1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,320 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,400 --> 00:00:39,920 Speaker 1: Turning to airlines, spirit renewing discussions to merge with Frontier 11 00:00:40,320 --> 00:00:43,600 Speaker 1: as a deep discount, airlines struggles to compete. I spoke 12 00:00:43,640 --> 00:00:46,960 Speaker 1: with Jeff Blue CEO Joanna Garrity yesterday about the hurdles 13 00:00:47,080 --> 00:00:49,040 Speaker 1: facing smaller airlines. Take a listen. 14 00:00:50,880 --> 00:00:53,400 Speaker 3: Smaller carriers really need to be given a fair shot 15 00:00:53,440 --> 00:00:56,320 Speaker 3: to win in this environment, and that's not happening right now. 16 00:00:56,400 --> 00:00:58,800 Speaker 3: So we're focus on what we can control. We're focus 17 00:00:58,880 --> 00:01:01,560 Speaker 3: on a whole series of initiative under our Jet Foward program. 18 00:01:01,600 --> 00:01:03,880 Speaker 3: We do need the government to kind of make that 19 00:01:04,120 --> 00:01:06,400 Speaker 3: a more level playing fields so smaller carriers can more 20 00:01:06,400 --> 00:01:08,840 Speaker 3: effectively compete. Twenty twenty six really is the year that 21 00:01:08,840 --> 00:01:11,600 Speaker 3: we should reap the benefits of all these initiatives that 22 00:01:11,600 --> 00:01:13,039 Speaker 3: we put into place in twenty twenty five. 23 00:01:13,240 --> 00:01:16,600 Speaker 1: Chili Kayalu of Jeffries joins us now for more And 24 00:01:16,680 --> 00:01:20,200 Speaker 1: as we talk about mergers once again in the airline space, 25 00:01:20,240 --> 00:01:23,800 Speaker 1: aside from the Big three, how difficult is it for 26 00:01:23,920 --> 00:01:27,640 Speaker 1: companies that are not Delta United or American to survive 27 00:01:27,800 --> 00:01:29,600 Speaker 1: in the current landscape of airlines. 28 00:01:29,800 --> 00:01:32,479 Speaker 4: Yeah, it seems this seems to be more defensive move 29 00:01:32,920 --> 00:01:35,400 Speaker 4: on the part of the airlines right. Consolidation is driven 30 00:01:35,400 --> 00:01:38,440 Speaker 4: by defensive tactics, and airlines in general are a very 31 00:01:38,440 --> 00:01:41,200 Speaker 4: tough business. That's why they trade at sixty percent discount 32 00:01:41,280 --> 00:01:45,080 Speaker 4: to the market. Airplanes are expensive. Boeing knows that costs 33 00:01:45,120 --> 00:01:47,800 Speaker 4: are expensive. Thirty percent is jet fuel, thirty percent is 34 00:01:47,880 --> 00:01:50,920 Speaker 4: labor labor. And when your revenues are growing three percent 35 00:01:50,960 --> 00:01:53,240 Speaker 4: because your pricing is down and your costs are up 36 00:01:53,280 --> 00:01:55,960 Speaker 4: five it creates a very difficult environment for airlines to 37 00:01:56,040 --> 00:01:58,920 Speaker 4: thrive in. Whether that's gate costs like Jet Blue mentioned 38 00:01:59,000 --> 00:02:02,200 Speaker 4: or additional fees. It makes it hard for airlines, so 39 00:02:02,240 --> 00:02:04,320 Speaker 4: they have to consolidate or they have to price down 40 00:02:04,560 --> 00:02:06,000 Speaker 4: to take market share, or. 41 00:02:05,920 --> 00:02:08,519 Speaker 1: They have to become other industries like credit card companies 42 00:02:08,760 --> 00:02:12,200 Speaker 1: or luxury experience providers. I mean, how much is that 43 00:02:12,280 --> 00:02:14,880 Speaker 1: the saving grace, the idea that you could get some 44 00:02:14,919 --> 00:02:19,560 Speaker 1: sort of additional premium customer that people are leaning into experiences. 45 00:02:18,960 --> 00:02:19,960 Speaker 5: Willing to pay for it. 46 00:02:20,600 --> 00:02:24,079 Speaker 1: How much is that, really, truthfully the model going forward? 47 00:02:24,200 --> 00:02:26,720 Speaker 5: That's always been the bookcase on airlines. 48 00:02:26,800 --> 00:02:31,000 Speaker 4: You value Delta sky miles on a credit card multiple. 49 00:02:31,080 --> 00:02:33,840 Speaker 4: You value their MRO business on an aftermarket multiple of 50 00:02:33,840 --> 00:02:36,600 Speaker 4: twenty five times. Ziebada a novel. All of a sudden, 51 00:02:36,600 --> 00:02:40,040 Speaker 4: you're getting an airline for free, essentially. So that's been 52 00:02:40,080 --> 00:02:43,880 Speaker 4: the bookcase. But the separation of those assets is likely hard, 53 00:02:43,919 --> 00:02:45,120 Speaker 4: and we haven't seen that happen. 54 00:02:45,320 --> 00:02:46,840 Speaker 6: Che I know you and the team of Jeffries are 55 00:02:46,840 --> 00:02:48,920 Speaker 6: bullish on United. But I'd like to talk about American 56 00:02:48,960 --> 00:02:51,639 Speaker 6: Airlines and some of the management decisions which has put 57 00:02:51,639 --> 00:02:54,200 Speaker 6: the company in place where it is today. I'm talking 58 00:02:54,280 --> 00:02:57,280 Speaker 6: about Seattle, I'm talking about routing, I'm talking about choice 59 00:02:57,320 --> 00:03:00,800 Speaker 6: of which airplanes to retire. You know, what will it 60 00:03:00,840 --> 00:03:03,600 Speaker 6: take for American Airlines to write the ship here? 61 00:03:04,360 --> 00:03:06,760 Speaker 5: I think the airline set up into twenty six. 62 00:03:06,960 --> 00:03:09,440 Speaker 4: And I say this every January and then I regret 63 00:03:09,480 --> 00:03:11,000 Speaker 4: it in February. 