1
00:00:05,800 --> 00:00:08,720
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

2
00:00:08,760 --> 00:00:11,520
Speaker 1: Along with my co host Lisa Bramowitz. Each day we

3
00:00:11,640 --> 00:00:15,120
Speaker 1: bring you the most important, noteworthy, and useful interviews for

4
00:00:15,200 --> 00:00:17,840
Speaker 1: you and your money, whether you're at the grocery store

5
00:00:17,960 --> 00:00:20,720
Speaker 1: or the trading floor. Find the Bloomberg p m L

6
00:00:20,840 --> 00:00:32,760
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. This Wednesday,

7
00:00:32,800 --> 00:00:35,280
Speaker 1: we are going to get the minutes from the latest

8
00:00:35,400 --> 00:00:38,519
Speaker 1: Federal Reserve meeting where they talked about everything from the

9
00:00:38,600 --> 00:00:42,880
Speaker 1: economy to potential risks to the downside uh for the US,

10
00:00:43,000 --> 00:00:46,040
Speaker 1: but most important, what everyone is looking for is guidance

11
00:00:46,159 --> 00:00:49,000
Speaker 1: on how the FED is going to unwind it's four

12
00:00:49,159 --> 00:00:53,400
Speaker 1: point five trillion dollar balance sheet. And for somebody who

13
00:00:53,400 --> 00:00:56,400
Speaker 1: knows quite a bit about this is former Minneapolis FED

14
00:00:56,440 --> 00:01:01,520
Speaker 1: President uh Nriana coach Lakota, who joins us now by phone.

15
00:01:02,040 --> 00:01:04,160
Speaker 1: He is also a Bloomberg View calumnists as well as

16
00:01:04,160 --> 00:01:07,959
Speaker 1: a professor of economics at the University of Rochester. Uh Marianna,

17
00:01:08,040 --> 00:01:09,920
Speaker 1: thank you so much for joining us. You wrote a

18
00:01:09,920 --> 00:01:12,840
Speaker 1: recent column saying that the FED is making a two

19
00:01:13,040 --> 00:01:16,240
Speaker 1: trillion dollar mistakes, saying that they really should not be

20
00:01:16,319 --> 00:01:18,920
Speaker 1: considering whether to shrink their balance sheet at all, it

21
00:01:19,000 --> 00:01:21,280
Speaker 1: is the wrong question. They should not go that route.

22
00:01:21,360 --> 00:01:25,839
Speaker 1: Can you explain why? Yeah, thanks for having me on, Lisa, UM.

23
00:01:25,920 --> 00:01:29,360
Speaker 1: So why thinking there is that? I remember when we

24
00:01:29,360 --> 00:01:32,480
Speaker 1: were hit with shocks, when I was back on the committee,

25
00:01:32,480 --> 00:01:36,200
Speaker 1: even the dark days of eleven UH, one of the

26
00:01:36,200 --> 00:01:37,720
Speaker 1: things we wanted to be able to do was to

27
00:01:37,840 --> 00:01:41,040
Speaker 1: lower interest rates UM, but we didn't have them. Couldn't

28
00:01:41,040 --> 00:01:42,760
Speaker 1: do that because the interest rates were pretty much as

29
00:01:42,760 --> 00:01:45,160
Speaker 1: low as they could go. If the FED were keep

30
00:01:45,560 --> 00:01:48,480
Speaker 1: keep their balance sheet at the current size of four

31
00:01:48,520 --> 00:01:51,600
Speaker 1: and a half trillion dollars or even potentially growing with

32
00:01:51,680 --> 00:01:55,600
Speaker 1: the economy UM, they would over the longer run, also

33
00:01:55,640 --> 00:01:58,240
Speaker 1: be keeping their short term interest rate tool higher because

34
00:01:58,240 --> 00:02:01,880
Speaker 1: they're already providing a lot of accommodation through UM that

35
00:02:02,360 --> 00:02:04,480
Speaker 1: balance sheet. The way you would offset that is by

36
00:02:04,560 --> 00:02:07,400
Speaker 1: keeping your your interest rate tool higher. So that means

37
00:02:07,440 --> 00:02:10,239
Speaker 1: when you go into a recession you're facing shocks, you've

38
00:02:10,280 --> 00:02:12,600
Speaker 1: got your interest rate tool that you're familiar with, you

39
00:02:12,680 --> 00:02:15,000
Speaker 1: know how it works. That's the one you're gonna belonging

40
00:02:15,040 --> 00:02:18,400
Speaker 1: on to two offset shocks. So I think the FED

41
00:02:18,440 --> 00:02:21,280
Speaker 1: would just be better off just as I say, keeping

42
00:02:21,280 --> 00:02:24,160
Speaker 1: the balance sheet constant or even uh I suggest my

43
00:02:24,480 --> 00:02:28,280
Speaker 1: post um keeping that um growing over time as the

44
00:02:28,280 --> 00:02:31,000
Speaker 1: economy grows. So another words, just to make sure that

45
00:02:31,040 --> 00:02:32,959
Speaker 1: I understand what you're saying. You're saying that if the

46
00:02:32,960 --> 00:02:35,680
Speaker 1: FED keeps the big balance sheet, then they have more

47
00:02:35,800 --> 00:02:38,800
Speaker 1: room to raise interest rates and then have that sort

48
00:02:38,800 --> 00:02:43,680
Speaker 1: of the more well known tool to deal with upcoming crises,

49
00:02:43,760 --> 00:02:46,480
Speaker 1: whereas if they shrink the balance sheet, they're going to

50
00:02:46,600 --> 00:02:49,880
Speaker 1: have a harder time raising rates just because the level

51
00:02:49,880 --> 00:02:52,480
Speaker 1: of accommodation is going to be less on the balance

52
00:02:52,480 --> 00:02:54,360
Speaker 1: sheet side. Am I Am I getting that right? Said?

53
00:02:54,520 --> 00:02:57,480
Speaker 1: Exactly right? Thank you for thank you? Okay, no, no, no,

54
00:02:57,520 --> 00:02:59,640
Speaker 1: I just want to make sure. I mean, I guess

55
00:02:59,639 --> 00:03:01,320
Speaker 1: that the ads an argument, and what a lot of

56
00:03:01,360 --> 00:03:03,880
Speaker 1: people are saying in the market is well, the Fed's

57
00:03:03,880 --> 00:03:06,560
Speaker 1: going to move at such a glacial pace, and because

58
00:03:06,600 --> 00:03:09,480
Speaker 1: demographics are changing to such a degree where you have

59
00:03:09,680 --> 00:03:14,280
Speaker 1: people aging and cycling their money into more reliable investments

60
00:03:14,360 --> 00:03:16,960
Speaker 1: like bonds, you're not going to end up getting that

61
00:03:17,000 --> 00:03:18,600
Speaker 1: big of a move, if anything at all. In fact,

62
00:03:18,680 --> 00:03:20,520
Speaker 1: yields on the on the long end might even go

63
00:03:20,600 --> 00:03:23,240
Speaker 1: down even as the Fed on wind's balance sheet and

64
00:03:23,240 --> 00:03:25,480
Speaker 1: then they'll have this tool as well open to them

65
00:03:25,880 --> 00:03:28,960
Speaker 1: in the next crisis. What do you say to that? Yeah,

66
00:03:29,040 --> 00:03:32,080
Speaker 1: I actually I've heard actually some speakers in the fom

67
00:03:32,160 --> 00:03:35,520
Speaker 1: C make this argument. I just don't understand it. Um.

68
00:03:35,600 --> 00:03:38,200
Speaker 1: The estimates we've had from the effect of the balance

69
00:03:38,240 --> 00:03:42,240
Speaker 1: sheet are pretty clear. It's it's basically substituteable with our

70
00:03:43,680 --> 00:03:45,440
Speaker 1: Like I laps in the hour because I'm still thinking

71
00:03:45,480 --> 00:03:48,560
Speaker 1: about myself being on the committee, but it's it's comperbebly

72
00:03:48,600 --> 00:03:52,720
Speaker 1: substituteable with the FED typical tool of the Fed funds rate.

73
00:03:53,320 --> 00:03:56,560
Speaker 1: UM So, as you reduce the size the balance sheet,

74
00:03:56,960 --> 00:04:00,600
Speaker 1: you are substituting for interest rate increase is and in

75
00:04:00,680 --> 00:04:03,600
Speaker 1: fact President Dudley and the New York Fed has made

76
00:04:03,600 --> 00:04:06,520
Speaker 1: this point on a couple of occasions. UM So, I

77
00:04:07,080 --> 00:04:08,720
Speaker 1: think that's the right way to be thinking about it.

78
00:04:08,800 --> 00:04:12,240
Speaker 1: If you scale back the position you have in in

79
00:04:12,320 --> 00:04:16,680
Speaker 1: long term assets, you're removing demand stimulus from the economy,

80
00:04:16,880 --> 00:04:18,960
Speaker 1: and um you're gonna have to make that up in

81
00:04:19,000 --> 00:04:20,400
Speaker 1: some way, and the way you'll be making it up

82
00:04:20,520 --> 00:04:22,680
Speaker 1: is by keeping your short term interest rate, the FED

83
00:04:22,720 --> 00:04:25,360
Speaker 1: funds rate, lower than you would otherwise be doing. So

84
00:04:25,400 --> 00:04:27,719
Speaker 1: this brings us to another column that you recently wrote

85
00:04:27,800 --> 00:04:31,760
Speaker 1: about forecasting growth, because when you talk about short term

86
00:04:31,760 --> 00:04:34,200
Speaker 1: interest rates, let's leave aside the balance sheet, right, because

87
00:04:34,480 --> 00:04:36,920
Speaker 1: let's say the FED decides to keep it at four

88
00:04:36,960 --> 00:04:40,000
Speaker 1: and a half trillion dollars for the time being, puts

89
00:04:40,080 --> 00:04:43,359
Speaker 1: off any discussion of ceasing to reinvest any proceeds that

90
00:04:43,360 --> 00:04:46,320
Speaker 1: they get from that, and they just focus on raising

91
00:04:46,480 --> 00:04:50,560
Speaker 1: interest rates. Um. There's a lot of questions about how

92
00:04:50,640 --> 00:04:53,440
Speaker 1: much they could really do that based on growth and

93
00:04:53,480 --> 00:04:56,480
Speaker 1: the potential for growth. And you know, when you look

94
00:04:56,560 --> 00:04:58,960
Speaker 1: at what the Fed is talking about, do you think

95
00:04:59,000 --> 00:05:02,160
Speaker 1: that they're measuring growth the right way? And given what

96
00:05:02,200 --> 00:05:05,800
Speaker 1: they're looking at, what's the sort of end rate for

97
00:05:05,880 --> 00:05:09,360
Speaker 1: overnight benchmark borrowing costs that you think is is feasible

98
00:05:09,400 --> 00:05:12,880
Speaker 1: in the near future? Oh wow? Okay, so that last

99
00:05:12,960 --> 00:05:15,839
Speaker 1: question is really hard, um, And it would depend on

100
00:05:15,880 --> 00:05:18,440
Speaker 1: where you end up with a balance sheet. Um. You know,

101
00:05:18,480 --> 00:05:21,839
Speaker 1: I think if you you were to to shrink the

102
00:05:21,839 --> 00:05:24,680
Speaker 1: balance sheet, you're it's really going to put much more

103
00:05:24,680 --> 00:05:26,160
Speaker 1: of a cap on where you can end up with

104
00:05:26,839 --> 00:05:29,040
Speaker 1: in the longer run with your your interest rate tool,

105
00:05:29,279 --> 00:05:31,320
Speaker 1: I would I wouldn't be surprised you would end up

106
00:05:31,320 --> 00:05:32,920
Speaker 1: with a number that starts with a two. You know,

107
00:05:33,000 --> 00:05:35,040
Speaker 1: in the in the longer run, FETs if if you

108
00:05:35,080 --> 00:05:36,920
Speaker 1: do end up shrinking the balance sheet to keep the

109
00:05:36,960 --> 00:05:39,960
Speaker 1: balance sheet where it is, then I think you're you'd

110
00:05:39,960 --> 00:05:42,360
Speaker 1: be able more feel more comfortable with the probably the

111
00:05:42,400 --> 00:05:45,479
Speaker 1: longer run, with the number that would start with a three. UM.

112
00:05:46,279 --> 00:05:50,720
Speaker 1: But let me talk. I think I think you've hit

113
00:05:50,800 --> 00:05:53,120
Speaker 1: upon a really important point, which is how hard it

114
00:05:53,200 --> 00:05:55,520
Speaker 1: is to gauge the growth opportunities that are out there

115
00:05:55,560 --> 00:05:58,480
Speaker 1: in the US. UM. There's a lot of pessimism out there,

116
00:05:58,760 --> 00:06:01,839
Speaker 1: UM that maybe the US two percent is all we

117
00:06:01,839 --> 00:06:04,920
Speaker 1: can hope for, UM, something in the two to three percent.

118
00:06:05,040 --> 00:06:08,760
Speaker 1: Rangel here some optimism as well from from certainly from

119
00:06:08,760 --> 00:06:12,240
Speaker 1: the administration is more optimistic about growth opportunities. But it's

120
00:06:12,360 --> 00:06:15,159
Speaker 1: really hard for us to as economist, to get that right.

121
00:06:15,240 --> 00:06:19,720
Speaker 1: And I think the Fed would be safer UM to

122
00:06:20,480 --> 00:06:22,640
Speaker 1: calibrating their interest rate increases to what's going on in

123
00:06:22,680 --> 00:06:25,800
Speaker 1: the inflation to mention they're better forecasting inflation. They'd be

124
00:06:25,839 --> 00:06:30,320
Speaker 1: understand inflationary pressure is better UM. And the whole question

125
00:06:30,360 --> 00:06:33,320
Speaker 1: of capacity, how much growth opportunity there are there are

126
00:06:33,360 --> 00:06:35,520
Speaker 1: in the US is about how much can we grow

127
00:06:35,560 --> 00:06:40,040
Speaker 1: the economy without running into generating too much inflation. So

128
00:06:40,080 --> 00:06:42,960
Speaker 1: I think the FED will be better off holding back,

129
00:06:43,680 --> 00:06:47,839
Speaker 1: being cautious about raising rates until we actually saw, um,

130
00:06:48,080 --> 00:06:50,080
Speaker 1: real clear signs that we're going to get back. We're

131
00:06:50,120 --> 00:06:53,560
Speaker 1: at two percent their target and staying there. So I know,

132
00:06:53,920 --> 00:06:56,480
Speaker 1: I'm sure that you're still friendly with people who are

133
00:06:56,600 --> 00:07:00,000
Speaker 1: on the INFMC right now, and do any of them

134
00:07:00,240 --> 00:07:02,360
Speaker 1: kind of feel the way that you do and just

135
00:07:02,560 --> 00:07:05,559
Speaker 1: feel like they the tides moving toward reducing the balance sheet.

136
00:07:05,640 --> 00:07:08,440
Speaker 1: But uh so we'll go along with that, but we're

137
00:07:08,520 --> 00:07:11,160
Speaker 1: kind of a little worried about that. Yeah, I know

138
00:07:11,280 --> 00:07:16,600
Speaker 1: nothing beyond page I'm just another outsider, like like everyone

139
00:07:16,600 --> 00:07:19,360
Speaker 1: else listening to this. I so, but I but when

140
00:07:19,360 --> 00:07:22,680
Speaker 1: I track um, you know, I you know, I think

141
00:07:22,880 --> 00:07:26,800
Speaker 1: the person who has probably been most cautious about the

142
00:07:26,800 --> 00:07:31,840
Speaker 1: interest rate increases, there's obviously, uh President cash Cary in Minneapolis,

143
00:07:32,120 --> 00:07:34,280
Speaker 1: and so you know, if you're asking me that question,

144
00:07:34,320 --> 00:07:35,720
Speaker 1: I guess I would point to him as being the

145
00:07:36,240 --> 00:07:39,960
Speaker 1: most obvious person on those lines. Marianna Coucha Lokotta, thank

146
00:07:40,000 --> 00:07:42,080
Speaker 1: you so much for joining us. Marianna Coutcha Lokotta is

147
00:07:42,080 --> 00:07:45,200
Speaker 1: a Bloomberg View columnist and of course the former Minneapolis

148
00:07:45,240 --> 00:07:49,560
Speaker 1: Fed president, currently professor of economics at the University of Rochester.

149
00:07:49,720 --> 00:08:03,880
Speaker 1: Really glad you could join us. President Trump did land

150
00:08:04,000 --> 00:08:07,840
Speaker 1: in Israel earlier today and we are already heard comments

151
00:08:07,880 --> 00:08:10,360
Speaker 1: from both President Trump as well as Israeli Prime Minister

152
00:08:10,640 --> 00:08:13,760
Speaker 1: Benjamin Natanya. Who to give us a better sense of

153
00:08:13,800 --> 00:08:16,840
Speaker 1: what we can expect to learn from this trip, I

154
00:08:16,840 --> 00:08:18,640
Speaker 1: want to bring in Michael Arnold, who is the bureau

155
00:08:18,680 --> 00:08:23,640
Speaker 1: chief for Israel and Palestinian Territories for Bloomberg. Michael, thank

156
00:08:23,680 --> 00:08:25,720
Speaker 1: you so much for joining us. I would just like

157
00:08:25,840 --> 00:08:29,040
Speaker 1: to first get a sense of what President Trump plans

158
00:08:29,080 --> 00:08:32,679
Speaker 1: to do while he is in Israel and Palestinian territories

159
00:08:33,080 --> 00:08:36,040
Speaker 1: and what the goal is here. Well, he's got quite

160
00:08:36,040 --> 00:08:38,760
Speaker 1: a full itemperary already. As soon as he landed, he

161
00:08:38,800 --> 00:08:41,040
Speaker 1: was whisked by helicopter to Jerusalem where he met with

162
00:08:41,080 --> 00:08:44,559
Speaker 1: the President. Then he took a tour of holy sites

163
00:08:44,600 --> 00:08:47,600
Speaker 1: in the Old City, both Christian and Jewish. Uh. Now

164
00:08:47,640 --> 00:08:49,400
Speaker 1: he's meeting with the Prime Minister and later he's going

165
00:08:49,480 --> 00:08:51,720
Speaker 1: to have dinner with the Prime Minister. Tomorrow is going

166
00:08:51,760 --> 00:08:53,959
Speaker 1: to head of the Palestinian Authority, areas to meet with

167
00:08:54,280 --> 00:08:58,240
Speaker 1: Mahmud Bas and then back to Israel for a major speech. Um.

168
00:08:58,320 --> 00:08:59,960
Speaker 1: In terms of what he's trying to accomplish, I think

169
00:09:00,000 --> 00:09:02,080
Speaker 1: if there's a few things, um, you know, he may

170
00:09:02,160 --> 00:09:04,440
Speaker 1: make some kind of of a statement on the peace

171
00:09:04,480 --> 00:09:07,439
Speaker 1: process that would give some clarity as to what the

172
00:09:07,480 --> 00:09:10,959
Speaker 1: Trump team's vision is for that, because until now he's

173
00:09:10,960 --> 00:09:15,120
Speaker 1: given really conflicting signals. Um. And I think also Israel

174
00:09:15,160 --> 00:09:17,240
Speaker 1: is going to be looking very closely to see if

175
00:09:17,240 --> 00:09:20,760
Speaker 1: there's really any substance to these these hints about closer

176
00:09:20,800 --> 00:09:23,559
Speaker 1: cooperation for Israel with the wider Arab world, including a

177
00:09:23,640 --> 00:09:27,760
Speaker 1: Saudi Arabia. You know, I'm struck by the tone. I've

178
00:09:27,800 --> 00:09:30,160
Speaker 1: been watching some of the a lot of the coverage,

179
00:09:30,320 --> 00:09:34,240
Speaker 1: particularly President Trump being in realit and being just with

180
00:09:34,280 --> 00:09:38,080
Speaker 1: all the Saudi Arabian princes and the incredible ceremonies, and

181
00:09:38,200 --> 00:09:41,200
Speaker 1: they were tracking his visit otto the minute of when

182
00:09:41,200 --> 00:09:45,680
Speaker 1: he would arrive. What kind of reception has President Trump

183
00:09:45,679 --> 00:09:50,400
Speaker 1: gotten in Israel? Uh, It's it's funny. Israel certainly can't

184
00:09:50,400 --> 00:09:54,320
Speaker 1: compete with the Saudi Arabia in terms of extravagance or

185
00:09:54,360 --> 00:09:58,120
Speaker 1: in or in hospitality. This is a place which has

186
00:09:58,240 --> 00:10:01,480
Speaker 1: has many good things, but customer service is not really

187
00:10:01,640 --> 00:10:03,920
Speaker 1: one of its strong points. So there was a very

188
00:10:03,920 --> 00:10:07,280
Speaker 1: simple welcoming ceremony at the at the airport, which um

189
00:10:07,880 --> 00:10:10,040
Speaker 1: uh Prime Minister Natanya who had to you know, had

190
00:10:10,040 --> 00:10:12,360
Speaker 1: to twist his his cabinet minister's arms just to get

191
00:10:12,360 --> 00:10:15,240
Speaker 1: them to go uh. And then there were some some

192
00:10:15,320 --> 00:10:17,800
Speaker 1: snaffoos with one of the connected members trying to take

193
00:10:17,840 --> 00:10:21,520
Speaker 1: a selfie with Trump to nothing. Who's chagrin um. But

194
00:10:21,640 --> 00:10:23,600
Speaker 1: you know, I think that this kind of, you know,

195
00:10:23,640 --> 00:10:26,800
Speaker 1: this is kind of the homely atmosphere of Israel. I'm

196
00:10:26,800 --> 00:10:29,920
Speaker 1: not sure if that's um quite up Trump's alley. You know,

197
00:10:29,960 --> 00:10:32,480
Speaker 1: you get the sense from his own um real estate

198
00:10:32,480 --> 00:10:34,680
Speaker 1: career that he might feel more at home in the

199
00:10:34,720 --> 00:10:37,600
Speaker 1: type of guilded palaces that he saw in in Saudi Arabia.

