1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,680 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. This 5 00:00:28,760 --> 00:00:31,840 Speaker 1: is a great interview because monemage and has one of 6 00:00:31,880 --> 00:00:36,199 Speaker 1: the great double major undergraduate degrees in the combine of 7 00:00:36,240 --> 00:00:39,879 Speaker 1: North American education out of Warten and economics and computer 8 00:00:39,960 --> 00:00:42,159 Speaker 1: science as well, and one of that means you know 9 00:00:42,240 --> 00:00:46,000 Speaker 1: that there's a zero in one in computer language. Did 10 00:00:46,000 --> 00:00:50,000 Speaker 1: we get enough of a zero in one decision? Tree? 11 00:00:50,200 --> 00:00:54,560 Speaker 1: Off of Friday's Mexico discussion, off of the various central 12 00:00:54,560 --> 00:00:57,960 Speaker 1: bankers discussions that you need on a zero in one 13 00:00:58,000 --> 00:01:04,080 Speaker 1: basis shift aggressively the alliance strategy. Hi Tom, Hi John, 14 00:01:04,360 --> 00:01:08,320 Speaker 1: Happy Monday. And yes, the Friday news was certainly an 15 00:01:08,360 --> 00:01:11,880 Speaker 1: interesting one in some ways. We actually felt that tariffs 16 00:01:12,120 --> 00:01:16,200 Speaker 1: perhaps worked with Mexico um interestingly, you know, when you 17 00:01:16,360 --> 00:01:19,920 Speaker 1: compare Mexico to China, a United States is a much 18 00:01:20,000 --> 00:01:24,360 Speaker 1: larger trading partner with Mexico account nearly of Mexican exports. 19 00:01:24,400 --> 00:01:29,120 Speaker 1: About GDP, the US for China is only about exports 20 00:01:29,360 --> 00:01:31,920 Speaker 1: four percent of GDP call it, so you know, really 21 00:01:32,080 --> 00:01:34,880 Speaker 1: clearly a more clear incentive for Mexico to act in 22 00:01:34,880 --> 00:01:37,280 Speaker 1: the phase of does it change your strategy? Does it 23 00:01:37,680 --> 00:01:40,560 Speaker 1: I want to know, on an equity market or bond 24 00:01:40,600 --> 00:01:44,039 Speaker 1: market basis, did you have to adjust off that information. 25 00:01:45,319 --> 00:01:49,080 Speaker 1: So we are still very much concerned about the second 26 00:01:49,120 --> 00:01:53,000 Speaker 1: half of the year when the Chinese tariffs perhaps escalate 27 00:01:53,080 --> 00:01:58,160 Speaker 1: to a full on five billion dollars of imports. We 28 00:01:58,240 --> 00:02:01,640 Speaker 1: think that could create some down side pressure on the economy, 29 00:02:01,680 --> 00:02:04,440 Speaker 1: on the consumer in particular, and so until we get 30 00:02:04,880 --> 00:02:08,200 Speaker 1: uh some direction on that, we remain defensive, a little 31 00:02:08,240 --> 00:02:11,000 Speaker 1: bit more conservative, I would say. So, no, not a 32 00:02:11,080 --> 00:02:14,480 Speaker 1: real change, although we do expect some you know, risk 33 00:02:14,560 --> 00:02:17,480 Speaker 1: on as you talked about, some perhaps a balance. Given 34 00:02:17,639 --> 00:02:21,760 Speaker 1: a positive uh some positive progress with Mexico, there seems 35 00:02:21,760 --> 00:02:24,280 Speaker 1: to be some confidence here that the FED can engineer 36 00:02:24,280 --> 00:02:26,320 Speaker 1: of soft landing. We're kind of back to that story, 37 00:02:26,800 --> 00:02:29,359 Speaker 1: um we before, maybe a couple of weeks back, this 38 00:02:29,480 --> 00:02:32,480 Speaker 1: tug of war between viewing low rates as a a 39 00:02:32,600 --> 00:02:35,880 Speaker 1: buffet to risk assets versus viewing low rates are signaling 40 00:02:35,960 --> 00:02:38,320 Speaker 1: something bad. The latter was winning out. Then last week, 41 00:02:38,360 --> 00:02:40,720 Speaker 1: it feels like the former is winning again. Manly, do 42 00:02:40,720 --> 00:02:43,040 Speaker 1: you think the FED can engineer what is called a 43 00:02:43,120 --> 00:02:46,520 Speaker 1: soft landing? Well, it's interesting, you know, we maybe have 44 00:02:46,720 --> 00:02:49,080 Speaker 1: a slightly different perspective. I do think last week we 45 00:02:49,080 --> 00:02:51,320 Speaker 1: did see a nice bounce off, you know, five to 46 00:02:51,360 --> 00:02:54,520 Speaker 1: seven percent correction in the SMP. But earlier on the 47 00:02:54,680 --> 00:02:56,800 Speaker 1: in the year, when markets work calling for a FED 48 00:02:56,880 --> 00:02:59,839 Speaker 1: rate cut, we didn't see the case for that as much. 49 00:03:00,360 --> 00:03:02,800 Speaker 1: You know, the idea of an insurance cut, the idea 50 00:03:02,880 --> 00:03:06,400 Speaker 1: that perhaps will cut to stimulate inflation, to us, didn't 51 00:03:06,480 --> 00:03:09,839 Speaker 1: quite makes sense and quite meet their mandates. Now, as 52 00:03:09,840 --> 00:03:12,160 Speaker 1: we're talking about the pressures building on the second half 53 00:03:12,160 --> 00:03:15,640 Speaker 1: of the year, perhaps downsides the global economy, the idea 54 00:03:15,680 --> 00:03:17,680 Speaker 1: of a rate cut is making more and more sense 55 00:03:17,720 --> 00:03:20,119 Speaker 1: to us. Um I think, you know, if the SAT 56 00:03:20,240 --> 00:03:22,960 Speaker 1: does see the whites of the eyes of a downturn 57 00:03:23,040 --> 00:03:26,760 Speaker 1: or resection, they will be forced to act and so uh, 58 00:03:26,800 --> 00:03:28,720 Speaker 1: you know, as the market starts pricing in more and 59 00:03:28,760 --> 00:03:30,840 Speaker 1: more rate cuts. We don't know if three makes sense, 60 00:03:30,880 --> 00:03:33,960 Speaker 1: but perhaps one or two by your end actually does 61 00:03:34,000 --> 00:03:35,840 Speaker 1: start to make sense. But we'd we'd like to see 62 00:03:35,880 --> 00:03:39,960 Speaker 1: some real data deterioration and perhaps beyond what a world's 63 00:03:40,000 --> 00:03:41,680 Speaker 1: coming to an end? Except I got a vix at 64 00:03:41,720 --> 00:03:46,720 Speaker 1: sixteen point zero seven with futures printing down twod what 65 00:03:46,800 --> 00:03:51,520 Speaker 1: do I do with cash that I must deploy dequities? 