WEBVTT - Dodd-Frank Repeal Won't Happen This Year, Nathan Dean Says 0:00:04.760 --> 0:00:07.720 Welcome to the Bloomberg P and L Podcast. I'm pim 0:00:07.800 --> 0:00:11.080 Fox along with my co host Lisa Abramowitz. Each day 0:00:11.119 --> 0:00:14.360 we bring you the most important, noteworthy, and useful interviews 0:00:14.400 --> 0:00:16.280 for you and your money, whether you at the grocery 0:00:16.320 --> 0:00:19.360 store or the trading floor. Find the Bloomberg pm L 0:00:19.480 --> 0:00:29.480 podcast on iTunes, SoundCloud and at Bloomberg dot com pim Fox. 0:00:29.480 --> 0:00:31.520 There is this headline that crossed the terminal today that 0:00:31.560 --> 0:00:34.080 I thought was fascinating and kind of funny. Gutting Dodd 0:00:34.120 --> 0:00:37.200 Frank is hard to Republicans turn to easier things, things 0:00:37.280 --> 0:00:41.120 like a bill about publishing research on exchange traded funds, 0:00:41.120 --> 0:00:44.240 which is a bit less controversial than rolling back, say, 0:00:44.760 --> 0:00:46.640 all of the banking regulations that were put in place 0:00:46.640 --> 0:00:48.839 in two ten. To get a little bit more perspective, 0:00:48.920 --> 0:00:51.360 Nathan Dean is here with us. He has a government 0:00:51.400 --> 0:00:54.440 analyst for Bloomberg Intelligence, and it is so nice to 0:00:54.480 --> 0:00:55.960 see him in person. He is with us in our 0:00:55.960 --> 0:00:59.279 Bloomberg eleven three oh studio. So, Nathan, how much can 0:00:59.320 --> 0:01:03.360 we really read into this idea? Uh that you know? 0:01:03.520 --> 0:01:07.360 Because there because Congress is focusing on these sort of smaller, 0:01:07.959 --> 0:01:12.600 more bipartisan issues they're just disregarding the idea of an 0:01:12.600 --> 0:01:14.840 overhaul of god Frank. So I don't think they're disregarding 0:01:14.840 --> 0:01:16.640 the idea of an overhaul of Dodd Frank. They're just 0:01:16.720 --> 0:01:19.680 recognizing the fact that it's going to take time. You know. 0:01:19.760 --> 0:01:22.520 I think that the House bill, the Financial Choice Act Bill, 0:01:22.600 --> 0:01:24.720 that the next version two point oh, it was supposed 0:01:24.720 --> 0:01:26.680 to be out in February. Now it's looking like we'll 0:01:26.680 --> 0:01:28.800 be out in March. It may be out in April. 0:01:28.840 --> 0:01:32.560 But I think the congressman's, especially the Senate, they recognize that, 0:01:32.840 --> 0:01:34.600 you know, if we want to replace dot Frank, it's 0:01:34.600 --> 0:01:36.080 going to take a long time. So let's try and 0:01:36.080 --> 0:01:37.760 do some stuff and get it out of the way. First, 0:01:37.959 --> 0:01:40.840 bipartisan bills like a need T F research, opening up 0:01:40.959 --> 0:01:43.680 venture capital funds to more investors. And just today they're 0:01:43.680 --> 0:01:46.919 having a hearing that on the House side about flood insurance. Nathan, 0:01:47.080 --> 0:01:49.280 maybe you can explain this because this also goes to 0:01:49.360 --> 0:01:54.240 the issue of reform for the Affordable Care Act for Obamacare. 0:01:55.000 --> 0:02:00.960 Republicans in Congress were not in favor of Dodd Frank legislation, correct, correct, 0:02:01.480 --> 0:02:04.040 And they've had a fair amount of time to come 0:02:04.120 --> 0:02:07.760 up with an alternative plan. Is that accurate? Correct? So 0:02:07.840 --> 0:02:11.119 where is this alternative plan? Why are they just crafting 0:02:11.320 --> 0:02:15.240 this plan now? So the House has crafted this Financial 0:02:15.280 --> 0:02:18.160 Choice Act very broad. It's never gonna pass it past 0:02:18.200 --> 0:02:20.440 the House and won't pass the Senate. In order to 0:02:20.480 --> 0:02:22.880 get anything past you've got to parrot down, you have 0:02:22.919 --> 0:02:26.280 to get specific. There is bipartisan openness to relieving banks 0:02:26.360 --> 0:02:31.520 below two fifty billion in assets. Correct, exactly, exactly, But 0:02:31.880 --> 0:02:34.560 right now, there's just no incentive to negotiate. I mean, 0:02:34.560 --> 0:02:36.919 if I'm if I'm on the Democratic side, for example, 0:02:37.600 --> 0:02:40.600 why would I negotiate on a DoD Frank bill? You know, 0:02:41.040 --> 0:02:44.120 when there are other things like Obamacare, attacks, reform, infrastructure, 0:02:44.400 --> 0:02:46.160 you know that they want to tackle first. I mean, 0:02:46.200 --> 0:02:48.959 it's not like banks are hurting right now. The fd 0:02:49.000 --> 0:02:52.040 i C put out a report last week saying record profits, 0:02:52.120 --> 0:02:54.720 you know, record small business lending. So does that mean 0:02:54.720 --> 0:02:57.760 that some of the optimism that's been baked into bank 0:02:57.880 --> 0:03:01.280 stocks and bank bonds is per ups a little ahead 0:03:01.280 --> 0:03:05.520 of itself just because there isn't likely to be anything 0:03:05.600 --> 0:03:08.560 in the cards for these very big banks, at least 0:03:09.240 --> 0:03:11.639 within the next set of know eight months, certainly within 0:03:11.680 --> 0:03:13.799 the short term, you know, we don't see any relief 0:03:14.160 --> 0:03:16.480 for the large investment banks coming from Congress in the 0:03:16.480 --> 0:03:19.079 short term. Regulatory side, it's a different matter, but even 0:03:19.120 --> 0:03:21.760 then that's going to take time and process. Gairman Henstling 0:03:21.800 --> 0:03:24.639 has said that this financial regulation is a year one issue, 0:03:24.840 --> 0:03:26.720 but if you look at the Senate side, it's probably 0:03:26.720 --> 0:03:28.880 more a year two issues. So I think if you're 0:03:28.880 --> 0:03:31.280 gonna look and see what can Congress do to replace 0:03:31.360 --> 0:03:33.480 dot Frank, It's not gonna happen this year. It's probably 0:03:33.480 --> 0:03:35.280 gonna happen next year. And if that, that's even if 0:03:35.280 --> 0:03:39.040 they negotiate. As someone who walks the halls of the 0:03:39.120 --> 0:03:41.960 Capital and Washington in general, wanting if you can give 0:03:42.040 --> 0:03:46.240 us who are looking into that bubble world into the 0:03:46.240 --> 0:03:49.040 belt Way a sort of an idea of what has changed. 0:03:49.640 --> 0:03:51.880 There's the tenor changed. I mean just in the last 0:03:51.920 --> 0:03:54.520 let's say a month or so in terms of trying 0:03:54.560 --> 0:03:57.760 to get anything actually out of the House, get it 0:03:57.760 --> 0:04:00.160 approved by the Senate, and get it on the President's desk. So, 0:04:00.640 --> 0:04:03.840 you know, there was this idea that when the new 0:04:03.960 --> 0:04:06.600 Congress takes took shape, that the Senate was going to 0:04:06.640 --> 0:04:10.040 negotiate Senate Democrats were gonna be willing to negotiate. You know, 0:04:10.120 --> 0:04:13.600 there was some toxicity about the Supreme Court choice, etcetera. 0:04:13.800 --> 0:04:15.800 You know that sort of pushed it off. But if 0:04:15.800 --> 0:04:18.200 Senator Creepo and the Senate Banking Committee is looking at 0:04:18.200 --> 0:04:22.040 Capital Form formation and these small bipartisan bills, he's trying 0:04:22.080 --> 0:04:25.039 to build up that goodwill so when that eventual financial 0:04:25.080 --> 0:04:29.080 regulation bill comes, he'll be able to work. Can we 0:04:29.120 --> 0:04:31.440 just get a sense, as somebody who does walk the halls, 0:04:31.640 --> 0:04:33.839 how much goodwill is there at this point between Republicans 0:04:33.839 --> 0:04:36.520 and Democrats? Is there anything? So? Goodwill is probably a 0:04:36.520 --> 0:04:40.080 strong word. But you know, the the Senate in particular 0:04:40.120 --> 0:04:44.280 are full of experienced senators who have faith in the institution. 0:04:44.360 --> 0:04:47.200 They know how to work together. Senator Schumer, Senator McConnell, 0:04:47.520 --> 0:04:50.920 Senator Shared Brown. You know they know that eventually they're 0:04:50.920 --> 0:04:54.279 going to have to negotiate um. You know, so, I 0:04:54.279 --> 0:04:57.520 I still think that it's much less It's certainly toxic, 0:04:58.000 --> 0:05:00.359 but it's much less toxic than if you were in 0:05:00.360 --> 0:05:02.000 the House or if you're dealing with the White House, 0:05:02.520 --> 0:05:05.080 and that it goes with legend, that goes for legislation. 0:05:05.120 --> 0:05:06.960 But as you said, it doesn't really apply to any 0:05:07.000 --> 0:05:10.440 of the regulatory changes that might happen, because that can 0:05:10.480 --> 0:05:13.680 become from an executive order or from many agency changes. 