WEBVTT - GOP Has Been Compromised by Protectionism, Sen. Jeff Flake Says 0:00:00.240 --> 0:00:04.040 Runch you by Bank of America Mary Lynch. With virtual reality, 0:00:04.320 --> 0:00:09.719 virtually everything will change. Discover opportunities in a transforming world. 0:00:10.119 --> 0:00:14.440 Be of a mL dot Com, slash VR, Mary Lynch, 0:00:14.520 --> 0:00:28.120 Pierced Fenner and Smith Incorporated. Ye, Welcome to the Bloomberg 0:00:28.120 --> 0:00:32.360 Surveillance Podcast. I'm Tom Keene with David Gura. Daily we 0:00:32.440 --> 0:00:36.080 bring you insight from the best of economics, finance, investment, 0:00:36.120 --> 0:00:42.200 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:42.280 --> 0:00:49.880 Bloomberg dot Com, and of course, on the Bloomberg The 0:00:50.040 --> 0:00:51.880 Morning on Monday, the thirty one of July. This is 0:00:51.880 --> 0:00:54.800 Bloomberg Surveillance on Bloomberg Radio. David Gura in New York 0:00:54.800 --> 0:00:57.720 with Franci Lakway in London. Today, Tom Keene is off 0:00:57.760 --> 0:00:59.720 the staff. You're instructed to alert me if they get 0:00:59.720 --> 0:01:02.640 any messages from Tom. In Manhattan, we were in Michael Cheryl. 0:01:02.680 --> 0:01:04.520 Now we're having a great conversation with him on Bloomberg 0:01:04.560 --> 0:01:06.440 Television just a few minutes ago. He's the chairman and 0:01:06.520 --> 0:01:09.360 CEO of market Field Asset Management. He joins me and 0:01:09.400 --> 0:01:12.119 our eleven three oh studios here in New York and Michael, 0:01:12.160 --> 0:01:14.000 let me just take a step back from from the 0:01:14.000 --> 0:01:16.200 news we were just reporting a moment, go, how does 0:01:16.200 --> 0:01:18.120 this say? How does this environment look for deals like 0:01:18.160 --> 0:01:20.560 the one we're seeing announced this morning. You know, it's 0:01:20.560 --> 0:01:24.880 pretty good. I know. I think people feel culportations, feel 0:01:24.880 --> 0:01:28.040 fairly good about the prospects and and willing to pay 0:01:28.319 --> 0:01:30.880 prices that sell us you know, find attractive. So I 0:01:30.920 --> 0:01:33.360 mean I think that you know, typically with the mature 0:01:33.400 --> 0:01:35.080 point of a bull market and the chure point of 0:01:35.120 --> 0:01:37.720 the economic cycle, you would expect to see m and 0:01:37.800 --> 0:01:40.399 a accelerator this at this point, and that's been happening 0:01:40.400 --> 0:01:42.520 this year. Michael, What have we learned from from earning 0:01:42.520 --> 0:01:44.360 season thus far? Here we are seeing a lot of 0:01:44.400 --> 0:01:47.680 companies report their second quarter earnings, and were financial companies 0:01:47.840 --> 0:01:50.040 last week, in the week beforehand, some tech companies last 0:01:50.040 --> 0:01:52.600 week as well. What are we learning about the state 0:01:52.600 --> 0:01:54.600 of the market from these companies we've reported thus far. 0:01:55.160 --> 0:01:57.800 I think it's been a pretty decent earning season. I 0:01:57.880 --> 0:01:59.880 think that that we needed one, given the the s 0:02:00.040 --> 0:02:01.920 P was up at an all time high, and you know, 0:02:01.960 --> 0:02:03.600 I think the fact that it's it's been a fairly 0:02:03.720 --> 0:02:06.240 quiet season in terms of the sponsored markets to it. 0:02:06.440 --> 0:02:08.840 I think that's I think that's fairly positive. You know, 0:02:08.840 --> 0:02:12.360 where there have been disappointments for markets taken action. But 0:02:12.440 --> 0:02:14.280 equally on on the other side, you had a you know, 0:02:14.280 --> 0:02:17.519 a company like Boeing completely blowing out and the market 0:02:17.560 --> 0:02:20.440 responding though positively to it. So as I as I 0:02:20.480 --> 0:02:22.600 said on on on TV earlier, I think this is 0:02:22.680 --> 0:02:25.080 very much for sweet spot of the economic cycle. It 0:02:25.160 --> 0:02:27.040 is the point at which you would expect earnings to 0:02:27.160 --> 0:02:29.760 meet and beat expectations, which you know, which they're able 0:02:29.800 --> 0:02:32.960 to do. And in most sectors we don't yet have 0:02:33.120 --> 0:02:35.760 