WEBVTT - Dollar to Weaken on Mexico Trade Tensions: Nordvig 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.760 along with my co host Lisa Brahmawitz. Each day we 0:00:07.880 --> 0:00:10.399 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.640 and your money, whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:23.400 Bloomberg dot com. We'll trade tensions between the US and 0:00:23.440 --> 0:00:27.200 some of its leading trading partners continued to escalate. First 0:00:27.280 --> 0:00:30.480 it was China, uh, then Mexico and now India. To 0:00:30.560 --> 0:00:32.280 get a sense of where we go next, we welcome 0:00:32.280 --> 0:00:36.400 our next guest, end Nordvig, founder in CEO of Exante 0:00:36.560 --> 0:00:40.920 Data LLC, also a chief strategist there at Exante based 0:00:40.920 --> 0:00:44.360 in New York City, YenS, Thanks so much for joining us. Um. 0:00:44.400 --> 0:00:47.640 It just seems like these concentric circles of ever growing 0:00:47.640 --> 0:00:50.839 trade tensions continue to widen. What is your sense of 0:00:50.880 --> 0:00:56.880 how this will play out for US economic growth? Yeah, 0:00:56.920 --> 0:00:59.760 I have to say it's rudy Stantin to be a 0:00:59.800 --> 0:01:02.960 so a big compounding effect in the sense that, okay, 0:01:03.080 --> 0:01:06.880 maybe the US economy could sort of take one trade 0:01:06.920 --> 0:01:09.320 war but when you start to have multiple trade wars 0:01:09.360 --> 0:01:13.240 at the same time, it becomes much harder to handle. 0:01:13.360 --> 0:01:19.959 So obviously, having a small amount of tariffs on as 0:01:20.000 --> 0:01:23.240 a small portion of trade is one thing, and we 0:01:23.360 --> 0:01:26.959 had that initially with the steel terroriffs. But we're starting 0:01:27.000 --> 0:01:30.120 to look at a situation where we could have tariffs 0:01:30.120 --> 0:01:34.600 on all imports from China. And the process that we're 0:01:34.640 --> 0:01:38.080 in now with Mexico starts from a low level of terrorists, 0:01:38.120 --> 0:01:42.039 but it is potentially on all goods ramping up to 0:01:43.160 --> 0:01:47.160 so if this goes the wrong way, we're really looking 0:01:47.160 --> 0:01:50.000 at a situation where you have tariffs on a very, 0:01:50.120 --> 0:01:54.800 very big number of imports. And most of the research 0:01:54.840 --> 0:01:56.920 has coming out on how this feed through into the 0:01:56.960 --> 0:02:00.880 economy suggests that US consumers pay really the bulk of 0:02:00.920 --> 0:02:03.640 the bill, and that's how you you get a really 0:02:03.720 --> 0:02:06.880 big negative impact on the US economy. What's interesting to 0:02:06.960 --> 0:02:10.040 me and is where the havens have been. I mean, 0:02:10.040 --> 0:02:13.440 we've seen people flood into the dollar, the broad Dollar 0:02:13.600 --> 0:02:18.160 index gaining about a half a percentage point last month. Meanwhile, 0:02:18.200 --> 0:02:21.200 we're also seeing people flood into US treasury, so US 0:02:21.280 --> 0:02:24.720 the sort of biggest beneficiary. UH, so far do you 0:02:24.720 --> 0:02:28.400 think that's going to continue. Yes. I think when you 0:02:28.480 --> 0:02:33.400 had the US China tension really driving things, it made 0:02:33.440 --> 0:02:36.839 some sense that there was a sort of positive dollar 0:02:36.840 --> 0:02:40.160 effect for a period of time, and that was linked 0:02:40.160 --> 0:02:42.000 to the fact that, Okay, China is a big part 0:02:42.000 --> 0:02:45.720 of the global economy, so the global growth situation with 0:02:45.760 --> 0:02:48.240 the terra rate and also the Chinese currency is such 0:02:48.240 --> 0:02:50.600 a big drive of global currency markets that if the 0:02:50.680 --> 0:02:54.840 Chinese currency was weakening, it was going to essentially push 0:02:54.880 --> 0:02:57.560 a lot of other currencies down with it and sort 0:02:57.560 --> 0:03:00.399 of implicitly generate dollar strength. But I think one once 0:03:00.440 --> 0:03:05.480 you escalate the trade war to include Mexico, it becomes 0:03:05.480 --> 0:03:07.960 different because number one day, the hit to the U 