1 00:00:09,720 --> 00:00:12,880 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with 2 00:00:13,560 --> 00:00:16,520 Speaker 1: David Gura. Daily we bring you insight from the best 3 00:00:16,560 --> 00:00:22,239 Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance 4 00:00:22,320 --> 00:00:27,000 Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 5 00:00:27,320 --> 00:00:38,640 Speaker 1: on the Bloomberg David February two thousand sixteen. Arguably one 6 00:00:38,640 --> 00:00:41,800 Speaker 1: of the two one of the three best Bloomberg View 7 00:00:41,880 --> 00:00:48,480 Speaker 1: columns ever ever ever. Kess Unstein of Chicago. The Scalia 8 00:00:48,720 --> 00:00:52,519 Speaker 1: I knew will be greatly missed. I featured this for 9 00:00:52,560 --> 00:00:56,880 Speaker 1: a week. I'm Bloomberg Surveillance. It was just that good 10 00:00:57,600 --> 00:01:00,440 Speaker 1: that shortly after Justice in nscalle a past away after 11 00:01:00,480 --> 00:01:03,240 Speaker 1: three decades on the Supreme Court. One of his sons 12 00:01:03,680 --> 00:01:05,480 Speaker 1: he had nine children, has compiled a new book with 13 00:01:05,600 --> 00:01:08,160 Speaker 1: Ed Whieland It's called Scalia Speaks, Reflections on Law, Faith 14 00:01:08,200 --> 00:01:11,440 Speaker 1: and Life Well Lived, a collection of the late justices 15 00:01:11,480 --> 00:01:13,679 Speaker 1: speeches that he delivered over the course of his career. 16 00:01:13,720 --> 00:01:15,880 Speaker 1: And Christopher Scalia joins us now on our phone lines. Chris, 17 00:01:15,880 --> 00:01:17,560 Speaker 1: it's great to speak with you. I have friends who 18 00:01:17,600 --> 00:01:19,600 Speaker 1: have clerked on the Court, and all of them without 19 00:01:19,600 --> 00:01:22,800 Speaker 1: failed talk about the the wit and intelligence of your 20 00:01:22,880 --> 00:01:26,120 Speaker 1: late father. Talk to us a bit about his speeches. 21 00:01:26,120 --> 00:01:28,880 Speaker 1: This is something that justices do when the court is 22 00:01:28,880 --> 00:01:31,400 Speaker 1: is not in session. They travel widely, travel around the world. 23 00:01:31,440 --> 00:01:33,880 Speaker 1: I know that your father did as well. How did 24 00:01:33,880 --> 00:01:37,240 Speaker 1: the approach that the speeches that he gave. Well, first, 25 00:01:37,240 --> 00:01:39,160 Speaker 1: thanks a lot for having me, for having me on 26 00:01:39,200 --> 00:01:41,320 Speaker 1: this morning. It's great to be talking to you about this. 27 00:01:41,840 --> 00:01:44,240 Speaker 1: But my Yeah, as you said, my father spoke around 28 00:01:44,280 --> 00:01:46,560 Speaker 1: the world over the course of his career, and of 29 00:01:46,600 --> 00:01:49,280 Speaker 1: course he delivered a lot of speeches to legal organization. 30 00:01:49,440 --> 00:01:53,360 Speaker 1: So we have about twelve speeches in this collection which 31 00:01:53,360 --> 00:01:58,040 Speaker 1: are speeches about my father's approach to the constitution and 32 00:01:58,080 --> 00:02:01,320 Speaker 1: interpreting laws. Those are those are probably the most important ones, 33 00:02:01,400 --> 00:02:05,720 Speaker 1: the ones where he really kind of um uh establishes 34 00:02:06,280 --> 00:02:11,200 Speaker 1: most clearly his his jurisprudence um on which his legacy relies. 35 00:02:11,639 --> 00:02:15,080 Speaker 1: But he spoke about much more than that um. And 36 00:02:15,320 --> 00:02:18,560 Speaker 1: there are nearly fifty speeches in this collection. Only twelve 37 00:02:18,600 --> 00:02:21,960 Speaker 1: of them are are about originalism or textualism. So there 38 00:02:22,240 --> 00:02:25,120 Speaker 1: are a lot of speeches. For example, there there's a 39 00:02:25,160 --> 00:02:28,120 Speaker 1: speech about turkey hunting here because he spoke at a 40 00:02:28,120 --> 00:02:33,160 Speaker 1: wild turkey Federation event in Nashville one year. Um, there's 41 00:02:33,200 --> 00:02:35,440 Speaker 1: a speech in which he described the games and sports 42 00:02:35,480 --> 00:02:38,560 Speaker 1: that he played growing up. Um. There's a section devoted 43 00:02:38,600 --> 00:02:42,600 Speaker 1: to his speeches about religion and faith, so those speeches 44 00:02:42,639 --> 00:02:44,839 Speaker 1: were very important to him. There's a there's a great 45 00:02:44,919 --> 00:02:48,080 Speaker 1: roast to Justice Ginsburg. And we included a number of 46 00:02:48,120 --> 00:02:51,560 Speaker 1: eulogies and tributes, so you know, he he was a 47 00:02:51,600 --> 00:02:54,760 Speaker 1: great speaker. So he was invited very often by many 48 00:02:54,800 --> 00:02:58,240 Speaker 1: many organizations, not just legal ones, And that was one 49 00:02:58,280 --> 00:03:00,440 Speaker 1: of the I think that was the most on part 50 00:03:00,520 --> 00:03:03,840 Speaker 1: of putting this collection together was just seeing the variety 51 00:03:03,880 --> 00:03:06,000 Speaker 1: and the range of what he talked about. I imagine 52 00:03:06,040 --> 00:03:08,040 Speaker 1: that you growing up mcclin had a lot of opportunities 53 00:03:08,080 --> 00:03:10,400 Speaker 1: to watch him at work, to draft some of these speeches, 54 00:03:10,400 --> 00:03:13,560 Speaker 1: to draft opinions as well. How did he approach the job? 55 00:03:13,800 --> 00:03:17,120 Speaker 1: We we we think of the powerful the power that 56 00:03:17,120 --> 00:03:19,680 Speaker 1: he had with words. I mean his opinions stand out 57 00:03:19,720 --> 00:03:22,520 Speaker 1: for for that, among other things. How did he approach 58 00:03:22,560 --> 00:03:26,720 Speaker 1: the job? You know, writing was hard work for him. Uh. 59 00:03:27,040 --> 00:03:31,000 Speaker 1: I asked him once whether whether it was easy? Uh, 60 00:03:31,120 --> 00:03:33,120 Speaker 1: because I like writing myself when I kind of wanted 61 00:03:33,160 --> 00:03:36,960 Speaker 1: insights from from how he approached it, and I asked him, 62 00:03:37,000 --> 00:03:38,520 Speaker 1: is it easy for you? And he said, no, it's 63 00:03:38,520 --> 00:03:41,640 Speaker 1: hard as hell, And that was a great relief to me. Uh. 64 00:03:41,680 --> 00:03:44,000 Speaker 1: And there's a speech in this collection in which he 65 00:03:44,000 --> 00:03:46,880 Speaker 1: he describes his writing process and kind of how he 66 00:03:47,000 --> 00:03:50,160 Speaker 1: learned how to write well. He said, the two of 67 00:03:50,160 --> 00:03:52,760 Speaker 1: the most important factors or time and sweat. There's the 68 00:03:52,800 --> 00:03:55,320 Speaker 1: time and sweat it takes to write clearly. And he 69 00:03:55,360 --> 00:03:58,600 Speaker 1: made it look easy because because he put so much 70 00:03:58,640 --> 00:04:00,960 Speaker 1: time into it. And I mean that's a rate shared 71 00:04:01,000 --> 00:04:03,200 Speaker 1: by many, many very good writers. So you know, I 72 00:04:03,200 --> 00:04:05,680 Speaker 1: would often see him work at harder work at in 73 00:04:05,760 --> 00:04:09,080 Speaker 1: his study, late at night, working on this, on speeches 74 00:04:09,160 --> 00:04:14,080 Speaker 1: or opinions, and on weekends as well. Um. And that 75 00:04:14,160 --> 00:04:16,159 Speaker 1: I think that hard work really comes through with the 76 00:04:16,200 --> 00:04:18,880 Speaker 1: clarity of what he you mentioned in his opinions, but 77 00:04:18,960 --> 00:04:21,479 Speaker 1: also his speeches. We think of him as an originalist, 78 00:04:21,560 --> 00:04:23,960 Speaker 1: somebody who was very true to the text of the Constitution. 