the sign of of sort of chronic over supply. There's 0:02:35.760 --> 0:02:37.960 a couple of sectors that that we'd start to be 0:02:37.960 --> 0:02:40.760 worried about going forwards. But but you know, in most 0:02:40.800 --> 0:02:45.920 cases businesses are still undergoing sensible expansion plans. And you know, 0:02:46.160 --> 0:02:48.680 you may say they're paying company is paying too much 0:02:48.720 --> 0:02:50.520 for company B, but at least you can understand why 0:02:50.520 --> 0:02:52.720 they want about it in the first place. Michael, you 0:02:52.800 --> 0:02:55.000 say there are a couple of industries that you would 0:02:55.000 --> 0:02:58.200 worry about, what are they? Commercial will of state in 0:02:58.280 --> 0:03:01.000 the United States is the one that the the you know, 0:03:01.120 --> 0:03:03.760 really has our attention. Where where I think there are 0:03:03.840 --> 0:03:06.360 signs of chronic over supply. And you know, even the 0:03:06.400 --> 0:03:10.000 news this morning that that Ang Bang is possibly going 0:03:10.040 --> 0:03:13.280 to be forced to divest it's it's recent US investments, 0:03:13.280 --> 0:03:15.239 a lot of which in were in real estate. I 0:03:15.280 --> 0:03:19.000 think that that's a market where supply and demand maybe 0:03:19.120 --> 0:03:22.040 starting to to really be problematic. You have a lot 0:03:22.080 --> 0:03:25.200 of new supply hitting over the next twelve to eighteen months, 0:03:25.240 --> 0:03:27.280 and a lot of the demand has been none US 0:03:27.360 --> 0:03:31.200 demand for commercial real estate, and you know, partly because 0:03:31.240 --> 0:03:33.960 of a weaker US dollar and partly in China's case, 0:03:34.000 --> 0:03:37.920 because of different government policies towards investments of board. I 0:03:37.960 --> 0:03:40.680 think the demand side maybe weakening just at the point 0:03:40.720 --> 0:03:43.400 that supplies accelerating. So you know, if there was one 0:03:43.440 --> 0:03:46.640 part of the domestic US economy the fankly we would 0:03:46.640 --> 0:03:49.040 expect to deteriorate over the next twelve months, it would 0:03:49.040 --> 0:03:52.600 be commercial will estate. Michael, do you worry that as 0:03:52.640 --> 0:03:55.200 there's more of a shift towards passive investment, it means, 0:03:55.600 --> 0:03:58.560 you know, almost automatically, that hedge funds take a bigger role, 0:03:58.600 --> 0:04:00.600 which means that there are less players are the markets, 0:04:00.760 --> 0:04:03.600 which actually means that you could have not disruption, but 0:04:03.760 --> 0:04:07.920 that you could be miss pricing things. I think certainly 0:04:08.240 --> 0:04:13.360 passive investing towards the ends of ball markets involves chronic mispricing. Um, 0:04:13.400 --> 0:04:16.000 I think you know, we're we're heading towards that, you know. 0:04:16.200 --> 0:04:18.760 I think it's something that I think is going to 0:04:18.839 --> 0:04:21.640 define the next bear market, which is which is likely 0:04:21.720 --> 0:04:26.200 to be much worse than economic economic conditions. Actually actually 0:04:26.240 --> 0:04:28.599 wanan't but but look, I I mean, I think that 0:04:28.720 --> 0:04:32.479 every investment cycle is a product cycle. Um that product 0:04:32.480 --> 0:04:35.040 tends to demonate dominate towards the end of this cycle. 0:04:35.120 --> 0:04:37.840 But there's no point in in in fighting the fact 0:04:37.839 --> 0:04:40.800 that people want passive investments and they're going to work 0:04:41.040 --> 0:04:43.839 very well at the index level, you know, until this 0:04:44.040 --> 0:04:46.320 this cycle heads off, you know, heads off a cliff. 0:04:46.400 --> 0:04:48.880 But um, I think it's something that that you do 0:04:48.960 --> 0:04:51.160 need to be aware of it. I think that understanding 0:04:51.160 --> 0:04:54.040 what's in indexes at this point in time is is crucial. 