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Speaker 1: Welcome to the Bloomberg pien L Podcast on past when you,

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Speaker 1: along with my co host Lisa Brahma, wits each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. Simmon's Energy America's team leader for

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Speaker 1: Bloomberg News, he joined us on our Bloomberg Interactive Brooker Studio. So,

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Speaker 1: first of all, Simon, are you surprised that Chevron walked

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Speaker 1: away today? No, we're not surprised as as as my work,

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Speaker 1: and you just heard him earlier that he's very keen.

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Speaker 1: We can't stress enough capital discipline, his commitment to returning

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Speaker 1: as much cash as possible to investors, not getting carried away,

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Speaker 1: and making bold and over ambitious deals here. So although

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Speaker 1: this was this would have been the biggest deal of

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Speaker 1: his career, it would have been I think possibly Chevron's

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Speaker 1: biggest acquisition today. The money that the offer was there

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Speaker 1: on the table, and they were pretty clear they were

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Speaker 1: they weren't going to go any higher, and a lot

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Speaker 1: of people saw them just staying with this, and when

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Speaker 1: Occidental came back improved their offer, it was it was

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Speaker 1: questionable whether Chevron had the willingness to go above that.

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Speaker 1: And certainly shareholders today are rewarding Chevron for that discipline,

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Speaker 1: they are not rewarding Occidental. Shares down six point two

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Speaker 1: in the week of Chevron's decision to walk away. How

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Speaker 1: negative is this for Accidental? To give you some idea,

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Speaker 1: Occidental's market caout the last time I looked with something

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Speaker 1: like a fifth of what Chevon's. It's Chevron is an

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Speaker 1: enormous company by any measure. It's got the balance sheet,

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Speaker 1: it's got the financial flexibility to buy a company of

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Speaker 1: Anadarko size fairly easily. For Occidental, this is a huge stretch,

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Speaker 1: and as we we know, they've been flying or literally

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Speaker 1: flying around the last couple of weeks trying to trying

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Speaker 1: to engineer this deal and make sure it works for them.

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Speaker 1: They've gone to Warren buffet it. They've got ten billion

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Speaker 1: dollars of cash, a commitment from him. They've gone total

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Speaker 1: in France Total, have agreed to take some assets post deal,

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Speaker 1: which should ease some concerns there Nevertheless, there is a

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Speaker 1: real anxiety that how is Occidental going to pay for

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Speaker 1: this and manage its balance sheet and not get too leveraged.

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Speaker 1: And this is this is the oil industry, of course,

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Speaker 1: this is a cyclical industry. Where the price has done

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Speaker 1: a bit better this year, there's no guarantee oil prices

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Speaker 1: will stay around where they are at the moment. They

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Speaker 1: won't go down back down to fifty dollars a barrel

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Speaker 1: or even lower next year. Who knows, so Simon, you

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Speaker 1: just you mentioned the great balance sheet that Chevron has.

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Speaker 1: What do you think Chevron's next step is, given that

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Speaker 1: they're now passing on in a darker I I think

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Speaker 1: any CEO, especially in the oil industry and the way

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Speaker 1: it is at the moment, with what's going on in

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Speaker 1: the Permian, myke Worth has got to be looking at

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Speaker 1: other other opportunities. Again, we heard him there. He wouldn't

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Speaker 1: be drawn into sort of naming names or really committing

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Speaker 1: himself to doing another deal. He's he's playing it as

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Speaker 1: you would expect him at this moment to be. It's

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Speaker 1: playing it safe, stressing the increase that announced this morning,

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Speaker 1: the share buy backs, and that's what she helds want

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Speaker 1: to see in the near term. But look what's going

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Speaker 1: on in the Permian right now. This is huge explosive

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Speaker 1: growth there. Exon and Chevron, the two big giants of

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Speaker 1: the industry here have for years have kind of sat

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Speaker 1: on the sidelines a bit. They've been involved, but they

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Speaker 1: it's only this year that they got really they made

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Speaker 1: really strong commitments to invest billions and billions over the

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Speaker 1: next few years and really make the Permian a centerpiece

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Speaker 1: of their growth plans. Uh. And there's a there's a

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Speaker 1: huge opportunity here in the Permian for these companies and

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Speaker 1: others to come in and consolidate. There's a very fragmented

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Speaker 1: ownership in that region. There are a lot of independent players,

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Speaker 1: mid sized companies, some of them have you know, operational challenges.