200
00:10:37,800 --> 00:10:40,360
Speaker 1: But this is what Israel has to offer, I'm wondering.

201
00:10:40,679 --> 00:10:43,280
Speaker 1: You know, we've heard a lot right before President Trump left,

202
00:10:43,360 --> 00:10:45,400
Speaker 1: there have been a lot of right articles written about

203
00:10:45,400 --> 00:10:49,400
Speaker 1: how he's escaping the turmoil of Washington. He's leaving the

204
00:10:49,400 --> 00:10:52,000
Speaker 1: the difficulties at home to go abroad. And one of

205
00:10:52,000 --> 00:10:56,520
Speaker 1: those difficulties came when President Trump perhaps inadvertently gave more

206
00:10:56,559 --> 00:11:01,160
Speaker 1: information or than than perhaps some in eligence officers wanted

207
00:11:01,240 --> 00:11:05,960
Speaker 1: him to to the Russian Foreign Minister, and included information

208
00:11:06,280 --> 00:11:12,679
Speaker 1: that allegedly was given to the US by an Israeli informant. Um.

209
00:11:12,840 --> 00:11:15,360
Speaker 1: Has there been any discussion about that, if not out

210
00:11:15,360 --> 00:11:18,720
Speaker 1: loud in back office discussions, have you gotten a sense

211
00:11:18,760 --> 00:11:22,480
Speaker 1: of what the reaction is like? Uh? In Israel? Yeah,

212
00:11:22,520 --> 00:11:24,400
Speaker 1: you know, certainly, you know, there was a lot of

213
00:11:24,440 --> 00:11:27,000
Speaker 1: consternation here. UM. I would note that it hasn't been

214
00:11:27,000 --> 00:11:29,600
Speaker 1: confirmed that the information came from Israel. There were also

215
00:11:29,640 --> 00:11:31,600
Speaker 1: some reports that it came from Jordan's, but you know,

216
00:11:31,640 --> 00:11:34,520
Speaker 1: the working assumption is that it did come from Israel. Um.

217
00:11:34,720 --> 00:11:36,960
Speaker 1: You know, people here are upset, but in the other hand,

218
00:11:37,080 --> 00:11:39,199
Speaker 1: you know, they don't really have much option other than

219
00:11:39,240 --> 00:11:43,400
Speaker 1: to continue sharing intelligence. Um, you know with the US. UM.

220
00:11:43,440 --> 00:11:45,280
Speaker 1: And in terms of you know how people here are

221
00:11:45,280 --> 00:11:48,400
Speaker 1: reacting to Trump's domestic problems. Uh, you know, the Prime

222
00:11:48,400 --> 00:11:51,920
Speaker 1: minister here is also under police investigation. So um. You

223
00:11:51,960 --> 00:11:54,160
Speaker 1: know this is something which Israeli's are are kind of

224
00:11:54,240 --> 00:11:58,600
Speaker 1: used to. It's it's the kind of background noise against

225
00:11:58,679 --> 00:12:01,760
Speaker 1: which you know, government is is conducted here. It's interesting

226
00:12:01,800 --> 00:12:03,760
Speaker 1: to note, you know, with with both of these leaders,

227
00:12:03,760 --> 00:12:06,680
Speaker 1: you know, kind of facing such such problems and both

228
00:12:06,720 --> 00:12:10,400
Speaker 1: feeling that they're hounded by opponents and are and are mistreated.

229
00:12:10,640 --> 00:12:12,360
Speaker 1: You know, perhaps this could push them to make some

230
00:12:12,400 --> 00:12:14,080
Speaker 1: kind of a breakthrough. And you know, we've we've certainly

231
00:12:14,080 --> 00:12:16,440
Speaker 1: seen leaders in the past, like you know, Nixon going

232
00:12:16,480 --> 00:12:19,160
Speaker 1: to China, you know, being able to make important breakthroughs

233
00:12:19,200 --> 00:12:21,120
Speaker 1: when they do feel that their their backs are against

234
00:12:21,120 --> 00:12:24,520
Speaker 1: the wall. You know. One other big issue here, possibly

235
00:12:24,559 --> 00:12:26,520
Speaker 1: the biggest is I ran, right. I mean, we just

236
00:12:26,640 --> 00:12:30,120
Speaker 1: had the election in Iran. The more moderate uh person

237
00:12:30,240 --> 00:12:34,080
Speaker 1: want candidate one? And uh yeah, President Trump has continued

238
00:12:34,120 --> 00:12:37,880
Speaker 1: with his more hardlined rhetoric, which frankly, my understanding is

239
00:12:37,920 --> 00:12:39,680
Speaker 1: that Israel would like to see more of. Can you

240
00:12:39,720 --> 00:12:42,000
Speaker 1: give us a sense of what might come of these

241
00:12:42,040 --> 00:12:45,120
Speaker 1: meetings that President Trump is having with Prime Minister Nathan

242
00:12:45,160 --> 00:12:49,439
Speaker 1: yah who and what the implications for Iran could be. Sure,

243
00:12:50,200 --> 00:12:52,439
Speaker 1: it's interesting because here, you know, even though so much

244
00:12:52,480 --> 00:12:54,760
Speaker 1: of the headlines, uh, you know deal with the peace process,

245
00:12:54,760 --> 00:12:58,320
Speaker 1: really Iran is the number one issue, uh and you know, uh,

246
00:12:58,360 --> 00:13:00,600
Speaker 1: I think it's really officials have have been really gratifying

247
00:13:00,640 --> 00:13:02,959
Speaker 1: to see the very strong statements that that the president

248
00:13:02,960 --> 00:13:05,680
Speaker 1: has made on this trip. Um the the speech that

249
00:13:05,679 --> 00:13:08,360
Speaker 1: he gave in Saudi Arabia which was presenting the the

250
00:13:08,640 --> 00:13:11,600
Speaker 1: war and terror as uh you know, as as you know,

251
00:13:11,679 --> 00:13:14,760
Speaker 1: not a not a clash of civilizations or class of religions,

252
00:13:14,800 --> 00:13:18,160
Speaker 1: but rather uh, you know, people of goodwill versus you know,

253
00:13:18,280 --> 00:13:20,880
Speaker 1: versus villains. Um you know. So I think that you

254
00:13:20,880 --> 00:13:24,120
Speaker 1: know that they've been quite hardened here. Um we you know,

255
00:13:24,160 --> 00:13:26,720
Speaker 1: we we were told, you know, by by a source

256
00:13:26,880 --> 00:13:28,760
Speaker 1: close to Natanya who the other day that he he

257
00:13:28,880 --> 00:13:32,160
Speaker 1: is going to really push hard for for new sanctions

258
00:13:32,160 --> 00:13:34,720
Speaker 1: on Iran that uh, you know, he wants to create

259
00:13:34,760 --> 00:13:39,120
Speaker 1: what but this advisor termed a dirty Harry moment, referring

260
00:13:39,200 --> 00:13:41,439
Speaker 1: to um, you know, to the clinice Wood films where

261
00:13:41,440 --> 00:13:43,000
Speaker 1: he would dare the bad guys to shoot him so

262
00:13:43,040 --> 00:13:45,200
Speaker 1: that he could blow them away. Uh. So that you know,

263
00:13:45,280 --> 00:13:47,400
Speaker 1: Israel's really hoping that the you know, that the that

264
00:13:47,440 --> 00:13:51,400
Speaker 1: the president can can really insist on Iran changing its

265
00:13:51,400 --> 00:13:53,560
Speaker 1: behavior and if it doesn't, you know, perhaps set up

266
00:13:53,559 --> 00:13:58,840
Speaker 1: a confrontation that that would improve the situation to Israel's advantage. Mclarnald,

267
00:13:58,920 --> 00:14:00,959
Speaker 1: thank you so much for keeping tabs on this and

268
00:14:01,000 --> 00:14:03,560
Speaker 1: I'm sure we will hear more about the trip. Michael

269
00:14:03,600 --> 00:14:07,439
Speaker 1: Arnold is a bureau chief for Israel and Palestinian Territories

270
00:14:07,480 --> 00:14:11,160
Speaker 1: for Bloomberg News, speaking with us about President Trump's trip

271
00:14:11,320 --> 00:14:22,000
Speaker 1: to the Middle East. We want to take a moment

272
00:14:22,040 --> 00:14:25,080
Speaker 1: to let you know about something new from Bloomberg. Starting

273
00:14:25,160 --> 00:14:28,000
Speaker 1: right now, you can use our io s app or

274
00:14:28,120 --> 00:14:31,760
Speaker 1: our new Google Chrome extension to scan any news story

275
00:14:31,840 --> 00:14:35,840
Speaker 1: on any website, instantly revealing relevant news and market data

276
00:14:35,880 --> 00:14:39,640
Speaker 1: from Bloomberg and other sources related to companies and people

277
00:14:39,680 --> 00:14:42,880
Speaker 1: you're reading about. So no matter where you're reading the news,

278
00:14:42,920 --> 00:14:45,200
Speaker 1: you can bring the power of Bloomberg's news and data

279
00:14:45,280 --> 00:14:48,680
Speaker 1: with you. It's pretty amazing. Download our Io s app

280
00:14:48,800 --> 00:14:51,240
Speaker 1: or search for the Bloomberg extension on the Chrome Store

281
00:14:51,280 --> 00:14:54,400
Speaker 1: to try it out. Learn more at Bloomberg dot com

282
00:14:54,400 --> 00:15:03,960
Speaker 1: slash lens. We've heard a lot about stagflation, but what

283
00:15:04,040 --> 00:15:09,240
Speaker 1: about stagulation? That term was coined by David Service, chief

284
00:15:09,240 --> 00:15:13,040
Speaker 1: market strategist at Jeffreys ll l C, and he joins

285
00:15:13,160 --> 00:15:16,000
Speaker 1: us now on some of his latest comments. David Um,

286
00:15:16,080 --> 00:15:18,680
Speaker 1: thank you so much for joining US. I was really

287
00:15:18,720 --> 00:15:22,200
Speaker 1: struck by your latest miss if you're talking about how

288
00:15:22,240 --> 00:15:27,640
Speaker 1: regulation is really, uh stymying growth in our economy and

289
00:15:27,720 --> 00:15:29,680
Speaker 1: in a way that people don't really recognize, and you

290
00:15:29,760 --> 00:15:32,560
Speaker 1: had a statistic that was pretty mind boggling to me.

291
00:15:32,600 --> 00:15:36,680
Speaker 1: You said that data suggests that nearly ten of US

292
00:15:36,760 --> 00:15:39,400
Speaker 1: g d P is associated with the cost of federal

293
00:15:39,480 --> 00:15:44,520
Speaker 1: regulation intervention. Really well, that's according to the Competitive Enterprise

294
00:15:44,560 --> 00:15:47,440
Speaker 1: Institute Lisa and UM. There's a lot of different studies

295
00:15:47,480 --> 00:15:52,160
Speaker 1: that The problem I've had in digging into the costs

296
00:15:52,200 --> 00:15:57,640
Speaker 1: of regulation is that, unfortunately, it becomes quite political quite quickly,

297
00:15:57,800 --> 00:16:00,760
Speaker 1: and so the think tanks that are associated with the

298
00:16:00,840 --> 00:16:02,960
Speaker 1: right come up with some numbers, that think tanks on

299
00:16:03,000 --> 00:16:06,360
Speaker 1: the left come up with other numbers. The economics profession

300
00:16:06,360 --> 00:16:09,160
Speaker 1: in and of itself is not particularly good at measuring

301
00:16:09,200 --> 00:16:12,120
Speaker 1: these things, and so you're really kind of, you know,

302
00:16:12,360 --> 00:16:14,160
Speaker 1: sort of throwing throwing your hands up in the air

303
00:16:14,240 --> 00:16:16,720
Speaker 1: a little bit and trying to trying to play some

304
00:16:16,760 --> 00:16:19,840
Speaker 1: guessing games, which by the way, is pretty true about

305
00:16:20,040 --> 00:16:23,080
Speaker 1: everything in the economics profession, frankly. But but it's just

306
00:16:23,400 --> 00:16:26,440
Speaker 1: says the chief market strategist at Jeffreys love it, but

307
00:16:26,480 --> 00:16:31,080
Speaker 1: it's particularly acute in this study of regulation. And I

308
00:16:31,080 --> 00:16:34,280
Speaker 1: think also it kind of um, you know, it gets

309
00:16:34,320 --> 00:16:36,440
Speaker 1: to the heart of a debate between you know, traditionally

310
00:16:36,480 --> 00:16:40,800
Speaker 1: interventionist economists and those who favor, you know, much less

311
00:16:40,800 --> 00:16:43,080
Speaker 1: government interventions. So it really gets to the heart of

312
00:16:43,120 --> 00:16:46,960
Speaker 1: the kind of Chicago School freshwater saltwater debates that have

313
00:16:47,040 --> 00:16:49,440
Speaker 1: gone on from all. Right, so let's put aside the

314
00:16:49,480 --> 00:16:53,560
Speaker 1: exact rigor with which some of these estimates are established.

315
00:16:53,600 --> 00:16:56,880
Speaker 1: A lot of people would agree that regulatory burdens have increased,

316
00:16:57,040 --> 00:17:00,920
Speaker 1: particularly since the two thousand and eight financial crisis. And

317
00:17:01,480 --> 00:17:05,520
Speaker 1: you make an argument that this has materially limited growth,

318
00:17:05,720 --> 00:17:09,320
Speaker 1: regardless of whether it's ten percent or not. Uh, And

319
00:17:09,359 --> 00:17:14,439
Speaker 1: that these regulations are largely nonproductive. In other words, they

320
00:17:14,440 --> 00:17:17,679
Speaker 1: don't really add anything to the economy, and that it

321
00:17:17,720 --> 00:17:21,919
Speaker 1: has these have reduced competition. Um. Do you think that

322
00:17:22,000 --> 00:17:27,960
Speaker 1: all regulations are nonproductive and that all regulations reduce competition? No? No,

323
00:17:28,160 --> 00:17:30,200
Speaker 1: And I think, look, there's other forces that can reduce

324
00:17:30,240 --> 00:17:33,800
Speaker 1: competition besides regulation. What I guess I'm poining. By the way,

325
00:17:33,840 --> 00:17:35,920
Speaker 1: that was a great question that we could probably talk

326
00:17:35,920 --> 00:17:39,639
Speaker 1: about for the next five days or more. But let

327
00:17:39,720 --> 00:17:41,320
Speaker 1: me let me just let me just try to get

328
00:17:41,320 --> 00:17:44,000
Speaker 1: to kind of the heart of the regulatory burden story.

329
00:17:45,080 --> 00:17:47,920
Speaker 1: One of the things that we've seen added significantly in

330
00:17:48,040 --> 00:17:51,040
Speaker 1: a lot of businesses are hours worked associated with things

331
00:17:51,080 --> 00:17:54,320
Speaker 1: like compliance and regulation. In the financial industry, for example,

332
00:17:54,359 --> 00:17:57,880
Speaker 1: I think the latest count has city banks compliance departments

333
00:17:57,880 --> 00:18:01,359
Speaker 1: somewhere in the neighborhood of which is the same size

334
00:18:01,359 --> 00:18:06,080
Speaker 1: as Golden Sas. That is a marked increase, significant increase

335
00:18:06,200 --> 00:18:09,280
Speaker 1: over what that department looked like prior to the crisis.

336
00:18:09,680 --> 00:18:13,560
Speaker 1: Those hours worked are are serving a purpose. We're we're

337
00:18:13,640 --> 00:18:17,960
Speaker 1: overseeing a systemically important institution and theory uh in a

338
00:18:18,000 --> 00:18:20,800
Speaker 1: better way to stave off financial crisis in the future.

339
00:18:21,119 --> 00:18:24,440
Speaker 1: But those hours work don't actually produce returns. They don't

340
00:18:24,480 --> 00:18:27,640
Speaker 1: produce GDP, they don't nobody's making a widget in that

341
00:18:28,000 --> 00:18:30,520
Speaker 1: in that compliance department. And so I think what you

342
00:18:30,560 --> 00:18:31,920
Speaker 1: have to come to grips with. And this is true

343
00:18:31,920 --> 00:18:36,120
Speaker 1: of environmental regulation, that's true of health care regulation. We've

344
00:18:36,160 --> 00:18:40,520
Speaker 1: added an enormous amount of hours worked to the menu

345
00:18:40,880 --> 00:18:44,760
Speaker 1: of of of job creation in the United States post crisis,

346
00:18:45,040 --> 00:18:47,880
Speaker 1: where a lot of those hours worked aren't actually contributing

347
00:18:47,920 --> 00:18:50,800
Speaker 1: to final demand in a traditional way, so we don't

348
00:18:50,840 --> 00:18:53,280
Speaker 1: get a lot of GDP per hour work, which is

349
00:18:54,040 --> 00:18:56,679
Speaker 1: my opinion one of the reasons why productivity, which is

350
00:18:56,960 --> 00:19:00,560
Speaker 1: output per hour work, has actually been slowing quite substantially,

351
00:19:00,600 --> 00:19:03,680
Speaker 1: and why returns on capital have been lower or our

352
00:19:03,760 --> 00:19:06,240
Speaker 1: star has been lower in the BEDS model, and why

353
00:19:06,400 --> 00:19:09,320
Speaker 1: potential growth appears to be closer to one and a

354
00:19:09,359 --> 00:19:11,399
Speaker 1: half two rather than two and a half three. So

355
00:19:11,440 --> 00:19:14,200
Speaker 1: I think a lot of that adds up. Now. I mean,

356
00:19:14,560 --> 00:19:17,240
Speaker 1: I'm not making a statement about is it good or bad.

357
00:19:17,280 --> 00:19:19,119
Speaker 1: I'm making a statement about what it means for interest

358
00:19:19,200 --> 00:19:21,480
Speaker 1: rates and what it means for economic growth. We don't

359
00:19:21,520 --> 00:19:25,200
Speaker 1: measure environmental quality in economic growth. We don't measure the

360
00:19:25,280 --> 00:19:28,920
Speaker 1: quality of our groundwater, or the likelihood or unlilihood of

361
00:19:28,920 --> 00:19:32,480
Speaker 1: a financial of financial instability event Those don't get put

362
00:19:32,520 --> 00:19:36,159
Speaker 1: into GDP, and so you have to make some u

363
00:19:36,320 --> 00:19:39,840
Speaker 1: you have to make some assumptions about well about whether

364
00:19:39,880 --> 00:19:41,520
Speaker 1: those things are good or bad. And I think a

365
00:19:41,520 --> 00:19:43,720
Speaker 1: lot of people would agree they're pretty good. Right well,

366
00:19:43,720 --> 00:19:45,800
Speaker 1: But but look, so let's bring it down to the market,

367
00:19:45,880 --> 00:19:48,520
Speaker 1: right because that's that's why this matters, is because if

368
00:19:48,520 --> 00:19:50,560
Speaker 1: you think that this is going to be uh, a

369
00:19:50,560 --> 00:19:53,560
Speaker 1: story of aging demographics and just sort of the change

370
00:19:53,680 --> 00:19:58,399
Speaker 1: in the overall economic global climate, then it's going to

371
00:19:58,440 --> 00:20:01,560
Speaker 1: be hard to change that, right, and therefore interest rates

372
00:20:01,600 --> 00:20:05,040
Speaker 1: would remain low no matter what any government almost does. Right.

373
00:20:05,119 --> 00:20:07,320
Speaker 1: But if you believe that there is a step like

374
00:20:07,359 --> 00:20:10,560
Speaker 1: cutting regulation that could materially boost growth, then we would

375
00:20:10,600 --> 00:20:13,680
Speaker 1: move away from this dag inflation uh kind of picture

376
00:20:13,840 --> 00:20:16,240
Speaker 1: and towards one where you could see interest rates rise

377
00:20:16,320 --> 00:20:20,399
Speaker 1: more substantially and stocks get a boost more substantially. Correct.

378
00:20:20,400 --> 00:20:22,760
Speaker 1: I mean, that's the reason why this matters for markets. Well,

379
00:20:22,920 --> 00:20:24,880
Speaker 1: I think you're exactly I think I think you're exactly

380
00:20:24,960 --> 00:20:28,440
Speaker 1: right on the first. And that's why we're talking about it. Um.

381
00:20:28,480 --> 00:20:32,119
Speaker 1: We're talking about it because, um, is it a demand

382
00:20:32,119 --> 00:20:34,000
Speaker 1: side problem or is it a supply side problem. Is

383
00:20:34,000 --> 00:20:37,200
Speaker 1: it a lack of aggregate demand, as my friend Larry

384
00:20:37,200 --> 00:20:40,920
Speaker 1: Summers would argue, because of aging demographics, because of income inequality,

385
00:20:41,160 --> 00:20:43,359
Speaker 1: because of a number of other issues that have created

386
00:20:43,400 --> 00:20:47,040
Speaker 1: this savings glut globally, or is this just that people

387
00:20:47,119 --> 00:20:51,320
Speaker 1: have underinvested, not because there's you know, there's some sort

388
00:20:51,320 --> 00:20:54,680
Speaker 1: of you know, you know, demand side problem. But they're

389
00:20:54,720 --> 00:20:59,240
Speaker 1: actually under investing because the supply side restrictions, the regulatory

390
00:20:59,320 --> 00:21:02,280
Speaker 1: environment made it very complicated to invest heavily in the

391
00:21:02,359 --> 00:21:05,639
Speaker 1: United States and in many other countries post crisis. And

392
00:21:05,680 --> 00:21:07,800
Speaker 1: I think, look, I think you can make an argument

393
00:21:07,800 --> 00:21:10,080
Speaker 1: for a demand shock pretty early in the crisis. There's

394
00:21:10,119 --> 00:21:12,720
Speaker 1: no question there was one in A eight nine. I

395
00:21:12,720 --> 00:21:14,840
Speaker 1: think what happened is starting in ten we started to

396
00:21:14,840 --> 00:21:18,800
Speaker 1: see this demand shock dissipate, but a regulatory environment emerged

397
00:21:18,800 --> 00:21:23,960
Speaker 1: that created a much more stagulatory outcome. If that's a word,

398
00:21:24,359 --> 00:21:27,359
Speaker 1: um that I'm going to create, uh, stagulatory outcome then

399
00:21:27,400 --> 00:21:30,960
Speaker 1: otherwise would have happened. And I think the exciting thing, um,

400
00:21:31,000 --> 00:21:33,560
Speaker 1: you know, there's a lot of exciting things about watching

401
00:21:33,560 --> 00:21:37,520
Speaker 1: our current political environment, um, notwithstanding you know SNL skits

402
00:21:37,520 --> 00:21:39,520
Speaker 1: in late night TV, which are pretty exciting to watch

403
00:21:39,520 --> 00:21:41,800
Speaker 1: as well. But I think the one exciting thing I

404
00:21:41,800 --> 00:21:43,959
Speaker 1: would say is, and what I've talked about with our

405
00:21:44,000 --> 00:21:46,800
Speaker 1: clients mostly is you know, it's not the trade, it's

406
00:21:46,840 --> 00:21:49,399
Speaker 1: not the immigration, it's not even the fiscal and the

407
00:21:49,520 --> 00:21:53,000
Speaker 1: tax stuff. That the exciting thing about these policies is

408
00:21:53,040 --> 00:21:55,400
Speaker 1: that there's a there's a sort of a move toward

409
00:21:55,480 --> 00:22:00,119
Speaker 1: deregulation which is being implemented at the departmental levels to

410
00:22:00,200 --> 00:22:02,920
Speaker 1: put me at the Interior Department, at the Commerce Department,

411
00:22:03,119 --> 00:22:05,840
Speaker 1: at the Treasury Department. It's not even a congressional push,

412
00:22:06,200 --> 00:22:09,320
Speaker 1: and I think that's a tailwind for exactly what you

413
00:22:09,359 --> 00:22:13,040
Speaker 1: were talking about, higher real returns to capital um, higher

414
00:22:13,080 --> 00:22:17,520
Speaker 1: productivity growth. Now, wait, David, David, just a real quick

415
00:22:17,880 --> 00:22:21,560
Speaker 1: one one line yes or no? Do you think that

416
00:22:21,880 --> 00:22:26,080
Speaker 1: the regulatory reform is happening right now? I do. I

417
00:22:26,119 --> 00:22:30,119
Speaker 1: think that these departments are changing the business environment so

418
00:22:30,200 --> 00:22:33,800
Speaker 1: that less regulation is coming down every day from those

419
00:22:33,840 --> 00:22:36,840
Speaker 1: in charge of pushing that regulation for which the department has.

420
00:22:37,040 --> 00:22:39,560
Speaker 1: David Service, thank you so much for joining us. David Service,

421
00:22:39,560 --> 00:22:45,959
Speaker 1: the chief market strategist at Jeffreys based in New York.

422
00:22:55,320 --> 00:22:58,560
Speaker 1: Ford shares up about one and a half percent after

423
00:22:58,600 --> 00:23:03,280
Speaker 1: news emerged at the former CEO, Mark Fields, was being

424
00:23:03,320 --> 00:23:07,720
Speaker 1: removed from office and being replaced by Turron specialists Jim Hackett.

425
00:23:07,800 --> 00:23:10,399
Speaker 1: Keith Notton has been following this and is at Ford

426
00:23:10,600 --> 00:23:13,600
Speaker 1: right now. Keith Noton is auto editor at large for

427
00:23:13,720 --> 00:23:17,720
Speaker 1: Bloomberg in Detroit. Keith, can you tell us did this

428
00:23:17,800 --> 00:23:19,840
Speaker 1: come about? Kind of suddenly, because it seems to take

429
00:23:19,840 --> 00:23:23,439
Speaker 1: a lot of people by surprise. Yeah, it happened very quickly.

430
00:23:23,760 --> 00:23:26,040
Speaker 1: We've known for a couple of weeks that Mark Fields

431
00:23:26,040 --> 00:23:28,719
Speaker 1: had been on the hot seat. The board had, um uh,

432
00:23:29,400 --> 00:23:31,080
Speaker 1: kind of grilled him at a meeting a couple of

433
00:23:31,080 --> 00:23:34,920
Speaker 1: weeks ago in advance of the annual meeting to find

434
00:23:34,960 --> 00:23:36,840
Speaker 1: out what was going on with the strategy because as

435
00:23:36,880 --> 00:23:39,199
Speaker 1: you said, the stock has been way down, profits are

436
00:23:39,280 --> 00:23:42,040
Speaker 1: falling this year. But then they had another board meeting

437
00:23:42,080 --> 00:23:45,520
Speaker 1: on Friday and decided it was time for a change.

438
00:23:45,520 --> 00:23:48,160
Speaker 1: So Bill Ford, the executive chairman, then went and met

439
00:23:48,200 --> 00:23:51,360
Speaker 1: with Mark Fields, who said he would resign. And then

440
00:23:51,400 --> 00:23:53,240
Speaker 1: Bill Ford turned to Jim Hackett and said, you're on

441
00:23:53,320 --> 00:23:56,960
Speaker 1: new man. So they focused today and talking about this

442
00:23:57,040 --> 00:23:59,800
Speaker 1: about how they need to speed up decision making. And

443
00:23:59,840 --> 00:24:01,840
Speaker 1: I think this was an example of the first one.

444
00:24:02,200 --> 00:24:04,000
Speaker 1: So let's talk about Jim Hackett. What do we know

445
00:24:04,040 --> 00:24:07,000
Speaker 1: about him? What's his background? Well, so he was for

446
00:24:07,200 --> 00:24:10,600
Speaker 1: years at the office furniture maker Steelcase, which is based

447
00:24:10,600 --> 00:24:14,119
Speaker 1: in Grand Rapids, Michigan, and um he really kind of

448
00:24:14,920 --> 00:24:18,160
Speaker 1: institute a cultural change there. He got them to think

449
00:24:18,240 --> 00:24:20,840
Speaker 1: less about, you know, just making furniture and more about

450
00:24:20,920 --> 00:24:24,040
Speaker 1: how people work and how offices should be designed, which

451
00:24:24,119 --> 00:24:28,000
Speaker 1: kind of ushered in the new era of more collaborative workspaces.

