WEBVTT - Harvey Endangered World's Most Important Chemical 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg P M L 0:00:20.840 --> 0:00:32.519 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. In 0:00:32.600 --> 0:00:35.720 the wake of Hurricane Harvey, we've talked a lot about 0:00:35.840 --> 0:00:40.599 gasoline prices spiking, crude values falling. But there's another chemical 0:00:40.960 --> 0:00:45.640 that is big produced, big production in Texas, and uh 0:00:45.720 --> 0:00:48.760 it possibly could be more important. I'm talking about ethylene, 0:00:48.800 --> 0:00:51.480 and I want to bring in Jack Caskey, who highlighted 0:00:51.520 --> 0:00:53.800 this in a recent Bloomberg News story. He's our chemical 0:00:54.040 --> 0:00:57.200 company's reporter and he is based in Houston. Also, I 0:00:57.240 --> 0:01:00.480 want to bring in Jason Minor, senior global chemical analyst 0:01:00.520 --> 0:01:04.520 for Bloomberg Intelligence based in Princeton, New Jersey. Jack, let's 0:01:04.520 --> 0:01:07.080 start with you. Can you give us a sense of 0:01:07.120 --> 0:01:11.120 the importance of this chemical that you highlighted, ethylene, and 0:01:11.240 --> 0:01:15.080 why the production of this chemical in Texas could be 0:01:15.360 --> 0:01:18.759 a bigger impact on what we consume every day than 0:01:18.800 --> 0:01:25.080 even gas prices. Yeah, lista UM ethylene is the world 0:01:25.240 --> 0:01:30.399 most produced petrochemical. Uh. It's in everything. It's in plastics 0:01:30.480 --> 0:01:34.399 or food packaging, your toys, it's entires and diapers and 0:01:34.840 --> 0:01:38.199 pretty much anything I thinks they don't even think about. 0:01:38.200 --> 0:01:42.280 You know, rubber, Uh contains athletes anthetic rubber. UM. The 0:01:42.360 --> 0:01:47.000 list is hundreds, if not thousands of products long. Uh, 0:01:47.640 --> 0:01:52.440 it's converted into you know, vinyls um. It's it's likely 0:01:52.520 --> 0:01:54.280 said plastics. I'm not going to go to the whole list, 0:01:54.320 --> 0:01:59.120 but it is the core of the petrochemical industry. Right. 0:01:59.160 --> 0:02:02.440 If it's the core of the petro chemical industry, Jason, 0:02:02.560 --> 0:02:04.880 I would like you to come in and comment on this. 0:02:05.240 --> 0:02:07.520 How long, what kind of time frame, and what are 0:02:07.560 --> 0:02:10.840 some of the specific challenges that are going to be 0:02:10.880 --> 0:02:14.160 faced by the industry to get it up and running. Yeah, 0:02:14.160 --> 0:02:17.320 they're there. Thanks. There's a couple of effects here actually 0:02:17.440 --> 0:02:21.079 UM two waves perhaps so in the near term. The 0:02:21.200 --> 0:02:24.520 estimates range between sort of forty and six of golf 0:02:24.520 --> 0:02:28.040 ethylene being down. That's maybe a fifth the u S 0:02:28.080 --> 0:02:30.400 maybe a fifth of the world's athlete supply. So the 0:02:30.480 --> 0:02:34.040 numbers sound big, of course, depends how long the adages 0:02:34.080 --> 0:02:37.320 are and remember, um, we haven't starved this industry for Capex, 0:02:37.400 --> 0:02:40.120 There's been a lot of spending which is operating in 0:02:40.160 --> 0:02:43.160 our favor. The second wave that might be more impactful 0:02:43.320 --> 0:02:47.120 is logistics. Um, we did have a massive wave, so 0:02:47.200 --> 0:02:51.000 ethylene first and biggest step it turns into plastic polyethylene. 0:02:51.400 --> 0:02:52.959 That's that's where it becomes kind of the face of 0:02:52.960 --> 0:02:55.480 petro chemicals. We use it every day. We had a 0:02:55.520 --> 0:02:58.400 massive wave of expansion in the US coming in plastic 0:02:58.480 --> 0:03:01.160 this year, and with that sort of coming over the 0:03:01.200 --> 0:03:03.440 next twenty four months, you know, it's it's as much 0:03:03.440 --> 0:03:06.720 as a quarter of additional capacity if those plants get 0:03:06.720 --> 0:03:09.679 back online fast. The next wave would be that that 0:03:09.840 --> 0:03:12.480 those pellets create sort of a local glut. They need 0:03:12.480 --> 0:03:15.720 to be exported. And clearly if you look at on 0:03:15.760 --> 0:03:17.880 the terminal, we have a nice map, real time map 0:03:17.880 --> 0:03:20.440 of the ships in the gulf. There it's a big 0:03:20.440 --> 0:03:23.240 parking lot, a lot of ships waiting, and the rail 0:03:23.240 --> 0:03:27.000 washouts could be pretty significant as well. Jason, I'd love 0:03:27.000 --> 0:03:29.520 to get your sense of why so much of the 0:03:29.520 --> 0:03:34.560 production of ethylene is based in Texas. Energy energy, energy, 0:03:35.160 --> 0:03:39.160 back to oil and then more recently shale gas and 0:03:39.160 --> 0:03:42.800 and uh the wave of expansion. Really, the US because 0:03:42.800 --> 0:03:46.360 of gale gas, has become the world's plastic and ethylene hub. 0:03:46.360 --> 0:03:49.080 I mean, we're at a moment where since two thousand, 0:03:49.400 --> 0:03:52.320 about a hundred and seventy nine billion of capex new 0:03:52.360 --> 0:03:55.320 projects have been announced and it's all driven by our 0:03:55.480 --> 0:03:59.840 very low cost position. And that's because of shale gas. So, uh, 0:04:00.160 --> 0:04:02.880 the supplies right there, and then you can ship, of 0:04:02.920 --> 0:04:06.280 course in good times from there quite effectively the rest 0:04:06.280 --> 0:04:10.320 of the world jack the companies that are specifically involved. 0:04:10.320 --> 0:04:13.720 We've seen pictures of the Archema plant and so on 0:04:14.120 --> 0:04:20.359 owned by out non US uh enterprises. What what kind 0:04:20.360 --> 0:04:24.280 of sort of new manufacturing or news you know, equipment 0:04:24.320 --> 0:04:26.360 is going to be necessary because I mean, if the 0:04:26.440 --> 0:04:29.159 motors of the electric motors are out, aren't they going 0:04:29.200 --> 0:04:33.920 to require rewiring? Yeah, that can happen. I mean it's 0:04:33.960 --> 0:04:35.919 really not going to be clear until they get in 0:04:35.920 --> 0:04:38.640 there and trying start these plants up what the problems 0:04:38.680 --> 0:04:42.080 are at any Yeah, electoral problems historically have been at 0:04:42.120 --> 0:04:47.400 the laid plants startups for months in past storms. You know, 0:04:47.680 --> 0:04:50.960 not commonly, but it does happen. Um. But yeah, water 0:04:51.360 --> 0:04:55.680 who knows where the water gets when it's a flood situation. So, um, 0:04:55.720 --> 0:05:01.640 there's I mean, and it's contaminated water. Correct, Well, brackish 0:05:01.680 --> 0:05:04.839 water is corrosive if it's uh you know if on 0:05:04.960 --> 0:05:07.560 these plants around the coast, so the water would be brackish. 0:05:07.760 --> 0:05:09.800 I don't know that it's contaminated. It just has salt 0:05:09.880 --> 0:05:13.400 in it, which is not good for metal. Jason, I'd 0:05:13.440 --> 0:05:15.320 love to get your sense and whether there's a precedent 0:05:15.400 --> 0:05:20.080 for this type of disruption in the ethylene production industry, 0:05:20.240 --> 0:05:24.280 going back to Trina Rita were really the the big 0:05:24.279 --> 0:05:27.359 precedent and um, you go back to two thousand and five. 0:05:27.440 --> 0:05:30.520 Now what's interesting is these companies and let's remember doubt 0:05:30.560 --> 0:05:32.840 you pot merged today, so what I'm about to say 0:05:32.920 --> 0:05:35.360 is even more true. But these are behemoth companies with 0:05:35.400 --> 0:05:38.320 a lot of diversification. Um, when you go back to 0:05:38.440 --> 0:05:42.200 the third quarterb oh five, um, Dow Chemical had only 0:05:42.360 --> 0:05:46.240 a two negative impact on their volumes from the Katrina 0:05:46.279 --> 0:05:49.800 and Arina Rita hurricanes. That just speaks to how hugely 0:05:49.800 --> 0:05:53.280 diversity these companies are. But that's really the precedent. Um, 0:05:53.400 --> 0:05:56.560 and again it kind of mutes what from an investor's perspective, 0:05:56.560 --> 0:05:59.520 you might see uh, some of the company impacts, although 0:06:00.000 --> 0:06:02.880 perhaps in chlor al kali maybe at old and UH 0:06:02.920 --> 0:06:05.680 and maybe some of the industrial gases for the rebuilding 0:06:05.720 --> 0:06:08.440 into thousand eighteen, the welding gases will see a little 0:06:08.440 --> 0:06:10.640 bit of improvement in earnings from this. I want to 0:06:10.640 --> 0:06:13.159 thank you both very much. Sorry, go ahead, Jack, you 0:06:13.200 --> 0:06:16.160 got a final comment. Yeah, I was just going to 0:06:16.240 --> 0:06:18.960 add that. Um. Some analyst Jeffreys in particular, is out 0:06:19.160 --> 0:06:22.320 with a note this overnight saying, you know, it could 0:06:22.320 --> 0:06:26.560 be until November until the petro chemical industry is you know, 0:06:26.600 --> 0:06:29.760 reaches the pre hurricane level. So that's two months from now, 0:06:30.240 --> 0:06:33.719 so that we could of course, nobody really knows, but 0:06:34.080 --> 0:06:37.640 it could be a month long process. Here. Thanks very 0:06:37.720 --> 0:06:42.120 much for joining us, gentlemen. Jason Miner, senior chemical global 0:06:42.160 --> 0:06:46.320 chemicals analysts for Bloomberg Intelligence, and A Jackkaski here is 0:06:46.320 --> 0:06:50.440 our chemical companies reporter for Bloomberg News. They're both reporting 0:06:50.520 --> 0:07:06.440 from Houston. So it turns out pim fox that algorithms 0:07:06.480 --> 0:07:09.560 get bored sometimes, uh, And it seems like perhaps in 0:07:09.640 --> 0:07:14.080 this market where trading volumes are just sagging away, even 0:07:14.120 --> 0:07:17.600 those computerized systems just can't seem to get their mojo back. 0:07:17.680 --> 0:07:20.080 Matt Mainlee joins US now. He's managing director and equity 0:07:20.120 --> 0:07:23.440 strategist at Miller, tay Back and Company. He is uh 0:07:23.720 --> 0:07:27.400 speaking with us uh after writing a note earlier today 0:07:27.720 --> 0:07:29.400 in which you say it's going to be a very 0:07:29.440 --> 0:07:33.400 boring day in front of the long weekend. Um, you're right, 0:07:33.720 --> 0:07:36.440 But I think that this is important because it's been 0:07:36.480 --> 0:07:38.520 boring for a while and there have been these lulls 0:07:38.600 --> 0:07:40.800 and the market has sort of either drifted along or 0:07:40.880 --> 0:07:44.200 gone up. What do you see in your models that 0:07:44.560 --> 0:07:47.400 is going to break this this sort of uh, this 0:07:47.480 --> 0:07:51.760 sort of trend and push it in one direction or another. Well, 0:07:51.800 --> 0:07:54.200 it's well, one thing is we we do have to 0:07:54.240 --> 0:07:57.080 get past the kind of the late August adul drums 0:07:57.080 --> 0:07:59.600 that we get every year, whether the Algals long before 0:07:59.600 --> 0:08:02.120 the Apple were involved the markets that it's going to 0:08:02.160 --> 0:08:05.400 be listless, uh, you know, late late in August. Uh. 0:08:05.440 --> 0:08:07.760 So that's gonna be one thing. But more importantly, we're 0:08:07.760 --> 0:08:09.800 gonna have to see what's gonna I think people you know, 0:08:09.840 --> 0:08:11.320 there's gonna be a lot of focus. Of course, what's 0:08:11.320 --> 0:08:14.400 gonna happen in Washington with the UH dead ceiling and 0:08:14.440 --> 0:08:17.240 things like that. But we also have, of course, what 0:08:17.440 --> 0:08:20.640 is the FED going to do on the UH, on 0:08:20.640 --> 0:08:23.200 on drinking their balance sheet? And will that have an impact? 0:08:23.200 --> 0:08:25.160 Because a lot of people are saying it's definitely gonna 0:08:25.160 --> 0:08:26.960 do this, or it's definitely gonna do that, But we 0:08:27.120 --> 0:08:28.920 but the most people and the smartest people. I think 0:08:28.920 --> 0:08:30.720 you're saying, we don't really know what's gonna what had 0:08:30.720 --> 0:08:32.240 happened with that. I think a lot of people are 0:08:32.240 --> 0:08:34.679 sitting on our hands because of that. UM. That's an 0:08:34.679 --> 0:08:37.760 interesting take, Matt, because when do you think that we're 0:08:37.800 --> 0:08:40.520 actually going to get a sense of what the effect 0:08:40.559 --> 0:08:43.360 will be? Because even if the FED announces some plan 0:08:43.440 --> 0:08:46.600 and say September, which is the absolute earliest, and it's 0:08:46.600 --> 0:08:49.560 more likely October, uh, we are going to see the 0:08:49.640 --> 0:08:53.680 real impact for a while. Right, Well, yes, I mean 0:08:54.240 --> 0:08:57.160 they can they We expect that they will tell us 0:08:57.200 --> 0:08:59.160 when they're going to start doing. Some people say they 0:08:59.240 --> 0:09:01.720 could start doing as early September, but I agree it's 0:09:01.760 --> 0:09:04.760 something that that is probably gonna be October at the earliest. UM. 0:09:04.800 --> 0:09:07.559 But there will be less liquidity in the system and 0:09:07.720 --> 0:09:11.080 UH by definition, and people a little worried about that. 0:09:11.120 --> 0:09:14.720 Now they're gonna go gradually, so that should be positive. 0:09:14.840 --> 0:09:16.360 And I do think that the you know that the 0:09:16.400 --> 0:09:19.440 market has uh, they've kind of signaled, and some of 0:09:19.440 --> 0:09:22.680 these other global central bankers have been saying that if 0:09:22.720 --> 0:09:25.560 things get majorlygue disrupted, though, they can step back on 0:09:25.600 --> 0:09:28.920 the accelerator. But it's still it's been a key driver 0:09:29.040 --> 0:09:31.000 to the markets in the last eight years. Not the 0:09:31.040 --> 0:09:33.560 only driver, Bunny and stretch of the imagination. But with 0:09:33.559 --> 0:09:36.360 with with liquidity going to be less plentiful, people are 0:09:36.400 --> 0:09:39.480 worried about Matt. You're joining us from Boston, home to 0:09:39.520 --> 0:09:43.120 Bloomberg one six one Boston, Newburyport, as well as thirteen 0:09:43.200 --> 0:09:46.160 thirty metro Western and the South Shore. And I want 0:09:46.160 --> 0:09:50.120 trick thoughts on the biotech industry, which has a great 0:09:50.160 --> 0:09:53.199 presence in the area. Bluebird Bio for example, these stocks, 0:09:53.240 --> 0:09:55.440 you know, you look at them every day. We're Bio 0:09:55.559 --> 0:09:58.480 up another four and a half percent, Biogen moves higher, 0:09:58.559 --> 0:10:02.440 Vertex Pharmaceuticals. What is the biotech industry tell you about 0:10:02.480 --> 0:10:06.000 the market, Well, it's it's it's certainly a bullish, uh 0:10:06.559 --> 0:10:08.920 bullish move in this group. I mean, we turned a 0:10:08.960 --> 0:10:10.640 positive on the group back in the in the spring, 0:10:10.640 --> 0:10:13.319 back in March, uh, and it kind of moved sideways 0:10:13.320 --> 0:10:15.160 for a while, but it broke out very nicely. And 0:10:15.440 --> 0:10:18.480 on a technical basis, it's had this great move. Uh. 0:10:18.800 --> 0:10:21.040 It made a double bottom in two thousand and sixteen, 0:10:21.360 --> 0:10:23.320 and then this year, after a little bit of rally, 0:10:23.360 --> 0:10:25.319 it's sold back off but held its two under day 0:10:25.360 --> 0:10:27.880 moving average, and since then it's been making It's made 0:10:27.880 --> 0:10:30.400 three higher high sense then, so it's very very bullish 0:10:30.400 --> 0:10:32.600 on a technical basis. And one of the things though, 0:10:32.600 --> 0:10:35.120 and I think it's gonna be very important because some 0:10:35.160 --> 0:10:37.400 of the innovations there on the fundamental side, things look 0:10:37.520 --> 0:10:39.800 very very good. But people a little bit worried. Geez, 0:10:39.840 --> 0:10:41.520 will we get a repeat of what happened in two 0:10:41.559 --> 0:10:44.080 thousand and fifteen when the group has been rolling very 0:10:44.160 --> 0:10:46.920 very strongly, Hillary Clinton came out and made comments about 0:10:47.320 --> 0:10:50.160 drug prices and the group basically crashed if it felt 0:10:50.280 --> 0:10:54.560 three the differences. There's a much different set up this time. 0:10:54.800 --> 0:10:57.400 In two thousand and fifteen, the group had rallied eighty 0:10:57.840 --> 0:11:02.079 percent over the previous fifteen months and wildly outperformed the SMP, 0:11:02.360 --> 0:11:04.920 which is only up about seventeen percent. Over that time frame. 