1 00:00:03,360 --> 00:00:08,840 Speaker 1: This is Bloomberg Surveillance. If anybody needs capable management teams 2 00:00:08,880 --> 00:00:11,200 Speaker 1: for the future, it's the commercial banks, right, They're not 3 00:00:11,240 --> 00:00:13,600 Speaker 1: going to go away. The business isn't going to go away. 4 00:00:13,680 --> 00:00:18,000 Speaker 1: It's not assigned that the economy if not prosperous. The 5 00:00:18,040 --> 00:00:20,120 Speaker 1: fact that in place there's only one passet, I don't 6 00:00:20,160 --> 00:00:21,639 Speaker 1: get it. The fourth coarter was bad in terms of 7 00:00:21,720 --> 00:00:23,639 Speaker 1: g d P, it wasn't bad in terms of jobs. 8 00:00:23,640 --> 00:00:25,920 Speaker 1: In fact, it was fantastic in terms of job growth. 9 00:00:25,960 --> 00:00:29,880 Speaker 1: And that's what's the most important. Bloomberg Surveillance your link 10 00:00:29,960 --> 00:00:34,400 Speaker 1: to the world of economics, finance, and investment. On Bloomberg Radio. 11 00:00:34,520 --> 00:00:38,519 Speaker 1: Good morning everyone, Bloomberg Surveillance. Scarlet Foo in for Michael McKeon. 12 00:00:38,600 --> 00:00:41,120 Speaker 1: This's Friday morning. I'm Tom keen. We welcome all of you. 13 00:00:41,280 --> 00:00:46,640 Speaker 1: Bloomberg twelve Boston, Bloomberg FM, Washington, Bloomberg eleven three on 14 00:00:46,640 --> 00:00:49,440 Speaker 1: New York. Good early morning out in San Francisco, the 15 00:00:49,440 --> 00:00:53,560 Speaker 1: Bay Area, Bloomberg nine sixty. We say good morning as well. 16 00:00:53,600 --> 00:00:56,360 Speaker 1: A retail focused in this our honor to bring you 17 00:00:57,480 --> 00:01:01,360 Speaker 1: Howard David Evans, who has really been really, really, really 18 00:01:01,480 --> 00:01:04,920 Speaker 1: quite good on the challenges of retail boy did he 19 00:01:04,959 --> 00:01:08,240 Speaker 1: get out front of the challenges of Macy's and Coles 20 00:01:08,240 --> 00:01:10,080 Speaker 1: and others. And we'll talk to him. Get an update 21 00:01:10,440 --> 00:01:15,440 Speaker 1: on the pulse of retail America. First, so we look 22 00:01:15,480 --> 00:01:18,600 Speaker 1: quickly at foreign exchange. UH. The four X brief this 23 00:01:18,680 --> 00:01:21,640 Speaker 1: morning brought you my Interactive Brokers winner of f f 24 00:01:21,840 --> 00:01:25,560 Speaker 1: X Weeks two thousand fifteen award for the best Retail 25 00:01:25,640 --> 00:01:29,200 Speaker 1: for X trading platform visit ib at ib kr dot 26 00:01:29,200 --> 00:01:33,759 Speaker 1: com Slash four x yen one thirteen thirty nine weeker 27 00:01:33,800 --> 00:01:37,080 Speaker 1: yen three days in a row, Euro under one, nine 28 00:01:37,160 --> 00:01:42,280 Speaker 1: seventy four euro a weakness, dollar strength off g DP movement, 29 00:01:42,360 --> 00:01:45,640 Speaker 1: a little better g d P number than expected. I 30 00:01:45,680 --> 00:01:47,280 Speaker 1: think we'll leave it there this morning. I mean in 31 00:01:47,400 --> 00:01:52,400 Speaker 1: sterling on doing better and as well, David. I don't 32 00:01:52,400 --> 00:01:56,000 Speaker 1: want to rip up your script, but um GAP needs 33 00:01:56,040 --> 00:01:58,760 Speaker 1: a miracle, right I mean? I mean, I mean, if 34 00:01:58,760 --> 00:02:01,920 Speaker 1: we're gonna have a Howard on on retail, can you 35 00:02:01,960 --> 00:02:04,760 Speaker 1: start with gafferd Is there something more important than gas? 36 00:02:04,880 --> 00:02:07,600 Speaker 1: We can start there? Why not? They mean they need something? 37 00:02:07,640 --> 00:02:10,640 Speaker 1: No question. GAP shares down about two percent in early trading. 38 00:02:11,160 --> 00:02:14,840 Speaker 1: The largest US focused the pool retailer that's GAPS claim 39 00:02:14,919 --> 00:02:17,560 Speaker 1: to fame. They expect earnings for the current fiscal year 40 00:02:17,600 --> 00:02:19,320 Speaker 1: to be two dollars twenty five cents to share it 41 00:02:19,400 --> 00:02:22,760 Speaker 1: best the high end of gaps forecast range trailed analysts 42 00:02:22,760 --> 00:02:26,200 Speaker 1: averagessetment in the Bloomberg survey by nineteen cents. And then 43 00:02:26,240 --> 00:02:28,720 Speaker 1: you have J. C. Penny, which is up more than 44 00:02:28,800 --> 00:02:32,720 Speaker 1: fourteen percent in early trading. The department store chains fourth 45 00:02:32,800 --> 00:02:35,800 Speaker 1: quarter profit and sales topped analysts estimates at least the 46 00:02:35,800 --> 00:02:38,600 Speaker 1: ones we surveyed here at Bloomberg UH and the results 47 00:02:38,600 --> 00:02:41,440 Speaker 1: showed Penny chief executive Marvin Allison is making progress and 48 00:02:41,520 --> 00:02:45,240 Speaker 1: turning around the company. Looking beyond retail, You've got Kraft 49 00:02:45,320 --> 00:02:48,560 Speaker 1: Hinds up five and a half percent, The food makers 50 00:02:48,560 --> 00:02:51,080 Speaker 1: fourth quarter earnings and sales beat estimates. Craft Hunts, of 51 00:02:51,080 --> 00:02:53,480 Speaker 1: course formed last year, and a deal orchestrated by private 52 00:02:53,480 --> 00:02:56,840 Speaker 1: equity firm three G Capital and Warren Buffetsbergshire Hathaway, so 53 00:02:56,840 --> 00:02:59,840 Speaker 1: they're among the winners. In response to those results, Monster 54 00:03:00,000 --> 00:03:03,360 Speaker 1: evers O down five percent. The energy drake maker's profit 55 00:03:03,400 --> 00:03:05,800 Speaker 1: and revenue trail the average estates for the third time 56 00:03:05,840 --> 00:03:09,440 Speaker 1: in the past four quarters. UH. Some more well received 57 00:03:09,520 --> 00:03:13,080 Speaker 1: earnings reports you've got the networking software maker Palo Alto 58 00:03:13,280 --> 00:03:16,880 Speaker 1: Networks up seven and a half percent, the data analysis 59 00:03:16,880 --> 00:03:21,679 Speaker 1: software makers Splunk of six months splunk as p lk 60 00:03:21,960 --> 00:03:24,320 Speaker 1: is the ticker of sixty and a half percent, and 61 00:03:24,440 --> 00:03:27,680 Speaker 1: stamps dot Com of twenty four and a half percent, 62 00:03:27,720 --> 00:03:30,880 Speaker 1: all in response to well receive from Southwestern Energy, though 63 00:03:30,960 --> 00:03:33,440 Speaker 1: down eleven and a half percent, the shale producer with 64 00:03:33,480 --> 00:03:35,880 Speaker 1: a fourth quarter loss as revenue trail estimates. And then 65 00:03:35,920 --> 00:03:38,920 Speaker 1: you have son Edison a lot of pieces to this story, 66 00:03:39,000 --> 00:03:42,760 Speaker 1: stocks a thirty percent in early trading. Hatchment manager David 67 00:03:42,760 --> 00:03:45,800 Speaker 1: Temper's attempt to block the company's proposed purchase of Vivin 68 00:03:45,880 --> 00:03:48,760 Speaker 1: Solar was turned away by a Delaware judge who all 69 00:03:48,800 --> 00:03:53,320 Speaker 1: the Tempers Appolution management couldn't prove the deal hurts investors, 70 00:03:53,320 --> 00:03:57,560 Speaker 1: and son Edison's Terraform power unit now Vivin Solar up 71 00:03:57,640 --> 00:04:01,040 Speaker 1: thirty seven and a half percent in early rating. Apple 72 00:04:01,080 --> 00:04:03,480 Speaker 1: Loosa has a nine and a half percent stake in 73 00:04:03,680 --> 00:04:06,120 Speaker 1: terror Form, and that stock is down eight and a 74 00:04:06,200 --> 00:04:10,600 Speaker 1: half percent. Weight Watchers International down twenty eight percent. The 75 00:04:10,640 --> 00:04:14,960 Speaker 1: weight loss company that partnered with Oprah Winfrey lad reported 76 00:04:15,000 --> 00:04:17,720 Speaker 1: an unexpected fourth quarteter loss, the number of act of 77 00:04:17,800 --> 00:04:22,560 Speaker 1: subscribers dropped four point eight percent, and finally, Republic Airways 78 00:04:22,600 --> 00:04:26,039 Speaker 1: Holdings not stock down eighty two percent sixty two cents 79 00:04:26,040 --> 00:04:30,000 Speaker 1: to share the regional jet owner file for bankruptcy Republic 80 00:04:30,040 --> 00:04:32,080 Speaker 1: side and in fact of a lack of pilots during 81 00:04:32,120 --> 00:04:35,560 Speaker 1: a contract dispute last year. David Wilson, thank you so much, 82 00:04:35,600 --> 00:04:37,520 Speaker 1: appreciate that. And now we're bring in a hard did 83 00:04:37,680 --> 00:04:42,039 Speaker 1: its associates who has given us just terrific perspective and 84 00:04:42,160 --> 00:04:45,440 Speaker 1: way out front Gap stores. Just as one example, folks, 85 00:04:45,440 --> 00:04:48,240 Speaker 1: I'll put the chart out on Bloomberg Radio Plus. Basically 86 00:04:48,240 --> 00:04:51,560 Speaker 1: it's made up eighty percent of the success coming out 87 00:04:51,560 --> 00:04:54,680 Speaker 1: of four five years ago. How how bad is it 88 00:04:54,839 --> 00:04:57,760 Speaker 1: out there? I want you to give me a reasoned 89 00:04:58,640 --> 00:05:03,279 Speaker 1: analysis of the state of retail getting out of the 90 00:05:03,440 --> 00:05:06,640 Speaker 1: ugly spring. They get to summer and they've got a 91 00:05:06,680 --> 00:05:11,320 Speaker 1: regroup for back to school. What's the strategy. Well, for Gap, 92 00:05:11,440 --> 00:05:14,719 Speaker 1: they're in a segment that is almost all bad. American 93 00:05:14,800 --> 00:05:20,080 Speaker 1: Eagle outfit is gas. Yeah, I mean every in the 94 00:05:20,160 --> 00:05:24,960 Speaker 1: apparel chain business at Abercrombie, you're gonna find very few 95 00:05:25,120 --> 00:05:28,560 Speaker 