1 00:00:00,120 --> 00:00:02,920 Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in 2 00:00:03,000 --> 00:00:07,840 Speaker 1: local communities, economies and a sustainable future. That's the power 3 00:00:08,080 --> 00:00:12,360 Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 4 00:00:12,760 --> 00:00:26,400 Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:26,440 --> 00:00:29,920 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:29,960 --> 00:00:34,800 Speaker 1: insight from the best of economics, finance, investment, and international relations. 7 00:00:35,240 --> 00:00:40,760 Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com 8 00:00:40,800 --> 00:00:48,040 Speaker 1: and of course on the Bloomberg And now joining us 9 00:00:48,040 --> 00:00:51,760 Speaker 1: the most important man and asset management in global Wall Street, 10 00:00:51,760 --> 00:00:55,440 Speaker 1: William McNabb of Vanguard. Wonderful bill to speak to you again. 11 00:00:55,720 --> 00:01:00,120 Speaker 1: How how many trillions of assets does Fortress Bogel have 12 00:01:00,360 --> 00:01:03,440 Speaker 1: right now? Oh? Thanks Tom, Um. You know today we 13 00:01:03,560 --> 00:01:06,880 Speaker 1: manage about four point two trillion or so on behalf 14 00:01:06,920 --> 00:01:12,160 Speaker 1: of investors. That's a I mean, someday they're gonna be 15 00:01:12,200 --> 00:01:16,399 Speaker 1: in America's GDP. David, that's gonna that's gonna happen. Phil Lovey. 16 00:01:16,600 --> 00:01:18,240 Speaker 1: Tom brings up to dB. Let me ask you for 17 00:01:18,280 --> 00:01:20,480 Speaker 1: your outlook for growth. I was looking at your looking 18 00:01:20,480 --> 00:01:23,120 Speaker 1: back at your outlook for your two thousand seventeen and 19 00:01:23,160 --> 00:01:25,520 Speaker 1: you you expressed a sense of possibility here that we 20 00:01:25,520 --> 00:01:28,760 Speaker 1: could get to three growth. Now five months in the 21 00:01:28,840 --> 00:01:32,440 Speaker 1: two thousand seventeen, are you still confident that could happen? Um, 22 00:01:32,480 --> 00:01:34,559 Speaker 1: I'm a lot less confident, you know. I think we've 23 00:01:35,120 --> 00:01:38,160 Speaker 1: not made as much progress in terms of you know, 24 00:01:38,280 --> 00:01:42,240 Speaker 1: tax and infrastructure UM as I think people had hoped. 25 00:01:42,800 --> 00:01:45,240 Speaker 1: And you know, anything that happens, you know between now 26 00:01:45,240 --> 00:01:47,680 Speaker 1: and the end of the year, the likely um, you know, 27 00:01:47,760 --> 00:01:50,960 Speaker 1: the consequences of that won't really be felt for another, 28 00:01:51,080 --> 00:01:54,200 Speaker 1: you know, twelve months. So I think it's looking less 29 00:01:54,240 --> 00:01:55,920 Speaker 1: likely that we're going to get back to that level. 30 00:01:56,400 --> 00:01:58,800 Speaker 1: How about how about globally? When you look at growth globally, 31 00:01:59,600 --> 00:02:02,760 Speaker 1: you know, it's um Again, it's still very muted, as 32 00:02:02,760 --> 00:02:05,920 Speaker 1: you know, and again I think the uncertainty, certainly in 33 00:02:05,960 --> 00:02:09,000 Speaker 1: Europe right now is weighing. But you know, even with 34 00:02:09,040 --> 00:02:11,880 Speaker 1: all the uncertainty, there are some i'll call it green 35 00:02:11,919 --> 00:02:13,919 Speaker 1: shoots that you're beginning to see. Um. You know, it's 36 00:02:13,919 --> 00:02:18,280 Speaker 1: an amazingly resilient global economy in a lot of ways. Obviously, 37 00:02:18,280 --> 00:02:20,799 Speaker 1: the other place people are keeping a very sharp eye 38 00:02:20,800 --> 00:02:24,400 Speaker 1: on is China, UM, which is tougher, to tougher to assess. 39 00:02:24,440 --> 00:02:27,400 Speaker 1: You know, it's much more opaque as you know. And UM, again, 40 00:02:27,440 --> 00:02:30,640 Speaker 1: our view there is China is still gonna click along, 41 00:02:30,720 --> 00:02:33,600 Speaker 1: albeit at a probably lower rate than UM you know, 42 00:02:33,639 --> 00:02:35,920 Speaker 1: the last decade or so. Give us a give us 43 00:02:35,919 --> 00:02:38,000 Speaker 1: a tour of the vanguard garden there where you see 44 00:02:38,000 --> 00:02:40,480 Speaker 1: in the green shoots starting to sprout. Well, you know 45 00:02:40,560 --> 00:02:44,680 Speaker 1: when you UM, when you talk to companies, UM, they're 46 00:02:44,720 --> 00:02:48,800 Speaker 1: actually excited for the first time in a number of 47 00:02:48,880 --> 00:02:52,640 Speaker 1: years about prospects for actual growth. UM. You know, seeing 48 00:02:53,560 --> 00:02:56,320 Speaker 1: some top line growth. And you know we've seen obviously 49 00:02:57,040 --> 00:02:59,880 Speaker 1: over the last several years, you know, pretty good prop 50 00:03:00,000 --> 00:03:02,480 Speaker 1: it ability, but that's been mostly due to you know, 51 00:03:02,760 --> 00:03:07,040 Speaker 1: streamlining and making operations more efficient. But we're beginning to 52 00:03:07,080 --> 00:03:09,960 Speaker 1: hear UM, you know, some sense that there there is 53 00:03:10,000 --> 00:03:13,079 Speaker 1: an opportunity for top line growth. You know, I think 54 00:03:13,120 --> 00:03:17,600 Speaker 1: from our investors perspective, UM, you know what, they just 55 00:03:17,760 --> 00:03:20,560 Speaker 1: keep there, They just keep in, you know, being very 56 00:03:20,639 --> 00:03:23,240 Speaker 1: disciplined and you know, taking a long view, which we 57 00:03:23,280 --> 00:03:26,080 Speaker 1: think is really important. Bill. I stood on a stage 58 00:03:26,080 --> 00:03:28,960 Speaker 1: at a leading college years ago and a bunch of 59 00:03:28,960 --> 00:03:31,960 Speaker 1: worthies announced to me it was a single digit world 60 00:03:32,560 --> 00:03:36,240 Speaker 1: you're saving grace is it's been a double digit Vanguard 61 00:03:36,560 --> 00:03:41,560 Speaker 1: Index s SPX kind of return are we do you 62 00:03:41,640 --> 00:03:44,560 Speaker 1: work every day assuming someday will actually be in a 63 00:03:44,600 --> 00:03:48,400 Speaker 1: single digit equity world? Or can we have the kind 64 00:03:48,400 --> 00:03:52,480 Speaker 1: of outperformance we've seen? No, Tom, great question. Um. We 65 00:03:52,600 --> 00:03:55,520 Speaker 1: actually for the last couple of years have been far, 66 00:03:55,600 --> 00:03:58,440 Speaker 1: far more muted in our long term outlook. Look, I 67 00:03:58,440 --> 00:04:01,360 Speaker 1: don't think anybody's particularly good at predicting twelve or even 68 00:04:01,360 --> 00:04:04,200 Speaker 1: twenty four months. But if you look at the next 69 00:04:04,240 --> 00:04:08,160 Speaker 1: ten years, our expectations are that equity returns will be 70 00:04:08,600 --> 00:04:14,160 Speaker 1: UM two or three hundred basis points below long term averages. Uh. 71 00:04:14,360 --> 00:04:17,240 Speaker 1: You know, we we run a pretty sophisticated model that 72 00:04:17,360 --> 00:04:21,119 Speaker 1: spits out a bunch of probabilities, but that's the central tendency. 73 00:04:21,320 --> 00:04:23,720 Speaker 1: And we know in fixed income the next ten years 74 00:04:23,720 --> 00:04:25,960 Speaker 1: that returns are going to be a couple hundred basis 75 00:04:25,960 --> 00:04:28,760 Speaker 1: points below the last thirty years. So when you take 76 00:04:28,800 --> 00:04:32,880 Speaker 1: that combination, you're looking at UM you know, real returns 77 00:04:32,960 --> 00:04:35,400 Speaker 1: that could be one and a half to two percent 78 00:04:35,760 --> 00:04:39,920 Speaker 1: below the last thirty years UM for a balanced portfolio. 79 00:04:40,000 --> 00:04:42,520 Speaker 1: And I think that has real consequences, and investors need 80 00:04:42,560 --> 00:04:45,599 Speaker 1: to be thinking about that, Dad us as we look 81 00:04:45,640 --> 00:04:49,080 Speaker 1: at the asset management business he is with Vanguard. We 82 00:04:49,120 --> 00:04:52,240 Speaker 1: will continue David Gerr and Tom Keane, the rarest of 83 00:04:52,400 --> 00:04:56,120 Speaker 1: rare in the same students together here together. It's been 84 00:04:57,000 --> 00:05:02,920 Speaker 1: i don't know days, weeks, mirror hours. I've got about 85 00:05:02,960 --> 00:05:06,640 Speaker 1: eight ways to go with David Gura, with William McNabb. 86 00:05:06,760 --> 00:05:11,240 Speaker 1: Bill McNab, Vanguard their chief executive officer on the watch. 87 00:05:11,560 --> 00:05:13,640 Speaker 1: It's hard to believe. Bill, it's been I believe nine 88 00:05:13,760 --> 00:05:18,400 Speaker 1: years since you've been uh providing this leadership to Vanguard. 