WEBVTT - Decisions, decisions… 0:00:03.960 --> 0:00:07.240 This is Bloomberg Opinion. I'm Vonnie Quinn. This week a 0:00:07.280 --> 0:00:10.719 lone boycott in China and a rebranding for an old company. 0:00:10.800 --> 0:00:13.480 Julie Ran and Brooks Southerland Coming up first though, to 0:00:13.600 --> 0:00:17.200 John Authors, as we review Europe's difficulties, the Tory party 0:00:17.280 --> 0:00:21.560 leadership race, and US market performance. So, John, we are finally, 0:00:21.680 --> 0:00:24.320 as you say, at the heavy heights of zero percent 0:00:24.440 --> 0:00:26.400 in Europe, and we may even go to one percent 0:00:26.480 --> 0:00:29.800 by year end. It sounds insane to say this, the 0:00:29.840 --> 0:00:31.800 heavy heights of zero percent. We did get a fifty 0:00:31.800 --> 0:00:34.479 basis point increase. Yes, it's the first increase in more 0:00:34.520 --> 0:00:39.240 than a decade, and on many levels this really breaks 0:00:39.280 --> 0:00:42.760 the mold for the way the ECB has been behaving 0:00:42.760 --> 0:00:46.160 more or less its entire existence. First of all, it's 0:00:46.240 --> 0:00:50.080 breached its own prior guidance basically told us it was 0:00:50.080 --> 0:00:51.800 going to be raising by twenty five, and then it 0:00:52.000 --> 0:00:56.120 raised by fifty. It's also saying in as many words 0:00:56.360 --> 0:01:00.120 that there is no forward guidance coming. They don't know 0:01:00.200 --> 0:01:02.720 what the data is going to be, and they don't 0:01:02.800 --> 0:01:05.160 therefore know what the interest rates are going to be. 0:01:05.240 --> 0:01:08.640 They've taken guidance quite a lot more seriously than the 0:01:08.640 --> 0:01:11.640 other central banks over the years, and they are now 0:01:11.800 --> 0:01:16.119 putting everything on being able to remain flexible. Well. As 0:01:16.120 --> 0:01:18.160 you point out, European Central LINKA has so much more 0:01:18.200 --> 0:01:20.520 to deal with than other central banks. Obviously, it's a 0:01:20.680 --> 0:01:24.480 conglomeration of countries. Just for comparison Burpses right now, Germany's 0:01:24.480 --> 0:01:27.400 tenure yields at one point to Italy's is at three 0:01:27.400 --> 0:01:29.840 point five, and that's one of the things that the 0:01:29.840 --> 0:01:34.840 ECB has to deal with. It's possibly the single most important, 0:01:35.240 --> 0:01:38.000 given that we now have an election coming up in 0:01:38.240 --> 0:01:43.160 Italy and the last time we had an Italian election 0:01:43.360 --> 0:01:48.600 it's caused an almighty mess. This time. All the punditory 0:01:48.680 --> 0:01:52.320 at the moment says that the Brothers of Italy, who 0:01:52.360 --> 0:01:55.240 despite their name are led by a woman, Georgie M. Meloney, 0:01:56.000 --> 0:02:00.000 seemed most likely to form a government or to provide 0:02:00.120 --> 0:02:05.160 the prime minister, and they are ultimately fairly directly descended 0:02:05.200 --> 0:02:10.040 from Benito. With Saloni's Fascist Party, members have been urged 0:02:10.160 --> 0:02:12.880 not to make the Roman salute in public anymore. This 0:02:13.000 --> 0:02:15.520 is not going to go down well in the rest 0:02:15.560 --> 0:02:17.600 of Europe. It was bad enough when you had the 0:02:17.680 --> 0:02:21.639 League as part of the government. If it comes to pass, 0:02:22.360 --> 0:02:26.000 that will really amp up the tension much further. But 0:02:26.040 --> 0:02:27.920 it's all of a piece, right, and this is part 0:02:27.960 --> 0:02:29.880 of what we're seeing all over the world. So you're 0:02:29.919 --> 0:02:33.640 seeing these more extreme parties get into government and hous 0:02:33.760 --> 0:02:38.720 other maybe less extreme parties, partially because of economic concerns 0:02:38.720 --> 0:02:41.079 and economic difficulties in Italy has been in trouble for 0:02:41.120 --> 0:02:44.720 a long time. Yes, I think where Italy is different 0:02:44.800 --> 0:02:47.400 from some of the others and dangerously so. It really 0:02:47.480 --> 0:02:50.799 is very much of an aging country and growth has 0:02:50.840 --> 0:02:54.880 been very slow for some decades now. It