1: arrow posts that you're gonna find very few winners and 96 00:05:28,640 --> 00:05:32,200 Speaker 1: almost all loses. Jay Crewe a disaster, So they're in 97 00:05:32,279 --> 00:05:37,279 Speaker 1: a business where everybody is in collapse, including them. The 98 00:05:37,320 --> 00:05:40,080 Speaker 1: good news about the Gap is they're richer than everyone else. 99 00:05:40,560 --> 00:05:43,119 Speaker 1: They're balance sheet is a monster, sitting with a billion 100 00:05:43,200 --> 00:05:46,800 Speaker 1: in cash, no debt. So this is a powerhouse company 101 00:05:46,880 --> 00:05:50,200 Speaker 1: that is not going away. They're still making money, they 102 00:05:50,279 --> 00:05:53,080 Speaker 1: have positive cash flow, they got lots of money. They 103 00:05:53,200 --> 00:05:57,720 Speaker 1: just keep closing stores and the future is uncertain. That's 104 00:05:57,760 --> 00:06:00,320 Speaker 1: the problem with the Gap. A little headline coming out 105 00:06:00,400 --> 00:06:02,839 Speaker 1: love more on this Honeywell offers a hundred eight dollars 106 00:06:02,920 --> 00:06:07,320 Speaker 1: per share to quote re engage with U t X. 107 00:06:07,400 --> 00:06:09,880 Speaker 1: That's away from how to Vid of its expertise, but 108 00:06:10,080 --> 00:06:14,359 Speaker 1: certainly important. U t X uh surging from eight seven 109 00:06:14,520 --> 00:06:18,239 Speaker 1: up to nine and the new wagers up another ten dollars. 110 00:06:18,240 --> 00:06:20,920 Speaker 1: Scarlett quickly, No. I wanted to get to Howard in 111 00:06:21,120 --> 00:06:24,280 Speaker 1: terms of what we see across the retailers. Is this 112 00:06:24,440 --> 00:06:28,240 Speaker 1: idea that these companies are big on promotions. When do 113 00:06:28,400 --> 00:06:31,400 Speaker 1: we or do we ever start to see margin expansion? Well, 114 00:06:31,440 --> 00:06:35,599 Speaker 1: we would never as long as you've got poverty doubling 115 00:06:35,680 --> 00:06:37,920 Speaker 1: in the last seven years, which of course has been 116 00:06:38,720 --> 00:06:40,840 Speaker 1: what we had one out of twelve in poverty, we 117 00:06:40,920 --> 00:06:43,240 Speaker 1: now born out of six and poverty seven years later. 118 00:06:43,560 --> 00:06:47,840 Speaker 1: As long as you've got that scarlet across America, as 119 00:06:47,920 --> 00:06:51,240 Speaker 1: long as Macy's is now building discount stores, as long 120 00:06:51,320 --> 00:06:54,400 Speaker 1: as norths from fastest growth this discount stores, as long 121 00:06:54,480 --> 00:06:57,440 Speaker 1: as Sacks fastest growth a discount stores, as long as 122 00:06:57,520 --> 00:07:00,160 Speaker 1: d J d J Max is the most power full 123 00:07:00,200 --> 00:07:04,160 Speaker 1: apparel retailer in the United States by far, and as 124 00:07:04,240 --> 00:07:07,600 Speaker 1: long as traditional walls are closing, then as long as 125 00:07:07,640 --> 00:07:11,960 Speaker 1: the middle class is decimated, Uh, you've got a smaller 126 00:07:12,040 --> 00:07:15,440 Speaker 1: and smaller piece of America with money and the aspirational 127 00:07:15,560 --> 00:07:18,560 Speaker 1: middle class is killed forever because of on that and 128 00:07:18,640 --> 00:07:22,080 Speaker 1: everything else, it's not going to change. So retailing has 129 00:07:22,240 --> 00:07:26,920 Speaker 1: changed forever, and price it will be more important forever. 130 00:07:27,520 --> 00:07:30,560 Speaker 1: Bed Bathroom Beyond. Can you imagine a thinking of giving 131 00:07:30,640 --> 00:07:36,600 Speaker 1: up coupons because this sacrilege and sound, it's unbelievable sacrilege. Well, 132 00:07:36,640 --> 00:07:39,320 Speaker 1: speaking of bed Bathroom Beyond, one of its rivals, certainly 133 00:07:39,360 --> 00:07:42,480 Speaker 1: on a higher end, would be restoration hardware. One thing 134 00:07:42,520 --> 00:07:45,640 Speaker 1: I found very interesting is the commentary from the CEO, 135 00:07:46,400 --> 00:07:50,520 Speaker 1: Gary Freedman. He talked about how a bear market wouldn't 136 00:07:50,560 --> 00:07:53,640 Speaker 1: be all bad news for the company because it could 137 00:07:53,680 --> 00:07:56,440 Speaker 1: bring lower real estate prices, which would help the change. 138 00:07:56,560 --> 00:07:59,320 Speaker 1: Is that I think that's one of the craziest comments 139 00:07:59,360 --> 00:08:03,600 Speaker 1: I have. But look, Gary Friedman is a brilliant, brilliant guy. 140 00:08:04,320 --> 00:08:07,720 Speaker 1: He is a groundbreaking guy. He's done the most exciting 141 00:08:07,800 --> 00:08:10,960 Speaker 1: thing in furniture in fifty years. There is no there's 142 00:08:11,000 --> 00:08:14,760 Speaker 1: no one like him right now. If you take that 143 00:08:14,920 --> 00:08:18,160 Speaker 1: explanation and the real estate, that's a little looney, Uh 144 00:08:18,640 --> 00:08:20,520 Speaker 1: what they don't think he is to change the real 145 00:08:20,640 --> 00:08:25,360 Speaker 1: estate bright, but he gave fifty reasons. He is the 146 00:08:25,440 --> 00:08:28,000 Speaker 1: real One of the key reasons that happened to him. 147 00:08:28,600 --> 00:08:31,920 Speaker 1: He's in a business that's out on the fashion edge. 148 00:08:32,080 --> 00:08:35,000 Speaker 1: That's what made him so great. Now, when you go 149 00:08:35,200 --> 00:08:39,959 Speaker 1: out on the fashion edge and the slightest ripple happens, 150 00:08:40,280 --> 00:08:44,199 Speaker 1: you're screwed. And that he he's in that kind of 151 00:08:44,240 --> 00:08:47,280 Speaker 1: a business. Did he expand too quickly? You've seen this 152 00:08:47,400 --> 00:08:50,640 Speaker 1: a million times. He did. This is Gary Friedman. This 153 00:08:50,800 --> 00:08:55,280 Speaker 1: guy is going wild. He's opening up giant he's doing Okay, 154 00:08:55,559 --> 00:08:58,320 Speaker 1: are there elements here of an Abercarbie and Fitch were 155 00:08:58,360 --> 00:09:02,920 Speaker 1: a dominant that Neddick CEO gets out in front of 156 00:09:03,080 --> 00:09:08,559 Speaker 1: trends or his p and L. Yes. Possibly, But but 157 00:09:08,800 --> 00:09:12,240 Speaker 1: this guy has done so much good stuff, all right, 158 00:09:14,040 --> 00:09:18,959 Speaker 1: I'm hesitant to say that yet because he's created America. 159 00:09:19,000 --> 00:09:23,160 Speaker 1: I mean, he's chased his entire into Since Home Depot, 160 00:09:23,240 --> 00:09:26,880 Speaker 1: we've never had anything like this the invention of home 161 00:09:26,960 --> 00:09:31,319 Speaker 1: Depot at Home Depot fifteen years ago. Try and threw 162 00:09:31,360 --> 00:09:34,920 Speaker 1: away five million dollars in liquid Howard, how we're gonna 163 00:09:34,920 --> 00:09:38,319 Speaker 1: go to break in and and move forward very quickly? Howard. 164 00:09:38,440 --> 00:09:42,040 Speaker 1: We saw Home Depot and Lowe's with solid same store sales. 165 00:09:42,360 --> 00:09:48,160 Speaker 1: Can your world of retail pull over the Home Depot excellence? Yeah? 166 00:09:48,200 --> 00:09:51,199 Speaker 1: I look the home sector, they're the kings of the 167 00:09:51,240 --> 00:09:54,480 Speaker 1: home sector. Now if you look at some other people 168 00:09:54,520 --> 00:09:58,280 Speaker 1: in the home sector, they're not so fantastic. But clearly 169 00:09:58,400 --> 00:10:01,000 Speaker 1: Home Depot and Lowe's have a formula. And here is 170 00:10:01,040 --> 00:10:05,760 Speaker 1: the difference between restorational lordwearing Home Depot. Home Depot cells. 171 00:10:05,800 --> 00:10:08,880 Speaker 1: What you have to have as hard whistling great, they 172 00:10:08,960 --> 00:10:11,400 Speaker 1: sell what you have. Now low cells what you have 173 00:10:11,600 --> 00:10:17,280 Speaker 1: to have you don't have to have anything in restoration hardware. 174 00:10:17,320 --> 00:10:21,160 Speaker 1: You don't have to have it. So he's when the 175 00:10:21,320 --> 00:10:27,280 Speaker 1: market gets volable anything restoration hardware. Okay, how this is phenomenal, 176 00:10:27,360 --> 00:10:29,560 Speaker 1: stay with us, hard to us with this. You heard 177 00:10:29,600 --> 00:10:33,720 Speaker 1: his support Mr Freeman over restoration hardware, which has been 178 00:10:33,760 --> 00:10:36,679 Speaker 1: a modest implosion, to say the least, future to the 179 00:10:36,760 --> 00:10:39,400 Speaker 1: last time restoration. I have not been in the store, 180 00:10:39,440 --> 00:10:42,440 Speaker 1: but I do do things off their website. I think 181 00:10:42,520 --> 00:10:45,640 Speaker 1: they're they're just I don't know what they do. The 182 00:10:45,760 --> 00:10:47,720 Speaker 1: furniture is too big. I know I've seen the ceiling 183 00:10:47,760 --> 00:10:54,480 Speaker 1: fan picture on your website. On your All right, let's 184 00:10:54,520 --> 00:10:56,760 Speaker 1: check in with John Tucker for the news headlines. Shot 185 00:10:57,040 --> 00:11:00,720 Speaker 1: find Scarlett. Donald Trump spent eight months launching a parade 186 00:11:00,720 --> 00:11:05,080 Speaker 1: of insults over any on all detractors of Marco Rubio's 187 00:11:05,080 --> 00:11:07,719 Speaker 1: survived by staying mostly in the sidelines. Rubio subtlely and 188 00:11:07,840 --> 00:11:10,800 Speaker 1: urgently emerged from the shadows last night to hammer the 189 00:11:11,080 --> 00:11:13,960 Speaker 1: front runner. The House considering a bill that would reverse 190 00:11:14,080 --> 00:11:17,280 Speaker 1: the man on the