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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along

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Speaker 1: with my co host of Bonnie Quinn. Every business day

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Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,

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Speaker 1: along with essential market moving news. Find the Bloomberg Markets

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Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,

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Speaker 1: and on Bloomberg dot Com. Time for Bloomberg Opinion Today,

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Speaker 1: we're joined by Narayana Cuta, Lakota, former Minneapolis FED president

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Speaker 1: and Bloomberg Opinion colums. He's also professor of economics at

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Speaker 1: the University of Rochester. Uh Nariana, thanks so much for

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Speaker 1: joining us. We really appreciate you coming on today. It's

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Speaker 1: gonna be a busy day for FED watchers today. We've

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Speaker 1: got the statement at two pm Wall Street time, and

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Speaker 1: then FED Chairman pals Uh press conference at two thirty.

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Speaker 1: What do you expect to hear most notably from Chairman

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Speaker 1: Pal's comments, Well, I think what we're waiting to hear

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Speaker 1: is largely about, um, what was the FED talking about

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Speaker 1: of the meeting? And you know, this has a meeting

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Speaker 1: where the FED is going to be talking about what's

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Speaker 1: going to happen in the future. I don't expect much

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Speaker 1: change in terms of monetary policy or in the statement

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Speaker 1: UM at this time. But I think that the FED

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Speaker 1: probably spent day a couple of a couple of days

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Speaker 1: of very spotful reflection on what are their tools, how

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Speaker 1: can they best use them? And UM, I'm hoping that

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Speaker 1: Chair Arman Powell will give us a little bit of

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Speaker 1: heads up about how that all those conversations went. What

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Speaker 1: might be done about forward guidance? Arianna, Well, UM, I

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Speaker 1: think vannie to that. I think for guidance is UM

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Speaker 1: something that the FED used during the last recovery. I

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Speaker 1: think they were buying large pleas with how it went.

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Speaker 1: But I think that the FED tried out what was

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Speaker 1: called calendar based guidance, where they talked about keeping rates

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Speaker 1: full low for a particular fixed period of time. I

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Speaker 1: doubt we're gonna see that UM coming down the pike

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Speaker 1: because the problem that is you get is you get

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Speaker 1: new information, you get to change that guidance, and changing

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Speaker 1: it is it turns out to be pretty challenging. So

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Speaker 1: what I think the FIT is likely to aim for

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Speaker 1: is UM what we we we call and said, state

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Speaker 1: based guidance, where they talk about the conditions under which

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Speaker 1: they're likely to to raise rates. Now, I don't to

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Speaker 1: be clear, I don't think anyone expects a rate increase

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Speaker 1: becoming certainly any time even the next calendar one and

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Speaker 1: and and probably not even in throughout two. So but

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Speaker 1: I think it's the reason this matters is UH, it

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Speaker 1: affects the path of medium term interest rates. So UM,

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Speaker 1: if the Fed says it's going to keep rates flow

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Speaker 1: um until say, inflation returns to well about two that

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Speaker 1: feeds into something different in terms of of of the

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Speaker 1: power of medium term interest rates and that that can

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Speaker 1: help stimulate the economy. Marianna, you're out with a column

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Speaker 1: recently the entitled the FED needs to focus on employment.

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Speaker 1: How do you believe they should focus on employment? Yeah, Paul,

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Speaker 1: I think that, UM. A lot of the discussion that

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Speaker 1: you'll hear among FED watchers is UH, and from FED

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Speaker 1: communication as well, is that they're talking about and thinking

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Speaker 1: about communicating through the inflation rate. So as saying as

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Speaker 1: I just articulated that they're UM their way, they way

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Speaker 1: you formula for guidances, We're gonna keep rates low intil

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Speaker 1: inflation has returned to two percent in the sustainable way,

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Speaker 1: or or maybe we've relying for an over food. I

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Speaker 1: understand why they're doing that. Um. I think that will

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Speaker 1: communicate that they're keeping rates lower for longer than maybe

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Speaker 1: than people would expect. At the same time, inflation is

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Speaker 1: a challenging marker for for households to figure out. They

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Speaker 1: might not think of their ways being able to keep

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Speaker 1: up with higher inflation, and so there's a lot of

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Speaker 1: evidence is on that is very mixed. I would say

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Speaker 1: in the economics literature about will hire inflation signing higher

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Speaker 1: inflation and lead people to cut back on spending or

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Speaker 1: lead them to spend more. Whereas saying you're going to

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Speaker 1: be focusing on employment, We're going to keep rates low

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Speaker 1: until unemployment returns to let's say four UM, that will

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Speaker 1: tell people, Okay, the FED is there until the recovery

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Speaker 1: is really complete and UM, and a low unemployment is

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Speaker 1: obviously UM something that everyone associates with with positive economic news. Norianna,

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Speaker 1: what kind of fiscal stimulus would help to maybe have

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Speaker 1: the economy avoids some of the structural employment that we

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Speaker 1: are definitely going to see. Yeah, I think that, UM,

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Speaker 1: there's I should think there should be more of a

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Speaker 1: sense that this is likely to be a long, longer

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Speaker 1: term issue. Um. You know, and I think you see

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Speaker 1: some of them in gry eucratic side, that you have

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Speaker 1: some recognition along those line. I think we should. There

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Speaker 1: should be a recognition as well that the problem the

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Speaker 1: economy is not uh, people feeling flushed with that six

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Speaker 1: dollars um extra benefit and so when they're staying home

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Speaker 1: and not well, not willing to work. The problem of

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Speaker 1: the economy is not enough demand. That that low demand

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Speaker 1: is because of public health concerns UM. And so the

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Speaker 1: role of government, I think in the situation is to

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Speaker 1: try to stimulate demand, and the best way to do that,

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Speaker 1: I think is by keeping unemployment insurance UM, extending those benefits,

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Speaker 1: extending the extra benefits. So that's interesting. I mean, you

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Speaker 1: get a sense that there's appetite in Washington, given what

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Speaker 1: you've heard and read and folks you've spoken to, that

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Speaker 1: there is that support for more stimulus. Here appears this

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Speaker 1: around appears to be much much more political than the

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Speaker 1: most recent or third round where we got the three

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Speaker 1: trillion dollars. So you know, I was answering that should

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Speaker 1: not the will part of the question, um, what will happen?

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Speaker 1: You know, politics not my forte, but I agree with

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Speaker 1: you completely. We've see a lot of polarization here. Um,

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Speaker 1: I think that you're you're gonna you're hearing more of

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Speaker 1: the concerns about boy, the dead is getting big. This

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Speaker 1: is just the wrong time to have those concerns and

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Speaker 1: continues to be a time of very high unemployment and

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Speaker 1: that highnemployment. I think the challenge for a lot of

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Speaker 1: people on the on the Republican side of the aisles

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Speaker 1: they see the unemployment is coming from the fact that

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Speaker 1: UM unplay insurance benefits are really high, and so that

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Speaker 1: is encouraging people in want to work, Whereas I think

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Speaker 1: it remains clear that the problem facing the economy is

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Speaker 1: that there's not enough demand out there. And um, if

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Speaker 1: there were more demand, there would be more hiring and uh,

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Speaker 1: and we'd have, you know, we'd have better, better economic

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Speaker 1: conditions going forward. Uh. But that's where we were reverted,

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Speaker 1: I think, unfortunately to the discussions we had in Congress

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Speaker 1: in in the latter part of out None twenty eleven,

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Speaker 1: where the debt um, the overhang of the of large

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Speaker 1: apparently large government debt um really forestalled a lot of

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Speaker 1: needed stimulus. So Marianna, I mean you can't stimulate demand

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Speaker 1: in a pandemic if people don't want to go outside. Therefore,

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Speaker 1: and I'm making, you know, a second jump here, should

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Speaker 1: politicians be worried about, you know, spending fiscally at times

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Speaker 1: like this or or or or you know, is the

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Speaker 1: GOP position correct that you can't you know, bankrupt and economy.

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Speaker 1: So so the as a lot of interest rates remain low,

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Speaker 1: and as long as people expect interest rates to remain low,

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Speaker 1: you're not close to bankrupting the economy. So the right always,

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Speaker 1: I think the right way to be thinking about government

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Speaker 1: debt is through the lens of prices and not quantities.

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Speaker 1: And so as long as we have such demand for

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Speaker 1: government debt as we see out there, you know, real

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Speaker 1: yields or mean is ridiculously low as they are, we're

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Speaker 1: not seeing a situation government is too high. I think, Um,

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Speaker 1: there's a very nice paper um economist Guel Lauren Zone,

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Speaker 1: Ronica Gary Eri would big Straw and von Burying. They

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Speaker 1: make it clear that the way they think about this

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Speaker 1: is we've got multiple sectors in the economy, and by

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Speaker 1: stimulating demand, what we can stimulate the demand for the

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Speaker 1: goods in the services that people can go out and

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Speaker 1: buy Nrianna Colt Lakota, thank you, Bloomberg opinion columnist, a

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Speaker 1: little bit of news to bring you. Boeing says that

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Speaker 1: it is going to lay off nineteen thousand people. That's

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Speaker 1: almost ten percent of its workforce, well between eight and

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Speaker 1: nine percent right now, but yeah, it's a wow number. Pole.

