WEBVTT - Weak Dollar is Great for EM, Santos Says 0:00:03.360 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.720 Bloomberg dot Com, and of course on the Bloomberg I 0:00:32.760 --> 0:00:37.159 wonder if Gabrielle Gabriella would want to dream baroness this 0:00:37.280 --> 0:00:40.640 week so you're better prepared to talk to Gabriella. Not 0:00:40.680 --> 0:00:44.200 necessarily nice big photograph of Lloyd Blank. Find of Goldman 0:00:44.240 --> 0:00:48.520 sax On the Barons. Uh. Gabriella Santos is the vice 0:00:48.560 --> 0:00:53.199 president for JP Morgan and our global market strategist for 0:00:53.360 --> 0:00:56.040 JP Morgan Asset Management. Gabriella, thank you very much for 0:00:56.080 --> 0:00:59.480 being here. Good morning. You know, as I was mentioning 0:00:59.480 --> 0:01:02.840 to Tom, looked like there was a crush people who 0:01:02.960 --> 0:01:06.800 really wanted to be in that room, And I'm wondering 0:01:06.959 --> 0:01:10.600 if you felt that there may be obviously you were 0:01:10.640 --> 0:01:14.880 not there, if there was a change in sentiment because 0:01:14.920 --> 0:01:18.360 of the remarks that were televised and broadcast by the 0:01:18.400 --> 0:01:21.280 President on that Friday, and whether that has had any 0:01:21.360 --> 0:01:24.880 effect in your mind about investor psychology. So if we 0:01:24.920 --> 0:01:27.800 think about how investors are feeling right now. They're feeling 0:01:28.240 --> 0:01:32.120 quite good about the global economy. They're feeling like we're 0:01:32.120 --> 0:01:36.479 finally on solid footing, but they're also wondering what could 0:01:36.520 --> 0:01:41.400 disrupt that balance. And so what I think UH investors 0:01:41.400 --> 0:01:45.160 were looking for in that speech was any sort of 0:01:45.760 --> 0:01:50.440 UH sign or inkling really around trade policy, which is 0:01:50.560 --> 0:01:54.000 seen as perhaps one of those risks that could disrupt 0:01:54.000 --> 0:01:57.200 this really good environment we're seeing for the global economy. 0:01:57.240 --> 0:02:00.200 And in that sense, I do think it was is 0:02:00.680 --> 0:02:05.120 well received. Uh. It was seen as a pragmatic UH 0:02:05.280 --> 0:02:09.639 speech by someone who doesn't want to disrupt that balance 0:02:09.680 --> 0:02:11.640 for the U. S and global economy. But I do 0:02:11.720 --> 0:02:14.760 still think that there are some trade anxieties lingering in 0:02:14.800 --> 0:02:17.760 the back of investors minds. Well, certainly we've got the 0:02:17.840 --> 0:02:21.240 last meeting, I think today in Montreal of the last 0:02:21.280 --> 0:02:25.880 meeting for this round of NAFTA renegotiation talks. Having said 0:02:25.919 --> 0:02:29.320 that we don't know what's going to happen, UH, let's 0:02:29.360 --> 0:02:33.680 say things stay the same status quo Latin America specifically, 0:02:33.800 --> 0:02:36.280 I want to get your thoughts investing in Latin America. 0:02:36.800 --> 0:02:39.080 I smile when you say that, because it's it's really 0:02:39.120 --> 0:02:42.280 the first time, I would say, in six seven years 0:02:42.680 --> 0:02:47.240 where Latin America is actually a positive story, right, so 0:02:47.280 --> 0:02:51.200 we do see growth turning around. Latin America is likely 0:02:51.280 --> 0:02:53.959 to grow at potential this year for the first time 0:02:54.000 --> 0:02:56.680 in those six seven We've got rising commodity prices. That's 0:02:56.720 --> 0:02:59.679 got to be good for countries that mind copper for 0:02:59.720 --> 0:03:03.840 Exa flore Brazil getting past their petrobrass scandal. Yes, so 0:03:04.080 --> 0:03:07.680 rising or just stable commodity prices are definitely a support 0:03:07.720 --> 0:03:10.160 for the region. But even more than that, I think 0:03:10.160 --> 0:03:12.840 it's about a lot of countries having really hit rock 0:03:12.880 --> 0:03:16.160 bottom when it comes to economic growth, and Brazil really 0:03:16.160 --> 0:03:19.200 comes to the forefront. Uh So it's about a cyclical 0:03:19.240 --> 0:03:23.520 improvement and also the perspective of a structural improvement with 0:03:23.919 --> 0:03:28.280 several changes in administrations towards a more business family stand Gabriela. 0:03:28.360 --> 0:03:30.720 We spoke with a finance maner of Indonesia today, a 0:03:30.919 --> 0:03:37.520 lengthy conversation with Mr Maliani Um. Indonesia's maybe a textbook 0:03:37.640 --> 0:03:42.120 of the complexity we don't see as equity investors. It's 0:03:42.120 --> 0:03:44.880 not just about buying a telephone company anymore. Is that 0:03:45.240 --> 0:03:49.320 how do you go about acquiring shares to make capital 0:03:49.360 --> 0:03:54.560 gain in these complex stories, these complex nations. So, I mean, 0:03:54.720 --> 0:03:57.360 if you think about all of the different puzzle pieces 0:03:57.400 --> 0:04:00.520 that make up this term that we use of emerging markets, 0:04:00.920 --> 0:04:03.640 it's really very very complex, right, And and so the 0:04:03.680 --> 0:04:06.680 way that we approach emerging markets is we have to 0:04:06.760 --> 0:04:10.000 have people on the ground, right, people who truly understand 0:04:10.080 --> 0:04:15.320 the dynamics in these economies, the dynamics and the political sphere, 0:04:15.360 --> 0:04:18.279 and frankly just the dynamics at the company level. Right. 0:04:18.680 --> 0:04:20.800 So the way that we think about emerging markets is 0:04:20.839 --> 0:04:23.800 really the most important thing when we look at the 0:04:23.800 --> 0:04:26.719 long run is earnings, right, and that's the same for 0:04:26.800 --> 0:04:29.760 emerging markets as well. So we have to have a 0:04:29.920 --> 0:04:34.200 good feel for how earnings growth is looking in a 0:04:34.279 --> 0:04:37.200 variety of companies countries. Just wants to know what to 0:04:37.279 --> 0:04:39.480 buy or what to sell. Like should you be going 0:04:39.520 --> 0:04:41.760 into the E t F E E M, for example, 0:04:41.839 --> 0:04:46.359 what t H B I shares I shares CI emerging 0:04:46.400 --> 0:04:48.960 markets CTF. So I would say that overall it's a 0:04:49.000 --> 0:04:52.760 positive environment for emerging markets as a whole. Right, So 0:04:52.880 --> 0:04:56.080 if passive is your only approach, that that's fine. But 0:04:56.440 --> 0:04:59.720 if you are able to take the active approach. UM, 0:04:59.800 --> 0:05:02.120 the there's definitely value to be had. And if you 0:05:02.160 --> 0:05:05.960 look at the correlations between countries and emerging markets, they're 0:05:05.960 --> 0:05:08.680 actually pretty low. So you are getting a bang for 0:05:08.720 --> 0:05:12.720 your book for actually picking countries, picking stocks, and really 0:05:12.760 --> 0:05:15.520 having that on the ground field. Give us a country. 0:05:15.640 --> 0:05:19.320 So as we were mentioning Latin America, I feel quite 0:05:19.320 --> 0:05:22.320 optimistic about um and it's not just because I'm Brazilian, 0:05:22.400 --> 0:05:24.440 but I do think that there's a lot to be 0:05:24.480 --> 0:05:28.640 said about Brazil this year with growth finally really picking 0:05:28.720 --> 0:05:31.440 up and as a result, earnings growth picking up as well. 0:05:31.520 --> 0:05:33.760 Where's week dollar play into that? If there's some monution 0:05:33.800 --> 0:05:37.400 gets his way, even if it's eventually adjusted as it was. 0:05:38.320 --> 0:05:41.640 Does does week dollar play into uh? Does week dollar 0:05:41.760 --> 0:05:45.320 push against gains in those Latin American countries? No? Week 0:05:45.360 --> 0:05:48.600 dollar is is really great actually for emerging markets. UM. 0:05:48.760 --> 0:05:51.719 So if we think about just two main ways, right, 0:05:51.760 --> 0:05:56.000 So a week or dollar relieve some pressure on inflation 0:05:56.240 --> 0:05:58.560 in a lot of these countries. That allows their central 0:05:58.600 --> 0:06:02.120 banks to keep rates pretty low, So that's helpful. That's 0:06:02.120 --> 0:06:06.839 a change from with the strong dollar. And then lastly, 0:06:07.040 --> 0:06:09.479 if you have a weaker dollar, it's also about the 0:06:09.520 --> 0:06:12.120 signal it sends. It sends the signal that growth is 0:06:12.160 --> 0:06:16.400 better elsewhere, that investors have a good risk appetite for 0:06:16.560 --> 0:06:19.360 countries outside of the US. So all those factors actually 0:06:19.360 --> 0:06:22.080 help emerging markets. A week dollar is a good thing. Okay, 0:06:22.080 --> 0:06:24.480 So the weak dollar is a good thing. And if 0:06:24.600 --> 0:06:28.920 you don't necessarily feel constrained to become a passive investor, 0:06:29.040 --> 0:06:32.000 is there any industry group or any specific area that 0:06:32.080 --> 0:06:34.479 you would recommend, Because I know that there are elections 0:06:34.520 --> 0:06:39.560 coming up all over Latin America this year, So emerging 0:06:39.640 --> 0:06:44.440 markets has beneath the surface, uh shifted shapes over the 0:06:44.440 --> 0:06:48.560 past couple of years. It started rebounding in was purely 0:06:48.600 --> 0:06:51.800 a commodity story, so materials, energy, and that was it. 0:06:52.080 --> 0:06:54.520 We've moved on from that. Last year it was all 0:06:54.560 --> 0:06:57.320 a story about technology and so Asia is the biggest 0:06:57.839 --> 0:07:01.040 gainer there. I think this year it's a difference story. Um, 0:07:01.080 --> 0:07:04.440 it's really two stories. It's about the improvement in domestic demand. 0:07:04.640 --> 0:07:07.200 So when we talk about Brazil turning around, the consumer 0:07:07.240 --> 0:07:11.080 coming back, So that would argue for things like consumer names, 0:07:11.120 --> 0:07:14.400 consumer discretionary as well as financials. And I think the 0:07:14.400 --> 0:07:18.840 other second bigger story is also about big export powerhouses 0:07:18.920 --> 0:07:23.240 benefiting from the improvement in industrial production and capex and 0:07:23.280 --> 0:07:26.240 developed markets, and that would argue for things like industrials 0:07:26.240 --> 0:07:28.880 in Asia. Well it seems as so Boeing not to 0:07:28.920 --> 0:07:32.320 mention Asia for your second, but Boeing is certainly believing 0:07:32.360 --> 0:07:35.000 in part of this because of the ongoing negotiations to 0:07:35.080 --> 0:07:39.560 acquire a part or all of em Air, the aircraft 0:07:39.560 --> 0:07:43.360 manufacturer in Brasila, Brazil. So that's still I would say 0:07:43.400 --> 0:07:47.840 there's national trophy, right, so there are some political considerations 0:07:47.880 --> 0:07:50.800 there the pres and this this is worse than talking 0:07:50.800 --> 0:07:54.120 about blockchain with or bitcoin. I didn't say a thing 0:07:54.200 --> 0:08:02.160 about bitcoin, did not going there. Gabriela Santos, Thank god, 0:08:02.160 --> 0:08:05.560 we're out of time with JP. Morgan Asset Management. Thank 0:08:05.600 --> 0:08:21.720 you so much. Whether it's down Dana Telsey, that tells 0:08:21.720 --> 0:08:24.320 the advisory group. Dana, thank you for joining us. I'm 0:08:24.320 --> 0:08:28.240 Bloomberg Radio, Bloomberg Television earlier where we dived into luxury. 0:08:28.600 --> 0:08:31.520 Let's dive right now to the death of retail. Retail 0:08:31.560 --> 0:08:34.959 is terrible. All the charts are ugly, except in junieh 0:08:35.160 --> 0:08:38.920 of last year, they all started to vault higher in 0:08:39.040 --> 0:08:41.920 share price. Macy's up. Maybe it's a big thing up 0:08:41.960 --> 0:08:44.800 a little bit, but some of these stocks have really moved. 0:08:44.880 --> 0:08:47.920 Let's go back. Why did retails start to do better 0:08:48.360 --> 0:08:51.680 summer of last year? The group and Tom thank you 0:08:51.760 --> 0:08:54.559 very much for having me exactly right. The group bottomed 0:08:54.559 --> 0:08:57.160 in August and in mid November it improved with the 0:08:57.160 --> 0:09:00.320 initial reads that this that the holiday see in the 0:09:00.320 --> 0:09:03.600 fourth quarter outlook was off to a solid start, and 0:09:03.640 --> 0:09:07.000 that was followed by tax reform becoming a reality. And 0:09:07.040 --> 0:09:11.040 then from their keep it from mid August to mid November, 0:09:11.080 --> 0:09:14.120 our stocks are up six eight percent versus the market, 0:09:14.200 --> 0:09:17.280 up just under five and then from mid November until 0:09:17.320 --> 0:09:21.200 now the stocks are up almost sev versus the market 0:09:21.280 --> 0:09:26.160 up ten percent. And frankly, valuations on current consensual consensus 0:09:26.200 --> 0:09:29.000 are certainly reasonable and earnings in our group are going 0:09:29.080 --> 0:09:32.120 to benefit from lower tax rates, so you're still going 0:09:32.160 --> 0:09:35.640 to have some momentum. With the easy comparisons, I mean 0:09:35.679 --> 0:09:38.400 within this is the y up and is it at 0:09:38.400 --> 0:09:41.360 the top line revenue in that crazy mix of unit 0:09:41.400 --> 0:09:44.800 and price, or is it down the income statement where 0:09:44.800 --> 0:09:47.320 they're finally going to maybe generate some cash. Which is 0:09:47.360 --> 0:09:49.920 it at the top or the middle of the income statement. 0:09:50.040 --> 0:09:52.520 It's both. I've got the top because there's a stronger 0:09:52.600 --> 0:09:55.600 response to the fashion cycle. I got I have in 0:09:55.640 --> 0:09:58.920 the middle. It's better position store fleets, it's improved the 0:09:59.000 --> 0:10:02.440 commerce capability these I've got a macro. I have hir 0:10:02.600 --> 0:10:08.120 income consumers and lower income consumers, each having more disposable dollars. 0:10:08.400 --> 0:10:11.240 And I don't have the election hangover like you had 0:10:11.320 --> 0:10:16.119 last year, Dana pim Fox. Here are you on Instagram 0:10:16.120 --> 0:10:18.880 Buy any chance? Not right now? Okay? But you are 0:10:18.920 --> 0:10:21.600 a member, right okay? So you're one of eight hundred 0:10:21.640 --> 0:10:25.960 million users. Of those users are actually connected to a 0:10:26.120 --> 0:10:30.760 business by choice. And where I'm going with this is 0:10:30.800 --> 0:10:34.240 that Facebook, of course, the parent company of Instagram, now 0:10:34.320 --> 0:10:40.120 has agreements to take data from in store UH positions 0:10:40.240 --> 0:10:43.200 of customers. In other words, they can geo locate you 0:10:43.880 --> 0:10:47.160 in a store. They then take the data from the 0:10:47.400 --> 0:10:52.920 store and combine that with your online activity. Is that 0:10:53.200 --> 0:10:56.480 something that you're seeing as being productive not only for 0:10:56.640 --> 0:11:00.800 obviously Facebook, but for the stores themselves. You see more 0:11:01.120 --> 0:11:05.080 focus on knowing more about your customer, whether it's from 0:11:05.200 --> 0:11:09.360 social media, whether it's from CRM systems, whether it's from 0:11:09.440 --> 0:11:13.040 enhanced loyalty programs. Instead of the customer just going to 0:11:13.080 --> 0:11:15.960 the store, the store is coming to the customer. But 0:11:16.040 --> 0:11:19.000 you need to marry this activity of buying with the 0:11:19.040 --> 0:11:21.920 activity of doing. And what we're seeing is we're seeing 0:11:21.920 --> 0:11:25.760 experiential retail come to the forefront. Well, the reason I 0:11:25.800 --> 0:11:28.640 mentioned this all is beriential retail PIM is where your 0:11:28.640 --> 0:11:32.800 will experience. It just means spend more. But think about it. 0:11:32.840 --> 0:11:36.000 You have gyms like Yoga Works, you have beauty salons 0:11:36.080 --> 0:11:38.800 like dry Bar. You have movies which are now wine 0:11:38.840 --> 0:11:41.600 dine and reclined theaters like I Pick. So I have 0:11:41.679 --> 0:11:45.880 a new way that customers are trafficking and center JANEA 0:11:45.880 --> 0:11:51.840 has helped us wine dine and he doesn't even need 0:11:51.880 --> 0:11:54.000 the movie. He just wants to do all three. He 0:11:54.000 --> 0:11:56.960 doesn't you need it all and it happens. Okay. But 0:11:57.080 --> 0:12:00.000 having said that, what I was going with this Instagram 0:12:00.000 --> 0:12:03.160 an online connection is about a third of the content 0:12:03.280 --> 0:12:06.559 that people who use Instagram save you know the new 0:12:06.679 --> 0:12:11.880 save post feature are from business accounts, right, so that 0:12:11.920 --> 0:12:14.760 means they're using it as a wish list of products 0:12:14.800 --> 0:12:19.000 that they may eventually purchase. And as a result, you 0:12:19.040 --> 0:12:21.400 now know that as a merchant and you can help 0:12:21.440 --> 0:12:24.360 them make that purchase in some way exactly. Well, what 0:12:24.679 --> 0:12:27.440 are the things you're seeing is where are companies investing 0:12:27.480 --> 0:12:30.760 their advertising dollars. You've seen a shift going on, and 0:12:30.760 --> 0:12:33.760 the shift for social media and Instagram is what we're 0:12:33.760 --> 0:12:37.680 seeing happen. Dana. One final question, who's battling best against 0:12:37.720 --> 0:12:41.240 the onslaught known as Gucci? Who's like like fighting Gucci 0:12:41.320 --> 0:12:43.040 the best? I mean, you have to think there's a 0:12:43.040 --> 0:12:45.560 couple of companies out there. Have LVMH, who has so 0:12:45.640 --> 0:12:48.800 many brands and so many creative directors. You have PVH 0:12:48.880 --> 0:12:52.120 with Calvin Klein and with Tommy Hilfiger. And let's see 0:12:52.120 --> 0:12:55.280 what caring does given the fact that Gucci, I mean, 0:12:55.320 --> 0:12:58.240 as you said, the momentum is continuing. I think something 0:12:58.280 --> 0:13:01.640 conservative for you, Dana, like the Margaret Leather pump. You 0:13:01.679 --> 0:13:04.640 can't make this up, folks, The Queen Margaret Leather pump 0:13:04.679 --> 0:13:10.000 at Bergdorf one thousand, one fifty dollars. Every home should have, 0:13:10.640 --> 0:13:12.960 well at least the black ones, but maybe even pin 0:13:13.080 --> 0:13:15.880 the pink and the black ones as well. Dana, Telsey, 0:13:15.960 --> 0:13:19.040 thank you so much, greatly appreciate it. With Telsey Advisory 0:13:19.040 --> 0:13:31.679 Group as well. Just the final chapter of his book, 0:13:32.600 --> 0:13:35.480 call It twenty Pages, is probably a good place for 0:13:35.520 --> 0:13:39.200 the President to start a strategy for competing in a 0:13:39.240 --> 0:13:44.839 globalized world. After the Pierceborgan interview Edward Alden. His book 0:13:44.880 --> 0:13:48.559 Failure to Adjust is absolutely phenomenal. It is a dense 0:13:49.160 --> 0:13:53.080 pro read on how Americans got left behind and the 0:13:53.080 --> 0:13:56.640 global economy. Ted Alden, good morning, Um, is you write 0:13:56.679 --> 0:14:00.520 about the startling comments the President made to Mr Morgan 0:14:01.559 --> 0:14:04.560 about Europe. I've had a lot of problems with the 0:14:04.600 --> 0:14:08.959 European Union and may morph into something very big. Um, 0:14:09.000 --> 0:14:11.840 He's gone after people that we usually think of, Why 0:14:11.920 --> 0:14:15.120 go after Europe? Well, I presume the reason he's going 0:14:15.160 --> 0:14:17.800 after Europe is the same reason he's going after Mexico 0:14:18.040 --> 0:14:20.520 and after South Korea and after China, which is the 0:14:20.640 --> 0:14:24.440 large trade surplus that Europe, mostly Germany runs with the 0:14:24.520 --> 0:14:26.840 United States. But it is an odd choice. I mean, 0:14:26.880 --> 0:14:29.920 if you look at where the real challenges on trade lie, 0:14:30.040 --> 0:14:33.160 China looms by far the largest. We could sure use 0:14:33.200 --> 0:14:35.200 the Europeans help on that one. We could use the 0:14:35.240 --> 0:14:40.960 Europeans help, which speaks of maybe multilateral is too strong. Uh, 0:14:41.160 --> 0:14:42.880 some would say hope in prayer. I don't mean to 0:14:42.960 --> 0:14:46.960 give it, but I mean, really the body language that 0:14:47.080 --> 0:14:50.360 Davos was, Okay, we're bilateral, but we're gonna make the rules. 0:14:50.960 --> 0:14:53.400 Is that what he wants with Europe as well? We're bilateral, 0:14:53.640 --> 0:14:56.880 but we make the rules on bree cheese. I don't know. 0:14:56.960 --> 0:14:59.280 It's it's a little puzzling. I mean, you know, the 0:14:59.360 --> 0:15:01.480 chance to make the rules on breeches and it wasn't 0:15:01.480 --> 0:15:03.760 gonna happen even there. But that was the t tip talks, 0:15:03.800 --> 0:15:06.360 and those have been suspended either the Europeans nor this 0:15:06.440 --> 0:15:10.120 administration or particularly eager to move forward to. But I 0:15:10.160 --> 0:15:12.200 would think that there are some at least some lowest 0:15:12.240 --> 0:15:16.760 common denominator possibilities for cooperation and and and that would 0:15:16.760 --> 0:15:19.000 be on China. I mean, European companies are having the 0:15:19.080 --> 0:15:22.920 same problems in China that American companies are having. Um, 0:15:22.960 --> 0:15:25.280 that's a much bigger fish to fry, it seems to 0:15:25.360 --> 0:15:27.920 me than than worrying about Germany's trades are plus with 0:15:27.960 --> 0:15:29.640 the United States, most of which is, you know, kind 0:15:29.680 --> 0:15:33.400 of fairly come by that. Germans are a great manufacturing nation. 0:15:33.440 --> 0:15:35.400 They make really good products. That's kind of the way 0:15:35.400 --> 0:15:38.080 the world's supposed to work on question. Do we have 0:15:38.200 --> 0:15:43.160 a quote unquote excuse me, it's a plague, folks, massive 0:15:43.200 --> 0:15:47.560 trade deficit? Do we have a massive trade deficit with Germany? Well, 0:15:47.560 --> 0:15:49.400 it's I mean it's large, it's you know, in the 0:15:49.440 --> 0:15:52.000 sort of sixty seventy billion dollar range. But if you know, 0:15:52.040 --> 0:15:54.640 if you compare it to the definite of China, which 0:15:54.760 --> 0:15:57.360 over three fifty billion dollars. No, I don't think massive 0:15:57.480 --> 0:16:00.720 is the right word. I think significant. Perhaps I'm running 0:16:00.800 --> 0:16:03.840 based on the title of your book, Failure to Adjust 0:16:03.840 --> 0:16:07.080 how Americans got left behind in the global economy. What 0:16:07.120 --> 0:16:10.240 would be a specific example of something that we would 0:16:10.280 --> 0:16:13.600 see in another country that we don't see here that 0:16:13.640 --> 0:16:17.040 you find that we're left behind? Oh, a whole bunch 0:16:17.040 --> 0:16:18.880 of things. I mean, you look at at the existence 0:16:18.920 --> 0:16:22.720 of apprenticeship programs and and work education experience far more 0:16:22.760 --> 0:16:26.080 prevalent in Europe. You look at their system for supporting 0:16:26.160 --> 0:16:29.160 unemployed workers and getting them back into the job market. 0:16:29.200 --> 0:16:32.840 The average European country spends five or six times what 0:16:32.880 --> 0:16:35.160 we do. Okay, but hang on, hang on right there, okay, 0:16:35.160 --> 0:16:37.280 So hang on right there with unemployment, So why do 0:16:37.320 --> 0:16:40.080 you have chronically high unemployment in a place like Spain. 0:16:40.840 --> 0:16:43.040 Oh well, look, I mean Spain is not, you know, 0:16:43.120 --> 0:16:45.360 particularly the best model here, and there are lots of 0:16:45.400 --> 0:16:48.200 reasons for high unemployment. Um, what I'm saying is that 0:16:48.280 --> 0:16:52.280 if you lose your job in Germany or Denmark, or 0:16:52.320 --> 0:16:55.560 Sweden or most of them. Wait wait wait wait wait 0:16:55.560 --> 0:16:57.680 wait wait. You can't cherry pick this, can you. I mean, 0:16:57.680 --> 0:16:59.360 I'm just saying, Look, if you look at the europe 0:16:59.560 --> 0:17:01.520 you're telling you're saying that the United States has got 0:17:01.600 --> 0:17:06.119 left behind for unemployment benefits. We do have unemployment insurance, 0:17:06.760 --> 0:17:10.160 and you have a completely different mindset when it comes 0:17:10.160 --> 0:17:13.399 to the labor market here because of the effect of unions. Right, 0:17:13.560 --> 0:17:16.320 Unions sit on the boards of most companies in Germany. 0:17:16.720 --> 0:17:18.840 Oh look, I have I would agree that there are 0:17:18.920 --> 0:17:22.000 reasons for the difference. I'm just saying that if you're 0:17:22.040 --> 0:17:25.680 trying to get maximum benefits out of your workforce, retrain 0:17:25.760 --> 0:17:27.199 them for the jobs that are available. You've got six 0:17:27.240 --> 0:17:29.760 million jobs open in the United States right now, and 0:17:29.840 --> 0:17:32.840 manufacturers crying bloody murder because they don't have folks with 0:17:32.840 --> 0:17:35.240 the skills to fill those jobs. And we are doing 0:17:35.320 --> 0:17:37.240 little or nothing as a country to try to meet 0:17:37.280 --> 0:17:39.760 that demand, so you feel that the it's a government's 0:17:39.760 --> 0:17:43.040 responsibility to do that. No, not necessarily. I mean, if 0:17:43.080 --> 0:17:45.080 you look at the Swedish model, it's all run by 0:17:45.119 --> 0:17:48.440 the companies with some cooperation from the union. Excuse me, 0:17:48.480 --> 0:17:51.200 I got a bit of tom I think I think 0:17:52.520 --> 0:17:55.760 everybody's got the plague. I mean, it's it is. It's 0:17:55.760 --> 0:17:59.879 a bad season, absolutely, it is a bad bad season. 0:18:00.119 --> 0:18:02.159 Within you know all that we're going What are you 0:18:02.160 --> 0:18:04.960 even listened for from the state of the Union. I 0:18:05.000 --> 0:18:08.280 assume it's going to be the same discussion as Davos, 0:18:08.400 --> 0:18:10.480 which is, you know, this is the way America is 0:18:10.520 --> 0:18:14.320 doing it. We're angry, We're an aggrieved America. So these 0:18:14.359 --> 0:18:16.399 are the rules, and if you want to participate, great, 0:18:16.440 --> 0:18:19.480 But is that a trade policy? Well, it's not a 0:18:19.480 --> 0:18:21.119 trade policy in the sense that you've got to make 0:18:21.160 --> 0:18:23.399 some choices. Obviously you can pick fights, and there's some 0:18:23.440 --> 0:18:26.080 fights worth picking, but I think the president has got 0:18:26.080 --> 0:18:29.040 to decide which those are. Are we more worried about NAFTA, 0:18:29.080 --> 0:18:30.919 or be more worried about Korea, or may be more 0:18:30.960 --> 0:18:34.359 worried about China? Are we more worried about Germany? What's 0:18:34.400 --> 0:18:37.240 the order of priority? And how is the United States 0:18:37.240 --> 0:18:39.000 going to go after these we we we may know 0:18:39.160 --> 0:18:42.679 more very soon when the announcements are made with respect 0:18:42.760 --> 0:18:45.480 to China trade policy, which are which are coming soon. 0:18:45.520 --> 0:18:48.399 But I'm hoping to get some clear sense of the 0:18:48.520 --> 0:18:52.879 hierarchy of priorities for this administration on trade. Well, the 0:18:52.880 --> 0:18:56.280 most recent news perhaps is the Bombardier deal. Right. Bombardier 0:18:56.359 --> 0:18:59.600 can now start shipping those C series jets to Delta 0:18:59.680 --> 0:19:01.960 air Lines because of that ruling of the U. S 0:19:02.000 --> 0:19:05.680 Trade Panel that was on Friday, Right, And so that 0:19:05.840 --> 0:19:08.520 means that Boeing isn't going to get what it wants. 0:19:08.880 --> 0:19:10.800 Is this an indication of the kind of things you're 0:19:10.800 --> 0:19:14.040 talking about? Well, I mean you can't necessarily conflate this 0:19:14.119 --> 0:19:16.719 with the Trump administration's policy. That decision was made by 0:19:16.720 --> 0:19:20.200 the International Trade Commission, which is an independent body, long 0:19:20.320 --> 0:19:23.480 history of independence. They looked into the case and simply said, 0:19:23.600 --> 0:19:26.879 you know, Boeing's claim for having been injured doesn't hold up, 0:19:26.920 --> 0:19:28.400 and I think a lot of the analysts looking at 0:19:28.400 --> 0:19:31.280 it thought that was the correct decision. Um Interestingly, though, 0:19:31.280 --> 0:19:34.040 those planes are now coming from Alabama. I mean, bombard 0:19:34.040 --> 0:19:36.240 you entered into a joint venture with Airbus to produce 0:19:36.280 --> 0:19:38.639 them inside the United States, in part because they were 0:19:38.680 --> 0:19:40.800 having their own problems, but in part to get around 0:19:40.800 --> 0:19:43.800 what they feared would be tariffs. So so it doesn't 0:19:43.800 --> 0:19:46.920 that end up being a good thing for the United States. Absolutely, 0:19:46.960 --> 0:19:49.240 I mean one of the really interesting things about Trump's 0:19:49.280 --> 0:19:52.400 policy is that in the short run, it can pay 0:19:52.440 --> 0:19:54.960 some benefits. I mean you look at h at the 0:19:54.960 --> 0:19:58.000 announcement by Chrysler to bring its light truck production back 0:19:58.000 --> 0:20:00.719 from Mexico. That was a hedge a against the NAFTA 0:20:00.760 --> 0:20:03.200 going away, which would have meant that those vehicles face 0:20:03.280 --> 0:20:06.960 to tariff. You look at the announcements by Apple, you 0:20:07.000 --> 0:20:10.040 look at the expansion announcements by Toyota. I mean, companies 0:20:10.040 --> 0:20:12.720 are trying to say to the President, yeah, we're going 0:20:12.800 --> 0:20:15.600 to bed big on America, and and the tax reform helps, right, 0:20:16.480 --> 0:20:18.439 corporate tax looks a heck of a lot better than 0:20:19.440 --> 0:20:22.320 So there's no question it can pay some benefits. Question 0:20:22.359 --> 0:20:25.600 is do other countries respond in ways that harm us 0:20:25.640 --> 0:20:28.080 export interests? We have seen that, yet we have we 0:20:28.160 --> 0:20:33.760 have economists at all explained to us the trade dynamics 0:20:33.800 --> 0:20:37.359 against savings equal investment and all that. Let's have you do. 0:20:37.440 --> 0:20:42.639 It is a more international relations specialist. When we say 0:20:42.960 --> 0:20:46.480 deficits are bad or surpluses are bad, that's confusing to 0:20:46.560 --> 0:20:50.000 our listeners. What do we want? Do we want a 0:20:50.040 --> 0:20:52.840 little deficit, do we want a surplus? What? What is 0:20:52.960 --> 0:20:55.919 the goal? I mean? I think the goal should be 0:20:56.000 --> 0:20:59.720 global economic growth, and we obviously want a big piece 0:20:59.720 --> 0:21:01.720 of that. And that's where the focus on the depth. 0:21:01.800 --> 0:21:05.320 That doesn't necessarily make a lot of sense because generally speaking, 0:21:05.359 --> 0:21:08.320 when the U. S economy grows more strongly, the trade 0:21:08.359 --> 0:21:11.439 deficit goes up. Um that said, you know, there are 0:21:11.480 --> 0:21:13.119 things you don't want to do. You don't want to 0:21:13.160 --> 0:21:16.879 be running a big budget deficit, which US government has 0:21:16.920 --> 0:21:18.760 been doing for a long time. You don't want a 0:21:18.840 --> 0:21:22.119 currency that's too strong that knocks you out of global markets. 0:21:22.160 --> 0:21:24.480 And I have some sympathy with the Trump administration on 0:21:24.560 --> 0:21:27.040 that one. So so I don't think the trade deficit 0:21:27.119 --> 0:21:31.040 alone is a good metric. But attracting investment, attracting jobs, 0:21:31.040 --> 0:21:33.320 boosting exports, those are all good things that we want 0:21:33.359 --> 0:21:36.800 to pay attention to as a country. Tell all the 0:21:37.960 --> 0:21:54.639 concept formulations failure to adjustice is wonderful booking. Are you 0:21:54.800 --> 0:21:59.440 gallows with Federated, which runs a huge amount of coupon money. 0:21:59.440 --> 0:22:03.240 His focus, he's on municipal bonds. He's had of something 0:22:03.520 --> 0:22:07.440 called the duration committee. R J. Gallo, with your experience 0:22:07.520 --> 0:22:11.280 in in fixed income, what does the duration committee do 0:22:11.359 --> 0:22:15.160 at a shop like Federated? Good morning Tom and him 0:22:15.200 --> 0:22:18.080 and thanks for having me um. Our main role on 0:22:18.119 --> 0:22:22.800 the Duration Committee is to make tactical calls on the 0:22:22.840 --> 0:22:26.760 direction of underlying US market yields, focusing on treasuries obviously 0:22:26.760 --> 0:22:29.439 the you know, sort of the basis for US fixed income. 0:22:30.119 --> 0:22:33.639 Our goal there is to generate alpha, generate access return 0:22:34.440 --> 0:22:37.639 by shading our duration shorter along depending upon what we 0:22:37.720 --> 0:22:41.520 expect from a macroeconomic context and a market outcome. Uh. 0:22:41.560 --> 0:22:43.640 You know, it's a it's a tough job. Calling rates 0:22:43.720 --> 0:22:45.840 is never an easy thing to do, especially with massive 0:22:46.200 --> 0:22:48.920 central bank balance sheets. But that's our goal. Okay, what's 0:22:48.960 --> 0:22:52.719 the level of sweat at the esteemed Federated group this morning? 0:22:52.760 --> 0:22:55.199 And I say that in the sense of all of 0:22:55.200 --> 0:23:00.240 our listeners understand yield up, price down. We're it is 0:23:00.320 --> 0:23:06.480 Federated hide in two thousand. Well, uh, it's interesting you 0:23:06.840 --> 0:23:09.160 say that we we we meet on an ad hoc 0:23:09.240 --> 0:23:12.600 basis and at least monthly to to adjust our duration call. 0:23:12.720 --> 0:23:16.440