1 00:00:00,680 --> 00:00:13,800 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:32,120 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. What 5 00:00:32,159 --> 00:00:34,159 Speaker 1: we're gonna do here and in a good half hour 6 00:00:34,400 --> 00:00:36,960 Speaker 1: we have Catherine Man with us with City Group is 7 00:00:37,000 --> 00:00:40,199 Speaker 1: to go to her acclaim her fame out of m 8 00:00:40,200 --> 00:00:42,959 Speaker 1: I T and all that she's done in academics and 9 00:00:43,360 --> 00:00:46,320 Speaker 1: dovetails with a story of two thousand nineteen which is 10 00:00:46,320 --> 00:00:48,879 Speaker 1: a trade war. And then we'll talk about the equity 11 00:00:48,920 --> 00:00:51,240 Speaker 1: markets and you know, the US economy and that here 12 00:00:51,800 --> 00:00:56,800 Speaker 1: in in a bit you wrote a classic in you 13 00:00:56,880 --> 00:01:00,880 Speaker 1: read a five with Michael Rosenberg Codependency into Function between 14 00:01:00,920 --> 00:01:04,200 Speaker 1: China and the US two thousand three, two thousand four. 15 00:01:04,840 --> 00:01:08,280 Speaker 1: You're one of the truly one of the experts on this. 16 00:01:08,720 --> 00:01:12,520 Speaker 1: Did you see a trade war coming? I didn't think 17 00:01:12,560 --> 00:01:15,039 Speaker 1: that a trade war was inevitable, um, but I do 18 00:01:15,160 --> 00:01:18,480 Speaker 1: think that, um, there was a definitely a pivot with 19 00:01:18,520 --> 00:01:21,920 Speaker 1: the change in leadership in China, and that pivot was 20 00:01:22,040 --> 00:01:27,000 Speaker 1: towards a more state oriented UH, and move away from 21 00:01:27,120 --> 00:01:33,120 Speaker 1: the objective of more private oriented enterprise running running the economy. UH. 22 00:01:33,160 --> 00:01:37,039 Speaker 1: There was also a pivot away from liberalization of the 23 00:01:37,120 --> 00:01:40,520 Speaker 1: capital account and a less management of the R and B. 24 00:01:41,240 --> 00:01:45,440 Speaker 1: And there was definitely a pivot toward a more UM 25 00:01:45,560 --> 00:01:51,760 Speaker 1: industrial policy strategy towards UM a national development And Paul, 26 00:01:51,800 --> 00:01:54,320 Speaker 1: we see this this morning with whispers out of China 27 00:01:54,360 --> 00:01:59,120 Speaker 1: again of an accommodation in their policies. So, Catherine, this 28 00:01:59,240 --> 00:02:04,120 Speaker 1: move I guess back towards more state control of the economy. 29 00:02:04,480 --> 00:02:07,760 Speaker 1: This is tied to mr G. Is this long term trend? 30 00:02:07,840 --> 00:02:09,680 Speaker 1: Do you think? Is this something because it seems like 31 00:02:09,720 --> 00:02:12,600 Speaker 1: China was moving more towards market economy is a little 32 00:02:12,600 --> 00:02:14,960 Speaker 1: bit on the margin. Are you now shifting back and 33 00:02:14,960 --> 00:02:17,839 Speaker 1: you think that's permanent? Well, I think it's hard to 34 00:02:18,000 --> 00:02:22,320 Speaker 1: make a judgment about permanence, but UM. I think the 35 00:02:22,400 --> 00:02:26,280 Speaker 1: what's what's most interesting to think about is the question 36 00:02:26,360 --> 00:02:30,520 Speaker 1: of does UH does a heavily managed direct approach to 37 00:02:31,360 --> 00:02:36,919 Speaker 1: UM becoming a frontier innovator along the dimensions that they 38 00:02:36,960 --> 00:02:39,359 Speaker 1: want to which is the man, you know, the manufacturing? 39 00:02:42,160 --> 00:02:45,520 Speaker 1: Can you do that with state direction? I think that's 40 00:02:45,560 --> 00:02:48,480 Speaker 1: really the most interesting question. It's always been a question 41 00:02:48,480 --> 00:02:51,400 Speaker 1: about industrial policy. How much state intervention, whether it be 42 00:02:51,480 --> 00:02:54,560 Speaker 1: a market economy or not, UM, how much data intervention 43 00:02:54,680 --> 00:02:58,240 Speaker 1: can get you to the frontier of innovation? And so 44 00:02:58,280 --> 00:03:01,679 Speaker 1: I think that's what is up for grabs here, UM. 45 00:03:01,880 --> 00:03:04,880 Speaker 1: And I think it's the evidence in the past has 46 00:03:04,919 --> 00:03:09,200 Speaker 1: been that, UM, if you're not at the frontier, state 47 00:03:09,240 --> 00:03:12,959 Speaker 1: intervention can can get you there, because you know, what 48 00:03:13,000 --> 00:03:15,519 Speaker 1: you're trying to get to. The frontier is at somebody 49 00:03:15,520 --> 00:03:17,680 Speaker 1: else is in front of you. UM. But can you 50 00:03:17,840 --> 00:03:20,680 Speaker 1: actually break through the frontier? Can you make the frontier 51 00:03:20,720 --> 00:03:24,520 Speaker 1: as a state state direction? That the evidence on that 52 00:03:24,600 --> 00:03:27,840 Speaker 1: is much more limited, right, is it? So as we 53 00:03:28,440 --> 00:03:31,639 Speaker 1: change our attack under this administration to more a bilateral 54 00:03:31,680 --> 00:03:34,839 Speaker 1: negotiation between the US and China, what is your thought 55 00:03:34,880 --> 00:03:37,680 Speaker 1: on that versus what had been the trend I think 56 00:03:37,720 --> 00:03:40,600 Speaker 1: prior to that for a period of time of multilateral 57 00:03:40,600 --> 00:03:42,920 Speaker 1: engagement with China is what do you think one is 58 00:03:43,040 --> 00:03:46,480 Speaker 1: better than the other? Well? I think this this administration 59 00:03:46,560 --> 00:03:50,800 Speaker 1: has gone bilateral in every single negotiation that it has 60 00:03:50,840 --> 00:03:53,240 Speaker 1: been involved with, even U s m c A was 61 00:03:53,320 --> 00:03:58,720 Speaker 1: ultimately broken up into two bilateral discussions and negotiations ZOM 62 00:03:58,720 --> 00:04:03,280 Speaker 1: there is no question that multilateral trade negotiations are superior 63 00:04:03,400 --> 00:04:08,120 Speaker 1: to bilateral UM. Bilateral are one off, one off deals, 64 00:04:08,600 --> 00:04:12,640 Speaker 1: and UM, we are a global economy. UM. We're kind 65 00:04:12,680 --> 00:04:15,560 Speaker 1: of eroding away from that right now, but but ultimately 66 00:04:16,320 --> 00:04:18,960 Speaker 1: it is better if we are a global economy and 67 00:04:19,560 --> 00:04:25,000 Speaker 1: UH you have market opening across all different economies. UH. 68 00:04:25,160 --> 00:04:29,080 Speaker 1: And that's where you get the benefits of the greatest variety, 69 00:04:29,200 --> 00:04:33,080 Speaker 1: the biggest scale, the lowest prices, UM, and the more 70 00:04:33,680 --> 00:04:36,840 Speaker 1: value change that creates the greatest productivity. What you end 71 00:04:36,920 --> 00:04:39,920 Speaker 1: up with bilateral negotiations. And this has been well known 72 00:04:40,480 --> 00:04:43,360 Speaker 1: for quite some time. Job just Bug Waddy called it, 73 00:04:43,720 --> 00:04:48,120 Speaker 1: probably twenty years ago spaghetti bowl. A spaghetti bowl where 74 00:04:48,760 --> 00:04:50,960 Speaker 1: the rules of origin because remember, if it's a bilateral 75 00:04:51,000 --> 00:04:53,440 Speaker 1: trade negotiation, you have to have rules of origin to 76 00:04:53,520 --> 00:04:57,040 Speaker 1: identify who's in and who's out of of a deal. 77 00:04:57,520 --> 00:05:02,960 Speaker 1: And those costs of rules of origin UM are extremely 78 00:05:03,000 --> 00:05:06,640 Speaker 1: expensive for companies to abide by. So you're raising the 79 00:05:06,800 --> 00:05:11,480 Speaker 1: cost of doing trade, of engaging in trade when it's 80 00:05:11,520 --> 00:05:14,479 Speaker 1: done on a bilateral basis. And with regard to China 81 00:05:14,560 --> 00:05:18,760 Speaker 1: in particular, UM, the issue that I'm most concerned about 82 00:05:19,040 --> 00:05:22,200 Speaker 1: is the with withdrawal. The US is sort of taking 