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Speaker 1: And what's what's happened in the last few weeks were

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Speaker 1: with Anadarka coming into play. It's really ignited a lot

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Speaker 1: of speculation about future m and A maybe involving Chevron,

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Speaker 1: but also maybe involving other majors, even x On Shell. Uh,

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Speaker 1: maybe some consolidation between some of those mid sized players

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Speaker 1: and really kind of rationalizing what's going on there. You know,

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Speaker 1: as you mentioned, Simon this is a cyclical business, and

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Speaker 1: I think about some of the pain that we've seen

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Speaker 1: in the Pachelle patch, particularly from the debt market side.

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Speaker 1: We certainly saw that in two thousand and fifteen, two

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Speaker 1: thousand and sixteen. I'm wondering whether this acquisition by Accidental

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Speaker 1: is setting up that company for a similar pain later on.

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Speaker 1: I mean, is are they going to end up paying

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Speaker 1: for this largely with dead And I am looking right

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Speaker 1: now at Occidental bonds that are selling off sharply, uh

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Speaker 1: in the our investment grade currently, but definitely investors are

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Speaker 1: showing some scottishness there. Yeah, it's a big question. I mean,

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Speaker 1: you look at I can't keep going back to the buffet,

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Speaker 1: the buffet deal and Buffet's got he's got, he's got

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Speaker 1: preferred stock. The paying I mean, this is really expensive

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Speaker 1: to get this deal done for them, and they ostensibly

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Speaker 1: did this to avoid a shareholder votes, but in the end,

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Speaker 1: you know, even if they push this through, it's going

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Speaker 1: to turn around and buy them. I definitely watched the

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Speaker 1: bonds um. There's a there's a huge continuing anxiety among investors,

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Speaker 1: bond holders, shareholders about what has happened in this sector

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Speaker 1: over the last three or four years. I mean, the

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Speaker 1: oil price sold off steeply back in and it's only

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Speaker 1: just started to recover. If you if you look over

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Speaker 1: us at the last five years or so, you know,

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Speaker 1: it used to be at a hundred dollars a barrel.

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Speaker 1: Where is it at the moment. It's like arrow depending

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Speaker 1: on which price you're looking at. Um. So we're not

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Speaker 1: out of the woods yet. And the last few years

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Speaker 1: the mantra has been in the oil industry capital discipline,

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Speaker 1: spending discipline. Uh, you know, and there are the industry

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Speaker 1: has hasn't yet recovered to the damage, hasn't really pair

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Speaker 1: the damage to its reputation. And you know, looking at

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Speaker 1: the commentary, speaking to investors, speaking to analysts over the

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Speaker 1: last couple of weeks, as I said, it's a real

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Speaker 1: worry that does this take over battles signal and an

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Speaker 1: end to this period of discipline and austerity. So Chevron

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Speaker 1: stepping backs given its investors a bit of a relief, um,

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Speaker 1: But for occidental shareholders, the anxiety is very real at

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Speaker 1: the moment, and it must be. There must be a

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Speaker 1: worry for investors in other share other companies right now.

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Speaker 1: Are they going to take a leap. Is this going

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Speaker 1: to be We're going to see more deals? Could we

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Speaker 1: see another takeover battle? I mean that would be kind

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Speaker 1: of negative for some of them. Sam and Casey, thank

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Speaker 1: you so much. I wonder I wonder where actually where

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Speaker 1: where is the jet right now? Real quickly, the last time,

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Speaker 1: for the last time I looked, it was still in

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Speaker 1: the in the Hague. And what that mean? What does

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Speaker 1: that mean? Very good? We don't even look to be clear.

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Speaker 1: We all we know is that the Occidental jet is

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Speaker 1: in the Netherlands. We don't know who's on board or

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Speaker 1: while they're there. One of my okay understood, Simon Casey,

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Speaker 1: Energy team leader Bloomberg News joining us on our Bloomberg

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Speaker 1: Interactive Broker studio. I believe Royal Dutch Shell might be

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Speaker 1: somewhere in that part of the world. But the Occidental

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Speaker 1: now owns this asset. They now own a big, big

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Speaker 1: piece of the Permian basin. UH. They've arranged for financing

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Speaker 1: with Warren Buffett in terms of ten billion dollars preferred stock. UH.

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Speaker 1: They've met with the folks and have an agreement a

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Speaker 1: total for some divestitures. So they're certainly putting their best

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Speaker 1: foot forward here. And what is a very big deal

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Speaker 1: for the occidental petroleum folks in terms of assets, in

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Speaker 1: terms of purchase price. Uh So, now the hard work begins. Now,

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Speaker 1: let's head to UH Nathan Hagar for World at national headlines, Nathan,

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Speaker 1: globally are getting more concerned today about the prospects of

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Speaker 1: no trade deal with between the US and China. Both

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Speaker 1: sides appear to be hardening their stance, and Nastac leading

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Speaker 1: the declines in the US, but down by one and

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Speaker 1: a half percent. Really though, one of the biggest moves

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Speaker 1: that can be seen in currency markets. I'm looking right

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Speaker 1: now at the ms c I Emerging Markets uh Currency Index,

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Speaker 1: which is poised for its biggest one day loss right

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Speaker 1: now since October eighteen, had fallen the most since August

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Speaker 1: of last year at one point, and has retraced all

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Speaker 1: of its gains for joining US now to talk about

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Speaker 1: this from the emerging markets angle and and just currencies

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Speaker 1: in general. Al Hasseani He is senior interest rates and

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Speaker 1: currencies analysts for Columbia thread Needle Investments, helping to oversee

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Speaker 1: four hundred and thirty billion dollars from Minneapolis, Minnesota. Thank

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Speaker 1: you so much for being with us ed. I just

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Speaker 1: want to start with the big move that we're seeing

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Speaker 1: in the ms I Emerging Markets Currency Index. I'm just wondering,

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Speaker 1: is this the beginning of something that could be a

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Speaker 1: real protracted sell off among emerging markets, particularly in South

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Speaker 1: in Asia should the deal breakdown completely? Sure, I mean

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Speaker 1: I think if the deal does break down, we probably

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Speaker 1: see a little bit more downside uh two currencies. If

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Speaker 1: you look at what happened, let's say, in the course

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Speaker 1: of the past six months in the e M space,

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Speaker 1: is we've seen uh the real rate question versus the

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Speaker 1: US shrink quite considerably. The M as a class of

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Speaker 1: the whole has done, has done quite well until I'd

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Speaker 1: say about two months ago, and it's flatline since. And

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Speaker 1: now we're starting to see some of that volatility and

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Speaker 1: risk assets spill over into e M UM and and

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Speaker 1: and generally that tends to be a very toxic combination

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Speaker 1: for for M currencies. So I talk about some of

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Speaker 1: the European currencies, thinking about the Euro obviously, the European

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Speaker 1: region very sensitive to you know, the health and growth

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Speaker 1: and situation in China. What is your thoughts about the

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Speaker 1: euro right here? Yeah, we we have liked being short

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Speaker 1: the euro for more than a year now, it's been

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Speaker 1: it's been a good trend. That trend is flat line,

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Speaker 1: I would say a little bit more recently, UM, A

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Speaker 1: couple of things have played into this flattening trend. And

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Speaker 1: instead of the decline and volatility in euro dollar one,

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Speaker 1: European data at this point seems to have a little

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Speaker 1: bit less downside than it did even three months ago.

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Speaker 1: We've bottomed out in a lot of the industrial in

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Speaker 1: the seas, We're starting to see some recovery in in

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Speaker 1: export data, some recovering sentiment data, and that's playing against

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Speaker 1: what we're seeing on on the trade front and again

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Speaker 1: greater uncertainly coming in terms of US China trade relations.

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Speaker 1: So those two forces are are playing off against each

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Speaker 1: other at the moment. And I would add the other

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Speaker 1: factor is in terms of positioning spect positioning. Speculative positioning

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Speaker 1: right now is quite heavily short the euro, and so

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Speaker 1: I think that that plays against UM dollar strength as well.

