Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and a Marie Hortenn. Join us each
Speaker 2: day for insight from the best in markets, economics, and
Speaker 2: geopolitics from our global headquarters in New York City. We
Speaker 2: are live on Bloomberg Television weekday mornings from six to
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify
Speaker 2: or anywhere else you listen, and as always on the
Speaker 2: Bloomberg Terminal and the Bloomberg Business App.
Speaker 3: We have the wonderful lineup of guests today, starting with
Speaker 3: the very own CEO of the Royal Bank of Canada,
Speaker 3: Dave Mackay, who joins us here.
Speaker 1: Dave, wonderful to see you. Thank you for being with us.
Speaker 4: It's great to be back.
Speaker 5: It's amazing at youears gone by already.
Speaker 3: Right, I mean, what's your impression so far of this jobos?
Speaker 3: It feels very different than previous ones.
Speaker 5: It's more intense. There's more leaders here than I think
Speaker 5: there's ever been. Over eight hundred and fifty CEOs, four
Speaker 5: hundred ministers, sixty five heads of state, so there's been
Speaker 5: a lot of dialogue already in the first kind of
Speaker 5: forty eight hours, a lot of joint business government leader dialogue,
Speaker 5: a run investment to your point, looking at making deals,
Speaker 5: looking at co investment, every country, looking at diversifying trade,
Speaker 5: bringing business leaders with them to talk about co investment
Speaker 5: or whether it's manufacturing investment, defense spend in Europe and Canada's
Speaker 5: going up, a lot of discussions about how do we
Speaker 5: spend eighty billion dollars in Canada on defense? You know
Speaker 5: what partners are we looking at?
Speaker 4: How do we use that.
Speaker 5: Defense spending lever to attract manufacturing investment, in automotive energy investment.
Speaker 5: So there's a lot of grand bargain discussions going on
Speaker 5: with business leaders with and haven't seen that before, and
Speaker 5: so it's different. It feels different. It's transactional to you said,
Speaker 5: but it's exciting. At the same time, there's opportunity here.
Speaker 3: Well you're talking about the excitement, and yet you are
Speaker 3: Royal Bank of Canada. You are expanding in the United States,
Speaker 3: and right now there is a breakdown in the relationship
Speaker 3: between these two trees.
Speaker 1: How problematic is that for you at.
Speaker 3: A time where you have been expanding in the United
Speaker 3: States and you do see flows at least in travel
Speaker 3: going me other direction a little bit.
Speaker 5: No, I think we're in this temporary world where we're
Speaker 5: trying to figure out how we're going to trade going forward.
Speaker 5: But I come back to the core of USMCA. Canada
Speaker 5: really helps America with affordability. We make things in Canadian dollars,
Speaker 5: we sell it to the US. The US buy is
Speaker 5: it that a thirty percent discount, but it's automotive parts,
Speaker 5: whether it's steel, aluminum, food, and a lot of our
Speaker 5: Canolagos the United States, and therefore we help keep prices
Speaker 5: down in the US. And if the US were to
Speaker 5: bring all of that back, it's inflationary, you shortage of
Speaker 5: labor in the United States. So as you look at
Speaker 5: the core of USMCA, it's good for America, and I
Speaker 5: think that gives me comfort that we will come to
Speaker 5: an arrangement going forward recognizing this is good for America.
Speaker 5: It's good for Canada obviously, but it's good for America
Speaker 5: and that's important to the President. There will be change,
Speaker 5: I don't think it will be the same agreement going forward,
Speaker 5: but the core of it, I think is so important
Speaker 5: to both sides, and that gives me comfort that we
Speaker 5: will continue to trade Canada, and you heard our Prime
Speaker 5: minister's message. I'm sure we'll talk about that has to
Speaker 5: diversified trade. I think we've relied on trade to the
Speaker 5: US substantially a big part of our economy. And I
Speaker 5: think that the conversations that are happening before Davos after Davos.
Speaker 5: In Davos are very much about here's what we're good at.
Speaker 5: Can we find a grand bargain deal. Can we expand
Speaker 5: trade across multiple countries where that's Europe, A lot of
Speaker 5: discussion with South Asia and Asia, and a lot of
Speaker 5: discussion with the Middle East, and investing in Canada. And
Speaker 5: what's different about Davos this year? Honestly, Lisa, it's risk
Speaker 5: on Canada.
Speaker 1: Let's talk about the Prime minister speech.
Speaker 6: The sharpest tone I've ever heard from Mark Carney about
Speaker 6: Donald Trump without mentioning Trump's name, He's talking about a
Speaker 6: new world order, saying these middle countries, if you're at
Speaker 6: the table prepared to get eaten. Does that make it
Speaker 6: harder when you're talking about things like watching the USMCA
Speaker 6: trade deal. Do you think that the relationship is going
Speaker 6: to become more challenging in Canada and the United States.
Speaker 5: I think relationships are about value exchange, and if there's
Speaker 5: good value exchange and you both see a benefit to that,
Speaker 5: then you're going to find the right place. So when
Speaker 5: just as I said, there's great value exchange, four hundred
Speaker 5: billion dollars go back and forth across the border every
Speaker 5: year because there's value. We're the number one trade relationship
Speaker 5: with thirty six states. Most of those are red states
Speaker 5: at the end of the day, So when we think
Speaker 5: about the importance of that relationship just beyond a federal
Speaker 5: level into the state level, it's really important. So I
Speaker 5: think you come back and you say it's good for America,
Speaker 5: it's good for Canada. That's the basis for exchange of
Speaker 5: value and going forward. Having said that, I think the
Speaker 5: Prime Minister is very clear that we haven't done our
Speaker 5: role in defending ourselves. We haven't invested enough of our
Speaker 5: GDP in defense, and you've seen that commitment to spend
Speaker 5: that money.
Speaker 4: We have to do that.
Speaker 5: We have to increasingly defend ourselves and are not just
Speaker 5: our economic security, it's our physical security.
Speaker 4: We have to play a bigger role.
Speaker 5: We have to defend the Arctic and we have to
Speaker 5: invest in the Arctic, and it's a big part of
Speaker 5: the commitment we've made to NATO and we've made to
Speaker 5: the United States that you'll see a greater investment from Canada.
Speaker 5: And we have to have dual use investments, not just military,
Speaker 5: but commercial and economic investments in the Arctic in Canada
Speaker 5: should play a role in doing that. So you're seeing
Speaker 5: that a big part of his speech yesterday. And we
Speaker 5: have to create scale. We're in a world of scale.
Speaker 5: Businesses needs scale, countries need scale, and I think the
Speaker 5: Prime Minister's message was we have to continue to diversify,
Speaker 5: but diversify in a way that you continue to build
Speaker 5: scale and what you need.
Speaker 4: So I think that's what I took away when he.
Speaker 6: Says diversify, does it mean maybe a new strategic partnership
Speaker 6: with China?
Speaker 4: Is that what you take from the Prime minister?
Speaker 5: You know, the Prime Mister was just in China a
Speaker 5: week ago and it was a very important delegation that
Speaker 5: he led to China to kind of reset the relationship
Speaker 5: after a better part of a decade where the relationship
Speaker 5: had separated, and part of it was to renew economic
Speaker 5: ties and to agree on areas where we definitely agree
Speaker 5: and to say these are areas where we might not agree,
Speaker 5: but let's focus on where we agree and where we
Speaker 5: can build a future together.
Speaker 4: And I think that was a very positive step.
Speaker 5: You saw China make a commitment to resume buying our
Speaker 5: canola oil, and that's very important market for Canola. The
Speaker 5: United States and China of big markets. We ceded a
Speaker 5: small part of our automotive market three percent to Chinese imports.
Speaker 5: That's an affordability issue. China will bring in affordable electric vehicles,
Speaker 5: So I think that's good for Canadians at the end
Speaker 5: of the day. So I think there's more to build
Speaker 5: on and I think it's part of diversifying across multiple countries.
Speaker 3: Okay, so we've gone all this time without talking about
Speaker 3: what you actually have done.
Speaker 1: You just had a year that's phenomenal. You had record.
Speaker 3: Revenues for any Canadian bank ever and you have grown tremendously.
Speaker 1: You beat all of your targets.
Speaker 3: I'm just wondering, when you're talking about diversifying businesses, does
Speaker 3: it go to your business as well?
Speaker 1: Are you expanding in places like China? Are you still
Speaker 1: planning to expand in the United States?
Speaker 5: Our second home markets, the United States. We've grown wonderfully
Speaker 5: in the United States. We just launched a whole new
Speaker 5: treasury management platform, the United States RBC clear that's had
Speaker 5: a great reception. Technology leaf we brought in twenty five
Speaker 5: billion dollars of new money from US senior corporate's fortune
Speaker 5: kind of five hundred. So the United States is our
Speaker 5: second home market and we continue to invest there. We
Speaker 5: lend significantly to US corporates, We lend in the mid
Speaker 5: corporate space, in the commercial space, and we have the
Speaker 5: fifth largest high net worth platform in the United States.
Speaker 5: So the US is very important to US, serving Americans,
Speaker 5: helping Americans grow. And I told the administration already yesterday
Speaker 5: that we've invested significant in the US economy and we're
Speaker 5: part of the solution, and we.
Speaker 4: Feel very welcome in the United States. So it's a
Speaker 4: big part of our strategy.
Speaker 5: To your point, our strategy has not included China up
Speaker 5: until now for all the reasons where we didn't have
Speaker 5: significant diplomatic ties. We didn't see the basis for that investment,
Speaker 5: and now we have to review that. I can't say
Speaker 5: how we would go back in, but if the trade
Speaker 5: continues to diversify and Canadian corporates invest in China, then
Speaker 5: we will have to be part of that. What I'm
Speaker 5: focused on now is the least significant investment commitments from
Speaker 5: the Middle East of Canada. I think one of the
Speaker 5: themes of Davos is Middle East is a great place
Speaker 5: to invest. Abu Dhabi, Dubai u Ate on that side,
Speaker 5: Riad and Saudi Arabia significant commitments on both sides, and
Speaker 5: you'll see a greater presence from RBC in the Middle
Speaker 5: East as well. So yes, to your point, it's a
Speaker 5: great question. You're seeing RBC become a more globally connected
Speaker 5: bank because Canada is going to become a more globally
Speaker 5: connected country. In the US is already incredibly globally connected country.
Speaker 2: Stay with us, Mulbloomberg. Savannah's coming up after this. We
Speaker 2: begin this out with stocks slightly lower following the biggest
Speaker 2: slide in three months of investors search for direction. The
Speaker 2: Morgan Stanley chairman and see Ted pick has Sino and
Speaker 2: he joined Usnaphomore.
Speaker 7: Ted, good to see.
Speaker 4: You guys, Thanks for having me. I'll like your mom
Speaker 4: like fading good, feeling pretty good.
Speaker 7: You're not going to be in the speech in about
Speaker 7: twenty eight minutes time. Avoid that.
Speaker 4: Yeah, I'll be with you, guys.
Speaker 2: Let's talk about how things are set up for twenty six.
Speaker 2: We've drawn a big distinction between the energy that's coming
Speaker 2: from European officials and the emotion they have about a
Speaker 2: place like Greenland, and the optimism that people have for
Speaker 2: the broader US economy, particularly from bankers regarding the pipeline
Speaker 2: and the amount of debt issuance we've seen over the
Speaker 2: past few months. The debt end to writing that you've
Speaker 2: really benefited from that's going to fund a lot of
Speaker 2: the transition. How ammed up are you about the year ahead?
Speaker 4: Well, thanks for having me, guys, great to see you.
Speaker 8: I'm pretty amped up. You know, we had several years
Speaker 8: where the emin ACTIVI who's going to get going? And
Speaker 8: then COVID happen and then retrooved, and it's taken a
Speaker 8: while for a tongue glue. But this kind of in
Speaker 8: this case literal noise speaks to c suite need to act,
Speaker 8: whether it's to reglobalize or reorient where your operations are,
Speaker 8: who you want to do business with, and as long
Speaker 8: as there's activity, we're busy. So cross border M and
Speaker 8: a large cap M and a going to be important
Speaker 8: AI access an accelerant to that too. If you want
Speaker 8: to act, you get after their productivity gains and embedded
Speaker 8: in AI. You have to have the wherewithal to do it.
Speaker 8: And if your market cap is thirty or forty billion,
Speaker 8: that's tough. You know, how do you take a couple
Speaker 8: of points off your income statement to do that year
Speaker 8: after year? But if you're two three hundred billion, maybe
Speaker 8: you got a shot. So people are thinking bigger. And
Speaker 8: then the sponsors, as you know, a couple thousand companies
Speaker 8: that have been sitting there that have a billion dollar
Speaker 8: market caps implied they need to come. And then very
Speaker 8: importantly have these great companies that have been private. And
Speaker 8: over the last fifteen years we've seen companies go public
Speaker 8: to defase options or effectively be secondaries.
Speaker 4: You may actually see great companies that.
Speaker 8: Are growth companies, some of them in the AI ecosystem,
Speaker 8: that want to go tap capital. So for the investment bank,
Speaker 8: a great period and for a wealth manager, leading wealth
Speaker 8: manager in the US and the world, you want to
Speaker 8: allocate your capital efficiently, so very exciting.
Speaker 2: Some pank some of those business lines. So let's just
Speaker 2: pick up on the IPO pipeline. The activity we could
Speaker 2: see later this year SpaceX open AI. We're talking about
Speaker 2: some absolute monsters. Even the team have been historically quite
Speaker 2: dominant in the tech sector. What are you doing right
Speaker 2: now to prepare for that moment that might be an.
Speaker 8: Office Well, these companies, you know, you bank them for
Speaker 8: a whole bunch of years and you get to know them.
Speaker 8: So there's a process, obviously the formal bakeoff process and
Speaker 8: then the go or no go decision.
Speaker 4: But typically the company has.
Speaker 8: A pretty good idea of what it wants to do
Speaker 8: ahead of time because it's selected its group. And the
Speaker 8: stakes are really high this round because as you say,
Speaker 8: these the implied market caps these companies are enormous, but
Speaker 8: also they are paradoxically they are very large but also
Speaker 8: mega growers. They have, you know, some of them have
Speaker 8: a little bit of a change the world field to them,
Speaker 8: so they could become must own. I mean, one of
Speaker 8: the things that you guys have talked a lot about
Speaker 8: is so much of the equity base has become either
Speaker 8: beta or it's become kind of the seven or eight names.
Speaker 8: What if there's some additional companies that three, four, or
Speaker 8: five hundred billion dollar market caps and trillion and a
Speaker 8: half dollars market cap. The active management community say is
Speaker 8: I want to own that. I want to own that
Speaker 8: from the time of the IPO. So I think it's
Speaker 8: not just Wall Street getting to know these companies. It's
Speaker 8: a whole bunch of investors who have either backed into
Speaker 8: early rounds or want to be there when the IPO.
Speaker 3: When we were speaking with you a year ago in
Speaker 3: these seats, you were talking about how it is going
Speaker 3: to be a great year for IPOs and M and A,
Speaker 3: and it was for your bottom line.
Speaker 1: You had an incredible year.
Speaker 3: There was, though, a lot of IPOs and a lot
Speaker 3: of deals that got stymied by Liberation Day and policy uncertainty.
Speaker 3: What has to go right for some of these deals
Speaker 3: to come to fruish and open ay anthropic SpaceX Well, I.
Speaker 8: Think part of the reason that these companies are so
Speaker 8: interesting to investors is they are not rushed to go public,
Speaker 8: So there has to be an element of being patient.
Speaker 8: If you're in and around the ecosystem. They don't have
Speaker 8: to come in the first half of twenty six I
Speaker 8: think come in the second half of twenty sixth. They
Speaker 8: could even come in twenty seven, but they are drawing
Speaker 8: a whole bunch of interest to names like them, derivative
Speaker 8: plays and the ecosystem. As you sort of disaggregate the
Speaker 8: entire AI daisy chain, where do you want to play?
Speaker 8: So the anticipation of the company going public almost is
Speaker 8: as important as the company itself coming. But whether they
Speaker 8: come LEASA in twenty six or twenty seven, they're going
Speaker 8: to come.
Speaker 4: They're going to come.
Speaker 3: It's sort of a dissonance right now when you talk
Speaker 3: to business leaders about how much enthusiasm there is for
Speaker 3: deals and for energy in the US economy, and then
Speaker 3: when you hear the policymakers, you hear uncertainty and you
Speaker 3: hear sell America. How do you square those two narratives
Speaker 3: at a time where you do hear a growing number
Speaker 3: of investors say they are diversifying away from US assets.
Speaker 8: I hear you guys talking about this a lot. I
Speaker 8: think there are two separate phenomena, but they're not exclusive.
Speaker 4: One is we got the arca history.
Speaker 8: You know, I've gone on about the end of the
Speaker 8: end of history and that things would get going again
Speaker 8: and the Nation States would be battling for a Gemini
Speaker 8: and kind of trying to you know, win out on
Speaker 8: the rise and fall nations. That's just a historical fact
Speaker 8: that kind of got there was an interregnum between Berlin,
Speaker 8: Wall and COVID. We're actually back to the balance of
Speaker 8: human history as we've all studied, and that means there's
Speaker 8: going to be the kind of stuff that we are
Speaker 8: living through right now. It's just been a while and
Speaker 8: I don't know necessarily that that is something we should
Speaker 8: expect to go away anytime soon. There's going to be renationalizing, nationalizing,
Speaker 8: and that means in some case they'll be higher country risk,
Speaker 8: they'll be maybe pockets of liquidity. There may be opportunistic
Speaker 8: transactions or allocations that happened. But after twenty years of
Speaker 8: financial oppression, we're back to live markets and.
Speaker 4: Live nation states. That's here.
Speaker 8: But at the same time, you have US capital markets
Speaker 8: which are more than half the capital stock.
Speaker 4: And the reality is very.
Speaker 8: Basically as we know, corporate health is excellent, consumer health
Speaker 8: at the top end is excellent, and obviously the administration
Speaker 8: is getting after housing for the bottom half of the
Speaker 8: k earnings as you know, grew eight percent this year,
Speaker 8: that could grow in the mid teams next year, that's
Speaker 8: double the long term average.
Speaker 4: That's pretty good. So good corporate, good.
Speaker 8: Consumer, excellent, capital markets, an easier FED the lowered by
Speaker 8: seventy five.
Speaker 4: Maybe there's more to go.
Speaker 8: Maybe it's a demand driven twenty twenty six, in which
Speaker 8: case the Fed doesn't have to move.
Speaker 4: We have good.
Speaker 8: Inflation, we keep on powering forwar growth. Or maybe it's
Speaker 8: supply side where they're spending, but there isn't the same
Speaker 8: kind of job creation and the federal help out, so
Speaker 8: they're downside cases. But just in the main oh, and
Speaker 8: the tailwinds of deregulation and the bill are kicking in.
Speaker 8: It kind of is hard to argue against the twenty
Speaker 8: six US led growth case.
Speaker 4: Now we can get a.
Speaker 8: Debate about where ASID prices should be, but in terms
Speaker 8: of just two years ago were talking about recession. Last
Speaker 8: year we weren't sure. Because the administrations come in, we're
Speaker 8: not talking about that today. So for our business, very simply,
Speaker 8: we write tickets to kind of two times GDP nominal,
Speaker 8: and so if you think about our Wealth and Investment Bank,
Speaker 8: if we're going to grow you know, five ten percent
Speaker 8: on a two times basis nominally, that should be pretty
Speaker 8: good for our business for doing our job.
Speaker 2: Culporate health is very good, it's excellent. Software in health
Speaker 2: is questionable. Right, can we talk about that.
Speaker 4: Right?
Speaker 2: The move in the last twenty four hours, the live
Speaker 2: market stuff, let's get into that. The move in Japan
Speaker 2: at the long end of the curve, is that a
Speaker 2: warning shot, is that the start of something bigger?
Speaker 8: Well, I mean this Japan trade has been talked about
Speaker 8: forever and uh and I would expect then in a
Speaker 8: lot of you know, highly indebted countries, you know off
Speaker 8: the Liz Trust moment, where the demographics are poor and
Speaker 8: you don't have the wherewithal our FIAT to kind of
Speaker 8: work your way through that, there could.
Speaker 4: Be some vulnerability. So what does that mean?
Speaker 8: That means if we're sort of do our economics meets
Speaker 8: you know, poly side thing. I think that means you
Speaker 8: want to get closer to places where you can act
Speaker 8: in your joint economic interest. And I think the Japanese
Speaker 8: examples one that we should continue to pay attention to.
Speaker 8: I wouldn't be surprised that we see pockets of that
Speaker 8: now and then when you know, there's a little talk
Speaker 8: of the bounty looks lousy, but we're going to inject
Speaker 8: a little stimulus and let's see I anyone notices, Yeah,
Speaker 8: they noticed, so you know you sort of have to
Speaker 8: you know, then then you just it's you know, it's
Speaker 8: a triballoon. It gets pulled back, and that's probably healthy
Speaker 8: for markets. You know, you see a lot of that's
Speaker 8: been bought act today. But that's different than the US
Speaker 8: Treasury phenomenon. Yeah, that's that's been hugely overblown. The reality
Speaker 8: is that when we did this a year ago, the
Speaker 8: Treasury Secretary is you know of anyone was talking about
Speaker 8: the ten year being so important to keep an eye on.
Speaker 8: I think the ten years around four fifty seven, four
Speaker 8: fifty five for sixty now it's a four twenty five
Speaker 8: four to thirty, so the ten years doing his job,
Speaker 8: there's some steepening. Yes, it's probably healthy. So I do
Speaker 8: think there's a conflation between kind of US Treasury phenomenon
Speaker 8: and the world, and I think there's a difference, and
Speaker 8: you know, we just have to continue to highlight the.
Speaker 1: Difference very quickly.
Speaker 6: Ten you spend time you grew up in Venezuela, New world.
Speaker 6: Now are you planning to maybe help facilitate companies go
Speaker 6: back in.
Speaker 4: Not prep for that question you lived in. Thank you
Speaker 4: so much.
Speaker 6: Interested because you have a different take, probably than every
Speaker 6: other CEO walking around this forum.
Speaker 8: Well that as well as an extraordinary place, has a
Speaker 8: proud but now in recent decades, very troubled history. But
Speaker 8: is you know, if you know your Monroe doctrine critical
Speaker 8: and has albeit as you've talked about it at length,
Speaker 8: it's it's it's more sulphuric, but very high, vast quantities
Speaker 8: of oil beneath the ground. So do I think Venezuela
Speaker 8: is going to be relevant? I think Latin America is
Speaker 8: going to be relevant. I think the Hemisphere is going
Speaker 8: to be relevant in its sort of thinking around how
Speaker 8: wants to get closer while maintaining its own, you know,
Speaker 8: political and social independence from the US. But I think
Speaker 8: coming together of some places may make some sense and
Speaker 8: maybe in the broader economic interest.
Speaker 4: Back to the previous question, it.
Speaker 2: Was a fantastic counts, thank you so much. I've got
Speaker 2: one more. Yes, it's not a land of mind. There
Speaker 2: was some news about Deutschebank, and I just want to
Speaker 2: breathe some life into that story, and essentially the Treasury
Speaker 2: Secretary came out there was some research that he didn't
Speaker 2: like and according to him, the Deutsche Bank CEO has
Speaker 2: turned around and said, I don't stand by that research.
Speaker 7: That's basically the point.
Speaker 2: Is it difficult for the research apartment of Milk and
Speaker 2: Stanley to say what they think in an environment like
Speaker 2: this one? And I asked this question because I know
Speaker 2: some tremendous individuals at Molke and Stanley in research, and
Speaker 2: they are all highly intelligent, capable and have their own
Speaker 2: thoughts about where they think we are.
Speaker 7: In this moment right now.
Speaker 2: But is it difficult in the C suite to allow
Speaker 2: them just to go out their full throat, full throttle,
Speaker 2: full blooded and just say what they really think about
Speaker 2: this moment.
Speaker 4: Absolutely not.
Speaker 8: I'm not at a piece of research at my desk
Speaker 8: for a yellow light or a no go. I think
Speaker 8: what gets a little tricky is these institutions.
Speaker 4: Also are desk analysts.
Speaker 8: So I don't know if this one came out of
Speaker 8: the research department or maybe a desk analyst sitting in
Speaker 8: one of the divisions.
Speaker 4: But to answer your question.
Speaker 8: Directly, we want we celebrate broad opinion, I do think,
Speaker 8: but to give not kind of the standard answer.
Speaker 4: Part of the reason you're like our research.
Speaker 8: Is because it's not just regurgitation, because we all have
Speaker 8: a lumber terminal, okay, So it has to have some
Speaker 8: kind of value add but it doesn't have to just
Speaker 8: be provocation for its own sake. So we have industry leaders,
Speaker 8: we have sector leaders. We have Seth Carpenter, who you
Speaker 8: pointed out. I was watching you talk to him, and
Speaker 8: I was and that was quite a moment when I.
Speaker 4: Looked Starbucks all over my sue. So thanks for that.
Speaker 4: That was excellent.
Speaker 8: You had at least one viewer that day, and that
Speaker 8: was me, so and Seth. But the answer is the
Speaker 8: independence of research is important.
Speaker 4: We've invested in it for all these years.
Speaker 8: That having been said, sort of writing research to just
Speaker 8: sort of provoke and kind of get your Warhol moment,
Speaker 8: I mean that is not really fair to the institution either,
Speaker 8: and it puts it puts the particular government or whomever
Speaker 8: in an awkward spot because they read the research. So
Speaker 8: I think there's got to be a balance between independent
Speaker 8: integrity and what you're writing and writing something that actually
Speaker 8: is meant to add value and bring intellectual capital to
Speaker 8: the fore.
Speaker 7: Seven of the Drunk and Bill I saw that out
Speaker 7: for you.
Speaker 4: I didn't actually split it up. I just swallowed wild.
Speaker 7: Thank you, sir, Thank you very much.
Speaker 4: Thank you.
Speaker 7: Stay with us.
Speaker 2: More Bloomberg surveillance coming up after this.
Speaker 7: Joining us now.
Speaker 2: The Republican Senator Tom tillis at the epicent of some
Speaker 2: of the conversations down in Washington, d C. Regarding the
Speaker 2: Federal Reserve Sena, it's good to see you. Great to
Speaker 2: see you. So you're like the human roadblock now to
Speaker 2: getting anyone confirmed. So let's get into that. Is it
Speaker 2: about the individual or the process?
Speaker 4: It's about the process.
Speaker 9: Look, I made the statement that I did when the
Speaker 9: news broke about the investigation on Chair Powell because I
Speaker 9: felt like, leading up to the markets, I was on
Speaker 9: a Sunday night that I want to send a signal
Speaker 9: to the market so the Fed is independent and will
Speaker 9: be independent, and this legal process needs to play itself out.
Speaker 1: Your signal to.
Speaker 6: The market is actually potentially why we saw the market
Speaker 6: shrug off.
Speaker 1: That's a PENA.
Speaker 9: Well, yeah, And I think also you have to look
Speaker 9: at people light Chair french Hill and others who weigh in.
Speaker 9: I think that it made a simple fact obvious. The
Speaker 9: Senate does have control over who gets.
Speaker 4: On the board.
Speaker 6: The Jump administration definitely doesn't like slow processes. So how
Speaker 6: long do you think this is actually going to take.
Speaker 9: Well, it's up to the Department of Justice at this point.
Speaker 9: I didn't get us here. They got us here, So
Speaker 9: they need to go through this process either prevent the
Speaker 9: facts fully adjudicated or determine.
Speaker 4: What to do with the investigation.
Speaker 1: So, in other words, and tell Us is dismissed. There
Speaker 1: there's no new FED chair.
Speaker 9: Well until it's the semester three hundred and forty seven days,
Speaker 9: that's the expiration of my term.
Speaker 3: Okay, right now, we're here where you are diverging quite
Speaker 3: a bit from some of the members of your own party,
Speaker 3: including President Trump.
Speaker 1: You've gone back and forth. You're not running for reelection.
Speaker 3: What do you tell people who try to get a
Speaker 3: sense of what the American people are going to do
Speaker 3: or what Congress is going to do. What do you
Speaker 3: tell them when they approach you here at Davos looking
Speaker 3: for direction.
Speaker 9: Well, I remind them that the United States two hundred
Speaker 9: and fifty years old now this year our happy birthday.
Speaker 9: But where a very complex democracy. It's very difficult to understand.
Speaker 9: It's difficult to understand the institution of the Senate and
Speaker 9: why one Senate member in this particular Congress can control
Speaker 9: processes on committees. You know, we're the deciding where the
Speaker 9: cloture maker.
Speaker 4: Where the deciding votes.
Speaker 9: So I think it's an opportunity for us to demonstrate
Speaker 9: democracy at its best in the United States. I support
Speaker 9: the vast majority of the President's policies, a lot of
Speaker 9: the Watts, but some of the House to me, make
Speaker 9: no sense to me. Greenland the what makes a lot
Speaker 9: of sense to me? Project power in Greenland? Why would
Speaker 9: any fiscal conservative want to spend billions of dollars to
Speaker 9: buy something that we already have access to. Greenland has
Speaker 9: offered us a base for a dollar, folks, we could
Speaker 9: get seventeen bases if you extend that for seventeen dollars
Speaker 9: versus fifty seven billion dollars or whatever it would cost.
Speaker 9: Not to mention the Danes pay about a half a
Speaker 9: billion dollars a year to just keep the infrastructure running
Speaker 9: for some fifty seven hundred and fifty seven thousand indigenous
Speaker 9: people on the island. Why do we want to take
Speaker 9: on that overhead? Is it really about projecting power in
Speaker 9: the Arctic.
Speaker 4: Or something else.
Speaker 9: If it's something else, maybe I look at the business case,
Speaker 9: but ostensibly it's about projecting power in the Artic and
Speaker 9: the best way to project power in the Arctic is
Speaker 9: through the NATO forces using their Arctic skills, their ice
Speaker 9: breaking skills. The projection of power that we come together,
Speaker 9: the synergy of the NATO alliance is far greater than
Speaker 9: anything in the United States could do.
Speaker 4: On its own.
Speaker 2: Do you know any fiscal conservatives in Washington.
Speaker 9: Well, starting with one, no, I think there are several looks,
Speaker 9: and we've got to start thinking about these other structural
Speaker 9: decisions that we make. The run up the debt already
Speaker 9: to unacceptable highs, with the fraud that we're seeing here,
Speaker 9: with the uncertainty, with the increasing debt, I worry about
Speaker 9: almost a level of irrational exuberance. We've somehow been able
Speaker 9: to withstand some of the uncertainty, but there's a proverbial
Speaker 9: straw out there, and these sorts of decisions could get
Speaker 9: us closer to breaking the camels better.
Speaker 7: What does corrective action actually look like?
Speaker 4: Corrective action?
Speaker 7: What's doable in Washington at the moment.
Speaker 9: Well, you know, presumably even if we were to move
Speaker 9: forward and there was some deal offered to Greenland, and
Speaker 9: and to Denmark that would require congressional approval. The president
Speaker 9: doesn't have a blank check that he can continue to
Speaker 9: run up debt. That would require a process and raizor
Speaker 9: thin margins.
Speaker 4: And if it's a process.
Speaker 9: That doesn't play out until next year, it's post election.
Speaker 9: We've got to know what Congress looks like next year,
Speaker 9: or they've got to know what Congress looks like next year.
Speaker 6: The President's fairly focused on November third and this affordability push.
Speaker 6: Do you expect him to make more phone calls to
Speaker 6: Senator Elizabeth Warren, another senior member on the Banking Committee,
Speaker 6: than to you.
Speaker 9: I actually, Elizabeth Warre and our friends, we're not political friends,
Speaker 9: personal friends.
Speaker 4: I got on the floor, no the well at the house.
Speaker 9: I said, Elizabeth, remarkable, you've sold the president on your
Speaker 9: arbitrary caps on credit. We're no longer going to rate
Speaker 9: for risk. We're just going to be rating basically what's
Speaker 9: going to happen. We're going to under or unbank a
Speaker 9: lot of people, and we're going to stabilize the asset
Speaker 9: backed secure asset backed securities market along the way. I said,
Speaker 9: Don't get me wrong, it's extraordinary that you've solved the
Speaker 9: President on this idea, but you know, I'm going to
Speaker 9: do everything I can to kill it.
Speaker 6: But do you think something will be done when it
Speaker 6: comes to credit cards?
Speaker 1: Maybe it's the other bill.
Speaker 9: That's why would we want to repeat a bad idea.
Speaker 9: If you're taking a look at MasterCard and BS, they're
Speaker 9: working with.
Speaker 4: The small retailer.
Speaker 9: The retailers have a legitimate concern and the credit card
Speaker 9: companies are working that out. We don't need a big
Speaker 9: government arbitrary solution. We've seen credit card competition acts in
Speaker 9: Europe and they've been abject failures. Seventy percent of all
Speaker 9: of the travel to Alaska, for example, are through rewards.
Speaker 9: Do you the money's got to come from somewhere? Do
Speaker 9: you think that that travel is going to be funded
Speaker 9: in the future. Are those sorts of rewards and programs
Speaker 9: going to be cut? It makes no sense. It's not sustainable,
Speaker 9: and I think that we have the votes and the
Speaker 9: Congress to hold it off.
Speaker 3: This Congress States has been known for process. That's one
Speaker 3: reason why a lot of businesses have invested in the
Speaker 3: United States and the capital markets that we've created. And
Speaker 3: I just wonder, as you are here with global business leaders.
Speaker 3: Does it worry you that you hear more investors, more
Speaker 3: businesses looking to diversify away from the United States because
Speaker 3: of a lack of predictability of process of policy.
Speaker 4: We have to do that.
Speaker 9: I spent nearly twenty years at Price Waterhouse Coopers and
Speaker 9: how Bey on global business services. I would I would
Speaker 9: have to tell every client I advised at that time,
Speaker 9: this is a risk. You've got to reduce your bybox
Speaker 9: for any sorts of high risk ventures. And that freezes capital,
Speaker 9: that that tamper's growth. That's the last thing we need
Speaker 9: right now.
Speaker 7: Are you going to be in the room in thirty
Speaker 7: six minutes time?
Speaker 4: One hundred percent?
Speaker 7: What are you expecting to hear?
Speaker 9: I'm expecting to here President Trump, you give a speech?
Speaker 4: What content? So one thing I'm certain of.
Speaker 7: Have you got to read on the content of seid speech?
Speaker 9: No, No, I'll hear it when everybody else here is it.
Speaker 9: But you know, I will tell you the raison. Everybody's
Speaker 9: probably what still has got the bling on for this
Speaker 9: says from we had a new tribe. The largest tribe
Speaker 9: east of the Mississippi is Columbia Indians. They got recognized
Speaker 9: after one hundred and thirty seven years of abuse and neglect.
Speaker 9: Interestingly enough, they're about the same sized tribe, fifty five
Speaker 9: thousand of the indigenous people in Greenland. I heard a
Speaker 9: very important comment when I was in Denmark. They say
Speaker 9: people can trade, but you can't trade people. We need
Speaker 9: to make everyone understand that those people on the ground
Speaker 9: have been there for forty five hundred years. They want
Speaker 9: us there, but they want us there in their territory,
Speaker 9: non American territory, and it can be accomplished much more conservatively,
Speaker 9: much more sustainably, by cooperation.
Speaker 2: This is the Bloomberg Survnmonts podcast, bringing you the best
Speaker 2: in markets, economics, an gio politics. You can watch the
Speaker 2: show life on Bloomberg TV weekday mornings from six am
Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple,
Speaker 2: Spotify or anywhere else you listen, and as always on
Speaker 2: the Bloomberg Terminal and the Bloomberg Business Amp.