Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amerie Hordernt. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
Speaker 2: live on Bloomberg Television weekday mornings from six to nine
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app. Stocks holding steady? Is
Speaker 2: Wall Street a waste? The next round of corporate results?
Speaker 2: Daryl Kronk of Wells Fargo, writing, based on our expectations
Speaker 2: for accelerated earnings, we believe the next twelve to fifteen
Speaker 2: months will favor us sequities. Darrell joins us now from
Speaker 2: More Darrek Grim Mornig Majah. What is it about the
Speaker 2: US stock market that this story is going to favor?
Speaker 1: Well, I think it's a number of things.
Speaker 3: So beyond the earning story, which I think you guys
Speaker 3: have well socialized and talk about in a kicked in,
Speaker 3: I think you've got a lot of certainty that is
Speaker 3: coming in vogue, right. I mean, we know the Fed's
Speaker 3: going to cut interest rates. We don't know exactly by
Speaker 3: how much and when, but we have a high degree
Speaker 3: of certainty that monetary policy is going to ease financial
Speaker 3: conditions over the next twelve to fifteen months.
Speaker 1: We know the fiscal rules we're playing by. Now.
Speaker 3: We had the One Big Beautiful Bill in July. There
Speaker 3: is no one Big Beautiful Bill two dot zero and
Speaker 3: the remainder of this president's term. So if corporate America
Speaker 3: is waiting around for mergers and acquisitions and capex and
Speaker 3: everything to kick in because they were uncertain let's say
Speaker 3: last April with Tariff's and Liberation Day, now they're much
Speaker 3: more certain, and there's a lot of stimulus corporately in
Speaker 3: that one Big Beautiful Bill. There's also a lot of
Speaker 3: stimulus in there for the consumer as well. I mean,
Speaker 3: there's going to be big tax refunds in the first
Speaker 3: quarter next year that people are underestimating right now.
Speaker 1: That will kick in.
Speaker 3: And history tells you the consumer spends a dollar seventeen
Speaker 3: cents of every dollar they get back in a tax refund, right,
Speaker 3: so they overspend what that is, So there's I think
Speaker 3: a wave coming that will push through for Corporate America
Speaker 3: and continue to drive that margin line in the bottom
Speaker 3: line righter.
Speaker 2: So the secon thing you like, your favorite is financials.
Speaker 2: Just moments again of the team at Bloomberg broke a story.
Speaker 2: I'm going to share it with you. Rate as follows.
Speaker 2: According to people familiar with the matter, the Federal Reserve
Speaker 2: has shown other US regulators the outlines of a revised
Speaker 2: plan that would dramatically relaxed abiden era bank capital proposal
Speaker 2: for Wall Streets largest lenders.
Speaker 4: I'll spare everyone the details.
Speaker 2: You can read through the details and have like the story,
Speaker 2: But ultimately this feels like the direction of travel. Absolutely
Speaker 2: how big a pillar is that if you're long gone financials,
Speaker 2: So deregulation is a is a pillar, and it matters
Speaker 2: greatly to.
Speaker 3: The gcify banks, right, I mean, and I think to
Speaker 3: your point about where Basel three was heading, you know,
Speaker 3: say twelve eighteen months ago to where it is today,
Speaker 3: huge one hundred and eighty degree turn just in the cinement.
Speaker 3: I think what's more important though, is probably two other pillars.
Speaker 1: One is you know, M and.
Speaker 3: A and CAPEX kicking in right, So you get this
Speaker 3: whole kind of you know, what we thought was going
Speaker 3: to be the merger acquisition cycle that was going to
Speaker 3: happen for all twenty five that got delayed because of tariffs,
Speaker 3: and more importantly and most importantly, maybe is the right
Speaker 3: way to say it. We think we have a high
Speaker 3: conviction the yal curve is going to keep steepening, right.
Speaker 3: I know it's kind of flat in the last couple
Speaker 3: of weeks. But if you think about this, if the
Speaker 3: Fed is going to cut interest rates and you're not
Speaker 3: going to get a recession, right, then those term premiums
Speaker 3: on inflation and growth on the long end of the
Speaker 3: curve have to come up, right, So the Fed's going
Speaker 3: to hold let's say short term rates alongside comes up steepening.
Speaker 1: Right.
Speaker 3: If we're wrong and that doesn't happen, Let's say we're
Speaker 3: on the precipice of a recession or a slower event
Speaker 3: that we don't know, then what has to happen. The
Speaker 3: Fed has to cut interest rates more than what's projected
Speaker 3: by the market right now, drives the.
Speaker 1: Short end down steepening, right.
