WEBVTT - Surveillance: Boeing's Rough Year 0:00:00.680 --> 0:00:13.800 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.120 Bloomberg dot Com, and of course on the Bloomberg. What 0:00:32.159 --> 0:00:34.159 we're gonna do here and in a good half hour 0:00:34.400 --> 0:00:36.960 we have Catherine Man with us with City Group is 0:00:37.000 --> 0:00:40.199 to go to her acclaim her fame out of m 0:00:40.200 --> 0:00:42.959 I T and all that she's done in academics and 0:00:43.360 --> 0:00:46.320 dovetails with a story of two thousand nineteen which is 0:00:46.320 --> 0:00:48.879 a trade war. And then we'll talk about the equity 0:00:48.920 --> 0:00:51.240 markets and you know, the US economy and that here 0:00:51.800 --> 0:00:56.800 in in a bit you wrote a classic in you 0:00:56.880 --> 0:01:00.880 read a five with Michael Rosenberg Codependency into Function between 0:01:00.920 --> 0:01:04.200 China and the US two thousand three, two thousand four. 0:01:04.840 --> 0:01:08.280 You're one of the truly one of the experts on this. 0:01:08.720 --> 0:01:12.520 Did you see a trade war coming? I didn't think 0:01:12.560 --> 0:01:15.039 that a trade war was inevitable, um, but I do 0:01:15.160 --> 0:01:18.480 think that, um, there was a definitely a pivot with 0:01:18.520 --> 0:01:21.920 the change in leadership in China, and that pivot was 0:01:22.040 --> 0:01:27.000 towards a more state oriented UH, and move away from 0:01:27.120 --> 0:01:33.120 the objective of more private oriented enterprise running running the economy. UH. 0:01:33.160 --> 0:01:37.039 There was also a pivot away from liberalization of the 0:01:37.120 --> 0:01:40.520 capital account and a less management of the R and B. 0:01:41.240 --> 0:01:45.440 And there was definitely a pivot toward a more UM 0:01:45.560 --> 0:01:51.760 industrial policy strategy towards UM a national development And Paul, 0:01:51.800 --> 0:01:54.320 we see this this morning with whispers out of China 0:01:54.360 --> 0:01:59.120 again of an accommodation in their policies. So, Catherine, this 0:01:59.240 --> 0:02:04.120 move I guess back towards more state control of the economy. 0:02:04.480 --> 0:02:07.760 This is tied to mr G. Is this long term trend? 0:02:07.840 --> 0:02:09.680 Do you think? Is this something because it seems like 0:02:09.720 --> 0:02:12.600 China was moving more towards market economy is a little 0:02:12.600 --> 0:02:14.960 bit on the margin. Are you now shifting back and 0:02:14.960 --> 0:02:17.839 you think that's permanent? Well, I think it's hard to 0:02:18.000 --> 0:02:22.320 make a judgment about permanence, but UM. I think the 0:02:22.400 --> 0:02:26.280 what's what's most interesting to think about is the question 0:02:26.360 --> 0:02:30.520 of does UH does a heavily managed direct approach to 0:02:31.360 --> 0:02:36.919 UM becoming a frontier innovator along the dimensions that they 0:02:36.960 --> 0:02:39.359 want to which is the man, you know, the manufacturing? 0:02:42.160 --> 0:02:45.520 Can you do that with state direction? I think that's 0:02:45.560 --> 0:02:48.480 really the most interesting question. It's always been a question 0:02:48.480 --> 0:02:51.400 about industrial policy. How much state intervention, whether it be 0:02:51.480 --> 0:02:54.560 a market economy or not, UM, how much data intervention 0:02:54.680 --> 0:02:58.240 can get you to the frontier of innovation? And so 0:02:58.280 --> 0:03:01.679 I think that's what is up for grabs here, UM. 0:03:01.880 --> 0:03:04.880 And I think it's the evidence in the past has 0:03:04.919 --> 0:03:09.200 been that, UM, if you're not at the frontier, state 0:03:09.240 --> 0:03:12.959 intervention can can get you there, because you know, what 0:03:13.000 --> 0:03:15.519 you're trying to get to. The frontier is at somebody 0:03:15.520 --> 0:03:17.680 else is in front of you. UM. But can you 0:03:17.840 --> 0:03:20.680 actually break through the frontier? Can you make the frontier 0:03:20.720 --> 0:03:24.520 as a state state direction? That the evidence on that 0:03:24.600 --> 