452
00:24:28,200 --> 00:24:31,280
Speaker 1: Uh and stead of the cubical farms that we used

453
00:24:31,280 --> 00:24:34,840
Speaker 1: to know and hate and now and then after that

454
00:24:34,880 --> 00:24:36,920
Speaker 1: he went to the University of Michigan al Modear. He

455
00:24:37,160 --> 00:24:40,040
Speaker 1: played football for Sembechler, and he uh he kind of

456
00:24:40,040 --> 00:24:43,679
Speaker 1: turned around their athletic department and made a very famous,

457
00:24:43,760 --> 00:24:47,159
Speaker 1: high profile higher in Jim Hobba the coach football team,

458
00:24:47,200 --> 00:24:49,600
Speaker 1: which then started winning. So he's had a couple of

459
00:24:50,200 --> 00:24:53,040
Speaker 1: turnarounds under his belt. Afford is not the sort of

460
00:24:53,040 --> 00:24:56,120
Speaker 1: classic turnaround where it's in crisis. It's expected to make

461
00:24:57,040 --> 00:25:00,800
Speaker 1: nine billion dollars this year pre tax, but is definitely

462
00:25:00,920 --> 00:25:04,560
Speaker 1: lagging its cross town rival General Motors in the product

463
00:25:04,560 --> 00:25:07,280
Speaker 1: lineup it has today and even in the electric vehicles

464
00:25:07,320 --> 00:25:10,400
Speaker 1: it has coming tomorrow. Well, what was the main problem

465
00:25:10,440 --> 00:25:14,280
Speaker 1: with Mark Fields. I mean, yes, he did make some decisions.

466
00:25:14,280 --> 00:25:16,680
Speaker 1: We've talked about this before about how perhaps he didn't

467
00:25:16,680 --> 00:25:20,480
Speaker 1: put as much emphasis on SUVs or light trucks that

468
00:25:20,560 --> 00:25:23,520
Speaker 1: other competitors did, and that sort of missed the mark

469
00:25:23,560 --> 00:25:26,000
Speaker 1: a little bit. With the increase that we've seen in

470
00:25:26,000 --> 00:25:28,560
Speaker 1: the sales of those vehicles in the past year or two.

471
00:25:29,000 --> 00:25:31,359
Speaker 1: But aside from that, I mean, investing in the future

472
00:25:31,400 --> 00:25:34,040
Speaker 1: doesn't seem like something that necessarily any successor would want

473
00:25:34,040 --> 00:25:37,959
Speaker 1: to change, right, Yeah, I think you know, he definitely

474
00:25:38,000 --> 00:25:41,439
Speaker 1: suffered by comparison to his predecessor, Alan Mollawley, who was

475
00:25:41,520 --> 00:25:44,280
Speaker 1: the rock star, but also in the sort of execution.

476
00:25:44,359 --> 00:25:48,560
Speaker 1: The magic that Molluley brought was this singular focus on

477
00:25:48,640 --> 00:25:51,320
Speaker 1: turning the company around. He called it his one forward Plan.

478
00:25:52,040 --> 00:25:55,280
Speaker 1: And then Mark Fields came along with this very complicated strategy.

479
00:25:55,320 --> 00:25:57,880
Speaker 1: It's you know about one foot today and one ft

480
00:25:57,920 --> 00:26:00,679
Speaker 1: and tomorrow or an automotive and mobility company. People had

481
00:26:00,720 --> 00:26:04,240
Speaker 1: a hard time understanding, you know, what he was aiming for,

482
00:26:04,359 --> 00:26:09,000
Speaker 1: and investors fled the stock. They didn't really understand where

483
00:26:09,040 --> 00:26:11,920
Speaker 1: he was going. And I think the employees as well

484
00:26:12,080 --> 00:26:15,080
Speaker 1: were confused and had a hard time kind of marshaling

485
00:26:15,119 --> 00:26:18,360
Speaker 1: themselves in all marching in the same direction. And so

486
00:26:18,840 --> 00:26:23,080
Speaker 1: what will I mean, I'm just trying to imagine somebody

487
00:26:23,080 --> 00:26:25,639
Speaker 1: with a furniture background and a football background coming in

488
00:26:25,720 --> 00:26:28,520
Speaker 1: to come up with like a really simple message for Ford,

489
00:26:28,720 --> 00:26:30,960
Speaker 1: we will the simple message be that we're gonna expect

490
00:26:30,960 --> 00:26:34,000
Speaker 1: from Jim Hackett. Well, he said today that it's not

491
00:26:34,080 --> 00:26:37,080
Speaker 1: about talking about these two different companies within one company.

492
00:26:37,119 --> 00:26:40,359
Speaker 1: That they're a singular company and you know they're going

493
00:26:40,400 --> 00:26:42,560
Speaker 1: to make money now and in the future, and they're

494
00:26:42,600 --> 00:26:44,760
Speaker 1: they're going to better explain how they're going to do that,

495
00:26:44,800 --> 00:26:46,800
Speaker 1: how they're going to do it with driverless cars and

496
00:26:46,840 --> 00:26:50,960
Speaker 1: car sharing and electric vehicles. But it's all part of

497
00:26:50,960 --> 00:26:54,600
Speaker 1: the piece instead of two separate pieces. And the key

498
00:26:54,640 --> 00:26:56,879
Speaker 1: and you can't underline it enough is they're going to

499
00:26:57,000 --> 00:27:01,760
Speaker 1: move quicker, move faster. For under Mark Fields has viewed

500
00:27:01,800 --> 00:27:04,639
Speaker 1: as having been a little indecisive and a little slow

501
00:27:04,640 --> 00:27:06,880
Speaker 1: off the mark, so they're going to try and change

502
00:27:06,880 --> 00:27:09,600
Speaker 1: that and just real quick. It seems like shareholders are

503
00:27:09,640 --> 00:27:13,159
Speaker 1: not swish. I mean, one and a half percent is

504
00:27:13,160 --> 00:27:14,800
Speaker 1: not that big of a move for such a big

505
00:27:15,200 --> 00:27:19,800
Speaker 1: change like this. Well, after declining under Mark Fields, I

506
00:27:19,800 --> 00:27:25,600
Speaker 1: think it's it's like a green shoot. There's promise, but

507
00:27:25,600 --> 00:27:27,280
Speaker 1: but yeah, they have a lot of ground to make

508
00:27:27,359 --> 00:27:30,120
Speaker 1: up for all of the value that's been destroyed over

509
00:27:30,119 --> 00:27:32,320
Speaker 1: the last three years. I'm sure that it's a very

510
00:27:32,359 --> 00:27:34,800
Speaker 1: interesting day to be at Ford Keith Noton, Thank you

511
00:27:34,840 --> 00:27:37,800
Speaker 1: so much for joining us from their Keith Notton is

512
00:27:37,800 --> 00:27:42,400
Speaker 1: our editor at large focusing on autos for Bloomberg News,

513
00:27:42,400 --> 00:27:47,679
Speaker 1: and he is based in Detroit. Thanks for listening to

514
00:27:47,680 --> 00:27:50,600
Speaker 1: the Bloomberg P and L podcast. You can subscribe and

515
00:27:50,640 --> 00:27:54,640
Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast

516
00:27:54,640 --> 00:27:58,120
Speaker 1: platform you prefer. I'm Pim Fox. I'm on Twitter at

517
00:27:58,320 --> 00:28:01,680
Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo. It's one

518
00:28:01,920 --> 00:28:04,600
Speaker 1: before the podcast. You can always catch us worldwide on

519
00:28:04,640 --> 00:28:05,480
Speaker 1: Bloomberg Radio