sail or import of ivory products 191 00:11:17,679 --> 00:11:20,800 Speaker 1: on doing US fish and wildlife rules that were intended 192 00:11:20,840 --> 00:11:24,839 Speaker 1: to halt the decline in wild elephant populations, and the 193 00:11:24,920 --> 00:11:28,400 Speaker 1: conventional wisdom was that California, especially the southern part of 194 00:11:28,559 --> 00:11:31,400 Speaker 1: the state would be awash this winter with rain and 195 00:11:31,480 --> 00:11:34,400 Speaker 1: the valleys and deep snow in the mountains. Alnina was 196 00:11:34,480 --> 00:11:36,439 Speaker 1: on the way to save the day. Well, a California 197 00:11:36,559 --> 00:11:39,920 Speaker 1: hydrologist now says the water supply forecast for the spring 198 00:11:40,040 --> 00:11:44,400 Speaker 1: period is falling like a stone. Global News twenty four 199 00:11:44,480 --> 00:11:47,120 Speaker 1: hours a day, powered by our two journalists in more 200 00:11:47,160 --> 00:11:49,880 Speaker 1: than one d fifty news videaus around the world. I'm 201 00:11:49,960 --> 00:11:52,760 Speaker 1: John Tuckers Scarlet and to John, thank you so much. 202 00:11:52,760 --> 00:11:57,559 Speaker 1: Futures Futures up one oh for Tom Keene and Scarlet 203 00:11:57,640 --> 00:12:05,960 Speaker 1: Foo on your Friday edition. Bloomberg Surveillance Worldwide Market Driver 204 00:12:06,120 --> 00:12:08,400 Speaker 1: is brought to you by your Mercedes Benz Tri State dealer. 205 00:12:08,480 --> 00:12:10,480 Speaker 1: When it comes to winter elements, put your best four 206 00:12:10,520 --> 00:12:14,000 Speaker 1: wheels forward with Mercedes Benz Formatic all wheel Drive. Visit 207 00:12:14,040 --> 00:12:17,320 Speaker 1: your Mercedes Benz Tri State dealer for test drive today. 208 00:12:17,440 --> 00:12:24,240 Speaker 1: This is Bloomberg Surveillance Global Business News twenty four hours 209 00:12:24,280 --> 00:12:27,400 Speaker 1: a day at Bloomberg dot Com, the Radio plus Mobile 210 00:12:27,440 --> 00:12:30,760 Speaker 1: Act and on your radio. This is a Bloomberg Business 211 00:12:30,840 --> 00:12:33,760 Speaker 1: Flash and I'm Para in Moscow. This updates brought to 212 00:12:33,840 --> 00:12:36,640 Speaker 1: you by Interactive Brokers and CME Group. If you're looking 213 00:12:36,679 --> 00:12:39,959 Speaker 1: for global futures contracts with low trading costs, look no further. 214 00:12:40,320 --> 00:12:43,360 Speaker 1: Interactive Brokers is the industry leader. Learn more at Interactive 215 00:12:43,360 --> 00:12:47,280 Speaker 1: Brokers dot com, slash c m E Group. Honeywell International 216 00:12:47,400 --> 00:12:49,959 Speaker 1: saying is seeking to re engage with United Technologies on 217 00:12:50,040 --> 00:12:52,559 Speaker 1: a merger, offering to pay a hundred eight dollars a share. 218 00:12:53,040 --> 00:12:56,720 Speaker 1: US DOCK Index futures, meanwhile, are moving higher amid corporate 219 00:12:56,760 --> 00:12:59,240 Speaker 1: earnings and signals from China's Central Bank that it will 220 00:12:59,280 --> 00:13:02,040 Speaker 1: act to bolster its economy. We check the markets every 221 00:13:02,080 --> 00:13:05,560 Speaker 1: fifteen minutes throughout the trading day. On Bloomberg SNP EMUNI 222 00:13:05,600 --> 00:13:08,280 Speaker 1: futures have eleven points. Dowie EMUNI futures have a hundred 223 00:13:08,400 --> 00:13:11,120 Speaker 1: ten nas. Documuny futures up thirty one, and the decks 224 00:13:11,160 --> 00:13:14,240 Speaker 1: in Germany's up to percent ten. Your treasury down fourteen 225 00:13:14,280 --> 00:13:17,400 Speaker 1: thirty seconds see yield one point seven six percent nine 226 00:13:17,480 --> 00:13:19,439 Speaker 1: Execred Oil a four and a half percent or a 227 00:13:19,520 --> 00:13:22,440 Speaker 1: dollar fifty to thirty four fifty eight of arrol Comas 228 00:13:22,480 --> 00:13:24,880 Speaker 1: Gold is down one point one percent or thirteen dollars 229 00:13:24,960 --> 00:13:28,360 Speaker 1: to twelve nine announced. The Euro a dollar oh nine 230 00:13:28,440 --> 00:13:31,560 Speaker 1: six three and the en one thirteen point five four, 231 00:13:31,960 --> 00:13:35,720 Speaker 1: and that's a Bloomberg business flash. Tom and Scarlett, Karen, 232 00:13:35,800 --> 00:13:39,719 Speaker 1: I think so much. The combined employees of Honeywell ut X, 233 00:13:39,840 --> 00:13:42,360 Speaker 1: if it was to come about to show you, the 234 00:13:42,520 --> 00:13:46,839 Speaker 1: scale would be three six thousand roughly revenue. I do 235 00:13:46,960 --> 00:13:49,480 Speaker 1: want to point out Honeywell has lower revenue than U 236 00:13:49,559 --> 00:13:54,720 Speaker 1: t X, even though they are the acquirer. In this attempt, 237 00:13:54,760 --> 00:13:57,880 Speaker 1: the key headline there is Karen Musk mentioning Honeywell six 238 00:13:58,000 --> 00:14:03,000 Speaker 1: to re engage with you nighted Uh Technologies. We re 239 00:14:03,120 --> 00:14:08,439 Speaker 1: engage with Howard d Vinovitz on retail. Howard, I I 240 00:14:08,600 --> 00:14:12,480 Speaker 1: look at Amazon. Is the elephant in the room. Is 241 00:14:12,679 --> 00:14:15,560 Speaker 1: I'm the channel working? Every time you hear that word, 242 00:14:15,640 --> 00:14:19,000 Speaker 1: it makes me cringe. It's like synergy. Is I'm the 243 00:14:19,160 --> 00:14:23,720 Speaker 1: channel working. Here's what's going on. If you call any retailer, 244 00:14:23,840 --> 00:14:28,800 Speaker 1: call Mazie's, call anybody going on Strom, Here's what they're 245 00:14:28,840 --> 00:14:32,600 Speaker 1: gonna tell you. What is the fastest growing party of business? 246 00:14:32,920 --> 00:14:37,080 Speaker 1: Every one of them We'll say online without by including 247 00:14:37,120 --> 00:14:42,400 Speaker 1: the gap anybody. That means from an allocation of asset 248 00:14:42,560 --> 00:14:44,960 Speaker 1: point of view, that's where they're putting the money. And 249 00:14:45,120 --> 00:14:49,520 Speaker 1: that makes sense. That's why all that's why all of 250 00:14:49,520 --> 00:14:51,960 Speaker 1: the ma shrinking stores, and that's why all of them 251 00:14:52,040 --> 00:14:55,280 Speaker 1: putting money into technology. And they're right, Scarlett, I know, 252 00:14:55,360 --> 00:14:57,840 Speaker 1: wants to jump in here. Terry Londron has been through 253 00:14:57,960 --> 00:15:02,880 Speaker 1: four to twelve cycles. Are the retailers being fast enough 254 00:15:03,040 --> 00:15:06,600 Speaker 1: this time around? I think they're doing what they can. 255 00:15:06,800 --> 00:15:11,680 Speaker 1: But there is a permanent change in America that that 256 00:15:12,880 --> 00:15:15,480 Speaker 1: Terry LongRun is now in the department store segment he 257 00:15:15,520 --> 00:15:19,000 Speaker 1: always has been. That means he's the high cost player 258 00:15:19,360 --> 00:15:21,960 Speaker 1: where we've got double the number of people in poverty 259 00:15:22,080 --> 00:15:27,400 Speaker 1: looking for deals. Hello, that is a gigantic problem. It 260 00:15:27,560 --> 00:15:29,920 Speaker 1: is a problem. But does it matter if the targets 261 00:15:30,000 --> 00:15:32,480 Speaker 1: to home depots, the Gafts of the world continue to 262 00:15:32,560 --> 00:15:35,400 Speaker 1: invest in their omnick channel infrastructure. As long as Amazon 263 00:15:35,520 --> 00:15:39,480 Speaker 1: keeps expanding its product line, it's it's offerings. What it 264 00:15:39,640 --> 00:15:43,200 Speaker 1: means is they're gonna shrink forever. What it means is 265 00:15:43,320 --> 00:15:47,840 Speaker 1: Macy's has got to keep drinking. Right now, they're trying 266 00:15:47,880 --> 00:15:51,360 Speaker 1: to monetize their real estate, shrinking those big, down down stores. 267 00:15:51,800 --> 00:15:54,880 Speaker 1: They're doing what they gotta do aid to stay alive 268 00:15:54,960 --> 00:15:58,040 Speaker 1: and raise capital and keep their stock price up and 269 00:15:58,280 --> 00:16:00,960 Speaker 1: be to get enough money to keep investing in what 270 00:16:01,080 --> 00:16:04,000 Speaker 1: they've got to do. That's what they're doing, and that's smart. 271 00:16:04,280 --> 00:16:06,680 Speaker 1: All right. We've named checked Terry Longren, We've talked about 272 00:16:06,760 --> 00:16:11,720 Speaker 1: Gary Freeman of Restoration Hardware. Who among the retail CEOs 273 00:16:11,840 --> 00:16:15,160 Speaker 1: gets this, who's doing it right? Well? The best retailer 274 00:16:15,240 --> 00:16:19,880 Speaker 1: is out there are I would say Costco In my opinion, 275 00:16:19,960 --> 00:16:23,880 Speaker 1: Costco is the best because Costco has a formula that 276 00:16:24,000 --> 00:16:27,400 Speaker 1: when you cut the role the BS, they really give 277 00:16:27,480 --> 00:16:31,400 Speaker 1: the customer the best deal. And guess what, everybody knows 278 00:16:31,480 --> 00:16:36,360 Speaker 1: that Aldi Food really gives the customer the best deal, 279 00:16:36,720 --> 00:16:39,640 Speaker 1: not BS like Walmar that I'm in down and dude, 280 00:16:40,080 --> 00:16:43,880 Speaker 1: they really not like what Bathom beyond. Here's a good bond. 281 00:16:43,960 --> 00:16:47,920 Speaker 1: But yet the other guy. These are not specific to CEOs, right, 282 00:16:48,000 --> 00:16:50,560 Speaker 1: This is a philosophy. This is a corporate philosophy of 283 00:16:50,640 --> 00:16:55,960 Speaker 1: corporate strategy. So the CEOs. Look, when Senegal ran Costco, 284 00:16:56,040 --> 00:17:00,600 Speaker 1: at least he was Sam Walten. I mean, I think 285 00:17:00,680 --> 00:17:03,520 Speaker 1: these companies that are winning, I think Amazon has got 286 00:17:03,600 --> 00:17:08,159 Speaker 1: the best CEO out there right now. I mean, I 287 00:17:08,359 --> 00:17:12,480 Speaker 1: think this guy is a game changer, guy who's on 288 00:17:12,680 --> 00:17:15,760 Speaker 1: a mission. He's all all he's done has changed the 289 00:17:16,160 --> 00:17:21,680 Speaker 1: entire retailing at seventy economy. This guy's amazing mis bays 290 00:17:21,760 --> 00:17:26,960 Speaker 1: those that's my opinion. Well, Tom, we were discussing earlier 291 00:17:27,040 --> 00:17:29,159 Speaker 1: how you and I don't actually go into stores anymore. 