79 00:04:24,000 --> 00:04:27,200 Speaker 1: You mentioned how he formed his his jurisprudence. Give us 80 00:04:27,200 --> 00:04:29,479 Speaker 1: a sense of how those two things complement each other. 81 00:04:30,240 --> 00:04:33,799 Speaker 1: His his his profound faith, among other things, his interest 82 00:04:33,839 --> 00:04:36,240 Speaker 1: in opera, his interest in music. I think I read 83 00:04:36,279 --> 00:04:38,240 Speaker 1: someplace that he was a fan of rickey, skagged and 84 00:04:38,240 --> 00:04:41,120 Speaker 1: bluegrass music as well. How did that all affect his 85 00:04:41,240 --> 00:04:45,120 Speaker 1: thinking about the law? Well, I don't know how those 86 00:04:45,160 --> 00:04:47,520 Speaker 1: all come together to shape his thinking about the law. 87 00:04:47,640 --> 00:04:50,240 Speaker 1: I do think that one misperception about him is that 88 00:04:50,640 --> 00:04:54,600 Speaker 1: he there there was a tight combination or tight kind 89 00:04:54,640 --> 00:04:57,919 Speaker 1: of intersection between his Catholic faith and how he interpreted 90 00:04:57,960 --> 00:05:00,640 Speaker 1: the law. And I don't think that. I don't think 91 00:05:00,640 --> 00:05:03,960 Speaker 1: that's accurate, because, um, he thought it was important for 92 00:05:04,040 --> 00:05:07,440 Speaker 1: judges to put their personal including religious beliefs, aside when 93 00:05:07,440 --> 00:05:11,039 Speaker 1: interpreting texts. So as an originalist, he focused on the 94 00:05:11,120 --> 00:05:16,279 Speaker 1: history and the text, the traditions of the constitution, um uh, 95 00:05:16,320 --> 00:05:18,880 Speaker 1: and not you know, tried not to impose his personal 96 00:05:18,920 --> 00:05:21,039 Speaker 1: beliefs on on what on what that said. And there's 97 00:05:21,040 --> 00:05:24,440 Speaker 1: a speech in here called um Faith and Judging where 98 00:05:24,520 --> 00:05:27,360 Speaker 1: he lays that out pretty clearly. No afelopment of Harvard, 99 00:05:27,800 --> 00:05:36,160 Speaker 1: which is a small school up to the north there. Um, 100 00:05:36,200 --> 00:05:38,480 Speaker 1: He's got a wonderful book called the Scorpions, which is 101 00:05:38,520 --> 00:05:42,320 Speaker 1: about f drs judges. What was the affinity of of 102 00:05:42,400 --> 00:05:46,920 Speaker 1: your father to the tumult of the Supreme Court before 103 00:05:47,000 --> 00:05:52,880 Speaker 1: and before the ren Quist Court. Well, I'm not sure 104 00:05:52,880 --> 00:05:54,560 Speaker 1: what you mean by that kind of are you asking 105 00:05:54,600 --> 00:05:56,839 Speaker 1: what the relationship between the justices look like? What did 106 00:05:56,960 --> 00:05:59,640 Speaker 1: What did he think of of the way the courts 107 00:05:59,640 --> 00:06:01,920 Speaker 1: shift it on the Douglas Court and on the courts 108 00:06:02,000 --> 00:06:08,880 Speaker 1: before that of the Yeah, as an originalist, he has 109 00:06:08,920 --> 00:06:13,120 Speaker 1: a lot of sharp words for for the direction the 110 00:06:13,120 --> 00:06:16,480 Speaker 1: court took after World War Two and especially during the 111 00:06:17,279 --> 00:06:21,640 Speaker 1: war in court because it drifted towards the living Constitution approach, 112 00:06:22,160 --> 00:06:25,200 Speaker 1: which he argues in a number of speeches here. Basically, 113 00:06:25,760 --> 00:06:29,600 Speaker 1: um Uh sees his control of the democratic process from 114 00:06:29,640 --> 00:06:31,400 Speaker 1: the people that puts it in the hands of the judges. 115 00:06:31,920 --> 00:06:34,680 Speaker 1: So uh he I think he was instrumental. He wasn't 116 00:06:34,680 --> 00:06:38,080 Speaker 1: the only person kind of pushing um what he considered 117 00:06:38,080 --> 00:06:41,800 Speaker 1: to move back to traditional interpretations in the Constitution. But 118 00:06:41,800 --> 00:06:46,720 Speaker 1: he was very, very influential in returning the court to originalism. 119 00:06:46,800 --> 00:06:51,920 Speaker 1: That traditional interpretation is different than a body of thought 120 00:06:51,960 --> 00:06:54,600 Speaker 1: in America that we don't need a judicial system. It 121 00:06:54,760 --> 00:06:57,920 Speaker 1: just impedes everything we do is led by the president 122 00:06:57,920 --> 00:07:01,080 Speaker 1: of the United States. What would Anton Scalia think of 123 00:07:01,160 --> 00:07:07,120 Speaker 1: President Trump's administration. My father stayed out of debates like 124 00:07:07,279 --> 00:07:09,039 Speaker 1: that when he was on the court, he didn't he 125 00:07:09,160 --> 00:07:12,800 Speaker 1: didn't make comments about presidents, uh when he was on 126 00:07:12,840 --> 00:07:14,760 Speaker 1: the court. So I think it's probably best. I I 127 00:07:14,840 --> 00:07:21,400 Speaker 1: honor that you went to Chris, Chris Scalia, you went 128 00:07:21,440 --> 00:07:25,680 Speaker 1: to the David Gurah School of Jurist. David saved me here, Chris, 129 00:07:25,680 --> 00:07:27,360 Speaker 1: I want to ask you about one speech in particular. 130 00:07:27,360 --> 00:07:29,440 Speaker 1: It's early on in the book, and it's an Italian 131 00:07:29,520 --> 00:07:32,200 Speaker 1: view of of the Irish. And and this is, as 132 00:07:32,280 --> 00:07:33,600 Speaker 1: is the case with a number of the speeches in 133 00:07:33,600 --> 00:07:36,920 Speaker 1: this book light at points he's reflecting on what it 134 00:07:36,920 --> 00:07:39,840 Speaker 1: means to be American, what heritage means as well. But 135 00:07:39,920 --> 00:07:41,800 Speaker 1: there is a dose of good humor as well. Tell 136 00:07:41,840 --> 00:07:45,120 Speaker 1: us a bit about that speech in particular. Well, that 137 00:07:45,120 --> 00:07:48,679 Speaker 1: that speech was delivered to um, I think the Sons 138 00:07:48,720 --> 00:07:51,200 Speaker 1: of St. Patrick up in New York City. Um, they 139 00:07:51,200 --> 00:07:53,320 Speaker 1: invited him to give a speech. And uh, you know, 140 00:07:53,320 --> 00:07:57,000 Speaker 1: obviously he was Italian, but his wife, my mom, Marie McCarthy, 141 00:07:57,080 --> 00:08:01,120 Speaker 1: was definitely not Italian. So and he grew around a 142 00:08:01,200 --> 00:08:04,400 Speaker 1: lot of Irish people as well. Um, so he went 143 00:08:04,440 --> 00:08:06,280 Speaker 1: to school with a lot of them. So, uh, he 144 00:08:06,400 --> 00:08:09,040 Speaker 1: likes to kind of poke fun at Irish people. Uh. 145 00:08:09,080 --> 00:08:11,440 Speaker 1: And and in that speech he kind of discusses some 146 00:08:11,520 --> 00:08:15,160 Speaker 1: of their distinguishing characteristics lately. He says at one point 147 00:08:15,200 --> 00:08:19,200 Speaker 1: something like, you know, to us subtle Italian, the bluntness 148 00:08:19,200 --> 00:08:22,760 Speaker 1: of you Irish people is very remarkable. Um. And he 149 00:08:23,040 --> 00:08:25,720 Speaker 1: cracks a few jokes about how, you know, how blunt 150 00:08:25,760 --> 00:08:28,160 Speaker 1: my mother was to him sometimes, the way she used 151 00:08:28,160 --> 00:08:30,040 Speaker 1: to make fun of him. I think that I think 152 00:08:30,080 --> 00:08:32,920 Speaker 1: that humor is gonna surprise a lot of people about 153 00:08:32,920 --> 00:08:35,560 Speaker 1: this collection. I mean, it's just and people know that 154 00:08:35,600 --> 00:08:38,439 Speaker 1: he was a funny person, but um, in these speeches 155 00:08:38,480 --> 00:08:41,360 Speaker 1: he's often laugh out loud funny. He Yankees fans. She 156 00:08:41,400 --> 00:08:43,880 Speaker 1: a Red Sox fan. I read as well. He's a 157 00:08:43,920 --> 00:08:49,760 Speaker 1: man of contradictions. Yeah, it's a wonderful book. Christically, thank 158 00:08:49,800 --> 00:08:52,440 Speaker 1: you very much for joining us. The book is Scalia Speaks, 159 00:08:52,440 --> 00:08:55,000 Speaker 1: Reflections on Law, Faith and life Well Lived, a collection 160 00:08:55,000 --> 00:08:58,560 Speaker 1: of speeches from Christopher Scalia's late father, a Justice Anton 161 00:08:58,559 --> 00:09:02,200 Speaker 1: and Scalia uh in the Saying Yes, an important forward 162 00:09:02,200 --> 00:09:06,120 Speaker 1: by Justice Ruth Bader Ginsburg and the two justices were 163 00:09:06,200 --> 00:09:09,360 Speaker 1: very good friends, despite as as many people know, the 164 00:09:09,400 --> 00:09:12,680 Speaker 1: fact that their jurisprudence differs greatly. Um, they maintained a 165 00:09:12,679 --> 00:09:16,600 Speaker 1: great friendship and travel to places, went to operate together. 166 00:09:17,080 --> 00:09:21,240 Speaker 1: Eight together, a really lovely remembrance of the late justice. 167 00:09:21,240 --> 00:09:36,760 Speaker 1: At the beginning of the book, David the gentleman from 168 00:09:36,840 --> 00:09:40,360 Speaker 1: Chicago is where. Yeah, he's in Zurich today there for 169 00:09:40,520 --> 00:09:43,120 Speaker 1: a conversation, a moderated discussion he took part in on 170 00:09:43,160 --> 00:09:46,440 Speaker 1: the global economy and monetary policy. Our colleague Manus Cranny 171 00:09:46,440 --> 00:09:49,840 Speaker 1: sat down with him as well for wide ranging conversation. 172 00:09:50,040 --> 00:09:52,320 Speaker 1: Let's head now to Zurich to Manis Cranny, the anchor 173 00:09:52,360 --> 00:09:55,880 Speaker 1: of Bloomberg Daybreak Europe. In conversation with Chicago Fed President 174 00:09:56,040 --> 00:09:58,800 Speaker 1: Charles Evans, Sir, which outed hut, the I m f 175 00:09:58,920 --> 00:10:01,559 Speaker 1: upgrading the growth actually for the United States, And in 176 00:10:01,679 --> 00:10:06,200 Speaker 1: your answer you hinted onnest I thought tax reform will come. 177 00:10:06,240 --> 00:10:08,080 Speaker 1: It's something that we thought about. I want to dig 178 00:10:08,120 --> 00:10:11,400 Speaker 1: a little bit deeper. How important is it to sustain 179 00:10:11,559 --> 00:10:14,360 Speaker 1: the growth in the United States of America to get 180 00:10:14,760 --> 00:10:18,720 Speaker 1: tax reform from this administration? Well, let me just make 181 00:10:18,760 --> 00:10:22,240 Speaker 1: sure I get the context right here. So, Um, at 182 00:10:22,240 --> 00:10:25,560 Speaker 1: the beginning of the year, after ten year treasury rates 183 00:10:25,600 --> 00:10:28,440 Speaker 1: went up. As we were putting together a forecast. We 184 00:10:28,520 --> 00:10:31,200 Speaker 1: made an assumption that the rates went up in part 185 00:10:31,280 --> 00:10:35,280 Speaker 1: because the administration was likely to implement uh more spending, 186 00:10:35,360 --> 00:10:38,840 Speaker 1: tax reform, things like that, and so that would support 187 00:10:38,880 --> 00:10:41,840 Speaker 1: stronger growth, and so we added a bit of that 188 00:10:42,280 --> 00:10:45,000 Speaker 1: into our outlook, and so we had a growth in 189 00:10:45,040 --> 00:10:46,520 Speaker 1: the two and a quarter to two and a half 190 00:10:46,520 --> 00:10:48,599 Speaker 1: percent range over the next couple of years. Now, the 191 00:10:48,640 --> 00:10:50,679 Speaker 1: way things have turned out, we probably don't have as 192 00:10:50,800 --> 00:10:52,960 Speaker 1: much of that in our outlook, and maybe it's a 193 00:10:52,960 --> 00:10:56,040 Speaker 1: little further into the future. But basically, the economy is 194 00:10:56,080 --> 00:10:57,599 Speaker 1: pretty strong in the US and so there are a 195 00:10:57,600 --> 00:11:00,319 Speaker 1: lot of organic reasons why I'm expecting growth of two 196 00:11:00,360 --> 00:11:02,280 Speaker 1: and a half to uh two and a quarter to 197 00:11:02,320 --> 00:11:04,280 Speaker 1: two and a half. And the global economy is better too, 198 00:11:04,280 --> 00:11:07,240 Speaker 1: as we were talking about. So if we have that 199 00:11:07,320 --> 00:11:10,880 Speaker 1: kind of an economy, we've had some rate hikes from 200 00:11:10,880 --> 00:11:15,119 Speaker 1: the Federal Reserve. Um, would you how would you describe 201 00:11:15,120 --> 00:11:18,440 Speaker 1: the Fed funds rate right now? Would you say, manus, 202 00:11:18,720 --> 00:11:20,960 Speaker 1: I think we are a commitative at the moment. How 203 00:11:20,960 --> 00:11:23,199 Speaker 1: would you describe the status quot at the moment? So 204 00:11:23,240 --> 00:11:25,880 Speaker 1: I think that's right. I think, uh, you know, going 205 00:11:25,920 --> 00:11:29,080 Speaker 1: back to December two thousand, fifteen, we've raised the federal 206 00:11:29,120 --> 00:11:31,800 Speaker 1: funds rate four times by a hundred basis points, and 207 00:11:31,840 --> 00:11:35,000 Speaker 1: so we're now targeting arrange for the funds rate between 208 00:11:35,800 --> 00:11:38,840 Speaker 1: one and one quarter per cent. I think that's still accommodative. 209 00:11:38,880 --> 00:11:42,000 Speaker 1: We still have ways to go in terms of getting 210 00:11:42,040 --> 00:11:45,760 Speaker 1: inflation up to our objective. It's uh, you know, disappointingly low. 211 00:11:45,800 --> 00:11:48,360 Speaker 1: I would say core PC is under one and a 212 00:11:48,400 --> 00:11:51,600 Speaker 1: half percent year over year. I think pretty much all 213 00:11:51,640 --> 00:11:53,560 Speaker 1: of us are expecting it to move up, but I 214 00:11:53,720 --> 00:11:56,120 Speaker 1: probably I'm thinking it's going to take a little bit 215 00:11:56,160 --> 00:11:59,160 Speaker 1: longer to get up to two percent than many people, 216 00:11:59,200 --> 00:12:02,959 Speaker 1: and so we might need uh a continued to accommodative stance. 