1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm term Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:32,879 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Are 5 00:00:32,920 --> 00:00:35,559 Speaker 1: we doing this? I'm told we're doing this. The CMEME 6 00:00:35,680 --> 00:00:39,239 Speaker 1: has joined The Bitcoin Revolution Future started trading last night. 7 00:00:39,280 --> 00:00:41,760 Speaker 1: I understand Tom Keane was literally up all night looking 8 00:00:41,760 --> 00:00:44,920 Speaker 1: for arbitrage opportunities, and he'll bring you the latest price 9 00:00:44,960 --> 00:00:49,120 Speaker 1: for our bitcoin futures in just a moment for more 10 00:00:49,400 --> 00:00:51,279 Speaker 1: to get you up to spin. What's sounding in d C, though, 11 00:00:51,320 --> 00:00:54,840 Speaker 1: is Carl Weinberg, the high Frequency Economics founder, charged with 12 00:00:54,920 --> 00:00:59,840 Speaker 1: divorcing his political biases from his economic analysis. Dr Weinberg, 13 00:01:00,160 --> 00:01:01,680 Speaker 1: great to have you with us on a program, Thanks 14 00:01:01,680 --> 00:01:03,440 Speaker 1: for joining us, Thanks for having me talk to me 15 00:01:03,440 --> 00:01:06,080 Speaker 1: about how tough that challenge has been this year. Well, 16 00:01:06,120 --> 00:01:09,200 Speaker 1: you know, the high Frequency Economics were divided. Jimo Sullivan 17 00:01:09,280 --> 00:01:11,800 Speaker 1: is the House Republican and I'm the House Democrat. And 18 00:01:12,000 --> 00:01:14,440 Speaker 1: it's amazing, though this year, how many things we've agreed upon, 19 00:01:14,720 --> 00:01:17,839 Speaker 1: which is unusual, but it's been a very difficult time 20 00:01:17,880 --> 00:01:21,399 Speaker 1: to separate politic politics from economics, that's for sure. Talk 21 00:01:21,400 --> 00:01:24,040 Speaker 1: to me about how you've parked your politics to one 22 00:01:24,080 --> 00:01:26,759 Speaker 1: side of the room and just focused on the economics. 23 00:01:26,760 --> 00:01:29,120 Speaker 1: What are you agreeing on? Well, what we agree on 24 00:01:29,280 --> 00:01:33,360 Speaker 1: is we have some skepticism about stimulating the economy right now, 25 00:01:33,400 --> 00:01:37,520 Speaker 1: with unemployment so low, with the risk of inflation so high, 26 00:01:37,600 --> 00:01:40,440 Speaker 1: and our house view at High Frequency Economics, and it's 27 00:01:40,440 --> 00:01:44,039 Speaker 1: in Jimo Sullivan's notes this morning, is that any stimulus 28 00:01:44,040 --> 00:01:46,039 Speaker 1: to the economy at this point is probably going to 29 00:01:46,120 --> 00:01:48,120 Speaker 1: move the FED to high rates a little bit faster 30 00:01:48,200 --> 00:01:51,440 Speaker 1: than it otherwise would have. And that is an implication 31 00:01:51,520 --> 00:01:54,280 Speaker 1: of this policy that's not being talked about in Washington, 32 00:01:54,360 --> 00:01:56,600 Speaker 1: but one that we talked about in High Frequency. So 33 00:01:56,680 --> 00:01:58,560 Speaker 1: do I think of next year is just the Federal 34 00:01:58,600 --> 00:02:01,000 Speaker 1: Reserve kind of offsetting any of a hating and the 35 00:02:01,200 --> 00:02:02,800 Speaker 1: potential for a matt up, at least in the U. 36 00:02:02,840 --> 00:02:06,440 Speaker 1: S economy is limited. I don't think offsetting is a 37 00:02:06,480 --> 00:02:09,160 Speaker 1: fair way to talk about either their intention, you know, 38 00:02:09,320 --> 00:02:11,079 Speaker 1: or what they're actually going to be able to do. 39 00:02:11,440 --> 00:02:13,440 Speaker 1: I think the FED and Jim writes about this in 40 00:02:13,480 --> 00:02:17,400 Speaker 1: his daily notes today. Um the Fed's job is to 41 00:02:18,480 --> 00:02:21,480 Speaker 1: keep the economy at full employment and to keep inflation 42 00:02:22,560 --> 00:02:26,320 Speaker 1: under control, and anything that threatens that mandate is going 43 00:02:26,360 --> 00:02:29,200 Speaker 1: to cause them to retract stimulus from the economy sooner. 44 00:02:29,320 --> 00:02:31,280 Speaker 1: I just want to bring this up. These are two 45 00:02:31,360 --> 00:02:35,680 Speaker 1: headlines that nobody cares about. But guess what they're coming 46 00:02:35,720 --> 00:02:38,440 Speaker 1: out back to back, and I think, John, it really 47 00:02:38,480 --> 00:02:42,919 Speaker 1: speaks to the tax legislation right on top of each other. 48 00:02:43,400 --> 00:02:47,520 Speaker 1: Hers she confirms packed by amplifies Snack Brands for one 49 00:02:47,560 --> 00:02:51,640 Speaker 1: point six billion, Tiny Penn National or by Las Vegas 50 00:02:51,639 --> 00:02:55,600 Speaker 1: Pinnacle Entertainment for about two point eight billion. But the 51 00:02:55,600 --> 00:02:57,440 Speaker 1: news is that came out at the same moment here 52 00:02:57,480 --> 00:02:59,920 Speaker 1: in the seven or two hour I mean it just 53 00:03:00,280 --> 00:03:04,080 Speaker 1: it really speaks to John, the whole frenzy that we 54 00:03:04,160 --> 00:03:08,040 Speaker 1: might get into here coming off text legislation. Is that 55 00:03:08,040 --> 00:03:10,120 Speaker 1: what we're gonna say? Count more m and a more 56 00:03:10,200 --> 00:03:12,160 Speaker 1: days of sitting here at seven a m. Eastern time 57 00:03:12,160 --> 00:03:15,800 Speaker 1: and just reading out headlines of another acquisition. You know, 58 00:03:15,840 --> 00:03:18,560 Speaker 1: we just had a very interesting conversation on television where 59 00:03:18,560 --> 00:03:21,760 Speaker 1: I asked this question, what are the yes? Well, I 60 00:03:21,800 --> 00:03:23,960 Speaker 1: asked the question, you know, well, what is the implication 61 00:03:24,040 --> 00:03:25,960 Speaker 1: of the tax code for M and A, And what 62 00:03:26,000 --> 00:03:27,800 Speaker 1: he said really got my attention, and I know you're 63 00:03:27,800 --> 00:03:29,639 Speaker 1: gonna be talking to him again in a few minutes. 64 00:03:29,840 --> 00:03:32,000 Speaker 1: He said, you know, well, what happened was that nothing 65 00:03:32,040 --> 00:03:34,520 Speaker 1: stupid happened. So therefore a lot of deals that were 66 00:03:34,560 --> 00:03:37,800 Speaker 1: on hold and anticipation that's something stupid would happen suddenly 67 00:03:37,800 --> 00:03:40,680 Speaker 1: now are coming into play, are are being realized. So 68 00:03:40,760 --> 00:03:42,680 Speaker 1: you know, maybe that's what the implication this is going 69 00:03:42,720 --> 00:03:45,280 Speaker 1: to be the absence of something bad. We start strong 70 00:03:45,320 --> 00:03:48,040 Speaker 1: in the monday, Karl Weinberg with us with high frequency Economics, 71 00:03:48,040 --> 00:03:50,480 Speaker 1: and of course Mr fry Sack, we'll join us a 72 00:03:50,520 --> 00:03:53,880 Speaker 1: bit on Fox Disney, CDs at UH and the rest 73 00:03:53,920 --> 00:03:58,000 Speaker 1: of ramifications for Global Wall Street, Bloomberg Surveillance. This morning 74 00:03:58,040 --> 00:04:01,120 Speaker 1: has always brought you by Investco. Learn how invest gooes. 