Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg We
Speaker 1: begin with the top story, A big question. Is Washington's
Speaker 1: trade war with Beijing go on a potentially irreversible course.
Speaker 1: The Treasury Department is planning to heighten scrutiny of Chinese
Speaker 1: investments in sensitive US industries under an emergency law. Prepared
Speaker 1: to hear a whole lot more about this story through
Speaker 1: the week. We can begin by heading over to Ways
Speaker 1: and catching up with and acar In, our chief Asia
Speaker 1: economics correspondent for Bloomberg News. And I'm really pleased to
Speaker 1: say he's joined with us late in the evening over
Speaker 1: in Hong Kong. So and the great to have you
Speaker 1: with us on the program this morning here in New York.
Speaker 1: Get us up to Spain and what's about to happen
Speaker 1: this week. So it looks like Jonathan, at the very least,
Speaker 1: the US are going to step up their scrutiny of
Speaker 1: Chinese investment in the US itself. Now this matter is
Speaker 1: because it goes to the heart of the U s
Speaker 1: conterterns concerns about China's future industrial strategy. Remember, China wants
Speaker 1: to create this high tech world leading economy and technology
Speaker 1: with a little help from the state, and the US
Speaker 1: is going to please about it. But for China to
Speaker 1: do that, they of course need to source a lot
Speaker 1: of technology from the US itself. So it seems like
Speaker 1: the US are going to block office channel of the
Speaker 1: U of Chinese companies buying big tech companies are buying
Speaker 1: their components from the US at the very least, trying
Speaker 1: to slow down at that advancement. So I think it
Speaker 1: illustrates that this trade spat is getting ever deeper by
Speaker 1: the week. So we've got the external pressures on the Chinese,
Speaker 1: we've got the internal pressures they're responding to as well.
Speaker 1: And to what extent was the triple our cut the
Speaker 1: reserve requirement ratio cut over the weekend to address the
Speaker 1: softer on his economy. Yeah, I think benefit of the
Speaker 1: doubt in this one. I think it was more driven
Speaker 1: by domestic issues, Jonathan, rather than external per se. They
Speaker 1: have been saying for some time now that smaller companies
Speaker 1: medium sized companies are facing higher boring costs. It's not
Speaker 1: that they're explicitly easing policy are looking to juice up
Speaker 1: growth overall. It's a fairly targeted, modest to measure. But
Speaker 1: at the same time, though, it's hard to completely ignore
Speaker 1: the broader macro backdrop of a slowing Chinese economy at
Speaker 1: the same time that the trade tensions are getting ever worse.
Speaker 1: So it's an indication that the policy makers are ready
Speaker 1: and willing to active need be. And there's a Harley
Speaker 1: Davidson's store. You know, if you're on the Boon and
Speaker 1: you go back towards where the residential sections are in Shanghai,
Speaker 1: I'm going to butcher the pronunciation, but near put to Oh,
Speaker 1: there's one of three Harley Davidson's stores in Shanghai. So
Speaker 1: is the basic theme here They're gonna stop selling Harley Davidson's. Well.
Speaker 1: The US companies operating in China are considered the vulnerable
Speaker 1: in all of this, Tom, There's no doubt about it.
Speaker 1: And the auto sector especially you mentioned motor bike sector
Speaker 1: especially is vulnerable because GM and Ford have expanded big
Speaker 1: plants across China. Tesla wants to Tesla wants to set
Speaker 1: up a big, big manufacturing plant in China. So if
Speaker 1: the trade tension, to read the point, reach a point
Speaker 1: where China is striking back, well, then life will be
Speaker 1: made a lot more awkward for those you has companies,
Speaker 1: including Harley and the Current. We've gotta let you run.
Speaker 1: So thank you very much for joining the program later
Speaker 1: on in Hong Kong to get us up to speed
Speaker 1: on what is happening in China. Sonny Krasinski, I'm ready
Speaker 1: placed to say joined us in the New York studio.
