WEBVTT - Elon Musk ≠ Warren Buffett, Kass Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jai Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.720 Bloomberg dot Com, and of course, on the Bloomberg so 0:00:33.840 --> 0:00:35.960 Trade front and center once again as we count you 0:00:36.000 --> 0:00:38.519 down to a Federal Reserve decision. No news conference, a 0:00:38.600 --> 0:00:41.040 statement which I'm sure that Tom pau Sally will be 0:00:41.120 --> 0:00:44.239 looking at closely. NBC Capital's chief economists joining us here 0:00:44.479 --> 0:00:46.920 in New York. Tom, good morning to you. Good morning gentlemen. 0:00:46.960 --> 0:00:49.519 How is everyone? Everything is great, and we're wondering how 0:00:50.000 --> 0:00:53.760 gradual great hikes for now? How long for now really is? 0:00:54.040 --> 0:00:57.320 For now is at least until the end of next year. Um. 0:00:57.360 --> 0:01:01.960 You know we that this has been our long standing call. Uh. 0:01:02.200 --> 0:01:04.440 And finally I think the market is starting to buy 0:01:04.440 --> 0:01:06.440 into it a bit more. They're still not quite convinced 0:01:06.440 --> 0:01:08.720 on nineteen. But you'll get two more hikes this year, 0:01:08.720 --> 0:01:11.119 and you'll get four hikes next year. Uh. And I look, 0:01:11.400 --> 0:01:13.920 it's not a heroic case. I mean, I think this 0:01:14.000 --> 0:01:16.840 is what people forget. Um, if you have economic activity 0:01:16.880 --> 0:01:20.759 that's accelerating. UM, labor dynamics that continue to suggest that 0:01:21.120 --> 0:01:23.840 the consumer is going to be in very good shape. Uh, 0:01:23.880 --> 0:01:25.960 then I think that will lend itself to the FED 0:01:26.000 --> 0:01:29.760 continuing this process of normalizing rates. So I don't think 0:01:29.800 --> 0:01:31.839 we're going out on a limb. It's great uncertainty shared 0:01:31.880 --> 0:01:35.759 by many about UM. If you took a twelve month 0:01:35.880 --> 0:01:39.280 rolling view of the economy waking up in nineteen looking 0:01:39.319 --> 0:01:42.360 ahead full hikes. Yeah, In fact, what I would say 0:01:42.400 --> 0:01:45.920 is economic activity actually doesn't look very different in nineteen 0:01:45.959 --> 0:01:47.560 than it does right now. And here we are with 0:01:47.680 --> 0:01:50.680 a year where you're going to see four hikes. So interesting. Yeah, yeah, 0:01:50.680 --> 0:01:52.560 So I think that's the sort of the right framework 0:01:52.600 --> 0:01:55.040 to think about it. In UM. You know, look, if 0:01:55.080 --> 0:01:59.080 we were if this was any standard economic expansion and 0:01:59.080 --> 0:02:01.040 we were here in your ten then yeah, you would 0:02:01.040 --> 0:02:03.520 make the case the FED was basically about to sort 0:02:03.520 --> 0:02:06.200 of stop the process. But it's actually I would say 0:02:06.240 --> 0:02:08.560 that the real risk is that you actually see more hikes, 0:02:08.600 --> 0:02:10.560 not fewer hikes from this FED. Well, let's just take 0:02:10.560 --> 0:02:13.040 the forecast from the street. The Magian estimate for growth 0:02:13.200 --> 0:02:15.960 next year is about two and a half percent. It's 0:02:16.000 --> 0:02:19.400 one eight percent. Where's obc on that. Um So for 0:02:19.440 --> 0:02:21.440 this year, we're right around three percent. For next year 0:02:21.440 --> 0:02:24.119 we're also around three percent. Um So, again just sort 0:02:24.120 --> 0:02:26.959 of the idea of continuing the expansion. We actually don't 0:02:26.960 --> 0:02:30.280 forecast beyond sort of the next two years. UM So 0:02:30.520 --> 0:02:32.680 I will not get myself into compliance trouble by saying 0:02:32.680 --> 0:02:36.720 anything about that. But nevertheless, Uh, look, I would tell 0:02:36.760 --> 0:02:37.880 you that if you want like a sort of a 0:02:37.880 --> 0:02:40.640 clue for where you're going to be in if there's 0:02:40.720 --> 0:02:43.680 we don't see any fundamental deterioration on the horizon. This 0:02:43.760 --> 0:02:46.120 is really interesting going into the Federal Reserve decision. A 0:02:46.160 --> 0:02:48.360 lot of people have made a lot out of the 0:02:48.400 --> 0:02:51.440 fact that the Federal Reserve is at odds with this administration. 