1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance podcast and I'm Tom Keane. 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Daily we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,000 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Right Now. 5 00:00:28,120 --> 00:00:31,160 Speaker 1: Something special with us William Dudley. He is a former 6 00:00:31,200 --> 00:00:34,200 Speaker 1: president of the New York Fellow Reserve. There are eight, nine, 7 00:00:34,280 --> 00:00:37,720 Speaker 1: ten topics that we could speak to William Dudley about, 8 00:00:37,840 --> 00:00:40,520 Speaker 1: but there is only one topic for those of economics, 9 00:00:40,560 --> 00:00:42,720 Speaker 1: and you've seen it percolate. We've done it on this 10 00:00:42,760 --> 00:00:45,919 Speaker 1: show as well, and that is a new governor at 11 00:00:45,960 --> 00:00:49,040 Speaker 1: the Felleral Reserve System. Her name is Judy Shelton. She 12 00:00:49,200 --> 00:00:52,360 Speaker 1: has an education degree from Portland State University, which is 13 00:00:52,400 --> 00:00:58,160 Speaker 1: six four miles from Bill Dudley's PhD at Berkeley. This 14 00:00:58,240 --> 00:01:01,240 Speaker 1: is a delicate conversation, Bill Dudley, but let me begin 15 00:01:01,360 --> 00:01:06,039 Speaker 1: with a blunt question. How does this system deal with 16 00:01:06,120 --> 00:01:12,200 Speaker 1: a potential governor this uniquely qualified. I don't think it 17 00:01:12,280 --> 00:01:15,040 Speaker 1: creates huge amounts of problems. That there have been governors 18 00:01:15,040 --> 00:01:17,440 Speaker 1: in the past that have been outside the mainstream. And 19 00:01:17,520 --> 00:01:21,200 Speaker 1: Wayne Angel, as someone who comes to mind, uh and 20 00:01:21,360 --> 00:01:24,000 Speaker 1: fed you know there's more than there's there's seven governors. 21 00:01:24,360 --> 00:01:26,800 Speaker 1: There will be seven governors if the Waller and Shelton 22 00:01:26,840 --> 00:01:29,360 Speaker 1: are confirmed, and I think you know they will. They 23 00:01:29,360 --> 00:01:32,080 Speaker 1: will have a voice, but they will not actually set 24 00:01:32,080 --> 00:01:36,039 Speaker 1: the path for Monterrey policy or regulatory policy. I'll be 25 00:01:36,080 --> 00:01:39,800 Speaker 1: set by J. Paul and Randy Quarrels. The heart of 26 00:01:39,840 --> 00:01:43,200 Speaker 1: her theory is the yearning to go back to another 27 00:01:43,319 --> 00:01:49,360 Speaker 1: time of a more closed American system, a more static economy. 28 00:01:49,400 --> 00:01:53,360 Speaker 1: To the many people that support Judy Shelton and that 29 00:01:53,840 --> 00:01:57,320 Speaker 1: desire that feeling of another time and place, how do 30 00:01:57,400 --> 00:02:01,000 Speaker 1: you respond in this time of an open America, an 31 00:02:01,000 --> 00:02:05,680 Speaker 1: open economy. Well, she has advocated returning to the gold standard, 32 00:02:05,720 --> 00:02:09,640 Speaker 1: and returning to the gold standard resulting tremendous increase in 33 00:02:09,680 --> 00:02:12,959 Speaker 1: the volatility of interest rates because basically, my gold prices 34 00:02:13,000 --> 00:02:14,720 Speaker 1: were going up, the Federal Reserve would have to rage 35 00:02:14,800 --> 00:02:18,639 Speaker 1: rates when gold prices would have to lower interest rates, 36 00:02:18,720 --> 00:02:21,680 Speaker 1: regardless of what was happening in the real economy, regardless 37 00:02:21,720 --> 00:02:24,440 Speaker 1: of was having to inflation, regardless of what was having 38 00:02:24,440 --> 00:02:27,520 Speaker 1: to The gold standard is not a good anchor for 39 00:02:27,680 --> 00:02:30,160 Speaker 1: US monetary So let's talk about the real economy. How 40 00:02:30,200 --> 00:02:32,680 Speaker 1: would you be reacting now to the data that started 41 00:02:32,720 --> 00:02:34,160 Speaker 1: to come through in America? We saw in the high 42 00:02:34,200 --> 00:02:36,320 Speaker 1: frequency day, so we've got a flavor that things were 43 00:02:36,320 --> 00:02:38,440 Speaker 1: starting to store to roll over, and now we see 44 00:02:38,440 --> 00:02:40,919 Speaker 1: it in jobless claims as well. They're starting to pick 45 00:02:41,000 --> 00:02:42,680 Speaker 1: up again. I said a couple of months ago that 46 00:02:42,720 --> 00:02:45,280 Speaker 1: it looks like the right wing of that v's starting 47 00:02:45,280 --> 00:02:47,079 Speaker 1: to break. What would that mean for you? It's a 48 00:02:47,080 --> 00:02:50,040 Speaker 1: policy make for the Fed again. Well, I think what's 49 00:02:50,040 --> 00:02:54,280 Speaker 1: happening is the recovering economic activity is flattening out is 50 00:02:55,080 --> 00:02:59,960 Speaker 1: as shut sounds are recurring, and social distancing is increasing again. 51 00:03:00,520 --> 00:03:02,800 Speaker 1: And I don't think we're gonna see a fall back 52 00:03:02,800 --> 00:03:05,400 Speaker 1: to where we were, uh, you know, in March, April 53 00:03:05,440 --> 00:03:08,600 Speaker 1: and May. But the recovery is going to be quite subdued. 54 00:03:08,960 --> 00:03:12,200 Speaker 1: The unemployment rate's gonna stay high for quite some time. 55 00:03:12,639 --> 00:03:14,800 Speaker 1: And as a consequence of that, Monterrey policy is going 56 00:03:14,840 --> 00:03:16,720 Speaker 1: to be on hold, and the Fed Federal Reserves be 57 00:03:16,800 --> 00:03:20,040 Speaker 1: looking around for what things can they do to provide 58 00:03:20,040 --> 00:03:22,680 Speaker 1: additional Monterrey pals. What things do you think they can 59 00:03:22,760 --> 00:03:25,400 Speaker 1: and should do in the months to come. Well, I 60 00:03:25,400 --> 00:03:28,040 Speaker 1: think Unfortunately, they don't have a lot of great weapons. 61 00:03:28,480 --> 00:03:30,360 Speaker 1: I think they're going to continue their large scale as 62 00:03:30,440 --> 00:03:33,799 Speaker 1: it purchases, buying treasuries and it is mortgage backed securities. 