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Speaker 1: More broadly, I would say dollars trend has more room

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Speaker 1: to run, but versus the euro, I think, UM, we're

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Speaker 1: seeing less and less room for for the euro tow

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Speaker 1: to weaken. And you know, I have to wonder the

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Speaker 1: big story today really is the trade tensions appear to

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Speaker 1: be ratcheting up between the US and China. I'm trying

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Speaker 1: to figure out how much of a game changer a

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Speaker 1: breakdown in discussions would be four currency markets. How much

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Speaker 1: would no deal between the US and China alter your

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Speaker 1: current views on currencies and in sort of where you're positioning, Yeah,

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Speaker 1: I would say I would say it probably as a

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Speaker 1: first order issue, we would strengthen my conviction that the

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Speaker 1: dollar will move higher UH, particularly against two baskets of currencies. First,

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Speaker 1: high beta EM currencies like South Africa, Mexico and Brazil

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Speaker 1: that have performed quite well on a year to date

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Speaker 1: basis um and and have a lot of room to

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Speaker 1: sell off UM and Second, developed market currencies of small,

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Speaker 1: open economies. And I would say there's sort of I

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Speaker 1: look at a basket of five, but the Australian dollar,

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Speaker 1: the New Zealand dollar, UH, Swedish Corona, Korean Land, and

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Speaker 1: the Canadian dollar. I think that basket is where we've

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Speaker 1: seen a combination of things. First, weakening growth into this environment,

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Speaker 1: the biggest exposure to trade, and therefore this this global

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Speaker 1: or this location between the U S and China, and

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Speaker 1: then central banks having to step in and now ease policy.

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Speaker 1: And we've seen New Zealand take a step in that direction.

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Speaker 1: We've seen easing signs from Australia, Korea, um And and Sweden.

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Speaker 1: And so all of these five currencies are now sort

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Speaker 1: of the front line of of of weakness versus a

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Speaker 1: are so ed you mentioned some of the areas and

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Speaker 1: emerging markets where you rightly have concerns, particularly in the

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Speaker 1: backdrop of a you know, a trade potential, trade escalating

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Speaker 1: conflict between the U S and China. Are there areas

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Speaker 1: in emerging markets where you still feel comfortable, uh, putting

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Speaker 1: capital to work. Sure, I would say in in local

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Speaker 1: rates markets, we've seen a couple of places where you're

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Speaker 1: pretty well compensated. Real rates are high central banks of

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Speaker 1: starting easing cycles. Um. I would say if you look

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Speaker 1: around Asia the moment um, Indonesia and the Philodines standout

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Speaker 1: as as pretty good places to put money to work

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Speaker 1: on a currency hatched basis um in in in in

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Speaker 1: the local rates markets, in in Latin America less so

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Speaker 1: just because you know, some of the core markets have

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Speaker 1: done quite well, uh, you know, particularly Brazil UM and

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Speaker 1: then when I look around for stress cases, I would

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Speaker 1: say again, so the two issues from last year in

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Speaker 1: Argentina and Turkey again float to the top of the

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Speaker 1: of the risk list and and and have performed quite poorly.

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Speaker 1: You today, Ed al Husseini, thanks so much for being

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Speaker 1: with us it as a senior Interest Rates and currency

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Speaker 1: as a Columnia thread Needle Investments joining us on the

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Speaker 1: phone from Minneappolis. Well, as usual, there is a lot

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Speaker 1: going on in the media industry as traditional media companies

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Speaker 1: look at their businesses to see if they can even

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Speaker 1: compete with big tech giants such as Amazon, Netflix, and Apple.

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Speaker 1: Our next guest is part of the top notch media

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Speaker 1: reporting team. We have a Bloomberg News, Lucashaw's entertainment reporter

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Speaker 1: for Bloomberg News, usually based on our Los Angeles bureau,

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Speaker 1: but joining us live here on our Bloomberg Interactive Brookers

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Speaker 1: studio here in New York. So, Lucas, thanks so much

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Speaker 1: for being with us. First of all, you know we

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Speaker 1: had Disney this week with earnings. They're making a big

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Speaker 1: pivot to try to be a streaming company. What did

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Speaker 1: you take out of some of Bob Ogger's comments. You

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Speaker 1: know he has very effectively changed the conversation around Disney

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Speaker 1: over the past couple of years. For a while, it was,

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Speaker 1: you know, the movie studio is doing so well because

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Speaker 1: of the Marvel movies and Pixar and Star Wars. But ESPN,

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Speaker 1: which had been the profit driver for so long, with

