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Johnson Says He Would Short Steel Based on Trump Protectionism · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
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• 0:32
  Speaker 1: at the US International Trade Commission in Washington, that's E
• 0:38
  Speaker 1: Street just over near the Capitol within walking distance. Representatives
• 0:43
  Speaker 1: of US Steel are speaking before the Trade Commission looking
• 0:48
  Speaker 1: for a revival of an argument against an antitrust complaint
• 0:53
  Speaker 1: having to do with dumping of steel by rival Chinese manufacturers.
• 0:58
  Speaker 1: And here to tell us more is Gordon Johnson. He
• 1:01
  Speaker 1: is managing director and the head of Alternative Energy as
• 1:04
  Speaker 1: well as Metals and mining equipment research, and he joins
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  Speaker 1: us on the phone. A great great to have you
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  Speaker 1: with us, A Gordon at Action Capital Management. I beg
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  Speaker 1: your pardon, um, you know, I was looking at the
• 1:15
  Speaker 1: at the price movement today of U S steal. We
• 1:18
  Speaker 1: got the stock up nearly four percent. Do they just
• 1:21
  Speaker 1: have to like wave a flag every now and again
• 1:23
  Speaker 1: and say, um dumping tariff and then you know, depending
• 1:27
  Speaker 1: upon whose in power it moves the stock. Yeah, I
• 1:30
  Speaker 1: mean that does indeed seem to be the case, and
• 1:33
  Speaker 1: it seems like the Trump administration is definitely focused on China.
• 1:37
  Speaker 1: But I think people need to look at, uh the
• 1:40
  Speaker 1: reality here. Uh the Obama administration h rained heavily down
• 1:45
  Speaker 1: on China. In fact, they hit China with a number
• 1:47
  Speaker 1: of very aggressive tariffs. And if you look at total
• 1:51
  Speaker 1: Chinese imports as a percent of US STILL imports UM
• 1:54
  Speaker 1: in six point one percent, seven point two percent, it
• 1:58
  Speaker 1: dropped all the way to two points. So the point is,
• 2:03
  Speaker 1: even if you basically completely closed China out from directly
• 2:07
  Speaker 1: importing still into the United States, is going to have
• 2:09
  Speaker 1: a very modest, if any impact on the overall steel backdrop.
• 2:13
  Speaker 1: And I think that the rhetoric are you know, comments
• 2:16
  Speaker 1: coming out of the Trump administration UH an impact on
• 2:19
  Speaker 1: the markets. Um. You know, people have this very aggressive
• 2:22
  Speaker 1: initial reaction, but it's just not the numbers just don't
• 2:25
  Speaker 1: pan out well, and let's get to what US deal
• 2:27
  Speaker 1: is actually doing. They filed a lawsuit against rival Chinese
• 2:32
  Speaker 1: manufacturing UH companies, saying that they colluded to keep prices
• 2:36
  Speaker 1: low to undercut American competitors. UH. They were filed this
• 2:41
  Speaker 1: though under a statute covering unfair trade practices, which usually
• 2:45
  Speaker 1: oversees domestic issues. I mean, does U S steal even
• 2:49
  Speaker 1: have standing? Is their international law that would bring Chinese
• 2:54
  Speaker 1: manufacturing companies into this? I mean, is this lawsuit a
• 2:58
  Speaker 1: no go basically? I mean it looks like it is.
• 3:01
  Speaker 1: I mean, a lot of the things they've done recently, UM.
• 3:04
  Speaker 1: I shouldn't say a lot of the things, but some
• 3:05
  Speaker 1: of the things they've done recently seemed to be UM,
• 3:08
  Speaker 1: pretty pretty aggressive UM and trying to benefit from uh
• 3:12
  Speaker 1: what appears to be a pro UH protectionists. UH, you
• 3:16
  Speaker 1: know US administration. Look, at the end of the day,
• 3:19
  Speaker 1: it seems like U S stills and this has been
• 3:20
  Speaker 1: the case for a while. It seems like their strategy
• 3:22
  Speaker 1: is effectively to benefit from protectionism, and that just doesn't work.
• 3:26
  Speaker 1: We saw this UM in late nineting in the late
• 3:29
  Speaker 1: nineties and the early two thousand's UH, when President George W.
• 3:33
  Speaker 1: Bush implemented a Section two A one tariff, which essentially
• 3:36
  Speaker 1: put taxes on every single still important for the United States.
• 3:39
  Speaker 1: Shortly thereafter, the European Union ruled this UM. UH that
• 3:43
  Speaker 1: that action unfair. Uh and and then shortly thereafter, you know,
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  Speaker 1: there were some reactions by the European Union and the
• 3:50
  Speaker 1: US pulled that back. Look, protectionism does not work because
• 3:54
  Speaker 1: effectively the bulk of US still demand is in China,
• 3:57
  Speaker 1: not US. The global still demand is in China. The
• 4:00
  Speaker 1: US has just roughly seven percent of global still demand.
• 4:02
  Speaker 1: And more importantly, these still manufacturers sell the people like
• 4:05
  Speaker 1: automakers and you know, appliance makers, etcetera. And those guys
• 4:09
  Speaker 1: have to compete globally. So if you drive up the
• 4:11
  Speaker 1: cost of domestic still, it's going to kill their customers
• 4:15
  Speaker 1: and eventually kill them. So it just doesn't work. Well, Gordon,
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  Speaker 1: I just want to put the put the production in
• 4:21
  Speaker 1: China in perspective, because China's steel capacity, global steel making capacity,
• 4:29
  Speaker 1: I believe, is bigger than the United States, European Union, Japan,
• 4:32
  Speaker 1: and Russia. Yeah yeah, I mean, I mean that they
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  Speaker 1: account for sevent of all steel making growth as well.
