1
00:00:00,120 --> 00:00:02,920
Speaker 1: Brought you by Bank of America Mary Lynch. Investing in

2
00:00:03,000 --> 00:00:07,840
Speaker 1: local communities, economies and a sustainable future. That's a power

3
00:00:08,080 --> 00:00:12,360
Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated

4
00:00:12,760 --> 00:00:26,400
Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.

5
00:00:26,440 --> 00:00:29,920
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

6
00:00:29,960 --> 00:00:34,800
Speaker 1: insight from the best of economics, finance, investment and international relations.

7
00:00:35,240 --> 00:00:40,760
Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com

8
00:00:40,800 --> 00:00:48,159
Speaker 1: and of course, on the Bloomberg. He is Jim O'Neil.

9
00:00:48,240 --> 00:00:52,479
Speaker 1: He's formerly chairman of Golden Sax Assets Management and he

10
00:00:52,680 --> 00:00:55,240
Speaker 1: was appointed also to the UK government as Commercial Secretary

11
00:00:55,440 --> 00:00:58,480
Speaker 1: to the Treasury, role he quit back in September last

12
00:00:58,560 --> 00:01:02,400
Speaker 1: Here he's also life fan of Manchester United. I'm trying

13
00:01:02,440 --> 00:01:04,040
Speaker 1: to give them the kind of the whole spectrum, Jim.

14
00:01:04,040 --> 00:01:05,959
Speaker 1: I know a lot of our viewers know you very well,

15
00:01:06,000 --> 00:01:09,759
Speaker 1: but it's important to not forget any aspect of your life.

16
00:01:09,880 --> 00:01:12,639
Speaker 1: He joins us now from London Gym. Overall, what struck

17
00:01:12,680 --> 00:01:15,160
Speaker 1: me in my conversation with Gentim is that he's much

18
00:01:15,200 --> 00:01:17,679
Speaker 1: more confident about the markets in the future and that

19
00:01:17,760 --> 00:01:19,440
Speaker 1: seemed to me like one of the reasons why he's

20
00:01:19,440 --> 00:01:22,440
Speaker 1: going for this capital raising direct to the markets instead

21
00:01:22,440 --> 00:01:25,120
Speaker 1: of selling off part of the Swiss Bank. Would you

22
00:01:25,160 --> 00:01:29,640
Speaker 1: be so optimistic about the markets overall? So, I thought,

23
00:01:29,840 --> 00:01:32,920
Speaker 1: certainly think for good morning. I certainly think from a

24
00:01:33,000 --> 00:01:37,600
Speaker 1: cyclical perspective, all all the things that I've kind of

25
00:01:37,640 --> 00:01:40,280
Speaker 1: follow these days, not quite as closely, of course as

26
00:01:40,319 --> 00:01:44,000
Speaker 1: I used to, but I still try to. In terms

27
00:01:44,040 --> 00:01:47,919
Speaker 1: of the states of the world cycle all very supportive

28
00:01:48,680 --> 00:01:52,240
Speaker 1: of the equity rally we're having around the world. Six

29
00:01:52,320 --> 00:01:57,960
Speaker 1: of the publicly available key ingredients to a global leading indicator,

30
00:01:58,200 --> 00:02:01,440
Speaker 1: I'm coincident indicator, many of them are at the strongest

31
00:02:01,520 --> 00:02:04,560
Speaker 1: levels since so eight, whether it's in the US or elsewhere.

32
00:02:04,680 --> 00:02:08,160
Speaker 1: So on that basis it makes a huge amount of sense.

33
00:02:08,639 --> 00:02:11,440
Speaker 1: The bit which is trickier is, of course, by definition,

34
00:02:11,480 --> 00:02:15,480
Speaker 1: the higher we go, the less cheap equity markets are.

35
00:02:16,440 --> 00:02:19,520
Speaker 1: And of course, if the strength of the recovery becomes

36
00:02:19,560 --> 00:02:23,600
Speaker 1: so powerful that it results in some kind of abrupt

37
00:02:23,600 --> 00:02:27,959
Speaker 1: shift in monasty policy to an end of QWI all

38
00:02:28,000 --> 00:02:31,320
Speaker 1: over the world, as well as a more accelerated tightening

39
00:02:31,320 --> 00:02:33,760
Speaker 1: in the US, than our guess is that will be

40
00:02:33,800 --> 00:02:37,120
Speaker 1: the ultimate challenge. But right now it looks it looks

41
00:02:37,160 --> 00:02:41,920
Speaker 1: surprisingly good from a surprisingly large number of different parts

42
00:02:41,960 --> 00:02:46,160
Speaker 1: of the world. Great, But are you concerned at all?

43
00:02:46,240 --> 00:02:47,960
Speaker 1: Gym And And you're actually right, and we've been trying

44
00:02:48,000 --> 00:02:50,359
Speaker 1: to figure out and surveillance exactly when the real talk

45
00:02:50,360 --> 00:02:53,240
Speaker 1: about the balance sheet redressing starts. But are you concerned

46
00:02:53,240 --> 00:02:57,520
Speaker 1: that the market seem to ignore all geopolitical risks? You know,

47
00:02:57,600 --> 00:02:59,840
Speaker 1: I don't really I have a sort of what seems

48
00:02:59,880 --> 00:03:02,440
Speaker 1: to be a bit of an unconventional view about this stuff. Well,

49
00:03:02,520 --> 00:03:05,920
Speaker 1: we've always, you know, we've had gear political risk since

50
00:03:06,720 --> 00:03:11,720
Speaker 1: I first started in this business. I remember many decades

51
00:03:11,760 --> 00:03:16,440
Speaker 1: ago flying into Q eight and arriving there and and

52
00:03:16,760 --> 00:03:21,680
Speaker 1: finding out news that Iraq was launching war on them. Uh.

53
00:03:21,680 --> 00:03:23,880
Speaker 1: And I actually we carried on with a business trip

54
00:03:23,919 --> 00:03:26,799
Speaker 1: for two days, as it happens. But you know, the

55
00:03:26,800 --> 00:03:30,160
Speaker 1: the idea that geo political risk and for that matter

56
00:03:30,160 --> 00:03:32,600
Speaker 1: of other uncertainty is and you I don't. I just

57
00:03:32,639 --> 00:03:36,400
Speaker 1: simply don't buy. What is new is that we live

58
00:03:36,400 --> 00:03:39,720
Speaker 1: in a twenty four seven world of media commentary where

59
00:03:39,760 --> 00:03:42,839
Speaker 1: everybody can comment and is aware of everything. That that's

60
00:03:42,880 --> 00:03:45,440
Speaker 1: the bit that's new. But the fact that's uncertainty, isn't

61
00:03:45,440 --> 00:03:48,400
Speaker 1: you at all? Jim On when you're a Premier League

62
00:03:48,520 --> 00:03:53,560
Speaker 1: soccer career was over. You worked for the Swiss Bank Corporation. Folks,

63
00:03:53,560 --> 00:03:56,320
Speaker 1: this is ancient history. Now we're going back twenty years, Jim,

64
00:03:57,480 --> 00:03:59,640
Speaker 1: that's when I went down to the Middle East. Yeah, Jim,

65
00:03:59,680 --> 00:04:03,240
Speaker 1: onial was the research force at Swiss Banking Corporation, which

66
00:04:03,280 --> 00:04:06,680
Speaker 1: was taken up by UBS. I believe it was in nine.

67
00:04:07,040 --> 00:04:10,000
Speaker 1: Jim O'Neill, help me here with a character of Swiss

68
00:04:10,040 --> 00:04:14,080
Speaker 1: banking and from where you sit, where does Credit Swiss

69
00:04:14,760 --> 00:04:18,520
Speaker 1: fit into too big to fail banking? I can't figure

70
00:04:18,520 --> 00:04:21,000
Speaker 1: out if they're a big bank, a middle bank, a

71
00:04:21,000 --> 00:04:26,240
Speaker 1: little bank, or a merger candidate. Which is it? Gosh,

72
00:04:26,279 --> 00:04:30,080
Speaker 1: that's a tough question because obviously I am four years

73
00:04:30,120 --> 00:04:33,200
Speaker 1: we moved from the world of finance. But nonetheless, uh,

74
00:04:34,320 --> 00:04:36,200
Speaker 1: I'm always happy to talk about anything, even if I

75
00:04:36,240 --> 00:04:38,760
Speaker 1: don't know anything about it. But um, first of all,

76
00:04:39,600 --> 00:04:44,080
Speaker 1: the merger was essentially Swiss Bank Corporations taking over you BS.

77
00:04:44,120 --> 00:04:47,800
Speaker 1: Excuse me, uh, And that that that was a time

78
00:04:47,880 --> 00:04:53,680
Speaker 1: where both SPC and Credit Swiss were essentially trying to

79
00:04:53,720 --> 00:04:57,880
Speaker 1: make a very aggressive accent to become as as big

80
00:04:57,920 --> 00:05:02,560
Speaker 1: globally as the big US guys uh. And for a

81
00:05:02,800 --> 00:05:07,160
Speaker 1: very brief period they persuaded themselves they could, And of

82
00:05:07,200 --> 00:05:10,159
Speaker 1: course the reality is much of the problems that then

83
00:05:10,240 --> 00:05:16,640
Speaker 1: followed For the next twenty years, even predating oh eight, particularly,

84
00:05:17,600 --> 00:05:21,160
Speaker 1: UBS got caught up badly in the mess they have.

85
00:05:21,279 --> 00:05:25,039
Speaker 1: They have perpetual problems, and I think to some extent,

86
00:05:25,200 --> 00:05:29,480
Speaker 1: credits WITH still struggles with aspects of the hangover from

87
00:05:29,520 --> 00:05:32,040
Speaker 1: all of that more than UBS has done that. From

88
00:05:32,080 --> 00:05:35,760
Speaker 1: what I can see, UBS has dealt better with the

89
00:05:35,800 --> 00:05:39,279
Speaker 1: whole shift into asset management and retaining its pre eminence

90
00:05:39,279 --> 00:05:43,479
Speaker 1: in that, and chosen more carefully to pull away from

91
00:05:43,560 --> 00:05:46,520
Speaker 1: some of the most unprofitable and most competitive parts of

92
00:05:46,600 --> 00:05:50,720
Speaker 1: the so called investment banking business. So I think they're

93
00:05:50,720 --> 00:05:52,440
Speaker 1: still trying to feed the way. But to answer your

94
00:05:52,480 --> 00:05:56,800
Speaker 1: basic question, they are both very big global banks within

95
00:05:56,880 --> 00:05:59,919
Speaker 1: the very big global banks. And this is the idea Jimmonial.

96
00:06:00,480 --> 00:06:02,920
Speaker 1: We had the merger with Fortas of Belgium and all that,

97
00:06:03,000 --> 00:06:05,520
Speaker 1: it was a real mass X number of years ago.

98
00:06:06,000 --> 00:06:09,120
Speaker 1: Can the American banks come in and add value to

99
00:06:09,160 --> 00:06:12,560
Speaker 1: the European banks or is there such a cultural divide

100
00:06:12,839 --> 00:06:16,360
Speaker 1: that any transactions in combinations with credit suites just to

101
00:06:16,480 --> 00:06:23,239
Speaker 1: unthinkable across the Atlantic. So again I don't think about

102
00:06:23,279 --> 00:06:26,120
Speaker 1: this as much as in my my higher levels of

103
00:06:26,160 --> 00:06:29,960
Speaker 1: my last life with GS. But that said, I do

104
00:06:30,080 --> 00:06:32,680
Speaker 1: think about it quite a bit. Um you know. I

105
00:06:32,680 --> 00:06:36,480
Speaker 1: think the American banks have buy and large played an

106
00:06:36,560 --> 00:06:44,120
Speaker 1: incredibly uh successful game relative to the big European globally

107
00:06:44,160 --> 00:06:49,040
Speaker 1: ambitious players almost across the board for the past twenty

108
00:06:49,120 --> 00:06:55,280
Speaker 1: years plus. And it's partly because they have dealt better

109
00:06:55,520 --> 00:06:59,919
Speaker 1: at home with their problems quicker. And it's partly because

110
00:07:00,640 --> 00:07:05,960
Speaker 1: they deal with the challenges by and large when they come,

111
00:07:06,040 --> 00:07:08,200
Speaker 1: and my goodness me, as we all know they come

112
00:07:08,240 --> 00:07:11,080
Speaker 1: for the big US banks often they buy a large

113
00:07:11,200 --> 00:07:16,440
Speaker 1: deal with them quicker and more viciously than the Europeans do.