Speaker 3: So in both cases, you know, when you wargame this out,
Speaker 3: I don't see a way that you don't end up
Speaker 3: with a steeper curve. Steeper curve favors financials.
Speaker 5: I'm looking right now on the heels of what John
Speaker 5: is just talking about, Bank of America, Wells Fargo, JP, Morgan,
Speaker 5: the Shire's futures all got a pop on the heels
Speaker 5: of the latest note of deregulation that we're seeing. I'm
Speaker 5: just wondering whether this is a read through to the
Speaker 5: broader economy or whether this is a financial specific sector.
Speaker 6: I mean, this sort of the initial read.
Speaker 5: On earnings has been incredibly positive on the backs of financials,
Speaker 5: but financials haven't been as tied to the broader consumer
Speaker 5: economy as much as in the past.
Speaker 6: So how do you pair those stories?
Speaker 3: Well, I think you know, when you look at the
Speaker 3: after last week's let's call it credit scare, right when
Speaker 3: the regional banks and what's happening in some of the
Speaker 3: private credit markets and stuff, we just don't see it.
Speaker 3: Right in the loan portfolios, the consumer remains strong, the
Speaker 3: small medium sized businesses remain strong, right, so the lending
Speaker 3: portfolios of these banks are pristine. Then you couple that
Speaker 3: with the investment banking piece kicking in and really driving
Speaker 3: earnings a steep or real curve. Right, all the stars
Speaker 3: kind of line up. Now, when you get all the
Speaker 3: stars line up, the problem is something that could go
Speaker 3: wrong in that equation, but we don't see it. To
Speaker 3: your point on deregulation, though, I would unequickly say, it's
Speaker 3: not simply a financial story.
Speaker 1: Right.
Speaker 3: It spills into the healthcare sector. It spills into the
Speaker 3: energy sector, right, it spills into frankly, the industrial sector
Speaker 3: on the reshoring of a lot of the manufacturing and
Speaker 3: that element. So I think all of that plays in
Speaker 3: and probably drives margin and earnings into twenty twenty five.
Speaker 1: We're actually I was twenty twenty six. Sorry, we're actually
Speaker 1: very bullish heading into next year.
Speaker 6: So when was the shift?
Speaker 5: Can you just walk us through the psychology, because I
Speaker 5: remember talking to you a couple months ago and you
Speaker 5: did not sound this positive, and a lot of people
Speaker 5: seemed a lot more worried. And suddenly everyone who comes
Speaker 5: in the show, no one can kind of find the
Speaker 5: real crack in this veneer.
Speaker 6: Right now, they're trying believe me.
Speaker 5: When did you really start to say, hold on a second,
Speaker 5: I need to upgrade my expectations and be more pro risk.
Speaker 3: I think in the middle of the summer, right, I
Speaker 3: think the summer when we started to see where the
Speaker 3: Fed was taking monetary policy, when we knew the fiscal
Speaker 3: clarity was kicking in. You get these big kind of
Speaker 3: multi year secular trends of the re vitalization of manufacturing
Speaker 3: AI of course all that stuff. Those are things that
Speaker 3: when you get I wrote a piece here not so
Speaker 3: long ago called you know, getting through the noise, getting
Speaker 3: the signal above the noise, right, and you start looking
Speaker 3: at these secular trends that we think have legs for
Speaker 3: maybe the next two to four, three to five years.
Speaker 3: They're powerful, right, and when they all align simultaneously, that
Speaker 3: creates a unique environment that you don't see very often, right,
Speaker 3: where you get manufacturing kicking in, you get technology continuing
Speaker 3: to do well.
Speaker 1: You get monetary and fiscal policy alignment.
Speaker 7: Right.
Speaker 3: I mean all those things can actually drive corporate earnings,
Speaker 3: and you also reduce some level uncertainty. I know, the
Speaker 3: day to day noise around uncertainty is high. You know,
Speaker 3: whether we're going to have you know, a g Trump meeting,
Speaker 3: and you know all those kind of things. But I
Speaker 3: think all of that starts to come down and you
Speaker 3: look through that out in the next two to four years.
Speaker 3: I think America does really well in the next couple
Speaker 3: of years.
Speaker 8: So what more was you next year? Then if you
Speaker 8: feel like you've gotten a lot of clarity in twenty
Speaker 8: twenty five, so.
Speaker 3: Question I would say the three eyes, Right, I think
Speaker 3: that this is what I wake up and kind of
Speaker 3: pay attention to inflation of course, right, which we'll get
Speaker 3: the reading Friday, interest rates, what happens because you know,
Speaker 3: if interest rates come down too far, you have to
Speaker 3: start asking the question why are they coming down so far? Right,
Speaker 3: there's a point where lower rates is good and then
Speaker 3: all of a sudden, lower rates start to become bad.
