WEBVTT - Little Upside Left in U.S. Junk Bonds: Diamond Hill 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.760 Along with my co host Lisa Brahmas. Each day we 0:00:07.880 --> 0:00:10.399 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.600 and your money. Whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor. Find a Bloomberg penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:23.800 Bloomberg dot com. A lot of people have been trying 0:00:23.800 --> 0:00:26.120 to hate on the hil bond market for years. They've 0:00:26.120 --> 0:00:29.120 been saying this area is inflated, it is going to 0:00:29.240 --> 0:00:32.120 be a boys for a big fall. The result this 0:00:32.240 --> 0:00:34.720 year so far has been a ten percent gain, the 0:00:34.800 --> 0:00:37.480 best return for the first six months of a year 0:00:37.520 --> 0:00:39.880 since two thousand and nine when we were climbing out 0:00:39.880 --> 0:00:42.880 of a financial crisis. Joining us to talk about this sector, 0:00:42.880 --> 0:00:45.680 Bill's Ox. He is chief investment Officer of fixed income 0:00:45.760 --> 0:00:48.559 at Diamond Hill Capital Management. Thank you so much for 0:00:48.640 --> 0:00:51.680 being with us today. I want to start with just 0:00:51.720 --> 0:00:55.560 a broad question. How much more upside is there left 0:00:55.640 --> 0:00:58.520 in the US hild bond market right now? Yea, there's 0:00:58.640 --> 0:01:02.760 very little upside left. It's more about treading water right 0:01:02.800 --> 0:01:05.960 here and earning your coupon for the back half of 0:01:06.000 --> 0:01:08.840 the year. So all right, but we are again we're 0:01:08.880 --> 0:01:11.000 at least it suggested we've had a great run here 0:01:11.319 --> 0:01:14.120 in the high were ten plus years into this economic cycle. 0:01:14.440 --> 0:01:18.880 Are there any sectors that you're overweight or underweight given 0:01:18.880 --> 0:01:21.240 where we are in the cycle here. Yeah. I mean 0:01:21.280 --> 0:01:24.560 one interesting sector that's still under a cloud, but a 0:01:24.600 --> 0:01:27.600 different cloud than the equity markets are focused on, would 0:01:27.640 --> 0:01:31.640 be pharma. In the high old space, the valuations are 0:01:31.760 --> 0:01:36.600 very much washed out. Yesterday's deal with Allergan could be 0:01:37.680 --> 0:01:40.520 a sign that that people are starting to take notice 0:01:40.520 --> 0:01:43.000 of those valuations. And is that simply because of the 0:01:43.400 --> 0:01:47.280 regulatory overhang of the sector? I think that's that's now. 0:01:47.280 --> 0:01:49.160 The business has have been weak, but they're starting to 0:01:49.480 --> 0:01:52.960 bottom out. But the primary issue on valuation today is 0:01:53.000 --> 0:01:56.800 the political overhang for sure, although there are other challenges 0:01:56.840 --> 0:01:59.520 to im think of Tava, for example, the biggest generic 0:01:59.600 --> 0:02:01.960 maker UH and their bonds have been beaten up. There 0:02:01.960 --> 0:02:05.080 an incredibly leveraged company and they haven't really seen the 0:02:05.120 --> 0:02:07.440 same kind of pricing power that they had in the past, 0:02:07.720 --> 0:02:09.440 and they faced a lot of headwinds. I mean, is 0:02:09.440 --> 0:02:11.120 that an area where you'd be willing to go or 0:02:11.120 --> 0:02:15.360 are you looking more toward US focused areas that have 0:02:15.480 --> 0:02:18.200 been hit by speculation about policy. No. I think that 0:02:18.360 --> 0:02:20.480 is one that that it makes sense to dip your 0:02:20.480 --> 0:02:24.240 toe in table. Yes, okay, really interesting to see that 0:02:24.360 --> 0:02:27.520 there is some opportunity there Are there any places that 0:02:27.600 --> 0:02:31.720 you're selling right now? Well, I the of the U 0:02:31.800 --> 0:02:34.680 S high old market right now has a maturity greater 0:02:34.720 --> 0:02:37.960 than five years in a yield to worse below five percent. 