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Speaker 1: Runt you by Bank of America Mary Lynch. With virtual reality,

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Speaker 1: virtually everything will change. Discover opportunities in a transforming world.

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Speaker 1: Be of a, mL dot Com, slash VR, Mary Lynch,

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Speaker 1: Pierce Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

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Speaker 1: of course, on the Bloomberg. Joining us now is Timothy Adams, who,

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Speaker 1: after a distinguished career in government, is the chief of

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Speaker 1: staff to Treasury Secretaries and a stint as Under Secretary

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Speaker 1: of the Treasury for International Affairs, is now the President

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Speaker 1: and CEO of the Institute of International Finance, representing banks

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Speaker 1: of all kinds from all over, along with hedge funds

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Speaker 1: and insurance companies as well. Great to see you. Eager

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Speaker 1: to talk about regulation here in a moment, but let

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Speaker 1: me just ask you to react to what we've seen

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Speaker 1: play out here over the last week. How do the

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Speaker 1: constituent memories of of the Institute sort of how are

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Speaker 1: they watching all this unfold? What do they care about

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Speaker 1: when they see this debate over healthcare take place. Were

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Speaker 1: amazingly volatilities down. The markets keep powering on and the

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Speaker 1: economy keeps moving on. So I was out on the

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Speaker 1: West coast last week seeing uh people from in the

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Speaker 1: banking sector in Silicon Valley. In some ways, they're a

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Speaker 1: little deaf to this. They're a little numb to the

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Speaker 1: politics in Washington, and they're just moving on doing business deals,

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Speaker 1: you know, moving on with life. The Washingtons paralyzed, which

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Speaker 1: is unfortunate because we have great challenge in this country.

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Speaker 1: We need to focus on productivity, job creation, and capital formation.

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Speaker 1: There's a huge to do list sitting in Washington, and

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Speaker 1: right now it's all about squabbling and we're very paralyzed.

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Speaker 1: What what has changed you say that the city, the

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Speaker 1: place is paralyzed. What's different between now and when you

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Speaker 1: were working for secretaries now working for the Treasury Department.

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Speaker 1: How has it changed. It's been a gradual process, is

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Speaker 1: an evolution, but it's just become much more polarized. The

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Speaker 1: city is at the grips of the extremes of both parties.

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Speaker 1: There isn't much that meets in the middle anymore. There's

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Speaker 1: not a sense of compromise. Bipartisanship has become a pejorative term,

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Speaker 1: and there's just not the kind of work we saw

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Speaker 1: back and say that the Reagan era where we had

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Speaker 1: tax reform, it was a bipartisan effort. Bill Bradley helped

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Speaker 1: lead that effort. That does not exist in Washington right now.

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Speaker 1: How hard is it to navigate the place now? Imagine

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Speaker 1: that you talked to a lot of a lot of banqueris,

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Speaker 1: you talk to people who had a sense of how

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Speaker 1: Washington works. If it's work working differently, how much harder

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Speaker 1: isn't now to figure out the way those mechanisms are moving. Well,

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Speaker 1: you have a new administration coming in that's just still

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Speaker 1: you know, being formed. The ho host of political positions

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Speaker 1: have yet to be filled, and so that's still trying

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Speaker 1: to figure out who do you deal with if you're

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Speaker 1: going to the Department of Labor there this morning. I

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Speaker 1: know you're trying trying to be nice. I know I'm

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Speaker 1: sorry for us to cut in your David's got the

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Speaker 1: of the show, Tim This is an historic moment. As

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Speaker 1: you beautifully said on television earlier, this is not Jim

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Speaker 1: Baker's White House, whose white House, is it it's what

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Speaker 1: it's the president's. I believe it's the people's, you know,

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Speaker 1: a different story ultimately starts the top and look at him.

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Speaker 1: They're they're wonderful people working in the administration. Gary Khene,

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Speaker 1: I'm a big fan. His staff at world class McMaster

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Speaker 1: at the NSC very good. And Treasury is actually coming

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Speaker 1: together and I think Steve and Neusian is a very

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Speaker 1: good leader there. But the politics is just so crippling

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Speaker 1: right now on both extremes that no one wants to

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Speaker 1: work across the aisle. Do you do you have any

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Speaker 1: hope that that's gonna change. I guess maybe tax cuts.

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Speaker 1: Maybe I was gonna ask you about how we got

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Speaker 1: that that news yesterday where there seemed to be some

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Speaker 1: agreement between the House and send it in the we

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Speaker 1: can turn to a tax form I think is a

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Speaker 1: bridge too far despite the best efforts, uh you know,

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Speaker 1: those in the House. But I do think we can

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Speaker 1: get a deal on tax cuts, maybe in Q four,

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Speaker 1: maybe Q one at the latest next year, where you

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Speaker 1: get a reduction corporate, you do something for pass through,

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Speaker 1: something for individuals, repatriation expensing. I think there's a deal

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Speaker 1: to be had, but I don't think it's gonna be

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Speaker 1: deficit neutral. That's what have we learned from the way

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Speaker 1: that this process is played out, the process of trying

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Speaker 1: to to make changes to healthcare that we can transfer

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Speaker 1: to tax reformer tax cuts, as you say, are we

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Speaker 1: are we learning something about the way the legislative process

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Speaker 1: is working here in two thousand sev It's always hard.

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Speaker 1: The founders designed a system, uh almost not to work right,

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Speaker 1: so everything has to align it perfectly to get anything done.

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Speaker 1: There's more of a consensus on taxes and their health.

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Speaker 1: In healthcare, you can't do healthcare reform based on a slogan,

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Speaker 1: and Republican Party had a slogan which is repeal and replaced,

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Speaker 1: but there was no replace. There's no consensus even within

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Speaker 1: the Republican Party of what healthcare should look like going forward.

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Speaker 1: Election night, I was standing with one Ian Bremer in

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Speaker 1: the moment where I knew this was gonna be history

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Speaker 1: made was when a suburban Philadelphia Bucks County type district

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Speaker 1: or whatever went Trump, which stunned me. I mean, you know,

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Speaker 1: what do I know? A lot of Americans, including Republicans,

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Speaker 1: are asking the Tim Adams of the party to resign

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Speaker 1: to quit explain why guys like you in the Beltway

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Speaker 1: right now can't resign in protest from this president. What

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Speaker 1: holds them back from resigning as assistant this or assistant that.

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Speaker 1: I think they have a greater sense of obligation to

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Speaker 1: the country. And I talked to a lot of even

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Speaker 1: the career staff. I talked to many officials on a

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Speaker 1: very on daily basis, and there's a sense that we've

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Speaker 1: got to move the country forward, that the presidency is transitional.

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Speaker 1: We have a president day well, another president years from now,

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Speaker 1: another president eight years after that. But the country needs

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Speaker 1: to do or and we need to focus on the

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Speaker 1: big challenges this country faces. Who are the adults in

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Speaker 1: the room? I mean, David, we haven't ansked this question

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Speaker 1: and ages are there right? Let me rephrases David three

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Speaker 1: to one? Are there any adults? As I said, I

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Speaker 1: think Gary County is doing an act. You know, well,

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Speaker 1: I don't know it's politics. We never talked politics. But

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Speaker 1: I think he's a very competent guy. He ran Goldman Sachs,

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Speaker 1: so I think Gary can do a good job. He's

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Speaker 1: got a great staff around him, but he's you know,

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Speaker 1: he needs support in the political sphere in the White House,

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Speaker 1: and the President needs to focus on policy, and there's

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Speaker 1: too many distractions. You listen to the rhetoric, there was

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Speaker 1: an eagerness to blow things up. Let me take the

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Speaker 1: G twenty or the G seventh an example of that.

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Speaker 1: I know that when you were Under Secretary for International

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Speaker 1: Affairs the Treasury Partment, that was something that you likely

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Speaker 1: had to to deal with. We saw the way that

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Speaker 1: those meetings played out. Yes, you can blow things up,

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Speaker 1: but should it be done in a more targeted way?

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Speaker 1: When you look at how the meetings were conducted at

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Speaker 1: those conferences, you look at the speeches that were given there, Uh,

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Speaker 1: there is a framework here that exists that I would

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Speaker 1: imagine you and others would think needs to be preserved. Sure,

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Speaker 1: I don't want to offend the status co. There's always

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Speaker 1: a room for moving these institutions forward. You know, whether

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Speaker 1: it's the Basel process or the G twenty, they can

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Speaker 1: always be improved. So disruption, some disruption within certain compound

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Speaker 1: is probably a positive and healthy cathartic experience, but blowing

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Speaker 1: the whole thing up is not, and we need to

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Speaker 1: work with our partners. That proved true in the midst

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Speaker 1: of the crisis, and there will be another crisis. I

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Speaker 1: don't know when, I don't know what it looked like.

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Speaker 1: But you need the capacity to work with your allies

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Speaker 1: around the world. Where'd you grow up in Kentucky? Murray, Kentucky,

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Speaker 1: West Mury, Kentucky, western part of the state, right on

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Speaker 1: the Tennessee border, about ten thousand people. Wonderful, idea like

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Speaker 1: place to grow up. It was an ideal place to

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Speaker 1: grow up. I would respectfully suggest those people aren't going

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Speaker 1: to vote for Secretary Clinton or the follow one. What

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Speaker 1: is the remorse that you see about this my certitude?

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Speaker 1: They voted for Mr Trump. Well you can, you can

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Speaker 1: look at the numbers, but uh, you know, my father

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Speaker 1: was a Union member. That part of that community were

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Speaker 1: long term Democrats. They were Roosevelt Democrats. Shift Reagan turn

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Speaker 1: and they became Republicans. Uh, you know the Democrats have

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Speaker 1: not been able to go back there. I think that's

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Speaker 1: my question. Well they can. Mr Schumer's beginning to nudge that,

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Speaker 1: but that's the kin. Chuck Schumer from New York City

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Speaker 1: go to Murray, Kentucky with a message the Resident Donald

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Speaker 1: Trump went from New York City with a message, Yes,

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Speaker 1: but He's both their language right, and he paid attention

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Speaker 1: to them and he said you matter, and he talked

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Speaker 1: about the keyword, the D word, which is dignity. These

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Speaker 1: people want dignity, they want to be treated with dignity,

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Speaker 1: and they just want to fortunately the clock, Thank god,

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Speaker 1: the clock's going a college on the twins. And there

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Speaker 1: we talk about dignity last night in the White House.

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Speaker 1: Can we come back and talk about I F business.

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Speaker 1: There's a big sign in the control ram. How about

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Speaker 1: we talk about what Tim really does. Tim Adams with

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Speaker 1: us with his public service under Secretaries O'Neil and Snow

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Speaker 1: and certainly with President Bush if you noticed he's from Kentucky. Uh.

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Speaker 1: And this day of history truly a major shout out, David,

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Speaker 1: girl and you've got to carry this forward, uh in

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Speaker 1: your politics today. David, What a job by our Washington

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Speaker 1: team last night. Yeah, I was waking up checking in

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Speaker 1: on on the votes and all of that. But yes,

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Speaker 1: Stephen Dennis, our senate reporter there well into the early

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Speaker 1: morning hours that reporting on what was going on Capitol Hill.

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Speaker 1: So you a plout it's to them for sure. And

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Speaker 1: now we do the unknown, We go where people fear

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Speaker 1: to go not talk about politics in Washington. Let me

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Speaker 1: do this with Timothy Adams. Um he is with the

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Speaker 1: I I F. This is a consortium with five banks

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Speaker 1: in financial institution, generally insurance companies, penshing fund solid banks

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Speaker 1: that Mr Ackerman and Deutsche Bank provided leadership decades ago

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Speaker 1: and Tim Adams after Mr Delar's historic tenure, drives a

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Speaker 1: conversation forward. Is Dot Frank the friend or foe of

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Speaker 1: Jamie Diamond? Well, there are parts of it which he

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Speaker 1: would like to probably change, but no one was cheerleading

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Speaker 1: for repeal of Dodd Frank. That was a myth. The

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Speaker 1: biggest concern came from smaller institutions. It felt like there

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Speaker 1: was a trickle down effect with respect to the cost

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Speaker 1: of compliance, and there was probably some truth to that.

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Speaker 1: And the Treasury report that just came out last month,

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Speaker 1: which outstanding report, very balanced, very thoughtful, really tries to

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Speaker 1: take a proportional approach to regulation. That's the right way

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Speaker 1: to do it. Do you have a number of how

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Speaker 1: much expense has been laid on banks because of Dad Frank?

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Speaker 1: Is it three of S G and A? Is it

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Speaker 1: six of revenue? What's the number you've come I don't

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Speaker 1: have a top number on top of me, but it's

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Speaker 1: a huge number on top of the constant spin for

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Speaker 1: I T, I T integration, cybersecurity. There's a whole host

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Speaker 1: of of cost challenges that all these institutions face. So

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Speaker 1: which is why I think you'll see further consolidation in

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Speaker 1: the industry. You look at the effort here to get

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Speaker 1: tax before, you look at the effort to change healthcare,

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Speaker 1: and then you look at regulations. You point out that

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Speaker 1: report from the Treasure Department, and as I have watched

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Speaker 1: all of this unfold, it was so detailed, hundred fifty

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Speaker 1: plus pages. That's just the first iteration of what the

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Speaker 1: Treasure Department plans to do. That was focused on banks

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Speaker 1: and specific Why not take that approach and apply it

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Speaker 1: to everything. Why do you think that on the issue

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Speaker 1: of regulation they seem to be so ahead in terms

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Speaker 1: of laying out what the policy position is. Well, it

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Speaker 1: does and require legislative action, So of what's in the

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Speaker 1: report they can do through the executive branch. And as

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Speaker 1: they have new individuals coming at the o c C,

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Speaker 1: the f D. I see Randy Corals yesterday, dear friend,

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Speaker 1: who was testifying for the position of the Vice chare

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Speaker 1: at the FED. They'll take those books those you said,

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Speaker 1: there's new tronches coming out and that will be their

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Speaker 1: north stars the way they'll think about regulation going forward.

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Speaker 1: It just takes time to get the new person in

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Speaker 1: a place and actually implement, but directionally, it's absolutely correct.

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Speaker 1: What did you hear from Mr Corals yesterday? Uh? He

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Speaker 1: was testifying before the Banking Committee. His nomination fully underway.

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Speaker 1: The hearing is underway. What did you hear from him?

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Speaker 1: How do you think the FED is going to take

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Speaker 1: a different role? How the role FED going to change

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Speaker 1: you when it comes to regulation under under his leadership,

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Speaker 1: at least in the regulatory sense. Well, I think, like

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Speaker 1: anyone who's going through center confirmation, you want to be

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Speaker 1: polite and have optionality. Look, I think he's I've known

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Speaker 1: it for a long time. We were colleagues for five years.

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Speaker 1: He's one of the kindest, nicest, most thoughtful individuals I've

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Speaker 1: ever had an opportunity to work with. I think he'll

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Speaker 1: be very pragmatic, very thoughtful. I don't think he comes

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Speaker 1: into this job with any sense of ideology, and I

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Speaker 1: think he wants to balance economic growth with safety and

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Speaker 1: sound as of the system. Which is the right way

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Speaker 1: to approach the job. You mentioned that the administration the

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Speaker 1: Treasure Department able to do things on its own when

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Speaker 1: it comes to to regulation. Is the Congress sitting back?

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Speaker 1: Does it recognize the fact that maybe real change can't

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Speaker 1: come through these other channels, and it's better to tone

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Speaker 1: down the rhetoric, not talk about repealing dot Frank, etcetera.

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Speaker 1: If change can happen in other parts of Washington. Sure,

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Speaker 1: getting sixty VOTs in the Center for anything is near impossible,

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Speaker 1: and that's what you need for most changes to dot Frank.

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Speaker 1: There are some elements that you can do through budget reconciliation,

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Speaker 1: but let the executive branch execute. That's what it's there for.

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Speaker 1: And there are ways to take a sort of a

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Speaker 1: new approach, a fresh approach at regulation. No one's calling

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Speaker 1: for a wholesale repeal of Dodd Frank or other regulatory changes.

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Speaker 1: It really is being smarter, more balanced, more thoughtful, more pragmatic.

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Speaker 1: Did the rule writting process work? It lasted so long,

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Speaker 1: so many thousands of pages, a lot of inks build.

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Speaker 1: Did it work the way those who crafted this long wanted? Well,

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Speaker 1: it's not over with. We still have the BOSL process balls.

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Speaker 1: The three capital requirements are still a work in process.

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Speaker 1: We may not have those until into the year. It

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Speaker 1: just never seems to end. And I think what's been

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Speaker 1: missing is is just good old fashioned cost benefit analysis,

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Speaker 1: right X anti X post implementation didn't do what I'm

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Speaker 1: supposed to do? Where their unattended consequences and what were

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Speaker 1: the cost? Too much banking talk. If the President United

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Speaker 1: States parachuted in to six fifty North twelfth Street, Murray, Kentucky,

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Speaker 1: four two oh seven one, that would be the home

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Speaker 1: of Cracker Barrel Old Country Diner, what would he hear

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Speaker 1: from the Republicans of Murray, Kentucky. Probably get to work,

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Speaker 1: you know, stop to Twitter, stop the chaos, and get

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Speaker 1: to work on the things you said you were gonna

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Speaker 1: be capable of doing. That well, it requires focus, attention,

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Speaker 1: and driving agenda, and right now that doesn't appear to

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Speaker 1: be the case. But that doesn't mean that there aren't

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Speaker 1: people within the administration who are working day in and

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Speaker 1: day out to try to craft an agenda. But also

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Speaker 1: remember this was a different kind of campaign. Most policies

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Speaker 1: are developed during the campaign, pros says, right, were back

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Speaker 1: in two thousand, we had our tax plan we worked

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Speaker 1: on it for eighteen months. It was ready to go

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Speaker 1: the first month we were in office, right, but that

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Speaker 1: didn't happen in this game, Tim Addams, we've run out

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Speaker 1: of time. Generous of you. I can't think of anyone

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Speaker 1: that should have canceled this morning, like Tim Adams and

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Speaker 1: the I thank you so much for being with us

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Speaker 1: worldwide and now out of the science of fixed income

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Speaker 1: George Bori as is Wells Fargoing. One of the great

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Speaker 1: things about Mr Bory not only talks to institutions about

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Speaker 1: huge fixed income actual issues, and that he actually talks

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Speaker 1: to the public. Let's start with bonds one on one,

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Speaker 1: fab one on one, our bonds in equities linked. Now

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Speaker 1: you and I were joining at the hip with DVID

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Speaker 1: un yield somehow mixed with the tenure yield. Are we

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Speaker 1: anywhere near that traditional linkage or does that a weight

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Speaker 1: fourteen radix? I think we are. I think we are linked.

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Speaker 1: I mean I think the reality is is that investors

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Speaker 1: of all stripes, individuals, institutions, uh, you name it, need income,

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Speaker 1: and income can come from a variety of different places.

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Speaker 1: Yields generally speaking, are pretty low kind of across the board,

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Speaker 1: and so finding that income is a real challenge. Dividends

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Speaker 1: are a nice source of income for a lot of folks,

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Speaker 1: and you've seen you know, dividend producing stocks to do

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Speaker 1: reasonably well over the last few years and even this year, UM,

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Speaker 1: and I think that just sort of underscores the need

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Speaker 1: for yield as bond as the central banks have pushed

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Speaker 1: down yields, companies investors have had to go to all

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Speaker 1: corners to find Let's be clear here, and this is critical,

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Speaker 1: dividends are not a yield equivalent. That's gospel, isn't. They

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Speaker 1: are not a yield equivalent, that is true, But it's

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Speaker 1: still produces uh, an income stream. And I think that's

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Speaker 1: the the important component. Um. You know, the value UM

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Speaker 1: analysis is different for each and and I think that's where, uh,

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Speaker 1: some of the differences and the distinctions start to start

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Speaker 1: to emerge. But I think the the underlying need for

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Speaker 1: that sort of steady stream of income is very very

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Speaker 1: high right now. And and I think that's a function

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Speaker 1: of policy. It's a function of what the Fed has done,

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Speaker 1: and it's a function of kind of the broader backdrop

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Speaker 1: of of relatively low yields, relatively low growth, relatively low inflation,

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Speaker 1: all the things that policymakers are are trying to address.

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Speaker 1: You call this a grinder thon, and I wonder how

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Speaker 1: you how you develop the endurance to deal with as

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Speaker 1: as an investor. I mean, I think the grinder though,

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Speaker 1: is just this low vall type of environment which has

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Speaker 1: been under sort of successive waves of of downward pressure

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Speaker 1: kind of reaching all time new lows. It means, um,

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Speaker 1: you know, for a fixed income investor, UH, that income

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Speaker 1: component becomes almost the largest part of your return, and

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Speaker 1: that's certainly been the case this year. It's absolutely critical,

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Speaker 1: uh that investors kind of capture that coupon, capture that return,

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Speaker 1: and kind of the compounding effect is where they're getting

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Speaker 1: the most amount of their return. I just went to

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Speaker 1: the Bloomberg terminal in the Oxford English diction area. I

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Speaker 1: looked up grinding. Than it's not there, continue, Mr grind

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Speaker 1: you note that what you own is as important as

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Speaker 1: what you don't own. To explain why that's the case

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Speaker 1: in this environment. So in in in the world of

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Speaker 1: corporate bonds, um, the additionally yield you earn for going

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Speaker 1: out of a treasury or a government bond into corporates,

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Speaker 1: UH is very thin right now, it's about a hundred

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Speaker 1: basis points for investment grade. It's about three to four

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Speaker 1: times that in the world of of high yield and

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Speaker 1: and it means the differentiation in your portfolio if you're

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Speaker 1: if you're trying to beat an index and you don't

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Speaker 1: buy something, that's a proactive decision. So um avoiding the

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Speaker 1: problems comes a big contributor to a bond portfolio, especially

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Speaker 1: in the world of corporate bonds, where yields are low,

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Speaker 1: spreads are thin, and the margin for error is pretty narrow.

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Speaker 1: Having a great conversation about credit here with George Borie,

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Speaker 1: he's the head of credit strategy at Wells Fargo. Twenty

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Speaker 1: four point three trillion dollars on corporate balance sheets. As

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Speaker 1: you know that scheduled to mature over the next five years,

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Speaker 1: how do you navigate that? What kind of complications does

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Speaker 1: that pose for you as an investor? So as an investor,

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Speaker 1: I think you you have to you have to be

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Speaker 1: careful sort of where you place your place, your place

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Speaker 1: your money. I think it's a couple of things. Number One,

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Speaker 1: it means there's gonna be a steady flow of bond

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Speaker 1: issuance over the next several years. Uh. You know, there's

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Speaker 1: roughly about five trillion dollars a debt that's scheduled to mature,

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Speaker 1: So there'll be plenty of opportunities to invest in corporate bonds. UM.

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Speaker 1: I think, you know, from an investor's perspective, it's picking

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Speaker 1: the right sectors, it's picking the right names. It's pretty

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Speaker 1: late in the credit cycle. Companies have borrowed a tremendous

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Speaker 1: amount of money over the last several years. UH, and

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Speaker 1: it's there ability to manage that debt that will be

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Speaker 1: kind of key. So you know, some of the sectors,

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Speaker 1: like some of the banking sector looks looks pretty attractive.

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Speaker 1: The banks are in pretty good position. Profitability has been

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Speaker 1: pretty nice. We've liked some healthcare companies UM in the

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Speaker 1: investment grade world over in the world of high yield,

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Speaker 1: some of the communication and telecom companies. You're you're really

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Speaker 1: looking for those companies that have very strong cash flows

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Speaker 1: and they're going to be able to preserve their access

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Speaker 1: to capital markets over the next couple of years. And

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Speaker 1: and that's the sort of the wrinkle, if you will,

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Speaker 1: that UM. You know that that corporate bond investors worry about.

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Speaker 1: It's the technical backdrop is just as important as you

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Speaker 1: know as the fundamental backdrop. The company's profitability is important,

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Speaker 1: their leverage is important, but then their ability to kind

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Speaker 1: of continue to access the market to manage and service

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Speaker 1: that debt becomes a real driver of those bond returns.

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Speaker 1: And uh, you know that's what we spent a lot

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Speaker 1: of time on. Yeah, it is the tendency right now

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Speaker 1: is your preference to move to to shorter duration. We

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Speaker 1: have been sort of slowly moving down the curve. As

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Speaker 1: you've seen, Bonn yields have started to rise a little bit.

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Speaker 1: I don't want to over over egg it, but they

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Speaker 1: have started to move And importantly there's been a little

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Speaker 1: bit of relief at the long end that the thirty

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Speaker 1: year treasury is getting back up close to three three.

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Speaker 1: We're not quite there yet, um and and so sort

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Speaker 1: of protecting your your price performance becomes absolutely critical. Uh,

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Speaker 1: the total return for corporate bonds or anywhere from four

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Speaker 1: and a half to five and a half percent. It's

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Speaker 1: a little short of equity ten percent returns, but we're

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Speaker 1: in sort of performance preservation mode. In the second half there,

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Speaker 1: we think bin yields will go up a bit, and

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Speaker 1: you want to protect those returns. I'm at the I'm

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Speaker 1: gonna get yelled at the kitchen table mode this weekend,

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Speaker 1: and that's because I'm under performing. The ancient retail path

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Speaker 1: is to extenderation, right, whether it's to go out to

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Speaker 1: twelve years full faith and credit or to go out

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Speaker 1: years tax free. Munich, what's the trap, right know? Of

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Speaker 1: extending duration. I think people are extending duration simply because they,

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Speaker 1: as we mentioned before, they need the yield. They need

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Speaker 1: as much extra yield as possible. But there's a lot

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Speaker 1: of price sensitivity when that happens. So bonn yields are

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Speaker 1: very very low, so any marginal move up in bin

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Speaker 1: yields you can have a disproportionate impact on the price,

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Speaker 1: and we're trying to protect against that. You could buy

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Speaker 1: a corporate bond that gives you a little extra yield

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Speaker 1: to buffer it. But if bon yields are rising, and

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Speaker 1: you know bond prices are going Now when I have

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Speaker 1: enjoyed x number of bear markets, come on. A guy

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Speaker 1: walks into Wells Fargo. He's got eight hundred seventy two thousand.

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Speaker 1: I understand, George, for you, that's a small account. Eight

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Speaker 1: hundred seventy two thousand. He's in tax free muni bonds

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Speaker 1: and he's got a duration of fifteen years, and he's

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Speaker 1: desperate free yield. He wants to go out to twenty

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Speaker 1: two years. That guy is gonna get killed in the

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Speaker 1: next bear market. You get a full faith to credit

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Speaker 1: thirty year two point. That puppy goes to three oh five.

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Speaker 1: What happens to that guy trying to climb on the

428
00:21:59,480 --> 00:22:03,600
Speaker 1: stage code with eight s Well, I think I think

429
00:22:03,640 --> 00:22:05,879
Speaker 1: if he if he doesn't sell the bond and he

430
00:22:05,960 --> 00:22:08,840
Speaker 1: just continues to coop that clip, that three percent coupon,

431
00:22:09,280 --> 00:22:12,439
Speaker 1: over time, he gets you know, he gets his income stream.

432
00:22:12,680 --> 00:22:14,840
Speaker 1: And I think that's the important thing right now, is

433
00:22:14,880 --> 00:22:18,040
Speaker 1: there's price sense, mark to market, price sensitivity, and then

434
00:22:18,080 --> 00:22:21,600
Speaker 1: there's the stability of the income stream. And that's what

435
00:22:21,640 --> 00:22:24,560
Speaker 1: we would really emphasize, is that stability. So you want

436
00:22:24,600 --> 00:22:26,400
Speaker 1: to kind of move a little bit up in quality

437
00:22:26,680 --> 00:22:30,560
Speaker 1: main sure that that stability of income is as protected

438
00:22:30,600 --> 00:22:33,639
Speaker 1: as possible, and then kind of move a little bit

439
00:22:33,640 --> 00:22:36,680
Speaker 1: shorter in duration just to protect against that price move.

440
00:22:36,920 --> 00:22:38,800
Speaker 1: And these are huge I mean, David, we make light

441
00:22:38,840 --> 00:22:41,280
Speaker 1: of this, but this is the nuts and bolts of

442
00:22:41,359 --> 00:22:43,960
Speaker 1: the huge pressure of so many of our listeners saying,

443
00:22:44,600 --> 00:22:49,760
Speaker 1: I'm exhausted by low interest rates. I've got to do something.

444
00:22:50,119 --> 00:22:53,920
Speaker 1: And that's the pressure that the investment houses face, is

445
00:22:54,240 --> 00:22:59,400
Speaker 1: what do you do? Five six? Tell me George, coupons

446
00:22:59,400 --> 00:23:03,440
Speaker 1: aren't coming back. Well, they're not coming back anytime soon. Um.

447
00:23:03,480 --> 00:23:06,800
Speaker 1: You know, there's there's you know, four percent it's about

448
00:23:06,960 --> 00:23:09,000
Speaker 1: you know, is about as as well as you can

449
00:23:09,000 --> 00:23:10,800
Speaker 1: do in the investment grade world. You have to go

450
00:23:10,840 --> 00:23:15,200
Speaker 1: into high yield to get something closer to five percent. Uh,

451
00:23:15,240 --> 00:23:18,000
Speaker 1: and then anything beyond that is really kind of a

452
00:23:18,040 --> 00:23:21,400
Speaker 1: distressed sort of situation where there's a real uh, kind

453
00:23:21,440 --> 00:23:24,359
Speaker 1: of problem situation that's either being worked out or coming

454
00:23:24,359 --> 00:23:27,119
Speaker 1: down the pipe. So I I think it's it's the

455
00:23:27,160 --> 00:23:30,119
Speaker 1: recognition that we're still very much in a low yield world,

456
00:23:30,359 --> 00:23:32,760
Speaker 1: um and and a low income world. And I don't

457
00:23:32,760 --> 00:23:34,639
Speaker 1: think that changes, you know, I think we're going to

458
00:23:34,800 --> 00:23:38,320
Speaker 1: stay in this environment for for a while. Uh. And

459
00:23:38,359 --> 00:23:40,080
Speaker 1: I think we heard that this week. We heard it

460
00:23:40,119 --> 00:23:43,119
Speaker 1: from the Fed. The Fed kind of pushed out their

461
00:23:43,160 --> 00:23:45,800
Speaker 1: expectations for a rate hike towards the end of this year.

462
00:23:46,119 --> 00:23:48,560
Speaker 1: The dollar came off a bit as a result of that.

463
00:23:49,040 --> 00:23:51,560
Speaker 1: And this kind of low yield world. I think we're

464
00:23:51,600 --> 00:23:54,560
Speaker 1: stuck here at least for at least for a couple

465
00:23:54,640 --> 00:23:57,360
Speaker 1: more months, but certainly into the end of the year.

466
00:23:57,520 --> 00:23:59,840
Speaker 1: You've got a little time here. Relatively soon applies, We've

467
00:23:59,840 --> 00:24:01,840
Speaker 1: got a couple of months until something happens with with

468
00:24:01,880 --> 00:24:05,520
Speaker 1: normalization in the Fed's balance sheet. In these interveeting weeks

469
00:24:05,600 --> 00:24:07,800
Speaker 1: or months. What are you doing to prepare for that?

470
00:24:07,840 --> 00:24:10,320
Speaker 1: How does that stand to change the environment. Yeah, I

471
00:24:10,800 --> 00:24:13,560
Speaker 1: think the you know, central bank activity is is a

472
00:24:13,600 --> 00:24:17,240
Speaker 1: potential vall moment, and so as we think about what's

473
00:24:17,240 --> 00:24:20,120
Speaker 1: going to happen in September, Congress will come back, We'll

474
00:24:20,119 --> 00:24:22,399
Speaker 1: see if we get anything done there. Clearly not a

475
00:24:22,400 --> 00:24:25,360
Speaker 1: lot is getting done right now, uh, and so there

476
00:24:25,359 --> 00:24:27,800
Speaker 1: could be some disappointment there. But then you get the

477
00:24:27,880 --> 00:24:30,919
Speaker 1: next wave of central bank announcements. You've got the Europeans,

478
00:24:30,920 --> 00:24:33,679
Speaker 1: the Japanese here in this country as well, and so

479
00:24:33,760 --> 00:24:36,480
Speaker 1: there's that kind of potential for VALL over the next

480
00:24:36,520 --> 00:24:38,400
Speaker 1: couple of weeks. I think it's kind of hunker down,

481
00:24:38,440 --> 00:24:40,959
Speaker 1: it's sort of play for that carry try and preserve

482
00:24:41,000 --> 00:24:43,879
Speaker 1: your returns. We're telling investors kind of move up a

483
00:24:43,880 --> 00:24:46,960
Speaker 1: little bit in quality we like, uh, you know, we

484
00:24:46,960 --> 00:24:49,160
Speaker 1: we we like some of the sectors as I mentioned before,

485
00:24:49,160 --> 00:24:52,080
Speaker 1: we like the banking sector, we like investment, create healthcare,

486
00:24:52,720 --> 00:24:57,320
Speaker 1: we like the telecommunication sector in uh in in high yield.

487
00:24:57,520 --> 00:24:59,879
Speaker 1: You know, we're looking for what I would call h

488
00:25:00,119 --> 00:25:03,600
Speaker 1: safe carry and and and that's really reflective of this

489
00:25:03,680 --> 00:25:08,800
Speaker 1: kind of very low volatility, slow grind, the grinder thon uh,

490
00:25:08,880 --> 00:25:12,480
Speaker 1: persisting over the next couple of months, the next couple

491
00:25:12,520 --> 00:25:15,320
Speaker 1: of weeks, and and and trying a position for that.

492
00:25:15,320 --> 00:25:17,320
Speaker 1: That's the way you select, the way that you you

493
00:25:17,320 --> 00:25:20,239
Speaker 1: approach this selection process. Looking at bonds changed over these

494
00:25:20,320 --> 00:25:25,000
Speaker 1: last few years. No, Uh, it hasn't you know, I

495
00:25:25,040 --> 00:25:27,680
Speaker 1: would say that, Um, you know, our our main focuses

496
00:25:27,720 --> 00:25:29,920
Speaker 1: on fundamentals. Uh. You know. You you want to look

497
00:25:29,960 --> 00:25:33,000
Speaker 1: at a company, what's their paying ability? Um? You know

498
00:25:33,080 --> 00:25:36,600
Speaker 1: what's changed is just simply the volume of money that's

499
00:25:36,640 --> 00:25:39,840
Speaker 1: being borrowed. Companies have gotten a lot bigger and and

500
00:25:39,880 --> 00:25:43,000
Speaker 1: the amount of money need to sustain those companies. Uh

501
00:25:43,359 --> 00:25:46,439
Speaker 1: is a big is a big factor. So so the

502
00:25:46,480 --> 00:25:49,000
Speaker 1: fundamentals are very important. That's the first thing you need

503
00:25:49,040 --> 00:25:51,879
Speaker 1: to look at. But then the second, as we discussed before,

504
00:25:52,359 --> 00:25:55,680
Speaker 1: how does that company navigate its way through the capital markets.

505
00:25:56,119 --> 00:26:00,399
Speaker 1: Preserving access to capital or maintaining access to capital is

506
00:26:00,400 --> 00:26:03,119
Speaker 1: really the lifeblood for a lot of companies, and I

507
00:26:03,160 --> 00:26:06,920
Speaker 1: think that's one potential pressure point as we look forward

508
00:26:07,280 --> 00:26:09,560
Speaker 1: into the end of this year, next year, and beyond

509
00:26:10,000 --> 00:26:13,680
Speaker 1: that that uh that there's the trillions in dollars roughly

510
00:26:13,800 --> 00:26:16,160
Speaker 1: six and a half trillion dollars of debt that kind

511
00:26:16,200 --> 00:26:19,440
Speaker 1: of sits on corporate balance sheets needs to be managed,

512
00:26:19,760 --> 00:26:23,240
Speaker 1: and managing that means access to capital in addition to

513
00:26:23,640 --> 00:26:27,160
Speaker 1: running a good operation. So there's there's sounded to two

514
00:26:27,200 --> 00:26:30,680
Speaker 1: angles um that we spend a lot of time focusing on.

515
00:26:31,680 --> 00:26:34,639
Speaker 1: This has been really wonderful on television and ratings today.

516
00:26:34,640 --> 00:26:37,160
Speaker 1: George Bori with Wells Fargo, thank you very much putting

517
00:26:37,200 --> 00:26:40,280
Speaker 1: up with our Washington New Slow and giving us wisdom.

518
00:26:40,400 --> 00:26:51,720
Speaker 1: Wisdom on coupon brunch you by Bank of America. Mary

519
00:26:51,840 --> 00:26:57,480
Speaker 1: Lynch with Virtual Reality virtually everything will change, Discover opportunities

520
00:26:57,800 --> 00:27:01,280
Speaker 1: in a transforming world be of a mL dot Com,

521
00:27:01,480 --> 00:27:13,560
Speaker 1: slash VR, Mary Lynch, Pierce Fentner and Smith Incorporated. Stephen

522
00:27:13,640 --> 00:27:18,480
Speaker 1: Friedman is a really thoughtful gentleman from b MP. Perry

523
00:27:18,520 --> 00:27:22,399
Speaker 1: Bob writing bigger broader on economics, Stephen, let's rip up

524
00:27:22,400 --> 00:27:25,159
Speaker 1: the script here and go market economics. I got a

525
00:27:25,240 --> 00:27:29,120
Speaker 1: trend over five quarters year over your GDP one point

526
00:27:29,119 --> 00:27:31,760
Speaker 1: to one point five, one point eight, two point zero,

527
00:27:32,119 --> 00:27:34,960
Speaker 1: two point one, the vectors in the right direction, but

528
00:27:35,080 --> 00:27:38,680
Speaker 1: it ain't happened. Do we need fiscal stimulus? Well, I

529
00:27:38,680 --> 00:27:40,919
Speaker 1: think it depends on what kind of stimulus you have.

530
00:27:41,119 --> 00:27:44,080
Speaker 1: If you just have tax cuts, uh, and it's not

531
00:27:44,160 --> 00:27:47,879
Speaker 1: an attempt to do anything to raise productivity trends in

532
00:27:47,920 --> 00:27:50,240
Speaker 1: the economy, that's not really going to lead to higher

533
00:27:50,240 --> 00:27:52,600
Speaker 1: trend growth. So if it's just tax cuts for the

534
00:27:52,640 --> 00:27:55,960
Speaker 1: for the for the sake of stimulus, I would say no,

535
00:27:56,119 --> 00:27:58,960
Speaker 1: because the economy is already growing above a very low

536
00:27:59,040 --> 00:28:02,520
Speaker 1: level of trend growth. Personal consumption is a mixture, but

537
00:28:02,680 --> 00:28:07,000
Speaker 1: those sets of numbers are stronger than the visible number.

538
00:28:07,359 --> 00:28:10,720
Speaker 1: Where is American economic growth weak right now? Well? I

539
00:28:10,920 --> 00:28:12,679
Speaker 1: think if we look at this number, and we'll need

540
00:28:12,720 --> 00:28:15,320
Speaker 1: to see the details, but it does seem like we

541
00:28:15,359 --> 00:28:19,160
Speaker 1: aren't getting the follow through on capex that we had

542
00:28:19,200 --> 00:28:21,200
Speaker 1: in the first quarter. We had a very strong contribution

543
00:28:21,240 --> 00:28:23,680
Speaker 1: to GDP and capex. We'll need to drill down and

544
00:28:24,040 --> 00:28:26,800
Speaker 1: see if that continued in Q two, I suspect that

545
00:28:26,840 --> 00:28:29,560
Speaker 1: the number was just at this level fixed investment. I

546
00:28:29,560 --> 00:28:31,520
Speaker 1: mean it sounds fair to Stephen because he's sitting here

547
00:28:31,560 --> 00:28:34,159
Speaker 1: in real time working off the famous B ANDP. He

548
00:28:34,280 --> 00:28:37,800
Speaker 1: walks in here with like seven laptops from BNP, very

549
00:28:38,240 --> 00:28:41,560
Speaker 1: fixed investment. Eight point one percent goes down to two

550
00:28:41,560 --> 00:28:45,400
Speaker 1: point two. That's dynamic that you're talking about, David. I

551
00:28:45,480 --> 00:28:47,560
Speaker 1: just want to it is your forecasting out here. Of course,

552
00:28:47,560 --> 00:28:49,560
Speaker 1: the clarion from this administration has been we'll get to

553
00:28:49,640 --> 00:28:52,400
Speaker 1: three percent growth through taxi form, regulatory form? What what?

554
00:28:52,400 --> 00:28:55,080
Speaker 1: What have you as as you forecast? Do you do

555
00:28:55,120 --> 00:28:56,920
Speaker 1: you see anything close to that? And what would be

556
00:28:56,960 --> 00:28:59,160
Speaker 1: the thing that would drive us to it? I don't.

557
00:28:59,200 --> 00:29:01,440
Speaker 1: I think it's very challenging to get to those numbers.

558
00:29:01,640 --> 00:29:04,160
Speaker 1: First of all, if we think about trend growth, you

559
00:29:04,160 --> 00:29:06,960
Speaker 1: need to think about labor force growth and productivity growth.

560
00:29:07,040 --> 00:29:10,680
Speaker 1: On the labor force side, Uh, we face strong demographic

561
00:29:10,720 --> 00:29:13,760
Speaker 1: headwinds with an aging population, and in addition to be frank,

562
00:29:13,960 --> 00:29:16,600
Speaker 1: Trump's immigration policies are actually going to push in the

563
00:29:16,600 --> 00:29:19,560
Speaker 1: opposite direction, so that's actually a negative for trend growth.

564
00:29:19,840 --> 00:29:22,040
Speaker 1: Then if we look at productivity. Yes, I think on

565
00:29:22,040 --> 00:29:24,040
Speaker 1: the margin, some of the things that the administration wants

566
00:29:24,040 --> 00:29:27,920
Speaker 1: to do in terms of reduced our regulation concernedly UH

567
00:29:28,040 --> 00:29:30,880
Speaker 1: and and tax reform can can boost productivity over the

568
00:29:30,920 --> 00:29:33,680
Speaker 1: longer term. But really there's there's an issue about how

569
00:29:33,680 --> 00:29:36,120
Speaker 1: skilled is our job is our is our labor market?

570
00:29:36,200 --> 00:29:38,080
Speaker 1: Is the job training there? And I think that that

571
00:29:38,200 --> 00:29:40,920
Speaker 1: continues to be a headwind. Give us your diagnosis of

572
00:29:40,960 --> 00:29:43,120
Speaker 1: the health of the consumer today, the degree to which

573
00:29:43,160 --> 00:29:45,560
Speaker 1: the consumer is driving the numbers we saw today driving

574
00:29:45,560 --> 00:29:48,360
Speaker 1: the health of this US economy overall, and I think

575
00:29:48,360 --> 00:29:50,080
Speaker 1: that will continue to be the case because when we

576
00:29:50,080 --> 00:29:52,440
Speaker 1: look at the consumer, first of all, we see that

577
00:29:52,680 --> 00:29:54,760
Speaker 1: jobs are very plentiful right now. We might not be

578
00:29:54,840 --> 00:29:57,880
Speaker 1: seeing the real wage growth that we want, but employment

579
00:29:58,120 --> 00:30:00,680
Speaker 1: is there. You add to that that consume balance sheets

580
00:30:00,680 --> 00:30:03,640
Speaker 1: are generally pretty healthy. The level of consumer leverage has

581
00:30:03,840 --> 00:30:06,600
Speaker 1: come down UH since since the Great Recession, so that's

582
00:30:06,640 --> 00:30:09,360
Speaker 1: positive as well. UH. And also the cost of servicing

583
00:30:09,400 --> 00:30:11,600
Speaker 1: debt is low to UH. And then you add to

584
00:30:11,600 --> 00:30:13,920
Speaker 1: that the sort of wealth effects from a higher stock market.

585
00:30:13,960 --> 00:30:16,480
Speaker 1: All that should be support of of solid of someone

586
00:30:16,520 --> 00:30:19,480
Speaker 1: on spectacular spending. This is an appropriate question for you again,

587
00:30:19,480 --> 00:30:22,080
Speaker 1: because you take a much broader, bigger picture with BNP

588
00:30:22,200 --> 00:30:26,600
Speaker 1: Perry than many. Is the glide path of economic growth

589
00:30:26,720 --> 00:30:30,080
Speaker 1: one point four one point to one point five, one

590
00:30:30,120 --> 00:30:33,880
Speaker 1: point eight, two point oh two point one? Is that

591
00:30:34,280 --> 00:30:38,760
Speaker 1: is that acceptable to any politician, Republican or Democrat. Probably

592
00:30:38,880 --> 00:30:42,680
Speaker 1: the politicians no, thank you now, So what are they

593
00:30:42,880 --> 00:30:46,040
Speaker 1: going to do? They couldn't do it last night we

594
00:30:46,120 --> 00:30:50,360
Speaker 1: saw what is to do for politicians? Word about getting

595
00:30:50,360 --> 00:30:53,959
Speaker 1: re elected, Well, there's a difference between getting reelected, as

596
00:30:53,960 --> 00:30:57,920
Speaker 1: you know, and what's going to raise trend growth over time. UM,

597
00:30:58,000 --> 00:30:59,800
Speaker 1: when it comes to re election, I suspect that in

598
00:30:59,840 --> 00:31:02,440
Speaker 1: the end of the day, UH, tax cuts are are

599
00:31:02,480 --> 00:31:05,680
Speaker 1: are most important for Republicans at this point in time.

600
00:31:06,080 --> 00:31:09,000
Speaker 1: If anything, I think the failure of their repeal and

601
00:31:09,040 --> 00:31:11,760
Speaker 1: replace efforts probably put more pressure on them to get

602
00:31:12,240 --> 00:31:15,400
Speaker 1: not necessarily to tax reform, but just two simple tax cuts.

603
00:31:15,440 --> 00:31:18,720
Speaker 1: Tax reform is a very complicated, UH area that's very

604
00:31:18,760 --> 00:31:21,000
Speaker 1: hard to do through the reconciliation process. I think in

605
00:31:21,040 --> 00:31:25,080
Speaker 1: the end, for their purposes of boosting their chances in

606
00:31:25,080 --> 00:31:27,440
Speaker 1: the next election, it's about tax cuts, and of course

607
00:31:27,440 --> 00:31:30,479
Speaker 1: off the numbers you're Karen Moscow spend the idea of

608
00:31:30,520 --> 00:31:34,320
Speaker 1: a much better number. This is true one point two

609
00:31:34,360 --> 00:31:38,600
Speaker 1: percent revision and we exploded David Gurwa up to two

610
00:31:38,640 --> 00:31:42,960
Speaker 1: point six percent. But the market doesn't really respond like

611
00:31:43,080 --> 00:31:46,280
Speaker 1: you think, why is that? Stephen free? But I mean

612
00:31:46,440 --> 00:31:48,840
Speaker 1: we're supposed to see green on the screen, higher yields,

613
00:31:49,680 --> 00:31:53,320
Speaker 1: stronger dollar, maybe even equities rebound. It didn't happen. Why not?

614
00:31:54,000 --> 00:31:57,680
Speaker 1: I think it's because I think expectations were actually uh yes,

615
00:31:57,880 --> 00:32:00,080
Speaker 1: possibly for an even stronger number. The risks were to

616
00:32:00,120 --> 00:32:02,480
Speaker 1: the upside. And I think that's because we had strong

617
00:32:02,560 --> 00:32:04,800
Speaker 1: drible goods numbers that came out yesterday and we saw

618
00:32:04,920 --> 00:32:08,680
Speaker 1: a number of people revising up their GDP forecasts. Uh

619
00:32:08,720 --> 00:32:10,640
Speaker 1: after that, I make markets were positioned for an even

620
00:32:10,640 --> 00:32:12,840
Speaker 1: stronger You've had time to look at the results, even

621
00:32:12,840 --> 00:32:16,920
Speaker 1: in French with BMP. What do you see? Uh? Well,

622
00:32:17,440 --> 00:32:19,440
Speaker 1: was I alluded to what I What I find investment

623
00:32:19,560 --> 00:32:22,840
Speaker 1: disappointing is yeah, the capex contribution to GDP just point

624
00:32:22,920 --> 00:32:27,560
Speaker 1: six percent, and also um residential investment actually subtracted from

625
00:32:27,560 --> 00:32:30,800
Speaker 1: growing that. Are you gonna blame the president? Everybody else?

626
00:32:30,840 --> 00:32:34,280
Speaker 1: Pile on here. Everybody else's bringing pleasant Trump for anything

627
00:32:34,280 --> 00:32:36,880
Speaker 1: at all? This morning. You want to blame the president

628
00:32:36,960 --> 00:32:40,040
Speaker 1: in Washington and a lack of confidence for this, No,

629
00:32:40,320 --> 00:32:42,160
Speaker 1: I don't. I don't think I would. I think if

630
00:32:42,200 --> 00:32:43,880
Speaker 1: the number had been very strong, I wouldn't have given

631
00:32:43,920 --> 00:32:45,800
Speaker 1: credit to Washington. So I can't do the same when

632
00:32:45,800 --> 00:32:48,280
Speaker 1: the number is weak. I think just this is just

633
00:32:48,680 --> 00:32:51,880
Speaker 1: within the normal variability of trend growth that's probably a

634
00:32:51,920 --> 00:32:56,120
Speaker 1: little bit below two percent um. I wasn't expecting sustained

635
00:32:56,240 --> 00:32:59,280
Speaker 1: growth um um. I don't expect to break out of

636
00:32:59,320 --> 00:33:01,440
Speaker 1: growth to the ups, and this is certainly consistent with

637
00:33:01,440 --> 00:33:03,840
Speaker 1: with with that expectation. I've got that statement from Wednesday

638
00:33:03,880 --> 00:33:05,680
Speaker 1: afternoon up on the screen here from the the f

639
00:33:05,800 --> 00:33:08,360
Speaker 1: O m C and in its assessment of the economy

640
00:33:09,000 --> 00:33:13,440
Speaker 1: memories of who are so far from liberal arts? Yeah,

641
00:33:13,480 --> 00:33:16,840
Speaker 1: I've got it right here, bookmarked in Google. Anyways. Uh,

642
00:33:17,120 --> 00:33:20,240
Speaker 1: note that business fixed income rather business fixed investment household

643
00:33:20,240 --> 00:33:22,400
Speaker 1: spending is. What did you make of the FED sense

644
00:33:22,440 --> 00:33:25,600
Speaker 1: of how the economy is doing right now? And how

645
00:33:25,600 --> 00:33:28,480
Speaker 1: do you react to to to j Yellen's contention here

646
00:33:28,480 --> 00:33:32,200
Speaker 1: that we're seeing a transitory inflationary headwinds right now? Well,

647
00:33:32,240 --> 00:33:34,480
Speaker 1: I don't I think their their view on growth has

648
00:33:34,520 --> 00:33:38,200
Speaker 1: been fairly consistent, sort of solid, but unspectacular. No one's

649
00:33:38,200 --> 00:33:39,680
Speaker 1: going to be very impressed with the rates of growth

650
00:33:39,720 --> 00:33:41,960
Speaker 1: that we're seeing. I have taken issue for a while

651
00:33:42,000 --> 00:33:45,600
Speaker 1: with how they've characterized characterized inflation, and I was very

652
00:33:45,840 --> 00:33:48,200
Speaker 1: hardened to see that in her testimony she seemed to

653
00:33:48,240 --> 00:33:51,520
Speaker 1: acknowledge that what we're seeing isn't just transitory. On the

654
00:33:51,560 --> 00:33:53,200
Speaker 1: other hand, when I look at the statement, when I

655
00:33:53,200 --> 00:33:55,280
Speaker 1: look at that second paragraph, which which is the forward

656
00:33:55,320 --> 00:33:57,959
Speaker 1: looking statement, it doesn't seem like they've really changed their

657
00:33:58,200 --> 00:34:01,560
Speaker 1: inflation expectations very much. They still expect inflation to rise

658
00:34:01,600 --> 00:34:04,680
Speaker 1: to two percent over the medium term, and that tells

659
00:34:04,720 --> 00:34:07,840
Speaker 1: me that you're still going to see rate increases going forward.

660
00:34:07,920 --> 00:34:10,040
Speaker 1: Not in September, but I think in December. If you

661
00:34:10,080 --> 00:34:13,120
Speaker 1: have some improvement in the month over month inflation readings,

662
00:34:13,360 --> 00:34:16,240
Speaker 1: they will continue to raise rates. The committee, the Committee

663
00:34:16,239 --> 00:34:19,160
Speaker 1: continuing to monitor inflation developments. Is there more it could

664
00:34:19,200 --> 00:34:21,160
Speaker 1: be doing more? Indeed it should be doing when it

665
00:34:21,160 --> 00:34:25,240
Speaker 1: comes to inflation. Well, I am very concerned with inflation expectations. Um.

666
00:34:25,280 --> 00:34:27,279
Speaker 1: I think they have fallen. I think they've slipped from

667
00:34:27,320 --> 00:34:30,120
Speaker 1: the feds two percent objective, and that tells you that

668
00:34:30,160 --> 00:34:32,920
Speaker 1: it's going to be even harder to hit two percent inflation.

669
00:34:33,360 --> 00:34:35,440
Speaker 1: I think in this phase that I think they do

670
00:34:35,520 --> 00:34:37,920
Speaker 1: need to reevaluate their strategy bet and I would prefer

671
00:34:37,920 --> 00:34:40,040
Speaker 1: to see them hold off raising rates at all until

672
00:34:40,120 --> 00:34:43,320
Speaker 1: you see some firming in the inflation trend. Yet it

673
00:34:43,360 --> 00:34:44,759
Speaker 1: seems like that's not going to be the case. It

674
00:34:44,760 --> 00:34:48,560
Speaker 1: seems like they are in perpetual motion. They're they're moving forward.

675
00:34:49,560 --> 00:34:50,719
Speaker 1: What do you what do you make of that? Is

676
00:34:50,719 --> 00:34:53,280
Speaker 1: it a return to a more traditional, more formula monetary

677
00:34:53,719 --> 00:34:55,640
Speaker 1: policy they contend to be doing that, do you think

678
00:34:55,760 --> 00:34:57,920
Speaker 1: or or is there a chance you think that the

679
00:34:57,960 --> 00:34:59,880
Speaker 1: level of nuance you're describing could come back into the

680
00:35:00,040 --> 00:35:02,160
Speaker 1: into the equation. I think the best we can hope

681
00:35:02,200 --> 00:35:05,279
Speaker 1: for is tactically they delay another rate increase until next year.

682
00:35:05,400 --> 00:35:07,560
Speaker 1: I think in terms of changing strategy, that's very hard

683
00:35:07,600 --> 00:35:09,400
Speaker 1: to do. When you're in the midst or at the

684
00:35:09,400 --> 00:35:12,000
Speaker 1: start of a leadership transition at the FED, you have

685
00:35:12,040 --> 00:35:13,480
Speaker 1: to wait to see who the next chair will be,

686
00:35:13,560 --> 00:35:15,400
Speaker 1: you have to see who the new governors are, So

687
00:35:15,440 --> 00:35:18,000
Speaker 1: actually changing strategy I think would be very difficult for

688
00:35:18,239 --> 00:35:21,120
Speaker 1: for that reason. I mean, we get back to where

689
00:35:21,120 --> 00:35:24,080
Speaker 1: the animal spirit is a nominal GDP? I mean, what

690
00:35:24,840 --> 00:35:28,759
Speaker 1: in your head is the run rate now of real

691
00:35:28,840 --> 00:35:33,600
Speaker 1: g d P and real inflation? Add them together and

692
00:35:33,640 --> 00:35:36,279
Speaker 1: that's called animal spirit. What are the two numbers you

693
00:35:36,400 --> 00:35:40,600
Speaker 1: have so for for real GDP, I would probably say

694
00:35:40,640 --> 00:35:45,240
Speaker 1: trend growth is around one and a half maybe one.

695
00:35:46,040 --> 00:35:48,240
Speaker 1: Continue with the inflation number, and I want to circle

696
00:35:48,280 --> 00:35:50,719
Speaker 1: back to them. So the inflation number should be two

697
00:35:50,719 --> 00:35:53,000
Speaker 1: percent if we think that the fattest credible and meaning

698
00:35:53,040 --> 00:35:55,600
Speaker 1: their objective, But over the last five ten years, what

699
00:35:55,640 --> 00:35:58,880
Speaker 1: is inflation average? On the edge of George ker Law

700
00:35:59,000 --> 00:36:02,840
Speaker 1: and Robert Schiller, you're modeling nominal GDP under four percent

701
00:36:03,360 --> 00:36:06,920
Speaker 1: is a general statement. We've talked about the politics earlier.

702
00:36:07,280 --> 00:36:10,319
Speaker 1: What does that mean for our kids? I mean, I

703
00:36:10,360 --> 00:36:14,480
Speaker 1: don't understand how a sub two percent run rate on

704
00:36:14,560 --> 00:36:16,759
Speaker 1: real GDP folks, of all the people we talked to,

705
00:36:16,840 --> 00:36:21,799
Speaker 1: that's pretty gloomy. How societally we can continue with that?

706
00:36:22,040 --> 00:36:25,000
Speaker 1: I just don't get it. How does the machine work

707
00:36:25,400 --> 00:36:29,520
Speaker 1: with the oil running it is sub two percent real GDP? Right?

708
00:36:31,880 --> 00:36:34,760
Speaker 1: I think it means that we have to think about

709
00:36:34,760 --> 00:36:37,160
Speaker 1: our spending habits and are willingness to take on debt.

710
00:36:37,320 --> 00:36:39,320
Speaker 1: For example, which I think is still too high in

711
00:36:39,320 --> 00:36:41,880
Speaker 1: the consumer sector. But of course, once you start to

712
00:36:41,880 --> 00:36:43,680
Speaker 1: think in those terms, if everybody does that, that just

713
00:36:43,760 --> 00:36:46,200
Speaker 1: leads to lower gowth going forward. And I would suggest

714
00:36:46,280 --> 00:36:48,879
Speaker 1: David Gurrow that if we get a Stephen Freeman view

715
00:36:48,920 --> 00:36:52,279
Speaker 1: and we say Dr Freeman is wrong, and we end

716
00:36:52,360 --> 00:36:54,840
Speaker 1: up with two or even two point one percent real GDP,

717
00:36:55,040 --> 00:36:58,240
Speaker 1: that's still not acceptable to a huge body of people

718
00:36:59,160 --> 00:37:02,719
Speaker 1: that that's true. And still where's the fiscal program to

719
00:37:02,800 --> 00:37:05,520
Speaker 1: begin to nudge us away from your gloomy view. So

720
00:37:05,680 --> 00:37:07,680
Speaker 1: I think you do need tax reform. I think you

721
00:37:07,760 --> 00:37:12,520
Speaker 1: do need um desperate infrastructure development. And something that continues

722
00:37:12,560 --> 00:37:15,160
Speaker 1: to knock get enough attention is education. In this country,

723
00:37:15,440 --> 00:37:17,640
Speaker 1: we do not have the skilled labor force that we

724
00:37:17,680 --> 00:37:20,160
Speaker 1: should have, and I think there's a tremendous skills mismatch

725
00:37:20,360 --> 00:37:22,680
Speaker 1: in the labor market. The jobs are out there, there

726
00:37:22,680 --> 00:37:25,480
Speaker 1: a tremendous amount of job openings out there, uh, and

727
00:37:25,560 --> 00:37:28,960
Speaker 1: yet there's still um uh you know, they're the unemployment

728
00:37:29,040 --> 00:37:30,600
Speaker 1: rate actually is still fairly high for the level of

729
00:37:30,680 --> 00:37:32,600
Speaker 1: job of things that's going to happen, not at the

730
00:37:32,640 --> 00:37:34,520
Speaker 1: federal level, but at the state and local level. We

731
00:37:34,560 --> 00:37:36,720
Speaker 1: had a conversation with one of our columnists a couple

732
00:37:36,719 --> 00:37:39,440
Speaker 1: of days back about the Fox condecision to invest in Wisconsin,

733
00:37:39,480 --> 00:37:40,960
Speaker 1: and he said, part of that plan is for there

734
00:37:40,960 --> 00:37:43,480
Speaker 1: to be some sort of collaboration with the community college

735
00:37:43,480 --> 00:37:45,160
Speaker 1: in the area. We've seen this across the country, where

736
00:37:45,160 --> 00:37:46,759
Speaker 1: you have a company come in, build a facility, and

737
00:37:46,800 --> 00:37:49,840
Speaker 1: then probably endow some program, the goal of which is

738
00:37:49,880 --> 00:37:51,920
Speaker 1: to get graduates of that program to work in the

739
00:37:51,920 --> 00:37:53,879
Speaker 1: new facility. Is that where we're headed when it comes

740
00:37:53,920 --> 00:37:56,440
Speaker 1: to training an apprenticeship and getting people skilled up for

741
00:37:56,680 --> 00:37:58,440
Speaker 1: jobs that they can do. Is that where it's going

742
00:37:58,480 --> 00:38:00,400
Speaker 1: to happen. Is it going to be engineered at the

743
00:38:00,400 --> 00:38:02,239
Speaker 1: state or local level? I think it has to happen

744
00:38:02,640 --> 00:38:05,280
Speaker 1: at a number of and what what you're describing isternally

745
00:38:05,320 --> 00:38:08,280
Speaker 1: a very positive development, those types of partnerships between businesses

746
00:38:08,320 --> 00:38:11,080
Speaker 1: and the local community. I do think though, when it

747
00:38:11,080 --> 00:38:13,920
Speaker 1: comes to the education system broadly, I think we've been

748
00:38:14,000 --> 00:38:17,120
Speaker 1: under investing in education broadly for years, and I think

749
00:38:17,120 --> 00:38:18,560
Speaker 1: that has to change if you want to have a

750
00:38:18,560 --> 00:38:22,560
Speaker 1: competitive workforce. Stephen Friedman, thank you so much. Really time,

751
00:38:22,600 --> 00:38:37,759
Speaker 1: I've got to get your back and he is the

752
00:38:37,800 --> 00:38:41,399
Speaker 1: real deal. And then the university of Texas, Austin. There's

753
00:38:41,400 --> 00:38:44,319
Speaker 1: a lot of people pretending to be from Austin. Lloyd

754
00:38:44,360 --> 00:38:46,840
Speaker 1: Doggett has been in every bar in Austin. He joins us.

755
00:38:46,920 --> 00:38:52,160
Speaker 1: Now he is the congressman from I guess I would say, folks,

756
00:38:52,160 --> 00:38:56,400
Speaker 1: not to bore anybody the uh, let's call it the

757
00:38:57,040 --> 00:39:02,360
Speaker 1: district of Texas. But Lloyd Dougett, what I would really say,

758
00:39:02,520 --> 00:39:06,160
Speaker 1: Taking off Chris Ingram's wonderful article in the Washington Post,

759
00:39:06,520 --> 00:39:09,560
Speaker 1: You're from the Elephant District. You are in one of

760
00:39:09,600 --> 00:39:15,200
Speaker 1: the most jerrymander districts in America. You are living jerrymandering.

761
00:39:15,920 --> 00:39:19,080
Speaker 1: What do we need to do in this nation about jerrymandering?

762
00:39:19,480 --> 00:39:23,960
Speaker 1: A wise one. Well, I also have the good fortune

763
00:39:23,960 --> 00:39:27,080
Speaker 1: of representing the Alamo and all of downtown sant Atonio

764
00:39:27,600 --> 00:39:30,640
Speaker 1: when people when people ask me about where I live,

765
00:39:30,719 --> 00:39:34,200
Speaker 1: I usually say I thirty five, which connects Austin and

766
00:39:34,280 --> 00:39:38,640
Speaker 1: San Antonio. I believe I'm the, uh, the only member

767
00:39:38,640 --> 00:39:42,480
Speaker 1: of Congress to have served under three different number districts.

768
00:39:42,480 --> 00:39:46,720
Speaker 1: So getting a chance, uh, courtesy of the Saint Republican leadership,

769
00:39:46,800 --> 00:39:48,880
Speaker 1: to meet a lot of great people in Texas, just

770
00:39:49,040 --> 00:39:51,680
Speaker 1: not all at the same time. Let me introduce David Gura,

771
00:39:51,760 --> 00:39:55,759
Speaker 1: who will be wiser great to have you with us

772
00:39:55,760 --> 00:39:58,760
Speaker 1: here on our fond sponsored by Spectrum Enterprise, your nationwide

773
00:39:58,760 --> 00:40:02,360
Speaker 1: provider of scalable fiberne work services and managed cloud solutions.

774
00:40:02,400 --> 00:40:04,719
Speaker 1: We got this joint statement yesterday from the White House

775
00:40:04,719 --> 00:40:08,040
Speaker 1: and Republican leadership on Capitol Hill about tax reform. In

776
00:40:08,040 --> 00:40:11,200
Speaker 1: the last paragraph of that statement, there's this line, as

777
00:40:11,239 --> 00:40:13,719
Speaker 1: the committees work towards this end, our hope is that

778
00:40:13,760 --> 00:40:15,480
Speaker 1: our friends on the other side of the aisle will

779
00:40:15,480 --> 00:40:19,640
Speaker 1: participate in this effort. Is there any appetite among Democrats

780
00:40:19,719 --> 00:40:23,919
Speaker 1: to engage with the process of tax reform at this point, Well,

781
00:40:24,000 --> 00:40:27,000
Speaker 1: it's a great appetite to participate. There's just not been

782
00:40:27,080 --> 00:40:30,200
Speaker 1: bunch opportunity. I mean, really, isn't an amazing that not

783
00:40:30,320 --> 00:40:34,880
Speaker 1: only Democrats but members of the business community across America.

784
00:40:35,719 --> 00:40:41,440
Speaker 1: Thirteen months after Paul Ryan announced the Great Republican tax Blueprint,

785
00:40:42,040 --> 00:40:45,839
Speaker 1: we have a three page press release containing only one

786
00:40:45,920 --> 00:40:50,520
Speaker 1: specific that they're abandoning their ill advised border adjustment tax

787
00:40:51,120 --> 00:40:54,840
Speaker 1: and really, you know, giving us less detail than President

788
00:40:54,840 --> 00:40:58,520
Speaker 1: Trump did in his one page summary of his tax

789
00:40:58,520 --> 00:41:01,880
Speaker 1: plan back in in April. We we look at the

790
00:41:01,960 --> 00:41:04,359
Speaker 1: dysfunction you could call it on Capitol Hill. Generally, give

791
00:41:04,400 --> 00:41:06,920
Speaker 1: us a sense of what what things are like on

792
00:41:06,960 --> 00:41:08,839
Speaker 1: the House Ways and Means Committee. You sit there, you're

793
00:41:08,880 --> 00:41:11,719
Speaker 1: the ranking member of the Subcommittee on Tax Policy within

794
00:41:11,840 --> 00:41:14,440
Speaker 1: that that committee. How much comedy is there among you

795
00:41:14,440 --> 00:41:17,280
Speaker 1: and your Republican colleagues when it comes to issues like

796
00:41:17,280 --> 00:41:20,120
Speaker 1: like taxes on the committee? Well, I think we have

797
00:41:20,200 --> 00:41:24,840
Speaker 1: a good professional relationship with the respect of one another.

798
00:41:25,239 --> 00:41:29,279
Speaker 1: Sometimes we can get together, often we cannot. But we've

799
00:41:29,320 --> 00:41:34,879
Speaker 1: gone almost a year without a single hearing without a

800
00:41:34,920 --> 00:41:39,960
Speaker 1: single person from the administration, are a tax expert or

801
00:41:40,000 --> 00:41:42,480
Speaker 1: a business that might be impacted by some of the

802
00:41:42,560 --> 00:41:45,319
Speaker 1: fine print of what we think this proposal might be

803
00:41:45,920 --> 00:41:49,840
Speaker 1: coming forward to explain it. We finally got the first

804
00:41:50,000 --> 00:41:55,719
Speaker 1: public hearings. We have had exactly one hearing on small business,

805
00:41:55,760 --> 00:42:00,600
Speaker 1: exactly one hearing on individual tax changes, where something as

806
00:42:00,680 --> 00:42:04,640
Speaker 1: complex and far reaching as our retirement system got one

807
00:42:04,680 --> 00:42:09,080
Speaker 1: witness for over a year. Uh. These uh far reaching

808
00:42:09,400 --> 00:42:14,040
Speaker 1: after thirty years attempt to get comprehensive tax reform. They

809
00:42:14,160 --> 00:42:19,840
Speaker 1: deserve thorough consideration because the impact of proposals like ending

810
00:42:20,000 --> 00:42:26,799
Speaker 1: automatic are like having automatic expensing, but eliminating interest deductions.

811
00:42:27,239 --> 00:42:30,200
Speaker 1: The impact of a proposal like that on different parts

812
00:42:30,200 --> 00:42:34,760
Speaker 1: of the American economy is far reaching, and every business

813
00:42:34,760 --> 00:42:39,040
Speaker 1: group deserves an opportunity, along with public interest groups and others,

814
00:42:39,440 --> 00:42:41,719
Speaker 1: to have us say and to see what's going on.

815
00:42:42,239 --> 00:42:46,440
Speaker 1: Not to approach this like the failed health care tax

816
00:42:46,480 --> 00:42:50,320
Speaker 1: cuts by keeping everything under lock and key and even

817
00:42:50,360 --> 00:42:53,799
Speaker 1: excluding not only Democrats but many Republicans from being able

818
00:42:53,880 --> 00:42:56,560
Speaker 1: to see what is going to happen. If you were

819
00:42:56,600 --> 00:42:59,720
Speaker 1: to have a drink with your colleague from Texas Congressman Brady,

820
00:43:00,040 --> 00:43:03,160
Speaker 1: one of those bars that Tom King just mentioned halves

821
00:43:03,239 --> 00:43:05,840
Speaker 1: up in the wood lends up where where Mr Brady

822
00:43:06,160 --> 00:43:08,319
Speaker 1: is from. What would you to to talk about? What's

823
00:43:08,360 --> 00:43:10,200
Speaker 1: your sense of the way Congress is working? Is there

824
00:43:10,200 --> 00:43:13,879
Speaker 1: a way forward to improve the relationship between colleagues like you? Well,

825
00:43:13,920 --> 00:43:17,200
Speaker 1: I've known Chairman Brady a long time, and certainly we

826
00:43:17,239 --> 00:43:20,200
Speaker 1: could sit down and talk about this. I think that

827
00:43:20,400 --> 00:43:22,840
Speaker 1: you know what I would be talking about is first

828
00:43:23,480 --> 00:43:27,839
Speaker 1: areas of apparent agreement. I would think it is so

829
00:43:27,920 --> 00:43:32,040
Speaker 1: important that we not burden any business or individual with

830
00:43:32,160 --> 00:43:35,680
Speaker 1: additional federal debt. With barring from the Saudiast and the

831
00:43:35,760 --> 00:43:40,600
Speaker 1: Chinese or whoever to finance tax breaks. And he has

832
00:43:40,640 --> 00:43:45,400
Speaker 1: said that's the approach that his plan will take. Uh.

833
00:43:45,440 --> 00:43:50,320
Speaker 1: That plan relied on this trillion dollars of revenue from

834
00:43:50,360 --> 00:43:54,400
Speaker 1: a border adjustment tax to raise the cost of everything

835
00:43:54,440 --> 00:43:58,279
Speaker 1: coming in the country. Uh. And now they that's the

836
00:43:58,320 --> 00:44:01,799
Speaker 1: one specific we got yesterday. Is there abandoning that? And

837
00:44:01,880 --> 00:44:04,160
Speaker 1: so what I would like to know is if we're

838
00:44:04,239 --> 00:44:07,880
Speaker 1: to maintain our shared view are apparently shared view of

839
00:44:08,000 --> 00:44:12,040
Speaker 1: no new debt, what specifics will there be to make

840
00:44:12,120 --> 00:44:15,279
Speaker 1: up that trillion dollar void? Lloyd Dogget, you know the

841
00:44:15,320 --> 00:44:17,279
Speaker 1: Broken Spoke. I don't even know if you've danced there,

842
00:44:17,280 --> 00:44:22,400
Speaker 1: and it is iconic. I'm going to suggest we do

843
00:44:22,480 --> 00:44:24,880
Speaker 1: the Texas to stuff. I'll bet you did. I would say,

844
00:44:25,000 --> 00:44:27,759
Speaker 1: just a lot of the Broken Spoke crew voted for

845
00:44:27,920 --> 00:44:32,520
Speaker 1: Mr Trump. Is their support wavering? Not so many in Austin,

846
00:44:32,600 --> 00:44:34,400
Speaker 1: but some of our neighbors who come in from the

847
00:44:34,400 --> 00:44:38,480
Speaker 1: surrounding area to enjoy a good time. Is their support wavering?

848
00:44:38,840 --> 00:44:41,719
Speaker 1: Is the Broken Spoke crew? Is their support wavering for

849
00:44:41,760 --> 00:44:45,359
Speaker 1: the president? I think it's very mixed. There's still many

850
00:44:45,840 --> 00:44:49,560
Speaker 1: people there who want to give him additional opportunity, but

851
00:44:49,920 --> 00:44:55,480
Speaker 1: it does really defy one's ability to understand it when

852
00:44:55,640 --> 00:45:00,520
Speaker 1: day after day, crisis after crisis, and this latest episode

853
00:45:00,560 --> 00:45:15,879
Speaker 1: that Lloyd dougat, thank you so much. There was episode one,

854
00:45:16,320 --> 00:45:19,920
Speaker 1: two and three, and it quickly dawned upon all of

855
00:45:19,960 --> 00:45:23,799
Speaker 1: us that for Global Wall Street, the David Rubinstein Show,

856
00:45:23,800 --> 00:45:28,080
Speaker 1: which doesn't even capture peer to peer conversations, was must watch,

857
00:45:28,280 --> 00:45:32,880
Speaker 1: must listen for all of Global Wall Street. The conversations

858
00:45:33,000 --> 00:45:36,920
Speaker 1: are fabulous between Mr Rubinstein and Carlisle Group and whoever

859
00:45:36,960 --> 00:45:40,359
Speaker 1: the guests may be. UM. This week's episode is really

860
00:45:40,400 --> 00:45:43,920
Speaker 1: cool because we have Chicago Law talking to Harvard Law.

861
00:45:44,080 --> 00:45:48,640
Speaker 1: Let us listen is David Rubinstein talks from Elliott Management

862
00:45:48,680 --> 00:45:53,279
Speaker 1: to the wonderful Paul Singer. Here's David Rubinstein. So how

863
00:45:53,280 --> 00:45:55,080
Speaker 1: do you see the economy right now? Are you worried

864
00:45:55,080 --> 00:45:57,560
Speaker 1: about the economy. I'm very concerned about where we are

865
00:45:58,600 --> 00:46:01,960
Speaker 1: in terms of the financial system, the economy, the American economy,

866
00:46:02,000 --> 00:46:06,200
Speaker 1: global economy. After nine years of what I consider to

867
00:46:06,200 --> 00:46:11,360
Speaker 1: be distorted, a distorted set of policies UM completely oriented

868
00:46:11,400 --> 00:46:15,560
Speaker 1: towards UM what I regard as monetary extremism, combined with

869
00:46:15,680 --> 00:46:21,560
Speaker 1: what I considered to be growth suppressive fiscal policies, regulatory, UM,

870
00:46:21,960 --> 00:46:26,040
Speaker 1: tax UM, and so I think it's created a distorted

871
00:46:26,440 --> 00:46:33,080
Speaker 1: recovery has been partially responsible for this, this augmentation, exacerbation

872
00:46:33,160 --> 00:46:39,640
Speaker 1: of um UH inequality that's caused a combination of that

873
00:46:40,280 --> 00:46:45,120
Speaker 1: and the incomplete recovery UM has caused this middle class

874
00:46:45,920 --> 00:46:51,080
Speaker 1: um UH stress and edginess around the world, which has

875
00:46:51,560 --> 00:46:56,120
Speaker 1: led to some political you know, fringe parties and fringe thoughts,

876
00:46:56,320 --> 00:47:00,520
Speaker 1: populism and so UM. After nine years of this official

877
00:47:01,239 --> 00:47:06,160
Speaker 1: UM levitation on the part of UM, financial assets, high

878
00:47:06,280 --> 00:47:09,600
Speaker 1: end real estate, art, the things that rich people by,

879
00:47:10,280 --> 00:47:14,280
Speaker 1: what we have today is a a global financial system

880
00:47:14,360 --> 00:47:18,120
Speaker 1: that's just about is leveraged and in many cases more

881
00:47:18,280 --> 00:47:22,080
Speaker 1: leveraged than before two thousand and eight, and so UM

882
00:47:22,120 --> 00:47:25,080
Speaker 1: and I don't think the financial system is more sound,

883
00:47:25,160 --> 00:47:27,880
Speaker 1: and I don't think that the fixes that have been

884
00:47:27,880 --> 00:47:33,080
Speaker 1: put into place have actually UM created a sound financial system.

885
00:47:33,160 --> 00:47:38,640
Speaker 1: So I don't believe that confidence is justified in policy

886
00:47:38,719 --> 00:47:42,640
Speaker 1: makers and in central bankers UM and the fact that

887
00:47:42,719 --> 00:47:49,319
Speaker 1: confidence has not been lost up to now UM is

888
00:47:48,520 --> 00:47:53,239
Speaker 1: is obvious. But if and when confidence is lost, I

889
00:47:53,280 --> 00:47:56,120
Speaker 1: think it could be lost in a very abrupt fashion,

890
00:47:56,719 --> 00:48:01,759
Speaker 1: causing UM conceivably a ruckus in the bond market, stock markets,

891
00:48:02,000 --> 00:48:07,600
Speaker 1: um UH and in financial Institute. Paul Singer window into

892
00:48:07,880 --> 00:48:10,719
Speaker 1: his conversation with David Rubinstein and joining us down Mr

893
00:48:10,760 --> 00:48:15,000
Speaker 1: Rubinstein with the celebration of peer to peer conversations. David,

894
00:48:15,040 --> 00:48:17,360
Speaker 1: First of all, are you having fun doing this? Is

895
00:48:17,400 --> 00:48:19,400
Speaker 1: it a chore now to be a rock star and

896
00:48:19,480 --> 00:48:23,120
Speaker 1: to do to do a TV and radio show? Hardly

897
00:48:23,160 --> 00:48:25,799
Speaker 1: a rock star, but it's it's pleasurable. UM. I do

898
00:48:25,960 --> 00:48:28,920
Speaker 1: enjoy talking to people that I have known for a while.

899
00:48:29,320 --> 00:48:31,680
Speaker 1: Almost all of these are individuals that I have either

900
00:48:31,719 --> 00:48:34,800
Speaker 1: talked to extensively, have done some business with, or or

901
00:48:34,840 --> 00:48:37,880
Speaker 1: have interviewed before. So it's a, you know, a friendly

902
00:48:37,920 --> 00:48:41,120
Speaker 1: kind of conversation. And UH with Paul Singer, I uh,

903
00:48:41,360 --> 00:48:43,239
Speaker 1: I was surprised by some of the things he said,

904
00:48:43,239 --> 00:48:46,319
Speaker 1: but I think they're very good. Cautionary notes there, cautionary notes.

905
00:48:46,360 --> 00:48:48,200
Speaker 1: He's a member of the Republican Party. Is he a

906
00:48:48,200 --> 00:48:52,640
Speaker 1: supporter of Mr? Trump? I asked him that, and he

907
00:48:52,719 --> 00:48:55,399
Speaker 1: did say that he voted for him, but beyond that,

908
00:48:55,440 --> 00:48:57,480
Speaker 1: he didn't really say that he was close to him.

909
00:48:57,480 --> 00:48:59,440
Speaker 1: He did say that he had met him at the

910
00:48:59,440 --> 00:49:01,359
Speaker 1: White House. He have been invited down, I guess once

911
00:49:01,480 --> 00:49:04,160
Speaker 1: one occasion, but he was fairly clear that he did

912
00:49:04,200 --> 00:49:08,560
Speaker 1: not actively support President Trump. Tom mentioned a moment ago.

913
00:49:08,600 --> 00:49:11,080
Speaker 1: You're both graduates of law school, and there's a point

914
00:49:11,080 --> 00:49:12,760
Speaker 1: in the interview where you asked him about the decision

915
00:49:12,800 --> 00:49:14,680
Speaker 1: that he made, not unlike the decision that you made

916
00:49:14,680 --> 00:49:17,799
Speaker 1: to leave practicing law to get into business. What did

917
00:49:17,800 --> 00:49:20,160
Speaker 1: you have to say about that and share a bit

918
00:49:20,160 --> 00:49:22,279
Speaker 1: about your personal experience as well, the decision to make

919
00:49:22,360 --> 00:49:25,879
Speaker 1: that move and what prompted you to do it. Well,

920
00:49:25,920 --> 00:49:27,719
Speaker 1: he may have been a better lawyer than I was.

921
00:49:27,880 --> 00:49:30,640
Speaker 1: I was a lawyer who practiced twice once in New

922
00:49:30,680 --> 00:49:32,839
Speaker 1: York and Washington. Was clear and my clients didn't think

923
00:49:32,880 --> 00:49:35,280
Speaker 1: I was so wonderful, and was clear that my colleagues

924
00:49:35,280 --> 00:49:37,160
Speaker 1: didn't think I was so good. So I had the

925
00:49:37,160 --> 00:49:39,799
Speaker 1: advantage of being Peter principaled as a lawyer. You know,

926
00:49:39,840 --> 00:49:42,240
Speaker 1: if I was a great lawyer, i'd be practicing law today.

927
00:49:42,280 --> 00:49:44,480
Speaker 1: I think I'd be less happy than I am today.

928
00:49:44,600 --> 00:49:47,040
Speaker 1: But lawyering is something that some people have a skill for.

929
00:49:47,239 --> 00:49:49,440
Speaker 1: I don't think I did. I think Paul felt he

930
00:49:49,560 --> 00:49:51,440
Speaker 1: had better things he could do, and I think he

931
00:49:51,480 --> 00:49:53,960
Speaker 1: was very happy that he he left the practice of law.

932
00:49:54,280 --> 00:49:57,719
Speaker 1: If you would speak to the stubbornness, the doggedness of

933
00:49:57,840 --> 00:49:59,840
Speaker 1: Paul Singer. We think of the role that he played

934
00:49:59,880 --> 00:50:04,040
Speaker 1: with regard to Argentine debt, the forcefulness with which he

935
00:50:04,080 --> 00:50:07,160
Speaker 1: deals with companies and whom with whom he invests give

936
00:50:07,239 --> 00:50:09,719
Speaker 1: us a sense of what he's like as a negotiator,

937
00:50:09,760 --> 00:50:13,279
Speaker 1: what he's like as an investor. People have a sense

938
00:50:13,320 --> 00:50:16,240
Speaker 1: that hedge fund investors are people who make a decision

939
00:50:16,360 --> 00:50:18,399
Speaker 1: one hour and then they reverse it an hour later,

940
00:50:18,480 --> 00:50:21,839
Speaker 1: or they trade out. He's a very dogged person, as

941
00:50:21,840 --> 00:50:25,600
Speaker 1: you suggest. He bought Argentine bonds probably fifteen years before

942
00:50:25,600 --> 00:50:27,920
Speaker 1: he actually sold them, and he held on to them

943
00:50:27,960 --> 00:50:30,320
Speaker 1: for through many many years when there was no movement

944
00:50:30,320 --> 00:50:33,399
Speaker 1: in the bonds at all. So he's a very determined person.

945
00:50:33,440 --> 00:50:35,880
Speaker 1: He's willing to hold on the positions for many, many years.

946
00:50:36,360 --> 00:50:38,920
Speaker 1: And he pointed out that he started his firm in

947
00:50:39,000 --> 00:50:42,200
Speaker 1: nineteen seventy seven with one point three million dollars. It's

948
00:50:42,239 --> 00:50:46,840
Speaker 1: compounded th net for over forty years, which is incredible

949
00:50:46,840 --> 00:50:49,840
Speaker 1: record for over forty year period of time. So I

950
00:50:49,840 --> 00:50:51,839
Speaker 1: I think he's obviously a person who has a longer

951
00:50:51,920 --> 00:50:54,400
Speaker 1: term perspective, and I think he's a person who was

952
00:50:54,640 --> 00:50:58,239
Speaker 1: the tip, not the typical perhaps hedge fund person who

953
00:50:58,280 --> 00:51:00,879
Speaker 1: has seen right there wrongly is trading in and out

954
00:51:00,880 --> 00:51:03,400
Speaker 1: of things very quickly. He tends not to do that. David,

955
00:51:03,719 --> 00:51:07,600
Speaker 1: You've got immense experience with the character and quality of

956
00:51:07,640 --> 00:51:11,920
Speaker 1: each and individual chief executive officers. Can a chief executive

957
00:51:11,960 --> 00:51:15,440
Speaker 1: officer from a big, fancy company, can they run something

958
00:51:15,719 --> 00:51:18,600
Speaker 1: entrepreneurial like Uber? That seems to be the topic of

959
00:51:18,640 --> 00:51:22,360
Speaker 1: the morning. Miss Whitman steps aside. Mr m l is vetted.

960
00:51:22,360 --> 00:51:24,960
Speaker 1: Maybe David Rubinstein is gonna run Uber? If you want

961
00:51:24,960 --> 00:51:28,360
Speaker 1: to make news this morning, let me know. Can a

962
00:51:28,440 --> 00:51:32,320
Speaker 1: corporate guy shift over to the entrepreneurial ballet and dress

963
00:51:32,440 --> 00:51:36,600
Speaker 1: of running Uber? Clearly there are different skill sets. Running

964
00:51:36,680 --> 00:51:39,840
Speaker 1: a large industrial conglomerate is different than running a startup.

965
00:51:39,880 --> 00:51:42,720
Speaker 1: On the other hand, uh Huber is hardly a startup

966
00:51:42,719 --> 00:51:44,680
Speaker 1: at this point. Jeff m L. I don't know if

967
00:51:44,680 --> 00:51:46,120
Speaker 1: he's going to take this job orre he has been

968
00:51:46,160 --> 00:51:49,279
Speaker 1: offered it, but he's clearly a very talented executive and

969
00:51:49,360 --> 00:51:52,279
Speaker 1: he did many good things at at GE. But I

970
00:51:52,320 --> 00:51:56,120
Speaker 1: believe that generally people who are running good fortune fifty

971
00:51:56,200 --> 00:51:59,799
Speaker 1: companies may not be the ideal people to run um

972
00:52:00,040 --> 00:52:02,120
Speaker 1: entrepreneurial companies. On the other hand, there are some cases

973
00:52:02,120 --> 00:52:04,359
Speaker 1: where that might work, and Jeff might be a good

974
00:52:04,360 --> 00:52:06,279
Speaker 1: example of the cop kind of person who could do that.

975
00:52:06,719 --> 00:52:09,000
Speaker 1: David Tom asked you if if Mr Singer is a

976
00:52:09,000 --> 00:52:10,880
Speaker 1: Trump supported let me just ask you about his his

977
00:52:10,960 --> 00:52:14,680
Speaker 1: politics more generally, He's invested a lot, yes, in candidates campaigns,

978
00:52:14,680 --> 00:52:17,440
Speaker 1: but also in certain social issues, and I wonder if

979
00:52:17,440 --> 00:52:18,960
Speaker 1: you could speak to that, but also just to a

980
00:52:18,960 --> 00:52:21,680
Speaker 1: trend that we've seen in recent months, certainly a lot

981
00:52:21,680 --> 00:52:24,440
Speaker 1: of executives, particularly in Silicon Valley, speaking out more on

982
00:52:24,960 --> 00:52:27,799
Speaker 1: social issues. Do you sense there's a trend there that

983
00:52:28,000 --> 00:52:32,480
Speaker 1: executives are more willing to put themselves out there. Yes,

984
00:52:32,560 --> 00:52:34,680
Speaker 1: I do. I think. Uh, Look, when you have a

985
00:52:34,680 --> 00:52:37,640
Speaker 1: great deal of money, and you have bought the various

986
00:52:38,120 --> 00:52:40,680
Speaker 1: physical material things you might want, you might say, I

987
00:52:40,719 --> 00:52:42,520
Speaker 1: want to do something else with my life. I want

988
00:52:42,520 --> 00:52:44,480
Speaker 1: to actually make a difference. And I can make a

989
00:52:44,480 --> 00:52:46,719
Speaker 1: difference in the political realm, or the governmental realm, or

990
00:52:46,719 --> 00:52:49,160
Speaker 1: the public realm. And and so Paul Singer is one

991
00:52:49,200 --> 00:52:51,640
Speaker 1: of those individuals. He's been very involved, as you said,

992
00:52:51,640 --> 00:52:55,240
Speaker 1: in the interview on marriage equality um as he pointed

993
00:52:55,239 --> 00:52:58,120
Speaker 1: out his youngest son told him when the youngest son

994
00:52:58,160 --> 00:53:00,960
Speaker 1: which twenty one, that he was gay, and and Paul

995
00:53:01,280 --> 00:53:05,239
Speaker 1: got very involved, first anonymously but later publicly in trying

996
00:53:05,280 --> 00:53:08,080
Speaker 1: to support marriage equality. I think he feels he's made

997
00:53:08,080 --> 00:53:10,400
Speaker 1: a real difference in that area. He obviously has, so.

998
00:53:10,440 --> 00:53:12,560
Speaker 1: I think many people who once they have money do

999
00:53:12,719 --> 00:53:16,120
Speaker 1: feel that there's more to money than just accumulating assets.

1000
00:53:16,120 --> 00:53:18,000
Speaker 1: There's some things you can do to change the world

1001
00:53:18,000 --> 00:53:19,720
Speaker 1: for the better, and I think Paul is an example

1002
00:53:19,760 --> 00:53:21,840
Speaker 1: of that. David Rubinstein, thank you so much. It is

1003
00:53:21,880 --> 00:53:24,680
Speaker 1: peer to peer conversations. The David Rubinstein Show, peer to

1004
00:53:24,680 --> 00:53:28,359
Speaker 1: peer conversations. I can't say enough about the extent of it,

1005
00:53:28,440 --> 00:53:32,680
Speaker 1: in the differentness of it compared to most media. On

1006
00:53:32,760 --> 00:53:37,960
Speaker 1: Bloomberg Television Wednesday, nine pm, globally rearring over the weekend,

1007
00:53:38,080 --> 00:53:43,280
Speaker 1: Bloomberg Radio Friday tonight, five pm, rearing throughout the weekend

1008
00:53:43,719 --> 00:53:47,040
Speaker 1: as well. We thank David Rubinstein for being with us.

1009
00:53:47,400 --> 00:53:58,200
Speaker 1: Is great. Thanks for listening to the Bloomberg Surveillance podcast.

1010
00:53:58,560 --> 00:54:02,560
Speaker 1: Subscribe and Liz us in two interviews on iTunes, SoundCloud

1011
00:54:02,960 --> 00:54:07,200
Speaker 1: or whichever podcast platform you prefer. I'm out on Twitter

1012
00:54:07,280 --> 00:54:11,080
Speaker 1: at Tom Keene. David Gura is at David Gura. Before

1013
00:54:11,120 --> 00:54:15,120
Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg

1014
00:54:15,200 --> 00:54:30,920
Speaker 1: Radio runt You by Bank of America Mary Lynch. With

1015
00:54:31,040 --> 00:54:36,440
Speaker 1: virtual reality, virtually everything will change. Discover opportunities in a

1016
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Speaker 1: transforming world. VI of a mL dot Com slash VR,

1017
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Speaker 1: Mary Lynch, Pierced Fenner and Smith Incorporated