1 00:00:09,720 --> 00:00:12,880 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keen with 2 00:00:13,560 --> 00:00:16,520 Speaker 1: David Gura. Daily we bring you insight from the best 3 00:00:16,560 --> 00:00:22,279 Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance 4 00:00:22,320 --> 00:00:27,000 Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 5 00:00:27,320 --> 00:00:34,240 Speaker 1: on the Bloomberg. Kevin Logan with us here this morning. 6 00:00:34,240 --> 00:00:37,680 Speaker 1: First off, Kevin Logan, chief US Economists at hs b C. 7 00:00:37,920 --> 00:00:39,840 Speaker 1: Let's start with the jobs report. We got those numbers 8 00:00:39,880 --> 00:00:42,199 Speaker 1: on Friday, of course, much ballyhood, and we treated them 9 00:00:42,200 --> 00:00:44,880 Speaker 1: as such on Friday as they crossed the Bloomberg given 10 00:00:44,960 --> 00:00:47,280 Speaker 1: Picking through the numbers, what stood out to you, Kevin, 11 00:00:48,000 --> 00:00:50,560 Speaker 1: The first thing that stood out was the how little 12 00:00:50,600 --> 00:00:53,000 Speaker 1: reaction there was in financial markets. I mean, I'll talk 13 00:00:53,000 --> 00:00:55,040 Speaker 1: about the data in a moment, but when we get 14 00:00:55,080 --> 00:00:57,760 Speaker 1: a good, solid report like that, you might think there'd 15 00:00:57,800 --> 00:00:59,840 Speaker 1: be more of a reaction. But in fact, there was 16 00:00:59,880 --> 00:01:03,200 Speaker 1: a modest moving the bond market. The dollar reacted, of course, 17 00:01:03,240 --> 00:01:05,280 Speaker 1: by strengthening a bit. When we look at the charts, 18 00:01:05,360 --> 00:01:07,960 Speaker 1: you look back one day and say, where was it. 19 00:01:07,959 --> 00:01:09,839 Speaker 1: It didn't seem like it was the kind of market 20 00:01:09,840 --> 00:01:12,840 Speaker 1: moving event that we've become accustomed to. Over the year, 21 00:01:12,880 --> 00:01:15,360 Speaker 1: but most of the market moving events have been political. 22 00:01:15,760 --> 00:01:18,200 Speaker 1: As for the data itself, it simply showed that the 23 00:01:18,240 --> 00:01:21,400 Speaker 1: economy is continuing to move along with a steady pace 24 00:01:21,520 --> 00:01:24,319 Speaker 1: of growth and employment and likely a steady pace in 25 00:01:24,360 --> 00:01:26,840 Speaker 1: the growth of GDP, a pick up from last year, 26 00:01:26,880 --> 00:01:30,039 Speaker 1: though that's important to recognize. Last year the economy did 27 00:01:30,120 --> 00:01:32,920 Speaker 1: really slow and the unemployment rate barely changed. The one 28 00:01:32,959 --> 00:01:35,240 Speaker 1: from four point nine to four point eight over the 29 00:01:35,240 --> 00:01:37,680 Speaker 1: course of two thousand sixteen. Now this year is now 30 00:01:37,760 --> 00:01:40,479 Speaker 1: the four point three percent. We're doing much better this year. 31 00:01:40,720 --> 00:01:43,400 Speaker 1: Now the total growth in jobs is about the same, 32 00:01:43,800 --> 00:01:46,760 Speaker 1: but uh, we're reaching deeper into the labor market and 33 00:01:46,800 --> 00:01:50,240 Speaker 1: that's driving down the unemployment rate. What's very interesting about 34 00:01:50,240 --> 00:01:53,240 Speaker 1: this though, it hasn't really pushed up wages yet. I mean, 35 00:01:53,640 --> 00:01:56,320 Speaker 1: we haven't seen that acceleration, which means that there's still 36 00:01:56,360 --> 00:01:58,520 Speaker 1: some slack, there's still some room in the labor market 37 00:01:58,560 --> 00:02:00,840 Speaker 1: for growth. In my opinion, we're just not seeing the 38 00:02:00,920 --> 00:02:03,040 Speaker 1: kind of pressure that you expect when you're getting close 39 00:02:03,080 --> 00:02:05,280 Speaker 1: to full employment. That Kevin, there's a there's a ritual 40 00:02:05,320 --> 00:02:07,240 Speaker 1: to this, or there has been. Over these last few months. 41 00:02:07,240 --> 00:02:10,000 Speaker 1: We get these job numbers and there's the same concern 42 00:02:10,760 --> 00:02:14,000 Speaker 1: over why there hasn't been more wage growth. I imagine 43 00:02:14,000 --> 00:02:16,480 Speaker 1: that you share that concern. What's what's the path forward here? 44 00:02:16,480 --> 00:02:17,920 Speaker 1: What's going to change that? Do you think if we've 45 00:02:17,919 --> 00:02:20,280 Speaker 1: got any more insight into into what could it could 46 00:02:20,280 --> 00:02:22,080 Speaker 1: cause way just to go out? Well, we did. We 47 00:02:22,200 --> 00:02:26,960 Speaker 1: do have some insight, uh, particularly on the the structure 48 00:02:27,000 --> 00:02:29,680 Speaker 1: of the labor market and it's composition. What we're seeing 49 00:02:29,760 --> 00:02:34,160 Speaker 1: is that more lower wage jobs are being are being created, 50 00:02:34,800 --> 00:02:37,839 Speaker 1: More people are entering the labor force who have were 51 00:02:37,840 --> 00:02:41,400 Speaker 1: not college educated. And uh, over the last few years 52 00:02:41,440 --> 00:02:44,560 Speaker 1: have been always talk about how college educated people were 53 00:02:44,560 --> 00:02:46,840 Speaker 1: moving down the ladder in the labor force, they were 54 00:02:46,840 --> 00:02:49,560 Speaker 1: taking jobs for which they were overqualified. Well, now the 55 00:02:49,560 --> 00:02:52,680 Speaker 1: economy has progressed far enough that we're starting to see 56 00:02:52,720 --> 00:02:55,440 Speaker 1: people being drawn in who are not college educated and 57 00:02:55,480 --> 00:02:58,800 Speaker 1: they're getting the jobs. But uh, these are tend to 58 00:02:58,840 --> 00:03:06,720 Speaker 1: be somewhat lower paying jobs in healthcare, leisure activities, restaurants, uh, hospitality, 59 00:03:06,760 --> 00:03:09,000 Speaker 1: and so on. Well, what that means it tends to 60 00:03:09,080 --> 00:03:11,320 Speaker 1: keep down the average. If you're creating a lot of 61 00:03:11,440 --> 00:03:15,000 Speaker 1: jobs in what are relatively low productivity, low wage sectors 62 00:03:15,040 --> 00:03:18,080 Speaker 1: of the economy, you're not going to see average wages 63 00:03:18,120 --> 00:03:21,120 Speaker 1: go up very much. And that's really what's happening. Kevin. 64 00:03:21,160 --> 00:03:23,400 Speaker 1: I wonder if you could just good morning, by the way, 65 00:03:23,240 --> 00:03:25,520 Speaker 1: I just wonder if you could speak to the issue 66 00:03:25,680 --> 00:03:30,640 Speaker 1: of autos and housing, two key areas of the economy. 67 00:03:30,720 --> 00:03:34,440 Speaker 1: We've been getting reports, particularly with the automobile sector. It's 68 00:03:34,480 --> 00:03:37,240 Speaker 1: great if you look at it historically, but it is 69 00:03:37,760 --> 00:03:40,320 Speaker 1: as they say, it has peaked. Let's say it as 70 00:03:40,360 --> 00:03:44,240 Speaker 1: plateau peak, as in a connotation that is a downside. 71 00:03:44,360 --> 00:03:45,800 Speaker 1: You know you've hit the top and you're about to 72 00:03:45,800 --> 00:03:48,600 Speaker 1: go down. It really seems like auto sales of plateau. 73 00:03:48,720 --> 00:03:50,480 Speaker 1: In fact, for the last eighteen months or so, they 74 00:03:50,480 --> 00:03:52,840 Speaker 1: even sitting up at roughly the same level for some 75 00:03:52,920 --> 00:03:55,040 Speaker 1: time now. It's at a very high level. So that's 76 00:03:55,080 --> 00:03:59,920 Speaker 1: good for the auto sector. Sixteen fifteen million closest seventy 77 00:04:00,200 --> 00:04:02,520 Speaker 1: just below last year. And I gotta break it. And 78 00:04:02,520 --> 00:04:10,560 Speaker 1: they're not automobiles. They're all basically and the crossover cars 79 00:04:10,720 --> 00:04:14,440 Speaker 1: and the SUVs as you call them, yes, and all 80 00:04:14,480 --> 00:04:17,680 Speaker 1: of that together running just over seventeen million now down 81 00:04:17,720 --> 00:04:20,279 Speaker 1: to about sixteen point eight or so, so it's still 82 00:04:20,440 --> 00:04:23,440 Speaker 1: very high level. Historically, and if they can maintain this, 83 00:04:23,560 --> 00:04:27,120 Speaker 1: it'll be a profitable industry, but one that's not growing 84 00:04:27,240 --> 00:04:30,000 Speaker 1: very much. And when there's so much capacity in that 85 00:04:30,080 --> 00:04:32,680 Speaker 1: industry globally as well as here in the United States, 86 00:04:32,839 --> 00:04:36,880 Speaker 1: that makes the competitive situation very intense. So no inflation 87 00:04:36,920 --> 00:04:40,240 Speaker 1: from the automobile industry. We have deflation in the automobile industry. 88 00:04:40,240 --> 00:04:43,040 Speaker 1: The average the average price of a motor vehicle in 89 00:04:43,040 --> 00:04:45,960 Speaker 1: the United States is slowly declining. It's down about a 90 00:04:46,000 --> 00:04:48,800 Speaker 1: percent or so over the last year, So no no 91 00:04:48,880 --> 00:04:51,600 Speaker 1: inflation coming from that sector. In fact, the durable goods 92 00:04:51,600 --> 00:04:54,400 Speaker 1: sector in general has experienced price declined for the last 93 00:04:54,440 --> 00:04:58,080 Speaker 1: few years, very gradual, very modest, but still no inflation 94 00:04:58,160 --> 00:05:00,279 Speaker 1: coming from that sector. We've heard from some of Brews 95 00:05:00,320 --> 00:05:02,160 Speaker 1: of the of the f O m C that they 96 00:05:02,160 --> 00:05:04,039 Speaker 1: are hesitant to raise rates in the light of the 97 00:05:04,040 --> 00:05:06,280 Speaker 1: fact that we haven't seen much movement in inflations by 98 00:05:06,279 --> 00:05:08,760 Speaker 1: no means the majority of that that committee, of course, 99 00:05:08,800 --> 00:05:12,600 Speaker 1: But as this persists, do they have more of a point? Uh? 100 00:05:12,920 --> 00:05:15,000 Speaker 1: Is is it worth waiting? Where is to maybe make 101 00:05:15,000 --> 00:05:16,919 Speaker 1: the counter argument there is? Is is it worth not 102 00:05:17,000 --> 00:05:19,600 Speaker 1: going ahead? I suppose based on what we've seen well, 103 00:05:19,680 --> 00:05:22,479 Speaker 1: this is the dilemma that is always facing monetary policy. 