WEBVTT - Surveillance: Trade Wars Would Be a Disaster, Goolsbee Says 0:00:00.080 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:27.400 Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.800 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:49.400 of course on the Bloomberg. Dean Current's with us. He's 0:00:49.400 --> 0:00:51.400 the CEO of Macro Risk Advisors. He joins us on 0:00:51.400 --> 0:00:54.280 the Spectrum Enterprise phone line, Spectrum Entro price nationwide fiber 0:00:54.280 --> 0:00:57.840 based network and I infrastructure solutions, and deemed great to 0:00:57.880 --> 0:01:00.120 have you with us. Yes, good morning, Thank you. We'll 0:01:00.120 --> 0:01:01.720 get to Volatilion a moment, but let me start with 0:01:01.760 --> 0:01:03.400 the speech. I know that you, like so many others, 0:01:03.440 --> 0:01:05.560 were lending an ear to that speech, and I wonderstand 0:01:05.560 --> 0:01:08.040 how you interpreted how you, as an investor, interpreted what 0:01:08.080 --> 0:01:11.920 the President had to say last Friday. Well, it's a 0:01:11.959 --> 0:01:16.280 continuation of some of the more nationalist America First policies 0:01:16.319 --> 0:01:20.080 that he's espoused and the essentially that he believes is 0:01:20.120 --> 0:01:23.560 the mandate that got him into office. Um, what these 0:01:24.000 --> 0:01:28.440 policies mean for markets? Uh, clearly you can paint a 0:01:28.480 --> 0:01:32.280 picture of a negative outcome from markets. Of course, so far, 0:01:32.360 --> 0:01:37.440 there's really been very little materialization of risk. Um. And uh, 0:01:38.040 --> 0:01:41.679 you know, these these political type sources of volatility have 0:01:41.800 --> 0:01:45.400 been increasing with with bregnant last year, the Trump upset 0:01:45.880 --> 0:01:49.640 and a very heavy calendar of elections in Europe. It's 0:01:49.760 --> 0:01:53.600 very challenging to know how and when some of these 0:01:53.680 --> 0:01:56.960 risks will make their way into markets, and so investors 0:01:57.000 --> 0:01:58.920 are you know, it could be in for a bumpy 0:01:59.000 --> 0:02:01.000 ride this year. It's gonna be Uh, it's going to 0:02:01.040 --> 0:02:04.000 be challenging. When you look at sources of volatilities, you say, 0:02:04.400 --> 0:02:07.760 are the political type ones the largest? They looming, the largest, 0:02:08.440 --> 0:02:13.280 taking up the most space. They are there in this category. 0:02:13.360 --> 0:02:15.799 I like to call it non market market risks. In 0:02:15.840 --> 0:02:19.160 other words, it's it's not the typical kind of risk 0:02:19.200 --> 0:02:24.080 that that the investors are comfortable with discounting. Um, it's there. Uh. 0:02:24.840 --> 0:02:29.720 Sometimes things happen for reasons that even in advance, you 0:02:30.040 --> 0:02:32.919 believe that the economic outcome won't be a good one, UH. 0:02:32.960 --> 0:02:37.040 For for Brexit, folks argued very strenuously and I would UH, 0:02:37.200 --> 0:02:40.760 I would contend rightly that long term this was not 0:02:40.840 --> 0:02:44.800 the right outcome for the UK, for the EU, and 0:02:44.880 --> 0:02:49.120 yet the citizenry was enraged enough to, you know, to 0:02:49.200 --> 0:02:50.800 vote for the exit. And I think the same as 0:02:51.000 --> 0:02:55.440 is true UH for Trump. For investors and at Macro 0:02:55.520 --> 0:03:01.440 Risk Advisors, we help investors hedge very often. And when 0:03:01.440 --> 0:03:04.880 you're contemplating hedging, of course, you're trying to weigh the 0:03:05.240 --> 0:03:08.040 risks in the market versus the cost of the insurance 0:03:08.160 --> 0:03:11.720 that you're you're buying. And in the last six weeks 0:03:11.800 --> 0:03:15.160 or so, even though we've been consumed by tweets and 0:03:15.480 --> 0:03:20.800 uncertainty on the geopolitical UH landscape, the risks in the 0:03:20.840 --> 0:03:23.720 market that the day to day fluctuations have been quite minimal. 0:03:24.040 --> 0:03:26.240 And so for the folks that did buy hedges, that 0:03:26.320 --> 0:03:30.040 did expand option premium, UH, they've certainly not been rewarded. 0:03:30.400 --> 0:03:33.200 And what that's done is it's continued to weigh on 0:03:33.400 --> 0:03:38.640 the VIX index of Folatility levels continue to decline. When 0:03:38.680 --> 0:03:40.960 when you're looking at this particular type of risk, how 0:03:41.040 --> 0:03:42.920 challenging is it? What what what investor is saying, so, what's 0:03:42.920 --> 0:03:44.800 their biggest concern they're bringing to you when they're when 0:03:44.800 --> 0:03:46.640 they're wondering about how to navigate this kind of non 0:03:46.680 --> 0:03:49.680 market market risk as you call it. Yeah, I think, um, 0:03:49.880 --> 0:03:54.640 it's so unpredictable. He's unpredictable. Um, what version of Trump 0:03:54.640 --> 0:03:58.240 policies our market is going to get? And Uh, in 0:03:58.280 --> 0:04:04.000 the last six eight weeks we've seen uh refleationary enthusiasm 0:04:04.040 --> 0:04:06.800 almost where where the view of Trump is a tax cutter, 0:04:06.920 --> 0:04:11.400 as a source of deregulation, as someone who can rekindle 0:04:11.440 --> 0:04:15.480 animal animal spirits that may have been suppressed during the 0:04:15.720 --> 0:04:20.160 post crisis time frame. So that's the good side. And 0:04:20.200 --> 0:04:22.159 of course markets have priced in quite a bit of 0:04:22.200 --> 0:04:25.640 that already, and the investors I speak to are grappling 0:04:25.640 --> 0:04:27.599 with the question of is it too much too soon? 0:04:28.400 --> 0:04:32.239 Will some of the policies ultimately emerged in a protectionist fashion, 0:04:33.600 --> 0:04:36.680 a trade war with China? These are bigger picture issues 0:04:36.720 --> 0:04:40.600 that you know, certainly UH confound market participants. And then 0:04:40.600 --> 0:04:42.240 the other thing I would just add, I think this 0:04:42.360 --> 0:04:46.719 is really really important is the interaction between fiscal and 0:04:46.760 --> 0:04:51.680 monetary policy has become considerably more complicated. Trump makes Janet 0:04:51.720 --> 0:04:55.080 Yellen's job much harder than it already was. And for 0:04:55.120 --> 0:04:57.600 a long time, the central banks were the only game 0:04:57.640 --> 0:05:01.840 in town. Uh, there's an exhaustion I think among investors 0:05:01.880 --> 0:05:07.680 globally with a force of monetary policy. But already Yelling 0:05:07.760 --> 0:05:11.800 and her counterparts at the FED are trying to articulate 0:05:11.839 --> 0:05:15.080 that they need to anticipate potential inflation through some of 0:05:15.080 --> 0:05:17.920 the Trump policy and briss when JP Morgan said they 0:05:17.960 --> 0:05:21.200 were decidedly focused on the path to some form of 0:05:21.279 --> 0:05:24.479 fiscal stimulus. Good morning everyone, Bloomberg Surveillance from New York. 0:05:24.720 --> 0:05:29.200 David gurn Tom Keen in the same studio. It's been 0:05:29.240 --> 0:05:32.760 New York. It's been a while, like weeks months, den't 0:05:32.760 --> 0:05:35.200 current it with us? With a math of correlation and 0:05:35.279 --> 0:05:38.840 volatility with Macro Risk Advisor's Dean. One of my great 0:05:38.880 --> 0:05:43.440 themes in Davos was the uncertainty within, or the uncertainty 0:05:43.720 --> 0:05:48.960 upon or the uncertainty about the uncertainty. It's a little 0:05:48.960 --> 0:05:52.719 bit like the volatility of the volatility. Tell us about 0:05:52.800 --> 0:05:56.480 that relationship. What are pros trying to do when they 0:05:56.520 --> 0:06:02.359 trade the volvo? Right? This is a nuanced point, but 0:06:02.640 --> 0:06:05.360 I think it's actually quite important. UM. We we spend 0:06:05.400 --> 0:06:09.640 our time UH studying not just volatility, but the correlation 0:06:09.720 --> 0:06:14.320 profile of sectors of stocks in UM assets like the 0:06:14.440 --> 0:06:17.520 SMP five hundred and an important point is that the 0:06:17.520 --> 0:06:22.200 Trump administration has created a huge sector divergence. At least 0:06:22.240 --> 0:06:24.200 in the first eight weeks or so, you had your 0:06:24.560 --> 0:06:28.960 reflationary type sectors things like the XLF, which have skyrocketed 0:06:29.360 --> 0:06:33.160 post the post the wind along with interest rates. And 0:06:33.200 --> 0:06:34.720 then you have the other side of it, which is 0:06:34.760 --> 0:06:40.680 the more disinflation defensive UH sectors, things like consumer staples, 0:06:40.720 --> 0:06:44.360 things like UH utilities, and you know the the I 0:06:44.440 --> 0:06:47.799 R and d X and so again, the the underneath 0:06:47.800 --> 0:06:50.200 the hood of this very low VIX is a lot 0:06:50.200 --> 0:06:53.680 of sector action and UH. And I think that UM 0:06:53.680 --> 0:06:56.560 and this is where your quote vol of vol question 0:06:56.640 --> 0:06:59.920 comes in. Even though the VIX is at twelve, it's 0:07:00.000 --> 0:07:02.760 certainly not going to spike down to six. But I 0:07:02.839 --> 0:07:06.039 do think that investors are under appreciating the potential for 0:07:06.120 --> 0:07:09.159 a more correlated move in stock. And then math guy, 0:07:09.200 --> 0:07:11.400 I want you to take it over to uncertainty where 0:07:11.440 --> 0:07:15.120 you can't create the probability distribution, you can't do the mathematics. 0:07:15.360 --> 0:07:19.840 If we talk about Trump uncertainty. Whatever our politics is, 0:07:19.840 --> 0:07:24.160 is there uncertainty upon uncertainty from where you set. I 0:07:24.240 --> 0:07:26.600 really believe that's the key thing, and that's what's changed 0:07:26.640 --> 0:07:28.840 in the last eight weeks. And again that's what I 0:07:28.840 --> 0:07:31.560 would argue the low VIX does not properly account for. 0:07:32.000 --> 0:07:34.320 It's a little backward looking the vix. It's looking at 0:07:34.680 --> 0:07:37.880 realize volatility and pricing options as if that will continue 0:07:38.360 --> 0:07:41.320 the uncertainty factor with Trump. Again, I'll tie it back 0:07:41.360 --> 0:07:45.280 to how it complicates the complicates the mission of the 0:07:45.320 --> 0:07:50.160 central banks by introducing this potential reflation or even inflationary 0:07:50.160 --> 0:07:53.000 impulse at a time when the business cycle is so 0:07:53.080 --> 0:07:56.640 old and four point nine percent unemployment. Yelling said it herself. 0:07:56.720 --> 0:08:00.640 Is it appropriate to throw a trillion dollars of stimulus 0:08:01.240 --> 0:08:03.960 at a business uh, you know, during the late stages 0:08:04.000 --> 0:08:06.520 of a business cycle, when we're already at four point 0:08:06.600 --> 0:08:09.280 nine percent unemployment? And what does that do? What does 0:08:09.320 --> 0:08:12.040 it do for you know, potential inflationary impulse? And how 0:08:12.120 --> 0:08:15.000 might she have to react? I think that's very challenging 0:08:15.040 --> 0:08:17.840 for investors at this point. That was fabulous, Thank you 0:08:17.880 --> 0:08:31.520 so much to incredent. I don't know about you, David Bureau. 0:08:31.560 --> 0:08:35.640 But my answer is when I'm confused, I like to 0:08:35.720 --> 0:08:41.120 read a lot. I read three lengthy, balanced articles this 0:08:41.160 --> 0:08:45.000 weekend on the Affordable Care Act. Sitting with us is 0:08:45.120 --> 0:08:48.960 truly one of the most experts, whatever Democratic, Republican, whatever 0:08:48.960 --> 0:08:52.720 your politics are, Mike Leavitt has a perspective on the 0:08:52.760 --> 0:08:55.280 Affordable Care Act and what it means with his work 0:08:55.840 --> 0:09:01.040 as a state governor Utah and then as they secretary 0:09:01.080 --> 0:09:04.920 of Health and Humans Services is becoming called h h S. 0:09:05.040 --> 0:09:10.920 I like health and Human Services. Uh better? What's the 0:09:11.040 --> 0:09:14.760 Republican plan? I read a lot and I haven't seen one. 0:09:14.880 --> 0:09:16.720 Is it? Do you have it? Can you show it 0:09:16.760 --> 0:09:19.560 to us this morning? One thing I believe we can 0:09:19.640 --> 0:09:21.800 be certain of is that at some point that will 0:09:21.840 --> 0:09:26.920 be a bill past the Congress titled repeal and Replace. 0:09:27.400 --> 0:09:31.160 They have dined out politically for three different elections. They've 0:09:31.200 --> 0:09:34.520 been rewarded. It's an essential they have to act, and 0:09:34.559 --> 0:09:37.800 I think they're poised to what the actual definition of 0:09:37.840 --> 0:09:40.880 repeal will be and what the definition the place We 0:09:40.920 --> 0:09:44.040 don't know, do you as a grizzled politician? I mean, 0:09:44.080 --> 0:09:46.000 I mean, I know there's like three Democrats in Utah 0:09:46.040 --> 0:09:49.040 so it's not a normal thing. But as a grizzled politician, 0:09:49.440 --> 0:09:53.120 do you assume you can't get to replace and the 0:09:53.360 --> 0:09:57.840 Ryan m McDonald's plan, McConnell plan, you can't get to 0:09:57.880 --> 0:10:02.720 replace until you do the repeal. I find it very 0:10:02.760 --> 0:10:06.360 difficult to think they can do them simultaneously. I think 0:10:06.360 --> 0:10:09.400 that they met the method and the means by which 0:10:09.440 --> 0:10:12.120 Congress works makes that difficult. I think the logic of 0:10:12.160 --> 0:10:16.440 it makes it difficult. Uh. I think they can lay 0:10:16.440 --> 0:10:19.360 a framework out for what they mean by replace and 0:10:19.440 --> 0:10:22.960 do that in a very short order after they do repeal. 0:10:23.559 --> 0:10:26.480 But I think that you can actually begin to chart 0:10:26.520 --> 0:10:29.239 how this looks. I think they will pass a budget resolution. 0:10:29.800 --> 0:10:32.400 Then I think they'll go through a series of of 0:10:32.960 --> 0:10:35.520 executive orders that will have some impact. Then I think 0:10:35.559 --> 0:10:38.000 they'll start unrepeal, and then I think they'll have to 0:10:38.040 --> 0:10:41.760 break the replace down into a series of bills. And 0:10:41.960 --> 0:10:44.160 my own sense is they'll lay a framework out and 0:10:44.160 --> 0:10:47.560 then legislative against it, legislat against it. Secretary Levitt Thom's 0:10:47.600 --> 0:10:49.439 been reading. I've been reading. I'm sure you have as well, 0:10:49.440 --> 0:10:51.680 and you bring to that reading a more perspective on 0:10:51.720 --> 0:10:55.280 this than than we have. When you see President Trump 0:10:55.320 --> 0:10:57.880 signing the executive orders he signed over the weekend with 0:10:57.920 --> 0:11:00.600 regard to the Affordable character What do they mean? Give 0:11:00.679 --> 0:11:02.240 us a sense of what he thinks he's gonna lessen 0:11:02.280 --> 0:11:05.320 the burden on agencies. Uh. And there was a lot 0:11:05.360 --> 0:11:08.000 of commentary about how that was eroding the Affordable Care Act. 0:11:08.000 --> 0:11:10.599 What what's he done thus far? There were two executive 0:11:10.679 --> 0:11:14.520 orders that were signed immediately upon his entering office. One 0:11:14.559 --> 0:11:18.160 of is a fairly standard part of the playbook of transition. 0:11:18.840 --> 0:11:22.440 You want to get control of anything in the regulation 0:11:22.559 --> 0:11:27.560 pipeline that you can still take out before it becomes effective. 0:11:27.559 --> 0:11:29.720 And President Obama did something similar when he was inigated. 0:11:29.840 --> 0:11:33.480 Virtually every president does this, and it's anything after November 0:11:34.720 --> 0:11:37.480 that was put into that pipeline you can bring back 0:11:37.600 --> 0:11:39.280 and take a look at it. And so that was 0:11:39.320 --> 0:11:46.240 the first executive order. This the second basically said, uh, 0:11:46.480 --> 0:11:49.160 I want to repeal and replace the Affordable Care Act, 0:11:49.360 --> 0:11:53.000 and I am instructing all of those in my administration 0:11:53.720 --> 0:11:57.160 to aggressively begin to look at it. Had one piece 0:11:57.200 --> 0:11:59.760 of important information that hasn't been reported, and that is 0:12:00.240 --> 0:12:02.560 I want to go through a policy process before you 0:12:02.600 --> 0:12:06.439 do anything. But I'm telling you this is the direction 0:12:06.440 --> 0:12:08.960 we're going. It was a direction center, it was an enabler, 0:12:09.440 --> 0:12:12.800 and it did give them sufficient authority that in the 0:12:12.880 --> 0:12:16.200 gray area or where there are areas of uncertainty in 0:12:16.280 --> 0:12:19.800 the law, they can regulate. Now that's very significant because 0:12:19.840 --> 0:12:24.080 the Affordable Care Act had many I mean, I've heard 0:12:24.120 --> 0:12:27.600 the term two thousand different places where it said the 0:12:27.679 --> 0:12:31.920 Secretary shall pass regulation, and they have been busy for 0:12:31.960 --> 0:12:37.280 the last six years passing regulation that defined the granularity 0:12:37.360 --> 0:12:39.520 of the Affordable Care Act. Well, there's a lot of 0:12:39.520 --> 0:12:41.880 the tail there that once you take it out, it's 0:12:41.920 --> 0:12:44.960 like taking the thread out of the tapestry. Things begin 0:12:45.040 --> 0:12:47.720 to fall apart. And they can probably do quite a 0:12:47.720 --> 0:12:52.880 bit too restrict the usefulness or restrict the functionality by 0:12:52.920 --> 0:12:55.960 simply passing regulation. As the chairman of Loved Partners, you 0:12:55.960 --> 0:12:58.880 know the principles here. I'm actually no Congressman. Price said, 0:12:58.880 --> 0:13:00.960 the presidents picked to be the head of of HHS 0:13:01.000 --> 0:13:03.720 to be your your successor in that job. And I 0:13:03.760 --> 0:13:06.160 recall reading that he had a plan for replace in 0:13:06.160 --> 0:13:08.000 the Affordable Care Act. What what sense do you have 0:13:08.080 --> 0:13:10.160 from what he's proposed in the past of where he 0:13:10.240 --> 0:13:12.240 might take this going forward. This is a very good 0:13:12.240 --> 0:13:15.760 point because the Republican Congress actually acted with a bill, 0:13:16.760 --> 0:13:19.000 passed it through both the House and the Senate, and 0:13:19.040 --> 0:13:22.520 it was vetoed by President Obama. The best predictor of 0:13:22.559 --> 0:13:27.120 the future is what we can see, and I think 0:13:27.160 --> 0:13:28.839 you can see that there are a number of things 0:13:28.920 --> 0:13:32.840 that that they could and couldn't do. For example, I 0:13:32.880 --> 0:13:35.640 think we'll see a lot of activity on Medicaid. They 0:13:35.640 --> 0:13:37.920 would like to obviously send more of that to the 0:13:37.920 --> 0:13:42.720 states with discretion. Now there's it's a double sided uh coin. 0:13:43.120 --> 0:13:46.880 On one hand, it gives the states more flexibility. On 0:13:46.960 --> 0:13:49.240 the other, it begins to limit the amount of money 0:13:49.280 --> 0:13:51.839 that they receive. And if you're a budget maker, that's 0:13:51.840 --> 0:13:54.720 an appealing thing because it gives you certainty. One of 0:13:54.720 --> 0:13:58.920 the problems for budgeteers in Congress is that they don't 0:13:58.960 --> 0:14:01.600 know with certainty how much money will be spent on 0:14:01.679 --> 0:14:03.960 the entitlement program. How do you respond to the other 0:14:04.000 --> 0:14:06.000 side that says, look whichever way he has slice at, 0:14:06.040 --> 0:14:09.560 whatever the Republicans do. The working numbers I have correct 0:14:09.559 --> 0:14:13.320 me if I'm wrong, Governor, is seven to thirty million 0:14:13.400 --> 0:14:17.640 people go without healthcare with this replacement of the Affordable 0:14:17.720 --> 0:14:20.640 Care Act. Is your math seven to thirty million or 0:14:20.640 --> 0:14:22.760 do you have a different calculus. Well, like I think 0:14:22.800 --> 0:14:25.520 we have to remember the Republicans have made a commitment 0:14:25.560 --> 0:14:28.360 that they're not going to allow people to hang out there, 0:14:28.920 --> 0:14:32.760 which Mr Trump certainly has a excuse me, David, every 0:14:32.800 --> 0:14:35.080 time I say Mr Trump a dollar in the bucket, 0:14:35.520 --> 0:14:39.640 the President says he's going to be sure everybody's happy 0:14:39.680 --> 0:14:43.880 on healthcare. Well, the commitment is initially by the Congress 0:14:43.920 --> 0:14:46.240 that they're not going to allow the twenty million people 0:14:46.400 --> 0:14:50.400 to go without insurance. Now, that causes some problem for 0:14:50.480 --> 0:14:53.560 them on the budget side, because they have to pay 0:14:53.600 --> 0:14:57.320 for that uh while they transition to whatever they're going 0:14:57.360 --> 0:14:59.440 to put into place, and that will have impact on 0:14:59.480 --> 0:15:03.240 the tack that tax bills that they ultimately pass. But 0:15:03.360 --> 0:15:06.040 I think it's a big problem if they do allow 0:15:06.640 --> 0:15:08.920 if they were to break that promise, because they would 0:15:09.000 --> 0:15:11.520 clearly that would be the rallying cry for the next 0:15:11.560 --> 0:15:15.240 three elections by the Democrats. You know, I was talking 0:15:15.240 --> 0:15:18.440 with the head of a few months back, and he 0:15:18.440 --> 0:15:19.920 said the new president would have a few months to 0:15:19.960 --> 0:15:21.760 sort of write the ship here or these spirals were 0:15:21.760 --> 0:15:24.000 going to get out of control and something else he 0:15:24.000 --> 0:15:25.960 said was that when you look at how this law 0:15:26.000 --> 0:15:29.600 was implemented, there was't enough attention paid to the back end. Uh. 0:15:29.600 --> 0:15:30.960 He said, There's a lot that could be done in 0:15:31.080 --> 0:15:34.120 terms of moving healthcare forward, but the back end services 0:15:34.160 --> 0:15:35.480 are still not where they need to be. Do you 0:15:35.480 --> 0:15:37.240 agree with that? And how how do they begin to change? 0:15:37.240 --> 0:15:39.480 How do you begin to change the infrastructure surrounding healthcare? 0:15:39.800 --> 0:15:42.520 I do agree with that, and I also believe that 0:15:42.560 --> 0:15:45.200 there are great lessons for the Republicans to learn in 0:15:45.240 --> 0:15:48.360 this process from what the Democrats did. The first thing 0:15:48.440 --> 0:15:52.840 is they passed it were they strictly partisan vote, and 0:15:53.000 --> 0:15:55.960 that sets that that that makes it very difficult to 0:15:55.960 --> 0:16:00.480 have it sustained politically over time. They have committed publicly 0:16:00.480 --> 0:16:05.000 that they're not going to do that. One component of 0:16:05.040 --> 0:16:07.560 it is they have only a two vote margin in 0:16:07.600 --> 0:16:11.120 the Senate, which is going to essentially require that they 0:16:11.160 --> 0:16:15.360 have that. The second component is the second lesson I think, 0:16:15.480 --> 0:16:17.720 is it takes time to do this. You have to 0:16:18.240 --> 0:16:21.720 the logistics of rolling out a massive program like this 0:16:22.320 --> 0:16:25.440 go well beyond which what most people think about. So 0:16:25.680 --> 0:16:28.560 thinking they're going to immediately do this, it's been in 0:16:28.880 --> 0:16:32.280 place for six years, they need time. Weird from Greg 0:16:32.320 --> 0:16:36.080 Bellier that the Republicans meeting in Philadelphia this week is 0:16:36.200 --> 0:16:39.840 the oddest of oddest things, the GOP with a president who, 0:16:40.320 --> 0:16:43.200 um some would say as a populist, maybe a conservative. 0:16:43.640 --> 0:16:45.960 I'm going to go to the great philosopher Brigham Young. 0:16:46.680 --> 0:16:49.040 Remember a chip on the shoulder is a sure sign 0:16:49.040 --> 0:16:51.640 of would higher up. How big a chip on the 0:16:51.720 --> 0:16:55.400 shoulder does this president have? He's the most unlived president 0:16:56.120 --> 0:16:59.680 or for that matter, on Romney president I've ever seen. 0:17:00.080 --> 0:17:04.800 Is he a Republican? There's a lot that we don't 0:17:04.880 --> 0:17:08.199 yet know about a President Trump. We know Candidate Trump, 0:17:08.680 --> 0:17:13.000 but we're only two days into President Trump. I think 0:17:13.000 --> 0:17:17.960 that we have we have begun to. It's become clear 0:17:18.040 --> 0:17:20.960 that he's not going to be like other presidents. What 0:17:21.119 --> 0:17:23.879 that actually will look like we don't know yet. But 0:17:24.000 --> 0:17:26.960 there's a we don't have. You gotta come back, I mean, 0:17:27.040 --> 0:17:28.800 please try to get back. It would like to speak 0:17:28.800 --> 0:17:31.640 to you, m Bloomberg surveillance again. I think this will 0:17:31.680 --> 0:17:34.399 be evolving, as you say, three days in and a 0:17:34.440 --> 0:17:37.800 busy agenda for the president this morning. Michael Lovitt, thank 0:17:37.800 --> 0:17:40.840 you so much. Mike Lovitt, the former Secretary of Health, 0:17:40.920 --> 0:17:45.840 Human Services and of course Governor of Utah as well. 0:17:54.640 --> 0:17:58.119 Brought you by Bank of America. Mary Lynch. Dedicated to 0:17:58.240 --> 0:18:02.359 bringing our clients insights solutions to meet the challenges of 0:18:02.359 --> 0:18:06.879 a transforming world. That's the power of global connections. Marylynch, 0:18:07.000 --> 0:18:15.520 Pierce Federan Smith Incorporated, Member s I p C. The 0:18:15.560 --> 0:18:19.159 first quarter wasn't good, second quarter wasn't much better. By 0:18:19.200 --> 0:18:21.320 the third quarter, I think that our next guest was 0:18:21.359 --> 0:18:24.520 spitting out his cheese, kurds and culvers. David Harrow joins 0:18:24.560 --> 0:18:27.560 this now. He's partner and Chief Investment Officer at Harris Associates, 0:18:27.600 --> 0:18:31.119 joining us now on the Spectrum Enterprise, oh Human Football, 0:18:32.840 --> 0:18:36.600 Specium Enterprise, Nationwide, Fiber Bass Network, and I T Infrastructure Solutions. 0:18:36.640 --> 0:18:38.240 David Hair, there's a great deal to talk about. Who 0:18:38.240 --> 0:18:39.920 you want to talk about? The game? First of all, 0:18:41.359 --> 0:18:48.120 which game was Tom mentioned? You might play coy But again, well, 0:18:48.160 --> 0:18:50.760 I have to say, and I have mentioned this, the 0:18:50.800 --> 0:18:53.480 packard defense has been suspect for such a long time 0:18:53.560 --> 0:18:58.160 and it was really exposed. It was really exposed last night. 0:18:58.280 --> 0:19:02.600 It was just awful, really, I mean that's I mean, 0:19:02.640 --> 0:19:05.400 they just converted just about every third dial and they 0:19:05.400 --> 0:19:07.640 moved the ball at well, and then when the Packers 0:19:07.680 --> 0:19:10.240 look to be doing something while that phone was nasty. 0:19:10.320 --> 0:19:13.320 But yeah, let's talk about the patriots. They earned it, 0:19:14.000 --> 0:19:16.520 and you know, Tom and I've always been big Patriot fans, 0:19:16.560 --> 0:19:21.520 and we're just so prove that they are undogs. Get 0:19:21.520 --> 0:19:24.680 a chance. Yes, life will go on and the Packers 0:19:24.720 --> 0:19:31.359 will rebuild. Are you at a point in your international investment? No? 0:19:31.680 --> 0:19:36.240 Seriously after Mr Trump's speech, what is the response of 0:19:36.280 --> 0:19:40.520 the executives you speak to each and every day abroad? Well, 0:19:40.520 --> 0:19:42.800 it's kind of a wait and see approach. And it 0:19:42.960 --> 0:19:46.320 is interesting now you know, travel frequently meet we meet 0:19:46.359 --> 0:19:50.640 with our managements and they're all very, very interested. This 0:19:50.720 --> 0:19:53.520 is the first thing that anyone's looks really is is 0:19:53.600 --> 0:19:56.439 what the Trump administration going to do? And is it 0:19:56.440 --> 0:19:58.400 going to be positive? Is it going to be negative? 0:19:58.800 --> 0:20:01.440 And as I mentioned, I mean certainly there are there. 0:20:01.480 --> 0:20:06.879 There's both. There's some very strong positive policy implications and 0:20:06.920 --> 0:20:09.040 there's some negative. And the negative has to do with 0:20:09.080 --> 0:20:12.720 this trade and protectionism. And you know, he keeps claiming 0:20:12.760 --> 0:20:15.560 that they're free traders as long as it's fair trade. 0:20:15.640 --> 0:20:20.280 I think that has to be clearly defined because businesses, Uh, 0:20:20.320 --> 0:20:22.879 if they want to invest in places that will be 0:20:23.080 --> 0:20:26.560 exporting into the United States, I think they want to 0:20:26.560 --> 0:20:30.000 make sure that those assets and those investments aren't for 0:20:30.119 --> 0:20:33.800 not um. So it is something they're all very, very 0:20:33.840 --> 0:20:35.800 concerned about. But on the other hand, you know, the 0:20:35.840 --> 0:20:39.919 positives are pretty obvious. The deregulation. As you know, regulation 0:20:40.000 --> 0:20:42.840 has strangled certain sectors of the U. S economy for 0:20:42.920 --> 0:20:47.040 eight years. If you look at Mr Barrow's essays from 0:20:47.119 --> 0:20:49.640 a e I about one of the reasons why he 0:20:49.720 --> 0:20:54.560 believes the recovery from the Great Recession was so soft 0:20:54.720 --> 0:20:57.680 was because of the over burdensome regulation. And I think 0:20:57.720 --> 0:21:00.920 this is one thing Mr Trump is really the President Trump, 0:21:00.960 --> 0:21:04.280 I guess, is really working to alleviate what do you 0:21:04.280 --> 0:21:07.960 would be positive on trade and on protection? And what 0:21:07.960 --> 0:21:09.680 are you what are you hearing? Are you hearing anything 0:21:09.720 --> 0:21:12.200 that makes that clearer for you? When you hear Wilbur 0:21:12.240 --> 0:21:15.080 Ross testifies say, or Stephen Manuchin, are they giving you 0:21:15.119 --> 0:21:17.240 a better sense of where this administration might be headed. 0:21:17.240 --> 0:21:18.920 I think back of what Greg Valier was saying about 0:21:19.200 --> 0:21:21.960 Doris Kurrns Goodwin's team of rivals, and and the fact 0:21:22.040 --> 0:21:24.320 that maybe the cabinet here will have some robust disagreement 0:21:24.359 --> 0:21:27.160 and influence what the president does. Are are you closer 0:21:27.200 --> 0:21:31.000 to having more clarity? I don't. I don't really think so. 0:21:31.080 --> 0:21:32.399 I mean I think we just I think in the 0:21:32.440 --> 0:21:35.640 next couple of weeks that will be flushed out. Um. 0:21:35.680 --> 0:21:39.000 But just from what these people say in front of 0:21:39.040 --> 0:21:44.000 their congressional testimony, I mean, we know what these are like, 0:21:44.200 --> 0:21:47.159 a lot of the commerce people are just grandstanding, so 0:21:47.200 --> 0:21:50.359 they say the safe conservative thing pretty much just to 0:21:50.440 --> 0:21:54.320 get you know, then um, the appointment. So I mean, 0:21:54.359 --> 0:21:56.800 I just don't know how serious to take the this, 0:21:56.800 --> 0:22:01.320 this this testimony in front of these committees. Let's start 0:22:01.400 --> 0:22:04.720 David with a portfolio. Do you do you restructure your 0:22:04.720 --> 0:22:08.880 portfolio at the margin? Do you adapt your portfolio? Well, 0:22:08.880 --> 0:22:11.560 as you know, we tend to act in a very 0:22:11.760 --> 0:22:16.640 very evolutionary fashion. We priced businesses as as price moves 0:22:16.720 --> 0:22:21.040 to our evaluations of these businesses, we make adjustments. And 0:22:21.119 --> 0:22:23.080 so if you look at the third and fourth quarter, 0:22:23.200 --> 0:22:25.720 we had a tremendous rally and some of the sectors 0:22:25.760 --> 0:22:30.560 we were overweight consumer discretionary industrials, financials, and so maybe 0:22:30.640 --> 0:22:33.080 we've trimmed a little bit of this as they've reached 0:22:33.119 --> 0:22:37.880 their prices, their cell prices were still very much overweight 0:22:38.000 --> 0:22:42.679 these areas. Because the revaluation has begun, but it isn't 0:22:42.720 --> 0:22:47.919 anywhere near completion. The pricing differential between these sectors and 0:22:48.000 --> 0:22:53.480 say consumer staples and utility stelecoms is still way too large. 0:22:53.840 --> 0:22:57.480 So though we've trimmed a little bit um and maybe 0:22:57.480 --> 0:23:01.280 we look a little less overweight, were still over Wait, doctors, 0:23:01.680 --> 0:23:03.679 I would say we're on the third or fourth inning. 0:23:04.160 --> 0:23:06.919 We still have a long way to go before this 0:23:06.920 --> 0:23:10.520 this uh we get proper valuation differentials in these sector. 0:23:10.640 --> 0:23:12.720 What we're gonna do is come back and talk to 0:23:12.800 --> 0:23:16.879 David Harrow solely about investment. Everything seems to be tinged 0:23:16.920 --> 0:23:20.320 with politics, tinged with international relations. Can we do that, 0:23:20.440 --> 0:23:24.600 David Girl, Can well try and come back and just 0:23:24.800 --> 0:23:29.760 talk about investment investment management with David A It's probably 0:23:29.760 --> 0:23:31.760 a good first question. If is it possible to do 0:23:31.840 --> 0:23:34.640 that in this day and age value investor exclusive? Yeah? 0:23:34.680 --> 0:23:36.840 I mean, I mean, can we come back and not 0:23:36.920 --> 0:23:39.479