• 4:40
  Speaker 1: That's right, and you know it looks crazy. Issue um.
• 4:43
  Speaker 1: In two thousand eight nine, China embarked upon a massive stimulus,
• 4:48
  Speaker 1: and that stimulus was targeted primarily at building essentially offices
• 4:52
  Speaker 1: and homes and that benefited the global steel community massively.
• 4:57
  Speaker 1: All these stocks went to the moon and it was
• 4:58
  Speaker 1: driven by China, and as a result, you had a
• 5:00
  Speaker 1: lot of capacity created in China, still capacity to meet
• 5:03
  Speaker 1: this boom in demand. Clearly there's a lot of empty
• 5:06
  Speaker 1: and ghost cities in China. It was inefficient capital, but
• 5:10
  Speaker 1: nonetheless that created a lot of capacity, and the problem
• 5:13
  Speaker 1: is that capacity is still existent, but the demand is
• 5:15
  Speaker 1: falling so um It's like, you know, when everything was
• 5:19
  Speaker 1: working in the favor of the U S still mills,
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  Speaker 1: they weren't complaining about what China was doing, which was
• 5:23
  Speaker 1: creating a lot of this capacity. But now that things are,
• 5:26
  Speaker 1: you know, turning around, now they're starting to complain. The
• 5:28
  Speaker 1: reality is this, there's about eighty eight countries that ships
• 5:31
  Speaker 1: still into the United States without a section to a
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  Speaker 1: one tariff going after one individual country. We've already killed China.
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  Speaker 1: I mean again, there are imports have trapped from like
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  Speaker 1: two million tons a year to roughly seven hundred and
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  Speaker 1: eighty nine thousand tons of year two thousand, fifteen to sixteen,
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  Speaker 1: six point one percent of US imports at two point
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  Speaker 1: six We've already killed them. But they're just gonna ship
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  Speaker 1: there still into another country. Uh, and eventually it will
• 5:51
  Speaker 1: probably find its way into the United States, and I
• 5:54
  Speaker 1: think that there's no way around that. And you know,
• 5:56
  Speaker 1: these U. S still mills continue to focus on China,
• 5:59
  Speaker 1: and I think China's already it's a dead horse. Well, Gordon,
• 6:02
  Speaker 1: I think it isn't interesting though, and it is telling
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  Speaker 1: that U. S. Steal is reviving some of these complaints
• 6:07
  Speaker 1: at this point and asking the major steel trade organization,
• 6:10
  Speaker 1: the US International Trade Commission in Washington, to support its
• 6:15
  Speaker 1: claims about collusion by Chinese manufacturers. Do you think that
• 6:20
  Speaker 1: they are going to get a warm reception by politicians
• 6:24
  Speaker 1: in Washington currently, or do you think that the geopolitical backdrop,
• 6:29
  Speaker 1: including North Korea, has changed the calculus for President Trump
• 6:32
  Speaker 1: and his advisors and that they will not take this
• 6:35
  Speaker 1: attempt by U. S. Steal seriously. Look, there's two things
• 6:38
  Speaker 1: all highlight. I think there's no doubt that the issues
• 6:40
  Speaker 1: in North Korea have changed Trump's view um and stance
• 6:45
  Speaker 1: on China. Clearly, in his um while campaigning, he said
• 6:49
  Speaker 1: he was going to label them a currency manipulator. He's
• 6:51
  Speaker 1: pulled that back. But let's look at the second dynamic
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  Speaker 1: we just had an O c TG oil Country tubular
• 6:57
  Speaker 1: good ruling UM, and that ruling came out with respect.
• 7:00
  Speaker 1: It wasn't Chinese, but it was on South Korean UM
• 7:04
  Speaker 1: essentially oil country tubular goods UH STILL producers UM that
• 7:07
  Speaker 1: service that sector rather and the overall result when the
• 7:11
  Speaker 1: result came out, the U. S Still stocks were battered
• 7:13
  Speaker 1: because the market was expecting a thirty to thirty five
• 7:16
  Speaker 1: percent tariff because Navarro essentially sent a letter to the
• 7:20
  Speaker 1: Department of Commerce and the tariff came out at roughly
• 7:23
  Speaker 1: for most guys, but the biggest guy was they dropped
• 7:25
  Speaker 1: the tariff from four percent to two percent. So the
• 7:28
  Speaker 1: reality is, if you look at the rhetoric, he's pulled
• 7:31
  Speaker 1: it back and if you look at the most recent decision,
• 7:33
  Speaker 1: it was not in favor of the U. S Still mills.
• 7:35
  Speaker 1: So you know, we would be shorting the stocks actually
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  Speaker 1: on UH strength around UH you know, Trump protectionism, etcetera.