0:04:54.120 --> 0:04:58.039 I'm always amazed at how little people who use indexes 0:04:58.040 --> 0:05:00.360 and E t F actually understand the way of h change, 0:05:00.480 --> 0:05:02.440 you know, across the course of the cycle. I think 0:05:02.480 --> 0:05:04.719 that's for the most useful thing you could do today 0:05:04.760 --> 0:05:07.560 is at least understand what's in the index that that 0:05:07.560 --> 0:05:09.480 that you're investing in, and I think in many cases 0:05:09.520 --> 0:05:11.719 you get quite a surprised Michael, let me ask you lastly. 0:05:11.760 --> 0:05:13.039 We'll come back here in just a moment, have a 0:05:13.040 --> 0:05:16.159 minute left, but let me ask you about emerging markets 0:05:16.240 --> 0:05:19.279 right now, what you're seeing there in dinto where you're 0:05:19.320 --> 0:05:21.520 particularly interested right now? When it comes to emerging markets, 0:05:21.640 --> 0:05:23.839 We're very positive on emerging markets. I think they have 0:05:23.880 --> 0:05:26.720 several forces going forward. And first of all, a generally 0:05:26.800 --> 0:05:30.520 better global economy I think, in particular, much better domestic 0:05:30.600 --> 0:05:33.400 Chinese economy, which has really started to have an impact 0:05:33.440 --> 0:05:36.840 on on on Asian markets. And then at the index level, 0:05:36.880 --> 0:05:41.080 this sneaky rewaiting towards technology. Either the MSCI Emerging Market 0:05:41.400 --> 0:05:45.000 Index is now more tech weighted than the SMP five 0:05:45.080 --> 0:05:48.239 hundred and and you know, it's really been technology returns 0:05:48.240 --> 0:05:50.880 which have been pushing emerging markets higher this time. You know, 0:05:50.920 --> 0:05:54.720 commodities haven't been very helpful to emerging markets. If that changes, 0:05:54.760 --> 0:05:57.279 that will be another know, another push in that direction. 0:05:57.760 --> 0:06:01.279 And the final pieces is a weaker US dollar involves 0:06:01.320 --> 0:06:05.520 stronger emerging market currencies. And you know, currency returns in 0:06:05.680 --> 0:06:08.520 many cases have been almost as high as domestic stock returns. 0:06:08.600 --> 0:06:11.599 So this is one of those years in which you 0:06:11.680 --> 0:06:14.520 really want to have a decent exposure to a m 0:06:14.600 --> 0:06:16.080 and I think that's going to continue to be true. 0:06:16.160 --> 0:06:17.800 We were having a nice chat with Michael Sholl of 0:06:17.920 --> 0:06:20.839 market Field Asset Management as he is CEO there on 0:06:20.920 --> 0:06:24.920 the markets, and Michael, you were pretty confident that actually 0:06:24.920 --> 0:06:28.120 what we've seen so far is a trend where indices 0:06:28.160 --> 0:06:30.960 go higher, keep on going higher. What could reverse that? 0:06:31.080 --> 0:06:34.360 I'm seeing the dollar gaining a touch, but actually, given 0:06:34.360 --> 0:06:39.080 all the geopolitics out there, can that reverse quite quickly? Um? 0:06:39.320 --> 0:06:42.000 You know, I mean with with markets, it's it's difficult 0:06:42.040 --> 0:06:44.120 to see an immediate catalyst which is going to make 0:06:44.160 --> 0:06:47.359 them go down. I mean, you could have, you know, 0:06:47.640 --> 0:06:49.680 a bigger version of what we saw on June ninth, 0:06:49.680 --> 0:06:52.239 when you know, the NASDAC for no apparent reason went down, 0:06:52.279 --> 0:06:54.159 and you know, I guess it could accelerate off that 0:06:54.240 --> 0:06:56.240 and you know, could have a five percent pullback before 0:06:56.279 --> 0:06:58.599 you know it in a couple of days. But you know, 0:06:58.760 --> 0:07:00.800 I think that would be noise in a in a 0:07:00.880 --> 0:07:03.640 in a fairly in a fairly calm environment, and and 0:07:03.920 --> 0:07:05.400 you know, I think if you're if you're waiting for 0:07:05.440 --> 0:07:08.360 something more spectacular to the downside, I think you're gonna 0:07:08.400 --> 0:07:10.200 have to be You're going to have to be patient, 0:07:10.280 --> 0:07:12.800 and you're going to have to wait for this cycle 0:07:12.880 --> 0:07:14.840 to deteriorate in some way or other. I mean, I 0:07:15.040 --> 0:07:18.080 think we, you know, right now, twenty seventeen looks like 0:07:18.120 --> 0:07:19.960 a good year. My guess, is going to go into 0:07:19.960 --> 0:07:22.040 the history books as a as a very good year, 0:07:22.480 --> 0:07:25.080 potentially the best year since two thousand and nine for 0:07:25.120 --> 0:07:28.200 most of the world and for the US potentially the 0:07:28.240 --> 0:07:31.400 best years you know since too, since two thousand and thirteen. 