104 00:05:22,520 --> 00:05:24,680 Speaker 1: Which mistake do you want to make? Do you want 105 00:05:24,720 --> 00:05:27,080 Speaker 1: to be too tight when you shouldn't be, or do 106 00:05:27,160 --> 00:05:28,880 Speaker 1: you want to be loose when you shouldn't be and 107 00:05:28,920 --> 00:05:31,760 Speaker 1: then pay the penalty later. And that's an argument that 108 00:05:31,960 --> 00:05:34,680 Speaker 1: is always shifted. It's a committee, there's a variety of opinion, 109 00:05:35,120 --> 00:05:38,080 Speaker 1: and right now I think, uh, there's a very valid 110 00:05:38,160 --> 00:05:40,760 Speaker 1: argument that this is a new error that we're in. Uh, 111 00:05:40,800 --> 00:05:43,920 Speaker 1: the inflation process has changed quite a lot. We can 112 00:05:43,960 --> 00:05:47,800 Speaker 1: be patient and wait and why not foster and nurture 113 00:05:47,880 --> 00:05:52,000 Speaker 1: the economy's growth with low interest rates. The counter argument is, well, 114 00:05:52,320 --> 00:05:54,480 Speaker 1: there's some truth to that, but we can see from 115 00:05:54,480 --> 00:05:56,280 Speaker 1: the past and when we get the unemployment right down 116 00:05:56,279 --> 00:05:58,680 Speaker 1: to this level and you look forward at a continuously 117 00:05:58,720 --> 00:06:01,280 Speaker 1: growing economy will soon have a three handle on the 118 00:06:01,360 --> 00:06:04,599 Speaker 1: unemployment rate by next year, early in two thousand and eighteen, 119 00:06:04,920 --> 00:06:07,280 Speaker 1: and that is likely to lead to higher inflation. So 120 00:06:07,320 --> 00:06:10,920 Speaker 1: we should move now, gradually, but move now, And that's 121 00:06:10,920 --> 00:06:13,719 Speaker 1: the artum they're swinging back and forth. Well, I think 122 00:06:13,760 --> 00:06:16,919 Speaker 1: that the gradualists are probably going to win out because 123 00:06:17,000 --> 00:06:19,880 Speaker 1: I think Janet Yelling herself is in that camp and 124 00:06:20,120 --> 00:06:22,520 Speaker 1: small moves. I mean, we had a rate hike in June. 125 00:06:22,520 --> 00:06:25,279 Speaker 1: The next one's probably coming in December, so that's a 126 00:06:25,360 --> 00:06:28,120 Speaker 1: nice gap between the rate hikes, and then they'll watch 127 00:06:28,160 --> 00:06:31,479 Speaker 1: the data again, and I only expect that next year 128 00:06:31,680 --> 00:06:33,760 Speaker 1: we'll see one rate hike. We're not likely to get 129 00:06:33,800 --> 00:06:37,279 Speaker 1: the three that are being projected by the Open Market 130 00:06:37,279 --> 00:06:41,440 Speaker 1: Committee right now. They'll keep adjusting. I think your listeners 131 00:06:41,440 --> 00:06:45,159 Speaker 1: are probably familiar with these dots that they uh project 132 00:06:45,200 --> 00:06:47,920 Speaker 1: how many times they'll they'll hike the funds rate. Over 133 00:06:47,960 --> 00:06:51,839 Speaker 1: the last few years, we've experienced this gradual downward moving 134 00:06:51,839 --> 00:06:53,880 Speaker 1: the dots. Every year they're hot and then they slowly 135 00:06:53,880 --> 00:06:56,280 Speaker 1: come down. I think we're in for that for another year. 136 00:06:56,880 --> 00:07:00,400 Speaker 1: We'll get very modest, perhaps one rate hike in d December, 137 00:07:00,640 --> 00:07:03,200 Speaker 1: one more next year, and that will balance these two 138 00:07:03,279 --> 00:07:06,120 Speaker 1: arguments that you've you've just pointed to. We have a 139 00:07:06,160 --> 00:07:09,279 Speaker 1: conversation in the abstract about who might be the next 140 00:07:09,279 --> 00:07:11,440 Speaker 1: FED chair and what he or she might do. So 141 00:07:11,480 --> 00:07:13,280 Speaker 1: if we have Kevin Warsher, John Taylor, if there's some 142 00:07:13,280 --> 00:07:16,920 Speaker 1: more rules based approach to monetary policy that could change things, 143 00:07:17,080 --> 00:07:19,360 Speaker 1: are you yet gaming out what that would look like 144 00:07:19,400 --> 00:07:21,480 Speaker 1: if if John Taylor say we're to be running the FED, 145 00:07:21,600 --> 00:07:23,440 Speaker 1: how he might deal with the with the the low 146 00:07:23,480 --> 00:07:26,800 Speaker 1: inflation that we've been seeing. Well, of course, in the 147 00:07:27,000 --> 00:07:29,800 Speaker 1: tailor rule, it's not just the inflation which is low. 148 00:07:29,840 --> 00:07:32,800 Speaker 1: There's also the unemployment rate, which is very low. And 149 00:07:33,000 --> 00:07:34,880 Speaker 1: once you drop a little the natural rate or the 150 00:07:34,880 --> 00:07:38,400 Speaker 1: so called nairou uh, the effect on the rule is 151 00:07:38,520 --> 00:07:41,960 Speaker 1: quite dramatic. The the unemployed rate has a bigger impact 152 00:07:42,080 --> 00:07:45,239 Speaker 1: in that rule than does inflation. When you're closer inflation 153 00:07:45,320 --> 00:07:47,840 Speaker 1: rate as we are now one and a half percent 154 00:07:47,880 --> 00:07:50,200 Speaker 1: instead of two, it only wants you to change the 155 00:07:50,240 --> 00:07:52,239 Speaker 1: interest rate a little bit. But when you move away 156 00:07:52,280 --> 00:07:54,880 Speaker 1: from what you think is full employment, then you're supposed 157 00:07:54,920 --> 00:07:58,000 Speaker 1: to react a lot. So John Taylor would be looking 158 00:07:58,000 --> 00:08:01,080 Speaker 1: to raise rates almost immediately, which, by the way, I 159 00:08:01,120 --> 00:08:04,440 Speaker 1: don't think enhances his chances of being nominated for the 160 00:08:04,880 --> 00:08:08,400 Speaker 1: for the position. We saw just recently that Donald Trump 161 00:08:08,920 --> 00:08:12,920 Speaker 1: uh indicated that he's a low interest rate guy, that 162 00:08:13,040 --> 00:08:18,080 Speaker 1: he uh uh praised Janet Yellen for following the policy 163 00:08:18,080 --> 00:08:20,600 Speaker 1: of low rates and that and that's why Janet Yellen's 164 00:08:20,680 --> 00:08:22,720 Speaker 1: name came back into the mix. But as long as 165 00:08:22,720 --> 00:08:26,000 Speaker 1: the President is interested in fostering and promoting economic growth. 166 00:08:26,240 --> 00:08:28,560 Speaker 1: I don't think he's going to look for a monetary hawk. 167 00:08:28,840 --> 00:08:31,000 Speaker 1: David Gurray and Pim Fox. Tom keene off today here 168 00:08:31,040 --> 00:08:33,920 Speaker 1: with Kevin Logan, the chief US economist at hs at BC, 169 00:08:34,080 --> 00:08:35,960 Speaker 1: and we were chatting here just during the break about 170 00:08:36,000 --> 00:08:38,560 Speaker 1: the Jackson Hole Conference that's coming up here the Kansas 171 00:08:38,559 --> 00:08:41,520 Speaker 1: City Fed convening its annual confab at the foot of 172 00:08:41,559 --> 00:08:44,920 Speaker 1: the Grand Titon souton in Jackson. What's changed since last year? 173 00:08:44,920 --> 00:08:46,880 Speaker 1: How's the how's the contour of the conversation going to 174 00:08:46,920 --> 00:08:49,600 Speaker 1: be different this time around? Well, the biggest change was 175 00:08:49,640 --> 00:08:53,840 Speaker 1: it last year people were focused on Brexit and political changes. 176 00:08:54,320 --> 00:08:57,120 Speaker 1: The Brexit vote had just occurred at the end of June, 177 00:08:57,760 --> 00:08:59,839 Speaker 1: and financial markets were in a little bit of term 178 00:08:59,840 --> 00:09:01,920 Speaker 1: more and there was a lot of uncertainty about the 179 00:09:01,920 --> 00:09:04,880 Speaker 1: outlook for policy and what the impact would be on 180 00:09:04,920 --> 00:09:06,800 Speaker 1: the global economy. There was a lot of fear at 181 00:09:06,840 --> 00:09:11,280 Speaker 1: that time. Nonetheless, Janet Yellen at that conference said that 182 00:09:11,320 --> 00:09:14,760 Speaker 1: the case for for tightening policy in the United States 183 00:09:14,880 --> 00:09:18,080 Speaker 1: had strengthened. She told the world it they were still 184 00:09:18,120 --> 00:09:20,960 Speaker 1: on course for tightening policy, that it would be gradual 185 00:09:21,000 --> 00:09:23,640 Speaker 1: of course, but that it was still necessary, and of 186 00:09:23,679 --> 00:09:26,319 Speaker 1: course it would be data dependent and so on. UH. 187 00:09:26,559 --> 00:09:28,760 Speaker 1: The surprise that came out of Jacksonville was that there 188 00:09:28,800 --> 00:09:32,520 Speaker 1: was no rate hike in September. So UH, there were 189 00:09:32,520 --> 00:09:35,520 Speaker 1: mixed messages coming out of Jacksonville. Last year, the case 190 00:09:35,559 --> 00:09:39,760 Speaker 1: for us UH policy tightening was strengthening, the economy was 191 00:09:39,800 --> 00:09:43,520 Speaker 1: doing a little bit better. Nonetheless, they held back from tightening. 192 00:09:43,559 --> 00:09:45,800 Speaker 1: I think this year things have changed. First of all, 193 00:09:45,960 --> 00:09:49,080 Speaker 1: the focus of the jackson Hole Symposium will be on 194 00:09:49,200 --> 00:09:52,240 Speaker 1: the global economy, on the international economy. Last year it 195 00:09:52,240 --> 00:09:56,880 Speaker 1: was on monetary policy, specifically wondering how the new tools 196 00:09:56,880 --> 00:09:59,240 Speaker 1: would be used in the future, and the warning was 197 00:09:59,280 --> 00:10:02,040 Speaker 1: that if was a recession, the FED we go back 198 00:10:02,080 --> 00:10:05,120 Speaker 1: to quantitative easing and lowering the interest right down to 199 00:10:05,280 --> 00:10:08,440 Speaker 1: zero again. This year, I think those concerns are less 200 00:10:08,720 --> 00:10:11,920 Speaker 1: and there's going to be an emphasis on the global 201 00:10:11,960 --> 00:10:15,720 Speaker 1: economy and possibly on policy coordination that leads the United 202 00:10:15,720 --> 00:10:18,120 Speaker 1: States on its own in a sense. The Fed is 203 00:10:18,200 --> 00:10:22,800 Speaker 1: on course to begin a disinvestment policy in UH October. 204 00:10:22,920 --> 00:10:25,320 Speaker 1: I think they will announce it in September, and that's 205 00:10:25,320 --> 00:10:27,280 Speaker 1: not going to change because of what goes on at 206 00:10:27,320 --> 00:10:29,800 Speaker 1: Jackson Hole, we're not gonna going to get any warnings 207 00:10:29,840 --> 00:10:34,680 Speaker 1: about how the economy or policy is data dependent. No, 208 00:10:34,840 --> 00:10:37,079 Speaker 1: I think they're going to move straight ahead, and then 209 00:10:37,160 --> 00:10:40,319 Speaker 1: we'll see what happens in December, when potentially we'll get 210 00:10:40,320 --> 00:10:43,000 Speaker 1: another rate hikes. So for Janet Yellen, who's likely to 211 00:10:43,000 --> 00:10:45,760 Speaker 1: give the opening address, we'll see if she'll continue to 212 00:10:46,160 --> 00:10:48,240 Speaker 1: put forward the idea of the economy is doing well 213 00:10:48,640 --> 00:10:53,480 Speaker 1: and that the case for further gradual tightened policy is 214 00:10:53,520 --> 00:10:57,760 Speaker 1: still still in play. Kevin to to interest rates follow 215 00:10:57,800 --> 00:11:01,040 Speaker 1: the economy or does the economy follow interest rates? Of 216 00:11:01,080 --> 00:11:06,440 Speaker 1: course they're they're determined simultaneously. Economic developments lead to changes 217 00:11:06,480 --> 00:11:09,760 Speaker 1: in financial markets. That we take Brexit last year, there 218 00:11:09,840 --> 00:11:13,200 Speaker 1: was a sudden change in sentiment and attitude about global growth, 219 00:11:13,520 --> 00:11:16,320 Speaker 1: and that led to a quick drop in interest rates. Now, 220 00:11:16,400 --> 00:11:21,360 Speaker 1: the interest rates falling then offset the UH anticipated slowdown 221 00:11:21,360 --> 00:11:26,640 Speaker 1: in demand. So there's a simultaneous UH determination and interaction. 222 00:11:27,000 --> 00:11:29,559 Speaker 1: Now right now, what's interesting is that the U s 223 00:11:29,600 --> 00:11:33,320 Speaker 1: economy is strengthening. We see that economic conditions this year 224 00:11:33,320 --> 00:11:36,719 Speaker 1: are better than last year. Orders for capital equipment or up, 225 00:11:37,040 --> 00:11:41,000 Speaker 1: the unemployment rate is lower. UH, consumer confidence is very high, 226 00:11:41,320 --> 00:11:43,120 Speaker 1: so it looks like we're still on a good course 227 00:11:43,160 --> 00:11:46,720 Speaker 1: for growth, yet interest rates remain low. But I believe 228 00:11:46,760 --> 00:11:50,439 Speaker 1: that the reason for that is global economic conditions. Inflation 229 00:11:50,559 --> 00:11:53,240 Speaker 1: is low and remains low in the United States not 230 00:11:53,360 --> 00:11:57,760 Speaker 1: because of US economic conditions, but because of global economic conditions. 231 00:11:57,880 --> 00:12:00,720 Speaker 1: And so to answer your question about well, which is 232 00:12:00,760 --> 00:12:04,000 Speaker 1: it is the economy driving interest rates or interest rates 233 00:12:04,080 --> 00:12:06,400 Speaker 1: driving the economy right now, I think it's the global 234 00:12:06,440 --> 00:12:10,040 Speaker 1: economy that's keeping inflation down and therefore driving the financial 235 00:12:10,040 --> 00:12:13,319 Speaker 1: mortgage drive keeping interest rates low. So in the case 236 00:12:13,400 --> 00:12:17,080 Speaker 1: of to answer your question finally that uh, it's the 237 00:12:17,120 --> 00:12:20,800 Speaker 1: economy that is determining the level of interest rates, and 238 00:12:20,920 --> 00:12:23,600 Speaker 1: right now, low inflation means low interest rates, all right, 239 00:12:23,679 --> 00:12:26,520 Speaker 1: So that my question then goes to protectionism and trade. 