83 00:05:22,200 --> 00:05:27,600 Speaker 1: an approach of withdrawing, breaking up that relationship, withdrawing and 84 00:05:27,720 --> 00:05:31,599 Speaker 1: becoming more national focused, and that takes away you know, 85 00:05:31,640 --> 00:05:34,920 Speaker 1: that creates a situation where China can go into all 86 00:05:34,920 --> 00:05:37,760 Speaker 1: of the other markets that the US is seceding from. 87 00:05:37,920 --> 00:05:39,839 Speaker 1: Let's take this to what you do it sitting up, 88 00:05:39,880 --> 00:05:43,080 Speaker 1: which is advised your institution and your business relationships every 89 00:05:43,120 --> 00:05:45,840 Speaker 1: day on this and folded and also with Paul Sweeney 90 00:05:45,839 --> 00:05:49,920 Speaker 1: and when Bloomberg Intelligence is doing worldwide. The gambit here 91 00:05:50,040 --> 00:05:53,480 Speaker 1: is phonies like me fly to Hong Kong. I land 92 00:05:53,480 --> 00:05:55,479 Speaker 1: at the airport, I get in a fancy car, I 93 00:05:55,520 --> 00:05:57,200 Speaker 1: go to the hotel, I go to the office at 94 00:05:57,240 --> 00:06:00,400 Speaker 1: hotel office hotel, I get back in the car, come 95 00:06:00,400 --> 00:06:02,640 Speaker 1: back home, and I say I went to China. I 96 00:06:02,680 --> 00:06:05,359 Speaker 1: mean that's the truth, and folks trust me. I didn't 97 00:06:05,360 --> 00:06:08,719 Speaker 1: go to China. The real world for City Group clients 98 00:06:09,240 --> 00:06:11,400 Speaker 1: is maybe they go to Hong Kong and then an 99 00:06:11,400 --> 00:06:14,080 Speaker 1: hour later they're on a plane to cheng Do. Is 100 00:06:14,120 --> 00:06:18,679 Speaker 1: that broken in this trade war, that that business relationship 101 00:06:18,800 --> 00:06:24,320 Speaker 1: of American businesses with their China equivalence, Well, that's certainly 102 00:06:24,480 --> 00:06:28,840 Speaker 1: part of the objective is to um break the value 103 00:06:28,920 --> 00:06:32,160 Speaker 1: chains that have been put into place between by US 104 00:06:32,240 --> 00:06:35,920 Speaker 1: business in order to produce for China or to use 105 00:06:36,000 --> 00:06:39,400 Speaker 1: China as a production platform for back to the United 106 00:06:39,440 --> 00:06:42,760 Speaker 1: States or for other markets. And so the objective of 107 00:06:42,760 --> 00:06:45,359 Speaker 1: of the of the trade war is in a tariffs 108 00:06:45,360 --> 00:06:49,080 Speaker 1: in particular, or to make it very costly to do that. Now, 109 00:06:49,120 --> 00:06:52,000 Speaker 1: what companies are doing is um you know, some of 110 00:06:52,040 --> 00:06:54,640 Speaker 1: them already had kind of in their in their desk 111 00:06:54,720 --> 00:06:58,039 Speaker 1: drawer the plan for moving away from China when it 112 00:06:58,040 --> 00:07:01,640 Speaker 1: became more more expensive to to to produce there, and 113 00:07:01,640 --> 00:07:03,520 Speaker 1: they've taken those out of the desk door, and they've 114 00:07:03,600 --> 00:07:07,800 Speaker 1: and they've started. Yeah they're flying the heno exactly or 115 00:07:07,920 --> 00:07:11,000 Speaker 1: or you know, yeah exactly. So ket I mean give 116 00:07:11,040 --> 00:07:13,920 Speaker 1: us a sense that it appears that we're moving towards 117 00:07:13,960 --> 00:07:16,320 Speaker 1: if I can be sorry for the latest tweet kind 118 00:07:16,360 --> 00:07:18,840 Speaker 1: of a phase one type of deal. Is this much 119 00:07:18,840 --> 00:07:21,840 Speaker 1: ado about nothing, because until we get the phase two 120 00:07:21,880 --> 00:07:24,240 Speaker 1: or phase three, this is kind of just soybeans going 121 00:07:24,280 --> 00:07:28,400 Speaker 1: back and forth. The phase one deal um looks a 122 00:07:28,400 --> 00:07:31,920 Speaker 1: lot like what was on the table in May um 123 00:07:32,040 --> 00:07:35,160 Speaker 1: and of course that did not that fell apart. So 124 00:07:35,360 --> 00:07:39,160 Speaker 1: UM we're we're we're cautiously optimistic as a team that 125 00:07:39,240 --> 00:07:45,000 Speaker 1: there will be something signed, but that it's implications are limited, 126 00:07:45,600 --> 00:07:50,120 Speaker 1: very limited. Um, you know, and and the are the 127 00:07:50,240 --> 00:07:52,280 Speaker 1: argument that it's the first of a of a set 128 00:07:52,320 --> 00:07:56,600 Speaker 1: of of of broader relationships and broader negotiations. I think 129 00:07:56,600 --> 00:07:59,520 Speaker 1: it's way too early to come to that conclusion because 130 00:07:59,560 --> 00:08:01,800 Speaker 1: the hard stuff is still the stuff that's on the table. 131 00:08:01,960 --> 00:08:05,239 Speaker 1: Katherine Man City Group, I, I really, I really can't 132 00:08:05,240 --> 00:08:08,560 Speaker 1: say enough. It's just a few years ago. She was 133 00:08:08,600 --> 00:08:11,960 Speaker 1: just out of m I T at the time. Is 134 00:08:12,000 --> 00:08:15,440 Speaker 1: a trade deficit sustainable? It's still worth reading today and 135 00:08:15,920 --> 00:08:19,480 Speaker 1: a primer for all, including a possibly the gentleman at 136 00:08:19,480 --> 00:08:33,199 Speaker 1: six Pennsylvania Avenue. Kit Jukes was with us during the 137 00:08:34,080 --> 00:08:38,560 Speaker 1: goodness of Prime Minister Johnson, that extraordinary election that we 138 00:08:38,600 --> 00:08:41,240 Speaker 1: saw with the Prime Minister and the shifts for the 139 00:08:41,320 --> 00:08:43,640 Speaker 1: ninety Kingdom. Now on this day we'll talk to Mr 140 00:08:43,720 --> 00:08:47,880 Speaker 1: Jukes society general about a bigger, broader picture as well. Kid, 141 00:08:47,880 --> 00:08:49,880 Speaker 1: I want to go back to Ken Rogoff when he 142 00:08:49,960 --> 00:08:52,120 Speaker 1: was on the watch at the I m F did 143 00:08:52,200 --> 00:08:55,520 Speaker 1: all sorts of research with the team on fixed versus 144 00:08:55,640 --> 00:09:01,040 Speaker 1: floating or even fixed it's abandoned currency versus folding. How 145 00:09:01,120 --> 00:09:05,440 Speaker 1: different is your study of dollar ran mimbi If it's 146 00:09:05,480 --> 00:09:08,120 Speaker 1: a floating dollar in a sort of kind of like 147 00:09:08,280 --> 00:09:11,720 Speaker 1: fixed ran mimbi, How does that change your study? I 148 00:09:11,760 --> 00:09:14,000 Speaker 1: think it changes everything when when look when you've got 149 00:09:14,040 --> 00:09:18,520 Speaker 1: if you if you reckon that of world trade is 150 00:09:18,520 --> 00:09:22,880 Speaker 1: is United States, China, and Europe. If you have a 151 00:09:22,960 --> 00:09:27,000 Speaker 1: fixed or pretty fixed relationship between two of those parties, 152 00:09:27,280 --> 00:09:30,400 Speaker 1: it locks down one side of the world. If all 153 00:09:30,520 --> 00:09:33,840 Speaker 1: three float freely against each other, we we live in 154 00:09:33,840 --> 00:09:35,840 Speaker 1: a We live in a world where all the other 155 00:09:35,880 --> 00:09:40,720 Speaker 1: currencies orbit to different degrees around each of those three currencies, 156 00:09:41,040 --> 00:09:43,199 Speaker 1: and it makes it more difficult. But it also means 157 00:09:43,240 --> 00:09:45,560 Speaker 1: that we have to we have to understand and the 158 00:09:45,559 --> 00:09:49,160 Speaker 1: one we understand least well is the Chinese unts because 159 00:09:49,320 --> 00:09:52,679 Speaker 1: as it moves more, as it floats more freely but 160 00:09:52,720 --> 00:09:55,760 Speaker 1: not completely freely, what we're faced with is we we 161 00:09:55,840 --> 00:10:00,160 Speaker 1: get far less information about monetary policy, about current c 162 00:10:00,320 --> 00:10:03,560 Speaker 1: policy from the Chinese than we do with the bombardments 163 00:10:03,600 --> 00:10:06,319 Speaker 1: on policy that we get in Europe and in the 164 00:10:06,400 --> 00:10:08,880 Speaker 1: United States. So we we kind of have to work 165 00:10:08,920 --> 00:10:11,400 Speaker 1: it out for ourselves. But that you know, in terms 166 00:10:11,400 --> 00:10:15,160 Speaker 1: of its share of world trade and influence on the 167 00:10:15,200 --> 00:10:17,640 Speaker 1: currencies on the economies of the rest of the world. 