1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:13,960 --> 00:00:17,560 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,640 --> 00:00:27,880 Speaker 1: bloomber dot com, and of course, on the Bloomberg Right Now. 5 00:00:28,240 --> 00:00:31,400 Speaker 1: A delicate conversation when you are a member of the 6 00:00:31,440 --> 00:00:35,680 Speaker 1: Federal Reserve system, as Charles Plosser was at the Philadelphia FED. 7 00:00:36,200 --> 00:00:39,920 Speaker 1: You are delicate even in retirement about the FED. We 8 00:00:40,040 --> 00:00:43,760 Speaker 1: asked Dr Plosser now not to be delicate. Charles Plosser, 9 00:00:44,000 --> 00:00:47,800 Speaker 1: you invented real business cycle theory. Kindling and Prescott got 10 00:00:47,800 --> 00:00:51,559 Speaker 1: the Nobel Prize, but you and Long came up with 11 00:00:51,600 --> 00:00:54,440 Speaker 1: the phrase and came up with the theory. There is 12 00:00:54,520 --> 00:00:58,360 Speaker 1: now a raging debate in your racket over the theoretical 13 00:00:58,480 --> 00:01:02,920 Speaker 1: qualifications of miss Shelton to join the FED. Is a governor? 14 00:01:03,600 --> 00:01:06,720 Speaker 1: Your theory has been criticized. Ben pretty gott a Nobel 15 00:01:06,800 --> 00:01:10,160 Speaker 1: prize out of it with Kindlan and Prescott. Does Judy 16 00:01:10,240 --> 00:01:19,000 Speaker 1: Shelton have a theory? Gee, Tom, I don't know. I 17 00:01:19,040 --> 00:01:23,600 Speaker 1: think obviously she is very popular in some circles, uh, 18 00:01:23,880 --> 00:01:26,640 Speaker 1: not so popular in others. But you know, I have 19 00:01:26,720 --> 00:01:28,840 Speaker 1: to I have to say that. You know, during the 20 00:01:28,840 --> 00:01:33,640 Speaker 1: course of the history, the Board of Governors has had 21 00:01:34,120 --> 00:01:39,160 Speaker 1: many people of many different stripes and perspectives and on 22 00:01:39,280 --> 00:01:44,839 Speaker 1: economics and macro economics. So I think that um uh, 23 00:01:44,880 --> 00:01:47,560 Speaker 1: if you if you think Judy Sheldon is a great 24 00:01:47,600 --> 00:01:50,560 Speaker 1: economist gonna be a great FED governor, then that's fine. 25 00:01:50,600 --> 00:01:53,960 Speaker 1: If you think that's not the case, then my guess 26 00:01:54,040 --> 00:01:58,440 Speaker 1: is she we'll have gros three little impact overall on 27 00:01:58,480 --> 00:02:03,080 Speaker 1: the way policies proceed. So yeah, I think debates not 28 00:02:03,120 --> 00:02:05,600 Speaker 1: a bad thing. So I tend to be a little 29 00:02:05,600 --> 00:02:11,880 Speaker 1: more open minded about about the willingness of the institution 30 00:02:12,000 --> 00:02:17,200 Speaker 1: to ah to respond to these sorts of episodes. So 31 00:02:17,240 --> 00:02:19,799 Speaker 1: I you know, she wouldn't have been my first pick, 32 00:02:20,080 --> 00:02:24,000 Speaker 1: But you know, I'm not sure the consequences are terribly 33 00:02:24,040 --> 00:02:26,600 Speaker 1: serious one way or another. Dr plus are the real 34 00:02:26,639 --> 00:02:30,200 Speaker 1: business cycle theory always is out a theory of exogynous shocks. 35 00:02:30,360 --> 00:02:34,200 Speaker 1: You've been given your exogynous shock with a deficit. What 36 00:02:34,280 --> 00:02:39,560 Speaker 1: will these trillion dollars of deficits due to our financial system? 37 00:02:40,000 --> 00:02:45,040 Speaker 1: And is there a certitude that we will see inflation? Well, 38 00:02:45,080 --> 00:02:48,799 Speaker 1: there's never a certain certain certain certain suit about anything 39 00:02:48,800 --> 00:02:53,160 Speaker 1: in the future. But I do think that we've had 40 00:02:53,160 --> 00:02:55,880 Speaker 1: a very serious shot to the system, probably due to 41 00:02:55,880 --> 00:02:59,200 Speaker 1: the shutdown and the coronavirus UH. And I think that 42 00:02:59,440 --> 00:03:02,000 Speaker 1: the large ets will have their own set of consequences. 43 00:03:02,000 --> 00:03:06,240 Speaker 1: We were already in a situation where UH fiscal policy 44 00:03:06,560 --> 00:03:10,160 Speaker 1: UH that being conducted in this country was not was 45 00:03:10,200 --> 00:03:13,360 Speaker 1: not sustainable, and this is just kind of make matters 46 00:03:13,400 --> 00:03:16,920 Speaker 1: even more challenging. So I think there's a real problem. 47 00:03:17,080 --> 00:03:21,799 Speaker 1: We've got a real problem. I think that ah and 48 00:03:21,960 --> 00:03:24,600 Speaker 1: and my real problem is is not is not just 49 00:03:24,720 --> 00:03:27,200 Speaker 1: the fiscal policy, but how the FED response to that 50 00:03:27,240 --> 00:03:29,520 Speaker 1: fiscal policy and the pressures they're going to be under 51 00:03:30,080 --> 00:03:36,280 Speaker 1: to engage in UH butys policy and support supporting physical 52 00:03:36,320 --> 00:03:38,600 Speaker 1: policy in ways it may be detrimental for the FED 53 00:03:38,640 --> 00:03:40,720 Speaker 1: and for the account as a whole. What would be 54 00:03:40,760 --> 00:03:44,200 Speaker 1: the best way for the FED to execute a lessoning 55 00:03:44,360 --> 00:03:49,160 Speaker 1: of the balance sheet? Well, I think they're there a 56 00:03:49,200 --> 00:03:52,000 Speaker 1: variety of views on that. My preference was would would 57 00:03:52,000 --> 00:03:54,400 Speaker 1: be to let them just continue to run this thing off, 58 00:03:54,440 --> 00:03:57,440 Speaker 1: to stop increasing the balance sheet. It seems like they 59 00:03:57,480 --> 00:03:59,840 Speaker 1: increase the balancing a lot. In a financial crisis. They 60 00:04:00,000 --> 00:04:03,000 Speaker 1: promist we would they promised exit and it never happened, 61 00:04:03,560 --> 00:04:07,160 Speaker 1: and now it's fifty present, bigger than it was after 62 00:04:07,240 --> 00:04:12,480 Speaker 1: the Great Crisis, the financial crisis. So um, I'm not 63 00:04:12,520 --> 00:04:14,760 Speaker 1: sure where this is going. And I think they need 64 00:04:14,800 --> 00:04:19,560 Speaker 1: to declare their independence and regained control of monetary policies. Uh. 65 00:04:19,760 --> 00:04:23,560 Speaker 1: That's independent of the fiscal pressures that they're going to 66 00:04:23,640 --> 00:04:27,840 Speaker 1: be under. Plus of Richard Fisher wants to punch. They 67 00:04:27,880 --> 00:04:29,919 Speaker 1: just don't make them like you guys anymore on the 68 00:04:29,960 --> 00:04:32,320 Speaker 1: fom C. Do you think we are suffering from groupthink 69 00:04:32,640 --> 00:04:36,400 Speaker 1: at the Federal Reserve? Well, there's always a there's always 70 00:04:36,400 --> 00:04:40,240 Speaker 1: a bit of that at any institution. Uh, And I 71 00:04:40,279 --> 00:04:44,480 Speaker 1: am worried that there's not enough pushback on things. I mean, 72 00:04:44,520 --> 00:04:48,679 Speaker 1: we we argued back in two thousand nine, ten eleven 73 00:04:48,720 --> 00:04:50,840 Speaker 1: the problems that we were going to get into que 74 00:04:51,160 --> 00:04:53,120 Speaker 1: and the dangers of the large ballot sheet and the 75 00:04:53,200 --> 00:04:56,360 Speaker 1: risk of it being abused by the fiscal authorities, and 76 00:04:56,400 --> 00:04:59,320 Speaker 1: the difficulty we were going to face and getting out 77 00:04:59,360 --> 00:05:03,760 Speaker 1: of it, and nobody wanted to listen then. And now 78 00:05:03,800 --> 00:05:06,760 Speaker 1: we're back in the same boat, except it's bigger and 79 00:05:06,800 --> 00:05:10,440 Speaker 1: the risk are greater. And so I think that it 80 00:05:10,480 --> 00:05:16,080 Speaker 1: would be wise upon the BED, particularly now, to be 81 00:05:16,200 --> 00:05:19,080 Speaker 1: more articular about what the exit ramp books like from 82 00:05:19,120 --> 00:05:21,480 Speaker 1: all this and how they're going to get out from 83 00:05:21,520 --> 00:05:26,520 Speaker 1: under it. And the abuse of the BED for fiscal 84 00:05:26,520 --> 00:05:29,440 Speaker 1: policy purposes is even larger now than it was then. 85 00:05:30,320 --> 00:05:33,720 Speaker 1: And I'm not I'm afraid that you know, it's not 86 00:05:33,800 --> 00:05:36,120 Speaker 1: looking good and I don't and I'm concerned the FED 87 00:05:36,160 --> 00:05:39,320 Speaker 1: doesn't push back enough. Charlie. I'm interested in this word 88 00:05:39,560 --> 00:05:42,520 Speaker 1: abuse because the Federal Reserve, a lot of people would 89 00:05:42,520 --> 00:05:45,719 Speaker 1: consider they are enabling this deliberately. This is an objective 90 00:05:46,120 --> 00:05:48,640 Speaker 1: to work with the Treasury, to work with fiscal authorities, 91 00:05:48,640 --> 00:05:51,839 Speaker 1: and not just the FED, but globally and many economists, Charlie, 92 00:05:51,839 --> 00:05:54,599 Speaker 1: considering that the optimal way of conducting policy right now. 93 00:05:54,960 --> 00:05:58,559 Speaker 1: This is what abuse, these words, these phrases. This isn't good, Charlie. 