actually overtook 0:02:54.880 --> 0:02:57.000 Britain at one point in the in the years after 0:02:57.040 --> 0:02:59.560 the war, it did have a boom. It has been 0:03:00.040 --> 0:03:03.040 languishing for a long time. One of the reasons Mario 0:03:03.120 --> 0:03:05.400 Dragi took the helm right because he was a technocrat 0:03:05.480 --> 0:03:06.440 and he had been at the helm of the E 0:03:06.520 --> 0:03:08.160 C B. And there was hope that he might be 0:03:08.160 --> 0:03:10.280 able to turn things around. But ultimately he didn't know, 0:03:10.440 --> 0:03:14.240 and they've had a succession of attempts. Romano Prodi came 0:03:14.280 --> 0:03:17.799 in to rescue after Berlusconi during the crisis ten years ago, 0:03:18.040 --> 0:03:21.000 very reminiscent of Greece in fact. Yes, so the ECB 0:03:21.120 --> 0:03:23.880 came up with this something that almost sounds like a vaccine. 0:03:23.880 --> 0:03:28.680 It's the transmission protection instruments. What is it? It seems 0:03:28.720 --> 0:03:34.160 to be a promise from the ECB that it's not 0:03:34.320 --> 0:03:38.080 going to let spreads get too wide, and that it 0:03:38.120 --> 0:03:42.160 will buy bonds or it's not ruling out in the 0:03:43.080 --> 0:03:48.760 private securities as well, to keep the different economies within 0:03:48.880 --> 0:03:51.200 Europe in line with each other. How is this not 0:03:51.320 --> 0:03:53.720 history rhyming a little bit? We had this before. Yes, 0:03:54.120 --> 0:03:58.880 this time is different, I would say, because the ECB 0:03:59.080 --> 0:04:04.280 is trying to give itself more discretion than it had before. 0:04:04.440 --> 0:04:09.000 It's really putting much more of its own credibility on 0:04:09.040 --> 0:04:13.480 the line. We have general criteria for when they would react, 0:04:13.680 --> 0:04:17.640 to do with how unwarranted the widening of spreads might be, 0:04:17.839 --> 0:04:21.800 how disorderly it might be. But those are described in words, 0:04:21.880 --> 0:04:24.880 not numbers, and it's going to be down to the 0:04:24.880 --> 0:04:29.000 Central Bank itself to fix the Other thing that's fascinating, though, 0:04:29.040 --> 0:04:30.720 is that you know, it's ten years since I had 0:04:30.760 --> 0:04:35.200 to spend most of my life covering this the o 0:04:35.480 --> 0:04:37.760 m T S. I had forgotten the existence of our 0:04:37.880 --> 0:04:41.159 m T S and and they were never actually used. 0:04:41.240 --> 0:04:43.839 The fascinating thing about Mario Dragi saying he would do 0:04:43.880 --> 0:04:46.400 whatever it takes. He never needed to the market in 0:04:46.480 --> 0:04:50.359 going it was market, yes, but it's there on the 0:04:50.360 --> 0:04:55.599 books as an opportunity. And Leguard said that that's part 0:04:55.720 --> 0:04:58.839 of their toolkit that they reserve the right to use, 0:04:58.880 --> 0:05:03.560 that they may well use. So that's a fairly directed 0:05:03.640 --> 0:05:06.320 mission that we're very close to the kind of existential 0:05:06.320 --> 0:05:08.400 worries about the Euro that we had a decade ago. 0:05:08.720 --> 0:05:10.880 The big difference this time is if you look at 0:05:10.960 --> 0:05:14.719 Italian spirits compared to Spain or Portugal, it really is 0:05:14.880 --> 0:05:19.480 an Italy problem now rather than a peripheral economies Portugal 0:05:19.560 --> 0:05:21.280 and Spain ten your yield in the in the two 0:05:21.680 --> 0:05:24.080 two and a half percent range, whereas we're talking to 0:05:24.120 --> 0:05:27.000 another presentative point for Italy at least. Yes, but unfortunately 0:05:27.080 --> 0:05:29.760 Italy is the biggest of those economies. But this is 0:05:29.880 --> 0:05:34.279 now very much a drama that focuses on Italy itself. 