WEBVTT - Bloomberg Surveillance: Remembering Henry Kissinger 0:00:05.080 --> 0:00:07.200 This is the Bloomberg Surveillance Podcast. 0:00:07.680 --> 0:00:08.280 I'm Lisa A. 0:00:08.320 --> 0:00:11.640 Bramwoid's, along with Tom Keen and Jonathan Ferrell, join us 0:00:11.680 --> 0:00:15.280 each day for insight from the best in economics, geopolitics, 0:00:15.320 --> 0:00:19.480 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:19.600 --> 0:00:22.840 Spotify and anywhere you get your podcasts, and always on 0:00:22.880 --> 0:00:26.440 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. 0:00:26.720 --> 0:00:29.000 Joining us right now is John Mclelthwaite, the Bloomberg News 0:00:29.120 --> 0:00:32.240 editor in chief, joining us from our London studio. John, 0:00:32.240 --> 0:00:34.120 thanks so much for taking the time this morning. Keeps 0:00:34.120 --> 0:00:38.199 the occasion of your discussion. Most recently, mister Kissinger, this 0:00:38.360 --> 0:00:39.479 boy so timely. 0:00:39.560 --> 0:00:41.720 That well, that was his one hundredth birthday. But I 0:00:41.760 --> 0:00:45.000 suppose I've interviewed him over the over the decades and 0:00:45.040 --> 0:00:49.480 different capacities, and I think the main thing about him 0:00:49.520 --> 0:00:52.080 being aged one hundred is that he had the ability 0:00:52.120 --> 0:00:55.840 to look back over that life and it does go 0:00:56.000 --> 0:00:58.440 right the way back. We have a actually other good 0:00:58.680 --> 0:01:03.440 column this morning by Andrew Kluth, who's from that one 0:01:03.440 --> 0:01:06.560 of my columns from Germany. He talks about Heinz Kissinger, 0:01:06.600 --> 0:01:09.640 as he was born and the world in which he arrived. 0:01:09.680 --> 0:01:13.199 You know, Kissinger was born very obviously back in nineteen 0:01:13.200 --> 0:01:16.680 twenty three, I think two years later Adolf Hitler came 0:01:16.720 --> 0:01:20.640 to his home time of Firth to denounce it as 0:01:20.640 --> 0:01:24.000 a kind of haven of sort of Jewish people. Basically, 0:01:24.480 --> 0:01:26.440 for the first sort of fourteen fifteen years of his 0:01:26.480 --> 0:01:30.880 life he was continually chased, harried and messed around before 0:01:30.920 --> 0:01:33.000 he escaped, first to London and then to New York. 0:01:33.640 --> 0:01:36.080 And I think that that sort of beginning, you know, 0:01:36.440 --> 0:01:40.759 he offers a perspective on the whole of recent history 0:01:40.840 --> 0:01:43.920 in a way that struck me that only weirdly, the 0:01:44.000 --> 0:01:46.600 queen in recent times has been similar to the extent 0:01:46.640 --> 0:01:51.160 of you know, Kissinger met everybody. He saw a vast 0:01:51.200 --> 0:01:54.160 amount of history in his life, ironic for somebody who 0:01:54.200 --> 0:01:57.000 began life as a history professor exactly. 0:01:57.080 --> 0:01:59.120 And you know, John, one of my earliest memories as 0:01:59.120 --> 0:02:02.360 a child is my father and my older brother arguing 0:02:02.400 --> 0:02:06.240 at the dinner table about Vietnam, about Henry Kissinger, about 0:02:06.280 --> 0:02:11.440 all of those things. He has served officially and unofficially 0:02:11.880 --> 0:02:16.080 twelve presidents, from President Kennedy the President Biden. Have we 0:02:16.160 --> 0:02:20.760 ever seen a diplomat with that range of experience, well, I. 0:02:20.760 --> 0:02:23.840 Think we have. And they were the ones that he studied. 