66 00:03:51,520 --> 00:03:53,880 Speaker 1: Do I sit on it? Or am I enthused to 67 00:03:54,000 --> 00:03:58,320 Speaker 1: acquire shares this morning? Yeah? You know, we we still 68 00:03:58,360 --> 00:04:02,000 Speaker 1: remain um offensive across equities and fixed income. But what 69 00:04:02,400 --> 00:04:05,800 Speaker 1: we talk about still inequities is the Barbell approach, and um, 70 00:04:05,880 --> 00:04:07,560 Speaker 1: you know what we like. On one hand of that, 71 00:04:07,600 --> 00:04:10,960 Speaker 1: Barbell continues to be those parts of technology that perhaps 72 00:04:11,000 --> 00:04:14,880 Speaker 1: are not as um you know, exposed to China, but 73 00:04:14,960 --> 00:04:19,839 Speaker 1: areas like mobile payments, cloud computing, perhaps cybersecurity, which should 74 00:04:19,839 --> 00:04:22,800 Speaker 1: be enhanced going forward. The other hand of that, Barbell 75 00:04:22,880 --> 00:04:25,040 Speaker 1: continues to be the more defensive area. So we like 76 00:04:25,480 --> 00:04:27,720 Speaker 1: the staples and the healthcare which have lagged this year, 77 00:04:27,880 --> 00:04:30,760 Speaker 1: which can do well in the desolerating growth environment. The 78 00:04:30,800 --> 00:04:33,560 Speaker 1: cloud around healthcare, I think has lifted a little bit, 79 00:04:33,640 --> 00:04:36,720 Speaker 1: and so evaluations actually look okay there. So in the 80 00:04:36,800 --> 00:04:39,600 Speaker 1: risk on part of the Barbel moment, you're looking for 81 00:04:39,600 --> 00:04:43,120 Speaker 1: the secular growth stories, is that right? Yes? So those 82 00:04:43,160 --> 00:04:45,320 Speaker 1: are the secular growth stories that really, you know, for 83 00:04:45,440 --> 00:04:48,480 Speaker 1: long term investors um or the three to five year horizons. 84 00:04:48,480 --> 00:04:52,240 Speaker 1: This these are areas of technology that are now less cyclical. 85 00:04:52,320 --> 00:04:54,479 Speaker 1: So tech has historically been you know, up and down, 86 00:04:54,560 --> 00:04:56,679 Speaker 1: up and down. But you know, areas like a mobile 87 00:04:56,680 --> 00:04:59,680 Speaker 1: payments or even cybersecurity or or parts of the cloud 88 00:04:59,760 --> 00:05:02,760 Speaker 1: are are interesting to us because you know they can 89 00:05:02,839 --> 00:05:06,240 Speaker 1: just continue to grow, expand their share and perhaps are 90 00:05:06,320 --> 00:05:08,720 Speaker 1: in the second growth mode. BNA, thank you so much. 91 00:05:10,240 --> 00:05:13,280 Speaker 1: Thank you this morning from Alis on the equity markets, 92 00:05:28,839 --> 00:05:31,760 Speaker 1: Mark Chandler Bannockburn with us who for years this said 93 00:05:31,800 --> 00:05:35,040 Speaker 1: avoid the blended index is trade weighted and look at 94 00:05:35,040 --> 00:05:39,000 Speaker 1: the pears pears Pears is Renmimbi got a vector finally 95 00:05:39,120 --> 00:05:43,640 Speaker 1: for seven j Golden sex rather over the weekend. Here's 96 00:05:43,680 --> 00:05:44,960 Speaker 1: what I did. I looked at the page that you 97 00:05:44,960 --> 00:05:47,880 Speaker 1: have on Bloomberg f x FM. Yeah you like that. 98 00:05:48,320 --> 00:05:51,960 Speaker 1: What shows you is based on current volatility. You have 99 00:05:52,000 --> 00:05:56,080 Speaker 1: a band around current spot. Given the volatility within three months, 100 00:05:56,880 --> 00:05:59,000 Speaker 1: the odds are that we're gonna break that seven double 101 00:05:59,040 --> 00:06:01,200 Speaker 1: O level. That is to say that seven double is 102 00:06:01,279 --> 00:06:03,640 Speaker 1: sort of the meat part of a bell shaped curve, 103 00:06:04,560 --> 00:06:05,880 Speaker 1: and so I think it's not such a big car. 104 00:06:05,920 --> 00:06:08,120 Speaker 1: I think that what's more interesting to me is to 105 00:06:08,160 --> 00:06:10,599 Speaker 1: your point on about how much the Chinese are concerned 106 00:06:10,600 --> 00:06:12,120 Speaker 1: about it, how much are they gonna offend it? And 107 00:06:12,120 --> 00:06:13,680 Speaker 1: we're not going to know it until we get a 108 00:06:13,680 --> 00:06:15,039 Speaker 1: little bit closer to it, you know. I think that 109 00:06:15,120 --> 00:06:17,080 Speaker 1: today was a bit of a catchup move because China 110 00:06:17,200 --> 00:06:19,720 Speaker 1: was closed on Friday, and so they did take the 111 00:06:19,960 --> 00:06:22,880 Speaker 1: NH the off shore that maybe lower and so the arm. Sure, 112 00:06:22,920 --> 00:06:24,280 Speaker 1: you're sort of played a little bit of catch up 113 00:06:24,279 --> 00:06:25,600 Speaker 1: with it. I want to give it a couple more 114 00:06:25,680 --> 00:06:27,280 Speaker 1: days to see what the Chinese are really going to 115 00:06:27,360 --> 00:06:30,480 Speaker 1: do here. So the choice, the decision mixes essentially from 116 00:06:30,480 --> 00:06:32,839 Speaker 1: a Chinese policy micro standpoint. Do you constrain, do you 117 00:06:32,880 --> 00:06:34,960 Speaker 1: toddle right, or do you engineer. There was some people 118 00:06:34,960 --> 00:06:38,760 Speaker 1: worried about them engineering currency weakness, no sign of that whatsoever. 119 00:06:39,040 --> 00:06:41,360 Speaker 1: Some people thought they might constrain it. A little sign 120 00:06:41,400 --> 00:06:44,599 Speaker 1: of that too. It looks like maybe Mark, they actually 121 00:06:44,640 --> 00:06:47,520 Speaker 1: just tolerate the weakness, They just let it happen. Sure, 122 00:06:47,560 --> 00:06:49,240 Speaker 1: I think that there's a good case that can be 123 00:06:49,080 --> 00:06:52,000 Speaker 1: for them. I mean, you see even yesterday or earlier today, 124 00:06:52,040 --> 00:06:56,520 Speaker 1: when the Asian equity markets all moved higher, China really struggled, 125 00:06:56,760 --> 00:06:58,440 Speaker 1: and I think maybe even the Shanghai might have been 126 00:06:58,440 --> 00:07:01,280 Speaker 1: even the underperforming the whole agent last night. And so 127 00:07:01,320 --> 00:07:03,080 Speaker 1: I think people are a bit reluctant because they're afraid 128 00:07:03,080 --> 00:07:06,200 Speaker 1: of this vicious cycle. Currency weekends, so we sell off 129 00:07:06,240 --> 00:07:08,640 Speaker 1: the stocks stocks weekend, so we sought the currency again, 130 00:07:08,800 --> 00:07:10,800 Speaker 1: and it's not clear how how how do you break that? 131 00:07:10,960 --> 00:07:13,960 Speaker 1: I love the way you framed f x FM with 132 00:07:13,960 --> 00:07:18,000 Speaker 1: with dollar reminby. I just looked at the volatility service, folks, 133 00:07:18,000 --> 00:07:21,000 Speaker 1: which doesn't play on TV or radio. It's wicked complicated, 134 00:07:21,400 --> 00:07:24,400 Speaker 1: but you know it's truly mark a one way bet 135 00:07:24,520 --> 00:07:28,400 Speaker 1: on ran Mindy or you Wan weakness. Anytime I say 136 00:07:28,520 --> 00:07:32,280 Speaker 1: one way bet all, my radar goes up. Is the 137 00:07:32,360 --> 00:07:34,640 Speaker 1: street wrong on this? I mean, can there be a 138 00:07:34,640 --> 00:07:38,440 Speaker 1: case for currency stability? Well, I think that's what China 139 00:07:38,520 --> 00:07:40,200 Speaker 1: really wants, and a big picture of things, I think 140 00:07:40,200 --> 00:07:43,320 Speaker 1: that a weaker R and B what it doesn't really shifts, 141 00:07:43,360 --> 00:07:46,040 Speaker 1: It really deters China from doing the kind of reforms 142 00:07:46,040 --> 00:07:48,440 Speaker 1: that wants to do to move up the value added chain. 