292 00:17:29,200 --> 00:17:31,719 Speaker 1: We just go and buy her online. Howard House luxury 293 00:17:31,800 --> 00:17:33,440 Speaker 1: before we let you go off. They had a good season. 294 00:17:33,760 --> 00:17:36,840 Speaker 1: A luxury is mixed, and that's because of what's going 295 00:17:36,880 --> 00:17:40,880 Speaker 1: on with China and Russia when they've got an also 296 00:17:41,280 --> 00:17:45,640 Speaker 1: vulnerability in the stock market tremendously affects them. Howard, thank 297 00:17:45,680 --> 00:17:47,639 Speaker 1: you so much, greatly appreciate hard to it. And we 298 00:17:47,720 --> 00:17:50,400 Speaker 1: need to shout out right now to Rebecca Minkoff who 299 00:17:50,520 --> 00:17:52,840 Speaker 1: darkened the Door fashion Week. It was great to see her. 300 00:17:53,119 --> 00:17:56,440 Speaker 1: She got up wicked early and was like heading out 301 00:17:56,480 --> 00:17:59,159 Speaker 1: to like forty seven hours of runway stuff with her 302 00:17:59,200 --> 00:18:01,840 Speaker 1: brother Jury, and you know, it's just like that American 303 00:18:01,920 --> 00:18:03,880 Speaker 1: spirit of okay, what do we do now? Granted that's 304 00:18:03,880 --> 00:18:06,840 Speaker 1: in luxury and Howard's looking at Scarlett. I thought it 305 00:18:06,960 --> 00:18:10,760 Speaker 1: was fascinating on restoration hardware, and I said to somebody 306 00:18:10,760 --> 00:18:14,879 Speaker 1: that you guy said, restoration hardware is so polarizing. People 307 00:18:14,920 --> 00:18:18,000 Speaker 1: either addicted to it, hate it, or at least they 308 00:18:18,040 --> 00:18:20,240 Speaker 1: know where it is. I mean just the catalog. Have 309 00:18:20,400 --> 00:18:22,760 Speaker 1: you ever gotten at home the catalog? Well, yeah, I 310 00:18:22,800 --> 00:18:25,240 Speaker 1: almost broke the mailbox and broke the mailbox and broke 311 00:18:25,280 --> 00:18:26,639 Speaker 1: your wrist or one of them. And it's just a 312 00:18:26,720 --> 00:18:33,359 Speaker 1: complete yeah it was, you know, and they're doing how 313 00:18:33,400 --> 00:18:35,600 Speaker 1: are we going? A huge response from Mr Davidovitz is 314 00:18:35,640 --> 00:18:38,000 Speaker 1: on and of course he uh I heard their real 315 00:18:38,119 --> 00:18:41,600 Speaker 1: support for Mr Friedman U in uh coming to grips 316 00:18:41,640 --> 00:18:44,760 Speaker 1: at Restoration Hardware with a path af Ford. We're looking 317 00:18:44,840 --> 00:18:46,720 Speaker 1: at all sorts of things. We're gonna focus in the 318 00:18:46,840 --> 00:18:50,520 Speaker 1: next half hour on U t X Honeywell. This has 319 00:18:50,560 --> 00:18:53,760 Speaker 1: been tangential. I would say it's been like, yeah, they're big, 320 00:18:53,920 --> 00:18:56,960 Speaker 1: and there's regulatory overlays and all that. But with this 321 00:18:57,200 --> 00:19:01,800 Speaker 1: new headline, let's go to it right now. On the Bloomberg, 322 00:19:02,640 --> 00:19:06,720 Speaker 1: the basic idea of Honeywell h seeking to quote re 323 00:19:06,960 --> 00:19:10,560 Speaker 1: engage with ut X and a hundred eight dollars per share. 324 00:19:10,760 --> 00:19:13,520 Speaker 1: That's because they have hell talks in the past kind 325 00:19:13,560 --> 00:19:16,120 Speaker 1: of got in the way, and then there's some concerns 326 00:19:16,160 --> 00:19:19,000 Speaker 1: from regulators as well, which kind of sty me the 327 00:19:19,040 --> 00:19:21,800 Speaker 1: whole deal. In the end, yeah, and and we're gonna 328 00:19:21,840 --> 00:19:24,120 Speaker 1: have some chat on this for you, some good conversation. 329 00:19:24,520 --> 00:19:27,840 Speaker 1: Just to put it in perspective, I'm trying to do this. 330 00:19:28,480 --> 00:19:33,040 Speaker 1: If you take a hundred and eight dollar valuation right 331 00:19:33,200 --> 00:19:37,240 Speaker 1: now U t x uh over the last ten years 332 00:19:38,359 --> 00:19:41,159 Speaker 1: is about a nine percent return. Eight point eight percent 333 00:19:41,280 --> 00:19:43,960 Speaker 1: is where I would put that modeling in a hundred 334 00:19:44,000 --> 00:19:48,040 Speaker 1: eight dollars per share. Uh. There it is UM a 335 00:19:48,080 --> 00:19:51,639 Speaker 1: little more on this headline out as well, Standard Charter, 336 00:19:51,840 --> 00:19:54,879 Speaker 1: the Challenge Emerging Market Bank their units. They may be 337 00:19:55,000 --> 00:19:59,080 Speaker 1: cut by Standard and Pores. On this Friday, Scarlet Fou 338 00:19:59,520 --> 00:20:02,680 Speaker 1: tom Key, Henrik Lunchrist is not with us. It's about 339 00:20:02,680 --> 00:20:07,119 Speaker 1: Bloomberg Surveillance. The Bloomberg Ski Report is brought to you 340 00:20:07,200 --> 00:20:09,080 Speaker 1: by land Rover. If it's in your nature to cast 341 00:20:09,119 --> 00:20:11,480 Speaker 1: off the every day and seek adventure, the Discovery Sport 342 00:20:11,560 --> 00:20:14,040 Speaker 1: was built to help your search. Visit land Rover trica 343 00:20:14,119 --> 00:20:16,400 Speaker 1: dot com for special offers during the Owned the Adventure 344 00:20:16,440 --> 00:20:24,480 Speaker 1: Sales event. Land Rover Above and Beyond broadcasting live to 345 00:20:24,640 --> 00:20:28,520 Speaker 1: New York Cloomberg eleventh, LEO to Washington, d C Bloomberg 346 00:20:28,600 --> 00:20:32,560 Speaker 1: ninety nine one to Boston Bloomberg twelve wonders to San Francisco, 347 00:20:32,720 --> 00:20:36,879 Speaker 1: Bloomberg nine to the country, Serious XM Channel one ninety 348 00:20:37,080 --> 00:20:40,560 Speaker 1: and around the globe the Bloomberg Radio plus Apend Bloomberg 349 00:20:40,600 --> 00:20:44,840 Speaker 1: dot com. This is Bloomberg Surveillance. Good morning, Young Karen 350 00:20:44,920 --> 00:20:47,560 Speaker 1: Moscow along with Tom Keen and Scarlet Foo and the 351 00:20:47,640 --> 00:20:50,639 Speaker 1: opening bill brought to you by SEI Imagine. When asset 352 00:20:50,760 --> 00:20:55,240 Speaker 1: management servicing is unconstrained by infrastructure, c s CIS Global 353 00:20:55,320 --> 00:20:58,399 Speaker 1: Operating Platform can be your catalyst for a business expansion 354 00:20:58,680 --> 00:21:02,160 Speaker 1: at se i c dot com slash imagine songs higher 355 00:21:02,200 --> 00:21:04,040 Speaker 1: at the open the s and P five hundred up 356 00:21:04,080 --> 00:21:06,960 Speaker 1: three ten percent or six points in nineteen fifty seven 357 00:21:07,280 --> 00:21:10,280 Speaker 1: downtowns industrial average of three ten percent or forty three 358 00:21:10,320 --> 00:21:13,280 Speaker 1: points to sixteen thousand, seven hundred fifty five and then 359 00:21:13,359 --> 00:21:15,879 Speaker 1: as Deck up seven tenths percent or thirty two points 360 00:21:16,119 --> 00:21:19,960 Speaker 1: to forty six fourteen tenure Treasury down fourteen thirty seconds, 361 00:21:20,040 --> 00:21:22,359 Speaker 1: the yield one point seven six percent, the yield on 362 00:21:22,440 --> 00:21:25,080 Speaker 1: a two year point seven six percent no i X 363 00:21:25,080 --> 00:21:27,200 Speaker 1: screwed oil have three point nine percent or a dollar 364 00:21:27,240 --> 00:21:29,800 Speaker 1: twenty nine to thirty four thirty six of barrel and 365 00:21:29,920 --> 00:21:32,240 Speaker 1: comex s gold is down nine tenths percent or eleven 366 00:21:32,280 --> 00:21:35,600 Speaker 1: dollars forty cents to twelve twenty seven thirty ounce the 367 00:21:35,680 --> 00:21:38,040 Speaker 1: euro a dollar oh nine six eight and again one 368 00:21:38,160 --> 00:21:41,480 Speaker 1: thirteen point five nine, Tom and Scarlett Karen, thanks so much, 369 00:21:41,600 --> 00:21:44,159 Speaker 1: Peter Armant of stern Age. You will join us here 370 00:21:44,200 --> 00:21:47,920 Speaker 1: in about ten minutes, fifteen minutes on Honeywell U t X, 371 00:21:48,040 --> 00:21:51,800 Speaker 1: U t X up two points hundred point zero three 372 00:21:52,600 --> 00:21:54,920 Speaker 1: on U t X and we've got a lot to 373 00:21:54,960 --> 00:21:57,239 Speaker 1: say about that coming up on our next block. Right now. 374 00:21:57,640 --> 00:22:00,800 Speaker 1: I love talking to Kevin get us. He's with UM 375 00:22:01,640 --> 00:22:04,760 Speaker 1: with Morgan Keegan uh and and and a part of 376 00:22:04,920 --> 00:22:08,159 Speaker 1: Raymond James. And it's about fixed income. And what I 377 00:22:08,200 --> 00:22:10,520 Speaker 1: love Kevin, as you're in the trenches. What is the 378 00:22:10,640 --> 00:22:14,320 Speaker 1: backstory right now to all of our audience that needs 379 00:22:14,400 --> 00:22:17,200 Speaker 1: to find yield? What's the dumb thing you see going 380 00:22:17,280 --> 00:22:19,879 Speaker 1: on right now? You know we are being is the 381 00:22:20,040 --> 00:22:22,479 Speaker 1: rare that the bond marked the Bondarre likes to think 382 00:22:22,480 --> 00:22:25,280 Speaker 1: of itself as a leader uh and uh and in 383 00:22:25,400 --> 00:22:29,280 Speaker 1: both movement and prices, and and right now it is following. 384 00:22:29,400 --> 00:22:32,960 Speaker 1: It's following oil prices like every other markets following oil prices. 385 00:22:33,040 --> 00:22:34,800 Speaker 1: So we so we're kind of getting our cues from 386 00:22:34,840 --> 00:22:37,760 Speaker 1: what happens overnight on oil prices to see how the 387 00:22:37,840 --> 00:22:41,280 Speaker 1: equity market goes, because that's gonna determine where interest rates 388 00:22:41,320 --> 00:22:43,320 Speaker 1: are headed. So where the interest rates go off, oil 389 00:22:43,400 --> 00:22:46,840 Speaker 1: breaks down further lower. It's a it's a it's a 390 00:22:46,880 --> 00:22:49,760 Speaker 1: pretty clean trade right now. We're seeing we're seeing interest 391 00:22:49,880 --> 00:22:52,760 Speaker 1: rates go up when oil goes up overnight, and equity 392 00:22:52,840 --> 00:22:55,600 Speaker 1: markets have good openings, a good beginnings, and as the 393 00:22:55,680 --> 00:22:59,960 Speaker 1: day goes on, we're pretty reactionary to that. But the auctions, 394 00:23:00,000 --> 00:23:02,840 Speaker 1: if you look at the auctions over the last five auctions, tremendous, 395 00:23:02,920 --> 00:23:06,760 Speaker 1: tremendous interests globally interest uh in the treasury auctions because 396 00:23:06,840 --> 00:23:09,399 Speaker 1: of a lack of inflation of FED that's now sitting 397 00:23:09,440 --> 00:23:13,080 Speaker 1: on its hands and um and yields that on comparables 398 00:23:13,080 --> 00:23:17,439 Speaker 1: against German bonds, against Japanese bonds, tremendous yield pick up 399 00:23:17,520 --> 00:23:19,800 Speaker 1: and and that's where the money's flowing in. Kevin connect 400 00:23:19,840 --> 00:23:21,800 Speaker 1: the dots for us for why oil is the leading 401 00:23:21,840 --> 00:23:24,879 Speaker 1: indicator for the bond market. I mean oil should be trading, 402 00:23:24,920 --> 00:23:27,959 Speaker 1: and it is trading often on supply concerns, not demand. 403 00:23:28,119 --> 00:23:30,480 Speaker 1: But why is it the proxy for global demand? What 404 00:23:31,160 --> 00:23:34,000 Speaker 1: about the transmission mechanism makes it a leading indicator. It's 405 00:23:34,040 --> 00:23:37,119 Speaker 1: a proxy for inflation primarily and for growth, And so 406 00:23:37,359 --> 00:23:41,000 Speaker 1: as oil falls UM, global economies suffer, and as those 407 00:23:41,000 --> 00:23:44,600 Speaker 1: economies suffer UM we have a double effect of both 408 00:23:44,680 --> 00:23:46,960 Speaker 1: the lack of inflation and a lack of growth, which 409 00:23:47,000 --> 00:23:50,080 Speaker 1: puts the FED in a position that that can't really tighten. 410 00:23:50,160 --> 00:23:52,320 Speaker 1: So I don't care whether they sing the song of 411 00:23:52,880 --> 00:23:57,160 Speaker 1: economic growth which is moderate, uh, some inflation around the corner, 412 00:23:57,240 --> 00:23:59,560 Speaker 1: which it isn't, or that the fact that they're gonna 413 00:23:59,640 --> 00:24:02,399 Speaker 1: raise the lyrics aren't being heard by the bond market. 414 00:24:02,680 --> 00:24:05,200 Speaker 1: So to what extent our sovereign wealth funds that have 415 00:24:05,359 --> 00:24:07,880 Speaker 1: no choice but to sell down some of their holdings 416 00:24:07,920 --> 00:24:10,320 Speaker 1: to raise cash, how much are they driving some of 417 00:24:10,400 --> 00:24:14,280 Speaker 1: this panic? Well? I think again, believe it or not, 418 00:24:14,400 --> 00:24:17,359 Speaker 1: the reach for yield, whether sovereign growth funds or just 419 00:24:17,600 --> 00:24:21,680 Speaker 1: a global investors in general, is coming back to the 420 00:24:21,960 --> 00:24:24,800 Speaker 1: the U S. Treasury market because of the yield pick 421 00:24:24,880 --> 00:24:27,560 Speaker 1: up and UM and the other As we lay out 422 00:24:27,600 --> 00:24:30,040 Speaker 1: these scenarios of inflation, it's just a better place to be. 423 00:24:30,160 --> 00:24:32,080 Speaker 1: So we can have a disconnect, which is why we're 424 00:24:32,080 --> 00:24:35,680 Speaker 1: seeing a flattening curve. If you have you know, pricing yield. 425 00:24:36,040 --> 00:24:38,840 Speaker 1: If yields are low, and you suggest they could even 426 00:24:38,880 --> 00:24:42,960 Speaker 1: go lower, you've got retail small guys. They're just trying 427 00:24:43,000 --> 00:24:45,760 Speaker 1: to make a coupon whatever whatever category a bond. And 428 00:24:45,800 --> 00:24:48,800 Speaker 1: if you say, look it's priced at you gotta hold 429 00:24:48,840 --> 00:24:53,800 Speaker 1: your breath and hope for that's a tenuous strategy for 430 00:24:53,960 --> 00:24:57,840 Speaker 1: a lot of smaller investors. Yeah, it really is. But 431 00:24:57,920 --> 00:24:59,399 Speaker 1: I think, um, I think if you how do you 432 00:24:59,560 --> 00:25:02,639 Speaker 1: hedge at day to day in your portfolio, well, I 433 00:25:02,720 --> 00:25:05,000 Speaker 1: think you know, you find a middle range. So it's 434 00:25:05,520 --> 00:25:07,760 Speaker 1: maybe a cop out, but five to seven years gives 435 00:25:07,800 --> 00:25:10,639 Speaker 1: you enough yield against the curve. It it insulates you 436 00:25:10,680 --> 00:25:13,920 Speaker 1: a little bit from from any potential fed move. And 437 00:25:14,480 --> 00:25:16,159 Speaker 1: qualities the key here. So you have to write it 438 00:25:16,200 --> 00:25:18,440 Speaker 1: out in quality. And so if you have a tax 439 00:25:18,560 --> 00:25:21,960 Speaker 1: the corporate space and corporate space high quality corporate space, yes, 440 00:25:22,040 --> 00:25:24,359 Speaker 1: but I would rather go to taxable munis or munis 441 00:25:24,359 --> 00:25:27,080 Speaker 1: in general. For still, even with this is important, folks, 442 00:25:27,400 --> 00:25:30,240 Speaker 1: even with a muni pop of last year, you're gonna 443 00:25:30,280 --> 00:25:34,040 Speaker 1: tell people those value and g os and revenues absolutely 444 00:25:34,280 --> 00:25:37,639 Speaker 1: uh in quality because um taxable equivalent meals are some 445 00:25:37,840 --> 00:25:40,400 Speaker 1: hundred two hundred twenty basis points better. We're still we're 446 00:25:40,440 --> 00:25:44,280 Speaker 1: still whether it's nine or versus five percent of of 447 00:25:44,880 --> 00:25:47,040 Speaker 1: of taxables? Were there the problems you and I are 448 00:25:47,080 --> 00:25:48,959 Speaker 1: talking like we've got two more teenis in our hand 449 00:25:49,000 --> 00:25:51,399 Speaker 1: at the monkey bar at four pm on a Friday. 450 00:25:51,480 --> 00:25:55,360 Speaker 1: Let me translate that, folks, after tax treatment, you can 451 00:25:55,440 --> 00:25:58,720 Speaker 1: pick up one to one point two percentage points of 452 00:25:58,920 --> 00:26:03,080 Speaker 1: yield in tax freeze versus the corporate debacle and taxables 453 00:26:03,320 --> 00:26:04,600 Speaker 1: right now, and this is from a guy with a 454 00:26:04,720 --> 00:26:07,600 Speaker 1: taxable heritage. Miss food dive in there. What is the 455 00:26:07,720 --> 00:26:10,359 Speaker 1: number one question that your clients are asking you that 456 00:26:10,640 --> 00:26:13,040 Speaker 1: they won't let go of that they just keep hammering 457 00:26:13,119 --> 00:26:16,160 Speaker 1: home on. Yeah. If you remember November December and into 458 00:26:16,200 --> 00:26:19,240 Speaker 1: the first the year, most of our clients, as predicted 459 00:26:19,280 --> 00:26:21,360 Speaker 1: by the Fed, we're looking for a higher interest rates, 460 00:26:21,440 --> 00:26:24,159 Speaker 1: So so they expected savings rates to go up, and 461 00:26:24,240 --> 00:26:28,560 Speaker 1: they expected opportunity with their cash to buy into higher yields. 462 00:26:28,720 --> 00:26:31,520 Speaker 1: The question we're asking now is they're asking us now, 463 00:26:31,680 --> 00:26:33,960 Speaker 1: is is when is that going to happen again? Because 464 00:26:34,000 --> 00:26:35,800 Speaker 1: all I've seen since the first of the year is 465 00:26:35,840 --> 00:26:39,080 Speaker 1: a drop of about forty basis points and yield from 466 00:26:39,119 --> 00:26:40,920 Speaker 1: the tenure. So we started the year at about a 467 00:26:40,960 --> 00:26:43,080 Speaker 1: two seventeen and here we are at about a one 468 00:26:43,119 --> 00:26:46,040 Speaker 1: in three quarters. Their main question is why do I 469 00:26:46,160 --> 00:26:48,640 Speaker 1: keep investing in the bond market and to winter yield 470 00:26:48,680 --> 00:26:50,240 Speaker 1: is gonna go up? Where I can put this cash 471 00:26:50,280 --> 00:26:51,920 Speaker 1: to work? And how do you give them an answer 472 00:26:52,000 --> 00:26:55,040 Speaker 1: that that that when we all have no clue what's 473 00:26:55,040 --> 00:26:57,280 Speaker 1: gonna happen next with oil? Yeah, I don't think anybody 474 00:26:57,359 --> 00:27:00,240 Speaker 1: has been very good at predicting both economic growth and 475 00:27:00,480 --> 00:27:02,720 Speaker 1: when the Fed uh will raise rates, and even the 476 00:27:02,760 --> 00:27:05,320 Speaker 1: FED themselves that they almost have to look back at 477 00:27:05,359 --> 00:27:08,000 