217 00:12:02,960 --> 00:12:06,240 Speaker 1: We're accommodative now. I think from here on out, every 218 00:12:06,360 --> 00:12:09,480 Speaker 1: rate increase is going to get closer to that line 219 00:12:09,559 --> 00:12:12,120 Speaker 1: where I'm not as sure that it's going to be 220 00:12:12,760 --> 00:12:16,079 Speaker 1: leading to inflation moving up. And so UM, I think 221 00:12:16,080 --> 00:12:18,400 Speaker 1: those are judgments that we have to uh come to 222 00:12:18,559 --> 00:12:21,079 Speaker 1: before the next rate increase. From the data that you're 223 00:12:21,080 --> 00:12:24,840 Speaker 1: seeing so far, where do you stand on a December hike? 224 00:12:26,480 --> 00:12:30,000 Speaker 1: You know, it's too early to say. I do think that, um, 225 00:12:30,120 --> 00:12:34,120 Speaker 1: the inflation data have been disappointing. I understand. I've read 226 00:12:34,160 --> 00:12:38,120 Speaker 1: the arguments. I've heard them that, uh, it's likely due 227 00:12:38,120 --> 00:12:41,800 Speaker 1: to transitory factors. There's certainly have been a number of 228 00:12:41,840 --> 00:12:44,280 Speaker 1: those in the US. I would say that, uh, you know, 229 00:12:44,400 --> 00:12:47,400 Speaker 1: low inflation is a global environment, and so the whole 230 00:12:47,440 --> 00:12:51,760 Speaker 1: world is dealing with trans story uh effects. Yeah, okay, Yeah, 231 00:12:51,880 --> 00:12:54,320 Speaker 1: I'm sure that there's some of that is true too. 232 00:12:54,360 --> 00:12:58,520 Speaker 1: I'm really nervous that inflation expectations are low. They've been 233 00:12:58,600 --> 00:13:02,199 Speaker 1: low for quite sometime. In our FMC statement going back 234 00:13:02,200 --> 00:13:05,360 Speaker 1: to October two thousand fourteen, we've been regularly calling out 235 00:13:05,400 --> 00:13:09,320 Speaker 1: the market measures of inflation expectations have been moving down, 236 00:13:09,360 --> 00:13:11,240 Speaker 1: that they're low. They continue to be low, even though 237 00:13:11,240 --> 00:13:13,760 Speaker 1: they bounced back a little bit after the election, and 238 00:13:13,800 --> 00:13:17,440 Speaker 1: I think survey measures are also weaker than sometimes we 239 00:13:17,520 --> 00:13:20,640 Speaker 1: talk about. Expectations are incredibly important. That that the five 240 00:13:20,720 --> 00:13:23,120 Speaker 1: year five year, the forward expectations of where ri's are 241 00:13:23,120 --> 00:13:25,120 Speaker 1: going to go. That's a benchmark that I look every 242 00:13:25,160 --> 00:13:27,400 Speaker 1: every day when I when I put into good I'm 243 00:13:27,440 --> 00:13:30,840 Speaker 1: not out on the same page. Hi, does the FED 244 00:13:31,520 --> 00:13:35,400 Speaker 1: push those expectations? What more should or could you do 245 00:13:35,880 --> 00:13:40,560 Speaker 1: to push the expectations up? Well, you know, this is 246 00:13:40,600 --> 00:13:42,800 Speaker 1: a this is a big thing question really, you know, 247 00:13:42,880 --> 00:13:46,240 Speaker 1: so this really comes down to how are we talking 248 00:13:46,280 --> 00:13:50,520 Speaker 1: about meeting our policy objectives. I think that, uh, you know, 249 00:13:50,600 --> 00:13:55,040 Speaker 1: we need to be basing our decisions on outcome based 250 00:13:55,120 --> 00:13:58,400 Speaker 1: monetary policy. We need to be very clear we are 251 00:13:58,559 --> 00:14:01,640 Speaker 1: and telling everybody we are supposed to be supporting full 252 00:14:01,640 --> 00:14:06,520 Speaker 1: employment and price stability. The unemployment rates quite low at 253 00:14:06,520 --> 00:14:09,320 Speaker 1: four point two percent. I think wage growth could be stronger, 254 00:14:09,360 --> 00:14:11,880 Speaker 1: so I think we're you know, pretty close to full employment. 255 00:14:11,880 --> 00:14:14,600 Speaker 1: But if stronger wage growth would reinforce that idea better. 256 00:14:14,880 --> 00:14:17,040 Speaker 1: But getting inflation up to two percent of something that's 257 00:14:17,120 --> 00:14:20,760 Speaker 1: very important and moving inflation expectations up um by just 258 00:14:20,840 --> 00:14:23,120 Speaker 1: talking about it, making sure we're willing to go above 259 00:14:23,160 --> 00:14:25,840 Speaker 1: two percent if that, you know, actually happens, because we've 260 00:14:25,840 --> 00:14:28,800 Speaker 1: got a symmetric inflation objective. That's my opinion. We do 261 00:14:28,840 --> 00:14:30,720 Speaker 1: have a symmetric inflation OBJECTI I think we should be 262 00:14:30,720 --> 00:14:34,320 Speaker 1: willing to push inflation above two percent because we should 263 00:14:34,360 --> 00:14:36,440 Speaker 1: be spending some time above two percent, just like we 264 00:14:36,520 --> 00:14:39,000 Speaker 1: spent quite a lot of time below two percent. Can 265 00:14:39,040 --> 00:14:40,320 Speaker 1: I can I ask you, can I just push a 266 00:14:40,360 --> 00:14:43,560 Speaker 1: little bit harder on that way, what is running hot 267 00:14:43,600 --> 00:14:46,720 Speaker 1: Evans style of Chicago style? Is it two and a 268 00:14:46,720 --> 00:14:49,520 Speaker 1: half percent? Is it towards three? Is it the ability 269 00:14:49,600 --> 00:14:52,520 Speaker 1: to to let it run, let it breathe? Well, I 270 00:14:52,520 --> 00:14:55,600 Speaker 1: don't think we should fear two and a half percent inflation. 271 00:14:55,880 --> 00:14:58,520 Speaker 1: If it's we're trying to get inflation up to two percent, 272 00:14:58,560 --> 00:15:01,040 Speaker 1: we get there quicker than we thought and we get 273 00:15:01,080 --> 00:15:02,440 Speaker 1: to two and a half. Two and a half is 274 00:15:02,480 --> 00:15:06,360 Speaker 1: not inconsistent with a symmetric two percent inflation objective. Uh, 275 00:15:06,560 --> 00:15:08,920 Speaker 1: we should be spending time above two percent, just like 276 00:15:08,960 --> 00:15:11,240 Speaker 1: we have been spending time below that. We should be 277 00:15:11,280 --> 00:15:14,800 Speaker 1: averaging two percent going forward over some period of time. 278 00:15:14,840 --> 00:15:18,280 Speaker 1: And if we started from a higher than two percent range, 279 00:15:18,320 --> 00:15:21,520 Speaker 1: then we would be pushing policy to a slightly restrictive 280 00:15:21,800 --> 00:15:24,240 Speaker 1: point and expecting it to come down over some period 281 00:15:24,240 --> 00:15:26,440 Speaker 1: of time. You touched on, obviously some of the other 282 00:15:26,440 --> 00:15:29,880 Speaker 1: metrics there, which is that they they unemployment rate, the 283 00:15:29,960 --> 00:15:33,360 Speaker 1: natural rate of unemployment. Hello, hello Kenchi Going okay, we 284 00:15:33,440 --> 00:15:34,920 Speaker 1: have about five minutes left, so I don't think we're 285 00:15:34,960 --> 00:15:36,560 Speaker 1: gonna answer that question in the net in the net 286 00:15:36,560 --> 00:15:39,920 Speaker 1: in the next five seconds. But for you, the propensity 287 00:15:39,960 --> 00:15:42,200 Speaker 1: you have to four percent to get to sub four percent. 