WEBVTT - Surveillance: Biden's Foreign Policy With Hormats 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 Jaily. 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 --> 0:00:29.800 and of course on the Bloomberg terminal. Right now, as 0:00:29.840 --> 0:00:33.640 we consider the distance from Cornwall the Brussels, Robert Horbats 0:00:33.760 --> 0:00:37.319 joins us. He's a Tideman Advisor's Ambassador Hormats of course 0:00:37.400 --> 0:00:40.720 his public service to the nation for Republicans and four 0:00:40.760 --> 0:00:44.240 Democrats as well. Ambassador, Thank you so much for your perspective. 0:00:44.640 --> 0:00:47.199 Uh this morning, I want to go back to one 0:00:47.240 --> 0:00:50.159 of the chapters of your wonderful book, The Price of Liberty, 0:00:50.560 --> 0:00:54.360 The First Great Test? What is the first great test 0:00:54.680 --> 0:00:59.960 for President Biden when he meets with Mr Putin? Well, 0:01:00.040 --> 0:01:03.440 he has to demonstrate that the United States is going 0:01:03.560 --> 0:01:09.880 to be much more resolute in resisting various cyber attacks 0:01:09.920 --> 0:01:14.640 that come from Russia or are perhaps sponsored by the 0:01:14.680 --> 0:01:17.360 Russian government. We're trying to sort out which is which, 0:01:17.880 --> 0:01:21.720 but certainly we have been plagued by lots of cyber 0:01:21.800 --> 0:01:26.280 problems coming from that country, either directly through the government 0:01:26.440 --> 0:01:30.520 or indirectly by people on that territory. And these not 0:01:30.600 --> 0:01:35.160 only are disruptive in themselves, but pretend the prospect of 0:01:35.200 --> 0:01:37.720 things getting even worse or escalating, and that can be 0:01:37.880 --> 0:01:41.679 very disruptive to American companies and to the overall American economy. 0:01:41.720 --> 0:01:44.880 We're very cyber vulnerable because we're so connected. Can we 0:01:44.959 --> 0:01:50.840 be cyber offensive? I'm sure we have been. I'm also 0:01:50.920 --> 0:01:53.360 sure that when we do it, we don't say anything. 0:01:53.600 --> 0:01:57.440 And the reason is that we don't want other countries, 0:01:57.520 --> 0:02:01.240 not just Russia and any other country understand how we 0:02:01.360 --> 0:02:04.480 do it, what we're doing, and what our technology is. 0:02:04.520 --> 0:02:07.360 That we certainly have the technology to be more offensive, 0:02:07.720 --> 0:02:10.760 and they know that. And I think that there is 0:02:10.919 --> 0:02:13.799 at least some sense that if they go too far, 0:02:13.919 --> 0:02:18.040 the United States can take action against them, and it 0:02:18.080 --> 0:02:21.320 could be very destructive because they have a weaker economy. 0:02:21.360 --> 0:02:23.840 That the problem is that we're a very connected economy, 0:02:23.880 --> 0:02:26.280 and therefore a lot of things can happen here in 0:02:26.360 --> 0:02:30.320 one area, say electricity, which could shut water supplies down, 0:02:30.560 --> 0:02:34.720 or transit systems down, or energy systems down. So the 0:02:34.760 --> 0:02:37.160 world's in a very precarious place. If we start getting 0:02:37.200 --> 0:02:41.400 into cyber attacks on one another, Ambassador, how much unity 0:02:41.560 --> 0:02:44.040 is there among the G seven, among the G thirty 0:02:44.200 --> 0:02:48.120 in combating cyber attacks together, in working together to make 0:02:48.120 --> 0:02:50.840 sure that networks are up to see speed and protected 0:02:50.880 --> 0:02:54.800 and the information is shared. Well, I would put it 0:02:54.919 --> 0:02:57.160 this way, we have a long way to go. Um. 0:02:57.200 --> 0:03:00.480 There are different countries who were vulnerable into a ways 0:03:00.560 --> 0:03:03.640 as you've seen, some Central and European countries have already 0:03:03.639 --> 0:03:07.280 born the brunt of this, and there is really not, 0:03:07.480 --> 0:03:13.079 I think a collective doctrine of collaboration or of what 0:03:13.200 --> 0:03:18.880 constitutes UH an attack that requires retaliation. The other problem 0:03:19.000 --> 0:03:23.200 is sourcing and energy at what they call attribution in 0:03:23.280 --> 0:03:26.720 this world, and you sometimes don't know where the cyber 0:03:26.760 --> 0:03:30.360 attack actually is coming from or who the perpetrator is, 0:03:30.800 --> 0:03:33.400 so that makes it more difficult as well. But I 0:03:33.440 --> 0:03:37.960 think the vulnerabilities are becoming increasingly apparent and there is 0:03:38.000 --> 0:03:40.880 going to be and there's a NATO is probably the 0:03:41.000 --> 0:03:44.400 vehicle for doing it, um and for getting this together, 0:03:44.520 --> 0:03:49.280 but we don't know as much about how these are done, 0:03:49.360 --> 0:03:52.040 where they're coming from, and we certainly don't have a 0:03:52.160 --> 0:03:57.240 doctrine of specific retaliation for specific kinds of attacks, but 0:03:57.400 --> 0:04:00.360 we know things are getting worse and if want to 0:04:00.400 --> 0:04:03.280 stop them, a we have to improve our defenses, which, 0:04:03.280 --> 0:04:06.400 as you've seen in certain instances, have not been all 0:04:06.480 --> 0:04:10.000 that good. In fact, they have been inadequate. And we 0:04:10.080 --> 0:04:14.400 also need them to know that if they don't deal 0:04:14.480 --> 0:04:17.560 with things that come from their government or from on 0:04:17.640 --> 0:04:21.600 their territory, we will have an opportunity and a will 0:04:21.720 --> 0:04:25.520 to take more action that can be very disruptive to them. Bob, 0:04:25.560 --> 0:04:27.680 there's a question the reason why I asked that this 0:04:27.760 --> 0:04:30.520 is not just about cyber but there's a broader point here. 0:04:30.600 --> 0:04:33.719 Leaving the G seven heading to the NATO summit, there 0:04:33.800 --> 0:04:36.039 was a lot of disagreement about how hard of a 0:04:36.040 --> 0:04:38.120 line to take with China, how hard of a line 0:04:38.160 --> 0:04:40.839 to take with Russia. But my eyes really are on China. 0:04:41.040 --> 0:04:44.400 Given the predominance in the global economy, where are the 0:04:44.440 --> 0:04:47.040 biggest question marks there in terms of getting some sort 0:04:47.080 --> 0:04:52.320 of unified strategy and how to interact with China. It's 0:04:52.320 --> 0:04:55.039 a great question and there is not a clear answer 0:04:55.080 --> 0:05:00.360 because the Europeans are concerned with certain things, certainly Chinese 0:05:00.400 --> 0:05:05.400 trade policy and electoral property protection uh UN level playing 0:05:05.480 --> 0:05:09.359 field that favors China. These of the American companies, but 0:05:09.440 --> 0:05:13.960 the European companies. But the problem is that companies in 0:05:14.000 --> 0:05:17.120 Europe and countries in Europe are very vulnerable. They have 0:05:17.160 --> 0:05:20.200 become very dependent on the Chinese market. That's been cut 0:05:20.200 --> 0:05:23.680 back somewhat, but if they take very tough action against China. 0:05:24.040 --> 0:05:27.840 For instance, German cars, which do very well in China, 0:05:27.960 --> 0:05:31.920 are vulnerable and other German products. UH. The United States 0:05:32.000 --> 0:05:34.599 is in a somewhat different position. The Europeans are not 0:05:34.680 --> 0:05:38.640 so concerned about the strategic strength of China. UH these 0:05:38.800 --> 0:05:42.000 China see the South China see and many of the 0:05:42.120 --> 0:05:45.920 geo political and geo strategic issues in the Pacific that 0:05:46.000 --> 0:05:50.640 we're concerned about don't so much trouble the Europeans. They're 0:05:50.680 --> 0:05:54.159 more concerned about the human rights issues. They're more concerned 0:05:54.160 --> 0:05:57.520 about trade issues. They don't want to all out trade 0:05:57.520 --> 0:06:01.680 war or all out confrontation with China. The United States 0:06:01.680 --> 0:06:04.719 has a lot of geostrategic and geopolitical issues. We have 0:06:04.760 --> 0:06:08.359 a navy there. The Europeans don't, so we have a 0:06:08.440 --> 0:06:12.720 wholly different set of issues. On the strategic side. Were 0:06:12.760 --> 0:06:15.520 similar to them, and we have similar concerns on the 0:06:15.520 --> 0:06:18.839 economic side and the human rights side. So my guess 0:06:18.920 --> 