1 00:00:05,800 --> 00:00:08,360 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim 2 00:00:08,400 --> 00:00:11,200 Speaker 1: Fox along with my co host Lisa A. Bramowitz. Each 3 00:00:11,240 --> 00:00:14,440 Speaker 1: day we bring you the most important, noteworthy, and useful 4 00:00:14,480 --> 00:00:17,079 Speaker 1: interviews for you and your money, whether you're at the 5 00:00:17,120 --> 00:00:20,360 Speaker 1: grocery store or the trading floor. Find the Bloomberg p 6 00:00:20,520 --> 00:00:30,320 Speaker 1: m L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. 7 00:00:30,360 --> 00:00:33,200 Speaker 1: I am so pleased to bring in our next guest, 8 00:00:33,320 --> 00:00:36,560 Speaker 1: Howard Barks. He has written a new memo. He of course, 9 00:00:36,640 --> 00:00:40,080 Speaker 1: is co founder of oak Tree Capital and UH is 10 00:00:40,120 --> 00:00:44,280 Speaker 1: the biggest distressed debt fund in the world. And he 11 00:00:44,360 --> 00:00:48,120 Speaker 1: joins us here in our eleven three oh studios And Uh, Howard, 12 00:00:48,159 --> 00:00:49,640 Speaker 1: thank you so much for being here. You just wrote 13 00:00:49,640 --> 00:00:52,720 Speaker 1: a new memo, the seven worst words in the world. 14 00:00:53,440 --> 00:00:58,520 Speaker 1: What are they for an investor? Too much money, chasing 15 00:00:58,560 --> 00:01:02,000 Speaker 1: too few deals? And we're there right now. Well, I 16 00:01:02,120 --> 00:01:05,400 Speaker 1: think that where you know, life in the investment world 17 00:01:05,520 --> 00:01:08,000 Speaker 1: is not black or white, as although many people try 18 00:01:08,040 --> 00:01:11,959 Speaker 1: to say that, Uh. The environment is not the worst 19 00:01:12,000 --> 00:01:14,920 Speaker 1: for investing anyone has ever seen. It's also far from 20 00:01:15,000 --> 00:01:17,680 Speaker 1: the best. UH. And if you draw a dividing line 21 00:01:17,680 --> 00:01:20,839 Speaker 1: down the middle, I would say we're in the vicinity 22 00:01:21,040 --> 00:01:25,319 Speaker 1: of too much money chasing too few deals. Howard Marks, 23 00:01:25,400 --> 00:01:28,360 Speaker 1: you are the author of mastering the market cycle, getting 24 00:01:28,400 --> 00:01:32,240 Speaker 1: the odds on your side, and that caused me also 25 00:01:32,360 --> 00:01:35,440 Speaker 1: to reread your I guess we can come. We call 26 00:01:35,480 --> 00:01:38,840 Speaker 1: it a famous memo about the race? Can we call 27 00:01:38,840 --> 00:01:43,679 Speaker 1: it the race to the bottom that basically called the 28 00:01:43,800 --> 00:01:48,920 Speaker 1: collapse and stocks and financial assets. You say, now that 29 00:01:49,000 --> 00:01:52,800 Speaker 1: we're closer to what two thousand six, does that kind 30 00:01:52,800 --> 00:01:54,840 Speaker 1: of ring a bell? Is that what echoes in your 31 00:01:54,840 --> 00:01:57,200 Speaker 1: mind when you look at current conditions? I think it's 32 00:01:57,200 --> 00:02:00,400 Speaker 1: fair to say, Uh, you know, conditions are not as 33 00:02:00,400 --> 00:02:03,520 Speaker 1: bad even as two thousand six. The banks are not 34 00:02:03,600 --> 00:02:06,360 Speaker 1: as heavily levered as they were. Uh. There is no 35 00:02:06,480 --> 00:02:09,840 Speaker 1: analog in the investment world today to the subprime mortgages 36 00:02:10,400 --> 00:02:15,160 Speaker 1: in their um magnitude infallaciousness. We don't have so many 37 00:02:15,320 --> 00:02:19,720 Speaker 1: levered entities out there waiting to melt down. Uh. But 38 00:02:20,000 --> 00:02:23,000 Speaker 1: what we do have is a lot of money chasing 39 00:02:23,200 --> 00:02:26,480 Speaker 1: not too many deals. That causes the prices to be 40 00:02:26,600 --> 00:02:31,720 Speaker 1: a bit up, which produces lower prospective returns and greater risk. Howard, 41 00:02:31,760 --> 00:02:34,080 Speaker 1: when you say that there's not a direct analog, I 42 00:02:34,160 --> 00:02:36,440 Speaker 1: think about some of the ways that this time is 43 00:02:36,560 --> 00:02:39,320 Speaker 1: different than in two thousand five two six, and one 44 00:02:39,360 --> 00:02:41,600 Speaker 1: of them is the flood of cash and to direct 45 00:02:41,760 --> 00:02:45,160 Speaker 1: lending funds and let direct lending firms and away from 46 00:02:45,200 --> 00:02:49,240 Speaker 1: the big banks. Uh. You had a quote referencing this, 47 00:02:50,080 --> 00:02:52,200 Speaker 1: what the wise man does in the beginning, the fool 48 00:02:52,400 --> 00:02:55,160 Speaker 1: does in the end. How do you see this ending? Well? 49 00:02:55,200 --> 00:02:58,640 Speaker 1: If if too much money is the seven worst words 50 00:02:58,639 --> 00:03:01,320 Speaker 1: in the world, what wise man doesn't the beginning the 51 00:03:01,360 --> 00:03:03,880 Speaker 1: fool does in the ends is the most important single 52 00:03:04,000 --> 00:03:10,320 Speaker 1: investment adage. Every trend which gets recognized in the early 53 00:03:10,400 --> 00:03:14,840 Speaker 1: days by the intelligent few and profited from. When those 54 00:03:15,040 --> 00:03:18,800 Speaker 1: profits become visible, everybody else wants to jump on the 55 00:03:18,840 --> 00:03:22,960 Speaker 1: bandwagon too, even though prices may now be the higher 56 00:03:22,960 --> 00:03:26,200 Speaker 1: than they should be. And when everybody jumps in at 57 00:03:26,240 --> 00:03:29,160 Speaker 1: the end, Uh, that's a little on the late side. 58 00:03:29,240 --> 00:03:31,359 Speaker 1: So I guess that my question is where are we 59 00:03:31,440 --> 00:03:33,600 Speaker 1: with that and what's going to be the consequence? Well, 60 00:03:33,639 --> 00:03:36,880 Speaker 1: direct lending is is one of the areas that has 61 00:03:36,920 --> 00:03:41,360 Speaker 1: been very popular. Popular popularity is the enemy of the 62 00:03:41,400 --> 00:03:43,520 Speaker 1: investor who wants to make a lot of money. Obviously, 63 00:03:43,560 --> 00:03:46,320 Speaker 1: if you buy things or do things that are extremely popular. 64 00:03:46,640 --> 00:03:49,440 Speaker 1: You should you're you're, you shouldn't expect to be getting 65 00:03:49,440 --> 00:03:52,400 Speaker 1: a bargain. A lot of money has flooded into direct lending. 