0:11:05.200 --> 0:11:07.200 So what it is that gave so many people a 0:11:07.360 --> 0:11:10.000 huge amount of conference confidence to add leverage to their 0:11:10.360 --> 0:11:13.520 to their positions. So when the group rolled over, Uh, 0:11:13.800 --> 0:11:16.680 it became much worse than otherwise there should have have 0:11:16.880 --> 0:11:19.640 because the fundamentals hadn't really changed, but people had to 0:11:19.720 --> 0:11:22.640 unwind their leverage. There was forced selling, you know, margin 0:11:22.679 --> 0:11:25.280 calls and things like that. Right now, this rally has 0:11:25.360 --> 0:11:27.640 been very good, but it hasn't been anything more than 0:11:27.640 --> 0:11:30.760 the the SMP has been. It's had percent rally along 0:11:30.800 --> 0:11:34.920 with a percent rally and the SMP, so we don't 0:11:34.960 --> 0:11:37.360 shouldn't have the same kind of leverage. So there's no 0:11:37.400 --> 0:11:39.520 guarantee the stock of the group can't go down, especially 0:11:39.559 --> 0:11:42.600 if the broader market corrects. But we don't have that 0:11:42.679 --> 0:11:44.839 leverage in there, So I don't I strongly believe that 0:11:44.840 --> 0:11:46.960 people don't have to worry about the same kind of 0:11:47.160 --> 0:11:49.680 disaster taking place at this time around. Uh, if the 0:11:49.679 --> 0:11:51.600 market sells off a little bit that took place at 0:11:51.679 --> 0:11:54.479 night and in two thousand fifteen, Matt, what a specific 0:11:54.559 --> 0:11:56.679 sector do you think is most at risk of a 0:11:56.760 --> 0:12:01.240 sell off? Well, I mean, you know, it's funny because 0:12:01.280 --> 0:12:03.439 the one thing that the people keep pointing to is 0:12:03.440 --> 0:12:06.400 in the energy stocks and and and how oil could 0:12:06.600 --> 0:12:08.240 dip back down and it took forty two and tests 0:12:08.240 --> 0:12:10.640 forty two again or even drop into the thirties. But 0:12:10.720 --> 0:12:12.920 that group is, you know, it is pretty washed out 0:12:12.960 --> 0:12:15.400 and and and so I would not look for that group. 0:12:15.600 --> 0:12:17.680 The one group that that I do get a little 0:12:17.679 --> 0:12:20.120 bit worried about. Of course, as a technology sector, the 0:12:20.160 --> 0:12:25.080 facts have just had this great amount of uh I'm sorry, 0:12:25.080 --> 0:12:29.160 obviously the great run this year, but the stock semiconductor 0:12:29.240 --> 0:12:31.480 endixes things stalling out a little bit lately, and that's 0:12:31.480 --> 0:12:34.880 been a great leadership group within the technology sector. So 0:12:35.080 --> 0:12:37.680 if we see a you know, a rolling over of 0:12:37.840 --> 0:12:40.600 the tech stocks or the semiconductor stocks, uh, and then 0:12:40.640 --> 0:12:42.760 of course the thank stocks lose any kind of momentum 0:12:42.800 --> 0:12:45.320 again uh, that could lead to the kind of at 0:12:45.360 --> 0:12:47.800 least minor unwinding of leverage that some people have added 0:12:47.800 --> 0:12:50.280 to their portfolios recently. And again I'm not saying we'll 0:12:50.280 --> 0:12:52.280 see a complete crash in the group like we saw 0:12:52.440 --> 0:12:54.880 this in the biotechs a couple of years ago, but 0:12:54.960 --> 0:12:57.520 it could, you know, could leave the group vulnerable. If so, 0:12:57.600 --> 0:12:59.560 keep an eye on those semiconductor stocks more so than 0:12:59.600 --> 0:13:02.440 the fang. As we move forward, Matt, we keep hearing 0:13:02.480 --> 0:13:07.680 all about the valuation, in other words, how expensive stocks are, 0:13:07.760 --> 0:13:11.440 at least on a relative basis. Does that make any 0:13:11.440 --> 0:13:15.160 sense in a market like this, Well, on a long 0:13:15.280 --> 0:13:18.679 term basis, you know, evaluations do matter. I mean, it's funny, 0:13:18.720 --> 0:13:22.360 how uh you know? I guess my My key point 0:13:22.400 --> 0:13:24.240 is that if you've you've got a lot in the 0:13:24.240 --> 0:13:26.440 stock market, you've had a great run here, that's great. 