WEBVTT - Surveillance: Taliban Control With Haass 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.960 and of course, on the Bloomberg terminal. Richard Hass has 0:00:31.000 --> 0:00:33.239 a very busy Monday morning because he is at the 0:00:33.280 --> 0:00:36.960 center of a raging debate of the past in Afghanistan. 0:00:37.040 --> 0:00:39.640 He's at the Council on Foreign Relations. I can't say 0:00:39.720 --> 0:00:42.320 enough about their website this morning to give you depth. 0:00:42.680 --> 0:00:44.800 And also my book of the Summer and Number of 0:00:44.800 --> 0:00:48.240 Summers Ago the World a brief introduction, I would suggest 0:00:48.240 --> 0:00:51.839 Ambassador Hass. It needs an update, Richard Ass. I want 0:00:51.880 --> 0:00:53.479 to get right to it, and I want to get 0:00:53.479 --> 0:00:56.200 to the movement forward. As I'll speak to Thomas Barfield 0:00:56.800 --> 0:00:59.920 coming up. Is this Taliban the same as the talib 0:01:00.040 --> 0:01:04.120 and of two thousand two if anything gets worse, Tom, 0:01:04.160 --> 0:01:07.319 because now it's had a chance to regroup, it now 0:01:07.400 --> 0:01:11.199 has access to American arms, and it's proven it's its 0:01:11.360 --> 0:01:15.600 resilience and the opposition in Afghanistan is if anything weaker 0:01:15.640 --> 0:01:17.679 than it was, so it's at least as bad. There's 0:01:17.720 --> 0:01:20.160 no sign, what you might say, of any mellowing by 0:01:20.200 --> 0:01:23.240 the Taliban. A careful read of Richard Hass The world 0:01:23.440 --> 0:01:26.240 is a vacuum gets filled. It's physics one O one 0:01:26.240 --> 0:01:28.920 Investador House, I know you took three courses in physics. 0:01:29.240 --> 0:01:32.760 It Overlain a few years ago. Is the vacuum going 0:01:32.800 --> 0:01:35.520 to be filled by China with the forty seven mile 0:01:35.600 --> 0:01:40.679 boarder they have constructed by the British in eight No, 0:01:40.880 --> 0:01:43.440 the Chinese don't want to get into Afghanistan. What they 0:01:43.480 --> 0:01:46.440 want tom is to keep essentially Afghanistan out of China. 0:01:46.800 --> 0:01:49.520 They are worried about their own Muslim minorities. The last 0:01:49.520 --> 0:01:53.280 thing they want is for them to be radicalized. Indeed, 0:01:53.320 --> 0:01:55.880 none of the neighbors, with the exception of Pakistan, I 0:01:55.920 --> 0:01:58.680 think is a lot of appethete for getting into Afghanistan. 0:01:58.920 --> 0:02:01.000 They want to keep it orrisks, they want to keep 0:02:01.000 --> 0:02:03.280 its gons, they want to keep its drugs out of 0:02:03.280 --> 0:02:06.600 their country. Also, one other thing, they're worried about refugee flows. 0:02:06.800 --> 0:02:08.480 And that's the other thing that people are going to 0:02:08.520 --> 0:02:11.000 be focused on. Let's swing five hundred miles west to 0:02:11.200 --> 0:02:14.640 Iran in the in the wonderful frontline effort that was 0:02:14.680 --> 0:02:18.720 done a number of weeks ago. There it is sunny 0:02:18.840 --> 0:02:21.639 and it is she is that ultimately what this will 0:02:21.680 --> 0:02:25.440 be about. No, again, I don't see particular friction there 0:02:25.520 --> 0:02:31.280 between Iran and Afghanistan. We've got problems with Iran, but 0:02:31.520 --> 0:02:33.480 that's to do with everything they're doing in the region, 0:02:33.520 --> 0:02:37.640 their nuclear program. This is uh Look, Iran has been 0:02:37.680 --> 0:02:40.760 helpful in the past twenty years ago, Tom, the Iranians 0:02:40.760 --> 0:02:44.400 are actually helpful and standing up a post Aliban government 0:02:44.440 --> 0:02:47.600 in Afghanistan. Why they want to stable neighbor. They don't 0:02:47.639 --> 0:02:51.200 want one that's producing and exporting drugs. So I don't 0:02:51.200 --> 0:02:53.040 think Iran is the place to look either for the 0:02:53.080 --> 0:02:55.760 problem here or for the solution. So Richard, where do 0:02:55.800 --> 0:02:58.000 we look? We looked at the allies who feel somewhat 0:02:58.040 --> 0:03:01.200 betrayed by the U S. No, the answer is there 0:03:01.320 --> 0:03:03.600 is no solution to look for. This is now the 0:03:03.680 --> 0:03:07.360 new reality in Afghanistan. It's going to be awful, awful 0:03:07.400 --> 0:03:11.200 for Afghans. The danger is they invite terrorists back in, 0:03:11.360 --> 0:03:16.079 or terrorists invite them themselves back in. Obviously, America's reputation 0:03:16.240 --> 0:03:20.480 for consistency and reliability has taken a hit. I worry 0:03:20.480 --> 0:03:24.639 about the long term consequences for Pakistan. It's ironic Pakistan 0:03:24.720 --> 0:03:27.960 provided a sanctuary which kept the Taliban alive, helped bring 0:03:28.040 --> 0:03:30.800 us to this point. It's quite possible some in the 0:03:30.800 --> 0:03:34.280 Taliban may now want to go ahead and further radicalize Pakistan. 0:03:34.680 --> 0:03:36.560 So in the medium to long run, I would I 0:03:36.560 --> 0:03:38.800 would worry about that. But I think for the United States, 0:03:38.800 --> 0:03:41.200 the focus has got to be on getting as many 0:03:41.240 --> 0:03:43.560 Afghans who work with us out of that country. It's 0:03:43.560 --> 0:03:45.960 outrageous that we would leave them behind, that we would 0:03:46.120 --> 0:03:48.520 abandon them. And then I think we have to go 0:03:48.600 --> 0:03:52.080 around the world trying to demonstrate that the awful scenes 0:03:52.120 --> 0:03:55.880 that we're seeing in Afghanistan are not somehow representative of 0:03:55.880 --> 0:03:59.480 the totality of American foreign policy. We've got to persuade 0:03:59.520 --> 0:04:02.400 people that they should not read too much into this. Richard. 0:04:02.400 --> 0:04:04.400 A lot of officials have said, this is not a 0:04:04.440 --> 0:04:07.360 war we could win. We basically were keeping the peace 0:04:07.360 --> 0:04:11.360 and sacrificing American soldiers and frankly soldiers of the Allies 0:04:11.400 --> 0:04:14.480 to keep a peace that was unnatural in this nation. 0:04:14.800 --> 0:04:16.680 What do you say to counter that why it was 0:04:16.720 --> 0:04:19.880 important in your view, for US troops to remain in 0:04:19.920 --> 0:04:23.080 Afghanistan at a much lower rate than they had been 0:04:23.160 --> 0:04:26.159 say five ten years ago. Look, we had reduced the 0:04:26.240 --> 0:04:29.640 US military presence to around three thousand. There hasn't been 0:04:29.640 --> 0:04:33.600 an American combat debt for for eighteen months, so this 0:04:33.680 --> 0:04:37.120 is a situation. I thought that for a relatively modest investment, 0:04:37.160 --> 0:04:40.120 we were getting good results. The American presence was essential 0:04:40.160 --> 0:04:42.920 to keep the eight nine thousand Allied troops there, and 0:04:42.960 --> 0:04:48.000 they provided a psychological and military floor for the Afghans. 0:04:48.000 --> 0:04:49.760 So no, it wasn't going to give you peace, It 0:04:49.880 --> 0:04:52.800 wasn't going to give you a military victory. What it 0:04:52.839 --> 0:04:56.120 was going to do is avoid bringing about exactly what 0:04:56.160 --> 0:04:58.560 we're seeing on our screens. And I think sometimes in 0:04:58.640 --> 0:05:01.719 foreign policy you've how to measure success not by what 0:05:01.800 --> 0:05:04.680 you accomplish, but but but why what you avert? And 0:05:04.760 --> 0:05:07.960 by that definition, this was a success and we undermined 0:05:08.040 --> 0:05:11.360 our own policy. Richard hasas with all of your experience, 0:05:11.520 --> 0:05:14.279 this comes back to and it's of our childhood Scoop 0:05:14.400 --> 0:05:18.000 Jackson of Washington State and maybe on the late Donald 0:05:18.080 --> 0:05:23.599 Rumsfeld and others, it's this thing called neo conservatism. How 0:05:23.640 --> 0:05:26.960 do the neo conservative crew pick up the pieces in 0:05:27.080 --> 0:05:31.440 your Washington a much or neo conservatives matter a whole 0:05:31.480 --> 0:05:34.520 lot right now because they haven't an ambitious farm policy. 