WEBVTT - Rates, China, Crypto, and Math (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.239 at Bloomberg dot com slash podcast. I don't know I 0:00:22.360 --> 0:00:25.360 got my Paul Sweeney personal inflation meter, otherwise known as 0:00:25.440 --> 0:00:29.840 unletted gas. It's continues to roll over. There's students, especially 0:00:29.880 --> 0:00:33.360 if you're at sheets in Newark, Ohio. First exactly, they're 0:00:33.360 --> 0:00:36.080 giving it away. Practically, we're seeing in other parts of 0:00:36.080 --> 0:00:39.400 the economy inflation A lot of people tell me has peaked. 0:00:39.920 --> 0:00:42.440 If that's in fact the case, why doesn't Ira Jersey's 0:00:42.440 --> 0:00:45.360 feed to reserve just put the brakes on it. Let's ask, right, 0:00:45.360 --> 0:00:48.120 he's chief US interest rate strategist for Bloomberg Intelligence, and 0:00:48.200 --> 0:00:50.120 we need to save some time to talk about World 0:00:50.120 --> 0:00:51.879 Cup here. Matt remind me on that. I know, but 0:00:51.920 --> 0:00:54.200 we're not going to talk about Amazon because Ira has 0:00:54.240 --> 0:00:57.360 such a cushy job. All he focuses on in sector, Ira, 0:00:57.440 --> 0:00:59.560 why don't you broaden your remit a little bit. I mean, 0:01:00.320 --> 0:01:03.560 the whole rate space is there for you. Well, my, well, 0:01:04.240 --> 0:01:07.960 so we have a credit strategist named Noel Hebert who 0:01:08.000 --> 0:01:11.720 covers corporates, so you can talk to him about what's 0:01:11.720 --> 0:01:13.400 going on in the text space and all the other 0:01:13.440 --> 0:01:16.360 sectors within within the corporate landscape. So also, I think 0:01:16.360 --> 0:01:19.520 it's fair actually, now that I think about it, considering 0:01:19.520 --> 0:01:22.360 the amount of FED speak out there, we need one 0:01:22.360 --> 0:01:24.679 guy that's just focused on that. Like, why did they 0:01:24.680 --> 0:01:29.200 come out and talk so much? Doesn't that annoy J? Powell? Uh, yeah, 0:01:29.200 --> 0:01:31.800 it would have annoyed down in Greenspan for sure. Um. Yeah. 0:01:31.840 --> 0:01:34.040 You know, the FED over the last twenty years has 0:01:34.080 --> 0:01:38.560 gotten very democratized and and there's just I think there's 0:01:38.600 --> 0:01:42.520 just been this push that all the members are um, 0:01:42.760 --> 0:01:44.759 you know, wanted to say things, and then they when 0:01:44.800 --> 0:01:46.680 they once they started too, it was hard to kind 0:01:46.720 --> 0:01:50.000 of put the genie back in the bottle. J. Powell. Certainly, 0:01:50.040 --> 0:01:53.200 it's still the mouthpiece for the entire Federal Reserve, and 0:01:53.520 --> 0:01:56.760 I think that his what he says matters obviously the most. 0:01:56.840 --> 0:01:59.800 And then um, but every member you know, wants to 0:01:59.840 --> 0:02:03.320 have their say, and you know from from an analysis perspective, 0:02:03.320 --> 0:02:06.520 it's a little bit easier for us too to determine 0:02:06.560 --> 0:02:09.480 things like where the dots are and and maybe who's 0:02:09.480 --> 0:02:13.000 who's really hawkish and dobbish visa be what you could 0:02:13.000 --> 0:02:16.280 do before Alan Greenspan or you know, left the Fed Reserve, 0:02:16.360 --> 0:02:19.000 because back then it was like, okay, it's whatever Alan 0:02:19.040 --> 0:02:21.800 Greenspan says. And but every once in a while you 0:02:21.919 --> 0:02:25.079 had some members that were more hawkish or dovish than him, 0:02:25.120 --> 0:02:28.079 and they would dissent and we didn't necessarily know in 0:02:28.160 --> 0:02:30.600 advance if they would. And now it's it's a little 0:02:30.600 --> 0:02:33.280 bit easier to determine, you know what, what the leaning 0:02:33.360 --> 0:02:36.519 of a majority or of the or or a significant 0:02:36.520 --> 0:02:38.480 minority of the Fed Reserve is going to be. Well. 0:02:38.480 --> 0:02:41.800 And now then to Paul's point, um, it does seem 0:02:41.840 --> 0:02:43.839 it's not just him, right. A lot of people think 0:02:43.880 --> 0:02:47.160 inflation has peaked now, even though