0:03:27.840 is much more limited, right, is it? So as we 0:03:28.440 --> 0:03:31.639 change our attack under this administration to more a bilateral 0:03:31.680 --> 0:03:34.839 negotiation between the US and China, what is your thought 0:03:34.880 --> 0:03:37.680 on that versus what had been the trend I think 0:03:37.720 --> 0:03:40.600 prior to that for a period of time of multilateral 0:03:40.600 --> 0:03:42.920 engagement with China is what do you think one is 0:03:43.040 --> 0:03:46.480 better than the other? Well? I think this this administration 0:03:46.560 --> 0:03:50.800 has gone bilateral in every single negotiation that it has 0:03:50.840 --> 0:03:53.240 been involved with, even U s m c A was 0:03:53.320 --> 0:03:58.720 ultimately broken up into two bilateral discussions and negotiations ZOM 0:03:58.720 --> 0:04:03.280 there is no question that multilateral trade negotiations are superior 0:04:03.400 --> 0:04:08.120 to bilateral UM. Bilateral are one off, one off deals, 0:04:08.600 --> 0:04:12.640 and UM, we are a global economy. UM. We're kind 0:04:12.680 --> 0:04:15.560 of eroding away from that right now, but but ultimately 0:04:16.320 --> 0:04:18.960 it is better if we are a global economy and 0:04:19.560 --> 0:04:25.000 UH you have market opening across all different economies. UH. 0:04:25.160 --> 0:04:29.080 And that's where you get the benefits of the greatest variety, 0:04:29.200 --> 0:04:33.080 the biggest scale, the lowest prices, UM, and the more 0:04:33.680 --> 0:04:36.840 value change that creates the greatest productivity. What you end 0:04:36.920 --> 0:04:39.920 up with bilateral negotiations. And this has been well known 0:04:40.480 --> 0:04:43.360 for quite some time. Job just Bug Waddy called it, 0:04:43.720 --> 0:04:48.120 probably twenty years ago spaghetti bowl. A spaghetti bowl where 0:04:48.760 --> 0:04:50.960 the rules of origin because remember, if it's a bilateral 0:04:51.000 --> 0:04:53.440 trade negotiation, you have to have rules of origin to 0:04:53.520 --> 0:04:57.040 identify who's in and who's out of of a deal. 0:04:57.520 --> 0:05:02.960 And those costs of rules of origin UM are extremely 0:05:03.000 --> 0:05:06.640 expensive for companies to abide by. So you're raising the 0:05:06.800 --> 0:05:11.480 cost of doing trade, of engaging in trade when it's 0:05:11.520 --> 0:05:14.479 done on a bilateral basis. And with regard to China 0:05:14.560 --> 0:05:18.760 in particular, UM, the issue that I'm most concerned about 0:05:19.040 --> 0:05:22.200 is the with withdrawal. The US is sort of taking 0:05:22.200 --> 0:05:27.600 an approach of withdrawing, breaking up that relationship, withdrawing and 0:05:27.720 --> 0:05:31.599 becoming more national focused, and that takes away you know, 0:05:31.640 --> 0:05:34.920 that creates a situation where China can go into all 0:05:34.920 --> 0:05:37.760 of the other markets that the US is seceding from. 0:05:37.920 --> 0:05:39.839 Let's take this to what you do it sitting up, 0:05:39.880 --> 0:05:43.080 which is advised your institution and your business relationships every 0:05:43.120 --> 0:05:45.840 day on this and folded and also with Paul Sweeney 0:05:45.839 --> 0:05:49.920 and when Bloomberg Intelligence is doing worldwide. The gambit here 0:05:50.040 --> 0:05:53.480 is phonies like me fly to Hong Kong. I land 0:05:53.480 --> 0:05:55.479 at the airport, I get in a fancy car, I 0:05:55.520 --> 0:05:57.200 go to the hotel, I go to the office at 0:05:57.240 --> 0:06:00.400 hotel office hotel, I get back in the car, come 0:06:00.400 --> 0:06:02.640 back home, and I say I went to China. I 0:06:02.680 --> 0:06:05.359 mean that's the truth, and folks trust me. I didn't 0:06:05.360 --> 0:06:08.719 go to China. The real world for City Group clients 0:06:09.240 --> 0:06:11.400 is maybe they go to Hong Kong and then an 0:06:11.400 --> 0:06:14.080 hour later they're on a plane to cheng Do. Is 0:06:14.120 --> 0:06:18.679 that broken in this trade war, that that business relationship 0:06:18.800 --> 0:06:24.320 of American