1 00:00:05,120 --> 00:00:08,480 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 2 00:00:08,520 --> 00:00:12,319 Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day 3 00:00:12,400 --> 00:00:16,880 Speaker 1: for insight from the best an economics, geopolitics, finance and investment. 4 00:00:17,280 --> 00:00:22,119 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,320 --> 00:00:26,600 Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com, 6 00:00:26,640 --> 00:00:29,840 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. 7 00:00:30,040 --> 00:00:33,080 Speaker 2: Let's kick off this OUs conversation with Emily Rowland, co 8 00:00:33,240 --> 00:00:36,920 Speaker 2: Chief investment strategist at John Hancock Investment Management. Emily, great 9 00:00:36,920 --> 00:00:38,879 Speaker 2: to catch up with you. In the last down on 10 00:00:38,880 --> 00:00:41,680 Speaker 2: Bloomberg TV, we spoke to Ben Ladra v Toro, who 11 00:00:41,720 --> 00:00:44,680 Speaker 2: referred to tech names as teddy best stocks. You huk them, 12 00:00:44,720 --> 00:00:46,840 Speaker 2: they happen you sleep at night. They delivered decent gains, 13 00:00:46,880 --> 00:00:48,919 Speaker 2: at least for him because he was long tech through 14 00:00:48,960 --> 00:00:51,599 Speaker 2: most of last year. Emily, do you still like those 15 00:00:51,600 --> 00:00:52,839 Speaker 2: so called teddy best stocks. 16 00:00:53,320 --> 00:00:55,760 Speaker 3: Yeah, we were long tech last year as well, really 17 00:00:55,800 --> 00:00:58,240 Speaker 3: as a function of our preference for quality. So we 18 00:00:58,240 --> 00:01:01,200 Speaker 3: were looking for companies with great balance sheets, tons of cash, 19 00:01:01,280 --> 00:01:02,880 Speaker 3: low interest burdens. 20 00:01:02,440 --> 00:01:04,480 Speaker 4: And we still like tech stops. 21 00:01:04,480 --> 00:01:06,560 Speaker 3: But we've got to recognize the fact that the S 22 00:01:06,600 --> 00:01:09,440 Speaker 3: and P five hundred growth index is now trading at 23 00:01:09,480 --> 00:01:13,320 Speaker 3: a forty four percent premium to its twenty year average. 24 00:01:13,360 --> 00:01:16,360 Speaker 3: So tech stops were up about fifty eight percent last 25 00:01:16,400 --> 00:01:19,039 Speaker 3: year on about five percent earnings growth. Now, don't get 26 00:01:19,080 --> 00:01:21,960 Speaker 3: me wrong, five percent earnings growth was of the best 27 00:01:22,000 --> 00:01:24,360 Speaker 3: globally in the US tech sector. But I think it 28 00:01:24,440 --> 00:01:27,039 Speaker 3: makes sense for tech to potentially take a bit of 29 00:01:27,040 --> 00:01:27,800 Speaker 3: a breather here. 30 00:01:27,840 --> 00:01:29,319 Speaker 4: We're not downgrading it. 31 00:01:29,520 --> 00:01:31,280 Speaker 3: But I don't know how much you can expect this 32 00:01:31,360 --> 00:01:33,480 Speaker 3: year after such an extraordinary twenty twenty three. 33 00:01:33,760 --> 00:01:36,920 Speaker 1: What are you doing on sixty forty I mean, to me, 34 00:01:37,040 --> 00:01:40,000 Speaker 1: this is a really important question. I've seen huge failure 35 00:01:40,080 --> 00:01:43,960 Speaker 1: of some of the marketing concepts like target benefit programs 36 00:01:44,000 --> 00:01:45,959 Speaker 1: and all the rest of it to get to an 37 00:01:46,000 --> 00:01:48,960 Speaker 1: asset allocation. What do you do sixty forty forward? 38 00:01:50,080 --> 00:01:52,920 Speaker 3: I mean, what an incredible year in twenty twenty three 39 00:01:53,000 --> 00:01:57,120 Speaker 3: for a sixty forty portfolio after horrible twenty twenty two 40 00:01:57,520 --> 00:02:00,360 Speaker 3: is up about eighteen percent last year. You know, when 41 00:02:00,360 --> 00:02:02,480 Speaker 3: we look at it and everybody was calling for it 42 00:02:02,520 --> 00:02:04,320 Speaker 3: to be dead, right, the death of the sixty to 43 00:02:04,320 --> 00:02:07,560 Speaker 3: forty portfolio clearly very much alive and well, when we 44 00:02:07,600 --> 00:02:09,840 Speaker 3: look at it, we're modestly adding to our. 45 00:02:09,760 --> 00:02:12,640 Speaker 4: Positions in fixed income. And to us, it's a math game. 46 00:02:13,160 --> 00:02:15,160 Speaker 3: You know, you look on the stock side of the house, 47 00:02:15,200 --> 00:02:17,200 Speaker 3: it's you know, you're sitting at nineteen and a half 48 00:02:17,240 --> 00:02:20,919 Speaker 3: times forward earnings. You've got twelve percent earnings growth penciled 49 00:02:20,919 --> 00:02:23,280 Speaker 3: in by analysts on the street. It's just a tough 50 00:02:23,360 --> 00:02:27,079 Speaker 3: starting point. We're not saying equities will do horrible this year. 51 00:02:27,080 --> 00:02:29,080 Speaker 3: It's just the bar is really high. And when you 52 00:02:29,120 --> 00:02:32,000 Speaker 3: look at fixed income, you know, four or five percent 53 00:02:32,040 --> 00:02:33,120 Speaker 3: on high quality bonds. 54 00:02:33,120 --> 00:02:35,560 Speaker 4: Of course, there was a better entry point back in. 55 00:02:35,560 --> 00:02:38,560 Speaker 3: October, but we still look at the income on high 56 00:02:38,639 --> 00:02:41,040 Speaker 3: quality bonds is a great way to sit here, get 57 00:02:41,080 --> 00:02:44,679 Speaker 3: paid to wait, as we might experience some more volatility 58 00:02:44,720 --> 00:02:47,800 Speaker 3: as the lagged impact of said tightening does cause crafts 59 00:02:47,800 --> 00:02:48,240 Speaker 3: to form. 60 00:02:48,480 --> 00:02:50,639 Speaker 4: In the economic picture and in the labor market. 61 00:02:50,800 --> 00:02:53,480 Speaker 1: Is there such a thing as growth y value? I mean, 62 00:02:53,520 --> 00:02:55,239 Speaker 1: I know you're going to tell me there's a partition 63 00:02:55,360 --> 00:02:59,200 Speaker 1: between value and growth. But if I'm upset with thirty 64 00:02:59,320 --> 00:03:04,079 Speaker 1: multiples or twenty two multiples, where's that grossy value? Or 65 00:03:04,120 --> 00:03:07,160 Speaker 1: at least I can hide Yeah. 66 00:03:07,160 --> 00:03:07,799 Speaker 4: Absolutely. 67 00:03:07,919 --> 00:03:10,040 Speaker 3: So when we look on the value side, you've got 68 00:03:10,040 --> 00:03:12,399 Speaker 3: to be really discerning because there's a lot of sick 69 00:03:12,480 --> 00:03:16,800 Speaker 3: locality inherently in value indices. So we're looking at areas 70 00:03:16,800 --> 00:03:20,639 Speaker 3: that have a high quality element to them. So healthcare, 71 00:03:20,680 --> 00:03:22,800 Speaker 3: for example, one of our favorite sectors. I know a 72 00:03:22,800 --> 00:03:25,200 Speaker 3: lot of people have been coming on here talking about healthcare. 73 00:03:25,240 --> 00:03:28,480 Speaker 3: It's trading at a ten percent discount to the broad market. 74 00:03:28,520 --> 00:03:31,919 Speaker 3: We think it's going to benefit as consumer behavior shifts. 75 00:03:31,960 --> 00:03:34,200 Speaker 3: Maybe we're not going to buy all the stuff we want. 76 00:03:34,480 --> 00:03:36,880 Speaker 3: I know we were talking about ath leisure earlier. By 77 00:03:36,880 --> 00:03:38,600 Speaker 3: the way, I have an eleven year old daughter. I'm 78 00:03:38,640 --> 00:03:41,000 Speaker 3: here to tell you ath leisure is alive and well. 79 00:03:41,640 --> 00:03:43,600 Speaker 3: But people are still going to do the things they 80 00:03:43,680 --> 00:03:45,360 Speaker 3: need to do. They're going to go to the doctor, 81 00:03:45,360 --> 00:03:48,640 Speaker 3: they're going to get medical care. Utilities another area that 82 00:03:48,680 --> 00:03:51,960 Speaker 3: got really really hurt down, you know last year, everybody 83 00:03:52,040 --> 00:03:55,000 Speaker 3: left it for dead. It's trading at a twenty percent discount. 