Speaker 1: But Pimco's executive vice president and market strategist Tony can
Speaker 1: you imagine that Tom and a Harley, Well, I have
Speaker 1: a honder if he wants to take a ride, but
Speaker 1: it's a dirt bike, I wouldn't be really yeah like
Speaker 1: it since my youth. It's the thing, one of my
Speaker 1: things on Staten Island at least, But there's less and
Speaker 1: less land to ride on. Very cool, very cool. Let's
Speaker 1: talk about China. I haven't really heard many people talking
Speaker 1: about a slower Chinese economy. You lays a focused on
Speaker 1: that at the moment. Yes, it matters a lot. Global
Speaker 1: nominal GDP this year will be in the low sixes.
Speaker 1: It matters. It means double digit earnings growth for global corporations,
Speaker 1: which is supportive of the equity markets and the credit markets,
Speaker 1: and it's uh it's vitally important for those assets. I
Speaker 1: think of China's economy's thirteen trillion in size grows near
Speaker 1: seven percent, so it's near nine billions of new GDP
Speaker 1: for the world. What does the U S economy grow
Speaker 1: at low two's twenty trillion dollar economy about half a
Speaker 1: little more than half the amount of China's growth in GDP.
Speaker 1: So the major contribution to world GDP growth is China.
Speaker 1: When you think of the various things that have happened
Speaker 1: in recent years, the stabilizing force has been China's China
Speaker 1: and its economy, So it matters a lot. What we
Speaker 1: are looking at, of course, is that these are these
Speaker 1: trade tensions small so far. Think of the fifth the
Speaker 1: tariff of put on fifty billions of goods. What is
Speaker 1: that billion dollars of price change for US consumers peanuts
Speaker 1: to a global economy that this year will grow about
Speaker 1: ninety five trillion dollars. And to put in perspective for
Speaker 1: a long term investor, think of the next three years,
Speaker 1: three trillion dollars of world gdp uh and these tariffs
Speaker 1: are you can't even mentioning. How do you respond to
Speaker 1: the fact that China has so much of our marginal growth.
Speaker 1: It's not It is for the world, but not of
Speaker 1: course the United States. And that's Donald Trump's issue. He
Speaker 1: wants to see China buy more from US. China purchases
Speaker 1: about one fifty billion dollars of goods from US each year,
Speaker 1: but we buy about US Americans five So we're not
Speaker 1: getting These policies are not going to lead to boosted
Speaker 1: US exports, are they? They're not likely to, but they
Speaker 1: probably actually they will, but the magnitude won't be great.
Speaker 1: There will be more of this soul than that salt.
Speaker 1: And if these trade tensions side, what are you watching
Speaker 1: in the short term market? When you walk in the door,
Speaker 1: you've got three log in Bloomberg's, you've got twelve screens.
Speaker 1: What do you look at when you when you walk
Speaker 1: into the well? The initials? Of course, any money market
Speaker 1: trader was interested in where repo is for the day.
Speaker 1: Where it is that large investors are putting the money overnight,
Speaker 1: and that's un England. But in the well, I'm not
Speaker 1: looking because it'll the mother nation Italy is not in it,
Speaker 1: So I'm not tough times. It's tough times, but we
Speaker 1: look more when we think about the money market more generally,
Speaker 1: we're thinking of where is it that the market thinks
Speaker 1: the path will be for the federal funds rate, the
Speaker 1: FEDS policy rate? Is it changing that would only happen glacially,
Speaker 1: meaning it we take a lot of data and new
Speaker 1: information to change the markets. For you on where the
Speaker 1: federal angry with its path? What is that data that
Speaker 1: you're going to glee? What what do you want to
Speaker 1: see that will allow you to know what German deal
Speaker 1: is going to do? The catalyst would be a change
Speaker 1: in inflation. He essentially in the last press conference after
Speaker 1: the last f O m C meeting, the Fed's policy
Speaker 1: meeting tossed out nairu, meaning where the Fed thinks inflation
Speaker 1: won't accelerate anymore, the job is raised three percent. Typically,
Speaker 1: an economist historically would say, well, job is rates low
Speaker 1: three point eight, but anything below x would mean higher
Speaker 1: inflation rate. That hasn't happened. So we watched John Tucker.
Speaker 1: You'll know this, Tony KRESSENDSI with his dirt bike when
Speaker 1: he when he was a kid on Staten Island. They
Speaker 1: went out pass Western Avenue to the container turn. He
Speaker 1: tried to do the Evil Kanevil, but evil Kanevil toy.