66 00:03:52,480 --> 00:03:54,920 Speaker 1: I say in the memo that in the last five 67 00:03:55,000 --> 00:03:57,640 Speaker 1: years there have been about three d and twenty new 68 00:03:58,240 --> 00:04:02,240 Speaker 1: direct lending funds, of which eight five were first time funds, 69 00:04:02,480 --> 00:04:05,400 Speaker 1: as compared to the previous five years, in which there 70 00:04:05,400 --> 00:04:08,840 Speaker 1: were about eighty direct lending funds, of which seventeen were 71 00:04:08,880 --> 00:04:11,320 Speaker 1: first time funds. So obviously a lot more funds, a 72 00:04:11,320 --> 00:04:14,560 Speaker 1: lot more money, a lot more rookies, UH doing their 73 00:04:14,600 --> 00:04:18,599 Speaker 1: first direct lending funds. Those are not the elements that 74 00:04:18,680 --> 00:04:24,000 Speaker 1: make for great results. A lot of debt outstanding right now. 75 00:04:24,040 --> 00:04:29,200 Speaker 1: What's your call on distress debt? Well, at the present time, UH, 76 00:04:29,240 --> 00:04:32,560 Speaker 1: you know, the the the distressed debt business is UH 77 00:04:32,760 --> 00:04:38,640 Speaker 1: pretty snoozy. Uh. In this kind of environment technical definition, 78 00:04:38,720 --> 00:04:41,800 Speaker 1: In this kind of environment with UH, with a very 79 00:04:41,839 --> 00:04:45,560 Speaker 1: strong economy and a very accommodating capital market, you're unlikely 80 00:04:45,600 --> 00:04:48,360 Speaker 1: to get much distress and the companies that get into 81 00:04:48,360 --> 00:04:53,520 Speaker 1: trouble are are likely to deserve it. Now, we believe 82 00:04:53,800 --> 00:04:59,080 Speaker 1: and hope that the large amount of lending and perhaps 83 00:04:59,400 --> 00:05:03,400 Speaker 1: less care just lending which is taking place today may 84 00:05:03,680 --> 00:05:08,000 Speaker 1: result when the economy weakens in a cascade of the 85 00:05:08,080 --> 00:05:12,080 Speaker 1: stress debt. And and we hope to be busy right now, 86 00:05:12,960 --> 00:05:16,240 Speaker 1: we're pretty much working on old deals much more than new. 87 00:05:16,600 --> 00:05:18,320 Speaker 1: When you say you hope to be busy, does that 88 00:05:18,360 --> 00:05:20,560 Speaker 1: mean that you're putting aside a lot of cash to 89 00:05:20,640 --> 00:05:26,640 Speaker 1: swoop in should there be more distress. We organized a 90 00:05:26,720 --> 00:05:33,160 Speaker 1: standby fund for distress debt investing UH in eight and 91 00:05:33,200 --> 00:05:36,960 Speaker 1: a half billion. That's our second largest fund in history, 92 00:05:37,000 --> 00:05:39,680 Speaker 1: I think, probably the second largest fund in the history 93 00:05:39,680 --> 00:05:42,320 Speaker 1: of the sector. And we have done very little with 94 00:05:42,360 --> 00:05:45,279 Speaker 1: that so far. It's it's largely just sitting on the 95 00:05:45,320 --> 00:05:48,160 Speaker 1: shelf in reserve. But you know, you have to pre 96 00:05:48,279 --> 00:05:50,640 Speaker 1: raise your money. In our business, nobody goes in at 97 00:05:50,640 --> 00:05:53,160 Speaker 1: the bottom. Well, but but two investors pushed back. Then 98 00:05:53,200 --> 00:05:55,159 Speaker 1: do they say, all right, we were hoping to swoop in. 99 00:05:55,240 --> 00:05:59,920 Speaker 1: It hasn't happened. To forget it. Our investors, I will 100 00:06:00,160 --> 00:06:03,719 Speaker 1: our very patients. Uh. They we don't make claims for 101 00:06:03,800 --> 00:06:07,760 Speaker 1: being able to time this stuff, and so uh. And 102 00:06:07,800 --> 00:06:10,760 Speaker 1: I think the investors realized that it's desirable to have 103 00:06:11,000 --> 00:06:14,520 Speaker 1: a commitment for the stress debt a commitment to oak 104 00:06:14,560 --> 00:06:19,440 Speaker 1: Tree for that moment, but we don't claim to know 105 00:06:19,520 --> 00:06:21,640 Speaker 1: when it will come. You know, they haven't put up 106 00:06:21,640 --> 00:06:26,080 Speaker 1: the money yet. It's just commitments. We haven't charged any fees. 107 00:06:26,920 --> 00:06:31,640 Speaker 1: So I think our investors will be happy to be patient. 108 00:06:32,480 --> 00:06:35,680 Speaker 1: Do you see investors currently playing the game a hot potato? 109 00:06:38,560 --> 00:06:43,520 Speaker 1: I think, well, you know, in in uh, in private equity, Uh, 110 00:06:43,600 --> 00:06:49,440 Speaker 1: we still see uh, the the trend towards what the 111 00:06:49,480 --> 00:06:52,560 Speaker 1: British call passed the parcel, and you call hot potato. 112 00:06:53,279 --> 00:06:57,520 Speaker 1: You know, you make an investment, it does well, it appreciates. Uh. 113 00:06:57,760 --> 00:06:59,880 Speaker 1: Maybe the fund that made the investment is coming to 114 00:06:59,920 --> 00:07:03,200 Speaker 1: the end of its life that maybe the managers would 115 00:07:03,200 --> 00:07:06,560 Speaker 1: like to realize they're carried interest in the profits, so 116 00:07:06,640 --> 00:07:09,600 Speaker 1: they sell it onward to some other fund which is 117 00:07:09,640 --> 00:07:12,400 Speaker 1: early in its investment life and wants to start putting 118 00:07:12,400 --> 00:07:16,480 Speaker 1: money to work. I think that's the technical definition of 119 00:07:16,560 --> 00:07:20,920 Speaker 1: hot potato. Throughout your memo, you were saying that in 120 00:07:20,960 --> 00:07:23,720 Speaker 1: this environment. You're not saying that there's a bond bubble 121 00:07:23,840 --> 00:07:26,680 Speaker 1: or that we're headed toward an imminent and catastrophic crash 122 00:07:26,680 --> 00:07:29,720 Speaker 1: by any means, but just saying that in this period 123 00:07:29,800 --> 00:07:33,640 Speaker 1: of elevated demand and incredible liquidity, people have to lower 124 00:07:33,680 --> 00:07:37,560 Speaker 1: their returns expectations and be cautious. And I'm just wondering 125 00:07:37,840 --> 00:07:42,560 Speaker 1: from your perspective. We've talked about this before, returns going forward? 126 00:07:42,800 --> 00:07:47,920 Speaker 1: Has that Has your view on that changed at all? Um? Exactly, Lisa, UM. 127 00:07:47,960 --> 00:07:55,520 Speaker 1: I mean, you know, debt today offers modest returns. Interest 128 00:07:55,640 --> 00:07:59,480 Speaker 1: rates are still close to the lowest in history. The 129 00:07:59,560 --> 00:08:03,120 Speaker 1: yields breads above those base rates are not that high. 130 00:08:03,200 --> 00:08:07,040 Speaker 1: They've come down as demand has has picked up. UM. 131 00:08:07,160 --> 00:08:12,640 Speaker 1: So you know, returns, while sounding generous compared to other markets, 132 00:08:13,040 --> 00:08:17,080 Speaker 1: are still low in the context of history. UM. And 133 00:08:17,560 --> 00:08:21,360 Speaker 1: so I don't think people should be uh that excited 134 00:08:21,880 --> 00:08:25,080 Speaker 1: about the prospective returns. And as you say, I think 135 00:08:25,120 --> 00:08:28,720 Speaker 1: the most important thing is to exercise caution. So what 136 00:08:28,800 --> 00:08:34,560 Speaker 1: returns are feasible to expect? It depends on the asset class. Hi, 137 00:08:34,640 --> 00:08:38,520 Speaker 1: your bonds pay about six uh, not a king's ransom, 138 00:08:38,640 --> 00:08:42,840 Speaker 1: but but better than treasuries. Uh. Direct lending might be 139 00:08:42,960 --> 00:08:46,600 Speaker 1: able to produce returns in the high single digits if 140 00:08:46,600 --> 00:08:50,240 Speaker 1: it's not levered um and and that sounds even better. 