WEBVTT - Bloomberg Surveillance TV: October 30th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business app. 0:00:36.200 --> 0:00:39.560 Stocks hovering your record highs as investors wait more magnificent 0:00:39.600 --> 0:00:42.920 seven earnings. Stuart Heiser City Group writing this, the early 0:00:42.960 --> 0:00:45.879 reactions to earnings have been mixed. We remain positive US 0:00:45.960 --> 0:00:48.960 equity Beta with a quality tilt and preference for AI 0:00:49.080 --> 0:00:52.000 power generations. Stuart joins us. Now, so great to see you, 0:00:52.240 --> 0:00:53.880 good morning, Thank you for being here. I'm glad the 0:00:53.920 --> 0:00:56.760 Polar bears didn't meet you. I'm just curious going forward. 0:00:56.800 --> 0:00:59.080 What's your takeaway is? Are you still all in on 0:00:59.200 --> 0:01:02.480 power generation despite the fact that investors seem a little 0:01:02.520 --> 0:01:06.040 bit cautious about spending more than revenues are growing. 0:01:06.040 --> 0:01:07.880 Yeah, we're still very positive on that story, and I 0:01:07.920 --> 0:01:09.560 think you're going to get a lot of political headlines 0:01:09.640 --> 0:01:12.600 next week with Election Day coming up that puts even 0:01:12.640 --> 0:01:15.520 more focus on utility prices. To be completely honest with you, 0:01:15.880 --> 0:01:18.240 all the capex numbers that Emory mentioned, a lot of 0:01:18.280 --> 0:01:21.000 that is going straight into data center build out. I mean, 0:01:21.120 --> 0:01:23.520 one of the Meta data centers in Louisiana costs twenty 0:01:23.560 --> 0:01:26.760 seven billion dollars, which for New Yorkers that's three tunnels 0:01:26.800 --> 0:01:30.040 under the Hudson River, so an astounding amount of money. 0:01:30.240 --> 0:01:33.000 So yeah, we're still there. Look, there are obviously risks 0:01:33.040 --> 0:01:35.200 to that, you know, just one headline that these chips 0:01:35.240 --> 0:01:37.560 need know less power that we thought would be very 0:01:37.560 --> 0:01:39.559 destructive for that trade, like we saw with deep Seat 0:01:39.560 --> 0:01:41.800 back in January. But for now, we do think it's 0:01:41.800 --> 0:01:43.399 the best sharp ratio way to kind of have that. 0:01:43.360 --> 0:01:43.960 AI drain on. 0:01:44.040 --> 0:01:46.240 And frankly, the best example of this is Caterpillar. The 0:01:46.240 --> 0:01:48.200 fact that those shares pop and most since two thousand 0:01:48.200 --> 0:01:51.720 and nine on energy not necessarily bulldozers. I'm just curious 0:01:51.760 --> 0:01:53.920 what you're expecting to learn from Amazon and Apple and 0:01:53.920 --> 0:01:56.080 whether that could feed into the story or that these 0:01:56.080 --> 0:01:59.120 earnings are irrelevant to you based on the capex spend 0:01:59.120 --> 0:02:02.080 that we've already heard the likes of Microsoft and Alphabet and. 0:02:02.040 --> 0:02:03.640 Meta, I mean, definitely not irrelevant. 0:02:03.640 --> 0:02:05.920 I think Amazon in particular, because you're going to get 0:02:05.960 --> 0:02:08.280 you know a little bit of a site into AWS, 0:02:08.360 --> 0:02:10.720 but also consumer spending, so I think Amazon will be 0:02:10.960 --> 0:02:13.080 quite interesting. I think Apple surprised people a little bit, 0:02:13.240 --> 0:02:15.079 you know, just just giving the uptake on the iPhone, 0:02:15.120 --> 0:02:17.080 but definitely important. Last night was a little more important, 0:02:17.080 --> 0:02:19.560 and that's how it was priced. You know, Amazon earning 0:02:19.600 --> 0:02:20.880 something after that would be very important. 0:02:20.880 --> 0:02:22.560 Again, do you think the bar is just too high 0:02:22.919 --> 0:02:24.120 consider what we saw from Meta? 0:02:24.960 --> 0:02:26.400 Yeah, you know, Meta is interesting. 0:02:26.440 --> 0:02:28.560 I think there's some view that they're they're operating cash 0:02:28.600 --> 0:02:30.920 flows are starting to converge with their capex spend, and 0:02:30.960 --> 0:02:32.440 the question is how are they going to finance that? 0:02:32.520 --> 0:02:34.960 And the discussion of how do you finance all this 0:02:35.000 --> 0:02:37.000 build out is a very big one. I think I 0:02:37.040 --> 0:02:39.280 think Oracle was issuing about forty billion in death this week, 0:02:39.360 --> 0:02:42.400 so yeah, it's you know, there is a question here, 0:02:42.440 --> 0:02:44.520 I think about how this is going to be financed, 0:02:44.560 --> 0:02:46.920 you know, medium to long term, and certainly the Meta stuff. 0:02:46.960 --> 0:02:49.160 It looks like, you know, they're all in and as 0:02:49.160 --> 0:02:50.960 they should be. I think you know, you both mentioned 0:02:50.960 --> 0:02:52.880 the amount of spending. I think it's because these companies 0:02:52.960 --> 0:02:55.400 view this as exextential. They feel that they have to 0:02:55.400 --> 0:02:56.119 win the AI tright. 0:02:56.240 --> 0:02:59.720 You mentioned energy though, Could the energy story keep up 0:03:00.160 --> 0:03:02.640 to spend or they'll be a pause just because we 0:03:02.639 --> 0:03:04.520 don't have the resources to power this. 0:03:04.840 --> 0:03:05.519 That's a good question. 0:03:05.560 --> 0:03:07.800 I mean, instead of Caterpillar bulldozers, maybe you give your 0:03:07.880 --> 0:03:09.000 kids Caterpillar turbines. 0:03:09.040 --> 0:03:11.360 I don't know, but yes, there's an issue with that. 0:03:11.400 --> 0:03:11.560 I think. 0:03:11.720 --> 0:03:13.799 Look when Oracle report a month. 0:03:13.639 --> 0:03:14.760 And a half ago or some of that was the 0:03:14.800 --> 0:03:18.280 big commentary was amazing revenue forecasts, they might not have 0:03:18.320 --> 0:03:21.800 the chips or the electricity to actually get there. So, 0:03:21.880 --> 0:03:23.880 you know, our folks on the ai I side think 0:03:23.880 --> 0:03:26.280 you may have to start almost like carving out hyperscalers 0:03:26.280 --> 0:03:28.520 and have them paying a premium for power, because it 0:03:28.560 --> 0:03:31.160 does seem like your ability to compete and also your 0:03:31.200 --> 0:03:34.040 ability to get access to the chips is linked to 0:03:34.120 --> 0:03:37.200 your proof of concept on the energy side of it. 0:03:37.240 --> 0:03:40.080 So yeah, it could be that we're earlier innings to your. 0:03:39.960 --> 0:03:42.560 Point because of bottlenecks as opposed to anything else. 0:03:42.840 --> 0:03:46.040 Power Lion is, the energy trade, is the AI trade, 0:03:46.280 --> 0:03:47.240 and the idea of. 0:03:47.360 --> 0:03:48.240 Rates going lower. 0:03:48.480 --> 0:03:51.920 How much was yesterday's shock that maybe this wasn't an 0:03:51.920 --> 0:03:54.160 all in FED with respect to a Deeszember rate cut 0:03:54.520 --> 0:03:58.240 potentially the first sign of a real problem for this trade. 0:03:58.680 --> 0:04:01.040 It hasn't been up until now because these companies have 0:04:01.080 --> 0:04:04.080 amazing palance sheets and are generating so much cash. I 0:04:04.080 --> 0:04:06.400 think the fact that Oracle is issuing a lot of 0:04:06.440 --> 0:04:09.000 debt and these numbers are becoming so big it could 0:04:09.040 --> 0:04:10.760 be a little bit more of an issue going forward. 0:04:10.800 --> 0:04:12.560 But the fact is these are you know, these. 0:04:12.400 --> 0:04:14.440 Are some of the strongest balance sheets on the planet 0:04:14.480 --> 0:04:16.200 from a lot of these large captachs. I don't think 0:04:16.279 --> 0:04:18.720 rates is going to impact them too much because frankly, 0:04:18.720 --> 0:04:21.760 they're willing to self finance this stuff at levels that 0:04:21.800 --> 0:04:25.080 a lot of people wouldn't finance them at because they 0:04:25.240 --> 0:04:26.760 view that spend is so important. 0:04:26.839 --> 0:04:29.040 Right, So then why is it important at all whether 0:04:29.040 --> 0:04:31.120 the FED cuts in December or not, Because you're talking 0:04:31.120 --> 0:04:33.120 about how it doesn't affect the biggest trade out there, 0:04:33.160 --> 0:04:36.280 which has been fueling GDP, has been fueling economic growth. 0:04:36.800 --> 0:04:39.119 It doesn't necessarily affect the fact that we see credit 0:04:39.160 --> 0:04:41.480 conditions that a lot of people, for all intentsive purposes, have. 0:04:41.440 --> 0:04:43.080 Been calling extraordinary loose. 0:04:43.360 --> 0:04:46.120 And you've already seen the momentum trade. Yes, have hiccups, 0:04:46.200 --> 0:04:48.920 but do really well. So does it really matter if 0:04:48.920 --> 0:04:50.040 the FED cuts in December. 0:04:50.320 --> 0:04:52.159 It's a very bullish way to look at markets. 0:04:52.200 --> 0:04:54.880 I would say if FED cuts don't matter for equities, look, 0:04:54.920 --> 0:04:57.000 I think it would matter more if we had more 0:04:57.080 --> 0:05:00.279 data in the sense that if you could confirm the 0:05:00.360 --> 0:05:03.200 labor market was continuing to slow down and they actually 0:05:03.200 --> 0:05:05.440 wanted to get back to neutral, in that case, it 0:05:05.440 --> 0:05:07.600 would matter more. We're in a bit of a data vacuum. 0:05:08.000 --> 0:05:09.680 I think the issue in the market's going to have 0:05:09.680 --> 0:05:11.839 a little bit with the FMC yesterday is really trying 0:05:11.839 --> 0:05:14.760 to understand the reaction function here for then in December, 0:05:14.839 --> 0:05:18.280 because you know Chrishn earlier mentioned this, you know they had. 0:05:18.160 --> 0:05:18.799 A base case. 0:05:18.880 --> 0:05:20.720 If you look at the data that's come in since 0:05:20.760 --> 0:05:24.640 that base case, the inflation data was fairly friendly. They 0:05:24.720 --> 0:05:27.240 themselves have stated down to side risk to the labor 0:05:27.320 --> 0:05:31.080 market from the shutdown. That combination of data wouldn't suggest 0:05:31.120 --> 0:05:33.400 that you don't cut in December. So I think the 0:05:33.520 --> 0:05:35.560 question here is is what is your reaction function, what 0:05:35.600 --> 0:05:37.400 are you going to be looking at, and how are 0:05:37.400 --> 0:05:39.080 you weighing the dual mandate risk? 0:05:39.320 --> 0:05:41.560 So the market now start to care about the shutdown 0:05:41.600 --> 0:05:43.520 because it may impact whether or not the FED. 0:05:43.360 --> 0:05:47.400 Can move, you know, potentially, the market seems very uninterested 0:05:47.520 --> 0:05:51.559 in shutdown politics at this point. Look, I think coming 0:05:51.600 --> 0:05:53.200 into this meeting, you say, if we go into the 0:05:53.200 --> 0:05:54.320 FED blind, there could be. 0:05:54.279 --> 0:05:54.840 Some risks there. 0:05:54.920 --> 0:05:56.680 The market kind of priced that out. The issue with 0:05:56.720 --> 0:05:59.200 the next one is they update the SEP, which is 0:05:59.320 --> 0:06:02.080 another level detail they're going to have to provide, and frankly, 0:06:02.120 --> 0:06:03.920 your data at that point could be two or three 0:06:03.960 --> 0:06:06.640 months old, depending because it's going to you know, if 0:06:06.640 --> 0:06:09.520 they reopen, you can get two month old labor data 0:06:09.520 --> 0:06:13.160 out pretty quick. They haven't collected anything on either inflation 0:06:13.800 --> 0:06:15.680 or labor market data now for two months, so it's 0:06:15.720 --> 0:06:17.040 not like they can just you know, push a button 0:06:17.080 --> 0:06:19.080 and get the inflation print. They could go into that 0:06:19.080 --> 0:06:22.120 December meeting with a lot less information than we hoped, 0:06:22.360 --> 0:06:24.200 but yeah, it doesn't I think you're going to need 0:06:24.200 --> 0:06:26.560 to