WEBVTT - Surveillance: EM Could Outperform DM, Greg Boutle Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm term Keene 0:00:13.480 --> 0:00:17.560 jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.919 Bloomberg dot Com, and of course on the Bloomberg here 0:00:32.920 --> 0:00:35.640 in New York. Joining against Gregg Boodle BMP parabying US 0:00:35.680 --> 0:00:38.400 head of Equity and Derivative Strategy and he joins US 0:00:38.440 --> 0:00:41.680 now can monitor Greig pretty muted price action. I've got 0:00:41.680 --> 0:00:43.559 to say, with the exception of Chinese equities, which we'll 0:00:43.560 --> 0:00:45.680 talk about in just a moment, but what's your explanation 0:00:45.720 --> 0:00:48.519 this morning as to why futures are up but just 0:00:48.600 --> 0:00:51.520 a half of one percent? Yeah. I think the slightly 0:00:51.600 --> 0:00:54.440 lackluster move from US equities this morning, up just under 0:00:54.480 --> 0:00:56.840 half a percent, is a reflection on how far we've 0:00:56.840 --> 0:01:00.240 already traveled since the December lows against the backdrop that's 0:01:00.280 --> 0:01:04.200 already seen some deterioration in terms of equity fundamentals and 0:01:04.280 --> 0:01:06.720 some of the hard macro data. The move in China 0:01:06.800 --> 0:01:10.720 is stomach six pc on a CSI three D. It's 0:01:10.760 --> 0:01:12.680 pretty difficult in the morning like this morning to wake 0:01:12.800 --> 0:01:15.600 up and untangle what is trade and what it's been 0:01:15.640 --> 0:01:19.280 driven by other factors and specifically China specific factors. Can 0:01:19.280 --> 0:01:21.399 you unwrap that a little bit for us? Gregg? Yeah, 0:01:21.440 --> 0:01:24.680 I think really it's kind of this confluence of factors. 0:01:24.680 --> 0:01:27.600 So we see a weaker dollar, a more dovish fed 0:01:28.240 --> 0:01:30.959 the market starting price in a resolution in terms of 0:01:31.000 --> 0:01:34.520 the trade tensions, and then a more kind of credit friendly, 0:01:34.560 --> 0:01:37.600 growth friendly environment coming in China, the stimulus at the 0:01:37.600 --> 0:01:39.640 start of this year working its way through UM. I 0:01:39.680 --> 0:01:41.559 think those things have all come together to make something 0:01:41.600 --> 0:01:44.400 of a perfect storm for China. And EM equity is 0:01:44.440 --> 0:01:47.560 relative to develop market equities. So E M over d 0:01:47.760 --> 0:01:50.320 M is that of this morning story or a longer 0:01:50.440 --> 0:01:52.680 term story? What's your base case, Greg? We think it's 0:01:52.680 --> 0:01:54.720 a slightly longer term story than that. Is something that 0:01:54.720 --> 0:01:57.200 we've been talking about for a while. Is the right 0:01:57.200 --> 0:02:00.680 trade to play a resolution of the trade or as 0:02:00.680 --> 0:02:02.520 I said, there's a kind of confluence of fact is 0:02:02.520 --> 0:02:05.640 not just trade supporting the idea that em could outperform 0:02:05.760 --> 0:02:07.760 developed markets. That's something that I think could run a 0:02:07.800 --> 0:02:10.320 little longer. Although clearly that price action from China this 0:02:10.360 --> 0:02:15.840 morning is very aggressive. How much is underpinned by dividend increase, 0:02:16.120 --> 0:02:18.840 use of cash back to shareholders. I mean it's folded 0:02:18.880 --> 0:02:22.680 into Washington talk and Democratic socialists that's say by backs 0:02:22.720 --> 0:02:25.240 are evil. I get all that, but just from a 0:02:25.320 --> 0:02:28.959 cf A standpoint, if it's a vector that's up not 0:02:29.160 --> 0:02:32.360 like it was in January hindsight, how much of that 0:02:32.520 --> 0:02:35.600 is underpinned by use of cash? Yeah. I think cash 0:02:35.600 --> 0:02:37.960 and balance sheet is something that is going to really 0:02:38.000 --> 0:02:41.240 support some parts of the US equity market. I think 0:02:41.280 --> 0:02:44.480 that the buy back story, whether it's returns through dividends 0:02:44.560 --> 0:02:47.320 or buy backs, the rooster return in some ways doesn't matter. 