businesses with their China equivalence, Well, that's certainly 0:06:24.480 --> 0:06:28.840 part of the objective is to um break the value 0:06:28.920 --> 0:06:32.160 chains that have been put into place between by US 0:06:32.240 --> 0:06:35.920 business in order to produce for China or to use 0:06:36.000 --> 0:06:39.400 China as a production platform for back to the United 0:06:39.440 --> 0:06:42.760 States or for other markets. And so the objective of 0:06:42.760 --> 0:06:45.359 of the of the trade war is in a tariffs 0:06:45.360 --> 0:06:49.080 in particular, or to make it very costly to do that. Now, 0:06:49.120 --> 0:06:52.000 what companies are doing is um you know, some of 0:06:52.040 --> 0:06:54.640 them already had kind of in their in their desk 0:06:54.720 --> 0:06:58.039 drawer the plan for moving away from China when it 0:06:58.040 --> 0:07:01.640 became more more expensive to to to produce there, and 0:07:01.640 --> 0:07:03.520 they've taken those out of the desk door, and they've 0:07:03.600 --> 0:07:07.800 and they've started. Yeah they're flying the heno exactly or 0:07:07.920 --> 0:07:11.000 or you know, yeah exactly. So ket I mean give 0:07:11.040 --> 0:07:13.920 us a sense that it appears that we're moving towards 0:07:13.960 --> 0:07:16.320 if I can be sorry for the latest tweet kind 0:07:16.360 --> 0:07:18.840 of a phase one type of deal. Is this much 0:07:18.840 --> 0:07:21.840 ado about nothing, because until we get the phase two 0:07:21.880 --> 0:07:24.240 or phase three, this is kind of just soybeans going 0:07:24.280 --> 0:07:28.400 back and forth. The phase one deal um looks a 0:07:28.400 --> 0:07:31.920 lot like what was on the table in May um 0:07:32.040 --> 0:07:35.160 and of course that did not that fell apart. So 0:07:35.360 --> 0:07:39.160 UM we're we're we're cautiously optimistic as a team that 0:07:39.240 --> 0:07:45.000 there will be something signed, but that it's implications are limited, 0:07:45.600 --> 0:07:50.120 very limited. Um, you know, and and the are the 0:07:50.240 --> 0:07:52.280 argument that it's the first of a of a set 0:07:52.320 --> 0:07:56.600 of of of broader relationships and broader negotiations. I think 0:07:56.600 --> 0:07:59.520 it's way too early to come to that conclusion because 0:07:59.560 --> 0:08:01.800 the hard stuff is still the stuff that's on the table. 0:08:01.960 --> 0:08:05.239 Katherine Man City Group, I, I really, I really can't 0:08:05.240 --> 0:08:08.560 say enough. It's just a few years ago. She was 0:08:08.600 --> 0:08:11.960 just out of m I T at the time. Is 0:08:12.000 --> 0:08:15.440 a trade deficit sustainable? It's still worth reading today and 0:08:15.920 --> 0:08:19.480 a primer for all, including a possibly the gentleman at 0:08:19.480 --> 0:08:33.199 six Pennsylvania Avenue. Kit Jukes was with us during the 0:08:34.080 --> 0:08:38.560 goodness of Prime Minister Johnson, that extraordinary election that we 0:08:38.600 --> 0:08:41.240 saw with the Prime Minister and the shifts for the 0:08:41.320 --> 0:08:43.640 ninety Kingdom. Now on this day we'll talk to Mr 0:08:43.720 --> 0:08:47.880 Jukes society general about a bigger, broader picture as well. Kid, 0:08:47.880 --> 0:08:49.880 I want to go back to Ken Rogoff when he 0:08:49.960 --> 0:08:52.120 was on the watch at the I m F did 0:08:52.200 --> 0:08:55.520 all sorts of research with the team on fixed versus 0:08:55.640 --> 0:09:01.040 floating or even fixed it's abandoned currency versus folding. How 0:09:01.120 --> 0:09:05.440 different is your study of dollar ran mimbi If it's 0:09:05.480 --> 0:09:08.120 a floating dollar in a sort of kind of like 0:09:08.280 --> 0:09:11.720 fixed ran mimbi, How does that change your study? I 0:09:11.760 --> 0:09:14.000 think it changes everything when when look when you've got 0:09:14.040 --> 0:09:18.520 if you if you reckon that of world trade is 0:09:18.520 --> 0:09:22.880 is United States, China, and Europe. If you have a 0:09:22.960 --> 0:09:27.000 fixed or pretty fixed relationship between two of those parties, 