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Speaker 1: Nineteen thousand jobs is what is expecting. It had given

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Speaker 1: a range of around sixteen thousand. But I guess you know,

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Speaker 1: it's what are you going to do if your planes

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Speaker 1: aren't being bought and if they can't even get up

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Speaker 1: in the air in this environment, you can't exactly keep

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Speaker 1: paying people, I suppose. Yeah, that's what we heard from

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Speaker 1: Brooks Sutherland and even Daniel DeMartino Booth talking about that.

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Speaker 1: And now the job losses are starting to hit the

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Speaker 1: white collar workers and they have just proportionate share of

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Speaker 1: consumer spend, and so that kind of dovetails into the

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Speaker 1: conservative economic out look, another data point for the Fed. Yeah,

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Speaker 1: and it really speaks to structural unemployment because of Boeing

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Speaker 1: is eliminating nineteen thousand jobs this year. How many of

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Speaker 1: those jobs that had been created in the economy will

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Speaker 1: ever come back? All right, let's move to big tech.

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Speaker 1: Maybe there's hope in big tech, but today, at least

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Speaker 1: we were moving to big tech because we're going to

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Speaker 1: talk about the congressional hearing that's beginning in about ten minutes.

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Speaker 1: We'll have four of the big CEOs, including Jeff Bezos,

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Speaker 1: who's never testified in front of Congress before, and of

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Speaker 1: course Tim Coke of Apple, Alphabets, Sounder, Phi, and Mark

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Speaker 1: Zuckerberg of Facebook appearing before the committee. Let's bring in

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Speaker 1: Jen Reid to talk to us about what we might

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Speaker 1: expect out of today. She's senior Litigation and idolst at

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Speaker 1: Bloomberg Intelligence. Jen, from what angle can be ex like

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Speaker 1: the most you know attacks on these CEOs? You know,

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Speaker 1: I think it'll be different for each CEO because the

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Speaker 1: issues that each company has, at least in the antitrust

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Speaker 1: world are really different and their businesses are quite different. Um,

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Speaker 1: So getting into the nitty gritty, it'll be different. But Bonnie,

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Speaker 1: I think overall, there's a lot of concern about data

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Speaker 1: and the amount of data that are in the hands

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Speaker 1: of these companies and what they do with that data, um,

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Speaker 1: and how that data allows them to maintain their position

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Speaker 1: and maybe keep rivals down, and so that could be

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Speaker 1: one overall you know, overriding theme or something that they

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Speaker 1: really grill these companies on. And I also think it's

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Speaker 1: gonna be a little bit different depending on who's doing

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Speaker 1: the questioning, you know, I think that Democrats are a

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Speaker 1: little bit more focused here on anti trust and market

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Speaker 1: power and harm to consumers, whereas I think some of

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Speaker 1: the Republicans at least are a little bit more focused

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Speaker 1: on whether or not these companies are biased and whether

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Speaker 1: they're censoring conservative content, which isn't an anti trust issue,

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Speaker 1: but I think will come up. So, Jen, I mean,

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Speaker 1: you're right, these are different companies of different profiles, but

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Speaker 1: they're all huge in terms of market capitalization, in terms

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Speaker 1: of front of mind for consumers, for investors, and now

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Speaker 1: for potentially regulators. Do you have a sense that which

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Speaker 1: companies might be more or less at risk here from

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Speaker 1: just overall regulatory oversight? Absolutely, I think by far it's

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Speaker 1: Google and Facebook, um, whether it be regulatory oversight, whether

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Speaker 1: it be some sort of a challenge from the FTC

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Speaker 1: or d o j UM. You know, Google, we've already

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Speaker 1: seen has been fined in Europe several times for anti

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Speaker 1: competitive behavior and it could amount to anti competitive behavior

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Speaker 1: here as well, the same conduct. Um, we do understand

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Speaker 1: that Bill Barr and the d o J is likely

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Speaker 1: to bring some sort of action against Google this year.

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Speaker 1: So I think the risk is highest for Google. And

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Speaker 1: then on Facebook. Um, you know, it just seems, at

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Speaker 1: least from the outside observer, that they really have had

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Speaker 1: a strategy of going out of the years and acquiring

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Speaker 1: nascent competitors. And I think there's all there is a

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Speaker 1: lot of scrutiny on that kind of conduct and what

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Speaker 1: would have come happened with what's happened with Instagram had

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Speaker 1: Facebook not acquired these companies. Um, and and so I

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Speaker 1: think that Facebook is also at risk. I think Amazon

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Speaker 1: would be next, and then Apple last. I don't see

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Speaker 1: Apple having a lot of risk here. No, I mean Facebook,

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Speaker 1: let's deal with that for a moment. How much will

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Speaker 1: Zuckerberg be questioned about, you know, fact checking political ads

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Speaker 1: and how they refused to do it and that it's

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Speaker 1: not really because of free speech, it's more a business decision.