Speaker 1: He wind him up and he jump anything. To the
Speaker 1: few places in New York City you can actually ride
Speaker 1: a dirt bike. I didn't know that. I like to
Speaker 1: do donuts and wheelies and go through over the Grant
Speaker 1: ramps like parents just said, you're not going over the
Speaker 1: Elizabeth Port as long as I stay off as Pimcock
Speaker 1: got a special insurance plan for It's funny. We don't
Speaker 1: thought too fast doing a doughnut in the dirt. So
Speaker 1: I think we'll see Sonny CHRISTENTI gray to have you
Speaker 1: with us. What's Italy need to do to get back
Speaker 1: into the World Cup? Is it like youth organization thing
Speaker 1: they need to do? Yes, we have need to invest
Speaker 1: in human capital. Jeffrey Dennas with us would ubs out
Speaker 1: of Boston this morning. On a merging market, jeff, how
Speaker 1: do you define dollars strength? Is it through d x
Speaker 1: Y that blended trading number? Is there a certain currency
Speaker 1: pair that you're watching that was your indication of future
Speaker 1: dollar strength. We tend to follow dollar euro as being
Speaker 1: the best indicator could have quit dollar strength. But of
Speaker 1: course technically you're right, Tom that you should be looking
Speaker 1: at the dollar trade wag. But I think the world
Speaker 1: will tends to look at as I say, dollar euros.
Speaker 1: Your your best indicators don't really mean by dollar strength,
Speaker 1: but that the dollar euro euro dollar rather doesn't have
Speaker 1: em and it doesn't. No, no, no, But I think
Speaker 1: the point the point obviously as far as the virgin
Speaker 1: market to concern, we have our own way of looking
Speaker 1: at it because we compare the emerging market indexting dollars
Speaker 1: with the emerging index and local currency, and that gives
Speaker 1: you a measure of EM currencies overall. But if the
Speaker 1: question was about what the generalized trend in in and
Speaker 1: then the dollar is around the world, I think the
Speaker 1: best way to read that in terms of his money
Speaker 1: coming into the U S Dollar out of the US
Speaker 1: dollar is versus the euro. How reliable is this CFTC
Speaker 1: data Just to get a broader sort of idea of
Speaker 1: what's having in the FX market in terms of positioning, Jeff,
Speaker 1: and what have we learned over the last week? Well,
Speaker 1: I mean this is this sort of position. Data is
Speaker 1: the sort of thing that you know, it's it's as
Speaker 1: good we've got, so we probably try to use it
Speaker 1: as best as we can, even though of course it's
Speaker 1: it's not perfect. But you know, when when something is
Speaker 1: there and you don't have much alternative, you tend to
Speaker 1: use that as a as an idea. I mean, I
Speaker 1: think what we would be we were beginning to think
Speaker 1: that the dollar strength was beginning to run out of
Speaker 1: steam a little bit um, you know, around the one
Speaker 1: level against the euro. I think probably there is a
Speaker 1: little bit of a reduction at the margin in terms
Speaker 1: of dollar longs going on over the last couple of weeks,
Speaker 1: because the dollar has started to flatten out. But the
Speaker 1: point is you're not seeing people going along the euro yet,
Speaker 1: let alone of course long emerging my occurrences which you
Speaker 1: would need to see as as you know, as the
Speaker 1: equivalent or they couldn't moved to it to a week
Speaker 1: of dollar going forward. So dollar may be peaking, I'm
Speaker 1: not sure it's going down yet. Well, that's what I
Speaker 1: was going to last Jeff. I mean, in the initial phase,
Speaker 1: you get the unwinding of the shorts, the capitulation of
Speaker 1: the shorts, and then you start a question whether we
Speaker 1: can build fundamental longs here on the US dollar. Have
Speaker 1: we even reached that phase where people are really building
Speaker 1: long term fundamental longs in the U S. Dollar. Oh,
Speaker 1: I suspect they are. I mean, clearly, if you go
Speaker 1: back to the early part of the year when dollar
Speaker 1: euros at one five, briefly everyone was long euro. That's
Speaker 1: now unwind itself. I think people have moved along dollar
Speaker 1: because the U. S. Economy has been so strong and
Speaker 1: Europe has been has been disappointing. So I think from
Speaker 1: a technical point of view, all this is above my
Speaker 1: pay grade. From a technical point of view, my guess
Speaker 1: is that the market is slightly long dollar. Our view
Speaker 1: is the dollar is fundamentally overvalued. Our view is the
Speaker 1: fattest broadly priced in Now. We think gradually the ECB
Speaker 1: is going to withdraw excessive stimulus. They're going to start
Speaker 1: to raise rates probably in the third quarter of next year.