0:09:27.280 --> 0:09:30.400 it locks down one side of the world. If all 0:09:30.520 --> 0:09:33.840 three float freely against each other, we we live in 0:09:33.840 --> 0:09:35.840 a We live in a world where all the other 0:09:35.880 --> 0:09:40.720 currencies orbit to different degrees around each of those three currencies, 0:09:41.040 --> 0:09:43.199 and it makes it more difficult. But it also means 0:09:43.240 --> 0:09:45.560 that we have to we have to understand and the 0:09:45.559 --> 0:09:49.160 one we understand least well is the Chinese unts because 0:09:49.320 --> 0:09:52.679 as it moves more, as it floats more freely but 0:09:52.720 --> 0:09:55.760 not completely freely, what we're faced with is we we 0:09:55.840 --> 0:10:00.160 get far less information about monetary policy, about current c 0:10:00.320 --> 0:10:03.560 policy from the Chinese than we do with the bombardments 0:10:03.600 --> 0:10:06.319 on policy that we get in Europe and in the 0:10:06.400 --> 0:10:08.880 United States. So we we kind of have to work 0:10:08.920 --> 0:10:11.400 it out for ourselves. But that you know, in terms 0:10:11.400 --> 0:10:15.160 of its share of world trade and influence on the 0:10:15.200 --> 0:10:17.640 currencies on the economies of the rest of the world. 0:10:17.920 --> 0:10:20.760 Make no mistake, the Chinese un is as important as 0:10:20.760 --> 0:10:23.320 the Euro or the U. S. Dollar now, and in 0:10:23.360 --> 0:10:26.880 some ways more important because because we understand it less well. 0:10:27.320 --> 0:10:30.040 So Kick, can you give us a bear case for 0:10:30.280 --> 0:10:33.959 the US dollar? I have not heard one. The bear 0:10:34.040 --> 0:10:35.640 case for you, as dollar is that there's a certain 0:10:35.679 --> 0:10:39.000 amount of complacency about the U. S. Economy, so that 0:10:39.040 --> 0:10:40.840 the best thing that could happen to it next year 0:10:41.200 --> 0:10:44.319 is it does about as well as people expect and 0:10:44.360 --> 0:10:48.040 continues at the current kind of gradually slowing pace. So 0:10:48.080 --> 0:10:51.080 the consensus is something like one percent growth next year, 0:10:51.280 --> 0:10:53.760 and the Fed does not very much of anything through 0:10:53.800 --> 0:10:57.440 that period. The bear cases that the earning cycle has 0:10:57.640 --> 0:11:00.560 clearly turned down, and as that continue used to be 0:11:00.840 --> 0:11:04.200 the most important thing driving or creating an economic cycle, 0:11:04.520 --> 0:11:06.600 the dangers are all to the down side. That that's 0:11:06.640 --> 0:11:08.959 the economic case. The other side of this, frankly, is 0:11:09.000 --> 0:11:11.679 the dollar is just about as expensive in real trade 0:11:11.679 --> 0:11:15.560 weighted terms as it can usefully get, and so two 0:11:15.600 --> 0:11:17.719 things can happen. It can stay here or it can 0:11:17.800 --> 0:11:21.760 weaken getting significantly stronger is going to be really difficult, 0:11:21.920 --> 0:11:24.600 or you're predicting that we stay here. I mean, you know, 0:11:24.640 --> 0:11:27.120 I'll be honest, folks, A strong dollar call this year 0:11:27.160 --> 0:11:30.200 has been just stay here, and that's been very against 0:11:30.240 --> 0:11:32.760 consensus as well. What's your call for next year? Is 0:11:32.800 --> 0:11:35.400 it stay here? My call for next year is that 0:11:35.440 --> 0:11:38.040 the dollar will do better than the Chinese un and 0:11:38.120 --> 0:11:40.920 the Euro will do better than both of them, and 0:11:40.960 --> 0:11:42.920 the yen will do better than all. What does a 0:11:43.040 --> 0:11:47.599 stronger euro do to your European GDP and European exports 0:11:47.640 --> 0:11:50.679 being so open, it doesn't help, so it won't go 0:11:50.760 --> 0:11:54.200 up very much. The context again is that if you 0:11:54.240 --> 0:11:57.440 think that since the creation of the euro, the euro 0:11:57.559 --> 0:12:01.040 has traded a little bit below purchasing our parity against 0:12:01.040 --> 0:12:03.640 the dollar against the sort of the calculation then based 0:12:03.640 --> 0:12:06.120 on just stuff we buy in the shops, that level 0:12:06.200 --> 0:12:09.120 is one thirty six. Now, so I know, folks who 0:12:09.200 --> 0:12:12.160 think that fair value for euro dollar is one thirty five, 0:12:12.679 --> 0:12:15.600 we are barely above one ten. We are the best 0:12:15.640 --> 0:12:19.720 part of below that level at the moment. I don't 0:12:19.800 --> 0:12:22.720 think that if the interest rate differential between the US 0:12:22.760 --> 0:12:26.040 and Europe narrow, as if the bondial differential narrowers to 0:12:26.120 --> 0:12:29.720 any significant degree. I don't think we can stay here forever. 0:12:29.960 --> 0:12:32.680 I don't think the Europeans will like it but for 0:12:32.760 --> 0:12:36.079 one minute. But I think that the balance of of 0:12:36.880 --> 0:12:41.680 relative economic performance is just beginning to shift in its favor. 0:12:41.760 --> 0:12:43.640 It's not gonna so if it if it makes it 0:12:43.720 --> 0:12:47.040 to one twenty, that that's making it less than half 0:12:47.080 --> 0:12:49.760 the way back from from where someone might think that 0:12:49.800 --> 0:12:51.840 fair value should be. We need a different way to 0:12:51.840 --> 0:12:54.080 think about fair value in that sense because the Chinese 0:12:54.160 --> 0:12:56.280 u and played such a big role. But but it's 0:12:56.360 --> 0:12:59.560 the it's again this piece that it's not inconceivable that 0:12:59.640 --> 0:13:01.760 once that move happens, that it happens more in the 0:13:01.760 --> 0:13:03.840 second half of next year than the first half, that 0:13:03.920 --> 0:13:07.280 it's slow, and that we spend most time just waiting 0:13:07.280 --> 0:13:10.360 on the US economy and the European economy, which is 0:13:10.440 --> 0:13:13.640 which is less volatile than the US, just does a 0:13:13.640 --> 0:13:17.079 little bit more miserably slowly. That the game changer that 0:13:17.080 --> 0:13:20.280 that could be could come but isn't necessarily going to come, 0:13:20.600 --> 0:13:22.760 is if the Europeans wake up one morning and realize 0:13:22.800 --> 0:13:25.160 that easing fiscal policies about the most sensible thing they 0:13:25.160 --> 0:13:27.880 could do at any point in time, but right now 0:13:28.000 --> 0:13:32.479 especially so. Kid. I'm looking at my chart here, basically 0:13:33.000 --> 0:13:36.760 just a one year chart for the sterling. I'm actually 0:13:36.800 --> 0:13:39.320 surprised as we pulled back down below one to thirty 0:13:39.360 --> 0:13:42.360 that we didn't get a more stained move above one 0:13:42.440 --> 0:13:45.240 thirty and holding above one thirty, maybe even moving higher 0:13:45.280 --> 0:13:48.559 on the Brexit. Where do you think Sterling trades here 0:13:48.600 --> 0:13:51.080 and what's kind of the key determinant. I think the 0:13:51.160 --> 0:13:53.800 key determinant of Westerning trades against the dollar next year 0:13:53.880 --> 0:13:56.959 will be where the Euro trades against the dollar. I 0:13:57.000 --> 0:14:00.320 think Sterling is now going to be much quieter against 0:14:00.400 --> 0:14:03.280 the Euro. And remember the the you know, the UK, 0:14:03.679 --> 0:14:06.280 despite everything, does much much, much more trade with Europe 0:14:06.280 --> 0:14:08.400 than with the United States. So it's it's what happens 0:14:08.440 --> 0:14:10.600 to the Euro that really matters. In other words, we 0:14:10.640 --> 0:14:13.640 can get we can get to one forty against the 0:14:13.679 --> 0:14:16.760 dollar if the Euro can get to one twenty against 0:14:16.760 --> 0:14:18.920 the dollar. But if if the Euro states here, we're 0:14:18.920 --> 0:14:20.520 just not going to go up much against the dollar. 0:14:20.800 --> 0:14:23.280 Otherwise we'd have to take the level against the Euro 0:14:23.840 --> 0:14:26.440 back to the kind of place we were at before 0:14:26.480 --> 0:14:29.240 this referendum, and the referendum is not going to go away. 0:14:29.520 --> 0:14:32.120 We might we might conceivably get a clean exit, but 0:14:32.120 --> 0:14:33.720 we're not going to put this back and never do it. 0:14:34.240 --> 0:14:36.720 Tell us about and this was a news item last week. 0:14:36.760 --> 0:14:39.680 Focus is sort of esoteric on Monday before the holiday season. 0:14:39.720 --> 0:14:43.960 But we'll go Lancashine. You. Sweden has a unique central 0:14:44.000 --> 0:14:48.640 bank experiment. They have a history of this, certainly going 0:14:48.680 --> 0:14:50.960 back to the Glory and Risk of nineteen ninety two. 0:14:51.040 --> 0:14:54.520 The sweat, I should say of nineteen ninety two is 0:14:54.520 --> 0:14:58.320 there a way Kitchuks to play the courage of Sweden 0:14:58.360 --> 0:15:02.720 where they say enough negative interest rates um. I think 0:15:02.720 --> 0:15:04.800 the weight of play it was was possibly to do 0:15:04.840 --> 0:15:07.160 it in advance of of when they did it, so 0:15:07.440 --> 0:15:09.320 that the Swedish Crowner had a big run when they 0:15:09.320 --> 0:15:11.200 first indicated that they were going to get interest rates 0:15:11.240 --> 0:15:14.520 back to zero. The probability now is that having gone 0:15:14.560 --> 0:15:17.960 from negative rates to zero rates, they stay at zero 0:15:18.120 --> 0:15:20.920 for a really long time and something has to change 0:15:20.960 --> 0:15:23.800 in the economy. Again. That the key here is, and 0:15:24.280 --> 0:15:27.280 I think they're they're an incredibly important lesson for everywhere. 0:15:27.320 --> 0:15:30.840 But the key here is, once you accept that negative 0:15:30.840 --> 0:15:34.960 interest rates have um, negative connotations for the economy that 0:15:34.960 --> 0:15:37.120 they're not just a win win, and they're definitely not 0:15:37.160 --> 0:15:39.360 just a win win for the economy. Then you have 0:15:39.560 --> 0:15:42.600 to be prepared to use fiscal policy as a tool 0:15:42.680 --> 0:15:45.360 for helping drive the economy and the short medium term 0:15:45.400 --> 0:15:47.800 in a way you didn't before. What you learn from 0:15:47.800 --> 0:15:52.040 Swiss from Sweden is if easier fiscal policy takes on 0:15:52.160 --> 0:15:55.440 as a as a fashion acround the world outside the 0:15:55.560 --> 0:15:59.360 United States, the Swedish trining will fly more likely. To 0:15:59.440 --> 0:16:01.160 my money, it's not the Swedes that will be the 0:16:01.160 --> 0:16:03.240 ones that these fiscal policy. It will be somebody else 0:16:04.040 --> 0:16:06.880 right now though, um I guess that the trade that 0:16:06.920 --> 0:16:08.920 I would like is is that the Norwegian croner is 0:16:08.960 --> 0:16:12.320 catching up on Swedish crona strength pretty quickly, and I 0:16:12.320 --> 0:16:14.920 would rather own the Norwegian croner than switch coroner. But 0:16:14.920 --> 0:16:17.480 but but the lesson from Sweden is it's all about 0:16:17.480 --> 0:16:21.320 fiscal policy in well have to well some are do 0:16:21.400 --> 0:16:24.120 we have Mr Jukes scheduled for January, we have to 0:16:24.160 --> 0:16:26.600 we have to drive forward that conversation very he was 0:16:26.640 --> 0:16:30.040 a very needge of m Mt Jukes. Thank you so 0:16:30.120 --> 0:16:32.920 much with such oh is just a wonderful help with 0:16:33.000 --> 0:16:45.920 us with perspective this year as well, Boeing coming out 0:16:45.960 --> 0:16:48.640 with the press release and management changes. David Calhoun named 0:16:48.680 --> 0:16:53.240 president and CEO Lawrence Kellner to become chairman of the board. Uh. 0:16:53.280 --> 0:16:55.600 They're saying new leadership to bring me nude commitment to 0:16:55.680 --> 0:16:59.680 transparency and better communication with regulators and customers in safety. 0:16:59.680 --> 0:17:02.720 So a change at the top at the top, Tom here, Uh, 0:17:02.800 --> 0:17:05.280 new CEO. Let's bring on a good friend, George ferguson 0:17:05.280 --> 0:17:08.959 Bloomberg Intelligence. He follows abobing and all things aerospace. George, 0:17:09.000 --> 0:17:11.240 does this surprise? You were getting a new leadership here 0:17:11.280 --> 0:17:15.760 the CEO out, new CEO in no, I think, Uh, 0:17:16.480 --> 0:17:18.040 you know, we we thought maybe it would take a 0:17:18.080 --> 0:17:20.679 little bit longer without bowing, might try to put the 0:17:21.000 --> 0:17:24.720 Max back in service before they changed leadership. But so 0:17:24.800 --> 0:17:26.760 it doesn't surprise. It's just maybe a little bit earlier 0:17:26.800 --> 0:17:30.880 than we expected. So, George, I mean, I guess when 0:17:30.880 --> 0:17:32.960 we look back on this with hindsight, you know, over 0:17:32.960 --> 0:17:37.480 the past year, it really does seem like management either 0:17:37.600 --> 0:17:40.920 didn't really understand the scope of the problem, didn't manage 0:17:40.920 --> 0:17:43.639 the parties, whether it's the f a A, whether it's investors, 0:17:43.640 --> 0:17:46.800 whether it's you know, it's competitors and customers. What do 0:17:46.880 --> 0:17:49.800 you think was the real undoing here or the real 0:17:49.840 --> 0:17:53.280 mistake from Boeing? You know, I mean we had seen 0:17:53.520 --> 0:17:56.240 I would say, a distinctive change in the way Bowing 0:17:56.880 --> 0:18:01.720 communicated to all kinds of constitution in sees with with 0:18:01.800 --> 0:18:07.000 Dennis Fellenberg, and I think that, um, that didn't help 0:18:07.119 --> 0:18:10.159 during the during the crisis, I think they had become 0:18:10.760 --> 0:18:14.760 they've provided less information. Uh, you know, they got much 0:18:14.760 --> 0:18:17.440 tighter with everything they I think there was a little 0:18:17.480 --> 0:18:20.399 bit of you know, feeling that they were at the 0:18:20.440 --> 0:18:22.399 top of their game, things were going great, and they 0:18:22.400 --> 0:18:25.040 didn't have to give all this information and I think 0:18:26.040 --> 0:18:28.159 I think that that hurt them ribly in this in 0:18:28.200 --> 0:18:31.840 this uh, in these latest problems. George David Calhoun is 0:18:31.880 --> 0:18:34.560 a uniquely qualified guy for this. Not only was this 0:18:34.720 --> 0:18:37.040 relationship to Wall Street and private equity in the black 0:18:37.040 --> 0:18:39.119 Stone Group, but I'm really going to go to what 0:18:39.200 --> 0:18:41.840 I learned in an interview years ago that the pros 0:18:41.960 --> 0:18:46.800 look at an airplane is engines with a fuselage attached, 0:18:46.920 --> 0:18:50.440 which I really didn't understand. And he has as a 0:18:50.480 --> 0:18:57.000 business executive the working knowledge of general electrics airplane engine business. 0:18:57.680 --> 0:19:03.280 Describe his impetencies on engines, which are the clearly part 0:19:03.359 --> 0:19:07.480 of the tragedy of these two plane crashes. What unique 0:19:07.560 --> 0:19:11.639 skills does he bring after his work with with Caterpillar 0:19:11.720 --> 0:19:14.200 and that and his work with black Stone and particularly 0:19:14.240 --> 0:19:19.359 with ges aircraft business. I mean, ge is so deep 0:19:19.400 --> 0:19:24.080 into the aviation business right in the the engine business, 0:19:24.080 --> 0:19:26.760 and I think that just means that he has a 0:19:26.840 --> 0:19:31.679 very good understanding of of the industry obviously had he 0:19:31.720 --> 0:19:34.960 has some great experience um and I just think that 0:19:35.119 --> 0:19:39.439 gives him executes and think quite quite well for I 0:19:39.440 --> 0:19:42.600 think all the for all the abuse I'd say gees 0:19:42.680 --> 0:19:45.800 getting in the marketplace as it as it restructures itself 0:19:46.720 --> 0:19:49.560 on the aircraft side, I think it's been an outstanding 0:19:49.600 --> 0:19:53.119 executor and so I think he brings that that skill 0:19:53.160 --> 0:19:56.359 set to Boeing. The interesting thing though, is that we 0:19:56.480 --> 0:20:00.719 just let a ge guy go at bowing commercial airplanes, right. 