Latest / Bloomberg Intelligence / Boeing Max Is Back, Cash Generation to Return in 2021: Ferguson

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Boeing Max Is Back, Cash Generation to Return in 2021: Ferguson · Bloomberg Intelligence

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  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
• 0:06
  Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
• 0:10
  Speaker 1: along with essential market moving news. Kind the Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. Well, I know what keeps
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  Speaker 1: Boeing flying higher, and that is the Boeing Max, which
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  Speaker 1: has been cleared to fly by the f A A.
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  Speaker 1: George Ferguson, let's bring you in senior aerospace, defense and
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  Speaker 1: airlines analysts for Bloomberg Intelligence. You know what, twenty months
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  Speaker 1: in the making, and there were a few hurdles along
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  Speaker 1: the way. But twenty months is that good enough time frame?
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  Speaker 1: Is that sort of reasonable? Booing would have opted for
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  Speaker 1: a much shorter time frame, So I don't know. Hopefully
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  Speaker 1: things like the Max grunning don't become regular occasions, so
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  Speaker 1: we have I guess timing for it. I think Bowing
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  Speaker 1: again would have wanted to be much shorter. And frank
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  Speaker 1: I think if if they would have been more focused
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  Speaker 1: on the problem in earlier days, it wouldn't have taken
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  Speaker 1: as long, George, what does it mean from a cash
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  Speaker 1: respective here to get this thing approved? It's my understanding
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  Speaker 1: that Bowing doesn't get paid until they deliver the aircraft. Yeah,
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  Speaker 1: so you know, we think that what this UH could
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  Speaker 1: provide up is a chance for going to be cash positive. Uh.
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  Speaker 1: You know what we're anticipating as boone could deliver up
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  Speaker 1: the thirty matches a month, so probably deliver maybe three
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  Speaker 1: and sixty airplanes next year. I think you need to
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  Speaker 1: see China authorized the airplane and Chinese airlines be willing
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  Speaker 1: to take some airplanes because Chinese air travels bouncing back
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  Speaker 1: faster than any around the world. Bowing has four and
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  Speaker 1: fifty of these airplanes on the ground right now. We
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  Speaker 1: estimate the cash value of those airplanes, besides the deposit
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  Speaker 1: they've already received from airlines, is north of twelve billion dollars.
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  Speaker 1: So from a cash generation standpoint, this this really changes. UH,
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  Speaker 1: this changes the cash Outlooking Bowing, how many were ordered,
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  Speaker 1: how many will be delivered, and how many orders were canceled? George,
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  Speaker 1: So we've seen some cancelations. I don't have all those
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  Speaker 1: numbers for the right the tip of my fingers here,
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  Speaker 1: but we've seen some cancelations, but largely from less soars.
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  Speaker 1: Less oars are usually the people to cancel if they
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  Speaker 1: have any sort of out because less oars by airplanes
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  Speaker 1: in the hopes that there's not going to be enough
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  Speaker 1: airplanes in the world and they can come in when
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  Speaker 1: they when they buy speculative and they come in, then
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  Speaker 1: they offer those airplanes to airlines that are need to
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  Speaker 1: lift that world just doesn't exist for the next bunch
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  Speaker 1: of years. And so if you're a less or and
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  Speaker 1: he would a shot to cancel, you did. We're more
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  Speaker 1: concerned about deferrals right. Airlines will definitely ask bowing to
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  Speaker 1: slow down deliveries to the airlines. You don't see that um,
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  Speaker 1: you know, and sort of as cancelations because those are
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  Speaker 1: quiet discussions they're having behind behind the scenes, and but
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  Speaker 1: we know those are going on. We've heard even companies
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  Speaker 1: like Southwest pushing out some of their deliveries and that's
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  Speaker 1: why we think, you know, if Boling could deliver thirty
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  Speaker 1: months of max is, that still would be a little
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  Speaker 1: bit less than sorry, a little bit more than half
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  Speaker 1: of what there toptic delivery rates would have been back
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  Speaker 1: inten when they're planning to go to fifty seven, so
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  Speaker 1: that the pain is still large, that the industry is
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  Speaker 1: nowhere near sort of those heavy days of night. But again,
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  Speaker 1: I think the real authorization gets them back into the
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  Speaker 1: business of delivering their most important cash generating airplane, which
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  Speaker 1: is which is very important. George, you mentioned China. Where
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  Speaker 1: are we in terms of or where is bowling in
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  Speaker 1: terms of getting approval to fly in China because you
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  Speaker 1: mentioned their air traffic is coming back more so than
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  Speaker 1: the rest of the world. So we haven't seen any
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  Speaker 1: reports out of the Chinese authorities about what they're ready
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  Speaker 1: to whether they're ready to let the Max fly again
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  Speaker 1: in China. And I suspect that this part of this
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  Speaker 1: question maybe wrapped around trade issues as well. Right you know,
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  Speaker 1: China and the US not really very happy with each
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  Speaker 1: other right now on the trade front, and so one
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  Speaker 1: of the things we're looking at is as a as
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  Speaker 1: a the president potential administration looks like it's going to
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  Speaker 1: change in Washington. You could have a Biden presidency. Is
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  Speaker 1: a potential approachment with the U S and China that
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  Speaker 1: could allow airplanes to start get delivered back into China.
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  Speaker 1: You remember, there's a there's a trying to trade deal
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  Speaker 1: that was signed by the Trump administration. The Chinese don't
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  Speaker 1: look like they were fulfilling the purchases that they said
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  Speaker 1: they would. Seems impossible for them to do it now.
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  Speaker 1: We also wonder if that trade deal might not get
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  Speaker 1: sort of re energized and pushed a year, and that
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  Speaker 1: as well could be could be a spur to get
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  Speaker 1: more airplanes delivered into China. The Chinese absolutely need to
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  Speaker 1: be taking gooing airplanes to meet the terms of that
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  Speaker 1: trade deal. But right now that trade deals in some
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  Speaker 1: sort of dove land. Sarah Pontac, who is still with
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  Speaker 1: Wilson Studio, the Chinese yuan is trading off shore at
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  Speaker 1: six fifty seventy. We've literally seen it full off a
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  Speaker 1: fifth in the last you know, a few weeks. It
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  Speaker 1: was at seven but higher than seven seven twenty at
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  Speaker 1: some point earlier this year. What's behind this water Stratagists saying, right,
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  Speaker 1: we really have the lowest sense about June. Just to
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  Speaker 1: put this in historical perspective, what strategists are saying is
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  Speaker 1: that some of this does have to do with the
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  Speaker 1: outcome of the presidential election. Sure, we are still dealing
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  Speaker 1: with the contested election, but the idea that you're going
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  Speaker 1: to have a Biden presidency and a return more so
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  Speaker 1: to geo political status quo, and where we still might
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  Speaker 1: have some tensions back and forth with US and China,
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  Speaker 1: even on the trade front, it likely will not look
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  Speaker 1: like it did under the President Trump administration. So that
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  Speaker 1: is really coming to gear on this also just the
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  Speaker 1: fact that if we look at the Chinese economy, we
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  Speaker 1: have seen a lift late. They do seem to have
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  Speaker 1: gotten the virus under control more so than Western countries
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  Speaker 1: like Europe in the US as well, that could be
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  Speaker 1: playing playing a role to But mostly what I typically
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  Speaker 1: here is bringing it back to geopolitical tensions and the
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  Speaker 1: results of the election to hey, George. Longer term for Boeing, here,
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  Speaker 1: what's the hit to you know, their reputation in the marketplace,
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  Speaker 1: their competitive position in the marketplace. I mean, I know
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  Speaker 1: it's essentially a duopoly air Bus and Boeing, But as
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  Speaker 1: some permanent or maybe at least some long term competitive
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  Speaker 1: damage been done to the Boeing company and its products,
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  Speaker 1: I think for for sure for the next bunch of years.
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  Speaker 1: You know this hurts for reputational standpoint, I guess in
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  Speaker 1: time it sort of it seems like all things sade,
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  Speaker 1: you know. I think a bunch of years ago before
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  Speaker 1: the Max with the n G and the air Bus
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  Speaker 1: CEO for those of us that do inside baseball on airplane,
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  Speaker 1: that's the that's the immediate predecessors to the latest airplanes.
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  Speaker 1: The seven thirty seven looked like it had a slight
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  Speaker 1: advantage over the old Airbus CEO. They had a couple
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  Speaker 1: of extra seats and their efficiency seemed to be a
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  Speaker 1: little bit better, and so they look like they had
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  Speaker 1: a slight advantage. In the world we're in now, it
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  Speaker 1: looks like Airbus might have a slight advantage and the
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  Speaker 1: narrow body air aircraft arena with the three Neo, which
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  Speaker 1: had larger fan sizes, a little better efficiency, and it's
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  Speaker 1: prepared to take those bigger fan sizes in the future.