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Speaker 1: And William R. John scathed as he and all of

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Speaker 1: the other tex CEOs newly always do you know, Vinny,

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Speaker 1: I absolutely think he will be questioned on that again,

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Speaker 1: even though this is meant to be an anti trust

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Speaker 1: hearing and that isn't an anti trust issue. I think

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Speaker 1: it will be probably a big part of his UH,

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Speaker 1: his answers to questions and his answers in UM this

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Speaker 1: here ring With respect to coming out unscathed UM, you know,

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Speaker 1: they generally do, and I think they will in this

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Speaker 1: instance as well, because one, I just don't know how

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Speaker 1: effective UM it can be when it's set up the

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Speaker 1: way it is, with five minutes of questioning of each

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Speaker 1: of these CEOs. UH. Usually these hearings in the past

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Speaker 1: have tended to be more partisan speechmaking UM and and

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Speaker 1: sort of grandstanding than they have been productive or casting

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Speaker 1: any of these companies in a bad light. UM. So

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Speaker 1: I don't I don't see any of them coming out

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Speaker 1: of this fearing damaged. Is there any realistic threat frond

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Speaker 1: of these companies from a breakup standpoint? That's just to me.

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Speaker 1: They just seems so big and so entrenched in the

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Speaker 1: economy and in people's lives. It just seems difficult. But

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Speaker 1: I still hear people calling for it, you know, Paul,

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Speaker 1: I think the biggest risk to them is actually le legislation.

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Speaker 1: And I say that because to try to achieve the

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Speaker 1: breakup of one of these companies in court, which is

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Speaker 1: what the FDC or DJ would have to do if

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Speaker 1: that's what they're seeking, is extremely hard. I mean, it

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Speaker 1: might even be hard just to hold these companies liable

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Speaker 1: for illegal monopolization because the way our antitrust laws have developed,

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Speaker 1: the precedents that the judges would have to follow make

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Speaker 1: it actually very difficult for a plaintiff to proves that

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Speaker 1: proved their case in this area. So not only do

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Speaker 1: they have to prove their case, but to get that

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Speaker 1: kind of a remedy, which would absolutely be considered the

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Speaker 1: most drastic remedy that could be imposed by a judge,

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Speaker 1: I think would be incredibly difficult. You know, we saw

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Speaker 1: that it failed years ago with Microsoft, and I have

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Speaker 1: to say that in that case, Microsoft was a blatant

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Speaker 1: and egregious violator of the antitrust laws. You know, they

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Speaker 1: were engaging in anti competitive conduct that was clearly anti competitive,

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Speaker 1: with very little legitimate pro competitive business justification for what

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Speaker 1: they're doing. I don't think that will be the case

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Speaker 1: for these companies. So even though it's possible that it

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Speaker 1: it will be launched by the d J, r FDC

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Speaker 1: to try to seek a breakup or divestiture. I don't

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Speaker 1: see it as having a likelihood of success in court. Interesting, Jenry,

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Speaker 1: thanks so much for joining us. We always appreciate your thoughts.

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Speaker 1: You have that unique and experienced viewpoint of antitrust law,

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Speaker 1: and it's certainly gonna be front and center today as

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Speaker 1: the tech titans appear before Congress. Jennifer Ree, she's a

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Speaker 1: senior antitrust litigation analysts for Bloomberg Intelligence. In a real

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Speaker 1: ace up our sleep and I think is a backstage

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Speaker 1: in Congress pol Yeah, like, are they all in the

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Speaker 1: corridors right now to try to wipe the sweat off there? Well,

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Speaker 1: I think they're all gonna be virtual today, right. I

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Speaker 1: think there will be virtual appearances by good points, so

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Speaker 1: you know it would be interesting. So the a's actually break,

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Speaker 1: I would say. But anyway, Amazon's Jeff Bezos, Apples, Tim Cook,

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Speaker 1: Alphabet Sundar Pinchai, and Facebook Mark Zuckerberg. They are testifying

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Speaker 1: before the House Subcommittee on Antitrust, Commercial and Administrative Law

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Speaker 1: that is at twelve noon. Bloomberg Radio will bring that

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Speaker 1: to live, so it'll be very interesting for the technology

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Speaker 1: sector here. So off to see how they play out.

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Speaker 1: So that'll be very interesting. So we'll have to see,

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Speaker 1: you know, we'll have to see that the stocks have

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Speaker 1: done great. I mean, the stocks aren't worried about Vannie,

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Speaker 1: so they keep powering along. They're leading this economy. Uh

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Speaker 1: and that is kind of the leading the stock market

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Speaker 1: certainly so. But it'll be very interesting to see how

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Speaker 1: they perform in front of Congress. Will bring that to you.

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Speaker 1: Time to talk bonds now fixed income more broadly, so,

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Speaker 1: the tenure hasn't really moved from its range. It's at

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Speaker 1: about fifty eight basis points as we await the FED.

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Speaker 1: But really the tenure just doing nothing. But if you

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Speaker 1: look at measures of credit risk, they're easing today on

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Speaker 1: prospects for a FED reiterating that it's going to be

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Speaker 1: doublished for a long time. Let's bring in someone who

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Speaker 1: knows all about these things. Stephen Kane is a group

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Speaker 1: managing director and portfolio manager at TCW Fixed Income two

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Speaker 1: five billion dollars in firm wide assets under management, and

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Speaker 1: Stephen joins us. Now, Stephen, why should credit risk be

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Speaker 1: easing when we're really not going to hear anything new

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Speaker 1: from the Federal Reserve today? I think what you're seeing

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Speaker 1: is really just an ongoing um flood of liquidity you know,

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Speaker 1: in the marketplace. So it's nothing new today. It's not

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Speaker 1: really built upon anything that the credit markets are expecting

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Speaker 1: from the FED, but really an ongoing comfort, if you will,

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Speaker 1: that the FED is going to be accommodative, You're going

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Speaker 1: to get fiscal um, some sort of fiscal package um,

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Speaker 1: and that you'll get ongoing liquidity coming into the marketplace. So, Steve,

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Speaker 1: I knowe you folks at TCW generally a very conservative

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Speaker 1: view here. There was initially during this pandemic talk about

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Speaker 1: a v shaped recovery. That does not seem to be

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Speaker 1: the case. Well, what are your thoughts? Well, um, I

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Speaker 1: mean I think there was hope going back a couple

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Speaker 1: of months that um, you know, the virus could be

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Speaker 1: dealt with through you know, social distancing and other preventative

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Speaker 1: measures and companies could you know, the economy could begin

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Speaker 1: to reopen and you could get companies rehiring again. Obviously

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Speaker 1: that's not been the case. Um. We think that this

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Speaker 1: is going to be a very challenging recovery and it's

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Speaker 1: not simply that the viruses is uh appears to be

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Speaker 1: with US UM and a threat for some period of time.

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Speaker 1: It's really that UM the disruption that that the closing

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Speaker 1: down the economy has caused, meaning that you've had a

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Speaker 1: number of industries UM suffer significant UM impacts, travel, hospitality,

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Speaker 1: most service businesses, restaurants, et cetera. And that UM in

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Speaker 1: turn leads to job loss and bankruptcies and and things

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Speaker 1: that are going to lead, we think, to a fairly

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Speaker 1: deep procession and fairly elevated levels of unemployment for a

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Speaker 1: prolonged period of time. So even when we get through

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Speaker 1: this virus, even if we're able to UM you know,

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Speaker 1: have a vaccine and relatively short order, the after effects

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Speaker 1: of the procession and the impact on service industries is

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Speaker 1: going to be rather permanent UM. And we think that's

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Speaker 1: going to be a fundamental headwind for the economy. So

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Speaker 1: why worry about adding to the deficit and the dead Ultimately?

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Speaker 1: Should we be worried about that? Will it hurt the

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Speaker 1: US bond markets, the US credit rating? You know, the

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Speaker 1: US dollar is a reserve currency. Or is it more

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Speaker 1: important to fix the economy right now? Well? I think

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Speaker 1: UM certainly policymakers and I think are doing what they

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Speaker 1: have to do meaning UM, I think supporting the economy

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Speaker 1: through UM through stimulus is what's necessary to keep this

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Speaker 1: recession from becoming even deeper or even you know, potentially

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Speaker 1: a depression. So you know, you have to solve the

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Speaker 1: problem today before it becomes too big to solve down

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Speaker 1: the road, and so they're doing what they have to now.

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Speaker 1: The long term implications are unknown at this point, but certainly, UM,

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Speaker 1: I think you're seeing weakness in the dollar is partly

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Speaker 1: reflecting the fact that UM in the U S is

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Speaker 1: running large deficits and printing huge sums of money, have

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Speaker 1: very sizeable monetary growth and UM and and that's certainly

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Speaker 1: weighing on the dollar. I think longer term, it's possible

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Speaker 1: you could see inflation. You've seen some modest drift up

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Speaker 1: in inflation expectations, and I think certainly if the government

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Speaker 1: continues to support the demand side side of the economy

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Speaker 1: with the supply side of the economy being impaired, UM,

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Speaker 1: you know, you could see inflation. UM. In terms of

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Speaker 1: the US credit rating, I think that's an issue far

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Speaker 1: down the road, in terms of whether you know the markets, UH,

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Speaker 1: the U S dollar you loses its reserve currency status

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Speaker 1: and you begin to see you know, default risk being

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Speaker 1: priced into the US market. I think that's that's far

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Speaker 1: down the roof, Steve, given your relatively cautious outlook, where

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Speaker 1: do you see opportunities or value in a fixing come

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Speaker 1: markets right here? Well, it's getting more and more challenging.

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Speaker 1: As as we've mentioned in the past. UH, the markets

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Speaker 1: were a lot more interesting a few months ago when

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Speaker 1: we were really adding risk uh aggressively. But now that

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Speaker 1: you've kind of retraced UM spreads, you've got investment grade

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Speaker 1: spreads into into the mid one twenties and high yield

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Speaker 1: back to five hundred off after being you know, well

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Speaker 1: north of a thousand. We're seeing less and less value

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Speaker 1: in credit and we've we've been trimming now. Having said that, UM,

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Speaker 1: there's still some opportunities out there and still some areas

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Speaker 1: of value, beginning with the agency mortgage UM sector, which

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Speaker 1: is obviously being directly supported by the FED through forty

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Speaker 1: billion of purchases monthly. And that's not only keeping valuations

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Speaker 1: steady and stable, but providing attractive carry and return, particularly

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Speaker 1: in the in the forward market. In the agency mortgage

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Speaker 1: tv A market UM, there's areas of the investment grade

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Speaker 1: corporate market that look interesting, money center banks, consumer noncyclicals,

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Speaker 1: food and beverage. UM spreads are still reasonably attractive there.

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Speaker 1: And you know these are businesses generally speaking, with strong

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Speaker 1: balance sheets and uh you know his ability through a

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Speaker 1: very difficult economic environment. So UM in terms of high yield,

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Speaker 1: you have to be very careful, UM in terms of

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Speaker 1: treading in that area, and we are definitely being you know,

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Speaker 1: cautious and trimming exposure is UM as valuations UH go higher.

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Speaker 1: Steve Kane, thanks so much for joining us. Aways appreciate

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Speaker 1: your comments. Steve Kane, Group managing director and portfolio managed

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Speaker 1: for tc W fixed Income. They've got two billion and

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Speaker 1: firm wide assets under management, so they know their way

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Speaker 1: around the fixed income markets here. Again, cautious view out

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Speaker 1: of tc W. That's been pretty consistent, and I think,

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Speaker 1: you know, you think about that V shape recovery. I

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Speaker 1: don't hear people talking about that much anymore as this

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Speaker 1: pandemic hangs on and we see resurgence in certain key

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Speaker 1: markets in the US and abroad. Busy, busy earnings day.

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Speaker 1: We have some industrial companies today, Boeing reboarding earnings, GE

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Speaker 1: also reported earnings. Both of those stocks are off in

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Speaker 1: trading today, suggesting that infestors were a little disappoint Let's

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Speaker 1: break down the numbers from those two giants. We can

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Speaker 1: do that with Brooks Sutherland, she's Deals and industrials columns

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Speaker 1: for Bloomberg Opinion, joins us on the phone from the

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Speaker 1: center of this country in Kansas. Brook Thanks so much

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Speaker 1: for joining us here. What are your takeaways from some

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Speaker 1: of these bell Weather industrial names. Yeah, I mean, I

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Speaker 1: think for both of them, the key focus was on

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Speaker 1: cash flow, and the numbers did come in, you know,

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Speaker 1: a bit better than what analy hadn't been expecting. But

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Speaker 1: you're still looking at a pretty bleak situation here with

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Speaker 1: g burning, you know, more than two billion boings burning

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Speaker 1: more than five billion UM. It's rough out there in

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Speaker 1: the arrow space sector. And I think you know, what

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Speaker 1: you're hearing from these companies is what we've heard from

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Speaker 1: the other aviation companies that are when is so far

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Speaker 1: there is not you know, a turnaround that's just around

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Speaker 1: the bend. I mean, you know, the g E CEO

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Speaker 1: Larry Cole pointed to some positive signs, mostly um, you know,

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Speaker 1: in China around a pick up and travel there. But

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Speaker 1: of course that is all domestic you're not seeing the

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Speaker 1: international lives come back. UM. And in the US, where

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Speaker 1: we have been seeing early signs of our recovery, that's

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Speaker 1: now taking a step back on this resurgence in coronavirus

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Speaker 1: cases UM. And So you know, I think what investors

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00:24:17,200 --> 00:24:20,399
Speaker 1: are sort of possibly rightly concluding here is that this

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00:24:20,600 --> 00:24:23,439
Speaker 1: is still a very tough slog and if you were

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00:24:23,480 --> 00:24:25,720
Speaker 1: hoping for glimmers of hope, you're not really going to

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00:24:25,800 --> 00:24:28,919
Speaker 1: find it. UM. And the announcements from Bowing and ge today,

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00:24:29,920 --> 00:24:32,320
Speaker 1: who are bowing you that seven thirty seven Max problems,

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00:24:32,400 --> 00:24:35,040
Speaker 1: we are going to be outdone by other problems in

435
00:24:36,240 --> 00:24:38,560
Speaker 1: what is the story with the seven thirty seven Max.

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00:24:38,640 --> 00:24:43,160
Speaker 1: I mean it kind of somehow saves Bowling in the end. Yeah,

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00:24:43,160 --> 00:24:46,320
Speaker 1: I I would be very skeptical of that UM notion.

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00:24:46,520 --> 00:24:49,720
Speaker 1: So you know, at this point, signals from regulators look

439
00:24:49,840 --> 00:24:52,520
Speaker 1: like this may be allowed back in the sky UM

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00:24:52,600 --> 00:24:55,040
Speaker 1: in sort of the early fourth quarter. But of course,

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00:24:55,200 --> 00:24:58,399
Speaker 1: the issue now for Bowing is not whether regulators approved it.

442
00:24:58,440 --> 00:25:02,240
Speaker 1: It's whether anybody wants the plane once they're able to

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00:25:02,400 --> 00:25:05,560
Speaker 1: take deliveries. That begins. The Southwest is the biggest operator

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00:25:05,600 --> 00:25:08,280
Speaker 1: of the Max, and CEO Gary Kelly was very clear

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00:25:08,400 --> 00:25:11,080
Speaker 1: last week that he is not interested in taking any

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00:25:11,280 --> 00:25:14,119
Speaker 1: max jets, any new max jets. Let's just say this

447
00:25:14,359 --> 00:25:16,800
Speaker 1: year they already have about thirty four that are parked.

448
00:25:17,160 --> 00:25:19,080
Speaker 1: That's going to be about all they can handle to

449
00:25:19,160 --> 00:25:21,440
Speaker 1: bring back, you know, at a time when obviously airlines

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00:25:21,480 --> 00:25:24,639
Speaker 1: are looking to take planes out of the circulation to

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00:25:24,840 --> 00:25:27,560
Speaker 1: deal with the drop off in demand. Um So, you know,

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00:25:27,640 --> 00:25:31,040
Speaker 1: there's some skepticism among analysts that Boeing is not going

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00:25:31,200 --> 00:25:34,879
Speaker 1: far enough and dialing back productions forty seven Max. It

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00:25:35,000 --> 00:25:37,960
Speaker 1: did take that down again today, saying it expects to

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00:25:38,000 --> 00:25:41,640
Speaker 1: get to thirty one a month by early two, which

456
00:25:41,720 --> 00:25:44,440
Speaker 1: is pushed back from an earlier time frame one. But

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00:25:44,560 --> 00:25:46,960
Speaker 1: that may not be going far enough because they still

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00:25:47,000 --> 00:25:49,680
Speaker 1: got about four and a shifty planes that are parts

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00:25:49,760 --> 00:25:51,760
Speaker 1: that they haven't been able to deliver. And you know

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00:25:51,880 --> 00:25:53,800
Speaker 1: the question is who's going to take them on what

461
00:25:54,000 --> 00:25:58,680
Speaker 1: time frames? Four planes that are just part that's extraordinary,

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00:25:59,000 --> 00:26:01,200
Speaker 1: And it just kind of goes wow, and it just

463
00:26:01,280 --> 00:26:03,200
Speaker 1: goes to the I guess, as you've been talking about, Brooke,

464
00:26:03,240 --> 00:26:06,840
Speaker 1: the lack of demand from the airline customers for for ge,

465
00:26:07,160 --> 00:26:10,720
Speaker 1: is this a story of just cutting cost cutting, cost

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00:26:10,760 --> 00:26:14,640
Speaker 1: cutting costs until things turn around. I don't see any

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00:26:14,760 --> 00:26:16,800
Speaker 1: other kind of growth driver there. I know people focus

468
00:26:16,880 --> 00:26:19,399
Speaker 1: on the power business, but I can't imagine that demand

469
00:26:19,480 --> 00:26:22,719
Speaker 1: there is very good either. It's not, no, I mean,

470
00:26:22,800 --> 00:26:25,040
Speaker 1: and this has really been a step back to the

471
00:26:25,119 --> 00:26:28,960
Speaker 1: Power division, which was showing you know, some stability and

472
00:26:29,080 --> 00:26:32,879
Speaker 1: sort of you know, it's not as pros, you know,

473
00:26:33,000 --> 00:26:35,320
Speaker 1: maybe being left of the drags for GE, and that

474
00:26:35,520 --> 00:26:38,520
Speaker 1: of course has been set back. You know, they are

475
00:26:38,600 --> 00:26:42,400
Speaker 1: still optimistic about a turnaround in power, but the timeline

476
00:26:42,400 --> 00:26:45,119
Speaker 1: has just been delayed. They are being very aggressive about

477
00:26:45,160 --> 00:26:48,200
Speaker 1: cost cut um I speak with Larry Cold just a

478
00:26:48,280 --> 00:26:50,200
Speaker 1: little bigger and act and you know if they would

479
00:26:50,240 --> 00:26:54,120
Speaker 1: follow down going and increasing their job sets that it's

480
00:26:54,119 --> 00:26:57,080
Speaker 1: premature to think about anything like that at this time.

481
00:26:57,240 --> 00:27:00,680
Speaker 1: In aviation, they are cutting about I count there. So

482
00:27:00,800 --> 00:27:04,560
Speaker 1: that is the aggressive toss move on their front. You know,

483
00:27:04,640 --> 00:27:07,680
Speaker 1: I will say that in terms of a recovery, g

484
00:27:08,280 --> 00:27:11,240
Speaker 1: will probably see that before Boeing, just because of the

485
00:27:11,359 --> 00:27:14,880
Speaker 1: nature of their business. So GE benefits by points coming

486
00:27:14,920 --> 00:27:18,840
Speaker 1: back into service UM and needing maintenance work, meeting repairs

487
00:27:19,040 --> 00:27:21,320
Speaker 1: their parts, that kind of thing. So you will see

488
00:27:21,400 --> 00:27:24,160
Speaker 1: that come back faster than you'll see demand for new things.

489
00:27:24,280 --> 00:27:26,560
Speaker 1: But you know, for both of these companies, you're looking

490
00:27:26,600 --> 00:27:30,679
Speaker 1: at a pretty protracted timeline very basically book any comments

491
00:27:30,720 --> 00:27:35,240
Speaker 1: on China either of them, uh, you know, in terms

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00:27:35,320 --> 00:27:38,800
Speaker 1: of what travel uh they are seeing you know, a

493
00:27:38,880 --> 00:27:41,240
Speaker 1: little bit of a recovery. They're just immenentally, but you're

494
00:27:41,280 --> 00:27:44,479
Speaker 1: not really seeing that international demands. Of course, many travel

495
00:27:44,560 --> 00:27:47,560
Speaker 1: bands remain in this place. There wasn't really any discussion

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00:27:47,600 --> 00:27:50,040
Speaker 1: at this point on seriffs UM. You know, I think

497
00:27:50,080 --> 00:27:52,920
Speaker 1: that has sort of moved out of the minds of

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00:27:53,119 --> 00:27:55,760
Speaker 1: CEOs at this point. Is we're dealing with um, you know,

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00:27:55,880 --> 00:27:59,960
Speaker 1: these sort of catastrophic declines in demand for air travel.

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00:28:00,160 --> 00:28:02,359
Speaker 1: I don't know that that's necessarily quite a top of

501
00:28:02,400 --> 00:28:05,680
Speaker 1: mind was it was in but certainly an issue UM

502
00:28:05,800 --> 00:28:10,200
Speaker 1: in the background. There. Brook Sutherland always encyclopedia of knowledge

503
00:28:10,240 --> 00:28:12,240
Speaker 1: when it comes to the industrials. She covers them for

504
00:28:12,440 --> 00:28:15,679
Speaker 1: Bloomberg Opinion and for Bloomberg more generally. We'll be awaiting

505
00:28:15,720 --> 00:28:19,760
Speaker 1: her columns on both Ge and Boeing, among others this

506
00:28:19,960 --> 00:28:23,680
Speaker 1: earning season. It's a book. Thank you and Paul. It

507
00:28:23,920 --> 00:28:28,520
Speaker 1: is interesting that you know, orders down thirty for ge,

508
00:28:28,800 --> 00:28:32,320
Speaker 1: but the stock actually reacts positively because that's how you

509
00:28:32,400 --> 00:28:34,320
Speaker 1: know wasn't as bad as anticipated. I mean, it is

510
00:28:34,359 --> 00:28:38,760
Speaker 1: down four percent, but it hasn't completely tamped. Thanks for

511
00:28:38,840 --> 00:28:42,280
Speaker 1: listening to Bloomberg Markets podcast. You can subscribe and listen

512
00:28:42,360 --> 00:28:45,840
Speaker 1: to interviews at Apple Podcasts or whatever a podcast platform

513
00:28:45,920 --> 00:28:49,040
Speaker 1: you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie

514
00:28:49,080 --> 00:28:51,840
Speaker 1: Quinn and Paul Sweeney I'm on Twitter at pt Sweeney.

515
00:28:51,920 --> 00:28:54,600
Speaker 1: Before the podcast, you can always catch us worldwide at

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00:28:54,640 --> 00:29:00,120
Speaker 1: Bloomberg Radio m