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You Can't Issue Debt Forever: State Street's Loh · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Sweene. You,
0:05
Speaker 1: along with my co host Lisa Brahma Waits, each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
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Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple
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Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot Com. Him Alex steel in Relisa A.
0:21
Speaker 1: Brahmowitz today, don't leave your powder dry. That was the
0:25
Speaker 1: takeaway from the market from New York Fed President John
0:27
Speaker 1: Williams speaking yesterday, and then things got really confusing. The
0:30
Speaker 1: New York Fed walks it back. President Trump tweets at
0:33
Speaker 1: the Fed's gotta stop with crazy quantitative tightening. Care to
0:36
Speaker 1: help us make sense of it all? As Marvin Low,
0:38
Speaker 1: global macro strategist First State Street, what did you literally
0:41
Speaker 1: make of the last like ten hours from Fed talk?
0:44
Speaker 1: You know what I think, Um, we can get a
0:47
Speaker 1: sense of how challenged the communication processes for the FED.
0:50
Speaker 1: That's the main thing. Um, They're they're cutting, They're cutting
0:53
Speaker 1: twenty at least. UM. I think there's a moderate um
0:57
Speaker 1: reason to think that it might be a little bit more.
0:59
Speaker 1: But really the that they put it out there and
1:00
Speaker 1: they didn't realize that it was going to have that
1:02
Speaker 1: big give an impact on the market and need to
1:04
Speaker 1: walk it back just shows that the communication process that
1:07
Speaker 1: they've had since the beginning of the year late last
1:09
Speaker 1: year is still an issue. So Marvin, again, as U
1:14
Speaker 1: Alex was mentioning, President Trump is out with a number
1:16
Speaker 1: of tweets this morning about the FED about their next actions.
1:20
Speaker 1: Just give us a sense, how do you think the
1:22
Speaker 1: FED deals with all this noise noise coming from the
1:25
Speaker 1: President as it relates to their policy making. You know,
1:27
Speaker 1: I mean Chairman Powell, you know, ultimately laid it out
1:30
Speaker 1: when he went in front of when he went in
1:32
Speaker 1: front of Congress. Um. You know, they can't ignore it,
1:35
Speaker 1: but ultimately they have a mandate they report to Congress,
1:38
Speaker 1: and I think that they do go back and lean
1:40
Speaker 1: upon that. Having said that, the amount of pressure that
1:43
Speaker 1: Chairman Powell must be facing is intense. So UM, I
1:46
Speaker 1: wouldn't say that they can completely ignore it, but you know,
1:49
Speaker 1: they do have, um the side of their mandate um
1:52
Speaker 1: to help them guide through that process. I'm also really
1:54
Speaker 1: interested in the interplay between the FED and the e
1:57
Speaker 1: c B s were like officially and then unofficially. I
2:00
Speaker 1: feel like it's who can get to the bottom first,
2:02
Speaker 1: who can be more dubish, How can they influence their
2:05
Speaker 1: currency the most? What kind of pressure is my own
2:08
Speaker 1: joggy going to feel on Thursday? Yeah, so you know,
2:10
Speaker 1: he's he's certainly um looking towards how he wants his legacy.
2:15
Speaker 1: But that's what he is, and we're all jealous of
2:19
Speaker 1: him for that. Um. I think the FED, you know,
2:21
Speaker 1: certainly has more room to move in this process. That's
2:25
Speaker 1: something that the market has been focused on, and the
2:27
Speaker 1: ECB will be happy to wait for the FED to
2:30
Speaker 1: make its first move and then all the other central
2:32
Speaker 1: banks are gonna, you know, have the all clear to
2:35
Speaker 1: kind of move in the same direction. So more of
2:37
Speaker 1: an at State Street. We're talking about Europe here, but
2:39
Speaker 1: as State Street as you think globally, you know, we
2:41
Speaker 1: think about the economies in Europe being you know, slowing, dramatically, weaking,
2:46
Speaker 1: even Germany's showing signs of weakness. How are you guys
2:49
Speaker 1: thinking about allocating assets to Europe in general? Yeah, I mean,
2:53
Speaker 1: you know, it's part of the asset allocation process. No, doubt. Um.