0:02:24.160 --> 0:02:27.919 They it was people like Mesenik and Taryon and people 0:02:27.960 --> 0:02:31.760 like that. Those were his heroes who lived in a 0:02:31.800 --> 0:02:33.919 time of kind of warfare in Europe and it was 0:02:33.960 --> 0:02:38.920 about bringing the peace. That's how he first emerged as 0:02:38.960 --> 0:02:42.040 a kind of semi public figure, was writing about the 0:02:42.040 --> 0:02:44.880 Congress of Vienna and things like that. But those were 0:02:44.919 --> 0:02:47.240 people who came and went. Obviously it was a different time, 0:02:47.280 --> 0:02:52.240 there were fewer democratic governments, and it had a different, 0:02:52.520 --> 0:02:55.760 very different feeling, But those were the people. Those were 0:02:55.800 --> 0:02:59.200 the thoughts that he carried throughout his life, this idea 0:02:59.320 --> 0:03:03.320 that nation have kind of sets of interests and it's 0:03:03.360 --> 0:03:06.119 about paying attention to those interests, but at the same 0:03:06.160 --> 0:03:10.480 time trying to to try and bring some degree of 0:03:10.560 --> 0:03:13.640 kind of loftier aims to it, but never forgetting you 0:03:13.680 --> 0:03:16.720 know that the rail in rail politic was something that 0:03:16.800 --> 0:03:18.359 was very close to his heart. 0:03:19.240 --> 0:03:22.040 John. I think you know, for many folks around the world, 0:03:22.040 --> 0:03:25.720 not just in America, Henry Kissinger kind of represents the 0:03:25.760 --> 0:03:30.920 whole post World War two thinking about global diplomacy. Global 0:03:31.520 --> 0:03:34.160 I just just the way the East versus the West 0:03:34.600 --> 0:03:37.480 that's changed recently in the last four or five six years, 0:03:37.480 --> 0:03:40.560 where a lot of countries are seemingly more nationalistic. 0:03:40.680 --> 0:03:41.640 America first, for it. 0:03:41.680 --> 0:03:44.240 Yes, you just you heard him on that clip in 0:03:44.280 --> 0:03:47.480 America first, that was very un Kissinger. He didn't he 0:03:47.560 --> 0:03:51.360 didn't like that. He was acutely aware of America's set 0:03:51.400 --> 0:03:53.640 of interests, just as I think he would argue he 0:03:53.680 --> 0:03:56.760 was acutely aware of China's set of interests. But he 0:03:56.880 --> 0:03:59.680 thought that America should play a role that was bigger 0:03:59.720 --> 0:04:02.600 than that. And again that was partly because he I 0:04:02.600 --> 0:04:05.160 think he did not least as a refugee you came 0:04:05.200 --> 0:04:08.280 to America. He saw America something bigger than that. But 0:04:08.320 --> 0:04:12.320 also for political reasons. If you have a hegemon, you know, 0:04:12.360 --> 0:04:17.200 again controversial issue whether hegemons exist. But for time it 0:04:17.240 --> 0:04:20.600 was Britain, and he liked the way that the British 0:04:20.680 --> 0:04:23.760 politicians in the nineteenth century managed to keep the peace 0:04:23.800 --> 0:04:26.440 by balancing different people against each other. And he thought 0:04:26.880 --> 0:04:30.600 America should do the same, and that was its role. 0:04:30.760 --> 0:04:35.080 It had two roles. One was to promote American interest democracy, 0:04:35.880 --> 0:04:38.279 but the other was just to keep the peace. And 0:04:38.320 --> 0:04:41.800 so when it came to things like China and what 0:04:41.880 --> 0:04:45.320 was happening there, he was absolutely kind of clear that 0:04:45.400 --> 0:04:49.760 you couldn't just go to the Chinese and give them 0:04:49.760 --> 0:04:52.880 a lecture on human rights. And at this point plenty 0:04:52.880 --> 0:04:55.159 of people listening to this, so well, that was typical Kissinger. 0:04:55.200 --> 0:04:57.039 He never cared about those things. I think he did. 0:04:57.080 --> 0:05:02.000 I think he understood, perhaps farm Or with one more 0:05:02.040 --> 0:05:06.200 personal experience and most of his critics, just how horrific 0:05:06.400 --> 0:05:08.480 man could be. To man, you know, he is not 0:05:08.600 --> 0:05:11.160 just growing up in Nazi Germany as a twenty year old, 0:05:11.240 --> 0:05:14.320 he went back and visited a concentration camp. He saw 0:05:14.360 --> 0:05:17.720 a huge amount of sort of evil done to people 0:05:17.880 --> 0:05:21.640 in his youth, so he wasn't unaware of that side 0:05:21.680 --> 0:05:25.840 of things. His main thing was to try and project 0:05:25.839 --> 0:05:26.640 to kind of peace. 