Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm term Keene
Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Are
Speaker 1: we doing this? I'm told we're doing this. The CMEME
Speaker 1: has joined The Bitcoin Revolution Future started trading last night.
Speaker 1: I understand Tom Keane was literally up all night looking
Speaker 1: for arbitrage opportunities, and he'll bring you the latest price
Speaker 1: for our bitcoin futures in just a moment for more
Speaker 1: to get you up to spin. What's sounding in d C, though,
Speaker 1: is Carl Weinberg, the high Frequency Economics founder, charged with
Speaker 1: divorcing his political biases from his economic analysis. Dr Weinberg,
Speaker 1: great to have you with us on a program, Thanks
Speaker 1: for joining us, Thanks for having me talk to me
Speaker 1: about how tough that challenge has been this year. Well,
Speaker 1: you know, the high Frequency Economics were divided. Jimo Sullivan
Speaker 1: is the House Republican and I'm the House Democrat. And
Speaker 1: it's amazing, though this year, how many things we've agreed upon,
Speaker 1: which is unusual, but it's been a very difficult time
Speaker 1: to separate politic politics from economics, that's for sure. Talk
Speaker 1: to me about how you've parked your politics to one
Speaker 1: side of the room and just focused on the economics.
Speaker 1: What are you agreeing on? Well, what we agree on
Speaker 1: is we have some skepticism about stimulating the economy right now,
Speaker 1: with unemployment so low, with the risk of inflation so high,
Speaker 1: and our house view at High Frequency Economics, and it's
Speaker 1: in Jimo Sullivan's notes this morning, is that any stimulus
Speaker 1: to the economy at this point is probably going to
Speaker 1: move the FED to high rates a little bit faster
Speaker 1: than it otherwise would have. And that is an implication
Speaker 1: of this policy that's not being talked about in Washington,
Speaker 1: but one that we talked about in High Frequency. So
Speaker 1: do I think of next year is just the Federal
Speaker 1: Reserve kind of offsetting any of a hating and the
Speaker 1: potential for a matt up, at least in the U.
Speaker 1: S economy is limited. I don't think offsetting is a
Speaker 1: fair way to talk about either their intention, you know,
Speaker 1: or what they're actually going to be able to do.
Speaker 1: I think the FED and Jim writes about this in
Speaker 1: his daily notes today. Um the Fed's job is to
Speaker 1: keep the economy at full employment and to keep inflation
Speaker 1: under control, and anything that threatens that mandate is going
Speaker 1: to cause them to retract stimulus from the economy sooner.
Speaker 1: I just want to bring this up. These are two
Speaker 1: headlines that nobody cares about. But guess what they're coming
Speaker 1: out back to back, and I think, John, it really
Speaker 1: speaks to the tax legislation right on top of each other.
Speaker 1: Hers she confirms packed by amplifies Snack Brands for one
Speaker 1: point six billion, Tiny Penn National or by Las Vegas
Speaker 1: Pinnacle Entertainment for about two point eight billion. But the
Speaker 1: news is that came out at the same moment here
Speaker 1: in the seven or two hour I mean it just
Speaker 1: it really speaks to John, the whole frenzy that we
Speaker 1: might get into here coming off text legislation. Is that
Speaker 1: what we're gonna say? Count more m and a more
Speaker 1: days of sitting here at seven a m. Eastern time
Speaker 1: and just reading out headlines of another acquisition. You know,
Speaker 1: we just had a very interesting conversation on television where
Speaker 1: I asked this question, what are the yes? Well, I
Speaker 1: asked the question, you know, well, what is the implication
Speaker 1: of the tax code for M and A, And what
Speaker 1: he said really got my attention, and I know you're
Speaker 1: gonna be talking to him again in a few minutes.
Speaker 1: He said, you know, well, what happened was that nothing
Speaker 1: stupid happened. So therefore a lot of deals that were
Speaker 1: on hold and anticipation that's something stupid would happen suddenly
Speaker 1: now are coming into play, are are being realized. So
Speaker 1: you know, maybe that's what the implication this is going
Speaker 1: to be the absence of something bad. We start strong
Speaker 1: in the monday, Karl Weinberg with us with high frequency Economics,
Speaker 1: and of course Mr fry Sack, we'll join us a
Speaker 1: bit on Fox Disney, CDs at UH and the rest
Speaker 1: of ramifications for Global Wall Street, Bloomberg Surveillance. This morning
Speaker 1: has always brought you by Investco. Learn how invest gooes.
