WEBVTT - Rate Cut Bets Spur Modest Market Gains 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.880 Business app. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.000 or watch us live on YouTube. 0:00:27.240 --> 0:00:27.880 Joining you so. 0:00:28.400 --> 0:00:32.160 From Minnesota, Brian Belski with this Rudia Mellis this morning. 0:00:32.200 --> 0:00:34.199 What was it like Brian Belski for The Globe and 0:00:34.240 --> 0:00:36.200 Mail to say you're a Canadian. 0:00:37.159 --> 0:00:38.440 Well, thank you so much. 0:00:38.680 --> 0:00:41.120 It's always great to be honest with you guys. And 0:00:41.159 --> 0:00:44.360 by the way, Lisa Miteo is talking about what about Me? 0:00:44.920 --> 0:00:47.320 In terms of the AI, there's a fantastic song from 0:00:47.400 --> 0:00:50.320 nineteen eighty four sung by Moving Pictures. It's called what 0:00:50.400 --> 0:00:52.640 About Me? And you could play that with respect to AI. 0:00:53.360 --> 0:00:56.480 But I think for years, you know, our mo for 0:00:56.560 --> 0:01:00.480 an amazing thirteen years and seven months, and I think 0:01:00.560 --> 0:01:03.360 that it was a perfect fit for us when we 0:01:03.440 --> 0:01:07.440 left Oppenheimer, because we could combine the culture of Minnesota 0:01:07.520 --> 0:01:12.200 here with what we brought to Oppenheimer. I'm sorry to 0:01:12.280 --> 0:01:15.440 BEMO with respect to our institutional focus in the US 0:01:15.480 --> 0:01:18.040 and working in New York for over twenty years, so 0:01:18.080 --> 0:01:19.240 a lot of people thought we. 0:01:19.080 --> 0:01:21.920 Were from Canada, and I'm not going to lie. I 0:01:22.000 --> 0:01:22.800 played it up. 0:01:23.440 --> 0:01:26.679 When I was seeing to seeing Canadian clients and went 0:01:26.720 --> 0:01:29.440 into the Minnesota I accent, you know a little bit. 0:01:29.600 --> 0:01:34.119 So you know, we had a wonderful experience at BIMO. 0:01:34.240 --> 0:01:36.399 We still hope that we may be partners going forward, 0:01:36.840 --> 0:01:38.559 and it was an amazing experience. 0:01:38.720 --> 0:01:42.640 What happens after we get the economic data we're not 0:01:42.840 --> 0:01:45.080 getting now, what does stocks do? 0:01:45.400 --> 0:01:47.840 It's a wonderful question because I think we're in kind 0:01:47.840 --> 0:01:50.400 of this conundrum right now. The markets actually have held 0:01:50.400 --> 0:01:52.680 in there a little bit better than we thought. We 0:01:52.720 --> 0:01:54.480 thought we'd actually get a little bit more of a 0:01:54.520 --> 0:01:57.280 pullback here. Maybe one of the problems with the market 0:01:57.360 --> 0:01:59.040 is there are too many bulls here at the end 0:01:59.040 --> 0:02:00.800 of this big bull site, or at least the end 0:02:00.840 --> 0:02:04.240 of the big move this year. And we really believe 0:02:04.320 --> 0:02:08.960 that Macro has really done a disservice to investors really 0:02:09.000 --> 0:02:10.040 since two thousand and nine. 0:02:10.040 --> 0:02:12.080 Now, your question is what happens when we get a 0:02:12.080 --> 0:02:12.799 flood of all this. 0:02:12.880 --> 0:02:18.120 Data again, it could be information overload, and at the 0:02:18.200 --> 0:02:20.320 end of the day, we're kind of looking forward with 0:02:20.360 --> 0:02:23.640 respect to what the oh, what's going to be in 0:02:23.720 --> 0:02:26.000 terms of these job losses that we keep hearing about 0:02:26.320 --> 0:02:27.880 and what the FED is going to do in twenty 0:02:27.919 --> 0:02:30.560 twenty six. I think this backup and yields to five 0:02:30.600 --> 0:02:34.320 percent clearly has put a dampening on the broadening out 0:02:34.320 --> 0:02:36.800 trade on a near term basis. We still think longer 0:02:36.880 --> 0:02:39.400 term rates a year from now will be lower, and 0:02:39.480 --> 0:02:42.080 that will actually be very very good for the broadening 0:02:42.120 --> 0:02:43.399 out trade into small. 0:02:43.080 --> 0:02:46.480 Gap into value, into things like dividend growth as well. 0:02:46.480 --> 0:02:49.720 Brian, for those that are concerned about valuation in this market, 0:02:49.760 --> 0:02:53.200 I think they may be focus in particular on kind 0:02:53.200 --> 0:02:56.040 of this AI trade and kind of the has the 0:02:56.080 --> 0:03:01.240 AI phenomenon across the economy, not just stack Has that 0:03:01.320 --> 0:03:03.640 created a bubble in the market? 0:03:03.680 --> 0:03:05.440 How do you kind of address that issue? 0:03:05.560 --> 0:03:07.160 Well, nice to see if Paul and waves you the 0:03:07.200 --> 0:03:08.800 other day when I was in studios. 0:03:09.000 --> 0:03:09.720 It's kind of fun. 0:03:09.960 --> 0:03:13.800 Anyway, I think that bubble, I know, I'm sorry that 0:03:13.840 --> 0:03:17.600 bubble is one of the most overused phrases in investments 0:03:17.639 --> 0:03:20.840 and in finance, just like dysfunctional family in most families. 0:03:20.880 --> 0:03:22.920 We'll find that out in about three weeks from today 0:03:23.320 --> 0:03:25.680 or tomorrow in terms of Thanksgiving. 0:03:25.760 --> 0:03:29.679 But anyway, I would say, I would say this that 0:03:30.320 --> 0:03:31.720 even when you're leading. 0:03:31.560 --> 0:03:34.880 Up to this interview, you talked about Qualcom, and Qualcom 0:03:34.960 --> 0:03:37.240 is a great company, but you see how Qualcom's running 0:03:37.240 --> 0:03:39.320 their business relative to some of their chip makers. We're 0:03:39.320 --> 0:03:44.000 seeing massive differentiation across companies. Back in the nineties, ninety nine, 0:03:44.080 --> 0:03:47.040 two thousand, we didn't have a lot of differentiation. All 0:03:47.080 --> 0:03:49.320 stocks that had anything to do with dot Com we 0:03:49.400 --> 0:03:51.640 used to call them dot bomb. After that, we're all 0:03:51.720 --> 0:03:55.280 kind of moving together. You're starting to see massive fundamental 0:03:55.400 --> 0:03:58.920 and performance deviations with respect to the diffusion and how 0:03:58.960 --> 0:04:02.040 these companies are. And so I don't think all companies 0:04:02.080 --> 0:04:04.360 are created equal in the AI space, and I think 0:04:04.400 --> 0:04:06.960 saying bubble is just a scare tactic. 0:04:07.000 --> 0:04:09.000 I would say also this, Paul, I. 0:04:09.000 --> 0:04:12.040 Really want you to think about the late nineties and 0:04:12.120 --> 0:04:14.720 how much everyone was making money. And what I mean 0:04:14.760 --> 0:04:17.640 by everybody is you had the big investment banks, had 0:04:17.680 --> 0:04:22.719 these these amazing and these huge IPOs, these huge secondary offerings, 0:04:22.720 --> 0:04:25.520 and most importantly, these business combinations. 0:04:25.520 --> 0:04:28.000 A lot of mergers and acquisitions. 0:04:27.560 --> 0:04:30.240 That were done with stock, where companies were buying other 0:04:30.279 --> 0:04:32.440 companies with stock that they had no value because the 0:04:32.440 --> 0:04:34.760 stock went up and they were taking that appreciation of 0:04:34.839 --> 0:04:37.000 the stock to buy another company. We're not seeing any 0:04:37.040 --> 0:04:41.599 of that yet, So when we see more of that frothy, frivolous. 0:04:41.080 --> 0:04:43.880 Type of activity, we would become a little bit more worried. 0:04:43.960 --> 0:04:47.800 On the AI side, paper buying real companies, think AOL 0:04:47.880 --> 0:04:48.800 buying time Warner. 0:04:49.160 --> 0:04:51.280 That was the trade of that decade. 0:04:51.800 --> 0:04:53.880 Brian talk to us about earning share where you know, 0:04:53.960 --> 0:04:56.800 kind of as seventy percent away through earnings. Seems to 0:04:56.800 --> 0:04:59.680 be pretty solid earning spree for Q three after a 0:04:59.720 --> 0:05:02.360 good Q two as well. Is this enough to support 0:05:02.360 --> 0:05:02.880 this market? 