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  Speaker 1: So I think bowings at a point where they really
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  Speaker 1: need to think about the competitiveness of the seven thirty seven,
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  Speaker 1: and they need to guard their reputation, and so I
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  Speaker 1: think that they got to start thinking about how they're
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  Speaker 1: gonna come forth with a new narrow body seven thirty
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  Speaker 1: seven and one that can be maybe get another leg
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  Speaker 1: up on Airbus. Of course, Airbus won't let that go
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  Speaker 1: without a without a fighting shore. George, who is responsible
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  Speaker 1: for getting people into the plane. Is that the airlines
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  Speaker 1: who have already ordered and used the on Pready seven Max.
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  Speaker 1: Or is it up to Bowing to put a campaign
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  Speaker 1: into the works that makes it seem like it's a
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  Speaker 1: great airplane to write on. I think it will be
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  Speaker 1: both right. There's some airlines that are absolutely bowing customers.
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  Speaker 1: They fly all bowing fleets. It's absolutely in their interest
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  Speaker 1: to get customers comfortable with the Max, their buyers of
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  Speaker 1: the Max. To even switch to the to an airbust
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  Speaker 1: product would would sort of, you know, create a lot
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  Speaker 1: of upheaval these companies, companies like Southwest, companies like Ryan Air.
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  Speaker 1: But at the same time, Boeing, even though they're one
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  Speaker 1: removed from the flying public, they really need to bolster
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  Speaker 1: the reputation of this airplane, and the airplane has really
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  Speaker 1: been reviewed extensively by the f a A. I think
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  Speaker 1: they've got to bring that forward to the consumer. And
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  Speaker 1: the training regiment for getting pilots back in the cockpit
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  Speaker 1: on the Max is a little more intense, and it
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  Speaker 1: would be for a typical what we call typewriting um
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  Speaker 1: type similar typewrated airplane, and so I think Bowing Boeing
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  Speaker 1: and the airlines need to bring forth this information to
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  Speaker 1: the flying public could be comfortable flying the airplane again
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  Speaker 1: and they don't suffer any demand problems because of that. Hey, sir,
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  Speaker 1: I just want to brought more broadly, what do you
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  Speaker 1: think are the kind of next catalyst for investors? What
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  Speaker 1: are the investors looking at? Now? We've kind of gotten
• 9:14
  Speaker 1: through you know, some we've gotten through earnings, we kind
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  Speaker 1: of know where the FED is, where you've got some
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  Speaker 1: idea of the vaccine timing. What do you think the
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  Speaker 1: market's looking at? I'd say, as of right now, likely
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  Speaker 1: what's going to be the next catalyst for any maybe
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  Speaker 1: short term moves in the market would be the development
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  Speaker 1: in the trajectory of COVID nineteen cases and restrictions. We
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  Speaker 1: have not gotten to the point where restrictions have really
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  Speaker 1: been ramped up to the point where we're going to
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  Speaker 1: see a drastic effect on an economy like we saw
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  Speaker 1: back in March. But what's going to happen as we
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  Speaker 1: get into the winter months. Granted though you are able
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  Speaker 1: to look further out, knowing that there is a vaccine,
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  Speaker 1: there and on that front, that means there are very
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  Speaker 1: high expectations for a growth rebound, not just on the
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  Speaker 1: economic front, but when it comes to earnings too. If
• 9:57
  Speaker 1: you look at expectations for one off its Q one
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  Speaker 1: Q two. Granted you have much easier comps because we
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  Speaker 1: saw numbers just fall off a cliff this year in
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  Speaker 1: the wake of the coronavirus in that first quarantine. But
• 10:08
  Speaker 1: if we do not see markets, especially cyclical areas of
• 10:12
  Speaker 1: the market, because that's where the most year over year
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  Speaker 1: growth is really expected, if that doesn't live up to expectations,
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  Speaker 1: that could certainly provide a catalyst for some volatility and
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  Speaker 1: some moving around here. At the point that we got
• 10:24
  Speaker 1: inventories crude oil inventories that came in much much less
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  Speaker 1: than expected. The market was looking for one point two
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  Speaker 1: four million barrels. We got seven sixty nine, and that's
• 10:33
  Speaker 1: giving another little boost to the price of oil zero,
• 10:36
  Speaker 1: which is now you know, close to forty two dollars
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  Speaker 1: a barrel. But we're really just in this range, and
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  Speaker 1: I guess OPAK is the next catalyst there. Yeah. Absolutely,
• 10:45
  Speaker 1: When we look at oil, it's pretty amazing to see
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  Speaker 1: we have a third day of gains today w t
• 10:49
  Speaker 1: I crude oil up more than one also on track
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  Speaker 1: for a third week of gains. So we have seen
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  Speaker 1: this sustained move higher. Right now we look at w
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  Speaker 1: t I crude oil barrel that's the highest and September.
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  Speaker 1: So we have not been able to completely break out,
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  Speaker 1: but it does seem as though OPEC and its allies
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  Speaker 1: do at least they're aware of the issues right now
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  Speaker 1: on the table as it relates to demand. However, again
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  Speaker 1: there is just plenty of optimism and the focus really
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  Speaker 1: here on that is on the positive side. Okay, Sarah contact,
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  Speaker 1: thank you so much for joining us. We always appreciate
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  Speaker 1: your thoughts on the markets from a cross asset perspective.
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  Speaker 1: Sarah Pontac cross As reporter for Bloomberg News and George Ferguson,
• 11:29
  Speaker 1: Senior Aerospace and Airlines Analyst for Bloomberg Intelligence. We get
• 11:33
  Speaker 1: up to speed on the Boeing News. We appreciate you.
• 11:39
  Speaker 1: We've heard a lot about Sparks this year. They've become
• 11:42
  Speaker 1: the vehicle of choice for people to raise and then
• 11:45
  Speaker 1: hopefully look for a company to go public with. Well,
• 11:48
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• 11:51
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  Speaker 1: and it's of more than eleven percent right now. So
• 12:00
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• 12:10
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• 12:46
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• 12:49
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• 12:54
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• 12:56
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• 13:22
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• 13:25
  Speaker 1: end of its useful life in fifteen to twenty years,
• 13:27
  Speaker 1: the battery is fully recyclable back back to its original
• 13:30
  Speaker 1: components to be reused in something else. Sounds pretty phenomenal.
• 13:34
  Speaker 1: Why did you decide to go public via a spack
• 13:37
  Speaker 1: and you know who's involved in the spat Yeah, so
• 13:41
  Speaker 1: so so it's a great question. So we um were
• 13:43
  Speaker 1: were We worked with b Riley Financial. We went through
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  Speaker 1: the you know, we were we were in the midst
• 13:48
  Speaker 1: of a fundraising round and had met with the team
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• 14:12
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• 14:17
  Speaker 1: people think of, you know, battery storage, sometimes I think
• 14:20
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• 14:24
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• 14:27
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• 14:30
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• 14:33
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• 14:36
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• 14:39
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• 14:41
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• 14:46
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• 14:50
  Speaker 1: from from the system, So using the system to charge
• 14:53
  Speaker 1: up and then putting that power back on the system
• 14:55
  Speaker 1: in zero to two hours beca my entighly competitive. The
• 14:58
  Speaker 1: way our company was founded and the way our technology
• 15:01
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• 15:03
  Speaker 1: longer duration discharge, so we can do anything from three
• 15:06
  Speaker 1: hours up to twelve hours of energy usage. And when
• 15:09
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• 15:13
  Speaker 1: against any other technology out in the marketplace. It's a
• 15:17
  Speaker 1: sort of it's almost like a series of churches, right
• 15:20
  Speaker 1: You you belong to one or you belong to the other.
• 15:22
  Speaker 1: You sort of pick your poison and that's it. Right. Well,
• 15:26
  Speaker 1: I mean, look, the energy the energy industry is always
• 15:29
  Speaker 1: going to have a mix of technologies to be able
• 15:31
  Speaker 1: to deliver the demands that you know that we all
• 15:34
  Speaker 1: that we all expect from modern life. And we're one
• 15:36
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• 15:39
  Speaker 1: of the market. So I think you could see both.
• 15:41
  Speaker 1: I don't. I don't think it's it's a it's a
• 15:43
  Speaker 1: it's an either or at an end. So Joe who
• 15:48
  Speaker 1: gives a sense of kind of who your customers are? Right? So,
• 15:51
  Speaker 1: so we we we we have systems in the field
• 15:54
  Speaker 1: now with some of the um per eminent utilities in
• 15:58
  Speaker 1: the United States. We have test systems with energy. We're
• 16:01
  Speaker 1: working with PFC and g so we work across utilities landscape.
