1 00:00:05,720 --> 00:00:13,040 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Lee. 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 --> 00:00:28,120 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Yeah. 5 00:00:33,080 --> 00:00:34,360 Speaker 1: Do you want to us here in New York City 6 00:00:34,360 --> 00:00:37,239 Speaker 1: in the studio and please to say Chris Grassanti Grassanti 7 00:00:37,280 --> 00:00:40,760 Speaker 1: Capital Management, CEO our value man, who says, don't worry 8 00:00:40,800 --> 00:00:43,680 Speaker 1: about Democrats taking the House, don't worry about higher rates, 9 00:00:43,680 --> 00:00:46,800 Speaker 1: and don't worry about inflation. Can we start with politics, Chris? 10 00:00:47,040 --> 00:00:49,160 Speaker 1: Why should we worry about the politics at the moment? 11 00:00:49,760 --> 00:00:51,839 Speaker 1: You know, I think almost the consensus view is that 12 00:00:51,880 --> 00:00:54,600 Speaker 1: the Democrats will take the House. It's very difficult to 13 00:00:54,640 --> 00:00:57,560 Speaker 1: see them taking the Senate. So I think the market 14 00:00:57,600 --> 00:01:00,080 Speaker 1: has priced in divided government. It's not like a a 15 00:01:00,160 --> 00:01:03,400 Speaker 1: lot has gotten done before this, So I you know, 16 00:01:03,440 --> 00:01:06,360 Speaker 1: I don't think if com on the day after election 17 00:01:06,440 --> 00:01:09,440 Speaker 1: day we see a divided Congress that it's it's going 18 00:01:09,480 --> 00:01:12,080 Speaker 1: to upset the market. Maybe a little volatility, maybe some opportunity, 19 00:01:12,080 --> 00:01:14,800 Speaker 1: but it's been so market positive with Republicans in the House, 20 00:01:14,800 --> 00:01:17,080 Speaker 1: and Republicans running the Senate as well. Why is the 21 00:01:17,080 --> 00:01:20,080 Speaker 1: opposite not apply. Well, we've gotten the tax break, we 22 00:01:20,120 --> 00:01:23,480 Speaker 1: will continue to get lower regulation because that's an executive function. 23 00:01:23,880 --> 00:01:26,440 Speaker 1: Um So I think that the trends that have repelled 24 00:01:26,480 --> 00:01:29,280 Speaker 1: the market can continue. Of course, the big wild card 25 00:01:29,360 --> 00:01:32,479 Speaker 1: is if the Houses goes democratic, whether we'll see lots 26 00:01:32,480 --> 00:01:35,319 Speaker 1: of investigations. But I think the final release of the 27 00:01:35,360 --> 00:01:38,479 Speaker 1: Muller Report will set that to rest one way or another. 28 00:01:38,560 --> 00:01:41,319 Speaker 1: In terms of a trade policy, the President kind of 29 00:01:41,400 --> 00:01:44,480 Speaker 1: rampant things up again, threatening to tax all imports coming 30 00:01:44,520 --> 00:01:47,400 Speaker 1: from China, and the data over the weekend from the Chinese, 31 00:01:47,400 --> 00:01:50,160 Speaker 1: the trade dates surplus might be narrowing, but with the 32 00:01:50,240 --> 00:01:52,960 Speaker 1: United States, and it's a record, it doesn't look good 33 00:01:53,000 --> 00:01:55,640 Speaker 1: for the Chinese if they're trying to have It's hard 34 00:01:55,640 --> 00:01:57,559 Speaker 1: to have sympathy for the Chinese in some ways, but 35 00:01:57,560 --> 00:01:59,920 Speaker 1: but here you kind of do because the trade deficit 36 00:02:00,120 --> 00:02:02,560 Speaker 1: typically widens, and Tom will be able to tell this 37 00:02:02,600 --> 00:02:05,880 Speaker 1: bitter night because we're having strong economic times and we 38 00:02:06,040 --> 00:02:09,120 Speaker 1: just buy more stuff because people have jobs, so the 39 00:02:09,480 --> 00:02:14,600 Speaker 1: deficit would widen. The problem is that's Trump's major litmus 40 00:02:14,639 --> 00:02:16,480 Speaker 1: test for whether things are fair or not. I don't 41 00:02:16,480 --> 00:02:18,880 Speaker 1: care about the politics. Here's a reality. We're ten years 42 00:02:18,919 --> 00:02:22,359 Speaker 1: on from Leman. We're only talking to optimists this week 43 00:02:22,400 --> 00:02:25,160 Speaker 1: that had the courage to stay in the market. How 44 00:02:25,200 --> 00:02:28,079 Speaker 1: did you stay in the market in April of two 45 00:02:28,120 --> 00:02:31,040 Speaker 1: thousand nine, Well, we ran to quality times. So you 46 00:02:31,160 --> 00:02:34,799 Speaker 1: buy JP Morgan, you buy Goldman Sacks. It was the 47 00:02:34,840 --> 00:02:36,760 Speaker 1: first time, really in a generation where they were turning. 48 00:02:37,200 --> 00:02:39,840 Speaker 1: What did he buy bear Sterns for like a dollar? Was? 49 00:02:39,880 --> 00:02:42,320 Speaker 1: It was like two dollars he bought Remember he bought 50 00:02:42,320 --> 00:02:43,680 Speaker 1: it for two dollars and then he had to up 51 00:02:43,680 --> 00:02:45,840 Speaker 1: the price to ten dollars because he got so many 52 00:02:45,880 --> 00:02:48,919 Speaker 1: complaints about And you loaded the boat on JP Morgan? 53 00:02:49,400 --> 00:02:52,200 Speaker 1: We did, because you know, if JP Morgan went under, 54 00:02:52,320 --> 00:02:55,840 Speaker 1: we had what was the sweat like in London with 55 00:02:55,960 --> 00:02:58,720 Speaker 1: Northern Rock. Nobody was loading the boat on Northern Rock, 56 00:02:59,240 --> 00:03:01,640 Speaker 1: good joke, they didn't, and that that was the story. 57 00:03:01,680 --> 00:03:03,959 Speaker 1: If you loaded, and if you loaded the boat on RBS, 58 00:03:04,080 --> 00:03:06,880 Speaker 1: I mean you are still struggling right now. That's the 59 00:03:06,880 --> 00:03:09,680 Speaker 1: difference I think between them. We say the United States, 60 00:03:09,720 --> 00:03:13,280 Speaker 1: the US did such a much better job of recapitalizing 61 00:03:13,320 --> 00:03:14,840 Speaker 1: the banks than the rest of you, and they took 62 00:03:14,880 --> 00:03:16,800 Speaker 1: their medicine earlier. I think that's right, because I think 63 00:03:16,800 --> 00:03:19,640 Speaker 1: you're Eurebe is still doing that. But we took and 64 00:03:19,680 --> 00:03:23,000 Speaker 1: sit here with the benefit of hindsight. When you sort 65 00:03:23,040 --> 00:03:25,639 Speaker 1: of talk about loading the boat of JP Morgan ten 66 00:03:25,720 --> 00:03:29,560 Speaker 1: years ago, it didn't seem that hopefullus did it. No. 67 00:03:29,680 --> 00:03:31,680 Speaker 1: I mean, that's why you could do it, although there 68 00:03:31,880 --> 00:03:34,920 Speaker 1: is some as the boat goes under water, you head 69 00:03:34,920 --> 00:03:36,560 Speaker 1: to the highest point, You head to the quality you 70 00:03:36,560 --> 00:03:38,320 Speaker 1: could have done JP Moore than you could have done 71 00:03:38,360 --> 00:03:41,160 Speaker 1: Wells Fargo. And by the way, in retrospect, neither Wells 72 00:03:41,200 --> 00:03:44,480 Speaker 1: Fargo nor JP Morgan had a single quarter of reported 73 00:03:44,560 --> 00:03:47,640 Speaker 1: losses during that period. But did you sell them now? Are? 74 00:03:47,680 --> 00:03:49,520 Speaker 1: Do you only own junk down? Do you only own 75 00:03:49,560 --> 00:03:52,640 Speaker 1: things with five symbols? No, we've sold j JP Morgan 76 00:03:52,680 --> 00:03:54,800 Speaker 1: simply because it's you know, it's quadruple since then, but 77 00:03:55,320 --> 00:03:58,120 Speaker 1: we've we own and would buy today the Wells Fargo 78 00:03:58,160 --> 00:04:00,720 Speaker 1: because of the company's specific problem, which I think they 79 00:04:00,720 --> 00:04:03,880 Speaker 1: will grow out. What's the differential value between JPEOPLE Morgan. 80 00:04:03,960 --> 00:04:07,240 Speaker 1: What what ratio do you use to compare and contrast 81 00:04:07,600 --> 00:04:10,600 Speaker 1: JPM with WS We use both price to book and 82 00:04:10,720 --> 00:04:14,040 Speaker 1: price to earnings In both cases, Wells because of their mix. 83 00:04:15,720 --> 00:04:18,599 Speaker 1: Right now, they're trading almost at parody, but the proviser 84 00:04:18,760 --> 00:04:20,960 Speaker 1: is time. They usually Wells usually trades at almost a 85 00:04:21,000 --> 00:04:25,240 Speaker 1: fifty premium because it has a more stable book of businesses, mortgages. 86 00:04:25,320 --> 00:04:27,159 Speaker 1: It's it's kind of bread and butter lending where JP 87 00:04:27,200 --> 00:04:30,480 Speaker 1: Morgan is more trading. So you can buy Wells if 88 00:04:30,520 --> 00:04:34,360 Speaker 1: they get the same historic premium, you'll make on your money. Chris, 89 00:04:34,440 --> 00:04:35,920 Speaker 1: can we get a quick word from you on Apple 90 00:04:36,440 --> 00:04:38,400 Speaker 1: big launch light this week? I know you hold the stock, 91 00:04:38,680 --> 00:04:40,839 Speaker 1: do what are you looking for? You know, it's it's funny. 92 00:04:41,040 --> 00:04:43,000 Speaker 1: We're contrarians and it's so it's hard to sit here 93 00:04:43,000 --> 00:04:46,200 Speaker 1: and defend Apple. But it's just done everything right. It's 94 00:04:46,240 --> 00:04:50,040 Speaker 1: not terribly expensive. And what we love are two things 95 00:04:50,040 --> 00:04:51,640 Speaker 1: that people don't usually talk about, which is all the 96 00:04:51,760 --> 00:04:54,760 Speaker 1: cash that's coming back, and second the services business, which 97 00:04:54,760 --> 00:04:57,160 Speaker 1: has gone It's almost like Amazon Web Services, the hidden 98 00:04:57,200 --> 00:05:00,240 Speaker 1: jam of Amazon. Here you have Apple services Busines is 99 00:05:00,360 --> 00:05:03,440 Speaker 1: where they're selling apps and everything else, and that's gone 100 00:05:03,480 --> 00:05:06,320 Speaker 1: from zero to almost ten percent of the revenue, and 101 00:05:06,480 --> 00:05:09,720 Speaker 1: we think it's heading to the company revealing late last 102 00:05:09,720 --> 00:05:12,360 Speaker 1: week that some of the twi's coming through will hit 103 00:05:12,360 --> 00:05:14,000 Speaker 1: some of that products. The President is saying, that's an 104 00:05:14,000 --> 00:05:17,400 Speaker 1: easy solution to that on shore um Sammy for duck Ship. 105 00:05:17,720 --> 00:05:19,640 Speaker 1: I'm sure it's not that obvious for Apple and not 106 00:05:19,680 --> 00:05:22,640 Speaker 1: that simplistic kind that, but anything to you because the 107 00:05:22,720 --> 00:05:25,640 Speaker 1: problem with all this trade stuff is you have to 108 00:05:25,680 --> 00:05:29,200 Speaker 1: make multi year capital spending decisions based on stuff that 109 00:05:29,279 --> 00:05:31,159 Speaker 1: can change. So no company is going to do that 110 00:05:31,240 --> 00:05:33,880 Speaker 1: until we get some certainty there. And so that Jonathan 111 00:05:34,279 --> 00:05:36,720 Speaker 1: coming full circle, that's the big wild card in this 112 00:05:36,720 --> 00:05:39,520 Speaker 1: this March. There's sure buy backs and dividing growth support 113 00:05:39,600 --> 00:05:42,159 Speaker 1: the market into two thousand nineteen or you know it 114 00:05:42,200 --> 00:05:44,360 Speaker 1: has it, has it has or will there be a 115 00:05:44,480 --> 00:05:46,720 Speaker 1: change behavior? I don't think, you know. I think it's 116 00:05:46,760 --> 00:05:48,680 Speaker 1: continues to be a tail wind Tom, but I don't 117 00:05:48,720 --> 00:05:50,839 Speaker 1: think we need it. I think for the first time 118 00:05:50,880 --> 00:05:55,080 Speaker 1: since the crisis, we have increasing employment, increasing wages for 119 00:05:55,120 --> 00:05:57,479 Speaker 1: the first time. So you've got a bunch of tail winds, 120 00:05:57,520 --> 00:05:59,800 Speaker 1: of which is shared by backs. Are are simply one 121 00:05:59,880 --> 00:06:03,200 Speaker 1: of Chris, thank you, great to catch up with you. 122 00:06:17,880 --> 00:06:20,039 Speaker 1: Why don't you bring in James? He is one of 123 00:06:20,080 --> 00:06:24,360 Speaker 1: the accurate payrolls forecasters on the planet. You my son 124 00:06:24,400 --> 00:06:28,839 Speaker 1: have enjoined us from High Frequency Economics, The chief US economist, Jim, 125 00:06:28,880 --> 00:06:32,800 Speaker 1: what did you look for Friday and did you get it? Hi? John? Morning, 126 00:06:32,960 --> 00:06:35,279 Speaker 1: Morning Tom? And Well, it was actually a bit a 127 00:06:35,279 --> 00:06:37,760 Speaker 1: bit stronger on the peril side than expected, plus on 128 00:06:37,839 --> 00:06:40,800 Speaker 1: the on the weight side obviously as well. So I 129 00:06:40,839 --> 00:06:42,800 Speaker 1: mean they were they were pretty strong numbers. I mean, 130 00:06:42,800 --> 00:06:45,040 Speaker 1: obviously monthly numbers jump around a lot, but I mean 131 00:06:45,080 --> 00:06:47,640 Speaker 1: it's pretty unambiguous that we keep getting something in the 132 00:06:47,720 --> 00:06:50,120 Speaker 1: in the range of two thousand a month on jobs, 133 00:06:50,160 --> 00:06:53,720 Speaker 1: which even though an employment held in Friday's numbers, more 134 00:06:53,760 --> 00:06:56,680 Speaker 1: than enough overtime to keep unemployment coming down. Meanwhile, wages 135 00:06:56,680 --> 00:06:59,000 Speaker 1: are accelerating. Yeah, but Jim, there is this feeling and 136 00:06:59,040 --> 00:07:00,960 Speaker 1: I've called you one of the most thanks for forecasters 137 00:07:01,000 --> 00:07:03,040 Speaker 1: because you are. But there are many people out there 138 00:07:03,080 --> 00:07:05,240 Speaker 1: that say this has got a whole lot more predictable 139 00:07:05,240 --> 00:07:07,400 Speaker 1: over the last couple of years. And wage growth has 140 00:07:07,400 --> 00:07:10,480 Speaker 1: been pretty stable. Payrolls growth has been stable around two 141 00:07:10,840 --> 00:07:13,080 Speaker 1: thousand every single month. Can we break out to a 142 00:07:13,160 --> 00:07:17,000 Speaker 1: higher trend on wage growth? Jim, Well, I think the 143 00:07:17,040 --> 00:07:19,720 Speaker 1: trend has been moving up and we'll continue to move 144 00:07:19,800 --> 00:07:22,760 Speaker 1: up I mean, the two point nine percent year over 145 00:07:22,920 --> 00:07:26,800 Speaker 1: year we saw on Friday is a new high and 146 00:07:26,840 --> 00:07:28,120 Speaker 1: that's going to keep on going up. And I think 147 00:07:28,120 --> 00:07:30,040 Speaker 1: we've seen the same already in fact in the employment 148 00:07:30,120 --> 00:07:33,240 Speaker 1: cost in which if anything, is more comprehensive, and the 149 00:07:33,360 --> 00:07:36,000 Speaker 1: private wage number, and that report was already up to two. 150 00:07:36,720 --> 00:07:40,000 Speaker 1: So what's the sweat at the Fed? I mean, coming 151 00:07:40,000 --> 00:07:42,320 Speaker 1: off for Friday, what you thought made a nice splash 152 00:07:42,320 --> 00:07:44,920 Speaker 1: and you know, end of the weekend, make America great 153 00:07:44,960 --> 00:07:48,160 Speaker 1: again and all that, what's the level of sweat or 154 00:07:48,200 --> 00:07:50,960 Speaker 1: the change in the level of sweat at the Fed? 155 00:07:52,320 --> 00:07:55,200 Speaker 1: And well, I mean, like everyone else, I'm sure they're 156 00:07:55,440 --> 00:07:58,680 Speaker 1: they're watching the trade, trade war threats and trade tensions 157 00:07:58,720 --> 00:08:01,400 Speaker 1: as as a stuff. And the monitor in terms of 158 00:08:01,440 --> 00:08:05,080 Speaker 1: the labor market itself numbers on Friday, and I think, 159 00:08:05,120 --> 00:08:07,520 Speaker 1: I mean, what they're worrying about is ultimately unemployment keeps 160 00:08:07,520 --> 00:08:10,920 Speaker 1: on falling and the economy overheats. The unemployment rate at 161 00:08:10,960 --> 00:08:14,240 Speaker 1: three point nine is already below the media and fedeficial 162 00:08:14,320 --> 00:08:16,360 Speaker 1: estimate of what sustainable over the long run for and 163 00:08:16,360 --> 00:08:19,000 Speaker 1: a half percent. And while the inflation numbers right now, 164 00:08:19,080 --> 00:08:20,720 Speaker 1: and I would say even the wage numbers right now 165 00:08:20,920 --> 00:08:23,360 Speaker 1: are pretty much where they want to see them. I Mean, 166 00:08:23,360 --> 00:08:26,000 Speaker 1: the question is do they stop at these at these 167 00:08:26,040 --> 00:08:28,520 Speaker 1: at these readings or do they keep on accelerating because 168 00:08:28,560 --> 00:08:31,360 Speaker 1: unemployment is too low? So I think ultimately, yeah, they're 169 00:08:31,400 --> 00:08:33,440 Speaker 1: in terms of the labor market they're worrying about. Ultimately, 170 00:08:33,520 --> 00:08:36,840 Speaker 1: this is unsustainably strong. Jim, that Fed staff paper that 171 00:08:36,880 --> 00:08:39,280 Speaker 1: came out over the weekend at Jackson Hole, um, several 172 00:08:39,320 --> 00:08:41,920 Speaker 1: weekends back. Do you think that is the guide? Just 173 00:08:42,160 --> 00:08:46,520 Speaker 1: follow the unemployment right and does that make sense to you? Well? Historically, 174 00:08:46,840 --> 00:08:49,280 Speaker 1: I mean they've always put a lot of emphasis on 175 00:08:49,280 --> 00:08:52,120 Speaker 1: the unemployment rate is a key slock indicator. And of 176 00:08:52,120 --> 00:08:55,120 Speaker 1: course I mean broadly, I mean, what what are the 177 00:08:55,120 --> 00:08:58,880 Speaker 1: FED goals? FEDS goals, I mean they're full employment and 178 00:08:59,240 --> 00:09:02,920 Speaker 1: price stability, and I mean they're defining price full employment 179 00:09:03,120 --> 00:09:05,360 Speaker 1: right now at least is four and a half percent 180 00:09:05,440 --> 00:09:07,640 Speaker 1: unemployment rate over the long haul. So yeah, I mean 181 00:09:08,080 --> 00:09:10,160 Speaker 1: it's it's never been so simple that the only thing 182 00:09:10,200 --> 00:09:12,320 Speaker 1: that matters for reslation is the uneployment rate. But I 183 00:09:12,360 --> 00:09:15,439 Speaker 1: mean it it's clearly an important indicator from their perspective. Jim, 184 00:09:16,080 --> 00:09:21,119 Speaker 1: review for us the quality of the jobs being created, 185 00:09:21,200 --> 00:09:24,200 Speaker 1: I mean, if we make the assumption everybody got two 186 00:09:24,280 --> 00:09:27,680 Speaker 1: hundred thou months wrong because proper job growth was a 187 00:09:27,720 --> 00:09:35,040 Speaker 1: huddy whatever, that marginal job growth that's surprised even the optimusts. 188 00:09:35,320 --> 00:09:39,640 Speaker 1: Are they good jobs, and I think they're probably pretty 189 00:09:39,679 --> 00:09:43,720 Speaker 1: average jobs on average, in the sense that the some 190 00:09:43,880 --> 00:09:45,520 Speaker 1: of them are above average and some of them were 191 00:09:45,559 --> 00:09:48,080 Speaker 1: below average. And I think that's inevitable when you've got 192 00:09:48,120 --> 00:09:51,199 Speaker 1: a hundred and fifty million jobs in terms of the level, 193 00:09:51,240 --> 00:09:53,360 Speaker 1: I mean, half them are average and half the average. 194 00:09:53,400 --> 00:09:55,960 Speaker 1: And not just trying to be facetious here, but the 195 00:09:56,120 --> 00:09:57,840 Speaker 1: point is that when you look at average early earnings 196 00:09:57,840 --> 00:10:00,400 Speaker 1: going up two point nine, and that's a pure average, 197 00:10:00,960 --> 00:10:03,720 Speaker 1: so I mean, that's similar to what we're seeing, for instance, 198 00:10:03,720 --> 00:10:07,520 Speaker 1: in the employment cost index, which is a weighted index. 199 00:10:07,800 --> 00:10:09,319 Speaker 1: I mean, this is a little technical, but if you 200 00:10:09,360 --> 00:10:13,840 Speaker 1: were consistently seeing below average weights jobs created, you'd see 201 00:10:13,840 --> 00:10:16,120 Speaker 1: the average early earnings number, which is the pure average, 202 00:10:16,760 --> 00:10:19,760 Speaker 1: go up much much less than the employment cost index, 203 00:10:19,800 --> 00:10:21,920 Speaker 1: which is a fixed weighted index. But they're pretty much 204 00:10:21,920 --> 00:10:25,360 Speaker 1: consistent right now. So implication is, yeah, they're above average jobs, 205 00:10:25,360 --> 00:10:27,880 Speaker 1: and there are below average jobs, but on average, I mean, 206 00:10:27,920 --> 00:10:29,920 Speaker 1: the new jobs being created are probably not all that 207 00:10:30,000 --> 00:10:32,680 Speaker 1: different from the stock of jobs that's already out there 208 00:10:32,679 --> 00:10:34,360 Speaker 1: d and fifty million jobs that are already out there 209 00:10:34,679 --> 00:10:37,079 Speaker 1: at this stage of the cycle. Given what unemployment is, 210 00:10:37,320 --> 00:10:43,120 Speaker 1: where is this payroll's growth coming from? And well, I 211 00:10:43,160 --> 00:10:46,120 Speaker 1: mean it's across the board in terms of sectors, for sure. 212 00:10:46,600 --> 00:10:50,200 Speaker 1: And it's not as if when you hit the roughly 213 00:10:50,200 --> 00:10:52,120 Speaker 1: what full employment is, and of course there's no clear 214 00:10:52,200 --> 00:10:54,000 Speaker 1: right answer, and what full employment is, I mean, four 215 00:10:54,000 --> 00:10:57,720 Speaker 1: point five is in the FATS estimate for what stainable 216 00:10:57,720 --> 00:10:59,199 Speaker 1: over the long haul. I mean three point nine is 217 00:10:59,200 --> 00:11:01,000 Speaker 1: obviously a bit below of that. But it's not as 218 00:11:01,080 --> 00:11:04,199 Speaker 1: if you suddenly hit a wall where you run out 219 00:11:04,200 --> 00:11:07,360 Speaker 1: of workers. And I mean at this point of the cycle, 220 00:11:07,800 --> 00:11:12,200 Speaker 1: then certainly workers are harder to find, and gradually we 221 00:11:12,240 --> 00:11:14,600 Speaker 1: start seeing the wage numbers drift up. So I think 222 00:11:14,640 --> 00:11:17,160 Speaker 1: that's the point we're at. And I mean, I certainly 223 00:11:17,160 --> 00:11:19,319 Speaker 1: over time you would expect, I mean, the payroll numbers 224 00:11:19,320 --> 00:11:22,520 Speaker 1: to slow a bit just because companies can't find workers. 225 00:11:22,880 --> 00:11:25,600 Speaker 1: But I guess we asked this question, Jim, is because 226 00:11:25,679 --> 00:11:29,360 Speaker 1: I was told this two years ago. Yeah, although I 227 00:11:29,360 --> 00:11:31,720 Speaker 1: don't think anyone would have really said you suddenly hit 228 00:11:31,760 --> 00:11:35,400 Speaker 1: a wall that you suddenly can't employment grow goes from 229 00:11:35,400 --> 00:11:38,839 Speaker 1: two hundred thousand, expected to slow, expected to go down 230 00:11:38,880 --> 00:11:41,600 Speaker 1: towards a hundred thousand, expected to go to maintenance rights. 231 00:11:41,640 --> 00:11:43,920 Speaker 1: It didn't. I yeah, I don't know. I would have 232 00:11:44,040 --> 00:11:46,559 Speaker 1: questioned that. I mean, just because you've hit more or 233 00:11:46,640 --> 00:11:49,680 Speaker 1: less full employment. And again it's also plausible that maybe 234 00:11:49,679 --> 00:11:51,640 Speaker 1: instead of two d and months would be getting two 235 00:11:51,640 --> 00:11:53,439 Speaker 1: fifty a month right now. I mean, if if the 236 00:11:53,480 --> 00:11:56,760 Speaker 1: unemployment rate we're higher, and there's been a lot of 237 00:11:56,760 --> 00:11:59,880 Speaker 1: stimulats in the economy recently, growth is actually accelerated and 238 00:12:00,000 --> 00:12:01,959 Speaker 1: means well, I mean you are seeing the wage numbers 239 00:12:01,960 --> 00:12:04,280 Speaker 1: starting starting to pick up, so that's where the pressure 240 00:12:04,520 --> 00:12:07,640 Speaker 1: is coming through. Fifteen weeks ago, it was like, Okay, 241 00:12:07,640 --> 00:12:09,920 Speaker 1: this is as good as it gets. It will taper off. 242 00:12:10,240 --> 00:12:13,680 Speaker 1: Where have you adjusted your taper? Now? Have you? Have 243 00:12:13,800 --> 00:12:18,120 Speaker 1: you extended this good growth into Q four and even 244 00:12:18,160 --> 00:12:23,079 Speaker 1: into two thousand nineteen, and I haven't changed any numbers recently. 245 00:12:23,080 --> 00:12:25,200 Speaker 1: I mean, I've got three percent for the second half 246 00:12:25,200 --> 00:12:27,000 Speaker 1: of this year, so still pretty good. I mean, I 247 00:12:27,000 --> 00:12:29,720 Speaker 1: don't think the trend is over four percent, which is 248 00:12:29,720 --> 00:12:31,960 Speaker 1: what the Q two number was. I mean four two 249 00:12:32,320 --> 00:12:34,360 Speaker 1: for the second quarter. But when I've got three percent 250 00:12:34,440 --> 00:12:36,440 Speaker 1: for the second half, I mean that said, I think 251 00:12:36,440 --> 00:12:38,559 Speaker 1: the temptation would be if anything go up a bit 252 00:12:38,640 --> 00:12:41,240 Speaker 1: from from three percent in the second half. The momentum 253 00:12:41,320 --> 00:12:43,319 Speaker 1: it looks so good, I mean last week obviously, the 254 00:12:43,360 --> 00:12:46,640 Speaker 1: IM numbers that came out, I mean, the job dis 255 00:12:46,679 --> 00:12:50,360 Speaker 1: claims numbers are at their lowestans nineteen nine. But I 256 00:12:50,360 --> 00:12:53,360 Speaker 1: do think ultimately, I mean, Taper of course is the 257 00:12:53,720 --> 00:12:55,720 Speaker 1: sort of a monitor policy ward these days. But in 258 00:12:55,800 --> 00:12:59,239 Speaker 1: terms of growth, I mean, I think the fiscal stimulus 259 00:12:59,240 --> 00:13:02,480 Speaker 1: will start fading into two and I think it's a 260 00:13:02,559 --> 00:13:06,439 Speaker 1: fac keeps tightening every quarter that gradually montro policy becomes 261 00:13:06,600 --> 00:13:09,240 Speaker 1: less accommodative as well. So I think it's it's pretty 262 00:13:09,240 --> 00:13:11,439 Speaker 1: plausible that growth does start to slow by two thousand 263 00:13:11,480 --> 00:13:13,960 Speaker 1: and nineteen. Jimmal Sullivan, thank you so much with high 264 00:13:13,960 --> 00:13:31,719 Speaker 1: frequency economics, and now folks are definitive discussion today on 265 00:13:31,920 --> 00:13:36,679 Speaker 1: trade in the ramifications for you. Very lovely is always 266 00:13:36,720 --> 00:13:40,960 Speaker 1: powerful in intellect with the Peterson Institute for International Economics, 267 00:13:40,960 --> 00:13:44,160 Speaker 1: but the real joy is very Lovely combined with their 268 00:13:44,200 --> 00:13:47,240 Speaker 1: colleague Chad Bone, and the two of them almost it 269 00:13:47,320 --> 00:13:50,960 Speaker 1: seems writing every other day, maybe every three days, have 270 00:13:51,160 --> 00:13:53,840 Speaker 1: put out a body of work that I know has 271 00:13:53,880 --> 00:13:57,040 Speaker 1: made me smarter about the trade debate. Mary, what's the 272 00:13:57,080 --> 00:14:02,520 Speaker 1: next thing you write for? Peterson? Thanks so much for that. Well, 273 00:14:02,520 --> 00:14:06,560 Speaker 1: we're particularly looking at just the some total of what's 274 00:14:06,600 --> 00:14:10,640 Speaker 1: going on and how it will uh make American businesses 275 00:14:11,440 --> 00:14:17,599 Speaker 1: either less competitive and international marketplaces or um forced companies 276 00:14:17,600 --> 00:14:20,360 Speaker 1: to move some of their operations offshore. I think that's 277 00:14:20,360 --> 00:14:23,880 Speaker 1: the real challenge that we're seeing right now. We're looking 278 00:14:23,880 --> 00:14:27,360 Speaker 1: a little longer term, uh, you know, beyond day to 279 00:14:27,440 --> 00:14:30,880 Speaker 1: day movies in the market and thinking longer term about competitiveness. 280 00:14:30,920 --> 00:14:35,880 Speaker 1: If it's make America great again in amercantile thinking of 281 00:14:35,920 --> 00:14:39,800 Speaker 1: the president or neo mercantilist, I guess I should say, 282 00:14:40,080 --> 00:14:44,880 Speaker 1: is it make China week again? Can the President with 283 00:14:45,000 --> 00:14:49,680 Speaker 1: these actions diminish China g d P or throw them 284 00:14:49,680 --> 00:14:55,760 Speaker 1: into some form of recession? Well, it definitely can have 285 00:14:55,800 --> 00:15:00,160 Speaker 1: an effect on China. I think that that the you 286 00:15:00,360 --> 00:15:03,400 Speaker 1: that the US is powerful enough to get them to 287 00:15:03,480 --> 00:15:08,120 Speaker 1: their knees where they will just wholeheartedly accept Trump's demands 288 00:15:08,240 --> 00:15:13,240 Speaker 1: is wrong. However, our purchases of their manufactured grids. They're 289 00:15:13,240 --> 00:15:16,560 Speaker 1: only about three percent of their total revenue. It's important 290 00:15:16,560 --> 00:15:20,280 Speaker 1: in other ways however, to them, and they're always uh 291 00:15:20,600 --> 00:15:24,840 Speaker 1: have their own internal struggles that this can make worse. Um. 292 00:15:24,880 --> 00:15:28,160 Speaker 1: I think it is an attempt to hurt them to 293 00:15:28,280 --> 00:15:31,840 Speaker 1: get what we want. Unfortunately, even if we do hurt them, 294 00:15:31,880 --> 00:15:34,200 Speaker 1: we won't get what we want, which is some sanity 295 00:15:34,440 --> 00:15:38,640 Speaker 1: in terms of intellectual property regimes and treatment of our 296 00:15:39,320 --> 00:15:44,120 Speaker 1: intellectual property and technology. This is something that of course 297 00:15:44,160 --> 00:15:47,600 Speaker 1: we share with other countries such as Japan, the European Union. 298 00:15:48,480 --> 00:15:52,080 Speaker 1: But the distraction of trade is you in the combine 299 00:15:52,360 --> 00:15:54,440 Speaker 1: I think of Nick Lartey and the rest of Peterson. 300 00:15:54,960 --> 00:16:00,440 Speaker 1: Does the distraction of trade dramatically damage investment it by 301 00:16:00,600 --> 00:16:06,440 Speaker 1: US companies and particularly US multinationals. I've given US multinationals 302 00:16:06,520 --> 00:16:09,960 Speaker 1: now their heads must be spinning over where the next 303 00:16:10,120 --> 00:16:15,760 Speaker 1: marginal investment dollar goes. Yes, and there's certainly an attempt 304 00:16:15,760 --> 00:16:19,640 Speaker 1: by the administration to notn have US companies invest in 305 00:16:19,720 --> 00:16:23,080 Speaker 1: China and quote to bring the jobs home. Um, that 306 00:16:23,240 --> 00:16:26,400 Speaker 1: is a powerful I think at okay, But but Mary, Mary, 307 00:16:26,480 --> 00:16:28,400 Speaker 1: I just set up a new router at my home, 308 00:16:28,480 --> 00:16:32,640 Speaker 1: Thank you, Nextgear, and it was made in Vietnam. I 309 00:16:32,640 --> 00:16:35,000 Speaker 1: mean the debate and this is no fault of mery 310 00:16:35,040 --> 00:16:39,000 Speaker 1: lovely folks who teaches at Syracuse. It's not China, China, China, 311 00:16:39,600 --> 00:16:43,280 Speaker 1: But the debate in the media is always US China, Mary, 312 00:16:43,360 --> 00:16:46,760 Speaker 1: and you know, it's a much richer set of adjacenc 313 00:16:46,800 --> 00:16:49,760 Speaker 1: ease it is. And that's why we're worried about US 314 00:16:49,800 --> 00:16:52,560 Speaker 1: competitiveness because there's a it's a big world. There's lots 315 00:16:52,560 --> 00:16:56,320 Speaker 1: of other UH countries out there. If we look at 316 00:16:56,400 --> 00:17:01,840 Speaker 1: even US operations in China, about se of the goods 317 00:17:01,880 --> 00:17:05,160 Speaker 1: that they're selling are being sold into Asia. So how 318 00:17:05,200 --> 00:17:08,960 Speaker 1: would tariffs on imports back to the state stop those 319 00:17:09,000 --> 00:17:11,800 Speaker 1: companies are moving to Asia? It won't. Asia's where the 320 00:17:11,840 --> 00:17:14,520 Speaker 1: market growth is. It's where these companies need to be 321 00:17:14,680 --> 00:17:18,640 Speaker 1: to make sure that they're profitable UH and return value 322 00:17:18,680 --> 00:17:23,000 Speaker 1: for investors. So this bilateral focus of the president keeps 323 00:17:23,080 --> 00:17:25,879 Speaker 1: him from seeing the bigger game. Part of that is 324 00:17:25,880 --> 00:17:28,679 Speaker 1: seeing what our multinationals are doing abroad the other courses. 325 00:17:28,720 --> 00:17:30,640 Speaker 1: As you point out that there's a lot of other 326 00:17:31,119 --> 00:17:35,000 Speaker 1: UH GO income countries who are ready to either take 327 00:17:35,040 --> 00:17:37,920 Speaker 1: more investment or finish off the goods so that they 328 00:17:37,920 --> 00:17:41,760 Speaker 1: come from say Vietnam, even with Chinese components. I mean 329 00:17:41,840 --> 00:17:45,040 Speaker 1: within the micro economics are wedges and incentives. What are 330 00:17:45,040 --> 00:17:49,520 Speaker 1: the incentives now that the president's creating with Trunch one 331 00:17:49,840 --> 00:17:54,119 Speaker 1: of taxes and now Trunch two of trade taxes. What 332 00:17:54,359 --> 00:17:57,520 Speaker 1: is the key incentive there that people have to adapt 333 00:17:57,600 --> 00:18:01,440 Speaker 1: and adjust to. Well, it's going to raise the price 334 00:18:01,480 --> 00:18:04,560 Speaker 1: of bringing an intermediate goods to the United States, and 335 00:18:04,600 --> 00:18:10,280 Speaker 1: so will will reorient some uh certainly supply chains. As 336 00:18:10,440 --> 00:18:13,440 Speaker 1: you know, it's possible for them to simply import goods 337 00:18:13,440 --> 00:18:16,760 Speaker 1: from other countries, other low wage countries, or we can 338 00:18:16,840 --> 00:18:20,320 Speaker 1: produce it here at a higher cost. It's essentially producing 339 00:18:20,320 --> 00:18:23,440 Speaker 1: a production island for the United States, and that will 340 00:18:23,480 --> 00:18:28,159 Speaker 1: force companies to move production for sport outside the United States. 341 00:18:28,240 --> 00:18:30,440 Speaker 1: That's the dynamic that it's setting up, and that's really 342 00:18:30,480 --> 00:18:32,520 Speaker 1: not good for workers or for investors. I'm not going 343 00:18:32,560 --> 00:18:35,240 Speaker 1: to put out this chart because it's Monday. In my brains, Fried, 344 00:18:35,320 --> 00:18:37,560 Speaker 1: I'll put out the link to it. And Mary, this 345 00:18:37,640 --> 00:18:40,080 Speaker 1: is Paul Krugman, who you know, people go mental because 346 00:18:40,080 --> 00:18:43,040 Speaker 1: Professor Krugman is talking about this, this or this. This 347 00:18:43,119 --> 00:18:47,240 Speaker 1: is the Krugman wheelhouse. This is the lovely wheelhouse. Is well, 348 00:18:47,640 --> 00:18:50,760 Speaker 1: if you've got a dynamic on the y axis mary 349 00:18:50,920 --> 00:18:54,960 Speaker 1: of the price of imports coming in, and on the 350 00:18:55,000 --> 00:18:59,119 Speaker 1: other side you've got the units the volume of imports 351 00:18:59,160 --> 00:19:03,400 Speaker 1: coming in, you have a demand for imports based on 352 00:19:03,440 --> 00:19:08,359 Speaker 1: the price of them and the units of them, and 353 00:19:08,440 --> 00:19:10,760 Speaker 1: you end up in a trade for war with what 354 00:19:10,880 --> 00:19:15,439 Speaker 1: Professor Krugman you would call a welfare loss. What's the 355 00:19:15,520 --> 00:19:20,440 Speaker 1: welfare loss to our listeners, Well, it's basically that we're 356 00:19:20,480 --> 00:19:22,920 Speaker 1: going to be forced to pay more for inputs and 357 00:19:22,960 --> 00:19:25,480 Speaker 1: will drive up the cost of our goods. And people 358 00:19:25,480 --> 00:19:28,560 Speaker 1: will say, well that will create jobs. Yes, it will 359 00:19:28,600 --> 00:19:31,160 Speaker 1: create jobs in the protected in industry, but it has 360 00:19:31,200 --> 00:19:33,760 Speaker 1: to take jobs from some place else. When I have 361 00:19:33,880 --> 00:19:37,200 Speaker 1: to pay more for my children's clothing, or for toys, 362 00:19:37,359 --> 00:19:39,879 Speaker 1: or for mobile phones, all of which are threatened with 363 00:19:39,920 --> 00:19:43,000 Speaker 1: the last trance of Chinese art, that means that I 364 00:19:43,040 --> 00:19:47,840 Speaker 1: can't buy myself a nice dress at the store, or upgrade, 365 00:19:47,880 --> 00:19:50,760 Speaker 1: you know, upgrade my router, or buy or you know, 366 00:19:50,920 --> 00:19:53,840 Speaker 1: buy a new car. That means jobs are not created 367 00:19:53,840 --> 00:19:57,959 Speaker 1: in those other industries. So basically you see the first thing, Oh, 368 00:19:58,000 --> 00:20:01,520 Speaker 1: well there's a job created in technic industry. X. Well, 369 00:20:01,560 --> 00:20:03,960 Speaker 1: you failed to seize the job that wasn't created in 370 00:20:04,000 --> 00:20:07,080 Speaker 1: another industry. And those other industries tend to be the 371 00:20:07,119 --> 00:20:10,400 Speaker 1: export industries that pay more, they're firm to do more, 372 00:20:10,520 --> 00:20:12,760 Speaker 1: R and D, and frankly their firms that are going 373 00:20:12,800 --> 00:20:15,880 Speaker 1: to drive innovation in the future. So we're really just 374 00:20:16,200 --> 00:20:20,000 Speaker 1: hampering ourselves in the future generations beautifully explained. I feel 375 00:20:20,040 --> 00:20:22,120 Speaker 1: like it's like, this is not like ECON one O one. 376 00:20:22,160 --> 00:20:24,240 Speaker 1: It's like ECON two or three or two oh four. 377 00:20:24,840 --> 00:20:28,639 Speaker 1: But within it, Mary is the idea of the marginal 378 00:20:28,840 --> 00:20:32,800 Speaker 1: or the next dollar I spend, or the next tradeable item. 379 00:20:33,119 --> 00:20:36,920 Speaker 1: When the President looks at the blunt instrument of car sales, 380 00:20:37,040 --> 00:20:40,359 Speaker 1: Germany bad, We're good. I mean, the simplistic tone. And 381 00:20:40,440 --> 00:20:43,280 Speaker 1: that's sort of criticism of President Trump, folks, it's just 382 00:20:43,359 --> 00:20:48,800 Speaker 1: a fact. It's a simplistic analysis. Drag President Trump over 383 00:20:48,800 --> 00:20:52,399 Speaker 1: to the dynamic space that Mary Lovely is in. Where's 384 00:20:52,440 --> 00:20:59,200 Speaker 1: the complexity of that simplistic debate? Well, where is the complexity? 385 00:20:59,240 --> 00:21:01,080 Speaker 1: I think there are a lot of people who are 386 00:21:01,119 --> 00:21:03,600 Speaker 1: trying to explain this to the president to make their 387 00:21:03,680 --> 00:21:07,639 Speaker 1: views heard. We saw many many companies UH testifying and 388 00:21:08,160 --> 00:21:10,760 Speaker 1: the hearings that were held for this latest tront of 389 00:21:11,280 --> 00:21:16,240 Speaker 1: taxes against Chinese imports. We saw tens of thousands of 390 00:21:16,280 --> 00:21:19,040 Speaker 1: companies asked for exemptions from the stealing a movement of terror. 391 00:21:19,680 --> 00:21:22,199 Speaker 1: So the business and you know world is trying to 392 00:21:22,240 --> 00:21:24,640 Speaker 1: get the message out this is not good for us. 393 00:21:25,480 --> 00:21:27,520 Speaker 1: You're hurting us in terms of the price of the 394 00:21:27,560 --> 00:21:31,000 Speaker 1: goods that we need to produce the US and eventually 395 00:21:31,080 --> 00:21:33,560 Speaker 1: it will show up in jobs. This has been wonderful, 396 00:21:33,640 --> 00:21:37,119 Speaker 1: very lovely. Thank you so much, greatly appreciate your attendance 397 00:21:37,160 --> 00:21:39,920 Speaker 1: on Bloomberg surveillance over the last number of weeks. Can't 398 00:21:39,960 --> 00:21:56,160 Speaker 1: say enough about what they're doing at Peterson h It's 399 00:21:56,160 --> 00:21:58,879 Speaker 1: a book's collusion. How central bankers ring the world know me? 400 00:21:58,960 --> 00:22:01,680 Speaker 1: Prints with us have been You can about an international 401 00:22:01,760 --> 00:22:05,520 Speaker 1: focus there not me James Diamond wanders in on page eighteen, 402 00:22:05,920 --> 00:22:08,480 Speaker 1: and a compare and contrast of the JP Morgan bear 403 00:22:08,520 --> 00:22:12,640 Speaker 1: Stearns effort with the United States of America government versus 404 00:22:12,640 --> 00:22:16,879 Speaker 1: stimulus effects and bail out effects of the international economy. 405 00:22:17,119 --> 00:22:20,200 Speaker 1: From where you sit, what is the state of America banking? 406 00:22:20,480 --> 00:22:24,280 Speaker 1: Are they truly too big to fail? Um? They remain 407 00:22:24,359 --> 00:22:26,360 Speaker 1: too big to fail? Its ironic actually worked for both 408 00:22:26,359 --> 00:22:29,080 Speaker 1: of those from um, they're they're too big to fail 409 00:22:29,160 --> 00:22:32,239 Speaker 1: because they actually existed on the subsidy. I mean in 410 00:22:32,280 --> 00:22:34,840 Speaker 1: the four and a half trillion at the tight now 411 00:22:34,880 --> 00:22:37,040 Speaker 1: four point two trillion of the said that the cheap 412 00:22:37,040 --> 00:22:38,520 Speaker 1: money and so forth, they were able to sort of 413 00:22:38,600 --> 00:22:41,280 Speaker 1: like bring themselves back from the frank. But in the process, UM, 414 00:22:41,320 --> 00:22:44,640 Speaker 1: the larger banks have collectively become larger. Uh. And there 415 00:22:44,760 --> 00:22:48,359 Speaker 1: was an ask frank past that was the postestensibly reduced 416 00:22:48,359 --> 00:22:50,120 Speaker 1: some of their risk and at least I mentioned before, 417 00:22:50,119 --> 00:22:53,840 Speaker 1: there has been something leveraging throughout. However, they still remain 418 00:22:53,920 --> 00:22:56,280 Speaker 1: reliant on that supply of money, on the quantity of 419 00:22:56,359 --> 00:22:58,639 Speaker 1: using that has propped up. So the treasury assets that 420 00:22:58,680 --> 00:23:00,639 Speaker 1: have gone through them, the mortgage assets have gone through them. 421 00:23:00,720 --> 00:23:03,720 Speaker 1: How they're reevaluating and half over the years those assets up, 422 00:23:03,800 --> 00:23:06,760 Speaker 1: so they're not as healthy as they they've just had 423 00:23:06,760 --> 00:23:10,480 Speaker 1: more money. But within your book Collusion, there's no chapter 424 00:23:10,760 --> 00:23:14,479 Speaker 1: on Canada. What's wrong with the Canadian system of like 425 00:23:14,560 --> 00:23:18,520 Speaker 1: five or six or seven banks? Um, you know, the 426 00:23:19,160 --> 00:23:21,119 Speaker 1: reason I don't have a chapter on on Canada is 427 00:23:21,119 --> 00:23:22,880 Speaker 1: because they didn't they didn't really rate in the whole 428 00:23:22,880 --> 00:23:25,560 Speaker 1: sort of quantitative easing of the rest of UM. The 429 00:23:25,600 --> 00:23:28,439 Speaker 1: major G seven countries that I and plus China that 430 00:23:28,480 --> 00:23:30,199 Speaker 1: I do look at as the major central banks in 431 00:23:30,280 --> 00:23:34,720 Speaker 1: terms of creating the electronic money through this process. UM so, 432 00:23:34,760 --> 00:23:37,760 Speaker 1: I mean they had a more stable and and less 433 00:23:38,119 --> 00:23:40,800 Speaker 1: leverage banking system to begin with. They weren't actually at 434 00:23:40,840 --> 00:23:43,080 Speaker 1: the UM you know, sort of crux of the crisis 435 00:23:43,160 --> 00:23:45,960 Speaker 1: when it happened, Emerging markets were much in paying. Canada 436 00:23:46,000 --> 00:23:48,199 Speaker 1: was to an extent and pain um you know, Europe 437 00:23:48,200 --> 00:23:50,320 Speaker 1: was in major pain and became still because of Greece, 438 00:23:50,359 --> 00:23:52,600 Speaker 1: because of other debt problems, because of major bank problems 439 00:23:52,600 --> 00:23:55,520 Speaker 1: and things like Deutschaum which continue and so forth. So 440 00:23:55,720 --> 00:23:58,080 Speaker 1: there were just more problems throughout some of the other 441 00:23:58,080 --> 00:24:03,080 Speaker 1: banking systems, and Canadians banks have been just relatively less 442 00:24:03,119 --> 00:24:06,000 Speaker 1: help than more stable going into this period. You know, 443 00:24:06,400 --> 00:24:09,439 Speaker 1: as we reflect on what happened ten years ago, I 444 00:24:09,520 --> 00:24:12,440 Speaker 1: have to wonder about the risk that has moved out 445 00:24:12,520 --> 00:24:15,960 Speaker 1: of the banking system and into the asset management world. 446 00:24:16,040 --> 00:24:17,880 Speaker 1: And there's been a lot of discussion about this, whether 447 00:24:17,920 --> 00:24:20,000 Speaker 1: it's private equity firms taking a lot of a lot 448 00:24:20,080 --> 00:24:23,119 Speaker 1: of the direct lending too smaller and mid sized businesses 449 00:24:23,400 --> 00:24:27,560 Speaker 1: that big banks once did. How concerned are you that 450 00:24:27,560 --> 00:24:32,119 Speaker 1: that is the next front lines of whatever crisis emerges. 451 00:24:33,320 --> 00:24:36,160 Speaker 1: That is such an excellent question. UM, it's it's at 452 00:24:36,200 --> 00:24:38,440 Speaker 1: the front lines, because if we have any kind of 453 00:24:38,760 --> 00:24:43,440 Speaker 1: unraveling UM through different points of possibility, whether it's geo politics, 454 00:24:43,440 --> 00:24:46,200 Speaker 1: whether that's you know, emerging market debt of false, corporate 455 00:24:46,200 --> 00:24:48,040 Speaker 1: debt of false. We've seen it in the US non 456 00:24:48,480 --> 00:24:51,800 Speaker 1: UH financial corporates have almost doubled from from three point 457 00:24:51,840 --> 00:24:53,920 Speaker 1: to trillion debt to six point two one trillion said 458 00:24:53,920 --> 00:24:55,880 Speaker 1: over this period, and so forth, UM and and these 459 00:24:55,920 --> 00:24:58,399 Speaker 1: asset management companies have grown on the back of what 460 00:24:58,520 --> 00:25:01,640 Speaker 1: has been a bull market that has been largely artificially 461 00:25:01,680 --> 00:25:04,720 Speaker 1: injected by quantity using and the results of that money 462 00:25:04,720 --> 00:25:07,159 Speaker 1: coming in and and and and investors and speculators and 463 00:25:07,240 --> 00:25:09,800 Speaker 1: these funds looking for returns on the back of that money. 464 00:25:09,840 --> 00:25:12,920 Speaker 1: So if that unravels, then the returns UM that these 465 00:25:12,920 --> 00:25:15,920 Speaker 1: growing asset management companies have been producing will start to 466 00:25:16,040 --> 00:25:18,600 Speaker 1: unravel as well. When debt starts to If it starts 467 00:25:18,640 --> 00:25:20,640 Speaker 1: to default, it takes money therefore out of the stock 468 00:25:20,680 --> 00:25:23,119 Speaker 1: market to pay for UM the liabilities of that debt 469 00:25:23,160 --> 00:25:25,600 Speaker 1: and so forth, and it becomes this sort of circular cascade, 470 00:25:25,600 --> 00:25:28,680 Speaker 1: and that ultimately means that all of these purchases, these 471 00:25:28,680 --> 00:25:30,920 Speaker 1: asset management companies and the larger ones that have grown 472 00:25:31,040 --> 00:25:33,560 Speaker 1: that purchased these assets over the years, have to start 473 00:25:33,600 --> 00:25:36,240 Speaker 1: seeing losses and have to start taking money out, um 474 00:25:36,280 --> 00:25:39,880 Speaker 1: you know, for redemptions from some of their customers as well. Well. 475 00:25:40,040 --> 00:25:42,640 Speaker 1: I guess that. Then the follow up question is are 476 00:25:42,720 --> 00:25:46,199 Speaker 1: any of these asset managers systemically important or is this 477 00:25:46,280 --> 00:25:49,280 Speaker 1: just sort of uh, this sort of cycle of liquidity 478 00:25:49,320 --> 00:25:53,639 Speaker 1: withdrawal that happens anytime there's a market sell off. The 479 00:25:53,680 --> 00:25:56,399 Speaker 1: reason they are more systemically important than they were, and 480 00:25:56,440 --> 00:25:59,000 Speaker 1: of course they're not insured, so these assets are not 481 00:25:59,080 --> 00:26:00,760 Speaker 1: you have guys see insure, and there's no unit of 482 00:26:00,920 --> 00:26:04,200 Speaker 1: government tied to them. Um. So as a result, that's 483 00:26:04,200 --> 00:26:06,760 Speaker 1: whether a bit more dangerous. It is soundly important because 484 00:26:06,800 --> 00:26:08,520 Speaker 1: they have bought a lot of the assets they've been 485 00:26:08,600 --> 00:26:10,399 Speaker 1: part of, you know, so the party of inflating on 486 00:26:10,440 --> 00:26:12,880 Speaker 1: the back of achieved money that has been created. Um. 487 00:26:12,880 --> 00:26:15,680 Speaker 1: But but we don't necessarily don't have to bail them out. Okay, 488 00:26:15,680 --> 00:26:18,160 Speaker 1: even nomi can't there be a good outcoming. And you've 489 00:26:18,160 --> 00:26:22,919 Speaker 1: been the great critic of the process of methodology of 490 00:26:23,200 --> 00:26:27,280 Speaker 1: developed countries solving the problem whatever the prices down the 491 00:26:27,400 --> 00:26:31,240 Speaker 1: road and wherever that price travels. But can't there be 492 00:26:31,320 --> 00:26:34,480 Speaker 1: an if you and Chairman Bernanke were to sit down together, 493 00:26:35,119 --> 00:26:38,280 Speaker 1: can't there be a constructive outcome to the financial system 494 00:26:38,359 --> 00:26:41,760 Speaker 1: or do you just throw in the towel. We'll have 495 00:26:41,840 --> 00:26:44,560 Speaker 1: to look at the financial system and the general economies 496 00:26:44,600 --> 00:26:47,480 Speaker 1: in combination, and I think some there there can be 497 00:26:47,560 --> 00:26:50,560 Speaker 1: solutions and even unlined possibilities to what we have. What 498 00:26:50,560 --> 00:26:54,399 Speaker 1: are those online possibilities right now? Well, well, one of 499 00:26:54,400 --> 00:26:56,560 Speaker 1: my possibilis right now, are you know some rads go 500 00:26:56,680 --> 00:27:00,320 Speaker 1: too higher, or there's there's there's there's currency protections throughout 501 00:27:00,359 --> 00:27:02,639 Speaker 1: the world, and that basically and stills just you know, 502 00:27:02,720 --> 00:27:05,040 Speaker 1: sort of freeze um that that that's that's a that's 503 00:27:05,040 --> 00:27:07,159 Speaker 1: a far case scenario because of other factors. But I 504 00:27:07,240 --> 00:27:09,640 Speaker 1: think you can solve some of that by going back 505 00:27:09,680 --> 00:27:11,800 Speaker 1: to the core of why supposedly this money was created 506 00:27:11,800 --> 00:27:14,480 Speaker 1: to begin with, is created to to basically inflate the economy. 507 00:27:14,720 --> 00:27:19,080 Speaker 1: Even though that we can differ through that. We can 508 00:27:19,119 --> 00:27:21,200 Speaker 1: basically say, look, there's all these debt in different countries 509 00:27:21,200 --> 00:27:25,320 Speaker 1: where it's BCB creating at the advantages and and and deflected. 510 00:27:25,400 --> 00:27:28,080 Speaker 1: Move it to more infrastructure, more long term, more sort 511 00:27:28,119 --> 00:27:30,960 Speaker 1: of sustainable, and actually follow that money. Right now, if 512 00:27:31,000 --> 00:27:33,040 Speaker 1: you follow the money, you know the lines are all 513 00:27:33,080 --> 00:27:35,119 Speaker 1: the correlation and causation as to the markets. But if 514 00:27:35,119 --> 00:27:38,119 Speaker 1: you follow it into sort of real long termustainable private 515 00:27:38,320 --> 00:27:42,600 Speaker 1: investment developments or you get a more structured future. Do 516 00:27:42,720 --> 00:27:47,240 Speaker 1: you just assume no, do you just assume stronger dollar 517 00:27:47,800 --> 00:27:53,520 Speaker 1: In this great unlined um, the dollar is tends to 518 00:27:53,520 --> 00:27:55,639 Speaker 1: be the recipient and the great unlined just because of 519 00:27:55,720 --> 00:27:58,280 Speaker 1: the flight to tow qualities like to safety that's perceived 520 00:27:58,320 --> 00:28:00,479 Speaker 1: in the fact that it remains the reserve currents. Throughout 521 00:28:00,480 --> 00:28:02,960 Speaker 1: this decade. There has been more movement to other currencies 522 00:28:03,000 --> 00:28:04,639 Speaker 1: at the trade alliances and so forth, and some of 523 00:28:04,640 --> 00:28:06,960 Speaker 1: the trade woards will continue to make that happen. However, 524 00:28:07,000 --> 00:28:08,880 Speaker 1: the dollar still remains at the top of that pile. 525 00:28:08,960 --> 00:28:11,919 Speaker 1: So if there's an acute problem, the dollar does go 526 00:28:12,000 --> 00:28:14,240 Speaker 1: up at Then in the wake of the crisis, the 527 00:28:14,280 --> 00:28:18,520 Speaker 1: dollar got basically creamed right away because of the fact 528 00:28:18,520 --> 00:28:21,119 Speaker 1: that it started financials the US. It really depends on 529 00:28:21,160 --> 00:28:23,520 Speaker 1: how it how It also plays out me, thank you 530 00:28:23,560 --> 00:28:27,080 Speaker 1: so many friends, all the President's bankers, and she follows 531 00:28:27,119 --> 00:28:31,080 Speaker 1: with a really terse two fifty pages, two hundred fifty 532 00:28:31,160 --> 00:28:36,000 Speaker 1: six pages collusion, How central bankers rigged the world. Very controversial. 533 00:28:43,320 --> 00:28:47,520 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 534 00:28:47,600 --> 00:28:52,920 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 535 00:28:52,960 --> 00:28:57,200 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 536 00:28:57,200 --> 00:29:01,080 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg 537 00:29:01,160 --> 00:29:01,440 Speaker 1: Radio