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Speaker 1: struggling because people were cutting the cord, canceling pay TV,

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Speaker 1: And he has shifted the focus to these new streaming

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Speaker 1: services ESPN Plus, Disney Plus and Hulu, in which Disney

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Speaker 1: owns a majority stake, and for the most part in

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Speaker 1: investors are going along with it. You know, Disney says

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Speaker 1: that profits they're down a little bit, but they're not

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Speaker 1: down as much as people think. Uh and and people

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Speaker 1: are cool with that. For the longest time, the the

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Speaker 1: you know, the important metric at Disney has been profitability

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Speaker 1: and it's not anymore. Is this a sort of a

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Speaker 1: recognition by investors that really the future of media is

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Speaker 1: streaming and that it's going to be expensive and this

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Speaker 1: is going to be a difficult time, But it's all

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Speaker 1: about how you position for the future, and profitability is

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Speaker 1: that much less important than the near term for the

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Speaker 1: short term. I think that's exactly right. You know, Netflix

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Speaker 1: has built this kind of colossus and earned evaluation north

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Speaker 1: of a hundred fifty billion dollars without making a cent

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Speaker 1: of profit. I mean they report one with their free

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Speaker 1: cash flow is really negative. Uh. You know, Disney obviously

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Speaker 1: can't get away with that, but they are going to

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Speaker 1: have a couple of years I think where they can

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Speaker 1: report profits that are flat or down a little bit,

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Speaker 1: provided that they show growth in streaming lucas. You know,

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Speaker 1: one of the things that I think drove the Disney

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Speaker 1: Century Fox deal was the belief that, gee, if you're

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Speaker 1: bob Byger and Disney, over the next five or ten years,

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Speaker 1: your competition is not so much Warner Brothers or Viacom.

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Speaker 1: It's maybe more like an Apple or Amazon. Do you

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Speaker 1: think those tech companies are going to at any point

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Speaker 1: really dive into the deep end of the pool in

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Speaker 1: terms of media and content. I would say that Amazon

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Speaker 1: at least is already there in terms of spending. I mean,

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Speaker 1: they're spending five six seven billion dollars on programming in

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Speaker 1: a year now. I don't know that they've had success

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Speaker 1: with their shows on the scale that that Netflix or

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Speaker 1: even Hulu has had. Most TV studio executives that I

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Speaker 1: talked to feel like the Amazon's perception in the market

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Speaker 1: is is vastly overstated. Um, Apple is a is a

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Speaker 1: big question mark. I'm really not sure how committed they are.

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Speaker 1: They had this big event a couple of months ago.

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Speaker 1: They tried out j j Abrams and Oprah and Reese

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Speaker 1: Witherspoon and Jennifer Aniston. You know, I was talking with

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Speaker 1: somebody yesterday who joked that it was like Apple just

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Speaker 1: staged its own Vanity fair cover. But we haven't seen

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Speaker 1: a second of any footage, and we don't know how

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Speaker 1: serious they are about selling the services. I think for

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Speaker 1: for Disney, it's at least now it's all about Netflix

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Speaker 1: and with the Fox steal, buying enough intellectual property, having

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Speaker 1: enough shows and movies that they're going to have a

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Speaker 1: robust service that has thousands of titles that you will

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Speaker 1: have to subscribe to. Do we have a better sense

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Speaker 1: of pricing for Apple or for Disney Disney Disney said

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Speaker 1: that it's going to be I think it's six, but

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Speaker 1: it's not going to include a lot of the other things, right,

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Speaker 1: I mean, it's not going to include absolutely everything. It

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Speaker 1: will have what you think of as kids or family

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Speaker 1: friendly programming, so the kind of everything animated Pixar and

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Speaker 1: you know, the record Ralph movies. All that will be there,

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Speaker 1: most of the Marvel movies, Star Wars movies, some original series.

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Speaker 1: What it won't have is some of that Edgy or

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Speaker 1: Fox programming that they just acquired that. I think the

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Speaker 1: average show that's on the FX network, for example, will

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Speaker 1: probably live elsewhere. But one thing that is going to

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Speaker 1: be on the app that surprised me a little bit

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Speaker 1: was The Simpsons, which you could see being a natural fit,

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Speaker 1: say for Hulu, which has done a lot in what

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Speaker 1: you quote unquote adult animation. Uh, and instead it's gonna

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Speaker 1: be on on Disney Plus. It's interesting that this streaming

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Speaker 1: business is getting kind of crowded. One could argue, we've

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Speaker 1: had announcements from you know, NBC that they're going to

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Speaker 1: launch a streaming service, Um, you know, a T and

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Speaker 1: T and so on and so forth. Is there a

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Speaker 1: sense out there about how much the market can really bear?

