WEBVTT - Apple Products Should Be Made in America, Vincent Vittorio Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg P and L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.440 Along with my co host Lisa A. Bramowitz. Each day 0:00:11.480 --> 0:00:15.000 we bring you the most important, noteworthy, and useful interviews 0:00:15.040 --> 0:00:17.520 for you and your money, whether you're at the grocery 0:00:17.560 --> 0:00:20.560 store or the trading floor. Find the Bloomberg P and 0:00:20.680 --> 0:00:31.840 L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. 0:00:31.840 --> 0:00:35.839 In the nineteen seventies, about twenty million Americans earned their 0:00:35.880 --> 0:00:39.519 paycheck from factory work. Well, today, about twelve and a 0:00:39.600 --> 0:00:43.040 half million workers remain in the industry. Here to tell 0:00:43.120 --> 0:00:47.080 us more about manufacturing in the United States and his movie, 0:00:47.159 --> 0:00:52.280 American Made Movie, is Vincent Vittorio. He is the director. Vincent. 0:00:52.320 --> 0:00:55.000 Thank you very much for being with us. Thanks so 0:00:55.040 --> 0:00:57.080 much for having me on. Can you just start off 0:00:57.080 --> 0:01:01.120 by telling us why did you decide to make this movie? Well, 0:01:01.200 --> 0:01:03.080 but my co director and I both had kind of 0:01:03.120 --> 0:01:07.440 a connection to manufacturing. My wife's parents were from Detroit 0:01:07.520 --> 0:01:10.000 and work to many of the auto manufacturers there, and 0:01:10.040 --> 0:01:14.000 then my business partners also was in Georgia, um a 0:01:14.040 --> 0:01:16.040 lot of the plants there that end up closing down, 0:01:16.200 --> 0:01:18.039 and we started to realize that, you know, with the 0:01:18.080 --> 0:01:21.319 power of documentary filmmaking, we can kind of get people 0:01:21.319 --> 0:01:24.400 to really understand that well, manufacturing isn't what it was, 0:01:25.000 --> 0:01:28.800 that there's still viable jobs for manufacturing, and so we 0:01:28.920 --> 0:01:32.559 produced a film that talks about kind of that, you know, um, 0:01:32.600 --> 0:01:36.440 the spirit of manufacturing that we can awaken with with 0:01:37.160 --> 0:01:40.320 encouraging people to buy from this country, from their community 0:01:40.360 --> 0:01:42.920 and their home state. Speak if you can about some 0:01:43.000 --> 0:01:45.800 of the specifics, because we know a lot of work 0:01:45.880 --> 0:01:48.320 that might have been done by human beings is now 0:01:48.400 --> 0:01:53.920 done by robots or is automated. But manufacturing employment, as 0:01:54.640 --> 0:01:57.560 evidenced by your movie, you can still lead to a 0:01:57.600 --> 0:02:01.480 positive economic outlook. No, definitely, you know there's a ripple 0:02:01.520 --> 0:02:04.400 effect that happens when you have a UM, a line 0:02:04.400 --> 0:02:06.800 of manufacturing that's much different than what it was twenty 0:02:06.880 --> 0:02:09.000 years ago. I mean you think of the way that 0:02:09.080 --> 0:02:11.480 things have advanced and the way that um A lot 0:02:11.520 --> 0:02:14.520 of these jobs are much more technology based, with having 0:02:14.520 --> 0:02:17.880 a background in technical education as opposed to being on 0:02:17.919 --> 0:02:20.720 a line where we're just putting apart together. And I 0:02:20.720 --> 0:02:23.240 think you know that really goes to the education into things. 0:02:23.280 --> 0:02:25.000 I mean, in your state of New York, there's a 0:02:25.000 --> 0:02:27.959 great program the p Tech program that you know, really 0:02:28.000 --> 0:02:31.400 get kids to understand kind of, um, the importance of 0:02:31.440 --> 0:02:33.440 a career pathway. And I think if we can have 0:02:33.560 --> 0:02:36.480 more things like that across this country to get kids 0:02:36.480 --> 0:02:38.920 to really understand that, you know, we don't all have 0:02:39.000 --> 0:02:41.680 to graduate with a liberal arts degree, but we can 0:02:41.680 --> 0:02:43.960 have a job that gets us kind of a foot 0:02:44.000 --> 0:02:47.359 forward with thinking about advanced manufacturing or careers um to 0:02:47.600 --> 0:02:50.480 kind of, I guess, respond to this skills gap. We're 0:02:50.520 --> 0:02:54.440 starting to see, well, a lot of manufacturers, indeed, the 0:02:54.440 --> 0:03:00.880 Manufacturers Association, National Association and manufacturers a big porter President 0:03:00.919 --> 0:03:05.040 Donald Trump. They speak about tax reform and how that 0:03:05.080 --> 0:03:08.880 could spur infrastructure spending. Is that also part of the 0:03:09.520 --> 0:03:11.560 picture when you know you made this movie, You've got 0:03:11.560 --> 0:03:13.400 to find what are the things that are going to 0:03:13.800 --> 0:03:18.360 make manufacturing economically viable? You know? Well, to start with 0:03:18.400 --> 0:03:20.280 the Trump side of things, I think that it's it's 0:03:20.360 --> 0:03:22.160 kind of one of those I don't know what it's 0:03:22.160 --> 0:03:26.280 gonna mean today versus tomorrow. I mean, so I think that, um, 0:03:26.600 --> 0:03:28.320 I don't know where he's going to bring things, but 0:03:28.360 --> 0:03:32.200 I do think the tax reform can definitely incentivize people 0:03:32.280 --> 0:03:34.360 to make things here and to give them a reason 0:03:34.440 --> 0:03:36.960 to not feel like they can go overseas. Um. I 0:03:37.080 --> 0:03:39.040 just you know, I really think it takes a lot 0:03:39.120 --> 0:03:41.960 of bipartisanship to come together to actually approve that on 0:03:42.000 --> 0:03:44.360 all sides. But what you do see is things like 0:03:44.400 --> 0:03:47.119 the fox con plant, you know in Wisconsin, and I mean, 0:03:47.160 --> 0:03:49.040 that's that's a huge thing to see. The fox com 0:03:49.040 --> 0:03:51.080 that we always look at is being a foreign entity 0:03:51.080 --> 0:03:54.000 of sorts that is now going to be manufacturing things 0:03:54.360 --> 0:03:56.920 on you know, our home soil. And I think that's 0:03:56.960 --> 0:03:58.480 that's a beautiful thing. And you see that with a 0:03:58.520 --> 0:04:00.960 lot of auto manufacturers. So I think that we need 0:04:01.000 --> 0:04:03.760 to give them reasons that aren't just about the tax code, 0:04:03.800 --> 0:04:07.320 but about communities reaching out and making them feel like 0:04:07.640 --> 0:04:11.440 the ripple effect that's going to not only help the 0:04:11.480 --> 0:04:14.320 state but help their their um. You know, they're they're 0:04:14.360 --> 0:04:18.120 manufacturing their brand, their their company. And as far as 0:04:18.800 --> 0:04:23.000 examples in the movie, maybe just give people some idea. Well, 0:04:23.040 --> 0:04:25.159 one one really big company which which I've grown to 0:04:25.200 --> 0:04:28.040 love through making the film Son Partly Bias is new balance. 0:04:28.480 --> 0:04:31.520 So new balance sneakers. You know, they make sneakers in 0:04:31.520 --> 0:04:33.880 the United States, not all of them, but a good 0:04:33.920 --> 0:04:36.760 amount of them, and it's grown tremendously in time. It's 0:04:36.800 --> 0:04:39.520 it's actually kind of ironic that, um, the people that 0:04:39.560 --> 0:04:43.440 are buying the most America made sneakers are overseas, which 0:04:43.480 --> 0:04:45.599 I think that goes back to say something about what 0:04:45.680 --> 0:04:48.520 that brand of made an America means. You know, if 0:04:48.839 --> 0:04:51.039 we can't look at that as we go to the 0:04:51.040 --> 0:04:53.520 big box store and think that this is something important 0:04:53.520 --> 0:04:56.200 that we make things here but other countries are noticing it, 0:04:56.240 --> 0:04:58.360 you know we need to take take interest in that. 0:04:58.440 --> 0:05:00.280 But um, New Balance is a great exam up on 0:05:00.600 --> 0:05:02.880 you know the other one that's based in based in Brighton, right, 0:05:02.880 --> 0:05:05.839 I mean they based in in Boston, home to Bloomberg 0:05:05.839 --> 0:05:11.160 one oh six one and Bloomberg. So that is certainly 0:05:11.680 --> 0:05:15.279 a feature of the sort of the made in America, 0:05:15.320 --> 0:05:18.840 made in the USA label, is it is prestigious outside 0:05:18.839 --> 0:05:22.080 the United States? What about making it prestigious inside the 0:05:22.120 --> 0:05:24.880 United States? You know that takes a lot with the marketing. 0:05:24.880 --> 0:05:26.839 I mean you've seen that the last two Super Bowls 0:05:26.880 --> 0:05:29.640 where you see that made an America ad that comes up. 0:05:29.960 --> 0:05:32.120 But I mean, if we can get people today to 0:05:32.200 --> 0:05:34.479 realize kind of what it means to have a personal 0:05:34.520 --> 0:05:37.920 relationship with the product we buy or the brand. I 0:05:37.920 --> 0:05:40.960 think we can do something. I mean Lebron James great example, right, 0:05:40.960 --> 0:05:44.320 He's getting paid millions of dollars to endorse anything and 0:05:44.360 --> 0:05:45.960 people are going to flock to it. I think if 0:05:46.000 --> 0:05:48.160 we can do that same thing with this Maid in 0:05:48.200 --> 0:05:51.200 America brand. I mean, can you imagine if Robert Downey Jr. 0:05:51.400 --> 0:05:53.120 Had like an Iron Man mask and he took it 0:05:53.160 --> 0:05:55.160 off and gave a pitch for the idea that like 0:05:55.480 --> 0:05:58.400 this was made right here in the USA. I mean, like, 0:05:58.440 --> 0:06:00.279 those are the kind of things that we need really 0:06:00.360 --> 0:06:02.560 kind of do to to spark that because there's no 0:06:02.600 --> 0:06:05.120 doubt we're not making you know, good quality stuff and 0:06:05.200 --> 0:06:07.520 you can go buy a desk at Ikea for a 0:06:07.600 --> 0:06:10.760 quarter of the price at the expensive furniture store, but 0:06:10.880 --> 0:06:13.800 you know, the money you're paying it comes across with 0:06:13.880 --> 0:06:17.279 the product you're getting. Things in America are made um 0:06:17.320 --> 0:06:19.560 to last, and I think that's something that I think 0:06:19.720 --> 0:06:22.440 I feel very passionate about with everything that I purchase. 0:06:22.640 --> 0:06:26.040 All right, But having having said that, do you find 0:06:26.040 --> 0:06:29.680 that there's a contradiction because if you go to a 0:06:29.800 --> 0:06:33.800 big box retailer, you're looking for the best price. You're 0:06:33.800 --> 0:06:36.160 not necessarily going to put the item or the palette 0:06:36.160 --> 0:06:39.080 of items back on the shelf because it's made somewhere else. 0:06:39.520 --> 0:06:42.840 And that is what has fueled a lot of innovation 0:06:42.880 --> 0:06:45.320 in the United States in terms of let's say, retailing 0:06:45.440 --> 0:06:49.640 or even making consumer products affordable. No, you're right. I 0:06:49.640 --> 0:06:51.640 mean it's very hard because we live in this kind 0:06:51.680 --> 0:06:54.520 of throwaway society where we don't plan on buying a 0:06:54.640 --> 0:06:56.520 couch that's going to last us more than a couple 0:06:56.520 --> 0:06:58.359 of years. I mean, and I think that's kind of 0:06:58.360 --> 0:07:00.960 a deeper question about like we buy and the way 0:07:01.000 --> 0:07:04.839 we buy. But I think that, um, ultimately it comes 0:07:04.920 --> 0:07:09.239 to supply and demand. If enough people are looking for 0:07:09.320 --> 0:07:11.960 American made products, of enough people are kind of looking 0:07:11.960 --> 0:07:14.600 for that brand, um and making sure they look at 0:07:14.600 --> 0:07:17.320 the label, it can change things. I mean, it's happened 0:07:17.320 --> 0:07:21.160 with the organic food movement. I mean, can you imagine, um, 0:07:21.200 --> 0:07:23.040 you know, ten years ago, if I would have said 0:07:23.080 --> 0:07:25.400 that organic foods would be like they are now, I 0:07:25.400 --> 0:07:27.560 mean you could never find them everywhere. And now I 0:07:27.560 --> 0:07:30.680 mean you've got truck stops, you know, and they're filled 0:07:30.680 --> 0:07:34.240 with healthy options. So I think it's because consumers demanded it. 0:07:34.280 --> 0:07:37.360 And so if consumers can demand um with their purchase 0:07:37.440 --> 0:07:39.760 power American made goods, then I think that the big 0:07:39.760 --> 0:07:42.400 box stores could start to see more of those coming there. 0:07:42.520 --> 0:07:44.520 If you give you a fifteen seconds, is there one 0:07:44.600 --> 0:07:46.880 product that you wish was made in the United States 0:07:46.920 --> 0:07:50.840 but isn't. Oh gosh, I mean, I think the Apple computer. 0:07:51.040 --> 0:07:53.240 I mean, that's that's a really big one because it 0:07:53.280 --> 0:07:55.800 was it was it was grown out of you know, 0:07:55.920 --> 0:07:59.720 my state of California, and with the the the engineering, 0:07:59.760 --> 0:08:02.640 the the prototypes, everything about it, we should make it here. 0:08:02.800 --> 0:08:04.600 I mean, we're making enough money with that. And I 0:08:04.600 --> 0:08:06.960 know that something President Trump and even you know, for 0:08:07.160 --> 0:08:09.600 President Obama was trying to do. I think that there's 0:08:09.640 --> 0:08:12.240 certain things we should really try to make here, and 0:08:12.320 --> 0:08:14.480 I think it's it's important. I want to thank you 0:08:14.560 --> 0:08:17.520 very much for spending time with us. Vincent Victorio. He 0:08:17.720 --> 0:08:33.720 is the director of American Made Movie. All right, let's 0:08:33.720 --> 0:08:37.480 turn our attention now to investments and Mike Mulaney. Mike 0:08:37.679 --> 0:08:41.040 is joining us from Boston Partners. He is the director 0:08:41.080 --> 0:08:43.880 of Global Market Research. Mike, thanks very much for being 0:08:44.360 --> 0:08:46.400 with us. Uh, you know, I want if we get 0:08:46.440 --> 0:08:49.560 start off with You've listed a couple of very important things. 0:08:49.559 --> 0:08:51.880 You've got things such as you know, the Trump bomp 0:08:52.920 --> 0:08:57.679 issues having to do with oil the Japanese market. And 0:08:57.679 --> 0:08:59.440 I'm wondering if we could kind of look at Japan 0:08:59.559 --> 0:09:01.840 first and work our way back to the United States 0:09:01.880 --> 0:09:06.280 because the Prime Minister, Shinzo Abe has called an election, 0:09:06.679 --> 0:09:11.599 and yeah, election, yes to us, it's reminiscent obviously of 0:09:11.679 --> 0:09:15.960 what Teresa May did in June, and yeah, you got 0:09:16.040 --> 0:09:20.040 exactly exactly. Now, this is a scheduled for October twenty two, 0:09:20.760 --> 0:09:24.440 and he's been in power for about five years, which 0:09:24.480 --> 0:09:28.000 is pretty long if you're a Japanese prime minister. But 0:09:28.160 --> 0:09:30.719 he is going to be going against He's going to 0:09:30.760 --> 0:09:33.080 be opposed by the Party of Hope. Now, this is 0:09:33.120 --> 0:09:37.199 this new conservative alliance which is led by the populist 0:09:37.240 --> 0:09:41.960 mayor of Tokyo, Uriko koek and she has previously served 0:09:42.000 --> 0:09:44.400 as Minister of Defense. And I'm wondering if you could 0:09:44.440 --> 0:09:50.040 describe what would happen if indeed shinzo Abe was returned 0:09:50.040 --> 0:09:53.480 to power with a reduced majority, or indeed didn't even 0:09:53.679 --> 0:09:56.400 make it past the post. Well, you have the question 0:09:56.440 --> 0:09:59.800 once again, the progress of of abenamics or abenamics in 0:09:59.840 --> 0:10:01.400 j general, if he was going to be able to 0:10:01.400 --> 0:10:04.599 push through his reforms that he's been relatively successful for 0:10:04.720 --> 0:10:07.040 if you look at both the economy uh and the 0:10:07.080 --> 0:10:09.080 markets in general and Japan. So I think that would 0:10:09.080 --> 0:10:12.360 be the primary question mark whether or not he would 0:10:12.400 --> 0:10:14.840 able to proceed with um with the same kind of 0:10:14.920 --> 0:10:17.040 vigor that he's had up a failure last you know, 0:10:17.080 --> 0:10:19.000 two to three years that that's been in place. Right now, 0:10:19.640 --> 0:10:23.080 looking at the Japanese stock market in dollar terms, up 0:10:23.080 --> 0:10:27.080 about twelve and a quarter percent so far this year. Yeah, 0:10:27.160 --> 0:10:29.760 And the key with the you know, the Japanese market 0:10:29.840 --> 0:10:32.600 is that investors basically have been burned so many times 0:10:32.600 --> 0:10:35.200 in the past about Japan. There's still kind of that 0:10:35.320 --> 0:10:38.040 weary eye about the market in general and the economy 0:10:38.040 --> 0:10:40.679 in general because we've had not just one, but probably 0:10:40.679 --> 0:10:43.160 at least two decades of the you know, the lost decades, 0:10:43.240 --> 0:10:45.640 not just they lost decade as far as Japan's concern, 0:10:46.120 --> 0:10:48.040 that goes to the economy and more or less for 0:10:48.080 --> 0:10:50.360 the markets in general. So I think, you know, we 0:10:50.440 --> 0:10:54.480 have to have a a proof statement coming from from 0:10:54.520 --> 0:10:56.600 this type of a snap election that we can can 0:10:56.679 --> 0:10:59.040 continue to see the improvement that we've seen, like I said, 0:10:59.080 --> 0:11:01.880 most recently from both the economy and the markets. Yeah, well, 0:11:01.880 --> 0:11:04.800 I was even thinking. You know that Governor Karda of 0:11:04.840 --> 0:11:09.480 the Bank of Japan, his reappointment is scheduled for eighteen 0:11:10.160 --> 0:11:12.720 but that could change if we get a new leader 0:11:12.720 --> 0:11:16.120 in Japan, no question, and we you know, if we 0:11:16.120 --> 0:11:18.880 were to air on both the Bank of Japan in 0:11:19.000 --> 0:11:21.600 on the Federal Reserve, we would like to see status quo, 0:11:22.040 --> 0:11:24.280 that being Karada staying in place as well as jon 0:11:24.320 --> 0:11:26.280 and staying in place. Just the stability of the market. 0:11:26.720 --> 0:11:29.360 I think Karroda has done a magnificent job. He's probably 0:11:29.400 --> 0:11:32.480 been the most uh do you want to call it aggressive, 0:11:32.559 --> 0:11:36.000 and it's not just um, you know, more or less 0:11:36.240 --> 0:11:40.840 creative of of the central bankers in the world. And 0:11:41.000 --> 0:11:44.359 once again it's done a good job of a stabilizing 0:11:44.400 --> 0:11:47.200 asset prices and stabilize the economy in general. Well, you're 0:11:47.240 --> 0:11:50.200 being diplomatic because some investors might say that he actually 0:11:50.200 --> 0:11:53.040 fixes the prices of assets because what they have about 0:11:53.040 --> 0:11:56.080 thirty three of the j GB market and like three 0:11:56.200 --> 0:12:01.640 quarters of all Japanese exchange traded funds that are owned 0:12:01.640 --> 0:12:04.760 by the central Bank. That's why I use the word creative, 0:12:05.160 --> 0:12:06.880 because it's something a little bit out of the norm 0:12:07.040 --> 0:12:10.839 that we've seen from other central bankers. But um, you know, 0:12:11.040 --> 0:12:14.240 it's it's a little bit reminiscent of what Mario Draga said, 0:12:14.880 --> 0:12:17.320 it's whatever it takes, and I think Corona has basically 0:12:17.400 --> 0:12:19.679 done that. Okay, so you help me circle back. We're 0:12:19.720 --> 0:12:23.000 gonna go to Europe now and Mario drag the European 0:12:23.520 --> 0:12:26.600 Central Bank tell me what you uh, what your thoughts 0:12:26.600 --> 0:12:28.920 are are there, because I know that later on in 0:12:28.960 --> 0:12:31.240 the week, I believe you know, we're going to get 0:12:31.280 --> 0:12:35.160 some news from the Central Bank of Europe, but also 0:12:35.160 --> 0:12:36.640 we're gonna get the Fed minutes. What are you what 0:12:36.679 --> 0:12:39.520 are you gonna take away from Europe? First? Well, Europe 0:12:39.600 --> 0:12:40.679 is going to be key, is that I think the 0:12:40.840 --> 0:12:42.920 twenty six I think is the meeting in Europe, and 0:12:43.000 --> 0:12:45.199 once again the eyes are gonna be focused on exactly 0:12:45.240 --> 0:12:48.360 what's going to happen with the balance sheet tapering program 0:12:48.360 --> 0:12:51.440 from the e c B. What we're worry about once 0:12:51.480 --> 0:12:54.439 again is that that's going to coincide with potentially the Fed, 0:12:54.600 --> 0:12:57.880 you know, uh, diminishing and dropping their balance sheet this 0:12:57.880 --> 0:12:59.839 this month as well, So we're gonna have a two 0:13:00.040 --> 0:13:02.560 for for the month of October potentially. As far as 0:13:02.600 --> 0:13:05.559 balance sheet um retracement, I guess you could say is 0:13:05.600 --> 0:13:09.000 concerns and we're leary about that because this is still 0:13:09.000 --> 0:13:10.920 a grand experiment, you know, on the way up, it 0:13:10.960 --> 0:13:13.280 was a grand experiment on the balance sheet explosions that 0:13:13.320 --> 0:13:16.280 we've seen around the world, and we're a little bit 0:13:16.400 --> 0:13:19.480 leary and that to think that we don't want to 0:13:19.520 --> 0:13:22.040 be naive to think there's not going to be some 0:13:22.120 --> 0:13:27.080 kind of symmetry between the the benefit of asset prices 0:13:27.120 --> 0:13:30.000 on the upside as balance sheets grew from the central 0:13:30.000 --> 0:13:33.160 banks versus as they shrink them. Um, there will be 0:13:33.200 --> 0:13:35.559 no impact. And I think that's where you know, people 0:13:35.640 --> 0:13:38.000 might be a bit naive. Have you've heard this from 0:13:38.480 --> 0:13:40.840 um Jamie diamond saying that you've got to watch this 0:13:40.960 --> 0:13:43.000 given that it is the grand experiment as far as 0:13:43.040 --> 0:13:45.560 balance sheets A concerned all right, Well as someone I 0:13:45.600 --> 0:13:47.880 know who's got a lot of experienced in fixed income 0:13:47.920 --> 0:13:49.960 markets put that hat on and tell us what do 0:13:50.000 --> 0:13:53.840 you think about the balance sheet unwind? And that gives 0:13:53.880 --> 0:13:56.040 us an opportunity to turn to the United States where 0:13:56.000 --> 0:13:57.880 do you think that's gonna do to yields? For example, 0:13:57.920 --> 0:14:00.839 we got the thirty year today basically on two point 0:14:00.880 --> 0:14:05.200 eight nine, the tenure at two thirty five. Uh. To 0:14:05.480 --> 0:14:08.400 two aspects of the yield story. So the first one 0:14:08.440 --> 0:14:10.880 would be, like you said, as far as the balance sheet, uh, 0:14:10.920 --> 0:14:14.560 you know, the FED owns. I believe it's of all 0:14:14.640 --> 0:14:18.120 mortgage backed securities and also seventeen percent of all treasuries 0:14:18.200 --> 0:14:22.160 right now, so they have been obviously in most recent years, 0:14:22.240 --> 0:14:25.040 the marginal buyer that's been out there for both the 0:14:25.080 --> 0:14:28.480 treasury market and the mortgage back market. So as that unwind, 0:14:28.520 --> 0:14:30.200 it's gonna have you're gonna have to find the next 0:14:30.200 --> 0:14:32.160 marginal buyer. I don't know if it's gonna be Japan. 0:14:32.200 --> 0:14:34.200 I don't know if it's gonna be China, but someone's 0:14:34.200 --> 0:14:36.920 gonna have to take up the slack that that is 0:14:37.040 --> 0:14:39.200 going to become apparent from the lack of FED buying. 0:14:39.280 --> 0:14:42.440 So that's number one. Rates should be higher to attract 0:14:42.480 --> 0:14:45.640 that next marginal buyer. To once again, you've got to 0:14:45.640 --> 0:14:48.280 go back to inflation. And you know, it's been a 0:14:49.000 --> 0:14:51.960 a quandary that the Janet Yellen has been talking about 0:14:52.000 --> 0:14:55.680 for quite some time. We did see some pressure obviously 0:14:55.760 --> 0:14:58.920 on average hourly earnings that came in and the report 0:14:58.960 --> 0:15:03.080 on Friday backup at two point. The question becomes is 0:15:03.120 --> 0:15:05.120 that's going to stick a not or is that once 0:15:05.120 --> 0:15:08.400 again just a byproduct of the hurricanes that we saw 0:15:08.520 --> 0:15:11.960 during the course of the September reporting period where lower 0:15:12.000 --> 0:15:15.800 wage journers fell out of the survey and therefore biased 0:15:15.840 --> 0:15:17.840 the numbers upwards. So we've still got a month to 0:15:17.880 --> 0:15:20.160 figure out if it was just a temporary factor or not. 0:15:20.680 --> 0:15:22.640 But ultimately it's going to be inflation that's going to 0:15:22.800 --> 0:15:25.880 drive where interest rates go. Um. I don't think that 0:15:26.760 --> 0:15:29.960 the FED itself can get too aggressive as far as 0:15:30.000 --> 0:15:33.360 pushing up the overall structure of rates. Thanks very much, 0:15:33.480 --> 0:15:36.720 Mike Mullaney. He is the director of Global market Research 0:15:36.800 --> 0:15:53.320 for Boston Properties. We now call upon Nick Hayman of 0:15:53.520 --> 0:15:58.600 William Blair Global Industrial Infrastructure Expert to tell us about 0:15:58.640 --> 0:16:02.080 a general electric Nick, always a pleasure. What do you 0:16:02.240 --> 0:16:05.280 make of the moves by John Flannery taking the reins 0:16:05.360 --> 0:16:10.960 earlier from Jeffrey Immelt, A new CFO and four vice chairs, 0:16:11.120 --> 0:16:16.200 well three four if you count the CFO leaving the company. Yeah, 0:16:16.280 --> 0:16:20.440 We have obviously a lot of change being implemented in 0:16:20.480 --> 0:16:25.440 a very short time period by John Flannery and it 0:16:25.760 --> 0:16:29.520 UH is leaving no stone unturned. But with regards to 0:16:29.840 --> 0:16:34.680 you know, Jeff Bornstein, the former CFO, and Beth Combstock 0:16:34.880 --> 0:16:39.320 and John Rice, I think that you know, John is 0:16:39.320 --> 0:16:43.000 is really trying to find, if you will, representatives of 0:16:43.040 --> 0:16:45.960 what he sees perhaps is more of the initiatives he's 0:16:45.960 --> 0:16:49.360 going to focus on going forward versus those that were 0:16:49.360 --> 0:16:54.160 really UM stewards of Jeff Emil's former CEO and chairman. 0:16:54.320 --> 0:16:58.080 All right, so what are some of the strategy points 0:16:58.200 --> 0:17:02.760 that John Flannery is into a rely on. Well, I mean, 0:17:02.880 --> 0:17:07.320 very simplistically, he's very UH focused near term on being 0:17:07.359 --> 0:17:11.800 able to help UM improve the cash flow from operating 0:17:11.800 --> 0:17:16.120 activities UM that this year, you know, clearly have been 0:17:16.240 --> 0:17:19.160 under pressure. We think UM they may not even reach 0:17:19.200 --> 0:17:21.919 the low end of their twelve to fourteen billion dollar target, 0:17:22.480 --> 0:17:27.879 and that reflects stepped up UH restructuring on a cash 0:17:27.920 --> 0:17:32.199 basis across all aspects of the company's operations. But I 0:17:32.240 --> 0:17:34.840 think that will lay out a clear plan to improve 0:17:34.920 --> 0:17:38.040 that by fifty or six percent by later this decade 0:17:38.040 --> 0:17:42.040 to eighteen to twenty billion dollars. G needs fifteen sixteen 0:17:42.080 --> 0:17:45.840 billion on a normalized capital spend of two and a 0:17:45.840 --> 0:17:48.920 half to three UH to be able to support HITS 0:17:48.960 --> 0:17:52.199 operations and pay it's eight billion dividend. Let's just go 0:17:52.280 --> 0:17:54.800 through some of the items, perhaps you know this a 0:17:54.840 --> 0:17:57.680 little bit more detailed, maybe getting ready for that November 0:17:57.720 --> 0:17:59.920 thirteenth meeting. I believe that John Sinner is going to 0:18:00.080 --> 0:18:04.639 addressing UH investors. Number One, you write, you talk about 0:18:04.680 --> 0:18:09.879 operationally weaker end market demand for gepower, transportation, and oil 0:18:10.280 --> 0:18:13.600 and transportation, right, yeah, and the oil and gas so 0:18:13.720 --> 0:18:16.760 you have when you're looking to reset, which is one 0:18:16.760 --> 0:18:20.240 of the exercises, He'll go through the two dollar two 0:18:20.119 --> 0:18:25.240 thousand eighteen UM target by jeff eimilt Um. He'll look 0:18:25.320 --> 0:18:28.000 to operationally adjust that for the weaker end market conditions 0:18:28.000 --> 0:18:30.280 you just mentioned. He's going to have some changes in 0:18:30.280 --> 0:18:34.000 the business portfolio, I'm sure for smaller businesses, but he's 0:18:34.000 --> 0:18:36.439 also going to have a tremendously larger I think amount 0:18:36.440 --> 0:18:39.000 of costs out a three billion or more. And then 0:18:39.040 --> 0:18:41.639 in turn he's going to reset the accounting so that 0:18:41.720 --> 0:18:46.280 will include you know, the full impact of contract asset investments. 0:18:46.320 --> 0:18:49.240 As well as their pension costs. Okay, So that and 0:18:49.280 --> 0:18:51.480 then you're talking that would lead you right into your 0:18:51.480 --> 0:18:54.119 second point, which is the portfolio pruning, getting rid of 0:18:54.160 --> 0:18:58.119 businesses that don't necessarily meet their cost to capital. Yes. No, 0:18:58.280 --> 0:19:01.320 there's definitely some peripheral businesses that I would call calls 0:19:01.480 --> 0:19:05.440 on the future him that in turn were funded under Jeff. 0:19:05.840 --> 0:19:08.560 But under John, if you're not earning your cost to capital, 0:19:08.800 --> 0:19:11.520 you're probably not on the team. These are not big 0:19:11.600 --> 0:19:14.960 parts of the company, but smaller adjunct businesses related to 0:19:15.000 --> 0:19:18.639 their core um industrial operations. All right, and you also 0:19:18.680 --> 0:19:21.679 mentioned that you previously mentioned the accounting, So okay, is 0:19:21.720 --> 0:19:24.240 that Is there anything more we need to know there? No, 0:19:24.400 --> 0:19:27.600 I mean accounting obviously has been There's four different sets 0:19:27.600 --> 0:19:29.520 of earnings that he presents, and I think we're going 0:19:29.720 --> 0:19:32.679 streamline this down to something on the order of, you know, 0:19:32.800 --> 0:19:36.320 gap accounting plus or minus um one time positive and 0:19:36.400 --> 0:19:39.960 negative items for restructuring their games. But he's really got 0:19:39.960 --> 0:19:42.959 to focus on getting this cash flow from operating activities up, 0:19:42.960 --> 0:19:46.400 which includes reducing the capital spending to this normalized level 0:19:46.440 --> 0:19:48.160 of two and a half to three billion from three 0:19:48.160 --> 0:19:50.199 and a half to four This year, he's got to 0:19:50.280 --> 0:19:54.240 narrow the focus of digital operation so that in turn 0:19:54.480 --> 0:19:57.479 that can reduce its um R and D and capital 0:19:57.480 --> 0:20:00.760 spending intensity. He's got to take and reduce the contract 0:20:00.800 --> 0:20:04.440 asset investments. And lastly, he's got to work to show 0:20:04.560 --> 0:20:08.160 up the nineteen billion contractual portion of the company's thirty 0:20:08.200 --> 0:20:12.280 one billion pension deficit. Alright, given all that and your 0:20:12.320 --> 0:20:18.000 outperform rating on the shares, is there a connection between 0:20:18.080 --> 0:20:22.160 all of this activity and Nelson pelts ed Garden, UH 0:20:22.200 --> 0:20:25.080 and Try and Fund Management will Try and has been 0:20:25.119 --> 0:20:29.199 involved for quite some time with GE and UM. I 0:20:29.240 --> 0:20:32.840 think at this point clearly UM giving them one of 0:20:32.880 --> 0:20:37.200 the seats on the board as uh Deer's former CEO 0:20:37.280 --> 0:20:41.119 step down, UM gives them an opportunity to continue to 0:20:41.160 --> 0:20:46.400 be a constructive partner in helping John accelerate the transformation 0:20:46.440 --> 0:20:50.840 of GEN. Alright, Having said that, though, Nick, what do 0:20:50.880 --> 0:20:53.760 you think that John would prefer to inherit in terms 0:20:53.840 --> 0:20:57.800 of how GE operates. I think he's trying to change 0:20:57.840 --> 0:21:00.800 what is not a broken company but a bloated company, 0:21:01.000 --> 0:21:05.240 and in turn trying to go across all aspects of 0:21:05.359 --> 0:21:07.880 the cost structure of the company, whether it's the new 0:21:07.880 --> 0:21:11.240 headquarters building, whether it's planes, whether it's cars for their 0:21:11.280 --> 0:21:15.080 management team, there's no stone left unturned PIM. And just 0:21:15.119 --> 0:21:18.120 to finally, Nick, you know, tell people how long you've 0:21:18.160 --> 0:21:21.560 been covering ge and how you see the company coming 0:21:21.560 --> 0:21:23.879 out from all of this. Well, we've been found for 0:21:23.880 --> 0:21:27.600 about thirty four years, and UM, what we're seeing here 0:21:27.840 --> 0:21:32.000 is a dichotomy between perhaps um the focus on their 0:21:32.040 --> 0:21:36.440 earnings reset for cell side analysts typically versus on the 0:21:36.520 --> 0:21:40.480 owners of the shares, a need to have visual improvement 0:21:40.920 --> 0:21:44.399 for actionable steps to lift the cash flow so you 0:21:44.400 --> 0:21:47.520