89 00:05:18,680 --> 00:05:20,640 Speaker 1: I've got any number of ways to go here. Let 90 00:05:20,640 --> 00:05:25,120 Speaker 1: me let me try this. Inform us that an e 91 00:05:25,320 --> 00:05:29,479 Speaker 1: t F is it like a mutual fund. How do 92 00:05:29,520 --> 00:05:32,760 Speaker 1: you respond when somebody says that, well, I think et 93 00:05:32,920 --> 00:05:35,280 Speaker 1: f s are you know, they're actually they are a 94 00:05:35,279 --> 00:05:38,719 Speaker 1: form of a mutual fund. You know. The difference obviously, 95 00:05:38,880 --> 00:05:42,720 Speaker 1: is that you can trade among you know, a buyer 96 00:05:42,760 --> 00:05:46,599 Speaker 1: and seller can trade amongst themselves any time during the day, 97 00:05:46,640 --> 00:05:50,040 Speaker 1: whereas with a fun you know, traditional fund, you only 98 00:05:50,040 --> 00:05:53,360 Speaker 1: settle at the end of the day. So UM, that 99 00:05:53,560 --> 00:05:57,800 Speaker 1: added liquidity UM is something that a number of investors prefer, 100 00:05:58,279 --> 00:06:02,840 Speaker 1: certainly advisors like having that added liquidity. And so we've 101 00:06:02,880 --> 00:06:05,280 Speaker 1: seen a huge rise in e t F s in 102 00:06:05,440 --> 00:06:09,440 Speaker 1: terms of their use in portfolios that advisors are creating 103 00:06:09,560 --> 00:06:11,839 Speaker 1: with their end clients. To be clear here, people aren't 104 00:06:11,920 --> 00:06:14,680 Speaker 1: day trading e t F s right, no, you know 105 00:06:15,120 --> 00:06:18,680 Speaker 1: you um there, I think you've got to think about 106 00:06:18,680 --> 00:06:20,800 Speaker 1: the e t F market in two buckets. That there 107 00:06:20,839 --> 00:06:24,960 Speaker 1: are institutional investors who use some e t F s um, 108 00:06:25,200 --> 00:06:29,480 Speaker 1: you know, to move big positions during the day. Um. 109 00:06:29,520 --> 00:06:33,000 Speaker 1: The vast majority, though certainly in our e t F universe, 110 00:06:33,040 --> 00:06:35,480 Speaker 1: are being used by advisors who are putting them into 111 00:06:35,480 --> 00:06:39,719 Speaker 1: buy and hold portfolios for their clients, and they're using 112 00:06:39,760 --> 00:06:41,839 Speaker 1: them as a core, if you will, for you know, 113 00:06:42,000 --> 00:06:44,960 Speaker 1: solutions that they're trying to create. Bill, you were talking 114 00:06:44,960 --> 00:06:48,159 Speaker 1: about just the size of the money that you you manage. 115 00:06:48,200 --> 00:06:50,440 Speaker 1: There's more money in value forage than Fort Knox. That 116 00:06:50,520 --> 00:06:52,560 Speaker 1: sounds like at this point, how do you think about growth? 117 00:06:52,760 --> 00:06:56,200 Speaker 1: How big can Vanguard get? So, you know, it's interesting 118 00:06:56,240 --> 00:06:58,640 Speaker 1: we've never had a growth objective, um, you know for 119 00:06:58,640 --> 00:07:01,480 Speaker 1: forty two years is now you know, I've been at 120 00:07:01,480 --> 00:07:04,520 Speaker 1: the firm since n We never sit down and say 121 00:07:04,560 --> 00:07:07,159 Speaker 1: we want to grow by x we actually always sit 122 00:07:07,200 --> 00:07:09,640 Speaker 1: down and talk about what can we do from a 123 00:07:09,720 --> 00:07:11,960 Speaker 1: service standpoint and what can we do from an investment 124 00:07:11,960 --> 00:07:16,920 Speaker 1: standpoint to better the opportunities for our clients, and growth 125 00:07:16,920 --> 00:07:20,160 Speaker 1: in a sense takes care of itself. I think, Um, 126 00:07:20,720 --> 00:07:24,880 Speaker 1: you know, from a size standpoint, UM, what's benefiting our 127 00:07:24,920 --> 00:07:27,680 Speaker 1: clients is we're able to do more for them at 128 00:07:27,680 --> 00:07:30,560 Speaker 1: a lower price. You know, this is a very scalable business, 129 00:07:30,640 --> 00:07:34,640 Speaker 1: and we're probably the best kind of UM way of 130 00:07:34,680 --> 00:07:37,480 Speaker 1: looking at that because of our ownership structure. You know, 131 00:07:37,560 --> 00:07:40,720 Speaker 1: the fact that we're owned by the funds. Everything we 132 00:07:40,760 --> 00:07:43,360 Speaker 1: do has to benefit that end investor. So when we 133 00:07:43,440 --> 00:07:47,320 Speaker 1: do have, you know, the opportunities to grow and it's 134 00:07:47,360 --> 00:07:50,080 Speaker 1: you know, what I would call good organic growth, then 135 00:07:50,320 --> 00:07:53,200 Speaker 1: the benefits of that from a scale standpoint get passed 136 00:07:53,200 --> 00:07:55,680 Speaker 1: on right to the investors. And that's actually been the 137 00:07:55,760 --> 00:07:57,960 Speaker 1: secret to our success. You know, if you think about it, 138 00:07:57,960 --> 00:08:01,520 Speaker 1: it's almost like a virtuous circle. You know, as people 139 00:08:01,560 --> 00:08:05,320 Speaker 1: have entrusted more assets with us, we've been able to 140 00:08:05,360 --> 00:08:08,600 Speaker 1: create scale that's allowed us to lower the cost, which 141 00:08:08,680 --> 00:08:11,160 Speaker 1: has made the performance even better. And you know, you 142 00:08:11,200 --> 00:08:14,040 Speaker 1: can see how that cycle works as we talk about 143 00:08:14,080 --> 00:08:17,400 Speaker 1: this active passive debate. Something that comes up often is talent. 144 00:08:18,080 --> 00:08:20,240 Speaker 1: How hard is it for you to attract talent to 145 00:08:20,320 --> 00:08:24,360 Speaker 1: Vanguard at this point? So UM, we actually have no 146 00:08:24,760 --> 00:08:28,640 Speaker 1: problem getting people. We've got a world class staff. UM. 147 00:08:28,680 --> 00:08:30,480 Speaker 1: You know, it's a place where people come to have 148 00:08:30,560 --> 00:08:33,520 Speaker 1: a career, not just for a job. And you know, 149 00:08:33,679 --> 00:08:36,480 Speaker 1: I can't tell you how many twenty and thirty year 150 00:08:36,880 --> 00:08:40,320 Speaker 1: m anniversaries I get to go and celebrate. It's it's 151 00:08:40,360 --> 00:08:43,640 Speaker 1: it's just a fantastic part about our culture. But interestingly, 152 00:08:43,920 --> 00:08:47,360 Speaker 1: we have a lot of people UM who want to join. 153 00:08:47,760 --> 00:08:51,240 Speaker 1: And as we're as we've been fortunate to continue to 154 00:08:51,280 --> 00:08:54,600 Speaker 1: have the opportunity to grow our staff, we actually have 155 00:08:54,679 --> 00:08:57,640 Speaker 1: been able to attract an incredible group of people. I 156 00:08:57,640 --> 00:09:00,920 Speaker 1: think people are very attracted David to the sin you 157 00:09:00,960 --> 00:09:04,560 Speaker 1: know that the idea that UM we have only one 158 00:09:04,600 --> 00:09:07,840 Speaker 1: constituency we serve in that being the end investor. That's 159 00:09:07,880 --> 00:09:11,560 Speaker 1: actually a pretty powerful UM recruiting tool, if you will. 160 00:09:11,960 --> 00:09:16,160 Speaker 1: Especially we're seeing among younger UM people, you know, people 161 00:09:16,160 --> 00:09:18,480 Speaker 1: coming right off the business school campuses or the college 162 00:09:18,520 --> 00:09:22,079 Speaker 1: campuses who might not be looking to go into financial 163 00:09:22,120 --> 00:09:26,400 Speaker 1: services or investment management specifically. But when you talk about 164 00:09:26,400 --> 00:09:29,160 Speaker 1: the mission, they get pretty fired up. And um, so 165 00:09:29,200 --> 00:09:32,840 Speaker 1: we've been able to attract some just fabulous folks. Bill mcnah, 166 00:09:32,920 --> 00:09:35,160 Speaker 1: thank you so much with Van guard A really good 167 00:09:35,160 --> 00:09:38,360 Speaker 1: conversation there and something that is front and center for 168 00:09:38,400 --> 00:09:41,360 Speaker 1: global Wall Street folks, and that is the by side 169 00:09:41,400 --> 00:09:58,079 Speaker 1: the esset management business is well, um Sree tomorrow will 170 00:09:58,080 --> 00:10:00,440 Speaker 1: talk to me about the good times when it was 171 00:10:00,480 --> 00:10:06,640 Speaker 1: three or four percent. GDPs was three Commar Economics Global 172 00:10:07,240 --> 00:10:10,160 Speaker 1: Advisors and joins us and it's truly one of our 173 00:10:10,200 --> 00:10:14,960 Speaker 1: most popular guests, your populus three because you've been right. 174 00:10:15,120 --> 00:10:19,720 Speaker 1: When do we get three Commar, escape velocity and get out, 175 00:10:19,720 --> 00:10:22,760 Speaker 1: as President Obama would say, to a better good, a 176 00:10:22,840 --> 00:10:27,080 Speaker 1: better GDP. I think before we get to that, tom 177 00:10:27,120 --> 00:10:30,240 Speaker 1: two things need to happen. One, what we have done 178 00:10:30,320 --> 00:10:34,560 Speaker 1: in terms of just boosting speculation in financial markets through 179 00:10:34,600 --> 00:10:37,199 Speaker 1: the monetary expansion would have to come to an end. 180 00:10:37,840 --> 00:10:42,800 Speaker 1: And second, you have to do something which Chairman Bernanke 181 00:10:43,040 --> 00:10:48,000 Speaker 1: told you during your interview yesterday, namely that workers need 182 00:10:48,040 --> 00:10:51,679 Speaker 1: to get education, they need to get vocational training the 183 00:10:51,880 --> 00:10:55,800 Speaker 1: kind this is what we call structural changes, and that's 184 00:10:55,840 --> 00:10:59,840 Speaker 1: what happened in Germany in two thousand three. And boosted 185 00:11:00,000 --> 00:11:04,000 Speaker 1: economic growth subsequently. But if if it's a structural change 186 00:11:04,000 --> 00:11:08,040 Speaker 1: and everybody tries out, education is the the major deal. 187 00:11:08,160 --> 00:11:12,480 Speaker 1: What is the non structural jump that policy can do 188 00:11:12,600 --> 00:11:15,480 Speaker 1: right now to give us a better economic growth is 189 00:11:15,559 --> 00:11:20,160 Speaker 1: an expansion of the fiscal deficit. If you do yes, 190 00:11:20,320 --> 00:11:22,960 Speaker 1: you can have an expansion in the fiscal deficit which 191 00:11:23,000 --> 00:11:26,480 Speaker 1: gives you a one shot boost to economic growth. It 192 00:11:26,640 --> 00:11:29,760 Speaker 1: is asked if you get a B twelve vitamin shot 193 00:11:29,840 --> 00:11:33,720 Speaker 1: to get additional energy tom but that lasts only so 194 00:11:33,800 --> 00:11:36,520 Speaker 1: long after that. If you want to keep your strength, 195 00:11:36,920 --> 00:11:40,160 Speaker 1: you need to be doing something different with your physical structure. 