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Speaker 1: Is it just kind of too early to figure that out.

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Speaker 1: It's a little early to figure that out. We've seen

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Speaker 1: people some firms are starting to do research on consumer willingness.

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Speaker 1: I think most people figure that there's a people will

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Speaker 1: subscribe to three to five, maybe six. There'll be a

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Speaker 1: lot more than them. And there are a lot of

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Speaker 1: already dozens, if not hundreds, of niche services that have

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Speaker 1: four hundred thousand subscribers, two hundred thousand subscribers. I really

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Speaker 1: don't know what happens to them in the long term,

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Speaker 1: and we could end up with, you know, a bundle

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Speaker 1: that is not that different from the PayTV bundle you

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Speaker 1: see today, where you pay fifty bucks a month or

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Speaker 1: a hundred bucks a month and you get seven or

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Speaker 1: eight of these. The question is will people participate? You know,

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Speaker 1: Apple try to do that. Instead of focusing on building

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Speaker 1: its own shows, it wanted to package together different subscription

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Speaker 1: services with its TV app, which it has on the

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Speaker 1: Apple TV set top block right now. The problem is

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Speaker 1: is that Netflix has been unwilling to participate, and if

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Speaker 1: you don't have the number one player, it's really hard

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Speaker 1: to drive customers. They're talking about how crowded is. Walmart's

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Speaker 1: getting into with a platform called Voodoo, not Hulu Voodoo,

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Speaker 1: but it is going to offer free programs just with commercials.

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Speaker 1: I'm wondering, who do you think would be the bundler.

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Speaker 1: Bundler for the different services, probably one of the big

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Speaker 1: tech companies, Apple, And because Apple and Amazon already offer

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Speaker 1: a version of this, Amazon as this program called Channels

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Speaker 1: where if you are a subscriber to Prime, which is,

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Speaker 1: you know, to free day delivery, you can add on

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Speaker 1: other services. Lucas Shaw, thank you so much, as always

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Speaker 1: for being with us. Lucas Shaw, Great, see you in person.

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Speaker 1: Entertainment reporter for Bloomberg News normally in Los Angeles, but

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Speaker 1: here with us in New York in a Bloomberg Interactive

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Speaker 1: broker's studios. But let's switch back to the China deal.

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Speaker 1: We're you know, this is the two days that really matter.

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Speaker 1: The US delegation and the Chinese delegation are meeting in Washington,

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Speaker 1: d C. Tensions are very high on both sides. To

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Speaker 1: get the latest of what we might expect, we welcome

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Speaker 1: Andy Brown and he's the editorial director for Bloomberg New Economy.

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Speaker 1: He joins us live here in our Bloomberg Interactive Brooker studio. So, Andy,

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Speaker 1: tensions are high on both sides. Just in the last

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Speaker 1: twenty four forty eight hours. Do you think we get

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Speaker 1: a deal here? Uh? Look, I I think the omens

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Speaker 1: are not looking good at all. I think it's it's

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Speaker 1: very notable that the chief Chinese negotiate, Leoha, is arriving

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Speaker 1: this time not as an emissary of President Si Jimping

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Speaker 1: as he did before, even though of course they're very close.

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Speaker 1: They've been friends since school days, which indicates it in

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Speaker 1: Chinese bureaucratic terms, they are in a sense lowering them

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Speaker 1: you know, position of this, of this delegation. It's smaller

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Speaker 1: than it was supposed to be. And there it seems

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Speaker 1: as though the lowering expectations as well. I mean, at

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Speaker 1: the very least, he's not arriving as a grand planet

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Speaker 1: opoury of presidents. He to wrap up a great trade

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Speaker 1: deal with the White House. You don't get that feeling

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Speaker 1: at all. So what happened? Look, I think a couple

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Speaker 1: of things. First of all, the economic context has changed.