64 00:03:10,880 --> 00:03:12,840 Speaker 5: Because I say the setup is positive. 65 00:03:12,440 --> 00:03:16,000 Speaker 4: For airlines, and I retract those comments pretty quickly, and 66 00:03:16,120 --> 00:03:17,880 Speaker 4: we've done that for America in the last two years. 67 00:03:17,919 --> 00:03:19,840 Speaker 4: But I do think the setup is positive and that 68 00:03:19,880 --> 00:03:23,600 Speaker 4: capacity going into twenty six is fairly tight. That goes 69 00:03:23,639 --> 00:03:26,200 Speaker 4: across the board for the airlines, and American in particular 70 00:03:26,639 --> 00:03:30,000 Speaker 4: has very easy comps. Recall a year and a half 71 00:03:30,040 --> 00:03:33,200 Speaker 4: ago they had a snap foo with their corporate relationship, 72 00:03:33,280 --> 00:03:36,680 Speaker 4: so their corporate is just getting back to twenty twenty 73 00:03:36,720 --> 00:03:39,119 Speaker 4: four levels, so they're about a year behind. And if 74 00:03:39,280 --> 00:03:41,240 Speaker 4: that's where we've seen a lot of the premium growth 75 00:03:41,280 --> 00:03:43,360 Speaker 4: is on that corporate so that could be a huge 76 00:03:43,440 --> 00:03:47,840 Speaker 4: upside driver for them if they take back their share 77 00:03:47,920 --> 00:03:49,760 Speaker 4: and then some, which they seem to do. 78 00:03:49,800 --> 00:03:50,280 Speaker 3: So they have the. 79 00:03:50,240 --> 00:03:53,440 Speaker 4: Easiest comp set, and airlines in general have an easy 80 00:03:53,440 --> 00:03:56,000 Speaker 4: comp set with the shutdown with the tariff impact in 81 00:03:56,120 --> 00:03:58,840 Speaker 4: Q one, so essentially Q one and Q four are 82 00:03:58,920 --> 00:04:01,640 Speaker 4: easy comps for them twenty six, but we'll see. I 83 00:04:01,720 --> 00:04:05,720 Speaker 4: think a rerating takes discipline, capacity in the market and 84 00:04:05,840 --> 00:04:09,320 Speaker 4: pricing for the main cabin to really improve at least 85 00:04:09,400 --> 00:04:10,240 Speaker 4: two flat. 86 00:04:10,560 --> 00:04:13,160 Speaker 6: Well, let's shift gears to the manufacturers. Let's talk about 87 00:04:13,160 --> 00:04:15,680 Speaker 6: Airbus and Boeing. Right, let's talk about how the market's 88 00:04:15,680 --> 00:04:20,120 Speaker 6: coping with these supply chain bottlenecks. I'm talking about forgings, Castings, Interiors. 89 00:04:20,360 --> 00:04:20,880 Speaker 5: Talk to us a. 90 00:04:20,839 --> 00:04:22,920 Speaker 6: Little bit about what your projections for those two companies 91 00:04:22,960 --> 00:04:23,560 Speaker 6: are in the new year. 92 00:04:23,640 --> 00:04:26,640 Speaker 4: Sure, So, I actually had one of my favorite days 93 00:04:26,680 --> 00:04:28,680 Speaker 4: of my career last week. I went up to Seattle 94 00:04:29,440 --> 00:04:31,520 Speaker 4: by myself and got to spend ten hours in rent 95 00:04:31,520 --> 00:04:34,120 Speaker 4: In and Ever and it was the most fun I've 96 00:04:34,200 --> 00:04:36,920 Speaker 4: had in that I saw the Boeing rent In line, 97 00:04:36,960 --> 00:04:39,719 Speaker 4: which creates the seven thirty seven that's about fifty percent 98 00:04:39,720 --> 00:04:42,160 Speaker 4: of their sales of buzzing, for the first time. It 99 00:04:42,240 --> 00:04:44,480 Speaker 4: was really neat to see the three lines cycling at 100 00:04:44,480 --> 00:04:47,440 Speaker 4: forty two. This is a manufacturer that was doing twenty 101 00:04:47,480 --> 00:04:50,560 Speaker 4: five a month in twenty four so did double production 102 00:04:50,800 --> 00:04:54,080 Speaker 4: at the end of this year, and the employment base 103 00:04:54,320 --> 00:04:55,480 Speaker 4: was invigorated. 104 00:04:55,839 --> 00:04:56,560 Speaker 5: They were happy. 105 00:04:56,720 --> 00:04:58,880 Speaker 4: And I think the new CEO, Kelly Orperg who's been 106 00:04:58,920 --> 00:05:01,799 Speaker 4: there for eighteen months, is certainly making that change happen. 107 00:05:01,839 --> 00:05:04,159 Speaker 4: He's changed about forty percent of the leadership in order 108 00:05:04,200 --> 00:05:06,520 Speaker 4: to do that. So really good news on the three 109 00:05:06,640 --> 00:05:09,400 Speaker 4: seven front and that the production rate is actually going up. 110 00:05:09,760 --> 00:05:13,280 Speaker 4: Airlines will have planes, and it's a matter of certification 111 00:05:13,480 --> 00:05:16,120 Speaker 4: on large programs like the Triple seven X they have, 112 00:05:16,279 --> 00:05:18,719 Speaker 4: which they took a big charge for in Q three. 