0:05:27.320 --> 0:05:30.000 John, we were speaking about this earlier on Bloomberg Television, 0:05:30.200 --> 0:05:32.960 and I have to say, I keep thinking in my 0:05:33.040 --> 0:05:36.240 head about the change of social media and the change 0:05:36.279 --> 0:05:39.840 of the way that information is transmitted, and how he 0:05:39.960 --> 0:05:43.080 viewed that as he did see the world and a 0:05:43.120 --> 0:05:45.479 sort of right and wrong and trying to push forward 0:05:45.520 --> 0:05:49.200 certain ideals, how he viewed that effort at a time 0:05:49.560 --> 0:05:52.679 where the mode of communication was very different. 0:05:53.440 --> 0:05:55.000 I think that's really at least I think that's a 0:05:55.120 --> 0:05:58.760 really good point. The answer is that kind of and 0:05:58.880 --> 0:06:01.680 it's not. You know, it's possible to admire Kissinger and 0:06:01.760 --> 0:06:05.279 be aware of his be aware of his faults, but 0:06:05.400 --> 0:06:08.320 the kind of paranoid, secretive side of Hendrick Kissinger, I mean, 0:06:08.360 --> 0:06:11.799 social media was a nightmare. He didn't like that, and 0:06:11.839 --> 0:06:14.480 he you know, and actually he would argue, look, he 0:06:14.520 --> 0:06:17.159 could not. It would have been far far more difficult 0:06:17.680 --> 0:06:20.400 to go reach out to China and bring them in 0:06:20.440 --> 0:06:23.400 from the cold in an era of social media. He 0:06:23.480 --> 0:06:25.440 you know, he went, he went to China on these 0:06:25.480 --> 0:06:29.560 secret missions he did, and because of that he was 0:06:29.600 --> 0:06:34.200 able to get Mao to effectively agree to come in. 0:06:34.279 --> 0:06:37.919 That changed the world history. Ditto the negotiations the Russians, 0:06:37.960 --> 0:06:40.520 Dito other things. His critics will immediately say, well, yes, 0:06:40.520 --> 0:06:43.160 and he also bombed Cambodia in the in the background, 0:06:43.279 --> 0:06:45.760 Well yes, that that would also be part of it. 0:06:46.279 --> 0:06:49.960 But his underlying, his underlying thing was to find different 0:06:49.960 --> 0:06:53.599 ways to bring people together. The interesting, one, very interesting 0:06:53.680 --> 0:06:57.200 thing from his perspective was he sometimes talked about the 0:06:57.240 --> 0:07:00.440 fact that leaders didn't get the same degree of kind 0:07:00.440 --> 0:07:03.400 of break that they once did. His last book, which 0:07:03.520 --> 0:07:08.000 was a portrait of six people who he admired, people 0:07:08.080 --> 0:07:11.640 Margaret Thatcher and Lee Kuan Knew and Richard Nixon, wasn't 0:07:12.120 --> 0:07:14.880 that great a one. But the stuff on Shelde Gaull particularly, 0:07:14.920 --> 0:07:17.760 I thought was an amazing piece of history. But what 0:07:18.280 --> 0:07:20.640 he what entreat him a bit was you know, you 0:07:20.680 --> 0:07:22.720 look at somebody like Winston church or you look at 0:07:22.720 --> 0:07:27.440 somebody like Kennedy, would they have survived in an era 0:07:27.680 --> 0:07:31.360 of as much intrusion from great journalists like all of us, 0:07:31.440 --> 0:07:35.000 or certainly the two of you would. Would they have survived? 0:07:35.000 --> 0:07:38.960 And that would in the era of gaffes and things? 0:07:39.000 --> 0:07:42.120 Would somebody like Churchill have continued? We don't know exactly, 0:07:42.200 --> 0:07:45.120 but he was. He was very acutely conscious of the 0:07:45.160 --> 0:07:48.600 need to have leaders who could sort of look more 0:07:48.680 --> 0:07:52.600 long term, who could sort of think about the underlying elements. 0:07:53.200 --> 0:07:56.960 Hey, John, do we know how mister Kishener felt about 0:07:57.040 --> 0:07:59.240 the relationship between the US and China? That's kind of 0:08:00.040 --> 0:08:01.480 I guess you've ad over the last three four or 0:08:01.520 --> 0:08:03.760 five six years. You know, if at the very least 0:08:03.760 --> 0:08:06.040 a technology called war, if not something a little bit more. 0:08:06.120 --> 0:08:09.360 Yeah, this is somewhat self referential, and I apologize to 0:08:09.400 --> 0:08:11.000 people for it, but that I used to do a 0:08:11.040 --> 0:08:13.400 regular interview with him at the New Economy Forum. And 0:08:13.440 --> 0:08:15.520 it began as we were in the foothills of a 0:08:15.560 --> 0:08:18.160 Cold War and the Cold War, and then we were 0:08:18.200 --> 0:08:20.400 on the edge of a precipice on the Cold War, 0:08:20.480 --> 0:08:23.520 and then we were near the Helm High Mountain passes. 