0:02:47.480 --> 0:02:50.000 I think if you've got a very robust balance sheet, 0:02:50.040 --> 0:02:52.680 net cash on the balance sheet, then that's something that's 0:02:52.720 --> 0:02:55.080 kind of going to give you a more defensive profile 0:02:55.120 --> 0:02:57.120 if we see a growth slow down and returning some 0:02:57.200 --> 0:02:59.360 of that cash is going to support your Earningspress, I 0:02:59.360 --> 0:03:01.760 know you're not great. We're going to talk about individual companies, 0:03:01.800 --> 0:03:06.760 but are reported from Omaha. Katherine Saglinsky just mentioned the 0:03:06.880 --> 0:03:09.640 pile of cash. Mr Buffet has there's a lot of 0:03:09.680 --> 0:03:12.840 other piles of cash out there. What's the I mean 0:03:12.880 --> 0:03:15.760 a lot of people I mentioned Mario Gabelly John tweeting 0:03:15.760 --> 0:03:18.280 out a newmant bureau. I mean a guy like a bell, 0:03:18.400 --> 0:03:20.840 He's like, why are you sitting in the cash? Do something? 0:03:21.639 --> 0:03:24.520 Is that urgency there? I don't know if the urgency 0:03:24.600 --> 0:03:26.480 is there. And some of the volatility that we've seen 0:03:26.560 --> 0:03:29.160 in equity markets over the last three to six months 0:03:29.280 --> 0:03:31.520 is maybe going to inject a little bit more of 0:03:31.560 --> 0:03:34.200 a noting caution rather than when we have a kind 0:03:34.240 --> 0:03:36.960 of more benign environment. But I think certainly, if we 0:03:37.000 --> 0:03:40.560 do see the growth environment slowing but not slowing too rapidly, 0:03:40.920 --> 0:03:43.400 UM corporates may look to try and offset some of 0:03:43.440 --> 0:03:45.880 that kind of organic slowdown by putting some of that 0:03:45.920 --> 0:03:47.920 cash to work. Well, there's one company that is selling, 0:03:47.960 --> 0:03:50.480 and it's General Electric, and the story drops across the 0:03:50.480 --> 0:03:53.040 Bloomberg that General Electric has agreed to sell it's buy 0:03:53.080 --> 0:03:56.280 a farmer business to Dana her for a total consideration 0:03:56.320 --> 0:03:59.400 including twenty one billion dollars in cash, as well as 0:03:59.480 --> 0:04:02.640 Danna has assumption of certain pension liabilities. That just dropped 0:04:02.680 --> 0:04:05.440 across the Bloomberg. General Electric up more than six percent. 0:04:06.000 --> 0:04:08.200 But is there almost an inside transit actually, I mean 0:04:08.280 --> 0:04:13.440 Mr copp Is, I mean I'm going to be honest 0:04:13.480 --> 0:04:16.120 and totally not surprised by this. So here's the headline 0:04:16.120 --> 0:04:19.640 that comes with it, expects to use proceeds to cut 0:04:19.720 --> 0:04:21.719 leverage and strength and balance sheet. Now this is a 0:04:21.800 --> 0:04:23.840 very g specific story, but let me get to the 0:04:23.880 --> 0:04:26.080 broadest story that I think you can speak to. Greg. 0:04:26.480 --> 0:04:29.200 It's the belief that beyond ge there's a lot of 0:04:29.240 --> 0:04:32.719 companies not in a similar position, but telling the same 0:04:32.800 --> 0:04:35.719 kind of story that this is the year that we're 0:04:35.720 --> 0:04:38.400 going to cut back on debt right size the balance sheet. 0:04:38.400 --> 0:04:39.960 It's the year of the debt diet. In the words 0:04:39.960 --> 0:04:42.279 of some guests that I've spoken to, do you believe 0:04:42.320 --> 0:04:45.359 it is? I think there's gonna be differentiation between those 0:04:45.400 --> 0:04:48.040 who do have leverage on the balance sheet see um, 0:04:48.080 --> 0:04:50.560 you know the end of the cycle inside, see growth slowing, 0:04:50.680 --> 0:04:53.080 and want to take measures to repair their balance sheet. 