December 17, 2025 • 21 mins
Featuring:
- Sheila Kahyaoglu, Senior Equity Research Analyst, Jefferies
- Rep. French Hill (R-AR)
- Elizabeth Economy, Hoover Institution Senior Fellow, US Commerce Department Former Senior China adviser
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amerie Hordern. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
live on Bloomberg Television weekday mornings from six to nine
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always on the Bloomberg
(00:34):
Terminal and the Bloomberg Business app.
Speaker 1 (00:36):
Turning to airlines, spirit renewing discussions to merge with Frontier
as a deep discount, airlines struggles to compete. I spoke
with Jeff Blue CEO Joanna Garrity yesterday about the hurdles
facing smaller airlines. Take a listen.
Speaker 3 (00:50):
Smaller carriers really need to be given a fair shot
to win in this environment, and that's not happening right now.
So we're focus on what we can control. We're focus
on a whole series of initiative under our Jet Foward program.
We do need the government to kind of make that
a more level playing fields so smaller carriers can more
effectively compete. Twenty twenty six really is the year that
we should reap the benefits of all these initiatives that
(01:11):
we put into place in twenty twenty five.
Speaker 1 (01:13):
Chili Kayalu of Jeffries joins us now for more And
as we talk about mergers once again in the airline space,
aside from the Big three, how difficult is it for
companies that are not Delta United or American to survive
in the current landscape of airlines.
Speaker 4 (01:29):
Yeah, it seems this seems to be more defensive move
on the part of the airlines right. Consolidation is driven
by defensive tactics, and airlines in general are a very
tough business. That's why they trade at sixty percent discount
to the market. Airplanes are expensive. Boeing knows that costs
are expensive. Thirty percent is jet fuel, thirty percent is
labor labor. And when your revenues are growing three percent
(01:50):
because your pricing is down and your costs are up
five it creates a very difficult environment for airlines to
thrive in. Whether that's gate costs like Jet Blue mentioned
or additional fees. It makes it hard for airlines, so
they have to consolidate or they have to price down
to take market share, or.
Speaker 1 (02:05):
They have to become other industries like credit card companies
or luxury experience providers. I mean, how much is that
the saving grace, the idea that you could get some
sort of additional premium customer that people are leaning into experiences.
Speaker 5 (02:18):
Willing to pay for it.
Speaker 1 (02:20):
How much is that, really, truthfully the model going forward?
Speaker 5 (02:24):
That's always been the bookcase on airlines.
Speaker 4 (02:26):
You value Delta sky miles on a credit card multiple.
You value their MRO business on an aftermarket multiple of
twenty five times. Ziebada a novel. All of a sudden,
you're getting an airline for free, essentially. So that's been
the bookcase. But the separation of those assets is likely hard,
and we haven't seen that happen.
Speaker 6 (02:45):
Che I know you and the team of Jeffries are
bullish on United. But I'd like to talk about American
Airlines and some of the management decisions which has put
the company in place where it is today. I'm talking
about Seattle, I'm talking about routing, I'm talking about choice
of which airplanes to retire. You know, what will it
take for American Airlines to write the ship here?
Speaker 5 (03:04):
I think the airline set up into twenty six.
Speaker 4 (03:06):
And I say this every January and then I regret
it in February.
Speaker 5 (03:10):
Because I say the setup is positive.
Speaker 4 (03:12):
For airlines, and I retract those comments pretty quickly, and
we've done that for America in the last two years.
But I do think the setup is positive and that
capacity going into twenty six is fairly tight. That goes
across the board for the airlines, and American in particular
has very easy comps. Recall a year and a half
ago they had a snap foo with their corporate relationship,
(03:33):
so their corporate is just getting back to twenty twenty
four levels, so they're about a year behind. And if
that's where we've seen a lot of the premium growth
is on that corporate so that could be a huge
upside driver for them if they take back their share
and then some, which they seem to do.
Speaker 3 (03:49):
So they have the.
Speaker 4 (03:50):
Easiest comp set, and airlines in general have an easy
comp set with the shutdown with the tariff impact in
Q one, so essentially Q one and Q four are
easy comps for them twenty six, but we'll see. I
think a rerating takes discipline, capacity in the market and
pricing for the main cabin to really improve at least
two flat.
Speaker 6 (04:10):
Well, let's shift gears to the manufacturers. Let's talk about
Airbus and Boeing. Right, let's talk about how the market's
coping with these supply chain bottlenecks. I'm talking about forgings, Castings, Interiors.
Speaker 5 (04:20):
Talk to us a.
Speaker 6 (04:20):
Little bit about what your projections for those two companies
are in the new year.
Speaker 4 (04:23):
Sure, So, I actually had one of my favorite days
of my career last week. I went up to Seattle
by myself and got to spend ten hours in rent
In and Ever and it was the most fun I've
had in that I saw the Boeing rent In line,
which creates the seven thirty seven that's about fifty percent
of their sales of buzzing, for the first time. It
was really neat to see the three lines cycling at
(04:44):
forty two. This is a manufacturer that was doing twenty
five a month in twenty four so did double production
at the end of this year, and the employment base
was invigorated.