Speaker 1: their at their move in December and think, you know, what, 478 00:27:08,200 --> 00:27:10,199 Speaker 1: was that the right move? Maybe it was, but we're 479 00:27:10,200 --> 00:27:13,680 Speaker 1: gonna have to see another ten fifteen dollars out of 480 00:27:13,760 --> 00:27:17,040 Speaker 1: oil up, and we're gonna have to see something other 481 00:27:17,080 --> 00:27:19,120 Speaker 1: than one and a half percent on a core PC 482 00:27:19,400 --> 00:27:21,880 Speaker 1: rate for the Fed. It's gonna have to be really 483 00:27:21,920 --> 00:27:24,440 Speaker 1: turning that corner towards two percent on inflation before we 484 00:27:24,480 --> 00:27:27,920 Speaker 1: see these higher yields. When I look at yield and 485 00:27:28,240 --> 00:27:30,760 Speaker 1: you know it was someone like Bill Gross suggesting financial 486 00:27:30,840 --> 00:27:34,840 Speaker 1: repression continues, I do believe inflation matters right now? Very low? 487 00:27:35,480 --> 00:27:38,600 Speaker 1: What's our real yield? Do we have financial repression? Until 488 00:27:38,640 --> 00:27:41,720 Speaker 1: you and I are ancient, I don't. I don't think so. 489 00:27:41,920 --> 00:27:44,359 Speaker 1: I don't think that we're um and I hope that 490 00:27:44,440 --> 00:27:47,240 Speaker 1: we're not headed towards you know, Japan's economy and interest 491 00:27:47,359 --> 00:27:51,160 Speaker 1: rate structure. Um but um uh. But we are seeing 492 00:27:52,240 --> 00:27:55,440 Speaker 1: a pretty significant move towards a flatter curve. And that 493 00:27:55,560 --> 00:27:58,960 Speaker 1: probably concerns me more than anything right now, is that 494 00:28:00,200 --> 00:28:02,280 Speaker 1: we've gone from about a hundred and forty basis points 495 00:28:02,320 --> 00:28:05,479 Speaker 1: to a hundred basis points between two's the tens, right, 496 00:28:05,560 --> 00:28:10,720 Speaker 1: So your dazzled? I know that huh flatten? Yeah, what's 497 00:28:10,760 --> 00:28:13,880 Speaker 1: it means? Well, it means that's right now. That means 498 00:28:13,920 --> 00:28:18,200 Speaker 1: it's a disconnect. But between what short rates uh are 499 00:28:18,840 --> 00:28:22,360 Speaker 1: the perception of short rates are currently versus where where 500 00:28:22,440 --> 00:28:24,840 Speaker 1: long rates and investors are putting their money um, and 501 00:28:24,960 --> 00:28:27,520 Speaker 1: it is the difference between economic growth and inflation right now. 502 00:28:28,160 --> 00:28:29,960 Speaker 1: This has been great, Kevin, give us thank you so much. 503 00:28:30,119 --> 00:28:34,040 Speaker 1: Thank you, I really really appreciate it. With Raymond James 504 00:28:34,119 --> 00:28:39,160 Speaker 1: and Morgan A. Keegan, Peter Armand coming up with stern 505 00:28:39,360 --> 00:28:42,080 Speaker 1: age formula with Bleacher and this is on something that 506 00:28:42,240 --> 00:28:45,320 Speaker 1: all of a sudden has become interesting. I'm sort of like, yeah, 507 00:28:45,360 --> 00:28:48,400 Speaker 1: honeywell ut X, I get it, And back and forth 508 00:28:48,440 --> 00:28:51,120 Speaker 1: with Scarlett with a one oh way, all of a sudden, 509 00:28:51,520 --> 00:28:55,160 Speaker 1: we go into the weekend with another interesting transaction. Absolutely 510 00:28:55,240 --> 00:28:57,280 Speaker 1: and in fact, Peter Armatt had written a note today 511 00:28:57,320 --> 00:28:59,920 Speaker 1: that had said a one dollar eight share offer clear 512 00:29:00,000 --> 00:29:02,720 Speaker 1: really not enough for management and shareholders, and at least 513 00:29:02,800 --> 00:29:06,120 Speaker 1: one dollars a share quote could be enough. He sees 514 00:29:06,160 --> 00:29:09,720 Speaker 1: a lengthy process that could extend to before being resolved, 515 00:29:09,880 --> 00:29:12,200 Speaker 1: and I I this will be my chart for Monday 516 00:29:12,360 --> 00:29:15,800 Speaker 1: on Bloomberg Television. You get a first look on Bloomberg Radio. 517 00:29:16,240 --> 00:29:19,040 Speaker 1: I put it out on Bloomberg Radio. Plus the twenty 518 00:29:19,120 --> 00:29:23,400 Speaker 1: year trend on ut X, the center tendency is a 519 00:29:23,520 --> 00:29:26,440 Speaker 1: hundred and twenty five dollars per share. When she gets 520 00:29:26,480 --> 00:29:29,200 Speaker 1: your right to work, Scarlett was talking about the dollars 521 00:29:29,640 --> 00:29:33,760 Speaker 1: six the vix lower eighteen a bullmark at eighteen point 522 00:29:33,840 --> 00:29:37,360 Speaker 1: four six. This hour of Surveillance is brought to you 523 00:29:37,440 --> 00:29:40,400 Speaker 1: by Maza White Planes. Visit Maza white Plains dot com. 524 00:29:40,480 --> 00:29:43,040 Speaker 1: Let's go to John Tucker now for news headlines. John well, 525 00:29:43,120 --> 00:29:46,280 Speaker 1: Scarlett and Tom. The final GOP debate before Superhot Tuesday 526 00:29:46,360 --> 00:29:49,640 Speaker 1: was a knockdown drag out a fair All in Houston, 527 00:29:49,800 --> 00:29:52,400 Speaker 1: and among the highlights Marco Rubio getting at her front 528 00:29:52,440 --> 00:29:55,320 Speaker 1: runner Donald Trump. Scan for Rubio, it was among the 529 00:29:55,400 --> 00:29:58,640 Speaker 1: political turner bound since it was Rubio who got flustered 530 00:29:59,040 --> 00:30:01,640 Speaker 1: during a New Hampshire bait when then Canada Chris Christie 531 00:30:01,640 --> 00:30:05,520 Speaker 1: accused him of repeating himself. Authorities say it wasn't terrorism 532 00:30:05,680 --> 00:30:09,520 Speaker 1: yesterday evening, but another workplace mass shooting near Wichita, Kansas. 533 00:30:10,000 --> 00:30:12,520 Speaker 1: An employee of Xcel Industries open fired the plant to 534 00:30:12,560 --> 00:30:16,719 Speaker 1: at least four people are dead, including the gunmen. Nevada 535 00:30:16,760 --> 00:30:19,840 Speaker 1: Governor Brian Santiville, a Republican, has bowed out of consideration 536 00:30:19,960 --> 00:30:22,560 Speaker 1: for the u su Preme Court as the partisan divisions 537 00:30:22,600 --> 00:30:24,960 Speaker 1: hardened over filling the vacancy left by the death of 538 00:30:25,080 --> 00:30:29,400 Speaker 1: Justice Anthony Scalia. And German beer brewers, who of course 539 00:30:29,440 --> 00:30:32,880 Speaker 1: pride themselves on using nothing but pure water, hops, malt, 540 00:30:33,000 --> 00:30:36,680 Speaker 1: and yeast to deliver a level of purity enshrined in 541 00:30:36,760 --> 00:30:40,240 Speaker 1: a five year old law, are now rejecting a study 542 00:30:40,280 --> 00:30:43,560 Speaker 1: that found traces of a weed killer in all fourteen 543 00:30:43,680 --> 00:30:46,720 Speaker 1: beer brands that were put under the microscope. The group 544 00:30:46,760 --> 00:30:52,240 Speaker 1: responding to a studied by the Munich Environmental Institute. Global 545 00:30:52,280 --> 00:30:56,480 Speaker 1: News Yeah, powered by a twenty fred journalist and more 546 00:30:56,480 --> 00:30:59,880 Speaker 1: than one hundred fifty news bureaus around the world to 547 00:31:00,000 --> 00:31:05,120 Speaker 1: their Girl'll just stick with the wine. The Clydesdales. You 548 00:31:05,120 --> 00:31:08,320 Speaker 1: can go to the Kleinsdale's John Tucker. Thank you so much. 549 00:31:09,400 --> 00:31:13,600 Speaker 1: Bullmarket Very Track sixteen thousand two of the VIS nineteen 550 00:31:13,680 --> 00:31:20,720 Speaker 1: point zero one. Next Honeywell United Technologies. Bloomberg Surveillance. Bloomberg 551 00:31:20,760 --> 00:31:22,720 Speaker 1: Surveillance is brought to you by Bank of America Mary 552 00:31:22,800 --> 00:31:26,080 Speaker 1: Lynch's Global Cash Management Solutions, helping you manage, protect, and 553 00:31:26,160 --> 00:31:29,120 Speaker 1: investor global cash wherever the road to growth leads. That's 554 00:31:29,160 --> 00:31:32,120 Speaker 1: the power of Global Connections. Bank of America North America 555 00:31:32,320 --> 00:31:39,760 Speaker 1: member ft I C Global Business News twenty four hours 556 00:31:39,800 --> 00:31:42,920 Speaker 1: a day at Bloomberg dot Com, the Radio plus mobile 557 00:31:42,960 --> 00:31:46,240 Speaker 1: app and on your radio. This is a Bloomberg Business 558 00:31:46,320 --> 00:31:49,840 Speaker 1: Flash and I'm Karen Moscow stocks are rising voice for 559 00:31:49,920 --> 00:31:52,000 Speaker 1: a second straight weekly gain after the S and P 560 00:31:52,200 --> 00:31:55,120 Speaker 1: five index are raised a monthly decline. And this comes 561 00:31:55,160 --> 00:31:57,200 Speaker 1: of its signals from China's Central Bank that it will 562 00:31:57,240 --> 00:31:59,960 Speaker 1: act to bolster its economy and it's crude oil clade. 