114
00:07:16,920 --> 00:07:19,240
Speaker 1: I think the other the other important point I would say,

115
00:07:19,240 --> 00:07:25,120
Speaker 1: which is relevant to the EUK issue tangentially on one

116
00:07:25,160 --> 00:07:28,880
Speaker 1: of the genuine faults of the EU is that they

117
00:07:28,920 --> 00:07:32,880
Speaker 1: have never embraced what they claimed they would plan to

118
00:07:32,880 --> 00:07:37,920
Speaker 1: do under the Lisbon Agenda and have true cross services reform.

119
00:07:38,040 --> 00:07:40,080
Speaker 1: I was reading in the paper this morning that the

120
00:07:40,440 --> 00:07:44,600
Speaker 1: latest tale of nonsense involving all Italia in some ways

121
00:07:44,640 --> 00:07:48,560
Speaker 1: it's a similar parent in the banking industry. We have

122
00:07:48,680 --> 00:07:52,080
Speaker 1: never yet to this date had a truly pan European

123
00:07:53,800 --> 00:07:58,120
Speaker 1: leading bank because of the restrictive practices within European countries

124
00:07:58,640 --> 00:08:01,120
Speaker 1: and so and so you get that, you can't really

125
00:08:01,120 --> 00:08:03,440
Speaker 1: have them competing with the big U s CAUs. Okay,

126
00:08:03,480 --> 00:08:19,040
Speaker 1: let's do the jumnail fabulous there on EU banking. This

127
00:08:19,080 --> 00:08:21,119
Speaker 1: is when we sur valence on Bloomberg Radio David Garratt

128
00:08:21,160 --> 00:08:23,280
Speaker 1: and Tom Keene in New York, and that Tom, you

129
00:08:23,280 --> 00:08:25,560
Speaker 1: are very excited about our necks against John Norman here

130
00:08:25,560 --> 00:08:29,040
Speaker 1: with us and leven three oh studios. I am John

131
00:08:29,040 --> 00:08:32,240
Speaker 1: Norman is off the London desk of JP Morgan, which

132
00:08:32,240 --> 00:08:36,680
Speaker 1: barely describes the synthesis of derivative and foreign exchange work

133
00:08:36,720 --> 00:08:40,320
Speaker 1: that JP Morgan delivers to Global Wall Street each and

134
00:08:40,480 --> 00:08:42,680
Speaker 1: every day. John, what are you writing about? Now? Let

135
00:08:42,720 --> 00:08:45,480
Speaker 1: me ask an open question to get started. Are you

136
00:08:45,520 --> 00:08:49,079
Speaker 1: focused on flows into Europe and a resilient euro Is

137
00:08:49,120 --> 00:08:53,120
Speaker 1: that the mystery of the selection cacophony we're in right now?

138
00:08:53,240 --> 00:08:55,400
Speaker 1: Or is it just the president and the dollar? Which

139
00:08:55,440 --> 00:08:58,880
Speaker 1: which area has your acute interest? Well, my cute interest

140
00:08:58,960 --> 00:09:01,320
Speaker 1: is more on traum, Trump and omics and what's left

141
00:09:01,320 --> 00:09:03,880
Speaker 1: of that program. We're writing on many things right now

142
00:09:03,920 --> 00:09:05,600
Speaker 1: because it's not the only thing that's in play, but

143
00:09:05,640 --> 00:09:07,840
Speaker 1: I think the Trump issue is the one that's potentially

144
00:09:07,840 --> 00:09:10,360
Speaker 1: most material for the market because expectations have been beaten

145
00:09:10,400 --> 00:09:12,640
Speaker 1: down so much. There's a lot of scope webside Surprise

146
00:09:12,800 --> 00:09:15,840
Speaker 1: it's Greek Wednesday here at surveillance were allowed to go

147
00:09:16,840 --> 00:09:19,400
Speaker 1: that we let do a little bit of omegan correlation

148
00:09:19,520 --> 00:09:22,640
Speaker 1: here and and and the linkages is the two s

149
00:09:22,640 --> 00:09:25,800
Speaker 1: tends spread as a proxy for the yield curve. Is

150
00:09:25,840 --> 00:09:28,719
Speaker 1: that linked in some way into the other dynamics of

151
00:09:28,800 --> 00:09:32,800
Speaker 1: the market, into foreign exchange, into a Swiss and German

152
00:09:32,880 --> 00:09:35,600
Speaker 1: yields which have been a little bit fragile recently. What

153
00:09:35,679 --> 00:09:38,319
Speaker 1: are the correlative impacts right now? Well, if I had

154
00:09:38,360 --> 00:09:41,040
Speaker 1: to know one asset price in the world for the

155
00:09:41,080 --> 00:09:42,800
Speaker 1: next three months or six months, it wouldn't be the

156
00:09:42,800 --> 00:09:44,840
Speaker 1: shape of the Yeol curve. There have been times when

157
00:09:44,840 --> 00:09:47,480
Speaker 1: the shape of the Yolk curve was indicative of reflation

158
00:09:47,520 --> 00:09:51,959
Speaker 1: expectations in the US through through stronger growth and higher inflation.

159
00:09:52,400 --> 00:09:56,360
Speaker 1: But that that relationship between the curve and the economy

160
00:09:56,360 --> 00:09:59,000
Speaker 1: and other financial markets is fairly unstable over time. What

161
00:09:59,040 --> 00:10:01,200
Speaker 1: are you looking at right now? Then if something matters.

162
00:10:01,240 --> 00:10:03,160
Speaker 1: I think if you have to look at one indicator

163
00:10:03,240 --> 00:10:05,439
Speaker 1: right now, it's probably the two year rate in the States,

164
00:10:05,440 --> 00:10:07,319
Speaker 1: because that's going to give you some indication of whether

165
00:10:07,440 --> 00:10:09,640
Speaker 1: a the Fed is following through on the dots regardless

166
00:10:09,679 --> 00:10:13,439
Speaker 1: of what the economy is doing, or whether um the

167
00:10:13,600 --> 00:10:17,400
Speaker 1: broader interest rate structure needs to adjust because Trump is

168
00:10:17,400 --> 00:10:20,280
Speaker 1: going to deliver on on some fiscal ambitions. Let's let's

169
00:10:20,280 --> 00:10:22,080
Speaker 1: take stock of this hundred day mark, even though the

170
00:10:22,080 --> 00:10:25,160
Speaker 1: President prefer we not do that, and look at trumponomics.

171
00:10:25,160 --> 00:10:27,079
Speaker 1: How fleshed out is it at this point? It was

172
00:10:27,120 --> 00:10:29,040
Speaker 1: pretty encoded at the beginning. We have a better sense

173
00:10:29,120 --> 00:10:31,679
Speaker 1: of what it is. And when you look at the market,

174
00:10:31,720 --> 00:10:34,720
Speaker 1: what are the indications of how well trumponomics is playing

175
00:10:34,720 --> 00:10:37,880
Speaker 1: out or not well? We we definitely know what it is.

176
00:10:38,160 --> 00:10:41,560
Speaker 1: What we are learning more about is how difficult almost

177
00:10:41,559 --> 00:10:44,920
Speaker 1: every aspect of trumponomics is to implement. So the main

178
00:10:44,920 --> 00:10:49,840
Speaker 1: components of this have been fiscal stimulus, deregulation, and reordering

179
00:10:49,880 --> 00:10:53,720
Speaker 1: of the international trade environment. The fiscal stimulus we suspected,

180
00:10:53,800 --> 00:10:55,240
Speaker 1: and now I think we have a lot of confirmation

181
00:10:55,520 --> 00:10:59,360
Speaker 1: is extremely difficult to push through a divided Washington, and

182
00:10:59,720 --> 00:11:04,640
Speaker 1: Washing is divided ideologically, even though nominally they're all Republicans.

183
00:11:05,160 --> 00:11:08,200
Speaker 1: The regulatory side, I think is the aspect where you

184
00:11:08,240 --> 00:11:10,520
Speaker 1: can be most hopeful because that can be effected through

185
00:11:10,520 --> 00:11:13,840
Speaker 1: executive order, and the president has been unusually active in

186
00:11:13,920 --> 00:11:16,760
Speaker 1: terms of issuing those since he took office, and and

187
00:11:16,800 --> 00:11:20,040
Speaker 1: all of those have basically instructed government agencies to spend

188
00:11:20,080 --> 00:11:24,080
Speaker 1: the next three months, four months, six months reassessing the

189
00:11:24,160 --> 00:11:27,560
Speaker 1: regulations inherited from President Obama. So there I would be

190
00:11:27,600 --> 00:11:29,760
Speaker 1: fairly hopeful that something can change, but it's a long

191
00:11:29,840 --> 00:11:32,920
Speaker 1: term process. And the trade side we're learning um is

192
00:11:32,960 --> 00:11:34,960
Speaker 1: that you know, there are a lot of constituencies in

193
00:11:34,960 --> 00:11:36,960
Speaker 1: the U. S. Economy and the corporate sector and in

194
00:11:37,000 --> 00:11:40,480
Speaker 1: Washington who just never shared Trump's view of what's wrong

195
00:11:40,520 --> 00:11:43,480
Speaker 1: with that international system. So you're ending up with a

196
00:11:43,520 --> 00:11:45,959
Speaker 1: Trump Atomics, which is much diluted from what we heard

197
00:11:45,960 --> 00:11:48,240
Speaker 1: on the campaign trail. But there's still some things on

198
00:11:48,280 --> 00:11:50,400
Speaker 1: the pipeline, particular on the regulatory side, which I think

199
00:11:50,440 --> 00:11:53,000
Speaker 1: can be material for markets. A core aspect of this

200
00:11:53,080 --> 00:11:55,880
Speaker 1: seems to be a currency policy, certainly something he talked

201
00:11:55,880 --> 00:11:57,760
Speaker 1: about on the campaign trail, but we have had job

202
00:11:57,760 --> 00:12:00,720
Speaker 1: owing from the Treasury Secretary as is his and want

203
00:12:01,240 --> 00:12:03,120
Speaker 1: and the president as well. How much is that up

204
00:12:03,200 --> 00:12:05,720
Speaker 1: ended things hearing from the president before we heard from

205
00:12:05,720 --> 00:12:09,200
Speaker 1: the Treasury Secretary and getting this semiannual effects report in

206
00:12:09,240 --> 00:12:13,040
Speaker 1: your world? How did that ring out? In my world?