143 00:07:48,840 --> 00:07:50,400 Speaker 1: So I think that China has it in their interest 144 00:07:50,480 --> 00:07:54,520 Speaker 1: to avoid a vicious cycle and a sharply weaker currency 145 00:07:54,640 --> 00:07:56,760 Speaker 1: to your point about engineering it, but tolerating a little 146 00:07:56,760 --> 00:07:59,320 Speaker 1: bit of weakness probably doesn't hurt that much, especially given 147 00:07:59,320 --> 00:08:01,800 Speaker 1: that's the direction of policy in general. Right, economy a 148 00:08:01,800 --> 00:08:05,320 Speaker 1: bit weaker, you expect some stimulus. The the PBOC governor 149 00:08:05,400 --> 00:08:07,840 Speaker 1: stead they have plenty of stimulus, and so I think 150 00:08:07,840 --> 00:08:10,120 Speaker 1: there's just perfectly consistent with it. So let's talk about 151 00:08:10,120 --> 00:08:12,320 Speaker 1: the effectiveness of the stimulus from the Chinese so far. 152 00:08:12,800 --> 00:08:17,240 Speaker 1: Expected policy drives markets because it shapes forecasts of future outcomes. 153 00:08:17,640 --> 00:08:20,360 Speaker 1: The future outcome that stimulus from the Chinese is shaping 154 00:08:20,400 --> 00:08:22,760 Speaker 1: is essentially that the rest of the world could well stabilize. 155 00:08:22,800 --> 00:08:24,400 Speaker 1: That was the belief going into the second half of 156 00:08:24,400 --> 00:08:27,320 Speaker 1: this year. Looking at the trade data from China, mark, 157 00:08:27,440 --> 00:08:30,080 Speaker 1: what can we read into the effectiveness of that stimulus 158 00:08:30,080 --> 00:08:33,440 Speaker 1: so far when the import data is still so weak. Yeah, 159 00:08:33,559 --> 00:08:34,920 Speaker 1: it's hard for me to read this because I think 160 00:08:34,920 --> 00:08:37,360 Speaker 1: a lot of this is being gamed. A lot of 161 00:08:38,080 --> 00:08:39,679 Speaker 1: two things happening. I think one is that a lot 162 00:08:39,760 --> 00:08:42,199 Speaker 1: of businesses in the US may be importing a lot 163 00:08:42,240 --> 00:08:45,760 Speaker 1: more stuff from China to build up inventories before tariffs 164 00:08:45,760 --> 00:08:48,640 Speaker 1: go into effect. I can see China doing similar things 165 00:08:48,640 --> 00:08:50,360 Speaker 1: on their end. But I also think there is a 166 00:08:50,360 --> 00:08:52,400 Speaker 1: weakness in the Chinese economy, and we see this through 167 00:08:52,440 --> 00:08:55,640 Speaker 1: the commodity through the through the commodity imports. You know, 168 00:08:55,679 --> 00:08:59,320 Speaker 1: they've had a huge African swine problem, have to have 169 00:08:59,400 --> 00:09:02,280 Speaker 1: to call their ward. And so what happens is soybean 170 00:09:02,360 --> 00:09:06,959 Speaker 1: imports plunged. You've got oil, Uh, the oil imports fell 171 00:09:07,040 --> 00:09:08,959 Speaker 1: as well. This is what you'd expect to see from 172 00:09:08,960 --> 00:09:11,199 Speaker 1: a weekending economy or economy has got some shocks. So 173 00:09:11,240 --> 00:09:14,280 Speaker 1: I think that it's funny. You know, most people disbelieve 174 00:09:14,280 --> 00:09:16,679 Speaker 1: a lot of Chinese data unless it's weak, and then 175 00:09:16,679 --> 00:09:19,559 Speaker 1: we believe it. That's where the invest device is right now. 176 00:09:19,720 --> 00:09:22,080 Speaker 1: Really interesting story coming out of Vietnam, Tom, you might 177 00:09:22,080 --> 00:09:25,800 Speaker 1: be interested in this. Some Chinese exporters going to extreme 178 00:09:25,920 --> 00:09:29,280 Speaker 1: lengths to avoid the tariffs from the United States. Vietnam 179 00:09:29,320 --> 00:09:31,800 Speaker 1: saying over the weekend that it found dozens of fake 180 00:09:31,880 --> 00:09:35,880 Speaker 1: product origin certificates and illegal transfers by companies trying to 181 00:09:35,920 --> 00:09:40,080 Speaker 1: cite step US tariffs on everything from agriculture to textiles 182 00:09:40,120 --> 00:09:43,400 Speaker 1: to steal This showing up in Vietnam, and if you 183 00:09:43,400 --> 00:09:45,200 Speaker 1: look at the Vietnam trade dates, we have seen a 184 00:09:45,280 --> 00:09:49,440 Speaker 1: huge bloommark from Vietnam into the United States. Yeah, this 185 00:09:49,520 --> 00:09:52,320 Speaker 1: is remarkable thing. You know, early in my career when 186 00:09:52,320 --> 00:09:56,040 Speaker 1: Reagan was the president, UH, Japan was the Asian power 187 00:09:56,080 --> 00:09:58,680 Speaker 1: we were afraid of. Uh. They accounted for about forty 188 00:09:59,080 --> 00:10:02,160 Speaker 1: of US import So now a thirty five years later 189 00:10:02,240 --> 00:10:04,720 Speaker 1: or something like that, and now China accounts for about 190 00:10:05,080 --> 00:10:08,520 Speaker 1: forty of US imports. And what we're gonna do is 191 00:10:08,559 --> 00:10:10,960 Speaker 1: blocked Chinese imports in the US and they're just gonna 192 00:10:11,000 --> 00:10:13,439 Speaker 1: go for someplace else. And Vietnam is probably the point 193 00:10:13,480 --> 00:10:15,719 Speaker 1: of sort of point. Everybody's focused on it right now. 194 00:10:15,960 --> 00:10:18,240 Speaker 1: And by the way, the Treasury Department has increased its 195 00:10:18,240 --> 00:10:21,440 Speaker 1: surveillance of countries under the currency and its currency walk. 196 00:10:21,480 --> 00:10:23,640 Speaker 1: You wonder if that look in Vietnam. Vietnam was what 197 00:10:23,880 --> 00:10:26,440 Speaker 1: the Vietnam is part of that. Now, let's talk about 198 00:10:26,440 --> 00:10:28,520 Speaker 1: what it makes for markets. You've got two codes wiked 199 00:10:28,600 --> 00:10:31,120 Speaker 1: dollar high requities. They're not connected as far as I'm 200 00:10:31,120 --> 00:10:33,480 Speaker 1: a web mark, So won't me through the two separate CODs? Yeah? 201 00:10:33,559 --> 00:10:35,720 Speaker 1: So sure so on the dollar. You know, I Bloomberg 202 00:10:35,760 --> 00:10:38,040 Speaker 1: published a book of mind back in two thousand and nine, 203 00:10:38,240 --> 00:10:41,360 Speaker 1: and I talked about a secular bull market for the dollar, 204 00:10:41,720 --> 00:10:43,840 Speaker 1: and now I'm concerned that secutive bull market for the 205 00:10:43,840 --> 00:10:45,760 Speaker 1: dollar is over. I can tell you quick three or 206 00:10:45,880 --> 00:10:48,760 Speaker 1: three level factoys for you. One is the policy mixes 207 