168 00:10:17,920 --> 00:10:20,760 Speaker 1: Make no mistake, the Chinese un is as important as 169 00:10:20,760 --> 00:10:23,320 Speaker 1: the Euro or the U. S. Dollar now, and in 170 00:10:23,360 --> 00:10:26,880 Speaker 1: some ways more important because because we understand it less well. 171 00:10:27,320 --> 00:10:30,040 Speaker 1: So Kick, can you give us a bear case for 172 00:10:30,280 --> 00:10:33,959 Speaker 1: the US dollar? I have not heard one. The bear 173 00:10:34,040 --> 00:10:35,640 Speaker 1: case for you, as dollar is that there's a certain 174 00:10:35,679 --> 00:10:39,000 Speaker 1: amount of complacency about the U. S. Economy, so that 175 00:10:39,040 --> 00:10:40,840 Speaker 1: the best thing that could happen to it next year 176 00:10:41,200 --> 00:10:44,319 Speaker 1: is it does about as well as people expect and 177 00:10:44,360 --> 00:10:48,040 Speaker 1: continues at the current kind of gradually slowing pace. So 178 00:10:48,080 --> 00:10:51,080 Speaker 1: the consensus is something like one percent growth next year, 179 00:10:51,280 --> 00:10:53,760 Speaker 1: and the Fed does not very much of anything through 180 00:10:53,800 --> 00:10:57,440 Speaker 1: that period. The bear cases that the earning cycle has 181 00:10:57,640 --> 00:11:00,560 Speaker 1: clearly turned down, and as that continue used to be 182 00:11:00,840 --> 00:11:04,200 Speaker 1: the most important thing driving or creating an economic cycle, 183 00:11:04,520 --> 00:11:06,600 Speaker 1: the dangers are all to the down side. That that's 184 00:11:06,640 --> 00:11:08,959 Speaker 1: the economic case. The other side of this, frankly, is 185 00:11:09,000 --> 00:11:11,679 Speaker 1: the dollar is just about as expensive in real trade 186 00:11:11,679 --> 00:11:15,560 Speaker 1: weighted terms as it can usefully get, and so two 187 00:11:15,600 --> 00:11:17,719 Speaker 1: things can happen. It can stay here or it can 188 00:11:17,800 --> 00:11:21,760 Speaker 1: weaken getting significantly stronger is going to be really difficult, 189 00:11:21,920 --> 00:11:24,600 Speaker 1: or you're predicting that we stay here. I mean, you know, 190 00:11:24,640 --> 00:11:27,120 Speaker 1: I'll be honest, folks, A strong dollar call this year 191 00:11:27,160 --> 00:11:30,200 Speaker 1: has been just stay here, and that's been very against 192 00:11:30,240 --> 00:11:32,760 Speaker 1: consensus as well. What's your call for next year? Is 193 00:11:32,800 --> 00:11:35,400 Speaker 1: it stay here? My call for next year is that 194 00:11:35,440 --> 00:11:38,040 Speaker 1: the dollar will do better than the Chinese un and 195 00:11:38,120 --> 00:11:40,920 Speaker 1: the Euro will do better than both of them, and 196 00:11:40,960 --> 00:11:42,920 Speaker 1: the yen will do better than all. What does a 197 00:11:43,040 --> 00:11:47,599 Speaker 1: stronger euro do to your European GDP and European exports 198 00:11:47,640 --> 00:11:50,679 Speaker 1: being so open, it doesn't help, so it won't go 199 00:11:50,760 --> 00:11:54,200 Speaker 1: up very much. The context again is that if you 200 00:11:54,240 --> 00:11:57,440 Speaker 1: think that since the creation of the euro, the euro 201 00:11:57,559 --> 00:12:01,040 Speaker 1: has traded a little bit below purchasing our parity against 202 00:12:01,040 --> 00:12:03,640 Speaker 1: the dollar against the sort of the calculation then based 203 00:12:03,640 --> 00:12:06,120 Speaker 1: on just stuff we buy in the shops, that level 204 00:12:06,200 --> 00:12:09,120 Speaker 1: is one thirty six. Now, so I know, folks who 205 00:12:09,200 --> 00:12:12,160 Speaker 1: think that fair value for euro dollar is one thirty five, 206 00:12:12,679 --> 00:12:15,600 Speaker 1: we are barely above one ten. We are the best 207 00:12:15,640 --> 00:12:19,720 Speaker 1: part of below that level at the moment. I don't 208 00:12:19,800 --> 00:12:22,720 Speaker 1: think that if the interest rate differential between the US 209 00:12:22,760 --> 00:12:26,040 Speaker 1: and Europe narrow, as if the bondial differential narrowers to 210 00:12:26,120 --> 00:12:29,720 Speaker 1: any significant degree. I don't think we can stay here forever. 211 00:12:29,960 --> 00:12:32,680 Speaker 1: I don't think the Europeans will like it but for 212 00:12:32,760 --> 00:12:36,079 Speaker 1: one minute. But I think that the balance of of 213 00:12:36,880 --> 00:12:41,680 Speaker 1: relative economic performance is just beginning to shift in its favor. 214 00:12:41,760 --> 00:12:43,640 Speaker 1: It's not gonna so if it if it makes it 215 00:12:43,720 --> 00:12:47,040 Speaker 1: to one twenty, that that's making it less than half 216 00:12:47,080 --> 00:12:49,760 Speaker 1: the way back from from where someone might think that 217 00:12:49,800 --> 00:12:51,840 Speaker 1: fair value should be. We need a different way to 218 00:12:51,840 --> 00:12:54,080 Speaker 1: think about fair value in that sense because the Chinese 219 00:12:54,160 --> 00:12:56,280 Speaker 1: u and played such a big role. But but it's 220 00:12:56,360 --> 00:12:59,560 Speaker 1: the it's again this piece that it's not inconceivable that 221 00:12:59,640 --> 00:13:01,760 Speaker 1: once that move happens, that it happens more in the 222 00:13:01,760 --> 00:13:03,840 Speaker 1: second half of next year than the first half, that 223 00:13:03,920 --> 00:13:07,280 Speaker 1: it's slow, and that we spend most time just waiting 224 00:13:07,280 --> 00:13:10,360 Speaker 1: on the US economy and the European economy, which is 225 00:13:10,440 --> 00:13:13,640 Speaker 1: which is less volatile than the US, just does a 226 00:13:13,640 --> 00:13:17,079 Speaker 1: little bit more miserably slowly. That the game changer that 227 00:13:17,080 --> 00:13:20,280 Speaker 1: that could be could come but isn't necessarily going to come, 228 00:13:20,600 --> 00:13:22,760 Speaker 1: is if the Europeans wake up one morning and realize 229 00:13:22,800 --> 00:13:25,160 Speaker 1: that easing fiscal policies about the most sensible thing they 230 00:13:25,160 --> 00:13:27,880 Speaker 1: could do at any point in time, but right now 231 00:13:28,000 --> 00:13:32,479 Speaker 1: especially so. Kid. I'm looking at my chart here, basically 232 00:13:33,000 --> 00:13:36,760 Speaker 1: just a one year chart for the sterling. I'm actually 233 00:13:36,800 --> 00:13:39,320 Speaker 1: surprised as we pulled back down below one to thirty 234 00:13:39,360 --> 00:13:42,360 Speaker 1: that we didn't get a more stained move above one 235 00:13:42,440 --> 00:13:45,240 Speaker 1: thirty and holding above one thirty, maybe even moving higher 236 00:13:45,280 --> 00:13:48,559 Speaker 1: on the Brexit. Where do you think Sterling trades here 237 00:13:48,600 --> 00:13:51,080 Speaker 1: and what's kind of the key determinant. I think the 238 00:13:51,160 --> 00:13:53,800 Speaker 1: key determinant of Westerning trades against the dollar next year 239 00:13:53,880 --> 00:13:56,959 Speaker 1: will be where the Euro trades against the dollar. I 240 00:13:57,000 --> 00:14:00,320 Speaker 1: think Sterling is now going to be much quieter against 241 00:14:00,400 --> 00:14:03,280 Speaker 1: the Euro. And remember the the you know, the UK, 242 00:14:03,679 --> 00:14:06,280 Speaker 1: despite everything, does much much, much more trade with Europe 243 00:14:06,280 --> 00:14:08,400 Speaker 1: than with the United States. So it's it's what happens 244 00:14:08,440 --> 00:14:10,600 Speaker 1: to the Euro that really matters. In other words, we 245 00:14:10,640 --> 00:14:13,640 Speaker 1: can get we can get to one forty against the 246 00:14:13,679 --> 00:14:16,760 Speaker 1: dollar if the Euro can get to one twenty against 247 00:14:16,760 --> 00:14:18,920 Speaker 1: the dollar. But if if the Euro states here, we're 248 00:14:18,920 --> 00:14:20,520 Speaker 1: just not going to go up much against the dollar. 