207
00:12:13,200 --> 00:12:15,520
Speaker 1: I don't really pay much attention to the idea of

208
00:12:15,520 --> 00:12:17,280
Speaker 1: a U S currency policy because the US has a

209
00:12:17,280 --> 00:12:20,439
Speaker 1: floating exchange rate. So unless you consider a lais a

210
00:12:20,520 --> 00:12:22,880
Speaker 1: fair policy to be a policy, there's not much for

211
00:12:22,920 --> 00:12:24,640
Speaker 1: the US to talk about, and there hasn't been much

212
00:12:24,679 --> 00:12:26,960
Speaker 1: to talk about even when Reuben was the Treasury Secretary

213
00:12:26,960 --> 00:12:30,080
Speaker 1: and the US had a strong dollar policy allegedly no

214
00:12:30,280 --> 00:12:34,080
Speaker 1: continue please, So my it's it's it's a bit of

215
00:12:34,080 --> 00:12:36,800
Speaker 1: a policy fiction. So to hear a focus on it,

216
00:12:36,840 --> 00:12:39,120
Speaker 1: whether it's a focus from the Treasury Secretary or the President,

217
00:12:39,240 --> 00:12:42,960
Speaker 1: is not very meaningful to me, except for intraday volatility,

218
00:12:43,160 --> 00:12:46,360
Speaker 1: because there's there's nothing there's no government practice that enforces

219
00:12:46,400 --> 00:12:48,120
Speaker 1: a level of the exchange rate, so there's nothing to

220
00:12:48,200 --> 00:12:52,120
Speaker 1: really be recast or or jettison in order to move

221
00:12:52,160 --> 00:12:55,800
Speaker 1: the dollar lower. And now we go theoretical. You mentioned

222
00:12:55,920 --> 00:12:58,600
Speaker 1: Mr Ruben Longer going far away. He worked for another

223
00:12:58,679 --> 00:13:01,280
Speaker 1: firm on the street. I can't remember which one it was.

224
00:13:01,440 --> 00:13:05,280
Speaker 1: In Secretary Ruben came up with a phrase that redefined

225
00:13:05,360 --> 00:13:10,240
Speaker 1: modern probability theory, likelihood can guys like you in the

226
00:13:10,280 --> 00:13:15,920
Speaker 1: trenches develop intelligent likelihood? Now, given the lack of low

227
00:13:16,400 --> 00:13:20,880
Speaker 1: the reality of low volatility, if it's this sluggish, this

228
00:13:21,480 --> 00:13:25,600
Speaker 1: Leaden out there, do your probability gu estimates go out

229
00:13:25,640 --> 00:13:27,840
Speaker 1: the window? Well? I think that's actually the dirty secret

230
00:13:27,840 --> 00:13:30,000
Speaker 1: of most Wall Street analysis is that it's not really

231
00:13:30,000 --> 00:13:34,199
Speaker 1: about precision and point estimates. It's about likelihood and risk bias.

232
00:13:34,200 --> 00:13:37,200
Speaker 1: Think so, folks, what you just heard there is the

233
00:13:37,280 --> 00:13:42,040
Speaker 1: gospel of surveillance. Continue. So when you say, is there

234
00:13:42,160 --> 00:13:45,080
Speaker 1: can we be confident around the bias of a market

235
00:13:45,160 --> 00:13:47,320
Speaker 1: or the likelihood of a market? I think you can

236
00:13:47,440 --> 00:13:51,920
Speaker 1: be when markets seem strangely priced, and there are some

237
00:13:51,960 --> 00:13:54,280
Speaker 1: strange pricings in the market. Now, one of them is

238
00:13:54,320 --> 00:13:56,760
Speaker 1: the flatness of the U S money market curve that

239
00:13:56,840 --> 00:14:01,000
Speaker 1: has ripple effects into currencies and commodities. I don't think

240
00:14:01,000 --> 00:14:04,920
Speaker 1: it quite matters for corporate markets. Yet there's another strange

241
00:14:04,920 --> 00:14:07,600
Speaker 1: pricing on the volatility side, where yes, of all should

242
00:14:07,600 --> 00:14:11,600
Speaker 1: be low or falling because the mac environment is quite stable,

243
00:14:11,679 --> 00:14:14,760
Speaker 1: but it probably shouldn't be this low. So you know

244
00:14:14,800 --> 00:14:18,120
Speaker 1: my biases higher yields, hired dollar within the range, and

245
00:14:18,200 --> 00:14:25,000
Speaker 1: higher ball. Okay over there, Okay, yeah, process religious I'm

246
00:14:25,000 --> 00:14:27,640
Speaker 1: putting out on Twitter now the gospel of Bloomberg surveillance

247
00:14:27,680 --> 00:14:30,440
Speaker 1: with John Norman. We continue out John Norman with us.

248
00:14:30,480 --> 00:14:32,680
Speaker 1: This is a treaty's usually based in London. And hey,

249
00:14:32,880 --> 00:14:34,720
Speaker 1: do when you come over do you bring a suitcase

250
00:14:34,720 --> 00:14:37,560
Speaker 1: of sterling for Mr Diamond? You like you have to

251
00:14:37,600 --> 00:14:41,960
Speaker 1: bring foreign exchange over something to meet with the brass.

252
00:14:42,520 --> 00:14:43,960
Speaker 1: I don't think you need that for me. Okay, I

253
00:14:43,960 --> 00:14:46,040
Speaker 1: want to get you in trouble here. Seriously, there's a

254
00:14:46,040 --> 00:14:48,000
Speaker 1: lot of you are a London veteran, and I don't

255
00:14:48,040 --> 00:14:49,600
Speaker 1: want you to get in trouble with Mr Diamond and

256
00:14:49,680 --> 00:14:52,760
Speaker 1: general counsel. How do you frame the idea of moving

257
00:14:52,880 --> 00:14:57,240
Speaker 1: talent to other parts of Europe from London? I understand staff,

258
00:14:57,880 --> 00:15:02,000
Speaker 1: but what about brain power? Like every company has X

259
00:15:02,120 --> 00:15:05,200
Speaker 1: number of John Norman's that are in London, their kids

260
00:15:05,200 --> 00:15:08,640
Speaker 1: are in school there, etcetera, etcetera. Etcetera. Is that going

261
00:15:08,680 --> 00:15:11,160
Speaker 1: to stay in London from where you sit without getting

262
00:15:11,160 --> 00:15:14,240
Speaker 1: you in trouble with JP Morgan staff Well, I think

263
00:15:14,280 --> 00:15:18,320
Speaker 1: that the whole Brexit issue is very functions specific with

264
00:15:18,360 --> 00:15:21,680
Speaker 1: respect to bands, meaning it's not really about all banking

265
00:15:21,680 --> 00:15:24,280
Speaker 1: activities potentially having to be done on shore within the

266
00:15:24,800 --> 00:15:28,320
Speaker 1: your area. It's about specific types of banking that might

267
00:15:28,360 --> 00:15:30,440
Speaker 1: have to be done. And this is why I think,

268
00:15:30,560 --> 00:15:32,320
Speaker 1: you know, most banks have been reasonably clear that will

269
00:15:32,360 --> 00:15:34,960
Speaker 1: be some share of their activities that move, but it's

270
00:15:35,000 --> 00:15:39,240
Speaker 1: probably a minority share of their activities. And in any event,

271
00:15:39,280 --> 00:15:41,760
Speaker 1: I feel like this whole debate has just gotten pushed

272
00:15:41,800 --> 00:15:43,880
Speaker 1: back a couple of years by the by the snap

273
00:15:43,920 --> 00:15:48,000
Speaker 1: election in the UK. Have you quantified if Italy leaves

274
00:15:48,000 --> 00:15:51,560
Speaker 1: the Euro how much the Italian Lyri will appreciate appreciate you,

275
00:15:52,160 --> 00:15:56,640
Speaker 1: if Madam wins, how much the French franc will depreciate?

276
00:15:57,600 --> 00:16:01,000
Speaker 1: Right now the back of a cock, I've done so,

277
00:16:01,040 --> 00:16:03,840
Speaker 1: getting back to your issue of risk bias, what I've

278
00:16:03,880 --> 00:16:07,000
Speaker 1: done the analysis on the franc, and I would say

279
00:16:07,320 --> 00:16:09,840
Speaker 1: the starting point for frank depreciation of France we're not

280
00:16:09,920 --> 00:16:13,880
Speaker 1: in the Euro is down and since Italy is a

281
00:16:13,920 --> 00:16:16,640
Speaker 1: more extreme version of France with respect to every debt metric,

282
00:16:16,880 --> 00:16:20,320
Speaker 1: it would probably be down as a starter. Are you

283
00:16:20,400 --> 00:16:22,600
Speaker 1: surprised at the extent to which just wasn't discussed during

284
00:16:22,640 --> 00:16:24,360
Speaker 1: the campaign leading up to the first round of the

285
00:16:24,360 --> 00:16:27,080
Speaker 1: French election. It didn't seem like economics where the economics

286
00:16:27,120 --> 00:16:31,600
Speaker 1: of a Frexit were front and center. I guess it's

287
00:16:31,600 --> 00:16:34,960
Speaker 1: not surprising that economics often gets short shrift during a

288
00:16:34,960 --> 00:16:38,880
Speaker 1: political campaign. What is interesting is that Lepin is now

289
00:16:38,960 --> 00:16:43,040
Speaker 1: publicly acknowledging that perhaps French savers might be disadvantaged by

290
00:16:43,160 --> 00:16:46,960
Speaker 1: a Frexit. So somehow the mimos I've kind of circulated

291
00:16:47,040 --> 00:16:51,080
Speaker 1: within the campaign community that maybe Frexit is not a

292
00:16:51,560 --> 00:16:53,720
Speaker 1: win when and it's potentially a lose lose and lose

293
00:16:53,720 --> 00:16:56,000
Speaker 1: big time going from Frexit to Brexit once again. I mean,

294
00:16:56,400 --> 00:16:59,680
Speaker 1: is this debase over clearing something that's going to pick

295
00:16:59,760 --> 00:17:02,280
Speaker 1: up as we move forward here? Is that it's that

296
00:17:02,280 --> 00:17:04,200
Speaker 1: going to be a bigger issue for folks in London.

297
00:17:04,640 --> 00:17:07,600
Speaker 1: Calls from France that clearing be moved out of London, Yes,

298
00:17:07,640 --> 00:17:09,840
Speaker 1: because that that is that is a function that's being

299
00:17:10,400 --> 00:17:14,120
Speaker 1: uh seen as um necessary to be performed on shore.

300
00:17:14,960 --> 00:17:18,240
Speaker 1: But that also means that UH banks where the majority

301
00:17:18,280 --> 00:17:20,359
Speaker 1: of employees are not involved in that activity, would be

302
00:17:20,359 --> 00:17:23,720
Speaker 1: staying in London. So it's there's not there's a there's

303
00:17:23,720 --> 00:17:26,920
Speaker 1: a reason why all of this talent is concentrated in

304
00:17:26,960 --> 00:17:28,720
Speaker 1: one place. There's a there's a synergy, and so I

305
00:17:28,760 --> 00:17:31,560
Speaker 1: think banks would only move the demenimous number of people

306
00:17:31,880 --> 00:17:34,760
Speaker 1: required to comply with new regulations. But it just seems

307
00:17:34,800 --> 00:17:37,119
Speaker 1: like that regulatory environment may not take shape for a

308
00:17:37,119 --> 00:17:39,040
Speaker 1: few years and the time we've got left with you

309
00:17:39,400 --> 00:17:43,200
Speaker 1: help me here with Canada. In your voluminous research reports

310
00:17:43,240 --> 00:17:47,359
Speaker 1: you do speak of of Canada. I was thunderstruck it

311
00:17:48,040 --> 00:17:50,920
Speaker 1: the weakness of Canadian dollar over the last couple of months.

312
00:17:50,920 --> 00:17:52,800
Speaker 1: And I guess there's oil, and there's this, that and

313
00:17:52,840 --> 00:17:56,040
Speaker 1: the other thing. Is there an opportunity for a listening

314
00:17:56,280 --> 00:17:59,120
Speaker 1: listeners with Canada with a trade talk going on? When

315
00:17:59,600 --> 00:18:01,960
Speaker 1: I mean, can is it even feasible to be weaker

316
00:18:02,000 --> 00:18:08,000
Speaker 1: from one? It is simply because I feel like the

317
00:18:08,040 --> 00:18:10,480
Speaker 1: big driver over the next six and twelve months is

318
00:18:10,480 --> 00:18:12,760
Speaker 1: going to be fed hiking Bank of Canada doing nothing.