113 00:05:18,960 --> 00:05:21,360 Speaker 5: So will that be certified at the end of next year. 114 00:05:21,520 --> 00:05:24,040 Speaker 1: It sounds like all of the airline and airplane related 115 00:05:24,040 --> 00:05:26,280 Speaker 1: executives saying twenty twenty six will be our year. Twenty 116 00:05:26,279 --> 00:05:28,880 Speaker 1: twenty five wasn't exactly it due to all of the 117 00:05:29,200 --> 00:05:33,240 Speaker 1: machinations throughout the throughout this year. I do want to 118 00:05:33,279 --> 00:05:35,000 Speaker 1: end with Frontier and Spirit. I know you can't talk 119 00:05:35,040 --> 00:05:37,120 Speaker 1: to these specific names. I do want to get a 120 00:05:37,200 --> 00:05:40,400 Speaker 1: general sense though, about whether the feeling right now in 121 00:05:40,400 --> 00:05:42,600 Speaker 1: the c suite is that this administration will be more 122 00:05:42,600 --> 00:05:45,880 Speaker 1: amenable to some of these tie ups and be more 123 00:05:46,040 --> 00:05:49,560 Speaker 1: open on a regulatory front than they have been. It's 124 00:05:49,560 --> 00:05:51,600 Speaker 1: been a mess every single time that companies have been 125 00:05:51,600 --> 00:05:53,280 Speaker 1: trying to that have tried to tie up. 126 00:05:53,440 --> 00:05:55,280 Speaker 5: Yeah, this is clearly a defensive move. 127 00:05:55,320 --> 00:05:57,839 Speaker 4: It'll take about five percent of capacity out of the market. 128 00:05:58,120 --> 00:06:01,560 Speaker 4: It'll help remove capacity to strain markets where you're seeing 129 00:06:01,600 --> 00:06:05,080 Speaker 4: pricing down, So you know, I think airline consolidation is 130 00:06:05,120 --> 00:06:06,599 Speaker 4: something we haven't seen a lot. 131 00:06:06,440 --> 00:06:08,039 Speaker 5: Of in aerospace on the hand. 132 00:06:08,040 --> 00:06:10,080 Speaker 4: On the other hand, going back a dal a day, 133 00:06:10,080 --> 00:06:15,680 Speaker 4: in aerospace and defense tech, it's been very prolific for 134 00:06:15,800 --> 00:06:19,559 Speaker 4: transactions in that market, whether it's manufacturers or defense tech, 135 00:06:19,600 --> 00:06:22,800 Speaker 4: with the administration really supporting growth in the industry. 136 00:06:22,839 --> 00:06:24,200 Speaker 5: So that's been a positive. 137 00:06:24,080 --> 00:06:26,920 Speaker 2: Stay with US multiple IMPEG Savanance coming up. 138 00:06:27,080 --> 00:06:27,600 Speaker 7: Off to this. 139 00:06:37,080 --> 00:06:38,160 Speaker 5: Joining us now for more. 140 00:06:38,200 --> 00:06:40,880 Speaker 1: I'm so pleased to say, as Republican Congressman French Hill 141 00:06:41,000 --> 00:06:44,080 Speaker 1: of Arkansas congressman, thank you so much for being with us. 142 00:06:44,120 --> 00:06:47,440 Speaker 1: I want to start with this disagreement in Congress about 143 00:06:47,480 --> 00:06:49,400 Speaker 1: even being able to vote. 144 00:06:49,080 --> 00:06:50,440 Speaker 5: On these subsidies. 145 00:06:50,800 --> 00:06:55,440 Speaker 1: Have you ever seen Congress Republicans in general more divided 146 00:06:55,640 --> 00:06:57,400 Speaker 1: over this issue than they are right now? 147 00:06:58,600 --> 00:07:00,000 Speaker 7: Well, Lisa, it's good to be with you. 148 00:07:00,000 --> 00:07:03,360 Speaker 8: Merry Christmas, Eppie, Hanika to all your viewers and everybody 149 00:07:03,440 --> 00:07:08,719 Speaker 8: at Bloomberg. Well, first, let's be clear the tax credits 150 00:07:08,760 --> 00:07:12,840 Speaker 8: for Obamacare policies are not expiring, the ones that were 151 00:07:12,880 --> 00:07:17,360 Speaker 8: expanded by Joe Biden during the COVID nineteen pandemic. Are expiring, 152 00:07:17,680 --> 00:07:20,640 Speaker 8: but that base tax credit that dates back to the 153 00:07:20,680 --> 00:07:25,440 Speaker 8: beginning of Obamacare for moderate income families with children is 154 00:07:25,480 --> 00:07:27,640 Speaker 8: still in place, So let's be clear about that. And 155 00:07:27,680 --> 00:07:30,800 Speaker 8: I'm not sure I agree with the estimate that was cited. 156 00:07:31,120 --> 00:07:34,440 Speaker 8: What Republicans are trying to do are side with American 157 00:07:34,480 --> 00:07:37,600 Speaker 8: families across the board and lower premiums across the board, 158 00:07:37,640 --> 00:07:41,120 Speaker 8: and we consistently brought bills to the House floor to 159 00:07:41,160 --> 00:07:44,600 Speaker 8: do that, and we've had Democrats reject them. Last week, 160 00:07:44,640 --> 00:07:47,640 Speaker 8: the Senate could not find a consensus on this, and 161 00:07:47,760 --> 00:07:50,720 Speaker 8: that's the definitive place. That was the commitment made during 162 00:07:50,800 --> 00:07:55,280 Speaker 8: the spending votes. So I think everybody, Democrats, independence, Republicans 163 00:07:55,600 --> 00:08:00,240 Speaker 8: all are suffering from the cost of living burden to 164 00:08:00,360 --> 00:08:03,960 Speaker 8: us by the nine percent inflation from the Biden administration. 165 00:08:04,160 --> 00:08:05,040 Speaker 7: That's coming down. 166 00:08:05,160 --> 00:08:07,760 Speaker 8: But there's much more work to do, and that includes 167 00:08:07,800 --> 00:08:11,560 Speaker 8: on passing bills that will actually lower premiums for all 168 00:08:11,560 --> 00:08:12,960 Speaker 8: Americans across the board. 169 00:08:13,360 --> 00:08:15,200 Speaker 6: Congressman Hile, I'm wondering if you could talk to us 170 00:08:15,200 --> 00:08:17,640 Speaker 6: a little bit about the Housing for twenty first Century Act, 171 00:08:17,680 --> 00:08:21,200 Speaker 6: the act that's expected to streamline housing development provide incentives 172 00:08:21,200 --> 00:08:23,880 Speaker 6: for builders just exactly what is the act and how 173 00:08:23,960 --> 00:08:25,800 Speaker 6: is it going to alleviate the lack of supplying the 174 00:08:25,880 --> 00:08:26,680 Speaker 6: US housing market. 175 00:08:27,080 --> 00:08:29,000 Speaker 7: You bet, thanks David. It's such a big issue. 176 00:08:29,000 --> 00:08:31,920 Speaker 8: We have so many people and so many markets that 177 00:08:32,000 --> 00:08:35,440 Speaker 8: have experienced a run up in house prices during the 178 00:08:35,480 --> 00:08:38,240 Speaker 8: past five years and certainly a run up in mortgage 179 00:08:38,320 --> 00:08:42,000 Speaker 8: rates due to the FED fighting the Biden inflation from 180 00:08:42,040 --> 00:08:45,680 Speaker 8: twenty one and twenty two, and that's really caused a 181 00:08:45,679 --> 00:08:47,880 Speaker 8: lot of people to not have access to the house 182 00:08:47,960 --> 00:08:50,520 Speaker 8: that they want. So what we're doing today is we're 183 00:08:50,520 --> 00:08:53,720 Speaker 8: marking up bills that will reduce regulatory costs to building 184 00:08:53,760 --> 00:08:59,240 Speaker 8: new houses, improve zoning to encourage better density, more different 185 00:08:59,320 --> 00:09:03,360 Speaker 8: kinds of unit across different cities in the US. We're 186 00:09:03,400 --> 00:09:07,360 Speaker 8: talking about improving opportunities for rural housing development, make it 187 00:09:07,440 --> 00:09:10,320 Speaker 8: easier for a veteran to get a veteran's loan, and 188 00:09:10,360 --> 00:09:13,280 Speaker 8: hold HUT accountable on what I think is a deplorable 189 00:09:13,400 --> 00:09:16,199 Speaker 8: job that they've done over the past decade or so 190 00:09:16,400 --> 00:09:20,320 Speaker 8: in managing public housing for our neediest citizens across the 191 00:09:20,320 --> 00:09:23,600 Speaker 8: country who I think have poor many poor conditions, and 192 00:09:23,679 --> 00:09:27,040 Speaker 8: HUT is not holding either private landlords or their own 193 00:09:27,600 --> 00:09:29,200 Speaker 8: housing authorities accountable. 194 00:09:29,679 --> 00:09:32,360 Speaker 6: Congressman Hill us housing affordability as we know as at 195 00:09:32,360 --> 00:09:34,960 Speaker 6: an all time loan. I'm wondering, what is the act 196 00:09:35,040 --> 00:09:37,640 Speaker 6: or the bill, the proposal. How does it address home 197 00:09:37,640 --> 00:09:41,079 Speaker 6: owner expenses, utilities, insurance. I mean, we know that you 198 00:09:41,160 --> 00:09:45,160 Speaker 6: know op X has really risen over the past few years. 199 00:09:45,480 --> 00:09:47,880 Speaker 6: Does it do anything to alleviate the stress on homeowners? 200 00:09:49,679 --> 00:09:53,480 Speaker 8: Well on homeowners again, eighty percent of the cost that 201 00:09:53,559 --> 00:09:57,679 Speaker 8: goes into a house or local zoning, local code decisions, 202 00:09:57,760 --> 00:10:01,559 Speaker 8: local development fees that are charged urged on building new houses. 203 00:10:02,040 --> 00:10:03,800 Speaker 7: If you want to bring down. 204 00:10:03,760 --> 00:10:07,800 Speaker 8: The cost of the mortgage or the cost of property 205 00:10:07,800 --> 00:10:11,040 Speaker 8: and casualty insurance, you need to confront inflation. Which is 206 00:10:11,040 --> 00:10:14,200 Speaker 8: why I believe the Fed's primary focus is price stability. 207 00:10:14,559 --> 00:10:17,439 Speaker 8: And we've made progress from the nine percent we experienced 208 00:10:17,480 --> 00:10:21,680 Speaker 8: under Joe Biden's fiscal mismanagement and the Fed's mismanagement coming 209 00:10:21,679 --> 00:10:25,760 Speaker 8: out of the pandemic, and there's a sustained pressure there 210 00:10:25,800 --> 00:10:29,439 Speaker 8: to bring down costs and that will in turn bring 211 00:10:29,480 --> 00:10:32,160 Speaker 8: down property and casually insurances that will bring down the 212 00:10:32,160 --> 00:10:35,199 Speaker 8: cost of financing. This is a prime goal for the administration. 213 00:10:35,640 --> 00:10:38,240 Speaker 8: But what this bill focuses on is lowering the cost 214 00:10:38,679 --> 00:10:43,000 Speaker 8: to manage housing, lower the cost to build housing, and 215 00:10:43,040 --> 00:10:46,280 Speaker 8: that's something I think will increase supply, and increase supply 216 00:10:46,400 --> 00:10:50,240 Speaker 8: will lower prices. We've already seen a modest break in 217 00:10:50,320 --> 00:10:54,719 Speaker 8: that five year high in price appreciation. About eleven top 218 00:10:54,760 --> 00:10:58,120 Speaker 8: twenty five markets are seeing some easing off on pricing. 