Speaker 1: Pure focus on investing, diversity of thought, and passion to
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Speaker 1: futures up nine. Uh, you know, John, I'm sorry, I'm
Speaker 1: on the watch twenty four eight zero nine on futures
Speaker 1: and the vix crushing down. I mean, we're not to
Speaker 1: an eight handle, but nine point three six. Get your
Speaker 1: bullmarket attention. I thought you were on watch today. Yeah,
Speaker 1: I am, sort of. I had to quote up the
Speaker 1: Dow up twelve months a year to date. Excuse me,
Speaker 1: let me do twelve months trailing. Forget about year to date,
Speaker 1: let's do um uh one one year. There it is
Speaker 1: the Dow up twelve months trailing. I think yeah, and
Speaker 1: uh spu twelve months trailing? Bitcoin up again? You pushed
Speaker 1: it higher, John with your discourse nineteen thousand to sixteen
Speaker 1: on bitcoin. I understand on the c m A you're
Speaker 1: buying five bitcoins per contract. I just said the size
Speaker 1: of the contract is a lot bigger on the CMA
Speaker 1: than the Sea bow. Yeah. I don't really understand it.
Speaker 1: I don't, you know. I defer to Matt Miller in Berlin.
Speaker 1: Does Carl Weinberg understand it? Does it make sense to
Speaker 1: your Carl? You know, I'm old enough to remember dot
Speaker 1: com stocks, and I'm thinking that what we're seeing in
Speaker 1: bitcoin is a lot like what we saw in the
Speaker 1: dot com bubble and in other bubbles. I mean, people
Speaker 1: used to think that tulips had a lot of value. Also, Uh,
Speaker 1: I just don't get it with bitcoin at this point.
Speaker 1: It's certainly it's a very small part of the economy.
Speaker 1: It's a very small part of the market. It's a
Speaker 1: lot of excitement for the last week of the year
Speaker 1: when there's not a lot of news going on, but
Speaker 1: at the end of the day, I just don't see
Speaker 1: the fundamentals behind it. As it becomes institutionalized though, and
Speaker 1: lands on exchanges like the Sea Bow and the cm A.
Speaker 1: Is there a risk that this bleeds if something goes
Speaker 1: wrong and bleeds out into other asset classes, or is
Speaker 1: it just still too small count Well, first of all,
Speaker 1: we have no history to look back on to to
Speaker 1: see where this is going to go, so we're all
Speaker 1: just kind of speculating about where it's going. And it
Speaker 1: might get very, very, very big. But it seems to
Speaker 1: me that it has to be embraced by the big
Speaker 1: financial institutions for the banking system to be useful. I
Speaker 1: think what I hear more talk about these days is
Speaker 1: talk about central banks starting to deal with digital currency
Speaker 1: rather than going adopting bitcoin as their digital currency and
Speaker 1: going to digital versions of settlement and transactions in their
Speaker 1: own currencies. Now we've heard two central bank governors say
Speaker 1: that that's not going to happen in the last couple
Speaker 1: of days Australia and Canada. But I don't think that
Speaker 1: that's such a far fetched idea. I think that's a
Speaker 1: much more likely possibility to gain traction than bitcoin, which
Speaker 1: is not backed by anything coming out. Is something that
Speaker 1: we've tried to question this program is where the regional
Speaker 1: activity for bitcoin trating is really taking place. It seems
Speaker 1: to be really really concentrated in Asia, in Japan, in
Speaker 1: South Korea. What's behind that count I have no idea,
Speaker 1: and I honestly don't know how anyone has any hard
Speaker 1: statistics on any of this at this point. And certainly
Speaker 1: we can't look back at the trends of the last
Speaker 1: ten or fifteen years and say, well, you know, this
Speaker 1: is how it went for this particular reason, were completely
Speaker 1: unexplored territory right now, and again, my view is is
Speaker 1: pretty firm about this. It's a very speculative currency, it's
Speaker 1: a very speculative commodity. And tell him that something you've
Speaker 1: noted as well, just the activity in Japan and South
Speaker 1: Korea that's dominated us. Right. If somebody said to me,
Speaker 1: right now, what's your major focus, I would say Korea.