63 00:03:34,320 --> 00:03:37,840 Speaker 1: They may come forward with more definitive forward guidance in 64 00:03:37,960 --> 00:03:41,240 Speaker 1: terms of keeping interest rates until low, for long, until 65 00:03:41,440 --> 00:03:44,240 Speaker 1: the unemployment rate falls below a particular level or inflation 66 00:03:44,280 --> 00:03:47,360 Speaker 1: clowns above particular level. But the real, the real focus 67 00:03:47,440 --> 00:03:49,400 Speaker 1: right now should be on fiscal policy. That's what the 68 00:03:49,480 --> 00:03:52,120 Speaker 1: U S economy needs. We're basically right at the edge 69 00:03:52,160 --> 00:03:55,640 Speaker 1: of a huge fiscal cliff with the expiration of the 70 00:03:55,640 --> 00:03:59,040 Speaker 1: six hundred dollars a week unemployment conversation benefits at the 71 00:03:59,120 --> 00:04:02,240 Speaker 1: end of this month. And if that's not, you know, 72 00:04:02,720 --> 00:04:06,880 Speaker 1: replaced by something significant soon, the commun is actually gonna 73 00:04:07,600 --> 00:04:12,120 Speaker 1: be weaker than participate. Bill Fedger Fedger J. Powell also 74 00:04:12,160 --> 00:04:15,160 Speaker 1: agreeing with you coming out and saying fiscal policy is necessary. 75 00:04:15,240 --> 00:04:17,800 Speaker 1: But the FED has control over monetary policy, and right 76 00:04:17,800 --> 00:04:21,400 Speaker 1: now monetary policy is pushing investors into equities. We're looking 77 00:04:21,440 --> 00:04:24,160 Speaker 1: at futures right now unchanged or a little bit higher 78 00:04:24,400 --> 00:04:27,440 Speaker 1: on the day ahead of the open, even after these 79 00:04:27,720 --> 00:04:31,960 Speaker 1: worsening labor statistics. How much should the equity market be 80 00:04:32,040 --> 00:04:35,200 Speaker 1: a gauge of financial conditions for the Federal Reserve something 81 00:04:35,240 --> 00:04:38,039 Speaker 1: to shoot for, with higher equity values being a good thing. 82 00:04:39,160 --> 00:04:41,320 Speaker 1: I don't think the Fed wants the equity market to 83 00:04:41,360 --> 00:04:44,160 Speaker 1: go to any particular level. They do want financial conditions 84 00:04:44,160 --> 00:04:46,240 Speaker 1: to be accommodati if they want markets to work. They 85 00:04:46,240 --> 00:04:48,320 Speaker 1: want markets the open and will functioning, and I think 86 00:04:48,360 --> 00:04:50,920 Speaker 1: that's what they've achieved. I think there are some people 87 00:04:50,920 --> 00:04:53,240 Speaker 1: on the Reserve that are a little bit concerned about 88 00:04:53,240 --> 00:04:55,960 Speaker 1: how high the equity market in the last sea minutes, 89 00:04:56,360 --> 00:04:59,719 Speaker 1: because saw a couple of people talking about financial stability 90 00:04:59,800 --> 00:05:02,400 Speaker 1: is jees. I personally think the stock market is high 91 00:05:02,440 --> 00:05:05,320 Speaker 1: mainly because bonnyals are low and bonniles are low because 92 00:05:05,360 --> 00:05:07,720 Speaker 1: Montreal policy is going to be very accommodative for a 93 00:05:07,800 --> 00:05:10,320 Speaker 1: number of years. Well. But to the extent that the 94 00:05:10,320 --> 00:05:13,480 Speaker 1: Fed is worried about the widening gap between wealthy and 95 00:05:13,560 --> 00:05:16,760 Speaker 1: poorer individuals, how concerning is it that their policies have 96 00:05:16,800 --> 00:05:20,479 Speaker 1: pushed up asset prices, have created easier financial conditions, but 97 00:05:20,600 --> 00:05:23,320 Speaker 1: clearly are not leading to a better labor market. Given 98 00:05:23,320 --> 00:05:27,240 Speaker 1: the fact that we're seeing a reversal in the claims numbers. Well, 99 00:05:27,279 --> 00:05:29,960 Speaker 1: I think they are frustrated by the fact that they 100 00:05:30,000 --> 00:05:33,360 Speaker 1: don't have good tools to address the issue of income 101 00:05:33,360 --> 00:05:36,440 Speaker 1: and equality. I think they wish they did have better tools. 102 00:05:36,440 --> 00:05:39,320 Speaker 1: But Montrey policy is not well suited for the fiscal policies. 103 00:05:39,640 --> 00:05:41,719 Speaker 1: So it's really for Congress and the administration to do 104 00:05:41,800 --> 00:05:45,080 Speaker 1: things on fiscal policy that help address the fact that 105 00:05:45,160 --> 00:05:48,240 Speaker 1: the burden of the of the pandemic is falling disproportionately 106 00:05:48,279 --> 00:05:51,520 Speaker 1: on low and moderating communciles. Bill Dudley Wethers, and we 107 00:05:51,520 --> 00:05:54,119 Speaker 1: will continue with the former president of New York FED. 108 00:05:54,320 --> 00:05:57,280 Speaker 1: We welcome all of you on Bloomberg Radio and Bloomberg Television. 109 00:05:57,320 --> 00:05:59,800 Speaker 1: Is John Farrell notes a flip in the market here, 110 00:06:00,000 --> 00:06:03,040 Speaker 1: you just come back dollars stronger. And John, we've got 111 00:06:03,040 --> 00:06:05,719 Speaker 1: to look as we as we continue with Bill Dudley, John, 112 00:06:05,760 --> 00:06:09,000 Speaker 1: we've got to look at the substantial curve flattening. It's 113 00:06:09,040 --> 00:06:11,560 Speaker 1: really broken down long end and buy two basis points 114 00:06:11,600 --> 00:06:14,560 Speaker 1: to about on a thirty year Bill, talk to me 115 00:06:14,600 --> 00:06:17,599 Speaker 1: about the QUE program and the scope for adjusting that 116 00:06:17,680 --> 00:06:19,800 Speaker 1: to sit at the long end just a little bit more. 117 00:06:19,880 --> 00:06:22,720 Speaker 1: The front end is already so well anchored. What can 118 00:06:22,760 --> 00:06:24,039 Speaker 1: you do with the long end and what did you 119 00:06:24,160 --> 00:06:28,360 Speaker 1: learn coming down to the last crisis. Well, the historically 120 00:06:28,360 --> 00:06:31,080 Speaker 1: as used their large scale asset purchased to buy treasuries 121 00:06:31,160 --> 00:06:34,039 Speaker 1: across the yield curve. They could decide to buy more 122 00:06:34,200 --> 00:06:37,120 Speaker 1: longer matority treasury since, as you point out, the short 123 00:06:37,240 --> 00:06:40,320 Speaker 1: end of the treasure market is well anchored by expectations 124 00:06:40,880 --> 00:06:44,160 Speaker 1: move for next for for several years, that has indicated 125 00:06:44,200 --> 00:06:46,920 Speaker 1: that they're going to shift their large scale asset purchase 126 00:06:47,000 --> 00:06:50,200 Speaker 1: programs from focusing on market function, which is now good 127 00:06:50,480 --> 00:06:53,200 Speaker 1: for focusing on how do you actually stimulate econmy I 128 00:06:53,200 --> 00:06:55,720 Speaker 1: think that it does imply that they're gonna buy a 129 00:06:55,839 --> 00:06:58,599 Speaker 1: greater proportion of longer dated treasury. But before we let 130 00:06:58,640 --> 00:07:01,159 Speaker 1: you go, I need a message for fiscal policymakers down 131 00:07:01,160 --> 00:07:04,400 Speaker 1: in Washington. There's a real discussion about perhaps allowing the 132 00:07:04,480 --> 00:07:08,480 Speaker 1: enhanced unemployment benefits to expire, maybe to taper them aggressively. 133 00:07:08,520 --> 00:07:10,320 Speaker 1: Maybe that's the best case that we can hope for 134 00:07:10,640 --> 00:07:14,440 Speaker 1: at the administration and Republicans. If that happens, what you 135 00:07:14,480 --> 00:07:19,720 Speaker 1: expect August and September data to look like, Bill, Well, again, 136 00:07:19,760 --> 00:07:21,800 Speaker 1: I think it's going to depend more on the course 137 00:07:21,840 --> 00:07:25,080 Speaker 1: of the pandemic and what social distancing that then requires. 138 00:07:25,160 --> 00:07:28,600 Speaker 1: But if there is no extension of unemployment, conversation benefits, 139 00:07:28,640 --> 00:07:31,360 Speaker 1: and I think you will see consequences for consumer spending. 140 00:07:31,520 --> 00:07:34,040 Speaker 1: The consumer spending is held up reasonably well in part 141 00:07:34,080 --> 00:07:37,600 Speaker 1: because household incomes have been well supported by fiscal policy 142 00:07:38,000 --> 00:07:41,000 Speaker 1: that supports ends the consequences. What we're seeing in the 143 00:07:41,000 --> 00:07:43,000 Speaker 1: liver market, You're gonna start to become more important in 144 00:07:43,080 --> 00:07:46,880 Speaker 1: terms of outlets. Bill, appreciate your time this morning. Appreciate 145 00:07:46,880 --> 00:07:48,800 Speaker 1: your patients to great to catch up you William don't 146 00:07:48,800 --> 00:08:02,440 Speaker 1: be their former New York Fed president right now joining us, 147 00:08:02,480 --> 00:08:05,440 Speaker 1: And I'm really looking forward to a good conversation with 148 00:08:05,560 --> 00:08:09,000 Speaker 1: a guy who has put together a firm of continued success. 149 00:08:09,160 --> 00:08:11,280 Speaker 1: It is ever cord as ever Core I s I 150 00:08:11,360 --> 00:08:13,600 Speaker 1: of course with the great at Himan and he is 151 00:08:13,720 --> 00:08:17,560 Speaker 1: Ralph Schlastein. He is co chairman and co CEO, looking 152 00:08:17,600 --> 00:08:20,080 Speaker 1: like he just played a folk act at the Dennison 153 00:08:20,160 --> 00:08:24,200 Speaker 1: College Michael Eisner Performing Center, and we are thrilled he 154 00:08:24,240 --> 00:08:27,840 Speaker 1: could join us this morning. Ralph, I want to talk 155 00:08:28,000 --> 00:08:32,160 Speaker 1: first about your senior chairman, Roger Altman. I think it 156 00:08:32,280 --> 00:08:36,719 Speaker 1: is under appreciated how lonely you guys were when you 157 00:08:36,800 --> 00:08:40,240 Speaker 1: set up ever cor. What did Altman and schlo Stein 158 00:08:40,360 --> 00:08:44,920 Speaker 1: do at that time that was so different? Well, I 159 00:08:44,960 --> 00:08:48,680 Speaker 1: wasn't there. Roger was there for the first fourteen years 160 00:08:48,840 --> 00:08:52,200 Speaker 1: without me. I joined eleven years ago. But he literally, 161 00:08:52,840 --> 00:08:58,000 Speaker 1: uh came back from his stint at the Treasury and 162 00:08:58,200 --> 00:09:02,840 Speaker 1: thought that the world needed a more old time investment bank, 163 00:09:03,200 --> 00:09:07,560 Speaker 1: one that focused purely on advice. Uh. And the very 164 00:09:07,679 --> 00:09:12,679 Speaker 1: first presentation he made twenty five years ago, the first 165 00:09:12,720 --> 00:09:17,360 Speaker 1: page had the words quality and integrity on that first page. 166 00:09:17,920 --> 00:09:20,320 Speaker 1: And I've been here eleven years. The one thing I 167 00:09:20,400 --> 00:09:23,400 Speaker 1: was allowed to do by Roger is I change quality 168 00:09:23,440 --> 00:09:26,840 Speaker 1: to excellence. And so now it's excellence in integrity. But 169 00:09:27,600 --> 00:09:31,760 Speaker 1: it's it's a great business model. We have very senior people. 170 00:09:32,320 --> 00:09:37,400 Speaker 1: They actually do the work rather than just show and 171 00:09:37,480 --> 00:09:40,920 Speaker 1: the board meeting. So well, that's a huge distinction, and 172 00:09:41,040 --> 00:09:43,240 Speaker 1: certainly we've seen that with Ed Hyman and with the 173 00:09:43,240 --> 00:09:46,760 Speaker 1: others of your your principles. Okay, let's cut to the chase. 174 00:09:47,120 --> 00:09:50,800 Speaker 1: How do you readjust and recalibrate out of this pandemic 175 00:09:51,440 --> 00:09:57,080 Speaker 1: given the competition of the major banks. Well, uh, what 176 00:09:57,160 --> 00:10:00,080 Speaker 1: we have done over the last several years is to 177 00:10:00,280 --> 00:10:05,200 Speaker 1: dramatically broaden the things that we can advise our clients on. 178 00:10:05,559 --> 00:10:10,320 Speaker 1: So we have the number one activist fence practice. We're 179 00:10:10,360 --> 00:10:14,440 Speaker 1: the only independent firm with an equity underwriting capability, and 180 00:10:14,480 --> 00:10:18,800 Speaker 1: in the quarter we just finished, we did more underwriting 181 00:10:18,800 --> 00:10:22,120 Speaker 1: revenues UH than we did all of last year, which 182 00:10:22,160 --> 00:10:25,960 Speaker 1: was a record for US. We have debt advisory, we 183 00:10:26,040 --> 00:10:30,640 Speaker 1: have restructuring UH advice on hedging. So what we've done 184 00:10:30,720 --> 00:10:36,160 Speaker 1: is we've built deep capabilities in everything that a company 185 00:10:36,200 --> 00:10:40,400 Speaker 1: would want to do. Big firm as a counterpart Ralph. 186 00:10:40,480 --> 00:10:42,880 Speaker 1: One important question, and this has come up with Lisa 187 00:10:42,920 --> 00:10:47,080 Speaker 1: Bramwis and John Farrell day after day. You guys have 188 00:10:47,200 --> 00:10:52,280 Speaker 1: been massively benefited by the stimulus of Jerome Powell and 189 00:10:52,320 --> 00:10:56,080 Speaker 1: by the leadership of Congress. How do you how do 190 00:10:56,120 --> 00:10:59,560 Speaker 1: you move forward with the American public Where we see 191 00:11:00,160 --> 00:11:03,760 Speaker 1: New York Wall Street and indeed global Wall Street benefiting 192 00:11:03,960 --> 00:11:10,000 Speaker 1: so much from the stimulus, That's a I think a 193 00:11:10,200 --> 00:11:15,559 Speaker 1: really really important issue. UH. There's clearly been a uh 194 00:11:16,080 --> 00:11:20,400 Speaker 1: massive effect on the capital markets, both the equity market 195 00:11:20,520 --> 00:11:24,199 Speaker 1: and the debt market. UH, and that has certainly benefited 196 00:11:24,240 --> 00:11:29,800 Speaker 1: the trading activities and the shares of the large firms 197 00:11:29,920 --> 00:11:33,800 Speaker 1: and of all all firms also, So we have this 198 00:11:35,040 --> 00:11:40,160 Speaker 1: massive inequality. It was necessary to stabilize the economy, but 199 00:11:40,240 --> 00:11:43,520 Speaker 1: it's had a much greater effect on the wealth of 200 00:11:43,559 --> 00:11:46,480 Speaker 1: the wealthy than it has on the well being of 201 00:11:46,520 --> 00:11:49,839 Speaker 1: those in me. Does that compromise your ambitions in any way, 202 00:11:49,840 --> 00:11:53,280 Speaker 1: shape or film, Ralph, No, I think we have to 203 00:11:53,320 --> 00:11:57,599 Speaker 1: continue to do what we do, but it does, UH, 204 00:11:57,760 --> 00:12:01,040 Speaker 1: in my private life make me some bard of of 205 00:12:01,880 --> 00:12:07,640 Speaker 1: UH people and of policies that are focused more on 206 00:12:07,720 --> 00:12:11,640 Speaker 1: a more equal distribution of wealth in this country. Give 207 00:12:11,679 --> 00:12:13,360 Speaker 1: us more detail on that, Ralph, Is that a shift 208 00:12:13,400 --> 00:12:16,559 Speaker 1: to the left for you politically speaking ahead of this election? No, 209 00:12:16,800 --> 00:12:21,920 Speaker 1: I actually, uh worked for Hubert Humphrey in the Senate 210 00:12:22,520 --> 00:12:25,680 Speaker 1: and then worked for President Carter in the White House, 211 00:12:25,720 --> 00:12:28,720 Speaker 1: so I've always had a I wouldn't call it a left. 212 00:12:28,760 --> 00:12:32,760 Speaker 1: I'm a conservative on fiscal policy, but I do believe 213 00:12:33,679 --> 00:12:35,920 Speaker 1: that we need to do more for those who are 214 00:12:36,520 --> 00:12:43,120 Speaker 1: underserved in terms of income, health care, housing in this country. So, Ralph, 215 00:12:43,120 --> 00:12:45,480 Speaker 1: given the fact that you're a fiscal conservative, what would 216 00:12:45,480 --> 00:12:47,720 Speaker 1: you say to companies right now raising record amounts of 217 00:12:47,760 --> 00:12:50,760 Speaker 1: debt in order to survive this period of time becoming 218 00:12:50,800 --> 00:12:54,800 Speaker 1: more indebted ahead of a period of slowing growth. Well, 219 00:12:54,840 --> 00:12:59,080 Speaker 1: I think the the most important thing for every company 220 00:12:59,200 --> 00:13:01,920 Speaker 1: to look at in the period that we've just been 221 00:13:01,960 --> 00:13:07,160 Speaker 1: through has been liquidity. Uh, do we have the cash 222 00:13:07,240 --> 00:13:11,920 Speaker 1: to survive? Because? Uh? In O eight O nine, we 223 00:13:12,080 --> 00:13:16,680 Speaker 1: learned that financial institutions fail not because of capital, but 224 00:13:16,760 --> 00:13:22,920 Speaker 1: because of liquidity. And in this UH recession, deep recession, 225 00:13:23,960 --> 00:13:29,760 Speaker 1: we have learned also that that phenomena is more widespread. 226 00:13:29,880 --> 00:13:32,120 Speaker 1: So we spent a lot of time in the last 227 00:13:32,160 --> 00:13:35,719 Speaker 1: four months encouraging companies to put more cash on their 228 00:13:35,720 --> 00:13:38,959 Speaker 1: brown sheets. But here's here's the conundrum, Rouph. Because we're 229 00:13:38,960 --> 00:13:41,480 Speaker 1: heading into a period of slowing growth, we have a 230 00:13:41,520 --> 00:13:45,320 Speaker 1: more fragile economy, and we have more indebted companies. Why 231 00:13:45,400 --> 00:13:49,080 Speaker 1: not just file for bankruptcy? Why not renegotiate the debtloads 232 00:13:49,080 --> 00:13:52,800 Speaker 1: now with creditors to reduce the obligations rather than putting 233 00:13:52,800 --> 00:13:57,559 Speaker 1: their entire capital models in a more precarious situation. Well, 234 00:13:57,600 --> 00:14:01,800 Speaker 1: there's some of that going on as well. Uh. I 235 00:14:01,840 --> 00:14:05,280 Speaker 1: think the real issue, UH, in terms of how to 236 00:14:05,440 --> 00:14:10,240 Speaker 1: solve one's balance sheet issues, depends upon the outlook for 237 00:14:10,240 --> 00:14:14,720 Speaker 1: the business. If if it truly is a the uh 238 00:14:15,000 --> 00:14:21,000 Speaker 1: type uh downturn and then recovery. Uh. Then it's just 239 00:14:21,080 --> 00:14:24,600 Speaker 1: a matter of having the cash to survive to the 240 00:14:24,600 --> 00:14:29,000 Speaker 1: other side of the chasm. Other businesses obviously are going 241 00:14:29,080 --> 00:14:33,520 Speaker 1: to be more seriously uh and permanently impaired, and for them, 242 00:14:33,960 --> 00:14:38,520 Speaker 1: you know, bankruptcy and recapitalization is the right model. Well, 243 00:14:38,560 --> 00:14:41,680 Speaker 1: if the heritage of ever Core Forward is on John 244 00:14:41,720 --> 00:14:44,560 Speaker 1: Weinberg and you and of course Mr Weinberg, that name 245 00:14:44,600 --> 00:14:48,840 Speaker 1: is magical and always associated with Golden Sex, I'd be 246 00:14:48,880 --> 00:14:52,920 Speaker 1: honored if you'd comment Ralph on the retail experiment at 247 00:14:52,920 --> 00:15:00,000 Speaker 1: Golden Sex. Can institutions be all things to all people? Uh? 248 00:15:00,000 --> 00:15:03,160 Speaker 1: If do you really want me to comment on that, 249 00:15:03,360 --> 00:15:09,400 Speaker 1: he'd love you take if I were in their shoes, 250 00:15:09,480 --> 00:15:13,960 Speaker 1: It's not the path that I would choose. Uh. I 251 00:15:14,000 --> 00:15:16,840 Speaker 1: think that. Well, there are two parts of their retail experiment. 252 00:15:17,440 --> 00:15:24,560 Speaker 1: One is collecting deposits. That makes sense because deposits are 253 00:15:24,720 --> 00:15:28,840 Speaker 1: much more stable funding source uh than going to the 254 00:15:28,920 --> 00:15:33,000 Speaker 1: institutional market. And I think that is a very sound 255 00:15:33,040 --> 00:15:34,920 Speaker 1: thing to do. And they're you know, they're paying up 256 00:15:34,960 --> 00:15:38,480 Speaker 1: a little bit, but they're paying for much more stable 257 00:15:39,200 --> 00:15:44,360 Speaker 1: liabilities or borrowings. Uh, the lending side of it. I'm 258 00:15:44,440 --> 00:15:47,800 Speaker 1: not a big fan of It's a very crowded business. 259 00:15:48,480 --> 00:15:52,320 Speaker 1: Uh and uh coming late to the party. In my view, 260 00:15:52,800 --> 00:15:55,880 Speaker 1: as you know, Ralph, Bloomberg, surveillance is all about the 261 00:15:55,960 --> 00:15:59,960 Speaker 1: conversation with experts. Of course, we all know your acquisition 262 00:16:00,040 --> 00:16:03,120 Speaker 1: of that Hyman Services a number of years ago. Tell 263 00:16:03,200 --> 00:16:07,400 Speaker 1: us the value, the intellectual component value of the future 264 00:16:07,480 --> 00:16:10,560 Speaker 1: Wall Street, the future global Wall Street. How much does 265 00:16:10,600 --> 00:16:14,920 Speaker 1: it matter that experts will be needed? I you know, 266 00:16:15,120 --> 00:16:19,600 Speaker 1: it's it's interesting. I often say, uh that we're We're 267 00:16:19,600 --> 00:16:22,280 Speaker 1: in every business that Goldman Sacks is in that meets 268 00:16:22,320 --> 00:16:26,200 Speaker 1: the following criteria. You compete solely on the basis of 269 00:16:26,280 --> 00:16:31,000 Speaker 1: your ideas, your intellectual capital, and your relationships. And the 270 00:16:31,000 --> 00:16:34,760 Speaker 1: only source of revenue is f income. So we are 271 00:16:35,560 --> 00:16:40,360 Speaker 1: we are the walking example of an intellectual capital firm. 272 00:16:40,520 --> 00:16:43,800 Speaker 1: We have two major businesses, the research business which you 273 00:16:43,920 --> 00:16:48,480 Speaker 1: just asked about, and the investment banking advisory business, and 274 00:16:48,560 --> 00:16:54,000 Speaker 1: both of those are fundamentally driven by intellectual capital. Ralph. 275 00:16:54,040 --> 00:16:56,720 Speaker 1: One final question, this is a critical importance. We have 276 00:16:56,800 --> 00:17:00,040 Speaker 1: a viewer that emails in right now, John from of 277 00:17:00,160 --> 00:17:03,520 Speaker 1: indremed and he suggests. I asked you, do you think 278 00:17:03,560 --> 00:17:06,000 Speaker 1: I could pull off the beard? Relf? I mean this 279 00:17:06,119 --> 00:17:09,400 Speaker 1: was a point of debate pre pandemic. Did you think 280 00:17:09,520 --> 00:17:14,359 Speaker 1: you know? Does my face say beard? Tom? You're asking 281 00:17:14,400 --> 00:17:17,240 Speaker 1: about you? Yeah, do you think I should grow a beard? 282 00:17:17,280 --> 00:17:20,400 Speaker 1: What do you think? I don't know. You should probably 283 00:17:20,600 --> 00:17:22,960 Speaker 1: ask those near and dear to you. Yeah, I did. 284 00:17:23,040 --> 00:17:28,960 Speaker 1: Hell from New Jersey said no, Ralph, last I go away. Congratulations, Congratulations, Ralph, 285 00:17:29,080 --> 00:17:34,040 Speaker 1: last time with ever talking to you. Thank you, Ralph, 286 00:17:34,080 --> 00:17:46,679 Speaker 1: appreciate it. Right now our conversation of the day on China, 287 00:17:46,760 --> 00:17:49,879 Speaker 1: Meredith Sumters eraise your group had a research strategy and 288 00:17:49,960 --> 00:17:52,760 Speaker 1: operations in a move from Bill Ackman over to the 289 00:17:52,800 --> 00:17:56,520 Speaker 1: authority of Meredith Sumters important out of LSE and a 290 00:17:56,640 --> 00:18:00,719 Speaker 1: course with a profound knowledge of China. Meredith, what can 291 00:18:00,760 --> 00:18:03,800 Speaker 1: you add to the conversation? You see the punditry, it's 292 00:18:03,800 --> 00:18:06,360 Speaker 1: in the zeitgeist right now. But what can you add 293 00:18:06,400 --> 00:18:09,879 Speaker 1: on this Thursday morning about this consulate tip for Tad. 294 00:18:11,560 --> 00:18:14,400 Speaker 1: Great to be here with you, Tom. I would say, like, look, 295 00:18:14,480 --> 00:18:18,520 Speaker 1: this is a remarkably unusual escalation. A closure of a 296 00:18:18,640 --> 00:18:22,080 Speaker 1: conflant outside of wartime is rare and It's really just 297 00:18:22,160 --> 00:18:24,520 Speaker 1: one of a myriad of US actions, as you've noted, 298 00:18:24,560 --> 00:18:26,800 Speaker 1: to pressure China and to try to put the ballateral 299 00:18:26,880 --> 00:18:31,240 Speaker 1: relationship on a fundamentally different course. And we heard comments 300 00:18:31,240 --> 00:18:34,040 Speaker 1: that this is strong, but the question is is it effective? 301 00:18:34,600 --> 00:18:38,760 Speaker 1: And what's key here? As you see this unswerving US 302 00:18:38,840 --> 00:18:43,240 Speaker 1: pressure in speeches of Trump administration officials over the past 303 00:18:43,280 --> 00:18:47,920 Speaker 1: several weeks, National Security Advisor O'Brien hitting out the ideology 304 00:18:47,960 --> 00:18:52,919 Speaker 1: of the CCP, the Communist Party, train General bar calling 305 00:18:53,000 --> 00:18:55,400 Speaker 1: China's ambitionism to trade with the US but to raid 306 00:18:55,440 --> 00:18:58,879 Speaker 1: the US, and of course Secretary of State Pompeo who's 307 00:18:58,920 --> 00:19:03,440 Speaker 1: called the relationship fundentally detrimental to the United States. All 308 00:19:03,520 --> 00:19:05,880 Speaker 1: this tells you is that you should expect the US 309 00:19:05,920 --> 00:19:10,320 Speaker 1: to continue this escalation with China up through November, even 310 00:19:10,359 --> 00:19:13,760 Speaker 1: as most US officials recognize that President Trump, accordin to 311 00:19:13,840 --> 00:19:16,880 Speaker 1: Whole Night numbers, is currently on track to potentially lose 312 00:19:16,880 --> 00:19:20,840 Speaker 1: in November. Their actions. Bottom line, what we're watching here 313 00:19:20,920 --> 00:19:23,840 Speaker 1: is their actions could fundamentally alter the course of the 314 00:19:23,960 --> 00:19:28,360 Speaker 1: Biloud relationship on the eve of a potential administration change. Well, Mary, 315 00:19:28,440 --> 00:19:30,280 Speaker 1: to let me ask you this from your perspective of 316 00:19:30,400 --> 00:19:36,000 Speaker 1: these decisions surgical or they reactive and unpredictable. You mean 317 00:19:36,000 --> 00:19:38,120 Speaker 1: that the decisions from the U S and Jonathan, Yeah, 318 00:19:38,119 --> 00:19:40,440 Speaker 1: I'm just wondering if there is an ultimate objective here 319 00:19:40,480 --> 00:19:42,320 Speaker 1: and there are some surgical decisions which are going to 320 00:19:42,400 --> 00:19:44,680 Speaker 1: come together in a bigger picture, there's a bigger strategy, 321 00:19:45,040 --> 00:19:48,679 Speaker 1: or whether this is just ad hoc. I wouldn't call 322 00:19:48,720 --> 00:19:51,280 Speaker 1: it necessarily ad hoc, but I wouldn't call it part 323 00:19:51,320 --> 00:19:55,760 Speaker 1: of a grand strategy at all. Talking to Trumba administration officials, 324 00:19:55,800 --> 00:19:58,480 Speaker 1: what's clear is the President has given a green light 325 00:19:58,520 --> 00:20:01,600 Speaker 1: for his officials to get how on China, thinking it 326 00:20:01,880 --> 00:20:04,399 Speaker 1: might help him in the polls, although so far his 327 00:20:04,520 --> 00:20:07,320 Speaker 1: campaign has been disappointed by that, with voters focus more 328 00:20:07,359 --> 00:20:11,080 Speaker 1: so on pandemic than on China. But President Trump has 329 00:20:11,119 --> 00:20:13,879 Speaker 1: been very clear that his Phase one trade deal is 330 00:20:13,960 --> 00:20:16,560 Speaker 1: off limits. So you see this tip for tat escalation 331 00:20:16,680 --> 00:20:19,240 Speaker 1: being pushed by the U S side that gets right 332 00:20:19,359 --> 00:20:22,320 Speaker 1: up to that breaking point, but it's not meant to 333 00:20:22,359 --> 00:20:24,719 Speaker 1: go over the line, and the risk is that they 334 00:20:24,760 --> 00:20:26,920 Speaker 1: could go over the line without knowing that they're doing. 335 00:20:26,960 --> 00:20:29,440 Speaker 1: So what happens then, what happens if the Phase one 336 00:20:29,480 --> 00:20:32,720 Speaker 1: trade deal gets rejected, is basically dead in the water, 337 00:20:32,760 --> 00:20:35,120 Speaker 1: as Leland Miller China Beige Book thinks it probably will 338 00:20:35,160 --> 00:20:38,720 Speaker 1: be soon, you know, at least. What's really key here 339 00:20:38,960 --> 00:20:41,080 Speaker 1: is that, well, obviously you know in the immediate term 340 00:20:41,119 --> 00:20:43,959 Speaker 1: there's going to be negative market reaction and fallout. This 341 00:20:44,080 --> 00:20:46,240 Speaker 1: is not what President Trump wants in his side, neither 342 00:20:46,359 --> 00:20:48,679 Speaker 1: is it what for his president she wants on on 343 00:20:48,800 --> 00:20:51,040 Speaker 1: Beijing side, which is why we still have a sixty 344 00:20:51,040 --> 00:20:55,520 Speaker 1: five percent probability that that deal last through the November election. 345 00:20:55,600 --> 00:20:58,119 Speaker 1: But what's really key here is that Phase one deal 346 00:20:58,320 --> 00:21:03,400 Speaker 1: is increasingly a relevant barometer of the U. S. China relationship. 347 00:21:03,720 --> 00:21:07,159 Speaker 1: Even if that deal provides, the broader relationship has pretty 348 00:21:07,240 --> 00:21:11,600 Speaker 1: much fallen apart, and that that is going to be 349 00:21:11,720 --> 00:21:13,720 Speaker 1: the case with regardless of whether you have a second 350 00:21:13,800 --> 00:21:16,400 Speaker 1: term compan administration or if you have a Joe Biden 351 00:21:16,400 --> 00:21:20,000 Speaker 1: administration who will come into office and inherit uh quite 352 00:21:20,000 --> 00:21:22,320 Speaker 1: a challenging by that of relationships. I mean, we can 353 00:21:22,359 --> 00:21:24,640 Speaker 1: go all day on this and the different theories of 354 00:21:24,840 --> 00:21:27,280 Speaker 1: game theory, Meredith Sumter, but it comes down to a 355 00:21:27,280 --> 00:21:29,840 Speaker 1: game of chicken. Maybe you go back to Cuba and 356 00:21:29,880 --> 00:21:33,840 Speaker 1: the Cuban missile crisis, mutual assured destruction. It comes down 357 00:21:33,840 --> 00:21:37,480 Speaker 1: to who's gonna blink first. How does that play out? 358 00:21:37,600 --> 00:21:41,399 Speaker 1: What is the process of how you get through a 359 00:21:41,480 --> 00:21:45,639 Speaker 1: game of chicken? Well, I would say I think that 360 00:21:45,800 --> 00:21:49,159 Speaker 1: from from Asians perspective, they're just trying to manage that 361 00:21:49,240 --> 00:21:52,560 Speaker 1: game of chicken through November, looking at poll numbers and 362 00:21:52,600 --> 00:21:54,960 Speaker 1: hoping that they're going to have a change in US 363 00:21:55,000 --> 00:21:58,480 Speaker 1: political leadership that they don't think will necessarily have a 364 00:21:58,560 --> 00:22:03,320 Speaker 1: fundmently different view of of that that um uh sort 365 00:22:03,320 --> 00:22:05,919 Speaker 1: of confrontation with China, but it will be handled in 366 00:22:05,920 --> 00:22:09,960 Speaker 1: a much different way and a much more manageable way 367 00:22:10,040 --> 00:22:12,479 Speaker 1: for Beijing murder. If we've got to wrap up by 368 00:22:12,520 --> 00:22:16,119 Speaker 1: talking about the response from Beijing. Last week, the United 369 00:22:16,200 --> 00:22:19,360 Speaker 1: Kingdom is freezing out announcing plans to freeze out Huawei. 370 00:22:19,480 --> 00:22:21,359 Speaker 1: What we've learned in the last twenty four hours is 371 00:22:21,400 --> 00:22:24,000 Speaker 1: that China is responding by having a blackout for the 372 00:22:24,040 --> 00:22:26,679 Speaker 1: English Premier League this coming weekend, the last game of 373 00:22:26,720 --> 00:22:29,800 Speaker 1: the season. I'm just wondering why they keep going towards sports. 374 00:22:29,800 --> 00:22:31,160 Speaker 1: They did this with the mp A and the last 375 00:22:31,160 --> 00:22:33,560 Speaker 1: twelve months as well, they're doing with English football. Now 376 00:22:33,600 --> 00:22:35,879 Speaker 1: in the last twenty four hours, how effective do you 377 00:22:35,880 --> 00:22:39,920 Speaker 1: think the strategy actually is? Jonathan talked about a game 378 00:22:39,920 --> 00:22:41,680 Speaker 1: of chicken. You think you have problems with the US 379 00:22:41,760 --> 00:22:44,600 Speaker 1: China relationship, and China has problems across the whole host 380 00:22:45,080 --> 00:22:48,800 Speaker 1: of its relationships externally. And the question is does Beijing 381 00:22:49,000 --> 00:22:53,000 Speaker 1: realize the strategic error that they're making. In other words, 382 00:22:53,000 --> 00:22:55,200 Speaker 1: at a time when the US positions vis the China 383 00:22:55,240 --> 00:22:57,119 Speaker 1: and frankly Vius to be, the rest of the world 384 00:22:57,720 --> 00:23:00,040 Speaker 1: has been at odds with with what the worst of 385 00:23:00,080 --> 00:23:03,359 Speaker 1: the world want, this could have been an opportunity for Beijing, 386 00:23:03,560 --> 00:23:07,480 Speaker 1: but really Beijing has fundamentally failed to capitalize on that 387 00:23:08,080 --> 00:23:11,520 Speaker 1: on the part of using politics in its own political 388 00:23:11,560 --> 00:23:14,800 Speaker 1: insentives to try to course other countries. That's going to 389 00:23:14,880 --> 00:23:18,159 Speaker 1: have negative fill over, John, are you telling me that 390 00:23:18,400 --> 00:23:21,399 Speaker 1: China is gonna blackout Crystal Palace and the tots that 391 00:23:21,520 --> 00:23:24,320 Speaker 1: massive game that you're so excited about, they won't be 392 00:23:24,359 --> 00:23:27,760 Speaker 1: able to see. Meredith, were gonna say thank you, Meredith 393 00:23:27,840 --> 00:23:31,000 Speaker 1: somethday you write your group had of research, strategy and operations. 394 00:23:41,600 --> 00:23:44,480 Speaker 1: Joining is right now a gentleman who it is important 395 00:23:44,520 --> 00:23:50,280 Speaker 1: to speak to on the miles rounded up six miles 396 00:23:51,160 --> 00:23:56,600 Speaker 1: from Manila west northwest to a set of islands with 397 00:23:56,840 --> 00:24:00,080 Speaker 1: Chinese jets on them in the South China Sea, and 398 00:24:00,119 --> 00:24:02,719 Speaker 1: that would, of course be James Trevinis. Admiral Stevinus has 399 00:24:02,800 --> 00:24:05,280 Speaker 1: been a wonderful friend of the show, and of course 400 00:24:06,080 --> 00:24:09,080 Speaker 1: has authored too many books to count, including the time 401 00:24:10,000 --> 00:24:13,880 Speaker 1: his ship came out of San Diego and he moved 402 00:24:13,880 --> 00:24:15,879 Speaker 1: out to sea for the first time. Admiral, thank you 403 00:24:15,960 --> 00:24:18,159 Speaker 1: so much for joining us this morning. How do we 404 00:24:18,280 --> 00:24:20,719 Speaker 1: show the flag in the South China Sea? How does 405 00:24:20,760 --> 00:24:25,879 Speaker 1: that actually happen? Tom? We take our ships as you 406 00:24:25,880 --> 00:24:30,600 Speaker 1: would expect. Our big aircraft carrier's nuclear powered aircraft carriers 407 00:24:30,680 --> 00:24:35,639 Speaker 1: are big amphibious carriers that carry thousands of marines and 408 00:24:35,720 --> 00:24:39,280 Speaker 1: above all our destroyers like the new movie Tom Hanks Greyhound, 409 00:24:39,720 --> 00:24:43,680 Speaker 1: those fast, lean ships that can go into these waters, 410 00:24:44,080 --> 00:24:47,400 Speaker 1: and we simply drive them through these waters. We operate 411 00:24:47,520 --> 00:24:50,200 Speaker 1: the aircraft of them. And we do this to demonstrate 412 00:24:50,280 --> 00:24:55,080 Speaker 1: to China that China's claim that the entire South China 413 00:24:55,160 --> 00:25:00,160 Speaker 1: Sea is territorial Chinese waters is preposterous and viole. It's 414 00:25:00,160 --> 00:25:04,080 Speaker 1: international law. These are called freedom of navigation patrols. It's 415 00:25:04,119 --> 00:25:08,760 Speaker 1: the most effective way to physically demonstrate these are high seas, 416 00:25:08,880 --> 00:25:11,320 Speaker 1: international water. And well, let me ask the question, and 417 00:25:11,400 --> 00:25:13,639 Speaker 1: I say this our attempt to say this with grace 418 00:25:14,320 --> 00:25:16,440 Speaker 1: and that we all have a collective memory of the 419 00:25:16,520 --> 00:25:19,119 Speaker 1: Falkland Islands where boats were floating around and all of 420 00:25:19,160 --> 00:25:21,520 Speaker 1: a sudden there was a missile. In this case, there 421 00:25:21,560 --> 00:25:27,639 Speaker 1: are some form of images of Chinese aviation within the vicinity. 422 00:25:28,280 --> 00:25:30,879 Speaker 1: How do we know that our kids are safe on 423 00:25:31,000 --> 00:25:35,080 Speaker 1: these ships? First of all, these ships have the most 424 00:25:35,160 --> 00:25:39,040 Speaker 1: sophisticated air defense systems in the world. Having said that, 425 00:25:39,280 --> 00:25:42,159 Speaker 1: you're absolutely correct, Tom. In the nineteen eighties during the 426 00:25:42,240 --> 00:25:48,119 Speaker 1: Falkland's invasion, number of British ships were sunk by Argentine aircraft. 427 00:25:48,600 --> 00:25:54,800 Speaker 1: On the other hand, are AEGIS combat system is very sophisticated. 428 00:25:54,840 --> 00:25:58,200 Speaker 1: Great are we have high speed missiles that go with it? 429 00:25:58,400 --> 00:26:02,600 Speaker 1: We can defend ourselves re noably well. Part of this again, 430 00:26:02,720 --> 00:26:04,840 Speaker 1: one final question. I know Paul Sweeney wants to jump 431 00:26:04,920 --> 00:26:09,720 Speaker 1: in here as well. Admiral it is tit for tat diplomacy. 432 00:26:10,520 --> 00:26:13,720 Speaker 1: You are toughs, I'm sure had to go through courses 433 00:26:13,800 --> 00:26:17,120 Speaker 1: on game theory. To our audience and to me it's 434 00:26:17,160 --> 00:26:20,640 Speaker 1: just a game of chicken. How does a diplomatic game 435 00:26:20,720 --> 00:26:25,840 Speaker 1: of chicken unravel? How does it end? Um it unravels. 436 00:26:25,880 --> 00:26:30,400 Speaker 1: Those are two different questions. It unravels if the protagonists 437 00:26:30,520 --> 00:26:35,359 Speaker 1: in the game on the point of the exercise UM miscalculate, 438 00:26:35,520 --> 00:26:40,760 Speaker 1: if a Navy destroyer UH fires on a Chinese jet 439 00:26:41,760 --> 00:26:44,119 Speaker 1: before it's in a firing position, and we have an 440 00:26:44,200 --> 00:26:48,199 Speaker 1: international incidents, that's how it unravels. The way we prevent 441 00:26:48,320 --> 00:26:50,879 Speaker 1: it is create buffer zones, Tom. And the way to 442 00:26:50,960 --> 00:26:54,440 Speaker 1: do that is negotiate with China for a set of 443 00:26:54,560 --> 00:26:58,880 Speaker 1: protocols and see that keep our forces some set distance 444 00:26:58,960 --> 00:27:02,040 Speaker 1: physically apart. We did that with the Soviet Union during 445 00:27:02,080 --> 00:27:05,399 Speaker 1: the Cold War. We're gonna need to do that with China. Admiral, 446 00:27:05,480 --> 00:27:07,000 Speaker 1: what is it? What is the state of the United 447 00:27:07,000 --> 00:27:09,879 Speaker 1: States Navy in the Pacific as we speak here is 448 00:27:09,880 --> 00:27:14,120 Speaker 1: because we think about the tensions rising with China. Good news, 449 00:27:14,200 --> 00:27:18,240 Speaker 1: bad news. Good news are carriers are forward. We have 450 00:27:18,320 --> 00:27:21,720 Speaker 1: two nuclear powered aircraft carriers in the South China Sea 451 00:27:21,840 --> 00:27:25,520 Speaker 1: right now. We have very capable forces in Japan Forward. 452 00:27:25,880 --> 00:27:29,800 Speaker 1: About half of our fleet focuses on that vast Pacific 453 00:27:30,320 --> 00:27:33,840 Speaker 1: water space. The bad news paul Is. For example, we 454 00:27:33,960 --> 00:27:36,479 Speaker 1: just recently had a fire and lost one of our 455 00:27:36,680 --> 00:27:41,000 Speaker 1: big deck UH amphibious carriers in San Diego, the Bonham 456 00:27:41,119 --> 00:27:45,280 Speaker 1: Richard Um. We see some instances where the Navy needs 457 00:27:45,359 --> 00:27:48,960 Speaker 1: to do better with its level of professionalism. That destroyer 458 00:27:49,040 --> 00:27:51,920 Speaker 1: collisions a couple of years ago. So Navy has some 459 00:27:52,080 --> 00:27:55,000 Speaker 1: work to do. It's not perfect, but it's still the 460 00:27:55,160 --> 00:27:59,640 Speaker 1: best maritime force in the world. I'm confident in the Navy. So, Adam, 461 00:27:59,680 --> 00:28:02,399 Speaker 1: what you kind of mentioned that the fire for that 462 00:28:02,680 --> 00:28:04,840 Speaker 1: ship in San Diego, We've we've all seen the images 463 00:28:04,960 --> 00:28:07,560 Speaker 1: on the news, and you mentioned some of those collisions 464 00:28:08,080 --> 00:28:10,720 Speaker 1: from uh some Navy ships over the last couple of years. 465 00:28:11,440 --> 00:28:14,760 Speaker 1: Is there anything there to extrapolate from those issues? Is 466 00:28:14,840 --> 00:28:17,680 Speaker 1: there a is there something wrong with the Navy? Is 467 00:28:17,760 --> 00:28:20,600 Speaker 1: there a breakdown anywhere you think the professionalism of the 468 00:28:20,680 --> 00:28:23,080 Speaker 1: Navy or these are just kind of one off coincidences. 469 00:28:23,880 --> 00:28:26,320 Speaker 1: Now I don't think they're one off coincidences. And and 470 00:28:26,560 --> 00:28:29,240 Speaker 1: I just did a piece in Bloomberg Opinion, where I'm 471 00:28:29,240 --> 00:28:31,960 Speaker 1: a columnist, as you know, on this exact subject. It's 472 00:28:32,000 --> 00:28:34,399 Speaker 1: time for the Navy to kind of say all stop, 473 00:28:34,480 --> 00:28:37,080 Speaker 1: let's take a hard look at how we're operating the 474 00:28:37,200 --> 00:28:42,400 Speaker 1: Navy because there are too many, uh, individual instances of concern. 475 00:28:42,560 --> 00:28:44,920 Speaker 1: The new Chief of Naval Operations, and he is new. 476 00:28:45,000 --> 00:28:47,320 Speaker 1: We have a new Secretary of the Navy. They both 477 00:28:47,440 --> 00:28:49,560 Speaker 1: gripped this, and I think you're going to see some 478 00:28:50,360 --> 00:28:54,200 Speaker 1: hard self examination by the service going forward. It seems 479 00:28:54,240 --> 00:28:58,800 Speaker 1: to be such rough language. Secretary of Pompeo with comments 480 00:28:58,880 --> 00:29:01,400 Speaker 1: this morning of the course in Denmark. I believe it 481 00:29:01,520 --> 00:29:03,600 Speaker 1: was yesterday. I believe he has a speech of four 482 00:29:03,680 --> 00:29:06,920 Speaker 1: pm this afternoon. Is moving so fast, folks, I can't 483 00:29:07,000 --> 00:29:11,640 Speaker 1: keep up. This is almost ad hoc diplomacy. Is there 484 00:29:11,680 --> 00:29:15,600 Speaker 1: a theory here admalstra vitas? I think there is a 485 00:29:15,800 --> 00:29:19,400 Speaker 1: theory with regard to China, which is, as we get 486 00:29:19,440 --> 00:29:23,120 Speaker 1: into this twenty one century, our greatest challenge is not 487 00:29:23,320 --> 00:29:25,560 Speaker 1: going to be Russia, which is what I focused on 488 00:29:25,680 --> 00:29:29,040 Speaker 1: when I was Supreme Allied Commander of NATO. Instead, our 489 00:29:29,120 --> 00:29:35,200 Speaker 1: greatest challenge going forward in this century tom economically, culturally, politically, diplomatically, 490 00:29:35,320 --> 00:29:38,400 Speaker 1: certainly militarily, is going to be China. So I think 491 00:29:38,480 --> 00:29:44,160 Speaker 1: the administration would say they are constructing a strategy to 492 00:29:44,360 --> 00:29:49,440 Speaker 1: compete with China to ensure that we maintain our sets 493 00:29:49,520 --> 00:29:52,560 Speaker 1: of alliances around the world. That's why you're seeing Secretary 494 00:29:52,640 --> 00:29:56,320 Speaker 1: Pompeo out on patrol all around the world making these points. 495 00:29:56,960 --> 00:29:58,480 Speaker 1: And well, I've got too short of visit. We have 496 00:29:58,560 --> 00:30:00,440 Speaker 1: to leave it there, but we look forward speaking to 497 00:30:00,440 --> 00:30:03,840 Speaker 1: you again. Apples te Vidis James Travins with us today 498 00:30:04,000 --> 00:30:07,400 Speaker 1: with just wonderful books. I can't say enough, folks about 499 00:30:07,440 --> 00:30:10,040 Speaker 1: the Leader's bookshelf. I just really can't say enough about 500 00:30:10,040 --> 00:30:14,200 Speaker 1: its effort, particularly here within the pandemic. Thanks for listening 501 00:30:14,320 --> 00:30:18,880 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 502 00:30:18,920 --> 00:30:24,120 Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 503 00:30:24,720 --> 00:30:28,000 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 504 00:30:28,080 --> 00:30:31,440 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.