00:10:48,840 --> 00:10:52,640 Speaker 1: change from type monetary loose fiscal, which is very positive 208 00:10:52,640 --> 00:10:55,800 Speaker 1: for a currency, to its exact opposite. Secondly, interest rate 209 00:10:55,840 --> 00:10:58,080 Speaker 1: differentials have been a leg for the dollar. They've been 210 00:10:58,080 --> 00:11:01,040 Speaker 1: moving against the US for six months, say against Europe, 211 00:11:01,440 --> 00:11:04,600 Speaker 1: that is. And the third thing is that another good 212 00:11:04,600 --> 00:11:06,760 Speaker 1: page I use on Bloomberg w c RS, I look 213 00:11:06,760 --> 00:11:08,920 Speaker 1: at the purchasing power parody using the O E C 214 00:11:09,040 --> 00:11:11,840 Speaker 1: D S model, the Euro is the most undervalued currency 215 00:11:11,880 --> 00:11:15,640 Speaker 1: abound twenty three undervalued. So I combine these things, changing 216 00:11:15,640 --> 00:11:19,040 Speaker 1: policy mixing the US, narrowing interest rate differentials, and an 217 00:11:19,040 --> 00:11:22,000 Speaker 1: overvalued dollar undervalued Euro, and that's what gives me my 218 00:11:22,040 --> 00:11:26,120 Speaker 1: sense of the dollar is gonna pull back. Equity market. 219 00:11:26,120 --> 00:11:28,920 Speaker 1: I'm bullish. I think that essentially what we saw is 220 00:11:28,960 --> 00:11:32,440 Speaker 1: that that may decline wasn't like a three leg decline, 221 00:11:32,600 --> 00:11:35,439 Speaker 1: hit a tradcement target almost to the pick and coming 222 00:11:35,480 --> 00:11:37,360 Speaker 1: back here. I think there's no place else for investors 223 00:11:37,400 --> 00:11:39,960 Speaker 1: to put their money. Bonds are low yields. We've got 224 00:11:40,080 --> 00:11:42,679 Speaker 1: something like eleven trillion dollars of negative yielding bonds now 225 00:11:42,679 --> 00:11:45,360 Speaker 1: in the world, So more than that thing, man, Yeah, 226 00:11:45,360 --> 00:11:46,640 Speaker 1: where can you get the money? So I think it 227 00:11:46,880 --> 00:11:49,160 Speaker 1: just forces us more and more into the equity market 228 00:11:49,160 --> 00:11:50,839 Speaker 1: for good or for bad, and it drives us into that. 229 00:11:51,080 --> 00:11:53,120 Speaker 1: We put you on the spot because markdow Out on 230 00:11:53,120 --> 00:11:55,000 Speaker 1: Twitter Aro asked this question. I think it's a great 231 00:11:55,040 --> 00:11:57,280 Speaker 1: mental exercise for everyone just to get together and asked 232 00:11:57,280 --> 00:12:00,480 Speaker 1: themselves this question. The next ten percent move in equities 233 00:12:00,559 --> 00:12:03,080 Speaker 1: higher or lower? You think higher? I guess it's higher. 234 00:12:03,480 --> 00:12:05,439 Speaker 1: Mark Chunder, Great to catch on with you. Banna Burn, 235 00:12:05,520 --> 00:12:08,760 Speaker 1: Global Chief market Strategist, joining us here a Bloomberg in 236 00:12:08,760 --> 00:12:11,080 Speaker 1: New York. Big week ahead again, Tom c p I, 237 00:12:11,080 --> 00:12:14,480 Speaker 1: p p I coming up, retail sales coming up on Friday, 238 00:12:14,559 --> 00:12:16,679 Speaker 1: we're here from President Dragia. I think Wednesday as well. 239 00:12:16,679 --> 00:12:19,160 Speaker 1: So some ECB speakers, what can you say? Well, over 240 00:12:19,280 --> 00:12:21,840 Speaker 1: the weekend there was a report from Router's over the weekend, 241 00:12:21,920 --> 00:12:24,679 Speaker 1: the officials, some of the officials they've spoken to, ready 242 00:12:24,720 --> 00:12:27,200 Speaker 1: to cut rates if the data gets worse. I have 243 00:12:27,360 --> 00:12:30,440 Speaker 1: no idea where ECB monetary policy goes. Given where it 244 00:12:30,480 --> 00:12:33,240 Speaker 1: is right now, Mark, are very quickly here because the 245 00:12:33,240 --> 00:12:35,560 Speaker 1: time it's just a race to the bottom. I mean, 246 00:12:35,600 --> 00:12:37,760 Speaker 1: I'm sorry, you know, it seems like what the central 247 00:12:37,800 --> 00:12:40,040 Speaker 1: banks wanted to do is tell the world that they 248 00:12:40,040 --> 00:12:42,320 Speaker 1: can do more if needed. The question is will more 249 00:12:42,400 --> 00:12:45,480 Speaker 1: be needed? Will more re q? I've lost count? What's 250 00:12:45,520 --> 00:12:49,880 Speaker 1: hilarious at que six? I mean, seriously, haven't we all 251 00:12:49,920 --> 00:12:51,600 Speaker 1: been here? Well? What do they buy next? I mean, 252 00:12:51,640 --> 00:12:54,360 Speaker 1: to Mark's point, you've already got around twelve trillion dollars 253 00:12:54,400 --> 00:12:57,199 Speaker 1: of native yielding assets worldwide. Where do they go next? 254 00:12:57,520 --> 00:13:00,720 Speaker 1: That by corporates that bought soft reigns to the equities. 255 00:13:00,880 --> 00:13:03,120 Speaker 1: And if they go to an SMB style depot, right, 256 00:13:03,600 --> 00:13:05,760 Speaker 1: did they bring it a tead rate? You guys are 257 00:13:05,800 --> 00:13:08,679 Speaker 1: doing all this fancy currency stuff. What do you I move? 258 00:13:08,840 --> 00:13:11,480 Speaker 1: Should I move to Connecticut? Why? Why don't you move 259 00:13:11,520 --> 00:13:14,520 Speaker 1: to Connecticut? That's where I went for this wedding? Did 260 00:13:14,520 --> 00:13:16,839 Speaker 1: you like lawns? I just wanted to thought people were 261 00:13:16,880 --> 00:13:20,559 Speaker 1: leaving Connecticut? I think so, I gotta I thought everyone 262 00:13:20,600 --> 00:13:23,280 Speaker 1: was heading to Florida. No, they're leaving Connecticut. Seriously, because 263 00:13:23,320 --> 00:13:25,280 Speaker 1: of a lot of texts. I just selling the Connecticut 264 00:13:25,320 --> 00:13:28,720 Speaker 1: dollar I want I want to buy a California Trimmer 265 00:13:29,120 --> 00:13:34,680 Speaker 1: high cut twenty five blade. It's a lot. Oh yeah, 266 00:13:35,360 --> 00:13:39,439 Speaker 1: I could see you ever ever mode alone. Seriously, when 267 00:13:39,480 --> 00:13:42,439 Speaker 1: did you last mother law? My father was the last 268 00:13:42,440 --> 00:13:45,920 Speaker 1: person in the black to have a power. More, when 269 00:13:45,960 --> 00:13:48,720 Speaker 1: did you last mother law? We got it fifty years ago. 270 00:13:49,120 --> 00:13:55,040 Speaker 1: It was President Mark Shannon. Great to catch Connecticut. I 271 00:13:55,080 --> 00:13:56,640 Speaker 1: could see you in Connecticut. I can't see your mother 272 00:13:56,679 --> 00:14:11,880 Speaker 1: and a lawn. This is a joy. We're gonna talk 273 00:14:11,920 --> 00:14:15,440 Speaker 1: to someone knee deep in the modern politics. Of course, 274 00:14:15,520 --> 00:14:17,440 Speaker 1: many of our listeners are gonna go, ye oh, that's great, 275 00:14:17,440 --> 00:14:19,040 Speaker 1: But it's still you gotta get in the voting booth 276 00:14:19,120 --> 00:14:21,960 Speaker 1: and vote and vote. But there's a certain way to brand, 277 00:14:22,040 --> 00:14:26,120 Speaker 1: to get message out, etcetera. Betela bult Um was, you know, 278 00:14:26,240 --> 00:14:30,920 Speaker 1: to call it a young adviser to Mr Obama where 279 00:14:30,920 --> 00:14:32,920 Speaker 1: he would say Senator and he'd raise his hand up 280 00:14:32,960 --> 00:14:35,400 Speaker 1: and say excuse me, sir, because he was that young. 