1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,200 --> 00:00:39,560 Speaker 3: Stocks hovering your record highs as investors wait more magnificent 11 00:00:39,600 --> 00:00:42,920 Speaker 3: seven earnings. Stuart Heiser City Group writing this, the early 12 00:00:42,960 --> 00:00:45,879 Speaker 3: reactions to earnings have been mixed. We remain positive US 13 00:00:45,960 --> 00:00:48,960 Speaker 3: equity Beta with a quality tilt and preference for AI 14 00:00:49,080 --> 00:00:52,000 Speaker 3: power generations. Stuart joins us. Now, so great to see you, 15 00:00:52,240 --> 00:00:53,880 Speaker 3: good morning, Thank you for being here. I'm glad the 16 00:00:53,920 --> 00:00:56,760 Speaker 3: Polar bears didn't meet you. I'm just curious going forward. 17 00:00:56,800 --> 00:00:59,080 Speaker 3: What's your takeaway is? Are you still all in on 18 00:00:59,200 --> 00:01:02,480 Speaker 3: power generation despite the fact that investors seem a little 19 00:01:02,520 --> 00:01:06,040 Speaker 3: bit cautious about spending more than revenues are growing. 20 00:01:06,040 --> 00:01:07,880 Speaker 4: Yeah, we're still very positive on that story, and I 21 00:01:07,920 --> 00:01:09,560 Speaker 4: think you're going to get a lot of political headlines 22 00:01:09,640 --> 00:01:12,600 Speaker 4: next week with Election Day coming up that puts even 23 00:01:12,640 --> 00:01:15,520 Speaker 4: more focus on utility prices. To be completely honest with you, 24 00:01:15,880 --> 00:01:18,240 Speaker 4: all the capex numbers that Emory mentioned, a lot of 25 00:01:18,280 --> 00:01:21,000 Speaker 4: that is going straight into data center build out. I mean, 26 00:01:21,120 --> 00:01:23,520 Speaker 4: one of the Meta data centers in Louisiana costs twenty 27 00:01:23,560 --> 00:01:26,760 Speaker 4: seven billion dollars, which for New Yorkers that's three tunnels 28 00:01:26,800 --> 00:01:30,040 Speaker 4: under the Hudson River, so an astounding amount of money. 29 00:01:30,240 --> 00:01:33,000 Speaker 4: So yeah, we're still there. Look, there are obviously risks 30 00:01:33,040 --> 00:01:35,200 Speaker 4: to that, you know, just one headline that these chips 31 00:01:35,240 --> 00:01:37,560 Speaker 4: need know less power that we thought would be very 32 00:01:37,560 --> 00:01:39,559 Speaker 4: destructive for that trade, like we saw with deep Seat 33 00:01:39,560 --> 00:01:41,800 Speaker 4: back in January. But for now, we do think it's 34 00:01:41,800 --> 00:01:43,399 Speaker 4: the best sharp ratio way to kind of have that. 35 00:01:43,360 --> 00:01:43,960 Speaker 5: AI drain on. 36 00:01:44,040 --> 00:01:46,240 Speaker 3: And frankly, the best example of this is Caterpillar. The 37 00:01:46,240 --> 00:01:48,200 Speaker 3: fact that those shares pop and most since two thousand 38 00:01:48,200 --> 00:01:51,720 Speaker 3: and nine on energy not necessarily bulldozers. I'm just curious 39 00:01:51,760 --> 00:01:53,920 Speaker 3: what you're expecting to learn from Amazon and Apple and 40 00:01:53,920 --> 00:01:56,080 Speaker 3: whether that could feed into the story or that these 41 00:01:56,080 --> 00:01:59,120 Speaker 3: earnings are irrelevant to you based on the capex spend 42 00:01:59,120 --> 00:02:02,080 Speaker 3: that we've already heard the likes of Microsoft and Alphabet and. 43 00:02:02,040 --> 00:02:03,640 Speaker 5: Meta, I mean, definitely not irrelevant. 44 00:02:03,640 --> 00:02:05,920 Speaker 4: I think Amazon in particular, because you're going to get 45 00:02:05,960 --> 00:02:08,280 Speaker 4: you know a little bit of a site into AWS, 46 00:02:08,360 --> 00:02:10,720 Speaker 4: but also consumer spending, so I think Amazon will be 47 00:02:10,960 --> 00:02:13,080 Speaker 4: quite interesting. I think Apple surprised people a little bit, 48 00:02:13,240 --> 00:02:15,079 Speaker 4: you know, just just giving the uptake on the iPhone, 49 00:02:15,120 --> 00:02:17,080 Speaker 4: but definitely important. Last night was a little more important, 50 00:02:17,080 --> 00:02:19,560 Speaker 4: and that's how it was priced. You know, Amazon earning 51 00:02:19,600 --> 00:02:20,880 Speaker 4: something after that would be very important. 52 00:02:20,880 --> 00:02:22,560 Speaker 6: Again, do you think the bar is just too high 53 00:02:22,919 --> 00:02:24,120 Speaker 6: consider what we saw from Meta? 54 00:02:24,960 --> 00:02:26,400 Speaker 5: Yeah, you know, Meta is interesting. 55 00:02:26,440 --> 00:02:28,560 Speaker 4: I think there's some view that they're they're operating cash 56 00:02:28,600 --> 00:02:30,920 Speaker 4: flows are starting to converge with their capex spend, and 57 00:02:30,960 --> 00:02:32,440 Speaker 4: the question is how are they going to finance that? 58 00:02:32,520 --> 00:02:34,960 Speaker 4: And the discussion of how do you finance all this 59 00:02:35,000 --> 00:02:37,000 Speaker 4: build out is a very big one. I think I 60 00:02:37,040 --> 00:02:39,280 Speaker 4: think Oracle was issuing about forty billion in death this week, 61 00:02:39,360 --> 00:02:42,400 Speaker 4: so yeah, it's you know, there is a question here, 62 00:02:42,440 --> 00:02:44,520 Speaker 4: I think about how this is going to be financed, 63 00:02:44,560 --> 00:02:46,920 Speaker 4: you know, medium to long term, and certainly the Meta stuff. 64 00:02:46,960 --> 00:02:49,160 Speaker 4: It looks like, you know, they're all in and as 65 00:02:49,160 --> 00:02:50,960 Speaker 4: they should be. I think you know, you both mentioned 66 00:02:50,960 --> 00:02:52,880 Speaker 4: the amount of spending. I think it's because these companies 67 00:02:52,960 --> 00:02:55,400 Speaker 4: view this as exextential. They feel that they have to 68 00:02:55,400 --> 00:02:56,119 Speaker 4: win the AI tright. 69 00:02:56,240 --> 00:02:59,720 Speaker 6: You mentioned energy though, Could the energy story keep up 70 00:03:00,160 --> 00:03:02,640 Speaker 6: to spend or they'll be a pause just because we 71 00:03:02,639 --> 00:03:04,520 Speaker 6: don't have the resources to power this. 72 00:03:04,840 --> 00:03:05,519 Speaker 5: That's a good question. 73 00:03:05,560 --> 00:03:07,800 Speaker 4: I mean, instead of Caterpillar bulldozers, maybe you give your 74 00:03:07,880 --> 00:03:09,000 Speaker 4: kids Caterpillar turbines. 75 00:03:09,040 --> 00:03:11,360 Speaker 5: I don't know, but yes, there's an issue with that. 76 00:03:11,400 --> 00:03:11,560 Speaker 7: I think. 77 00:03:11,720 --> 00:03:13,799 Speaker 5: Look when Oracle report a month. 78 00:03:13,639 --> 00:03:14,760 Speaker 4: And a half ago or some of that was the 79 00:03:14,800 --> 00:03:18,280 Speaker 4: big commentary was amazing revenue forecasts, they might not have 80 00:03:18,320 --> 00:03:21,800 Speaker 4: the chips or the electricity to actually get there. So, 81 00:03:21,880 --> 00:03:23,880 Speaker 4: you know, our folks on the ai I side think 82 00:03:23,880 --> 00:03:26,280 Speaker 4: you may have to start almost like carving out hyperscalers 83 00:03:26,280 --> 00:03:28,520 Speaker 4: and have them paying a premium for power, because it 84 00:03:28,560 --> 00:03:31,160 Speaker 4: does seem like your ability to compete and also your 85 00:03:31,200 --> 00:03:34,040 Speaker 4: ability to get access to the chips is linked to 86 00:03:34,120 --> 00:03:37,200 Speaker 4: your proof of concept on the energy side of it. 87 00:03:37,240 --> 00:03:40,080 Speaker 5: So yeah, it could be that we're earlier innings to your. 88 00:03:39,960 --> 00:03:42,560 Speaker 4: Point because of bottlenecks as opposed to anything else. 89 00:03:42,840 --> 00:03:46,040 Speaker 3: Power Lion is, the energy trade, is the AI trade, 90 00:03:46,280 --> 00:03:47,240 Speaker 3: and the idea of. 91 00:03:47,360 --> 00:03:48,240 Speaker 1: Rates going lower. 