we've only gotten a 0:02:47.280 --> 0:02:51.639 very small set of numbers to corroborate that. But the 0:02:52.040 --> 0:02:55.440 speakers for the most part are talking about a step down, 0:02:55.560 --> 0:02:58.840 a reduction in the rate hike increases that we've seen. 0:02:59.720 --> 0:03:03.440 So have we reached that point? I mean, are we 0:03:03.520 --> 0:03:08.160 looking at something of a pivot. Yeah, so you know, 0:03:08.200 --> 0:03:10.639 this is something that actually that J. Powell has been 0:03:10.639 --> 0:03:13.920 mentioning since uh since July. Right, So it's not this 0:03:14.000 --> 0:03:17.200 isn't a new concept, and that this step down in 0:03:17.320 --> 0:03:19.480 the pace of hikes. They weren't going to hike at 0:03:19.480 --> 0:03:22.200 seventy five basis points every single meeting forever, right, So 0:03:22.240 --> 0:03:24.280 at some point they were going to have to slow 0:03:24.320 --> 0:03:26.840 the pace or just stop. And and I think in 0:03:26.880 --> 0:03:28.880 December they're only going to go fifty. I think they'll 0:03:28.880 --> 0:03:31.320 go then after that, And and I mentioned to you 0:03:31.360 --> 0:03:34.680 guys before you know, they're going to go to the 0:03:35.240 --> 0:03:39.360 basis point. UM moved again, probably starting in at the 0:03:39.360 --> 0:03:42.560 February meeting, the February first meeting, because it allows them 0:03:42.600 --> 0:03:44.520 just to calibrate just a little bit more like should 0:03:44.520 --> 0:03:47.120 they go to five on the upper round of the 0:03:47.440 --> 0:03:49.160 Fed funds target? Should they go to five and a 0:03:49.240 --> 0:03:52.600 quarter like some people, UM think they should go. So 0:03:53.080 --> 0:03:55.400 by by going in twenty five, they can just calibrate 0:03:55.440 --> 0:03:57.400 towards the end of hikes. But but I think the 0:03:57.440 --> 0:04:01.800 important point there is that to paulse question is that, yes, 0:04:01.840 --> 0:04:05.080 inflation seems like it's rolled over, the economy is slowing 0:04:05.120 --> 0:04:07.760 a bit and because of that that the FED is 0:04:07.840 --> 0:04:09.880 nearing the end of their hikes. Whether or not they 0:04:09.880 --> 0:04:14.040 go another another fifty seventy five hundred basis points, it's 0:04:14.080 --> 0:04:16.200 still the end is still in sight. And I think 0:04:16.200 --> 0:04:19.280 that that's the important part point for the markets right now. 0:04:19.279 --> 0:04:20.920 All right, that's enough on the rates market. Let's get 0:04:20.960 --> 0:04:24.839 the important stuff. Two pm. Wall Street Time today, US Iran. 0:04:25.400 --> 0:04:26.960 How do you think this is going to go? Especially 0:04:27.040 --> 0:04:29.599 in a World Cup where literally anyone can win. Yes, 0:04:29.600 --> 0:04:32.640 it seems like it. So I think for Iran, given 0:04:32.680 --> 0:04:36.279 that they they beat Whales, they're gonna probably play pretty 0:04:36.279 --> 0:04:38.840 defensively against US and try to put you know, nine 0:04:38.920 --> 0:04:41.480 or ten guys behind the ball and just trying and 0:04:41.520 --> 0:04:43.839 try to beat us on on a counter attack. And 0:04:43.839 --> 0:04:46.320 and historically, if you go look at what the US 0:04:46.360 --> 0:04:50.360 has done against other countries in North and Central America 0:04:50.440 --> 0:04:52.800 that they play that that we play in the Gold Cup, 0:04:53.200 --> 0:04:55.400 we we tend to have a pretty hard time breaking 0:04:55.400 --> 0:04:59.760 down very what we call bunker defenses. So um so 0:04:59.800 --> 0:05:02.680 I think that that you know, I hate to say this, 0:05:02.720 --> 0:05:04.840 but this is gonna be probably a one goal game, 0:05:04.880 --> 0:05:06.480 and I think it will be, you know, maybe one 0:05:06.560 --> 0:05:09.680 nail to the US and in the end, um, but 0:05:10.080 --> 0:05:12.160 and and if we do score early, I think that 0:05:12.160 --> 0:05:14.440 that will get that will get I ran out of 0:05:14.440 --> 0:05:17.280 their bunker, because they're in order for them to continue 0:05:17.320 --> 0:05:19.760 and actually make it to the next round, they're going 0:05:19.800 --> 0:05:22.239 to have to then play to to at least draw 0:05:22.839 --> 0:05:26.880 the US. And how much does historically matter? I mean, 0:05:27.400 --> 0:05:31.080 in a in a contest where Saudi Arabia beats Argentina, 0:05:31.279 --> 0:05:33.720 is that because Saudi Arabia historically is great at soccer 0:05:33.800 --> 0:05:37.080 and Argentina is horrible? No? Not, not not at all, 0:05:37.120 --> 0:05:41.120 I think I Well, in rewatching, that's the percentage history, 0:05:41.279 --> 0:05:46.040 you know, I mean, um, compared to chance. Well, well, 0:05:46.120 --> 0:05:48.240 let me say this firstly, I think any of these 0:05:48.279 --> 0:05:51.760 teams could be any any other team on a on 0:05:51.800 --> 0:05:54.520 any given day. I mean, that's one of the that's 0:05:54.560 --> 0:05:57.560 like almost every sport, right, especially when you're talking about 0:05:57.600 --> 0:06:00.800 high level professional athletes. I think in that Argentina Sordi 0:06:00.800 --> 0:06:03.679 Arabia game, I think Argentina came out a bit flat. 0:06:03.760 --> 0:06:05.720 I think that their defense has some holes in it. 0:06:05.880 --> 0:06:10.839 That um that you know, Saudi Arabia certainly exploited and um, 0:06:11.000 --> 0:06:13.479 so you know, but that's a one off game. I think, 0:06:13.600 --> 0:06:17.520 you know, taking the games the afternoon, um as in 0:06:17.560 --> 0:06:20.520 a bubble. I think the US has the more talented players, 0:06:20.520 --> 0:06:22.880 but I Ran does play very compact. They are very 0:06:23.000 --> 0:06:26.040 organized defensively, and and that's going to create problems for 0:06:26.080 --> 0:06:27.760 the US. All Right, it's good stuff. I think it's 0:06:27.760 --> 0:06:30.279 gonna be musty TV for a lot of sports fans today, 0:06:30.279 --> 0:06:32.560 even if you're not a Soccer World Cup fan. Our 0:06:32.680 --> 0:06:36.920 Jersey chief US Interest rate strategist and Chief Soccer strategists 0:06:36.920 --> 0:06:44.160 slash football strategist for Bloomberg Intelligence. Over the last few days, 0:06:44.200 --> 0:06:46.120 you know, surprised me. To me, I guess it's just 0:06:46.640 --> 0:06:48.440 I've really been kind of moving in response to kind 0:06:48.440 --> 0:06:50.760 of some of the news we're getting out of China, 0:06:51.080 --> 0:06:53.960 and I guess that goes to the whole global economic 0:06:54.560 --> 0:06:57.760 you know, reopening, recession risk, all those types of things 0:06:57.400 --> 0:07:01.200 on global scale is obviously economy. So we wait to 0:07:01.240 --> 0:07:03.760 talk to people who have got some experience thinking about 0:07:03.800 --> 0:07:06.920 investing in that part of the world. Uh Hans Dout 0:07:07.000 --> 0:07:08.559 is one of those people who's the CEO of Mitchell 0:07:08.600 --> 0:07:10.880 Madison Group, and I think that his claim to fame 0:07:10.920 --> 0:07:14.560 as he is an undergraduate from the University of Michigan, 0:07:14.600 --> 0:07:19.160 who have had a an extraordinarily successful weekend. So Hans, 0:07:19.200 --> 0:07:22.160 let me get your your thoughts here on the Higher 0:07:22.200 --> 0:07:27.040 State Michigan game. You guys know what went to Dartmouth, right, Yes, 0:07:27.240 --> 0:07:29.680 you got your m right, but I thought you got 0:07:29.680 --> 0:07:32.040 your b A from the university. I did not. I 0:07:32.040 --> 0:07:38.160 did not about that, thank god. Okay, so you know 0:07:38.200 --> 0:07:40.160 we had a Michigan guy coming on, and I will 0:07:40.240 --> 0:07:45.680 say you know that Michigan played an incredible game on Saturday, 0:07:45.720 --> 0:07:48.280 and Ohio State simply did not show up. I don't 0:07:48.280 --> 0:07:50.800 know where our defensive coordinator was. He didn't seem to 0:07:50.800 --> 0:07:52.840 be working that day, even though I thought that's why 0:07:52.880 --> 0:07:56.760 we hired him. All of this means nothing to Hans 0:07:56.880 --> 0:07:59.440 Doll because he didn't go to Michigan. No, but he 0:07:59.440 --> 0:08:02.760 got his NBA qualified. Alright, let's let's pivot to the 0:08:02.960 --> 0:08:05.440 China first. Let's talk about your China bona fides then, 0:08:05.760 --> 0:08:10.320 because I know that you have made uh substantial contributions 0:08:10.360 --> 0:08:15.760 to the tang In Song law and um you have 0:08:15.960 --> 0:08:21.600 helped US government officials understand China and Chinese legal history. 0:08:22.360 --> 0:08:24.840 How did you get into China going to school in Germany? 0:08:24.920 --> 0:08:28.800 And then UM in Vermont. Well, well, we basically a 0:08:29.280 --> 0:08:31.880 consulting firm, right, so we most of what we did 0:08:31.920 --> 0:08:35.120 over the last decade or so, it's help American companies 0:08:35.240 --> 0:08:39.080 established UM production of China, sourcing from China, right, So 0:08:39.160 --> 0:08:43.040 my main business has been strategic sourcing, helping Western companies 0:08:43.200 --> 0:08:47.760 established you know, production and uh, you know sourcing agreement 0:08:47.840 --> 0:08:51.320 all over the world. Of course in China in particular lately, 0:08:51.360 --> 0:08:54.199 we've actually helped a lot of Chinese companies be more 0:08:54.240 --> 0:08:57.640 efficient within China. And of course since COVID, that whole 0:08:57.679 --> 0:09:00.319 business does nothing going on. I mean, you and I 0:09:00.360 --> 0:09:03.320 spent a lot of time going to China before COVID. 0:09:03.320 --> 0:09:05.160 I was actually part of the UM. I was in 0:09:05.200 --> 0:09:08.600 Hong Kong doing the protests and everything, and I thought 0:09:08.600 --> 0:09:11.360 that was going to actually result in something, but it didn't. 0:09:11.480 --> 0:09:14.160 Right in, the Chinese clearly clamped down on this, And 0:09:14.200 --> 0:09:16.000 I think we're just living in the world that looks 0:09:16.080 --> 0:09:19.800 quite different from from the world that you know existed 0:09:19.840 --> 0:09:23.240 before COVID, because you know, China is on number one 0:09:23.400 --> 0:09:26.880 too political rival, there's no doubt about that. And you're 0:09:26.880 --> 0:09:31.200 looking at the zero COVID policies causing you know, lots 0:09:31.200 --> 0:09:34.559 of issues politically, and you know, the staw, the protests, 0:09:34.559 --> 0:09:36.640 the markets up a little bit. I guess people are 0:09:36.640 --> 0:09:39.880 more optimistic, but still um. You know, you look at 0:09:40.000 --> 0:09:42.800 at the policy response and it seems to me that 0:09:43.360 --> 0:09:46.360 they are. There's an element of political obsession, you know, 0:09:46.400 --> 0:09:50.000 with zero COVID policy, of course, but there's also maybe 0:09:50.000 --> 0:09:53.040 an element of the fact that China has to flatten 0:09:53.080 --> 0:09:57.120 the curve more than we had to do, right, because 0:09:57.200 --> 0:10:00.920 the vaccination rates aren't very good, especially among people, and 0:10:00.960 --> 0:10:04.880 maybe the hospital capacity and the medical system isn't as 0:10:04.920 --> 0:10:09.560 good as as they make us believe, right, So that's 0:10:09.559 --> 0:10:12.000 going going to continue a thing. Can you help us 0:10:12.080 --> 0:10:18.280 understand why j and ping Um continues to stick to 0:10:18.320 --> 0:10:22.440 this COVID zero policy. Why not you know, mass vaccinations. 0:10:22.480 --> 0:10:25.400 They have the supply chains to make stuff, right, they 0:10:25.440 --> 0:10:29.240 have the authority to order people to take stuff. Why 0:10:29.280 --> 0:10:32.520 not deal with it that way rather than this way. 0:10:32.920 --> 0:10:34.520 I mean they have done to certain extent, right, So 0:10:34.600 --> 0:10:37.600 you have about ninety ciment population is vaccine it twice 0:10:38.120 --> 0:10:41.360 the lowest vaccination rates are among people over eighty, which 0:10:41.400 --> 0:10:44.240 is very concerning. I think they're old enough to remember 0:10:45.160 --> 0:10:47.760 the good old base and they don't trust the government. Uh. 0:10:47.800 --> 0:10:50.960 And and you have the vaccine is you know, far 0:10:51.080 --> 0:10:54.800 less effective than than than MR and A technology. It's 0:10:54.840 --> 0:10:57.360 not style vaccine. Um. And I think you have the 0:10:57.559 --> 0:10:59.960 I mean, you can't really trust the numbers are China, right, 0:11:00.000 --> 0:11:02.920 I mean, I do not believe that the hospital capacity 0:11:03.120 --> 0:11:05.040 is as good as they claim it would be. And 0:11:05.080 --> 0:11:07.680 if they have a major outbreak with the with the 0:11:07.720 --> 0:11:11.880 more you infectious variants, um, you know, one to two 0:11:11.920 --> 0:11:14.600 million people would die and would make the leadership look 0:11:14.679 --> 0:11:17.040 really bad, right, And I think that's why they're not 0:11:17.160 --> 0:11:19.600 doing it. They're they're easing us a little bit. I 0:11:19.600 --> 0:11:22.760 think they're walking this fine line between you know, protests 0:11:22.800 --> 0:11:26.880 and and and people you know, sense of complaining and 0:11:26.880 --> 0:11:29.920 and and all that. But it's the old flatan in 0:11:29.960 --> 0:11:32.680 the curve that you're going to get it right eventually. 0:11:33.520 --> 0:11:35.480 So over the long haul, you're gonna get it. Yeah, 0:11:35.480 --> 0:11:37.280 of course. Well look Miracle said that right at the 0:11:37.360 --> 0:11:39.880 very beginning of the pandemic before when we all thought 0:11:39.920 --> 0:11:43.240 it was crazy. She said, I think sixty people are 0:11:43.240 --> 0:11:45.360 going to end up getting COVID and we thought this 0:11:45.440 --> 0:11:50.120 is in March of that's nuts. And she turned out there. So, Hans, 0:11:50.280 --> 0:11:53.400 how do you we we've all recognized that the Chinese 0:11:53.400 --> 0:11:56.400 governments in a very difficult position here. How do you 0:11:56.440 --> 0:12:01.600 actually think this ultimately plays out? It's hard to say. 0:12:01.400 --> 0:12:05.360 I think we have to understand that China is this 0:12:05.600 --> 0:12:10.200 ultimate surveillance state, right and with enormous powers, right, and 0:12:10.240 --> 0:12:13.120 so drawing any parallels from the past, I think it 0:12:13.200 --> 0:12:15.920 is very dangerous because that's just that's just not how 0:12:16.000 --> 0:12:20.000 it was. Right. You might have protests, but the degree 0:12:20.040 --> 0:12:23.360 to which China is monitoring its population, you know, through 0:12:23.400 --> 0:12:27.160 the phones and through cameras and all this stuff, makes 0:12:27.160 --> 0:12:31.079 it pretty very effective at putting any kind of protests down. 0:12:31.160 --> 0:12:34.599 And I think, you know, you the models we've me 0:12:34.679 --> 0:12:36.720 have used in the past, and you know, in terms 0:12:36.720 --> 0:12:38.959 of like German square and even Hong Kong and to 0:12:39.080 --> 0:12:41.839 US nineteen may not apply, I think that will be 0:12:41.960 --> 0:12:48.079 quite successful in keeping the population under control. It's very interesting, indeed, 0:12:48.160 --> 0:12:51.360 what do you think in terms of you know, Apple, 0:12:51.480 --> 0:12:57.079 for example, is now UM accelerating its quest to produce 0:12:57.160 --> 0:13:01.240 more iPhones elsewhere UM. A lot of companies have, as 0:13:01.280 --> 0:13:04.360 you know at Mitchell Madison UM looked for ways to 0:13:04.640 --> 0:13:08.560 untangle themselves from the Chinese supply chain web. Is that 0:13:08.559 --> 0:13:10.800 going to happen or are we gonna all chill out 0:13:10.840 --> 0:13:14.000 and they're gonna keep making all this stuff by well, 0:13:14.040 --> 0:13:16.040 I certainly hope not right. I mean, I think you've 0:13:16.080 --> 0:13:18.680 seen some some elements of this. You saw you guys 0:13:18.720 --> 0:13:22.360 reported that Mexico had the absolute largest monthly export to 0:13:22.360 --> 0:13:25.560 the United States and there were some pretty sophisticated you know, 0:13:25.600 --> 0:13:29.040 product automotive parts and so forth. I think it's happening. 