281 00:14:35,720 --> 00:14:38,080 Speaker 1: Now he's ancient. He's like really moved on to the 282 00:14:38,120 --> 00:14:41,120 Speaker 1: ancient level. And Bendela Bull joins us here on the 283 00:14:41,200 --> 00:14:45,280 Speaker 1: new politics. And now President Trump is taking best practices 284 00:14:45,320 --> 00:14:48,680 Speaker 1: from President Obama. Written up with great acclaim over the 285 00:14:48,680 --> 00:14:52,480 Speaker 1: weekend in the Atlantic magazine, Bettela Bull joins us this morning, Ben, 286 00:14:52,520 --> 00:14:56,480 Speaker 1: good morning. Agree with you. While you you aged me quickly, 287 00:14:56,640 --> 00:14:59,680 Speaker 1: I aged you quickly. Let's say what I find fascinating 288 00:15:00,000 --> 00:15:02,920 Speaker 1: as you came out of Middlebury College, where you were 289 00:15:02,960 --> 00:15:06,120 Speaker 1: like the head of the Democrat, the college Democrats or whatever. 290 00:15:06,720 --> 00:15:13,000 Speaker 1: Are there any Republicans at Middlebury College? Well, when when 291 00:15:13,000 --> 00:15:15,400 Speaker 1: I was there, I would say the student body was 292 00:15:15,480 --> 00:15:21,040 Speaker 1: maybe twenty five percent Republicans. So they actually thought me 293 00:15:21,120 --> 00:15:22,560 Speaker 1: had to be a better debate or we had some 294 00:15:22,720 --> 00:15:25,960 Speaker 1: very very smart ones in my classes. That's good to 295 00:15:25,960 --> 00:15:27,800 Speaker 1: get the going. And of course a lot of people 296 00:15:27,920 --> 00:15:30,080 Speaker 1: say the younger crew is less engaged today than it 297 00:15:30,160 --> 00:15:33,760 Speaker 1: really should be. I want one more general question before 298 00:15:33,760 --> 00:15:37,360 Speaker 1: we get to your wonderful Atlantic magazine article. What's the 299 00:15:37,400 --> 00:15:41,080 Speaker 1: impact of Bernie Sanders? Do I mean it's the second 300 00:15:41,120 --> 00:15:44,960 Speaker 1: time around for Mr Sanders, he is aged, etcetera. Is 301 00:15:45,000 --> 00:15:48,280 Speaker 1: there the same impact or the different impact with his 302 00:15:48,520 --> 00:15:53,320 Speaker 1: loyal younger following Well, I think some of the Sanders 303 00:15:53,480 --> 00:15:56,320 Speaker 1: changed the terms of the debate. He came forward with 304 00:15:56,440 --> 00:16:01,960 Speaker 1: some very bold policy ideas like free college, like medicare 305 00:16:02,040 --> 00:16:05,320 Speaker 1: for all that I think have moved where the Democratic 306 00:16:05,360 --> 00:16:08,880 Speaker 1: primary electorate is um. I do think there are some 307 00:16:09,000 --> 00:16:12,160 Speaker 1: candidates to embrace aspects of his policies who have a 308 00:16:12,240 --> 00:16:15,560 Speaker 1: better chance of winning the nomination and beating Donald Trump 309 00:16:15,560 --> 00:16:18,880 Speaker 1: in the long run. So they've taken the best of Bernie, 310 00:16:19,000 --> 00:16:21,880 Speaker 1: but I think have more realistic plans to win an 311 00:16:21,920 --> 00:16:28,080 Speaker 1: elected The last sentence of your Atlantic idea so important. 312 00:16:28,080 --> 00:16:31,200 Speaker 1: If Democrats don't act now, the Trump campaign will define 313 00:16:31,240 --> 00:16:34,880 Speaker 1: the general election on its own terms before we can 314 00:16:34,920 --> 00:16:38,200 Speaker 1: even choose our nominee. He's the incumbent, He's supposed to 315 00:16:38,280 --> 00:16:44,800 Speaker 1: do that, right, Well, he's exploiting a contentious primary. What 316 00:16:44,960 --> 00:16:48,840 Speaker 1: there's twenty three Democrats competing on our side of the aisle. 317 00:16:48,880 --> 00:16:51,640 Speaker 1: It's going to be a long and contentious primary because 318 00:16:51,640 --> 00:16:55,720 Speaker 1: we've got very strong candidates. And what Donald Trump is 319 00:16:55,760 --> 00:16:58,920 Speaker 1: doing is he's taking every day that started on January 320 00:16:58,960 --> 00:17:02,120 Speaker 1: one of this year to talk to persuadable voters in 321 00:17:02,160 --> 00:17:05,639 Speaker 1: battleground states and get his message out. My view is 322 00:17:05,680 --> 00:17:07,600 Speaker 1: that we need to start filling that gap on the 323 00:17:07,640 --> 00:17:11,720 Speaker 1: Democratic side of the aisle, and not just primary. How 324 00:17:11,760 --> 00:17:14,040 Speaker 1: do you define liberal progressive? I mean, I mean we 325 00:17:14,080 --> 00:17:17,080 Speaker 1: had George will On age seventy eighties. It's my book 326 00:17:17,119 --> 00:17:22,040 Speaker 1: of the year. It's a book than that everyone should read, progressive, liberals, conservatives, 327 00:17:22,119 --> 00:17:25,320 Speaker 1: everybody to read to get the old theology brought forward 328 00:17:25,359 --> 00:17:29,880 Speaker 1: to the new theology. But what's the Democrat Party theology? 329 00:17:29,960 --> 00:17:33,199 Speaker 1: The Democratic Party theology that can win right now? Is 330 00:17:33,200 --> 00:17:36,159 Speaker 1: it more to the center? Can can they actually go 331 00:17:36,320 --> 00:17:42,040 Speaker 1: more liberal? Well? I think it's a broad opportunity agenda 332 00:17:42,160 --> 00:17:44,960 Speaker 1: that no matter who you are and what means you're 333 00:17:44,960 --> 00:17:48,160 Speaker 1: born with, there should still be a chance to get 334 00:17:48,160 --> 00:17:52,760 Speaker 1: ahead in this country if you work hard. And with 335 00:17:52,840 --> 00:17:56,600 Speaker 1: the Trump administration, I think we've seen uh self dealing. 336 00:17:56,880 --> 00:18:01,080 Speaker 1: I think we've seen the tax cuts that rewarded corporations 337 00:18:01,119 --> 00:18:05,520 Speaker 1: but actually raised taxes on people in states where you 338 00:18:05,520 --> 00:18:09,960 Speaker 1: had those state in local tax exemption. So the Democratic 339 00:18:10,000 --> 00:18:11,880 Speaker 1: Party is a broad tent, and I think we want 340 00:18:11,920 --> 00:18:15,719 Speaker 1: to go into this election not only attracting self defined 341 00:18:15,760 --> 00:18:21,680 Speaker 1: progressive but attracting independence and even laps Republicans to the 342 00:18:21,920 --> 00:18:25,560 Speaker 1: Republican Party. Don't associate with the Republican Party of today, 343 00:18:25,600 --> 00:18:29,000 Speaker 1: though they have in the past. Ben la Bolt with 344 00:18:29,080 --> 00:18:32,679 Speaker 1: this folks an important article Atlantic Magazine. Whatever your politics, 345 00:18:32,920 --> 00:18:36,560 Speaker 1: it really defines the dynamics of modern campaigning. Right now, 346 00:18:36,800 --> 00:18:40,760 Speaker 1: what is the best practice from a Senator Obama or 347 00:18:40,800 --> 00:18:47,160 Speaker 1: a President Obama term to the President Trump will utilize forward. Well, 348 00:18:47,160 --> 00:18:49,879 Speaker 1: what I think he's doing is is taking the reelection 349 00:18:49,960 --> 00:18:54,080 Speaker 1: playbook that he saw the Obama campaign implement. Now. When 350 00:18:54,080 --> 00:18:57,800 Speaker 1: we started that campaign at the beginning of the New 351 00:18:57,880 --> 00:19:01,600 Speaker 1: York Times to give President Obamas seventeen percent chance of 352 00:19:01,680 --> 00:19:07,520 Speaker 1: being reelected based on historic economic indicators. We realized early 353 00:19:07,600 --> 00:19:11,480 Speaker 1: in that year that voters had forgotten how bad the 354 00:19:11,560 --> 00:19:15,480 Speaker 1: financial crisis had been in the potential peril as President 355 00:19:15,520 --> 00:19:18,560 Speaker 1: Obama entered office and we've been hemorrhaging jobs at the 356 00:19:18,640 --> 00:19:21,919 Speaker 1: end of the Bush administration. We reminded them of the 357 00:19:21,960 --> 00:19:24,320 Speaker 1: big decision too May to get us back on track 358 00:19:24,520 --> 00:19:29,680 Speaker 1: from the Recovery Act to making a bold decision to 359 00:19:29,680 --> 00:19:33,480 Speaker 1: to save the auto industry. But we had two years 360 00:19:33,520 --> 00:19:36,280 Speaker 1: to implement that effort. There was a contentious primary on 361 00:19:36,320 --> 00:19:38,680 Speaker 1: the Republican side of the aisle, and we spent those 362 00:19:38,720 --> 00:19:42,880 Speaker 1: two years talking to our targeted voters in battleground states. 363 00:19:43,080 --> 00:19:45,720 Speaker 1: That's exactly what the Trump campaign is doing today. They're 364 00:19:45,720 --> 00:19:48,840 Speaker 1: doing it through advertising, They're doing it trips and the 365 00:19:48,880 --> 00:19:52,879 Speaker 1: presidents taking to battleground markets and and Democrats are focused 366 00:19:53,520 --> 00:19:56,320 Speaker 1: on fighting each other to win the nomination. I'd expect 367 00:19:56,359 --> 00:19:59,160 Speaker 1: that of them during the primary, but it's given President 368 00:19:59,160 --> 00:20:01,640 Speaker 1: Trump a free year to get his message out. Ben Bolt, 369 00:20:01,680 --> 00:20:03,640 Speaker 1: he's getting his message out right now talking to Joe 370 00:20:03,640 --> 00:20:07,560 Speaker 1: Cernan over at CNBC, which is to be expected. And 371 00:20:07,560 --> 00:20:09,919 Speaker 1: the headlines across the Bloomberger is simple. He doesn't want 372 00:20:09,920 --> 00:20:12,880 Speaker 1: to cut spending on defense. Um he says no deal 373 00:20:12,920 --> 00:20:16,520 Speaker 1: with China would mean more terrorists, means the usual discussion 374 00:20:16,520 --> 00:20:21,280 Speaker 1: if you will do the Democrats fight back on policy, 375 00:20:21,600 --> 00:20:25,200 Speaker 1: as we've certainly seen, and let's let's suggest that candidate 376 00:20:25,240 --> 00:20:28,560 Speaker 1: Warren is the policy wank of them all, or do 377 00:20:28,600 --> 00:20:33,240 Speaker 1: they have to fight back or frame the the process 378 00:20:33,320 --> 00:20:36,560 Speaker 1: on emotion? I mean, do you go policy or do 379 00:20:36,640 --> 00:20:41,000 Speaker 1: you go emotion to position yourself at the convention or 380 00:20:41,040 --> 00:20:45,000 Speaker 1: after the convention. I think it's a mix of policy 381 00:20:45,280 --> 00:20:48,879 Speaker 1: and values. So certainly we can argue that the tax 382 00:20:48,920 --> 00:20:52,399 Speaker 1: cuts to benefited corporations but not the average American was 383 00:20:52,520 --> 00:20:55,920 Speaker 1: not good policy. We can lay out an education plan 384 00:20:56,040 --> 00:20:59,680 Speaker 1: to make sure that in this century economy, we're laying 385 00:20:59,680 --> 00:21:02,239 Speaker 1: out of plan for the average American to have a 386 00:21:02,240 --> 00:21:06,240 Speaker 1: good tank job twenty years from now, thirty years from now. 387 00:21:06,840 --> 00:21:10,280 Speaker 1: But ultimately, elections are about values just as they are 388 00:21:10,359 --> 00:21:12,960 Speaker 1: about policy. And I think when you see images of 389 00:21:13,800 --> 00:21:16,679 Speaker 1: you know, kids being locked up in cages at the border, 390 00:21:16,760 --> 00:21:19,640 Speaker 1: that's not who we are. And I think that's uh. 391 00:21:19,680 --> 00:21:23,159 Speaker 1: It's also important that our candidates campaigned on on the 392 00:21:23,240 --> 00:21:26,960 Speaker 1: values that they see as fun amount. You know, I 393 00:21:27,000 --> 00:21:29,560 Speaker 1: was gonna say that's it, but this is so important. 394 00:21:29,640 --> 00:21:35,919 Speaker 1: Then Democrats have to address an American fear over immigration. 395 00:21:36,520 --> 00:21:39,119 Speaker 1: Do they criticize a president or do they come up 396 00:21:39,160 --> 00:21:43,320 Speaker 1: with their own policy of x thousands of people at 397 00:21:43,359 --> 00:21:45,480 Speaker 1: the border? Which which is the best way to go 398 00:21:45,640 --> 00:21:49,480 Speaker 1: for them? Well, I think there's a couple of approaches. 399 00:21:49,520 --> 00:21:52,399 Speaker 1: First of all, I think almost every Democrat in the 400 00:21:52,440 --> 00:21:55,240 Speaker 1: field is on the record and support of a comprehensive 401 00:21:55,240 --> 00:21:59,480 Speaker 1: immigration plan that yes, successive border security, but also offers 402 00:22:00,400 --> 00:22:03,639 Speaker 1: a passive citizenship, and they view that as as fundamental 403 00:22:04,160 --> 00:22:06,919 Speaker 1: to the American way. Secondly, I think we need to 404 00:22:06,920 --> 00:22:11,840 Speaker 1: attack the notion that it's immigration, um that's affecting the 405 00:22:11,920 --> 00:22:14,720 Speaker 1: jobs of the average worker in the middle of the country. 406 00:22:14,920 --> 00:22:16,600 Speaker 1: You know, I think the trends have a lot more 407 00:22:16,640 --> 00:22:21,080 Speaker 1: to do with our modern economy and globalization and automation, 408 00:22:21,359 --> 00:22:23,280 Speaker 1: and I think it's on us to roll out a 409 00:22:23,320 --> 00:22:27,639 Speaker 1: plan to show how um new economy jobs will be 410 00:22:27,640 --> 00:22:30,040 Speaker 1: created in the middle of the country, and how if 411 00:22:30,040 --> 00:22:33,199 Speaker 1: you're not a software engineer, uh, you still have a 412 00:22:33,320 --> 00:22:36,760 Speaker 1: viable path to finding a good paying job in the future. 413 00:22:36,880 --> 00:22:40,080 Speaker 1: I agree we should roll out more policy on that front. Okay, Ben, 414 00:22:40,080 --> 00:22:42,080 Speaker 1: we gotta leave it there, bendable, Thank you so much. 415 00:22:42,359 --> 00:22:45,679 Speaker 1: An important article in the Atlantic magazine. Controversial article got 416 00:22:45,680 --> 00:22:49,080 Speaker 1: a lot of splash, as it should. He's former National 417 00:22:49,080 --> 00:23:08,840 Speaker 1: Press secretary for President Obama's re election campaign. This is 418 00:23:08,920 --> 00:23:12,600 Speaker 1: the interview of the day on the roll up of 419 00:23:12,680 --> 00:23:16,880 Speaker 1: the Pentagon's providers. Nicholas Hayman was around when the Wright 420 00:23:16,960 --> 00:23:20,560 Speaker 1: Brothers did the first government contract to the Pentagon, and 421 00:23:20,640 --> 00:23:23,040 Speaker 1: we are thrilled and honored that he could join us 422 00:23:23,320 --> 00:23:26,080 Speaker 1: this morning. Nick came in. I think we all know 423 00:23:26,280 --> 00:23:28,119 Speaker 1: good to have you, Nick. I think we all know 424 00:23:28,240 --> 00:23:33,280 Speaker 1: that U, t X and Raytheon are ginormous, venerable. We've 425 00:23:33,280 --> 00:23:36,240 Speaker 1: been told by six experts today. There's a little overlap. 426 00:23:37,000 --> 00:23:40,200 Speaker 1: What is the why of this? Is it a revenue grab? 427 00:23:40,480 --> 00:23:45,000 Speaker 1: Is it a synergy players, there's something else nefarious going 428 00:23:45,080 --> 00:23:47,800 Speaker 1: on now, they've they've alluded to a little bit of 429 00:23:47,880 --> 00:23:50,480 Speaker 1: you know, opportunity from a revenue standpoint, but I think 430 00:23:50,520 --> 00:23:54,720 Speaker 1: the real core of the Y is simply you're now 431 00:23:54,880 --> 00:23:58,879 Speaker 1: seeing a convergence of defense in our critical technologies that 432 00:23:58,920 --> 00:24:02,959 Speaker 1: are going to be increased ly utilized across commercial airspace. 433 00:24:03,720 --> 00:24:07,960 Speaker 1: And whether that's cyber protection, you know, for connected aircraft, 434 00:24:08,200 --> 00:24:10,600 Speaker 1: and you know, Raytheon is already a major provider for 435 00:24:10,600 --> 00:24:13,920 Speaker 1: the military aircraft of that today and whether you know, 436 00:24:14,000 --> 00:24:17,879 Speaker 1: Raytheon is developed the next generation digital air traffic control. 437 00:24:17,960 --> 00:24:21,840 Speaker 1: We're still using an analog system here UM radar, ground 438 00:24:21,840 --> 00:24:25,919 Speaker 1: based UM and so that'll make a safer and traffic 439 00:24:25,920 --> 00:24:29,840 Speaker 1: control environment. And then the advanced analytics and and AI 440 00:24:30,000 --> 00:24:34,960 Speaker 1: Raytheon really far into that, and that's to optimize both 441 00:24:34,960 --> 00:24:39,200 Speaker 1: the protection aftermarket service. It's really basic stuff. They're they're buying. 442 00:24:39,200 --> 00:24:41,640 Speaker 1: They're buying brain power, they're buying engineers. I get all 443 00:24:41,680 --> 00:24:43,880 Speaker 1: of that. They're gonna bring them in and there's gonna 444 00:24:43,920 --> 00:24:48,520 Speaker 1: be magic. If you're advising the Joint Chiefs of Staff today, 445 00:24:48,640 --> 00:24:52,920 Speaker 1: what do you say about this transaction? Well, you can 446 00:24:52,960 --> 00:24:57,280 Speaker 1: tell from the pitch today that both companies were targeting 447 00:24:57,320 --> 00:25:02,480 Speaker 1: an audience way beyond institutional investor thank you, And you 448 00:25:02,800 --> 00:25:06,680 Speaker 1: only heard like eighteen to twenty million of capital return, 449 00:25:06,760 --> 00:25:09,359 Speaker 1: half dividends, half shared by back in the first three years, 450 00:25:09,600 --> 00:25:13,520 Speaker 1: and that was really the only kind of if you will, 451 00:25:13,560 --> 00:25:17,960 Speaker 1: inducement for investors. And what you really heard was, Hey, Pentagon, 452 00:25:18,000 --> 00:25:21,000 Speaker 1: we're going to increase our R and D. We're gonna 453 00:25:21,040 --> 00:25:24,440 Speaker 1: share half the one billion of you know, planned cost 454 00:25:24,480 --> 00:25:27,600 Speaker 1: savings in the first three years. And I think in 455 00:25:27,640 --> 00:25:29,760 Speaker 1: the the other side of the room that really wasn't 456 00:25:29,800 --> 00:25:31,760 Speaker 1: talked about too much to day is Airbus and Boeing 457 00:25:31,920 --> 00:25:35,840 Speaker 1: and their approvals critical as well. And you know, the 458 00:25:36,000 --> 00:25:39,000 Speaker 1: one key thing here that you don't need approval for 459 00:25:39,240 --> 00:25:42,440 Speaker 1: is China, and China really held up probably four months 460 00:25:42,440 --> 00:25:46,960 Speaker 1: longer than expected the Collins Transact. Just these there's no 461 00:25:47,720 --> 00:25:50,720 Speaker 1: uh need for China's approval for national defense. You know, 462 00:25:50,840 --> 00:25:54,160 Speaker 1: suppliers of these combined sales would be to d D 463 00:25:54,680 --> 00:25:58,560 Speaker 1: so Nick. In the marketplace, broadly, investors seem to be 464 00:25:58,720 --> 00:26:01,600 Speaker 1: have a preference for you know, pure play companies. Here, 465 00:26:01,600 --> 00:26:05,920 Speaker 1: we're putting a defense aviation company and a commercial aviation 466 00:26:06,040 --> 00:26:07,760 Speaker 1: kind of company together. Is that kind of does that 467 00:26:07,800 --> 00:26:13,280 Speaker 1: suggest a discount for this proformer company going forward? Excellent question, Paul, 468 00:26:13,440 --> 00:26:16,440 Speaker 1: and I think what what's really going on? I asked 469 00:26:16,440 --> 00:26:19,480 Speaker 1: that last night when I spoke to management, and basically 470 00:26:20,200 --> 00:26:24,320 Speaker 1: what they're arguing is that the combined companies, even though 471 00:26:24,320 --> 00:26:28,720 Speaker 1: you have forty five percent commercial defense, that combined companies 472 00:26:28,720 --> 00:26:33,000 Speaker 1: will have a higher growth and in turn that should 473 00:26:33,080 --> 00:26:37,960 Speaker 1: help offset, if you will, the discount that would normally 474 00:26:38,800 --> 00:26:42,760 Speaker 1: be assigned for you know, a hybrid aerospace. What do 475 00:26:42,800 --> 00:26:45,080 Speaker 1: they do with usakash then, I mean if you run 476 00:26:45,119 --> 00:26:48,240 Speaker 1: through yet on a merger basis, I mean with this 477 00:26:48,440 --> 00:26:53,360 Speaker 1: dominance almost duopoly. What does it pulse when you triopoly? Well, yes, 478 00:26:53,680 --> 00:26:55,760 Speaker 1: Nick would call it a quad opoly. I don't know. 479 00:26:56,680 --> 00:26:59,080 Speaker 1: But within this focus, Nick came in, what does USA 480 00:26:59,160 --> 00:27:02,760 Speaker 1: cash do? Well, you know, I think that they're looking 481 00:27:02,840 --> 00:27:06,000 Speaker 1: for eight billion up from six proformer this year eight. 