0:02:51.760 --> 0:02:55.040 That sustainable three percent GDP growth just is not sustainable. 0:02:55.520 --> 0:02:57.200 You're on the side of the administration, then you think 0:02:57.200 --> 0:02:59.280 it is sustainable. Yeah, So let me not say I'm 0:02:59.320 --> 0:03:04.560 taking sides uh particular debate exactly. I don't want to 0:03:04.560 --> 0:03:06.920 be on the side of any administration. But what I 0:03:06.919 --> 0:03:09.520 would simply say is, uh, yeah, look, I think that 0:03:09.600 --> 0:03:14.320 three percent is relatively easy to achieve as long as 0:03:14.520 --> 0:03:18.160 labor market dynamics continue. To improve much as we see 0:03:18.200 --> 0:03:20.720 them improving. But you know what I would say is 0:03:20.960 --> 0:03:23.239 getting north of three percent. Boy, do I think the 0:03:23.320 --> 0:03:25.359 hurdle is very high for that. UM. I don't think 0:03:25.360 --> 0:03:27.840 you're gonna see anything close to four percent on a 0:03:27.880 --> 0:03:31.360 sustained basis. But interestingly, we here we are with a 0:03:31.520 --> 0:03:34.480 four four handle growth number in Q two, and guess 0:03:34.520 --> 0:03:36.560 what's gonna happen in Q three. You're going to see 0:03:36.560 --> 0:03:39.400 another four handle. So I think this allows the administration 0:03:39.440 --> 0:03:41.840 to actually take a victory lap around four percent. We 0:03:41.840 --> 0:03:44.160 don't think four percent is sustainable, UM, And not to 0:03:44.200 --> 0:03:47.040 bore your listeners, but the reality for next quarters four 0:03:47.080 --> 0:03:50.240 percent is it's just an inventory snap back. UM. You 0:03:50.280 --> 0:03:52.360 know you're gonna get It's gonna add one full percentage 0:03:52.360 --> 0:03:55.840 point to growth UM consumption all the while will be 0:03:55.880 --> 0:03:58.080 around two and a half percent. And every business person 0:03:58.160 --> 0:04:01.560 listen to this school and Percelli's not okay. September twenty six, 0:04:02.000 --> 0:04:06.960 November December nineteen. Then we go into next year January thirty, 0:04:07.040 --> 0:04:10.880 March twenty May one, June nine. I'm looking at the 0:04:10.920 --> 0:04:13.920 cost of money a two year yield two point six 0:04:13.960 --> 0:04:16.880 seven percent. If I get a PURSELLI three or four 0:04:17.000 --> 0:04:21.560 rate increases. Where's my two year yield come May one, 0:04:21.839 --> 0:04:24.920 two thousand nineteen. Yeah, so you're looking at a really 0:04:24.920 --> 0:04:28.599 like an incredibly flat yield curve. There's no question about it. 0:04:28.640 --> 0:04:30.360 Part of the problem, particularly if you just think about 0:04:30.360 --> 0:04:33.359 like sort of the term structure more broadly, UM. You know, 0:04:33.440 --> 0:04:36.040 if you think about UM, you know the thing that 0:04:36.120 --> 0:04:39.039 really does the driving from a back end of the 0:04:39.080 --> 0:04:42.159 curve perspective, ten year yields in particular, you know, you 0:04:42.320 --> 0:04:44.920 tend to have some inflationary impulse that really tends to 0:04:44.960 --> 0:04:48.359 push UM back end rates a little higher. The reality 0:04:48.400 --> 0:04:50.400 is we just don't see a lot of inflationary pressure. 0:04:50.440 --> 0:04:52.400 But if are you talking about a three fifty on 0:04:52.440 --> 0:04:54.800 the two year yield? Right? Yeah, exactly, So if you 0:04:54.839 --> 0:04:57.240 what does that do to business? What does that do 0:04:57.480 --> 0:05:01.480 to nominal spirit? So here, let's just make sure we 0:05:01.600 --> 0:05:03.760 sort of hash out this whole thing. So we have 0:05:03.880 --> 0:05:06.320 by the end of next year, we actually have funds 0:05:06.360 --> 0:05:09.400 at three fifty UM and we have tens at three 0:05:09.400 --> 0:05:13.919 seventy five. So you're looking at a completely flat yield 0:05:13.920 --> 0:05:18.920 curve again