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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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Speaker 1: with Jonathan Ferroll and Lisa Brownwitz Jay Leye. We bring

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Speaker 1: you insight from the best and economics, finance, investment and

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Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg

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Speaker 1: dot Com and of course on the Bloomberg Tournament. The

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Speaker 1: nikes are of covering a conference as you're sitting there

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Speaker 1: and someone drops by for an interview, maybe unexpected the

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Speaker 1: time and can shift. And we've got a fantastic guest

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Speaker 1: coming up now with Bloomberg's Francine Laqua over in Glasgow, Scotland.

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Speaker 1: Hey Francine, Hi John. We're delighted to be joined by

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Speaker 1: Mark Karney here of course, so looking at finance, so

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Speaker 1: looking at COP twenty six in Glasgow. He's also former

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Speaker 1: Bank of England Governor Mark as a voice, Thank you

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Speaker 1: so much for making us smart on what finance can do,

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Speaker 1: because I mean COMP twenty six starts today. To G

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Speaker 1: twenty was a little bit of the dull drum because

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Speaker 1: we've and get some of the pledges that a lot

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Speaker 1: of people were hoping for. What does it mean for

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Speaker 1: your expectations for COP twenty six. Well, I think a

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Speaker 1: couple of things. I'm going to quote the Secretary General's

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Speaker 1: hopes unfulfilled but not yet buried. The one and a

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Speaker 1: half degrees anchor in the G twenty communicate is significant,

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Speaker 1: some progress, but we've got a lot of work to do.

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Speaker 1: What we and the big question for this week, at

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Speaker 1: least for this Wednesday, is what can finance and more

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Speaker 1: specifically the private financial sector, what can it do to

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Speaker 1: help solve this problem? So it's going to really have

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Speaker 1: to step up, and there's been a lot of institutions,

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Speaker 1: a lot of people around the world have been working

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Speaker 1: in order to do that. Yeah, we don't even have

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Speaker 1: a price on carbon yet, when will we get that? Well,

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Speaker 1: we don't have a price on carbon. But what I

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Speaker 1: think our message on Wednesday to world leaders, to policy makers,

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Speaker 1: to business people around the world is finance is going

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Speaker 1: to be there, and finance is going to be there

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Speaker 1: in two respects. One work we've we've retooled the financial system.

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Speaker 1: We've changed the plumbing, if you will, the financial system,

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Speaker 1: a bunch of very worthy reforms that actually, to be honest,

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Speaker 1: only the audience that Bloomberg would fully understand and appreciate

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Speaker 1: and we can go through them for the next hour. UM.

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Speaker 1: But you know, think mandatory disclosure, think stress testing all that.

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Speaker 1: So part is reallytooling. But then it's also about financial

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Speaker 1: institutions stepping up and say saying that they are going

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Speaker 1: to finance this transition, this enormous hundred trillion dollar transition

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Speaker 1: that needs to happen over the next three decades. They're

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Speaker 1: gonna finance it, and they're gonna mark their own homework.

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Speaker 1: They're gonna show up year and year out say what

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Speaker 1: their emissions are of their clients. UM, have specific strategies

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Speaker 1: for reducing carbon fair share of fifty down by That's

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Speaker 1: what the Glasgow Financial Alliance is all. But why not

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Speaker 1: stop actually putting money into fossil fuel full stop, instead

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Speaker 1: of talking about the transition. Well, you've got I mean,

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Speaker 1: we're living through problems with the transition right now in

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Speaker 1: terms of we have both far far too many fossil

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Speaker 1: fuels in the world. We're gonna have enormous stranded assets.

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Speaker 1: Half of gas, three quarters of coal, et cetera, maybe

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Speaker 1: up as much as half of oil reserves. Proven reserves

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Speaker 1: need to stay in the ground if we're gonna get

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Speaker 1: to where we are. But we also have local short

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Speaker 1: term shortages of some of those exact materials were here

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Speaker 1: in the UK. They a shortage of the storage of gas.

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Speaker 1: So there needs to be some only some limited financing

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Speaker 1: for a transition, but only for a transition, which is

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Speaker 1: why you need things like g fans that are relentlessly, ruthlessly,

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Speaker 1: absolutely focused on that transition to net zero and not

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Speaker 1: just any transition and one and a half degree transition,

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Speaker 1: which sorry if I may, which is what G twenty

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Speaker 1: leaders signed off on yesterday. But the G twenty leaders

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Speaker 1: didn't stop, for example, coal from being used domestically. And

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Speaker 1: and so we're doing progress, but we're going at it slowly. Well,

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Speaker 1: we're doing progress. We need to accelerate it. We need

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Speaker 1: to recognize there's differences and as as obviously are between

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Speaker 1: advanced economies developing economies, uh, some of those there's a

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Speaker 1: there's a different timeline for fully ending coal. We want

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Speaker 1: to stop coal, not just new coal, but stop use

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Speaker 1: of coal by the advanced economies. That's what powering past coal,

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Speaker 1: which is a big element of of COP is about.

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Speaker 1: But also by the end of the next decade in

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Speaker 1: the emerging developing world and if I may again to

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Speaker 1: bring it back to fin finance. UM. To give them

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Speaker 1: the confidence to do that, they need to see literally

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Speaker 1: a wall of money that's available for their transition. So

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Speaker 1: when they're building up alternative energy that the money is

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Speaker 1: going to be there. Who could do better in finance?

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Speaker 1: Is it the asset managers or the big banks? Well,

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Speaker 1: what we're gonna reveal on Wednesday is who's doing the

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Speaker 1: best um and so from asset managers sneak peak. Well, look,

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Speaker 1: the problem is it's a hundred trillion dollar problem. And

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Speaker 1: so the questions who's stepping up for the solution the

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Speaker 1: members of de fans, so those are in net zero

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Speaker 1: Banking Alliance, that zer Asset Managers Alliance, the asset owners,

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Speaker 1: the big pension funds stepping up with these commitments and

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Speaker 1: then we need to channel them to where they're needed

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Speaker 1: the most. How much stress is there at the moment

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Speaker 1: amongst the asset managers that actually some of the e

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Speaker 1: s G labeled products than if you probe are are

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Speaker 1: not green? Well, well, look there is some stress, and

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Speaker 1: it's great that there is. That's it's not great that

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Speaker 1: it happens, but it's great that there's that scrutiny, and

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Speaker 1: there's that skepticism or healthy skepticism about E s G

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Speaker 1: labels or sustainable lay goals, and that again is one

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Speaker 1: of the reasons we're having this ruthless, relentless focus on

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Speaker 1: net zero because in the end, look, we can't stabilize

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Speaker 1: the climate unless we get to net zero. And it's

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Speaker 1: a simple These are hard numbers. Your emissions are either

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Speaker 1: A or B. They're going up or down. And if

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Speaker 1: they're going down, are they going down consistent with the

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Speaker 1: science we've anchored in the science, the same science the

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Speaker 1: u N and others used for the one a half

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Speaker 1: degree objectives. Compulsory, should you not have regulators coming in

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Speaker 1: and saying, well, this is a new definition, you stick

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Speaker 1: by it and we're gonna measure. So it's a great question.

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Speaker 1: So let's look at what happened with TCFD climate disclosure.

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Speaker 1: Six years ago. You and I were in Paris, we

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Speaker 1: talked about this, we talked of other things. Now that's

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Speaker 1: moving to become mandatory compulsory after after that period of time.

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Speaker 1: What we're talking about in terms of net zero disclosure,

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Speaker 1: moving that to compulsory absolutely. I think we have a

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Speaker 1: couple of weird year window where best practice is developed

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Speaker 1: by the private sector on what exact informations use, stakeholders

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Speaker 1: make those judgments, and then yes, I think the jurisdictions,

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Speaker 1: major jurisdiction should make this compulsory. I mean, economically, where

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Speaker 1: the crossroads because of the energy crisis, because of inflationary pressures,

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Speaker 1: does it worry you that actually it puts the transition

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Speaker 1: backwards a little bit? Well, I mean, if I were

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Speaker 1: a policy maker, I'm not one at the moment, but

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Speaker 1: if I were in policy, always in policy maker at heart,

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Speaker 1: and I care about the economy. Um. Look, I think

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Speaker 1: one of the opportunities to turn the easy bit of

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Speaker 1: the recovery has been reopening our economies. Yes, there's been

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Speaker 1: some frictions, but we've gotten that boost of growth was reopening.

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Speaker 1: Now we need to sustain an expansion. We're only going

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Speaker 1: to do that with investment. Business investment business balance sheets

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Speaker 1: are in pretty good shape. If you have directions such

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Speaker 1: as moving towards a net zero economy, we have huge,

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Speaker 1: huge investment that a hundred trillion figure I mentioned has

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Speaker 1: huge positive GDP multipliers as it comes forward. So that's

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Speaker 1: the opportunity done leash to turn recovery into an expansion.

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Speaker 1: But so if we get a temper tantrum, I don't

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Speaker 1: know whether we do a tap per testum temper tap

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Speaker 1: per tenttrum. But then what does that mean for E

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Speaker 1: s G. Product appetite? Well, again, what I'm looking for.

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Speaker 1: So when you look for where to be in financial markets,

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Speaker 1: given a situation which you know, yes, there is an

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Speaker 1: adjustment going on on interest rates, I'd rather have this

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Speaker 1: adjustment going on at interest rates rather than slipping back

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Speaker 1: into a liquidity trap, which is where we were around

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Speaker 1: the customer liquidity trap for many years after the financial crisis.

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Speaker 1: So now as global interest rates are moving up, ideally

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Speaker 1: what's happening is real interest rates are moving up because

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Speaker 1: we're getting the kind of investment and kind of returns

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Speaker 1: that we need that's sustained recovery. You want me to

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Speaker 1: stop you're having that. We have to stop having it

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Speaker 1: to a time tantrum. But we'll get you back on

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Speaker 1: Mark Arty, thank you for joining us. This is Bloomberg.

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Speaker 1: I have to say, sitting in this sea, there's always

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Speaker 1: been an honor for me to cover up this industry.

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Speaker 1: Working in this industry, it's really really difficult and We're

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Speaker 1: always very happy when someone way like gets a new seat.

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Speaker 1: Troyes has got a new seat, the chief market strategist

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Speaker 1: f f S Investments. Troy Congratulations, before we start a conversation,

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Speaker 1: just told to me about the new seat you've got.

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Speaker 1: What's going to change for you. Yeah, So I'm incredibly

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Speaker 1: excited to join FS Investments as their chief market strategists. So,

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Speaker 1: you know, it's a firm that I've known since two

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Speaker 1: thousand fourteen, when I had the pleasure of meeting the founder,

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Speaker 1: Michael Foreman. You know, one of the things that attracted

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Speaker 1: me to them was not only investment excellence, but the

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Speaker 1: fact that they took that investment excellence and found pretty

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Speaker 1: unique ways to package sophisticated strategies so that retail investors

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Speaker 1: could actually access them. As you remember, in our industry,

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Speaker 1: a lot of the early stage, more sophisticated alternatives were

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Speaker 1: really exclusively for sovereign wealth funds or pensions. So getting

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Speaker 1: to work with a firm whose DNA is tied to

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Speaker 1: finding ways for retail investors to participate very very exciting.

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Speaker 1: UM And you know right now, as you guys know,

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Speaker 1: one of the biggest challenges for all investors is what

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Speaker 1: to do with their fixed incomm allocation, and they've variety

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Speaker 1: of really exciting solutions there. I will never underestimate anyone's

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Speaker 1: ability in this industry, Troy, to deliver a marketing pitch

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Speaker 1: just like that on a time it's ready to go,

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Speaker 1: doing what I can, Troy, let's start this interview properly.

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Speaker 1: The Federal Reserve, big big build up in the front

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Speaker 1: end of the cup. How much pushback this week? Well,

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Speaker 1: I don't think there'll be a lot of pushback from

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Speaker 1: the Fed. I mean, I think they're going to talk

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Speaker 1: more broadly about the fact that they're going to be patient.

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Speaker 1: But you know, at the end of the day, and

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Speaker 1: Lisa was bringing this up before, markets are getting more

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Speaker 1: and more comfortable with the probability of them hiking at

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Speaker 1: least twice next year. And that's certainly good news from

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Speaker 1: a standpoint of market stability. But other than that, I mean,

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Speaker 1: remember what, we'll stop this rally. And I disagree with

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Speaker 1: Mike Wilson with all due respect, it's probably gonna go

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Speaker 1: into January at least, is when liquidity finally starts to

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Speaker 1: wane meaningfully. We've seen a meaningful drop over the past

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Speaker 1: five months but M two is still growing faster the

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Speaker 1: nominal GDP and giving the seasonality, right now, we do

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Speaker 1: expect the green light to stay go. But as we

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Speaker 1: get into next year, that lights darting flash yellow, right

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Speaker 1: because you know, as the FED tapers, you're gonna have

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Speaker 1: slore and two growth. As markets start to focus more

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Speaker 1: and more on the potential hikes, you'll see that flat line.

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Speaker 1: And so that's when you start to get into period

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Speaker 1: where could have multiple corrections. There's another way of saying this,

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Speaker 1: another way of tracking this, and that perhaps is the

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Speaker 1: real yield. And I was looking at a Lori Calvacino

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Speaker 1: note of RBC Capital and she was saying, really, what's

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Speaker 1: behind the rally is the fact that yields have remained

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Speaker 1: so negative on a real basis in the ten year space,

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Speaker 1: in the five year space, etcetera. Meaning basically, inflation expectations

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Speaker 1: are rising much faster phenomenal yields. At what point do

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Speaker 1: you expect that to reverse, if at all? In other words,

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Speaker 1: is this unsustainable where we are right now? Yes, So

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Speaker 1: go back to the last cycle, right, Remember we only

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Speaker 1: got two real yields in the front end. Towards the

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Speaker 1: end of the Powell hiking regime, and markets didn't take

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Speaker 1: that too well. Right, So as we look into next year,

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Speaker 1: remember there's a couple of accidents that could happen. One

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Speaker 1: is the Fed is forced to tighten faster. Even if

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Speaker 1: they should, they probably won't. The other is that the

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Speaker 1: bond market starts to actually price in meaningfully higher UH

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Speaker 1: inflation like we're living in right now. And as you

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Speaker 1: get that big back end of the curve move, you

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Speaker 1: start to price in closer to flat. Did you hear me, John,

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Speaker 1: I just said closer to flats, and that leads to

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Speaker 1: some type of dislocation. But the bottom line is at

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Speaker 1: multiples at these levels, you know, when you think about

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Speaker 1: where yields are are rising, you think about liquidity is

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Speaker 1: going to slow down, you know. Now it is really

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Speaker 1: one of those times where you want to start to

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Speaker 1: diversify into alternatives. Troy I often say you that it's

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Speaker 1: just trying to just job to read bedtime stories to

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Speaker 1: people nervous about the market and to help them sleep

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Speaker 1: at night and to stay invested. It's not job asier

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Speaker 1: or hard to right now. Yeah, you know, I think

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Speaker 1: right now it's easier, right because it's a risk on

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Speaker 1: environment for markets right, and there's a lot more FOAMO

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Speaker 1: now than there was stay you know, during the Eurozone

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Speaker 1: crisis or fifteen sixteen. So I think the challenge for

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Speaker 1: a strategist now is to get people to focus on

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Speaker 1: other assets where they can potentially not have as much

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Speaker 1: upside as equities in the short term, but have a

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Speaker 1: much less downside, you know, particularly in things like senior

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Speaker 1: secured commercial real estate, floating rate debt, other more hybrid

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Speaker 1: strategies in corporate fixed income, things that can hit that

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Speaker 1: mid to high schinnole digit return with far less downside

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Speaker 1: when the inevitable occurs next year in multiple corrections. I'm

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Speaker 1: always listening, Troy, you know that, always listening. That's good.

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Speaker 1: That's good. I've always listened to you too, John held

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Speaker 1: from your buddy of FS Investments on this market, joining

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Speaker 1: us on this market. Lisa Hornby had a US multisector

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Speaker 1: fixed income as sad as Lasa. We heard from Tiny

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Speaker 1: to Iron in the past week, and he talks about

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Speaker 1: credit holding gum. So long as credit holds up, equities

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Speaker 1: will be okay. Have you been surprised by how well

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Speaker 1: insulated credit has been despite everything going on around US? Yeah? Actually,

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Speaker 1: I have been a little bit you know, you would

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Speaker 1: think that some of this rates volatility would have filtered

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Speaker 1: into UM equity and credit and risk markets more broadly,

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Speaker 1: but so far it's it's been pretty resilient, you know.

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Speaker 1: I guess for us, the thing that we're looking at

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Speaker 1: the most closely is, at least for US fixed income markets,

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Speaker 1: the UH the impact on foreign and overseas demand. I mean,

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Speaker 1: that's something that we've become very reliant on over the

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Speaker 1: past years. There's been a tremendous amount of of yield

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Speaker 1: buying just by European, Japanese, Asian based investors UM and

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Speaker 1: to the extent we start to see front end yields

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Speaker 1: move higher, which impacts the cost of their hedging their

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Speaker 1: currencies UM, that could eventually have some impact on their

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Speaker 1: demand for US credit product. So far, we're not seeing

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Speaker 1: much of a change in that front UM and and

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Speaker 1: and so we've seen really credit spreads be quite resilient. UM.

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Speaker 1: You know, our expectation is that we will get a

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Speaker 1: little bit more volatility in the coming months, particularly as

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Speaker 1: we get some of these central bank moves UM out

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Speaker 1: of the way and we see UM you know, how

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Speaker 1: markets can actually stand on their own without the huge

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Speaker 1: liquidity uh that we've had provided to us over the

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Speaker 1: last speak teen months or so. Lisa, I'm gonna live

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Speaker 1: up to my reputation as Dr Gloom because I keep

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Speaker 1: thinking about what happens when the FED starts hiking, what

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Speaker 1: happens when we get to the end of this cycle?

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Speaker 1: What does the end of this credit cycle look like?

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Speaker 1: I think the end of this credit cycle probably looks

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Speaker 1: like the end of most credit cycles. Right, you start

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Speaker 1: to see leverage increase, um, you know, you start to

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Speaker 1: see some of the same phenomenon we've seen in the past. UM.

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Speaker 1: For us, we tend to use spreads as our guide.

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Speaker 1: Right when spreads get almost insanely tight, and I could

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Speaker 1: I could almost say we're we're close at that point. Well,

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Speaker 1: but forgive me, Lisa, I'm sorry of a breaking in here.

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Speaker 1: But it's not just what do you look for, but

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Speaker 1: what's the nature of default at a time when the

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Speaker 1: Federal Reserve has gotten a reputation of stepping in? Well,

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Speaker 1: that's a good question. I guess your question is is

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Speaker 1: the FED allowing a credit cycle to exist anymore? Um?

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Speaker 1: And I don't know, you know, frankly, we don't know

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Speaker 1: the answer to that, I think you think markets are

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Speaker 1: still going to the hape like it will exist. But

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Speaker 1: what you saw this past crisis and probably what's to

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Speaker 1: come in the future is that those bounces low to

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Speaker 1: the to the absolutely you know low and credit spreads

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Speaker 1: to the peak and then back become shorter in nature

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Speaker 1: because the markets start to discount a very quick and

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Speaker 1: rapids central bank response. Yeah, I was. I was speaking

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Speaker 1: with Steen Jakobson over at Central Saxo Bank earlier today

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Speaker 1: and he he basically said that he said central banks

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Speaker 1: are so far behind the curve on inflation that they

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Speaker 1: are going to have to act more quickly. The cycle

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Speaker 1: hiking cycle is going to be shorter, and it actually

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Speaker 1: might result in them having to loosen policy again earlier

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Speaker 1: because of a kind of overreaction. What's your reaction to that.

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Speaker 1: I mean, look, I think central banks are always behind markets.

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Speaker 1: You're seeing that today, right, It's the central banks that

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Speaker 1: are catching up to what the market has done in

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Speaker 1: terms of pricing, at least in the US. UM So,

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Speaker 1: I think I think that's probably spot on. Central banks

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Speaker 1: are going to respond. They're they're trying to respond on

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Speaker 1: a number of fronts. I mean, Powell has a very

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Speaker 1: difficult cult message to walk ahead of himself this week. Right,

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Speaker 1: he can't be too benign on inflation, otherwise you're gonna

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Speaker 1: have the bottom market vigilanty sort of pushing that narrative.

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Speaker 1: At the same time, Um, the market has undergone quite

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Speaker 1: a significant front end repricing. You cannot you don't want

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Speaker 1: to see a situation where the market start to kind

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Speaker 1: of go crazy on that front, and and Powell endorses it.

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Speaker 1: So I think all of these central bankers are kind

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Speaker 1: of in for a difficult a difficult messaging over the

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Speaker 1: next couple of years, really, as this inflation narrative is,

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Speaker 1: in our view not quite as transitorious people have made

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Speaker 1: it out to be. And that's probably a more structural

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Speaker 1: trend rather than a very short term one. Lasa, just quickly,

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Speaker 1: there must be some weakness somewhere that you're just nibbling

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Speaker 1: at thinking about buying. I'm looking at Italian tends right now,

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Speaker 1: up ten eleven basis points over in Italy too. This

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Speaker 1: is a world, whether it's a struggle to get yield,

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Speaker 1: a world where central banks will have some limitations on

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Speaker 1: how far they can push the policy. Right, there's one

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Speaker 1: seven in Italy, get it down to you, sit out

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Speaker 1: and wait for more. What is it, Lisa, We're not

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Speaker 1: quite there yet on Italy. I know you love to

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Speaker 1: ask me about that one, UM, but I will say

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Speaker 1: that emerging markets are starting to open up as an

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Speaker 1: opportunity for us. I mean, we have seen pretty dramatic

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Speaker 1: underperformance in some of the e M names UM, and

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Speaker 1: there are in our view there are some opportunities there.

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Speaker 1: We'd like to get a little bit of stability and

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Speaker 1: the dollar UM to give us a bit more confidence

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Speaker 1: in taking some of that trade. But certainly there are

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Speaker 1: emerging market issuers that have underperformed and those that are

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Speaker 1: are geared to the US economic recovery. We're a bit

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Speaker 1: more favorable on those UM. We are starting to take

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Speaker 1: advantage of some of the opportunities. They're interesting. Come on

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Speaker 1: when you bind a little bit more and we can

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Speaker 1: talk more about at LESA thank you at Lisa Homebias

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Speaker 1: Shrouders takes us immediately to the China conversation. It's all

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Speaker 1: about one thing. This wait for the Federal Reserve, give

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Speaker 1: us your right guidance. Joining us now is Andrew Holland Horst,

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Speaker 1: Chief US Economists at City global market. Now, Mr Holland Host,

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Speaker 1: you had some forecast out of the standard this yef

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Speaker 1: for right hikes from the FETE to stop next year

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Speaker 1: in December. As you've indicated, people thought you were whole

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Speaker 1: kish and now accusing you of being a dove. That's right, Yeah,

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Speaker 1: that's definitely been the evolution. When we came into the

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Speaker 1: year with that forecast, people actually asked us, did you

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Speaker 1: put the wrong year behind December? December three should have

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Speaker 1: been December four, but no, it was two. And we're

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Speaker 1: still in December twenty two, even as we see the

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Speaker 1: market is starting to move ahead of us here. So

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Speaker 1: this is the ultimate win for a strategist, right. This

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Speaker 1: means that you are early and potentially late, but probably

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Speaker 1: dead on what gave you conviction before and what gives

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Speaker 1: you conviction now that they're not going to hike more

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Speaker 1: than just once next year. You know, I don't know

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Speaker 1: if conviction is really the word that I can use,

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Speaker 1: but the single thing that we were looking at was

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Speaker 1: the rapid recovery and demand and what that would mean

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Speaker 1: for inflation. And really it's the inflation story that matters.

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Speaker 1: And that's why I say it's hard to say conviction

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Speaker 1: because inflation has been a difficult variable for any macro

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Speaker 1: economists to get right, for any policymaker to get right.

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Speaker 1: But when we came into the year looking at the numbers,

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Speaker 1: it looked like that strong demand was going to be

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Speaker 1: there that could drive some stronger inflation. I think that's

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Speaker 1: what we're seeing coming through in the data now, and

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Speaker 1: when we see the market moving these rate hikes earlier,

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Speaker 1: when we see some calls that are thinking about the

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Speaker 1: FED hiking earlier, I think it's really about that inflation story.

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Speaker 1: What we're seeing in shelter prices, what we're seeing in services.

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Speaker 1: We know it's there in goods. The question is does

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Speaker 1: it broad in now, does it become more persistent, does

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Speaker 1: it stay with us? And does that cause it fed

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Speaker 1: the hike. Let's look past Wednesday to Friday to the

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Speaker 1: payrolls report that we're going to get. If we get

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Speaker 1: a low surprise and negative surprise downside surprise, what does

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Speaker 1: that mean in terms of tightness for this labor market.

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Speaker 1: It's so interesting because we were so focused on the

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Speaker 1: headline jobs number because the Fed told us substantial further

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Speaker 1: progress in the labor market. That's what we needed to

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Speaker 1: see to get to the taper. Well, we're to the

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Speaker 1: taper now. We think that at the FOC meeting this

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Speaker 1: EEK will have an announcement of the tapering of a

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00:20:02,320 --> 00:20:05,480
Speaker 1: D and twenty billion a month of assive purchases. So

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Speaker 1: the focus is no longer so much on that headline

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Speaker 1: jobs number. Now the focus is is there a shortage

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Speaker 1: of workers in the labor market? So you can have

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Speaker 1: a week reading and the jobs report because there's no

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Speaker 1: demand for jobs. If we get a week reading, I

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Speaker 1: think it's going to be driven by the fact that

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Speaker 1: there's not the supply of workers there behind it. So

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Speaker 1: we're really looking at data on wages, We're looking at

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Speaker 1: data on participation. It's that shortage story that matters more

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Speaker 1: than the particular headline jobs number. Okay, so let's focus

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Speaker 1: in on participation, which has stayed stubbornly low around that level.

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Speaker 1: Is that structural now it looks like at least a

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Speaker 1: piece of instructural I think where we can most clearly

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Speaker 1: say there's probably a structural element is with those fifty

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Speaker 1: five and over, somewhere between five hundred thousand and a

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Speaker 1: million workers we think have dropped out of the labor force.

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Speaker 1: Which are really early retirements. Right, This was you had

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Speaker 1: excess savings during the pandemic period, maybe lost some attachment

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Speaker 1: to a job, and now that retirement which was five

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Speaker 1: years ten years off, it came early, and so those

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Speaker 1: workers are probably permanently out. We're watching on a month

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Speaker 1: a month basis is the prime age workers. Are you

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Speaker 1: seeing those prime maje workers coming back in or staying out?

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Speaker 1: And I think that's where the surprise has been, especially

429
00:21:14,720 --> 00:21:18,080
Speaker 1: relative to policymaker expectations. There was a view at the

430
00:21:18,080 --> 00:21:21,600
Speaker 1: FED that enhanced unemployment benefits were going to expire, schools

431
00:21:21,600 --> 00:21:23,600
Speaker 1: are going to reopen, and you'd have really a surge

432
00:21:23,600 --> 00:21:26,080
Speaker 1: of workers coming back into the labor force. And I

433
00:21:26,160 --> 00:21:27,760
Speaker 1: think it's clear now in the data that we're not

434
00:21:27,760 --> 00:21:31,000
Speaker 1: seeing that surge of workers. The question now is is

435
00:21:31,040 --> 00:21:33,119
Speaker 1: there going to be a trickle of workers that's slowly

436
00:21:33,119 --> 00:21:35,200
Speaker 1: coming in and relieving some of the worker shortage that

437
00:21:35,240 --> 00:21:38,119
Speaker 1: we're seeing, or is this really structural People people have

438
00:21:38,240 --> 00:21:41,560
Speaker 1: just re examined their lives, made a different life plan,

439
00:21:42,040 --> 00:21:44,960
Speaker 1: and working for some people is not part of that. Now. Well, Andrew,

440
00:21:45,040 --> 00:21:47,520
Speaker 1: you mentioned excess savings during the course of the pandemic

441
00:21:47,520 --> 00:21:48,879
Speaker 1: and That brings me back to the note out of

442
00:21:48,920 --> 00:21:50,960
Speaker 1: Mike Wilson and the team at Morgan Stanley this morning.

443
00:21:50,960 --> 00:21:53,000
Speaker 1: His whole thesis is that the bowl run in equities

444
00:21:53,200 --> 00:21:55,720
Speaker 1: can't last for much longer. But what's interesting is he

445
00:21:55,760 --> 00:21:58,800
Speaker 1: points to a payback and demand early next year, and

446
00:21:58,880 --> 00:22:00,760
Speaker 1: that a lot of that excess saves is now back

447
00:22:01,040 --> 00:22:03,760
Speaker 1: to pre pandemic levels. Inflation is starting to bite for

448
00:22:03,800 --> 00:22:05,879
Speaker 1: some of those lower end consumers, and you're going to

449
00:22:05,960 --> 00:22:08,800
Speaker 1: see a year over your decline in personal disposable income.

450
00:22:08,800 --> 00:22:12,000
Speaker 1: At what point are you worried about the consumer's proposant

451
00:22:12,080 --> 00:22:15,800
Speaker 1: propensity and willingness to spend and to be tolerant of

452
00:22:15,840 --> 00:22:19,560
Speaker 1: the higher prices that companies are trying to pass through. Yeah,

453
00:22:19,640 --> 00:22:21,879
Speaker 1: great question, and I think I get worried about it

454
00:22:21,880 --> 00:22:24,840
Speaker 1: when I think about late two. If I look at

455
00:22:24,920 --> 00:22:27,720
Speaker 1: at early two, then the story that you mentioned, the

456
00:22:27,760 --> 00:22:31,639
Speaker 1: pent up demand supply that just hasn't satisfied that demand.

457
00:22:31,640 --> 00:22:33,920
Speaker 1: If you look at autos, for instance, running twelve million

458
00:22:34,000 --> 00:22:37,119
Speaker 1: thirteen million annualized auto sales a month, that numbers should

459
00:22:37,119 --> 00:22:39,639
Speaker 1: be sixteen or seventeen million, those people still want to

460
00:22:39,640 --> 00:22:41,720
Speaker 1: buy cars, and as soon as that production ramps up,

461
00:22:41,760 --> 00:22:44,080
Speaker 1: we're gonna see those auto sales. So it's hard to

462
00:22:44,119 --> 00:22:47,360
Speaker 1: get too negative on the first half of two. When

463
00:22:47,400 --> 00:22:49,840
Speaker 1: you look at the second half of two, that's when

464
00:22:49,880 --> 00:22:52,200
Speaker 1: you think about have we worked through some of those

465
00:22:52,640 --> 00:22:55,639
Speaker 1: savings that have been pent up that are ready to

466
00:22:55,680 --> 00:22:59,919
Speaker 1: come out and become demand. Are we seeing higher prices?

467
00:23:00,080 --> 00:23:02,960
Speaker 1: Is that are now outstripping the rises that we're seeing

468
00:23:02,960 --> 00:23:05,760
Speaker 1: in wages. So wages are accelerating, but prices, of course

469
00:23:05,760 --> 00:23:09,560
Speaker 1: are also rising rapidly. That means real incomes are actually

470
00:23:09,640 --> 00:23:12,199
Speaker 1: declining um. So that's, you know, as part of the

471
00:23:12,200 --> 00:23:14,199
Speaker 1: demand story, it's also part of the inflation story. Does

472
00:23:14,240 --> 00:23:16,159
Speaker 1: that become a little bit of a spiral where we

473
00:23:16,240 --> 00:23:19,200
Speaker 1: see prices and wages rising together or does this actually

474
00:23:19,200 --> 00:23:21,680
Speaker 1: become something that's negative for demand where prices are moving

475
00:23:22,000 --> 00:23:24,520
Speaker 1: too much ahead of wages. And this really goes to

476
00:23:24,560 --> 00:23:26,720
Speaker 1: the idea that people in the market tend to be impatient,

477
00:23:26,760 --> 00:23:29,520
Speaker 1: which is probably why I enjoy covering them because I

478
00:23:29,560 --> 00:23:31,760
Speaker 1: relate deeply. But this idea that once we get a

479
00:23:31,800 --> 00:23:34,159
Speaker 1: sense of when the FED will hike, we look to

480
00:23:34,240 --> 00:23:36,560
Speaker 1: what's next? How many more times? What's the pace of

481
00:23:36,640 --> 00:23:38,280
Speaker 1: rate hikes going to look like? What is the end

482
00:23:38,280 --> 00:23:40,440
Speaker 1: of the cycle going to look like and you take

483
00:23:40,480 --> 00:23:43,040
Speaker 1: it on from there. Andrew holl And Harts, chief at

484
00:23:43,200 --> 00:23:46,280
Speaker 1: US economist of City Group, what is your view here

485
00:23:46,359 --> 00:23:49,880
Speaker 1: about the path of this rate hiking cycle? The idea

486
00:23:50,160 --> 00:23:53,119
Speaker 1: that if the Fed hikes sooner, they cannot go for

487
00:23:53,240 --> 00:23:56,879
Speaker 1: that long and it will be a shorter cycle I

488
00:23:56,920 --> 00:23:59,000
Speaker 1: think in terms of where they get to in terms

489
00:23:59,000 --> 00:24:01,199
Speaker 1: of eternal rate. Right now, it looks like maybe that

490
00:24:01,320 --> 00:24:03,280
Speaker 1: terminal rate is not going to be that high. If

491
00:24:03,280 --> 00:24:05,880
Speaker 1: you look at the last hiking cycle, you only really

492
00:24:05,920 --> 00:24:09,920
Speaker 1: got real rates up to about a hundred basis points,

493
00:24:10,160 --> 00:24:14,000
Speaker 1: which means that nominal rates really shouldn't be going much

494
00:24:14,119 --> 00:24:16,960
Speaker 1: past two to three percent. And then you think about

495
00:24:16,960 --> 00:24:19,159
Speaker 1: where rates came back down to. Real rates ended up

496
00:24:19,200 --> 00:24:21,639
Speaker 1: around zero basis points, which would be nominal rates around

497
00:24:21,680 --> 00:24:25,040
Speaker 1: two percent. So the destination I think is not too high,

498
00:24:25,119 --> 00:24:27,280
Speaker 1: or at least will be viewed as not too high.

499
00:24:27,359 --> 00:24:29,960
Speaker 1: On the other hand, remember we're in a flexible average

500
00:24:29,960 --> 00:24:33,000
Speaker 1: inflation targeting regime. What does that mean? It means that

501
00:24:33,080 --> 00:24:37,000
Speaker 1: you allow inflation to overshoot before you start raising rates.

502
00:24:37,000 --> 00:24:39,800
Speaker 1: It means that when you start raising rates, you should

503
00:24:39,800 --> 00:24:42,920
Speaker 1: have a lot of confidence about proceeding with rate hikes.

504
00:24:42,960 --> 00:24:45,119
Speaker 1: So even though the destination is not too far away,

505
00:24:45,440 --> 00:24:48,399
Speaker 1: I think the Fed will be relatively deliberate about raising rates.

506
00:24:48,600 --> 00:24:51,639
Speaker 1: One rate hike every quarter, so about four rate hikes

507
00:24:51,640 --> 00:24:54,160
Speaker 1: a year, maybe only getting up to around two percent

508
00:24:54,240 --> 00:24:57,199
Speaker 1: nominal rates, but still I wouldn't expect that this is

509
00:24:57,280 --> 00:24:59,119
Speaker 1: kind of you know, one or two rate hikes and

510
00:24:59,200 --> 00:25:01,240
Speaker 1: you're done, all right. So that's all on the monetary

511
00:25:01,280 --> 00:25:04,240
Speaker 1: policy side, Andrew on the fiscal policy side, maybe we

512
00:25:04,320 --> 00:25:06,879
Speaker 1: could actually see some action down on Capitol Hill this

513
00:25:06,920 --> 00:25:09,000
Speaker 1: week as it relates to the infrastructure package and the

514
00:25:09,000 --> 00:25:11,680
Speaker 1: social spending package. But both of those are a lot

515
00:25:11,760 --> 00:25:15,400
Speaker 1: smaller in size and scope than originally intended. Net net,

516
00:25:15,400 --> 00:25:17,480
Speaker 1: when you look at a package that is smaller, but

517
00:25:17,520 --> 00:25:20,480
Speaker 1: also maybe you know the revenue the pay for kind

518
00:25:20,520 --> 00:25:23,400
Speaker 1: of side that is also more moderate than expected, how

519
00:25:23,440 --> 00:25:25,560
Speaker 1: does that inform your thesis for what the economy is

520
00:25:25,560 --> 00:25:28,720
Speaker 1: going to look like over the next five ten years. Yeah,

521
00:25:28,760 --> 00:25:30,760
Speaker 1: I think it's a really difficult question over five or

522
00:25:30,800 --> 00:25:33,359
Speaker 1: ten years. And remember that some of the elements of

523
00:25:33,359 --> 00:25:36,600
Speaker 1: this fiscal package, even if they're initially legislated for one

524
00:25:36,720 --> 00:25:39,119
Speaker 1: or two years. Take the enhanced child tax credit as

525
00:25:39,160 --> 00:25:43,200
Speaker 1: an example. For instance, if that becomes popular, then it

526
00:25:43,280 --> 00:25:47,160
Speaker 1: may stay part of legislation even beyond the period when

527
00:25:47,160 --> 00:25:50,359
Speaker 1: it's meant to expire according to this particular fiscal package.

528
00:25:50,359 --> 00:25:52,760
Speaker 1: So when we actually project these things out, we don't

529
00:25:52,800 --> 00:25:56,000
Speaker 1: just take current law as what will happen. We actually

530
00:25:56,000 --> 00:25:59,679
Speaker 1: make assumptions about things like a child tax credit being continued.

531
00:25:59,720 --> 00:26:02,399
Speaker 1: So I think what you're likely to see here is

532
00:26:03,640 --> 00:26:07,160
Speaker 1: spending that exceeds revenue. There's still a lot of questions

533
00:26:07,160 --> 00:26:09,520
Speaker 1: about the revenue side. In any case, it will be

534
00:26:09,560 --> 00:26:13,200
Speaker 1: spending that's pre front loaded relative to revenue. So we'll

535
00:26:13,200 --> 00:26:16,919
Speaker 1: have things like a corporate tax, maybe a fift minimum

536
00:26:16,960 --> 00:26:20,400
Speaker 1: corporate tax that's gonna extend out for ten years, whereas

537
00:26:20,440 --> 00:26:23,640
Speaker 1: the spending hands child tax credit, for instance, that's gonna

538
00:26:23,680 --> 00:26:25,800
Speaker 1: be front loaded in the first couple of years. So

539
00:26:25,840 --> 00:26:28,280
Speaker 1: I think we're looking at larger deficits. I think we're

540
00:26:28,320 --> 00:26:33,560
Speaker 1: looking at net positive physical impulse, but relative to a

541
00:26:33,680 --> 00:26:36,560
Speaker 1: hugely positive physical impulse over the last couple of years.

542
00:26:36,720 --> 00:26:39,160
Speaker 1: So that's really what the economy has to navigate here.

543
00:26:39,240 --> 00:26:43,400
Speaker 1: Is coming from direct transfers on the order of trillions

544
00:26:43,400 --> 00:26:46,520
Speaker 1: of dollars to individuals, and now we're talking about hundreds

545
00:26:46,520 --> 00:26:59,280
Speaker 1: of billions going forward and going to see potential bank

546
00:26:59,320 --> 00:27:01,840
Speaker 1: decisions out the only thing taking place this week. We

547
00:27:01,920 --> 00:27:04,399
Speaker 1: now have to head to Glasgow, Scotland to catch up

548
00:27:04,400 --> 00:27:06,960
Speaker 1: with Blimberg's France st Laqua as the COP twenty six

549
00:27:07,040 --> 00:27:12,720
Speaker 1: summit kicks off. Good morning Francine, Good morning John. I'm

550
00:27:12,720 --> 00:27:15,720
Speaker 1: delighted to be here at COPY six. We're not sure

551
00:27:15,720 --> 00:27:19,720
Speaker 1: whether a lot will be agreed given the downpour of negativity.

552
00:27:19,720 --> 00:27:21,359
Speaker 1: I would say from a lot of chief executive about

553
00:27:21,400 --> 00:27:23,520
Speaker 1: what was achieved at G twenty, which was meant to

554
00:27:23,520 --> 00:27:26,399
Speaker 1: be the preparatory work for them the two hundred countries

555
00:27:26,440 --> 00:27:28,440
Speaker 1: and their delegates arriving here in Glasgow. But I am

556
00:27:28,480 --> 00:27:31,120
Speaker 1: delighted to be speaking to Jacob stoles Holm, the chief

557
00:27:31,160 --> 00:27:34,480
Speaker 1: executive officer of Rio Tinto, who's here in the Glasgow

558
00:27:34,600 --> 00:27:37,199
Speaker 1: trying to achieve well, it's trying to actually get some

559
00:27:37,200 --> 00:27:39,199
Speaker 1: of the targets that you laid out. So thank you

560
00:27:39,200 --> 00:27:41,199
Speaker 1: so much for joining us. Thank you for giving us,

561
00:27:41,240 --> 00:27:43,480
Speaker 1: I think your first interview as chief executive of Rio

562
00:27:43,560 --> 00:27:46,600
Speaker 1: Tinto with very ambitious plans. You're one of, you know,

563
00:27:46,680 --> 00:27:49,400
Speaker 1: the biggest producers of iron ore that Houston steel making,

564
00:27:49,440 --> 00:27:53,080
Speaker 1: steelmaking extremely polluting. What do you now need to achieve

565
00:27:53,119 --> 00:27:59,719
Speaker 1: to make sure that your goals are stuck took? Fighting

566
00:28:00,040 --> 00:28:03,280
Speaker 1: machines isn't challenge for us. We have a big carbon

567
00:28:03,359 --> 00:28:07,240
Speaker 1: foot print. Also, it's a huge opportunity for us because

568
00:28:07,840 --> 00:28:11,199
Speaker 1: fundamentally it's a very physical transition of the society we

569
00:28:11,280 --> 00:28:15,080
Speaker 1: live in an energy transition. You need more solar selves,

570
00:28:16,960 --> 00:28:23,080
Speaker 1: wind turbines, transmission lines, electrical vehicles, all requiring the materials

571
00:28:23,119 --> 00:28:26,200
Speaker 1: that we are producing. But the problem we have right

572
00:28:26,200 --> 00:28:29,200
Speaker 1: now is we first have to de carbonize our change,

573
00:28:29,320 --> 00:28:33,080
Speaker 1: which is expensive and difficult, very expensive. And we just

574
00:28:33,160 --> 00:28:36,040
Speaker 1: laid our plans where we will in this directly seven

575
00:28:36,040 --> 00:28:39,080
Speaker 1: and a half billion, but initiate much more investments in

576
00:28:39,160 --> 00:28:42,760
Speaker 1: this decade in order to a cheap production of our

577
00:28:42,840 --> 00:28:45,800
Speaker 1: carbon foot plant by by the end of the decade.

578
00:28:45,840 --> 00:28:48,880
Speaker 1: It's an ambusiness plan, but it's doable. But it's our

579
00:28:49,040 --> 00:28:52,440
Speaker 1: part in order to also benefit from the growth circoms

580
00:28:52,560 --> 00:28:56,080
Speaker 1: from seen transition. So when will we be able to

581
00:28:56,120 --> 00:28:57,840
Speaker 1: know a lot more about Scope three? This is a

582
00:28:57,880 --> 00:29:00,800
Speaker 1: hard part because it's basically you give the iron or

583
00:29:00,920 --> 00:29:05,160
Speaker 1: the steelmakers. It's how they decarbonize, So what's the plan there. Well,

584
00:29:05,160 --> 00:29:08,800
Speaker 1: first of all, the challenge for steammakers is even bigger

585
00:29:08,920 --> 00:29:12,080
Speaker 1: than it is far US as minors. But I see

586
00:29:12,080 --> 00:29:14,840
Speaker 1: them doing a lot. A lot is happening in China

587
00:29:14,960 --> 00:29:17,520
Speaker 1: right now. We do research and development with them, with

588
00:29:17,960 --> 00:29:21,840
Speaker 1: Japan and in Europe, etcetera. It has to be a corporation.

589
00:29:22,960 --> 00:29:25,360
Speaker 1: The major part of the solution is with the steam makeup,

590
00:29:25,360 --> 00:29:27,320
Speaker 1: but part of it is with us as minors in

591
00:29:27,400 --> 00:29:30,520
Speaker 1: terms of the quality of products we're delivering, etcetera, etcetera.

592
00:29:30,920 --> 00:29:33,560
Speaker 1: And we are exploring various options. And one of the

593
00:29:33,560 --> 00:29:36,440
Speaker 1: options that we are exploring is, for example, is that

594
00:29:36,520 --> 00:29:39,480
Speaker 1: an opportunity for the first part of the steam making,

595
00:29:39,840 --> 00:29:45,000
Speaker 1: the iron making, the production, should that be done green Iroland?

596
00:29:45,240 --> 00:29:48,280
Speaker 1: Is that something that we could participate or activity. So

597
00:29:48,320 --> 00:29:50,920
Speaker 1: we're actually doing an awful lot in that. From spect

598
00:29:51,280 --> 00:29:53,800
Speaker 1: it's China very committed. So we were disappointed by what

599
00:29:53,920 --> 00:29:56,560
Speaker 1: came out of the G twenty. So we don't really

600
00:29:56,560 --> 00:29:59,560
Speaker 1: have an agreement on you know, for example, domestic coal plans.

601
00:29:59,680 --> 00:30:02,320
Speaker 1: We don't really have an agreement on this Global methane

602
00:30:02,720 --> 00:30:08,800
Speaker 1: Um summit. So what can we achieve from now fifty

603
00:30:09,040 --> 00:30:12,480
Speaker 1: is very far. I think people has to focus a

604
00:30:12,520 --> 00:30:15,240
Speaker 1: little bit on the short term what is actually really happening.

605
00:30:15,640 --> 00:30:19,480
Speaker 1: And the reality is China is hit when it comes

606
00:30:19,520 --> 00:30:26,600
Speaker 1: to installing renewable innity. Their their their program is incredible, ambitious,

607
00:30:26,960 --> 00:30:29,120
Speaker 1: they are hit when it comes to a penetration of

608
00:30:29,320 --> 00:30:32,080
Speaker 1: maketure vehicle. So we just see a lot going on

609
00:30:32,080 --> 00:30:34,840
Speaker 1: on the ground in China. In terms of timeline, when

610
00:30:34,840 --> 00:30:36,840
Speaker 1: will you be able to set out your emissions for

611
00:30:36,920 --> 00:30:40,480
Speaker 1: scope to just go three? We have our action plans now.

612
00:30:40,600 --> 00:30:43,320
Speaker 1: We we released that on our Capital Markets Day last week.

613
00:30:43,800 --> 00:30:46,040
Speaker 1: But what we now need to monitor is what will

614
00:30:46,080 --> 00:30:49,320
Speaker 1: the industry, the steammakers do and therefore we plan as

615
00:30:49,360 --> 00:30:52,120
Speaker 1: part of our annual report to be more numerical about it.

616
00:30:52,160 --> 00:30:54,000
Speaker 1: But what it's important right now is to tell what

617
00:30:54,040 --> 00:30:55,440
Speaker 1: are we doing. But at the end of the day,

618
00:30:55,480 --> 00:30:58,000
Speaker 1: school three, we can never be under percent and control

619
00:30:58,040 --> 00:31:00,680
Speaker 1: of when you look at what else not in control

620
00:31:00,720 --> 00:31:04,080
Speaker 1: of is of course the energy crisis. It's a freight

621
00:31:04,160 --> 00:31:06,400
Speaker 1: around the world and the fact that the economy seems

622
00:31:06,400 --> 00:31:09,080
Speaker 1: to be stalling once again, does it make it harder

623
00:31:09,640 --> 00:31:12,200
Speaker 1: for you to achieve your climate goals because of the

624
00:31:12,280 --> 00:31:16,240
Speaker 1: difficult environment we see. No, I wouldn't say so. I mean,

625
00:31:16,400 --> 00:31:19,200
Speaker 1: obviously we were very lucky at the beginning of the

626
00:31:19,280 --> 00:31:22,040
Speaker 1: year and we had our best half year about the

627
00:31:22,080 --> 00:31:24,880
Speaker 1: first half way the economy was growing a lot. Right

628
00:31:24,920 --> 00:31:27,720
Speaker 1: now the economy is slown down, and that probably makes

629
00:31:27,760 --> 00:31:30,560
Speaker 1: sense because, as you say, we're strucking to move things

630
00:31:30,560 --> 00:31:33,520
Speaker 1: around in the world, and there's a looming energy crisis,

631
00:31:33,640 --> 00:31:36,280
Speaker 1: and ultimately it will have an impact. But I think

632
00:31:36,320 --> 00:31:38,320
Speaker 1: it's as your auditorm impact. It's a matter of the

633
00:31:38,360 --> 00:31:42,680
Speaker 1: world to solid supplying issues. How many how much inflationary

634
00:31:42,720 --> 00:31:45,960
Speaker 1: pressure are you seeing across your products? Well, for sure

635
00:31:46,120 --> 00:31:48,400
Speaker 1: there was a lot of inflation induced in the first

636
00:31:48,440 --> 00:31:50,640
Speaker 1: half where the world was growing at a high pace.

637
00:31:50,760 --> 00:31:54,200
Speaker 1: But yes, it's one of the challenges. What does that mean?

638
00:31:54,240 --> 00:31:56,200
Speaker 1: I mean, do you hedge, do your clients ask for

639
00:31:56,240 --> 00:31:59,160
Speaker 1: a little bit of time? It must be actually, you

640
00:31:59,200 --> 00:32:02,160
Speaker 1: know how of something to deal with. It hasn't been

641
00:32:02,160 --> 00:32:04,600
Speaker 1: that bad for us, and quite frankly, we have also

642
00:32:04,680 --> 00:32:07,800
Speaker 1: benefited from from part of the infacing comes from higher

643
00:32:07,840 --> 00:32:10,959
Speaker 1: commodity advices. What does it mean for China? Where are

644
00:32:10,960 --> 00:32:13,200
Speaker 1: we in China right now? If there if there continues

645
00:32:13,240 --> 00:32:17,040
Speaker 1: to be that zero COVID tolerance policy. Is it difficult

646
00:32:17,080 --> 00:32:21,360
Speaker 1: for you to ship things on from China? The whole

647
00:32:21,400 --> 00:32:25,280
Speaker 1: logistics works extremely well personally as the CEO, and they said,

648
00:32:25,320 --> 00:32:27,600
Speaker 1: but I still haven't been able to travel to China.

649
00:32:28,080 --> 00:32:31,320
Speaker 1: We have my biggest customers are but it's it's a

650
00:32:31,360 --> 00:32:34,160
Speaker 1: difficult world for all of us from COVID. What's your

651
00:32:34,280 --> 00:32:37,000
Speaker 1: relationship with stillmakers right now? Is there some kind of

652
00:32:37,040 --> 00:32:39,720
Speaker 1: agreements that you would give them, for example, you know,

653
00:32:40,000 --> 00:32:42,239
Speaker 1: monetize or to try and help fund some of their

654
00:32:42,240 --> 00:32:47,720
Speaker 1: efforts to become more green? YEA. Ultimately, first of all,

655
00:32:47,760 --> 00:32:50,840
Speaker 1: we have very good, very long term relationships with our

656
00:32:50,880 --> 00:32:53,960
Speaker 1: customers that we have worked with for decades and and

657
00:32:54,040 --> 00:32:56,480
Speaker 1: that's where we will tend to on China. Are any aligned,

658
00:32:56,480 --> 00:32:59,240
Speaker 1: We always think in a very long term horizon and

659
00:32:59,280 --> 00:33:02,240
Speaker 1: the air fars natural for us to form research and

660
00:33:02,280 --> 00:33:07,720
Speaker 1: development corporations, including we have the Chinese universities, etcetera. And

661
00:33:07,800 --> 00:33:11,240
Speaker 1: so the problem with A and D is as a businessman,

662
00:33:11,280 --> 00:33:13,480
Speaker 1: I like to see we solve very quickly, but at

663
00:33:13,480 --> 00:33:16,720
Speaker 1: the unfortunately often takes a little longer. You're pushing me

664
00:33:16,800 --> 00:33:19,200
Speaker 1: as well, when can you come with the scope three resolve?

665
00:33:19,280 --> 00:33:21,800
Speaker 1: But but very often it takes a long time. Little

666
00:33:21,880 --> 00:33:25,880
Speaker 1: give you an example, we're trying to decobonize completely aluminium

667
00:33:26,160 --> 00:33:29,240
Speaker 1: with our Illicits project. This project has been going on

668
00:33:29,320 --> 00:33:33,520
Speaker 1: for twenty years and now it's us. We've been promising

669
00:33:33,600 --> 00:33:35,600
Speaker 1: and we might be able to change the hundred year

670
00:33:35,600 --> 00:33:41,719
Speaker 1: old manufacturing method, but it just takes time. And therefore

671
00:33:41,720 --> 00:33:44,000
Speaker 1: what you need now the world in order to achieve

672
00:33:44,040 --> 00:33:46,680
Speaker 1: twenty fifty, the world needs to put in a lot

673
00:33:46,720 --> 00:33:49,440
Speaker 1: of seats of research and development in order to have

674
00:33:49,560 --> 00:33:52,360
Speaker 1: the brake roots necessarily, are you frustrated by the lack

675
00:33:52,400 --> 00:33:54,960
Speaker 1: of time or by you know, by the speed at

676
00:33:55,000 --> 00:33:57,520
Speaker 1: which progress is being made. So you're a new chief executive,

677
00:33:57,920 --> 00:34:00,440
Speaker 1: what's the thing that's most frustrating in your job? I

678
00:34:00,440 --> 00:34:02,720
Speaker 1: don't look at it like that, because there's so much

679
00:34:02,760 --> 00:34:06,440
Speaker 1: we can do with existing technology and we haven't done enough.

680
00:34:06,600 --> 00:34:09,560
Speaker 1: And what I said when we were announcing our targets

681
00:34:09,560 --> 00:34:11,919
Speaker 1: at the Capital market states, we are now starting an

682
00:34:11,960 --> 00:34:15,040
Speaker 1: internal race because there's much much more we can do,

683
00:34:15,239 --> 00:34:18,040
Speaker 1: and we will do. Our thousands of engineers who are

684
00:34:18,120 --> 00:34:21,520
Speaker 1: used to classical energy solutions now have to think about

685
00:34:21,560 --> 00:34:25,120
Speaker 1: renewable energy solutions. That's for us to do. But you

686
00:34:25,160 --> 00:34:28,960
Speaker 1: can't solve of the see you two without some breaks

687
00:34:28,960 --> 00:34:31,560
Speaker 1: through in technology. And there I think the world will

688
00:34:31,600 --> 00:34:34,799
Speaker 1: have to be patient because Auntie just takes longer, I

689
00:34:34,800 --> 00:34:38,120
Speaker 1: mean patients. How so when will we see green steel? Well,

690
00:34:38,160 --> 00:34:41,600
Speaker 1: but look the way we look at it thirty we

691
00:34:41,640 --> 00:34:44,759
Speaker 1: want to have half our carbon foot traunt and I

692
00:34:44,840 --> 00:34:47,759
Speaker 1: want by twenty thirty to have a very clear passway

693
00:34:47,880 --> 00:34:52,000
Speaker 1: without a lot of uncertainty towards zero. Okay, thanks so

694
00:34:52,040 --> 00:34:53,960
Speaker 1: much for joining us as a mute in to chief executive.

695
00:34:54,000 --> 00:34:56,759
Speaker 1: Junco steals home his first interview actually as a chief

696
00:34:56,800 --> 00:34:58,600
Speaker 1: executive with that John, and will send it back to

697
00:34:58,640 --> 00:35:01,040
Speaker 1: you in New York, France saying thank you so much.

698
00:35:01,080 --> 00:35:02,800
Speaker 1: Looking forward to a waste conference with you on the

699
00:35:02,840 --> 00:35:06,480
Speaker 1: ground in Glasgow, Scotland. This is the Bloomberg Surveillance Podcast.

700
00:35:06,719 --> 00:35:10,120
Speaker 1: Thanks for listening. Join us live weekdays from seven to

701
00:35:10,200 --> 00:35:14,200
Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television

702
00:35:14,600 --> 00:35:18,640
Speaker 1: each day from six to nine am for insight from

703
00:35:18,640 --> 00:35:23,200
Speaker 1: the best in economics, finance, investment, and international relations. And

704
00:35:23,280 --> 00:35:28,480
Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg

705
00:35:28,520 --> 00:35:32,200
Speaker 1: dot com, and of course on the terminal. I'm Tom Keene,

706
00:35:32,200 --> 00:35:34,239
Speaker 1: and this is Bloomberg