2:56
Speaker 1: You know, it's a global world. You need a certain
2:58
Speaker 1: amount of assets with in there. Um. I think it's
3:01
Speaker 1: a function of how you want to move around the
3:03
Speaker 1: benchmarks and the European challenges are out there, whether it's
3:07
Speaker 1: from a growth perspective, whether it's from their banking system,
3:10
Speaker 1: whether it's from the fact that the ECB just doesn't
3:12
Speaker 1: have as many bullets. Ultimately, if we are going towards
3:15
Speaker 1: this um more looser type of environment, and you know,
3:20
Speaker 1: do you really want to put an excess amount of
3:22
Speaker 1: your allocation there? And it's it's hard to see wanting
3:25
Speaker 1: to um overweight it more than your benchmarks. So when
3:28
Speaker 1: it comes to the bondom market, I mean, do you
3:30
Speaker 1: feel like we've topped out, that we're at the peak
3:33
Speaker 1: of where bond prices can be in Europe? Um? Well, um,
3:37
Speaker 1: we're certainly getting there. UM. I think that the e
3:40
Speaker 1: c B has already signaled that it's willing to go
3:43
Speaker 1: further into negative yields, even um if it does cause
3:46
Speaker 1: more problems for the banking system, But it can't go
3:49
Speaker 1: that much further. Um. You know, the Fed's certainly has
3:51
Speaker 1: much more room if we need to go there. I
3:53
Speaker 1: wouldn't say that yields here can't go lower, but certainly
3:57
Speaker 1: kind of the relative movement between US yields and really
4:00
Speaker 1: the rest of the development market yields is a different
4:03
Speaker 1: type of profile. So, Marvin, bringing it back to this
4:06
Speaker 1: side of the pond, we're having starting to have some
4:08
Speaker 1: more discussions or more heated discussions about the debt ceiling.
4:11
Speaker 1: How do you think that plays out over the next
4:13
Speaker 1: couple of weeks. I guess it's kind of the time frameer. Yeah, Um,
4:16
Speaker 1: you know, it's certainly it's certainly good that they're talking
4:18
Speaker 1: about it now. Um. I however, and probably a bit
4:22
Speaker 1: skeptical that they can get anything done. So um, you know,
4:24
Speaker 1: I would think that we're going to talk about September again,
4:27
Speaker 1: and we'll talk about all of the measures that might
4:30
Speaker 1: try and get something done before Congress leaves for the
4:33
Speaker 1: summer vacation. You think the odds they're pretty low, you
4:35
Speaker 1: know what. Um, the fact that they're talking about it
4:37
Speaker 1: is positive. I'm just skeptical based on based on how
4:41
Speaker 1: our government has kind of functioned. Um, if it does
4:44
Speaker 1: get done, it's great. There would be a lot of
4:46
Speaker 1: short term issuance because the checking account of the U
4:49
Speaker 1: S Government has been drawn down as we've been in
4:51
Speaker 1: this debt ceiling, but it winds up being more of
4:53
Speaker 1: a short term kind of market type of issue. I
4:55
Speaker 1: don't think it's ultimately disruptive. So when is markets actually
4:58
Speaker 1: gonna care about the debt ceil um or or just
5:01
Speaker 1: the amount of debt that like we're going to have
5:03
Speaker 1: to issue to pay off deficit. Oh yeah, the two
5:06
Speaker 1: different stories there. Certainly, UM the market. The market will
5:10
Speaker 1: care UM if we get to September again and we
5:13
Speaker 1: have all these dire warnings that they're not gonna be
5:15
Speaker 1: able to pay their debt and the rating agencies get involved, UM,
5:18
Speaker 1: I don't expect UM any you know, they'll they'll come
5:21
Speaker 1: to they'll come to an agreement. UM. In terms of
5:24
Speaker 1: longer term with yields where they are now, UM, I
5:28
Speaker 1: think investors are willing to look past the fact that
5:30
Speaker 1: we're going to have these record amounts of debt UM.
5:33
Speaker 1: I'm not a m MT advocate, but at this point
5:36
Speaker 1: there is demand for treasure yields and we've certainly seen
5:39
Speaker 1: that UM as we kind of pushed towards these lower levels.
5:41
Speaker 1: Where is the m MT argument or discussion these days?
5:44
Speaker 1: Is it's I haven't heard about it recently. We have
5:46
Speaker 1: to define it, like are we at the place that
5:47
Speaker 1: we don't have to define it anymore? Because it's like
5:49
Speaker 1: that acculate modern monetary theory. Basically, it says what and
5:54
Speaker 1: what does it say? And where are we with it?
