Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane
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 Troy
Speaker 1: Guy ask you you want to us in the studio
Speaker 1: here in New York, Chief investment officer at Skybridge Capital.
Speaker 1: Great to see you, Troy. Let's talk about that the
Speaker 1: Federal Reserve. Everyone seems to view the fetes Sometimes there's
Speaker 1: this pockets of market participants that always bring it up.
Speaker 1: Does the FETE know something we don't know looking at
Speaker 1: those minutes yesterday? They know nothing that we know. No, no,
Speaker 1: I mean, at the end of the day, their data dependent.
Speaker 1: They've been articulating that for quite some time. You know.
Speaker 1: Obviously last year, like most market participants thought growth would
Speaker 1: stay stronger in Q four and the impact from monetary
Speaker 1: tightening would not be as dramatic. And you know, the
Speaker 1: beauty of where we are today now that financial conditions
Speaker 1: have loosened off the extreme tights of December is every
Speaker 1: investor knows it's just as much as the Fed. You
Speaker 1: can look at the data's rolls rolls in and make
Speaker 1: your own informed decisions of whether you're being paid enough
Speaker 1: to take that risk. And you know, one of the
Speaker 1: things that surprised us recently is that markets have been
Speaker 1: so sure that the next move is a cut. You know,
Speaker 1: when you talk to policy makers or economists or just
Speaker 1: look at the data yourselves, there's a non zero probability
Speaker 1: that we have one of two more hikes this cycle, right,
Speaker 1: But there's also a reasonable probability the next move is
Speaker 1: a cut in and and that's been unusual the last
Speaker 1: six years because two years ago it was either one hike,
Speaker 1: two hikes, three hikes, and there was no probability of
Speaker 1: a cut. And obviously in the in the crisis, it
Speaker 1: was cutting rates to zero as fast as possible. Just
Speaker 1: to put you on the spot a little bit. Do
Speaker 1: you think the barber is higher for a hike or
Speaker 1: is the bar hi for a cut at this point?
Speaker 1: You know, I think the bar is higher for a
Speaker 1: hike at this point because if you look at the
Speaker 1: weakness growth overseas and the natural slowing in the U.
Speaker 1: S economy. You know, we've talked about this before, where
Speaker 1: last year was peak cyclical growth. Uh, this year, we
Speaker 1: expected somewhere between two to two and a half, but
Speaker 1: it could be slightly lower given how Europe's really fallen
Speaker 1: off a cliff um and you go into and you're
Speaker 1: looking at one and a half to two. So given
Speaker 1: that inflations rolled over, given his slow his growth has
Speaker 1: been overseas, given the fact that we're much later in
Speaker 1: the cycle and there's no way consumption growth or business
Speaker 1: fixed investment gives to be high this year in twenties
Speaker 1: they were last year. You know, that would lead us
Speaker 1: to think that there's a higher probability of a cut,
Speaker 1: But you can't completely discount the one to two more
Speaker 1: hikes in this cycle if growth picks back up. Troy,
Speaker 1: good morning. I know in December twenty six you told
Speaker 1: your Massachusetts Institute of Technology to load the boat and
Speaker 1: they did double leverage up or up twelve percent of
Speaker 1: the Dow in the spent of the Nasdack composite. How
Speaker 1: far behind his institutional Wall Street in the equity markets
Speaker 1: right now? Uh? Well, I would say anyone that all
Speaker 1: is ascid allocation is behind always behind equities, right, So
Speaker 1: if you're not, this cycle has been really reminisced of
Speaker 1: the nineties. As you guys know right where, you know,
Speaker 1: the only way to keep up with equities is to
Speaker 1: be a percent long equities, and the only way to
Speaker 1: perform equities has been to be levered long, right, But
Speaker 1: no one does that, right. The question is how much
Speaker 1: of your equity capital you peel off into fixed income?
Speaker 1: You know, and for defined benefit plans, it's not such
Speaker 1: a bad idea because you know, it helps provide cash
Speaker 1: flow um. When you look at the average investor compared
Speaker 1: to the late nineties, when it was all equities all
Speaker 1: the time, they own more fixed income, more alternative investments,
Speaker 1: and so as you've seen the embrace of acid allocation
Speaker 1: by not only institutions behind it worths. What that obviously
Speaker 1: leads to is less upside when things are fantastic, like
Speaker 1: we've really been through the last four years, but also
Speaker 1: far less downside when things turn south. And so yeah,
Speaker 1: I mean, so that's why we look at it. If
Speaker 1: you believe in asaid allocation, embrace it, it leads to
Speaker 1: more continuous, constant return streams and dramatically less volatility um.
Speaker 1: But that being said, in cycles like this or the
Speaker 1: late nineties, you obviously would be better off long equities.
Speaker 1: Are you positioned for higher equity prices? You know, we're so.
Speaker 1: Our job is to make high single digit tim with
Speaker 1: as little downside and correlation in bated equities as possible.