482 00:27:06,040 --> 00:27:08,879 Speaker 1: You know, just for you new TC arrow Um and 483 00:27:08,960 --> 00:27:14,399 Speaker 1: RAI seon Um that you're looking at returning twenty you 484 00:27:14,440 --> 00:27:17,280 Speaker 1: know billion or something in the first three years. So 485 00:27:17,400 --> 00:27:20,800 Speaker 1: call it you know six seven billion a year, so 486 00:27:21,280 --> 00:27:24,560 Speaker 1: you know most of your free cash is coming back. Ironically, 487 00:27:25,280 --> 00:27:28,800 Speaker 1: you look at the balance sheet of the combined Entityllion 488 00:27:28,920 --> 00:27:32,800 Speaker 1: net debt. Only two billion of that is raytheon's billion 489 00:27:33,480 --> 00:27:37,520 Speaker 1: is utc Arrow, which is down forty one bion with 490 00:27:37,880 --> 00:27:41,600 Speaker 1: you know, um uh, the otis in the carrier now. 491 00:27:41,600 --> 00:27:44,320 Speaker 1: It's just it's like to me, it seems like, why 492 00:27:44,320 --> 00:27:47,919 Speaker 1: do you anounce this now? Why today? If this has 493 00:27:47,960 --> 00:27:52,080 Speaker 1: been in the in the hopper working through for a year. Okay, 494 00:27:52,320 --> 00:27:56,480 Speaker 1: And my sense is that there's probably um something to 495 00:27:56,520 --> 00:27:58,560 Speaker 1: do with the fact that you wanted to get ahead 496 00:27:58,560 --> 00:28:00,840 Speaker 1: of the Paris Air Show because there may be some 497 00:28:00,960 --> 00:28:04,480 Speaker 1: other news at the Paris Air Show. Listen to you, 498 00:28:04,720 --> 00:28:07,720 Speaker 1: he's so good. Nick came in gossip calumnists. If you're 499 00:28:07,760 --> 00:28:10,720 Speaker 1: just owing his folks, Nick came in with us William Blair, 500 00:28:10,760 --> 00:28:13,399 Speaker 1: I should point out Paul Sweeney combined there on the 501 00:28:13,480 --> 00:28:18,000 Speaker 1: edge of three thousand employees. Just extraordinary behemoth here. So, 502 00:28:18,000 --> 00:28:20,359 Speaker 1: so what you mentioned the Paris Air Show, Nick, what 503 00:28:20,400 --> 00:28:21,760 Speaker 1: do you expect to come out of it? There's a 504 00:28:21,840 --> 00:28:24,280 Speaker 1: lot of uncertain You've got this deal, you've got Boeing. 505 00:28:24,960 --> 00:28:27,480 Speaker 1: What do you expect to come out of Paris? Probably 506 00:28:27,480 --> 00:28:31,359 Speaker 1: no new products, no new platforms. Okay, what we'll see 507 00:28:31,400 --> 00:28:35,360 Speaker 1: more about is either new orders or we'll see orders 508 00:28:35,400 --> 00:28:40,320 Speaker 1: possibly you know, move that aren't yet fulfilled entirely from 509 00:28:40,440 --> 00:28:43,720 Speaker 1: one supplier to another. So there's going to be more 510 00:28:43,760 --> 00:28:46,720 Speaker 1: of a shuffle and you know the date card than 511 00:28:46,760 --> 00:28:50,120 Speaker 1: there is necessarily going to be you know, new announcements 512 00:28:50,160 --> 00:28:53,080 Speaker 1: about where the next concert is gonna be. Does this 513 00:28:53,160 --> 00:28:57,280 Speaker 1: deal today, the United Technologies Raitheon deal, does that suggest 514 00:28:57,400 --> 00:28:59,760 Speaker 1: or is that prompt more M and A in the 515 00:29:00,560 --> 00:29:03,880 Speaker 1: or aviation business. It's a good question. And you know, 516 00:29:04,040 --> 00:29:07,160 Speaker 1: at this juncture there's less and less on the pure 517 00:29:07,320 --> 00:29:11,640 Speaker 1: defense that really is going to have arguably the same 518 00:29:11,720 --> 00:29:16,760 Speaker 1: kind of strategic merit behind the raytheon you know, you know, 519 00:29:16,880 --> 00:29:20,720 Speaker 1: Technologies airspace merger. So you you've got gender Dynamics, and 520 00:29:20,760 --> 00:29:23,480 Speaker 1: you've got North of Greminan and you've got Lockheed, and 521 00:29:23,480 --> 00:29:25,200 Speaker 1: then you start going way down in the weeds in 522 00:29:25,280 --> 00:29:29,040 Speaker 1: terms of who's there for defense and then to argue 523 00:29:29,120 --> 00:29:32,239 Speaker 1: that you know they one of those should merge with 524 00:29:32,440 --> 00:29:37,360 Speaker 1: g Aviation or should merge with you know, Saffron or Honeywell, 525 00:29:37,400 --> 00:29:39,880 Speaker 1: Honeywell comes with a lot other stuff. You know, So 526 00:29:39,920 --> 00:29:42,320 Speaker 1: I don't I don't really think that this is going 527 00:29:42,400 --> 00:29:45,000 Speaker 1: to be kind of a domino, you know, first first 528 00:29:45,040 --> 00:29:48,360 Speaker 1: of a series of domino actions. But Nick came in 529 00:29:48,440 --> 00:29:51,480 Speaker 1: one final question based on all that you said here, 530 00:29:51,480 --> 00:29:54,320 Speaker 1: it really it. Who's pauling me to be in Paris 531 00:29:54,360 --> 00:29:57,200 Speaker 1: in six days eighteen hours? Yeah, I mean we need 532 00:29:57,240 --> 00:30:01,200 Speaker 1: to get how you going for the food or the entertaining? 533 00:30:01,320 --> 00:30:03,240 Speaker 1: Oh no, I would never do that. We'd be going 534 00:30:03,440 --> 00:30:07,000 Speaker 1: for the for the guy Johnson lectures on the cast 535 00:30:07,080 --> 00:30:09,320 Speaker 1: of the Wing of an Airbus. Nick came in, Thank 536 00:30:09,360 --> 00:30:13,719 Speaker 1: you so much, and I'm really appreciate him coming up. 537 00:30:14,080 --> 00:30:18,280 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 538 00:30:18,320 --> 00:30:23,680 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 539 00:30:23,720 --> 00:30:27,959 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 540 00:30:27,960 --> 00:30:32,200 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.