5:56
Speaker 1: You know, effectively says that UM, governments can issue as
5:59
Speaker 1: much as they and we don't really have to worry
6:01
Speaker 1: about it, and you can run big deficits and finance
6:04
Speaker 1: whatever you want, and there's always gonna be a buyer
6:06
Speaker 1: fort um. You know. Certainly the increase in debts that
6:11
Speaker 1: we've seen over the last couple of years makes one
6:13
Speaker 1: believe that that might be true. But you Q, you
6:15
Speaker 1: candid shoot debt forever. UM. You do crowd out, you
6:17
Speaker 1: do create an environment where zombie companies are allowed to
6:21
Speaker 1: go on longer. There are costs to the economy. UM.
6:25
Speaker 1: When we get to the point UM where productivity growth
6:28
Speaker 1: and overall growth is is gets to a new normal
6:32
Speaker 1: and people worry about it, the amount of debt is
6:33
Speaker 1: going to be part of that discussion. Yeah, I'm just
6:35
Speaker 1: not buying it. I'm I'm in that camp that's just
6:37
Speaker 1: not buying it. But we'll see Marvin low global macro
6:40
Speaker 1: strategist State Street based in Boston, but joining us on
6:42
Speaker 1: our Bloomberg Interactive Brooker Studio, talking all things FED in
6:46
Speaker 1: all things economics. Of course, the FED meets at the
6:49
Speaker 1: end of July. Markets certainly looking for at least a
6:52
Speaker 1: twenty five basis point cut. This is Bloomberg. Well consumers
7:11
Speaker 1: worldwide continued debate energy sources, including fossil fuels, nuclear and
7:16
Speaker 1: sustainable sources such as wind and sun I think at
7:18
Speaker 1: the latest insight on how nuclear power fits in We
7:21
Speaker 1: turn to Seth Gray, President and CEO of Liebridge Corporation
7:25
Speaker 1: based in Rest in Virginia. Seth thanks, thanks so much
7:28
Speaker 1: for joining us. Just wonder if you could give us
7:30
Speaker 1: an update on kind of the status of nuclear power
7:33
Speaker 1: in the US right now. Well, Lucile, your power has
7:36
Speaker 1: been kind of flat, hasn't been growing, hasn't been falling much,
7:40
Speaker 1: has been producing about twenty percent of the nation's electricity
7:44
Speaker 1: for some time, and now we're coming to something of
7:48
Speaker 1: an inflection point. Are we going to keep renewing the
7:51
Speaker 1: licenses of the old plants? Will we build more of those?
7:55
Speaker 1: Are are we going to move forward to newer technologies
7:59
Speaker 1: for few tools that could really upgrade those older reactors
8:03
Speaker 1: and deploy newer, more advanced technologies. And we have plants
8:09
Speaker 1: in this country out of four hundred fifty in the world.
8:13
Speaker 1: China and Russia are moving aggressively to take the lead
8:17
Speaker 1: around the world, and the US is now taking some
8:21
Speaker 1: very serious steps in Congress, in the administration, and in
8:25
Speaker 1: the companies to make sure that the US competes and
8:29
Speaker 1: does very well in those international markets which feed through
8:32
Speaker 1: supply chains to manufacturing all across America. So we definitely
8:39
Speaker 1: had the Trump administration, UH in some ways want to
8:42
Speaker 1: backstop colon nuclear because they want a reliable source of
8:45
Speaker 1: energy that sort of stays in storage versus a solar
8:48
Speaker 1: and wind um is that legitimate argument, like do we
8:51
Speaker 1: really need to backstop nuclear or should we just let
8:54
Speaker 1: market forces kind of work their way through the system. Well,
8:57
Speaker 1: it's a very legitimate argument to give value you to it.
9:00
Speaker 1: What you can do at a coal plant for a
9:03
Speaker 1: period of months, and you could do it a nuclear
9:05
Speaker 1: plant for a period of many years is have enough
9:08
Speaker 1: fuel on the site to run that plant twenty four seven.
9:11
Speaker 1: So nuclear reactors can run twenty four seven even if
9:15
Speaker 1: trucks or trains can't deliver any fuel to the plant.
9:19
Speaker 1: Of course, the renewables can't run when the sun isn't shining,
9:22
Speaker 1: the wind isn't blowing, and need to be backed up
9:26
Speaker 1: by natural gas, which UM relies on gas flowing through
9:31
Speaker 1: the pipelines that could be cut off. So for unquestionable
9:35
Speaker 1: electricity deliver seven, you really do need nuclear and or coal.
9:40
Speaker 1: Nuclear for for a much longer period could provide it,
9:44
Speaker 1: just as it powers our submarines for years. They could
9:47
Speaker 1: stay underwater or aircraft carriers because they have nuclear reactors.
9:52
Speaker 1: You know, try that with wind power. So so I
9:56
Speaker 1: think it's a legitimate argument to give value to reliability
9:59
Speaker 1: of electric grid with nuclear power. So, Seth, you mentioned
10:04
Speaker 1: so newer technologies that need to come into the nuclear
10:07
Speaker 1: power play. UM gives a sense of what some of
10:10
Speaker 1: those technologies are maybe kind of where your company fits in, right.
10:14
Speaker 1: So light Bridge is developing a new nuclear fuel that
10:19
Speaker 1: will work in the existing reactors and new ones. The
10:22
Speaker 1: project just recently received its first US Department of Energy
10:26
Speaker 1: grant to support the project and help take it forward.
10:30
Speaker 1: Our fuel technology is going to make the existing reactors
10:34
Speaker 1: much more economical by increasing the power that comes out
10:38
Speaker 1: of the plants, running the plants even longer between refuelings,
10:43
Speaker 1: dramatically improved the safety, running about a thousand degrees celsius
10:47
Speaker 1: about six degrees fahrenheit cooler than the fuel and current reactors,
10:52
Speaker 1: and also dramatically enhanced proliferation resistance so that nothing could
10:57
Speaker 1: ever be used in a weapons program. And also part
11:01
Speaker 1: of the future of nuclear is these smaller reactors. The
11:05
Speaker 1: lead there is a company called New Scale, and we're
11:08
Speaker 1: starting to work with New Scale to bring our fuel
11:11
Speaker 1: to their smaller reactors, which I think will really be
11:14
Speaker 1: the lead in the next generation of nuclear reactors deployed
11:17
Speaker 1: here and around the world. And a big part of
11:19
Speaker 1: that is obviously a cost. Can you walk me through,
11:22
Speaker 1: like how much it costs to say, build a new plant,
11:25
Speaker 1: maintain your current plant, and then build the modular fleet.
11:28
Speaker 1: Basically yeah, yeah, well, basically, the the costs of building
11:34
Speaker 1: plants are very expensive when they're first of a kind,
11:38
Speaker 1: and then after you build about six or nine of them,
11:42
Speaker 1: you're at what some people call nth of a kind.
11:44
Speaker 1: You know what they're going to cost going forward. So
11:48
Speaker 1: one of the plants that was designed in the US
11:52
Speaker 1: by the company that's now Westinghouse and is being deployed
11:55
Speaker 1: around the world. The Koreans are working with Westinghouse deploying
11:59
Speaker 1: in Abu Dhabi makes megalots of electricity. That's a ton
12:03
Speaker 1: of power. Cost about five billion dollars to build. That's
12:07
Speaker 1: a pretty solid number. You could you could build those
12:10
Speaker 1: kind of reactors or other similar ones for about five
12:14
Speaker 1: billion dollars on what you'd call levelized cost of electricity
12:19
Speaker 1: out over the cost of the plant, that is cheaper
12:22
Speaker 1: than um. Then Cole that that that works very well
12:28
Speaker 1: over time. It's obviously a very big upfront cost, but
12:32
Speaker 1: then your fuel cat costs for sixty years or even
12:35
Speaker 1: eighty years are are very low. Seth You mentioned earlier
12:39
Speaker 1: kind of the some of the new technologies that could
12:41
Speaker 1: ensure or heighten non proliferation of some of this nuclear technology.
12:45
Speaker 1: And we've got some obviously some issues with Iran right now.
12:47
Speaker 1: Give us a sense of just kind of the global
12:49
Speaker 1: deployment and the safety around deploying a nuclear technologies globally. Yeah,
12:55
Speaker 1: So first on Iran, they've suspended some of their obligations
12:59
Speaker 1: under the new Clear Deal there enriching uranium a little
13:02
Speaker 1: bit higher than they're supposed to. They're making a little
13:05
Speaker 1: bit more of it than they're supposed to. They could
13:08
Speaker 1: easily step back and go back under those limits. They're
13:12
Speaker 1: trying to get European countries to help them work around
13:15
Speaker 1: US sanctions, which I think are being very effective on Iran.
13:20
Speaker 1: So that's not really too great a warrior on Iran yet.
13:24
Speaker 1: I think it's more of a negotiation dance of them
13:27
Speaker 1: with Europeans. Nuclear reactors deployed by major companies under safe
13:32
Speaker 1: licensing regimes like the US Nuclear Regulatory Commission are the
13:36
Speaker 1: safest way of generating power in the world. Nobody has
13:41
Speaker 1: ever died from radiation from anything in the reactor in
13:45
Speaker 1: the history of the US power and nuclear power industry.
13:48
Speaker 1: Even at Fukushima, as great an industrial disaster as that was,
13:53
Speaker 1: nobody died from anything nuclear. People died from an earthquake,
13:57
Speaker 1: people died from a tsunami, but actually not from anything
14:00
Speaker 1: in the reactor. So it's um. It's a very safe
14:04
Speaker 1: technology and um in terms of proliferation. The way it's
14:10
Speaker 1: handled under the International Atomic Energy Agency oversight is very
14:15
Speaker 1: well done, and with light bridges fuel it will be
14:17
Speaker 1: even much more non proliferative understood, Seth, great, thank you
14:21
Speaker 1: so much for joining us. Set as President CEO of
14:23
Speaker 1: light Bridge Corporation, based in Reston, Virginia, bridgeting as we
14:27
Speaker 1: think about how different technologies deployed globally. Well, Boeing is
14:46
Speaker 1: back in the news. The company plans to report a
14:49
Speaker 1: four point nine billion dollar accounting charge related to its
14:52
Speaker 1: beleaguered seven thirty seven Max jetliner, and the company also
14:55
Speaker 1: said that the plane would return to service in the
14:57
Speaker 1: fourth quarter, easing fears that that's timetable could slip into
15:01
Speaker 1: next year. To think a little deeper, we welcome our
15:03
Speaker 1: next guest, George Ferguson. George is a senior analysts covering aerospace, defense,
15:08
Speaker 1: and the airlines for Bloomberg Intelligence. He joins us on
15:10
Speaker 1: the phone from Bloomberg Intelligence headquarters in Princeton, New Jersey. George,
15:15
Speaker 1: thanks so much for joining us. The stocks up about,
15:18
Speaker 1: you know, three point seven percent on the news years
15:20
Speaker 1: like a shareholders like this. Yeah, I think I think
15:23
Speaker 1: you're right, Paul. I think it starts to put a
15:27
Speaker 1: a a cuff or a back limit on when we
15:31
Speaker 1: think we see this airplane back in service, and it
15:34
Speaker 1: gives investors a number that they can they can look
15:37
Speaker 1: at for what the cost is going to be. I mean,
15:40
Speaker 1: I think that they're probably being conservative. And the date
15:44
Speaker 1: the airplane re enter service, I think Boeing doesn't want
15:46
Speaker 1: that date to slip and at least the date that
15:49
Speaker 1: they've provided, So my guess is they're probably fairly confident
15:52
Speaker 1: the airplane gets back in service. That's in line I
15:55
Speaker 1: think with expectations that were in the marketplace for late
15:59
Speaker 1: three Q early for for Q entry to service. The
16:05
Speaker 1: cost of the airplane being out of service was a
16:08
Speaker 1: little bit higher than we expected at Bloomberg Intelligence. Um,
16:12
Speaker 1: you know, I think the Bowing probably again put a
16:14
Speaker 1: conservative number together here, so it's probably bigger than even
16:18
Speaker 1: they expected. And they detail that they it's not going
16:22
Speaker 1: to be all cash, so it's not gonna be all
16:24
Speaker 1: four point nine billion in dollars. There'll be other types
16:28
Speaker 1: of concessions they offer our customers that are will be
16:30
Speaker 1: over an extended period of time, and so I think
16:32
Speaker 1: now investors have a little more clarity around that, and
16:35
Speaker 1: that's part of what you're seeing today. I feel so skeptical.
16:37
Speaker 1: I gotta be honest with you. I feel like my
16:39
Speaker 1: it's like, what do I want to win the lottery.
16:41
Speaker 1: It's kind of the same thing. But let's pretend let's
16:43
Speaker 1: pretend that this is correct, Bowing's estimates are correct. Things
16:46
Speaker 1: get fixed in the fourth quarter. What's not accounted for
16:50
Speaker 1: in the numbers, as in litigation or compensation for airlines,
16:55
Speaker 1: et cetera. Yeah, so, I mean, as I read it,
16:57
Speaker 1: it looks like the compensation for victims it wasn't in that.
17:02
Speaker 1: And you know, we think that's a pretty knowable number.