0:03:08.040 --> 0:03:12.839 s economy is disproportionate larger, in part because Mexico has 0:03:12.919 --> 0:03:16.720 more imports from the US that they can retaliate against, 0:03:17.120 --> 0:03:19.799 but also just because those two effects start to stack 0:03:19.919 --> 0:03:22.120 up to on top of each other and and the 0:03:22.200 --> 0:03:25.799 FED really is forced to respond more forcefully. And that's 0:03:25.800 --> 0:03:29.120 what you're started to see obviously in FED pricing having 0:03:29.120 --> 0:03:32.680 moved very aggressively. So now not only are we pricing 0:03:32.800 --> 0:03:35.640 a FED cut by September, but we're really starting to 0:03:35.680 --> 0:03:38.280 pry a high probability that the Fed will be forced 0:03:38.320 --> 0:03:42.240 to move sooner than that. It's a pretty extraordinarily quick shift. 0:03:42.360 --> 0:03:45.160 And the rate moves are now such that that the 0:03:45.240 --> 0:03:48.280 dollar is starting to take a hit, And I think, 0:03:48.360 --> 0:03:51.720 right this so and I think the problem is that 0:03:51.760 --> 0:03:53.720 we've we've come from a period where the dollar has 0:03:53.720 --> 0:03:57.720 been strong for about a year, So momentum starts to turn, 0:03:58.440 --> 0:04:00.480 there could be a lot of technical adjust ones that 0:04:00.480 --> 0:04:02.960 that can really put the dollar on quite a bit 0:04:03.000 --> 0:04:05.680 of pressure. And today might be a really important day 0:04:05.680 --> 0:04:09.200 because the euros down to move. Gold is having a 0:04:09.320 --> 0:04:11.880 very big move today, which is typically a reflection of 0:04:11.920 --> 0:04:15.120 the broader dollar direction. So it's a quite important day 0:04:15.160 --> 0:04:17.839 for the currency market today, I would argue. So, yeah, 0:04:18.080 --> 0:04:20.679 staying with the currency markets, the when we think about China, 0:04:20.720 --> 0:04:23.880 in particular the trade tensions there to what extent I mean, 0:04:23.960 --> 0:04:27.320 historically the Japanese yen has been perceived as a safe haven. 0:04:27.640 --> 0:04:31.040 Do you still consider that to be the case? Yes, 0:04:31.160 --> 0:04:35.000 I think the yen has has clearly participated in this 0:04:35.279 --> 0:04:39.080 UH dynamic over the last few sessions where the dollar 0:04:39.160 --> 0:04:43.920 is trading on the back foot, and that has generated 0:04:44.080 --> 0:04:46.680 a decent size move. Thow on dollar yen. It's not 0:04:46.760 --> 0:04:49.320 like a big break from the range we've seen the 0:04:49.400 --> 0:04:51.080 last couple of years. We've sort of been in a 0:04:51.800 --> 0:04:54.640 in a one oh five one of fifteen range, which 0:04:54.640 --> 0:04:57.400 is relatively now a range over the last two three years. 0:04:57.960 --> 0:05:00.560 So the big question is whether we're gonna really break 0:05:00.600 --> 0:05:04.120 out of that range. And I think there's two big 0:05:04.200 --> 0:05:07.480 questions that The one question is, okay, a Japanese investor 0:05:07.560 --> 0:05:10.840 is going to start to hitch the US assets Differently 0:05:11.040 --> 0:05:13.680 if we're looking at potentially a big slow adown in 0:05:13.800 --> 0:05:17.080 US growth and the fail actually cutting rates, So that's 0:05:17.120 --> 0:05:19.599 something that that certainly will come into play if if 0:05:19.839 --> 0:05:23.480 the FED really delivers and they carry involved in in 0:05:23.480 --> 0:05:26.320 in this trade and therefore the cost of hedging comes down. 0:05:26.880 --> 0:05:28.840 And then the other thing that that's really important to 0:05:28.880 --> 0:05:32.760 the end is Japanese companies have been on a bit 0:05:32.839 --> 0:05:35.280 of a buying spree in terms of buying up other 0:05:35.360 --> 0:05:38.800 companies around the world m and a activity that could 0:05:38.880 --> 0:05:41.440 be in question if we have a real sort of 0:05:41.480 --> 0:05:45.359 tense global environment, and that would also see the end 0:05:45.400 --> 0:05:48.480 strength and if that outflow stops. So I think there's 0:05:48.480 --> 0:05:51.080 a chance we can break out of this range. The 0:05:51.360 --> 0:05:53.560 big thing to watch in the short term is is 0:05:53.640 --> 0:05:58.080 this theme of escalation sticking, Like are we going to 0:05:58.160 --> 0:06:01.000 have the escalation on June ten with the tariffs actually 0:06:01.040 --> 0:06:05.160 coming into effect in relation to Mexico, and then are 0:06:05.160 --> 0:06:09.040 we going to have some kind of positive headlines at 0:06:09.040 --> 0:06:11.400 the G twenty meeting when when it takes place in 0:06:11.680 --> 0:06:14.200 Japan at the end of the month, or are we 0:06:14.279 --> 0:06:16.320 just going to literally move to the full blown trade 0:06:16.320 --> 0:06:18.680 war versus China. I think those are the really key 0:06:18.720 --> 0:06:21.040 things to watch there. How much for the dollar weaken 0:06:21.120 --> 0:06:25.240 in your view? So I think if if the FED 0:06:25.720 --> 0:06:29.880 is really delivering cuts here in coming months, and we 0:06:30.000 --> 0:06:36.200 have an environment where where perhaps the Chinese actually hold 0:06:36.600 --> 0:06:39.360 their currency, so that's a key one. But if the 0:06:39.440 --> 0:06:42.400 Chinese don't allow their currency to move, then I think 0:06:42.440 --> 0:06:45.680 we're in an environment where the dollar can weaken meaningfully. 0:06:45.680 --> 0:06:50.159 But if the Chinese allow their currency to break seven, 0:06:50.279 --> 0:06:54.400 so a depreciation beyond what they've allowed in recent years, 0:06:55.040 --> 0:06:58.320 then you have a sort of tricky situation with as 0:06:58.960 --> 0:07:02.880 dollar bearish impulse from the FED, but actually accounts of 0:07:03.000 --> 0:07:05.440 force from the direction of the Chinese currency. So it's 0:07:05.560 --> 0:07:09.120 absolutely crucial whether the Chinese are going to hold the 0:07:09.200 --> 0:07:12.640 currency here as they've done in recent weeks, or whether 0:07:12.680 --> 0:07:15.400 they're going to allow a break of seven if we 0:07:15.560 --> 0:07:19.400 move to a full blown trade war. So yeah, it's 0:07:19.440 --> 0:07:23.160 just given the uncertainty surrounding global trade, are there pockets 0:07:23.240 --> 0:07:28.440 of relative safety that you're looking at in terms of currencies? Um, well, 0:07:28.600 --> 0:07:31.000 I think I think one thing that's been very interesting 0:07:31.440 --> 0:07:33.640 over the last week or so that I actually think 0:07:34.200 --> 0:07:39.120 can continue is that we're now seeing that emerging market 0:07:39.160 --> 0:07:42.800 currencies that had a really bad year over the last 0:07:42.880 --> 0:07:51.120 year or so can actually start to perform better. So, um, 0:07:51.160 --> 0:07:54.160 it's it's a situation where we have a sort of 0:07:54.160 --> 0:07:59.520 bearish positioning in e M space that is now perhaps 0:07:59.520 --> 0:08:02.600 too bare if we have a much low environment for 0:08:02.640 --> 0:08:06.160 global yields, So I think EM currencies can start to 0:08:06.200 --> 0:08:09.640 ironically do better, especially relative to other risk asses. So 0:08:09.680 --> 0:08:11.320 for example, if to compare with the S and P, 0:08:11.840 --> 0:08:15.200 I think currencies can do better. Nord Vig, thank you 0:08:15.240 --> 0:08:17.200 so much for being with us. A really interesting call 0:08:17.280 --> 0:08:19.960 there about how emerging market currencies will do well as 0:08:20.000 --> 0:08:23.400 yields continue to go lower here in the United States. 0:08:23.480 --> 0:08:27.080 YenS nord vigas founder and chief executive officer of Exante Data, 0:08:27.280 --> 0:08:44.760 also chief strategist at Elexante Advisors. There's been a market 0:08:45.000 --> 0:08:47.920 shift in sentiment from oh, China and the US will 0:08:47.960 --> 0:08:50.320 come to some sort of deal to what will it 0:08:50.400 --> 0:08:53.480 protracted trade war look like? Joining us now to think 0:08:53.520 --> 0:08:57.160 about that is Carl Weinberg, Founder in chief international economist 0:08:57.200 --> 0:09:01.200 at High Frequency Economics. Carl, let's start and fast forward 0:09:01.480 --> 0:09:04.880 making some assumptions that trade wars rage on, the market 0:09:05.120 --> 0:09:09.079 keeps declining, and an economic downturn ensues. What does that 0:09:09.160 --> 0:09:13.640 economic downturn look like? Well, good morning, Lisa Um. You know, 0:09:13.760 --> 0:09:17.240 the economic downturn that we're looking at worldwide right now 0:09:17.280 --> 0:09:19.840 is a little bit broader than trade, but than the 0:09:20.000 --> 0:09:22.640 trade wars, but it all has its roots in trade, 0:09:22.640 --> 0:09:25.560 which is now flatter declining depending on the metric you 0:09:25.559 --> 0:09:29.640 look at worldwide, and you know, companies that export are 0:09:29.679 --> 0:09:33.640 the ones that are affected. First. Tariffs affect consumers make 0:09:33.679 --> 0:09:36.120 them a little bit less reluctant to buy stuff because 0:09:36.120 --> 0:09:39.040 they have less disposable income, is they're they're spending power 0:09:39.080 --> 0:09:42.040 goes down. But the first reel hit is probably going 0:09:42.080 --> 0:09:44.000 to be on the side of corporations that are going 0:09:44.040 --> 0:09:46.880 to face supply chain issues. They're going to face cost 0:09:46.920 --> 0:09:51.120 issues and then that will lead to financial market implications. So, 0:09:51.200 --> 0:09:55.679 Dr Winberg, we got some disappointing US manufacturing data out today, 0:09:55.960 --> 0:09:58.080 give us a sense of to the extent that these 0:09:58.120 --> 0:10:02.760 trade skirmishes uncertainties continue, maybe even expand. If you think 0:10:02.800 --> 0:10:05.880 about you know, India as well now being in the crosshairs, 0:10:06.280 --> 0:10:09.320 how do you think the manufacturing community around the world 0:10:09.480 --> 0:10:13.240 will respond, Good morning, Paul. Yes, everybody has got to 0:10:13.280 --> 0:10:16.920 be alarmed by this because the expansion of the U. S. 0:10:16.960 --> 0:10:20.800 Administration's tariff i'll call a tariff aggression to borrow language 0:10:20.800 --> 0:10:26.240 from the Chinese UM basically undermines the confidence that companies 0:10:26.280 --> 0:10:29.920 of all kinds all around the world face and making 0:10:29.960 --> 0:10:32.640 business plans and decisions. They don't really know the cost 0:10:32.679 --> 0:10:35.040 structure that they're going to face, they don't really know 0:10:35.120 --> 0:10:38.040 the trade and the tariff regime, and as the FedEx 0:10:38.080 --> 0:10:40.600 example indicates, they don't even know if they're going to 0:10:40.640 --> 0:10:45.120 be constrained in their business. Enterprises and companies that resist 0:10:45.800 --> 0:10:49.480 the tariff advances by the United States, the tariff increases. 0:10:49.520 --> 0:10:52.719 So it's a general role of uncertainty, it's a role 0:10:52.760 --> 0:10:56.640 of profit compression, and it's certainly in these uncertain times, 0:10:56.640 --> 0:10:59.240 it's one that causes companies to cut back on investment 0:10:59.440 --> 0:11:01.839 until the all clears, and of course that's always bad 0:11:01.880 --> 0:11:04.640 for the world economy. You were saying earlier that there 0:11:04.679 --> 0:11:08.880 will be financial market implications. Basically, the market's going to 0:11:08.960 --> 0:11:11.120 sell off. Risk assets are going to sell off in 0:11:11.320 --> 0:11:16.319 this scenario. How much is this going to be a crash? Like, yeah, Well, 0:11:16.320 --> 0:11:18.440 you know, I was listening to Bloomberg Radio as I 0:11:18.480 --> 0:11:20.640 was driving into the office this morning and heard you 0:11:20.679 --> 0:11:24.080 guys talking about individual companies and the impacts that this 0:11:24.200 --> 0:11:27.079 is having on their earnings forecasts, on their profit forecast, 0:11:27.400 --> 0:11:30.560 on their general rural view of the world in there, 0:11:30.720 --> 0:11:33.559 and their guidance to markets. So this is really how 0:11:33.640 --> 0:11:36.880 it begins, you know, crashes. You know, I'm not in 0:11:36.920 --> 0:11:39.440 the business of predicting crashes. You know, I don't think 0:11:39.480 --> 0:11:41.839 we have to have a stock market crash. The stock 0:11:41.880 --> 0:11:45.080 market is certainly high enough that some kind of correction 0:11:45.240 --> 0:11:48.840 is probably coming anyway. This just increases the odds of 0:11:48.880 --> 0:11:51.280 that happening. But a crash, you know that that's not 0:11:51.400 --> 0:11:54.000 my domain to predict it. I don't have anything on 0:11:54.120 --> 0:11:57.200 my horizon that will cause a crash. Dr Weinberg, I 0:11:57.200 --> 0:12:01.640 think I have a straightforward question here. Who pays for tariffs? Oh, 0:12:01.720 --> 0:12:04.800 that's a really straightforward question, very refreshing also because the 0:12:04.840 --> 0:12:08.199 Trump administration has it all wrong when they raise tariffs 0:12:08.280 --> 0:12:11.840 on things that come from China. You pay the tariffs, right, 0:12:11.880 --> 0:12:15.000 not the Chinese. Now, the Chinese may lose themselves to 0:12:15.040 --> 0:12:18.400 the United States, but since the exports are growing between 0:12:18.440 --> 0:12:21.080 oh say, five and ten percent per year anyhow, they're 0:12:21.080 --> 0:12:23.120 probably going to sell whatever they don't sell to you 0:12:23.200 --> 0:12:27.480 to somebody else and um. In terms of the counterfeariling tariffs, 0:12:27.720 --> 0:12:30.559 the Chinese have been very careful to tariff things for 0:12:30.640 --> 0:12:33.479 which they consumers at home have a lot of substitutes, 0:12:33.520 --> 0:12:36.600 like soybeans. Think by soybeans from any number of countries 0:12:36.600 --> 0:12:39.160 in the world. They just buy less from the U. S. Farmer, 0:12:39.440 --> 0:12:41.440 and the U. S. Farmer is the one who pays 0:12:41.880 --> 0:12:43.760 the tariff. So at the end of the day, when 0:12:43.760 --> 0:12:46.200 you go out to buy your iPad and you can't 0:12:46.200 --> 0:12:49.079 buy it from any source other than China, you end 0:12:49.120 --> 0:12:51.760 up paying the tariff. Your income to spend on other 0:12:51.800 --> 0:12:54.440 things is reduced, and you're the one who then has 0:12:54.480 --> 0:12:58.120 the vote to determine whether or not this regime is 0:12:58.120 --> 0:13:01.679 going to continue. So one sort of theory, and President 0:13:01.679 --> 0:13:04.800 Trump has put this out, is that eventually companies will 0:13:04.800 --> 0:13:08.480 rejigger their supply chains so they don't rely on countries 0:13:08.720 --> 0:13:11.200 that are the most tariff And this is sort of 0:13:11.200 --> 0:13:14.760 the point of putting on these levies. I guess my 0:13:14.880 --> 0:13:16.880 question is, you know, how do you respond to people 0:13:16.920 --> 0:13:19.040 who say, look, this is temporary in order to get 0:13:19.400 --> 0:13:23.719 the trading situation more fair, and then the US will 0:13:23.760 --> 0:13:26.679 prosper as a result of it. A Lisa, you sound 0:13:26.679 --> 0:13:28.839 like a Wall Street economist. You know, at the end 0:13:28.840 --> 0:13:30.800 of the day, everything's going to be all right. But 0:13:30.920 --> 0:13:33.480 until we get there, all right, we have to survive, 0:13:33.800 --> 0:13:36.640 al right. A company who supply chain is interrupted today 0:13:36.960 --> 0:13:39.679 has to live until tomorrow to be able to take 0:13:39.720 --> 0:13:43.199 advantages of whatever is coming better and tomorrow. We economists 0:13:43.200 --> 0:13:49.240 are always guilty of ignoring transition costs and transition obstacles 0:13:49.600 --> 0:13:52.840 as we talk about one new situation being better than another. 0:13:53.120 --> 0:13:55.280 You know, maybe we will or maybe we won't be 0:13:55.280 --> 0:13:57.840 better off tomorrow. We can debate that forever. But for 0:13:57.880 --> 0:14:00.120 a car company that has to source parts from a 0:14:00.160 --> 0:14:02.520 country that can no longer trade with or at a 0:14:02.559 --> 0:14:06.480 twenty higher costs. That's a problem for survival today. That's 0:14:06.520 --> 0:14:09.800 a problem for pricing today, for profits today, for making 0:14:09.840 --> 0:14:13.000 payroll today, for hiring and firing workers today. And that's 0:14:13.040 --> 0:14:15.880 really what we're talking about in the financial markets, isn't it. 0:14:15.880 --> 0:14:20.520 It's today? So Dr Weinberg, are the particular industries that 0:14:20.560 --> 0:14:22.800 you think are most at risk here? In? It's just 0:14:22.880 --> 0:14:27.080 a rising and trade tension environment. Um is there anything 0:14:27.080 --> 0:14:29.840 particularly that I think investor should be looking out for. Well, 0:14:29.840 --> 0:14:31.920 you know, I can hide behind my role as a 0:14:31.920 --> 0:14:34.600 macro economist and say that I don't look at industries, 0:14:34.880 --> 0:14:37.280 but as a macro economist, what I can say is 0:14:37.320 --> 0:14:42.000 that pretty much every industry, whether it's manufacturing or services, 0:14:42.240 --> 0:14:45.840 today has gone global. Pretty much all industries, pretty much 0:14:45.880 --> 0:14:48.440 all companies have some kind of linkage to the rest 0:14:48.440 --> 0:14:51.840 of the world, and therefore every company is vulnerable to 0:14:52.320 --> 0:14:57.480 um uh these uh this tariff regime and um I 0:14:57.520 --> 0:15:00.720 can't even think of any exceptions of a pure domestic 0:15:01.400 --> 0:15:04.960 company that purely sources things domestically. I mean, even if 0:15:04.960 --> 0:15:07.320 you just use a laptop computer to do your books. 0:15:07.360 --> 0:15:10.440 You know, Joe the plumber is vulnerable to higher tariffs 0:15:10.480 --> 0:15:13.200 on that computer that he does his books on because 0:15:13.400 --> 0:15:17.080 of the tariff things. So we're all subject to this 0:15:17.120 --> 0:15:20.320 in one way or another, all industries, al sectors, all people, 0:15:20.600 --> 0:15:23.040 no place to hide. One thing that I find interesting 0:15:23.320 --> 0:15:25.720 is the question of who's going to suffer more, the 0:15:25.840 --> 0:15:29.960 US or emerging markets, including China. We have PIMCO coming 0:15:29.960 --> 0:15:32.680 out and saying investors are underestimating the value in emerging 0:15:32.680 --> 0:15:36.000 market stocks. Do you think that right now developing markets 0:15:36.000 --> 0:15:40.280 are going to be less hard hit than the United States? Well, 0:15:40.280 --> 0:15:43.400 you know, the developing markets. I mean, let's look at China. Alright. 0:15:43.480 --> 0:15:46.360 China makes a wide variety of stuff, and the United 0:15:46.360 --> 0:15:50.000 States is only about fift of its export market, and 0:15:50.080 --> 0:15:51.880 it's not going to lose all its exports of the 0:15:51.920 --> 0:15:54.800 United States. For sure, Americans will pay more for the 0:15:54.840 --> 0:15:58.560 stuff that they can't get from somewhere else. However, all right, 0:15:59.080 --> 0:16:01.080 a lot of the stuff that they won't sell here 0:16:01.080 --> 0:16:03.640 in the United States. They've got eight five percent of 0:16:03.640 --> 0:16:06.240 the world to sell their stuff too. Now, China is 0:16:06.400 --> 0:16:09.760 an extraordinary case because of the diversity of its products. 0:16:09.800 --> 0:16:13.040 But whether you're selling you know, broad based commodities or 0:16:13.240 --> 0:16:16.640 high end manufactured goods. If you're any country in the world, 0:16:17.040 --> 0:16:20.360 you can sell it probably to somebody else if you 0:16:20.400 --> 0:16:22.720 can't sell it in the United States. And that's really 0:16:22.720 --> 0:16:26.280 one of the flaws in the strategy. Unilateral attacks on 0:16:26.400 --> 0:16:29.720 countries like this when you're not the biggest dominant player 0:16:29.760 --> 0:16:32.480 in the world anymore, that is a strategic error in 0:16:32.480 --> 0:16:35.760 my opinion, Dr Carl Weinberg, thank you so much. Dr 0:16:35.840 --> 0:16:38.640 Weinberger's that found their in chief international economists at High 0:16:38.640 --> 0:16:42.480 Frequency Economics. I think a couple of takeaways there are. 0:16:42.640 --> 0:16:46.440 Number one, trade wars are bad um and number two, 0:16:46.880 --> 0:16:51.320 tariffs ultimately are paid by the consumer, neither of which 0:16:51.400 --> 0:17:10.280 is good for a global economic growth. Let's talk clean 0:17:10.440 --> 0:17:13.320 energy for the home. In the US, buildings account for 0:17:13.320 --> 0:17:17.280 nearly of all carbon emissions, and one company has a 0:17:17.280 --> 0:17:20.159 plan to curb those emissions. Kathy Hannon is the CEO 0:17:20.280 --> 0:17:23.320 and co founder of Dandelion Energy. Dandelion Energy is a 0:17:23.359 --> 0:17:26.199 spin out company of Google x and as the nation's 0:17:26.280 --> 0:17:30.399 leading home geothermal company. Kathy, thanks so much for joining us. 0:17:30.400 --> 0:17:33.280 So just tell us a little bit about dandelions technology 0:17:33.359 --> 0:17:36.320 and how it kind of works. I'd be happy to so. 0:17:36.560 --> 0:17:41.960 Dandelion installs residential geothermal systems. These are systems heating and 0:17:41.960 --> 0:17:44.960 cooling systems that get placed in the home, usually where 0:17:45.000 --> 0:17:48.159 the furnace used to be, and they have what are 0:17:48.200 --> 0:17:50.840 called ground loops. So these are pipes that we install 0:17:50.920 --> 0:17:53.959 in the ground and they let that heat pump gather 0:17:54.080 --> 0:17:56.040 heat from the ground to heat the home in the 0:17:56.080 --> 0:17:58.840 winter and then push heat into the ground to cool 0:17:58.880 --> 0:18:02.040 the home in the summer. So they're very inexpensive to operate, 0:18:02.240 --> 0:18:06.240 very quiet, and a lot of homeowners have started switching 0:18:06.359 --> 0:18:09.280 from there from their furnaces. Can you give us a 0:18:09.320 --> 0:18:14.360 sense of just how big adoption has been so far? Absolutely? So. 0:18:14.520 --> 0:18:19.359 The company actually started selling our product UM a little 0:18:19.359 --> 0:18:21.879 bit less than a year ago, and we already have 0:18:22.040 --> 0:18:24.960 hundreds of customers in New York, which is the market 0:18:25.000 --> 0:18:27.679 we serve today. So if I were to do this 0:18:27.720 --> 0:18:30.240 to my home, what's my out of pocket costs and 0:18:30.280 --> 0:18:34.320 what are my hopeful savings? Absolutely well, UM out of 0:18:34.320 --> 0:18:39.720 pocket costs tend to be around eighteen to twenty thousand dollars, 0:18:40.080 --> 0:18:43.120 which sounds like a lot, but when you consider that 0:18:44.080 --> 0:18:48.720 UM many homeowners are spending three thousand, four thousand dollars 0:18:48.760 --> 0:18:52.560 a year on fuel, oil or propane um. That payback 0:18:52.600 --> 0:18:56.240 period tends to be very very fast, and we offer financing, 0:18:56.359 --> 0:18:59.080 so actually most of our homeowners choose to pay nothing 0:18:59.160 --> 0:19:03.640 up front, so zero cost, and then UM they pay 0:19:03.640 --> 0:19:07.200 off the system over time and the repayment amount each 0:19:07.240 --> 0:19:09.640 month is less than what they would have been spending 0:19:09.680 --> 0:19:12.360 to eat their home otherwise, so they're actually coming out 0:19:12.400 --> 0:19:15.720 ahead every single month that they have the system. One 0:19:15.720 --> 0:19:18.679 thing that I find really interesting about this company is 0:19:18.680 --> 0:19:20.960 that it's to spin out from Google X, which is 0:19:20.960 --> 0:19:25.119 where all moonshot ideas are born at Google and you 0:19:25.200 --> 0:19:28.280 worked there before becoming the CEO and co founder of 0:19:28.320 --> 0:19:31.440 Dandeline Energy. Why did you decide to spin it out? 0:19:32.480 --> 0:19:34.800 So we made the decision with Google X to spin 0:19:34.880 --> 0:19:39.359 it out because this company really UM was ready. It 0:19:39.480 --> 0:19:43.919 was ready to start selling products to homeowners. And what 0:19:44.040 --> 0:19:48.359 Google X specializes in as research and development UM moonshot 0:19:48.400 --> 0:19:51.320 projects that can take a decade to come to fruition, 0:19:51.359 --> 0:19:53.840 but then when they do, they change the world. And 0:19:53.960 --> 0:19:57.000 for this project, we didn't need that decade. We UM 0:19:57.040 --> 0:19:59.280 we were ready to start selling the product, so we 0:19:59.359 --> 0:20:03.040 decided to been it out and started to sell. So 0:20:03.200 --> 0:20:07.480 talking about this, the German Geothermal market is it? I mean, 0:20:07.480 --> 0:20:10.000 how big is it? How fast is it growing? Um, 0:20:10.119 --> 0:20:13.200 just give us a sense of what the market looks like. Well, today, 0:20:13.480 --> 0:20:16.560 it is actually quite a small market in the sense 0:20:16.600 --> 0:20:21.440 that very few homeowners get to enjoy geothermal heating and cooling. 0:20:21.960 --> 0:20:25.160 And I would say many homeowners haven't really heard about 0:20:25.160 --> 0:20:29.680 it even, which is a shame because there's just so 0:20:29.760 --> 0:20:32.439 much money that homeowners could save if they were to 0:20:32.480 --> 0:20:35.320 adopt the technology. What's been preventing it from being larger 0:20:35.320 --> 0:20:37.639 in the past has been it's been too expensive. So 0:20:37.680 --> 0:20:41.840 a typical system in the past has cost fifty or more, 0:20:42.280 --> 0:20:45.880 which is just out of range for almost everyone. Um. 0:20:45.920 --> 0:20:49.200 But the heating and cooling market couldn't be bigger. So 0:20:49.359 --> 0:20:52.800 all of us spend so much money, especially in climates 0:20:52.800 --> 0:20:56.360 that get cold in the winter, on heating, and that 0:20:56.400 --> 0:20:59.359 market is hundreds of billions of dollars. What was it 0:20:59.400 --> 0:21:03.320 like working at Google x Oh it was fantastic. So 0:21:03.480 --> 0:21:06.199 my job, which I was so lucky to have, I 0:21:06.280 --> 0:21:09.280 was a rapid evaluator is what we called it. So 0:21:09.320 --> 0:21:13.720 what that meant is I got to explore new opportunities 0:21:13.760 --> 0:21:16.240 for Google to invest in technologies that could have a 0:21:16.320 --> 0:21:20.359 huge impact and become huge businesses someday. And I think 0:21:20.400 --> 0:21:23.359 one of the great things about X is just the 0:21:23.440 --> 0:21:26.720 intellectual freedom that we were given to do that sort 0:21:26.760 --> 0:21:29.399 of thing, and then also, of course the quality of 0:21:29.440 --> 0:21:32.239 the people that we got to work with. Who So 0:21:32.359 --> 0:21:34.359 when you think about the Google lex is you know, 0:21:34.640 --> 0:21:36.439 I guess investors, when I think about Google X, it 0:21:36.520 --> 0:21:39.280 really is these moon shots. How many projects are roughly 0:21:39.440 --> 0:21:42.040 being worked on, I guess, or how many you know 0:21:42.080 --> 0:21:44.240 at any given time, and then I guess you just 0:21:44.280 --> 0:21:46.880 decide when it's time to spin out, right, Yeah, So 0:21:47.119 --> 0:21:49.720 the way it works is at the very early stages, 0:21:49.920 --> 0:21:53.080 things are just an idea. So it's really you know, 0:21:53.160 --> 0:21:56.320 there are there are hundreds of ideas getting batted around 0:21:56.800 --> 0:21:59.240 at any given time, but most of them, as you 0:21:59.240 --> 0:22:03.400 can imagine, make it very far because part of the 0:22:03.440 --> 0:22:07.160 process it access to identify as quickly as possible. Why 0:22:07.200 --> 0:22:10.080 I give an idea is doomed not to work. So 0:22:10.119 --> 0:22:14.439 we're trained to be optimists, but optimists who are always 0:22:14.480 --> 0:22:17.440 looking for the fatal flaw. Because opportunity costs is such 0:22:17.480 --> 0:22:20.200 a real thing, especially at a place like Google with 0:22:20.320 --> 0:22:23.360 so many resources, So the areas that are most ripe 0:22:23.359 --> 0:22:27.000 for disruption energy. You pinpointed, is are there any others 0:22:27.000 --> 0:22:30.520 that are sort of high areas of interest? Well, I 0:22:30.520 --> 0:22:33.600 haven't been there for two years, so I can't speak 0:22:34.240 --> 0:22:37.720 about the areas of interest there today, but I know 0:22:37.840 --> 0:22:42.159 that UM we were always very attentive to trends and technology, 0:22:42.240 --> 0:22:49.840 so you can imagine that UM areas like artificial intelligence, robotics, UM, 0:22:49.920 --> 0:22:55.200 you know, maybe maybe agriculture, maybe bio. I think all 0:22:55.200 --> 0:22:58.600 of those areas we're just seeing such rapid development that 0:22:58.760 --> 0:23:01.320