and business spirit. So what I would say is, 0:05:19.600 --> 0:05:24.200 if we continue to print these job numbers, and we 0:05:24.240 --> 0:05:28.400 continue to print firm wage pressures if M I S 0:05:28.600 --> 0:05:31.000 M is able to continue to hold up, which again, 0:05:31.080 --> 0:05:32.560 let let me be clear, I'm not I don't want 0:05:32.560 --> 0:05:35.440 to make a sound like these are guesses. Um. We 0:05:35.520 --> 0:05:38.599 have every reason to believe that they will. Um, then 0:05:38.680 --> 0:05:43.159 so too will the corporate psyche. I'm just wondering what 0:05:43.200 --> 0:05:45.200 the rest of the bank i'bviously think of this? Cool? 0:05:45.320 --> 0:05:47.960 Where's your credit scene? What are your credit scene thinking? 0:05:48.040 --> 0:05:50.320 If you can just get the front end all the 0:05:50.360 --> 0:05:52.960 way up to three and a half percent, what's min 0:05:52.960 --> 0:05:55.760 incentive to take risk with high yield as taught as 0:05:55.760 --> 0:05:58.520 it is right now? But tell tell me where we 0:05:58.560 --> 0:06:01.440 are in the cycle? Right? Tell me like in noords, 0:06:01.680 --> 0:06:04.080 I don't think it's a single variable equation. You can't 0:06:04.120 --> 0:06:06.919 just simply say, hey, by the way, but um, you 0:06:06.960 --> 0:06:09.280 know yields er this, Well, that's not that simple. Tell 0:06:09.320 --> 0:06:11.640 me what else is happening? Right? If everything else continues 0:06:11.680 --> 0:06:15.320 to move along at a reasonable pays, then everything shifts higher. Um. 0:06:15.360 --> 0:06:17.000 And I think that's the right way of thinking about 0:06:17.040 --> 0:06:20.040 So basically, Tom and just to dig date Princy with 0:06:20.320 --> 0:06:22.400 thinking about this, you think there will be a big 0:06:22.400 --> 0:06:25.839 supply side response in the U. S economy. Then yeah, 0:06:25.920 --> 0:06:27.760 So it's funny if we think about sort of the 0:06:27.760 --> 0:06:31.760 notion of aggregate demand UM. Aggregate demand is obviously always 0:06:31.760 --> 0:06:34.880 a function of what's happening from a labor perspective, right, 0:06:34.880 --> 0:06:36.920 It always comes back to labor um and so if 0:06:36.960 --> 0:06:40.880 you're able to continue to push labor firmer, which which 0:06:40.960 --> 0:06:43.240 let's keep in mind, we are now actually getting to 0:06:43.279 --> 0:06:47.440 the tightest part of the labor cycle right now, um, 0:06:47.480 --> 0:06:49.240 which guess what happens at the tightest part of the 0:06:49.320 --> 0:06:52.560 labor cycle. Wage pressures really accelerate. So then you all 0:06:52.560 --> 0:06:55.599 of a sudden have an additional catalyst for aggregate demand. 0:06:56.000 --> 0:06:58.440 So you think productivity picks up because people are gonna 0:06:58.440 --> 0:07:01.640 have to invest and tell you productivity already is picking up. 0:07:01.800 --> 0:07:03.640 Now again, is it to the point where we want 0:07:03.640 --> 0:07:05.520 to see it? Yeah, I mean, you know, that's a 0:07:05.560 --> 0:07:08.080 debatable point, but the reality is productivity has picked up. 0:07:08.120 --> 0:07:11.280 And I would further add think of it this way. 0:07:11.880 --> 0:07:14.520 Right now we were I would say all the pieces 0:07:14.520 --> 0:07:17.120 are in place to actually have a really nice little 0:07:17.160 --> 0:07:21.720 CAPEX run here. One commercial industrial UM lending standards have eased, 0:07:22.040 --> 0:07:25.720 and that tends to lead outright lending. Um too. If 0:07:25.760 --> 0:07:29.520 you think about where we are from an equipment perspective 0:07:29.520 --> 0:07:31.720 in the United States, the average age of equipment in 0:07:31.720 --> 0:07:33.840 the United States is about ten years old. That's actually 0:07:33.960 --> 0:07:37.640 very old as US by US standards. So that would 0:07:37.640 --> 0:07:39.680 also suggest that at a minimum we could be on 0:07:39.720 --> 0:07:42.119 the verge of a replacement cycle in the United States. 