17:06
Speaker 1: It's uh, you know, we think there's maybe a billion
17:09
Speaker 1: and a half worth of potential cost of victims um.
17:14
Speaker 1: But you know, and and that kind of that kind
17:16
Speaker 1: of litigation can drag on for years, and it's it's
17:19
Speaker 1: a discussion about what the value of of people are,
17:22
Speaker 1: which is a bit of a macab discussion. But I
17:26
Speaker 1: don't think that there's I don't think there's a lot
17:28
Speaker 1: more that's uh, that's overhanging because of this this grounding,
17:32
Speaker 1: unless the grounding gets extended. So George, let's talk about
17:36
Speaker 1: the seven max itself. Um, do you expect this the
17:40
Speaker 1: next time you go to London Air Show of the
17:42
Speaker 1: Paris Airshow? Do you think Boeing is going to have
17:44
Speaker 1: success in the years ahead selling this aircraft. I do.
17:48
Speaker 1: We've seen key customers that have come out supporting the airplane. Um.
17:52
Speaker 1: I think the I A G Letter of intent at
17:55
Speaker 1: Paris was was huge um and and the you know
17:59
Speaker 1: p but like Willie Walsh, the I A G CEO
18:04
Speaker 1: and UH and Ryan air CEO of come out and
18:06
Speaker 1: endorse the airplane. That's a strong endorsement. UM So I
18:10
Speaker 1: think that uh, this is this has definitely been a
18:14
Speaker 1: difficult period for Boeing. But once they get this airplane
18:16
Speaker 1: back in the air, provided they have no other problems
18:19
Speaker 1: that I think, Look, they've really poured over this airplane. Now.
18:21
Speaker 1: My guess is um that that this will fade within
18:25
Speaker 1: you know, six months or so. What's going to be
18:27
Speaker 1: the hold up? Is it going to be getting past
18:30
Speaker 1: regulators compliance? Is it going to be the actual fix itself?
18:35
Speaker 1: Um So, I don't think. I think the bigger challenge
18:39
Speaker 1: here will be to sell it to global regulators. And
18:43
Speaker 1: I think that the I A g Um sale was
18:47
Speaker 1: part of that was part of that fix, and I
18:50
Speaker 1: think it will be they'll look for airlines in the
18:52
Speaker 1: different regions to apply pressure to regulators to at least
18:55
Speaker 1: review the airplane so that it can re enter service. Um,
18:59
Speaker 1: I think i AG probably got a pretty good price,
19:01
Speaker 1: and so they'll be incentive to go to the European
19:03
Speaker 1: regulator and say, hey, take a look to the airplane,
19:05
Speaker 1: tell us what they've got to do to re ender service.
19:07
Speaker 1: I really think that the FAA has poured over this
19:10
Speaker 1: airplane now because they don't want their credibility, um, you know,
19:14
Speaker 1: further damaged. And so I think given the intensity of
19:18
Speaker 1: the f A is probably put into the into the review,
19:21
Speaker 1: I think Boeing out to be in in good shape
19:23
Speaker 1: to get it get it flying in the US and
19:26
Speaker 1: in Europe pretty quickly thereafter, because I think the Europeans
19:29
Speaker 1: also they don't want to separate this regulatory regime that
19:33
Speaker 1: has sort of relied on each other's, you know, each
19:36
Speaker 1: different jurisdictions regulator. I think everybody in the aviation industry
19:40
Speaker 1: doesn't want to break that regime where you can rely
19:43
Speaker 1: on regulators in the different regions, and so I think
19:46
Speaker 1: the Europeans, without a real strong reason not to take
19:49
Speaker 1: the airplane back, will will resist your delay. George Ferguson,
19:53
Speaker 1: thank you so much. George has a senior aerospace, defense
19:55
Speaker 1: and airlines analyst for Bloomberg Intelligence joining us on the
19:58
Speaker 1: phone from Princeton, New Jerse, Z, will you get on
20:01
Speaker 1: the seven. We're literally going to ask you that question.
20:03
Speaker 1: The answer for me is yes, without I think so.
20:07
Speaker 1: But like I think I could take a moment, I
20:09
Speaker 1: don't think I take my kid on it interesting. I
20:12
Speaker 1: just feel like, you know, by the ton of thing
20:13
Speaker 1: gets in the air, it's gonna be the safest plane
20:15
Speaker 1: in the air given what has had to deal with.
20:17
Speaker 1: Let's head over now to Nathan Hagen Studios in Washington,
20:20
Speaker 1: d C. To get a check on world and national headlines.
20:23
Speaker 1: At Nathan Focus on Munis is brought to you by
20:40
Speaker 1: Build America Mutual BAM Green Star Bonds finance projects that
20:44
Speaker 1: protect and restore the environment with more renewable energy and
20:47
Speaker 1: efficient transportation and buildings. Visit build America dot com slash
20:51
Speaker 1: green Star, BAM Building America. When we talk municipal bonds,
20:56
Speaker 1: I love to talk about the Puerto Rican market. It
20:58
Speaker 1: continues to make news. Looks like Puerto Rico is seeking
21:01
Speaker 1: to restructure about twenty seven billion dollars of obligations tied
21:05
Speaker 1: to the central government and its mean utility. UH to
21:08
Speaker 1: get the latest, we welcome a good friend Joe my
21:10
Speaker 1: Sack Joe as editor for Bloomberg Bloomberg Brief for Bloomberg News.
21:14
Speaker 1: He joins us here in our Bloomberg Interactive Brokers studio. Joe,
21:18
Speaker 1: what is the latest on this ever or never ending
21:21
Speaker 1: saga of the Puerto Rican debt situation? Riots in the
21:25
Speaker 1: streets this week? It was riots the you know, the
21:30
Speaker 1: restructuring we'll go on at some point. Uh, but right
21:36
Speaker 1: now the population is restive. It's the only way to
21:40
Speaker 1: describe it. And what are they protesting? They are protesting
21:44
Speaker 1: almost nine hundred pages of chats that the governor was
21:49
Speaker 1: having with his various aids and you know, sometimes pretty
21:53
Speaker 1: salty stuff and uh and and in general protesting you know,
21:59
Speaker 1: the incompa. It's of government on the island for years
22:03
Speaker 1: and corruption. So you know, eventually it just blew up.
22:07
Speaker 1: So who knows whether the governor will be able to
22:11
Speaker 1: survive it. However, the restructuring goes on, and of course
22:15
Speaker 1: this being the muni market, prices of Puerto Rico bonds
22:18
Speaker 1: were unchanged. Well, I was gonna say so, I said
22:20
Speaker 1: for Lisa, I don't know what two months ago on
22:23
Speaker 1: a Friday, and Joe, you were here and we literally
22:25
Speaker 1: had the exact same conversation, So like, what's what's a
22:29
Speaker 1: time frame that he's looking at me? Funny when I
22:31
Speaker 1: say that certainly, um, you know the the we're going
22:37
Speaker 1: to have resolution of this certainly this year. So I
22:42
Speaker 1: would you know, what is that another four or five months?
22:47
Speaker 1: I know the the oversight board is going to put
22:50
Speaker 1: their plan on the table, uh in about him, you know,
22:55
Speaker 1: within the next several weeks. And there's also fifty billion
22:59
Speaker 1: dollars or so that the government owns or owes for
23:01
Speaker 1: retirees and things like that, So I don't I mean,
23:04
Speaker 1: this is far from over as it relates to the
23:07
Speaker 1: overall finances of Puerto Rico. This you're you're talking about
23:10
Speaker 1: just some of these bonds that have been in default, right,
23:13
Speaker 1: just the bonds, the the fifty billion dollar figure you
23:16
Speaker 1: site is uh, you know what's owed to retirees and
23:19
Speaker 1: Puerto ricoes into a good job with its pension fund
23:22
Speaker 1: which is now at zero. So I know that Paul
23:25
Speaker 1: loves Puerto Rico and he knows that I love pg
23:27
Speaker 1: and E. So I want to talk about what's happening
23:29
Speaker 1: with PGNY their bonds sort of where California is and
23:32
Speaker 1: trying to restructure their dad have a liability fund. You know,
23:37
Speaker 1: California past legislation to UH set up a fund for
23:43
Speaker 1: the utilities to take advantage of in case there are
23:48
Speaker 1: more raging wildfires and you know they have UH you know,
23:53
Speaker 1: rather than having utilities go broke, UH, they would be
23:56
Speaker 1: able to tap this fund. Um. But the legislation also
24:00
Speaker 1: contains some uh impediments or it's it's not as perfect
24:05
Speaker 1: as it might be to allow municipalities to buy parts
24:11
Speaker 1: of the utilities, and especially p GEN San Francisco wanted
24:15
Speaker 1: to buy part of it, and they said, hey, you
24:18
Speaker 1: have to go back in and tweak this law for
24:20
Speaker 1: US California. And it looks like the lawmakers there are
24:27
Speaker 1: constructive on this. They say that might go back in
24:30
Speaker 1: and do this. Alex have ever been to the consumer
24:33
Speaker 1: electronics show in Las Vegas? Oh? I have have youtten
24:36
Speaker 1: written the mono rail from the convention center to your hotel.
24:40
Speaker 1: I don't remember. It was a long time ago when
24:41
Speaker 1: I was miserable. Yes, that's for you exactly. This famed monorail,
24:47
Speaker 1: which not that many people use, is the problem. That's
24:51
Speaker 1: the problem for their monorail they had a little problem
24:53
Speaker 1: with their municipal debt, didn't they? Joe, Oh wow, what
24:58
Speaker 1: a story. This is obviously the story of the week. Response.
25:02
Speaker 1: Um Mono Rail sold six d fifty million dollars in
25:06
Speaker 1: bonds in two thousand and two. It was to acquire
25:11
Speaker 1: the system and expanded, which they did and in uh
25:16
Speaker 1: they chapter reserve funds out of the words went into
25:21
Speaker 1: default and in they they went to bankruptcy. Twelve they
25:29
Speaker 1: emerged from bankruptcy after wiping out nine percent of the
25:33
Speaker 1: bond holders principle, so they wound up owing thirteen million
25:37
Speaker 1: dollars and this week they paid off that thirteen million dollars,
25:40
Speaker 1: which means they're ready to come back for the innicipal market.
25:44
Speaker 1: Can you believe it? Alex, believe me. If you had
25:47
Speaker 1: been on the monorail, you would have been cheered up
25:50
Speaker 1: because it's nice on the motto else I don't know.
25:52
Speaker 1: I had literally just flown in from Paris and then
25:54
Speaker 1: too New York to Vegas, like I don't know what
25:56
Speaker 1: time it was, but um, what's the demand going to
25:58
Speaker 1: be like? And what is the FED have to kind
26:00
Speaker 1: of say about it? Oh? Man? But you know what,
26:04
Speaker 1: what is a lot of angry people who uh say
26:10
Speaker 1: this is insane. This is a perfect example of how
26:14
Speaker 1: frall the of the municipal market is. And uh in
26:19
Speaker 1: other words, there'll be lots of demand. Well, I don't know,
26:23
Speaker 1: I mean haven't been at ce s. The cab lines
26:25
Speaker 1: are like forever. The monoreel is a good option. Why
26:28
Speaker 1: does no one use it? I don't know. It's it's
26:30
Speaker 1: it's a car culture. You know, it's a car culture. Well, see,
26:33
Speaker 1: now this is part of the the the plan or
26:36
Speaker 1: the the the mono rail would definitely like to extend
26:40
Speaker 1: to the airport, but the cab industry is dead set
26:44
Speaker 1: against it. So uh, you know, we'll see where the
26:49
Speaker 1: where this expansion plan goes and if they're ever able
26:52
Speaker 1: to at tap the market again. But there is a
26:54
Speaker 1: small deal on the Bloomberg calendar for the deal for
26:58
Speaker 1: the deal, Okay, we'll see Joe Mesac, Bloomberg editor in
27:02
Speaker 1: for the Bloomberg Brief for the Municipal Markets covering all
27:05
Speaker 1: things Muni's forest, joining us here in our Bloomberg Interactive
27:08
Speaker 1: Broker Studio. I don't know, I'm going to stick with
27:10
Speaker 1: the mono rail. I mean some sense, you're making good
27:13
Speaker 1: sense of it, especially during CS because literally that the
27:16
Speaker 1: lines for the calves at the hotel and they're just
27:18
Speaker 1: for every they need that well, I think they just
27:21
Speaker 1: like a slay you need. It's not something in Davos.
27:25
Speaker 1: So we'll see, but we'll see if they can. In fact,
27:27
Speaker 1: if Las Vegas Monroe can come back to the market,
27:29
Speaker 1: will be on that story. This is Bloomberg. Thanks for
27:32
Speaker 1: listening to the Bloomberg pen L podcast. You can subscribe
27:34
Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast
27:37
Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.
27:41
Speaker 1: I'm Lisa abram Woyds. I'm on Twitter at Lisa A.
27:43
Speaker 1: Bram Woit's one before the podcast. You can always catch
27:46
Speaker 1: us worldwide. I'm Bloomberg Radio.