84 00:03:55,240 --> 00:03:57,560 Speaker 3: So we could see a rotation into those sort of 85 00:03:57,920 --> 00:04:01,040 Speaker 3: dogs of the Dow as potentially tech takes a breather 86 00:04:01,120 --> 00:04:02,160 Speaker 3: into twenty twenty four. 87 00:04:02,480 --> 00:04:04,800 Speaker 5: Emily, one thing I've really been struggling with in twenty 88 00:04:04,840 --> 00:04:07,520 Speaker 5: twenty four is what is the biggest risk. Is it 89 00:04:07,560 --> 00:04:10,040 Speaker 5: a reacceleration of inflation or is it recession. 90 00:04:11,560 --> 00:04:14,080 Speaker 3: Oh that's the question of the year, I think, and 91 00:04:14,200 --> 00:04:17,640 Speaker 3: you know, I think, as you're looking at looser financial conditions, 92 00:04:17,640 --> 00:04:19,599 Speaker 3: this is going to be one for the history books. 93 00:04:19,720 --> 00:04:22,679 Speaker 3: Right was the FED to dubvish over the last two meetings, 94 00:04:22,720 --> 00:04:26,479 Speaker 3: suggesting that cuts are coming. In the summary of economic projections, 95 00:04:26,480 --> 00:04:29,640 Speaker 3: markets are pricing in five six rate cuts this year, 96 00:04:29,640 --> 00:04:32,440 Speaker 3: and of course that's caused the loosening and financial conditions 97 00:04:32,440 --> 00:04:35,520 Speaker 3: which has been really spurring this pivot party that we've 98 00:04:35,560 --> 00:04:38,599 Speaker 3: been talking about on the show this year. Right now, 99 00:04:38,640 --> 00:04:42,000 Speaker 3: the pivot party's feeling a little bit like maybe a hangover. 100 00:04:42,200 --> 00:04:45,320 Speaker 3: Maybe we're like trying out dry January here or something. 101 00:04:45,440 --> 00:04:47,360 Speaker 4: Is the markets are now back to. 102 00:04:47,320 --> 00:04:50,599 Speaker 3: This good news on the economic front, which is causing 103 00:04:50,680 --> 00:04:53,400 Speaker 3: yields to back up being sort of bad news on 104 00:04:53,480 --> 00:04:56,960 Speaker 3: the equity front. So our as recession goes, I think 105 00:04:57,000 --> 00:04:59,800 Speaker 3: everybody's sort of tired of talking about And frankly, Matt 106 00:05:00,240 --> 00:05:02,359 Speaker 3: and I don't really get paid on our views on 107 00:05:02,400 --> 00:05:04,640 Speaker 3: whether recession plays out or not. We get paid on 108 00:05:04,920 --> 00:05:07,839 Speaker 3: how we think about positioning into this environment, So maybe 109 00:05:07,839 --> 00:05:10,479 Speaker 3: if it could, you know, we're prepared if an economic 110 00:05:10,520 --> 00:05:15,000 Speaker 3: contraction takes place again lead leaning into high quality bonds, 111 00:05:15,080 --> 00:05:18,560 Speaker 3: looking at income, and then rotating into these more defensive 112 00:05:18,560 --> 00:05:21,240 Speaker 3: parts of the market that should benefit on a relative 113 00:05:21,240 --> 00:05:24,240 Speaker 3: basis if something breaks. If something breaks and we do 114 00:05:24,279 --> 00:05:25,880 Speaker 3: see that contraction play out, I. 115 00:05:25,880 --> 00:05:28,880 Speaker 5: Guess that the way this folds into positioning is leaning 116 00:05:28,920 --> 00:05:34,000 Speaker 5: into high quality income producing fixed income. Does this really 117 00:05:34,040 --> 00:05:37,000 Speaker 5: get up ended if the economy is hotter than expected 118 00:05:37,000 --> 00:05:39,400 Speaker 5: and if the pivot party, as you pointed out, has 119 00:05:39,440 --> 00:05:40,360 Speaker 5: just run way too far. 120 00:05:42,160 --> 00:05:44,360 Speaker 3: Yeah, I mean there is a potential here, you know, 121 00:05:44,440 --> 00:05:48,039 Speaker 3: certainly for rates to chop around. We're watching energy prices closely, 122 00:05:48,120 --> 00:05:50,679 Speaker 3: which could play into the inflation picture here. Of course, 123 00:05:50,720 --> 00:05:53,560 Speaker 3: the data on Thursday on CPI is going to be 124 00:05:53,600 --> 00:05:55,800 Speaker 3: you know, critically important here, so there is a risk 125 00:05:55,880 --> 00:05:58,719 Speaker 3: here that we see a reacceleration. It's just hard to 126 00:05:58,800 --> 00:06:02,480 Speaker 3: imagine an environment where inflation goes back to the nine 127 00:06:02,560 --> 00:06:05,320 Speaker 3: percent that we saw in the summer of twenty twenty two. Obviously, 128 00:06:05,360 --> 00:06:08,919 Speaker 3: there was some very unique sort of pandemic era dynamics 129 00:06:08,920 --> 00:06:12,479 Speaker 3: there around supply chains, around fiscal stimulus, so we think 130 00:06:12,520 --> 00:06:15,960 Speaker 3: that ultimately we go back to a low growth, low inflation, 131 00:06:16,560 --> 00:06:19,400 Speaker 3: low rate environment which really permeated the markets and the 132 00:06:19,440 --> 00:06:22,880 Speaker 3: economy for much of the last decade. Nothing changed except 133 00:06:23,120 --> 00:06:26,839 Speaker 3: we pumped five trillion dollars of stimulus into the US economy. 134 00:06:26,839 --> 00:06:30,520 Speaker 3: There's forces out there that are very much disinflationary, and 135 00:06:30,560 --> 00:06:32,880 Speaker 3: we think over the longer term, that's where we go, 136 00:06:33,000 --> 00:06:35,120 Speaker 3: and we're headed in that direction certainly as we start 137 00:06:35,200 --> 00:06:35,480 Speaker 3: the year. 138 00:06:35,560 --> 00:06:37,279 Speaker 2: I mean, I mentioned ben Light and he talked about 139 00:06:37,279 --> 00:06:40,640 Speaker 2: the opportunities in Europe. Is the buys still America US 140 00:06:40,720 --> 00:06:42,920 Speaker 2: stocks it is? 141 00:06:43,000 --> 00:06:44,719 Speaker 3: I mean, you guys have been talking a lot this 142 00:06:44,839 --> 00:06:47,920 Speaker 3: morning about how horrible, for lack of a better word, 143 00:06:47,960 --> 00:06:51,000 Speaker 3: the data is coming out of Europe and certainly in Germany, 144 00:06:51,080 --> 00:06:53,920 Speaker 3: and it's interesting to see, you know, stocks. 145 00:06:53,520 --> 00:06:56,120 Speaker 4: Really not reacting to that. In Europe. 146 00:06:56,160 --> 00:06:59,640 Speaker 3: You know, there's been buoyancy, there's been participation. The weaker 147 00:06:59,680 --> 00:07:02,840 Speaker 3: dollar has helped non US equities. But when we look 148 00:07:02,880 --> 00:07:06,480 Speaker 3: to the US, we're holding up the best around the world. Economically, 149 00:07:06,520 --> 00:07:09,840 Speaker 3: our labor market is undoubtedly the strongest across the world, 150 00:07:09,840 --> 00:07:12,920 Speaker 3: and earning estimates here are more robust than they are 151 00:07:12,920 --> 00:07:15,160 Speaker 3: in other areas. And then Finally, we just have more 152 00:07:15,240 --> 00:07:18,080 Speaker 3: high quality stocks here in the US. So we do 153 00:07:18,160 --> 00:07:21,760 Speaker 3: still have a preference for US equities over international, especially 154 00:07:22,080 --> 00:07:24,400 Speaker 3: over emerging market equities, where we think China is going 155 00:07:24,440 --> 00:07:25,600 Speaker 3: to be challenged into this year. 156 00:07:25,720 --> 00:07:28,200 Speaker 2: Interesting, Emily, thank you. Am we Rout in the of 157 00:07:28,320 --> 00:07:29,840 Speaker 2: John Hancock Investment Management. 158 00:07:40,120 --> 00:07:44,160 Speaker 1: Brook Sutherland knows this cold. She's a Bloomberg opinion columnist, 159 00:07:44,560 --> 00:07:48,680 Speaker 1: and she knows that Clyde Cessna in nineteen sixteen invented 160 00:07:48,680 --> 00:07:52,600 Speaker 1: our aviation world in Wichita, Kansas. So we're going to 161 00:07:52,640 --> 00:07:55,320 Speaker 1: go to Wichita right now and talk about how we 162 00:07:55,360 --> 00:07:59,240 Speaker 1: actually build the things we take for granted. How shattered 163 00:07:59,400 --> 00:08:04,560 Speaker 1: is Ava Kansas this morning? Brook, how not afraid? But 164 00:08:04,720 --> 00:08:07,120 Speaker 1: just how is there confidence broken? 