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Speaker 1: Um that when they began the talks, the Chinese economy

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Speaker 1: was looking pretty fragile. They've since short it up with

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Speaker 1: a mix of all kinds of stimulus. Um. They've got

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Speaker 1: the private sector firing again. Um. And you know, on

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Speaker 1: the other hand, the Chinese may calculate that the United

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Speaker 1: States has become more fragile. But I think there's another

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Speaker 1: issue here that you know, regardless of how sincerely or

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Speaker 1: her may have been in making concessions, he's now coming

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Speaker 1: up against the reality that he's got to sell this

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Speaker 1: to an unyielding bureaucracy. You know, in Chinese leaders, despite

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Speaker 1: what people think, are not omnipotent. So you know, this

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Speaker 1: d to get it into law, which is apparently what

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Speaker 1: Robert Lightheiser wants. This is not a simple matter, you know.

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Speaker 1: To do that, it's going to require a concerted push

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Speaker 1: by President Ji Jimping, And frankly, it is not clear

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Speaker 1: to me why he would want to do that. Why

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Speaker 1: we Why would he want to expand that much political

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Speaker 1: capital and take personal responsibility for dismantling portions of the

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Speaker 1: Chinese state owned economy, which the Chinese themselves have identified

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Speaker 1: as being key to supporting the Chinese Communist Party and frankly,

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Speaker 1: a better modeled for competing successfully against the United States

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Speaker 1: and areas of high technology and industries of the future.

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Speaker 1: What's interesting, I think when we started this whole process,

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Speaker 1: maybe two assumptions might have been A, both sides needed deal,

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Speaker 1: and B it doesn't happen to be the end all,

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Speaker 1: be all deal. We just need to take this risk

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Speaker 1: off the table. Is there an argument to be made

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Speaker 1: that one side or the other maybe overplay their hand here? Yeah,

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Speaker 1: the clear clearly, Um, you know, this has been a

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Speaker 1: This has been a game of chicken, right between two

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Speaker 1: two leaders, um, and you know, each calculating that they

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Speaker 1: have more leverage. What is interesting, however, I mean, even

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Speaker 1: though the markets have been expecting a deal, I mean

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Speaker 1: this was always frankly naive. I mean, you know that

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Speaker 1: for the Chinese the deal is it is never a deal,

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Speaker 1: It's the start of a negotiation. This was never going

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Speaker 1: to be a deal to end everything. This was you know,

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Speaker 1: in in in Chinese terms, Um, you know this this

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Speaker 1: this was this was going to be a truce. I

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Speaker 1: mean the most we could expect a fragile piece, um,

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00:23:29,720 --> 00:23:32,760
Speaker 1: you know, to be followed by much more fundamental structural

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00:23:32,840 --> 00:23:36,440
Speaker 1: conflict between the United States and China. I guess I'm

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Speaker 1: just still struggling to understand then, how there was so

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Speaker 1: much hope baked into what was going to happen this week,

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Speaker 1: and the fact that people thought there would be something signed,

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Speaker 1: given the fact that the U should have been aware

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Speaker 1: of some of these structural challenges to getting through what

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Speaker 1: they wanted to get through from the Chinese, and China

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Speaker 1: knew exactly what President Trump wanted at least you know,

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Speaker 1: from the negotiations. I'm just struggling to understand what this

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00:24:04,520 --> 00:24:08,359
Speaker 1: means about the ongoing negotiations. It seems like there's a

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00:24:08,440 --> 00:24:12,160
Speaker 1: huge communication breach here. If not something well, I think

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00:24:12,200 --> 00:24:14,439
Speaker 1: we should be taking our cues from businesses on the

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00:24:14,480 --> 00:24:17,360
Speaker 1: ground in China. And what they're telling us is they're

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Speaker 1: they're expecting tariffs, they're already planning for them tariffs and

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Speaker 1: two billion dollars of Chinese exports. They're already uh stockpiling

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Speaker 1: some companies that are importing Chinese made goods, and they're

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Speaker 1: ripping supply chains out of China just as quickly as

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Speaker 1: they can. The process, of course, has been well underway

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Speaker 1: for the past year, and it's exhilarating now. And if

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00:24:38,440 --> 00:24:41,159
Speaker 1: you know what what you hear is when businesses complaining