0:06:21.680 is if there's to be some measure of unity, it's 0:06:21.720 --> 0:06:25.520 really in those areas, not in the geopolitical ones. Um 0:06:26.160 --> 0:06:28.039 do We're trying to get them to take a tougher 0:06:28.120 --> 0:06:31.160 line on China, but they are also concerned about their 0:06:31.200 --> 0:06:34.800 economic vulnerability, and they're much more reticent to do back. 0:06:35.800 --> 0:06:38.520 Do we risk, by the way, pushing China and Russia 0:06:38.600 --> 0:06:43.880 closer together? Bob? How strong is that relationship? Well, we've 0:06:43.920 --> 0:06:47.280 already in part done that because it is I mean, 0:06:47.279 --> 0:06:50.960 the Europeans, the Russians, and the and the Chinese have 0:06:51.120 --> 0:06:54.799 had their issues over time. In fact, the first opening 0:06:54.880 --> 0:06:58.440 between the United States and China came because the Chinese 0:06:58.480 --> 0:07:01.960 and we perceived a Russian wreck to China along the 0:07:02.040 --> 0:07:05.279 Assouri River, and there were there were numerous Russian divisions 0:07:05.720 --> 0:07:08.880 on the Chinese border. So it hasn't been a particularly 0:07:08.920 --> 0:07:12.400 comfortable relationship from time to time. But now they're beginning 0:07:12.440 --> 0:07:16.720 to realize that if they want to deal with the 0:07:16.840 --> 0:07:20.680 United States and resist some American pressures, they're going to 0:07:20.800 --> 0:07:24.000 probably have to work together. And that's what they're doing. 0:07:24.080 --> 0:07:26.400 And I do think there is that that has happened 0:07:26.400 --> 0:07:30.000 already and the risk is that it will happen even 0:07:30.040 --> 0:07:33.880 even further. The other thing is that other other countries 0:07:33.920 --> 0:07:36.240 in the middle our field, they don't want to be 0:07:36.320 --> 0:07:39.600 caught like a lot of the Asians. Between the United States, 0:07:40.080 --> 0:07:43.760 I wanted to ask about I wanted to ask about that, Bob. 0:07:43.800 --> 0:07:46.320 The last time I sat on set with Tom Keane 0:07:46.440 --> 0:07:49.880 in person um there was an attempted coup de eta 0:07:50.080 --> 0:07:52.720 on air to one which he uh fought back and 0:07:52.760 --> 0:07:57.280 brushed off pretty quickly. How does Turkey fit into NATO 0:07:57.440 --> 0:07:59.440 right now? I mean, they do have the second largest 0:07:59.560 --> 0:08:01.920 army in the alliance, but they don't really see eye 0:08:01.960 --> 0:08:06.480 to eye with the US. Well, they don't on numerous issues, 0:08:06.600 --> 0:08:09.720 Syria being one of them, Northern Iraq being another, of 0:08:09.800 --> 0:08:12.960 the Kurds being another im that's part of the Syria 0:08:13.080 --> 0:08:15.840 Northern Iraq issue. On the other hand, the Turks are 0:08:15.880 --> 0:08:19.440 extremely valuable. Their bases are very important to the United 0:08:19.480 --> 0:08:26.000 States in in resisting Russian pressure. M the Turks have 0:08:26.160 --> 0:08:28.760 made are Towan and proven have both made efforts to 0:08:28.800 --> 0:08:33.200 try to improve relations, which they have done, but they 0:08:33.520 --> 0:08:37.400 still want and the assurance that the United States is 0:08:37.480 --> 0:08:41.120 going to be there if relations with the Russians deteriorate. 0:08:41.400 --> 0:08:44.040 I think that that question that you've asked is an 0:08:44.040 --> 0:08:47.320 important one. Are we going to be and is Natio 0:08:47.400 --> 0:08:50.600 going to be resolute with Putin moving more and more 0:08:50.600 --> 0:08:54.800 troops up into Central Europe? Not across the border um 0:08:55.320 --> 0:08:59.720 necessarily although, but the troops have gone many troops have 0:08:59.800 --> 0:09:02.959 gone up close to the border. So there's a feeling 0:09:03.520 --> 0:09:06.800 among unease among the NATO countries. I think one of 0:09:06.800 --> 0:09:10.320 the tests in the NATO summit today is going to 0:09:10.400 --> 0:09:15.000 be are we all committed to Article five? And what 0:09:15.000 --> 0:09:20.560 would we do if there were incursions in Article five countries, 0:09:20.559 --> 0:09:22.960 that is to say, NATO countries, and what will we 0:09:23.000 --> 0:09:26.120 do if their incursions into other countries that are not 0:09:26.200 --> 0:09:30.440 in NATO but whose interests are important in the United States. 