WEBVTT - Bloomberg Surveillance TV: April 3, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.440 Terminal and the Bloomberg Business App. Eric Canterer joins us now, 0:00:37.440 --> 0:00:40.360 the former House Majority leader and vice chair of Molis 0:00:40.400 --> 0:00:41.000 and Company. 0:00:41.200 --> 0:00:43.000 Eric, Good to see you, sir, Good to be here. 0:00:43.120 --> 0:00:45.080 We're all trying to figure out how close are we 0:00:45.200 --> 0:00:47.159 to a point where a leader in America comes out 0:00:47.159 --> 0:00:50.159 with a set of policies and this market rejects it. 0:00:50.360 --> 0:00:51.640 How close are we to that moment? 0:00:51.840 --> 0:00:55.760 You know, it is so reminiscent of the discussion that 0:00:56.000 --> 0:00:57.920 we had even when I was on the hill, and 0:00:57.960 --> 0:01:00.120 if you look back even ten years ago, we were 0:01:00.120 --> 0:01:02.680 screaming the same thing that we have reached a point 0:01:02.720 --> 0:01:06.039 of unsustainable debt levels. We have to do something about it, 0:01:06.240 --> 0:01:08.760 and I certainly agree with what both Kim Griffin and 0:01:08.840 --> 0:01:11.640 Larry Frank Larry Fink have said that we are on 0:01:11.680 --> 0:01:16.080 an unsustainable path. I think, though, that the discussion around 0:01:16.120 --> 0:01:18.840 the debt and deficit is a little bit too simplistic, 0:01:19.000 --> 0:01:23.040 because yes, it's okay to have some level of debt 0:01:23.040 --> 0:01:25.520 and deficit. I think people, most people in their lives 0:01:25.560 --> 0:01:27.399 have it, and I think the government's the same. I 0:01:27.440 --> 0:01:29.800 think the trouble you get into is when you start 0:01:29.840 --> 0:01:33.000 growing that deficit more quick and the debt more quickly 0:01:33.040 --> 0:01:35.959 than you grow the economy. And there is no agreement 0:01:36.000 --> 0:01:38.080 though on what to do about this, And so if 0:01:38.080 --> 0:01:40.760 the parties would sort of step back and focus on 0:01:40.800 --> 0:01:45.080 growing the economy, it actually the decisions to correct the 0:01:45.160 --> 0:01:48.639 situation would be a little bit easier, the political cost 0:01:48.760 --> 0:01:51.560 a little less if people could just try and focus 0:01:51.600 --> 0:01:53.880 on how we're growing the economy instead of a lot 0:01:53.920 --> 0:01:56.160 of the policy that's underway in Washington. 0:01:56.200 --> 0:01:58.640 Isn't that the argument that the former administration led by 0:01:58.720 --> 0:02:01.960 President Donald Trump made that we can pile a more debt, 0:02:01.960 --> 0:02:03.880 but ultimately we're going to do it because we're pro growth. 0:02:03.920 --> 0:02:04.800 Did that work out well? 0:02:05.160 --> 0:02:08.040 No, because you've got to address both. I mean, there's 0:02:08.040 --> 0:02:11.240 no question that it is the demographics in our country 0:02:11.560 --> 0:02:15.639 and the healthcare costs and the increase in those healthcare costs. 0:02:15.440 --> 0:02:19.000 Turbo charge now with higher interest rates. That's where this is. 0:02:19.040 --> 0:02:22.640 This trifecta of a really toxic mix that we've got 0:02:22.639 --> 0:02:26.200 that is threatening I think the future. And I don't 0:02:26.240 --> 0:02:29.960 know if we're going to see the two candidates for president, 0:02:30.040 --> 0:02:33.880 the existing the incumbent and Donald Trump ever propose a 0:02:33.919 --> 0:02:34.440 fix to this. 0:02:34.600 --> 0:02:36.400 But I think we know how to do it. We 0:02:36.440 --> 0:02:38.079 talked about how to do it when I was there. 