0:05:34.720 --> 0:05:37.520 They want to transform the world. They're often want the 0:05:37.560 --> 0:05:39.600 United States to act alone. I would think Tom the 0:05:39.600 --> 0:05:42.320 biggest challenge for the United States right now, and by 0:05:42.320 --> 0:05:45.640 the way, across his party lines, just like Afghanistan policy 0:05:46.200 --> 0:05:48.200 was something that crossed party lines, is that we do 0:05:48.320 --> 0:05:52.440 too little, that the United States essentially pulls back from 0:05:52.480 --> 0:05:56.880 the world, focuses on our challenges here at home, and 0:05:57.320 --> 0:05:59.640 essentially under reaches in the world. And if I were 0:06:00.000 --> 0:06:03.200 wire Las crystal Ball, I would be more worried about 0:06:03.200 --> 0:06:07.080 American underreach going forward than overreach. Well, I mean, did 0:06:07.120 --> 0:06:09.840 you go to zacurious post American world? What does our 0:06:09.920 --> 0:06:16.320 post Afghanistan world look like? Well, in Afghanistan, it looks horrific. Uh, 0:06:16.560 --> 0:06:18.120 you know, we'reund the rest of the world. That's up 0:06:18.160 --> 0:06:20.120 for GUS still for us to determine. Are we going 0:06:20.160 --> 0:06:22.839 to stand by our allies, Are we going to stand 0:06:22.880 --> 0:06:25.320 up to Russia and China? Are we going to actually 0:06:25.360 --> 0:06:29.640 do more to combat climate change? To improve global health? 0:06:29.680 --> 0:06:33.920 Machinery there's nothing about Afghanistan, TOM that stops UPS from 0:06:34.040 --> 0:06:38.680 increasing our exports of COVID vaccines. There's nothing about Afghanistan, 0:06:38.760 --> 0:06:42.120 TOM that stops UPS from joining the Asia Pacific Regional 0:06:42.160 --> 0:06:46.440 trade Agreements. I can go on. So again, I disagree 0:06:46.480 --> 0:06:49.080 fundamentally with what the last administration and this one have 0:06:49.160 --> 0:06:52.200 done in Afghanistan, but that doesn't stop us from doing 0:06:52.279 --> 0:06:54.359 other smart things in the world which are just to 0:06:54.400 --> 0:06:55.960 sort of put a bow on this. You were talking 0:06:56.000 --> 0:06:58.400 about this concern about allies and the perception of the 0:06:58.480 --> 0:07:01.080 United States and the trustworthy US of some of the 0:07:01.120 --> 0:07:04.159 assertions and involvement that the US has had. You're concerned 0:07:04.160 --> 0:07:07.320 about under involvement with some of these other initiatives that 0:07:07.320 --> 0:07:09.920 you're talking about, whether it's combating global warming, whether it's 0:07:09.960 --> 0:07:13.960 combating the pandemic. How much cloud has President Biden lost 0:07:14.040 --> 0:07:17.679 on the international stage among allies who already are somewhat 0:07:17.720 --> 0:07:21.440 skeptical of the U s promises. Look, this is I'm 0:07:21.480 --> 0:07:23.360 not going to sugarcoat it. This is this is a 0:07:23.440 --> 0:07:26.960 bad thing. He gained some cloud by the original response 0:07:27.000 --> 0:07:31.480 to COVID increasing vaccine production and distribution. He gained cloud 0:07:31.520 --> 0:07:35.360 by the performance of the US economy. This is clearly 0:07:36.160 --> 0:07:38.960 a setback. That said he's got three and a half 0:07:39.080 --> 0:07:42.400 years to to go to to to make a record, 0:07:42.680 --> 0:07:46.200 But there's no way this is anything but something significant 0:07:46.240 --> 0:07:48.840 in the deficit columns. This this, this will hurt both 0:07:48.880 --> 0:07:51.720 the reality and the perception of the United States in 0:07:51.760 --> 0:07:54.400 the world, and it reinforces a narrative that was already 0:07:54.400 --> 0:07:57.600 out there, which is that Disunited States is different than 0:07:57.640 --> 0:08:01.080 the old United States that had tremendous staying power throughout 0:08:01.120 --> 0:08:04.160 the Cold War. Richard tremendous pace in Project Syndicate over 0:08:04.160 --> 0:08:06.240 the weekend. Thanks for writing now before we let you go, 0:08:06.840 --> 0:08:09.720 a message for this administration. We've heard a limited amount 0:08:09.720 --> 0:08:11.880 from the President over the weekend. What's your number one 0:08:11.920 --> 0:08:15.640 question for them this morning? What more can they do 0:08:15.720 --> 0:08:18.840 to help these Afghans who are trapped in the country 0:08:18.880 --> 0:08:22.840 and are vulnerable. It's I just find that I find 0:08:22.880 --> 0:08:26.160 it painful to to watch. I think we've got to 0:08:26.200 --> 0:08:28.400 do more to help them. We can't simply be focused 0:08:28.640 --> 0:08:31.600 on getting Americans out. And then the real question is 0:08:31.600 --> 0:08:33.400 what we've been talking about here, how do we how 0:08:33.400 --> 0:08:37.760 does this administration prove to the world that American foreign 0:08:37.760 --> 0:08:41.360 policy should not be understood through this lens or or prison. 0:08:41.679 --> 0:08:43.959 We have got to be active and we've got to 0:08:44.000 --> 0:08:47.400 be smart elsewhere. We can't undo the mistakes we've made 0:08:47.440 --> 0:08:50.480 in Afghanistan. Let's be blunt. Doesn't mean though, we have 0:08:50.559 --> 0:08:53.720 to make mistakes elsewhere. Important words this morning, Richard, Thank you. 0:08:53.880 --> 0:09:02.320 Richard has their Council on Foreign Relations President. Right now, 0:09:02.320 --> 0:09:05.640 we're gonna digress with Christopher Morange. He's the Valley Funds, 0:09:06.360 --> 0:09:09.920 their chief investment officer. Of where the value is right now, 0:09:10.000 --> 0:09:13.400 Chris Marangie, where is the value going into September of 0:09:13.480 --> 0:09:16.960 two thousand twenty one. Oh, it's certainly harder to find 0:09:16.960 --> 0:09:18.640 than a year ago, but there is still value out 0:09:18.640 --> 0:09:20.679 there in the market. And the question is is now 0:09:20.720 --> 0:09:23.320 the time to jump back in the reflation trade if 0:09:23.360 --> 0:09:28.200 you missed it nine months ago? And I think typically yes, 0:09:28.280 --> 0:09:32.320 there are some areas that were um, perhaps exuberant uh 0:09:32.360 --> 0:09:36.400 and have now corrected. UM. Still like areas like live 0:09:36.520 --> 0:09:40.160 entertainment between we think we'll come back strongly again this 0:09:40.320 --> 0:09:44.560 fall into next year. UM. You know as well as UH, 0:09:44.679 --> 0:09:48.720 the consumer impulse to purchase is still there. UM. Obviously, 0:09:48.760 --> 0:09:51.120 as we heard from Kate, you know, some supply chain 0:09:51.160 --> 0:09:53.360 issues which are constraining of the ability to meet that 0:09:53.440 --> 0:09:56.240 demand you've got, And folks on radio, you need to 0:09:56.280 --> 0:09:59.280 understand that the secret weapon of Christopher Marange is all 0:09:59.320 --> 0:10:01.960 the Manila full olders he's got over his left shoulder, 0:10:02.360 --> 0:10:06.760 covering every company out there. What is the knowledge base 0:10:06.880 --> 0:10:10.680 that you and Mario Gabelly have right now company to company? 0:10:10.760 --> 0:10:13.160 Do you have a confidence in what you're hearing or 0:10:13.200 --> 0:10:15.720 is it a mystery for you into the next round 0:10:15.720 --> 0:10:19.040 of conference calls? Yeah, so, you know, we don't put 0:10:19.080 --> 0:10:21.400 a lot of weight in things like the Empire in decks. 0:10:21.480 --> 0:10:23.680 We you know, we're listening to what companies are saying 0:10:23.720 --> 0:10:26.000 on their conference calls. What are they saying some of 0:10:26.000 --> 0:10:29.320 those meetings, and and it's pretty much universally the demand 0:10:29.400 --> 0:10:32.160 is there. It's hard to meet that demand. Um supply 0:10:32.240 --> 0:10:35.400 chain issues affecting not just manufacturing companies, but you know, 0:10:35.520 --> 0:10:37.840 service companies that just can't get the stuff to install 0:10:37.880 --> 0:10:40.600 in people's homes for example. And and the concern one 0:10:40.640 --> 0:10:43.320 concern is that could worsen is as the rest of 0:10:43.320 --> 0:10:45.680 the world is China and Asia in particular, you know, 0:10:45.720 --> 0:10:49.439 deal with the delta variant. How concerned are you about 0:10:49.480 --> 0:10:51.680 margin pressures. This seems to be one of the dividing 0:10:51.720 --> 0:10:54.280 factors between the bulls and the bears. Are the less 0:10:54.280 --> 0:11:00.840 bullish of for US equities, Yeah, you know, the we 0:11:00.920 --> 0:11:03.360 tend to focus. We we love companies obviously that have 0:11:03.760 --> 0:11:07.720 uh pricing power. We've always focused on those kind of companies, UM, 0:11:07.760 --> 0:11:11.920 you know, companies with the control scarce resources, whether that's uh, 0:11:12.080 --> 0:11:17.400 you know, broadband, UM, consumative brand of products, UM, waste collection, 0:11:17.440 --> 0:11:20.040 et cetera, and um. You know, they've been able to 0:11:20.559 --> 0:11:22.199 take price and pass some of that probably through a 0:11:22.240 --> 0:11:24.440 maintain margin. But yeah, it's gonna it's gonna be hard. 0:11:24.640 --> 0:11:26.560 You know, a lot of companies benefited in the first 0:11:26.559 --> 0:11:29.720 and second quarter from the tail winds of cutting causes 0:11:29.720 --> 0:11:32.280 deeply in the crisis a year ago, and now those 0:11:32.280 --> 0:11:35.320 costs are gonna start coming back, and so it is 0:11:35.320 --> 0:11:37.280 something that we're watching and we're a little concerned about 0:11:37.280 --> 0:11:38.800 for the next year. I don't think you're focused on 0:11:39.000 --> 0:11:42.199 value right now. We're hearing a real bifurcation between those 0:11:42.200 --> 0:11:44.600 who say it's time to keep leaning into the cyclical trade, 0:11:44.920 --> 0:11:48.400 especially after the under underperformance of late and others who 0:11:48.400 --> 0:11:51.319 say stick with big text, stick with some of these 0:11:51.400 --> 0:11:54.560 names to just have incredible amounts of cash and relatively 0:11:54.960 --> 0:11:58.840 small staffs compared to the overall revenue. Where do you 0:11:58.920 --> 0:12:02.000 weigh in on this and why? Yeah, you know, I 0:12:02.360 --> 0:12:04.360 tend to lead toward the former that that there's still 0:12:04.360 --> 0:12:06.880 some likes to the to the cyclical trade. Um. You know, 0:12:06.920 --> 0:12:09.600 there are you know, a few specific big tech names, 0:12:09.800 --> 0:12:13.079 Glogle in particular, which we own, um that actually benefit 0:12:13.080 --> 0:12:15.240 from both sides. They are both the reopening play and 0:12:15.280 --> 0:12:17.840 a quarantine play. If you can keep both things. You know, 0:12:17.880 --> 0:12:20.160 they are a major beneficiary of their turn of advertising, 0:12:20.200 --> 0:12:23.560 particularly as really relates to things like travel, um and 0:12:23.640 --> 0:12:25.640 so um. You know, you have to look company by 0:12:25.640 --> 0:12:28.560 company and not just make judgments about individual sectors, which 0:12:28.559 --> 0:12:31.520 is ya, all these Minila folders here, that's good. Let's 0:12:31.520 --> 0:12:33.720 make a judgment about one of the wheelhouses of good 0:12:33.760 --> 0:12:37.520 belly over the years, and that is this whole entertainment 0:12:37.679 --> 0:12:42.720 streaming telephone, cell phone infrastructure. When you guys are way 0:12:42.720 --> 0:12:45.720 out front on what John Malone wrought, where are you 0:12:45.880 --> 0:12:50.560 now on all that stuff that we use every day? Yeah? 0:12:50.559 --> 0:12:51.959 So you know, we used to define the world as 0:12:51.960 --> 0:12:55.240 distribution versus content. Um. Yeah, that's a little bit of 0:12:55.320 --> 0:13:01.280 uh of a fake um uh break. But I still 0:13:01.320 --> 0:13:04.880 think distribution is very important. The broadband company's high pricing 0:13:04.880 --> 0:13:07.600 power the warrior has been and always will be what 0:13:07.640 --> 0:13:10.080 does the government do about that? And so far, you know, 0:13:10.080 --> 0:13:12.839 the infrastructure Bill is probably a net positive for the 0:13:12.880 --> 0:13:15.720 broadband companies to the extent that it funds you know, 0:13:15.760 --> 0:13:18.719 additional build out and gets the additional customers. But but 0:13:18.800 --> 0:13:23.679 that regulatory uh sort of democles is out there, and 0:13:23.760 --> 0:13:28.080 obviously the fid administration seems to be swinging that more aggressively. Late. 0:13:28.160 --> 0:13:30.200 On the content side, you know, a lot of questions 0:13:30.240 --> 0:13:32.960 about what happens with theatrical and the streaming wars continue. 0:13:33.240 --> 0:13:34.640 It was a little bit of a lake wabby gone 0:13:34.679 --> 0:13:36.600 in the second quarter where pretty much all the streaming 0:13:36.600 --> 0:13:39.680 services did a little bit better than everyone expected. But 0:13:39.720 --> 0:13:42.520 that's probably gonna change at some point. The consumer will 0:13:42.679 --> 0:13:45.960 have too many services choose from Chris, you mentioned policy, 0:13:46.240 --> 0:13:47.920 and I do want to sort of end here where 0:13:47.920 --> 0:13:50.680 we begin, which is Afghanistan, and how much that actually 0:13:50.800 --> 0:13:54.320 does put a kink in a President Biden's ability to 0:13:54.840 --> 0:13:57.040 push through his policy, to push through his three and 0:13:57.040 --> 0:13:59.760 a half trillion dollar human infrastructure bill, let alone the 0:13:59.760 --> 0:14:03.000 bipe partisan bill that has about five fifty billion dollars 0:14:03.000 --> 0:14:05.360 of spending. How are you looking at this? You trading 0:14:05.400 --> 0:14:08.679 on this in any way? Yeah? You know, I think 0:14:08.679 --> 0:14:12.560 one of the when um, when it became probable that 0:14:12.640 --> 0:14:15.360 Biden would get elected and was in fact elected, we 0:14:15.440 --> 0:14:20.280 anticipated higher tax rates and built those into our company models. 0:14:20.600 --> 0:14:22.560 And obviously we haven't seen that just yet. You know 0:14:22.640 --> 0:14:24.920 that will have to be paid force in the in 0:14:24.920 --> 0:14:28.000 the reconciliation, and so tax rates aren't going to go up, 0:14:28.280 --> 0:14:29.840 but I think they probably go up less than maybe 0:14:29.840 --> 0:14:33.040 we expected a year ago. Uh, and so that's a 0:14:33.160 --> 0:14:36.440 sort of a plus. Um. But you know, this is 0:14:36.440 --> 0:14:39.320 gonna put additional pressure on inflation, which we look at 0:14:39.520 --> 0:14:42.160 and U I think we mentioned Afghanistan parked the price 0:14:42.200 --> 0:14:44.840 that directly into the market, but you probably some additional 0:14:44.880 --> 0:14:47.440 defense spending and the risk premium in general just has 0:14:47.480 --> 0:14:50.520 to go up. Chrismin Ranky back in the office going 0:14:50.560 --> 0:14:52.680 to say that, Chris, it's gonna catch out. Chrismin RANKI 0:14:52.720 --> 0:15:00.960 that Betty funds the value. Let's get to the discussion 0:15:01.080 --> 0:15:03.360 right now. What we're gonna do here is really focused 0:15:03.400 --> 0:15:06.840 on setting up your end of August here into the 0:15:06.960 --> 0:15:09.840 end of the third quarter in September. No one better 0:15:09.880 --> 0:15:12.880 to do that than with someone managing real money, no 0:15:13.160 --> 0:15:16.720 coorum is it invest goo And what's really interesting to 0:15:16.760 --> 0:15:19.080 be you know, while you're in the crosshairs the hardest 0:15:19.120 --> 0:15:22.960 part of the market right now, which is intermediate bonds. 0:15:23.760 --> 0:15:27.240 What are you doing on the duration bet right now? 0:15:27.680 --> 0:15:31.760 Is you, by portfolio mandate, are caught in the crosshairs 0:15:31.880 --> 0:15:36.880 of this market right so on the duration mandate, we're 0:15:36.880 --> 0:15:40.160 staying largely close to neutral. I think it makes sense 0:15:40.200 --> 0:15:42.400 to have a bit of a steep neer on here 0:15:42.520 --> 0:15:46.320 UM if you have more of a multisector account UM, 0:15:46.400 --> 0:15:49.520 but from the duration standpoint, in our intermediate bond fund 0:15:49.600 --> 0:15:52.920 vers staying clothed the neutral. And then we would recommend 0:15:53.120 --> 0:15:57.840 for high yield UH portfolio managers to add some defensive 0:15:58.040 --> 0:16:02.680 or you know, maybe UM other growth related asset managers 0:16:02.920 --> 0:16:05.800 to add some defensive assets here, like the intermediate bond 0:16:05.800 --> 0:16:09.800 fund or investment grade UM just because there are like you. 0:16:09.800 --> 0:16:12.280 You are were just referring to a lot of blooming 0:16:12.320 --> 0:16:15.680 and uncertainties around and you said, the ball market is 0:16:15.720 --> 0:16:18.360 not reacting. It's all it's because we're waiting on Wednesday, 0:16:18.440 --> 0:16:20.880 were waiting on the Emblom see minutes and the taper, 0:16:21.160 --> 0:16:23.880 the big taper debata on timing. We all started to 0:16:23.920 --> 0:16:26.920 say some discrimination just in terms of credit quality and 0:16:26.960 --> 0:16:29.080 the degree to which you are exposed to things like 0:16:29.120 --> 0:16:31.400 the doubts of variant. No Whill, is that encouraging for you? 0:16:31.520 --> 0:16:33.520 Is that a healthy sign that the credit market is 0:16:33.520 --> 0:16:38.480 functioning that way? So we are seeing it. So earning 0:16:38.560 --> 0:16:42.480 the earning season was very healthy. Earnings growth was very strong. 0:16:43.040 --> 0:16:46.200 UM where that strength came in was a little bit bifurcated, 0:16:46.240 --> 0:16:49.280 but we expect overall the earnings growth to continue and 0:16:49.320 --> 0:16:52.720 to and leveraging to continue. The delta variant we have 0:16:52.800 --> 0:16:55.000 to watch very closely. Of course, we don't see it 0:16:55.120 --> 0:16:59.000 necessarily impacting our base case for growth. Really the most 0:16:59.040 --> 0:17:02.880 impact has been the supply destructions from it UM, and 0:17:02.920 --> 0:17:05.800 that's something that we have to watch closely. But the 0:17:05.840 --> 0:17:08.600 demand is still there, so ultimately that just kind of 0:17:08.640 --> 0:17:11.960 maybe flattens the trajectory of growth, but that doesn't necessarily 0:17:12.040 --> 0:17:14.440 take it away. Does it make sense, Noel to then 0:17:14.720 --> 0:17:20.320 that high yield bonds are under performing investment grade? The 0:17:20.480 --> 0:17:25.120 high yeld bonds, Yes, for um. For most of this year, 0:17:25.600 --> 0:17:28.080 high yield bonds have done really well, triple seeds have 0:17:28.160 --> 0:17:33.160 done really well. Premium and new issue has not necessarily 0:17:33.720 --> 0:17:36.720 been very attractive lately, and I think that's why we're 0:17:36.720 --> 0:17:40.080 seeing some of that um that peel back in in 0:17:40.160 --> 0:17:43.359 high yield bonds, just taking a broader step back. Mark 0:17:43.400 --> 0:17:46.040 Howard of b MP Pariva was on the show earlier 0:17:46.080 --> 0:17:47.760 and he was saying that right now, where there is 0:17:47.800 --> 0:17:50.600 no problem, you can keep leaning into risk, But longer 0:17:50.720 --> 0:17:55.040 term we're setting ourselves up for some inequalities within the 0:17:55.080 --> 0:17:57.760 markets and potential. I don't want to say bubbles, but 0:17:57.800 --> 0:18:01.960 bubbles particularly with respect to you a certain credit borrowing. 0:18:02.240 --> 0:18:04.000 What's your sense of that? Do you agree that this 0:18:04.080 --> 0:18:06.720 is going to become a serious problem in a couple 0:18:06.720 --> 0:18:10.760 of years time. So this is something that we definitely 0:18:10.800 --> 0:18:13.040 have to watch and could be a problem in a 0:18:13.040 --> 0:18:15.280 couple of years time. But what we're watching, i'd say 0:18:15.280 --> 0:18:17.760 over the next three to six months, after we get 0:18:17.760 --> 0:18:20.359 the taper announcement out of the way, and you know 0:18:20.440 --> 0:18:22.359 whether or not it's going to be a taper tantrum 0:18:22.440 --> 0:18:24.359 and whether or not we learn from history is up 0:18:24.359 --> 0:18:27.000 for debate. But um, in the next three or six months, 0:18:27.000 --> 0:18:29.640 we do want to stay nimble here because that's when 0:18:29.680 --> 0:18:32.560 the FED hikes start to get priced in. That's when 0:18:32.560 --> 0:18:38.200 the market turns to focus on the actual f MC mandate, 0:18:38.280 --> 0:18:41.520 So employment coming down and whether or not inflation is 0:18:41.520 --> 0:18:44.639 going to be transitory, and how sticky those sticking components 0:18:44.760 --> 0:18:47.480 just can really be. So walk me through your approach 0:18:47.520 --> 0:18:49.400 to floating right with that in mind, to a whow 0:18:49.560 --> 0:18:53.400 what is it said? Right now? I'd have a little 0:18:53.400 --> 0:18:55.840 bit of floating rate just to kind of take some 0:18:56.080 --> 0:19:00.240 down some of your exposure to high yield be because 0:19:00.280 --> 0:19:03.719 they're still is You're still getting compensated there. The demand 0:19:03.720 --> 0:19:06.359 and technicals they are still very strong, still seeing for 0:19:06.520 --> 0:19:09.720 in demand in both floating rate and investment grade and 0:19:09.840 --> 0:19:12.040 some crossover in high yields. So I think it makes 0:19:12.080 --> 0:19:14.720 sense to diversify, or I'm always kind of selling the 0:19:14.720 --> 0:19:18.040 diversification picture because it does make sense here. There's still 0:19:18.119 --> 0:19:21.119 a little bit of value to to be had in 0:19:21.280 --> 0:19:25.120 the floating rate hed your conviction about the future, while 0:19:25.160 --> 0:19:27.119 conviction about high rights or a hedge that we might 0:19:27.160 --> 0:19:30.720 get them. Um, I think we're gonna see higher rates 0:19:30.760 --> 0:19:33.440 from here. It's just gonna be a little bit messier, 0:19:33.720 --> 0:19:37.679 um than you know, over the next several weeks, we 0:19:37.800 --> 0:19:40.600 just have a lot of uncertainty and um, that's gonna 0:19:40.600 --> 0:19:44.440 be definitely something to watch. If we get past the 0:19:44.520 --> 0:19:47.119 taper and it kind of u is quiet, then I 0:19:47.400 --> 0:19:51.000 expect the rates to continue to steepen out because we 0:19:51.119 --> 0:19:54.880 do continue to expect growth to be robust, and that's 0:19:54.920 --> 0:19:59.000 ultimately going to push this curve steeper. What is the 0:19:59.080 --> 0:20:02.199 goal over the next three to five years. Is it 0:20:02.240 --> 0:20:06.320 to clip a coupon or can you actually find total return? 0:20:08.760 --> 0:20:10.880 I think you can find total return, but it's gonna 0:20:10.920 --> 0:20:15.760 be more on a sector basis um or specific bond basis. 0:20:16.080 --> 0:20:18.280 But over the next three or five years, while the 0:20:18.600 --> 0:20:20.760 the you know, of course, when we get into the 0:20:20.800 --> 0:20:23.919 five year scenario, it's hard, of course to call that 0:20:23.960 --> 0:20:27.240 far out. But the ultimate goal would be to clip 0:20:27.280 --> 0:20:31.480 the coupon, diversify ad where there is value and complacency 0:20:31.520 --> 0:20:36.240 within markets and complacency within sectors. No, we've gotta leave 0:20:36.240 --> 0:20:38.359 it that it's gonna catch up. And this fixed income market, 0:20:38.400 --> 0:20:47.359 now i'll call him that invest portfolio manage you what 0:20:47.440 --> 0:20:49.639 we've always tried to do here is John Lisa and 0:20:49.680 --> 0:20:52.359 I are committed to bringing you the experts you know 0:20:52.480 --> 0:20:55.800 on China, Folks, that the expert is Jonathan Spence and 0:20:55.880 --> 0:20:59.399 its classic to Search for Modern China. What is the 0:20:59.440 --> 0:21:04.200 Search for Modern China? For Afghanistan? It is Thomas Barfield 0:21:04.200 --> 0:21:07.520 out of Penn and Harvard, holding court in anthropology at 0:21:07.560 --> 0:21:11.760 Boston University, and he's president of the American Institute for 0:21:11.840 --> 0:21:16.119 Afghanistan Studies and his red covered book, a cultural and 0:21:16.160 --> 0:21:20.840 political history. Trust me, folks, this is the absolute singular 0:21:21.359 --> 0:21:25.960 one volume on the real Afghanistan. Professor Barfield, thank you 0:21:26.000 --> 0:21:28.800 so much for joining us. We're honored. I must ask 0:21:28.880 --> 0:21:34.800 of the people of your institute. Are they safe in Afghanistan? Uh? 0:21:34.880 --> 0:21:38.920 We don't know. My director got out to Delhi um 0:21:39.160 --> 0:21:42.000 last week and we're trying to move our staffs there 0:21:42.000 --> 0:21:46.640 if they have visas. But you know, all air traffic 0:21:46.680 --> 0:21:50.560 has gone so um they're in safe houses in Kabble. 0:21:50.720 --> 0:21:53.960 But we're watching what's what's going to happen, Professor Barfield, 0:21:54.040 --> 0:21:55.679 just because the time I've got to get to the 0:21:55.680 --> 0:21:58.120 advanced moment as we wait to hear from the President 0:21:58.119 --> 0:22:01.760