Speaker 5 (04:55):
They were happy.
Speaker 4 (04:56):
And I think the new CEO, Kelly Orperg who's been
there for eighteen months, is certainly making that change happen.
He's changed about forty percent of the leadership in order
to do that. So really good news on the three
seven front and that the production rate is actually going up.
Airlines will have planes, and it's a matter of certification
on large programs like the Triple seven X they have,
which they took a big charge for in Q three.
Speaker 5 (05:18):
So will that be certified at the end of next year.
Speaker 1 (05:21):
It sounds like all of the airline and airplane related
executives saying twenty twenty six will be our year. Twenty
twenty five wasn't exactly it due to all of the
machinations throughout the throughout this year. I do want to
end with Frontier and Spirit. I know you can't talk
to these specific names. I do want to get a
general sense though, about whether the feeling right now in
the c suite is that this administration will be more
(05:42):
amenable to some of these tie ups and be more
open on a regulatory front than they have been. It's
been a mess every single time that companies have been
trying to that have tried to tie up.
Speaker 5 (05:53):
Yeah, this is clearly a defensive move.
Speaker 4 (05:55):
It'll take about five percent of capacity out of the market.
It'll help remove capacity to strain markets where you're seeing
pricing down, So you know, I think airline consolidation is
something we haven't seen a lot.
Speaker 5 (06:06):
Of in aerospace on the hand.
Speaker 4 (06:08):
On the other hand, going back a dal a day,
in aerospace and defense tech, it's been very prolific for
transactions in that market, whether it's manufacturers or defense tech,
with the administration really supporting growth in the industry.
Speaker 5 (06:22):
So that's been a positive.
Speaker 2 (06:24):
Stay with US multiple IMPEG Savanance coming up.
Speaker 7 (06:27):
Off to this.
Speaker 5 (06:37):
Joining us now for more.
Speaker 1 (06:38):
I'm so pleased to say, as Republican Congressman French Hill
of Arkansas congressman, thank you so much for being with us.
I want to start with this disagreement in Congress about
even being able to vote.
Speaker 5 (06:49):
On these subsidies.
Speaker 1 (06:50):
Have you ever seen Congress Republicans in general more divided
over this issue than they are right now?
Speaker 7 (06:58):
Well, Lisa, it's good to be with you.
Speaker 8 (07:00):
Merry Christmas, Eppie, Hanika to all your viewers and everybody
at Bloomberg. Well, first, let's be clear the tax credits
for Obamacare policies are not expiring, the ones that were
expanded by Joe Biden during the COVID nineteen pandemic. Are expiring,
but that base tax credit that dates back to the
(07:20):
beginning of Obamacare for moderate income families with children is
still in place, So let's be clear about that. And
I'm not sure I agree with the estimate that was cited.
What Republicans are trying to do are side with American
families across the board and lower premiums across the board,
and we consistently brought bills to the House floor to
(07:41):
do that, and we've had Democrats reject them. Last week,
the Senate could not find a consensus on this, and
that's the definitive place. That was the commitment made during
the spending votes. So I think everybody, Democrats, independence, Republicans
all are suffering from the cost of living burden to
us by the nine percent inflation from the Biden administration.
Speaker 7 (08:04):
That's coming down.
Speaker 8 (08:05):
But there's much more work to do, and that includes
on passing bills that will actually lower premiums for all
Americans across the board.
Speaker 6 (08:13):
Congressman Hile, I'm wondering if you could talk to us
a little bit about the Housing for twenty first Century Act,
the act that's expected to streamline housing development provide incentives
for builders just exactly what is the act and how
is it going to alleviate the lack of supplying the
US housing market.
Speaker 7 (08:27):
You bet, thanks David. It's such a big issue.
Speaker 8 (08:29):
We have so many people and so many markets that
have experienced a run up in house prices during the
past five years and certainly a run up in mortgage
rates due to the FED fighting the Biden inflation from
twenty one and twenty two, and that's really caused a
lot of people to not have access to the house
that they want. So what we're doing today is we're
(08:50):
marking up bills that will reduce regulatory costs to building
new houses, improve zoning to encourage better density, more different
kinds of unit across different cities in the US. We're
talking about improving opportunities for rural housing development, make it
easier for a veteran to get a veteran's loan, and
hold HUT accountable on what I think is a deplorable
(09:13):
job that they've done over the past decade or so
in managing public housing for our neediest citizens across the
country who I think have poor many poor conditions, and
HUT is not holding either private landlords or their own
housing authorities accountable.
Speaker 6 (09:29):
Congressman Hill us housing affordability as we know as at
an all time loan. I'm wondering, what is the act
or the bill, the proposal. How does it address home
owner expenses, utilities, insurance. I mean, we know that you
know op X has really risen over the past few years.
Does it do anything to alleviate the stress on homeowners?
Speaker 8 (09:49):
Well on homeowners again, eighty percent of the cost that
goes into a house or local zoning, local code decisions,
local development fees that are charged urged on building new houses.
Speaker 7 (10:02):
If you want to bring down.
Speaker 8 (10:03):
The cost of the mortgage or the cost of property
and casualty insurance, you need to confront inflation. Which is
why I believe the Fed's primary focus is price stability.
