Speaker 1: This is Bloomberg Business Week from Bloomberg Radio. Hi, I'm
Speaker 1: Carol Master with Kaylee Lines. Welcome to the weekend edition
Speaker 1: of Bloomberg Business Week. Over the next couple of hours,
Speaker 1: what are you News of the week, insights from the
Speaker 1: magazine and more. And this magazine, this issue is all
Speaker 1: about twenty twenty. It is the year ahead issue, from
Speaker 1: politics and power and what's ahead for the global economy
Speaker 1: and markets, to technology and trends in the luxury space
Speaker 1: and a lot more so. For better or worse, US
Speaker 1: and global markets have become inextricably entwined with American politics.
Speaker 1: Here to explain Michael Reagan, he keeps a watch on
Speaker 1: the financial markets for US. So what do you we
Speaker 1: do know? Right? We watched the election so carefully in
Speaker 1: terms of what it might mean for investors. Right, Yeah,
Speaker 1: it's this kind of awkward position that a lot of
Speaker 1: investors and analysts have been thrust into. Is now they
Speaker 1: have to sort of have a sideline as a political
Speaker 1: scientist and kind of gauge where the tea leaves in
Speaker 1: the politics world are headed. It is it really is
Speaker 1: turning into old market of its own almost And you know,
Speaker 1: there's these prediction sites that you can tract sort of
Speaker 1: where the the betting community believes, uh, the horse race lies.
Speaker 1: In politics, We'll tell us about one strategist that you
Speaker 1: actually went to visit, right, because you start off your
Speaker 1: story with that, and I think it tells yeah, yeah,
Speaker 1: it's It's funny. Laurie Calvacina at RBC UH and she
Speaker 1: wrote in a note how she's she looks at these
Speaker 1: uh political polling charts almost like stock charts right now,
Speaker 1: and um, you know she's looking at Elizabeth Warren is
Speaker 1: like a momentum stock because she's really rising in the polls,
Speaker 1: and she's she's said she would advise shorting Joe Biden,
Speaker 1: uh in my comrade from the University of Delaware, unfortunately,
Speaker 1: but just because he's waning in momentum in the pulse.
Speaker 1: But you know what's really fascinating is that so much
Speaker 1: is at stake with politics right now because obviously, when
Speaker 1: President Trump was elected, you know, politics ruled everything in
Speaker 1: global markets for you know, ever since basically. But now
Speaker 1: some of these Democratic can candidates are really have platforms
Speaker 1: that are really threatened to sort of upend a lot
Speaker 1: of the main industries in the US well, they're talking
Speaker 1: about Medicare for all, right, that's going to have implications
Speaker 1: on all of those publicly held healthcare plan absolutely. Yeah,
Speaker 1: And that's why Elizabeth Lawren's ascent in the polls is
Speaker 1: really has well. She's kind of scrambling to try to
Speaker 1: decipher what it could possibly mean, because her plans are
Speaker 1: all over the place, so broad reaching. Um that a
Speaker 1: you have to kind of figure out, well, what will
Speaker 1: her priorities be, uh, and what will she sort of
Speaker 1: be able to get to accomplish. And a lot depends
Speaker 1: obviously on what the Congress looks like after the next election,
Speaker 1: But a hypothetical Elizabeth Warren presidency is has well. She's
Speaker 1: scrambling to try to figure out all the ripple effects. Obviously,
Speaker 1: as you said, Medicare for all would have major implications
Speaker 1: for the healthcare sector. Um. She also wants to raise
Speaker 1: the minimum wage, which would pressure a lot of margins
Speaker 1: at at some companies, but it would also provide a
Speaker 1: lot more spending in the economy, so there'd be winners
Speaker 1: and losers in that scenario. Um. Obviously, she's talked about
Speaker 1: getting tougher on the banks. Um. The thinking is that
Speaker 1: her sec would be very much a pitfall of an
Speaker 1: sec uh, and on and on and on. There's so
Speaker 1: many different ripple effects that um, it's it's a mad
Speaker 1: dash to try to sort it all out. What's really
Speaker 1: interesting is, as of yet, um, there doesn't seem to
Speaker 1: be much of her ascent priced in two markets so far,
Speaker 1: and analysts are saying, well, look for that to potentially
Speaker 1: change maybe early in the first quarter, around February or March,
Speaker 1: when we start to get those primary results in, and
Speaker 1: it really will then become more clear who the front
Speaker 1: runner is in the Democratic race, because right now it
Speaker 1: really is a worse race. Well, there's still a long
Speaker 1: way to go, right, and of course many people say
Speaker 1: that regardless of how far left she maybe now, if
Speaker 1: it does get to the general election where she is
Speaker 1: the Democratic candidate, she's going to have to move more
Speaker 1: to a middle. So I wonder if maybe you don't
Speaker 1: want to overprice everything she's saying now, because again, we
Speaker 1: have so far to go and stances could change. Yeah,
Speaker 1: that's that's absolutely right. You know, the assumption is you
Speaker 1: run very far left to win that primary, then you
Speaker 1: moved to the middle. Elizabeth Barren's a bit of a
Speaker 1: wild card. I don't know how far to the middle
Speaker 1: you can expect her to move. Again, I think it
Speaker 1: a lot goes back to how much she can get
Speaker 1: through Congress. So some analysts are looking at, well, what
Speaker 1: can she accomplish through executive orders or through existing channels
Speaker 1: in the executive branch rather than get through Congress um.
Speaker 1: So there's a lot of moving pieces, and this is
Speaker 1: an analysis I think that's going to keep going on
Speaker 1: and on. Might take a take a step back because
Speaker 1: I think it used to be that we thought if
Speaker 1: there was a Democrat in the White House ultimately that
Speaker 1: it wasn't good for business right, and that there was
Speaker 1: a Republican it was and that's the markets would play
Speaker 1: off of that. But in years, in recent years, we
Speaker 1: haven't seen that, Like, tell me what happens if it's
Speaker 1: a Democrat versus a Republican? Is it all good? And yeah?
Speaker 1: There's so many different variables and scenarios you can run,
Speaker 1: you know, is it a Democrat who's got who has
Speaker 1: a full Democratic Senate and House beyond them or a
Speaker 1: mixed sipolit chamber And there's so many different scenarios you
Speaker 1: can run. Historically, I don't put a lot of faith
Speaker 1: in any of them because every situation is so unique,
Speaker 1: and the candidates are, the economic environment going into the
Speaker 1: elections are unique. So I think we've kind of uh
Speaker 1: gotten into this unchartered territory with President Trump doing stuff
Speaker 1: that no president has done before, aggressively hitting UH China
Speaker 1: the tariffs, threatening them elsewhere. So he kind of broke
Speaker 1: what I think would be the paradigm of the past
Speaker 1: and you have to kind of just play the cards
Speaker 1: on the on the table now. Yeah. Absolutely, And to
Speaker 1: the point of President Trump, you also mentioned your peach
Speaker 1: that you can't extract politics from talk of a recession
Speaker 1: right now, and a lot of that is due to
Speaker 1: the president's policies, specifically in regard to the trade war,
Speaker 1: which as we know, is impacting his base pretty substantially.
Speaker 1: Those areas are feeling the most pain. But a lot
Speaker 1: of the strategists we've talked to on Bloomberg Television say
Speaker 1: that because of going into he's not going to run
Speaker 1: a recession. That could mean that he is going to
Speaker 1: kind of have to shift his strategy in a lot
Speaker 1: of ways over the course of the next year as
Speaker 1: we run up to the election. What could that look
Speaker 1: like for the moment. That's another huge wild card. I mean,
Speaker 1: obviously we've seen what appears to be progress on the
Speaker 1: China US trade tensions. Um, we've seen that movie before
Speaker 1: and it's sort of you know, has ended badly, but
Speaker 1: this time people are kind of putting in a lot
Speaker 1: of faith in exactly what you're talking about. That Uh,
Speaker 1: he can't ratchet up tensions much more without risking a
Speaker 1: global recession or US recession. Basically, I mean the manufacturing sector, uh,
Speaker 1: in many countries is already in recession. If you look
Speaker 1: at the models, I think the Bloomberg Economics model, it
Speaker 1: pulls in a lot of different inputs. It's about a
Speaker 1: chance of a recession in the next twelve and it
Speaker 1: was higher earlier. It was high. Yeah, the FEDS model
Speaker 1: is much simpler. It just looks at the deal curb
Speaker 1: about a thirty five chance. There. That's Mike Reagan, who
Speaker 1: keeps a watch on the financial markets for US, just
Speaker 1: reminding us how closely connected are the financial markets and
Speaker 1: of course those presidential elections. So it's a big week
Speaker 1: for Boeing. Of course, we've got earnings from the company,
Speaker 1: and more importantly, we got an update the company mapping
Speaker 1: out a big boost in seven thirty seven max output.
Speaker 1: Justin Bachman writes about what to expect from Boeing in
Speaker 1: nineteen Justin, has not been a great year for Bowing,
Speaker 1: to say the least. No, to say the least, their
Speaker 1: best slane product was grounded for most of the year
Speaker 1: following to fatal accidents that killed six people. Um, you know,
Speaker 1: airlines are not taking this that, you know, no no
Speaker 1: regulators letting it in their airspace. Uh So it's really
Speaker 1: been a tough tough year for Bowing in terms of
Speaker 1: the MAX And Justin, it's not just now the fact
Speaker 1: that they need to get the planes back in the year,
Speaker 1: it's that they need to get travelers willing to go
Speaker 1: back on the planes right right, Their airline customers really
Speaker 1: need to face up to how much of a public
Speaker 1: fear and concern is there about this airplane? And you know,
Speaker 1: the old saying is that the you know, the safest
Speaker 1: airplane is probably one that has the most attention to it.