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  Speaker 1: Because I think that his desire for China to help
• 7:46
  Speaker 1: solve the North Korean problem is much bigger than the
• 7:49
  Speaker 1: rhetoric given in the campaign season, and I think that
• 7:51
  Speaker 1: we're seeing that play out in reality. And just to
• 7:54
  Speaker 1: note right, I mean, you've got US steal down for
• 7:56
  Speaker 1: the year. Right, it's down about a little bit more
• 7:58
  Speaker 1: than ten percent, right, right, I mean it's up big
• 8:00
  Speaker 1: today on this rhetoric. But um, you know you just
• 8:04
  Speaker 1: had you just you are, I just reported earnings. You
• 8:06
  Speaker 1: are as a big equipment rental company here in the
• 8:08
  Speaker 1: US of their business in the US eight percent in Canada,
• 8:11
  Speaker 1: and they just dropped their expectation, uh for growth in
• 8:15
  Speaker 1: the U S. What was it. I think it was
• 8:17
  Speaker 1: two four before now they're getting to I think two
• 8:20
  Speaker 1: point four percent. And in in Canaday they were looking
• 8:23
  Speaker 1: for four percent. This is industrial growth and they took
• 8:25
  Speaker 1: it down the negative point three percent. So I think,
• 8:28
  Speaker 1: you know, the optimism on Trump, I think reality is
• 8:32
  Speaker 1: starting to set in and I think that you know,
• 8:33
  Speaker 1: as earnings come out, I think that two one earnings
• 8:35
  Speaker 1: for still guys are gonna be good. But I think
• 8:37
  Speaker 1: as some of the earnings come out for industrial guys,
• 8:39
  Speaker 1: I think there's just some disappointment ahead. Gordon Johnson, thank
• 8:42
  Speaker 1: you so much for joining us. Gorton Johnson as Managing
• 8:43
  Speaker 1: Director and head of Alternative Energy, Medals and Mining and
• 8:46
  Speaker 1: Equipment Research at Axiomic Capital Management in New York. This
• 8:50
  Speaker 1: is Bloombergh. We talk a lot about President Trump's infrastructure
• 9:06
  Speaker 1: spending plan. He talked about a one trillion dollar program
• 9:10
  Speaker 1: that he was going to implement to fix our roads
• 9:12
  Speaker 1: and bridges and tunnel. Somebody with pretty good insight into
• 9:16
  Speaker 1: what that plan might look like is David Compton. He's
• 9:19
  Speaker 1: chief executive officer of Old Dominion freight Line, which is
• 9:23
  Speaker 1: based in Thomasville, North Carolina, and it just celebrated its
• 9:26
  Speaker 1: twenty fifth year on the NASDACT. David, thank you so
• 9:29
  Speaker 1: much for joining us. Thank you for having me on
• 9:32
  Speaker 1: with you today. So I wanted to start with the
• 9:35
  Speaker 1: infrastructure spending plan because I know that you were co chair.
• 9:40
  Speaker 1: You are the co chair of the American Trucking Association's
• 9:43
  Speaker 1: Infrastructure Task Force, and you have met with President Trump.
• 9:47
  Speaker 1: Can you give us some insight into how feasible the
• 9:50
  Speaker 1: infrastructure spending plan that he was talking about is and
• 9:53
  Speaker 1: kind of where it is right now, well as we
• 9:57
  Speaker 1: understand it now, the the Trump administration is working on
• 10:03
  Speaker 1: their infrastructure plan and hope to have um something out
• 10:08
  Speaker 1: into Congress by the end of May. That's the latest
• 10:12
  Speaker 1: we hear. You know, as far as the total infrastructure
• 10:16
  Speaker 1: you know of one trillion. Uh. It's it's it's a
• 10:19
  Speaker 1: little bit hard for me to address all of it
• 10:21
  Speaker 1: because I honestly don't believe that that trucking and transportation
• 10:27
  Speaker 1: roads and bridges will will get uh um but perhaps
• 10:31
  Speaker 1: maybe a third of that um that excuse me, kind
• 10:37
  Speaker 1: of frog in my throat, But that's that's basically where
• 10:41
  Speaker 1: we where we are on that uh. But the uh,
• 10:46
  Speaker 1: you know, the cost of under investment in our highways
• 10:49
  Speaker 1: and bridges is absolutely huge. Congestion on the interstate systems
• 10:54
  Speaker 1: alone are costing the trucking industry nearly uh fifty billion dollars,
• 11:00
  Speaker 1: and it's estimated over one hundred billion for all motorists.
• 11:04
  Speaker 1: Automobile repairs due to potholes are costing the average motorists
• 11:10
  Speaker 1: over five hundred dollars per year per motorists, for a
• 11:14
  Speaker 1: grand total of a hundred and twelve billion. Roadside crashes
• 11:19
  Speaker 1: UM are causing due to you know, antiquated designs and
• 11:23
  Speaker 1: poor insurance and exit ramps or anyone who's been in
• 11:28
  Speaker 1: traffic understands how how it's sort of challenged US roads are.
• 11:31
  Speaker 1: But David, do you think that we really are going
• 11:33
  Speaker 1: to see uh material change or material construction in the
• 11:38
  Speaker 1: next three years that could potentially even support your business.
• 11:41
  Speaker 1: I certainly hope so. Our Infrastructure Task Force, which is
• 11:47
  Speaker 1: made up of eleven CEO s from from small truck
• 11:51
  Speaker 1: lines all the way with less than a hundred trucks
• 11:54
  Speaker 1: up to the nation's largest truck lines UH, is working
• 11:58
  Speaker 1: with the Trump administrate and UH leaders in Congress, both
• 12:04
  Speaker 1: the Senate and the House side UH to try to
• 12:07
  Speaker 1: shape an infrastructure bill that addresses the most critical problems
• 12:12
  Speaker 1: of the trucking industry and provides for the most immediate
• 12:16
  Speaker 1: and sustainable financing solutions. And we think we've got a
• 12:21
  Speaker 1: pretty good a pretty good plan or roadmap to be
• 12:25
  Speaker 1: able to come up with the money that's needed UH
• 12:28
  Speaker 1: to accomplish this. All right, Mr Congan, I'm wondering if
• 12:32
  Speaker 1: I could just attack this this topic in just a
• 12:35
  Speaker 1: slightly different way, because I every now and again I'm
• 12:38
  Speaker 1: on the road and I see one of your thirty
• 12:40
  Speaker 1: thousand tractor trailers all across the country, and they have
• 12:44
  Speaker 1: the Major League Baseball UH, you know logo on on
• 12:50
  Speaker 1: on the side. You move the teams of Major League Baseball.
• 12:55
  Speaker 1: It's like, uh, you know, moving chessboard or something. I mean,
• 13:00
  Speaker 1: because you know, you move them from spring training back
• 13:03
  Speaker 1: to the right. I mean, I'm this is something that
• 13:05
  Speaker 1: you're this is detail and I mean, my goodness moving
• 13:08
  Speaker 1: is it just such a stressful thing for anybody? Imagine
• 13:10
  Speaker 1: doing this to the level that you guys at old
• 13:13
  Speaker 1: Dominion Freight do that. What are do you feel that
• 13:17
  Speaker 1: you're being heard by the right people to fix some
• 13:21
  Speaker 1: of these I mean, no one is four potholes right.
• 13:23
  Speaker 1: No one says okay, no, no, no, we love pottle.
• 13:25
  Speaker 1: No one ever says that. So is there are there
• 13:28
  Speaker 1: some things that you feel that you're being heard by
• 13:31
  Speaker 1: the right people in the right place at the right time.
• 13:34
  Speaker 1: Considering that we that you have Donald Trump as president
• 13:37
  Speaker 1: that will help fix some of these very basic things
• 13:40
  Speaker 1: that you've just described, and that obviously you're in a
• 13:43
  Speaker 1: better position to tell to explain what's going on than
• 13:46
  Speaker 1: than you know, someone just reading a paper. I believe
• 13:49
  Speaker 1: we are in an excellent position to be heard. The
• 13:52
  Speaker 1: meeting that we had with President Trump Vice President Pence,
• 13:57
  Speaker 1: Just what's that like? Can you shed some can you
• 13:59
  Speaker 1: just us what's it like to even be there? What
• 14:01
  Speaker 1: does it feel like? Well? It was it was an
• 14:03
  Speaker 1: exciting day it was. It was actually monumental. It was
• 14:07
  Speaker 1: the first time in the history of the American Trucking
• 14:09
  Speaker 1: Association for a t A to have two trucks on
• 14:13
  Speaker 1: the lawn at the White House, represented by eleven UH
• 14:18
  Speaker 1: top CEOs from our industry and twelve of our top
• 14:23
  Speaker 1: truck drivers representing the America's road team, and the ability
• 14:27
  Speaker 1: to meet the President and Vice President opened the door
• 14:30
  Speaker 1: for further discussions. Obviously, the day that we were there
• 14:35
  Speaker 1: was the day that the Health health Care Repeal and
• 14:39
  Speaker 1: Replaced bill was supposed to be voted on, and and
• 14:42
  Speaker 1: that was the top of mind for the for President
• 14:45
  Speaker 1: Trump that particular day. But we have had subsequent we
• 14:51
  Speaker 1: being the truck the A t A, UH President Chris Spear, UH,
• 14:57
  Speaker 1: the Senior Vice President, Bill Sullivan, and others in leadership
• 15:01
  Speaker 1: at A t A have had some meaningful discussions with UH,
• 15:06
  Speaker 1: some of Trump's advisors and we are what specifically would
• 15:10
  Speaker 1: you like to have happened or do you believe would
• 15:14
  Speaker 1: be helpful to their mission to improve the infrastructure? What
• 15:19
  Speaker 1: what can people do? Who here you speak and UH,
• 15:23
  Speaker 1: well here's here and all the people that are into
• 15:26
  Speaker 1: baseball because you're you're you're moving those baseball teams. Well,
• 15:29
  Speaker 1: the baseball teams are are important for us, uh, but
• 15:33
  Speaker 1: but not as important as the uh ninety thousand shippers
• 15:38
  Speaker 1: that uh that we have UM giving us revenue. But right,
• 15:43
  Speaker 1: your customers, Yeah, our customers. Baseball is very small part
• 15:47
  Speaker 1: of it. But here's the deal. The annual cost of
• 15:50
  Speaker 1: under investment in in in our infrastructure is costing motors
• 15:55
  Speaker 1: over fourteen hundred dollars per year. And what we are
• 15:59
  Speaker 1: proposed using, UH, what we're proposing UH is a build
• 16:04
  Speaker 1: America infrastructure fee to be added at the to the
• 16:10
  Speaker 1: rack cost per gallon of just twenty cents and and
• 16:15
  Speaker 1: have this thing index to fuel economy and inflation. Twenty
• 16:19
  Speaker 1: cents a gallon is really not very much. You recall
• 16:22
  Speaker 1: when we were all paying uh four and five dollars
• 16:26
  Speaker 1: a gallon for gas. UH. Twenty cents a gallon only
• 16:30
  Speaker 1: represents an annual cost of roughly eighty dollars per motorists
• 16:35
  Speaker 1: to address a four hundred dollar per motorists problem. To me,
• 16:41
  Speaker 1: that is a good return on investment. And this infrastructure
• 16:45
  Speaker 1: fee at the rack. I don't know if you know
• 16:47
  Speaker 1: what I rack is, but there are thirteen hundred active
• 16:51
  Speaker 1: UH terminals fuel racks across the country owned by only
• 16:56
  Speaker 1: two fifty five owners, and they collect and pay the
• 17:01
  Speaker 1: thanks for we gotta leave it there, David Congdon, I'm sorry,
• 17:04
  Speaker 1: the chief executive of Old Dominion freight Line. We want
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  Speaker 1: more at Bloomberg dot com. Slash lens Well corrosion. Corrosion
• 17:56
  Speaker 1: is a two point two trillion dollar problem worldwide, and
• 18:01
  Speaker 1: our next guest is trying to solve it. Christina Lamancy
• 18:05
  Speaker 1: is the president and the chief executive and the co
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  Speaker 1: founder and a physicist and just happens to be in
• 18:10
  Speaker 1: charge of Modu Metal, based in Seattle, but she joins
• 18:14
  Speaker 1: us here in our studio, Christina, thank you very much
• 18:16
  Speaker 1: for being here. Um. Corrosion, I guess we could say
• 18:20
  Speaker 1: rust is a problem that is never really going to
• 18:23
  Speaker 1: go away because of the just the nature of certain
• 18:26
  Speaker 1: types of chemical and metal reactions, unless, of course, I
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  Speaker 1: guess we call modu metal. Tell us what you're doing
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  Speaker 1: to fight this battle? Absolutely, so, we are UM, first
• 18:36
  Speaker 1: of all, trying to address this huge problem that today
• 18:40
  Speaker 1: represents about four point one percent of the gross domestic
• 18:43
  Speaker 1: product of the United States. So we spend a lot
• 18:45
  Speaker 1: of money and a lot of energy addressing this challenge
• 18:48
  Speaker 1: of corrosion, and we think we can reduce that impact
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  Speaker 1: on our economy. We're doing it by introducing an entirely
• 18:55
  Speaker 1: new class of materials into the marketplace. That class of materials,
• 19:00
  Speaker 1: UH is what we call nano laminated alloys. They're basically
• 19:03
  Speaker 1: like metallic plywood, so they're layered materials, but in our case,
• 19:07
  Speaker 1: the layers are on the nanometer scale. UM, and maybe
• 19:11
  Speaker 1: even more profoundly impactful is that we're we're having in
• 19:14
  Speaker 1: order to bring these materials to market, to revolutionize the
• 19:17
  Speaker 1: manufacturing process for metals as well. So we have a
• 19:20
  Speaker 1: process that doesn't use heat anymore. We're actually using electricity
• 19:24
  Speaker 1: as the input form of energy to manufacture metals directly.
• 19:27
  Speaker 1: So before we get into the specifics I'm wondering so far.
• 19:31
  Speaker 1: I mean, the company has been around for a couple
• 19:34
  Speaker 1: of years and this technology has been around for a
• 19:35
  Speaker 1: couple of years. How has the demand grown by industrial companies? Well,
• 19:41
  Speaker 1: we when we first started out with mode metal, it
• 19:44
  Speaker 1: was just a concept, so we were really just trying
• 19:46
  Speaker 1: to figure out how to bring this this technology from
• 19:49
  Speaker 1: a science into really a manufacturing process. Now we're working
• 19:54
  Speaker 1: with with major oil and gas companies to bring it
• 19:57
  Speaker 1: into very large scale market applications. So the market has
• 20:01
  Speaker 1: really embraced the technology. And we talk about the cost
• 20:04
  Speaker 1: of corrosion. It's something that impacts a number of major industries.
• 20:09
  Speaker 1: So oil and gas is just one example. Infrastructure construction,
• 20:14
  Speaker 1: I mean, transportation, you name it. The pain is there
• 20:18
  Speaker 1: for a lot of major industries. So it's been it
• 20:20
  Speaker 1: has been embraced across the board. Uh, in terms of
• 20:24
  Speaker 1: its applications. Well, I also just want to congratulate you,
• 20:27
  Speaker 1: Christina lamos Ny. Uh. You are a finalist for the
• 20:32
  Speaker 1: Edison Awards, So good luck with that, I know you're
• 20:34
  Speaker 1: here in New York. You've been named the finalist for
• 20:37
  Speaker 1: for that. Can you use let's say the Coastguard as
• 20:40
  Speaker 1: an example. Obviously they must deal as most ship owners
• 20:45
  Speaker 1: must deal with corrosion and rust. Tell us about using
• 20:49
  Speaker 1: modu metal technology for the Coastguard. That's such a great example.
• 20:52
  Speaker 1: In fact, we've done some work with the Coastguard. We've
• 20:55
  Speaker 1: deployed technology with them. As as you mentioned, the Coast
• 20:58
  Speaker 1: Guard operates in a very corrosive environment. So they they're
• 21:01
  Speaker 1: typically operating in marine environments where they're salt water, oftentimes
• 21:06
  Speaker 1: high temperature. So on the coast of of let's say
• 21:10
  Speaker 1: North Carolina, Florida, things like that, um or you have
• 21:13
  Speaker 1: accelerated corrosion because of heat and um and so corrosion
• 21:17
  Speaker 1: is degrading the fleet. Even even as they're operating and
• 21:21
  Speaker 1: building new structures, they're having to deal with the degradation
• 21:25
  Speaker 1: of the old. We've actually done some work with the
• 21:27
  Speaker 1: Coast Guard on something as simple as connectors fasteners like
• 21:30
  Speaker 1: you know, bolts. It turns out that's a that's a
• 21:33
  Speaker 1: critical point of a failure for for some of these
• 21:37
  Speaker 1: these structures. And so basically what we've done in in
• 21:40
  Speaker 1: some cases we actually just coat conventional steals with our
• 21:43
  Speaker 1: nano layered alloys and we can extend the life as
• 21:46
  Speaker 1: much as tend to. We've demonstrated thirty times increase in
• 21:50
  Speaker 1: performance at an equivalent cost to like a conventional zinc.
• 21:55
  Speaker 1: So it's a dramatic difference in terms of the longevity
• 21:58
  Speaker 1: of that product in a field, the safety factor associated
• 22:02
  Speaker 1: with that connector, and we basically are keeping cost at parity.
• 22:07
  Speaker 1: So talking about that cost, I mean, how much would
• 22:10
  Speaker 1: it cost to nano laminate say, all the bolts in
• 22:15
  Speaker 1: a ship, and uh, how how do you how exactly
• 22:19
  Speaker 1: do you nano laminate something? Yeah, the way to think
• 22:21
  Speaker 1: about it, I think is it we're introducing a new structure,
• 22:25
  Speaker 1: so it's the nano lamination. It's um to kind of
• 22:28
  Speaker 1: geek out on the science a little bit. We're kind
• 22:30
  Speaker 1: of we're galvanically coupling to similar metals when we make
• 22:33
  Speaker 1: these layered alloys, and we're controlling that galvanic couple and
• 22:36
  Speaker 1: that's what's extending the life of the product in a
• 22:39
  Speaker 1: corrosive environment. We're doing it though with the same basic
• 22:43
  Speaker 1: raw materials, So from a cost driver standpoint, we really
• 22:46
  Speaker 1: have the same basic costs as a conventional let's say,
• 22:50
  Speaker 1: hot dip galvanized process. We're just fundamentally changing the structure
• 22:56
  Speaker 1: and that's resulting in a huge impact in terms of performance.
• 22:59
  Speaker 1: Are planning on taking the public company public right now
• 23:03
  Speaker 1: we're private and UH and we're really growing the business
• 23:06
  Speaker 1: to try to bring the product into the market in
• 23:08
  Speaker 1: a very very big way. But where are you getting
• 23:12
  Speaker 1: financing from? So we do UM. We do a lot
• 23:15
  Speaker 1: of work with within the oil and gas sector, as
• 23:17
  Speaker 1: I mentioned, And the fun part for us is that
• 23:20
  Speaker 1: a lot of our customers have actually joined us as
• 23:22
  Speaker 1: partners UM. So today we're jointly owned by Chevron, Conico,
• 23:27
  Speaker 1: Phillips BP, all of whom were customers and then they
• 23:30
  Speaker 1: became partners in the venture. We're also jointly owned by
• 23:33
  Speaker 1: the founders FUN out of Silicon Valley, and so we
• 23:36
  Speaker 1: just have a great team of partners that have joined
• 23:38
  Speaker 1: us in this venture. Christina Lamosney, thank you so much
• 23:41
  Speaker 1: for joining us. Really a fascinating developments president and chief
• 23:45
  Speaker 1: executive officer and co founder of Madu Metal, which is
• 23:48
  Speaker 1: based in Seattle, but she is here with us in
• 23:50
  Speaker 1: our Bloomberg eleven three oh studio, and she gave us
• 23:53
  Speaker 1: business cards that are made out of nano laminated metal.
• 23:59
  Speaker 1: Pretty cool him, I think I think I need some metal.
• 24:02
  Speaker 1: There you go. That was the sound of it. Well,
• 24:16
  Speaker 1: Republicans have come up with a replacement to the Dad
• 24:19
  Speaker 1: Frank Act of two thousand and ten. It is going
• 24:22
  Speaker 1: to be aired in a hearing later this month. I
• 24:25
  Speaker 1: want to bringing Nathan Dean, who's a government an analyst
• 24:27
  Speaker 1: for Bloomberg Intelligence, is going to tell us what's in
• 24:31
  Speaker 1: this replacement to the Dodd Frank Act before we get there, Nathan,
• 24:35
  Speaker 1: is this thing dead on arrival or does this thing
• 24:37
  Speaker 1: have legs? So it's dead arrival? When when you think
• 24:40
  Speaker 1: about it, when it's becoming law, it will pass the House,
• 24:43
  Speaker 1: It should pass the House. It should pass the House
• 24:45
  Speaker 1: by August. You will see a lot of headlines of
• 24:47
  Speaker 1: talking about this will pass. But it's dead on arrival
• 24:49
  Speaker 1: in the Senate. This this is the Republican kitchen sink bill.