0:07:42.320 --> 0:07:45.040 Companies are flush with cash. How many companies have we 0:07:45.120 --> 0:07:46.520 heard now say, hey, by the way, on the back 0:07:46.560 --> 0:07:48.760 of repatriation, remember how we said we were going to 0:07:48.920 --> 0:07:51.320 use that for stock back backs. Um, yeah, we're actually 0:07:51.320 --> 0:07:53.240 gonna use some of that for capex too. So I 0:07:53.280 --> 0:07:55.240 would say the pieces are in place actually to have 0:07:55.320 --> 0:07:58.160 that scenario playoff. We go on. This has been great, 0:07:58.200 --> 0:08:01.080 congratulations on your wage and hill over the last twenty 0:08:01.120 --> 0:08:06.280 four months has been great thought provoking stuff this morning. Yeah, 0:08:06.320 --> 0:08:09.520 and I don't think anybody's prepared John for a three percent, 0:08:09.640 --> 0:08:12.800 let alone three quarters, three thirty three sixty, never mind 0:08:13.800 --> 0:08:16.080 of the four hand or we saw in the previous quarter. 0:08:16.120 --> 0:08:18.360 In this quarter, that would be something, you know, I 0:08:18.360 --> 0:08:20.880 would say that John, can we agree that that's an 0:08:20.920 --> 0:08:23.080 outlier course, It's not like cool. But Tom picks on 0:08:23.120 --> 0:08:26.160 something quite important. Many people are focused on the export 0:08:26.280 --> 0:08:28.680 numbers fading in the next quarter. What they haven't picked 0:08:28.760 --> 0:08:30.440 up on, and I haven't heard much of, is the 0:08:30.480 --> 0:08:33.320 fact that the inventory number the previous quarter actually canceled 0:08:33.320 --> 0:08:36.480 out the contribution from trade in the last quarter. And Tom, 0:08:36.520 --> 0:08:38.800 I guess that's your point, is that yes, export might 0:08:38.800 --> 0:08:40.559 trade and that it might fade in the next quarter, 0:08:40.840 --> 0:08:43.040 but the invatory build is going to offset it anyway. Yeah, 0:08:43.280 --> 0:08:46.079 you get uh. In fact, it's a one full percentage 0:08:46.120 --> 0:08:49.120 point increase from inventories loan, which is just astounding. And again, 0:08:49.280 --> 0:08:52.000 make no mistake, we don't think a number like that's repeatable, 0:08:52.000 --> 0:08:54.360 which is why, as I said earlier, we don't think 0:08:54.400 --> 0:08:57.280 four percent growth is going to be sustained. You'll shift 0:08:57.320 --> 0:09:00.240 back down closer to you know, roughly three percent, which 0:09:00.280 --> 0:09:02.520 is still above a lot of not the gloom crew, 0:09:02.600 --> 0:09:05.680 but people. It's above the crowd on the rest of 0:09:05.720 --> 0:09:08.320 the street. We can say that with some conviction. You 0:09:08.320 --> 0:09:10.320 can just see it in the estimates. Are you gonna 0:09:10.360 --> 0:09:12.960 be ready, John? Today? For one of my other properties, 0:09:13.000 --> 0:09:16.800 which is the FED decides, I'm gonna watch unlike the 0:09:16.880 --> 0:09:20.640 real yield, I do watch you when the Fed descide. 0:09:21.040 --> 0:09:22.920 I just watch it. It's smart. But you don't watch me. 0:09:23.000 --> 0:09:29.360 You watch Diane Swant, Jeff Rosenberg, Scarlet, Yeah, exactly, and 0:09:29.640 --> 0:09:31.719 you're sort of on the side getting frustrates. I'm way 0:09:31.760 --> 0:09:35.200 on the side. Yeah. You know, Scarlett's got Scott coming in. 0:09:35.240 --> 0:09:37.400 That'll be good. Scott miner coming in. It's very good. 0:09:38.320 --> 0:09:41.000 Scarlet food. As tough as nails. I mean, she's brutal, 0:09:41.440 --> 0:09:59.480 she she's got she elbows me time shut up. Nothing 0:09:59.640 --> 0:10:04.640 is more basic and more foundational than mining and international mining. 0:10:04.960 --> 0:10:08.320 With an important conversation now and the state of mining 0:10:08.360 --> 0:10:13.160 and China. Here is are John Faraoll, Good morning, guy's 0:10:13.200 --> 0:10:15.720 John Sebasti and Jack the See. I've reattends out joining 0:10:15.800 --> 0:10:18.240 us now from London. Ja. It's always great to catch 0:10:18.320 --> 0:10:19.560 up with you, and I have to say, out of 0:10:19.559 --> 0:10:21.840 all the executives that I speak to, you have a 0:10:21.840 --> 0:10:24.360 really unique inside into what is going gone with China. 