0:05:34.320 --> 0:05:36.960 We also have, unfortunately the issue that Italy is particularly 0:05:37.000 --> 0:05:40.359 dependent on Russian energy, which is another thing that the 0:05:40.360 --> 0:05:42.159 ECB has to deal with. As you point out, you're 0:05:42.200 --> 0:05:44.920 three things were Italy energy and europe banking system, which 0:05:44.920 --> 0:05:46.640 as we know, is weaker than that of the United 0:05:46.640 --> 0:05:48.520 States right now, has been since the financial crisis and 0:05:48.560 --> 0:05:52.360 even before Energy John, just a brief word on that. Yes, 0:05:52.560 --> 0:05:54.400 I mean I am not using this word lightly. We 0:05:54.520 --> 0:05:57.360 saw natural gas in Germany over the last two years 0:05:57.400 --> 0:06:01.600 skyrockets natural gas. Yes, the north Stream pipeline, which had 0:06:01.600 --> 0:06:05.680 been closed for maintenance, possibly with air quotes around maintenance, 0:06:06.880 --> 0:06:12.440 has reopened and some supplies are flowing. I think the 0:06:12.440 --> 0:06:15.080 read through that most people are taking is that puting 0:06:15.160 --> 0:06:19.120 his demonstrated very clearly that he can turn off supply 0:06:19.520 --> 0:06:21.839 if he wants to have a surprised that everybody took 0:06:21.839 --> 0:06:26.560 that so literally. It's you know, and and that's that's 0:06:26.600 --> 0:06:28.760 still very much of a risk that he might do 0:06:28.839 --> 0:06:32.280 it again. That the sort of almost mafia like comment 0:06:32.400 --> 0:06:34.839 that if you don't help me get this part, it's 0:06:34.880 --> 0:06:36.839 going to have to come down to only twenty percent 0:06:36.920 --> 0:06:41.680 of capacity next week. Yeah, that's that's not encouraging. You 0:06:41.680 --> 0:06:45.240 don't want to be in Russia's vice, that's for sure. So, 0:06:45.279 --> 0:06:47.479 as you point out on a recent piece on British positions, 0:06:47.480 --> 0:06:48.839 are going to give us some light relief in a 0:06:48.839 --> 0:06:51.120 hot summer for anyone out there who hasn't yet seen Yes, 0:06:51.160 --> 0:06:53.920 Prime Minister or Armando Yanuchi is the thick of it, which, 0:06:53.920 --> 0:06:55.960 by the way, was the inspiration for Viev. I'm sure 0:06:56.040 --> 0:06:58.520 everyone knows that. Then you're welcome, because you've got a 0:06:58.520 --> 0:07:01.000 great summer ahead. We've got have a great summer ahead 0:07:01.080 --> 0:07:03.840 in Britain because we have two candidates now. John talked 0:07:03.880 --> 0:07:06.880 to us about Liz trust She is, I guess, part 0:07:06.920 --> 0:07:09.880 of a long line of politicians that swing according to 0:07:10.320 --> 0:07:12.360 wherever the weather veins take er. She grew up a 0:07:12.440 --> 0:07:15.520 liberal in protesting Margaret Thatcher at one point, and now 0:07:15.560 --> 0:07:20.280 she has embraced Taurism. Yes, I'm not so startled by 0:07:20.320 --> 0:07:22.840 the fact that when she was at school she was 0:07:23.000 --> 0:07:25.520 among the crowds going macky Maki, making out out out. 0:07:25.600 --> 0:07:28.680 That's that was very much the thing all young people 0:07:28.760 --> 0:07:31.840 in Britain at that time have felt like doing. What 0:07:32.040 --> 0:07:34.640 is more intriguing is that as a young adult into 0:07:34.800 --> 0:07:38.640 twenties she was a very active member of the Liberal Democrats. 0:07:38.840 --> 0:07:42.520 That is unusual. It's also very unusual that she was 0:07:42.560 --> 0:07:47.040 actually quite a coherent and persuasive supporter of remaining in 0:07:47.080 --> 0:07:52.320 the EU during the y and the fact that she 0:07:52.440 --> 0:07:56.480 has been accepted and is generally regarded in the party 0:07:56.600 --> 0:08:01.960 now as the hard line Brexity he candidate. When both 0:08:02.000 --> 0:08:04.880 Penny more than the last person she eliminated, and Risci 0:08:04.960 --> 0:08:09.640 Sunac her other opponents, actually did vote for Brexit when 0:08:09.720 --> 0:08:13.920 she didn't, that is really a very strange development. It's 0:08:13.920 --> 0:08:16.160 amazing how politics can work that way. Not only that, 0:08:16.360 --> 0:08:19.360 but she voted Remain. But yet she was one of 0:08:19.400 --> 0:08:21.880 the politicians loyal to Boris Johnson right at the bitter end. 0:08:21.920 --> 0:08:23.960 She apparently didn't want him to go, even at the 0:08:24.000 --> 0:08:28.480 very end. Yes, I think that there's certainly an element 0:08:28.720 --> 0:08:32.160 of trying to position herself Risci Sunac the year her 0:08:32.200 --> 0:08:38.120 competitor was one of the two ministers whose resignations a 0:08:38.160 --> 0:08:40.680 couple of weeks ago really did precipitate the end of 0:08:40.920 --> 0:08:45.640 Boris Johnson. He had stayed loyal for a long time. 0:08:46.360 --> 0:08:50.240 But there is still this sense among those who like 0:08:50.920 --> 0:08:53.640 Boris and he has a certain degree of personal popularity 0:08:53.720 --> 0:08:56.080 with the party in the country, that that he is 0:08:56.120 --> 0:08:58.240 one of the traitors, that he is the brutus figure 0:08:58.240 --> 0:09:02.000 who put the dagger in. And the more she can 0:09:02.240 --> 0:09:05.920 suggest that she is the one who didn't want Boris 0:09:06.000 --> 0:09:08.440 to go, who was loyal. The more that could well 0:09:08.559 --> 0:09:11.400 help her in this particular electorate over the next two 0:09:11.400 --> 0:09:14.240 months was seventy five thousand Conservative Wary members are going 0:09:14.280 --> 0:09:16.280 to vote. How much of it will be on personality 0:09:16.360 --> 0:09:18.200 and just the types of things we've been enumerating, and 0:09:18.200 --> 0:09:21.000 how much will be on economic policy because Richie Sonac 0:09:21.240 --> 0:09:25.559 and let's trous have very different economic policies. Again, they 0:09:25.640 --> 0:09:28.400 certainly have been presenting very different economic policies in the 0:09:28.520 --> 0:09:32.040 last few days. I don't see any particular evidence this 0:09:32.200 --> 0:09:34.920 Trust was the Chief Secretary to the Treasury, which the 0:09:35.000 --> 0:09:37.880 junior minister below Chancellor of the Exchequer at one point, 0:09:38.559 --> 0:09:42.120 and so is Rischie Soonak. I'm not aware of any 0:09:42.200 --> 0:09:47.480 great change in Conservative economic policy between the two, but yes, 0:09:47.960 --> 0:09:50.960 as it stands, and I think this is the fascinating part. 0:09:51.040 --> 0:09:55.920 The clear policy difference between them is on macro economics, 0:09:56.200 --> 0:10:00.439 and really because in Britain's case, because you, Europe has 0:10:00.520 --> 0:10:04.680 just swallowed up all politics on the right of the 0:10:04.720 --> 0:10:07.959 spectrum ever since that chair. This really is the first 0:10:08.000 --> 0:10:13.600 time there has been a direct head on arguments over economics, 0:10:13.640 --> 0:10:17.000 over over how to run the economy in a generation. 0:10:17.760 --> 0:10:21.120 What is very interesting here is that you might see 0:10:21.240 --> 0:10:24.480 the completion of the trend of the reversal of the 0:10:24.520 --> 0:10:27.080 traditional parties of the right and left. You've already seen 0:10:27.120 --> 0:10:30.280 that to some extent in the US, where the Trumpist 0:10:30.800 --> 0:10:33.679 Republican Party is now getting prepared to be more aggressive 0:10:33.679 --> 0:10:36.600 with the private sector even than the Democrats are that 0:10:36.640 --> 0:10:40.080 they were very happy to spend huge amounts of money 0:10:40.120 --> 0:10:43.959 and not fund it, etcetera. They seem to have completed 0:10:43.960 --> 0:10:46.680 this transition to being what we have never previously thought 0:10:46.679 --> 0:10:52.400 of as right wing economics. Richie Sunac doesn't like deficits. 0:10:52.600 --> 0:10:54.640 He spent a huge amount of money on COVID, but 0:10:54.760 --> 0:10:59.040 his emphasis is on tax raises if necessary to try 0:10:59.080 --> 0:11:03.280 to bring the deficits down. A city slash all Street background. Oh, 0:11:03.360 --> 0:11:06.280 he was Goldman Sax, followed by Chris Holmes, Hedge Fund, 0:11:06.320 --> 0:11:09.200 the Children's Investment Fund. He had quite a gold plated 0:11:09.200 --> 0:11:13.960 City of London financial career. So he is basically arguing 0:11:14.040 --> 0:11:16.920 for what you might call the orthodox cy that's been 0:11:16.960 --> 0:11:21.080 around pretty much since Thatcher. Without the great belief that 0:11:21.320 --> 0:11:23.960 tax cuts in their own right will pay for themselves, 0:11:24.000 --> 0:11:25.840 which you would have thought would go down better with 0:11:25.960 --> 0:11:27.839 the party members. But