Apple Products Should Be Made in America, Vincent Vittorio Says

half million workers remain in the industry. Here to tell us more about manufacturing in the United States and his movie, American Made Movie, is Vincent Vittorio. He is the director. Vincent. Thank you very much for being with us. Thanks so much for having me on. Can you just start off by telling us why did you decide to make this movie? Well, but my co director and I both had kind of

a connection to manufacturing. My wife's parents were from Detroit and work to many of the auto manufacturers there, and then my business partners also was in Georgia, um a lot of the plants there that end up closing down, and we started to realize that, you know, with the power of documentary filmmaking, we can kind of get people to really understand that well, manufacturing isn't what it was, that there's still viable jobs for manufacturing, and so we

produced a film that talks about kind of that, you know, um, the spirit of manufacturing that we can awaken with with encouraging people to buy from this country, from their community and their home state. Speak if you can about some of the specifics, because we know a lot of work that might have been done by human beings is now done by robots or is automated. But manufacturing employment, as evidenced by your movie, you can still lead to a

positive economic outlook. No, definitely, you know there's a ripple effect that happens when you have a UM, a line of manufacturing that's much different than what it was twenty years ago. I mean you think of the way that things have advanced and the way that um A lot of these jobs are much more technology based, with having a background in technical education as opposed to being on

a line where we're just putting apart together. And I think you know that really goes to the education into things. I mean, in your state of New York, there's a great program the p Tech program that you know, really get kids to understand kind of, um, the importance of

a career pathway. And I think if we can have more things like that across this country to get kids to really understand that, you know, we don't all have to graduate with a liberal arts degree, but we can have a job that gets us kind of a foot forward with thinking about advanced manufacturing or careers um to

kind of, I guess, respond to this skills gap. We're starting to see, well, a lot of manufacturers, indeed, the Manufacturers Association, National Association and manufacturers a big porter President Donald Trump. They speak about tax reform and how that could spur infrastructure spending. Is that also part of the picture when you know you made this movie, You've got to find what are the things that are going to

make manufacturing economically viable? You know? Well, to start with the Trump side of things, I think that it's it's kind of one of those I don't know what it's gonna mean today versus tomorrow. I mean, so I think that, um, I don't know where he's going to bring things, but I do think the tax reform can definitely incentivize people to make things here and to give them a reason

to not feel like they can go overseas. Um. I just you know, I really think it takes a lot of bipartisanship to come together to actually approve that on all sides. But what you do see is things like the fox con plant, you know in Wisconsin, and I mean, that's that's a huge thing to see. The fox com that we always look at is being a foreign entity of sorts that is now going to be manufacturing things on you know, our home soil. And I think that's that's a beautiful thing. And you see that with a

lot of auto manufacturers. So I think that we need to give them reasons that aren't just about the tax code, but about communities reaching out and making them feel like the ripple effect that's going to not only help the state but help their their um. You know, they're they're manufacturing their brand, their their company. And as far as

examples in the movie, maybe just give people some idea. Well, one one really big company which which I've grown to love through making the film Son Partly Bias is new balance. So new balance sneakers. You know, they make sneakers in the United States, not all of them, but a good

amount of them, and it's grown tremendously in time. It's it's actually kind of ironic that, um, the people that are buying the most America made sneakers are overseas, which I think that goes back to say something about what that brand of made an America means. You know, if we can't look at that as we go to the big box store and think that this is something important that we make things here but other countries are noticing it, you know we need to take take interest in that.

But um, New Balance is a great exam up on you know the other one that's based in based in Brighton, right, I mean they based in in Boston, home to Bloomberg one oh six one and Bloomberg. So that is certainly a feature of the sort of the made in America, made in the USA label, is it is prestigious outside the United States? What about making it prestigious inside the United States? You know that takes a lot with the marketing.

I mean you've seen that the last two Super Bowls where you see that made an America ad that comes up. But I mean, if we can get people today to realize kind of what it means to have a personal relationship with the product we buy or the brand. I think we can do something. I mean Lebron James great example, right, He's getting paid millions of dollars to endorse anything and people are going to flock to it. I think if we can do that same thing with this Maid in

America brand. I mean, can you imagine if Robert Downey Jr. Had like an Iron Man mask and he took it off and gave a pitch for the idea that like this was made right here in the USA. I mean, like, those are the kind of things that we need really kind of do to to spark that because there's no doubt we're not making you know, good quality stuff and you can go buy a desk at Ikea for a quarter of the price at the expensive furniture store, but you know, the money you're paying it comes across with

the product you're getting. Things in America are made um to last, and I think that's something that I think I feel very passionate about with everything that I purchase. All right, But having having said that, do you find that there's a contradiction because if you go to a big box retailer, you're looking for the best price. You're not necessarily going to put the item or the palette of items back on the shelf because it's made somewhere else.