319
00:18:13,160 --> 00:18:15,480
Speaker 1: And since that is not priced into bonds, it's not

320
00:18:15,760 --> 00:18:18,679
Speaker 1: higher rate in the US, big money flows to that thing.

321
00:18:18,800 --> 00:18:20,240
Speaker 1: So I look at the trade issue as a bit

322
00:18:20,240 --> 00:18:21,960
Speaker 1: of a side show, because I don't think the US

323
00:18:22,080 --> 00:18:25,840
Speaker 1: is looking at Canada as a structural problem for the US.

324
00:18:25,960 --> 00:18:31,240
Speaker 1: It's Canada is uh one of the US largest trading

325
00:18:31,280 --> 00:18:33,280
Speaker 1: partners if you add exports and imports, But if you

326
00:18:33,520 --> 00:18:37,080
Speaker 1: met those, Canada is a very minor contributor to the

327
00:18:37,160 --> 00:18:39,200
Speaker 1: US is overall trade. Does the President of the United

328
00:18:39,240 --> 00:18:43,520
Speaker 1: States know what you just said? I think at them

329
00:18:43,560 --> 00:18:45,680
Speaker 1: right now, I think they're likely. I think their presidential

330
00:18:45,800 --> 00:18:49,960
Speaker 1: advis Let me let me ask you, well, we're on

331
00:18:50,000 --> 00:18:52,600
Speaker 1: the subject of the FED. Do you expect the same

332
00:18:52,800 --> 00:18:54,840
Speaker 1: rhetoric about data driven this to prevail when we talk

333
00:18:54,880 --> 00:18:57,160
Speaker 1: about winding down the balance sheet? In other words, are

334
00:18:57,160 --> 00:19:00,199
Speaker 1: you able to apply pure data to that process or

335
00:19:00,240 --> 00:19:02,560
Speaker 1: in this uncharted territories it's something new that requires a

336
00:19:02,600 --> 00:19:05,120
Speaker 1: bit of a bit of gut instinct as well. Well.

337
00:19:05,160 --> 00:19:07,560
Speaker 1: If you if you think of shrinking the balance sheet

338
00:19:07,680 --> 00:19:10,320
Speaker 1: is just another way to tighten monetary policy, then the

339
00:19:10,320 --> 00:19:12,679
Speaker 1: same kind of principles that have led the FED to

340
00:19:12,760 --> 00:19:14,879
Speaker 1: raise short term raised with the same ones that determine

341
00:19:14,880 --> 00:19:16,320
Speaker 1: the pace of which it will let the balance sheet

342
00:19:16,359 --> 00:19:19,080
Speaker 1: roll off. I think what is going to get more interesting,

343
00:19:19,440 --> 00:19:23,520
Speaker 1: um is the inability of anyone to really calibrate how

344
00:19:23,600 --> 00:19:25,960
Speaker 1: changes in the balance sheet affects interest rates, because we've

345
00:19:25,960 --> 00:19:28,160
Speaker 1: never seen that that process of motion before. So that's

346
00:19:28,480 --> 00:19:31,240
Speaker 1: where the uncertainty comes. And there's another element of uncertainty

347
00:19:31,280 --> 00:19:33,359
Speaker 1: that will come next year when the composition of the

348
00:19:33,359 --> 00:19:35,200
Speaker 1: FED is different and we have to see whether or

349
00:19:35,200 --> 00:19:38,600
Speaker 1: not this kind of autopilot runoff strategy that we presume

350
00:19:38,760 --> 00:19:40,400
Speaker 1: yell at and will put in place into this year

351
00:19:40,920 --> 00:19:43,760
Speaker 1: is going to be maintained in getting based on presumption.

352
00:19:43,800 --> 00:19:46,200
Speaker 1: Here reports that Randy Quarrels will be this new regulatory

353
00:19:46,240 --> 00:19:48,280
Speaker 1: head at the FED. Does that tell us anything about

354
00:19:48,320 --> 00:19:51,320
Speaker 1: the personality composition of this new FED or or is

355
00:19:51,359 --> 00:19:53,800
Speaker 1: that really sort of an outlying character on the on

356
00:19:53,840 --> 00:19:55,639
Speaker 1: the on the board of governors. I think it's I

357
00:19:55,680 --> 00:19:58,480
Speaker 1: think it's a bit early to tell. And and importantly,

358
00:19:58,480 --> 00:20:01,880
Speaker 1: there as many as five eats you know, up for grabs,

359
00:20:01,920 --> 00:20:06,719
Speaker 1: so it's it's it's it's really too early to make

360
00:20:06,840 --> 00:20:09,000
Speaker 1: a judgment on this. My bias is to say that

361
00:20:09,480 --> 00:20:13,119
Speaker 1: you will have a more conservative FED. Uh, not necessarily

362
00:20:13,119 --> 00:20:15,840
Speaker 1: because that's what the president wants, but because uh, These

363
00:20:15,880 --> 00:20:18,399
Speaker 1: are appointees that have to be Senate approved, and and

364
00:20:18,480 --> 00:20:22,399
Speaker 1: Senate Republicans probably would prefer more conservative policymakers in generous

365
00:20:22,400 --> 00:20:24,240
Speaker 1: If you just spend your morning with us, John Norman

366
00:20:24,359 --> 00:20:26,639
Speaker 1: is with JP Morgan London joining us in our New

367
00:20:26,720 --> 00:20:37,640
Speaker 1: York studios. This morning brought you by Bank of America

368
00:20:37,720 --> 00:20:41,960
Speaker 1: Mary Lynch, dedicated to bringing our clients insights and solutions

369
00:20:42,240 --> 00:20:45,560
Speaker 1: to meet the challenges of a transforming world. That's the

370
00:20:45,600 --> 00:20:50,720
Speaker 1: power of global connections. Mary Lynch, Pierce Federan Smith Incorporated,

371
00:20:50,880 --> 00:20:59,440
Speaker 1: Member s I p C. There's something new from Bloomberg.

372
00:20:59,520 --> 00:21:02,480
Speaker 1: It's called Lens. Starting right now, you can use the

373
00:21:02,480 --> 00:21:06,680
Speaker 1: Bloomberg Io s app off your iPhone or iPad or

374
00:21:07,040 --> 00:21:10,879
Speaker 1: our new Google Chrome extension to read any news story

375
00:21:11,000 --> 00:21:14,920
Speaker 1: on any website, scan it, and then instantly you see

376
00:21:14,960 --> 00:21:19,080
Speaker 1: the news stories relevant market data from Bloomberg. In addition,

377
00:21:19,400 --> 00:21:22,440
Speaker 1: see all the bios of the key people mentioned in

378
00:21:22,520 --> 00:21:25,720
Speaker 1: the story. It's called Lens, and it is just that,

379
00:21:25,880 --> 00:21:29,000
Speaker 1: a lens into the people and the data of any

380
00:21:29,080 --> 00:21:32,960
Speaker 1: story you may be reading. Again, Lens brings you the

381
00:21:33,000 --> 00:21:36,480
Speaker 1: power of Bloomberg's news and data. Download or io s

382
00:21:36,520 --> 00:21:39,840
Speaker 1: app or search for the Bloomberg Extension at the Chrome

383
00:21:39,960 --> 00:21:43,400
Speaker 1: Store to try lens out. Learn more at Bloomberg dot

384
00:21:43,440 --> 00:21:53,160
Speaker 1: com slash lens bring are bringing the author that we have. Yeah,

385
00:21:53,240 --> 00:21:56,000
Speaker 1: we continue to look at this balance here between geopolitical risk,

386
00:21:56,119 --> 00:21:58,040
Speaker 1: central banking, all of that. Let's let's bring in James

387
00:21:58,080 --> 00:22:00,679
Speaker 1: to Vidas, Admiral James T. Vidas now Dana Fletcher School

388
00:22:00,840 --> 00:22:03,080
Speaker 1: Flaw and Diplomacy joining us on our phone lines and

389
00:22:03,359 --> 00:22:05,520
Speaker 1: eager to talk to adamal Stefrita's about what's going on

390
00:22:06,160 --> 00:22:08,399
Speaker 1: in East Asia, about our policy toward North Koreba. But

391
00:22:08,480 --> 00:22:12,399
Speaker 1: let's begin with Russia US Russia relations. Word yesterday from

392
00:22:12,480 --> 00:22:15,919
Speaker 1: Jason Chafe, it's the soon to be former Committee chairman

393
00:22:16,600 --> 00:22:19,880
Speaker 1: joining us. He said here that that Michael Flynn, former

394
00:22:19,920 --> 00:22:22,400
Speaker 1: National Security Advisor, Michael Flynn may have violated US law

395
00:22:22,400 --> 00:22:26,000
Speaker 1: by failing to disclose his business dealings with Russia and Turkey. Obviously,

396
00:22:26,040 --> 00:22:29,680
Speaker 1: the shadow cast by this continues to encompass the White House,

397
00:22:30,200 --> 00:22:32,679
Speaker 1: UH and many parts of Washington. James surreas, where do

398
00:22:32,720 --> 00:22:35,960
Speaker 1: we go from here with this investigation into Russia interference

399
00:22:36,280 --> 00:22:39,840
Speaker 1: in our election? We've got to follow the facts wherever

400
00:22:39,840 --> 00:22:43,480
Speaker 1: they lead, As the saying goes without fear or favor, David,

401
00:22:43,560 --> 00:22:48,760
Speaker 1: and I am. I'm increasingly concerned that that the diffusion

402
00:22:48,880 --> 00:22:53,919
Speaker 1: pattern of the investigations is increasing and therefore makes it

403
00:22:54,000 --> 00:22:58,200
Speaker 1: less likely they'll converge on a set of outcomes. Right now,

404
00:22:58,400 --> 00:23:01,520
Speaker 1: by my count, or at least four are separate investigations

405
00:23:01,560 --> 00:23:05,760
Speaker 1: in progress. My money is on the FBI. They're pretty relentless.

406
00:23:06,040 --> 00:23:08,879
Speaker 1: Uh as the saying goes, they always get their man,

407
00:23:09,119 --> 00:23:12,040
Speaker 1: and I am hopeful that that will be the one

408
00:23:12,080 --> 00:23:15,280
Speaker 1: to focus on in the months ahead. There are a

409
00:23:15,320 --> 00:23:17,919
Speaker 1: lot of people here expressing some concern about James Comby's

410
00:23:17,920 --> 00:23:19,879
Speaker 1: ability to follow this through in light of what happened

411
00:23:20,080 --> 00:23:22,280
Speaker 1: during the during the campaign. Do you still have confidence

412
00:23:22,280 --> 00:23:25,520
Speaker 1: in his ability to do that? I do. I think

413
00:23:25,600 --> 00:23:28,520
Speaker 1: that despite the fact that you saw the New York

414
00:23:28,520 --> 00:23:31,480
Speaker 1: Times articles that talked about the way in which he

415
00:23:31,760 --> 00:23:35,760
Speaker 1: handled the two different investigations Trump and Clinton differently, and

416
00:23:35,840 --> 00:23:39,720
Speaker 1: that undermine sums confidence in him. If you really read

417
00:23:39,760 --> 00:23:42,159
Speaker 1: that material, and if you know director Comy and his

418
00:23:42,240 --> 00:23:45,480
Speaker 1: history and background, I think he is someone who tries

419
00:23:45,560 --> 00:23:47,360
Speaker 1: to keep the ball in the middle of the fairway,

420
00:23:47,400 --> 00:23:48,920
Speaker 1: and I think you will on this one as well.