0:05:03.800 --> 0:05:06.240 We think it is, and that's what kept us bullish 0:05:06.680 --> 0:05:09.640 after the April time period where we saw the out 0:05:09.720 --> 0:05:13.320 year period with respect to twenty twenty six versus twenty 0:05:13.320 --> 0:05:15.440 twenty five earnings revisions. 0:05:15.120 --> 0:05:16.240 Really begin to bottom on. 0:05:16.440 --> 0:05:19.360 In turn, we think that's really what's driven a big 0:05:19.400 --> 0:05:21.479 part of this. We also think too that if you 0:05:21.480 --> 0:05:23.560 take a look at the equal weight to S and 0:05:23.640 --> 0:05:27.880 P five hundred, those companies actually from an earning's revision 0:05:27.920 --> 0:05:30.600 basis are starting to see a lot stronger recovery. 0:05:30.680 --> 0:05:34.240 Lastly, if you take a look at the operating performance. 0:05:33.720 --> 0:05:35.839 Of companies, whether or it's cash flow or return on 0:05:35.880 --> 0:05:38.760 equity or return on assets. We're starting to see from 0:05:38.800 --> 0:05:42.000 a sector basis, the majority of the most cyclical areas 0:05:42.040 --> 0:05:42.840 begin to turn and out. 0:05:42.839 --> 0:05:45.039 What makes this field really really good? About twenty six 0:05:45.040 --> 0:05:45.720 and twenty seven. 0:05:45.960 --> 0:05:48.560 Brian Belski with iss samilis here this morning across the 0:05:48.640 --> 0:05:52.760 nation on YouTube. Thank you worldwide for your support on YouTube. 0:05:52.800 --> 0:05:56.600 Subscribe to Bloomberg Podcast. We're waiting on Kathy Wood here 0:05:56.600 --> 0:05:59.480 in about five minutes. Going from Brian Bellskin to Kathy Wood. 0:06:00.160 --> 0:06:03.160 A good thing, Brian, I got to squeeze two things 0:06:03.200 --> 0:06:06.120 in here. All of a sudden, we have tech issuing 0:06:06.320 --> 0:06:10.039 bonds to pay for AI. Of course you study you 0:06:10.040 --> 0:06:12.080 should have seen him. He got an A plus at 0:06:12.160 --> 0:06:15.200 USC in Medigliani and Miller's theorem. 0:06:15.520 --> 0:06:18.119 Does it matter that big tech issues debt? 0:06:18.160 --> 0:06:21.840 Brian Belski, Well, if you take a look at debt 0:06:21.960 --> 0:06:25.719 equity in the tech sector, but then also free cash flow, 0:06:25.800 --> 0:06:27.719 it's off the charts in terms of free cash flow 0:06:27.760 --> 0:06:29.279 and debt equity is very very low. 0:06:29.400 --> 0:06:32.440 So with respect to where where they are in the cycle, 0:06:32.480 --> 0:06:35.359 it's not surprising that they're out in the debt markets 0:06:35.400 --> 0:06:38.680 doing this, especially given the fact that capex is that 0:06:38.880 --> 0:06:41.719 now the bigger question Tom is going to be in 0:06:41.760 --> 0:06:44.360 two years from now, do we see a massive reversal 0:06:44.400 --> 0:06:45.120 in Capex? 0:06:46.000 --> 0:06:47.400 And I don't mean to be Johnny. 0:06:47.120 --> 0:06:49.560 Rainklau, but at some point we're going to have our recession. 0:06:49.640 --> 0:06:52.160 So are we going to have a Capex recession in 0:06:52.200 --> 0:06:53.040 a couple of years? 0:06:53.120 --> 0:06:55.640 Again, I don't know that, but when you have. 0:06:55.680 --> 0:06:58.640 This big ramp up in capex funded by something else 0:06:58.680 --> 0:07:01.760 that is not normally funded, I think that could ultimately 0:07:01.920 --> 0:07:03.720 lead some pullback in the market. 0:07:03.760 --> 0:07:06.200 Okay, this is a classy way Belskin and I've been 0:07:06.200 --> 0:07:08.400 doing this for years and he's a class ack. 0:07:08.520 --> 0:07:08.919 Folks. 0:07:09.440 --> 0:07:13.200 As you know, Brian your opiniata and Kathy Wood is 0:07:13.240 --> 0:07:16.920 a greater piniata than Brian Belski. I want you to 0:07:16.960 --> 0:07:21.640 explain the efficacy of a tech only and a high 0:07:21.720 --> 0:07:26.600 beta tech only trade if your time frame is longer 0:07:26.640 --> 0:07:29.120 than a year. Right now to Keathy Wood's on fire, 0:07:29.720 --> 0:07:34.280 but over a longer time frame, her math, her performance 0:07:34.320 --> 0:07:37.560 goes way down. You can't have it both ways, Ken. 0:07:37.440 --> 0:07:41.560 You you can't. And we have a tremendous amount of 0:07:41.600 --> 0:07:44.000 respect for Kathy. We've known her for a long time. 0:07:44.360 --> 0:07:46.480 I remember going to her offices when I was a 0:07:46.480 --> 0:07:50.720 strategist at Merrillnch even before that, Piper, Jeffrey and so 0:07:51.600 --> 0:07:54.200 I think that the holding period for stocks is what 0:07:54.320 --> 0:07:57.720 kind of what in the average of those of those 0:07:57.760 --> 0:08:01.760 performances really really hurt that longer term side of things. 0:08:01.800 --> 0:08:03.880 But remember you go back to the. 0:08:03.800 --> 0:08:07.040 Old notion of Stocksviville long run and buying more on 0:08:07.160 --> 0:08:09.760 dips and things like that. That's why we're big believers 0:08:10.200 --> 0:08:14.320 of having different strategies and also running portfolios with respect 0:08:14.320 --> 0:08:17.320 to value, a small mid gap and dividing growth to 0:08:17.440 --> 0:08:19.040 balance out the tech positions. 0:08:19.240 --> 0:08:22.200 Yeah, Brian, one final thing. I mean, Michael Barr calls 0:08:22.240 --> 0:08:24.880 in sick today. Do you see that, like three am? 0:08:24.960 --> 0:08:25.600 Yeah, exactly. 0:08:25.640 --> 0:08:28.200 You know, he calls it in a bapslager and he's sick, 0:08:28.600 --> 0:08:30.960 and I called it missus. Barry said he's not sick. 0:08:31.240 --> 0:08:35.120 The Vikings beat the Lions. Okay, Ryan, help me here, 0:08:35.320 --> 0:08:38.720 JJ McCarthy, Is he really for real or was that 0:08:38.840 --> 0:08:41.520 a one off what he did to the Detroit Lions? 0:08:42.320 --> 0:08:44.840 Well? Quite frankly, he's got a big test this weekend too, 0:08:44.920 --> 0:08:47.600 with the Ravens. The Ravens haven't been playing great this year, 0:08:47.640 --> 0:08:50.320 but they do have that traditional strong defense. 0:08:50.840 --> 0:08:52.199 In our view, being in. 0:08:52.160 --> 0:08:55.280 Minnesota here, we don't believe anybody on the sports side 0:08:55.360 --> 0:08:57.839 until they put a string of games together. And JJ 0:08:57.960 --> 0:09:00.000 unfortunately hasn't been able to put a couple of games 0:09:00.040 --> 0:09:02.160 together number one because he's been hurt and number two 0:09:02.200 --> 0:09:05.800 because you know, he hasn't really been able to do that. 0:09:06.040 --> 0:09:08.800 So I think this is a big test for him. 0:09:08.920 --> 0:09:12.920 We're hopeful and quite frankly prayerful that we finally have 0:09:13.000 --> 0:09:14.880 a franchise quarterback, but time will tell. 0:09:15.559 --> 0:09:18.240 We will see on time will tell. With Brian Belski, 0:09:18.679 --> 0:09:22.280 he sets up Qumillus and will of course be calling 0:09:22.320 --> 0:09:26.040 on all of the institutional success he's had with this 0:09:26.160 --> 0:09:29.920 great bull market. He is one who has absolutely nailed 0:09:29.920 --> 0:09:34.360 Paul participate. Brian Belski is with Humillis. Thank you so much, Brian, 0:09:34.440 --> 0:09:37.679 and best of luck from all of Team Surveillance. 0:09:38.280 --> 0:09:39.000 Stay with us. 0:09:39.240 --> 0:09:42.480 More from Bloomberg Surveillance coming up after this. 0:09:49.720 --> 0:09:53.280 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:09:53.360 --> 0:09:56.520 weekday afternoons from seven to ten am Eastern Listen on 0:09:56.600 --> 0:09:59.959 Apple karplay and android otto with the Bloomberg Business app, 0:10:00.200 --> 0:10:02.000 or watch us live on YouTube. 