0:10:24.760 --> 0:10:27.199 When we first met, you run the copper and cold business, 0:10:27.200 --> 0:10:30.200 building up a multi billion dollar trade with the country. 0:10:30.400 --> 0:10:32.280 A lot of people trying to understand what's going on 0:10:32.320 --> 0:10:36.960 there now, jus and I'm just wondering what your insight is. Yeah, 0:10:37.000 --> 0:10:39.960 I think well, first of all, let's let's say a 0:10:39.960 --> 0:10:42.559 few words about the results today. As you know, we 0:10:42.559 --> 0:10:46.480 we disclose our first half result. Very strong performance seven 0:10:46.520 --> 0:10:49.480 point two billion dollars of returns the clear today to 0:10:49.520 --> 0:10:53.080 a shoulders including two point two billion dollars of interim 0:10:53.160 --> 0:10:56.120 evident which is the highest in the entire water and 0:10:56.200 --> 0:11:00.280 for a six year history of the company. Now, um 0:11:00.280 --> 0:11:03.439 to your question in terms of outlook, is the outlook 0:11:03.480 --> 0:11:06.040 is pretty positive in ration to China is as far 0:11:06.080 --> 0:11:09.520 as we see it. And remember we have multiple entry 0:11:09.559 --> 0:11:11.839 point in ration to China. We're selling I know, we're 0:11:11.840 --> 0:11:14.520 selling books like we're saying, copper and so on so forth. 0:11:14.880 --> 0:11:17.440 Today it's absolutely clear that they could be is slowing 0:11:17.520 --> 0:11:21.480 down as expected, as forecast. At the same time, is 0:11:21.840 --> 0:11:24.480 you saw a few weeks ago the Chinese government deciding 0:11:24.520 --> 0:11:27.720 to put some similars into the system. So today when 0:11:27.720 --> 0:11:30.760 I look at the other books have in China, as 0:11:30.800 --> 0:11:32.840 I said, either in nine or books a copper and 0:11:32.880 --> 0:11:36.120 so on to force, I do not have any concerns whatsoever. 0:11:36.440 --> 0:11:39.240 So the Chinese situation, as far as we see it 0:11:39.280 --> 0:11:42.160 is pretty good. My personal experience of it is, you know, 0:11:42.200 --> 0:11:44.760 I go there maybe three four times a year. UM. 0:11:44.920 --> 0:11:48.079 Last time I met with Chao, the chairman of SASSAK, 0:11:48.120 --> 0:11:50.760 who controls most of the issues in China, it was 0:11:50.800 --> 0:11:53.400 pretty clear in his discussion that the restructuring of the 0:11:53.559 --> 0:11:56.920 sea industry, the restructuring of the alimnium is here to say, 0:11:57.040 --> 0:11:59.360 which means that China will continue to buy high quality 0:11:59.400 --> 0:12:01.720 product and it's a great piece of news for realt 0:12:01.760 --> 0:12:03.360 into well j S at the moment. Though, just to 0:12:03.360 --> 0:12:05.200 talk about China a little bit further, do you see 0:12:05.240 --> 0:12:07.640 them hitting an inflection point where they do start to 0:12:08.120 --> 0:12:10.840 boost in terms of amount by shifting towards stimulus and 0:12:10.840 --> 0:12:13.240 pulling away from de leveraging. It's not a scenario you 0:12:13.320 --> 0:12:17.679 can see playing out. Yeah, I think I think it 0:12:17.720 --> 0:12:20.160 could happen. It could happen. Absolutely. I think they've been 0:12:20.200 --> 0:12:23.520 able to manage the debt level in a pretty good way. Um. 0:12:23.559 --> 0:12:25.920 You know, I'm one of the most optimist person inneration 0:12:26.000 --> 0:12:28.160 to their ability to manage a debt level, and I've 0:12:28.240 --> 0:12:30.480 been saying it on this program a few times in 0:12:30.520 --> 0:12:33.400 the past. Today, I'm not concerned about the ability to 0:12:33.440 --> 0:12:36.160 manage that at all. Um, the economy is still growing, 0:12:36.200 --> 0:12:38.760 you know, six point seven percent as they manage to 0:12:38.800 --> 0:12:41.079 deliver in the second quarter of this year. If you 0:12:41.160 --> 0:12:43.800 look at it by any kind of other standards or 0:12:43.800 --> 0:12:46.760 the geography, it's a massive number. So today China is 