92 00:03:48,480 --> 00:03:51,920 Speaker 3: How much was yesterday's shock that maybe this wasn't an 93 00:03:51,920 --> 00:03:54,160 Speaker 3: all in FED with respect to a Deeszember rate cut 94 00:03:54,520 --> 00:03:58,240 Speaker 3: potentially the first sign of a real problem for this trade. 95 00:03:58,680 --> 00:04:01,040 Speaker 4: It hasn't been up until now because these companies have 96 00:04:01,080 --> 00:04:04,080 Speaker 4: amazing palance sheets and are generating so much cash. I 97 00:04:04,080 --> 00:04:06,400 Speaker 4: think the fact that Oracle is issuing a lot of 98 00:04:06,440 --> 00:04:09,000 Speaker 4: debt and these numbers are becoming so big it could 99 00:04:09,040 --> 00:04:10,760 Speaker 4: be a little bit more of an issue going forward. 100 00:04:10,800 --> 00:04:12,560 Speaker 5: But the fact is these are you know, these. 101 00:04:12,400 --> 00:04:14,440 Speaker 4: Are some of the strongest balance sheets on the planet 102 00:04:14,480 --> 00:04:16,200 Speaker 4: from a lot of these large captachs. I don't think 103 00:04:16,279 --> 00:04:18,720 Speaker 4: rates is going to impact them too much because frankly, 104 00:04:18,720 --> 00:04:21,760 Speaker 4: they're willing to self finance this stuff at levels that 105 00:04:21,800 --> 00:04:25,080 Speaker 4: a lot of people wouldn't finance them at because they 106 00:04:25,240 --> 00:04:26,760 Speaker 4: view that spend is so important. 107 00:04:26,839 --> 00:04:29,040 Speaker 3: Right, So then why is it important at all whether 108 00:04:29,040 --> 00:04:31,120 Speaker 3: the FED cuts in December or not, Because you're talking 109 00:04:31,120 --> 00:04:33,120 Speaker 3: about how it doesn't affect the biggest trade out there, 110 00:04:33,160 --> 00:04:36,280 Speaker 3: which has been fueling GDP, has been fueling economic growth. 111 00:04:36,800 --> 00:04:39,119 Speaker 3: It doesn't necessarily affect the fact that we see credit 112 00:04:39,160 --> 00:04:41,480 Speaker 3: conditions that a lot of people, for all intentsive purposes, have. 113 00:04:41,440 --> 00:04:43,080 Speaker 1: Been calling extraordinary loose. 114 00:04:43,360 --> 00:04:46,120 Speaker 3: And you've already seen the momentum trade. Yes, have hiccups, 115 00:04:46,200 --> 00:04:48,920 Speaker 3: but do really well. So does it really matter if 116 00:04:48,920 --> 00:04:50,040 Speaker 3: the FED cuts in December. 117 00:04:50,320 --> 00:04:52,159 Speaker 5: It's a very bullish way to look at markets. 118 00:04:52,200 --> 00:04:54,880 Speaker 4: I would say if FED cuts don't matter for equities, look, 119 00:04:54,920 --> 00:04:57,000 Speaker 4: I think it would matter more if we had more 120 00:04:57,080 --> 00:05:00,279 Speaker 4: data in the sense that if you could confirm the 121 00:05:00,360 --> 00:05:03,200 Speaker 4: labor market was continuing to slow down and they actually 122 00:05:03,200 --> 00:05:05,440 Speaker 4: wanted to get back to neutral, in that case, it 123 00:05:05,440 --> 00:05:07,600 Speaker 4: would matter more. We're in a bit of a data vacuum. 124 00:05:08,000 --> 00:05:09,680 Speaker 4: I think the issue in the market's going to have 125 00:05:09,680 --> 00:05:11,839 Speaker 4: a little bit with the FMC yesterday is really trying 126 00:05:11,839 --> 00:05:14,760 Speaker 4: to understand the reaction function here for then in December, 127 00:05:14,839 --> 00:05:18,280 Speaker 4: because you know Chrishn earlier mentioned this, you know they had. 128 00:05:18,160 --> 00:05:18,799 Speaker 5: A base case. 129 00:05:18,880 --> 00:05:20,720 Speaker 4: If you look at the data that's come in since 130 00:05:20,760 --> 00:05:24,640 Speaker 4: that base case, the inflation data was fairly friendly. They 131 00:05:24,720 --> 00:05:27,240 Speaker 4: themselves have stated down to side risk to the labor 132 00:05:27,320 --> 00:05:31,080 Speaker 4: market from the shutdown. That combination of data wouldn't suggest 133 00:05:31,120 --> 00:05:33,400 Speaker 4: that you don't cut in December. So I think the 134 00:05:33,520 --> 00:05:35,560 Speaker 4: question here is is what is your reaction function, what 135 00:05:35,600 --> 00:05:37,400 Speaker 4: are you going to be looking at, and how are 136 00:05:37,400 --> 00:05:39,080 Speaker 4: you weighing the dual mandate risk? 137 00:05:39,320 --> 00:05:41,560 Speaker 6: So the market now start to care about the shutdown 138 00:05:41,600 --> 00:05:43,520 Speaker 6: because it may impact whether or not the FED. 139 00:05:43,360 --> 00:05:47,400 Speaker 4: Can move, you know, potentially, the market seems very uninterested 140 00:05:47,520 --> 00:05:51,559 Speaker 4: in shutdown politics at this point. Look, I think coming 141 00:05:51,600 --> 00:05:53,200 Speaker 4: into this meeting, you say, if we go into the 142 00:05:53,200 --> 00:05:54,320 Speaker 4: FED blind, there could be. 143 00:05:54,279 --> 00:05:54,840 Speaker 5: Some risks there. 144 00:05:54,920 --> 00:05:56,680 Speaker 4: The market kind of priced that out. The issue with 145 00:05:56,720 --> 00:05:59,200 Speaker 4: the next one is they update the SEP, which is 146 00:05:59,320 --> 00:06:02,080 Speaker 4: another level detail they're going to have to provide, and frankly, 147 00:06:02,120 --> 00:06:03,920 Speaker 4: your data at that point could be two or three 148 00:06:03,960 --> 00:06:06,640 Speaker 4: months old, depending because it's going to you know, if 149 00:06:06,640 --> 00:06:09,520 Speaker 4: they reopen, you can get two month old labor data 150 00:06:09,520 --> 00:06:13,160 Speaker 4: out pretty quick. They haven't collected anything on either inflation 151 00:06:13,800 --> 00:06:15,680 Speaker 4: or labor market data now for two months, so it's 152 00:06:15,720 --> 00:06:17,040 Speaker 4: not like they can just you know, push a button 153 00:06:17,080 --> 00:06:19,080 Speaker 4: and get the inflation print. They could go into that 154 00:06:19,080 --> 00:06:22,120 Speaker 4: December meeting with a lot less information than we hoped, 155 00:06:22,360 --> 00:06:24,200 Speaker 4: but yeah, it doesn't I think you're going to need 156 00:06:24,200 --> 00:06:26,560 Speaker 4: to see more paychecks miss for the market to really 157 00:06:26,600 --> 00:06:27,560 Speaker 4: care to be honest with you. 158 00:06:27,720 --> 00:06:29,359 Speaker 3: At this point, though, people are trying to look at 159 00:06:29,360 --> 00:06:31,560 Speaker 3: what they do have, which is corporate earnings. And we've 160 00:06:31,600 --> 00:06:34,919 Speaker 3: seen pretty varied earnings. Right, there's a Chipotle story. I 161 00:06:34,960 --> 00:06:36,720 Speaker 3: keep coming back to what I sound like a broken record. No, 162 00:06:36,760 --> 00:06:38,840 Speaker 3: I'm not obsessed with Chipotle, but there is this feeling 163 00:06:39,160 --> 00:06:42,559 Speaker 3: they are eating the margins insert your pun here, because 164 00:06:42,560 --> 00:06:45,680 Speaker 3: they cannot pass along any price increases that are commensurate 165 00:06:45,760 --> 00:06:48,200 Speaker 3: with the costs that are increasing on their end. And 166 00:06:48,240 --> 00:06:51,680 Speaker 3: they're talking about real weakness, particularly in lower income consumers, 167 00:06:51,680 --> 00:06:54,039 Speaker 3: at the same time that you're seeing higher end products 168 00:06:54,160 --> 00:06:56,640 Speaker 3: in particular, our first class airline tickets for example, do 169 00:06:56,760 --> 00:06:59,640 Speaker 3: really well. So, yes, it's the case shaped economy. At 170 00:06:59,680 --> 00:07:02,880 Speaker 3: what point is that weakness going to start bleeding into 171 00:07:02,920 --> 00:07:05,160 Speaker 3: the credit cracks, the cockroaches, whatever you want to call 172 00:07:05,200 --> 00:07:06,719 Speaker 3: it that some people have been trying. 173 00:07:06,560 --> 00:07:07,120 Speaker 1: To suss out. 174 00:07:07,440 --> 00:07:08,440 Speaker 5: Yeah, it's a great question. 