0:02:38.200 --> 0:02:41.120 That part of the market gives people comfort and that 0:02:41.240 --> 0:02:43.600 the it's defensive, but the price is just too high. 0:02:43.639 --> 0:02:45.400 I think that's an area that you actually have to 0:02:45.440 --> 0:02:47.840 be selling right now. You know, one of the areas 0:02:47.840 --> 0:02:50.520 that's just been a huge issue or has been kind 0:02:50.520 --> 0:02:53.960 of the greater communication space, you know a T and T, Comcast, 0:02:54.040 --> 0:02:57.360 things like that, and there's so much technology change going on. 0:02:57.440 --> 0:02:59.960 There's some uh M and a activity in this space. 0:03:00.000 --> 0:03:03.760 How do you guys feel about the communications sector? Big issuers? Yeah, 0:03:03.760 --> 0:03:05.919 I mean in the high yield market, you're really talking 0:03:05.960 --> 0:03:09.920 about Sprint and T Mobile and whether that deal gets 0:03:09.919 --> 0:03:13.239 approved or not, Sprint will be under severe pressure of 0:03:13.320 --> 0:03:17.359 that deal does not get approved, Probably a very high 0:03:17.440 --> 0:03:21.640 probability that they file for bankruptcy and the investment grade space, 0:03:22.120 --> 0:03:24.440 there's a lot of pressure on A T and T 0:03:24.600 --> 0:03:27.839 and Verizon. I mean that those businesses are are very 0:03:27.880 --> 0:03:31.360 mature right now, and they're they're tough, capital intensive businesses. 0:03:32.120 --> 0:03:34.320 So the picture that you're painting right now, which is 0:03:34.360 --> 0:03:39.360 security selection, treading water, coupon collecting for a firm that 0:03:39.440 --> 0:03:42.720 overseas twenty three billion dollars. And I'm looking right now 0:03:42.760 --> 0:03:45.880 at the inflows into the high yield sector. They have 0:03:46.000 --> 0:03:50.760 been escalating, Uh significantly. Does that concern you given the 0:03:50.760 --> 0:03:53.280 fact that there just aren't that many opportunities out there 0:03:53.480 --> 0:03:55.840 to put that money to work in a way that 0:03:55.880 --> 0:03:58.480 you think might be prudent. Well, if we were too 0:03:58.520 --> 0:04:01.200 big and I had to put those inflows to work 0:04:01.400 --> 0:04:05.880 and in a relatively less liquid high old market, I 0:04:05.920 --> 0:04:09.160 would be concerned. But we're very disciplined in terms of 0:04:09.160 --> 0:04:11.960 our capacity, so that inflows have been steady but not 0:04:12.040 --> 0:04:14.360 at all difficult for us to put the war. We're 0:04:14.400 --> 0:04:20.640 hearing more and more from economists, investors, strategists about rising 0:04:20.680 --> 0:04:23.840 odds of a recession mid next year's that's something you're 0:04:23.880 --> 0:04:26.800 thinking about as you think about your portfolio. Well, I 0:04:26.800 --> 0:04:29.359 think the treasury market is is the best signal of 0:04:29.400 --> 0:04:34.800 that right now, And we're discounting three rate cuts between 0:04:34.880 --> 0:04:37.440 now and the end of the year, And to me, 0:04:37.560 --> 0:04:40.640 that's kind of on the precipice of that, that's probably 0:04:40.680 --> 0:04:44.839 still consistent with insurance against too low inflation, but anything 0:04:44.880 --> 0:04:47.920 more than that. And now the treasury market is discounting 0:04:47.960 --> 0:04:51.279 a much higher probability of recession. So we're we're close. 0:04:51.320 --> 0:04:54.039 I'm close to being concerned about that, but not quite yet. 0:04:54.720 --> 0:04:57.960 Are you more concerned about the longer term for the 0:04:58.040 --> 0:05:02.000 high old bond market or the private depth markets right now? Yeah? 0:05:02.040 --> 0:05:05.600 I think that the private debt markets probably have grown 0:05:05.760 --> 0:05:08.239 much more rapidly that the high yield market. Although flows 0:05:08.240 --> 0:05:11.560 have been strong this year, it's actually down in size 0:05:11.600 --> 0:05:13.680 over the last three years or so, with the loan 0:05:13.720 --> 0:05:16.680 market and then the private debt market increasing in size. 0:05:16.680 --> 0:05:20.839 So I think that investor expectations in the private loan 0:05:20.880 --> 0:05:23.560 market are probably more out of whack with reality than 0:05:23.640 --> 0:05:25.360 what you would see in the high yield market. And 0:05:25.400 --> 0:05:28.919 how significant is the risk that you see in say 0:05:29.000 --> 0:05:31.800 a recession, I mean, are we looking at just normal 0:05:31.880 --> 0:05:35.360 declines that are you know, not necessarily super painful but 0:05:35.520 --> 0:05:38.599 you know our declines. Are we talking about something that's 0:05:38.600 --> 0:05:41.479 more substantial than that? Yeah, I mean LDD Leverage finance 0:05:41.560 --> 0:05:44.760 is extremely resilient. We saw that in the financial crisis. 