Speaker 1: So when you have that mandate, particularly at the late
Speaker 1: stage of a cycle, when when there's been so little
Speaker 1: alpha and the equity part of the capital structure, you know,
Speaker 1: we've been focused more on cash flows tied to the
Speaker 1: U S consumer UH, commercial real estate UM, whether it's
Speaker 1: government sponsored plans like Freddie Max freddie k Plan or
Speaker 1: SBL plan UM, you know, tied to the regional community
Speaker 1: banking system. So we look at that as we can
Speaker 1: provide high single digit returns but have far less upside
Speaker 1: if things go south. Obviously that's disappointing in quarters like
Speaker 1: Q one or or in two thousand and seventeen. But
Speaker 1: if we can hit high schnole digit returns and be
Speaker 1: up in years like last year, which we in a
Speaker 1: handful of others were, you know, that's the consistent which
Speaker 1: own stream at least that our investors are looking for.
Speaker 1: So let's talk about that high single digit returns with
Speaker 1: low beta to equity, don't you end up with a
Speaker 1: really concentrated portfolio here in the United States. Well, look
Speaker 1: there the consumer credit sectors vast, right, I mean, there's
Speaker 1: r n B s, there's legacy student loans, um, there's
Speaker 1: some uh you might be surprised with some attractive auto loans,
Speaker 1: auto receivables these days. You know, if you look at
Speaker 1: the c MBS market, their vast uh. You know, the
Speaker 1: banking system the US is vast. So you know, from
Speaker 1: our standpoint, you always have to pick one or two
Speaker 1: or maybe three high conviction themes um which are certainly
Speaker 1: uh no, more concentrated than being long equities because at
Speaker 1: the end of for long equities, you know, it's all
Speaker 1: about beta. But how do you bomp out that just quickly? Troy? Yeah, Well,
Speaker 1: again we were thinking of any individual investment theme. We're
Speaker 1: shooting for high single digits with much less downside than equities.
Speaker 1: So that's the bar it needs to clear. Now any
Speaker 1: given time, certain ones have more condact city like coming
Speaker 1: off the Trump election, obviously bank credit quality was going
Speaker 1: to expand dramatically and improve. Um. Right now, we're looking
Speaker 1: more at multifamily uh, certain plans that are sponsored by
Speaker 1: the government where you have slightly better upside less downside.
Speaker 1: So so there's no classic barbelling like from an ASDA
Speaker 1: allocation standpoint of hey, we're long equities that gives us
Speaker 1: the juice, and there were also long bonds which gives
Speaker 1: us downside protection. Were more linear thinkers, Tom and looking
Speaker 1: for positive convexity and that every theme has to stand
Speaker 1: on its own interesting and hopefully provide some downside and
Speaker 1: correlation benefits with others or downside protection. But we're not
Speaker 1: gonna add something that can make two to three percent
Speaker 1: just because it'll be you know, uh down a little
Speaker 1: less if things go south. Troy right to catch out
Speaker 1: with you. I'm not going to run Troy Gusky that
Speaker 1: Chief Investment Alfasa at Skybridge Capital. Our next guest is
Speaker 1: truly expert on the courage it took to clear markets
Speaker 1: in the US, but Johnny can't convey how it. Davos,
Speaker 1: this was the and only backstory Clear cleared the banking
Speaker 1: Systetcy grazijoining US now head of Banks and Diversified Finance
Speaker 1: Research Morgan Stanley, Betsy has always a privilege to get
Speaker 1: your thoughts, to read your research, help us prepare for
Speaker 1: the bank running season that begins later this week, Yes, tomorrow,
Speaker 1: we're going to kick off with Wells and JP uh P,
Speaker 1: n C, Bright and Early. Our expectation is that, look,
Speaker 1: the numbers are going to be a little bit weak.
Speaker 1: They're gonna be down year on year in trading and
Speaker 1: an advisory. We believe that's more than in the price
Speaker 1: right because it's expected given the fact that we had
Speaker 1: the government shutdown, so we should be prepared for that.
Speaker 1: Our our estimates are still a little bit below the street, um,
Speaker 1: and I think that's just you know, people being a
Speaker 1: little late to update their numbers for what we know.
Speaker 1: I read one of your recent notes pricing the right cut.
Speaker 1: The fear of the right cut seems to be driving everything,
Speaker 1: particularly the back end of last year and into this year.
Speaker 1: Have we priced that into we believe. So now look,
Speaker 1: let me explain what that means. To your point, fear
Speaker 1: of recession seems to be priced into the bank stocks
Speaker 1: and nowhere else in the SMP. When we look at
Speaker 1: the SMP, the pe is you know, close to close
Speaker 1: to highs and the relative pe of the banking sector
Speaker 1: today that I cover is bumping around cycle lows. So
Speaker 1: you know, I kind of asked myself, why is that? Um,
Speaker 1: And it's it's hard for me to to understand why
Speaker 1: people think there's you know, recession coming in the near term.
Speaker 1: It's right where I wanted to go. But first, Betsy,
Speaker 1: it's really important. How did James Gorman do yesterday in
Speaker 1: the LoveFest and Washington? Are you trying to get Bessie
Speaker 1: in trouble? Are you trying to get Bessie in trouvel? Oh?
Speaker 1: We could talk and get her into so much trouble.