249 00:14:20,800 --> 00:14:23,280 Speaker 1: Otherwise we'd have to take the level against the Euro 250 00:14:23,840 --> 00:14:26,440 Speaker 1: back to the kind of place we were at before 251 00:14:26,480 --> 00:14:29,240 Speaker 1: this referendum, and the referendum is not going to go away. 252 00:14:29,520 --> 00:14:32,120 Speaker 1: We might we might conceivably get a clean exit, but 253 00:14:32,120 --> 00:14:33,720 Speaker 1: we're not going to put this back and never do it. 254 00:14:34,240 --> 00:14:36,720 Speaker 1: Tell us about and this was a news item last week. 255 00:14:36,760 --> 00:14:39,680 Speaker 1: Focus is sort of esoteric on Monday before the holiday season. 256 00:14:39,720 --> 00:14:43,960 Speaker 1: But we'll go Lancashine. You. Sweden has a unique central 257 00:14:44,000 --> 00:14:48,640 Speaker 1: bank experiment. They have a history of this, certainly going 258 00:14:48,680 --> 00:14:50,960 Speaker 1: back to the Glory and Risk of nineteen ninety two. 259 00:14:51,040 --> 00:14:54,520 Speaker 1: The sweat, I should say of nineteen ninety two is 260 00:14:54,520 --> 00:14:58,320 Speaker 1: there a way Kitchuks to play the courage of Sweden 261 00:14:58,360 --> 00:15:02,720 Speaker 1: where they say enough negative interest rates um. I think 262 00:15:02,720 --> 00:15:04,800 Speaker 1: the weight of play it was was possibly to do 263 00:15:04,840 --> 00:15:07,160 Speaker 1: it in advance of of when they did it, so 264 00:15:07,440 --> 00:15:09,320 Speaker 1: that the Swedish Crowner had a big run when they 265 00:15:09,320 --> 00:15:11,200 Speaker 1: first indicated that they were going to get interest rates 266 00:15:11,240 --> 00:15:14,520 Speaker 1: back to zero. The probability now is that having gone 267 00:15:14,560 --> 00:15:17,960 Speaker 1: from negative rates to zero rates, they stay at zero 268 00:15:18,120 --> 00:15:20,920 Speaker 1: for a really long time and something has to change 269 00:15:20,960 --> 00:15:23,800 Speaker 1: in the economy. Again. That the key here is, and 270 00:15:24,280 --> 00:15:27,280 Speaker 1: I think they're they're an incredibly important lesson for everywhere. 271 00:15:27,320 --> 00:15:30,840 Speaker 1: But the key here is, once you accept that negative 272 00:15:30,840 --> 00:15:34,960 Speaker 1: interest rates have um, negative connotations for the economy that 273 00:15:34,960 --> 00:15:37,120 Speaker 1: they're not just a win win, and they're definitely not 274 00:15:37,160 --> 00:15:39,360 Speaker 1: just a win win for the economy. Then you have 275 00:15:39,560 --> 00:15:42,600 Speaker 1: to be prepared to use fiscal policy as a tool 276 00:15:42,680 --> 00:15:45,360 Speaker 1: for helping drive the economy and the short medium term 277 00:15:45,400 --> 00:15:47,800 Speaker 1: in a way you didn't before. What you learn from 278 00:15:47,800 --> 00:15:52,040 Speaker 1: Swiss from Sweden is if easier fiscal policy takes on 279 00:15:52,160 --> 00:15:55,440 Speaker 1: as a as a fashion acround the world outside the 280 00:15:55,560 --> 00:15:59,360 Speaker 1: United States, the Swedish trining will fly more likely. To 281 00:15:59,440 --> 00:16:01,160 Speaker 1: my money, it's not the Swedes that will be the 282 00:16:01,160 --> 00:16:03,240 Speaker 1: ones that these fiscal policy. It will be somebody else 283 00:16:04,040 --> 00:16:06,880 Speaker 1: right now though, um I guess that the trade that 284 00:16:06,920 --> 00:16:08,920 Speaker 1: I would like is is that the Norwegian croner is 285 00:16:08,960 --> 00:16:12,320 Speaker 1: catching up on Swedish crona strength pretty quickly, and I 286 00:16:12,320 --> 00:16:14,920 Speaker 1: would rather own the Norwegian croner than switch coroner. But 287 00:16:14,920 --> 00:16:17,480 Speaker 1: but but the lesson from Sweden is it's all about 288 00:16:17,480 --> 00:16:21,320 Speaker 1: fiscal policy in well have to well some are do 289 00:16:21,400 --> 00:16:24,120 Speaker 1: we have Mr Jukes scheduled for January, we have to 290 00:16:24,160 --> 00:16:26,600 Speaker 1: we have to drive forward that conversation very he was 291 00:16:26,640 --> 00:16:30,040 Speaker 1: a very needge of m Mt Jukes. Thank you so 292 00:16:30,120 --> 00:16:32,920 Speaker 1: much with such oh is just a wonderful help with 293 00:16:33,000 --> 00:16:45,920 Speaker 1: us with perspective this year as well, Boeing coming out 294 00:16:45,960 --> 00:16:48,640 Speaker 1: with the press release and management changes. David Calhoun named 295 00:16:48,680 --> 00:16:53,240 Speaker 1: president and CEO Lawrence Kellner to become chairman of the board. Uh. 296 00:16:53,280 --> 00:16:55,600 Speaker 1: They're saying new leadership to bring me nude commitment to 297 00:16:55,680 --> 00:16:59,680 Speaker 1: transparency and better communication with regulators and customers in safety. 298 00:16:59,680 --> 00:17:02,720 Speaker 1: So a change at the top at the top, Tom here, Uh, 299 00:17:02,800 --> 00:17:05,280 Speaker 1: new CEO. Let's bring on a good friend, George ferguson 300 00:17:05,280 --> 00:17:08,959 Speaker 1: Bloomberg Intelligence. He follows abobing and all things aerospace. George, 301 00:17:09,000 --> 00:17:11,240 Speaker 1: does this surprise? You were getting a new leadership here 302 00:17:11,280 --> 00:17:15,760 Speaker 1: the CEO out, new CEO in no, I think, Uh, 303 00:17:16,480 --> 00:17:18,040 Speaker 1: you know, we we thought maybe it would take a 304 00:17:18,080 --> 00:17:20,679 Speaker 1: little bit longer without bowing, might try to put the 305 00:17:21,000 --> 00:17:24,720 Speaker 1: Max back in service before they changed leadership. But so 306 00:17:24,800 --> 00:17:26,760 Speaker 1: it doesn't surprise. It's just maybe a little bit earlier 307 00:17:26,800 --> 00:17:30,880 Speaker 1: than we expected. So, George, I mean, I guess when 308 00:17:30,880 --> 00:17:32,960 Speaker 1: we look back on this with hindsight, you know, over 309 00:17:32,960 --> 00:17:37,480 Speaker 1: the past year, it really does seem like management either 310 00:17:37,600 --> 00:17:40,920 Speaker 1: didn't really understand the scope of the problem, didn't manage 311 00:17:40,920 --> 00:17:43,639 Speaker 1: the parties, whether it's the f a A, whether it's investors, 312 00:17:43,640 --> 00:17:46,800 Speaker 1: whether it's you know, it's competitors and customers. What do 313 00:17:46,880 --> 00:17:49,800 Speaker 1: you think was the real undoing here or the real 314 00:17:49,840 --> 00:17:53,280 Speaker 1: mistake from Boeing? You know, I mean we had seen 315 00:17:53,520 --> 00:17:56,240 Speaker 1: I would say, a distinctive change in the way Bowing 316 00:17:56,880 --> 00:18:01,720 Speaker 1: communicated to all kinds of constitution in sees with with 317 00:18:01,800 --> 00:18:07,000 Speaker 1: Dennis Fellenberg, and I think that, um, that didn't help 318 00:18:07,119 --> 00:18:10,159 Speaker 1: during the during the crisis, I think they had become 319 00:18:10,760 --> 00:18:14,760 Speaker 1: they've provided less information. Uh, you know, they got much 320 00:18:14,760 --> 00:18:17,440 Speaker 1: tighter with everything they I think there was a little 321 00:18:17,480 --> 00:18:20,399 Speaker 1: bit of you know, feeling that they were at the 322 00:18:20,440 --> 00:18:22,399 Speaker 1: top of their game, things were going great, and they 323 00:18:22,400 --> 00:18:25,040 Speaker 1: didn't have to give all this information and I think 324 00:18:26,040 --> 00:18:28,159 Speaker 1: I think that that hurt them ribly in this in 325 00:18:28,200 --> 00:18:31,840 Speaker 1: this uh, in these latest problems. George David Calhoun is 326 00:18:31,880 --> 00:18:34,560 Speaker 1: a uniquely qualified guy for this. Not only was this 327 00:18:34,720 --> 00:18:37,040 Speaker 1: relationship to Wall Street and private equity in the black 328 00:18:37,040 --> 00:18:39,119 Speaker 1: Stone Group, but I'm really going to go to what 329 00:18:39,200 --> 00:18:41,840 Speaker 1: I learned in an interview years ago that the pros 330 00:18:41,960 --> 00:18:46,800 Speaker 1: look at an airplane is engines with a fuselage attached, 331 00:18:46,920 --> 00:18:50,440 Speaker 1: which I really didn't understand. And he has as a 332 00:18:50,480 --> 00:18:57,000 Speaker 1: business executive the working knowledge of general electrics airplane engine business. 333 00:18:57,680 --> 00:19:03,280 Speaker 1: Describe his impetencies on engines, which are the clearly part 334 00:19:03,359 --> 00:19:07,480 Speaker 1: of the tragedy of these two plane crashes. What unique 335 00:19:07,560 --> 00:19:11,639 Speaker 1: skills does he bring after his work with with Caterpillar 336 00:19:11,720 --> 00:19:14,200 Speaker 1: and that and his work with black Stone and particularly 337 00:19:14,240 --> 00:19:19,359 Speaker 1: with ges aircraft business. I mean, ge is so deep 338 00:19:19,400 --> 00:19:24,080 Speaker 1: into the aviation business right in the the engine business, 339 00:19:24,080 --> 00:19:26,760 Speaker 1: and I think that just means that he has a 340 00:19:26,840 --> 00:19:31,679 Speaker 1: very good understanding of of the industry obviously had he 341 00:19:31,720 --> 00:19:34,960 Speaker 1: has some great experience um and I just think that 342 00:19:35,119 --> 00:19:39,439 Speaker 1: gives him executes and think quite quite well for I 343 00:19:39,440 --> 00:19:42,600 Speaker 1: think all the for all the abuse I'd say gees 344 00:19:42,680 --> 00:19:45,800 Speaker 1: getting in the marketplace as it as it restructures itself 345 00:19:46,720 --> 00:19:49,560 Speaker 1: on the aircraft side, I think it's been an outstanding 346 00:19:49,600 --> 00:19:53,119 Speaker 1: executor and so I think he brings that that skill 347 00:19:53,160 --> 00:19:56,359 Speaker 1: set to Boeing. The interesting thing though, is that we 348 00:19:56,480 --> 00:20:00,719 Speaker 1: just let a ge guy go at bowing commercial airplanes, right. 349 00:20:00,760 --> 00:20:03,960 Speaker 1: McAlister was running commercial airplanes and he just went out 350 00:20:03,960 --> 00:20:05,480 Speaker 1: the door. So we had a guy go out the 351 00:20:05,480 --> 00:20:08,320 Speaker 1: door as well. But what's topic, I mean, George, what's 352 00:20:08,359 --> 00:20:10,600 Speaker 1: so good about your skill set? As you actually know 353 00:20:10,680 --> 00:20:14,760 Speaker 1: the operational skill sets of this company and this company 354 00:20:14,840 --> 00:20:17,720 Speaker 1: in crisis. What's this to do list today? Is he 355 00:20:17,800 --> 00:20:21,240 Speaker 1: supposed to speak to employees? Is he supposed to speak 356 00:20:21,240 --> 00:20:23,959 Speaker 1: to the f A A. I mean, what's what's the 357 00:20:24,000 --> 00:20:27,400 Speaker 1: immediate to do list for Mr Calhoun? Is it replaces 358 00:20:27,520 --> 00:20:31,400 Speaker 1: Mr Muhlenberg. Yeah, I think he has to. I think 359 00:20:31,400 --> 00:20:32,960 Speaker 1: he has to get with the f A A and 360 00:20:32,960 --> 00:20:37,000 Speaker 1: and repair that relationship as quickly as possible. Right, I 361 00:20:37,040 --> 00:20:39,879 Speaker 1: think really they need the f A to review the 362 00:20:39,920 --> 00:20:43,000 Speaker 1: MAX and help get it back into service as soon 363 00:20:43,040 --> 00:20:45,480 Speaker 1: as possible. They need to go to the f A 364 00:20:45,600 --> 00:20:48,840 Speaker 1: and and and just be ready to support them in 365 00:20:48,920 --> 00:20:51,760 Speaker 1: that effort and make sure that that's that's an absolutely 366 00:20:51,760 --> 00:20:55,720 Speaker 1: positive relationship because so key to this company's future is 367 00:20:56,320 --> 00:20:58,920 Speaker 1: getting that MAX back into the air and getting things 368 00:20:59,000 --> 00:21:01,119 Speaker 1: moving again. Paul, I want to be careful in the 369 00:21:01,160 --> 00:21:05,200 Speaker 1: headlines here, Mr Calhoun is joining Boeing as CEO January, 370 00:21:06,720 --> 00:21:10,000 Speaker 1: and in the in the in the the headlines following on, 371 00:21:10,359 --> 00:21:14,640 Speaker 1: Mr Greg Smith will serve as interim CEO. Right, Okay, 372 00:21:14,640 --> 00:21:18,840 Speaker 1: we had Mr Mullenberg actually resigning, So George, it's interesting 373 00:21:18,880 --> 00:21:21,239 Speaker 1: here just give us a sense of the state of 374 00:21:21,280 --> 00:21:23,560 Speaker 1: the relationship between Boeing and the regulators. I mean, it 375 00:21:23,600 --> 00:21:26,920 Speaker 1: seemed like for decades, if not for all time, it 376 00:21:26,960 --> 00:21:30,680 Speaker 1: was a very strong, close working relationship. What happened, well, 377 00:21:30,680 --> 00:21:34,600 Speaker 1: I mean, I mean, the regulators clearly have um, you know, 378 00:21:34,640 --> 00:21:37,520 Speaker 1: the reputations had tarnished through this whole seven thirty seven 379 00:21:37,560 --> 00:21:43,600 Speaker 1: Max problem, and and it seemed like Dennis and the 380 00:21:43,640 --> 00:21:46,000 Speaker 1: regulators weren't on the same sheet of music because you know, 381 00:21:46,040 --> 00:21:48,080 Speaker 1: we well we don't get a lot of information for 382 00:21:48,280 --> 00:21:51,240 Speaker 1: that relationship was working. You know, we we all heard 383 00:21:51,240 --> 00:21:53,159 Speaker 1: that he had sort of got called to Washington to 384 00:21:53,240 --> 00:21:55,680 Speaker 1: talk to the regulator a couple of weeks ago and 385 00:21:55,720 --> 00:21:58,280 Speaker 1: asked not to give timetables for when the MAX was 386 00:21:58,320 --> 00:22:01,160 Speaker 1: going back into service. I would have thought he would 387 00:22:01,160 --> 00:22:03,480 Speaker 1: have been coordinating that with the f a A and 388 00:22:03,560 --> 00:22:07,600 Speaker 1: making sure that you know, they're they're both of their 389 00:22:07,680 --> 00:22:10,040 Speaker 1: views for how the process would work for getting the 390 00:22:10,119 --> 00:22:12,760 Speaker 1: MAX into the air were in sync. And I think 391 00:22:12,800 --> 00:22:15,960 Speaker 1: that was very surprising to me, all Right. I would 392 00:22:15,960 --> 00:22:17,879 Speaker 1: have thought the f a A A would have been looking 393 00:22:17,880 --> 00:22:21,199 Speaker 1: over Boeing shoulder as they went through all of the 394 00:22:21,280 --> 00:22:24,680 Speaker 1: fixes to the MAX. So even though they need they 395 00:22:24,680 --> 00:22:26,800 Speaker 1: need to be able to sign off on it, you know, 396 00:22:26,840 --> 00:22:29,720 Speaker 1: from an f A standpoint is being safe. They could 397 00:22:29,720 --> 00:22:33,040 Speaker 1: have seen the process and been provided some level of 398 00:22:33,080 --> 00:22:36,200 Speaker 1: comfort in that. And it seems like we're still three 399 00:22:36,240 --> 00:22:38,880 Speaker 1: months away from getting this airplane back in the air. Well, 400 00:22:38,920 --> 00:22:42,720 Speaker 1: that's let me frame this again. With David Calhoun taking 401 00:22:43,440 --> 00:22:45,960 Speaker 1: over here in January, we believe in the stream of 402 00:22:46,000 --> 00:22:49,560 Speaker 1: headlines coming out, Greg Smith, the