Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Leye. 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 YEA. Treasuries.
Speaker 1: The story of the last couple of months is just
Speaker 1: yields bleeding lower. This morning, yields unchanged tenure yields to
Speaker 1: eighty three on a US two year note were unchanged
Speaker 1: at two fifty. Sort of story sentiment just whip storic,
Speaker 1: first by Treasury Secretary Steve Manuchin, who for some set
Speaker 1: the States race softer approach towards China, and then by
Speaker 1: economic advisor Larry Cundlow, who suggested the US wasn't backing down.
Speaker 1: Joining me here in New York is Kate Moore blank Rock,
Speaker 1: chief equity strategist. Good morning to k Good morning, So
Speaker 1: what do you site to clients? What on earth is
Speaker 1: going gone? Well, look, I think it's very difficult for
Speaker 1: any of us to predict what's going on in the
Speaker 1: White House. The White House has difficult predicting what's going
Speaker 1: on in the White House. So outside people can't really
Speaker 1: forecast exactly how trade will evolve. Here's what we do
Speaker 1: know is that this back and forth in this uncertainty
Speaker 1: is starting to have an impact on how companies are
Speaker 1: talking about taking risk. And that's something we're really focused on,
Speaker 1: especially because the expectations for spending and investing we're very
Speaker 1: strong going into the beginning of this year and then
Speaker 1: got supercharged after the tax cuts. So any kind of
Speaker 1: change in tone we get from companies as the reporting
Speaker 1: second quarter earnings, particularly around guiding for investment and if
Speaker 1: they're sighting trade issues, which we've heard a couple very
Speaker 1: high profile ceo s do over recent days. UM I
Speaker 1: would hope that would have an influence on the way
Speaker 1: that the trade discussions evolved. So tell me how you
Speaker 1: see the balance of risks around CAPEX improving. Is the
Speaker 1: balance of risk now tilted to the downside or to
Speaker 1: the upside? Look, I was always in the camp that
Speaker 1: Capex was going to be a little bit more conservative
Speaker 1: than some of the initial surveys suggested. You know, you
Speaker 1: had a lot of companies either because they felt explicit
Speaker 1: political pressure or implicit or because things were finally feeling
Speaker 1: a little bit better on the regulatory environment. They felt
Speaker 1: like they had to say they were going to spend
Speaker 1: more money. It's not a bad thing, but you know,
Speaker 1: the follow through has been you know, um, you know,
Speaker 1: not necessarily as strong as some of these surveys would suggest,
Speaker 1: and in fact, looking back at the historic data, it
Speaker 1: almost never is. There's not a great relationship there. But
Speaker 1: very importantly, the companies that are spending today or those
Speaker 1: that already have had a lot of free cash, Yes, sir,
Speaker 1: some of them are getting benefiting from the tax cuts
Speaker 1: and repatriating money um back to the US, But we're
Speaker 1: not getting a lot of the riskier companies all of
Speaker 1: a sudden changing their investment plans. And I certainly you know,
Speaker 1: see the policy environment and the trade environment make not
Speaker 1: a difficult switch right now. It's funny, it's hard to
Speaker 1: reconcile west sentiment is at the moment on Wall Street
Speaker 1: with the numbers that were expected to get from the
Speaker 1: second quarter in the US economy. We're expecting a big
Speaker 1: second quarter GDP figure. Yeah, Kate, how do you reconcile
Speaker 1: those two things, sentiment and the fundamentals on the ground
Speaker 1: in the United States at the moment, I know, it's
Speaker 1: a little bit difficult radio, John, but for the I
Speaker 1: was just nodding my head as you were speaking. It's
Speaker 1: not just the GDP figures for the second quarter, but
Speaker 1: it's also second quarter earnings. I think we're going to
Speaker 1: have a big bucket of strong data in the US
Speaker 1: over the next couple of weeks, that we're going to
Speaker 1: have not only strong consumption and strong overall economic growth,
Speaker 1: but actually quite strong earnings across a huge variety of sectors.
Speaker 1: And you know that doesn't seem to be playing itself
Speaker 1: out in prices across risk asses at this moment. Within
Speaker 1: all this is new cash. Cash has a yield. Now
Speaker 1: is cash a new asset class for cape more? Cash
Speaker 1: is definitely an asset class that it hasn't been for
Speaker 1: a very long time. I don't see it as a
Speaker 1: great substitute for overall equity risk, but it certainly does
Speaker 1: change the calculation on the fixed income side, and across
Speaker 1: a lot of the fixed income portfolios within black Rock,
Speaker 1: we've seen a rotation towards holding a shorter duration instruments
Speaker 1: and more cash. You know, it's a prudent thing to do,
Speaker 1: even for you know, a multi asset investor. Who's thinking
Speaker 1: about waiting for even a further pullback or looking for
Speaker 1: opportunities and with a slightly higher risk premium. Here's a
Speaker 1: headline out just perfectly time for ms more Walgreens Dow
Speaker 1: component third quarter beats estimates make America ready again, and
Speaker 1: they announced a ten billion dollar share buy back. The
Speaker 1: thousand employees they got free cash flow the generating per
Speaker 1: year of six billion dollars. So they're gonna buy back
Speaker 1: off the top of my head twenty months. Yeah, free. Look.