288 00:15:42,400 --> 00:15:46,040 Speaker 1: Is there is there a risk if that keeps dropping? Well, 289 00:15:46,080 --> 00:15:49,560 Speaker 1: I definitely think that if the labor market continues to 290 00:15:49,600 --> 00:15:52,320 Speaker 1: be very strong, if unemployment continues to fall, if it 291 00:15:52,320 --> 00:15:56,080 Speaker 1: falls before below four percent, that's a sign that there 292 00:15:56,120 --> 00:15:59,320 Speaker 1: should be mounting inflation pressures. Now we do have to 293 00:15:59,360 --> 00:16:02,920 Speaker 1: realize it. Uh, the technical aspects of this, the Phillips 294 00:16:02,920 --> 00:16:06,080 Speaker 1: curve is really quite flattened, so we probably won't see 295 00:16:06,080 --> 00:16:10,240 Speaker 1: inflation move up very much because of that. You know, 296 00:16:10,280 --> 00:16:12,200 Speaker 1: it might take something like three and a half percent 297 00:16:12,240 --> 00:16:15,640 Speaker 1: before you really see inflation pick up from a strong 298 00:16:15,760 --> 00:16:18,120 Speaker 1: labor market. But on the other hand, there's a risk there, 299 00:16:18,120 --> 00:16:21,680 Speaker 1: and so I understand why, um, you know, we don't 300 00:16:21,720 --> 00:16:25,280 Speaker 1: want to risk inflation getting out of control. I would 301 00:16:25,360 --> 00:16:27,880 Speaker 1: just say that if we're gonna have a two percent 302 00:16:27,920 --> 00:16:30,400 Speaker 1: inflation objective, we have to be willing to spend time 303 00:16:30,440 --> 00:16:33,560 Speaker 1: above two percent. That might be you know, three point 304 00:16:33,640 --> 00:16:37,560 Speaker 1: nine percent unemployment and inching the funds rate up gradually. 305 00:16:37,600 --> 00:16:39,840 Speaker 1: The way that we've talked about, can I ask you 306 00:16:39,880 --> 00:16:42,640 Speaker 1: the single most talked about topic. My colleagues in the 307 00:16:42,720 --> 00:16:44,400 Speaker 1: United States have been talking about it before we came 308 00:16:44,440 --> 00:16:46,600 Speaker 1: to talk to you. You and I touched on it 309 00:16:46,680 --> 00:16:49,840 Speaker 1: is succession succession planning. So let's go out of a 310 00:16:49,880 --> 00:16:55,200 Speaker 1: slightly different way. What does the FED need in its 311 00:16:55,280 --> 00:16:59,280 Speaker 1: next phase of leadership? You've lived under Banankee, you've lived 312 00:16:59,320 --> 00:17:01,640 Speaker 1: one to Janet Adden, You've also had experience of Green 313 00:17:01,680 --> 00:17:04,880 Speaker 1: spanning the room, Charles Evans, what is the FED need 314 00:17:04,960 --> 00:17:08,920 Speaker 1: in terms of leadership going forward for successful succession? Well, 315 00:17:08,960 --> 00:17:11,760 Speaker 1: I think we've been extremely well served by the leadership 316 00:17:11,840 --> 00:17:14,000 Speaker 1: of the FED chairs that we've had, the ones that 317 00:17:14,040 --> 00:17:17,399 Speaker 1: you mentioned. UM. I think we need thoughtful discussions. I 318 00:17:17,440 --> 00:17:21,400 Speaker 1: think we need UH committee members who bring UH their 319 00:17:21,440 --> 00:17:24,600 Speaker 1: best thinking to the table. Different viewpoints. The viewpoint that 320 00:17:24,680 --> 00:17:28,720 Speaker 1: I'm expressing right here is different than many around the table. 321 00:17:28,760 --> 00:17:32,119 Speaker 1: I think we benefit from everybody thinking what are the 322 00:17:32,119 --> 00:17:35,040 Speaker 1: wrist scenarios we might be facing? What is it that 323 00:17:35,040 --> 00:17:37,840 Speaker 1: could lead inflation to be above two percent? Evans? When 324 00:17:37,880 --> 00:17:41,200 Speaker 1: you say it's okay, how about this circumstance, where are 325 00:17:41,240 --> 00:17:43,280 Speaker 1: you gonna be okay with that? Well, let's think that 326 00:17:43,280 --> 00:17:45,760 Speaker 1: one through. UM. So we need to challenge each other, 327 00:17:46,200 --> 00:17:48,440 Speaker 1: and so we need leaders and presidents so that we, 328 00:17:48,760 --> 00:17:52,040 Speaker 1: you know, have that give and take discussion. Charles Evans 329 00:17:52,040 --> 00:17:55,760 Speaker 1: of Chicago, a vibrant conversation David Grew with Manas Cranny 330 00:17:56,160 --> 00:18:00,520 Speaker 1: in Zurich on the dynamics of inflation and you know 331 00:18:00,560 --> 00:18:03,320 Speaker 1: this better than than I and Mike McKee does as well. 332 00:18:03,359 --> 00:18:05,720 Speaker 1: But to something interesting about Charles Evans is he has 333 00:18:05,720 --> 00:18:08,240 Speaker 1: been at that institution for for so long. His background 334 00:18:08,320 --> 00:18:10,760 Speaker 1: is in research. He headed up research at the Federals 335 00:18:10,800 --> 00:18:12,760 Speaker 1: or Bank of Chicago as well. We've seen that in 336 00:18:12,760 --> 00:18:15,159 Speaker 1: other banks. He has the system. So how does that 337 00:18:15,240 --> 00:18:18,399 Speaker 1: change the leadership of the leadership role one plays when 338 00:18:18,400 --> 00:18:21,399 Speaker 1: you have that institutional background. It's a big difference in 339 00:18:21,600 --> 00:18:24,919 Speaker 1: in your your point as well taken, and that every 340 00:18:25,000 --> 00:18:29,000 Speaker 1: president is different. Evans is so prodigious and so able 341 00:18:29,760 --> 00:18:33,720 Speaker 1: that he speaks with as do others, a certain clip 342 00:18:34,000 --> 00:18:39,600 Speaker 1: and directness which is very different than the more politically 343 00:18:39,640 --> 00:18:46,080 Speaker 1: based chairman, vice chairman, UH and governors, and directness to 344 00:18:46,200 --> 00:18:50,560 Speaker 1: Mr Cranny as well. There's a directness to Charles Evans 345 00:18:50,640 --> 00:18:54,640 Speaker 1: which has always been there. Not that he's the smartest 346 00:18:54,640 --> 00:18:57,800 Speaker 1: guy in the room. He's got a wonderful academic humility, 347 00:18:57,840 --> 00:19:02,760 Speaker 1: but he's got a real blie. In this strange word expectations, 348 00:19:02,880 --> 00:19:16,760 Speaker 1: I would suggests joining us Michael Nail to get us 349 00:19:16,760 --> 00:19:20,800 Speaker 1: started here during this season, give us the seventy feet 350 00:19:20,880 --> 00:19:25,480 Speaker 1: view thumb up or thub down on the profitability of 351 00:19:25,520 --> 00:19:32,720 Speaker 1: banks thumbs up and two thumbs up. So, Tom, you 352 00:19:33,080 --> 00:19:36,800 Speaker 1: know I've been covering the US banks for three decades. 353 00:19:37,240 --> 00:19:42,480 Speaker 1: You spoke to Hamilton's personal But what's underappreciated. See you 354 00:19:42,560 --> 00:19:47,120 Speaker 1: lead with profitability, and profitability is improving. But what's underappreciated 355 00:19:47,320 --> 00:19:50,359 Speaker 1: is the resiliency of the banks. This should be one 356 00:19:50,400 --> 00:19:53,280 Speaker 1: more quarter that should lead to it one more year 357 00:19:53,840 --> 00:19:56,520 Speaker 1: where banks are a lot more boring, where they don't 358 00:19:56,560 --> 00:20:00,199 Speaker 1: blow up. Are they going to distribute cashual by the 359 00:20:00,240 --> 00:20:05,800 Speaker 1: shareholders or is it more of a synergistic stock value play? 360 00:20:05,920 --> 00:20:08,920 Speaker 1: Is it just financial engineering? One oh one, three years out, 361 00:20:09,440 --> 00:20:12,840 Speaker 1: it's a lot more sustainable growth, not just growth. You 362 00:20:12,880 --> 00:20:15,679 Speaker 1: go back one or two decades ago, it was about markets. 