1 00:00:00,120 --> 00:00:02,920 Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in 2 00:00:03,000 --> 00:00:07,840 Speaker 1: local communities, economies and a sustainable future. That's the power 3 00:00:08,080 --> 00:00:12,360 Speaker 1: of global connections. Mary Lynch, Pierce Fenner and Smith Incorporated 4 00:00:12,760 --> 00:00:27,400 Speaker 1: Member s i p C. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:27,800 --> 00:00:31,520 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:31,560 --> 00:00:36,600 Speaker 1: insight from the best in economics, finance, investment, and international relations. 7 00:00:37,000 --> 00:00:41,600 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 8 00:00:41,680 --> 00:00:49,479 Speaker 1: of course, on the Bloomberg. A little earlier today, our 9 00:00:49,520 --> 00:00:52,280 Speaker 1: colleague Francine Locke sat down with the Managing Director of 10 00:00:52,280 --> 00:00:55,440 Speaker 1: the International Monetary Fund at Christine Legarde in Brussels. She 11 00:00:55,480 --> 00:00:57,520 Speaker 1: had given a speech there on some of the risks 12 00:00:57,520 --> 00:00:59,520 Speaker 1: that the I m F is focusing on, among them 13 00:00:59,520 --> 00:01:03,400 Speaker 1: protect is M and political uncertainty. Let's take a listen 14 00:01:03,440 --> 00:01:06,240 Speaker 1: to what she had to say. Protection is M is 15 00:01:06,400 --> 00:01:10,800 Speaker 1: clearly a threat and one that if it was to 16 00:01:10,880 --> 00:01:15,600 Speaker 1: be realized, would would really be a break on growth, 17 00:01:15,959 --> 00:01:19,200 Speaker 1: would be a break on productivity, would be a break 18 00:01:19,360 --> 00:01:25,840 Speaker 1: on investment, because we are seeing that both innovation and 19 00:01:25,920 --> 00:01:31,480 Speaker 1: trade are conducive to productivity. Productivity is the engine for 20 00:01:31,520 --> 00:01:35,759 Speaker 1: growth and better allocation of resources. So, you know, as 21 00:01:35,800 --> 00:01:39,720 Speaker 1: part of the risks that we see clearly protectionism is one. 22 00:01:40,600 --> 00:01:44,119 Speaker 1: The political uncertainty that we see around the world, particularly 23 00:01:44,160 --> 00:01:49,560 Speaker 1: in the European region is also high on our agenda 24 00:01:49,600 --> 00:01:54,080 Speaker 1: of risks. And you know, the potential for capital flows 25 00:01:54,720 --> 00:01:58,320 Speaker 1: moving from emerging market economies to advanced economies as a 26 00:01:58,360 --> 00:02:01,440 Speaker 1: result of the reinforcement of a dollar and a rise 27 00:02:01,480 --> 00:02:04,200 Speaker 1: of interest rates is a third one. Those are the 28 00:02:04,240 --> 00:02:08,800 Speaker 1: sort of three rieks risks um that apply to a 29 00:02:08,840 --> 00:02:13,239 Speaker 1: situation which you know is quite positive at the moment. 30 00:02:13,600 --> 00:02:15,919 Speaker 1: Do you believe that the Trump administration, though, could be 31 00:02:16,000 --> 00:02:19,720 Speaker 1: less protection is that we feared just at the early 32 00:02:19,720 --> 00:02:24,560 Speaker 1: in the beginning of January. You know, as as always, 33 00:02:25,120 --> 00:02:32,480 Speaker 1: I don't think that any economy would actually um prescribe 34 00:02:33,200 --> 00:02:40,320 Speaker 1: limited growth, limited productivity, limited investment, limited innovation. So if 35 00:02:40,360 --> 00:02:48,120 Speaker 1: if policymakers, including the US policymakers, want better growth, more investment, 36 00:02:48,400 --> 00:02:52,720 Speaker 1: more innovation and productivity, trade is part of the solution. Now, 37 00:02:52,760 --> 00:02:55,400 Speaker 1: then you go into the question of what kind of trade. 38 00:02:56,120 --> 00:02:59,960 Speaker 1: Is it trade with restriction, is it trade with distort 39 00:03:00,000 --> 00:03:02,760 Speaker 1: if measures, and I think everybody, I hope I would 40 00:03:02,800 --> 00:03:06,120 Speaker 1: agree that we do not want distortions. We do not 41 00:03:06,320 --> 00:03:10,480 Speaker 1: want restrictions. We want a trade that is open, that 42 00:03:10,720 --> 00:03:26,720 Speaker 1: is fair and inclusive in order to facilitate opportunities. Great 43 00:03:26,720 --> 00:03:28,320 Speaker 1: to have with us. Mark Chandler had of f X 44 00:03:28,360 --> 00:03:30,760 Speaker 1: at Brown Brothers hereman here in our Bloomberg eleven three 45 00:03:30,800 --> 00:03:33,079 Speaker 1: oh studios. Since I was doing that day to check Mark, 46 00:03:33,120 --> 00:03:35,520 Speaker 1: I was remiss and not mentioning euro yen right now 47 00:03:35,640 --> 00:03:40,760 Speaker 1: one you've been paying particularly close attention to that pair. Why, yeah, sure. 48 00:03:40,920 --> 00:03:43,960 Speaker 1: I think that that euro yen parents captures the axis 49 00:03:44,040 --> 00:03:46,160 Speaker 1: and which you can capture a lot of the driving 50 00:03:46,200 --> 00:03:50,840 Speaker 1: forces right now between the geopolitical concerns in Syria and 51 00:03:50,920 --> 00:03:54,080 Speaker 1: in Korea peninsula as well as the French elections. And 52 00:03:54,120 --> 00:03:57,240 Speaker 1: so that euro yen cross has been moving against the 53 00:03:57,280 --> 00:04:00,840 Speaker 1: Euro for eleven days in a row through yesterday, and 54 00:04:00,880 --> 00:04:03,520 Speaker 1: that's the longest losing streak the euro has had against 55 00:04:03,560 --> 00:04:06,400 Speaker 1: the Japanese yen since the advent of the euro back 56 00:04:06,400 --> 00:04:09,120 Speaker 1: in the late nineties. Does it does it reflect entirely 57 00:04:09,160 --> 00:04:11,320 Speaker 1: geopolitics or is there something else to play when you 58 00:04:11,320 --> 00:04:14,600 Speaker 1: look at the Japanese economy sign well, the Japanese economy 59 00:04:14,640 --> 00:04:16,600 Speaker 1: and the euros on economy is growing. It looks like 60 00:04:16,640 --> 00:04:20,400 Speaker 1: above trend here in Q one as the as both 61 00:04:20,440 --> 00:04:23,279 Speaker 1: economies seem to be catching a good uh sort of 62 00:04:23,320 --> 00:04:27,080 Speaker 1: good traction here. But I think that the you're the 63 00:04:27,160 --> 00:04:29,880 Speaker 1: dollar yen itself. I think it's a relationship that's really 64 00:04:29,960 --> 00:04:32,279 Speaker 1: driven right now by the ten year US yield. And 65 00:04:32,320 --> 00:04:34,200 Speaker 1: so even though a lot of people talked about the 66 00:04:34,279 --> 00:04:37,400 Speaker 1: yen strength yesterday at safe Haven, I don't only see 67 00:04:37,440 --> 00:04:39,600 Speaker 1: that so much. I see short covering of the end, 68 00:04:39,800 --> 00:04:42,000 Speaker 1: but I think it's really being driven by the drop 69 00:04:42,000 --> 00:04:44,400 Speaker 1: in US yields. You know, we were trading roughly to 70 00:04:44,640 --> 00:04:47,719 Speaker 1: thirty two sixty on the tenure UH for several months, 71 00:04:47,960 --> 00:04:49,880 Speaker 1: and we broke through the downside of that and find 72 00:04:49,920 --> 00:04:52,400 Speaker 1: it difficult to get back into that old range, you know, 73 00:04:52,440 --> 00:04:54,119 Speaker 1: Mark chand Are. One of the things I was looking 74 00:04:54,120 --> 00:04:56,640 Speaker 1: at is I was comparing equity markets and going back 75 00:04:56,680 --> 00:05:00,320 Speaker 1: about thirty days, I was checking on the Japanese equity market, 76 00:05:00,360 --> 00:05:02,520 Speaker 1: taking a look also at the SMP five. It looks 77 00:05:02,520 --> 00:05:04,640 Speaker 1: like we've done a round turn. That's so we've just 78 00:05:04,720 --> 00:05:07,760 Speaker 1: come and sort of lapped ourselves almost. Is there any 79 00:05:08,480 --> 00:05:11,960 Speaker 1: context that you can help us understand why this is happening. 80 00:05:11,960 --> 00:05:14,640 Speaker 1: Why we seem to have this uh sort of On 81 00:05:14,680 --> 00:05:17,200 Speaker 1: the one hand, you know, people get bullish, they wait 82 00:05:17,240 --> 00:05:20,160 Speaker 1: for earnings to come out, then everybody sells. Is it 83 00:05:20,320 --> 00:05:22,279 Speaker 1: just really you know, by the news, sell the room 84 00:05:23,320 --> 00:05:25,479 Speaker 1: the otherwise, sell the news by the room or sell 85 00:05:25,520 --> 00:05:27,599 Speaker 1: the news. Yeah, I think that, you know, Brown Brothers, 86 00:05:27,720 --> 00:05:30,240 Speaker 1: we really help our clients through value investing in the problem. 87 00:05:30,360 --> 00:05:32,480 Speaker 1: Right now, there's not a lot of value with stock markets. 88 00:05:32,839 --> 00:05:35,719 Speaker 1: The US stock marketing record highs, many other stock markets 89 00:05:35,720 --> 00:05:37,960 Speaker 1: that had big rallies. Emerging markets have been a real 90 00:05:38,000 --> 00:05:40,120 Speaker 1: surprise in the first quarter up I want to say 91 00:05:40,160 --> 00:05:43,039 Speaker 1: about eight percent or so. The Japanese stock market is 92 00:05:43,040 --> 00:05:45,040 Speaker 1: really making new loads for the year I think yesterday 93 00:05:45,080 --> 00:05:47,599 Speaker 1: or today, and this I think is really reflection of 94 00:05:47,800 --> 00:05:50,919 Speaker 1: the value that we have before, but also the young strength. 95 00:05:51,279 --> 00:05:53,840 Speaker 1: You know, foreigners have been big sellers of Japanese stocks 96 00:05:53,880 --> 00:05:57,040 Speaker 1: most of this year. Very end of March they turned buyers. 97 00:05:57,279 --> 00:05:59,400 Speaker 1: And I suspect that the new fiscal year begins, we'll 98 00:05:59,400 --> 00:06:02,600 Speaker 1: see Japanese capital outflows resume and we'll see foreigners again 99 00:06:02,720 --> 00:06:07,560 Speaker 1: looking at Japanese stocks. As far as the political situation 100 00:06:07,600 --> 00:06:10,599 Speaker 1: goes in in Asia and North Korea. I'm sure that's 101 00:06:10,640 --> 00:06:13,040 Speaker 1: something that you didn't go to school to learn how 102 00:06:13,080 --> 00:06:15,479 Speaker 1: to write about or even think about a factor into 103 00:06:15,560 --> 00:06:19,160 Speaker 1: your analysis. But how do you do that? Yeah? So 104 00:06:19,600 --> 00:06:21,200 Speaker 1: how do people like me look at a couple of things. 105 00:06:21,200 --> 00:06:23,719 Speaker 1: One is we try to understand what's happening, and we 106 00:06:23,720 --> 00:06:26,320 Speaker 1: try to make scenarios about what's going to happen. And 107 00:06:26,360 --> 00:06:28,560 Speaker 1: I think that, you know, the Korean Peninsula is one 108 00:06:28,560 --> 00:06:31,720 Speaker 1: of the left the last of the Cold War sort 109 00:06:31,720 --> 00:06:35,119 Speaker 1: of challenges, and I think that there's you know, it's 110 00:06:35,400 --> 00:06:38,120 Speaker 1: what's really challenging about it is when East when West 111 00:06:38,160 --> 00:06:40,840 Speaker 1: Germany had that leveraged biout of East Germany after the 112 00:06:40,880 --> 00:06:43,599 Speaker 1: Berlin Wall fell, Germany decided to do it on zone 113 00:06:44,240 --> 00:06:48,240 Speaker 1: finance the takeover. But South Korea is not rich enough 114 00:06:48,480 --> 00:06:51,280 Speaker 1: it will do that for North Korea. So it's much 115 00:06:51,279 --> 00:06:53,480 Speaker 1: more of an internationally. And East Germany did not have 116 00:06:53,560 --> 00:06:56,520 Speaker 1: nuclear weapons. East Joreman did have nuclear weapons. But the 117 00:06:56,600 --> 00:07:00,040 Speaker 1: idea is that how can how could the create to 118 00:07:00,240 --> 00:07:02,880 Speaker 1: be united? Is that anybody's interest to really put this 119 00:07:03,040 --> 00:07:05,560 Speaker 1: conflict to rest? And I don't think China would like 120 00:07:05,600 --> 00:07:09,560 Speaker 1: the Korean Peninsula dominated by South Korea US interest. I 121 00:07:09,600 --> 00:07:12,600 Speaker 1: don't think Japan would like a United Korean peninsula where 122 00:07:12,600 --> 00:07:15,480 Speaker 1: it would be a real rival to the Japanese economic 123 00:07:15,760 --> 00:07:18,960 Speaker 1: UH power in in East Asia as well. So I'm 124 00:07:18,960 --> 00:07:20,840 Speaker 1: not sure that anybody has It's sort of like the 125 00:07:20,840 --> 00:07:23,840 Speaker 1: Middle East. Everybody complains about it, and I see that. 126 00:07:23,920 --> 00:07:25,480 Speaker 1: Of course, people try to do things about it, but 127 00:07:25,480 --> 00:07:26,760 Speaker 1: at the end of the day, it might not be 128 00:07:26,800 --> 00:07:29,600 Speaker 1: in the collective interest to really resolve these conflicts, which 129 00:07:29,640 --> 00:07:31,920 Speaker 1: is why they're not resolved. Help us understand how you 130 00:07:32,000 --> 00:07:35,600 Speaker 1: weigh the political risk versus the fundamentals. UH is political 131 00:07:35,720 --> 00:07:38,840 Speaker 1: risk taking precedence at this point, and that's a good question. 132 00:07:38,840 --> 00:07:40,720 Speaker 1: I think that, you know, I start of think of 133 00:07:40,720 --> 00:07:43,640 Speaker 1: it like this, that's it's like a radio actually the markets, 134 00:07:43,680 --> 00:07:45,960 Speaker 1: and I think that sometimes there's noise and sometimes there's 135 00:07:45,960 --> 00:07:49,000 Speaker 1: a signal. And I think that people like myself, our 136 00:07:49,120 --> 00:07:52,240 Speaker 1: job is trying to help investors distinguish between the noise 137 00:07:52,240 --> 00:07:55,280 Speaker 1: and the signal. And I think that the underlying macroeconomic 138 00:07:55,320 --> 00:07:59,720 Speaker 1: fundamentals are the ultimate signal, and the geopolitics is noise, 139 00:07:59,800 --> 00:08:02,400 Speaker 1: though important noise around that signal. And so I think 140 00:08:02,400 --> 00:08:04,480 Speaker 1: it's sort of a bit of a disruption. But I 141 00:08:04,520 --> 00:08:07,560 Speaker 1: think that the geopolitical situation is not something that can 142 00:08:07,560 --> 00:08:09,640 Speaker 1: be sustained. A high level of tension like this cannot 143 00:08:09,640 --> 00:08:11,760 Speaker 1: be sustained. Something has to give, and I think that 144 00:08:11,800 --> 00:08:14,480 Speaker 1: we go back into a more stable situation as we 145 00:08:14,520 --> 00:08:17,960 Speaker 1: get past this this coming weekend. How cognizant is this administration? 146 00:08:17,960 --> 00:08:20,080 Speaker 1: Do you think about what the markets are thinking? We 147 00:08:20,120 --> 00:08:21,920 Speaker 1: can ask about this in the context of the FED 148 00:08:21,920 --> 00:08:24,280 Speaker 1: as well, and you certainly heard from some FED speakers 149 00:08:24,280 --> 00:08:26,800 Speaker 1: that they are aware of or interested in what the 150 00:08:26,800 --> 00:08:28,680 Speaker 1: markets are are doing. But for a guy like you 151 00:08:28,800 --> 00:08:32,360 Speaker 1: trying to find out what administration's policies are, uh, you know, 152 00:08:32,520 --> 00:08:35,120 Speaker 1: do you think there's some sympathy for people the markets, 153 00:08:35,160 --> 00:08:37,400 Speaker 1: for people that's just generally here trying to figure out 154 00:08:37,440 --> 00:08:39,199 Speaker 1: what the heck is going on? I think that's really 155 00:08:39,200 --> 00:08:41,360 Speaker 1: the challenge. I just come back from a long business 156 00:08:41,400 --> 00:08:43,080 Speaker 1: trip in Asia, and I think this is the key 157 00:08:43,160 --> 00:08:47,800 Speaker 1: question everybody has, is the Trump administration unknown quantity. I 158 00:08:47,840 --> 00:08:51,120 Speaker 1: know that there's some experienced people there in the in 159 00:08:51,160 --> 00:08:53,120 Speaker 1: the cabinet, but there's a lot of people with little 160 00:08:53,120 --> 00:08:57,360 Speaker 1: political experience, with little knowledge experience in foreign policy. And 161 00:08:57,400 --> 00:09:00,319 Speaker 1: I think that the communication style all this adds to 162 00:09:00,480 --> 00:09:04,440 Speaker 1: uncertainties signals that are being sent inadvertedly, and so I 163 00:09:04,440 --> 00:09:07,120 Speaker 1: think this is what makes the investment climate all the 164 00:09:07,160 --> 00:09:11,520 Speaker 1: more difficult, uncertainty of policy, untested quantities out there. So 165 00:09:11,600 --> 00:09:13,679 Speaker 1: I think there's a real challenge. But what we try 166 00:09:13,720 --> 00:09:16,000 Speaker 1: to do is still focus on the underlying signal, and 167 00:09:16,040 --> 00:09:18,880 Speaker 1: that's going to be reversion back to macroeconomics, and they're 168 00:09:18,920 --> 00:09:22,520 Speaker 1: the key issue is FED policy, tightening of FED policy, 169 00:09:23,160 --> 00:09:25,800 Speaker 1: balance sheet and what other central banks will do. Bank 170 00:09:25,840 --> 00:09:28,760 Speaker 1: of Japan is still easing policy, e c B is 171 00:09:28,800 --> 00:09:31,760 Speaker 1: still expanding its balance sheet. So I think that the 172 00:09:31,880 --> 00:09:35,760 Speaker 1: divergence still underpins a large, a long dollar position in 173 00:09:35,800 --> 00:09:37,440 Speaker 1: the long run, but we got this noise in the 174 00:09:37,440 --> 00:09:41,360 Speaker 1: short run. Tell us about China and the Chinese you want, 175 00:09:41,600 --> 00:09:45,240 Speaker 1: and I know that Stephen Schwarzman, the head of Black 176 00:09:45,640 --> 00:09:49,599 Speaker 1: black Stone, yesterday was speaking on Bloomberg Television with the 177 00:09:49,679 --> 00:09:54,360 Speaker 1: David Weston in which he spoke about China as a 178 00:09:54,480 --> 00:09:57,400 Speaker 1: currency manipulator, and the point that he made, I believe 179 00:09:57,520 --> 00:09:59,800 Speaker 1: was that he doesn't think that that's going to be 180 00:09:59,840 --> 00:10:02,720 Speaker 1: a label that will get put on the Chinese. Yeah, 181 00:10:02,720 --> 00:10:05,439 Speaker 1: that's my view as well. I think that oftentimes in 182 00:10:05,520 --> 00:10:09,640 Speaker 1: campaigns I think Bush, Obama, Romney all talked about China 183 00:10:09,679 --> 00:10:12,280 Speaker 1: manipulating the currency. It may have in the past, but 184 00:10:12,360 --> 00:10:15,679 Speaker 1: the Treasury Department has come up with a criteria and 185 00:10:15,800 --> 00:10:18,600 Speaker 1: China just doesn't make the criteria. For example, one of 186 00:10:18,600 --> 00:10:21,720 Speaker 1: the criteria is that that a country has a large 187 00:10:21,960 --> 00:10:25,440 Speaker 1: by that they mean more than three percent current account surplus. 188 00:10:26,280 --> 00:10:28,520 Speaker 1: China is close to half of that. I think last 189 00:10:28,600 --> 00:10:32,000 Speaker 1: year is about one point eight percent. Another criteria is 190 00:10:32,040 --> 00:10:36,160 Speaker 1: a country that has increasing currency reserves as they intervene 191 00:10:36,200 --> 00:10:38,400 Speaker 1: in the foreign exchange market. And as we know, over 192 00:10:38,400 --> 00:10:41,480 Speaker 1: the last eighteen months or so, China's reserves have fallen 193 00:10:41,520 --> 00:10:44,559 Speaker 1: by a trillion dollars. A trillion dollars there's more reserves 194 00:10:44,559 --> 00:10:49,040 Speaker 1: in the US Canada have combined. And so again China 195 00:10:49,040 --> 00:10:50,880 Speaker 1: dosn't meet this criteria. And I think this is we 196 00:10:50,920 --> 00:10:54,880 Speaker 1: have to make a distinction between operational policy and declaratory policy. 197 00:10:54,960 --> 00:10:57,040 Speaker 1: How how is that shown up in the market. In 198 00:10:57,080 --> 00:10:59,280 Speaker 1: other words, if if some one didn't tell you that 199 00:10:59,320 --> 00:11:02,920 Speaker 1: the Chinese uh this trillion dollars hadn't flooded out, where 200 00:11:02,920 --> 00:11:06,000 Speaker 1: would you go to see it and understand where it 201 00:11:06,080 --> 00:11:08,480 Speaker 1: ended up going? Yeah, well, this gets a little bit tricky. 202 00:11:08,520 --> 00:11:09,599 Speaker 1: I don't think you can really just look at the 203 00:11:09,600 --> 00:11:12,280 Speaker 1: foreign exchange market because the currency, the R and B, 204 00:11:12,520 --> 00:11:14,880 Speaker 1: is very steady against the dollar. I don't think you 205 00:11:14,880 --> 00:11:16,880 Speaker 1: can look at the Chinese stock market. It's being driven 206 00:11:16,880 --> 00:11:19,080 Speaker 1: by other things. What I would be looking at is 207 00:11:19,120 --> 00:11:22,319 Speaker 1: really is the Chinese companies that borrowed dollars that are 208 00:11:22,320 --> 00:11:24,800 Speaker 1: paying them back, and that the i i f TO 209 00:11:24,880 --> 00:11:27,959 Speaker 1: Institute for the National Finance said that about two thirds 210 00:11:28,040 --> 00:11:31,559 Speaker 1: or those capital outflows from China are really Chinese companies 211 00:11:31,559 --> 00:11:34,800 Speaker 1: who borrowed dollars paying them back. So I'd be looking 212 00:11:34,800 --> 00:11:36,920 Speaker 1: at those kind of below the surface things that are 213 00:11:36,840 --> 00:11:39,520 Speaker 1: a bit bit more difficult, too difficult to find. But 214 00:11:39,559 --> 00:11:43,959 Speaker 1: are there, nonetheless those Chinese companies that are in debt 215 00:11:44,400 --> 00:11:46,520 Speaker 1: and they're paying back in US dollars they borrow the 216 00:11:46,559 --> 00:11:48,520 Speaker 1: dollars and when the dollars and index for that or 217 00:11:48,559 --> 00:11:50,440 Speaker 1: something I mean is there. You just gotta go company 218 00:11:50,440 --> 00:11:52,160 Speaker 1: by company by company and you have to look at 219 00:11:52,160 --> 00:11:54,440 Speaker 1: really what's behind the capital flows. I think a lot 220 00:11:54,480 --> 00:11:56,360 Speaker 1: of us look at the trade flows, but I really 221 00:11:56,360 --> 00:11:58,000 Speaker 1: think that behind the trade flows that was a sort 222 00:11:58,040 --> 00:12:00,360 Speaker 1: of our parents generation. But I think now it's the 223 00:12:00,400 --> 00:12:02,640 Speaker 1: capital market that drives the trade flows, not the other 224 00:12:02,679 --> 00:12:05,440 Speaker 1: way around. David Grew with Pim Fox today, Tom keene 225 00:12:05,480 --> 00:12:07,840 Speaker 1: Off this week, Mark Chandler with us from Brown Brothers. 226 00:12:07,840 --> 00:12:09,560 Speaker 1: Hariman and Mark and I were listening to the interview 227 00:12:09,600 --> 00:12:12,199 Speaker 1: that Francine Lockwood did with Christine Lagard just a few 228 00:12:12,200 --> 00:12:15,360 Speaker 1: minutes ago. She was enumerating risks Mark. She said, it's protectionism, 229 00:12:15,720 --> 00:12:18,800 Speaker 1: political uncertainty. We've talked about both those in some detail. 230 00:12:18,880 --> 00:12:21,679 Speaker 1: That she said, potential for capital flows moving, How does 231 00:12:21,720 --> 00:12:23,800 Speaker 1: that play out in an economy that she says is 232 00:12:24,320 --> 00:12:26,800 Speaker 1: quote quite positive at the moment. Yeah. I think when 233 00:12:26,840 --> 00:12:29,920 Speaker 1: she was getting at David was that typically you'd want 234 00:12:29,920 --> 00:12:33,680 Speaker 1: to see the developed world lend money and invest in 235 00:12:33,720 --> 00:12:37,880 Speaker 1: emerging markets. But really characterized really the pre crisis era, 236 00:12:38,240 --> 00:12:41,560 Speaker 1: pre crisis phase at least was capital flows going from 237 00:12:41,559 --> 00:12:44,680 Speaker 1: emerging markets back to the developed world. And I think 238 00:12:44,720 --> 00:12:47,000 Speaker 1: that the stabilized and the other issue I think that 239 00:12:47,080 --> 00:12:49,480 Speaker 1: the capital flow issue raises is what Pim and I 240 00:12:49,520 --> 00:12:51,760 Speaker 1: had talked about before, and that is that many countries 241 00:12:51,800 --> 00:12:54,719 Speaker 1: and companies borrowed dollars when U S interrust rates were 242 00:12:54,720 --> 00:12:57,359 Speaker 1: low and the dollar was cheap. And now that that 243 00:12:57,360 --> 00:13:00,400 Speaker 1: that cycle is reversing. It looks like there's some dollar 244 00:13:00,520 --> 00:13:04,600 Speaker 1: imbalances out there still, and that becomes also a destabilizing element. 245 00:13:05,040 --> 00:13:08,119 Speaker 1: Francy asked her about China being labeled the currency manipulator, 246 00:13:08,160 --> 00:13:11,120 Speaker 1: the prospect for that happening, and she demurred. Talking about 247 00:13:11,120 --> 00:13:12,559 Speaker 1: the report the I m F is going to release 248 00:13:12,600 --> 00:13:14,040 Speaker 1: here in a couple of months. I noticed the same 249 00:13:14,080 --> 00:13:17,080 Speaker 1: thing happening now within the Trump administration, Stephen Nutan saying 250 00:13:17,120 --> 00:13:19,000 Speaker 1: we're gonna get this forex report, this twice a year 251 00:13:19,320 --> 00:13:21,960 Speaker 1: FX report soon and uh, you know, not not having 252 00:13:21,960 --> 00:13:24,840 Speaker 1: the hot rhetoric that we saw on the campaign trail. Certainly, 253 00:13:25,360 --> 00:13:26,920 Speaker 1: are you ruling that out at this point in light 254 00:13:26,920 --> 00:13:29,400 Speaker 1: of what we're hearing from from the US the U S. Government, 255 00:13:29,400 --> 00:13:31,120 Speaker 1: Do you think it's unlikely that we'll see that that 256 00:13:31,200 --> 00:13:33,800 Speaker 1: labeling happen? In some ways, I think it's unlikely. But 257 00:13:33,840 --> 00:13:36,120 Speaker 1: on the other hand, look at what happened when Japanese 258 00:13:36,120 --> 00:13:39,319 Speaker 1: Prime Minister Abbe visited the US. UH the U S 259 00:13:39,400 --> 00:13:42,280 Speaker 1: and Japan agreed to a high level between the Vice 260 00:13:42,320 --> 00:13:44,960 Speaker 1: President and the Japanese Finance minister to having to have 261 00:13:45,040 --> 00:13:48,680 Speaker 1: trade talks. And now after President she visited the United States, 262 00:13:48,679 --> 00:13:50,680 Speaker 1: the US and China are going to be a hundred 263 00:13:50,720 --> 00:13:54,320 Speaker 1: day crash negotiations on a cabinet level. And it turns 264 00:13:54,360 --> 00:13:57,120 Speaker 1: out that if a country is found guilty of manipulation 265 00:13:57,160 --> 00:13:59,320 Speaker 1: by the U S Tradure Department, the first thing that 266 00:13:59,360 --> 00:14:02,520 Speaker 1: has to happen bilateral trade talks. So I think that 267 00:14:02,640 --> 00:14:05,080 Speaker 1: for me, it's the reason that China doesn't get sady. 268 00:14:05,080 --> 00:14:07,760 Speaker 1: The currency manipulated is one that doesn't meet the criteria. 269 00:14:07,880 --> 00:14:11,400 Speaker 1: And secondly, because there's already these trade talks in place. 270 00:14:11,679 --> 00:14:14,599 Speaker 1: And I think this is really partly the Trump negotiating 271 00:14:14,600 --> 00:14:18,160 Speaker 1: type strategy. Make these outlandish claims and then get the 272 00:14:18,200 --> 00:14:21,440 Speaker 1: other side to uh, to compromise, to make some concessions, 273 00:14:21,480 --> 00:14:22,960 Speaker 1: and then you can pull back, that is, the US 274 00:14:22,960 --> 00:14:25,840 Speaker 1: can pull back from some extreme operation excuse me, some 275 00:14:26,120 --> 00:14:29,920 Speaker 1: extreme declaratory policy, Mark Chandler, Can I just ask you? 276 00:14:29,960 --> 00:14:32,080 Speaker 1: And I know I'm putting in a tough position because 277 00:14:32,440 --> 00:14:35,600 Speaker 1: talking about other people's credibility is always a fool's errand 278 00:14:35,640 --> 00:14:38,080 Speaker 1: but um, you know, we are how many years into 279 00:14:38,160 --> 00:14:43,200 Speaker 1: the Greek crisis eight years? Uh, you have um a 280 00:14:43,280 --> 00:14:46,840 Speaker 1: situation now where a fifth of the Greek population is 281 00:14:46,840 --> 00:14:51,320 Speaker 1: currently unemployed, and that's being generous with the statistics. Uh, 282 00:14:51,360 --> 00:14:54,760 Speaker 1: you're talking about a hundred and eighty percent debt to 283 00:14:54,920 --> 00:14:58,960 Speaker 1: GDP plus about two and a half billion euros has 284 00:14:59,040 --> 00:15:02,359 Speaker 1: just gone out of Greek banks in January and February 285 00:15:02,360 --> 00:15:05,920 Speaker 1: of this year. If you can't solve a problem like Greece, 286 00:15:05,960 --> 00:15:09,160 Speaker 1: which I understand is about the economy, the size of Philadelphia, 287 00:15:09,880 --> 00:15:12,640 Speaker 1: what credibility do you have to talk about all the 288 00:15:12,720 --> 00:15:16,080 Speaker 1: other efforts that are going on around the world. And 289 00:15:16,400 --> 00:15:17,880 Speaker 1: I think that you know, I think that him. This 290 00:15:17,920 --> 00:15:20,480 Speaker 1: is I think a issue that people haven't focused on yet. 291 00:15:20,920 --> 00:15:22,440 Speaker 1: It's coming up. It's gonna coming to a head in 292 00:15:22,440 --> 00:15:24,400 Speaker 1: the next couple of months. And here's what the issue is. 293 00:15:24,920 --> 00:15:27,400 Speaker 1: The German parliament and the Dutch parliaments say the only 294 00:15:27,400 --> 00:15:30,280 Speaker 1: way that they'll give more money to for the grease bailout, 295 00:15:30,480 --> 00:15:33,320 Speaker 1: so called bailout, is if the I m F contributes money. 296 00:15:33,880 --> 00:15:36,520 Speaker 1: The US is not sure that it wants to okay 297 00:15:36,600 --> 00:15:38,920 Speaker 1: the I m F to contribute even more money to Greece. 298 00:15:39,760 --> 00:15:41,480 Speaker 1: Isn't this a problem? I think you the point that 299 00:15:41,600 --> 00:15:43,560 Speaker 1: I hear you raising. Isn't this a problem that europe 300 00:15:43,560 --> 00:15:46,280 Speaker 1: can solve themselves? Do they need you? If Tillerson says, 301 00:15:46,280 --> 00:15:49,080 Speaker 1: what do US taxpayers have an interest in Ukraine? Surely 302 00:15:49,200 --> 00:15:52,200 Speaker 1: U S taxpayers don't have an interest in bailing out griefs. 303 00:15:52,640 --> 00:15:55,200 Speaker 1: And so I could conceive of a situation where the 304 00:15:55,320 --> 00:15:58,080 Speaker 1: I m F board rejects that is, with the US 305 00:15:58,160 --> 00:16:00,360 Speaker 1: veto tells the I m F it cannot lend more 306 00:16:00,400 --> 00:16:02,680 Speaker 1: money to degrees, and there causes a bit of a 307 00:16:02,720 --> 00:16:05,120 Speaker 1: crisis in Europe, because then what can the Germans do 308 00:16:05,480 --> 00:16:07,800 Speaker 1: a few months ahead of their national elections? Couldn't you 309 00:16:07,840 --> 00:16:10,880 Speaker 1: foresee a similar conversation where somebody off handedly says, why 310 00:16:10,920 --> 00:16:14,120 Speaker 1: do US taxpayers care about the IMV? Yeah? I think 311 00:16:14,160 --> 00:16:16,360 Speaker 1: you know. This is an important point I think is 312 00:16:16,400 --> 00:16:19,480 Speaker 1: that that is that the the American first rhetoric of 313 00:16:19,560 --> 00:16:21,840 Speaker 1: Trump's is not hearkened back to World War Two, but 314 00:16:22,000 --> 00:16:25,240 Speaker 1: World War One. And remember what happens after Woodrow Wilson 315 00:16:25,400 --> 00:16:28,360 Speaker 1: proposes the League of Nations. The Senate says, no, you don't. 316 00:16:29,160 --> 00:16:31,000 Speaker 1: And what the US was launching then, even though a 317 00:16:31,000 --> 00:16:32,880 Speaker 1: lot of people call it an isolationist phase, it was 318 00:16:32,920 --> 00:16:36,480 Speaker 1: really unilateralist. And I think this is the issue the 319 00:16:36,560 --> 00:16:38,480 Speaker 1: under the Trump administration. I think the idea is that 320 00:16:38,520 --> 00:16:43,040 Speaker 1: these multi lateral institutions may prevent the US from articulating 321 00:16:43,120 --> 00:16:45,800 Speaker 1: or expressing its national interest, but I think that at 322 00:16:45,800 --> 00:16:48,000 Speaker 1: the end of the day, uh, the US will be 323 00:16:48,000 --> 00:16:50,680 Speaker 1: hesitant to break from these, even though it might perhaps, 324 00:16:50,760 --> 00:16:52,880 Speaker 1: as they've hinted, not necessarily listen to the all the 325 00:16:53,080 --> 00:16:56,640 Speaker 1: w t O declarations UH where they where they try 326 00:16:56,640 --> 00:17:00,680 Speaker 1: to exert their influence stronger within these multi lavel institutions 327 00:17:01,000 --> 00:17:04,520 Speaker 1: and enforced more vigorously some of the trade agreements. So 328 00:17:04,560 --> 00:17:07,840 Speaker 1: I think that this is a risk that the protectionist, nationalist, 329 00:17:08,080 --> 00:17:11,480 Speaker 1: scorched earth wing of the Trump administration wins out. But 330 00:17:11,640 --> 00:17:14,919 Speaker 1: right now I'd say it looks like, uh, maybe a 331 00:17:15,000 --> 00:17:19,320 Speaker 1: tilt the other way with that Kushner Bannon reproache mais 332 00:17:19,400 --> 00:17:21,639 Speaker 1: that seemed to be in place as of last weekend. 333 00:17:21,680 --> 00:17:23,520 Speaker 1: Our Mark Channel with Brown Brothers Harriman, thanks for being 334 00:17:23,520 --> 00:17:34,720 Speaker 1: with us. Appreciated. Brought you by Bank of America, Mary Lynch. 335 00:17:34,840 --> 00:17:39,080 Speaker 1: Dedicated to bringing our clients insights and solutions to meet 336 00:17:39,119 --> 00:17:42,600 Speaker 1: the challenges of a transforming world. That's the power of 337 00:17:42,640 --> 00:17:48,479 Speaker 1: global connections. Mary Lynch, Pierce Federin Smith Incorporated, Member s 338 00:17:48,520 --> 00:17:54,760 Speaker 1: I p C. Turning out a foreign policy he had 339 00:17:54,760 --> 00:17:56,679 Speaker 1: a four year tour of duty in Brussels is the 340 00:17:56,680 --> 00:17:59,720 Speaker 1: Supreme Allied Commander, Admiral James Debritus is now doing the 341 00:17:59,720 --> 00:18:02,000 Speaker 1: flex A School the Toughts University. He's anost is great 342 00:18:02,000 --> 00:18:03,679 Speaker 1: to talk with you, is always, especially on this day 343 00:18:03,720 --> 00:18:05,960 Speaker 1: when the NATO Secretary General is in Washington, d c. 344 00:18:06,440 --> 00:18:08,160 Speaker 1: For a series of meetings at the White House. Will 345 00:18:08,200 --> 00:18:11,000 Speaker 1: he'll hear from him later this afternoon when he and 346 00:18:11,040 --> 00:18:13,600 Speaker 1: the President have a press conference at the White House. 347 00:18:14,040 --> 00:18:15,760 Speaker 1: How confident are you that we're going to move beyond 348 00:18:15,760 --> 00:18:19,040 Speaker 1: the conversation about funding with these two leaders today. It's 349 00:18:19,080 --> 00:18:21,400 Speaker 1: something that the President is very keen to talk about. 350 00:18:21,440 --> 00:18:23,960 Speaker 1: He has been keen to talk about. Has he has 351 00:18:24,000 --> 00:18:26,000 Speaker 1: he made his voice heard on that issue enough? Do 352 00:18:26,000 --> 00:18:28,560 Speaker 1: you think we can move past it? I think he has. 353 00:18:28,600 --> 00:18:31,119 Speaker 1: And you know, there's a business show. If a NATO 354 00:18:31,280 --> 00:18:33,440 Speaker 1: or a stock I would say now is a pretty 355 00:18:33,480 --> 00:18:35,520 Speaker 1: good time to buy some more of it. Um. It 356 00:18:35,680 --> 00:18:40,040 Speaker 1: is going to be a good conversation about the challenges 357 00:18:40,119 --> 00:18:43,600 Speaker 1: that Russia poses to the Alliance, about the possibility for 358 00:18:44,160 --> 00:18:48,119 Speaker 1: additional NATO resources devoted to the fight against Syria, and 359 00:18:48,200 --> 00:18:50,760 Speaker 1: hopefully a little bit about cybersecurity and how we can 360 00:18:50,760 --> 00:18:54,280 Speaker 1: work together on that. So yes, I think message received 361 00:18:54,320 --> 00:18:57,040 Speaker 1: at NATO on the funding and we are going to 362 00:18:57,080 --> 00:18:59,399 Speaker 1: be able to move beyond it. Uh, it's gonna be 363 00:18:59,480 --> 00:19:03,280 Speaker 1: an awkward conversation to have about the one sentence offhand 364 00:19:03,320 --> 00:19:06,359 Speaker 1: remarks seemingly the Secretary of State Rex Tillerson made yesterday 365 00:19:06,400 --> 00:19:09,480 Speaker 1: about about the Ukraine. He said, well, why should US 366 00:19:09,520 --> 00:19:12,000 Speaker 1: taxpayers care about Ukraine? If you, if you had a 367 00:19:12,000 --> 00:19:13,800 Speaker 1: few minutes with the Secretary, what would you say in 368 00:19:13,840 --> 00:19:17,480 Speaker 1: response to that? I would say that any time we 369 00:19:17,720 --> 00:19:22,240 Speaker 1: allow a big nation like Russia to invade a relatively 370 00:19:22,280 --> 00:19:25,639 Speaker 1: small nation like Ukraine and carve off a significant chunk 371 00:19:25,680 --> 00:19:29,080 Speaker 1: of its territory, in this case the CRIMEA, if we, 372 00:19:29,400 --> 00:19:32,320 Speaker 1: as an international community, and as the United States as 373 00:19:32,359 --> 00:19:36,240 Speaker 1: a leading nation, allow that to happen, we are all 374 00:19:36,320 --> 00:19:40,120 Speaker 1: at risk. And therefore I would say to the American 375 00:19:40,160 --> 00:19:42,720 Speaker 1: taxpayers that we don't have to send a couple of 376 00:19:42,800 --> 00:19:45,639 Speaker 1: hundred thousand troops to Ukraine, but we ought to be 377 00:19:45,680 --> 00:19:49,240 Speaker 1: in the game helping arm their military and pushing back 378 00:19:49,280 --> 00:19:52,560 Speaker 1: against this kind of Russian aggression. It's in our global 379 00:19:52,680 --> 00:19:55,960 Speaker 1: interest to do so. Admiralstravitas, I wonder if you could 380 00:19:56,000 --> 00:19:59,560 Speaker 1: share just a bit of your personal history to demonstrate 381 00:19:59,600 --> 00:20:02,760 Speaker 1: how tractable some of these conflicts can be. And I'm 382 00:20:02,800 --> 00:20:06,399 Speaker 1: thinking of your grandfather and Turkey and then your return 383 00:20:06,480 --> 00:20:12,080 Speaker 1: to Turkey. I can. In nine two my grandparents became refugees. 384 00:20:12,240 --> 00:20:15,240 Speaker 1: They were of Greek descent, but they were citizens of 385 00:20:15,280 --> 00:20:18,280 Speaker 1: the Ottoman Empire, living in western Turkey in a town 386 00:20:18,359 --> 00:20:22,760 Speaker 1: then called Smyrna today it's known as Zazmir. The Turks Uh, 387 00:20:23,080 --> 00:20:26,720 Speaker 1: to put it politely, invited them to leave. They became refugees. 388 00:20:26,760 --> 00:20:29,360 Speaker 1: The city was burned, they were rescued by Greek fishermen 389 00:20:29,960 --> 00:20:33,560 Speaker 1: and therefore came to Ellis Island. So my family story 390 00:20:33,640 --> 00:20:36,919 Speaker 1: is born out of these kind of refugee challenges. Now 391 00:20:37,160 --> 00:20:39,520 Speaker 1: the question would be for someone like me who has 392 00:20:39,560 --> 00:20:43,520 Speaker 1: a shall we say, complicated family history with Turkey, can 393 00:20:43,600 --> 00:20:46,960 Speaker 1: I rise above that? And the answer is yes. And 394 00:20:47,080 --> 00:20:49,800 Speaker 1: when I was NATO Commander, the first city I visited 395 00:20:49,920 --> 00:20:54,080 Speaker 1: as the Supreme Alley Commander was Anca, Turkey. And after 396 00:20:54,760 --> 00:20:59,120 Speaker 1: four years as the commander, when I left, the Turkish 397 00:20:59,320 --> 00:21:03,439 Speaker 1: Foreign Minister h later the Prime Minister, Ahmed Davitt, who 398 00:21:03,520 --> 00:21:07,359 Speaker 1: presented me with a book of vintage postcards made of 399 00:21:07,400 --> 00:21:11,560 Speaker 1: the Greek community in Smyrna in the nineteen twenties, and 400 00:21:11,600 --> 00:21:15,120 Speaker 1: he said, Admiral, you have helped us see that we 401 00:21:15,760 --> 00:21:19,320 Speaker 1: need to know the past, but not be imprisoned by it. 402 00:21:19,520 --> 00:21:21,320 Speaker 1: And I think that was a pretty good lesson for me. 403 00:21:21,720 --> 00:21:24,919 Speaker 1: So what what packet of postcards would you like to 404 00:21:25,000 --> 00:21:29,520 Speaker 1: send our show to both the Vladimir Putin UH and 405 00:21:29,960 --> 00:21:34,160 Speaker 1: perhaps even the leadership of Iran. Yeah, in a nice way. 406 00:21:34,320 --> 00:21:38,440 Speaker 1: With Russia, the packet of postcards I think we want 407 00:21:38,440 --> 00:21:43,000 Speaker 1: to show is that of US Russian cooperation in the 408 00:21:43,040 --> 00:21:46,640 Speaker 1: Second World War. We do have history together that can 409 00:21:46,720 --> 00:21:49,480 Speaker 1: be positive. I think we can also talk about our 410 00:21:49,520 --> 00:21:53,520 Speaker 1: cooperation and things as diverse as counter terrorism, counter piracy 411 00:21:53,920 --> 00:21:58,920 Speaker 1: in Afghanistan. But the cautionary message needs to be that 412 00:21:59,040 --> 00:22:02,720 Speaker 1: was then and is not now. In terms of Iran, 413 00:22:02,960 --> 00:22:06,040 Speaker 1: I think it's even more difficult. We we don't have 414 00:22:06,119 --> 00:22:09,440 Speaker 1: any shared history of cooperation with Iran. In fact, we 415 00:22:09,440 --> 00:22:11,560 Speaker 1: we live today as part of the fruit of a 416 00:22:11,640 --> 00:22:15,239 Speaker 1: poison tree from the hostage crisis. And so I think 417 00:22:15,320 --> 00:22:19,160 Speaker 1: with Iran it's really tabula rasa clean slate. We need 418 00:22:19,200 --> 00:22:23,639 Speaker 1: to find UH kind of track two diplomatic ways to 419 00:22:23,680 --> 00:22:25,840 Speaker 1: approach them. Both of those are going to be very hard, 420 00:22:25,840 --> 00:22:28,159 Speaker 1: and we have to start by confronting both Russia and 421 00:22:28,200 --> 00:22:31,400 Speaker 1: Iran when they line up behind a brutal war criminal 422 00:22:31,480 --> 00:22:35,360 Speaker 1: like Lasa. How should Secretary State Rex Tillers don't approach 423 00:22:35,400 --> 00:22:38,399 Speaker 1: these meetings today with Sergey Lava, the Foreign Minister, and 424 00:22:38,440 --> 00:22:42,800 Speaker 1: perhaps with the President Vladimir Putin. The White House has 425 00:22:42,840 --> 00:22:44,760 Speaker 1: been keen to talk about fake news. We see this 426 00:22:44,800 --> 00:22:47,480 Speaker 1: four page document which they lay out the case for 427 00:22:47,560 --> 00:22:50,720 Speaker 1: Russia covering up or or excusing or trying to obfuscate 428 00:22:50,760 --> 00:22:52,600 Speaker 1: when it comes to the gas attack we saw northern 429 00:22:52,600 --> 00:22:55,200 Speaker 1: Syria last week. How hard is it to engage with 430 00:22:55,720 --> 00:22:59,160 Speaker 1: a party that is not acknowledging the facts. Well, first 431 00:22:59,200 --> 00:23:01,720 Speaker 1: of all, I gotta say I've been very encouraged over 432 00:23:01,760 --> 00:23:04,960 Speaker 1: the last several weeks by, if you will, the emergence 433 00:23:05,000 --> 00:23:08,840 Speaker 1: of Secretary of State Rex Tillerson. He's he's now doing media, 434 00:23:09,040 --> 00:23:13,240 Speaker 1: he's engaging in the public debate, he's attending the important 435 00:23:13,240 --> 00:23:17,840 Speaker 1: meetings alongside the president. He's going to Moscow. So I 436 00:23:17,880 --> 00:23:21,960 Speaker 1: think he is stepping up and doing so very well. Secondly, 437 00:23:22,600 --> 00:23:24,959 Speaker 1: I think he needs to bring that kind of laconic 438 00:23:25,200 --> 00:23:30,359 Speaker 1: Texan approach he has comment about Assad yesterday really struck 439 00:23:30,400 --> 00:23:34,359 Speaker 1: a chord with me simply flatly saying SIDS regime is 440 00:23:34,359 --> 00:23:37,080 Speaker 1: not going to survive with someone like Tillerson. I'm always 441 00:23:37,080 --> 00:23:40,439 Speaker 1: reminded of that story of the Texas Rangers when the 442 00:23:40,640 --> 00:23:43,919 Speaker 1: governor of Texas was asked to send Texas Rangers to 443 00:23:43,960 --> 00:23:46,840 Speaker 1: quell a riot and the mayor of the town said, 444 00:23:47,240 --> 00:23:50,919 Speaker 1: how many can you send? And the governor send one riot, 445 00:23:51,080 --> 00:23:54,760 Speaker 1: one ranger. And I think Rex Tillerson is that kind 446 00:23:54,800 --> 00:23:58,719 Speaker 1: of Texan. So I think a tough talking, here are 447 00:23:58,760 --> 00:24:01,080 Speaker 1: the facts, laying it out. That's why the memo is 448 00:24:01,119 --> 00:24:03,680 Speaker 1: a good thing, is going to be the best way 449 00:24:03,680 --> 00:24:06,760 Speaker 1: to deal with Russia because Russia responds to strength, and 450 00:24:06,840 --> 00:24:10,720 Speaker 1: I think that's what Secretary Tillerson needs to project well 451 00:24:10,760 --> 00:24:14,160 Speaker 1: as someone that's so familiar with that. With that particular area. 452 00:24:15,000 --> 00:24:19,359 Speaker 1: Is there this idea that now only bilateral agreements will work, 453 00:24:19,600 --> 00:24:22,800 Speaker 1: or this idea that there is a regional or comprehensive 454 00:24:23,280 --> 00:24:26,400 Speaker 1: kind of conflict resolution that can take place that would 455 00:24:26,480 --> 00:24:32,520 Speaker 1: satisfy Syria and Iran, Iraq and that whole area. The latter, 456 00:24:33,040 --> 00:24:35,280 Speaker 1: We're not going to solve this in a unilateral way. 457 00:24:35,400 --> 00:24:38,639 Speaker 1: As as much as I support the Tomahawks strikes, they 458 00:24:38,640 --> 00:24:41,720 Speaker 1: are certainly not the answer. They're merely the beginning of 459 00:24:41,760 --> 00:24:45,720 Speaker 1: a more serious conversation. Uh. The strategic message of the 460 00:24:45,800 --> 00:24:49,320 Speaker 1: strikes was quite simple, that the United States A is 461 00:24:49,359 --> 00:24:52,680 Speaker 1: willing to use force and be intends to be involved 462 00:24:52,680 --> 00:24:55,000 Speaker 1: in the resolution. But I think the way to think 463 00:24:55,000 --> 00:24:57,199 Speaker 1: about how to resolve it is to go back to 464 00:24:57,280 --> 00:25:00,840 Speaker 1: the Balkans in the n nineties, and it took a 465 00:25:00,880 --> 00:25:03,879 Speaker 1: coalition that included not only NATO in the United States, 466 00:25:03,920 --> 00:25:08,159 Speaker 1: but did ultimately include Russia to solve those wars in 467 00:25:08,200 --> 00:25:12,040 Speaker 1: the which looked a lot like Syria does today. So 468 00:25:12,160 --> 00:25:15,480 Speaker 1: I'm much more a believer in the multilateral regional solution 469 00:25:15,520 --> 00:25:19,240 Speaker 1: than us doing anything unilaterally. Had a conversation with Sandy 470 00:25:19,240 --> 00:25:21,120 Speaker 1: Winnifeld a couple of days ago, right on the heels 471 00:25:21,119 --> 00:25:23,240 Speaker 1: of those strikes. We were talking about the difficulty of 472 00:25:23,359 --> 00:25:25,399 Speaker 1: enforcing a red line like that and then thinking that 473 00:25:25,400 --> 00:25:27,320 Speaker 1: you're not going to change policy, that there isn't going 474 00:25:27,359 --> 00:25:30,119 Speaker 1: to be cause for another set of strikes like the 475 00:25:30,119 --> 00:25:32,480 Speaker 1: one that we had last week. Do you agree that 476 00:25:32,520 --> 00:25:36,879 Speaker 1: it's it's becomes more complicated now? It does? And um, 477 00:25:36,960 --> 00:25:38,880 Speaker 1: that's kind of good. News bad news. The good news 478 00:25:39,000 --> 00:25:43,879 Speaker 1: is that we've enforced a long stated US position against 479 00:25:43,920 --> 00:25:45,959 Speaker 1: the use of chemical weapons, and I think the strikes 480 00:25:45,960 --> 00:25:49,080 Speaker 1: were legal under international law for a variety of reasons. 481 00:25:49,119 --> 00:25:52,119 Speaker 1: But the bad news is you've put chips on the 482 00:25:52,160 --> 00:25:55,320 Speaker 1: table now and it's it would be a thousand times 483 00:25:55,320 --> 00:25:58,040 Speaker 1: words to have launched those strikes, and then the next 484 00:25:58,040 --> 00:26:02,160 Speaker 1: time it happens, do nothing. That's simply unthinkable. So we're 485 00:26:02,200 --> 00:26:04,960 Speaker 1: back in the game. The question is can we modulate 486 00:26:05,119 --> 00:26:08,000 Speaker 1: our approach so that we don't end up with a 487 00:26:08,080 --> 00:26:10,440 Speaker 1: hundred and fifty thousand troops like we did in Iraq 488 00:26:10,480 --> 00:26:12,800 Speaker 1: and Afghanistan. We don't want to do that. We want 489 00:26:12,840 --> 00:26:15,119 Speaker 1: to be smarter about how we do it. Back to 490 00:26:15,160 --> 00:26:18,800 Speaker 1: the previous question, regional multilateral is really the way to 491 00:26:18,840 --> 00:26:21,760 Speaker 1: go an most let me ask you to reflect on 492 00:26:21,800 --> 00:26:24,399 Speaker 1: what we saw at mar Lago last week. Yes, of 493 00:26:24,400 --> 00:26:26,879 Speaker 1: course events interceded. We saw the strikes on Syria, but 494 00:26:26,960 --> 00:26:29,680 Speaker 1: let's focus on China here, focused on East Asia for 495 00:26:29,680 --> 00:26:32,040 Speaker 1: for a little bit. What were you watching, what what 496 00:26:32,119 --> 00:26:33,960 Speaker 1: queues were you looking at? What were you hoping to 497 00:26:34,000 --> 00:26:36,600 Speaker 1: see as an outcome from that summit in Florida last week? 498 00:26:37,400 --> 00:26:40,080 Speaker 1: I thought It was a good summit, and the President 499 00:26:40,200 --> 00:26:42,920 Speaker 1: must have been very happy with the fact that those 500 00:26:42,960 --> 00:26:48,360 Speaker 1: strikes unfolded. Literally they're having dinner down there, pretty remarkable, 501 00:26:48,480 --> 00:26:53,000 Speaker 1: in a very good way to signal to the Chinese 502 00:26:53,080 --> 00:26:55,000 Speaker 1: that we're willing to use for us, we're in the 503 00:26:55,000 --> 00:26:57,480 Speaker 1: game as it applies not only in Syria, but the 504 00:26:57,480 --> 00:27:02,080 Speaker 1: implied message of similarly in North Korea. What I was 505 00:27:02,160 --> 00:27:05,960 Speaker 1: looking for was a shared statement out of the two 506 00:27:05,960 --> 00:27:09,800 Speaker 1: of them that they would work the North Korea problem together, 507 00:27:09,840 --> 00:27:13,199 Speaker 1: because I think at the end all roads to Punyang 508 00:27:13,320 --> 00:27:17,720 Speaker 1: lead through Beijing, so that transpired. And then on trade, 509 00:27:17,800 --> 00:27:21,320 Speaker 1: I think they had a pretty calm talk which made 510 00:27:21,320 --> 00:27:23,560 Speaker 1: me feel as though we're not going to see any 511 00:27:23,560 --> 00:27:27,480 Speaker 1: precipitous action out of this administration in terms of tariffs 512 00:27:27,560 --> 00:27:30,960 Speaker 1: or barriers to Chinese goods, at least immediately. So I 513 00:27:31,000 --> 00:27:34,280 Speaker 1: think that's all good. And the the uber message I 514 00:27:34,320 --> 00:27:37,440 Speaker 1: would say is, um, it's going to be more about 515 00:27:37,480 --> 00:27:39,760 Speaker 1: China than it is about Russia. And if you looked 516 00:27:39,800 --> 00:27:42,240 Speaker 1: at the rhetoric during the campaign, it was a lot 517 00:27:42,280 --> 00:27:45,680 Speaker 1: of g We're going to conduct a grand bargain with Russia. 518 00:27:45,880 --> 00:27:47,440 Speaker 1: I wouldn't go so far as to say this is 519 00:27:47,480 --> 00:27:50,480 Speaker 1: a pivot to China, but it's certainly underlines the fact 520 00:27:50,480 --> 00:27:55,159 Speaker 1: that the administration gets it correctly that it's really about 521 00:27:55,200 --> 00:27:57,880 Speaker 1: the Pacific and about China over the long haul for US. 522 00:27:58,359 --> 00:28:00,879 Speaker 1: We're speaking with Admiral James has To Ritas used, the 523 00:28:00,880 --> 00:28:03,560 Speaker 1: dean of the Fletcher School at Toughs University, a former 524 00:28:03,600 --> 00:28:06,639 Speaker 1: Supreme Allied commander at NATO, is also the author of 525 00:28:06,640 --> 00:28:12,120 Speaker 1: the Accidental Admiral. Let's talk about solutions. Admirals tots in 526 00:28:12,240 --> 00:28:15,800 Speaker 1: terms of hard and soft power. As a former commander 527 00:28:15,800 --> 00:28:19,560 Speaker 1: of a destroyer squadron and a carrier strike group, which 528 00:28:19,560 --> 00:28:23,720 Speaker 1: would you rather have a television and media network or 529 00:28:23,840 --> 00:28:28,480 Speaker 1: a carrier? You got to have both. And uh and 530 00:28:28,520 --> 00:28:32,000 Speaker 1: as I always say, hard power, there are times when 531 00:28:32,040 --> 00:28:34,399 Speaker 1: you absolutely need it. We're not going to negotiate a 532 00:28:34,480 --> 00:28:36,879 Speaker 1: solution with the Islamic State. We're going to find him 533 00:28:36,880 --> 00:28:40,640 Speaker 1: and kill them. But um, the lawn game so often 534 00:28:40,840 --> 00:28:44,880 Speaker 1: is about the soft power side. It's about strategic communications, 535 00:28:45,080 --> 00:28:52,520 Speaker 1: creating better global opportunities, expanding economic solutions. So you need both. 536 00:28:52,560 --> 00:28:55,480 Speaker 1: You need hard and soft power. And the mistake is 537 00:28:55,480 --> 00:28:57,800 Speaker 1: when you think about it as an on and off switch, 538 00:28:57,840 --> 00:29:01,040 Speaker 1: that that it's a binary choice. Um, it's actually a 539 00:29:01,080 --> 00:29:03,640 Speaker 1: real stat you've got to dial it in. So at 540 00:29:03,680 --> 00:29:06,120 Speaker 1: the moment, we needed hard power to respond to the 541 00:29:06,200 --> 00:29:09,200 Speaker 1: chemical strikes. Over time in the Middle East, we're gonna 542 00:29:09,200 --> 00:29:12,240 Speaker 1: need soft power if we're gonna really solve the problems there. 543 00:29:12,480 --> 00:29:16,360 Speaker 1: You need both. How cohesive is this foreign policy team? 544 00:29:16,400 --> 00:29:18,960 Speaker 1: I imagine that you know Secretary Defense James Mattis, well, 545 00:29:18,960 --> 00:29:22,360 Speaker 1: you probably know hr McMaster, Lieutenant General char McMaster as well. 546 00:29:22,440 --> 00:29:24,280 Speaker 1: Perhaps you know litt less of a known quantit would 547 00:29:24,320 --> 00:29:27,480 Speaker 1: be Nikki Haley, the U N Ambassador. But are they 548 00:29:27,520 --> 00:29:29,800 Speaker 1: Are they becoming a unified voice here? And how do 549 00:29:29,840 --> 00:29:32,960 Speaker 1: they complement one another? I would say over the last 550 00:29:33,000 --> 00:29:38,760 Speaker 1: two weeks we've seen a grammatic improvement in synchronicity amongst them. 551 00:29:38,800 --> 00:29:41,240 Speaker 1: There's still a little bit of a disconnect with ambastaor 552 00:29:41,240 --> 00:29:45,360 Speaker 1: Haley up at the United Nations and what Secretary Tillerson saying. 553 00:29:45,680 --> 00:29:49,479 Speaker 1: But broadly speaking, you're seeing this team come together, and 554 00:29:49,520 --> 00:29:53,000 Speaker 1: I think I would attribute it frankly to hr McMaster. 555 00:29:53,200 --> 00:29:56,400 Speaker 1: The job of the National Security Advisor is to be 556 00:29:56,560 --> 00:29:59,800 Speaker 1: that coalescing feature, not to create policy, but to give 557 00:30:00,000 --> 00:30:03,400 Speaker 1: all those cabinet officials room and space to work together 558 00:30:03,440 --> 00:30:06,600 Speaker 1: and come up with coherent policy. Lieutenant General Master, I've 559 00:30:06,640 --> 00:30:09,600 Speaker 1: known for twenty years. He's brilliant. In fact, in my 560 00:30:09,680 --> 00:30:12,920 Speaker 1: latest book, The Leader's Bookshelf, one of the books I 561 00:30:12,960 --> 00:30:16,880 Speaker 1: talked about is hr McMaster's book, Dereliction of Duty. He 562 00:30:16,920 --> 00:30:19,040 Speaker 1: could not be better in this role and is off 563 00:30:19,080 --> 00:30:21,280 Speaker 1: to a terrific start, and I think you're seeing that 564 00:30:21,440 --> 00:30:24,680 Speaker 1: reflected in the cabinet performances. What did you learn from 565 00:30:24,680 --> 00:30:28,720 Speaker 1: his book? I learned that you have to speak truth 566 00:30:28,800 --> 00:30:32,800 Speaker 1: to power unafraid. And the book, of course, is about 567 00:30:33,080 --> 00:30:36,080 Speaker 1: the Joint chiefs of Staff during the Vietnam era who 568 00:30:36,080 --> 00:30:41,440 Speaker 1: are not challenging President Johnson, and that contributed to us 569 00:30:41,920 --> 00:30:46,040 Speaker 1: UH falling deeper into the spiral of Vietnam and UH. 570 00:30:46,080 --> 00:30:50,480 Speaker 1: The unvarnished truth is what a senior military officer owes 571 00:30:50,920 --> 00:30:54,600 Speaker 1: his or her leadership. And I think that's loud and clear. 572 00:30:54,640 --> 00:30:58,600 Speaker 1: In today's world, President Trump needs voices that are unafraid 573 00:30:58,800 --> 00:31:01,200 Speaker 1: to come to him and point out where we're failing 574 00:31:01,200 --> 00:31:03,480 Speaker 1: and what we need to do. Earlier, we were talking 575 00:31:03,520 --> 00:31:05,960 Speaker 1: with Mark Chandler. He's in the in the foreign exchange space, 576 00:31:06,000 --> 00:31:09,320 Speaker 1: and we're talking about time horizons. This is an administration 577 00:31:09,360 --> 00:31:11,560 Speaker 1: that maintains that it has plans but doesn't want to 578 00:31:11,560 --> 00:31:13,360 Speaker 1: share them, and certainly that's something the present has said 579 00:31:13,400 --> 00:31:15,440 Speaker 1: over and over again. His his reasoning for that is 580 00:31:15,480 --> 00:31:17,760 Speaker 1: he doesn't want to give away the secrets or giveaway 581 00:31:17,760 --> 00:31:20,600 Speaker 1: the the strategy. Help us understand the degree to which 582 00:31:20,640 --> 00:31:22,480 Speaker 1: we should trust a leader who says that, do we 583 00:31:22,520 --> 00:31:24,800 Speaker 1: need to know more about, say, what happens next in 584 00:31:24,800 --> 00:31:28,000 Speaker 1: in Syria after the strikes that we saw last week, 585 00:31:28,200 --> 00:31:29,960 Speaker 1: do we do we need to know more of the contours, 586 00:31:30,000 --> 00:31:33,080 Speaker 1: more of the plan going forward. I think there's a 587 00:31:33,160 --> 00:31:37,720 Speaker 1: distinction to be made here between strategic plans and tactical execution. 588 00:31:38,200 --> 00:31:41,640 Speaker 1: I think strategic plans need to be discussed, they need 589 00:31:41,640 --> 00:31:44,680 Speaker 1: to be shared. You need to build support both in 590 00:31:44,720 --> 00:31:47,880 Speaker 1: Congress and more importantly, with the American people. You can't 591 00:31:47,920 --> 00:31:51,720 Speaker 1: do that without laying out what your plan is, ends ways, 592 00:31:51,760 --> 00:31:55,320 Speaker 1: and means in Syria, in dealing with North Korea and 593 00:31:55,360 --> 00:32:00,480 Speaker 1: so forth. On the other hand, it is foolish to 594 00:32:00,520 --> 00:32:04,680 Speaker 1: transmit your tactical plans. Okay, I'm gonna launch Tomahawk strikes. 595 00:32:04,920 --> 00:32:07,120 Speaker 1: Then I'm going to bring in special forces, Then I'm 596 00:32:07,120 --> 00:32:10,320 Speaker 1: going to bring in long range bombers laying out that 597 00:32:10,400 --> 00:32:13,600 Speaker 1: kind of campaign plan obviously as a mistake. You need 598 00:32:13,640 --> 00:32:17,440 Speaker 1: to understand the difference between those two. What's desperately needed, 599 00:32:17,440 --> 00:32:20,800 Speaker 1: in my view from the United States on Syria is 600 00:32:20,920 --> 00:32:23,800 Speaker 1: a strategic vision, and we have not heard that as yet. 601 00:32:24,200 --> 00:32:26,080 Speaker 1: What do you make of what Senator Lindsey Graham and 602 00:32:26,080 --> 00:32:27,719 Speaker 1: others have said that there need to be more troops 603 00:32:27,720 --> 00:32:30,640 Speaker 1: on the ground in the region focused on Syria. Yeah, 604 00:32:30,680 --> 00:32:33,440 Speaker 1: I agree with that up to a point. So let's 605 00:32:33,480 --> 00:32:36,960 Speaker 1: put it in perspective. At that peak, we had pushing 606 00:32:37,000 --> 00:32:40,200 Speaker 1: two hundred thousand troops in Iraq. When I was the 607 00:32:40,280 --> 00:32:44,200 Speaker 1: NATO commander and I had responsibility for the mission in Afghanistan, 608 00:32:44,240 --> 00:32:48,080 Speaker 1: I had one hundred and sixty thousand troops there. Um, 609 00:32:48,120 --> 00:32:51,120 Speaker 1: we don't need that level of troops, but I would 610 00:32:51,200 --> 00:32:56,000 Speaker 1: argue we probably need around ten thousand troops in Iraq 611 00:32:56,280 --> 00:33:01,160 Speaker 1: and Syria to support the local forces as they accomplished 612 00:33:01,200 --> 00:33:03,960 Speaker 1: the military missions. That's kind of the model we've moved 613 00:33:03,960 --> 00:33:07,240 Speaker 1: to in Afghanistan, where we only have eight thousand US 614 00:33:07,320 --> 00:33:10,080 Speaker 1: troops and the Europeans have about six thousand. We used 615 00:33:10,080 --> 00:33:12,720 Speaker 1: to have a hundred fifty thousand. We can use local 616 00:33:12,760 --> 00:33:15,240 Speaker 1: troops that ought to be the model. We do need 617 00:33:15,760 --> 00:33:18,560 Speaker 1: somewhat of an increase, but certainly not what we did 618 00:33:18,600 --> 00:33:22,880 Speaker 1: in Afghanistan and Iraq. Admiral Stavita's what kind of public 619 00:33:22,880 --> 00:33:25,920 Speaker 1: relations effort would be needed to convince the American public? 620 00:33:25,920 --> 00:33:28,320 Speaker 1: Do you believe that ten thousand US troops ought to 621 00:33:28,320 --> 00:33:31,680 Speaker 1: be in Syria. I think that there is an enormous 622 00:33:31,680 --> 00:33:34,800 Speaker 1: amount of what I'll call Middle East fatigue in the country, 623 00:33:35,200 --> 00:33:39,120 Speaker 1: and people kind of conflate everything as Iraq and Afghanistan 624 00:33:39,240 --> 00:33:43,800 Speaker 1: and Syria and Libya and Palestinians, and it's just a 625 00:33:44,000 --> 00:33:47,760 Speaker 1: huge mess. What we need to do is disaggregate these 626 00:33:47,760 --> 00:33:52,200 Speaker 1: things and UH queue up for the American public UH 627 00:33:52,400 --> 00:33:58,880 Speaker 1: Syria and bash R El asads particular form of brutality. 628 00:33:58,920 --> 00:34:01,680 Speaker 1: I think the US public would get it that people 629 00:34:01,760 --> 00:34:06,200 Speaker 1: that are using chemical weapons like that have absolutely got 630 00:34:06,240 --> 00:34:09,120 Speaker 1: to be stopped. And I think um I would lead 631 00:34:09,120 --> 00:34:13,239 Speaker 1: with that and then build the strategy out beyond it. So, 632 00:34:13,239 --> 00:34:15,680 Speaker 1: in other words, use that use the images in the 633 00:34:15,719 --> 00:34:19,239 Speaker 1: public in the public venue in order to help formulate 634 00:34:19,280 --> 00:34:23,160 Speaker 1: that kind of policy exactly. I think the American public 635 00:34:23,280 --> 00:34:26,239 Speaker 1: as a general proposition, will go along with the use 636 00:34:26,360 --> 00:34:31,239 Speaker 1: of American force as long as they understand why it 637 00:34:31,360 --> 00:34:34,759 Speaker 1: matters to them. And I think the case, just as 638 00:34:34,760 --> 00:34:38,520 Speaker 1: we were talking in the earlier segment about why Ukraine UH, 639 00:34:38,600 --> 00:34:40,319 Speaker 1: the case to be made is you don't want to 640 00:34:40,400 --> 00:34:44,160 Speaker 1: let big nations gobble up chunks of little nations. And 641 00:34:44,520 --> 00:34:46,520 Speaker 1: here in Syria you want to make the case that 642 00:34:47,000 --> 00:34:50,719 Speaker 1: war criminals need to be stopped. And boy, we we 643 00:34:50,719 --> 00:34:53,760 Speaker 1: should have learned that lesson across the course of history, 644 00:34:53,840 --> 00:34:57,160 Speaker 1: going back certainly to the last century and fascism as 645 00:34:57,160 --> 00:34:59,320 Speaker 1: it wrote up in Europe. What do you think reporter 646 00:34:59,360 --> 00:35:02,120 Speaker 1: should be asking the Secretary General today at that press conference? 647 00:35:02,200 --> 00:35:04,000 Speaker 1: Was that was the number one question you think they 648 00:35:04,040 --> 00:35:06,960 Speaker 1: need to ask? Well, I am going to be pragmatic 649 00:35:06,960 --> 00:35:08,919 Speaker 1: here and say the first question out of the box 650 00:35:08,960 --> 00:35:12,600 Speaker 1: ought to be funding. It ought to be, uh, Secretary General, 651 00:35:12,880 --> 00:35:15,880 Speaker 1: how soon will the NATO nations hit the two percent 652 00:35:16,239 --> 00:35:19,160 Speaker 1: gross domestic product goal that they've set for themselves. I 653 00:35:19,200 --> 00:35:22,680 Speaker 1: think the second question ought to be will NATO participate 654 00:35:22,920 --> 00:35:26,920 Speaker 1: in operations against the Islamic State as an alliance? And 655 00:35:26,960 --> 00:35:29,120 Speaker 1: I think the third question a little bit off the 656 00:35:29,239 --> 00:35:32,120 Speaker 1: beaten track, but would be an important one is what 657 00:35:32,280 --> 00:35:36,120 Speaker 1: is NATO doing to protect itself from cyber attacks. When 658 00:35:36,120 --> 00:35:40,080 Speaker 1: you look at Russia's growing capability demonstrated in our own election, 659 00:35:40,480 --> 00:35:42,799 Speaker 1: I think that's an alliance problem as well. So there's 660 00:35:42,800 --> 00:35:52,840 Speaker 1: three questions and old James tebrids. Thanks very much. Thanks 661 00:35:52,840 --> 00:35:57,280 Speaker 1: for listening to the Bloomberg Surveillance Podcast. Subscribe and listen 662 00:35:57,360 --> 00:36:02,680 Speaker 1: to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. 663 00:36:03,440 --> 00:36:06,319 Speaker 1: I'm out on Twitter at Tom Keene. David Gura is 664 00:36:06,440 --> 00:36:10,200 Speaker 1: at David Gura. Before the podcast, you can always catch 665 00:36:10,280 --> 00:36:26,360 Speaker 1: us worldwide. I'm Bloomberg Radio, brought you by Bank of 666 00:36:26,400 --> 00:36:30,400 Speaker 1: America Mary Lynch, dedicated to bringing our clients insights and 667 00:36:30,480 --> 00:36:34,680 Speaker 1: solutions to meet the challenges of a transforming world. That's 668 00:36:34,680 --> 00:36:38,279 Speaker 1: the power of global connections. Mary Lynch, Pierce, Fenner and 669 00:36:38,360 --> 00:36:41,719 Speaker 1: Smith Incorporated Member s I p C.