• 16:05
  Speaker 1: We also do work with renewable renewable power companies company
• 16:09
  Speaker 1: called pecka t. We just announced a large agreement with
• 16:13
  Speaker 1: them a couple of weeks ago. And then we also
• 16:15
  Speaker 1: do micrograde applications. You know, we're we're doing a micrograde
• 16:18
  Speaker 1: application working through the Shell Foundation in Nigeria where we
• 16:21
  Speaker 1: really see the technology being great in that application because
• 16:24
  Speaker 1: of the safety and operability of it to be able
• 16:26
  Speaker 1: to power remote villages and be able to bring power
• 16:29
  Speaker 1: to the people in the world that don't have it. Joe,
• 16:32
  Speaker 1: final questions, we don't have much time, but what will
• 16:33
  Speaker 1: you do with the money where I eased in particular,
• 16:36
  Speaker 1: so uh go from a company that has a proven
• 16:39
  Speaker 1: product in the manufacturing process to a scale company. So
• 16:42
  Speaker 1: a lot we'll go into scaling up our factory in Pittsburgh, Pennsylvania,
• 16:45
  Speaker 1: where we're gonna we're gonna increase the throughput of that facility,
• 16:49
  Speaker 1: building out our team both on the commercial side and
• 16:52
  Speaker 1: also on the project side, and then lastly financing projects
• 16:56
  Speaker 1: where we look at this is a big opportunity to
• 16:58
  Speaker 1: be able to accelerate the application of energy storage in
• 17:01
  Speaker 1: the marketplace by bringing our own financing to the projects. Hey, Joe,
• 17:06
  Speaker 1: thanks so much. For joining us to really appreciate congratulations
• 17:08
  Speaker 1: on getting public Joe Master Angelo, CEO of EOS Energy
• 17:12
  Speaker 1: Enterprises that went public yesterday via US back Dog Duncan
• 17:18
  Speaker 1: almost a funny amail to talk a little bit about
• 17:20
  Speaker 1: these housing numbers which have been on fire today and
• 17:24
  Speaker 1: also most recently, so Doug talked to us, how do
• 17:27
  Speaker 1: we continue to have such demand when people are, you know,
• 17:31
  Speaker 1: out of a job to the tune of ten million
• 17:34
  Speaker 1: of them. The job loss has been heavily concentrated in
• 17:38
  Speaker 1: work categories which are hourly wage workers in the service sector,
• 17:43
  Speaker 1: particularly in areas that are discretionary spending by middle and
• 17:47
  Speaker 1: upper income households. Those UH workers tend to be more
• 17:52
  Speaker 1: heavily concentrated in apartments as opposed to ownership. So if
• 17:57
  Speaker 1: you are a person with a salary UH and that
• 18:02
  Speaker 1: job has been stable, you're not in the service sector.
• 18:05
  Speaker 1: With the interest rates where they are, this is a
• 18:07
  Speaker 1: great time to consider locking in a long term, very low,
• 18:10
  Speaker 1: historically low interest rate and and buy a house. So, Doug,
• 18:16
  Speaker 1: are we revising up our view of or your your
• 18:19
  Speaker 1: view of kind of just housing starts and and just
• 18:22
  Speaker 1: the whole housing market, because it just seems to be
• 18:24
  Speaker 1: an extraordinarily bright spot and an otherwise very difficult economy. Yeah,
• 18:30
  Speaker 1: there's two or three things going on. One is the
• 18:33
  Speaker 1: millennials are at peak home buying and they tend to
• 18:36
  Speaker 1: be more in the salaried space, so they're younger, they've
• 18:40
  Speaker 1: been a building families. They're now thinking about buying homes
• 18:44
  Speaker 1: moving out of apartments. Second one is that to the
• 18:47
  Speaker 1: extent that you live in an apartment in a densely
• 18:50
  Speaker 1: populated area and you have concerns about the continuing related
• 18:54
  Speaker 1: to the virus, this might be a great time to
• 18:57
  Speaker 1: be moving toward the suburban markets and less density. And
• 19:02
  Speaker 1: then the third is if you're an older household that
• 19:05
  Speaker 1: already owns a home and could conceptually sell that house,
• 19:09
  Speaker 1: you might not be so anxious to do that today
• 19:11
  Speaker 1: because people would come to visit the house walk through
• 19:14
  Speaker 1: carrying the virus, and you might be on a higher
• 19:16
  Speaker 1: risk category. So to supply in the existing homes is
• 19:21
  Speaker 1: actually at historic lows, leading to very strong starts and
• 19:25
  Speaker 1: construction of new homes to meet that shift in demand.
• 19:29
  Speaker 1: Are we beginning to see that slowed down? Was today
• 19:32
  Speaker 1: the first sign of that where we saw building permits
• 19:35
  Speaker 1: come in flat for October, much less than the one
• 19:37
  Speaker 1: pot anticipated, and September's number was revised lower to four
• 19:43
  Speaker 1: point seven. So building permits obviously the first sign of
• 19:47
  Speaker 1: future building. Yes, I think that's that's an accurate assessment.
• 19:52
  Speaker 1: One thing to recall is that the virus really hit
• 19:55
  Speaker 1: the economy in the March April time frame, which is
• 19:58
  Speaker 1: typically the peak homebuying season in the year. So we
• 20:03
  Speaker 1: moved what's the normal cyclical peak back in the year
• 20:07
  Speaker 1: to the to the late summer and early fall. So
• 20:11
  Speaker 1: we've been writing that shift of the of the demand cycle,
• 20:16
  Speaker 1: and now I think we're starting to see the work
• 20:18
  Speaker 1: off of that. To your point about the flattening out
• 20:22
  Speaker 1: of permits, Doug, how's the mortgage original origination market today?
• 20:27
  Speaker 1: Are lenders writing mortgages? How tough is it to get
• 20:31
  Speaker 1: a mortgage? How's that looking? Well? The criteria to qualify
• 20:36
  Speaker 1: for a mortgage have been tightened with the concern about
• 20:40
  Speaker 1: employment characteristics, but not not dramatically tightened, and the volumes
• 20:47
  Speaker 1: of business that are being done are going to be
• 20:50
  Speaker 1: all time records. From a nominal dollar perspective, we expect
• 20:53
  Speaker 1: in four point one trillion dollars of mortgage production uh.
• 20:59
  Speaker 1: And of course lot of that, about two point six
• 21:02
  Speaker 1: trillion of that will be refinancing activity. That is, people
• 21:06
  Speaker 1: who already have a mortgage who have taken advantage of
• 21:08
  Speaker 1: these historically low interest rates to refinance it at a
• 21:11
  Speaker 1: lower rate. That will continue into next year. The total
• 21:14
  Speaker 1: numbers will fall up, but they will still be at
• 21:16
  Speaker 1: very high levels. And one thing to bear in mind
• 21:20
  Speaker 1: is even if pen your treasury rates were to move up,
• 21:23
  Speaker 1: which they have a little bit recently, the spreads in
• 21:26
  Speaker 1: that market suggests that lenders could narrow the spreads and
• 21:30
  Speaker 1: hold mortgage rates where they are, which would continue the
• 21:36
  Speaker 1: benefits to consumers and through next year. Doug, what's happening
• 21:39
  Speaker 1: to credit quality out there? Well, the one question on
• 21:44
  Speaker 1: the credit quality front is relates to the forbearances for
• 21:51
  Speaker 1: those who do have a mortgage and did lose a
• 21:54
  Speaker 1: job or saw a serious truncation of their income through
• 21:59
  Speaker 1: reduced overtime time our bonuses. So there was an initial
• 22:03
  Speaker 1: surge in people who applied for the very easy terms
• 22:07
  Speaker 1: to take forbearance. Actually a lot of those folks were
• 22:10
  Speaker 1: doing that on a precautionary basis. We've done some surveys
• 22:15
  Speaker 1: of them and they said well, we we took it
• 22:17
  Speaker 1: because it was easier to take on the chance that
• 22:19
  Speaker 1: we might lose our job. But now the job seems
• 22:22
  Speaker 1: to be stable, so we've we've become current again. There's
• 22:26
  Speaker 1: still a segment of borrowers who are in forbearance have
• 22:29
  Speaker 1: lost jobs or truncated income that we will start to
• 22:32
  Speaker 1: see play out in the first quarter of next year,
• 22:36
  Speaker 1: and in many cases, if they can't bring a current
• 22:38
  Speaker 1: the loan will be modified to payment terms that they
• 22:41
  Speaker 1: can that they can maintain. Dog thank you for the updates. Housing,
• 22:46
  Speaker 1: of course always on our mind. Dug Duncan, Chief columnists
• 22:49
  Speaker 1: add Funny May joining us there. Well, as we all
• 22:54
  Speaker 1: work from home, learn from home. It's putting additional focus
• 22:59
  Speaker 1: on cyber security, and our next guest says that quantum
• 23:02
  Speaker 1: technology is going to accelerate that concerned. Alan Mechler, managing
• 23:06
  Speaker 1: partner for Asamam Adventures, also CEO of three d R Holdings,
• 23:11
  Speaker 1: joins us here. Alan talk to us about quantum technology
• 23:16
  Speaker 1: and kind of what that is and what that may
• 23:18
  Speaker 1: mean for cybersecurity going forward. It's quite complicated. Okay, we've
• 23:26
  Speaker 1: got seven minutes here. Yes, Well, the the the quantum
• 23:31
  Speaker 1: revolution is upon US, I should say quantum technology revolution.