0:10:02.080 --> 0:10:03.800 We have the right kind studio and now want to 0:10:03.800 --> 0:10:06.680 treat usually a Queen Victoria Streeter and a continent somewhere. 0:10:06.679 --> 0:10:08.960 Older Schweting is with us right. 0:10:08.880 --> 0:10:12.640 Now, truly expert on all of this at baron Berg Bank. 0:10:12.720 --> 0:10:14.280 Let me start with the same question I had for 0:10:14.400 --> 0:10:16.720 mister Howard at B and P Perry back. Should the 0:10:16.840 --> 0:10:20.720 Fed is Central Bank, the US Central Bank enjoy the 0:10:20.800 --> 0:10:23.480 descent that we see at the Bank of England? Do 0:10:23.559 --> 0:10:26.440 you embrace A five to four vote is a good 0:10:26.480 --> 0:10:27.280 talking point? 0:10:27.800 --> 0:10:29.760 I would say it's a good talking point, But descent 0:10:29.920 --> 0:10:32.280 on its own is not always good. It depends on 0:10:32.320 --> 0:10:35.480 what the arguments are. And in a way, this descent 0:10:35.720 --> 0:10:39.280 shows that we are in rather uncertain times. The Bank 0:10:39.360 --> 0:10:42.800 of England really is having a quandary. Inflation very high, 0:10:43.240 --> 0:10:44.839 but the economy lightly is low. 0:10:44.920 --> 0:10:47.200 So what do they do in the reset to a 0:10:47.280 --> 0:10:50.120 higher inflation rank going from one point ninety two percent 0:10:50.200 --> 0:10:53.080 out to two point x Dare I say three percent? 0:10:53.520 --> 0:10:54.679 There's a culture for. 0:10:54.720 --> 0:10:57.840 That in America, maybe there's a culture for that in 0:10:57.920 --> 0:11:03.440 pre Brexit England, Germany to Pokote, the economists Bart Simpson, Yep, 0:11:03.440 --> 0:11:06.480 they're gonna have a cow. How is Germany going to 0:11:06.520 --> 0:11:09.440 react to a new higher inflation regime? 0:11:11.120 --> 0:11:15.120 Well, Germany will probably be part of the higher inflation 0:11:15.200 --> 0:11:19.520 regime for a simple reason. We have labor shortages coming 0:11:19.559 --> 0:11:23.240 across most of the advanced world, especially in the US 0:11:23.240 --> 0:11:27.520 thanks to well net immigration dropping to zero over here 0:11:27.760 --> 0:11:32.120 and in Europe demography plays a role labor shortages. Main 0:11:32.400 --> 0:11:35.400 wages in the future, not necessarily this year or next year, 0:11:35.440 --> 0:11:37.839 but longer run will rise faster than in the past. 0:11:37.960 --> 0:11:40.640 Artificial intelligence helps but won't fully offset that. 0:11:41.080 --> 0:11:43.160 Get used to more wage. 0:11:42.880 --> 0:11:45.440 Inflation in the long run, and central banks needing to 0:11:45.559 --> 0:11:48.320 keep rates at a level that's above what we usually 0:11:48.320 --> 0:11:49.960 had for the last twenty years. 0:11:50.520 --> 0:11:55.679 You know, most of us grew up with globalization and 0:11:56.520 --> 0:11:58.800 arguably the net positive effects of globalization. 0:11:59.559 --> 0:12:03.240 Is globalization dead or on the back burner? 0:12:03.480 --> 0:12:06.560 How do you think about globalzation and the economic effects 0:12:06.559 --> 0:12:08.880 of globalization over the last forty fifty years? 0:12:09.120 --> 0:12:10.199 Where are we on that story? 0:12:10.240 --> 0:12:10.480 Now? 0:12:11.400 --> 0:12:13.439 The big wave of globalization is over. 0:12:13.679 --> 0:12:16.640 China has fully integrated into the world economy, and now 0:12:16.679 --> 0:12:19.080 it's actually that China is sort of decoupling here, and 0:12:19.120 --> 0:12:22.360 they're a bit from the global economy, and we are 0:12:22.640 --> 0:12:25.079 no longer in a phase of globalization. We are in 0:12:25.120 --> 0:12:30.880 a phase of regionalization. Trade relations and financial relations between friends, 0:12:31.160 --> 0:12:35.240 between partners, between close neighbors are likely to increase significantly. 