165 00:08:08,440 --> 00:08:11,280 Speaker 6: I think you have to be rather concerned in Whichita? 166 00:08:11,360 --> 00:08:14,600 Speaker 6: I mean that is the home of Spirit Aerosystems, which 167 00:08:14,640 --> 00:08:17,640 Speaker 6: is the supplier that makes the fuselage on the Boeing Max. 168 00:08:17,680 --> 00:08:20,360 Speaker 6: Now this is not it's not clear yet if this 169 00:08:20,560 --> 00:08:23,600 Speaker 6: was a Spirit issue, but they have had a history 170 00:08:23,680 --> 00:08:29,320 Speaker 6: of quality control glitches just in this past year, really, 171 00:08:29,400 --> 00:08:32,240 Speaker 6: and there's a lot of scrutiny over the relationship between 172 00:08:32,280 --> 00:08:34,640 Speaker 6: Boeing and Spirit Aerosystems. This used to be a part 173 00:08:34,800 --> 00:08:37,840 Speaker 6: of Boeing until back in two thousand and five, executives 174 00:08:37,840 --> 00:08:40,640 Speaker 6: decided they could boost their profit margins by focusing on 175 00:08:40,720 --> 00:08:43,960 Speaker 6: design and outsourcing some of the actual manufacturing work. But 176 00:08:44,080 --> 00:08:46,280 Speaker 6: this was really just a set of factories. This was 177 00:08:46,320 --> 00:08:49,000 Speaker 6: never really meant to be an independent business, and I 178 00:08:49,000 --> 00:08:52,000 Speaker 6: think this relationship is going to get a lot of scrutiny. 179 00:08:52,080 --> 00:08:55,320 Speaker 6: There's been speculation of could Boeing buy Spirit Aerosystems. I 180 00:08:55,320 --> 00:08:58,440 Speaker 6: think that would be very complicated, considering Spirit has since 181 00:08:58,480 --> 00:09:02,120 Speaker 6: diversified into contracts Airbus and the military. But I do 182 00:09:02,200 --> 00:09:04,640 Speaker 6: think both Boeing and Airbus down the road are going 183 00:09:04,679 --> 00:09:07,760 Speaker 6: to work at vertically integrating more of that aerospace structure's 184 00:09:07,800 --> 00:09:10,480 Speaker 6: work because it's just not a tenable relationship. 185 00:09:10,720 --> 00:09:13,960 Speaker 1: Is this enough for Airbus to get a legit foothold 186 00:09:14,040 --> 00:09:15,559 Speaker 1: into American aviation? 187 00:09:17,080 --> 00:09:19,080 Speaker 6: I mean, I think they have one. What's interesting is 188 00:09:19,080 --> 00:09:23,080 Speaker 6: that Airbus has remained much more vertically integrated than Boeing 189 00:09:23,160 --> 00:09:25,600 Speaker 6: ever has. They'd outsourced some stuff here and there, but 190 00:09:25,640 --> 00:09:28,280 Speaker 6: they have not done it to the extent that Boeing did, 191 00:09:28,320 --> 00:09:30,839 Speaker 6: And in hindsight, being twenty twenty, that was clearly the 192 00:09:30,920 --> 00:09:31,920 Speaker 6: right decision. 193 00:09:32,040 --> 00:09:35,520 Speaker 5: I'm wondering the decision by the airline companies of which 194 00:09:35,559 --> 00:09:39,000 Speaker 5: planes to buy. Why it is that United and Alaska 195 00:09:39,040 --> 00:09:42,440 Speaker 5: Air had a disproportionate number of these particular jets. Is 196 00:09:42,440 --> 00:09:44,280 Speaker 5: it just the roots that they decided to fly on, 197 00:09:44,720 --> 00:09:46,199 Speaker 5: Was it just simply availability? 198 00:09:46,320 --> 00:09:47,080 Speaker 4: Was it the cost? 199 00:09:48,200 --> 00:09:49,680 Speaker 6: I mean, I think it's a little bit of both. 200 00:09:49,679 --> 00:09:52,120 Speaker 6: The reality is we have a duopoly. It's Boeing and 201 00:09:52,160 --> 00:09:55,240 Speaker 6: it's Airbus, and Airbus is sold out of its Marquee 202 00:09:55,280 --> 00:09:58,480 Speaker 6: narrow body jets into the twenty thirties. I think, you know, 203 00:09:58,520 --> 00:10:00,960 Speaker 6: depending on the roots you want to fly. Fuel efficiency 204 00:10:01,360 --> 00:10:05,200 Speaker 6: engines are also a concern. So the max Jet only 205 00:10:05,320 --> 00:10:08,680 Speaker 6: takes the engine from CFM International, which is the joint 206 00:10:08,720 --> 00:10:12,240 Speaker 6: venture from Saffron and ge Airbus. You can choose between 207 00:10:12,320 --> 00:10:15,200 Speaker 6: that CFM engine or a variant of it, or the 208 00:10:15,400 --> 00:10:18,400 Speaker 6: GTF from RTX, which of course is having problems of 209 00:10:18,440 --> 00:10:20,760 Speaker 6: its own. They've had to do a very costly recall 210 00:10:21,080 --> 00:10:24,960 Speaker 6: of that engine technology because of again a manufacturing glitch 211 00:10:25,160 --> 00:10:28,120 Speaker 6: that time involved powdered metal. So if you're an airline, 212 00:10:28,480 --> 00:10:30,920 Speaker 6: I don't really know what's your best option is because 213 00:10:30,960 --> 00:10:33,320 Speaker 6: you're now having problems with both of these aircraft, but 214 00:10:33,360 --> 00:10:36,280 Speaker 6: you don't have a lot of alternatives. The one thing 215 00:10:36,280 --> 00:10:38,440 Speaker 6: we should say is that so far, all of the 216 00:10:38,480 --> 00:10:41,680 Speaker 6: investigations the grounding is really focused on the Max nine, 217 00:10:41,720 --> 00:10:44,440 Speaker 6: so that actually makes up a relatively small percentage of 218 00:10:44,480 --> 00:10:49,000 Speaker 6: the overall operating Max fleet and the order backlog. So 219 00:10:49,040 --> 00:10:52,640 Speaker 6: the Max eight is really the workhorse of that Boeing 220 00:10:52,679 --> 00:10:55,079 Speaker 6: family of jets, and that so far has not come 221 00:10:55,160 --> 00:10:58,040 Speaker 6: under scrutiny, although it's a fair question as to whether 222 00:10:58,160 --> 00:10:59,080 Speaker 6: it may at some point. 223 00:10:59,320 --> 00:11:01,800 Speaker 5: George Fergus of Loloberg Intelligence was on yesterday and he 224 00:11:01,880 --> 00:11:04,600 Speaker 5: was talking about how there are some serious staffing issues 225 00:11:04,640 --> 00:11:07,560 Speaker 5: since the pandemic and that could play a role in 226 00:11:07,559 --> 00:11:09,480 Speaker 5: some of these supply chain issues or at least some 227 00:11:09,520 --> 00:11:14,080 Speaker 5: of the assembly line issues and the lack of assiduousness 228 00:11:14,080 --> 00:11:18,200 Speaker 5: to tightening the bolts. Do you buy into this? This 229 00:11:18,160 --> 00:11:20,800 Speaker 5: is something that you've been hearing from other executives of 230 00:11:20,800 --> 00:11:23,480 Speaker 5: industrial companies that they just do not have the quality 231 00:11:23,559 --> 00:11:26,280 Speaker 5: or number of staffers to really make sure that things 232 00:11:26,280 --> 00:11:27,080 Speaker 5: are done properly. 233 00:11:28,400 --> 00:11:30,360 Speaker 6: Absolutely. I mean, I think if you look back to 234 00:11:30,400 --> 00:11:33,000 Speaker 6: the pandemic, we bailed out the airlines, but we did 235 00:11:33,000 --> 00:11:36,360 Speaker 6: not bail out the aerospace manufacturing supply chain, which was 236 00:11:36,400 --> 00:11:39,480 Speaker 6: a very created a lopsided dynamic where these companies just 237 00:11:39,600 --> 00:11:41,920 Speaker 6: laid off in mass and then they could not hire 238 00:11:41,960 --> 00:11:44,200 Speaker 6: people back when they wanted to. Now, I would also 239 00:11:44,280 --> 00:11:47,440 Speaker 6: put some of the blame though, on these aerospace manufacturing companies, 240 00:11:47,679 --> 00:11:50,959 Speaker 6: because we have long had supply chain issues in this 241 00:11:51,080 --> 00:11:54,080 Speaker 6: corner of the world. Even before the pandemic, companies were 242 00:11:54,080 --> 00:11:56,920 Speaker 6: struggling to ramp up production to meet Boeing and Airbus goals, 243 00:11:57,200 --> 00:11:59,400 Speaker 6: and so you would think that maybe these companies might 244 00:11:59,400 --> 00:12:01,199 Speaker 6: have had some price of mine to hold on to 245 00:12:01,320 --> 00:12:03,959 Speaker 6: the workers. And I've written about the railroads who are 246 00:12:03,960 --> 00:12:07,400 Speaker 6: making some structural decisions about not laying off workers when 247 00:12:07,520 --> 00:12:09,880 Speaker 6: times get tough, and whether we should see sort of 248 00:12:09,920 --> 00:12:13,000 Speaker 6: a similar mindset shift in the aerospace world. I think 249 00:12:13,000 --> 00:12:14,439 Speaker 6: that would be very necessary. 250 00:12:14,480 --> 00:12:16,280 Speaker 1: I mean, Brook, you're expert at this. In the last hour, 251 00:12:16,320 --> 00:12:18,120 Speaker 1: I talked about Boeing and I looked at a fancy 252 00:12:18,160 --> 00:12:21,720 Speaker 1: Bloomberg chart, and I'm saying something happened starting on and 253 00:12:21,800 --> 00:12:25,839 Speaker 1: around twenty sixteen as simple as I can. Did they 254 00:12:25,840 --> 00:12:29,720 Speaker 1: lose the culture? Did they lose the engineering discipline when 255 00:12:29,720 --> 00:12:31,079 Speaker 1: they exited Seattle? 256 00:12:32,440 --> 00:12:34,800 Speaker 6: I think at this point, you have to look at 257 00:12:34,880 --> 00:12:37,680 Speaker 6: deep rooted cultural issues. I mean, it has been one 258 00:12:37,880 --> 00:12:40,800 Speaker 6: problem after another at Boeing, and I know Dave Calhoun 259 00:12:40,840 --> 00:12:43,440 Speaker 6: has been very resistant to conversations that this is the 260 00:12:43,480 --> 00:12:48,160 Speaker 6: cultural problem. He's resisted more sweeping overhauls of the engineering ranks, 261 00:12:48,200 --> 00:12:51,000 Speaker 6: or management ranks or the culture there. But I think 262 00:12:51,400 --> 00:12:54,040 Speaker 6: what's needed is a true reset. And I go back 263 00:12:54,080 --> 00:12:56,600 Speaker 6: to GE because there are a lot of crossovers between 264 00:12:56,600 --> 00:12:59,920 Speaker 6: GE and Boeing management. Over the years, that company went 265 00:13:00,080 --> 00:13:02,920 Speaker 6: through a proper cultural reset and it is now on 266 00:13:03,000 --> 00:13:06,960 Speaker 6: a much healthier path. It's breaking up, but it's making 267 00:13:07,000 --> 00:13:09,680 Speaker 6: money again, it's generating cash flow again, and it is 268 00:13:09,760 --> 00:13:12,400 Speaker 6: overall a much healthier company. And I think that when 269 00:13:12,440 --> 00:13:14,880 Speaker 6: you have these type of crises, and especially when it's 270 00:13:14,920 --> 00:13:18,240 Speaker 6: sort of something as basic, potentially as screwing in the 271 00:13:18,280 --> 00:13:20,600 Speaker 6: bolts on a door, you have to look at how 272 00:13:20,640 --> 00:13:23,720 Speaker 6: did we get here and what sort of cultural norms 273 00:13:23,720 --> 00:13:26,720 Speaker 6: are in place that would allow this type of thing 274 00:13:26,760 --> 00:13:29,480 Speaker 6: to happen, allow planes to be delivered in this condition. 275 00:13:29,280 --> 00:13:32,000 Speaker 2: Broken Resistant of regulates us to that conversation. 276 00:13:34,240 --> 00:13:36,480 Speaker 6: I don't think they should be resistant because I think 277 00:13:36,480 --> 00:13:38,880 Speaker 6: their reputation is also on the line here. Now, remember 278 00:13:38,920 --> 00:13:42,240 Speaker 6: that the FAA is supposed to be inspecting and checking 279 00:13:42,360 --> 00:13:46,040 Speaker 6: every single max plane before it is handed over to customers. 280 00:13:46,120 --> 00:13:47,920 Speaker 6: That was a protocol that was put in place in 281 00:13:47,960 --> 00:13:50,680 Speaker 6: the wake of those two fatal crashes. When it came 282 00:13:50,720 --> 00:13:54,200 Speaker 6: out that that flight control software was much more prone 283 00:13:54,240 --> 00:13:57,800 Speaker 6: to being triggered by malfunctioning sensors than regulators realize and 284 00:13:57,840 --> 00:14:01,760 Speaker 6: also a lot more powerful. Their reputation of the FAA 285 00:14:01,840 --> 00:14:03,760 Speaker 6: really took a hit in that accident, and this was 286 00:14:03,840 --> 00:14:05,880 Speaker 6: meant to be part of their response to that. So 287 00:14:05,920 --> 00:14:10,080 Speaker 6: the FAA also missed something here, and so I think 288 00:14:10,080 --> 00:14:12,600 Speaker 6: it should be in their interests to try to beef 289 00:14:12,679 --> 00:14:17,240 Speaker 6: up scrutiny of Boeing and also the overall aerospace safety infrastructure. 290 00:14:17,280 --> 00:14:19,280 Speaker 6: I mean, this is not the only issue that we've had. 291 00:14:19,320 --> 00:14:21,560 Speaker 6: We've also had close calls on the runways, and I 292 00:14:21,560 --> 00:14:24,120 Speaker 6: think we've gotten very comfortable as a country because we've 293 00:14:24,120 --> 00:14:27,560 Speaker 6: been lucky enough not to have very many fatal accidents 294 00:14:27,640 --> 00:14:30,920 Speaker 6: in recent years. But you cannot get complacent about aerospace safety. 295 00:14:31,000 --> 00:14:33,600 Speaker 2: We just quickly, where is your focus right now? Is 296 00:14:33,600 --> 00:14:36,960 Speaker 2: it on Boeing spirit error systems? The individuals that make 297 00:14:36,960 --> 00:14:39,040 Speaker 2: the fuselage for the seven thirty seven? Is it on 298 00:14:39,080 --> 00:14:42,680 Speaker 2: the carrier Alaskaare is it on the FAA? Where's your focus? 299 00:14:43,680 --> 00:14:45,480 Speaker 6: Well, I would say all of the above, because I 300 00:14:45,480 --> 00:14:47,640 Speaker 6: follow all those companies, But I think Boeing is the 301 00:14:47,640 --> 00:14:50,280 Speaker 6: most important story here. How do they react to this, 302 00:14:50,400 --> 00:14:52,840 Speaker 6: What types of changes do they make, whether that involves 303 00:14:52,880 --> 00:14:56,000 Speaker 6: their supply chain, whether it involves management. If you remember, 304 00:14:56,120 --> 00:14:58,600 Speaker 6: back in sort of mid twenty twenty two, there was 305 00:14:58,640 --> 00:15:02,560 Speaker 6: an unusual number of Boeing customers calling for management changes. 306 00:15:02,600 --> 00:15:05,120 Speaker 6: Now that has since sort of quieted down, but I 307 00:15:05,160 --> 00:15:07,320 Speaker 6: do wonder if in the wake of this accident that 308 00:15:07,440 --> 00:15:10,040 Speaker 6: might start to pick back up again. Now, Boeing did 309 00:15:10,120 --> 00:15:13,480 Speaker 6: name the chief operating officer last month, Stephanie Pope, who's 310 00:15:13,480 --> 00:15:15,760 Speaker 6: ahead of their services arm, sort of making her the 311 00:15:15,800 --> 00:15:19,120 Speaker 6: heir apparent to Dave Calhoun. I would keep an eye 312 00:15:19,160 --> 00:15:22,160 Speaker 6: on whether any type of management changes happened sooner rather 313 00:15:22,200 --> 00:15:24,200 Speaker 6: than later. But I would also say that this is 314 00:15:24,320 --> 00:15:26,640 Speaker 6: a company that could really use some fresh eyes and 315 00:15:26,720 --> 00:15:31,120 Speaker 6: maybe promoting from within my race and more eyebrows. 316 00:15:31,120 --> 00:15:33,520 Speaker 2: Interesting I broke this was great brook sepal and that 317 00:15:33,920 --> 00:15:35,200 Speaker 2: of Bloomberg opinion. 318 00:15:39,400 --> 00:15:42,480 Speaker 1: What we know for certain is Ian Bremer and all 319 00:15:42,520 --> 00:15:44,760 Speaker 1: of you raise your group, have to rewrite their top 320 00:15:44,840 --> 00:15:48,880 Speaker 1: risks for twenty twenty four on January ninth. That's how 321 00:15:49,040 --> 00:15:52,760 Speaker 1: fast things are happening. He is here today with the 322 00:15:52,800 --> 00:15:56,440 Speaker 1: top risk. What a grim set of risks in an 323 00:15:56,520 --> 00:16:00,920 Speaker 1: election year. How uncertain is it to get to March 324 00:16:01,480 --> 00:16:03,040 Speaker 1: or to get to say the middle of May. 325 00:16:03,320 --> 00:16:04,960 Speaker 7: Well, first of all, happy new year, Tom, and to 326 00:16:05,000 --> 00:16:07,040 Speaker 7: all of you here at Bloomberg Surveillance. It's so nice 327 00:16:07,080 --> 00:16:09,240 Speaker 7: to join you as we kick off twenty twenty four 328 00:16:09,280 --> 00:16:10,040 Speaker 7: on January ninth. 329 00:16:10,560 --> 00:16:14,560 Speaker 8: No, I don't think we have to rewrite these risks, but. 330 00:16:14,600 --> 00:16:19,360 Speaker 7: I think we have to recognize just how incapable we, 331 00:16:19,760 --> 00:16:22,880 Speaker 7: the United States and our present set of global leaders 332 00:16:23,120 --> 00:16:28,520 Speaker 7: are in trying to contain the geopolitical risks and conflicts. 333 00:16:28,280 --> 00:16:31,240 Speaker 8: That we face today. You just saw the entry we had. 334 00:16:31,080 --> 00:16:35,160 Speaker 7: Blinken standing there in the Middle East saying they need 335 00:16:35,200 --> 00:16:38,280 Speaker 7: to understand We need them to understand. 336 00:16:38,320 --> 00:16:40,160 Speaker 8: The hu Thies need to understand the need to stop this. 337 00:16:40,480 --> 00:16:42,880 Speaker 7: He could have easily said, the Hamas needs to understand 338 00:16:42,880 --> 00:16:45,320 Speaker 7: they have to let these hostages go. The Israeli war 339 00:16:45,360 --> 00:16:47,680 Speaker 7: Copit cabinet needs to understand that they can't continue to 340 00:16:47,720 --> 00:16:51,720 Speaker 7: expand the fighting in the region. The United States has 341 00:16:52,360 --> 00:16:56,640 Speaker 7: zero ability to actually make those messages land with the 342 00:16:56,680 --> 00:16:59,720 Speaker 7: actors on the ground who are escalating this. 343 00:17:00,360 --> 00:17:04,000 Speaker 1: Triangulate this right now with Freed Zakaria's essay and Foreign 344 00:17:04,040 --> 00:17:08,480 Speaker 1: Affairs Magazine in his Post American World. In the Bremer 345 00:17:08,760 --> 00:17:12,480 Speaker 1: Post American World, you say the US is battling itself. 346 00:17:12,760 --> 00:17:15,959 Speaker 1: That sounds a lot like Zakaria twenty years ago. Triangulate 347 00:17:16,080 --> 00:17:19,359 Speaker 1: right now the lack of confidence you have in our 348 00:17:19,520 --> 00:17:21,280 Speaker 1: US geopolitical strategy. 349 00:17:22,760 --> 00:17:24,479 Speaker 7: It was about twelve years ago when I first came 350 00:17:24,560 --> 00:17:27,480 Speaker 7: up with this idea of a G zero world where 351 00:17:27,760 --> 00:17:30,960 Speaker 7: the United States was not going to be willing and 352 00:17:31,160 --> 00:17:34,159 Speaker 7: able to be the global policeman, the architect of global trade, 353 00:17:34,160 --> 00:17:37,040 Speaker 7: and the promoter of global values, but that no other 354 00:17:37,160 --> 00:17:40,160 Speaker 7: country or group of countries would be able to step 355 00:17:40,200 --> 00:17:44,920 Speaker 7: into its place, and that as that geopolitical recession played out, 356 00:17:45,400 --> 00:17:48,760 Speaker 7: there would be more conflict, There would be more vacuums 357 00:17:48,760 --> 00:17:51,760 Speaker 7: that would be filled by rogue actors who take advantage 358 00:17:51,840 --> 00:17:54,680 Speaker 7: of the comparative chaos, of the lack of leadership. Twelve 359 00:17:54,760 --> 00:17:59,120 Speaker 7: years of that gets you much bigger. 360 00:17:59,080 --> 00:18:00,800 Speaker 8: And unmitting fighting. 361 00:18:01,720 --> 00:18:04,640 Speaker 7: We see that with Russia Ukraine started in twenty fourteen, 362 00:18:05,040 --> 00:18:07,760 Speaker 7: nobody really pushed back, and now we are here in 363 00:18:07,800 --> 00:18:11,040 Speaker 7: twenty twenty four and that war is turning trajectory in 364 00:18:11,040 --> 00:18:12,760 Speaker 7: a way that none of us are comfortable with. 365 00:18:13,240 --> 00:18:13,840 Speaker 8: In the West. 366 00:18:14,080 --> 00:18:16,760 Speaker 7: You see that in the Middle East, and that is 367 00:18:16,920 --> 00:18:20,280 Speaker 7: set to expand significantly. And we see in the United 368 00:18:20,280 --> 00:18:26,320 Speaker 7: States itself that we are increasingly a tribal, non functional 369 00:18:26,400 --> 00:18:27,840 Speaker 7: democracy and crisis. 370 00:18:28,440 --> 00:18:29,400 Speaker 8: Very simple point. 371 00:18:29,600 --> 00:18:33,159 Speaker 7: When you have the former Secretary of Defense under Trump 372 00:18:33,400 --> 00:18:38,159 Speaker 7: saying this man is a threat to democracy. He was 373 00:18:38,560 --> 00:18:42,520 Speaker 7: in charge of American national security under Trump. When you 374 00:18:42,600 --> 00:18:47,600 Speaker 7: have the person who is running having tried to subvert 375 00:18:47,760 --> 00:18:50,840 Speaker 7: a free and fair transfer of power, doing everything in 376 00:18:50,880 --> 00:18:51,400 Speaker 7: his power. 377 00:18:51,240 --> 00:18:51,640 Speaker 8: To do so. 378 00:18:52,040 --> 00:18:57,040 Speaker 7: In a functional democracy, that would be the number one 379 00:18:57,080 --> 00:18:58,159 Speaker 7: issue of the election. 380 00:18:58,280 --> 00:18:59,320 Speaker 8: Nothing else would be close. 381 00:19:00,119 --> 00:19:03,640 Speaker 7: So is it that we're somehow getting our facts wrong, 382 00:19:04,200 --> 00:19:06,520 Speaker 7: or is it that the United States is not a 383 00:19:06,560 --> 00:19:12,200 Speaker 7: consolidated functional democracy because there ain't no other advanced industrial democracies. 384 00:19:12,800 --> 00:19:15,159 Speaker 7: No one else in the G seven is having the 385 00:19:15,240 --> 00:19:18,920 Speaker 7: problems in legitimacy of its political institutions at the United 386 00:19:18,920 --> 00:19:20,920 Speaker 7: States is experiencing in twenty twenty four. 387 00:19:20,960 --> 00:19:23,960 Speaker 8: What do you think those What do I think which you. 388 00:19:23,880 --> 00:19:26,480 Speaker 2: Think it is? Do you think it is a functioning democracy? 389 00:19:26,640 --> 00:19:28,880 Speaker 7: No, No, I think it's a hybrid system. I think 390 00:19:29,119 --> 00:19:33,760 Speaker 7: the US democratic institutions have significantly eroded over the course 391 00:19:33,800 --> 00:19:37,960 Speaker 7: of the past several decades. We have normalized that because 392 00:19:38,040 --> 00:19:41,200 Speaker 7: all of the things that are unprecedented as they happen, 393 00:19:41,600 --> 00:19:44,000 Speaker 7: and we still live here in the United States, we're 394 00:19:44,040 --> 00:19:45,960 Speaker 7: basically saying, well, okay, I guess that's the way it 395 00:19:45,960 --> 00:19:48,320 Speaker 7: works now. So impeachment doesn't work, and we can impeach 396 00:19:48,400 --> 00:19:50,520 Speaker 7: someone twice and they can still run again. 397 00:19:50,720 --> 00:19:51,800 Speaker 8: I guess that's the way it works. 398 00:19:51,800 --> 00:19:54,000 Speaker 7: You can have ninety one indictments and I guess that's 399 00:19:54,040 --> 00:19:56,160 Speaker 7: the way it works. You can post and say things 400 00:19:56,200 --> 00:19:57,919 Speaker 7: that you never would have heard. I guess that's the 401 00:19:57,920 --> 00:20:00,359 Speaker 7: way it works now. In a set again, he's the 402 00:20:00,400 --> 00:20:04,199 Speaker 7: context of the world's most powerful, very functional economy and 403 00:20:04,240 --> 00:20:09,520 Speaker 7: the world's most functional, very powerful global defense capacity. You'd say, well, 404 00:20:09,520 --> 00:20:12,679 Speaker 7: maybe it's okay that the United States isn't a functional democracy, 405 00:20:12,800 --> 00:20:15,560 Speaker 7: but it will be different, and so yeah, I think 406 00:20:15,680 --> 00:20:19,719 Speaker 7: we can't normalize the dysfunction of the US political system, 407 00:20:19,880 --> 00:20:23,600 Speaker 7: the illegitimacy of its institutions and the fact that democracy 408 00:20:23,640 --> 00:20:26,720 Speaker 7: in twenty twenty four in the United States is in crisis. 409 00:20:26,760 --> 00:20:30,720 Speaker 8: That is the reality, and our allies know that. 410 00:20:31,200 --> 00:20:34,479 Speaker 7: They're deeply worried about it, all of them around the world, 411 00:20:35,080 --> 00:20:39,360 Speaker 7: and our adversaries see this as potentially a huge opportunity 412 00:20:39,560 --> 00:20:40,320 Speaker 7: for themselves. 413 00:20:40,359 --> 00:20:42,240 Speaker 2: So when do you see us twelve months from now, 414 00:20:42,440 --> 00:20:43,359 Speaker 2: what do things look like? 415 00:20:43,840 --> 00:20:48,040 Speaker 7: Well, first of all, let's talk about March April May. 416 00:20:48,320 --> 00:20:50,240 Speaker 8: Tom said, you need to completely rewrite this. 417 00:20:50,680 --> 00:20:54,600 Speaker 7: Then when Trump gets the nomination, which is very very likely, 418 00:20:55,119 --> 00:20:59,160 Speaker 7: he will overnight become far more powerful on the US 419 00:20:59,200 --> 00:21:02,760 Speaker 7: and the global state. All of the Republicans will be 420 00:21:02,880 --> 00:21:05,160 Speaker 7: loyal to him in a way that right now they 421 00:21:05,200 --> 00:21:09,840 Speaker 7: still have hedging capacity and the media that is following 422 00:21:09,880 --> 00:21:13,480 Speaker 7: and supporting Trump, and the ability to raise money to 423 00:21:13,720 --> 00:21:15,000 Speaker 7: drive that campaign. 424 00:21:15,040 --> 00:21:17,320 Speaker 8: And that means his policy pronouncements like. 425 00:21:17,560 --> 00:21:19,800 Speaker 7: There would never be a war against Israel if I 426 00:21:19,840 --> 00:21:22,200 Speaker 7: was president, because I showed the Iranians I announced that 427 00:21:22,240 --> 00:21:26,080 Speaker 7: assassination of Cosumsulamani. Well, that's going to be the policy 428 00:21:26,640 --> 00:21:30,840 Speaker 7: for Trump, and therefore the Republicans Zelenski corrupt. 429 00:21:30,880 --> 00:21:32,000 Speaker 8: I'd end this warrant to day. 430 00:21:32,000 --> 00:21:33,639 Speaker 7: I'd show him what's what I'm not going to give 431 00:21:33,720 --> 00:21:36,000 Speaker 7: him billions and billions of dollars on the back of 432 00:21:36,040 --> 00:21:39,440 Speaker 7: the American taxpace that becomes the policy. So the Overton 433 00:21:39,520 --> 00:21:43,440 Speaker 7: window right of what is an acceptable policy framed debate 434 00:21:43,520 --> 00:21:46,720 Speaker 7: in the United States is going to change very dramatically 435 00:21:47,160 --> 00:21:50,280 Speaker 7: when Trump becomes the nominee. Again, assuming that it's not given, 436 00:21:50,320 --> 00:21:54,879 Speaker 7: but assuming that in twelve months time, the stakes are 437 00:21:54,880 --> 00:21:58,520 Speaker 7: a lot higher for both leaders than they ever have 438 00:21:58,760 --> 00:22:03,120 Speaker 7: been before. Right, So if Trump wins, Biden and many 439 00:22:03,160 --> 00:22:06,920 Speaker 7: many people around him believe that they will face legal jeopardy, 440 00:22:06,960 --> 00:22:10,360 Speaker 7: that Trump will politicize the FBI, the dj the irs 441 00:22:10,480 --> 00:22:14,080 Speaker 7: and go after them and a McCarthyite, you know, prioritization 442 00:22:14,119 --> 00:22:16,720 Speaker 7: of policy, where Trump of course faces potential prison time. 443 00:22:16,760 --> 00:22:19,000 Speaker 7: So the stakes are much much higher than we saw 444 00:22:19,040 --> 00:22:19,960 Speaker 7: in twenty twenty. 445 00:22:20,119 --> 00:22:23,359 Speaker 5: Just quickly, I is Biden the antidote to this at 446 00:22:23,359 --> 00:22:25,720 Speaker 5: a time where we're there are real questions around the 447 00:22:25,760 --> 00:22:30,919 Speaker 5: Defense secretary and his absence, his undisclosed hospitalization in the 448 00:22:31,000 --> 00:22:34,080 Speaker 5: sense that President Biden is not very popular and isn't 449 00:22:34,119 --> 00:22:36,000 Speaker 5: really addressing that. 450 00:22:36,160 --> 00:22:38,320 Speaker 7: I was a little surprised that we had no idea 451 00:22:38,359 --> 00:22:40,720 Speaker 7: where the Secretary Defense was for several days in the 452 00:22:40,720 --> 00:22:42,720 Speaker 7: middle of the war. That usually happens in China, that 453 00:22:42,800 --> 00:22:45,560 Speaker 7: doesn't happen in the United States. Yeah, And I discussed 454 00:22:45,560 --> 00:22:47,119 Speaker 7: that with an official yesterday and he kind of had 455 00:22:47,119 --> 00:22:47,720 Speaker 7: a chuckle over it. 456 00:22:47,720 --> 00:22:49,080 Speaker 2: It's exactly what I said yesterday. 457 00:22:49,119 --> 00:22:52,000 Speaker 8: Yeah, is it really I missed that I talked to 458 00:22:52,119 --> 00:22:54,080 Speaker 8: you said, man, no, no, this is a Chinese official. 459 00:22:54,119 --> 00:22:55,479 Speaker 8: But it was pretty funny. We all had a good 460 00:22:55,520 --> 00:22:57,480 Speaker 8: chuckle over it. Not not what you want to see. 461 00:22:57,560 --> 00:23:04,040 Speaker 7: Look, I think that Biden has the intention of being 462 00:23:04,119 --> 00:23:07,520 Speaker 7: the antidote. He wants to follow rule of law. But 463 00:23:07,720 --> 00:23:09,879 Speaker 7: I mean, we're in the fourth year of the Biden 464 00:23:09,880 --> 00:23:13,639 Speaker 7: administration and the country. The reality is the country is 465 00:23:13,720 --> 00:23:18,600 Speaker 7: more politically divided. Our institutions are weaker today than they 466 00:23:18,640 --> 00:23:22,720 Speaker 7: were when Biden became president. So he does not have 467 00:23:22,760 --> 00:23:27,960 Speaker 7: the ability to resolve the divisions in the United States. Look, 468 00:23:27,960 --> 00:23:30,240 Speaker 7: you look at Russia and Ukraine today and you'd say 469 00:23:30,240 --> 00:23:32,960 Speaker 7: that Zelenski would like to end the war, but he 470 00:23:33,000 --> 00:23:36,320 Speaker 7: doesn't have the ability to do that, right, And that's 471 00:23:36,359 --> 00:23:40,080 Speaker 7: the problem. We have these major conflicts geopolitically between Russia 472 00:23:40,080 --> 00:23:43,600 Speaker 7: and Ukraine, between Israel and Hamas, and between the United 473 00:23:43,600 --> 00:23:46,800 Speaker 7: States and itself. And in none of these cases is 474 00:23:46,840 --> 00:23:49,800 Speaker 7: diplomacy and option. And in none of these cases do 475 00:23:49,840 --> 00:23:53,639 Speaker 7: the principles have the ability and the willingness to stop 476 00:23:53,720 --> 00:23:57,520 Speaker 7: the fighting. That that's what twenty twenty four is. That 477 00:23:58,160 --> 00:24:00,280 Speaker 7: is when I look ahead in twelve months time, that's 478 00:24:00,320 --> 00:24:02,159 Speaker 7: where we are. That's what jizra means. 479 00:24:02,280 --> 00:24:04,720 Speaker 2: Always an interesting rate. Thanks for Johannissa. It's going to 480 00:24:04,720 --> 00:24:07,560 Speaker 2: catch on in prema if you write A great. 481 00:24:16,880 --> 00:24:19,160 Speaker 1: Part of what you get here is the view from 482 00:24:19,160 --> 00:24:23,600 Speaker 1: a different geography, Nadiere. Martin Wiggens, director, it's veeeling capital. 483 00:24:23,640 --> 00:24:27,800 Speaker 1: We're thrilled that you Jones today from Oslo, Norway. What 484 00:24:28,000 --> 00:24:31,720 Speaker 1: is the oil distinction of your Norway? It's not that 485 00:24:31,960 --> 00:24:39,160 Speaker 1: much production, but Norway gets so much credibility within oil analysis. 486 00:24:39,200 --> 00:24:40,000 Speaker 1: How does that work? 487 00:24:41,080 --> 00:24:45,040 Speaker 9: Thank you? Well, we are, of course a steady producer, right, 488 00:24:45,119 --> 00:24:47,879 Speaker 9: we are a country that delivers oil. Of course we 489 00:24:47,960 --> 00:24:52,240 Speaker 9: are not at peak production and we're declining quite steadily 490 00:24:52,280 --> 00:24:55,359 Speaker 9: when we look forward after twenty twenty five twenty six, 491 00:24:55,520 --> 00:24:58,560 Speaker 9: and on top of that energy transition as well. We're 492 00:24:58,600 --> 00:25:01,760 Speaker 9: the forefront in terms of test us buy and things 493 00:25:01,800 --> 00:25:05,159 Speaker 9: like that. But we are very reliable in producing and 494 00:25:05,200 --> 00:25:07,840 Speaker 9: delivering oil and natural gas, as we saw when this 495 00:25:08,400 --> 00:25:09,840 Speaker 9: war started in Ukraine. 496 00:25:10,240 --> 00:25:12,439 Speaker 1: A two part question, is there a one price for 497 00:25:12,520 --> 00:25:15,440 Speaker 1: oil now and is that Brent crude? And how does 498 00:25:15,480 --> 00:25:21,280 Speaker 1: the massive American production change your calculus on what Brent does. 499 00:25:22,400 --> 00:25:26,800 Speaker 9: The US market is a huge influencer and it influences 500 00:25:26,840 --> 00:25:30,040 Speaker 9: not only the oil price, it influences shipping prices and 501 00:25:30,080 --> 00:25:33,920 Speaker 9: how movements go all around the world. When we look 502 00:25:33,960 --> 00:25:36,680 Speaker 9: at Brent, of course there is the North Sea which 503 00:25:36,720 --> 00:25:39,160 Speaker 9: is setting the benchmark, and we look at those physical grades, 504 00:25:39,200 --> 00:25:42,880 Speaker 9: but they're very small relative to the overall picture. When 505 00:25:42,960 --> 00:25:46,399 Speaker 9: we see what is the swing crude right now because 506 00:25:46,440 --> 00:25:49,360 Speaker 9: of the OPEC cuts and because Saudi of Arabia, yes 507 00:25:49,400 --> 00:25:52,600 Speaker 9: they lowered the official selling prices, but they're towing the 508 00:25:52,640 --> 00:25:56,119 Speaker 9: line and maintaining low production. That swing producer right now 509 00:25:56,280 --> 00:25:59,240 Speaker 9: is the United States. And that is why it's a huge. 510 00:25:59,000 --> 00:26:02,560 Speaker 2: Influence, amazing change. Yeah, it raises the question just how 511 00:26:02,600 --> 00:26:05,320 Speaker 2: influential the cartel still is, just how much power do 512 00:26:05,359 --> 00:26:05,600 Speaker 2: they have? 513 00:26:06,160 --> 00:26:08,040 Speaker 9: But this was I think the big fear that played 514 00:26:08,040 --> 00:26:11,000 Speaker 9: out yesterday because by lowering those prices, Saudi Arabia has 515 00:26:11,040 --> 00:26:14,160 Speaker 9: been saying throughout December. Demand is good, but by dropping 516 00:26:14,160 --> 00:26:17,160 Speaker 9: it so steeply in two dollars, they're saying, oh, actually 517 00:26:17,240 --> 00:26:19,160 Speaker 9: demand is not that strong. At the same time, when 518 00:26:19,160 --> 00:26:21,720 Speaker 9: we saw US production jump one point one million barrels 519 00:26:21,720 --> 00:26:24,200 Speaker 9: per day year on year last year. Oh, are they 520 00:26:24,240 --> 00:26:27,040 Speaker 9: starting to go for market share? That is the concern. 521 00:26:27,160 --> 00:26:31,399 Speaker 9: But it's normal for them to cut prices in January, 522 00:26:31,720 --> 00:26:34,600 Speaker 9: so the market is waiting to see, Okay, are they 523 00:26:34,640 --> 00:26:38,400 Speaker 9: going to be cutting in February March, and then they 524 00:26:38,440 --> 00:26:40,520 Speaker 9: start to get worried. So although we had a big 525 00:26:40,560 --> 00:26:42,840 Speaker 9: sell off yesterday, we've bounced back and we think that 526 00:26:42,880 --> 00:26:44,480 Speaker 9: positioning is still late on this move. 527 00:26:44,520 --> 00:26:46,200 Speaker 2: I'm trying to remember the year when was the market 528 00:26:46,240 --> 00:26:49,520 Speaker 2: share gained year? Was that twenty fourteen, twenty fifteen when 529 00:26:49,520 --> 00:26:51,639 Speaker 2: they made a massive push for that Yes, that all. 530 00:26:51,920 --> 00:26:55,480 Speaker 9: Absolutely, when we finally got that shale invasion on the 531 00:26:55,480 --> 00:26:58,600 Speaker 9: global market, which we've been waiting for, to be honest, 532 00:26:58,600 --> 00:27:01,160 Speaker 9: for more than a year, and the demand just kept 533 00:27:01,240 --> 00:27:03,560 Speaker 9: growing in Asia until it broke the back. 534 00:27:04,040 --> 00:27:06,160 Speaker 2: Do you think you would see a repeat of that? 535 00:27:06,280 --> 00:27:08,000 Speaker 2: Is that what you're suggesting we're looking out for. 536 00:27:08,359 --> 00:27:11,560 Speaker 9: We do not see that right now at all. Being 537 00:27:11,600 --> 00:27:15,439 Speaker 9: the case because the US growth in those years, we 538 00:27:15,440 --> 00:27:17,600 Speaker 9: were looking at one point five two million barrels per 539 00:27:17,640 --> 00:27:19,760 Speaker 9: day year on your growth, one point one is punchy 540 00:27:19,800 --> 00:27:22,320 Speaker 9: when the market was expecting five hundred thousand barrels per day, 541 00:27:22,600 --> 00:27:24,160 Speaker 9: but it's not enormous. 542 00:27:24,640 --> 00:27:27,720 Speaker 5: But there is actually an analogy, which is when oil 543 00:27:27,720 --> 00:27:30,520 Speaker 5: prices fall to a certain level, the shale patch doesn't 544 00:27:30,520 --> 00:27:33,680 Speaker 5: make sense and production stops or slows and you see 545 00:27:33,760 --> 00:27:36,880 Speaker 5: rigs taking it offline. Are we close to that kind 546 00:27:36,960 --> 00:27:39,119 Speaker 5: of point? If the US is the swing producer, are 547 00:27:39,160 --> 00:27:42,960 Speaker 5: we close to them adjusting supplies in response to a 548 00:27:43,040 --> 00:27:43,760 Speaker 5: lack of demand. 549 00:27:44,600 --> 00:27:47,040 Speaker 9: We would need to see WTI trading in the low 550 00:27:47,119 --> 00:27:49,600 Speaker 9: sixties before I think there is a change in behavior. 551 00:27:49,880 --> 00:27:52,479 Speaker 9: But because we have such a low duck count right 552 00:27:52,520 --> 00:27:56,000 Speaker 9: the drilled uncompleted wells, the response will be slower. So 553 00:27:56,080 --> 00:27:58,720 Speaker 9: this is where we expect seasonally a slow down in 554 00:27:58,720 --> 00:28:02,120 Speaker 9: that production because they're not so personic prices. They're steady prices, 555 00:28:02,480 --> 00:28:04,480 Speaker 9: but we're not going to see that kind of growth 556 00:28:04,760 --> 00:28:07,040 Speaker 9: we saw last year. The big change though, is we 557 00:28:07,080 --> 00:28:10,960 Speaker 9: should start to see rig counts actually increase some which 558 00:28:11,000 --> 00:28:12,879 Speaker 9: we didn't see last year. And that's what the market 559 00:28:12,920 --> 00:28:13,760 Speaker 9: really got wrong. 560 00:28:14,080 --> 00:28:16,040 Speaker 5: Bear with me because this is sort of complicated, But 561 00:28:16,080 --> 00:28:18,360 Speaker 5: I remember when people argued that part of the reason 562 00:28:18,440 --> 00:28:21,280 Speaker 5: oil prices were going down was because rates were so high. 563 00:28:21,480 --> 00:28:24,040 Speaker 5: There was an actual cost to parking your capital and 564 00:28:24,080 --> 00:28:27,080 Speaker 5: a physical good that wasn't generating the same kind of 565 00:28:27,080 --> 00:28:31,200 Speaker 5: income that t bells were. If the FED cuts rates, 566 00:28:31,520 --> 00:28:34,920 Speaker 5: could that effectively send more investors into oil and cause 567 00:28:34,920 --> 00:28:36,119 Speaker 5: oil prices to rise. 568 00:28:37,359 --> 00:28:41,880 Speaker 9: It could, yes, And because especially the expectation, well that 569 00:28:42,000 --> 00:28:45,320 Speaker 9: demand will be higher, right, So then we when we 570 00:28:45,360 --> 00:28:47,120 Speaker 9: look at our forecast right now for the US, we're 571 00:28:47,120 --> 00:28:49,840 Speaker 9: only seeing maybe fifty hundred thousand barrels per day year 572 00:28:49,880 --> 00:28:52,320 Speaker 9: in year growth in demand. It can be much higher. 573 00:28:52,600 --> 00:28:55,040 Speaker 9: When we look at China, the expectation is four hundred 574 00:28:55,040 --> 00:28:57,280 Speaker 9: thousand barls per day. Ye're in your growth versus one 575 00:28:57,280 --> 00:29:01,280 Speaker 9: point six last year. It's very tepid. Changes can absolutely 576 00:29:01,320 --> 00:29:04,640 Speaker 9: drive that. The big driver this year though is non 577 00:29:04,800 --> 00:29:08,360 Speaker 9: OECB Asia ex India, ex China. That's five hundred and 578 00:29:08,360 --> 00:29:10,360 Speaker 9: six hundred thousand barrels per day year on your growth 579 00:29:10,440 --> 00:29:12,959 Speaker 9: that didn't come last year that we thought would come 580 00:29:13,040 --> 00:29:13,520 Speaker 9: last year. 581 00:29:13,560 --> 00:29:16,000 Speaker 5: We haven't even mentioned the conflict to the Middle East. Yeah, 582 00:29:16,080 --> 00:29:18,840 Speaker 5: and I'm really struggling to even understand what to look 583 00:29:18,880 --> 00:29:21,480 Speaker 5: for to understand when this will influence oil prices, because 584 00:29:21,480 --> 00:29:23,600 Speaker 5: everyone was expecting it to and then it didn't. What 585 00:29:23,640 --> 00:29:26,080 Speaker 5: are you watching for to understand that, yes, this is 586 00:29:26,120 --> 00:29:28,040 Speaker 5: going to actually have a disruptive influence. 587 00:29:28,200 --> 00:29:32,000 Speaker 9: Firstly, we're watching crude flows and product flows right so 588 00:29:32,320 --> 00:29:35,920 Speaker 9: we have seen less Russian creed going through the Red Sea, 589 00:29:36,120 --> 00:29:38,720 Speaker 9: but that's alongside what they were supposed to cut, so 590 00:29:38,760 --> 00:29:41,040 Speaker 9: there's no big change there. We're also looking to see 591 00:29:41,080 --> 00:29:43,920 Speaker 9: product exports out of the Middle East into Europe. Those 592 00:29:43,960 --> 00:29:49,080 Speaker 9: should really slow down. Those should really pump up Middle 593 00:29:49,080 --> 00:29:52,280 Speaker 9: distillate prices, which then should support oil. That's the part 594 00:29:52,320 --> 00:29:53,600 Speaker 9: that we haven't seen yet. 595 00:29:54,040 --> 00:29:56,200 Speaker 1: I want to take a summary question back to your 596 00:29:56,240 --> 00:29:59,480 Speaker 1: work at Morgan Stanley at Philbro years ago. All that 597 00:29:59,520 --> 00:30:02,920 Speaker 1: you've done commodities, Where in God's name is US oil 598 00:30:03,000 --> 00:30:07,640 Speaker 1: policy or US oil production in five years or ten years? 599 00:30:07,680 --> 00:30:11,240 Speaker 1: Do you have any sense of the dynamic we have 600 00:30:11,440 --> 00:30:13,320 Speaker 1: out to twenty thirty. 601 00:30:14,360 --> 00:30:17,040 Speaker 9: I believe that there has been a strong understanding that 602 00:30:17,080 --> 00:30:20,080 Speaker 9: we need to maintain energy security, the reason we maintained 603 00:30:20,160 --> 00:30:22,560 Speaker 9: lower oil prices last year, and the year before was 604 00:30:22,600 --> 00:30:24,600 Speaker 9: because we had a strong spr and because we have 605 00:30:24,680 --> 00:30:27,800 Speaker 9: massive productions. So I think the investment will continue to 606 00:30:27,920 --> 00:30:32,080 Speaker 9: be in natural gas and in oil. China is taking 607 00:30:32,080 --> 00:30:34,840 Speaker 9: this out of our playbook, being the number one investor 608 00:30:34,840 --> 00:30:39,280 Speaker 9: in renewables, big oil producer, importing gas, and so I 609 00:30:39,280 --> 00:30:42,840 Speaker 9: think we will absolutely continue to do this. However, when 610 00:30:42,840 --> 00:30:46,400 Speaker 9: we look at these golden patches, maybe there's only two 611 00:30:46,480 --> 00:30:50,520 Speaker 9: million barrels per day additional growth to come, it's still 612 00:30:50,560 --> 00:30:52,200 Speaker 9: a massive number fifteen millions. 613 00:30:52,480 --> 00:30:55,680 Speaker 2: It's in just on US production and reserves. So we 614 00:30:55,760 --> 00:30:59,760 Speaker 2: drained the strategic midterm reserve, yes, a couple of winters ago. 615 00:31:00,080 --> 00:31:02,040 Speaker 2: What's left and when are we refilling it? And are 616 00:31:02,080 --> 00:31:04,360 Speaker 2: we going to do that going into an election this year? 617 00:31:04,600 --> 00:31:07,880 Speaker 9: Well, I think this depends a lot on that relationship 618 00:31:07,920 --> 00:31:11,080 Speaker 9: with Saudi Arabia. Right when we had this near piece 619 00:31:11,560 --> 00:31:15,000 Speaker 9: coming before the Hamas attack, we had Saudi Arabia announcing 620 00:31:15,000 --> 00:31:17,880 Speaker 9: more oil coming back, and then we had immediately after 621 00:31:17,920 --> 00:31:20,720 Speaker 9: the attack, Biden saying we're going to buy oil at 622 00:31:20,720 --> 00:31:23,120 Speaker 9: seventy nine ARLs and Beryl they bought a very small 623 00:31:23,160 --> 00:31:26,160 Speaker 9: token amount, but we're in a happy range. I think 624 00:31:26,200 --> 00:31:29,000 Speaker 9: for the electorate of course the electric would like it lower, 625 00:31:29,360 --> 00:31:31,280 Speaker 9: but we're not in a dangerous range. So I think 626 00:31:31,320 --> 00:31:34,720 Speaker 9: slow buying will continue. But I also think we will 627 00:31:34,720 --> 00:31:39,160 Speaker 9: see policy that is supportive of continued investment in oil 628 00:31:39,160 --> 00:31:41,600 Speaker 9: and gas, and that will really support things forward. 629 00:31:41,720 --> 00:31:43,360 Speaker 2: Nadia, thank you. It's going to say it here in 630 00:31:43,400 --> 00:31:46,480 Speaker 2: New York City. Nadia Massen wign that as fell in capital. 631 00:31:46,800 --> 00:31:50,640 Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 632 00:31:50,800 --> 00:31:55,000 Speaker 1: anywhere else you get your podcasts. Listen live every weekday 633 00:31:55,240 --> 00:31:59,760 Speaker 1: starting at seven am Eastern, Bloomberg dot Com, the iHeartRadio 634 00:32:00,560 --> 00:32:04,120 Speaker 1: tune In, and the Bloomberg Business App. You can watch 635 00:32:04,280 --> 00:32:08,600 Speaker 1: us live on Bloomberg Television and always. I'm the Bloomberg Terminal. 636 00:32:08,960 --> 00:32:13,120 Speaker 1: Thanks for listening. I'm Tom Keen, and this is Bloomberg