• 23:36
  Speaker 1: The word quantum could be obviously used for a lot
• 23:39
  Speaker 1: of things, but quantum computing and quantum technology are going
• 23:46
  Speaker 1: to be able to do calculations and solve problems and
• 23:51
  Speaker 1: for industries um but also will cause problems because the
• 23:55
  Speaker 1: computing power is um, almost science fiction like in terms
• 24:00
  Speaker 1: of how much it can do compared to the largest
• 24:04
  Speaker 1: supercomputer today and what that means of course from cybersecurity
• 24:10
  Speaker 1: and particularly financial security keywords, passwords or whatever, uh cyber
• 24:18
  Speaker 1: cyber Uh, there's tremendous worry about what what could happen
• 24:24
  Speaker 1: when when these computers so to speak come online, which
• 24:28
  Speaker 1: still is several years away. What about now? What is
• 24:34
  Speaker 1: the situation right now? Well, right now there technically is
• 24:39
  Speaker 1: not a quantum computer as what is in terms of
• 24:45
  Speaker 1: what's projected. The basis for defining a quantum computer or
• 24:51
  Speaker 1: the ability for it to do whatever it needs you
• 24:54
  Speaker 1: wanted to do, is based on the number of cubits,
• 24:58
  Speaker 1: which is a measurement um in terms of what bits
• 25:03
  Speaker 1: were bits are to a computer today which I think
• 25:06
  Speaker 1: we're all familiar with. Cubits are what are the equivalent
• 25:12
  Speaker 1: for a quantum computer. It is estimated that at least
• 25:16
  Speaker 1: a thousand cubits would have to be created or programmed
• 25:20
  Speaker 1: from any manufacturer for a quantum computer to be online
• 25:24
  Speaker 1: and ready to go at this particular point in time.
• 25:29
  Speaker 1: Company like IBM, for example, UM has as it's working
• 25:35
  Speaker 1: towards creating a quantum computer, has about fifty to sixty
• 25:40
  Speaker 1: that have been have been programmed. UM. Now, one can
• 25:46
  Speaker 1: do things with that, but until you get to a thousand,
• 25:52
  Speaker 1: which probably according to IBM and recently chatting with Bob Sutter,
• 25:58
  Speaker 1: who who runs the program up at IBM, UH, that's
• 26:02
  Speaker 1: probably projected for them two thousand twenty three UM to
• 26:07
  Speaker 1: get to a situation where a quantum computer would be
• 26:15
  Speaker 1: totally online, ready to go, we're projecting two thousand, uh,
• 26:20
  Speaker 1: two thousand thirty, so you know, ten years from now.
• 26:24
  Speaker 1: So Alan, what we've seen over the last I don't
• 26:28
  Speaker 1: know decade or so, but certainly accelerated over the last
• 26:30
  Speaker 1: four years is is kind of a cold technology cold
• 26:33
  Speaker 1: war between China and the West as it relates to
• 26:38
  Speaker 1: quantum technology. Is that something that is also developing upon
• 26:42
  Speaker 1: those lines. Actually, I'd say it's terrifying um in terms
• 26:47
  Speaker 1: of what China is supposedly doing compared to what we're
• 26:52
  Speaker 1: doing or other so called Western countries um neutral countries
• 26:57
  Speaker 1: around the world. We obviously so they don't have complete
• 27:01
  Speaker 1: information about China's investment, but we do know that they
• 27:05
  Speaker 1: have created the equivalent of campuses or universities, I think
• 27:11
  Speaker 1: tanks just just to study what what what what they
• 27:15
  Speaker 1: can do or what could be done with quantum. My
• 27:18
  Speaker 1: understanding is they've invested well north of five to ten
• 27:22
  Speaker 1: billion dollars already and are literally driven to dominate in
• 27:29
  Speaker 1: this area. And unfortunately, um forgetting whatever your politics, my politics,
• 27:35
  Speaker 1: or anyone's politics might be. Instead of worrying about you
• 27:42
  Speaker 1: know which side of the fence turon a Democrat Republican,
• 27:47
  Speaker 1: this country should be worrying more about what the Chinese
• 27:50
  Speaker 1: are doing in uh quantum technology and and uh we
• 27:54
  Speaker 1: should really get cracking. I know that the Biden administration
• 27:59
  Speaker 1: is already an bounced several hundred million dollars towards further
• 28:04
  Speaker 1: research into quantum um, but that's a really just a
• 28:10
  Speaker 1: pittance in terms of what's probably needed compared to what
• 28:13
  Speaker 1: the Chinese are Because whoever has dominance in quantum or
• 28:17
  Speaker 1: gets their first could really raise havoc with um being
• 28:23
  Speaker 1: able to crack computer systems, financial networks and and the like.
• 28:29
  Speaker 1: So needless to say, that's pretty terrifying. If in fact
• 28:31
  Speaker 1: the Chinese have saved years and years and years and
• 28:36
  Speaker 1: developed developing fighter planes stealth technology. Just think what they
• 28:41
  Speaker 1: can do if they come up with this next type
• 28:45
  Speaker 1: of computing power um, which they will at this point
• 28:49
  Speaker 1: way before we will in this country. Well, you have
• 28:53
  Speaker 1: to tell us what you're invested in so we can
• 28:55
  Speaker 1: watch out for the future. All right, Well, it's it's
• 29:00
  Speaker 1: definitely uh. As I say, the press hasn't really picked
• 29:04
  Speaker 1: us up yet at all. You know, what companies are
• 29:06
  Speaker 1: you invested in? Alan Well? Um. In terms of myself,
• 29:12
  Speaker 1: I do two things. I create a research in this
• 29:18
  Speaker 1: area called Inside Quantum Technology, and we also do events.
• 29:24
  Speaker 1: We just had an event with six people from thirty
• 29:28
  Speaker 1: countries around the world with the seventies speakers UM. But
• 29:33
  Speaker 1: in terms of investing, the the investing that I do
• 29:37
  Speaker 1: on a venture capital basis, it's a different thing for
• 29:41
  Speaker 1: quantum because any anyone who is and and there are
• 29:44
  Speaker 1: hundreds of millions being invested every month in this uh
• 29:47
  Speaker 1: in this in this area. But you really have to
• 29:51
  Speaker 1: look out ten you know, ten fifteen twenty years if
• 29:54
  Speaker 1: you make an investment and venture capital. H So, while
• 29:58
  Speaker 1: I cover this from a media perspective, I'm not really investing,
• 30:02
  Speaker 1: although certainly I'm I'm watching because my horizon is more
• 30:07
  Speaker 1: like five years or seven years, not ten fifteen twenty years.
• 30:12
  Speaker 1: All right, And for anyone interested, there is a list
• 30:14
  Speaker 1: of the types of companies that you do invest in
• 30:17
  Speaker 1: in terms of private equity in sort of an exitent
• 30:20
  Speaker 1: fight ten years at your website, asimov Ventures dot com.
• 30:23
  Speaker 1: Our thanks to you for joining us today. Fascinating discussion
• 30:26
  Speaker 1: there with Alan Mecker of Asimov Adventures and decades of
• 30:31
  Speaker 1: experience in the most modern elements of computing and computing technology.
• 30:37
  Speaker 1: Thanks for listening to Bloomberg Markets podcast. You can subscribe
• 30:41
  Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast
• 30:44
  Speaker 1: platform you prefer. I'm Bonnie Quinn. I'm on Twitter at
• 30:48
  Speaker 1: Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at
• 30:50
  Speaker 1: pt Sweeney. Before the podcast, you can always catch us
• 30:53
  Speaker 1: worldwide at Bloomberg Radio.