WEBVTT - Surveillance: Earnings Growth Not Significant, Levitt Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.440 Bloomberg dot Com, and of course on the Bloomberg Really 0:00:28.440 --> 0:00:30.200 Placed to say that. Joining us here in the studio 0:00:30.240 --> 0:00:33.520 in New York City is Brian Levitt, invest global market strategist. 0:00:33.520 --> 0:00:36.680 Good mornitude. You'll take on that how well this market 0:00:36.720 --> 0:00:38.680 is holding up in the face of some bad news 0:00:38.720 --> 0:00:40.959 here and that through much of this week. Well, it's 0:00:40.960 --> 0:00:43.040 a better tone for the market. I mean, think about 0:00:43.040 --> 0:00:46.400 how negative investors were in the summer. You had seen 0:00:46.479 --> 0:00:49.400 interest rates go down significantly, we inverted the yield curve, 0:00:49.520 --> 0:00:52.559 and what you really need was policy to respond. So 0:00:52.600 --> 0:00:55.480 the Federal Reserve has responded and will continue to respond. 0:00:55.840 --> 0:00:58.920 We've seen some modest improvements in tone in the US 0:00:59.120 --> 0:01:02.560 China trade such ovation. So I view this as the 0:01:02.600 --> 0:01:06.600 market had gotten very negative. The tone is getting somewhat 0:01:06.640 --> 0:01:09.200 more positive, and now the market is is really looking 0:01:09.240 --> 0:01:11.920 for the next catalyst to press higher. All the earnings 0:01:11.920 --> 0:01:14.600 through this week, for every Amazon, there is a Microsoft 0:01:14.600 --> 0:01:16.880 for every Texas Instruments. There is an insalet. It's been 0:01:16.920 --> 0:01:19.720 pretty mixed scratually through the week so far. Bron, it's 0:01:19.720 --> 0:01:21.720 that your tight tip. Yeah, it's a very mixed picture 0:01:21.760 --> 0:01:24.000 and and earnings growth is not going to be significant. 0:01:24.040 --> 0:01:27.960 It's very consistent with a global economy that had slowed 0:01:28.040 --> 0:01:31.640 pretty meaningfully amid all of the policy uncertainty. So this 0:01:31.680 --> 0:01:35.720 is the third growth scare we've had in this elongated cycle. 0:01:36.040 --> 0:01:39.600 The first time the European Central Bank stepped in, the 0:01:39.640 --> 0:01:43.280 second time in the Federal Reserve backed off. And now 0:01:43.520 --> 0:01:46.759 markets are looking for clarity on trade, which will start 0:01:46.760 --> 0:01:50.080 to improve business sentiment and start to improve capital expenditures, 0:01:50.240 --> 0:01:53.120 start to improve the manufacturing sector. So the market is 0:01:53.200 --> 0:01:56.800 dealing with a a flat earnings growth environment and we 0:01:56.880 --> 0:02:00.080 wait for the next catalyst to improve business comp it 0:02:00.160 --> 0:02:03.240 ends and start to improve economic activity globally. And Brian, 0:02:03.240 --> 0:02:04.960 at what point do you think we need to worry 0:02:05.040 --> 0:02:08.040 or be concerned about valuation. We've had a nice run 0:02:08.120 --> 0:02:11.200 up in the market this year roughly, yet earnings have 0:02:11.240 --> 0:02:14.160 been kind of flatish. Where are we evaluation? Yes, So 0:02:14.200 --> 0:02:16.840 the market, Um, if you look at the broad SMP five, 0:02:17.240 --> 0:02:20.400 you're trading somewhere around nineteen nineteen and a half times earnings. 0:02:20.440 --> 0:02:23.720 So that is expensive compared to the long term average, 0:02:23.840 --> 0:02:25.880 but I think it makes more sense for investors to 0:02:25.960 --> 0:02:28.200 think about it within the confines of the current interest 0:02:28.280 --> 0:02:31.200 rate and inflation environment. And so, you know, if you're 0:02:31.240 --> 0:02:35.239 if you say a nineteen times price earnings multiple on stocks, 0:02:35.240 --> 0:02:37.280 I'd rather think of it of an earnings yield, an 0:02:37.280 --> 0:02:40.440 earnings yield of you know, call it one hundred and 0:02:40.440 --> 0:02:43.320 sixty earnings divided by three thousand on the SMPS, around 0:02:43.320 --> 0:02:45.680 four and a half percent, compared to a one point 0:02:45.680 --> 0:02:48.360 each treasury yield. So yes, stocks are a little bit 0:02:48.400 --> 0:02:51.519 