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00:24:41,200 --> 00:24:44,280
Speaker 1: to the White House about you know, the damage that

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Speaker 1: this is doing to their operations, the response is, what

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Speaker 1: you've known about this for a long You've had a

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Speaker 1: year to get your supply chains out of China. What

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Speaker 1: are you doing? So how do you think, let's say,

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00:24:53,520 --> 00:24:56,080
Speaker 1: let's fast forward, you know, maybe you know, a day

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Speaker 1: and a half from here. In Friday evening, the two

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00:24:58,960 --> 00:25:02,320
Speaker 1: sides break and typically there's some release or some press

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Speaker 1: conference or some communic a what do you expect to

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Speaker 1: come from each side? I think it would be pretty

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00:25:08,680 --> 00:25:11,560
Speaker 1: surprising if what we got at the end of it

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00:25:11,600 --> 00:25:14,360
Speaker 1: was a complete breakdown of the tot. I don't think

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Speaker 1: either side want that. I think it's more likely to

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Speaker 1: be packaged as a we have serious issues to resolve,

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Speaker 1: We're going to go away, think about it, and come

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00:25:21,280 --> 00:25:23,280
Speaker 1: back to the table at some point. But there's no

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00:25:23,320 --> 00:25:26,399
Speaker 1: way for for for the US not to implement tariffs

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Speaker 1: at you know, one minute after midnight tonight, because that's

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Speaker 1: what President Trump has promised. I think it's highly likely

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00:25:33,760 --> 00:25:36,359
Speaker 1: that we're that we're going to see US tarrets and

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00:25:36,359 --> 00:25:39,959
Speaker 1: then we're going to see retaliator reaction from China. And

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Speaker 1: even if they do continue to have a conversation and

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Speaker 1: eventually come out with something constructive saying that they're going

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Speaker 1: to continue talking, we're still getting tariffs, the additional tariffs

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Speaker 1: going up. I would have feel that's the most likely outcome,

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Speaker 1: and let's be clear, it's it appears that the tariffs

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00:25:55,160 --> 00:25:57,920
Speaker 1: on the Chinese economy has had an effect. I mean

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00:25:57,960 --> 00:26:01,320
Speaker 1: they are ownerous, are they not? They are, But you know,

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00:26:02,720 --> 00:26:06,240
Speaker 1: China's head has many ways of cushioning the impact. I mean,

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00:26:06,320 --> 00:26:10,480
Speaker 1: so you know, through the currency for instance, UM and

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00:26:10,520 --> 00:26:13,560
Speaker 1: through stimulus measures. I mean, they've been pumping up the

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00:26:13,600 --> 00:26:17,680
Speaker 1: economy through a mix of fiscal monetary policy. As I

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00:26:17,760 --> 00:26:22,160
Speaker 1: said earlier, they've been supporting the private sector. UM. They've

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00:26:22,280 --> 00:26:24,920
Speaker 1: righted the ship. There were the The Chinese economy is

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00:26:24,920 --> 00:26:27,600
Speaker 1: in much better shape now than it was six months ago.

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Speaker 1: Of course, some of that did ride on this idea

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Speaker 1: that there would be a trade deal. If there is

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Speaker 1: a full breakdown in talks, how much of the improvement

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Speaker 1: will get reversed in China? Well, yeah, that's a good question.

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Speaker 1: Another question is how much more stimulus will they apply

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Speaker 1: and how much can they and how much can they?

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Speaker 1: All very good questions which we will not be able

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Speaker 1: to answer. But Andy Brown, we will have you back

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Speaker 1: and we will attempt once more. Andy Brown, we really

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Speaker 1: appreciate your insights, truly truly illuminating. Andy Brown's editorial director

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Speaker 1: for the Bloomberg New Economy Forum. Thanks for listening. To

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00:27:00,200 --> 00:27:02,840
Speaker 1: the Bloomberg pen L podcast. You can subscribe and listen

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00:27:02,880 --> 00:27:06,200
Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.

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Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm

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00:27:09,119 --> 00:27:11,159
Speaker 1: Lisa A. Bram Woyds. I'm on Twitter at Lisa A.

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00:27:11,240 --> 00:27:13,800
Speaker 1: Bram wits One. Before the podcast, you can always catch

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Speaker 1: us worldwide. I'm Bloomberg Radio