0:05:13.720 --> 0:05:15.960 So the executive orders that Donald Trump put out don't 0:05:16.000 --> 0:05:19.000 apply to the financial regulators, the independent overseen by Congress. 0:05:19.120 --> 0:05:20.960 Yet you know, if I'm at the SEC, or if 0:05:20.960 --> 0:05:22.600 the CFDC in the White House calls me up to 0:05:22.600 --> 0:05:24.840 say follow my executive order, I'm going to say yes. 0:05:25.320 --> 0:05:27.400 You know, I think on the regulatory side, were really 0:05:27.440 --> 0:05:30.559 need to wait until Janet Yellen leaves in February two eighteen. 0:05:30.560 --> 0:05:33.000 When Donald Trump starts getting his own people in mid 0:05:33.040 --> 0:05:35.680 two eighteen, I think you'll start seeing a lot of stuff. 0:05:35.960 --> 0:05:39.719 But before then you're gonna see some small jurisdictional I 0:05:39.720 --> 0:05:43.520 mean small rulemaking, small tweaks. You know, nothing brought or 0:05:43.560 --> 0:05:46.800 any anything like that. Thanks very much for enlightening us. 0:05:46.880 --> 0:05:50.080 And Nathan Dean is a government analyst for Bloomberg Intelligence. 0:05:50.080 --> 0:06:05.360 He knows all about what's going on in Washington. Right now, 0:06:05.360 --> 0:06:08.200 we want to turn to another bit of news on 0:06:08.320 --> 0:06:13.560 President Trump's radar. John Huntsman has been picked by President 0:06:13.560 --> 0:06:17.039 Trump to be his Russian ambassador and to get a 0:06:17.040 --> 0:06:20.760 better sense of what this might mean for US Russian relations. 0:06:20.760 --> 0:06:23.119 I want to bring in Richard Kahan, a managing partner 0:06:23.160 --> 0:06:27.120 at Eurasia Advisors who has intimate knowledge of Russia and 0:06:27.240 --> 0:06:30.200 has boots on the ground, very close sense of what 0:06:30.440 --> 0:06:32.279 is going on there. Richard, what do you make of 0:06:32.320 --> 0:06:36.680 this selection? Well, look, I think John Huntsman is a 0:06:36.760 --> 0:06:41.279 seasoned diplomat, uh, someone extremely well connected politically with the 0:06:41.279 --> 0:06:46.200 Republican Party, and someone who is a very safe, solid 0:06:46.320 --> 0:06:50.320 choice during a period when the last thing Trump needs 0:06:50.440 --> 0:06:54.320 is a messy confirmation hearing. And so I think part 0:06:54.320 --> 0:06:57.000 of the explanation for the choice is the domestic aspect. 0:06:57.720 --> 0:07:00.840 But he's also a very experienced leman who I think 0:07:00.839 --> 0:07:03.120 can do a fine job in terms of representing our 0:07:03.120 --> 0:07:06.240 country in Russia. Um, he does not, as you know, 0:07:06.360 --> 0:07:09.760 have a background, if you will, in the Russian world, 0:07:10.960 --> 0:07:15.520 but former US Ambassador to China, former US Ambassador to Singapore, 0:07:15.600 --> 0:07:19.400 and former governor of Utah. Absolutely so, Uh, this is 0:07:19.400 --> 0:07:21.400 a man of great experience and I'm sure he'll handle 0:07:21.480 --> 0:07:24.360 this posting extremely well. And I think we're lucky, frankly 0:07:24.400 --> 0:07:27.040 to have someone with his level of experience serving our 0:07:27.040 --> 0:07:29.440 country in that capacity. You know, Richard, One of the 0:07:29.480 --> 0:07:31.920 reasons why I was really eager to speak with you 0:07:32.360 --> 0:07:34.480 was because of some of the messiness that we've been 0:07:34.480 --> 0:07:39.920 hearing about the President Trump's campaign with respect to its 0:07:39.920 --> 0:07:43.640 relationship with China. In your opinion of somebody who does 0:07:43.720 --> 0:07:47.480 have a pretty close knowledge and contacts in Russia, do 0:07:47.560 --> 0:07:50.160 you think that there is enough evidence that has already 0:07:50.160 --> 0:07:53.200 been presented to give you a concrete feeling that there 0:07:53.320 --> 0:07:56.960 was some kind of collusion between the Trump campaign and 0:07:57.080 --> 0:08:01.760 Russia to win the US election. I would say that 0:08:02.760 --> 0:08:05.680 I think the wise course at this stage to put 0:08:05.680 --> 0:08:07.920 this behind us, and for the president to put it 0:08:07.960 --> 0:08:10.920 behind him, is to get in front of it by calling, 0:08:10.960 --> 0:08:13.680 for example, for an independent commission to look at it, 0:08:14.080 --> 0:08:17.680 to go forward with disclosure on his own part in 0:08:17.800 --> 0:08:21.200 terms of all of his contacts, all the rumors of compliment, 0:08:21.440 --> 0:08:24.520 anything that could potentially come out, because we are going 0:08:24.560 --> 0:08:28.160 to see an ongoing trickle of information, so I think 0:08:28.200 --> 0:08:30.720 that is the wisest court. Of course. It also will 0:08:30.760 --> 0:08:36.679 help him avoid any issues relating to UH interfering with 0:08:36.840 --> 0:08:39.600 the you know, with an investigation, which as we know, 0:08:39.720 --> 0:08:44.040 it's it's not necessarily the actions themselves, it's the actions 0:08:44.480 --> 0:08:49.800 subsequent that can lead to various legal problems. So I 0:08:49.840 --> 0:08:54.400 think he's asking for trouble by having this handled exclusively 0:08:54.679 --> 0:09:00.360 by a Republican dominated committee, and that then a long term, 0:09:00.360 --> 0:09:02.520 you know, this is only going to lead to a 0:09:02.600 --> 0:09:05.520 longer and more painful situation. But I guess a long 0:09:05.760 --> 0:09:07.520 it's a long way of getting into the answer to 0:09:07.559 --> 0:09:12.000 your question. I do have genuine concerns. I thought it was, 0:09:12.559 --> 0:09:15.720 but no, I am gonna answer. I do think that 0:09:16.840 --> 0:09:19.640 from what I've both seen and what I've heard in Moscow, 0:09:20.160 --> 0:09:24.560 that there is reason to be concerned about this issue 0:09:24.920 --> 0:09:28.520 of whether, uh, the decisions that he made in the 0:09:28.559 --> 0:09:30.560 past and potentially sound that he will make in the 0:09:30.600 --> 0:09:33.320 future are fully independent, or whether they are in part 0:09:34.080 --> 0:09:39.880 influenced by relationships financial or otherwise, or compromat that the 0:09:39.960 --> 0:09:43.360 Russians may have. And Uh, I think it's healthy for 0:09:43.440 --> 0:09:46.520 us to get to the bottom of all of that. UM. 0:09:46.559 --> 0:09:48.800 I regret that that's a situation, but I think that 0:09:48.800 --> 0:09:51.080 that is the case. I wonder if you could comment 0:09:51.160 --> 0:09:54.199 on the state of the Russian economy having come out 0:09:54.240 --> 0:09:57.120 of a recession, and I'm wondering whether you can speak 0:09:57.200 --> 0:10:01.720 to the issue of economic performing in not just taking 0:10:01.760 --> 0:10:07.120 into account the oil sector, because chemical, agriculture, machinery, food. Uh, 0:10:07.160 --> 0:10:09.720 what is the state of the Russian economy right now? 0:10:10.559 --> 0:10:13.880 The Russian economy has largely been frozen for some period, 0:10:13.960 --> 0:10:19.400 has been compared often to the bression of years. The 0:10:19.440 --> 0:10:22.920 financial markets really have not been functioning. This is in 0:10:23.040 --> 0:10:25.800 part due, of course, to sanctions, but that's not the 0:10:25.960 --> 0:10:31.280 entire story. It's also due to just the sense of anuih, 0:10:32.480 --> 0:10:36.200 the freezing, if you will, of the initiative in that environment, 0:10:36.280 --> 0:10:39.720 because people recognize that if they build a company and 0:10:39.760 --> 0:10:46.679 have success, that ultimately some government related entities will seek 0:10:46.760 --> 0:10:50.360 to obtain control of that. So I was I was 0:10:50.679 --> 0:10:53.320 hoping to lead you down to military spending, because the 0:10:53.360 --> 0:10:55.480 Russians of this said that they are going to increase 0:10:55.520 --> 0:10:58.280 the military spending, but also the way that they calculate 0:10:58.360 --> 0:11:02.439 GDP has changed and they now include military spending as 0:11:02.480 --> 0:11:05.640 part of that GDP report. Well, first, let me say, 0:11:05.679 --> 0:11:10.360 Russian military spending is a fraction of what we spend. Uh. 0:11:10.679 --> 0:11:13.200 The statistics I've seen is somewhere in the area of 0:11:13.640 --> 0:11:17.000 maybe six to seven percent of what we spend on 0:11:17.000 --> 0:11:21.280 on on our defense spending. And indeed, the increase that 0:11:21.440 --> 0:11:25.360 is now being proposed by the current administration would be 0:11:25.400 --> 0:11:27.600 in the amount of the total amount of what Russia 0:11:27.640 --> 0:11:31.520 spends on defense. UH. So, you know, Russia is not 0:11:31.600 --> 0:11:36.240 in a position to compete with US on defense spending, 0:11:36.280 --> 0:11:40.760 but we're already in a position that dramatically exceeds anything 0:11:41.040 --> 0:11:43.480 that the Russians can put up on all sorts of 0:11:44.240 --> 0:11:47.679 military fronts. I want to thank you very much for 0:11:47.760 --> 0:11:52.480 joining us. Richard con he is managing partner for Eurasia Advisers, 0:11:52.920 --> 0:11:57.320 giving us some detail about the United States relationship with Russia, 0:11:57.920 --> 0:12:02.080 maybe pointing out that John Huntsman Ambassador, he's been selected 0:12:02.120 --> 0:12:05.240 to be the U s Ambassador to Russia by President 0:12:05.280 --> 0:12:09.320 Donald Trump. Perhaps he can change the relations and with 0:12:09.520 --> 0:12:25.160 more and more positive note. Is your phone spying on you? 0:12:25.240 --> 0:12:27.679 That is the big question of the day. I want 0:12:27.679 --> 0:12:29.880 to bring in David Garrity. He's CEO of g v 0:12:30.000 --> 0:12:33.600 A Research, also a columnist at Investo PDA. Uh he 0:12:33.720 --> 0:12:36.360 is here with us in our Bloomberg eleven three oh studio. 0:12:36.600 --> 0:12:39.160 And David, I know that you're interested in talking about 0:12:39.440 --> 0:12:43.760 Alphabet's launch of Android android messages, but I kind of 0:12:43.760 --> 0:12:46.320 feel like we have to start with the recent CIA 0:12:46.520 --> 0:12:51.640 leaks and the emphasis that that's placed on security, particularly 0:12:51.640 --> 0:12:55.720 with respect to your phone. David, do you expect that 0:12:55.840 --> 0:13:01.880 this new emphasis on potential hacks could alter the landscape 0:13:02.080 --> 0:13:05.440 for demand for Androids versus iPhones? Well, certainly, I will 0:13:05.520 --> 0:13:10.080 lead to a greater demand for more secure software. And clearly, Android, 0:13:10.760 --> 0:13:14.040 with about eighty eight percent share of globally installed smartphone 0:13:14.080 --> 0:13:18.040 operating systems, is a big target where and it's easier 0:13:18.080 --> 0:13:21.079 to break into the Android than the iPhone currently. Yes, 0:13:21.200 --> 0:13:24.200 it is. And to the extent that you have anyone 0:13:24.240 --> 0:13:27.680 of a number of smartphone original equipment manufacturers or o 0:13:27.760 --> 0:13:30.400 e m s who have been taking the basic Android 0:13:30.760 --> 0:13:34.840 software system and then custom tailoring it. In the process 0:13:34.880 --> 0:13:37.520 of doing that, they may also have created further security risk, 0:13:37.559 --> 0:13:40.559 which is what helps assist hackers in terms of getting 0:13:40.600 --> 0:13:44.480 access to Android powered phones. David Garty, I mean, I'm 0:13:44.480 --> 0:13:47.200 not going to pursue the security issue for the time 0:13:47.240 --> 0:13:50.120 being because I mean, everybody knows that you know, everything 0:13:50.200 --> 0:13:53.199 is hackable, right, I mean, there's nothing that is not hackable. 0:13:53.240 --> 0:13:55.160 Although hold on a second, because I think it will 0:13:55.240 --> 0:13:57.440 make a difference if people are focusing more on this, 0:13:57.600 --> 0:14:00.000 it might determine whether they decide to buy an Android 0:14:00.080 --> 0:14:01.720 or an iPhone. I mean that's my point, all right, 0:14:01.720 --> 0:14:04.080 Well so okay, well good, well let's take that, because David, 0:14:04.120 --> 0:14:06.679 I want you to talk about the different marketplaces for 0:14:07.200 --> 0:14:13.280 Apple iOS devices and Android operating system devices, because I 0:14:13.400 --> 0:14:17.840 understand that the Android operating system device that's a mid 0:14:17.920 --> 0:14:20.800 to lower market price point, that's going to be a 0:14:20.880 --> 0:14:22.800 lot of a lot more growth there than it is 0:14:22.840 --> 0:14:25.560 going to be at the higher end. And that's a 0:14:25.680 --> 0:14:29.880 de facto Chrome experience, right Google out of Chrome, and 0:14:29.920 --> 0:14:33.240 then that's a Google Search experience. And now I want 0:14:33.280 --> 0:14:36.120 you to tell us about messaging because they also want 0:14:36.160 --> 0:14:39.040 that to be a Google experience. Yeah, certainly. I mean, 0:14:39.080 --> 0:14:41.840 with respect of messaging, we've been seeing essentially a shift 0:14:41.880 --> 0:14:45.520 in terms of people's communication away from email and over 0:14:45.560 --> 0:14:48.200 towards messaging. It used to be SMS messages, but it's 0:14:48.200 --> 0:14:52.320 really more taking place within I Message, Android or Google's 0:14:52.400 --> 0:14:55.560 problem with respect to messaging was again this proliferation if 0:14:55.560 --> 0:14:58.640 you will, across various handset O E MS. They needed 0:14:58.680 --> 0:15:01.440 to establish a standard out. They have a product that's 0:15:01.440 --> 0:15:04.680 been coming onto the market called Android Messages. They're trying 0:15:04.720 --> 0:15:09.760 to acquire a certain base experience and standard that applies 0:15:09.800 --> 0:15:13.600 across all Android instances, so they can be as competitive 0:15:13.920 --> 0:15:17.080 as say Apple's EYE message has been. And understand, Apple 0:15:17.120 --> 0:15:21.120 I Message has recently generated about sixty three quadrillion. That's 0:15:21.160 --> 0:15:24.120 ten to the fifteen Power messages per year, or to 0:15:24.160 --> 0:15:27.320 put it differently, that's two hundred thousand EYE messages per 0:15:27.360 --> 0:15:31.040 second that are being sent. So that's an ecosystem that 0:15:31.120 --> 0:15:33.640 has a wall around it because I understand you know, 0:15:33.680 --> 0:15:37.320 if you do not have an iOS phone, you're not 0:15:37.400 --> 0:15:41.080 getting anything but those I Well, if you have let's 0:15:41.120 --> 0:15:44.000 say an I uh Touch or at iPad or something, 0:15:44.480 --> 0:15:48.080 then you're inside the Apple ecosystem. Yes you are, and 0:15:48.120 --> 0:15:50.080 to the extent that you're obviously sending to someone who 0:15:50.120 --> 0:15:52.040 has an Apple device. On the other side, it's all 0:15:52.040 --> 0:15:54.080 gonna be done within I message. That doesn't say that 0:15:54.360 --> 0:15:57.560 you have messages incent outside they will be sending text messages. 0:15:57.600 --> 0:16:01.240 But yes, your points correct. We've a lot about sort 0:16:01.240 --> 0:16:06.000 of the saturation of mobile phones, and I'm wondering from 0:16:06.040 --> 0:16:10.840 your perspective, is there anything that Alphabet could do, or 0:16:10.880 --> 0:16:15.520 frankly even Samsung or Apple to change that or to 0:16:15.640 --> 0:16:19.160 sort of suddenly change the landscape and cause people to 0:16:19.720 --> 0:16:24.200 buy more iPhones or um or or greatly expand potential 0:16:24.200 --> 0:16:26.160 places where people use them. Well, this has been a 0:16:26.160 --> 0:16:28.640 problem certainly, you know that the smartphone market has been 0:16:28.680 --> 0:16:31.040 bumping up against and the whole knock on Apple had 0:16:31.080 --> 0:16:33.120 been the fact that their market was saturated, and you're 0:16:33.120 --> 0:16:35.920 looking at users who were holding onto their phones for 0:16:35.960 --> 0:16:37.880 a longer period of time just because of the cost 0:16:37.920 --> 0:16:40.880 relative to their incomes. And you know, Jason chafe It's 0:16:40.920 --> 0:16:43.200 comment about sort of saying well they should buy healthcare 0:16:43.240 --> 0:16:46.760 premiums and not iPhones, you know, certainly goes over like 0:16:46.760 --> 0:16:48.920 like a lead balloon. But it does touch on the 0:16:48.920 --> 0:16:52.680 fact that you know, smartphones have become more expensive. Clearly 0:16:52.840 --> 0:16:55.760 we're looking more in growth in other areas being able 0:16:55.800 --> 0:16:59.200 to apply these software systems to the Internet of things, 0:16:59.240 --> 0:17:01.960 which is where you are to raise more concerns having 0:17:01.960 --> 0:17:04.199 to do with some of these security elements that you 0:17:04.240 --> 0:17:07.080 were talking about earlier. But I would make one point 0:17:07.119 --> 0:17:10.640 is that while technology itself is capable of being hacked, 0:17:11.000 --> 0:17:15.040 we know from the experience around the Democratic National Committee 0:17:15.320 --> 0:17:18.959 last year that is really more human behavior which is hackable, 0:17:19.320 --> 0:17:22.760 not necessarily the devices. So if people are concerned about 0:17:22.800 --> 0:17:24.920 their security. The first thing they need to do is 0:17:24.960 --> 0:17:27.960 look to themselves and how is it that they're interacting 0:17:27.960 --> 0:17:31.160 with technologies? How is it that they control the information 0:17:31.240 --> 0:17:35.359 that they either access or create themselves? With respect to that, 0:17:35.640 --> 0:17:41.760 is there a differential between messaging versus phone voice phone 0:17:42.119 --> 0:17:43.639 over the phones? You know what I mean? As far 0:17:43.680 --> 0:17:46.960 as hackability, well, to the extent that I messages are 0:17:47.000 --> 0:17:51.320 are encrypted. And it's something where Apple in dealing with 0:17:51.440 --> 0:17:55.840 the San Bernardino massacre. You know, Apple had taken a 0:17:55.880 --> 0:17:58.600 stand that they didn't want to provide access to the 0:17:58.600 --> 0:18:01.760 shooters phones and their devices. Um. You know certainly in 0:18:01.760 --> 0:18:03.760 that respect now that there are hacks that were found 0:18:03.800 --> 0:18:07.000 around it. Um, but Apple tends to be more secure 0:18:07.119 --> 0:18:10.679 in this regard relatives, say to an Android. And certainly 0:18:10.680 --> 0:18:13.240 if you looked at voice communications, you know, for for 0:18:13.359 --> 0:18:16.359 an encrypted voice call, uh, you'd have to go to 0:18:16.400 --> 0:18:19.240 a special hand set. So from that standpoint, you would 0:18:19.240 --> 0:18:22.800 be interestingly enough find that messaging, say on an Apple platform, 0:18:22.840 --> 0:18:25.760 tends to be more secure relative to other means of communication. 0:18:26.280 --> 0:18:29.320 I want to get your thoughts on investing in Alphabet, 0:18:29.359 --> 0:18:32.679 the parent company of Google. Here's a stock that is 0:18:32.920 --> 0:18:37.000 up about nine percent so far this year. And I 0:18:37.080 --> 0:18:42.000 just love this comparison. In two thousand seven, Google's revenue 0:18:42.040 --> 0:18:47.040 was sixteen and a half billion revenue two thousand sixteen 0:18:48.200 --> 0:18:51.560 over nine billion. This is a company went sixteen and 0:18:51.600 --> 0:18:55.639 a half to over nine billion, and it's still growing 0:18:55.680 --> 0:18:59.639 at double digit rates. Yes, And from that standpoint, I mean, 0:18:59.640 --> 0:19:03.560 the big search applications are still you know, very solid 0:19:03.560 --> 0:19:06.119 in the margins are certainly something that the desire of 0:19:06.160 --> 0:19:10.199 many other businesses, but we are looking at larger addressable 0:19:10.240 --> 0:19:13.480 markets that they're potentially moving into. People have certainly talked 0:19:13.480 --> 0:19:16.239 about driverless vehicles and the scale. But even if just 0:19:16.320 --> 0:19:21.560 the messaging that you've described becomes moderately successful, is this 0:19:21.600 --> 0:19:25.080 a company is just going to continue to bold, you know, 0:19:25.760 --> 0:19:28.840 bowl forward. In this way, Google is is very much 0:19:28.880 --> 0:19:31.480 well established in terms of the human capital that they 0:19:31.480 --> 0:19:34.400 have in place and capability of the people who are there, 0:19:34.440 --> 0:19:37.399 in their ability to continue to retract and retain these people. 0:19:37.760 --> 0:19:41.520 And from that standpoint, um, you know, Trump's blathering about 0:19:41.560 --> 0:19:45.320 immigration aside, Google could just as easily set up its 0:19:45.400 --> 0:19:48.679 operations outside the US to the detriment of the U 0:19:48.800 --> 0:19:51.440 S tax base and still continue to be a very 0:19:51.480 --> 0:19:55.919 competitive company on a global scale. So from that standpoint, 0:19:56.160 --> 0:19:58.879 we clearly look at Google as being a company that 0:19:59.400 --> 0:20:01.760 arguably has be part of a core portfolio for anybody 0:20:01.800 --> 0:20:05.119 who's looking at the technology sector. Other names like Snap 0:20:05.160 --> 0:20:08.159 perhaps not so much. Thanks very much. David Garretty is 0:20:08.200 --> 0:20:10.560 always a pleasure. He is the chief executive a g 0:20:10.640 --> 0:20:27.160 v A Research. President Donald Trump is scheduled to meet 0:20:27.280 --> 0:20:30.600 with almost a dozen chief executives of small and mid 0:20:30.680 --> 0:20:33.760 size banks from around the United States. There he is 0:20:33.760 --> 0:20:38.600 seeking their their contribution and their input for a discussion 0:20:38.640 --> 0:20:41.880 about regulations which may be hurting their ability to lend 0:20:41.880 --> 0:20:45.280 the consumers and small businesses. This is all part of 0:20:45.320 --> 0:20:48.439 the listening sessions that are taking place under the ages 0:20:48.480 --> 0:20:52.320 of the National Economic Council, and we will bring that 0:20:52.359 --> 0:20:56.560 to you as it happens. Well, let's focus our attention 0:20:56.600 --> 0:21:00.399 more closely on one element of President Donald Trump and 0:21:00.440 --> 0:21:04.159 the Republicans plans for taxes. Uh. They've said they'd like 0:21:04.240 --> 0:21:08.200 to court cut corporate taxes, allow the repatriation of cash 0:21:08.800 --> 0:21:12.600 that are in corporate accounts overseas, and also eliminate company's 0:21:12.640 --> 0:21:17.920 ability to deduct interest expenses from taxes. Here to tell 0:21:18.000 --> 0:21:22.080 us more is Noah Smith a contributor to Bloomberg View 0:21:22.400 --> 0:21:26.359 and he blogs at No Opinion. No, it's great to 0:21:26.359 --> 0:21:28.200 have you here in the studio. Thanks for being with us. 0:21:28.720 --> 0:21:30.560 All right, So this, let's say that this is the 0:21:32.080 --> 0:21:36.800 focus of the attention of bond market participants is whether 0:21:37.040 --> 0:21:42.000 corporations will continue to be allowed to deduct bond interest payments. 0:21:42.359 --> 0:21:46.919 What is going on there? Right? So, uh, for every company, 0:21:46.920 --> 0:21:49.159 you have to make a decision how much do we 0:21:49.200 --> 0:21:51.080 fund our operations with equity and how much do we 0:21:51.119 --> 0:21:55.200 fund our operations with debt? Actually, most US corporations fund 0:21:55.760 --> 0:21:59.200 mostly with equity. Actually debt is is smaller for equity, 0:21:59.720 --> 0:22:02.520 fine for US corporations, but there's still a lot of 0:22:02.520 --> 0:22:05.920 debt out there. For banks, it's the opposite. Banks really 0:22:05.920 --> 0:22:08.520 take on a lot of debt, have very high leverage ratios, 0:22:08.720 --> 0:22:11.360 so they are the ones who would be most affected, 0:22:11.400 --> 0:22:15.359 although all all companies would be someone affected. The idea is, 0:22:15.680 --> 0:22:19.480 right now we actually privileged debt finance over equity finance, 0:22:19.840 --> 0:22:24.360 and under this new policy that would be changed going forward, 0:22:24.440 --> 0:22:27.160 it would be a much more level playing field between 0:22:27.160 --> 0:22:30.000 the two. Well, no, this is actually shaking debt markets 0:22:30.000 --> 0:22:32.280 in a pretty massive way. There is some speculation that 0:22:32.320 --> 0:22:35.480 the record pace of investment grade issuance that we've seen 0:22:35.560 --> 0:22:38.720 this year is to lock in the current deduction over 0:22:38.720 --> 0:22:40.679 a longer period of time that it will be grandfathered 0:22:40.720 --> 0:22:43.720 in as they are unable to deduct these interest payments 0:22:44.119 --> 0:22:47.520 from their taxes going forward. You made an interesting argument 0:22:47.520 --> 0:22:49.399 in a recent column. You're saying, you know, this is 0:22:49.600 --> 0:22:51.719 very important, that this is part of the tax postal, 0:22:51.760 --> 0:22:55.920 and it's probably a good thing. You highlight how studies 0:22:55.960 --> 0:22:59.760 have shown that the more debt levels are elevated in 0:22:59.760 --> 0:23:04.280 a country, the more damaging asset price declines are for 0:23:04.320 --> 0:23:07.040 an economy. So, in other words, you're saying, structurally, this 0:23:07.119 --> 0:23:09.800 might actually be a good thing to push corporations to 0:23:09.840 --> 0:23:12.199 take on less debt and to fund themselves more with equity. 0:23:12.200 --> 0:23:15.720