1
00:00:05,800 --> 00:00:08,720
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

2
00:00:08,760 --> 00:00:11,520
Speaker 1: Along with my co host Lisa Bramowitz. Each day we

3
00:00:11,640 --> 00:00:15,120
Speaker 1: bring you the most important, noteworthy, and useful interviews for

4
00:00:15,200 --> 00:00:17,840
Speaker 1: you and your money, whether you're at the grocery store

5
00:00:17,960 --> 00:00:20,720
Speaker 1: or the trading floor. Find the Bloomberg p m L

6
00:00:20,840 --> 00:00:31,320
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Now, however,

7
00:00:31,320 --> 00:00:33,760
Speaker 1: I'd like to go to Canal Kapoor, who is chief

8
00:00:33,760 --> 00:00:37,319
Speaker 1: executive officer of morning Star, which oversees more than two

9
00:00:37,680 --> 00:00:40,280
Speaker 1: billion dollars of assets and is well known for the

10
00:00:40,360 --> 00:00:45,920
Speaker 1: analytics that it provides surrounding asset managers and two investors. Kunal,

11
00:00:46,000 --> 00:00:48,519
Speaker 1: thank you so much for joining us. I feel like

12
00:00:48,600 --> 00:00:52,640
Speaker 1: you're uniquely positioned to have a good perspective on the

13
00:00:52,840 --> 00:00:56,760
Speaker 1: shift in asset management from active to passive. Can you

14
00:00:56,760 --> 00:00:59,560
Speaker 1: give me a sense from morning Stars perspective, how has

15
00:00:59,640 --> 00:01:03,000
Speaker 1: this changed your business? Yeah, well, good morning, first of all,

16
00:01:03,120 --> 00:01:07,160
Speaker 1: and thanks for having me join you. You're right, obviously

17
00:01:07,200 --> 00:01:10,000
Speaker 1: we're seeing some season like shifts in frum says or

18
00:01:10,200 --> 00:01:14,880
Speaker 1: the move from active managers two passive managers. And you

19
00:01:14,880 --> 00:01:16,960
Speaker 1: know my view on this, and I think this represents

20
00:01:17,000 --> 00:01:19,840
Speaker 1: a lot of you two is that while it's been

21
00:01:19,920 --> 00:01:24,040
Speaker 1: cost in that fashion, the real move is from high

22
00:01:24,080 --> 00:01:28,240
Speaker 1: cost offerings to low cost offerings. And much of what

23
00:01:28,280 --> 00:01:32,320
Speaker 1: you're seeing, at least in the active space today in

24
00:01:32,520 --> 00:01:36,000
Speaker 1: in in what i'll call the retail area is UM

25
00:01:36,040 --> 00:01:38,280
Speaker 1: you know, typical of what you saw in the institutional

26
00:01:38,280 --> 00:01:41,199
Speaker 1: space over the past three decades. So at some level

27
00:01:41,280 --> 00:01:44,360
Speaker 1: it was inevitable that he who were going to come down.

28
00:01:44,560 --> 00:01:47,280
Speaker 1: And you know, the asset management business, if you look

29
00:01:47,280 --> 00:01:50,000
Speaker 1: at the historical performance of a lot of the publicly

30
00:01:50,000 --> 00:01:52,840
Speaker 1: traded asset managers, our life has been good. You know,

31
00:01:52,880 --> 00:01:56,720
Speaker 1: you've been looking at over forty percent, which in any

32
00:01:56,720 --> 00:02:00,480
Speaker 1: other industry is almost unthinkable. And I think, you know,

33
00:02:00,520 --> 00:02:03,240
Speaker 1: margins are probably coming down, you know, more to sort

34
00:02:03,240 --> 00:02:06,640
Speaker 1: of the twenty percentage level. Uh, it's kind of more typical.

35
00:02:07,080 --> 00:02:11,320
Speaker 1: So still good businesses by far um as as opposed

36
00:02:11,320 --> 00:02:13,280
Speaker 1: to be in great businesses. But what I will say is,

37
00:02:13,360 --> 00:02:17,280
Speaker 1: you know, for Morning Starts perspective, UM, ultimately we are

38
00:02:17,400 --> 00:02:21,440
Speaker 1: focused on serving investors and helping investors. And you know,

39
00:02:21,480 --> 00:02:26,280
Speaker 1: today's investors asking for different things. They're asking more for

40
00:02:26,400 --> 00:02:31,600
Speaker 1: Portola solutions, they're asking more for multi assets solutions, they're

41
00:02:31,639 --> 00:02:35,280
Speaker 1: asking more for help navigating some of their regulatory challenges

42
00:02:35,320 --> 00:02:38,080
Speaker 1: that they're seeing. And I would just also just add

43
00:02:38,160 --> 00:02:42,320
Speaker 1: that finally, most investors are just in a better place

44
00:02:42,600 --> 00:02:46,240
Speaker 1: than they were ten fifteen years ago, given that there's

45
00:02:46,280 --> 00:02:49,160
Speaker 1: more choice, given that there's little fees, given that the

46
00:02:49,200 --> 00:02:51,760
Speaker 1: quality of advice is going up. So as much as

47
00:02:51,840 --> 00:02:55,320
Speaker 1: things are changing, there's always plenty opportunity to help investors

48
00:02:55,400 --> 00:02:57,880
Speaker 1: and you know, get them to the outcomes. Were hoping

49
00:02:57,919 --> 00:03:01,079
Speaker 1: for one thing that you said what I thought was compelling.

50
00:03:01,200 --> 00:03:04,880
Speaker 1: There's a focus on low cost rather than high cost funds,

51
00:03:05,000 --> 00:03:09,239
Speaker 1: and h some Bloomberg intelligence analyzes have shown that money

52
00:03:09,320 --> 00:03:12,960
Speaker 1: is flowing to low cost fees UH low cost funds

53
00:03:12,960 --> 00:03:16,760
Speaker 1: and out of high cost funds regardless of performance. So UH,

54
00:03:16,960 --> 00:03:20,480
Speaker 1: in a period like that where there is the singular

55
00:03:20,520 --> 00:03:25,240
Speaker 1: focus on low cost of funds, does morning Star find

56
00:03:25,360 --> 00:03:29,800
Speaker 1: that people are less willing to pay to understand better

57
00:03:30,160 --> 00:03:33,480
Speaker 1: the background of the asset manager that they're investing with

58
00:03:33,520 --> 00:03:34,800
Speaker 1: because they're just going to go to an e t

59
00:03:34,960 --> 00:03:38,480
Speaker 1: F for some kind of passive fund. Anyway, I wouldn't

60
00:03:38,560 --> 00:03:42,720
Speaker 1: say that the reality is even in the passive arena,

61
00:03:43,080 --> 00:03:47,040
Speaker 1: the platora of options today are pretty meaningful. UM. I

62
00:03:47,040 --> 00:03:50,440
Speaker 1: think you know, if in fact you're compared the number

63
00:03:50,520 --> 00:03:54,760
Speaker 1: of publicly created stocks to the number of indexes that

64
00:03:54,800 --> 00:03:58,600
Speaker 1: have been created in this country, to tractors and things. UM,

65
00:03:58,640 --> 00:04:01,080
Speaker 1: I think there are more than a million nexes and

66
00:04:01,320 --> 00:04:03,320
Speaker 1: obviously you know, the number of public stocks is um

67
00:04:03,440 --> 00:04:05,920
Speaker 1: in the thousands, and so that just kind of gives

68
00:04:06,000 --> 00:04:08,320
Speaker 1: you a sense of the fact that the choices are

69
00:04:08,320 --> 00:04:12,880
Speaker 1: still overwhelming, and the reality is that most investors still

70
00:04:13,560 --> 00:04:16,920
Speaker 1: want help. Um, they just wanted at a lower cost.

71
00:04:17,120 --> 00:04:19,880
Speaker 1: And you know, my view here is that lower costs

72
00:04:19,920 --> 00:04:25,240
Speaker 1: actually should increase interest that you know, investors maybe who

73
00:04:25,279 --> 00:04:27,400
Speaker 1: had less interest in the past, and we were inclined

74
00:04:27,440 --> 00:04:31,280
Speaker 1: to invest in. So for us, it's meant UM, you know,

75
00:04:31,320 --> 00:04:34,800
Speaker 1: doing even more as it pertains to what we call

76
00:04:34,920 --> 00:04:38,440
Speaker 1: decision outsourcing, which is where people choose to outsource the

77
00:04:38,480 --> 00:04:42,479
Speaker 1: money management, and particularly in the financial advisor space, Morning

78
00:04:42,520 --> 00:04:45,640
Speaker 1: starts doing more and more UM to work and help

79
00:04:45,640 --> 00:04:48,919
Speaker 1: advisors meet that need. You know, one thing you said

80
00:04:49,120 --> 00:04:51,120
Speaker 1: really stands out to me at there are thousands of

81
00:04:51,320 --> 00:04:56,360
Speaker 1: indexes and not as many stocks. This concerns me. Does

82
00:04:56,400 --> 00:04:59,840
Speaker 1: it concern you? Yeah? I think it does I mean

83
00:05:00,040 --> 00:05:02,880
Speaker 1: many ways. You know, some of us the explosion of products,

84
00:05:03,120 --> 00:05:08,240
Speaker 1: leverage products, very narrow niche indexes. It's sort of reminiscent

85
00:05:08,240 --> 00:05:10,200
Speaker 1: of what you saw when you have to tech media

86
00:05:10,240 --> 00:05:14,000
Speaker 1: telecom bubble, where people were just trying to find slivers

87
00:05:14,000 --> 00:05:16,560
Speaker 1: and a lot of what our term is, you know,

88
00:05:16,600 --> 00:05:19,440
Speaker 1: the shenanigans that went on in the mutual fund industry

89
00:05:19,440 --> 00:05:21,760
Speaker 1: in the late ninety nineties and the early part of

90
00:05:21,760 --> 00:05:24,560
Speaker 1: the century and then kind of got fleshed out, I

91
00:05:24,600 --> 00:05:26,040
Speaker 1: think have sort of shown up in the E t

92
00:05:26,200 --> 00:05:28,039
Speaker 1: F world. So there's a lot of good ets, but

93
00:05:28,080 --> 00:05:31,000
Speaker 1: there's a lot of dangerous cts as well, and I

94
00:05:31,000 --> 00:05:35,080
Speaker 1: think investors obviously just need to be cautious. I also

95
00:05:35,160 --> 00:05:38,040
Speaker 1: just kind of point out that m you know, inexpervitors

96
00:05:38,920 --> 00:05:45,200
Speaker 1: continue to maybe on the pure data side, the prices

97
00:05:45,279 --> 00:05:47,839
Speaker 1: indexing is probably so high then it needs to be intact.

98
00:05:47,920 --> 00:05:51,080
Speaker 1: Morning Star has an initiative called the Open indextrog Initiatives

99
00:05:51,640 --> 00:05:55,840
Speaker 1: where we've made are data indexes available at no cost

100
00:05:56,120 --> 00:06:00,800
Speaker 1: and banking practises, um you know, to ask managers because

101
00:06:00,800 --> 00:06:03,279
Speaker 1: we do feel like that that's an unnecessary cost that

102
00:06:03,320 --> 00:06:05,760
Speaker 1: they have to take today. No real quickly do you

103
00:06:05,760 --> 00:06:09,279
Speaker 1: think that the that the shift toward passive is slowing

104
00:06:09,279 --> 00:06:11,400
Speaker 1: and that the pendulum is moving a little more to active.

105
00:06:12,800 --> 00:06:16,360
Speaker 1: The data does not suggest that today. It certainly seems

106
00:06:16,400 --> 00:06:20,400
Speaker 1: like the momentum in passive continues to be very strong.

107
00:06:21,279 --> 00:06:23,240
Speaker 1: Um But what you're seeing that I think is more

108
00:06:23,320 --> 00:06:28,080
Speaker 1: heartening is that active managers are I think, more aggressively

109
00:06:28,160 --> 00:06:30,640
Speaker 1: luring their fees and really thinking through how they can

110
00:06:31,160 --> 00:06:35,359
Speaker 1: more directly have a compelling offering to investors. So, at

111
00:06:35,400 --> 00:06:36,840
Speaker 1: the end of the day, if you're an active fund,

112
00:06:36,880 --> 00:06:39,800
Speaker 1: you do need to earn your keep, and I think

113
00:06:39,880 --> 00:06:41,920
Speaker 1: what you're seeing is that more and more active funds

114
00:06:41,960 --> 00:06:45,479
Speaker 1: are starting to really try to answer that question. I

115
00:06:45,520 --> 00:06:47,760
Speaker 1: remember that, you know, people used to say that funds

116
00:06:47,800 --> 00:06:49,800
Speaker 1: have sold and not thought. I think that that's not

117
00:06:49,880 --> 00:06:52,200
Speaker 1: the case anymore. Thank you so much for joining us.

118
00:06:52,240 --> 00:06:55,640
Speaker 1: Kuna Kapoor is chief executive officer of morning Star, which

119
00:06:55,680 --> 00:07:00,000
Speaker 1: is based in Chicago and oversees two hundred billion dollars.

120
00:07:10,880 --> 00:07:13,200
Speaker 1: I want to bring in Doug Barthwick, Managing director and

121
00:07:13,280 --> 00:07:17,120
Speaker 1: head of ex at Chapeling and Company. Doug, I appreciate

122
00:07:17,120 --> 00:07:18,880
Speaker 1: you coming on. You know, there's been a lot of

123
00:07:18,920 --> 00:07:22,200
Speaker 1: focus on the dollar, which has fallen to the lowest

124
00:07:22,480 --> 00:07:26,760
Speaker 1: against a comparable piers since November eighth, since the election,

125
00:07:26,960 --> 00:07:29,280
Speaker 1: And there is a lot of discussion that this is

126
00:07:29,760 --> 00:07:32,560
Speaker 1: the direct result, that this is basically a proxy of

127
00:07:32,600 --> 00:07:35,280
Speaker 1: the U S is stock falling. I mean, if this

128
00:07:35,360 --> 00:07:37,800
Speaker 1: is basically essentially the same thing and that the dollar

129
00:07:37,840 --> 00:07:39,960
Speaker 1: could be treated that way, do you agree, is that

130
00:07:40,080 --> 00:07:43,160
Speaker 1: is the political turmoil really what's driving the dollar today? No,

131
00:07:43,360 --> 00:07:46,360
Speaker 1: I I dis tree completely, some poor a lot of

132
00:07:46,400 --> 00:07:49,200
Speaker 1: cold water on that argument. Please go on. Ever since

133
00:07:49,400 --> 00:07:51,520
Speaker 1: Trump came into power, he's talked about a week dollar,

134
00:07:51,680 --> 00:07:53,559
Speaker 1: and he's talked about how he's wanted a week dollar

135
00:07:53,880 --> 00:07:58,680
Speaker 1: to renegotiate trading vents. For example, today there is discussion

136
00:07:58,720 --> 00:08:03,120
Speaker 1: coming out of the Department where they talked about linking

137
00:08:03,360 --> 00:08:07,200
Speaker 1: currency manipulation and making a currency clause soon after. So,

138
00:08:07,360 --> 00:08:09,400
Speaker 1: the president has been talking about making the US more

139
00:08:09,400 --> 00:08:11,680
Speaker 1: competitive and one of the ways he wants to do

140
00:08:11,720 --> 00:08:13,920
Speaker 1: that is by having a weaker dollar, and we've just

141
00:08:14,200 --> 00:08:17,040
Speaker 1: seen that against surplus currencies really since he's come into

142
00:08:17,280 --> 00:08:20,080
Speaker 1: into office. And so the move that we've seen today,

143
00:08:20,280 --> 00:08:22,520
Speaker 1: people have talked about the shocking moves and the markets.