0:04:53.279 --> 0:04:55.359 But there are other corporates out there who have big 0:04:55.400 --> 0:04:57.920 piles of cash, who have anything we'll be looking to 0:04:57.960 --> 0:04:59.880 put that cash to work. So one of the things 0:05:00.000 --> 0:05:02.719 we've been talking about is looking at the differentiation between 0:05:02.760 --> 0:05:05.680 those who can do things like sustained buy backs, maybe 0:05:05.680 --> 0:05:08.440 even accelerate returns to shareholders and those who are going 0:05:08.480 --> 0:05:10.480 to have to cut back. How many companies are in 0:05:10.480 --> 0:05:12.560 that position, because the thing I worry about sitting here 0:05:12.640 --> 0:05:15.320 is central banks shifting towards an easing bias. But I 0:05:15.360 --> 0:05:17.600 just wonder how much corporates have already leveraged over the 0:05:17.680 --> 0:05:20.000 last couple of years, what difference it will make to 0:05:20.400 --> 0:05:23.080 adjust the supply and price of credit, and whether that 0:05:23.120 --> 0:05:26.479 will be enough to stimulate demand. Yeah. I mean, we 0:05:26.560 --> 0:05:28.680 have had this more dovish tone from the FED, but 0:05:28.720 --> 0:05:30.880 we've been in an environment really for the past ten 0:05:30.960 --> 0:05:33.200 years where there's been an awful lot of support coming 0:05:33.240 --> 0:05:36.360 from central banks. So I think clearly this has been 0:05:36.560 --> 0:05:38.920 one of the drivers that's taken the SMP back up 0:05:38.960 --> 0:05:42.400 from on Christmas eve UM. So I think the ability 0:05:42.520 --> 0:05:46.440 for there to be more liquidity driven rally, for a 0:05:46.480 --> 0:05:49.200 more dovish FED to incrementally drive upside from here is 0:05:49.320 --> 0:05:51.600 much more challenging. I think perhaps one of the biggest 0:05:51.680 --> 0:05:55.560 risks for nineteen is policy impotence. It's just the very 0:05:55.600 --> 0:05:57.640 idea that these central banks try and do more, but 0:05:57.720 --> 0:06:00.520 the effective of it, effectiveness of it is enough, And 0:06:00.560 --> 0:06:02.719 I just wonder whether the one right now we're experiencing 0:06:02.760 --> 0:06:06.200 that to some degree in China. Great because the Chinese 0:06:06.200 --> 0:06:08.880 are doing a lot. It's supporting markets. I haven't seen 0:06:08.960 --> 0:06:12.120 it materially support the economy just yet. Yes, I think 0:06:12.120 --> 0:06:14.680 that's a very important point. You can get some knee 0:06:14.720 --> 0:06:18.320 jerk reaction in terms of equities outperforming when you get stimulus, 0:06:18.360 --> 0:06:20.400 but really for that to drive for sustained rally, what 0:06:20.440 --> 0:06:23.000 you need to see is the stimulus find its way 0:06:23.040 --> 0:06:25.720 into the hard data. If you see the macro data improving, 0:06:25.839 --> 0:06:28.039 that's likely to drive the market higher. Greg, thank you 0:06:28.120 --> 0:06:45.360 so much. Thank you. We speak to the vice president 0:06:45.360 --> 0:06:49.040 of odd for Bloomberg Intelligence, Carol Board darkens the door. 0:06:49.120 --> 0:06:50.920 I'm going to cut to the chase, away from all 0:06:50.960 --> 0:06:54.920 the mambo jumbo. How can this be an arms length transaction? 0:06:55.360 --> 0:06:59.240 Mr Copple bleeds Danner her Blue. He's working for g 0:06:59.640 --> 0:07:02.240 I know the Boards signed off on it and all that. 0:07:02.320 --> 0:07:05.719 You've gotta be kidding me. Uh you know, about a 0:07:05.800 --> 0:07:09.200 year ago Danner wanted to buy it and uh Ge 0:07:09.240 --> 0:07:12.360 rebuffed them. Uh he got I mean, let's be fair, 0:07:12.400 --> 0:07:14.440 he got twenty one billion dollars and he needs cat. 0:07:16.160 --> 0:07:19.720 It's actually a little lesson. I thought I had billion um. 0:07:19.760 --> 0:07:22.680 The peer group, which is dan her Thermo Fisher um 0:07:22.880 --> 0:07:26.960 in the life science business or eighteen nineteen right now. So, um, 0:07:27.000 --> 0:07:29.880 the deal you know was good for Danna her as 0:07:29.880 --> 0:07:31.880 well as good for G. G has to balance, I 0:07:31.920 --> 0:07:33.760 mean G has to balance. I need money and I 0:07:33.800 --> 0:07:36.200 need it fast. And the positive in this is that 0:07:36.240 --> 0:07:40.000 they've been getting two billion, three billion from selling tod 0:07:40.080 --> 0:07:41.840 J and J come in here or you know, name 0:07:41.920 --> 0:07:45.440 six other companies you know better than me. I'm not 0:07:45.480 --> 0:07:47.480 sure if there was a bid. I know that Danner 0:07:47.640 --> 0:07:50.000 was interesting, you know, was just gonna be questioned in 0:07:50.080 --> 0:07:54.120 the next week. I I think people are so happy 0:07:54.120 --> 0:07:56.800 that they're getting that much money, and that will so 0:07:56.840 --> 0:07:59.840 all my radars up. I mean no, I might see 0:07:59.840 --> 0:08:02.800 your I see your point because it's it's they got that. 0:08:03.040 --> 0:08:07.440 They got it below peer multiples. Uh, it's a growth business. 0:08:07.480 --> 0:08:11.080 Margins are are very good. Um, and but is in 0:08:11.120 --> 0:08:13.720 a box. They have to balance. I need the money. 0:08:13.840 --> 0:08:18.920 What did dinner or two? Did it go down ten answers? No, no, no, 0:08:19.280 --> 0:08:22.640 because if they paid fifteen times for it. Now, what's interesting, Karen, 0:08:22.720 --> 0:08:23.840 is not just a move in the stop, but the 0:08:23.920 --> 0:08:26.760 moving the debt as well. It's up three cents on 0:08:26.800 --> 0:08:31.560 the dollar. Erupt to fifty on the G perpetual. It's 0:08:31.560 --> 0:08:34.000 a triple B credit and they're using the money to 0:08:34.120 --> 0:08:36.400 right size the balance sheet. How important is that? That's 0:08:36.440 --> 0:08:41.200 extremely important because there was fear of a downgrade. Uh, 0:08:41.600 --> 0:08:45.000 they need to get the debt down as quickly as possible. 0:08:45.040 --> 0:08:47.600 There wasn't a lot of large chunks left that they 0:08:47.640 --> 0:08:51.280 could sell um and you know, oil service is the 0:08:51.320 --> 0:08:54.280 only one they have left that's a reasonable, reasonable size chunk. 0:08:54.600 --> 0:08:57.199 So this does solve the you know, big chunk of 0:08:57.200 --> 0:08:59.760 the debt problem. It doesn't solve it completely, and I 0:08:59.800 --> 0:09:02.200 think will ease the fears about another downgrade. Yeah, so 0:09:02.200 --> 0:09:03.880 we tried it ninety two cents on the dollar, and 0:09:03.920 --> 0:09:06.480 there's been this big fit about another down Right. Do 0:09:06.559 --> 0:09:08.360 you think this is sufficient or do they need to 0:09:08.360 --> 0:09:11.160 do more? Do they need to raise more capital? You know, 0:09:11.640 --> 0:09:13.480 you know they've got to continue to raise capital. But 0:09:13.520 --> 0:09:16.760 I think the emergency, I would say the emergency might 0:09:16.800 --> 0:09:18.240 be over in the in the near town. So you 0:09:18.320 --> 0:09:21.600 sound by a farmer, You keep healthcare, The healthcare IPI 0:09:21.720 --> 0:09:23.920 is not going to happen. What's next? What's the next 0:09:24.040 --> 0:09:26.760 unit that you'll lay the focused on. I think healthcare 0:09:26.760 --> 0:09:29.080 will happen, but it won't happen right away, and he 0:09:29.120 --> 0:09:32.480 needs the cash flow. UM, this doesn't you know, I 0:09:32.520 --> 0:09:36.120 don't think it aborts the UM option to sell healthcare, 0:09:36.120 --> 0:09:38.280 but he needs a cash flow. So right now he 0:09:38.720 --> 0:09:41.199 can stop the bleeding with this sale, get the cash 0:09:41.200 --> 0:09:43.760 from healthcare to do other things, and eventually I think 0:09:43.760 --> 0:09:46.640 you'll get Are there other suitors that could step in 0:09:46.640 --> 0:09:49.120 here in the next forty hours and say, wait a minute, 0:09:50.040 --> 0:09:54.600 that I think that's a possibility. Okay, I mean we're 0:09:54.640 --> 0:09:57.040 so far from the ge of schenected in New York. 0:09:57.160 --> 0:10:00.560 You've mentioned before Karen Aviation and might right, that's the 0:10:00.559 --> 0:10:03.679 crown jewel. Now, yes, that's you know, you know, they 0:10:03.720 --> 0:10:06.360 get rid of Healthier, they get rid of oil service, 0:10:06.400 --> 0:10:11.480 it's it's it's power, it's renewables, and it's a crown jewel. Yeah, 0:10:11.480 --> 0:10:14.480 it's gonna say. I mean, basically, it's an airline engine company. 0:10:14.840 --> 0:10:16.960 It's running a power business. Because they can't figure out 0:10:16.960 --> 0:10:19.079 how to get rid of it that they're going to 0:10:19.160 --> 0:10:20.800 have to just shrink power as much as they can. 0:10:20.880 --> 0:10:23.280 That's not an option to sell. Now, I don't you 0:10:23.360 --> 0:10:25.559 don't do bi hold sell what's the stock etch with 0:10:25.720 --> 0:10:28.199 the stock up a zillion percent, were up over twelve. 0:10:28.280 --> 0:10:31.679 We're just below twelve twelve. I mean, I don't need 0:10:31.720 --> 0:10:35.000 a target from me. I know that's impolite, but I mean, 0:10:35.000 --> 0:10:37.320 does this say everything have legs to forty or is 0:10:37.320 --> 0:10:41.280 it plus or minus five points? It's got a lot 0:10:41.320 --> 0:10:44.959 more work to do, uh to run to anywhere where 0:10:45.040 --> 0:10:46.920 near that. I mean, they've still got a big promise. 0:10:48.240 --> 0:10:53.480 I just have a glass. I don't want a price forecast. 0:10:53.559 --> 0:10:55.720 But you know, the stock was what six or seven? 0:10:56.520 --> 0:11:00.680 It's it's done, you know, up to America. It's what 0:11:00.720 --> 0:11:03.360 Deutsche Bank is to Europe. And the question that comes 0:11:03.400 --> 0:11:05.360 up with Deutsche Bank again and again and again is 0:11:05.360 --> 0:11:07.559 whether you can cut your way to growth. And it's 0:11:07.559 --> 0:11:10.400 a question that's asked about g E as well. Radically 0:11:10.440 --> 0:11:13.440 different company, of course, but the same situation. Can you 0:11:13.520 --> 0:11:15.760 cut your way to growth? I think they're trying to 0:11:15.760 --> 0:11:19.760 cut their way to stability and um and when once 0:11:19.800 --> 0:11:22.800 they can stabilize power and there's some signs in order 0:11:22.840 --> 0:11:25.679 that that's happening, they can stop the bleeding there they've 0:11:25.720 --> 0:11:28.240 got a growth engine. Well I'm not playing on words, 0:11:28.280 --> 0:11:31.280 but it's it's it's aviation and frankly healthcare is nine 0:11:31.880 --> 0:11:34.360 operating margins and will be more like fifteen sixty without this. 0:11:34.559 --> 0:11:37.960 Are they benefited by the death of the airbus? Uh three? 0:11:38.760 --> 0:11:40.920 I mean the day move a lot more engines on 0:11:41.000 --> 0:11:45.320 smaller planes. No, g E and Pratt and Whitney are 0:11:45.480 --> 0:11:48.800 the big engine guys. So yeah, so um, you know 0:11:49.200 --> 0:11:51.400 that plane goes, but there's others that there's a million 0:11:54.240 --> 0:11:55.880 with a lot going to hear and thank you so 0:11:56.000 --> 0:12:00.839 much wandering on the energy, and you know, I would say, 0:12:00.920 --> 0:12:16.520 next forty eight hours, we'll see. We went through the 0:12:16.640 --> 0:12:19.319 surveillance data bank and try to find one of our 0:12:19.360 --> 0:12:23.400 guests that actually listen to all the speeches, and Julia 0:12:23.440 --> 0:12:29.280 Cornado joins usspect policy perspectives. What do these speeches mean, Julie? 0:12:29.400 --> 0:12:32.560 To a grizzled PhD pro like you, do you actually 0:12:32.600 --> 0:12:34.480 listen to these speeches? Did you just look at the 0:12:34.480 --> 0:12:39.240 Bloomberg headlines? You just ignore them? Well, actually a number 0:12:39.280 --> 0:12:42.319 of the speakers were speaking at an event in New York, 0:12:42.400 --> 0:12:44.439 so I was able to attend to that event and 0:12:44.640 --> 0:12:47.760 see the full glory of the said speakers in person. 0:12:47.920 --> 0:12:51.840 So um, it was as you that was why we 0:12:51.880 --> 0:12:56.000 got such a day. Lose the annual conference, the Booth conference, 0:12:56.040 --> 0:12:59.200 since you got in New York exactly, Yeah, Rob and 0:12:59.280 --> 0:13:03.040 Roger enjoining a tomorrow on Bloomberg Surveillance ex Chicago. Next 0:13:03.280 --> 0:13:06.400 RBI in India with an important new book as well. 0:13:06.400 --> 0:13:08.520 Give us a FED update. It's you know, we're marching 0:13:08.559 --> 0:13:11.720 to March and then there's a March meeting. You know, 0:13:11.760 --> 0:13:14.120 I know there's a press conference and all that, but 0:13:14.440 --> 0:13:18.880 is it a dead meeting? Is FED speak goes effectively? 0:13:19.240 --> 0:13:22.320 The March meeting is dead in policy terms because the 0:13:22.360 --> 0:13:24.560 FED has hit the pouse button. So we know that 0:13:24.600 --> 0:13:26.680 they're pretty much on hold for the first half of 0:13:26.679 --> 0:13:29.400 the year as they sort of gather the data and 0:13:29.440 --> 0:13:32.760 take the temperature on the economy. Most of the speakers 0:13:32.800 --> 0:13:36.560 that we heard from are looking forward to this evaluation 0:13:36.600 --> 0:13:40.520 of their policy tool kit and whether they should tweak 0:13:40.559 --> 0:13:44.800 their inflation targeting approach, and that's the hot topic of 0:13:44.840 --> 0:13:47.319 the day. I look Julia at the dot plot, which 0:13:47.360 --> 0:13:49.559 I haven't looked at phone since Michael McKee stopped the 0:13:49.559 --> 0:13:53.360 press conference last time around, and not only is the 0:13:53.400 --> 0:13:58.160 market call distant from the FED call, but the market 0:13:58.160 --> 0:14:02.800 cause of vector going to lower rates out for years. 0:14:02.840 --> 0:14:07.200 To me, the slope of the market call has radically changed. 0:14:07.240 --> 0:14:10.600 Am I right on that? Um? Yes, you are right, 0:14:10.640 --> 0:14:12.560 and I think that what we will see at the 0:14:12.600 --> 0:14:16.480 March meeting is another flattening of the dot plot, and 0:14:16.679 --> 0:14:19.480 with the FED moving closer to the market, rather than 0:14:19.520 --> 0:14:22.840 the market moving closer to the Fed, but the Fed. 0:14:23.160 --> 0:14:26.040 This is where there's a key difference between the market 0:14:26.080 --> 0:14:28.880 and the dot plot, and that is that the dot 0:14:28.920 --> 0:14:32.320 plot is the FED official communication. The Feed is never 0:14:32.360 --> 0:14:36.280 going to say we're projecting failure, we're predicting a recession. 0:14:36.600 --> 0:14:39.920 The market can make dot call um and effectively some 0:14:39.960 --> 0:14:42.560 people in the market believe. And in fact, the National 0:14:42.600 --> 0:14:46.120 Association of Business Economist survey just showed that the modal 0:14:46.120 --> 0:14:51.200 expectation is for a recession in h So that's what 0:14:51.400 --> 0:14:53.840 the market is, at least many in the market are thinking. 0:14:53.880 --> 0:14:55.600 And that's why we have a bit of a rate 0:14:55.680 --> 0:14:59.480 cut price in whether it's twenty one, they're always pushing 0:14:59.480 --> 0:15:02.120 out this. There is always a recession called somewhere in 0:15:02.120 --> 0:15:04.320 the mixed. Julia, what you mentioned earlier, I think it's 0:15:04.400 --> 0:15:08.680 really interesting the prospect of a higher inflation target. Muhammad 0:15:08.720 --> 0:15:11.400 al Arian running for bloom Back Opinion Today, and he 0:15:11.440 --> 0:15:13.680 wrote the following, will the fect be able to meet 0:15:13.720 --> 0:15:16.640 a higher inflation target if it already struggles to make 0:15:16.680 --> 0:15:20.160 its current want on a consistent basis? What difference does 0:15:20.200 --> 0:15:23.720 it make? Julia Well, I think that is probably the 0:15:23.800 --> 0:15:28.240 single biggest shortcoming of evaluating that approach, is they don't 0:15:28.240 --> 0:15:31.840 even know whether it's feasible, uh to hit a higher 0:15:31.840 --> 0:15:35.720 inflation target or to even average at a slightly higher 0:15:36.640 --> 0:15:40.080 run rate of inflation over a longer horizon. We we 0:15:40.160 --> 0:15:43.600 haven't been hitting the inflation target. Is that because inflation 0:15:43.640 --> 0:15:46.400 expectations have slipped lower and that's something that they can 0:15:46.520 --> 0:15:52.560 correct with their communication. Or are there inflationary processes, you know, deeper, 0:15:52.640 --> 0:15:56.960 more structural processes that hold back inflation and would sort 0:15:57.000 --> 0:15:59.760 of you know, put the sends credibility at risk if 0:15:59.760 --> 0:16:01.920 they if they've raised the target at a time when 0:16:01.920 --> 0:16:04.640 inflation is structurally low. So that's one of the big 0:16:04.720 --> 0:16:06.800 questions that they're going to be grappling with as they 0:16:06.840 --> 0:16:09.280 do this evaluation. What do you make of this evaluation 0:16:09.360 --> 0:16:12.720 playing out as publicly as it currently is. Well, I 0:16:12.760 --> 0:16:16.720 think the idea in them doing that is to emphasize 0:16:16.720 --> 0:16:20.120 that they understand they are a public institution, even though 0:16:20.360 --> 0:16:25.920 they do have independence. If they don't acknowledge and respond 0:16:26.120 --> 0:16:30.480 to public demands, they will lose that independence. They understand 0:16:30.520 --> 0:16:33.680 that more now than ever before. And so I think 0:16:33.720 --> 0:16:36.800 that the idea of having these town halls and these 0:16:36.800 --> 0:16:39.960 public conferences is to make sure that the public fully 0:16:40.000 --> 0:16:42.720 buys into any changes that are made. And it's a 0:16:42.760 --> 0:16:44.480 good thing. I mean, I think they're going to hear 0:16:44.520 --> 0:16:47.240 a variety of perspectives like the one you just mentioned 0:16:47.680 --> 0:16:51.000 that they might not get as loudly as if they 0:16:51.400 --> 0:16:55.359 do it behind closed door until with a specro policy perspective. 0:17:08.359 --> 0:17:11.000 This is a joy. We have waited and waited and 0:17:11.000 --> 0:17:14.520 waited to get the two hundred and seventy two page 0:17:14.800 --> 0:17:18.680 book of the year in business. This is an economics. 0:17:18.720 --> 0:17:23.320 It's not investment or finance. It's like the behavior of business. 0:17:23.400 --> 0:17:26.240 We are thrilled to bring in a gene case. Uh 0:17:26.359 --> 0:17:29.000 and her book be fearless. It has not only come 0:17:29.000 --> 0:17:31.919 out in a splash, but it's really come out to 0:17:32.040 --> 0:17:35.400 some immense acclaim as well. Just go out to Amazon 0:17:35.440 --> 0:17:37.879 and look at the acclaim and Uh, it speaks for 0:17:38.000 --> 0:17:41.399 its self. We said that gene Case, you can't come 0:17:41.520 --> 0:17:45.680 on until Lady Gaga talks about you at the Academy Awards. 0:17:46.040 --> 0:17:48.960 Of course, that's what happened last night. Are you wearing 0:17:48.960 --> 0:17:54.760 Alexander McQueen today, Jane, I'm trying. I'm trying to channel Gaga. No, 0:17:54.920 --> 0:17:57.200 there was Gaga and your husband Steve Case. Of course, 0:17:57.240 --> 0:18:00.400 with modest internet, acclaim goes it's not about how many 0:18:00.440 --> 0:18:03.720 times you are knocked down. It's about how many times 0:18:03.760 --> 0:18:06.280 you get up and keep going. This is Gaga last 0:18:06.359 --> 0:18:09.399 night wearing McQueen at the end of the show, Gene Case. 0:18:09.480 --> 0:18:13.200 Forget about the advantages of Gene Case and Steve Case. 0:18:13.400 --> 0:18:16.080 Give us one example of how you were knocked down 0:18:16.480 --> 0:18:20.000 years ago. Sure well, I tell the story in my 0:18:20.040 --> 0:18:23.479 new book, Be Fearless. You know I was um We 0:18:23.560 --> 0:18:26.760 We had a large initiative at the Case Foundation where 0:18:26.760 --> 0:18:29.720 I run to bring clean water to sub Saharan Africa 0:18:29.760 --> 0:18:32.360 in ten countries. And when I launched it, I had 0:18:32.440 --> 0:18:35.879 President Clinton to my right and First Lady Laura Bush 0:18:35.920 --> 0:18:38.840 to my left. But as we started to execute the 0:18:38.920 --> 0:18:42.159 project on the ground in Africa, things weren't going so well. 0:18:42.600 --> 0:18:44.760 And it's a bit of a longer story, but after 0:18:44.920 --> 0:18:47.520 trying to course correct and make things right. We had 0:18:47.520 --> 0:18:50.359 to acknowledge the failure, and I did so very publicly 0:18:50.440 --> 0:18:54.440 by writing a blog the painful acknowledgement of coming up short. 0:18:54.640 --> 0:18:56.879 This is a very public failure I had, and I 0:18:56.960 --> 0:18:59.600 like to tell that story because you know, entrepreneurs can 0:18:59.600 --> 0:19:02.320 be a little more comfortable with failure. But in the 0:19:02.359 --> 0:19:05.000 world more broadly, people are stopped in their tracks and 0:19:05.040 --> 0:19:06.680 they think it's over. And part of the reason I 0:19:06.720 --> 0:19:09.520 wrote the book Be Fairly is, you know, to really 0:19:09.520 --> 0:19:12.119 tell the stories of well known and less well known 0:19:12.560 --> 0:19:15.880 success stories, better lines and failure along the way. What's 0:19:15.920 --> 0:19:18.400 so important here? And we have a surveillance dumpster wory 0:19:18.520 --> 0:19:20.879 throw in all the business books that don't have the 0:19:20.960 --> 0:19:26.679 interior visceral energy. Be Fearless has you talk about being 0:19:26.800 --> 0:19:30.439 normal and about avoiding normal. Let's start with that sweat 0:19:30.480 --> 0:19:33.920 condition right now. How do our listeners, how do our 0:19:33.960 --> 0:19:39.000 listeners kids get away from normal? Sure? Well, of course 0:19:39.040 --> 0:19:41.520 that's all a play on the words of the town 0:19:41.560 --> 0:19:45.000 I was born in, which was normal, Illinois, as the 0:19:45.080 --> 0:19:47.960 youngest afoe being raised by a single mom, and no 0:19:48.080 --> 0:19:51.200 I had vignettes, but this is mostly a storytelling book 0:19:51.280 --> 0:19:54.800 about others. And the real message of it is that 0:19:54.880 --> 0:19:58.920 it's ordinary people who do extraordinary things. But to get 0:19:58.960 --> 0:20:02.879 too extraordinary, we have to get uncomfortable, get outside of normal. 0:20:03.320 --> 0:20:05.560 You know. I like to say nothing great comes from 0:20:05.600 --> 0:20:08.640 the comfort zone. And we did some research about six 0:20:08.720 --> 0:20:12.159 years ago really to study the core qualities of successful 0:20:12.320 --> 0:20:15.400 entrepreneurs and innovators. How many times do they feel? How 0:20:15.400 --> 0:20:19.080 many times do they fail before they found success? Oh? 0:20:19.160 --> 0:20:21.480 In some cases multiple times, you know. I like to 0:20:21.520 --> 0:20:24.040 talk about Oprah who was told she just wasn't right 0:20:24.119 --> 0:20:27.359 for TV, and yet look at the media empire she 0:20:27.440 --> 0:20:31.880 has created. Steve Jobs fired from the very company he founded, 0:20:32.119 --> 0:20:34.919 which then enabled him to go back later and totally 0:20:34.960 --> 0:20:38.320 transformed that company. So time and time again. You know, 0:20:38.359 --> 0:20:41.560 that chapter is called fail and the Footsteps of Giants. 0:20:41.600 --> 0:20:43.760 So it really is an important message that we have 0:20:43.880 --> 0:20:46.000 to get a little uncomfortable, we have to be bold 0:20:46.040 --> 0:20:49.520 and take some risks, but that it's really available to 0:20:49.720 --> 0:20:52.600 anyone to break well. So what we'll do. Gene cases 0:20:52.800 --> 0:20:55.800 ringing my colleague Paul Sweeney, who saw Duke go down 0:20:55.800 --> 0:20:58.240 in flames a week and a half ago and find 0:20:58.320 --> 0:21:01.639 resurrection here over the week. Paul Gee, one of the 0:21:01.680 --> 0:21:04.160 principles in your book. I found interesting was the concept 0:21:04.160 --> 0:21:06.320 of making the big bet. And that's something that I 0:21:06.320 --> 0:21:09.560 don't think is really is intuitive for you know, most people, 0:21:09.600 --> 0:21:12.240 the more conservative. Why it's important to think about making 0:21:12.240 --> 0:21:14.119 a big bet. And you have an example of somebody 0:21:14.119 --> 0:21:17.760 who's who's done it and done it well, sure, well, 0:21:17.920 --> 0:21:19.880 you know what I say is make a big bet 0:21:19.880 --> 0:21:22.560 and make history. It turns out what our research showed 0:21:23.000 --> 0:21:28.119 was across geographies and across sectors where transformational change happened 0:21:28.200 --> 0:21:30.560 is where people really start out with a big bet, 0:21:30.920 --> 0:21:34.120 not really dry for incremental change, but keep an eye 0:21:34.160 --> 0:21:36.200 on the price. Now, of course, how you're going to 0:21:36.280 --> 0:21:39.280