0:12:46.760 --> 0:12:49.079 You're growing, It's not going as fast as they used 0:12:49.120 --> 0:12:52.160 to be. There's still lots of raw material and Riotintol 0:12:52.320 --> 0:12:54.760 is very well placed to benefit from it in many ways, 0:12:54.800 --> 0:12:56.360 though real tints are also in the eye of the 0:12:56.400 --> 0:12:58.720 storm when it comes to the trade story, JS many 0:12:58.720 --> 0:13:00.920 people with points to the fact that the second largest 0:13:00.920 --> 0:13:04.880 aluminum producer outside of China, the biggest exporter of aluminum 0:13:04.920 --> 0:13:07.680 into the United States from Canada. That puts you in 0:13:07.720 --> 0:13:10.040 a little bit of a point attention at the moment, Jazz, 0:13:10.120 --> 0:13:12.120 I don't see that tension in the numbers. Do you 0:13:12.160 --> 0:13:15.440 have the confidence that it will stay that way? Well, 0:13:15.520 --> 0:13:17.560 let's be absolutely here. I mean, let's give you an example. 0:13:17.600 --> 0:13:20.479 It's absolutely here. We are very strong player is in alumnium. 0:13:20.559 --> 0:13:22.440 You know that the bulk of the almnium were produce 0:13:22.520 --> 0:13:25.560 in Canada is sold in the US. We represent around 0:13:25.640 --> 0:13:27.720 one third of all the alumnium or should I said 0:13:27.720 --> 0:13:30.720 aluminum consume in the US. And today there have been 0:13:30.720 --> 0:13:33.680 no issues whatsoever. There have been no matter of impact 0:13:34.080 --> 0:13:36.320 in ratio to the trade and the tariff ands on 0:13:36.360 --> 0:13:39.400 so forth, because the way the pricing works, it means 0:13:39.440 --> 0:13:41.560 that the type today are made by our customer and 0:13:41.600 --> 0:13:43.679 the end user in the US. That's the first aspect. 0:13:43.679 --> 0:13:46.600 The circle aspect is we need to step back. You know, 0:13:46.679 --> 0:13:48.840 the best interests from the end user in the US 0:13:48.960 --> 0:13:51.439 is to have access to a low cost, reliable source 0:13:51.480 --> 0:13:54.920 of alumium. And some people would say access to a 0:13:54.920 --> 0:13:58.199 green source of allmium. And today the alemium smelter that 0:13:58.240 --> 0:14:00.600 we have in Canada are the best now, not even 0:14:00.679 --> 0:14:02.520 in the first quarter of the costcove there in the 0:14:02.559 --> 0:14:05.840 first design. And if you combine death this with two things. 0:14:05.840 --> 0:14:08.400 One is the hydrol base, so it's a sore set 0:14:08.440 --> 0:14:10.800 of water and that's in terms of energy. And the 0:14:10.840 --> 0:14:14.079 second element, if you think about the partnership we signed 0:14:14.120 --> 0:14:16.719 recently with Apple and we've Alcoha to develop in the 0:14:16.800 --> 0:14:20.160 TANNEL technology for aluminium spelter. Pretty soon there will be 0:14:20.240 --> 0:14:23.320 the greenness of the greenness across the industry. Very low cost, 0:14:23.720 --> 0:14:27.200 very reliable source of aluminium, very green. I believe that 0:14:27.360 --> 0:14:29.240 is in the best interests of the end user in 0:14:29.280 --> 0:14:31.560 the US. To have access to this metal. So today, 0:14:31.840 --> 0:14:34.440 to answer your question, ineration to trade between the US 0:14:34.480 --> 0:14:37.680 and Canada for aluminium, no issues whatsoever suggest today it 0:14:37.720 --> 0:14:39.400 doesn't matter what I throwout. You seem to be very 0:14:39.400 --> 0:14:41.800 optimistic and confident. Let's talk about the elephant in the room. 0:14:41.840 --> 0:14:44.360 When I woke up this morning and came into the 0:14:44.480 --> 0:14:47.200 office and switched on the Plumberg terminal in saw London traded, 0:14:47.280 --> 0:14:49.280 the stock was down hard. The stock is still down 0:14:49.480 --> 0:14:51.920 by almost four percent. What is your rdom What's going 0:14:51.920 --> 0:14:55.200 on with the stock this morning? Yeah, I mean, let's 0:14:55.200 --> 0:14:56.840 be clear. I mean, first of all, is the entire 0:14:56.880 --> 0:14:59.360 your mining business or mining industry was down in this 0:14:59.400 --> 0:15:01.280 morning when I okay it as well. That's one aspect. 