0:20:00.760 --> 0:20:03.960 McAlister was running commercial airplanes and he just went out 0:20:03.960 --> 0:20:05.480 the door. So we had a guy go out the 0:20:05.480 --> 0:20:08.320 door as well. But what's topic, I mean, George, what's 0:20:08.359 --> 0:20:10.600 so good about your skill set? As you actually know 0:20:10.680 --> 0:20:14.760 the operational skill sets of this company and this company 0:20:14.840 --> 0:20:17.720 in crisis. What's this to do list today? Is he 0:20:17.800 --> 0:20:21.240 supposed to speak to employees? Is he supposed to speak 0:20:21.240 --> 0:20:23.959 to the f A A. I mean, what's what's the 0:20:24.000 --> 0:20:27.400 immediate to do list for Mr Calhoun? Is it replaces 0:20:27.520 --> 0:20:31.400 Mr Muhlenberg. Yeah, I think he has to. I think 0:20:31.400 --> 0:20:32.960 he has to get with the f A A and 0:20:32.960 --> 0:20:37.000 and repair that relationship as quickly as possible. Right, I 0:20:37.040 --> 0:20:39.879 think really they need the f A to review the 0:20:39.920 --> 0:20:43.000 MAX and help get it back into service as soon 0:20:43.040 --> 0:20:45.480 as possible. They need to go to the f A 0:20:45.600 --> 0:20:48.840 and and and just be ready to support them in 0:20:48.920 --> 0:20:51.760 that effort and make sure that that's that's an absolutely 0:20:51.760 --> 0:20:55.720 positive relationship because so key to this company's future is 0:20:56.320 --> 0:20:58.920 getting that MAX back into the air and getting things 0:20:59.000 --> 0:21:01.119 moving again. Paul, I want to be careful in the 0:21:01.160 --> 0:21:05.200 headlines here, Mr Calhoun is joining Boeing as CEO January, 0:21:06.720 --> 0:21:10.000 and in the in the in the the headlines following on, 0:21:10.359 --> 0:21:14.640 Mr Greg Smith will serve as interim CEO. Right, Okay, 0:21:14.640 --> 0:21:18.840 we had Mr Mullenberg actually resigning, So George, it's interesting 0:21:18.880 --> 0:21:21.239 here just give us a sense of the state of 0:21:21.280 --> 0:21:23.560 the relationship between Boeing and the regulators. I mean, it 0:21:23.600 --> 0:21:26.920 seemed like for decades, if not for all time, it 0:21:26.960 --> 0:21:30.680 was a very strong, close working relationship. What happened, well, 0:21:30.680 --> 0:21:34.600 I mean, I mean, the regulators clearly have um, you know, 0:21:34.640 --> 0:21:37.520 the reputations had tarnished through this whole seven thirty seven 0:21:37.560 --> 0:21:43.600 Max problem, and and it seemed like Dennis and the 0:21:43.640 --> 0:21:46.000 regulators weren't on the same sheet of music because you know, 0:21:46.040 --> 0:21:48.080 we well we don't get a lot of information for 0:21:48.280 --> 0:21:51.240 that relationship was working. You know, we we all heard 0:21:51.240 --> 0:21:53.159 that he had sort of got called to Washington to 0:21:53.240 --> 0:21:55.680 talk to the regulator a couple of weeks ago and 0:21:55.720 --> 0:21:58.280 asked not to give timetables for when the MAX was 0:21:58.320 --> 0:22:01.160 going back into service. I would have thought he would 0:22:01.160 --> 0:22:03.480 have been coordinating that with the f a A and 0:22:03.560 --> 0:22:07.600 making sure that you know, they're they're both of their 0:22:07.680 --> 0:22:10.040 views for how the process would work for getting the 0:22:10.119 --> 0:22:12.760 MAX into the air were in sync. And I think 0:22:12.800 --> 0:22:15.960 that was very surprising to me, all Right. I would 0:22:15.960 --> 0:22:17.879 have thought the f a A A would have been looking 0:22:17.880 --> 0:22:21.199 over Boeing shoulder as they went through all of the 0:22:21.280 --> 0:22:24.680 fixes to the MAX. So even though they need they 0:22:24.680 --> 0:22:26.800 need to be able to sign off on it, you know, 0:22:26.840 --> 0:22:29.720 from an f A standpoint is being safe. They could 0:22:29.720 --> 0:22:33.040 have seen the process and been provided some level of 0:22:33.080 --> 0:22:36.200 comfort in that. And it seems like we're still three 0:22:36.240 --> 0:22:38.880 months away from getting this airplane back in the air. Well, 0:22:38.920 --> 0:22:42.720 that's let me frame this again. With David Calhoun taking 0:22:43.440 --> 0:22:45.960