expensive to their own history, but are still cheap compared 0:02:51.560 --> 0:02:55.080 to bonds um at a time when investors really haven't 0:02:55.080 --> 0:02:59.360 gotten euphoric about equities. So yeah, do we have significant 0:02:59.440 --> 0:03:03.440 multiple spansion here? Perhaps not. I suspect what drives markets 0:03:03.520 --> 0:03:06.639 higher is a better policy mix that starts to improve 0:03:06.840 --> 0:03:11.720 economic activity and ultimately drives earnings higher. In so, given 0:03:11.720 --> 0:03:14.320 that we're ten plus years into this economic cycle where 0:03:14.360 --> 0:03:17.720 valuations are not cheap historically, but we have the the 0:03:17.840 --> 0:03:20.280 low interest rate environment, are there certain sectors that you 0:03:20.360 --> 0:03:22.840 like right here? Because we've heard people talk about I 0:03:22.880 --> 0:03:24.760 need to be safe. I need to be you know, 0:03:24.840 --> 0:03:27.639 kind of get into the less risky sectors. But those 0:03:27.680 --> 0:03:29.840 aren't cheap, and I think about reets in YouTube and 0:03:29.880 --> 0:03:32.600 things like that. What sectors do you think about at 0:03:32.639 --> 0:03:34.320 this point of the sector. Well, I think it's too 0:03:34.400 --> 0:03:36.160 late to get defensive. I mean the time to be 0:03:36.280 --> 0:03:39.080 defensive was when the tenure Treasury right was going from 0:03:39.080 --> 0:03:41.440 three and a quarter to one fifty. And that was 0:03:41.800 --> 0:03:43.840 the market telling you we were in the throes of 0:03:43.840 --> 0:03:46.840 a policy mistake both from the FED and the administration 0:03:46.880 --> 0:03:49.440 on trade. You know, this back up in rates and 0:03:49.560 --> 0:03:52.240 a little bit of an improving tone that favors the 0:03:52.240 --> 0:03:55.040 more cyclical parts of the market. I don't think we're 0:03:55.080 --> 0:03:57.560 going into this environment where the u S gets to 0:03:57.600 --> 0:04:00.120 this new higher sustained level of growth and starts to 0:04:00.200 --> 0:04:03.040 unlock the deeper value in the markets. I would favor 0:04:03.080 --> 0:04:05.000 in the near term the more cyclical parts of the 0:04:05.040 --> 0:04:09.160 market as growth improves as you get out into Honestly, 0:04:09.240 --> 0:04:11.680 I think we're just gonna get back into this slow 0:04:11.720 --> 0:04:14.520 growth world where investors are going to get back to 0:04:14.560 --> 0:04:19.640 paying these fancy multiples on true growth companies and discretionary names. 0:04:19.640 --> 0:04:24.320 And technology names. Market leadership tends to not change meaningfully 0:04:24.400 --> 0:04:26.840 later in the cycle. So we're in a period right now. 0:04:26.880 --> 0:04:29.560 We're more value, more cyclical. But I think we get 0:04:29.600 --> 0:04:31.960 back to growth in a slow growth world type of environment, 0:04:32.000 --> 0:04:36.039 slow growth trend, growth that's sufficient for a sustainable break 0:04:36.080 --> 0:04:40.520 at three. Oh yeah, absolutely, um, you know this. We 0:04:40.520 --> 0:04:42.440 we we have been in this nice environment of two 0:04:42.480 --> 0:04:45.040 percent growth for a long period of time that didn't 0:04:45.080 --> 0:04:48.160 really please workers, didn't really please the voters, but it's 0:04:48.160 --> 0:04:51.200 been fantastic for the equity markets. And the reason it's 0:04:51.240 --> 0:04:53.480 fantastic for the equity markets because it's strong enough to 0:04:53.520 --> 0:04:56.320 support corporate earnings but not so strong as to bring 0:04:56.400 --> 0:04:59.880 forward inflation and FED tightening, and so in that type 0:04:59.880 --> 0:05:02.400 of environment, you just don't want to upset the apple cart. 0:05:02.520 --> 0:05:05.880 What we've been dealing with since with stimulus and then 0:05:05.880 --> 0:05:08.800 FED rate hikes and then the trade war is upsetting 0:05:08.920 --> 0:05:12.600 this nice two growth, two percent inflation, no fed tightening 0:05:12.680 --> 0:05:15.400 environment that's been very good for equities and should continue 0:05:15.400 --> 0:05:17.400 to be good for equity. Let's wrap this conversation up 