And we've made progress from the nine percent we experienced
under Joe Biden's fiscal mismanagement and the Fed's mismanagement coming
out of the pandemic, and there's a sustained pressure there
(10:25):
to bring down costs and that will in turn bring
down property and casually insurances that will bring down the
cost of financing. This is a prime goal for the administration.
But what this bill focuses on is lowering the cost
to manage housing, lower the cost to build housing, and
that's something I think will increase supply, and increase supply
(10:46):
will lower prices. We've already seen a modest break in
that five year high in price appreciation. About eleven top
twenty five markets are seeing some easing off on pricing.
Speaker 1 (10:58):
Congress Fan, one thing that we keep talking about is
the affordability crisis. And you've talked about President Biden several times.
At what point do you think the President Trump needs
to also, though, take some responsibility for the idea that
inflation still is above its two percent target. He's talking
about keeping rates even lower at the same time that
(11:18):
he's been talking about the affordability crisis as a hoax.
Speaker 8 (11:23):
Well, look, the affordability crisis is not a hoax. I
mean we see it in the grocery store when we shop.
We've seen it in the price level that increased as
a result. As I said of the Biden inflation, that
will come down over time. There's work to be done.
I think the President's put his attention on doing that
by lowering long term energy prices, by increasing We're going
(11:44):
to vote this week to increase permitting on federal lands,
which will open up future development for oil on gas production.
Speaker 7 (11:51):
That's good.
Speaker 8 (11:52):
Encouraging production across the country will bring down gas prices
over the next few years.
Speaker 7 (11:57):
And patrollum goes into everything that we make.
Speaker 8 (11:59):
So that will bring down prices as well as some
of the things we're tackling on deregulation and financing. I've
worked hard in my committee to bring down the cost
of financing by making our banks of all sizes more competitive,
to have more capital to lend to people who are
building houses or wanting to have a mortgage on their
(12:19):
first house.
Speaker 5 (12:20):
It's been just about a minute left.
Speaker 1 (12:21):
But how much will further FED rate cuts actually help
with the affordability crisis? If price stability is you said,
is their pre eminent mandate.
Speaker 8 (12:31):
Well, look, this is why the FED has a tough
job to determine what the right price level is, what
the right level of ample reserves are. And prices have
been coming down, they just have gotten sticky right above
the Fed's target. So I just simply say that the
biggest tax on the American people is inflation, and we've
witnessed a forty year high of it due to the
(12:52):
mistakes made by the FED coming out of the pandemic,
and Joe Biden's decision to spend six trillion dollars more
borrowed in the markets that I think was not the
right decision to take, and we got inflation as a
result of too many dollars chasing too few goods for
those two years.
Speaker 2 (13:09):
Stay with us mulplindex Savana's coming up off to this.
Speaker 1 (13:22):
One thing that has been really strong this year has
been discussions around trade. The White House keeping on the
pressure on China, Treasure Secretary Scott Best and telling media
the country's one trillion dollar trade surplus is unsustainable. Joining
us now as Elizabeth Economy Senior Fellow at the Hoover
Institution and one of the stalwart experts and scholars of
the Chinese economy. Elizabeth, thank you so much for being
(13:44):
with us. I want to start with your take on
the trade war so far this year.
Speaker 5 (13:49):
Is there a clear winner?
Speaker 1 (13:51):
Has there been any progress? Has it reshaped the relationship
between the US and China?
Speaker 9 (13:56):
Sure?
Speaker 10 (13:56):
Lots of questions wrapped up into that.
Speaker 8 (14:00):
You know.
Speaker 10 (14:00):
Look, I think the good news is the Bussan summit
between Presidency and Trump really did establish a new equilibrium
between the two countries that really you know, we took
back some of the moves we'd made on export controls
both sides. That was really important, especially for the United
States because of China's hold on the you know, critical
(14:21):
minerals and rare earth elements.
Speaker 9 (14:23):
We took back.
Speaker 10 (14:24):
The shipping port dot fees, you know, so, and we
took off ten percent off the tariffs that we had
on China, you know, so from fifty seven down to
forty seven percent. So I think a new equilibrium. But
that's not to say that there aren't going to be
perturbations to the system. And we've already seen just over
the past week with the announcement out of the State
(14:45):
Department of pax Silica this you know, new arrangement between
the United States and eight other countries to try to
develop really a trusted supply chain from you know, Ai
for the AI semiconductor supply chain all the way from
you know investments in Australia in rare earth elements and
critical minerals all the way through the UAE, with you know,
(15:07):
providing financing. And then of course Taiwan is a special
partner to the group because of course, you know, ninety
percent of there are more of this advanced semiconductors that
certainly the US relies on come from Taiwan. So you know,
we took that action, and then the Chinese, you know,
put back on some export controls around gallium and germanium
and graphite, and put some companies that are involved in
(15:28):
this new pack silica on their Unreliable Entities list, and
so you know they're going to be these kind of
tit for tat moves. Clearly, you know, the administration is
not stomping in terms of what it wants to see
in the tech competition space. It's going to do what
it wants to do, and Shine is going to respond
in kind.
Speaker 5 (15:47):
You know, hopefully we don't.
Speaker 10 (15:48):
Go into a free fall, we don't end up back
at the you know, one hundred and fifty one hundred
and seventy five percent caraff level. But I don't think
it's going to be smooth sailing.
Speaker 1 (15:57):
There has been this bigger question about which economy is
strong and better to withstand some of this volatility. Over
the past couple of days, we've gotten data out of
China signifying that there has been an ongoing decline, weakening
and consumer appetite this concern about prices that are falling
too rapidly. Do you think that this is laying the
groundwork for some sort of stimulus to support the economy
(16:20):
during this prolonged tip for tag I.
Speaker 10 (16:23):
Mean, look that Chinese you know playbook is basically, you know,
more investment, and you know, over the past couple of years,
that investment has moved away from the property sector, which
has been in a prolonged slump, to the tech sector,
you know, clean tech, legacy semiconductors, the whole array of
made in China, twenty twenty five technologies, you know, where
(16:43):
China wants to dominate, Chinese companies to dominate at home
and then become global champions. So that includes new materials
and evs and AI, all these you know, important cutting
edge technologies. That is the playbook, and that is what
they've been doing. But I think that's running its course.
Local governments have you been building up their you know debt.
The property sector is still slumping, There's no consumer confidence.
(17:06):
The country has done very little to reshape the social
welfare net to make people feel confident right that they're
not going to have to spend their savings on some
healthcare emergency or on their children's education. So the pension
system is you know, basically broken in about a third
of the provinces. So they have to do more to
(17:26):
boost consumer confidence. They've been reluctant to do that and
people are not and that's why they're not buying. And
you know, as an aside, you know, also the birth
rate continues to fall, and birth rate tracks with consumer confidence.
So if they want to begin to address their demographic challenges,
which are also enormous, they need to do more to
(17:47):
address their consumer confidence.
Speaker 6 (17:48):
That's right, Elizabeth, demographic challenges, it's real estate crisis is
entering it's fifth year in a row. Yet insiders are
calling for a stronger you on despite the fact that
it's an exportlet economy. I mean, I think sports rose
above one trillion dollars for the first time on record
last month. To talk to us about you know why,
our insiders, why is China looking for the you want
to appreciate in twenty twenty six, Well, I.
Speaker 10 (18:11):
Think it reflects a policy debate within China, and you know,
a strong view one would encourage you know, consumers to
buy more. It would give China greater credibility on the
international stage in terms of you know, saying that It's
currency should be the you know, should become a real
reserve currency in the future as it pushes to dedollarize
the global economy, and it would relieve some of the
(18:34):
pressure that it's beginning to face from the international community
now in terms of all those exports, right, because it's
not just the United States that is calling out China
for its you know, export of its over capacity and
all those you know, evs and batteries, et cetera. It's
now it's Europe, it's Mexico for example. It's threatening I think,
fifty percent tariffs on Chinese goods. So I think China
(18:58):
has a problem again not only with the United States
and some of the advanced economies, but also with middle
income and increasingly emerging economies that are seeing you know,
their markets flooded with these Chinese goods, and their nascent
industries are never going to be never going to have
a chance to compete. So I think that would be
those would be some of the reasons that the Chinese
government might make a move toward appreciating.
Speaker 6 (19:19):
The Yan Yeah, I mean, Elizabeth, Chinese equities are up
I think one point eight two percent overnight following that
successful IPO of Meta X. I think the Chinese equity
markets up sixteen seventeen.
Speaker 7 (19:29):
Percent year to date.
Speaker 6 (19:30):
Talk to us about foreign interest in Chinese equities. I mean,
for me, I mean I look at the variable interest
and toity structure as a putoff, right, I mean, you
don't own anything really. You're owning a hold co in
the Caymans. You're not really owning an op goo.
Speaker 5 (19:43):
Talk to us about how.
Speaker 6 (19:44):
An investor, a foreign investor here in the US, can
get comfortable owning Chinese shares.
Speaker 10 (19:50):
Okay, so you're pushing me past what I, you know,
actually focus on.
Speaker 9 (19:54):
So I don't want to be giving investment advice to
of course, Well let me to say, I think, you know,
the Chinese stark stock market, you know, has been compared
to a casino you know, and gambling by you know.
Speaker 10 (20:08):
Some of China's most prominent economists. So you know, I
would always just say fire beware. But you know, I
am not in a position to be giving advice in
this space.
Speaker 1 (20:18):
You are in a position to be getting advice to
policymakers who'll be listening closely. Elizabeth Economy and for the
Hoover institution. Thank you so much for being with us.
This is one of the key stories that we've been
focusing on, just how intertwined are these economies and who
is going to win ultimately at a time when investors
aren't sure yet, they're both voting with their feet on
both fronts well.
Speaker 6 (20:38):
Affordability issues in China, I mean, the real estate crisis.
It's fifth year in a row China. Vanke, a state
owned developer, is probably been the fault this week. I mean,
it's just things run mess domestically, and the fact that
they're going to make exports that much more competitive by
trying to appreciate the you on just doesn't make.
Speaker 5 (20:53):
Much sense to me.
Speaker 2 (20:54):
This is the Bloomberg's Events podcast, bringing you the best
in markets, economics, an gie policy. You can watch the
show live on Bloomberg TV weekday mornings from six am
to nine am Eastern. Subscribe to the podcast on Apple,
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the Bloomberg Terminal and the Bloomberg Business app.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amerie Hordern. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
live on Bloomberg Television weekday mornings from six to nine
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always on the Bloomberg
(00:34):
Terminal and the Bloomberg Business app.
Speaker 1 (00:36):
Turning to airlines, spirit renewing discussions to merge with Frontier
as a deep discount, airlines struggles to compete. I spoke
with Jeff Blue CEO Joanna Garrity yesterday about the hurdles
facing smaller airlines. Take a listen.
Speaker 3 (00:50):
Smaller carriers really need to be given a fair shot
to win in this environment, and that's not happening right now.
So we're focus on what we can control. We're focus
on a whole series of initiative under our Jet Foward program.
We do need the government to kind of make that
a more level playing fields so smaller carriers can more
effectively compete. Twenty twenty six really is the year that
we should reap the benefits of all these initiatives that
(01:11):
we put into place in twenty twenty five.
Speaker 1 (01:13):
Chili Kayalu of Jeffries joins us now for more And
as we talk about mergers once again in the airline space,
aside from the Big three, how difficult is it for
companies that are not Delta United or American to survive
in the current landscape of airlines.
Speaker 4 (01:29):
Yeah, it seems this seems to be more defensive move
on the part of the airlines right. Consolidation is driven
by defensive tactics, and airlines in general are a very
tough business. That's why they trade at sixty percent discount
to the market. Airplanes are expensive. Boeing knows that costs
are expensive. Thirty percent is jet fuel, thirty percent is
labor labor. And when your revenues are growing three percent
(01:50):
because your pricing is down and your costs are up
five it creates a very difficult environment for airlines to
thrive in. Whether that's gate costs like Jet Blue mentioned
or additional fees. It makes it hard for airlines, so
they have to consolidate or they have to price down
to take market share, or.
Speaker 1 (02:05):
They have to become other industries like credit card companies
or luxury experience providers. I mean, how much is that
the saving grace, the idea that you could get some
sort of additional premium customer that people are leaning into experiences.
Speaker 5 (02:18):
Willing to pay for it.
Speaker 1 (02:20):
How much is that, really, truthfully the model going forward?
Speaker 5 (02:24):
That's always been the bookcase on airlines.
Speaker 4 (02:26):
You value Delta sky miles on a credit card multiple.
You value their MRO business on an aftermarket multiple of
twenty five times. Ziebada a novel. All of a sudden,
you're getting an airline for free, essentially. So that's been
the bookcase. But the separation of those assets is likely hard,
and we haven't seen that happen.
Speaker 6 (02:45):
Che I know you and the team of Jeffries are
bullish on United. But I'd like to talk about American
Airlines and some of the management decisions which has put
the company in place where it is today. I'm talking
about Seattle, I'm talking about routing, I'm talking about choice
of which airplanes to retire. You know, what will it
take for American Airlines to write the ship here?
Speaker 5 (03:04):
I think the airline set up into twenty six.
Speaker 4 (03:06):
And I say this every January and then I regret
it in February.
Speaker 5 (03:10):
Because I say the setup is positive.
Speaker 4 (03:12):
For airlines, and I retract those comments pretty quickly, and
we've done that for America in the last two years.
But I do think the setup is positive and that
capacity going into twenty six is fairly tight. That goes
across the board for the airlines, and American in particular
has very easy comps. Recall a year and a half
ago they had a snap foo with their corporate relationship,
(03:33):
so their corporate is just getting back to twenty twenty
four levels, so they're about a year behind. And if
that's where we've seen a lot of the premium growth
is on that corporate so that could be a huge
upside driver for them if they take back their share
and then some, which they seem to do.
Speaker 3 (03:49):
So they have the.
Speaker 4 (03:50):
Easiest comp set, and airlines in general have an easy
comp set with the shutdown with the tariff impact in
Q one, so essentially Q one and Q four are
easy comps for them twenty six, but we'll see. I
think a rerating takes discipline, capacity in the market and
pricing for the main cabin to really improve at least
two flat.
Speaker 6 (04:10):
Well, let's shift gears to the manufacturers. Let's talk about
Airbus and Boeing. Right, let's talk about how the market's
coping with these supply chain bottlenecks. I'm talking about forgings, Castings, Interiors.
Speaker 5 (04:20):
Talk to us a.
Speaker 6 (04:20):
Little bit about what your projections for those two companies
are in the new year.
Speaker 4 (04:23):
Sure, So, I actually had one of my favorite days
of my career last week. I went up to Seattle
by myself and got to spend ten hours in rent
In and Ever and it was the most fun I've
had in that I saw the Boeing rent In line,
which creates the seven thirty seven that's about fifty percent
of their sales of buzzing, for the first time. It
was really neat to see the three lines cycling at
(04:44):
forty two. This is a manufacturer that was doing twenty
five a month in twenty four so did double production
at the end of this year, and the employment base
was invigorated.
Speaker 5 (04:55):
They were happy.
Speaker 4 (04:56):
And I think the new CEO, Kelly Orperg who's been
there for eighteen months, is certainly making that change happen.
He's changed about forty percent of the leadership in order
to do that. So really good news on the three
seven front and that the production rate is actually going up.
Airlines will have planes, and it's a matter of certification
on large programs like the Triple seven X they have,
which they took a big charge for in Q three.
Speaker 5 (05:18):
So will that be certified at the end of next year.
Speaker 1 (05:21):
It sounds like all of the airline and airplane related
executives saying twenty twenty six will be our year. Twenty
twenty five wasn't exactly it due to all of the
machinations throughout the throughout this year. I do want to
end with Frontier and Spirit. I know you can't talk
to these specific names. I do want to get a
general sense though, about whether the feeling right now in
the c suite is that this administration will be more
(05:42):
amenable to some of these tie ups and be more
open on a regulatory front than they have been. It's
been a mess every single time that companies have been
trying to that have tried to tie up.
Speaker 5 (05:53):
Yeah, this is clearly a defensive move.
Speaker 4 (05:55):
It'll take about five percent of capacity out of the market.
It'll help remove capacity to strain markets where you're seeing
pricing down, So you know, I think airline consolidation is
something we haven't seen a lot.
Speaker 5 (06:06):
Of in aerospace on the hand.
Speaker 4 (06:08):
On the other hand, going back a dal a day,
in aerospace and defense tech, it's been very prolific for
transactions in that market, whether it's manufacturers or defense tech,
with the administration really supporting growth in the industry.
Speaker 5 (06:22):
So that's been a positive.
Speaker 2 (06:24):
Stay with US multiple IMPEG Savanance coming up.
Speaker 7 (06:27):
Off to this.
Speaker 5 (06:37):
Joining us now for more.
Speaker 1 (06:38):
I'm so pleased to say, as Republican Congressman French Hill
of Arkansas congressman, thank you so much for being with us.
I want to start with this disagreement in Congress about
even being able to vote.
Speaker 5 (06:49):
On these subsidies.
Speaker 1 (06:50):
Have you ever seen Congress Republicans in general more divided
over this issue than they are right now?
Speaker 7 (06:58):
Well, Lisa, it's good to be with you.
Speaker 8 (07:00):
Merry Christmas, Eppie, Hanika to all your viewers and everybody
at Bloomberg. Well, first, let's be clear the tax credits
for Obamacare policies are not expiring, the ones that were
expanded by Joe Biden during the COVID nineteen pandemic. Are expiring,
but that base tax credit that dates back to the
(07:20):
beginning of Obamacare for moderate income families with children is
still in place, So let's be clear about that. And
I'm not sure I agree with the estimate that was cited.
What Republicans are trying to do are side with American
families across the board and lower premiums across the board,
and we consistently brought bills to the House floor to
(07:41):
do that, and we've had Democrats reject them. Last week,
the Senate could not find a consensus on this, and
that's the definitive place. That was the commitment made during
the spending votes. So I think everybody, Democrats, independence, Republicans
all are suffering from the cost of living burden to
us by the nine percent inflation from the Biden administration.
Speaker 7 (08:04):
That's coming down.
Speaker 8 (08:05):
But there's much more work to do, and that includes
on passing bills that will actually lower premiums for all
Americans across the board.
Speaker 6 (08:13):
Congressman Hile, I'm wondering if you could talk to us
a little bit about the Housing for twenty first Century Act,
the act that's expected to streamline housing development provide incentives
for builders just exactly what is the act and how
is it going to alleviate the lack of supplying the
US housing market.
Speaker 7 (08:27):
You bet, thanks David. It's such a big issue.
Speaker 8 (08:29):
We have so many people and so many markets that
have experienced a run up in house prices during the
past five years and certainly a run up in mortgage
rates due to the FED fighting the Biden inflation from
twenty one and twenty two, and that's really caused a
lot of people to not have access to the house
that they want. So what we're doing today is we're
(08:50):
marking up bills that will reduce regulatory costs to building
new houses, improve zoning to encourage better density, more different
kinds of unit across different cities in the US. We're
talking about improving opportunities for rural housing development, make it
easier for a veteran to get a veteran's loan, and
hold HUT accountable on what I think is a deplorable
(09:13):
job that they've done over the past decade or so
in managing public housing for our neediest citizens across the
country who I think have poor many poor conditions, and
HUT is not holding either private landlords or their own
housing authorities accountable.
Speaker 6 (09:29):
Congressman Hill us housing affordability as we know as at
an all time loan. I'm wondering, what is the act
or the bill, the proposal. How does it address home
owner expenses, utilities, insurance. I mean, we know that you
know op X has really risen over the past few years.
Does it do anything to alleviate the stress on homeowners?
Speaker 8 (09:49):
Well on homeowners again, eighty percent of the cost that
goes into a house or local zoning, local code decisions,
local development fees that are charged urged on building new houses.
Speaker 7 (10:02):
If you want to bring down.
Speaker 8 (10:03):
The cost of the mortgage or the cost of property
and casualty insurance, you need to confront inflation. Which is
why I believe the Fed's primary focus is price stability.
And we've made progress from the nine percent we experienced
under Joe Biden's fiscal mismanagement and the Fed's mismanagement coming
out of the pandemic, and there's a sustained pressure there
(10:25):
to bring down costs and that will in turn bring
down property and casually insurances that will bring down the
cost of financing. This is a prime goal for the administration.
But what this bill focuses on is lowering the cost
to manage housing, lower the cost to build housing, and
that's something I think will increase supply, and increase supply
(10:46):
will lower prices. We've already seen a modest break in
that five year high in price appreciation. About eleven top
twenty five markets are seeing some easing off on pricing.
Speaker 1 (10:58):
Congress Fan, one thing that we keep talking about is
the affordability crisis. And you've talked about President Biden several times.
At what point do you think the President Trump needs
to also, though, take some responsibility for the idea that
inflation still is above its two percent target. He's talking
about keeping rates even lower at the same time that
(11:18):
he's been talking about the affordability crisis as a hoax.
Speaker 8 (11:23):
Well, look, the affordability crisis is not a hoax. I
mean we see it in the grocery store when we shop.
We've seen it in the price level that increased as
a result. As I said of the Biden inflation, that
will come down over time. There's work to be done.
I think the President's put his attention on doing that
by lowering long term energy prices, by increasing We're going
(11:44):
to vote this week to increase permitting on federal lands,
which will open up future development for oil on gas production.
Speaker 7 (11:51):
That's good.
Speaker 8 (11:52):
Encouraging production across the country will bring down gas prices
over the next few years.
Speaker 7 (11:57):
And patrollum goes into everything that we make.
Speaker 8 (11:59):
So that will bring down prices as well as some
of the things we're tackling on deregulation and financing. I've
worked hard in my committee to bring down the cost
of financing by making our banks of all sizes more competitive,
to have more capital to lend to people who are
building houses or wanting to have a mortgage on their
(12:19):
first house.
Speaker 5 (12:20):
It's been just about a minute left.
Speaker 1 (12:21):
But how much will further FED rate cuts actually help
with the affordability crisis? If price stability is you said,
is their pre eminent mandate.
Speaker 8 (12:31):
Well, look, this is why the FED has a tough
job to determine what the right price level is, what
the right level of ample reserves are. And prices have
been coming down, they just have gotten sticky right above
the Fed's target. So I just simply say that the
biggest tax on the American people is inflation, and we've
witnessed a forty year high of it due to the
(12:52):
mistakes made by the FED coming out of the pandemic,
and Joe Biden's decision to spend six trillion dollars more
borrowed in the markets that I think was not the
right decision to take, and we got inflation as a
result of too many dollars chasing too few goods for
those two years.
Speaker 2 (13:09):
Stay with us mulplindex Savana's coming up off to this.
Speaker 1 (13:22):
One thing that has been really strong this year has
been discussions around trade. The White House keeping on the
pressure on China, Treasure Secretary Scott Best and telling media
the country's one trillion dollar trade surplus is unsustainable. Joining
us now as Elizabeth Economy Senior Fellow at the Hoover
Institution and one of the stalwart experts and scholars of
the Chinese economy. Elizabeth, thank you so much for being
(13:44):
with us. I want to start with your take on
the trade war so far this year.
Speaker 5 (13:49):
Is there a clear winner?
Speaker 1 (13:51):
Has there been any progress? Has it reshaped the relationship
between the US and China?
Speaker 9 (13:56):
Sure?
Speaker 10 (13:56):
Lots of questions wrapped up into that.
Speaker 8 (14:00):
You know.
Speaker 10 (14:00):
Look, I think the good news is the Bussan summit
between Presidency and Trump really did establish a new equilibrium
between the two countries that really you know, we took
back some of the moves we'd made on export controls
both sides. That was really important, especially for the United
States because of China's hold on the you know, critical
(14:21):
minerals and rare earth elements.
Speaker 9 (14:23):
We took back.
Speaker 10 (14:24):
The shipping port dot fees, you know, so, and we
took off ten percent off the tariffs that we had
on China, you know, so from fifty seven down to
forty seven percent. So I think a new equilibrium. But
that's not to say that there aren't going to be
perturbations to the system. And we've already seen just over
the past week with the announcement out of the State
(14:45):
Department of pax Silica this you know, new arrangement between
the United States and eight other countries to try to
develop really a trusted supply chain from you know, Ai
for the AI semiconductor supply chain all the way from
you know investments in Australia in rare earth elements and
critical minerals all the way through the UAE, with you know,
(15:07):
providing financing. And then of course Taiwan is a special
partner to the group because of course, you know, ninety
percent of there are more of this advanced semiconductors that
certainly the US relies on come from Taiwan. So you know,
we took that action, and then the Chinese, you know,
put back on some export controls around gallium and germanium
and graphite, and put some companies that are involved in
(15:28):
this new pack silica on their Unreliable Entities list, and
so you know they're going to be these kind of
tit for tat moves. Clearly, you know, the administration is
not stomping in terms of what it wants to see
in the tech competition space. It's going to do what
it wants to do, and Shine is going to respond
in kind.
Speaker 5 (15:47):
You know, hopefully we don't.
Speaker 10 (15:48):
Go into a free fall, we don't end up back
at the you know, one hundred and fifty one hundred
and seventy five percent caraff level. But I don't think
it's going to be smooth sailing.
Speaker 1 (15:57):
There has been this bigger question about which economy is
strong and better to withstand some of this volatility. Over
the past couple of days, we've gotten data out of
China signifying that there has been an ongoing decline, weakening
and consumer appetite this concern about prices that are falling
too rapidly. Do you think that this is laying the
groundwork for some sort of stimulus to support the economy
(16:20):
during this prolonged tip for tag I.
Speaker 10 (16:23):
Mean, look that Chinese you know playbook is basically, you know,
more investment, and you know, over the past couple of years,
that investment has moved away from the property sector, which
has been in a prolonged slump, to the tech sector,
you know, clean tech, legacy semiconductors, the whole array of
made in China, twenty twenty five technologies, you know, where
(16:43):
China wants to dominate, Chinese companies to dominate at home
and then become global champions. So that includes new materials
and evs and AI, all these you know, important cutting
edge technologies. That is the playbook, and that is what
they've been doing. But I think that's running its course.
Local governments have you been building up their you know debt.
The property sector is still slumping, There's no consumer confidence.
(17:06):
The country has done very little to reshape the social
welfare net to make people feel confident right that they're
not going to have to spend their savings on some
healthcare emergency or on their children's education. So the pension
system is you know, basically broken in about a third
of the provinces. So they have to do more to
(17:26):
boost consumer confidence. They've been reluctant to do that and
people are not and that's why they're not buying. And
you know, as an aside, you know, also the birth
rate continues to fall, and birth rate tracks with consumer confidence.
So if they want to begin to address their demographic challenges,
which are also enormous, they need to do more to
(17:47):
address their consumer confidence.
Speaker 6 (17:48):
That's right, Elizabeth, demographic challenges, it's real estate crisis is
entering it's fifth year in a row. Yet insiders are
calling for a stronger you on despite the fact that
it's an exportlet economy. I mean, I think sports rose
above one trillion dollars for the first time on record
last month. To talk to us about you know why,
our insiders, why is China looking for the you want
to appreciate in twenty twenty six, Well, I.
Speaker 10 (18:11):
Think it reflects a policy debate within China, and you know,
a strong view one would encourage you know, consumers to
buy more. It would give China greater credibility on the
international stage in terms of you know, saying that It's
currency should be the you know, should become a real
reserve currency in the future as it pushes to dedollarize
the global economy, and it would relieve some of the
(18:34):
pressure that it's beginning to face from the international community
now in terms of all those exports, right, because it's
not just the United States that is calling out China
for its you know, export of its over capacity and
all those you know, evs and batteries, et cetera. It's
now it's Europe, it's Mexico for example. It's threatening I think,
fifty percent tariffs on Chinese goods. So I think China
(18:58):
has a problem again not only with the United States
and some of the advanced economies, but also with middle
income and increasingly emerging economies that are seeing you know,
their markets flooded with these Chinese goods, and their nascent
industries are never going to be never going to have
a chance to compete. So I think that would be
those would be some of the reasons that the Chinese
government might make a move toward appreciating.
Speaker 6 (19:19):
The Yan Yeah, I mean, Elizabeth, Chinese equities are up
I think one point eight two percent overnight following that
successful IPO of Meta X. I think the Chinese equity
markets up sixteen seventeen.
Speaker 7 (19:29):
Percent year to date.
Speaker 6 (19:30):
Talk to us about foreign interest in Chinese equities. I mean,
for me, I mean I look at the variable interest
and toity structure as a putoff, right, I mean, you
don't own anything really. You're owning a hold co in
the Caymans. You're not really owning an op goo.
Speaker 5 (19:43):
Talk to us about how.
Speaker 6 (19:44):
An investor, a foreign investor here in the US, can
get comfortable owning Chinese shares.
Speaker 10 (19:50):
Okay, so you're pushing me past what I, you know,
actually focus on.
Speaker 9 (19:54):
So I don't want to be giving investment advice to
of course, Well let me to say, I think, you know,
the Chinese stark stock market, you know, has been compared
to a casino you know, and gambling by you know.
Speaker 10 (20:08):
Some of China's most prominent economists. So you know, I
would always just say fire beware. But you know, I
am not in a position to be giving advice in
this space.
Speaker 1 (20:18):
You are in a position to be getting advice to
policymakers who'll be listening closely. Elizabeth Economy and for the
Hoover institution. Thank you so much for being with us.
This is one of the key stories that we've been
focusing on, just how intertwined are these economies and who
is going to win ultimately at a time when investors
aren't sure yet, they're both voting with their feet on
both fronts well.
Speaker 6 (20:38):
Affordability issues in China, I mean, the real estate crisis.
It's fifth year in a row China. Vanke, a state
owned developer, is probably been the fault this week. I mean,
it's just things run mess domestically, and the fact that
they're going to make exports that much more competitive by
trying to appreciate the you on just doesn't make.
Speaker 5 (20:53):
Much sense to me.
Speaker 2 (20:54):
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