And that is what has fueled a lot of innovation in the United States in terms of let's say, retailing or even making consumer products affordable. No, you're right. I mean it's very hard because we live in this kind of throwaway society where we don't plan on buying a couch that's going to last us more than a couple of years. I mean, and I think that's kind of a deeper question about like we buy and the way we buy. But I think that, um, ultimately it comes

to supply and demand. If enough people are looking for American made products, of enough people are kind of looking for that brand, um and making sure they look at the label, it can change things. I mean, it's happened with the organic food movement. I mean, can you imagine, um, you know, ten years ago, if I would have said that organic foods would be like they are now, I mean you could never find them everywhere. And now I mean you've got truck stops, you know, and they're filled

with healthy options. So I think it's because consumers demanded it. And so if consumers can demand um with their purchase power American made goods, then I think that the big box stores could start to see more of those coming there. If you give you a fifteen seconds, is there one product that you wish was made in the United States but isn't. Oh gosh, I mean, I think the Apple computer.

I mean, that's that's a really big one because it was it was it was grown out of you know, my state of California, and with the the the engineering, the the prototypes, everything about it, we should make it here. I mean, we're making enough money with that. And I know that something President Trump and even you know, for President Obama was trying to do. I think that there's certain things we should really try to make here, and I think it's it's important. I want to thank you

very much for spending time with us. Vincent Victorio. He is the director of American Made Movie. All right, let's turn our attention now to investments and Mike Mulaney. Mike is joining us from Boston Partners. He is the director of Global Market Research. Mike, thanks very much for being with us. Uh, you know, I want if we get start off with You've listed a couple of very important things. You've got things such as you know, the Trump bomp

issues having to do with oil the Japanese market. And I'm wondering if we could kind of look at Japan first and work our way back to the United States because the Prime Minister, Shinzo Abe has called an election, and yeah, election, yes to us, it's reminiscent obviously of what Teresa May did in June, and yeah, you got exactly exactly. Now, this is a scheduled for October twenty two, and he's been in power for about five years, which

is pretty long if you're a Japanese prime minister. But he is going to be going against He's going to be opposed by the Party of Hope. Now, this is this new conservative alliance which is led by the populist mayor of Tokyo, Uriko koek and she has previously served as Minister of Defense. And I'm wondering if you could describe what would happen if indeed shinzo Abe was returned to power with a reduced majority, or indeed didn't even

make it past the post. Well, you have the question once again, the progress of of abenamics or abenamics in j general, if he was going to be able to push through his reforms that he's been relatively successful for if you look at both the economy uh and the markets in general and Japan. So I think that would be the primary question mark whether or not he would able to proceed with um with the same kind of vigor that he's had up a failure last you know,

two to three years that that's been in place. Right now, looking at the Japanese stock market in dollar terms, up about twelve and a quarter percent so far this year. Yeah, And the key with the you know, the Japanese market is that investors basically have been burned so many times

in the past about Japan. There's still kind of that weary eye about the market in general and the economy in general because we've had not just one, but probably at least two decades of the you know, the lost decades, not just they lost decade as far as Japan's concern, that goes to the economy and more or less for

the markets in general. So I think, you know, we have to have a a proof statement coming from from this type of a snap election that we can can continue to see the improvement that we've seen, like I said, most recently from both the economy and the markets. Yeah, well,

I was even thinking. You know that Governor Karda of the Bank of Japan, his reappointment is scheduled for eighteen but that could change if we get a new leader in Japan, no question, and we you know, if we were to air on both the Bank of Japan in on the Federal Reserve, we would like to see status quo, that being Karada staying in place as well as jon and staying in place. Just the stability of the market.

I think Karroda has done a magnificent job. He's probably been the most uh do you want to call it aggressive, and it's not just um, you know, more or less creative of of the central bankers in the world. And once again it's done a good job of a stabilizing

asset prices and stabilize the economy in general. Well, you're being diplomatic because some investors might say that he actually fixes the prices of assets because what they have about thirty three of the j GB market and like three quarters of all Japanese exchange traded funds that are owned by the central Bank. That's why I use the word creative, because it's something a little bit out of the norm

that we've seen from other central bankers. But um, you know, it's it's a little bit reminiscent of what Mario Draga said, it's whatever it takes, and I think Corona has basically done that. Okay, so you help me circle back. We're gonna go to Europe now and Mario drag the European Central Bank tell me what you uh, what your thoughts are are there, because I know that later on in the week, I believe you know, we're going to get some news from the Central Bank of Europe, but also

we're gonna get the Fed minutes. What are you what

are you gonna take away from Europe? First? Well, Europe is going to be key, is that I think the twenty six I think is the meeting in Europe, and once again the eyes are gonna be focused on exactly what's going to happen with the balance sheet tapering program from the e c B. What we're worry about once again is that that's going to coincide with potentially the Fed, you know, uh, diminishing and dropping their balance sheet this this month as well, So we're gonna have a two

for for the month of October potentially. As far as balance sheet um retracement, I guess you could say is concerns and we're leary about that because this is still a grand experiment, you know, on the way up, it was a grand experiment on the balance sheet explosions that we've seen around the world, and we're a little bit leary and that to think that we don't want to be naive to think there's not going to be some kind of symmetry between the the benefit of asset prices

on the upside as balance sheets grew from the central banks versus as they shrink them. Um, there will be no impact. And I think that's where you know, people might be a bit naive. Have you've heard this from um Jamie diamond saying that you've got to watch this given that it is the grand experiment as far as balance sheets A concerned all right, Well as someone I know who's got a lot of experienced in fixed income markets put that hat on and tell us what do

you think about the balance sheet unwind? And that gives us an opportunity to turn to the United States where do you think that's gonna do to yields? For example, we got the thirty year today basically on two point eight nine, the tenure at two thirty five. Uh. To two aspects of the yield story. So the first one would be, like you said, as far as the balance sheet, uh,

you know, the FED owns. I believe it's of all mortgage backed securities and also seventeen percent of all treasuries right now, so they have been obviously in most recent years, the marginal buyer that's been out there for both the treasury market and the mortgage back market. So as that unwind, it's gonna have you're gonna have to find the next marginal buyer. I don't know if it's gonna be Japan.

I don't know if it's gonna be China, but someone's gonna have to take up the slack that that is going to become apparent from the lack of FED buying. So that's number one. Rates should be higher to attract that next marginal buyer. To once again, you've got to go back to inflation. And you know, it's been a a quandary that the Janet Yellen has been talking about for quite some time. We did see some pressure obviously on average hourly earnings that came in and the report

on Friday backup at two point. The question becomes is that's going to stick a not or is that once again just a byproduct of the hurricanes that we saw during the course of the September reporting period where lower wage journers fell out of the survey and therefore biased the numbers upwards. So we've still got a month to figure out if it was just a temporary factor or not. But ultimately it's going to be inflation that's going to

drive where interest rates go. Um. I don't think that the FED itself can get too aggressive as far as pushing up the overall structure of rates. Thanks very much, Mike Mullaney. He is the director of Global market Research for Boston Properties. We now call upon Nick Hayman of William Blair Global Industrial Infrastructure Expert to tell us about

a general electric Nick, always a pleasure. What do you make of the moves by John Flannery taking the reins earlier from Jeffrey Immelt, A new CFO and four vice chairs, well three four if you count the CFO leaving the company. Yeah, We have obviously a lot of change being implemented in a very short time period by John Flannery and it

UH is leaving no stone unturned. But with regards to you know, Jeff Bornstein, the former CFO, and Beth Combstock and John Rice, I think that you know, John is is really trying to find, if you will, representatives of what he sees perhaps is more of the initiatives he's going to focus on going forward versus those that were really UM stewards of Jeff Emil's former CEO and chairman. All right, so what are some of the strategy points

that John Flannery is into a rely on. Well, I mean, very simplistically, he's very UH focused near term on being able to help UM improve the cash flow from operating activities UM that this year, you know, clearly have been under pressure. We think UM they may not even reach the low end of their twelve to fourteen billion dollar target, and that reflects stepped up UH restructuring on a cash

basis across all aspects of the company's operations. But I think that will lay out a clear plan to improve that by fifty or six percent by later this decade to eighteen to twenty billion dollars. G needs fifteen sixteen billion on a normalized capital spend of two and a half to three UH to be able to support HITS operations and pay it's eight billion dividend. Let's just go through some of the items, perhaps you know this a little bit more detailed, maybe getting ready for that November

thirteenth meeting. I believe that John Sinner is going to addressing UH investors. Number One, you write, you talk about operationally weaker end market demand for gepower, transportation, and oil and transportation, right, yeah, and the oil and gas so you have when you're looking to reset, which is one of the exercises, He'll go through the two dollar two thousand eighteen UM target by jeff eimilt Um. He'll look to operationally adjust that for the weaker end market conditions

you just mentioned. He's going to have some changes in the business portfolio, I'm sure for smaller businesses, but he's also going to have a tremendously larger I think amount of costs out a three billion or more. And then in turn he's going to reset the accounting so that will include you know, the full impact of contract asset investments.

As well as their pension costs. Okay, So that and then you're talking that would lead you right into your second point, which is the portfolio pruning, getting rid of businesses that don't necessarily meet their cost to capital. Yes. No, there's definitely some peripheral businesses that I would call calls on the future him that in turn were funded under Jeff. But under John, if you're not earning your cost to capital,

you're probably not on the team. These are not big parts of the company, but smaller adjunct businesses related to their core um industrial operations. All right, and you also mentioned that you previously mentioned the accounting, So okay, is

that Is there anything more we need to know there? No, I mean accounting obviously has been There's four different sets of earnings that he presents, and I think we're going streamline this down to something on the order of, you know, gap accounting plus or minus um one time positive and

negative items for restructuring their games. But he's really got to focus on getting this cash flow from operating activities up, which includes reducing the capital spending to this normalized level of two and a half to three billion from three and a half to four This year, he's got to narrow the focus of digital operation so that in turn that can reduce its um R and D and capital spending intensity. He's got to take and reduce the contract

asset investments. And lastly, he's got to work to show up the nineteen billion contractual portion of the company's thirty one billion pension deficit. Alright, given all that and your outperform rating on the shares, is there a connection between all of this activity and Nelson pelts ed Garden, UH and Try and Fund Management will Try and has been

involved for quite some time with GE and UM. I think at this point clearly UM giving them one of the seats on the board as uh Deer's former CEO step down, UM gives them an opportunity to continue to be a constructive partner in helping John accelerate the transformation of GEN. Alright, Having said that, though, Nick, what do you think that John would prefer to inherit in terms

of how GE operates. I think he's trying to change what is not a broken company but a bloated company, and in turn trying to go across all aspects of the cost structure of the company, whether it's the new headquarters building, whether it's planes, whether it's cars for their management team, there's no stone left unturned PIM. And just to finally, Nick, you know, tell people how long you've been covering ge and how you see the company coming

out from all of this. Well, we've been found for about thirty four years, and UM, what we're seeing here is a dichotomy between perhaps um the focus on their earnings reset for cell side analysts typically versus on the owners of the shares, a need to have visual improvement for actionable steps to lift the cash flow so you can sustain the dividend. And if they see that, I think the investors are likely to ultimately um rerate the yield from four currently to probably something like three over

the next year. All right, well, we're gonna have to wait and see what happens, and we're going to count on you. I know you're gonna probably be at that November thirteenth meeting, get more details and we could check

in with you then. Thanks very much, Nick Hayman from William Blair Expert when it comes to global industrial infrastructure shares u S economist Richard Taylor, one of the founding fathers of behavioral economics has won this year's Nobel Prize for Economics, and here to tell us more about this winner is Simon Kennedy. He is our editor for Brexit, amongst other things. Simon, thanks for joining me here in

the studio. What does it say about the state of economics when the winner of this year's prize has this quote? Conventional conventional economics assumes that people are highly rational, superrational, and unemotional. They can calculate like a computer and have no self control problems, meaning that that does not exist. Really, it's taken until seventeen for people to get the stamp of approval that emotions are what drive markets as much as markets. Well, I think we've seen some element in

the past. Is Daniel Kannaman and Robert Shilow win in the PASTA but but I think it's very important for the behavioral economics field that Richard failure as one. He's been very much a cheerleader for that and and for a long period of time, as you you hint had, behavior economics was kind of the the ugly member of the family. It was pushed to the side. A lot of people didn't buy it. People when you say a

lot of people. You mean a lot of people in academia, because certainly in markets, anyone who's an investor knows that animal spirits and emotion played very crucial role. But I think in mainstream because you couldn't put it in a formula, it was kind of rejected as a as not a as not it was a party trick, something that's interesting. I'll tell someone a good story to dinner party. But it wasn't viewed as as important to the mainstream economics.

And now it quite liarly is. And it's been brought in by people a Richard Taylor, by people like Robert Shiller, promoted by people like Mia the author and Limberview columnist Michael Lewis in his new book, It's very important, and so along with the fund stories that are accessible and mean that this field of economics, it's perhaps more popular parts more interesting. I start into one colleague today who said his daughter was interested in it because the kind

of free economics. I was just going to mention that, yes, indeed, well, his book, one of his many books, of Faylor's many books that he co authored, this one with the Cass Sunstein, is entitled Nudge Right improving decisions about health, wealth and happiness. Do you believe that that had an influence on on the Nobel Committee that would eventually give him the prize? I think so in one way it's already influenced how

we live our lives. If in the last decade, people like Barack Obama in the White House, David Cameron in Downing Street in the UK have turned to this kind of theory, this theory that you can can do things, you can change, you make small incentives and you can change how people behave, how vote, how consumers and voters behave. And if you can do that in a time of a big budget deficits, when you haven't got the money to spend to incentivize them, you can you can quote

unquote nudge them into into doing things you're in. One example in the UK, um they discovered that taxes were that were paid quicker. If you sent a letter to two taxpayers saying everyone in your areal, a lot of people in your area have already paid their taxes. Uh, And it kind of clicked something intoone's brain. Now, what if every if my neighbors have done so, I better get on that. And so they are sort of like being in a classroom in elementary school and the teacher says,

everyone else has cleaned up their desk, what about you. Yeah, it's it's kind of guilt by by by association, And yeah, I was actually talking about it this time my sons the other day. When you see a sign that says police sir, I don't know if you see them in America, but in the UK you'll see these signs saying you're entering a police traffic zone. Well, they might just have spend money on the sign and that there's no police coming up. But does anyone want to trust that they

want to they're going to slow down. So it's all about tricking the brain into behaving in a way that's optimal for society. Does does the work of Richard Daylor Does it also include the idea that we have tricked ourselves into believing that we are rational, that we make decisions, and then what we do is we go and find evidence to fit the decisions that we've made, not because it's true, but because it makes us feel good. Yeah. Absolutely,

you want to explain why you've done in. One area of his work is on quiz shows, So there's a quiz show called Deal or No Deal, and it turns out that actually people are the further they go into the process, their behavior or the choices of which briefcase to open up is led by did they get lucky

earlier in the in the thing. If they feel they're they're lucky earlier and they've got this what's called the hot hand, they feel that they can continue, and so they take risks based on what's happened before, even though the odds would suggest that they should have behaved. Does that Does that indicate in your mind that what has happened is we've used statistics in a way that can't necessarily predict the future, but we wish it did. Yeah. Absolutely.

I think it's because you know, you say, well, all right, the probability of something, but the probability of something is always yes or no. It's you know, fifty fifty, but it doesn't matter how many times you flip the coin.

That's still the probability. But statistics will tell you something else. Yeah, and you're One of the things that was used by this money is he's been in the big short film talking about c d os and this idea that that yeah, that he he brings this idea that you can have a hot hand fallacy that that that you you become

more confident based on what's already well. I can also lead to bad decisions and investments, because if you find a manager and you look at the track record and you say, well, the manager has done great for the last twenty years, has nothing really to do with the performance for the next year. And it doesn't necessarily mean you should drop that manager or add that manager is

past performance no longer an indgient future. Right, that goes right with the police science, right, you know, the disclaimer. Last thing to you, if you were to take this information and his body of work and try to apply it to the world of asset management, where would you come out. What would you take away from this? Well, I think he's already he's he's spent a lot of time on four oh one programs and how they can can be incentivize, how people can can save you know,

obviously savings is a huge thing. We all talked about getting our pension up in versus up exactly. So you say, if you're a company, um, so traditionally the paper it comes in, you're so busy and you never really opted in something time has taken. It's actually people. Obviously, pensions are are good things for most people. So therefore, if you have to opt out, if you have to send the paperwork to get out of the pension, it's more likely you'll be in the pensions. And do you have

a copy of Nudge. I've a signed copy of a signed copy of the joy that the joy of the Nobel Prize today was that that actually, I'm familiar with a lot of economies work. There's someone who very familiar with so we were able to write good stories on the basis that he's very accessible. This is someone who

it's not he's not just for economists, all right. Thanks very much, as Simon Kennedy, part of our Bloomberg Economics team, much appreciated the author of Richard Taylor, the author of Nudge, winner of the Nobel Prize of Economic Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's

one before the podcast. You can always catch us worldwide on Bloomberg Radio.