94 00:05:58,560 --> 00:06:01,360 Speaker 1: Why is it not good? Can communicate that really clearly. 95 00:06:01,720 --> 00:06:06,960 Speaker 1: It's it's not good because the FED was granted independence 96 00:06:07,000 --> 00:06:09,880 Speaker 1: in order to be able to conduct policy for the 97 00:06:09,960 --> 00:06:14,520 Speaker 1: long run and to conduct policy independent of policy and 98 00:06:15,040 --> 00:06:19,080 Speaker 1: partisan politics. And what we see now is when you 99 00:06:19,120 --> 00:06:24,920 Speaker 1: lose that independence, when you become more susceptible to politicization, 100 00:06:25,680 --> 00:06:30,000 Speaker 1: then the decisions will no longer necessarily be about the 101 00:06:30,040 --> 00:06:33,680 Speaker 1: best interests of the economy. But whoever happens to have 102 00:06:33,960 --> 00:06:37,400 Speaker 1: political power, either in Congress or the administration, Charlie, are 103 00:06:37,400 --> 00:06:40,080 Speaker 1: we already there when it comes to asset price inflation? 104 00:06:40,080 --> 00:06:44,240 Speaker 1: You've got FED officials that have been pretty sanguine about Yeah, 105 00:06:44,279 --> 00:06:48,120 Speaker 1: I'm worried that we we The FED is enabling this, 106 00:06:48,320 --> 00:06:53,920 Speaker 1: maybe not intentionally, but indirectly they are enabling the ability 107 00:06:54,160 --> 00:06:58,120 Speaker 1: of of of this thing to go on and encouraging 108 00:06:58,920 --> 00:07:02,599 Speaker 1: uh expectations from the marketplace in other parts of the 109 00:07:02,600 --> 00:07:06,200 Speaker 1: economy that the FED is the restuer, not just a 110 00:07:06,320 --> 00:07:09,760 Speaker 1: last resort but a first resort. And Congress has used 111 00:07:09,760 --> 00:07:13,240 Speaker 1: the beds balance sheet to fund the Transportation Bill, and 112 00:07:13,280 --> 00:07:16,760 Speaker 1: in two thousands fifteen they used to do in this 113 00:07:16,920 --> 00:07:20,600 Speaker 1: crisis to have the FED to lending on behalf of 114 00:07:20,680 --> 00:07:24,080 Speaker 1: the treasury instead of having the Treasury do it. They 115 00:07:24,160 --> 00:07:26,960 Speaker 1: have you know, they funded into the super Financed Protection 116 00:07:26,960 --> 00:07:29,720 Speaker 1: Agency out of the FED budget, but with no authority 117 00:07:29,800 --> 00:07:33,640 Speaker 1: by the FED. So they are examples of how the 118 00:07:33,680 --> 00:07:37,520 Speaker 1: fiscal authorities are abusing the Fed's balance sheet, and the 119 00:07:37,600 --> 00:07:41,040 Speaker 1: FED has allowed this to happen without much pushback. They're 120 00:07:41,080 --> 00:07:44,560 Speaker 1: operating regime of this large ballot sheet and their unwillingness 121 00:07:44,560 --> 00:07:48,000 Speaker 1: to shrink it. And there the expectations they've set up 122 00:07:48,000 --> 00:07:53,600 Speaker 1: with the financial markets of backing failures and polatility is 123 00:07:53,640 --> 00:07:58,480 Speaker 1: all part of the play here too, as part of 124 00:07:58,480 --> 00:08:03,480 Speaker 1: the actions that are supporting and encouraging um. This lack 125 00:08:03,520 --> 00:08:08,840 Speaker 1: of independence I think dangerous from a philosophical perspective. People 126 00:08:08,880 --> 00:08:11,280 Speaker 1: talk about the dangers of a FED or a central 127 00:08:11,280 --> 00:08:15,520 Speaker 1: bank not being politically independent. From an economic perspective, what 128 00:08:15,640 --> 00:08:18,480 Speaker 1: are the negative consequences from the fact that the FED 129 00:08:18,680 --> 00:08:21,080 Speaker 1: has taken the actions that it has, to your view, 130 00:08:21,560 --> 00:08:24,400 Speaker 1: perhaps too much in tandem with the Treasury Department and 131 00:08:24,440 --> 00:08:29,600 Speaker 1: the U S administration. One of the dangers the dangers 132 00:08:29,640 --> 00:08:33,920 Speaker 1: are losing control both inflation and political independence. I mean, 133 00:08:34,000 --> 00:08:41,160 Speaker 1: look what the history of of central banking and politic 134 00:08:41,600 --> 00:08:43,920 Speaker 1: is not a is not a pretty one. That those 135 00:08:44,000 --> 00:08:47,360 Speaker 1: countries where central banks have become arms of the political 136 00:08:47,480 --> 00:08:52,040 Speaker 1: or administrative authorities and used the substitute for sound fiscal 137 00:08:52,080 --> 00:08:57,520 Speaker 1: policies and encourage money creation is the history is terrible. 138 00:08:57,640 --> 00:09:00,920 Speaker 1: I mean, the empirical evidence is this waught with hyper 139 00:09:00,960 --> 00:09:04,160 Speaker 1: inflations with Zimbabwe or Germany. You just go down the 140 00:09:04,240 --> 00:09:08,440 Speaker 1: list Argentina. I mean, you just go down the list 141 00:09:08,480 --> 00:09:12,199 Speaker 1: and see what happened when the central banks become pawns 142 00:09:12,280 --> 00:09:15,800 Speaker 1: of the political authorities. But Charles, we did not see that. 143 00:09:15,880 --> 00:09:18,160 Speaker 1: Let's be clear here, they're coming out of the crisis, 144 00:09:18,520 --> 00:09:21,760 Speaker 1: many look for higher inflation and it didn't occur. Did 145 00:09:21,800 --> 00:09:24,920 Speaker 1: it just go over on the balance sheet side to assets. 146 00:09:25,200 --> 00:09:28,680 Speaker 1: Did we just simply move the dynamics of price over 147 00:09:28,720 --> 00:09:33,760 Speaker 1: to asset inflation. Well? Perhaps, But really what happened was 148 00:09:33,880 --> 00:09:36,520 Speaker 1: when the FED people said, the FRED pretty money. But 149 00:09:36,600 --> 00:09:39,080 Speaker 1: mostly what it did was put reserves in the banking 150 00:09:39,120 --> 00:09:42,760 Speaker 1: system that sat there. Part of the problem and the puzzle, 151 00:09:42,960 --> 00:09:44,800 Speaker 1: I think, and one of the things that I think 152 00:09:44,920 --> 00:09:49,480 Speaker 1: is problematic for the future is that money supply growth, 153 00:09:49,520 --> 00:09:54,319 Speaker 1: money in circulation. After the Great Financial Crisis, all that 154 00:09:54,400 --> 00:09:56,880 Speaker 1: stuff that FED printed sat in the banks. It didn't 155 00:09:56,880 --> 00:09:59,520 Speaker 1: circulate very much, so there was no big increase in 156 00:09:59,520 --> 00:10:02,120 Speaker 1: the money. I think that's an interesting puzzle. May have 157 00:10:02,160 --> 00:10:04,599 Speaker 1: to do with interest on reserves and other things. That 158 00:10:04,840 --> 00:10:07,200 Speaker 1: hasn't answered this question yet. But if you look at 159 00:10:07,240 --> 00:10:10,640 Speaker 1: what's happened in the last three months, unlike the Great 160 00:10:10,679 --> 00:10:13,920 Speaker 1: Financial Crisis when the bed blew up its ballacy, in 161 00:10:13,960 --> 00:10:18,079 Speaker 1: this episode, there's been a huge increase in money. I 162 00:10:18,120 --> 00:10:19,600 Speaker 1: don't know whether it's going to lead to a different 163 00:10:19,600 --> 00:10:23,280 Speaker 1: outcome or not. It depends on what the Fed does. 164 00:10:23,440 --> 00:10:28,079 Speaker 1: But I think that, um, that's part of the puzzle 165 00:10:28,679 --> 00:10:30,800 Speaker 1: and part of the thing that the Dead's not really 166 00:10:30,840 --> 00:10:34,720 Speaker 1: hasn't really addressed in its review of what their new 167 00:10:34,760 --> 00:10:37,240 Speaker 1: strategy has been to be. I mean, they've tried, after 168 00:10:37,360 --> 00:10:42,120 Speaker 1: much criticism, they tried to get inflation up to or 169 00:10:42,240 --> 00:10:45,200 Speaker 1: claim they were because the zero interest rates for what 170 00:10:45,400 --> 00:10:49,280 Speaker 1: seven years almost and inflation didn't rise. So now they're 171 00:10:49,280 --> 00:10:52,160 Speaker 1: talking about a new strategy where they're gonna plan on 172 00:10:52,280 --> 00:10:54,600 Speaker 1: overshooting inflated well, I mean they haven't even be able 173 00:10:54,640 --> 00:10:57,640 Speaker 1: to get it too with zero interest rates for seven years, 174 00:10:57,679 --> 00:11:01,200 Speaker 1: So what's wrong? That's the elephant in the room here 175 00:11:01,760 --> 00:11:04,760 Speaker 1: that the Fed needs to address, not some refined view 176 00:11:04,880 --> 00:11:10,760 Speaker 1: of inflation averaging versus in place of targeting or whatever. 177 00:11:10,920 --> 00:11:13,960 Speaker 1: I think they need a more fundamental thing about what 178 00:11:14,120 --> 00:11:16,920 Speaker 1: their policies. Maybe it's like I said, the interest wrong 179 00:11:16,960 --> 00:11:21,120 Speaker 1: reserves or a large balance sheet, all those things impact 180 00:11:21,400 --> 00:11:27,600 Speaker 1: how the how monetary policy works for that Chairman, Pal's 181 00:11:27,640 --> 00:11:29,959 Speaker 1: happy you're not on that f o MC today. As 182 00:11:30,000 --> 00:11:32,480 Speaker 1: that mating begins, childs, we've gotta leave it there. It's 183 00:11:32,520 --> 00:11:35,040 Speaker 1: fantastic to catch up. This always fortunate to speak to 184 00:11:35,080 --> 00:11:37,840 Speaker 1: your child's plus to that the former Philadelphia Fed president. 185 00:11:40,760 --> 00:11:44,000 Speaker 1: Right now, let's jump start this discussion and do it 186 00:11:44,040 --> 00:11:47,959 Speaker 1: through the prism of experience of Tobias Levkovic at City Group. 187 00:11:47,960 --> 00:11:50,320 Speaker 1: It helps. He was a sell side analyst. He knows 188 00:11:50,320 --> 00:11:53,800 Speaker 1: the granularity of corporations and of course the bigger view 189 00:11:54,200 --> 00:11:57,360 Speaker 1: at City Group on the stock market. Tobias, have you 190 00:11:57,440 --> 00:12:00,679 Speaker 1: changed your view in the last number of days? On 191 00:12:00,720 --> 00:12:03,120 Speaker 1: the last number of days, we think the market and 192 00:12:03,120 --> 00:12:05,959 Speaker 1: we have thought the market was a bit ahead of itself, Um, 193 00:12:06,040 --> 00:12:09,280 Speaker 1: in the sense that the expectations were powerful recovery on 194 00:12:09,320 --> 00:12:12,120 Speaker 1: earnings without kind of bumps along the way back to 195 00:12:12,200 --> 00:12:15,440 Speaker 1: some degree by quote unquote the power put um. I 196 00:12:15,480 --> 00:12:18,680 Speaker 1: was looking to your private conversation about the bond market, Um, 197 00:12:18,720 --> 00:12:20,920 Speaker 1: and the bond mark is actually something that two different messages. 198 00:12:20,960 --> 00:12:22,360 Speaker 1: If you all you did was look at the U 199 00:12:22,400 --> 00:12:25,800 Speaker 1: S tenure yield, you would say it is disbelieving. If 200 00:12:25,840 --> 00:12:28,079 Speaker 1: you like in the recovery. But if you were looking 201 00:12:28,080 --> 00:12:31,400 Speaker 1: at the US tenure break evens, they continue to move higher. 202 00:12:31,559 --> 00:12:34,280 Speaker 1: So there is an expectation for something happening, at least 203 00:12:34,280 --> 00:12:36,440 Speaker 1: in the pricing side. Are you seeing that in the 204 00:12:36,480 --> 00:12:39,280 Speaker 1: equity space. I mean, I'm looking at revenue shortfalls at 205 00:12:39,280 --> 00:12:42,280 Speaker 1: three revenue shortfalls at McDonald's. I mean, are you just 206 00:12:42,360 --> 00:12:46,599 Speaker 1: baking that into your two thousand? Yeah? We are. We 207 00:12:46,640 --> 00:12:48,440 Speaker 1: having to look. We're we're looking for earnings to this 208 00:12:48,520 --> 00:12:51,040 Speaker 1: year in the one five range and then one fifty 209 00:12:51,080 --> 00:12:53,600 Speaker 1: next year. Consensus for next year is one sixty four, 210 00:12:54,040 --> 00:12:56,160 Speaker 1: and a survey we did in late June is over 211 00:12:56,640 --> 00:13:01,280 Speaker 1: forty institutions suggested that seventy of them believe that one 212 00:13:01,360 --> 00:13:03,600 Speaker 1: sixty four is too high. On the other end, people 213 00:13:03,720 --> 00:13:06,760 Speaker 1: heart chasing momentum because they need to perform. So certain 214 00:13:06,760 --> 00:13:10,320 Speaker 1: stalks are carrying further. They're jumping in even if they 215 00:13:10,320 --> 00:13:12,880 Speaker 1: don't necessarily like it um, but they feel they have 216 00:13:13,000 --> 00:13:14,920 Speaker 1: to be. To quote in New York Claudo, you've gotta 217 00:13:14,920 --> 00:13:16,520 Speaker 1: be in it to win it. It's about what do 218 00:13:16,520 --> 00:13:18,640 Speaker 1: you think of the argument that, because we've got narrow breadth, 219 00:13:18,679 --> 00:13:21,000 Speaker 1: this is a fragile rally. Do you agree with that, 220 00:13:21,800 --> 00:13:24,760 Speaker 1: not directly. Um, Look, there are some large cap tech 221 00:13:24,840 --> 00:13:27,480 Speaker 1: names that are clearly leading the market in the sense 222 00:13:27,480 --> 00:13:31,280 Speaker 1: that people wanted secular growth with bulletproof balance sheets and 223 00:13:31,400 --> 00:13:33,960 Speaker 1: pre cast flew generation the kind of a defensive trade. 224 00:13:34,320 --> 00:13:37,280 Speaker 1: But for example of the second quarter, A hundred twenty 225 00:13:37,360 --> 00:13:40,120 Speaker 1: six names in the SMP five beat the SMP five 226 00:13:40,160 --> 00:13:43,280 Speaker 1: hundred by more than ten percentage points. So it's not 227 00:13:43,360 --> 00:13:45,600 Speaker 1: like only five names did well. A D twenty one 228 00:13:45,600 --> 00:13:48,120 Speaker 1: did poorly, and I think that's kind of missed in 229 00:13:48,160 --> 00:13:50,840 Speaker 1: the what I would call the narrative out there. Well, 230 00:13:50,880 --> 00:13:53,680 Speaker 1: let's add to the narrative big tech turningsis Thursday. What's 231 00:13:53,720 --> 00:13:57,360 Speaker 1: the data bias Lefkovitch guide at this point, Well, I 232 00:13:57,400 --> 00:14:01,640 Speaker 1: think people are looking for the actually some disappointment because 233 00:14:01,720 --> 00:14:05,119 Speaker 1: the expectations are high. The work from home the construct 234 00:14:05,160 --> 00:14:08,840 Speaker 1: has generated some particular business trends that it really accelerated 235 00:14:08,880 --> 00:14:12,240 Speaker 1: trends that we're going before. So the idea of online 236 00:14:12,240 --> 00:14:14,680 Speaker 1: shopping versus in store shopping has been a trend for 237 00:14:14,720 --> 00:14:17,199 Speaker 1: a while, but we've probably moved it forward two years 238 00:14:17,240 --> 00:14:21,480 Speaker 1: because the pandemic, telehealth, the same thing, cloud computing, all 239 00:14:21,520 --> 00:14:25,120 Speaker 1: these things were ready very much moving along. All we've 240 00:14:25,120 --> 00:14:28,840 Speaker 1: really done is supercharge that that's beat to bias. In meantime, 241 00:14:28,960 --> 00:14:30,520 Speaker 1: one of the big stories of the past week has 242 00:14:30,520 --> 00:14:32,720 Speaker 1: been the weaker dollar, the dollar following to the weakest 243 00:14:32,760 --> 00:14:38,000 Speaker 1: according versus it's a competitor currencies since two thousand eighteen. 