as you say, we are seeing 0:11:27.840 --> 0:11:30.120 this shift now now exactly that is what will be 0:11:30.160 --> 0:11:32.160 one of the points that will be very interesting the 0:11:32.200 --> 0:11:36.120 conservative membership. I think the average age is something like sixty, 0:11:36.320 --> 0:11:40.480 and they tend to be small c conservative, So you 0:11:40.640 --> 0:11:44.360 would traditionally have thought the sun approach would be more 0:11:44.400 --> 0:11:48.840 popular with that electorate than Liz trust saying let's cut taxes, 0:11:49.600 --> 0:11:53.640 and this sounds like early Ronald Reagan and then those 0:11:53.679 --> 0:11:55.920 tax cuts will pay for themselves as people un least 0:11:55.920 --> 0:11:59.840 their energy. That is a big difference in approach, both 0:11:59.840 --> 0:12:02.640 the saying the other one is left wing or socialist. 0:12:02.880 --> 0:12:05.720 I wouldn't say either of them were. Basically one is saying, 0:12:05.720 --> 0:12:07.599 if you want to raise taxes, you're a socialist, and 0:12:07.640 --> 0:12:09.319 the other is saying, if you want to borrow more money, 0:12:09.360 --> 0:12:13.160 you're a socialist, which is a little immature. Well, that 0:12:13.160 --> 0:12:15.440 wouldn't be the first time that we had seen imature 0:12:15.480 --> 0:12:18.559 going on in all sorts of politics, not just particularly British. 0:12:18.760 --> 0:12:20.800 Have to ask you though about the US before we 0:12:20.920 --> 0:12:24.600 let you go. Obviously, Federal Reserve meeting next week, and 0:12:24.800 --> 0:12:26.880 we've seen this nice rally. As you point out, the 0:12:26.880 --> 0:12:29.520 direction of the market and its breadth, both consistent with 0:12:29.520 --> 0:12:31.200 what we might expect to see if a major low 0:12:31.240 --> 0:12:34.240 we're near. And yet you're saying it's not compelling enough 0:12:34.280 --> 0:12:36.800 to just buy diving into the market. Yes, well, I 0:12:37.120 --> 0:12:39.440 mean it's risky to be out of the market altogether. 0:12:39.520 --> 0:12:42.719 Don't don't ever saying that. I'm suggesting, don't be in 0:12:42.760 --> 0:12:46.280 at all. But in terms of making very big assets 0:12:46.320 --> 0:12:49.440 allocation calls to move from cash into stocks or from 0:12:49.480 --> 0:12:52.520 bonds stock at the moment, I don't see a good 0:12:52.720 --> 0:12:56.679 case to do that, because we still don't have our 0:12:56.760 --> 0:13:00.160 arms around exactly how bad the effect on profits is 0:13:00.200 --> 0:13:02.920 going to be, and we don't know how bad the 0:13:03.000 --> 0:13:06.360 economy is going to be. If inflation, it's not about 0:13:06.440 --> 0:13:09.360 where it peaks, it's about how quickly it comes down. Really, 0:13:09.400 --> 0:13:12.440 if inflation is still, say five percent at the end 0:13:12.480 --> 0:13:16.200 of this year, which is plenty conceivable, then rates are 0:13:16.240 --> 0:13:18.520 going to have to stay higher for longer than is 0:13:18.559 --> 0:13:22.120 currently embedded in prices, and that would suggest stocks herself, 0:13:22.880 --> 0:13:25.400 it's not going to come down to two this year. 0:13:25.400 --> 0:13:27.400 If it's down at three and a half percent by 0:13:27.400 --> 0:13:30.559 the end of the year, then you would get very 0:13:30.679 --> 0:13:38.040 much greater confidence that no, I don't. But that's the 0:13:38.040 --> 0:13:41.640 point I'm making, that that that we really need to 0:13:41.760 --> 0:13:48.000 find out how quickly inflation can be brought under control. 0:13:48.800 --> 0:13:51.280 If I had to take an over Under this point, 0:13:52.000 --> 0:13:55.520 I think the market is underestimating the risks that we 0:13:55.640 --> 0:13:59.400 continue to have inflation even if the economy isn't doing great. 