0:12:35.320 --> 0:12:37.680 We see the trend clearly in Europe where we see 0:12:37.720 --> 0:12:40.360 our exports to the US and China drop, what where 0:12:40.400 --> 0:12:44.840 we see our internal trade increase. So French choring, French 0:12:44.920 --> 0:12:47.959 trading would say, is the new is the new trend? 0:12:48.040 --> 0:12:50.559 And then we'll see what happens with AI with So. 0:12:50.520 --> 0:12:54.040 The Germany district are getting closer together, well, they've been 0:12:54.080 --> 0:12:56.640 pretty pretty close for a long time already, but it's 0:12:56.640 --> 0:12:58.959 the Germans and the pone size one example, are getting 0:12:58.960 --> 0:12:59.560 closer together. 0:12:59.679 --> 0:13:02.719 For instan it's Germany now exports more to Poland than 0:13:02.720 --> 0:13:03.559 it does to China. 0:13:03.880 --> 0:13:05.440 This is one of the big changes in the world. 0:13:05.720 --> 0:13:07.719 This is really This came up a couple of days ago. 0:13:07.800 --> 0:13:10.880 Holger schmeting with US folks to advance the conversation, and 0:13:10.880 --> 0:13:14.960 we welcome all of you acrassination on YouTube. Thank you 0:13:15.080 --> 0:13:18.199 so much for this experiment. A lot of conversation in 0:13:18.320 --> 0:13:22.440 Montreal about the YouTube talked about it's another distribution of 0:13:22.480 --> 0:13:25.120 what we're doing, particularly abroad, and thank you so much. 0:13:25.360 --> 0:13:28.040 The October numbers at Google gave us were just really 0:13:28.400 --> 0:13:31.920 really outstanding futures of ten here, the VIC seventeen point 0:13:32.000 --> 0:13:35.920 eight three and the broader economy globally in America. Holger 0:13:35.960 --> 0:13:40.439 schmeeting with this a Behrenberg Bank. I look Holger at 0:13:40.480 --> 0:13:42.640 where we are and to me, it still comes down 0:13:42.720 --> 0:13:47.760 to business investment, the whole AI distraction and nominal GDP. 0:13:48.320 --> 0:13:51.720 What's your frame out of nominal GDP out two years. 0:13:52.760 --> 0:13:55.320 Well, for the US, nominal DDP growth is going to 0:13:55.360 --> 0:14:00.640 slow somewhat, largely because the real economy is slow. That 0:14:00.760 --> 0:14:04.920 is largely due to Trump policies. Tariffs are ultimately bad, 0:14:05.040 --> 0:14:08.239 even if they'll lead to an initial search of inward investment. 0:14:08.840 --> 0:14:12.360 And the AI boom is great, but you probably cannot 0:14:12.400 --> 0:14:16.800 maintain the growth rates of AI related investment. And as 0:14:16.840 --> 0:14:19.400 to inflation in the US, it will recede a bit 0:14:19.440 --> 0:14:21.600 thanks to the help of shelter for say the next 0:14:21.640 --> 0:14:25.680 twelve month, but it will stay elevated point five percent 0:14:25.720 --> 0:14:26.960 at higher and longer term. 0:14:27.040 --> 0:14:28.880 Labor shortage is biting the. 0:14:29.000 --> 0:14:32.560 US inflation rate is set will likely settle at two 0:14:32.560 --> 0:14:35.200 point five to three percent, at one point five percent 0:14:35.240 --> 0:14:38.240 trend growth to that and your nominal GDP well four 0:14:38.280 --> 0:14:38.680 and a bit. 0:14:39.960 --> 0:14:44.240 We saw Germany and some other European countries step up 0:14:44.240 --> 0:14:49.680 their spending earlier this year in terms of infrastructure defense. 0:14:50.480 --> 0:14:52.800 Give us an update on that. Is that actually happening. 0:14:52.800 --> 0:14:56.120 Are the dollars being spent or the euros being spent? 0:14:56.640 --> 0:14:58.320 Well, what you saw earlier this year is actually in 0:14:58.360 --> 0:15:01.440 an announcement that Germany will step up in spending. Okay, 0:15:01.600 --> 0:15:05.960 we have seen it for defense spending since twenty three 0:15:06.120 --> 0:15:09.160 that is being stepped up, But the big investment infrastructure 0:15:09.160 --> 0:15:12.920 boost is only in the making. Germany passed its budget 0:15:12.960 --> 0:15:16.080 for this year in September, so the orders are now 0:15:16.160 --> 0:15:19.720 being placed, probably for the actual investment taking place next year, 0:15:19.920 --> 0:15:22.400 which is one reason why next year Germany will be 0:15:22.520 --> 0:15:24.600 doing a little better on its economy than it's been 0:15:24.640 --> 0:15:25.600 doing for the last four years. 0:15:25.600 --> 0:15:27.360 Can I do an audible sure? Okay. 0:15:27.360 --> 0:15:30.280 One of the big themes in Montreal was like where 0:15:30.240 --> 0:15:32.920 we're going with climate change? Of David Gura down in 0:15:32.920 --> 0:15:36.880 Brazil at COP thirty and all that. I read an 0:15:36.960 --> 0:15:41.560 article about Portia which I think is owned by VWS Buzzing, 0:15:42.000 --> 0:15:44.680 and they're flat on their back because they bet on 0:15:44.840 --> 0:15:47.640 electric and they're turning away from that. You're one of 0:15:47.720 --> 0:15:50.800 the best I know on this holder. Where is green? 0:15:51.720 --> 0:15:57.120 Where is climate change? Where is the liberality of those politics? 0:15:57.480 --> 0:16:01.360 I'm a continent in Britain over the next five years. 0:16:01.400 --> 0:16:02.560 Is there a shift going on? 0:16:03.240 --> 0:16:06.840 There is a shift going on, not really away from greenery. 0:16:06.920 --> 0:16:09.560 We in Europe are fully aware that climate change is 0:16:09.560 --> 0:16:12.200 a threat, but we're also aware that we have to 0:16:12.200 --> 0:16:16.720 be pragmatic about how we reduce our CO two emissions. 0:16:17.120 --> 0:16:20.920 So we are heading for more flexible, more pragmatic approaches, 0:16:21.400 --> 0:16:23.480 and so some companies that tried in a way to 0:16:23.680 --> 0:16:27.880 front run the transition to electric vehicles are now seeing okay, 0:16:28.160 --> 0:16:30.960 we're not going that fast, but it's the pace is 0:16:31.000 --> 0:16:36.200 slowing down, but the transition towards greener outlook, towards greener 0:16:36.200 --> 0:16:39.440 policies that is ongoing in Europe. 0:16:39.840 --> 0:16:42.280 The most visious notes I ever got was from a 0:16:42.320 --> 0:16:45.240 fan l from New Jersey. Oh yeah, Elle emails in. 0:16:45.360 --> 0:16:48.040 He goes It's not the Detroit Auto Show, it's the 0:16:48.080 --> 0:16:52.120 North American International Auto Show. I'm at the North American 0:16:52.200 --> 0:16:55.520 International Auto Show Polgish meeting with the head of Mercedes, 0:16:55.520 --> 0:16:58.720 the guy with the mustache, and the answer is he goes, 0:16:58.840 --> 0:17:01.440 we're not going green line, that we're going to be hybrid. 0:17:01.880 --> 0:17:06.040 So in Germany there's this parsing between Mercedes, who've done 0:17:06.080 --> 0:17:09.320 it more intelligently than someone like Porsche. Is that is 0:17:09.359 --> 0:17:10.000 that accurate? 0:17:10.800 --> 0:17:13.399 Well, different companies have done it differently, and they need 0:17:13.520 --> 0:17:17.080 Some companies went probably a bit too far in trying 0:17:17.119 --> 0:17:20.439 to sort of front run the green but hybrid is 0:17:20.520 --> 0:17:23.399 sort of probably an intermediate stage. I would say we 0:17:23.480 --> 0:17:28.240 are ultimately going very much towards electro mobility, but the 0:17:28.320 --> 0:17:30.920 pace at which we are going and the transition being 0:17:30.920 --> 0:17:33.639 a bit more pragmatic, a bit more hybrid, that is 0:17:33.760 --> 0:17:36.440 kind of a change that's creeping in In response to well, 0:17:36.520 --> 0:17:38.080 it's it's not cheap to do the trend. 0:17:38.200 --> 0:17:40.960 Can I just make an observation for Augish meeting and 0:17:41.040 --> 0:17:43.920 all of the continent, it is so good that Lufthansa 0:17:44.240 --> 0:17:47.000 didn't get rid of the seven forty seven. One of 0:17:47.040 --> 0:17:50.160 the great things in New York City is a Loutanza 0:17:50.520 --> 0:17:51.640 seven forty. 