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Speaker 1: Brunt You by Bank of America Mary Lynch with virtual reality,

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Speaker 1: virtually everything will change. Discover opportunities in a transforming world

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Speaker 1: be of a, mL dot Com, slash VR, Mary Lynch,

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Speaker 1: Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best of economics, finance, investment and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course, on the Bloomberg Nicholas Burns with us.

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Speaker 1: Who needs no introduction on the program, David, Why don't

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Speaker 1: you bring him Mr Burns? Since we spent the entire

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Speaker 1: break talking about how the Red Sox did assigned Aaron

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Speaker 1: Judge Ruthian. Are we talking about the election last week

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Speaker 1: in the UK and in economic context a few minutes ago?

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Speaker 1: Help us understand it in a in a political one.

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Speaker 1: How does this change the amount of capital that the

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Speaker 1: Prime Minister has? How optimistic are you? How likely is

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Speaker 1: it do you think that she's going to be able

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Speaker 1: to hold onto the to the job well, David, Prime

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Speaker 1: Minister tourism is significantly weakened by this this now, she

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Speaker 1: she didn't lose the election. Technically the Conservatives are still

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Speaker 1: in power, probably with a minority party from Northern Ireland

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Speaker 1: Democratic Union Party. But she didn't exceed, she didn't meet

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Speaker 1: the expectations. Labor won many, many more seats, and so

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Speaker 1: you have to ask is she going to be prime

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Speaker 1: minister a year from now? Next week the United Kingdom

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Speaker 1: begins it's Brexit negotiations with the European Union. This is

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Speaker 1: gonna be very tough because now all the weight, the

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Speaker 1: leverage has shifted over to the EU, and there's widespread

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Speaker 1: speculation that at some point the next several months she

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Speaker 1: could be out of power. Someone like Boris Johnson, the

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Speaker 1: Foreign Secretary could be in power. Um and the country

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Speaker 1: is still very much divided by Brexit. Need a clinic

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Speaker 1: right now. This is a mystery to me. Through the

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Speaker 1: weekend of a lot of different reading, and I understand

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Speaker 1: the UK newspaper cadence is very different from what I

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Speaker 1: see out of America. Ce E J. Dion's wonderful column

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Speaker 1: today in the Washington Post Boris Johnson is prime Minister?

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Speaker 1: How unimaginable is that to the British people? Well, you know,

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Speaker 1: as inimaginable as it was that Donald Trump would be

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Speaker 1: President of the United States. For the American people. Boris

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Speaker 1: Johnson is um unique in British politics to say the

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Speaker 1: least his personality. But he's experienced, highly intelligent, sophisticated about

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Speaker 1: the world. I think it's not unimaginable. I take your

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Speaker 1: point on he's highly intelligent. I get all that Gordon

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Speaker 1: Brown off the chart ete side and someone like you, Ambassador,

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Speaker 1: why why does he play the part? If he playss

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Speaker 1: if he has the cut of hot cloth to be

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Speaker 1: someone more conservative, right, it brings in votes and votes

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Speaker 1: as part of his political identity. Um. But Britain is

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Speaker 1: in I think trouble right now because you don't have

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Speaker 1: any kind of unified direction on the part of the

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Speaker 1: political class or the politicians as to what they should

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Speaker 1: be doing in these Brexit negotiations. And correspondingly, we were

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Speaker 1: talking um earlier on Bloomberg. If you had said a

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Speaker 1: month and a half ago that France would be stable,

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Speaker 1: that France would be strengthening, that France and Germany would

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Speaker 1: be re emerging as the twin engines of the EU.

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Speaker 1: Mat Kroll one another victory yesterday in the first round

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Speaker 1: of the French legislative parliamentary elections. He's set up to

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Speaker 1: win a complete victory next week. In the second round.

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Speaker 1: He'll go for a pension and labor and tax reform.

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Speaker 1: It'll be difficult, but you can see France and much

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Speaker 1: better ship in David. To give you perspective on that,

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Speaker 1: I was in France running up my m X and

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Speaker 1: it was really questionable what McCrow would do. Those expenses

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Speaker 1: haven't even cleared yet and mcross got the big victory.

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Speaker 1: I'm looking for the big victory to what does all

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Speaker 1: of that say about party what we've seen here in

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Speaker 1: the UK, what we're seeing in France as well. Of course,

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Speaker 1: he had his victory and there was uh interested enthusiasm

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Speaker 1: about that from from many corners. But there was also

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Speaker 1: a lot of doubt that he would be able to

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Speaker 1: field candidates in every district and he would be able

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Speaker 1: to assemble anything close to to a majority. How did

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Speaker 1: that happen and what does that say about parties generally? Well,

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Speaker 1: he's a uniquely gifted politician, much in the way that

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Speaker 1: Barack Obama took America by storm in the two thousand

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Speaker 1: and eight election. He has all the great skills and

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Speaker 1: the charisma to succeed publicly. I think the French are

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Speaker 1: also reacting to the prospect of Marine le Pen victory

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Speaker 1: the populist right wing leader to the dissolution of the

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Speaker 1: European Union. I think Americans don't fully understand the depth

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Speaker 1: of support among many Europeans for this European project that

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Speaker 1: they began just after the Second World War. And now

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Speaker 1: France strengthening, Germany strengthening this could be very good news

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Speaker 1: for the EU, in part fueled by insecurity about the

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Speaker 1: United States. For the first time in three narrations, there's

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Speaker 1: an American president who does not look upon Europe primarily

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Speaker 1: as a strategic partner. He looks upon Germany as an

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Speaker 1: economic competitor. He had a disastrous visit to Brussels three

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Speaker 1: weeks ago, and I think that is fueling in part

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Speaker 1: this belief in Europe. We've got to get our act together.

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Speaker 1: We have to strengthen the European Union. These are the

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Speaker 1: two countries France and Germany to do it. The great

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Speaker 1: tragedy is that their second leading economy, their largest military,

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Speaker 1: will soon be out Britain, and Britain itself is searching

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Speaker 1: for an identity as it leads the European Union. Do

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Speaker 1: you think that he thinks that he had a disastrous

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Speaker 1: visit to Brussels? And then how do you you remedy

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Speaker 1: that you look ahead to the G twenty in Hamburg,

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Speaker 1: And we've read all of the reporting about what transpired

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Speaker 1: in the dinner with leaders following the speech that he

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Speaker 1: gave in Brussels. If if we have a leader who

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Speaker 1: is convinced that the way that he spoke, what he

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Speaker 1: addressed in Brussels was better than fine, how does that

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Speaker 1: how does that change the political geopolitical landscape. Well, here's

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Speaker 1: the I think here's the problem of the effectiveness and

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Speaker 1: unity of the Trump administration. I think the President probably

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Speaker 1: feels he had a good visit because he said what

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Speaker 1: he's been saying as a politician for the last two

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Speaker 1: years about the EU. They're freeloaders, they don't pay their dues, etcetera.

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Speaker 1: The White House staff, the cabinet know what a disaster

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Speaker 1: it was. This is our principal defense alliance in the world, NATO,

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Speaker 1: and the core of it is an attack on one

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Speaker 1: of us is an attack on all of us. The

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Speaker 1: President's refusal to say those words, although he now said

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Speaker 1: them Friday Um shocked the American political establishment, shocked his

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Speaker 1: own administration because Secretary Teller student Secretary Maddis had every

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Speaker 1: reason to believe that those words were in the speech

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Speaker 1: until an hour before he gave it. And and the

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Speaker 1: fact that Donald Trump, in addition, is not standing up

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Speaker 1: to Russian interference in our election. It's got a lot

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Speaker 1: of people worried about how he views his job of

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Speaker 1: protecting this country. On that note, that was a through

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Speaker 1: line throughout James Combe's testimony last Thursday. Essentially he said,

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Speaker 1: we can't lose sight of the bigger picture here. Yes,

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Speaker 1: there's a there's a debate over two principles in a

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Speaker 1: room and what they said to each other, but there

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Speaker 1: there is the threat of further intervention and elections and

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Speaker 1: other events by the Russians. How do we How seriously

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Speaker 1: are we taking that? Do you think as a country?

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Speaker 1: You know, it's interesting. I thought that was the most

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Speaker 1: effective part of Director Comy's testimony, when he said, with

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Speaker 1: great confidence that they intervened in our election. Russia, they

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Speaker 1: intervened in a massive way. We've got to guard against

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Speaker 1: it. It It was a patriotic message, I thought, and you're

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Speaker 1: seeing this week a sanctions bill against Russia. You will

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Speaker 1: be debated on the Senate floor today led by by

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Speaker 1: by John McCain and others. This is the right response.

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Speaker 1: The Russians are a threat to us. The fact that

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Speaker 1: the President never asked James Comey about the nature of

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Speaker 1: the Russian intervention, never asked him what do we do

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Speaker 1: about this? All the questions and the President James Comey

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Speaker 1: were how does this affect me? Donald Trump? And I

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Speaker 1: think you're seeing a reaction in the Republican Party, Republican

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Speaker 1: leaders standing up to say we've got to do something

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Speaker 1: to hit back against the Russians with sanctions and to

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Speaker 1: prepare ourselves to defend ourselves the next time we have

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Speaker 1: an election. Ambassador, what is your tool list to do

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Speaker 1: list for the Secretary who state he is a chief

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Speaker 1: executive officer? Are the true multinational one of our great companies?

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Speaker 1: Whatever anybody thinks about it, all, etcetera, etcetera. What is

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Speaker 1: your prescription for Secretary Tillers? And you know, I think

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Speaker 1: he's got he needs to rebind our alliance with NATO

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Speaker 1: and and and knitted up again. After after all the

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Speaker 1: uncontaty about Article five number one. Number two, there's an

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Speaker 1: assault on Roca now by American and Syrian forces. There's

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Speaker 1: an assault on Mosul. This is a big movement to

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Speaker 1: to move to force the Islamic State out of both

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Speaker 1: Syria and Iraq. And he's the one who has to

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Speaker 1: keep that coalition together. And you see him trying to

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Speaker 1: do that in settling and diminishing the tensions between Gutter

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Speaker 1: and Saudi Arabia. He also has to balance the fact

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Speaker 1: that we're a partner with China economically in some respects,

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Speaker 1: but we're a competitor and the Chinese are running amuck

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Speaker 1: in the South China. See, this is a tough job.

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Speaker 1: I hope that's kept us be happy with that. Yeah,

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Speaker 1: but come on, isn't the toughest job. He's got to

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Speaker 1: have a cup of coffee at the White House. The

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Speaker 1: toughest problem is that he is not being backed up

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Speaker 1: by the President of the United States a key moments.

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Speaker 1: That's the toughest part of his job, the greatest. Thank

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Speaker 1: you very much for Nicholas Burns, a professor to practice

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Speaker 1: that come back when the Yankees lose, I surely will

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Speaker 1: always Yes, David, it was extraordinary. I actually watched the

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Speaker 1: entire Saturday game, just by chance. I haven't done in years.

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Speaker 1: Actually watched it like a fan at the park, except

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Speaker 1: I watched on the famous TV. And it's just it's

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Speaker 1: just funny. You could be the greatest Yankee hater of

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Speaker 1: all time. That would be me. And they're just glorious

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Speaker 1: to watch. I imagine you were up late last night

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Speaker 1: as well. Hoy, No, it's no foregone. I have trouble

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Speaker 1: with the modern game. It's great, it's exciting. I'm glad

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Speaker 1: they play. I just make gold like you gotta write

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Speaker 1: a column, Bloomberge column on the MO. I just I'm

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Speaker 1: all judge. I got my ninety nine jersey on underneath.

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Speaker 1: That's true. I can verify the judge worldwide. This is

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Speaker 1: Bloomberg Robert Sinch, who's good to have on because he's

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Speaker 1: been so right about Sterling. It was weak. He said,

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Speaker 1: get along. He was right a while back, he said,

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Speaker 1: get short. Here we are on, Bob. I need to

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Speaker 1: make some money off the weekend. I lost a lot

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Speaker 1: of money betting against the Yankees. Uh, what do I

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Speaker 1: do with Sterling? You know, I think there's still some

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Speaker 1: downside for Sterling um in the short run. I think

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Speaker 1: we're probably in a trading range. We're moving to the

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Speaker 1: lower end of that range, as you suggested, and I

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Speaker 1: think the next leg will have to be a stronger dollar,

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Speaker 1: and we do think we're going to get that as

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Speaker 1: the year progresses, as as markets are probably underestimating what

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Speaker 1: the Fed is going to do. By your end, where

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Speaker 1: do you stand on this whole argument about Briggs that

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Speaker 1: a lot of people who were proponents of it say, look,

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Speaker 1: we had it and the economy hasn't suffered that dramatically

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Speaker 1: sterling sterling aside, there were those who were against it

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Speaker 1: who are worried about what's going to happen here as

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Speaker 1: we inch closer to June nineteen and still closer still

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Speaker 1: to to that deadline two years from now. Are you

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Speaker 1: sympathetic to that argument? You know? I think that that

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Speaker 1: this is one that's um getting a little beaten to

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Speaker 1: death UM excessive focus on something that goes into effect

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Speaker 1: two years from now. UM. But certainly it keeps the

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Speaker 1: dialogue going. Look, this is a long, UM, probably arduous negotiation. UM.

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Speaker 1: When when we when we reached the conclusion, my view

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Speaker 1: continues to be that the Europeans have as much to

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Speaker 1: lose as the bridge to do in this Brexit process.

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Speaker 1: If you look at Eurozone exports, UM, the US and

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Speaker 1: the UK are right up there at the top, almost

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Speaker 1: equal in terms of the amount of exports from the

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Speaker 1: from the EU. So they don't really want to see

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Speaker 1: a hard Brexit and a lack of trade going forward.

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Speaker 1: So I think the rhetoric will be tough, but these

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Speaker 1: are negotiations. They'll be long negotiations, um. And I don't

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Speaker 1: think we're going to learn very much over the next month,

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Speaker 1: three months, six months, except the fact that that that

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Speaker 1: Prime Minister make kind of overstepped, overreached, and uh, I

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Speaker 1: think this this moves us towards um, you know, sort

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Speaker 1: of more of more balanced negotiations going forward. We're in

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Speaker 1: a six percent dollar bear market off the Bloomberg Dollar Index.

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Speaker 1: That's since the beginning of the year. We're in a

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Speaker 1: four percent four point seven dollar beer market going back

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Speaker 1: to the beginning of the year prior. There's a theme here,

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Speaker 1: Bob sin Well, we'll turn dollar around. It just simply

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Speaker 1: underestimating Janet yellow and rating increases. Yeah, I think that's

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Speaker 1: a significant part of it. I also think that you know,

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Speaker 1: we came into this year with the market very build

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Speaker 1: up on the dollar, and we had long positions in

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Speaker 1: the dollar against the whole variety of currencies based on

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Speaker 1: expectations of what the FED would do this year UM

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Speaker 1: and of course markets tend to sense out those those

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Speaker 1: positions that are most extreme, and certainly if you look

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Speaker 1: at some of the hedge fund returns this year, they

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Speaker 1: would suggest that, in fact, a lot of funds got

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Speaker 1: this dollar position wrong. However, we've now against a number

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Speaker 1: of currencies shifted the opposite way, and we're seeing very

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Speaker 1: large long positions in the in the Euro reported by

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Speaker 1: the CFTC. I would also note big long positions now

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Speaker 1: in the Mexican Paco of all currencies. So I think

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Speaker 1: what we had was excessive long positions. The economy gave

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Speaker 1: us another soft first quarter. UM Uncertainties have developed about

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Speaker 1: what the FED is going to do after this June meeting,

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Speaker 1: and so we've unwound a lot of those positions, and

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Speaker 1: that that has brought the dollar lower. I think from

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Speaker 1: this from these levels, we now have the market pretty

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Speaker 1: negative on the dollar, positioning built up short the dollar,

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Speaker 1: and I think, you know, another FED rate hike by

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Speaker 1: the end of the year without much action in the

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Speaker 1: rest of the world. I think we're going to see

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Speaker 1: the dollar higher, David, I note that robertson just driving

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Speaker 1: sterling lower one getting right near the weakness of June ninth, Friday.

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Speaker 1: We'll come back with Bob, since you're in just a

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Speaker 1: moment to talk a bit about dollar Mexico. Let me

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Speaker 1: ask you quickly before we go to break here, though, Bob,

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Speaker 1: about the yen. In light of the b o J

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Speaker 1: meeting later this week. We got the FED first and

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Speaker 1: then the BOJ meeting on the fifteen six. Are you

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Speaker 1: expecting any sort of surprise out of that meeting this week? No,

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Speaker 1: I don't think so. I mean, I think the the

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Speaker 1: the only surprise you might see out of the b

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Speaker 1: o J is them beginning to admit that this annotative

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Speaker 1: easing thing, um, it just can't continue forever um. But

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Speaker 1: I don't think that the yen is going to allow

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Speaker 1: them that flexibility right now. I think they'd like to

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Speaker 1: back away a little bit uh from continuing to add

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Speaker 1: to their balance sheet and liquidity, But unfortunately, with the

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Speaker 1: end strengthening, it's not a good time to do that.

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Speaker 1: Robert Sinch with us, the Amber's Pierrepont too many things

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Speaker 1: to speak about with Bob Sinch. Bob, what is the

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Speaker 1: decision tree for chair yelling at the press conference to

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Speaker 1: indicate what she's gonna do in the future. Is she

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Speaker 1: gonna say, well, there's slack in the economy which was

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Speaker 1: three years ago, or is it looking for Vice Chairman

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Speaker 1: Fisher's alter accommodative shift. What's what's gonna be the buzz

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Speaker 1: if you will, that she's gonna frame at the press

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Speaker 1: conference to describe the next year. Well, I think the

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Speaker 1: biggest difficulty she faces is reconciling the labor market data,

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Speaker 1: which the FED even admits, even even the most dubbish

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Speaker 1: members of the board, I admit the labor market is

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Speaker 1: probably operating at at at full employment with still soft wages,

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Speaker 1: and now this recent weakening of the inflation rate, which

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Speaker 1: really kind of upsets I think the Fed's plan about

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Speaker 1: where they're headed. Um, we've had some some funky numbers

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Speaker 1: and a couple of categories in the technology area that

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Speaker 1: have kind of messed up the readings that all of

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Speaker 1: a sudden popped up out of nowhere. But I think

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Speaker 1: that's the that's the the issues that that Mike McKee

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Speaker 1: is going to bring up to her is is how

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Speaker 1: do you reconcile the reported inflation and wage numbers with

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Speaker 1: this very strong growth and employment. Now, I think the

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Speaker 1: way to reconcile it is the growth and employment has

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Speaker 1: been for the most part in some some lower wage industries,

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Speaker 1: and so the way are our wage data works, it's

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Speaker 1: a it's a weighted average of who's working in what

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Speaker 1: jobs and what they get paid. And I think that's

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Speaker 1: been biasing down a little bit um wage pressures, but nonetheless,

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Speaker 1: um the inflation numbers themselves really create a difficult environment

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Speaker 1: for the Fed, and I think she'll fall back on normalization.

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Speaker 1: We need to normalize policy. Something that that Steve Stanley

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Speaker 1: and I've been talking about a long a long time ago,

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Speaker 1: is that what this kind of labor market and this

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Speaker 1: kind of growth in the economy, why should the Fed

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Speaker 1: funds the real Fed funds rate still be negative. And

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Speaker 1: I think that's, uh, that's kind of the thought process

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Speaker 1: as to why they want to bring the real Fed

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Speaker 1: funds rate to neutral, which I think probably gets them

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Speaker 1: to to somewhere around one and a half percent at

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Speaker 1: this point. What stands in the way of her doing that?

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Speaker 1: What could derail that that plan inflation inflation inflation? You know,

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Speaker 1: I mean, I think there's sort of there are two

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Speaker 1: schools of thought and thinking about what the Fed needs

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Speaker 1: to do. Um, there's the school that I belong to,

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Speaker 1: which is we need to normalize policies. I said, bring

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Speaker 1: the real Fed funds rate back to neutral, and you know,

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Speaker 1: I'd say that we would have to argue that whatever

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Speaker 1: measure of inflation you're looking at, it's at least one

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Speaker 1: and a half percent. Uh. And those who are arguing,

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Speaker 1: why do you hike rades? Why do you tighten policy?

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Speaker 1: What inflation is so low and not showing signs of acceleration,

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Speaker 1: And one of them is an argument based on sort

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Speaker 1: of the rate of change, what do we need to

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Speaker 1: do to change policy because of inflation? And the other

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Speaker 1: one is to say, let's get policy back to a

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Speaker 1: normalized level after this ten years of crisis, and that

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Speaker 1: does require having a different level of the Fed funds rates,

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Speaker 1: So it's kind of a rate of change argument versus

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Speaker 1: a level argument. Let's talk a bit about dollar Mexico here.