0:15:01.320 --> 0:15:04.160 The second aspect is, you know, let's step back. You know, 0:15:04.240 --> 0:15:06.480 I'm not driving this company on the back of the 0:15:06.480 --> 0:15:09.320 share place of a few hours of trading in London 0:15:09.680 --> 0:15:11.600 or wherever in New York. Will see when he opens. 0:15:11.880 --> 0:15:13.480 You know, this is a company which we have been 0:15:13.520 --> 0:15:15.880 there for world for six years. We just deliverse seven 0:15:15.920 --> 0:15:18.400 point two billion dollars of returned to the shoulders, including 0:15:18.440 --> 0:15:21.160 the highest dividend in the entire history of the company. 0:15:21.520 --> 0:15:23.960 We have a sound business. What is very important, and 0:15:24.080 --> 0:15:26.880 back to your previous question, there is uncertainty in the marketplace. 0:15:26.920 --> 0:15:28.960 So what we need to do is to have a 0:15:29.040 --> 0:15:31.480 very resident business case on the back of bound sheets, 0:15:31.520 --> 0:15:33.320 on the back of the quality of our portfolio, on 0:15:33.360 --> 0:15:35.520 the back of the quality of a performance, in order 0:15:35.560 --> 0:15:37.560 to make sure that we deliver on our commitment to 0:15:37.560 --> 0:15:40.160 a shoulder, which is to deliver super returned in the 0:15:40.160 --> 0:15:42.760 shop medium and long term. And what we've deliversed this 0:15:43.200 --> 0:15:45.640 morning seven point two billion dollars a return. If you 0:15:45.720 --> 0:15:47.760 think about what we didiver last year on the foll year, 0:15:47.800 --> 0:15:50.800 which was just below ten billion dollars, those are big money, 0:15:51.120 --> 0:15:53.600 big ticket items. Were just deliving on our commitments. So 0:15:53.640 --> 0:15:56.000 let's see what the share parace does does in the 0:15:56.040 --> 0:15:58.840 coming weeks and months. I've got sevens late left jas 0:15:58.880 --> 0:16:01.520 and I've got two questions for you. The increasing costs 0:16:01.920 --> 0:16:03.800 cost inflation is looking like a little bit of a 0:16:03.800 --> 0:16:06.440 problem on the margin. Didn't say it in the Anglo numbers. 0:16:06.520 --> 0:16:09.960 Why do I say it in Rio? Well, I think 0:16:09.960 --> 0:16:11.880 what you've see in real is two things. First of 0:16:11.920 --> 0:16:15.080 all is we did acknowledge that inflation was coming back fast, 0:16:15.160 --> 0:16:17.960 and we acknowledge it as early as NOBIL December, whereas 0:16:18.000 --> 0:16:19.960 maybe some of our computers have not done it. But 0:16:20.040 --> 0:16:23.040 the simple aspect is we've taken actions early on. That's 0:16:23.040 --> 0:16:25.320 what we call our MiNet to market policulary program. And 0:16:25.400 --> 0:16:27.400 all in all, what you see to there is the 0:16:27.640 --> 0:16:31.040 ability to maintain or EBD margins. And you saw forte 0:16:31.560 --> 0:16:34.320 BD margin which compares to fourty four percent on the 0:16:34.360 --> 0:16:37.400 full year business last year nine point two billion dollars 0:16:37.440 --> 0:16:40.600 of EBD seven point two billion dollars of return to 0:16:40.640 --> 0:16:43.120 the shoulders today. Final question, Jess, and I'm going to 0:16:43.200 --> 0:16:45.960 leave the most antagonizing question until last, because then you 0:16:45.960 --> 0:16:47.560 get to leave and I don't have to deal with it. 0:16:47.920 --> 0:16:50.800 You've just promised seven billion dollars to invest us. You've 0:16:50.840 --> 0:16:53.560 basically said this more to come. The stocks still down, 0:16:54.200 --> 0:16:56.640 there's no real sign of growth coming from this company. 0:16:56.920 --> 0:17:00.800 The critics would say, this mining company, which should be 0:17:00.920 --> 0:17:04.280 very cyclical, it's just become a utility. It's become boring. 0:17:04.840 --> 0:17:08.520 Why is that a good thing? Jacks hold on. We 0:17:08.600 --> 0:17:11.400 have to be clear. Our commitment to sholders is verst important. 