219 00:10:58,440 --> 00:11:01,720 Speaker 1: Congress Fan, one thing that we keep talking about is 220 00:11:01,760 --> 00:11:05,480 Speaker 1: the affordability crisis. And you've talked about President Biden several times. 221 00:11:05,480 --> 00:11:07,920 Speaker 1: At what point do you think the President Trump needs 222 00:11:07,960 --> 00:11:11,520 Speaker 1: to also, though, take some responsibility for the idea that 223 00:11:11,640 --> 00:11:14,360 Speaker 1: inflation still is above its two percent target. He's talking 224 00:11:14,360 --> 00:11:18,480 Speaker 1: about keeping rates even lower at the same time that 225 00:11:18,760 --> 00:11:21,880 Speaker 1: he's been talking about the affordability crisis as a hoax. 226 00:11:23,800 --> 00:11:26,800 Speaker 8: Well, look, the affordability crisis is not a hoax. I 227 00:11:26,800 --> 00:11:29,040 Speaker 8: mean we see it in the grocery store when we shop. 228 00:11:29,080 --> 00:11:32,320 Speaker 8: We've seen it in the price level that increased as 229 00:11:32,360 --> 00:11:35,040 Speaker 8: a result. As I said of the Biden inflation, that 230 00:11:35,080 --> 00:11:38,200 Speaker 8: will come down over time. There's work to be done. 231 00:11:38,400 --> 00:11:40,719 Speaker 8: I think the President's put his attention on doing that 232 00:11:40,800 --> 00:11:44,680 Speaker 8: by lowering long term energy prices, by increasing We're going 233 00:11:44,720 --> 00:11:47,840 Speaker 8: to vote this week to increase permitting on federal lands, 234 00:11:47,840 --> 00:11:51,360 Speaker 8: which will open up future development for oil on gas production. 235 00:11:51,600 --> 00:11:52,160 Speaker 7: That's good. 236 00:11:52,520 --> 00:11:55,600 Speaker 8: Encouraging production across the country will bring down gas prices 237 00:11:55,640 --> 00:11:57,120 Speaker 8: over the next few years. 238 00:11:57,120 --> 00:11:59,600 Speaker 7: And patrollum goes into everything that we make. 239 00:11:59,480 --> 00:12:02,400 Speaker 8: So that will bring down prices as well as some 240 00:12:02,440 --> 00:12:06,720 Speaker 8: of the things we're tackling on deregulation and financing. I've 241 00:12:06,720 --> 00:12:09,480 Speaker 8: worked hard in my committee to bring down the cost 242 00:12:09,520 --> 00:12:13,360 Speaker 8: of financing by making our banks of all sizes more competitive, 243 00:12:13,360 --> 00:12:16,679 Speaker 8: to have more capital to lend to people who are 244 00:12:16,679 --> 00:12:19,720 Speaker 8: building houses or wanting to have a mortgage on their 245 00:12:19,760 --> 00:12:20,200 Speaker 8: first house. 246 00:12:20,480 --> 00:12:21,680 Speaker 5: It's been just about a minute left. 247 00:12:21,720 --> 00:12:24,920 Speaker 1: But how much will further FED rate cuts actually help 248 00:12:24,960 --> 00:12:28,360 Speaker 1: with the affordability crisis? If price stability is you said, 249 00:12:28,559 --> 00:12:29,920 Speaker 1: is their pre eminent mandate. 250 00:12:31,040 --> 00:12:32,840 Speaker 8: Well, look, this is why the FED has a tough 251 00:12:32,920 --> 00:12:36,000 Speaker 8: job to determine what the right price level is, what 252 00:12:36,040 --> 00:12:39,800 Speaker 8: the right level of ample reserves are. And prices have 253 00:12:39,920 --> 00:12:44,040 Speaker 8: been coming down, they just have gotten sticky right above 254 00:12:44,160 --> 00:12:47,120 Speaker 8: the Fed's target. So I just simply say that the 255 00:12:47,160 --> 00:12:50,280 Speaker 8: biggest tax on the American people is inflation, and we've 256 00:12:50,320 --> 00:12:52,720 Speaker 8: witnessed a forty year high of it due to the 257 00:12:52,760 --> 00:12:55,280 Speaker 8: mistakes made by the FED coming out of the pandemic, 258 00:12:55,640 --> 00:12:59,000 Speaker 8: and Joe Biden's decision to spend six trillion dollars more 259 00:12:59,520 --> 00:13:02,240 Speaker 8: borrowed in the markets that I think was not the 260 00:13:02,320 --> 00:13:05,040 Speaker 8: right decision to take, and we got inflation as a 261 00:13:05,120 --> 00:13:08,600 Speaker 8: result of too many dollars chasing too few goods for 262 00:13:08,679 --> 00:13:09,480 Speaker 8: those two years. 263 00:13:09,559 --> 00:13:13,000 Speaker 2: Stay with us mulplindex Savana's coming up off to this. 264 00:13:22,480 --> 00:13:24,880 Speaker 1: One thing that has been really strong this year has 265 00:13:24,880 --> 00:13:27,200 Speaker 1: been discussions around trade. The White House keeping on the 266 00:13:27,240 --> 00:13:30,840 Speaker 1: pressure on China, Treasure Secretary Scott Best and telling media 267 00:13:30,960 --> 00:13:34,960 Speaker 1: the country's one trillion dollar trade surplus is unsustainable. Joining 268 00:13:35,040 --> 00:13:38,160 Speaker 1: us now as Elizabeth Economy Senior Fellow at the Hoover 269 00:13:38,320 --> 00:13:42,160 Speaker 1: Institution and one of the stalwart experts and scholars of 270 00:13:42,200 --> 00:13:44,920 Speaker 1: the Chinese economy. Elizabeth, thank you so much for being 271 00:13:44,960 --> 00:13:47,320 Speaker 1: with us. I want to start with your take on 272 00:13:47,360 --> 00:13:49,400 Speaker 1: the trade war so far this year. 273 00:13:49,720 --> 00:13:50,880 Speaker 5: Is there a clear winner? 274 00:13:51,000 --> 00:13:53,920 Speaker 1: Has there been any progress? Has it reshaped the relationship 275 00:13:54,080 --> 00:13:55,360 Speaker 1: between the US and China? 276 00:13:56,559 --> 00:13:56,839 Speaker 9: Sure? 277 00:13:56,920 --> 00:13:59,120 Speaker 10: Lots of questions wrapped up into that. 278 00:14:00,160 --> 00:14:00,360 Speaker 8: You know. 279 00:14:00,400 --> 00:14:03,840 Speaker 10: Look, I think the good news is the Bussan summit 280 00:14:03,920 --> 00:14:08,720 Speaker 10: between Presidency and Trump really did establish a new equilibrium 281 00:14:09,200 --> 00:14:12,400 Speaker 10: between the two countries that really you know, we took 282 00:14:12,440 --> 00:14:16,080 Speaker 10: back some of the moves we'd made on export controls 283 00:14:16,120 --> 00:14:18,680 Speaker 10: both sides. That was really important, especially for the United 284 00:14:18,760 --> 00:14:21,720 Speaker 10: States because of China's hold on the you know, critical 285 00:14:21,720 --> 00:14:23,200 Speaker 10: minerals and rare earth elements. 286 00:14:23,720 --> 00:14:24,600 Speaker 9: We took back. 287 00:14:24,400 --> 00:14:28,680 Speaker 10: The shipping port dot fees, you know, so, and we 288 00:14:28,920 --> 00:14:31,280 Speaker 10: took off ten percent off the tariffs that we had 289 00:14:31,360 --> 00:14:33,480 Speaker 10: on China, you know, so from fifty seven down to 290 00:14:33,520 --> 00:14:36,720 Speaker 10: forty seven percent. So I think a new equilibrium. But 291 00:14:36,760 --> 00:14:38,280 Speaker 10: that's not to say that there aren't going to be 292 00:14:38,360 --> 00:14:42,400 Speaker 10: perturbations to the system. And we've already seen just over 293 00:14:42,440 --> 00:14:45,320 Speaker 10: the past week with the announcement out of the State 294 00:14:45,360 --> 00:14:49,560 Speaker 10: Department of pax Silica this you know, new arrangement between 295 00:14:49,600 --> 00:14:52,640 Speaker 10: the United States and eight other countries to try to 296 00:14:52,680 --> 00:14:56,680 Speaker 10: develop really a trusted supply chain from you know, Ai 297 00:14:56,840 --> 00:14:59,760 Speaker 10: for the AI semiconductor supply chain all the way from 298 00:15:00,080 --> 00:15:03,600 Speaker 10: you know investments in Australia in rare earth elements and 299 00:15:03,600 --> 00:15:07,600 Speaker 10: critical minerals all the way through the UAE, with you know, 300 00:15:07,680 --> 00:15:10,600 Speaker 10: providing financing. And then of course Taiwan is a special 301 00:15:10,640 --> 00:15:13,400 Speaker 10: partner to the group because of course, you know, ninety 302 00:15:13,400 --> 00:15:16,120 Speaker 10: percent of there are more of this advanced semiconductors that 303 00:15:16,240 --> 00:15:19,280 Speaker 10: certainly the US relies on come from Taiwan. So you know, 304 00:15:19,480 --> 00:15:21,600 Speaker 10: we took that action, and then the Chinese, you know, 305 00:15:21,880 --> 00:15:25,040 Speaker 10: put back on some export controls around gallium and germanium 306 00:15:25,080 --> 00:15:28,160 Speaker 10: and graphite, and put some companies that are involved in 307 00:15:28,200 --> 00:15:31,880 Speaker 10: this new pack silica on their Unreliable Entities list, and 308 00:15:31,920 --> 00:15:34,240 Speaker 10: so you know they're going to be these kind of 309 00:15:34,280 --> 00:15:37,880 Speaker 10: tit for tat moves. Clearly, you know, the administration is 310 00:15:37,920 --> 00:15:40,520 Speaker 10: not stomping in terms of what it wants to see 311 00:15:41,160 --> 00:15:43,920 Speaker 10: in the tech competition space. It's going to do what 312 00:15:43,920 --> 00:15:46,320 Speaker 10: it wants to do, and Shine is going to respond 313 00:15:46,360 --> 00:15:46,840 Speaker 10: in kind. 314 00:15:47,360 --> 00:15:48,480 Speaker 5: You know, hopefully we don't. 315 00:15:48,280 --> 00:15:50,080 Speaker 10: Go into a free fall, we don't end up back 316 00:15:50,080 --> 00:15:51,760 Speaker 10: at the you know, one hundred and fifty one hundred 317 00:15:51,760 --> 00:15:55,320 Speaker 10: and seventy five percent caraff level. But I don't think 318 00:15:55,360 --> 00:15:56,560 Speaker 10: it's going to be smooth sailing. 319 00:15:57,040 --> 00:15:59,680 Speaker 1: There has been this bigger question about which economy is 320 00:15:59,720 --> 00:16:03,400 Speaker 1: strong and better to withstand some of this volatility. Over 321 00:16:03,400 --> 00:16:05,040 Speaker 1: the past couple of days, we've gotten data out of 322 00:16:05,160 --> 00:16:09,640 Speaker 1: China signifying that there has been an ongoing decline, weakening 323 00:16:09,760 --> 00:16:13,720 Speaker 1: and consumer appetite this concern about prices that are falling 324 00:16:14,040 --> 00:16:16,440 Speaker 1: too rapidly. Do you think that this is laying the 325 00:16:16,440 --> 00:16:20,080 Speaker 1: groundwork for some sort of stimulus to support the economy 326 00:16:20,200 --> 00:16:23,400 Speaker 1: during this prolonged tip for tag I. 327 00:16:23,320 --> 00:16:26,880 Speaker 10: Mean, look that Chinese you know playbook is basically, you know, 328 00:16:27,040 --> 00:16:30,520 Speaker 10: more investment, and you know, over the past couple of years, 329 00:16:30,560 --> 00:16:33,000 Speaker 10: that investment has moved away from the property sector, which 330 00:16:33,000 --> 00:16:35,560 Speaker 10: has been in a prolonged slump, to the tech sector, 331 00:16:36,040 --> 00:16:39,600 Speaker 10: you know, clean tech, legacy semiconductors, the whole array of 332 00:16:39,880 --> 00:16:43,760 Speaker 10: made in China, twenty twenty five technologies, you know, where 333 00:16:43,840 --> 00:16:46,680 Speaker 10: China wants to dominate, Chinese companies to dominate at home 334 00:16:46,680 --> 00:16:49,800 Speaker 10: and then become global champions. So that includes new materials 335 00:16:49,840 --> 00:16:53,200 Speaker 10: and evs and AI, all these you know, important cutting 336 00:16:53,320 --> 00:16:56,240 Speaker 10: edge technologies. That is the playbook, and that is what 337 00:16:56,280 --> 00:16:59,760 Speaker 10: they've been doing. But I think that's running its course. 338 00:17:00,040 --> 00:17:03,080 Speaker 10: Local governments have you been building up their you know debt. 339 00:17:03,080 --> 00:17:06,200 Speaker 10: The property sector is still slumping, There's no consumer confidence. 340 00:17:06,240 --> 00:17:08,960 Speaker 10: The country has done very little to reshape the social 341 00:17:09,000 --> 00:17:12,840 Speaker 10: welfare net to make people feel confident right that they're 342 00:17:12,840 --> 00:17:14,639 Speaker 10: not going to have to spend their savings on some 343 00:17:14,720 --> 00:17:19,160 Speaker 10: healthcare emergency or on their children's education. So the pension 344 00:17:19,240 --> 00:17:22,920 Speaker 10: system is you know, basically broken in about a third 345 00:17:22,960 --> 00:17:26,600 Speaker 10: of the provinces. So they have to do more to 346 00:17:26,640 --> 00:17:30,439 Speaker 10: boost consumer confidence. They've been reluctant to do that and 347 00:17:30,520 --> 00:17:32,840 Speaker 10: people are not and that's why they're not buying. And 348 00:17:32,960 --> 00:17:36,440 Speaker 10: you know, as an aside, you know, also the birth 349 00:17:36,520 --> 00:17:41,119 Speaker 10: rate continues to fall, and birth rate tracks with consumer confidence. 350 00:17:41,119 --> 00:17:43,720 Speaker 10: So if they want to begin to address their demographic challenges, 351 00:17:43,720 --> 00:17:46,959 Speaker 10: which are also enormous, they need to do more to 352 00:17:47,000 --> 00:17:48,480 Speaker 10: address their consumer confidence. 353 00:17:48,680 --> 00:17:51,720 Speaker 6: That's right, Elizabeth, demographic challenges, it's real estate crisis is 354 00:17:51,840 --> 00:17:54,399 Speaker 6: entering it's fifth year in a row. Yet insiders are 355 00:17:54,480 --> 00:17:57,640 Speaker 6: calling for a stronger you on despite the fact that 356 00:17:57,960 --> 00:18:00,640 Speaker 6: it's an exportlet economy. I mean, I think sports rose 357 00:18:00,680 --> 00:18:02,600 Speaker 6: above one trillion dollars for the first time on record 358 00:18:02,720 --> 00:18:05,439 Speaker 6: last month. To talk to us about you know why, 359 00:18:05,560 --> 00:18:08,479 Speaker 6: our insiders, why is China looking for the you want 360 00:18:08,560 --> 00:18:11,680 Speaker 6: to appreciate in twenty twenty six, Well, I. 361 00:18:11,640 --> 00:18:15,000 Speaker 10: Think it reflects a policy debate within China, and you know, 362 00:18:15,200 --> 00:18:18,560 Speaker 10: a strong view one would encourage you know, consumers to 363 00:18:18,600 --> 00:18:21,520 Speaker 10: buy more. It would give China greater credibility on the 364 00:18:21,640 --> 00:18:25,359 Speaker 10: international stage in terms of you know, saying that It's 365 00:18:25,600 --> 00:18:28,440 Speaker 10: currency should be the you know, should become a real 366 00:18:28,520 --> 00:18:31,600 Speaker 10: reserve currency in the future as it pushes to dedollarize 367 00:18:31,600 --> 00:18:34,800 Speaker 10: the global economy, and it would relieve some of the 368 00:18:34,840 --> 00:18:38,000 Speaker 10: pressure that it's beginning to face from the international community 369 00:18:38,040 --> 00:18:41,080 Speaker 10: now in terms of all those exports, right, because it's 370 00:18:41,119 --> 00:18:44,439 Speaker 10: not just the United States that is calling out China 371 00:18:44,560 --> 00:18:48,040 Speaker 10: for its you know, export of its over capacity and 372 00:18:48,119 --> 00:18:51,040 Speaker 10: all those you know, evs and batteries, et cetera. It's 373 00:18:51,080 --> 00:18:54,480 Speaker 10: now it's Europe, it's Mexico for example. It's threatening I think, 374 00:18:54,520 --> 00:18:58,119 Speaker 10: fifty percent tariffs on Chinese goods. So I think China 375 00:18:58,200 --> 00:19:01,679 Speaker 10: has a problem again not only with the United States 376 00:19:01,680 --> 00:19:03,920 Speaker 10: and some of the advanced economies, but also with middle 377 00:19:03,960 --> 00:19:07,439 Speaker 10: income and increasingly emerging economies that are seeing you know, 378 00:19:07,480 --> 00:19:10,639 Speaker 10: their markets flooded with these Chinese goods, and their nascent 379 00:19:10,720 --> 00:19:12,720 Speaker 10: industries are never going to be never going to have 380 00:19:12,760 --> 00:19:15,399 Speaker 10: a chance to compete. So I think that would be 381 00:19:15,440 --> 00:19:17,359 Speaker 10: those would be some of the reasons that the Chinese 382 00:19:17,400 --> 00:19:20,200 Speaker 10: government might make a move toward appreciating. 383 00:19:19,600 --> 00:19:22,719 Speaker 6: The Yan Yeah, I mean, Elizabeth, Chinese equities are up 384 00:19:22,720 --> 00:19:24,800 Speaker 6: I think one point eight two percent overnight following that 385 00:19:24,840 --> 00:19:27,919 Speaker 6: successful IPO of Meta X. I think the Chinese equity 386 00:19:27,920 --> 00:19:29,360 Speaker 6: markets up sixteen seventeen. 387 00:19:29,080 --> 00:19:29,760 Speaker 7: Percent year to date. 388 00:19:30,400 --> 00:19:33,160 Speaker 6: Talk to us about foreign interest in Chinese equities. I mean, 389 00:19:33,359 --> 00:19:35,720 Speaker 6: for me, I mean I look at the variable interest 390 00:19:35,800 --> 00:19:38,679 Speaker 6: and toity structure as a putoff, right, I mean, you 391 00:19:38,680 --> 00:19:41,200 Speaker 6: don't own anything really. You're owning a hold co in 392 00:19:41,240 --> 00:19:43,239 Speaker 6: the Caymans. You're not really owning an op goo. 393 00:19:43,600 --> 00:19:44,679 Speaker 5: Talk to us about how. 394 00:19:44,960 --> 00:19:47,479 Speaker 6: An investor, a foreign investor here in the US, can 395 00:19:47,480 --> 00:19:49,520 Speaker 6: get comfortable owning Chinese shares. 396 00:19:50,400 --> 00:19:53,399 Speaker 10: Okay, so you're pushing me past what I, you know, 397 00:19:53,680 --> 00:19:54,840 Speaker 10: actually focus on. 398 00:19:54,920 --> 00:19:57,480 Speaker 9: So I don't want to be giving investment advice to 399 00:19:57,560 --> 00:20:00,960 Speaker 9: of course, Well let me to say, I think, you know, 400 00:20:01,000 --> 00:20:04,000 Speaker 9: the Chinese stark stock market, you know, has been compared 401 00:20:04,000 --> 00:20:07,920 Speaker 9: to a casino you know, and gambling by you know. 402 00:20:08,000 --> 00:20:11,320 Speaker 10: Some of China's most prominent economists. So you know, I 403 00:20:11,320 --> 00:20:15,320 Speaker 10: would always just say fire beware. But you know, I 404 00:20:15,359 --> 00:20:17,280 Speaker 10: am not in a position to be giving advice in 405 00:20:17,320 --> 00:20:17,840 Speaker 10: this space. 406 00:20:18,480 --> 00:20:20,080 Speaker 1: You are in a position to be getting advice to 407 00:20:20,119 --> 00:20:22,600 Speaker 1: policymakers who'll be listening closely. Elizabeth Economy and for the 408 00:20:22,640 --> 00:20:25,480 Speaker 1: Hoover institution. Thank you so much for being with us. 409 00:20:25,520 --> 00:20:27,800 Speaker 1: This is one of the key stories that we've been 410 00:20:27,800 --> 00:20:31,840 Speaker 1: focusing on, just how intertwined are these economies and who 411 00:20:31,880 --> 00:20:34,920 Speaker 1: is going to win ultimately at a time when investors 412 00:20:35,160 --> 00:20:37,439 Speaker 1: aren't sure yet, they're both voting with their feet on 413 00:20:37,520 --> 00:20:38,439 Speaker 1: both fronts well. 414 00:20:38,480 --> 00:20:41,320 Speaker 6: Affordability issues in China, I mean, the real estate crisis. 415 00:20:41,320 --> 00:20:44,000 Speaker 6: It's fifth year in a row China. Vanke, a state 416 00:20:44,000 --> 00:20:46,480 Speaker 6: owned developer, is probably been the fault this week. I mean, 417 00:20:46,480 --> 00:20:49,119 Speaker 6: it's just things run mess domestically, and the fact that 418 00:20:49,160 --> 00:20:51,280 Speaker 6: they're going to make exports that much more competitive by 419 00:20:51,280 --> 00:20:53,320 Speaker 6: trying to appreciate the you on just doesn't make. 420 00:20:53,240 --> 00:20:53,800 Speaker 5: Much sense to me. 421 00:20:54,480 --> 00:20:58,040 Speaker 2: This is the Bloomberg's Events podcast, bringing you the best 422 00:20:58,080 --> 00:21:01,119 Speaker 2: in markets, economics, an gie policy. You can watch the 423 00:21:01,160 --> 00:21:04,160 Speaker 2: show live on Bloomberg TV weekday mornings from six am 424 00:21:04,320 --> 00:21:07,439 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, 425 00:21:07,760 --> 00:21:10,600 Speaker 2: Spotify or anywhere else you listen, and as always on 426 00:21:10,600 --> 00:21:13,080 Speaker 2: the Bloomberg Terminal and the Bloomberg Business app.