196 00:11:40,600 --> 00:11:43,480 Speaker 1: And it's the same thing with the economy that something 197 00:11:43,520 --> 00:11:46,920 Speaker 1: has to be done to keep the economy permanently at 198 00:11:46,920 --> 00:11:49,200 Speaker 1: a higher level. Can tell you from Santa Monica because 199 00:11:49,200 --> 00:11:52,640 Speaker 1: of the B twelve vitamin s What did you make 200 00:11:52,679 --> 00:11:54,200 Speaker 1: of the statement yesterday that we got from the Fed 201 00:11:54,360 --> 00:11:57,880 Speaker 1: the effects in the first quarter were transitory? You agree 202 00:11:57,880 --> 00:12:00,760 Speaker 1: with that. I'm glad you asked the question it because 203 00:12:00,840 --> 00:12:03,520 Speaker 1: I have very strong feelings on that. I don't think 204 00:12:03,559 --> 00:12:08,400 Speaker 1: the Fed has any idea whether it is transitory, semi permanent, 205 00:12:08,600 --> 00:12:12,559 Speaker 1: or permanent. They have made statements over the last eight 206 00:12:12,800 --> 00:12:15,839 Speaker 1: nine years that growth was going to pick up. That 207 00:12:15,960 --> 00:12:20,120 Speaker 1: statement was first made in two thousand one two thousand nine, 208 00:12:20,520 --> 00:12:24,400 Speaker 1: repeated every year since, hasn't happened. So there is no 209 00:12:24,600 --> 00:12:27,560 Speaker 1: basis for these statements. You just say that and hope 210 00:12:27,600 --> 00:12:31,120 Speaker 1: people will believe you, and then on the basis of that, 211 00:12:31,520 --> 00:12:34,640 Speaker 1: maybe you would spend more. You would then stimulate the 212 00:12:34,640 --> 00:12:38,320 Speaker 1: economy based on your animal spirits and your expectation that 213 00:12:38,400 --> 00:12:41,079 Speaker 1: things are going to get better. But in reality, if 214 00:12:41,120 --> 00:12:45,800 Speaker 1: you were a strict constructionist economist, there is no basis 215 00:12:45,800 --> 00:12:47,800 Speaker 1: to expect that. What did you see in their of 216 00:12:47,840 --> 00:12:50,120 Speaker 1: interests yesterday? There wasn't a whole lot of commentary about 217 00:12:50,120 --> 00:12:52,920 Speaker 1: the balance sheet, for for instance, anything jump out of 218 00:12:52,960 --> 00:12:56,040 Speaker 1: you from the Fed statement police yesterday too. What jumped 219 00:12:56,040 --> 00:12:58,559 Speaker 1: out of it was the vagueness of it all. They 220 00:12:58,640 --> 00:13:01,240 Speaker 1: did not even come out and say that they were 221 00:13:01,240 --> 00:13:04,960 Speaker 1: going to raise interest rates on June. Even that was 222 00:13:05,080 --> 00:13:08,720 Speaker 1: left wig even though after the meeting the probability of 223 00:13:09,040 --> 00:13:13,560 Speaker 1: race in the markets went up close to they did 224 00:13:13,640 --> 00:13:17,920 Speaker 1: talk about pairing the vialent sheet. But there was more 225 00:13:18,080 --> 00:13:21,480 Speaker 1: that came out of the Bernankee Tom Keene interview yesterday 226 00:13:21,520 --> 00:13:26,200 Speaker 1: than it came from the Fed itself, so o most 227 00:13:26,200 --> 00:13:32,680 Speaker 1: popular guest global ross. So we we really do not 228 00:13:32,920 --> 00:13:38,680 Speaker 1: have David any basis in terms of clarity in terms 229 00:13:38,679 --> 00:13:41,520 Speaker 1: of what it is. And that has been my problem 230 00:13:41,559 --> 00:13:44,520 Speaker 1: with the Federal Reserve ever since you do not have 231 00:13:44,559 --> 00:13:48,320 Speaker 1: the transparency, you don't have clear decision rules. You only 232 00:13:48,440 --> 00:13:50,480 Speaker 1: know and this is I think one reason why the 233 00:13:50,480 --> 00:13:54,360 Speaker 1: stock market has been surging is that that the stock 234 00:13:54,640 --> 00:13:57,440 Speaker 1: stock market believes that the FED will protect them in 235 00:13:57,480 --> 00:13:59,720 Speaker 1: case of a fall. That's about all you know, Street 236 00:14:00,120 --> 00:14:02,120 Speaker 1: was the three were talking earlier about, Yeah, the second 237 00:14:02,160 --> 00:14:05,640 Speaker 1: quarter bounds, do we have an investment bounce with that? 238 00:14:07,040 --> 00:14:10,480 Speaker 1: We don't have an investment bounced yet. And that is 239 00:14:10,520 --> 00:14:13,760 Speaker 1: why I think the any pickup in economic growth is 240 00:14:13,800 --> 00:14:16,880 Speaker 1: going to be limited to more of a of a 241 00:14:17,000 --> 00:14:20,280 Speaker 1: jump back from the very depressed first quarter and probably 242 00:14:20,320 --> 00:14:23,600 Speaker 1: calculation issues with the first quarter that you have it, 243 00:14:23,800 --> 00:14:27,800 Speaker 1: rather than a fundamental change in consumption or investment. Both 244 00:14:27,800 --> 00:14:30,320 Speaker 1: of them continued to be very weak in the first quarter, 245 00:14:30,560 --> 00:14:34,440 Speaker 1: especially on the consumption side, and if you if you 246 00:14:34,480 --> 00:14:37,240 Speaker 1: look at some of the recent price figures, the latest 247 00:14:37,640 --> 00:14:41,880 Speaker 1: core inflation figure was actually negative month on month, and 248 00:14:41,960 --> 00:14:44,680 Speaker 1: the real consumption spending in the month of March was 249 00:14:44,760 --> 00:14:49,120 Speaker 1: up only because prices fell at the nominal consumption was leveled. 250 00:14:49,640 --> 00:14:52,120 Speaker 1: These do not signify to me any sign of a 251 00:14:52,240 --> 00:14:55,560 Speaker 1: pick big pickup in terms of strength. I was talking 252 00:14:55,600 --> 00:14:58,480 Speaker 1: to Brian Mornehan yesterday, the chairman City of Bank of America. 253 00:14:58,560 --> 00:15:00,400 Speaker 1: We were talking about hard data and so data, and 254 00:15:00,440 --> 00:15:04,480 Speaker 1: he says, the economy feels different, it feels better. What 255 00:15:04,560 --> 00:15:07,000 Speaker 1: can you buy with soft data? How do you feel 256 00:15:07,040 --> 00:15:10,880 Speaker 1: about that debate? I think that debate and the soft 257 00:15:10,960 --> 00:15:14,680 Speaker 1: data being consumer confidence numbers which are very good, business 258 00:15:14,760 --> 00:15:18,440 Speaker 1: confidence numbers which are good, but they're not backed by data, 259 00:15:18,560 --> 00:15:20,840 Speaker 1: and I think some of that I think there is 260 00:15:20,880 --> 00:15:24,040 Speaker 1: a gap that initially you had the big pick up 261 00:15:24,280 --> 00:15:27,120 Speaker 1: David on the overall confidence in the aftermath of the 262 00:15:27,120 --> 00:15:32,720 Speaker 1: Trump election, and that lasted into the presidential inauguration on January. 263 00:15:33,920 --> 00:15:37,680 Speaker 1: But thereafter, especially in March and April, we started started 264 00:15:37,680 --> 00:15:41,480 Speaker 1: to see the stumbling blocks taking place. The measures could 265 00:15:41,520 --> 00:15:44,000 Speaker 1: not be passed very quickly. We're waiting to see whether 266 00:15:44,400 --> 00:15:47,760 Speaker 1: the healthcare bill will in fact get two sixteen Republican 267 00:15:47,840 --> 00:15:52,640 Speaker 1: votes this afternoon or this evening. Um. Those doubts mean 268 00:15:52,760 --> 00:15:56,360 Speaker 1: that eventually I think consumer sentiment numbers are the soft 269 00:15:57,400 --> 00:16:03,160 Speaker 1: data will follow the hard data somewhat lower. The gap 270 00:16:03,280 --> 00:16:05,440 Speaker 1: is I think more a matter of time before they 271 00:16:05,480 --> 00:16:08,480 Speaker 1: both catch up to each other. Give us a little 272 00:16:08,520 --> 00:16:10,240 Speaker 1: preview here of what you're looking for on Sunday night 273 00:16:10,720 --> 00:16:12,360 Speaker 1: out of France. Tom's gonna be head over there with 274 00:16:12,400 --> 00:16:16,400 Speaker 1: Francine Lockwa anchoring our special Coverageohn Sunday afternoon here Sunday 275 00:16:16,440 --> 00:16:19,920 Speaker 1: evening in Europe. What's that election going to tell you 276 00:16:19,960 --> 00:16:22,280 Speaker 1: about the economic direction of France and Europe? More broadly, 277 00:16:23,240 --> 00:16:27,240 Speaker 1: I'm taking David that the election result is is set. 278 00:16:27,560 --> 00:16:31,480 Speaker 1: You have Emmanuel mcrome winning, and the question is what 279 00:16:31,720 --> 00:16:34,680 Speaker 1: is the abstention rate like or what happens with the 280 00:16:34,680 --> 00:16:37,440 Speaker 1: people actually something that they do in France. You go 281 00:16:37,520 --> 00:16:40,080 Speaker 1: actually to the polling booth, but you put in a 282 00:16:40,120 --> 00:16:44,120 Speaker 1: blank vote, which is like an abstention, and to what 283 00:16:44,320 --> 00:16:48,840 Speaker 1: extent that reduces the margin by which he wins. So 284 00:16:49,000 --> 00:16:52,760 Speaker 1: if you are talking about somebody winning plus one vote 285 00:16:52,800 --> 00:16:56,320 Speaker 1: as the winner, he's definitely seems to be there to win. 286 00:16:57,240 --> 00:16:59,560 Speaker 1: But the real issue that after is going to be 287 00:16:59,800 --> 00:17:04,800 Speaker 1: the how is he going to implement policies? June France's 288 00:17:05,200 --> 00:17:10,679 Speaker 1: parliamentary elections. He does not belong to any regular party, 289 00:17:10,760 --> 00:17:14,520 Speaker 1: not as Marine Lupin, and assuming he's the winner, he 290 00:17:14,640 --> 00:17:17,760 Speaker 1: has to co opt the help of whomever he nominates 291 00:17:17,800 --> 00:17:21,160 Speaker 1: as the prime minister to work with him. And this 292 00:17:21,240 --> 00:17:25,520 Speaker 1: process of which is known as cohabitation in French politics, 293 00:17:25,880 --> 00:17:28,600 Speaker 1: has never worked out well. It means it continues, but 294 00:17:28,680 --> 00:17:32,800 Speaker 1: you can't get tough measures past and France needs very 295 00:17:32,800 --> 00:17:36,960 Speaker 1: difficult measures in terms of spending control. It needs the 296 00:17:37,080 --> 00:17:40,000 Speaker 1: labor market is very rigid, which needs to be made 297 00:17:40,080 --> 00:17:44,120 Speaker 1: more flexible by the new president. And we essentially had 298 00:17:44,160 --> 00:17:48,720 Speaker 1: wasted years under francois Land because he talked about increasing 299 00:17:49,320 --> 00:17:52,639 Speaker 1: tax rates and he was essentially he drove away businesses 300 00:17:53,440 --> 00:17:56,600 Speaker 1: that needs to be redressed and done in a hurry. 301 00:17:56,720 --> 00:18:01,200 Speaker 1: And I'm not sure Mr McCrow, despite his pro business 302 00:18:01,280 --> 00:18:06,960 Speaker 1: leanings and his investment banker background, would have enough populous 303 00:18:07,600 --> 00:18:11,000 Speaker 1: support or parliamentary support to do so. You can bring 304 00:18:11,040 --> 00:18:13,120 Speaker 1: it right over the United States, I mean his Franzy 305 00:18:13,200 --> 00:18:16,760 Speaker 1: mentioned this morning Fency. Likewise, it's a whole different structure 306 00:18:16,840 --> 00:18:19,280 Speaker 1: over there. We've got this key vote today. Do you 307 00:18:19,359 --> 00:18:23,160 Speaker 1: sense right now? And this weekend's recomm herd that there 308 00:18:23,200 --> 00:18:28,520 Speaker 1: is a change, an optimism that will get things done. Uh, 309 00:18:28,600 --> 00:18:32,160 Speaker 1: you're in the United States. Today's vote, Yeah, I think 310 00:18:32,280 --> 00:18:35,280 Speaker 1: if there is If the vote passes the House today, 311 00:18:35,400 --> 00:18:37,920 Speaker 1: yes there is going to be a rise and optimism. 312 00:18:37,960 --> 00:18:39,879 Speaker 1: But then you're going to wait to see if it 313 00:18:39,920 --> 00:18:43,320 Speaker 1: passes in the Senate, because what we hear is that 314 00:18:43,400 --> 00:18:46,159 Speaker 1: the opposition in the Senate to passing it is just 315 00:18:46,240 --> 00:18:49,080 Speaker 1: as intense and it's going to be very difficult to 316 00:18:49,119 --> 00:18:52,000 Speaker 1: get fifty votes in the in the Senate. So if 317 00:18:52,000 --> 00:18:55,679 Speaker 1: it passes, yes, you've crossed a stumbling block and the 318 00:18:55,800 --> 00:18:58,600 Speaker 1: market may have a sigh of relief. The futures are 319 00:18:58,720 --> 00:19:03,160 Speaker 1: up today partly expecting something good to happen, but then 320 00:19:03,280 --> 00:19:05,760 Speaker 1: once again reality is going to set in you. What 321 00:19:05,960 --> 00:19:08,480 Speaker 1: you need is a period of time when you can 322 00:19:08,520 --> 00:19:13,119 Speaker 1: take a lot of the legislative approvals as given. And 323 00:19:13,200 --> 00:19:17,160 Speaker 1: I don't think we're there yet. Tom Again, I look 324 00:19:17,200 --> 00:19:20,399 Speaker 1: at the similar stuff teller to interviews yesterday in this 325 00:19:20,600 --> 00:19:24,960 Speaker 1: and it is untrade Ben Bernanke and Wilbur Ross do 326 00:19:25,800 --> 00:19:30,359 Speaker 1: not agree and how the United States should affect a 327 00:19:30,400 --> 00:19:35,840 Speaker 1: new trade policy living given globalization educator audience, what a 328 00:19:35,920 --> 00:19:40,600 Speaker 1: Secretary Ross believe? What is Chairman Bernanke believe. I think 329 00:19:40,960 --> 00:19:43,560 Speaker 1: that's a great question and a timely one. Let me 330 00:19:44,040 --> 00:19:47,359 Speaker 1: divide this in in this manner, I think Secretary Ross 331 00:19:47,560 --> 00:19:52,959 Speaker 1: is talking about making for fair trade, free trade, but 332 00:19:53,040 --> 00:19:57,680 Speaker 1: with the regulations being followed properly. I think the difference 333 00:19:57,800 --> 00:20:01,200 Speaker 1: is that if you really want the US to benefit, 334 00:20:01,359 --> 00:20:04,439 Speaker 1: you need to go beyond the trade balance alone and 335 00:20:04,480 --> 00:20:08,199 Speaker 1: look at the total balance of payments. Partly because of 336 00:20:08,240 --> 00:20:12,240 Speaker 1: my having been a student with Bob Mandel at Columbia University, 337 00:20:12,600 --> 00:20:14,679 Speaker 1: we look at what we call the total balance of 338 00:20:14,680 --> 00:20:18,720 Speaker 1: payments including capital influence. And one of the pieces I 339 00:20:18,760 --> 00:20:22,320 Speaker 1: did for Bloomberg View recently is to say that if 340 00:20:22,359 --> 00:20:26,320 Speaker 1: we go and increase the market share for US companies 341 00:20:26,359 --> 00:20:30,200 Speaker 1: in China, for instance, you get a lot more benefit 342 00:20:30,400 --> 00:20:33,520 Speaker 1: in terms of jobs being created in the United States 343 00:20:33,920 --> 00:20:37,639 Speaker 1: rather than just fighting on the trade front. And I 344 00:20:37,680 --> 00:20:41,080 Speaker 1: think the Bernanki approach with which I agree is in 345 00:20:41,160 --> 00:20:43,760 Speaker 1: terms of the free trade that he supports, I would 346 00:20:43,760 --> 00:20:48,480 Speaker 1: extend it beyond just merchandise trade and extended to services 347 00:20:48,560 --> 00:20:52,120 Speaker 1: and capital influence in a manner in which the United 348 00:20:52,160 --> 00:20:56,640 Speaker 1: States benefits by having more opportunities, for instance, for US 349 00:20:56,720 --> 00:21:00,119 Speaker 1: corporations to bid for contracts in China, which are they 350 00:21:00,160 --> 00:21:02,240 Speaker 1: had unable to do it right at this moment you 351 00:21:02,320 --> 00:21:04,520 Speaker 1: thank you so much. Compared with us this morning with 352 00:21:04,640 --> 00:21:08,400 Speaker 1: a prescient view on economic growth, we will see there's 353 00:21:08,440 --> 00:21:11,800 Speaker 1: other people that push against darter commar and speak of 354 00:21:12,200 --> 00:21:14,879 Speaker 1: three and even higher g D because I don't know 355 00:21:14,920 --> 00:21:16,639 Speaker 1: where that is right now, David, because the date has 356 00:21:16,680 --> 00:21:19,879 Speaker 1: been a little saggy. Is the FED mentioned yesterday. I 357 00:21:19,920 --> 00:21:22,840 Speaker 1: don't think they used the word saggy, but I would 358 00:21:22,840 --> 00:21:27,960 Speaker 1: have okay over there, okay, just thinking of what you know, 359 00:21:28,600 --> 00:21:30,159 Speaker 1: what happened quite beautifully is at the end of your 360 00:21:30,160 --> 00:21:31,920 Speaker 1: review with Memberne you talked about Trey and I was 361 00:21:31,960 --> 00:21:33,840 Speaker 1: able to bring that up with with Wilbur Rosso. Well, 362 00:21:33,880 --> 00:21:35,600 Speaker 1: you know, he talked about you. You asked him about 363 00:21:35,760 --> 00:21:39,440 Speaker 1: what the dissolution of where the disappearance of NAFTA would mean, 364 00:21:39,480 --> 00:21:41,400 Speaker 1: and it was interesting to hear Wilbur Ross talk about 365 00:21:41,760 --> 00:21:43,359 Speaker 1: how you have to you would have to replace it 366 00:21:43,400 --> 00:21:45,360 Speaker 1: with something and he sort of alluded to the fact 367 00:21:45,400 --> 00:21:47,920 Speaker 1: that might be actually what was discussed during negotiations over 368 00:21:47,960 --> 00:21:50,119 Speaker 1: the TPP. So he's saying that you can't have a 369 00:21:50,359 --> 00:21:53,320 Speaker 1: can't have a vacuum, but his approach thus far has 370 00:21:53,359 --> 00:21:56,040 Speaker 1: been so piecemeal to look at it by industry by industry, 371 00:21:56,080 --> 00:21:58,479 Speaker 1: sector by sector. He talks about enforcement. I asked him 372 00:21:58,480 --> 00:22:00,639 Speaker 1: about the reciprocal tax at the Press and flood with 373 00:22:01,200 --> 00:22:03,560 Speaker 1: Margaret Talent and Jennifer Jacobs in an interview with Bloomberg. 374 00:22:04,160 --> 00:22:08,320 Speaker 1: What's interesting about that is he highlights this disparity in tariffs. Um, 375 00:22:08,560 --> 00:22:10,800 Speaker 1: these are things that have been negotiated over year's time, 376 00:22:11,440 --> 00:22:15,360 Speaker 1: and to sort of go against what's been done under 377 00:22:15,359 --> 00:22:17,679 Speaker 1: the aegis of, or the impromter of of of the 378 00:22:17,840 --> 00:22:19,199 Speaker 1: w t O is something that I think is going 379 00:22:19,240 --> 00:22:22,040 Speaker 1: to be highly controversial and difficult for for the US. 380 00:22:22,800 --> 00:22:28,800 Speaker 1: Good morning, Bloomberg, FM, Washington. David and I are always 381 00:22:28,880 --> 00:22:32,400 Speaker 1: honest with each other. I missed your interview yesterday well 382 00:22:32,720 --> 00:22:35,320 Speaker 1: because Justin Charp Banner and I made a beeline for 383 00:22:35,400 --> 00:22:37,000 Speaker 1: Ben's chili. But you had to go. You had to 384 00:22:37,040 --> 00:22:42,840 Speaker 1: get that half smoke had to get you speak singularly, No, 385 00:22:43,080 --> 00:22:46,200 Speaker 1: it was a plural half smoke. There you go, afternoon. 386 00:22:46,400 --> 00:22:49,359 Speaker 1: So I'm glad you briefed me on Secretary Ross's good effort. 387 00:22:49,359 --> 00:22:51,000 Speaker 1: We think the sank your first time as well. It's 388 00:22:51,080 --> 00:22:52,680 Speaker 1: very nice to come to New York to do that 389 00:22:52,800 --> 00:22:56,000 Speaker 1: with us at the It was very nice of Ben's 390 00:22:56,040 --> 00:23:02,760 Speaker 1: Chili bowl let me in yesterday coffee milkshake as well, 391 00:23:08,720 --> 00:23:12,199 Speaker 1: brought you by Bank of America. Mary Lynch dedicated to 392 00:23:12,320 --> 00:23:16,200 Speaker 1: bringing our clients insights and solutions to meet the challenges 393 00:23:16,359 --> 00:23:20,080 Speaker 1: of a transforming world. That's the power of global connections. 