Speaker 1: I'm trying to read it everything I can and I
Speaker 1: can't say enough about Tim Coulpen writing for Bloomberg View,
Speaker 1: who has a fabulous, almost visceral understanding of non Japan,
Speaker 1: non China, Asian, but Korea and falling in the Gaia politics.
Speaker 1: So you're looking at I'm looking to Korea in the
Speaker 1: market forenzy. It's cultural, as Carl mentioned, its cultural, it's behavioral.
Speaker 1: I'm curious about not only China, Japan, Korea, but the
Speaker 1: nuances but between the three and on this Monday morning
Speaker 1: with nineteen thousand two to two on bitcoin, and let
Speaker 1: me tell you, folks on a log chart, it's a
Speaker 1: moon shot and most focused on Korea. Could be wrong
Speaker 1: on that, but that's where I am right now. Let
Speaker 1: me do a data check here with Carl Weinberg, excuse me.
Speaker 1: Futures up ten deal futures up a hundred and fifty
Speaker 1: two UH tenure yield UH two point three seven up
Speaker 1: to basis points, so lifted yields here as well. We
Speaker 1: did that within sharp curve steepening on Friday. Right now
Speaker 1: the curve fifty two basis points is recovered. Nice. I'm
Speaker 1: gonna call it a churn into the market really here
Speaker 1: with gold up four dollars twelve sixty one. Uh, the
Speaker 1: ounce as well, John, what are you looking at? What's
Speaker 1: sterling doing? Nothing? Right? It's a little bit stronger against
Speaker 1: more broadly a week dollar in J ten. Today the
Speaker 1: dollar weaker against nine out of the ten major currencies
Speaker 1: in J ten space. And that's the story of the
Speaker 1: year as well. Can I ask you a question, all right?
Speaker 1: If this tax thing is so good for the US
Speaker 1: economy and everybody is so excited about it and so
Speaker 1: surprised about it, why isn't the dollars stronger this morning?
Speaker 1: I don't know, Kyl. I think we seem to be
Speaker 1: trading on twin deficits. It feels like a very E
Speaker 1: M type story to me, and I keep hearing that
Speaker 1: over the last couple of weeks as well. I just
Speaker 1: I just don't get the weakness of the dollar right now.
Speaker 1: It seems like the dollars should generally be strengthening and
Speaker 1: everything is against it, and I don't see why. Carl Weinberg,
Speaker 1: thank you so much for being with a season with
Speaker 1: high frequency economics. I'm being incredibly rude here. You'd think
Speaker 1: John Farrell would bring in the United Kingdom Council General
Speaker 1: to New York with, without question, the most important British
Speaker 1: shure besides John apologizing to me, that's me apologizing to you.
Speaker 1: But I'm gonna ask one quick question here before John
Speaker 1: gets two important issues. Uh, Anthony Phillipson with us you
Speaker 1: just finished as high aishion or to Singapore for the
Speaker 1: United Kingdom government. There is a primal wish of many
Speaker 1: British Ers to get the empire back. We're going to
Speaker 1: be global trade, We're going to do the empire back.
Speaker 1: What's it like to hear that talk when you visit
Speaker 1: the Shaney Cemetery near the Singapore airport, or the cemetery
Speaker 1: to the north where so many Britishers dined. How do
Speaker 1: you respond when you hear Brexitters say are going to
Speaker 1: bring the umpire back? Well, thank you very much. Indeed,
Speaker 1: it's a great pleasure to be with you this morning.
Speaker 1: And that's not quite what the Brexits are saying, and
Speaker 1: it certainly know what the British government is saying. What
Speaker 1: we're saying is we're going to deliver a smooth, constructive
Speaker 1: exit from the European Union. We're going to deliver the
Speaker 1: the will of the British people is expressed in the
Speaker 1: referendum in June last year, and then we're going to
Speaker 1: go and create a new free trading Yes, buccaneering in
Speaker 1: the way in the words of some yes, but this
Speaker 1: is going to be based on partnerships. This is going
Speaker 1: to be based on forward looking the economy of the future.
Speaker 1: We're not looking back because we're very proud of our history,
Speaker 1: but lots of countries very proud of their history. We're
Speaker 1: very proud of our old relationships, including especially with the
Speaker 1: United States. This is about looking forward, not looking back.
Speaker 1: So naturally, Anthony, I have an English accent, so people
Speaker 1: always ask me in New York what's going on with Brexit?
Speaker 1: And I should probably just say call Anthony, because you're
Speaker 1: the guy that's got to turn around to people and
Speaker 1: tell them here what is actually happening with Brexit. So
Speaker 1: you tell us what is going on because from the
Speaker 1: New York looking into Europe it looks like a total mess. Well,
Speaker 1: we're engaged in the process. The Primister kicked off when
Speaker 1: she sent her article fifty letters we call it in
Speaker 1: March this year. Last week, on Friday, in Brussels. The
Speaker 1: stage moved on to a really significant moment where we
Speaker 1: we concluded phase one, as we've called it, the withdrawal process.
Speaker 1: Um it's going to be a long process from here,
Speaker 1: but we've made good progress. And the reason why this
Speaker 1: is significant is there are lots of people commenting on Brexit.
Speaker 1: We haven't given a running commentary on the negotiations quite deliberately,
Speaker 1: but Friday was a significant moment and I think that
Speaker 1: was recognized in statements from the Prime Minister was recognized
Speaker 1: and statements from Donald Tusk, the President of the Council,
Speaker 1: and from John clude Younger the President's Commission, and indeed
Speaker 1: other other European leaders. Now we move on to the
Speaker 1: next phase of discussion, starting crucially with the question about
Speaker 1: how we start talking about the future trade partnership and
Speaker 1: then we start talking about how we implement that agreement
Speaker 1: between us moving forward. It looks like the UK is
Speaker 1: just going to be told what they're going to get
Speaker 1: rather than ask and receive that. The feeling you get
Speaker 1: through phase one is that the UK didn't really achieve
Speaker 1: any concessions from the European side whatsoever. What concessions do
Speaker 1: you think the UK did get from the European Union
Speaker 1: and what do you think they're going to get in
Speaker 1: phase two. Well, I think if we look at phase one,
Speaker 1: this is we've always said it's going to be negotiation.
Speaker 1: I would say that we achieved some very significant moments.
Speaker 1: We achieved a first settlement on the issue of citizens rights,
Speaker 1: both for EU citizens in the UK, UK citizens in
Speaker 1: the EU. We have always said that in terms of
Speaker 1: the financial settlement, we would honor our commitments, and what
Speaker 1: we did was we worked through in great detail with
Speaker 1: European partners what those what those commitments are going to be,
Speaker 1: and in the context of Ireland, which of course crucial
Speaker 1: for the people of Northern Ireland, we agreed that we
Speaker 1: would move forward in a way that would not return
Speaker 1: to the borders of the past. I don't think it's
Speaker 1: particually helpful to look at concessions or wins or losses.
Speaker 1: This is about a negotiation and agreed way forward and
Speaker 1: that's what we are doing. So there's a lot of
Speaker 1: banks here on Wall Street that I'm sure asking you
Speaker 1: have a lot of questions. What is going to happen
Speaker 1: with the relationship with the e U twenty seven and
Speaker 1: the United Kingdom Post and how are they going to
Speaker 1: continue to operate Can they operate after in the same
Speaker 1: way they operated before? So I think what I would
Speaker 1: say is that what they will be able to do
Speaker 1: is to operate in the city of London as one
Speaker 1: of the great financial centers of the world, along of
Speaker 1: course with New York. They will continue to be operating
Speaker 1: in a in a climate that will be a wonderful
Speaker 1: location for doing business with With the European Union. Then
Speaker 1: at seven UM, one of the former German finance minister
Speaker 1: himself said the other day that what Europe needs is
Speaker 1: a strong London. They don't need to see London moving
Speaker 1: to other places. So the banks will be there, The
Speaker 1: banks will be there, There won't go anywhere. And we
Speaker 1: all love London because London is fantastic. I love London,
Speaker 1: but I'd like to know if they're going to continue
Speaker 1: to have passporting. Are they're going to continue to have passporting,
Speaker 1: Will they get that concession from Europe, Because when we
Speaker 1: talk about concessions, I think it is important to know
Speaker 1: whether you get that concession from the EU for the city.
Speaker 1: What the negotiation will deliver is a new set of
Speaker 1: arrangements between London and the Eurozone in London and the
Speaker 1: seven That is exactly what we're about to work out.
Speaker 1: The Chancellor himself gave a speech in the city the
Speaker 1: other day where he made clear that there is an
Speaker 1: absolute priority of the British government to deliver that new relationship.
Speaker 1: What exactly it looks like, we don't know. That's what
Speaker 1: the negotiation will deliver. You've got a hard job, Anthony Phillipson.
Speaker 1: They knew UK. A Council General to New York and
Speaker 1: Director General of International Trade North America, Tom Kane, you're forgiven.
Speaker 1: Thank one of all. We'd love to have you back
Speaker 1: for a longer time. I would love to come back.
Speaker 1: There's so much, so much to talk about here, Council General,
Speaker 1: thank you so much. Without further ado, we're gonna continue
Speaker 1: with Robert Profuseck of Jones Day and I'm going to
Speaker 1: rip up the stript script because Bob, since just emailed in,
Speaker 1: Bob Sinch is an FX dollar guy. Is one of
Speaker 1: the outcomes of tax reform that foreign investment looks to
Speaker 1: come into the United States for complete acquisition or even
Speaker 1: for some kind of minority interest in American assets. That's
Speaker 1: quite possible that a short term impact has gotta be stimulative.
Speaker 1: There's gonna be money coming back by US companies. It's
Speaker 1: there's there's gonna be But if I'm a European multinational,
Speaker 1: I mean, John, there's Unilever and they're doing spreads business,
Speaker 1: which I you know, don't understand. If I'm a foreign company,
Speaker 1: do I want to bring money back into the United
Speaker 1: States and by minority or majority interests, Yes, you can,
Speaker 1: because it's just the rate differential is going to be
Speaker 1: different and you don't have to go to this structure.
Speaker 1: I mean, if you look at the structure of many
Speaker 1: non U S comp you know, we're we're real critical
Speaker 1: US companies with inversions and stuff. You look at the
Speaker 1: other side, you look at their corporate structure looks like
Speaker 1: you open the back of an old time TV set.
Speaker 1: It was so complicated to try to deal with this
Speaker 1: high US tax rate. The dollar has had an awful year, Bob,
Speaker 1: and we often ask us sounds whether that really moves
Speaker 1: the donald for the C suite. Did they sit there
Speaker 1: and say other in Europe or an Asia and say,
Speaker 1: look at the performance of the dollar. Things got cheaper.
Speaker 1: America's on sale for sure because and that's a financing arbitrage.
Speaker 1: If they're you know, financing it from what sure they
Speaker 1: can do it. And one of the things about again
Speaker 1: looking out from the US perspective of the European bring
Speaker 1: more money back in. There'll be more money here. There's
Speaker 1: been a lot of I mean, when you're the average
Speaker 1: CEO says I got two M and A possibilities in
Speaker 1: the old days. If when we're off shore, you did
Speaker 1: it because you wanted to use up that off shore
Speaker 1: catch um Bob, I want you to define right now
Speaker 1: why a hundred jillion dollars at private equity is different
Speaker 1: than a hundred jillion dollars anywhere you look at pots
Speaker 1: of money. How do you treat private equity pots of
Speaker 1: money different? Well, there is that's about the right number
Speaker 1: for private equity. There's an amazing amount of capital that's
Speaker 1: been committed when you look at the fundraising this year,
Speaker 1: but as cash cash it's been astonishing. The difference is
Speaker 1: they have to put that money or they want to
Speaker 1: put that money to work. Now that doesn't mean it
Speaker 1: is burning a hole in their pocket they're gonna do
Speaker 1: dumb deal, but it does mean they're in the deal business.
Speaker 1: Companies are in their business and deals that maybe a
Speaker 1: part of it, whereas a private equity guy that is
Speaker 1: hit his business is putting that capital. Am I right?
Speaker 1: You know? Pick on KKR, there's a general partner, there's
Speaker 1: lots of limited partners whatever that put money in. They've
Speaker 1: got a big, big pot of money. And then do
Speaker 1: they pick an industry category and say, go review a
Speaker 1: hundred companies and let's see which five are gonna bid
Speaker 1: for the Absolutely there's some funds that are industry specific.
Speaker 1: The KKR is the Blackstones, the big ones. They're more generic.
Speaker 1: What they do very often look at where things are going,
Speaker 1: and you know, they're just like everybody else. There are
Speaker 1: things that are hot for a reason. Now right now,
Speaker 1: I know this sounds it's kind of dumb, but it's
Speaker 1: hard to find an industry that's not hot. In M
Speaker 1: and A, it really well, again and again John Ferroll
Speaker 1: three headlines in the last hour, profuse driving the conversation.
Speaker 1: Penn National to buy Pinnacle, David Wilson will have more
Speaker 1: and it's Hershey confirms they're gonna buy Amplify snack brains.
Speaker 1: I don't even know what that is. Campbell's to buy
Speaker 1: Snyder's Lands. Shout out to Mario Gabelli who nailed that.
Speaker 1: As always, I'm struggling to see why these companies need
Speaker 1: private equity financing at this point when the debt markets
Speaker 1: wide open. When you think about when these companies were
Speaker 1: formed Bob the car Loves of this world KKR, the
Speaker 1: opportunity set in front of them at the time is very,
Speaker 1: very different to the opportunity said in front of them now.
Speaker 1: You've talked about them needing to put the cash to work.
Speaker 1: They're struggling to find places to put a cash to work,
Speaker 1: aren't they. Yeah, they are. And one of the things
Speaker 1: they're doing many of in fact, almost all of them,
Speaker 1: they're they're not just looking at traditional LBO transactions. A
Speaker 1: lot of them are doing financing. Um. While the debt
Speaker 1: markers are fabulous, if you're below a triple B, not
Speaker 1: so good. It's hard to get money because of the
Speaker 1: pressure on the banks. So guess who shows up in
Speaker 1: that private equity there. Almost every private equity firm now
Speaker 1: is doing alternative financings, so called special situations, which usually
Speaker 1: means either distress or at least below investment grade. So
Speaker 1: they're doing everything else they've got a lot of money
Speaker 1: to allocate. Even though a lot of the major um
Speaker 1: PE investors, like the public pension funds and and and
Speaker 1: the like, have said they're dialing back, but they really haven't.
Speaker 1: In the real world, they say it, but they this
Speaker 1: is an asset class you can't pass up, and it's huge.
Speaker 1: I haven't I don't know the specifics, but I'm certain
Speaker 1: there are four or five fundraising efforts where they raised
Speaker 1: over ten billion dollars. The problems when when KKR started out,
Speaker 1: if they could get to five hundred million dollars, that
Speaker 1: was a big thing. The problem, though, is it starts
Speaker 1: from the top. Investors are looking cross asset right now,
Speaker 1: and they're looking at opportunities and they're struggling to find
Speaker 1: strong returns even in high yield where you get what
Speaker 1: five percent now historically incredibly low. So they're sitting there
Speaker 1: and they say, where can I put my money. Let's
Speaker 1: give it to someone else, and let's give it a
Speaker 1: private equity and hopefully they can come up with a
Speaker 1: better idea. So their access to cash is absolutely fine.
Speaker 1: They've got loads of it. They just done what to
Speaker 1: do with it? Do they? And you raise the point
Speaker 1: about alternative financing is the future for PE in a
Speaker 1: much bigger way. Just an alternative financing bank, it could be.
Speaker 1: It's it's like almost everything in today's world of world
Speaker 1: of transparency and instant information. It means so many things
Speaker 1: are converging. I mean, think about think about Golden and Sacks. Yeah,
Speaker 1: it isn't everything today, right, I mean twenty years ago
Speaker 1: it was an investment bank. It's everything is converging. Now.
Speaker 1: Does that mean we're all doing the same things? No,
Speaker 1: not really, Um, it's different. It's very difficult to get
Speaker 1: below investment grade credit from a traditional it's not very
Speaker 1: difficult to get it from private equity. From the investor standpoint,
Speaker 1: is this also an opportunity to get exposure to a
Speaker 1: market that typically it is difficult for you to get.
Speaker 1: And what I mean by that is many of these
Speaker 1: new technology companies aren't going public. The opportunities aren't in
Speaker 1: public markets at the moment. They're in private markets. And
Speaker 1: they kind of stand there, Bob, they're not going public.
Speaker 1: Is that the way he is thinking about the situation now?