Speaker 3: And the third one that doesn't maybe get as much
Speaker 3: better time as illiquidity. Right, I mean, if you look
Speaker 3: at what's happening in the repo market, you're seeing reserves
Speaker 3: drained down in the banking system, Which is why I
Speaker 3: think here in October, power will come to the table
Speaker 3: and say we're going to start setting the stage to
Speaker 3: ending QT. QT is worth by our math, another twenty
Speaker 3: five basis point interest rate cut. So if we get
Speaker 3: twenty five in actual FED funds in October, you get
Speaker 3: QT happening there's another twenty five. You get twenty five
Speaker 3: in December. Right, All that starts to add up.
Speaker 8: When you say interest rates going saloon, you have to
Speaker 8: question why it's because the economy is so bad. Do
Speaker 8: you think they're being job owned by the White House.
Speaker 1: Well, the reason might be the latter.
Speaker 3: But I think when you start getting interest rates lower,
Speaker 3: you have to start saying, what's going on there? Is
Speaker 3: it a true flight to quality or is it just
Speaker 3: the whole curve shifting down?
Speaker 1: Right?
Speaker 3: Once you get that flight to quality element and narrative
Speaker 3: that enters the discussion, that's where you have to kind
Speaker 3: of pay attention. We're not there yet, we don't think
Speaker 3: we're going to be there, but that's what you would
Speaker 3: want to watch for.
Speaker 4: Stay with us.
Speaker 2: More Bloomberg surveillance coming up After this, trade tensions between
Speaker 2: the United States and China remaining high. President Trump saying
Speaker 2: he expects to reach a good trade deal with China,
Speaker 2: but his meeting with President chiajing Ping in South Korea
Speaker 2: next week may not happen. At Mills of Raymond, James
Speaker 2: writes the following, the big question is how much beyond
Speaker 2: the status quo can get negotiated and it's previously banned
Speaker 2: US technology about to get the green light for the
Speaker 2: Chinese market at join just now for more. And I
Speaker 2: think you're right on the money. What is and isn't
Speaker 2: on the table in these negotiations. What isn't going to
Speaker 2: be pound of any potential deal?
Speaker 7: Yeah, John, I think everything is on the table. I
Speaker 7: think what we're seeing is that if China went into
Speaker 7: this with the status quo, China would come out with
Speaker 7: the status quo. So you're seeing a playbook we've seen
Speaker 7: time and time again. And Trump is moving the goalpost,
Speaker 7: ramping up the pressure.
Speaker 4: She is doing the same.
Speaker 7: She in China has come to Trump two point zero
Speaker 7: much more prepared. They are sending a message We're willing
Speaker 7: to do things that could be mutually a short economic destruction.
Speaker 7: So come to the table and talk. I do think
Speaker 7: the number one thing that she cares about in these
Speaker 7: conversations are these tech controls, the semiconductors and semicap equipment
Speaker 7: that has been banned going into China. The US policy
Speaker 7: is shifting here, John, and it is now the default
Speaker 7: kind of desire of the US government to have the
Speaker 7: US technology be the default full stack globally. And they
Speaker 7: don't think they can kind of shut out the Chinese market.
Speaker 7: So there's more room for negotiation here than I think
Speaker 7: most investors realize.
Speaker 8: And is China basic taking this hardline strategy. And there's
Speaker 8: been some reporting about this because they think Trump will fold.
Speaker 7: I think it's they think Trump will fold, or they
Speaker 7: will think that Trump will give them more if they
Speaker 7: push for more emory. You go back to earlier this year,
Speaker 7: it was their restrictions on rare earths that got Trump
Speaker 7: to walk back those one hundred and forty five percent terrorfs.
Speaker 7: We were dangerously close to having real negative impact on
Speaker 7: our industrial production here in the United States. And while
Speaker 7: we're signing these different critical mineral deals rare earth deals,
Speaker 7: it's going to be five plus years before we're able
Speaker 7: to get most of these. So China does have some
Speaker 7: cards that they can play, and as they play them,
Speaker 7: Trump has been willing to negotiate more. They view Trump
Speaker 7: as a transactor, and so to get him to transact,
Speaker 7: you got to push him in that right direction.
Speaker 8: Do you find it suspect that China hasn't confirmed any meeting.
Speaker 7: It's been the way things have happened all year long.
Speaker 7: What we have seen is the US delegation comes out
Speaker 7: and they give a read out, and then China confirms nothing.
Speaker 7: And then what we've seen is that everything that the
Speaker 7: US side has said has actually followed through.
Speaker 4: I do think this meeting happens.
Speaker 7: I do think part of this is that she does
Speaker 7: not want to appear to be weak. Some of the
Speaker 7: calculus that China has had is that what Trump wanted
Speaker 7: the most was to have this meeting, so they gave
Speaker 7: him a meeting. I'm also okay with the fact that
Speaker 7: we've already set up a home and away after this.
Speaker 7: Trump is supposed to go to Beijing, she is supposed
Speaker 7: to come to the United States, so that takes away
Speaker 7: a little bit of the pressure here. That hasn't been
Speaker 7: confirmed necessarily by the Chinese side either, but we can
Speaker 7: get some flourish, big announcements coming out, but really working
Speaker 7: on these details to be determined later on, which has
Speaker 7: happened on every other trade deal so far this year.
Speaker 5: And it seems like they're both buying time, both the
Speaker 5: Chinese and the United States, and trying to rearrange some
Speaker 5: of the supply chains the technological backdrop.
Speaker 6: In the meantime.
Speaker 5: I just wonder what the negotiating chips are going to
Speaker 5: be to buy time. How much Taiwan is going to
Speaker 5: come into play, how much the Russia Ukraine war is
Speaker 5: going to.
Speaker 6: Come into play.
Speaker 5: Do you have a sense of how much that's on
Speaker 5: the table if there is some sort of meeting.
Speaker 7: Yeah, So Trump has said that he expects there to
Speaker 7: be some level of conversation about Taiwan. I do think
Speaker 7: that this is obviously the big focus of a lot
Speaker 7: of investors, and I get a ton of questions about.
Speaker 4: That at Raymond James.
Speaker 7: Trump has said that they don't have a plan to invade.
Speaker 7: I think trying to bring down a little bit of
Speaker 7: those tensions. The last meeting between a US president and
Speaker 7: she occurred at the last APEC summit, and she supportedly
Speaker 7: said that there was no kind of need for a
Speaker 7: military intervention as long as a peaceful reunification occurs. I
Speaker 7: do think that a lot of folks look at that
Speaker 7: Trump as a transactor to say, is Taiwan more on
Speaker 7: the table than we could normally see? Beyond that, Trump
Speaker 7: has also been very concerned about the agricultural purchases of China.
Speaker 4: So can Chinda make some kind.
Speaker 7: Of agricultural purchases make that commitment for a trillion dollars
Speaker 7: of investment in the United States, and therefore we can
Speaker 7: send them those semiconductors and that semicap equipment, especially if
Speaker 7: we're moving to this idea that US technology needs to
Speaker 7: be the default technology.
Speaker 4: Those are the things that I'm watching here in these negotiations. Lisa,
Speaker 4: stay with us.
Speaker 2: More Bloomberg surveillance coming up after this first turn back
Speaker 2: to markets, what a move and gold extending losses after
Speaker 2: its steepest sell off in over a decade. The precious
Speaker 2: metals record run before yesterday's sparking concern at a US
Speaker 2: debasement trade. Jane Furley of Rabbabank debunking that theory writing
Speaker 2: the basement would imply and move away from the dollar
Speaker 2: and US treasuries into assets such as gold, and there
Speaker 2: is very little evidence to back up these flows. Jane
Speaker 2: joins us now for more.
Speaker 4: Jane, welcome to the program.
Speaker 2: It's been a really curious year because the narrative around
Speaker 2: foreign exchange was born in one quarter, and it was
Speaker 2: the first quarter of twenty twenty five, and I find
Speaker 2: it difficult to find evidence that the rest of the
Speaker 2: year really drives with that narrative at all. We had
Speaker 2: a big blast of dollar weakness. Jane, what's followed, Well,
Speaker 2: you're quite right.
Speaker 9: I mean most of that dollar weakness has really done
Speaker 9: in the first five months of the year and ever since.
Speaker 9: We'll actually over the last month or two, I keep
Speaker 9: on finding myself saying, well, no, actually that the dollar
Speaker 9: isn't we it's been one of the better performers in
Speaker 9: I think it's a better performance right now in the
Speaker 9: months today and perhaps over the one month.
Speaker 4: For you too.
Speaker 9: So actually, essentially, if we look at the dollar index,
Speaker 9: for instance, that's sort of gone nowhere since at the
Speaker 9: beginning of July. And what are we looking at in
Speaker 9: euro dollar? You know, a currency at the dollar that
Speaker 9: is certainly well off. It's those versus the euro. So
Speaker 9: we we aren't looking at a week dollar as as
Speaker 9: we as we stand. But yes, the theme really was
Speaker 9: set at the start of the year by that huge
Speaker 9: bat of dollar weekness.
Speaker 2: So Jane, let's talk about reality and the last few weeks,
Speaker 2: and then we can get to the peculiar move yesterday,
Speaker 2: the wild swing we saw in gold. Well recently we
Speaker 2: have seen gold rip high started to go vertical the
Speaker 2: middle of August and never looked back. And alongside that
Speaker 2: we did have dollar stri and participate as well. So Jane,
Speaker 2: what explains those moves? What's the relationship if there is
Speaker 2: one between the two, you.
Speaker 9: Know what I mean? Normally, of course, when you get
Speaker 9: a stronger dollar, then a profit taking sets in. And
Speaker 9: I think with respect to gold, yeah, there are good
Speaker 9: reasons I think for many portfolios to think about diversification
Speaker 9: this year, and I think that's still a valid theme
Speaker 9: and I think gold, you know, can be held along
Speaker 9: those lines. But you know, I do think there was
Speaker 9: lots of fomo you a phrase that I've heard, you know,
Speaker 9: in your channel quite a lot over the last few weeks,
Speaker 9: and certainly you know, at the start of this week
Speaker 9: the Australian press work we're showing pictures of the retail
Speaker 9: investors queueing around the block to get their hands on
Speaker 9: some gold. And I think for many institutional investors, you know,
Speaker 9: that was perhaps the last stort, so profit taking pushed
Speaker 9: in as well with the stronger dollar. I think as
Speaker 9: we go into the next year, there's probably still a theme,
Speaker 9: a reason to diversify her portfolios, and maybe gold again
Speaker 9: is part of that. But I think it is going
Speaker 9: to struggle quite clearly to match those very recent high
Speaker 9: in the very near future.
Speaker 5: Jane, is the concept of debasement just overly binary. And
Speaker 5: there's something else afoot that is maybe along the same
Speaker 5: kind of theme but isn't quite as strong, which is
Speaker 5: more people are considering that the dollar isn't the only
Speaker 5: thing in town.
Speaker 6: There is a discussion.
Speaker 5: Yesterday about how Ethiopia is trying to transfer loans that
Speaker 5: had been dollars denominated into U and I mean, honestly,
Speaker 5: this is not necessarily something that's going to cause alarm
Speaker 5: bells everywhere, but there is the sense that people are
Speaker 5: looking for alternatives. At what point is that a realistic
Speaker 5: narrative to really play into your calculations.
Speaker 9: You know, I think we'd probably could be having the
Speaker 9: same sort of conversation in twenty or thirty years time
Speaker 9: that there is a theme of you know, reduced dollars
Speaker 9: for instance in global reserves, and you know, we can
Speaker 9: trace that being back, you know, to the start of
Speaker 9: this century if we like. There is a theme also,
Speaker 9: you know, in China they want to internationalize their currency
Speaker 9: a lot more the Euro. We've had several times from
Speaker 9: Christine regard from the ECB sins this year that she
Speaker 9: wants to have a bigger role for the euro on
Speaker 9: an international basis. So we can assume maybe the eural
Speaker 9: will makes some progress, or remember will continue to make
Speaker 9: that the progress that it's been making. But the dollar
Speaker 9: has a massive advantage. It's already a huge transactional currency
Speaker 9: around the globe, across Africa, Latin America, across Asia, and
Speaker 9: the US Treasury will be making attempts, you know, to
Speaker 9: protect that, not the least with you know, with stable coin.
Speaker 9: So it is going to be something that the ustroasure
Speaker 9: will fight back on. But yeah, there might still be
Speaker 9: incremental benefits, perhaps an international loalization for remomb beats or Europe.
Speaker 9: But I still think that that's that those games are
Speaker 9: going to be really quite modest.
Speaker 6: Jane, how many questions do you still get about bitcoin?
Speaker 9: Not that many more about stable coin. I think this
Speaker 9: year less about bitcoin. I mean bitcoin, you know, certainly
Speaker 9: very much in the news, but I think most people
Speaker 9: have come to terms with this. You know, this is
Speaker 9: something that you know, it's an asset. Perhaps it's part
Speaker 9: of that diversifications story again, but it used to be
Speaker 9: perhaps a different type of comprehension about where bitcoin was,
Speaker 9: and perhaps in misunderstanding that it was a currency in
Speaker 9: the way you know that the yen or the euro,
Speaker 9: that the dollar was. And I think that misunderstanding really
Speaker 9: now has more or less ebbed away.
Speaker 7: Jane.
Speaker 8: When it comes to gold, if there's too much momentum
Speaker 8: and that's starting to wane, what do you make of
Speaker 8: everyone talking about five thousand dollars an ounce next year?
Speaker 9: You know, I think if we were to look at
Speaker 9: you know, really big movements, we'd have to be looking at,
Speaker 9: you know, significant movements in the backdrops for the world economy.
Speaker 9: So maybe you know, we would have to be expecting
Speaker 9: or seen a shock rise in inflation perhaps, or you know,
Speaker 9: maybe more geopolitical tension perhaps, And I think if we
Speaker 9: were looking down those lines and seeing that type of stress,
Speaker 9: then I think that there is perhaps the reason is
Speaker 9: to carry on moving to inter gold, and it's you know,
Speaker 9: because of its intrinsic value, et cetera. But you know,
Speaker 9: we're not looking at huge amounts of inflation anymore. I mean,
Speaker 9: if we go back, you know, to the start of
Speaker 9: the year, people were panicking about the degree of inflation
Speaker 9: that we could see in the US. We're not panicking anymore,
Speaker 9: you know, we're seeing far more moderate types of inflation. Yes,
Speaker 9: we're still focused on you know that there's the potential
Speaker 9: for worsening in the trade front, which could create inflation,
Speaker 9: but there isn't that panic anymore. And assuming that we
Speaker 9: don't get panic either run inflation or the geopolitics, then
Speaker 9: I think these sorts of games are really going to
Speaker 9: calm down.
Speaker 2: Jane wanted to finish on the move of the day
Speaker 2: in foreign exchange is Sterling inflation came in a little
Speaker 2: bit lighter than expected, yielded down across the curve, particularly
Speaker 2: the front end. We're now down by about eleven basis
Speaker 2: points on a two year guilt this morning. Sterling's a
Speaker 2: whole lot weaker for a fourth session one thirty three seventeen.
Speaker 2: Out of the corner of my eye, Jane, what's behind
Speaker 2: the latest move? And do you think the Bank of
Speaker 2: England will embrace this move lower in inflation and ultimately
Speaker 2: deliver more rate cards.
Speaker 9: You know, I think they're still a world count here
Speaker 9: because yes, the inflation data was better than expected, lower
Speaker 9: than expected. Yes, it's still well above where the Bank
Speaker 9: of England wants it to be. But between now and
Speaker 9: the December Bank of England meeting, which is the one
Speaker 9: the market is now focusing on for a possible cut,
Speaker 9: we do have that November twenty sixth budget in the UK,
Speaker 9: and there is speculation that Richurieson may cut the eighty
Speaker 9: on energy bills in order to bring inflation down further,
Speaker 9: and that maybe could give the Bank of England the
Speaker 9: sort of confidence that they need to cut infistrates again.
Speaker 2: See stay with us more Bloomberg surveillance coming up after this.
Speaker 2: President Trump reiterating his pledge to revive American manufacturing, the
Speaker 2: Commonwealth of Virginia securing thirteen billion dollars in new domestic
Speaker 2: investments between July and October of this year alone. I'm
Speaker 2: very pleased to say that joining the program now is
Speaker 2: the Republican Governor Glenn Youngkin of Virginia. He joins us
Speaker 2: now for more. Governor, welcome to the program. So always
Speaker 2: good to catch up with you.
Speaker 10: Yeah, good morning, John, And it has been a very
Speaker 10: very busy few months for us as we have welcomed
Speaker 10: a lot of manufacturing into Virginia, particularly from the pharmaceutical sector,
Speaker 10: and I think it demonstrates that we're leading not just
Speaker 10: in Virginia but in America and resoring this critical supply chain.
Speaker 2: So, Governor of the serenadly a consensus, we need to
Speaker 2: do more of that, produce more manufacture more domestically here
Speaker 2: in the United States. Can you share with us what
Speaker 2: you've done in Virginia to attract more of that investment
Speaker 2: from overseas and bring it back home. And perhaps she's
Speaker 2: murk as a good example of that.
Speaker 10: Yeah, we identified three years ago that pharmaceutical manufacturing had
Speaker 10: to come back to the United States. It's a national
Speaker 10: security imperative where all of the active pharmaceutical ingredients were
Speaker 10: being manufactured overseas and a lot of them in China,
Speaker 10: and we needed to.
Speaker 11: Bring it back.
Speaker 10: But on top of that, we saw big investments coming
Speaker 10: from the pharmaceutical manufacturers, and so we prepared a great
Speaker 10: workforce development program. We lessened all of our regulations. We've
Speaker 10: cut almost thirty percent of our regulations in Virginia. And
Speaker 10: then finally we made sure that we had sites ready
Speaker 10: for them. We're a business friendly state, ready to go,
Speaker 10: and then we went and recruited them. And you combine
Speaker 10: that with President Trump's strong push against the pharmaceutical industry
Speaker 10: to bring manufacturing to America. And we've just seen a
Speaker 10: huge drive of reshoring and investment, and yes, it's been
Speaker 10: thirteen billion dollars in work. Was our latest big announcement
Speaker 10: this week with a three billion dollar facility to set
Speaker 10: up their active Pharmaceutical and Small Molecule Manufacturing Center of
Speaker 10: Excellence here in Virginia. They're going to hire five hundred
Speaker 10: people direct and there's going to be thousands of indirect
Speaker 10: jobs plus construction jobs. And it's just another big step
Speaker 10: of bringing manufacturing home. I like to say made in
Speaker 10: America means made in Virginia.
Speaker 6: Governor.
Speaker 8: We've all seen a lot of tech companies invest in Virginia.
Speaker 8: There's a lot of data centers in Northern Virginia. We've
Speaker 8: also seen, though, the cost of electricity prices go up.
Speaker 6: How are you balancing the two?
Speaker 10: Well, we first start with it's an imperative to have
Speaker 10: an all of the above, all American energy plan, and
Speaker 10: that means that, yeah, we have to embrace natural gas
Speaker 10: and nuclear and yes, of course the renewables that we
Speaker 10: already have, but we've got to build a.
Speaker 11: Lot more power on top of that.
Speaker 10: Because Virginia is the data center capital of the world,
Speaker 10: and we're seeing investment all over the state. Now we
Speaker 10: also are driving bring your own power initiatives and so
Speaker 10: power goes behind the meter. That actually keeps rate payers whole,
Speaker 10: so they don't get charged with a disproportionate amount of
Speaker 10: the cost of the infrastructure build necessary to support the
Speaker 10: data center industry. And again, this is a national security
Speaker 10: imperative that we're so pleased as happening in Virginia. You know,
Speaker 10: since I became governor, we've had one hundred and forty
Speaker 10: billion dollars of commitments from businesses to expand here or
Speaker 10: come here. And that's manufacturing and distribution and research and development.
Speaker 10: And I think it just goes to show that when
Speaker 10: you care create a business friendly environment, where a right
Speaker 10: to work state we have deregulated, we have made sure
Speaker 10: we have the best workforce in the country, businesses will
Speaker 10: come and invest, and that creates opportunity for not just Virginians,
Speaker 10: but I think to supply in all of these critical
Speaker 10: critical needs that once we're manufactured overseas and they're all
Speaker 10: coming home.
Speaker 8: You talk about an all of energy approach. The Trump
Speaker 8: administration has canceled federal funding for things like offshore wind
Speaker 8: and some renewable projects. Has that become a problem for
Speaker 8: you as you are dealing with higher electricity prices.
Speaker 11: Well, it hasn't. It hasn't for us in Virginia.
Speaker 10: We of course have been really pushing to build new
Speaker 10: natural gas plants and we hope to lead the nation
Speaker 10: and the development of small modular reactors, and we do
Speaker 10: have wind and solar projects underway. The reality is the
Speaker 10: previous Democrat administration in Virginia so underestimated the growth aspects
Speaker 10: of Virginia that we're behind, and that's why we're massively
Speaker 10: building in order to catch back up on top of that.
Speaker 10: I do believe it's one of the great challenges for
Speaker 10: our nation, and that's why President Trump's initiative for energy
Speaker 10: dominance has to be a top imperative because we're finding that, Yes,
Speaker 10: when we're building data centers and advanced manufacturing and of
Speaker 10: course electrifying just about everything, power demand goes up substantially.
Speaker 11: We've seen China developing.
Speaker 10: Gas plants, nuclear plants like crazy, and we're behind, and
Speaker 10: so we have to build in America, and we need
Speaker 10: to do that fast so that we cannot just catch up,
Speaker 10: but we can supply all of the reshoring of American
Speaker 10: manufacturing that is going to secure our future.
Speaker 5: Governor, you really are at the vanguard in Virginia of
Speaker 5: a lot of trends around the nation, particularly when it
Speaker 5: comes to the labor market.
Speaker 6: You are bringing jobs back.
Speaker 5: You also have a heavy investment from the likes of Amazon,
Speaker 5: which is supposedly on the way to replacing a lot
Speaker 5: of roles with robots. And I'm just wondering what role
Speaker 5: you see in terms of job training to try to
Speaker 5: adapt to a rapidly shifting backdrop in terms of technology.
Speaker 10: Yeah, we have been out in front here because of
Speaker 10: course artificial intelligence particularly is now part of every aspect
Speaker 10: of the business supply chain. Of course, from design and
Speaker 10: engineering all the way through to manufacturing, marketing. Everything is
Speaker 10: being fundamentally changed. And so we initiated, in partnership with Google,
Speaker 10: ten thousand AI credentials that allow folks free to come
Speaker 10: in and build their capabilities. And I think mean as
Speaker 10: we see technology rapidly transforming the way we do business,
Speaker 10: we have to rapidly transform the way we prepare our
Speaker 10: workforce to.
Speaker 11: Thrive in that environment.
Speaker 10: Listen, we got a lot of jobs in Virginia we
Speaker 10: have two hundred and seventy seven thousand more people working
Speaker 10: today than when we started, two hundred twenty thousand open
Speaker 10: and available jobs, and the one hundred and forty billion
Speaker 10: of capital investment underpins another eighty five thousand jobs and
Speaker 10: nearly forty thousand construction jobs. So we've got a lot
Speaker 10: of work to do here to prepare a workforce to
Speaker 10: take advantage of that opportunity. And I think making sure
Speaker 10: that workforce is AI ready is really important, and that's
Speaker 10: why we've been way out in front to make sure
Speaker 10: that that workforce is prepared for it.
Speaker 5: Governor, I remember talking to you when you used to
Speaker 5: be at Carlisle, and you've had this incredible dual hat
Speaker 5: where you've been investing on one side in infrastructure and
Speaker 5: then you are responsible.
Speaker 6: For helping to plan and bring jobs in.
Speaker 5: I'm just wondering, does it concern you some of the
Speaker 5: private investments that we've seen in some of the infrastructure
Speaker 5: spending and some of the speculation that maybe things could
Speaker 5: be getting a little bit frothy in that space.
Speaker 10: Listen, the big difference that we're seeing now is the
Speaker 10: capital investments, particularly around data centers and AI and machine learning,
Speaker 10: are tied to business commitments in order to drive forward
Speaker 10: this transformation, and therefore it needs to get invested behind.
Speaker 10: We need to see the power investment, and we're competing
Speaker 10: against China day in and day out.
Speaker 11: Listen, this is a race.
Speaker 10: We need to make sure that we have the appropriate
Speaker 10: stop gaps and just in case that the application of
Speaker 10: AI begins to overwhelm the interface between humans and decisions.
Speaker 10: And my Artificial Intelligence Executive Order that I wrote last
Speaker 10: year said that we are going to incorporate artificial intelligence
Speaker 10: and what we're doing in government, but we're also going
Speaker 10: to make sure that we have people between advice and decisions,
Speaker 10: and I think that's one of our big steps. But
Speaker 10: with regards to the investment that we are seeing, I
Speaker 10: firmly believe that this investment will grow great capabilities and
Speaker 10: those capabilities will be put to work. And that's why
Speaker 10: it's so important that we win the artificial intelligence race
Speaker 10: and not allow China to win it.
Speaker 8: Governor Runkin, just quickly, have you spoken to the Trump
Speaker 8: administration speaker Johnson Leader soon about reopening the government because
Speaker 8: your constituents, hundreds of thousands of them, are not getting
Speaker 8: paid right now.
Speaker 10: Yeah, this is the Schumer shutdown is such a tragedy
Speaker 10: because they're holding America and Virginia hostage at a time
Speaker 10: when they need to be doing their jobs, which is
Speaker 10: of course funding government. The Schumer Democrats voted in support
Speaker 10: of a clean se are thirteen times during the Biden administration.
Speaker 10: There's a clean cr sitting on their desks, and they
Speaker 10: just need to vote and open up the government. I
Speaker 10: will tell you, we're starting to see some real pressures.
Speaker 10: I applaud the Trump administration for making sure that the
Speaker 10: military and law enforcement are getting paid. I know they're
Speaker 10: working hard to try to lessen the pain on the
Speaker 10: American people. But at the end of the day, we're
Speaker 10: starting to worry about snap benefit next month. And to
Speaker 10: say that the Schumer shutdown is going to hold hostage
Speaker 10: Americans who need support for food insecurity is absolutely crazy.
Speaker 2: This is the Bloomberg Surveillance podcast, bringing you the best
Speaker 2: in markets, economics, antient politics. You can watch the show
Speaker 2: live on Bloomberg TV weekday mornings from six am to
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify
Speaker 2: or anywhere else you listen, and as always on the
Speaker 2: Bloomberg terminal and the Bloomberg Business app