394 00:23:20,440 --> 00:23:24,960 Speaker 1: Mary Lynch, Pierce Feeder and Smith Incorporated Member s I 395 00:23:25,119 --> 00:23:33,800 Speaker 1: p C. There's something new from Bloomberg. It's called Lens. 396 00:23:33,800 --> 00:23:36,800 Speaker 1: Starting right now, you can use the Bloomberg Io s 397 00:23:36,880 --> 00:23:41,000 Speaker 1: app off your iPhone or iPad or our new Google 398 00:23:41,080 --> 00:23:44,960 Speaker 1: Chrome extension to read any news story on any website, 399 00:23:45,480 --> 00:23:49,080 Speaker 1: scan it, and then instantly see the news stories relevant 400 00:23:49,080 --> 00:23:53,480 Speaker 1: market data from Bloomberg. In addition, see all the bios 401 00:23:53,560 --> 00:23:57,280 Speaker 1: of the key people mentioned in the story. It's called Lens, 402 00:23:57,600 --> 00:24:00,280 Speaker 1: and it is just that, a lens into the pole 403 00:24:00,600 --> 00:24:04,440 Speaker 1: and the data of any story you may be reading. Again, 404 00:24:04,680 --> 00:24:07,800 Speaker 1: Lens brings you the power of Bloomberg's news and data. 405 00:24:08,200 --> 00:24:11,399 Speaker 1: Download or Io s app or search for the Bloomberg 406 00:24:11,400 --> 00:24:15,320 Speaker 1: extension at the Chrome Store to try lens out. Learn 407 00:24:15,320 --> 00:24:23,720 Speaker 1: more at Bloomberg dot com. Slash lens libby control with 408 00:24:23,800 --> 00:24:27,199 Speaker 1: us with Pimco joining us Libby, I'm gonna cut right 409 00:24:27,240 --> 00:24:30,120 Speaker 1: to the chase I don't care about today. Is there 410 00:24:30,160 --> 00:24:33,600 Speaker 1: even a hint that the Senate will let the death 411 00:24:33,720 --> 00:24:38,439 Speaker 1: of Obamacare happen? Well? I think, I mean you you 412 00:24:38,560 --> 00:24:41,480 Speaker 1: raise a good point that regardless of the outcome of 413 00:24:41,520 --> 00:24:45,640 Speaker 1: the House vote today, the repeal and replaced bill faces 414 00:24:45,760 --> 00:24:50,120 Speaker 1: a really uphill road in the Senate. Um In some ways, 415 00:24:50,160 --> 00:24:54,080 Speaker 1: the House vote was supposed to be the easiest step um. 416 00:24:54,119 --> 00:24:56,600 Speaker 1: So the fact that they've had difficulty just shows you 417 00:24:57,000 --> 00:24:59,920 Speaker 1: really that there's not a lot of unanimity among Republicans 418 00:25:00,040 --> 00:25:02,879 Speaker 1: about what to do on Obamacare. And I think, very 419 00:25:02,920 --> 00:25:06,760 Speaker 1: importantly there are lots of provisions that voters like about Obamacare. 420 00:25:06,920 --> 00:25:09,800 Speaker 1: So yes, to your point, regardless of what happens today 421 00:25:09,800 --> 00:25:12,560 Speaker 1: on healthcare, it's going to face an uphill road in 422 00:25:12,560 --> 00:25:16,080 Speaker 1: the Senate. I think that probably something will get done, 423 00:25:16,200 --> 00:25:19,000 Speaker 1: but it won't get done for several months. And I 424 00:25:19,040 --> 00:25:22,000 Speaker 1: think the Senate is going to do what the House 425 00:25:22,160 --> 00:25:24,720 Speaker 1: you know, arguably should have done, which is hold hearings 426 00:25:24,760 --> 00:25:28,480 Speaker 1: and have a markup and go through the regular legislative process. 427 00:25:28,520 --> 00:25:29,960 Speaker 1: And and that you know, as we all know, it 428 00:25:30,000 --> 00:25:32,000 Speaker 1: takes a lot of time. Is your sense here that 429 00:25:32,040 --> 00:25:35,159 Speaker 1: Republicans in the House are voting on a bill and 430 00:25:35,240 --> 00:25:39,160 Speaker 1: that's enough where they think of this as a good bill? Yeah, 431 00:25:39,200 --> 00:25:41,280 Speaker 1: I think it's I think it's mixed that, you know. 432 00:25:41,600 --> 00:25:45,119 Speaker 1: I think they're probably folks in the Republican Conference who 433 00:25:45,200 --> 00:25:48,600 Speaker 1: wish that they could wait to take a vote until 434 00:25:48,640 --> 00:25:51,960 Speaker 1: they get say the score from the Congressional Budget Office 435 00:25:52,000 --> 00:25:54,520 Speaker 1: about how much it's going to cost and what the 436 00:25:54,640 --> 00:25:57,800 Speaker 1: coverage looks like under the new bill. Um. But yeah, 437 00:25:57,840 --> 00:26:00,840 Speaker 1: there is a lot of um, you know, I think 438 00:26:00,880 --> 00:26:03,720 Speaker 1: desire just to get this off their plate. They want 439 00:26:03,800 --> 00:26:06,959 Speaker 1: to move on to tax reform, for example. They know 440 00:26:07,080 --> 00:26:09,119 Speaker 1: this is going to be amended in the Senate, and 441 00:26:09,160 --> 00:26:11,440 Speaker 1: so I think some members just think, well, we'll take 442 00:26:11,440 --> 00:26:13,440 Speaker 1: the we'll take the vote and uh and then the 443 00:26:13,520 --> 00:26:16,960 Speaker 1: second it's a dangerous as their risky strategy. Though politically, 444 00:26:17,280 --> 00:26:19,880 Speaker 1: does that risky strategy get in the way of one 445 00:26:19,960 --> 00:26:22,120 Speaker 1: PM or whenever they're going to vote today? I mean, 446 00:26:24,000 --> 00:26:27,360 Speaker 1: you've just described what I've read a lot about Libby. 447 00:26:27,400 --> 00:26:30,440 Speaker 1: What's the sweat factor on the floor? I mean, are 448 00:26:30,520 --> 00:26:34,600 Speaker 1: people going why am I doing this? Or Giddier is 449 00:26:34,640 --> 00:26:38,520 Speaker 1: your champagne? And well, what's the mood. Well, you know 450 00:26:38,600 --> 00:26:42,280 Speaker 1: you would think, um, and certainly under other speakers, there 451 00:26:42,320 --> 00:26:45,480 Speaker 1: would not be a vote unless they're pretty confident in 452 00:26:45,520 --> 00:26:47,760 Speaker 1: their whip count, right, that they know that when they 453 00:26:47,800 --> 00:26:49,760 Speaker 1: get this to the floor of the vote, that they'll 454 00:26:49,760 --> 00:26:52,000 Speaker 1: get the in this case, two sixteen votes that they 455 00:26:52,040 --> 00:26:56,720 Speaker 1: need to pass legislation. I don't think they're quite there yet. Um, 456 00:26:56,760 --> 00:26:59,640 Speaker 1: there are eighteen knows, they can only afford to lose 457 00:26:59,640 --> 00:27:01,879 Speaker 1: twenty two votes and then lots of folks who are 458 00:27:01,920 --> 00:27:05,199 Speaker 1: still undecided. So I think the idea and the calculus 459 00:27:05,320 --> 00:27:08,280 Speaker 1: is well will hold this vote. They're breaking for recess 460 00:27:08,320 --> 00:27:10,560 Speaker 1: at the end of the day today. Um, and we'll 461 00:27:10,560 --> 00:27:12,800 Speaker 1: try to twist some arms. But I, you know, I 462 00:27:12,840 --> 00:27:15,880 Speaker 1: think it's going to be close. But it sounds like 463 00:27:15,960 --> 00:27:18,760 Speaker 1: the Republican leadership have the confidence that they have the votes, 464 00:27:18,840 --> 00:27:21,520 Speaker 1: albeit you know, by a very thin margin. It might 465 00:27:21,560 --> 00:27:24,720 Speaker 1: only pass by one, uh one vote or so. Our 466 00:27:24,800 --> 00:27:28,679 Speaker 1: chief Washington correspondent Kevin's really at keV surreally tweeting fifteen 467 00:27:28,720 --> 00:27:31,760 Speaker 1: minutes ago a quote from Mark Meadows Carson Mark Meadows, 468 00:27:31,760 --> 00:27:34,280 Speaker 1: who was on his way through statutory hall quote, We're 469 00:27:34,280 --> 00:27:37,639 Speaker 1: going to pass this thing today. How fractured is this 470 00:27:37,680 --> 00:27:40,399 Speaker 1: Republican Party in the House of Representatives. We talked with 471 00:27:40,440 --> 00:27:43,800 Speaker 1: the Congress from Jim Jordan yesterday, Uh, Carson french Hill 472 00:27:43,880 --> 00:27:46,480 Speaker 1: as well. There were so many factions of the Republican 473 00:27:46,480 --> 00:27:50,160 Speaker 1: Party in the House. Specifically, how does how Speaker Paul 474 00:27:50,200 --> 00:27:54,240 Speaker 1: Ryan corral all these disparate groups? Yeah, and you know 475 00:27:54,359 --> 00:27:56,879 Speaker 1: he's been, Um, he's been a little bit limited in 476 00:27:56,960 --> 00:27:59,760 Speaker 1: terms of the tools and his tool kit because if 477 00:27:59,800 --> 00:28:06,040 Speaker 1: you remember, their previous pre Republican and Democratic leadership could 478 00:28:06,080 --> 00:28:09,560 Speaker 1: use something called earmarks to get their conference on board 479 00:28:09,600 --> 00:28:12,280 Speaker 1: with difficult votes. Um. You know, that's sort of the 480 00:28:12,440 --> 00:28:17,720 Speaker 1: unsavory practice of appropriating money to members of Congresses district. 481 00:28:18,040 --> 00:28:19,879 Speaker 1: There's nothing illegal about it, but I think that the 482 00:28:19,920 --> 00:28:22,560 Speaker 1: American population just didn't feel like it was above board. 483 00:28:22,840 --> 00:28:25,880 Speaker 1: But regardless, it was actually an effective tool in order 484 00:28:25,920 --> 00:28:29,919 Speaker 1: to corral a disjointed conference. Uh. Speaker Ryan doesn't have 485 00:28:30,000 --> 00:28:32,760 Speaker 1: that anymore because Byner allowed that. So, you know, he 486 00:28:32,800 --> 00:28:35,480 Speaker 1: doesn't have the tool in his tool kit. And as 487 00:28:35,520 --> 00:28:38,200 Speaker 1: a result, you know, you you are seeing probably need 488 00:28:38,400 --> 00:28:41,560 Speaker 1: fractions in the party more evident than you would have before. Libby, 489 00:28:41,600 --> 00:28:45,080 Speaker 1: We're not making a highway building at the New York. 490 00:28:45,720 --> 00:28:51,000 Speaker 1: This is Obamacare, I believe it's or whatever of g 491 00:28:51,120 --> 00:28:53,360 Speaker 1: d P. Are you telling me we're supposed to do 492 00:28:53,400 --> 00:28:56,520 Speaker 1: the legislation of a highway to at the good New 493 00:28:56,600 --> 00:29:00,920 Speaker 1: York like Obamacare? Come on, no is I've been saying 494 00:29:00,960 --> 00:29:03,320 Speaker 1: that it's it's It would have helped. I think it 495 00:29:03,360 --> 00:29:06,280 Speaker 1: would have. It would have helped uh Speaker Ryan in 496 00:29:06,280 --> 00:29:09,480 Speaker 1: in this in this case. But you plan really isn't 497 00:29:09,480 --> 00:29:13,240 Speaker 1: a really important point because you know, they're they're effectively 498 00:29:13,280 --> 00:29:16,360 Speaker 1: air dropping legislation on the Republican Conference and sort of 499 00:29:16,400 --> 00:29:19,160 Speaker 1: expecting them to pass it. And you know, that's a again, 500 00:29:19,200 --> 00:29:23,320 Speaker 1: that's a politically risky strategy because even if this bill 501 00:29:23,400 --> 00:29:25,440 Speaker 1: gets really amended in the Senate, which I think the 502 00:29:25,480 --> 00:29:28,320 Speaker 1: expectation is that it will be, Um, these folks are 503 00:29:28,320 --> 00:29:31,360 Speaker 1: still on the record for taking this vote. And if 504 00:29:31,400 --> 00:29:34,640 Speaker 1: the CBO, for instance, comes back and says that folks 505 00:29:34,680 --> 00:29:37,200 Speaker 1: won't get coverage and the pre existing you know, uh 506 00:29:37,400 --> 00:29:41,440 Speaker 1: provision isn't sufficient enough, that's going to be something that 507 00:29:41,720 --> 00:29:44,440 Speaker 1: I think we'll probably haunt them going into the mid terms, 508 00:29:44,480 --> 00:29:47,440 Speaker 1: which are you know, amazingly just right around the corner. 509 00:29:48,320 --> 00:29:50,240 Speaker 1: There is no CBO score. We talked about that just 510 00:29:50,280 --> 00:29:52,240 Speaker 1: a couple of minutes ago. How big a deal is that? 511 00:29:52,800 --> 00:29:55,080 Speaker 1: Is that something you think a lot of these congressmen's 512 00:29:55,080 --> 00:29:58,960 Speaker 1: constituencies understand the importance of that and and how blindly 513 00:29:58,960 --> 00:30:01,840 Speaker 1: are they entering into this about getting that score from that? Yeah, 514 00:30:02,000 --> 00:30:06,120 Speaker 1: you know it's something that they You know, Republicans really 515 00:30:06,120 --> 00:30:10,560 Speaker 1: criticized Democrats during the Obama administration for not waiting for 516 00:30:11,040 --> 00:30:14,440 Speaker 1: the CBO score on big pieces of legislation. Um, so 517 00:30:14,520 --> 00:30:18,040 Speaker 1: I think they're certainly opening themselves up to criticism within 518 00:30:18,240 --> 00:30:20,560 Speaker 1: within the Beltway. But you're right, I mean it does 519 00:30:20,600 --> 00:30:23,680 Speaker 1: the CBO score really matter to you know, the sort 520 00:30:23,680 --> 00:30:27,480 Speaker 1: of regular voter. No, But in terms of the headlines 521 00:30:27,520 --> 00:30:30,040 Speaker 1: that it creates, Yes, And I think that's what they're 522 00:30:30,040 --> 00:30:33,480 Speaker 1: really concerned about and is honestly part of the calculus here. 523 00:30:33,480 --> 00:30:36,600 Speaker 1: They want folks to take this vote. I would presume 524 00:30:37,200 --> 00:30:40,320 Speaker 1: before that CBO score comes out with fear that that, 525 00:30:40,440 --> 00:30:41,959 Speaker 1: you know, it may not be that it may not 526 00:30:41,960 --> 00:30:44,800 Speaker 1: look that good. What does this mean for for tax reform? 527 00:30:44,800 --> 00:30:48,640 Speaker 1: Looking ahead to tax reforms, As you pointed out in 528 00:30:48,640 --> 00:30:51,160 Speaker 1: a note, you know, there are no significant legislative achievements 529 00:30:51,200 --> 00:30:54,000 Speaker 1: for this President. Yet he'd like to have some how 530 00:30:54,040 --> 00:31:00,479 Speaker 1: how contingent on this passing? Is tax reform? Well, in 531 00:31:00,520 --> 00:31:05,320 Speaker 1: some ways, tax reform is easier with this because um, 532 00:31:05,360 --> 00:31:07,880 Speaker 1: as you as you all know, this is actually a 533 00:31:08,000 --> 00:31:11,720 Speaker 1: tax tax cut, um in addition to the sort of 534 00:31:11,720 --> 00:31:15,480 Speaker 1: the repeal and replacement of Obamacare, because it repeals some 535 00:31:15,600 --> 00:31:19,680 Speaker 1: of those tax provisions that were associated with Obamacare, uh 536 00:31:19,680 --> 00:31:22,800 Speaker 1: and the original legislation. So it actually makes tax reform 537 00:31:23,240 --> 00:31:27,200 Speaker 1: a little bit easier because it takes care of about 538 00:31:27,200 --> 00:31:30,040 Speaker 1: a trillion dollars and in tax cuts that tax reform 539 00:31:30,040 --> 00:31:33,840 Speaker 1: wouldn't have to address otherwise. Um. But then from a 540 00:31:33,880 --> 00:31:36,400 Speaker 1: process perspective, it actually makes it a little bit more 541 00:31:36,400 --> 00:31:39,880 Speaker 1: difficult because now it requires some of the fiscal your 542 00:31:39,880 --> 00:31:42,920 Speaker 1: twenty eight team budget to be passed before tax reform 543 00:31:43,000 --> 00:31:46,080 Speaker 1: because of his reconciliation issue. We're going to come back, 544 00:31:46,120 --> 00:31:49,640 Speaker 1: but little I want to circle back. Does any of 545 00:31:49,680 --> 00:31:53,760 Speaker 1: this check matter if the Senate exists? Is the Senate 546 00:31:53,800 --> 00:31:57,400 Speaker 1: going to pass what the Republicans are voting on at 547 00:31:57,400 --> 00:32:02,760 Speaker 1: one PMSH this afternoon? No? Okay, no, they will not. 548 00:32:02,880 --> 00:32:06,880 Speaker 1: They will not pass as is. They will amend it significantly. Okay, 549 00:32:07,080 --> 00:32:09,320 Speaker 1: that'll be a good point to pick up on. When 550 00:32:09,520 --> 00:32:12,200 Speaker 1: is it was that was that fair and balanced? David 551 00:32:12,200 --> 00:32:14,480 Speaker 1: ga I just tried to I like her one word 552 00:32:14,520 --> 00:32:18,360 Speaker 1: answer there, that's right ahead. Yeah, no, no, just you know, 553 00:32:18,600 --> 00:32:20,760 Speaker 1: I mean everybody is like the soap operat to get 554 00:32:20,800 --> 00:32:23,120 Speaker 1: to Michael Barr. What is it Michael Barr one PM 555 00:32:23,200 --> 00:32:28,520 Speaker 1: or tonight is like, yeah, I was thinking the same thing. 556 00:32:28,560 --> 00:32:34,920 Speaker 1: I'm moder today. Yeah, probably, Michael. I have our news 557 00:32:34,960 --> 00:32:37,400 Speaker 1: force in New York. Well did that a minute? Okay too? 558 00:32:37,800 --> 00:32:40,440 Speaker 1: They were conservatives, but they became moderates and they went 559 00:32:40,480 --> 00:32:43,240 Speaker 1: back to conservatives. I get that that all happened in 560 00:32:43,280 --> 00:32:46,840 Speaker 1: the last twenty four hours. How will Speaker Ryan Conjol 561 00:32:46,960 --> 00:32:51,440 Speaker 1: cajole other moderates to come over and seal this deal today? 562 00:32:51,520 --> 00:32:55,800 Speaker 1: If I'm a moderate, I'm a moderate, aren't I? Yes? 563 00:32:55,920 --> 00:32:59,520 Speaker 1: And and many of these moderates, of course are from 564 00:32:59,600 --> 00:33:02,320 Speaker 1: district because that went to Hillary Clinton, So they really 565 00:33:02,360 --> 00:33:05,080 Speaker 1: have an eye on the dynamics for UH in the 566 00:33:05,520 --> 00:33:09,240 Speaker 1: eighteen mid terminal elections. I think Fred Upton, who is 567 00:33:09,320 --> 00:33:13,080 Speaker 1: a moderate and who is of course behind the the 568 00:33:13,160 --> 00:33:17,280 Speaker 1: last minute changed to this bill, will be very instrumental 569 00:33:17,360 --> 00:33:20,480 Speaker 1: in terms of convincing the rest of the moderates that 570 00:33:20,560 --> 00:33:23,080 Speaker 1: they should vote on this. And as we were talking 571 00:33:23,080 --> 00:33:24,960 Speaker 1: about before, I think the calculus here is, let's just 572 00:33:25,000 --> 00:33:27,200 Speaker 1: get it out of the house. Let's you know, move 573 00:33:27,240 --> 00:33:30,040 Speaker 1: on with this. Let's um have you know, put some 574 00:33:30,080 --> 00:33:32,960 Speaker 1: points on the board, so to speak, uh, and and 575 00:33:33,000 --> 00:33:35,760 Speaker 1: then move on to other you know, other issues. Um 576 00:33:35,840 --> 00:33:37,720 Speaker 1: that we promised the electorate that we would that we 577 00:33:37,720 --> 00:33:39,680 Speaker 1: would move on. Lib. Did it used to be bad 578 00:33:39,680 --> 00:33:42,640 Speaker 1: when you were on Capitol Hill? Was their dialogue regular 579 00:33:42,680 --> 00:33:45,400 Speaker 1: dialogue between staffers on the House side and staffers on 580 00:33:45,440 --> 00:33:47,600 Speaker 1: the Senate side? Did it seemed like there was a 581 00:33:47,640 --> 00:33:50,320 Speaker 1: better relationship than than there is now? You know, I 582 00:33:50,320 --> 00:33:54,400 Speaker 1: think just in general, there was more comody, um, you know, 583 00:33:54,480 --> 00:33:58,560 Speaker 1: between the parties and between the chambers. UM. I think folks, 584 00:33:58,840 --> 00:34:00,800 Speaker 1: you know, went out with each other regardless of what 585 00:34:00,840 --> 00:34:04,400 Speaker 1: their political affiliation was. I don't I don't sense that 586 00:34:04,400 --> 00:34:08,000 Speaker 1: that is as pervasive now, which is um, which is unfortunate. 587 00:34:08,040 --> 00:34:10,680 Speaker 1: And there were members who spent a lot of time 588 00:34:10,920 --> 00:34:13,600 Speaker 1: with with each other across the aisle, and I don't 589 00:34:13,640 --> 00:34:16,759 Speaker 1: think that happens either. So you know, that's sort of 590 00:34:16,760 --> 00:34:19,759 Speaker 1: a long way of saying that some of these sort 591 00:34:19,760 --> 00:34:23,439 Speaker 1: of relationships outside of work. Uh, you know, I don't 592 00:34:23,480 --> 00:34:25,480 Speaker 1: think exists as much as they as they did. And 593 00:34:25,520 --> 00:34:27,239 Speaker 1: as a result, you know, I think we've seen the 594 00:34:27,320 --> 00:34:30,600 Speaker 1: results from the perspective that it's things are more part 595 00:34:30,600 --> 00:34:32,719 Speaker 1: of sen So you're not done in Washington at the 596 00:34:32,719 --> 00:34:36,319 Speaker 1: Trump Hotel bars saying count the Democrats, right, that's not 597 00:34:36,400 --> 00:34:41,840 Speaker 1: a game? Uh not, no, not there. There are a 598 00:34:41,880 --> 00:34:46,800 Speaker 1: lot of unemployed Democrats in Washington right now. They're still 599 00:34:46,800 --> 00:34:50,640 Speaker 1: looking for the first Democrats that walk to the door, Livy. 600 00:34:51,000 --> 00:34:53,160 Speaker 1: The hottest ticket in Newport Beach next week is at 601 00:34:53,160 --> 00:34:56,600 Speaker 1: the PIMCO Secular Forum. We heard about that a couple 602 00:34:56,600 --> 00:34:58,880 Speaker 1: of weeks a couple of weeks back, and Ben BERNANKI 603 00:34:58,920 --> 00:35:02,120 Speaker 1: will be there along with and Marie Slaughter, Jean Lautriche Larry. 604 00:35:02,120 --> 00:35:04,680 Speaker 1: Summary's the invitation you and I got. It was just 605 00:35:07,880 --> 00:35:10,239 Speaker 1: maybe next year, guys. I love the photo of this room. 606 00:35:10,320 --> 00:35:12,279 Speaker 1: You know that they're gathered around this round table in 607 00:35:12,320 --> 00:35:14,520 Speaker 1: the center of a large lecture hall. It looks like 608 00:35:14,520 --> 00:35:16,759 Speaker 1: a meeting of the U. N. Security Council. Anyhow, what 609 00:35:16,800 --> 00:35:18,399 Speaker 1: are you going to be listening for? New Gang which 610 00:35:18,480 --> 00:35:20,879 Speaker 1: is going to be there among others. As you all 611 00:35:20,920 --> 00:35:22,960 Speaker 1: gather there. What do you want to hear from the 612 00:35:22,960 --> 00:35:25,720 Speaker 1: former Speaker of the House, from from the former Treasury 613 00:35:25,760 --> 00:35:29,200 Speaker 1: secretary and others. Yeah, so you know, this is um. 614 00:35:29,200 --> 00:35:31,719 Speaker 1: This is sort of an integral part of our investment 615 00:35:31,719 --> 00:35:34,680 Speaker 1: process that we've been doing for thirty plus years, UM, 616 00:35:34,760 --> 00:35:37,920 Speaker 1: where we all gather around every year in terms of 617 00:35:37,960 --> 00:35:40,880 Speaker 1: sort of testing what our outlook for the economy is 618 00:35:40,960 --> 00:35:44,120 Speaker 1: in a more secular fashion, so three to five years 619 00:35:44,160 --> 00:35:46,920 Speaker 1: out and it's a good sort of gut check, so 620 00:35:47,000 --> 00:35:50,120 Speaker 1: to speak. And I think this year especially, we will 621 00:35:50,120 --> 00:35:52,680 Speaker 1: be talking about some of the assumptions we made last year, 622 00:35:52,760 --> 00:35:55,520 Speaker 1: which were sort of this new neutral idea that the 623 00:35:55,600 --> 00:35:58,600 Speaker 1: site is going to be sort of lower for longer. 624 00:35:59,040 --> 00:36:01,680 Speaker 1: And we've had a lot of the discussion after in 625 00:36:01,719 --> 00:36:05,560 Speaker 1: the in the intervening months of whether that still holds. 626 00:36:05,560 --> 00:36:08,399 Speaker 1: And so I think there week next week will really 627 00:36:08,400 --> 00:36:10,480 Speaker 1: be to test that. And of course public policy has 628 00:36:10,480 --> 00:36:13,600 Speaker 1: a big part, a big role in that insofar as 629 00:36:13,800 --> 00:36:16,919 Speaker 1: will we see a lot of fiscal expansion from the 630 00:36:17,040 --> 00:36:19,480 Speaker 1: US government and as a result, will have said be 631 00:36:19,600 --> 00:36:22,440 Speaker 1: you know, forced to move faster than they would otherwise. UM. 632 00:36:22,480 --> 00:36:25,560 Speaker 1: I think, you know, not to prejudge the outcome but 633 00:36:25,680 --> 00:36:28,640 Speaker 1: you know, just given the rate of um of the 634 00:36:28,920 --> 00:36:31,360 Speaker 1: legislative movement, you know, I think, well, you know, our 635 00:36:31,440 --> 00:36:34,120 Speaker 1: view is that will probably see some fiscal expansion, but 636 00:36:34,160 --> 00:36:36,600 Speaker 1: it will be a lot smaller than I think a 637 00:36:36,600 --> 00:36:39,520 Speaker 1: lot of people had originally expected and maybe even hoped 638 00:36:39,600 --> 00:36:43,000 Speaker 1: after after the election. So you know, I who knows, 639 00:36:43,120 --> 00:36:46,280 Speaker 1: but I would I would presume that I will probably 640 00:36:46,320 --> 00:36:48,640 Speaker 1: call us more around our new neutral thesis than this 641 00:36:48,719 --> 00:36:51,719 Speaker 1: idea of a of a new paradigm. It looks like 642 00:36:51,760 --> 00:36:54,359 Speaker 1: an amazing well, I mean, you've got an invitation time 643 00:36:59,480 --> 00:37:01,759 Speaker 1: and you know it your question to David about you know, 644 00:37:01,800 --> 00:37:05,040 Speaker 1: speaker g I think he can put some of you know, 645 00:37:05,120 --> 00:37:09,840 Speaker 1: what we have seen in in context, um and and 646 00:37:09,840 --> 00:37:12,680 Speaker 1: and you know, just talk a little bit about you 647 00:37:12,760 --> 00:37:15,840 Speaker 1: know how you know how significant of course the hundred 648 00:37:15,920 --> 00:37:18,840 Speaker 1: day mark UM came and passed last week? You know 649 00:37:18,880 --> 00:37:22,200 Speaker 1: how significant was that was it? That you know President 650 00:37:22,200 --> 00:37:25,480 Speaker 1: Trump hadn't had any legislative accomplishment and sort of what 651 00:37:25,520 --> 00:37:28,439 Speaker 1: does that what does that mean for his remaining time 652 00:37:28,480 --> 00:37:30,680 Speaker 1: in office? Um and as we all know, that sort 653 00:37:30,680 --> 00:37:33,840 Speaker 1: of an arbitrary milestone. And you know, I would argue 654 00:37:33,880 --> 00:37:36,040 Speaker 1: that the first year is a lot more important than 655 00:37:36,160 --> 00:37:39,080 Speaker 1: the first hundred days. Um, so you know there's still 656 00:37:39,160 --> 00:37:42,120 Speaker 1: lots of time and in terms of before you know 657 00:37:42,160 --> 00:37:44,520 Speaker 1: what the what the president's legacy is going to be. 658 00:37:44,840 --> 00:37:46,920 Speaker 1: Let me thank you so much. Let me control PIMCO 659 00:37:47,080 --> 00:38:04,120 Speaker 1: with some clear talk here on our legislative process, and 660 00:38:04,239 --> 00:38:06,920 Speaker 1: now an important interview with commodities on the move, iron 661 00:38:07,040 --> 00:38:10,640 Speaker 1: or truly plunging, I use that word carefully, and copper 662 00:38:11,120 --> 00:38:15,239 Speaker 1: a set of lower eyes. And then oil and the 663 00:38:15,280 --> 00:38:18,239 Speaker 1: only word I can properly use, folks, is grinding. It 664 00:38:18,440 --> 00:38:23,319 Speaker 1: is day after day after day where oil struggles on 665 00:38:23,360 --> 00:38:26,279 Speaker 1: the bid. Stephen Short knows every valve and pipe from 666 00:38:26,320 --> 00:38:29,400 Speaker 1: here to Cushing with the Short reports Stephen, good morning, 667 00:38:30,000 --> 00:38:33,360 Speaker 1: good morning. Why is this happening? Is it a linkage 668 00:38:33,440 --> 00:38:38,799 Speaker 1: of all commodities? Are as each commodity a specific story. Well, 669 00:38:39,320 --> 00:38:42,440 Speaker 1: for me, it's a specific story with regard to oil, 670 00:38:42,640 --> 00:38:45,279 Speaker 1: of course, and we have to keep in mind it 671 00:38:45,360 --> 00:38:48,680 Speaker 1: begins with OPEC. Keep in mind back in November when 672 00:38:48,840 --> 00:38:52,680 Speaker 1: Opec made this surprise announcement about a production cut in 673 00:38:52,800 --> 00:38:57,440 Speaker 1: December and January, after that announcement, Wall Street went all 674 00:38:57,480 --> 00:39:00,440 Speaker 1: in on higher oil prices, and as we know, and 675 00:39:00,480 --> 00:39:04,920 Speaker 1: as Bloomberg has reported OPEC was actually consulting with the 676 00:39:05,000 --> 00:39:08,359 Speaker 1: largest hedge funds and oil traders in the world. That's 677 00:39:08,360 --> 00:39:11,000 Speaker 1: how they got to that decision in November. It has 678 00:39:11,080 --> 00:39:14,279 Speaker 1: not panned out for Wall Street, And in February we 679 00:39:14,320 --> 00:39:17,480 Speaker 1: saw a mass liquidation of all that length and hence 680 00:39:17,800 --> 00:39:22,120 Speaker 1: we dropped from about fifty barrel in February in December 681 00:39:22,400 --> 00:39:24,400 Speaker 1: and we got down to more or less of where 682 00:39:24,440 --> 00:39:28,400 Speaker 1: we are today. Then in March, this seasonality kicks in. 683 00:39:28,520 --> 00:39:31,919 Speaker 1: Guys refineries come out of their turnaround season, they start 684 00:39:31,960 --> 00:39:34,799 Speaker 1: buying more crudel, there's more demand in the market, there's 685 00:39:34,840 --> 00:39:38,160 Speaker 1: support for price, and we had a nice evil rally 686 00:39:38,280 --> 00:39:41,600 Speaker 1: uh in March and into April, but low and behold 687 00:39:42,160 --> 00:39:45,200 Speaker 1: the markets coming crashing down. What's different in this wave 688 00:39:45,320 --> 00:39:50,920 Speaker 1: lower April into May versus February into March. Right that 689 00:39:51,160 --> 00:39:54,279 Speaker 1: February into March was and I'll attribute that to the 690 00:39:54,400 --> 00:39:57,839 Speaker 1: liquidation of the Wall Street bulls getting out of their 691 00:39:57,880 --> 00:40:01,439 Speaker 1: position and taking their lumps and and by selling off 692 00:40:01,520 --> 00:40:05,439 Speaker 1: their length. Hence the weakness. And then we did get 693 00:40:05,480 --> 00:40:09,399 Speaker 1: this bump up in price because of seasonality. But let's 694 00:40:09,400 --> 00:40:13,040 Speaker 1: go back to OPEC. The only thing that OPEC has 695 00:40:13,080 --> 00:40:18,080 Speaker 1: succeeded in is raising the cost for its Dubai lenked crude, 696 00:40:18,360 --> 00:40:20,600 Speaker 1: for its crude oils priced off of the marker in 697 00:40:20,640 --> 00:40:23,040 Speaker 1: the Middle East, and they've raised the cost of that 698 00:40:23,160 --> 00:40:26,520 Speaker 1: crude oil relative to the crude oil that is priced 699 00:40:26,560 --> 00:40:29,480 Speaker 1: off of the North American market, the NMEX and the 700 00:40:29,560 --> 00:40:33,800 Speaker 1: North Sea market ice spread. So what we are seeing now, guys, 701 00:40:34,160 --> 00:40:37,919 Speaker 1: is a situation where let's look at China because right 702 00:40:38,000 --> 00:40:42,600 Speaker 1: now OPEC, and this is important, non opeque oil is 703 00:40:42,640 --> 00:40:46,920 Speaker 1: now competing with the Dubai market for sales to Asian refineries. 