Speaker 1: And the blip of the European economies in the first
Speaker 1: quarter was probably just a blip, and we see decent
Speaker 1: growth going forward. Those are all the reasons why ultimately
Speaker 1: we would be sellers of the dollar, not buys of
Speaker 1: the dollar. But obviously, frankly the market is trying to
Speaker 1: work out which way we go from here. What about
Speaker 1: EM equities, I mean the ever run, I mean they
Speaker 1: do what they do there, I guess there. You know,
Speaker 1: they're uh, the cyclical and they down down, down, they
Speaker 1: go up. What about now, Jeff, Well, we're we're inclined
Speaker 1: to be positive from here, even though there's a flood
Speaker 1: of negative news at the moment. The reason we're inclined
Speaker 1: to be positive is partly because of our of that
Speaker 1: dollar view. We expect to see um, you know, the
Speaker 1: dollar going lower that will start to push money back
Speaker 1: towards the emerging markets going forward. We've made the comment
Speaker 1: to people that in fact, the fundamental damage to the
Speaker 1: after class from the sell off recently has not been
Speaker 1: that great. We've seen very little in the way of
Speaker 1: global I'm sorry, of of economic growth downgrades in EM
Speaker 1: We've cut Brazil with cut South Africa and Ansia a
Speaker 1: little bit, but you're not seeing broad downgrades. Also, earnings
Speaker 1: numbers are holding up pretty well, and that means some
Speaker 1: valuation opportunities have opened up in them. But the key
Speaker 1: from here is are we anywhere near right as far
Speaker 1: as the dollars concerned. And now I think we've got
Speaker 1: to worry about what the impact of this trade rhetoric
Speaker 1: and the ratch ng up of this trade action will
Speaker 1: have on the Chinese economy. And I think that's all
Speaker 1: people are worrying about today. With the cutting reserve requires
Speaker 1: doesn't mean the Chinese economy is weaker than we all think.
Speaker 1: If the Chinese is going to be a a word, a
Speaker 1: weak and significantly that was, that would would have put
Speaker 1: downward pressure on the Chinese currency. That would be a
Speaker 1: reason why people would hold off from buying a mergant
Speaker 1: markets merge market equities at this point in time. So, Jeffy,
Speaker 1: you see in the weakness in the currency, and you
Speaker 1: see a Chinese establishment are beginning to use the ex
Speaker 1: channel as a policy tool to address the softening that
Speaker 1: we're seeing in the economy. I don't think so. I
Speaker 1: think you assume the currency move today is in reaction
Speaker 1: to the reserve requirement cuts. I think what you've got
Speaker 1: to assume is the reserve requirement cut is partly a
Speaker 1: response to the concerns over the economy slowing down at
Speaker 1: the second quarter, and of course the potential impact down
Speaker 1: the road of trade action from the US on the
Speaker 1: Chinese economy. Although to be fair, our economists have argued
Speaker 1: all the year that you will see some liquidity injection
Speaker 1: into the economy from the Chinese authorities through lower reserve crimes.
Speaker 1: Have not been looking for a rape cut, So in
Speaker 1: some sense this is actually pretty much what what was expected.
Speaker 1: But I think what's happening here is is causing the
Speaker 1: market to worry about Chinese growth, and it's that that's
Speaker 1: bringing the currency down, and there's no sign whatsoever of
Speaker 1: the Chinese authorities wanting to use the current directly as
Speaker 1: a weapon if you like to to find the impact
Speaker 1: of of a U S trade war. Jeff dons very
Speaker 1: quickly her Eastern Europe. It's something John and I have
Speaker 1: been remissing talking about with the focus on Pacific room
Speaker 1: trade wards Eastern Europe. Where is the opportunity there, without
Speaker 1: any question. We we like Polish equities, we like Hungarian equities,
Speaker 1: are both very small markets, especially Hungary, But at the
Speaker 1: point there is that these economies are very closely tied
Speaker 1: to Europe, and we think what you saw in the
Speaker 1: first quarter weak to European growth is almost certainly temporary. Also,
Speaker 1: currency that current you tend to go double wamy in
Speaker 1: both directions on the currency that when the Euro starts
Speaker 1: to go back up again against the dollar, which is
Speaker 1: all longer term view, the best metters these currencies will
Speaker 1: even appreciate again the Euro itself. The Poland for example,
Speaker 1: is growing it over four. We like the market had
Speaker 1: a tough start to the year. We think there are
Speaker 1: opportunities they're going forward. Thank you so much, Jeff Don's
Speaker 1: greatly appreciate it. With ubs em Primer today. This is
Speaker 1: a joy. Deverora Lair with us who was with the
Speaker 1: Paulson Institute as a vice chairman, and Deborah Lair brings
Speaker 1: a really interesting and nuanced thinking to this relationship Secretary
Speaker 1: Paulson has done of America and China. Deborah, I want
Speaker 1: to go to your Twitter feed where you retweet Eric
Speaker 1: Fish with a Reuter's story, and this has been something
Speaker 1: in my mind. It comes off Elizabeth Economies work at
Speaker 1: the Council on Foreign Relations, Does the President and does
Speaker 1: all of America understand that China is heading towards She
Speaker 1: thought that there's going to be a new almost zeitgeist
Speaker 1: that permeates Chinese politics. Well, that's really an excellent question.
Speaker 1: I don't think probably all of America understands, but I
Speaker 1: think there's a concern within the administration and this is
Speaker 1: part of what's driving I think the use of National
Speaker 1: Security UM legislation or policies to look at economic security
Speaker 1: and seeing the two because of these concerns. For example,
Speaker 1: President she shared a very important meeting this past week
Speaker 1: on foreign policy and was outlining a very aggressive foreign
Speaker 1: policy that has internationally and domestic implications. Secretary Paulson's heritage
Speaker 1: at Treasury and where the Posti Institute has been to
Speaker 1: speak to China to develop a dialogue. I literally was
Speaker 1: with him the day this start. I can't recall the event,
Speaker 1: but it was a Treasury event in Washington where he
Speaker 1: really tried to jump start a discussion. Has that been destroyed?
Speaker 1: Has been the Paulson initiative of eight nine years ago?
Speaker 1: Is it? Is it just gone well in its current form? Yes.
Speaker 1: I mean that we started the Strategic Economic Dialogue as
Speaker 1: a way to fit within China's decision making process so
Speaker 1: that we could get basic agreement on some of the
Speaker 1: big issues that would be facing the United States in China,
Speaker 1: and once they had the guidance from the top, it
Speaker 1: would be much easier at the working level to sort
Speaker 1: out the details. At this stage, most of the dialogue
Speaker 1: appears to be occurring at the cabinet secretary level to
Speaker 1: the vice premiers in China, with literally at working level,
Speaker 1: well to Richard McGregor's working the Communist Party. Is it
Speaker 1: a new Communist party? Is president she really running a
Speaker 1: not a reaffirmation of MAO. I think that's too simplistic.
Speaker 1: But is it a reaffirmation of a stronger dominant Communist Party?
Speaker 1: Whatever American elites think. Well, certainly Richard McGregor's book really
Speaker 1: was excellent and still is very relevant today. The what
Speaker 1: what She's biggest challenge in coming into office was that
Speaker 1: he did not have the tools to govern his country
Speaker 1: on a day to day basis. He could reach down
Speaker 1: into the system to grab a dissident or something like that,
Speaker 1: but he could not ensure that mayors and um provincial
Speaker 1: governors were implementing his policies consistently. In fact, it was
Speaker 1: so bad that he continues to send out UM policy
Speaker 1: enforcement teams to go check that they're actually local officials
Speaker 1: are actually implementing and doing what they're supposed to be doing,
Speaker 1: and he viewed and this is why the anti corruption
Speaker 1: campaign ended up being seminal to his first term. His
Speaker 1: view was, I need to get back those tools of
Speaker 1: government to to govern my country, and I'm going to
Speaker 1: do it through the Communist Party. And we see the
Speaker 1: Communist Party playing a much bigger role than it has
Speaker 1: historically since before done. And it's not only involved in
Speaker 1: party matters, but it's in the economy, it's in private business,
Speaker 1: and it's something that American companies are going to have
Speaker 1: to face as they go forward. So, Deborah, just as
Speaker 1: a final question, what is the concentration of power in
Speaker 1: China ultimately mean for these Tride discussions, the Tride negotiations
Speaker 1: with the United States, Well, ironically, it might make it
Speaker 1: a little bit easier since the President she is very
Speaker 1: much calling the shots in terms of what can be done,
Speaker 1: and he's put some very sophisticated UM bureaucrats around him,
Speaker 1: with one she Sean and Leoho, who really understand how
Speaker 1: markets work, who understand and have a long background with
Speaker 1: the United States, have ties with a broad range of
Speaker 1: government officials, former government officials, and business leaders. But she
Speaker 1: and the President have a very good working relationship, and
Speaker 1: ultimately I think that this deal is going to be
Speaker 1: done between the two presidents. Debora, thank you so much.
Speaker 1: We look forward to speaking to you against soon. Debra Laver,
Speaker 1: the Paulson Institute of the story is not going to
Speaker 1: go away, and we really appreciate her international relations perspective.
Speaker 1: We go to London, now, Karen Noble heart with us
Speaker 1: is General Electric breaks up and up? How many more
Speaker 1: of these transactions, Karen are there? This is a three
Speaker 1: billion dollar bolt off, not a bolt on, a bolt off.
Speaker 1: How many more bolt offs are there? For? G Well,
Speaker 1: I think, Um, what they've been signaling is that they're
Speaker 1: going deep down and and uh there's not a lot
Speaker 1: of big segments left to sell, but they're going within
Speaker 1: segments and looking for pieces. And this is rather small.
Speaker 1: You know, all of Powers thirty six billion and this
Speaker 1: in sales, and this has a billion in sales. So
Speaker 1: they're getting deep down and dirty to try to get
Speaker 1: pieces of of UM the company that and uh, you
Speaker 1: know they sold the whole transportation business. That's probably the
Speaker 1: last that is the last big unit in my opinion,
Speaker 1: UM that they'll sell. Uh. They have a lighting business,
Speaker 1: very small, not going to get them much money um
Speaker 1: and then they'll do something with UM. You know, Baker
Speaker 1: used ge um at some point as well. So I
Speaker 1: think they're telling you, you know, like the g E
Speaker 1: power is a huge business. They're big problems are in
Speaker 1: the big turbines. But there's stuff that they're going to
Speaker 1: sell around the margin. Does this really matter? It doesn't
Speaker 1: look like the investors are really twelve cents. I mean, okay,
Speaker 1: so you sell the these this business based in Austria
Speaker 1: making reciprocating engines and generator sets right diesel engines as well. Uh,
Speaker 1: why bother to do this? Well, you know when he
Speaker 1: came out with his first twenty billion dollars you know
Speaker 1: UM in asset sales and the and the stock went
Speaker 1: down like six percent. This was this was in that
Speaker 1: And he's looking at all small things and it's not enough.
Speaker 1: We knew it wasn't enough when he announced the twenty billion.
Speaker 1: But he's methodically chipping off these little pieces. And the
Speaker 1: one good thing is everything he's sold so far he's
Speaker 1: gotten better than expected proceeds. But it's too small. This
Speaker 1: was people were talking price talk was two billion. They
Speaker 1: got three in a quarter. Transportation people were talking said
Speaker 1: seven billion, they got ten billion UM, so they're getting
Speaker 1: better prices, but they they're not selling anything big enough
Speaker 1: to matter. Is the dividends safe? I think that that
Speaker 1: jury is still out. I mean, you know, I think
Speaker 1: that they're going to try um but you know it's
Speaker 1: going to get tight towards the latter part of the year.
Speaker 1: So I think the investors still expect there's a chance
Speaker 1: of that happening with all that's going on politically. Is
Speaker 1: ge Powers salvation China? I mean, if the power business
Speaker 1: is flat on its back, does does China need g
Speaker 1: E Power? Well, you know g E that's a very
Speaker 1: consolidated business, so it's g E, it's Semens, it's miss
Speaker 1: A Bishi. So yeah, I mean China's you know, gonna
Speaker 1: have to buy something, you know, power from g E
Speaker 1: for sure. The problem is most of these emerging markets,
Speaker 1: including China, aren't buying the mega stuff that that is
Speaker 1: the core of their product line, the big the big
Speaker 1: turbines and both gas and steam. So they've got to
Speaker 1: redirect the product line, as does everybody in the business.
Speaker 1: So bottom line is they've got to shut a lot
Speaker 1: of capacity. We say, is it is it all fixed?
Speaker 1: Costs or they're actually variable costs which variable out the door. Well,
Speaker 1: they're doing that already. They've taken a billion out. Their
Speaker 1: goal is for another billion of calling, you know, laying
Speaker 1: off people, UM, trying to um cut call loss. But
Speaker 1: eventually it's got to be bricks and mortar. There's too
Speaker 1: much capacity globally, you know, at ge and across the industry.
Speaker 1: And you know they bought Alstum and you know, it's
Speaker 1: hard to close things in France. So that's one that
Speaker 1: they're kind of stuck with for a while. So they've
Speaker 1: got to do something with the part of the business.
Speaker 1: What do you think Nelson Pelts wants him to do?
Speaker 1: He's got a little bit under one percent of the stock. Uh,
Speaker 1: you know, I think that he's gonna want a bigger
Speaker 1: break up. Um, I'm not sure that the whole thing
Speaker 1: is going to be broken up. I'm not in that camp.
Speaker 1: I think that they've got two of their three big
Speaker 1: businesses are good, good businesses. UM. I think you know,
Speaker 1: he certainly would want them to get out of as
Speaker 1: much as they can. But um, he's got two of
Speaker 1: the three businesses are good businesses that he'll remain margin
Speaker 1: cents in the dollar. What do you model that, folks?
Speaker 1: This is from the revenue statement. You come down off
Speaker 1: sales and somewhere in the vicinity of net income as
Speaker 1: a thing called they're making thirteen cents in the dollar.
Speaker 1: Can they get back to a you know, fifteen sixteen
Speaker 1: cents in the dollar. I think they can if they
Speaker 1: can stabilize power. But it's got that's a multi year problem.
Speaker 1: I mean, they're making twenty you know, uh on on
Speaker 1: EBI dat basis six cents in in on the dollar
Speaker 1: in UH in aerospace, and they're making you know, almost
Speaker 1: twenty in in healthcare. So their way over that in
Speaker 1: a couple of okay, but now they don't have multi
Speaker 1: y What do you do with g E power with
Speaker 1: the urgency to thirty one that they have. I think
Speaker 1: what they're gonna do is try to monetize other assets. Um. Frankly,
Speaker 1: like I think that they'll sell some of the They've
Speaker 1: got a twenty five billion dollar investment in Baker Hues. Yeah,
Speaker 1: but you know, well, how much what's the employee counting gepower?
Speaker 1: Any idea? Let's see they did they're they're doing, Um,
Speaker 1: I'm not exactly sure it's big. The answers they got
Speaker 1: they have more employees than JP Morgan. I mean, they're
Speaker 1: not Walmart. But the answer is they got a zillion
Speaker 1: bodies in ge Power, right, yeah, I mean yeah, I mean, uh,
Speaker 1: they were selling They laying off twelve thousand people and
Speaker 1: that was about six eight percent. So it's it's a
Speaker 1: big number. It's a big number, and that's where they
Speaker 1: have to work. Are they ready to make those tough decisions?
Speaker 1: I think in Power they know that they have to
Speaker 1: do big things. I think They're trying to figure out
Speaker 1: what to do. He's a methodical guy and that's part
Speaker 1: of the thing that's frustrating people. Are you Are you
Speaker 1: in England just to watch Belgium, England and football? Now
Speaker 1: I'm here for a conference that there was a lot
Speaker 1: of talk about that. Trying to get up to speech.
Speaker 1: You'll know more than me. Karen Lauren, thank you with
Speaker 1: Bloomberg Intelligence on ge. Thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subs gribe and listen to interviews on Apple Podcasts, SoundCloud,
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Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.
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