Speaker 1: I would be very surprised if we didn't see a
Speaker 1: whole swath of new buyback announcements coming after earnings. It
Speaker 1: makes sense for companies if they don't have perfect visibility
Speaker 1: into future demand. I mean, this is one of the
Speaker 1: other things with challenging. As we talked about the Quebec
Speaker 1: story as well, you need to if you're gonna engage
Speaker 1: in a multi year investment plan. I feel like you
Speaker 1: can predict the cycle. But this is critical. And this
Speaker 1: goes frankly back to Mario Dragging and Chairman Poule and
Speaker 1: the rest companies that you look at every day are
Speaker 1: managing for a low nominal GDP, low revenue growth environment.
Speaker 1: That's they're they're going out there buying revenue growth. Good
Speaker 1: morning everyone with Pinnacle. They're going out there buying revenue growth,
Speaker 1: and they're buying back stock because they don't know what
Speaker 1: to do with the money. I don't even think it's
Speaker 1: just they don't know what to do with the money.
Speaker 1: I would just suggest that you know, companies are at
Speaker 1: especially US companies, record level of profits. They've had this
Speaker 1: boost from the tax cuts, and what they're doing today
Speaker 1: is saying, I will make some investments for the future,
Speaker 1: but realistically, this is a very long cycle. And they
Speaker 1: are the same people who are kind of cautious about
Speaker 1: whether or not the bull market can continue, who are
Speaker 1: also managing these companies and saying, I don't want to
Speaker 1: spend too far, too much, too far into the cycle.
Speaker 1: I want to have some dry powder, and buying back
Speaker 1: shares also provides them with a little support and dry
Speaker 1: powder as well. Okay, speaking of a sector that buying
Speaker 1: bank shares the banks. Now, I don't want to let
Speaker 1: you go without talking about the financials in the United States.
Speaker 1: We're on a thirteen day losing streak. We just did that.
Speaker 1: I'm glad you're doing it again. It's worth doing. It's
Speaker 1: a record losing streak on a daily record forever. It
Speaker 1: is a record daily losing streak on financials. Doesn't amount
Speaker 1: to a big, big slide, but it's a record daily
Speaker 1: losing streak. Okay, what do you think of that? What's
Speaker 1: behind it? Going into stress test results that should reveal
Speaker 1: the banks have got the green light to go ahead
Speaker 1: with buying back a lot of stock. I find it
Speaker 1: a little bit puzzling. I can come up with us
Speaker 1: a bunch of micro explanations for why the banks have underperformed,
Speaker 1: but you know, in this environment where we're expecting more
Speaker 1: cash return and we're expecting very good results today, where
Speaker 1: the regulatory environment is easing, where rates are going up,
Speaker 1: with the macro backdrops strong, and you know, I think
Speaker 1: some of these micro explanations shouldn't hold a lot of
Speaker 1: water after today. Why did Denmark beat the Republic of
Speaker 1: Ireland five to one last fall? What happened that? Tom?
Speaker 1: You know, we'll have to take that offline because I'm
Speaker 1: afraid the viewers are not ready for my explanation. The
Speaker 1: listeners on radio as listeners, John again, I'm surprised Anie
Speaker 1: took you white minutes to bring up the World comp Well,
Speaker 1: we're gonna get to it a minute here. You know,
Speaker 1: the England Belgium today is like a big deal. Is
Speaker 1: Ireland a soccer force? John like at a decent same
Speaker 1: that just didn't mike it. They didn't. I wouldn't call
Speaker 1: it false, but it's a decent tang. They beat whales
Speaker 1: what nothing in October. You're fascinated by this, I am.
Speaker 1: I it's the highlights. Last night I was almost interested
Speaker 1: in Germany losing. I mean it was like really exciting. Yeah,
Speaker 1: I mean I was. I was doing my radio show
Speaker 1: in London. It started at mid day Eastern time, and
Speaker 1: the game was literally bumping right up against the start
Speaker 1: of the radio show. So I watched the game at
Speaker 1: my desk, then sprinted to the radio show for London. Yeah,
Speaker 1: and just made the start of the program. I think
Speaker 1: the last time I sprinted Nixon was London listeners. They
Speaker 1: take some satisfaction from Germany's exit from the World Cup.
Speaker 1: Yeah yeah, okay, well very good, Kate, Kate more, thank you,
Speaker 1: thank you, Kate, thank you for tolerating this. I feel
Speaker 1: like Tom at the moment, I'm thanking all our guests
Speaker 1: and saying thank you for tolerating. Well, that's true, but
Speaker 1: she's optimistic view of the market. I have an optimistic view,
Speaker 1: but I think a fairly balanced view in terms of
Speaker 1: corporate activity. And actually that's why I'm more optimistic. Look,
Speaker 1: I'm just one last point on when you look at
Speaker 1: the performance of World Cup. Okay, when you look at
Speaker 1: the performance of companies that have done, you know, the
Speaker 1: highest levels of cat bas not just since the financial crisis,
Speaker 1: but over kind of a thirty year period, they've underperformed
Speaker 1: those companies that have been more conservative and have returned
Speaker 1: cash to shareholders. So you know, this this big hope
Speaker 1: that we were going to get a spending wave that's
Speaker 1: going to lead to our performance of all these companies,
Speaker 1: I think it's overdone. We don't have the same veterinarian.
Speaker 1: But I take vet bill to the vet and I write.
Speaker 1: When I write a checkout to the vetinary, and I
Speaker 1: just write it out to a prep school. I don't
Speaker 1: even write it out to the damn VET. I write
Speaker 1: it out, just make it out to this prep school.
Speaker 1: I just write it directly. It's amazing. I could fund
Speaker 1: a small country with my vet bill. You could, you know,
Speaker 1: we could fund an island nation. Tom, we're still on
Speaker 1: live radio. You know when what you can do this
Speaker 1: in a commercial break? Oh no, this is people care
Speaker 1: about vet build. They can about the vet bill. No,
Speaker 1: that builds the name of the dog. Yeah, like your family.
Speaker 1: Foreign exchange has been a tough place to live over
Speaker 1: the last couple of years. Seventeen people called for a
Speaker 1: stronger dollar, We got a weaker one. Eighteen people called
Speaker 1: for eight weeker dollar. We got a stronger one. And
Speaker 1: I still haven't heard the dollar bears capitulate. Well, I
Speaker 1: can tell you we've got a bit of a dollar
Speaker 1: ball here. David Wood joins US now of Bank of
Speaker 1: America Meryl Lynch, head of Global Rates Effects and e
Speaker 1: M Fixed Income Strategy and Economics Research. David, when did
Speaker 1: your title get so long? I know, it's crazy, absolutely crazy. Well,
Speaker 1: welcome to the program. Helped me out with the US
Speaker 1: dollar call because I keep talking to dollar bear after
Speaker 1: dollar bear that refuses to capitulate and believe in what
Speaker 1: we're seeing on the screen. So far this year, you know,
Speaker 1: it's amazing. You know, I've been traveling on the West
Speaker 1: Coast in the last two or three days. L and
Speaker 1: Cisco Seattle's decramental. I'm telling you, I could not find
Speaker 1: a single claim that was long the dollar. And it's
Speaker 1: amazing because this probably must be of a record of
Speaker 1: some sort because we've just had a total person dollar rally.
Speaker 1: It's amazing. I cannot find a single person or either
Speaker 1: professor to be longer dollar for that might have been
Speaker 1: bullish per dollar. It's pretty crazy. This also leads me
Speaker 1: to think that, you know, there's no question of this dollar,
Speaker 1: Railly is probably gonna keep going. So David, that's what
Speaker 1: I've been looking at this morning as well, and I
Speaker 1: fold em into this too. You know, despite the price action,
Speaker 1: I really haven't heard that much capitulation from e M
Speaker 1: bulls or dollar bears, and at least me just concluding
Speaker 1: that I just don't have any conviction that this trade
Speaker 1: is totally exhausted. And it is that pretty much where
Speaker 1: you are as well, David, just folding the forces. They
Speaker 1: are really going to drive this dollar through the back
Speaker 1: end of the year. I think so, because you know,
Speaker 1: especially when it comes to e M, because a big
Speaker 1: difference between this game self off. First of all, we
Speaker 1: saw that in two thirteen, the two dozen thirteens, you
Speaker 1: saw a big correction in prices, but we also saw
Speaker 1: a very significant positional adjustment. This time we've seen a
Speaker 1: big correction of prices. We haven't seen anything like what
Speaker 1: we saw in terms of positional adjustment. Tells me there's
Speaker 1: not aquidity for one thing. I mean, certainly, the average
Speaker 1: age of market makers in e M on Walster right
Speaker 1: now is probably ten years younger than they were five
Speaker 1: six years ago. There is absolutely north door to even
Speaker 1: get out. So from that point of view, this, this
Speaker 1: is a very very worrying thing to me, David, this
Speaker 1: is right where I wanted to go. I'm glad you
Speaker 1: brought this up and that I would suggest into this cycle,
Speaker 1: whatever happens, we're dealing with a wildly a historical street
Speaker 1: and that they really don't know the history. How close
Speaker 1: are we to the correlations and the behavior the emotions
Speaker 1: that you get with strong dollar weaker e M. I mean, Tommy,
Speaker 1: I think jobs right, I mean this is why in
Speaker 1: any ways I mean this, this, this is why e
Speaker 1: M gets very dangerous when cross over investors start to
Speaker 1: basically give up. I'll give an example. Incredibly right now,
Speaker 1: not that incredible. Do you know right now you can
Speaker 1: buy a one year JP Morgan paper or Bank American
Speaker 1: paper that pays you three percent and more. In other word,
Speaker 1: is the first time in at least ten years you
Speaker 1: can earn three percent without thinking a duration risk, without
Speaker 1: taking any credit risk, just being lone the US dollar?
Speaker 1: And why if you can earn three person by jating
Speaker 1: working paper, why the hell would you want to buy
Speaker 1: Brazil six percent? This is what I think a lot
Speaker 1: of crossover investors started to ask themselves. And this is
Speaker 1: the reason why I think if we just get ten percent,
Speaker 1: a crossover investors mean investors were not bench points EM
Speaker 1: started basically pulled out. I think you're gonna see a
Speaker 1: shock wave three EM that we haven't begun to see yet, David.
Speaker 1: In the limited time that we have with you, I've
Speaker 1: already got to get your thoughts on on China as well.
Speaker 1: If we're going to see a shock in am, what
Speaker 1: are we about to see in China? And just what
Speaker 1: is going on with the Chinese currency? Unpack? What is
Speaker 1: driving this currency lawa waka? I think you know what
Speaker 1: last year my worst call was that I thought Chinese
Speaker 1: commun was gonna slow because of the de leveraging. But
Speaker 1: a gains what last year, global growth was so strong,
Speaker 1: you know, Chinese textbook growth is so strong and more
Speaker 1: than offset of deal leveraging. This time around toy first, boy,
Speaker 1: they're confused. The leverage. Global growth was definitely not as
Speaker 1: quite as strong. So basically there's no question Chinese group
Speaker 1: this swimming, which means that they need easier credit conditions
Speaker 1: and monster conditions which I'm killing now they have to
Speaker 1: will I'm willing to give because they were under pressure
Speaker 1: to prop up the R and B. Now I think
Speaker 1: it's very clear they have now a gun pointing at
Speaker 1: their head and they have no choice. They're now starting
Speaker 1: to let the R and B go. Notwith getting the
Speaker 1: fact that the under pressure from the US to basically
Speaker 1: reach your agreement on trade, but I think you know,
Speaker 1: in some sense the arm by weakness is actually very concerning. David,
Speaker 1: what is your calling yen? I just want to frame
Speaker 1: how big a move you see? What's your twelve months?
Speaker 1: I'll call in dollar yen dollar again? You mean dolling
Speaker 1: dollar again? I think yeah, I think we're going to
Speaker 1: one fifteen, one seventeen. Just because I'm so incredibly bullish
Speaker 1: about the US. Isn't so much move isn't that like
Speaker 1: a disruptive move to see seven big figures? You know what?
Speaker 1: You know, I've been doing this for twenty years, then
Speaker 1: you know me. I've been a doom and gloom guy far,
Speaker 1: but I've never been this bullish the US economy in
Speaker 1: twenty years. I've been doing this well, I am absolutely
Speaker 1: It's a liberating, basically feeling every morning I wake up,
Speaker 1: you know what? And that's that's the fundamental story here,
Speaker 1: which is that this economy is growing gangbuster and for
Speaker 1: all the reasons in the market remains in denial that
Speaker 1: because this times reform, it is absolutely changing the way
Speaker 1: people think about the economy. In my new special in
Speaker 1: Corporate America, David really emphatic, and we have a real
Speaker 1: limited time left. So just one quick final question. I
Speaker 1: just wonder whether Dolly and is the cleaner rates play
Speaker 1: in G ten at the moment. And the reason I
Speaker 1: asked this is what is the global dividend of a
Speaker 1: really strong U S economy? And if we get the
Speaker 1: dollar that really starts to rip in the way you
Speaker 1: think it will, aren't we gonna need to buy a
Speaker 1: little bit of Japanese? Yeah? Aren't we going to see
Speaker 1: a bit of risk aversion internationally. So that's why I
Speaker 1: still like selling euro dollar as my favorite based. The
Speaker 1: dollar interesting because I'm telling you, whether there's there's no
Speaker 1: tree war, the economy is gonna go crazy, and I'm
Speaker 1: telling you the dollar is going to search because we're
Speaker 1: gonna see a massive reproaching of the terminal five months.
Speaker 1: Rade's going to go down. The toilet in Europe is
Speaker 1: much more dependent on Ian than is the US. So
Speaker 1: it was very simple, David, We're going to leave it there.
Speaker 1: David would thank you so much on the West coast
Speaker 1: greatly appreciate what a trooper to get up this early.
Speaker 1: This is, without question, our interview of the day. Travis
Speaker 1: Langner is in Chicago. He is out of the academic
Speaker 1: combine of Kansas, but he is a person of immense uniqueness.
Speaker 1: He has clerked both for Justice Kennedy and also for
Speaker 1: Justice Brett Kavanaugh, who is on the short short list
Speaker 1: to replace h Mr Kennedy. We are joined now by
Speaker 1: Mr Langner in Washington. Travis, wonderful to have you with us,
Speaker 1: no effelments with us yesterday from Harvard Law and spoke
Speaker 1: of the moment of Justice Kennedy help our audience with
Speaker 1: how Justice Kennedy practice Supreme Court law? What was he
Speaker 1: like in the chambers? While in chambers and with his colleagues,
Speaker 1: he was just incredibly collegial. You know, the Court presents
Speaker 1: in its written work as sometimes fairly a combative place
Speaker 1: among the justices. In fact, many of them have very
Speaker 1: close relationships, and Justice Kennedy really was a part of
Speaker 1: that fabric friends on both sides of the aisle, as
Speaker 1: as we would would think of it from outside the court.
Speaker 1: And I think you saw that in the statements from
Speaker 1: his colleagues yesterday. Who really will miss his personal presence
Speaker 1: on the court and in chambers as well as his
Speaker 1: legal mind and his work critically as we move to
Speaker 1: Brett Kevanaugh and the other candidates. To me, it seems
Speaker 1: like a generational shift. Noah and others, Cass Sunstein and
Speaker 1: others speak of Justice Kennedy's interpretation of dignity is his
Speaker 1: broader view of making law. Is that a generational shift
Speaker 1: of the past, And what will the new law be,
Speaker 1: whether it's Justice Kavanaugh or someone else, Well, I think
Speaker 1: I'm not sure if it's a generational shift in legal thinking,
Speaker 1: it's certainly anytime there's an opportunity for a president to
Speaker 1: make an appointment, a nomination to the Supreme Court. It's
Speaker 1: usually a generational shift, just in the sense that Justice
Speaker 1: Kennedy will be eighty two this summer, and all of
Speaker 1: the folks who are mentioned as possible replacements are in
Speaker 1: their their early fifties or maybe they're late forties. In
Speaker 1: terms of his jurisprudence and what the future of the
Speaker 1: Court looks like. If Justice Kennedy really is at heart
Speaker 1: a conservative, but someone uh, you know, if you trace
Speaker 1: his roots to California and maybe think of a of
Speaker 1: a western a US Western libertarianism, and that's really a
Speaker 1: streak that runs through all of his opinions, and there
Speaker 1: is a there is probably a new type of conservatism
Speaker 1: whoever is nominated to replace him. From where you sit,
Speaker 1: what is the distinction between the present Justice Gorsuch in
Speaker 1: a candidates such as Kavanaugh or is it almost a
Speaker 1: cookie cutter modern conservatism? Well, I think to contrast Justice
Speaker 1: Corset and and Judge Kavanaugh, Uh, there are probably some
Speaker 1: differences on the margins and the way they would approach
Speaker 1: certain issues, and certainly in the types of experience that
Speaker 1: they've had. Uh. Judge gorse It's now Justice scor Such
Speaker 1: sat on the Tent Circuit Court of Appeals in Denver,
Speaker 1: which is a circuit that is a little different from
Speaker 1: Judge Kavanaugh's Cortner in d C. For the types of
Speaker 1: issues where they have expertise, but in terms of their
Speaker 1: legal thinking, uh, their their work as a mainstream conservative
Speaker 1: in the law today, those are two very similar. Name
Speaker 1: your voice and the heritage, and Professor Felbon at Harvard
Speaker 1: captured this and Scorpions beautifully. Your voice and heritage out
Speaker 1: of Kansas and Chicago is critical, and that it's a
Speaker 1: Midwest voice in whether it's Wizard White from the past
Speaker 1: and the rest of them. There is an American view
Speaker 1: that the Supreme Court is controlled by the elites of
Speaker 1: the East and a few selected liberals that got lost
Speaker 1: on the West coast. How mid continent will this Supreme
Speaker 1: Court become? How Kansas like will this Supreme Court be?
Speaker 1: I'm not sure it will be terribly Kansas like. But
Speaker 1: I would say that of of the potential nominees that
Speaker 1: are listed now, all of them, regardless of their current geography,
Speaker 1: share an academic background and a background in the law
Speaker 1: that looks very similar and is fairly elite, and UH
Speaker 1: Professor Feltman and others have have rightly pointed out that
Speaker 1: this is not a court made up of Byron Whites
Speaker 1: and Tony Kennedy's and UH folks from Minnesota, California, all
Speaker 1: across the country. This is an East Coast court, regardless
Speaker 1: of who is nominated and even if that person happens
Speaker 1: to sit now in the Midwest, Travis. We often talk
Speaker 1: about politicians getting into power and changing a little bit
Speaker 1: in how they view things and trying to find either
Speaker 1: more consensus or being more belligerent. Is it the same
Speaker 1: for justices to do p People change when they get
Speaker 1: appointed to the Supreme Court in their beliefs. I don't
Speaker 1: know if they change immediately upon appointment to the Supreme Court,
Speaker 1: but we've seen historically changes while justices serve on the Court,
Speaker 1: and of course the Court is a legal institution, but
Speaker 1: but also in many ways of political institution. Justices read
Speaker 1: the newspaper. They know the issues of our time, and
Speaker 1: as the balance of courts shifts and as members come
Speaker 1: and go, you do see changes among the remaining members.
Speaker 1: That certainly happened with Justice O'Connor, particularly when Justice Scalia
Speaker 1: joined the court. Some would say that it happened a
Speaker 1: bit with Justice Kennedy after Justice O'Connor departed the court
Speaker 1: in two thousand six, And it could be something that
Speaker 1: happens that we see potentially with Chief Justice Roberts, who
Speaker 1: many are saying now becomes the center of the court,
Speaker 1: regardless of who is confirmed. But you know that center
Speaker 1: will have moved slightly to the right if it is
Speaker 1: the Chief Justice now who occupies that middle position. I
Speaker 1: What exact effect will this have on social issues facing
Speaker 1: the court? Is there one social issue that that will
Speaker 1: really be in the limelight. Well, you know, there's discussion
Speaker 1: about several social issues, abortion probably being the leading one,
Speaker 1: but it's not clear what exact effect a new justice
Speaker 1: will have. You know, many of the justices, or all
Speaker 1: of them really on the shortlist, of course, come from
Speaker 1: the more conservative school of legal thought. That doesn't necessarily
Speaker 1: mean that all abortion decisions are potentially overturned or or reversed.
Speaker 1: There could be some narrowing, but frankly, we've seen that
Speaker 1: over the last ten or twenty years, narrowing of the
Speaker 1: abortion opinions, even with Justice Kennedy frankly at the center
Speaker 1: of the court, Mr Leonard, what is the difference between
Speaker 1: a five four in a six three court? If we
Speaker 1: get to a six three, I mean I can't even
Speaker 1: fathom getting to seven two. But what's the difference between
Speaker 1: five four and six three? Well, I think internally at
Speaker 1: the court as well as x sternally just from a
Speaker 1: public awareness and uh trust in the court as an
Speaker 1: institution standpoint. There certainly, you know, for all of us
Speaker 1: externally watching the court, when you see a six three
Speaker 1: or seven too, and you see broad consensus around an
Speaker 1: opinion on a controversial issue, that probably means it's a
Speaker 1: more narrow opinion, uh, And for many people that's a
Speaker 1: comforting sign that the Court is being more incrementalist as
Speaker 1: opposed to taking some broader steps. I don't know that
Speaker 1: replacement for Justice Kennedy changes the number of five to
Speaker 1: four decisions on this Court. And it's interesting actually, in
Speaker 1: the term just concluded, Justice Kennedy never joined the four
Speaker 1: more liberal justices to create that classic five to four
Speaker 1: that we've seen in previous terms. So it could be
Speaker 1: that next term with a replacement for Justice Kennedy looks
Speaker 1: a lot like this term in terms of how the
Speaker 1: vote stack stack up, excuse me among the nine of them.
Speaker 1: Mr Langner, thank you so much for joining us today
Speaker 1: with Keller Langner in Washington, Travis Legner. This is beyond
Speaker 1: well timed with bearings yes of olden time and Bearings
Speaker 1: asset management joining us now. It's Christopher Smart and that
Speaker 1: is a name some of you in international relations will do. Oh,
Speaker 1: there's literally no one in international relations who was linked
Speaker 1: to finance as Christopher Smart has his work at the
Speaker 1: Kennedy School, among other places, as public service to the nation,
Speaker 1: but also as a c f A and working within finance,
Speaker 1: including with Pioneer Investments of Boston years ago. Christopher Smart,
Speaker 1: it is an opportune time to rip up the script
Speaker 1: and speak to you of the Helsinki's of the past
Speaker 1: and the idea that Mr Putin will meet with Mr
Speaker 1: Trump in a new Helsinki. Our Eli Lake this morning
Speaker 1: is scar you think about the idea of an uncontrolled
Speaker 1: Mr Trump meeting with Mr Putin? What should the administration
Speaker 1: fear with the president one on one with Mr Putin? Well,
Speaker 1: I think these things, as you say, are normally very
Speaker 1: well scripted, very well prepared, and the meeting outcomes are
Speaker 1: usually well determined and planned in advance. Having two leaders
Speaker 1: go into a room together is something through history I
Speaker 1: think we have seen as not a formula for success,
Speaker 1: partly because when they come out of the room, it's
Speaker 1: never clear what has happened. Um. We had a similar example,
Speaker 1: I think when President Kennedy with Chairman Kristoff, and they
Speaker 1: both came out with very different reports of that meeting.
Speaker 1: So that's at least one thing to fear. The second
Speaker 1: thing is that it's very hard to know what the
Speaker 1: next step is in the US Russia relationship. As important
Speaker 1: as it is, we are at a point where we
Speaker 1: just don't like talking to each other about anything, and
Speaker 1: for a lot of reasons that I think on our
Speaker 1: side are very well founded. But the Russian reject the facts.
Speaker 1: The old Daniel Patrick moynihan line about you have the
Speaker 1: right to your own opinion, but not your own facts.
Speaker 1: The Russians are working from a different set of facts,
Speaker 1: even though they're wrong. Within this is this template of
Speaker 1: international investment. John Farrell and I have spent days and
Speaker 1: weeks were the new international politics. How does that fall
Speaker 1: into international investment? I think for an investor, as much
Speaker 1: time as we spend looking at the politics, and as
Speaker 1: important as those things are, when at the end of
Speaker 1: the day you're buying a stock or you're buying a bond,
Speaker 1: you're looking to discount the cash flows you're going to
Speaker 1: get back, and while you wonder and wring your hands
Speaker 1: over the future of the Korean peninsula, it's very hard
Speaker 1: to price that back into an investment. So I think
Speaker 1: investors up until now and for the last several years
Speaker 1: and for years to come, will focus on the economic
Speaker 1: data more than anything else. Um. But I think they
Speaker 1: have to start pricing in things like trade wars, where
Speaker 1: the flow of goods and services across borders will become
Speaker 1: more expensive, and that will have an impact on markets.
Speaker 1: Does that diminish global nominal GDP, diminishing damp in the
Speaker 1: animal spirit, and does that lead to the mergers like
Speaker 1: we saw yesterday with Pinnacle and Cannagra. We're basically the
Speaker 1: only way you can grow is to grow out and
Speaker 1: acquire revenue. I mean, we end up with a new
Speaker 1: m and a well. I think that will drive the
Speaker 1: economics and the technology. I think you're driving you towards globalization,
Speaker 1: larger firms, more cross order scale at the same time
Speaker 1: as you see the politics are working in the other direction,
Speaker 1: where where populist uh elected officials around the world they're
Speaker 1: trying to take more control of their borders and um
Speaker 1: make you know, throw up walls that weren't there before. Christopher,
Speaker 1: is this going to force the mainstream to to wake
Speaker 1: out to what the electra ultimately would like to see,
Speaker 1: Because what I see from many guests that come on
Speaker 1: this program on trade, it's a very sort of china
Speaker 1: apologist stance from a lot of people on the trade issue.
Speaker 1: On immigration, they're like several years behind what the election
Speaker 1: has been calling for. UM. So the rise a populism
Speaker 1: is only going to get a whole lot worse. UM,
Speaker 1: so long as the mainstream political parties don't wake up
Speaker 1: to what is actually happening. Well, I think it depends
Speaker 1: on which mainstream parties you're talking about, But I think
Speaker 1: you're absolutely right. You know, there is change of foot
Speaker 1: and we have seen that in elections that have shocked, um,
Speaker 1: the establishments in the United States and Europe and elsewhere.
Speaker 1: And I think there is an important set of lessons
Speaker 1: that new politicians and new political leaders need to draw
Speaker 1: on China. I think you know what is absolutely right
Speaker 1: is that China has been a very difficult and um
Speaker 1: bad actor in many ways in the global trade system.
Speaker 1: I think the question is how do you best deal
Speaker 1: with China? Because it is going to continue to grow
Speaker 1: and become bigger and more influential in not just the
Speaker 1: trading system but the global financial system. Uh, and that
Speaker 1: takes much more than slapping tarots on one side or
Speaker 1: the other. So what is the best approach? I mean,
Speaker 1: we continually have this conversation on Bloomberg Radio, and I
Speaker 1: don't necessarily subscribe to one approach. My question continually always
Speaker 1: the approach of the last ten years hasn't worked, So
Speaker 1: why should we carry on doing the same thing. Well,
Speaker 1: I think you just have to keep at it is
Speaker 1: my short and not very dramatic answer, But I think
Speaker 1: it's one of those things where these are not transactions,
Speaker 1: These are not one offs or deals that we need
Speaker 1: to be focusing on. We need to be focusing on
Speaker 1: building a relationship because China will be here for a
Speaker 1: long time. We just talked to David Woo, a Bank
Speaker 1: of America, Maryland, and he's on the cell side and
Speaker 1: he's out pushing a research agenda, which is a wonderful thing.
Speaker 1: You're on the bi side. Does the by side you
Speaker 1: have a dollar call? I mean, do you guys sit
Speaker 1: around the shop trying to bet the dollar? No? I
Speaker 1: think we look at the dollar is a very important
Speaker 1: determinant of value and markets around the world, and so
Speaker 1: we're always thinking, are you framing for a strong dollar? New?
Speaker 1: I think if you look at the way things have
Speaker 1: been headed and the you know, we are raising rates here,
Speaker 1: the rest of the world seems to be moving in
Speaker 1: a different direction that, as you know, has been moving
Speaker 1: the dollar lately, and that seems like a continued direction.
Speaker 1: But I think, um uh, it's a very confusing time
Speaker 1: in many ways because we don't have the synchronized growth
Speaker 1: that we've had anymore, just because of the time that
Speaker 1: we've got left with you in the news flow and
Speaker 1: with your unique focus on when did you first go
Speaker 1: to Moscow? Uh? Well, Peter the Great? Who was I mean?
Speaker 1: Within that? Is this the myth and the mystery? John?
Speaker 1: You may be better at this than me of what
Speaker 1: is our What do we get wrong about Russian capitalism
Speaker 1: right now? When you talk to people in the West
Speaker 1: about Russia? What do we get wrong when we try
Speaker 1: to interpret it well? I think Russia is a very
Speaker 1: big and very complicated country that often we get wrong
Speaker 1: because we ascribe everything to Putin and to a single
Speaker 1: leader and to a single It is more complex than that.
Speaker 1: It is far more complex than that. It is a group.
Speaker 1: It is a country of a hundred and fifty million people.
Speaker 1: It's not just oil, it's not just commodities, even though
Speaker 1: they dominate the economy. Uh. It is also a new
Speaker 1: generation that is come of age long since the Soviet
Speaker 1: Union fell apart. Uh. And I think we do ourselves
Speaker 1: a disservice to think of it in in monolithic terms.
Speaker 1: Dr Smart. Do we over emphasize oligarchs? I mean, John
Speaker 1: looks at them because they end up buying all the
Speaker 1: English soccer teams, but that's true. But do we overlook
Speaker 1: the oligarcs. Well, I think they're they're an important part
Speaker 1: of the picture as well, but they're also not the
Speaker 1: only part of the picture. Um um. But that's uh
Speaker 1: something that we can you know. I think, just to
Speaker 1: get the World Cup in here for a second and Russia,
Speaker 1: I just wanted to put it for team Russia. They've
Speaker 1: moved on and there they look. I think I think
Speaker 1: we're going to have them in the finals, and then
Speaker 1: there'll be a huge investigation over whether or not they
Speaker 1: were driving referes. Just Christopher Smart, I'm so glad you're
Speaker 1: here because we're gonna pick on Ferroll right now. Amphony
Speaker 1: from Sparta emails in and says, and they say American
Speaker 1: sports are hard to follow. John he insists that you
Speaker 1: recap why England and Belgium want to lose today, because
Speaker 1: want to lose because they want to avoid the better
Speaker 1: team in the next round. No, Columbia is who they're
Speaker 1: going to play. Why is Colombia one of the better teams. Well,
Speaker 1: Columbia are one of the better teams compared to say,
Speaker 1: Senegalo Japan. Who would you rather play? Okay, you'd rather
Speaker 1: play keeping Sac No, I imagine you'd rather play Senegalo
Speaker 1: Japan the Colombia. I would have thought. So when we
Speaker 1: get a barn Burner zero zero tie in the eighty
Speaker 1: ninth minute and they add on all those and they
Speaker 1: might just play Columbia, what do do they all go?
Speaker 1: They all go to the don't they all go to
Speaker 1: the just don't think the middle of the field cannon.
Speaker 1: They go halfback. No, no, trying to play it. Stop
Speaker 1: trying to get him to play it. I don't want
Speaker 1: to to play it. I don't want him to play it.
Speaker 1: What are you controlling the control? I'm fighting you and
Speaker 1: I really don't want Ken to play it, and he's
Speaker 1: gone with you. It's great to know where I stand
Speaker 1: on this program in the hierarchy of things. Isn't all
Speaker 1: We're playing the Simpsons here once again. I've got to
Speaker 1: thank you, Chris. Thank you so much for the wisdom
Speaker 1: on Russian world coaps. It's with bearings, we should say,
Speaker 1: and on the international investment, of course, on the stronger
Speaker 1: dollar as well. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.