0:17:51.320 --> 0:17:55.480 Seven j a Newerican JFK. Every day that's a great 0:17:55.480 --> 0:17:58.080 and beautiful they're way much. We should bring them back. 0:17:58.240 --> 0:18:00.520 Yeah, I mean, we're definitely that's a streat point. 0:18:00.760 --> 0:18:03.400 Holger schmraining with us on this day of dissent at 0:18:03.400 --> 0:18:07.399 the Bank of England. Stay with us. More from Bloomberg 0:18:07.480 --> 0:18:08.760 Surveillance coming. 0:18:08.560 --> 0:18:16.600 Up after this. 0:18:16.600 --> 0:18:20.520 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:18:20.560 --> 0:18:23.879 starting at seven am Eastern on Applecarplay and Android Auto 0:18:23.960 --> 0:18:26.920 with the Bloomberg Business app. You can also listen live 0:18:27.000 --> 0:18:30.600 on Amazon Alexa from our flagship New York station, Just 0:18:30.640 --> 0:18:34.240 say Alexa play Bloomberg eleven thirty joining. 0:18:33.920 --> 0:18:36.240 Us now and really really looking for She's been so 0:18:36.320 --> 0:18:39.720 busy that we really had a challenge to get around 0:18:39.720 --> 0:18:43.480 now a generous amount of time was Shannon O'Neill's Senior 0:18:43.520 --> 0:18:47.680 Vice President Greenberg Chair at the Council on Foreign Relations, 0:18:47.680 --> 0:18:53.040 Definitive on Latin America in the broader global economy. Shannon O'Neil, 0:18:53.040 --> 0:18:55.720 you've got though it's been way too long, by the way, Shannon, 0:18:55.800 --> 0:18:59.960 you've got this fabulous essay on supply lines. If you're 0:19:00.200 --> 0:19:06.280 to sit with President Trump and explain America's naivete about 0:19:06.359 --> 0:19:09.280 our supply lines, what would you say to the president. 0:19:10.280 --> 0:19:12.480 Well, thanks for having me, and there's so much to say, 0:19:12.920 --> 0:19:15.960 but I think, especially in this article, i'd narrow in 0:19:16.080 --> 0:19:19.320 on defense because that really is the issue and where 0:19:19.359 --> 0:19:22.320 there is reasons to intervene in the US economy to 0:19:22.359 --> 0:19:25.959 make sure that we're secure. And here the blanket TIFFs 0:19:26.000 --> 0:19:27.880 that we put in place, some of the other controls 0:19:27.880 --> 0:19:31.280 that we've had are making us less safe rather than more. 0:19:31.320 --> 0:19:33.959 And in part because the company is the primes, you know, 0:19:34.160 --> 0:19:37.160 those at our defense contractors is really hard to work 0:19:37.160 --> 0:19:39.840 in this environment. They have challenges now to their supply 0:19:40.800 --> 0:19:44.120 because tariffs on steel, aluminum, other things are increasing their costs, 0:19:44.119 --> 0:19:46.159 which is more expensive for our tax players and for 0:19:46.240 --> 0:19:50.280 these companies. But there's also challenges now for demand. These 0:19:50.280 --> 0:19:52.560 are specialized industries, and you know the way you get 0:19:52.560 --> 0:19:55.280 contracts is through treaties, through alliances. You don't sell an 0:19:55.400 --> 0:19:58.600 F thirty five to just anybody. And as we step 0:19:58.680 --> 0:20:02.000 back from these alliances with traditional allies, you know there's 0:20:02.119 --> 0:20:04.320 smaller markets out there from many of these companies. 0:20:04.840 --> 0:20:09.520 Shannon, does that open the way for China, Russia others 0:20:09.560 --> 0:20:10.240 to fill the void? 0:20:11.560 --> 0:20:13.600 It opens the way for those, but it also opens 0:20:13.600 --> 0:20:16.320 the way for other industries to grow around the world. Right, 0:20:16.320 --> 0:20:19.000 We've seen Germany talk about spending a trillion dollars over 0:20:19.000 --> 0:20:20.560 the next ten years, but a lot of that's for 0:20:20.600 --> 0:20:24.639 their own defense industry. And you know, traditionally allies like 0:20:24.680 --> 0:20:29.439