175 00:07:08,920 --> 00:07:11,000 Speaker 4: I would say, first class plane tickets, you must have 176 00:07:11,000 --> 00:07:11,560 Speaker 4: been doing very well. 177 00:07:11,880 --> 00:07:13,400 Speaker 1: I'm not checking out myself to carry on. 178 00:07:15,400 --> 00:07:17,160 Speaker 5: It's it can be an issue. 179 00:07:17,160 --> 00:07:19,640 Speaker 4: But look, this has been almost like a slow motion 180 00:07:20,040 --> 00:07:21,720 Speaker 4: you know, car crash on the labor side, right, I 181 00:07:21,720 --> 00:07:23,480 Speaker 4: feel we've been talking about weakness in the labor market 182 00:07:23,520 --> 00:07:25,840 Speaker 4: for eighteen or eighteen or twenty four months, and yeah, 183 00:07:26,040 --> 00:07:28,720 Speaker 4: there are pockets of risk even you know Walmart's last earnings, 184 00:07:28,800 --> 00:07:30,520 Speaker 4: you know they discussed that, you know, tariffs are going 185 00:07:30,560 --> 00:07:32,680 Speaker 4: to be an issue in coming quarters. So yeah, there 186 00:07:32,720 --> 00:07:35,040 Speaker 4: is a build into this and we we what we 187 00:07:35,120 --> 00:07:37,880 Speaker 4: might start, we might see is the impact from tariffs, 188 00:07:37,920 --> 00:07:40,760 Speaker 4: but it's it's very slow and kind of methodical how 189 00:07:40,760 --> 00:07:44,480 Speaker 4: it bleeds in. I do think, you know, retailer earnings 190 00:07:44,520 --> 00:07:45,920 Speaker 4: later in the quarter are going to be going to 191 00:07:45,960 --> 00:07:47,800 Speaker 4: be very important because you know, the front half of 192 00:07:47,800 --> 00:07:50,720 Speaker 4: earning has been you know, buyased towards larger cap stocks 193 00:07:50,720 --> 00:07:52,480 Speaker 4: with a lot of exposure to capital markets and a 194 00:07:52,520 --> 00:07:54,600 Speaker 4: lot of exposure to the AI theme, and those have 195 00:07:54,720 --> 00:07:57,040 Speaker 4: generally come in well. But look that the market seems 196 00:07:57,080 --> 00:07:59,440 Speaker 4: pretty happy to whistle by that cemetery, as they say, 197 00:07:59,440 --> 00:08:01,120 Speaker 4: and until ven marks. 198 00:08:00,920 --> 00:08:03,000 Speaker 1: Are going to rally, I think stay with us. 199 00:08:03,160 --> 00:08:05,880 Speaker 6: More Bloomberg surveillance coming up after. 200 00:08:05,640 --> 00:08:17,520 Speaker 3: This Leland Miller China base book writing this, the US 201 00:08:17,560 --> 00:08:21,360 Speaker 3: has in fact offer deeper concessions to secure this truth 202 00:08:21,480 --> 00:08:24,240 Speaker 3: once those details emerged this deal, we'll look far more 203 00:08:24,280 --> 00:08:27,480 Speaker 3: one sided in China's favor and perhaps also less likely 204 00:08:27,520 --> 00:08:28,720 Speaker 3: to hold Leland joins US. 205 00:08:28,760 --> 00:08:30,440 Speaker 1: Now Leland, Why do you say that. 206 00:08:30,480 --> 00:08:33,080 Speaker 3: What concessions do you see the US offering China to 207 00:08:33,120 --> 00:08:35,240 Speaker 3: secure this deal that seem lopsided? 208 00:08:36,480 --> 00:08:38,280 Speaker 8: Well, I think this is the beginning of the deal, 209 00:08:38,440 --> 00:08:39,320 Speaker 8: not the end of the deal. 210 00:08:39,440 --> 00:08:42,000 Speaker 9: So I think what we saw at the the you know, 211 00:08:42,040 --> 00:08:45,319 Speaker 9: in the last twelve hours, was a successful start. You know, 212 00:08:45,440 --> 00:08:48,719 Speaker 9: the President agreed to pull back tariffs in return for 213 00:08:48,800 --> 00:08:51,960 Speaker 9: the Chinese agreeing to pull back where Earth their new 214 00:08:52,040 --> 00:08:55,080 Speaker 9: rare Earth export control regime. You know, people may not 215 00:08:55,120 --> 00:08:56,680 Speaker 9: be happy with the a lot of people may not 216 00:08:56,679 --> 00:08:59,040 Speaker 9: be happy with the shipping fees being postponed, but in general, 217 00:08:59,280 --> 00:09:02,440 Speaker 9: the low hanging fruit was addressed. What you didn't see 218 00:09:02,760 --> 00:09:04,600 Speaker 9: was something that I think a lot of China Hawks 219 00:09:04,600 --> 00:09:06,680 Speaker 9: were scared that they would wake up to, which is 220 00:09:06,800 --> 00:09:09,679 Speaker 9: a whole bunch of export controls pulled back in some 221 00:09:09,720 --> 00:09:11,120 Speaker 9: sort of quid pro quo. 222 00:09:11,760 --> 00:09:13,760 Speaker 8: But again, President Trump announced. 223 00:09:13,360 --> 00:09:16,840 Speaker 9: That he is heading to heading to China early next year, 224 00:09:17,120 --> 00:09:19,520 Speaker 9: and there will be more concessions, and there will be 225 00:09:19,520 --> 00:09:21,160 Speaker 9: more back and forth, and there will be a broader 226 00:09:21,200 --> 00:09:24,880 Speaker 9: deal there that they're working on right now. So we're 227 00:09:24,920 --> 00:09:27,080 Speaker 9: working on the margins of the deal, and as we 228 00:09:27,120 --> 00:09:28,800 Speaker 9: get closer to the core, I think that's when things 229 00:09:28,800 --> 00:09:30,160 Speaker 9: are going to a bit more controversial. 230 00:09:30,320 --> 00:09:33,080 Speaker 6: Lew And what about AI chips because the President had 231 00:09:33,120 --> 00:09:35,520 Speaker 6: said that they would discuss Blackwell, then he said they 232 00:09:35,559 --> 00:09:38,199 Speaker 6: didn't discuss Blackwell, but they discussed other chips, and it's 233 00:09:38,240 --> 00:09:40,880 Speaker 6: now for China to talk about that with in video. 234 00:09:40,960 --> 00:09:41,840 Speaker 6: Where does this stand. 235 00:09:43,520 --> 00:09:45,880 Speaker 9: I think what the President came to understand over the 236 00:09:45,920 --> 00:09:47,440 Speaker 9: last you know, twenty four hours or so is that 237 00:09:47,480 --> 00:09:50,280 Speaker 9: this is by far the most controversial aspect of any 238 00:09:50,320 --> 00:09:53,920 Speaker 9: trade deal. When you start incorporating export control rollbacks are 239 00:09:53,960 --> 00:09:56,760 Speaker 9: which are done for national security purposes as part of 240 00:09:56,800 --> 00:09:58,520 Speaker 9: a trade deal where you're just trying to get China 241 00:09:58,559 --> 00:10:02,560 Speaker 9: to buy more commodities, this becomes very, very problematic. And 242 00:10:02,600 --> 00:10:05,320 Speaker 9: so I think what the President realized is that it 243 00:10:05,320 --> 00:10:08,800 Speaker 9: is teaming to do a little bit more uh research 244 00:10:08,880 --> 00:10:12,280 Speaker 9: on on what made sense here. Obviously that there's a 245 00:10:12,679 --> 00:10:14,120 Speaker 9: you know, this is this is this is a very 246 00:10:14,120 --> 00:10:16,000 Speaker 9: big issue. But you know, if the President is trying 247 00:10:16,000 --> 00:10:19,120 Speaker 9: to build up, you know, a broader deal, this was 248 00:10:19,160 --> 00:10:20,880 Speaker 9: the These are the low hanging branches, and then I 249 00:10:20,880 --> 00:10:23,199 Speaker 9: think as they work towards the technology side, that's when 250 00:10:23,200 --> 00:10:24,479 Speaker 9: things are to get more controversial. 251 00:10:24,920 --> 00:10:27,400 Speaker 6: What about TikTok as well, we heard there's going to 252 00:10:27,440 --> 00:10:30,760 Speaker 6: be some sort of deal regarding TikTok, and all that 253 00:10:30,800 --> 00:10:33,679 Speaker 6: we heard from the Chinese Commerce Ministry is that they 254 00:10:33,679 --> 00:10:34,440 Speaker 6: will keep talking. 255 00:10:35,720 --> 00:10:38,040 Speaker 9: Yeah, I think there's a general sense that the Chinese 256 00:10:38,080 --> 00:10:41,000 Speaker 9: side is not completely against any TikTok deal, but I 257 00:10:41,000 --> 00:10:43,559 Speaker 9: think that they're holding their cards as close to the 258 00:10:43,640 --> 00:10:46,440 Speaker 9: chest for as long as possible. Uh, and so you know, 259 00:10:46,600 --> 00:10:49,360 Speaker 9: they can get the maximum maximum concessions possible. You know, 260 00:10:49,520 --> 00:10:51,720 Speaker 9: keep in mind, if we would just announce every concession 261 00:10:51,800 --> 00:10:54,040 Speaker 9: right now and then President Trump announced a trip to 262 00:10:54,320 --> 00:10:57,320 Speaker 9: China and April, there'd be this whole scramble to try 263 00:10:57,320 --> 00:10:59,880 Speaker 9: to understand what that's for. So I think some of 264 00:10:59,880 --> 00:11:01,760 Speaker 9: the some of the things that people were talking about 265 00:11:01,840 --> 00:11:04,840 Speaker 9: being released right now are actually being pushed back a 266 00:11:04,920 --> 00:11:08,080 Speaker 9: number of months. And well, I think both sides are 267 00:11:08,080 --> 00:11:10,360 Speaker 9: trying to see what the other side is willing to 268 00:11:10,400 --> 00:11:12,640 Speaker 9: give before they have a final framework. 269 00:11:12,800 --> 00:11:15,160 Speaker 6: So it's a Dave tant for about a year. But 270 00:11:15,240 --> 00:11:20,200 Speaker 6: that doesn't mean this relationship cannot escalate. With any sort 271 00:11:20,240 --> 00:11:22,400 Speaker 6: of truth that comes out of the White House, What 272 00:11:22,440 --> 00:11:26,199 Speaker 6: would your message be to investors that think, potentially they 273 00:11:26,200 --> 00:11:29,320 Speaker 6: could ignore this relationship for the next twelve months. 274 00:11:30,280 --> 00:11:32,920 Speaker 9: I think, look, an agreement to not do something for 275 00:11:32,960 --> 00:11:35,439 Speaker 9: a year only holds as long as the Chinese decide 276 00:11:35,440 --> 00:11:37,080 Speaker 9: they're not going to do something they don't feel like 277 00:11:37,080 --> 00:11:40,439 Speaker 9: they've been provoked or something else. There's an issue that 278 00:11:41,320 --> 00:11:42,800 Speaker 9: one of your truths doesn't mean one of your truths. 279 00:11:42,800 --> 00:11:44,400 Speaker 9: It means a truth until one of the sides the 280 00:11:44,440 --> 00:11:46,959 Speaker 9: sides that truce doesn't work anymore. But the larger point is, 281 00:11:47,000 --> 00:11:49,600 Speaker 9: I think on tariffs, so the President's moved back tariffs 282 00:11:49,640 --> 00:11:52,640 Speaker 9: by ten percent, so you have a headline rate of 283 00:11:52,679 --> 00:11:54,840 Speaker 9: fifty seven percent. That sound going down to forty seven 284 00:11:54,960 --> 00:11:57,400 Speaker 9: or so. That sounds high. You've got an effective rate 285 00:11:57,440 --> 00:12:00,240 Speaker 9: around thirty percent. So I think the larger picture here 286 00:12:00,280 --> 00:12:04,080 Speaker 9: is they've gone down enough that they're getting very close 287 00:12:04,120 --> 00:12:07,160 Speaker 9: to what competitor producers are actually being charged in the twenties, 288 00:12:07,240 --> 00:12:09,040 Speaker 9: you know, Vietnam and the Mexicos and. 289 00:12:10,520 --> 00:12:11,800 Speaker 8: Other Southeast Asian countries. 290 00:12:11,960 --> 00:12:14,560 Speaker 9: If they get too close, all the de risking work 291 00:12:14,600 --> 00:12:17,079 Speaker 9: that the president has done will start going the other direction, 292 00:12:17,160 --> 00:12:19,000 Speaker 9: there will not be an incentive to move your supply 293 00:12:19,080 --> 00:12:20,679 Speaker 9: chains out of China, so they're gonna have to look 294 00:12:20,679 --> 00:12:22,600 Speaker 9: at that very closely. They're about at the end of 295 00:12:22,640 --> 00:12:24,640 Speaker 9: what they could do in terms of terraff productions on 296 00:12:24,720 --> 00:12:28,040 Speaker 9: China without reversing the president's terraf regime that he fought 297 00:12:28,160 --> 00:12:29,559 Speaker 9: very hard to put in place. 298 00:12:29,679 --> 00:12:32,440 Speaker 3: Well, and the optics of this trip have been pretty powerful, 299 00:12:32,480 --> 00:12:35,240 Speaker 3: the idea of a Southeast Asia tour in Malaysia and 300 00:12:35,320 --> 00:12:37,960 Speaker 3: inking some of the deals and the niceties between the 301 00:12:38,080 --> 00:12:41,960 Speaker 3: likes of the Tie and the Vietnamese and the other 302 00:12:42,080 --> 00:12:44,880 Speaker 3: leaders in the region, Japan as well. 303 00:12:45,120 --> 00:12:45,880 Speaker 1: What do you make of that? 304 00:12:45,960 --> 00:12:48,400 Speaker 3: Do you think that that does give the US closer 305 00:12:48,440 --> 00:12:51,240 Speaker 3: allies in Southeast Asia? They gave it more clout, more 306 00:12:51,280 --> 00:12:53,800 Speaker 3: ammunition heading into these meetings with China. 307 00:12:55,240 --> 00:12:58,160 Speaker 9: Certainly, the more the United States interacts with its allies 308 00:12:58,160 --> 00:13:00,800 Speaker 9: and partners in Asia, the more leverage have with China, 309 00:13:00,840 --> 00:13:03,720 Speaker 9: and the smarter policy will be because you'll be able 310 00:13:03,720 --> 00:13:06,080 Speaker 9: to de risk your supply chains outside of things that 311 00:13:06,120 --> 00:13:09,520 Speaker 9: give China leverage points on your economy. So it's good politics, 312 00:13:09,559 --> 00:13:11,960 Speaker 9: it's good economics. I think it's very helpful. You know, 313 00:13:12,000 --> 00:13:13,679 Speaker 9: you look at what happened with the critical minerals. That 314 00:13:13,800 --> 00:13:18,400 Speaker 9: Chinese released a very powerful export control regime that exerted 315 00:13:18,440 --> 00:13:21,520 Speaker 9: dominance over the supply chains of the world in terms 316 00:13:21,520 --> 00:13:24,439 Speaker 9: of rare earths and critical minerals. The US has immediately 317 00:13:24,480 --> 00:13:27,520 Speaker 9: responded and tried to go out and have partnerships with Australia, 318 00:13:27,679 --> 00:13:29,840 Speaker 9: with Southeast Asian countries. You know. So I think that 319 00:13:29,880 --> 00:13:33,240 Speaker 9: what China did was quite momentous, but at the same 320 00:13:33,280 --> 00:13:35,400 Speaker 9: time it has lit a fire under the United States 321 00:13:35,520 --> 00:13:37,760 Speaker 9: to try to do something to fix the problem. Well. 322 00:13:37,840 --> 00:13:39,520 Speaker 3: And one thing that China page book does so well 323 00:13:39,520 --> 00:13:43,400 Speaker 3: as you track real time economic activity going on in China, 324 00:13:43,480 --> 00:13:45,960 Speaker 3: there's been this stagnation that we've talked about on employment 325 00:13:46,040 --> 00:13:48,960 Speaker 3: rate for youth, very high, and a real question about 326 00:13:48,960 --> 00:13:52,160 Speaker 3: how much the economic backdrop is going to push Jijinping 327 00:13:52,320 --> 00:13:54,640 Speaker 3: to the table to try to make sure that the 328 00:13:54,720 --> 00:13:56,600 Speaker 3: relationship with the United States in front of the rest 329 00:13:56,600 --> 00:13:58,840 Speaker 3: of the world isn't severed. How well are they doing 330 00:13:59,000 --> 00:14:01,840 Speaker 3: rebalancing their aman to more of a consumption less of 331 00:14:01,880 --> 00:14:05,320 Speaker 3: just simply an output based economic model. 332 00:14:06,440 --> 00:14:08,720 Speaker 9: The contours of your question are really important because if 333 00:14:08,760 --> 00:14:11,000 Speaker 9: you were asking how their economic performance is doing. I 334 00:14:11,000 --> 00:14:13,760 Speaker 9: would say it's doing well enough for she, it's doing 335 00:14:13,800 --> 00:14:15,600 Speaker 9: well enough. And so I don't think that they feel 336 00:14:15,600 --> 00:14:17,880 Speaker 9: any pressure to come to the table with the United States. 337 00:14:18,040 --> 00:14:20,040 Speaker 8: But if your question is, have they been you know. 338 00:14:20,280 --> 00:14:23,080 Speaker 9: Creating this this this wave of you know, this shift 339 00:14:23,080 --> 00:14:25,240 Speaker 9: from investment to consumption, which they've been promising the last 340 00:14:25,240 --> 00:14:27,720 Speaker 9: ten years, No, there's absolutely no sign of that whatsoever. 341 00:14:27,760 --> 00:14:29,320 Speaker 9: And I don't think you will see that. What you've 342 00:14:29,320 --> 00:14:32,400 Speaker 9: see how the Chinese government is sort of resistance to this. 343 00:14:32,520 --> 00:14:34,320 Speaker 9: It's been we got to produce more, we have to 344 00:14:34,400 --> 00:14:37,520 Speaker 9: export more. We you know, we have to continue to 345 00:14:37,840 --> 00:14:41,680 Speaker 9: use manufacturing and industry as our growth driver. That is 346 00:14:41,760 --> 00:14:45,360 Speaker 9: running into a buzzsaw, which is which is global trade friction. 347 00:14:45,520 --> 00:14:47,840 Speaker 9: So you know, the Chinese have talked a lot about 348 00:14:47,840 --> 00:14:50,960 Speaker 9: a consumption, They've done very little on consumption. So I 349 00:14:50,960 --> 00:14:52,720 Speaker 9: think that's something to watch in the future. But you know, 350 00:14:53,160 --> 00:14:55,640 Speaker 9: rather than listening to what they say, I would urge 351 00:14:55,640 --> 00:14:58,000 Speaker 9: everyone to watch what they do. And I think that's 352 00:14:58,000 --> 00:14:59,680 Speaker 9: going to be very important because if they do not 353 00:15:00,000 --> 00:15:03,080 Speaker 9: create the mechanisms to spur up more domestic demand in China, 354 00:15:03,280 --> 00:15:05,560 Speaker 9: than these trade frictions will never go away. It's not 355 00:15:05,600 --> 00:15:07,320 Speaker 9: a Trump thing, it's a China thing. 356 00:15:08,800 --> 00:15:09,520 Speaker 1: Stay with us. 357 00:15:09,720 --> 00:15:12,480 Speaker 6: More Bloomberg surveillance coming up after. 358 00:15:12,200 --> 00:15:24,720 Speaker 3: This fetchair j Powell giving no guarantees that the Central 359 00:15:24,760 --> 00:15:28,040 Speaker 3: Bank will deliver a third consecutive rate cut in December. 360 00:15:28,320 --> 00:15:32,160 Speaker 3: Sanal Desiah Franklin Templeton, writing this, it's telling that Powell 361 00:15:32,240 --> 00:15:34,920 Speaker 3: quickly shifted to the emphasis to December. It was a 362 00:15:34,920 --> 00:15:37,560 Speaker 3: clever move to distract from the fact that the economic 363 00:15:37,600 --> 00:15:42,160 Speaker 3: outlook did not really justify yesterday's cut, Sana joins us. Now, Sanal, 364 00:15:42,200 --> 00:15:45,280 Speaker 3: I always love hearing your takes as they are different 365 00:15:45,360 --> 00:15:48,280 Speaker 3: from what everyone else is talking about. Why do you 366 00:15:48,320 --> 00:15:51,040 Speaker 3: think it is interesting that they did cut rates this 367 00:15:51,240 --> 00:15:54,240 Speaker 3: meeting when it was completely expected and baked in two 368 00:15:54,320 --> 00:15:58,880 Speaker 3: market expectations, given the fact that his rhetoric was a 369 00:15:58,880 --> 00:16:00,880 Speaker 3: bit hawkish and casting doubt on December. 370 00:16:01,920 --> 00:16:04,200 Speaker 10: So thanks Lisa for always fun being here. But here's 371 00:16:04,240 --> 00:16:04,520 Speaker 10: the thing. 372 00:16:05,640 --> 00:16:08,320 Speaker 11: What I'm what I'm saying here is certainly the market 373 00:16:08,400 --> 00:16:10,960 Speaker 11: expected it, and the fair guided us towards rate cut, 374 00:16:11,000 --> 00:16:12,720 Speaker 11: so of course they were going to cut. But that's 375 00:16:12,720 --> 00:16:14,880 Speaker 11: a heck of a response if you're asked, why did 376 00:16:14,880 --> 00:16:17,360 Speaker 11: you cut well because you expected us to cut. That's 377 00:16:17,360 --> 00:16:20,440 Speaker 11: really not very convincing. What I was talking about really 378 00:16:20,880 --> 00:16:24,880 Speaker 11: is that the underlying data, much the way that power 379 00:16:25,280 --> 00:16:29,240 Speaker 11: is telegraphing, that December is not a done deal. Quite frankly, 380 00:16:29,320 --> 00:16:32,080 Speaker 11: yesterday's cut should not have been a done deal either. 381 00:16:32,520 --> 00:16:33,720 Speaker 10: And what I mean by this. 382 00:16:33,960 --> 00:16:36,920 Speaker 11: Is that several people have pointed to benign inflation. 383 00:16:37,440 --> 00:16:38,760 Speaker 10: I would actually beg to differ. 384 00:16:38,880 --> 00:16:44,200 Speaker 11: Since the middle of twenty twenty three now, inflation hasn't 385 00:16:44,240 --> 00:16:45,280 Speaker 11: really come down very much. 386 00:16:45,320 --> 00:16:47,120 Speaker 10: We've been at about three percent and. 387 00:16:47,120 --> 00:16:50,120 Speaker 11: It's been over two years now that inflation has been 388 00:16:50,160 --> 00:16:54,400 Speaker 11: stuck at around three percent. Yes, we're down by zero 389 00:16:54,520 --> 00:16:59,200 Speaker 11: point three percent since then, so inflation isn't actually actively 390 00:16:59,200 --> 00:17:02,240 Speaker 11: coming down coming down the speed at wag inflation is 391 00:17:02,240 --> 00:17:05,400 Speaker 11: coming down, it's glacial. In terms of the labor market, 392 00:17:05,800 --> 00:17:08,639 Speaker 11: there aren't very good signs which indicate that the labor 393 00:17:08,680 --> 00:17:12,960 Speaker 11: market is doing poorly. Powell indicated he talked a lot 394 00:17:13,080 --> 00:17:14,240 Speaker 11: about the supply issues. 395 00:17:14,320 --> 00:17:16,919 Speaker 10: That's absolutely correct. I fully concur with this. 396 00:17:17,480 --> 00:17:19,919 Speaker 11: There was a Dallas Fed paper which talked about thirty 397 00:17:20,040 --> 00:17:22,119 Speaker 11: k as being the new break even. 398 00:17:22,840 --> 00:17:24,600 Speaker 10: Based on current ADP. 399 00:17:24,680 --> 00:17:27,879 Speaker 11: Rolling four week numbers, we're looking at fifty to fifty 400 00:17:27,920 --> 00:17:29,600 Speaker 11: five k for this last month. 401 00:17:29,680 --> 00:17:31,800 Speaker 10: So, if anything, the labor market's doing rather well. 402 00:17:32,359 --> 00:17:33,919 Speaker 3: So at this point you think that it might have 403 00:17:33,960 --> 00:17:36,359 Speaker 3: been a mistake for them to cut rates by twenty 404 00:17:36,400 --> 00:17:37,560 Speaker 3: five basis points. 405 00:17:37,880 --> 00:17:40,800 Speaker 1: Where do you see it showing up going forward? Right now? 406 00:17:40,880 --> 00:17:44,320 Speaker 3: Markets are not expressing concern. If anything, they're responding more. 407 00:17:44,320 --> 00:17:46,800 Speaker 3: It's the lack of a December rate cut, and you're 408 00:17:46,840 --> 00:17:48,760 Speaker 3: not saying the move that we saw last year when 409 00:17:48,800 --> 00:17:51,119 Speaker 3: they cut rates, and you saw long End yeld's rise 410 00:17:51,480 --> 00:17:52,160 Speaker 3: in response. 411 00:17:53,240 --> 00:17:55,360 Speaker 10: So I actually do I wouldn't go as far as 412 00:17:55,560 --> 00:17:57,760 Speaker 10: this is within what I would consider the margin of errol. 413 00:17:57,920 --> 00:17:59,480 Speaker 11: If they took it to three percent, I think it 414 00:17:59,480 --> 00:18:02,480 Speaker 11: would be inst Given the current state of the economy, 415 00:18:02,840 --> 00:18:05,159 Speaker 11: I think three point seventy five four I think it 416 00:18:05,160 --> 00:18:07,240 Speaker 11: should be four. They've cut to three point seventy five. 417 00:18:08,200 --> 00:18:11,200 Speaker 11: It's not catastrophic in terms of why the market has 418 00:18:11,200 --> 00:18:13,080 Speaker 11: not responded in the same way. 419 00:18:13,520 --> 00:18:18,160 Speaker 10: I think with complete you can make the. 420 00:18:18,200 --> 00:18:21,280 Speaker 7: Argument, very strong argument that whatever else you think about 421 00:18:21,359 --> 00:18:24,879 Speaker 7: last year's ratecards, those four rate cards came against the 422 00:18:24,920 --> 00:18:30,359 Speaker 7: backdrop of meaningfully higher inflation and lower unemployment and somewhat 423 00:18:30,359 --> 00:18:31,000 Speaker 7: stronger growth. 424 00:18:31,040 --> 00:18:31,600 Speaker 10: So it was a. 425 00:18:31,560 --> 00:18:35,199 Speaker 11: Particularly odd time to deliver the size and number of 426 00:18:35,240 --> 00:18:38,000 Speaker 11: rate cards they did. Nonetheless, if we look at where 427 00:18:38,000 --> 00:18:41,480 Speaker 11: we are today, the FED is standing on the cusp 428 00:18:41,760 --> 00:18:46,160 Speaker 11: of a first quota, which potentially is going to see 429 00:18:46,200 --> 00:18:52,840 Speaker 11: tailwinds for both GDP and for infation, small tailwinds coming 430 00:18:52,880 --> 00:18:55,960 Speaker 11: from say, tariffs on the inflation front and from the 431 00:18:56,000 --> 00:18:59,840 Speaker 11: GDP front. We finally start seeing the impact of the 432 00:19:00,160 --> 00:19:03,960 Speaker 11: Beautiful Bill on taxes, and I think that that's something 433 00:19:03,960 --> 00:19:07,520 Speaker 11: which the Fed must take into account as we look forward. 434 00:19:07,760 --> 00:19:10,399 Speaker 11: So I don't think that the December rate cut is 435 00:19:10,400 --> 00:19:13,640 Speaker 11: a foregone conclusion. And I think potentially if they cut 436 00:19:13,680 --> 00:19:16,679 Speaker 11: in December, it's a pretty risky thing to do in 437 00:19:17,200 --> 00:19:19,919 Speaker 11: front or what we know is going to happen in 438 00:19:20,040 --> 00:19:20,480 Speaker 11: Q one. 439 00:19:20,800 --> 00:19:23,440 Speaker 6: What do you need to see between now and December 440 00:19:23,480 --> 00:19:26,199 Speaker 6: to then in your mind think okay, they should be 441 00:19:26,440 --> 00:19:27,280 Speaker 6: and we'll be cutting. 442 00:19:28,160 --> 00:19:30,040 Speaker 11: I think it would basically be that weakness of the 443 00:19:30,119 --> 00:19:33,520 Speaker 11: labor market, so we should And really, yes, it does 444 00:19:33,600 --> 00:19:37,000 Speaker 11: depend on getting some data, and I know we've got 445 00:19:37,000 --> 00:19:40,360 Speaker 11: problems getting the data given that the government is still 446 00:19:40,400 --> 00:19:45,480 Speaker 11: shut down, But there are other higher frequency indicators we 447 00:19:45,520 --> 00:19:49,520 Speaker 11: can look at. We also have earnings reports which continue 448 00:19:49,520 --> 00:19:50,320 Speaker 11: to come down. 449 00:19:50,280 --> 00:19:54,280 Speaker 12: If the mass of those earnings reports starts moving in 450 00:19:54,320 --> 00:19:58,119 Speaker 12: the direction of pointing to a significantly weaker consumer and 451 00:19:58,200 --> 00:20:01,680 Speaker 12: here I would be looking in particular in areas such as airlines, 452 00:20:01,720 --> 00:20:06,160 Speaker 12: you know, the consumer dependent pieces of the economy which 453 00:20:06,200 --> 00:20:10,120 Speaker 12: actually continue to show strength. And so if we started 454 00:20:10,160 --> 00:20:13,919 Speaker 12: seeing a massive data moving in that direction, sure, I 455 00:20:14,080 --> 00:20:17,160 Speaker 12: also actually do understand why if. 456 00:20:17,760 --> 00:20:20,000 Speaker 10: They don't have more. 457 00:20:19,840 --> 00:20:25,600 Speaker 11: Meaningful data showing significant weakness, they would err on the 458 00:20:25,680 --> 00:20:29,040 Speaker 11: side of not cutting rather than cutting, because we do 459 00:20:29,160 --> 00:20:32,520 Speaker 11: know that those AsSalt tax deductions are going to go 460 00:20:32,680 --> 00:20:36,280 Speaker 11: up in the beginning of next year. Childher child's tax 461 00:20:36,320 --> 00:20:38,560 Speaker 11: credits are going to go up. A lot of the 462 00:20:38,600 --> 00:20:40,840 Speaker 11: pieces of the big beautiful bill which are not being 463 00:20:40,880 --> 00:20:45,200 Speaker 11: discussed today, actually go into play as we start off 464 00:20:45,200 --> 00:20:48,040 Speaker 11: in the next year. So I'm not sure where the 465 00:20:48,160 --> 00:20:51,320 Speaker 11: gloom about the economy comes from, because we get fiscal 466 00:20:51,359 --> 00:20:54,000 Speaker 11: tailwinds pretty early in twenty twenty six. 467 00:20:54,400 --> 00:20:56,520 Speaker 3: So no, just quickly here, We've got about a minute 468 00:20:56,840 --> 00:20:59,680 Speaker 3: meta just to put out this announcement that they're announcing 469 00:21:00,080 --> 00:21:03,360 Speaker 3: six part dollars bond sale following their earning support yesterday. 470 00:21:03,400 --> 00:21:06,040 Speaker 3: It follows what we saw from Oracle last week is 471 00:21:06,040 --> 00:21:08,919 Speaker 3: almost forty billion dollars of debt being sold. I'm just 472 00:21:09,000 --> 00:21:12,119 Speaker 3: wondering if that makes you concerned about the investment grade 473 00:21:12,119 --> 00:21:14,919 Speaker 3: space given the glood of AI related supply coming to 474 00:21:14,960 --> 00:21:15,280 Speaker 3: the fore. 475 00:21:16,560 --> 00:21:18,920 Speaker 11: I don't think where I'd go as far as seeing 476 00:21:19,280 --> 00:21:22,360 Speaker 11: we are concerned. The fact that the market is currently 477 00:21:22,480 --> 00:21:24,800 Speaker 11: absorbing it, spreads are very tight. 478 00:21:24,880 --> 00:21:25,760 Speaker 10: It probably makes. 479 00:21:25,560 --> 00:21:28,560 Speaker 13: Sense for these companies to issue, But I would say 480 00:21:28,680 --> 00:21:32,800 Speaker 13: that overall, we're starting from a position where credit as 481 00:21:32,840 --> 00:21:35,640 Speaker 13: price pretty close to profection, not much spoke to error. 482 00:21:37,720 --> 00:21:38,440 Speaker 1: Stay with us. 483 00:21:38,600 --> 00:21:41,159 Speaker 6: More Bloomberg surveillance coming up after this. 484 00:21:50,560 --> 00:21:53,760 Speaker 3: President Trump teasing an energy deal with China after both 485 00:21:53,760 --> 00:21:57,400 Speaker 3: countries reach a tariff and rare Earth agreement, joining US now. 486 00:21:57,440 --> 00:21:59,960 Speaker 3: I am so pleased to say, as US Energy Secretary 487 00:22:00,440 --> 00:22:03,080 Speaker 3: Chris right from Toronto where he is in the G 488 00:22:03,200 --> 00:22:07,680 Speaker 3: seven meetings with other world leaders talking about energy and 489 00:22:07,960 --> 00:22:11,240 Speaker 3: what can be done to build out US Energy Secretary, 490 00:22:11,359 --> 00:22:13,080 Speaker 3: thank you so much for being with us. I want 491 00:22:13,080 --> 00:22:16,280 Speaker 3: to start with this deal that President Trump was hinting 492 00:22:16,320 --> 00:22:18,200 Speaker 3: at with China, talking. 493 00:22:18,040 --> 00:22:19,159 Speaker 1: About Alaska oil. 494 00:22:19,680 --> 00:22:23,080 Speaker 3: What details can you provide us with what contours of 495 00:22:23,160 --> 00:22:23,959 Speaker 3: this transaction? 496 00:22:24,240 --> 00:22:25,440 Speaker 1: Do you expect to come to light. 497 00:22:26,359 --> 00:22:30,000 Speaker 14: Look, China is by far the world's largest importer of 498 00:22:30,040 --> 00:22:33,480 Speaker 14: oil and importer of natural gas. The US is by 499 00:22:33,480 --> 00:22:36,400 Speaker 14: far the world's largest exporter of natural gas and by 500 00:22:36,440 --> 00:22:39,239 Speaker 14: far the world's largest producer of oil. So there's so 501 00:22:39,440 --> 00:22:44,760 Speaker 14: much space for mutually beneficial deals between the US and China. 502 00:22:44,800 --> 00:22:48,879 Speaker 14: Alaska was mentioned in that deal Dialogue's enormous reserves on 503 00:22:48,960 --> 00:22:52,800 Speaker 14: the Alaskan Slope. They've been strangled by the Biden administration 504 00:22:52,880 --> 00:22:55,520 Speaker 14: and Alaskan production has been in decline, but lots of 505 00:22:55,600 --> 00:22:58,080 Speaker 14: room for that production to grow, lots of room to 506 00:22:58,119 --> 00:23:00,800 Speaker 14: bring natural gas from the North slope of Alaska and 507 00:23:00,920 --> 00:23:04,720 Speaker 14: bring that to all of our allies along the East 508 00:23:04,760 --> 00:23:07,800 Speaker 14: Asian ram or frankly anywhere in the world. But President 509 00:23:07,840 --> 00:23:10,440 Speaker 14: Trump is just a master negotiator. He finds out what 510 00:23:10,520 --> 00:23:12,919 Speaker 14: is it that's critical to the Chinese, what is it 511 00:23:12,960 --> 00:23:15,840 Speaker 14: that's critical to the United States, and finds that sweet 512 00:23:15,840 --> 00:23:17,960 Speaker 14: spot of a deal that works for both countries. 513 00:23:18,400 --> 00:23:21,760 Speaker 6: Could potentially the United States fill a gap if China 514 00:23:21,840 --> 00:23:25,480 Speaker 6: decides to buy less energy from Russia, especially since the 515 00:23:25,560 --> 00:23:27,920 Speaker 6: US government sanctioned Royceneft and Luke Oil. 516 00:23:29,160 --> 00:23:33,680 Speaker 14: Absolutely absolutely today the US produces fifty percent more oil 517 00:23:33,720 --> 00:23:36,760 Speaker 14: than Russia or Saudi Arabia, and it just puts not 518 00:23:36,880 --> 00:23:39,760 Speaker 14: just the United States, but the world in a better position. 519 00:23:40,240 --> 00:23:43,320 Speaker 14: Can we squish out half of Russian oil exports and 520 00:23:43,400 --> 00:23:46,560 Speaker 14: still have a roughly balanced oil market? Absolutely we can. 521 00:23:47,840 --> 00:23:48,440 Speaker 5: Have you been in. 522 00:23:48,400 --> 00:23:51,639 Speaker 6: Touch as well with your counterparts in South Korea? The 523 00:23:51,680 --> 00:23:54,679 Speaker 6: President coming back on this strip, talked about the tariff 524 00:23:54,760 --> 00:23:56,840 Speaker 6: rate in South Korea and the plan for them to 525 00:23:56,840 --> 00:24:00,119 Speaker 6: buy oil and gas in vast quantities part of that 526 00:24:00,200 --> 00:24:00,760 Speaker 6: trade deal. 527 00:24:01,920 --> 00:24:06,920 Speaker 14: Yes, I've been in dialogues with the Korean staff since 528 00:24:06,920 --> 00:24:08,879 Speaker 14: I arrived in the office. You know, Korea is a 529 00:24:08,920 --> 00:24:13,960 Speaker 14: great industrial nation, also short on energy resources but long 530 00:24:14,040 --> 00:24:16,879 Speaker 14: on other assets. So yeah, lots of room for United 531 00:24:16,880 --> 00:24:20,639 Speaker 14: States to grow our role in supplying natural gas, oil, 532 00:24:20,800 --> 00:24:23,200 Speaker 14: and frankly nuclear technology to South Korea. 533 00:24:23,280 --> 00:24:25,080 Speaker 6: I bring this up because it sounds like, are you 534 00:24:25,119 --> 00:24:27,479 Speaker 6: preparing some sort of trip to the Asia Pacific if 535 00:24:27,520 --> 00:24:29,479 Speaker 6: you have to meet with your Chinese counterparts and your 536 00:24:29,520 --> 00:24:32,440 Speaker 6: South Korean counterparts for the United States to send more 537 00:24:32,600 --> 00:24:33,720 Speaker 6: energy to that part. 538 00:24:33,560 --> 00:24:34,040 Speaker 1: Of the world. 539 00:24:34,840 --> 00:24:36,720 Speaker 5: Oh, I go wherever the President tells me. 540 00:24:37,040 --> 00:24:38,639 Speaker 14: But yes, I would be going to Asian in a 541 00:24:38,680 --> 00:24:41,119 Speaker 14: few weeks, and heck, I may be going sooner than that. 542 00:24:41,640 --> 00:24:44,159 Speaker 14: You know, I'll get debriefed from all the dialogues and 543 00:24:44,200 --> 00:24:46,919 Speaker 14: all what must be done promptly in the follow up. 544 00:24:46,960 --> 00:24:49,239 Speaker 14: Could be heading there very shortly, but I don't know 545 00:24:49,320 --> 00:24:52,360 Speaker 14: about that right now. But of course Asia is the 546 00:24:52,400 --> 00:24:55,760 Speaker 14: center of the world economy after the United States. So yeah, 547 00:24:55,760 --> 00:25:00,520 Speaker 14: that's a critical alliances, critical partnerships, and critical oil demand sources. 548 00:25:00,720 --> 00:25:02,800 Speaker 3: Mister secretary, I feel like we should have a map 549 00:25:02,840 --> 00:25:04,879 Speaker 3: here of all the places where you've got trips planned, 550 00:25:04,920 --> 00:25:06,440 Speaker 3: because I suspect that you're going to be heading to 551 00:25:06,480 --> 00:25:09,040 Speaker 3: Grece soon too. And the old idea of how much 552 00:25:09,320 --> 00:25:12,439 Speaker 3: the US is exporting in terms of energy to the 553 00:25:12,480 --> 00:25:17,040 Speaker 3: European region, especially as they reduce reliance on Russia. Can 554 00:25:17,080 --> 00:25:20,160 Speaker 3: you tell us anything about how that relationship is developing. 555 00:25:21,320 --> 00:25:24,600 Speaker 14: Actually, it's been great dialogues. I think the European nations. 556 00:25:24,640 --> 00:25:28,240 Speaker 14: The war in Ukraine really crystallized. Yes, it wasn't a 557 00:25:28,280 --> 00:25:32,399 Speaker 14: good idea to have all of our key energy supply 558 00:25:32,560 --> 00:25:35,439 Speaker 14: coming from Russia, largest supplier of oil to them, largest 559 00:25:35,440 --> 00:25:39,200 Speaker 14: supplier of natural gas to them, largest supplier of coal 560 00:25:39,240 --> 00:25:42,119 Speaker 14: to Europe, and the United States has slid in to 561 00:25:42,200 --> 00:25:45,680 Speaker 14: displace Russia as the largest supplier of natural gas to Europe. 562 00:25:45,800 --> 00:25:48,240 Speaker 14: We can do the same thing with oil, and I 563 00:25:48,240 --> 00:25:51,440 Speaker 14: think we're today the second largest supplier of coal to Europe, 564 00:25:51,920 --> 00:25:55,760 Speaker 14: So I think there's mutual agreement on both sides. 565 00:25:55,760 --> 00:25:56,119 Speaker 5: There. 566 00:25:56,320 --> 00:26:00,240 Speaker 14: Certainly there's some regulations in Europe cs Triple D, which 567 00:26:00,240 --> 00:26:04,560 Speaker 14: is just a way overreach in the regulatory regime that's 568 00:26:04,600 --> 00:26:07,280 Speaker 14: going to make it sticky to ramp up energy movement 569 00:26:07,320 --> 00:26:10,200 Speaker 14: as fast as we'd like. But we're in constant dialogue 570 00:26:10,200 --> 00:26:13,680 Speaker 14: to fix those problems. I'm excited about the future relationship 571 00:26:14,000 --> 00:26:16,520 Speaker 14: between the European nations and the United States. It's always 572 00:26:16,560 --> 00:26:18,920 Speaker 14: been good, but I think it's going to grow a lot. 573 00:26:18,800 --> 00:26:19,480 Speaker 1: Mister Secretary. 574 00:26:19,480 --> 00:26:21,280 Speaker 3: A lot of people come on the show talk about 575 00:26:21,280 --> 00:26:24,040 Speaker 3: their concerns about higher energy prices in the United States. 576 00:26:24,160 --> 00:26:29,080 Speaker 3: They talk about artificial intelligence, the power demands, the inability 577 00:26:29,119 --> 00:26:32,119 Speaker 3: to really provide the energy that would be required to 578 00:26:32,240 --> 00:26:34,600 Speaker 3: expand at the pace that a lot of AI giants 579 00:26:34,880 --> 00:26:35,840 Speaker 3: are talking about. 580 00:26:36,320 --> 00:26:37,760 Speaker 1: How do you plan to mitigate that? 581 00:26:37,920 --> 00:26:40,760 Speaker 3: Is there a level at which power prices get so 582 00:26:40,920 --> 00:26:44,159 Speaker 3: expensive that the United States will reduce some of the 583 00:26:44,200 --> 00:26:45,840 Speaker 3: exports to the rest of the world. 584 00:26:46,960 --> 00:26:50,679 Speaker 14: Well, they are actually different factors that control them. Like 585 00:26:50,760 --> 00:26:54,359 Speaker 14: our large exports of natural gas today are actually still 586 00:26:54,400 --> 00:26:57,160 Speaker 14: relatively modest compared to the amount of gas we produce, 587 00:26:57,359 --> 00:27:00,880 Speaker 14: and we can easily produce vastly more natural gas today. 588 00:27:01,240 --> 00:27:04,560 Speaker 14: So power prices. The problem isn't the price of natural gas. 589 00:27:04,840 --> 00:27:10,159 Speaker 14: The problem is the infrastructure, generation facilities, transmission lines. The 590 00:27:10,200 --> 00:27:14,159 Speaker 14: Biden administration for four years, forced the closure of a 591 00:27:14,160 --> 00:27:16,960 Speaker 14: lot of coal plants, a few gas plants, prevented the 592 00:27:17,040 --> 00:27:20,880 Speaker 14: building of new coal and natural gas power plants. They said, 593 00:27:21,200 --> 00:27:25,119 Speaker 14: they built a lot of unreliable, intermittent electricity that's spread 594 00:27:25,119 --> 00:27:28,960 Speaker 14: all over the country that takes more transmission assets. All 595 00:27:29,040 --> 00:27:31,080 Speaker 14: of that goes into the rate base and has pushed 596 00:27:31,160 --> 00:27:33,760 Speaker 14: up prices. Frankly, it's part of the reason why President 597 00:27:33,800 --> 00:27:35,160 Speaker 14: Trump got elected. 598 00:27:35,359 --> 00:27:37,080 Speaker 5: So we're having to reverse all those things. 599 00:27:37,119 --> 00:27:40,359 Speaker 14: Stop the closure of coal plants, make it easier to 600 00:27:40,400 --> 00:27:44,000 Speaker 14: build new natural gas plants, make new sources that want 601 00:27:44,040 --> 00:27:48,840 Speaker 14: to come on be successful commercially, not dependent upon subsidies, 602 00:27:49,119 --> 00:27:53,439 Speaker 14: and not require massive new transmission investments that all just 603 00:27:53,520 --> 00:27:56,159 Speaker 14: go on to the rate payers. So we're doing a 604 00:27:56,240 --> 00:27:58,600 Speaker 14: lot of things. At FIRK, we had a big announcement 605 00:27:58,680 --> 00:28:02,240 Speaker 14: last Thursday. I probably can't go into here, but specifically 606 00:28:02,359 --> 00:28:06,160 Speaker 14: aimed at artificial intelligence, how we can speed new firm 607 00:28:06,240 --> 00:28:10,359 Speaker 14: generation without driving up the price of electricity. I share 608 00:28:10,400 --> 00:28:14,040 Speaker 14: the American consumers' worries about the recent rises in price 609 00:28:14,080 --> 00:28:17,119 Speaker 14: of electricity over the last four years, and I'm working 610 00:28:17,240 --> 00:28:20,280 Speaker 14: seven days a week to stop those price rises and 611 00:28:20,560 --> 00:28:23,600 Speaker 14: enable the United States to lead in artificial intelligence. 612 00:28:23,680 --> 00:28:26,880 Speaker 6: We've seen one of the most significant significant announcements from 613 00:28:26,880 --> 00:28:29,359 Speaker 6: this administration when it comes to nuclear The government is 614 00:28:29,400 --> 00:28:32,919 Speaker 6: planning this partnership eighty billion dollars for nuclear reactors with 615 00:28:33,000 --> 00:28:36,200 Speaker 6: a Canadian company, Westinghouse. Who will develop them? 616 00:28:36,240 --> 00:28:36,640 Speaker 1: And where? 617 00:28:36,720 --> 00:28:38,360 Speaker 6: Can you give us more details about this? 618 00:28:39,360 --> 00:28:42,120 Speaker 14: Oh? I would call Westinghouse an American company. It's a 619 00:28:42,160 --> 00:28:44,840 Speaker 14: legacy American company and it's majority owned. 620 00:28:44,560 --> 00:28:45,440 Speaker 5: By the Americans. 621 00:28:45,480 --> 00:28:50,719 Speaker 14: It has a Canadian partner in Camico, but it's an 622 00:28:50,720 --> 00:28:55,720 Speaker 14: American company. This is a plan to partner across the 623 00:28:55,760 --> 00:28:59,040 Speaker 14: country at a few different locations to build, as you 624 00:28:59,080 --> 00:29:01,800 Speaker 14: saw in the announcement, gave dollar amounts, but a large 625 00:29:01,880 --> 00:29:05,600 Speaker 14: amount of power. Think of order ten gigawatts of new 626 00:29:05,720 --> 00:29:09,200 Speaker 14: electric generating production capacity, and to do it in a 627 00:29:09,200 --> 00:29:12,280 Speaker 14: way that's efficient. So instead of one here and one 628 00:29:12,320 --> 00:29:15,120 Speaker 14: starting a few years later, we want to stage in 629 00:29:15,280 --> 00:29:19,960 Speaker 14: the construction of these plants to most efficiently use construction workers, 630 00:29:20,040 --> 00:29:23,920 Speaker 14: assembler's fabrication, so that we lower the cost of nuclear 631 00:29:23,960 --> 00:29:27,680 Speaker 14: generation restand up the supply chain in the United States. 632 00:29:28,280 --> 00:29:31,200 Speaker 14: This is quite an exciting project and more details will 633 00:29:31,200 --> 00:29:33,520 Speaker 14: come out as we fill in, as we fill in 634 00:29:33,560 --> 00:29:37,840 Speaker 14: those dots. But the President Trump promised to relaunch nuclear 635 00:29:37,960 --> 00:29:40,760 Speaker 14: energy Unlesia, nuclear renaissance in the United States. 636 00:29:40,920 --> 00:29:41,920 Speaker 5: This is a big part of that. 637 00:29:41,880 --> 00:29:44,320 Speaker 6: Effort, and just I wanted to get your take on 638 00:29:44,360 --> 00:29:47,160 Speaker 6: a reversal we've seen from Bill Gates, someone who's long 639 00:29:47,240 --> 00:29:50,080 Speaker 6: talked about climate change. He's sort of pivoting his stance 640 00:29:50,120 --> 00:29:52,680 Speaker 6: and according to his staff, you recently met with him, 641 00:29:52,960 --> 00:29:55,480 Speaker 6: did you have a hand in how now he's talking 642 00:29:55,480 --> 00:29:56,240 Speaker 6: about energy. 643 00:29:57,080 --> 00:29:59,720 Speaker 14: I've had multiple great dialogues with Bill Gates over the 644 00:29:59,800 --> 00:30:02,840 Speaker 14: last last year, at multiple times and at some length 645 00:30:02,880 --> 00:30:07,040 Speaker 14: of course, he's a very thoughtful, successful entrepreneur, and climate 646 00:30:07,120 --> 00:30:07,960 Speaker 14: change is a real thing. 647 00:30:08,080 --> 00:30:09,200 Speaker 5: It's a real challenge. 648 00:30:09,280 --> 00:30:12,360 Speaker 14: It's just not remotely close to the world's top challenge. 649 00:30:12,520 --> 00:30:15,880 Speaker 14: And the problem is by putting it the top challenge. 650 00:30:16,000 --> 00:30:19,960 Speaker 14: The ineffective things governments have done have raised the price 651 00:30:20,040 --> 00:30:23,360 Speaker 14: of energy, lowered the reliability of the energy system, and 652 00:30:23,400 --> 00:30:26,440 Speaker 14: they've stood in the way of efforts to combat hunger, 653 00:30:26,720 --> 00:30:32,120 Speaker 14: food insecurity, energy security, education, and all the other global challenges. 654 00:30:33,400 --> 00:30:35,880 Speaker 14: So yeah, Bill and I have had great dialogues. He's 655 00:30:35,880 --> 00:30:39,040 Speaker 14: done fabulous stuff in public health around the world, and 656 00:30:40,240 --> 00:30:43,280 Speaker 14: I'm thrilled to see him talk in a more candid 657 00:30:43,280 --> 00:30:44,720 Speaker 14: way about this issue. 658 00:30:45,640 --> 00:30:49,160 Speaker 2: This is the Bloomberg Survendments podcast, bringing you the best 659 00:30:49,200 --> 00:30:52,520 Speaker 2: in markets, economics, antient politics. You can watch the show 660 00:30:52,560 --> 00:30:55,520 Speaker 2: live on Bloomberg TV weekday mornings from six am to 661 00:30:55,640 --> 00:30:59,400 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 662 00:30:59,520 --> 00:31:01,760 Speaker 2: or anywhere else you listen, and as always on the 663 00:31:01,800 --> 00:31:04,200 Speaker 2: Bloomberg Terminal and the Bloomberg Business out 664 00:31:08,320 --> 00:31:08,760 Speaker 13: Mm hmm