1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:17,560 Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:31,040 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Dermyer's 5 00:00:31,040 --> 00:00:34,600 Speaker 1: with HSBC with David bloom And they have truly an 6 00:00:34,640 --> 00:00:40,480 Speaker 1: outlier in now prescient call on dollar stability and then 7 00:00:40,560 --> 00:00:44,360 Speaker 1: dollar strength. He joins us this morning, it's ben dollars stability, 8 00:00:44,440 --> 00:00:47,919 Speaker 1: there's recent dollar strength. What will it take for you 9 00:00:48,000 --> 00:00:50,960 Speaker 1: to get the home run of a solid strong dollar 10 00:00:51,080 --> 00:00:54,720 Speaker 1: move balest I think more more the same. This is 11 00:00:54,760 --> 00:00:56,640 Speaker 1: this is one of the problems I think for the market. 12 00:00:56,760 --> 00:00:59,800 Speaker 1: That hasn't been enough glamour in the currency market. It's 13 00:00:59,840 --> 00:01:01,840 Speaker 1: it's it's not been where they examine as you sold 14 00:01:01,840 --> 00:01:06,199 Speaker 1: that huge swinging ex but I've got a suit for radio, 15 00:01:06,280 --> 00:01:08,200 Speaker 1: got a suit for radio. You can't do it, but 16 00:01:08,280 --> 00:01:11,040 Speaker 1: you you got the glamour going there. Yeah, hooks to 17 00:01:11,280 --> 00:01:15,560 Speaker 1: hooks with charm and the I think, I'm yeah, it's 18 00:01:15,600 --> 00:01:18,039 Speaker 1: it's more the same. The dollar is a high yielding currency. 19 00:01:18,080 --> 00:01:21,880 Speaker 1: You're getting paid for doing nothing, which is I talked 20 00:01:21,880 --> 00:01:24,760 Speaker 1: about this of the Morne. Give us to compare in 21 00:01:24,880 --> 00:01:28,039 Speaker 1: your world, what's the difference in yield between the dollar 22 00:01:28,200 --> 00:01:31,880 Speaker 1: duration and the yen jur You know the duration? Okay, 23 00:01:31,920 --> 00:01:33,600 Speaker 1: so you're getting paid two and a half percent just 24 00:01:33,720 --> 00:01:37,959 Speaker 1: in the dollar front one year, Well either it's pretty 25 00:01:38,000 --> 00:01:40,720 Speaker 1: flat curve, as you know, and then you're paying away 26 00:01:40,880 --> 00:01:42,640 Speaker 1: the privilege you have to pay for the privilege you 27 00:01:42,720 --> 00:01:45,240 Speaker 1: have given money to the Eurozone are too, well to 28 00:01:45,280 --> 00:01:47,319 Speaker 1: a number of countries around the world. So if you like, 29 00:01:47,400 --> 00:01:50,440 Speaker 1: if you're an investor, your your first porticole is God, 30 00:01:50,480 --> 00:01:51,880 Speaker 1: I gotta make kind of two and a half three 31 00:01:51,880 --> 00:01:54,480 Speaker 1: percent if I want to be short dollar just to 32 00:01:54,520 --> 00:01:58,279 Speaker 1: break even. That that's my starting point. So if nothing 33 00:01:58,360 --> 00:02:00,520 Speaker 1: is happening in currency markets, well then you may as 34 00:02:00,560 --> 00:02:02,560 Speaker 1: well just hold the dollar and pick up those coins 35 00:02:02,560 --> 00:02:04,600 Speaker 1: from in front of the steam. Doesn't give a damn 36 00:02:04,600 --> 00:02:08,079 Speaker 1: about this conversation. Going over to Europe, suits is there 37 00:02:08,360 --> 00:02:11,320 Speaker 1: is there a reasonable bear case out there for the dollar? 38 00:02:12,080 --> 00:02:13,920 Speaker 1: Not one that's worked. I mean there are a number 39 00:02:13,919 --> 00:02:15,720 Speaker 1: of bear cases out there for the dollar. Look, I 40 00:02:15,760 --> 00:02:18,359 Speaker 1: would say a reasonable one, but a highly unlikely one 41 00:02:18,600 --> 00:02:21,080 Speaker 1: is if Germany were sending you to say, do you 42 00:02:21,120 --> 00:02:23,560 Speaker 1: know what, our economy is really struggling. We got a 43 00:02:23,600 --> 00:02:26,079 Speaker 1: US China trade war, olders are struggling. We're going to 44 00:02:26,160 --> 00:02:28,960 Speaker 1: do a fiscal stimulus. So you know, the Trump fiscal 45 00:02:29,000 --> 00:02:31,040 Speaker 1: stimulus was a game changer for the dollar. I would 46 00:02:31,120 --> 00:02:34,359 Speaker 1: argue the market misinterpreted. It was a cyclical story, not 47 00:02:34,480 --> 00:02:37,040 Speaker 1: a structural one. And I think if if the Germans 48 00:02:37,080 --> 00:02:39,880 Speaker 1: were to do something equivalent, then that could change the 49 00:02:39,919 --> 00:02:42,000 Speaker 1: complexion of the Europe. But it just does not. So 50 00:02:42,160 --> 00:02:44,600 Speaker 1: you don't know. You don't think Germany is there yet 51 00:02:44,800 --> 00:02:47,079 Speaker 1: and it's not likely to be there in six months, 52 00:02:47,120 --> 00:02:48,880 Speaker 1: for example. It doesn't feel that way. I mean you 53 00:02:49,320 --> 00:02:52,280 Speaker 1: look at and actually doesn't kind of holding it over Germany. 54 00:02:52,320 --> 00:02:54,120 Speaker 1: But look at Canada. They were another one where you 55 00:02:54,120 --> 00:02:55,440 Speaker 1: could have said there was a case to be made 56 00:02:55,440 --> 00:02:58,600 Speaker 1: for big fiscal impulse. They didn't do it. Australia again, 57 00:02:58,840 --> 00:03:02,840 Speaker 1: could they have done They chose not to. So just internationally, 58 00:03:02,919 --> 00:03:06,680 Speaker 1: there's not that appetite yet yet for for a fiscal 59 00:03:06,720 --> 00:03:10,079 Speaker 1: stimulus outside of the US. Essentially, I'm not sure. You know, 60 00:03:10,120 --> 00:03:13,799 Speaker 1: if I'm Germany, what am I waiting for? You're you're 61 00:03:13,840 --> 00:03:17,040 Speaker 1: waiting for spontaneous improvement, as as I do with my 62 00:03:17,160 --> 00:03:20,359 Speaker 1: kids who are constantly disappointed. Um, you know, it's this 63 00:03:20,480 --> 00:03:22,600 Speaker 1: is where we're at, and look, there has been some improvement. 64 00:03:22,639 --> 00:03:25,400 Speaker 1: We we saw some okay industrial production numbers out of 65 00:03:25,440 --> 00:03:28,120 Speaker 1: Germany in one iteration, but orders a week p M. 66 00:03:28,160 --> 00:03:30,560 Speaker 1: I is and manufacturing your week. So I don't know. 67 00:03:30,639 --> 00:03:33,720 Speaker 1: You're you're certainly hoping for resolution of US channel trade talks, 68 00:03:34,120 --> 00:03:36,320 Speaker 1: and you're hoping that Chinese demand for autos picks up 69 00:03:36,320 --> 00:03:38,360 Speaker 1: because it hasn't as yet. So maybe they're the two 70 00:03:38,400 --> 00:03:40,360 Speaker 1: kind of pinch points you're you're waiting on in Germany. 71 00:03:41,360 --> 00:03:44,360 Speaker 1: You know, I look at the currency market right now. 72 00:03:44,800 --> 00:03:46,640 Speaker 1: Is it a time to make a lot of money? 73 00:03:47,240 --> 00:03:49,280 Speaker 1: I mean, is it a frustrating time? Or is there 74 00:03:49,480 --> 00:03:52,640 Speaker 1: is there a real opportunity out there? I think I think, 75 00:03:52,680 --> 00:03:54,280 Speaker 1: to be honest, I think is the frustrating time. Because 76 00:03:54,440 --> 00:03:56,320 Speaker 1: my sales people hate me for saying that one. I know, 77 00:03:56,480 --> 00:03:59,880 Speaker 1: but how do your sale And I don't need the 78 00:04:00,120 --> 00:04:04,040 Speaker 1: Lennen of HSBC, but how do sales people across all 79 00:04:04,720 --> 00:04:07,320 Speaker 1: of effects just survived day to day? Well? Do you 80 00:04:07,320 --> 00:04:10,080 Speaker 1: know what's interesting? You know you said about the importance 81 00:04:10,120 --> 00:04:12,920 Speaker 1: of research. What I've noticed is salespeople may because the 82 00:04:12,960 --> 00:04:14,880 Speaker 1: markets acquire, seem to have a lot more time for 83 00:04:15,000 --> 00:04:18,679 Speaker 1: writing opinion emails. So you're getting a lot more color 84 00:04:18,800 --> 00:04:21,120 Speaker 1: and opinion coming from sales desk because I think there's 85 00:04:21,120 --> 00:04:24,080 Speaker 1: actually not that much happening, which is why research is 86 00:04:24,120 --> 00:04:26,160 Speaker 1: kind of obliged to keep the thematic pieces going to, 87 00:04:26,279 --> 00:04:28,760 Speaker 1: you know, the higher level stuff, because otherwise we're just 88 00:04:28,800 --> 00:04:31,560 Speaker 1: commenting on what's your higher level stuff for Beijing? Right now? 89 00:04:31,640 --> 00:04:34,440 Speaker 1: If you were writing how to in folks with HSBC, 90 00:04:34,560 --> 00:04:38,200 Speaker 1: the Hong Kong and Shanghai Banking Corporation, your iconic tower 91 00:04:38,320 --> 00:04:41,920 Speaker 1: there in Hong Kong, what do you right to thematically 92 00:04:42,040 --> 00:04:46,039 Speaker 1: advise Beijing? Well, at the moment, are our China view 93 00:04:46,240 --> 00:04:48,440 Speaker 1: is that we're going to get something of an improvement 94 00:04:48,480 --> 00:04:50,839 Speaker 1: in second half growth. We're going to have a US 95 00:04:50,920 --> 00:04:52,680 Speaker 1: China trade deal. But we're going to have a deal. 96 00:04:52,920 --> 00:04:56,520 Speaker 1: Why because that's what it's in both sides interest to 97 00:04:56,600 --> 00:04:59,320 Speaker 1: get there. The problem is that we've got politics always, 98 00:04:59,640 --> 00:05:02,760 Speaker 1: we've its way through this this this logic of economics 99 00:05:03,040 --> 00:05:05,000 Speaker 1: um and you know that's where we've got taros in 100 00:05:05,040 --> 00:05:07,360 Speaker 1: the first place. So you know, what's the conviction level 101 00:05:07,400 --> 00:05:09,440 Speaker 1: and that I think it's pretty high, but the timing 102 00:05:09,520 --> 00:05:12,880 Speaker 1: conviction that's where it's less high. Can you give me 103 00:05:13,120 --> 00:05:15,320 Speaker 1: some help here. We're gonna make a one, two three, 104 00:05:15,440 --> 00:05:20,680 Speaker 1: now a fourth leg down to sterling weakness. Do you 105 00:05:20,760 --> 00:05:25,560 Speaker 1: have a level south weaker on cable where this really 106 00:05:25,600 --> 00:05:29,040 Speaker 1: gets serious for the United Kidnomers are just noise. Well, 107 00:05:29,040 --> 00:05:32,239 Speaker 1: we're already punching through a kind of a few support levels, 108 00:05:32,400 --> 00:05:36,000 Speaker 1: so it's already developing into something if you like, beyond 109 00:05:36,279 --> 00:05:40,200 Speaker 1: recent experience. Um. There's no magic number. Um, but I 110 00:05:40,440 --> 00:05:42,160 Speaker 1: guess the number that was sprung to mind when you 111 00:05:42,240 --> 00:05:45,400 Speaker 1: had the question was one ten, which sounds really one ten, 112 00:05:45,600 --> 00:05:48,280 Speaker 1: which sounds really weird. Not heard that, but one ten 113 00:05:48,400 --> 00:05:51,400 Speaker 1: is where you go if we get no do Okay, okay, wait, wait, wait, 114 00:05:51,839 --> 00:05:57,479 Speaker 1: this is important Brexit two weeks afterwards, Pharaohs still on medication. Okay, fine, 115 00:05:57,760 --> 00:06:01,760 Speaker 1: there are houses talking one ten. In a few parody calls, 116 00:06:02,200 --> 00:06:04,920 Speaker 1: we got as low as one twenty maybe one nineteen. 117 00:06:05,600 --> 00:06:08,480 Speaker 1: Are you suggesting as a house call, we're gonna go 118 00:06:08,680 --> 00:06:12,240 Speaker 1: through the levels of late two thousand sixteen to a 119 00:06:12,360 --> 00:06:15,400 Speaker 1: new weeker sterling. We've been suggesting since the beginning of Brexit. 120 00:06:15,480 --> 00:06:17,600 Speaker 1: If we get a no dealing Brexit, you will get 121 00:06:17,680 --> 00:06:19,640 Speaker 1: one from that. Yeah, we got one tent. If we 122 00:06:19,720 --> 00:06:22,080 Speaker 1: get no deal brexit, cable will trade one tenter. You 123 00:06:22,200 --> 00:06:25,320 Speaker 1: suggested this to the various and sundry sea class officers 124 00:06:25,400 --> 00:06:28,040 Speaker 1: of HSBC. Joe, It's interesting. I do a lot of 125 00:06:28,360 --> 00:06:32,320 Speaker 1: maybe like advising of of of corporates in the US 126 00:06:32,360 --> 00:06:34,880 Speaker 1: and and others, and a key part of the risk 127 00:06:34,920 --> 00:06:37,520 Speaker 1: managing processes. You have to understand the tail risks around 128 00:06:37,560 --> 00:06:40,080 Speaker 1: this are enormous. That's a huge tail risk. One tent 129 00:06:40,160 --> 00:06:41,960 Speaker 1: on the down side, but potentially one fifty on the 130 00:06:42,000 --> 00:06:44,080 Speaker 1: top side if we get no Brexit. You know, that's 131 00:06:44,120 --> 00:06:46,800 Speaker 1: what you're managing as a you know, risk manager to 132 00:06:46,880 --> 00:06:49,279 Speaker 1: corporate And I said, I said, how how much you hedged? 133 00:06:49,640 --> 00:06:52,200 Speaker 1: He said enough not to lose my job. And that's 134 00:06:52,279 --> 00:06:54,720 Speaker 1: that's the hedging ratios. Pharrol just emailed in from I 135 00:06:54,800 --> 00:06:57,680 Speaker 1: think Philadelphia is on as we overnight Francine as a 136 00:06:57,720 --> 00:07:02,240 Speaker 1: Gulf stream. Liverpool or touts, Oh oh no, I don't 137 00:07:02,279 --> 00:07:05,880 Speaker 1: like other Liverpool. You don't like, but I know, okay, 138 00:07:05,920 --> 00:07:12,040 Speaker 1: I'm gonna go with Liverpool. Liverpool Ill, yeah, I feel 139 00:07:12,080 --> 00:07:14,080 Speaker 1: on the seven o'clock are I've got to do soccer talk. 140 00:07:14,240 --> 00:07:16,800 Speaker 1: You know. It's like, Paul, you don't care. I don't care. 141 00:07:17,040 --> 00:07:19,880 Speaker 1: Michael Bard, do you care about Pharaoh's soccer talk? Well, 142 00:07:19,920 --> 00:07:23,600 Speaker 1: I have to because I cover sports. You have to. 143 00:07:24,520 --> 00:07:28,080 Speaker 1: We really don't care. I mean, listening the very factor 144 00:07:28,160 --> 00:07:30,280 Speaker 1: cony it. Soccer is upsetting enough anyway, but we'll just 145 00:07:30,400 --> 00:07:33,040 Speaker 1: leave it there. It's the best we can do. Oh God, 146 00:07:33,680 --> 00:07:36,680 Speaker 1: Chris Collins and Bloomberg corning me the other day, Aston Villa, 147 00:07:36,800 --> 00:07:40,920 Speaker 1: I'm like, I don't care anyways, postmedi Darreth, thank you 148 00:07:40,960 --> 00:07:58,520 Speaker 1: so much. Jarr By with HSBC. Kathy Jones joins the 149 00:07:58,560 --> 00:08:00,800 Speaker 1: sounder schwab and fix some kids. What does the swap 150 00:08:00,920 --> 00:08:05,320 Speaker 1: call on inflation? Well, we're looking for it to uh, 151 00:08:05,600 --> 00:08:09,560 Speaker 1: to stay pretty stable and in the long term sort 152 00:08:09,560 --> 00:08:12,360 Speaker 1: of edge lower. We've got the complication of the terriffs 153 00:08:13,240 --> 00:08:16,160 Speaker 1: in the short run, so those get passed along the consumers. 154 00:08:16,200 --> 00:08:17,720 Speaker 1: We might get a bit of a notch up, but 155 00:08:18,360 --> 00:08:23,040 Speaker 1: true inflation in terms of demand driven inflation, we're just 156 00:08:23,160 --> 00:08:25,440 Speaker 1: not seeing it. I mean, you're not seeing it. And 157 00:08:25,520 --> 00:08:28,760 Speaker 1: I guess their services is staying. And Chairman Powell talked 158 00:08:28,760 --> 00:08:31,160 Speaker 1: about the Dells trimmed and it's like, it's what we 159 00:08:31,280 --> 00:08:34,679 Speaker 1: all feel like, two three percent inflation. Everybody out there 160 00:08:34,720 --> 00:08:40,040 Speaker 1: agrees that's inflation. But goods inflation has rolled over. Does 161 00:08:40,120 --> 00:08:44,079 Speaker 1: that fold into the fixed income market with a great 162 00:08:44,320 --> 00:08:49,560 Speaker 1: missed guess on inflation through the rest of this year? Yeah, 163 00:08:49,600 --> 00:08:52,200 Speaker 1: I think it does. And you know, not only has 164 00:08:52,240 --> 00:08:56,160 Speaker 1: the Fed been um inaccurate in their predictions for unemployment, 165 00:08:56,200 --> 00:09:00,160 Speaker 1: they've been quite inaccurate in their predictions for inflation. So 166 00:09:00,360 --> 00:09:07,760 Speaker 1: nicely just massive shade on. Well, you know, the thing 167 00:09:08,040 --> 00:09:11,000 Speaker 1: as as we see some of these good prices come down. 168 00:09:11,080 --> 00:09:13,400 Speaker 1: Now now there are exceptions like iron Ore and you 169 00:09:13,440 --> 00:09:15,839 Speaker 1: know a few others, as we see a lot of 170 00:09:15,920 --> 00:09:18,720 Speaker 1: input prices kind of rolling over and starting to come 171 00:09:18,760 --> 00:09:21,679 Speaker 1: back down, um that you have to believe that that 172 00:09:21,760 --> 00:09:25,280 Speaker 1: will translate into less upward pressure on inflation. And so 173 00:09:25,440 --> 00:09:28,320 Speaker 1: inflation looks like it's steady ish right around this level. 174 00:09:28,520 --> 00:09:31,600 Speaker 1: And the volatility of inflation has been extraordinarily low over 175 00:09:31,640 --> 00:09:34,120 Speaker 1: the past couple of years. So not only of inflation below, 176 00:09:34,640 --> 00:09:37,719 Speaker 1: but the movement up and down of inflation has been 177 00:09:38,080 --> 00:09:40,880 Speaker 1: really tight in a very tight band. So, Kathy, as 178 00:09:40,920 --> 00:09:44,000 Speaker 1: I look at the w I RP function on the 179 00:09:44,040 --> 00:09:48,200 Speaker 1: Bloomberg terminal. You're pulling out some Bloomberg functionality looking markets 180 00:09:48,200 --> 00:09:51,480 Speaker 1: looking about a seventy chance of a rate cut by 181 00:09:51,559 --> 00:09:55,600 Speaker 1: the end of the years. That's something you're envisioning as well. Well, 182 00:09:56,000 --> 00:09:58,959 Speaker 1: you know, we do think that the probability of the 183 00:09:59,080 --> 00:10:02,719 Speaker 1: next move being cut is greater than the probability of 184 00:10:02,840 --> 00:10:05,199 Speaker 1: a hike, whether it's the end of this year or 185 00:10:05,240 --> 00:10:07,880 Speaker 1: early next year, it's kind of the question in our minds. 186 00:10:08,400 --> 00:10:11,079 Speaker 1: But between the slowdown that we're seeing in the economy 187 00:10:11,200 --> 00:10:15,120 Speaker 1: after the ebbing impact of the tax tax cuts and 188 00:10:15,200 --> 00:10:19,920 Speaker 1: spending increases, and the global economy being soft, and this 189 00:10:20,240 --> 00:10:24,240 Speaker 1: reconsideration of policy by the Fed, which we hope will 190 00:10:24,880 --> 00:10:28,040 Speaker 1: come to some conclusion. Um, I think that likelihood is 191 00:10:28,080 --> 00:10:31,880 Speaker 1: a cut, not a hike. Yeah, Kethy, when you when 192 00:10:31,960 --> 00:10:34,040 Speaker 1: you look at what we do, I want you to 193 00:10:34,120 --> 00:10:38,200 Speaker 1: take a given Schwab client. They've got a pot of money, 194 00:10:38,280 --> 00:10:40,640 Speaker 1: whatever the size of the pot is, and they go, 195 00:10:40,800 --> 00:10:44,840 Speaker 1: we're financially repressed. We can't work in the Cathy Jones world. 196 00:10:45,240 --> 00:10:48,280 Speaker 1: We need more yield, we need more return. What do 197 00:10:48,440 --> 00:10:53,000 Speaker 1: they do in the summer of two thousand nine. Yeah, 198 00:10:53,160 --> 00:10:56,599 Speaker 1: it's tough, I'm I know I'm out visiting clients in Allentown, 199 00:10:56,679 --> 00:11:01,319 Speaker 1: Pennsylvania today, and it is the question mark now that 200 00:11:01,520 --> 00:11:03,440 Speaker 1: rates are back down to this two and a half 201 00:11:03,520 --> 00:11:05,839 Speaker 1: percent area, what do I do if I'm retired and 202 00:11:05,880 --> 00:11:07,920 Speaker 1: I really don't want to take a lot of risk? 203 00:11:08,000 --> 00:11:10,640 Speaker 1: How do I put together a portfolio? And I think 204 00:11:10,679 --> 00:11:13,760 Speaker 1: you just have to have realistic expectations that you're going 205 00:11:13,800 --> 00:11:17,520 Speaker 1: to need a combination of of you know, solid core 206 00:11:17,679 --> 00:11:22,200 Speaker 1: fixed income that's you know, treasuries, investment grade corporates, high 207 00:11:22,280 --> 00:11:24,360 Speaker 1: quality munis. But then you're gonna have to spice it 208 00:11:24,480 --> 00:11:29,040 Speaker 1: up if you want more income, uh, you know, maybe 209 00:11:29,080 --> 00:11:32,240 Speaker 1: reads and MLPs, preferred securities. You're gonna have to put 210 00:11:32,320 --> 00:11:35,080 Speaker 1: it all together to get a blend that's not too risky. 211 00:11:35,559 --> 00:11:38,280 Speaker 1: But does give you learn spice it up? That's at 212 00:11:38,360 --> 00:11:41,960 Speaker 1: Northwestern NBA. You learnt at the phrase spice it up. Yeah, 213 00:11:41,960 --> 00:11:43,679 Speaker 1: we didn't learn that. It's fue cool. But UM, I 214 00:11:43,760 --> 00:11:46,120 Speaker 1: know what she's saying. I know what you're saying, Kathy. So, 215 00:11:46,280 --> 00:11:49,760 Speaker 1: Kathy you're at in Allentown today is will you be 216 00:11:49,840 --> 00:11:54,600 Speaker 1: asked about emerging markets today in Allentown? Probably not? Um, 217 00:11:54,720 --> 00:11:58,280 Speaker 1: I haven't had questions about emerging markets recently. That was 218 00:11:58,360 --> 00:12:00,959 Speaker 1: kind of a hot topic a while back, um, but 219 00:12:01,120 --> 00:12:04,120 Speaker 1: it seems to have died down. We were underweight last year, 220 00:12:05,040 --> 00:12:09,400 Speaker 1: we went to neutral when valuations on emerging market bonds 221 00:12:09,480 --> 00:12:12,520 Speaker 1: and to return to a more normal level. But we're 222 00:12:12,559 --> 00:12:15,360 Speaker 1: still not big fans right now because the currency risk 223 00:12:15,400 --> 00:12:18,240 Speaker 1: seems pretty high to us. So in a high yield space, 224 00:12:18,280 --> 00:12:20,960 Speaker 1: I mean, one could argue, given even if we are, 225 00:12:21,320 --> 00:12:23,600 Speaker 1: you know, ten plus years into the economic cycle, there's 226 00:12:23,640 --> 00:12:26,640 Speaker 1: still good credit quality in the high old market. Is 227 00:12:26,679 --> 00:12:29,160 Speaker 1: that and clearly that's where you can find some yield. 228 00:12:29,720 --> 00:12:31,800 Speaker 1: Are you selective in the high old market or are 229 00:12:31,840 --> 00:12:34,160 Speaker 1: you comfortable putting some of your clients into the high 230 00:12:34,160 --> 00:12:37,880 Speaker 1: old market? You know, we think some allocation to high 231 00:12:37,920 --> 00:12:40,800 Speaker 1: yield is okay for people who kind of have a 232 00:12:40,880 --> 00:12:43,599 Speaker 1: longer term time horizon and have the risk appetite. But 233 00:12:43,720 --> 00:12:47,079 Speaker 1: we're pretty cautious on credit right now. And our concern 234 00:12:47,280 --> 00:12:52,680 Speaker 1: is just what share Powell expressed about the movement down 235 00:12:52,800 --> 00:12:56,640 Speaker 1: and average credit quality in investment grade and what impact 236 00:12:56,720 --> 00:12:59,280 Speaker 1: that might have if you get some downgrades into high 237 00:12:59,360 --> 00:13:01,719 Speaker 1: yield HI you old markets is not that big to 238 00:13:01,800 --> 00:13:05,120 Speaker 1: absorb what could be a wave of down grades, So 239 00:13:05,160 --> 00:13:08,200 Speaker 1: we're pretty cautious on credit. The other area we're really 240 00:13:08,240 --> 00:13:11,560 Speaker 1: cautious on is leverage loan the bank loan sector. Well, 241 00:13:11,640 --> 00:13:13,760 Speaker 1: that's important and what way is that going to affect 242 00:13:13,760 --> 00:13:18,199 Speaker 1: our listeners. Well, if they have a fund um that 243 00:13:18,480 --> 00:13:22,560 Speaker 1: invests in bank loans, which is possible, UM, they may 244 00:13:22,679 --> 00:13:25,240 Speaker 1: want to take a close look at that because we're 245 00:13:25,320 --> 00:13:29,120 Speaker 1: concerned about the lack of covenant quality UM and if 246 00:13:29,160 --> 00:13:31,719 Speaker 1: we go into an economic downturn, these are companies that 247 00:13:31,800 --> 00:13:34,160 Speaker 1: could be affected by it. Kathy, thank you so much. 248 00:13:34,200 --> 00:13:39,400 Speaker 1: Kethy Jones with Fixed Income at Schwab Schwab Center for 249 00:13:39,559 --> 00:13:57,760 Speaker 1: Financial Research as well. If you were worried about the 250 00:13:57,840 --> 00:14:01,959 Speaker 1: inflation up or inflation, own call right now. And I 251 00:14:02,000 --> 00:14:04,199 Speaker 1: think a lot of people are focused on this. This 252 00:14:04,400 --> 00:14:07,240 Speaker 1: is the conversation of the day. This will definitely be 253 00:14:07,320 --> 00:14:10,760 Speaker 1: out on our podcast. I looked at the podcast numbers yesterday. 254 00:14:11,240 --> 00:14:15,040 Speaker 1: Thank you everyone for for We are blown away by 255 00:14:15,120 --> 00:14:18,920 Speaker 1: the subscriptions and the daily listening and the length of 256 00:14:19,080 --> 00:14:23,120 Speaker 1: listening of our podcasts. Spotify, Apple Music all the what 257 00:14:23,280 --> 00:14:25,600 Speaker 1: iTunes is that how you say it is that Apple 258 00:14:25,720 --> 00:14:28,480 Speaker 1: Music ers at iTunes like iTunes. That's that that that 259 00:14:28,640 --> 00:14:31,920 Speaker 1: that's everything that's everything. Anyways, thank you for the podcast, 260 00:14:32,240 --> 00:14:35,960 Speaker 1: and Alberto Gallo of Algebras will be there today. Alberto, 261 00:14:36,280 --> 00:14:40,840 Speaker 1: you you totally push against the high inflation argument. Why. 262 00:14:44,080 --> 00:14:48,239 Speaker 1: One reason is that there is lack of fiscal stimulus 263 00:14:48,320 --> 00:14:51,640 Speaker 1: were laid in the cycle. China is stimulating the economy, 264 00:14:51,720 --> 00:14:54,880 Speaker 1: but it's around the stimulus is around a quarter fifth 265 00:14:55,000 --> 00:14:57,560 Speaker 1: maybe of what they didn't. Europe is still on this 266 00:14:57,640 --> 00:15:01,320 Speaker 1: side of Germany is not pushing the the pedal U 267 00:15:01,560 --> 00:15:04,800 Speaker 1: and the US can do infrastructure spending, but it seems 268 00:15:05,240 --> 00:15:09,200 Speaker 1: a very long and difficult project to actually implement. The 269 00:15:09,280 --> 00:15:13,840 Speaker 1: other reason is Montrey policy is loose, but rates low 270 00:15:14,040 --> 00:15:17,960 Speaker 1: for a very long time can actually become deflationary because 271 00:15:18,000 --> 00:15:23,160 Speaker 1: they benefit large firms. They create a liquidity trap where 272 00:15:23,320 --> 00:15:30,000 Speaker 1: zombie companies don't get restructured. They don't exactly, they choked 273 00:15:30,080 --> 00:15:32,960 Speaker 1: a lot the smaller firms, which create productivity on your 274 00:15:33,040 --> 00:15:37,160 Speaker 1: jobs over time. Then there's negative interest rates accentuate all this. 275 00:15:37,720 --> 00:15:41,400 Speaker 1: Everyone is telling me it's a failed experiment. How does 276 00:15:41,480 --> 00:15:44,040 Speaker 1: Europe and frankly, oh what is it? Paul Levin trillion 277 00:15:44,640 --> 00:15:48,640 Speaker 1: negative right now? I mean, how Albert Ogallo do you 278 00:15:49,000 --> 00:15:56,640 Speaker 1: extricate yourself from the zombie market of negative interest rates. Unfortunately, 279 00:15:56,800 --> 00:16:01,320 Speaker 1: the base cases we're going to stay in this environment 280 00:16:01,600 --> 00:16:05,120 Speaker 1: until many of the structural issues in Europe are solved. 281 00:16:05,240 --> 00:16:07,880 Speaker 1: So the c B has been talking about Eurozone save 282 00:16:08,040 --> 00:16:11,240 Speaker 1: us as they want to push for a common bond 283 00:16:12,000 --> 00:16:15,800 Speaker 1: for European countries to have a common financing and potentially 284 00:16:15,840 --> 00:16:18,920 Speaker 1: also fiscal policy. You can have for very long in 285 00:16:18,960 --> 00:16:21,840 Speaker 1: a monetary union without a fiscal union. Drug has been 286 00:16:21,880 --> 00:16:24,320 Speaker 1: saying it for a very long time. So in the meantime, 287 00:16:24,360 --> 00:16:27,160 Speaker 1: the patient is is sort of stuck in an unesthetic 288 00:16:28,520 --> 00:16:31,760 Speaker 1: with an unesthetic in this operating room, but the doctors 289 00:16:31,800 --> 00:16:34,200 Speaker 1: don't come and do the operations, and the doctors are 290 00:16:34,240 --> 00:16:37,200 Speaker 1: the politicians. Um, so this is where this is a 291 00:16:37,240 --> 00:16:41,000 Speaker 1: scenario where we're in. It's kicked the can economics. You 292 00:16:41,120 --> 00:16:43,880 Speaker 1: want to be long rates. You want to be long 293 00:16:44,240 --> 00:16:47,600 Speaker 1: maybe not boons, but or it is Portugal, Greece. You 294 00:16:47,640 --> 00:16:51,240 Speaker 1: want to be long credit. You don't have the escape 295 00:16:51,320 --> 00:16:55,600 Speaker 1: velocity to benefit from uh from you know, to benefit 296 00:16:55,640 --> 00:17:00,400 Speaker 1: inequities or in asset classes that require acceleration. You Paul 297 00:17:00,480 --> 00:17:03,080 Speaker 1: how he goes to physics there. Yep, it's like you know, 298 00:17:03,160 --> 00:17:06,119 Speaker 1: it's like aerospace with Alberta exactly. So Alberta, one of 299 00:17:06,160 --> 00:17:11,959 Speaker 1: the underpinnings for a strengthening European economy is good trade, 300 00:17:12,119 --> 00:17:15,640 Speaker 1: global trade with including China. And I was just reading 301 00:17:15,680 --> 00:17:17,679 Speaker 1: your stellar note from mid April when you came back 302 00:17:17,720 --> 00:17:20,080 Speaker 1: from Spring IMF meetings, and one of the summaries there 303 00:17:20,200 --> 00:17:24,480 Speaker 1: was it appeared at that time that trade tensions were abating. Obviously, 304 00:17:24,600 --> 00:17:27,400 Speaker 1: how the world has changed in just several weeks. How 305 00:17:27,640 --> 00:17:29,960 Speaker 1: concerned are you? How concerned is the I m F 306 00:17:30,359 --> 00:17:33,800 Speaker 1: and the European economies for what seems to be heightening 307 00:17:33,840 --> 00:17:40,840 Speaker 1: trade tensions. It's a big concern because Europe is the region, 308 00:17:40,960 --> 00:17:43,960 Speaker 1: the most open region to trade in the world. You know, 309 00:17:44,440 --> 00:17:50,160 Speaker 1: Germany in particular is very exposed to Tuasia exports um 310 00:17:50,720 --> 00:17:53,200 Speaker 1: and and also other countries like Italy or Spain. So 311 00:17:53,320 --> 00:17:57,359 Speaker 1: Europe is suffering from increased tensions. On top of that, 312 00:17:57,480 --> 00:18:00,960 Speaker 1: there's internal divisions like Brexit, which make life even harder. 313 00:18:01,440 --> 00:18:06,520 Speaker 1: Having said that, positioning is extremely short. Um you know, 314 00:18:06,640 --> 00:18:10,520 Speaker 1: Europe has disappeared from the map of many investors, and 315 00:18:10,680 --> 00:18:13,000 Speaker 1: therefore if you have a little bit of positive news, 316 00:18:13,760 --> 00:18:16,280 Speaker 1: things can trade up, for example, or they just don't 317 00:18:16,320 --> 00:18:18,520 Speaker 1: trade down as much as you may think. For example, 318 00:18:18,800 --> 00:18:21,200 Speaker 1: you know, the euros hasn't really gone down that much 319 00:18:21,560 --> 00:18:24,479 Speaker 1: this month, even though there were a lot of negative 320 00:18:24,520 --> 00:18:27,320 Speaker 1: news on trade, and that shows you that the already 321 00:18:27,359 --> 00:18:31,040 Speaker 1: bearish positioning away from what Algebras does. Alberto Gallo, what 322 00:18:31,240 --> 00:18:33,359 Speaker 1: is big money doing in Europe? I mean if they 323 00:18:33,400 --> 00:18:36,119 Speaker 1: look at the yield differentials between Italy and Germany or 324 00:18:36,280 --> 00:18:43,840 Speaker 1: you know that what is institutional money actually doing. I 325 00:18:44,080 --> 00:18:50,400 Speaker 1: believe that there's a good appetite for relatively safer countries France, 326 00:18:50,480 --> 00:18:55,159 Speaker 1: you know, Netherlands, Belgium, down even to Spain. When you 327 00:18:55,160 --> 00:18:57,720 Speaker 1: look at the risk your jurisdictions like Italy where you 328 00:18:57,800 --> 00:19:02,840 Speaker 1: still have a fract fractured coalition, um there is there's 329 00:19:03,000 --> 00:19:06,680 Speaker 1: been very very light positioning, so investors have not come 330 00:19:06,720 --> 00:19:10,320 Speaker 1: back the credit market. This is critical, Albert at the 331 00:19:10,400 --> 00:19:11,639 Speaker 1: time we've got left, we g got a rip of 332 00:19:11,680 --> 00:19:15,440 Speaker 1: the script here because you viscerally understand Italy. Can you 333 00:19:15,600 --> 00:19:19,480 Speaker 1: be an Italy optimist? Can they extricate themselves from this 334 00:19:19,680 --> 00:19:25,840 Speaker 1: political coalition of a coalition they're in. You're you're probably 335 00:19:25,920 --> 00:19:28,879 Speaker 1: gonna have to face reality. The reality at the end 336 00:19:28,920 --> 00:19:31,719 Speaker 1: of the year is the budget law. They have created 337 00:19:31,800 --> 00:19:36,760 Speaker 1: a hole all around forty billion euros in additional spending, 338 00:19:37,440 --> 00:19:39,720 Speaker 1: so they have to face this big hurdle. They'll they'll 339 00:19:39,800 --> 00:19:42,879 Speaker 1: argue about it because both parties Northern League and Five 340 00:19:42,920 --> 00:19:46,520 Speaker 1: Stars have promised that they wouldn't increase VAT, but they 341 00:19:46,560 --> 00:19:49,879 Speaker 1: will have to increase taxes you know VA in particular 342 00:19:50,080 --> 00:19:53,320 Speaker 1: to make for the short fold they have created. So 343 00:19:53,440 --> 00:19:56,080 Speaker 1: there's there's gonna be an argument. Um. The good news 344 00:19:56,119 --> 00:19:58,800 Speaker 1: is the market is not long, so this will not 345 00:19:58,920 --> 00:20:01,159 Speaker 1: count as a surprise. But there's going to be an argument, 346 00:20:01,240 --> 00:20:04,399 Speaker 1: and it could end in a better coalition with maybe 347 00:20:04,680 --> 00:20:07,359 Speaker 1: a more pro business government, or it could end in 348 00:20:07,440 --> 00:20:12,160 Speaker 1: a technical, technocratic technical government. So I expect some relatively, 349 00:20:12,200 --> 00:20:15,879 Speaker 1: I'm not. I'm still on the sidelines there as well. Okay, 350 00:20:17,520 --> 00:20:20,160 Speaker 1: somewhere else. You prefer to go somewhere else, as clear 351 00:20:20,200 --> 00:20:26,159 Speaker 1: as that. Albert Gallos Algebra UH Today greatly appreciate his perspective. 352 00:20:40,119 --> 00:20:43,960 Speaker 1: Our conversation of the day on Brexit. Rres Raphael writes 353 00:20:44,040 --> 00:20:47,440 Speaker 1: for Bloomberger Opinion and is brilliant on the fabric of 354 00:20:47,560 --> 00:20:51,680 Speaker 1: Brexit against the fabric of the United Kingdom culture. Torres 355 00:20:52,000 --> 00:20:56,840 Speaker 1: on every newspaper is a quiet story adjacent to all 356 00:20:56,920 --> 00:21:02,480 Speaker 1: the idiocy, and there is British Steel is done. British 357 00:21:02,520 --> 00:21:07,560 Speaker 1: steel Harold Wilson July of nine seven and really almost 358 00:21:07,640 --> 00:21:10,760 Speaker 1: coming out of Clementale in World War Two and all 359 00:21:10,840 --> 00:21:14,760 Speaker 1: the emotion of Thatcher. What is the symbolism to anybody 360 00:21:14,880 --> 00:21:19,840 Speaker 1: distracted in London that British steel is going down while 361 00:21:19,880 --> 00:21:23,840 Speaker 1: they're fighting about Brexit. Well, I mean for the Brexitters, 362 00:21:23,920 --> 00:21:28,440 Speaker 1: Tom it's part of this narrative of betrayal and a 363 00:21:28,560 --> 00:21:33,440 Speaker 1: government that has failed to deliver and is therefore incapable 364 00:21:33,480 --> 00:21:37,000 Speaker 1: of managing the economy. It doesn't seem to be hurting 365 00:21:37,160 --> 00:21:41,080 Speaker 1: their claim that a no deal Brexit would not be 366 00:21:41,240 --> 00:21:43,640 Speaker 1: bad for for Britain's economy. So you have this incredible 367 00:21:43,720 --> 00:21:46,200 Speaker 1: disconnect between the facts on the ground. Of course British 368 00:21:46,200 --> 00:21:48,600 Speaker 1: steel is a complicated stories and not just about it, 369 00:21:48,760 --> 00:21:51,879 Speaker 1: is it, But this disconnect between the facts on the 370 00:21:52,000 --> 00:21:55,680 Speaker 1: ground and what each side is trying to claim that 371 00:21:55,840 --> 00:21:59,280 Speaker 1: these that these moments mean. But at the moment, I 372 00:21:59,359 --> 00:22:03,080 Speaker 1: think British steel is getting a lot less attention than 373 00:22:03,240 --> 00:22:06,280 Speaker 1: what's happening in Parliament and Theresa May's you know, last 374 00:22:06,359 --> 00:22:09,280 Speaker 1: ditch effort to try to get her deal through, which 375 00:22:09,320 --> 00:22:12,600 Speaker 1: it seems doomed, as we've discussed before, and interests. You've 376 00:22:12,640 --> 00:22:15,640 Speaker 1: been so good about being balanced about this within all 377 00:22:15,680 --> 00:22:18,560 Speaker 1: the emotion, and you know, I honestly don't know whether 378 00:22:18,600 --> 00:22:21,200 Speaker 1: there's Raphael Paul Sweeney has leave a remain which is 379 00:22:21,240 --> 00:22:23,440 Speaker 1: the way it should be. I can't say that about 380 00:22:23,440 --> 00:22:26,600 Speaker 1: the Telegraph, where they're clearly like Brexity and they're all 381 00:22:26,680 --> 00:22:29,720 Speaker 1: pumped up in that. Ian Duncan Smith, who's been very 382 00:22:29,760 --> 00:22:32,680 Speaker 1: wonderful on our program, He's been very honest with me 383 00:22:32,800 --> 00:22:39,320 Speaker 1: about his core emotions are remorseless. Remainder government has hijack Brexit. 384 00:22:39,880 --> 00:22:46,000 Speaker 1: That's true, isn't it. Well, First on on kind of 385 00:22:46,119 --> 00:22:49,639 Speaker 1: how we position these things as as journalists, I should 386 00:22:49,680 --> 00:22:53,680 Speaker 1: just say that it makes no sense to be contemptuous 387 00:22:53,720 --> 00:22:57,000 Speaker 1: of either side. This was such a highly contested It 388 00:22:57,119 --> 00:22:59,880 Speaker 1: was a highly contested vote. Is this a Remainder government. 389 00:23:00,040 --> 00:23:02,320 Speaker 1: I don't think one can say that it has a 390 00:23:02,720 --> 00:23:07,920 Speaker 1: manifesto pledge to deliver on the referendum. It happens to 391 00:23:08,000 --> 00:23:10,719 Speaker 1: be a minority government and that's the most important thing. 392 00:23:11,119 --> 00:23:14,280 Speaker 1: And the fact that they simply did not have the 393 00:23:14,359 --> 00:23:17,520 Speaker 1: numbers in Parliament for any Brexit deal because of the 394 00:23:17,600 --> 00:23:21,960 Speaker 1: reliance of this on the Northern Ireland Democratic Unionist Party. 395 00:23:22,560 --> 00:23:25,600 Speaker 1: Uh is you know, I would say reason number one 396 00:23:25,800 --> 00:23:28,240 Speaker 1: why Theresa May couldn't get a deal over the line. 397 00:23:28,280 --> 00:23:30,000 Speaker 1: In the end, it was a binary choice. You can 398 00:23:30,040 --> 00:23:32,400 Speaker 1: have an open border in Ireland as a good Friday 399 00:23:32,600 --> 00:23:35,720 Speaker 1: Peace agreement and common sense dictates, but you cannot do 400 00:23:35,840 --> 00:23:38,040 Speaker 1: that while leaving the Customs Union unless you want to 401 00:23:38,040 --> 00:23:40,760 Speaker 1: put a border in the Irish Sea, which the Conservatives don't. 402 00:23:40,760 --> 00:23:43,679 Speaker 1: So you know, these are the reasons, um, these are 403 00:23:43,720 --> 00:23:46,159 Speaker 1: the reasons why you know, in the first order, May 404 00:23:46,200 --> 00:23:49,080 Speaker 1: couldn't get her deal passed. So terres, I was shocked. 405 00:23:49,119 --> 00:23:51,240 Speaker 1: Maybe I shouldn't. I'm not shocked, May be surprised just 406 00:23:51,400 --> 00:23:55,960 Speaker 1: how quickly Theresa May's latest deal kind of just lost 407 00:23:56,320 --> 00:23:59,440 Speaker 1: all momentum. What happened? Yeah, I mean I think it 408 00:23:59,760 --> 00:24:04,200 Speaker 1: was uh not enough for any of the four different 409 00:24:04,240 --> 00:24:06,720 Speaker 1: constituencies she needed to satisfy. And one of the things 410 00:24:06,800 --> 00:24:10,520 Speaker 1: we've noticed, um, as this process has has, you know, 411 00:24:10,640 --> 00:24:14,040 Speaker 1: continued month in and out, is that each side is 412 00:24:14,040 --> 00:24:17,280 Speaker 1: getting more entrenched in their position. So you know, for 413 00:24:17,760 --> 00:24:20,440 Speaker 1: the d U p uh she had she promised a 414 00:24:20,640 --> 00:24:24,320 Speaker 1: legal commitment to find alternative arrangements in the back stop. 415 00:24:24,359 --> 00:24:27,200 Speaker 1: They said that, you know, that's not enough um for 416 00:24:27,760 --> 00:24:31,920 Speaker 1: the people who wanted a second referendum. She promised a 417 00:24:32,040 --> 00:24:33,720 Speaker 1: vote on whether to have one, and they said, no, 418 00:24:33,840 --> 00:24:36,200 Speaker 1: that's not enough. You have to advocate for it. So 419 00:24:36,720 --> 00:24:38,880 Speaker 1: none of the things that she can offer now is enough. 420 00:24:39,640 --> 00:24:42,159 Speaker 1: The time we have left to your observation on the 421 00:24:42,240 --> 00:24:45,639 Speaker 1: minority government, which I think is brilliant. If Prime Minister 422 00:24:45,880 --> 00:24:48,800 Speaker 1: Johnson steps out of ten Downing Street in a couple 423 00:24:48,800 --> 00:24:51,720 Speaker 1: of days or a week or three weeks, is he 424 00:24:52,400 --> 00:24:57,840 Speaker 1: more minority ish or is he more majority ish? What's 425 00:24:57,880 --> 00:25:02,720 Speaker 1: the prediction there? Well, I think the parliamentary arithmetic doesn't 426 00:25:02,800 --> 00:25:05,879 Speaker 1: change at all. If Johnson becomes Prime minister, Okay, we 427 00:25:06,000 --> 00:25:08,480 Speaker 1: still have the same parliament. What it would mean is, 428 00:25:08,640 --> 00:25:10,399 Speaker 1: you know, he'd have a lot of support from the 429 00:25:10,600 --> 00:25:15,399 Speaker 1: Conservative Party base, but nothing new in parliament. So I 430 00:25:15,480 --> 00:25:18,720 Speaker 1: think we head to October thirty one, the deadline for 431 00:25:18,800 --> 00:25:21,440 Speaker 1: his latest extension, and he goes to Brussels and he says, 432 00:25:21,520 --> 00:25:24,000 Speaker 1: please may have another extension. We could do a whole 433 00:25:24,080 --> 00:25:27,520 Speaker 1: longer discussion with Tosa Field just about Lord Patton's comments 434 00:25:27,600 --> 00:25:31,600 Speaker 1: on course Johnson in Asia, which we're just extraordinary. Look 435 00:25:31,680 --> 00:25:50,000 Speaker 1: for those foks challenge as well. In the white marble 436 00:25:50,080 --> 00:25:53,960 Speaker 1: of Capitol Hill is Kevin surli our chief. Washington corresponded, Kevin, 437 00:25:54,080 --> 00:25:56,800 Speaker 1: let's wander back on a lovely forty days or so 438 00:25:57,720 --> 00:26:02,800 Speaker 1: to Mr Manusian getting a lecture from the lovely congresswoman 439 00:26:02,880 --> 00:26:06,800 Speaker 1: from Los Angeles over how you run a hearing and 440 00:26:07,080 --> 00:26:10,400 Speaker 1: who's in charge? Who's in charge today on Capitol Hill? 441 00:26:10,760 --> 00:26:13,800 Speaker 1: The Secretary of the Treasuries he is testimony or the 442 00:26:13,920 --> 00:26:17,960 Speaker 1: various chairman and chare women. So I gotta be honest, 443 00:26:18,320 --> 00:26:21,640 Speaker 1: I think both the Secretary Manution and Chairwoman Waters would 444 00:26:21,680 --> 00:26:24,119 Speaker 1: say that they're each in charge. In the back and 445 00:26:24,280 --> 00:26:28,280 Speaker 1: source that continued from last month's hear and continued write 446 00:26:28,320 --> 00:26:31,680 Speaker 1: it for this morning because Secretary Manution moved up the 447 00:26:31,800 --> 00:26:34,240 Speaker 1: start time of the hearing and he's going to have 448 00:26:34,400 --> 00:26:37,040 Speaker 1: the hearing wrapped up by ten forty five to get 449 00:26:37,080 --> 00:26:39,280 Speaker 1: back to the White House for that infrastructure meeting the 450 00:26:39,320 --> 00:26:42,920 Speaker 1: President Trump has with democratic leadership. But the optics of 451 00:26:43,000 --> 00:26:47,600 Speaker 1: this and the tension between UH Chairwoman Waters and Secretary 452 00:26:47,680 --> 00:26:52,200 Speaker 1: Manution just clearly clearly continuing, what does what does the 453 00:26:52,320 --> 00:26:58,399 Speaker 1: executive branch risk by this approach to a very state 454 00:26:58,560 --> 00:27:03,840 Speaker 1: in an entrenched process on Capitol Hill. Well, they're reskalienating 455 00:27:04,280 --> 00:27:07,680 Speaker 1: suburban voters and independent voters, and and and and the 456 00:27:07,760 --> 00:27:09,680 Speaker 1: voters that they have to win back, quite frankly that 457 00:27:09,760 --> 00:27:12,680 Speaker 1: they lost in eighteen and a lot of those suburban 458 00:27:12,800 --> 00:27:15,919 Speaker 1: districts like in Texas that flipped blue. But the bottom 459 00:27:16,000 --> 00:27:19,159 Speaker 1: line is they don't see that much of a risk, uh, 460 00:27:19,240 --> 00:27:22,480 Speaker 1: to pushing back against these investigations. Political whackable is how 461 00:27:22,520 --> 00:27:25,400 Speaker 1: I described it earlier. See you Tom on Bloomberg Surveillance. 462 00:27:25,440 --> 00:27:28,440 Speaker 1: But look, I I just spoke with Chairwoman Water. She 463 00:27:28,520 --> 00:27:29,800 Speaker 1: had a duck out of the hearing to go to 464 00:27:29,880 --> 00:27:32,200 Speaker 1: a caucus meeting, and she said that they're going to 465 00:27:32,400 --> 00:27:35,480 Speaker 1: use every avenue available to them in order to get 466 00:27:35,520 --> 00:27:38,359 Speaker 1: President Trump to hand over those tax records. And I 467 00:27:38,440 --> 00:27:40,880 Speaker 1: also do want to note just the headlines that Secretary 468 00:27:41,000 --> 00:27:45,480 Speaker 1: Manution said at the hearing about regarding trade policy, because 469 00:27:45,480 --> 00:27:47,080 Speaker 1: he said that he has no plans as of now 470 00:27:47,160 --> 00:27:49,440 Speaker 1: to travel to Beijing for those U S trade talks. 471 00:27:49,720 --> 00:27:52,560 Speaker 1: He's urging Congress to ratify U S m c A 472 00:27:53,040 --> 00:27:57,040 Speaker 1: or face quote unquote significant economic downside, Uh, if it's 473 00:27:57,080 --> 00:27:59,960 Speaker 1: not ratified. And finally, this is a really interesting policy 474 00:28:00,000 --> 00:28:03,560 Speaker 1: the moments. Congressman David Kostovs is, a Republican from Tennessee, 475 00:28:04,119 --> 00:28:07,360 Speaker 1: asked Secretary Manution what he should be telling farmers who 476 00:28:07,359 --> 00:28:10,720 Speaker 1: are concerned about the trade implications of the U. S. 477 00:28:10,840 --> 00:28:13,840 Speaker 1: China trade talks. And what Secretary Manution says is that 478 00:28:13,920 --> 00:28:16,800 Speaker 1: the revenue used from tariffs, a portion of it might 479 00:28:16,920 --> 00:28:20,720 Speaker 1: go to help those farmers. So that's some new wordage 480 00:28:20,760 --> 00:28:23,680 Speaker 1: that we're hearing from the Treasury Department. If you're long 481 00:28:23,800 --> 00:28:26,960 Speaker 1: enough in Washington, Paul, I'm sorry he didn't learn that 482 00:28:27,200 --> 00:28:33,840 Speaker 1: Penn State. So Kevin, what are the news see? Okay, 483 00:28:35,040 --> 00:28:37,639 Speaker 1: So Kevin, as it relates to the tax returns, realistically, 484 00:28:37,760 --> 00:28:40,520 Speaker 1: what are the next steps here once this hearing is over. 485 00:28:41,800 --> 00:28:44,280 Speaker 1: It's in the court, you know, I mean, listen, and 486 00:28:44,360 --> 00:28:46,280 Speaker 1: I didn't get a law degree of Penn States. But 487 00:28:46,600 --> 00:28:48,760 Speaker 1: but it's going to the court because the U. S. 488 00:28:48,800 --> 00:28:51,880 Speaker 1: District judge here in Washington d C. Earlier this week 489 00:28:51,960 --> 00:28:55,400 Speaker 1: complied are ruled in sided with Democrats in the sense 490 00:28:55,480 --> 00:28:59,320 Speaker 1: that the judge said, uh that that that you know, 491 00:28:59,440 --> 00:29:02,080 Speaker 1: they would have to hand over some of the tax records. Um, 492 00:29:02,400 --> 00:29:05,560 Speaker 1: But the Treasury Department, the White House, they're fully prepared 493 00:29:05,880 --> 00:29:08,840 Speaker 1: to take this thing all the way up, uh, including 494 00:29:08,880 --> 00:29:10,600 Speaker 1: an appeal it even if it has to go to 495 00:29:10,640 --> 00:29:13,400 Speaker 1: the Supreme Court. What would do the Supreme Court do? 496 00:29:13,640 --> 00:29:16,720 Speaker 1: Is there a betting within the parlors that you frequent 497 00:29:16,920 --> 00:29:20,480 Speaker 1: in Washington? You know, let's assume it goes this judge appeal, appeal, 498 00:29:20,480 --> 00:29:23,280 Speaker 1: appeal appeal. I mean, do we know what the Supreme 499 00:29:23,320 --> 00:29:26,840 Speaker 1: Court would do? Well, they'd have to decide. I mean, 500 00:29:26,960 --> 00:29:29,040 Speaker 1: the reasoning that the White House is saying is that 501 00:29:29,080 --> 00:29:33,000 Speaker 1: there's no quote unquote legislative purpose for there to be 502 00:29:33,240 --> 00:29:35,800 Speaker 1: handing over tax records. And Democrats are saying that they 503 00:29:35,840 --> 00:29:39,600 Speaker 1: have the authority to do that, given their constitutional authority 504 00:29:40,360 --> 00:29:43,880 Speaker 1: to go into investigations. So, you know, I think ultimately 505 00:29:43,960 --> 00:29:47,960 Speaker 1: we lose sight of one the rarity of this situation 506 00:29:48,080 --> 00:29:51,240 Speaker 1: of tax records. It's a national The bottom line is 507 00:29:51,280 --> 00:29:53,240 Speaker 1: that folks want to know whoever's in the White House, 508 00:29:53,480 --> 00:29:56,360 Speaker 1: but they have financial dealings to hostile foreign powers, and 509 00:29:56,560 --> 00:29:59,960 Speaker 1: that's the crux of all of them. But the republic 510 00:30:00,040 --> 00:30:03,880 Speaker 1: compolling suggests that that Republican voters aren't aren't really paying 511 00:30:03,920 --> 00:30:06,920 Speaker 1: so much attentions. You know, I understand you're in the 512 00:30:06,960 --> 00:30:09,960 Speaker 1: white August halls of of Capitol Hill, but if we 513 00:30:10,000 --> 00:30:14,040 Speaker 1: could spare another two minutes with us. Yeah, the president's polls, 514 00:30:14,240 --> 00:30:17,160 Speaker 1: I mean, I know Mike Allen and XO shows the 515 00:30:17,240 --> 00:30:20,800 Speaker 1: poll every day thumb up, thumb down in a range. 516 00:30:21,360 --> 00:30:24,360 Speaker 1: How is the president actually dueling? You know all the 517 00:30:24,520 --> 00:30:27,920 Speaker 1: polls guys like you look at every day. Well so, 518 00:30:28,360 --> 00:30:30,600 Speaker 1: you know, and Mike Nurse is better than anybody. I mean, 519 00:30:30,640 --> 00:30:34,800 Speaker 1: you've got to really the national polls are a good 520 00:30:34,920 --> 00:30:37,680 Speaker 1: snapshot to some extent, but the polls of everyone inside 521 00:30:37,720 --> 00:30:40,240 Speaker 1: of the Beltway and the parties are looking at are 522 00:30:40,360 --> 00:30:44,200 Speaker 1: are very very much more smaller and granular. And you've 523 00:30:44,240 --> 00:30:47,560 Speaker 1: got to go, for example, to western Pennsylvania just see 524 00:30:47,720 --> 00:30:51,200 Speaker 1: if the Biden effect is taking impact there is in 525 00:30:51,360 --> 00:30:54,360 Speaker 1: the in Connor Lamb country. Well, I think they would 526 00:30:54,400 --> 00:30:56,680 Speaker 1: say that it is. Uh And that's why you saw 527 00:30:56,760 --> 00:31:00,320 Speaker 1: President Trump campaigning in Pennsylvania earlier this week, just the 528 00:31:00,440 --> 00:31:03,880 Speaker 1: day after uh Biden's former rollout on the other side 529 00:31:03,880 --> 00:31:06,480 Speaker 1: of the state, Philly, my neck of the woods. So um, 530 00:31:07,160 --> 00:31:10,680 Speaker 1: you've got to look at Youngstown, Ohio and these types 531 00:31:10,720 --> 00:31:15,560 Speaker 1: of town because that there were seventy hours voters who 532 00:31:15,760 --> 00:31:17,960 Speaker 1: lept from Obama to Trump in the last Okay, you 533 00:31:18,040 --> 00:31:20,680 Speaker 1: mentioned Youngstown, Ohio. Tim Ryan's on with stuff over the 534 00:31:20,760 --> 00:31:24,200 Speaker 1: MSNBC Right now, How does a gentleman from Youngstown, Ohio 535 00:31:24,640 --> 00:31:27,719 Speaker 1: get traction to get from one or two percent pulling 536 00:31:28,040 --> 00:31:30,360 Speaker 1: up to five or six percent polling? What does a 537 00:31:30,400 --> 00:31:33,240 Speaker 1: guy from mom and I don't do. I'm gonna cut 538 00:31:33,280 --> 00:31:36,400 Speaker 1: through the kind of the political chatter. He's gonna have 539 00:31:36,520 --> 00:31:39,680 Speaker 1: to pray that uh, he gets an opening in the 540 00:31:39,760 --> 00:31:42,000 Speaker 1: centrist lane, and then that would that would have to 541 00:31:42,080 --> 00:31:45,720 Speaker 1: be a Biden collapse or another centrist candidate, like a 542 00:31:45,760 --> 00:31:48,200 Speaker 1: battle collapse. But most people think that Better is kind 543 00:31:48,200 --> 00:31:50,880 Speaker 1: of struggling right now. Um, at least that's the chatter 544 00:31:51,000 --> 00:31:54,200 Speaker 1: in their way. But for Ryan to catch off's gonna 545 00:31:54,200 --> 00:31:56,280 Speaker 1: need a strong debate performance boost his name. I d 546 00:31:56,760 --> 00:31:59,840 Speaker 1: and prays drop out. One final question. If you need 547 00:31:59,880 --> 00:32:04,320 Speaker 1: a cup of coffee at Capitol Hill, what do you do? Well? Actually, 548 00:32:04,400 --> 00:32:07,360 Speaker 1: I'm down in the Rayburn Uh Where am I in 549 00:32:07,400 --> 00:32:11,080 Speaker 1: the Rayburn cafeteria to get my cup of coffee? Literally 550 00:32:11,160 --> 00:32:13,760 Speaker 1: as we before I go to cup this is it 551 00:32:13,840 --> 00:32:16,480 Speaker 1: isn't My friends, Kathy and Charlie over on the Senate side. 552 00:32:16,640 --> 00:32:19,080 Speaker 1: They're the nicest people. Or MS Norma and the Senate 553 00:32:19,160 --> 00:32:21,719 Speaker 1: cafeteria very good. There we go with news you can 554 00:32:21,800 --> 00:32:29,320 Speaker 1: use Kevin Sirelli and MS Norma. Thanks for listening to 555 00:32:29,400 --> 00:32:33,880 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 556 00:32:33,960 --> 00:32:39,800 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 557 00:32:39,880 --> 00:32:43,120 Speaker 1: on Twitter at Tom Keane before the podcast. You can 558 00:32:43,200 --> 00:32:46,400 Speaker 1: always catch us worldwide. I'm Bloomberg Radio.