0:13:26.480 --> 0:13:28.880 But the one thing is that people say they're afraid 0:13:28.880 --> 0:13:31.840 they're gonna move miss the next move. I mean, there's 0:13:31.840 --> 0:13:33.160 a lot of fear. And I can understand that with 0:13:33.200 --> 0:13:36.319 institutional investors because they get measured on you know, every 0:13:36.440 --> 0:13:39.640 quarter every year. But the individuals, it's like, hey, I've 0:13:39.640 --> 0:13:41.880 had this great run since two thousand and nine, uh, 0:13:41.960 --> 0:13:44.800 and do I really do I really have to worry 0:13:44.840 --> 0:13:47.200 about missing the next five percent move? I guess. My 0:13:47.280 --> 0:13:49.839 point is that on a long term basis, the market 0:13:49.880 --> 0:13:53.240 should be fine, but most people do much better when 0:13:53.280 --> 0:13:56.800 they're buying more when the market is inexpensive and cheap 0:13:57.280 --> 0:13:59.920 and and oversold than they do when the market is 0:14:00.080 --> 0:14:02.720 overbought and expensive, Like it is now. I mean there's 0:14:02.720 --> 0:14:05.240 a reason that that the Warren Buffett has got his 0:14:05.240 --> 0:14:09.200 biggest cast position ever he became a billionaire. But buying cheap, 0:14:09.320 --> 0:14:10.960 I'm not saying it out of the stock market many 0:14:10.960 --> 0:14:13.960 stretch of imagination, but you have a little bit. There's 0:14:13.960 --> 0:14:15.640 nothing wrong with taking a few chips off the table, 0:14:15.679 --> 0:14:18.560 so you have something if and when the market does correct, Matt, 0:14:18.760 --> 0:14:20.760 real quick, the dollar. Do you think this is the 0:14:20.800 --> 0:14:22.600 year's biggest pain trade, that we're going to see a 0:14:22.640 --> 0:14:27.680 strengthening against all of the current short positions. The potential 0:14:27.800 --> 0:14:30.760 is definitely there. We have with the d s I, 0:14:30.840 --> 0:14:33.920 which is a daily sentiment index, with UH which is 0:14:33.960 --> 0:14:37.280 a sentiment indicator that's very low only temper cent bulls. 0:14:37.400 --> 0:14:40.000 And then plus, as you mentioned, the positioning everybody short. 0:14:40.080 --> 0:14:42.720 The thing was just the zact opposite of what we 0:14:42.720 --> 0:14:44.520 saw at the beginning of the year when everybody was long. 0:14:44.760 --> 0:14:46.840 Now everybody's short. I think the pain trade in the 0:14:46.880 --> 0:14:48.200 last four months of the year could be to the 0:14:48.280 --> 0:14:50.520 upside in the dollar. Thank you very much for being 0:14:50.520 --> 0:14:53.520 with us, Matt Maine. He is managing director and equity 0:14:53.600 --> 0:14:57.520 strategist for Miller tay Back, joining us from Boston. He's 0:14:57.560 --> 0:15:12.280 on site at the Boston Convention and Exhibition Center. Can 0:15:12.400 --> 0:15:16.440 President Trump get very rapid action from Congress on emergency 0:15:16.560 --> 0:15:19.520 funding for Texas? Here to tell us more is our 0:15:19.560 --> 0:15:23.760 senior White House correspondent, Margaret Talive. She joins us from Washington, 0:15:23.800 --> 0:15:27.080 and you can follow Margaret on Twitter at Margaret Tala. 0:15:27.240 --> 0:15:30.520 That's t a l e V. Alright, Margaret, So what 0:15:30.560 --> 0:15:33.720 are the chances that the build or when Congress comes back, 0:15:33.720 --> 0:15:35.320 that we get a bill that includes all of this 0:15:35.400 --> 0:15:39.080 emergency funding. I think the chances are very good. I mean, 0:15:39.360 --> 0:15:42.160 with the caveats that anything can happen, and as we've 0:15:42.200 --> 0:15:45.400 seen time and time again, unexpected drama has become injected 0:15:45.400 --> 0:15:47.880 in some of these events. But look um, from the 0:15:47.880 --> 0:15:51.280 White House's perspective, there is a real desire to not 0:15:51.440 --> 0:15:54.400 have a debt limit crisis at the end of September, 0:15:54.440 --> 0:15:56.720 to not have a debt limit crisis or a default 0:15:56.720 --> 0:15:59.640 situation that can affect markets and blow up plans for 0:15:59.720 --> 0:16:03.480 a x CUB plan. There is also this parallel request 0:16:03.800 --> 0:16:07.240 to have a real debate over the government spending bill, 0:16:08.000 --> 0:16:10.880 including yes, the wall, even if that fight gets deferred, 0:16:10.880 --> 0:16:13.240 and yes, the possibility of a shutdown, even if it's 0:16:13.320 --> 0:16:17.000 temporary shutdown that some fiscal conservatives want to be able 0:16:17.120 --> 0:16:20.640 to decouple those events is something they'd like to do, 0:16:20.840 --> 0:16:25.640 and everybody across the spectrum within the Republican Party as 0:16:25.640 --> 0:16:28.720 well as Democrats, understands the need and wants to support 0:16:28.760 --> 0:16:31.760 the need UH to cover you know, FEMA's bills in 0:16:31.880 --> 0:16:33.840 the next few weeks. So the money doesn't right now 0:16:33.880 --> 0:16:35.920 before the end of the fiscal year. So linking the 0:16:35.960 --> 0:16:39.360 two UH in theory could be risky if it denied 0:16:39.640 --> 0:16:43.200 UM the emergency money. But I think the calculation at 0:16:43.200 --> 0:16:45.320 this point is going to be that this will be 0:16:45.320 --> 0:16:47.960 an offer that the lawmakers can't refuse, and it gives 0:16:47.960 --> 0:16:51.440 the ones who have constituencies that would be troubled by 0:16:51.440 --> 0:16:54.000 the debt failing increased clean um some cover to do it. 0:16:54.320 --> 0:16:58.880 So basically, this is shaming the more conservative side of 0:16:59.000 --> 0:17:03.120 the GOP into passing a bill that they might otherwise 0:17:03.160 --> 0:17:05.399 feel uncomfortable with because they can't go back to their 0:17:05.400 --> 0:17:08.160 constituents and say, yeah, I voted against helping all those 0:17:08.160 --> 0:17:10.480 people who are now homeless, those thousands and thousands of 0:17:10.480 --> 0:17:13.040 people in shelters. Yeah, you could look at it a shamming. 0:17:13.119 --> 0:17:15.320 You could look at this as political cover. You also 0:17:15.320 --> 0:17:17.680 could look at it as sort of a tacit. Uh 0:17:17.920 --> 0:17:21.560 promised to let them have the fight over government spending, 0:17:21.840 --> 0:17:24.679 just not to attach it to paying debts that are 0:17:24.720 --> 0:17:28.679 already incurred. Margaret, You know, I was looking recently at 0:17:28.720 --> 0:17:35.440 renderings of the border wall that the president has been 0:17:35.480 --> 0:17:39.600 speaking about, and uh, this set aside the issue of 0:17:39.600 --> 0:17:41.320 whether it's a good thing or bad thing for just 0:17:41.359 --> 0:17:44.520 a moment. But it struck me that building a wall 0:17:44.840 --> 0:17:47.439 might is it possible that we could build those kinds 0:17:47.480 --> 0:17:50.960 of projects to prevent against future catastrophes or at least 0:17:51.119 --> 0:17:55.720 mitigate against uh, this kind of catastrophic flooding. Oh, you 0:17:55.800 --> 0:17:58.840 were talking about a two for that would be a 0:17:58.880 --> 0:18:03.280 border wall construction and as an emergency management preventative tactics 0:18:03.280 --> 0:18:06.520 gone into politics. Right, this is amazing Well, or at 0:18:06.560 --> 0:18:08.760 least in other words, I mean to kind of shift 0:18:08.800 --> 0:18:11.359 the well seriously, to shift the focus. I maybe because 0:18:11.400 --> 0:18:13.960 I mean, we're facing the potential of another hurricane that 0:18:14.080 --> 0:18:18.520 is forming in the Eastern Atlantic, and many experts say that, 0:18:18.560 --> 0:18:22.040 you know, we should expect more types of this extreme weather. 0:18:22.680 --> 0:18:25.159 Why not, uh, you know, why not shift the attention. 0:18:25.160 --> 0:18:26.960 They all right, we're gonna build this, but first we're 0:18:26.960 --> 0:18:30.240 gonna build you know, these systems and infrastructure to prevent 0:18:30.240 --> 0:18:32.879 against future catastrophes. Okay, I'm going to tell you that 0:18:32.920 --> 0:18:36.200 I have not heard any sort of extensive substance scientific 0:18:36.200 --> 0:18:38.320 debate about this, but that if we hear that there's 0:18:38.359 --> 0:18:40.720 funding for an Army Corps of Engineer study to figure 0:18:40.760 --> 0:18:43.760 out overlays for a border wall and for flood management, 0:18:44.240 --> 0:18:46.400 calling you, you're gonna get the credit for this one. 0:18:46.480 --> 0:18:49.040 But but I will say that President Trump has looked, 0:18:49.040 --> 0:18:51.520 of course and putting solar panels on his conception for 0:18:51.560 --> 0:18:53.720 a wall, has looked at a number of different ways 0:18:53.760 --> 0:18:57.359 to uh both sell it rhetorically and politically, and to 0:18:58.080 --> 0:19:00.640 try to come up with funding macan isms that could 0:19:00.640 --> 0:19:02.720 in theory work or at least keep the debate alive. 0:19:02.760 --> 0:19:05.479 I would say nothing is off the table in this debate. 0:19:05.560 --> 0:19:08.360 But for now, this administration has decided that the one 0:19:08.359 --> 0:19:10.159 thing they'd like to take off the table is this 0:19:10.200 --> 0:19:12.320 debate over the debt limit, over the debt ceiling. And 0:19:12.359 --> 0:19:14.840 they think I think that they think, and we'll know, 0:19:15.400 --> 0:19:18.959 uh perhaps later today that this that the coupling of 0:19:19.000 --> 0:19:22.080 that with the emergency FEMA and s b A assistance, 0:19:22.119 --> 0:19:24.679 at least just to patch through the fiscal year is uh, 0:19:25.200 --> 0:19:27.479 maybe the smartest way to do it. Margaret, I'd love 0:19:27.480 --> 0:19:29.879 to you to take a little bit bigger picture of 0:19:29.920 --> 0:19:33.600 view on the GOP and the mood right now in 0:19:33.960 --> 0:19:36.800 Washington and just get a sense of as we move 0:19:36.880 --> 0:19:39.760 beyond the healthcare debate and towards something that is much 0:19:39.760 --> 0:19:42.280 more comfortable for everybody within the g OP, which is 0:19:42.320 --> 0:19:47.120 tax reform. Have have things gotten less acrimonious well over 0:19:47.160 --> 0:19:50.680 the summer, No, they've gotten more acrimonious, and something that 0:19:51.280 --> 0:19:55.520 that should be easier than healthcare, tax reform has complexities 0:19:55.600 --> 0:19:57.680 of its own, which we're going to see emerge. That's 0:19:57.680 --> 0:20:00.399 part of the reason why the Trump administration is looking 0:20:00.440 --> 0:20:03.240 for ways again to at least take the death healing 0:20:03.240 --> 0:20:05.520 fight out of the way and let this be a 0:20:05.560 --> 0:20:08.879 fight over government spending. But look, the earlier plans for 0:20:09.000 --> 0:20:14.320 broad stroke tax reform, you know, have shrunk in terms 0:20:14.359 --> 0:20:17.880 of ambition, so that the must pass situation now really 0:20:17.960 --> 0:20:20.680 is a tax cut as far as the Republican Party 0:20:20.720 --> 0:20:24.280 is concerned. And there are divisions within the Republican Party 0:20:24.400 --> 0:20:27.080 about those who think that uh, any cuts have to 0:20:27.119 --> 0:20:29.280 be offset, how are they going to be offset? Uh? 0:20:29.520 --> 0:20:32.520 Is the Trump administration and the Congression leadership going to 0:20:32.520 --> 0:20:36.440 propose tax increases on the very wealthy or no tax cut? 0:20:36.800 --> 0:20:39.639 Uh for the wealthy? What are the thresholds going to be? 0:20:39.680 --> 0:20:42.000 What's the size of the middle class tax cut? What's 0:20:42.040 --> 0:20:45.240 more important? Middle class tax cuts or the corporate tax cut? 0:20:45.600 --> 0:20:48.760 Can President Trump live with something that's uh, not a 0:20:48.800 --> 0:20:51.320 fift cut, but something in the mid twenties. These are 0:20:51.359 --> 0:20:54.359 all questions that the White House has not answered because 0:20:54.359 --> 0:20:58.119 they haven't put details to paper, and that um converse 0:20:58.119 --> 0:21:00.320 hasn't answered because they've been gone for several weeks. All 0:21:00.359 --> 0:21:01.920 of this will come to the four in the next 0:21:01.960 --> 0:21:05.080 couple of weeks as lawmakers come back. Margaret Tellivan, thank 0:21:05.080 --> 0:21:06.680 you so much for joining us, and I really hope 0:21:06.720 --> 0:21:09.720 that you can have some quality time off over this 0:21:09.840 --> 0:21:25.120 long weekend. Shares of General Motors are up more than 0:21:25.160 --> 0:21:28.159