0:13:59.600 --> 0:14:02.640 That underestimating the risks that even the economy is slowing, 0:14:02.720 --> 0:14:05.880 the fit can't bring rates down. I'm not certain that's 0:14:05.880 --> 0:14:08.520 going to happen, but that seems to me to be 0:14:09.000 --> 0:14:12.480 a real risk. And until we can establish that that's 0:14:12.480 --> 0:14:14.440 not going to happen, that, you know, I'm barking at 0:14:14.440 --> 0:14:17.560 the moon on that one, I would be cautious about 0:14:17.640 --> 0:14:20.160 going all in on the stock market. Well, keep at 0:14:20.240 --> 0:14:21.720 least a little powder dry, if not a lot of 0:14:21.720 --> 0:14:25.040 powder dry. Just okay, that's always a good idea, John 0:14:25.080 --> 0:14:27.560 Authors there, don't forget. You can also listen to Bloomberg 0:14:27.600 --> 0:14:30.520 Opinion as a podcast on Apple, Spotify, or wherever you 0:14:30.560 --> 0:14:34.080 get your podcasts. This week, General Electric revealed a new 0:14:34.160 --> 0:14:37.480 name for its power business, ver Nova. The rebranding coming 0:14:37.520 --> 0:14:40.120 as GE prepares to split into three over the next 0:14:40.120 --> 0:14:43.280 couple of years. The renaming reveals, though, a deeper question 0:14:43.400 --> 0:14:47.000 for the industrial behemoth and for companies more broadly, just 0:14:47.080 --> 0:14:50.040 how old is too old? We're joined by Book Sutherland. 0:14:50.200 --> 0:14:52.880 Not many companies around as long as GE hundred and 0:14:52.920 --> 0:14:56.360 thirty years, and a deglomeration has been underway for some time. 0:14:56.480 --> 0:14:59.920 Can you explain why GE needed to undertake this man 0:15:00.040 --> 0:15:02.520 less task? You know, I think this is a company 0:15:02.560 --> 0:15:06.160 that for a while now has been too complicated for 0:15:06.360 --> 0:15:09.880 its own good. Made a lot of arguments for many years, 0:15:09.880 --> 0:15:13.640 but they were borrowing technology between the different businesses that 0:15:13.840 --> 0:15:17.440 you know, the ability to have executives jump around between 0:15:17.520 --> 0:15:22.440 their diversified portfolio made them stronger management teams. And that 0:15:22.600 --> 0:15:25.240 all has been turned on his head in recent years, 0:15:25.320 --> 0:15:28.040 just given the challenges that has faced and I think 0:15:28.080 --> 0:15:33.000 investors have grown increasingly frustrated with the negative surprises that 0:15:33.000 --> 0:15:35.400 have come out of the company, from the fifteen billion 0:15:35.440 --> 0:15:38.560 dollar shortfall and insurance to the cash crunch and the 0:15:38.560 --> 0:15:42.720 power business or recently the renewable energy business is having difficulties, 0:15:42.760 --> 0:15:45.440 and I think investors just are ready for a cleaner, 0:15:45.600 --> 0:15:48.720 simpler story, right, and the stock still not far off 0:15:48.800 --> 0:15:52.360 its financial crisis lows. The CURRENCYEO that are called decided 0:15:52.400 --> 0:15:54.760 to split into three back in November, and at the 0:15:54.760 --> 0:15:57.240 time you loaded the approach, where are we now with us? 0:15:57.520 --> 0:16:01.000 They're still sticking with the same plan. One issue is 0:16:01.040 --> 0:16:03.840 that it takes a while. I mean, he is a 0:16:03.960 --> 0:16:08.480 very big, complicated company. It's untangling. It is a mammoth task. 0:16:08.640 --> 0:16:10.680 And so they announced the break up plan in November. 0:16:10.800 --> 0:16:13.080 The first of the spinoffs is not scheduled to happen 0:16:13.160 --> 0:16:16.200 until early twenties three. That will be the health care 0:16:16.240 --> 0:16:18.880 business um and then they plan to spin off the 0:16:19.000 --> 0:16:22.400 combination of their gas power, renewable energy, and digital assets 0:16:22.440 --> 0:16:26.120 in early leaving behind an aerospace business. You're talking about, 0:16:26.320 --> 0:16:29.360 you know, a multi year timeline and there is a 0:16:29.440 --> 0:16:32.200 lot of space in between, and within that, we have 0:16:32.480 --> 0:16:36.360 a volatile economic environment and that just makes it really 0:16:36.400 --> 0:16:39.240 difficult for investors to make the decision to own ge 0:16:39.480 --> 0:16:42.080 right now while it's going through this process. They think 0:16:42.640 --> 0:16:44.600 it seems like there's a lot of investors out there 0:16:44.600 --> 0:16:46.720 who would rather wait and owned shares and some of 0:16:46.760 --> 0:16:50.280 these independing