563 00:32:00,120 --> 00:32:02,720 Speaker 1: We check the markets every fifteen minutes throughout the trading day. 564 00:32:02,760 --> 00:32:05,000 Speaker 1: On Bloomberg, the S and P five hundred up three 565 00:32:05,040 --> 00:32:07,280 Speaker 1: tenths per cent or six points in nineteen fifty eight 566 00:32:07,520 --> 00:32:10,200 Speaker 1: dowd Johnes industrial average of three tenths percent or forty 567 00:32:10,240 --> 00:32:13,200 Speaker 1: two points to sixteen thousand, seven hundred thirty nine. Then 568 00:32:13,280 --> 00:32:15,480 Speaker 1: Astacs a half per cent or twenty two points to 569 00:32:15,600 --> 00:32:19,040 Speaker 1: forty six oh four. Ten year Treasury down twelve thirty seconds, 570 00:32:19,120 --> 00:32:21,760 Speaker 1: the yield one point seven five percent yield on the 571 00:32:21,800 --> 00:32:24,920 Speaker 1: two year point seven six percent. Nimex screwed oil up 572 00:32:25,000 --> 00:32:27,239 Speaker 1: three percent or a dollar three to thirty four ten 573 00:32:27,320 --> 00:32:29,960 Speaker 1: a barrel Comex Gold down seven tenths per cent or 574 00:32:30,000 --> 00:32:33,120 Speaker 1: eight dollars fifty cents to twelve thirty thirty announced the 575 00:32:33,240 --> 00:32:35,600 Speaker 1: euro a dollar oh nine seven three the N one 576 00:32:35,680 --> 00:32:39,400 Speaker 1: thirteen point four eight. Honeywell International saying that a tie 577 00:32:39,520 --> 00:32:42,640 Speaker 1: up with United Technologies would create seventy two billion dollars 578 00:32:42,680 --> 00:32:46,480 Speaker 1: in combined shareholder value, part of a February nineteenth presentation 579 00:32:46,600 --> 00:32:49,520 Speaker 1: pushing for a deal that the target company said was unworkable, 580 00:32:49,880 --> 00:32:52,400 Speaker 1: Honeywell said the proposed offer of a hundred eight dollars 581 00:32:52,440 --> 00:32:54,360 Speaker 1: per share woul lead to cost savings of three and 582 00:32:54,360 --> 00:32:56,960 Speaker 1: a half billion dollars in four years, as it said 583 00:32:57,000 --> 00:32:59,800 Speaker 1: it was seeking to re engage with United Technologies on 584 00:33:00,040 --> 00:33:03,960 Speaker 1: possible transaction and Hilton Worldwide holdings, the world's largest operator 585 00:33:04,000 --> 00:33:06,440 Speaker 1: of a hotel room, said it will continue to pursue 586 00:33:06,480 --> 00:33:10,040 Speaker 1: spinoffs of its hotel properties and timeshare business to boost 587 00:33:10,080 --> 00:33:13,880 Speaker 1: shareholder value. That's a Bloomberg business flash, thom and Scarlett Karen, 588 00:33:13,960 --> 00:33:16,640 Speaker 1: thanks so much, folks. Peter Armand joins us some stern 589 00:33:16,760 --> 00:33:20,160 Speaker 1: energy gleature right now at these head of their aerospace 590 00:33:20,200 --> 00:33:22,520 Speaker 1: and defense system. Peter thrilled to have you and thank 591 00:33:22,560 --> 00:33:25,600 Speaker 1: you so much on an incredible morning to join us. 592 00:33:26,560 --> 00:33:29,440 Speaker 1: My chart for Monday is a twenty year trend on 593 00:33:29,520 --> 00:33:34,200 Speaker 1: one of American's icons ut X and I don't understand 594 00:33:34,440 --> 00:33:38,080 Speaker 1: a hundred and eight my center tendency twenty years back 595 00:33:38,560 --> 00:33:41,000 Speaker 1: is a hundred and twenty three dollars a share. A 596 00:33:41,120 --> 00:33:43,959 Speaker 1: one standard deviation premium is a hundred and forty eight 597 00:33:44,040 --> 00:33:47,320 Speaker 1: dollars a share in way out stupid, it's two standard 598 00:33:47,400 --> 00:33:50,800 Speaker 1: deviations a hundred and seventy eight dollars a share. Why 599 00:33:50,960 --> 00:33:55,520 Speaker 1: is Honeywell low balling this offer? Well, I think it's 600 00:33:55,640 --> 00:33:58,520 Speaker 1: it's it's initially I think probably the first the first 601 00:33:58,560 --> 00:34:01,920 Speaker 1: of what I will be probably an initial offer. Uh, 602 00:34:02,000 --> 00:34:05,000 Speaker 1: if you look, I mean United Technologies in the last 603 00:34:05,080 --> 00:34:09,560 Speaker 1: few years has struggled. There is a incredible industrial business, 604 00:34:09,640 --> 00:34:14,279 Speaker 1: but they they've run into um a point where their 605 00:34:14,280 --> 00:34:17,160 Speaker 1: businesses are very mature and their margins are running at 606 00:34:17,200 --> 00:34:19,080 Speaker 1: peak levels, and so they have to go through a 607 00:34:19,120 --> 00:34:22,760 Speaker 1: restructuring to kind of reset the bar and re engage growth. 608 00:34:22,880 --> 00:34:25,759 Speaker 1: And I think Honeywell seas an opportunity to try to 609 00:34:25,800 --> 00:34:28,399 Speaker 1: combine to businesses and take advantage of that. Is there 610 00:34:28,440 --> 00:34:31,400 Speaker 1: regulatory overlap? We've seen all sorts of different comments on 611 00:34:31,520 --> 00:34:36,200 Speaker 1: this three thousand combine employees. I got revenues out, Oh, 612 00:34:36,280 --> 00:34:38,680 Speaker 1: I don't know, ninety eight billion or something, give or 613 00:34:38,719 --> 00:34:42,920 Speaker 1: take a couple billion. But what's the overlap? Yeah, the 614 00:34:43,040 --> 00:34:47,120 Speaker 1: overlap um Initially, I think it's fairly significant. It's in 615 00:34:47,520 --> 00:34:50,320 Speaker 1: a couple of key areas in the aerospace side, small 616 00:34:50,400 --> 00:34:54,040 Speaker 1: aircraft and helicopter engines, auxiliary power units otherwise not as 617 00:34:54,040 --> 00:34:58,600 Speaker 1: ap us, aircraft, environmental control systems, aircraft wheels and bay breaks, 618 00:34:58,680 --> 00:35:02,080 Speaker 1: and then the firing security products the ladder. There's plenty 619 00:35:02,120 --> 00:35:04,439 Speaker 1: of competition for so the fire security products, you could 620 00:35:04,440 --> 00:35:07,279 Speaker 1: easily divest some of those and it wouldn't be an issue. 621 00:35:07,640 --> 00:35:09,320 Speaker 1: And I think they're they're clearly is going to be 622 00:35:09,400 --> 00:35:12,200 Speaker 1: some horse trading going on around the airspace assets about 623 00:35:12,239 --> 00:35:16,960 Speaker 1: what they would divest and satisfy regulators. Regulators is one thing. 624 00:35:17,120 --> 00:35:21,600 Speaker 1: Customer resistance is another. U t XS CEO had said 625 00:35:21,680 --> 00:35:24,120 Speaker 1: earlier this week that that would make a merger too 626 00:35:24,200 --> 00:35:26,759 Speaker 1: difficult to get done. What kind of customer resistance we 627 00:35:26,800 --> 00:35:30,200 Speaker 1: were talking about here, So you're talking about Boeing air 628 00:35:30,280 --> 00:35:34,279 Speaker 1: Bus UH in particular, and then probably the Department of Defense. UH, 629 00:35:34,400 --> 00:35:38,439 Speaker 1: it's more probably on the commercial side. Initially, UM, we've 630 00:35:38,560 --> 00:35:43,120 Speaker 1: looked at the the the key aircraft platforms, whether it's 631 00:35:43,120 --> 00:35:45,799 Speaker 1: Bowings or Airbus, both of the kind of the narrow 632 00:35:45,840 --> 00:35:49,600 Speaker 1: body side, the twenty for Airbus or the seven sevent 633 00:35:49,840 --> 00:35:52,440 Speaker 1: three fifty, both new platforms that are ramping, and if 634 00:35:52,480 --> 00:35:54,840 Speaker 1: you do the analysis, it looks like that from a 635 00:35:54,960 --> 00:35:58,799 Speaker 1: cost basis that this combination and some of those platforms, 636 00:35:58,920 --> 00:36:01,719 Speaker 1: the combination with Halt and somewhere between seven and sevent 637 00:36:02,360 --> 00:36:05,920 Speaker 1: of the total cost base. So it's significant, significant, but 638 00:36:06,000 --> 00:36:08,640 Speaker 1: it's not a deal breaker. There are some competitors out 639 00:36:08,640 --> 00:36:12,480 Speaker 1: there that have larger shares um, so clearly there's a 640 00:36:12,520 --> 00:36:15,239 Speaker 1: negotiation going on. And what you could horsetrate out Peter, 641 00:36:15,320 --> 00:36:17,279 Speaker 1: I meant where US astern ag as we look at 642 00:36:17,360 --> 00:36:19,440 Speaker 1: Honeywell U t X. Peter, I'm looking at the Bloomberg 643 00:36:19,560 --> 00:36:23,080 Speaker 1: terminal and U t X is subpar across the entire 644 00:36:23,160 --> 00:36:26,399 Speaker 1: income statement. But with that, there's not much different. I've 645 00:36:26,440 --> 00:36:30,400 Speaker 1: got nominal growth U t X three four percent. Honeywell 646 00:36:30,480 --> 00:36:33,759 Speaker 1: does better, maybe it's five percent. I've got eva DA 647 00:36:33,920 --> 00:36:36,759 Speaker 1: they outperformed by two hundred basis points. Where does U 648 00:36:36,880 --> 00:36:40,280 Speaker 1: t X have to get better to defend against everybody, 649 00:36:40,320 --> 00:36:42,479 Speaker 1: including Honeywell. Do they have to do in the middle 650 00:36:42,520 --> 00:36:46,160 Speaker 1: of the income statement and expenses, etcetera. Or do they 651 00:36:46,239 --> 00:36:50,200 Speaker 1: just have to do better revenue? Yeah, Well, unfortunately it's 652 00:36:50,200 --> 00:36:52,440 Speaker 1: a little bit of both. They have they have to 653 00:36:52,920 --> 00:36:55,600 Speaker 1: uh cut, they have to go through restructuring, so they 654 00:36:55,680 --> 00:36:57,960 Speaker 1: lost some share with OTIS over the last few years 655 00:36:58,360 --> 00:37:01,000 Speaker 1: and to hold margin and instead they now have to 656 00:37:01,440 --> 00:37:03,960 Speaker 1: you know, cut some pricing to uh so that's going 657 00:37:04,040 --> 00:37:06,000 Speaker 1: to hurt their margins in order to get some volume 658 00:37:06,080 --> 00:37:08,160 Speaker 1: back the same thing. They've got a you know, a 659 00:37:08,239 --> 00:37:10,960 Speaker 1: very strong franchise with Carrier, but they're running up against 660 00:37:11,239 --> 00:37:13,560 Speaker 1: kind of peak margin levels and they and they're continuing 661 00:37:13,560 --> 00:37:16,239 Speaker 1: to look at ways to improve the cost structure there. 662 00:37:16,600 --> 00:37:18,840 Speaker 1: And then the on the Pratt and Whitney side, I mean, 663 00:37:18,920 --> 00:37:21,200 Speaker 1: they just have they have the benefit of having a 664 00:37:21,360 --> 00:37:24,960 Speaker 1: great new engine, but unfortunately it's really next decade story 665 00:37:25,040 --> 00:37:30,640 Speaker 1: before it starts generating a lot of income growls. Because 666 00:37:30,680 --> 00:37:33,040 Speaker 1: I think he's looking to build kind of the next 667 00:37:33,120 --> 00:37:40,279 Speaker 1: big industrial uh want. I think he wants to do 668 00:37:40,480 --> 00:37:44,480 Speaker 1: something where he sees enormous synergies where there is a 669 00:37:44,640 --> 00:37:48,120 Speaker 1: margin a margin expansion story that could still be in 670 00:37:48,239 --> 00:37:51,160 Speaker 1: play when you look at the combination and I think 671 00:37:51,239 --> 00:37:54,560 Speaker 1: you put the best in class of Honeywell's operating system, 672 00:37:54,960 --> 00:37:57,879 Speaker 1: which has delivered tremendous share older values since Dave Cody 673 00:37:57,960 --> 00:37:59,879 Speaker 1: has installed it, and I think he looks at there's 674 00:37:59,880 --> 00:38:02,120 Speaker 1: an opportunity to do that with you. What does this 675 00:38:02,239 --> 00:38:05,120 Speaker 1: mean for General Electric then, which is putting all its 676 00:38:05,120 --> 00:38:09,240 Speaker 1: eggs in one basket as an industrial company, General Electric 677 00:38:09,960 --> 00:38:12,319 Speaker 1: or the other other big industrials out there that if 678 00:38:12,520 --> 00:38:15,200 Speaker 1: this deal gets done, there can always be a knee 679 00:38:15,280 --> 00:38:17,759 Speaker 1: jerk reaction. I think General General Electric, which we don't 680 00:38:17,800 --> 00:38:20,040 Speaker 1: have a rating on UM, is on their own path. 681 00:38:20,120 --> 00:38:22,560 Speaker 1: They've obviously been cleaning up their own story and investing 682 00:38:22,560 --> 00:38:26,160 Speaker 1: a lot of the financial assets, so I think that's 683 00:38:26,160 --> 00:38:28,959 Speaker 1: a different story. But you know, clearly if you saw 684 00:38:29,520 --> 00:38:32,280 Speaker 1: this deal ultimately get done and it would take probably 685 00:38:32,320 --> 00:38:35,600 Speaker 1: well into seventeen UM, there probably would be a knee 686 00:38:35,680 --> 00:38:38,560 Speaker 1: jerk reaction, if from a competitive standpoint, just because you'd 687 00:38:38,600 --> 00:38:41,920 Speaker 1: have a very strong offering. Here's a partial score honeywell 688 00:38:42,000 --> 00:38:48,200 Speaker 1: twelve U t X six point five shareholder return last decade. 689 00:38:50,320 --> 00:38:52,719 Speaker 1: You say this will be a lengthy process, Peter, that 690 00:38:52,800 --> 00:38:56,719 Speaker 1: could extend into before being resolved. Surely David Cody uh 691 00:38:56,760 --> 00:38:59,280 Speaker 1: sees this as well. Why now, why is he choosing 692 00:38:59,320 --> 00:39:02,920 Speaker 1: to act now? Well, I think he sees an opera 693 00:39:03,280 --> 00:39:07,040 Speaker 1: a window here with the United Technologies that frankly, it's 694 00:39:07,360 --> 00:39:10,680 Speaker 1: UM a very strong industrial company, but they're going through 695 00:39:10,719 --> 00:39:13,720 Speaker 1: a period where UM three out of their four segments 696 00:39:13,760 --> 00:39:16,480 Speaker 1: this year alone are going to show negative EBIT growth. 697 00:39:17,040 --> 00:39:20,640 Speaker 1: So and because of the you know, headwinds that they're seeing. 698 00:39:20,719 --> 00:39:23,239 Speaker 1: Some of that is is self inflicted with a great 699 00:39:23,280 --> 00:39:25,520 Speaker 1: new engine that they're delivering and that's causing a drag 700 00:39:25,600 --> 00:39:28,040 Speaker 1: for Pratt and Whitney, but others is where they need 701 00:39:28,120 --> 00:39:30,440 Speaker 1: to kind of restructuring the business, whether it's OTIS or 702 00:39:31,200 --> 00:39:34,200 Speaker 1: what they're seeing on the aerospace system side. So UM, 703 00:39:34,360 --> 00:39:37,080 Speaker 1: I think there's an opening window here to see maybe 704 00:39:37,120 --> 00:39:39,960 Speaker 1: if we put a combination together, we we divest some 705 00:39:40,080 --> 00:39:43,440 Speaker 1: of the key assets that ultimately this is a one 706 00:39:43,480 --> 00:39:48,399 Speaker 1: plus one equal story. What about getting shareholders on his side, 707 00:39:48,480 --> 00:39:51,759 Speaker 1: Honeywell bringing over some of the u TX as shareholders. 708 00:39:51,960 --> 00:39:54,480 Speaker 1: Are there any activists that play or potential activists that 709 00:39:54,520 --> 00:39:57,600 Speaker 1: play that could get in. I don't see this being 710 00:39:58,360 --> 00:40:01,160 Speaker 1: a near term activist story. I this is more about 711 00:40:01,880 --> 00:40:06,080 Speaker 1: convincing UH United Technology shareholders that there's real value here 712 00:40:06,480 --> 00:40:09,880 Speaker 1: and trying to keep what could be disappointment among the 713 00:40:09,960 --> 00:40:14,040 Speaker 1: Honeywell shareholders who the reality is historically this is not 714 00:40:14,160 --> 00:40:16,759 Speaker 1: what they signed up for. They signed up for what 715 00:40:17,120 --> 00:40:22,719 Speaker 1: was a very strong, UH clear messaging story UH five 716 00:40:22,760 --> 00:40:26,120 Speaker 1: billion dollar acquisitions and less continuing to tuck those in, 717 00:40:26,880 --> 00:40:29,520 Speaker 1: improving the cost structure of those deals, adding you know, 718 00:40:29,880 --> 00:40:32,800 Speaker 1: the Honeywell kind of operating system and then seeing the 719 00:40:32,920 --> 00:40:36,880 Speaker 1: benefit of acretion going forward. So this is a deviation, 720 00:40:36,960 --> 00:40:39,480 Speaker 1: a game changer for that. And and guess what, We're 721 00:40:39,480 --> 00:40:41,719 Speaker 1: gonna have their Honeywell Investor Day next Wednesday in New 722 00:40:41,800 --> 00:40:44,239 Speaker 1: York and we're gonna hear a lot more about we'll 723 00:40:44,239 --> 00:40:46,600 Speaker 1: get you back on and that tell me the makeup 724 00:40:46,640 --> 00:40:48,319 Speaker 1: And let's just pick on U t X. I mean, 725 00:40:48,440 --> 00:40:51,080 Speaker 1: Judd greg Is on the Senator Greg on the Honeywell board. 726 00:40:51,120 --> 00:40:54,480 Speaker 1: But tell me the quality of the U t X board. 727 00:40:54,520 --> 00:40:56,680 Speaker 1: I see Governor Whitman of New Jersey on the board, 728 00:40:57,160 --> 00:41:00,920 Speaker 1: Terry McGraw on the board as well, in Alan coleman 729 00:41:01,000 --> 00:41:04,000 Speaker 1: on the board. Uh what's the quality that board? And 730 00:41:04,080 --> 00:41:08,560 Speaker 1: do they tell the management what to do? Good question? Well, 731 00:41:08,760 --> 00:41:12,520 Speaker 1: I mean both of these companies have tremendous boards. And 732 00:41:13,440 --> 00:41:18,960 Speaker 1: John Faraci excuse me, Yeah, And there's a background of 733 00:41:20,080 --> 00:41:24,879 Speaker 1: of other advisors, um, you know, former executives United Technologies 734 00:41:24,920 --> 00:41:28,279 Speaker 1: who are certainly close to the story also, So I 735 00:41:28,400 --> 00:41:30,799 Speaker 1: think they'll have great counsel and it's just a matter 736 00:41:30,920 --> 00:41:35,440 Speaker 1: of whether they're satisfied, whether this is enough value being created, 737 00:41:35,480 --> 00:41:39,000 Speaker 1: and whether they're willing to uh deal with the change 738 00:41:39,040 --> 00:41:42,400 Speaker 1: and potential governance and having Honeywell run these what are 739 00:41:42,480 --> 00:41:46,120 Speaker 1: great assets that technologist, Peter, thank you so much. Well, 740 00:41:46,360 --> 00:41:48,279 Speaker 1: my people will talk to your people, so maybe we 741 00:41:48,320 --> 00:41:51,439 Speaker 1: can drag you on the show next week sometime after 742 00:41:51,560 --> 00:41:56,080 Speaker 1: the Honeywell meeting. Mr I meant is with Stern aging Leature, 743 00:41:56,160 --> 00:41:59,840 Speaker 1: we thank him for his short term support today, Scott, 744 00:42:00,040 --> 00:42:03,239 Speaker 1: that was fascinating. I love what he said about this 745 00:42:03,440 --> 00:42:06,520 Speaker 1: is outside the box of what Honeywell shareholders would want. Yeah, 746 00:42:06,560 --> 00:42:08,600 Speaker 1: they didn't sign up for this, right, I mean they 747 00:42:08,640 --> 00:42:11,080 Speaker 1: were not looking for a year or two of lengthy process, 748 00:42:11,200 --> 00:42:15,400 Speaker 1: lengthy negotiations, asset to sales and back and forth with 749 00:42:15,480 --> 00:42:18,640 Speaker 1: regulators for any of this. Bloomber Radio Plus you got 750 00:42:18,719 --> 00:42:21,279 Speaker 1: the first look at my chart for Monday, which is 751 00:42:21,400 --> 00:42:24,919 Speaker 1: really interesting. It is it is the trend of ut 752 00:42:25,360 --> 00:42:28,960 Speaker 1: X and the valuations of the center tendency of a 753 00:42:29,040 --> 00:42:33,920 Speaker 1: two decade trend, which you heard Mr Armand say he 754 00:42:33,960 --> 00:42:36,120 Speaker 1: thinks a hundred eight dollars and shares a little brief, 755 00:42:36,200 --> 00:42:39,759 Speaker 1: a little early, and it would probably migrate higher if 756 00:42:39,840 --> 00:42:44,000 Speaker 1: they ensue to battle. I think scarlet food. We're produced 757 00:42:44,000 --> 00:42:47,000 Speaker 1: by y U N. Kent Felio, our Global technical director 758 00:42:47,040 --> 00:42:48,120 Speaker 1: of Bloomberg surveillance,