0:02:38.280 --> 0:02:40.160 It's interesting that you have both sides of this. You 0:02:40.160 --> 0:02:43.040 have from the policy perspective when you're in Congress, and 0:02:43.080 --> 0:02:45.359 you have now from the Wall shuep perspective when you're 0:02:45.360 --> 0:02:49.520 deciding how to invest and where to allocate. How convinced 0:02:49.600 --> 0:02:51.840 are you that this time is different, that the bond 0:02:51.919 --> 0:02:53.880 market is going to wake up to the risks that 0:02:53.960 --> 0:02:55.840 you see from the fiscal side. 0:02:55.919 --> 0:02:58.640 Well, listen, I think on the deal making side at MOLAS, 0:02:58.639 --> 0:03:01.520 I mean, what we're seeing is client who really reacted 0:03:01.639 --> 0:03:04.200 over the last couple of years to this volatility and 0:03:04.280 --> 0:03:08.240 uncertainly around interest rates. Obviously, interest rates when you're in 0:03:08.280 --> 0:03:12.240 the deal making business are very, very impactful. So you know, 0:03:12.360 --> 0:03:14.840 I do think you know, at some point the market 0:03:14.880 --> 0:03:18.799 is going to reject this continued occurrence of debt. I mean, 0:03:18.800 --> 0:03:23.240 we're spending a trillion, seven hundred billion dollars more of 0:03:23.360 --> 0:03:26.800 money than we have every single year at some point. 0:03:27.000 --> 0:03:29.960 But again, I always go back to the fact that we're. 0:03:29.919 --> 0:03:32.639 Quote unquote the fastest killed on the block in this country. 0:03:32.680 --> 0:03:35.440 Where else are you going to put your money? And 0:03:35.520 --> 0:03:39.440 whether we're seeing signs of that now and diversification, I'm 0:03:39.480 --> 0:03:42.080 not sure yet. I'm not sure because when I look 0:03:42.120 --> 0:03:44.559 at it and you look at the you know, ADP. 0:03:44.400 --> 0:03:47.000 Report out today, we'll get the jobs reported out later 0:03:47.040 --> 0:03:47.640 this week. 0:03:47.960 --> 0:03:51.920 But you know, where else is there this innovation and dynamism. 0:03:52.040 --> 0:03:53.960 I mean, we're on a role in this country where 0:03:54.000 --> 0:03:57.800 you've got more small business startups than we've ever had before. 0:03:57.920 --> 0:04:00.840 That is a signal that people are optimistic about America. 0:04:00.920 --> 0:04:03.320 If the market, though, was to push Washington's hand, because 0:04:03.400 --> 0:04:05.400 you know, Washington is not going to be the ones 0:04:05.440 --> 0:04:08.320 to come up with a plan for the fiscal deficit. 0:04:08.720 --> 0:04:10.800 Are the right people in place? You had a great 0:04:10.840 --> 0:04:14.560 relationship in twenty eleven with then former Vice President Biden. 0:04:14.640 --> 0:04:16.560 He's spoke glowingly about you able to work in a 0:04:16.600 --> 0:04:19.160 bipartisan fashion. Are the right people in place to actually 0:04:19.160 --> 0:04:20.159 come to the crisis. 0:04:20.400 --> 0:04:23.840 Look, I think that the situation will demand that people, 0:04:24.200 --> 0:04:26.560 you know, step up and come up with a solution. 0:04:26.680 --> 0:04:29.359 And there's really to me if you want to fix 0:04:29.480 --> 0:04:31.840 the problem and send the signal to the markets that 0:04:31.880 --> 0:04:34.240 the country and the investors in the markets. 0:04:33.880 --> 0:04:35.479 That the country is on the right path. 0:04:36.000 --> 0:04:39.640 You know, it's a simple notion, but it's difficult politically. 0:04:40.080 --> 0:04:42.560 You know, you just take the steps to change the 0:04:42.640 --> 0:04:46.600 healthcare entitlement, the Medicare program from a defined benefit system 0:04:46.640 --> 0:04:49.960 to a defined contribution and basically off lay some of 0:04:50.000 --> 0:04:54.040 the risks to the beneficiaries. That's really really tough politically. 0:04:54.600 --> 0:04:57.480 But if there were a crisis, if the markets did 0:04:57.520 --> 0:05:00.440 reject what's going on in Washington, you could take more 0:05:00.440 --> 0:05:04.080 interim steps to go in and tweak the age of retirement, 0:05:04.240 --> 0:05:07.920 to reduce the indexing of benefits. 0:05:08.920 --> 0:05:10.320 You could means test there are. 0:05:10.200 --> 0:05:12.360 Some things where you could buy and the government could 0:05:12.360 --> 0:05:16.080 buy us decade plus in terms of the viability of 0:05:16.080 --> 0:05:17.360 these programs. 0:05:16.839 --> 0:05:19.560 That just doesn't win elections. I want to talk about 0:05:19.600 --> 0:05:21.839 some of the proposals we are hearing from the candidates. 0:05:21.960 --> 0:05:24.279 Former President Donal Trump is talking about ten percent tariffs 0:05:24.520 --> 0:05:27.240 a wall, and then sixty percent blanket tariffs on China. 0:05:27.600 --> 0:05:29.760 We ran the numbers and that says PC be north 0:05:29.760 --> 0:05:32.680 of three percent. Yet again, do you think you would 0:05:32.680 --> 0:05:35.360 actually do that given the fact that this can mean 0:05:35.720 --> 0:05:38.000 such higher inflation, especially on everyday Americans. 0:05:38.160 --> 0:05:38.880 Well, you know, I. 0:05:38.880 --> 0:05:41.719 Think he goes back to that ammunition that someone had 0:05:41.800 --> 0:05:46.000 given back in sixteen. You know, don't take him literally, 0:05:46.080 --> 0:05:49.800 take him figuratively. Who knows, who knows what we can expect. 0:05:50.080 --> 0:05:53.800 I think the unpredictability is what he likes. And there's 0:05:53.800 --> 0:05:57.719 no question that his messages. We have been taken advantage 0:05:57.760 --> 0:06:00.560 of by others, in particular China, and we need to 0:06:00.600 --> 0:06:02.760 step up and gain some leverage when we try and 0:06:02.800 --> 0:06:06.719 negotiate some resolution of this situation. But listen, there are 0:06:07.120 --> 0:06:10.440 very troubling signs coming out of China, separate and apart 0:06:10.480 --> 0:06:15.000 from the national security concerns around particularly sensitive industries. And 0:06:15.279 --> 0:06:18.440 you know, because you think about what's going on with 0:06:18.600 --> 0:06:22.120 EVS and the fact that the Chinese government is well 0:06:22.120 --> 0:06:24.320 aware they've got to do something to take care of 0:06:24.360 --> 0:06:28.400 their domestic economy. So they are ramping up production in 0:06:28.440 --> 0:06:31.320 their manufacturing sector, and guess what, they're going to have 0:06:31.360 --> 0:06:34.279 so much excess that now they're already looking like they're 0:06:34.720 --> 0:06:37.680 sort of dumping all those into Europe. And the EVE 0:06:38.000 --> 0:06:41.640 situation very very concerning in our OEMs here are equally 0:06:41.720 --> 0:06:43.520 I think, as concerned that that may. 0:06:43.320 --> 0:06:45.760 Happen when it comes to a deal making perspective. How 0:06:45.839 --> 0:06:48.240 much you're avoiding cross border deals because of some of 0:06:48.279 --> 0:06:50.080 these questions and concerns. 0:06:50.240 --> 0:06:52.320 Well, you know, I think it's very interesting because so 0:06:52.480 --> 0:06:56.640 much of the sectors that investors will look to really 0:06:56.720 --> 0:06:59.600 we're shining in the US, and there's a lot of European, 0:07:00.120 --> 0:07:03.200 Asian Middle East investors who are looking to allocate their 0:07:03.240 --> 0:07:06.120 capital here in the US. But of course there are 0:07:06.279 --> 0:07:09.960 political ramifications to monies coming in, and we've seen that 0:07:10.040 --> 0:07:13.080 when it comes to countries that are not aligned with US, 0:07:13.120 --> 0:07:17.360 whether it's China or someone else who is just not 0:07:17.520 --> 0:07:20.040 on the favored list. You have to go through the 0:07:20.120 --> 0:07:22.800 hoops with Scippius and things like that. But I think 0:07:22.800 --> 0:07:25.520 the real concern that you know, I continue to hear 0:07:25.600 --> 0:07:28.560 from clients at MOLAS and others. Is the fact that 0:07:28.600 --> 0:07:32.400 we've got a situation with our anti trust regulators that 0:07:32.480 --> 0:07:36.280 it's not just applicable to cross border deals, it's applicable 0:07:36.320 --> 0:07:39.240 to every deal. And I think what Lena Khan Jonathan 0:07:39.280 --> 0:07:43.080 Canner have done at both FTC and DOJ has been 0:07:43.320 --> 0:07:46.400 such a stretch in terms of interpreting the law and 0:07:46.440 --> 0:07:49.360 the anti trust law, and they've I think done a 0:07:49.360 --> 0:07:53.440 disservice to our country, to investors, and frankly damaging the 0:07:53.480 --> 0:07:56.840 competitiveness of America as a destination for capital. 0:07:57.000 --> 0:07:58.720 That's the world we live in right now. We were 0:07:58.720 --> 0:08:00.760 talking to Brian moynahan just the other week on the 0:08:00.760 --> 0:08:03.080 trading floor of Banks for America at a similar complaint. 0:08:03.120 --> 0:08:04.880 It was talking about the amount of deals that were 0:08:04.880 --> 0:08:07.200 being held back by the prospect of them just not 0:08:07.280 --> 0:08:09.280 being able to pass, not being able to go through, 0:08:09.520 --> 0:08:11.440 and no one wanted to be on the wrong side 0:08:11.480 --> 0:08:13.560 of that, being left to hung out to drive for 0:08:13.600 --> 0:08:15.680 a year without any idea of whether the deal will 0:08:15.680 --> 0:08:18.119 close or not. You've see the same thing potential deals 0:08:18.120 --> 0:08:20.000 that could close that just aren't being made right now. 0:08:20.040 --> 0:08:23.000 You know, I do think and what I will say 0:08:23.040 --> 0:08:26.440 to decision makers, is that you know, if we're going 0:08:26.480 --> 0:08:28.440 to go forward, if there's going to be a deal 0:08:28.480 --> 0:08:31.920 to work, we're going to have to make sure that 0:08:32.000 --> 0:08:36.200 we allocate the necessary time, resources and commitment to get 0:08:36.240 --> 0:08:37.239 through that process. 0:08:37.679 --> 0:08:40.200 But think about it, if we like. 0:08:40.320 --> 0:08:43.720 To be the location in the world where capital flows 0:08:43.720 --> 0:08:47.040 to its most efficient use, where it's the most dynamic 0:08:47.120 --> 0:08:51.560 economy velocity of capital, we shouldn't have to do this. 0:08:51.800 --> 0:08:54.040 And unfortunately, there is just an. 0:08:53.960 --> 0:08:59.720 Overwhelming ideology that's infecting the policy in the current administration 0:09:00.080 --> 0:09:04.600 Washington that is not necessarily that favorable. But again, all 0:09:04.640 --> 0:09:08.000 the while you look to and say where else or 0:09:08.160 --> 0:09:08.840 is it any better? 0:09:08.920 --> 0:09:10.840 Let me ask you this though, is that ideology effect 0:09:10.880 --> 0:09:13.079 in both parties? Because right on cue deal crosses the 0:09:13.120 --> 0:09:15.920 Blimberg terminal, We announce it, we talk about it, we 0:09:16.000 --> 0:09:18.520 go to the Twitter account of the Center of Massachusetts 0:09:18.559 --> 0:09:19.600 tweet shock. 0:09:19.920 --> 0:09:20.920 Not surprised at all. 0:09:21.040 --> 0:09:23.199 What is surprising is the amount of Republicans that agree 0:09:23.200 --> 0:09:25.400 with the Now that's a shift, and I'm trying to 0:09:25.400 --> 0:09:27.439 work out do we actually have a business friendly party 0:09:27.480 --> 0:09:28.760 in Washington anymore? 0:09:28.800 --> 0:09:29.520 Does one exist? 0:09:29.840 --> 0:09:32.040 Well? Listen, I always I'd say I'm a limited government, 0:09:32.240 --> 0:09:37.960 pro free market, pro national security, conservative Republican. But I agree, Jonathan, 0:09:38.000 --> 0:09:41.200 with your with your sentiment that Donald Trump has changed 0:09:41.200 --> 0:09:44.520 the nature of the Republican Party. We are, i believe, 0:09:44.640 --> 0:09:49.559 now perceived as the working class party, and the Democratic 0:09:49.600 --> 0:09:53.240 Party has done more to ingratiate itself with quote unquote 0:09:53.280 --> 0:09:55.959 the elite and the very and the very far left 0:09:55.960 --> 0:09:59.440 on the ideological spectrum, and somehow the extremes are meeting 0:10:00.320 --> 0:10:02.679 and you're seeing this happen. And I worry about this 0:10:02.800 --> 0:10:06.679 because this extreme push in terms of government role in 0:10:06.720 --> 0:10:09.080 the economy has happened. 0:10:08.679 --> 0:10:10.840 With the support of both parties. 0:10:11.200 --> 0:10:13.840 You look at the IRA Bill, certainly that was one party, 0:10:13.840 --> 0:10:15.360 that was the Democratic Party, But if. 0:10:15.280 --> 0:10:18.560 You look at the Chips Bill, that look what that did. 0:10:18.600 --> 0:10:22.240 I mean, that was industrial policy focus on a particular 0:10:22.320 --> 0:10:25.800 industry that folks in my party decided was a good 0:10:25.880 --> 0:10:28.400 thing for national securities. So let's let the government go 0:10:28.480 --> 0:10:30.920 all in. That is not sort of the limited government 0:10:31.480 --> 0:10:32.760 outlook that you see. 0:10:33.440 --> 0:10:36.120 And so you're right there is a shift towards labor. 0:10:37.040 --> 0:10:40.280 Labor is in the polling public polling this country at 0:10:40.320 --> 0:10:44.960 all time high in terms of favorability, and both parties 0:10:45.040 --> 0:10:47.680 you've seen it. How in the world can a white 0:10:47.679 --> 0:10:49.679 house go and join the picket lines. 0:10:49.760 --> 0:10:52.080 That's what President Biden did, But you know what, so 0:10:52.240 --> 0:10:53.080 did Donald Trump. 0:10:53.360 --> 0:10:56.760 So did several Republican senators joined the picket lines in Detroit. 0:10:56.840 --> 0:10:59.520 Well to Jonathan's point, jd Vance, who is a VP 0:11:00.000 --> 0:11:02.959 shortless candidate, literally came out and said he thinks men 0:11:02.960 --> 0:11:04.760 a con is maybe the only effective person in the 0:11:04.800 --> 0:11:07.320 Biden administration. So say it was to be Trump, are 0:11:07.320 --> 0:11:10.199 you getting the same sort of DOJ same sort of FTC. 0:11:10.920 --> 0:11:13.480 I see, And you know that's the real question. 0:11:13.640 --> 0:11:16.280 As the weather, we're going to continue to see the extremity. 0:11:16.440 --> 0:11:19.600 I don't buy that because I still think there is 0:11:19.679 --> 0:11:20.240 a DNA. 0:11:20.720 --> 0:11:23.520 We're a product of that extremity. You lost your seat 0:11:23.559 --> 0:11:26.000 because of that, in that populous wave that people said 0:11:26.120 --> 0:11:27.480 you were really the beginning of it. 0:11:27.559 --> 0:11:30.760 But remember where the anger was. 0:11:30.840 --> 0:11:34.839 The anger really was against the so called establishment. It 0:11:34.960 --> 0:11:39.200 wasn't necessarily towards you know it was it was towards 0:11:39.200 --> 0:11:43.520 everything we thought and probably assigned an over weight to 0:11:43.720 --> 0:11:47.440 the import of profligate spending in Washington. I think it 0:11:47.480 --> 0:11:52.160 was just more it is about the establishment, the system 0:11:52.320 --> 0:11:55.680 et cetera. I don't necessarily think people are going to 0:11:55.720 --> 0:11:59.240 the polls in November based on anti trust regulation. 0:11:59.480 --> 0:12:00.959 I really so. 0:12:01.320 --> 0:12:05.360 I think that where you're going to have manifests in 0:12:05.520 --> 0:12:09.040 a next Republican Trump administration is more of the DNA 0:12:09.200 --> 0:12:13.480 that's a little bit more balanced and not so punitive 0:12:13.679 --> 0:12:14.439 on corporates. 0:12:14.480 --> 0:12:16.680 People might not be going to the polls, but you 0:12:16.720 --> 0:12:18.760 have to plan a business around it, and that's really 0:12:18.760 --> 0:12:20.640 one of the key questions. And we keep getting people 0:12:20.640 --> 0:12:23.720 in here saying, Lori Calvecina, it's like staring at the sun. 0:12:24.000 --> 0:12:27.120 How do you plan for something that feels like it 0:12:27.200 --> 0:12:29.240 is shifting and you don't know exactly. How is there 0:12:29.240 --> 0:12:32.120 any way that you are planning with the business and 0:12:32.200 --> 0:12:35.080 the deal making to get ahead of whatever kind of 0:12:35.080 --> 0:12:36.600 push we're going to get in November. 0:12:36.720 --> 0:12:40.559 So I just think that we've got to be very mindful. 0:12:40.760 --> 0:12:44.080 In twenty twenty five, there will be the super Bowl 0:12:44.320 --> 0:12:48.160 of fiscal policy debate because you've got exploration of the 0:12:48.200 --> 0:12:50.880 Trump tax cuts and some would say, well, not all 0:12:50.960 --> 0:12:53.320 of them, Well yes, there will be. Everything will be 0:12:53.360 --> 0:12:57.720 on the table, and just to extend the lower the 0:12:57.800 --> 0:13:02.560 four hundred thousand dollars and under income bracket. That's a 0:13:02.559 --> 0:13:04.880 three point two trillion dollar issue. 0:13:04.960 --> 0:13:06.040 You talk about the debt. 0:13:06.640 --> 0:13:09.240 Fiscal year twenty three, we were at seven hundred and 0:13:09.280 --> 0:13:13.080 ninety one billion dollars of interest costs and we're going up, 0:13:14.040 --> 0:13:16.400 and so everything's going to be on the table IRA. 0:13:16.840 --> 0:13:19.680 The subsidies I can, I would say, if there's any 0:13:19.760 --> 0:13:23.240 anticipation and advice I would give for those who have 0:13:23.679 --> 0:13:25.200 been on the uptake in terms of. 0:13:25.200 --> 0:13:28.720 These subsidies with the IRA, especially as. 0:13:28.559 --> 0:13:31.640 It relates to evs and renewable industries, we better take 0:13:31.640 --> 0:13:34.480 a real look to see whether we think those will continue, 0:13:34.520 --> 0:13:36.720 because they're going to be on the table too. I 0:13:36.800 --> 0:13:39.880 believe my party will first up look at some of 0:13:39.880 --> 0:13:41.360 those subsidies and get rid of them. 0:13:41.440 --> 0:13:43.640 So final question for you trying to work this sold out, 0:13:43.679 --> 0:13:46.280 because I think this is really really difficult. In twenty sixteen, 0:13:46.320 --> 0:13:47.960 we had a candidate, and I think if you could 0:13:47.960 --> 0:13:50.040 divorce the person from the policy, the policy you looked 0:13:50.080 --> 0:13:53.640 at was pro business, low taxes, comfrontation at some point 0:13:53.760 --> 0:13:56.440 with China, and then TikTok Campen in the last couple 0:13:56.480 --> 0:13:59.040 of weeks, and I was just thinking it's a Trump 0:13:59.040 --> 0:14:02.360 template from Vulge one applicable to Volume two. Do you 0:14:02.360 --> 0:14:03.000 think it is. 0:14:04.400 --> 0:14:04.719 I do. 0:14:04.800 --> 0:14:07.319 I don't think that he has changed much in terms 0:14:07.360 --> 0:14:11.880 of his career trajectory. He's always been anti China. He's 0:14:12.000 --> 0:14:16.600 always tried to go and getting some leverage in negotiations. 0:14:16.600 --> 0:14:19.560 He's a deal maker. I also think that he is 0:14:20.160 --> 0:14:22.920 focused on a growing economy. I think at the end 0:14:22.920 --> 0:14:25.080 of the day, with all the noise you see from 0:14:25.160 --> 0:14:28.200 J D Bands coming together with Elizabeth Warren and what 0:14:28.360 --> 0:14:30.440 have you, at the end of the day, the Trump 0:14:30.520 --> 0:14:34.080 administration next time will be pro business because he'll want 0:14:34.160 --> 0:14:35.680 to see a growing economy. 0:14:35.760 --> 0:14:37.080 I could talkch you well day, this was great. 0:14:37.120 --> 0:14:39.640 I stood against soon Eric, Thank you, Eric cantor that 0:14:39.960 --> 0:14:53.120 of mo listen, Michael Collins and PGM sank This defet's 0:14:53.160 --> 0:14:55.880 own projections indicate a policy rate of Nearty four percent 0:14:55.920 --> 0:14:58.400 by the end of twenty five, leaving a narrow margin 0:14:58.440 --> 0:15:00.520 of error for a ten yere yield in the low 0:15:00.600 --> 0:15:04.480 four percent area. Given the incoming treasury supply and inflation, 0:15:04.680 --> 0:15:07.440 the remains above target. Michael Collins on place to say 0:15:07.560 --> 0:15:09.600 is with us right now? Michael Collins said, I just 0:15:09.640 --> 0:15:11.880 hear a little argument there for high upon yields. 0:15:12.920 --> 0:15:14.520 You know, Jonathan, just think about it. 0:15:14.560 --> 0:15:17.320 If you're the Federal Reserve, why would you even think 0:15:17.360 --> 0:15:20.800 about cutting interest rates when the economy continues to be 0:15:21.080 --> 0:15:25.960 really solid, Inflation, as we just saw Lorettamester say, continues 0:15:26.000 --> 0:15:29.280 to be sticky and well above their target. The labor 0:15:29.360 --> 0:15:33.320 market is still rock solid, if not outright strong. The 0:15:33.360 --> 0:15:36.080 stock market has been hitting new highs, credit spreads are 0:15:36.120 --> 0:15:39.280 new lows. Financial conditions are the easiest they've been since 0:15:39.320 --> 0:15:42.160 just after the Fed started hiking, Why would you cut 0:15:42.160 --> 0:15:46.120 interest rates with that backdrop? Right, So their mo is 0:15:46.160 --> 0:15:49.600 to sit on their hands, really not do anything until 0:15:49.640 --> 0:15:52.920 they have to until one of those indicators starts to crack, right, 0:15:53.120 --> 0:15:56.200 And we're looking for signs that those indicators are cracking, 0:15:56.400 --> 0:15:58.000 and they're just not there yet. 0:15:58.120 --> 0:16:00.240 So if I called you this morning and said ten year, 0:16:00.280 --> 0:16:02.880 four thirty seven, thirty year four fifty two, would you 0:16:02.960 --> 0:16:03.760 like some you'd say no. 0:16:05.120 --> 0:16:07.560 You know, we're actually short a little bit, like the 0:16:07.680 --> 0:16:09.720 very front end, the two to kind of seven year 0:16:09.760 --> 0:16:12.280 part of the curve, because that's where all those cuts 0:16:12.640 --> 0:16:14.840 are priced in over the next year or year and 0:16:14.880 --> 0:16:18.280 a half. But Jonathan, over the long term, we're sticking 0:16:18.360 --> 0:16:21.040 to our guns. I'm looking at the twenty year today 0:16:21.440 --> 0:16:24.880 at four sixty, and this is what we're advising our clients. 0:16:24.960 --> 0:16:27.880 If you have a long term time horizon three years 0:16:27.920 --> 0:16:31.400 and out, you're supposed to buy long term interest rates 0:16:31.400 --> 0:16:35.760 here there is value. They'll probably be lower in three 0:16:35.840 --> 0:16:38.000 years from now, but it's really the next you know, 0:16:38.040 --> 0:16:40.560 six twelve, eighteen months that we're hedging our bets. 0:16:40.640 --> 0:16:43.240 How much is that complete faith that the Federal Reserve 0:16:43.360 --> 0:16:46.920 will be overly cautious in terms of how quickly they'll 0:16:46.960 --> 0:16:50.120 cut rates? In other words, if they don't cut if 0:16:50.120 --> 0:16:52.840 they don't really follow through on that they do cut 0:16:52.920 --> 0:16:55.600 rates in June despite some of this strong data, would 0:16:55.640 --> 0:17:00.760 you move away from that long duration view now? 0:17:00.880 --> 0:17:02.600 I think if they cut rates sooner, you know it. 0:17:02.640 --> 0:17:05.879 Even Embolden's the view that those long term interest rates 0:17:06.160 --> 0:17:09.240 in the mid fours are too high. Right looking at 0:17:08.920 --> 0:17:12.760 the five year, five year markets pricing of what the 0:17:12.800 --> 0:17:15.280 Fed funds rate is going to be leased, So so that's 0:17:15.320 --> 0:17:17.680 like a really term expectation of the funds rate. 0:17:18.080 --> 0:17:20.640 It's at three eighty today, all. 0:17:20.600 --> 0:17:24.239 Right, So the markets are only pricing in about one 0:17:24.280 --> 0:17:28.160 hundred and sixty or so basis points of cuts forever, right, 0:17:28.200 --> 0:17:31.200 And that that's really why we have a stronger viewpoint 0:17:31.240 --> 0:17:35.520 on the longer term value in treasury yields right now, 0:17:35.560 --> 0:17:38.160 because I think the Fed funds rate is probably going 0:17:38.200 --> 0:17:41.440 to average well below three point eight percent a year 0:17:41.800 --> 0:17:42.960 for the next ten years. 0:17:43.040 --> 0:17:43.119 Right. 0:17:43.160 --> 0:17:45.360 I mean we're just really debating, you know, the next 0:17:45.400 --> 0:17:47.760 six to twelve months. But wow, over the long term, 0:17:48.359 --> 0:17:52.400 I mean, global growth is slowing, China is really struggling. 0:17:52.480 --> 0:17:56.879 You're seeing inflation in Europe continue to decelerate, right, So, 0:17:57.200 --> 0:18:02.800 I mean there are big picture signs globally that growth 0:18:02.840 --> 0:18:05.080 is going to continue to moderate and then inflation will 0:18:05.119 --> 0:18:08.679 ultimately come down. It's really the challenge has been in 0:18:08.720 --> 0:18:09.800 the US data. 0:18:10.040 --> 0:18:12.000 Which is interesting because this is one of the key 0:18:12.080 --> 0:18:13.919 nodes of debate, which is basically, are we in a 0:18:14.040 --> 0:18:17.880 new regime post pandemic of higher inflation or to your point, 0:18:18.080 --> 0:18:21.560 are we not. Would a possible policy shift change that 0:18:21.760 --> 0:18:25.560 the potential for a more aggressive protectionist type of policy 0:18:25.880 --> 0:18:29.480 with higher tariffs and more sort of near shoring and 0:18:29.560 --> 0:18:30.720 on shoring of production. 0:18:31.680 --> 0:18:34.640 Yeah, I mean the world Lisa had been pricing in 0:18:34.680 --> 0:18:37.280 and according to our models, the markets we're pricing in 0:18:37.800 --> 0:18:43.879 almost one hundred percent probability of this really weakflation soft 0:18:43.960 --> 0:18:47.280 landing scenario, and we thought, you know, that was too aggressive, 0:18:47.400 --> 0:18:51.680 meaning risk assets were maybe too a bullion, too optimistic. 0:18:52.160 --> 0:18:56.040 One of the big risks to that scenario is obviously 0:18:56.160 --> 0:18:59.840 heightened geopolitical risk, as you point out the political re 0:19:00.080 --> 0:19:04.399 action to that, the stickiness of inflation associated with that, 0:19:04.560 --> 0:19:08.080 and you're seeing obviously things like oil jumping here, but 0:19:08.119 --> 0:19:10.399 even some of the commodities that have underperformed, like lumber, 0:19:10.720 --> 0:19:14.800 natural gas, iron ore are bottoming out here. So you 0:19:14.880 --> 0:19:18.800 could have this kind of bounce in commodities associated with 0:19:18.840 --> 0:19:21.800 some of the geopolitical risk, which leads to stickier inflation, 0:19:21.840 --> 0:19:24.720 which leads to a FED that is forced to hold 0:19:24.760 --> 0:19:25.359 rates higher. 0:19:25.359 --> 0:19:28.240 And to us, that's a risk to the markets, that's a. 0:19:28.280 --> 0:19:31.359 Risk to the economy, that's a risk to you know, 0:19:31.440 --> 0:19:33.280 credit spreads, if you will, well. 0:19:33.280 --> 0:19:35.760 Let's talk about credit spreads, high yold spreads a little 0:19:35.800 --> 0:19:38.400 bit wider, still in at around three hundred basis points 0:19:38.440 --> 0:19:39.520 and then multi year tights. 0:19:39.840 --> 0:19:40.119 Mica ah. 0:19:40.160 --> 0:19:42.600 Custom we could come back to on this program, is 0:19:42.640 --> 0:19:45.680 that title's a reflection of strength or complacency. How would 0:19:45.720 --> 0:19:46.400 you describe it? 0:19:47.160 --> 0:19:48.880 You know, it is a little bit of both. 0:19:48.880 --> 0:19:52.159