240 00:12:26,559 --> 00:12:29,840 Speaker 1: If that's the case, efforts to wall off the United 241 00:12:29,880 --> 00:12:33,200 Speaker 1: States economically, politically, and so on, what effect do you 242 00:12:33,200 --> 00:12:35,560 Speaker 1: think they'll have. Well, first of all, I think it'll 243 00:12:35,600 --> 00:12:37,480 Speaker 1: be piecemeal, so it's not going to have a great, 244 00:12:38,280 --> 00:12:42,560 Speaker 1: a very large effect. All countries have some protectionism to 245 00:12:42,679 --> 00:12:47,400 Speaker 1: some degree. Uh. There's been, of course, a decades long 246 00:12:47,440 --> 00:12:50,160 Speaker 1: effort to the lower barriers and to increase trading has 247 00:12:50,160 --> 00:12:52,640 Speaker 1: been very successful, and that's where we have a globally 248 00:12:52,679 --> 00:12:57,520 Speaker 1: integrated economy. Now, I think that trade restrictions, as I said, 249 00:12:57,559 --> 00:13:00,360 Speaker 1: are going to be piecemeal and small, so they shouldn't 250 00:13:00,360 --> 00:13:03,520 Speaker 1: have a big effect. Uh. What's more important, though, is 251 00:13:03,559 --> 00:13:08,000 Speaker 1: the fact that right now there's uh excess supply throughout 252 00:13:08,040 --> 00:13:10,160 Speaker 1: the world. By excess supply, I mean there's ample supply 253 00:13:10,200 --> 00:13:12,920 Speaker 1: of the economy. The global economy has grown so much, 254 00:13:13,240 --> 00:13:17,600 Speaker 1: has moved forward so quickly through technological changes and through 255 00:13:17,960 --> 00:13:21,160 Speaker 1: the integration of economies that that's what's keeping inflation down 256 00:13:21,160 --> 00:13:24,160 Speaker 1: and it's what's keeping growth in the United States. Limited. 257 00:13:24,360 --> 00:13:27,360 Speaker 1: Protectionism is not going to change that. Protectionism is not 258 00:13:27,400 --> 00:13:32,840 Speaker 1: going to change the global uh supply. Kevin Logan appreciate 259 00:13:33,000 --> 00:13:35,120 Speaker 1: all the time. This morning on TV and radio, Kevin Logan, 260 00:13:35,120 --> 00:13:38,160 Speaker 1: the chief US economist at HSBC, joining me and Pim 261 00:13:38,240 --> 00:13:41,080 Speaker 1: Fox this morning. Tom Keene has this August Monday off, 262 00:13:41,080 --> 00:13:43,440 Speaker 1: This is Bloomberg Surveillance on Bloomberg Radio in New York 263 00:13:43,520 --> 00:13:59,800 Speaker 1: coast to coast and worldwide. Jipper layer Head a distinguished 264 00:13:59,840 --> 00:14:02,480 Speaker 1: career in the appropriate sector before joining at the Administrator 265 00:14:02,480 --> 00:14:04,120 Speaker 1: that the White House is a staffer. Then going on 266 00:14:04,120 --> 00:14:07,600 Speaker 1: to the Paulson Institute with the Hank Paulson, former Treasury Secretary. 267 00:14:07,600 --> 00:14:09,880 Speaker 1: She's now a senior fellow at the Paulsons who joins 268 00:14:09,920 --> 00:14:11,800 Speaker 1: us now from our bureau in Washington, d C. Great 269 00:14:11,800 --> 00:14:14,440 Speaker 1: to speak with you this morning, and I'll begin if 270 00:14:14,440 --> 00:14:16,319 Speaker 1: I could, just by asking you about the quality of 271 00:14:16,360 --> 00:14:19,200 Speaker 1: conversation here between the US and China. We've seen the 272 00:14:19,240 --> 00:14:21,920 Speaker 1: barbs the president has thrown on Twitter. How do you 273 00:14:21,960 --> 00:14:25,440 Speaker 1: assess the relationship now, the political relationship between this country 274 00:14:25,560 --> 00:14:30,120 Speaker 1: and China. Certainly when the administration took office, there was 275 00:14:30,200 --> 00:14:33,720 Speaker 1: great concern about how difficult the relationship was going to be, 276 00:14:33,800 --> 00:14:36,640 Speaker 1: just given the commentary during the campaign, But the Moral 277 00:14:36,680 --> 00:14:40,280 Speaker 1: Lago Summit, in the emphasis that President Trump places on 278 00:14:40,360 --> 00:14:44,960 Speaker 1: personal relationships, allowed him to create I think, quite a 279 00:14:45,000 --> 00:14:47,720 Speaker 1: good relationship with President She's so at the top. At 280 00:14:47,760 --> 00:14:51,640 Speaker 1: least there's a personal relationship. But consistently we hear from 281 00:14:51,640 --> 00:14:55,680 Speaker 1: the administration that they described the relationship right now is tense, 282 00:14:56,360 --> 00:15:00,240 Speaker 1: and there's a lot of concern about China's willingness an 283 00:15:00,320 --> 00:15:03,840 Speaker 1: ability to take action on North Korea. The action this 284 00:15:03,880 --> 00:15:07,480 Speaker 1: weekend hopefully has led off some of that steam. Certainly, 285 00:15:07,600 --> 00:15:12,200 Speaker 1: China support for the new sanctions is critically important, and 286 00:15:12,280 --> 00:15:15,880 Speaker 1: hopefully we'll start to see China taking other actions in 287 00:15:15,960 --> 00:15:18,400 Speaker 1: terms of increasing some of the pressure and stopping some 288 00:15:18,520 --> 00:15:22,280 Speaker 1: of its trade with that regime. There's a sense of 289 00:15:22,400 --> 00:15:26,560 Speaker 1: urgency here, catalyzed in part by these intercontinental ballistic missile 290 00:15:26,560 --> 00:15:29,880 Speaker 1: tests that the North Korea is behind. But I wonder 291 00:15:29,880 --> 00:15:32,080 Speaker 1: if you could speak to just the issue of time 292 00:15:32,920 --> 00:15:35,960 Speaker 1: diplomatically with regards the relationship between the U s and China. 293 00:15:36,000 --> 00:15:37,640 Speaker 1: There was, as you mentioned, that meeting between the two 294 00:15:37,720 --> 00:15:40,240 Speaker 1: leaders in Florida just a few months ago, and then 295 00:15:40,280 --> 00:15:42,400 Speaker 1: shortly thereafter, just a couple of months thereafter, there was 296 00:15:42,480 --> 00:15:45,040 Speaker 1: a president of the United States expressing some dissatisfaction with 297 00:15:45,080 --> 00:15:47,400 Speaker 1: how far things had moved along in a pretty narrow 298 00:15:47,880 --> 00:15:51,600 Speaker 1: time frame. How how radical, how different are those expectations 299 00:15:51,600 --> 00:15:55,240 Speaker 1: from reality, do you think? Well? Diplomatically, as you say, 300 00:15:55,320 --> 00:15:58,160 Speaker 1: the relations and discussions are going on with the Chinese 301 00:15:58,160 --> 00:16:02,720 Speaker 1: on a very consistent basis from Secretary Tillerson to a 302 00:16:02,800 --> 00:16:04,680 Speaker 1: number of the officials in the White House that Tina 303 00:16:04,720 --> 00:16:08,400 Speaker 1: Palell has been the Deputy National Security Advisor, as a 304 00:16:08,480 --> 00:16:11,160 Speaker 1: point person for North Korea and as in regular touch 305 00:16:11,280 --> 00:16:15,480 Speaker 1: with the Chinese pushing for additional movement on North Korea, 306 00:16:16,080 --> 00:16:19,680 Speaker 1: but definitely there is a timing issue. As we see 307 00:16:19,720 --> 00:16:24,760 Speaker 1: North Korea continuing to fire missiles, it's increasingly important for 308 00:16:24,840 --> 00:16:28,600 Speaker 1: the US to move forward in taking action, and if 309 00:16:28,640 --> 00:16:31,400 Speaker 1: we're not able to convince China to move with us, 310 00:16:31,440 --> 00:16:34,400 Speaker 1: it's important that we find other ways to try and 311 00:16:34,440 --> 00:16:36,880 Speaker 1: bring about pressure. I mean, this is an issue. These 312 00:16:36,920 --> 00:16:40,840 Speaker 1: discussions have been going on for many, many years, but 313 00:16:41,000 --> 00:16:44,480 Speaker 1: it's important that we start to see some real steps forward, 314 00:16:45,120 --> 00:16:48,160 Speaker 1: any any chance of a rethink on US policy as 315 00:16:48,200 --> 00:16:54,800 Speaker 1: regards a unified Korean peninsula. You know, I think there 316 00:16:54,840 --> 00:16:57,360 Speaker 1: has to be some very creative thinking about how to 317 00:16:57,520 --> 00:17:02,160 Speaker 1: bring the best solution for UH stopping this regime from 318 00:17:02,160 --> 00:17:05,880 Speaker 1: firing its missiles. Okay, but I mean it is state. 319 00:17:05,920 --> 00:17:09,320 Speaker 1: Isn't it stated US policy that, you know, the North 320 00:17:09,359 --> 00:17:11,880 Speaker 1: and the South really are just one and that the 321 00:17:11,920 --> 00:17:15,160 Speaker 1: peninsula should be one Korea. That was the at least 322 00:17:15,160 --> 00:17:19,520 Speaker 1: the U S official position. Yes, but I think it's 323 00:17:19,800 --> 00:17:22,439 Speaker 1: is they continue to have discussions in the big picture, 324 00:17:22,480 --> 00:17:25,960 Speaker 1: for example, with China. Certainly we agree on what the 325 00:17:26,040 --> 00:17:29,560 Speaker 1: end goal is in terms of a d nuclarization of 326 00:17:29,600 --> 00:17:33,760 Speaker 1: North Korea, but in how that actually takes place. China 327 00:17:33,840 --> 00:17:39,560 Speaker 1: certainly has concerns about South Korea US troops on its border, 328 00:17:39,960 --> 00:17:41,720 Speaker 1: and that's where some of the issues are going to 329 00:17:41,720 --> 00:17:44,600 Speaker 1: get very difficult with China and what this final deal 330 00:17:44,720 --> 00:17:48,960 Speaker 1: actually looks like. I wonder what more China could be do. 331 00:17:49,040 --> 00:17:51,280 Speaker 1: We saw the new sanctions imposed over the weekend. The 332 00:17:51,359 --> 00:17:53,760 Speaker 1: U s clearly looking at China to do more one 333 00:17:53,800 --> 00:17:55,600 Speaker 1: of the deficits as you see. Then what has China 334 00:17:55,680 --> 00:17:58,520 Speaker 1: not been doing? And when the US, when the administration 335 00:17:58,560 --> 00:18:00,800 Speaker 1: talks about China taking more of a dership role here, 336 00:18:00,920 --> 00:18:04,280 Speaker 1: what more indeed could China be doing. That's really an 337 00:18:04,280 --> 00:18:07,720 Speaker 1: excellent question for one of the biggest challenges in China 338 00:18:07,760 --> 00:18:09,800 Speaker 1: today and I think this is this is much bigger 339 00:18:09,800 --> 00:18:12,520 Speaker 1: than North Korea. It's one of the challenges President she 340 00:18:12,640 --> 00:18:14,560 Speaker 1: is really trying to get his hands around. And it's 341 00:18:14,920 --> 00:18:17,360 Speaker 1: while he can reach down into the system on any 342 00:18:17,400 --> 00:18:19,480 Speaker 1: given day, he can shut down a factory, he can 343 00:18:19,480 --> 00:18:22,800 Speaker 1: stop a bank, he can arrest someone, he has a 344 00:18:23,640 --> 00:18:28,159 Speaker 1: very difficult time implementing policy on a consistent basis. If 345 00:18:28,200 --> 00:18:31,760 Speaker 1: there are local officials who are determined to implement something 346 00:18:31,800 --> 00:18:35,199 Speaker 1: that's different from what Beijing is asking it takes a 347 00:18:35,320 --> 00:18:38,200 Speaker 1: very long time, and there's little retribution for that action. 348 00:18:38,880 --> 00:18:42,520 Speaker 1: And so not only do they have to stop any 349 00:18:42,680 --> 00:18:46,040 Speaker 1: consistent trade going on with North Korea, but they have 350 00:18:46,200 --> 00:18:50,720 Speaker 1: to also stop the unofficial trade and also looking at 351 00:18:50,760 --> 00:18:54,000 Speaker 1: how trade is being conducted, maybe not just directly out 352 00:18:54,000 --> 00:18:58,240 Speaker 1: of China, but through third parties, through third countries. But 353 00:18:58,359 --> 00:19:00,080 Speaker 1: let me ask you about what we've heard from this 354 00:19:00,119 --> 00:19:03,440 Speaker 1: administration so far about North Korea. They've used the phrase 355 00:19:03,480 --> 00:19:05,960 Speaker 1: strategic patients. That's what they've said. Was the policy in 356 00:19:06,000 --> 00:19:10,080 Speaker 1: place before they took over the White House? Was that 357 00:19:10,160 --> 00:19:12,560 Speaker 1: not working? As they've said, in other words, had had 358 00:19:12,600 --> 00:19:14,720 Speaker 1: they had the US government been too patient with North 359 00:19:14,800 --> 00:19:19,440 Speaker 1: Korea amidst all of the testing that we've seen previously. Yeah, 360 00:19:19,480 --> 00:19:22,480 Speaker 1: it's these are very very complicated issues to try it address, 361 00:19:22,560 --> 00:19:25,040 Speaker 1: and there is limited leverage in many ways that we 362 00:19:25,119 --> 00:19:29,200 Speaker 1: have with this new regime. In the past, the U 363 00:19:29,359 --> 00:19:32,040 Speaker 1: Six Party talks were able to make some progress. We 364 00:19:32,040 --> 00:19:35,920 Speaker 1: were able to trade visits by whether it was heads 365 00:19:35,920 --> 00:19:39,520 Speaker 1: of state or by secretaries of state to make some progress. 366 00:19:39,560 --> 00:19:42,560 Speaker 1: But those old tactics don't seem to be working any longer, 367 00:19:42,640 --> 00:19:46,080 Speaker 1: and so it's time to be thinking creatively about new tactics. 368 00:19:46,920 --> 00:19:49,639 Speaker 1: Can you speak to the issue of how the Chinese 369 00:19:49,680 --> 00:19:52,920 Speaker 1: and other members of the Asian Council, how they view 370 00:19:53,040 --> 00:19:55,520 Speaker 1: the U. S State Department and Rex Tellerson, Now, I 371 00:19:55,520 --> 00:19:57,760 Speaker 1: mean they read the same papers, they get the same 372 00:19:57,760 --> 00:20:01,399 Speaker 1: reports that we get about the the US administration, and 373 00:20:01,440 --> 00:20:04,360 Speaker 1: I'm sure they also follow Twitter. Yeah. I don't think 374 00:20:04,400 --> 00:20:06,800 Speaker 1: I can speak for what's in the minds of the 375 00:20:06,920 --> 00:20:10,160 Speaker 1: Chinese and the other countries in terms of their opinions 376 00:20:10,160 --> 00:20:15,159 Speaker 1: of wreck Tillerson. Certainly, it's just important and there's no 377 00:20:15,280 --> 00:20:18,359 Speaker 1: question that many of the countries in that region want 378 00:20:18,359 --> 00:20:23,000 Speaker 1: the United States to remain engaged and very actively engaged 379 00:20:23,040 --> 00:20:28,040 Speaker 1: in the region. Does that include making sure that China 380 00:20:28,280 --> 00:20:32,840 Speaker 1: does not expand its building of islands or even adding, 381 00:20:32,920 --> 00:20:35,840 Speaker 1: you know, its own navy ports around the world. One 382 00:20:36,000 --> 00:20:39,720 Speaker 1: was just opened in Africa. Yeah, and those are very 383 00:20:39,720 --> 00:20:42,119 Speaker 1: important issues. Certainly, there are a number of countries in 384 00:20:42,160 --> 00:20:46,520 Speaker 1: the regions who have different views on China's actions, who 385 00:20:46,640 --> 00:20:49,800 Speaker 1: view it is essential that the United States remain a 386 00:20:49,920 --> 00:20:55,000 Speaker 1: major presence in the region. Japan, Australia, some of the 387 00:20:55,040 --> 00:20:58,000 Speaker 1: smaller countries who were fighting on the South China Sea issue. 388 00:20:58,160 --> 00:20:59,920 Speaker 1: No question at all. I want to come back in 389 00:21:00,040 --> 00:21:01,600 Speaker 1: talk trade with you in just a little bit, but 390 00:21:01,640 --> 00:21:03,920 Speaker 1: before we get there, let me ask you about the 391 00:21:04,200 --> 00:21:06,919 Speaker 1: recent dialogue that we had in Washington, d C. I 392 00:21:06,920 --> 00:21:09,159 Speaker 1: know that you were instrumental in pushing for the creation 393 00:21:09,160 --> 00:21:10,399 Speaker 1: of what came to be known as the U S 394 00:21:10,400 --> 00:21:14,119 Speaker 1: Strategic and Economic Dialogue, this annual meeting of Chinese leaders 395 00:21:14,119 --> 00:21:17,800 Speaker 1: and US leaders alternating between Washington and Beijing. And it 396 00:21:17,880 --> 00:21:20,040 Speaker 1: was a you know, a bifurcated thing. As as the 397 00:21:20,080 --> 00:21:23,119 Speaker 1: name implies, there was a strategic side in an economic side. 398 00:21:23,160 --> 00:21:26,760 Speaker 1: This meeting in Washington seems squarely focused on on the economy, 399 00:21:26,800 --> 00:21:28,719 Speaker 1: and we didn't get a statement of a path forward 400 00:21:29,280 --> 00:21:32,119 Speaker 1: on the heels of that meeting in Washington. What do 401 00:21:32,119 --> 00:21:33,800 Speaker 1: you make it? Just the quality of the the the 402 00:21:33,840 --> 00:21:36,320 Speaker 1: official channels. How big a loss is it not to 403 00:21:36,400 --> 00:21:40,840 Speaker 1: have that dual focused regular meeting between these two countries. Well, 404 00:21:40,960 --> 00:21:43,679 Speaker 1: just to clarify, I was involved in the creation of 405 00:21:43,720 --> 00:21:47,280 Speaker 1: the first dialogue press sector Paulson, which was the Strategic 406 00:21:47,359 --> 00:21:51,120 Speaker 1: Economic Dialogue, and I do think that it lost its 407 00:21:51,160 --> 00:21:54,159 Speaker 1: way in some part. While the intentions were good and 408 00:21:54,280 --> 00:21:58,439 Speaker 1: combining the strategic side the whole rationale in creating it 409 00:21:58,560 --> 00:22:02,200 Speaker 1: as just an economic focused dialogue was to help create 410 00:22:02,720 --> 00:22:05,240 Speaker 1: the priorities with the US government so that we were 411 00:22:05,320 --> 00:22:07,919 Speaker 1: clear in our requests with the Chinese in terms of 412 00:22:07,960 --> 00:22:10,840 Speaker 1: what we were looking for, and it fit within the 413 00:22:10,920 --> 00:22:14,280 Speaker 1: decision making process on the economic side for the Chinese 414 00:22:14,680 --> 00:22:18,480 Speaker 1: when the strategic side was combined with it. And previous 415 00:22:18,480 --> 00:22:20,880 Speaker 1: in the Bush administration they have been on separate tracks, 416 00:22:21,200 --> 00:22:25,200 Speaker 1: so it wasn't taking away at all, and from a 417 00:22:25,240 --> 00:22:29,800 Speaker 1: strategic dialogue. Just the Obama administration made an agreement to 418 00:22:29,840 --> 00:22:33,760 Speaker 1: combine them. You often had trade issues like climate change 419 00:22:33,800 --> 00:22:37,640 Speaker 1: that Secretary Carey was leading being discussed with foreign policy 420 00:22:37,680 --> 00:22:39,880 Speaker 1: people on the Chinese side who really didn't have any 421 00:22:39,880 --> 00:22:42,119 Speaker 1: authority over that, and in the end it became a 422 00:22:42,200 --> 00:22:48,199 Speaker 1: very cumbersome agreement discussion. I think it's very important that 423 00:22:48,240 --> 00:22:51,240 Speaker 1: this administration has gone back to just a focus on 424 00:22:51,320 --> 00:22:55,920 Speaker 1: the economic side, and it's um I think a very 425 00:22:55,960 --> 00:22:59,680 Speaker 1: good thing. The strategic dialogue they created between the Secretary 426 00:22:59,720 --> 00:23:03,960 Speaker 1: of def and the Secretary of State focuses on the 427 00:23:04,040 --> 00:23:06,480 Speaker 1: right issues and they're able to get the right side 428 00:23:06,480 --> 00:23:08,600 Speaker 1: of the system in China to the table to make 429 00:23:09,359 --> 00:23:13,359 Speaker 1: decisions who have authority over those issues. There, and we 430 00:23:13,400 --> 00:23:18,919 Speaker 1: are speaking with Deborah Lair, Senior Fellows Paulson OH Paulson Institute. 431 00:23:19,240 --> 00:23:23,119 Speaker 1: She joins us from our nine one studio in Washington, 432 00:23:23,240 --> 00:23:26,600 Speaker 1: d C. And just to put it into context, one 433 00:23:26,640 --> 00:23:29,040 Speaker 1: of Deborah's previous jobs she serves as in the US 434 00:23:29,119 --> 00:23:32,200 Speaker 1: government Executive Office of the President as Deputy Assistant US 435 00:23:32,240 --> 00:23:37,800 Speaker 1: Trade Representative for China. On our topic is China and Asia. Deborah, 436 00:23:37,880 --> 00:23:40,399 Speaker 1: of course, I'm sure you heard the news North Korea 437 00:23:40,720 --> 00:23:43,800 Speaker 1: today threatening to use nuclear weapons against the United States 438 00:23:43,800 --> 00:23:48,520 Speaker 1: have provoked Uh. Secretary of State Rex Tillison says, negotiations, 439 00:23:48,920 --> 00:23:55,040 Speaker 1: but only if the North Korean stopped testing these weapons. Uh. 440 00:23:55,240 --> 00:23:59,280 Speaker 1: Do you believe that's really going to happen. Well, it's 441 00:23:59,400 --> 00:24:02,960 Speaker 1: very hard to anything that the North Korean leader is 442 00:24:03,000 --> 00:24:05,960 Speaker 1: going to do, but I think it's very important, obviously 443 00:24:06,000 --> 00:24:09,080 Speaker 1: that the administration continue to use all means possible to 444 00:24:09,160 --> 00:24:15,280 Speaker 1: try and bring his actions under some kind of discipline. Well, 445 00:24:15,320 --> 00:24:19,320 Speaker 1: based on your your experience with the Chinese leaders, what 446 00:24:19,320 --> 00:24:21,040 Speaker 1: what is it do you believe that they could do 447 00:24:21,080 --> 00:24:25,280 Speaker 1: that they're not doing in order to assist the United 448 00:24:25,280 --> 00:24:29,200 Speaker 1: States entity the Koreans to try to disarm this. Uh, 449 00:24:29,280 --> 00:24:33,399 Speaker 1: this potential threat. Yeah, it's very interesting the relationship that 450 00:24:33,440 --> 00:24:38,359 Speaker 1: the Chinese have with this leader versus his father and grandfather. Uh, 451 00:24:38,480 --> 00:24:41,680 Speaker 1: they actually were much closer to the two predecessors who 452 00:24:41,720 --> 00:24:45,360 Speaker 1: were frequent visitors to China. This leader has not actually 453 00:24:45,480 --> 00:24:49,040 Speaker 1: visited China since he took office, and there there is 454 00:24:49,080 --> 00:24:52,119 Speaker 1: a lot that the Chinese can be doing. They We've 455 00:24:52,119 --> 00:24:55,840 Speaker 1: seen that trade over the last few months has gone 456 00:24:55,960 --> 00:24:59,879 Speaker 1: up by ten percent with North Korea. This is the 457 00:25:00,000 --> 00:25:04,199 Speaker 1: ppposedly non sanctioned related trade, but those are other areas 458 00:25:04,240 --> 00:25:08,399 Speaker 1: that could be shut down. The Chinese are responsible for 459 00:25:08,560 --> 00:25:12,400 Speaker 1: nine of the trade with North Korea, and so there 460 00:25:12,560 --> 00:25:14,800 Speaker 1: is a significant amount that they can be doing to 461 00:25:14,880 --> 00:25:18,640 Speaker 1: try and put additional pressure and bring about some kind 462 00:25:18,640 --> 00:25:21,399 Speaker 1: of change in North Korea's actions. Help us if you 463 00:25:21,440 --> 00:25:25,040 Speaker 1: would distill the U. S IS message on trade with China. 464 00:25:25,119 --> 00:25:27,639 Speaker 1: We had a report last week that the US is 465 00:25:27,680 --> 00:25:32,040 Speaker 1: considering a new investigation into intellectual property issues with China. 466 00:25:32,080 --> 00:25:35,760 Speaker 1: That's on top of an ongoing investigation to steal production 467 00:25:35,760 --> 00:25:38,400 Speaker 1: other metals production, and of course there is the project 468 00:25:38,400 --> 00:25:40,720 Speaker 1: that will Bross. The Secretary of Commerce is spearheading looking 469 00:25:40,720 --> 00:25:44,120 Speaker 1: at the bilateral trade relationships between Chinese and US companies. 470 00:25:44,480 --> 00:25:47,560 Speaker 1: I wonder if you're able to discerner what the administration's 471 00:25:47,560 --> 00:25:49,760 Speaker 1: trade strategy is at this point, especially when it comes 472 00:25:49,760 --> 00:25:53,640 Speaker 1: to US China trade. The administration appears to be very 473 00:25:53,680 --> 00:25:56,520 Speaker 1: focused on trying to what they say is rebalance the 474 00:25:56,560 --> 00:26:01,840 Speaker 1: relationship and address the issues of somewhat related to reciprocity 475 00:26:01,920 --> 00:26:06,159 Speaker 1: Chinese access to the US market versus US access in 476 00:26:06,280 --> 00:26:09,159 Speaker 1: China's market in China, you know, we haven't had a 477 00:26:09,200 --> 00:26:12,040 Speaker 1: major trade agreement with the Chinese since they joined the 478 00:26:12,040 --> 00:26:15,479 Speaker 1: World Trade Organization, which was over fifteen years ago. And 479 00:26:15,560 --> 00:26:17,919 Speaker 1: in that time, while we've seen certainly a lot of 480 00:26:17,920 --> 00:26:22,119 Speaker 1: reform in China's economy and it's continued to grow and strengthen, 481 00:26:22,480 --> 00:26:25,040 Speaker 1: we haven't seen a lot of market opening, particularly for 482 00:26:25,160 --> 00:26:27,720 Speaker 1: US companies, and we've seen a lot of changes in 483 00:26:27,760 --> 00:26:30,360 Speaker 1: a number of their practices and how they're treating our 484 00:26:30,400 --> 00:26:35,879 Speaker 1: companies versus domestic companies, and how policies and approvals and 485 00:26:36,000 --> 00:26:40,600 Speaker 1: various things like that are being applied for companies in China. 486 00:26:41,160 --> 00:26:44,280 Speaker 1: Now that said, American companies still have a very strong 487 00:26:44,320 --> 00:26:47,080 Speaker 1: presence there. They're still making a significant amount of money 488 00:26:47,080 --> 00:26:49,960 Speaker 1: in those markets, and they're very dependent on China given 489 00:26:50,119 --> 00:26:53,680 Speaker 1: its growth plan. What the administration seems to be very 490 00:26:53,720 --> 00:26:57,080 Speaker 1: focused on is how to continue to push for market 491 00:26:57,119 --> 00:27:00,000 Speaker 1: opening so that we can continue to export to China. 492 00:27:00,600 --> 00:27:03,080 Speaker 1: But we also should be focused on the areas where 493 00:27:03,119 --> 00:27:06,080 Speaker 1: the US is most competitive and continuing to push for 494 00:27:06,520 --> 00:27:09,800 Speaker 1: market opening for services, which is where the U S 495 00:27:09,880 --> 00:27:13,160 Speaker 1: is one of the world's leaders, and we see great 496 00:27:13,160 --> 00:27:16,760 Speaker 1: growth in the Chinese service market and opportunities there, and 497 00:27:16,800 --> 00:27:21,199 Speaker 1: also pushing for protection of intellectual property rights. I've had 498 00:27:21,200 --> 00:27:23,639 Speaker 1: occasion to talk with Michael from In, the former US 499 00:27:23,680 --> 00:27:26,120 Speaker 1: Trade Representative, a number of times, and he will frequently 500 00:27:26,119 --> 00:27:27,960 Speaker 1: push back on this argument that the U S could 501 00:27:28,000 --> 00:27:31,520 Speaker 1: be doing more to pursue complaints or cases against China 502 00:27:31,640 --> 00:27:34,280 Speaker 1: under the w t O rules. When when you look 503 00:27:34,320 --> 00:27:36,320 Speaker 1: at it, when you look at what this past administration does, 504 00:27:36,359 --> 00:27:39,359 Speaker 1: the administration previous to that one did as well, do 505 00:27:39,440 --> 00:27:41,760 Speaker 1: you see that they could have done more because hindsight? 506 00:27:42,480 --> 00:27:44,000 Speaker 1: But could more be done here when it comes to 507 00:27:44,000 --> 00:27:47,159 Speaker 1: to complaining to the w t O. Hid sight and 508 00:27:47,160 --> 00:27:51,000 Speaker 1: the w t O certainly has his role, its role, uh. 509 00:27:51,160 --> 00:27:53,280 Speaker 1: The reason that we pushed so hard, and as you said, 510 00:27:53,320 --> 00:27:55,359 Speaker 1: I was one of the negotiators there, we pushed so 511 00:27:55,400 --> 00:27:59,000 Speaker 1: hard to bring China into a roles based organization. Then 512 00:27:59,040 --> 00:28:02,240 Speaker 1: the key became forcusing on enforcement of the commitments that 513 00:28:02,280 --> 00:28:05,600 Speaker 1: they had made, and the Obama administration did take a 514 00:28:05,680 --> 00:28:08,399 Speaker 1: number of trade cases to the w t O, but 515 00:28:08,480 --> 00:28:11,879 Speaker 1: those are a very lengthy process. And one of the 516 00:28:11,880 --> 00:28:14,400 Speaker 1: things that we did not see in the last administration 517 00:28:14,480 --> 00:28:18,000 Speaker 1: until the very end was any kind of bilateral negotiation 518 00:28:18,080 --> 00:28:21,200 Speaker 1: with the Chinese. What the administration chose to do, and 519 00:28:21,280 --> 00:28:24,760 Speaker 1: it was a high risk gambit, was to negotiate with 520 00:28:24,840 --> 00:28:28,960 Speaker 1: the countries around China and creating the Trans Pacific Partnership 521 00:28:29,040 --> 00:28:32,520 Speaker 1: the t p P. In the end, obviously they couldn't 522 00:28:32,520 --> 00:28:35,960 Speaker 1: deliver on the final agreement and this administration chose not 523 00:28:36,080 --> 00:28:38,959 Speaker 1: to pursue it. The same with the Bilatteral Investment Treaty. 524 00:28:39,040 --> 00:28:41,960 Speaker 1: They started negotiating that with China and that would have, 525 00:28:42,120 --> 00:28:47,040 Speaker 1: if concluded, resulted in additional market access for our company's 526 00:28:47,080 --> 00:28:51,000 Speaker 1: additional investment protections, but in the end they couldn't finish 527 00:28:51,040 --> 00:28:53,040 Speaker 1: the agreement. De great to speak with you this morning. 528 00:28:53,040 --> 00:28:54,760 Speaker 1: Thank you very much for being so generous with your time. 529 00:28:54,800 --> 00:28:57,040 Speaker 1: Debra Layer of the Pulsa Institute in Washington, d c 530 00:28:57,200 --> 00:29:00,040 Speaker 1: joining us to talk about US China relationships on this 531 00:29:00,080 --> 00:29:02,960 Speaker 1: Monday morning. This is Bloomberg Surveillance on Bloomberg Radio. David 532 00:29:02,960 --> 00:29:05,760 Speaker 1: Gurrow with pim Box today. Tom Keene has the day off. 533 00:29:06,000 --> 00:29:21,040 Speaker 1: This is Bloomberg. Well, as I mentioned, Adam pos and 534 00:29:21,080 --> 00:29:22,719 Speaker 1: joins us now. He's the president of the Print at 535 00:29:22,720 --> 00:29:25,160 Speaker 1: the Peterson Institute for International Economics. Great to have us 536 00:29:25,160 --> 00:29:28,840 Speaker 1: with him with us from our Bloomberg nine studios in Washington, 537 00:29:29,200 --> 00:29:31,360 Speaker 1: d c. Adam, great to speak with you once again. 538 00:29:31,360 --> 00:29:33,440 Speaker 1: And I wonder if we could pick up from the 539 00:29:33,520 --> 00:29:35,480 Speaker 1: job numbers that we got last week how the FED 540 00:29:35,960 --> 00:29:38,600 Speaker 1: might be processing them. We had a conversation on surveillance 541 00:29:38,600 --> 00:29:41,200 Speaker 1: on television today in which we looked at the unemployment 542 00:29:41,240 --> 00:29:44,240 Speaker 1: numbers juxtaposed with the inflation read and of course, so 543 00:29:44,320 --> 00:29:46,440 Speaker 1: that's the pickle that the FED is in right now, 544 00:29:46,440 --> 00:29:48,920 Speaker 1: trying to find its way out of this low inflation environment. 545 00:29:48,920 --> 00:29:51,920 Speaker 1: As the jobs numbers seem to be coming in pretty decent, 546 00:29:52,120 --> 00:29:54,760 Speaker 1: how do you see the path forward looking well, David, 547 00:29:54,800 --> 00:29:57,200 Speaker 1: thanks for having me back on surveillance. I think the 548 00:29:57,240 --> 00:30:00,680 Speaker 1: FED is in what I would call normal different cultis right, 549 00:30:00,720 --> 00:30:03,720 Speaker 1: We're so used to this long period of having really 550 00:30:03,800 --> 00:30:07,560 Speaker 1: momentous FED decisions and then a period where there were 551 00:30:07,560 --> 00:30:10,600 Speaker 1: no fit decisions, or rather a decision not to move, 552 00:30:11,040 --> 00:30:13,920 Speaker 1: and now we're into Frankly, what's the kind of difficulty 553 00:30:13,920 --> 00:30:16,360 Speaker 1: you have in the normal economy is how do you 554 00:30:16,400 --> 00:30:20,160 Speaker 1: balance the growth and the or rather the employment and 555 00:30:20,200 --> 00:30:22,680 Speaker 1: inflation objectives. I mean, I think the way to look 556 00:30:22,720 --> 00:30:25,600 Speaker 1: at it is, unlike in some recent years, there's very 557 00:30:25,640 --> 00:30:30,040 Speaker 1: decent arguments on both sides. My view is that the 558 00:30:31,080 --> 00:30:33,360 Speaker 1: it's not so much that I think there's not going 559 00:30:33,400 --> 00:30:38,320 Speaker 1: to be any inflation, but the risks of inflation taking 560 00:30:38,360 --> 00:30:41,560 Speaker 1: off in some huge way are nil. And so when 561 00:30:41,560 --> 00:30:46,280 Speaker 1: you have these confusing labor market numbers, that unemployment keeps dropping, 562 00:30:46,320 --> 00:30:50,880 Speaker 1: which says, okay, we're reaching the limit, versus product participation 563 00:30:50,920 --> 00:30:53,720 Speaker 1: goes up, which says there's still room to go. You 564 00:30:53,760 --> 00:30:56,760 Speaker 1: don't need to sweat it that much. Frankly, I'd rather 565 00:30:56,960 --> 00:31:00,520 Speaker 1: they just hold off. How much introspection? How much uh 566 00:31:00,840 --> 00:31:03,400 Speaker 1: introspection is there right now? In monetary policy? We have 567 00:31:03,480 --> 00:31:06,280 Speaker 1: the central moment A few weeks back at this ECB form, 568 00:31:06,320 --> 00:31:09,000 Speaker 1: we're looking ahead to the the confab and Jackson Hole, 569 00:31:09,040 --> 00:31:12,680 Speaker 1: and just a few weeks there was a conversation about coordination, 570 00:31:12,680 --> 00:31:16,280 Speaker 1: increased coordination in Portugal. Do you expect that conversation to 571 00:31:16,320 --> 00:31:20,680 Speaker 1: continue in Jackson Hole? Well, unfortunate thanks to Ester George 572 00:31:20,680 --> 00:31:22,440 Speaker 1: and the Federals are back in Kansas City to get 573 00:31:22,440 --> 00:31:25,240 Speaker 1: to attend again this year. You and be both you know, 574 00:31:25,440 --> 00:31:29,280 Speaker 1: it's it's a great privilege because they've tightened up those standards. Um, 575 00:31:29,320 --> 00:31:32,480 Speaker 1: but I don't think coordination is really the issue right now. 576 00:31:32,560 --> 00:31:36,360 Speaker 1: I think it's much more about coming to a common 577 00:31:36,480 --> 00:31:40,240 Speaker 1: understanding that we have this low inflation environment across the 578 00:31:40,280 --> 00:31:43,560 Speaker 1: world that Japan, as I and many others have been 579 00:31:43,600 --> 00:31:46,720 Speaker 1: pointing out the last few years, has done pretty much 580 00:31:46,760 --> 00:31:49,520 Speaker 1: everything the textbook people like me and much more distinguished 581 00:31:49,520 --> 00:31:51,840 Speaker 1: people like Ben Bernankey have been saying, and they still 582 00:31:51,840 --> 00:31:54,640 Speaker 1: don't have inflation. Us we have everything that looks like 583 00:31:54,680 --> 00:31:58,800 Speaker 1: a mediocre but real recovery, still no inflation. So it's 584 00:31:58,880 --> 00:32:01,960 Speaker 1: less about coordination, know more about figuring out what's really 585 00:32:02,000 --> 00:32:06,000 Speaker 1: going on, Adam post And you've been quoted as saying 586 00:32:06,040 --> 00:32:08,720 Speaker 1: it's reached the point where the only decision is how 587 00:32:08,800 --> 00:32:11,080 Speaker 1: freaked out you want to be by how much this 588 00:32:11,200 --> 00:32:16,160 Speaker 1: contradicts previous knowledge or previous theory. Where does that lead 589 00:32:16,200 --> 00:32:19,120 Speaker 1: people to for their next step? I mean, if that 590 00:32:19,200 --> 00:32:21,160 Speaker 1: was going to be sort of emblazoned on a banner 591 00:32:21,160 --> 00:32:24,520 Speaker 1: when everyone arrives at Jackson Hall. Well, to be fair 592 00:32:24,560 --> 00:32:27,280 Speaker 1: to the Jackson Hole programmers, they actually essentially made that 593 00:32:27,360 --> 00:32:29,280 Speaker 1: the banner last year. They were a little ahead of 594 00:32:29,320 --> 00:32:31,560 Speaker 1: the curve, not quite as pith ly as you quote 595 00:32:31,560 --> 00:32:34,400 Speaker 1: me saying. But remember they had a paper last year 596 00:32:34,440 --> 00:32:37,160 Speaker 1: by John Faust. I believe it was talking about how 597 00:32:37,200 --> 00:32:39,520 Speaker 1: little we know on inflation predictions, and a lot of 598 00:32:39,560 --> 00:32:42,520 Speaker 1: the stuff on the program last year was about that. 599 00:32:42,560 --> 00:32:44,280 Speaker 1: I mean, who cares about the program, but just as 600 00:32:44,320 --> 00:32:47,000 Speaker 1: a marker of where things are, I think there is 601 00:32:47,120 --> 00:32:51,640 Speaker 1: legitimate reason to be freaked out intellectually that these straightforward 602 00:32:51,640 --> 00:32:54,720 Speaker 1: Phillips curve model, but also a lot of the underlying 603 00:32:54,800 --> 00:32:59,400 Speaker 1: things for inflation targeting, about forward looking expectations, central bank credibility, 604 00:33:00,200 --> 00:33:05,200 Speaker 1: um uh, the the difficulty of anchoring expectations turns out 605 00:33:05,200 --> 00:33:08,760 Speaker 1: to be wrong. Now in practical terms, they're wrong in 606 00:33:08,800 --> 00:33:11,640 Speaker 1: the sense that they're much more sticky than we thought 607 00:33:11,720 --> 00:33:14,640 Speaker 1: they were. Um that inflation is far less likely to 608 00:33:15,080 --> 00:33:17,000 Speaker 1: spike up than we thought they were. So in a 609 00:33:17,080 --> 00:33:21,320 Speaker 1: sense where people are is Uh, you can still use 610 00:33:21,760 --> 00:33:25,400 Speaker 1: economics for basic engineering purposes even if you can't use 611 00:33:25,440 --> 00:33:29,120 Speaker 1: it for real physics understanding, Adam, let me ask you 612 00:33:29,240 --> 00:33:31,160 Speaker 1: just shifting gears here a little bit about what the 613 00:33:31,160 --> 00:33:33,480 Speaker 1: Congress faces when when members of the House and send 614 00:33:33,480 --> 00:33:36,240 Speaker 1: I get back to Washington in September after this month 615 00:33:36,320 --> 00:33:39,440 Speaker 1: long recess. It is a pretty heavy agenda item of 616 00:33:39,440 --> 00:33:41,480 Speaker 1: things that the Congress has to do, including raising the 617 00:33:41,520 --> 00:33:44,480 Speaker 1: dead ceiling, UH, and hashing out something when it comes 618 00:33:44,480 --> 00:33:47,440 Speaker 1: to funding. Who's going to be the leading light here 619 00:33:47,480 --> 00:33:49,040 Speaker 1: when it comes to to raising the deaths and who 620 00:33:49,080 --> 00:33:50,600 Speaker 1: are you listening to or who do you think is 621 00:33:50,600 --> 00:33:52,160 Speaker 1: going to be guiding the way here? Is is the 622 00:33:52,200 --> 00:33:54,680 Speaker 1: administration speaking with any kind of unified voice when it 623 00:33:54,720 --> 00:33:57,240 Speaker 1: comes to the need to raise the dead ceiling? Well, 624 00:33:57,360 --> 00:34:01,000 Speaker 1: if one follows Day today, David certainly looks like they're 625 00:34:01,040 --> 00:34:03,800 Speaker 1: finally converging on saying they want a clean bill to 626 00:34:03,880 --> 00:34:06,760 Speaker 1: raise the dead ceiling. I think Secretary Nuken and to 627 00:34:06,840 --> 00:34:09,879 Speaker 1: some degree UH any C chair Cone have been very 628 00:34:09,920 --> 00:34:12,920 Speaker 1: clear on that. My understanding from Bloomberg reporting was, I 629 00:34:12,960 --> 00:34:15,560 Speaker 1: think last week mcmulvaney, the O and B director, came 630 00:34:15,600 --> 00:34:19,600 Speaker 1: on board on that. So that's really everybody from the administration. 631 00:34:19,880 --> 00:34:24,720 Speaker 1: The question is party discipline. Can the House control the 632 00:34:24,880 --> 00:34:28,840 Speaker 1: so called Freedom Caucus people, the extreme right wingers, um? 633 00:34:28,920 --> 00:34:33,439 Speaker 1: And I hope they can because even if you used 634 00:34:33,480 --> 00:34:36,799 Speaker 1: to believe in what they thought, UM, it's clear from 635 00:34:36,800 --> 00:34:39,759 Speaker 1: the last five years that if you create a crisis 636 00:34:39,760 --> 00:34:42,600 Speaker 1: over the debt ceiling, you don't change the fundamental path 637 00:34:42,880 --> 00:34:46,319 Speaker 1: of the budget. So I'd suggest they just get that 638 00:34:46,440 --> 00:34:49,120 Speaker 1: vote done and then move on to the real debate, 639 00:34:49,160 --> 00:34:51,799 Speaker 1: which is about tax reform. And the Treasury Department here 640 00:34:51,840 --> 00:34:54,799 Speaker 1: is saying that the government funding will run out sort of, 641 00:34:54,880 --> 00:34:57,640 Speaker 1: will hit that dead ceiling. It sounds like an early October. 642 00:34:57,680 --> 00:34:59,440 Speaker 1: Great to speak with that. Imposing once again, the president 643 00:34:59,440 --> 00:35:02,520 Speaker 1: of the Peterson Institute for International Economics joining us from 644 00:35:02,520 --> 00:35:05,120 Speaker 1: our nine nine one studios in Washington, d C. This morning. 645 00:35:05,120 --> 00:35:07,520 Speaker 1: Great to speak with him, as always here on Bloomberg 646 00:35:07,560 --> 00:35:10,000 Speaker 1: Surveillance with David Gura and Pim Fox. This morning. Tom 647 00:35:10,080 --> 00:35:13,960 Speaker 1: Keene is off and I just want just one interjected 648 00:35:14,000 --> 00:35:16,520 Speaker 1: one just because a news item that I've always been 649 00:35:16,520 --> 00:35:19,840 Speaker 1: watching a Tesla. Tesla is going to sell planning to 650 00:35:19,880 --> 00:35:22,360 Speaker 1: sell one and a half billion dollars of bonds in 651 00:35:22,440 --> 00:35:25,839 Speaker 1: order to support that Model three release. They burned through 652 00:35:25,840 --> 00:35:28,240 Speaker 1: about that much I think in the first quarter building 653 00:35:28,280 --> 00:35:30,799 Speaker 1: that Model three Bloomberg surveillance on Bloomberg Radio in New 654 00:35:30,880 --> 00:35:45,640 Speaker 1: York coast to coast and worldwide. You got up what 655 00:35:45,719 --> 00:35:48,960 Speaker 1: I like before before the birds started tripping, the bars 656 00:35:49,000 --> 00:35:51,080 Speaker 1: were still full as I made my way here New 657 00:35:51,120 --> 00:35:53,880 Speaker 1: York City. That doesn't say much, but well, we'll give 658 00:35:53,920 --> 00:35:56,160 Speaker 1: you some some crackers or something, well, you know, and 659 00:35:56,200 --> 00:35:58,359 Speaker 1: that leads me to Mondolize because we're gonna be talking 660 00:35:58,440 --> 00:36:01,880 Speaker 1: right now about Irene rosen Felt, the current chief executive 661 00:36:01,880 --> 00:36:04,520 Speaker 1: of Mandale and uh, well, we want to know what's 662 00:36:04,560 --> 00:36:07,000 Speaker 1: next because she's exiting the company. And here to help 663 00:36:07,080 --> 00:36:10,400 Speaker 1: us understand this is Alexeia Howard of Sandford Bernstein. She 664 00:36:10,480 --> 00:36:12,239 Speaker 1: is an expert on all things having to do with 665 00:36:12,280 --> 00:36:14,920 Speaker 1: the packaged food industry and she joins us on our 666 00:36:14,920 --> 00:36:17,680 Speaker 1: phone lines. Alexeia Howard, good morning, Thank you for being 667 00:36:17,719 --> 00:36:21,120 Speaker 1: with us. Tell us a little bit about Mandalie and 668 00:36:21,200 --> 00:36:26,919 Speaker 1: what kind of company Irene Rosenfeld is leaving. Very good 669 00:36:26,960 --> 00:36:30,920 Speaker 1: question and good morning as well. So Mandalis obviously was 670 00:36:31,320 --> 00:36:35,360 Speaker 1: created during the breakup of Craft foods in two thousand 671 00:36:35,440 --> 00:36:38,920 Speaker 1: and twelve. It's basically the snacking business from there. So 672 00:36:38,960 --> 00:36:41,759 Speaker 1: if you think of the old Nabisco company, that's a 673 00:36:41,760 --> 00:36:44,840 Speaker 1: big piece of it. Uh. Craft bought Cadbury back in 674 00:36:44,880 --> 00:36:48,440 Speaker 1: two thousand and ten, which is a lot of product overseas, 675 00:36:48,480 --> 00:36:51,800 Speaker 1: the old Cabrey's dairy milk brand everywhere around the world 676 00:36:52,120 --> 00:36:54,280 Speaker 1: and here in the US they have tried and gum. 677 00:36:54,800 --> 00:36:57,480 Speaker 1: Uh they have obviously all the Oreo crackers and and 678 00:36:57,520 --> 00:36:59,759 Speaker 1: that kind of thing. And Irene has been trying to 679 00:36:59,760 --> 00:37:02,960 Speaker 1: build this up into a global snacking powerhouse for the 680 00:37:03,040 --> 00:37:06,720 Speaker 1: last five years. She's been CEO of the Craft company. 681 00:37:07,040 --> 00:37:10,000 Speaker 1: She began that roll in two thousand and six, and 682 00:37:10,040 --> 00:37:12,120 Speaker 1: so she's really been at the job a little over 683 00:37:12,160 --> 00:37:16,160 Speaker 1: ten years now. And obviously we heard uh just recently 684 00:37:16,160 --> 00:37:20,040 Speaker 1: that she's planning to step down in November. So what 685 00:37:20,200 --> 00:37:22,000 Speaker 1: kind of company does she leave? It? Does is it? 686 00:37:22,080 --> 00:37:24,600 Speaker 1: I mean? Is this would have better to keep Craft 687 00:37:24,800 --> 00:37:28,800 Speaker 1: and the snack this snack business together. I mean, because 688 00:37:29,680 --> 00:37:34,960 Speaker 1: the plan was, you know, to get this company really charging, 689 00:37:35,040 --> 00:37:37,839 Speaker 1: you know and firing, but has that really worked out? 690 00:37:38,640 --> 00:37:42,120 Speaker 1: Stocks down this year? The plan with the plan originally 691 00:37:42,239 --> 00:37:44,840 Speaker 1: was to get the top line going because the snacks 692 00:37:44,840 --> 00:37:47,840 Speaker 1: piece of the business was always the fastest growing piece 693 00:37:47,880 --> 00:37:49,680 Speaker 1: of the business when it was the piece of craft, 694 00:37:49,800 --> 00:37:54,200 Speaker 1: when the two pieces were together. Unfortunately, they've had a 695 00:37:54,200 --> 00:37:57,080 Speaker 1: lot of issues in emerging markets over the last five 696 00:37:57,160 --> 00:38:00,279 Speaker 1: years or so, some executional issues at the begining, and 697 00:38:00,280 --> 00:38:03,680 Speaker 1: then obviously the macroeconomic slowdown in places like Brazil and 698 00:38:03,840 --> 00:38:07,279 Speaker 1: China and even India that caught them a little bit 699 00:38:07,360 --> 00:38:10,600 Speaker 1: unawares um and so the top line has definitely been 700 00:38:10,600 --> 00:38:14,239 Speaker 1: disappointing to investors. On the other hand, Nelson Pelted, the 701 00:38:14,239 --> 00:38:17,200 Speaker 1: activist investor, got involved. He actually joined the board in 702 00:38:17,280 --> 00:38:21,120 Speaker 1: January fourteen, and he started to push very hard for 703 00:38:21,160 --> 00:38:25,239 Speaker 1: the company to look at margin expansion UM. Back in 704 00:38:25,280 --> 00:38:28,880 Speaker 1: two thousand and twelve, when they started pushing for margin 705 00:38:28,920 --> 00:38:33,240 Speaker 1: expansion more explicitly um, the underlying margins were down about 706 00:38:33,280 --> 00:38:36,560 Speaker 1: ten percent. Now they're getting close to seventeen percent, so 707 00:38:36,640 --> 00:38:38,840 Speaker 1: that's a pretty big move over the last three or 708 00:38:38,840 --> 00:38:42,040 Speaker 1: four years. So they've really been addressing the cost base. 709 00:38:42,160 --> 00:38:45,040 Speaker 1: They've been addressing the number of products that they sell 710 00:38:45,080 --> 00:38:47,799 Speaker 1: around the world, the number of suppliers they have, really 711 00:38:47,800 --> 00:38:51,320 Speaker 1: trying to streamline and simplify the organization, and they've driven 712 00:38:51,440 --> 00:38:55,280 Speaker 1: nice underlying earnings growth, so the margin story, the profit 713 00:38:55,320 --> 00:38:58,560 Speaker 1: progress has actually been pretty good, but I definitely agree 714 00:38:58,560 --> 00:39:01,520 Speaker 1: that the top line has pretty lack luster all around. 715 00:39:01,920 --> 00:39:04,680 Speaker 1: You mentioned the difficulties of this company has faced it 716 00:39:04,719 --> 00:39:08,080 Speaker 1: faced in some emerging markets. Could you just enumerate some 717 00:39:08,160 --> 00:39:10,000 Speaker 1: of them for for a company of this scale trying 718 00:39:10,000 --> 00:39:12,319 Speaker 1: to do business in so many places, what are the 719 00:39:12,360 --> 00:39:16,360 Speaker 1: principal difficulties? So? I think in China was probably the 720 00:39:16,400 --> 00:39:19,200 Speaker 1: one that captured most people of attention. They did a 721 00:39:19,200 --> 00:39:23,240 Speaker 1: phenomenal job between two thousand seven and two thousand twelves 722 00:39:23,320 --> 00:39:26,840 Speaker 1: or so. We're driving the Oreo Cookies brand from about 723 00:39:26,880 --> 00:39:30,360 Speaker 1: thirty million dollars in sales up to about six hundred 724 00:39:30,360 --> 00:39:32,479 Speaker 1: million dollars in sales in the space of a few 725 00:39:32,680 --> 00:39:35,400 Speaker 1: few years there and then it all stalled, and I 726 00:39:35,400 --> 00:39:38,440 Speaker 1: think a lot of that was UM the slowdown in 727 00:39:38,480 --> 00:39:41,160 Speaker 1: the economy over in China that certainly hit them hard, 728 00:39:41,400 --> 00:39:44,200 Speaker 1: But they also had problems with distribution um they had, 729 00:39:44,480 --> 00:39:47,560 Speaker 1: so they definitely had some execution issues as well at 730 00:39:47,560 --> 00:39:50,480 Speaker 1: the start. More recently, because of the slowdown, they've lost 731 00:39:50,520 --> 00:39:53,200 Speaker 1: share to some of the more local brands, and I 732 00:39:53,239 --> 00:39:56,360 Speaker 1: think they may have have maybe pushed too hard on 733 00:39:56,400 --> 00:39:58,640 Speaker 1: the innovation. That was hard to keep it up for 734 00:39:58,680 --> 00:40:02,160 Speaker 1: a time. In Rezial, it's also been a macroeconomic roller 735 00:40:02,160 --> 00:40:04,960 Speaker 1: coaster down there for a while. Uh. They again, they 736 00:40:04,960 --> 00:40:08,080 Speaker 1: also had some distribution issues right at the outset, just 737 00:40:08,160 --> 00:40:11,720 Speaker 1: as the split was happening from craft foods. In Russia, 738 00:40:11,800 --> 00:40:15,440 Speaker 1: they took a bit too much pricing. UM Also back 739 00:40:15,440 --> 00:40:18,640 Speaker 1: in or So, just as coffee prices were coming down, 740 00:40:19,560 --> 00:40:22,080 Speaker 1: they had some problems with pricing over there. The good 741 00:40:22,120 --> 00:40:25,320 Speaker 1: news was that most of those issues were addressed very quickly. 742 00:40:25,680 --> 00:40:29,279 Speaker 1: In India, they had a high quality problem where the 743 00:40:29,320 --> 00:40:31,719 Speaker 1: business was growing so rapidly that they ran out of 744 00:40:31,760 --> 00:40:34,879 Speaker 1: capacity for a short period. But once a new plant 745 00:40:34,960 --> 00:40:37,440 Speaker 1: got up and running again, that business seems to have 746 00:40:37,480 --> 00:40:39,680 Speaker 1: done fairly well. So what are the what are the 747 00:40:39,680 --> 00:40:42,360 Speaker 1: most pressing issues that the that the company needs to 748 00:40:42,360 --> 00:40:46,440 Speaker 1: address UM I think at this stage it really is 749 00:40:46,480 --> 00:40:49,360 Speaker 1: all about the top line. They've demonstrated this good track 750 00:40:49,440 --> 00:40:52,600 Speaker 1: record of margin expansion and earnings growth, and they still 751 00:40:52,640 --> 00:40:55,319 Speaker 1: have I believe a few years of that to play out. 752 00:40:55,360 --> 00:40:58,160 Speaker 1: They've been opening new manufacturing plants around the world and 753 00:40:58,480 --> 00:41:00,799 Speaker 1: really addressing that the cost base but the problem is 754 00:41:00,840 --> 00:41:03,799 Speaker 1: the top line that it's been stuck in this very 755 00:41:03,960 --> 00:41:07,680 Speaker 1: very low single digit territory for really most of the 756 00:41:07,760 --> 00:41:11,279 Speaker 1: last five years, and they've got to fix the um 757 00:41:11,320 --> 00:41:14,200 Speaker 1: their ability, I guess, to to innovate, to drive in 758 00:41:14,200 --> 00:41:18,839 Speaker 1: a innovation around the globe, get the promotional activity really 759 00:41:18,880 --> 00:41:21,160 Speaker 1: locked up tight, get the marketing sorted out, and so 760 00:41:21,200 --> 00:41:24,400 Speaker 1: that Alexia. So then why are why are they focused 761 00:41:24,440 --> 00:41:26,680 Speaker 1: on cutting costs now? I mean, that's not going to 762 00:41:26,800 --> 00:41:30,799 Speaker 1: drive the top line. Well, it's been phases, so I 763 00:41:30,840 --> 00:41:34,520 Speaker 1: think it was the right call back in to pivot 764 00:41:34,600 --> 00:41:38,440 Speaker 1: to margin expansion because that was obviously the low hanging fruit. 765 00:41:38,840 --> 00:41:42,160 Speaker 1: I think perhaps in this transition that we're like we're 766 00:41:42,160 --> 00:41:44,920 Speaker 1: going to see later in the year um that might 767 00:41:45,000 --> 00:41:47,640 Speaker 1: be a signal that the company is ready to actually 768 00:41:47,640 --> 00:41:51,279 Speaker 1: refocus on the top line. Let me ask you just 769 00:41:51,360 --> 00:41:55,000 Speaker 1: about this this transition. Ms Rosenfeld is going to stay 770 00:41:55,040 --> 00:41:57,480 Speaker 1: on in a board capacity, I gather, But to the 771 00:41:57,480 --> 00:41:59,880 Speaker 1: company here has gone outside. It's not picked an internal 772 00:42:00,000 --> 00:42:01,759 Speaker 1: and you'd imagine that there probably was at least one 773 00:42:01,800 --> 00:42:04,120 Speaker 1: or two from within the company's ranks they could have gone, 774 00:42:04,280 --> 00:42:06,880 Speaker 1: that could have gone to. Do you have any hesitation 775 00:42:06,880 --> 00:42:08,480 Speaker 1: do you have any worry about the fact that they've 776 00:42:08,480 --> 00:42:12,200 Speaker 1: gone outside UM. I think it's always a little bit 777 00:42:12,239 --> 00:42:14,480 Speaker 1: of an eye O know, when when companies go outside, 778 00:42:14,480 --> 00:42:17,400 Speaker 1: I think that has to be UM has to be acknowledged, 779 00:42:17,440 --> 00:42:20,320 Speaker 1: and it's it's not all that common for you know, 780 00:42:20,400 --> 00:42:24,440 Speaker 1: normally promote from within. Seemed to be more the what 781 00:42:24,480 --> 00:42:26,480 Speaker 1: I've seen over the last ten or eleven years covering 782 00:42:26,520 --> 00:42:30,200 Speaker 1: the space. UM. So yes, going going to the outside, 783 00:42:30,239 --> 00:42:34,080 Speaker 1: going to a CEO that has a good track record 784 00:42:34,160 --> 00:42:37,720 Speaker 1: and McCain for driving top line growth and bottom bottom 785 00:42:37,719 --> 00:42:40,359 Speaker 1: line growth. I think Irene's comment was he can walk 786 00:42:40,400 --> 00:42:44,000 Speaker 1: and chew gum um and that was that was I mean, 787 00:42:44,040 --> 00:42:48,880 Speaker 1: it's an interesting choice because obviously McCain is private um UM. 788 00:42:48,960 --> 00:42:53,200 Speaker 1: Mr Dirk Vanderput obviously has a lot of experience that 789 00:42:53,320 --> 00:42:55,800 Speaker 1: are known and Coca Cola so are the publicly traded 790 00:42:55,840 --> 00:42:59,640 Speaker 1: CpG companies, but not in the CEO role, so he 791 00:42:59,680 --> 00:43:03,239 Speaker 1: hasn't run a publicly traded company yet. Aside from that 792 00:43:03,320 --> 00:43:06,120 Speaker 1: principal difference, the public private difference, how is how is 793 00:43:06,200 --> 00:43:09,600 Speaker 1: McCain different from models, Well, obviously it's a very since 794 00:43:09,840 --> 00:43:13,680 Speaker 1: UM it's a much more focused product line. Basically in 795 00:43:13,719 --> 00:43:17,400 Speaker 1: the in the frozen potatoes business, and a lot of 796 00:43:17,400 --> 00:43:21,400 Speaker 1: the the the quick service restaurants will be their primary customers, 797 00:43:21,440 --> 00:43:23,799 Speaker 1: so it is a much simpler business. As I say, 798 00:43:23,840 --> 00:43:26,279 Speaker 1: he clearly has a good track record UM. They were 799 00:43:26,400 --> 00:43:29,759 Speaker 1: very keen to point out on the original um UH 800 00:43:30,120 --> 00:43:32,600 Speaker 1: call when this was discussed that he's managed to grow 801 00:43:32,960 --> 00:43:36,719 Speaker 1: revenues by fifty in the last six years that he's 802 00:43:36,760 --> 00:43:39,319 Speaker 1: been running the business, and three quarters of that has 803 00:43:39,320 --> 00:43:43,080 Speaker 1: been organic, organic growth, which is impressive. But definitely a 804 00:43:43,120 --> 00:43:47,120 Speaker 1: much more focused company um UM in terms of product 805 00:43:47,160 --> 00:43:50,160 Speaker 1: lines and obviously the much more complicated Mondolie business. We'll 806 00:43:50,200 --> 00:43:51,520 Speaker 1: come back in just a moment here. What do you 807 00:43:51,560 --> 00:43:55,360 Speaker 1: make of the timing of this this announcement UM, It's interesting, 808 00:43:55,360 --> 00:43:59,239 Speaker 1: I mean, maybe not that surprising, given that Irene has 809 00:43:59,560 --> 00:44:02,600 Speaker 1: the Missouris themselves has been there for longer than ten years. 810 00:44:02,640 --> 00:44:05,200 Speaker 1: It might be just time for her to to think 811 00:44:05,239 --> 00:44:08,759 Speaker 1: about moving on UM. But obviously there's a lot of 812 00:44:08,760 --> 00:44:12,640 Speaker 1: discussion about consolidation in the space and so people the 813 00:44:12,680 --> 00:44:16,080 Speaker 1: biggest conversations that the morning that this was all announced, 814 00:44:16,640 --> 00:44:19,200 Speaker 1: the questions were around, well, what does this mean for 815 00:44:19,200 --> 00:44:21,560 Speaker 1: for a deal? Because Models has obviously been one of 816 00:44:21,600 --> 00:44:25,880 Speaker 1: the possible candidates as the next target for Craft Times. 817 00:44:25,920 --> 00:44:29,359 Speaker 1: So people are definitely noodling on that. I flipped through 818 00:44:29,360 --> 00:44:32,120 Speaker 1: your notes here, Alexia, and I love the passage here 819 00:44:32,480 --> 00:44:35,640 Speaker 1: on an interesting love triangle that's developed between Modeles, Craft Times, 820 00:44:35,640 --> 00:44:38,680 Speaker 1: and PepsiCo, whereby, as you write, a sizeable deal could 821 00:44:38,719 --> 00:44:42,160 Speaker 1: emerge between any two of these companies over the coming months. 822 00:44:42,200 --> 00:44:44,440 Speaker 1: How how ripe is the environment here for a merger 823 00:44:44,480 --> 00:44:47,279 Speaker 1: and walk us through what's likely to happen when it 824 00:44:47,320 --> 00:44:52,279 Speaker 1: comes to mergers and acquisitions in this food space? Sure so, Um, 825 00:44:52,360 --> 00:44:56,279 Speaker 1: the US packaged food sector is still the most fragmented 826 00:44:56,320 --> 00:44:59,280 Speaker 1: staples sector in the developed world. If you think about 827 00:44:59,600 --> 00:45:02,239 Speaker 1: beverage is or household products, Um, they're all a lot 828 00:45:02,239 --> 00:45:04,520 Speaker 1: more concentrated. So you've got a lot of fairly small 829 00:45:04,600 --> 00:45:09,759 Speaker 1: companies in here. Um. Clearly Craft higns I guess um 830 00:45:10,040 --> 00:45:14,200 Speaker 1: with three g uh in the background there Um, they've 831 00:45:14,239 --> 00:45:16,840 Speaker 1: been looking to do another deal. Their last move was 832 00:45:16,920 --> 00:45:20,719 Speaker 1: buying Craft in fifteen. Now we're about two years on 833 00:45:20,800 --> 00:45:23,040 Speaker 1: from that deal. They've sucked a lot of the meat 834 00:45:23,040 --> 00:45:25,600 Speaker 1: off the bones, and they clearly are looking for another 835 00:45:25,760 --> 00:45:29,440 Speaker 1: another move, judging by the bid earlier. This year for Unilever, 836 00:45:29,600 --> 00:45:32,960 Speaker 1: which obviously didn't work out. So the question has become 837 00:45:33,000 --> 00:45:35,920 Speaker 1: who else might they go after? And frankly, a lot 838 00:45:35,960 --> 00:45:39,040 Speaker 1: of the heavily processed packaged food companies that are very 839 00:45:39,160 --> 00:45:42,680 Speaker 1: US centric, like General Mills or Kellogg, they're having such 840 00:45:42,719 --> 00:45:44,759 Speaker 1: a hard time in the US market right now that 841 00:45:44,800 --> 00:45:47,400 Speaker 1: I think it's much less likely that they would be 842 00:45:47,440 --> 00:45:52,040 Speaker 1: candidates for Forecraft Higns because there's so much uncertainty. Whereas 843 00:45:52,160 --> 00:45:54,279 Speaker 1: a company like a Monolis that has a lot more 844 00:45:54,400 --> 00:45:58,279 Speaker 1: exposure in international markets, or even a Pepsi, which is 845 00:45:58,719 --> 00:46:02,040 Speaker 1: the sort of three parts of my love triangle here, um, 846 00:46:02,440 --> 00:46:04,960 Speaker 1: they would seem to be sort of more obvious candidates 847 00:46:05,000 --> 00:46:07,480 Speaker 1: because they've got very strong brands, They've got a lot 848 00:46:07,520 --> 00:46:11,000 Speaker 1: of exposure to emerging markets. That's the kind of direction 849 00:46:11,000 --> 00:46:13,920 Speaker 1: that I think Kraftheis needs to take at this point. Now. 850 00:46:14,120 --> 00:46:17,960 Speaker 1: It's interesting between these three companies because um, back in 851 00:46:18,000 --> 00:46:20,680 Speaker 1: two thousand and twelve or so, when Nelson Pelts was 852 00:46:20,680 --> 00:46:23,640 Speaker 1: putting together his white paper on Pepsi, he was talking 853 00:46:23,680 --> 00:46:26,839 Speaker 1: about possibly trying to get Pepsi to make a bid 854 00:46:26,880 --> 00:46:30,839 Speaker 1: for Mondelise back then, um, so clearly now with him 855 00:46:30,840 --> 00:46:33,479 Speaker 1: on the Mondolese board. There has been a question mark 856 00:46:33,520 --> 00:46:35,719 Speaker 1: about whether Mondolese might want to make a move on 857 00:46:35,800 --> 00:46:38,600 Speaker 1: Free to Lay, which is obviously a big, big chunk 858 00:46:38,640 --> 00:46:42,480 Speaker 1: of PEPSI as a company. So m yes, it's not 859 00:46:42,560 --> 00:46:45,600 Speaker 1: clear whether any deal will happen. Clan none other companies 860 00:46:45,600 --> 00:46:48,600 Speaker 1: have commented publicly on any such deal, but you could 861 00:46:48,600 --> 00:46:51,480 Speaker 1: imagine a situation where two of those three companies might 862 00:46:51,520 --> 00:46:55,200 Speaker 1: see something fairly sizeable happening. Now. Obviously the change of 863 00:46:55,280 --> 00:46:58,600 Speaker 1: leadership at Mondolise has left everybody's head scratching. The fact 864 00:46:58,600 --> 00:47:00,680 Speaker 1: that the stock price didn't move a much that day 865 00:47:00,680 --> 00:47:02,920 Speaker 1: and there was very low volume. I think people have 866 00:47:03,000 --> 00:47:05,400 Speaker 1: all kind of concluded it's a damp squab. If we're 867 00:47:05,440 --> 00:47:08,760 Speaker 1: going to pass the baton to somebody else, then maybe 868 00:47:08,920 --> 00:47:11,160 Speaker 1: that means that a deal isn't in the offering um. 869 00:47:11,239 --> 00:47:14,719 Speaker 1: So that's clearly where the investors have landed. I would 870 00:47:14,719 --> 00:47:17,080 Speaker 1: say it's going to be a wait and c situation. 871 00:47:17,719 --> 00:47:21,840 Speaker 1: Stranger things have happened, you know, I am I'm curious 872 00:47:21,840 --> 00:47:23,799 Speaker 1: you just if you could help us assess the role 873 00:47:23,840 --> 00:47:25,920 Speaker 1: that Nelson Peltz has played the role of activist investment. 874 00:47:26,000 --> 00:47:28,200 Speaker 1: What have we learned about activist investment here. From from 875 00:47:28,200 --> 00:47:32,400 Speaker 1: what we've seen with Mr Pelts and and and with Mandels, well, 876 00:47:32,440 --> 00:47:35,319 Speaker 1: I would say there's a lot of activist investors that 877 00:47:35,360 --> 00:47:38,399 Speaker 1: have been involved over the space, particularly in recent years. 878 00:47:38,400 --> 00:47:41,400 Speaker 1: If you think about Joanna Partners being involved with ConAgra 879 00:47:41,680 --> 00:47:45,040 Speaker 1: and obviously we have Engaged Capital now involved with with 880 00:47:45,120 --> 00:47:49,440 Speaker 1: handful Ift deal. Um so yeah. Mr Pelts has was 881 00:47:49,840 --> 00:47:52,400 Speaker 1: back in the day involved with Hines back in two 882 00:47:52,440 --> 00:47:55,000 Speaker 1: thousand and six and then he stayed on for another 883 00:47:55,080 --> 00:47:58,879 Speaker 1: few years involved over there. He's been involved with with 884 00:47:59,280 --> 00:48:02,839 Speaker 1: Craft and now Mandels much more actively since he took 885 00:48:02,840 --> 00:48:07,400 Speaker 1: a board seat in January four UM. Obviously hard to 886 00:48:07,440 --> 00:48:10,400 Speaker 1: tell exactly what his influence has been behind the scenes. 887 00:48:10,640 --> 00:48:13,200 Speaker 1: He doesn't comment publicly on that, but we have seen 888 00:48:13,239 --> 00:48:17,680 Speaker 1: a lot of leadership changes at below Iron Rosenfelt at 889 00:48:17,719 --> 00:48:21,520 Speaker 1: Mandels since he's been in place. UM so so yes, 890 00:48:21,560 --> 00:48:23,759 Speaker 1: I mean I think he has a long a long 891 00:48:23,920 --> 00:48:28,279 Speaker 1: term um sort of vision for the company. He's not 892 00:48:28,320 --> 00:48:29,920 Speaker 1: one of those people that gets in and gets own 893 00:48:30,000 --> 00:48:33,160 Speaker 1: super quickly. Um. But also I think he probably does 894 00:48:33,440 --> 00:48:36,200 Speaker 1: keep the management team on their toes and who knows 895 00:48:36,239 --> 00:48:38,120 Speaker 1: when it comes to deal making what what his angle 896 00:48:38,239 --> 00:48:40,680 Speaker 1: might be Alexie. Last question here just about the most 897 00:48:40,680 --> 00:48:43,120 Speaker 1: recent round of earnings, there was mentioned of a of 898 00:48:43,160 --> 00:48:45,160 Speaker 1: a cyber attack, the degree to which the company is 899 00:48:45,200 --> 00:48:47,239 Speaker 1: dealing with that. I had a chance to sit down 900 00:48:47,239 --> 00:48:48,920 Speaker 1: with sir Martin Sorel a few weeks back of where 901 00:48:48,920 --> 00:48:51,480 Speaker 1: his WPP was wrapped up in an attack of its 902 00:48:51,520 --> 00:48:53,399 Speaker 1: own and is going through all those pieces. He talked 903 00:48:53,440 --> 00:48:56,120 Speaker 1: about that the difficulties of of doing that, how heavily 904 00:48:56,120 --> 00:48:58,520 Speaker 1: does that way on Mond is just finding its way 905 00:48:58,880 --> 00:49:02,239 Speaker 1: out of that hack. To be honest, I think with 906 00:49:02,360 --> 00:49:05,120 Speaker 1: that it was it was disclosed, you know, as soon 907 00:49:05,160 --> 00:49:08,040 Speaker 1: as they knew that it was material enough to to 908 00:49:08,200 --> 00:49:10,600 Speaker 1: have an impact on the earnings cycle this time around. 909 00:49:11,320 --> 00:49:13,080 Speaker 1: But they are saying it might have a little bit 910 00:49:13,120 --> 00:49:15,359 Speaker 1: of a bearing on the third quarter learnings, but they 911 00:49:15,400 --> 00:49:17,759 Speaker 1: reiterated their guidance for the full year on both the 912 00:49:17,760 --> 00:49:20,400 Speaker 1: top and the bottom line. So I think from an 913 00:49:20,400 --> 00:49:25,160 Speaker 1: investor standpoint, it was a one time unfortunate incidents and 914 00:49:25,160 --> 00:49:27,600 Speaker 1: people are willing to look through it. Lastly, here, I 915 00:49:27,640 --> 00:49:29,319 Speaker 1: just weve got about thirty seconds left. How are you 916 00:49:29,320 --> 00:49:32,520 Speaker 1: going to assess the the affocacy of the job performance 917 00:49:32,560 --> 00:49:34,239 Speaker 1: of this this new CEO what are the metrics you're 918 00:49:34,239 --> 00:49:37,279 Speaker 1: going to be looking at. Well, clearly the the top 919 00:49:37,320 --> 00:49:39,200 Speaker 1: line is going to be the thing that everybody is 920 00:49:39,200 --> 00:49:41,480 Speaker 1: going to be looking at, so organic sales growth and 921 00:49:41,600 --> 00:49:45,240 Speaker 1: his plans for innovation and marketing and driving the top line. Also, 922 00:49:45,320 --> 00:49:46,840 Speaker 1: we want to know that he's not going to drop 923 00:49:46,880 --> 00:49:49,440 Speaker 1: the ball on the margins. And the big question on 924 00:49:49,480 --> 00:49:52,719 Speaker 1: investors minds is will he have to rebase earnings. I 925 00:49:52,800 --> 00:49:55,400 Speaker 1: don't think so agiven that the company is in good shape, 926 00:49:55,400 --> 00:49:57,759 Speaker 1: but an incoming CEO from the outside you never know. 927 00:49:58,280 --> 00:49:59,759 Speaker 1: Great to speak with you this morning. Thank you very 928 00:49:59,840 --> 00:50:01,920 Speaker 1: much for being so generous with your time. That's Alexia Howard. 929 00:50:01,920 --> 00:50:04,080 Speaker 1: She's an analyst with Stanford Bernstein talking with us about 930 00:50:04,080 --> 00:50:06,680 Speaker 1: the future of Montali's, one of the food companies that 931 00:50:06,680 --> 00:50:18,360 Speaker 1: she covers there at Sanford Bernstein. Thanks for listening to 932 00:50:18,400 --> 00:50:23,120 Speaker 1: the Bloomberg Surveillas podcast. Subscribe and listen to interviews on 933 00:50:23,280 --> 00:50:28,879 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 934 00:50:28,880 --> 00:50:32,680 Speaker 1: on Twitter at Tom Keene. David Gura is at David Gura. 935 00:50:33,120 --> 00:50:37,040 Speaker 1: Before the podcast, you can always catch us worldwide. I'm 936 00:50:37,040 --> 00:50:37,919 Speaker 1: Bloomberg Radio