141 00:08:50,320 --> 00:08:52,360 Speaker 1: Of course, you give up your liquidity, you get that 142 00:08:52,480 --> 00:08:57,440 Speaker 1: you uh perhaps lend to uh less well tested companies 143 00:08:57,440 --> 00:09:00,880 Speaker 1: and you enjoy less diversification, so you pay a price 144 00:09:01,520 --> 00:09:05,360 Speaker 1: for the excess returns. But you know, um, the old 145 00:09:05,440 --> 00:09:08,440 Speaker 1: Jim Morrison song been down so long it looks like 146 00:09:08,559 --> 00:09:11,160 Speaker 1: up to me. I think that's how people feel today. 147 00:09:11,160 --> 00:09:15,760 Speaker 1: About eight or nine percent the US thirty year treasury 148 00:09:16,440 --> 00:09:22,000 Speaker 1: has reached its highest level and yield. Since you speak 149 00:09:22,000 --> 00:09:24,840 Speaker 1: about three things when you look at investing, recent history, 150 00:09:24,920 --> 00:09:28,080 Speaker 1: human emotion, and asset pricing. We talked a little bit 151 00:09:28,080 --> 00:09:32,319 Speaker 1: about recent history. Tell us about human emotion and asset pricing. 152 00:09:33,240 --> 00:09:35,600 Speaker 1: You know him. One of the best things about the 153 00:09:35,640 --> 00:09:38,760 Speaker 1: market today in general is that we do not see 154 00:09:38,760 --> 00:09:43,320 Speaker 1: a prevalence of euphoria. The people in the media, we 155 00:09:43,400 --> 00:09:45,840 Speaker 1: don't hear them saying, oh, this is your last best 156 00:09:45,920 --> 00:09:47,719 Speaker 1: chance to get in on the market before it goes 157 00:09:47,760 --> 00:09:50,040 Speaker 1: to the moon. The book Doubt thirty six thousand has 158 00:09:50,080 --> 00:09:54,199 Speaker 1: not been reissued. That's all good. We want to see levelheadedness. 159 00:09:54,840 --> 00:09:57,880 Speaker 1: What the challenges is that even people, even though people 160 00:09:57,920 --> 00:10:01,600 Speaker 1: aren't thinking bullish, they're acting bullish, are dropping their caution 161 00:10:01,960 --> 00:10:04,880 Speaker 1: to move out the risk curve to take on riskier 162 00:10:04,920 --> 00:10:08,479 Speaker 1: assets in the hope that they can provide decent returns 163 00:10:08,800 --> 00:10:12,440 Speaker 1: in a low return world, and it is their behavior 164 00:10:12,559 --> 00:10:15,280 Speaker 1: that affects the condition of the market, and that's why 165 00:10:15,360 --> 00:10:19,440 Speaker 1: we're calling for caution. I'm wondering, since you're firm does 166 00:10:19,440 --> 00:10:23,320 Speaker 1: so much on the ground research of companies, you have 167 00:10:23,360 --> 00:10:26,880 Speaker 1: an incredible view into the U. S economy, and I'm wondering, 168 00:10:27,120 --> 00:10:30,319 Speaker 1: do you think that people are overly confident in its 169 00:10:30,360 --> 00:10:33,280 Speaker 1: strength right now? I think when you when you say 170 00:10:33,400 --> 00:10:37,680 Speaker 1: it's strength right now is great in the economy is 171 00:10:37,760 --> 00:10:44,079 Speaker 1: very strong. Uh. The question is is it's sustainable? Is 172 00:10:44,720 --> 00:10:52,679 Speaker 1: the performance of a sign of a future trend? Or 173 00:10:52,880 --> 00:10:56,200 Speaker 1: is it a highly stimulated result of the tax bill, 174 00:10:56,800 --> 00:11:02,760 Speaker 1: in which case favorable comparisons will become their difficult Uh. 175 00:11:02,800 --> 00:11:05,720 Speaker 1: You know I always say that doctors rarely give shots 176 00:11:05,760 --> 00:11:10,680 Speaker 1: of adrenaline to healthy patients. Uh. Will the tax bill 177 00:11:11,520 --> 00:11:17,520 Speaker 1: produce over stimulation of the economy, necessitating the Fed increasing 178 00:11:18,480 --> 00:11:22,640 Speaker 1: rates further in order to prevent inflation? And will that 179 00:11:22,760 --> 00:11:28,240 Speaker 1: have a negative effect on economic growth? I have a 180 00:11:28,360 --> 00:11:32,560 Speaker 1: very strongly held view, and that is we'll see as 181 00:11:32,600 --> 00:11:37,320 Speaker 1: as the author of Mastering the Market Cycle, does the 182 00:11:37,440 --> 00:11:43,880 Speaker 1: popularity and interest in bitcoin and marijuana related stocks ring 183 00:11:43,920 --> 00:11:47,760 Speaker 1: a bell. You know it does, PIM and I wrote 184 00:11:47,800 --> 00:11:52,599 Speaker 1: a memo in July of seventeen mentioned bitcoin, got a 185 00:11:52,640 --> 00:11:55,520 Speaker 1: lot of attention for that. I don't want to invade 186 00:11:55,559 --> 00:12:00,559 Speaker 1: against bitcoin or against pot stocks, but the and I 187 00:12:00,600 --> 00:12:05,080 Speaker 1: want to point out is that the ability to have 188 00:12:05,360 --> 00:12:08,880 Speaker 1: an asset like Bitcoin on other coins and have Bitcoin 189 00:12:09,000 --> 00:12:13,280 Speaker 1: go up nineteen x last year should put people on 190 00:12:13,440 --> 00:12:16,520 Speaker 1: notice that this is a climate in which speculative behavior 191 00:12:16,640 --> 00:12:20,560 Speaker 1: is taking place. It is that that these kinds of 192 00:12:20,559 --> 00:12:26,600 Speaker 1: phenomena like you mentioned do not occur in cautious, skeptical, disciplined, 193 00:12:26,880 --> 00:12:31,360 Speaker 1: risk averse markets. And you know, the best, the biggest, 194 00:12:31,400 --> 00:12:34,920 Speaker 1: the easiest money in the investment business is to buy 195 00:12:34,960 --> 00:12:39,199 Speaker 1: when people are skeptical, discipline, risk averse, and even terrified. 196 00:12:39,880 --> 00:12:43,600 Speaker 1: Nobody would say that's today, well done. Thank you very 197 00:12:43,679 --> 00:12:46,240 Speaker 1: much for being with us. A pleasure. Howard Marks He 198 00:12:46,360 --> 00:12:49,520 Speaker 1: is the co chairman of oak Tree Capital. He is 199 00:12:49,559 --> 00:12:53,040 Speaker 1: the author of the new book Mastering the Market Cycle, 200 00:12:53,360 --> 00:13:08,280 Speaker 1: Getting the Odds on Your Side. The topic now is trade, 201 00:13:08,360 --> 00:13:10,760 Speaker 1: and our guest is Robert Lawrence. He is the Albert 202 00:13:10,760 --> 00:13:13,640 Speaker 1: Williams Professor of Trade and Investment at the John F. 203 00:13:13,720 --> 00:13:17,240 Speaker 1: Kennedy School of government at Harvard University. He is also 204 00:13:17,280 --> 00:13:21,800 Speaker 1: a senior Fellow at the Peterson Institute for International Economics, 205 00:13:22,160 --> 00:13:25,000 Speaker 1: and he previously served as a member of the Council 206 00:13:25,000 --> 00:13:30,360 Speaker 1: of Economic Advisors under President Bill Clinton. Robert Lawrence, thank 207 00:13:30,360 --> 00:13:32,960 Speaker 1: you very much for being with us. Will this new 208 00:13:33,040 --> 00:13:36,360 Speaker 1: trade agreement, as far as you know it, will it 209 00:13:36,559 --> 00:13:42,160 Speaker 1: increase employment in the automobile industry? I think it could, 210 00:13:43,480 --> 00:13:49,160 Speaker 1: although it's not perfectly clear because there are some positive 211 00:13:49,160 --> 00:13:53,640 Speaker 1: effects and some potentially negative effects. So so I would 212 00:13:53,640 --> 00:13:58,439 Speaker 1: say I would expect some moderate effect on the auto 213 00:13:58,520 --> 00:14:02,680 Speaker 1: industry's employment in the US. Do you think, Professor Lawrence, 214 00:14:02,720 --> 00:14:05,800 Speaker 1: that on the whole this is a a sort of 215 00:14:05,840 --> 00:14:10,600 Speaker 1: bent more toward free trade or more toward protectionism. I 216 00:14:10,640 --> 00:14:17,480 Speaker 1: think it's it's it's bent more towards protection. But we 217 00:14:17,480 --> 00:14:20,480 Speaker 1: we kind of has escaped a bullet because it's not 218 00:14:21,240 --> 00:14:24,960 Speaker 1: a certainty. NaSTA has now been renewed, and there were 219 00:14:25,040 --> 00:14:28,680 Speaker 1: many people who were worried about that. Um it has 220 00:14:28,720 --> 00:14:31,480 Speaker 1: been improved in certain respects, in the sense of things 221 00:14:31,520 --> 00:14:35,920 Speaker 1: like the digital economy are now included, labor and environment 222 00:14:35,960 --> 00:14:40,160 Speaker 1: are treated within the agreement. But I would say there's 223 00:14:40,200 --> 00:14:43,520 Speaker 1: a lot of constraints more constraints being placed on the 224 00:14:43,560 --> 00:14:47,640 Speaker 1: auto industry. They've raised the amount of value added required 225 00:14:47,720 --> 00:14:51,120 Speaker 1: to qualify for NaSTA. So there are a number of 226 00:14:51,200 --> 00:14:56,040 Speaker 1: measures which are less free trade, if you will, what 227 00:14:56,240 --> 00:14:59,320 Speaker 1: it's a but, but it's not. I don't think it's 228 00:14:59,320 --> 00:15:03,440 Speaker 1: a momentous change. And the effect on US farmers, for example, 229 00:15:03,520 --> 00:15:09,560 Speaker 1: with the Canadian dairy market, yes, well, there are slight improvements, 230 00:15:09,880 --> 00:15:12,880 Speaker 1: but if you look at the numbers involved, their their minuscule, 231 00:15:14,040 --> 00:15:19,320 Speaker 1: so so um, again it's kind of um, it's a change, 232 00:15:19,800 --> 00:15:22,360 Speaker 1: but the amount of additional dairy that that we're going 233 00:15:22,400 --> 00:15:25,040 Speaker 1: to be able to sell in Canada is going to 234 00:15:25,080 --> 00:15:28,240 Speaker 1: be increased, but the quota is on the you know, 235 00:15:28,680 --> 00:15:32,080 Speaker 1: less than ten percent more. Professor Lawrence, I want to 236 00:15:32,120 --> 00:15:35,640 Speaker 1: get your your thoughts on what this new agreement does 237 00:15:35,760 --> 00:15:38,920 Speaker 1: for the US. Is a path forward with China. Some 238 00:15:38,920 --> 00:15:41,320 Speaker 1: people are saying it actually sets a precedent and give 239 00:15:41,400 --> 00:15:45,400 Speaker 1: some sort of view into President Trump's trade policy. Do 240 00:15:45,400 --> 00:15:50,640 Speaker 1: you agree with that? Well, I think it has elements 241 00:15:50,680 --> 00:15:54,840 Speaker 1: that are aimed at China. You know, there's a there's 242 00:15:54,920 --> 00:15:59,400 Speaker 1: quite a remarkable provision which says that if if the 243 00:15:59,480 --> 00:16:03,800 Speaker 1: Canadians try to all the Mexicans try to negotiate a 244 00:16:03,840 --> 00:16:08,800 Speaker 1: free trade agreement with with China. Now the United States 245 00:16:08,800 --> 00:16:12,600 Speaker 1: has the right to withdraw from NaSTA. In other words, 246 00:16:12,680 --> 00:16:16,080 Speaker 1: we eat they're they're using this agreement has trying to 247 00:16:16,120 --> 00:16:21,880 Speaker 1: put leverage on China and to constrain its opportunities. UM. 248 00:16:21,880 --> 00:16:26,040 Speaker 1: It's also in Canada not very popular because it's seen 249 00:16:26,080 --> 00:16:29,280 Speaker 1: by some as an intrusion on Canadian sovereignty and their 250 00:16:29,360 --> 00:16:34,200 Speaker 1: ability to conduct their trade policies. UM. By and large, 251 00:16:34,240 --> 00:16:38,400 Speaker 1: it is sort of closing the US market and the 252 00:16:38,440 --> 00:16:43,200 Speaker 1: North American market somewhat to Chinese who might want might 253 00:16:43,240 --> 00:16:46,640 Speaker 1: have wanted to have sell more cars in the United States, 254 00:16:46,640 --> 00:16:49,960 Speaker 1: something that they aren't doing much now but potentially in 255 00:16:50,000 --> 00:16:54,000 Speaker 1: the future. But on the other hand, you know, the 256 00:16:54,720 --> 00:17:02,280 Speaker 1: tariffs on UH steel and aluminum remain in place, and um, 257 00:17:02,320 --> 00:17:04,960 Speaker 1: that's going to make it less attractive for American auto 258 00:17:05,160 --> 00:17:09,760 Speaker 1: manufacturers to produce cars for the Chinese market. And then 259 00:17:09,800 --> 00:17:13,119 Speaker 1: we also have the tariffs against our cause the Chinese 260 00:17:13,119 --> 00:17:16,199 Speaker 1: are lowering their tariffs in general in automobiles, but not 261 00:17:16,320 --> 00:17:21,119 Speaker 1: against US. So I would say on that front, and 262 00:17:21,280 --> 00:17:23,880 Speaker 1: it hit had unless we get rid of those tariffs 263 00:17:23,960 --> 00:17:27,920 Speaker 1: with with China and get out of that war. Um, 264 00:17:28,320 --> 00:17:30,560 Speaker 1: we're actually and that's where I think some of the 265 00:17:30,640 --> 00:17:34,600 Speaker 1: negative effects of the NAFTA will come. We're not encouraging 266 00:17:35,280 --> 00:17:39,240 Speaker 1: the auto firms to use the US as a base 267 00:17:39,320 --> 00:17:43,760 Speaker 1: for production for exports. You're referring to that section too. 268 00:17:43,960 --> 00:17:48,119 Speaker 1: Three to the tariff protections. Correct, Yes, we have tariffs 269 00:17:48,119 --> 00:17:51,280 Speaker 1: on steel and illuminium in the name of national security. 270 00:17:52,320 --> 00:17:55,919 Speaker 1: There's also the threat that in the future we could 271 00:17:56,200 --> 00:18:02,000 Speaker 1: um put additional tariffs on automobiles the name of national security. Now, 272 00:18:02,040 --> 00:18:06,240 Speaker 1: what the what the Mexicans and Canadians have gotten out 273 00:18:06,240 --> 00:18:09,639 Speaker 1: of this agreement is they're going to be side letters 274 00:18:09,640 --> 00:18:12,639 Speaker 1: in which at least their current volumes aren't going to 275 00:18:12,680 --> 00:18:17,000 Speaker 1: be subject to those Paris, Professor Lawrence, I'd love your 276 00:18:17,040 --> 00:18:21,760 Speaker 1: thoughts just going forward about what this negotiation process has 277 00:18:21,840 --> 00:18:24,560 Speaker 1: done to the political good will between the US and 278 00:18:24,640 --> 00:18:30,760 Speaker 1: Mexico and Canada. UM. I think it's the it's a 279 00:18:30,800 --> 00:18:35,560 Speaker 1: good question. I think are in general, are feelings of 280 00:18:35,680 --> 00:18:39,639 Speaker 1: closeness to to UM to the Canadians, their their feelings 281 00:18:39,640 --> 00:18:43,080 Speaker 1: of closeness to US, I think are have been damaged 282 00:18:43,400 --> 00:18:46,920 Speaker 1: as a result of this. I think you know, they've 283 00:18:46,960 --> 00:18:50,439 Speaker 1: got the sense that it's it is America trying to 284 00:18:50,440 --> 00:18:54,240 Speaker 1: put America first. But I think they're also heaving a 285 00:18:54,359 --> 00:18:57,159 Speaker 1: sigh of relief that things aren't as bad as they 286 00:18:57,200 --> 00:19:03,600 Speaker 1: could have been. The the trade pact that is set 287 00:19:03,640 --> 00:19:05,960 Speaker 1: to be voted on by Congress, do you believe it's 288 00:19:05,960 --> 00:19:13,239 Speaker 1: a template for U s trade negotiations with China? Not really, um. 289 00:19:14,400 --> 00:19:18,240 Speaker 1: I think the kind of questions, the really tough questions 290 00:19:19,359 --> 00:19:23,520 Speaker 1: that we're going to face with China, aren't really dealt 291 00:19:23,600 --> 00:19:28,040 Speaker 1: with in this trade agreement. One dimension where I would 292 00:19:28,240 --> 00:19:30,800 Speaker 1: I would I would say it's it's kind of a 293 00:19:30,840 --> 00:19:36,560 Speaker 1: template is that currency of the were included in this agreement, 294 00:19:37,240 --> 00:19:39,399 Speaker 1: and I think if we ever had an agreement with China, 295 00:19:39,720 --> 00:19:44,040 Speaker 1: we'd want to cover currency and currency manipulation. So in 296 00:19:44,080 --> 00:19:47,159 Speaker 1: that sense, we've done something. But the big problems with 297 00:19:47,280 --> 00:19:52,600 Speaker 1: China that relate to the protection of intellectual property and 298 00:19:52,680 --> 00:19:57,919 Speaker 1: the false transfer of technologies to China, and how do 299 00:19:58,000 --> 00:20:01,959 Speaker 1: we deal with state owned enterprise as in China, those 300 00:20:02,000 --> 00:20:05,240 Speaker 1: aren't really dealt with in this agreement because they're not 301 00:20:05,320 --> 00:20:09,440 Speaker 1: problems that we have with the with the Canadians or 302 00:20:09,480 --> 00:20:14,280 Speaker 1: the Mexican Professor Lawrence, Just to sort of wrap up 303 00:20:14,320 --> 00:20:17,280 Speaker 1: one thing that's been on my mind is whether President 304 00:20:17,320 --> 00:20:20,639 Speaker 1: Trump wants a trade agreement with China. And there was 305 00:20:21,000 --> 00:20:25,000 Speaker 1: a news report out yesterday about rising tensions in in 306 00:20:25,040 --> 00:20:30,880 Speaker 1: the South Seas between Chinese warships and US warships. How 307 00:20:30,880 --> 00:20:33,080 Speaker 1: do you see this whole thing evolving and and sort 308 00:20:33,080 --> 00:20:37,320 Speaker 1: of what's the compass. I'm very worried about that. Um. 309 00:20:37,440 --> 00:20:41,400 Speaker 1: I mean, I think he would like a trade agreement 310 00:20:41,480 --> 00:20:45,520 Speaker 1: with China in which they totally surrender, and he's playing 311 00:20:45,600 --> 00:20:48,960 Speaker 1: for that one and absent that. By that, I mean 312 00:20:49,000 --> 00:20:52,359 Speaker 1: they agree to give up a lot of their industrial policies, 313 00:20:52,480 --> 00:20:56,200 Speaker 1: which are the the core element of their development strategy. 314 00:20:56,880 --> 00:20:59,080 Speaker 1: And I don't see that as very likely. And I 315 00:20:59,119 --> 00:21:01,040 Speaker 1: think that's all aim at ly what he would like 316 00:21:01,119 --> 00:21:03,919 Speaker 1: to see happen, or certainly people who are advising him 317 00:21:03,960 --> 00:21:08,560 Speaker 1: would like to see happen. And so I believe that 318 00:21:08,640 --> 00:21:11,760 Speaker 1: these tariffs are going to remain in place for a 319 00:21:11,800 --> 00:21:16,200 Speaker 1: long time, unfortunately, and I think it's going to be 320 00:21:16,280 --> 00:21:21,119 Speaker 1: damaging too to our trade, uh to to our to 321 00:21:21,520 --> 00:21:26,880 Speaker 1: our economy and and and to the Chinese economy. Professor 322 00:21:26,920 --> 00:21:29,840 Speaker 1: lawrenced just quickly, what have we learned as part of 323 00:21:30,320 --> 00:21:33,800 Speaker 1: the negotiating style of the U. S. Trade representative Visa v. 324 00:21:34,359 --> 00:21:37,520 Speaker 1: Mexico and Canada. And what can we take away from 325 00:21:37,520 --> 00:21:42,439 Speaker 1: this example. Well, I think both in this case and 326 00:21:42,600 --> 00:21:49,280 Speaker 1: in the case of the Korea agreement, um, they they 327 00:21:48,760 --> 00:21:53,520 Speaker 1: they use it. They weighed the big stick. But when 328 00:21:53,880 --> 00:21:59,200 Speaker 1: the time comes, actually, uh, you know, President Trump had 329 00:21:59,280 --> 00:22:03,200 Speaker 1: called this the NaSTA, the worst agreement, you know, he'd 330 00:22:03,200 --> 00:22:07,520 Speaker 1: ever seen. But in fact what he ultimately agreed to 331 00:22:07,960 --> 00:22:11,760 Speaker 1: in the case of both the Korea and this new 332 00:22:11,800 --> 00:22:18,480 Speaker 1: agreement with Canada Mexico is a is a modification. Professor 333 00:22:18,560 --> 00:22:20,479 Speaker 1: Robert Lawrence, thank you so much for being with us. 334 00:22:20,520 --> 00:22:22,840 Speaker 1: We're gonna have to leave it. They're really illuminating an 335 00:22:22,840 --> 00:22:26,280 Speaker 1: important conversation. The Albert L. Williams, Professor of a Trade 336 00:22:26,320 --> 00:22:29,560 Speaker 1: Investment in John F. Kennedy School of Government at Harvard University, 337 00:22:29,840 --> 00:22:33,240 Speaker 1: also a senior Fellow at the Peterson Institute for International Economics, 338 00:22:33,480 --> 00:22:36,480 Speaker 1: as well as a former member of the Council of 339 00:22:36,520 --> 00:22:51,240 Speaker 1: Economic Advisors for President Clinton. Just this week we heard 340 00:22:51,440 --> 00:22:56,639 Speaker 1: from the President of the European Commission, Jean Claude Junker, saying, 341 00:22:56,760 --> 00:22:59,440 Speaker 1: we have to do everything to avoid a new Greece 342 00:23:00,200 --> 00:23:04,439 Speaker 1: this time in Italy crisis. Here to tell us about 343 00:23:04,440 --> 00:23:09,000 Speaker 1: it is Ferdinando Giuliano. Here's our Bloomberg opinion editor based 344 00:23:09,080 --> 00:23:11,960 Speaker 1: in Rome, and he joins us. Now, Ferdinando, thank you 345 00:23:12,040 --> 00:23:14,200 Speaker 1: very much for being with us. Maybe just spell out 346 00:23:14,280 --> 00:23:16,840 Speaker 1: for people who have not been following the back and 347 00:23:16,920 --> 00:23:21,520 Speaker 1: forth in Italian politics, who are the players and how 348 00:23:21,560 --> 00:23:25,440 Speaker 1: did they get into so much trouble. So the players 349 00:23:25,480 --> 00:23:29,600 Speaker 1: are the two populist parties, the Five Star Movements and 350 00:23:29,680 --> 00:23:34,679 Speaker 1: the League, which after the March the fourth election, decided 351 00:23:34,760 --> 00:23:40,560 Speaker 1: to team up and form these uh coalition of strange bedfellows, 352 00:23:40,560 --> 00:23:42,959 Speaker 1: because remember the two parties run against each other at 353 00:23:43,000 --> 00:23:46,679 Speaker 1: the election, but then decided to form this anti establishment 354 00:23:46,720 --> 00:23:50,720 Speaker 1: government and their economic program, which was published in mid May, 355 00:23:51,119 --> 00:23:56,920 Speaker 1: included spending commitments which topped a hundred billion euros according 356 00:23:56,960 --> 00:24:00,879 Speaker 1: to independent estimates. So that started freeing out the bond 357 00:24:00,920 --> 00:24:06,000 Speaker 1: market and you started seeing Italian bond deals going up 358 00:24:06,720 --> 00:24:11,399 Speaker 1: in UH May June, and then it's really been a 359 00:24:11,480 --> 00:24:16,439 Speaker 1: roller coaster with the finance minister, technocrat Giovann Tria, trying 360 00:24:16,480 --> 00:24:19,280 Speaker 1: to reassure the markets that the deficit and the debt 361 00:24:19,359 --> 00:24:22,840 Speaker 1: will be under kept under control. Now, remember Italy's public 362 00:24:22,920 --> 00:24:25,280 Speaker 1: debt is one of the largest in the world, over 363 00:24:25,359 --> 00:24:28,119 Speaker 1: one hundred and thirty percent of cross domestic products. So 364 00:24:28,400 --> 00:24:31,640 Speaker 1: investors are watching very closely. So on the one hand, 365 00:24:31,680 --> 00:24:34,000 Speaker 1: we have the finance minister. On the other hand, we 366 00:24:34,040 --> 00:24:36,720 Speaker 1: have the leaders of the two parties really want to 367 00:24:36,720 --> 00:24:39,720 Speaker 1: make good on their promises because they want to deliver 368 00:24:39,960 --> 00:24:42,600 Speaker 1: change and bring growth. And at the moment we are 369 00:24:42,640 --> 00:24:47,399 Speaker 1: at the crunch point because the deficit targets for the 370 00:24:47,440 --> 00:24:49,840 Speaker 1: next year in the forthcoming year need to be published. 371 00:24:49,960 --> 00:24:52,119 Speaker 1: Well they really had to be published last week, but 372 00:24:52,200 --> 00:24:56,040 Speaker 1: we'll be published within hours or days, and investors are 373 00:24:56,600 --> 00:25:01,760 Speaker 1: watching very closely to understand how toward extend these parties 374 00:25:01,920 --> 00:25:07,400 Speaker 1: will really continue with their spending pledges and we'll put 375 00:25:07,440 --> 00:25:10,080 Speaker 1: them into practice. You know, it seemed like there are 376 00:25:10,160 --> 00:25:13,040 Speaker 1: this good news overnight out of Italy, right we had 377 00:25:13,520 --> 00:25:16,040 Speaker 1: a sort of announcement that there was a plan to 378 00:25:16,160 --> 00:25:19,320 Speaker 1: reduce the deficit. The problem was it also came with 379 00:25:19,440 --> 00:25:23,359 Speaker 1: increasing stimulus, and at first the markets thought, oh, this 380 00:25:23,440 --> 00:25:25,959 Speaker 1: is good news, and then based on where bondyields are, 381 00:25:26,000 --> 00:25:28,360 Speaker 1: they came down a little bit. But I mean, they're 382 00:25:28,400 --> 00:25:30,360 Speaker 1: not buying it. Does this make sense to you? Their 383 00:25:30,440 --> 00:25:34,520 Speaker 1: latest plan. Well, the plan at the moment is, as 384 00:25:34,560 --> 00:25:37,000 Speaker 1: you said, you know, very hard to believe. Today we 385 00:25:37,040 --> 00:25:40,560 Speaker 1: had the Finance Minister saying he's targeting at two point 386 00:25:40,600 --> 00:25:45,960 Speaker 1: four percent um depthicit for next year. However, it also 387 00:25:46,000 --> 00:25:50,080 Speaker 1: made clear that the deficit, the structural depthicity without any 388 00:25:50,119 --> 00:25:53,679 Speaker 1: additional measure, would be two percent of GDP, and he 389 00:25:53,760 --> 00:25:57,119 Speaker 1: wants to do raise investment by another not point percent 390 00:25:57,200 --> 00:25:59,760 Speaker 1: of GDP, So that takes us already to two point 391 00:25:59,760 --> 00:26:03,520 Speaker 1: two percent of GDP. Now we have just a little margin, 392 00:26:03,640 --> 00:26:07,040 Speaker 1: which is around three point five billion to really make 393 00:26:07,119 --> 00:26:10,800 Speaker 1: good on all these promises, lowering the pension age, some 394 00:26:10,840 --> 00:26:13,720 Speaker 1: sort of income support scheme for the poor, lower taxes 395 00:26:13,920 --> 00:26:17,359 Speaker 1: which these parties are throwing around. So it's at the 396 00:26:17,440 --> 00:26:20,800 Speaker 1: moment it's very hard to square how you can keep 397 00:26:20,840 --> 00:26:24,200 Speaker 1: the deficit under control make good on your promises at 398 00:26:24,200 --> 00:26:27,600 Speaker 1: the time when the Italian and European economy really seemed 399 00:26:27,640 --> 00:26:35,280 Speaker 1: to be slowing. Ferdinando the Commissioner for Economic Affairs, Pierre Moscovici, 400 00:26:35,840 --> 00:26:39,600 Speaker 1: has released part of a text of a speech that 401 00:26:39,640 --> 00:26:43,360 Speaker 1: he gave at the o E c D in Paris, saying, quote, 402 00:26:43,400 --> 00:26:48,680 Speaker 1: like the Hungarians, Italians also opted for a decidedly euroskeptic 403 00:26:48,800 --> 00:26:53,560 Speaker 1: and xenophobic government that on migration and budgetary issues, is 404 00:26:53,640 --> 00:26:58,679 Speaker 1: trying to get rid of European obligations. I mean, do 405 00:26:58,720 --> 00:27:01,119 Speaker 1: you agree with that? Well, I wrote I wrote a 406 00:27:01,160 --> 00:27:04,320 Speaker 1: column just yesterday which basically said that the European Commission 407 00:27:04,359 --> 00:27:08,280 Speaker 1: should really avoid making these such such remarks, using such 408 00:27:09,480 --> 00:27:11,879 Speaker 1: such you know, this kind of tone. And the reason 409 00:27:12,000 --> 00:27:14,760 Speaker 1: is because actually the two parties, the League in the 410 00:27:14,800 --> 00:27:18,840 Speaker 1: Five Star movement that thriving on this rhetoric from Brussels, 411 00:27:18,840 --> 00:27:20,919 Speaker 1: because it's very easy for them to just, you know, 412 00:27:21,520 --> 00:27:26,560 Speaker 1: portray these bureaucrats, European bureaucrats as the really enemies of 413 00:27:26,600 --> 00:27:30,800 Speaker 1: the Italian people. The people are trying to stop them 414 00:27:30,840 --> 00:27:35,400 Speaker 1: from making good on all their lavish promises. So I think, 415 00:27:35,400 --> 00:27:37,480 Speaker 1: you know, a much better strategy for Europe would be 416 00:27:37,520 --> 00:27:39,919 Speaker 1: to obviously apply the rules. I mean, there are some 417 00:27:40,000 --> 00:27:43,520 Speaker 1: rules which say high that country should really try to 418 00:27:43,520 --> 00:27:45,879 Speaker 1: bring this stept down during an upturn. And at the 419 00:27:45,880 --> 00:27:48,160 Speaker 1: moment we're not in a recession. The economy is growing, 420 00:27:48,200 --> 00:27:50,159 Speaker 1: so that's the time to do it. But at the 421 00:27:50,200 --> 00:27:54,320 Speaker 1: same time, really leave it to investors, because investors are 422 00:27:54,359 --> 00:27:58,600 Speaker 1: already nervous they're watching this very closely, and there will 423 00:27:58,640 --> 00:28:02,000 Speaker 1: be a lot of pressure on Italian government to you know, 424 00:28:02,520 --> 00:28:07,960 Speaker 1: reigning this crazy spending pledges. So frankly, I think these 425 00:28:08,000 --> 00:28:12,720 Speaker 1: comments are not particularly helpful. They only make the populists 426 00:28:12,760 --> 00:28:16,240 Speaker 1: look stronger. Far better to keep, you know, stick to 427 00:28:16,280 --> 00:28:19,439 Speaker 1: the rules, apply the rules, but let's let the markets 428 00:28:19,480 --> 00:28:22,760 Speaker 1: really do the job. Yeah, Fernando Julianna, thank you so 429 00:28:22,840 --> 00:28:25,880 Speaker 1: much for being with us. Fernando Giuliano is a Bloomberg 430 00:28:25,880 --> 00:28:30,639 Speaker 1: Opinion editor in Rome watching this drama unfold. Of course, 431 00:28:31,040 --> 00:28:34,880 Speaker 1: there have been an increasing number of comparisons between Italy 432 00:28:34,960 --> 00:28:37,840 Speaker 1: and Greece, given the fact that their bond yields are 433 00:28:37,880 --> 00:28:42,560 Speaker 1: now treating closer together than you're seeing with Germany, and uh, 434 00:28:42,800 --> 00:28:55,520 Speaker 1: I don't know, interesting times, interesting times. The New York 435 00:28:55,520 --> 00:29:00,760 Speaker 1: Times reported a bombshell article about President Donald Trump's finances, 436 00:29:00,880 --> 00:29:03,560 Speaker 1: basically saying he got a lot of his money from 437 00:29:03,680 --> 00:29:06,400 Speaker 1: his dad, despite his claims that he was a self 438 00:29:06,560 --> 00:29:10,440 Speaker 1: made million billionaire. Excuse me joining us now. Tim O'Brien, 439 00:29:10,480 --> 00:29:14,560 Speaker 1: executive diver editor of Bloomberg Opinion, also um the author 440 00:29:14,800 --> 00:29:17,920 Speaker 1: of the book Trump Nation, The Art of Being the Donalds. 441 00:29:17,960 --> 00:29:21,840 Speaker 1: Also he has been sued by Donald Trump and one. So, uh, 442 00:29:21,960 --> 00:29:24,200 Speaker 1: that's going to throw that out here, Tim, Why did 443 00:29:24,240 --> 00:29:25,600 Speaker 1: you make of this New York Times piece? But what 444 00:29:25,600 --> 00:29:28,040 Speaker 1: do we learn that was new? Um? Well, I think 445 00:29:28,080 --> 00:29:30,160 Speaker 1: the main things in it that were newly so were 446 00:29:30,200 --> 00:29:34,880 Speaker 1: the various structures his parents and his siblings invented to 447 00:29:35,120 --> 00:29:39,000 Speaker 1: transfer as much of the parents money to the kids 448 00:29:39,080 --> 00:29:42,520 Speaker 1: without incurring inheritance or gift taxes, which was a lot. 449 00:29:42,600 --> 00:29:46,120 Speaker 1: About a billion dollars went to the children. Under tax 450 00:29:46,240 --> 00:29:48,520 Speaker 1: rules at the time when that happened, it should have 451 00:29:48,560 --> 00:29:52,000 Speaker 1: been tax about a fifty rate, but because of various 452 00:29:52,000 --> 00:29:54,880 Speaker 1: structures that the kids put in, uh, it only got 453 00:29:54,920 --> 00:29:58,720 Speaker 1: taxed at about five. So instead of paying over five 454 00:29:59,120 --> 00:30:01,760 Speaker 1: million dollars in tax is they've paid about a little 455 00:30:01,760 --> 00:30:04,040 Speaker 1: bit over fifty. So is any of this illegal though 456 00:30:04,440 --> 00:30:07,800 Speaker 1: a big portion of it's perfectly legal, um, including the 457 00:30:08,240 --> 00:30:10,440 Speaker 1: you know, the sort of conduits that they used to 458 00:30:10,480 --> 00:30:12,880 Speaker 1: transfer the money. The piece of it that might be 459 00:30:13,320 --> 00:30:17,080 Speaker 1: and is at least untoward and possibly illegal, is that 460 00:30:17,200 --> 00:30:20,480 Speaker 1: they used bogus valuations on some of the assets that 461 00:30:20,520 --> 00:30:24,400 Speaker 1: were being transferred, particularly buildings. They had an appraiser who 462 00:30:24,440 --> 00:30:28,000 Speaker 1: appeared to have low ball the valuations on lots and 463 00:30:28,080 --> 00:30:32,080 Speaker 1: lots of these buildings. However, those valuations occurred I think 464 00:30:32,240 --> 00:30:35,959 Speaker 1: well over a decade ago, and Uh the appraiser said, Look, 465 00:30:35,960 --> 00:30:38,840 Speaker 1: I don't have the paperwork anymore and statutes of limitations 466 00:30:38,880 --> 00:30:42,040 Speaker 1: have run. So I don't think that there's legal exposure 467 00:30:42,080 --> 00:30:43,600 Speaker 1: here for the president. There may end up being a 468 00:30:43,880 --> 00:30:48,200 Speaker 1: civil penalty. There's no I would be really I would 469 00:30:48,200 --> 00:30:50,960 Speaker 1: bet you know, my own small wallet on the fact 470 00:30:50,960 --> 00:30:53,720 Speaker 1: that there wouldn't be a criminal penalty. Um. I think 471 00:30:53,720 --> 00:30:56,280 Speaker 1: the larger lesson from it, though, is it It does 472 00:30:56,400 --> 00:31:00,080 Speaker 1: speak to how dependent Donald Trump has always been on 473 00:31:00,240 --> 00:31:04,560 Speaker 1: his father, uh, to get launched as a businessperson, to 474 00:31:04,680 --> 00:31:08,160 Speaker 1: fend off bankruptcy as a business person, and to just 475 00:31:08,200 --> 00:31:14,200 Speaker 1: get repeated help getting past his myriad mistakes as a businessman. Tim. 476 00:31:14,600 --> 00:31:16,560 Speaker 1: In addition to your book on Trump, I know that 477 00:31:16,600 --> 00:31:20,480 Speaker 1: you've also written about a book called the Lincoln Conspiracy, 478 00:31:20,560 --> 00:31:23,280 Speaker 1: right I have? Yeah, is there any The reason I 479 00:31:23,320 --> 00:31:26,520 Speaker 1: bring that up is because that takes a wider view 480 00:31:26,680 --> 00:31:29,160 Speaker 1: of the kind of tenor of the time between the 481 00:31:29,240 --> 00:31:31,000 Speaker 1: end of the Civil War and the First World War? 482 00:31:31,680 --> 00:31:35,360 Speaker 1: Can you describe based on what we know and also 483 00:31:35,400 --> 00:31:37,880 Speaker 1: the revelations today from the New York Times, which, as 484 00:31:37,920 --> 00:31:40,600 Speaker 1: you just described, may or may not be brand new. 485 00:31:41,680 --> 00:31:44,320 Speaker 1: What do you believe to be the tenor of the 486 00:31:44,360 --> 00:31:48,640 Speaker 1: inner circle of President Donald Trump? Well, then I think 487 00:31:48,640 --> 00:31:51,480 Speaker 1: he's running a very chaotic administration. I think it it 488 00:31:51,600 --> 00:31:56,440 Speaker 1: reflects the Trump organization, which was very chaotically run. It 489 00:31:56,520 --> 00:31:59,880 Speaker 1: was essentially a cult of personality at the Trump organization, 490 00:32:00,000 --> 00:32:03,520 Speaker 1: built around marketing him and his name. It wasn't a 491 00:32:03,560 --> 00:32:06,520 Speaker 1: Fortune five hundred company. It was a mom and pop 492 00:32:06,600 --> 00:32:11,200 Speaker 1: boutique operation in Trump Tower that really served his needs. 493 00:32:11,480 --> 00:32:14,960 Speaker 1: And he's essentially transferred that into the White House. Um, 494 00:32:15,000 --> 00:32:18,240 Speaker 1: the White House is short on process, it's short on 495 00:32:18,320 --> 00:32:23,080 Speaker 1: policy aspirations. It is long on public appearances and and 496 00:32:23,200 --> 00:32:27,120 Speaker 1: emotional relationships with the Trump base. That works in a campaign, 497 00:32:27,320 --> 00:32:30,479 Speaker 1: it doesn't work for running a federal government employs two 498 00:32:30,520 --> 00:32:34,120 Speaker 1: million people. One thing that I'm struck by. President Trump 499 00:32:34,280 --> 00:32:36,880 Speaker 1: did respond to the New York Times article, slamming it 500 00:32:36,960 --> 00:32:39,440 Speaker 1: for being boring in old news and saying that now 501 00:32:40,560 --> 00:32:42,360 Speaker 1: of all stories in the New York Times are negative 502 00:32:42,360 --> 00:32:44,240 Speaker 1: on him, and just because they're just sort of sour 503 00:32:44,280 --> 00:32:46,440 Speaker 1: on getting the election call wrong. And I guess that 504 00:32:46,480 --> 00:32:49,560 Speaker 1: I'm wondering how much any of this matters when it 505 00:32:49,640 --> 00:32:54,800 Speaker 1: comes to how different populations in America view President Trump 506 00:32:54,840 --> 00:32:57,120 Speaker 1: and whether they support him or not. Well, you know, 507 00:32:57,480 --> 00:32:59,600 Speaker 1: it's it's easy to sort of define his base as 508 00:32:59,640 --> 00:33:05,680 Speaker 1: post industrial workers, male workers, white workers, and in fact, 509 00:33:06,160 --> 00:33:10,200 Speaker 1: affluent Republicans were also a core support group for the president. 510 00:33:10,280 --> 00:33:15,360 Speaker 1: And he's delivered things that that cohort wanted. He delivered uh, 511 00:33:15,440 --> 00:33:20,280 Speaker 1: a massive tax cut, he has delivered deregulation. Um, he 512 00:33:20,360 --> 00:33:24,400 Speaker 1: has populated the district courts. Um, those are things that's 513 00:33:24,400 --> 00:33:27,880 Speaker 1: meaningful to that group of people. Um. The blue collar 514 00:33:27,920 --> 00:33:30,800 Speaker 1: workers who support them wat job supported him, want jobs. 515 00:33:31,120 --> 00:33:34,960 Speaker 1: I am not convinced yet, um that they don't think 516 00:33:34,960 --> 00:33:36,920 Speaker 1: he's going to fulfill that promise. But the clock is 517 00:33:37,000 --> 00:33:38,640 Speaker 1: ticking on that. You know. You can look at places 518 00:33:38,680 --> 00:33:42,040 Speaker 1: like Indiana where Trump and Pence made a big show 519 00:33:42,080 --> 00:33:45,040 Speaker 1: of saving all those jobs that carrier and then months 520 00:33:45,120 --> 00:33:49,400 Speaker 1: later those jobs disappeared. Uh. You know, there's fisher fishermen 521 00:33:49,440 --> 00:33:53,200 Speaker 1: in the coasts of both Louisiana and and Connecticut who 522 00:33:53,240 --> 00:33:56,080 Speaker 1: have who are feel that they've been betrayed. You see 523 00:33:56,120 --> 00:33:58,400 Speaker 1: these interviews in the press where they thought the president 524 00:33:58,440 --> 00:34:00,520 Speaker 1: was going to deliver job growth them and they haven't 525 00:34:00,520 --> 00:34:03,280 Speaker 1: seen it. So I think job growth, but that's gonna 526 00:34:03,280 --> 00:34:06,080 Speaker 1: be a longer term, multi year phenomenon. Right now, I 527 00:34:06,120 --> 00:34:08,280 Speaker 1: think it's base really likes him, and then the Republicans 528 00:34:08,640 --> 00:34:11,919 Speaker 1: that are wealthy businessmen, they don't care about this other 529 00:34:11,960 --> 00:34:14,360 Speaker 1: stuff as much if the policies are what they like. 530 00:34:14,480 --> 00:34:15,799 Speaker 1: Is that sort of those well, I mean, I think, 531 00:34:15,840 --> 00:34:19,200 Speaker 1: I think I think it would appear that that those 532 00:34:19,200 --> 00:34:23,080 Speaker 1: are pocketbook voters and they see the government. Both both 533 00:34:23,080 --> 00:34:25,960 Speaker 1: of those constituencies see the government for different reasons as 534 00:34:26,080 --> 00:34:28,560 Speaker 1: obstructionists or in the way they don't see a benefit 535 00:34:28,920 --> 00:34:32,239 Speaker 1: from it. Trump speaks to both of those populations when 536 00:34:32,239 --> 00:34:37,960 Speaker 1: he says governments the problem, um and uh. For affluent voters, 537 00:34:38,000 --> 00:34:40,880 Speaker 1: they don't need government services as much. For blue collar voters, 538 00:34:41,160 --> 00:34:44,600 Speaker 1: they need those services, but they don't know what they're missing. All. 539 00:34:44,640 --> 00:34:46,520 Speaker 1: I'm gonna throw you a little bit of a curveball here. 540 00:34:46,560 --> 00:34:49,400 Speaker 1: But because of the nature of the investigation by the 541 00:34:49,400 --> 00:34:51,799 Speaker 1: New York Times, do you think that the president is 542 00:34:51,880 --> 00:34:57,480 Speaker 1: sympathetic to another round attax cuts? Wow? I mean, I 543 00:34:57,520 --> 00:35:00,680 Speaker 1: think I think the president is sympathetic to anything that 544 00:35:00,800 --> 00:35:03,400 Speaker 1: makes him look like he's winning, and he defines that 545 00:35:03,600 --> 00:35:08,440 Speaker 1: very broadly. Um further, are two things that motivate everything 546 00:35:08,480 --> 00:35:14,160 Speaker 1: he does. A survival and being self aggrandizing. That's all 547 00:35:14,200 --> 00:35:17,200 Speaker 1: you need to know, all right, Thanks very much. Tim 548 00:35:17,239 --> 00:35:21,960 Speaker 1: O'Brien is executive editor for Bloomberg Opinion. He is, of course, 549 00:35:22,000 --> 00:35:26,560 Speaker 1: the author of Trump Nation, The Art of Being the Donald. 550 00:35:26,760 --> 00:35:32,960 Speaker 1: It's also the author of The Lincoln Conspiracy. Thanks for 551 00:35:33,000 --> 00:35:35,680 Speaker 1: listening to the Bloomberg P and L podcast. You can 552 00:35:35,719 --> 00:35:39,520 Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud, or 553 00:35:39,560 --> 00:35:43,040 Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm on 554 00:35:43,080 --> 00:35:47,239 Speaker 1: Twitter at pim Fox. I'm on Twitter at Lisa Abramowits 555 00:35:47,280 --> 00:35:50,319 Speaker 1: one before the podcast. You can always catch us worldwide 556 00:35:50,320 --> 00:35:51,280 Speaker 1: on Bloomberg Radio.