421
00:23:49,040 --> 00:23:51,320
Speaker 1: I don't think that we've spoken since the Secretary State

422
00:23:51,359 --> 00:23:54,080
Speaker 1: Rex Tillerson made that trip to Moscow, met with his

423
00:23:54,160 --> 00:23:56,440
Speaker 1: Russian counterparts Sergei Lavrov, and also with the President of

424
00:23:56,480 --> 00:23:59,800
Speaker 1: Russia as well of Vladimir Putin. What did you observe

425
00:24:00,119 --> 00:24:02,280
Speaker 1: that trip? There was the ambiguity about whether or not

426
00:24:02,320 --> 00:24:04,320
Speaker 1: he would get that meeting with the President of Russia,

427
00:24:04,440 --> 00:24:06,800
Speaker 1: something that Secretary of State John Kerry had every time

428
00:24:06,800 --> 00:24:09,120
Speaker 1: that he went to Moscow. He did end up sitting

429
00:24:09,119 --> 00:24:12,000
Speaker 1: down with him for about two hours, I believe was reported.

430
00:24:12,440 --> 00:24:14,800
Speaker 1: What is the what is the Admiral James Travirida's read

431
00:24:14,880 --> 00:24:17,760
Speaker 1: on US Russia relations at this point? Well on a

432
00:24:17,800 --> 00:24:22,359
Speaker 1: scale of zero to ten, where ten would be Tillerson

433
00:24:22,440 --> 00:24:26,240
Speaker 1: came out of the meeting and holding hands with Lavrov

434
00:24:26,320 --> 00:24:29,560
Speaker 1: and Putin's arm around him, and we all decided we

435
00:24:29,560 --> 00:24:32,040
Speaker 1: were going to bury the hatchet right in the back

436
00:24:32,359 --> 00:24:34,680
Speaker 1: of Assad, which is what we should be doing. That

437
00:24:34,680 --> 00:24:36,680
Speaker 1: would be a ten, that would have been a great outcome,

438
00:24:37,119 --> 00:24:39,680
Speaker 1: or a zero, which would be the KGB bust the

439
00:24:39,720 --> 00:24:43,119
Speaker 1: meeting and drags Tillerson away for interrogation. I'd call this

440
00:24:43,200 --> 00:24:46,760
Speaker 1: about a three. It was it was chilly, it was

441
00:24:47,440 --> 00:24:51,399
Speaker 1: uh not good atmospheric the hey, you wait to see

442
00:24:51,400 --> 00:24:54,520
Speaker 1: the president and then a two hour harangue, as it's

443
00:24:54,520 --> 00:24:57,560
Speaker 1: been described to me by those who were aware of it.

444
00:24:57,640 --> 00:24:59,159
Speaker 1: I don't think it was a good meeting, and I

445
00:24:59,200 --> 00:25:01,919
Speaker 1: don't think it advanced stuff. I pity the young ensign

446
00:25:02,000 --> 00:25:03,919
Speaker 1: that had to go up to the flight deck or

447
00:25:03,920 --> 00:25:06,280
Speaker 1: whatever it's called at the top of the ship to

448
00:25:06,400 --> 00:25:09,840
Speaker 1: talk to the captain to Mr Stevens to get dressed

449
00:25:09,880 --> 00:25:13,760
Speaker 1: down because something wasn't proper. Three fourths below in the

450
00:25:13,800 --> 00:25:17,600
Speaker 1: engine room must have been Yeah, we had a few

451
00:25:17,640 --> 00:25:22,520
Speaker 1: conversations like that. Your book is phenomenal. It's only April,

452
00:25:22,560 --> 00:25:25,680
Speaker 1: but it's certainly on my shortlist for book of the year. Uh.

453
00:25:25,880 --> 00:25:30,880
Speaker 1: Mr Larrabie Eric Larrabie writing on FDR Commander in Chief

454
00:25:31,480 --> 00:25:36,000
Speaker 1: FDR his lieutenants in their war. Does Mr Trump have

455
00:25:36,160 --> 00:25:40,439
Speaker 1: any lieutenants? Is he a commander in chief? Or is

456
00:25:40,480 --> 00:25:43,800
Speaker 1: this dysfunctions so great that there's no hope of a

457
00:25:43,880 --> 00:25:48,840
Speaker 1: martial a king or in eMates. I think we're not

458
00:25:48,960 --> 00:25:51,560
Speaker 1: going to see a marshal, a king, or in nimics,

459
00:25:51,640 --> 00:25:55,960
Speaker 1: but I am hopeful that with the departure of Flynn,

460
00:25:56,040 --> 00:26:00,800
Speaker 1: with the demusion of the role of Steve Bannon. We're seeing, uh,

461
00:26:00,960 --> 00:26:03,760
Speaker 1: perhaps a team of rivals to go to Doris Kern's

462
00:26:03,760 --> 00:26:07,360
Speaker 1: good ones, but starting to pull together. I think it's

463
00:26:07,440 --> 00:26:10,560
Speaker 1: unlikely we'll see that kind of focus that FDR had

464
00:26:10,680 --> 00:26:13,600
Speaker 1: and and Tom. Of course, we we need to account

465
00:26:13,600 --> 00:26:16,280
Speaker 1: for the fact that FDR had the crystallizing effect of

466
00:26:16,280 --> 00:26:20,440
Speaker 1: a global world, of course, but in today's world, with

467
00:26:20,480 --> 00:26:23,359
Speaker 1: so many different elements at play, I think the best

468
00:26:23,400 --> 00:26:26,680
Speaker 1: we can hope for is a team of rivals type outcome,

469
00:26:26,720 --> 00:26:29,240
Speaker 1: and I feel it's trending in that direction. To be fair,

470
00:26:29,440 --> 00:26:31,359
Speaker 1: I want to get your read on the power that

471
00:26:31,440 --> 00:26:34,000
Speaker 1: this cabinet has, particularly in the national security arena. There

472
00:26:34,040 --> 00:26:36,440
Speaker 1: was a there was a lot of complaining about how

473
00:26:36,480 --> 00:26:39,600
Speaker 1: centralized power was military power with security power was in

474
00:26:39,640 --> 00:26:43,280
Speaker 1: the Obama White House? Has that changed somewhat? So does

475
00:26:43,320 --> 00:26:45,160
Speaker 1: the Does the cabinet in the White House have more

476
00:26:45,160 --> 00:26:47,760
Speaker 1: autonomy than in the Obama White House? Do you do

477
00:26:47,760 --> 00:26:49,879
Speaker 1: you see the military playing a bigger role, perhaps than

478
00:26:49,920 --> 00:26:53,760
Speaker 1: it did under a President Obama enormous change. As a

479
00:26:53,840 --> 00:26:58,800
Speaker 1: combatant commander myself for seven years both at NATO and

480
00:26:58,840 --> 00:27:01,159
Speaker 1: then before that at US Southern Command in charge of

481
00:27:01,200 --> 00:27:04,119
Speaker 1: everything south of the United States. UM, I felt the

482
00:27:04,160 --> 00:27:07,280
Speaker 1: long arm of the White House frequently grabbed my shoulder

483
00:27:07,359 --> 00:27:10,159
Speaker 1: and direct me, and I'd often go back to Secretary

484
00:27:10,200 --> 00:27:12,560
Speaker 1: Gates and say, hey, I can't do my job. The

485
00:27:12,600 --> 00:27:16,679
Speaker 1: White House staff is pushing on me from everything I

486
00:27:16,720 --> 00:27:19,399
Speaker 1: can see. And I've spoken with the General Maddis, General

487
00:27:19,480 --> 00:27:23,600
Speaker 1: Kelly uh that has stopped. UM. This is really a

488
00:27:23,760 --> 00:27:28,640
Speaker 1: decentralized command and control structure, and that poses other additional challenges.

489
00:27:28,640 --> 00:27:30,280
Speaker 1: But I think it's a far better way to run

490
00:27:30,320 --> 00:27:35,640
Speaker 1: a complex global world than the previous. Hey, let's run

491
00:27:35,680 --> 00:27:38,560
Speaker 1: it from d C and put the telescoping arm out

492
00:27:38,600 --> 00:27:41,840
Speaker 1: on you. So I think it particularly Secretary Maddis. General

493
00:27:41,840 --> 00:27:44,840
Speaker 1: Mattis has a great deal of autonomy, and he'll use

494
00:27:44,840 --> 00:27:47,800
Speaker 1: it cautiously and judiciously. But well, let me let me

495
00:27:47,800 --> 00:27:49,760
Speaker 1: turn our attention to North Korea. In the time that

496
00:27:49,800 --> 00:27:52,440
Speaker 1: we have left our colleague here. Nick Waddas, who covers

497
00:27:52,480 --> 00:27:54,280
Speaker 1: foreign policy for We Hear A Bloomberg News, did a

498
00:27:54,320 --> 00:27:56,639
Speaker 1: great piece looking at what the US might do in

499
00:27:56,720 --> 00:27:58,520
Speaker 1: terms of strikes, what it might be able to do,

500
00:27:58,600 --> 00:28:01,240
Speaker 1: and what the reaction to that might be. I imagine

501
00:28:01,280 --> 00:28:03,040
Speaker 1: this is something that you've seen gamed out. This is

502
00:28:03,080 --> 00:28:05,800
Speaker 1: something that Phillys Military has had to have thought of before.

503
00:28:06,880 --> 00:28:09,040
Speaker 1: Are are we there yet? Have we Have we exhausted

504
00:28:09,040 --> 00:28:10,840
Speaker 1: most of our options when it comes to sanctions, when

505
00:28:10,840 --> 00:28:15,000
Speaker 1: it comes to diplomacy, No, we've not. I think that

506
00:28:15,240 --> 00:28:20,880
Speaker 1: we're actually just beginning to see uh new Chinese sanctions bite. Um,

507
00:28:20,920 --> 00:28:24,760
Speaker 1: we're seeing China willing to play with the new president

508
00:28:24,800 --> 00:28:27,600
Speaker 1: on this one. And I think that we still have

509
00:28:27,680 --> 00:28:30,160
Speaker 1: a way to go on sanctions. Now we are seeing

510
00:28:30,200 --> 00:28:32,720
Speaker 1: a lot of saber rattling and I'll i'll say very

511
00:28:32,760 --> 00:28:37,120
Speaker 1: salient the arrival of USS Michigan and eight thousand ton

512
00:28:37,880 --> 00:28:43,080
Speaker 1: submarine with fifty plus Tomahawk missiles. Um, we're still rattling

513
00:28:43,080 --> 00:28:47,000
Speaker 1: those sabers pretty hard. But I think sanctions and diplomacy

514
00:28:47,120 --> 00:28:48,800
Speaker 1: still have a way to go. And if I felt

515
00:28:48,840 --> 00:28:53,240
Speaker 1: in Washington Post has North Korea conducting life fire artillery drills?

516
00:28:53,320 --> 00:28:55,600
Speaker 1: Help me here with a question. Every American of a

517
00:28:55,640 --> 00:28:58,000
Speaker 1: certain vintage, as in the back of the mind, we're

518
00:28:58,000 --> 00:29:00,120
Speaker 1: gonna go show the flag over there in Japan is

519
00:29:00,160 --> 00:29:03,440
Speaker 1: going to show the flag, etcetera. And all anybody can remember,

520
00:29:03,440 --> 00:29:06,800
Speaker 1: Admiral Stevinus is that afternoon when we learned that an

521
00:29:06,800 --> 00:29:10,560
Speaker 1: Exocet missile shot from a million miles away he could

522
00:29:10,680 --> 00:29:14,720
Speaker 1: hit a British UH destroyer or whatever off the Falkland Islands.

523
00:29:15,080 --> 00:29:21,200
Speaker 1: Can they reach us doing our exercises? They can. However,

524
00:29:21,320 --> 00:29:25,600
Speaker 1: we have much much better air defense systems. Tom are

525
00:29:25,760 --> 00:29:30,560
Speaker 1: aegis UH anti ship missile defense system is very very

526
00:29:30,600 --> 00:29:35,320
Speaker 1: capable of defending our carriers, are destroyers, are cruisers. Um

527
00:29:35,440 --> 00:29:39,600
Speaker 1: also recalled that we will take out those systems before

528
00:29:39,680 --> 00:29:41,680
Speaker 1: they're launching at us. So and how do you do that?

529
00:29:41,720 --> 00:29:44,640
Speaker 1: How do you do that? Yeah? We we can, you

530
00:29:44,720 --> 00:29:47,719
Speaker 1: say so without you know, I can. I can a

531
00:29:47,720 --> 00:29:52,520
Speaker 1: combination of cyber, a combination of our special forces and

532
00:29:52,720 --> 00:29:56,120
Speaker 1: our ability to use intelligence and early warning so that

533
00:29:56,200 --> 00:29:58,560
Speaker 1: we can can we can strike before they strike us.

534
00:29:58,560 --> 00:30:00,680
Speaker 1: In other words, Tom, we want to shoot the archer,

535
00:30:01,080 --> 00:30:03,280
Speaker 1: not deal with the arrow that's coming in, and we

536
00:30:03,320 --> 00:30:06,040
Speaker 1: will do that if necessary. Thank you, very valuable. Admiral

537
00:30:06,080 --> 00:30:08,440
Speaker 1: Stevida's the course of the Fletcher School with his service

538
00:30:08,760 --> 00:30:11,240
Speaker 1: within the U. S. Navy, and I really can't say

539
00:30:11,320 --> 00:30:13,400
Speaker 1: enough about his new book. I've been talking about the

540
00:30:13,480 --> 00:30:16,160
Speaker 1: Leaders book. What it basically is is the album with

541
00:30:16,200 --> 00:30:19,480
Speaker 1: all his Connections went to fifty people with brass on

542
00:30:19,480 --> 00:30:22,440
Speaker 1: their shoulders, they got eagles on their shoulders, John Tucker

543
00:30:22,480 --> 00:30:24,760
Speaker 1: and stuff like that, and he said, what's the book

544
00:30:24,800 --> 00:30:27,480
Speaker 1: that matters for you? When it's an eclectic book? David

545
00:30:27,520 --> 00:30:32,640
Speaker 1: Gurrett includes Mark Twain's Connective Connectic Yankees in the Surveillance

546
00:30:32,680 --> 00:30:37,760
Speaker 1: Courting whatever it was. It's really really interesting eclectic set

547
00:30:37,760 --> 00:30:41,880
Speaker 1: of books, including Michael Schar's Killer Angels about Gettysburg among others.

548
00:30:42,200 --> 00:30:45,280
Speaker 1: Very strong, very strong, and a nice reading. And you've

549
00:30:45,280 --> 00:30:48,200
Speaker 1: been reading books from it. I mean, I've taken this

550
00:30:48,280 --> 00:31:04,160
Speaker 1: Stravidas kool Aid full disclosure right now. Jeffrey Curry joining us.

551
00:31:04,200 --> 00:31:07,680
Speaker 1: He's with Golden Sex or Global head of Commodities at Research. Jeffrey,

552
00:31:07,760 --> 00:31:09,840
Speaker 1: let me start right in and gold Martillion with you

553
00:31:10,240 --> 00:31:13,880
Speaker 1: on supply and demand elasticities. Is the latest drop in oil?

554
00:31:14,320 --> 00:31:18,000
Speaker 1: Is it about supplied dynamics or is it about demand dynamics?

555
00:31:18,400 --> 00:31:21,040
Speaker 1: I would say the same drivers that pushed us down

556
00:31:21,080 --> 00:31:24,320
Speaker 1: in March, which were mainly technical, Um, we would argue

557
00:31:24,600 --> 00:31:27,320
Speaker 1: the back end drove that down draft in in March,

558
00:31:27,360 --> 00:31:29,360
Speaker 1: and the back end is driving it again, which I

559
00:31:29,400 --> 00:31:31,280
Speaker 1: think really goes to a broader point that it was

560
00:31:31,320 --> 00:31:35,560
Speaker 1: probably strategic hedging programs as opposed to anybody trading fundamentals,

561
00:31:35,560 --> 00:31:39,200
Speaker 1: because I would argue that people who trade fundamentals are

562
00:31:39,200 --> 00:31:41,600
Speaker 1: wearing thin. They still have their positions there, but their

563
00:31:41,640 --> 00:31:45,200
Speaker 1: patients wearing thin. Um. We did not see big exodus

564
00:31:45,240 --> 00:31:47,320
Speaker 1: of the length out of the market, which I think

565
00:31:47,400 --> 00:31:50,080
Speaker 1: is an indication that this was really more of black

566
00:31:50,120 --> 00:31:52,560
Speaker 1: box trading and the driver of it was selling on

567
00:31:52,600 --> 00:31:57,520
Speaker 1: the back. What's the visible OPEC Russia US dynamic? Now

568
00:31:57,600 --> 00:32:01,160
Speaker 1: forget about the black box, what is the dynamics of

569
00:32:01,200 --> 00:32:04,400
Speaker 1: supply and demand? You will watch as we stay at

570
00:32:04,480 --> 00:32:07,080
Speaker 1: fifty and as we go forward into the summer. Well,

571
00:32:07,440 --> 00:32:10,120
Speaker 1: if you look at the fundamental scorecard, it is still

572
00:32:10,120 --> 00:32:13,560
Speaker 1: supportive of higher prices in inventory draws. But the fact

573
00:32:13,600 --> 00:32:15,600
Speaker 1: of the matter is you have not seen the inventory

574
00:32:15,680 --> 00:32:17,560
Speaker 1: draws in the u S data, which we believe will

575
00:32:17,600 --> 00:32:19,560
Speaker 1: be the last place you see. It is why the

576
00:32:19,600 --> 00:32:21,880
Speaker 1: patients is beginning to wear it wear thin. Now, in

577
00:32:21,960 --> 00:32:24,760
Speaker 1: terms of the fundamental three things we're watching one global

578
00:32:24,760 --> 00:32:27,160
Speaker 1: demand and this really is a global demand story as

579
00:32:27,200 --> 00:32:29,320
Speaker 1: we go into the second half of the business cycle.

580
00:32:29,720 --> 00:32:33,280
Speaker 1: The survey data that came out in first quarter was gangbusters.

581
00:32:33,560 --> 00:32:37,240
Speaker 1: The markets need to see it transition into strong hard

582
00:32:37,320 --> 00:32:41,000
Speaker 1: data and commodity demand. UM. China's demand dated that came

583
00:32:41,000 --> 00:32:44,400
Speaker 1: out last week for the macro very strong. So that's first.

584
00:32:44,400 --> 00:32:47,840
Speaker 1: Second we're watching is low cost producers cutting production OPEC

585
00:32:47,880 --> 00:32:51,400
Speaker 1: in Russia again on the scorecard. That looks relatively positive

586
00:32:51,600 --> 00:32:54,120
Speaker 1: that they have actually implemented the cuts and more than

587
00:32:54,160 --> 00:32:57,040
Speaker 1: what they had we had anticipated. Then the third issue

588
00:32:57,280 --> 00:33:00,160
Speaker 1: is the shale response. UM. At this point, yeah, US

589
00:33:00,160 --> 00:33:02,080
Speaker 1: we believe there's gonna be a big shale response at

590
00:33:02,080 --> 00:33:03,840
Speaker 1: the end of this year. We have a takeout of

591
00:33:03,920 --> 00:33:06,640
Speaker 1: eight fifty thousand barrels per day, but we're not there yet.

592
00:33:06,680 --> 00:33:09,880
Speaker 1: The inventory draws are a second quarter phenomena. We're still

593
00:33:09,920 --> 00:33:12,680
Speaker 1: confident they're gonna happen. Look at these headlines crossing about

594
00:33:12,800 --> 00:33:14,840
Speaker 1: Steve Manusian speaking an event I think convened by the

595
00:33:14,880 --> 00:33:17,200
Speaker 1: Hill in Washington, d C. Talking about this tax proposal

596
00:33:17,200 --> 00:33:19,440
Speaker 1: that's going to be unveiled today at the White House.

597
00:33:19,440 --> 00:33:21,640
Speaker 1: How much does that affect your world? How much does

598
00:33:21,640 --> 00:33:23,320
Speaker 1: that affect the commodities? Were what we get from the

599
00:33:23,320 --> 00:33:26,040
Speaker 1: White House, what happens with tax reform. I would argue

600
00:33:26,080 --> 00:33:29,120
Speaker 1: that that the big issue is the potential for a

601
00:33:29,200 --> 00:33:32,840
Speaker 1: border adjustment tax on commodities UM for US. We're watching

602
00:33:33,240 --> 00:33:36,000
Speaker 1: three things. First is, I think it's important to remember

603
00:33:36,000 --> 00:33:38,480
Speaker 1: tax cuts are a lot easier than tax reform. In fact,

604
00:33:38,560 --> 00:33:40,280
Speaker 1: in the messages that he just came out and said,

605
00:33:40,440 --> 00:33:44,800
Speaker 1: the focus was on that corporate tax rate UM. The

606
00:33:44,840 --> 00:33:47,400
Speaker 1: one issue about the administration has they've been very clear

607
00:33:47,480 --> 00:33:50,560
Speaker 1: that they're they're not supportive of a strong dollar, which

608
00:33:50,600 --> 00:33:54,080
Speaker 1: means there's probability they back away from that border adjustment tax,

609
00:33:54,320 --> 00:33:57,240
Speaker 1: which then really takes the impact on commodities down a

610
00:33:57,320 --> 00:33:59,680
Speaker 1: notch because that was the potential for to create a

611
00:33:59,680 --> 00:34:03,160
Speaker 1: big rise in w T I and gasoline prices in

612
00:34:03,200 --> 00:34:06,240
Speaker 1: the US. The second issue is that we're still short

613
00:34:06,280 --> 00:34:08,719
Speaker 1: on short on details, which means that this thing could

614
00:34:08,719 --> 00:34:10,480
Speaker 1: get pushed out quite a bit. But the third and

615
00:34:10,520 --> 00:34:13,759
Speaker 1: most important point is the market doesn't have a lot

616
00:34:13,760 --> 00:34:16,160
Speaker 1: of confidence of anything real positive coming out of this.

617
00:34:16,280 --> 00:34:18,279
Speaker 1: So if you do see some positive event, you can

618
00:34:18,320 --> 00:34:20,439
Speaker 1: put a lot of downward pressure on markets such as gold.

619
00:34:20,560 --> 00:34:22,319
Speaker 1: Ask you a question about gold. We see gold here

620
00:34:22,320 --> 00:34:24,680
Speaker 1: at the twelve six right now, and we've seen it

621
00:34:24,719 --> 00:34:27,120
Speaker 1: go down since the French election. How much of movement

622
00:34:27,160 --> 00:34:30,080
Speaker 1: in gold right now is attributable to political risk of

623
00:34:30,160 --> 00:34:34,359
Speaker 1: rucus et f flows um. I would say political risk

624
00:34:34,440 --> 00:34:37,080
Speaker 1: needs to be divided into political risks such as the

625
00:34:37,840 --> 00:34:41,239
Speaker 1: lack of confidence in the administration pushing through anything real positive,

626
00:34:41,480 --> 00:34:45,040
Speaker 1: and then geopolitical risks such as North North Korea or Syria.

627
00:34:45,440 --> 00:34:47,960
Speaker 1: Obviously the North Korean Syria. There's something embedded in there,

628
00:34:48,000 --> 00:34:49,960
Speaker 1: but it's not a lot. I like to point out

629
00:34:50,000 --> 00:34:52,560
Speaker 1: everybody's calling me about gold gold. Did you point out

630
00:34:52,560 --> 00:34:55,680
Speaker 1: twelve sixty five? That's not that interesting? Gold Vall at nine,

631
00:34:56,160 --> 00:34:58,000
Speaker 1: which tells you the rest of the markets are even

632
00:34:58,000 --> 00:35:00,200
Speaker 1: more boring than what's going on in gold. In the

633
00:35:00,280 --> 00:35:03,480
Speaker 1: boring is the money question, which is where are we

634
00:35:03,600 --> 00:35:06,560
Speaker 1: in some supercycle? Which is a phrase I don't particularly like.

635
00:35:07,160 --> 00:35:09,600
Speaker 1: But the fact is we did have a commodity boom

636
00:35:10,239 --> 00:35:12,000
Speaker 1: that you were part of. We're gonna we don't blame

637
00:35:12,040 --> 00:35:14,040
Speaker 1: it on Jeff Curry, but we started to blame the

638
00:35:14,120 --> 00:35:17,040
Speaker 1: end of it on Jeff Curry. Whether the whether the

639
00:35:17,040 --> 00:35:20,360
Speaker 1: next commodity boom or is it just a lassitude or

640
00:35:20,400 --> 00:35:23,560
Speaker 1: even the historic commodity to deflation that we knew in

641
00:35:23,560 --> 00:35:28,320
Speaker 1: our youth. When we look at long term oil prices.

642
00:35:28,440 --> 00:35:31,920
Speaker 1: They they were stable at summer around fifty to sixty

643
00:35:31,960 --> 00:35:34,440
Speaker 1: dollars a barrel throughout that down draft, even when the

644
00:35:34,440 --> 00:35:37,760
Speaker 1: front end went to which really underscores that the market

645
00:35:37,840 --> 00:35:41,280
Speaker 1: is finding a new point a mean reversion somewhere around

646
00:35:41,480 --> 00:35:44,560
Speaker 1: let's say fifty to fifty five dollars a barrel on oil.

647
00:35:45,040 --> 00:35:48,160
Speaker 1: That normalization is an indication that the market now has

648
00:35:48,200 --> 00:35:52,440
Speaker 1: confidence that shale is the dominant resource based the dominant technology.

649
00:35:52,480 --> 00:35:54,960
Speaker 1: So all we're arguing right now is the cost of

650
00:35:55,000 --> 00:35:58,239
Speaker 1: extracting shale. It can go below, it can go above.

651
00:35:58,680 --> 00:36:01,520
Speaker 1: We've we've seen an off of the earnings reports out

652
00:36:01,520 --> 00:36:03,000
Speaker 1: of the companies to put it in the number of

653
00:36:03,000 --> 00:36:06,279
Speaker 1: somewhere in that a barrel. But the risk are that

654
00:36:06,280 --> 00:36:09,239
Speaker 1: that's beginning to drift down. And you know, if you

655
00:36:09,440 --> 00:36:12,440
Speaker 1: use the nineties as an example, because you think about supercycles,

656
00:36:12,440 --> 00:36:15,360
Speaker 1: we've had three. One was in the nineteen fifties, the

657
00:36:15,360 --> 00:36:17,160
Speaker 1: other one was the seventies, and the other one wasn't

658
00:36:17,280 --> 00:36:19,759
Speaker 1: two thousand's. Yes, you could argue there are about new

659
00:36:19,800 --> 00:36:22,239
Speaker 1: demand growth Western Europe and the first one Japan and

660
00:36:22,239 --> 00:36:25,960
Speaker 1: then China, but the real supercycle driver was technology. It

661
00:36:26,000 --> 00:36:28,759
Speaker 1: was offshore in the fifties, deep water in the seventies,

662
00:36:28,920 --> 00:36:31,400
Speaker 1: shale in two thousand. Those periods in between, once you

663
00:36:31,440 --> 00:36:34,720
Speaker 1: knew the technology were characterized by stable long term prices

664
00:36:34,760 --> 00:36:37,879
Speaker 1: for commodities. That's the type of environment. Does that technology

665
00:36:37,960 --> 00:36:41,120
Speaker 1: continue with an inertial force that keeps us at fifty

666
00:36:41,120 --> 00:36:43,160
Speaker 1: a barrel? Or is the real thing we should be

667
00:36:43,200 --> 00:36:46,560
Speaker 1: talking about quickly, your Jeff, is a new technology coming

668
00:36:46,600 --> 00:36:50,399
Speaker 1: on again? If we use the eighties and nineties as

669
00:36:50,520 --> 00:36:52,960
Speaker 1: an example of this, we were confident that the long

670
00:36:53,080 --> 00:36:55,080
Speaker 1: term oil price was twenty dollars a barrel with him,

671
00:36:55,200 --> 00:36:57,399
Speaker 1: but it didn't stop the market from going as low

672
00:36:57,440 --> 00:36:59,360
Speaker 1: as ten on the bottom and as high as forty

673
00:36:59,360 --> 00:37:01,880
Speaker 1: on the top, but the back end remain anchored somewhere

674
00:37:01,880 --> 00:37:04,239
Speaker 1: around twenty. So in terms of thinking about you know

675
00:37:04,280 --> 00:37:07,160
Speaker 1: your technology, They're gonna get better at shale, but it's

676
00:37:07,160 --> 00:37:09,759
Speaker 1: gonna be offset by inflationary pressures, which is why you

677
00:37:09,760 --> 00:37:12,239
Speaker 1: stayed at twenty dollars a barrel over that time period. Okay,

678
00:37:12,320 --> 00:37:14,160
Speaker 1: John Tucker, do you have any more questions on like

679
00:37:14,200 --> 00:37:17,080
Speaker 1: you're driving in your home reach to how much am

680
00:37:17,080 --> 00:37:21,680
Speaker 1: I gonna pay for gas? Let's get down, Yeah, our

681
00:37:21,760 --> 00:37:25,439
Speaker 1: our near term target for two Q is fifty seven

682
00:37:25,560 --> 00:37:28,200
Speaker 1: fifty on t I, fifty nine on Brent, which really

683
00:37:28,239 --> 00:37:30,280
Speaker 1: means we're gonna go into a trading range of somewhere

684
00:37:30,320 --> 00:37:33,040
Speaker 1: between fifty five and sixty. We've been in this let's

685
00:37:33,040 --> 00:37:36,560
Speaker 1: call it fifty dropping down in the seven, but it's

686
00:37:36,680 --> 00:37:40,040
Speaker 1: basically movement, Jeff. We didn't care about the price of oil.

687
00:37:40,120 --> 00:37:43,160
Speaker 1: We wanted to know about the tolls in New Jersey. Y,

688
00:37:43,239 --> 00:37:46,359
Speaker 1: thank you so much. Thanks with Golden Sex, greatly appreciate it.

689
00:37:46,360 --> 00:38:02,479
Speaker 1: This morning, the Michael Mayo with this, who has put

690
00:38:02,480 --> 00:38:04,720
Speaker 1: a shingle out at a number of Wall Street firms

691
00:38:05,120 --> 00:38:07,120
Speaker 1: right now, shingles out at home where they say stopped

692
00:38:07,120 --> 00:38:10,239
Speaker 1: working so hard. Michael Mayo on the banks. I want

693
00:38:10,239 --> 00:38:12,120
Speaker 1: to go to City Group and what I think is

694
00:38:12,200 --> 00:38:17,000
Speaker 1: the most interesting chairman CEO dialectic Maybe that's the right word,

695
00:38:17,080 --> 00:38:20,480
Speaker 1: dynamic in banking. We've got a guy with a degree

696
00:38:20,480 --> 00:38:25,440
Speaker 1: in Eastern civilization, Michael O'Neill, dealing with a really really

697
00:38:25,480 --> 00:38:29,440
Speaker 1: good football player from Harvard and Mr Corbett is it

698
00:38:29,520 --> 00:38:33,319
Speaker 1: oil and water? Do they get along? And when are

699
00:38:33,320 --> 00:38:35,799
Speaker 1: the two of them going to get together to make

700
00:38:35,840 --> 00:38:39,560
Speaker 1: this ten for one reverse split dog move. You sound

701
00:38:39,640 --> 00:38:41,319
Speaker 1: like some of the investors at the City Group and

702
00:38:41,360 --> 00:38:43,480
Speaker 1: your meetings. Thank you. I don't own shares full of

703
00:38:43,520 --> 00:38:46,480
Speaker 1: closure closure. Look, the reason I go to annual meetings,

704
00:38:46,480 --> 00:38:48,440
Speaker 1: the reason I went to the City Group annual meeting

705
00:38:48,640 --> 00:38:52,719
Speaker 1: as a Wall Street analyst who ADVISEDES institutional investors is

706
00:38:52,760 --> 00:38:56,360
Speaker 1: it's the only chance, the once a year chance to

707
00:38:56,480 --> 00:38:59,960
Speaker 1: ask questions of Michael O'Neill, the chairman, and other directors

708
00:39:00,400 --> 00:39:03,040
Speaker 1: and have them be held publicly accountable. It's also the

709
00:39:03,080 --> 00:39:06,120
Speaker 1: only chance I can see both Mike's at City Group,

710
00:39:06,200 --> 00:39:10,320
Speaker 1: the chairman and the CEO interact and it's they definitely

711
00:39:10,400 --> 00:39:13,840
Speaker 1: interact well. Um, you know, job of the chairman is

712
00:39:13,880 --> 00:39:16,319
Speaker 1: to oversee management. But I don't want them to get

713
00:39:16,320 --> 00:39:18,759
Speaker 1: along too well. And that's another reason I went to

714
00:39:18,760 --> 00:39:21,960
Speaker 1: the meeting yesterday. They've City Group has certainly made progress.

715
00:39:22,120 --> 00:39:26,160
Speaker 1: You know that the downsizing they've done um with the

716
00:39:26,200 --> 00:39:29,080
Speaker 1: City holdings that was the bad assets. That's equal to

717
00:39:29,200 --> 00:39:33,640
Speaker 1: divesting the fifth and sixth largest US banks combined. They've

718
00:39:33,640 --> 00:39:36,400
Speaker 1: come a long way. They've improved the balance sheet to

719
00:39:36,400 --> 00:39:39,240
Speaker 1: one of the strongest levels that it's ever been. Having

720
00:39:39,239 --> 00:39:43,400
Speaker 1: said that, the returns are still subpart. I want to

721
00:39:43,400 --> 00:39:47,040
Speaker 1: make clear, David, surveillance correction. I said Eastern civilization. Michael

722
00:39:47,040 --> 00:39:50,880
Speaker 1: O'Neil's degrees in European civilization. But David, what's important here

723
00:39:50,960 --> 00:39:54,160
Speaker 1: is Mr O'Neill as senior, as he is enjoyed working

724
00:39:54,200 --> 00:39:57,960
Speaker 1: at Continental Illinois, he knows what a bad workout looks like,

725
00:39:58,560 --> 00:40:01,600
Speaker 1: what happens Mike Mayo after he leaves. Is this a

726
00:40:01,680 --> 00:40:04,399
Speaker 1: sort of bifurcated system of governance that could change yet again?

727
00:40:04,440 --> 00:40:06,600
Speaker 1: Could we see these roles combined going forward? Well, that

728
00:40:06,680 --> 00:40:09,080
Speaker 1: was one of my questions yesterday. And the chairman of

729
00:40:09,120 --> 00:40:11,319
Speaker 1: City Group yesterday said he has two years left and

730
00:40:11,360 --> 00:40:14,400
Speaker 1: he's leaving UM. And he also said once he leaves

731
00:40:14,400 --> 00:40:17,240
Speaker 1: City Group, all options are on the table. So City

732
00:40:17,280 --> 00:40:19,680
Speaker 1: Group right now is a separate chairman and CEO. He

733
00:40:19,800 --> 00:40:23,480
Speaker 1: said it's possible. He didn't say probable, but possible they

734
00:40:23,520 --> 00:40:26,320
Speaker 1: have one person take both roles. And it was interesting

735
00:40:26,320 --> 00:40:28,680
Speaker 1: he said, you know, giving someone the chairman role is

736
00:40:28,719 --> 00:40:31,799
Speaker 1: not a reward or punishment, it's just what's best at

737
00:40:31,880 --> 00:40:36,040
Speaker 1: that particular time. We're talking with Chris Alman of Council's

738
00:40:36,040 --> 00:40:37,600
Speaker 1: a little while ago, and they had a presence at

739
00:40:37,640 --> 00:40:39,799
Speaker 1: the Wells Fargo meeting yesterday. Let me ask us a

740
00:40:39,800 --> 00:40:42,400
Speaker 1: broad question about how you approach these annual meetings. It's

741
00:40:42,400 --> 00:40:45,239
Speaker 1: an opportunity to ask questions. Yesterday was an opportunity to

742
00:40:45,239 --> 00:40:47,360
Speaker 1: the Wells Fargo meeting for counselors to advocate for some

743
00:40:47,440 --> 00:40:49,520
Speaker 1: change to the board there. What do you hope to

744
00:40:49,560 --> 00:40:52,760
Speaker 1: get out of it? What is your approach answers to questions?

745
00:40:52,760 --> 00:40:55,279
Speaker 1: How do you carry that forward after the meeting takes place? Why?

746
00:40:55,280 --> 00:40:58,520
Speaker 1: I think your keyword and your question is advocate. What

747
00:40:58,640 --> 00:41:02,160
Speaker 1: am I personally advocate eating for. I'm at annual meetings

748
00:41:02,160 --> 00:41:05,440
Speaker 1: and I'm unique among people dealing with institutional investors. I

749
00:41:05,440 --> 00:41:08,200
Speaker 1: don't usually see anyone else there, and sometimes I'm asking

750
00:41:08,280 --> 00:41:11,120
Speaker 1: nine of the ten questions. But what I'm adcating is

751
00:41:11,160 --> 00:41:15,160
Speaker 1: not on behalf of the customers, or the employees, or

752
00:41:15,200 --> 00:41:17,600
Speaker 1: the public interest, or a lot of other matters that

753
00:41:17,600 --> 00:41:20,480
Speaker 1: are very important, whether it's climate change or board diversity.

754
00:41:20,800 --> 00:41:24,160
Speaker 1: I'm there to advocate for one stakeholder and one stakeholder loan,

755
00:41:24,400 --> 00:41:27,040
Speaker 1: and that's the shareholder. And so I want to know

756
00:41:27,160 --> 00:41:30,080
Speaker 1: instead of having a check the box exercise, and that

757
00:41:30,160 --> 00:41:33,400
Speaker 1: happens at most annual meetings. I want to talk about

758
00:41:33,440 --> 00:41:38,279
Speaker 1: matters of substance. So that's strategy, business mix, capital allocation,

759
00:41:38,560 --> 00:41:41,520
Speaker 1: the major risk, the things that will drive long term

760
00:41:41,560 --> 00:41:44,600
Speaker 1: shareholder values at that point and fancying the car with

761
00:41:44,640 --> 00:41:48,000
Speaker 1: an important credit suitez interview. Today people are confronting the

762
00:41:48,080 --> 00:41:51,280
Speaker 1: strategy of it ain't working. Is the ton it City

763
00:41:51,320 --> 00:41:54,200
Speaker 1: Group like a credit suite Deutche Bank with earnings tomorrow

764
00:41:54,520 --> 00:41:57,040
Speaker 1: it ain't working, or a City Group saying no, it

765
00:41:57,320 --> 00:42:00,719
Speaker 1: is working and we just need more time, which is well.

766
00:42:00,760 --> 00:42:03,239
Speaker 1: I'd say my reaction City Group and your meeting is

767
00:42:03,440 --> 00:42:06,160
Speaker 1: sweet and sour. So that the sweet part. And by

768
00:42:06,200 --> 00:42:08,600
Speaker 1: the way, they had good food there yesterday for the

769
00:42:08,640 --> 00:42:11,680
Speaker 1: sweet and you know, for to buy one share of

770
00:42:11,680 --> 00:42:13,560
Speaker 1: City Group stock at sixty dollars, you can go to

771
00:42:13,560 --> 00:42:16,440
Speaker 1: the angry meeting and get bread, pudding, pumpkin muffins, peach

772
00:42:16,480 --> 00:42:22,160
Speaker 1: Aprica pastries in the works but right now. But the

773
00:42:22,200 --> 00:42:25,480
Speaker 1: sweet part is the restructuring that they've done um and

774
00:42:25,560 --> 00:42:28,320
Speaker 1: so they've come a long way. Their market sharing capital

775
00:42:28,320 --> 00:42:31,720
Speaker 1: markets is the best that it's been since the financial crisis.

776
00:42:31,719 --> 00:42:34,400
Speaker 1: They made progress in the wholesale side. On the consumer side,

777
00:42:34,440 --> 00:42:38,840
Speaker 1: they've divested many businesses Argentina, Brazil, Colombia, UM and so.

778
00:42:39,120 --> 00:42:41,239
Speaker 1: And on the regulatory side, they're the only one of

779
00:42:41,280 --> 00:42:43,040
Speaker 1: the eight large banks that got a clean bill of

780
00:42:43,120 --> 00:42:46,200
Speaker 1: health on the first round of the Living Will UM.

781
00:42:46,239 --> 00:42:48,799
Speaker 1: So that's all positive. And also the chairman for the

782
00:42:48,840 --> 00:42:52,080
Speaker 1: first time yesterday's thaw City Group can get their two

783
00:42:52,120 --> 00:42:55,239
Speaker 1: thousand nineteen targets. The sour side of this though, Tom

784
00:42:55,280 --> 00:42:57,480
Speaker 1: And as you brought up Mike O'Neil, he is the

785
00:42:57,680 --> 00:43:00,719
Speaker 1: bank restructuring guru, he's the chairman. He agreed with the

786
00:43:00,760 --> 00:43:03,960
Speaker 1: CEO saying the restructuring is done. And I'm not sure

787
00:43:04,000 --> 00:43:07,920
Speaker 1: why the restructuring is done when they have such subpar returns,

788
00:43:08,160 --> 00:43:11,799
Speaker 1: worst in class stock market valuation and by their own words,

789
00:43:11,800 --> 00:43:13,640
Speaker 1: they're not fully optimized. So I think they might need

790
00:43:13,640 --> 00:43:16,520
Speaker 1: a restructuring. Two point out, David. I would point out

791
00:43:16,800 --> 00:43:20,279
Speaker 1: that the shares are trading where they were in No. No,

792
00:43:20,440 --> 00:43:23,120
Speaker 1: that's not in the land of the Great Walter Riston.

793
00:43:23,680 --> 00:43:26,920
Speaker 1: But that's twenty two years ago. When you look at

794
00:43:26,920 --> 00:43:29,160
Speaker 1: the earning season, that's where we get deutche Bank earnings tomorrow.

795
00:43:29,160 --> 00:43:32,680
Speaker 1: That's another animal in the menagerie of bank earnings. But

796
00:43:32,760 --> 00:43:34,520
Speaker 1: let's let me ask you, so what we're seeing shape

797
00:43:34,560 --> 00:43:36,319
Speaker 1: up as the trends here, particularly when you look at

798
00:43:36,400 --> 00:43:37,920
Speaker 1: the role Wall Street is playing in the role that

799
00:43:37,960 --> 00:43:41,640
Speaker 1: Main Street is playing in banking. I'd say when I

800
00:43:41,719 --> 00:43:44,120
Speaker 1: look at the bank earnings for the first quarter US

801
00:43:44,160 --> 00:43:49,720
Speaker 1: bank earnings, the winners were Wall Street activities, really economy clients.

802
00:43:50,040 --> 00:43:51,879
Speaker 1: So if you look at the Wall Street activities, they're

803
00:43:51,920 --> 00:43:54,640
Speaker 1: leading over Main Street, and most of the large banks

804
00:43:54,640 --> 00:43:58,120
Speaker 1: beat numbers due to capital market activities, so that's that's

805
00:43:58,160 --> 00:44:02,160
Speaker 1: fixed income, trading, equity aiding, underwriting um and those were

806
00:44:02,400 --> 00:44:04,160
Speaker 1: one fifth both year of a year in quarter of

807
00:44:04,200 --> 00:44:06,520
Speaker 1: a quarter. That was good. On the other hand, loans

808
00:44:07,600 --> 00:44:10,760
Speaker 1: had their traditional loans had their worst quarter in six years.

809
00:44:10,960 --> 00:44:13,359
Speaker 1: So what you saw is a degree of a substitution

810
00:44:13,440 --> 00:44:17,879
Speaker 1: effect less corporates going to traditional bank loans and more

811
00:44:18,000 --> 00:44:20,799
Speaker 1: going to the capital markets quickly. Or do you have

812
00:44:20,840 --> 00:44:25,360
Speaker 1: an opinion on credit suits how they will be placed

813
00:44:25,800 --> 00:44:31,080
Speaker 1: into a better place with the credit freeze capital raise today?

814
00:44:31,120 --> 00:44:34,160
Speaker 1: I have a general comment on European banks. The US

815
00:44:34,239 --> 00:44:38,320
Speaker 1: banks raised capital in two thousand nine, and the European

816
00:44:38,320 --> 00:44:40,800
Speaker 1: banks are starting to raise a lot more capital now,

817
00:44:40,920 --> 00:44:44,560
Speaker 1: so eight years later, better late than never having said that.

818
00:44:44,880 --> 00:44:47,040
Speaker 1: You know, the Swiss banks traditionally have some of the

819
00:44:47,160 --> 00:44:50,719
Speaker 1: highest capital ratios in the world on some measures, but

820
00:44:50,840 --> 00:44:53,759
Speaker 1: on the traditional kind of equity asset ratio, it's still

821
00:44:53,840 --> 00:44:56,800
Speaker 1: far below the US banks. You were legendary at that shop.

822
00:44:56,960 --> 00:44:59,200
Speaker 1: Do you feel there's such a Swiss imperative that the

823
00:44:59,239 --> 00:45:02,560
Speaker 1: Swiss government will say no credit sweez? Is this important

824
00:45:02,640 --> 00:45:06,359
Speaker 1: Switzerland and this is the way we're going to do it? Well?

825
00:45:06,400 --> 00:45:08,160
Speaker 1: I think you know we talked about too big to

826
00:45:08,200 --> 00:45:11,000
Speaker 1: fail in the United States. I say that's nothing like Switzerland.

827
00:45:11,520 --> 00:45:14,719
Speaker 1: That's a lot more. You know, germane to the foundation,

828
00:45:14,760 --> 00:45:17,040
Speaker 1: the country that enter to the US. You see that

829
00:45:17,120 --> 00:45:21,399
Speaker 1: look that he's given me on you toay Michael Mayo,

830
00:45:21,560 --> 00:45:23,840
Speaker 1: thank you so much, glad to make your morning miserable.

831
00:45:23,920 --> 00:45:27,719
Speaker 1: He's an independent bank analyst, but of great substance, and

832
00:45:27,800 --> 00:45:30,279
Speaker 1: we look forward to his next business. Is he maybe

833
00:45:30,320 --> 00:45:35,680
Speaker 1: he's retired a little more trouble time, and as long

834
00:45:35,719 --> 00:45:49,800
Speaker 1: as they keep serving breakfast at he'll keep going. Thanks

835
00:45:49,840 --> 00:45:54,000
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

836
00:45:54,040 --> 00:45:59,640
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

837
00:45:59,680 --> 00:46:02,680
Speaker 1: you for For I'm on Twitter at Tom Keene. David

838
00:46:02,719 --> 00:46:06,880
Speaker 1: Gura is at David Gura. Before the podcast, you can

839
00:46:06,960 --> 00:46:21,439
Speaker 1: always catch us worldwide. I'm Bloomberg Radio, brought you by

840
00:46:21,680 --> 00:46:25,400
Speaker 1: Bank of America. Mary Lynch. Dedicated to bringing our clients

841
00:46:25,480 --> 00:46:29,680
Speaker 1: insights and solutions to meet the challenges of a transforming world.

842
00:46:30,120 --> 00:46:33,840
Speaker 1: That's the power of global connections. Mary Lynch, Pierce, Feeder

843
00:46:33,920 --> 00:46:37,440
Speaker 1: and Smith Incorporated Member s I p C.