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Speaker 1: Welcome to the Bloomberg PENL Podcast. I'm Paul Sweeney. You,

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Speaker 1: along with my co host Lisa Brahmawits. Each day we

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Speaker 1: bring you the most noteworthy and useful interviews for you

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Speaker 1: and your money. Whether at the grocery store or the

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Speaker 1: trading floor. Find a Bloomberg PENL podcast on Apple podcast

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Speaker 1: or wherever you listen to podcasts, as well as at

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Speaker 1: Bloomberg dot com. Paul Sweeney here with Alex Steele sitting

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Speaker 1: in for Lisa A. Bramwits Market Drivers Today is brought

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Speaker 1: to you by Marks Panis l l P Marx Pannet

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Speaker 1: Tax Advisers to help family businesses reach their financial goals.

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Speaker 1: For over one years at Marks Panneth Success is Personal.

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Speaker 1: Learn more at marks pannet dot com slash tax. Also today,

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Speaker 1: Alex's International Women's Day. We're celebrating with an all female

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Speaker 1: cast during the show. I know I am the outline,

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Speaker 1: the random guy. Thank you for allowing me to be here,

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Speaker 1: to ruin the whole set up here. But obviously a

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Speaker 1: big day today, Job's Day, the twenty thousand job print

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Speaker 1: really taking the market by surprise. Let's dig into that

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Speaker 1: a little bit, along with some other macro issu you is.

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Speaker 1: We're fortunate to have Alicia Levine with us. Alicia is

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Speaker 1: a chief market strategist at b n y Melon Investment Management.

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Speaker 1: She joins us here in a Bloomberg Interactive broker studio. Alicia, welcome,

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Speaker 1: thanks for coming here. Hi, good morning. Wow. Uh twenty

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Speaker 1: thousand dollar number job number not much impact in a

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Speaker 1: bond market, but certainly equity markets seemed a little rattled.

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Speaker 1: What do you make of it? I think it was

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Speaker 1: a noisy month, and it's the month coming after coming

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Speaker 1: after the shutdown. I don't really take too much stock

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Speaker 1: in one month data, but the interesting thing about the

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Speaker 1: job market is that you can actually get a rapid turn.

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Speaker 1: So if you have to see a second month like this,

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Speaker 1: then I'd start to worry. I'd like to point out

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Speaker 1: one thing, which is the labor participation rate, which has

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Speaker 1: risen half a percentage point over the last twelve months.

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Speaker 1: This is phenomenal, and since it's International Women's Day, I

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Speaker 1: just want to point out that it's driven by women

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Speaker 1: in the US getting back into the labor force. We

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Speaker 1: have higher wages, we have better jobs, we have such

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Speaker 1: a wonderful job market out there. I think it's terrific

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Speaker 1: that women are getting back into the labor force and

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Speaker 1: we should celebrate that today. I'd like to see the

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Speaker 1: wage though, on those jobs that they're getting into, which, well,

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Speaker 1: that's an interesting thing. I'll tell you this about different story.

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Speaker 1: So the wage number is actually pretty optimistic because you know,

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Speaker 1: we saw it was up four tenths for the month,

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Speaker 1: and then you're over the year three and three point

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Speaker 1: four percent, which is the best it's been in many,

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Speaker 1: many years. The interesting thing about where the wage gains

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Speaker 1: are is really at the bottom quintile of the earning spectrum,

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Speaker 1: and the bottom quintile of the earning spend spectrum. Spends

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Speaker 1: its earnings. They don't say they spend because they have

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Speaker 1: needs that needs to be met. So this is actually terrific,

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Speaker 1: and I'm not i suspect that wages are going up

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Speaker 1: everywhere and so women re entering the workforce should be

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Speaker 1: beneficiaries of that. So is your sense that, okay, so

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Speaker 1: we had generally a good jobs market, Let's take this

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Speaker 1: is a little bit of a one off. Here is

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Speaker 1: your sense that the economy is still generally looking at

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Speaker 1: a two two and a half percent type of range,

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Speaker 1: and your your recession risk is a little bit off

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Speaker 1: the table. At this point, our scition risk is definitely

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Speaker 1: off the table. The economy does look like it's generating

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Speaker 1: two to two and a half percent. I'll say this

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Speaker 1: about the first quarter. This looks like to be the

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Speaker 1: kitchen sink first quarter. All the bad news is coming

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Speaker 1: out in the first quarter, first quarter g d P print.

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Speaker 1: So we have bad weather, we have the effects of

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Speaker 1: the shutdown. We also have the effects of the equity

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Speaker 1: sell off in the fourth quarter of last year, which

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Speaker 1: I'm sure dampened animal spirits a little bit in the

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Speaker 1: following quarter. So this is our kitchen sync quarter. It's

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Speaker 1: coming in somewhere between one to one and a half percent,

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Speaker 1: which means the rest of the year really has to

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Speaker 1: make up for that to get to your two to

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Speaker 1: two and a half percent growth rate. We think the

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Speaker 1: economy is pretty strong. So the interesting thing to me

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Speaker 1: is the market reaction today. So we saw hardly any

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Speaker 1: move in the bond market, a teeny bit in the dollar,

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Speaker 1: but the equity downturn feels sticky, and so that leads

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Speaker 1: me to wonder if it's not about the jobs market

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Speaker 1: at all, Like how much of the market action do

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Speaker 1: you feel like, is the e c B like coming

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Speaker 1: out guns a blazing yesterday and then the worries about

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Speaker 1: China trade data over night versus a US. So I

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Speaker 1: don't think the jobs data is what's rattling the market.

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Speaker 1: And if you think about the total market since the

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Speaker 1: beginning of two thousand and nineteen, the bond market was

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Speaker 1: telling you a very different story than from what the

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Speaker 1: equity market has been telling you. And it's interesting because

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Speaker 1: as an equity person, I like to say, well, the

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Speaker 1: bond markets always right, and the bond mark was telling

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Speaker 1: you that there just is no lift in the inflation

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Speaker 1: or a larger bump to growth globally. I think the

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Speaker 1: reason that the markets sold up so much on Mario

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Speaker 1: drags comments yesterday is that Draggy and the ECB has

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Speaker 1: always seemed to be behind the data curve, so responding

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Speaker 1: to terrible data and the fact that he seemed that

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Speaker 1: he came in before the terrible data actually happened, there

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Speaker 1: was some question about whether he knew more than he

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Speaker 1: really really was saying. And perhaps it's worse than we think.

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Speaker 1: And I'll give you one scenario where really could be

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Speaker 1: worse than we think, and that is nobody is talking

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Speaker 1: about those three oh one tariffs on German automobiles. However,

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Speaker 1: it was quick smy, what is that tariff and how

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Speaker 1: important is it? So the thing about the three ones,

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Speaker 1: the two three two tariffs which were the steel tariffs,

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Speaker 1: and the three oh one tariffs, which were the auto tariffs,

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Speaker 1: are tariffs that are completely controlled by the administration, so

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Speaker 1: Congress has no say in it, and this is an

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Speaker 1: area where the administration can really drive policy. So they

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Speaker 1: had a study about whether or not the tariffs, whether

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Speaker 1: there have been fair trade practices, and whether there's some

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Speaker 1: national security issue at stake should the administration put tariffs

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Speaker 1: on European automobiles. So the report came out at the

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Speaker 1: end of February, but it was held close to the vest.

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Speaker 1: The law is it must be released within ninety days.

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Speaker 1: That ninety days is mid to end of May. So

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Speaker 1: I believe that the administration feels that it's implementation of

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Speaker 1: tariffs has been very successful in renegotiating trade deals, and

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Speaker 1: that's why I think we're going to see tariffs on

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Speaker 1: German automobiles. Now that's going to kill the German economy

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Speaker 1: and the European economy. So to that point, Bloomberg Economics

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Speaker 1: at auto tariff on European cars puts thirty billion dollars

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Speaker 1: of European GDP at risk. Wow, that's a number, that's

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Speaker 1: a big number. Alicia Levin, thank you so much for

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Speaker 1: joining us. Alicia is a chief market strategist for b

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Speaker 1: n y Melon Investment Management. She joined us live here

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Speaker 1: in the Bloomberg Interactive Broker studio. Coming up, we're gonna

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Speaker 1: pivot and take a look at the energy markets. See

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Speaker 1: what's happening in Venezuela, Saudi Aramco. Lots of to do

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Speaker 1: on the energy space as well. It's not just about jobs.

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Speaker 1: Energy is also critical here going forward. This is Bloomberg. Well,

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Speaker 1: the equity markets aren't the only ones that have experienced

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Speaker 1: extraordinary volatility over the last let's say three or four months.

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Speaker 1: The global oil market also has been quite volatile. When

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Speaker 1: you take a look at the Brent crude for example,

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Speaker 1: it's the good news is it's up about from its

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Speaker 1: December lows, but the bad news is it's still down

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Speaker 1: about from its October high. So trying to get a

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Speaker 1: sense of where the next move might be for global oil.

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Speaker 1: Let's welcome our next guest, Dr ellen Wald. Dr Wald

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Speaker 1: is the president of Transversal Consulting. She has also the

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Speaker 1: non resident Senior Fellow at the Atlantic Council's Global Energy Centator,

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Speaker 1: and she's also a contributor to Bloomberg Opinion. Dr Wald welcome, um.

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Speaker 1: I wondered if, given the volatility we have seen in

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Speaker 1: global oil over the last several months, what is your

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Speaker 1: outlook for oil for the remainder of the year. You know,

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Speaker 1: I think that right now we're kind of in a

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Speaker 1: bit of a holding pattern, waiting to see what happens,

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Speaker 1: particularly as we head into April and May, and then

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Speaker 1: also into the summer driving season in the US. A

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Speaker 1: lot right now in terms of where oil is gonna

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Speaker 1: end up depends on political moves, particularly by the White House.

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Speaker 1: The oil sanctions on Venezuela came as kind of a surprise,

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Speaker 1: and now we're we need to see what's going to

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Speaker 1: happen in May with the Iran sanctions. That could potentially

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Speaker 1: remove another million barrels a day from the market. So

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Speaker 1: if the President decides that they want to zero out

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Speaker 1: iranney and oil exports, then that could have a significant

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Speaker 1: um that could actually provide a significant lift on oil prices,

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Speaker 1: But if they decide not to do that, then it's

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Speaker 1: entirely possible that we could see oil prices trending lower.

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Speaker 1: Then on the other side of the equation, we've got demand,

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Speaker 1: and we've seen from opaque, from the E I A,

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Speaker 1: from the i A, all of them have been cutting

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Speaker 1: their forecasts for demand growth as we go forward into

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Speaker 1: and into so right now though, we're really waiting to

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Speaker 1: see whether that actually does pan out. And I think

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Speaker 1: that the summer driving season and gasoline demand and jet

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Speaker 1: fuel demand as well are going to be important indicators

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Speaker 1: for where we're heading in the second half of and

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Speaker 1: into So if you sort of weigh the Venezuela sanctions

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Speaker 1: in IRANNIE sanctions and looking ahead to the waivers and stuff, literally,

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Speaker 1: what's the oil price that President Trumps makes his decision at, Well,

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Speaker 1: that's that's a really good question. He certainly seems to

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Speaker 1: get kind of antsy when oil prices head upwards. UM

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Speaker 1: I would say maybe in the in the sixteed dollar

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Speaker 1: they all range for w T I and seventy dollar

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Speaker 1: barrel range for Brent. But I do also think that

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Speaker 1: his decision really depends more on gasoline prices and were

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Speaker 1: we generally see higher gasoline prices in the summer. We

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Speaker 1: produce a slightly more expensive blend of gasoline that we use,

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Speaker 1: And I'm not sure the President is necessarily going to

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Speaker 1: take those variations into account, but he definitely gets gets

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Speaker 1: anxious when prices get, you know, above that that marker.

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Speaker 1: And so I do think that. And it also depends

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Speaker 1: on how long these Venezuela sanctions continue. For I think

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Speaker 1: that the calculus probably was that they would be done

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Speaker 1: by now. And this problem in Venezuela is really becoming

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Speaker 1: or of a long term rather than a short term issue.

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Speaker 1: And I wouldn't be surprised if we see even greater

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Speaker 1: crackdowns on the financial institutions that India and China are

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Speaker 1: using to facilitate purchases of Venezuelan oil, and that could

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Speaker 1: also play a role and could possibly drive up oil

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Speaker 1: prices higher as well. So, how what's it like doing

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Speaker 1: business right now in Venezuela, Because when you ask the companies,

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Speaker 1: the standard line is like, we will make sure to

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Speaker 1: cooperate with any kind of sanctions that come through, and

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Speaker 1: we're talking to the U. S. Government like that's what

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Speaker 1: you're going to hear, right what's the reality. The reality

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Speaker 1: is that things are a lot more complicated, and a

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Speaker 1: lot of it does also depend on the personal relationships

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Speaker 1: between you know, Venezuela, between the manual government and some

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Speaker 1: of these companies up, particularly the Russian ones and the

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Speaker 1: Chinese ones that have lent Venezuela a lot of money.

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Speaker 1: Their concern here is that is not just buying oil,

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Speaker 1: and China isn't just invested in a situation as a

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Speaker 1: source of petroleum. They've also lent a great deal of

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Speaker 1: money to Venezuela and they want, uh, they want to

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Speaker 1: get that money back, and they want to get the

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Speaker 1: interest payments on that. So they're going to be doing

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Speaker 1: everything they can to make sure that that's facilitated. So

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Speaker 1: Dr Wild, I know you're also the author of a

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Speaker 1: book entitled Saudi Inc. Which kind of looks at the

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Speaker 1: whole Saudi a Ramco issue and the family and so

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Speaker 1: on and so forth. So I need to ask my

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Speaker 1: Ramco I p O question, which question when is it

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Speaker 1: going to happen? Is it going to happen? When is

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Speaker 1: it going to happen? And kind of what are the

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Speaker 1: drivers here? You know, that's a really great question, especially

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Speaker 1: because we just saw the other day that a Saudi

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Speaker 1: oil minister again made a statement saying the i p

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Speaker 1: O is going to happen in another two years. And

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Speaker 1: right now they're still facilitating or they're still going about

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Speaker 1: their acquisition of the petrochemical giant Sabboc, which is really

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Speaker 1: pushed off any kind of IPO move for for quite

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Speaker 1: some time. And I do think that the ip O

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Speaker 1: schedule definitely depends on this this acquisition right now. I

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Speaker 1: think what's going into the calculus are can they get

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Speaker 1: the valuation that they want and they may not be

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Speaker 1: able to do that unless the company grows some more,

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Speaker 1: and so I wouldn't be surprised if that two year

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Speaker 1: timetable could become three or four years, depending on how

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Speaker 1: how fast they can grow. Another calculus here is um

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Speaker 1: what's going on between the Saudi government and the Saudi

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Speaker 1: Oil Ministry and a Ramco, and the Saudi government is

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Speaker 1: looking to basically kind of cash in on this i

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Speaker 1: p O to fund their public investment fund there their

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Speaker 1: sovereign wealth fund, and right now they don't have the

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Speaker 1: amount of money that they're looking for by buying Sabboc

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Speaker 1: from the p I S. However, the sovereign well fund

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Speaker 1: will get more money, and so they may be more

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Speaker 1: satisfied and willing to UM hold off on the I

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Speaker 1: p O. I feel as the Saudia's always say conditions

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Speaker 1: are optimal. Well, you know, talk about that for a second.

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Speaker 1: Because ip week Saudi Ramco a CEO. He seemed pretty upset.

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Speaker 1: He was definitely like, investors don't buy our industry. They're

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Speaker 1: writing us off for dead, and that's not true. There's

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Speaker 1: going to be a supply gap. To me, that sounds

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Speaker 1: like a CEO that wasn't able to market in IPO. Yeah,

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Speaker 1: they definitely ran into some issues marketing the I p

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Speaker 1: O and marketing the company. But I do think a

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Speaker 1: lot of that has to do with UM a lot

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Speaker 1: of misunderstandings that are perpetuated about a Ramco and particularly

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Speaker 1: about Saudi Arabia's oil and it's oil reserves, And so

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Speaker 1: I can understand his frustration there. There's a lot of

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Speaker 1: misinformation out there. Dr ellen Wall, thank you so much

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Speaker 1: for joining us. Dr Wald as a President of Transversal Consulting,

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Speaker 1: nonresident Senior Fellow at the Atlantic Council's Global Energy Center

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Speaker 1: and also contributor to Bloomberg opinions. So what is your

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Speaker 1: sense of this, IPO, Alex, does this happen in our lifetime?

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Speaker 1: Maybe in our lifetime? I don't know. I'm gonna Sarah

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Speaker 1: week next week, I'm talking to twelve Energy CEO, so

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Speaker 1: I'll let you know. I'll get back to you on Wednesday.

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Speaker 1: I'm just I'm just speaking for all the energy investment

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Speaker 1: bankers out there who are waiting for what was going

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Speaker 1: to be a monster pay day for them, and they

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Speaker 1: still hope. So taking a look at West Texas Intermediate

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Speaker 1: crewed right here, fifty five dollars down a little bit,

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Speaker 1: got about two and a half percent today. This is Bloomberg.

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Speaker 1: Just crossing the Bloomberg terminal right now is news that

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Speaker 1: x Fox executive Bill Shine resigning from the White House

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Speaker 1: out according to uh Sarah Huggaby Sanders. Uh so, that

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Speaker 1: is a relatively short tenure for Mr Shin, as he

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Speaker 1: came to the White House from the news corporation Century Fox.

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Speaker 1: So just crossing the headlines right now. But thinking about

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Speaker 1: the jobs data, clearly not well received by the equity markets.

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Speaker 1: Continue to be a little bit weak there, but absolutely

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Speaker 1: a complete yawner from the fixed income markets. I'm looking

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Speaker 1: at the ten year Treasury literally unchanged on my Bloomberg

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Speaker 1: screen yielding two point six four percent. So to help

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Speaker 1: us kind to dig into, uh, the bond market, all

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Speaker 1: things fixed income, we welcome back our friend Kathleen Gaffney.

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Speaker 1: Cathlene is co director of Diversified Fixed Income and EAT

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Speaker 1: and Vancy. Vance has over four billion dollars under management,

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Speaker 1: about eighty billion dollars of which is in fixed income.

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Speaker 1: Cathlene is based in Boston, but she joins us today

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Speaker 1: in our Bloomberg eleven three oh studios in New York.

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Speaker 1: I feel like you're here as often here as you

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Speaker 1: are in in the Boston. I'm sure you've got lots

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Speaker 1: of travels. So what did you make, Kathleen coming out

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Speaker 1: of this job? Number obviously a kind of a strange number,

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Speaker 1: But what's your takeaway? Yeah, it definitely was a strange

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Speaker 1: number and not something that I would extrapolate. Although clearly

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Speaker 1: the market, especially equities, are thinking more about lower growth. Uh,

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Speaker 1: that's the pattern that we've heard in Europe as well.

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Speaker 1: But it was interesting that wages are increasing and I've

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Speaker 1: got my eyes on what's going on with inflation, and

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Speaker 1: that's what I think bond investors need to be wary of.

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Speaker 1: Was that was the inflation number? Okay, we're not We're

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Speaker 1: not going too fast, are we. No, we're not going

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Speaker 1: fast enough. But just just the increase in wages. Uh,

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Speaker 1: we know that we've got a tight labor market, so

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Speaker 1: that's going to be some sort of pressure. And there

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Speaker 1: is stimulus out there with the Fed on pause. Uh,

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Speaker 1: that's still accommodative policy. And China is also providing stimulus.

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Speaker 1: So I wouldn't read too much into one one data point.

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Speaker 1: Does the tenure at two point six and the tenure

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Speaker 1: bunule at six basis points? Do those two numbers make

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Speaker 1: sense to you? They make sense in a world where

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Speaker 1: their inflation is going to remain low for a very

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Speaker 1: long time. But we're hearing and it'll be interesting to

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Speaker 1: hear what Powell has to say. But the Fed is

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Speaker 1: starting to think about how anchored investors expectations are, and

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Speaker 1: that it seems that it is very hard to get

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Speaker 1: anyone to believe that there could be momentum higher, which

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Speaker 1: means they are likely to start using the average inflation

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Speaker 1: target and let it go a little bit higher. And

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Speaker 1: wages moving up is one piece of that we just

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Speaker 1: have moved up. And I was gonna say that they

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Speaker 1: have moved up here, they've moved up in Europe as well, Paul,

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Speaker 1: in fact, like if you're gonna look at green shoots

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Speaker 1: like that's one of them, even, dare I say in Europe?

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Speaker 1: So Kathleen, that's you know. On the European issue, we

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Speaker 1: had some very dour commentary coming out of marriage draw

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Speaker 1: yesterday in the ECB kind of what what is your

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Speaker 1: takeaway from what you heard yesterday out of Europe? How

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Speaker 1: concerned are you? I I'm somewhat concerned. UH, and and

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Speaker 1: Europe is definitely UH really slow to react, and that

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Speaker 1: and the ability to get more growth is hampering UH policy,

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Speaker 1: and so they're in a really tough place. UM. But

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Speaker 1: I do think that much of that is due to

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Speaker 1: the uncertainty around the globe UH due to Brexit and

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Speaker 1: also due ton tarns about China. Germany. UH exports a

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Speaker 1: lot to China, and so I think they feel that.

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Speaker 1: I do think that the uncertainty is going to be

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Speaker 1: resolved with the U S. China relations, and I think

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Speaker 1: with the China stimulus that's coming, I think that's positive,

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Speaker 1: but it probably isn't something that we're going to see

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Speaker 1: until later this year. So for now we're really stuck

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Speaker 1: in the pause mode and limbo mode until we see

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Speaker 1: more positive economic data. But the market keeps flipping from

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Speaker 1: one side to the other without making a whole lot

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Speaker 1: of progress. Um, focusing on inflation and letting it run

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Speaker 1: will impact the dollar, and a lower dollar helps to

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Speaker 1: get growth going. So here's what I just really struggle

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Speaker 1: to understand is that growth isn't horrible, Like we're not

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Speaker 1: going to recession right yet. I'm gonna point against six

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Speaker 1: basis points for the German tenure BUNO. But then you

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Speaker 1: go into the fact we might have a China trade

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Speaker 1: deal for example, The dat is not terrible. The markets

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Speaker 1: pricing in like rate cuts this year from the fed

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Speaker 1: ecb rate hike is now out until like now the

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Speaker 1: back half of in terms of the markets telling you

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Speaker 1: so to me, anything is going to be better than

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Speaker 1: what the markets are thinking. Yes, So aren't we going

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Speaker 1: to have to have some kind of showdown here where

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Speaker 1: the markets have to play catch up and then there's

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Speaker 1: gonna be some volatility or some unwind like is that

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Speaker 1: a thing we're going to have to focus on? Yes,

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Speaker 1: but I just don't know when it's going to happen.

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Speaker 1: It feels like it's not going to happen til later

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Speaker 1: this year. But that is exactly what I would want

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Speaker 1: to be prepared for. That's the biggest that's the biggest risk.

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Speaker 1: And the FED really does want to get rates up,

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Speaker 1: but they just don't have the ability to move. So

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Speaker 1: a weaker dollar is a great way to solve that

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Speaker 1: equation because they don't have to lower and they can

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Speaker 1: take their time raising. Yeah, at we're looking at the dollar.

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Speaker 1: I've been talking to folks on I just don't see

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Speaker 1: what against which currency it will depreciate. I mean it's

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Speaker 1: just you know, you look around the world. I mean

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Speaker 1: it's just the dollar, you know. I just you don't

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Speaker 1: see it. You have, you know, the weakness obviously in

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Speaker 1: Europe that we heard about. Yes, we have China. We're

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Speaker 1: not really sure where they are. UM. So it's interesting,

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Speaker 1: but I think as a US economy, UM. We've had

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Speaker 1: a couple of guests on today. One was kind of

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Speaker 1: calling for a recession in one was saying, no any

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Speaker 1: sense of kind of where you think that's going to

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Speaker 1: play out. I do think that the fundamentals are are

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Speaker 1: good enough that we're not close to a point where

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Speaker 1: we're going to be at recession. UM. Leverage has been

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Speaker 1: picking up, but it's still relatively modest. Uh So, I

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Speaker 1: think a recession is much further out. It is more

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Speaker 1: the volatility that as expectations UM start to get lifted,

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Speaker 1: you'll you'll see the volatility in the credit markets because

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Speaker 1: they've been pulled higher in price, lower in yield because

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Speaker 1: of that appetite for yield. When we're stuck in uh

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Speaker 1: to pause and and limbo. What is your strongest conviction

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Speaker 1: trade right now? Uh e M currency. So to Paul's question,

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Speaker 1: I think that's what the dollar will be weaker against

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Speaker 1: is China. You are seeing the U want move up there.

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Speaker 1: All signals are that they want stability and consumption. Interesting. Kathleen,

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Speaker 1: thank you so much for joining us. There's always a

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Speaker 1: lot to talk about, particularly after on a on a

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Speaker 1: jobs Friday. Kathleen Gaffney Kathie's co director of diversified fixed

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Speaker 1: income at Eaton Advance. Uh they managed over four un

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Speaker 1: billion dollars and she joins us here in our Bloomberg

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Speaker 1: eleven three OH studios. Thank you so much. Alex, thank

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Speaker 1: you for joining sitting in today Jeff fun on Radio.

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Speaker 1: It was a pleasure. Yeah, I do. I get to

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Speaker 1: just you do all the heavy lifting. I just hang

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Speaker 1: out here and talk. I mean, it's awesome. It's my

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Speaker 1: husband's nightmare exactly. Alex has founded up to sit in

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Speaker 1: for Lisa Abrahmo Witz. Coming up on Bloomberg Radio is politics, Policy,

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Speaker 1: Power and Law with June Grasso. June, what are you

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Speaker 1: looking at today? Well, we're gonna have a live interview

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Speaker 1: with Nancy Pelosi. I've course, we're gonna look at the

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Speaker 1: manifort sentencing and the jobs numbers. Excellent, excellent. Looking here

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Speaker 1: at the market. Still down a little bit today on

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Speaker 1: the equity markets, but generally very strong. I'm Paul Sweeney

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Speaker 1: and along with my sit in co host Alex Steele,

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Speaker 1: this is Bloomberg Now on Bloomberg Markets. US focus on

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Speaker 1: Munis is brought to you by Build America Mutual BAM

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00:22:23,240 --> 00:22:26,320
Speaker 1: Green Star Bonds finance projects that protect and restore the

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00:22:26,400 --> 00:22:30,280
Speaker 1: environment with more renewable energy and efficient transportation and buildings.

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00:22:30,680 --> 00:22:36,080
Speaker 1: Visit build America dot com, slash Green Star, BAM Building America. Well,

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Speaker 1: there is a growing i'll call it chatter within Congress

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Speaker 1: to repeal the ten thousand dollar cap on deductions for

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Speaker 1: state and local taxes or salt. To use a vernacular

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Speaker 1: to get an update on this and all things muni,

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Speaker 1: let's welcome once again Amanda Albright. Amanda is the a

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Speaker 1: municipal bond reporter for Bloomberg News. She joins us here

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Speaker 1: in our Bloomberg Interactive Brooker Studio Amanda, Welcome again. UM.

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Speaker 1: Is there any chance that this issue with the state

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Speaker 1: local taxes can get any movement in Congress? So as

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Speaker 1: that story outlines UM by Joe Light, it doesn't look

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Speaker 1: like that there will be any traction made on that proposal.

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00:23:11,640 --> 00:23:15,680
Speaker 1: Both Republicans and Democrats have their own reasons for not

431
00:23:15,720 --> 00:23:19,080
Speaker 1: supporting the um you know, change to that, and for

432
00:23:19,240 --> 00:23:21,760
Speaker 1: muni investors, UM, they might be looking at all the

433
00:23:21,800 --> 00:23:24,480
Speaker 1: cash coming in and saying, well, maybe we don't mind

434
00:23:24,560 --> 00:23:27,720
Speaker 1: the cap on salt deductions because it's led to just

435
00:23:27,800 --> 00:23:30,680
Speaker 1: tremendous demand for municipal bonds as people you know seek

436
00:23:30,680 --> 00:23:33,359
Speaker 1: out tax heavens UM. And so that's something that's really

437
00:23:33,359 --> 00:23:36,480
Speaker 1: propped up performance this year for the muni market. Have

438
00:23:36,600 --> 00:23:38,680
Speaker 1: you noticed after sort of a couple of years of

439
00:23:38,720 --> 00:23:41,320
Speaker 1: dealing with this UM the difference in say state, it's

440
00:23:41,320 --> 00:23:43,639
Speaker 1: like Connecticut, because I gotta tell you, like so many

441
00:23:43,680 --> 00:23:46,480
Speaker 1: guys in the industry that I talked to are like, yeah, yeah, yeah,

442
00:23:46,480 --> 00:23:48,479
Speaker 1: I live in Connecticut and they really don't. Their residents

443
00:23:48,520 --> 00:23:51,239
Speaker 1: in Florida, but like they actually live in Connecticut. Right. So,

444
00:23:51,280 --> 00:23:54,240
Speaker 1: we talked to a financial advisor UM this week about

445
00:23:54,320 --> 00:23:56,679
Speaker 1: just the salt driven demand for munis and she was

446
00:23:56,720 --> 00:23:59,800
Speaker 1: saying that UM, she is definitely hearing from more clients

447
00:23:59,840 --> 00:24:02,720
Speaker 1: who were worried about taxes and just that's becoming more

448
00:24:02,840 --> 00:24:05,480
Speaker 1: part of the calculus for them. She was basically saying

449
00:24:05,520 --> 00:24:07,840
Speaker 1: that no one that she works with ever retires to

450
00:24:07,920 --> 00:24:10,720
Speaker 1: New Jersey. They're retiring from New Jersey and leaving UM.

451
00:24:10,720 --> 00:24:13,080
Speaker 1: And she basically says she has clients from all over

452
00:24:13,119 --> 00:24:16,199
Speaker 1: the US UM that have previously lived in New Jersey

453
00:24:16,240 --> 00:24:18,760
Speaker 1: and maybe taxes weren't the only reason why they left,

454
00:24:18,800 --> 00:24:21,680
Speaker 1: but it certainly wasn't something that kept them there. Interesting.

455
00:24:21,720 --> 00:24:24,800
Speaker 1: Well interesting as a resident of New Jersey, this is

456
00:24:24,840 --> 00:24:26,840
Speaker 1: near and dear to my heart. But another issue is

457
00:24:27,040 --> 00:24:29,399
Speaker 1: entering for the state of New Jersey's New Jersey Governor

458
00:24:29,400 --> 00:24:32,440
Speaker 1: Phil Murphy, who will be on Bloomberg Radio and Television

459
00:24:32,480 --> 00:24:35,760
Speaker 1: today in the four o'clock hour. We should mention, but

460
00:24:35,840 --> 00:24:38,120
Speaker 1: he released the state budgets at thirty eight point six

461
00:24:38,200 --> 00:24:42,359
Speaker 1: billion dollar budget. In there on the revenue line was

462
00:24:42,480 --> 00:24:47,120
Speaker 1: taxes supposedly going to come from cannabis legalized weed, uh,

463
00:24:47,359 --> 00:24:48,960
Speaker 1: something along the order of three hundred or three and

464
00:24:49,080 --> 00:24:51,399
Speaker 1: fifty million dollars. But they're actually coming in much less.

465
00:24:51,400 --> 00:24:54,399
Speaker 1: What's going on there? Right? So Murphy's budget UM only

466
00:24:54,560 --> 00:24:57,840
Speaker 1: estimated that it could raise sixty million from cannabis taxes,

467
00:24:57,880 --> 00:25:00,520
Speaker 1: which haven't been legalized yet, I should add, UM, So

468
00:25:00,600 --> 00:25:02,960
Speaker 1: before he was estimating that this could be something that

469
00:25:03,000 --> 00:25:05,560
Speaker 1: could raise three hundred million dollars a year. UM. But

470
00:25:05,600 --> 00:25:07,439
Speaker 1: now it's kind of, you know, a reality check for

471
00:25:07,520 --> 00:25:10,080
Speaker 1: New Jersey and other states. UM. New York is also

472
00:25:10,119 --> 00:25:13,600
Speaker 1: talking about legalizing marijuana UM, which you know is a

473
00:25:13,600 --> 00:25:17,760
Speaker 1: competitor to any legalized UM marijuana in New Jersey. UM.

474
00:25:17,800 --> 00:25:20,320
Speaker 1: There's also this issue of the black market and people

475
00:25:20,320 --> 00:25:23,560
Speaker 1: who already were getting their marijuana from one source, and

476
00:25:23,640 --> 00:25:26,520
Speaker 1: will they actually go and pay taxes on a source

477
00:25:26,520 --> 00:25:28,879
Speaker 1: that they weren't you know, previously paying taxes on. It

478
00:25:29,480 --> 00:25:31,879
Speaker 1: just highlights to me kind of the desperate measures that

479
00:25:31,960 --> 00:25:33,840
Speaker 1: some states are kind of grappling at. So it's not

480
00:25:33,840 --> 00:25:36,440
Speaker 1: only you know, taxing pot. I'm gonna say, pot. Is

481
00:25:36,480 --> 00:25:39,960
Speaker 1: that Okay? Am I doing myself? Okay? Um okay, we

482
00:25:40,200 --> 00:25:42,560
Speaker 1: see so um. Then but then it's also the proposal

483
00:25:42,560 --> 00:25:44,000
Speaker 1: in New York right that if you have a condo

484
00:25:44,080 --> 00:25:45,680
Speaker 1: and you don't live there and you rent it, that

485
00:25:45,720 --> 00:25:47,320
Speaker 1: then you gotta get taxed on that. I mean, like,

486
00:25:47,359 --> 00:25:50,119
Speaker 1: are these investors like these kind of proposals when it

487
00:25:50,119 --> 00:25:51,840
Speaker 1: comes to the mini market. That's a great point. And

488
00:25:51,880 --> 00:25:54,480
Speaker 1: I think, um, I would put marijuana taxes up there

489
00:25:54,520 --> 00:25:57,320
Speaker 1: with like cigarette taxes and gasoline taxes as being these

490
00:25:57,400 --> 00:26:02,040
Speaker 1: kind of imperfect revenue sources um various reasons. So cigarette taxes, um,

491
00:26:02,080 --> 00:26:04,760
Speaker 1: the more that you tax cigarettes, the more consumption decline.

492
00:26:04,800 --> 00:26:07,040
Speaker 1: So that's kind of an imperfect revenue source. But it's

493
00:26:07,080 --> 00:26:09,639
Speaker 1: one that states, especially UM states where there's a lot

494
00:26:09,680 --> 00:26:12,080
Speaker 1: of anti tax sentiment, well they view those as easy

495
00:26:12,160 --> 00:26:15,119
Speaker 1: to raise because it's a it's a syntax. Um. And

496
00:26:15,160 --> 00:26:17,080
Speaker 1: then with gas taxes, you know, there's a lot of

497
00:26:17,080 --> 00:26:21,040
Speaker 1: talk about electric vehicles, hybrid cars. You know, how reliable

498
00:26:21,240 --> 00:26:23,280
Speaker 1: is gas tax money going to be in thirty years,

499
00:26:23,280 --> 00:26:24,880
Speaker 1: which is kind of the time brand that states are

500
00:26:24,880 --> 00:26:27,720
Speaker 1: working with. So I think for marijuana taxes, it has

501
00:26:27,760 --> 00:26:30,240
Speaker 1: its own sort of issues. Um, but it is something

502
00:26:30,280 --> 00:26:31,680
Speaker 1: that you know, like we saw with the m t

503
00:26:31,760 --> 00:26:34,560
Speaker 1: A last week. Um, it's an easy, you know tax

504
00:26:34,640 --> 00:26:37,720
Speaker 1: that lawmakers can propose. It's easier to you know, float

505
00:26:37,760 --> 00:26:39,160
Speaker 1: that than it is to say I'm going to raise

506
00:26:39,200 --> 00:26:41,879
Speaker 1: your income taxes by one percent or so. But some

507
00:26:41,920 --> 00:26:44,200
Speaker 1: other states I'm thinking Colorado and some others that have

508
00:26:44,240 --> 00:26:49,520
Speaker 1: had legalized marijuana, they had similar tax shortfall issues or

509
00:26:49,640 --> 00:26:51,840
Speaker 1: they're doing a little bit better. So it's more of

510
00:26:51,880 --> 00:26:54,080
Speaker 1: like a nice to have for a state like Colorado,

511
00:26:54,119 --> 00:26:56,040
Speaker 1: which is you know, a really strong credit. There's like

512
00:26:56,080 --> 00:26:58,760
Speaker 1: tons of people moving in. Um, this is not something

513
00:26:58,800 --> 00:27:01,480
Speaker 1: that we're seeing any state kind of build their their

514
00:27:01,480 --> 00:27:04,240
Speaker 1: budget around. It's still a very small percentage of their

515
00:27:04,480 --> 00:27:07,440
Speaker 1: overall general fund. Um. You know, they're working with billions

516
00:27:07,440 --> 00:27:10,200
Speaker 1: of dollars and you know, marijuana tacks money right now

517
00:27:10,400 --> 00:27:12,760
Speaker 1: just isn't enough to kind of make or break a

518
00:27:12,800 --> 00:27:16,720
Speaker 1: state credit. Uh. What is the most popular moon mini

519
00:27:16,760 --> 00:27:20,280
Speaker 1: market right now as an investment? Yeah, UM, I would

520
00:27:20,280 --> 00:27:23,680
Speaker 1: probably say New York and California. Are up there. Um,

521
00:27:23,680 --> 00:27:26,159
Speaker 1: maybe even more of an extent New York because the

522
00:27:26,200 --> 00:27:29,040
Speaker 1: spreads on the state's debt have just tightened so dramatically.

523
00:27:29,200 --> 00:27:32,400
Speaker 1: Um during this season of salt demand and all that. Yeah,

524
00:27:32,440 --> 00:27:34,800
Speaker 1: let's say that supply or demand issue. It's a little

525
00:27:34,800 --> 00:27:37,080
Speaker 1: bit of both. So there is really really strong demand,

526
00:27:37,119 --> 00:27:41,240
Speaker 1: but um, supply is not yet you know, outweighing the

527
00:27:41,320 --> 00:27:43,600
Speaker 1: amount of reinvestment money that we're seeing coming in. We're

528
00:27:43,640 --> 00:27:46,320
Speaker 1: also seeing lots of cash new cash coming into muni

529
00:27:46,400 --> 00:27:49,040
Speaker 1: mutual funds and um, even Muni e t F this

530
00:27:49,080 --> 00:27:52,639
Speaker 1: week they attracted um, you know money. UM. So it

531
00:27:52,760 --> 00:27:55,440
Speaker 1: is a supply and demand dynamic, and I think people

532
00:27:55,480 --> 00:27:57,560
Speaker 1: are kind of worried about what happens if the demand

533
00:27:57,680 --> 00:27:59,800
Speaker 1: runs out, but no one is actually calling for that

534
00:27:59,840 --> 00:28:02,400
Speaker 1: to happen. They think this salt dynamic is only gonna

535
00:28:02,520 --> 00:28:06,360
Speaker 1: get worse after people, you know, finished doing their taxes. Yeah, exactly,

536
00:28:06,400 --> 00:28:09,640
Speaker 1: tax season. Here we go, Amanda write me this bond

537
00:28:09,640 --> 00:28:13,080
Speaker 1: reporter for Bloomberg News. Thanks for listening to the Bloomberg

538
00:28:13,119 --> 00:28:15,800
Speaker 1: P and L podcast. You can subscribe and listen to

539
00:28:15,800 --> 00:28:20,359
Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

540
00:28:20,760 --> 00:28:24,320
Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm

541
00:28:24,359 --> 00:28:27,639
Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.

542
00:28:27,680 --> 00:28:30,320
Speaker 1: You can always catch us worldwide on Bloomberg Radio