Speaker 1: From the investor standpoint, give the money to them and
Speaker 1: they can get me exposure to these and that's and
Speaker 1: that's the convergence. Believe it. I'm not. That's I guess
Speaker 1: the only word I have. But that's the convergence between
Speaker 1: VC and private equity investing. There is a convergence of
Speaker 1: everything on that score. I look at this and I
Speaker 1: look again at the Frenzy, and a lot of our
Speaker 1: listeners are viewers on TV. I got a couple of
Speaker 1: emails on this. It seems almost like it's just all
Speaker 1: for the corporate class. How does labor end up within
Speaker 1: the broader sense of transactions in America? Well, labor is
Speaker 1: very often um because synergies in labor's view, and I'm
Speaker 1: not sure it's all that incorrect synergies labor, I mean
Speaker 1: labor popping a hundred year a year, and all of
Speaker 1: a sudden it's like oops, yeah, because synergies is a
Speaker 1: different word for a nicer word for job cuts. Very often,
Speaker 1: rationalization is another word for job cuts. On the other hand,
Speaker 1: you know, if your business isn't performing even without him
Speaker 1: and A, they're going to be job cuts. We see
Speaker 1: that every time there's a market a market break break.
Speaker 1: I saw that. You know, think about publishing, the actual
Speaker 1: publishing business today, Well, they've been deals here Tom Warner.
Speaker 1: Obviously it's huge, but time inc being acquired by Meredith.
Speaker 1: But if you don't do that, what are you gonna do?
Speaker 1: You're quickly Were you involved in the Alston General Electric transaction? Yes,
Speaker 1: you were in comment on that. You cannot comment on
Speaker 1: that one. John, would you like to comment? Michael Barr,
Speaker 1: would you like to comment on ge Alston? I would
Speaker 1: love to. Okay, thank you so much, greatly appreciate it.
Speaker 1: With John's day, I was going to ask about a
Speaker 1: challenging transaction. It appears from General Electric. We greatly appreciate
Speaker 1: him with this. Am I getting out of this as
Speaker 1: smoothly as I can. You know you've done a good job.
Speaker 1: And just say that the politics in Europe has changed
Speaker 1: so much in the last couple of years, whereby the
Speaker 1: European politicians are now willing to allow a big player
Speaker 1: in Germany to get together with a big player in
Speaker 1: France in a way that maybe they wouldn't have done
Speaker 1: in the past, because they know that the future is
Speaker 1: not competing France against Germany, It's competing Europe against China
Speaker 1: in a much, much bigger way. And I think that's
Speaker 1: the change for me this year in Europe whilst we've
Speaker 1: seen some of these deals come through, is that the
Speaker 1: Germans and the French are allowing these big companies where
Speaker 1: they had a state interest to special interest to actually
Speaker 1: get together. Okay, well, very bad, profuser, Thank you so much.
Speaker 1: I've been really looking forward to this interview. Jared Bernstein
Speaker 1: is a wonderful economist. I'm gonna say, with a tilt
Speaker 1: to the Democrats to the left, work for Vice President Biden,
Speaker 1: but he has such respect that all Republicans, all Conservatives
Speaker 1: at each at any time listen to Mr Bernstein with
Speaker 1: the Center on Budget and Policy Priorities, Jared Um, I
Speaker 1: looked at your website and you go where any good
Speaker 1: lefty kind of center on budget and policy priorities? Will
Speaker 1: you talk about the child tax credit? And this one,
Speaker 1: Jared of the conversation I had this weekend was on
Speaker 1: state and local taxes. Do you people yet have anywhere
Speaker 1: in the vicinity of how low of income level married
Speaker 1: where the state and local tax disadvantage is tangible? Is
Speaker 1: it obviously it's like six hundred thousand five as an
Speaker 1: household income, I'll bet it's a lot lower number. Do
Speaker 1: we have any clue where it is yet I don't
Speaker 1: know that number. It's different for every state, but it
Speaker 1: is true. Somebody showed me some numbers for West Virginia
Speaker 1: that showed that that did the loss of that exemption
Speaker 1: does cut for some. UH does hit some lower income families,
Speaker 1: especially those who by the way, end up paying more
Speaker 1: sales tax than income tax, which happens sometimes. That said,
Speaker 1: the bulk of those UH exemptions UH typically benefited those
Speaker 1: in the top part of the income scale. You know,
Speaker 1: there's another concern there, which is UH that's Germane to
Speaker 1: folks like us at the Center on Budget, which is
Speaker 1: that we we believe that one of the reasons states
Speaker 1: are able to raise revenues in order to do the
Speaker 1: things that they want to do, which in some of
Speaker 1: these blue states tend to be sort of anti poverty
Speaker 1: kinds of things, has to do with the ability to
Speaker 1: engage those taxes. So so the loss of that could
Speaker 1: impact state's ability sustain That's right where I wanted to go.
Speaker 1: Is a what what folks economists like uh Dr Bernstein
Speaker 1: called a second rounder second order effect. The massive second
Speaker 1: order effect is Governor Cuomo, Governor Christier, whoever follows on
Speaker 1: Governor brown Out in California in twenty other states. They're
Speaker 1: gonna have to change their actual intrinsic budgets, aren't they.
Speaker 1: They probably will, because not only will it be a
Speaker 1: challenge for them to sustain their tax systems. Now people
Speaker 1: are going to look at their twenty nineteen filings in
Speaker 1: April and recognize that they can no longer exempt some
Speaker 1: of their state and local payments from their federal liabilities.
Speaker 1: But if they decide they wanted to raise revenues to
Speaker 1: engage in maybe expand their earned income credit or even
Speaker 1: do uh an infrastructure build out. Uh, that's that that
Speaker 1: constraint is going to be a new one for them. Jared,
Speaker 1: there was a story a number of months ago where
Speaker 1: a well known hedge fund manager a very rich individual
Speaker 1: New Jersey and left a hole in the budget the
Speaker 1: affluent are bound to leave? To what extent do the
Speaker 1: affluent leave these states? Well, I'm glad you asked me that,
Speaker 1: because there's a very good article on page eight two
Speaker 1: of the Wall Street Journal which purports to answer that question.
Speaker 1: And the answer is it's not zero, but it's not large.
Speaker 1: I think one study suggested that New York City could
Speaker 1: lose two to four percent of its most affluent folks.
Speaker 1: There are so many amenities in these cities, New York,
Speaker 1: San Francisco. The taxes are just one of the variables
Speaker 1: that keep you there, and it depends on your age
Speaker 1: and where you are in your career. Uh. To the
Speaker 1: extent that there will be some out migration, I think
Speaker 1: it will be small. I had a conversation for the
Speaker 1: first time just last week about what would happen to
Speaker 1: municipal bonds from these states and whether actually we could
Speaker 1: face a serious problem in the coming years. You send
Speaker 1: Jared that actually you don't foresee that happening. The affluent
Speaker 1: will not go There will not be a budget problem
Speaker 1: in the coming years for some of these states. I
Speaker 1: don't think you're going to see anything like that happen
Speaker 1: in the next few years. As I said a second ago, though,
Speaker 1: there is the possibility that you start to see some
Speaker 1: pressure from more affluent taxpayers because they can no longer uh,
Speaker 1: they can no longer exempt their state and local payments
Speaker 1: against their federal liabilities. And you know, three or four
Speaker 1: or five years that could that could start to pressure
Speaker 1: state budgets. No question, what are the Jared state and
Speaker 1: local taxes actually get cut in some of these states. Well,
Speaker 1: I think that the odds are more that they don't
Speaker 1: get raised than they get than they get cut. Uh.
Speaker 1: You know, state budgets aren't in in great shape. They're
Speaker 1: still looking at rainy day funds, and and remember there's
Speaker 1: a recession out there somewhere, and I think, especially given
Speaker 1: the fiscal conditions at the federal level, a lot of
Speaker 1: anti processionary kinds of spending is going to fall on
Speaker 1: the state level. So I think they want to build
Speaker 1: up their rainy day funds and and keep their tax
Speaker 1: structure and in as as an intact as they can
Speaker 1: for the near term. Now, let's come back with Jared
Speaker 1: Bernstein against Center and Budget and Policy parties. The analysis
Speaker 1: of this tax legislation now unsigned, will be just extraordinary.
Speaker 1: And you know, my amateur take is, John, it's a
Speaker 1: complete mystery for every single American. As we go into
Speaker 1: the end of the year, we'll try to get some
Speaker 1: clarity with Dr At Bernstein, Senior Fellow the Center on
Speaker 1: Budget and Policy Priorities. Thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio