400 --> 00:24:13,080 Speaker 1: sold the operations to Perjoy, and now it looks compared 443 00:24:13,119 --> 00:24:16,960 Speaker 1: to Forward relatively fleet footed. Uh Ford is sort of 444 00:24:17,520 --> 00:24:20,679 Speaker 1: taking a bit more time obviously with the new CEO 445 00:24:20,880 --> 00:24:24,560 Speaker 1: wanted to think about how exactly the should be done, 446 00:24:24,560 --> 00:24:26,720 Speaker 1: and clearly a very sensitive thing to do as well. 447 00:24:26,760 --> 00:24:28,399 Speaker 1: If you're going to cut jobs in Europe, you're going 448 00:24:28,440 --> 00:24:31,879 Speaker 1: to expect some political backlash and obviously pressure from the 449 00:24:31,880 --> 00:24:34,800 Speaker 1: trade unions to Ford is not said how many jobs 450 00:24:34,840 --> 00:24:38,160 Speaker 1: they planned to cut yet, but some bad news across 451 00:24:38,160 --> 00:24:40,240 Speaker 1: the industry to day, with Jaggi landro Over saying as 452 00:24:40,280 --> 00:24:43,159 Speaker 1: well that they would cut four and a half thousand jobs. Clearly, 453 00:24:43,200 --> 00:24:48,000 Speaker 1: neither company can tolerate making losses. Lots of different factors 454 00:24:48,320 --> 00:24:51,119 Speaker 1: putting pressure on their their cash at the moment, and 455 00:24:51,280 --> 00:24:55,400 Speaker 1: they filled it enough enough, Chris, Where are the biggest 456 00:24:55,440 --> 00:24:58,720 Speaker 1: losses going to come? Because we've noted in the past, 457 00:24:58,760 --> 00:25:02,240 Speaker 1: like about six years ago, I think Ford closed three 458 00:25:02,240 --> 00:25:04,199 Speaker 1: of their factories in Europe. Two of them were in 459 00:25:04,240 --> 00:25:07,159 Speaker 1: the United Kingdom and one was in Belgium. Where do 460 00:25:07,280 --> 00:25:10,360 Speaker 1: the cuts come now? Well, I mean it's been quite 461 00:25:10,400 --> 00:25:12,959 Speaker 1: a piecemeal approach from Ford so far. I mean they 462 00:25:13,000 --> 00:25:15,359 Speaker 1: have said they'll close a plant in Ford. They have 463 00:25:15,520 --> 00:25:17,600 Speaker 1: said that there will be some jot losses in Germany, 464 00:25:17,800 --> 00:25:20,960 Speaker 1: but no real detail today on on which plants could 465 00:25:20,960 --> 00:25:23,359 Speaker 1: be affected. I mean, I think there is some nervousness 466 00:25:23,359 --> 00:25:27,639 Speaker 1: around an engine plant in the UK. Clearly, the United 467 00:25:27,720 --> 00:25:30,359 Speaker 1: Kingdom is much in focus. Brexit hasn't happened yet, but 468 00:25:30,440 --> 00:25:33,440 Speaker 1: if it does, it's going to create huge problems for 469 00:25:33,480 --> 00:25:36,240 Speaker 1: the car industry there. So that's clearly not helping sentiment 470 00:25:36,320 --> 00:25:38,840 Speaker 1: towards the economy and and of course selling cars in 471 00:25:38,840 --> 00:25:41,640 Speaker 1: the UK these days is tough and if you sell 472 00:25:41,720 --> 00:25:44,439 Speaker 1: cars and pounds, by the time you convert the revenue 473 00:25:44,480 --> 00:25:46,440 Speaker 1: into dollars, well you're not left with very much. So 474 00:25:46,720 --> 00:25:49,560 Speaker 1: that hasn't created a very appetising picture for Ford in 475 00:25:49,600 --> 00:25:51,480 Speaker 1: the UK, which used to be, you know, one of 476 00:25:51,480 --> 00:25:54,880 Speaker 1: its stronger international operations. Right now, essentially Ford only makes 477 00:25:54,920 --> 00:25:59,440 Speaker 1: money in the United States, so it's entire international operations 478 00:25:59,440 --> 00:26:03,200 Speaker 1: are kind of in focus. China has been a disaster 479 00:26:03,280 --> 00:26:05,480 Speaker 1: for the company over the last few months and obviously 480 00:26:05,520 --> 00:26:09,159 Speaker 1: needs to be turned around too. Ford also has operations 481 00:26:09,359 --> 00:26:12,400 Speaker 1: in Turkey. It's a joint venture. It makes those transit 482 00:26:13,280 --> 00:26:17,240 Speaker 1: connect vans. How's the business outside of Europe for Ford 483 00:26:17,400 --> 00:26:21,919 Speaker 1: in the region? Well, um, you know, Ford said today 484 00:26:21,920 --> 00:26:25,480 Speaker 1: that commercial vehicles were a source of strength for the company, 485 00:26:25,880 --> 00:26:27,600 Speaker 1: so I think that's one thing that they would trying 486 00:26:27,600 --> 00:26:30,400 Speaker 1: to protect. I'm not sure on the details in Turkey, 487 00:26:30,480 --> 00:26:33,280 Speaker 1: but you know, all its international operations are going to 488 00:26:33,359 --> 00:26:36,440 Speaker 1: be put under the microscope in South America, very very 489 00:26:36,480 --> 00:26:40,520 Speaker 1: difficult sales in China, you know, plunging. Same problem for 490 00:26:40,600 --> 00:26:43,840 Speaker 1: Jaguar landro Over as well. By the way, uh they've 491 00:26:44,000 --> 00:26:48,960 Speaker 1: exposed obviously to uh the shifting in taste away from 492 00:26:49,280 --> 00:26:53,560 Speaker 1: saloon cars at Jaguar Cells towards SUVs uh. And so really, 493 00:26:53,680 --> 00:26:56,080 Speaker 1: I mean the problems, the list of problems just keeps 494 00:26:56,080 --> 00:26:59,280 Speaker 1: growing for both these companies. Well is it structural to 495 00:26:59,359 --> 00:27:01,720 Speaker 1: adios mean, you know the team that we have a 496 00:27:01,760 --> 00:27:04,520 Speaker 1: Bloomberg you know, I think about Jaguar this and for 497 00:27:04,880 --> 00:27:10,760 Speaker 1: that and all that, But what's the total auto sales worldwide? 498 00:27:11,680 --> 00:27:14,480 Speaker 1: And are those unit sales going to come down eight 499 00:27:15,320 --> 00:27:18,920 Speaker 1: like the Credit Swiss statistic. Well, I'm not sure about 500 00:27:19,000 --> 00:27:23,920 Speaker 1: unit sales, but simply put, it will just become simpler 501 00:27:24,040 --> 00:27:26,239 Speaker 1: to produce cars in the future. So yes, they may 502 00:27:26,359 --> 00:27:27,879 Speaker 1: they may well sell few of them if we're going 503 00:27:27,920 --> 00:27:30,720 Speaker 1: to do more car sharing and right hailing. But the 504 00:27:31,119 --> 00:27:34,480 Speaker 1: fundamental thing is the electric motor isn't very complicated to 505 00:27:34,480 --> 00:27:38,800 Speaker 1: produce compared to a combustion engine, and in future, you know, 506 00:27:38,800 --> 00:27:42,400 Speaker 1: it's much more straightforward for competitors to get the industry 507 00:27:42,440 --> 00:27:44,359 Speaker 1: these days because you don't need the kind of expertise 508 00:27:44,400 --> 00:27:45,800 Speaker 1: that you had in the past, or at least that 509 00:27:45,840 --> 00:27:49,639 Speaker 1: etis is very different and batteries, for example, probably not 510 00:27:49,680 --> 00:27:51,600 Speaker 1: going to be produced in Europe. They'll be produced by 511 00:27:51,600 --> 00:27:54,359 Speaker 1: Asian manufacturers, maybe with some local production, but it won't 512 00:27:54,359 --> 00:27:58,680 Speaker 1: be value value added from from the German manufacturers. Chris Brian, 513 00:27:58,720 --> 00:28:02,159 Speaker 1: thank you so much from Berlin's Morning, an important essay 514 00:28:02,320 --> 00:28:05,920 Speaker 1: in a quick essay in Bloomberg Opinion on GM versus 515 00:28:06,040 --> 00:28:16,800 Speaker 1: Ford in Europe. Thanks for listening to the Bloomberg Surveillance podcast. 516 00:28:17,160 --> 00:28:22,119 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 517 00:28:22,240 --> 00:28:26,560 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 518 00:28:26,680 --> 00:28:30,560 Speaker 1: Keane before the podcast. You can always catch us worldwide. 519 00:28:31,000 --> 00:28:32,080 Speaker 1: I'm Bloomberg Radio.