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Speaker 1: You've written about that in a in a recent note, Bob,

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Speaker 1: and I'm looking at it here and where at levels

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Speaker 1: we haven't been out since the election. Uh what what

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Speaker 1: accounts for that? How worried are you here about where

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Speaker 1: where dollar Mexico might be heading? Boy, you talk about

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Speaker 1: round trips post election and and and recently. Um, that

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Speaker 1: is one of the biggest round trips. Mexico was in

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Speaker 1: the in the Blueberg rankings of extended major currencies thirty

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Speaker 1: one currencies. The Mexican peso was ranked thirty at thirty

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Speaker 1: one in the second half of last year and first

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Speaker 1: year to date this year, complete round trip. Um. Look,

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Speaker 1: I think it's a it's it's a microcosm of the

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Speaker 1: dollar story in general. Uh. We we had a very

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Speaker 1: large short position in the pace, so long position of

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Speaker 1: the dollar versus the pace. So at the end of

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Speaker 1: the year, after all, you're going to have fed tightening

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Speaker 1: that's probably bad for the pace. So you're going to

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Speaker 1: have a border wall, You're going to have renegotiation of NAFTA.

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Speaker 1: A lot of reasons for the market to be very

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Speaker 1: negative to pay. So we've heard a lot less rhetoric

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Speaker 1: about things like the wall and disagreements about NAFTA. Obviously,

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Speaker 1: a big adjustment in uh in expectations or some adjustment

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Speaker 1: and expectations about what the Fed will do, and those

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Speaker 1: big short positions in the pace SO have gotten squeezed.

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Speaker 1: What's kind of amazing to me now is we've gone

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Speaker 1: to the opposite extreme. We have a multi year high

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Speaker 1: in the long positions in the in the pace SO

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Speaker 1: and in the speculative community, at least according to the CFTC.

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Speaker 1: We have oil prices lower, which would normally be a

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Speaker 1: negative for the pay so. We have interest rate spreads.

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Speaker 1: You look at five year interest rate differential between the

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Speaker 1: US and Mexico, and the Mexican advantages started to come

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Speaker 1: down in the last couple of weeks. So I think

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Speaker 1: the market has gotten very complacent about dollar mex As

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Speaker 1: I said, it's been the best performing currency. A lot

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Speaker 1: of folks have probably lost a lot of money being

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Speaker 1: short to pay so this year. Um, but right when

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Speaker 1: the market gives up on a position like that, that's

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Speaker 1: when I think it's time to go the other direction.

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Speaker 1: And I think, I think as we look out over

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Speaker 1: the next three months, Uh, my favorite long dollar position

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Speaker 1: now is shifted from pound. At these levels, I still

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Speaker 1: like the dollar versus the pound, but I think our

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Speaker 1: favorite position would now be long the dollar versus the

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Speaker 1: Mexican pays. I look bother at this and I guess

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Speaker 1: I got to go back to Sterling with the news

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Speaker 1: flow we've got, Now, what does Prime Minister Johnson mean

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Speaker 1: for Sterling? Can you hazard to guess that? Or is

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00:21:02,720 --> 00:21:07,120
Speaker 1: that just so arbitrary and irresponsible I shouldn't even ask

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Speaker 1: the question. No, I mean I think that that Look,

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Speaker 1: you know, Boris Johnson has had a pretty um significant

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Speaker 1: rebound in terms of his political fortunes over the last

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Speaker 1: six to nine months, and you look around the world,

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Speaker 1: particularly places close to us around the world, he doesn't

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Speaker 1: seem that extreme anymore. So, Um, you know, I think

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Speaker 1: that's a that's a that's a potential outcome. It would

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Speaker 1: tilt the UK back towards more of a of a

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Speaker 1: harder line on the whole breggsit process. Um, you know,

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Speaker 1: I find I find this very interesting. Who would have

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Speaker 1: thought two weeks ago we'd be sitting here saying or

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Speaker 1: three weeks ago, oh, we're gonna have political certainty in

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Speaker 1: France with a with a party that didn't even exist

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Speaker 1: eighteen months ago, and we're going to have political uncertainty

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Speaker 1: in the UK. I mean, it just tells you how

401
00:21:57,400 --> 00:22:01,119
Speaker 1: how volatile these more these these politics fool environments are

402
00:22:01,400 --> 00:22:04,000
Speaker 1: um and you know, sort of good news for France,

403
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Speaker 1: I hope going forward, Bob, since thank you so much

404
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Speaker 1: for Amazon pierpoint this morning, as we walked through that

405
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Speaker 1: linkage of the Lippus paper, the global system of foreign

406
00:22:11,720 --> 00:22:16,359
Speaker 1: exchange market into yields yields higher risk on curve is

407
00:22:16,440 --> 00:22:18,640
Speaker 1: really not steep and all that much yet it has

408
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Speaker 1: but it's just just a teen sweens. Let's see if

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Speaker 1: a level four, David, but the two year yield one point.

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Speaker 1: I dutifully trotted out the lollipop chart, and I was

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Speaker 1: surprised I hadn't looked at it in a while. Day

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Speaker 1: it's like five weeks ago, and give it out to

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Speaker 1: select people. But anyways, the lollipop chart shows higher yields

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Speaker 1: and one point three four seven zero on the two

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Speaker 1: year is June is busting out all over And you

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Speaker 1: go on to the other means one of the one

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Speaker 1: of the let's let's before we do that on Bloomberg

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Speaker 1: June July September twenty. That's a long distance from July

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Speaker 1: to September twenty. So in that from June fourteen, there's

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Speaker 1: three jobs reports before September. So that that's pretty cool,

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Speaker 1: ninety two from Mr Edison and a host of others

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Speaker 1: established a company called General Electric with the modest exception

427
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Speaker 1: ge from most of those hundred in twenty five years.

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Speaker 1: He's a legend and industrial research on Wall Street with

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00:24:16,119 --> 00:24:20,440
Speaker 1: his vertical research partners. We welcome the tank commander Jeff Spray. Jeff,

431
00:24:20,440 --> 00:24:23,600
Speaker 1: good morning, Good morning, Tom, thank you very much. What

432
00:24:23,800 --> 00:24:30,760
Speaker 1: happened with Mr mL? Did he just simply overstay his welcome? Yeah? Tom.

433
00:24:30,760 --> 00:24:33,919
Speaker 1: I think the short answer here is, um, you know,

434
00:24:33,960 --> 00:24:37,800
Speaker 1: there was a lot of trials and tribulations with capital deployment,

435
00:24:37,840 --> 00:24:40,360
Speaker 1: and all of the Jeffs left, you know, a positive

436
00:24:40,400 --> 00:24:43,119
Speaker 1: mark on the company in many ways. Obviously the stock

437
00:24:43,160 --> 00:24:47,359
Speaker 1: has you know, lag very substantially over his tenure, and

438
00:24:47,440 --> 00:24:50,399
Speaker 1: I think the pressure finally built in the in the

439
00:24:50,440 --> 00:24:52,800
Speaker 1: board decided it was time to make a change. I

440
00:24:52,840 --> 00:24:55,560
Speaker 1: did the recovery from O nine as part of the

441
00:24:55,880 --> 00:25:00,119
Speaker 1: email tough times chair, what a great recovery. What's but

442
00:25:00,240 --> 00:25:03,800
Speaker 1: in the last twelve eighteen months, why the almost bear

443
00:25:03,920 --> 00:25:08,360
Speaker 1: market in GE shares, well, Thomas has been this increasing

444
00:25:08,440 --> 00:25:11,240
Speaker 1: focus and I think rightly so on on ges cash

445
00:25:11,280 --> 00:25:14,720
Speaker 1: flow over the last eighteen months or so. So we

446
00:25:14,720 --> 00:25:16,679
Speaker 1: we got that very big bounce in the stock in

447
00:25:17,640 --> 00:25:21,040
Speaker 1: when when Tryon got involved in that. You know, that

448
00:25:21,119 --> 00:25:24,280
Speaker 1: sparked a lot of investor interest, but the actual uh,

449
00:25:24,440 --> 00:25:27,919
Speaker 1: you know, uh, operating results have struggled somewhat over that

450
00:25:28,040 --> 00:25:31,439
Speaker 1: time frame, and we've had this increasing disconnect between the

451
00:25:31,480 --> 00:25:35,200
Speaker 1: cash flow and the earnings, and I think investors rightly

452
00:25:35,240 --> 00:25:37,800
Speaker 1: have focused more on the cash flow metrics in terms

453
00:25:37,840 --> 00:25:41,080
Speaker 1: of a proper valuation approaching David Garrow from three years

454
00:25:41,080 --> 00:25:45,439
Speaker 1: ago twenty one billion free cash, thirteen billion free cash

455
00:25:45,520 --> 00:25:48,520
Speaker 1: and then down to the recent challenges and acquisitions of

456
00:25:48,640 --> 00:25:52,880
Speaker 1: actually negative free cash, modeling back to only eleven billion

457
00:25:53,520 --> 00:25:56,840
Speaker 1: for fiscal year seventeen. That off the Bloomberg David Jeff,

458
00:25:56,840 --> 00:25:59,159
Speaker 1: help us look ahead here at what you think this

459
00:25:59,280 --> 00:26:01,360
Speaker 1: this company's thing to do? Obviously, there'll be a new

460
00:26:01,440 --> 00:26:04,280
Speaker 1: leadership in place. We've seen GE spin off it's it's

461
00:26:04,320 --> 00:26:05,879
Speaker 1: finance unit. Do you think we're going to see more

462
00:26:05,920 --> 00:26:09,639
Speaker 1: spinoffs going forward? Well, it's a really interesting question, David,

463
00:26:09,640 --> 00:26:12,800
Speaker 1: because if you look at John Flannery's background, although he's

464
00:26:13,240 --> 00:26:17,840
Speaker 1: had some very successful operating experience recently in GE Healthcare,

465
00:26:18,359 --> 00:26:20,800
Speaker 1: he also has a business development background and spent a

466
00:26:20,840 --> 00:26:24,000
Speaker 1: lot of time in GE Capital, which always involves buying

467
00:26:24,000 --> 00:26:26,480
Speaker 1: and selling things. So I think that does kind of

468
00:26:26,520 --> 00:26:29,760
Speaker 1: spark the question of the debate about will he do

469
00:26:29,920 --> 00:26:33,560
Speaker 1: something more dramatic. Clearly he'll want to put his mark

470
00:26:33,600 --> 00:26:36,160
Speaker 1: on the company. That one thing I would note that currently,

471
00:26:36,800 --> 00:26:38,399
Speaker 1: you know, my some of the parts value on the

472
00:26:38,440 --> 00:26:41,760
Speaker 1: company is about twenty four dollars. So that makes it

473
00:26:41,800 --> 00:26:45,440
Speaker 1: a little tricky to do wholesale dismantlement because you kind

474
00:26:45,440 --> 00:26:48,920
Speaker 1: of lay bare that valuation disconnect and that that's twenty

475
00:26:48,960 --> 00:26:52,520
Speaker 1: four dollars would be before we think about any disynergy

476
00:26:52,680 --> 00:26:55,439
Speaker 1: from corporate or tax or other things. As you know,

477
00:26:55,480 --> 00:26:58,160
Speaker 1: and you take a part a company like this, if

478
00:26:58,160 --> 00:27:00,639
Speaker 1: you as as you watched him this play out with

479
00:27:00,680 --> 00:27:03,760
Speaker 1: the with the activist investors, with Nelson Peltive trying partners.

480
00:27:03,800 --> 00:27:06,439
Speaker 1: How well has he handled that that pressure? What lessons

481
00:27:06,480 --> 00:27:09,080
Speaker 1: are to be learned by the way that that's been navigating.

482
00:27:11,160 --> 00:27:15,360
Speaker 1: You're asking a questions from from a Jeff mmel stands, Yeah, exactly. Uh,

483
00:27:15,400 --> 00:27:17,600
Speaker 1: you know, I think he you know, he addressed it

484
00:27:17,640 --> 00:27:21,280
Speaker 1: pretty straight on. I think they they showed kind of,

485
00:27:21,720 --> 00:27:23,920
Speaker 1: you know, an open attitude towards it. You know, they

486
00:27:23,920 --> 00:27:27,359
Speaker 1: didn't they didn't dig in and fight, you know, so

487
00:27:27,400 --> 00:27:30,600
Speaker 1: I think there was an acknowledgement that try and brought

488
00:27:30,640 --> 00:27:32,560
Speaker 1: some good ideas to the table, and they were willing

489
00:27:32,600 --> 00:27:34,440
Speaker 1: to kind of think about what they were saying and

490
00:27:35,040 --> 00:27:38,160
Speaker 1: work with them to some degree. So from that standpoint,

491
00:27:38,320 --> 00:27:40,919
Speaker 1: you know, I think they handled it the right way.

492
00:27:41,119 --> 00:27:44,000
Speaker 1: I would just say, though, you know, just the gravitational

493
00:27:44,040 --> 00:27:46,359
Speaker 1: pull of the valuation though, was just kind of worked

494
00:27:46,359 --> 00:27:48,840
Speaker 1: against the company in the back of the envelope. Uh.

495
00:27:49,320 --> 00:27:52,080
Speaker 1: Skill set here is to look at the margin down

496
00:27:52,119 --> 00:27:55,080
Speaker 1: the income statement. You mentioned CASHALA earlier. Maybe it's ebadar

497
00:27:55,119 --> 00:27:58,160
Speaker 1: earnings before interest taxes and the other stuff. I didn't

498
00:27:58,160 --> 00:28:01,199
Speaker 1: pass on the see it. But but Jeff, there's a

499
00:28:01,200 --> 00:28:03,639
Speaker 1: compare and contrast here to U t X and to

500
00:28:03,720 --> 00:28:08,240
Speaker 1: Honeywell and GE is nowhere near that, even at sixteen

501
00:28:08,320 --> 00:28:10,840
Speaker 1: cents on the dollar down to E, but U t

502
00:28:11,119 --> 00:28:14,440
Speaker 1: X and Honeywell are generating a lot more. Is that

503
00:28:14,480 --> 00:28:19,439
Speaker 1: easily fixable? I don't think it's easily fixable, Tom. Some

504
00:28:19,560 --> 00:28:21,919
Speaker 1: of it is, you know, is the difference in the

505
00:28:22,000 --> 00:28:25,800
Speaker 1: business um and so that you know, you don't fix

506
00:28:25,880 --> 00:28:27,880
Speaker 1: that overnight. And one thing that I would say though,

507
00:28:27,960 --> 00:28:31,200
Speaker 1: is that if you look at G's cash flow, UH

508
00:28:31,400 --> 00:28:34,040
Speaker 1: cash flow margins, so free cash flow is a percentage

509
00:28:34,040 --> 00:28:36,840
Speaker 1: of sales, it's actually very similar to U t X

510
00:28:36,840 --> 00:28:39,360
Speaker 1: and companies like a BB and Siemens who would be there.

511
00:28:39,800 --> 00:28:42,480
Speaker 1: They're close piers. So one of the conundrums that I

512
00:28:42,520 --> 00:28:45,920
Speaker 1: think Mr Flannery has is that's cash flow is not

513
00:28:46,200 --> 00:28:51,040
Speaker 1: poor per se, it's actually that the earnings construct that

514
00:28:51,200 --> 00:28:54,880
Speaker 1: is a quote unquote operating construct and excludes a few things,

515
00:28:55,600 --> 00:28:58,400
Speaker 1: has created this large disconnect between what the cash flow

516
00:28:58,520 --> 00:29:03,160
Speaker 1: is and what the EPs is. Okay, over their data

517
00:29:03,760 --> 00:29:08,280
Speaker 1: just too much. We're never ever Jeff Sprague on again. Jeff,

518
00:29:08,320 --> 00:29:10,520
Speaker 1: thank you so much. Great really honored to have Jeff

519
00:29:10,560 --> 00:29:14,480
Speaker 1: Sprague on with this with Vertical Research UH this morning.

520
00:29:14,480 --> 00:29:17,880
Speaker 1: He's truly a legend, almost that I first met Jeff Sprague, Uh,

521
00:29:18,000 --> 00:29:20,840
Speaker 1: David Garrow with his writings. What you meet analysts when

522
00:29:20,880 --> 00:29:23,680
Speaker 1: they write, because writing is what matters. And he wrote

523
00:29:23,760 --> 00:29:27,400
Speaker 1: these brilliant short essays for bear Stearns. This is a

524
00:29:27,440 --> 00:29:31,840
Speaker 1: million years ago and and it was sensitivity analysis, and

525
00:29:31,920 --> 00:29:35,240
Speaker 1: you know all this this typical stuff of industrials about

526
00:29:35,240 --> 00:29:37,480
Speaker 1: what not to do. That was not a ringing endorsement.

527
00:29:37,600 --> 00:29:41,000
Speaker 1: I don't I don't you know, we don't do buy

528
00:29:41,040 --> 00:29:43,800
Speaker 1: old seller, folks. But we've given you a number of

529
00:29:43,840 --> 00:29:50,000
Speaker 1: opinions this morning, uh particul Karen Earlhart from Bloomberg Intelligence

530
00:29:50,400 --> 00:29:52,520
Speaker 1: on very short notice. Joy this as well. Great to

531
00:29:52,560 --> 00:29:54,920
Speaker 1: hear from Jeff Fake. And we'll get Nicholas Hayman out

532
00:29:54,920 --> 00:29:58,479
Speaker 1: among the others here in the coming days, Mr uh

533
00:29:58,880 --> 00:30:15,760
Speaker 1: Mr Flannery's General Electric. This is what Bloomberg surveillance is

534
00:30:15,760 --> 00:30:17,800
Speaker 1: all about, folks. We have honored to bring you our

535
00:30:17,880 --> 00:30:21,160
Speaker 1: coverage this morning of General Electric. And we finished strong

536
00:30:21,280 --> 00:30:26,040
Speaker 1: for calling us from O'Hare. Nicholas Hayman with William Blair. Nick,

537
00:30:26,120 --> 00:30:28,920
Speaker 1: thank you so much for joining us as you wait

538
00:30:29,320 --> 00:30:33,200
Speaker 1: for the plane. Nick, it is the changing of a guard.

539
00:30:33,320 --> 00:30:36,440
Speaker 1: Is it a generational change? A g E. There's that

540
00:30:36,560 --> 00:30:39,640
Speaker 1: new brooms syndrome. Will Mr Flannery move a lot of

541
00:30:39,640 --> 00:30:43,520
Speaker 1: people in and out? Um? No, I don't expect a

542
00:30:43,560 --> 00:30:46,360
Speaker 1: whole lot of change at all time. Actually, I would

543
00:30:46,400 --> 00:30:49,040
Speaker 1: say at this juncture, you're more likely to see a

544
00:30:49,040 --> 00:30:52,080
Speaker 1: lot of the changes that have really, you know, been

545
00:30:52,160 --> 00:30:55,880
Speaker 1: structurally put in place since maybe April seem when they

546
00:30:55,920 --> 00:30:59,040
Speaker 1: announced the Alpha energy. These are all going to comminate.

547
00:30:59,280 --> 00:31:02,720
Speaker 1: And now if you do have as you saw on

548
00:31:02,760 --> 00:31:05,000
Speaker 1: the first quarter, with the exception of free cash flow,

549
00:31:05,480 --> 00:31:08,840
Speaker 1: much stronger fundamental performance, we think the free cash and

550
00:31:08,880 --> 00:31:12,480
Speaker 1: the cash from operations will be much better, uh from

551
00:31:12,560 --> 00:31:15,120
Speaker 1: the second quarter on out. And if that's the case,

552
00:31:15,320 --> 00:31:19,120
Speaker 1: you actually have now a new CEO who's a pragmatic

553
00:31:19,240 --> 00:31:22,840
Speaker 1: leader and who in turn gives an opportunity for that

554
00:31:23,320 --> 00:31:28,920
Speaker 1: enhanced fundamental performance to actually benefit the share price. Under

555
00:31:28,960 --> 00:31:31,520
Speaker 1: Jeff who was a very strong leader, but it was

556
00:31:31,680 --> 00:31:35,400
Speaker 1: very tended to be a big optimists Okay, uh, coming

557
00:31:35,440 --> 00:31:40,920
Speaker 1: from sales and marketing background, Um, that aspirational nature had

558
00:31:41,040 --> 00:31:44,680
Speaker 1: basically uh warnt ben I guess the best way to say,

559
00:31:45,160 --> 00:31:48,280
Speaker 1: a lot of the institutional investment community, and in turn,

560
00:31:48,520 --> 00:31:52,480
Speaker 1: the traction from the improvement of all these changes to

561
00:31:52,640 --> 00:31:56,640
Speaker 1: exit largely most majority of financial services, and then to

562
00:31:57,040 --> 00:32:00,520
Speaker 1: really supersize your p our business. And now you're oil

563
00:32:00,560 --> 00:32:05,280
Speaker 1: and gas. You're now a chance for this finally actually

564
00:32:05,800 --> 00:32:09,400
Speaker 1: all all the improvements in the fundamentals to actually now

565
00:32:09,560 --> 00:32:11,720
Speaker 1: benefit the place. Many would agree with you, and you

566
00:32:11,760 --> 00:32:13,840
Speaker 1: see it from a share price from ten to thirty

567
00:32:13,840 --> 00:32:17,400
Speaker 1: off of the onine bottom. Brian moynihan, among others, Mr

568
00:32:17,440 --> 00:32:20,680
Speaker 1: corbetted City Group would kill for Jeff m l performance

569
00:32:20,680 --> 00:32:22,920
Speaker 1: off the bottom. You and I talked twenty four months

570
00:32:22,960 --> 00:32:26,360
Speaker 1: ago about Jeff m L arguably being CEO of the

571
00:32:26,440 --> 00:32:30,000
Speaker 1: Year in the way he had to reinvent his generous

572
00:32:30,040 --> 00:32:33,479
Speaker 1: electric Why is he being shown the door now? I mean,

573
00:32:33,520 --> 00:32:36,360
Speaker 1: I get flannery. Maybe it's a generational change and that,

574
00:32:36,560 --> 00:32:40,160
Speaker 1: But what exactly did Jeff m L do wrong? I

575
00:32:40,160 --> 00:32:42,320
Speaker 1: don't think it was so much wrong per se. But

576
00:32:42,440 --> 00:32:45,000
Speaker 1: when you know in late fifteen he laid out a

577
00:32:45,120 --> 00:32:49,840
Speaker 1: vision for two dollars and earnings by the end of eighteen. Okay, um,

578
00:32:49,880 --> 00:32:52,760
Speaker 1: the guy the stepping stone to get there, the dollars

579
00:32:52,760 --> 00:32:56,200
Speaker 1: sixty dollars seventy this year, people are comfortable that that

580
00:32:56,320 --> 00:32:59,040
Speaker 1: range could be hit um. I think it may be

581
00:32:59,200 --> 00:33:01,480
Speaker 1: at the opera end of that range. We'll see. But

582
00:33:01,640 --> 00:33:03,960
Speaker 1: now I think the biggest, in the hardest part was

583
00:33:04,000 --> 00:33:06,280
Speaker 1: for investors to understand how you could go, say from

584
00:33:06,280 --> 00:33:09,920
Speaker 1: the dollar sixty five to two dollars, without any external

585
00:33:09,960 --> 00:33:14,720
Speaker 1: benefit of tax reform, of US infrastructure modernization, or any

586
00:33:14,760 --> 00:33:17,320
Speaker 1: of the other initiatives that were, at you know, one time,

587
00:33:17,400 --> 00:33:20,360
Speaker 1: widely expected to occur under the Trump administration this year.

588
00:33:20,640 --> 00:33:23,080
Speaker 1: Jeffrey Emil sat down with a John Micklethwaite, editor in

589
00:33:23,120 --> 00:33:24,520
Speaker 1: chief a couple of months ago, I think it was

590
00:33:24,560 --> 00:33:27,680
Speaker 1: back in February and Boston, and he asked Mr Emil

591
00:33:27,800 --> 00:33:30,160
Speaker 1: how he's changed the company, and he said, uh, it's

592
00:33:30,200 --> 00:33:33,280
Speaker 1: more global, it's more focused on the customer. When I

593
00:33:33,320 --> 00:33:36,040
Speaker 1: became CEO, he said, we were seventy percent inside the

594
00:33:36,080 --> 00:33:40,240
Speaker 1: United States. Now we're seventy outside the United States. As

595
00:33:40,280 --> 00:33:42,240
Speaker 1: we begin to to look at his legacy at G

596
00:33:42,680 --> 00:33:46,160
Speaker 1: is that the biggest part of it. That's one of them.

597
00:33:46,280 --> 00:33:49,480
Speaker 1: You know. The second will be that he's certainly at

598
00:33:49,480 --> 00:33:51,960
Speaker 1: the very leading edge of figuring out how to convert

599
00:33:52,480 --> 00:33:57,120
Speaker 1: into the digital organization that can create value um from

600
00:33:57,160 --> 00:34:01,200
Speaker 1: from information and all of the insights and UM you know,

601
00:34:01,400 --> 00:34:04,719
Speaker 1: continue to push with those analytic insites to a company

602
00:34:04,760 --> 00:34:09,200
Speaker 1: that's masked customization in terms of what they produce UM.

603
00:34:09,239 --> 00:34:11,719
Speaker 1: You know with additive metal manufacturing. So there's a lot

604
00:34:11,719 --> 00:34:15,680
Speaker 1: of transformational nature of what how you buildings. But you're

605
00:34:15,719 --> 00:34:20,400
Speaker 1: moving beyond the based products, beyond the long term service agreements,

606
00:34:20,480 --> 00:34:23,720
Speaker 1: and even beyond the software to now you know, add

607
00:34:23,800 --> 00:34:27,120
Speaker 1: as a fourth way to create value of customers information.

608
00:34:28,120 --> 00:34:31,360
Speaker 1: Nicholas Shalman with US with William Blair, thrilled to have

609
00:34:31,400 --> 00:34:33,560
Speaker 1: him on after talking to a number of other g

610
00:34:33,760 --> 00:34:36,120
Speaker 1: E types this morning. Nick came in, how do they

611
00:34:36,200 --> 00:34:39,400
Speaker 1: put three D basis points on the IBADA margin? You

612
00:34:39,480 --> 00:34:42,640
Speaker 1: come down the income statement. I believe they're underperforming U

613
00:34:42,719 --> 00:34:45,640
Speaker 1: t X, underperforming aneywell and on and on and on.

614
00:34:45,840 --> 00:34:51,240
Speaker 1: How do they strap on a better IBADA margin? Well,

615
00:34:51,280 --> 00:34:53,560
Speaker 1: you know, you're certainly taking these structural costs out right,

616
00:34:53,640 --> 00:34:55,279
Speaker 1: a billion this year and a billion next year to

617
00:34:55,280 --> 00:34:58,200
Speaker 1: get down to twenty two point three billion and total

618
00:34:58,239 --> 00:35:00,959
Speaker 1: structural costs. I think you know, we were just out

619
00:35:01,000 --> 00:35:04,799
Speaker 1: recently to see Bill Rout, who runs to Digital and UM.

620
00:35:04,840 --> 00:35:08,359
Speaker 1: I would honestly tell you in our framework that there

621
00:35:08,440 --> 00:35:12,000
Speaker 1: was the expectation that after investing aggressively to build out

622
00:35:12,000 --> 00:35:16,440
Speaker 1: the partners for the Predicts alliance as well as UM

623
00:35:16,560 --> 00:35:21,040
Speaker 1: several major M and A acquisitions and train about thirty

624
00:35:21,080 --> 00:35:25,480
Speaker 1: thousand independent software programmers, that seventeen and eighteen were supposed

625
00:35:25,480 --> 00:35:29,160
Speaker 1: to be the breakaway years for digital to contribute incremental

626
00:35:29,200 --> 00:35:31,880
Speaker 1: sales and earning scrut to ge and clearly in my

627
00:35:32,000 --> 00:35:35,799
Speaker 1: mind that will occur in eighteen and on not seventeen.

628
00:35:36,480 --> 00:35:39,640
Speaker 1: So you know, UM, I think I think as you

629
00:35:39,719 --> 00:35:42,359
Speaker 1: look forward, the things that are really going to be

630
00:35:42,520 --> 00:35:47,319
Speaker 1: internally uh catalysts capable catalysts for g V will be

631
00:35:47,840 --> 00:35:51,680
Speaker 1: the ability or to be digital to move from conceptual productivity,

632
00:35:52,080 --> 00:35:57,759
Speaker 1: internal enhancer to actual strong third party sales. And I

633
00:35:57,800 --> 00:36:02,120
Speaker 1: think the second thing will be pretty pretty timely transformational

634
00:36:02,200 --> 00:36:05,799
Speaker 1: burger uh go on gas would maker use he take

635
00:36:05,880 --> 00:36:07,800
Speaker 1: and move away on gas from ten percent of g

636
00:36:09,520 --> 00:36:15,120
Speaker 1: and instead of North American upstream that's growing, it's now sixty.

637
00:36:15,600 --> 00:36:17,319
Speaker 1: So in the second half of this year you're going

638
00:36:17,400 --> 00:36:21,360
Speaker 1: to suddenly see really a drag racer acceleration in the

639
00:36:21,440 --> 00:36:24,600
Speaker 1: performance of what is now going to the company. It's amazing.

640
00:36:24,800 --> 00:36:27,680
Speaker 1: So you see the difference there David girl in Nick

641
00:36:27,760 --> 00:36:31,160
Speaker 1: Cayman's tone versus what even earlier is optimism? David jumping

642
00:36:31,200 --> 00:36:33,040
Speaker 1: with one Yeah, Nick, I think it was last month

643
00:36:33,400 --> 00:36:35,359
Speaker 1: jeff Eymilt was saying that he has as much as

644
00:36:35,360 --> 00:36:38,799
Speaker 1: twelve billion dollars in unallocated capital, ostensibly the use for

645
00:36:38,920 --> 00:36:41,280
Speaker 1: for acquisitions. Do do you expect that to be deployed

646
00:36:41,280 --> 00:36:43,160
Speaker 1: here under mr Mr Flannery or is there going to

647
00:36:43,200 --> 00:36:45,160
Speaker 1: be a more wait and see approach here with this

648
00:36:45,239 --> 00:36:50,520
Speaker 1: leadership changeover? I think that, um, you know, is anything. Uh,

649
00:36:50,640 --> 00:36:54,319
Speaker 1: you have a couple more investors coming here. They'll consumer lighting, business,

650
00:36:54,600 --> 00:36:57,080
Speaker 1: doustrial solutions. They closed at the end of this year

651
00:36:57,280 --> 00:37:00,480
Speaker 1: imminently of your water. Um he made. Take a look

652
00:37:00,520 --> 00:37:04,120
Speaker 1: at the medical portfolio. We just had seemens who are

653
00:37:04,160 --> 00:37:06,560
Speaker 1: follow h four weeks ago get up and have their

654
00:37:06,680 --> 00:37:11,040
Speaker 1: kind of webcast debutants party for their health plan years.

655
00:37:11,080 --> 00:37:13,000
Speaker 1: And that is you know, they're gonna e merge that

656
00:37:13,080 --> 00:37:15,279
Speaker 1: they're gonna I p o it, They're gonna spin it

657
00:37:15,320 --> 00:37:18,840
Speaker 1: out and so much like they did with Lighting. Okay,

658
00:37:18,880 --> 00:37:21,880
Speaker 1: as from a little ahead of gus decision to to

659
00:37:22,040 --> 00:37:24,439
Speaker 1: to exit the lighting, so I think that there will

660
00:37:24,480 --> 00:37:28,960
Speaker 1: be an evaluation of perhaps parts of the healthcare portfolio.

661
00:37:29,080 --> 00:37:31,920
Speaker 1: Having you know, John's background in M and A and

662
00:37:32,040 --> 00:37:36,440
Speaker 1: strategic planning prior to writing healthcare. He's as good at

663
00:37:36,480 --> 00:37:39,759
Speaker 1: hand if that is any And that portfolio GEES is

664
00:37:39,760 --> 00:37:43,680
Speaker 1: actually much more valuable than the one Healthlan years the

665
00:37:43,719 --> 00:37:47,040
Speaker 1: seams because they have gone so much further into by

666
00:37:47,040 --> 00:37:49,520
Speaker 1: a pharma and that's really where the growth and the

667
00:37:49,600 --> 00:37:52,920
Speaker 1: returns are going forward. The other businesses are performing well,

668
00:37:53,360 --> 00:37:56,280
Speaker 1: but they don't hold the same you know, uh future

669
00:37:56,360 --> 00:37:59,000
Speaker 1: you know growth potential. Nick came in one final question

670
00:37:59,040 --> 00:38:02,080
Speaker 1: by hold Cell. Please frame, uh, please frame where you

671
00:38:02,080 --> 00:38:06,560
Speaker 1: are on bi hold Cell. We are you know, outperformed

672
00:38:07,040 --> 00:38:10,600
Speaker 1: and um we uh we believe amongst the large camp

673
00:38:10,680 --> 00:38:12,920
Speaker 1: stocks that we industrial stocks, that we found them all

674
00:38:12,960 --> 00:38:15,040
Speaker 1: the industry. Second, this is hands down the number one.

675
00:38:15,440 --> 00:38:21,200
Speaker 1: It's trailed and yet it's fundamental text you know, um,

676
00:38:21,320 --> 00:38:25,000
Speaker 1: they cash flow. They have really started to rebound. We've

677
00:38:25,040 --> 00:38:28,080
Speaker 1: seen tremendous orders here from Vietnam and from Saudi Arabia

678
00:38:28,080 --> 00:38:30,120
Speaker 1: in the last couple of weeks. We don't think that

679
00:38:30,200 --> 00:38:33,239
Speaker 1: there's any fundamental hiccup or even shortfall as many have

680
00:38:33,280 --> 00:38:35,839
Speaker 1: alluded to for the cards to the dividend being able

681
00:38:35,840 --> 00:38:38,080
Speaker 1: to be paid and sustained. But in fact what we

682
00:38:38,200 --> 00:38:40,879
Speaker 1: do see is we now see an ability to take

683
00:38:41,000 --> 00:38:44,240
Speaker 1: and convert what should be a lot stronger uh tast

684
00:38:44,360 --> 00:38:47,480
Speaker 1: from operating activities over the next three quarter, second third

685
00:38:48,120 --> 00:38:52,239
Speaker 1: and the next year to be to be aligned with

686
00:38:53,280 --> 00:38:57,000
Speaker 1: you know, um much much better still this year price

687
00:38:57,160 --> 00:38:59,400
Speaker 1: this year, price of them. You know, if you're all

688
00:38:59,520 --> 00:39:02,320
Speaker 1: all even with everybody else, just moving along with everybody.

689
00:39:03,040 --> 00:39:06,040
Speaker 1: And it hasn't been and the message has battle try

690
00:39:06,080 --> 00:39:07,760
Speaker 1: has been were gonna cut the dividend and the Matthew

691
00:39:07,840 --> 00:39:10,799
Speaker 1: isn't even remotely there. Okay, you wouldn't be buying back,

692
00:39:12,760 --> 00:39:15,759
Speaker 1: you know. I think it's all gonna come out. Nick,

693
00:39:15,840 --> 00:39:18,480
Speaker 1: Thank you, Thank you your troopers. William Blair from o'harrey

694
00:39:18,480 --> 00:39:32,680
Speaker 1: International Airport today. Thanks for listening to the Bloomberg Surveillance podcast.

695
00:39:33,160 --> 00:39:38,360
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

696
00:39:38,480 --> 00:39:42,759
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom Keene,

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00:39:42,880 --> 00:39:47,200
Speaker 1: David Gura. Is that David Gura before the podcast? You

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00:39:47,280 --> 00:40:01,759
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio, brought you

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00:40:01,880 --> 00:40:05,960
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