Speaker 1: But at the same time, a lot of the public
Speaker 1: doesn't pay attention to what they're flying, but in this
Speaker 1: case they might. Uh, there's there's good evidence from surveys
Speaker 1: and such that people will be asking and will be
Speaker 1: very cognizant of what they're flying and want to know
Speaker 1: is it a MAX. If it's not a MAX, they
Speaker 1: probably don't care, but they do want to know if
Speaker 1: it's going to be that aircraft, and if it is,
Speaker 1: what new airlines have to do to get those people
Speaker 1: comfortable that it's safe to fly again. Well, let's talk
Speaker 1: about what the airlines are doing, because it's interesting. They're
Speaker 1: gonna lay it out right, if you make a reservation,
Speaker 1: they're gonna let you know if you're gonna be flying
Speaker 1: one of these jets, right. Yeah, the the three US
Speaker 1: airlines that have at Southwest, American and United UM, I'll
Speaker 1: say that they are going to be very transparent in
Speaker 1: this process and they want everybody to know up front
Speaker 1: when you're buying a ticket if that flight is going
Speaker 1: to be on a seven thirty seven Max UM and
Speaker 1: and the idea it's practical because they don't want people
Speaker 1: getting on the plane and then having sort of a
Speaker 1: freak out incident, um, you know, on the aircraft with
Speaker 1: the crew, social media, etcetera. It makes a lot more
Speaker 1: sense to separate those folks early in the process or
Speaker 1: as early as possible. Even if that's at the airport
Speaker 1: at check in, and somebody finds out, Uh, they're going
Speaker 1: to let you rebook without a fee or penalty to
Speaker 1: go on another aircraft if you're not comfortable flying on
Speaker 1: the Max. And we don't know how long that's gonna last.
Speaker 1: They've been a little bit hesitant to disclose how long
Speaker 1: that policy will last, but I think for several months
Speaker 1: at least. It's it's going to be the case where
Speaker 1: you're allowed to rebook if you don't want to fly it.
Speaker 1: And how much of a burden does do the airlines
Speaker 1: have to bear in restoring confidence in this gender? Is
Speaker 1: that mostly Boeing is prerogative at this point. It's definitely
Speaker 1: a shared responsibility. But I think what happens is once
Speaker 1: the government say, you know, in the US and Europe
Speaker 1: and China, etcetera, that this airplane can fly, and the
Speaker 1: airlines are very eager to get it back into service
Speaker 1: for financial reasons, then it becomes the airline issue because
Speaker 1: they're dealing with their own customers and their own customers
Speaker 1: fears and concerns and questions, and you know, Boeing is
Speaker 1: going to be involved in in doing what airlines asked
Speaker 1: them to do. But I really think that at that
Speaker 1: point it becomes an airline centered issue of dealing with
Speaker 1: their own customers. So that's probably where we're going to
Speaker 1: see the most outreach and the most communications. I think
Speaker 1: one of the folks that you talked to, I think
Speaker 1: it was a consultant, talking about how maybe the airlines
Speaker 1: need to have their own executives and maybe their executives families,
Speaker 1: and maybe Boeing executives and Boeing's executives families actually take
Speaker 1: some of the flights um to show that you know,
Speaker 1: they are supporting this jet and feel comfortable flying it, right.
Speaker 1: I think that's another thing we'll see. Definitely the CEOs
Speaker 1: of those three airlines and probably in Canada as well,
Speaker 1: will fly on the jet and make it very publicly
Speaker 1: known that they're they're comfortable flying on the jet, may
Speaker 1: have families, I think. I think you're going to see
Speaker 1: a very broad based media outreach in terms of, you know,
Speaker 1: telling everybody, this is what has been done, this is
Speaker 1: the the appropriate certification process, and this is why our
Speaker 1: pilots are comfortable. And you're going to see a message
Speaker 1: from everybody in the industry that the plane is not
Speaker 1: safe to fly. But at the end of the day,
Speaker 1: I think also they just need to fly it. It's
Speaker 1: got to go back into service and it has to
Speaker 1: to fly without incident and over time people will you know,
Speaker 1: gradually start to come back around to it. And at
Speaker 1: least that's the thinking justin how much of this is
Speaker 1: about the seven thirty seven Max, that particular plane, and
Speaker 1: then how much of this is that Boeing has to
Speaker 1: restore its reputation as a company. Right, Yeah, Boeing is
Speaker 1: facing a lot of issues, including you know, a grand
Speaker 1: jury inquiry in Washington. Their whole certification process is under
Speaker 1: review by the d OT. So there are some other
Speaker 1: issues that remain after the seven thirties seven Max is
Speaker 1: I'm grounded um and and that has you know, bearing
Speaker 1: on a new They're working on a new plane called
Speaker 1: the Triple seven X a wide body uh and that
Speaker 1: was supposed to fly in it's going to be probably
Speaker 1: one now. But that whole process is going to come
Speaker 1: in for another very vigorous round of scrutiny when they
Speaker 1: have a new plane that they're putting through. And so
Speaker 1: I think I think for Bowing there's a long long
Speaker 1: tail of of aftermath for this incident even after the
Speaker 1: plane is back in service, because I think that's a
Speaker 1: great question. I mean, I think, you know, whenever a
Speaker 1: company is going through crisis, you wonder about the culture
Speaker 1: within and whether or not the problem that allowed um
Speaker 1: this situation to occur has it been fixed? And I
Speaker 1: guess that's what we need to get to the bottom
Speaker 1: up with with Boeing, right, and I think there are
Speaker 1: a lot more questions coming in terms of last week,
Speaker 1: Boeing made a big change in management from placing their
Speaker 1: commercial airplanes chief. You know, it's an open question about
Speaker 1: whether other executives and other changes that Boeing are forthcoming
Speaker 1: after the Max is back in the air. You know,
Speaker 1: that doesn't mean that the end of the case for
Speaker 1: Bowing by any means. And of course, in addition to
Speaker 1: the management changes, we also got earnings from Bowing this
Speaker 1: week in A big part of their commentary was that
Speaker 1: they think this plane is going to be back in
Speaker 1: the air in the fourth quarter. They're actually ramping up
Speaker 1: their output and we know there's orders in the backlog.
Speaker 1: Do people still want the jet? Is that really that
Speaker 1: they are right to have that? Optimary Airlines right? Is
Speaker 1: it still in demand? Right, because it's been so important
Speaker 1: to Boeing. Yeah, it really is. We we hear all
Speaker 1: these headlines for this year, but but we also forget
Speaker 1: that this airplane was pretty revolutionary on the economics. Um
Speaker 1: you know, roughly less fuel burns. So if you're an
Speaker 1: airline operator, this this airplane is very much needed and
Speaker 1: you very much wanted to operate the way that it
Speaker 1: was you know, sold and purchased. You you bought this
Speaker 1: thing for a very clear economic reason, and you want
Speaker 1: to capitalize on that. Um. So the flight issues that's
Speaker 1: been a very big negative. But longer term, I mean
Speaker 1: airlines like Southwest, this is the core of that operation
Speaker 1: for many many years to come. So justin would you
Speaker 1: fly it tough question, I think. I think so it's
Speaker 1: it's it's one of those things that do you want
Speaker 1: to be the first one on it? And like we
Speaker 1: were saying before this, this airplane is so scrutinized, and
Speaker 1: you know that's the airplane that's probably the safest in
Speaker 1: the sky. So I don't think it's a question of
Speaker 1: does it fundamentally have problems? But I have talked with
Speaker 1: pilots who say there are certain places they won't fly it. Uh,
Speaker 1: they don't think pilot training standards are the same. So
Speaker 1: I think that's another issue that people will will have
Speaker 1: to grapple with. That's Justin Bakman, a reporter in Dallas
Speaker 1: with an update on Boeing this week and the latest
Speaker 1: on the seven thirty seven MAX. Safe to say is
Speaker 1: turning out to be the year of the streaming wars,
Speaker 1: no doubt about that. Let's get to Lucashaw knows all
Speaker 1: about this, he joins us from Los Angeles. Um, streaming
Speaker 1: wars is right. What we is in four new services
Speaker 1: coming online for new services coming online in a twelve
Speaker 1: month period. So we know that the three biggest right
Speaker 1: now our Netflix, Amazon and Hulu. Netflix far and away
Speaker 1: the largest, Amazon the second biggest and pure numbered terms,
Speaker 1: but in terms of users less clear because you get
Speaker 1: it for free with Prime and then and then Hulu third.