• 24:52
  Speaker 1: There are just too many provisions in here to get
• 24:55
  Speaker 1: bipartisans support in the Senate. And because the filibuster still exists,
• 24:59
  Speaker 1: you know, there's there's the this bill really doesn't have
• 25:01
  Speaker 1: any chance over there in this Senate. Okay, So given
• 25:03
  Speaker 1: the fact that it's probably did on arrival in the Senate,
• 25:06
  Speaker 1: should we care about it? There are provisions in this
• 25:09
  Speaker 1: thing that we should care about. It's a starting point,
• 25:11
  Speaker 1: it's a negotiations so uh, leaving. A lot of this
• 25:14
  Speaker 1: bill is designed about this teen percent leverage ratio banks
• 25:17
  Speaker 1: need to go from you know, around six and a
• 25:19
  Speaker 1: half to ten percent for the big banks. That could
• 25:21
  Speaker 1: cost him around four hundred twenty billion for the eight largest.
• 25:24
  Speaker 1: But there are other provisions in this bill that i'd
• 25:25
  Speaker 1: look at, you know, look at how they're going to
• 25:27
  Speaker 1: change the stress testing process. Uh, look how they're going
• 25:30
  Speaker 1: to make relief for smaller and community sized banks. But
• 25:33
  Speaker 1: a lot of the controversial provisions in here, repealing the
• 25:36
  Speaker 1: vocal rule, changing the CFBB, uh, repealing the Durban Amendment,
• 25:41
  Speaker 1: which would cost the banks. You know, it did cost
• 25:43
  Speaker 1: the banks billions of dollars and interchange fees. You know,
• 25:46
  Speaker 1: those things are just too controversial. They're not going to
• 25:48
  Speaker 1: pass Elizabeth More and they're not going to pass the
• 25:50
  Speaker 1: other Democrats, and so I think it's more importantly to
• 25:53
  Speaker 1: see what's going to come out of the Senate in
• 25:55
  Speaker 1: their review, and we're expecting that sometime the next couple
• 25:57
  Speaker 1: of months. The Senate has a of course, the Banking Committee,
• 26:02
  Speaker 1: and Senator Mike Creepo, he's the Republican from Idaho, is
• 26:06
  Speaker 1: the chairman. Can you give us some insight into his
• 26:09
  Speaker 1: thinking and then maybe kind of reference a previous bill
• 26:13
  Speaker 1: that was introduced by the former Banking chairman, UH, Senator
• 26:17
  Speaker 1: Richard Shelby, a Republican from Alabama. Yeah, so you know,
• 26:21
  Speaker 1: the Senate right now is conducting a review of dot Frank.
• 26:23
  Speaker 1: They actually went out to the industry and he said,
• 26:25
  Speaker 1: send us comments. And this was bipartisan effort, both Mike
• 26:28
  Speaker 1: Creepo and Senator Sherried Brown, the ranking member from Ohio,
• 26:31
  Speaker 1: and the bank comments and the industry comments have been
• 26:33
  Speaker 1: piling in. Goldman Sachs, for example, just submitted their comments.
• 26:37
  Speaker 1: Bloomberg News did an article on it, and it talked
• 26:39
  Speaker 1: about changing the stress test, changing the calculation of a
• 26:42
  Speaker 1: leverage ratio. So a lot of this stuff I think
• 26:44
  Speaker 1: could generate bipartisans support, But really what happens in the
• 26:48
  Speaker 1: Senate we expect them to put together their own bill.
• 26:51
  Speaker 1: You know, you mentioned Senator Richard Shelby, his big push
• 26:54
  Speaker 1: last year was changing the city threshold. He wanted the
• 26:56
  Speaker 1: city threshold to go from fifty billion to five billion.
• 27:00
  Speaker 1: Senator Mike Crepo he wants that changed as well. Is
• 27:03
  Speaker 1: probably too high. You know that five billion would would
• 27:06
  Speaker 1: allow P and C and US Bank, for example, to
• 27:08
  Speaker 1: should their shed their Ciffy designation. To be clear, Siffy
• 27:11
  Speaker 1: is significantly important financial institution, correct, and if you're labeled
• 27:16
  Speaker 1: to Ciffy means you get a lot more capital in
• 27:18
  Speaker 1: liquidity requirements and then you have to go through the
• 27:20
  Speaker 1: stress test. So you know, whether that that threshold ends
• 27:25
  Speaker 1: up a tune in fifty billion or it moves to
• 27:27
  Speaker 1: a case by case designation. You know, we do expect
• 27:30
  Speaker 1: the Senate because this is one of Senator Creepo's key
• 27:33
  Speaker 1: things that he wants to work on. We do think
• 27:35
  Speaker 1: that Ciffy threshold is going to be in there. So, Nathan,
• 27:37
  Speaker 1: as you were saying, this is sort of a kitchen
• 27:39
  Speaker 1: sink effort by Republican Congressman h. But the interesting thing
• 27:43
  Speaker 1: is banks are not too excited about this bill. It's
• 27:46
  Speaker 1: called the Financial Choice Act. It would replace the Dodd
• 27:49
  Speaker 1: Frank Act, which set out to prevent another bank driven
• 27:54
  Speaker 1: financial crisis like the one that we saw in two
• 27:56
  Speaker 1: thousand and eight. Why aren't big banks excitedly for two reasons. One,
• 28:01
  Speaker 1: you know, like we mentioned going to the ten percent
• 28:03
  Speaker 1: leverage ratio, that's gonna increase capital requirements for large spanks.
• 28:06
  Speaker 1: You know, Bi's credited Animal Sternal Cocuna did analysis where
• 28:08
  Speaker 1: it's four and twenty billion for JP Morgan. That's billion alone.
• 28:12
  Speaker 1: It's probably not something they want to do. Secondly, they
• 28:14
  Speaker 1: probably understand that this bill is dead on arrival, and
• 28:17
  Speaker 1: so why waste the political capital fighting for full repeal
• 28:20
  Speaker 1: of the vocal rule when you know it's not gonna happen.
• 28:22
  Speaker 1: You know, you hear a lot of comments coming from
• 28:24
  Speaker 1: Jamie Diamond and other bankers saying, you know, we just
• 28:27
  Speaker 1: need to tweak the vocal rule and we need to
• 28:28
  Speaker 1: play around with the market making exemption. You know, but
• 28:31
  Speaker 1: in spirit, you know, they say they're okay with it.
• 28:34
  Speaker 1: So I think the banks are waiting to see what
• 28:37
  Speaker 1: comes from the Senate. You know. One thing to keep
• 28:40
  Speaker 1: in mind, you know, Chairman Henseling he's term limited at
• 28:42
  Speaker 1: the end of this term, so he's got two years
• 28:44
  Speaker 1: to essentially put something out there, and if not he's
• 28:46
  Speaker 1: gonna have to move off of the chairmanship. So, you know,
• 28:50
  Speaker 1: we still don't think dot frank is gonna be a
• 28:52
  Speaker 1: year one issue. I think you'll see something come out
• 28:54
  Speaker 1: from the Senate later this year, but I still think
• 28:56
  Speaker 1: dot frank will be a two year issue. So if
• 28:58
  Speaker 1: this is not a year one she I mean, are
• 29:00
  Speaker 1: there specific deadlines that they have to meet in order
• 29:03
  Speaker 1: to get the ball rolling on this? So no, there's
• 29:06
  Speaker 1: no specific deadlines. I think that, you know, one thing
• 29:09
  Speaker 1: that we are telling our clients is watch out for
• 29:11
  Speaker 1: the debt ceiling debates and the government shutdown debates later
• 29:14
  Speaker 1: this year, not the April one, but maybe in September,
• 29:17
  Speaker 1: because that's the time that's ripe for amendments. You know,
• 29:19
  Speaker 1: back in two thousand fourteen, Republicans inserted this amendment that
• 29:23
  Speaker 1: repealed the swaps pushout provision. They did it three days
• 29:26
  Speaker 1: before government shut down. They sent it up to the
• 29:28
  Speaker 1: White House, and they told President Barack Obama sign it
• 29:31
  Speaker 1: or the government's going to be shut down. And President
• 29:33
  Speaker 1: Obama did sign it. So this is this tactic of
• 29:36
  Speaker 1: putting an amendment out there. You know, if I wanted
• 29:38
  Speaker 1: to repeal the vocal rule for example, maybe I submit
• 29:40
  Speaker 1: it right before the debt ceiling is about to hit
• 29:43
  Speaker 1: and see what happens. So we're just telling clients to
• 29:45
  Speaker 1: be very careful about those deadlines, probably in September August
• 29:48
  Speaker 1: time frame. But in terms of just repealing dot frank,
• 29:51
  Speaker 1: this can go on to two thou eighteen. There's no
• 29:53
  Speaker 1: really no no deadline there, all right. So if there
• 29:55
  Speaker 1: if there's no deadline, just quickly, Nathan Um, why are
• 29:58
  Speaker 1: the Republicans even bothering to do this to keep it
• 30:01
  Speaker 1: in the new cycle. I think that, you know, they
• 30:03
  Speaker 1: need to show that they're doing something. You know, this
• 30:04
  Speaker 1: is there's been a lot of work done on repealing
• 30:07
  Speaker 1: dot frank. They've this has been going back to two
• 30:09
  Speaker 1: thousand ten. There's been over two fifty bills that have
• 30:12
  Speaker 1: passed the House that have said something. So I think
• 30:14
  Speaker 1: this is to keep the ball rolling. And you know,
• 30:16
  Speaker 1: if they can move on with infrastructure and tax reform
• 30:18
  Speaker 1: and healthcare, then you know, I think you'll have the
• 30:21
  Speaker 1: pieces in place. All right. I want to thank you
• 30:23
  Speaker 1: very much for giving us all the information. Nathan Dean
• 30:25
  Speaker 1: is government analysts for Bloomberg Intelligence. You're joining us from
• 30:29
  Speaker 1: our Bloomberg Studios in Washington, and you can follow Nathan
• 30:34
  Speaker 1: Dean on Twitter at Nathan Dean d C. Thanks for
• 30:40
  Speaker 1: listening to the Bloomberg P and L podcast. You can
• 30:42
  Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud, or
• 30:46
  Speaker 1: whatever podcast platform you prefer. I'm Pim Fox. I'm on
• 30:50
  Speaker 1: Twitter at Pam Fox. I'm on Twitter at Lisa abramowits
• 30:54
  Speaker 1: one before the podcast. You can always catch us worldwide
• 30:57
  Speaker 1: on Bloomberg Radio