see more paychecks miss for the market to really 0:06:26.600 --> 0:06:27.560 care to be honest with you. 0:06:27.720 --> 0:06:29.359 At this point, though, people are trying to look at 0:06:29.360 --> 0:06:31.560 what they do have, which is corporate earnings. And we've 0:06:31.600 --> 0:06:34.919 seen pretty varied earnings. Right, there's a Chipotle story. I 0:06:34.960 --> 0:06:36.720 keep coming back to what I sound like a broken record. No, 0:06:36.760 --> 0:06:38.840 I'm not obsessed with Chipotle, but there is this feeling 0:06:39.160 --> 0:06:42.559 they are eating the margins insert your pun here, because 0:06:42.560 --> 0:06:45.680 they cannot pass along any price increases that are commensurate 0:06:45.760 --> 0:06:48.200 with the costs that are increasing on their end. And 0:06:48.240 --> 0:06:51.680 they're talking about real weakness, particularly in lower income consumers, 0:06:51.680 --> 0:06:54.039 at the same time that you're seeing higher end products 0:06:54.160 --> 0:06:56.640 in particular, our first class airline tickets for example, do 0:06:56.760 --> 0:06:59.640 really well. So, yes, it's the case shaped economy. At 0:06:59.680 --> 0:07:02.880 what point is that weakness going to start bleeding into 0:07:02.920 --> 0:07:05.160 the credit cracks, the cockroaches, whatever you want to call 0:07:05.200 --> 0:07:06.719 it that some people have been trying. 0:07:06.560 --> 0:07:07.120 To suss out. 0:07:07.440 --> 0:07:08.440 Yeah, it's a great question. 0:07:08.920 --> 0:07:11.000 I would say, first class plane tickets, you must have 0:07:11.000 --> 0:07:11.560 been doing very well. 0:07:11.880 --> 0:07:13.400 I'm not checking out myself to carry on. 0:07:15.400 --> 0:07:17.160 It's it can be an issue. 0:07:17.160 --> 0:07:19.640 But look, this has been almost like a slow motion 0:07:20.040 --> 0:07:21.720 you know, car crash on the labor side, right, I 0:07:21.720 --> 0:07:23.480 feel we've been talking about weakness in the labor market 0:07:23.520 --> 0:07:25.840 for eighteen or eighteen or twenty four months, and yeah, 0:07:26.040 --> 0:07:28.720 there are pockets of risk even you know Walmart's last earnings, 0:07:28.800 --> 0:07:30.520 you know they discussed that, you know, tariffs are going 0:07:30.560 --> 0:07:32.680 to be an issue in coming quarters. So yeah, there 0:07:32.720 --> 0:07:35.040 is a build into this and we we what we 0:07:35.120 --> 0:07:37.880 might start, we might see is the impact from tariffs, 0:07:37.920 --> 0:07:40.760 but it's it's very slow and kind of methodical how 0:07:40.760 --> 0:07:44.480 it bleeds in. I do think, you know, retailer earnings 0:07:44.520 --> 0:07:45.920 later in the quarter are going to be going to 0:07:45.960 --> 0:07:47.800 be very important because you know, the front half of 0:07:47.800 --> 0:07:50.720 earning has been you know, buyased towards larger cap stocks 0:07:50.720 --> 0:07:52.480 with a lot of exposure to capital markets and a 0:07:52.520 --> 0:07:54.600 lot of exposure to the AI theme, and those have 0:07:54.720 --> 0:07:57.040 generally come in well. But look that the market seems 0:07:57.080 --> 0:07:59.440 pretty happy to whistle by that cemetery, as they say, 0:07:59.440 --> 0:08:01.120 and until ven marks. 0:08:00.920 --> 0:08:03.000 Are going to rally, I think stay with us. 0:08:03.160 --> 0:08:05.880 More Bloomberg surveillance coming up after. 0:08:05.640 --> 0:08:17.520 This Leland Miller China base book writing this, the US 0:08:17.560 --> 0:08:21.360 has in fact offer deeper concessions to secure this truth 0:08:21.480 --> 0:08:24.240 once those details emerged this deal, we'll look far more 0:08:24.280 --> 0:08:27.480 one sided in China's favor and perhaps also less likely 0:08:27.520 --> 0:08:28.720 to hold Leland joins US. 0:08:28.760 --> 0:08:30.440 Now Leland, Why do you say that. 0:08:30.480 --> 0:08:33.080 What concessions do you see the US offering China to 0:08:33.120 --> 0:08:35.240 secure this deal that seem lopsided? 0:08:36.480 --> 0:08:38.280 Well, I think this is the beginning of the deal, 0:08:38.440 --> 0:08:39.320 not the end of the deal. 0:08:39.440 --> 0:08:42.000 So I think what we saw at the the you know, 0:08:42.040 --> 0:08:45.319 in the last twelve hours, was a successful start. You know, 0:08:45.440 --> 0:08:48.719 the President agreed to pull back tariffs in return for 0:08:48.800 --> 0:08:51.960 the Chinese agreeing to pull back where Earth their new 0:08:52.040 --> 0:08:55.080 rare Earth export control regime. You know, people may not 0:08:55.120 --> 0:08:56.680 be happy with the a lot of people may not 0:08:56.679 --> 0:08:59.040 be happy with the shipping fees being postponed, but in general, 0:08:59.280 --> 0:09:02.440 the low hanging fruit was addressed. What you didn't see 0:09:02.760 --> 0:09:04.600 was something that I think a lot of China Hawks 0:09:04.600 --> 0:09:06.680 were scared that they would wake up to, which is 0:09:06.800 --> 0:09:09.679 a whole bunch of export controls pulled back in some 0:09:09.720 --> 0:09:11.120 sort of quid pro quo. 0:09:11.760 --> 0:09:13.760 But again, President Trump announced. 0:09:13.360 --> 0:09:16.840 That he is heading to heading to China early next year, 0:09:17.120 --> 0:09:19.520 and there will be more concessions, and there will be 0:09:19.520 --> 0:09:21.160 more back and forth, and there will be a broader 0:09:21.200 --> 0:09:24.880 deal there that they're working on right now. So we're 0:09:24.920 --> 0:09:27.080 working on the margins of the deal, and as we 0:09:27.120 --> 0:09:28.800 get closer to the core, I think that's when things 0:09:28.800 --> 0:09:30.160 are going to a bit more controversial. 0:09:30.320 --> 0:09:33.080 Lew And what about AI chips because the President had 0:09:33.120 --> 0:09:35.520 said that they would discuss Blackwell, then he said they 0:09:35.559 --> 0:09:38.199 didn't discuss Blackwell, but they discussed other chips, and it's 0:09:38.240 --> 0:09:40.880 now for China to talk about that with in video. 0:09:40.960 --> 0:09:41.840 Where does this stand. 0:09:43.520 --> 0:09:45.880 I think what the President came to understand over the 0:09:45.920 --> 0:09:47.440 last you know, twenty four hours or so is that 0:09:47.480 --> 0:09:50.280 this is by far the most controversial aspect of any 0:09:50.320 --> 0:09:53.920 trade deal. When you start incorporating export control rollbacks are 0:09:53.960 --> 0:09:56.760 which are done for national security purposes as part of 0:09:56.800 --> 0:09:58.520 a trade deal where you're just trying to get China 0:09:58.559 --> 0:10:02.560 to buy more commodities, this becomes very, very problematic. And 0:10:02.600 --> 0:10:05.320 so I think what the President realized is that it 0:10:05.320 --> 0:10:08.800 is teaming to do a little bit more uh research 0:10:08.880 --> 0:10:12.280 on on what made sense here. Obviously that there's a 0:10:12.679 --> 0:10:14.120 you know, this is this is this is a very 0:10:14.120 --> 0:10:16.000 big issue. But you know, if the President is trying 0:10:16.000 --> 0:10:19.120 to build up, you know, a broader deal, this was 0:10:19.160 --> 0:10:20.880 the These are the low hanging branches, and then I 0:10:20.880 --> 0:10:23.199 think as they work towards the technology side, that's when 0:10:23.200 --> 0:10:24.479 things are to get more controversial. 0:10:24.920 --> 0:10:27.400 What about TikTok as well, we heard there's going to 0:10:27.440 --> 0:10:30.760 be some sort of deal regarding TikTok, and all that 0:10:30.800 --> 0:10:33.679 we heard from the Chinese Commerce Ministry is that they 0:10:33.679 --> 0:10:34.440 will keep talking. 0:10:35.720 --> 0:10:38.040 Yeah, I think there's a general sense that the Chinese 0:10:38.080 --> 0:10:41.000 side is not completely against any TikTok deal, but I 0:10:41.000 --> 0:10:43.559 think that they're holding their cards as close to the 0:10:43.640 --> 0:10:46.440 chest for as long as possible. Uh, and so you know, 0:10:46.600 --> 0:10:49.360 they can get the maximum maximum concessions possible. You know, 0:10:49.520 --> 0:10:51.720 keep in mind, if we would just announce every concession 0:10:51.800 --> 0:10:54.040 right now and then President Trump announced a trip to 0:10:54.320 --> 0:10:57.320 China and April, there'd be this whole scramble to try 0:10:57.320 --> 0:10:59.880 to understand what that's for. So I think some of 0:10:59.880 --> 0:11:01.760 the some of the things that people were talking about 0:11:01.840 --> 0:11:04.840 being released right now are actually being pushed back a 0:11:04.920 --> 0:11:08.080 number of months. And well, I think both sides are 0:11:08.080 --> 0:11:10.360 trying to see what the other side is willing to 0:11:10.400 --> 0:11:12.640 give before they have a final framework. 0:11:12.800 --> 0:11:15.160 So it's a Dave tant for about a year. But 0:11:15.240 --> 0:11:20.200 that doesn't mean this relationship cannot escalate. With any sort 0:11:20.240 --> 0:11:22.400 of truth that comes out of the White House, What 0:11:22.440 --> 0:11:26.199 would your message be to investors that think, potentially they 0:11:26.200 --> 0:11:29.320 could ignore this relationship for the next twelve months. 0:11:30.280 --> 0:11:32.920 I think, look, an agreement to not do something for 0:11:32.960 --> 0:11:35.439 a year only holds as long as the Chinese decide 0:11:35.440 --> 0:11:37.080 they're not going to do something they don't feel like 0:11:37.080 --> 0:11:40.439 they've been provoked or something else. There's an issue that 0:11:41.320 --> 0:11:42.800 one of your truths doesn't mean one of your truths. 0:11:42.800 --> 0:11:44.400 It means a truth until one of the sides the 0:11:44.440 --> 0:11:46.959 sides that truce doesn't work anymore. But the larger point is, 0:11:47.000 --> 0:11:49.600 I think on tariffs, so the President's moved back tariffs 0:11:49.640 --> 0:11:52.640 by ten percent, so you have a headline rate of 0:11:52.679 --> 0:11:54.840 fifty seven percent. That sound going down to forty seven 0:11:54.960 --> 0:11:57.400 or so. That sounds high. You've got an effective rate 0:11:57.440 --> 0:12:00.240 around thirty percent. So I think the larger picture here 0:12:00.280 --> 0:12:04.080 is they've gone down enough that they're getting very close 0:12:04.120 --> 0:12:07.160 to what competitor producers are actually being charged in the twenties, 0:12:07.240 --> 0:12:09.040 you know, Vietnam and the Mexicos and. 0:12:10.520 --> 0:12:11.800 Other Southeast Asian countries. 0:12:11.960 --> 0:12:14.560 If they get too close, all the de risking work 0:12:14.600 --> 0:12:17.079 that the president has done will start going the other direction, 0:12:17.160 --> 0:12:19.000 there will not be an incentive to move your supply 0:12:19.080 --> 0:12:20.679 chains out of China, so they're gonna have to look 0:12:20.679 --> 0:12:22.600 at that very closely. They're about at the end of 0:12:22.640 --> 0:12:24.640 what they could do in terms of terraff productions on 0:12:24.720 --> 0:12:28.040 China without reversing the president's terraf regime that he fought 0:12:28.160 --> 0:12:29.559 very hard to put in place. 0:12:29.679 --> 0:12:32.440 Well, and the optics of this trip have been pretty powerful, 0:12:32.480 --> 0:12:35.240 the idea of a Southeast Asia tour in Malaysia and 0:12:35.320 --> 0:12:37.960 inking some of the deals and the niceties between the 0:12:38.080 --> 0:12:41.960 likes of the Tie and the Vietnamese and the other 0:12:42.080 --> 0:12:44.880 leaders in the region, Japan as well. 0:12:45.120 --> 0:12:45.880 What do you make of that? 0:12:45.960 --> 0:12:48.400 Do you think that that does give the US closer 0:12:48.440 --> 0:12:51.240 allies in Southeast Asia? They gave it more clout, more 0:12:51.280 --> 0:12:53.800 ammunition heading into these meetings with China. 0:12:55.240 --> 0:12:58.160 Certainly, the more the United States interacts with its allies 0:12:58.160 --> 0:13:00.800 and partners in Asia, the more leverage have with China, 0:13:00.840 --> 0:13:03.720 and the smarter policy will be because you'll be able 0:13:03.720 --> 0:13:06.080 to de risk your supply chains outside of things that 0:13:06.120 --> 0:13:09.520 give China leverage points on your economy. So it's good politics, 0:13:09.559 --> 0:13:11.960 it's good economics. I think it's very helpful. You know, 0:13:12.000 --> 0:13:13.679 you look at what happened with the critical minerals. That 0:13:13.800 --> 0:13:18.400 Chinese released a very powerful export control regime that exerted 0:13:18.440 --> 0:13:21.520 dominance over the supply chains of the world in terms 0:13:21.520 --> 0:13:24.439 of rare earths and critical minerals. The US has immediately 0:13:24.480 --> 0:13:27.520 responded and tried to go out and have partnerships with Australia, 0:13:27.679 --> 0:13:29.840 with Southeast Asian countries. You know. So I think that 0:13:29.880 --> 0:13:33.240 what China did was quite momentous, but at the same 0:13:33.280 --> 0:13:35.400 time it has lit a fire under the United States 0:13:35.520 --> 0:13:37.760 to try to do something to fix the problem. Well. 0:13:37.840 --> 0:13:39.520 And one thing that China page book does so well 0:13:39.520 --> 0:13:43.400 as you track real time economic activity going on in China, 0:13:43.480 --> 0:13:45.960 there's been this stagnation that we've talked about on employment 0:13:46.040 --> 0:13:48.960 rate for youth, very high, and a real question about 0:13:48.960 --> 0:13:52.160 how much the economic backdrop is going to push Jijinping 0:13:52.320 --> 0:13:54.640 to the table to try to make sure that the 0:13:54.720 --> 0:13:56.600 relationship with the United States in front of the rest 0:13:56.600 --> 0:13:58.840 of the world isn't severed. How well are they doing 0:13:59.000 --> 0:14:01.840 rebalancing their aman to more of a consumption less of 0:14:01.880 --> 0:14:05.320 just simply an output based economic model. 0:14:06.440 --> 0:14:08.720 The contours of your question are really important because if 0:14:08.760 --> 0:14:11.000 you were asking how their economic performance is doing. I 0:14:11.000 --> 0:14:13.760 would say it's doing well enough for she, it's doing 0:14:13.800 --> 0:14:15.600 well enough. And so I don't think that they feel 0:14:15.600 --> 0:14:17.880 any pressure to come to the table with the United States. 0:14:18.040 --> 0:14:20.040 But if your question is, have they been you know. 0:14:20.280 --> 0:14:23.080 Creating this this this wave of you know, this shift 0:14:23.080 --> 0:14:25.240 from investment to consumption, which they've been promising the last 0:14:25.240 --> 0:14:27.720 ten years, No, there's absolutely no sign of that whatsoever. 0:14:27.760 --> 0:14:29.320 And I don't think you will see that. What you've 0:14:29.320 --> 0:14:32.400 see how the Chinese government is sort of resistance to this. 0:14:32.520 --> 0:14:34.320 It's been we got to produce more, we have to 0:14:34.400 --> 0:14:37.520 export more. We you know, we have to continue to 0:14:37.840 --> 0:14:41.680 use manufacturing and industry as our growth driver. That is 0:14:41.760 --> 0:14:45.360 running into a buzzsaw, which is which is global trade friction. 0:14:45.520 --> 0:14:47.840 So you know, the Chinese have talked a lot about 0:14:47.840 --> 0:14:50.960 a consumption, They've done very little on consumption. So I 0:14:50.960 --> 0:14:52.720 think that's something to watch in the future. But you know, 0:14:53.160 --> 0:14:55.640 rather than listening to what they say, I would urge 0:14:55.640 --> 0:14:58.000 everyone to watch what they do. And I think that's 0:14:58.000 --> 0:14:59.680 going to be very important because if they do not 0:15:00.000 --> 0:15:03.080 create the mechanisms to spur up more domestic demand in China, 0:15:03.280 --> 0:15:05.560 than these trade frictions will never go away. It's not 0:15:05.600 --> 0:15:07.320 a Trump thing, it's a China thing. 0:15:08.800 --> 0:15:09.520 Stay with us. 0:15:09.720 --> 0:15:12.480 More Bloomberg surveillance coming up after. 0:15:12.200 --> 0:15:24.720 This fetchair j Powell giving no guarantees that the Central 0:15:24.760 --> 0:15:28.040 Bank will deliver a third consecutive rate cut in December. 0:15:28.320 --> 0:15:32.160 Sanal Desiah Franklin Templeton, writing this, it's telling that Powell 0:15:32.240 --> 0:15:34.920 quickly shifted to the emphasis to December. It was a 0:15:34.920 --> 0:15:37.560 clever move to distract from the fact that the economic 0:15:37.600 --> 0:15:42.160 outlook did not really justify yesterday's cut, Sana joins us. Now, Sanal, 0:15:42.200 --> 0:15:45.280 I always love hearing your takes as they are different 0:15:45.360 --> 0:15:48.280 from what everyone else is talking about. Why do you 0:15:48.320 --> 0:15:51.040 think it is interesting that they did cut rates this 0:15:51.240 --> 0:15:54.240 meeting when it was completely expected and baked in two 0:15:54.320 --> 0:15:58.880 market expectations, given the fact that his rhetoric was a 0:15:58.880 --> 0:16:00.880 bit hawkish and casting doubt on December. 0:16:01.920 --> 0:16:04.200 So thanks Lisa for always fun being here. But here's 0:16:04.240 --> 0:16:04.520 the thing. 0:16:05.640 --> 0:16:08.320 What I'm what I'm saying here is certainly the market 0:16:08.400 --> 0:16:10.960 expected it, and the fair guided us towards rate cut, 0:16:11.000 --> 0:16:12.720 so of course they were going to cut. But that's 0:16:12.720 --> 0:16:14.880 a heck of a response if you're asked, why did 0:16:14.880 --> 0:16:17.360 you cut well because you expected us to cut. That's 0:16:17.360 --> 0:16:20.440 really not very convincing. What I was talking about really 0:16:20.880 --> 0:16:24.880 is that the underlying data, much the way that power 0:16:25.280 --> 0:16:29.240 is telegraphing, that December is not a done deal. Quite frankly, 0:16:29.320 --> 0:16:32.080 yesterday's cut should not have been a done deal either. 0:16:32.520 --> 0:16:33.720 And what I mean by this. 0:16:33.960 --> 0:16:36.920 Is that several people have pointed to benign inflation. 0:16:37.440 --> 0:16:38.760 I would actually beg to differ. 0:16:38.880 --> 0:16:44.200 Since the middle of twenty twenty three now, inflation hasn't 0:16:44.240 --> 0:16:45.280 really come down very much. 0:16:45.320 --> 0:16:47.120 We've been at about three percent and. 0:16:47.120 --> 0:16:50.120 It's been over two years now that inflation has been 0:16:50.160 --> 0:16:54.400 stuck at around three percent. Yes, we're down by zero 0:16:54.520 --> 0:16:59.200 point three percent since then, so inflation isn't actually actively 0:16:59.200 --> 0:17:02.240 coming down coming down the speed at wag inflation is 0:17:02.240 --> 0:17:05.400 coming down, it's glacial. In terms of the labor market, 0:17:05.800 --> 0:17:08.639 there aren't very good signs which indicate that the labor 0:17:08.680 --> 0:17:12.960 market is doing poorly. Powell indicated he talked a lot 0:17:13.080 --> 0:17:14.240 about the supply issues. 0:17:14.320 --> 0:17:16.919 That's absolutely correct. I fully concur with this. 0:17:17.480 --> 0:17:19.919 There was a Dallas Fed paper which talked about thirty 0:17:20.040 --> 0:17:22.119 k as being the new break even. 0:17:22.840 --> 0:17:24.600 Based on current ADP. 0:17:24.680 --> 0:17:27.879 Rolling four week numbers, we're looking at fifty to fifty 0:17:27.920 --> 0:17:29.600 five k for this last month. 0:17:29.680 --> 0:17:31.800