704 00:40:47,160 --> 00:40:50,520 Speaker 1: So when we look at the latest statistics, China month 705 00:40:50,600 --> 00:40:55,040 Speaker 1: on month saw its imports from Saudi Arabia Dubai length 706 00:40:55,320 --> 00:40:59,440 Speaker 1: drop fourteen percent and it's imports from another OPEC country 707 00:40:59,520 --> 00:41:02,600 Speaker 1: and go La West Africa linked to the North Sea 708 00:41:02,640 --> 00:41:07,960 Speaker 1: market rise. So what is happening, guys, is the bulls 709 00:41:07,960 --> 00:41:11,320 Speaker 1: will keep on trying to tell you that these is 710 00:41:11,360 --> 00:41:14,200 Speaker 1: an OPEC story and OPEC is going to balance the market. 711 00:41:14,440 --> 00:41:18,040 Speaker 1: When we look at the Google geographical spreads to the 712 00:41:18,080 --> 00:41:20,560 Speaker 1: link between the North Sea market and the Dubai market, 713 00:41:20,560 --> 00:41:22,920 Speaker 1: the link between the NYMEX market and the buy market, 714 00:41:23,280 --> 00:41:27,160 Speaker 1: it is clear that OPEC has failed and it's endeavor 715 00:41:27,440 --> 00:41:30,440 Speaker 1: to balance the market. Now, the biggest problem here is 716 00:41:30,640 --> 00:41:33,880 Speaker 1: this is when demand is at its strongest. As we said, 717 00:41:33,960 --> 00:41:36,400 Speaker 1: the refiners are coming out of the winter maintenance season 718 00:41:36,800 --> 00:41:39,440 Speaker 1: to buying a lot of crude oil. Crude oil demand 719 00:41:39,440 --> 00:41:42,040 Speaker 1: in the United States has never been higher, and so 720 00:41:42,200 --> 00:41:45,280 Speaker 1: you have to ask yourself, if the bulls can't rally 721 00:41:45,360 --> 00:41:48,000 Speaker 1: the market when the demand is at its highest and 722 00:41:48,080 --> 00:41:50,880 Speaker 1: OPEC has failed to balance the market, then you have 723 00:41:51,080 --> 00:41:53,440 Speaker 1: indeed a lot of issues ahead of you if you 724 00:41:53,480 --> 00:41:56,000 Speaker 1: are bullish when you look at the third and fourth quarter, 725 00:41:56,280 --> 00:41:58,680 Speaker 1: when we're still producing a lot of oil and that 726 00:41:58,760 --> 00:42:01,800 Speaker 1: demand begins to fall. David jump in, David, Yeah, So 727 00:42:01,840 --> 00:42:03,800 Speaker 1: when this happens and we did below fifty dollars a 728 00:42:03,840 --> 00:42:06,239 Speaker 1: verrel first time that's happened since mid March, I think 729 00:42:06,239 --> 00:42:08,880 Speaker 1: we get this red head alert here on the Blomberg. 730 00:42:09,040 --> 00:42:11,440 Speaker 1: What's the significance of it where as support as you 731 00:42:11,480 --> 00:42:14,360 Speaker 1: see it, and what is moving below that fifty dollar threshold? 732 00:42:14,360 --> 00:42:18,000 Speaker 1: And tell you, well, keep in mind the fifty threshold 733 00:42:18,160 --> 00:42:20,800 Speaker 1: is just that. It's just the numbers. It's a big 734 00:42:20,840 --> 00:42:22,920 Speaker 1: sexy it's got a five in front of it. I'm like, 735 00:42:23,040 --> 00:42:24,960 Speaker 1: good if you if you go below five, then you're 736 00:42:25,080 --> 00:42:28,319 Speaker 1: you're in a four right, So it's just psychological. But 737 00:42:28,480 --> 00:42:30,960 Speaker 1: as we know, psychology drives a lot of the market. 738 00:42:31,280 --> 00:42:34,640 Speaker 1: So the bottom line here, guys is if you're bullish oil, 739 00:42:35,040 --> 00:42:38,520 Speaker 1: this is your do or die moment. We are now 740 00:42:38,680 --> 00:42:42,920 Speaker 1: playing in a significant area of technical sport support. In 741 00:42:42,960 --> 00:42:47,200 Speaker 1: the spot I mixed market, that support is forty two 742 00:42:48,200 --> 00:42:50,759 Speaker 1: thirty two. As I look at my Bloomberg, we're right 743 00:42:50,800 --> 00:42:54,960 Speaker 1: at forty. So we are well now into that range. 744 00:42:55,440 --> 00:42:58,799 Speaker 1: That range if you're bullish has to hold. In the 745 00:42:58,840 --> 00:43:01,360 Speaker 1: Brent market, in the spy Brent market, that number is 746 00:43:01,560 --> 00:43:07,160 Speaker 1: fifty seven three, So dipping below fifty dollars, we are 747 00:43:07,280 --> 00:43:10,960 Speaker 1: once again now in that key area of technical support. 748 00:43:11,280 --> 00:43:14,640 Speaker 1: If you cannot hold that support, and keep in mind, 749 00:43:14,800 --> 00:43:17,680 Speaker 1: if you can't hold that support now when demand has 750 00:43:17,760 --> 00:43:20,600 Speaker 1: never been stronger, then you've got a real issue. Because 751 00:43:20,680 --> 00:43:23,800 Speaker 1: if you break the bottom of that range two and 752 00:43:23,840 --> 00:43:30,000 Speaker 1: the name XO on the on the Brent market, if 753 00:43:30,000 --> 00:43:32,360 Speaker 1: you can't hold that when demand stronger, then you have 754 00:43:32,480 --> 00:43:35,520 Speaker 1: real issues. And your biggest threat now is you're gonna 755 00:43:35,560 --> 00:43:39,480 Speaker 1: embolden the bears to jump further into this market. And 756 00:43:39,520 --> 00:43:42,640 Speaker 1: then heck, if you think fifty is a sexy number 757 00:43:42,640 --> 00:43:45,320 Speaker 1: and BRNT wait till we start talking about forty for 758 00:43:45,440 --> 00:43:47,960 Speaker 1: no mix w T I. So it is do or 759 00:43:48,000 --> 00:43:50,200 Speaker 1: die now for oil bowls. See what do we learn 760 00:43:50,280 --> 00:43:52,200 Speaker 1: yesterday from the Department of Energy when you got that 761 00:43:52,200 --> 00:43:56,280 Speaker 1: that report from them? What do we learned? Yep, we've 762 00:43:56,400 --> 00:43:58,719 Speaker 1: learned and and keep in mind, I want I want 763 00:43:58,719 --> 00:44:01,680 Speaker 1: to really stress this to listeners. You can't look at 764 00:44:01,719 --> 00:44:04,799 Speaker 1: these d OE reports in a one off It was 765 00:44:04,920 --> 00:44:09,120 Speaker 1: just one week. It's impossible to capture the entire complex 766 00:44:09,200 --> 00:44:11,279 Speaker 1: within one week's worth of data. So you look at 767 00:44:11,280 --> 00:44:14,040 Speaker 1: the trends, and what we saw yesterday was just the 768 00:44:14,120 --> 00:44:17,520 Speaker 1: continuation of the trend. And that trend is you cannot 769 00:44:17,560 --> 00:44:20,239 Speaker 1: swing a cat in the United States without hitting a 770 00:44:20,280 --> 00:44:27,840 Speaker 1: barrel of crude oil. So what we saw absolutely And 771 00:44:27,880 --> 00:44:31,400 Speaker 1: so what we've learned, guys, is that since OPEX announcement, 772 00:44:31,600 --> 00:44:34,160 Speaker 1: and the bulls want to keep their head in the sand, 773 00:44:34,320 --> 00:44:37,600 Speaker 1: they don't want to address this issue. They keep on ignoring. 774 00:44:37,640 --> 00:44:40,879 Speaker 1: They all want to focus on OPEC, they don't want 775 00:44:40,920 --> 00:44:46,600 Speaker 1: to focus on North American demand. And since that announcement, 776 00:44:46,640 --> 00:44:51,040 Speaker 1: BIOPEC back in November, US producers have already put six 777 00:44:51,120 --> 00:44:54,360 Speaker 1: hundred thousand barrels of oil back into the market. And 778 00:44:54,400 --> 00:44:56,840 Speaker 1: if you believe the e I A forecast by the 779 00:44:56,920 --> 00:45:00,000 Speaker 1: end of this year, don't add another two hundred thousand 780 00:45:00,040 --> 00:45:02,279 Speaker 1: arrows of oil to the market. And so let's keep 781 00:45:02,280 --> 00:45:04,319 Speaker 1: this in mind, because when we look at the February 782 00:45:04,520 --> 00:45:08,080 Speaker 1: export numbers of US crud all they surged to a 783 00:45:08,160 --> 00:45:11,239 Speaker 1: record of one point one million barrels a day. More 784 00:45:11,320 --> 00:45:15,040 Speaker 1: than half of that oil went right into Saudi Arabia 785 00:45:15,120 --> 00:45:19,319 Speaker 1: Irand's backyard, that is to say, to Asian refiners. So 786 00:45:19,400 --> 00:45:21,800 Speaker 1: when we look at the export numbers in February, guys, 787 00:45:22,360 --> 00:45:27,360 Speaker 1: Chinese buying of US crude all jumped three thousand barrels 788 00:45:27,400 --> 00:45:33,040 Speaker 1: a day, while Chinese imports of Saudi Arabian crude oil Steve, 789 00:45:33,080 --> 00:45:34,560 Speaker 1: We're gonna have you back. We got to go out 790 00:45:34,600 --> 00:45:39,160 Speaker 1: and find out barrel oil standing something like that. Stephen 791 00:45:39,280 --> 00:45:51,440 Speaker 1: Short with our cat report this morning. Thanks for listening 792 00:45:51,480 --> 00:45:56,200 Speaker 1: to the Bloomberg Saveillas podcast. Subscribe and listen to interviews 793 00:45:56,200 --> 00:46:01,320 Speaker 1: on Apple Podcasts, SoundCloud, or whichever punch has platform you prefer. 794 00:46:01,840 --> 00:46:04,920 Speaker 1: I'm on Twitter at Tom Keene, David Gura is at 795 00:46:05,040 --> 00:46:09,879 Speaker 1: David Gura. Before the podcast, you can always catch us worldwide. 796 00:46:10,080 --> 00:46:24,200 Speaker 1: I'm Bloomberg Radio, brought you by Bank of America. Mary Lynch. 797 00:46:24,320 --> 00:46:28,560 Speaker 1: Dedicated to bringing our clients insights and solutions to meet 798 00:46:28,600 --> 00:46:32,080 Speaker 1: the challenges of a transforming world. That's the power of 799 00:46:32,120 --> 00:46:37,240 Speaker 1: global connections. Mary Lynch, Pierce, Feeder and Smith Incorporated Member 800 00:46:37,840 --> 00:46:38,480 Speaker 1: s I p C