363 00:20:15,720 --> 00:20:20,199 Speaker 1: Here now it's about returns and profitability. That's sustainable. And 364 00:20:20,240 --> 00:20:23,359 Speaker 1: what a contrast to ten years ago. I'm looking at 365 00:20:23,400 --> 00:20:26,439 Speaker 1: operating income for JP Morgan, which is a size of 366 00:20:26,440 --> 00:20:29,560 Speaker 1: the continent of Antarctic or whatever it is. City group 367 00:20:29,680 --> 00:20:33,320 Speaker 1: not so much in City group does not have growthiness 368 00:20:33,560 --> 00:20:36,960 Speaker 1: of operating income is city group really a quasi utility 369 00:20:37,160 --> 00:20:40,199 Speaker 1: where they're just generating out the same operating income. And 370 00:20:40,280 --> 00:20:42,760 Speaker 1: let's play with it. You know the US banks, it's 371 00:20:42,840 --> 00:20:46,520 Speaker 1: less that they're managed like utilities, but more like there 372 00:20:47,080 --> 00:20:50,720 Speaker 1: their output is more utility, like more annulity, like more predictable. 373 00:20:50,760 --> 00:20:54,040 Speaker 1: In fact, for the third quarter earnings, which start tomorrow, 374 00:20:54,080 --> 00:20:57,040 Speaker 1: we'd sum up the positives as the three cs, and 375 00:20:57,160 --> 00:21:00,399 Speaker 1: one C would be cost control not just about the news. 376 00:21:00,600 --> 00:21:02,920 Speaker 1: Another see would be credit quality, the quality of the 377 00:21:02,960 --> 00:21:06,760 Speaker 1: loan portfolios remains very strong. And the third seed would 378 00:21:06,760 --> 00:21:10,199 Speaker 1: be capital and cap return. This is the first quarter 379 00:21:10,680 --> 00:21:14,359 Speaker 1: since the June FED stress test that allowed banks to 380 00:21:14,359 --> 00:21:17,399 Speaker 1: return one billion dollars of capital over the next Do 381 00:21:17,440 --> 00:21:19,440 Speaker 1: you value them on price to book? Then? I mean 382 00:21:19,440 --> 00:21:22,280 Speaker 1: we all understood five years ago they're trading it. You know, 383 00:21:22,320 --> 00:21:24,959 Speaker 1: world's gonna come to an end. Valuation city groups some 384 00:21:25,080 --> 00:21:29,520 Speaker 1: vicinity of priced book? Should they be a premium to book? 385 00:21:29,640 --> 00:21:32,000 Speaker 1: Do we get back to the joy that you and 386 00:21:32,080 --> 00:21:35,320 Speaker 1: I knew in our ute? Well on that metric, it's 387 00:21:35,320 --> 00:21:38,120 Speaker 1: a financial metric that we used to value bank stocks. 388 00:21:38,200 --> 00:21:41,959 Speaker 1: The stock price relative to its book value. Bank stocks 389 00:21:42,000 --> 00:21:46,920 Speaker 1: are still undervalued by at least one third versus historical ranges. David, 390 00:21:46,960 --> 00:21:50,560 Speaker 1: that's I'm here, end of the financial lesson May. I've 391 00:21:50,600 --> 00:21:52,760 Speaker 1: got your fine book to my left, that is Exile 392 00:21:52,800 --> 00:21:55,040 Speaker 1: in Wall Street, and you marked a tenth anniversary here. 393 00:21:55,080 --> 00:21:57,200 Speaker 1: Ten years ago today you were watching an exhibition game 394 00:21:57,240 --> 00:22:00,080 Speaker 1: between the Nixon Pro basketball team. From from tell of 395 00:22:00,119 --> 00:22:03,320 Speaker 1: even the world changed, especially with regard to to City. 396 00:22:03,480 --> 00:22:05,200 Speaker 1: Tell us what happened then when you look at City 397 00:22:05,200 --> 00:22:08,160 Speaker 1: then versus now? Has this bank done a one? Eight? Well? 398 00:22:08,160 --> 00:22:13,160 Speaker 1: Ten years ago today, October eleven, two thousand seven, I'm 399 00:22:13,200 --> 00:22:15,960 Speaker 1: sitting at Madison Square Garden, and I'm getting all these 400 00:22:16,040 --> 00:22:20,040 Speaker 1: texts about announcements from City Group that then CEO Chuck 401 00:22:20,119 --> 00:22:24,040 Speaker 1: Prince was firing a lot of people underneath him, restructuring, restructuring, 402 00:22:24,640 --> 00:22:27,960 Speaker 1: and then Robert Reuben, ex Treasury Secretary released as a 403 00:22:27,960 --> 00:22:30,880 Speaker 1: statement saying that Chuck Prince will be around for many 404 00:22:30,960 --> 00:22:35,760 Speaker 1: years to come. This is when the board was accountable 405 00:22:35,800 --> 00:22:39,000 Speaker 1: to no investor that I'd ever spoken with. This is 406 00:22:39,040 --> 00:22:42,760 Speaker 1: when City Group was sitting with a balance sheet with 407 00:22:43,119 --> 00:22:47,440 Speaker 1: tens of billions of dollars of losses on subprime securities, 408 00:22:47,840 --> 00:22:50,720 Speaker 1: and they're saying that everything's fine and everything's dandy. Well, 409 00:22:50,800 --> 00:22:52,600 Speaker 1: you go from Biden not to hold, but to sell. 410 00:22:52,920 --> 00:22:55,359 Speaker 1: What went to sell? The stock was over five dollars 411 00:22:55,400 --> 00:22:58,760 Speaker 1: a share, and we just thought completely out of touch. 412 00:22:58,880 --> 00:23:01,080 Speaker 1: And for me, as I write it out, Uh, you 413 00:23:01,080 --> 00:23:03,240 Speaker 1: know in my book this was the start of the 414 00:23:03,240 --> 00:23:06,480 Speaker 1: financial crisis ten years ago today. Well, as it turned out, 415 00:23:06,680 --> 00:23:09,560 Speaker 1: one month later, Chuck Prince was out, the stock went 416 00:23:09,600 --> 00:23:12,240 Speaker 1: into a free fall, and City Group led the financial 417 00:23:12,280 --> 00:23:16,000 Speaker 1: industry into the financial crisis. So while ten years ago today, 418 00:23:16,200 --> 00:23:19,840 Speaker 1: now it's ten years forward, it's night and day. So 419 00:23:20,000 --> 00:23:22,280 Speaker 1: as as relates to City Group, just like we said, 420 00:23:22,320 --> 00:23:25,119 Speaker 1: for the industry, the balance sheet is the strongest that 421 00:23:25,160 --> 00:23:28,359 Speaker 1: has been in a generation. Uh, the credit quality is strong, 422 00:23:28,480 --> 00:23:31,680 Speaker 1: capital strong, liquidity strong. There's a lot of eyes looking 423 00:23:31,720 --> 00:23:34,280 Speaker 1: over the shoulder, a City Group a lot more resilient. 424 00:23:34,480 --> 00:23:37,040 Speaker 1: We think they could survive not just one financial crisis, 425 00:23:37,119 --> 00:23:40,360 Speaker 1: but to financial crisis. So a pillar strength and stability 426 00:23:40,480 --> 00:23:42,800 Speaker 1: still hasn't gone as far as they need to. And 427 00:23:42,840 --> 00:23:44,879 Speaker 1: I'm happy to talk about that. You're getting to be 428 00:23:44,920 --> 00:23:47,280 Speaker 1: such a study. Your entourage, we could barely fit them 429 00:23:47,280 --> 00:23:50,760 Speaker 1: into a radio studios. You're listed in Vanity Fair this 430 00:23:50,840 --> 00:23:54,159 Speaker 1: month in an article on Mr Diamond of JP Morgan. 431 00:23:54,240 --> 00:23:56,480 Speaker 1: Have you talked to Mr Diamond about the value of 432 00:23:56,560 --> 00:24:00,400 Speaker 1: bitcoin and is there a Mic Mayo view on coin 433 00:24:00,480 --> 00:24:02,600 Speaker 1: that won't get you in trouble, won't get you thrown 434 00:24:02,640 --> 00:24:06,440 Speaker 1: under the stage coach. Well, look, the banking industry, it's 435 00:24:06,520 --> 00:24:09,480 Speaker 1: less about how fast can you grow revenues and how 436 00:24:09,520 --> 00:24:12,639 Speaker 1: profitably and sustainably can you grow revenue. So part of 437 00:24:12,640 --> 00:24:15,960 Speaker 1: that is improving efficiency. We think US banks would be 438 00:24:16,000 --> 00:24:19,200 Speaker 1: the most efficient in history in five years. Crypto will 439 00:24:19,240 --> 00:24:23,760 Speaker 1: help on that. Well, you know, the blockchain, the undergnology 440 00:24:24,040 --> 00:24:26,919 Speaker 1: has the potential to help. It's not like flipping a switch, 441 00:24:27,119 --> 00:24:29,640 Speaker 1: but that's one of many avenues that banks can take. 442 00:24:29,800 --> 00:24:33,680 Speaker 1: Can you belong big cooin? Here? I do not give 443 00:24:33,720 --> 00:24:38,640 Speaker 1: a view the horses. I did not give you my disclosures. 444 00:24:39,320 --> 00:24:41,960 Speaker 1: You do not give you a disclosures Bitcoin. Mike Mayo, 445 00:24:42,720 --> 00:24:44,679 Speaker 1: thank you so much for a quick visit. Here we 446 00:24:44,720 --> 00:24:47,600 Speaker 1: begin our earning season. Of course we take it as seriously. 447 00:24:47,600 --> 00:24:49,919 Speaker 1: We'll try to do better than good and give you 448 00:24:49,960 --> 00:24:53,640 Speaker 1: some of the uh information more than just revenue dynamics 449 00:24:53,640 --> 00:24:56,000 Speaker 1: and earnings dynamics, and of course talk to some smart 450 00:24:56,040 --> 00:24:59,720 Speaker 1: people like Mr Mayo to give you that value add 451 00:24:59,760 --> 00:25:03,879 Speaker 1: you expect only from Bloomberg Surveillance. Mr Mayo is with 452 00:25:03,960 --> 00:25:06,760 Speaker 1: the Stage Coast Company. Mr Wells Fargo. Are you enjoying 453 00:25:06,760 --> 00:25:10,920 Speaker 1: it time? Week fourteen? So far everybody wants to collaborate. 454 00:25:11,440 --> 00:25:14,639 Speaker 1: Ken Center on speaking terms. Ken Center the new Internet 455 00:25:14,680 --> 00:25:17,160 Speaker 1: analyst at Wells Farger Securities. He's a rock star, He's 456 00:25:17,280 --> 00:25:20,640 Speaker 1: Mr Future. He came out with his launch. I can't 457 00:25:20,800 --> 00:25:22,840 Speaker 1: believe you in the stage coach on a four hour 458 00:25:22,920 --> 00:25:38,239 Speaker 1: trip to St. Louis. Let's getting right to it. Nick 459 00:25:38,320 --> 00:25:40,720 Speaker 1: came and joins us to William Blair. Uh, Nick, we 460 00:25:40,760 --> 00:25:43,200 Speaker 1: want to talk about the overall frenzy in your world 461 00:25:43,200 --> 00:25:45,919 Speaker 1: of industry, but I've got to get a g E update. 462 00:25:45,960 --> 00:25:49,200 Speaker 1: We talked to many others cautious, I would suggest you've 463 00:25:49,240 --> 00:25:53,800 Speaker 1: been more optimistic on the timeline of restructuring for Mr Flannery, 464 00:25:53,840 --> 00:25:58,680 Speaker 1: which is it. Have you amended your view on General Electric? No? No, 465 00:25:58,920 --> 00:26:01,560 Speaker 1: we have not. We would uh would Tom expect that 466 00:26:01,640 --> 00:26:04,399 Speaker 1: the dividend would be an issue to be evaluated if 467 00:26:04,480 --> 00:26:08,440 Speaker 1: we hadn't spent fourteen billion dollars and launched several new 468 00:26:08,600 --> 00:26:12,240 Speaker 1: major projects products give me across all of the core 469 00:26:12,840 --> 00:26:14,960 Speaker 1: major business of the company over the last four or 470 00:26:14,960 --> 00:26:19,119 Speaker 1: five years. So that's behind them, that investment wave. And 471 00:26:19,359 --> 00:26:21,960 Speaker 1: in turn, I think Tom's probably someplace in the neighborhood 472 00:26:21,960 --> 00:26:25,240 Speaker 1: of having made about of the decisions that he has 473 00:26:25,280 --> 00:26:29,120 Speaker 1: to make to strutally change the board, the management, the portfolio, 474 00:26:29,680 --> 00:26:33,400 Speaker 1: and the cost structure. So you know, this is this 475 00:26:33,440 --> 00:26:37,400 Speaker 1: is something that's moving at bullet speed. And I think 476 00:26:37,440 --> 00:26:40,000 Speaker 1: that you know, if unless you had a world war, 477 00:26:40,160 --> 00:26:43,000 Speaker 1: you know three, um, you're not really looking at a 478 00:26:43,080 --> 00:26:45,680 Speaker 1: risk of the dividend on a strategic basis. Is the 479 00:26:45,720 --> 00:26:49,320 Speaker 1: task for the new ge management? Is it what they 480 00:26:49,440 --> 00:26:51,800 Speaker 1: need to do or is it what they need to 481 00:26:51,880 --> 00:26:54,480 Speaker 1: avoid what they need not to do, which is that 482 00:26:54,720 --> 00:26:57,480 Speaker 1: they need to what to get rid of or what 483 00:26:57,600 --> 00:27:00,800 Speaker 1: to stop spending on and to bring full focus to 484 00:27:01,240 --> 00:27:04,040 Speaker 1: you know, they use spending that they do, uh continue 485 00:27:04,080 --> 00:27:07,000 Speaker 1: to make that generates value. And so this is not 486 00:27:07,080 --> 00:27:11,359 Speaker 1: a broken company, it's a bloated company. Those two are 487 00:27:11,440 --> 00:27:14,639 Speaker 1: very different. What's Nick came in famous for David grew up, 488 00:27:14,840 --> 00:27:18,560 Speaker 1: it would be compare and contrast matrix is very good. Gee, 489 00:27:18,720 --> 00:27:21,359 Speaker 1: why don't you dive in here? Girl is going for 490 00:27:21,440 --> 00:27:25,640 Speaker 1: see if a love he's really wading in here right now, 491 00:27:26,040 --> 00:27:28,760 Speaker 1: do compare and contract for the legend. Yeah, this is 492 00:27:28,800 --> 00:27:30,359 Speaker 1: this is a great comparison in the back. What can 493 00:27:30,400 --> 00:27:32,520 Speaker 1: we learn from looking at these two companies side by side, 494 00:27:32,520 --> 00:27:35,639 Speaker 1: looking at Honeywell and looking at the side by side. Well, 495 00:27:35,680 --> 00:27:38,840 Speaker 1: you know, Honeywell today is shifting gears and you know, 496 00:27:38,920 --> 00:27:43,479 Speaker 1: moving to change its overall um sources of future earnings 497 00:27:43,480 --> 00:27:48,119 Speaker 1: growth to have a much greater amount of organic revenue growth. 498 00:27:48,600 --> 00:27:50,119 Speaker 1: And it's trying to figure out how to do that 499 00:27:50,160 --> 00:27:52,480 Speaker 1: by being able to outgrow its end markets. And to 500 00:27:52,600 --> 00:27:55,760 Speaker 1: do so, it's looking to take advantage of its hidden asset, 501 00:27:56,119 --> 00:27:59,800 Speaker 1: which is a massive installed base, and to upgrade that 502 00:28:00,119 --> 00:28:03,120 Speaker 1: software to enable in a better functionality of those products 503 00:28:03,359 --> 00:28:05,520 Speaker 1: and be able to connect them, to be able to 504 00:28:05,560 --> 00:28:09,160 Speaker 1: create real time insights. And you know, uh, it's it's 505 00:28:09,200 --> 00:28:12,960 Speaker 1: a very interesting transition. So they're just simplifying the company. 506 00:28:13,040 --> 00:28:15,080 Speaker 1: It's not broken at all. It's one of the best, 507 00:28:15,119 --> 00:28:20,000 Speaker 1: if not the best managed diversified industrials today in the world. 508 00:28:20,080 --> 00:28:24,720 Speaker 1: So um, it's a very different approach than obviously what 509 00:28:24,920 --> 00:28:28,560 Speaker 1: g s up against, which is to radically truncate. You saw, 510 00:28:28,560 --> 00:28:31,280 Speaker 1: of course, this announcement from Morris Planes yesterday about what 511 00:28:31,359 --> 00:28:34,000 Speaker 1: Honeywell intends to do. It is not electing to spin 512 00:28:34,080 --> 00:28:36,760 Speaker 1: off its aerophace aerospace division. Do do you think it's 513 00:28:36,800 --> 00:28:38,640 Speaker 1: likely to happen down the line? This is something that 514 00:28:39,120 --> 00:28:42,040 Speaker 1: Dan Lobe is agitated for. The statements that we saw 515 00:28:42,080 --> 00:28:44,600 Speaker 1: from from his fund indicate that he's content enough with 516 00:28:44,640 --> 00:28:46,800 Speaker 1: what we saw yesterday. Do you think something's going to 517 00:28:46,800 --> 00:28:50,440 Speaker 1: happen to aerospace down the line? Now? I know this 518 00:28:50,600 --> 00:28:53,240 Speaker 1: is a trend that we're starting to see, you know, 519 00:28:53,280 --> 00:28:58,240 Speaker 1: where everybody's trying to unlock value by deconglomerating because equity 520 00:28:58,320 --> 00:29:01,840 Speaker 1: valuations everywhereround the world are high, and these companies have 521 00:29:01,920 --> 00:29:04,760 Speaker 1: become so big that in turn and now there's questions 522 00:29:04,760 --> 00:29:08,200 Speaker 1: about whether or not um they would have more value 523 00:29:08,320 --> 00:29:11,120 Speaker 1: with a better focus as spun authentities. I don't. I 524 00:29:11,160 --> 00:29:13,520 Speaker 1: don't think that, you know, the airspace business. Is it 525 00:29:13,560 --> 00:29:16,360 Speaker 1: all going to be spun out in some tax efficient 526 00:29:16,360 --> 00:29:19,239 Speaker 1: reverse Morse trust and then merged with ge you know, 527 00:29:19,360 --> 00:29:22,560 Speaker 1: engines or aviation or whatever. I don't. I don't think 528 00:29:22,560 --> 00:29:25,360 Speaker 1: that's coming. Nick needs to do is a party over 529 00:29:25,400 --> 00:29:28,640 Speaker 1: I mean, within the frenzy of restructuring Walmart, this, you know, 530 00:29:29,040 --> 00:29:32,920 Speaker 1: industries and companies away from your expertise. Do you sense 531 00:29:32,920 --> 00:29:35,560 Speaker 1: here that what this is really about a CFOs realize 532 00:29:35,560 --> 00:29:38,600 Speaker 1: the party is over and they're gonna have not cheap 533 00:29:38,640 --> 00:29:41,760 Speaker 1: money anymore, that at some point it's actually expensive. So 534 00:29:41,800 --> 00:29:45,160 Speaker 1: it's like, let's get it done. I think it's also, 535 00:29:45,320 --> 00:29:48,320 Speaker 1: you know, we've got many changes going on. We're about 536 00:29:48,320 --> 00:29:50,720 Speaker 1: this obviously in a move to create value now with 537 00:29:50,960 --> 00:29:56,160 Speaker 1: you know, information UM as opposed to just services as 538 00:29:56,200 --> 00:29:59,920 Speaker 1: opposed to software and the actual product. We've got struck 539 00:30:00,000 --> 00:30:03,120 Speaker 1: shoal changes that are sweeping across our end markets. And 540 00:30:03,160 --> 00:30:07,560 Speaker 1: transportation for autonomous operation of vehicles and that's all kinds 541 00:30:07,560 --> 00:30:10,640 Speaker 1: of vehicles, not just cars, as well as the electrification 542 00:30:10,640 --> 00:30:12,960 Speaker 1: of the drive train. We've got you on, the move 543 00:30:13,040 --> 00:30:16,480 Speaker 1: to subsee as opposed to surface in the oil gas, 544 00:30:16,480 --> 00:30:21,040 Speaker 1: the shift to UH electrification and renewables UH in power 545 00:30:21,080 --> 00:30:26,920 Speaker 1: generation instead of fossil and you know this encroachment by 546 00:30:26,920 --> 00:30:29,840 Speaker 1: many of the aircraft manufacturers on their supplier base, both 547 00:30:29,840 --> 00:30:33,200 Speaker 1: for services and actual products. So it's you know, these 548 00:30:33,280 --> 00:30:36,560 Speaker 1: changes are are really now what I think a lot 549 00:30:36,600 --> 00:30:39,200 Speaker 1: of the management are trying to figure out. Nick. I've 550 00:30:39,240 --> 00:30:41,080 Speaker 1: I've gone through the note with a with a highlighter 551 00:30:41,080 --> 00:30:42,720 Speaker 1: and a pen and something that I made sure to 552 00:30:42,760 --> 00:30:44,760 Speaker 1: mark Wes a ligne in your note saying that it 553 00:30:44,800 --> 00:30:47,120 Speaker 1: happens to be one of the best backdoor beneficiaries from 554 00:30:47,200 --> 00:30:50,280 Speaker 1: higher oil prices. Why is that the case? They owned 555 00:30:50,280 --> 00:30:53,600 Speaker 1: sixty two and a half percent of Baker Hughes and 556 00:30:54,000 --> 00:30:57,720 Speaker 1: u UH that has given them a huge opportunity to 557 00:30:57,840 --> 00:31:01,240 Speaker 1: participate now in the North American upstream market that they 558 00:31:01,280 --> 00:31:04,840 Speaker 1: didn't previously have they were more of an offshore focused 559 00:31:04,880 --> 00:31:08,760 Speaker 1: market and um it allows them to participate in this 560 00:31:08,920 --> 00:31:13,200 Speaker 1: next phase of improving return invested capital for independent North 561 00:31:13,200 --> 00:31:16,000 Speaker 1: American introducers by outsourcing all the service of their e 562 00:31:16,080 --> 00:31:20,959 Speaker 1: M p affts and then bringing up their predictive seismic 563 00:31:21,160 --> 00:31:24,760 Speaker 1: geological seismic analytics so they know where to frack within 564 00:31:24,840 --> 00:31:28,200 Speaker 1: the vertical and horizontal access of the well. Has way 565 00:31:28,240 --> 00:31:31,080 Speaker 1: too much technology for me, Nick Cammon, thank you so much, 566 00:31:31,080 --> 00:31:34,440 Speaker 1: greatly appreciated. Too short of business. Just can't say enough 567 00:31:34,480 --> 00:31:37,880 Speaker 1: about the different the value we get from different people 568 00:31:37,880 --> 00:31:42,880 Speaker 1: on the street with decades of experience across industrial marriage 569 00:31:43,760 --> 00:31:57,160 Speaker 1: an industrial landscape. Mr Hayman is with William Blair, Thanks 570 00:31:57,160 --> 00:32:01,320 Speaker 1: for listening to the Bloomberg Surveillance Podcast. Subscribe and listen 571 00:32:01,360 --> 00:32:07,000 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform 572 00:32:07,080 --> 00:32:10,600 Speaker 1: you prefer. I'm on Twitter at Tom Keene. David Gura 573 00:32:10,920 --> 00:32:14,640 Speaker 1: is at David Gura. Before the podcast, you can always 574 00:32:14,640 --> 00:32:17,400 Speaker 1: catch US World one. I'm Bloomberg Radio