75 00:04:01,240 --> 00:04:05,800 Speaker 1: Pure focus on investing, diversity of thought, and passion to 76 00:04:05,880 --> 00:04:08,960 Speaker 1: exceed can help you get more out of life. Visit 77 00:04:09,040 --> 00:04:14,400 Speaker 1: investco dot com slash more out of life again. The 78 00:04:14,440 --> 00:04:17,320 Speaker 1: futures up nine. Uh, you know, John, I'm sorry, I'm 79 00:04:17,320 --> 00:04:22,240 Speaker 1: on the watch twenty four eight zero nine on futures 80 00:04:22,720 --> 00:04:24,719 Speaker 1: and the vix crushing down. I mean, we're not to 81 00:04:24,760 --> 00:04:27,760 Speaker 1: an eight handle, but nine point three six. Get your 82 00:04:28,600 --> 00:04:32,400 Speaker 1: bullmarket attention. I thought you were on watch today. Yeah, 83 00:04:32,440 --> 00:04:34,560 Speaker 1: I am, sort of. I had to quote up the 84 00:04:34,720 --> 00:04:39,880 Speaker 1: Dow up twelve months a year to date. Excuse me, 85 00:04:40,160 --> 00:04:42,600 Speaker 1: let me do twelve months trailing. Forget about year to date, 86 00:04:42,680 --> 00:04:46,080 Speaker 1: let's do um uh one one year. There it is 87 00:04:46,560 --> 00:04:52,560 Speaker 1: the Dow up twelve months trailing. I think yeah, and 88 00:04:52,839 --> 00:04:58,080 Speaker 1: uh spu twelve months trailing? Bitcoin up again? You pushed 89 00:04:58,080 --> 00:05:02,680 Speaker 1: it higher, John with your discourse nineteen thousand to sixteen 90 00:05:03,279 --> 00:05:06,360 Speaker 1: on bitcoin. I understand on the c m A you're 91 00:05:06,400 --> 00:05:11,200 Speaker 1: buying five bitcoins per contract. I just said the size 92 00:05:11,200 --> 00:05:13,160 Speaker 1: of the contract is a lot bigger on the CMA 93 00:05:13,240 --> 00:05:16,920 Speaker 1: than the Sea bow. Yeah. I don't really understand it. 94 00:05:16,920 --> 00:05:19,320 Speaker 1: I don't, you know. I defer to Matt Miller in Berlin. 95 00:05:19,640 --> 00:05:22,440 Speaker 1: Does Carl Weinberg understand it? Does it make sense to 96 00:05:22,480 --> 00:05:24,920 Speaker 1: your Carl? You know, I'm old enough to remember dot 97 00:05:24,960 --> 00:05:27,880 Speaker 1: com stocks, and I'm thinking that what we're seeing in 98 00:05:27,920 --> 00:05:30,200 Speaker 1: bitcoin is a lot like what we saw in the 99 00:05:30,240 --> 00:05:32,680 Speaker 1: dot com bubble and in other bubbles. I mean, people 100 00:05:32,800 --> 00:05:35,720 Speaker 1: used to think that tulips had a lot of value. Also, Uh, 101 00:05:35,960 --> 00:05:38,279 Speaker 1: I just don't get it with bitcoin at this point. 102 00:05:38,320 --> 00:05:40,680 Speaker 1: It's certainly it's a very small part of the economy. 103 00:05:40,720 --> 00:05:42,880 Speaker 1: It's a very small part of the market. It's a 104 00:05:42,920 --> 00:05:44,720 Speaker 1: lot of excitement for the last week of the year 105 00:05:44,760 --> 00:05:46,359 Speaker 1: when there's not a lot of news going on, but 106 00:05:46,680 --> 00:05:48,159 Speaker 1: at the end of the day, I just don't see 107 00:05:48,160 --> 00:05:51,160 Speaker 1: the fundamentals behind it. As it becomes institutionalized though, and 108 00:05:51,240 --> 00:05:53,520 Speaker 1: lands on exchanges like the Sea Bow and the cm A. 109 00:05:54,320 --> 00:05:56,640 Speaker 1: Is there a risk that this bleeds if something goes 110 00:05:56,680 --> 00:05:59,680 Speaker 1: wrong and bleeds out into other asset classes, or is 111 00:05:59,720 --> 00:06:02,760 Speaker 1: it just still too small count Well, first of all, 112 00:06:02,760 --> 00:06:04,520 Speaker 1: we have no history to look back on to to 113 00:06:04,560 --> 00:06:06,120 Speaker 1: see where this is going to go, so we're all 114 00:06:06,160 --> 00:06:08,600 Speaker 1: just kind of speculating about where it's going. And it 115 00:06:08,720 --> 00:06:11,240 Speaker 1: might get very, very, very big. But it seems to 116 00:06:11,279 --> 00:06:13,120 Speaker 1: me that it has to be embraced by the big 117 00:06:13,160 --> 00:06:16,680 Speaker 1: financial institutions for the banking system to be useful. I 118 00:06:16,720 --> 00:06:19,159 Speaker 1: think what I hear more talk about these days is 119 00:06:19,200 --> 00:06:23,960 Speaker 1: talk about central banks starting to deal with digital currency 120 00:06:24,480 --> 00:06:27,479 Speaker 1: rather than going adopting bitcoin as their digital currency and 121 00:06:27,520 --> 00:06:30,760 Speaker 1: going to digital versions of settlement and transactions in their 122 00:06:30,800 --> 00:06:33,520 Speaker 1: own currencies. Now we've heard two central bank governors say 123 00:06:33,560 --> 00:06:35,240 Speaker 1: that that's not going to happen in the last couple 124 00:06:35,240 --> 00:06:38,200 Speaker 1: of days Australia and Canada. But I don't think that 125 00:06:38,200 --> 00:06:40,520 Speaker 1: that's such a far fetched idea. I think that's a 126 00:06:40,600 --> 00:06:44,479 Speaker 1: much more likely possibility to gain traction than bitcoin, which 127 00:06:44,560 --> 00:06:48,000 Speaker 1: is not backed by anything coming out. Is something that 128 00:06:48,080 --> 00:06:50,839 Speaker 1: we've tried to question this program is where the regional 129 00:06:50,880 --> 00:06:53,680 Speaker 1: activity for bitcoin trating is really taking place. It seems 130 00:06:53,680 --> 00:06:57,599 Speaker 1: to be really really concentrated in Asia, in Japan, in 131 00:06:57,640 --> 00:07:01,000 Speaker 1: South Korea. What's behind that count I have no idea, 132 00:07:01,200 --> 00:07:04,080 Speaker 1: and I honestly don't know how anyone has any hard 133 00:07:04,120 --> 00:07:07,440 Speaker 1: statistics on any of this at this point. And certainly 134 00:07:07,480 --> 00:07:09,240 Speaker 1: we can't look back at the trends of the last 135 00:07:09,240 --> 00:07:11,160 Speaker 1: ten or fifteen years and say, well, you know, this 136 00:07:11,240 --> 00:07:14,200 Speaker 1: is how it went for this particular reason, were completely 137 00:07:14,280 --> 00:07:18,200 Speaker 1: unexplored territory right now, and again, my view is is 138 00:07:18,520 --> 00:07:21,440 Speaker 1: pretty firm about this. It's a very speculative currency, it's 139 00:07:21,440 --> 00:07:23,800 Speaker 1: a very speculative commodity. And tell him that something you've 140 00:07:23,800 --> 00:07:27,000 Speaker 1: noted as well, just the activity in Japan and South 141 00:07:27,080 --> 00:07:29,400 Speaker 1: Korea that's dominated us. Right. If somebody said to me, 142 00:07:29,520 --> 00:07:31,680 Speaker 1: right now, what's your major focus, I would say Korea. 143 00:07:32,120 --> 00:07:34,440 Speaker 1: I'm trying to read it everything I can and I 144 00:07:34,480 --> 00:07:37,720 Speaker 1: can't say enough about Tim Coulpen writing for Bloomberg View, 145 00:07:38,120 --> 00:07:44,239 Speaker 1: who has a fabulous, almost visceral understanding of non Japan, 146 00:07:44,320 --> 00:07:48,920 Speaker 1: non China, Asian, but Korea and falling in the Gaia politics. 147 00:07:48,920 --> 00:07:50,920 Speaker 1: So you're looking at I'm looking to Korea in the 148 00:07:50,960 --> 00:07:55,280 Speaker 1: market forenzy. It's cultural, as Carl mentioned, its cultural, it's behavioral. 149 00:07:56,160 --> 00:07:59,120 Speaker 1: I'm curious about not only China, Japan, Korea, but the 150 00:07:59,200 --> 00:08:02,160 Speaker 1: nuances but between the three and on this Monday morning 151 00:08:02,200 --> 00:08:06,320 Speaker 1: with nineteen thousand two to two on bitcoin, and let 152 00:08:06,320 --> 00:08:08,520 Speaker 1: me tell you, folks on a log chart, it's a 153 00:08:08,560 --> 00:08:11,400 Speaker 1: moon shot and most focused on Korea. Could be wrong 154 00:08:11,440 --> 00:08:13,240 Speaker 1: on that, but that's where I am right now. Let 155 00:08:13,240 --> 00:08:16,960 Speaker 1: me do a data check here with Carl Weinberg, excuse me. 156 00:08:17,040 --> 00:08:20,040 Speaker 1: Futures up ten deal futures up a hundred and fifty 157 00:08:20,040 --> 00:08:24,560 Speaker 1: two UH tenure yield UH two point three seven up 158 00:08:24,560 --> 00:08:27,520 Speaker 1: to basis points, so lifted yields here as well. We 159 00:08:27,560 --> 00:08:30,640 Speaker 1: did that within sharp curve steepening on Friday. Right now 160 00:08:31,720 --> 00:08:35,400 Speaker 1: the curve fifty two basis points is recovered. Nice. I'm 161 00:08:35,400 --> 00:08:37,240 Speaker 1: gonna call it a churn into the market really here 162 00:08:37,440 --> 00:08:40,320 Speaker 1: with gold up four dollars twelve sixty one. Uh, the 163 00:08:40,400 --> 00:08:42,079 Speaker 1: ounce as well, John, what are you looking at? What's 164 00:08:42,120 --> 00:08:45,040 Speaker 1: sterling doing? Nothing? Right? It's a little bit stronger against 165 00:08:45,080 --> 00:08:47,800 Speaker 1: more broadly a week dollar in J ten. Today the 166 00:08:47,840 --> 00:08:51,120 Speaker 1: dollar weaker against nine out of the ten major currencies 167 00:08:51,120 --> 00:08:53,199 Speaker 1: in J ten space. And that's the story of the 168 00:08:53,240 --> 00:08:55,160 Speaker 1: year as well. Can I ask you a question, all right? 169 00:08:55,240 --> 00:08:57,320 Speaker 1: If this tax thing is so good for the US 170 00:08:57,360 --> 00:08:59,440 Speaker 1: economy and everybody is so excited about it and so 171 00:08:59,520 --> 00:09:01,880 Speaker 1: surprised about it, why isn't the dollars stronger this morning? 172 00:09:01,880 --> 00:09:03,319 Speaker 1: I don't know, Kyl. I think we seem to be 173 00:09:03,840 --> 00:09:06,640 Speaker 1: trading on twin deficits. It feels like a very E 174 00:09:06,800 --> 00:09:08,720 Speaker 1: M type story to me, and I keep hearing that 175 00:09:08,760 --> 00:09:10,800 Speaker 1: over the last couple of weeks as well. I just 176 00:09:10,880 --> 00:09:12,880 Speaker 1: I just don't get the weakness of the dollar right now. 177 00:09:12,880 --> 00:09:15,280 Speaker 1: It seems like the dollars should generally be strengthening and 178 00:09:15,520 --> 00:09:18,000 Speaker 1: everything is against it, and I don't see why. Carl Weinberg, 179 00:09:18,040 --> 00:09:19,679 Speaker 1: thank you so much for being with a season with 180 00:09:19,800 --> 00:09:40,120 Speaker 1: high frequency economics. I'm being incredibly rude here. You'd think 181 00:09:40,160 --> 00:09:43,080 Speaker 1: John Farrell would bring in the United Kingdom Council General 182 00:09:43,400 --> 00:09:46,120 Speaker 1: to New York with, without question, the most important British 183 00:09:46,120 --> 00:09:50,439 Speaker 1: shure besides John apologizing to me, that's me apologizing to you. 184 00:09:50,480 --> 00:09:54,200 Speaker 1: But I'm gonna ask one quick question here before John 185 00:09:54,200 --> 00:09:58,400 Speaker 1: gets two important issues. Uh, Anthony Phillipson with us you 186 00:09:58,559 --> 00:10:01,960 Speaker 1: just finished as high aishion or to Singapore for the 187 00:10:02,040 --> 00:10:06,080 Speaker 1: United Kingdom government. There is a primal wish of many 188 00:10:06,160 --> 00:10:09,880 Speaker 1: British Ers to get the empire back. We're going to 189 00:10:10,000 --> 00:10:13,320 Speaker 1: be global trade, We're going to do the empire back. 190 00:10:13,960 --> 00:10:17,520 Speaker 1: What's it like to hear that talk when you visit 191 00:10:17,559 --> 00:10:22,360 Speaker 1: the Shaney Cemetery near the Singapore airport, or the cemetery 192 00:10:22,440 --> 00:10:25,280 Speaker 1: to the north where so many Britishers dined. How do 193 00:10:25,440 --> 00:10:29,200 Speaker 1: you respond when you hear Brexitters say are going to 194 00:10:29,240 --> 00:10:33,040 Speaker 1: bring the umpire back? Well, thank you very much. Indeed, 195 00:10:33,120 --> 00:10:34,680 Speaker 1: it's a great pleasure to be with you this morning. 196 00:10:34,720 --> 00:10:37,079 Speaker 1: And that's not quite what the Brexits are saying, and 197 00:10:37,080 --> 00:10:38,840 Speaker 1: it certainly know what the British government is saying. What 198 00:10:38,880 --> 00:10:42,160 Speaker 1: we're saying is we're going to deliver a smooth, constructive 199 00:10:42,160 --> 00:10:44,520 Speaker 1: exit from the European Union. We're going to deliver the 200 00:10:44,520 --> 00:10:46,199 Speaker 1: the will of the British people is expressed in the 201 00:10:46,240 --> 00:10:48,719 Speaker 1: referendum in June last year, and then we're going to 202 00:10:48,760 --> 00:10:53,160 Speaker 1: go and create a new free trading Yes, buccaneering in 203 00:10:53,160 --> 00:10:55,800 Speaker 1: the way in the words of some yes, but this 204 00:10:55,880 --> 00:10:57,440 Speaker 1: is going to be based on partnerships. This is going 205 00:10:57,480 --> 00:10:59,920 Speaker 1: to be based on forward looking the economy of the future. 206 00:11:00,480 --> 00:11:02,400 Speaker 1: We're not looking back because we're very proud of our history, 207 00:11:02,440 --> 00:11:04,160 Speaker 1: but lots of countries very proud of their history. We're 208 00:11:04,200 --> 00:11:06,439 Speaker 1: very proud of our old relationships, including especially with the 209 00:11:06,520 --> 00:11:09,120 Speaker 1: United States. This is about looking forward, not looking back. 210 00:11:09,200 --> 00:11:11,360 Speaker 1: So naturally, Anthony, I have an English accent, so people 211 00:11:11,360 --> 00:11:13,360 Speaker 1: always ask me in New York what's going on with Brexit? 212 00:11:13,400 --> 00:11:15,920 Speaker 1: And I should probably just say call Anthony, because you're 213 00:11:15,920 --> 00:11:17,280 Speaker 1: the guy that's got to turn around to people and 214 00:11:17,280 --> 00:11:19,440 Speaker 1: tell them here what is actually happening with Brexit. So 215 00:11:19,520 --> 00:11:21,480 Speaker 1: you tell us what is going on because from the 216 00:11:21,480 --> 00:11:26,520 Speaker 1: New York looking into Europe it looks like a total mess. Well, 217 00:11:26,679 --> 00:11:28,959 Speaker 1: we're engaged in the process. The Primister kicked off when 218 00:11:29,000 --> 00:11:31,000 Speaker 1: she sent her article fifty letters we call it in 219 00:11:31,040 --> 00:11:35,880 Speaker 1: March this year. Last week, on Friday, in Brussels. The 220 00:11:36,559 --> 00:11:39,480 Speaker 1: stage moved on to a really significant moment where we 221 00:11:39,480 --> 00:11:42,640 Speaker 1: we concluded phase one, as we've called it, the withdrawal process. 222 00:11:43,120 --> 00:11:45,199 Speaker 1: Um it's going to be a long process from here, 223 00:11:45,200 --> 00:11:48,160 Speaker 1: but we've made good progress. And the reason why this 224 00:11:48,200 --> 00:11:51,199 Speaker 1: is significant is there are lots of people commenting on Brexit. 225 00:11:52,000 --> 00:11:54,880 Speaker 1: We haven't given a running commentary on the negotiations quite deliberately, 226 00:11:55,360 --> 00:11:57,440 Speaker 1: but Friday was a significant moment and I think that 227 00:11:57,480 --> 00:12:00,000 Speaker 1: was recognized in statements from the Prime Minister was recognized 228 00:12:00,040 --> 00:12:02,560 Speaker 1: and statements from Donald Tusk, the President of the Council, 229 00:12:02,640 --> 00:12:04,720 Speaker 1: and from John clude Younger the President's Commission, and indeed 230 00:12:04,720 --> 00:12:07,800 Speaker 1: other other European leaders. Now we move on to the 231 00:12:07,880 --> 00:12:11,400 Speaker 1: next phase of discussion, starting crucially with the question about 232 00:12:11,400 --> 00:12:13,960 Speaker 1: how we start talking about the future trade partnership and 233 00:12:14,000 --> 00:12:16,439 Speaker 1: then we start talking about how we implement that agreement 234 00:12:16,440 --> 00:12:18,400 Speaker 1: between us moving forward. It looks like the UK is 235 00:12:18,400 --> 00:12:20,160 Speaker 1: just going to be told what they're going to get 236 00:12:20,360 --> 00:12:23,600 Speaker 1: rather than ask and receive that. The feeling you get 237 00:12:23,600 --> 00:12:25,880 Speaker 1: through phase one is that the UK didn't really achieve 238 00:12:25,880 --> 00:12:29,600 Speaker 1: any concessions from the European side whatsoever. What concessions do 239 00:12:29,600 --> 00:12:32,480 Speaker 1: you think the UK did get from the European Union 240 00:12:32,480 --> 00:12:33,880 Speaker 1: and what do you think they're going to get in 241 00:12:33,920 --> 00:12:36,120 Speaker 1: phase two. Well, I think if we look at phase one, 242 00:12:36,280 --> 00:12:38,040 Speaker 1: this is we've always said it's going to be negotiation. 243 00:12:38,080 --> 00:12:40,319 Speaker 1: I would say that we achieved some very significant moments. 244 00:12:40,320 --> 00:12:43,559 Speaker 1: We achieved a first settlement on the issue of citizens rights, 245 00:12:43,679 --> 00:12:46,000 Speaker 1: both for EU citizens in the UK, UK citizens in 246 00:12:46,040 --> 00:12:48,720 Speaker 1: the EU. We have always said that in terms of 247 00:12:48,720 --> 00:12:50,920 Speaker 1: the financial settlement, we would honor our commitments, and what 248 00:12:50,960 --> 00:12:52,760 Speaker 1: we did was we worked through in great detail with 249 00:12:52,800 --> 00:12:55,960 Speaker 1: European partners what those what those commitments are going to be, 250 00:12:56,320 --> 00:12:58,520 Speaker 1: and in the context of Ireland, which of course crucial 251 00:12:58,800 --> 00:13:02,120 Speaker 1: for the people of Northern Ireland, we agreed that we 252 00:13:02,120 --> 00:13:03,760 Speaker 1: would move forward in a way that would not return 253 00:13:03,800 --> 00:13:05,400 Speaker 1: to the borders of the past. I don't think it's 254 00:13:05,400 --> 00:13:07,920 Speaker 1: particually helpful to look at concessions or wins or losses. 255 00:13:08,200 --> 00:13:10,880 Speaker 1: This is about a negotiation and agreed way forward and 256 00:13:10,880 --> 00:13:12,319 Speaker 1: that's what we are doing. So there's a lot of 257 00:13:12,360 --> 00:13:15,120 Speaker 1: banks here on Wall Street that I'm sure asking you 258 00:13:15,120 --> 00:13:16,880 Speaker 1: have a lot of questions. What is going to happen 259 00:13:16,920 --> 00:13:19,520 Speaker 1: with the relationship with the e U twenty seven and 260 00:13:19,559 --> 00:13:23,320 Speaker 1: the United Kingdom Post and how are they going to 261 00:13:23,320 --> 00:13:27,600 Speaker 1: continue to operate Can they operate after in the same 262 00:13:27,640 --> 00:13:31,920 Speaker 1: way they operated before? So I think what I would 263 00:13:31,920 --> 00:13:33,240 Speaker 1: say is that what they will be able to do 264 00:13:33,280 --> 00:13:35,040 Speaker 1: is to operate in the city of London as one 265 00:13:35,080 --> 00:13:36,800 Speaker 1: of the great financial centers of the world, along of 266 00:13:36,800 --> 00:13:39,560 Speaker 1: course with New York. They will continue to be operating 267 00:13:39,720 --> 00:13:43,440 Speaker 1: in a in a climate that will be a wonderful 268 00:13:43,440 --> 00:13:47,439 Speaker 1: location for doing business with With the European Union. Then 269 00:13:47,480 --> 00:13:51,199 Speaker 1: at seven UM, one of the former German finance minister 270 00:13:51,280 --> 00:13:54,240 Speaker 1: himself said the other day that what Europe needs is 271 00:13:54,240 --> 00:13:56,280 Speaker 1: a strong London. They don't need to see London moving 272 00:13:56,280 --> 00:13:58,440 Speaker 1: to other places. So the banks will be there, The 273 00:13:58,440 --> 00:14:00,280 Speaker 1: banks will be there, There won't go anywhere. And we 274 00:14:00,280 --> 00:14:02,720 Speaker 1: all love London because London is fantastic. I love London, 275 00:14:02,920 --> 00:14:04,440 Speaker 1: but I'd like to know if they're going to continue 276 00:14:04,480 --> 00:14:07,319 Speaker 1: to have passporting. Are they're going to continue to have passporting, 277 00:14:07,360 --> 00:14:09,520 Speaker 1: Will they get that concession from Europe, Because when we 278 00:14:09,520 --> 00:14:11,880 Speaker 1: talk about concessions, I think it is important to know 279 00:14:11,960 --> 00:14:15,480 Speaker 1: whether you get that concession from the EU for the city. 280 00:14:15,800 --> 00:14:18,120 Speaker 1: What the negotiation will deliver is a new set of 281 00:14:18,200 --> 00:14:21,520 Speaker 1: arrangements between London and the Eurozone in London and the 282 00:14:22,320 --> 00:14:24,520 Speaker 1: seven That is exactly what we're about to work out. 283 00:14:24,960 --> 00:14:27,440 Speaker 1: The Chancellor himself gave a speech in the city the 284 00:14:27,440 --> 00:14:29,680 Speaker 1: other day where he made clear that there is an 285 00:14:29,680 --> 00:14:32,280 Speaker 1: absolute priority of the British government to deliver that new relationship. 286 00:14:32,440 --> 00:14:34,320 Speaker 1: What exactly it looks like, we don't know. That's what 287 00:14:34,360 --> 00:14:37,280 Speaker 1: the negotiation will deliver. You've got a hard job, Anthony Phillipson. 288 00:14:37,480 --> 00:14:40,000 Speaker 1: They knew UK. A Council General to New York and 289 00:14:40,040 --> 00:14:44,200 Speaker 1: Director General of International Trade North America, Tom Kane, you're forgiven. 290 00:14:44,320 --> 00:14:46,880 Speaker 1: Thank one of all. We'd love to have you back 291 00:14:46,920 --> 00:14:48,880 Speaker 1: for a longer time. I would love to come back. 292 00:14:49,160 --> 00:14:53,160 Speaker 1: There's so much, so much to talk about here, Council General, 293 00:14:53,200 --> 00:15:10,000 Speaker 1: thank you so much. Without further ado, we're gonna continue 294 00:15:10,000 --> 00:15:12,240 Speaker 1: with Robert Profuseck of Jones Day and I'm going to 295 00:15:12,360 --> 00:15:15,440 Speaker 1: rip up the stript script because Bob, since just emailed in, 296 00:15:15,520 --> 00:15:18,880 Speaker 1: Bob Sinch is an FX dollar guy. Is one of 297 00:15:18,920 --> 00:15:22,520 Speaker 1: the outcomes of tax reform that foreign investment looks to 298 00:15:22,600 --> 00:15:26,600 Speaker 1: come into the United States for complete acquisition or even 299 00:15:26,640 --> 00:15:30,840 Speaker 1: for some kind of minority interest in American assets. That's 300 00:15:30,960 --> 00:15:34,520 Speaker 1: quite possible that a short term impact has gotta be stimulative. 301 00:15:34,600 --> 00:15:37,960 Speaker 1: There's gonna be money coming back by US companies. It's 302 00:15:39,200 --> 00:15:42,000 Speaker 1: there's there's gonna be But if I'm a European multinational, 303 00:15:42,040 --> 00:15:44,560 Speaker 1: I mean, John, there's Unilever and they're doing spreads business, 304 00:15:44,560 --> 00:15:48,720 Speaker 1: which I you know, don't understand. If I'm a foreign company, 305 00:15:48,760 --> 00:15:50,880 Speaker 1: do I want to bring money back into the United 306 00:15:50,920 --> 00:15:53,600 Speaker 1: States and by minority or majority interests, Yes, you can, 307 00:15:53,720 --> 00:15:56,120 Speaker 1: because it's just the rate differential is going to be 308 00:15:56,120 --> 00:15:58,440 Speaker 1: different and you don't have to go to this structure. 309 00:15:58,440 --> 00:15:59,960 Speaker 1: I mean, if you look at the structure of many 310 00:16:00,080 --> 00:16:02,480 Speaker 1: non U S comp you know, we're we're real critical 311 00:16:02,600 --> 00:16:04,840 Speaker 1: US companies with inversions and stuff. You look at the 312 00:16:04,880 --> 00:16:07,320 Speaker 1: other side, you look at their corporate structure looks like 313 00:16:07,360 --> 00:16:09,320 Speaker 1: you open the back of an old time TV set. 314 00:16:09,440 --> 00:16:12,360 Speaker 1: It was so complicated to try to deal with this 315 00:16:12,760 --> 00:16:16,000 Speaker 1: high US tax rate. The dollar has had an awful year, Bob, 316 00:16:16,480 --> 00:16:18,640 Speaker 1: and we often ask us sounds whether that really moves 317 00:16:18,640 --> 00:16:20,880 Speaker 1: the donald for the C suite. Did they sit there 318 00:16:20,920 --> 00:16:23,240 Speaker 1: and say other in Europe or an Asia and say, 319 00:16:23,280 --> 00:16:25,200 Speaker 1: look at the performance of the dollar. Things got cheaper. 320 00:16:25,440 --> 00:16:29,520 Speaker 1: America's on sale for sure because and that's a financing arbitrage. 321 00:16:29,600 --> 00:16:32,080 Speaker 1: If they're you know, financing it from what sure they 322 00:16:32,080 --> 00:16:34,360 Speaker 1: can do it. And one of the things about again 323 00:16:34,440 --> 00:16:37,280 Speaker 1: looking out from the US perspective of the European bring 324 00:16:37,280 --> 00:16:39,760 Speaker 1: more money back in. There'll be more money here. There's 325 00:16:39,760 --> 00:16:41,440 Speaker 1: been a lot of I mean, when you're the average 326 00:16:41,440 --> 00:16:44,400 Speaker 1: CEO says I got two M and A possibilities in 327 00:16:44,440 --> 00:16:46,680 Speaker 1: the old days. If when we're off shore, you did 328 00:16:46,720 --> 00:16:48,880 Speaker 1: it because you wanted to use up that off shore 329 00:16:48,960 --> 00:16:52,480 Speaker 1: catch um Bob, I want you to define right now 330 00:16:52,760 --> 00:16:57,680 Speaker 1: why a hundred jillion dollars at private equity is different 331 00:16:57,680 --> 00:17:01,280 Speaker 1: than a hundred jillion dollars anywhere you look at pots 332 00:17:01,320 --> 00:17:04,679 Speaker 1: of money. How do you treat private equity pots of 333 00:17:04,680 --> 00:17:08,800 Speaker 1: money different? Well, there is that's about the right number 334 00:17:08,800 --> 00:17:11,280 Speaker 1: for private equity. There's an amazing amount of capital that's 335 00:17:11,320 --> 00:17:13,360 Speaker 1: been committed when you look at the fundraising this year, 336 00:17:13,480 --> 00:17:16,400 Speaker 1: but as cash cash it's been astonishing. The difference is 337 00:17:16,760 --> 00:17:18,639 Speaker 1: they have to put that money or they want to 338 00:17:18,680 --> 00:17:20,920 Speaker 1: put that money to work. Now that doesn't mean it 339 00:17:21,040 --> 00:17:22,760 Speaker 1: is burning a hole in their pocket they're gonna do 340 00:17:22,800 --> 00:17:26,280 Speaker 1: dumb deal, but it does mean they're in the deal business. 341 00:17:26,359 --> 00:17:29,159 Speaker 1: Companies are in their business and deals that maybe a 342 00:17:29,160 --> 00:17:31,800 Speaker 1: part of it, whereas a private equity guy that is 343 00:17:31,920 --> 00:17:35,240 Speaker 1: hit his business is putting that capital. Am I right? 344 00:17:35,400 --> 00:17:37,720 Speaker 1: You know? Pick on KKR, there's a general partner, there's 345 00:17:37,760 --> 00:17:40,560 Speaker 1: lots of limited partners whatever that put money in. They've 346 00:17:40,560 --> 00:17:43,320 Speaker 1: got a big, big pot of money. And then do 347 00:17:43,400 --> 00:17:47,199 Speaker 1: they pick an industry category and say, go review a 348 00:17:47,280 --> 00:17:49,720 Speaker 1: hundred companies and let's see which five are gonna bid 349 00:17:49,800 --> 00:17:54,600 Speaker 1: for the Absolutely there's some funds that are industry specific. 350 00:17:54,640 --> 00:17:58,040 Speaker 1: The KKR is the Blackstones, the big ones. They're more generic. 351 00:17:58,200 --> 00:18:00,720 Speaker 1: What they do very often look at where things are going, 352 00:18:01,320 --> 00:18:03,919 Speaker 1: and you know, they're just like everybody else. There are 353 00:18:03,960 --> 00:18:06,320 Speaker 1: things that are hot for a reason. Now right now, 354 00:18:06,760 --> 00:18:11,200 Speaker 1: I know this sounds it's kind of dumb, but it's 355 00:18:11,280 --> 00:18:13,879 Speaker 1: hard to find an industry that's not hot. In M 356 00:18:13,920 --> 00:18:16,560 Speaker 1: and A, it really well, again and again John Ferroll 357 00:18:16,600 --> 00:18:20,400 Speaker 1: three headlines in the last hour, profuse driving the conversation. 358 00:18:20,800 --> 00:18:23,760 Speaker 1: Penn National to buy Pinnacle, David Wilson will have more 359 00:18:23,760 --> 00:18:26,800 Speaker 1: and it's Hershey confirms they're gonna buy Amplify snack brains. 360 00:18:26,840 --> 00:18:29,560 Speaker 1: I don't even know what that is. Campbell's to buy 361 00:18:29,920 --> 00:18:33,000 Speaker 1: Snyder's Lands. Shout out to Mario Gabelli who nailed that. 362 00:18:33,200 --> 00:18:36,360 Speaker 1: As always, I'm struggling to see why these companies need 363 00:18:36,800 --> 00:18:39,600 Speaker 1: private equity financing at this point when the debt markets 364 00:18:39,640 --> 00:18:41,920 Speaker 1: wide open. When you think about when these companies were 365 00:18:41,960 --> 00:18:45,199 Speaker 1: formed Bob the car Loves of this world KKR, the 366 00:18:45,240 --> 00:18:48,160 Speaker 1: opportunity set in front of them at the time is very, 367 00:18:48,440 --> 00:18:50,600 Speaker 1: very different to the opportunity said in front of them now. 368 00:18:50,640 --> 00:18:52,480 Speaker 1: You've talked about them needing to put the cash to work. 369 00:18:52,720 --> 00:18:54,720 Speaker 1: They're struggling to find places to put a cash to work, 370 00:18:54,760 --> 00:18:56,520 Speaker 1: aren't they. Yeah, they are. And one of the things 371 00:18:56,520 --> 00:18:59,080 Speaker 1: they're doing many of in fact, almost all of them, 372 00:18:59,119 --> 00:19:03,240 Speaker 1: they're they're not just looking at traditional LBO transactions. A 373 00:19:03,240 --> 00:19:05,800 Speaker 1: lot of them are doing financing. Um. While the debt 374 00:19:05,800 --> 00:19:08,199 Speaker 1: markers are fabulous, if you're below a triple B, not 375 00:19:08,320 --> 00:19:10,639 Speaker 1: so good. It's hard to get money because of the 376 00:19:10,680 --> 00:19:13,439 Speaker 1: pressure on the banks. So guess who shows up in 377 00:19:13,480 --> 00:19:17,680 Speaker 1: that private equity there. Almost every private equity firm now 378 00:19:18,119 --> 00:19:22,960 Speaker 1: is doing alternative financings, so called special situations, which usually 379 00:19:23,000 --> 00:19:26,639 Speaker 1: means either distress or at least below investment grade. So 380 00:19:26,680 --> 00:19:28,560 Speaker 1: they're doing everything else they've got a lot of money 381 00:19:28,600 --> 00:19:32,439 Speaker 1: to allocate. Even though a lot of the major um 382 00:19:32,640 --> 00:19:36,159 Speaker 1: PE investors, like the public pension funds and and and 383 00:19:36,200 --> 00:19:39,439 Speaker 1: the like, have said they're dialing back, but they really haven't. 384 00:19:39,560 --> 00:19:42,240 Speaker 1: In the real world, they say it, but they this 385 00:19:42,280 --> 00:19:45,080 Speaker 1: is an asset class you can't pass up, and it's huge. 386 00:19:45,119 --> 00:19:48,040 Speaker 1: I haven't I don't know the specifics, but I'm certain 387 00:19:48,680 --> 00:19:52,960 Speaker 1: there are four or five fundraising efforts where they raised 388 00:19:52,960 --> 00:19:56,600 Speaker 1: over ten billion dollars. The problems when when KKR started out, 389 00:19:56,720 --> 00:19:59,359 Speaker 1: if they could get to five hundred million dollars, that 390 00:19:59,440 --> 00:20:01,639 Speaker 1: was a big thing. The problem, though, is it starts 391 00:20:01,640 --> 00:20:04,119 Speaker 1: from the top. Investors are looking cross asset right now, 392 00:20:04,160 --> 00:20:06,200 Speaker 1: and they're looking at opportunities and they're struggling to find 393 00:20:06,240 --> 00:20:08,119 Speaker 1: strong returns even in high yield where you get what 394 00:20:08,240 --> 00:20:11,480 Speaker 1: five percent now historically incredibly low. So they're sitting there 395 00:20:11,520 --> 00:20:13,480 Speaker 1: and they say, where can I put my money. Let's 396 00:20:13,480 --> 00:20:15,080 Speaker 1: give it to someone else, and let's give it a 397 00:20:15,080 --> 00:20:17,000 Speaker 1: private equity and hopefully they can come up with a 398 00:20:17,040 --> 00:20:19,879 Speaker 1: better idea. So their access to cash is absolutely fine. 399 00:20:19,920 --> 00:20:21,720 Speaker 1: They've got loads of it. They just done what to 400 00:20:21,720 --> 00:20:23,400 Speaker 1: do with it? Do they? And you raise the point 401 00:20:23,440 --> 00:20:26,639 Speaker 1: about alternative financing is the future for PE in a 402 00:20:26,760 --> 00:20:31,160 Speaker 1: much bigger way. Just an alternative financing bank, it could be. 403 00:20:31,200 --> 00:20:34,639 Speaker 1: It's it's like almost everything in today's world of world 404 00:20:34,640 --> 00:20:38,000 Speaker 1: of transparency and instant information. It means so many things 405 00:20:38,080 --> 00:20:42,160 Speaker 1: are converging. I mean, think about think about Golden and Sacks. Yeah, 406 00:20:42,400 --> 00:20:45,040 Speaker 1: it isn't everything today, right, I mean twenty years ago 407 00:20:45,119 --> 00:20:48,800 Speaker 1: it was an investment bank. It's everything is converging. Now. 408 00:20:48,840 --> 00:20:50,840 Speaker 1: Does that mean we're all doing the same things? No, 409 00:20:50,960 --> 00:20:55,880 Speaker 1: not really, Um, it's different. It's very difficult to get 410 00:20:56,359 --> 00:21:01,000 Speaker 1: below investment grade credit from a traditional it's not very 411 00:21:01,000 --> 00:21:05,080 Speaker 1: difficult to get it from private equity. From the investor standpoint, 412 00:21:05,160 --> 00:21:07,280 Speaker 1: is this also an opportunity to get exposure to a 413 00:21:07,320 --> 00:21:09,160 Speaker 1: market that typically it is difficult for you to get. 414 00:21:09,160 --> 00:21:10,640 Speaker 1: And what I mean by that is many of these 415 00:21:10,680 --> 00:21:14,240 Speaker 1: new technology companies aren't going public. The opportunities aren't in 416 00:21:14,280 --> 00:21:16,919 Speaker 1: public markets at the moment. They're in private markets. And 417 00:21:16,920 --> 00:21:19,280 Speaker 1: they kind of stand there, Bob, they're not going public. 418 00:21:19,560 --> 00:21:21,560 Speaker 1: Is that the way he is thinking about the situation now? 419 00:21:21,600 --> 00:21:24,159 Speaker 1: From the investor standpoint, give the money to them and 420 00:21:24,200 --> 00:21:26,280 Speaker 1: they can get me exposure to these and that's and 421 00:21:26,320 --> 00:21:28,680 Speaker 1: that's the convergence. Believe it. I'm not. That's I guess 422 00:21:28,720 --> 00:21:30,919 Speaker 1: the only word I have. But that's the convergence between 423 00:21:31,000 --> 00:21:34,000 Speaker 1: VC and private equity investing. There is a convergence of 424 00:21:34,040 --> 00:21:38,280 Speaker 1: everything on that score. I look at this and I 425 00:21:38,400 --> 00:21:41,280 Speaker 1: look again at the Frenzy, and a lot of our 426 00:21:41,640 --> 00:21:43,920 Speaker 1: listeners are viewers on TV. I got a couple of 427 00:21:43,960 --> 00:21:47,399 Speaker 1: emails on this. It seems almost like it's just all 428 00:21:47,560 --> 00:21:52,200 Speaker 1: for the corporate class. How does labor end up within 429 00:21:52,240 --> 00:21:57,399 Speaker 1: the broader sense of transactions in America? Well, labor is 430 00:21:57,480 --> 00:22:02,320 Speaker 1: very often um because synergies in labor's view, and I'm 431 00:22:02,359 --> 00:22:06,800 Speaker 1: not sure it's all that incorrect synergies labor, I mean 432 00:22:06,960 --> 00:22:11,359 Speaker 1: labor popping a hundred year a year, and all of 433 00:22:11,400 --> 00:22:14,800 Speaker 1: a sudden it's like oops, yeah, because synergies is a 434 00:22:14,800 --> 00:22:18,480 Speaker 1: different word for a nicer word for job cuts. Very often, 435 00:22:19,320 --> 00:22:22,240 Speaker 1: rationalization is another word for job cuts. On the other hand, 436 00:22:22,880 --> 00:22:25,000 Speaker 1: you know, if your business isn't performing even without him 437 00:22:25,040 --> 00:22:26,560 Speaker 1: and A, they're going to be job cuts. We see 438 00:22:26,600 --> 00:22:30,440 Speaker 1: that every time there's a market a market break break. 439 00:22:30,520 --> 00:22:32,919 Speaker 1: I saw that. You know, think about publishing, the actual 440 00:22:32,960 --> 00:22:36,560 Speaker 1: publishing business today, Well, they've been deals here Tom Warner. 441 00:22:36,640 --> 00:22:40,720 Speaker 1: Obviously it's huge, but time inc being acquired by Meredith. 442 00:22:41,200 --> 00:22:42,960 Speaker 1: But if you don't do that, what are you gonna do? 443 00:22:42,960 --> 00:22:47,720 Speaker 1: You're quickly Were you involved in the Alston General Electric transaction? Yes, 444 00:22:48,000 --> 00:22:51,119 Speaker 1: you were in comment on that. You cannot comment on 445 00:22:51,160 --> 00:22:55,280 Speaker 1: that one. John, would you like to comment? Michael Barr, 446 00:22:55,280 --> 00:22:58,160 Speaker 1: would you like to comment on ge Alston? I would 447 00:22:58,200 --> 00:23:03,480 Speaker 1: love to. Okay, thank you so much, greatly appreciate it. 448 00:23:03,520 --> 00:23:06,399 Speaker 1: With John's day, I was going to ask about a 449 00:23:06,520 --> 00:23:09,880 Speaker 1: challenging transaction. It appears from General Electric. We greatly appreciate 450 00:23:09,960 --> 00:23:11,560 Speaker 1: him with this. Am I getting out of this as 451 00:23:11,560 --> 00:23:13,360 Speaker 1: smoothly as I can. You know you've done a good job. 452 00:23:13,359 --> 00:23:16,200 Speaker 1: And just say that the politics in Europe has changed 453 00:23:16,440 --> 00:23:18,879 Speaker 1: so much in the last couple of years, whereby the 454 00:23:18,960 --> 00:23:22,560 Speaker 1: European politicians are now willing to allow a big player 455 00:23:22,600 --> 00:23:24,520 Speaker 1: in Germany to get together with a big player in 456 00:23:24,560 --> 00:23:26,199 Speaker 1: France in a way that maybe they wouldn't have done 457 00:23:26,240 --> 00:23:28,679 Speaker 1: in the past, because they know that the future is 458 00:23:28,680 --> 00:23:33,000 Speaker 1: not competing France against Germany, It's competing Europe against China 459 00:23:33,400 --> 00:23:35,040 Speaker 1: in a much, much bigger way. And I think that's 460 00:23:35,040 --> 00:23:36,879 Speaker 1: the change for me this year in Europe whilst we've 461 00:23:36,920 --> 00:23:38,520 Speaker 1: seen some of these deals come through, is that the 462 00:23:38,600 --> 00:23:41,320 Speaker 1: Germans and the French are allowing these big companies where 463 00:23:41,320 --> 00:23:43,480 Speaker 1: they had a state interest to special interest to actually 464 00:23:43,520 --> 00:23:46,960 Speaker 1: get together. Okay, well, very bad, profuser, Thank you so much. 465 00:24:05,000 --> 00:24:07,760 Speaker 1: I've been really looking forward to this interview. Jared Bernstein 466 00:24:08,440 --> 00:24:11,440 Speaker 1: is a wonderful economist. I'm gonna say, with a tilt 467 00:24:11,440 --> 00:24:14,800 Speaker 1: to the Democrats to the left, work for Vice President Biden, 468 00:24:15,240 --> 00:24:18,920 Speaker 1: but he has such respect that all Republicans, all Conservatives 469 00:24:18,920 --> 00:24:22,399 Speaker 1: at each at any time listen to Mr Bernstein with 470 00:24:22,520 --> 00:24:25,800 Speaker 1: the Center on Budget and Policy Priorities, Jared Um, I 471 00:24:25,840 --> 00:24:28,640 Speaker 1: looked at your website and you go where any good 472 00:24:28,720 --> 00:24:31,520 Speaker 1: lefty kind of center on budget and policy priorities? Will 473 00:24:31,560 --> 00:24:35,200 Speaker 1: you talk about the child tax credit? And this one, 474 00:24:36,160 --> 00:24:39,239 Speaker 1: Jared of the conversation I had this weekend was on 475 00:24:39,440 --> 00:24:44,040 Speaker 1: state and local taxes. Do you people yet have anywhere 476 00:24:44,160 --> 00:24:50,280 Speaker 1: in the vicinity of how low of income level married 477 00:24:51,200 --> 00:24:56,919 Speaker 1: where the state and local tax disadvantage is tangible? Is 478 00:24:56,960 --> 00:25:00,199 Speaker 1: it obviously it's like six hundred thousand five as an 479 00:25:00,200 --> 00:25:04,199 Speaker 1: household income, I'll bet it's a lot lower number. Do 480 00:25:04,200 --> 00:25:07,280 Speaker 1: we have any clue where it is yet I don't 481 00:25:07,280 --> 00:25:10,240 Speaker 1: know that number. It's different for every state, but it 482 00:25:10,359 --> 00:25:13,840 Speaker 1: is true. Somebody showed me some numbers for West Virginia 483 00:25:14,080 --> 00:25:17,680 Speaker 1: that showed that that did the loss of that exemption 484 00:25:17,760 --> 00:25:22,520 Speaker 1: does cut for some. UH does hit some lower income families, 485 00:25:23,240 --> 00:25:25,280 Speaker 1: especially those who by the way, end up paying more 486 00:25:25,320 --> 00:25:29,040 Speaker 1: sales tax than income tax, which happens sometimes. That said, 487 00:25:29,080 --> 00:25:34,399 Speaker 1: the bulk of those UH exemptions UH typically benefited those 488 00:25:34,400 --> 00:25:37,480 Speaker 1: in the top part of the income scale. You know, 489 00:25:37,520 --> 00:25:41,040 Speaker 1: there's another concern there, which is UH that's Germane to 490 00:25:41,160 --> 00:25:43,240 Speaker 1: folks like us at the Center on Budget, which is 491 00:25:43,280 --> 00:25:46,119 Speaker 1: that we we believe that one of the reasons states 492 00:25:46,119 --> 00:25:48,399 Speaker 1: are able to raise revenues in order to do the 493 00:25:48,440 --> 00:25:50,119 Speaker 1: things that they want to do, which in some of 494 00:25:50,119 --> 00:25:52,800 Speaker 1: these blue states tend to be sort of anti poverty 495 00:25:52,880 --> 00:25:55,480 Speaker 1: kinds of things, has to do with the ability to 496 00:25:55,640 --> 00:25:58,639 Speaker 1: engage those taxes. So so the loss of that could 497 00:25:58,640 --> 00:26:02,600 Speaker 1: impact state's ability sustain That's right where I wanted to go. 498 00:26:02,920 --> 00:26:06,320 Speaker 1: Is a what what folks economists like uh Dr Bernstein 499 00:26:06,359 --> 00:26:11,240 Speaker 1: called a second rounder second order effect. The massive second 500 00:26:11,400 --> 00:26:15,600 Speaker 1: order effect is Governor Cuomo, Governor Christier, whoever follows on 501 00:26:15,920 --> 00:26:20,200 Speaker 1: Governor brown Out in California in twenty other states. They're 502 00:26:20,200 --> 00:26:24,920 Speaker 1: gonna have to change their actual intrinsic budgets, aren't they. 503 00:26:25,359 --> 00:26:27,919 Speaker 1: They probably will, because not only will it be a 504 00:26:28,040 --> 00:26:31,480 Speaker 1: challenge for them to sustain their tax systems. Now people 505 00:26:31,480 --> 00:26:34,119 Speaker 1: are going to look at their twenty nineteen filings in 506 00:26:34,200 --> 00:26:37,239 Speaker 1: April and recognize that they can no longer exempt some 507 00:26:37,320 --> 00:26:40,159 Speaker 1: of their state and local payments from their federal liabilities. 508 00:26:40,440 --> 00:26:43,040 Speaker 1: But if they decide they wanted to raise revenues to 509 00:26:43,520 --> 00:26:48,080 Speaker 1: engage in maybe expand their earned income credit or even 510 00:26:48,119 --> 00:26:52,159 Speaker 1: do uh an infrastructure build out. Uh, that's that that 511 00:26:52,320 --> 00:26:54,879 Speaker 1: constraint is going to be a new one for them. Jared, 512 00:26:54,880 --> 00:26:57,320 Speaker 1: there was a story a number of months ago where 513 00:26:57,359 --> 00:26:59,920 Speaker 1: a well known hedge fund manager a very rich individual 514 00:27:00,200 --> 00:27:02,399 Speaker 1: New Jersey and left a hole in the budget the 515 00:27:02,480 --> 00:27:05,920 Speaker 1: affluent are bound to leave? To what extent do the 516 00:27:05,960 --> 00:27:09,719 Speaker 1: affluent leave these states? Well, I'm glad you asked me that, 517 00:27:09,760 --> 00:27:12,040 Speaker 1: because there's a very good article on page eight two 518 00:27:12,080 --> 00:27:15,240 Speaker 1: of the Wall Street Journal which purports to answer that question. 519 00:27:15,680 --> 00:27:18,760 Speaker 1: And the answer is it's not zero, but it's not large. 520 00:27:18,920 --> 00:27:22,280 Speaker 1: I think one study suggested that New York City could 521 00:27:22,280 --> 00:27:25,040 Speaker 1: lose two to four percent of its most affluent folks. 522 00:27:25,240 --> 00:27:28,640 Speaker 1: There are so many amenities in these cities, New York, 523 00:27:28,680 --> 00:27:31,480 Speaker 1: San Francisco. The taxes are just one of the variables 524 00:27:31,480 --> 00:27:33,520 Speaker 1: that keep you there, and it depends on your age 525 00:27:33,520 --> 00:27:36,119 Speaker 1: and where you are in your career. Uh. To the 526 00:27:36,160 --> 00:27:38,679 Speaker 1: extent that there will be some out migration, I think 527 00:27:38,720 --> 00:27:40,879 Speaker 1: it will be small. I had a conversation for the 528 00:27:40,880 --> 00:27:43,159 Speaker 1: first time just last week about what would happen to 529 00:27:43,280 --> 00:27:45,760 Speaker 1: municipal bonds from these states and whether actually we could 530 00:27:45,760 --> 00:27:48,280 Speaker 1: face a serious problem in the coming years. You send 531 00:27:48,359 --> 00:27:51,120 Speaker 1: Jared that actually you don't foresee that happening. The affluent 532 00:27:51,160 --> 00:27:53,359 Speaker 1: will not go There will not be a budget problem 533 00:27:53,560 --> 00:27:56,240 Speaker 1: in the coming years for some of these states. I 534 00:27:56,280 --> 00:27:58,560 Speaker 1: don't think you're going to see anything like that happen 535 00:27:58,640 --> 00:28:01,720 Speaker 1: in the next few years. As I said a second ago, though, 536 00:28:01,920 --> 00:28:04,919 Speaker 1: there is the possibility that you start to see some 537 00:28:05,000 --> 00:28:09,800 Speaker 1: pressure from more affluent taxpayers because they can no longer uh, 538 00:28:09,960 --> 00:28:13,560 Speaker 1: they can no longer exempt their state and local payments 539 00:28:13,600 --> 00:28:16,400 Speaker 1: against their federal liabilities. And you know, three or four 540 00:28:16,440 --> 00:28:18,600 Speaker 1: or five years that could that could start to pressure 541 00:28:18,600 --> 00:28:21,359 Speaker 1: state budgets. No question, what are the Jared state and 542 00:28:21,440 --> 00:28:26,240 Speaker 1: local taxes actually get cut in some of these states. Well, 543 00:28:26,280 --> 00:28:28,240 Speaker 1: I think that the odds are more that they don't 544 00:28:28,280 --> 00:28:31,040 Speaker 1: get raised than they get than they get cut. Uh. 545 00:28:31,400 --> 00:28:34,600 Speaker 1: You know, state budgets aren't in in great shape. They're 546 00:28:34,640 --> 00:28:37,960 Speaker 1: still looking at rainy day funds, and and remember there's 547 00:28:37,960 --> 00:28:41,200 Speaker 1: a recession out there somewhere, and I think, especially given 548 00:28:41,240 --> 00:28:44,080 Speaker 1: the fiscal conditions at the federal level, a lot of 549 00:28:44,120 --> 00:28:47,080 Speaker 1: anti processionary kinds of spending is going to fall on 550 00:28:47,120 --> 00:28:49,200 Speaker 1: the state level. So I think they want to build 551 00:28:49,280 --> 00:28:51,840 Speaker 1: up their rainy day funds and and keep their tax 552 00:28:51,960 --> 00:28:55,560 Speaker 1: structure and in as as an intact as they can 553 00:28:55,600 --> 00:28:57,680 Speaker 1: for the near term. Now, let's come back with Jared 554 00:28:57,720 --> 00:29:02,040 Speaker 1: Bernstein against Center and Budget and Policy parties. The analysis 555 00:29:02,280 --> 00:29:07,880 Speaker 1: of this tax legislation now unsigned, will be just extraordinary. 556 00:29:07,960 --> 00:29:10,880 Speaker 1: And you know, my amateur take is, John, it's a 557 00:29:10,880 --> 00:29:15,040 Speaker 1: complete mystery for every single American. As we go into 558 00:29:15,080 --> 00:29:16,400 Speaker 1: the end of the year, we'll try to get some 559 00:29:16,440 --> 00:29:20,280 Speaker 1: clarity with Dr At Bernstein, Senior Fellow the Center on 560 00:29:20,440 --> 00:29:31,640 Speaker 1: Budget and Policy Priorities. Thanks for listening to the Bloomberg 561 00:29:31,720 --> 00:29:37,680 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 562 00:29:38,040 --> 00:29:42,240 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 563 00:29:42,280 --> 00:29:46,560 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 564 00:29:47,000 --> 00:29:48,120 Speaker 1: I'm Bloomberg Radio