0:17:11.400 --> 0:17:13.600 We have committed to the very super return in the 0:17:13.640 --> 0:17:16.200 shop medium and long term. That the first point, and 0:17:16.240 --> 0:17:19.359 we had to re establish our track record. Like the 0:17:19.400 --> 0:17:21.280 rest of the industry, last ten fifteen years of the 0:17:21.320 --> 0:17:24.040 industry have not been very good. Last couple of years 0:17:24.040 --> 0:17:25.439 for us have been very good. We did a ten 0:17:25.480 --> 0:17:27.640 billion or last year and with Diverse a seven point 0:17:27.640 --> 0:17:29.720 two the first six months of this year. Now at 0:17:29.760 --> 0:17:32.679 the same time is we are very clear that growth 0:17:32.720 --> 0:17:36.040 has to be an element of all strategy because if 0:17:36.040 --> 0:17:38.240 you don't grow in the mining business, you disappear because 0:17:38.240 --> 0:17:41.080 of depletion. We have some attractive growth options. We were 0:17:41.160 --> 0:17:43.120 one of the if you maybe the only one investing 0:17:43.160 --> 0:17:45.679 at the bottom of cycle. Think about the investment we 0:17:45.720 --> 0:17:47.480 did in in the are in all last year. Think 0:17:47.480 --> 0:17:50.119 about the investment we are currently doing in book Site 0:17:50.160 --> 0:17:53.440 in in Queensland. Think about the investment we're doing in 0:17:53.520 --> 0:17:55.320 Copper and goal in Mortgola at this point in time. 0:17:55.400 --> 0:17:58.560 So we have some growth option in our portfolio. Um 0:17:58.640 --> 0:18:01.760 what is very important for is is to focus on 0:18:01.760 --> 0:18:04.520 on growth which is of high quality. And my view 0:18:05.000 --> 0:18:07.720 is the old mantra value of a volume. It's better 0:18:07.760 --> 0:18:10.280 to deliver a few projects but do them very well 0:18:10.760 --> 0:18:13.200 on time, on budgets. In the safe manner than trying 0:18:13.200 --> 0:18:15.040 to pursue too many things at the same time and 0:18:15.160 --> 0:18:18.760 an average performance. All mantra is about value of a volume. 0:18:18.840 --> 0:18:21.800 All mantri is about creating value. Four shoulders on. Mantra 0:18:22.119 --> 0:18:23.960 is not about being big for the sake of it. 0:18:24.080 --> 0:18:27.040 It's also Bastin Jack the CEO. Every since j has 0:18:27.040 --> 0:18:28.960 always grit a catch up with you guys. Back to 0:18:29.359 --> 0:18:31.800 John Ferrell, thank you so much, greatly appreciate that this 0:18:31.840 --> 0:18:36.840 morning in conversation on mining on China and on real 0:18:37.080 --> 0:18:55.640 attentive for INSTED. I believe we're going to Tesla right now. Yeah, 0:18:55.680 --> 0:18:57.760 we are going to Tesla, and Tesla planning to invest 0:18:57.800 --> 0:19:00.680 in five billion dollars in a possible Chinese actory. This 0:19:00.840 --> 0:19:03.120 is a nice Bloomberg scoop. It's according to a person 0:19:03.200 --> 0:19:07.840 familiar with the situation. And this of course comes at 0:19:07.840 --> 0:19:11.600 probably an inopportune time because the trade war in the US, 0:19:11.840 --> 0:19:15.800 which makes establishing production in China more imperative for the 0:19:15.840 --> 0:19:18.320 electric car pioneer. So I'm not sure whether it's actually 0:19:18.440 --> 0:19:21.639 a supplying tape problem or whether building a factory in 0:19:21.760 --> 0:19:24.120 China gives it the edge because then it can export 0:19:24.359 --> 0:19:27.080 to the region. If trade concerns were to escalate joining 0:19:27.119 --> 0:19:30.399 US now is Bloomberg's Asia and Needs Desk editor mL 0:19:30.520 --> 0:19:33.359 Brian in Beijing, who can kind of, you know, cut 0:19:33.359 --> 0:19:35.000 through the noise to to make sense of all of 0:19:35.000 --> 0:19:36.680 this emma? Is this a good move or it is 0:19:36.720 --> 0:19:38.639 a bad move. It's not to supply parts, right, Is 0:19:38.640 --> 0:19:41.159 it to actually build cars in China that then they 0:19:41.160 --> 0:19:46.800 can export regionally? Yeah, that's right. So it is to 0:19:46.880 --> 0:19:51.040 build an entire cars Modelisque Dance in China. It has 0:19:51.040 --> 0:19:54.080