144
00:08:22,520 --> 00:08:24,880
Speaker 1: So you know, the year, dollars up forty pits, so

145
00:08:24,920 --> 00:08:28,200
Speaker 1: that's less than half a percent. Certainly, dollar ends come off,

146
00:08:28,200 --> 00:08:30,520
Speaker 1: but I think that's because it's really been very well

147
00:08:30,600 --> 00:08:33,240
Speaker 1: been the last few days, and now we're sort of, uh,

148
00:08:33,320 --> 00:08:35,520
Speaker 1: it's happen a little bit of a more reaction because

149
00:08:35,559 --> 00:08:37,640
Speaker 1: stock and the stocks are off. Even in the stock market,

150
00:08:37,640 --> 00:08:40,439
Speaker 1: you're talking about one point three pullback. But a weaker

151
00:08:40,520 --> 00:08:43,480
Speaker 1: dollar has been in this administration's interest for quite some time.

152
00:08:44,040 --> 00:08:47,760
Speaker 1: He's discussed that number of times via tweets, are certainly

153
00:08:47,840 --> 00:08:50,920
Speaker 1: in speeches, and so it makes sense you see the

154
00:08:50,920 --> 00:08:54,280
Speaker 1: dollars start to weaken, certainly against surplus currencies, although the

155
00:08:54,360 --> 00:08:58,440
Speaker 1: timing is uh, pretty uncanny. I mean, basically, as the

156
00:08:58,480 --> 00:09:01,480
Speaker 1: turmoil has built, the dollar has sold off, and people

157
00:09:01,480 --> 00:09:03,400
Speaker 1: are saying, and it's not just the dollar, right, You've

158
00:09:03,400 --> 00:09:06,120
Speaker 1: seen yields fall and treasury prices increase, and you've seen

159
00:09:06,160 --> 00:09:10,480
Speaker 1: stocks fallen. Basically, this is the deflation of the trumsflation trade. Basically,

160
00:09:10,520 --> 00:09:13,559
Speaker 1: people thinking, well, perhaps President Trump can't get his agenda

161
00:09:13,600 --> 00:09:16,600
Speaker 1: through as as well as possibly we believed a couple

162
00:09:16,600 --> 00:09:19,559
Speaker 1: of months ago. Do you think that that's a valid argument. No,

163
00:09:19,720 --> 00:09:22,760
Speaker 1: I think that's really fitting Trump News into what people

164
00:09:22,800 --> 00:09:25,359
Speaker 1: already think about valuations. When you think of the valuations

165
00:09:25,400 --> 00:09:27,920
Speaker 1: of the stock market, I think every single guest you've

166
00:09:27,920 --> 00:09:29,720
Speaker 1: had on over the past two months has talked about

167
00:09:29,720 --> 00:09:31,760
Speaker 1: how the U S. Stock market is very over bud

168
00:09:31,880 --> 00:09:35,200
Speaker 1: against any metric. When it comes down to the pricing

169
00:09:35,240 --> 00:09:38,439
Speaker 1: in of a June hike by the Fed, I think

170
00:09:38,679 --> 00:09:40,920
Speaker 1: a good number of is we're arguing that that made

171
00:09:40,960 --> 00:09:43,320
Speaker 1: little sense given that the growth trajectory in the U

172
00:09:43,360 --> 00:09:45,720
Speaker 1: S ins have stalled in the first quarter, and also

173
00:09:45,760 --> 00:09:48,160
Speaker 1: given the inflation in taking up as much as possible.

174
00:09:48,240 --> 00:09:51,640
Speaker 1: So you know, we were pricing a chance of June

175
00:09:51,720 --> 00:09:54,160
Speaker 1: hike just a couple of days ago. Certainly it's come

176
00:09:54,200 --> 00:09:57,160
Speaker 1: off since then, but I think that there's been a

177
00:09:57,280 --> 00:10:00,520
Speaker 1: supreme excitement or an exuberance in the fixing on market

178
00:10:00,640 --> 00:10:03,199
Speaker 1: and in the equity market that is now being priced

179
00:10:03,200 --> 00:10:06,760
Speaker 1: back to more of a realistic nature. Uh just want

180
00:10:06,760 --> 00:10:10,760
Speaker 1: to remind listeners that we are awaiting comments from President Trump,

181
00:10:10,760 --> 00:10:14,040
Speaker 1: who will be speaking to the U. S. Coastcard Academy

182
00:10:14,360 --> 00:10:17,360
Speaker 1: at their commencement ceremony in New London, Connecticut, and he

183
00:10:17,440 --> 00:10:21,080
Speaker 1: is currently receiving a salute end We will bring you

184
00:10:21,160 --> 00:10:25,320
Speaker 1: his comments when they come, so, Doug, how far can

185
00:10:25,520 --> 00:10:28,120
Speaker 1: this dollar sell off go? At what point will it

186
00:10:28,160 --> 00:10:30,679
Speaker 1: have exhausted itself? Are we back to a more realistic

187
00:10:31,440 --> 00:10:34,559
Speaker 1: view of the economy and how much it can possibly

188
00:10:34,600 --> 00:10:37,960
Speaker 1: pick up? Well, I think that if we were to

189
00:10:37,960 --> 00:10:40,840
Speaker 1: look at a repricing of the dollar for trade reasons,

190
00:10:40,880 --> 00:10:44,280
Speaker 1: I think you're looking at move in the euro orcent

191
00:10:44,400 --> 00:10:46,320
Speaker 1: move lower in the dollar now that you could see

192
00:10:46,320 --> 00:10:49,280
Speaker 1: then the euro trading around at one thirty level. Remember

193
00:10:49,320 --> 00:10:51,600
Speaker 1: we were at one six back and had a number

194
00:10:51,600 --> 00:10:53,560
Speaker 1: of years ago. And if the Fed was to turn

195
00:10:53,600 --> 00:10:55,360
Speaker 1: around and say, you know what, we've been wanting to

196
00:10:55,400 --> 00:10:58,280
Speaker 1: aggressively raise rates, but now we realize that the economy

197
00:10:58,320 --> 00:11:00,480
Speaker 1: is not growing as fast as as we would expect,

198
00:11:00,880 --> 00:11:04,319
Speaker 1: then I'd expected you'll start to drop in the US

199
00:11:04,360 --> 00:11:05,959
Speaker 1: at the same time as the e c D. It's

200
00:11:05,960 --> 00:11:11,160
Speaker 1: talking about removing the um accommodation, its support from both sides.

201
00:11:11,320 --> 00:11:13,280
Speaker 1: So in other words, you're saying that you could see

202
00:11:13,440 --> 00:11:18,040
Speaker 1: the euro increase by twenty versus the dollar, or if

203
00:11:18,080 --> 00:11:19,440
Speaker 1: you want to look at the flip side of the euro,

204
00:11:19,600 --> 00:11:23,360
Speaker 1: the US dollar could uh decline or depreciate another twenty

205
00:11:23,440 --> 00:11:26,959
Speaker 1: percent versus the euro in that situation, Yeah, I think

206
00:11:26,960 --> 00:11:30,040
Speaker 1: that would make absolute time chap. That's that's pretty fascinating. Basically,

207
00:11:30,120 --> 00:11:33,600
Speaker 1: you're saying that people ratchet back their expectations for growth

208
00:11:33,600 --> 00:11:37,000
Speaker 1: in the US just as Europe continues to gain speed

209
00:11:37,040 --> 00:11:42,520
Speaker 1: and possibly starts to extricate itself from its stimulus program. Certainly,

210
00:11:42,760 --> 00:11:45,440
Speaker 1: but the number of international organizations that have also said

211
00:11:45,480 --> 00:11:47,320
Speaker 1: that the US dollar right now has been training around,

212
00:11:48,720 --> 00:11:52,200
Speaker 1: has been over valued. When you look at the Treasury

213
00:11:52,240 --> 00:11:54,719
Speaker 1: Secretary comments, he's talked about certainly a strong dollars in

214
00:11:54,880 --> 00:11:57,680
Speaker 1: US interest but that's in the long term and the

215
00:11:57,720 --> 00:12:00,040
Speaker 1: short term. He said that it is not necessarily in

216
00:12:00,080 --> 00:12:03,080
Speaker 1: the US interests, and and there's also been discusnment how

217
00:12:03,120 --> 00:12:05,240
Speaker 1: it's not that the US dollars is strong, it's just

218
00:12:05,360 --> 00:12:08,000
Speaker 1: other currencis of being a little bit too weak. And

219
00:12:08,080 --> 00:12:10,040
Speaker 1: so we think that the tide is certainly on the

220
00:12:10,080 --> 00:12:12,760
Speaker 1: move for a weaker dollar, and we think that that's

221
00:12:13,040 --> 00:12:15,319
Speaker 1: what we're seeing right now. So how much can the

222
00:12:15,360 --> 00:12:19,360
Speaker 1: weaker dollar lead to stronger emerging markets because we've been

223
00:12:19,400 --> 00:12:22,960
Speaker 1: talking a lot about developing markets and whether the rally

224
00:12:23,080 --> 00:12:25,960
Speaker 1: in both the currencies as well as the stocks and

225
00:12:26,360 --> 00:12:29,600
Speaker 1: bonds have has gone too far, and I have to wonder,

226
00:12:29,760 --> 00:12:33,000
Speaker 1: you know, if the US is slowing down or certainly

227
00:12:33,000 --> 00:12:35,800
Speaker 1: not as robust as people had expected, then wouldn't that

228
00:12:35,920 --> 00:12:39,920
Speaker 1: eventually be in negative for emerging markets? Well, well, there's

229
00:12:39,960 --> 00:12:42,480
Speaker 1: the flip side there that then a strong dollar is

230
00:12:42,559 --> 00:12:45,240
Speaker 1: negative for emerging markets because the emerging markets issue a

231
00:12:45,240 --> 00:12:47,320
Speaker 1: lot of their debt and dollars. As the dollar gets

232
00:12:47,320 --> 00:12:49,880
Speaker 1: too strong, emerging markets can't afford to pay back their

233
00:12:49,920 --> 00:12:52,520
Speaker 1: debt and so they run into extreme difficulties that you

234
00:12:52,600 --> 00:12:55,240
Speaker 1: saw in the agent crisis. Now on the other side,

235
00:12:55,280 --> 00:12:57,680
Speaker 1: if the dollar starts to weaken, then the emerging markets

236
00:12:57,679 --> 00:13:00,920
Speaker 1: actually start to strengthen versus the dollar, and that's actually

237
00:13:01,000 --> 00:13:03,199
Speaker 1: quite positive for them because obviously the dollar debt becomes

238
00:13:03,200 --> 00:13:05,560
Speaker 1: more manageable for them. And you're already seeing you know,

239
00:13:05,840 --> 00:13:08,120
Speaker 1: you see witness in the US equity market today and

240
00:13:08,160 --> 00:13:11,040
Speaker 1: you see dollar max move lower, the mexing pace was

241
00:13:11,160 --> 00:13:13,280
Speaker 1: rallying today as opposed to weakening. Then that sort of

242
00:13:13,280 --> 00:13:16,920
Speaker 1: tells us is more of a dollar move than anything else. So, Doug,

243
00:13:17,000 --> 00:13:19,400
Speaker 1: do you think that we've seen full capitulation for all

244
00:13:19,520 --> 00:13:22,320
Speaker 1: the dollar bowls that we're heading into this year full

245
00:13:22,360 --> 00:13:25,400
Speaker 1: on expecting the dollar just to rally. You know, there's

246
00:13:25,400 --> 00:13:27,800
Speaker 1: been i'd say over the last three months, you've seen

247
00:13:27,920 --> 00:13:30,040
Speaker 1: people throw in the towel and their parity comments that

248
00:13:30,120 --> 00:13:32,920
Speaker 1: they always expected that you're to go to parity. Uh so,

249
00:13:33,040 --> 00:13:35,240
Speaker 1: certainly the twell has been thrown in there. You're seeing

250
00:13:35,240 --> 00:13:37,920
Speaker 1: now a lot of funds that our momentum followers start

251
00:13:37,960 --> 00:13:39,880
Speaker 1: to go along to euros, supposed to short the euro.

252
00:13:40,520 --> 00:13:42,280
Speaker 1: And I think that if you look at the futures

253
00:13:42,320 --> 00:13:44,439
Speaker 1: now you have guys going long euros and s puch

254
00:13:44,480 --> 00:13:46,800
Speaker 1: a short year. So I think that's certainly the trade

255
00:13:46,960 --> 00:13:49,840
Speaker 1: is now. It was very overcrowded to be short to euro.

256
00:13:49,960 --> 00:13:52,840
Speaker 1: I think it's now starting the markets getting more comfortable

257
00:13:52,840 --> 00:13:55,160
Speaker 1: being long euros and being short to dollar. And I

258
00:13:55,160 --> 00:13:57,600
Speaker 1: think that's going to continue. You know. I gotta say, Doug,

259
00:13:57,720 --> 00:13:59,839
Speaker 1: it's really interesting to me to watch these moves and

260
00:14:00,000 --> 00:14:02,760
Speaker 1: people saying it's all because of the turmoil in Washington,

261
00:14:03,040 --> 00:14:04,960
Speaker 1: and part of it is that we're not getting new data.

262
00:14:05,000 --> 00:14:07,520
Speaker 1: We're just sort of, you know, facing the facts a

263
00:14:07,559 --> 00:14:09,720
Speaker 1: little bit more. I understand what you're saying that basically

264
00:14:09,720 --> 00:14:12,439
Speaker 1: this isn't uh, this isn't the turmoil in Washington bleeding

265
00:14:12,480 --> 00:14:15,160
Speaker 1: into markets, but to some degree, Uh, it's sort of

266
00:14:15,160 --> 00:14:18,760
Speaker 1: forcing people to at least face the data that's coming

267
00:14:18,760 --> 00:14:22,120
Speaker 1: out that might not support the same kind of refleation. No, Look,

268
00:14:22,680 --> 00:14:25,600
Speaker 1: the turmoil in Washington was really affecting the data that

269
00:14:25,680 --> 00:14:27,960
Speaker 1: I don't think you see stock markets just off their

270
00:14:28,040 --> 00:14:31,160
Speaker 1: highs and that that's really where we are right now.

271
00:14:31,200 --> 00:14:34,000
Speaker 1: So I think there's turmoil in Washington and that creates

272
00:14:34,080 --> 00:14:37,680
Speaker 1: a very full news cycle, but I'm not sure that

273
00:14:37,680 --> 00:14:40,920
Speaker 1: that's been bleeding into equity markets or into think or

274
00:14:40,920 --> 00:14:43,560
Speaker 1: eating currency markets quite as much as it's bleeding into

275
00:14:43,560 --> 00:14:46,320
Speaker 1: the news cycle and taking up the newspapers. So which

276
00:14:46,320 --> 00:14:49,000
Speaker 1: cross are you watching the most carefully? I'm looking at, Uh,

277
00:14:49,200 --> 00:14:51,400
Speaker 1: I'm looking at the end that the new Haven right,

278
00:14:51,440 --> 00:14:54,720
Speaker 1: which is up more than one and a half percent today.

279
00:14:54,800 --> 00:14:56,880
Speaker 1: What are you looking at? Yeah? I think Dalian is

280
00:14:56,920 --> 00:14:58,760
Speaker 1: very important one to look at. But really, any any

281
00:14:58,800 --> 00:15:01,560
Speaker 1: currency that has a surf plus versus the US is

282
00:15:01,640 --> 00:15:04,080
Speaker 1: one that I would expect to see more strengthened. And

283
00:15:04,160 --> 00:15:08,360
Speaker 1: so Europe had the surplus for Germany for sure, Japan does,

284
00:15:08,440 --> 00:15:11,240
Speaker 1: Canada does. In Mexico and you're seeing dollar mex continue

285
00:15:11,280 --> 00:15:13,760
Speaker 1: to move lower. You're seeing dollar cat continue to move lower,

286
00:15:13,840 --> 00:15:16,240
Speaker 1: do Euro move higher and Dolly move lower? And I

287
00:15:16,280 --> 00:15:19,160
Speaker 1: think we're continuously moves like that. Thank you so much

288
00:15:19,200 --> 00:15:22,160
Speaker 1: for joining us. Doug Barthwick, Managing Director and head of

289
00:15:22,320 --> 00:15:26,360
Speaker 1: f X at Chack Delane and Company, commenting on the

290
00:15:26,480 --> 00:15:28,920
Speaker 1: decline that we've seen in the dollar. It's been the

291
00:15:28,920 --> 00:15:31,760
Speaker 1: biggest three day move in a couple of months, and

292
00:15:31,880 --> 00:15:35,520
Speaker 1: you are seeing the lowest levels since the November election.

293
00:15:43,800 --> 00:15:45,320
Speaker 1: We want to take a moment to let you know

294
00:15:45,360 --> 00:15:48,280
Speaker 1: about something new from Bloomberg. Starting right now, you can

295
00:15:48,400 --> 00:15:51,280
Speaker 1: use our io s app or our new Google Chrome

296
00:15:51,320 --> 00:15:54,920
Speaker 1: extension to scan any news story on any website, instantly

297
00:15:54,920 --> 00:15:57,760
Speaker 1: revealing relevant news and market data from Bloomberg and other

298
00:15:57,800 --> 00:16:00,440
Speaker 1: sources related to the companies and people you read about.

299
00:16:00,680 --> 00:16:02,600
Speaker 1: So no matter where you're reading the news, you can

300
00:16:02,640 --> 00:16:05,240
Speaker 1: bring the power of Bloomberg's news and data with you.

301
00:16:05,400 --> 00:16:08,480
Speaker 1: It's pretty amazing. Download our Io s app or search

302
00:16:08,520 --> 00:16:10,720
Speaker 1: for the Bloomberg extension on the Chrome Store to try

303
00:16:10,720 --> 00:16:23,600
Speaker 1: it out. Learn more at Bloomberg dot com slash lens. Well,

304
00:16:23,640 --> 00:16:26,280
Speaker 1: there has been a lot of discussion since well, frankly

305
00:16:26,320 --> 00:16:30,440
Speaker 1: over the past week about at what point the allegations

306
00:16:30,480 --> 00:16:35,320
Speaker 1: against President Trump rise to an impeachable defense? With us

307
00:16:35,320 --> 00:16:38,080
Speaker 1: to give us more perspective on what the standard is,

308
00:16:38,120 --> 00:16:40,240
Speaker 1: I want to bring in Andrew Martin, who's legal editor

309
00:16:40,360 --> 00:16:43,240
Speaker 1: for Bloomberg News, who joins us here in our Bloomberg

310
00:16:43,240 --> 00:16:45,960
Speaker 1: eleven three oh studios. Andrew, thank you so much for

311
00:16:46,080 --> 00:16:50,320
Speaker 1: joining us. So let's just first get in there with

312
00:16:50,720 --> 00:16:53,640
Speaker 1: what is an impeachable offense? And at what point does

313
00:16:53,760 --> 00:16:58,080
Speaker 1: anything that President Trump is has alleged has allegedly done

314
00:16:58,640 --> 00:17:01,239
Speaker 1: rises at I mean, frankly, I've had so many competing

315
00:17:01,440 --> 00:17:04,480
Speaker 1: essays by different legal scholars saying it does, it doesn't.

316
00:17:05,040 --> 00:17:07,840
Speaker 1: Where do you where do you weigh in on this? Well? Um,

317
00:17:08,760 --> 00:17:11,879
Speaker 1: there is widespread disagreement. Let's start with whether or not

318
00:17:11,920 --> 00:17:16,640
Speaker 1: there was a crime committed. Um, and I think um,

319
00:17:17,080 --> 00:17:20,000
Speaker 1: the issue there is to prove that there was an

320
00:17:20,000 --> 00:17:23,119
Speaker 1: obstruction of justice charge. They have to prove that he

321
00:17:23,200 --> 00:17:26,520
Speaker 1: had corrupt intent. Let's just let's just be clear obstruction

322
00:17:26,560 --> 00:17:31,040
Speaker 1: of justice by trying to encourage trying to encourage former

323
00:17:31,119 --> 00:17:36,679
Speaker 1: FBI director Jim Comey to not investigate uh, Michael Flynn

324
00:17:36,920 --> 00:17:39,679
Speaker 1: or anything else related to rush correct exactly? You know,

325
00:17:39,720 --> 00:17:44,320
Speaker 1: this this story that emerged yesterday that that Comy kept

326
00:17:44,359 --> 00:17:46,600
Speaker 1: notes of his conversations and in those notes he said

327
00:17:46,640 --> 00:17:50,960
Speaker 1: Trump asked him to stop the investigation of Flynn. UM,

328
00:17:51,200 --> 00:17:54,080
Speaker 1: you know, to prove that that's actually abstruction, an obstruction

329
00:17:54,119 --> 00:17:58,119
Speaker 1: of justice criminal charge, UM, prosecutors would have to show

330
00:17:58,280 --> 00:18:03,320
Speaker 1: that that Trump had an intent to a corrupt intent.

331
00:18:03,359 --> 00:18:05,439
Speaker 1: In other words, he was trying to protect himself. And

332
00:18:05,480 --> 00:18:08,000
Speaker 1: that's a very high bar. UM. You know, you could

333
00:18:08,080 --> 00:18:13,280
Speaker 1: argue some some have argued that his previous uh tweets,

334
00:18:13,320 --> 00:18:16,520
Speaker 1: his firing of Comy, would would would add to that.

335
00:18:17,040 --> 00:18:19,159
Speaker 1: But UM, it's a difficult thing. You basically have to

336
00:18:19,160 --> 00:18:22,000
Speaker 1: get inside Trump's head. And while he's provided some of

337
00:18:22,000 --> 00:18:26,280
Speaker 1: that through his tweets. UM. I think a number of

338
00:18:26,320 --> 00:18:29,760
Speaker 1: legal scholars have said, what what's available now, UM isn't

339
00:18:29,880 --> 00:18:32,080
Speaker 1: enough to rise to that level. Now. Impeachment is a

340
00:18:32,119 --> 00:18:37,160
Speaker 1: different thing altogether. UM, there's a lesser standard for um.

341
00:18:37,240 --> 00:18:39,560
Speaker 1: What it takes to impeach and presidents. Um, it's high

342
00:18:39,560 --> 00:18:42,560
Speaker 1: crimes and misdemeanors. And ultimately what that means is whatever

343
00:18:42,600 --> 00:18:47,280
Speaker 1: Congress decides it means. So UM, you know, UM, it's

344
00:18:47,400 --> 00:18:50,679
Speaker 1: it's it's it's part judicial part political UM, and the

345
00:18:50,720 --> 00:18:54,520
Speaker 1: fact that now there's a Republican Congress suggests, UM, the

346
00:18:54,520 --> 00:18:59,320
Speaker 1: bar would be extremely high unless public opinion changes to

347
00:18:59,400 --> 00:19:02,240
Speaker 1: such degree. Have to change a lot, have to change

348
00:19:02,240 --> 00:19:05,240
Speaker 1: a lot. Now, you know, at the midterm elections, if

349
00:19:05,320 --> 00:19:09,000
Speaker 1: the House of Representatives, uh, if the political makeup change,

350
00:19:09,080 --> 00:19:11,560
Speaker 1: that would you know, you know the likelihood of an

351
00:19:11,600 --> 00:19:16,160
Speaker 1: impeachment charge would would increase as well. But UM again UM,

352
00:19:16,200 --> 00:19:20,000
Speaker 1: you know, high crimes and misdemeanors is vaguely worded. UM.

353
00:19:20,119 --> 00:19:23,760
Speaker 1: So it ultimately, UM is up to Congress to decide

354
00:19:23,760 --> 00:19:26,439
Speaker 1: what exactly that means. You know, the news cycle is

355
00:19:26,480 --> 00:19:29,680
Speaker 1: moving so quickly that we've moved on to the memos

356
00:19:29,800 --> 00:19:33,320
Speaker 1: that for me. FBI Director James Comey wrote before we

357
00:19:33,440 --> 00:19:38,840
Speaker 1: fully hushed out the alleged league that President Trump right,

358
00:19:38,880 --> 00:19:41,919
Speaker 1: it does that basically that there was the allegation that

359
00:19:42,000 --> 00:19:45,399
Speaker 1: President Trump gave information to the Russian Foreign Ministry in

360
00:19:45,520 --> 00:19:50,320
Speaker 1: his meeting with him. Uh that could potentially compromise a

361
00:19:50,520 --> 00:19:55,000
Speaker 1: key person of intelligence that gives intelligence to the U

362
00:19:55,080 --> 00:19:58,439
Speaker 1: S and a key cooperator which also was allegedly UH

363
00:19:58,640 --> 00:20:02,240
Speaker 1: from Israel. It's hard to keep up with all of this. Um,

364
00:20:02,400 --> 00:20:07,080
Speaker 1: could anything in there fall into an impeachable offense or

365
00:20:07,119 --> 00:20:11,399
Speaker 1: something that could be criminal. Even if indeed President Trump

366
00:20:11,440 --> 00:20:15,560
Speaker 1: compromised an intelligence that's certainly not criminal because as I

367
00:20:15,640 --> 00:20:19,639
Speaker 1: understand that the president has the right to declassify information

368
00:20:19,880 --> 00:20:25,000
Speaker 1: as he likes. Now, UM, you know, I think that

369
00:20:25,640 --> 00:20:29,240
Speaker 1: the founders UM didn't sort of anticipate somebody doing it

370
00:20:29,280 --> 00:20:34,119
Speaker 1: just by mistake or just sort of bragging about something. Um.

371
00:20:34,200 --> 00:20:36,560
Speaker 1: Although we again we don't know what the president's intent

372
00:20:36,720 --> 00:20:40,080
Speaker 1: was and divulging this information, but again he has the authority.

373
00:20:40,119 --> 00:20:43,240
Speaker 1: Did he classified whatever he wants? So UM, definitely not

374
00:20:43,320 --> 00:20:46,040
Speaker 1: a crime. But again in terms of impeachment, UM, if

375
00:20:46,040 --> 00:20:48,760
Speaker 1: there was a decision that he endangered American interests, that

376
00:20:48,880 --> 00:20:52,480
Speaker 1: he endangered a key source, UM, I would think that

377
00:20:52,520 --> 00:20:54,560
Speaker 1: could be part of an impeachment. Again, it's up to

378
00:20:54,600 --> 00:20:57,840
Speaker 1: Congress to decide how to how to frame those charges

379
00:20:57,880 --> 00:21:00,720
Speaker 1: if they were to proceed. Is there anything that a

380
00:21:00,840 --> 00:21:05,679
Speaker 1: president could do that would force impeachment on a faster

381
00:21:05,760 --> 00:21:11,760
Speaker 1: timetable away from the political process, Well, UM, yes, UM,

382
00:21:11,800 --> 00:21:14,560
Speaker 1: I think if there are clear evidence of crimes committed,

383
00:21:14,720 --> 00:21:17,760
Speaker 1: as there was in Watergate, for instance, UM, I think

384
00:21:17,800 --> 00:21:22,240
Speaker 1: that would definitely UM speed up any kind of impeachment process.

385
00:21:22,520 --> 00:21:24,480
Speaker 1: You remember, I mean there has been all kinds of

386
00:21:24,680 --> 00:21:28,280
Speaker 1: UM comparisons here to Watergate and and Nixon and the

387
00:21:28,320 --> 00:21:30,480
Speaker 1: smoking Gun memo, which I wrote about yesterday, which is

388
00:21:30,640 --> 00:21:33,320
Speaker 1: by the way, fascinating reading UM in the in the

389
00:21:33,359 --> 00:21:38,040
Speaker 1: current context. You know, the distinction here is UM. By

390
00:21:38,040 --> 00:21:43,320
Speaker 1: the time uh, you know, impeachment proceedings were begun against Nixon,

391
00:21:43,720 --> 00:21:46,320
Speaker 1: you know, there are actual crimes that were covered up

392
00:21:46,320 --> 00:21:48,199
Speaker 1: in the background, and and as of now, you know,

393
00:21:48,960 --> 00:21:52,840
Speaker 1: you could argue that um, Trump has has his behavior

394
00:21:52,840 --> 00:21:55,000
Speaker 1: has been a radic or or that he's made some

395
00:21:55,240 --> 00:21:59,160
Speaker 1: you know, incredible mistakes or whatever. UM. But as far

396
00:21:59,200 --> 00:22:01,280
Speaker 1: as we know, there hasn't a crime, even even in

397
00:22:01,320 --> 00:22:05,120
Speaker 1: the Russian investigation. You know, UM, we have no idea

398
00:22:05,119 --> 00:22:08,399
Speaker 1: if there's crimes committed and um as uh you know, again,

399
00:22:08,680 --> 00:22:10,240
Speaker 1: as you point out early, I've read so much I

400
00:22:10,280 --> 00:22:13,040
Speaker 1: forget where I read this. But even if UM, Michael

401
00:22:13,080 --> 00:22:17,080
Speaker 1: Flynn didn't register as a foreign agent, which is uh

402
00:22:17,720 --> 00:22:21,800
Speaker 1: uh you know, a crime, I mean, it hardly rises

403
00:22:21,840 --> 00:22:24,160
Speaker 1: to the level of impeachment of the president. I think.

404
00:22:24,240 --> 00:22:26,199
Speaker 1: So well, just to sort of give a quick refresh,

405
00:22:26,320 --> 00:22:30,960
Speaker 1: or what was the crime and Watergate, Well, there was

406
00:22:31,000 --> 00:22:32,840
Speaker 1: a bunch of crimes on water but one was you know,

407
00:22:32,880 --> 00:22:38,080
Speaker 1: they broke into burglars sent by presidents paid by the

408
00:22:38,119 --> 00:22:41,919
Speaker 1: president's reelection committee, broke into Democratic National headquarters. Um. And

409
00:22:41,960 --> 00:22:44,040
Speaker 1: then you know, the real crime was the cover up

410
00:22:44,080 --> 00:22:48,840
Speaker 1: that followed. UM. So UM. Yeah, I mean it's just

411
00:22:48,880 --> 00:22:50,480
Speaker 1: as interesting sort of look back, but I think that

412
00:22:50,560 --> 00:22:53,040
Speaker 1: it's important to sort of recognize that there hasn't really

413
00:22:53,040 --> 00:22:56,720
Speaker 1: been a crime here. So any kind of negotiation over

414
00:22:56,760 --> 00:22:59,679
Speaker 1: impeachment of discussions over that really are more political than

415
00:22:59,720 --> 00:23:03,239
Speaker 1: anything else right now. So far, and again, you know,

416
00:23:03,480 --> 00:23:07,479
Speaker 1: for all the fascination with this Russia investigation, and it

417
00:23:07,560 --> 00:23:12,560
Speaker 1: is fascinating, Um, there's so many questions that are unanswered

418
00:23:12,560 --> 00:23:17,480
Speaker 1: about it, um, particularly at you know, at what level

419
00:23:18,000 --> 00:23:23,240
Speaker 1: if any um Trump's um associates, you know, coordinated with Russia.

420
00:23:23,280 --> 00:23:26,120
Speaker 1: We have no idea. UM. And again with the exception

421
00:23:26,160 --> 00:23:28,719
Speaker 1: of the fact that Michael Flynn did not register as

422
00:23:28,720 --> 00:23:32,120
Speaker 1: a foreign agent. UM. You know, he hasn't been charged

423
00:23:32,160 --> 00:23:34,960
Speaker 1: for that. So UM. Right now, there's there's no crimes

424
00:23:35,400 --> 00:23:39,200
Speaker 1: and there may be none beyond that. So UM. Anyway,

425
00:23:39,320 --> 00:23:40,760
Speaker 1: I have a feeling that we're going to be talking

426
00:23:40,760 --> 00:23:42,119
Speaker 1: more about this. And I have a feeling that this

427
00:23:42,320 --> 00:23:44,119
Speaker 1: is not an issue that's going to be going away

428
00:23:44,160 --> 00:23:46,960
Speaker 1: anytime to you know, twenty four hours from now, things

429
00:23:46,960 --> 00:23:48,960
Speaker 1: can be entirely different. We have no ideas. I have

430
00:23:48,960 --> 00:23:50,680
Speaker 1: a feeling that they will be. Andrew Martin, thank you

431
00:23:50,760 --> 00:23:53,240
Speaker 1: so much for joining us. Andrew Martin is legal editor

432
00:23:53,440 --> 00:23:57,159
Speaker 1: for Bloomberg. Talking about the legal standards UH that a

433
00:23:57,320 --> 00:24:01,160
Speaker 1: president's actions would have to rise to to merrit either

434
00:24:01,200 --> 00:24:05,360
Speaker 1: impeachment or conviction of a crime. And right now, as

435
00:24:05,400 --> 00:24:08,520
Speaker 1: we were saying, President Trump's actions are not criminal, UH,

436
00:24:09,000 --> 00:24:12,800
Speaker 1: at least in any way that people are currently aware of. UH.

437
00:24:12,840 --> 00:24:27,960
Speaker 1: And so it makes impeachment that much more political. Right now,

438
00:24:28,520 --> 00:24:31,040
Speaker 1: I am pleased to bring in Serena us a theory

439
00:24:31,240 --> 00:24:34,520
Speaker 1: of Vedantah. He is director of research at the Jerome

440
00:24:34,720 --> 00:24:38,119
Speaker 1: Levi Forecasting Center. UH. And you have come out with

441
00:24:38,280 --> 00:24:42,199
Speaker 1: a recent forecast that I thought was very compelling talking

442
00:24:42,240 --> 00:24:45,480
Speaker 1: about how despite all of the turmoil that we talked

443
00:24:45,520 --> 00:24:48,960
Speaker 1: about incessantly, the outlook for the U. S economy has

444
00:24:49,040 --> 00:24:52,840
Speaker 1: actually gotten much clear. Can you explain, yeah, thank you.

445
00:24:52,960 --> 00:24:56,840
Speaker 1: These You know, if you if you circle back immediately

446
00:24:56,880 --> 00:24:58,840
Speaker 1: after the election, you know, the big thing was one

447
00:24:58,840 --> 00:25:00,360
Speaker 1: of the policy changes that are going to be there.

448
00:25:00,400 --> 00:25:02,560
Speaker 1: You know, there was trade policy, that is tax policy,

449
00:25:02,640 --> 00:25:05,160
Speaker 1: there is infrastructure, you know, everything was up in there,

450
00:25:05,320 --> 00:25:08,280
Speaker 1: and how much was going to happen in two thousand seventeen. Um,

451
00:25:08,400 --> 00:25:11,720
Speaker 1: what's become clearer now is that much of trade policy

452
00:25:12,080 --> 00:25:15,920
Speaker 1: is uh, it's it's it's shelf for now, at least,

453
00:25:15,920 --> 00:25:20,440
Speaker 1: I mean something really disruptive. You can have moderate ones um.

454
00:25:20,560 --> 00:25:22,920
Speaker 1: And there is not going to be any real tax

455
00:25:22,920 --> 00:25:25,199
Speaker 1: policy that's going to be done this year that's going

456
00:25:25,240 --> 00:25:30,080
Speaker 1: to take effect this year. Um, most likely something will

457
00:25:30,840 --> 00:25:33,520
Speaker 1: at the best we'll get some tax reform or a

458
00:25:33,600 --> 00:25:35,960
Speaker 1: tax package later in the year that will start taking

459
00:25:35,960 --> 00:25:37,879
Speaker 1: effect from two thousand eighteen. So, in so far as

460
00:25:37,920 --> 00:25:40,720
Speaker 1: two thousand seventeen outlook is concerned, you know, we have

461
00:25:40,840 --> 00:25:43,120
Speaker 1: some clarity in that regard. There is still a slim

462
00:25:43,240 --> 00:25:45,720
Speaker 1: chance that we might pass something in the middle of

463
00:25:45,720 --> 00:25:48,920
Speaker 1: the year that takes effect with retroactive effect, but very

464
00:25:49,000 --> 00:25:51,520
Speaker 1: very unlikely. So in other words, you're basically edifying this

465
00:25:51,640 --> 00:25:55,160
Speaker 1: idea that the trumpflation trade is over, that the Trump

466
00:25:55,240 --> 00:25:58,919
Speaker 1: pump should probably disappear, And then the question is what

467
00:25:58,960 --> 00:26:03,320
Speaker 1: should markets look like without these inflated expectations. Well, you know,

468
00:26:03,480 --> 00:26:05,760
Speaker 1: there's still the possibility that they will pass tax cuts

469
00:26:05,800 --> 00:26:09,680
Speaker 1: for two eighteen, but I think it's a narrow range um,

470
00:26:10,160 --> 00:26:11,920
Speaker 1: and you thought that it was not that big of

471
00:26:11,920 --> 00:26:15,040
Speaker 1: a tax cut. In other words, the prediction, and I

472
00:26:15,040 --> 00:26:19,160
Speaker 1: believe your your prediction was one that is that's right,

473
00:26:19,240 --> 00:26:21,800
Speaker 1: not some of the much higher, not much higher numbers

474
00:26:21,840 --> 00:26:24,639
Speaker 1: that we were being bandied around. That is absolutely right. So,

475
00:26:25,240 --> 00:26:26,879
Speaker 1: but that will still be a help and maybe the

476
00:26:26,880 --> 00:26:28,639
Speaker 1: economy starts to look a little saggy. You know, a

477
00:26:28,680 --> 00:26:31,919
Speaker 1: hullion dollars will be certainly of some help. So, but

478
00:26:31,960 --> 00:26:33,919
Speaker 1: I thought it was interesting also in the outlook that

479
00:26:33,920 --> 00:26:36,879
Speaker 1: you talk about emerging markets, equities and credit and you

480
00:26:36,960 --> 00:26:40,879
Speaker 1: talk about how that looks overblown. Well, you know, the

481
00:26:40,880 --> 00:26:43,280
Speaker 1: credit part of it certainly looks overblown. But that's what

482
00:26:43,400 --> 00:26:45,520
Speaker 1: is happening. In the fixed income world. What you're seeing

483
00:26:45,600 --> 00:26:48,600
Speaker 1: is because the yields are so low in the developerl

484
00:26:48,800 --> 00:26:52,120
Speaker 1: there is still enormous pressure to searching. When things look

485
00:26:52,280 --> 00:26:55,320
Speaker 1: relatively stable and tranquil, people come out of their foxhols

486
00:26:55,320 --> 00:26:58,280
Speaker 1: and they're looking for yields um. The equity world, on

487
00:26:58,320 --> 00:27:01,399
Speaker 1: the other hand, is slightly different because the returns in

488
00:27:01,680 --> 00:27:03,280
Speaker 1: the US have been pretty good. I don't think there's

489
00:27:03,320 --> 00:27:05,919
Speaker 1: still such a clamor to move to the emerging markets.

490
00:27:06,160 --> 00:27:08,760
Speaker 1: So what you see is a big disconnect between if

491
00:27:08,800 --> 00:27:11,040
Speaker 1: you look at the e M high yield with respect

492
00:27:11,080 --> 00:27:13,560
Speaker 1: to US HIG yield, you know, the spreads have narrow dramatically,

493
00:27:14,040 --> 00:27:18,520
Speaker 1: but ems in relative to SMP have not rallied that dramatically,

494
00:27:18,560 --> 00:27:21,080
Speaker 1: you know, So there's still I've actually been struggling with

495
00:27:21,080 --> 00:27:23,919
Speaker 1: this idea. So and I was reading through your forecast

496
00:27:23,960 --> 00:27:26,800
Speaker 1: and you said that your treasury holdings are currently about

497
00:27:26,800 --> 00:27:28,479
Speaker 1: half of what they were before the election, and you're

498
00:27:28,520 --> 00:27:30,359
Speaker 1: going to maintain them at that level. And otherwards the

499
00:27:30,359 --> 00:27:33,439
Speaker 1: expectation that yields will continue to rise. Uh if the

500
00:27:33,680 --> 00:27:35,920
Speaker 1: if the idea is that inflation is not going to

501
00:27:36,040 --> 00:27:39,439
Speaker 1: pick up meaningfully compared to where it was expected to. Uh,

502
00:27:39,440 --> 00:27:43,000
Speaker 1: you know a couple of months ago, why wouldn't e

503
00:27:43,119 --> 00:27:45,600
Speaker 1: M continue to rally That it's the same kind of

504
00:27:45,680 --> 00:27:49,040
Speaker 1: low rate environment that would drive people back into EM. Absolutely,

505
00:27:49,080 --> 00:27:50,399
Speaker 1: there are there are two things that are that are

506
00:27:50,480 --> 00:27:53,120
Speaker 1: driving the e M. One is well, the trumflation is gone.

507
00:27:53,119 --> 00:27:55,120
Speaker 1: There is still the sense that e M s are

508
00:27:55,160 --> 00:27:57,520
Speaker 1: in the midst of reflation, you know, so there are

509
00:27:57,600 --> 00:27:59,879
Speaker 1: and of course the dollar and the FT, I mean

510
00:27:59,880 --> 00:28:01,760
Speaker 1: the dollar weakness in the FED is also helping. So

511
00:28:01,800 --> 00:28:04,320
Speaker 1: what is a financial aspect of it and and the

512
00:28:04,320 --> 00:28:07,000
Speaker 1: flows coming into em. The other is the economic angle,

513
00:28:07,080 --> 00:28:08,960
Speaker 1: which is that e M s are okay, e M

514
00:28:09,000 --> 00:28:10,600
Speaker 1: s are out of the woods and they're coming back.

515
00:28:11,200 --> 00:28:13,639
Speaker 1: That part of it is going to be disabused, that

516
00:28:13,720 --> 00:28:17,639
Speaker 1: notion that there is a sustained them recovery going on.

517
00:28:17,760 --> 00:28:19,880
Speaker 1: In other words, they're not out of the woods. They're

518
00:28:19,880 --> 00:28:23,120
Speaker 1: not recovering so quickly. Yeah, people are perhaps a little

519
00:28:23,160 --> 00:28:26,800
Speaker 1: too optimistic developing markets, which markets in particularly talking about

520
00:28:27,400 --> 00:28:29,600
Speaker 1: the MS outside of China because China so much of

521
00:28:29,640 --> 00:28:31,880
Speaker 1: it is depends on their own policy. But the MS

522
00:28:31,880 --> 00:28:36,560
Speaker 1: outside of China are just being being driven by the

523
00:28:36,600 --> 00:28:38,800
Speaker 1: events in the rest of the world. In particular, there's

524
00:28:38,840 --> 00:28:41,360
Speaker 1: a global inventory cycle that that that we had from

525
00:28:41,440 --> 00:28:43,200
Speaker 1: late last year and to the big beginning of this

526
00:28:43,280 --> 00:28:46,120
Speaker 1: year that is helping the e M s. So can

527
00:28:46,160 --> 00:28:49,400
Speaker 1: you explain so, So, if you look at last year

528
00:28:49,440 --> 00:28:52,320
Speaker 1: the global inventories coming into two thousands sixteen, there was

529
00:28:52,320 --> 00:28:56,440
Speaker 1: a moderate liquidation um and from the middle of last

530
00:28:56,480 --> 00:29:00,200
Speaker 1: year they started building up, especially the US but also Ena.

531
00:29:01,280 --> 00:29:03,920
Speaker 1: So the building up of inventories by the U, S

532
00:29:03,920 --> 00:29:07,920
Speaker 1: and China was trigger a global inventory up cycle intert

533
00:29:08,320 --> 00:29:12,720
Speaker 1: stuff of everything E. And the more that they build up,

534
00:29:12,760 --> 00:29:15,040
Speaker 1: the less they'll have to import later, that is right,

535
00:29:15,240 --> 00:29:17,440
Speaker 1: that is later. And and because this is not a

536
00:29:17,560 --> 00:29:20,360
Speaker 1: sustained inventory cycle, beven not. We didn't have a severe

537
00:29:20,400 --> 00:29:23,440
Speaker 1: liquidation like like like from a recession. So you know,

538
00:29:23,440 --> 00:29:25,080
Speaker 1: it's more or less done. You can see it already

539
00:29:25,080 --> 00:29:28,040
Speaker 1: in the SM trending down in the US, and and

540
00:29:28,080 --> 00:29:30,480
Speaker 1: the regional freed manufacturings which are you know even more

541
00:29:30,520 --> 00:29:33,600
Speaker 1: timely they're coming down, uh, and freight indicators you know,

542
00:29:33,600 --> 00:29:36,360
Speaker 1: the railroads. So but this will all the idea being

543
00:29:36,400 --> 00:29:38,719
Speaker 1: that this will all kind of feed into emerging markets

544
00:29:38,760 --> 00:29:42,320
Speaker 1: because the developed markets will be importing less as their inventories.

545
00:29:42,440 --> 00:29:46,760
Speaker 1: That is fascinating perspective. Thank you so much for coming

546
00:29:46,800 --> 00:29:52,000
Speaker 1: in screen of us theory of a Dan three yes,

547
00:29:52,160 --> 00:29:54,480
Speaker 1: thank you, yes, as the director of research of the

548
00:29:54,560 --> 00:29:58,160
Speaker 1: Jerome Levi Forecasting Center joining us here in our Bloomberg

549
00:29:58,160 --> 00:30:01,040
Speaker 1: eleven three oh studios talking about how the economic out

550
00:30:01,040 --> 00:30:03,640
Speaker 1: look for the US hasn't changed all that might much

551
00:30:03,920 --> 00:30:06,240
Speaker 1: despite all the drama that we have been hearing about

552
00:30:06,240 --> 00:30:11,800
Speaker 1: in Washington, d C. Thanks for listening to the Bloomberg

553
00:30:11,880 --> 00:30:14,520
Speaker 1: P and L podcast. You can subscribe and listen to

554
00:30:14,560 --> 00:30:19,080
Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

555
00:30:19,520 --> 00:30:23,080
Speaker 1: I'm Pim Fox. I'm on Twitter at pim Fox. I'm

556
00:30:23,120 --> 00:30:26,400
Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.

557
00:30:26,440 --> 00:30:29,040
Speaker 1: You can always catch us worldwide on Bloomberg Radio