0:09:30.480 --> 0:09:34.840 So the question of how do you convinced Putin to 0:09:35.000 --> 0:09:39.120 be restrained um is is going to be a critical one. 0:09:39.360 --> 0:09:43.440 And other ways of improving relations with Russia over the 0:09:43.520 --> 0:09:47.040 next several years. The Europeans would like that to see 0:09:47.040 --> 0:09:49.360 that you see that happen. Also, we're out of time, 0:09:49.360 --> 0:09:51.600 we'll do it again, Robert Hormace, thank you so much, 0:09:51.600 --> 0:09:54.200 Ambassador Harmats of the time and advisors and I shoul't 0:09:54.240 --> 0:09:57.160 say enough about his books on the United States and 0:09:57.200 --> 0:10:06.000 our diplomacy. Let's dive into this right now on a 0:10:06.040 --> 0:10:09.080 Monday reset as you reset to get the fourth of July, 0:10:09.160 --> 0:10:11.920 we're watching the affairs of NATO to bring it up 0:10:11.920 --> 0:10:15.760 to speed there. Excuse me, I'm gasping over the length 0:10:15.760 --> 0:10:19.640 of the carpet, uh, to talk of NATO. We had 0:10:19.679 --> 0:10:22.160 the photo shoot, we had the great meet and greet 0:10:22.240 --> 0:10:24.360 that looks sort of Hollywood is to say the least. 0:10:24.600 --> 0:10:28.160 And maybe now we go into individual discussions UH to 0:10:28.280 --> 0:10:31.280 be had in NATO bilaterals as they call him. The 0:10:31.400 --> 0:10:34.840 President meets with Mr Putin Mr Putin out on NBC 0:10:35.360 --> 0:10:38.280 UH in the last number of hours, making for some 0:10:38.440 --> 0:10:41.760 very tough language there on how he sets up his 0:10:41.880 --> 0:10:44.960 meeting with the President of the United States. Tough language 0:10:45.000 --> 0:10:47.440 down from Brian Nick of now Vine as we try 0:10:47.440 --> 0:10:49.440 to get out of our way in the market. Brian, 0:10:49.600 --> 0:10:51.319 how do you frame and I mean New Vine is 0:10:51.360 --> 0:10:52.880 known as a buy house, but you do a lot 0:10:52.920 --> 0:10:56.520 of equity as well, how do you frame the mystery 0:10:56.800 --> 0:11:02.040 of Q three in Q four earnings? Yeah, we're actually 0:11:02.040 --> 0:11:04.000 just starting to write about this for a major outlook 0:11:04.040 --> 0:11:06.800 and we want to get out here is how how 0:11:06.840 --> 0:11:09.800 are things going versus how is the market expecting them 0:11:09.800 --> 0:11:12.400 to go? So the first half was all about exceeding expectations, 0:11:12.679 --> 0:11:16.520 earnings beating expectations, economic data beating expectations, vaccinations and the 0:11:16.559 --> 0:11:19.960 vaccines themselves being more effective and more widespread and distributed 0:11:20.000 --> 0:11:22.080 than expected. I think now we're getting to this point 0:11:22.120 --> 0:11:24.920 where the markets and the economy overall are starting to 0:11:24.960 --> 0:11:27.920 just merely meet expectations. And that's why you've seen a bit, 0:11:27.960 --> 0:11:31.480 I think of a of a tapering back in the tenure. 0:11:31.520 --> 0:11:33.240 I think you've seen a bit of a flattening out 0:11:33.240 --> 0:11:36.280 in terms of the pace of increases in the equity markets, 0:11:36.280 --> 0:11:38.600 and about the pace of sort of the narrowing and 0:11:38.640 --> 0:11:40.559 spreads and the credit markets. Everything has sort of come 0:11:40.600 --> 0:11:43.160 to a not quite a crawl, but maybe something you know, 0:11:43.200 --> 0:11:47.520 asymptotically approaching some equilibrium level until we get new news. 0:11:47.600 --> 0:11:49.160 How is the second half of the year going to go. 0:11:49.200 --> 0:11:52.760 I think obviously what we're expecting is fewer surprises then 0:11:52.800 --> 0:11:55.040 we've gotten in the last couple of quarters from earning season, 0:11:55.320 --> 0:11:57.800 and that probably has you know, some some relation to 0:11:57.840 --> 0:11:59.400 what's going on in the bond markets as well. With 0:11:59.520 --> 0:12:01.600 the tenure having come often with the fat I think 0:12:01.600 --> 0:12:04.680 it's expected to remain quite dubbish on June. I think 0:12:04.800 --> 0:12:06.880 in the June meeting, I think if they say anything hawkeys, 0:12:06.920 --> 0:12:09.400 it will be a mistake. So, Brian, give us the 0:12:09.440 --> 0:12:15.440 distinction between successful and beating expectations and disappointing expectations. Is 0:12:15.440 --> 0:12:18.120 it companies that have pricing power that can raise prices 0:12:18.120 --> 0:12:21.199 on consumers to meet some of the supply chain disruptions 0:12:21.240 --> 0:12:24.000 and the higher commodity prices, or is it simply being 0:12:24.040 --> 0:12:28.600 big tech and everyone eating an iPhone. Yeah, that's certainly 0:12:28.679 --> 0:12:30.400 the pattern we're used to. Right when they were the 0:12:30.400 --> 0:12:32.680 world is sort of decelerating that sort of text moment 0:12:32.720 --> 0:12:34.600 to shine, and every time you've seen interest rates come 0:12:34.640 --> 0:12:36.720 back at the same time as earnings have started to 0:12:36.760 --> 0:12:39.720 decelerate back or maybe not beat as reliably, that's been 0:12:39.760 --> 0:12:41.720 a really good time to be in tech. And so 0:12:41.920 --> 0:12:45.560 we've been pretty neutral between the the ultracyclical deep value 0:12:45.640 --> 0:12:48.080 and then the sort of the higher growth defensives. We're 0:12:48.120 --> 0:12:50.320 kind of spread out across the board there because again 0:12:50.360 --> 0:12:53.240 we're obviously, you know, leaning into the uncertainty of bit 0:12:53.240 --> 0:12:57.679 but also looking for a pretty um, you know, sharp 0:12:57.840 --> 0:13:01.959 and and noticeable deceleration in economic out in the US. Overseas, though, 0:13:02.000 --> 0:13:04.280 I think we're still waiting for peak economic growth. We're 0:13:04.280 --> 0:13:06.439 waiting for peak growth in Europe, the UK, later in 0:13:06.480 --> 0:13:09.840 the eur Asia and emerging markets as they get themselves vaccinated. 0:13:09.840 --> 0:13:11.400 So there could be a bit of a rotation here 0:13:11.720 --> 0:13:14.040 as investors look for where are we still seeing the 0:13:14.080 --> 0:13:18.040 news being expectations? They could be looking outside the United States? Brian, 0:13:18.080 --> 0:13:20.200 are you concerned it all here? I guess about the 0:13:20.200 --> 0:13:24.000 inability to I guess properly forecast some of the economic 0:13:24.040 --> 0:13:26.720 trends out there, We're starting to see a lot more 0:13:26.840 --> 0:13:29.680 sort of uh, I guess surprises, if you will, at 0:13:29.760 --> 0:13:31.960 least as far as what a certain economists and certain 0:13:31.960 --> 0:13:34.480 strategies on the street are expecting with regards something to 0:13:34.559 --> 0:13:36.920 the economic data points, not only here in the US, 0:13:37.000 --> 0:13:39.360 but really overseas as well. Do you think that that 0:13:39.400 --> 0:13:41.760 could end up creating a little bit more volatility as 0:13:41.760 --> 0:13:45.600 we go forward. I think certainly outside the US we're 0:13:45.600 --> 0:13:48.160 still seeing most of the data coming in better than expected. 0:13:48.200 --> 0:13:50.080 I think if you've got an economic model that's worked 0:13:50.080 --> 0:13:52.440 for the last seven recessions. It probably didn't work very 0:13:52.480 --> 0:13:54.079 well for this one because more like a light switch 0:13:54.480 --> 0:13:57.360 getting turned off and turned back on. So most of 0:13:57.360 --> 0:13:59.920 the data, especially with all the stimulus, with the back 0:14:00.040 --> 0:14:03.600 and nations being is completely you know, unique variable to 0:14:03.640 --> 0:14:06.160 this recession. I think that has caused a lot of 0:14:06.160 --> 0:14:09.600 the economy economic forecasting to be you know, too low. 0:14:09.920 --> 0:14:11.760 And I think we're starting to see that overseas more 0:14:11.800 --> 0:14:13.960 as well. In the US, we've actually seen the surprise 0:14:14.200 --> 0:14:17.080 indexes that we track UM coming back down to close 0:14:17.160 --> 0:14:19.560 to neutral UM. So it's this is the housing market is, 0:14:19.600 --> 0:14:21.840 you know, showing signs of maybe just cooling off just 0:14:21.880 --> 0:14:23.800 a bit. Consumer is not gonna be as hot without 0:14:23.840 --> 0:14:26.000 the stimulus moving forward, it should be easier to forecast 0:14:26.040 --> 0:14:28.200 these things once we get all these kind of strange 0:14:28.240 --> 0:14:32.040 and unique variables out of the way. Brian, the calculus 0:14:32.280 --> 0:14:35.720 off of pre pandemic is standard and pours five undered 0:14:35.800 --> 0:14:40.800 up thirty sort of a blended bond event up three percent. 0:14:41.000 --> 0:14:43.960 You made the coupon and a tenC weens bit of 0:14:44.000 --> 0:14:49.000 total return as well. Are people worn out with fixed income? 0:14:49.080 --> 0:14:52.200 And I say this with immense respect with what Nouvine 0:14:52.240 --> 0:14:57.560 invented across America in the packaging of unit trust. Are 0:14:57.600 --> 0:15:02.400 we worn out from bond returns? Well, I think what 0:15:02.440 --> 0:15:05.160 we're telling clients is that, you know, you should be 0:15:05.240 --> 0:15:09.800 diversifying into higher yielding or just non correlated parts of 0:15:09.840 --> 0:15:11.800 the fixed income market, because whether or not interest rates 0:15:11.800 --> 0:15:13.760 move up from here, it's gonna be tough to make 0:15:13.800 --> 0:15:16.440 that three and a half percent again over the next 0:15:16.520 --> 0:15:20.000 year with a traditional bond portfolio, given how low fields 0:15:20.000 --> 0:15:21.560 have gotten and if they move, if they're moving higher, 0:15:21.560 --> 0:15:24.040 it's gonna be even tougher to do that, as we 0:15:24.080 --> 0:15:27.240 expect they will over the next year, two years, three years, UM. 0:15:27.320 --> 0:15:29.840 So what we're looking to, you know, set people up 0:15:29.880 --> 0:15:31.800 with instead is, you know, things like the high yield 0:15:31.800 --> 0:15:34.840 part of municipal bond market, emerging market credit where we 0:15:34.920 --> 0:15:37.280 don't think there's value, and anything that's sort of less 0:15:37.320 --> 0:15:39.880 correlated to rising rates or less susceptible to rising rates. 0:15:39.880 --> 0:15:42.840 So anything like in the loan area, senior loans, floating 0:15:42.920 --> 0:15:45.360 rate securities where you could be building in a little 0:15:45.400 --> 0:15:47.640 bit more protection against that that rises and rates that 0:15:47.720 --> 0:15:49.400 ends up knocking a lot of things off the board. 0:15:49.640 --> 0:15:52.360 Brian Nick, thank you so much with Levine this morning, 0:15:52.360 --> 0:16:00.280 their chief investor strategist. Right now on American politics X 0:16:00.680 --> 0:16:04.240 we go granular with Gregory Vellier. He has a tough 0:16:04.320 --> 0:16:07.400 life to the south of Switzerland, up in the Alps, 0:16:07.680 --> 0:16:11.080 lost with some Saint Bernard somewhere on his way to Milan. 0:16:11.440 --> 0:16:15.560 He is leading the way to American tourism in Europe. Greg, 0:16:15.680 --> 0:16:19.200 very quickly, here should Americans travel to Europe? You're leading 0:16:19.240 --> 0:16:22.240 the way. If you had if you've had your shots, 0:16:22.360 --> 0:16:26.040 if you have been tested recently, yes, Okay, we'll leave 0:16:26.040 --> 0:16:27.960 it there, Greg, Let's go. There's too much going on. 0:16:28.240 --> 0:16:30.560 I want to go to a great NPR thing I 0:16:30.600 --> 0:16:34.760 heard on Tennessee, which is a distance between Memphis and Nashville, 0:16:35.160 --> 0:16:38.320 where the Democrats of Memphis, the Democrats of Nashville, and 0:16:38.320 --> 0:16:42.480 the fifth and ninth districts get jerrymandered out in this 0:16:42.640 --> 0:16:46.440 cost the Democrats the House. How many of those battles 0:16:46.520 --> 0:16:49.640 are there out there now? To give a speaker Pelosi 0:16:49.800 --> 0:16:54.160 some serious angst. If forced to make a wager today, Tom, 0:16:54.320 --> 0:16:58.840 I think the House falls to the Republicans. In history 0:16:58.880 --> 0:17:01.600 would indicate it. Three district thing would indicate it. Some 0:17:01.680 --> 0:17:05.480 important Democrats have announced their resignation. I think the Republicans 0:17:05.480 --> 0:17:08.919 are favored. The Republicans are favored. What kind of Republican 0:17:09.000 --> 0:17:11.840 House would it be? Would it be fragile and of gridlock? 0:17:13.040 --> 0:17:16.199 It wouldn't be fragile. I think that McCarthy is going 0:17:16.240 --> 0:17:18.679 to have his hands full with people who are not 0:17:19.240 --> 0:17:22.880 don't owe him anything, but I think you'd get gridlock 0:17:22.960 --> 0:17:26.760 to Tom in the last two years of Biden's first term. Yeah, Lisa, 0:17:26.800 --> 0:17:29.680 this is really important. The first real conversation we've had 0:17:29.960 --> 0:17:32.760 about a majority GOP in the House. Yeah. The idea 0:17:32.840 --> 0:17:35.480 here of what happens if the Democrats can't go it 0:17:35.520 --> 0:17:37.880 alone and how much urgency is it behind is there 0:17:37.880 --> 0:17:42.760 behind them to get something done before mid terms? Greg, 0:17:43.080 --> 0:17:45.479 what is your sense of how likely it is that 0:17:45.520 --> 0:17:48.960 we see some sort of deal, whether bipartisan or partisan, 0:17:49.440 --> 0:17:52.439 by next year. Given all of the hurdles and the 0:17:52.480 --> 0:17:55.960 divisions within the Democratic Party, I think only one of 0:17:56.000 --> 0:17:59.240 the three, Lisa, you'll get something on infrastructure, It's sure 0:17:59.280 --> 0:18:01.600 as heck isn't going to be two point to five trillion. 0:18:01.640 --> 0:18:03.959 It will be much much less. The other two are 0:18:04.040 --> 0:18:07.080 in trouble. The two trillion for social programs is on 0:18:07.200 --> 0:18:09.880 life support. And then finally the third one, a big 0:18:09.920 --> 0:18:12.480 tax hyde I think is also on life support. There 0:18:12.560 --> 0:18:16.200 might be a little on the very wealthy and big corporations, 0:18:16.480 --> 0:18:20.159 but grandiose tax hype that Biden wants, I think is 0:18:20.160 --> 0:18:22.640 in real trouble. And meantime, there does seem to see 0:18:23.080 --> 0:18:26.280 some unity when it comes to Republicans and Democrats on 0:18:26.359 --> 0:18:29.880 the international strategy, particularly with respect to China. And I'm 0:18:29.880 --> 0:18:33.680 wondering whether the President Biden's tour internationally this past couple 0:18:33.680 --> 0:18:36.879 of weeks really gives lights how far apart the US 0:18:36.920 --> 0:18:40.399 has gotten from European allies when it comes to what 0:18:40.640 --> 0:18:44.720 exactly they should do with respect to China. I think 0:18:44.720 --> 0:18:47.920 Biden sort of got what he wanted from our allies 0:18:47.920 --> 0:18:51.560 on China. I think we are demanding more transparency on 0:18:51.640 --> 0:18:55.399 the virus, we are demanding that they treat their dissonance better. 0:18:56.040 --> 0:18:59.359 We're demanding that they stopped hacking into our companies. So 0:18:59.400 --> 0:19:01.280 I think on a lot of these key issues, there's 0:19:01.320 --> 0:19:04.240 not a lot of space between US and European allies 0:19:04.280 --> 0:19:07.800 were all united in opposition to China. Right now, do 0:19:07.840 --> 0:19:10.040 you think those greg that some of those allies have 0:19:10.160 --> 0:19:12.879 the same cushion, the same wiggle room. I guess to 0:19:12.920 --> 0:19:15.639 push back against China in the way that maybe the 0:19:15.720 --> 0:19:19.440 US has good point. I think the US is more 0:19:19.560 --> 0:19:23.760 adamant the Western Europeans have other issues, including Putin, of course, 0:19:24.080 --> 0:19:27.719 but I do think that again, Biden got into communicate 0:19:28.480 --> 0:19:31.440 what he wanted. He didn't get everything. We still can't 0:19:31.440 --> 0:19:34.880 decide what we're gonna do with Cole. He and Trudeau 0:19:35.000 --> 0:19:37.480 did not agree on opening up the border with Canada. 