0:05:17.440 --> 0:05:19.200 the debate of the week for me, have we seen 0:05:19.279 --> 0:05:21.720 off the worst of it? Have we seen off the 0:05:21.760 --> 0:05:24.120 worst of it. Sometimes the information content and how a 0:05:24.160 --> 0:05:27.480 market response to information is just as important as the 0:05:27.560 --> 0:05:29.760 data itself. And through this week, the p m ice 0:05:29.760 --> 0:05:32.760 haven't picked up in Europe. Business confidence in Germany a 0:05:32.760 --> 0:05:35.240 glimmer of hope, but it's not really that convincing yet. 0:05:35.720 --> 0:05:40.280 The stoxics hundred new height. What's the signal that, Brian, Yes, 0:05:40.320 --> 0:05:43.479 so the market is sniffing out a better policy mix 0:05:43.600 --> 0:05:46.640 leading to better economic activity. And so I believe we 0:05:46.680 --> 0:05:48.680 have seen the worst of him. And look, Jonathan, we 0:05:48.680 --> 0:05:50.120 we got to one and a half on the ten 0:05:50.200 --> 0:05:53.400 year rate. We got to an inverted yield curve. That 0:05:53.640 --> 0:05:56.239 was the bond market telling us, well, is what happened 0:05:56.240 --> 0:05:59.120 with the dollar and strength the currency market telling us 0:05:59.320 --> 0:06:01.480 we're in the throw is of a policy mistake that's 0:06:01.560 --> 0:06:04.760 leading to a severe economic slowdown. As you start to 0:06:04.839 --> 0:06:09.400 change that narrative, fed steps in administration starts talking about 0:06:09.440 --> 0:06:12.119 skinny deals. We kicked the can down the road further. 0:06:12.200 --> 0:06:15.240 On Brexit and this idea of a of a hard 0:06:15.360 --> 0:06:19.640 Brexit or no deal brexit, U brexit first just to 0:06:19.680 --> 0:06:23.280 clean now carry on, Brian, play the word of the day, um, 0:06:23.400 --> 0:06:25.839 and you know all of that starts to improve the 0:06:25.880 --> 0:06:29.080 tone in the market and market um so, I suspect 0:06:29.440 --> 0:06:32.640 you will see the purchasing manager in the season, the 0:06:32.720 --> 0:06:36.040 leading indicators of economic activity start to pick up again, 0:06:36.240 --> 0:06:39.680 just like they did when the European Central Bank responded 0:06:39.680 --> 0:06:42.200 in twelve and just like they did when the FED 0:06:42.240 --> 0:06:45.039 backed off. In the debate we're having right now is 0:06:45.040 --> 0:06:48.479 so polarizing. I imagine there are people screaming, screaming, sang 0:06:48.600 --> 0:06:50.719 I agree with Brian. There will be other people saying 0:06:50.800 --> 0:06:52.960 I completely disagree. Let's put you on the spot. You 0:06:52.960 --> 0:06:54.719 think we've seen the loan for the ten year for 0:06:54.760 --> 0:06:56.640 this year? Oh yeah, I think we've seen the low 0:06:56.680 --> 0:06:59.440 for the tenure. Um. I don't think that we're going 0:06:59.480 --> 0:07:02.800 to see the tenure rate go meaningfully higher. This is 0:07:02.800 --> 0:07:06.680 a cyclical move up in tenure, but the tenure will 0:07:07.160 --> 0:07:10.720 likely reflect where where real economic activity is. In the 0:07:10.800 --> 0:07:13.760 United States, call it, call it closer to two percent, 0:07:13.920 --> 0:07:18.240 but you know three was treasuries that had been oversold, 0:07:18.520 --> 0:07:21.080 one and a half was treasuries that were overbought. And 0:07:21.440 --> 0:07:24.280 two percent right along the lines of where potential growth 0:07:24.320 --> 0:07:26.200 is in this country, is a is a more reasonable 0:07:26.320 --> 0:07:28.320 rate for the tenure. Great to see you. Great to 0:07:28.320 --> 0:07:30.800 see you as well. Brian Levitt, Investar Global Markets, trying 0:07:30.840 --> 0:07:47.920 to just here is your two second Brexit warning. Now 0:07:47.960 --> 0:07:50.280 we're going to discuss Brexit. Here's the latest for you. 0:07:50.760 --> 0:07:53.360 The Prime Minister has been forced legally to us for 0:07:53.360 --> 0:07:56.240 an extension. The EU has not said when that extension 0:07:56.240 --> 0:07:58.640 will go to because the Prime Minister is now asking 0:07:58.680 --> 0:08:01.760 for an election. Jeremy Corbin is so fast saying no. 0:08:02.320 --> 0:08:05.000 