Speaker 1: I had a lot of meetings on my calendar already. Yeah,
Speaker 1: I didn't. And watch the Betsy. To your point on
Speaker 1: the mystery of bank valuations, do the banks goose that
Speaker 1: with financial engineering or do they just have to wait
Speaker 1: to find a better value? You know, I think that
Speaker 1: what has happened is we need to crank through the
Speaker 1: next several quarters here and our expectation is that we
Speaker 1: have solid economy and that you know, our are my
Speaker 1: colleague Allen Center, who you know well uh is looking
Speaker 1: for a pickup in g d P over you know,
Speaker 1: two q three q UM from what is expected to
Speaker 1: be a low point in one queue due to government shutdown.
Speaker 1: Another reasons the banks that I just happened to review
Speaker 1: City Group yesterday, picking randomly among the gathered. The operating
Speaker 1: income build at these ginormous institutions is extraordinary yesterday, did
Speaker 1: Washington or our listeners or myself or John do we
Speaker 1: actually understand how big the big banks are? Oh? Me, Oh,
Speaker 1: that's a question for me. Um. You know, yeah, I
Speaker 1: do expect that you know, people understand that the the
Speaker 1: you know, top five banks have depending on the asset class,
Speaker 1: fifties sixty percent of you know the market. Um. Importantly,
Speaker 1: that's in part because they've been investing in their plant
Speaker 1: and equipment, investing in their technology, UM, investing in you know,
Speaker 1: branch refreshes, et cetera. And not that other institutions haven't either,
Speaker 1: But brand matters, advertising matters, national reach matters, and these
Speaker 1: are things that are you know, working to the advantage
Speaker 1: of some of the larger institutions. But can you just
Speaker 1: give us a hand to help us out with something
Speaker 1: that a lot of people find difficult to understand, and
Speaker 1: that's the relationship between treasury yields and what should and
Speaker 1: shouldn't happen with bank stocks. What we've seen over the
Speaker 1: last year or so, is this the yield curve narrows,
Speaker 1: flattens bank stocks roll over, But at the same time,
Speaker 1: net interest margins are not getting narrow that they've been
Speaker 1: getting wider. We misunderstanding the relationship and how that's evolved
Speaker 1: over the last ten years between what happens with the
Speaker 1: yield curve and what happens with bank profitability. Well, it's
Speaker 1: a great question, and I think one of the things
Speaker 1: that's happened over the past decade or so is that,
Speaker 1: you know, bank um business mix has widened out a
Speaker 1: little bit, right. I mean, you go back ten years
Speaker 1: ago and you had companies that were just broker dealers
Speaker 1: or companies that were very heavily skewed towards you know,
Speaker 1: corporate or consumer, and now you've got more of a mix.
Speaker 1: In an addition, you do have a bigger portion of
Speaker 1: the deposits in some organizations coming from consumer deposits. And
Speaker 1: then the last thing I would highlight is the yield
Speaker 1: curve flattens that that does pressure certain parts of their business.
Speaker 1: But what I think the market forgets is that banks
Speaker 1: benefit from non interest bearing deposits, and noninterestparing deposits are
Speaker 1: as much as about of your average earning assets. So
Speaker 1: you know, really the not only the shape of the
Speaker 1: curve matters, but the absolute level of rates. And when
Speaker 1: the front end of the curve is at two forty,
Speaker 1: you have and you have twenty of your your average
Speaker 1: earning assets funded by zero percent cost of funds. I
Speaker 1: think that's the piece that the market forgots so deposit
Speaker 1: by the restate really low and we have this essentially,
Speaker 1: we have this free funding and you can then lend
Speaker 1: it out. And making this sound very simplistic, but you
Speaker 1: can make a lot of money that way. And I'm
Speaker 1: just wondering whether the sensitivity to the yield curve has
Speaker 1: changed quite radically over the last ten years. To what
Speaker 1: degree is that true? But say, I think on a
Speaker 1: bank by bank basis, there's some evidence of that. UM
Speaker 1: As a system overall, what we've seen is as these
Speaker 1: rate cycles UM you know, continue, you get you actually
Speaker 1: have had a build up over the last ten years
Speaker 1: in liquidity, and that liquidity is relatively cheap for banks.
Speaker 1: So that's my answer to your question. Let's see, thank
Speaker 1: you really appreciated one of our joys. There's guests that
Speaker 1: we see every spring meeting of the I Am of
Speaker 1: Jacob Frankel, with us tomorrow, among others, Catherine Man of
Speaker 1: City Group we are thrilled to have with us now,
Speaker 1: William Lee with the Milken Institute, with City Group for years,
Speaker 1: and of course is public service at the International Monetary
Speaker 1: Fund as well. Bill, I want to go back to
Speaker 1: first principles, and we saw it a bit overnight with
Speaker 1: President Trump tweeting on the evil trade of Europe as well.