0:19:37.800 --> 0:19:40.440 But I'd say the first part of this trip has 0:19:40.480 --> 0:19:44.480 been a great public relations success. I think Biden's numbers, 0:19:44.520 --> 0:19:47.800 his job approval numbers are headed higher. Do you oh so, 0:19:47.880 --> 0:19:50.280 do you think, though I guess some of the international 0:19:50.359 --> 0:19:53.439 gains that he maybe making the international stage, that that 0:19:53.520 --> 0:19:56.439 actually translates to the real people on the ground here 0:19:56.480 --> 0:19:58.679 in the US with regards to his popularity and the 0:19:58.800 --> 0:20:01.320 likelihood that they may vote for him or Leasa's party. Again, 0:20:02.040 --> 0:20:04.760 Oh fearless forecast. I think within a week or two, 0:20:05.040 --> 0:20:08.919 Biden's numbers will be a little over six positive. That 0:20:09.000 --> 0:20:12.040 gives him political capital. He's gonna need it to get 0:20:12.160 --> 0:20:15.000 much done on infrastructure. I think we're several weeks away 0:20:15.400 --> 0:20:18.159 from ironing out any kind of deal on infrastructure, so 0:20:18.240 --> 0:20:23.240 he needs that high approval number to help his cause. Greg. 0:20:23.280 --> 0:20:25.359 One final question here, we've got to get back to 0:20:25.400 --> 0:20:29.360 the markets and what we're seeing at NATO is well. 0:20:29.640 --> 0:20:35.160 In this political Maelstrom, we seem to be back to normalcy. 0:20:35.200 --> 0:20:38.520 Can you say that that Mr Biden has dragged us 0:20:38.560 --> 0:20:42.600 back to a diplomatic and domestic normalcy or is the 0:20:42.720 --> 0:20:46.159 jury still out? It's a huge point, Tom, and I 0:20:46.200 --> 0:20:48.359 think the answer is yes. You know, whether it was 0:20:48.440 --> 0:20:51.720 Macrone or Merkel, they all pretty much agree the US 0:20:51.840 --> 0:20:54.879 is back. There was a good will, good spirit between 0:20:54.880 --> 0:20:57.600 all the leaders. Obviously the Putent meeting isn't going to 0:20:57.720 --> 0:21:00.119 go great, but I think with our allies that a 0:21:00.200 --> 0:21:03.520 sense that after these four horrible years, things are are 0:21:03.560 --> 0:21:07.399 returning to normal. Very good, Gregg, thank you so much, greatly, 0:21:07.440 --> 0:21:11.080 greatly appreciated. This morning. Mr val joining us from the 0:21:11.119 --> 0:21:14.000 Alps of Switzerland on his way to Italy, which is 0:21:14.040 --> 0:21:17.479 maybe the best news we've said in eighteen months. Uh, 0:21:22.840 --> 0:21:25.879 let's get right to Michael Darta, MKM partners here to 0:21:25.920 --> 0:21:28.480 set up the economic week and he joins us from 0:21:28.520 --> 0:21:33.439 an island somewhere vicinity south of Cape Cod. Michael Darta, 0:21:33.560 --> 0:21:38.159 Martha's vineyard. You're living it out there. Wages, lack of labor, 0:21:38.720 --> 0:21:42.640 lack of housing. It's a real time microcosm of what 0:21:42.640 --> 0:21:46.239 we've got worldwide. Are we gonna see wages rise and 0:21:46.359 --> 0:21:50.800 stay elevated? Well, Tom, we are seeing them rise, and 0:21:50.920 --> 0:21:53.639 certainly out here on the vineyard you can see these 0:21:53.880 --> 0:21:57.639 supply side disturbances that have been holding back job growth 0:21:57.640 --> 0:22:00.320 over the last few months. We're way out in the 0:22:00.359 --> 0:22:05.440 westerly sort of a remote part of the island. They're 0:22:05.520 --> 0:22:10.480 only a couple options in terms of restaurants where we are, 0:22:11.000 --> 0:22:13.639 and none of them are open for indoor dining. And 0:22:13.680 --> 0:22:16.879 it's not because of COVID, it's because they cannot find 0:22:17.080 --> 0:22:22.680 employees staff, and so it's essentially a takeout situation where 0:22:22.760 --> 0:22:29.680 you can sit down there with no staffy. Michael, get 0:22:29.680 --> 0:22:33.280 out the grill, play the Gorilla album from James Taylor 0:22:33.320 --> 0:22:36.880 and move forward. Okay, let's look at the national situation now, 0:22:37.520 --> 0:22:40.600 Michael Darda, do you believe in a sustain g d P? 0:22:40.840 --> 0:22:43.399 I mean, looking at the top level and linking a 0:22:43.480 --> 0:22:47.359 nominal GDP to where we are. Do we misjudge the 0:22:47.480 --> 0:22:52.520 sustainability of this economy to Boom? I think that's exactly 0:22:52.560 --> 0:22:55.680 what's happening. Tom We are in a boom. There are 0:22:55.760 --> 0:22:59.199