James Apy has the unfortunate luck of joining us on 0:08:05.040 --> 0:08:07.920 this program to talk about it. Aberdeen Standard Investments senior 0:08:07.960 --> 0:08:10.120 investment manager to join the Sound of London. Good morning 0:08:10.120 --> 0:08:12.800 to James. More than John, How you doing what is 0:08:12.840 --> 0:08:16.120 going on in the United Kingdom? You could have eased 0:08:16.120 --> 0:08:18.560 me and gently with a question about something a little 0:08:18.680 --> 0:08:23.560 less ridiculous, but thank you for starting me with the 0:08:23.560 --> 0:08:27.880 the impossible task. I don't know, like I gave up 0:08:28.640 --> 0:08:30.720 doing what I normally do as an investor looking at 0:08:30.720 --> 0:08:33.959 the world probabilistically gaming this out. How do I know 0:08:33.960 --> 0:08:36.080 who's incentivized to do what? What does the world look 0:08:36.080 --> 0:08:38.959 like in all of these scenarios, etcetera, etcetera. It hasn't worked. 0:08:39.840 --> 0:08:43.720 I you know, the normal motivations for political individuals and 0:08:43.800 --> 0:08:46.480 parties don't seem to be driving their decisions. And I 0:08:46.480 --> 0:08:51.280 think most confusingly, and most recently of all, the opposition strategy, 0:08:51.320 --> 0:08:53.920 which was opposed everything because you want an election, has 0:08:53.960 --> 0:08:56.360 now been well, you don't want an election either, so 0:08:56.440 --> 0:08:58.480 what do you want? And that means it's very difficult 0:08:58.840 --> 0:09:01.600 because of the Fixed Parliament's Actor. This is what's god 0:09:01.640 --> 0:09:04.920 us into this mess. Really, the unintended consequences of that 0:09:05.000 --> 0:09:10.079 legislation unlesson until the Labor Party's policy is a bit 0:09:10.200 --> 0:09:13.319 clearer and easy to understand. We're trapped in this situation 0:09:13.320 --> 0:09:15.679 where the EU won't move until they know what we're doing, 0:09:15.679 --> 0:09:17.920 and we can't move until the EU is confirmed. So 0:09:18.240 --> 0:09:20.080 it's a tough one. I think essentially we're talking about 0:09:20.080 --> 0:09:22.120 a general election, if that's mid December or not. I 0:09:22.160 --> 0:09:24.600 guess we'll find out more in the coming days for 0:09:24.640 --> 0:09:26.520 our listeners who might not be familiar with the Fixed 0:09:26.600 --> 0:09:29.079 Term Parliament Act, Essentially, to get a snap election in 0:09:29.120 --> 0:09:31.640 the United Kingdom, it's not enough the government calls for it. 0:09:31.679 --> 0:09:34.400 You need two thirds of MPs to actually vote for it. 0:09:34.480 --> 0:09:36.280 So for the Prime Minister to get what he wants, 0:09:36.600 --> 0:09:39.040 he needs the leader of the Opposition Jeremy Corbyn and 0:09:39.120 --> 0:09:41.600 some Labor MPs to come with him. James, I was 0:09:41.600 --> 0:09:43.880 looking at the letter from the Prime Minister to the 0:09:43.960 --> 0:09:46.439 Leader of the Opposition on page two. In the first paragraph, 0:09:46.520 --> 0:09:49.480 the EU may offer only a short extension, say the 0:09:49.720 --> 0:09:54.120 fifteenth November. This would obviously be my preference, but I 0:09:54.200 --> 0:09:57.560 was illegally prevented by Parliament and the courts from suggesting this. James, 0:09:57.760 --> 0:10:00.040 I think it's pretty clear he's suggesting. Get I just 0:10:00.120 --> 0:10:02.160 wonder what the EU will come back with, because this 0:10:02.240 --> 0:10:05.359 is actually pretty critical for the next moves in markets 0:10:05.679 --> 0:10:09.200 and the next moves politically. What extension the EU actually 0:10:09.200 --> 0:10:11.920 gives the UK And so far, James, we've had no answer, 0:10:12.840 --> 0:10:16.079 no exactly. So the e used position is obviously that 0:10:16.200 --> 0:10:21.040 an extension is almost a foregone conclusion. But increasingly they recognize, 0:10:21.080 --> 0:10:23.880 and I think we all recognize that purgatory is suiting 0:10:23.880 --> 0:10:26.480 no one. So they're not they don't want to be 0:10:26.520 --> 0:10:28.560 involved in UK politics, but neither do they want to 0:10:28.559 --> 0:10:31.240 be involved in just continually kicking the can down the 0:10:31.320 --> 0:10:34.120 road without any sign of resolution. So they want from 0:10:34.240 --> 0:10:37.320 us a plan. Why are we having this extension and therefore, 0:10:37.360 --> 0:10:40.040 what's an appropriate length of time. The problem is that 0:10:40.120 --> 0:10:42.880 Jeremy Corbyn, the leader of the Opposition, is saying I 0:10:42.960 --> 0:10:45.319 will not vote for an election, I will not vote 0:10:45.360 --> 0:10:47.480 for this deal. I will basically not vote for anything 0:10:47.600 --> 0:10:50.760 until no Deal is quote unquote taken off the table, 0:10:51.120 --> 0:10:55.480 which is an impossibility because even if you could legislate 0:10:55.520 --> 0:10:57.880 to take it off the tables as they have, that 0:10:57.960 --> 0:11:01.200 legislation can always be undone when a government has a majority. 0:11:01.280 --> 0:11:03.960 So again we're sort of trapped in this situation. I 0:11:03.960 --> 0:11:07.280 think President mcquan is is an important figure to watch here. 0:11:07.080 --> 0:11:10.079 He's the de facto leader I think of the European Union, 0:11:10.280 --> 0:11:12.640 and I think he's working well with Prime Minister Johnson, 0:11:12.840 --> 0:11:15.600 and I think they're trying to pressure together the UK 0:11:15.720 --> 0:11:18.440 Parliament to get its act together. When push comes to shove, 0:11:18.480 --> 0:11:20.680 I still think it's probably more likely that that we 0:11:20.760 --> 0:11:22.560 end up with an extension to the end of January 0:11:22.640 --> 0:11:25.679 than one to the middle of November. I say that 0:11:25.760 --> 0:11:29.600 with low confidence, with low comb James, I'll lay after brexit. 0:11:29.640 --> 0:11:31.560 Hook here, let's focus on the markets a little bit. 0:11:31.800 --> 0:11:34.720 I'm inclined with indices at or near all time highs. 0:11:34.760 --> 0:11:37.560 I've got earnings tep it at best. I've got growth 0:11:37.640 --> 0:11:40.080 slow and globally, you know, I'm hard pressed not to 0:11:40.160 --> 0:11:42.160 just take all my chips off the table and go home. 0:11:42.280 --> 0:11:45.640 What are your thoughts? Yeah, I mean that's essentially not 0:11:45.679 --> 0:11:47.600 necessarily all of your chips off the table. I think 0:11:47.600 --> 0:11:49.840 there are still places that you can find value in markets, 0:11:49.840 --> 0:11:53.400 but those of that that value exists in defensive asset classes, 0:11:53.480 --> 0:11:56.640 not in pro cyclical risky asset classes. I completely agree. 0:11:56.679 --> 0:12:00.440 I'd actually have a more negative categorization of the earning picture. 0:12:01.320 --> 0:12:04.040 I think the earnings that are being reported are not great, 0:12:04.040 --> 0:12:07.480 and the earnings that are being reported, you know, diverging 0:12:07.640 --> 0:12:10.880 hugely from the underlying profitability of films across the US 0:12:10.920 --> 0:12:14.960 economy in particular. So to me, equities up here are 0:12:15.080 --> 0:12:18.520 incredibly expensive considering where we are in the economic cycle, 0:12:18.920 --> 0:12:22.000 and I don't see any evidence that the main macro 0:12:22.200 --> 0:12:25.720 themes which have driven this economic decline are going away 0:12:25.880 --> 0:12:27.559 or a changing course. So I think we're on a 0:12:27.640 --> 0:12:31.640 path towards recession. That's not imminent, but that's the path 0:12:31.679 --> 0:12:33.679 that we're on, and therefore I still want to own 0:12:33.720 --> 0:12:35.760 treasury duration and I do not want to own risk. 0:12:35.800 --> 0:12:38.800 The efforts James Athey, thank you and I'm sorry that 0:12:38.840 --> 0:12:41.480 we started with Brexit, but unfortunately that's where we are 0:12:41.480 --> 0:12:43.880 in the UK no man's land, with the zombie Parliament 0:12:43.880 --> 0:12:46.280 and hoping for a solution. Cave all this morning one 0:12:46.320 --> 0:12:49.400 pound one two and down a quarter of one percent. 0:12:49.480 --> 0:12:53.959 That was James Ane from Aberdeen Standard Investment, Senior investment manager. 0:12:54.040 --> 0:13:08.600 J want to us out of London. The politics of 0:13:08.720 --> 0:13:11.520 d C just over the last week's a few weeks 0:13:11.559 --> 0:13:15.240 relatively speaking, fading into the background on Wall Street just 0:13:15.280 --> 0:13:17.520 a little bit, just a little bit, but it's interesting. 0:13:17.520 --> 0:13:19.760 It's not just earnings, and it's not just the FED 0:13:19.880 --> 0:13:22.800 that investors have to deal with as they think about 0:13:23.080 --> 0:13:26.280 the markets. It's also geopolitics. We've got trade with China 0:13:26.320 --> 0:13:28.640 and we've also got some military situations in the Middle East. 0:13:28.640 --> 0:13:30.839 To get a sense of what's going on there. We 0:13:30.920 --> 0:13:34.640 welcome Brett Bruin, director of the Global Situation Room, also 0:13:34.720 --> 0:13:37.880 former Global Engagement Director in the Obama White House, joining 0:13:37.960 --> 0:13:40.160 us on the phone from our DC bureau. But thanks 0:13:40.160 --> 0:13:42.440 so much for joining us. Give us a sense of 0:13:42.559 --> 0:13:46.360 kind of how you view the US situation in Syria, 0:13:46.720 --> 0:13:50.400 given that the US pulled out and all that's happened. Well, 0:13:50.440 --> 0:13:56.080 I think unfortunately, the US has shown increasing um issues 0:13:56.240 --> 0:14:01.160 with its allies. We are not any longer a reliable partner, 0:14:01.200 --> 0:14:05.080 and that was clearly on display with terms decision to 0:14:05.960 --> 0:14:10.120 both pull out of Syria to back away from the Kurds. 0:14:10.240 --> 0:14:14.480 And unfortunately this has pretty far reaching consequences, not just 0:14:14.679 --> 0:14:18.160 for Syria, not just for the Middle East, but our countries. 0:14:18.280 --> 0:14:22.400 Groups are going to be reluctant to get into these 0:14:22.480 --> 0:14:28.280 kinds of engagements with the US, knowing that our track record, 0:14:28.360 --> 0:14:32.080 particularly our recent track record, is pretty spotty. So, Brett, 0:14:32.120 --> 0:14:35.400 it's interesting President Trump, you know, made the clear argument 0:14:35.440 --> 0:14:37.640 that it's just time to bring our troops home. We 0:14:37.680 --> 0:14:41.360 can't be the policeman for the world. That is obviously, 0:14:41.840 --> 0:14:44.840 uh in contrast to post World War two policy for 0:14:45.080 --> 0:14:48.760 the US. What do you think in reality it means 0:14:49.000 --> 0:14:51.160 for some of the other hotspots of the world. I'm 0:14:51.160 --> 0:14:55.440 thinking Korea on top of mind. Well, I think what 0:14:55.480 --> 0:14:59.720 we're seeing. And it's interesting you mentioned Korea because Trump's 0:14:59.800 --> 0:15:04.680 just vision to pull out of the Iran nuclear deal 0:15:05.160 --> 0:15:08.560 makes a nuclear deal with North Korea that much more 0:15:08.680 --> 0:15:13.360 difficult because he's shown how the US from administration to 0:15:13.440 --> 0:15:18.040 administration isn't necessarily going to honor the word of the 0:15:18.160 --> 0:15:22.720 last president. So the calculation for someone like Kim Jong 0:15:22.800 --> 0:15:25.360 nunn he is let me just see how much I 0:15:25.360 --> 0:15:30.600 can extract from this guy and not really make significant compromises. 0:15:30.680 --> 0:15:33.040 So the art of the deal when it comes to 0:15:33.320 --> 0:15:37.680 President Trump is um pretty superficial. So Pratt, let me 0:15:37.720 --> 0:15:40.600 tread carefully on two of these issues, North Korea in 0:15:40.640 --> 0:15:43.000 the Middle East, and I want to lean on your expertise. 0:15:43.040 --> 0:15:45.720 Many people criticize the current president of the United States 0:15:45.760 --> 0:15:48.960 for his approach in places like Syria, in places like 0:15:49.000 --> 0:15:51.440 North Korea, but the previous approach didn't seem to be 0:15:51.520 --> 0:15:53.880 that too effective either. Can you walk me through what 0:15:53.920 --> 0:15:57.480 you think the ultimate the optimal approach actually is. Well, 0:15:57.480 --> 0:16:00.200 and let me contrast to you, because there is this 0:16:00.720 --> 0:16:04.720 narrative out there. Well, Obama was reluctant to get into Syria. 0:16:04.840 --> 0:16:08.760 Obama pulled our troops out of Iraq. I was actually 0:16:08.800 --> 0:16:11.800 on a forward operating base outside of to create two 0:16:11.800 --> 0:16:14.160 thousand and eight two thousand nine. When we did that, 0:16:14.240 --> 0:16:17.960 the difference was there was a plan, there was a process, 0:16:17.960 --> 0:16:22.240 it was orderly. In the Trump foreign policy world, these 0:16:22.280 --> 0:16:26.320 decisions changed from hour to hour, and that is what 0:16:26.560 --> 0:16:30.040 makes it so chaotic and and quite frankly, that creates 0:16:30.080 --> 0:16:34.320 this collateral damage. It ricochets around the region and the world, 0:16:34.520 --> 0:16:39.160 you know, creating unintended consequences. So, Brett, if I were 0:16:39.200 --> 0:16:43.200 to pull a number of folks in the foreign policy 0:16:43.280 --> 0:16:46.560 establishment in Washington, professionals that have been there before the 0:16:46.560 --> 0:16:49.920 Trump administration are likely to be there after the Trump administration, 0:16:50.360 --> 0:16:53.360 how do they view kind of what our policy should 0:16:53.360 --> 0:16:58.040 be as it relates to engagement or disengagement. Well, there's 0:16:58.040 --> 0:17:01.360 a lot of concerns here in Washington. I've started calling 0:17:01.360 --> 0:17:05.560 it a post American error where the United States is 0:17:05.600 --> 0:17:10.160 no longer serving as the guaranteer of security stability around 0:17:10.200 --> 0:17:14.720 the world. Our credibility um was really taking a hit 0:17:14.840 --> 0:17:19.080 under this administration. The challenge I think for the foreign 0:17:19.119 --> 0:17:23.879 policy establishment is how do you rebuild, whether it is 0:17:24.000 --> 0:17:28.080 under this administration or a future administration. And I think 0:17:28.080 --> 0:17:32.560 it's going to become by showing that we can hold 0:17:33.960 --> 0:17:37.240 ourselves to certain standards and others to those standards, and 0:17:37.600 --> 0:17:41.560 we will become more reliable. Policy can continuity and a 0:17:41.640 --> 0:17:45.600 doct democracy, Brett, You'll Apprecia is incredibly difficult, and I 0:17:45.680 --> 0:17:47.520 just look at the situation right now and think, well, 0:17:47.600 --> 0:17:50.760 isn't this what people voted for In the last election. 0:17:50.800 --> 0:17:53.879 The president was pretty clear about how he would handle 0:17:54.359 --> 0:17:57.040 foreign relations, that he wouldn't want to get involved in 0:17:57.119 --> 0:17:59.040 places like the Middle East. In fact, he wanted to 0:17:59.080 --> 0:18:03.480 pull back. Should we be surprised, Well, I think there 0:18:03.560 --> 0:18:09.920 uh is a difference between political rhetoric and national security 0:18:10.640 --> 0:18:15.159 implementation and toward you know, Trump has always had his 0:18:15.359 --> 0:18:20.679 isolationists tendencies. He's always talked about America first, but there 0:18:20.880 --> 0:18:23.919 is a way of doing it. It's not as destructive. 0:18:24.400 --> 0:18:27.440 And if we just look at his record over the 0:18:27.520 --> 0:18:30.280 last two and a half years, there's not much that 0:18:30.480 --> 0:18:33.239 he has built on the world stage. He's bulldozed a 0:18:33.240 --> 0:18:37.040 whole lot. But we also need to have trade deals, 0:18:37.119 --> 0:18:40.440 we need to have um these institutions in place. And 0:18:40.680 --> 0:18:43.880 I haven't seen it anything that the Trump is actually 0:18:44.520 --> 0:18:47.199 been able to accomplish for all of his you know, 0:18:47.240 --> 0:18:51.359 bombast and Brett, give us a sense of what you 0:18:51.400 --> 0:18:55.800 think Russia is doing here? Does Russia you the American 0:18:55.920 --> 0:18:59.639 pullback off of the global stage to whatever extent we 0:18:59.720 --> 0:19:03.160 are only back what extent is Russia viewing it as 0:19:03.160 --> 0:19:07.120 a real opportunity to reassert itself on the global stage. Oh, 0:19:07.160 --> 0:19:11.000 it's a huge win. And let's just take what recently 0:19:11.040 --> 0:19:17.080 transpired in Syria. Russia has moved in asserted themselves over 0:19:17.920 --> 0:19:21.760 the territory um in the northeast of Syria. These um 0:19:21.920 --> 0:19:24.960 Putin who was meeting in soci with Urdwan. They sort 0:19:25.000 --> 0:19:29.480 of divided up the spoils. And ironically, Russia has become 0:19:29.680 --> 0:19:34.160 a more reliable ally for countries in the region than 0:19:34.280 --> 0:19:38.960 the United States. Bashar al assan um and and other 0:19:39.119 --> 0:19:41.920 leaders in the region are now looking to Moscow and 0:19:42.000 --> 0:19:44.880 saying we can get a better deal. We can get 0:19:45.040 --> 0:19:49.280 a more reliable deal from Putin than we can from 0:19:49.600 --> 0:19:52.359 a Trump or or any American leader. That wasn't the 0:19:52.400 --> 0:19:55.960 same true under Obama, you say, under any other American leader, Brett, 0:19:56.000 --> 0:19:58.080 and I wonder if the same was true under Obama 0:19:58.119 --> 0:20:01.560 as well. Why is that different this time around? Sound Well, Look, 0:20:01.840 --> 0:20:06.800 I think the Obama foreign policy certainly had the shortcomings, 0:20:06.880 --> 0:20:10.160 and I witnessed many of them firsthand. I mean, when 0:20:10.160 --> 0:20:13.679 we looked at the rise of Isis and we were 0:20:13.680 --> 0:20:16.720 reluctant to engage, and even when Obama came out in 0:20:16.760 --> 0:20:20.880 a primetime addressed and he was still quite cautious. There 0:20:21.080 --> 0:20:25.879 is undoubtedly errors that were committed under the last administration, 0:20:26.119 --> 0:20:29.760 and we're talking on a whole different spell when it 0:20:29.800 --> 0:20:32.239 comes to this administration. We've got to leave it there. 0:20:32.359 --> 0:20:35.040 We'll continue the conversation another day. Brett Ruin there, director 0:20:35.040 --> 0:20:37.520 of the Global Situation Room and form a Global Engagement 0:20:37.560 --> 0:20:55.960 Director in the Obama White House. There is a question, 0:20:56.119 --> 0:20:57.680 what do you do at this point? You have a 0:20:57.720 --> 0:20:59.240 bunch of cash, you're heading into the end of the 0:20:59.320 --> 0:21:02.520 year of people have been fairly conservative. Do you just 0:21:02.760 --> 0:21:06.119 buy the dip? Vanila right, Richardson joining us now she 0:21:06.320 --> 0:21:10.520 is Edward Jones investment strategist. Uh and Nila, it seems 0:21:10.520 --> 0:21:13.840 to be that that is what you're recommending by any dip. 0:21:14.119 --> 0:21:19.080 Is that correct? Yes? And in a word, so, we 0:21:19.200 --> 0:21:24.000 know that the growth pattern in the economy is slowing. 0:21:24.080 --> 0:21:26.639 We see weakness and manufacturing, but we still see some 0:21:26.720 --> 0:21:29.760 bright lights when it comes to the consumer. The consumer 0:21:29.800 --> 0:21:33.199 has been resilient, so that's that pillar of the economy 0:21:33.280 --> 0:21:36.280 we think remains. We're also going to see a downturn 0:21:36.359 --> 0:21:39.000 in terms of earnings growth, but not earning so we 0:21:39.080 --> 0:21:42.879 think that earnings will slow, especially at this quarter, and 0:21:42.880 --> 0:21:46.760 then pick up in the fourth quarter and into next year. 0:21:46.800 --> 0:21:49.080 So what does that mean for the investor. It means 0:21:49.119 --> 0:21:52.760 that we expect more volatility, but we expect the bull 0:21:52.800 --> 0:21:55.840 market to continue. So this is the time to put 0:21:55.920 --> 0:21:58.879 that cash that's been sitting on the sideline to work 0:21:59.119 --> 0:22:03.520 to buy quality of the investment at more attractive valuations. Well, Neil, 0:22:03.680 --> 0:22:05.679 let's talk about valuation a little bit. We've had the 0:22:06.080 --> 0:22:08.399 s and p up, you know, rough this year, but 0:22:08.560 --> 0:22:11.600 essentially no meaningful earnings growth. So I need to be 0:22:11.600 --> 0:22:16.000 concerned about valuation. That this market is rich, We don't. 0:22:16.240 --> 0:22:18.960 We think that the market is reasonably priced. It's not 0:22:19.160 --> 0:22:21.439 cheap like it was in December when we had that 0:22:21.480 --> 0:22:23.560 big stell up, and that was a good time if 0:22:23.560 --> 0:22:25.879 you put money into the market, then you saw a 0:22:26.160 --> 0:22:29.720