chief financial officer and 403 00:22:49,600 --> 00:22:54,439 Speaker 1: executive vice president, will uh be the interim CEO. Of 404 00:22:54,480 --> 00:22:57,119 Speaker 1: course we know him. There was affiliate issue with the 405 00:22:57,119 --> 00:22:59,920 Speaker 1: Economic Club of New York. We affiliate Bowing the Sea 406 00:23:00,000 --> 00:23:04,159 Speaker 1: at but very much headquartered in Chicago. UM. George Freeman 407 00:23:04,200 --> 00:23:08,480 Speaker 1: with this right now, giving us wonderful perspective on this, Uh, George, 408 00:23:09,040 --> 00:23:10,720 Speaker 1: the plane is going to get back in the air 409 00:23:10,760 --> 00:23:15,520 Speaker 1: and X months says, who what are the engineering changes 410 00:23:16,280 --> 00:23:19,560 Speaker 1: that they need to do to get the f A 411 00:23:19,560 --> 00:23:23,359 Speaker 1: a okay and to get the confidence of their staffing, 412 00:23:23,800 --> 00:23:28,520 Speaker 1: including pilots and also the American public. Well, I mean, 413 00:23:29,240 --> 00:23:33,840 Speaker 1: the as near as we can tell, uh, the you know, 414 00:23:33,880 --> 00:23:35,679 Speaker 1: the biggest fix is going to be a fix to 415 00:23:35,760 --> 00:23:39,119 Speaker 1: software on this MCAST system. Let's call it an anti 416 00:23:39,160 --> 00:23:42,240 Speaker 1: stall system, UM. And then it's going to be training 417 00:23:42,240 --> 00:23:46,679 Speaker 1: the pilots to use this new system. As near as 418 00:23:46,680 --> 00:23:49,800 Speaker 1: we can tell, that fix to m CAST is done, 419 00:23:49,840 --> 00:23:53,360 Speaker 1: but the FA has to be satisfied. Okay, it won't override. 420 00:23:53,400 --> 00:23:55,199 Speaker 1: Have they move the engines? I mean a lot of 421 00:23:55,200 --> 00:23:57,600 Speaker 1: the geometry this and I'm working off the great work 422 00:23:57,680 --> 00:24:01,080 Speaker 1: you did and others, particularly in c at all. Is 423 00:24:01,119 --> 00:24:06,720 Speaker 1: there an engineering change away from software? No, No, it's 424 00:24:06,720 --> 00:24:10,040 Speaker 1: the same plane it is. And look, I think the airplane. 425 00:24:10,640 --> 00:24:12,840 Speaker 1: Our sense from what we've done is that from the 426 00:24:12,840 --> 00:24:15,960 Speaker 1: work we've done and the people we've talked to, is that, well, 427 00:24:16,000 --> 00:24:18,520 Speaker 1: the engines change a bit of the physics, and I 428 00:24:18,560 --> 00:24:20,760 Speaker 1: think it means long term they can't do much more 429 00:24:21,359 --> 00:24:25,280 Speaker 1: with this airframe. The airplane as it's designed now, with 430 00:24:25,359 --> 00:24:29,720 Speaker 1: an MCAST system that's working properly, is a safe airplane 431 00:24:29,760 --> 00:24:33,359 Speaker 1: and will be a member of fleets for a long time. George, 432 00:24:33,400 --> 00:24:35,320 Speaker 1: is there any risk here that they just scrapped the 433 00:24:35,320 --> 00:24:39,400 Speaker 1: seven three seven Max? I don't think so. Um, I'll 434 00:24:39,440 --> 00:24:42,400 Speaker 1: never say never. I hate saying never, but I don't 435 00:24:42,480 --> 00:24:44,560 Speaker 1: think so because I think, as I just said, I 436 00:24:44,560 --> 00:24:48,439 Speaker 1: think the airplane is safe to fly. This software system 437 00:24:48,480 --> 00:24:51,320 Speaker 1: was designed to keep people out of trouble with an 438 00:24:51,320 --> 00:24:53,920 Speaker 1: airplane where they had pushed the engines forward. There was 439 00:24:53,960 --> 00:24:57,399 Speaker 1: a risk of on on heavy thrust takeoffs of the 440 00:24:57,560 --> 00:25:00,719 Speaker 1: of the um nose being pulled up a bit and 441 00:25:00,760 --> 00:25:03,760 Speaker 1: potentially getting into a stall. This was designed to keep 442 00:25:03,840 --> 00:25:07,080 Speaker 1: pilots out of trouble. Clearly they got some pilots into 443 00:25:07,080 --> 00:25:11,159 Speaker 1: trouble because it was it provided too much deflection to 444 00:25:11,240 --> 00:25:14,800 Speaker 1: them to the control surfaces on the airplane and drove 445 00:25:14,800 --> 00:25:17,439 Speaker 1: the nose towards the ground. I believe that if they 446 00:25:17,440 --> 00:25:20,000 Speaker 1: get the fixed to that software, which I think they're done. 447 00:25:20,000 --> 00:25:23,800 Speaker 1: I've heard American Airlines pilots way have gone into simulators 448 00:25:23,840 --> 00:25:27,320 Speaker 1: and flown the new m CAST software and said it 449 00:25:27,400 --> 00:25:31,000 Speaker 1: reacted as they expected and that they and that they felt, 450 00:25:31,160 --> 00:25:34,280 Speaker 1: you know, pretty confident in the safety of this of 451 00:25:34,320 --> 00:25:38,560 Speaker 1: this system. I believe it means the airplane is viable 452 00:25:38,920 --> 00:25:40,719 Speaker 1: and will be in fleets for a long time. I 453 00:25:40,760 --> 00:25:43,280 Speaker 1: do think, though, that bone needs to come out of 454 00:25:43,320 --> 00:25:47,159 Speaker 1: this and go at hard, a new narrow body, a 455 00:25:47,200 --> 00:25:50,560 Speaker 1: new seven thirty seven, because they've pushed this one for 456 00:25:50,600 --> 00:25:53,200 Speaker 1: all they can get. And I think that the next 457 00:25:53,240 --> 00:25:55,600 Speaker 1: time that we go to if we go to bigger engines, 458 00:25:56,080 --> 00:26:00,600 Speaker 1: bigger fan sizes to to create better efficiency, I think 459 00:26:00,640 --> 00:26:03,840 Speaker 1: that there they can't put underneath this air frame, and 460 00:26:03,880 --> 00:26:06,800 Speaker 1: so they got to fix that. Okay, but that gets 461 00:26:06,840 --> 00:26:11,000 Speaker 1: back to the engineering issue. Is there an established understanding 462 00:26:11,040 --> 00:26:15,000 Speaker 1: on people like you, all the regulators, the pilots, etcetera, 463 00:26:15,480 --> 00:26:21,960 Speaker 1: that X the software the existing frame is doable. I 464 00:26:22,040 --> 00:26:24,600 Speaker 1: think there is. It appears to me that there's a 465 00:26:24,640 --> 00:26:28,480 Speaker 1: fair amount of consensus in the marketplace that among among 466 00:26:28,520 --> 00:26:32,160 Speaker 1: the smart people in the marketplace, which I'm probably doesn't 467 00:26:32,160 --> 00:26:36,880 Speaker 1: even include me, include other people that I read. Well, 468 00:26:36,880 --> 00:26:38,800 Speaker 1: it's interesting just time that in the pre market the 469 00:26:38,800 --> 00:26:41,359 Speaker 1: stock is now trading up about one point eight percent 470 00:26:41,480 --> 00:26:44,000 Speaker 1: in the pre market here. So um, so the market 471 00:26:44,040 --> 00:26:47,119 Speaker 1: kind of likes what it's seeing here, that change in management. 472 00:26:47,440 --> 00:26:52,200 Speaker 1: So I mean, George, long lasting risk to reputation within 473 00:26:52,359 --> 00:26:58,360 Speaker 1: the community foreboing, Um, you know what, the Max's problems 474 00:26:58,359 --> 00:27:00,840 Speaker 1: have lasted longer than I would expect. The star Lander 475 00:27:00,920 --> 00:27:03,960 Speaker 1: didn't help this week. Um, I think yeah, I think 476 00:27:04,000 --> 00:27:05,680 Speaker 1: you they're they're banged up here for a couple of 477 00:27:05,760 --> 00:27:09,159 Speaker 1: years on reputation for sure. Um, it's been it's been 478 00:27:09,160 --> 00:27:12,800 Speaker 1: a rough yere Okay, George, thank you so much. We're 479 00:27:12,800 --> 00:27:15,600 Speaker 1: gonna we're gonna move on here. This has been absolutely 480 00:27:15,640 --> 00:27:28,640 Speaker 1: informative right now joining us Brooke Sutherland, who has been 481 00:27:28,640 --> 00:27:32,520 Speaker 1: writing not only this crisis but the synthesis of it 482 00:27:32,960 --> 00:27:36,640 Speaker 1: into all of manufacturing America. Brooks, thank you so much 483 00:27:36,640 --> 00:27:40,359 Speaker 1: for joining us on short notice. They have gone to 484 00:27:40,520 --> 00:27:44,760 Speaker 1: the most obvious person here. There is clearly no time 485 00:27:44,920 --> 00:27:49,080 Speaker 1: for an outside search within all your reporting. What is 486 00:27:49,119 --> 00:27:53,200 Speaker 1: the first to do for Mr Calhoun? I mean, I 487 00:27:53,240 --> 00:27:57,280 Speaker 1: think the most obvious thing is to get into the sky, 488 00:27:57,400 --> 00:28:01,399 Speaker 1: but they're obviously a number of before you can do that. 489 00:28:01,480 --> 00:28:03,120 Speaker 1: I mean, I think what we've learned in the last 490 00:28:03,119 --> 00:28:06,359 Speaker 1: couple of weeks is just how stringing the relationship has 491 00:28:06,359 --> 00:28:10,200 Speaker 1: been with the FAA is hugely unprecedented for the FAA 492 00:28:10,359 --> 00:28:14,040 Speaker 1: administrator to come out and publicly admonished a company like Going, 493 00:28:14,480 --> 00:28:17,439 Speaker 1: as Steve Dixon did a couple of weeks ago, really 494 00:28:17,520 --> 00:28:20,600 Speaker 1: really significant turn in this crisis. And I think that 495 00:28:20,840 --> 00:28:23,040 Speaker 1: is one big reason why you're seeing going make this 496 00:28:23,119 --> 00:28:27,640 Speaker 1: change this relationship. Reassuring the FAA that there is no 497 00:28:27,800 --> 00:28:29,919 Speaker 1: effort at all by going to try to speed up 498 00:28:29,960 --> 00:28:32,720 Speaker 1: this process is essential. And you also have to look 499 00:28:32,760 --> 00:28:36,520 Speaker 1: at the customers. Um Arizonians are not happy the Southwest 500 00:28:36,520 --> 00:28:39,200 Speaker 1: Airlines CEO Gary Kelly has made it abundantly clear that 501 00:28:39,280 --> 00:28:41,720 Speaker 1: he's very frustrated. Was going to the point that he's 502 00:28:41,720 --> 00:28:44,200 Speaker 1: been talking about looking at Airbus. Well, that's right where 503 00:28:44,200 --> 00:28:46,719 Speaker 1: I wanted to go. I mean, our guy Brook, our 504 00:28:46,760 --> 00:28:49,760 Speaker 1: Guy Johnson's on Bloomberg Television right now, expert on to 505 00:28:49,880 --> 00:28:53,480 Speaker 1: lose and Airbus. Are we really at risk in America 506 00:28:54,160 --> 00:28:59,360 Speaker 1: of iconic brands dropping the iconic engineering technology we have 507 00:28:59,800 --> 00:29:03,840 Speaker 1: in using Airbus far greater in America. So you have 508 00:29:04,000 --> 00:29:06,240 Speaker 1: not seen that yet, And a big part of that 509 00:29:06,360 --> 00:29:09,160 Speaker 1: is because airbus is backlog is so long. I believe 510 00:29:09,160 --> 00:29:11,400 Speaker 1: it's about six years, and so you'll be waiting a 511 00:29:11,440 --> 00:29:13,360 Speaker 1: long time if you join the back of the line 512 00:29:13,400 --> 00:29:15,720 Speaker 1: right now for an Airbus jet. But I do think 513 00:29:15,880 --> 00:29:18,920 Speaker 1: longer term there's a significant risk of Bowing losing its 514 00:29:18,920 --> 00:29:21,920 Speaker 1: competitive edge, losing its reputational advantage. I mean, all you 515 00:29:21,960 --> 00:29:24,640 Speaker 1: have to do is look at the Airbus A XLR, 516 00:29:24,720 --> 00:29:27,840 Speaker 1: which they just launched at the Paris air Show in June. 517 00:29:27,880 --> 00:29:31,440 Speaker 1: And Boeing was supposed to be working on a competitor 518 00:29:31,480 --> 00:29:33,840 Speaker 1: to that, the new middle market aircraft, and that had 519 00:29:33,880 --> 00:29:35,880 Speaker 1: to be put on the shelf because the seven seven 520 00:29:35,920 --> 00:29:39,200 Speaker 1: MAC crisis. Airbus has been getting tons of orders for 521 00:29:39,200 --> 00:29:42,560 Speaker 1: the XLR, and that is shrinking the market share opportunity 522 00:29:42,640 --> 00:29:44,880 Speaker 1: for that Boeing plane, which I think likely does not 523 00:29:45,120 --> 00:29:47,719 Speaker 1: launched at this point. And I think what Airbus has 524 00:29:47,800 --> 00:29:50,000 Speaker 1: essentially done is because you have to remember that the 525 00:29:50,040 --> 00:29:53,800 Speaker 1: seven thirty seven mac UH flight control system that was, 526 00:29:54,040 --> 00:29:56,400 Speaker 1: you know, thought to be significantly at the root of 527 00:29:56,440 --> 00:29:59,680 Speaker 1: these crashes was put in place because Airbus came out 528 00:29:59,720 --> 00:30:03,520 Speaker 1: with UM when we're fuel efficient UH signal body jet 529 00:30:03,560 --> 00:30:05,680 Speaker 1: and Boeing felt like that they had to respond, so 530 00:30:05,800 --> 00:30:08,320 Speaker 1: they and they had to respond quickly, so they rejiggered 531 00:30:08,320 --> 00:30:11,480 Speaker 1: the model to adapt it to the bigger, more fuel 532 00:30:11,480 --> 00:30:14,480 Speaker 1: efficient engine. And that's why you got those flight control system. 533 00:30:14,520 --> 00:30:17,400 Speaker 1: So we're really here because of competition from Airbus, and 534 00:30:17,400 --> 00:30:19,960 Speaker 1: so I do think you have to worry about competition 535 00:30:20,000 --> 00:30:23,000 Speaker 1: longer term. And SMP and Moody's when they downgraded Borings 536 00:30:23,040 --> 00:30:26,280 Speaker 1: credit rating last week, specifically cited that rist and they 537 00:30:26,280 --> 00:30:28,400 Speaker 1: were going to do that decision. Brook Solo and thank 538 00:30:28,400 --> 00:30:30,200 Speaker 1: you so much for joining us in a short notices. 539 00:30:30,240 --> 00:30:33,880 Speaker 1: Greatly appreciate it. This morning, writing of course from Bloomberg News, 540 00:30:44,280 --> 00:30:46,520 Speaker 1: we rip up the script and you can do that 541 00:30:46,600 --> 00:30:51,080 Speaker 1: with someone who's competence is Gregtly Gregory Valier with a GF. 542 00:30:51,680 --> 00:30:54,880 Speaker 1: We should be talking politics, maybe, Greg, we can talk 543 00:30:54,920 --> 00:30:57,200 Speaker 1: about a president who was out front of his own 544 00:30:57,240 --> 00:31:00,400 Speaker 1: fa A. We do this, folks, with the announcement. Mr 545 00:31:00,440 --> 00:31:05,320 Speaker 1: Milenberg will resign immediately from Boeing. David Calhoun, their lead director, 546 00:31:05,360 --> 00:31:07,880 Speaker 1: will take over h in a matter of weeks, and 547 00:31:07,960 --> 00:31:11,160 Speaker 1: their CFO Mr Smith will step in. Is it room 548 00:31:10,880 --> 00:31:14,920 Speaker 1: at CEO? Greg? How does the f a A with 549 00:31:15,040 --> 00:31:19,680 Speaker 1: an annual budget of twenty kazillion dollars a year? How 550 00:31:19,720 --> 00:31:23,680 Speaker 1: do they fit into the Washington you know? Not? Their 551 00:31:23,760 --> 00:31:28,320 Speaker 1: pretty low profile time considering their budget. Uh, they've obviously 552 00:31:28,400 --> 00:31:33,440 Speaker 1: had a difficult year, has has Boeing, But yeah, very 553 00:31:33,440 --> 00:31:39,600 Speaker 1: low profile. It comes within the idea of regulators are 554 00:31:39,640 --> 00:31:41,880 Speaker 1: there and they're supposed to help us, and there's the 555 00:31:41,960 --> 00:31:44,120 Speaker 1: FDA and that and all the rest of it. But 556 00:31:44,240 --> 00:31:47,000 Speaker 1: the f a A is so viscerable, visceral to our 557 00:31:47,040 --> 00:31:51,240 Speaker 1: listeners and viewers. Uh, and that we fly our families 558 00:31:51,280 --> 00:31:54,400 Speaker 1: on it. We we It's an immediate thing and I 559 00:31:54,440 --> 00:31:57,960 Speaker 1: think it really goes A president viscerally got this in 560 00:31:58,080 --> 00:32:00,960 Speaker 1: March when this story broke. I mean, with all the 561 00:32:01,040 --> 00:32:06,680 Speaker 1: critics and the proponents of President Trump, sometimes his energy 562 00:32:07,000 --> 00:32:10,480 Speaker 1: makes things happen, doesn't it. It does, Tom he has 563 00:32:10,600 --> 00:32:14,680 Speaker 1: tremendous energy. And I also would say he's got good instincts. 564 00:32:14,760 --> 00:32:16,560 Speaker 1: I think he has a good finger on the pulse 565 00:32:16,600 --> 00:32:19,560 Speaker 1: of the country. I think that he's very underrated in 566 00:32:19,600 --> 00:32:23,360 Speaker 1: that regard. So Greg talk about having a good pulse 567 00:32:23,520 --> 00:32:26,560 Speaker 1: on the finger on the pulse. You've had a no 568 00:32:26,720 --> 00:32:30,680 Speaker 1: recession call in nineteen You are pretty aggressive. It seems 569 00:32:30,720 --> 00:32:35,000 Speaker 1: like the markets now agree with you. We've heard the 570 00:32:35,040 --> 00:32:40,760 Speaker 1: word frothy come into the discussion. I think that this 571 00:32:40,920 --> 00:32:44,040 Speaker 1: is an overbought market, to say the least. At some 572 00:32:44,080 --> 00:32:46,120 Speaker 1: point people are going to have to realize that things 573 00:32:46,160 --> 00:32:48,800 Speaker 1: don't go straight up. I must say I've been a 574 00:32:48,800 --> 00:32:52,120 Speaker 1: little surprised to hear retail clients start to talk in 575 00:32:52,160 --> 00:32:55,719 Speaker 1: a frothy way. That sometimes can be a warning signal 576 00:32:55,800 --> 00:32:58,360 Speaker 1: that the market is getting a little bit overvalued. What 577 00:32:58,640 --> 00:33:01,160 Speaker 1: does frothy retail me? Does that mean that they're buying 578 00:33:01,200 --> 00:33:04,120 Speaker 1: the extra marginal gift of ali a family, a Tiffany's 579 00:33:04,400 --> 00:33:07,000 Speaker 1: What does that mean? I wish I should be so lucky. 580 00:33:07,040 --> 00:33:10,680 Speaker 1: But no, I think people are not perhaps a where 581 00:33:10,720 --> 00:33:13,760 Speaker 1: the fact that markets can can go down from time 582 00:33:13,800 --> 00:33:17,040 Speaker 1: to time. I would say, this guy's the reason I 583 00:33:17,080 --> 00:33:19,920 Speaker 1: said all year long way I thought the recession was 584 00:33:19,960 --> 00:33:23,360 Speaker 1: not remotely imminent. Comes from Washington. And it's not just 585 00:33:23,480 --> 00:33:27,920 Speaker 1: a FED it's fiscal policy. I've never seen spending like this. 586 00:33:28,080 --> 00:33:30,840 Speaker 1: There's a great editorial this morning in the Wall Street 587 00:33:30,920 --> 00:33:34,360 Speaker 1: Journal on spending. It's totally out of control. In the 588 00:33:34,400 --> 00:33:37,360 Speaker 1: short run, it's good for the economy and the long term, 589 00:33:37,520 --> 00:33:39,720 Speaker 1: we got a lot of debt to finance. Greg, you 590 00:33:39,760 --> 00:33:41,920 Speaker 1: and I we can say this in honor of people 591 00:33:41,960 --> 00:33:45,320 Speaker 1: like Paul Songas and Pete Peterson and the late uh 592 00:33:45,480 --> 00:33:49,120 Speaker 1: Paul Boker as well. We've been talking this for decades. 593 00:33:49,160 --> 00:33:52,800 Speaker 1: I know interest rates are low, but but there's truly 594 00:33:52,840 --> 00:33:55,880 Speaker 1: no breaks on this whatsoever. I mean, what do we 595 00:33:55,920 --> 00:33:59,320 Speaker 1: do in the next budget go around? Well, there's no 596 00:33:59,360 --> 00:34:02,440 Speaker 1: one's scared of this story. Because we were told if 597 00:34:02,480 --> 00:34:05,960 Speaker 1: deficits took off, we'd have high inflation. We didn't. We 598 00:34:05,960 --> 00:34:09,320 Speaker 1: were told if deficits really exploded, we would have a 599 00:34:09,480 --> 00:34:12,960 Speaker 1: lower economic growth. We didn't. So with interest rates of 600 00:34:13,120 --> 00:34:16,280 Speaker 1: this low, it's awfully hard to convince the public anything 601 00:34:16,320 --> 00:34:19,120 Speaker 1: to be worried about. How do we develop a mega, 602 00:34:19,239 --> 00:34:24,239 Speaker 1: ginormous infrastructure bill. If that's where we're coming to, I 603 00:34:24,280 --> 00:34:26,360 Speaker 1: think that we could get one. I think that Trump 604 00:34:26,920 --> 00:34:29,239 Speaker 1: could maybe say some of the money comes from the 605 00:34:29,280 --> 00:34:33,200 Speaker 1: private sector. That's the Wilbur Russ strategy. But I think 606 00:34:33,239 --> 00:34:34,879 Speaker 1: next year it's going to be high on his list 607 00:34:34,880 --> 00:34:39,360 Speaker 1: two things infrastructure number one, Number two tax cuts. Trump 608 00:34:39,400 --> 00:34:41,279 Speaker 1: is going to talk aggressively. You won't get him, I 609 00:34:41,280 --> 00:34:44,080 Speaker 1: don't think, but he's got a great campaign issue. I mean, Paul, 610 00:34:44,120 --> 00:34:46,760 Speaker 1: it's amazing when you think of infrastructure and you divided 611 00:34:46,880 --> 00:34:51,719 Speaker 1: among tunnels to New Jersey airports here there and everywhere, 612 00:34:51,840 --> 00:34:53,880 Speaker 1: and every other bridge that's out there that needs to 613 00:34:53,920 --> 00:34:57,560 Speaker 1: be fixed, I mean trillions, And it's like catnip in 614 00:34:57,640 --> 00:35:00,640 Speaker 1: an election to talk about that. To talk about tax cuts, 615 00:35:00,800 --> 00:35:03,440 Speaker 1: people like hearing about that, whether you can pay for 616 00:35:03,520 --> 00:35:07,080 Speaker 1: it or not, suddenly becomes less relevant. I mean about 617 00:35:07,080 --> 00:35:11,160 Speaker 1: that tax cut from with hindsight, What does your take 618 00:35:11,239 --> 00:35:14,840 Speaker 1: on that? Two quick points. Number one, Yes, there was 619 00:35:14,880 --> 00:35:18,640 Speaker 1: a sugar high for individuals, I get that, but the 620 00:35:18,680 --> 00:35:23,800 Speaker 1: positives for business persist. Lower tax rates, repatriation of earnings, 621 00:35:23,960 --> 00:35:28,279 Speaker 1: very liberal depreciation schedules. All of these tax provisions have 622 00:35:28,440 --> 00:35:32,200 Speaker 1: fueled the rally and continue to fuel the rally. So 623 00:35:32,520 --> 00:35:35,520 Speaker 1: if we have a discussion of another tax cut, would 624 00:35:35,520 --> 00:35:39,000 Speaker 1: this be the quote unquote middle class tax cut because 625 00:35:39,000 --> 00:35:41,319 Speaker 1: the first one wasn't really perceived as a middle class Well, 626 00:35:41,360 --> 00:35:44,680 Speaker 1: good point, Paul, and I think that the only way 627 00:35:44,719 --> 00:35:47,080 Speaker 1: this could have any chance at all of getting through 628 00:35:47,080 --> 00:35:49,920 Speaker 1: the House and Nancy Pelosi would be if it was 629 00:35:49,960 --> 00:35:53,840 Speaker 1: in middle class tax got that raised taxes on corporations 630 00:35:54,000 --> 00:35:56,400 Speaker 1: and the wealthy. That means it would be dead on 631 00:35:56,520 --> 00:35:59,400 Speaker 1: arrival with Republicans. So I think if we're going to 632 00:35:59,480 --> 00:36:02,200 Speaker 1: talk a lot about it, but I don't see anything happening. Greg. 633 00:36:02,200 --> 00:36:04,360 Speaker 1: Thank you so much. We greatly appreciate your time and 634 00:36:04,400 --> 00:36:07,040 Speaker 1: again his morning note must read in all of political 635 00:36:07,080 --> 00:36:10,880 Speaker 1: Wall Street is with the A g F of of Toronto, 636 00:36:10,960 --> 00:36:14,040 Speaker 1: thrilled to Greg Bell could join us. Thanks for listening 637 00:36:14,080 --> 00:36:18,640 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 638 00:36:18,640 --> 00:36:23,880 Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 639 00:36:24,440 --> 00:36:27,799 Speaker 1: I'm on Twitter at Tom Keene Before the podcast, you 640 00:36:27,800 --> 00:36:31,200 Speaker 1: can always catch us worldwide. I'm Bloomberg radio