0:05:44.800 --> 0:05:48.280 Spreads blue out in uh, you know, a year and then, 0:05:48.400 --> 0:05:51.360 but mostly in the three months after Lehman Brothers filed 0:05:51.960 --> 0:05:54.600 to over two thousand basis points, but high yield was 0:05:54.640 --> 0:05:56.760 back above its high water mark in the fall of 0:05:56.800 --> 0:06:00.400 two thousand nine. So it's a very resilient asset class. 0:06:00.440 --> 0:06:04.080 Each sector in leverage finance can pick up the other. 0:06:04.760 --> 0:06:06.839 So I don't think it's going to bring the economy 0:06:06.880 --> 0:06:09.640 down or anything like that. Bill Zocks, thanks so much 0:06:09.680 --> 0:06:12.320 for being with us. Bill as a chief investment officer 0:06:12.320 --> 0:06:15.840 of fixed income for Diamond Hill Capital Management, about three 0:06:15.839 --> 0:06:19.480 billion dollars under management, is based in Columbus, Ohio the 0:06:19.800 --> 0:06:22.200 Ohio State University. I don't know why you guys say 0:06:22.200 --> 0:06:24.560 at the Ohio State, but it sounds good. We'll go 0:06:24.640 --> 0:06:40.800 with it. Traders are preparing for the onset of G 0:06:41.120 --> 0:06:44.320 twenty talks, and as one guest on Billover Television said 0:06:44.320 --> 0:06:47.599 this morning, it really is b G two meeting because 0:06:47.640 --> 0:06:50.679 really we're looking at j and Ping and President Trump 0:06:51.120 --> 0:06:53.960 of China and the US getting together and coming to 0:06:54.040 --> 0:06:57.000 some sort of ceasefire. Maybe perhaps to set the stage 0:06:57.040 --> 0:06:59.120 from very pleased to say, we have Leland Miller with US, 0:06:59.200 --> 0:07:03.839 chief executive for Sir China beij Book International in New York. 0:07:03.880 --> 0:07:07.239 He's joining us in our Bloomberg Interactive Broker Studios Leland 0:07:07.680 --> 0:07:11.360 Uh just to set the stage for these discussions between 0:07:11.720 --> 0:07:16.200 Presidents JJ and Ping and Trump. What is the economic 0:07:16.280 --> 0:07:20.239 backdrop in particular of China right now? Sure, so, people 0:07:20.240 --> 0:07:23.480 who have been very gloomy over the last several months, 0:07:23.680 --> 0:07:26.680 one because trade talks haven't gone well, but also you've 0:07:26.680 --> 0:07:28.560 had pieces of official data that have come in that 0:07:28.640 --> 0:07:31.160 haven't made people very happy. And then there's rumors of 0:07:31.200 --> 0:07:34.320 trouble within the financial system, so a lot of pessimism 0:07:34.360 --> 0:07:37.520 out there. Are new Q two data, which was released 0:07:37.520 --> 0:07:40.840 this morning is actually more optimistic on that. So from 0:07:40.840 --> 0:07:43.440 a top line perspective, Q two improved over Q one, 0:07:43.480 --> 0:07:45.600 which I don't think many people expected. And then on 0:07:45.640 --> 0:07:50.720 the sectual perspective, manufacturing and retail were the two co leaders. 0:07:51.000 --> 0:07:54.119 So a lot of people probably assume manufacturing is under fire. 0:07:54.400 --> 0:07:56.480 That's true because of the trade war, but there was 0:07:57.120 --> 0:08:01.120 evidence of very strong policy support, so manufacturers borrowed more 0:08:01.240 --> 0:08:03.400 and they borrowed the cheapest rates. This is the government 0:08:03.440 --> 0:08:06.800 stepping in. And Rita also did relatively well, so we Uh, 0:08:06.880 --> 0:08:11.120 there's some some worries on inventory, but the the key 0:08:11.160 --> 0:08:14.920 metrics for those two sectors in particular or upbeat. Hiring 0:08:15.000 --> 0:08:17.320 was upbeat, which means the trade war hasn't hit China 0:08:17.320 --> 0:08:19.440 word hurts yet. Uh. And overall, I think that there 0:08:19.480 --> 0:08:23.440 was improvement the economy. How about the shadow banking situation 0:08:23.480 --> 0:08:26.200 that had been on the downside as China begun to 0:08:26.360 --> 0:08:29.520 de lever over the less several years. What's the status there. Well, 0:08:30.160 --> 0:08:34.560 when people heard the term deleveraging over the last several years, uh, 0:08:34.760 --> 0:08:37.760 they assumed that China was actually actively deleveraging. I mean 0:08:37.800 --> 0:08:39.800 the government was saying it was doing that. China was 0:08:39.840 --> 0:08:45.840 never deleveraging. It was doing some aspects of financial uh, deleveraging, 0:08:46.040 --> 0:08:48.240 and in particular, they were cracking down on shadow finance. 0:08:48.400 --> 0:08:50.880 That's something that's crystal cleared our data. So for the 0:08:50.920 --> 0:08:54.280 past two to three years, we've seen shadow finance cracked 0:08:54.280 --> 0:08:57.760 down on a much lower share of overall borrowing over 0:08:57.800 --> 0:09:01.880 time and UH more to that borrowing going from off 0:09:01.880 --> 0:09:04.480 balance sheet to on balance sheet. The borrowing wasn't there, 0:09:04.520 --> 0:09:07.280 wasn't less borrowing, but it was going from the shadows 0:09:07.360 --> 0:09:10.920 to the on balance on balance sheet where it could 0:09:10.960 --> 0:09:13.800 be was turning more transparent and more regulated. Well, that 0:09:13.920 --> 0:09:16.559 just reversed completely. This quarter we saw an explosion I 0:09:16.600 --> 0:09:19.480 think explosions right word for this of shadow banking and 0:09:19.559 --> 0:09:22.760 Q two it was the highest one quarter jump we've 0:09:22.760 --> 0:09:26.160 seen in shadow banking usage in the history of China 0:09:26.200 --> 0:09:29.280 based book survey. So what clearly is happening here. Q 0:09:29.480 --> 0:09:32.080 one was a big credit quarter for China that made 0:09:32.080 --> 0:09:34.000 a decision that they were going to create a cushion 0:09:34.040 --> 0:09:36.280 for the economy in a worst case scenario for the 0:09:36.280 --> 0:09:39.079 trade war, prepare for the downside. And Q two was 0:09:39.120 --> 0:09:42.960 an expansion of that, almost as much borrowing overall, almost 0:09:43.000 --> 0:09:48.120 as aggressive, uh diminishment of of of rejection rates, et cetera, 0:09:48.520 --> 0:09:52.000 but an expansion of shadow banking. So it's really amazing 0:09:52.040 --> 0:09:53.839 what the Chinese have done since the fourth quarter in 0:09:53.880 --> 0:09:56.600 the credit side. Leland, I want to just highlight this 0:09:56.640 --> 0:09:58.760 point once again because this seems to be a really 0:09:58.760 --> 0:10:00.600 big deal. You did just put out this early look 0:10:00.640 --> 0:10:04.800 brief of the Q two Chinese economy. The fact that 0:10:05.120 --> 0:10:09.640 shadow banking activity increased at the fastest pace quarter over 0:10:09.760 --> 0:10:12.640 quarter since China Beijing book began in two thousand and 0:10:12.679 --> 0:10:16.959 ten seems significant. What is the potential risk here? I mean, 0:10:17.040 --> 0:10:20.920 how close are we to the consequences of this? Because 0:10:21.120 --> 0:10:23.880 it is a pretty closed economy, so some people say 0:10:23.920 --> 0:10:28.199 it's contained in terms of riskiness. Well, there's a reason 0:10:28.240 --> 0:10:31.000 that the Beijing leadership cracked down on shadow banking several 0:10:31.040 --> 0:10:35.079 years ago because they said, this is an enormous vulnerability. 0:10:35.080 --> 0:10:38.880 It operates outside of most rules. It operates in a 0:10:38.960 --> 0:10:41.760 very out pake manner. Uh. There's important parts of shadow 0:10:41.760 --> 0:10:43.920 finance for the economy, but there's also Ponzi schemes, and 0:10:43.920 --> 0:10:47.800 there's no real way to to control this unless we 0:10:48.160 --> 0:10:50.760 shine a light on it. Now. They have been doing 0:10:50.800 --> 0:10:52.440 more and more and more to crack down on shadow 0:10:52.440 --> 0:10:54.680 finance for years, and what they're essentially doing right now 0:10:54.920 --> 0:10:57.280 is just throwing that all out. You know, the Trump 0:10:57.320 --> 0:10:59.679 trade war is such a priority to make sure you 0:10:59.720 --> 0:11:02.160 don't look weak in the face of that, and in 0:11:02.320 --> 0:11:07.160 order to guard your downside if this goes wrong. Uh, 0:11:07.160 --> 0:11:09.680 they have essentially said we're gonna we're gonna forget about 0:11:09.679 --> 0:11:12.360 the long term consequences which could hit in the short 0:11:12.440 --> 0:11:14.520 term and medium term or long term. It's an unclear 0:11:14.559 --> 0:11:17.440 how long the a you know, taking fuse they have 0:11:17.480 --> 0:11:19.480 on this, but they decided that's not the priority. The 0:11:19.480 --> 0:11:21.200 priority is to make sure that we're getting credit to 0:11:21.200 --> 0:11:24.040 everybody that we have stronger growth numbers. And as a result, 0:11:24.040 --> 0:11:25.600 they've tossed out some of the good work they've done 0:11:25.640 --> 0:11:27.839 over the past few years. All right, let's turn our 0:11:27.960 --> 0:11:30.319 attention to the G twenty. About an hour President Trump 0:11:30.320 --> 0:11:33.840 aboard Air Force one for Osaka. What is in your 0:11:33.840 --> 0:11:38.640 mind a realistic expectation for the G two. Right, Markets 0:11:38.640 --> 0:11:42.560 have been much too barish on Osaka for weeks and 0:11:42.600 --> 0:11:46.400 weeks because after President Trump implemented terrorists back in May, 0:11:46.760 --> 0:11:51.160 there was this belief, due to the coverage UH that 0:11:51.360 --> 0:11:54.640 the two sides were hardening and that China was preparing 0:11:54.640 --> 0:11:58.360 for the long war and singing patriotic songs, and you know, 0:11:58.400 --> 0:12:01.319 the US was was led tariff man who wanted to 0:12:01.400 --> 0:12:03.960 lead the crusade against China, and you know, the two 0:12:04.240 --> 0:12:06.880 you know, two sides had nowhere to go except farther apart. 0:12:07.160 --> 0:12:10.640 This was never true. Nothing has fundamentally changed since the 0:12:10.720 --> 0:12:13.960 terroriffs are raised, with the exception of some cracked some 0:12:14.040 --> 0:12:17.520 technology company crackdowns that are going to be used as 0:12:17.559 --> 0:12:21.200 trade fodder trade chips. In terms with President She so 0:12:21.440 --> 0:12:25.560 we are not at a deal yet, but the atmosphere 0:12:25.600 --> 0:12:29.120 for Osaka is one of the White House clearly wanting 0:12:29.320 --> 0:12:32.000 a reset of talks. They're willing to punt the last 0:12:32.000 --> 0:12:34.640 tranche of tariffs and its entirety to make that happen. 0:12:34.679 --> 0:12:36.719 They're willing to give assurances on Huawei that will be 0:12:36.760 --> 0:12:39.160 part of a final deal. All the music that she 0:12:39.320 --> 0:12:42.280 wants to hear, uh and in return that the Chinese 0:12:42.280 --> 0:12:45.040 have to say, we will return to the base text 0:12:45.600 --> 0:12:47.920 and we will work from that base text that was 0:12:47.960 --> 0:12:52.160 about nine note A Secretary of Nation said, So, assuming 0:12:52.160 --> 0:12:54.760 that the Chinese go along with this, the President wants 0:12:54.760 --> 0:12:57.319 to ride this out, and we're gonna see uh, quite 0:12:57.320 --> 0:13:01.360 a quite a positive solution from a deal standpoint at Osaka. Really, 0:13:01.440 --> 0:13:03.800 so you think it's not just gonna be uh, the 0:13:03.800 --> 0:13:07.440 the uh, the fact that the trade tensions are going 0:13:07.480 --> 0:13:09.760 to escalate, but there actually will be a resolution. I 0:13:09.800 --> 0:13:11.400 don't think there's gonna be a resolution that there's not 0:13:11.440 --> 0:13:13.280 gonna be a final deal. They're not ready to do 0:13:13.320 --> 0:13:16.240 a final deal, but if they don't get along, you're 0:13:16.240 --> 0:13:21.160 gonna see UH tariffs on all five billion starting July one. 0:13:21.520 --> 0:13:23.120 And that was a real possibility. As a matter of that, 0:13:23.240 --> 0:13:26.920 markets were rather scared a few weeks ago that this 0:13:27.040 --> 0:13:29.400 was a becoming more and more of a possibility. Look, 0:13:29.480 --> 0:13:31.520 that is not on the table right now. They have 0:13:31.559 --> 0:13:34.960 not been war gaming that possibility. Internally, they want to reset. 0:13:35.200 --> 0:13:37.360 So I think that the fact that this continues on 0:13:37.960 --> 0:13:41.160 may not be seen as as bullish because in some ways, 0:13:41.480 --> 0:13:43.560 you know, we're just getting tired of this entire tarade. 0:13:43.600 --> 0:13:46.080 At the same time, this looked like it was going 0:13:46.400 --> 0:13:48.679 in the wrong direction and it was accelerating in the 0:13:48.720 --> 0:13:51.800 wrong direction. That wasn't true. But now markets are correcting 0:13:51.840 --> 0:13:54.360 themselves and they will realize that this has got that 0:13:54.440 --> 0:13:57.000 there is a clear glide path to a deal if 0:13:57.080 --> 0:13:59.640 the two sides decide they want to get there. We'll 0:13:59.640 --> 0:14:02.320 see out that this week, hopefully some movement there. Leland Miller, 0:14:02.360 --> 0:14:05.000 CEO of the China Beige Book International, joining us in 0:14:05.000 --> 0:14:24.360 our Bloomberg eleven three oh studios today starts the two 0:14:24.560 --> 0:14:28.760 day extravaganza of democratic debates, including a twenty candidates to 0:14:28.840 --> 0:14:32.720 become uh the lead in the contest against President Trump. 0:14:32.840 --> 0:14:35.440 Joining us now, Tim O'Brien, I'm so glad to say, 0:14:35.480 --> 0:14:38.160 executive editor for Bloomberg Opinion, joining us here in our 0:14:38.200 --> 0:14:42.040 interactive broker's studios, always with fresh perspective and all things 0:14:42.040 --> 0:14:44.920 politics and certainly President Trump. I'm just wondering, are we 0:14:45.000 --> 0:14:49.240 looking at a circular firing squad tonight. That's a great question, Lisa. 0:14:49.360 --> 0:14:51.720 I you know, we'll see what happens when all these 0:14:51.760 --> 0:14:53.880 folks get on stage. It's a lot of people, but 0:14:53.960 --> 0:14:57.320 I don't think the spirit of this is uh, they 0:14:57.320 --> 0:15:00.520 want to try to assassinate each other. Uh. They clearly 0:15:00.600 --> 0:15:04.240 need to get Biden out of their ways. To some extent, 0:15:04.360 --> 0:15:07.840 Joe Biden hasn't had to put much effort into making 0:15:08.240 --> 0:15:11.080 public statements around things he's He's stepped in it a 0:15:11.080 --> 0:15:14.360 few times when he has, but he's clearly the front runner. 0:15:14.560 --> 0:15:17.040 So I think the extent to which the people on 0:15:17.120 --> 0:15:19.480 stage tonight, which Biden won't be there tonight, he'll be 0:15:19.480 --> 0:15:22.560 there tomorrow, they needed to find themselves an opposition to 0:15:22.640 --> 0:15:25.400 Joe Biden and then I think the second step is 0:15:25.440 --> 0:15:28.920 an opposition to President Trump, and I think they don't 0:15:28.920 --> 0:15:31.000 really see a need to define themselves in opposition to 0:15:31.040 --> 0:15:34.280 one another. So do you think that beginning tonight and 0:15:34.320 --> 0:15:37.160 through the all the the debates coming up, do you 0:15:37.160 --> 0:15:40.960 think the strategy will be for these candidates to focus 0:15:41.040 --> 0:15:44.680 on President Trump, attack President Trump, per se, or maybe 0:15:44.720 --> 0:15:47.720 step back and maybe try to differentiate themselves to find 0:15:47.720 --> 0:15:50.120 their own policies. And you know, Paul, I think I 0:15:50.160 --> 0:15:53.120 think you know. I'm not a political consultant, but I 0:15:53.160 --> 0:15:55.240 think you know, in the media, we do know when 0:15:55.320 --> 0:15:58.200 things gain traction and when people start paying attention to things. 0:15:58.480 --> 0:16:00.720 And I think each of these candidates gonna have to say, 0:16:00.760 --> 0:16:02.920 because we're gonna have a limited amount of time, what 0:16:03.080 --> 0:16:05.920 can I say that We'll get picked up after the 0:16:05.960 --> 0:16:08.760 debates are over and give me the kind of follow 0:16:08.840 --> 0:16:10.760 up where I can get asked on to other shows 0:16:11.000 --> 0:16:13.880 and I can begin to define myself in front of voters, 0:16:13.920 --> 0:16:16.120 because it's gonna be very hard with this many people 0:16:16.600 --> 0:16:18.800 for any of them to really stand out. And one 0:16:18.880 --> 0:16:21.280 question I have is how much to the left is 0:16:21.320 --> 0:16:23.680 the Democratic Party swinging? And do we have a sense 0:16:23.880 --> 0:16:27.360 of just where what's gaining tractions so far and what 0:16:27.440 --> 0:16:29.880 that means about the direction of the party. Well, you 0:16:29.920 --> 0:16:32.440 know that I think the Democrats have as similar dynamic 0:16:33.000 --> 0:16:35.720 as the as the GOP does, where you've got you 0:16:35.720 --> 0:16:37.760 know that the left wing of the Democratic Party is 0:16:37.800 --> 0:16:40.640 pushing for bolder policy proposals in the same way that 0:16:40.680 --> 0:16:45.440 the populist wing of of the GOP is. I think. UM, 0:16:45.480 --> 0:16:48.960 I think the Democrats have to figure out what they 0:16:49.040 --> 0:16:51.360 can put in front of a national block of voters 0:16:51.720 --> 0:16:55.560 and make palatable. And I think traditionally in national elections 0:16:55.800 --> 0:16:59.600 that's been the middle of the road kind of program. Uh. However, 0:16:59.640 --> 0:17:01.760 there's very you know, we're in an era where there's 0:17:01.760 --> 0:17:04.800 a lot of wealth inequality. UM. I think the Trump 0:17:04.880 --> 0:17:08.720 presidency has brought intolerance and racial insensitivities to the frow 0:17:09.320 --> 0:17:12.040 and to the four and I think that that's going 0:17:12.200 --> 0:17:16.520 to Uh, those are issues that Democrats have to address. So, Tim, 0:17:16.520 --> 0:17:18.240 I've got a million things to talk about here, but 0:17:18.280 --> 0:17:21.400 let's shift gears to the Mueller hearings. Uh. It now 0:17:21.440 --> 0:17:25.040 looks like Mr Mueller is gonna appear before uh Senate, 0:17:25.240 --> 0:17:28.000 um a car before Congress next month. How important do 0:17:28.040 --> 0:17:31.280 you think his appearance in his testimony is I think 0:17:31.320 --> 0:17:34.200 the theatrics of it really matter, Paul. I think most 0:17:34.240 --> 0:17:37.440 Americans haven't read the Mulla Report. It's a long, dense 0:17:37.520 --> 0:17:40.360 thing that that we in the media have consumed. Apparently 0:17:40.400 --> 0:17:44.360 the President hasn't read it um and I think the 0:17:44.480 --> 0:17:49.679 congressional hearings offer this easily digestible visual way for average 0:17:49.680 --> 0:17:53.800 Americans across the country to connect with what Muller believes 0:17:53.800 --> 0:17:57.080 that report was about. And I think the second reason 0:17:57.119 --> 0:18:01.840 that's important is I think Bill barr Uh really was 0:18:02.440 --> 0:18:07.399 politically adept and and shrewd about trying to define it 0:18:07.440 --> 0:18:09.639 before the report even came out, and he had a 0:18:09.640 --> 0:18:12.880 lot of free air time as Attorney General to define 0:18:12.920 --> 0:18:14.920 the report in a way that I think wasn't accurate. 0:18:14.960 --> 0:18:17.480 I think it was designed to protect the president. I 0:18:17.520 --> 0:18:19.679 don't think bar was hiding the fact that that's what 0:18:19.760 --> 0:18:21.760 he was up to, but that doesn't mean it was 0:18:22.000 --> 0:18:24.560 an accurate reflection of what the report said. And so 0:18:24.640 --> 0:18:26.520 this is a moment for that to happen. I guess 0:18:26.520 --> 0:18:29.080 that one question I have is there have been a 0:18:29.119 --> 0:18:32.240 number of surveys that show that the bulk of Americans 0:18:32.320 --> 0:18:35.000 are sick of the Mala report and aren't necessarily trained 0:18:35.040 --> 0:18:37.960 on it, and that basically they think that probably President 0:18:38.000 --> 0:18:39.840 Trump did some things that were wrong, but they kind 0:18:39.840 --> 0:18:41.919 of just want to move on. And I'm wondering what 0:18:42.000 --> 0:18:45.160 the political risk is for Harping on this point, even 0:18:45.240 --> 0:18:48.879 if there is some credence to the view that there 0:18:48.880 --> 0:18:50.760 that there are aspects of this report that have not 0:18:50.800 --> 0:18:53.199 been highlighted well, because I think that there's more than 0:18:53.280 --> 0:18:55.359 politics at work here where a nation of laws, and 0:18:55.400 --> 0:18:57.600 I think one of the dangerous things that emerged here 0:18:57.680 --> 0:18:59.960 is that I think the president and his attorney general 0:19:00.040 --> 0:19:03.560 have defined him and the presidency is above the law. 0:19:03.640 --> 0:19:05.439 And we live in a country which we believe no 0:19:05.440 --> 0:19:07.800 one is above the law. And I think that people 0:19:07.800 --> 0:19:11.240 on both sides of the political aisle should find common 0:19:11.280 --> 0:19:13.679 ground around that principle, even if it comes at a 0:19:13.680 --> 0:19:16.720 political cost. We've had other moments in our history where 0:19:16.720 --> 0:19:20.399 politicians have taken unpopular stands or taken stands on issues 0:19:20.440 --> 0:19:23.760 of photos don't care about, in order further the good 0:19:23.920 --> 0:19:26.320 uh the good, the good will and the well being 0:19:26.320 --> 0:19:29.200 of the nation. So do you think the Democrats will 0:19:29.280 --> 0:19:32.720 use the Maldar testimony as perhaps a step towards impeachment. 0:19:33.680 --> 0:19:36.720 I have no idea. You know clearly Nancy Pelosi does 0:19:36.760 --> 0:19:39.920 not think impeachment is smart politically. I think there's law 0:19:39.960 --> 0:19:43.240 and order types and and other principle people in the 0:19:43.320 --> 0:19:45.840 in the party who think that it should happen regardless. 0:19:46.760 --> 0:19:49.200 I'm wondering, considering the fact that you actually have read 0:19:49.240 --> 0:19:51.920 through this report, what are the areas that you think 0:19:51.920 --> 0:19:55.760 are going to get sort of highlighted as breaking the law, 0:19:55.880 --> 0:19:58.840 moments that could be exactly speaking to what you what 0:19:58.880 --> 0:20:01.199 you just said, Yeah, I've now read it twice, I'm 0:20:01.240 --> 0:20:04.480 sorry to say. And um, I think the second half 0:20:04.520 --> 0:20:07.560 of the report on obstruction of justice is glaring. I 0:20:07.600 --> 0:20:10.439 think you can't read that report and not believe that 0:20:10.520 --> 0:20:14.439 there were very definable instances in which the president tried 0:20:14.520 --> 0:20:19.320 to disrupt the Mueller investigation and uh Jim Comey's investigation, 0:20:20.000 --> 0:20:22.000 that he tried to pull other people in his orbit 0:20:22.040 --> 0:20:24.640 to do this. It was very bald faced. I don't 0:20:24.640 --> 0:20:26.520 think there's any doubt around it. I think the only 0:20:26.560 --> 0:20:29.920 reason Bob Mueller decided not to indict the president is 0:20:29.960 --> 0:20:32.800 because he believed that the Justice Department had a rule 0:20:32.840 --> 0:20:35.960 preventing him from doing so I think the language and 0:20:35.960 --> 0:20:39.200 the report clearly laid out that he believed it was 0:20:39.280 --> 0:20:41.399 up to the Congress to decide what to do next, 0:20:41.680 --> 0:20:44.120 but that he wasn't willing to exonerate the president from 0:20:44.160 --> 0:20:48.400 having committed no crimes. What would be a successful outcome 0:20:48.480 --> 0:20:50.879 for the Democrats with with this testimony? What are they 0:20:50.960 --> 0:20:54.399 really looking for? Uh? You know, I think they're I 0:20:54.400 --> 0:20:55.919 think they're I don't know. I don't know there's a 0:20:56.040 --> 0:20:58.280 unified golder. I think there's some that would like to 0:20:58.359 --> 0:21:00.520 see it, as you asked earlier, Paul out is, you know, 0:21:00.640 --> 0:21:02.760 to make it a first step on the way towards impeachment. 0:21:03.000 --> 0:21:05.840 I think there's others that would be satisfied for it 0:21:06.000 --> 0:21:10.520 simply to raise doubts among the electorate about the president 0:21:10.600 --> 0:21:14.280 and his ethics and the way he operates. How much 0:21:14.320 --> 0:21:17.639 support is there from the Republicans to defend him regardless 0:21:17.800 --> 0:21:20.600