companies than stick around for what is bound 0:16:50.280 --> 0:16:53.520 to be a messy unraveling. Now I'm quoting from one 0:16:53.520 --> 0:16:55.280 of your recent columns. If the lesson of g e 0:16:55.440 --> 0:16:57.160 s past is that it was too bold and it 0:16:57.160 --> 0:17:00.520 should have been cautious, the lesson of the present maybe 0:17:00.560 --> 0:17:02.520 that the company is too cautious about letting go of 0:17:02.520 --> 0:17:04.520 its legacy when it should be bolder. What do you 0:17:04.560 --> 0:17:06.920 mean by letting go of its legacy? Book? They came 0:17:06.960 --> 0:17:10.280 out this week with the branding for these new companies, 0:17:10.280 --> 0:17:13.760 and they are going to be called Healthcare, ke e, Eero, Space, 0:17:13.960 --> 0:17:17.440 and ge Vernova is the last one being the combination 0:17:17.440 --> 0:17:20.439 of the gas power, wind turbine and digital assets that 0:17:20.480 --> 0:17:23.640 I've described. I think it's surprising to me that they're 0:17:23.800 --> 0:17:27.040 keeping the g E name with these businesses. Again, this 0:17:27.080 --> 0:17:29.480 isn't a hundreds and thirty year old company. It has 0:17:29.520 --> 0:17:32.960 a very long legacy. It is well known for commercializing 0:17:33.000 --> 0:17:37.280 modern lighting, being a powerhouse behind jet engines. GE had 0:17:37.280 --> 0:17:39.320 a hand in developing a gem engine that takes off 0:17:39.359 --> 0:17:42.480 every two seconds. They power a third of the world's electricity. 0:17:42.520 --> 0:17:45.760 So there's a lot of history there, But recently that 0:17:45.920 --> 0:17:49.240 name has not really resonated in a good way with investors, 0:17:49.240 --> 0:17:50.960 and so you know, if this breakup is meant to 0:17:51.000 --> 0:17:53.920 be a reinvention of the company. In my mind, it 0:17:53.960 --> 0:17:56.200 would be a good time to really give these businesses 0:17:56.240 --> 0:17:59.960 an independent identity, to let them escape from the legacy 0:18:00.280 --> 0:18:03.480 g E pass and carve out their own future for sure. 0:18:03.600 --> 0:18:06.679 And Larry called what's his reasoning behind it? Has he 0:18:06.800 --> 0:18:09.800 given a presentation on what he's expecting to happen once 0:18:09.840 --> 0:18:12.760 these spin offs actually happen, you know? I think Larry 0:18:13.000 --> 0:18:15.919 Colpe is a big believer in de centralized management, and 0:18:15.960 --> 0:18:18.359 he's done a lot of this within the confines of 0:18:18.359 --> 0:18:22.440 the current g structure, pushing more accountability down into the businesses. 0:18:22.960 --> 0:18:25.480 But there's obviously only so much that you can do 0:18:25.640 --> 0:18:27.720 when you are still a conglomerate, and so this is 0:18:27.760 --> 0:18:31.240 sort of the natural evolution of that, where these businesses 0:18:31.320 --> 0:18:33.879 will be empowered to make their own decisions when it 0:18:33.880 --> 0:18:37.000 comes to capital allocation in terms of day to day operations, 0:18:37.440 --> 0:18:39.879 debt management, whatever it might be. I think there is 0:18:39.920 --> 0:18:43.760 a strong track record of industrial spinoffs proving that when 0:18:44.080 --> 0:18:47.680 management is properly incentivized and focused on just one business, 0:18:47.800 --> 0:18:50.440 it's beneficial for the company. And so I think that's 0:18:50.480 --> 0:18:53.640 the end goal here, and nothing about the branding changes 0:18:53.680 --> 0:18:56.400 that goal by any means. But it will still have 0:18:56.440 --> 0:18:58.879 that E name um and so you know, the company 0:18:58.920 --> 0:19:01.320 says that they did as of it, they got feedback 0:19:01.359 --> 0:19:04.200 from their customers employees that wanted them to keep the name. 0:19:04.359 --> 0:19:06.080 I think that if you look at some of the 0:19:06.080 --> 0:19:08.520 other industrial breakups that have happened, there is some value 0:19:08.520 --> 0:19:10.760 and letting go and starting fresh will be interesting to 0:19:10.760 --> 0:19:12.879 see what happens as we go to twenty three and 0:19:12.920 --> 0:19:16.639 twenty four, what happens generally with these spinoffs books. It's 0:19:16.680 --> 0:19:18.440 going to be interesting to see how this one slaves out. 0:19:18.440 --> 0:19:20.680 So there was a time period where you know, all 0:19:20.840 --> 0:19:24.080 spin offs essentially did well. They were very hot and 0:19:24.200 --> 0:19:26.720 people liked them, and then you know, in recent years 0:19:26.760 --> 0:19:29.359 it's kind of gotten more into flitting hairs in the 0:19:29.400 --> 0:19:31.639 industrial sector. That is not what is happening with g E. 0:19:31.720 --> 0:19:36.440 These are obviously very distinct businesses a very separate markets. 0:19:36.440 --> 0:19:38.400 But I do think, you know, you might see some 0:19:38.640 --> 0:19:41.359 new investors taking a look at the companies that maybe 0:19:41.400 --> 0:19:43.440 weren't interested in owning the g E of the past, 0:19:43.720 --> 0:19:46.160 even if they liked the healthcare business, because then they 0:19:46.200 --> 0:19:49.840 also got an aerospace business and insurance headaches and you know, 0:19:49.880 --> 0:19:51.680 whatever else it might be. I think, you know, you 0:19:51.760 --> 0:19:54.840 might also see some re shuffling among the AIMA list community. 0:19:54.960 --> 0:19:58.200 Right now ges covered by a multi industrial analysts. It's 0:19:58.200 --> 0:20:00.639 not going to be a multi industrial company in a 0:20:00.680 --> 0:20:03.639 few years time, so that may bring some different types 0:20:03.880 --> 0:20:07.280 of perspectives into the fault um. And so you know, 0:20:07.400 --> 0:20:10.560 I do think they're changing their profile with this breakup 0:20:10.600 --> 0:20:14.120 and potentially attracting different kinds of people. Brook Sutherland. There 0:20:14.600 --> 0:20:17.320 to China now with all of its woes from COVID 0:20:17.480 --> 0:20:21.320 to growth to this mortgage payer boycott. There's also, of 0:20:21.359 --> 0:20:24.080 course the prospect of a call between President Biden and 0:20:24.160 --> 0:20:26.200 she in the coming days. That would be the first 0:20:26.280 --> 0:20:28.960 since March. Let's get to Schuli Wren. It appears there 0:20:28.960 --> 0:20:31.080 may be a bit of a rap proschment on the cards, 0:20:31.119 --> 0:20:33.879 with a call between President Biden and China's Chies and 0:20:33.920 --> 0:20:36.000 Ping in the coming days. That's the first between the 0:20:36.040 --> 0:20:38.919 leaders since March. Also a council trip to Taiwan for 0:20:38.960 --> 0:20:41.639 a House speaker Nancy Pelosi, which likely has something to 0:20:41.640 --> 0:20:45.040 do with diplomacy and maybe even deference to China. Let's 0:20:45.040 --> 0:20:48.480 get straight to Shuli Wren. Shuli China is grappling with 0:20:48.520 --> 0:20:51.320 a whole range of its own economic and COVID woes. 0:20:51.560 --> 0:20:53.760 Right now, talk to us a little bit about where 0:20:53.840 --> 0:20:56.960 China is growth wise for this year. I hope there 0:20:57.040 --> 0:20:58.960 is growth at all in China. I mean, with the 0:20:59.480 --> 0:21:02.920 whole COVID A zero UH city lockdowns, it's very very 0:21:02.920 --> 0:21:07.360 hardful China's economy to to not any positive growth. So 0:21:07.359 --> 0:21:10.640 so for this court between US and the Chinese president, 0:21:10.960 --> 0:21:14.680 presidents actually has an incentive to play nice, to try 0:21:14.720 --> 0:21:18.280 to you know, to drop export carrots. So so I'm 0:21:18.400 --> 0:21:21.800 pretty positive on this book. Right. So, if we remember 0:21:21.840 --> 0:21:24.199 the former president Donald Trump had imposed charles and more 0:21:24.200 --> 0:21:28.040 than three billion dollars in Chinese imports. Obviously the Biden 0:21:28.040 --> 0:21:30.240 administration is trying to do everything it can to bring 0:21:30.280 --> 0:21:32.960 down inflation in the United States before the midterms, but 0:21:33.040 --> 0:21:36.680 also to appear to be bringing down inflation with everything possible. 0:21:37.040 --> 0:21:39.920 What kinds of outcomes could we see from this call 0:21:40.040 --> 0:21:42.960 that would make any difference to either economy. I think 0:21:43.040 --> 0:21:46.320