0:13:29.160 --> 0:13:32.240 The private sector as usual will drive this shift away 0:13:32.240 --> 0:13:33.920 from China. This is not going to be a top 0:13:34.000 --> 0:13:38.839 down thing, um, And I think there's alternatives, right, Obviously, 0:13:38.880 --> 0:13:41.640 there's huge capital investment in the country that have to 0:13:41.640 --> 0:13:44.800 be replicated. I think, you know, Taiwan was probably the 0:13:44.840 --> 0:13:47.840 most dangerous situation that from the private sector of perspective 0:13:47.880 --> 0:13:50.440 that could happen. What a dangerous for both parties. I 0:13:50.480 --> 0:13:53.400 think people will be hopefully be be cool about it, right, 0:13:53.400 --> 0:13:57.080 cool aheads. But I think the private sector has taken 0:13:57.160 --> 0:14:02.240 lead on this, and the name of the game is diversification. Diversisification, diversification. 0:14:02.320 --> 0:14:06.000 You cannot relye when this thing that's even Apple like 0:14:06.120 --> 0:14:10.040 the most sophisticated supply Cheam company on the in the 0:14:10.080 --> 0:14:13.520 history of humanity, you got hit pretty hard, right, Yea, 0:14:13.559 --> 0:14:17.520 it's a it's an extraordinary situation, seemingly fluid changing by 0:14:17.600 --> 0:14:20.280 the day there in China, with as you mentioned, Hans, 0:14:20.320 --> 0:14:24.400 this broad broad implications for the global economy, hansdo CEO 0:14:24.600 --> 0:14:27.080 of Weight, Hans Dow. Where did you study? Which university 0:14:27.080 --> 0:14:30.880 in Germany? You know? I think I studied in Mannheim, 0:14:30.960 --> 0:14:33.600 which sounded a little bit like Michigan. Maybe that's that's 0:14:33.640 --> 0:14:36.880 what happened. Oh, that's like a Weinheimer. That's like an 0:14:37.280 --> 0:14:41.040 engineering school. Right, it's a cool place, you know. Yeah. 0:14:41.160 --> 0:14:45.920 I love Monheim and we use their used car indexes. 0:14:46.080 --> 0:14:49.760 Oh we do. That's right, good stuff, all right, exactly. 0:14:52.880 --> 0:14:54.760 We're gonna round table a little bit right now. Our 0:14:54.800 --> 0:14:58.720 topic is going to be this railroad potential strike that's 0:14:58.760 --> 0:15:00.320 out there. I've got a couple of weeks kind of 0:15:00.360 --> 0:15:02.080 deal with that. Now, I would have big implications for 0:15:02.080 --> 0:15:03.880 this economy. So we need to get a couple of 0:15:03.880 --> 0:15:08.120 smart people on here. Bloomberg Intelligence Senior Transportation analyst Lead 0:15:08.120 --> 0:15:10.520 class now who joins us on the phone, and Jody 0:15:10.560 --> 0:15:12.760 Schneider here on O Bloomberg inter actor Broker Studio. She's 0:15:12.800 --> 0:15:15.600 a political news director for Bloomberg TV and Radio. So 0:15:15.880 --> 0:15:18.040 let's start with you. I'd love to get a sense 0:15:18.040 --> 0:15:21.240 of what you're hearing from the big railroad companies that 0:15:21.320 --> 0:15:24.400 you talked to. What are they saying here, Hey, Paul, 0:15:24.480 --> 0:15:26.520 thanks for having me. Um. You know, I think that 0:15:26.640 --> 0:15:30.320 you know, I think they remain relatively optimistic that that 0:15:30.360 --> 0:15:35.800 our agreement can can come before the December ninth deadline. Obviously, 0:15:35.880 --> 0:15:38.800 the closer you get to that deadline, the rails will 0:15:38.880 --> 0:15:43.080 have to start shutting down their networks to ensure that um, 0:15:43.120 --> 0:15:45.440 you know, fraid it's not going to get lost in 0:15:45.520 --> 0:15:48.600 the system. Uh and also to make sure that their 0:15:48.600 --> 0:15:53.080 employees are home, um, you know when when the strike happens. Um, 0:15:53.160 --> 0:15:55.320 So you know, you could see a disruption before the 0:15:55.400 --> 0:15:59.040 December and ninth deadline. Uh, as as we get closer 0:15:59.080 --> 0:16:02.440 to that deadline. If in fact, um, you know, the companies, 0:16:02.520 --> 0:16:04.760 the railroads feel that they can't get to an agreement. 0:16:04.960 --> 0:16:08.280 But but obviously noise out of Washington looks like, you know, 0:16:08.320 --> 0:16:12.320 the federal government, the administration and Congress is working pretty 0:16:12.320 --> 0:16:14.520 hard to make sure that doesn't happen. Just because of 0:16:14.560 --> 0:16:17.480 the you know, the impact the economy which the American 0:16:17.520 --> 0:16:21.360 trucking or is to start the Association of American Railroads 0:16:21.360 --> 0:16:24.040 are putting out around two billion dollars a day. Are 0:16:24.120 --> 0:16:26.680 we still looking at the same problems we were back 0:16:26.720 --> 0:16:32.880 in August September, where you know, railroad employees can't get 0:16:32.880 --> 0:16:35.880 a day off to go to the doctor, or where 0:16:35.920 --> 0:16:39.280 you know one woman or man is in charge of 0:16:39.400 --> 0:16:43.640 an entire freight train along a route. Yeah, you know, 0:16:43.760 --> 0:16:46.240 it's it's really not about pay. Uh, you know, the 0:16:47.520 --> 0:16:50.240 pay aspect, they're getting a pretty nice bump. They're getting 0:16:51.920 --> 0:16:56.560 raises over a four or four or five year period. Um. 0:16:56.800 --> 0:16:59.480 It's really about to your point to work rules. You know, 0:16:59.600 --> 0:17:03.479 how easy or difficult is it for a rail employee 0:17:03.520 --> 0:17:05.840 to you know, call and sick to go to a 0:17:05.920 --> 0:17:08.640 doctor's appointment? You know, are they going to be penalized 0:17:08.760 --> 0:17:11.120 for that? You know, there's about thirteen groups that are 0:17:11.160 --> 0:17:16.080 negotiating as part of this National Railway Railway Labor Conference. 0:17:16.600 --> 0:17:20.960 Four of them have not ratified the agreement. The others, uh, 0:17:21.280 --> 0:17:24.960 seven have ratified the agreement. Um. And so it's really 0:17:24.960 --> 0:17:29.520 those those score holdouts that could really snag things up. Now, 0:17:30.200 --> 0:17:32.040 what's what's the problem here on the side of the 0:17:32.119 --> 0:17:36.520 railroad operators. I mean, why not give your employees um 0:17:36.800 --> 0:17:39.960 days off to deal with healthcare issues. I mean, you 0:17:39.960 --> 0:17:44.840 wouldn't insist that a locomotive work every day. If it's 0:17:44.880 --> 0:17:48.480 broken down, you're not gonna put it in service, right right. 0:17:48.560 --> 0:17:51.680 And I'm not definitely here to defend the railroads any 0:17:51.720 --> 0:17:55.160 stretch of imagination, but you know, this is something that's 0:17:55.200 --> 0:17:59.600 typically negotiated at the local level. That's what the rails 0:17:59.600 --> 0:18:02.400 are saying. So they're not necessarily saying that we're mean 0:18:02.440 --> 0:18:05.040 and we don't want our employees to take off. We're 0:18:05.040 --> 0:18:07.359 saying that this is typically dealt at the local level, 0:18:07.359 --> 0:18:10.119 and that's where it should be a negotiated opposed to 0:18:10.160 --> 0:18:16.080 this national broad contract for all the railroads. Um, you know. 0:18:16.560 --> 0:18:20.600 And the problem also becomes, you know a lot of 0:18:20.680 --> 0:18:24.480 railroads are operating a lot more efficiently because they've implemented 0:18:24.520 --> 0:18:28.280 precision scheduling railroading, which is pretty much six stigma for 0:18:28.400 --> 0:18:31.679 the rail industry. Uh. And you know they're trying to 0:18:31.720 --> 0:18:34.520 operate lean and mean, and you know, when if if if, 0:18:34.680 --> 0:18:37.840 if you're scheduled to work and someone's calling out, that 0:18:38.240 --> 0:18:41.240 put a wrench in the whole system. Uh. But the 0:18:41.320 --> 0:18:43.960 rails need to probably realize, well, maybe we need to 0:18:44.080 --> 0:18:47.840 resource our systems a little more. Uh. And you know, 0:18:47.880 --> 0:18:51.119 if that's going to cost tend basis in operating ratio, 0:18:52.000 --> 0:18:54.080 so be it. But you know, that's that's an argument 0:18:54.160 --> 0:18:57.160 that the railroads will have to have, uh, not only 0:18:57.320 --> 0:19:01.160 you know, discussion with the unions, but also discussions with 0:19:01.240 --> 0:19:05.159 the shareholder as well, because you know, because rail investors 0:19:05.160 --> 0:19:10.199 are probably myopically focused on the operating ratio, which is 0:19:10.200 --> 0:19:13.639 an inverse of an EVA margin, So lower the better. Hey, Jody, 0:19:13.720 --> 0:19:17.200 want to bring you in here. What can this administration do? 0:19:17.320 --> 0:19:19.119 What should they do? What do you think they can 0:19:19.119 --> 0:19:22.520 get done? Well? President Biden says, now he was going 0:19:22.560 --> 0:19:25.920 to go to Congress. Uh, and yesterday in his statement 0:19:26.200 --> 0:19:31.480 expressing concern about this potential strike now that it's coming closer, 0:19:31.960 --> 0:19:36.119 that he said lawmakers should immediately codify the agreement that 0:19:36.280 --> 0:19:38.919 he helped of course broker in September between the unions 0:19:38.920 --> 0:19:41.720 and the railroads. Uh. It looks like then the House 0:19:41.760 --> 0:19:45.880 they're getting ready to do that, outgoing Speaker Nancy Pelosi, 0:19:46.160 --> 0:19:48.639 so she will move to do that to codify that 0:19:48.760 --> 0:19:51.800 this week. The Senate is a little trickier because they 0:19:51.800 --> 0:19:54.000 have other things on the agenda, and the Senate always 0:19:54.040 --> 0:19:57.400 takes longer to do things. Things like the intervening day 0:19:58.160 --> 0:20:01.800 pop up, so it's unclear whether that will happen. There 0:20:01.840 --> 0:20:04.080 By the way Congress has acted, we went and looked. 0:20:04.320 --> 0:20:09.119 They've acted eighteen times to prevent strikes. Um. They but 0:20:09.280 --> 0:20:13.000 the last time they did this was so Um, it's 0:20:13.000 --> 0:20:16.640 been a while. You could say that again. Yes, it's 0:20:16.680 --> 0:20:21.240 been twenty six years, eight years. Um. So hey, while 0:20:21.240 --> 0:20:22.919 we have you here, Jody, when are we gonna know 0:20:23.000 --> 0:20:27.160 the full composition of the Senate? Yeah? So next Tuesday 0:20:27.200 --> 0:20:30.520 we have a big runoff between Herchel Walker and the 0:20:30.520 --> 0:20:34.760 Republican side and sitting Senator Raphael Warnock on the Democratic side. 0:20:35.359 --> 0:20:38.960 Early voting has been a record in that so a 0:20:39.040 --> 0:20:41.200 lot of people have already gotten out there. Uh, it's 0:20:41.200 --> 0:20:43.680 still polls and there are a ton of polls, but 0:20:43.720 --> 0:20:46.120 the polls are showing them pretty neck and neck. Uh. 0:20:46.160 --> 0:20:48.920 It won't determine obviously, the majority in the Senate, because 0:20:48.920 --> 0:20:52.719 we already knew that. Um, the Democrats have picked that up. 0:20:52.960 --> 0:20:54.560 But it will give them a little bit of breathing 0:20:54.640 --> 0:20:57.560 room the Democrats if they do win that seat. And 0:20:57.920 --> 0:21:00.439 so it looks neck and neck. Lots of you know 0:21:00.600 --> 0:21:03.720 issues there, And of course herschel Walker was somebody who 0:21:03.800 --> 0:21:07.960 Donald Trump had supported. Brian Kemp, the governor who just 0:21:08.040 --> 0:21:12.080 was reelected, is now supporting uh Walker. He hadn't done 0:21:12.080 --> 0:21:14.280 a whole lot for him in the general campaign, but 0:21:14.440 --> 0:21:17.359 is now appearing on the stage with him. Interesting fact 0:21:17.400 --> 0:21:21.879 and another fun fact here, two hundred thousand voters voted 0:21:21.920 --> 0:21:25.520 for Kemp who did not vote for Walker in the 0:21:25.600 --> 0:21:28.320 general election. So the question is are they are those 0:21:28.320 --> 0:21:30.760 people likely to show up or some who voted for 0:21:30.840 --> 0:21:32.600 him likely to show up. It's all going to be 0:21:32.640 --> 0:21:35.399 about turn out, all right, Jody, great stuff, Thanks so 0:21:35.480 --> 0:21:37.159 much for joining us here in our Bloomberg and Director 0:21:37.200 --> 0:21:41.320 Broker studio, Lee Glasgow. He's a senior transportation analyst focusing 0:21:41.320 --> 0:21:43.480 on the rails and the trucks and all that logistics stuff, 0:21:43.520 --> 0:21:46.639 so certainly the perfect guy to get on the phone 0:21:46.680 --> 0:21:49.359 here and talk to us about what could be a 0:21:49.520 --> 0:21:54.160 strike for the nation's railroads beginning December ninth. So that's 0:21:54.160 --> 0:21:56.359