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Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in

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Speaker 1: local communities, economies and a sustainable future. That's the power

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Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated

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Speaker 1: member s I p C. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

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Speaker 1: of course, on the Bloomberg Gina Martin Adams is our

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Speaker 1: chief equity strategist here at Bloomberg Intelligent that she joins

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Speaker 1: us here in our Bloomberg eleven three studios. Welcome. Great

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Speaker 1: to have you with us. Let's start broad here looking

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Speaker 1: at this market, of your market in search of of

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Speaker 1: a catalyst. What are you seeing as you look at

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Speaker 1: equities right now? Yeah, and in a short term, we've

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Speaker 1: entered some sort of consolidation mode. You can call it

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Speaker 1: the post reflation trade. I don't know what you want

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Speaker 1: to call it, but since the beginning of the March,

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Speaker 1: of the month of March, stocks have kind of been

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Speaker 1: moving in a sideways direction and in the grand scheme

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Speaker 1: of things, it's a modest consolidation within a long term

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Speaker 1: up trend um. It looks like we broke out of

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Speaker 1: pretty significant correction by the end of last year. We

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Speaker 1: broke out. We confirmed a lot of long term up

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Speaker 1: trend lines with that correction, and it's been off to

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Speaker 1: the races since. So it's natural that you have these

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Speaker 1: consolidations amidst the ups trend. It doesn't look like it's

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Speaker 1: anything more ominous yet, but there has been some modest

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Speaker 1: defensive rotation to suggest the market is is taken a pause. Here.

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Speaker 1: Help us with the costliness of the expensiveness of stocks.

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Speaker 1: Right now you get the most expensive since two thousand

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Speaker 1: and two. I believe what are you seeing there? Yeah?

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Speaker 1: From a price to earnings perspective, the index is expensive.

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Speaker 1: It's really difficult to say anything else. We're looking at

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Speaker 1: about eighteen times forward earnings. Are just under eighteen times

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Speaker 1: forward earnings. You know. The trouble with valuations is for

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Speaker 1: a timing mechanism, they're pretty poor. I mean, they tend

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Speaker 1: to trend over time. A good example, we crested the

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Speaker 1: eighteen times level of on price to earnings back in

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Speaker 1: six and then the market continue to move higher all

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Speaker 1: the way into the s peak in two thousands, So

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Speaker 1: if you used valuation purely as your investment thesis in

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Speaker 1: that time, you would have missed out on a tremendous

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Speaker 1: amount of market gains. There are still values in the market.

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Speaker 1: If you look at price to book, for example, you

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Speaker 1: find energy stocks, financial stocks are still trading well below

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Speaker 1: long term peaks. Long term averages as well on price

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Speaker 1: to earnings. Healthcare, telecom, and financials all screen as relatively

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Speaker 1: cheap compared to their long term history. So not all

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Speaker 1: of the market is extremely expensive. And when you talk

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Speaker 1: about price to earnings, it's really a poor timing mechanisms.

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Speaker 1: You gotta be pretty careful. What are valuations contracting at.

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Speaker 1: I think a lot of it is the bond market

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Speaker 1: and interest rates. I mean, you know, stocks in a

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Speaker 1: vacuum look expensive, but when you compare them to bonds,

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Speaker 1: they look cheap. I mean, the earning zeald of five

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Speaker 1: point six percent compares with a treasury yield of two

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Speaker 1: point three, five, two point four somewhere in that range.

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Speaker 1: That's well above long term average on a relative basis.

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Speaker 1: So the earning seal you get out of stocks is

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Speaker 1: extremely attractive and that keeps uh I think of floor

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Speaker 1: under valuations. The other thing is that when you look

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Speaker 1: at real interest rates, the rate of the tenure less inflation,

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Speaker 1: we're still just above zero. It's this is still very

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Speaker 1: supportive in the long term. When real and real rates

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Speaker 1: are in that zero to two range, valuations rise. So

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Speaker 1: you know, on a relative scale, there's still a lot

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Speaker 1: of reason for stocks um to continue to move higher.

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Speaker 1: Good morning everyone, Bloomberg with David Gerr and Tom Keane.

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Speaker 1: Do you know help me here with equities? What's what's

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Speaker 1: the actuarial assumption you have in your head? I mean,

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Speaker 1: everybody that's a single digit world. You've got to be cautious.

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Speaker 1: We're gonna be lucky if we make six and a

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Speaker 1: cloud of dividends and the answers. It's been double digit

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Speaker 1: nirvana since basically since two thousand nine. What's your what's

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Speaker 1: the gena Martin Adams actually real assumption? Yeah, it's a

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Speaker 1: good question, you know. I think that one of the

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Speaker 1: things that strikes me in this cycle, when you look

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Speaker 1: at two thousand nine to date and how well stocks

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Speaker 1: have done, is that it is now um sort of

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Speaker 1: consensus to be cautious it is very persistent sentiment that

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Speaker 1: exists out there. UM. On a negative scale, it's everyone

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Speaker 1: points out the reasons why stocks shouldn't rise instead of

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Speaker 1: why stocks should continue to rise, and that in and

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Speaker 1: of itself presents this wall of worry that allows for

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Speaker 1: stocks to go higher. It seems very counterintuitive, but the

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Speaker 1: reality is when there are few people left to sell,

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Speaker 1: stocks are going to default higher. The other thing to

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Speaker 1: consider is generally over time, what really matters for stocks

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Speaker 1: is if the economy is growing. It doesn't matter if

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Speaker 1: it's growing that slowly, it doesn matter if it's growing quickly.

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Speaker 1: If the economy's growing, stocks tend to go higher. And

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Speaker 1: then the really big uh massive declines and stocks tend

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Speaker 1: to happen when the economy slows down substantially, and we

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Speaker 1: just haven't had that experience. It's been a very slow

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Speaker 1: growth scenario. But that slow growth has been manageable by companies.

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Speaker 1: They can cost cut their way to success. Um And

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Speaker 1: that's another sort of counterintuitive point. Nobody wants to own

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Speaker 1: stocks because they're cutting costs, but the reality is that

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Speaker 1: produces earnings growth. How long can that continue? Though, you know,

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Speaker 1: we said we've been talking about how long can it

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Speaker 1: continue since? Even so, it seems that it can continue

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Speaker 1: for a long time because companies are driven to produce

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Speaker 1: bottom line earnings results, right, that's the the entire point

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Speaker 1: of share ownership is a share of that earnings result.

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Speaker 1: They have to have some top line. Right. We experience

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Speaker 1: energy sector correction in which the top line contracted, and

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Speaker 1: we saw that what that can do to overall earnings.

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Speaker 1: So so you can't do this without some top line growth.

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Speaker 1: But as long as that top line growing incrementally, you

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Speaker 1: can continue to cut and grow margin. David, are you

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Speaker 1: with us today? I mean you're barely here yesterday rested

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Speaker 1: after the Carolina post reflation post. What we do of

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Speaker 1: the game? Where you do they do on Classic? The

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Speaker 1: Encore presentation, Gina, I'm sorry, Mr Gurrol went to the

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Speaker 1: Chapel University. Forget him. You know it's like an n

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Speaker 1: C double A. I think help me here in this GENA.

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Speaker 1: I wonder if what our audience may not know is

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Speaker 1: you were wonderful through this bull market of saying, look,

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Speaker 1: I measured, I'm conservative, I'm cautious, but I'm not going

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Speaker 1: to be in cash. Yeah, what's explained to our audience?

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Speaker 1: The price of saying I'm going to be in cash.

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Speaker 1: Oh wow, Well you've missed out on an equity market

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Speaker 1: that's reaching new highs every year except for UM It's

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Speaker 1: been incredible to miss out on this bull trend. And

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Speaker 1: what's really amazing is how many people have missed out

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Speaker 1: on this bull trend. If you get equity ownership in

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Speaker 1: the United States, despite the fact that stocks were reaching

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Speaker 1: new highs, equity ownership among households actually shrank throughout this

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Speaker 1: last cycle. So that tells you that most US households

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Speaker 1: have completely missed this bull market. Not only have you

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Speaker 1: had a bull market in stocks, but you've had a

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Speaker 1: pretty strong bull market in corporate credit and high yield credit.

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Speaker 1: Even the bond market. Rates have continued to go lower

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Speaker 1: and lower and lower every year. So any asset you

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Speaker 1: picked outside of cash would have made you money. And

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Speaker 1: the FED told us in two thousand and eight two

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Speaker 1: thousand nine that they were going to keep rates lower

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Speaker 1: for longer, punishing anyone who kept money in cash savings

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Speaker 1: and the bit that's a one big lesson of this

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Speaker 1: cycle is do not fight the Fed. When the Fed

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Speaker 1: says they are going to keep rates low, we have

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Speaker 1: to pay attention. As painful as it is and as

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Speaker 1: scary as it is to take on that risk in

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Speaker 1: an environment where there is, you know, a lot of uncertainty,

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Speaker 1: the reality is the FED really does have a heavy

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Speaker 1: hand in driving market out. What's the FED telegraphing. Now,

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Speaker 1: if you're an equities investor and you're you're listening to

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Speaker 1: what Fed policy micers have to say, what's the what's

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Speaker 1: the advice that they're giving that you should not ignore.

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Speaker 1: They are saying that they are going to move the

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Speaker 1: rate incredibly slowly in a very measured pace, and keep

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Speaker 1: rates very accommodative. That's what they're saying to me until

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Speaker 1: they start really seriously considering contracting that balance sheet, really

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Speaker 1: seriously considering moving that policy rate rapidly higher. The FED

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Speaker 1: is still on your side. The Fed's got your box.

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Speaker 1: So to say, as an equity investor, I want to

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Speaker 1: come back and dive into the actual Bloomberg intelligence work

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Speaker 1: you're doing, particularly on sector analysis as well. Gina Martin adds,

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Speaker 1: with this Bloomberg intelligence running all the equity strategy product

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Speaker 1: and as I said earlier on television, what's what's magical

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Speaker 1: about Gina combining an economic analysis with fundamental analysis and

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Speaker 1: technical analysis as well as Michael bar knows. That's the

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Speaker 1: kool aid I sip every day. Again, Michael Barr, you

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Speaker 1: ken't doing a vacuum and and the kool aid with

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Speaker 1: with good sugar man ingredients. And I put I put

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Speaker 1: on the headphones and I listened to that great band

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Speaker 1: DuPont Ratio. It's absolutely phenomenal for this. Gina Martin Adams

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Speaker 1: Bloomberg Intelligences who look at the equity uh markets. You've

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Speaker 1: met John Butler, I'm sure a great Apple analyst, and

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Speaker 1: you know he doesn't do bi hold Cell and Apple,

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Speaker 1: but he's been brilliant when the gloom and the gloom comes,

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Speaker 1: it happen. Jim Cook is evil when that comes in.

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Speaker 1: He goes maybe not so help us here away from

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Speaker 1: bi hold Cell with the different sector calls, which sector

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Speaker 1: right now seems rational and seems like an opportunity to

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Speaker 1: prosper when you look at the balance sheet and that

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Speaker 1: strange thing capital allocation? Which sector works? So we actually

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Speaker 1: this will be near and dear to your heart given

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Speaker 1: you like the effusion of so many different disciplines. Were

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Speaker 1: on a sector model that combines current technicals with valuations

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Speaker 1: with estimate achievability on the atball record. Yeah, and this

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Speaker 1: guy spits out for us, what sectors have the best

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Speaker 1: combination of all of these trends right now and right now?

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Speaker 1: Those are very defensive consumer staples, utilities, healthcare, but also technology.

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Speaker 1: So technology is the one cyclical that sort of sticks

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Speaker 1: in with the defensive sectors as as looking like having

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Speaker 1: you know, it looks it looks like it has a

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Speaker 1: pretty good combination of of trends. What role is energy

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Speaker 1: playing right now? Inequities were about how it played role historically. Uh, now,

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Speaker 1: when you look at energy, what effect does it happen? Well,

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Speaker 1: it's it's only six and a half percent of the index,

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Speaker 1: so it's extremely small, which is really interesting. It's a

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Speaker 1: very small share of of the index. But nonetheless it

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Speaker 1: plays the role of most volatile player. You know, it

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Speaker 1: moves a lot in one direction or another. But you

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Speaker 1: can have period of time now where energy stocks are

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Speaker 1: outright falling in the market. Is not because it is

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Speaker 1: so small. I don't want to get you in trouble

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Speaker 1: with your general counsel, Paul Sweeney, but can you buy

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Speaker 1: take a historical level of a sector as a percent

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Speaker 1: of the standard. Can you go long energy because it's

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Speaker 1: low single digit sector knowing someday you're gonna sell it

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Speaker 1: when it's I mean, can you do that? I mean,

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Speaker 1: is that a scrap? It could be if you have

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Speaker 1: an extremely long person, long term perspective, and you look

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Speaker 1: for the major shifted shifts in market cap share, you'd

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Speaker 1: find that energy is certainly the most depressed sector in

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Speaker 1: the index right now. After the recession that the energy

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Speaker 1: companies went through in in fifteen sixteen, valuations um still

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Speaker 1: screen attractively. You know, sometimes valuations are low for a reason.

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Speaker 1: That may be the case with energy, but it's certainly

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Speaker 1: screens as having the lowest price to book, lowest price

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Speaker 1: to earnings ratio in the index because of the distress

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Speaker 1: that it went through. So you know, can I say that,

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Speaker 1: you know, I would advise against if you have a

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Speaker 1: long term holding period. Sometimes these are great ideas. This

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Speaker 1: is what deep value is all about, is finding those

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Speaker 1: sort of fallen angels who have been left for nothing.

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Speaker 1: Um So, so maybe that's that's not a bad strategy.

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Speaker 1: Talk about valuations. Something ask about just macroeconomics and politics

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Speaker 1: and the degree to which that's driving the market right now.

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Speaker 1: How much attention, how much credence do you give to

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Speaker 1: those when you're looking at stocks. Well, I definitely look

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Speaker 1: at um policy. I try to really rationalize politics. So

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Speaker 1: with policy, monetary policy means a lot for stocks, and

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Speaker 1: and monetary policy is something we've focus a lot on.

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Speaker 1: We've got some research out today focused on sort of

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Speaker 1: the current state of monetary policy and how it might

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Speaker 1: impact the equity market. For example, for fiscal policy, we

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Speaker 1: try to narrow it down you actual policies that could

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Speaker 1: have an impact on earnings growth on the SMP five

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Speaker 1: because you know, the truth is that we've had a

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Speaker 1: lot of political events over the last several years, none

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Speaker 1: of which have truly derailed the path for stocks. So

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Speaker 1: you want to be pretty careful regarding your assumptions for

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Speaker 1: how much politicians can actually matter for the equity market.

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Speaker 1: Um but a couple of fiscal policy issues right now

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Speaker 1: do come to the forefront. One is this outright reduction

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Speaker 1: in corporate tax possibility that could actually have a meaningful

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Speaker 1: impact on earnings growth should it manifest within the next

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Speaker 1: few years. So we did some research on that. We

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Speaker 1: found that a twenty drop or a drop to corporate

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Speaker 1: tax rate could actually increase SMP five hundred earnings growth

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Speaker 1: by about seven percent in ten should it occur now,

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Speaker 1: I don't know if it will occur. I don't know

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Speaker 1: if it will occur by twenty eighteen, but it could occur.

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Speaker 1: The other thing that we think is potentially meaningful for

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Speaker 1: stocks right now is repatriation. If we do get a

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Speaker 1: repatriation effort passed through UM legislation, we could see a

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Speaker 1: meaningful impact to certain components of the equity market. The

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Speaker 1: last time we had repatriation, we saw a very significant

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Speaker 1: acceleration and share by backs. Right if we see that again,

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Speaker 1: that will have a meaningful impact on SMP five hundreds.

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Speaker 1: So there are a couple of things that I think

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Speaker 1: do matter, but you really have to sift through a

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Speaker 1: lot of noise to find those things. The Gina Marne Adams,

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Speaker 1: thank you so much. With Bloomberg Intelligence on Equity Strategy,

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Speaker 1: David Gura, Tom Keane, Bloomberg Surveillance, Gary Shilling with US.

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Speaker 1: I don't think it needs an introduction to our audience.

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Speaker 1: People don't on inflation. Let me get out of the

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Speaker 1: way to call where's the tenure yield in twelve months time? Gary,

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Speaker 1: I think it will be a lot closer to one percent.

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Speaker 1: And where it is now, let's go down. Yeah, Why, well,

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Speaker 1: I think there's a very very good chance that we're

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Speaker 1: gonna see a lower, lower race of inflation, maybe even deflation.

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Speaker 1: It's also secondly, it's a safe haven. And third, if

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Speaker 1: you look at the yields on US ten your treasuries

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Speaker 1: versus the sovereigns of almost every other developed country, our

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Speaker 1: yields are higher and and and that gives an advantage

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Speaker 1: to a foreign investor. And if the dollar rises, they

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Speaker 1: get a double win and they get a translation gain

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Speaker 1: to boot. So the divergence and the end of the

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Speaker 1: divergence is going to be our yields normalized back to

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Speaker 1: where their yields are. Does Janet Yelling have the shilling memo?

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Speaker 1: Did you send you your monthly newsletter? Well, she gets it,

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Speaker 1: I don't know if she don't know if she follows

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Speaker 1: it or not. Next to no one agrees with you.

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Speaker 1: I mean they just think either stable rates or the

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Speaker 1: vectors are pointing to higher inflation toime for thirty seven years,

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Speaker 1: ever since nineteen eighty one, when that when the thirty

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Speaker 1: year was fifteen point two percent. And I said we're

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Speaker 1: entering the bond rally a lifetime. That's what the chorus

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Speaker 1: has been saying. It's always there's never been a period

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Speaker 1: in there. And you've you've you've noted us for many,

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Speaker 1: many years. There's never been a period in there when

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Speaker 1: the majority, the consensus said that race are going down.

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Speaker 1: It's always up. Inflation is up, race are up. Yeah,

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Speaker 1: it's gonna end at some point, but I don't think

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Speaker 1: we're there yet. What's the role of cash in a

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Speaker 1: portfolio right now? How do you regard cash? How important

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Speaker 1: is it to keep cash? Well? I I think I

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Speaker 1: mean in portfolio's remanaged, we have a very high component

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Speaker 1: of cash because the markets are basically been moving sideways

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Speaker 1: and sideways movement markets are the ones that kill you. Uh.

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Speaker 1: But but you know cash is uh uh. Cash is cheap.

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Speaker 1: With interest rates low, there's not much advantage in not

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Speaker 1: being in cash, so um, I think high. And if

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Speaker 1: you look at mutual funds they hire, they have a

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Speaker 1: lot of higher cash position than they normally do. So

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Speaker 1: you know, cash is cash is not trash. What do

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Speaker 1: you what do you say to those like Gina Martin Adams.

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Speaker 1: We're just talking to her a moment to go our

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Speaker 1: our chief equity strategst here at Blomberg Intelligence. You say, Uh,

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Speaker 1: if you just held on to cash, if you didn't

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Speaker 1: put in equities, you missed out. You are missing out. Indeed,

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Speaker 1: what's your response to to that? Well, Uh, you can

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Speaker 1: pick any time thing you know you you can. You

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Speaker 1: can prove anything by picking the right commnsions. Economists used

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Speaker 1: to call that growth wanship and and sure if you pick,

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Speaker 1: if you pick the last h if you like the

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Speaker 1: last couple of months you look past since the election,

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Speaker 1: that's true. If you look on the last couple of weeks,

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Speaker 1: not really do you see an end to this, to

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Speaker 1: this bull market? You note here that bull market doesn't

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Speaker 1: dive old age. They don't dive old age evenual. You know,

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Speaker 1: in a post World War two period they've been in

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Speaker 1: with on two reasons. One is the FED jacks up

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Speaker 1: interest rates enough they try to cool the economy. They

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Speaker 1: say they don't want to precipitate a recession, But in

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Speaker 1: eleven of twelve tries, by my reckonding, they've gotten a recession.

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Speaker 1: The only soft landing was in the mid nineties. The other,

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Speaker 1: the other killer, is some kind of a shock like

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Speaker 1: the like the dot com blow off in the late

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Speaker 1: nineties or the housing subprime mortgage collapse in the mid

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Speaker 1: two thousand's. Now, I don't see anything right on the

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Speaker 1: horizon that could qualify as a shock. Uh. Yeah, you

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Speaker 1: could get a blow up in the Middle East. You

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Speaker 1: could have China major problems with their financials. But I

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Speaker 1: don't see anything that's really cruising for a bruising. But

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Speaker 1: I don't see the FED jacking uprates that high either.

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Speaker 1: I think they're going to move very cautious. You and

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Speaker 1: I talked to her this morning about yen one fifty.

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Speaker 1: That's a huge move from the one ten level. That

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Speaker 1: is ultimate or steroidal obianomics. What does the one fifty

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Speaker 1: yen do to Mr Abby in the nation of Japan, Well,

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Speaker 1: it would make him a big hero because it would

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Speaker 1: mean that he had achieved, he had achieved an objective.

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Speaker 1: And more importantly, it wouldn't be just the number, because

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Speaker 1: I don't know the average Japanese every morning wakes up

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Speaker 1: and the first thing you said, where is the yen

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Speaker 1: against the dollar. I think they look at the state

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Speaker 1: of the economy and they would like to see a

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Speaker 1: more rapidly growing economy. But bear in mind that Japan

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Speaker 1: is a very high living standard and unlike unlike Europe

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Speaker 1: and North of America where voters are mad as hell

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Speaker 1: and they've turned to the left and right fringers that

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Speaker 1: you're talking about marial Japan, you haven't seen that. It's

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Speaker 1: a different culture. But I believe correct me if I'm

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Speaker 1: wronging Dr Schilling that if you have that devaluation of

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Speaker 1: a currency, you have a wealth destruction. Whose wealth is

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Speaker 1: destroyed migrating from one ten to one fifty, Well, it isn't.

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Speaker 1: The Japanese holdings abroad. They've got the biggest holdings overseas

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Speaker 1: of anybody, and it means that the value in the

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Speaker 1: end terms of the dollar holdings overseas go up. And

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Speaker 1: by the way, that's a very important source of money

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Speaker 1: for them to support their aging population. They could transfer

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Speaker 1: a lot of those foreign assets into imports to support

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Speaker 1: not only those Asian people, because they're not going to

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Speaker 1: have enough people working to support not only themselves but

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Speaker 1: all those retirees. Let's talk a little bit about China.

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Speaker 1: What you're seeing there as we head to this meeting

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Speaker 1: in Florida tomorrow, uh and and Friday? Are you going?

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Speaker 1: I'm not going it. The weather is getting better up here.

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Speaker 1: You can't afford to stake well well China. China's growth

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Speaker 1: is slowing. And what's interesting there. It's a top down

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Speaker 1: it's a top down regime, and we're seeing what she lately,

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Speaker 1: he is becoming a big brother in the Orwellian nine cents.

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Speaker 1: In other words, they now have an effect people Uh,

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Speaker 1: looking even at the local level, contrary to make sure

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Speaker 1: that they're thinking right. Uh, it's it's it's it's a

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Speaker 1: typical reaction of a top down machime when it's worried

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Speaker 1: about delivering on his promises. In China, the government basically

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Speaker 1: promises the populace that they'll have reasonable growth, little higher

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Speaker 1: living standards and return the populace UH says, we'll keep

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Speaker 1: our nose out of politics. That's that's a social contract

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Speaker 1: that's being challenged now because Chinese growth, they say now

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Speaker 1: six and a half per cent real GDP growth this year,

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Speaker 1: that's probably about twice reality. Uh. And and and they

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Speaker 1: are they are really scrambling. And I think they are

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Speaker 1: worried about what's tossed out a lot of previous Chinese dynasties.

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Speaker 1: And I call this the Maaeo dynasty and that a

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Speaker 1: social unrest caused by high unemployment. On the issue of currency, Uh,

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Speaker 1: do you think it's going to be high on the

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Speaker 1: agenda at this meeting in Florida? And you look at

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Speaker 1: just the reporting ahead of ahead of this meeting, there

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Speaker 1: is uh a lot of a sense of confusion surrounding

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Speaker 1: what role the Chinese currency is playing in the world

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Speaker 1: economy right now. Well, you don't you know, of course,

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Speaker 1: you don't really know, but there hasn't been a lot

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Speaker 1: of rhetoric out of Trump lately on the currency manipulation

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Speaker 1: of the yuan, and it has actually gone up a

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Speaker 1: bit recently. Of course, they they moved back and forth

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Speaker 1: there between linking to the dollar and linking to this

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Speaker 1: back basket of currencies to their advantage, and they always

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Speaker 1: wanted their doing this for manipulation purposes. And they also

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Speaker 1: are trying to stand the outflow of money from China

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Speaker 1: which has forced them to reduce their reserves from four

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Speaker 1: tray into three troy and too accommodate the the outflow.

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Speaker 1: But I think it will probably more enter on on

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Speaker 1: trying to reduce the trade imbalance there and the idea

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Speaker 1: of of of access to Chinese markets and intellectual property

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Speaker 1: and some of these issues that are pretty pretty flagrant

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Speaker 1: in terms of international standards. Uh. And I think we're

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Speaker 1: rather a tackle. And bear in mind when then she

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Speaker 1: made his speech at Davos, Uh, he was on the

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Speaker 1: defensive when he when he quotes Lincoln, which he did,

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Speaker 1: you know for the people, other people, by the people.

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Speaker 1: You know, this guy is on the run. That's not

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Speaker 1: a big deal. Gary, David Gurk quotes Lincoln. You know,

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Speaker 1: where's inflation with tenure? You put a one percent figure

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Speaker 1: on the tenure yield? Quickly here where's inflation? It's probably zero?

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Speaker 1: Or he maybe even less scary. I mean, if you

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Speaker 1: look at if you look in peace time, peace time

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Speaker 1: is normally deflation. Are we We've looked at data going

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Speaker 1: back to seventeen forty nine, divided all the years into

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Speaker 1: wartime and peace time, and in wartime the inflation rate

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Speaker 1: averages averages eight point two percent. In peacetime it's negative

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Speaker 1: half a percent. We gotta go, Gary Shilling, thank you

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Speaker 1: so much for rolling his up. Brought to you by

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Speaker 1: Bank of America. Mary Lynch, dedicated to bringing our clients

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Speaker 1: insights and solutions to meet the challenges of a transforming world.

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Speaker 1: That's the power of global connections. Mary Lynch, Pierce Feeder

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Speaker 1: and Smith Incorporated Member s I PC David, it's important

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Speaker 1: if you're bringing in corporate money and representing corporations, that

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Speaker 1: you're smarter than just being on K Street in Washington.

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Speaker 1: And the careful choice is to be in the same

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Speaker 1: building as the Palm Restaurant. That's really what matters. There's

428
00:23:56,080 --> 00:23:59,760
Speaker 1: a little street, Jefferson Place, and you walk down and

429
00:23:59,760 --> 00:24:03,399
Speaker 1: your turn right and there's the Palm. Our next guest

430
00:24:03,440 --> 00:24:07,400
Speaker 1: is smarter than all other lobbyists in Washington because they're

431
00:24:07,440 --> 00:24:10,680
Speaker 1: in the vicinity of the Palm, the acclaimed Palm restaurant.

432
00:24:10,760 --> 00:24:12,640
Speaker 1: Is there a Tom Keane caricature on the wall? Yet

433
00:24:12,680 --> 00:24:15,760
Speaker 1: there was going to be, And I said, I could

434
00:24:15,800 --> 00:24:19,920
Speaker 1: never do that to l Hunt. Albert Hunt holds center

435
00:24:20,359 --> 00:24:23,359
Speaker 1: front in the back, in the deep back from his

436
00:24:23,480 --> 00:24:26,200
Speaker 1: wonderful efforts at CEN and years ago. It's Nancy mcclearn

437
00:24:26,280 --> 00:24:30,520
Speaker 1: and she's the CEO of the Organization for International Investments.

438
00:24:30,560 --> 00:24:32,920
Speaker 1: She convened a group of the CEOs of foreign based

439
00:24:32,920 --> 00:24:36,800
Speaker 1: companies yesterday in Washington, meeting with administration officials. And let

440
00:24:36,840 --> 00:24:39,440
Speaker 1: me just start with the context of the meeting here.

441
00:24:39,920 --> 00:24:42,080
Speaker 1: How did it come about? What were the main topics

442
00:24:42,080 --> 00:24:45,760
Speaker 1: of discussion? Nancy, Yeah, good morning, Thanks for having me on.

443
00:24:45,920 --> 00:24:48,240
Speaker 1: And it is pretty fantastic to be above the palm.

444
00:24:48,680 --> 00:24:51,880
Speaker 1: I will say, it's a good it's a good place

445
00:24:51,880 --> 00:24:55,560
Speaker 1: to have sort of is your cafeteria. Um, So, yesterday

446
00:24:55,640 --> 00:24:59,800
Speaker 1: we had about a dozen CEO of U S subsidiaries

447
00:25:00,080 --> 00:25:03,880
Speaker 1: foreign companies. So these were the top US executives at

448
00:25:03,920 --> 00:25:06,960
Speaker 1: these companies and and the purpose of the meeting was

449
00:25:07,119 --> 00:25:12,639
Speaker 1: to uh work with the administration and Congress to consider

450
00:25:13,200 --> 00:25:17,399
Speaker 1: foreign direct investment as they develop a pro growth agenda,

451
00:25:18,160 --> 00:25:22,040
Speaker 1: because foreign direct investment actually has a pretty outsized impact

452
00:25:22,160 --> 00:25:25,639
Speaker 1: of the U. S economy. Even though these companies like

453
00:25:26,040 --> 00:25:30,520
Speaker 1: b A, SF and Samsung and air Bus, Panasonic represent

454
00:25:31,000 --> 00:25:35,280
Speaker 1: less than one percent of all US businesses, they employ

455
00:25:35,560 --> 00:25:38,880
Speaker 1: over five percent of the private sector workforce about six

456
00:25:38,960 --> 00:25:42,959
Speaker 1: point four million Americans, much of it in the manufacturing sector.

457
00:25:43,520 --> 00:25:48,000
Speaker 1: So U subsidiaries of these companies employe about two point

458
00:25:48,040 --> 00:25:51,119
Speaker 1: four million manufacturing jobs across the U S, which is

459
00:25:51,160 --> 00:25:58,880
Speaker 1: about of all manufacturing jobs. They they hire American scientists

460
00:25:58,880 --> 00:26:02,840
Speaker 1: and engineers and R and D. Here they do about

461
00:26:03,600 --> 00:26:06,479
Speaker 1: of all American R and D. We had the pleasure

462
00:26:06,520 --> 00:26:08,640
Speaker 1: yesterday of talking to it to Barry eccleston, I gather

463
00:26:08,720 --> 00:26:11,200
Speaker 1: was at the meeting, Yester, the president of Airbus America's

464
00:26:11,640 --> 00:26:16,240
Speaker 1: I wonder, we note that the populist foment and fervor

465
00:26:16,280 --> 00:26:18,399
Speaker 1: all across the world. How does that play out in

466
00:26:18,400 --> 00:26:20,639
Speaker 1: the corporate sector for companies that are foreign based but

467
00:26:20,640 --> 00:26:23,960
Speaker 1: have American subsidiaries. How is how is populism affecting the

468
00:26:24,000 --> 00:26:27,359
Speaker 1: way they do business? Well, you know, there is a

469
00:26:27,359 --> 00:26:30,040
Speaker 1: bit of uncertainty. But again that was the reason that

470
00:26:30,119 --> 00:26:34,119
Speaker 1: these executives came into town because their story is um

471
00:26:34,160 --> 00:26:37,800
Speaker 1: you know, really um I think impactful. And as we

472
00:26:37,840 --> 00:26:41,119
Speaker 1: met with Secretary Manu Chin and Ross and Senate leaders,

473
00:26:41,160 --> 00:26:45,960
Speaker 1: you could see that there was a good understanding of

474
00:26:46,000 --> 00:26:50,360
Speaker 1: the importance of foreign direct investment in the US economy.

475
00:26:50,359 --> 00:26:53,240
Speaker 1: And I think that some perhaps didn't realize, you know,

476
00:26:53,320 --> 00:26:57,560
Speaker 1: how varied foreign direct investment is from all different countries,

477
00:26:58,119 --> 00:27:02,879
Speaker 1: around all different industries. And we received a really favorable

478
00:27:03,040 --> 00:27:08,240
Speaker 1: um uh response. Right, how is lobbying changed in Washington?

479
00:27:08,320 --> 00:27:11,560
Speaker 1: I say, his folks, with respect for the representation. Going

480
00:27:11,600 --> 00:27:13,960
Speaker 1: back to the Willard Hotel out of the civil or

481
00:27:13,960 --> 00:27:16,199
Speaker 1: did you did you ever smoke a cigar in that

482
00:27:16,280 --> 00:27:19,719
Speaker 1: corridor around Robin Bar, the round Robin Bar, Nancy, if

483
00:27:19,760 --> 00:27:24,679
Speaker 1: you're asking me, okay, well I thought maybe a lobby

484
00:27:26,440 --> 00:27:30,639
Speaker 1: is the act changed? Is Mr Trump changed the cadence

485
00:27:31,040 --> 00:27:36,120
Speaker 1: in the pace of your good representation of your good clients? Well,

486
00:27:36,160 --> 00:27:40,800
Speaker 1: you know, lobbying gets a bad rap. Lobbying is educating.

487
00:27:41,400 --> 00:27:44,639
Speaker 1: And if you think of um people who go up

488
00:27:44,680 --> 00:27:48,720
Speaker 1: to Capitol Hill and talk about the need for cancer research,

489
00:27:48,880 --> 00:27:51,639
Speaker 1: or do you even think about your local p p A.

490
00:27:51,800 --> 00:27:55,760
Speaker 1: If you, you know, go educate the school system on

491
00:27:55,880 --> 00:27:58,120
Speaker 1: things that are important for your kids. These are all

492
00:27:58,119 --> 00:28:01,399
Speaker 1: actually technically lobbying, but they don't have as much of

493
00:28:01,400 --> 00:28:05,200
Speaker 1: a bad rap, right, And so lobbing is really educating

494
00:28:05,800 --> 00:28:10,400
Speaker 1: and policy makers actually get a great deal from understanding

495
00:28:10,480 --> 00:28:13,679
Speaker 1: all different sides. The most important aspect I think of

496
00:28:13,720 --> 00:28:18,040
Speaker 1: lobbying is transparency. Knowing who is going up uh to

497
00:28:18,240 --> 00:28:22,199
Speaker 1: Washington and talking to legislators and having it be you know,

498
00:28:22,480 --> 00:28:26,640
Speaker 1: lots of sunshine and very open as to who's going up.

499
00:28:26,680 --> 00:28:31,560
Speaker 1: And for these companies that that came yesterday, their names

500
00:28:31,600 --> 00:28:34,359
Speaker 1: are not as well known as some of our homegrown

501
00:28:34,359 --> 00:28:37,920
Speaker 1: companies here in the United States, which makes it that

502
00:28:38,000 --> 00:28:41,600
Speaker 1: much more important that they go to Washington and they educate,

503
00:28:42,080 --> 00:28:45,320
Speaker 1: because when someone thinks of a foreign company in the US,

504
00:28:45,440 --> 00:28:49,520
Speaker 1: they might think of some monolithic company, not a company

505
00:28:50,120 --> 00:28:55,600
Speaker 1: like Samsung, who told this fantastic story about they acquired

506
00:28:55,640 --> 00:28:58,320
Speaker 1: a small company in New Jersey a few years ago

507
00:28:59,000 --> 00:29:02,640
Speaker 1: and it had, you know, less than a hundred employees,

508
00:29:03,360 --> 00:29:07,040
Speaker 1: and they dumped a lot of money into it, spent

509
00:29:07,120 --> 00:29:09,280
Speaker 1: a lot of doing a lot of R and D

510
00:29:09,440 --> 00:29:13,200
Speaker 1: here in the United States, developing technology that is now

511
00:29:13,320 --> 00:29:17,000
Speaker 1: in all fung phones around the world. So they've given

512
00:29:17,040 --> 00:29:21,520
Speaker 1: this small company this incredible global reach. And those are

513
00:29:21,560 --> 00:29:25,080
Speaker 1: the stories that we went up to Washington yesterday and

514
00:29:25,120 --> 00:29:31,120
Speaker 1: talked about. Because the populist movement, I think, sort of

515
00:29:31,160 --> 00:29:34,840
Speaker 1: broad brushes some of these things and which made it

516
00:29:34,880 --> 00:29:36,920
Speaker 1: that much more important for these these companies to go up.

517
00:29:36,960 --> 00:29:40,760
Speaker 1: And we know the landmarks in Washington, long Worth, Cannon, Dirkson,

518
00:29:40,800 --> 00:29:43,120
Speaker 1: and the rest, of course the Palm among them. I

519
00:29:43,120 --> 00:29:45,560
Speaker 1: guess what I'm wondering about is that the landscape has changed.

520
00:29:45,560 --> 00:29:47,000
Speaker 1: In other words, you have people in New York who

521
00:29:47,080 --> 00:29:49,440
Speaker 1: just wonder what's going on in Washington into this administration.

522
00:29:49,480 --> 00:29:52,880
Speaker 1: It's a different world. Uh Is the means of lobbying different?

523
00:29:52,920 --> 00:29:56,240
Speaker 1: Are you having difficulty finding the right people to talk to?

524
00:29:56,360 --> 00:30:01,600
Speaker 1: Has that changed? All? Come on? The phone's ringing off? UM?

525
00:30:01,640 --> 00:30:04,040
Speaker 1: You know what, I think that lobbying over the last

526
00:30:04,120 --> 00:30:07,360
Speaker 1: several years has changed, not just with this administration. I

527
00:30:07,400 --> 00:30:10,760
Speaker 1: think that it definitely were in an environment where it's uh,

528
00:30:10,800 --> 00:30:13,360
Speaker 1: to some extent, bottom up right. It's not that you

529
00:30:13,480 --> 00:30:17,120
Speaker 1: just go see the very top leadership or um, you know,

530
00:30:17,800 --> 00:30:20,160
Speaker 1: the ones that that you know, you see on the

531
00:30:20,200 --> 00:30:22,800
Speaker 1: news all the time. I think there is this importance

532
00:30:23,360 --> 00:30:26,840
Speaker 1: more than ever before, not only to to educate um,

533
00:30:26,920 --> 00:30:30,160
Speaker 1: the top leaders, but but educate the rank and file

534
00:30:30,680 --> 00:30:33,280
Speaker 1: in Congress as well as the public as well as

535
00:30:33,280 --> 00:30:37,080
Speaker 1: our employees, you know, the employees that our member companies

536
00:30:37,080 --> 00:30:40,160
Speaker 1: that they get a paycheck from companies that are headquartered

537
00:30:40,240 --> 00:30:43,880
Speaker 1: or abroad, need to understand the importance of global connections.

538
00:30:44,320 --> 00:30:46,360
Speaker 1: And you know, that was part of it was just

539
00:30:46,520 --> 00:30:49,840
Speaker 1: you know, yesterday was part of our our our broader

540
00:30:49,880 --> 00:30:54,320
Speaker 1: efforts to get people to understand the importance of global connections.

541
00:30:54,920 --> 00:30:57,440
Speaker 1: And you know, when people think about the global economy,

542
00:30:57,600 --> 00:30:59,680
Speaker 1: there's a lot of focus on the trade of good

543
00:31:00,080 --> 00:31:03,720
Speaker 1: US is across borders, but the cross border investment really

544
00:31:03,800 --> 00:31:06,040
Speaker 1: dwarfed that. Okay, we're gonna have to leave it there,

545
00:31:06,120 --> 00:31:09,880
Speaker 1: Nancy mclintard, thank you so much. Maybe possibly not that

546
00:31:10,200 --> 00:31:13,080
Speaker 1: we've ever been there, but we would see the beefsteak,

547
00:31:13,120 --> 00:31:17,760
Speaker 1: tomato capri or Andy's mixed green salad, and then after

548
00:31:17,840 --> 00:31:22,480
Speaker 1: that the prime Porterhouse steak twenty eight ounces at the Washington,

549
00:31:23,240 --> 00:31:39,640
Speaker 1: d C. Palm Restaurant. David, would that be feasible? We're

550
00:31:39,680 --> 00:31:42,120
Speaker 1: gonna close out with a few minutes with the most

551
00:31:42,160 --> 00:31:47,800
Speaker 1: important surgeon, Toby Cosgrove out of Williams. So Williams segment, folks,

552
00:31:47,840 --> 00:31:55,479
Speaker 1: we're doing Arthur Levitt of Williams College Mammoths and with

553
00:31:55,600 --> 00:31:58,400
Speaker 1: us now. Dr Cosgrove of course acclaimed at the Cleveland

554
00:31:59,040 --> 00:32:02,040
Speaker 1: Clinic to because the last time we took was what

555
00:32:02,120 --> 00:32:05,120
Speaker 1: talked was in Davos. Help me here with what your

556
00:32:05,280 --> 00:32:11,400
Speaker 1: Cleveland clinic needs from Washington in terms of Obamacare reform

557
00:32:11,520 --> 00:32:14,719
Speaker 1: or some form of new Ryan or Trump Care. What

558
00:32:14,760 --> 00:32:17,680
Speaker 1: do you need? Well, I think we've not got the

559
00:32:17,760 --> 00:32:22,600
Speaker 1: right of aspects of healthcare reform. If you look at

560
00:32:22,600 --> 00:32:25,680
Speaker 1: the Affordable Care Act basically started trying to do three

561
00:32:25,720 --> 00:32:30,120
Speaker 1: things that tried to increase coverage, It tried to improve quality,

562
00:32:30,120 --> 00:32:33,000
Speaker 1: and try to decrease costs. And really the issue is

563
00:32:34,000 --> 00:32:37,640
Speaker 1: the fact that costs continue to rise. The question is

564
00:32:37,680 --> 00:32:40,920
Speaker 1: how can we bring down costs of healthcare, which is

565
00:32:40,960 --> 00:32:44,840
Speaker 1: a problem in every developed country around the world because

566
00:32:45,440 --> 00:32:47,760
Speaker 1: people are older and there are more things we can

567
00:32:47,760 --> 00:32:50,520
Speaker 1: do for people which are going to drive up costs.

568
00:32:50,960 --> 00:32:53,600
Speaker 1: So if you look at it bringing down the cost

569
00:32:53,640 --> 00:32:56,080
Speaker 1: of healthcare, there's really only two ways you can do it.

570
00:32:56,720 --> 00:32:59,840
Speaker 1: One you can have a more efficient delivery system for

571
00:33:00,080 --> 00:33:04,000
Speaker 1: people who are sick um and secondly, you can begin

572
00:33:04,080 --> 00:33:07,120
Speaker 1: to keep decrease the burden of disease by keeping people

573
00:33:07,240 --> 00:33:10,840
Speaker 1: out of the hospital and prevent them from getting chronic diseases.

574
00:33:11,320 --> 00:33:14,080
Speaker 1: And there are things that you can do legislatively and

575
00:33:14,160 --> 00:33:18,800
Speaker 1: things that you can do um administratively on both those

576
00:33:18,840 --> 00:33:22,160
Speaker 1: accounts to begin to decrease the cost. I would like

577
00:33:22,200 --> 00:33:25,680
Speaker 1: to see us going back to the root cause of

578
00:33:26,040 --> 00:33:30,280
Speaker 1: the problem, which is escalating cost of healthcare, and uh,

579
00:33:30,480 --> 00:33:34,600
Speaker 1: then I think we would be more appropriately directed and

580
00:33:34,640 --> 00:33:37,360
Speaker 1: perhaps you could even get a bipartisan agreement on the

581
00:33:37,400 --> 00:33:39,600
Speaker 1: fact that we need to decrease the cost of health Care,

582
00:33:40,280 --> 00:33:42,200
Speaker 1: Dr cost we'll talk on TV here in about half

583
00:33:42,200 --> 00:33:44,520
Speaker 1: an hour time on Bloomberg Telligent. But a quick question

584
00:33:44,560 --> 00:33:46,880
Speaker 1: here just about where we go from here in Washington,

585
00:33:46,920 --> 00:33:49,120
Speaker 1: there are reports that Republicans on the Hill are taking

586
00:33:49,200 --> 00:33:51,840
Speaker 1: up healthcare reform. Yet again, do you have the sense

587
00:33:51,880 --> 00:33:55,200
Speaker 1: that lawmakers are now having the kinds of conversations you're

588
00:33:55,200 --> 00:33:58,200
Speaker 1: talking about that we've we've been through the politics over

589
00:33:58,240 --> 00:34:00,800
Speaker 1: the last few weeks associated with healthcare for maybe now

590
00:34:01,440 --> 00:34:04,320
Speaker 1: with a less time limited sense there's a conversation about

591
00:34:04,320 --> 00:34:07,840
Speaker 1: policy happening. Well, I think the policy of the Affordable

592
00:34:07,880 --> 00:34:10,319
Speaker 1: Care Act, to begin to move from just paying for

593
00:34:10,480 --> 00:34:14,120
Speaker 1: volume to begin to pay for outcomes is the right

594
00:34:14,440 --> 00:34:19,040
Speaker 1: direction to go. The discussion, as near as I can

595
00:34:19,080 --> 00:34:22,400
Speaker 1: tell from the distance of Cleveland, is that we continue

596
00:34:22,440 --> 00:34:25,080
Speaker 1: to talk about how we're going to move uh, the

597
00:34:25,080 --> 00:34:27,880
Speaker 1: amount of money that the government is paying and uh

598
00:34:28,040 --> 00:34:31,520
Speaker 1: two different segments and managed to do it in different ways.

599
00:34:31,840 --> 00:34:34,239
Speaker 1: We're not really going to what I think the root

600
00:34:34,320 --> 00:34:38,359
Speaker 1: caused the problem is too shorts today, Dr Costco, We're

601
00:34:38,360 --> 00:34:40,040
Speaker 1: gonna have to leave it there. Toby Costco with the

602
00:34:40,080 --> 00:34:51,360
Speaker 1: Cleveland Clinic, Thanks for listening to the Bloomberg surveillance podcast.

603
00:34:51,719 --> 00:34:56,840
Speaker 1: Subscribe and listen to interviews on iTunes, SoundCloud, or whichever

604
00:34:56,960 --> 00:35:01,359
Speaker 1: podcast platform you prefer. I'm out Twitter at Tom Keene,

605
00:35:01,480 --> 00:35:05,279
Speaker 1: David Gura is at David Gura. Before the podcast, you

606
00:35:05,320 --> 00:35:21,600
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio, brought you

607
00:35:21,640 --> 00:35:25,319
Speaker 1: by Bank of America Mary Lynch. Dedicated to bringing our

608
00:35:25,360 --> 00:35:28,960
Speaker 1: clients insights and solutions to meet the challenges of a

609
00:35:28,960 --> 00:35:33,840
Speaker 1: transforming world. That's the power of global connections. Mary Lynch, Pierce,

610
00:35:33,960 --> 00:35:37,800
Speaker 1: Fenner and Smith Incorporated, Member s i p C