0:07:31.480 --> 0:07:33.920 And if that's going to change, then it's going to 0:07:34.000 --> 0:07:36.760 be because of new news. The news sitting in front 0:07:36.760 --> 0:07:39.280 of us today, the existing news. It doesn't look that 0:07:39.440 --> 0:07:42.040 damaging to anything, and it's easier to see markets go 0:07:42.120 --> 0:07:44.120 higher and go lower at this point. But you're not 0:07:44.120 --> 0:07:46.320 worried about some kind of big policy mistake. And I 0:07:46.360 --> 0:07:48.760 feel like I ask you every ten minutes, but you 0:07:48.840 --> 0:07:52.000 don't really know what the distortions are until you take 0:07:52.040 --> 0:07:54.480 away that safety blanket. I think there's no doubt that 0:07:54.560 --> 0:07:57.800 central banks will lose control of this cycle, but I 0:07:57.280 --> 0:08:00.160 I think they are either too tight too long or 0:08:00.240 --> 0:08:02.000 too loose too long, and it looks like the latter 0:08:02.040 --> 0:08:04.000 is going to be the case for cycle. So I 0:08:04.200 --> 0:08:06.280 I do think that by the end of this year, 0:08:06.920 --> 0:08:09.320 global inflation is going to be moving back to where 0:08:09.320 --> 0:08:12.120 central banks want it. And the wire for next year 0:08:12.120 --> 0:08:14.760 would be does it continue to move higher and does 0:08:14.800 --> 0:08:18.080 it undermine the ability of central banks to to keep 0:08:18.120 --> 0:08:21.880 in control of monetary policy, you know, in say twenty eighteen. 0:08:21.920 --> 0:08:24.000 But it's it's it's going to take time to get there. 0:08:24.240 --> 0:08:26.040 I'm not the sort of person that believes that central 0:08:26.040 --> 0:08:29.760 banks have sort of you know, become alchemists, have solved 0:08:29.800 --> 0:08:33.480 economic cycles. I think, I think this will end in 0:08:33.480 --> 0:08:36.240 in a in a period of chaos, But it takes 0:08:36.280 --> 0:08:38.439 time for chaos to emerge. You know, two thousand and 0:08:38.520 --> 0:08:41.200 eight didn't suddenly start on a on a sunny June 0:08:41.200 --> 0:08:43.400 morning when when the Bear Stearns funds blew up. It 0:08:43.559 --> 0:08:47.280 started eighteen months eighteen months before that. And the technology 0:08:47.320 --> 0:08:50.440 cycle ended in March two thousand, but it ended with 0:08:50.480 --> 0:08:53.360 a couple of quarters of massive inventory build ups in 0:08:53.360 --> 0:08:56.240 in in in in key areas of a of a 0:08:56.320 --> 0:09:00.040 technology sector. And right now it's difficult to see that 0:09:00.559 --> 0:09:03.840 process of excess getting to the point that you actually 0:09:03.840 --> 0:09:06.199 should be worried about it. You can understand that the 0:09:06.360 --> 0:09:09.360 markets aren't meant to levitate them the way that they 0:09:09.400 --> 0:09:12.560 have been doing. You know, I'm sympathetic to someone like 0:09:12.600 --> 0:09:16.160 Howard Marks who's trying to sound the medium term alarm. 0:09:16.200 --> 0:09:18.360 But if you're asking me, am I worried about where 0:09:18.400 --> 0:09:20.679 the market's going to be on August first, or September 0:09:20.720 --> 0:09:23.640 one or October first? You know, factly, I'm not like now, 0:09:23.840 --> 0:09:25.559 you know, it might change, but if it changes, it 0:09:25.559 --> 0:09:28.200 will be because something different happened. Michael, you mentioned that 0:09:28.240 --> 0:09:31.560 the prospects for k I see the inevitable prospect for KAS. 0:09:31.679 --> 0:09:33.480 What are you looking at for indicators of when that 0:09:33.679 --> 0:09:35.320 that comes? What? What? What are the data that you 0:09:35.360 --> 0:09:37.360 pay the closest attention to. You know, as I say, 0:09:37.679 --> 0:09:41.480 in key sectors, supply and demand numbers matter, Inventory matters. 0:09:41.480 --> 0:09:44.440 As boring as they are, you know, do do matter? 0:09:44.600 --> 0:09:47.840 I think that that you know, measuring market cap is 0:09:47.840 --> 0:09:51.280 starting to become important understanding how large markets are. I mean, 0:09:51.280 --> 0:09:55.400 you know the SMPS. You know how many trillions of 0:09:55.440 --> 0:09:57.240 dollars is that? What is a temper cent move in 0:09:57.320 --> 0:10:00.520 the SMP how does that? You know, actually, matt Against 0:10:00.520 --> 0:10:02.920 what what what central banks? You know what central banks 0:10:02.920 --> 0:10:05.560 are doing? So that's what that's what we you know, 0:10:05.920 --> 0:10:08.400 sort of really struggle with the data. Obviously, you look 0:10:08.400 --> 0:10:10.880 at it when it comes in. It hasn't generally been 0:10:11.000 --> 0:10:14.080 very surprising, and and you know, if it started to 0:10:14.120 --> 0:10:16.440 move in a in a new direction, then when you'd 0:10:16.440 --> 0:10:19.200 start paying more more attention to it. But I think 0:10:19.240 --> 0:10:21.880 the the question I have two questions in my mind. 0:10:21.920 --> 0:10:25.000 One is is what is what happened in commodities three 0:10:25.080 --> 0:10:28.520 years ago when supply and demand got badly out of 0:10:28.559 --> 0:10:31.560 balance and provoked a deep correction in that area? Could 0:10:31.640 --> 0:10:35.240 that happen in other sectors in the global economy? And 0:10:35.240 --> 0:10:37.679 and number two, at what point is the size of 0:10:37.760 --> 0:10:41.520 market cap of fixed income and equities itself problematic? At 0:10:41.559 --> 0:10:44.479 what point is our markets so large that the overwhelmed 0:10:44.480 --> 0:10:47.320 the generosity of central banks? And you know that's going 0:10:47.360 --> 0:10:49.360 to be a very difficult question to answer, but at 0:10:49.400 --> 0:10:51.840 some point it's going to matter. Michael, great to speak 0:10:51.880 --> 0:10:53.000 with you. Thank you very much for the time doing 0:10:53.000 --> 0:10:54.800 both the radio and television with this at this one. 0:10:54.840 --> 0:10:56.960 We really appreciate that Michael Shell, he is the chairman 0:10:57.000 --> 0:11:00.040 and CEO portfolio manager as well at market Field. I 0:11:00.120 --> 0:11:15.080 said management, I was writing through the president's schedule, just 0:11:15.080 --> 0:11:17.400 a moment to go busy day in Washington, as I said, 0:11:17.400 --> 0:11:20.040 here to help us understand what's going on today and 0:11:20.480 --> 0:11:21.839 here as we push ahead of the rest of the year, 0:11:21.880 --> 0:11:24.120 is Wendy Schieler. She's the chair of the political science 0:11:24.120 --> 0:11:26.800 department at Brown University. Joins us Professor Schiler. Great to 0:11:26.800 --> 0:11:29.120 speak with you once again that this is being herald 0:11:29.240 --> 0:11:32.040 is a new day, at least within the confines of 0:11:32.080 --> 0:11:34.240 the White House. John Kelly taking over for Ryan's previous 0:11:34.240 --> 0:11:36.280 who has been the chief of staff since the beginning 0:11:36.320 --> 0:11:39.240 of this administration. How radical a change does this promise 0:11:39.320 --> 0:11:41.400 to be? Do you think? Well, I mean, it could 0:11:41.480 --> 0:11:45.760 really be a very very strong decision by the President 0:11:46.120 --> 0:11:49.000 if he allows John Kelly to get the White House 0:11:49.040 --> 0:11:52.079 in order. Let's not forget you know, Dwight D. Eisenhower, 0:11:52.160 --> 0:11:55.319 who was a general, really created this position. Truman had 0:11:55.400 --> 0:11:58.520 a sort of pseudo chief of staff, but Eisenhower really thought, 0:11:58.520 --> 0:12:00.480 you need a chief of staff. Government's big, the White 0:12:00.520 --> 0:12:02.480 House is big, and it has to be a chain 0:12:02.520 --> 0:12:05.040 of command. And this is a military guy at General 0:12:05.280 --> 0:12:08.960 who's used to that kind of organization. Will Trump respect 0:12:09.120 --> 0:12:11.960 that kind of organizational skill. I don't know. I don't 0:12:11.960 --> 0:12:14.480 think we know. If he does, I think things get 0:12:14.559 --> 0:12:16.560 much better for him in the White House. If he doesn't, 0:12:16.720 --> 0:12:19.520 I think things remain really chaotic. Question about history here, 0:12:19.520 --> 0:12:22.320 Professor Schiller. Have we had an administration like this before 0:12:22.320 --> 0:12:25.880 where there spent so many factions within the White House itself? 0:12:25.880 --> 0:12:28.079 A lot being made this morning of the fact that uh, 0:12:28.200 --> 0:12:30.839 Jared Kushner and Ivanka Trump, the President's son in law 0:12:30.880 --> 0:12:34.800 and daughter, respectively, senior advisories, both like John Kelly, think 0:12:34.840 --> 0:12:37.440 he's a good choice for this job. Have we seen 0:12:37.480 --> 0:12:41.240 a as fractious an administration as this one? I think 0:12:41.440 --> 0:12:43.160 I think you have, particularly in the first year. I 0:12:43.160 --> 0:12:46.040 think you've seen pretty chaotic administrations. And let's not forget 0:12:46.040 --> 0:12:49.280 Bill Clinton's administration. The first nine months of that, I mean, 0:12:49.280 --> 0:12:51.080 I would argue, even until you get to NAFTA in 0:12:51.080 --> 0:12:54.000 December of nineties three was a disaster. I mean, it 0:12:54.040 --> 0:12:56.840 was couttern appointments flying left and right, not making it through, 0:12:56.960 --> 0:12:58.920 and and the House was mad at dam and then 0:12:58.920 --> 0:13:01.640 the Senate was mad adam. He lost on stimulus. I mean, 0:13:01.640 --> 0:13:03.920 there was a disaster that first year, and I think 0:13:03.960 --> 0:13:06.640 that was because he had voices, lots of voices surrounding 0:13:06.679 --> 0:13:09.440 him and hadn't settled on a couple of people he trusted. 0:13:09.640 --> 0:13:12.000 You need an agenda as a president, though, to want 0:13:12.000 --> 0:13:14.240 to listen to people to tell you how to accomplish it. 0:13:14.440 --> 0:13:16.960 We just don't know if Trump actually has an agenda, 0:13:17.200 --> 0:13:18.960 and that makes it hard for everybody who works form 0:13:18.960 --> 0:13:21.240 in the White House, whether they're fassionately fighting or not, 0:13:21.600 --> 0:13:23.160 what do you want to try to get done? And 0:13:23.200 --> 0:13:24.920 if you're not on the same team on that score, 0:13:25.160 --> 0:13:27.240 I just don't know how everything else doesn't fall apart. 0:13:27.640 --> 0:13:30.440 Professor Schiller, what exactly does it chief of Stuff do? 0:13:30.640 --> 0:13:32.559 So you either take, you know, a bet that this 0:13:32.640 --> 0:13:36.200 is a command and control managerial task, which means that 0:13:36.320 --> 0:13:38.960 John Kelly, he's a retired general, would do quite well. 0:13:39.000 --> 0:13:41.920 But if it's a very political job, does he really 0:13:41.920 --> 0:13:44.080 have any experience in these kind of things? Well, I 0:13:44.120 --> 0:13:46.600 think you're pointing out just a really important facet of 0:13:46.600 --> 0:13:49.559 the way that each individual president chooses to sort of 0:13:49.600 --> 0:13:52.480 decide what people who work form will do. Right, So, 0:13:52.559 --> 0:13:55.120 sometimes the domestic counsel or the advisor to the president 0:13:55.200 --> 0:13:57.280 is the political person, and the chief of staff is 0:13:57.320 --> 0:14:01.480 literally the organizational gatekeeper, and that manages the president's time, 0:14:01.600 --> 0:14:04.400 the flow of information to the president, and the president's agenda. 0:14:04.800 --> 0:14:07.679 But if you're somebody who doesn't have anybody else doing 0:14:07.679 --> 0:14:10.400 the politics, then the chief of staff takes on that 0:14:10.520 --> 0:14:12.920 additional role. So I think it depends on what the 0:14:12.920 --> 0:14:15.240 president is good at and not good at, and how 0:14:15.320 --> 0:14:17.480 much that president can see that the chief of staff 0:14:17.520 --> 0:14:20.520 can balance out his weaknesses and strengths. I don't think 0:14:20.560 --> 0:14:23.160 President Trump, at least at the moment, has actually self 0:14:23.200 --> 0:14:27.000 reflected on that yet. So right now it looks like 0:14:27.160 --> 0:14:30.400 just to get the White House in order, staff up completely. 0:14:30.400 --> 0:14:32.480 You know, the White House, even the President's staff is 0:14:32.600 --> 0:14:35.280 sort of half full right now. You've got tons of 0:14:35.320 --> 0:14:38.720 positions throughout the administration in cabinet departments that are going empty, 0:14:39.160 --> 0:14:41.160 and you know, there's one way to slow the federal 0:14:41.160 --> 0:14:43.560 government down, but some jobs have to be filled. So 0:14:43.640 --> 0:14:45.680 I would think that would be first on the agenda 0:14:45.760 --> 0:14:48.880 for the chief of Staff very quickly. Does John Kelly 0:14:48.920 --> 0:14:51.080 have the support of Congress and does he need it? 0:14:52.080 --> 0:14:54.240 I don't think he. I don't think they know, yeah, 0:14:54.280 --> 0:14:56.560 I think Congress always respects people who have a long, 0:14:56.760 --> 0:14:59.560 uh successful military career, But I don't think he needs 0:14:59.600 --> 0:15:01.880 that quite yet. I mean, remember were serious is best 0:15:01.880 --> 0:15:04.000 friends of Paul Ryan, and he doesn't have a job anymore. 0:15:04.160 --> 0:15:05.840 So I'm just not sure how much that will matter 0:15:05.880 --> 0:15:08.280 to the Trump administration. But you do want to have 0:15:08.360 --> 0:15:11.000 open lines of communication. So he does want to be 0:15:11.040 --> 0:15:13.560 available to Congressional leaders when they want to talk to him, 0:15:13.720 --> 0:15:16.000 and he wants to be open in hearing them. And 0:15:16.040 --> 0:15:18.520 I think if he does that, he'll cultivate a good 0:15:18.520 --> 0:15:21.120 relationship with the leadership. Professor Schiller, let me ask you 0:15:21.280 --> 0:15:24.000 about something you mentioned a few moments ago. You're talking 0:15:24.040 --> 0:15:26.200 about a lot of the positions that have still gone 0:15:26.280 --> 0:15:30.320 unfilled in this administration. Uh. We heard from Anthony Scara, 0:15:30.440 --> 0:15:32.280 much of the new communications director, that his means of 0:15:32.280 --> 0:15:35.440 combating leaks would be to fire everybody. What does the 0:15:35.760 --> 0:15:39.680 pool look like a perspective members of this administration? How 0:15:39.800 --> 0:15:41.480 how how much of a deficit are they operating with 0:15:41.520 --> 0:15:43.320 at this point? And how much do you think that 0:15:43.400 --> 0:15:46.760 John Kelly could write that well? I mean, David, you're 0:15:46.800 --> 0:15:50.280 pointing out something that's so important to a functioning White House. 0:15:50.600 --> 0:15:52.920 You know, the government, centeral government is very big. If 0:15:52.960 --> 0:15:56.680 cabint departments you have, you have tremendous amount of oversight 0:15:56.760 --> 0:15:58.840 of how policy being implemented. And if you want to 0:15:58.880 --> 0:16:01.320 change that policy, you have two people in the chairs 0:16:01.360 --> 0:16:03.920 at the desk doing their job and they don't have 0:16:04.040 --> 0:16:06.840 that yet. So if you have more people who lose 0:16:06.880 --> 0:16:08.640 their jobs in the White House, then you've got to 0:16:08.640 --> 0:16:11.239 replace them, and you've got to go to security clearances 0:16:11.560 --> 0:16:13.520 and a lot of questions are asked. So you've got 0:16:13.520 --> 0:16:16.040 to replace them with more establishment people who maybe have 0:16:16.080 --> 0:16:19.800 served in white Houses prior to the Trump administration. And 0:16:19.840 --> 0:16:22.480 that's something Trump doesn't have any knowledge about in terms 0:16:22.480 --> 0:16:25.800 of connections. You know, establishment Republicans are not going to 0:16:25.800 --> 0:16:27.520 work for Donald Trump, at least not at the moment. 0:16:27.560 --> 0:16:30.360 They haven't been offering themselves. They're turning things down. People 0:16:30.440 --> 0:16:32.920 don't really want to go there. And John Kelly's job 0:16:33.280 --> 0:16:35.720 is to make it a more attractive proposition to bring 0:16:35.800 --> 0:16:39.280 in people with some prior government experience, particularly places like 0:16:39.320 --> 0:16:42.280 the State Department where you need diplomacy. You need this 0:16:42.320 --> 0:16:44.800 to be functioning, and that's I think the big problem. 0:16:44.800 --> 0:16:47.320 I think nobody wants to touch that job or any 0:16:47.400 --> 0:16:49.560 job right now who's in the Republican Party. They're just 0:16:49.560 --> 0:16:53.280 thinking ahead. The geographic gulf between the White House and 0:16:53.280 --> 0:16:55.000 the Capital, I would guess is about a mile and 0:16:55.040 --> 0:16:58.400 a half wide. When it comes to how each of 0:16:58.400 --> 0:17:00.960 those places understands one another, where are we How much 0:17:01.000 --> 0:17:02.880 of an understanding of the way Congress works does this 0:17:02.920 --> 0:17:05.840 administration have? Uh? And is the Congress getting better and 0:17:05.920 --> 0:17:08.800 understanding the motivations of the White House? Well? I think 0:17:08.800 --> 0:17:11.880 that Donald Trump understandably expected that the Republican Party, even 0:17:11.920 --> 0:17:16.000 though they had been factionalized and fought his nomination really 0:17:16.040 --> 0:17:19.000 almost to the end, would embrace him, would accept him 0:17:19.040 --> 0:17:21.440 and embrace him, and that he would have a lot 0:17:21.520 --> 0:17:24.920 of mojo among the base to push them in terms 0:17:24.920 --> 0:17:27.520 of grassroots movement. If they didn't do what he wanted, 0:17:27.600 --> 0:17:30.160 he'd go out he rallies. And then is the people 0:17:30.200 --> 0:17:32.480 who like Trump would pressure the Congress to do what 0:17:32.480 --> 0:17:34.720 Trump wanted him to do. It has not turned out 0:17:34.760 --> 0:17:37.440 to be that way. The Republican Party has not really 0:17:37.440 --> 0:17:40.360 turned a corner to embrace him. And because Trump's approval 0:17:40.400 --> 0:17:43.399 ratings are so low, he just doesn't have enough juice 0:17:43.440 --> 0:17:46.840 politically among the base in enough areas around the country 0:17:47.040 --> 0:17:50.000 to pressure enough Republicans a couple of them here and there, 0:17:50.320 --> 0:17:52.760 But he doesn't have that wide swath of you know, 0:17:52.800 --> 0:17:56.800 bully pulplic popularity. And that's something that's traditionally been a 0:17:56.960 --> 0:18:00.840 very important and strong weapon for the president, particularly early 0:18:00.880 --> 0:18:03.359 in his term with his own party, and Trump seems 0:18:03.400 --> 0:18:06.439 to be completely missing that. And the longer it goes 0:18:06.520 --> 0:18:08.639 that he has a bad approval reading and he doesn't 0:18:08.680 --> 0:18:11.520 seem to be generating any support, the more Republicans are 0:18:11.560 --> 0:18:14.440 upper re election in November eighteen, will say we don't 0:18:14.480 --> 0:18:16.840 trust him, we want to distance ourselves. We've got to 0:18:16.840 --> 0:18:19.240 go our own way, because he could a throw us 0:18:19.320 --> 0:18:21.959 under the bus at any time, and be he becomes 0:18:22.000 --> 0:18:25.119 so unstable that he becomes a real liability. Would the 0:18:25.160 --> 0:18:27.440 President be able to push through a tax overhaul this 0:18:27.600 --> 0:18:30.359 year if he were to focus on that. I don't 0:18:30.359 --> 0:18:32.040 think he. I don't think we need the president to 0:18:32.040 --> 0:18:34.320 push the tax bill. I think the Republican leadership is 0:18:34.640 --> 0:18:38.119 desperately wants to do a tax reform bill. Uh. They 0:18:38.160 --> 0:18:40.879 want to cut corporate taxes, they want to cut you know, 0:18:40.920 --> 0:18:43.400 income taxes, you know there's two things going on here. 0:18:43.440 --> 0:18:46.040 They think there's obviously too much taxation, that's the Republican 0:18:46.080 --> 0:18:49.040 Party platform. But to just as Ronald Reagan did, they 0:18:49.040 --> 0:18:51.800 want to squeeze the revenue stream. Because if you squeeze 0:18:51.800 --> 0:18:54.040 the revenue stream, and you cut the revenue stream, you 0:18:54.080 --> 0:18:57.359 can cut spending, particularly entitlements. You know, Paul Lyon has 0:18:57.440 --> 0:19:00.560 not forgotten about his desire to cut Medicaid and cut 0:19:00.600 --> 0:19:03.840 Medicare and really transform the entitlement state UH into something 0:19:03.920 --> 0:19:06.400 very different and much smaller. And you know, the first 0:19:06.400 --> 0:19:08.919