0:08:24.360 --> 0:08:28.200 You know, it just generally got worse. I think right now, 0:08:28.840 --> 0:08:31.480 I think he was. He got gradually more and more 0:08:31.480 --> 0:08:34.760 pessimistic about it, I think, and I think with good reason, 0:08:35.280 --> 0:08:38.080 and what I think he despaired of a bit. On 0:08:38.400 --> 0:08:42.320 the American side, we see to spare to people who 0:08:42.440 --> 0:08:45.800 sort of understood China and were willing to look towards 0:08:45.800 --> 0:08:48.920 a sort of bigger goal. And so those people who 0:08:48.960 --> 0:08:51.840 criticized Henrik Gistjoe, you know, in some cases very obviously 0:08:51.880 --> 0:08:54.720 correctly for not doing as much about human rights as 0:08:54.760 --> 0:08:59.199 perhaps you could, they sometime, you know, hit the lessons 0:08:59.200 --> 0:09:02.560 of his life were that you had to talk, you 0:09:02.640 --> 0:09:05.800 have to get people to come together to do things. 0:09:05.880 --> 0:09:08.240 And you see what he managed to do in the 0:09:08.440 --> 0:09:11.640 Middle East, especially in the context of what's happening now, 0:09:12.160 --> 0:09:15.040 and you do get some sense of the importance of 0:09:15.120 --> 0:09:18.040 rail politic. One thing I said to Lisa earlier, which 0:09:18.040 --> 0:09:20.320 I think is probably true, is that you know, you 0:09:20.320 --> 0:09:25.080 look at American foreign policy, this arch rail politica. If 0:09:25.080 --> 0:09:27.920 he had been running American foreign policy over the past 0:09:27.960 --> 0:09:30.880 thirty years, do you think that America and the cause 0:09:30.920 --> 0:09:33.000 of diplomacy would be better or not? I think it 0:09:33.040 --> 0:09:34.000 probably would be better. 0:09:34.200 --> 0:09:36.720 Very good, John mccordthwaite, thank you so much for a 0:09:36.720 --> 0:09:39.000 couple of minutes of your time. We really appreciate John mccorthwaite. 0:09:39.000 --> 0:09:42.000 Bloomberg News editor in chief Hughes reporting to us from 0:09:42.160 --> 0:09:44.120 London on the passing of Henry Kissinger. 0:09:48.440 --> 0:09:52.240 Neil Dutta, head of economics at Renaissance Macro Research, joining 0:09:52.280 --> 0:09:55.800 us now fresh off his Thanksgiving holiday. Neil, does this 0:09:55.920 --> 0:09:59.440 data just sort of underscore this soft landing nirvana that 0:09:59.480 --> 0:10:02.400 you really pin pinned over the last few months. 0:10:04.640 --> 0:10:07.240 Well, thank you, Lisa, you're giving me too much credit. 0:10:07.280 --> 0:10:09.000 I think I pinned it over the last few weeks. 0:10:09.120 --> 0:10:11.120 But you know, I do think that the data is 0:10:11.160 --> 0:10:13.680 lining up and we're on a glide path now to 0:10:13.720 --> 0:10:16.640 a rate cut, probably by March. Frankly, if you look 0:10:16.679 --> 0:10:20.920 at core PC inflation since June, it's up just two 0:10:21.000 --> 0:10:23.120 point three percent at an annual rate. 0:10:23.240 --> 0:10:25.920 And there's a lot of disinflation in the pipeline as 0:10:25.960 --> 0:10:29.000 we know. We know that, you know, when we look at. 0:10:28.920 --> 0:10:31.960 Car prices at the wholesale level that's declining. We see 0:10:31.960 --> 0:10:34.000 that pretty much month in and month out. That's going 0:10:34.040 --> 0:10:37.720 to bleed into core consumer prices over the next few months. 0:10:38.480 --> 0:10:41.840 We know that rendeal inflation is moderating, that's going to 0:10:41.840 --> 0:10:44.680 also bleed into core inflation over the next few months. 0:10:44.720 --> 0:10:48.400 And the normalization of supply chain should take pressure off 0:10:48.400 --> 0:10:52.280 of prices for core consumer goods outside of cars. So 0:10:52.800 --> 0:10:57.040 I think it's highly likely that you know, core inflation 0:10:57.440 --> 0:10:59.839 is you know, running sub to and a half for 0:11:00.360 --> 0:11:04.280 probably you know, on a six month basis by the 0:11:04.320 --> 0:11:08.720 first quarter of next year. And you know, when you 0:11:08.720 --> 0:11:11.160 think about the FED is giving us the playbook, I mean, 0:11:11.160 --> 0:11:14.320 if we just want to read it, Waller basically told 0:11:14.400 --> 0:11:17.080 us this week that he's following sort of a standard 0:11:17.080 --> 0:11:20.880 Taylor rule type or framework, and if inflation slows, the 0:11:20.920 --> 0:11:21.920 FED will cut it. 0:11:21.960 --> 0:11:22.960 Really is that simple. 0:11:23.040 --> 0:11:24.840 I don't want to make a judgment about whether that's 0:11:25.160 --> 0:11:27.120 right or wrong, but that's what they're going to do. 0:11:27.679 --> 0:11:31.240 So I think, sorry Tony cut in here, but I'm 0:11:31.240 --> 0:11:33.640 just struck by what you were saying earlier in the year, 0:11:33.720 --> 0:11:37.400 when you were saying people have underestimated how much momentum 0:11:37.400 --> 0:11:39.680 there is in the economy and that come next year, 0:11:39.720 --> 0:11:43.160 we're going to be surprised by the stickiness of the inflation, 0:11:43.320 --> 0:11:46.800 the stickiness of just what we see in terms of growth. 0:11:47.120 --> 0:11:49.000 How do you pair that idea. 0:11:48.679 --> 0:11:50.400 And the fact that we continue to get better than 0:11:50.440 --> 0:11:53.679 expected economic data, how do you pair that with ongoing 0:11:53.720 --> 0:11:56.480 disinflation in tandem with what the FED was hoping for? 0:11:56.559 --> 0:11:59.280 And even then some well, I mean, the. 0:11:59.200 --> 0:12:03.200 Economy is whole up, but it's clear that there's more 0:12:03.240 --> 0:12:07.080 disinflation despite that growth. And you know, I think the 0:12:07.120 --> 0:12:11.120 FED is looking at what's happening with realized inflation, right, 0:12:11.200 --> 0:12:14.160 So the fact that actual inflation is moderating, that will 0:12:14.160 --> 0:12:16.959 pressure them to cut interest rates because they don't want 0:12:17.000 --> 0:12:22.280 to get real interest rates in their framework unduly high, 0:12:22.320 --> 0:12:24.840 too high. And so I think, really that's what it 0:12:24.880 --> 0:12:28.000 comes down to. And as I say, I mean, part 0:12:28.040 --> 0:12:30.000 of this job isn't so much what I think they 0:12:30.000 --> 0:12:32.240 should do. But what I think they will do and 0:12:32.800 --> 0:12:34.880 what they're telling us what they what they will do. 0:12:34.920 --> 0:12:37.559 If inflation continues to come in like it's been coming in, 0:12:38.920 --> 0:12:40.800 the FED is going to respond to that. I don't 0:12:40.800 --> 0:12:43.600 think it's a situation where they're cutting aggressively. I mean, 0:12:43.600 --> 0:12:45.520 I think part of the issue right now, Lisa is that, 0:12:45.920 --> 0:12:47.360 you know a lot of folks aren't used to the 0:12:47.360 --> 0:12:49.439 FED just surgically cutting interest rates. 0:12:49.480 --> 0:12:51.360 I mean, it's usually they do a lot or nothing 0:12:51.400 --> 0:12:51.720 at all. 0:12:52.920 --> 0:12:56.920 But I think what we're talking about for next year, 0:12:57.000 --> 0:13:00.440 for twenty twenty four is really a recalibration of monetary 0:13:01.040 --> 0:13:04.360 not unlike frankly, what we saw in nineteen ninety five, 0:13:04.400 --> 0:13:07.320 where the FED came off of air very very aggressive 0:13:07.360 --> 0:13:10.640 tightening and cut rates a few times, trying to just 0:13:10.679 --> 0:13:11.760 basically trying to. 0:13:12.040 --> 0:13:13.000 You know, fine tune. 0:13:14.200 --> 0:13:16.600 You know, their their monetary policy, which frankly, I think 0:13:16.920 --> 0:13:20.280 you know they can justify that based on the inflation 0:13:20.360 --> 0:13:21.480 data as it's going to come in. 0:13:21.800 --> 0:13:23.360 Well, I know that earlier in the year you were 0:13:23.400 --> 0:13:25.760 also talking about how inflation is going to be higher 0:13:26.000 --> 0:13:27.880 for a longer period of time. Do you still think that, 0:13:30.160 --> 0:13:30.600 I mean, I. 0:13:31.200 --> 0:13:33.600 Do, but the question is around the time horizon. I mean, 0:13:33.600 --> 0:13:36.800 I think that the economy is growing above trend. That's 0:13:36.880 --> 0:13:40.200 ultimately going to have some effects on prices. But I 0:13:40.600 --> 0:13:42.400 you know, there is a lot of disinflation in the 0:13:42.440 --> 0:13:45.280 process and in train, and the FED is going to 0:13:45.320 --> 0:13:45.960 respond to that. 0:13:47.360 --> 0:13:49.160 You Know, the issue, frankly. 0:13:48.880 --> 0:13:54.720 Is does the soft landing enthusiasm today does that reignite 0:13:54.760 --> 0:13:58.360 inflation later. I think that that's something that Feds should 0:13:58.440 --> 0:14:00.439 keep in the back of the of their mind. Frankly, 0:14:01.040 --> 0:14:03.440 that may be one reason, you know, kind of puts 0:14:03.920 --> 0:14:04.640 a ceiling on. 0:14:04.600 --> 0:14:05.760 How many cuts they can do. 0:14:06.000 --> 0:14:07.960 But I do think we have to get through this 0:14:08.000 --> 0:14:10.760 period of disinflation first, and I think the FED is 0:14:10.800 --> 0:14:13.400 going to react to that disinflation, which is why I 0:14:13.440 --> 0:14:15.920 think they'll cut interest rates and they'll probably front load 0:14:15.960 --> 0:14:18.520 the cuts and sort of get it out of the 0:14:18.520 --> 0:14:21.560 system quickly. Look, they're already telling you that they're going 0:14:21.600 --> 0:14:23.360 to cut rates. I mean, they were at. 0:14:23.200 --> 0:14:26.440 Four in June, as Mike. 0:14:26.520 --> 0:14:29.760 As Mike mentioned, they went to two in September, and 0:14:29.800 --> 0:14:32.320 they might they might signal that, you know, a pause 0:14:32.400 --> 0:14:35.920 in December and pencil in three three cuts for twenty 0:14:36.000 --> 0:14:38.400 twenty four. I mean, that doesn't tell you when they 0:14:38.440 --> 0:14:40.080 do it, and that's why I said I think given 0:14:40.120 --> 0:14:42.080 the glide path and inflation that we're likely to get, 0:14:42.120 --> 0:14:43.920 they probably do it sooner than later. 0:14:44.120 --> 0:14:46.360 Neil, I'm curious from your vantage point, a lot of 0:14:46.360 --> 0:14:48.920 people have been saying it's going to be the bond 0:14:48.960 --> 0:14:51.360 market's dream and that you're going to get an ongoing 0:14:51.480 --> 0:14:54.520 rally in bonds that that will tee off an equity 0:14:54.560 --> 0:14:57.400 market rally. Do you agree with that type of recipe 0:14:57.520 --> 0:14:59.480 or do you think that it's not so simple, especially 0:14:59.520 --> 0:15:02.480 if there is a longer term question embedded in bonds 0:15:02.520 --> 0:15:06.600 of what the new neutral rate is that actually solid 0:15:06.600 --> 0:15:10.240 inflation but not overly hot a bank that's a central 0:15:10.280 --> 0:15:13.160 bank that's surgically cutting that's really positive for risk, but 0:15:13.200 --> 0:15:15.680 not necessarily on the other side for bonds. 0:15:17.240 --> 0:15:18.200 Well, I mean, I think. 0:15:18.080 --> 0:15:22.360 It probably may weigh on longer term rates obviously, right, 0:15:22.400 --> 0:15:23.320 I mean, but that's I. 0:15:23.280 --> 0:15:24.560 Mean again for the stock market. 0:15:24.640 --> 0:15:27.080 I mean, it's it's ultimately an environment where companies can 0:15:27.120 --> 0:15:30.880 make money, which should continue to help, you know, stock 0:15:30.960 --> 0:15:31.960 prices go higher. 0:15:33.320 --> 0:15:35.640 Neil Dudda of Renaissance Macro, thank you so much for 0:15:35.680 --> 0:15:56.560 being with us. 0:15:46.320 --> 0:15:48.960 The latest from four this morning, a new range for 0:15:49.000 --> 0:15:52.400 twenty twenty three adjusted earnings before interest ten billion to 0:15:52.480 --> 0:15:55.960 ten point five billion, the previous range before suspending guidance 0:15:56.040 --> 0:15:58.560 eleven to twelve. We've got a lot to talk about. 0:15:58.600 --> 0:15:59.960 We can do that now with John Lord of four 0:16:00.280 --> 0:16:02.800 C five. Good morning, John, Good morning. Let's talk about it. 0:16:02.840 --> 0:16:05.040 Where is it? Where's my ten billion dollar buyback? Why 0:16:05.080 --> 0:16:06.520 a different approach from you and the team. 0:16:06.640 --> 0:16:08.760 Well, we have a great plan in our Ford plus plan, 0:16:08.960 --> 0:16:12.720 and we're focused on investing in growth and profitability and 0:16:12.800 --> 0:16:16.120 through that rewarding our shareholders with a higher price, plus 0:16:16.200 --> 0:16:19.000 also paying out forty to fifty percent of our free 0:16:19.000 --> 0:16:22.160 cash flow in dividends. And so we're investing in the business. 0:16:22.200 --> 0:16:26.160 We have three great segments that are growth segments, Ford 0:16:26.200 --> 0:16:30.640 Pro Our commercial business margins in the mid teens for us, 0:16:30.720 --> 0:16:33.600 that's very high in our industry. Profits are going to 0:16:33.600 --> 0:16:36.680 almost double this year, more than double this year, and 0:16:36.840 --> 0:16:40.320 we have a great opportunity with the mostes. We have 0:16:40.720 --> 0:16:43.480 to drive significant profitability. 0:16:42.960 --> 0:16:44.680 Costs to gun up as well. So let's talk about 0:16:44.720 --> 0:16:47.640 the labor contract nine hundred dollars to the cost of 0:16:47.680 --> 0:16:50.840 each car. Off the back of that UAW contract now 0:16:50.880 --> 0:16:53.880 just for our audience, because you're aware of these figures already, GM, 0:16:53.920 --> 0:16:56.920 who we spoke to yesterday are at five seventy five. 0:16:57.680 --> 0:16:59.440 I'm still trying to sit here and work out how 0:16:59.480 --> 0:17:02.400 do we get from five to seventy five GM and 0:17:02.520 --> 0:17:04.720 nine hundred dollars to the cost of each car forward? 0:17:04.760 --> 0:17:05.720 What is that about? 0:17:05.960 --> 0:17:08.040 Well, when you look at it, we're five hundred dollars 0:17:08.119 --> 0:17:10.880 to start in twenty twenty four, and that grows over 0:17:10.960 --> 0:17:14.120 time as wages increase. The biggest increase in this contract 0:17:14.160 --> 0:17:17.200 is gross wage increase. It's significant over twenty five percent. 0:17:18.160 --> 0:17:21.000 And then our footprint in the US is bigger than 0:17:21.040 --> 0:17:24.040 General Motors. But the rest of that, I'm not exactly 0:17:24.080 --> 0:17:27.120 sure why their number is that much lower than ours. 0:17:27.160 --> 0:17:29.719 That's something that would have unpacked with them. We know 0:17:29.800 --> 0:17:31.840 what we've done with this contract. We know what the 0:17:31.920 --> 0:17:35.119 start point is. It's sixty to seventy basis points on 0:17:35.119 --> 0:17:38.479 our income statement basis. And now what we need to 0:17:38.520 --> 0:17:41.000 do is we need to work on driving productivity and 0:17:41.040 --> 0:17:44.800 efficiencies and reducing the labor hours, the hours it takes 0:17:44.800 --> 0:17:46.919 to build a vehicle and reducing that cost. And that's 0:17:46.960 --> 0:17:48.920 what we're going to be focused on going forward. 0:17:48.680 --> 0:17:52.000 So it's going to be cost reductions rather than trying 0:17:52.040 --> 0:17:54.560 to raise prices for the end consumer. 0:17:54.600 --> 0:17:55.120 Is that right? 0:17:55.440 --> 0:17:58.199 Well, now you have to think about pricing differently in 0:17:58.240 --> 0:18:01.200 our industry because all segments aren't the same. There's different 0:18:01.200 --> 0:18:04.399 pricing power across the segments. That's why we feel that 0:18:04.440 --> 0:18:06.679 what we did in segmenting the business and having the 0:18:06.720 --> 0:18:09.280 transparency around that, it's important. If you look at the 0:18:09.280 --> 0:18:12.080 commercial business in pro we believe they're still pent up 0:18:12.080 --> 0:18:15.040 demand and pricing power there. However, in blue in the 0:18:15.040 --> 0:18:17.400 more of the retail consumer segment, you're going to see 0:18:17.440 --> 0:18:20.680 prices come down. We've been consistent talking about that. Back 0:18:20.720 --> 0:18:24.000 in thirteen thirteen point four percent of disposable income to 0:18:24.000 --> 0:18:26.680 buy a vehicle went up to fifteen point seven and 0:18:26.760 --> 0:18:29.879 twenty twenty two it's down to fourteen point five percent roughly. 0:18:29.920 --> 0:18:32.160 Now we see that coming back to thirteen point four 0:18:32.200 --> 0:18:33.920 percent as you move through twenty twenty four. 0:18:34.320 --> 0:18:36.760 Well, when you talk about lower price points, I think 0:18:36.800 --> 0:18:40.360 about some of the Chinese car manufacturers and the production 0:18:40.680 --> 0:18:44.959 much more cheaply of electric vehicles in particular, that are 0:18:45.000 --> 0:18:47.760 really making a competitive advantage. How do you compete with them, 0:18:47.840 --> 0:18:50.680 especially given the labor contracts and some of the other 0:18:51.000 --> 0:18:52.760 working operating costs that you're dealing with. 0:18:52.960 --> 0:18:54.840 Yeah, it's a good point, and that's something that we're 0:18:54.960 --> 0:18:58.520 very focused on. Again, the segmentation, each segment is different. 0:18:58.760 --> 0:19:01.520 We've seen prices come down now in the electric segment 0:19:01.640 --> 0:19:04.320 much quicker than we expected, and the reason for that 0:19:04.920 --> 0:19:07.679 is that we're moving out of the early adopters who 0:19:07.760 --> 0:19:11.040 are willing to pay for higher prices. Early majority customers aren't. 0:19:11.160 --> 0:19:13.600 They're not willing to pay that premium. So we're seeing 0:19:13.600 --> 0:19:15.800 those come down and we expect them to equalize with 0:19:15.840 --> 0:19:18.040 gas prices. So it's all going to be about cost 0:19:18.119 --> 0:19:21.520 in efficiency, capital efficiency, et cetera. We have to get 0:19:21.560 --> 0:19:23.679 more competitive on cost and that's what we're focused on 0:19:23.720 --> 0:19:26.040 in our second generation and third generation vehicles. 0:19:26.080 --> 0:19:28.800 What is handing with demand in the evase? What is 0:19:28.800 --> 0:19:31.159 hanpden mag is this real pushback that changes to approach. 0:19:31.760 --> 0:19:33.960 I think what it is is it's the adoption rate. 0:19:34.000 --> 0:19:37.320 It's that flatter than what we had expected. That increase 0:19:37.400 --> 0:19:41.159 isn't as great fifty percent up this year from sales standpoints, 0:19:41.160 --> 0:19:43.680 so they're coming. It's going to be part of the industry. 0:19:43.960 --> 0:19:46.679 Eventually we'll get to those higher growth rates. So we 0:19:46.760 --> 0:19:49.960 have to adjust our capital investment. We have to adjust 0:19:50.000 --> 0:19:50.919 our approach in the near turn. 0:19:51.040 --> 0:19:53.320 That sounds like a change in execution, no strategy. 0:19:53.640 --> 0:19:56.200 Absolutely, it is a change in execution. 0:19:55.840 --> 0:19:56.359 Not strategy. 0:19:56.400 --> 0:19:58.320 So let's talk about the numbers. You've pushed at twelve 0:19:58.359 --> 0:20:01.399 billion an EV related and vestments. Should we expect to 0:20:01.440 --> 0:20:03.560 say a little bit more of that going on? 0:20:03.720 --> 0:20:06.480 Depends on the customer and the adoption rate and how 0:20:06.520 --> 0:20:09.480 that pushes out. If the adoption rate starts to grow faster, 0:20:09.720 --> 0:20:11.600 we'll increase our capital investments. 0:20:11.680 --> 0:20:13.680 Let's get through the guide. I've got two points. Sure, 0:20:13.680 --> 0:20:15.080