Speaker 1: Exactly how mercantilist, How seventeenth century are these I m
Speaker 1: F meetings. The I m F meetings is like a
Speaker 1: gathering of the masters of economists. And I think one
Speaker 1: of the differences between golf and economics is that here
Speaker 1: we have a bipolar world. The International Entrey Fund is
Speaker 1: a edifice of multilateralism. And so we are all at
Speaker 1: the I m F worried about why it is that
Speaker 1: President Trump is so bilateral, but the domestic economists here
Speaker 1: in the US are getting more and more bilattle, and
Speaker 1: President Trump is saying to the world, you know, I'm
Speaker 1: gonna bash down the bilateral deficit with China. They're gonna
Speaker 1: bash down the bilattal deficit with the EU, and and
Speaker 1: this kind of bashing down to bilateral deficits and and
Speaker 1: and surpluses is doing nothing but just keeping that aggregate
Speaker 1: common account deficit as big as it always was. So
Speaker 1: so it's a it's a full game in part. But
Speaker 1: I think President Trump has got onto something because he's
Speaker 1: trying to say, we need to restructure our economy so
Speaker 1: that we can compete with our biggest competitors, China and
Speaker 1: the EU. But do we overestimate our fear of their wealth,
Speaker 1: our fear of their growing incomes. Do we overestimate the
Speaker 1: demographic economics of China? Absolutely, Tom, Just as we overestimated
Speaker 1: the Soviet Union and what a huge power it was
Speaker 1: supposed to be and it turned out that they were not.
Speaker 1: China may well be that. But one thing we know
Speaker 1: about China is that their intellectual powerhouse, their intellectual capital,
Speaker 1: was trained at might Teach, Health Tech and Stanford and
Speaker 1: and these are the places that that we have a
Speaker 1: handle on. So we know that China is in fact
Speaker 1: pushing the frontier out and it's up to us to
Speaker 1: develop our own intellectual capital, our own technology is to
Speaker 1: be able to compete. But let's just assume that the
Speaker 1: resolution with China is a positive one, the outcome is
Speaker 1: a good one. Let's move on to Europe. What happens next? Boy, John,
Speaker 1: You know I as an ugly American and as someone
Speaker 1: who was the head of the German desk when I
Speaker 1: was at the I M f uh. They used to say, Bill,
Speaker 1: when you got up Europe, it's like John Wayne walking
Speaker 1: down the Chan's else. And I have to say that
Speaker 1: Europe is such a morass of structural problems that they
Speaker 1: barely can get a one handle on growth. And so
Speaker 1: so when you talk about all these issues of Brexit
Speaker 1: and and continental Europe and the banking system uh at
Speaker 1: Italy going to default, I think this to me, that's
Speaker 1: just characteristic of what you're really is slow growth full stop,
Speaker 1: whereas China and US has still will have the potential
Speaker 1: for high digit growth. That's what I worry about, battle
Speaker 1: that China can respond to a tried dispute with the
Speaker 1: United States. I've really struggle to say how the Europeans
Speaker 1: can the Chinese can inject some stiminus into the economy.
Speaker 1: Monasty policy in Europe looks totally exhausted, Fiscal policy looks
Speaker 1: incredibly constrained. What do they do? The old retort of
Speaker 1: I M F policy prescription, structural change and guess what,
Speaker 1: that's the last thing they ever do. In fact, they
Speaker 1: never get to it. So I I honestly believe that
Speaker 1: if I were a global investor, the last place I've
Speaker 1: been look into Europe. Well, if you're a global investor
Speaker 1: and your name is Prime Minister Mayor David Davies is
Speaker 1: just making headlines right now in the Telegraph. I mean,
Speaker 1: is the United Kingdom wrong to say, you know, we
Speaker 1: just really don't want to go down that road. The
Speaker 1: United Kingdom, in some ways it's very special because London
Speaker 1: is still a global capital market, is global uh place
Speaker 1: where global investors go to allocate their funds, and and
Speaker 1: whether it's tied to Europe but tied to the rest
Speaker 1: of the world in some out of the way Europe,
Speaker 1: the UK is gonna do quite well in and of itself.
Speaker 1: Trouble is, the UK is more than just London, and
Speaker 1: and the other parts of the UK have to start
Speaker 1: to fall in line with the same problems that's facing Europe,
Speaker 1: which is they've got structural problems. The technology, for example,
Speaker 1: in the UK, UK used to be the best air
Speaker 1: jet engine makers in the world with Rose Royce. They
Speaker 1: have lost that edge. But let's talk about a service sector,
Speaker 1: shall we and what's gonna happen next in the UK?
Speaker 1: What has happened with services? I barely have a herit discussed.
Speaker 1: When was the last time you worried about insurance from Lloyd's?
Speaker 1: I mean, you know they again? I think, uh, the
Speaker 1: service sector and everything else in the euro in the
Speaker 1: UK has to modernize. When was the last time a
Speaker 1: hit movie was made in the UK? US right now
Speaker 1: has compared advantage in the export of services. Uh, Marvel
Speaker 1: comic movies and and and and all these these these
Speaker 1: these uh Disney productions. They are flooding the world. And
Speaker 1: I think the UK has got to get up with
Speaker 1: gett and speed with doing exactly that. What has been
Speaker 1: clear Bill over the last few months that Europe is
Speaker 1: incredibly divided about how to deal with the Brexit situation.
Speaker 1: Tom earlier bringing up the example of Emmanuel Macron trying
Speaker 1: to play to the audience back home, trying to hold
Speaker 1: things up. If you can't get the whole of Europe
Speaker 1: to agree, how on earth did we get the whole
Speaker 1: of Europe to agree and to get the UK to
Speaker 1: agree to the same thing. You just repeated exactly what
Speaker 1: we were saying before, which is, uh, He's going to
Speaker 1: Europe as an ugly American. I've got to say, Europe
Speaker 1: is in a thousand year war and it's going to
Speaker 1: continue the next thousand years, I think, battling tribalism. So
Speaker 1: what can Madame Legard do about does? I mean, you know,
Speaker 1: we come down here, happy talk interviews Madame Legarde later today,
Speaker 1: Bill ye. But what can a multilateral institution do given
Speaker 1: these fractured relationships. I think the best we can do
Speaker 1: is to recognize that countries are countries and there are
Speaker 1: national objectives. So does Brussels matter? I mean, this is
Speaker 1: perfect overnight, Charles de Gaulle angel a miracle. They matter,
Speaker 1: Brussels doesn't matter. Brussels has got get out of the way,
Speaker 1: just as Washington's gotta get out of the way. And
Speaker 1: I think get letting, letting an entrepreneurship and private sector
Speaker 1: take hold in Europe is the biggest challenge yet to
Speaker 1: great comments, Billy, thank you so much with the Milk
Speaker 1: and Institute, Johnny, you know, to get to our controversial
Speaker 1: and steam guests here. Now, let me just say that, John,
Speaker 1: about the time claims were back where they were in
Speaker 1: October of sixty nine. The hit that Steve Moore was
Speaker 1: listening to was suspicious minds. What's it it really? And
Speaker 1: what a number it is? As well. I'm really pleased
Speaker 1: to say that Stephen Moore joined us now distinguished Visiting
Speaker 1: Fellow at the Heritage Foundation, and we assume the presuming
Speaker 1: President Trump choice for a seat on the Federal Reserve. Steve,
Speaker 1: did you ever think you'd become this controversial? Well, no,
Speaker 1: I didn't. I I'm sort of surprised by the by
Speaker 1: the resistance by the left to my nomination. But it's
Speaker 1: going fine, and you know, I'm well, I'm doing well
Speaker 1: with the Senators, and so this is going to happen. Um.
Speaker 1: You know, I do have some controversial views I'm in
Speaker 1: terms of what I want to do with the FED.
Speaker 1: I feel very strongly about more transparency at the FED.
Speaker 1: I think there should be more openness and sunlight about
Speaker 1: how the FED operates. Um. I do believe that maybe
Speaker 1: this is controversial, maybe it's not. I believe, as as
Speaker 1: Donald Trump believes and and Larry Cudlow believes, that growth
Speaker 1: does not cause inflation. I'll say that again, growth does
Speaker 1: not cause inflation. I think there are too many people
Speaker 1: at the FED, and too many people find in the
Speaker 1: financial industry who believe that every time we get growth,
Speaker 1: sometimes we have to pull that back because it causes inflation.
Speaker 1: If you have an increase in goods and services, prices fall,
Speaker 1: they don't rise. We'll get to the economics. Just to
Speaker 1: get to the process quickly. Yeah, when does it become official? Well,
Speaker 1: I have to go through an FBI clearance and I
Speaker 1: have to also do a financial disclosure that could take
Speaker 1: I don't know exactly how long it'll take for that
Speaker 1: to be completed, maybe a month. And so the way
Speaker 1: this process works is that you're formally nominated once you've
Speaker 1: gone through the clearance. So what was unusual is that
Speaker 1: that this story kind of got out before. Usually you'd
Speaker 1: go through the clearance first and then be nominated. So
Speaker 1: Steve Moore of the uproar over your candidacy to be
Speaker 1: with the FED is about theory as well. Let us
Speaker 1: begin with the defense of supply side theory. There are
Speaker 1: many that push against it. In much of what they
Speaker 1: say is we don't have tangible evidence that growth doesn't
Speaker 1: harm fiscal trajectories. Growth, How do we get growth and
Speaker 1: a better debt and a better deficit well, look, I
Speaker 1: mean supply side. I am a supply sider. I believe
Speaker 1: the way to grow the economy has increased the supply
Speaker 1: of goods and services and increase employment. And by the way,
Speaker 1: I mean, as there ever been a better vindication of
Speaker 1: supply side economics than the last two years when all
Speaker 1: the liberal remember when Trump was elected, all the all
Speaker 1: the his critics that he was going to cause a
Speaker 1: second great depression. Remember, and this is gonna be the
Speaker 1: you know, the worst financial meltdown in history if he
Speaker 1: was elected. And of course just the opposite has happened
Speaker 1: where we now have, uh, you know, we have markets
Speaker 1: up some since he was elected. We have a very
Speaker 1: strong economy. And I think the tax cuts had I'm
Speaker 1: I'm totally proud of the tax cuts. I mean, has
Speaker 1: there ever been a policy that's worked so rapidly and
Speaker 1: so effectively as the tax I'm gonna take it over.
Speaker 1: The fifth was like the phone ring in their folks,
Speaker 1: was Herman Kane online to um Steve. I want to
Speaker 1: talk Steve more about the expansion of the Dutton deficit.
Speaker 1: My chart for chart of the year last year was
Speaker 1: the twin deficits, the trade deficit, the president so concerned
Speaker 1: with and also the growing fiscal deficit. Isn't the price
Speaker 1: of a supply side cud Lot Moore theory at some
Speaker 1: point all of the eighties, that debt and deficit catches
Speaker 1: up with us. Well, look, I think what's most important
Speaker 1: is how I am a depsit hawk by you. You
Speaker 1: go back to the last twenty five years, I don't
Speaker 1: think I look, well, let me make this point. I
Speaker 1: mean it's a very important one. I don't think you can.
Speaker 1: I challenge you to find anyone, anyone in Washington who
Speaker 1: has wanted to cut government spending more than me. I mean, really,
Speaker 1: I don't think you Since I was twenty five years
Speaker 1: old I came to this town, I was the youngest.
Speaker 1: But our listeners, we have to cut governments. Okay, everyone
Speaker 1: knows we have to cut government spending. By the way,
Speaker 1: it's not a Republican or Democrat thing. Both parties want
Speaker 1: to speak way too much money. You will enter the
Speaker 1: FED with the reality of a vector on the twin
Speaker 1: deficits that take us back to middle Reagan? Can we
Speaker 1: sustain that with supply side theory? If the economy is growing,
Speaker 1: the most important thing about the debtist make sure, the
Speaker 1: economy is growing faster than the debt. I think you
Speaker 1: all agree on that. And you know, if you if
Speaker 1: we stayed on the course that we had been on
Speaker 1: for the previous ten years, where the economy was growing
Speaker 1: at one point at one point nine percent, that's not sustainable.
Speaker 1: The debt is going to cycle out of control. We
Speaker 1: have increased the growth rate from one point five percent
Speaker 1: in Obama's last year two over three percent. Now, I
Speaker 1: mean that's a that's an incredible record in two years.
Speaker 1: So you get that economy growing at three percent on
Speaker 1: a suspeninable level, you're gonna level off debt as a
Speaker 1: share GDP, and over time the debt is going to
Speaker 1: be reduced as a percentage GDP. But we do have
Speaker 1: to cut government spending. There's no doubt about it. There's
Speaker 1: no argument there. Government spending is way way too high.
Speaker 1: We have to do something about the entitlements. We have
Speaker 1: to do something about bringing down the domestic spending, and
Speaker 1: even the military. I think we spending too much money,
Speaker 1: frankly on the military. We have to cut Everyone knows that.
Speaker 1: The problem. I mean even you know it's not a
Speaker 1: revenue problem, right, We have more revenues in two thousand
Speaker 1: eighteen than any time in history. It is a spending problem. Well,
Speaker 1: a lot of people listening right I mean, do not
Speaker 1: do you people listening to this problem right now are
Speaker 1: gonna be a sealing that three it's a story of yesteryear.
Speaker 1: It has been and gone. Three percent is no longer sustainable.
Speaker 1: Projections that we see from the economists that join us
Speaker 1: on this program, most of them have two handles. Why
Speaker 1: are they wrong? Why you? Because these are the same
Speaker 1: people said I mean, you know, I don't know who
Speaker 1: you're talking to, but you know all the people at
Speaker 1: the New York Times and the Washington Post and so
Speaker 1: on are the same people who two years ago, go
Speaker 1: back and read what they said when if Donald Trump
Speaker 1: is elected. We are going to journalist Steve, I'm talking
Speaker 1: to economists who are forecasting, on average, the estimate that
Speaker 1: we're looking at, the median estimate in our Bloomberg Serve
Speaker 1: at one point nine. Let's assume they're wrong. You're right
Speaker 1: that we get three percent. Hold on, I'm not saying
Speaker 1: that we are going to get. What I'm saying is
Speaker 1: we have the rights if we have the right set
Speaker 1: of policy. Place is policies in place. Look, we have
Speaker 1: created an incredibly pro growth, pro business atmosphere with the
Speaker 1: reduction and tax rates, right with the reduction and regulation,
Speaker 1: with the pro American energy policies and other pro business
Speaker 1: policies we've got. Now, my problem has been, I do
Speaker 1: think over the last four months or so, the FED
Speaker 1: has been too tight. They've looked at this economic growth
Speaker 1: and they felt like they've had to pull it back.
Speaker 1: And my point is, growth does not inflation. Let's get
Speaker 1: a little practice here and you going before the Senate,
Speaker 1: the House, and everybody else and at Washington. The fact
Speaker 1: is they're gonna tell you it's a guilded age. You're
Speaker 1: gonna say it heritage, that it's a lackey in America,
Speaker 1: every man for himself. How does Steve Moore define the
Speaker 1: income and the wealth wealth inequality that we saw for
Speaker 1: example yesterday between Mr Diamond and the congresswoman from Harlem.
Speaker 1: How do you define this guilded age? And what are
Speaker 1: you gonna do about it? I love growth, I mean
Speaker 1: I I'm for growth. I'm for growth for Mr Diamond
Speaker 1: or by the way, you call us a guilded age.
Speaker 1: Wait a minute, you've seen the statistics for the first
Speaker 1: we not only have we had the strongest wage growth
Speaker 1: for American workers in fifteen years, but according to the
Speaker 1: Wall Street Journal just two weeks ago, the biggest wage
Speaker 1: gains in the American economy. You guys know this. The
Speaker 1: biggest wage gains have going to the kind of the
Speaker 1: lowest income, lowest skilled workers. So that's reducing income into quality,
Speaker 1: it's not raising it. We've got a minute left. I
Speaker 1: need to went through some really quick questions. I need
Speaker 1: some quick answers. WHI is FED independence so important? FED
Speaker 1: independence is important because we don't want politicians making the
Speaker 1: decisions about what the FED should be doing. It should
Speaker 1: be made by professionals. But that doesn't mean everyone has
Speaker 1: to be a PhD economist. I love the fact that
Speaker 1: Herman Kane is going to the FED. Practically agree with
Speaker 1: that state absolutely. Next question is if the perceived independence
Speaker 1: of the Federal Reserve is damaged by your nomination, are
Speaker 1: you willing to withdraw? Well, how would it be. It's
Speaker 1: not going to be. I'm i am independent. Perception of
Speaker 1: the independence. You have to read My book is very
Speaker 1: clear trump Anomics. People have to read it. They don't
Speaker 1: know what they're talking about I've been very critical of
Speaker 1: Donald Trump on a lot of issues on trade, and
Speaker 1: I think he's spending too much money. So I will
Speaker 1: be independent of him, but I also agree with a
Speaker 1: lot of things that he's done, and I'm not gonna
Speaker 1: apologize for that. I help they adjenda together. Stephen Moore,
Speaker 1: great to catch out with you. Thank you got fiery Tom.
Speaker 1: I wish I had a bit more time to time.
Speaker 1: Stephen wore Zone walkman for a solid hour, and we'll
Speaker 1: go after this. Maybe we can get sixty minutes with
Speaker 1: Stephen Moore and then we can get herm and trying
Speaker 1: to join us as well, and we can just hash
Speaker 1: it all out well. Is a tumultuous time, not only
Speaker 1: for economic theory. What we missed their Stephen wore a
Speaker 1: huge proponent of MMD same so Steve. Great to catch
Speaker 1: out with you. Debbie Dingle is of course a congresswoman,
Speaker 1: well known in Washington and of course in her Michigan,
Speaker 1: a descendant of all of the body by Fisher people,
Speaker 1: and she joins us this morning. Debbie, what was it
Speaker 1: like to grow up in the extended and I do
Speaker 1: mean extended Fisher family, I mean innovation? Was there from
Speaker 1: the get go, wasn't it well, good morning and it
Speaker 1: I mean, yes, it was. I mean for a long time, Michigan,
Speaker 1: Southeast Michigan was known that probing it the forefront of innovation, technology,
Speaker 1: trying to get the next design. Unfortunately, I think in
Speaker 1: the seventies, uh, people began to, I don't want to say,
Speaker 1: become lazy, but got settled in and you know, we
Speaker 1: had some very tough times in the industry and people
Speaker 1: realized that we weren't keeping current with some of the
Speaker 1: times and some of the challenges. And since then, the
Speaker 1: auto industry keeps going up and down in terms of
Speaker 1: what's happened. And I fear that there's so many challenges
Speaker 1: up there right now that we've got to make sure
Speaker 1: that the US I wanted to be Southeast Michigan staying
Speaker 1: at the forefront. And it the challenge right now. What
Speaker 1: is the Dingle prescription to do that? We had a
Speaker 1: president overnight begin to once again advance the idea of
Speaker 1: trade discussions, let around automobiles in Europe as well there
Speaker 1: boodle or whatever he said, trading partners as well. But
Speaker 1: what is the Dingle prescription to jump start America back
Speaker 1: to manufacturing excellence. Well, I don't, I actually don't. I
Speaker 1: think one of the reasons that President Trump won and
Speaker 1: I was one of the people that predicted it, is
Speaker 1: because we had bad trade deals that didn't create a
Speaker 1: level of playing field. So I don't think. I always
Speaker 1: call it napsis to point because I want everybody to
Speaker 1: understand what we're talking about. And actually at one point
Speaker 1: out for the industry terribly. But you know, the faction
Speaker 1: matter is and global climate is real. I mean we
Speaker 1: see it happening every day, and other countries coron of
Speaker 1: mandating electric vehicles, Western Europe mandating electric vehicles, India's mandating
Speaker 1: electric vehicles, and our country is not encouraging, uh the development.
Speaker 1: We don't have a the electricity infrastructure to support it.
Speaker 1: And now the presidents actively taking shots at evs. That
Speaker 1: sounds helpful because we're trading in the global marketplace. We've
Speaker 1: got to have products that's gonna go there. Nor can
Speaker 1: you know, I was really proud of the fact autunomos
Speaker 1: nasals are also coming because there's consumer confidence issues. They
Speaker 1: are creative them, but they're being built and they're gonna
Speaker 1: be built in China, Western Europe and India again, and
Speaker 1: we can't. The House unanimously and I am very proud
Speaker 1: of this, unanimously passed out a committee and the Congress
Speaker 1: a regulatory framework for those to be developed and explored.
Speaker 1: Senate killed it, and you know, again we're standing still
Speaker 1: there's not a regulatory framework for it. Yesterday several of
Speaker 1: the companies A Toyot, Afford and Gentlemotors announced they were
Speaker 1: forming up a consortium to study autonomousteo because one work
Speaker 1: on them. But you know, this stuff's gonna happen. It's
Speaker 1: gonna be built someplace. It's gonna be built someplace. Yeah,
Speaker 1: should be built here. This is a wonderful conversation today
Speaker 1: with Debbie Dingles. She's a congresswoman from Michigan, of course,
Speaker 1: and wife of Lake John Dingle. I watched the festivities
Speaker 1: congresswoman yesterday between the acclaim Maxine Waters, age eighty, head
Speaker 1: of the House Financial Services Committee, and at one point
Speaker 1: I said to myself, John Dingle would never have asked
Speaker 1: questions in that way, where is the civility gone? Where
Speaker 1: is the grace gone? Even in talking to Evil Wall Street?
Speaker 1: Instead of the almost sniping that we saw over the
Speaker 1: last number of days. I am very concerned about the
Speaker 1: tone of what happening in America period. Thank you. You know,
Speaker 1: are trying never to attack anybody individually, from the White
Speaker 1: House on down, but we leaders set homes they you know,
Speaker 1: the rhetoric, the lack of civility is coming every place.
Speaker 1: I think the Internet, while it was founded to help
Speaker 1: connect us, has become a tool of total lack of civility.
Speaker 1: It lets people anonymously say the most divisive, horrendous, horrific thing.
Speaker 1: And I think all of us, I mean, I've gotten
Speaker 1: much more verbal about this. Uh since with all of
Speaker 1: these shootings and all of the you know, I live
Speaker 1: in the city that's got the largest population of Muslims
Speaker 1: and the hate crimes that are going down there. You know,
Speaker 1: you sort of live it in the community that you're
Speaker 1: going in. But the Jewish community is also seen it.
Speaker 1: It's not it's not okay, and all of us have
Speaker 1: to start now, but it starts. I want the House
Speaker 1: has to do it, The Senate's got to do it.
Speaker 1: Administration has got to do it. People yearned, maybe for
Speaker 1: a moderate Republican or moderate Democrats stance here. How should
Speaker 1: old line Democrats and disaffected Republicans. How should they adapt
Speaker 1: to the new strident progressive democratic message? Do they wait
Speaker 1: it out? Did they change it? Now? Even President Obama
Speaker 1: the other day weighing in on this, what would you
Speaker 1: do there? Do you just his patients the Dingle prescription? Well,
Speaker 1: John Geggle probably would be more patient than well, actually
Speaker 1: John Diggle would be twittering right now with some of
Speaker 1: these very wise thoughts. You know when he did adapt.
Speaker 1: You know when John Staph used to collect his wittisms
Speaker 1: or are the things that his daily you know, sort
Speaker 1: of wisdoms that he would just say, you can't imagine
Speaker 1: any sus twitter very well, because his wisdom was sort
Speaker 1: of made for Twitter. I myself, I'm not a raping
Speaker 1: We'll know and will call me that. Uh, But I
Speaker 1: am for medicare for all. But I want to figure
Speaker 1: out how we get health care for every American. But
Speaker 1: I want to bring everybody to the table. I don't
Speaker 1: you know. A lot of this is true. We have
Speaker 1: to have these economic discussions. We're the only industrialized nation
Speaker 1: in the world that doesn't guarantee all of its citizens healthcare,
Speaker 1: and we're competing in a marketplace where we're chased twice
Speaker 1: as much as most of the countries and getting okay,
Speaker 1: But the great fear of socialized medicine. Can the Democratic
Speaker 1: Party with a Democratic president, can they deliver modern healthcare
Speaker 1: that isn't socialized. We have to figure that out. And
Speaker 1: you know the factor menders. Everybody screamed about the Affordable
Speaker 1: Care Act and it's not perfect. There are things that
Speaker 1: must be changed, and we can't get to changing or
Speaker 1: making them law better because everybody's always playing games with it.
Speaker 1: But you've seen how the pendulum has swung from ten
Speaker 1: years ago where everybody it was, you know, it was
Speaker 1: the worst thing since life bread and now in the
Speaker 1: last election, people understand that ut we need to protect
Speaker 1: people with creating conditions if people are trying to want
Speaker 1: to make people forget that. In the late and when
Speaker 1: that field was passed, the auto companies were healthcare providers
Speaker 1: who happened to build products, and a lot of companies
Speaker 1: the healthcare costs of a very small business, Uniford healthcare.
Speaker 1: You got to figure this out. Well, we gotta figure
Speaker 1: it out, and there's an urgency to a de Wie Dingle.
Speaker 1: Thank you so much for an extended conversation today. Debor
Speaker 1: Dingle of the twelfth District in Michigan, a Democrat. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio