WEBVTT - We Will Get a Different Fed During Next Seven Years, El-Erian Says 0:00:00.240 --> 0:00:04.040 Runch you by Bank of America Mary Lynch. With virtual reality, 0:00:04.320 --> 0:00:09.719 virtually everything will change. Discover opportunities in a transforming world 0:00:10.119 --> 0:00:14.440 be of a, mL dot Com, slash VR, Mary Lynch, 0:00:14.520 --> 0:00:29.240 Pierce Fenner, and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast. 0:00:29.280 --> 0:00:32.760 I'm Tom Keene with David Gura. Daily we bring you 0:00:32.840 --> 0:00:37.640 insight from the best of economics, finance, investment, and international relations. 0:00:38.080 --> 0:00:43.640 Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 0:00:43.640 --> 0:00:50.520 and of course on the Bloomberg. Welcome Morning on Friday, 0:00:50.520 --> 0:00:52.640 the twenty one of July. Happy Friday, everybody. This is 0:00:52.640 --> 0:00:55.600 Bloomberg Surveillance on Bloomberg Radio. David Garrow with Tom Keene 0:00:55.600 --> 0:00:57.440 in New York, joining US now in our Bloomberg eleven 0:00:57.440 --> 0:00:59.120 three year studios here in New York as Chris Ferroni 0:00:59.200 --> 0:01:00.840 is the head of Technical now US as its fatiguous 0:01:00.840 --> 0:01:03.000 Research partners, and it's great to see. I want to 0:01:03.000 --> 0:01:05.720 start broad if I could hear talk about the markets. 0:01:05.720 --> 0:01:07.280 If I could. On Monday, you wrote it's difficult to 0:01:07.280 --> 0:01:10.200 get negative with all the major induscries at new highs. 0:01:10.280 --> 0:01:13.120 Let's start just with with your perspective on Uh, the 0:01:13.120 --> 0:01:14.800 induscries here in the U S and globally, I know 0:01:14.840 --> 0:01:16.880 you look at them all an aggregant. Yeah, exactly. When 0:01:16.920 --> 0:01:20.319 you look at when the big top formations typically take shape, 0:01:20.400 --> 0:01:23.800 it's when participation has gotten very very narrow, not when 0:01:23.840 --> 0:01:25.840 all the groups and all the industries and all the 0:01:25.880 --> 0:01:27.800 sectors are making new highs. I mean, just think about 0:01:27.800 --> 0:01:30.360 the last week or so, We've had everything from the 0:01:30.440 --> 0:01:33.679 Russell two thousand, to the SMP to the equal weighted SMP, 0:01:33.840 --> 0:01:37.320 the Value Line Index, most global induscries at or near 0:01:37.360 --> 0:01:41.000 new highs. That is a confirmed backdrop where we're not 0:01:41.120 --> 0:01:45.119 seeing the narrowness that typically accompanies a bigger problem. So 0:01:45.360 --> 0:01:48.120 I recognize where we are here in the calendar. I 0:01:48.200 --> 0:01:52.400 recognize the next twelve weeks are often the toughest stretch 0:01:52.440 --> 0:01:55.440 of the year. But we have to make a differentiation 0:01:55.560 --> 0:01:58.680 between a pause or a consolidation and a big top 0:01:58.720 --> 0:02:00.960 and we just do not think on the verge of 0:02:01.000 --> 0:02:03.000 a big problem here. You talk a bit about that, 0:02:03.000 --> 0:02:05.400 that calendar you mentioned it it is a short term risk. 0:02:05.440 --> 0:02:07.640 Why is that the case historically? Why is that? Why 0:02:07.720 --> 0:02:10.440 is August in September so problematic? You know, I think 0:02:10.520 --> 0:02:12.040 you come up with a lot of reasons. It's kind 0:02:12.040 --> 0:02:13.799 of a lull in the calendar as you get through 0:02:13.880 --> 0:02:17.520 July earnings that tends to mark the top and seasonality 0:02:18.160 --> 0:02:22.280 at least until late September early October. But what's important, 0:02:22.320 --> 0:02:25.080 what we've learned in our work is how the trend 0:02:25.080 --> 0:02:29.000 of the market can really influence seasonality, and when you're 0:02:29.080 --> 0:02:34.160 in an uptrend, the weakness in September and August is 0:02:34.240 --> 0:02:37.480 often less pervasive than when you're in a downtrend. Those 0:02:37.560 --> 0:02:40.799 months are worse when you're already in a bear market 0:02:40.919 --> 0:02:43.200 or in a downtrend. That's obviously not the case at 0:02:43.200 --> 0:02:44.960 the moment. Tom and I've been talking a lot about 0:02:45.040 --> 0:02:47.120 of volatility here over these last few weeks and needed 0:02:47.160 --> 0:02:49.720 a chart of corporate spread against the cbo E. Let 0:02:49.720 --> 0:02:53.040 me let me talk Chris. Never in girl's life did 0:02:53.120 --> 0:02:56.760 he think you'd be talking? No, I didn't, or did 0:02:56.800 --> 0:03:01.079 I You've got you've got corporate versus the CBO VIX. 0:03:01.120 --> 0:03:02.280 What do you what do you get when you chart 0:03:02.320 --> 0:03:04.440 those two against one another? I think you know, we 0:03:04.480 --> 0:03:07.400 hear a lot of how extraordinary volatility here is being 0:03:07.440 --> 0:03:11.400 as low as we've seen over recent months. When you 0:03:11.440 --> 0:03:13.639 look at it as a function of credit, and that's 0:03:13.639 --> 0:03:16.360 how we think about volatility. When credit conditions are stable, 0:03:16.440 --> 0:03:18.480 volatility should be low. So when we look at the 0:03:18.520 --> 0:03:22.360 relationship and when we regress b double a corporate spreads 0:03:22.800 --> 0:03:25.000 versus the vix, the vix is actually right where it 0:03:25.000 --> 0:03:27.240 should be. It's on that line of best fit. The 0:03:27.320 --> 0:03:30.480 VIX should be low when credit conditions are behaved, and 0:03:30.520 --> 0:03:33.080 that remains the case when you when you look at 0:03:32.800 --> 0:03:35.880 the credit markets generally, is there stress? What do you 0:03:35.920 --> 0:03:38.440 what do you see? Uh, we certainly don't see stress. 0:03:38.560 --> 0:03:41.120 I think the more important question as we kind of 0:03:41.120 --> 0:03:43.240 moved through the back after the year, is do we 0:03:43.280 --> 0:03:46.680 see signs of complacency. It's possible that may be starting 0:03:46.680 --> 0:03:50.600 to build here a little bit. Um we've certainly, you know, 0:03:50.640 --> 0:03:52.920 we watched stuff like put calls to get a cent 0:03:53.120 --> 0:03:55.840 the options market. Um, I would be a little bit 0:03:55.880 --> 0:04:00.440 reluctant saying that the environment is terribly complacent just yet, 0:04:00.480 --> 0:04:03.080 but will certainly watch that. I think the bigger messages 0:04:03.640 --> 0:04:07.040 if this market is going to meaningfully deteriorate, my guess 0:04:07.160 --> 0:04:10.200 is that credit would weaken as well. What's the bet 0:04:10.240 --> 0:04:12.760 of institutions? Everybody? You know, on the modern day loves 0:04:12.800 --> 0:04:15.560 to talk about hedge funds. What's long only by side 0:04:15.560 --> 0:04:18.840 doing boring mutual funds? Are they two percent in cash 0:04:19.279 --> 0:04:22.360 or they twelve percent in cash? Well? I think this 0:04:22.440 --> 0:04:24.240 is where some of the sentiment data can really be 0:04:24.279 --> 0:04:27.000 helpful in answering that question. And you know, there's two 0:04:27.000 --> 0:04:29.320 types of sentiment data. There's data that measures what people 0:04:29.360 --> 0:04:32.280 say they're doing surveys, and then there's data that measures 0:04:32.279 --> 0:04:34.719 what people are actually doing your money, And we prefer 0:04:34.760 --> 0:04:36.120 to look at the latter. We want to know what 0:04:36.120 --> 0:04:39.440 people are actually doing. I would describe the street as 0:04:40.080 --> 0:04:44.160 modestly net long. I don't think they are as aggressively 0:04:44.279 --> 0:04:47.159 long as they may like to be. Now, whether it's 0:04:47.200 --> 0:04:50.000 concerns out of Washington or concerns about earnings that maybe 0:04:50.120 --> 0:04:53.240 inhibiting that, But I would not say we're aggressively long. 0:04:53.960 --> 0:04:55.960 Look at a chart. Here, they're flipping through the chart 0:04:55.960 --> 0:05:00.320 book Tom in real time, looking at get On, saying 0:05:00.360 --> 0:05:02.800 what this is. We've got a liberal arts clown Cornell 0:05:03.279 --> 0:05:07.000 in a political economy guy from Villanova, and we're flipping 0:05:07.000 --> 0:05:11.000 through a chart book. I'm looking at your chart of 0:05:11.040 --> 0:05:14.960 t j X. Here, he sputter h tread break fade rallies. 0:05:15.120 --> 0:05:17.479 We've heard so many good things about t J t 0:05:17.600 --> 0:05:20.280 j X, t j X in contrast to other retailers. 0:05:20.640 --> 0:05:22.240 What are you seeing here when you compare these childings? 0:05:22.240 --> 0:05:24.160 And that's kind of what worries me about the chart 0:05:24.520 --> 0:05:26.599 about the stock is that it's been a place to 0:05:26.680 --> 0:05:30.200 hide for so many investors in a really bad sector 0:05:30.640 --> 0:05:33.440 for now so many years. And um, I have just 0:05:33.560 --> 0:05:36.080 never seen a bear market in a group where ultimately 0:05:36.120 --> 0:05:38.400 every stock doesn't go down and ultimately they hit the 0:05:38.440 --> 0:05:41.080 best ones last, and they fit all the bad ones, 0:05:41.160 --> 0:05:43.080 so they're onto the best one. And I think t 0:05:43.200 --> 0:05:46.600 j X ross Shore's h is an example of names 0:05:46.600 --> 0:05:48.360 that have been good that we need to be more 0:05:48.360 --> 0:05:52.320 careful with her. How do you technically synthesize the raging 0:05:52.400 --> 0:05:57.080 debate of bricks and mortar retail with Amazon? It makes 0:05:57.120 --> 0:05:59.960 every It's on the Bloomberg Business Week this week, folks, 0:06:00.480 --> 0:06:05.600 fabulous analysis of the big big tech companies. But technically, 0:06:05.640 --> 0:06:07.880 what do you see when somebody says bricks and mortar 0:06:07.960 --> 0:06:11.880 and Amazon, Well, we know where the weakness has certainly been. 0:06:12.000 --> 0:06:13.680 And you know, we could have said a year ago 0:06:13.920 --> 0:06:16.320 or two years ago that that relationship was so stretched 0:06:16.320 --> 0:06:19.280 with strength from Amazon and weakness from the retail names. 0:06:19.320 --> 0:06:23.440 My sense is that the traditional brick and mortar stocks, 0:06:23.640 --> 0:06:28.719 the consensus uh the view there has now gotten so negative. Well, 0:06:28.760 --> 0:06:31.680 we may want to start fishing around for some opportunities. Now. 0:06:31.839 --> 0:06:34.679 What strikes me is some of these probably will be zeros, 0:06:34.760 --> 0:06:38.560 others will not. I wonder if central bank policy, frankly, 0:06:38.600 --> 0:06:40.839 over the last seven or eight years, has probably prolonged 0:06:40.960 --> 0:06:45.480 this when we have lost some of these companies already. Exactly, 0:06:45.760 --> 0:06:48.800 David Gering, time me, David. I'm over here calculating how 0:06:48.880 --> 0:06:52.200 much more expensive and Martini is at Hemingway's bar in Paris. 0:06:52.760 --> 0:06:55.880 Since the first round of the elections, the dollars gotten weaker. 0:06:56.760 --> 0:06:59.760 It's gone from thirty five dollars to thirty seven dollars. 0:07:00.320 --> 0:07:07.680 Nine cents. Have you that's a week dollar. That's a 0:07:07.680 --> 0:07:12.239 week dollar. Let's have you? Do you have a dollar 0:07:12.360 --> 0:07:15.320 chart to save me? I do have all the calculation 0:07:15.400 --> 0:07:17.360 myself to save you. And I think we need to 0:07:17.400 --> 0:07:20.880 remember something. The dollar has been weakening here for fifteen months. 0:07:21.400 --> 0:07:23.800 This is not a new story. And if anything, the 0:07:23.800 --> 0:07:27.720 dollars responding precisely as it tends to respond in periods 0:07:27.800 --> 0:07:30.280 when the FED is raising rates. In five of the 0:07:30.360 --> 0:07:33.200 last six cycles where the FED has raised rates, we 0:07:33.280 --> 0:07:35.840 have seen the dollar go down, not up. I know 0:07:35.920 --> 0:07:38.880 that sounds counterintuitive, but that that is typically have a 0:07:38.920 --> 0:07:42.240 dollar reacts to a rising rate, uh environment, And I 0:07:42.280 --> 0:07:45.160 would just say one point further, looking at the d 0:07:45.360 --> 0:07:48.280 X why, I actually think it's a very poorly constructed 0:07:48.280 --> 0:07:52.120 in dept. It's about se euros. We prefer to look 0:07:52.160 --> 0:07:54.600 at an equally weighted dollar index. We put about twenty 0:07:54.600 --> 0:07:59.200 different pairs in there, and that deteriorated long before, uh say, 0:07:59.240 --> 0:08:02.080 you're a strengthened. This really important point. And I would 0:08:02.080 --> 0:08:05.160 point out, David gurl that the Bloomberg d X wise 0:08:05.240 --> 0:08:09.280 a lot better, different blend precisely much much just just equal. 0:08:09.280 --> 0:08:11.880 Weay to just like Chris talks about, but the d 0:08:12.040 --> 0:08:15.240 X wise would people quote but often pros use a 0:08:15.240 --> 0:08:17.880 different index, David, Chris, let me ask you about golden 0:08:17.920 --> 0:08:20.880 What you're seeing there is this a twelve fifty level 0:08:20.880 --> 0:08:22.480 when you look at the gold chart. What stands out 0:08:22.480 --> 0:08:24.440 to you, well, what stands out to me is what 0:08:24.480 --> 0:08:26.760 hasn't happened. We've had a week dollar and gold can't 0:08:26.760 --> 0:08:29.960 seem to respond, um. I think the most interesting things 0:08:29.960 --> 0:08:32.800 in our business are when something doesn't go up when 0:08:32.800 --> 0:08:35.520 it should, and this is an example of where gold 0:08:35.520 --> 0:08:38.680 probably could have rallied as the dollar has weakened, and 0:08:38.760 --> 0:08:42.000 its inability to do so really leaves me questioning the 0:08:42.000 --> 0:08:45.800 trend I think is ultimately a tough level. I'd say 0:08:45.800 --> 0:08:48.160 the same thing on the silver chart. I mean, these 0:08:48.160 --> 0:08:52.000 are uh, really two things that are in different trends 0:08:52.040 --> 0:08:54.880 at best, and I would be inclined to fade rallies 0:08:54.880 --> 0:08:57.440 in that environment with both gold and silver and copper 0:08:57.440 --> 0:08:59.640 continuing to break out. Yeah, copper is better here, I 0:08:59.640 --> 0:09:01.480 think personal stand out and we like to look at 0:09:01.480 --> 0:09:04.920 the ratio between copper and gold um, and that ratio 0:09:05.000 --> 0:09:08.920 has firmed here as well. Now interestingly, when coppers up, 0:09:08.920 --> 0:09:11.920 when iron ore is up, when they're outperforming gold, you 0:09:12.000 --> 0:09:14.680 tend to see rates go up in that environment as well. 0:09:14.720 --> 0:09:17.000 I know we're kind of stuck in this twenty to 0:09:17.280 --> 0:09:20.120 thirty range, but I wouldn't know that. The street is 0:09:20.400 --> 0:09:22.959 very very long bonds. I think there's an element of 0:09:23.000 --> 0:09:25.920 complacency there, whereas if something goes right, you can get 0:09:25.920 --> 0:09:28.679 a pretty quick move wire in yields that's the second 0:09:29.000 --> 0:09:32.360 time you've mentioned that today, and is you and I 0:09:32.440 --> 0:09:37.280 know bonds are generally out front of shocks than equities. 0:09:37.800 --> 0:09:40.560 So if I'm going to play bonds, which bonds do 0:09:40.760 --> 0:09:44.320 I play? If I'm going to get a reversal, well, 0:09:44.360 --> 0:09:47.240 I think where you've seen positioning get very crowded is 0:09:47.400 --> 0:09:52.040 more towards the longer end uh tens and thirties, where 0:09:52.120 --> 0:09:55.280 uh that's where I think the trade is most crowded. 0:09:55.800 --> 0:10:00.880 UM watch very closely this two level on yield. I 0:10:00.960 --> 0:10:03.920 think if we hold that and we get some surprise, 0:10:04.040 --> 0:10:06.319 you could see that squeeze play at very quickly. I 0:10:06.360 --> 0:10:09.520 would point out that someone Engross out on the West 0:10:09.559 --> 0:10:13.280 Coast agrees with Mr Bruins analysis bills out at too 0:10:13.400 --> 0:10:16.640 forty is being much more key and before that's a 0:10:16.640 --> 0:10:19.920 fair amount of noise as well. Christopher Ron, thank you 0:10:20.000 --> 0:10:24.720 so much greatly, really really value add not only in TV, 0:10:25.160 --> 0:10:27.280 and we'll send the charts out here for radio as well. 0:10:27.320 --> 0:10:30.959 As we get through the morning, you're gonna, you know, 0:10:31.120 --> 0:10:33.720 do our planning for them. Looking at this bar Hemingway 0:10:33.760 --> 0:10:35.960 in Paris, it says he drank fifty one dry martinis 0:10:35.960 --> 0:10:39.760 in a row. I didn't do that. He did that 0:10:39.760 --> 0:10:41.800 that you know did. It's it's you know, and it's 0:10:41.840 --> 0:10:43.400 one of one of the great things. This is the 0:10:43.480 --> 0:10:46.320 Riz Carlton Folks in Paris. And what's great about it 0:10:46.360 --> 0:10:48.679 is they just redid it and they didn't screw it up. 0:10:49.400 --> 0:10:53.839 So many famous hotels and all that when they redo them, 0:10:53.880 --> 0:10:57.160 they're never the same. And we went and its way 0:10:57.160 --> 0:10:59.480 in the back tuck to the corner. It's absolutely packed 0:10:59.559 --> 0:11:02.320 from the mom what they opened the door, it's packed, 0:11:02.400 --> 0:11:07.319 and it's got all of the Hemingway memorabilia. And it 0:11:07.440 --> 0:11:10.600 happens that the bartender takes great pride and you know, 0:11:10.679 --> 0:11:14.520 the squeaky clean glasses and all that. But for anybody 0:11:14.600 --> 0:11:20.160 jetting to Paris, UM, it's an extravagance. It's it's comically expensive, 0:11:20.640 --> 0:11:23.280 but I got to admit it's worth it, just for one. 0:11:23.760 --> 0:11:39.800 We'll go there sometimetime. We are so privileged here with 0:11:39.920 --> 0:11:44.080 the quality of our guests. UM. And then at I'm 0:11:44.120 --> 0:11:47.000 and uh, Nicholas Salman's give me, I'll get it right. 0:11:47.080 --> 0:11:50.920 Nicholas Salman with earlier and right now of equal quality. 0:11:51.000 --> 0:11:54.839 Jeffrey Sprague with US with Vertical Research Partners, legendary in 0:11:54.880 --> 0:11:58.400 Wall Street looking at industrials, any number of companies that 0:11:58.520 --> 0:12:02.720 particularly notice work could Cohen a number of years ago, Jeff, 0:12:02.760 --> 0:12:06.160 you've got a very on Jeff Sprague word in your 0:12:06.200 --> 0:12:10.920 research report. Please define for Mr. M L listening, what 0:12:11.040 --> 0:12:15.439 are disk synergies? Well, dis synergy is in a good 0:12:15.440 --> 0:12:19.079 morning Tom would really be the you know, the inverse 0:12:19.160 --> 0:12:21.319 of what we think about when we put companies together, 0:12:21.520 --> 0:12:25.040 and and it's you know, enjoy synergies from maybe removing 0:12:25.080 --> 0:12:28.880 redundancies and corporate costs or other things. And so I 0:12:28.960 --> 0:12:31.679 was addressing to the idea of dis synergies along the lines. 0:12:31.720 --> 0:12:36.120 If you really pulled ge apart entirely, you start getting 0:12:36.120 --> 0:12:38.920 a lot of leakage in terms of tax and the 0:12:39.000 --> 0:12:41.960 need to put in place re done to corporate costs. Now, 0:12:42.280 --> 0:12:45.120 obviously companies do spinoffs and things all the time, so 0:12:45.200 --> 0:12:48.320 these are things that would be overcome. The point I 0:12:48.400 --> 0:12:50.600 was trying to make though, is that to do some 0:12:50.720 --> 0:12:53.600 kind of wholesale break up into many pieces I think 0:12:53.679 --> 0:12:57.680 becomes very inefficient. Is there a risk here, I access earlier, Nick, 0:12:57.840 --> 0:13:01.680 Is there a risk here? Of finance ancial engineering? They 0:13:01.679 --> 0:13:04.520 bring out their report, they're all cash flow this return 0:13:04.559 --> 0:13:08.439 of shares, return to cash share buy back. That is 0:13:08.480 --> 0:13:11.440 there a risk that they're doing in IBM redux of 0:13:12.040 --> 0:13:18.240 financial engineering substituting for firm excellence. Well, that's part of 0:13:18.280 --> 0:13:20.840 what's gotten used to the you know, the concerns that 0:13:20.920 --> 0:13:22.400 we have. I think when I was on your show 0:13:22.440 --> 0:13:24.680 a few weeks ago, I talked about the weakness and 0:13:24.720 --> 0:13:27.679 the cash flow, and so we've we've had this disconnect 0:13:27.960 --> 0:13:31.679 materialized over the last couple of years where accounting earnings 0:13:31.720 --> 0:13:35.720 are better than the actual cash for the company. And uh, 0:13:35.760 --> 0:13:38.960 you know, I think that's still a very clear investor concern. 0:13:39.080 --> 0:13:42.160 And so you know here today the cash flow is 0:13:42.240 --> 0:13:45.120 better in the second quarter, but still worse than expected 0:13:45.160 --> 0:13:47.040 for the half. So they're you know, they're in a 0:13:47.040 --> 0:13:49.280 bit of a hole on cash flow. They maintain their 0:13:49.280 --> 0:13:51.960 guidance for the year on cash flow, but they've got 0:13:51.960 --> 0:13:54.400 a pretty big hill to climb now to to get 0:13:54.400 --> 0:13:57.000 to that target, and I think investors are going to 0:13:57.240 --> 0:13:59.520 be rightly concerned that there is some risk that they 0:13:59.559 --> 0:14:02.400 don't get there. Jeffson, certainly, June, we've learned a bit 0:14:02.400 --> 0:14:04.600 about John Flambery, who's coming in his CEO. You know, 0:14:04.640 --> 0:14:06.920 he likes the Almond Brothers. He wishes he knew how 0:14:06.920 --> 0:14:09.439 to play the blues guitar. He said that to employees 0:14:09.480 --> 0:14:11.360 in a in a Facebook life, what do we know 0:14:11.360 --> 0:14:13.520 about how he's going to run this this company? You 0:14:13.559 --> 0:14:15.160 have that merger of the oil and gas division and 0:14:15.200 --> 0:14:17.640 Baker Hughes now completed. What are you what are you 0:14:17.760 --> 0:14:20.040 looking for from this new CEO when he takes over 0:14:20.040 --> 0:14:23.600 in August. First, I think we're going to see a 0:14:24.320 --> 0:14:27.000 you know, obviously there's gonna be a reevaluation in the portfolio, 0:14:27.040 --> 0:14:30.560 and I do think things will get done with the portfolio, 0:14:30.600 --> 0:14:33.040 and notwithstanding by the synergy common I think there will 0:14:33.080 --> 0:14:35.480 be a mover too, perhaps with the oil and gas, 0:14:35.480 --> 0:14:38.600 perhaps with some other businesses. But I think he's really 0:14:38.640 --> 0:14:43.120 gonna dig in and buckle down on cost execution. You know, 0:14:43.200 --> 0:14:46.240 this is something that the company obviously as has done, 0:14:46.280 --> 0:14:48.440 but I think there needs to be a higher sense 0:14:48.480 --> 0:14:51.880 of urgency. I think it's notable that when he took 0:14:51.880 --> 0:14:55.840 over the healthcare business, he ended up replacing of his 0:14:55.960 --> 0:14:59.280 direct reports um and he tied this to the fact 0:14:59.320 --> 0:15:02.160 that people just weren't, you know, moving as quickly as 0:15:02.160 --> 0:15:05.400 he wanted or their behaviors really aren't what he was 0:15:05.440 --> 0:15:08.480 looking for. So I think it's going to be clear. 0:15:08.480 --> 0:15:10.640 There's a new sheriff in town. Obviously this is a 0:15:10.840 --> 0:15:13.240 you know, a very big ship to turn. But I 0:15:13.280 --> 0:15:15.360 think there's gonna be a you know, a very blunt 0:15:15.440 --> 0:15:18.280 message that the company needs to, you know, buckle down 0:15:18.320 --> 0:15:22.240 here and drive performance. Is there many billion dollar backlog 0:15:22.280 --> 0:15:26.440 a thing that's not going to go away anytime soon? Well, 0:15:26.440 --> 0:15:28.960 you have a very good backlog. I think the the 0:15:29.200 --> 0:15:31.840 question that we really have, like when you look at 0:15:31.880 --> 0:15:34.880 some of these margins is really uh, you know the 0:15:35.280 --> 0:15:39.880 margins in backlog. You know what was done to you know, 0:15:40.040 --> 0:15:44.720 capture those orders, right, Uh, you know, to to be extreme, right, 0:15:44.760 --> 0:15:47.080 you could if you want to give stuff away, it's 0:15:47.080 --> 0:15:49.080 easy to get in order. And I'm not suggesting they've 0:15:49.120 --> 0:15:51.760 given stuff away, but I think there's you know, when 0:15:51.760 --> 0:15:53.760 you look at the margin pressure that there's been and 0:15:53.960 --> 0:15:56.560 kind of a cash flow disconnect there, there is some 0:15:56.720 --> 0:15:59.360 concern that well, although the backlog is big and a 0:15:59.440 --> 0:16:03.560 nominal value sense, that the profitability invented in it perhaps 0:16:03.680 --> 0:16:05.680 is not that high. We gotta get you back. We 0:16:05.760 --> 0:16:08.080 got lots to talk about. Jeffrey Sprague, thank you so 0:16:08.160 --> 0:16:12.440 much this morning. Vertical Research Partners. Uh really truly legendary 0:16:12.440 --> 0:16:15.400 on General Electric. A lot of different stories here. I 0:16:15.400 --> 0:16:18.960 I hope, folks you heard the distinctive differences there between 0:16:19.040 --> 0:16:22.200 Mr Hayman more optimistic than Mr Sprague. But that's what 0:16:22.360 --> 0:16:31.800 makes for a market. We like that runt you by 0:16:32.080 --> 0:16:36.360 Bank of America Mary Lynch. With virtual reality, virtually everything 0:16:36.400 --> 0:16:41.280 will change, discover opportunities in a transforming world, be of 0:16:41.440 --> 0:16:46.080 a mL dot com, slash VR, Mary Lynch, Pierced Fenner 0:16:46.160 --> 0:16:55.360 and Smith Incorporated. Right now speaking of team coverage, UM 0:16:55.400 --> 0:16:57.680 a gentleman who drives the story for it. And what's 0:16:57.680 --> 0:17:00.080 so great about Tim O'Brien, folks, is he does and 0:17:00.200 --> 0:17:03.840 do like the star turn Trump essay once every four weeks. 0:17:03.840 --> 0:17:06.639 He's really grinding it every day. And there he was 0:17:06.720 --> 0:17:09.960 last night with Anderson Cooper and Mr Tuban grinding it up. 0:17:10.000 --> 0:17:12.720 How come you dress better for Anderson than you do 0:17:12.840 --> 0:17:14.920 for us on radio? What's that? I want to tell 0:17:14.960 --> 0:17:16.920 you have exactly the same clothes on as I did 0:17:17.000 --> 0:17:20.320 last night. That's how it tower. That's disgusting. I don't 0:17:20.320 --> 0:17:22.040 think you want to know that I have not changed 0:17:22.080 --> 0:17:24.200 my word we got next time, I think we should 0:17:24.200 --> 0:17:26.040 get Anderson in a bow tie and that would move 0:17:26.080 --> 0:17:29.280 things forward. Okay, So you know, it's been a fabulous 0:17:29.600 --> 0:17:33.080 forty eight hours for Bloomberg News and driving the story forward. 0:17:33.359 --> 0:17:35.720 And what's great about your work, Tim O'Brien at Bloomberg 0:17:35.800 --> 0:17:40.040 View is you've always gone back to the original Mr Trump. 0:17:40.760 --> 0:17:43.720 Does the last four to eight hours surprise you of 0:17:43.760 --> 0:17:48.440 the president knowing the original Mr Trump? No, it doesn't 0:17:48.480 --> 0:17:50.200 at all. I think this is a guy who under 0:17:50.240 --> 0:17:54.760 pressure lashes out. He's uh. At the end of the day, 0:17:54.800 --> 0:17:58.640 there are two things I think that drive the president's thinking, uh, 0:17:58.800 --> 0:18:03.000 self aggrandizement and self preservation. And I think what you 0:18:03.080 --> 0:18:07.280 have now in the midst of this investigation is pure 0:18:07.400 --> 0:18:11.119 self preservation. And now we know that they're looking at 0:18:11.160 --> 0:18:14.560 trying to pardon as many people in the administration as 0:18:14.560 --> 0:18:18.280 they can. He's, apparently, per the Washington Post, inquired about 0:18:18.640 --> 0:18:23.119 pardoning himself. And I would add our great Bloomberg News 0:18:23.160 --> 0:18:29.440 reporters yesterday broke a very significant director Stephen Dennis this morning. Uh, yeah, 0:18:30.080 --> 0:18:34.840 both and Christian yesterday on the scope of Mueller's investigation 0:18:34.920 --> 0:18:37.239 expanding in a direction, the President said he doesn't want 0:18:37.280 --> 0:18:39.639 to go all of Trump's business deals. Tim, You're right, 0:18:39.640 --> 0:18:42.119 as Mueller certainly knows by now, Trump's business history doesn't 0:18:42.160 --> 0:18:45.040 merely have a closet full of skeletons that has warehouses 0:18:45.600 --> 0:18:47.280 full them. What can you tell us about the bay 0:18:47.359 --> 0:18:50.320 Rock group at Felix Sater and how they might be 0:18:50.359 --> 0:18:52.800 the focus of Mr Mueller's investigation. Well, you know, the 0:18:52.840 --> 0:18:55.400 tricky thing with bay Rock and the compelling thing about 0:18:55.440 --> 0:18:58.199 it is they were development firm two floors beneath the 0:18:58.200 --> 0:19:02.200 Trump organization's own office is in Trump Tower. A principal 0:19:02.240 --> 0:19:05.320 at the firm, Felix Sader had longstanding ties to both 0:19:05.760 --> 0:19:09.880 Russian organized crime groups and American organized crime groups. UH. 0:19:10.080 --> 0:19:13.320 The Trump family, the eldest two children and the president. 0:19:14.000 --> 0:19:16.560 We're in business with bay Rock for several years, from 0:19:16.600 --> 0:19:18.920 about two thousand and three to two thousand and eleven. 0:19:19.240 --> 0:19:24.320 They ultimately built the Trump Soho hotel together. And there's 0:19:24.359 --> 0:19:27.000 an issue around how bay Rock was funded and where 0:19:27.000 --> 0:19:29.320 it's funding came from. A big chunk of its funding 0:19:29.359 --> 0:19:34.679 came from overseas. UH investigators have been concerned that it 0:19:34.800 --> 0:19:40.280 possibly involved money laundering and all in all these relationships, 0:19:40.280 --> 0:19:42.440 the issue is whether or not there were representatives of 0:19:42.480 --> 0:19:45.400 the Kremlin or other foreign interests using these guys your 0:19:45.520 --> 0:19:48.600 classic Trump Nation. You have City Group in the index. 0:19:49.119 --> 0:19:52.040 You've got Chase Manhattan in the index. You don't have 0:19:52.119 --> 0:19:56.040 Deutsche Bank in the index. Is Deutsche Bank interesting here? 0:19:56.280 --> 0:19:59.440 Deutsche Bank is very interesting. They post date my book 0:19:59.520 --> 0:20:04.439 basic because I published the book in two thousand and five, 0:20:04.800 --> 0:20:08.800 and Trump's relationship with Deutsche Bank as a major Lennard 0:20:08.800 --> 0:20:13.080 had just begune around that time that they financed his 0:20:13.080 --> 0:20:16.960 his hotel and condominium project in Chicago and have since 0:20:17.000 --> 0:20:20.200 then become a major I think presence in his financial life. Tim, 0:20:20.200 --> 0:20:21.919 what are you gonna be listening for? Next week? Two 0:20:22.000 --> 0:20:24.480 days of of big hearings? Of course, Jared Kushner testifying 0:20:24.480 --> 0:20:26.680 and closed session before the Intelligence committed them, before the 0:20:26.720 --> 0:20:29.960 Justice Committee. We've gone Paul Manaford and Donald Trump Junior? 0:20:30.000 --> 0:20:31.680 What are you gonna be listening for? I suppose on 0:20:31.720 --> 0:20:34.040 Wednesday you're gonna be listening for whatch on on Monday 0:20:34.040 --> 0:20:37.440 when those doors are closed. Well, I think everyone wants 0:20:37.440 --> 0:20:39.520 to know if other quid pro quos in any of 0:20:39.600 --> 0:20:41.600 these relationships, just to cut through all the noise, I 0:20:41.600 --> 0:20:44.840 think there's been a lot of conspiracy theorizing about Trump 0:20:44.880 --> 0:20:47.560 and Russia. I think there's been a lot of misguided 0:20:47.600 --> 0:20:50.480 focus on certain Russian related topics. At the end of 0:20:50.520 --> 0:20:52.320 the day, I think what people have to care about 0:20:52.840 --> 0:20:56.840 was issues like sanctions on Russia, where those traded off 0:20:57.280 --> 0:21:00.720 for financial favors in any way to ump Cushing or 0:21:00.720 --> 0:21:03.719 anyone else in the administration. Tim m'brian, thank you very much. 0:21:03.720 --> 0:21:08.000 Appreciated Timbrian graduations also executive editor of course if Bloomberg 0:21:08.040 --> 0:21:11.960 View and bloombergafly, I mean it's been reporting for Bloomberg 0:21:11.960 --> 0:21:14.720 has been extraordinary. What are you guys gonna do Monday? 0:21:15.800 --> 0:21:17.600 I think Monday, we're just going to get back at it, 0:21:17.640 --> 0:21:20.879 to get back at it. In years, the story here 0:21:21.040 --> 0:21:24.560 is the grind of reporting, getting back at it every day, 0:21:24.680 --> 0:21:27.280 like three thousand people or whatever working on this story. 0:21:27.680 --> 0:21:30.359 It's it's it's a good show. Tim O'Brien, thank you 0:21:30.400 --> 0:21:32.960 so much. Bloomberg View and he publishes today. I'll get 0:21:33.000 --> 0:21:47.000 that out on social media here in a moment right 0:21:47.080 --> 0:21:49.800 for Bloomberg View rights all over the street in worldwide 0:21:49.840 --> 0:21:54.399 with Alian's Muhammad Larian, Dr Larry and my read of 0:21:54.440 --> 0:21:57.600 the summer is Olivier Blanchard at a conference in Naples, 0:21:58.080 --> 0:22:01.520 who went right back to blench Chard Summers went back 0:22:01.560 --> 0:22:05.439 to Blanchard Fisher and really dug into the oddities of 0:22:05.520 --> 0:22:09.960