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Speaker 1: Runch you by Bank of America Mary Lynch. With virtual reality,

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Speaker 1: virtually everything will change. Discover opportunities in a transforming world.

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Speaker 1: Be of a mL dot Com, slash VR, Mary Lynch,

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Speaker 1: Pierced Fenner and Smith Incorporated. Ye, Welcome to the Bloomberg

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Speaker 1: Surveillance Podcast. I'm Tom Keene with David Gura. Daily we

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Speaker 1: bring you insight from the best of economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg The

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Speaker 1: Morning on Monday, the thirty one of July. This is

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Speaker 1: Bloomberg Surveillance on Bloomberg Radio. David Gura in New York

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Speaker 1: with Franci Lakway in London. Today, Tom Keene is off

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Speaker 1: the staff. You're instructed to alert me if they get

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Speaker 1: any messages from Tom. In Manhattan, we were in Michael Cheryl.

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Speaker 1: Now we're having a great conversation with him on Bloomberg

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Speaker 1: Television just a few minutes ago. He's the chairman and

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Speaker 1: CEO of market Field Asset Management. He joins me and

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Speaker 1: our eleven three oh studios here in New York and Michael,

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Speaker 1: let me just take a step back from from the

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Speaker 1: news we were just reporting a moment, go, how does

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Speaker 1: this say? How does this environment look for deals like

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Speaker 1: the one we're seeing announced this morning. You know, it's

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Speaker 1: pretty good. I know. I think people feel culportations, feel

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Speaker 1: fairly good about the prospects and and willing to pay

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Speaker 1: prices that sell us you know, find attractive. So I

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Speaker 1: mean I think that you know, typically with the mature

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Speaker 1: point of a bull market and the chure point of

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Speaker 1: the economic cycle, you would expect to see m and

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Speaker 1: a accelerator this at this point, and that's been happening

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Speaker 1: this year. Michael, What have we learned from from earning

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Speaker 1: season thus far? Here we are seeing a lot of

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Speaker 1: companies report their second quarter earnings, and were financial companies

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Speaker 1: last week, in the week beforehand, some tech companies last

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Speaker 1: week as well. What are we learning about the state

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Speaker 1: of the market from these companies we've reported thus far.

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Speaker 1: I think it's been a pretty decent earning season. I

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Speaker 1: think that that we needed one, given the the s

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Speaker 1: P was up at an all time high, and you know,

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Speaker 1: I think the fact that it's it's been a fairly

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Speaker 1: quiet season in terms of the sponsored markets to it.

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Speaker 1: I think that's I think that's fairly positive. You know,

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Speaker 1: where there have been disappointments for markets taken action. But

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Speaker 1: equally on on the other side, you had a you know,

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Speaker 1: a company like Boeing completely blowing out and the market

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Speaker 1: responding though positively to it. So as I as I

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Speaker 1: said on on on TV earlier, I think this is

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Speaker 1: very much for sweet spot of the economic cycle. It

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Speaker 1: is the point at which you would expect earnings to

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Speaker 1: meet and beat expectations, which you know, which they're able

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Speaker 1: to do. And in most sectors we don't yet have

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Speaker 1: the sign of of sort of chronic over supply. There's

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Speaker 1: a couple of sectors that that we'd start to be

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Speaker 1: worried about going forwards. But but you know, in most

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Speaker 1: cases businesses are still undergoing sensible expansion plans. And you know,

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Speaker 1: you may say they're paying company is paying too much

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Speaker 1: for company B, but at least you can understand why

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Speaker 1: they want about it in the first place. Michael, you

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Speaker 1: say there are a couple of industries that you would

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Speaker 1: worry about, what are they? Commercial will of state in

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Speaker 1: the United States is the one that the the you know,

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Speaker 1: really has our attention. Where where I think there are

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Speaker 1: signs of chronic over supply. And you know, even the

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Speaker 1: news this morning that that Ang Bang is possibly going

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Speaker 1: to be forced to divest it's it's recent US investments,

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Speaker 1: a lot of which in were in real estate. I

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Speaker 1: think that that's a market where supply and demand maybe

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Speaker 1: starting to to really be problematic. You have a lot

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Speaker 1: of new supply hitting over the next twelve to eighteen months,

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Speaker 1: and a lot of the demand has been none US

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Speaker 1: demand for commercial real estate, and you know, partly because

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Speaker 1: of a weaker US dollar and partly in China's case,

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Speaker 1: because of different government policies towards investments of board. I

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Speaker 1: think the demand side maybe weakening just at the point

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Speaker 1: that supplies accelerating. So you know, if there was one

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Speaker 1: part of the domestic US economy the fankly we would

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Speaker 1: expect to deteriorate over the next twelve months, it would

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Speaker 1: be commercial will estate. Michael, do you worry that as

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Speaker 1: there's more of a shift towards passive investment, it means,

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Speaker 1: you know, almost automatically, that hedge funds take a bigger role,

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Speaker 1: which means that there are less players are the markets,

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Speaker 1: which actually means that you could have not disruption, but

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Speaker 1: that you could be miss pricing things. I think certainly

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Speaker 1: passive investing towards the ends of ball markets involves chronic mispricing. Um,

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Speaker 1: I think you know, we're we're heading towards that, you know.

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Speaker 1: I think it's something that I think is going to

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Speaker 1: define the next bear market, which is which is likely

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Speaker 1: to be much worse than economic economic conditions. Actually actually

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Speaker 1: wanan't but but look, I I mean, I think that

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Speaker 1: every investment cycle is a product cycle. Um that product

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Speaker 1: tends to demonate dominate towards the end of this cycle.

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Speaker 1: But there's no point in in in fighting the fact

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Speaker 1: that people want passive investments and they're going to work

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Speaker 1: very well at the index level, you know, until this

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Speaker 1: this cycle heads off, you know, heads off a cliff.

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Speaker 1: But um, I think it's something that that you do

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Speaker 1: need to be aware of it. I think that understanding

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Speaker 1: what's in indexes at this point in time is is crucial.

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Speaker 1: I'm always amazed at how little people who use indexes

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Speaker 1: and E t F actually understand the way of h change,

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Speaker 1: you know, across the course of the cycle. I think

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Speaker 1: that's for the most useful thing you could do today

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Speaker 1: is at least understand what's in the index that that

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Speaker 1: that you're investing in, and I think in many cases

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Speaker 1: you get quite a surprised Michael, let me ask you lastly.

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Speaker 1: We'll come back here in just a moment, have a

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Speaker 1: minute left, but let me ask you about emerging markets

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Speaker 1: right now, what you're seeing there in dinto where you're

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Speaker 1: particularly interested right now? When it comes to emerging markets,

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Speaker 1: We're very positive on emerging markets. I think they have

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Speaker 1: several forces going forward. And first of all, a generally

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Speaker 1: better global economy I think, in particular, much better domestic

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Speaker 1: Chinese economy, which has really started to have an impact

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Speaker 1: on on on Asian markets. And then at the index level,

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Speaker 1: this sneaky rewaiting towards technology. Either the MSCI Emerging Market

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Speaker 1: Index is now more tech weighted than the SMP five

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Speaker 1: hundred and and you know, it's really been technology returns

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Speaker 1: which have been pushing emerging markets higher this time. You know,

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Speaker 1: commodities haven't been very helpful to emerging markets. If that changes,

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Speaker 1: that will be another know, another push in that direction.

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Speaker 1: And the final pieces is a weaker US dollar involves

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Speaker 1: stronger emerging market currencies. And you know, currency returns in

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Speaker 1: many cases have been almost as high as domestic stock returns.

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Speaker 1: So this is one of those years in which you

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Speaker 1: really want to have a decent exposure to a m

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Speaker 1: and I think that's going to continue to be true.

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Speaker 1: We were having a nice chat with Michael Sholl of

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Speaker 1: market Field Asset Management as he is CEO there on

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Speaker 1: the markets, and Michael, you were pretty confident that actually

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Speaker 1: what we've seen so far is a trend where indices

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Speaker 1: go higher, keep on going higher. What could reverse that?

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Speaker 1: I'm seeing the dollar gaining a touch, but actually, given

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Speaker 1: all the geopolitics out there, can that reverse quite quickly? Um?

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Speaker 1: You know, I mean with with markets, it's it's difficult

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Speaker 1: to see an immediate catalyst which is going to make

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Speaker 1: them go down. I mean, you could have, you know,

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Speaker 1: a bigger version of what we saw on June ninth,

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Speaker 1: when you know, the NASDAC for no apparent reason went down,

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Speaker 1: and you know, I guess it could accelerate off that

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Speaker 1: and you know, could have a five percent pullback before

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Speaker 1: you know it in a couple of days. But you know,

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Speaker 1: I think that would be noise in a in a

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Speaker 1: in a fairly in a fairly calm environment, and and

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Speaker 1: you know, I think if you're if you're waiting for

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Speaker 1: something more spectacular to the downside, I think you're gonna

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Speaker 1: have to be You're going to have to be patient,

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Speaker 1: and you're going to have to wait for this cycle

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Speaker 1: to deteriorate in some way or other. I mean, I

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Speaker 1: think we, you know, right now, twenty seventeen looks like

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Speaker 1: a good year. My guess, is going to go into

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Speaker 1: the history books as a as a very good year,

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Speaker 1: potentially the best year since two thousand and nine for

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Speaker 1: most of the world and for the US potentially the

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Speaker 1: best years you know since too, since two thousand and thirteen.

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Speaker 1: And if that's going to change, then it's going to

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Speaker 1: be because of new news. The news sitting in front

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Speaker 1: of us today, the existing news. It doesn't look that

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Speaker 1: damaging to anything, and it's easier to see markets go

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Speaker 1: higher and go lower at this point. But you're not

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Speaker 1: worried about some kind of big policy mistake. And I

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Speaker 1: feel like I ask you every ten minutes, but you

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Speaker 1: don't really know what the distortions are until you take

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Speaker 1: away that safety blanket. I think there's no doubt that

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Speaker 1: central banks will lose control of this cycle, but I

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Speaker 1: I think they are either too tight too long or

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Speaker 1: too loose too long, and it looks like the latter

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Speaker 1: is going to be the case for cycle. So I

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Speaker 1: I do think that by the end of this year,

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Speaker 1: global inflation is going to be moving back to where

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Speaker 1: central banks want it. And the wire for next year

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Speaker 1: would be does it continue to move higher and does

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Speaker 1: it undermine the ability of central banks to to keep

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Speaker 1: in control of monetary policy, you know, in say twenty eighteen.

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Speaker 1: But it's it's it's going to take time to get there.

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Speaker 1: I'm not the sort of person that believes that central

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Speaker 1: banks have sort of you know, become alchemists, have solved

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Speaker 1: economic cycles. I think, I think this will end in

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Speaker 1: in a in a period of chaos, But it takes

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Speaker 1: time for chaos to emerge. You know, two thousand and

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Speaker 1: eight didn't suddenly start on a on a sunny June

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Speaker 1: morning when when the Bear Stearns funds blew up. It

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Speaker 1: started eighteen months eighteen months before that. And the technology

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Speaker 1: cycle ended in March two thousand, but it ended with

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Speaker 1: a couple of quarters of massive inventory build ups in

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Speaker 1: in in in in key areas of a of a

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Speaker 1: technology sector. And right now it's difficult to see that

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Speaker 1: process of excess getting to the point that you actually

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Speaker 1: should be worried about it. You can understand that the

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Speaker 1: markets aren't meant to levitate them the way that they

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Speaker 1: have been doing. You know, I'm sympathetic to someone like

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Speaker 1: Howard Marks who's trying to sound the medium term alarm.

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Speaker 1: But if you're asking me, am I worried about where

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Speaker 1: the market's going to be on August first, or September

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Speaker 1: one or October first? You know, factly, I'm not like now,

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Speaker 1: you know, it might change, but if it changes, it

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Speaker 1: will be because something different happened. Michael, you mentioned that

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Speaker 1: the prospects for k I see the inevitable prospect for KAS.

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Speaker 1: What are you looking at for indicators of when that

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Speaker 1: that comes? What? What? What are the data that you

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Speaker 1: pay the closest attention to. You know, as I say,

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Speaker 1: in key sectors, supply and demand numbers matter, Inventory matters.

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Speaker 1: As boring as they are, you know, do do matter?

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Speaker 1: I think that that you know, measuring market cap is

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Speaker 1: starting to become important understanding how large markets are. I mean,

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Speaker 1: you know the SMPS. You know how many trillions of

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Speaker 1: dollars is that? What is a temper cent move in

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Speaker 1: the SMP how does that? You know, actually, matt Against

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Speaker 1: what what what central banks? You know what central banks

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Speaker 1: are doing? So that's what that's what we you know,

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Speaker 1: sort of really struggle with the data. Obviously, you look

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Speaker 1: at it when it comes in. It hasn't generally been

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Speaker 1: very surprising, and and you know, if it started to

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Speaker 1: move in a in a new direction, then when you'd

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Speaker 1: start paying more more attention to it. But I think

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Speaker 1: the the question I have two questions in my mind.

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Speaker 1: One is is what is what happened in commodities three

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Speaker 1: years ago when supply and demand got badly out of

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Speaker 1: balance and provoked a deep correction in that area? Could

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Speaker 1: that happen in other sectors in the global economy? And

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Speaker 1: and number two, at what point is the size of

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Speaker 1: market cap of fixed income and equities itself problematic? At

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Speaker 1: what point is our markets so large that the overwhelmed

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Speaker 1: the generosity of central banks? And you know that's going

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Speaker 1: to be a very difficult question to answer, but at

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Speaker 1: some point it's going to matter. Michael, great to speak

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Speaker 1: with you. Thank you very much for the time doing

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Speaker 1: both the radio and television with this at this one.

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Speaker 1: We really appreciate that Michael Shell, he is the chairman

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Speaker 1: and CEO portfolio manager as well at market Field. I

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Speaker 1: said management, I was writing through the president's schedule, just

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Speaker 1: a moment to go busy day in Washington, as I said,

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Speaker 1: here to help us understand what's going on today and

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Speaker 1: here as we push ahead of the rest of the year,

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Speaker 1: is Wendy Schieler. She's the chair of the political science

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Speaker 1: department at Brown University. Joins us Professor Schiler. Great to

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Speaker 1: speak with you once again that this is being herald

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Speaker 1: is a new day, at least within the confines of

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Speaker 1: the White House. John Kelly taking over for Ryan's previous

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Speaker 1: who has been the chief of staff since the beginning

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Speaker 1: of this administration. How radical a change does this promise

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Speaker 1: to be? Do you think? Well, I mean, it could

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Speaker 1: really be a very very strong decision by the President

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Speaker 1: if he allows John Kelly to get the White House

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Speaker 1: in order. Let's not forget you know, Dwight D. Eisenhower,

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Speaker 1: who was a general, really created this position. Truman had

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Speaker 1: a sort of pseudo chief of staff, but Eisenhower really thought,

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Speaker 1: you need a chief of staff. Government's big, the White

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Speaker 1: House is big, and it has to be a chain

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Speaker 1: of command. And this is a military guy at General

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Speaker 1: who's used to that kind of organization. Will Trump respect

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Speaker 1: that kind of organizational skill. I don't know. I don't

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Speaker 1: think we know. If he does, I think things get

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Speaker 1: much better for him in the White House. If he doesn't,

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Speaker 1: I think things remain really chaotic. Question about history here,

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Speaker 1: Professor Schiller. Have we had an administration like this before

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Speaker 1: where there spent so many factions within the White House itself?

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Speaker 1: A lot being made this morning of the fact that uh,

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Speaker 1: Jared Kushner and Ivanka Trump, the President's son in law

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Speaker 1: and daughter, respectively, senior advisories, both like John Kelly, think

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Speaker 1: he's a good choice for this job. Have we seen

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Speaker 1: a as fractious an administration as this one? I think

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Speaker 1: I think you have, particularly in the first year. I

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Speaker 1: think you've seen pretty chaotic administrations. And let's not forget

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Speaker 1: Bill Clinton's administration. The first nine months of that, I mean,

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Speaker 1: I would argue, even until you get to NAFTA in

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Speaker 1: December of nineties three was a disaster. I mean, it

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Speaker 1: was couttern appointments flying left and right, not making it through,

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Speaker 1: and and the House was mad at dam and then

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Speaker 1: the Senate was mad adam. He lost on stimulus. I mean,

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Speaker 1: there was a disaster that first year, and I think

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Speaker 1: that was because he had voices, lots of voices surrounding

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Speaker 1: him and hadn't settled on a couple of people he trusted.

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Speaker 1: You need an agenda as a president, though, to want

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Speaker 1: to listen to people to tell you how to accomplish it.

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Speaker 1: We just don't know if Trump actually has an agenda,

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Speaker 1: and that makes it hard for everybody who works form

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Speaker 1: in the White House, whether they're fassionately fighting or not,

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Speaker 1: what do you want to try to get done? And

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Speaker 1: if you're not on the same team on that score,

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Speaker 1: I just don't know how everything else doesn't fall apart.

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Speaker 1: Professor Schiller, what exactly does it chief of Stuff do?

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Speaker 1: So you either take, you know, a bet that this

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Speaker 1: is a command and control managerial task, which means that

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Speaker 1: John Kelly, he's a retired general, would do quite well.

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Speaker 1: But if it's a very political job, does he really

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Speaker 1: have any experience in these kind of things? Well, I

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Speaker 1: think you're pointing out just a really important facet of

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Speaker 1: the way that each individual president chooses to sort of

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Speaker 1: decide what people who work form will do. Right, So,

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Speaker 1: sometimes the domestic counsel or the advisor to the president

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Speaker 1: is the political person, and the chief of staff is

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Speaker 1: literally the organizational gatekeeper, and that manages the president's time,

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Speaker 1: the flow of information to the president, and the president's agenda.

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Speaker 1: But if you're somebody who doesn't have anybody else doing

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Speaker 1: the politics, then the chief of staff takes on that

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Speaker 1: additional role. So I think it depends on what the

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Speaker 1: president is good at and not good at, and how

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Speaker 1: much that president can see that the chief of staff

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Speaker 1: can balance out his weaknesses and strengths. I don't think

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Speaker 1: President Trump, at least at the moment, has actually self

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Speaker 1: reflected on that yet. So right now it looks like

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Speaker 1: just to get the White House in order, staff up completely.

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Speaker 1: You know, the White House, even the President's staff is

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Speaker 1: sort of half full right now. You've got tons of

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Speaker 1: positions throughout the administration in cabinet departments that are going empty,

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Speaker 1: and you know, there's one way to slow the federal

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Speaker 1: government down, but some jobs have to be filled. So

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Speaker 1: I would think that would be first on the agenda

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Speaker 1: for the chief of Staff very quickly. Does John Kelly

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Speaker 1: have the support of Congress and does he need it?

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Speaker 1: I don't think he. I don't think they know, yeah,

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Speaker 1: I think Congress always respects people who have a long,

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Speaker 1: uh successful military career, But I don't think he needs

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Speaker 1: that quite yet. I mean, remember were serious is best

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Speaker 1: friends of Paul Ryan, and he doesn't have a job anymore.

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Speaker 1: So I'm just not sure how much that will matter

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Speaker 1: to the Trump administration. But you do want to have

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Speaker 1: open lines of communication. So he does want to be

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Speaker 1: available to Congressional leaders when they want to talk to him,

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Speaker 1: and he wants to be open in hearing them. And

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Speaker 1: I think if he does that, he'll cultivate a good

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Speaker 1: relationship with the leadership. Professor Schiller, let me ask you

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Speaker 1: about something you mentioned a few moments ago. You're talking

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Speaker 1: about a lot of the positions that have still gone

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Speaker 1: unfilled in this administration. Uh. We heard from Anthony Scara,

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Speaker 1: much of the new communications director, that his means of

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Speaker 1: combating leaks would be to fire everybody. What does the

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Speaker 1: pool look like a perspective members of this administration? How

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Speaker 1: how how much of a deficit are they operating with

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Speaker 1: at this point? And how much do you think that

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Speaker 1: John Kelly could write that well? I mean, David, you're

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Speaker 1: pointing out something that's so important to a functioning White House.

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Speaker 1: You know, the government, centeral government is very big. If

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Speaker 1: cabint departments you have, you have tremendous amount of oversight

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Speaker 1: of how policy being implemented. And if you want to

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Speaker 1: change that policy, you have two people in the chairs

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Speaker 1: at the desk doing their job and they don't have

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Speaker 1: that yet. So if you have more people who lose

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Speaker 1: their jobs in the White House, then you've got to

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Speaker 1: replace them, and you've got to go to security clearances

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Speaker 1: and a lot of questions are asked. So you've got

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Speaker 1: to replace them with more establishment people who maybe have

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Speaker 1: served in white Houses prior to the Trump administration. And

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Speaker 1: that's something Trump doesn't have any knowledge about in terms

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Speaker 1: of connections. You know, establishment Republicans are not going to

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Speaker 1: work for Donald Trump, at least not at the moment.

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Speaker 1: They haven't been offering themselves. They're turning things down. People

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Speaker 1: don't really want to go there. And John Kelly's job

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Speaker 1: is to make it a more attractive proposition to bring

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Speaker 1: in people with some prior government experience, particularly places like

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Speaker 1: the State Department where you need diplomacy. You need this

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Speaker 1: to be functioning, and that's I think the big problem.

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Speaker 1: I think nobody wants to touch that job or any

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Speaker 1: job right now who's in the Republican Party. They're just

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Speaker 1: thinking ahead. The geographic gulf between the White House and

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Speaker 1: the Capital, I would guess is about a mile and

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Speaker 1: a half wide. When it comes to how each of

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Speaker 1: those places understands one another, where are we How much

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Speaker 1: of an understanding of the way Congress works does this

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Speaker 1: administration have? Uh? And is the Congress getting better and

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Speaker 1: understanding the motivations of the White House? Well? I think

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Speaker 1: that Donald Trump understandably expected that the Republican Party, even

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Speaker 1: though they had been factionalized and fought his nomination really

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Speaker 1: almost to the end, would embrace him, would accept him

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Speaker 1: and embrace him, and that he would have a lot

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Speaker 1: of mojo among the base to push them in terms

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Speaker 1: of grassroots movement. If they didn't do what he wanted,

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Speaker 1: he'd go out he rallies. And then is the people

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Speaker 1: who like Trump would pressure the Congress to do what

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Speaker 1: Trump wanted him to do. It has not turned out

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Speaker 1: to be that way. The Republican Party has not really

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Speaker 1: turned a corner to embrace him. And because Trump's approval

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Speaker 1: ratings are so low, he just doesn't have enough juice

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Speaker 1: politically among the base in enough areas around the country

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Speaker 1: to pressure enough Republicans a couple of them here and there,

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Speaker 1: But he doesn't have that wide swath of you know,

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Speaker 1: bully pulplic popularity. And that's something that's traditionally been a

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Speaker 1: very important and strong weapon for the president, particularly early

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Speaker 1: in his term with his own party, and Trump seems

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Speaker 1: to be completely missing that. And the longer it goes

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Speaker 1: that he has a bad approval reading and he doesn't

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Speaker 1: seem to be generating any support, the more Republicans are

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Speaker 1: upper re election in November eighteen, will say we don't

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Speaker 1: trust him, we want to distance ourselves. We've got to

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Speaker 1: go our own way, because he could a throw us

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Speaker 1: under the bus at any time, and be he becomes

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Speaker 1: so unstable that he becomes a real liability. Would the

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Speaker 1: President be able to push through a tax overhaul this

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Speaker 1: year if he were to focus on that. I don't

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Speaker 1: think he. I don't think we need the president to

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Speaker 1: push the tax bill. I think the Republican leadership is

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Speaker 1: desperately wants to do a tax reform bill. Uh. They

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Speaker 1: want to cut corporate taxes, they want to cut you know,

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Speaker 1: income taxes, you know there's two things going on here.

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Speaker 1: They think there's obviously too much taxation, that's the Republican

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Speaker 1: Party platform. But to just as Ronald Reagan did, they

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Speaker 1: want to squeeze the revenue stream. Because if you squeeze

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Speaker 1: the revenue stream, and you cut the revenue stream, you

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Speaker 1: can cut spending, particularly entitlements. You know, Paul Lyon has

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Speaker 1: not forgotten about his desire to cut Medicaid and cut

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Speaker 1: Medicare and really transform the entitlement state UH into something

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Speaker 1: very different and much smaller. And you know, the first

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Speaker 1: place you started to squeeze the revenue line. So I

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Speaker 1: think that's the big part about tax cuts that's really

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Speaker 1: ideologically important to the leadership in the House and Senate.

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Speaker 1: So they're going to write a bill that they want

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Speaker 1: and they're gonna hope that he signs it, and I

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Speaker 1: wouldn't have any expectation that he wouldn't. Great, But I

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Speaker 1: don't understand why the president doesn't focus on that. If

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Speaker 1: you want to win it's smaller big, he can focus

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Speaker 1: on tax and get it through because he seems to

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Speaker 1: be just just a speculation, you know, obsessed with anything

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Speaker 1: that has Obama's name on it. He just seems to

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Speaker 1: want to prove that he can erase Obama's legacy altogether,

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Speaker 1: and that means erasing something called Obamacare and replacing it

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Speaker 1: was something called trump Care. It seems to be a

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Speaker 1: personal obsession of his and the only people can talk

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Speaker 1: about of that. I think the people are the people

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Speaker 1: who are closest to him, who can say, listen, you've

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Speaker 1: got a long time line here, let's just move on

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Speaker 1: and get a success and then come back to Obamacare

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Speaker 1: when you have more political juice. You know, you keep

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Speaker 1: going at this thirty approval rating and you don't get

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Speaker 1: yourself out of that. Eventually voters just decide, we're just

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Speaker 1: missing you. We're not going to be able to restore

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Speaker 1: our confidence in you. And that's where the president is.

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Speaker 1: If we're talking about this in December, in January and

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Speaker 1: he's still at he may get reelected, it's possible, but

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Speaker 1: he will have no juice or cloud with the Congress

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Speaker 1: going into next year, and so that means obsessing on

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Speaker 1: things that they've moved on from. It's just going to

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Speaker 1: be spending his wheels. On Friday, I had a conversation

431
00:20:28,600 --> 00:20:31,240
Speaker 1: with Tim Phillips, who's the President of Americans for prosperity

432
00:20:31,240 --> 00:20:33,560
Speaker 1: of conservative group that's backed by the Koch brothers, and

433
00:20:33,600 --> 00:20:35,000
Speaker 1: they're going to be investing a lot of money and

434
00:20:35,040 --> 00:20:37,959
Speaker 1: resources in tax reform. And I asked him how he

435
00:20:38,040 --> 00:20:41,639
Speaker 1: reacted to the joint statement we got from Republican leadership

436
00:20:41,640 --> 00:20:44,200
Speaker 1: in Congress and the White House untaxed. For my sense

437
00:20:44,200 --> 00:20:47,399
Speaker 1: of it was, Uh, it was still pretty thin if

438
00:20:47,400 --> 00:20:48,840
Speaker 1: you compare to what we got from the White House

439
00:20:48,840 --> 00:20:50,520
Speaker 1: a few months back that was a page long. This

440
00:20:50,640 --> 00:20:52,840
Speaker 1: was maybe a little more than a page. Of course,

441
00:20:52,880 --> 00:20:55,639
Speaker 1: there was a definitive news that the border adjustment tax

442
00:20:56,119 --> 00:20:58,440
Speaker 1: has been dropped. And I asked him if that was

443
00:20:58,480 --> 00:21:00,000
Speaker 1: a good thing, that that you don't have a whole

444
00:21:00,040 --> 00:21:02,720
Speaker 1: lot of details, if that makes negotiation easier, and he

445
00:21:02,800 --> 00:21:05,359
Speaker 1: sort of indicated that it was. Are you surprised by

446
00:21:05,359 --> 00:21:07,919
Speaker 1: how little policy detail we have at this point and

447
00:21:07,960 --> 00:21:10,119
Speaker 1: do you think that's necessarily a good thing or a

448
00:21:10,119 --> 00:21:11,880
Speaker 1: bad thing. Well, I think you have to have people

449
00:21:11,880 --> 00:21:14,840
Speaker 1: who really understand the tax code to have a very

450
00:21:14,880 --> 00:21:18,320
Speaker 1: complex conversation, and I don't think Trump is staffed up

451
00:21:18,440 --> 00:21:21,040
Speaker 1: enough either at Treasury or even in the White House

452
00:21:21,240 --> 00:21:23,880
Speaker 1: to have that kind of conversation. And I'm not sure

453
00:21:23,920 --> 00:21:27,400
Speaker 1: the president really understands all the round vacations of all

454
00:21:27,440 --> 00:21:29,639
Speaker 1: the changes that he may or may not support in

455
00:21:29,680 --> 00:21:31,800
Speaker 1: the tax code. And the other thing is it's still

456
00:21:31,800 --> 00:21:34,000
Speaker 1: a tough political issue for the president because he never

457
00:21:34,000 --> 00:21:36,920
Speaker 1: released his tax returns, So it just will dog him,

458
00:21:37,240 --> 00:21:40,400
Speaker 1: dog him everywhere he goes. You know, there'll be a question, Oh,

459
00:21:40,440 --> 00:21:42,840
Speaker 1: you want tax reform, you want to change the tax code. Hey,

460
00:21:42,880 --> 00:21:46,040
Speaker 1: how about we see your tax returns. So I think

461
00:21:46,119 --> 00:21:47,760
Speaker 1: that's the problem with the president. If he could just

462
00:21:47,840 --> 00:21:50,560
Speaker 1: release them and get that out of the way, I

463
00:21:50,600 --> 00:21:53,119
Speaker 1: think you have a clean slate on taxes and publicly

464
00:21:53,400 --> 00:21:56,439
Speaker 1: could promote or object to things that Congress wants to do.

465
00:21:56,840 --> 00:21:59,200
Speaker 1: But I think that's the other problem with the Republican Congress.

466
00:21:59,320 --> 00:22:02,359
Speaker 1: They don't want to get their message clouded by constant

467
00:22:02,440 --> 00:22:05,080
Speaker 1: calls for asking the president to release his tax returns,

468
00:22:05,200 --> 00:22:07,879
Speaker 1: which will inevitably happen when you're talking about tax reform,

469
00:22:08,440 --> 00:22:10,320
Speaker 1: pressor Shela, let me ask you about the debt limit.

470
00:22:10,520 --> 00:22:12,840
Speaker 1: This comes around time and time again. I think for

471
00:22:12,840 --> 00:22:16,080
Speaker 1: people who are listening, who are investors, economists involved in

472
00:22:16,080 --> 00:22:18,840
Speaker 1: the market, this is hugely important, and I wonder who

473
00:22:18,840 --> 00:22:20,600
Speaker 1: you're going to be listening to for guidance on how

474
00:22:20,640 --> 00:22:23,280
Speaker 1: this administration, how this Congress is going to deal with

475
00:22:23,320 --> 00:22:25,679
Speaker 1: it this time around. There's talk again of having a

476
00:22:25,720 --> 00:22:27,879
Speaker 1: clean debt ceiling increase, there's talk of tethering it to

477
00:22:28,440 --> 00:22:31,320
Speaker 1: spending cuts. Who's going to be taking the leadership role?

478
00:22:31,320 --> 00:22:33,960
Speaker 1: And who are you listening to? Well, I pay attention

479
00:22:34,000 --> 00:22:36,879
Speaker 1: to Mark Meadows, who's a congress for pub converressman from

480
00:22:36,920 --> 00:22:39,879
Speaker 1: North Carolina, who's the head of the Freedom Caucus. You know,

481
00:22:39,920 --> 00:22:42,920
Speaker 1: they're about thirty six official members. Give her take. Uh,

482
00:22:42,960 --> 00:22:46,359
Speaker 1: They've got some really interesting party discipline subparties has been

483
00:22:46,440 --> 00:22:49,000
Speaker 1: going on in the Freedom Caucus. And I'm listening to him,

484
00:22:49,040 --> 00:22:51,080
Speaker 1: I'm watching him. I'm thinking about what is he's saying

485
00:22:51,119 --> 00:22:53,159
Speaker 1: about the debt limit? Does he want it clean? Are

486
00:22:53,200 --> 00:22:55,800
Speaker 1: they going to support it? He's already indicated he doesn't

487
00:22:55,800 --> 00:22:58,000
Speaker 1: want to see a government shutdown over it. But these

488
00:22:58,040 --> 00:23:01,840
Speaker 1: are the most fiscal hawk ish members of the Republican Party,

489
00:23:02,119 --> 00:23:04,439
Speaker 1: and I'm looking to see what they want to see happen,

490
00:23:04,480 --> 00:23:07,119
Speaker 1: because Paul Ryan can't get it through without them. So

491
00:23:07,320 --> 00:23:09,080
Speaker 1: that's who I'm watching to figure out what's going to

492
00:23:09,160 --> 00:23:10,960
Speaker 1: come out of the House. And I think right now.

493
00:23:11,040 --> 00:23:13,359
Speaker 1: McConnell's trying to regroup in the Republican Party in the

494
00:23:13,400 --> 00:23:15,680
Speaker 1: Senate and try to find a way to move forward

495
00:23:15,760 --> 00:23:18,480
Speaker 1: and be solid. You know, you just can't bring another

496
00:23:18,600 --> 00:23:21,159
Speaker 1: proposition to the Senate floor for the majority party and

497
00:23:21,280 --> 00:23:23,800
Speaker 1: lose again. You know, that's what started to happen to Bayner,

498
00:23:24,040 --> 00:23:26,040
Speaker 1: and he needed the Democrats to get things done like

499
00:23:26,119 --> 00:23:28,560
Speaker 1: the debt ceiling and opening up the government again. And

500
00:23:28,640 --> 00:23:31,359
Speaker 1: McConnell just can't afford to do that this early in

501
00:23:31,400 --> 00:23:34,920
Speaker 1: this unified party government, particularly going into next year. Push

502
00:23:34,920 --> 00:23:37,200
Speaker 1: again here to that October first at Denverine will continue

503
00:23:37,240 --> 00:23:39,000
Speaker 1: to watch what we hear from the Treasury Department and

504
00:23:39,080 --> 00:23:41,560
Speaker 1: the Congress, from Mr Meadows and others. Wendy Schiller, thank

505
00:23:41,560 --> 00:23:42,960
Speaker 1: you very much for your time this morning both on

506
00:23:42,960 --> 00:23:45,480
Speaker 1: Bloomberg Radio and Bloomberg Television as well. That's Wendy Schilder

507
00:23:45,520 --> 00:23:48,520
Speaker 1: of Brown University and Providence, Rhode Island. She's a share

508
00:23:48,520 --> 00:23:58,560
Speaker 1: of the Political Science department at Brown University. Brunch you

509
00:23:58,640 --> 00:24:02,720
Speaker 1: by Bank of America Merrill Lynch. With virtual reality, virtually

510
00:24:02,880 --> 00:24:08,159
Speaker 1: everything will change. Discover opportunities in a transforming world. VI

511
00:24:08,240 --> 00:24:12,760
Speaker 1: of a mL dot Com slash VR Meryll Lynch, Pierced

512
00:24:12,800 --> 00:24:20,680
Speaker 1: Fenner and Smith Incorporated roscasters joints here. As I mentioned

513
00:24:20,680 --> 00:24:23,800
Speaker 1: our Bloomberg eleven three studios, he's ahead of the globalcation

514
00:24:23,840 --> 00:24:25,920
Speaker 1: portfolio at black Rock. Great to have you with us here.

515
00:24:26,240 --> 00:24:27,960
Speaker 1: Thanks for taking the time to come in. Oh Dave,

516
00:24:28,000 --> 00:24:30,520
Speaker 1: thanks for having me. Let me start by asking about volatility.

517
00:24:30,520 --> 00:24:32,520
Speaker 1: We haven't talked about it that much this morning, and

518
00:24:32,520 --> 00:24:35,160
Speaker 1: you look at volatility still hovering around U these loads.

519
00:24:35,160 --> 00:24:38,800
Speaker 1: Talk about the particular challenges you face navigating this low

520
00:24:38,840 --> 00:24:42,240
Speaker 1: vall world. Well, I think the biggest challenges everyone's waiting

521
00:24:42,280 --> 00:24:44,560
Speaker 1: for it to end. Uh. We've seen the VIX go

522
00:24:44,720 --> 00:24:47,119
Speaker 1: from load to load to low. It's not just in

523
00:24:47,160 --> 00:24:49,800
Speaker 1: the equity markets. We see the same pattern in bond

524
00:24:49,840 --> 00:24:53,640
Speaker 1: markets as well, and this left everybody justifiably nervous about

525
00:24:53,640 --> 00:24:56,400
Speaker 1: how much longer can go on, which has meant there's

526
00:24:56,400 --> 00:24:58,200
Speaker 1: been a lot of focus on hedging. There's been a

527
00:24:58,240 --> 00:25:01,480
Speaker 1: lot of focus on downside. But in an environment which

528
00:25:01,480 --> 00:25:05,560
Speaker 1: economic volatility is low and monetary accommodation is still very

529
00:25:05,640 --> 00:25:08,000
Speaker 1: much present, not just in the US but also throughout

530
00:25:08,080 --> 00:25:12,040
Speaker 1: the world, markets are just marching quietly on. What are

531
00:25:12,080 --> 00:25:14,719
Speaker 1: you most worried about Russ. I would say, there are

532
00:25:14,720 --> 00:25:16,040
Speaker 1: a couple of things. You know. One thing that does

533
00:25:16,080 --> 00:25:19,119
Speaker 1: have me a bit nervous. One of the side effects

534
00:25:19,160 --> 00:25:22,400
Speaker 1: of low volatility is you see a lot of investors

535
00:25:22,520 --> 00:25:25,760
Speaker 1: really having to lever up, getting crowded trades to kind

536
00:25:25,760 --> 00:25:28,240
Speaker 1: of produce returns. And we hear about some of the

537
00:25:28,359 --> 00:25:32,560
Speaker 1: leverage in the hedge funds space, particularly in market neutral

538
00:25:32,600 --> 00:25:35,240
Speaker 1: equity long short it reminds me a little bit of

539
00:25:35,240 --> 00:25:37,879
Speaker 1: what the world like ten years ago. We also at

540
00:25:37,880 --> 00:25:40,680
Speaker 1: the low volatility environment and a lot of hedge funds

541
00:25:40,960 --> 00:25:44,119
Speaker 1: we're levering up in ways that produced a very fragile market.

542
00:25:44,400 --> 00:25:46,760
Speaker 1: And again, in that type of environment, it doesn't take

543
00:25:46,760 --> 00:25:49,800
Speaker 1: a big shock to produce some very bad results, at

544
00:25:49,880 --> 00:25:52,119
Speaker 1: least for a short period of time. So as are

545
00:25:52,160 --> 00:25:54,320
Speaker 1: you saying that hedge funds have too much space in

546
00:25:54,359 --> 00:25:57,880
Speaker 1: these financial markets? And does that really lead to distortions? Now,

547
00:25:57,880 --> 00:25:59,760
Speaker 1: it's not that hedge funds have too much space, it's

548
00:25:59,800 --> 00:26:02,480
Speaker 1: that are particular types of hedge funds that in a

549
00:26:02,520 --> 00:26:05,399
Speaker 1: low volatility environment or doing what what they need to do,

550
00:26:05,440 --> 00:26:07,760
Speaker 1: which is to level up to try to generate a

551
00:26:07,800 --> 00:26:11,320
Speaker 1: target return, and that creates a risk. It creates an

552
00:26:11,359 --> 00:26:14,880
Speaker 1: additional risk, Uh, if many of those players are focused

553
00:26:14,920 --> 00:26:18,000
Speaker 1: on particularly crowded parts of the market. And again we've seen,

554
00:26:18,160 --> 00:26:21,240
Speaker 1: for example in US equities, is that leadership has been

555
00:26:21,280 --> 00:26:24,719
Speaker 1: somewhat narrow. It's been very much a market dominated by

556
00:26:24,760 --> 00:26:27,400
Speaker 1: some large cap tech names. Uh. And that's the type

557
00:26:27,400 --> 00:26:29,560
Speaker 1: of thing you always want to take account of. Ask

558
00:26:29,600 --> 00:26:31,760
Speaker 1: a couple of questions about about currency. Here is a

559
00:26:31,800 --> 00:26:34,880
Speaker 1: proxy for political risk. You look at the week dollar,

560
00:26:34,960 --> 00:26:37,159
Speaker 1: you look at all of the political dulations coming out

561
00:26:37,200 --> 00:26:39,800
Speaker 1: of Washington, d C. How different is this environment that

562
00:26:39,880 --> 00:26:42,520
Speaker 1: the currency market right now, given what we've seen in

563
00:26:42,640 --> 00:26:44,720
Speaker 1: terms of political risk here in the US and in

564
00:26:44,760 --> 00:26:48,040
Speaker 1: Europe as well, well, I think the currency market is

565
00:26:48,040 --> 00:26:51,240
Speaker 1: is discounting a couple of things. I mean, certainly politics

566
00:26:51,320 --> 00:26:53,280
Speaker 1: is have an impact, although I think it's less about

567
00:26:53,359 --> 00:26:57,520
Speaker 1: political risk and more about a reversal of the Trump

568
00:26:57,520 --> 00:27:00,600
Speaker 1: trade which dominated in the back half of sixteen. And

569
00:27:00,600 --> 00:27:04,080
Speaker 1: as we remember, you know, at that time, there was optimism,

570
00:27:04,080 --> 00:27:09,280
Speaker 1: their expectations for significant fiscal stimulus for infrastructure, for tax cuts,

571
00:27:09,359 --> 00:27:12,400
Speaker 1: and clearly, as of now, none of that has actually occurred.

572
00:27:12,800 --> 00:27:15,440
Speaker 1: So what you've seen is that many of those trades

573
00:27:15,640 --> 00:27:19,800
Speaker 1: the run up in in value, the run up in financials, uh,

574
00:27:20,000 --> 00:27:22,720
Speaker 1: the run up in interest rates, and of course the

575
00:27:22,800 --> 00:27:25,320
Speaker 1: dollar have all reversed. Now the dollar has been the

576
00:27:25,359 --> 00:27:28,000
Speaker 1: most violent reversal, and I think in some ways that

577
00:27:28,080 --> 00:27:31,240
Speaker 1: reflects the fact that not only have we seen some disappointment,

578
00:27:31,760 --> 00:27:34,679
Speaker 1: uh from the administration, we've also seen a moderation of

579
00:27:34,720 --> 00:27:38,320
Speaker 1: the U s economy and surprisingly a particularly strong economy

580
00:27:38,320 --> 00:27:41,520
Speaker 1: in Europe, which means that rate differential, the fact that

581
00:27:41,560 --> 00:27:44,720
Speaker 1: the FED was going to lead other central banks, that's

582
00:27:44,760 --> 00:27:46,879
Speaker 1: not quite as strong of a narrative as it was,

583
00:27:47,240 --> 00:27:50,160
Speaker 1: which is why the dollars pulled back so dramatically, particularly

584
00:27:50,200 --> 00:27:52,560
Speaker 1: against the euro rus. Do you have a sense from

585
00:27:52,560 --> 00:27:55,760
Speaker 1: this administration of what its dollar policy is? We had,

586
00:27:55,800 --> 00:27:58,360
Speaker 1: of course, the the Reuben strong dollar policy for so long.

587
00:27:59,000 --> 00:28:01,119
Speaker 1: There was a lot of talk about to where this

588
00:28:01,160 --> 00:28:04,159
Speaker 1: administration wanted the dollar to be from many officials within

589
00:28:04,160 --> 00:28:07,320
Speaker 1: the administration, including the President himself. What's your sense of

590
00:28:07,320 --> 00:28:09,880
Speaker 1: what this administration wants when it comes to dollar strength? Well,

591
00:28:09,920 --> 00:28:12,680
Speaker 1: I think, like everybody else, uh, you know, I we

592
00:28:12,720 --> 00:28:16,399
Speaker 1: don't have any strong insight into the administration's policy on this,

593
00:28:16,560 --> 00:28:19,199
Speaker 1: but I think what you can derive both from comments

594
00:28:19,200 --> 00:28:23,399
Speaker 1: from the President himself up also from discussion about potential

595
00:28:23,480 --> 00:28:27,160
Speaker 1: successors to Janet Yellen or even reappointing UH miss Yelling

596
00:28:27,200 --> 00:28:30,040
Speaker 1: to to the role of chair, is that the administration

597
00:28:30,119 --> 00:28:33,119
Speaker 1: is somewhat comfortable up with a dollar that's either a

598
00:28:33,119 --> 00:28:36,320
Speaker 1: bit softer in the trading range. And that's one of

599
00:28:36,320 --> 00:28:38,320
Speaker 1: the reasons I think the dollar has pulled back that

600
00:28:38,520 --> 00:28:41,280
Speaker 1: this is not an administration at least so far, has

601
00:28:41,360 --> 00:28:44,960
Speaker 1: signaled they're looking for a strong dollar policy. Does a

602
00:28:45,040 --> 00:28:50,080
Speaker 1: soft dollar mean a soft economy? Actually it doesn't. Up

603
00:28:50,120 --> 00:28:53,320
Speaker 1: in some ways, it it actually means the opposite. So

604
00:28:53,360 --> 00:28:55,880
Speaker 1: if you take a look at US corporate earnings in

605
00:28:55,920 --> 00:28:58,680
Speaker 1: the second quarter, they're actually quite strong. We're seeing earnings

606
00:28:58,680 --> 00:29:02,000
Speaker 1: growth of nine or ten percent, We're seeing revenue growth

607
00:29:02,000 --> 00:29:05,320
Speaker 1: around five percent. UH. This is much better than expected,

608
00:29:05,320 --> 00:29:07,600
Speaker 1: and I think a lot of that can be attributed

609
00:29:07,640 --> 00:29:10,160
Speaker 1: to the fact that the softer dollar has provided a

610
00:29:10,240 --> 00:29:15,800
Speaker 1: tailwind for many US multinationals. In addition, if you think globally, UH,

611
00:29:15,960 --> 00:29:19,720
Speaker 1: a stronger dollar is a de facto monetary tightening. UH

612
00:29:19,800 --> 00:29:22,320
Speaker 1: not just in the US, but globally, is particularly hard

613
00:29:22,320 --> 00:29:25,640
Speaker 1: on emerging markets. I think one of the reasons global

614
00:29:25,680 --> 00:29:28,040
Speaker 1: markets have done as well as they have here to date.

615
00:29:28,640 --> 00:29:31,520
Speaker 1: Is that while the Fed has nudged up interest rates, uh,

616
00:29:31,560 --> 00:29:35,600
Speaker 1: the weaker dollars actually kept monetary conditions more accommodated. But

617
00:29:35,640 --> 00:29:37,760
Speaker 1: for us very quickly, if you have a weaker dollar,

618
00:29:37,840 --> 00:29:40,000
Speaker 1: it means that the FED doesn't see an economy strong

619
00:29:40,120 --> 00:29:43,120
Speaker 1: enough to withhold normalization. That's not good thing. Well, the

620
00:29:43,160 --> 00:29:46,000
Speaker 1: FED certainly is being cautious about normalization. And I wouldn't

621
00:29:46,080 --> 00:29:48,760
Speaker 1: argue with the fact this is not an economy running away,

622
00:29:48,800 --> 00:29:51,000
Speaker 1: but it's an economy, for better or worse, where it's

623
00:29:51,040 --> 00:29:53,200
Speaker 1: been for the last seven or eight years, which is

624
00:29:53,480 --> 00:29:57,880
Speaker 1: generating very low inflation and steady but uninspiring two percent growth.

625
00:29:57,960 --> 00:30:00,560
Speaker 1: So I'd say it's it's no better or worse than

626
00:30:00,560 --> 00:30:02,400
Speaker 1: what we've had for most of the last five years.

627
00:30:02,560 --> 00:30:04,160
Speaker 1: Rust Cast, which is with us here in our Bloomberg

628
00:30:04,200 --> 00:30:06,400
Speaker 1: eleven three oh studios in New York. He's the manager

629
00:30:06,400 --> 00:30:08,520
Speaker 1: of the Global Allocation Fund at black Rock. Here with

630
00:30:08,560 --> 00:30:10,680
Speaker 1: me in Francine Lackwell, who is in Free tom to

631
00:30:10,760 --> 00:30:12,360
Speaker 1: day and Russ I wanted to ask you about energy.

632
00:30:12,400 --> 00:30:14,840
Speaker 1: We're gonna have a conversation in a few minutes about

633
00:30:14,840 --> 00:30:16,840
Speaker 1: the oil market in particular. But when you look at

634
00:30:16,960 --> 00:30:19,400
Speaker 1: when you look at equities, when you look at other

635
00:30:19,480 --> 00:30:21,760
Speaker 1: other assets at this point, how much is energy driving

636
00:30:22,040 --> 00:30:24,840
Speaker 1: markets at this point? Not as much as it used

637
00:30:24,880 --> 00:30:27,920
Speaker 1: to Obviously energies driving energy stocks. But if we think

638
00:30:27,960 --> 00:30:31,440
Speaker 1: about the impact of oil prices relative to where they

639
00:30:31,480 --> 00:30:34,840
Speaker 1: were eighteen months ago in early sixteen, uh. If you

640
00:30:34,840 --> 00:30:38,040
Speaker 1: remember back, that was a time when lower oil was

641
00:30:38,080 --> 00:30:41,440
Speaker 1: really scaring the entire market, particularly the US high yield market.

642
00:30:41,920 --> 00:30:45,440
Speaker 1: And today we see resiliency relative to the price of oil. Now,

643
00:30:45,440 --> 00:30:47,440
Speaker 1: I think there's a limit to that. If we were

644
00:30:47,480 --> 00:30:50,360
Speaker 1: to see oil slip well below forty into the mid thirties,

645
00:30:50,720 --> 00:30:52,840
Speaker 1: I do think you'd see some stress both in bond

646
00:30:52,880 --> 00:30:55,600
Speaker 1: markets and equity markets. But in the mid forties we've

647
00:30:55,600 --> 00:30:58,560
Speaker 1: seen is that many energy producers in the US can

648
00:30:58,600 --> 00:31:01,640
Speaker 1: be profitable and close to those levels. Rus do you

649
00:31:01,680 --> 00:31:05,840
Speaker 1: believe OPEC are still in control of the price of oil? Well, fenceeing.

650
00:31:05,880 --> 00:31:08,440
Speaker 1: Clearly OPEC is not in control the way they were

651
00:31:08,520 --> 00:31:11,920
Speaker 1: let's say thirty years ago. We've got a major player

652
00:31:11,920 --> 00:31:15,040
Speaker 1: in US shale producers. The US is now producing over

653
00:31:15,120 --> 00:31:17,880
Speaker 1: nine million barrels of oil per day, and the key

654
00:31:17,920 --> 00:31:20,200
Speaker 1: thing is that for many of these producers to break even,

655
00:31:20,200 --> 00:31:22,680
Speaker 1: as I mentioned, a moment ago is lower and they're

656
00:31:22,800 --> 00:31:25,680
Speaker 1: very nimble. They can bring production on and off again

657
00:31:26,200 --> 00:31:29,360
Speaker 1: much quicker than was the case two decades ago. And

658
00:31:29,400 --> 00:31:32,160
Speaker 1: this means that it has resulted in some loss of control,

659
00:31:32,280 --> 00:31:36,360
Speaker 1: some loss of pricing control for the OPEC cartel, right,

660
00:31:36,400 --> 00:31:38,680
Speaker 1: what can they actually do to keep the price under control?

661
00:31:38,760 --> 00:31:41,400
Speaker 1: As you say, there's so much competition from us. Shall

662
00:31:42,000 --> 00:31:44,479
Speaker 1: their meeting I think in Abudabi next week on the seventh,

663
00:31:44,520 --> 00:31:47,840
Speaker 1: to try and make sure that there's compliance that will

664
00:31:47,880 --> 00:31:50,920
Speaker 1: do almost nothing, will it? I think OPEC would have

665
00:31:51,000 --> 00:31:53,720
Speaker 1: to pull back on production much more than they've been

666
00:31:53,760 --> 00:31:56,320
Speaker 1: able to so far. And again the last agreement, UH

667
00:31:56,360 --> 00:31:59,800
Speaker 1: their exceptions for Libya, for Nigeria, this is where a

668
00:31:59,840 --> 00:32:02,200
Speaker 1: lot of the marginal productions occurred over the last six

669
00:32:02,240 --> 00:32:04,840
Speaker 1: to nine months. So whether or not OPEC is going

670
00:32:04,880 --> 00:32:08,960
Speaker 1: to be able to have a draconian enough cut, I think,

671
00:32:09,000 --> 00:32:11,680
Speaker 1: as you suggest, that's just not clear. Let me ask

672
00:32:11,720 --> 00:32:13,320
Speaker 1: you have China a little bit here, can put it

673
00:32:13,320 --> 00:32:15,160
Speaker 1: towards Asia for for the last few minutes that that

674
00:32:15,240 --> 00:32:18,800
Speaker 1: we have with you, uh, we we watched as the

675
00:32:18,880 --> 00:32:21,760
Speaker 1: Chinese government convene this one belt, one road for him,

676
00:32:22,120 --> 00:32:24,520
Speaker 1: I talked about the prospects for a lot more investment,

677
00:32:24,520 --> 00:32:26,360
Speaker 1: not just in China, but in the region as a whole.

678
00:32:26,360 --> 00:32:29,440
Speaker 1: How does that stand to change the region? I think

679
00:32:29,440 --> 00:32:31,680
Speaker 1: there are a couple of things. One, obviously, we are

680
00:32:31,720 --> 00:32:35,200
Speaker 1: seeing a multipolar world, which which is the you know,

681
00:32:35,240 --> 00:32:38,200
Speaker 1: the the obvious observation, uh in how that's going to

682
00:32:38,240 --> 00:32:41,160
Speaker 1: play it? I don't think anyone knows. The other, of course,

683
00:32:41,360 --> 00:32:44,760
Speaker 1: is the significance of Chinese growth, something we're all focusing

684
00:32:44,800 --> 00:32:47,160
Speaker 1: on much more than was the case ten years ago.

685
00:32:47,760 --> 00:32:50,120
Speaker 1: And I think that's one reason the global economies in

686
00:32:50,160 --> 00:32:53,520
Speaker 1: decent shape right now. China has been able to avoid,

687
00:32:53,600 --> 00:32:56,360
Speaker 1: at least thus far, the hard landing that people were

688
00:32:56,440 --> 00:32:59,640
Speaker 1: very concerned about in early sixteen. Growth is stable. We

689
00:32:59,680 --> 00:33:02,080
Speaker 1: think it is likely to slow, but slow at and

690
00:33:02,160 --> 00:33:04,840
Speaker 1: measured pace, and that means that China continues, at least

691
00:33:04,840 --> 00:33:08,120
Speaker 1: for now, to be a source of stability for the

692
00:33:08,120 --> 00:33:10,320
Speaker 1: global economy. Friend, and I had the pleasure of talking

693
00:33:10,320 --> 00:33:12,680
Speaker 1: with your colleague Isabel Mateosi Lago a few a few

694
00:33:12,680 --> 00:33:14,800
Speaker 1: moments ago on Bloomberg Television. We talked a little bit

695
00:33:14,840 --> 00:33:19,040
Speaker 1: about industrial overcapacity in China. Recall going with the US

696
00:33:19,080 --> 00:33:21,920
Speaker 1: Treasury Secretary now former US Treasury Secretary to Beijing, and

697
00:33:21,920 --> 00:33:23,640
Speaker 1: this was something that he was hammering on a lot.

698
00:33:23,800 --> 00:33:26,640
Speaker 1: China's need to reckon with this and do more about it.

699
00:33:26,680 --> 00:33:29,240
Speaker 1: We saw steel production reach I believe a record level

700
00:33:29,280 --> 00:33:32,200
Speaker 1: here on a month month basis last month or earlier

701
00:33:32,240 --> 00:33:35,360
Speaker 1: this month. Is China finally reckon reckoning with the fact

702
00:33:35,360 --> 00:33:37,360
Speaker 1: that it's it's producing too much steel, too much of

703
00:33:37,360 --> 00:33:40,440
Speaker 1: other metals. I think it is, Although you know, as

704
00:33:40,480 --> 00:33:42,680
Speaker 1: you as you know, this can be a very long process.

705
00:33:42,720 --> 00:33:46,120
Speaker 1: But we are seeing some changes anecdotally. We're hearing of

706
00:33:46,240 --> 00:33:50,480
Speaker 1: the closure of many, many small inefficient minds and and factories.

707
00:33:50,760 --> 00:33:52,880
Speaker 1: We're also seeing a change of the macro level. If

708
00:33:52,880 --> 00:33:56,640
Speaker 1: we look at the difference between producer prices prices out

709
00:33:56,640 --> 00:33:59,200
Speaker 1: of the factory gate in China today which are now

710
00:33:59,280 --> 00:34:02,640
Speaker 1: positive versus a few years ago when they were consistently negative,

711
00:34:03,280 --> 00:34:06,600
Speaker 1: it does suggest that China is slowly starting to come

712
00:34:06,640 --> 00:34:09,960
Speaker 1: to grips with their overcapacity problem. First, what worries you

713
00:34:10,000 --> 00:34:12,080
Speaker 1: about China the most is it's that you have I guess,

714
00:34:12,120 --> 00:34:15,800
Speaker 1: the the holy the unholy trinity of you know, reserves

715
00:34:15,800 --> 00:34:17,880
Speaker 1: going down. They need to stay blast one. At the

716
00:34:17,920 --> 00:34:20,200
Speaker 1: same time, they have to make sure that outflows don't

717
00:34:20,239 --> 00:34:23,960
Speaker 1: get worse. I think the the the capital account is

718
00:34:23,960 --> 00:34:27,040
Speaker 1: definitely a source of concern. So far, they've been able

719
00:34:27,080 --> 00:34:29,279
Speaker 1: to manage that. I think my my bigger concerned friends

720
00:34:29,280 --> 00:34:31,280
Speaker 1: see and again, I don't know when it becomes an issue,

721
00:34:31,640 --> 00:34:34,800
Speaker 1: but certainly the build up of debt over the last

722
00:34:34,880 --> 00:34:37,680
Speaker 1: five or ten years in China is worrying. Uh We've

723
00:34:37,680 --> 00:34:40,520
Speaker 1: seen similar build ups in the past in other countries.

724
00:34:40,760 --> 00:34:43,160
Speaker 1: It hasn't ended well. Now. That doesn't mean that China

725
00:34:43,239 --> 00:34:45,680
Speaker 1: is facing a Western style banking crisis. It is a

726
00:34:45,719 --> 00:34:49,600
Speaker 1: different system, but it does mean if bad debts accumulate,

727
00:34:50,160 --> 00:34:52,640
Speaker 1: that can be a drag on China at a time

728
00:34:52,640 --> 00:34:55,360
Speaker 1: when when the rest of the world is very dependent

729
00:34:55,400 --> 00:34:58,040
Speaker 1: upon Chinese growth. Could it be as ugly as a

730
00:34:58,080 --> 00:35:01,080
Speaker 1: financial crisis. Well, I think it really depends on how

731
00:35:01,160 --> 00:35:03,920
Speaker 1: bad you think the bad debt situation is, and the

732
00:35:03,920 --> 00:35:06,880
Speaker 1: truth is nobody knows. I'm a little bit encouraged by

733
00:35:06,880 --> 00:35:09,320
Speaker 1: the fact that most of that debt is held domestically

734
00:35:09,360 --> 00:35:13,360
Speaker 1: by China uh in that China does have significant resources

735
00:35:13,400 --> 00:35:15,480
Speaker 1: to address it, whether or not they're going to be

736
00:35:15,560 --> 00:35:17,680
Speaker 1: ultimately successful, I think is one of the big risks

737
00:35:17,680 --> 00:35:19,840
Speaker 1: we're all facing over let's say, the next five years.

738
00:35:20,040 --> 00:35:21,560
Speaker 1: Russ grates to please with you. Thank you very much

739
00:35:21,640 --> 00:35:23,799
Speaker 1: for joining us here on Blimberg Spilience Frestcast, which manager

740
00:35:23,800 --> 00:35:25,600
Speaker 1: with the Global Allocation funded black Rock here in our

741
00:35:25,600 --> 00:35:40,239
Speaker 1: Bloomberg eleven three oh studios pleasure now to be joined

742
00:35:40,239 --> 00:35:43,240
Speaker 1: by Dennis Gardner, the editor, of course of the Gartment Letter. Dennis,

743
00:35:43,280 --> 00:35:45,120
Speaker 1: great to talk with you, as always, uh A few

744
00:35:45,160 --> 00:35:47,160
Speaker 1: people can do this as well as you weave in

745
00:35:47,239 --> 00:35:50,080
Speaker 1: the political risk with the market volatility that we've seen.

746
00:35:50,160 --> 00:35:52,120
Speaker 1: Let me ask you first of all about how markets

747
00:35:52,120 --> 00:35:55,680
Speaker 1: have reacted to the second intercontinental ballistic missile test we

748
00:35:55,680 --> 00:35:57,719
Speaker 1: saw last week. Of course, we're watching to see what

749
00:35:57,760 --> 00:35:59,520
Speaker 1: the fallout from that is going to be on the

750
00:35:59,560 --> 00:36:02,520
Speaker 1: diplomat and policy up front. How's it playing out in markets?

751
00:36:02,560 --> 00:36:05,080
Speaker 1: What is it? What does it portend for you? Well,

752
00:36:05,320 --> 00:36:07,920
Speaker 1: first of all, the response has been rather temp at heaven.

753
00:36:07,960 --> 00:36:10,799
Speaker 1: That's gold has gotten a bid, but not a dramatic one.

754
00:36:10,960 --> 00:36:13,680
Speaker 1: And in past times one might have expected gold to

755
00:36:13,680 --> 00:36:16,879
Speaker 1: be up fifty five dollars and then it's up eight

756
00:36:16,960 --> 00:36:20,160
Speaker 1: or ten dollars instead. The dollar itself is a little

757
00:36:20,160 --> 00:36:22,919
Speaker 1: bit weaker, but the operative wards here are a little

758
00:36:22,920 --> 00:36:26,719
Speaker 1: bit so the responses have been strangely quiet. It is

759
00:36:26,760 --> 00:36:30,000
Speaker 1: as if there is no real problem whatsoever, or if

760
00:36:30,000 --> 00:36:31,920
Speaker 1: there is a problem, it is certainly manageable. So I

761
00:36:31,920 --> 00:36:34,040
Speaker 1: think some people might well be surprised by the tepid

762
00:36:34,120 --> 00:36:37,120
Speaker 1: nature with which many of the markets have responded. Right,

763
00:36:37,120 --> 00:36:39,200
Speaker 1: But then it's I'm also looking at iron or right,

764
00:36:39,320 --> 00:36:42,359
Speaker 1: and that's riley quite significantly. In fact, we're looking at

765
00:36:42,400 --> 00:36:44,759
Speaker 1: almost like you know, a bull run. And this is

766
00:36:44,800 --> 00:36:48,799
Speaker 1: after we had some pretty strong China manufacturing data. Well,

767
00:36:48,960 --> 00:36:51,040
Speaker 1: I think that the first of all, you you had

768
00:36:51,040 --> 00:36:52,920
Speaker 1: a bear market in iron and steel for a long

769
00:36:52,920 --> 00:36:54,600
Speaker 1: period of time. Now all of a sudden it's turned.

770
00:36:54,640 --> 00:36:57,440
Speaker 1: They both have turned much for the better. Base metals

771
00:36:57,600 --> 00:36:59,880
Speaker 1: across the board have turned for the better. And I

772
00:37:00,040 --> 00:37:03,640
Speaker 1: think that is exemplary of better economic environs here in

773
00:37:03,640 --> 00:37:06,520
Speaker 1: the United States, but more importantly, better economic environs and

774
00:37:06,640 --> 00:37:09,080
Speaker 1: and and they hope for better economic environment in the

775
00:37:09,120 --> 00:37:11,760
Speaker 1: future in China. I think you have to be impressed

776
00:37:11,760 --> 00:37:13,759
Speaker 1: by the fact that that iron and steel prices are

777
00:37:13,760 --> 00:37:17,279
Speaker 1: doing as well as they are. If there are economic

778
00:37:17,440 --> 00:37:20,040
Speaker 1: data points or anecdotal economic data points that I'm going

779
00:37:20,080 --> 00:37:22,800
Speaker 1: to pay attention to. Shipping is one. Iron ore and

780
00:37:22,800 --> 00:37:24,880
Speaker 1: steel prices are another, and both of them are starting

781
00:37:24,880 --> 00:37:27,440
Speaker 1: to turn for the better. Can can it go higher?

782
00:37:27,480 --> 00:37:29,239
Speaker 1: If you look at what China is trying to do?

783
00:37:29,320 --> 00:37:31,879
Speaker 1: So they're you know, trying to I guess, fight over

784
00:37:31,920 --> 00:37:35,319
Speaker 1: capacity um and rein in some more unruly events by

785
00:37:35,360 --> 00:37:38,480
Speaker 1: cutting production. Well, I think that you're you're common about

786
00:37:38,520 --> 00:37:41,000
Speaker 1: how how swift has been the increase in iron ore

787
00:37:41,080 --> 00:37:45,120
Speaker 1: prices and iron prices themselves, and steel prices. Perhaps after

788
00:37:45,200 --> 00:37:47,279
Speaker 1: a very short span of time, they're a bit overbought,

789
00:37:47,560 --> 00:37:50,440
Speaker 1: might develop a bit of weakness, but I would suspect

790
00:37:51,000 --> 00:37:53,400
Speaker 1: any sort of weakness that one gets, one should be

791
00:37:53,400 --> 00:37:55,440
Speaker 1: a buyer. So what do I think the trend is?

792
00:37:55,480 --> 00:37:57,280
Speaker 1: I think the trend and iron ore prices and steel

793
00:37:57,280 --> 00:37:59,680
Speaker 1: prices and even shipping values are for the better. We

794
00:37:59,680 --> 00:38:02,399
Speaker 1: would is talking with Michael Whitner of Suction about oil.

795
00:38:02,440 --> 00:38:04,120
Speaker 1: I want to get your take on on oil as

796
00:38:04,160 --> 00:38:06,760
Speaker 1: well as we look ahead to this OPEC non OPEC

797
00:38:06,800 --> 00:38:10,799
Speaker 1: meeting in Abu Dhabi next next week. What's your sense

798
00:38:10,840 --> 00:38:14,000
Speaker 1: of what's driving oil prices at this point. Now. Well,

799
00:38:14,080 --> 00:38:16,160
Speaker 1: first of all, the thing that I'll pay more attention

800
00:38:16,200 --> 00:38:17,960
Speaker 1: to when it comes to oil is the term structure.

801
00:38:18,040 --> 00:38:21,200
Speaker 1: What is what is the is the contango narrowing, is

802
00:38:21,239 --> 00:38:24,200
Speaker 1: the backwardation widening, and the fact that we have moved.

803
00:38:24,320 --> 00:38:27,479
Speaker 1: And let's begin by saying that until about three weeks ago,

804
00:38:27,520 --> 00:38:30,720
Speaker 1: I had been manifestly barish of crude oil, clearly, no, no,

805
00:38:30,719 --> 00:38:33,680
Speaker 1: no equivocation. But then about three weeks ago I started

806
00:38:33,680 --> 00:38:37,000
Speaker 1: to watch as the front months, as as the backwardation

807
00:38:37,120 --> 00:38:41,200
Speaker 1: began to narrow, and discussions incumbent in the markets that

808
00:38:41,239 --> 00:38:43,920
Speaker 1: perhaps we might even move to backwardation, which is a

809
00:38:44,080 --> 00:38:47,719
Speaker 1: very strange, very material change over the course of the

810
00:38:47,760 --> 00:38:51,400
Speaker 1: past several years. That shifting nature of moving from a

811
00:38:51,400 --> 00:38:55,320
Speaker 1: contango to a backwardation tells us one either supply is diminished,

812
00:38:55,360 --> 00:38:58,520
Speaker 1: which is not true, or demand is increasing, which must

813
00:38:58,560 --> 00:39:02,280
Speaker 1: be true. So I I look at the Coude oil market,

814
00:39:02,600 --> 00:39:06,240
Speaker 1: and having been manifestly overtly bearished for a long period

815
00:39:06,239 --> 00:39:09,040
Speaker 1: of time, finally I have to say to myself, maybe

816
00:39:09,120 --> 00:39:12,040
Speaker 1: higher prices lie ahead. Now after the last two weeks,

817
00:39:12,040 --> 00:39:14,600
Speaker 1: when prices have gone up rather swiftly, would I be

818
00:39:14,680 --> 00:39:17,399
Speaker 1: a buyer here. No, But just like the discussion of

819
00:39:17,560 --> 00:39:20,680
Speaker 1: iron ore prices, any weakness, perhaps a dollar dollar and

820
00:39:20,680 --> 00:39:22,759
Speaker 1: a half two dollars from here, then I shall be

821
00:39:23,040 --> 00:39:25,880
Speaker 1: Dennis Gartment. How worried are you about the week the

822
00:39:25,960 --> 00:39:29,200
Speaker 1: weekend dollar? It's been weak now for a while. How

823
00:39:29,200 --> 00:39:33,719
Speaker 1: worried about that are you? Not? Not? Particularly? Uh? If

824
00:39:33,840 --> 00:39:36,520
Speaker 1: if we walked in several times and we watched the

825
00:39:36,520 --> 00:39:39,279
Speaker 1: the euro trading above one and doing it in a

826
00:39:39,400 --> 00:39:41,680
Speaker 1: very short period of time, and doing it on a

827
00:39:41,719 --> 00:39:44,480
Speaker 1: flash upward, I might be concerned. But the fact that

828
00:39:44,480 --> 00:39:49,320
Speaker 1: it is quietly, laboriously the dollars quietly, laboriously moving lower,

829
00:39:49,360 --> 00:39:52,560
Speaker 1: the euro is quietly rather or in an orderly fashion

830
00:39:52,600 --> 00:39:56,160
Speaker 1: movement fashion moving higher. It doesn't bother me that much.

831
00:39:56,160 --> 00:39:58,279
Speaker 1: It does mean that we will probably do better as

832
00:39:58,320 --> 00:40:01,000
Speaker 1: far as exports trade is concerned. And if you're a

833
00:40:01,040 --> 00:40:04,000
Speaker 1: corn grower, if you're somebody in the in the wheat

834
00:40:04,120 --> 00:40:06,680
Speaker 1: export business, a week or dollar is something that you

835
00:40:06,719 --> 00:40:09,399
Speaker 1: would applaud. But let's not be too concerned. It has.

836
00:40:09,520 --> 00:40:12,239
Speaker 1: It has weakened, no question. The fact that we've gone

837
00:40:12,239 --> 00:40:15,640
Speaker 1: from one oh five euros to one fifteen euros might

838
00:40:15,680 --> 00:40:17,920
Speaker 1: be some of some concern, but it's done it over

839
00:40:17,960 --> 00:40:20,520
Speaker 1: the course of three or four months, so it's been orderly,

840
00:40:20,600 --> 00:40:23,560
Speaker 1: it's been slow, it's been laborious, and I therefore know

841
00:40:23,680 --> 00:40:26,520
Speaker 1: it is a great good deal of sleep over it all, right, Dennis,

842
00:40:26,560 --> 00:40:28,840
Speaker 1: What is actually impacting the price of oil more the

843
00:40:28,920 --> 00:40:33,520
Speaker 1: dollar or OPEC? I think it is a combination of

844
00:40:33,560 --> 00:40:35,080
Speaker 1: bolt and I hate to take that the middle of

845
00:40:35,120 --> 00:40:37,000
Speaker 1: the road attitude, but I think it is a combination

846
00:40:37,040 --> 00:40:40,880
Speaker 1: of both. OPEC is clearly worried about its ability to

847
00:40:40,960 --> 00:40:43,920
Speaker 1: get crude oil, to get w t I above fifty,

848
00:40:43,920 --> 00:40:46,520
Speaker 1: to get Brent above fifty two dollars and keep it there.

849
00:40:46,920 --> 00:40:48,759
Speaker 1: They need to keep it there. They're going to try

850
00:40:48,760 --> 00:40:52,439
Speaker 1: to keep it there, but they need to restrain. Well,

851
00:40:52,600 --> 00:40:54,680
Speaker 1: let me back up. The big problem that OPEC has

852
00:40:54,840 --> 00:40:58,160
Speaker 1: is in just a few of its members, Nigeria, uh

853
00:40:58,480 --> 00:41:01,920
Speaker 1: Libya and perhaps even angle Ala. Nigeria and Libya have

854
00:41:02,040 --> 00:41:04,840
Speaker 1: been left out of the quota system. In both Nigeria

855
00:41:04,880 --> 00:41:08,480
Speaker 1: and Libya have been extraordinary and increasing production, to the

856
00:41:08,520 --> 00:41:11,560
Speaker 1: dismay of the Emirates, to the obvious dismay of the

857
00:41:11,600 --> 00:41:14,440
Speaker 1: Saudi Arabians, and they need to bring them back into

858
00:41:14,480 --> 00:41:16,640
Speaker 1: the fold. They need to in this next meeting, they

859
00:41:16,680 --> 00:41:19,440
Speaker 1: have to find some way to put in Nigeria and

860
00:41:19,840 --> 00:41:23,360
Speaker 1: Libya back into the quota system. Whether the Nigeria and Libya,

861
00:41:23,480 --> 00:41:27,080
Speaker 1: who will even allow themselves excuse me, to be put

862
00:41:27,080 --> 00:41:29,200
Speaker 1: back into the quote as another question for another time,

863
00:41:29,680 --> 00:41:32,319
Speaker 1: but obviously the Saudia's would prefer seeing it done. Can

864
00:41:32,360 --> 00:41:34,040
Speaker 1: they do it? I don't know. Looking forward to that

865
00:41:34,080 --> 00:41:35,960
Speaker 1: another time with Dennis Garman. I hope to see in

866
00:41:35,960 --> 00:41:37,960
Speaker 1: New York sometimes soon. That's Dennis Gartman. He's the editor

867
00:41:38,000 --> 00:41:39,839
Speaker 1: of the Garment Letter. Joining us on our phone lines.

868
00:41:52,480 --> 00:41:54,200
Speaker 1: A pleasure to have here in our Bloomberg eleven three

869
00:41:54,320 --> 00:41:57,000
Speaker 1: studios in the York. Senator Jeff Flake, the junior Senator

870
00:41:57,040 --> 00:41:59,480
Speaker 1: from Arizona, Republican Senator from Arizona, author of the new

871
00:41:59,520 --> 00:42:02,920
Speaker 1: book It's of a Conservative, a rejection of destructive politics

872
00:42:02,960 --> 00:42:05,759
Speaker 1: and a return to principal. Great to have you here

873
00:42:05,800 --> 00:42:07,480
Speaker 1: with us amid all of the political news out of

874
00:42:07,480 --> 00:42:09,799
Speaker 1: Washington over these last few weeks's thanks for having me on.

875
00:42:09,880 --> 00:42:12,160
Speaker 1: It's nice to be out of Washington just a little

876
00:42:12,160 --> 00:42:14,920
Speaker 1: bit anyway, I'm sure. Well, let me start with with

877
00:42:14,960 --> 00:42:17,600
Speaker 1: what transpired here over these uh, these last few days

878
00:42:17,640 --> 00:42:20,239
Speaker 1: of course, the debates that led up to the vote

879
00:42:20,239 --> 00:42:22,320
Speaker 1: on a piece of healthcare legislation early in the morning

880
00:42:22,600 --> 00:42:25,520
Speaker 1: a few nights ago. Describe that process for us. I

881
00:42:25,520 --> 00:42:26,799
Speaker 1: think there must have been a lot of people who

882
00:42:26,800 --> 00:42:28,640
Speaker 1: are listening to the show who who wondered what happened

883
00:42:28,640 --> 00:42:31,000
Speaker 1: between the procedural vote and how this happened on such

884
00:42:31,000 --> 00:42:34,200
Speaker 1: an accelerated way walk us through? Uh what what? What

885
00:42:34,239 --> 00:42:36,960
Speaker 1: went on on on Capitol Hill over the last few days. Well,

886
00:42:37,040 --> 00:42:40,200
Speaker 1: I'm not sure it's fruitful to go through the whole thing.

887
00:42:41,440 --> 00:42:43,600
Speaker 1: It was a kind of an ugly process. It always

888
00:42:43,719 --> 00:42:46,480
Speaker 1: is when you get a big piece of legislation like

889
00:42:46,520 --> 00:42:48,920
Speaker 1: this that we're trying to move through quickly. There is

890
00:42:49,120 --> 00:42:51,880
Speaker 1: a bit of an urgency to it, and that uh,

891
00:42:52,160 --> 00:42:55,520
Speaker 1: you know, the insurance markets out there are unstable, and

892
00:42:56,120 --> 00:43:00,400
Speaker 1: the exchange around the country, the Obamacare exchange is altering.

893
00:43:00,440 --> 00:43:03,040
Speaker 1: In Arizona, we have fifteen counties. In fourteen of the

894
00:43:03,040 --> 00:43:06,839
Speaker 1: fifteen counties, there's only one insurer, and you know, there's

895
00:43:06,960 --> 00:43:10,360
Speaker 1: there's a risk of losing that insure. So there was

896
00:43:10,480 --> 00:43:13,560
Speaker 1: there was, you know, urgency to go through it. We

897
00:43:13,640 --> 00:43:17,200
Speaker 1: just didn't didn't keep it alive. I wish we had.

898
00:43:17,760 --> 00:43:21,680
Speaker 1: I think that for those in Arizona, for example, two

899
00:43:21,719 --> 00:43:25,480
Speaker 1: hundred thousand people wake up this morning without health insurance.

900
00:43:25,520 --> 00:43:29,960
Speaker 1: They've paid the fine, but they can't afford to get insurance,

901
00:43:30,200 --> 00:43:34,440
Speaker 1: and so we we desperately need that reform. But I

902
00:43:34,480 --> 00:43:37,920
Speaker 1: think if we learned anything from the past couple of

903
00:43:37,920 --> 00:43:40,880
Speaker 1: months and certainly last week, is that there are limits

904
00:43:40,920 --> 00:43:43,520
Speaker 1: to what one party can do alone help us understand

905
00:43:43,560 --> 00:43:45,880
Speaker 1: the degree to which the thing is still alive and

906
00:43:45,920 --> 00:43:47,920
Speaker 1: the role that the White House is playing here. I

907
00:43:47,920 --> 00:43:50,520
Speaker 1: spoke with the Director of the Office of Management Budget

908
00:43:50,560 --> 00:43:52,919
Speaker 1: last week, mcmulvaaney, and he said it was his hope

909
00:43:52,920 --> 00:43:54,719
Speaker 1: that the Senate would still vote on something related to

910
00:43:54,719 --> 00:43:57,560
Speaker 1: healthcare over the weekend. He clarified those comments further, saying

911
00:43:57,960 --> 00:43:59,799
Speaker 1: he thinks that Senate shouldn't vote on anything else until

912
00:43:59,840 --> 00:44:02,879
Speaker 1: they another vote on health care. Are you content to

913
00:44:02,880 --> 00:44:05,239
Speaker 1: to leave this behind for now and and focus on

914
00:44:05,280 --> 00:44:07,520
Speaker 1: other parts the legislative agenda? Where is this something you're

915
00:44:07,560 --> 00:44:09,319
Speaker 1: still going to be you and your colleagues are still

916
00:44:09,320 --> 00:44:11,040
Speaker 1: gonna be trying to work on Well, we've got to

917
00:44:11,080 --> 00:44:13,040
Speaker 1: continue to work on it. But I don't think that

918
00:44:13,160 --> 00:44:17,240
Speaker 1: any new vote before the weekend is going to be fruitful.

919
00:44:17,280 --> 00:44:20,280
Speaker 1: I mean, what would that vote be on a motion

920
00:44:20,360 --> 00:44:23,040
Speaker 1: to proceed to something? A motion to proceed to what?

921
00:44:24,160 --> 00:44:27,239
Speaker 1: Um so I we don't have enough of a consensus

922
00:44:27,440 --> 00:44:30,680
Speaker 1: on the Republican side to move ahead. We are going

923
00:44:30,719 --> 00:44:32,680
Speaker 1: to need to sit down with our colleagues from the

924
00:44:32,680 --> 00:44:34,920
Speaker 1: other side of the aisle. I think that's going to happen.

925
00:44:35,239 --> 00:44:37,200
Speaker 1: We all knew that we would get here at some point.

926
00:44:37,280 --> 00:44:39,560
Speaker 1: For parts of the reform there there are only so

927
00:44:39,560 --> 00:44:42,359
Speaker 1: many things you can do under rules of reconciliation where

928
00:44:42,360 --> 00:44:45,600
Speaker 1: it only requires fifty one votes. So we we just

929
00:44:45,640 --> 00:44:48,200
Speaker 1: got there sooner than we thought we would. And on

930
00:44:48,239 --> 00:44:50,480
Speaker 1: the relationship, but with the White House, I was on

931
00:44:50,520 --> 00:44:53,120
Speaker 1: air on television when that President Trump convened his lunch

932
00:44:53,120 --> 00:44:55,600
Speaker 1: with Senate Republicans at the White House, And and if

933
00:44:55,600 --> 00:44:57,840
Speaker 1: you just look over these past few weeks, there were

934
00:44:57,880 --> 00:45:00,680
Speaker 1: a few occasions that among them he tried to to

935
00:45:00,719 --> 00:45:03,240
Speaker 1: wield some influence, some political influence, to try to sway

936
00:45:03,320 --> 00:45:05,520
Speaker 1: some on the fence votes to to vote for this

937
00:45:05,560 --> 00:45:09,200
Speaker 1: particular piece of legislation. How effective was that? How healthy

938
00:45:09,280 --> 00:45:11,040
Speaker 1: is it to have that kind of relationship between one

939
00:45:11,080 --> 00:45:13,399
Speaker 1: branch and the other. Well, I don't know that that

940
00:45:14,320 --> 00:45:18,359
Speaker 1: in itself moved the needle much. Um. I know there

941
00:45:18,960 --> 00:45:22,239
Speaker 1: there's concern among some of my colleagues that, you know,

942
00:45:22,360 --> 00:45:25,719
Speaker 1: the House got through the process, the President had a

943
00:45:25,760 --> 00:45:28,600
Speaker 1: big signing ceremony, and then a few weeks later he

944
00:45:28,680 --> 00:45:33,560
Speaker 1: referred to the House product as as mean. And I

945
00:45:33,640 --> 00:45:36,759
Speaker 1: know that doesn't inspire a lot of confidence among my

946
00:45:36,880 --> 00:45:40,239
Speaker 1: colleagues that that you know that the same won't be

947
00:45:40,280 --> 00:45:43,399
Speaker 1: said of a bill that we would pass, and so

948
00:45:43,560 --> 00:45:45,560
Speaker 1: that that that makes it difficult. Let me tell you,

949
00:45:45,640 --> 00:45:49,279
Speaker 1: it does make it difficult that relationship. Centator, how would

950
00:45:49,280 --> 00:45:51,719
Speaker 1: you describe the relationship between the Republican Party and the

951
00:45:51,760 --> 00:45:56,160
Speaker 1: President right now? Oh? It's you know, on some things.

952
00:45:56,440 --> 00:45:59,640
Speaker 1: Let me just take the positive. He named a great

953
00:45:59,640 --> 00:46:04,160
Speaker 1: super Court justice. We worked with the president on regulatory reform.

954
00:46:04,280 --> 00:46:07,960
Speaker 1: We passed I think fourteen so called c r a

955
00:46:08,120 --> 00:46:12,000
Speaker 1: S or Congressional Review Act, where we paired back regulations

956
00:46:12,040 --> 00:46:16,279
Speaker 1: that were straining the economy. Um. The President, we think

957
00:46:16,800 --> 00:46:20,640
Speaker 1: most most Republicans in the in the Congress think he

958
00:46:20,680 --> 00:46:23,960
Speaker 1: has good instincts on tax reform, lower the rates, broad

959
00:46:23,960 --> 00:46:27,920
Speaker 1: in the base. Um, that's the Republican orthodoxy. So there

960
00:46:27,960 --> 00:46:30,960
Speaker 1: are some things that we will work with the President on,

961
00:46:31,280 --> 00:46:36,080
Speaker 1: but many of us are very concerned with one, the

962
00:46:36,160 --> 00:46:40,560
Speaker 1: kind of the chaotic atmosphere that's going on at the

963
00:46:40,560 --> 00:46:44,320
Speaker 1: White House, whether whether it's has to do with domestic

964
00:46:44,360 --> 00:46:51,200
Speaker 1: policy or foreign policy. It's profoundly unconservative to to uh,

965
00:46:51,520 --> 00:46:56,840
Speaker 1: you know, have an unsteady, unpredictable uh, you know, policy.

966
00:46:57,200 --> 00:47:00,920
Speaker 1: And so that's concerning. And then uh, things like trade.

967
00:47:02,200 --> 00:47:04,600
Speaker 1: I'm very concerned and many of my colleagues are as

968
00:47:04,600 --> 00:47:08,279
Speaker 1: well that we're being left behind by other countries who

969
00:47:08,280 --> 00:47:13,719
Speaker 1: are moving ahead. And and then also um, the kind

970
00:47:13,719 --> 00:47:16,960
Speaker 1: of plane to the base, uh, making it very difficult

971
00:47:17,000 --> 00:47:19,120
Speaker 1: for us to grow the party and speak to a

972
00:47:19,160 --> 00:47:22,280
Speaker 1: lot of our larger audience. Is there enough trust between

973
00:47:22,280 --> 00:47:24,839
Speaker 1: the presidents and the Republicans and if there isn't, how

974
00:47:24,880 --> 00:47:28,560
Speaker 1: does the president regain that trust? Well, I think, you know,

975
00:47:28,680 --> 00:47:30,799
Speaker 1: we'll have to work on some other issues. Healthcare was

976
00:47:30,800 --> 00:47:33,640
Speaker 1: a tough one to start with. It really was. Health

977
00:47:33,640 --> 00:47:36,840
Speaker 1: Care is a big, complex, any issue in and of itself,

978
00:47:36,920 --> 00:47:42,360
Speaker 1: but it's it's personalized for people, and you know, obviously hindsight,

979
00:47:43,239 --> 00:47:45,520
Speaker 1: but it would have been better to start with something else.

980
00:47:46,239 --> 00:47:49,359
Speaker 1: So I think maybe with tax reform, if we can

981
00:47:49,760 --> 00:47:52,200
Speaker 1: build some trust there. I think they are more shared

982
00:47:53,280 --> 00:47:58,400
Speaker 1: values there perhaps that we can work on. Um. But

983
00:47:58,400 --> 00:48:00,120
Speaker 1: but a lot of it has to do all so

984
00:48:00,239 --> 00:48:05,759
Speaker 1: with with tone and demeanor. Um. You know, we in

985
00:48:05,800 --> 00:48:10,040
Speaker 1: the Senate have rules that you know, almost always require

986
00:48:10,160 --> 00:48:12,719
Speaker 1: us to work across the aisle. It's not just on

987
00:48:12,760 --> 00:48:15,920
Speaker 1: piece of legislation, but just to move you know, the

988
00:48:15,960 --> 00:48:21,280
Speaker 1: Senate business. It's done by unanimous consent or by supermajorities.

989
00:48:21,360 --> 00:48:24,799
Speaker 1: And and when the President is referring to people on

990
00:48:24,840 --> 00:48:27,160
Speaker 1: the other side of the aisle as losers or clowns,

991
00:48:27,280 --> 00:48:31,000
Speaker 1: and um, you know it just that that doesn't help matters,

992
00:48:31,040 --> 00:48:32,600
Speaker 1: It really doesn't. Well, let's come back here in a

993
00:48:32,600 --> 00:48:34,319
Speaker 1: couple of minutes talk about some of those that rules.

994
00:48:34,360 --> 00:48:36,279
Speaker 1: Of course, the President proposing in these recent days that

995
00:48:36,800 --> 00:48:39,040
Speaker 1: new kind of nuclear option here going with a simple majority.

996
00:48:39,080 --> 00:48:40,919
Speaker 1: Eager to talk to you about that. And uh Andrew

997
00:48:40,920 --> 00:48:43,760
Speaker 1: new book, conscious of a Conservative, rejection of destructive politics

998
00:48:43,760 --> 00:48:46,640
Speaker 1: and a return to principal. Eager to see how conservatism

999
00:48:46,640 --> 00:48:50,040
Speaker 1: fits into the Republican Party today. Senator Jeff Flake with

1000
00:48:50,080 --> 00:48:52,120
Speaker 1: us here on bloom brick surveillance in our studios in

1001
00:48:52,160 --> 00:48:56,239
Speaker 1: New York's Republican Senator from Arizona Junior Senator from Arizona

1002
00:48:56,440 --> 00:48:58,840
Speaker 1: joining us here on bloom Brick surveillance. Let me ask you,

1003
00:48:58,840 --> 00:49:00,960
Speaker 1: if I could, Senator Flight, just about what it's like

1004
00:49:01,040 --> 00:49:03,600
Speaker 1: to be a conservative in the Republican Party today. When

1005
00:49:03,600 --> 00:49:05,879
Speaker 1: I talked to members of the House in particular, Uh,

1006
00:49:05,920 --> 00:49:07,960
Speaker 1: it's not uncommon if the Republican members, but then to

1007
00:49:07,960 --> 00:49:10,800
Speaker 1: be affiliated with the Freedom Caucus or some other caucus

1008
00:49:10,840 --> 00:49:14,680
Speaker 1: ideological caucus within the Republican Party on Capitol Hill. How

1009
00:49:14,719 --> 00:49:17,120
Speaker 1: tough does it make things to have such a maybe

1010
00:49:17,160 --> 00:49:20,560
Speaker 1: not fractured, but uh, different different parts of the Republican Party.

1011
00:49:20,560 --> 00:49:22,920
Speaker 1: How do you get them to to cohere? Well, that's

1012
00:49:22,960 --> 00:49:25,040
Speaker 1: a lot of what the book is about. That's why

1013
00:49:25,080 --> 00:49:27,840
Speaker 1: I wrote this book, Conscience of a Conservative kind of

1014
00:49:27,840 --> 00:49:31,840
Speaker 1: borrowing from the from Verry Goldwaters of you know, Seminal

1015
00:49:32,160 --> 00:49:36,360
Speaker 1: Tome of fifty six years ago, where he recognized that

1016
00:49:36,440 --> 00:49:39,640
Speaker 1: the party had had kind of been compromised by the

1017
00:49:39,680 --> 00:49:43,560
Speaker 1: New Deal at that point. I think the party today

1018
00:49:43,800 --> 00:49:50,840
Speaker 1: is being compromised by things like protectionism and uh um

1019
00:49:50,920 --> 00:49:54,960
Speaker 1: um and also this this kind of demeanor that we

1020
00:49:55,080 --> 00:49:57,960
Speaker 1: have where you have to be matter than everybody else

1021
00:49:58,239 --> 00:50:01,960
Speaker 1: and and it it's not a good combination if you

1022
00:50:02,000 --> 00:50:04,959
Speaker 1: want to grow the party. So I am concerned with

1023
00:50:04,960 --> 00:50:07,919
Speaker 1: with where the party is and where the White House

1024
00:50:07,960 --> 00:50:11,040
Speaker 1: has been, and and that's really what the book is about.

1025
00:50:11,200 --> 00:50:14,680
Speaker 1: And it's not not an opportune time to write a

1026
00:50:14,680 --> 00:50:19,000
Speaker 1: book like this when I'm in my reelection bid, but

1027
00:50:19,239 --> 00:50:21,840
Speaker 1: I felt it was important enough to to spell it

1028
00:50:21,880 --> 00:50:24,480
Speaker 1: out as to where I think conservatives need to go.

1029
00:50:25,080 --> 00:50:30,040
Speaker 1: We need to embrace traditional republicanism and conservatism, which is

1030
00:50:30,160 --> 00:50:34,600
Speaker 1: limited government to economic freedom, free trade, um and and

1031
00:50:34,640 --> 00:50:37,279
Speaker 1: not looks for short term gain. I looked at the

1032
00:50:37,480 --> 00:50:39,440
Speaker 1: White House is a bit of a microcosm for this.

1033
00:50:39,520 --> 00:50:41,440
Speaker 1: Of course, there's all the palace intrigue. But you hear

1034
00:50:41,440 --> 00:50:44,040
Speaker 1: about those who are the so called globalists butting heads

1035
00:50:44,080 --> 00:50:48,440
Speaker 1: with the conservatives, Steve Bannon types, what what what have you? Uh?

1036
00:50:48,480 --> 00:50:51,439
Speaker 1: And I we just read Josh Green's book about Steve Bannon,

1037
00:50:51,480 --> 00:50:53,480
Speaker 1: the role he played in the President's election campaign and

1038
00:50:53,520 --> 00:50:56,920
Speaker 1: now in his administration, to my mind, at least to

1039
00:50:56,960 --> 00:50:58,640
Speaker 1: my reading at least, sort of wants to blow things

1040
00:50:58,719 --> 00:51:01,239
Speaker 1: up in a different way than you just in your book.

1041
00:51:01,840 --> 00:51:04,879
Speaker 1: How does that complicate matters to to have people within

1042
00:51:04,920 --> 00:51:07,920
Speaker 1: the party calling for a wholescale invention. You're calling for

1043
00:51:08,000 --> 00:51:11,280
Speaker 1: it in one way, he's calling for it in another. Uh.

1044
00:51:11,680 --> 00:51:13,600
Speaker 1: Can there be a coming together? Can there be a

1045
00:51:14,200 --> 00:51:16,680
Speaker 1: unified Republican Party? Do you think? Well? I think our

1046
00:51:16,719 --> 00:51:20,760
Speaker 1: first obligation is Conservatives, is to be honest with people.

1047
00:51:20,880 --> 00:51:23,920
Speaker 1: And it's far easier for a politician to point to

1048
00:51:23,920 --> 00:51:27,200
Speaker 1: a shuttered factory and say, oh, that's just a free trade.

1049
00:51:27,239 --> 00:51:29,960
Speaker 1: You know, Mexico took your jobs or China did, when

1050
00:51:29,960 --> 00:51:32,480
Speaker 1: it's far more complex than that. And we have to

1051
00:51:32,560 --> 00:51:36,600
Speaker 1: realize we're five percent of the world's population, of the

1052
00:51:36,600 --> 00:51:39,400
Speaker 1: world's economic output. If we don't find new markets for

1053
00:51:39,440 --> 00:51:43,520
Speaker 1: our goods, we simply don't grow economically. I recall, you know,

1054
00:51:43,560 --> 00:51:46,400
Speaker 1: the term globalist I went during my last campaign. There

1055
00:51:46,440 --> 00:51:48,400
Speaker 1: was a blog post in Arizona at one point that

1056
00:51:48,480 --> 00:51:51,319
Speaker 1: said that Jeff Flake was seen in the company of

1057
00:51:51,400 --> 00:51:58,000
Speaker 1: globalists in Paris, frances I thought at that point, I thought, well,

1058
00:51:58,040 --> 00:52:02,000
Speaker 1: you know, what else do you find im Paris? Or

1059
00:52:02,600 --> 00:52:06,080
Speaker 1: what's the alternative to be called the provincialist or localist

1060
00:52:06,280 --> 00:52:09,680
Speaker 1: or I'll take globalist if that's the case. But I

1061
00:52:09,719 --> 00:52:13,200
Speaker 1: think we have to recognize that Obviously, we need to

1062
00:52:13,239 --> 00:52:16,320
Speaker 1: address the concerns of the factory worker who may be

1063
00:52:16,520 --> 00:52:20,480
Speaker 1: out of a job because of automation um or because

1064
00:52:20,840 --> 00:52:25,359
Speaker 1: we've simply found a more efficient allocation of capital. That's

1065
00:52:25,360 --> 00:52:28,920
Speaker 1: what capitalism does, and we need to be sensitive with

1066
00:52:29,000 --> 00:52:32,279
Speaker 1: that and work with job training programs and whatever else

1067
00:52:32,320 --> 00:52:35,960
Speaker 1: to deal with it. But we shouldn't tell them that

1068
00:52:35,960 --> 00:52:38,480
Speaker 1: that some of those jobs are coming back um in

1069
00:52:38,560 --> 00:52:42,239
Speaker 1: certain energy sectors or coal mines or whatnot, when when

1070
00:52:42,680 --> 00:52:44,720
Speaker 1: you know that's that's just not the way we're headed.

1071
00:52:45,280 --> 00:52:47,919
Speaker 1: And so I think we owe it to ourselves and

1072
00:52:48,040 --> 00:52:50,680
Speaker 1: certainly to the country and to the Party to be

1073
00:52:50,760 --> 00:52:53,800
Speaker 1: honest about these things. But Senator, how does the party

1074
00:52:53,840 --> 00:52:56,960
Speaker 1: regroup and refocus? Does it just only really have to

1075
00:52:57,000 --> 00:53:00,399
Speaker 1: be the president refocusing and maybe regrouping, and that mean

1076
00:53:00,560 --> 00:53:02,799
Speaker 1: that the parties is on a better track, on a

1077
00:53:02,800 --> 00:53:05,279
Speaker 1: better footing. Well, this has been this isn't just the

1078
00:53:05,320 --> 00:53:09,160
Speaker 1: president's problem. That we've been adrift for a while. I

1079
00:53:10,040 --> 00:53:12,640
Speaker 1: in the book, I talk a lot about coming to

1080
00:53:12,680 --> 00:53:16,280
Speaker 1: Congress along with Mike Pence. We both ran free market

1081
00:53:16,320 --> 00:53:19,200
Speaker 1: think tanks in the nineties. We got to Congress at

1082
00:53:19,200 --> 00:53:21,680
Speaker 1: the same time, all full of them and vigor and

1083
00:53:21,760 --> 00:53:24,560
Speaker 1: wanting to have these great debates over you know, whether

1084
00:53:24,600 --> 00:53:26,840
Speaker 1: it should be a flat tax or a consumption tax,

1085
00:53:27,000 --> 00:53:30,759
Speaker 1: and and quickly found that the party was kind of

1086
00:53:30,800 --> 00:53:34,880
Speaker 1: slipping away in our These great debates were kind of

1087
00:53:34,880 --> 00:53:38,239
Speaker 1: in the past, and we became the party of of

1088
00:53:38,360 --> 00:53:43,480
Speaker 1: earmarks and and corruption, and so much so that in

1089
00:53:43,560 --> 00:53:46,279
Speaker 1: two thousand six we lost the White House. I'm sorry,

1090
00:53:46,320 --> 00:53:48,600
Speaker 1: we lost both houses of Congress, and then in eight

1091
00:53:48,680 --> 00:53:51,799
Speaker 1: lost the White House, and frankly we deserved it given

1092
00:53:51,840 --> 00:53:54,120
Speaker 1: what we were doing at that time, the overspending and

1093
00:53:54,440 --> 00:53:58,520
Speaker 1: everything else. I'm just afraid that unless we get back

1094
00:53:58,560 --> 00:54:02,800
Speaker 1: to traditional insipoles of limited government, economic freedom, free trade,

1095
00:54:03,280 --> 00:54:08,839
Speaker 1: and a politics that isn't mean and course uh, then

1096
00:54:08,880 --> 00:54:11,560
Speaker 1: we're going to be in the minority again. Are there

1097
00:54:11,600 --> 00:54:16,000
Speaker 1: any circumstances where you see the party splitting um? You know,

1098
00:54:16,040 --> 00:54:18,279
Speaker 1: I don't think that that's the case. I don't think

1099
00:54:18,320 --> 00:54:20,600
Speaker 1: that that's needed. I do think that we have to

1100
00:54:20,680 --> 00:54:24,719
Speaker 1: have a recommitment to conservative principles. That's what the book

1101
00:54:24,800 --> 00:54:28,440
Speaker 1: is about. But I do still think that the Republican

1102
00:54:28,520 --> 00:54:34,200
Speaker 1: Party is the vehicle for conservative policy, and and I

1103
00:54:34,239 --> 00:54:36,600
Speaker 1: think it can remain so. But it's going to require

1104
00:54:37,680 --> 00:54:41,759
Speaker 1: recommitment and to to stand up when whether it's the

1105
00:54:41,800 --> 00:54:45,399
Speaker 1: President or somebody else who's trying to take us down

1106
00:54:46,320 --> 00:54:50,000
Speaker 1: a path that that simply doesn't hold up or won't

1107
00:54:50,000 --> 00:54:52,279
Speaker 1: work in the long run. You know, this is a

1108
00:54:52,400 --> 00:54:56,120
Speaker 1: populism is you know, it's called populism because it might

1109
00:54:56,120 --> 00:54:59,320
Speaker 1: be popular in the moment, but I'm afraid we're on

1110
00:54:59,360 --> 00:55:01,959
Speaker 1: a bit of a s a high now and when

1111
00:55:01,960 --> 00:55:05,000
Speaker 1: we come down it'll be particularly unpleasant. You can look

1112
00:55:05,000 --> 00:55:06,880
Speaker 1: at this present through prison that he's a sort of

1113
00:55:06,880 --> 00:55:10,000
Speaker 1: populist proxy for frustration. Uh. And I think there's a

1114
00:55:10,000 --> 00:55:13,120
Speaker 1: lot of frustration with how slow things seem to happen

1115
00:55:13,239 --> 00:55:15,440
Speaker 1: or not happen in Washington. E see you see that

1116
00:55:15,440 --> 00:55:17,319
Speaker 1: play out with this president when it comes to our

1117
00:55:17,320 --> 00:55:20,840
Speaker 1: relationship with China, in particular, he met the President in

1118
00:55:20,880 --> 00:55:23,279
Speaker 1: Florida in just a few months later, he'd expressed some

1119
00:55:23,320 --> 00:55:27,120
Speaker 1: frustration that things hadn't moved along faster with with China's

1120
00:55:27,120 --> 00:55:30,680
Speaker 1: willingness to show some might towards North Korea. You're seeing

1121
00:55:30,680 --> 00:55:32,320
Speaker 1: his frustration play on now, And imagine a lot of

1122
00:55:32,360 --> 00:55:34,480
Speaker 1: Americans frustration play out now when it comes to this

1123
00:55:34,520 --> 00:55:37,200
Speaker 1: healthcare vote and the rules of the Senate. We've seen

1124
00:55:37,200 --> 00:55:39,480
Speaker 1: the President tweet over these last few days about changing

1125
00:55:40,120 --> 00:55:42,640
Speaker 1: the way that the Senate votes on things, to make

1126
00:55:42,640 --> 00:55:44,680
Speaker 1: it to move it to a simple majority fifty one

1127
00:55:45,040 --> 00:55:47,920
Speaker 1: votes as opposed to to sixty. Do you do you

1128
00:55:48,000 --> 00:55:51,320
Speaker 1: understand the the the impulse to to make that change

1129
00:55:51,440 --> 00:55:53,319
Speaker 1: and sort of what kind of effect would that have

1130
00:55:53,480 --> 00:55:56,239
Speaker 1: on policy making, on legislating and Washington if we were

1131
00:55:56,239 --> 00:55:58,120
Speaker 1: to see a change like that, uh, in the most

1132
00:55:58,200 --> 00:56:01,120
Speaker 1: the world's greatest deliberative body. Well, let's keep in mind

1133
00:56:01,160 --> 00:56:03,880
Speaker 1: that we failed to get fifty one votes, let alone

1134
00:56:03,920 --> 00:56:08,000
Speaker 1: sixty for the realism you described just a few moments ago. Right,

1135
00:56:08,600 --> 00:56:11,480
Speaker 1: So I don't think that would change anything immediately, but

1136
00:56:11,520 --> 00:56:15,319
Speaker 1: I think for the long term it would be extremely detrimental. Uh.

1137
00:56:15,480 --> 00:56:17,279
Speaker 1: If if we were to move to assistant where the

1138
00:56:17,320 --> 00:56:21,319
Speaker 1: Senate was just like the House, where we responded more

1139
00:56:21,440 --> 00:56:25,520
Speaker 1: to populist sentiment, Uh, then we would be lurching, I

1140
00:56:25,560 --> 00:56:28,840
Speaker 1: think back and forth as we have been with regard

1141
00:56:28,880 --> 00:56:31,960
Speaker 1: to healthcare. Democrats were able to do it. They had

1142
00:56:32,000 --> 00:56:36,160
Speaker 1: sixty votes for a short time back in two thousand eleven,

1143
00:56:36,800 --> 00:56:41,760
Speaker 1: and and then we have Obamacare, and now we're trying

1144
00:56:41,800 --> 00:56:45,759
Speaker 1: to repeal it just with a very Republican majority. Um,

1145
00:56:45,880 --> 00:56:49,000
Speaker 1: and you know we'd be lurching back a couple of years. Uh,

1146
00:56:49,120 --> 00:56:52,759
Speaker 1: you know, towards another extreme. We're far better off when

1147
00:56:52,800 --> 00:56:54,960
Speaker 1: the Senate works the way it has. When we reach

1148
00:56:55,040 --> 00:56:59,399
Speaker 1: across the aisle, the requirement of sixty votes almost always

1149
00:56:59,400 --> 00:57:03,799
Speaker 1: require is bipartisan approach. And let's face it, if you

1150
00:57:03,840 --> 00:57:07,600
Speaker 1: want legislation to endure the test of time, it's best

1151
00:57:07,719 --> 00:57:10,359
Speaker 1: when you reach across the aisle. And most importantly, as

1152
00:57:10,400 --> 00:57:13,280
Speaker 1: I talked about in the book, UM, the most important

1153
00:57:13,280 --> 00:57:15,640
Speaker 1: things we've got to solve in the future dealing with

1154
00:57:15,680 --> 00:57:18,640
Speaker 1: our debt and our deficit. We're we've got twenty trillion

1155
00:57:18,680 --> 00:57:21,160
Speaker 1: in debt. We're going to soon be back at trillion

1156
00:57:21,160 --> 00:57:24,760
Speaker 1: dollar deficits. At some point, the financial markets are going

1157
00:57:24,840 --> 00:57:27,360
Speaker 1: to respond and just say you're not such a good

1158
00:57:27,360 --> 00:57:31,040
Speaker 1: bet anymore. In order to fix that, we have to

1159
00:57:31,080 --> 00:57:34,440
Speaker 1: sit down with our colleagues across the aisle. Because no

1160
00:57:34,480 --> 00:57:37,600
Speaker 1: one party, Republican or Democrat, if that party controls both

1161
00:57:37,720 --> 00:57:41,000
Speaker 1: chambers in the White House, no one party will tackle

1162
00:57:41,040 --> 00:57:43,800
Speaker 1: it alone because they share or they don't share, any

1163
00:57:43,800 --> 00:57:46,240
Speaker 1: of the political blame. You've got to have the parties

1164
00:57:46,280 --> 00:57:48,640
Speaker 1: as we've done in the past couple of decades. Every

1165
00:57:48,680 --> 00:57:51,840
Speaker 1: good budget agreement we've had over the past forty years

1166
00:57:52,320 --> 00:57:54,760
Speaker 1: has been done when we had divided government, where both

1167
00:57:54,760 --> 00:57:56,600
Speaker 1: parties sat down and said, all right, let's share the

1168
00:57:56,600 --> 00:58:00,280
Speaker 1: political risk. And so, as I explained the book, that's

1169
00:58:00,320 --> 00:58:02,919
Speaker 1: the approach that we've got to have moving ahead. Center

1170
00:58:02,960 --> 00:58:04,320
Speaker 1: Fake Thank you very much, don't be a stranger. I'd

1171
00:58:04,320 --> 00:58:05,880
Speaker 1: love to have you back on the show in the future.

1172
00:58:05,880 --> 00:58:08,000
Speaker 1: That Senator Jeff Flake, author of Conscious of a Conservative

1173
00:58:08,000 --> 00:58:10,600
Speaker 1: Rejection of destructive Politics and a Return to Principle. That

1174
00:58:10,640 --> 00:58:13,840
Speaker 1: book out tomorrow. This is Bloomberg Surveillance on Bloomberg Radio

1175
00:58:13,920 --> 00:58:15,760
Speaker 1: David Gura with Francine Lack with Tom Keane back in

1176
00:58:15,840 --> 00:58:29,880
Speaker 1: our studios tomorrow. Thanks for listening to the Bloomberg Surveillance podcast.

1177
00:58:30,320 --> 00:58:35,560
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

1178
00:58:35,640 --> 00:58:39,960
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom Keene,

1179
00:58:40,040 --> 00:58:44,400
Speaker 1: David Gura is at David Gura. Before the podcast, you

1180
00:58:44,440 --> 00:58:59,000
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio. Brunch you

1181
00:58:59,080 --> 00:59:02,440
Speaker 1: by Bank of a America Merrill Lynch. With virtual reality,

1182
00:59:02,680 --> 00:59:08,120
Speaker 1: virtually everything will change discover opportunities in a transforming world,

1183
00:59:08,480 --> 00:59:12,800
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1184
00:59:12,880 --> 00:59:15,240
Speaker 1: Pierced Fenner and Smith Incorporated,