Speaker 1: In part that's only in the US. That's the new
Speaker 1: players are Apple TV Plus launching November one, Disney Plus
Speaker 1: launching November twelve, and then HBO Max and Casts Peacock
Speaker 1: will both debut sometime next year. The thinking on HBO
Speaker 1: Max is probably in the spring, with some testing before then,
Speaker 1: and Peacock just sometime before the Olympics in Tokyo next summer,
Speaker 1: and which one of these is going to be the
Speaker 1: most formidable opponent to Netflix, whether it's on pricing or
Speaker 1: on content. The perception among people in Hollywood at least,
Speaker 1: and I think on Wall Street, is that Disney Plus
Speaker 1: is the most formidable, uh in part because of its
Speaker 1: pricing six nine is quite affordable, and then just what
Speaker 1: it has. You know, Disney operates the most powerful movie
Speaker 1: studio in the world. It has these brands Pixar, Marvel, Lucasfilm,
Speaker 1: and Disney. That means a lot to customers, meet a
Speaker 1: lot to kids. And so the kind of the on
Speaker 1: ramp for Disney Plus seems quite easy. It's going to
Speaker 1: be very hard if you're a parent not to buy
Speaker 1: this just to save money a little bit, because you're
Speaker 1: probably having to rent or buy movies over and over
Speaker 1: again to show your kids. That being said, I am
Speaker 1: most interested, I think in HBO Max because Disney Plus
Speaker 1: could still be an additive to Netflix. It cheap, and
Speaker 1: it's targeted. It's not trying to be everything. You know,
Speaker 1: Netflix's enemy in a sense is cable. It wants to
Speaker 1: replace cable television with Internet television, and it have Netflix
Speaker 1: b the number one network Plus is a little bit
Speaker 1: more like a cable network in the traditional sense. You
Speaker 1: stick with that analogy and that metaphor because it's super
Speaker 1: serves a particular audience. HBO Max is the only one
Speaker 1: of these new services that is similarly trying to be
Speaker 1: all things to all people. And they also of a
Speaker 1: wide array of programming right from the get go. Yeah,
Speaker 1: HBO Max combines what you already get with HBO so
Speaker 1: Library of Sopranos, Game of Thrones, new shows like The
Speaker 1: Watchman and Catherine, the Great Show that's just come out.
Speaker 1: As well as that, you're going to fold in other
Speaker 1: programming from across what was once Time Warner now Warner
Speaker 1: Media and all part of the Phone Company, A T
Speaker 1: and T. That is that includes movies from Warner Brothers,
Speaker 1: so that's Aquaman, Harry Potter, all things like that. That
Speaker 1: includes Cartoon Network, That includes documentaries from CNN, that includes
Speaker 1: the Warner some projects from the Warner Brothers TV Library,
Speaker 1: which is the largest independent studio in Hollywood. So you're
Speaker 1: talking about friends, You're talking about the Big Bang Theory.
Speaker 1: I mean, there's just so much content out there. But
Speaker 1: the question is, are people willing to pay for four,
Speaker 1: maybe five streaming services to get to that content? I mean,
Speaker 1: is there room for everyone here? There's room for a
Speaker 1: lot of them. If it's everybody, I'm not sure, you know.
Speaker 1: Most research suggests, or when I when I talk to
Speaker 1: John Stinky, who's overseeing HBO Max for a p and T,
Speaker 1: their research suggests it at least that people are going
Speaker 1: to spend about a hundred dollars on TV. Some people
Speaker 1: are still paying for traditional cable. In fact, a lot
Speaker 1: of people are still paying for cable or satellite. The
Speaker 1: number is kind of in the eighty million rage maybe
Speaker 1: a little higher. That will continue to go down, but
Speaker 1: you still have a lot of people who want news, sports.
Speaker 1: But let's say people will pay for three or four services,
Speaker 1: maybe five if they have a lot of disposable income.
Speaker 1: That probably means Netflix, which is just built in Amazon
Speaker 1: which barely even counts in this, and then they'll probably
Speaker 1: add on a couple of others. So maybe that's Hulu
Speaker 1: with the Disney plus those two can be sold together.
Speaker 1: Maybe it's HBO Max. It's hard to see every single
Speaker 1: one of these serve. This is knocking it out of
Speaker 1: the park. Well, let's talk about two um that we
Speaker 1: haven't talked too much about, and that's Apple. Let's talk
Speaker 1: about them, and let's also talk about Comcast Peacocks. Start
Speaker 1: with Apple because they don't have a ton of programming
Speaker 1: um from the first day out, but they also do
Speaker 1: have a lot of subscribers are already and people using
Speaker 1: Apple devices. Yeah, Apple is the most unusual in that
Speaker 1: they are not if you are going to pay for
Speaker 1: TV Plus, which is the paid version of their service,
Speaker 1: you are only getting a handful of original series. I
Speaker 1: think that a lot of half a dozen on launch day.
Speaker 1: Uh you know, let's say they have a dozen by
Speaker 1: the end of the year. But most every every one
Speaker 1: of these other services is going to have originals as
Speaker 1: the thing to bring you in and then thousands of
Speaker 1: other titles that can satisfy you in between. Apple will
Speaker 1: not have that. But what Apple does happen as an
Speaker 1: advantage is the largest kind of the largest customer base
Speaker 1: almost from scratch, because you're gonna get Apple TV Plus
Speaker 1: for free for a year anytime you buy an Apple device.
Speaker 1: Apple sells two million devices in the year, so let's
Speaker 1: say a fifth a quarter to those people keep it
Speaker 1: after one year. Apple is automatically one of the biggest
Speaker 1: online TV networks in the world. Comcast Peacock is a
Speaker 1: is a different proposition. Comcast is the largest cable provider
Speaker 1: in the US and they're giving again customers Peacock for
Speaker 1: free if they are a PATV customer. Seems a little
Speaker 1: counterintuitives and from the full point of a lot of
Speaker 1: these stout services is for people who don't want cable.
Speaker 1: But I don't know. I think it's unclear what the
Speaker 1: full Comcast strategy is here. That's Lucas Shaw. He's our
Speaker 1: go to person when it comes to media and content.
Speaker 1: We caught up with him in Los Angeles. Get ready, everybody,
Speaker 1: because there's a lot of new streaming services could be
Speaker 1: great for the consumer. It's all coming in and for
Speaker 1: a look at the year ahead in politics and also
Speaker 1: Trump's scariest political opponent. Let's turn to Josh Green. He
Speaker 1: joins us now from our Washington bureau. So let's talk
Speaker 1: about it. What is it that President Trump really needs
Speaker 1: to be worried about when it comes to re election. Well,
Speaker 1: what he needs to worry about is the fact that
Speaker 1: the economy, by most forecast is trending in the wrong direction,
Speaker 1: and in particular, manufacturing is trending in the wrong direction
Speaker 1: in a recession. That is key in the group of
Speaker 1: swing states in the Upper Midwest that are probably going
Speaker 1: to decide the next election. Yeah, the demographics, the geographics
Speaker 1: are really important here. But when Trump considers that, is
Speaker 1: it too late for him to change the game, even
Speaker 1: if he were to InCor trade deal with China? Say,
Speaker 1: are we too far gone? Too much damage done? Well?
Speaker 1: I don't think so necessarily. I mean, the way I
Speaker 1: think about this, I break this into into two lanes.
Speaker 1: If you look at what Trump promised coming in during
Speaker 1: his first year as president, he promised four or five
Speaker 1: or even six percent growth across the economy. That's not
Speaker 1: going to happen. On the other hand, he he has
Speaker 1: had some positives. Unemployment is at a fifty year low.
Speaker 1: The stock market hasn't moved up a lot, but it's
Speaker 1: it's sort of trading water near all time highs. And
Speaker 1: he's managed to keep Republicans sentiment behind him even as
Speaker 1: he faces a slowing economy and impeachment. I think the
Speaker 1: big unknown in the people that I spoke to for
Speaker 1: this story was what are the effects of the trade
Speaker 1: war gonna be going forward. We're now seeing them bite
Speaker 1: into growth, bite into the economy, hurt state economies in
Speaker 1: states that Trump needs to win. However, there is still
Speaker 1: time to strike at least a modest trade deal with China,
Speaker 1: and I think if he were to do that, that
Speaker 1: could turn sentiment around in a way that would certainly
Speaker 1: benefit his re election choices. Yeah, Josh, what I love
Speaker 1: about it as you do break it down into kind
Speaker 1: of what happened right after he came into the White House,
Speaker 1: and you did see manufacturing jobs coming back. There was
Speaker 1: a lot of momentum. The tax cut certainly had an impact.
Speaker 1: But in the last year or so you've seen that
Speaker 1: kind of shift and as you say, those key states
Speaker 1: that he won last time around, um, it's gotten tougher
Speaker 1: in terms of some of the manufacturing jobs and some
Speaker 1: of those stories. That's right. If you if you go
Speaker 1: back and look at his turn from kind of a
Speaker 1: macro level, it's really interesting Trump delivered in his eighteen
Speaker 1: months two years, you had the stock market going up,
Speaker 1: you had manufacturing job growing is Jamie Diamond said in
Speaker 1: seen Trump had really succeeded in unleashing animal spirits partly
Speaker 1: because of his tax cut. The problem for Trump is
Speaker 1: that all that has stalled out, in large part due
Speaker 1: to the trade war that he started. So you have, uh,
Speaker 1: animal spirits have gone away. Companies aren't investing. We are
Speaker 1: now in a manufacturing recession, and that has hurt the
Speaker 1: economies and states like Wisconsin, Michigan, Pennsylvania where recent polls
Speaker 1: show all of the top Democrats Biden, Warren Sanders beating
Speaker 1: Trump and a head to head matchup. That is a
Speaker 1: flashing red warning signal for Trump as he looks ahead
Speaker 1: to the election. But again, there are bright spots. He's
Speaker 1: still got time to turn the ship around, uh and
Speaker 1: and pull another upset. But let's talk more about pulling
Speaker 1: and where exactly voters stand as to what kind of
Speaker 1: job they think the president has done. Are they still
Speaker 1: behind him? Do they still approve? Trump's approval has been
Speaker 1: room arkably consistent and about the forty percent approval, uh,
Speaker 1: you know, fifty two to fifty six disapproval. That's been
Speaker 1: true throughout everything, through the Muller investigation and now the
Speaker 1: impeachment drama. He has managed to keep. Most importantly, he's
Speaker 1: managed to keep Republican voters pretty much behind him. He's
Speaker 1: got a solid approval ratings, so as of now, his
Speaker 1: voters aren't abandoning him as we saw in ten. The
Speaker 1: electoral college I think favors of Republican candidate like Trump. Um,
Speaker 1: there are areas where he has to worry. He has
Speaker 1: lost enormous amounts of support among non college white women
Speaker 1: who are instrumental to his coalition in ten. Uh. He
Speaker 1: is driving away voters in the suburbs who I think
Speaker 1: are gonna be really important. But on the other hand,
Speaker 1: he's brought new people into the political process, so his
Speaker 1: campaign believes that they can excite voters who don't usually vote,
Speaker 1: who like Trump, who likes that he fights, likes what
Speaker 1: he stands for. It will be a test of whether
Speaker 1: he can turn out an enough Republican voters in two
Speaker 1: under to overcome what is undoubtedly going to be a
Speaker 1: blue wave of Democrats. But your story, Josh, a reminder
Speaker 1: with everything that's going on globally as well in the
Speaker 1: US and down in Washington, and we've seen this in
Speaker 1: past elections before, it is truly ultimately about the economy
Speaker 1: and how everybody feels come the next election. It really
Speaker 1: is if you look at the three presidents in the
Speaker 1: twentieth century who lost the re election races. All three
Speaker 1: of them were running in a recession and it costs
Speaker 1: them the election. Trump isn't there yet, but all forecasts
Speaker 1: show that things are trending in a bad direction. That's
Speaker 1: Josh Green. We caught up with him from Washington and
Speaker 1: just a reminder of that when it comes down to it,
Speaker 1: when everybody goes to the polls come next November, it's
Speaker 1: all about how good you feel about your job, your
Speaker 1: economic prospects. It's all about the economy. Concerns about companies
Speaker 1: becoming too big and too dominant might bring about the
Speaker 1: great antitrust reawakening. Jonah Sarah always gets us thinking, and
Speaker 1: he does that again with his article this week. I
Speaker 1: said to you before we got started, this is why
Speaker 1: I love reading your columns. You rem find us of
Speaker 1: what's happened in the past, bringing some history. So tell
Speaker 1: us about the great antitrust reawakening. What are we talking about, Well,
Speaker 1: we're talking about coming out of an antitrust slumber. Really
Speaker 1: um the last time, uh, the Department of Justice really
Speaker 1: went after a company tried to break it up with
Speaker 1: Microsoft twenty years ago, and since then and even before then,
Speaker 1: the anti trusts have been evolving into this thing where
Speaker 1: if if it didn't harm the consumer, if it didn't
Speaker 1: push up prices, the country said the legal profession and
Speaker 1: the court said it's okay. So now you've got Google,
Speaker 1: you've got Facebook, you've got Amazon, you've got other tech companies,
Speaker 1: and you have all this consolidation that's taken place. And
Speaker 1: people are saying, well, you can't use the consumer welfare
Speaker 1: standard for big tech because people are getting everything for free, right,
Speaker 1: And that's different, right, And that doesn't really get at
Speaker 1: get at its power and what it can do and
Speaker 1: what we should do about it. And so there's this
Speaker 1: whole movement um a lot of young economists but others
Speaker 1: as well, who are saying, we need to start thinking
Speaker 1: about anti trust in a different way. We need to
Speaker 1: kind of go back to the way we thought about
Speaker 1: it in the thirties and forties, where just bigness alone
Speaker 1: was a problem and we need to come up with
Speaker 1: a different set of solutions. Well, why is now the moment?
Speaker 1: Why why is this the year of the great reawakening
Speaker 1: on this? Well, I think there's two reasons. Um. One one,
Speaker 1: I think is the growing awareness of income inequality. And
Speaker 1: I know that may sound strange, but if you think
Speaker 1: about airlines, there used to be twenty airlines. Now there's four,
Speaker 1: and that gives them incredible pricing power, and it gives
Speaker 1: them incredible power over the labor force. So a lot
Speaker 1: of people are thinking, you know, maybe this had something
Speaker 1: to do with income into quality. The second reason has
Speaker 1: to do with all the problems Facebook in particular has
Speaker 1: had the privacy problems, the data problems, Cambridge Analytica the election.
Speaker 1: David Cecelini, who is the head of the House Anti
Speaker 1: Trust Up Committee, told me specifically he'd been thinking about
Speaker 1: these issues, but when Cambridge Analytica came on that the
Speaker 1: light bulb went on and said, you know, I'm in
Speaker 1: a position to do something. I gotta do something. Yeah,
Speaker 1: because it's interesting, like I love the history that you know,
Speaker 1: you remind us that government used to be suspicious a
Speaker 1: big companies, right, they were constantly on the watch, and
Speaker 1: then it kind of changed with that. Thinking about okay,
Speaker 1: our consumers harmed. GM used to say internally, we can't
Speaker 1: have market share over because if we have market share
Speaker 1: over forty, the government's going to come after us, and
Speaker 1: they'll try to break us up, and so we have
Speaker 1: to keep our market share contained. You know, Microsoft at
Speaker 1: his peak with Windows, they had a market share of
Speaker 1: percent exactly exactly. You know, we'll talk to us little
Speaker 1: bit about the Microsoft case and remind us because ultimately
Speaker 1: they lost initially and they were supposed to be broken up.
Speaker 1: That's right. The trial court judge who got very angry
Speaker 1: at Microsoft many times during that trial. Believe you me,
Speaker 1: I was there. He definitely concluded it should be broken up.
Speaker 1: The Windows part of the company should be one company,
Speaker 1: and the application his part were you know, Microsoft were
Speaker 1: and all that should be a different company. But um,
Speaker 1: he made a fatal mistake, which is that he was
Speaker 1: talking to the press behind the scenes the whole time,
Speaker 1: and when that came out, it gave the appeals court
Speaker 1: uh grounds to overturn his his verdict, and so the
Speaker 1: appeals court overturned it, and then the Bush administration came
Speaker 1: along and settled in a way that was, you know,
Speaker 1: slap on the wrist, but but nothing too heavy. But Joe,
Speaker 1: what's significant about this is that you say Microsoft became
Speaker 1: a different company as a result. Right, Microsoft was chastened
Speaker 1: by the trial, you know, watching Bill Gates on on
Speaker 1: on his deposition. I don't know if you remember where
Speaker 1: you know, you know, it depends on what I hate
Speaker 1: to find that and that, and then it was awful.
Speaker 1: They really became chasened. They wanted to be viewed as
Speaker 1: good corporate citizens again, and they realized that if they
Speaker 1: used the same techniques I Using Windows to squash a
Speaker 1: potential competitor, the government would go after them again. So
Speaker 1: they doing that. And let's remind everybody was about Netscape, right, No, no,
Speaker 1: what was that? What was wasn't it? It wasn't Escape.
Speaker 1: I was gonna say, Napster. No, it's not really around. No,
Speaker 1: Netscape has gone. But but Explorer, the Microsoft browser is
Speaker 1: not the dominant browser. There's Google Chrome, there's Safari, there's
Speaker 1: other other browsers. So the key thing is that because
Speaker 1: Microsoft was constrained, because it no longer could flex his
Speaker 1: muscles the way it used to, that really led to
Speaker 1: companies like Google and Facebook being able to rise because
Speaker 1: they didn't have to worry about this giant up in Redmond,
Speaker 1: Washington squashing them. Okay, well now they have to worry
Speaker 1: about not that on that side, But now the part
Speaker 1: the potential of them possibly getting broken up. And you
Speaker 1: kind of alluded to how this has become an issue
Speaker 1: in Democrats are focused on this, but is there kind
Speaker 1: of a bipartisan consensus that something needs to happen with
Speaker 1: these giants? Well, and I feel like Democrats and Republicans
Speaker 1: are both focused on it. Well, if you excuse me,
Speaker 1: the new senator from Missouri, Josh Holly, has been incredibly
Speaker 1: outspoken about the wrongs. What's what's wrong with the with
Speaker 1: with big tech. So that's one example. A lot of
Speaker 1: conservatives are concerned beating up on big tech because they
Speaker 1: think it's biased against conservatives. I don't really believe that,
Speaker 1: but it puts them of a mind to do something.
Speaker 1: I told you always give us things to think about,
Speaker 1: especially as we go in because this will be a
Speaker 1: major issue totally is going to be a big issue
Speaker 1: Washington campaign trail. So um, certainly something to think about,
Speaker 1: big time. Joe, Thank you so much. Thank you for
Speaker 1: having me. Kaylee Lines and I caught up with Matt
Speaker 1: Townsend about how the US economy is being supported by
Speaker 1: the U S consumer. Matt says it will be no different.
Speaker 1: You know, the US economy is always relied on consumer
Speaker 1: spending as a big chunk of the economy. Uh, you know, interesting,
Speaker 1: interesting status of the US economy is consumer spending in China.
Speaker 1: That just shows you how different it is. Um. But
Speaker 1: now the US economy is relying on consumers even more
Speaker 1: so because things like manufacturing are actually technically in contracts
Speaker 1: right now. They're cutting jobs, let's output. So it's the
Speaker 1: U S consumer and that's what's propping up the economy
Speaker 1: right now. Is the consumer feeling good still? To this
Speaker 1: point they are? And that's you know, one of these
Speaker 1: sort of counterintuitive aspects of the story is that broadly
Speaker 1: economists at the big banks you know, Goldman, Sachs, Morgan, Stanley,
Speaker 1: they do not see a recession coming next year. Um.
Speaker 1: The few bears on the case that sort of see
Speaker 1: one coming, they're basically pointing to consumers being hurt by
Speaker 1: some job losses and maybe slow down spending. But as
Speaker 1: of now, I mean, the sort of broadly speaking economists
Speaker 1: do not see recession coming, and largely because the US
Speaker 1: consumer is so strong. Well, that's what I love about
Speaker 1: your story, mat, is that you go through a bunch
Speaker 1: of the economic data points. I mean, consumers are optimistic. Right, Yeah,
Speaker 1: consumer confidence is you know, relatively, you know, at the
Speaker 1: highest levels in a decade, you know, since before the recession,
Speaker 1: which is remarkable considering how long this expansion has gone on, right,
Speaker 1: longest on record. We hit that over the summer, and
Speaker 1: yet the still optimistic. They're still optimistic. Um. You know,
Speaker 1: the data is showing more wage gains coming. You know,
Speaker 1: there's there's a stat called you know, if you look
Speaker 1: at a stat on job openings, you know, it's over
Speaker 1: seven million people. Over seven million jobs are open right now.
Speaker 1: So what does that mean. I mean, there's a big
Speaker 1: demand for labor all across the economy and people are
Speaker 1: able to either negotiate raises or leave for better jobs
Speaker 1: where they get raises. That's raising wages, um, sort of
Speaker 1: lifting up you know, the economic um fortunes of America.
Speaker 1: And you know, as long as that's happening, it's hard
Speaker 1: to see where this is going to change. How do
Speaker 1: you get to recession if you've got that going on
Speaker 1: right exactly? And you know, some of the cracks in
Speaker 1: the armor, so to speak, are housing, So housing prices
Speaker 1: have them going up has been a big boon to
Speaker 1: consumer spending because people are spending a lot more on
Speaker 1: their homes, and just think about all the things that
Speaker 1: means you're buying furniture, you're hiring contractors, and that is
Speaker 1: slowing down. Home sales gains are home prices are decelerating,
Speaker 1: and it's because of lack of demand, not lack of supply.
Speaker 1: It depends on the market, but they're there. In some markets,
Speaker 1: like you know, New York for example, the concern is
Speaker 1: too much supply is driving down the and you have
Speaker 1: more and more people renting rather than buying as well,
Speaker 1: right exactly. Um. And then you know things like healthcare
Speaker 1: costs if those keep going, if there's some sort of
Speaker 1: repeal of Obamacare, right, and all of some people have
Speaker 1: to pay more out of pocket for health insurance. Think
Speaker 1: about the people on Obamacare. Those are sort of the
Speaker 1: people in middle income, low income that could really stretch
Speaker 1: their wallets. Um. And then you know job growth. Job growth,
Speaker 1: while still positive, has slowed down. So you know, if
Speaker 1: you're a bear on the U S consumer, you see
Speaker 1: that continue to slow down, maybe the effects of the
Speaker 1: trade war, uncertainty about the economy, freezes of hiring decisions,
Speaker 1: and you see job growth slowing and slowing slowing, and
Speaker 1: that could you know, create a sort of cycle of
Speaker 1: people worried about the economy and maybe cutting back on
Speaker 1: investment spending well, and on those worries about the economy.
Speaker 1: I mean, we hear a lot here on Bloomberg from
Speaker 1: strategists talking about are we talking ourselves into a recession?
Speaker 1: Are we entering a slowdown? Is the consumers start to
Speaker 1: feel those jitters? The everyday person in America? Yeah, I
Speaker 1: mean it's interesting because consumer psychologies is obviously a big
Speaker 1: part of this. And if you think there's going to
Speaker 1: be a recession, do you take that big vacation, Do
Speaker 1: you put an addition on your house? Do you go
Speaker 1: out and buy a new car? No, especially if you're
Speaker 1: worried about your job, if you're if you're work for
Speaker 1: a company or in a sector that has made under pressure.
Speaker 1: There's been other companies laying off people. Maybe your companies
Speaker 1: had layoffs previously, that that could be what you know
Speaker 1: was quoted the story as a self fulfilling prophecy. I
Speaker 1: think there's going to be a recession. There for a
Speaker 1: recession comes because consumers pull back. It's so funny that
Speaker 1: you know, you look at the statistics about you know,
Speaker 1: consumer optimism, but I feel like I have so many
Speaker 1: conversations with people who are like, I don't have enough money.
Speaker 1: You know, it's really tight, I'm not getting wage increases,
Speaker 1: or I'm worried about my doublic You hear those conversations,
Speaker 1: and yet you see the statistics come out in the
Speaker 1: data and it shows optimism. Yeah there's something, Yeah, there's
Speaker 1: something going on there. Whether there's this dichotomy between what
Speaker 1: you hear from your friends and anecdotes and sort of
Speaker 1: this data shows No. Granted, consumer confidence isn't always necessarily
Speaker 1: the best measure to look at a lot of consumers
Speaker 1: maybe don't realize what's going on probably in the economy,
Speaker 1: or you know, certain pockets of the consumer world feel
Speaker 1: it differently. Well, and I thought it's interesting you watch
Speaker 1: the markets you talk about, you know, different stock sectors
Speaker 1: in their performance you talked about in terms of consumer
Speaker 1: discretionary to that, you see some of the discount retailers
Speaker 1: doing better when it comes to consumer shopping, and that
Speaker 1: can show that what consumers are a little worried made
Speaker 1: yeah exactly. I mean, you know what we saw on
Speaker 1: the Great Recession, right was people trading down so even
Speaker 1: trading down to dollar stores. So so you know Target
Speaker 1: wasn't doing as well because people were trading down to
Speaker 1: dollar stores to Walmart. And you know, the the opposite
Speaker 1: side of Walmart and Target doing well is they're doing well.
Speaker 1: But is it because more middle class, upper middle class
Speaker 1: shoppers are shopping them buying clothes necessities there instead of
Speaker 1: a department stores or higher in places. Right, We're seeing
Speaker 1: a lot of weakness in those aspects of retail, sort
Speaker 1: of the middle of the road. Think about Gap, think
Speaker 1: about Victoria's Secret, things like that, where they're pure discretionary spending, right,
Speaker 1: and those things are actually are not doing quite so
Speaker 1: well well in the pace of spending. This pace of
Speaker 1: spending growth rather, of course it is very important. Are
Speaker 1: there signs of it tapering down as we go into
Speaker 1: the holiday season and into Yeah, I mean the last
Speaker 1: month of the report wasn't positive and it was sort
Speaker 1: of a negative surprise. So but that's just one month,
Speaker 1: and you know there's potential variables there. That's Matt Townsend
Speaker 1: reminding us that the U. S. Consumer is so important
Speaker 1: to the current economy. It's going to be even more so.
Speaker 1: We're in a new era on many levels thanks to
Speaker 1: the pushback against globalization and the trade wars initiated by
Speaker 1: the US. One sector undergoing a great unwinding as a
Speaker 1: result is of course the chip sector. Right we see
Speaker 1: this big time Austin Cars here with more on the
Speaker 1: remapping of an industry. I mean, this is I really
Speaker 1: do wonder if we're gonna look back in time and say, Okay,
Speaker 1: this was a this was a moment in time in
Speaker 1: terms of the semiconductor industry. Absolute really. I mean the
Speaker 1: crazy thing about the semi conductor and chip market is
Speaker 1: you just don't realize how embedded it is to every
Speaker 1: single device we use. I mean, whether that's Windows, PCs,
Speaker 1: are iPhones, are Android tablets. All the little teeny parts
Speaker 1: that control memory and processing speed um all come from
Speaker 1: a global set of partners, mostly in Asia. Yet they
Speaker 1: power so many of the parts that we have here
Speaker 1: in the US. And so the big pivot, the big
Speaker 1: thing that we're focusing on in this Business Week story
Speaker 1: is whether or not there is going to be this
Speaker 1: great divide, great unwinding for a market that was heading
Speaker 1: toward more interconnectedness is now might be pulled apart and
Speaker 1: grate sort of a great firewall between China and the US. Yeah, well, okay,
Speaker 1: so they're in everything, but they aren't necessarily made everywhere.
Speaker 1: These things are heavily concentrated, So can you kind of
Speaker 1: map that out for us totally. One of the things
Speaker 1: that we highlight in the story is this big I
Speaker 1: P lawsuit that's coming up between Global Foundries, which is
Speaker 1: a semi conductor foundry, and these guys are always sing
Speaker 1: always Yeah, there's a back and forth. There's a lot
Speaker 1: of arguments about the legitimacy of these lawsuits. But what
Speaker 1: they wanted to highlight, what they're really playing up in
Speaker 1: this and finding reception on, is that not just that
Speaker 1: there's a growing corporate consolidation of these parts, but also regional. Uh.
Speaker 1: The company they're suing, t SMC, is based in Taiwan. Um.
Speaker 1: You know, according to Bloomberg Intelligence data, they owned about
Speaker 1: of outsourced chip production. That means basically, you know, a
Speaker 1: company that designs a chip but wants them to manufacture it,
Speaker 1: and that's massive that you know. Global Founders actually says
Speaker 1: for the more advanced chips, it's something like the bargain
Speaker 1: chair um. And so they're playing up the geopolitical concerns
Speaker 1: about this, just how concerns should we be that, you know,
Speaker 1: basically our iPhones couldn't run if we got cut off
Speaker 1: from that market, from that manufacturer, from that region. That's
Speaker 1: what they keep They kept referring to this company as
Speaker 1: being from Greater China, although they are from Taiwan. But
Speaker 1: they want to play into those geopolitical fears about the
Speaker 1: US China trade war right now. Well, and we've seen
Speaker 1: that play out right right. I mean, semi conductors have
Speaker 1: been a very volatile sector for basically the duration of
Speaker 1: this eighteen month long trade war because every trade headline,
Speaker 1: you know, semi conductors are so vulnerable to that, and
Speaker 1: a lot of the conversation has been, Okay, how do
Speaker 1: we then get the supply chains out of China? How
Speaker 1: do they really go about doing that? Where do they
Speaker 1: go and can they really do that that quickly? It's complicated.
Speaker 1: I mean Bloomberg Intelligence, one of the analysts that we
Speaker 1: had talked to just in terms of electronics manufacturing, said
Speaker 1: the immediate impact would be about nearly a third of
Speaker 1: electronics manufacturing would move out of China to places like
Speaker 1: get your head around that, Vietnam, uh India, U Taiwan elsewhere,
Speaker 1: which is a really compelling, uh you know, massive shift
Speaker 1: that the downside to that is that normally takes a
Speaker 1: couple of quarters, if not years to actually relocate some
Speaker 1: of those manufacturing centers, and also likely means that supply
Speaker 1: chain costs will go up. Component costs, depending on who
Speaker 1: you talked to, could go up quite materially, which have
Speaker 1: an uh impact on end customers. So this holiday season,
Speaker 1: you might not see prices raised, but you might see
Speaker 1: less discounts. That's one of the things I heard from
Speaker 1: from analysts, just because supply chain costs will go up.
Speaker 1: But the greater concern, I think is just that some
Speaker 1: of these companies are just having to find new suppliers
Speaker 1: or even create their own supply chains. Uh. Huawei being
Speaker 1: the major example in I know, because of these sort
Speaker 1: of corporate blacklist as well as teriffs that some people
Speaker 1: argue have been weaponized to a degree. Well, if you
Speaker 1: think about it, Huawei has been certainly a focal point
Speaker 1: for President Trump, right, and it's been really problematic for
Speaker 1: that company by having some of these bands put in place,
Speaker 1: and it really has created everyone kind of to rethink, Okay, now,
Speaker 1: maybe I need to be doing it in my backyard. Basically, Yeah,
Speaker 1: I mean, I think there is something something healthy about
Speaker 1: creating more competition. I think you want that in the
Speaker 1: market at the same time, sort of this you know,
Speaker 1: President Trump had tweeted recently in August just actually I
Speaker 1: think a couple of days before the the t SMC
Speaker 1: Global Foundaries lawsuit that he was hereby ordering US companies
Speaker 1: to find, you know, new new companies from manufacturers from China.
Speaker 1: It doesn't you know, work that way. Of course, you
Speaker 1: can't just order US tech companies to find uh new suppliers,
Speaker 1: in part because this stuff is incredibly different. This is
Speaker 1: precision manufacturing. You need a high skilled labor pool to
Speaker 1: actually do this stuff, and then you actually need the
Speaker 1: components that supply the silicon to to manufacturer. One of
Speaker 1: the things I've loved in your story is you, um,
Speaker 1: what would be kind of a really severe outcome and
Speaker 1: I'm just gonna take your words, a so called silicon
Speaker 1: curtain of country by country restrictions which could split up
Speaker 1: chip suppliers between Eastern and Western companies. We can can
Speaker 1: you know, constantly kind of talk about this of the
Speaker 1: world being split into right in terms of the US
Speaker 1: and its allies, and then maybe China and its allies,
Speaker 1: and that we could see in terms of chip production.
Speaker 1: You know what's interesting is, you know you often think
Speaker 1: about those in sort of militaristic terms. Certainly the technology
Speaker 1: that they might developing for their military is divided up
Speaker 1: between Eastern and Western companies. But now you're talking about
Speaker 1: consumer products. You know, we we have that the so
Speaker 1: called Great Firewall in China, where you traditionally thought of
Speaker 1: it as a software divide. You know, we use Facebook,
Speaker 1: they use we chad Um. You know, there's a very
Speaker 1: very strong divide between Allie pay and Venmo, let's say,
Speaker 1: But imagine bringing that to the hardware market, where suddenly
Speaker 1: you can actually get access to certain technology because it's
Speaker 1: only available in Asia, or you can't actually get access
Speaker 1: some U S phones because they're only available in Western countries.
Speaker 1: Think that's the big fear, and you wonder what happens
Speaker 1: to like global innovation as a result of it. That
Speaker 1: that's I think that you know, most of the analysts
Speaker 1: I talked to, we're not bullish about this. This wasn't
Speaker 1: like a healthy thing that they thought overall. They just
Speaker 1: thought it would slow the pace of innovation. One analysts
Speaker 1: actually told me that we could potentially paying more for
Speaker 1: devices that are actually worse than quality because we just
Speaker 1: don't have the best parts. And talk about the implications
Speaker 1: for five G two, because that's a big innovation. We've
Speaker 1: all been waiting for for it to come, but this
Speaker 1: can kind of set that back a bit absolutely. I
Speaker 1: mean it also complicates that This is actually as most
Speaker 1: analysts I talked to you told me, this was the
Speaker 1: one technology we finally agreed on. It was a universal standard.
Speaker 1: It's not like any other technology out there where we
Speaker 1: have different standards and different companies wanting to approach it.
Speaker 1: This was a universal thing and we were heading in
Speaker 1: that direction and suddenly we're unwinding it. So now there
Speaker 1: might be different network suppliers. There already are for Hua, Huawei,
Speaker 1: they're developing their own uh and other companies Unisak I
Speaker 1: think in China is also developing their own mobile chip
Speaker 1: set to compete in five G reportedly, and so that
Speaker 1: just you know whether or not it's a great unwinding
Speaker 1: or divide a silicon curtain. It is a great reshuffling
Speaker 1: I guess of the technology market. And is it too
Speaker 1: late if we get some kind of trade war resolution,
Speaker 1: this whole thing gets put to bed. Is this going
Speaker 1: to happen anyway? So far as I've been feels like yeah,
Speaker 1: I think. I think that there's a longer term impacts both. Um.
Speaker 1: You know, some of the analysts I talked to you
Speaker 1: just say you can't settle this the Yeah, the train
Speaker 1: has been put in motion. Um, but there's also other
Speaker 1: things that play, not just supply chain, but talent pool.
Speaker 1: And when you start relocating supply chains. Um, you know,
Speaker 1: these things don't happen overnight. So if you start building
Speaker 1: and semiconductor facilities cost fifty billion dollars to build, they
Speaker 1: take years and years and years to set up. So
Speaker 1: once you start putting this stuff in motion, I think
Speaker 1: there's complications that just can't be ended through one trade
Speaker 1: deal agreement. That's reporter Austin car We caught up with
Speaker 1: him in New York talking about the vulnerability is being
Speaker 1: exposed because of the U. S john A trade war
Speaker 1: and how it may be creating a remapping of the
Speaker 1: chip industry. It's been talked about and talked up for
Speaker 1: a long time. It's gone through a few iterations, cost
Speaker 1: a lot of money, and it is opening up this week,
Speaker 1: and Craig Giomona has followed the hopes and dreams, the
Speaker 1: trials and travails, and now the reality of the American dream.
Speaker 1: This story, I feel like it's its own little serious
Speaker 1: it is, and I think everybody from this area, especially
Speaker 1: from New Jersey, has seen this thing for close to
Speaker 1: twenty years. Right next to Giant Stadium, you know, the
Speaker 1: ski slope has been out there multi color on the highway.
Speaker 1: And it sounds like or seems like it's finally going
Speaker 1: to get open, which I think a lot of people
Speaker 1: never thought they'd see this day. I mean Governor Christie
Speaker 1: knocked it going back years and finial right, financial crisis
Speaker 1: really threw this off the rails the first time around,
Speaker 1: and now here we are finally about ready to get
Speaker 1: it open. Well, and tell us more about what exactly
Speaker 1: it is. You mentioned a ski sclope, but there's also
Speaker 1: a Nickelodeon theme part. What all does this project entail?
Speaker 1: You know they're calling it basically a retail entertainment complex.
Speaker 1: I think it's something like fifty percent entertainment retail. I
Speaker 1: mean it's a mall, right, but it's a lot more
Speaker 1: than a mall. In the traditional sense. I mean, you've
Speaker 1: got all your stores. There's gonna be luxury stores like
Speaker 1: our Maze and Sacks Fifth Avenue. Definitely high end though right,
Speaker 1: definitely high end. But you know, they also talk about
Speaker 1: Forever twenty one. So it's got sort of the standard
Speaker 1: go to mall stores you would expect. There's a lot
Speaker 1: of dining, a twenty restaurant, dining terrorists, and then there's
Speaker 1: all this other stuff. The water park, the hockey Rank,
Speaker 1: the ski slope. It's all opening kind of in phases.
Speaker 1: But you know, you hear a lot about experiential retail,
Speaker 1: right like the retail apocalyas. Nobody wants to shop at
Speaker 1: stores anymore. People want to shop online. It's much more convenient.
Speaker 1: The The argument has been that people will come out
Speaker 1: for something to do. They want to see the theme park,
Speaker 1: So are they going to shop at the gap? I
Speaker 1: mean maybe not, but they might walk by the gap
Speaker 1: on the way to the water park or a restaurant
Speaker 1: or whatever else it is, assuming they can get there
Speaker 1: and are willing to deal with the traffic. In northern
Speaker 1: New Jersey, it's a retail story, it's an entertainment story,
Speaker 1: it's an investment story. There's so many real estate story right,
Speaker 1: there's so many moving parts to this. Who's the who
Speaker 1: are the investors behind it? Let's get there right. So
Speaker 1: basically a company called Triple five Group, which is out
Speaker 1: of Canada, took this over in twentyven. They're the ones
Speaker 1: that really have gotten this over. The finish line. It's
Speaker 1: controlled by the Gramesean family, their billionaires. This is the
Speaker 1: family business. It's been around forever. But they weren't in
Speaker 1: there initially, were they They were not. They took this
Speaker 1: over in The big thing that they did was they
Speaker 1: got a one point seven billion dollar construction loan from
Speaker 1: JP Morgan and some other people. And you know, they
Speaker 1: have about that three billion, north of three billion into
Speaker 1: the project. The total is something like five but basically
Speaker 1: they have roughly three or so on the line here
Speaker 1: and basically betting on the future of malls. And one
Speaker 1: of the interesting interesting things that they also happen to
Speaker 1: own Mall of America and the West Edmonton Mall, which
Speaker 1: I think are the two largest malls in North America,
Speaker 1: and they have put up steak in each of those
Speaker 1: as collateral for the construction loan on this project. A
Speaker 1: lot on the line it is. And the reason why
Speaker 1: this came out is because officials up in Minnesota where
Speaker 1: Mall of America is. They found out basically because they're
Speaker 1: working on a water park with these guys next to
Speaker 1: Mall of America, and as part of the public disclosure process,
Speaker 1: these loan documents came out. But interesting bet that they've
Speaker 1: made putting up a big steak in their existing properties
Speaker 1: on this new mall project. Is it going to work?
Speaker 1: There's some skepticism for sure about the willingness of New
Speaker 1: Yorkers to get on a bus at Port Authority and
Speaker 1: go over to the Meadowlands on a Saturday. You know,
Speaker 1: our tourists gonna do this. I certainly think people will
Speaker 1: go to see it. The traffic over there is bad.
Speaker 1: Anybody that's gone to a jet or a Giant's game
Speaker 1: or a concert and MetLife Stadium knows it's not the
Speaker 1: easiest place to get to. It's like five miles from
Speaker 1: the Lincoln Tunnel. That five miles can take two hours
Speaker 1: if it's the wrong time of day. You know, if
Speaker 1: it's the middle of night, it's a fifteen minute drive.
Speaker 1: So how this all works on the transportation end of
Speaker 1: things will be interesting. They're really not doing anything besides
Speaker 1: special buses to get people there. So it's really a
Speaker 1: bet on the willingness of people to go over there
Speaker 1: and check out these crazy attractions that they've built. And
Speaker 1: they're betting four million people will go over there. Here,
Speaker 1: they're saying high number it does. They're saying forty million
Speaker 1: people annually. Look, I mean, New Jersey has a bunch
Speaker 1: of malls in Bergen County, and that part of the
Speaker 1: state some of the most traffic clouded roads in the nation.
Speaker 1: So I think it's it's wait and see. I think
Speaker 1: there's certainly a group of people that are going to
Speaker 1: go out there to take a look, right, because people
Speaker 1: are like that the novelty and just I can't sort
Speaker 1: of emphasize enough how much of a thing this has
Speaker 1: been in northern New Jersey for so long. I grew
Speaker 1: up in northern New Jersey, and I have to say
Speaker 1: it's funny. I was coming back from a trip this
Speaker 1: weekend and we were like, Okay, is there a giant game?
Speaker 1: Like we think about it New constantly because you don't
Speaker 1: want to be in that area because you can just
Speaker 1: sit for hours to kind of move around. So I
Speaker 1: do wonder about the transportation part of this. It's a
Speaker 1: big it's a big piece of it. Like I said,
Speaker 1: I think there's a lot of people that will go
Speaker 1: there if certainly wants to take a look. It's a
Speaker 1: new thing, it's the hot new story. Will they go
Speaker 1: back again and again? Are people going to make that
Speaker 1: their shopping destination? I mean that remains to be seen
Speaker 1: because look, there's fewer and fewer reasons to shop at
Speaker 1: a store every day. It gets better and better shopping online.
Speaker 1: What they're saying is theme park, all these attractions are
Speaker 1: the things that are going to bring people in. Well,
Speaker 1: I guess let's take an optimistic lens on it. Then
Speaker 1: if it does attract forty million visitors a year, is
Speaker 1: that a sign that this is now what it takes
Speaker 1: to drive foot traffic to traditional malls. That's certainly how
Speaker 1: people will look at it, because I mean, you hear
Speaker 1: a lot about the retail apocalypse, right and there are
Speaker 1: certainly dying malls out there, but they're older malls. You know,
Speaker 1: luxury high end malls have done pretty well. I mean
Speaker 1: I've been out in Guardens Date Plaza the last couple
Speaker 1: of Black Fridays. You know, reporting for the consumer team
Speaker 1: here at Bloomberg. It's crowded, right, I mean those people
Speaker 1: are they shopping at the Gap? Maybe not, but the
Speaker 1: Apple stores always packed, the Tesla stores packed, people are
Speaker 1: eating at the restaurant. So people still like to get
Speaker 1: out of the house, despite the fact that they might
Speaker 1: want to shop for their pants and their shirts online
Speaker 1: just because it's easier. But people do still want to
Speaker 1: do things. And in a large part of the country
Speaker 1: outside of New York City, people are still out in
Speaker 1: their cars on the weekends. So look, there's a chance
Speaker 1: for this to work. I think there's a lot of
Speaker 1: factors where people say, hi, I just wonder long term
Speaker 1: about the willingness of people to drive over there. That's
Speaker 1: Craig Giemona talking to us about the trials and tribulations,
Speaker 1: if you will, about the American Dream. It's been going
Speaker 1: on for decades. It's a retail story, that's a real
Speaker 1: estate story. There's so much to it, and folks, it's
Speaker 1: finally open. So in the Year Ahead issue, Hannah Elliot,
Speaker 1: who tracks all things high end transportation for us and
Speaker 1: is of course part of our Pursuits team, sat down
Speaker 1: with Diamond's chief design officer, and we always say she's
Speaker 1: got the best job because she really does. So tell
Speaker 1: us about who you talked with. So I spoke with
Speaker 1: Gordon Wagner, and he is a superstar in the car
Speaker 1: world for his designs. Of course, if you drive, if
Speaker 1: you drive basically any Mercedes these days, the C class,
Speaker 1: the E class, S class, all of the SUVs, UH,
Speaker 1: the A mg G Team Mercedes, which is their sports car,
Speaker 1: he's designed all of those. Um. So he's been very
Speaker 1: influential as for a long time there since a long
Speaker 1: time designer. But he's still pretty young. He's fifty one. UM.
Speaker 1: And he is also the one that's been doing these
Speaker 1: crazy conceptual cars that you may have seen like with
Speaker 1: my Box, Um he's done. If you follow him on Instagram,
Speaker 1: it's great because he'll put up photos of like taxi
Speaker 1: drones that are like flying devices that he's conceived. You
Speaker 1: know that possibly could happen. Um. But I spoke with
Speaker 1: him and he's great. We'll talk to us a bit
Speaker 1: about that because I thought that was interesting. I love
Speaker 1: concept cars because you do wonder about, okay, how much
Speaker 1: of this will ultimately be a reality. Yes, you kind
Speaker 1: of talked to him a little bit about that. Yeah,
Speaker 1: he's great to talk to because he looks like a
Speaker 1: very clean cut, you know, staunch type of German Man.
Speaker 1: But he's a really open, free thinker, and he basically says, look,
Speaker 1: I'm already living in the future here, and it's you know,
Speaker 1: it's not gonna happen next year, but within the next
Speaker 1: one of years, we can certainly expect to see flying
Speaker 1: taxi drones. And actually, if you think about it, planes
Speaker 1: are already using autopilot technologies to fly most of the time.
Speaker 1: So actually auto autopilot self driving vehicles are easier to
Speaker 1: do in the air than on the ground, right because
Speaker 1: we already used that. So that's kind of exciting. Is
Speaker 1: he's pretty convinced that kind of infrastructure and development is
Speaker 1: going to keep pace with all of these ideas we've had.
Speaker 1: I mean, a lot of the electron vehicles autopilot as
Speaker 1: we've seen, it's been kind of slow rolling. Doesn't expect
Speaker 1: that to accelerate, he he in the air, I mean,
Speaker 1: he's really kind of out there. He says, Look, it's
Speaker 1: easier to do in the air. The real thing, um
Speaker 1: is still consumer concerns about range anxiety, you know, that's
Speaker 1: still a real thing. Um. And then like legal issues, UM,
Speaker 1: infrastructure in general. We have all the technology, says, we
Speaker 1: have all the technology already. Basically, it's other things that
Speaker 1: are keeping us back, like consumer concerns, UM, you know,
Speaker 1: legality issues, insurance things, um, the price of building infrastructure
Speaker 1: that sort. Yeah. I thought that was important because I
Speaker 1: think I feel like we've been talking about you need
Speaker 1: the infrastructure there to make this really ramp up, and
Speaker 1: we've been talking about it for years. But he's right,
Speaker 1: it's still not there. No, it's not there. I mean,
Speaker 1: it's nice to think about these things, of course, but
Speaker 1: when it really comes to like this year, next year,
Speaker 1: the following year, we're not going to see flying cars
Speaker 1: in the next five or ten years. You know. It's
Speaker 1: it's it's happening and we can do it, um, but
Speaker 1: a lot of other things need to catch up first.
Speaker 1: I want to shift gears a little bit to sustainability
Speaker 1: because you asked him, point is sustainable luxury and oxymoron
Speaker 1: that was his answer. He immediately it was like, no, actually,
Speaker 1: the key of luxury is sustainability. He said, Look, luxury
Speaker 1: is is being admired by society for any number of
Speaker 1: things for your success, your intelligence, your wealth, whatever, um.
Speaker 1: And part of that admiration requires the responsibility to society,
Speaker 1: and sustainability is how you show the responsibility. If that
Speaker 1: makes sense. Yeah, he basically sayes, Look, if if luxury
Speaker 1: is going to continue, and it will, it has to
Speaker 1: go hand in hand with sustainability. Amazing, Yeah, I have it.
Speaker 1: Well you always think it is to fun places and
Speaker 1: to see fun cars. Um, Hannah, thank you. Thanks. In
Speaker 1: the year ahead, look at luxury, James Parmy checks out
Speaker 1: the galleries that are turning into museums. I'm like, wait, what,
Speaker 1: what's going on? Well, you know you're not the only
Speaker 1: person to have that reaction. Um. In in Chelsea, the
Speaker 1: New York neighborhood on the far west side of Manhattan,
Speaker 1: there are at least four different for profit art galleries
Speaker 1: that are at least the size of many midsized museums.
Speaker 1: And that's like thirty square feet, Like are huge, easily easily? Yeah.
Speaker 1: David's Werner is actually planning uh an exhibition space that
Speaker 1: has fifty square feet, which is the same amount of
Speaker 1: exhibition space. The Whitney has a few blocks down. So
Speaker 1: these are massive buildings. So why is this happening. Well,
Speaker 1: there are a lot of different reasons. Um, some people
Speaker 1: ascribe this sort of kind of constant competition with one
Speaker 1: another and I need to grow large and larger and larger,
Speaker 1: just in sort of needless expansion. But there are actually
Speaker 1: major economic forces at play here, and the primary one
Speaker 1: actually doesn't have to do with the viewing public. It
Speaker 1: has to do with galleries artists. So there are a
Speaker 1: finite number of blue chip artists out there and artists
Speaker 1: states out there, and galleries want those artists to states
Speaker 1: to stick with them, and there's usually nothing binding them
Speaker 1: these artists to go with one gallery another. So they're
Speaker 1: creating museum quality spaces for these artists to induce them
Speaker 1: to stay. And it's not just about size. I mean,
Speaker 1: they're doing a lot of other things emulating museums beyond
Speaker 1: just you know, having really big spaces. That's exactly gerience,
Speaker 1: right exactly. So you know, galleries have always put on
Speaker 1: shows that are in whatever way noncommercial. You know, they'll
Speaker 1: get loans from museums or private collections or foundations and
Speaker 1: they'll do these pretty academic shows. They hire curators, they
Speaker 1: hire real art historians, and they put them on but
Speaker 1: now that these galleries are growing larger and larger and larger,
Speaker 1: that means that they have more and more space to
Speaker 1: do these quite museum quality exhibitions. Well, and it's interesting,
Speaker 1: I think I was going through the list. They have cafes,
Speaker 1: exhibition spaces, events schedules, curators, book publishing, arms, bars importantly. Yeah,
Speaker 1: and you know, for instance, Pace Gallery, which just opened
Speaker 1: a seventy five thousand square foot gallery massive um in Chelsea,
Speaker 1: UM has hired museum curators to put together public performance
Speaker 1: schedules UM that are taking place in this absolutely beautiful natural,
Speaker 1: skylit space UM where anyone can go. And that is
Speaker 1: what a museum does. So help me out here because
Speaker 1: I was thinking about when I read this, I mean
Speaker 1: massive spaces. It's expensive real estate. I mean is it
Speaker 1: financially I mean they're in a business, right a gallery,
Speaker 1: are they? Is it financially paying off for them? It
Speaker 1: seems to UM usually wouldn't be doing it right, well,
Speaker 1: they wouldn't be doing it, but they might be doing
Speaker 1: it as a loss leader. You know, we don't actually
Speaker 1: have these are private enterprises, so we don't have a
Speaker 1: look at their books, so we can only speculate what
Speaker 1: do they tell you that. So they they say that
Speaker 1: it absolutely makes sense for their business because one, when
Speaker 1: they have hundreds of thousands of people coming through the door,
Speaker 1: it creates a buzz that you just can't buy otherwise.
Speaker 1: And collectors want to be part of whatever they perceive
Speaker 1: of a de zeitgeist. And if you have lines of
Speaker 1: people going down the block, but you're ushered in and
Speaker 1: invited to see this thing that everyone is desperate to see,
Speaker 1: obviously that has an impact on the perception that these
Speaker 1: works are valuable. Exactly. So are the galleries the big
Speaker 1: winners here or is it just art levers because you
Speaker 1: can get into these galleries for free, unlike a lot
Speaker 1: of museums. Well that's the excellent point, so museums. But
Speaker 1: it's true though museums cost twenty dollars a ticket, and
Speaker 1: that means a family of four, let's say a bull
Speaker 1: with two eighteen year old kids, that family is going
Speaker 1: to be paying a hundred dollars to see art at
Speaker 1: the Whitney, as opposed to anyone and whoever they want
Speaker 1: can just waltz in. It's a free art dealing experience.
Speaker 1: And that's why Chelsea and all of these galleries and
Speaker 1: London and Los Angeles anywhere. That's why they're also wonderful
Speaker 1: because you get to have these totally gratis art experiences.
Speaker 1: But now that these museums are actually rivaling midsize now
Speaker 1: that these galleries arrivaling midsize museums, now you're having a
Speaker 1: free museum experience. And so quite right, everyone benefits except
Speaker 1: possibly the competition, which is to a museums themselves. So
Speaker 1: what I mean, are you hearing any kind of rumblings
Speaker 1: from the museums, um, in terms of you know, they've
Speaker 1: got to be watching this, they are. You know, there's
Speaker 1: certainly a level of skepticism. And I say this only anecdotally.
Speaker 1: I you know, haven't had official comment from any museum representatives. UM.
Speaker 1: I will say that museums and galleries have an extremely
Speaker 1: symbiotic relationship. Museums oftentimes rely on galleries to partially fund
Speaker 1: the shows of contemporary artists. So UM, it's certainly not
Speaker 1: clear cut adversarial or clear cut purely beneficial relationship. I
Speaker 1: gotta say, one of my favorite things about New York
Speaker 1: has always been like wandering downtown and you just see,
Speaker 1: you never know where stumble into or something an event
Speaker 1: going on, and you can I mean sometimes you can
Speaker 1: wander and sometimes you have to be asked, but you know, well,
Speaker 1: you know, that's actually also hits on this very interesting question,
Speaker 1: which is to say how people feel when they're just
Speaker 1: coming in off the street. And for a very long time,
Speaker 1: art galleries felt pretty imposing. I would say to the
Speaker 1: average art lover, who or maybe an average art lover,
Speaker 1: maybe maybe even if you don't love it, maybe if
Speaker 1: you're just casually interested, there's it's not necessarily a warm,
Speaker 1: fuzzy place. And the other part of this growth of
Speaker 1: galleries is that they don't really want these massive buildings
Speaker 1: to be empty. They want people inside, and so to
Speaker 1: that end, they're becoming much more user friendly. Really um well,
Speaker 1: and I'm sure size for the person viewing the art. Also,
Speaker 1: because I've walked into galleries before, I'm the only person
Speaker 1: in there. I feel like I have to be quiet
Speaker 1: as a mouse. And to your point, it's a little
Speaker 1: bit of an uncomfortable experience. And when you're in more
Speaker 1: of a museum type space with a lot of other
Speaker 1: people around you, I could see how that makes a
Speaker 1: little bit more enticing, and that's what it should be.
Speaker 1: You know, art is approachable, or at least it should
Speaker 1: be approachable, and it should be something that you can
Speaker 1: engage with and have fun with and deal with. You know,
Speaker 1: a lot of this art is not meant to be imposing,
Speaker 1: and so in a sense this is potentially a very
Speaker 1: positive development for everyone, especially if you're putting a bar
Speaker 1: in a gallery. It sounds like a fun thing to do. Um,
Speaker 1: James Tarmy, You're always fun. Thank thank you so much
Speaker 1: for having me. And that wraps up Bloomberg Business Week's
Speaker 1: weekend podcast. I'm Carol Masser along with Kaylee Lines. Thanks
Speaker 1: so much for joining us. Be sure to it into
Speaker 1: Bloomberg Business Week Radio with Jason Kelly and myself live
Speaker 1: Monday through Friday starting at two pm Wall Street Time.
Speaker 1: And if you can't catch us live, check out our
Speaker 1: daily podcast for the ride home. Find it at iTunes, SoundCloud,
Speaker 1: and of course at Bloomberg dot com. You can get
Speaker 1: this week's edition of the magazine that is on newstands now.
Speaker 1: We'll be back next week at the same time. This
Speaker 1: is Bloomberg