244 00:14:38,080 --> 00:14:41,360 Speaker 1: How does this factor intro equity strategy. So it's actually 245 00:14:41,440 --> 00:14:44,360 Speaker 1: quite importantly. So if I look at um a budget 246 00:14:44,400 --> 00:14:48,280 Speaker 1: deficits percent of GDP, it's pretty been pretty good lead 247 00:14:48,320 --> 00:14:51,720 Speaker 1: indicator for many years now for the dollar, and it 248 00:14:51,800 --> 00:14:54,880 Speaker 1: was suggesting the weakness are ready prior even to the pandemic. 249 00:14:55,120 --> 00:14:57,400 Speaker 1: But I think as the pandemic occurred, people went for 250 00:14:57,440 --> 00:14:59,320 Speaker 1: the safety of the dollar. They rent for the safety 251 00:14:59,320 --> 00:15:02,560 Speaker 1: of treasuries. UM, the beliefing, hey, this is the economy 252 00:15:02,560 --> 00:15:05,080 Speaker 1: in the world. Um, they're going to have significant support 253 00:15:05,120 --> 00:15:08,600 Speaker 1: systems of the fiscal or or monetary stimulus, and there's 254 00:15:08,600 --> 00:15:12,320 Speaker 1: a place to hide. As we're starting to reopen the economy. 255 00:15:12,320 --> 00:15:14,800 Speaker 1: And even with these kind of awful lumps in terms 256 00:15:14,840 --> 00:15:17,760 Speaker 1: of outbreaks, UM, it's unlikely we're gonna shut down the 257 00:15:17,760 --> 00:15:19,960 Speaker 1: economy the same way we did March A from and 258 00:15:20,000 --> 00:15:23,640 Speaker 1: me again, it's just too expensive. UM. From an economic perspective, 259 00:15:23,680 --> 00:15:26,000 Speaker 1: too many job losses and not to mention some of 260 00:15:26,000 --> 00:15:27,640 Speaker 1: the social ills that come out of in terms of 261 00:15:27,680 --> 00:15:30,760 Speaker 1: mental health, domestic confused, things like that. So it's unlikely 262 00:15:30,800 --> 00:15:34,760 Speaker 1: you'll see that kind of stupdown. You may see sporadic 263 00:15:34,800 --> 00:15:37,560 Speaker 1: ones or regionally focused ones, but not in entire countries. 264 00:15:37,960 --> 00:15:40,920 Speaker 1: And in that sense, um, you're looking at environment where 265 00:15:40,920 --> 00:15:43,240 Speaker 1: the dollar doesn't have to be at safe haven when 266 00:15:43,280 --> 00:15:47,920 Speaker 1: that pulls back. Historically, emerging markets of perform in the US. Historically, 267 00:15:48,520 --> 00:15:51,240 Speaker 1: certain groups that are even though they have large international 268 00:15:51,720 --> 00:15:55,440 Speaker 1: sales like pharma or semifectors, actually don't do as well 269 00:15:55,840 --> 00:15:57,640 Speaker 1: um with a week in dollar. And then there are 270 00:15:57,640 --> 00:16:02,320 Speaker 1: other ones that do particularly well, more commodity orient energy, materials, etcetera. Um, 271 00:16:02,360 --> 00:16:05,120 Speaker 1: So there are you know, aspects to the dollars that 272 00:16:05,160 --> 00:16:07,760 Speaker 1: are quite important. So in other words, is this the 273 00:16:07,760 --> 00:16:09,800 Speaker 1: playbook that you're going to the idea that we're going 274 00:16:09,840 --> 00:16:11,520 Speaker 1: to have a week or dollar going forth it will 275 00:16:11,520 --> 00:16:14,680 Speaker 1: continue to weekend given the fact that given the parameters 276 00:16:14,680 --> 00:16:16,200 Speaker 1: that you just laid out, and that people should be 277 00:16:16,200 --> 00:16:20,920 Speaker 1: going into merging markets and staying away from the multinationals 278 00:16:20,920 --> 00:16:24,080 Speaker 1: not necessarily Again, I said multinationals like and take advantage 279 00:16:24,080 --> 00:16:25,840 Speaker 1: and take a look at semi knectors, take a look 280 00:16:25,840 --> 00:16:30,440 Speaker 1: at Farmer their multinationally have large exposure to international sales 281 00:16:30,480 --> 00:16:33,560 Speaker 1: that they actually do poorly when the dollar weekends. Um, 282 00:16:33,640 --> 00:16:35,440 Speaker 1: and they do better when the dollar strength, which is 283 00:16:35,480 --> 00:16:38,240 Speaker 1: not consistent with kind of the intuitivelopment of what it 284 00:16:38,280 --> 00:16:41,280 Speaker 1: does think of an international sales with the dollar weekends 285 00:16:41,320 --> 00:16:44,640 Speaker 1: will actually translate to higher remedies in the US if 286 00:16:44,640 --> 00:16:47,320 Speaker 1: they don't trade that way. Um we can. Every real's 287 00:16:47,400 --> 00:16:50,800 Speaker 1: entitled to their misperceptions, but um, we actually look it 288 00:16:50,880 --> 00:16:55,920 Speaker 1: happen stocks straight tobias away from Fortress Corbett. Your thoughts 289 00:16:55,920 --> 00:17:00,760 Speaker 1: on the big banks, Um, Look, they're they're an area 290 00:17:00,800 --> 00:17:03,960 Speaker 1: that investors have disliked for a while. Um. Initially it 291 00:17:04,040 --> 00:17:06,600 Speaker 1: was the shape that yel curve concerns about credit loss 292 00:17:06,640 --> 00:17:09,120 Speaker 1: provisions in in kind of a bad economy. But they're 293 00:17:09,119 --> 00:17:12,320 Speaker 1: willing to trade up some other cyclicals around that. So 294 00:17:12,480 --> 00:17:15,440 Speaker 1: you know, we wonder if there's something even more um 295 00:17:15,480 --> 00:17:18,840 Speaker 1: disturbing an investor's mindsets. Maybe this acceleration I talked about 296 00:17:18,880 --> 00:17:22,280 Speaker 1: and trends pushes more towards fintech. But but I think 297 00:17:22,359 --> 00:17:26,400 Speaker 1: the stocks themselves look very very attractively valued right now 298 00:17:26,440 --> 00:17:30,000 Speaker 1: in the banks. Um the you know, again, if if 299 00:17:30,000 --> 00:17:32,399 Speaker 1: the world isn't as awful as everybody thinks them, the 300 00:17:32,440 --> 00:17:36,760 Speaker 1: credit lost provisions of an over provisioned um and you know, 301 00:17:36,800 --> 00:17:39,720 Speaker 1: there still is business activity out there, either large corporations, 302 00:17:39,760 --> 00:17:42,679 Speaker 1: the need to borrow money. The credit card businesses is 303 00:17:42,840 --> 00:17:45,760 Speaker 1: you know, are generally doing well as people are buying 304 00:17:45,800 --> 00:17:48,960 Speaker 1: things online using their cards, either debit or credit. So 305 00:17:49,000 --> 00:17:50,679 Speaker 1: it's kind of hard to to kind of get a 306 00:17:50,760 --> 00:17:55,040 Speaker 1: sense that things are awful awful in banks. There is 307 00:17:55,119 --> 00:17:58,199 Speaker 1: some concern. I believe that the elections, maybe um, if 308 00:17:58,200 --> 00:18:01,199 Speaker 1: the Democrats take um, the Senate as well as the 309 00:18:01,200 --> 00:18:03,879 Speaker 1: White House, and maybe there'll be some more kind of 310 00:18:04,240 --> 00:18:07,439 Speaker 1: big bashing. But um, you know these are these are 311 00:18:07,480 --> 00:18:10,400 Speaker 1: more speculation than anything. Kind of really at this point, 312 00:18:10,960 --> 00:18:17,359 Speaker 1: great to catch up with these Lekevich that city. Chris 313 00:18:17,400 --> 00:18:20,679 Speaker 1: Krueger is a Cowen and he has a reputation for 314 00:18:20,800 --> 00:18:24,520 Speaker 1: exquisite layout of the detail. He did that in June 315 00:18:24,560 --> 00:18:28,160 Speaker 1: for Cowen of the many previous trillion dollars of stimulus. 316 00:18:28,280 --> 00:18:30,600 Speaker 1: I'm sure you'll do it again in August. Chris Kruger 317 00:18:30,680 --> 00:18:34,000 Speaker 1: joins us. Now, Chris, what is the detail you're most 318 00:18:34,080 --> 00:18:38,720 Speaker 1: focused on as we staggered as some kind of agreement. Yeah, well, 319 00:18:39,280 --> 00:18:41,080 Speaker 1: good morning, thanks for having me back. I mean, I 320 00:18:41,119 --> 00:18:43,560 Speaker 1: think that the big question here, the crux of this 321 00:18:43,680 --> 00:18:47,200 Speaker 1: Phase four bill is going to be the expiring six 322 00:18:47,320 --> 00:18:52,960 Speaker 1: hundred dollar weekly unemployment insurance payments, which which ended last 323 00:18:53,320 --> 00:18:56,600 Speaker 1: which ended this this weekend. The House Democrats want to 324 00:18:56,640 --> 00:19:01,240 Speaker 1: extend that for six months at six dollars. The Republican 325 00:19:01,320 --> 00:19:04,719 Speaker 1: plan from last night would take that six hundred dollars 326 00:19:04,760 --> 00:19:08,280 Speaker 1: down to two hundred dollars through September and then basically 327 00:19:08,480 --> 00:19:10,639 Speaker 1: kick it to the states for the states to figure 328 00:19:10,680 --> 00:19:15,120 Speaker 1: out how to cap it at previous wages. I mean, 329 00:19:15,119 --> 00:19:18,040 Speaker 1: I think there's there's no real surprise from the bid 330 00:19:18,040 --> 00:19:22,280 Speaker 1: ask where we are. Uh The House Democrats put up 331 00:19:22,320 --> 00:19:26,040 Speaker 1: over three trillion dollars over two months ago, and I 332 00:19:26,080 --> 00:19:28,719 Speaker 1: think it will be one of the great political what ifs. 333 00:19:28,880 --> 00:19:32,720 Speaker 1: You know, why President Trump and the Republicans didn't sort 334 00:19:32,720 --> 00:19:37,400 Speaker 1: of embrace a three trillion dollar stimulus two months ago, 335 00:19:37,480 --> 00:19:41,600 Speaker 1: whereas now we're we're steering off of fiscal cliff for 336 00:19:41,680 --> 00:19:45,399 Speaker 1: over twenty million Americans, and we're probably somewhere in the 337 00:19:45,480 --> 00:19:48,600 Speaker 1: trillion to one and a half trillion dollar ballpark, Chris, 338 00:19:48,600 --> 00:19:51,919 Speaker 1: from an economic perspective, let alone a political one, is 339 00:19:51,960 --> 00:19:54,960 Speaker 1: there any argument that you believe in that you think 340 00:19:55,040 --> 00:20:00,520 Speaker 1: is legitimate against having a six hundred dollar unemployment benefit continue, 341 00:20:00,640 --> 00:20:05,320 Speaker 1: the enhanced unemployment benefit continue for the next couple of months. Well, 342 00:20:05,359 --> 00:20:08,879 Speaker 1: the real pushback has been from UH a number of 343 00:20:08,880 --> 00:20:12,639 Speaker 1: White House advisors and Senate Republicans. If you recall, Phase 344 00:20:12,720 --> 00:20:16,240 Speaker 1: three in March almost fell apart over the six hundred 345 00:20:16,320 --> 00:20:21,760 Speaker 1: dollar weekly supplemental various studies have shown that, you know, 346 00:20:21,880 --> 00:20:25,080 Speaker 1: as much as five five out of the six folks 347 00:20:25,760 --> 00:20:31,560 Speaker 1: are getting effectively a raised from their previous salary from 348 00:20:31,600 --> 00:20:36,040 Speaker 1: from January. This is really, though, the key um, the 349 00:20:36,359 --> 00:20:40,639 Speaker 1: key controversy with the bill. Republicans will get the liability shield, 350 00:20:40,720 --> 00:20:43,919 Speaker 1: Democrats will get some chunk of money to go to 351 00:20:44,520 --> 00:20:49,440 Speaker 1: states and municipalities. The six hundred dollar unemployment UH fiscal 352 00:20:49,480 --> 00:20:53,040 Speaker 1: cliff is the real is the real question, Chris, is 353 00:20:53,040 --> 00:20:55,639 Speaker 1: an interim bill at this point dead on arrival? Do 354 00:20:55,640 --> 00:20:59,560 Speaker 1: you see any prospect for that down in Washington? It 355 00:20:59,680 --> 00:21:02,960 Speaker 1: could happen, right sort of. The old saying is whenever 356 00:21:03,040 --> 00:21:05,760 Speaker 1: Washington finds itself on the edge of a fiscal cliff, 357 00:21:05,840 --> 00:21:10,040 Speaker 1: they tend to build more land. UM, so perhaps doing 358 00:21:10,080 --> 00:21:14,720 Speaker 1: an extension of the six hundred dollar weekly payments maybe 359 00:21:14,760 --> 00:21:20,080 Speaker 1: through September that because you will have another cliff when 360 00:21:20,080 --> 00:21:23,320 Speaker 1: the fiscal year begins on October one, Right, you'll have 361 00:21:23,440 --> 00:21:25,760 Speaker 1: to pass some kind of bill to keep the government 362 00:21:25,760 --> 00:21:28,840 Speaker 1: from shutting down. So maybe tying it to that. But 363 00:21:28,960 --> 00:21:33,320 Speaker 1: that's gonna be that's gonna come under intense pressure from UH. 364 00:21:33,400 --> 00:21:36,920 Speaker 1: You know a number of fiscal hawks who have all 365 00:21:36,960 --> 00:21:41,240 Speaker 1: of a sudden return to Washington after two years of hibernation. 366 00:21:41,440 --> 00:21:44,600 Speaker 1: How does being a fiscal huwk poll in America at 367 00:21:44,640 --> 00:21:48,760 Speaker 1: the moment, Chris amongst some of these constituencies, you know, 368 00:21:48,880 --> 00:21:51,960 Speaker 1: I've I've, like I said earlier, I think that that 369 00:21:52,400 --> 00:21:54,320 Speaker 1: you know, it's going to be one of the great 370 00:21:54,359 --> 00:21:59,120 Speaker 1: political what ifs on that Heroes package over three trillion 371 00:21:59,200 --> 00:22:04,440 Speaker 1: dollars from UH that the House Democrats sponsored over and 372 00:22:04,640 --> 00:22:07,360 Speaker 1: past over two months ago. I think it's it's it's 373 00:22:07,440 --> 00:22:13,119 Speaker 1: quite regional, you see, but candidly, the the the Senate 374 00:22:13,160 --> 00:22:16,040 Speaker 1: Republicans who are most vocal on this are not running 375 00:22:16,080 --> 00:22:19,760 Speaker 1: for reelection, right, they have staggered terms, so that maybe 376 00:22:19,800 --> 00:22:22,560 Speaker 1: answers your question. This is the question, and I want 377 00:22:22,560 --> 00:22:24,560 Speaker 1: to sort of double down on what John was talking about, 378 00:22:24,600 --> 00:22:28,600 Speaker 1: this idea of what political benefit is they're going against 379 00:22:28,640 --> 00:22:32,399 Speaker 1: some sort of big fiscal stimulus at this point, how 380 00:22:32,680 --> 00:22:37,160 Speaker 1: is the idea of an ongoing enhanced unemployment benefit polling 381 00:22:37,520 --> 00:22:43,960 Speaker 1: among Republicans? I haven't seen specific polling relative to Republicans. 382 00:22:43,960 --> 00:22:47,560 Speaker 1: I mean there is a real belief among Senate Republicans though, 383 00:22:47,680 --> 00:22:52,160 Speaker 1: that this extension of the six hundred dollars is keeping 384 00:22:52,880 --> 00:22:57,320 Speaker 1: um is keeping the economy back, meaning that people would 385 00:22:57,400 --> 00:23:00,359 Speaker 1: rather stay at home and collect the six hundred dollars 386 00:23:00,960 --> 00:23:04,440 Speaker 1: on top of their state payments as opposed to going 387 00:23:04,480 --> 00:23:08,359 Speaker 1: back into the workforce and looking for jobs. Chris, what 388 00:23:08,440 --> 00:23:11,080 Speaker 1: are you going to look for today in the next 389 00:23:11,119 --> 00:23:15,280 Speaker 1: twenty four hours in Washington? The whole cable media frenzy, 390 00:23:15,359 --> 00:23:18,920 Speaker 1: the newspaper frenzy, et cetera. What is Chris Krueger most 391 00:23:19,000 --> 00:23:22,280 Speaker 1: focused on? Well, I mean it is a bit of 392 00:23:22,480 --> 00:23:24,560 Speaker 1: a crazed week here. I mean you you have the 393 00:23:24,640 --> 00:23:28,320 Speaker 1: ongoing funeral of of of the late John Lewis, you 394 00:23:28,359 --> 00:23:31,000 Speaker 1: have the big tech hearing tomorrow, You obviously have the 395 00:23:31,040 --> 00:23:35,760 Speaker 1: FED as well. So I don't expect much on Phase 396 00:23:35,840 --> 00:23:41,080 Speaker 1: four today. The primary negotiators, though, are pretty much the 397 00:23:41,119 --> 00:23:44,320 Speaker 1: same from Phase three, with the exception of now Mark Meadows, 398 00:23:44,359 --> 00:23:47,639 Speaker 1: the White House Chief of Staff is sort of a 399 00:23:47,760 --> 00:23:50,880 Speaker 1: co head along with the Treasury Secretary. But then it's 400 00:23:50,960 --> 00:23:57,040 Speaker 1: you know, the the the actors we've seen before, McConnell, Pelosi, Schumer, Um. 401 00:23:57,200 --> 00:24:00,000 Speaker 1: So you know, at some point I suspect we will 402 00:24:00,119 --> 00:24:04,639 Speaker 1: have a meeting at the White House, which will probably predictably, 403 00:24:04,880 --> 00:24:07,400 Speaker 1: you know, go sideways. I think, as you know, you 404 00:24:07,400 --> 00:24:09,720 Speaker 1: you want to keep those five folks in a room. 405 00:24:09,800 --> 00:24:13,760 Speaker 1: I think injecting the president into these talks. You know, 406 00:24:13,840 --> 00:24:16,880 Speaker 1: we've seen that the last couple of times, and it inevitably, 407 00:24:17,520 --> 00:24:20,920 Speaker 1: you know, causes a negative tape bomb that also could 408 00:24:20,920 --> 00:24:24,400 Speaker 1: be a positive, right, That's sort of how the sausage 409 00:24:24,440 --> 00:24:27,760 Speaker 1: is made here, so we'll see it unfold this. I 410 00:24:27,800 --> 00:24:31,200 Speaker 1: would say though, that this has a lack of urgency 411 00:24:31,240 --> 00:24:34,919 Speaker 1: that the previous negotiations had, and I think some of 412 00:24:34,960 --> 00:24:37,920 Speaker 1: that is because you know, we're not opening limit down 413 00:24:37,960 --> 00:24:40,399 Speaker 1: every morning anymore. We need the market to do the 414 00:24:40,440 --> 00:24:43,919 Speaker 1: hard work. It's depressing. Chris, Thank you, sir, Chris Krueger. 415 00:24:44,000 --> 00:24:51,320 Speaker 1: Col I'm Washingham Research, Great managing tire writ right now 416 00:24:51,440 --> 00:24:54,280 Speaker 1: a serious conversation, but we must digress at the top 417 00:24:54,320 --> 00:24:57,600 Speaker 1: with a Lieutenant Governor of the Empire State Counthy Hokel 418 00:24:57,680 --> 00:25:00,760 Speaker 1: is a pride of Buffalo, and she knows quite well 419 00:25:01,000 --> 00:25:04,360 Speaker 1: that nothing really matters except for the movie The Natural. 420 00:25:04,440 --> 00:25:07,400 Speaker 1: The Natural was filmed in Buffalo. It was a hugely 421 00:25:07,440 --> 00:25:13,080 Speaker 1: important emotional vision of old baseball parks, and then Buffalo 422 00:25:13,119 --> 00:25:16,320 Speaker 1: went on to build the jewel of minor league baseball, 423 00:25:16,359 --> 00:25:19,280 Speaker 1: pilot Field, which is now where the Toronto Blue Jays 424 00:25:19,480 --> 00:25:23,040 Speaker 1: will play. Bloomberg Surveillance is of course sent a note 425 00:25:23,040 --> 00:25:26,000 Speaker 1: to Toronto saying, You've got to be kidding me. Hoco 426 00:25:26,080 --> 00:25:28,960 Speaker 1: has to throw out the first pitch. Lieutenant Governor, Will 427 00:25:28,960 --> 00:25:33,360 Speaker 1: you throw out the first pitch for the Toronto Blue Jays? Oh? 428 00:25:33,440 --> 00:25:35,399 Speaker 1: If asked, I will serve and I'll get out there 429 00:25:35,440 --> 00:25:38,200 Speaker 1: start pricing every But I've been known for even single 430 00:25:38,240 --> 00:25:40,480 Speaker 1: aid teams to stand along the New York States through 431 00:25:40,520 --> 00:25:43,119 Speaker 1: a practicing if I just don't embarrass my state and 432 00:25:43,160 --> 00:25:45,399 Speaker 1: my family. So I'm not good at it, but I 433 00:25:45,480 --> 00:25:48,960 Speaker 1: take it very seriously. I watched videos of other first pitches, 434 00:25:49,040 --> 00:25:50,680 Speaker 1: and uh, you know, I just don't want to bring 435 00:25:50,720 --> 00:25:54,359 Speaker 1: any uh. Stop you're being political. You don't want to 436 00:25:54,400 --> 00:25:57,280 Speaker 1: do a fauci. Let's leave it at that. Too many 437 00:25:58,840 --> 00:26:01,280 Speaker 1: you don't want to any other allan, Yeah, you don't 438 00:26:01,280 --> 00:26:03,000 Speaker 1: want to do a thought. I got it. Look, there's 439 00:26:03,080 --> 00:26:04,840 Speaker 1: we don't have enough time here when there's so many 440 00:26:04,880 --> 00:26:08,080 Speaker 1: serious issues. You're gonna get a hundred billion dollars of 441 00:26:08,160 --> 00:26:12,840 Speaker 1: school aid from the Republican stimulus? Is that enough? What 442 00:26:12,960 --> 00:26:15,960 Speaker 1: a joke? I mean, seriously, you know when you see 443 00:26:16,080 --> 00:26:20,159 Speaker 1: see the Republicans now have this crisis in their own states. 444 00:26:20,200 --> 00:26:22,679 Speaker 1: I mean a couple of months ago they were saying, 445 00:26:22,760 --> 00:26:25,360 Speaker 1: and I'm not making this up, Mitch McConnell said, there'll 446 00:26:25,359 --> 00:26:27,960 Speaker 1: be no blue state ballots. And that's when it was 447 00:26:28,400 --> 00:26:32,000 Speaker 1: New York and New Jersey and Connecticut. In California, Well, today, 448 00:26:32,200 --> 00:26:35,520 Speaker 1: because no one followed the playbook that Governor Cuomo handed 449 00:26:35,560 --> 00:26:37,840 Speaker 1: them on how to manage a pandemic, we have a 450 00:26:37,880 --> 00:26:42,480 Speaker 1: crisis in the red states Florida, Arizona, Texas, etcetera. So 451 00:26:42,720 --> 00:26:44,880 Speaker 1: to think that that's going to be enough money for 452 00:26:44,920 --> 00:26:47,480 Speaker 1: the rest of the country and New York State in particular, 453 00:26:47,880 --> 00:26:51,320 Speaker 1: it's paltry. It's embarrassment, and there's no way that schools 454 00:26:51,320 --> 00:26:54,080 Speaker 1: can open safely if we don't get more assistance from 455 00:26:54,080 --> 00:26:56,840 Speaker 1: the federal government. Don't even be talking about a trillion 456 00:26:56,880 --> 00:26:59,240 Speaker 1: dollar plan. That's how much should be going to the 457 00:26:59,240 --> 00:27:02,120 Speaker 1: state local governments period for getting everything else. I mean, 458 00:27:02,119 --> 00:27:05,520 Speaker 1: that's that's the baseline, just for state local in order 459 00:27:05,520 --> 00:27:08,720 Speaker 1: for us to make up for fourteen billion dollars in 460 00:27:08,840 --> 00:27:13,880 Speaker 1: lost revenue five billion dollars in additional expenses which continue 461 00:27:13,920 --> 00:27:17,960 Speaker 1: to climb every day. So so don't you don't embarrass yourselves. Washington, 462 00:27:17,960 --> 00:27:21,320 Speaker 1: get your act together, and if the center Republicans can't 463 00:27:21,520 --> 00:27:24,480 Speaker 1: get their unity in their caucus, then turn it over 464 00:27:24,520 --> 00:27:27,359 Speaker 1: to Chuck schumerk will get the job done, Lieutenant Governor. 465 00:27:27,400 --> 00:27:29,439 Speaker 1: A lot of economists agree with you that the states 466 00:27:29,600 --> 00:27:32,359 Speaker 1: very much need a pretty big fiscal bailout or some 467 00:27:32,400 --> 00:27:34,920 Speaker 1: sort of fiscal support. There is a question though, about 468 00:27:34,960 --> 00:27:37,399 Speaker 1: what the states can be doing with respect to luring 469 00:27:37,440 --> 00:27:40,200 Speaker 1: back businesses once the pandemic is over. Midtown is a 470 00:27:40,240 --> 00:27:43,280 Speaker 1: ghost town. People are leaving the state, people are leaving 471 00:27:43,280 --> 00:27:46,280 Speaker 1: the city. What economic plans do you have a are 472 00:27:46,280 --> 00:27:49,440 Speaker 1: you talking about to try to bring businesses and residents 473 00:27:49,480 --> 00:27:53,400 Speaker 1: back at Leasta, you hit right on it. I mean, normally, 474 00:27:53,440 --> 00:27:55,920 Speaker 1: the state of New York is very generous in terms 475 00:27:55,920 --> 00:28:00,520 Speaker 1: of incentivizing businesses from Buffalo to Manhattan, and we understand 476 00:28:00,560 --> 00:28:03,000 Speaker 1: that that's part of our job, is an opportunity for 477 00:28:03,040 --> 00:28:06,080 Speaker 1: businesses to thrive and create jobs. That's the bottom line, 478 00:28:06,080 --> 00:28:08,600 Speaker 1: get people back to work. If we do not get 479 00:28:08,640 --> 00:28:11,639 Speaker 1: that assistance from the state, from the federal government, how 480 00:28:11,680 --> 00:28:14,600 Speaker 1: are we going to continue funding the economic development plans 481 00:28:14,600 --> 00:28:18,840 Speaker 1: that I oversee its chair of the regur money we 482 00:28:18,880 --> 00:28:20,520 Speaker 1: have to do it. I don't mean to interrupt, but 483 00:28:20,600 --> 00:28:23,600 Speaker 1: as you well know, there's twelve Republicans upstate in New 484 00:28:23,680 --> 00:28:27,280 Speaker 1: York who are fighting for their political life. Are Republicans 485 00:28:27,280 --> 00:28:30,720 Speaker 1: and Democrats in New York State on the same page, 486 00:28:30,800 --> 00:28:33,960 Speaker 1: or frankly in Arkansas? Are they on the same page 487 00:28:33,960 --> 00:28:37,719 Speaker 1: as saying? Do the elites in Washington wake up? I 488 00:28:37,800 --> 00:28:44,800 Speaker 1: just don't see the calendar immediacy in Washington. Yeah. I 489 00:28:44,840 --> 00:28:47,120 Speaker 1: don't know what planet they're living on, Tom, I really don't. 490 00:28:47,200 --> 00:28:50,400 Speaker 1: Have they not been seeing the overcrowding and hospitals and 491 00:28:50,440 --> 00:28:53,680 Speaker 1: people in other states just searching for the ppe that 492 00:28:53,720 --> 00:28:55,840 Speaker 1: we had to go through that don't they understand that. 493 00:28:56,000 --> 00:28:59,120 Speaker 1: What's what's the unemployment rate in Buffalo? Right now? I 494 00:28:59,120 --> 00:29:01,840 Speaker 1: don't have a clue. What's the unemployment rate in your Buffalo? 495 00:29:03,040 --> 00:29:05,800 Speaker 1: I'll tell you state. Why did six percent Buffalo? It's 496 00:29:05,840 --> 00:29:08,680 Speaker 1: probably closer to and for them to say that they're 497 00:29:08,680 --> 00:29:12,360 Speaker 1: going to cut unemployment insurance, I'm sorry. A year ago 498 00:29:12,400 --> 00:29:15,240 Speaker 1: in New York State, we had a four percent unemployment rate. 499 00:29:15,600 --> 00:29:19,960 Speaker 1: Great success of the CuMo administration. People were working. They're 500 00:29:20,000 --> 00:29:22,760 Speaker 1: assuming that people want to now stay home. People that 501 00:29:22,840 --> 00:29:24,800 Speaker 1: are just being lazy and they don't want to get 502 00:29:24,840 --> 00:29:27,080 Speaker 1: back to work because they can collect six hundred dollars 503 00:29:27,080 --> 00:29:29,760 Speaker 1: a week. They can't get back to work because the 504 00:29:29,760 --> 00:29:32,240 Speaker 1: hotels are not open. There's no jobs for them. They 505 00:29:32,280 --> 00:29:35,560 Speaker 1: want to get back and then okay, down the through 506 00:29:35,560 --> 00:29:38,800 Speaker 1: way to the late Great Barbarabie Connabal Great. He wanted 507 00:29:38,880 --> 00:29:43,360 Speaker 1: fiscal prudence around the federal government. What's the certitude for 508 00:29:43,400 --> 00:29:45,880 Speaker 1: conservatives that we're gonna pay back all this debt down 509 00:29:45,960 --> 00:29:49,960 Speaker 1: the road. Our economy will come back and it will 510 00:29:50,000 --> 00:29:52,800 Speaker 1: come back roaring if we can get the assistance from 511 00:29:52,840 --> 00:29:55,320 Speaker 1: the federal government to get us through a one hundred 512 00:29:55,400 --> 00:29:58,120 Speaker 1: year pandemic. This is not something we asked for on 513 00:29:58,160 --> 00:30:00,719 Speaker 1: a regular basis, even though we do know that New 514 00:30:00,760 --> 00:30:04,200 Speaker 1: York State sends about thirty billion more to Washington annually 515 00:30:04,760 --> 00:30:06,680 Speaker 1: compared to what we get back. And you look at 516 00:30:06,680 --> 00:30:09,000 Speaker 1: a state like Kentucky that's a taker. We're a giver. 517 00:30:09,160 --> 00:30:11,960 Speaker 1: So we're not even trying to settle that score. We're 518 00:30:12,040 --> 00:30:14,400 Speaker 1: just saying, can you help us out. Federal government, like 519 00:30:14,440 --> 00:30:17,640 Speaker 1: other national governments around the planet, they don't leave the 520 00:30:17,640 --> 00:30:22,040 Speaker 1: individual provinces of different countries defend for themselves. Don't do 521 00:30:22,080 --> 00:30:25,240 Speaker 1: that here. States. We need a federal response, we needed 522 00:30:25,360 --> 00:30:27,800 Speaker 1: since the beginning, and and heaven help us if you're 523 00:30:27,800 --> 00:30:30,400 Speaker 1: not figuring out a federal response to getting this this 524 00:30:30,560 --> 00:30:33,120 Speaker 1: vaccine out there once it's developed. We have to make 525 00:30:33,160 --> 00:30:35,640 Speaker 1: sure that they're developing that now, make sure it's going 526 00:30:35,680 --> 00:30:39,000 Speaker 1: to be available for everybody in both the Defense Defense 527 00:30:39,040 --> 00:30:42,240 Speaker 1: Production Act. Don't leave it up to every individual company 528 00:30:42,280 --> 00:30:44,040 Speaker 1: to try and go to the the marketing commercial life that 529 00:30:44,120 --> 00:30:47,120 Speaker 1: this needs to be a federal government response or else 530 00:30:47,160 --> 00:30:49,800 Speaker 1: we'll never get our economy. Back to Cathy forty five seconds, 531 00:30:49,800 --> 00:30:52,240 Speaker 1: forgive me for keeping this one type. If you don't 532 00:30:52,240 --> 00:30:54,160 Speaker 1: get the A G one, how quickly does the state 533 00:30:54,200 --> 00:30:58,600 Speaker 1: level austerity begin in New York almost immediately. We are 534 00:30:58,640 --> 00:31:00,600 Speaker 1: counting on this. We need that money out to give 535 00:31:00,680 --> 00:31:03,440 Speaker 1: to our schools so they can have the PP and 536 00:31:03,440 --> 00:31:06,920 Speaker 1: the disinfecting and and rent additional space or wherever they 537 00:31:06,960 --> 00:31:08,959 Speaker 1: need to do, just to get our kids back to school. 538 00:31:09,200 --> 00:31:11,320 Speaker 1: And guess what if our kids don't get back to school, 539 00:31:11,600 --> 00:31:14,320 Speaker 1: the economy doesn't go back because who's watching the kids 540 00:31:14,320 --> 00:31:17,040 Speaker 1: when the parents go to work. And this always falls 541 00:31:17,040 --> 00:31:19,880 Speaker 1: on the shoulders of women. Senator Gillibrand and I tour 542 00:31:20,000 --> 00:31:21,840 Speaker 1: the States of the last couple of days, going to 543 00:31:22,280 --> 00:31:25,840 Speaker 1: cities large and small, talking about a childcare crisis that 544 00:31:25,960 --> 00:31:28,760 Speaker 1: is going to hold back our recovery and settle dollars 545 00:31:28,760 --> 00:31:30,280 Speaker 1: going to assist with that. Well, it's going to start 546 00:31:30,360 --> 00:31:33,280 Speaker 1: hurting almost immediately, Lieutenant Governor, I appreciate your time place 547 00:31:33,320 --> 00:31:35,600 Speaker 1: come back to Autenant, Governor of New York. That Kathee, 548 00:31:39,520 --> 00:31:42,920 Speaker 1: it is all rage and of course of govos each 549 00:31:42,920 --> 00:31:47,760 Speaker 1: and every year there is a theme that becomes so 550 00:31:47,920 --> 00:31:50,600 Speaker 1: in Paul. I don't know where E. S g B 551 00:31:51,040 --> 00:31:53,560 Speaker 1: came in, but it wasn't last year. What happened last 552 00:31:53,640 --> 00:31:59,520 Speaker 1: year is it reached a massive pre pandemic critical mass 553 00:31:59,680 --> 00:32:04,720 Speaker 1: and was so stunning as an eighteen year Uh, Davos Watcher, 554 00:32:05,360 --> 00:32:08,800 Speaker 1: maybe fifteen years excuse me, Davos Watcher, is it was 555 00:32:08,840 --> 00:32:11,480 Speaker 1: a real conviction to it this time around. I give 556 00:32:11,520 --> 00:32:13,800 Speaker 1: a shout at the Bank of America, who I did 557 00:32:13,840 --> 00:32:18,680 Speaker 1: a panel with on E s G Environmental, social and 558 00:32:18,800 --> 00:32:22,680 Speaker 1: corporate governance. Matthew Winkler is how I go to Davos. 559 00:32:22,720 --> 00:32:25,720 Speaker 1: He's the former editor in chief, editor in chief emeritus 560 00:32:25,720 --> 00:32:28,480 Speaker 1: and but very much working as usual fifteen hour a 561 00:32:28,560 --> 00:32:32,320 Speaker 1: day for Bloomberg, still penning an essay on E s G. 562 00:32:33,440 --> 00:32:37,120 Speaker 1: And Matt you say, there's a real persistency to E 563 00:32:37,400 --> 00:32:43,120 Speaker 1: s G being acknowledged by the street. Is profitable, Tom, 564 00:32:43,120 --> 00:32:47,200 Speaker 1: It's always good to be with you. Um. Yes, Uh. 565 00:32:47,280 --> 00:32:51,880 Speaker 1: It's a long term trend, but it's accentuated by COVID nineteen. 566 00:32:52,280 --> 00:32:55,080 Speaker 1: And what we're seeing right now this year is E 567 00:32:55,280 --> 00:32:58,440 Speaker 1: s T is where the profits are. So what that 568 00:32:58,480 --> 00:33:01,840 Speaker 1: means is, if you like doing the right thing, increasingly 569 00:33:01,920 --> 00:33:06,280 Speaker 1: is the smartest bet. Why is that evident? Well, if 570 00:33:06,280 --> 00:33:08,880 Speaker 1: you just looked at the broad market, which is I shares, 571 00:33:09,520 --> 00:33:11,920 Speaker 1: exchange traded funds, if you look at the ones that 572 00:33:11,960 --> 00:33:16,440 Speaker 1: are invested in E s G. They're dramatically outperforming the 573 00:33:16,560 --> 00:33:21,600 Speaker 1: SMP five index. Uh no, lesser light if you will. 574 00:33:22,000 --> 00:33:27,480 Speaker 1: Then al Gore recently told a conference held but Bloomberg that, um, 575 00:33:27,520 --> 00:33:30,920 Speaker 1: it is ever clearer that sustainable technologies are super and better. 576 00:33:31,640 --> 00:33:35,200 Speaker 1: And so when you look at actually you know the 577 00:33:35,240 --> 00:33:37,720 Speaker 1: performance of companies, which we can do on the Bloomberg 578 00:33:37,800 --> 00:33:41,440 Speaker 1: my colleagues Chinpay and I. You know, there are more 579 00:33:41,440 --> 00:33:45,240 Speaker 1: than three dozen companies generating at least fifty of their 580 00:33:45,240 --> 00:33:48,360 Speaker 1: revenue from clean energy products or clean technology, and as 581 00:33:48,360 --> 00:33:51,680 Speaker 1: a group, their sales are going to grow this year 582 00:33:55,880 --> 00:33:59,440 Speaker 1: or so. And that's a marked contrast to say the 583 00:33:59,560 --> 00:34:03,240 Speaker 1: SMP five Energy and Deck, which is the benchmark for 584 00:34:03,280 --> 00:34:06,960 Speaker 1: fossil fuel. And those companies are going to have residented 585 00:34:07,040 --> 00:34:12,239 Speaker 1: clients of about this year, and their growth in the 586 00:34:12,280 --> 00:34:14,640 Speaker 1: next two years it's going to be much less than 587 00:34:14,680 --> 00:34:17,919 Speaker 1: the s G crowd. Matt, you mentioned L. L. Gore. 588 00:34:18,040 --> 00:34:21,040 Speaker 1: You mentioned L. Gore. I believe he's a Democrat, something 589 00:34:21,040 --> 00:34:24,200 Speaker 1: about a hanging chad. Years ago. His e s G 590 00:34:24,400 --> 00:34:30,000 Speaker 1: become a Republican theme as well. Well. If you're an investor, 591 00:34:30,120 --> 00:34:34,319 Speaker 1: you don't presumably care so much about politics or ideology. 592 00:34:34,360 --> 00:34:37,400 Speaker 1: What you care about is total return. So if you 593 00:34:37,520 --> 00:34:41,520 Speaker 1: look at the total return, which I think Republicans and 594 00:34:41,560 --> 00:34:46,400 Speaker 1: Democrats alike are interested in, the total return over five years, 595 00:34:46,440 --> 00:34:49,600 Speaker 1: two years, one year, you know, pick any period really 596 00:34:49,640 --> 00:34:54,080 Speaker 1: since two thousand fifteen, and the E. S G company's 597 00:34:54,239 --> 00:34:59,840 Speaker 1: total return is staggeringly better than the fossil fuel crowd. 598 00:35:00,160 --> 00:35:04,120 Speaker 1: So if you want to make money, um, you know 599 00:35:04,360 --> 00:35:08,760 Speaker 1: and stay rich. Uh, this has been a good trade. Um, 600 00:35:08,760 --> 00:35:11,920 Speaker 1: and not just you know, this year, but uh, really 601 00:35:11,920 --> 00:35:15,400 Speaker 1: over a longer term period. So why is that happening. 602 00:35:15,840 --> 00:35:21,720 Speaker 1: It's because, as Gore said, the growth is in alternative energy. 603 00:35:22,040 --> 00:35:26,120 Speaker 1: That's where investors increasingly are getting most excited, and that's 604 00:35:26,120 --> 00:35:29,200 Speaker 1: where the innovation is, whereas in fossil fuel it's basically 605 00:35:29,200 --> 00:35:31,960 Speaker 1: the same over and over again. That goes back to 606 00:35:32,000 --> 00:35:34,919 Speaker 1: the revenue line, the revenue dynamical we've been talking about. Yeah, 607 00:35:34,920 --> 00:35:37,840 Speaker 1: it's interesting, Matt. I'm wondering have you noticed a difference 608 00:35:37,880 --> 00:35:41,280 Speaker 1: maybe either in performance of stocks or willingness of companies 609 00:35:41,320 --> 00:35:44,239 Speaker 1: to embrace E s G post you know, in the 610 00:35:44,239 --> 00:35:48,880 Speaker 1: context of this new world we're in here with the pandemic. Well, again, 611 00:35:48,960 --> 00:35:51,360 Speaker 1: if you go to the Bloomberg and this is something 612 00:35:51,400 --> 00:35:54,400 Speaker 1: my colleague Shouldntay does all the time, and look at 613 00:35:54,440 --> 00:35:59,280 Speaker 1: their trajectory of the exchange traded funds that are invested 614 00:35:59,480 --> 00:36:03,400 Speaker 1: in the s G and the exchange traded funds invested 615 00:36:03,440 --> 00:36:07,840 Speaker 1: saying fossil fuel, it's dramatic. I mean, the divergence is dramatic. 616 00:36:07,880 --> 00:36:11,360 Speaker 1: So what that shows you is slow of funds consistently, 617 00:36:12,040 --> 00:36:15,760 Speaker 1: robustly is slowing into e s G, whereas fossil fuel 618 00:36:15,840 --> 00:36:19,560 Speaker 1: is the same old, same old, and it's relatively stable, 619 00:36:19,640 --> 00:36:23,719 Speaker 1: but there's no growth there. So that's where the excitement is. 620 00:36:23,760 --> 00:36:26,640 Speaker 1: And you know, one really dramatic example of this, and 621 00:36:26,760 --> 00:36:28,640 Speaker 1: you know, I don't want to belabor this point because 622 00:36:28,640 --> 00:36:30,839 Speaker 1: I have before on the show, is if you look 623 00:36:30,880 --> 00:36:34,920 Speaker 1: at the gap between a Ramco that's the Saudi Arabian 624 00:36:35,239 --> 00:36:39,080 Speaker 1: oil company that still is the world's most valuable company 625 00:36:39,120 --> 00:36:42,560 Speaker 1: went public in December more, you know, right after its 626 00:36:42,600 --> 00:36:45,759 Speaker 1: I p O was worth more than two trillion dollars. Well, 627 00:36:45,800 --> 00:36:49,720 Speaker 1: what's happened since then? The gap between a Ramco and Tesla, 628 00:36:49,800 --> 00:36:54,839 Speaker 1: which I don't need to advertise, has has narrowed by 629 00:36:54,880 --> 00:37:00,000 Speaker 1: about five billion dollars. That's that's a really dramatic uh. 630 00:37:00,200 --> 00:37:04,080 Speaker 1: You know, situation if you like. Now, what's interesting about 631 00:37:04,160 --> 00:37:07,879 Speaker 1: that is that five billion dollars is a little more 632 00:37:07,920 --> 00:37:12,040 Speaker 1: than the four hundred and sixty seven billion value of 633 00:37:12,080 --> 00:37:15,280 Speaker 1: the world's ninth largest company. That would be Berkshire Hathaway, 634 00:37:15,600 --> 00:37:19,480 Speaker 1: created by Warren Buffett, once the world's richest man. He's 635 00:37:19,520 --> 00:37:23,080 Speaker 1: the avatar of value investing. He's so far shown no 636 00:37:23,160 --> 00:37:27,600 Speaker 1: inclination to move towards if so far, but it's really 637 00:37:28,120 --> 00:37:30,640 Speaker 1: an indication of the sign of the time. See you 638 00:37:31,120 --> 00:37:33,760 Speaker 1: see Paul, Matt brings this up. I loaded the boat 639 00:37:33,840 --> 00:37:37,520 Speaker 1: double leverage on a railco. What a nightmare that's been 640 00:37:38,040 --> 00:37:40,880 Speaker 1: exactly right. Hey Matt, thanks, uh thanks, thanks so much 641 00:37:40,880 --> 00:37:43,240 Speaker 1: for joining us. We appreciate it. Matt Winkler, co founder 642 00:37:43,600 --> 00:37:47,560 Speaker 1: of Bloomberg News and Bloomberg Editor in Chief emeritus. Thanks 643 00:37:47,560 --> 00:37:51,800 Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen 644 00:37:52,040 --> 00:37:57,400 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform 645 00:37:57,480 --> 00:38:01,799 Speaker 1: you prefer. I'm on Twitter at Tom Mean before the podcast. 646 00:38:01,840 --> 00:38:05,360 Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio