Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Do
Speaker 1: you want to stay? Hevery in New York on Police
Speaker 1: to say is Howard Wards, c IO of Growth Equities
Speaker 1: at Gabelly Funds. Good morning to Howard, Good morning John.
Speaker 1: What are we looking for in about ninety minutes? What
Speaker 1: are you looking for? Well, I think we're gonna have
Speaker 1: a good number, and I know I can't tell you
Speaker 1: whether it's going to be or two fifty, but probably
Speaker 1: is going to be in there somewhere. And it just
Speaker 1: would point out that, you know, we have to hold
Speaker 1: back from putting too much weight on any one month's numbers.
Speaker 1: You need to look at the trend line, three month average,
Speaker 1: and not only that, but remember that these numbers tend
Speaker 1: to get revised once or twice and so the headline
Speaker 1: number we get today may not last well. The average
Speaker 1: number through the years I've found is north of two k.
Speaker 1: It's pretty stunning. How would we you set up. Did
Speaker 1: you think the economy would go out to this highest
Speaker 1: sort of high trajectory that it's reached over the last
Speaker 1: complementso suck UH, I would tell you yes, because we're
Speaker 1: having a terrific year. So we must have been doing
Speaker 1: something right UH in our in our growth fund, which
Speaker 1: is up about year to date and nine present plus
Speaker 1: over the last twelve months. But that's been with a
Speaker 1: focus on what I'm going to describe as defensive growth stocks,
Speaker 1: which means zero weights to underweights in energy, UH, industrials,
Speaker 1: producer durables. And we also don't happen to own any
Speaker 1: consumer staples which are not experiencing much of any growth.
Speaker 1: So we've been positioned properly for the market that we've had,
Speaker 1: and I think that's really the way to go, because
Speaker 1: the economy is starting to slow now, even though it's
Speaker 1: doing very well. It's gonna slow from the four point
Speaker 1: two percent pace in the second quarter to finish the
Speaker 1: year probably with around a three percent growth UH in
Speaker 1: the back half of the year between Q three and
Speaker 1: Q four, and then it's probably gonna slow a little
Speaker 1: bit below that for next year. So your argument at
Speaker 1: the moment, the argument that you're pushing is stay invested,
Speaker 1: but get a little bit more defensive. Yes, I think
Speaker 1: defensive growth is the place to be as long as
Speaker 1: the FEDS tightening rates are rising. When the Fed titans
Speaker 1: pas go down, it happens virtually every single time, and
Speaker 1: it's happened so far this year. We started the year
Speaker 1: with an eighteen pe on four earnings. Now we're down
Speaker 1: to sixteen. Uh. If the Fed were to stop tightening,
Speaker 1: I would be a little bit more aggressive in terms
Speaker 1: of unwinding my more defensive growth posture. And I think
Speaker 1: that's the argument right now. It's home that with high ye,
Speaker 1: it's in high rights. It's going to weigh on any
Speaker 1: potential multiple expansion. Can the earnings deliver? I mean to me, Howard,
Speaker 1: what's so important here within your linkage of the economy
Speaker 1: into equities and your huge double digit success and how
Speaker 1: performance of alpha. We could talk all day about the
Speaker 1: under performance of the smart people acid allocating and such.
Speaker 1: Our the bottom line is the linkage of animal spirit
Speaker 1: phenomenal GDP over the revenue growth and it's had it's
Speaker 1: at a tangible pop. What happens if the economy not
Speaker 1: you know, gloom and doom, but if the economy ebbs.
Speaker 1: Does the revenue growth EBB. Well, the revenue growth has
Speaker 1: been surprisingly stable for the overall SMP five DRED anyway,
Speaker 1: it tends to come in right around five and I
Speaker 1: think that's going to continue. One thing that's I think
Speaker 1: key for thinking about next year, because we do have
Speaker 1: some headwinds. You know. I mentioned that rising rates, rising
Speaker 1: dollar is there as well. That's the headwind, and rising
Speaker 1: oil is all headwinds. But what I don't think is
Speaker 1: fully appreciated is that there's another round of fiscal stimulus
Speaker 1: that will hit the economy next year, not so much
Speaker 1: in the form of the tax cut, but in the
Speaker 1: form of increased government spending and so and and even
Speaker 1: with some friction on the trade front, the fiscal boost
Speaker 1: that that we get next year is going to overwhelm that.
Speaker 1: So the economy is in pretty good shape. And I
Speaker 1: don't see on the horizon a situation where you'd say,
Speaker 1: let's worry about a receiption. John, I think this is
Speaker 1: critical from Howard wards. Optimism is huge odd performance over
Speaker 1: five even ten years. But the gloom that's out there
Speaker 1: and we're all steeled for Friday doom and gloom equity letters.
Speaker 1: Is not only that, but in the jobs report today
Speaker 1: it hasn't slowed down much. I mean, the gloom story
Speaker 1: is going to be sort of presented to straight off
Speaker 1: than the numbers drop when you get better wage growth
Speaker 1: at some point of the next several months. The one
Speaker 1: you see the cost Prussia, the cost inflation is that Howard,
Speaker 1: I want to get to this argument that actually we
Speaker 1: could get EPs acceleration through as well. That's not can happen.
Speaker 1: It's not gonna You don't think that can happen. No,
Speaker 1: because you had the big boost this year from the
Speaker 1: tax reform. Without the tax reform, we would have had
Speaker 1: maybe twelve percent growth and earnings this year, and with
Speaker 1: it it's over. And so the expectations for next year
Speaker 1: is that we'll have and I'm talking SMP well, have
Speaker 1: SMP five earnings growth of approximately ten next year, and
Speaker 1: maybe just a hair less than that in two thousand twenty,
Speaker 1: even though it's a little bit early to be focused
Speaker 1: on that. So we can't we can't do better, uh
Speaker 1: in two thousand and nineteen because we don't have the
Speaker 1: big tax cut to hit earnings the way it has
Speaker 1: this last year. And one thing that that tax cut
Speaker 1: has done. In addition to having the good, good economy,
Speaker 1: with the change in the repatriation of foreign cash, the
Speaker 1: US companies have been able to not only continue to
Speaker 1: buy back stock at a record rate about seven billion
Speaker 1: dollars this on a trailing twelve month basis, that's almost
Speaker 1: well what it was in the previous year. But they're
Speaker 1: also able to boost capital spending by about eight percent.
Speaker 1: Uh So we've got about about eight hundred billion dollars
Speaker 1: of capital spending. Now that's that's projected for the next
Speaker 1: twelve months. This is a big change, so you get
Speaker 1: the fiscal stimulus for next year. And I should have
Speaker 1: mentioned also a nice increase in capital spending that we've
Speaker 1: been waiting for for a long time, you know. I
Speaker 1: I look Howard at at what to buy, and we've
Speaker 1: hardly touched on the financials today. Every conversation John and
Speaker 1: I have is thumb up, thumb down on the financials.
Speaker 1: Do they have the cash generation that's required for Gabelli? Yes,
Speaker 1: they do. Tom. The financial sector, of course, has a
Speaker 1: variety of names in it depending on which indices you
Speaker 1: look at, because it can include the the visas and
Speaker 1: the master cards and the pay pals and a number
Speaker 1: of non bank financial service companies, but it also obviously
Speaker 1: includes the bank, but the banks, but I would say
Speaker 1: across the board. While of these companies are are in
Speaker 1: a position where they're generating handsome free cash flowers, and
Speaker 1: the banks, the banks are beneficiaries of higher rates. But
Speaker 1: of course if the yield curve continues to flatten, that's
Speaker 1: not going to help them so much. And of course
Speaker 1: loan demands a factor. But generally speaking, this should be
Speaker 1: a very good period for the bank's printing money, free
Speaker 1: cash flow, buying backstock and increasing dividends. Howard, Um, this
Speaker 1: is really important, and that that I've got to be
Speaker 1: inflicted upon me weekend English football here in the next
Speaker 1: coming three hours with John and his other pets. We
Speaker 1: were about John, did you see the twenty four page
Speaker 1: New York Post is sound the fold out Yankees? And
Speaker 1: this is the fold out for those of you worldwide
Speaker 1: and coast to coast Boston Monster. Yes, And Howard, would
Speaker 1: you as a as a die in the world New
Speaker 1: Yorker explain to Mr Farrell's specialists is to seven zip codes.
Speaker 1: Doesn't get any better than Yankees, Red Sox come to
Speaker 1: fall and it's layoffs. It is absolutely the the best
Speaker 1: drama that baseball can produce. So I'm looking forward to
Speaker 1: what's the equivalent in English football. I'm gonna send Manchester
Speaker 1: United Liverpool as a league game. That would probably be
Speaker 1: a big big league game traditionally speaking, but they don't
Speaker 1: tie in baseball. And I should say, Mario, if you're listening, uh,
Speaker 1: you can go ahead and invite me to come to
Speaker 1: one of these games. Does does Mary I have a box?
Speaker 1: What do you mean? Does Mary I'll have a box?
Speaker 1: Is the Pope Catholic? Because you got a box? That
Speaker 1: not one of those he has seat? You know, your
Speaker 1: nice seats. It's not how many seats around the table.
Speaker 1: Just that's why I'm asking hap. It's not one of those.
Speaker 1: It's not one of those expensive sas that Mario Gabelli
Speaker 1: just wants to be like the wonderful Michael Pricing the
Speaker 1: Yankees rock on his finger. You know, when Michael Price
Speaker 1: would show up, he'd always wear his Yankees ring just
Speaker 1: to aggravate me. It's like, yeah's sick, it's blended. I
Speaker 1: don't think it's too difficult to antrovate you. No, that's true.
Speaker 1: That's day morning, to be honest with you worldwide, This
Speaker 1: Yankees red sox, this is Bloomberg. We want to go
Speaker 1: over now to the policy of driving the American labor
Speaker 1: economy forward. We can do that with Betsy Stevenson at Michigan,
Speaker 1: former chief economists for Department of Labor, among other things,
Speaker 1: and one of our most thoughtful thinkers on the idea
Speaker 1: of policy, on the idea of the broad spectrum of
Speaker 1: the American labor economy, Betsy I mentioned earlier with Jim Blastman,
Speaker 1: it is a gilded age. There is an inequality. Is
Speaker 1: this better job economy is an Eisenhower like three point
Speaker 1: seven unemployment rate bringing our inequalities to a lesser point
Speaker 1: um So clear respect, it is because take a look
Speaker 1: at um the unemployment rate to see that unemployment has
Speaker 1: come down sharply for people with less education UM, and
Speaker 1: that's created a reduction in inequality. There is a reduction
Speaker 1: in inequality. But I'm getting so much mail arguing when
Speaker 1: market economists, people like Dr Glassman say that we're a
Speaker 1: fully employed America, there's a huge body of people that
Speaker 1: don't agree with that, including there would suggest a lot
Speaker 1: of people that support President Trump as well, we've got
Speaker 1: wage growth, and let's say it's three round, But is
Speaker 1: it a barbell wage growth where some are getting large
Speaker 1: grade growth and many others are getting less than large. Yeah,
Speaker 1: so that may be clear when I say that this
Speaker 1: is helping with inequality and helping him one dimension, which
Speaker 1: is that we're seeing people across the spectrum being able
Speaker 1: to find work. Now, the the quality of that work,
Speaker 1: the desirability of that work, and how much it pays
Speaker 1: it's still varying enormously. Um, we're seeing wage gates that
Speaker 1: continue to go primarily to the top end of the
Speaker 1: income distribution. We have seen nominal wage growth pick up slightly,
Speaker 1: but we've also seen inflation pick up slightly, and so
Speaker 1: we're not really seeing any pickups in real wage growth.
Speaker 1: And real wage growth is what matters for the bottom line.
Speaker 1: We can't care about not how many dollars in your pocket,
Speaker 1: but what you can fly with those dollars. Betsy Stevenson,
Speaker 1: we'd like a longer conversation here in the coming days
Speaker 1: and weeks at the University of Michigan. There are any
Speaker 1: number of things to speak of with Timothy O'Brien of
Speaker 1: Bloomberg Opinion, including his definitive work on the finances of
Speaker 1: the president. Maybe we'll touch on that here in a moment.
Speaker 1: What he is is a student of history, and Mr
Speaker 1: O'Brien and I would agree given the belt Way up
Speaker 1: or over Judge Kavana on all somehow of the number
Speaker 1: of people, Tim that don't know their history, it's just breathtaking.
Speaker 1: Noah Feldman with that fabulous Bloomberg opinion article today, going
Speaker 1: back to the scorpions and going back to the court
Speaker 1: of another time. In a resume, Tim, you always see
Speaker 1: this the first in his family to attend college. His
Speaker 1: father was a metal lather buried in the factories of Pittsburgh,
Speaker 1: and Orange Hatch made it through academics, growing up in
Speaker 1: poverty out to Utah and to be a force of
Speaker 1: a Senate. The son of a metal latherer is going
Speaker 1: after the guy living above Gucci on Fifth Avenue. What's
Speaker 1: Orange Hatch want from President Trump? Well, this is interesting,
Speaker 1: tom Or. This week, after New York Times dropped this
Speaker 1: huge story on the Trump families tax maneuvers over decades,
Speaker 1: Hatch said that he thought that the president should release
Speaker 1: his tax returns, which is is an interesting thing given
Speaker 1: that Hatch has largely been support sort of of most
Speaker 1: of the president's policies. And as we know, the president
Speaker 1: doesn't want to release his tax returns. So one wonders
Speaker 1: why now, And perhaps it's that, uh, there's damage being
Speaker 1: done by uh, this lack of disclosure around the president finances.
Speaker 1: I've asked you this before. Let's get an update. What's
Speaker 1: in the tax returns. The tax returns would show how
Speaker 1: robust his businesses really are. He doesn't run a fortune empire.
Speaker 1: It's a boutique family business that's largely about marketing. Um.
Speaker 1: It would show what kind of money he's getting overseas.
Speaker 1: That's obviously relevant in the context of the Muller investigation.
Speaker 1: It's relevant in the context of just good government. I
Speaker 1: think we should know what possible influences are coming to
Speaker 1: bear on the person in the Oval office. George Worst,
Speaker 1: Senor and maybe George Bush Jr. You know, they had
Speaker 1: oil interests. I mean, they were transactional and they and
Speaker 1: they release their taxes, and they created effective trusts to
Speaker 1: insulate them from any decisions around those holdings once they
Speaker 1: became president. President Trump has done neither of those, I
Speaker 1: mean within that is, and I think it's a big
Speaker 1: deal that four year old orange hatches saying, come on
Speaker 1: now is the time or any interest in that? I
Speaker 1: think there's gonna be ample interests after the midterms. Okay,
Speaker 1: what happens in the mid terms, Let's say to two things.
Speaker 1: Democrats take the House and just percolating now with Greg
Speaker 1: Vla and Mike Allen and Axials and others. Democrats take
Speaker 1: the Senate. Those are two different things, aren't there they are?
Speaker 1: And if um, on the tax front, if if Democrats
Speaker 1: don't have both houses, it would be hard for the
Speaker 1: Congress to compel the return. But if they do, they
Speaker 1: can literally, in conjunction with the I R S, force
Speaker 1: a release of the president. Could that be the I
Speaker 1: R S as an executive branch, isn't it? But the
Speaker 1: the I R S has to be beholden to certain
Speaker 1: mandates coming out of the Congress in certain situations, and
Speaker 1: this is one of them. Just because of time. Let's
Speaker 1: switch gears here the New York Times article and the
Speaker 1: president's finances. Um, everyone agreed, whatever their party it was,
Speaker 1: it was a profound investigative peace. What was the thing
Speaker 1: in there that made Tim O'Brien sit up and read um?
Speaker 1: I think the the the extensive detail they had on
Speaker 1: the use of tax shelters by the Trump family over
Speaker 1: decades to shelter everybody did it, but everybody did it,
Speaker 1: and I think a big portion of what they did
Speaker 1: was perfectly legal. There is a portion in there that smells,
Speaker 1: that looks dubious, but it's a long time ago and
Speaker 1: it's a debate. I I don't think there's gonna be
Speaker 1: any criminal charges coming out of this. There may be
Speaker 1: some civil fines. The one thing that really pops to
Speaker 1: me the whole piece was that Donald Trump, while his
Speaker 1: father slipped into Alzheimer's, attached to coddstle to his father's
Speaker 1: will in order to try to get executive authority and
Speaker 1: to become the executor over his father's entire business empire.
Speaker 1: And Fred noticed this even though he was getting cloudy,
Speaker 1: and he asked his daughter, the judge, to look at it.
Speaker 1: She also thought it smelled. So they took the whole
Speaker 1: process out of Donald's hands and hired a new state
Speaker 1: attorney for themselves so they could redraft Fred's will so
Speaker 1: his son couldn't get control of the empire. Is that
Speaker 1: a state attorney of elible for various investigations now, uhily,
Speaker 1: but again these are you know that there substantial limitations here.
Speaker 1: A lot of this stuff is ancient. Let us talk
Speaker 1: about uh Kavana again, Tim O'Brien with his Bloomberg opinion,
Speaker 1: and and it is very much that in opinion, uh,
Speaker 1: your team with David Shipley has written a number of
Speaker 1: editorials about the nuances of this moment. What will you
Speaker 1: watch today and then end the Saturday vote? Well, I
Speaker 1: think clearly how um you know the key Republican senators
Speaker 1: on this particular voter lining up Jeff Lake, Lisa Murkowski,
Speaker 1: and Susan Collins that you know, we've known that for
Speaker 1: a while, that that hasn't changed. I think what's interesting
Speaker 1: is the debate around Kavanaugh himself has moved um off
Speaker 1: of uh sexual harassment or sexual assaulted onto issues about
Speaker 1: his credibility and his rascity. Yeah, but even you know,
Speaker 1: the people making the argument about his temperament that that's
Speaker 1: not an issue. They haven't taken on this core thing
Speaker 1: about the fact that he lied demonstrably during his testimony.
Speaker 1: I was thunderstruck by his op ed in the Wall
Speaker 1: Street Journal today. I mean, I'm sure if he died one,
Speaker 1: Tim O'Brien, you would have said, sure, we'll run that
Speaker 1: op ed. I get that, but was that appropriate that
Speaker 1: a nominee would would what, you're smarter than me on
Speaker 1: a language? What's the right word? Advocate for himself. He's
Speaker 1: been for quite a while. He was lobbying on the boats,
Speaker 1: like in six hours. He's been doing that throughout. I'm saying,
Speaker 1: I don't, I don't, I think, I don't think he can.
Speaker 1: He's out of the box as a Supreme Court nominee.
Speaker 1: He's doing things no nominee has done before. In that
Speaker 1: op ed he said that he would hate to see
Speaker 1: the Supreme Court broken apart by partisanship. But that's that's
Speaker 1: said by the conductor of the train that has already
Speaker 1: left the station. He's part and parcel of that problem.
Speaker 1: Is he setting himself up with whatever events occur where
Speaker 1: he says, you know, I've been through the process for
Speaker 1: the good of the country, and Tim O'Brien, I'm gonna
Speaker 1: pull my nomination. Is that what we're gonna in the
Speaker 1: next eighteen I don't think he's going to do that
Speaker 1: unless you see the Republicans turn against like within where
Speaker 1: we go from here and you know, obviously we could
Speaker 1: talk to Professor Felman or others, and and folks, I
Speaker 1: should say, Bloomberg opinion and Bloomberg in general are legal
Speaker 1: coverage has been fabulously balanced, I think, with different opinions,
Speaker 1: whether it's John Coffee on Tesla or it's it's a
Speaker 1: Noah Felman of Harvard on the history of the Supreme Court,
Speaker 1: and some of these these emotional culture work resh preneurs
Speaker 1: as well. Leading a conservative and a uniquely conservative charge
Speaker 1: is well, let's go there. When this is done the
Speaker 1: first Wednesday of November, what will be the new conservative thought?
Speaker 1: Or is it still Trump? Is um even going into
Speaker 1: on the right after the midterm? I I think, Um, Look,
Speaker 1: I you know, I think all journalists have been chastened
Speaker 1: about trying to predict where votes are going to go.
Speaker 1: But if um, the polling is to be relied upon,
Speaker 1: it looks like the Democrats of a very decisive advantage
Speaker 1: in the House and the Senate is still up in
Speaker 1: the air. I think even if the Democrats get the House,
Speaker 1: a lot of what Trump has been able to do
Speaker 1: thus far is going to get complex because committees like Judiciary, Oversight,
Speaker 1: and Intelligence are going to start launching subpoena bombs at
Speaker 1: the White House, and it's going to really tie the
Speaker 1: White House up in knots. Let's talk journalism. Uh, you've
Speaker 1: been a student of this with your with your work
Speaker 1: with different vendors over the years. Mark benny Off wants
Speaker 1: to buy Time magazine. What would you do with it? Well,
Speaker 1: you know, I think we're in an era right now
Speaker 1: where there are wealthy people who see media properties as
Speaker 1: as entities that they can revive by simply flooding it
Speaker 1: with resources, and as you know, it's much more complex
Speaker 1: than that. I think Jeff Bezos taking over the Washington
Speaker 1: Post was a happy event for journalism, and I hope
Speaker 1: for him. Uh he's bringing some innovation to it, but
Speaker 1: he's also he also got his hands on a legacy
Speaker 1: newspaper that already had a loyal audience and brought in
Speaker 1: a horse from Boston. I should point out Baron, and
Speaker 1: he got the great Mighty Baron. But you know, he
Speaker 1: he was able to bring resources to something that was
Speaker 1: already a fairly enterprise. Time is time question, No, because
Speaker 1: I think there's a different Time is making a contrast.
Speaker 1: I don't think the Times probably, I don't think that.
Speaker 1: I don't think the Time Inc. Properties are at the
Speaker 1: top of their game in the same way the Washington Post.
Speaker 1: And that matters if you're gonna have a successful media enterprise.
Speaker 1: Timo Brian, thank you so much. Timothy O'Brien with Bloomberg
Speaker 1: Opinion writing and I'll be writing or what do you
Speaker 1: publish it today? I mean your's day starts at what
Speaker 1: st five m every day? Are on my way to
Speaker 1: the office. Very good, Timo Brian, thank you so much.
Speaker 1: And look for his work, particularly on the finances of
Speaker 1: the president. Of course, his important book of a few
Speaker 1: years ago for New York City for our audience worldwide,
Speaker 1: and please to welcome our listeners on Bloomberg Radio and
Speaker 1: on Bloomberg TV for the Trump administration's view on what
Speaker 1: is happening. Let's bring in Larry Carblo, National Economic Council Director,
Speaker 1: who joins us now. Larry, good morning to you, sir,
Speaker 1: Thank you, Jonathan, appreciate it very much. It's good to
Speaker 1: see and we won't get wrapped up in that one
Speaker 1: thirty four because the upward revision is pretty decent and
Speaker 1: the overall picture for the labor markets. So let's start
Speaker 1: just stick it in let's I just want to make
Speaker 1: that point. I don't mean to interrupt, but that's a
Speaker 1: really key point because you, of all people, know how
Speaker 1: these numbers bump around. So you got a one thirty
Speaker 1: something and you've got an eighty thousand plus revision, So
Speaker 1: this is actually you know, the increase in the level
Speaker 1: for September is uh what the two thousand? That's awful,
Speaker 1: good number. I just want to make that point. It's
Speaker 1: a point well made, Larry. So let's talk about the
Speaker 1: unemployment rate for the eight year old for the administration.
Speaker 1: What's your view on how low this can go? Because
Speaker 1: many economists the same work full employment, this is kind
Speaker 1: of it. We can't go much lower than this. You
Speaker 1: have a different opinion, Lowry, Well, I don't want to
Speaker 1: give a forecast, per se, but I do think it
Speaker 1: can go lower. And I think people are moving back
Speaker 1: into the labor force as wages and incentives increase, you know,
Speaker 1: lower taxes and so forth, you've got fatter paychecks going.
Speaker 1: I just did some calculations. I hope I get this right.
Speaker 1: The average hourly earnings up two point eight percent year
Speaker 1: on year in the report. But Jonathan, I like to
Speaker 1: add the work hours. The increase in work hours for
Speaker 1: the year is two point six So you put those
Speaker 1: two together, you've got five point four per six, five
Speaker 1: point six percent increase in wage income. And I'm gonna
Speaker 1: take the PC data at two right, the inflation and two,
Speaker 1: that's a three and a half three point six percent
Speaker 1: real wage increase. That's huge. And all I'm saying is
Speaker 1: after taxes, that's gonna bring more people into the workforce.
Speaker 1: So we're growing in a capital goods boom. And I
Speaker 1: think unemployment has some downside to go, but mostly it's
Speaker 1: a very healthy story. And the days of this week
Speaker 1: has been pretty style of the IDP report earlier this
Speaker 1: week give us a pretty good sign of what was
Speaker 1: happening in the non manufacturing guy Sam, all of this,
Speaker 1: Larry is driving a pretty sustained bit back into the U. S. Dollar.
Speaker 1: It was stable for a period of this year, is
Speaker 1: starting to runny again. And I just wonder whether the
Speaker 1: President thinks that what is happening in the FX market
Speaker 1: is off setting some of the accomplishments. South swear well, no,
Speaker 1: look that dollars actually been pretty steady. I have it
Speaker 1: on my sheets from yesterday and three quarters caught. That's
Speaker 1: pretty much in the mid range. I think in the
Speaker 1: last ten or twelve years it's gone up and down.
Speaker 1: A healthy dollar is a healthy economy. A healthy dollar
Speaker 1: tracks invest in for all over the world, and we're
Speaker 1: providing enough incentives and competitiveness again on low taxes and
Speaker 1: regulations to bring money home. I think it's a terrific positive. Uh,
Speaker 1: you know, I think it's a great read on the
Speaker 1: success of the country. Our view, the Treasury view, Stephen,
Speaker 1: the nutrition's view is we would like a stable, you know, stable, steady,
Speaker 1: strong dollar as far as the eye can see, looks
Speaker 1: like we're getting that. There's a lot of confidence here.
Speaker 1: Is that the president's view too, Larry, I think generally
Speaker 1: it is the president's view. President has a lot of opinions. Uh,
Speaker 1: sometimes up, sometimes down. We're not trying to influence anybody's policy.
Speaker 1: We're not trying to influence the Fed's policy. We're not
Speaker 1: trying to influence the dollar policy. It's steady as you go. Actually,
Speaker 1: um J. Powell, as you know, has made a lot
Speaker 1: of interesting statements saying that better growth, which is what
Speaker 1: we're getting, is not necessarily inflation. And I would say, Jonathan,
Speaker 1: if you have a steady dollar, you gotta low steady
Speaker 1: goal price. Uh, that's a big sign. There's no inflation
Speaker 1: out there. We're just growing. And you were talking about
Speaker 1: bond rates a few moments ago. I don't know what
Speaker 1: your quote is this morning, about three two for the
Speaker 1: ten year. I think that's up about thirty five basis points.
Speaker 1: So it's the long end of the curve. It's not
Speaker 1: the Fed funds rate, but most of that is the
Speaker 1: real interest rate, the real tips rate, which is up
Speaker 1: I think three quarters are you know, almost eight? What
Speaker 1: does that tell you? I suggest people are expecting higher
Speaker 1: capital returns and stronger US economic growth the head. That's
Speaker 1: a very positive sign. Larry. I've got to say your
Speaker 1: analysis in the bond market is spot on. It is
Speaker 1: a pickup in real rates through the last week that's
Speaker 1: really driven a ten year and a thirty year yield
Speaker 1: out to highs. You said you don't want to influence
Speaker 1: anyone's policy, maybe domestically, but internationally we know that's not true.
Speaker 1: So let's talk about China. I wonder if you saw
Speaker 1: the Bloomberg reporting over the last twenty four hours that
Speaker 1: revealed how China used a tiny chip to hack into
Speaker 1: an infiltrate some of the supply chains of some of
Speaker 1: the biggest companies on the planet, including US companies. Larry,
Speaker 1: have you read that story and is it something the
Speaker 1: administration is looking into? Well, you know, I read every
Speaker 1: Bloomberg story. I have no doubt, Larry, and I you know,
Speaker 1: I look at all your tapes, Jonathan, and I try
Speaker 1: to memorize all of them, so I'm up to speed.
Speaker 1: I will only say that I have some uncertainty because
Speaker 1: a lot of these companies, I believe Apple in the lead,
Speaker 1: have denied the story. The story. I'm not smart enough
Speaker 1: to know the answer to that, but I think it's
Speaker 1: a good thing to be on guard because our Chinese
Speaker 1: so called friends have done a lot of mischief in
Speaker 1: that area, uh not least of which in addition to
Speaker 1: these chips and stealing of technology cyber hacking. So I
Speaker 1: don't know the bottom line. Maybe you'll help me clarify
Speaker 1: it as the day goes on, but i'd sure keep
Speaker 1: a watch on it. Well, Larry, they have to add
Speaker 1: that story, but there's some pretty strong sourcing behind the
Speaker 1: reporting here at Bloombergers. I'm sure you can imagine that
Speaker 1: kind of backs it up pretty well, which is why
Speaker 1: we published and I do think it takes us to
Speaker 1: a bigger conversation about trade. Larry. Economists typically always talk
Speaker 1: about trade through the allocation of scarce resources and the
Speaker 1: most efficient allocation of scarce resources, and where should things
Speaker 1: be produced, etcetera, etcetera. They typically ignor national security. Do
Speaker 1: you think we have got a series of examples which
Speaker 1: do justify why manufacturing, a lot of manufacturing does need
Speaker 1: to be domestic? Well, look, um, our policy of President's
Speaker 1: trade policy, you know, has put the Chinese unnoticed that
Speaker 1: we cannot accept their unfair trading practices, THEFT DI I
Speaker 1: P force transfer of technology. You've heard this and you've
Speaker 1: heard it from me and others. High tariffs on industrial
Speaker 1: and agriculture commodities, and non tariff barriers. They won't let
Speaker 1: American companies own uh fifty one or fifty that's where
Speaker 1: the tech is stolen. Um. Sometimes they say, yeah, we'll
Speaker 1: give your ownership, but we won't give your license. So
Speaker 1: what is that good? Good does that do? So? The
Speaker 1: President has been on guard. Uh. He believes that the
Speaker 1: whole trade relationships broken, and we have been, as you know,
Speaker 1: negotiating on and off, it has been unsatisfactory thus far.
Speaker 1: I think Secretary Manutin has said better to talk than
Speaker 1: not talk. But the talks have to be serious, and
Speaker 1: maybe I want to underscore, maybe Jonathan, there might be
Speaker 1: a meeting with the two presidents, she and Trump down
Speaker 1: in Buenos aireas UH in late November at the G twenty.
Speaker 1: But that's a maybe. I can't confirm that. So possibly,
Speaker 1: so far it's been unsatisfactory. We've done very well. We've
Speaker 1: done very well as you know on the U S
Speaker 1: m c A. I hope I got that right. I
Speaker 1: got learned that new phrase. We're opening up trade discussions
Speaker 1: with Europe. We're opening up trade discussions with Japan. They'll
Speaker 1: send a signal to China. We signed a Tripartei Jonathan, EU,
Speaker 1: USA A Japan against unfair trading practices and other illegal
Speaker 1: trades that was aimed at China. So the Western allies
Speaker 1: are very much united here. But so far we just
Speaker 1: haven't got any results. China, you're making some really good
Speaker 1: progress solving some of the trade disputes. Some you can't
Speaker 1: tease me like that with a meeting of one of salaries,
Speaker 1: so that talks about doing that right now? You haven't
Speaker 1: talks about setting that up at the moment. I'm sorry
Speaker 1: I missed that last one. Are you having talks about
Speaker 1: setting up a meeting and one of salaries between the
Speaker 1: two leaders of China at the United States? Are those
Speaker 1: talks right now? There there is discussion about that. I
Speaker 1: can't confirm it. I'm just saying there is discussion about
Speaker 1: that before then, Jonathan, I don't. I don't think so.
Speaker 1: I don't hear it. I'd love to be wrong again. Personally,
Speaker 1: I think it's better to talk than not talk. But
Speaker 1: the talk has to be serious and significant, no smoke blowing,
Speaker 1: you know, come with concrete proposals. Say yes, there's something
Speaker 1: we've offered because the relationship has got to change now.
Speaker 1: President wants to protect American workers, farmers, ranchers, the whole economy.
Speaker 1: We want to be on a level of playing field. Uh,
Speaker 1: if they open their barriers, we will export sell a
Speaker 1: million jillion goods and Service says we're the hottest, most
Speaker 1: competitive economy in the world. And by the way, if
Speaker 1: China really wants to help its consumers, then let Americans
Speaker 1: supply our superior goods. But we just haven't had any
Speaker 1: satisfaction on that yet, Larry look great to catch up
Speaker 1: you from the White House already, appreciate your time so
Speaker 1: as always and always a great sport following Pyrose fraud
Speaker 1: and some great analysis of the bulkmark of that gens
Speaker 1: as well. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio