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Speaker 1: We beginning this point with the bias left Vich. He's
Speaker 1: the chief US Equity Strategic City and joins us in
Speaker 1: our Bloomberg eleven three oh studios. We see the tweet
Speaker 1: this morning piece together. What happened over these last nine
Speaker 1: days between the business meetings in Saudi Arabia, moving on
Speaker 1: to Europe, the Native Summit, at the g semit, at
Speaker 1: seven Summit, after that, what's your takeaway from that about
Speaker 1: the state of the integrity of the alliance between the
Speaker 1: US and Europe and what does that say to you
Speaker 1: about the direction of the U S economy. I'm not
Speaker 1: sure the two are necessarily rely Yeah, I would say
Speaker 1: probably the the alliance is you know, is fine. Um,
Speaker 1: I think they're you know, ebbsom and flows of of
Speaker 1: that alliance. And and there there's certainly differences between for example,
Speaker 1: the way George Bush conducted himself, George W. Bush conducted
Speaker 1: himself with Europe, the way Obama did, and now the
Speaker 1: way Trump is doing it. And it tends to you know,
Speaker 1: move along with the with the various people involved. I've
Speaker 1: always said that, you know, I've been going to Europe
Speaker 1: for you know, close to thirty years, and and there's
Speaker 1: kind of this you're either neutral about the US off
Speaker 1: European or you're really negative about the US off your
Speaker 1: European They're never almost a little bit positive about the
Speaker 1: US because then I guess you have to get up
Speaker 1: your European citizenship or something. Um. And I joke about
Speaker 1: it a little bit. But there tends to be a
Speaker 1: lot of the political differences show up in the relationships
Speaker 1: that that are even conversation with investors. It's not even
Speaker 1: about the leaders of the country. So there's certainly a
Speaker 1: more i don't know, progressive mindset maybe in Europe that
Speaker 1: doesn't necessarily exist in the US. Fully, there's obviously different
Speaker 1: political sizes in the US, but it's much more entrenched
Speaker 1: in Europe. And I think that tends to come to
Speaker 1: the four when you have different leaders who have different perspectives.
Speaker 1: At this stage, four months into this this administration does
Speaker 1: a tweet like the one this morning or the one
Speaker 1: last week about UH automakers German automakers comment about German
Speaker 1: automakers not a tweet, but but a common doesn't have
Speaker 1: much of an effect on your your world, not really.
Speaker 1: I mean there there's there was. I think initially when
Speaker 1: the tweets came out and the people were and I
Speaker 1: don't know if those novel are knew it, just it
Speaker 1: had an immediate reaction in the markets. And then they've
Speaker 1: been having fewer and fewer impacts in the market, and
Speaker 1: that was kind of our thought process that have eventually
Speaker 1: it would kind of fade into the background. Um, it
Speaker 1: doesn't help, but it's I don't think it's a dominant feature.
Speaker 1: I think we care more about economic progress. Jim Bullard
Speaker 1: of the St. Louis FID was never view by Bloomberg
Speaker 1: guests to Day and talked about how this new administration
Speaker 1: will have to fill the expectations it's it's laid out
Speaker 1: in the stock market has for what it intends to do.
Speaker 1: How heavily does that way on you. So, you know,
Speaker 1: we we track a lot of different things in the
Speaker 1: in the stock market, including let's say high tax versus
Speaker 1: low tax performance stocks. We look at the um the
Speaker 1: interest expense deductibility potentially being removed. You know, how's that
Speaker 1: affecting stocks that have that kind of exposure. And most
Speaker 1: of the Trump trades have pretty much rolled off. So
Speaker 1: the idea that this is being priced in the market UM,
Speaker 1: I think is antiquated. With all due respect to Mr Bullard,
Speaker 1: I think he's wrong on that on that front. To
Speaker 1: the city up, good morning, every good morning, David, Tom
Speaker 1: glad you survived the three weekend, made it up with
Speaker 1: that incident and we watched all Pirates of the Caribbean.
Speaker 1: You did. It's like there's eight of our Yeah, not
Speaker 1: the new one, I hope, Yeah, I got I got
Speaker 1: ice shadow on that. It's great for radio. The one
Speaker 1: thing on the data screen that's there, and I know
Speaker 1: the record highs inequities and all that sp and not
Speaker 1: the doubt yet is curve flattening? What is kurve flattening
Speaker 1: signal to a guy like you. In my mind, it's
Speaker 1: more about global flows of money than it is about
Speaker 1: economic trend. Now I'm probably not. I can find people
Speaker 1: who will say the other side of that argument, that
Speaker 1: there's something wrong economically. Um. The reason I say that
Speaker 1: is because what is what's your competition to a tune
Speaker 1: a quarter tenure yield in the world today? Point oh
Speaker 1: four and J G B's uh point for on a
Speaker 1: bund yield of equivalent duration um. And I think if
Speaker 1: there's a problem, chances are tenure treasuries would rally or
Speaker 1: the dollarwood rally. So if you're a foreign investor, buying
Speaker 1: the US isn't a particularly bad trade. And just very quickly, folks,
Speaker 1: that's price up, yield down. So the curve is flatter
Speaker 1: from the land of Lefkovitch because the tenure yield is
Speaker 1: lower rather than higher. Would you be a steeper curve
Speaker 1: we have all the fet is also raising rates on
Speaker 1: the short end, So okay, we need to have a
Speaker 1: moment of silence. David, it's the crunch time for the
Speaker 1: cif A exams. It's coming up this weekend. All cf
Speaker 1: A candidates had a miserable Memorial Day weekend and we
Speaker 1: say good morning to all of them. They haven't slept.
Speaker 1: They say best of luck as well. There's like eight
Speaker 1: thousand of them at City Group. Right, did they get
Speaker 1: the week off? I don't think they have the week off,
Speaker 1: And I've had associates who've definitely taken a couple of
Speaker 1: days off for it. Uh. They're going back to your
Speaker 1: points about the yield curve flattening. I think it's it's
Speaker 1: less from my perspective about the economy. UM, most of
Speaker 1: the data that I look at UM is still pretty supportive.
Speaker 1: The one area that's squishy, call it is the autos.
Speaker 1: But if I look at capital spending, intention, hiring intentions,
Speaker 1: new order trends, UM, consumer sentiment, all the kinds of
Speaker 1: things that you'd like to be seeing are are suggesting
Speaker 1: that we aren't necessarily in the economy. And again, autos
Speaker 1: is an area that there's been a little bit of
Speaker 1: tension around prime subprime loans and uh and and retail
Speaker 1: sales trans inventory. There is some issues in autos and
Speaker 1: we're monitoring carefully. Yeah, this great note out a couple
Speaker 1: of weeks back on growth. Looking at growth as you've
Speaker 1: been thinking about it chewing it over as we've seen
Speaker 1: the White House continue to reiterate, we're gonna see three percent?
Speaker 1: What what new? What? What new things have you come
Speaker 1: to inclusion on what what have you learned here? Thinking
Speaker 1: about growth in such detail. So we were we were
Speaker 1: thinking about a longer term perspective when were wroth at
Speaker 1: the pieces called growth, and the one you're highlighting was
Speaker 1: called growth growth My kingdom for growth, UM and and
Speaker 1: the idea was more around what are the long term
Speaker 1: drivers of growth? And historically it's been things like population growth,
Speaker 1: income growth, productivity, and innovation. Now I think innovation is
Speaker 1: still pretty darned healthy out there. UM. I was out
Speaker 1: in California last week, and you know stle Com values
Speaker 1: humming UM. But if you look at the demographics, they've
Speaker 1: clearly weakened the The birth rates are down, population growth
Speaker 1: is down, still adding eighty two million people globally every year,
Speaker 1: but off off of larger base, the percentage increases decline UM.
Speaker 1: Income growth was a big story in emerging markets over
Speaker 1: the past decade plus and and it's still happening. It's
Speaker 1: not as aggressive, but it's still happening again off a
Speaker 1: higher base. UM. And the one area that's probably the
Speaker 1: most disturbing and I think is the one that causes
Speaker 1: angst amongst economists around the world is productivity is just
Speaker 1: seemingly not there despite all this investment in technology. And
Speaker 1: I'm not sure if it's because people are sitting at
Speaker 1: you know, watching you know, looking at their Facebook feeds
Speaker 1: h during the day and seeing what their friends had
Speaker 1: for lunch, um, or you know, or they're playing candy
Speaker 1: Crush instead of working at their desks. I just don't know, um,
Speaker 1: But but there there is some you know, you made
Speaker 1: a common earlier in on TV Tom about Marty Felstone.
Speaker 1: I know that Harvard there are spending a lot of
Speaker 1: time trying to understand why we're not seeing all this
Speaker 1: productivity benefits. Maybe we're measuring widgets per man hour correct
Speaker 1: incorrectly in this kind of service based economy with with
Speaker 1: new digital tech achnology. And I have sympathy to that
Speaker 1: view because it does seem like things are much more productive.
Speaker 1: You can sit there in the cab, pay your bills,
Speaker 1: you know, off your phone through your bank account with
Speaker 1: mobile so I mean that that's much more productive than
Speaker 1: sitting at home at night writing check Okay, but David,
Speaker 1: where are you on this? Because to me, it's a
Speaker 1: partition of American society as much as we saw on
Speaker 1: the reporting of a mobile day weekend, there's a group
Speaker 1: of society that's taking advantage of what Tobias just mentioned
Speaker 1: as a whole another group that's just being loved by
Speaker 1: the wayside. And I suppose too, there's the argument as well, Tobias,
Speaker 1: how are we getting any better at measuring this? Do
Speaker 1: you do you see signs that we are? No, I
Speaker 1: don't see any. But I don't see signs we're getting
Speaker 1: better at measuring And I think this is I think
Speaker 1: this is where economists are struggling. I've talked to a
Speaker 1: number of them and they have not kind of found
Speaker 1: the holy grail on this um. But you know, to
Speaker 1: your point, time, I think innovation over time has always
Speaker 1: left some people behind. I mean, when I went back
Speaker 1: in the ninet thirties, I think was close to um
Speaker 1: of the American workforce was working down on the form.
Speaker 1: Today it's less than two percent. Productivities up more than
Speaker 1: tenfold through a whole bunch of measures, including mechanized farming,
Speaker 1: including anti fungus type UM pesticides including UH modified c
Speaker 1: that can that can survive different temperature swings. So there's
Speaker 1: a lot of different things going on that allows people
Speaker 1: to to kind of move elsewhere. The question is, and
Speaker 1: I think this is the fair one, are we retraining
Speaker 1: people fast enough well for that new economy? And the
Speaker 1: answer is probably know in The answer is that's where
Speaker 1: every article ends upgoing. Is this mystery of retraining and
Speaker 1: almost career shift, which is a theme under its own,
Speaker 1: Or Tobias Levkovich of sitting David Gurr and and with
Speaker 1: you on a Tuesday, four day workwate somebody said a
Speaker 1: younger soul, David said, what's a holiday length and work week?
Speaker 1: And you know, I said, well, you gotta live it.
Speaker 1: You know how it is. Folks, you're like working five
Speaker 1: days and you work four days and they tell you
Speaker 1: to squeeze in five days or six days, and that's
Speaker 1: how you get to a holiday length and at work week.
Speaker 1: He knows about that. He's an academic professor. That was
Speaker 1: a little sarcasm there, Professor Calamarus at Columbia University Hard Work, CHERYLS. Calamaris,
Speaker 1: who's planning a sixth sabbatical reforming financial regulation after Dodd
Speaker 1: Frank is a small but important book. If you wrote
Speaker 1: this book for the believers in a more conservative free
Speaker 1: market take on regulation, what's in this book for liberals?
Speaker 1: What's in this book for Democrats that support UM? Senator
Speaker 1: Warren Speaker Pelosi? Why do they need to read this book? Actually, Tom,
Speaker 1: at the end of the book, I try to argue
Speaker 1: that it's exactly directed to them, because, UM, some of
Speaker 1: the concerns the ineffectiveness of regulation, not just the high
Speaker 1: costs of regulation, and also the collapse of due process
Speaker 1: in regulation should particularly be concerns for Democrats, especially now
Speaker 1: that they're not in power. So we've had eight years
Speaker 1: of the Obama administration. They don't worry about process the
Speaker 1: Democrats when they're in control, but they're not in control
Speaker 1: right now. Trump is going to point, for example, at
Speaker 1: least five and maybe all seven of the governors of
Speaker 1: the FED, and now the discretion the unlimited discretionary uh
Speaker 1: sort of moment to moment cough cask process of regulation
Speaker 1: is going to be in the people's hands that he appoints.
Speaker 1: So I think that it's an attractive time for Democrats
Speaker 1: to be thinking about due process given that, UH, some
Speaker 1: of their concerns about the Trump administration. So I I
Speaker 1: really do feel that this is a bipartisan story. Um.
Speaker 1: And I wouldn't even describe this as a conservative set
Speaker 1: of principles. I would just describe it as a rational
Speaker 1: set of principles. The the the academic literature over the
Speaker 1: past nine years has now evaluated the regulatory reforms, and
Speaker 1: the evaluation is very negative. The regulatory reforms aren't accomplishing
Speaker 1: what they wanted to accomplish by their own lights. They're
Speaker 1: doing it at very high cost and having pretty much
Speaker 1: destroyed due process uh in the regulatory sphere. So I
Speaker 1: think it's a it's a failure across the board. What
Speaker 1: lessons can we can we learn? What lessons can we
Speaker 1: draw from what's happened with the so called fiduciary rule.
Speaker 1: This is something that was in the prominence of Department
Speaker 1: of Labor for some time. We have a new Labory
Speaker 1: Secretary who has expressed some desire for the sec to
Speaker 1: take on a role in its implementation and oversight. Uh. Indeed,
Speaker 1: it seems like we may be headed in that that direction.
Speaker 1: What does that city about the level of complexity associated
Speaker 1: with financial regulation now that you have two different agencies
Speaker 1: fighting this truth war over who's gonna oversee a rule
Speaker 1: like that one? It's an excellent question. I mean, I
Speaker 1: think there are two things that leap to mind. One is,
Speaker 1: once people are used to something and have already gone
Speaker 1: through spending the costs to adopt it, especially the large players,
Speaker 1: they want to keep with the status quo. So you're
Speaker 1: seeing that having already implemented some changes or about to
Speaker 1: implement them, having paid the cost of it, they now
Speaker 1: don't want to have to think again about whether the
Speaker 1: fiduciary rule makes sense. Um. I think that there's another
Speaker 1: piece to it, which is that specific to the fiduciary rule,
Speaker 1: that there are some arguments in favor of it. Um,
Speaker 1: it's a trade off. It's not clear that it's a
Speaker 1: good idea, but it's not clear that it's a terrible idea.
Speaker 1: So I think I was very encouraged that, um, we're
Speaker 1: now going to have from the Labor Department, uh, a
Speaker 1: sort of thoughtful review. That's what they should be doing.
Speaker 1: Is the president on board. I can't figure out if
Speaker 1: he's a conservative liberal, regulationist deregulationist. Depends on the tweet, Yeah,
Speaker 1: what is it? You gotta you gotta are you gonna
Speaker 1: join his staff. Can we make some news here this morning? UM,
Speaker 1: I have not been approved. Let's just leave it at that.
Speaker 1: And but I would say that I would be willing
Speaker 1: to because I think that this is a time where
Speaker 1: we have to come together. And I think that the
Speaker 1: President is uh not fully formed. His views are not
Speaker 1: fully formed on exactly what to do in financial regulation.
Speaker 1: But I think his instinct is right, which is that there's, um,
Speaker 1: there's been a lack of discipline in terms of cost
Speaker 1: benefit analysis on regulation, and so I think that his
Speaker 1: his action so far on the regulatory front um have
Speaker 1: actually been very encouraging. And as I would emphasize, you
Speaker 1: have to also ask who's in charge now in the
Speaker 1: Treasury Department. Mutan doesn't really seem to know much about
Speaker 1: financial regulation yet, and he doesn't have an under secretary.
Speaker 1: In fact, now I don't even think there's one that's
Speaker 1: been named. Because can you pass the litmus test? I'm
Speaker 1: not sure. Well, you know, I think Nick Burns, who
Speaker 1: joined policy, are you on the ugly list? I maybe
Speaker 1: I don't know. I did know. I criticized the idea
Speaker 1: of Chinese currency manipulation in two thousand and fifteen, that's
Speaker 1: been the main, the main thing. So you never know,
Speaker 1: how do you teach finance differently than you did in
Speaker 1: two thousand six. You don't need a face lift to
Speaker 1: do that, but how do you teach the troops differently
Speaker 1: than you did in June or in April of two
Speaker 1: thousand seven. You know, UH finance has sort of um
Speaker 1: fallen off a cliff UH in NBA curriculums, mainly because
Speaker 1: of the change in UH jobs that happened in two
Speaker 1: thousand seven, and so a lot of the teaching has
Speaker 1: to do with trying to think through UM how crises occur.
Speaker 1: And I've been teaching, of course for twenty years called
Speaker 1: emerging financial markets, which is all about how things tectonic
Speaker 1: shifts happen in different countries. So it was very natural
Speaker 1: for me. I I feel like it actually helped my
Speaker 1: class because it made risk and systemic risk really was
Speaker 1: brought to life by the crisis. So for me it
Speaker 1: was actually good news. But for much of our teaching
Speaker 1: and finance, I have to say, I think that it
Speaker 1: was a little bit overconfident that we thought that it was. Ah, well,
Speaker 1: it's also normal and it's also just about technical details,
Speaker 1: whereas In fact, people started asking very basic questions, do
Speaker 1: do banks know what they're doing? Um? Do people have
Speaker 1: a way to quantify risk on a forward looking basis
Speaker 1: that's useful? So these were really fundamental questions. I think
Speaker 1: the curriculum has been affected. But from my class, this
Speaker 1: was really grisp from my mills, because that's that's really
Speaker 1: what I like to teach. I wanna ask you about
Speaker 1: Alan Meltzer. He passed away on May the eighth. We
Speaker 1: were very closely do something on the show, and then
Speaker 1: the president fired as FBI director and things got busy
Speaker 1: the following morning. I know that you you knew him
Speaker 1: well and every worked on the shadow Open Market Committe
Speaker 1: with what should we know about him? And in his
Speaker 1: legacy Again, he passed away on May the eight. Well,
Speaker 1: Allen was an amazingly diverse and hard working person. I
Speaker 1: was with him in the hospital. Uh just you know
Speaker 1: a couple of days before he died, and he was
Speaker 1: working in the I c U. He was working on
Speaker 1: his new book with pen and paper, with the oxygen
Speaker 1: hooked up and very very weak. UM. So he was
Speaker 1: just somebody who had an incredible dedication. He worked on
Speaker 1: issues as diverse as um what's the link between monetary
Speaker 1: policy and inflation or the political economy of elections? Why
Speaker 1: sometimes growth versus redistribution wins in an election. He also
Speaker 1: worked on reform of the international financial institutions, the I
Speaker 1: m F, the World Bank, etcetera. UM. He worked though
Speaker 1: on many other issues. UM he founded the Shadow Open
Speaker 1: Market Committee. UM. You know, just an amazing contribute. What
Speaker 1: was his work with Carl Brunner of the University of Rochester.
Speaker 1: The Carnegie Rochester series was legendary for all in economics.
Speaker 1: What was Carl Brunner Elor Meltzer's legacy. Well, you know,
Speaker 1: I was at Allen's apartment and I noticed several pictures
Speaker 1: in his office of Carl Brunner. Still so, Carl Brunner
Speaker 1: was an incredible influence on Allen and not all of us.
Speaker 1: And it was a personal partnership of dedication to public
Speaker 1: policy old school style, right people who saw problems at
Speaker 1: that time in the seventies, people were saying that inflation
Speaker 1: wasn't caused by monetary policy, and Carl and Alan, I
Speaker 1: think we're absolutely dedicated to showing that wasn't true. In
Speaker 1: the Carnegie Rochester Public Policy series was really unique very valuable.
Speaker 1: Charles Collenyers, thank you so much for Columbia. David. My
Speaker 1: great Allen Meltzer memory was somebody holding an umbrella over
Speaker 1: his head in the pouring rain at Jackson Hole and
Speaker 1: his lee upset that he's wasting time. My TV said
Speaker 1: Mr Meltzer. There's too many panels, aren't there? In heat?
Speaker 1: God fear Tom. That used to be simpler, there were
Speaker 1: fewer panels. In honor of Allan Meltzer. Charles calumeres with
Speaker 1: thoughts there. This is Bloomberg Brunt you by Bank of
Speaker 1: America Mary Lynch. With virtual reality, virtually everything will change.
Speaker 1: Discover opportunities in a transforming world. VI of a mL
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Speaker 1: There's something new from Bloomberg. It's called Lens. Starting right now,
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Speaker 1: Bloomberg dot com slash lens. David Harrow with US from Chicago.
Speaker 1: He invests in large cap internationals and is known he'll
Speaker 1: have an off You're here and off You're there, but
Speaker 1: has put together just a terrific long term track record. David,
Speaker 1: good morning. What is your appetite for international stocks right now?
Speaker 1: Has all the easy money been made? No? First of all,
Speaker 1: it's never easy to make money time. You know that. Um,
Speaker 1: there's always the beauty of having the globe at your disposal,
Speaker 1: as you are always able to find a place or
Speaker 1: a pocket where there's value where perhaps fear and fright
Speaker 1: have caused opportunity. And I think if you're looking at
Speaker 1: the differential that European equities still sell at from evaluation
Speaker 1: differential perspective to US equities as an example, there's still
Speaker 1: some opportunity there. So we're not seeing fire sale prices
Speaker 1: like we did after Brexit or in February. But we're
Speaker 1: seeing some reasonable valuations, especially in some of the European
Speaker 1: continental blue chips and financials. Where are the other places
Speaker 1: and pockets you're you're looking at outside of the Eurozone. Well,
Speaker 1: we have increased our m exposure a little bit, but
Speaker 1: again this is all driven from bottom up valuation. Uh,
Speaker 1: some places are easier than others. UM, we have an
Speaker 1: exposure to I've got a few good quality Mexican stocks
Speaker 1: Group or all of Visa is an example. UM. And
Speaker 1: we we actually have in our large camp strategy at
Speaker 1: Chinese stock I do which is not of course the
Speaker 1: leading search engine in China, but one of the leaders
Speaker 1: and artificial intelligence, one of the top two or three
Speaker 1: players and artificial intelligence in the world. So, and they're
Speaker 1: not owned, there's not a direct government ownership, which always
Speaker 1: scares us. Of course, there are some government influence because
Speaker 1: of how the Chinese regulates the Internet, but it's it's
Speaker 1: not owned by government entities, which is which is the
Speaker 1: case for a great deal of the Chinese stocks. Is
Speaker 1: China a place you're looking to more and more for
Speaker 1: companies that are innovative. You mentioned that company doing work
Speaker 1: on yes search, but also AI and I wonder if
Speaker 1: if if that's increasingly the place you look to for
Speaker 1: for new novel technology. Well, it's kind of tough because
Speaker 1: of this government involvement. What I mean by government involved
Speaker 1: mentis the government basically tells them what to buy and
Speaker 1: what to sell and wow to expand. And even with
Speaker 1: some of the tech companies, uh, you just don't really
Speaker 1: have it independence that you want that you could get elsewhere.
Speaker 1: And so this is a major problem. I mean, you
Speaker 1: could talk all he wants about globalization, but when you're
Speaker 1: a European automaker and you want to build a plant
Speaker 1: and they want your battery technology for free, that's not globalization.
Speaker 1: Where we on use of cash and if we finally
Speaker 1: get interest rate normalization, I guess the first question is
Speaker 1: do you predict that how will use of cash change
Speaker 1: in a more normal rate environment. I mean, that's a
Speaker 1: great question, Tom. I do think there will be interest
Speaker 1: rate normalization. I think this has just been a long cycle.
Speaker 1: But eventually you'll start to see interest rates uh reflect
Speaker 1: you know, inflation levels, etcetera, etcetera, etcetera. So I do
Speaker 1: think you'll see some interest rate normalization, that the central
Speaker 1: banks will realize that these low negative rates haven't really
Speaker 1: had the desired impact. And one of the reasons why
Speaker 1: they haven't is remember Irving Fisher's quantity theory of money
Speaker 1: and the equals p Q will The problem is that
Speaker 1: velocity you know, has which was supposed to be stable,
Speaker 1: has fallen, and this is what you're getting at uses
Speaker 1: of money. Well, at some point you're going to see
Speaker 1: the velocity of money pick up and you're going to
Speaker 1: see kind of back to the quantity theory of money.
Speaker 1: But because of technology and financial technology, I would assume
Speaker 1: actual uses of cash continue to decline, though of course
Speaker 1: the black market loves the use cash. When you when
Speaker 1: you talk about the length of the cycle, that's being
Speaker 1: along the cycle, what are the signs you see that
Speaker 1: it may be coming to an end? Well, I think
Speaker 1: in the United States in particular, you're starting to see um,
Speaker 1: the easing cycle turn um, we see interest rates lifteeing um,
Speaker 1: talk of what to do with the FENS balance sheet.
Speaker 1: These are all little signs that we're gonna start to
Speaker 1: see back to a pickup in a normal interest rate environment.
Speaker 1: Even in Europe, I think there's some some talk about
Speaker 1: we're getting getting towards the end of using monetary policy
Speaker 1: as an end all and be all tool. And I
Speaker 1: think that's also something that needs to be mentioned, is
Speaker 1: we have around the globe relied far too much on
Speaker 1: an imperfect tool, and that's monetary policy. I mean, monetary
Speaker 1: policy is best used to provide a stable price level.
Speaker 1: It is not meant to be used to to lift
Speaker 1: employment level simultaneously everywhere to get the economic engine necessarily started.
Speaker 1: Because of this whole notion that Kane says, you can't
Speaker 1: necessarily push your strength if people don't have positive expectations
Speaker 1: about the future or animal spirits that they are not
Speaker 1: going to invest, they're not going to so so there
Speaker 1: has to be something other than monetary policy. And this,
Speaker 1: I think is one of the lessons that we're learning
Speaker 1: post the Great Financial Crisis of two thousand and eight
Speaker 1: and two thousand nine, is that monetary policy can facilitate growth,
Speaker 1: but you need other policies to really ignite the engines
Speaker 1: of growth. And there's been far too much reliance, in
Speaker 1: my view, on monetary policy, and it's been used to
Speaker 1: someone incorrectly. It is a blunt tool. It is not
Speaker 1: a tool that you could find tune and use meticulously.
Speaker 1: What have we learned about the promise of policy, about
Speaker 1: optimism here over these last five six months since since
Speaker 1: the election. Is you look at yourself and other investors
Speaker 1: and how they reacted to the presidential election last year
Speaker 1: and all that that could have ushered in or people
Speaker 1: thought it would usher in. What have we learned now
Speaker 1: a few months into the president's term. Well, I think
Speaker 1: we haven't learned all that much quite yet. I think
Speaker 1: what we're the biggest thing we've learned is this kind
Speaker 1: of consistent bashing of success send capitalism and banks and
Speaker 1: greedy bankers and all of us. You know, everyone's greedy
Speaker 1: and everyone's out to get the world. At least we've
Speaker 1: backed off of that, and I think there was a
Speaker 1: realization that the private sector creates jobs, the private sector
Speaker 1: creates opportunity, the private sector creates upward mobility, and it's
Speaker 1: not this evil boogeyman. Perhaps that is the biggest lesson learned,
Speaker 1: the biggest relief because prior to this, I mean, we
Speaker 1: had eight years of of you know, the bashing of
Speaker 1: the private sector and a free enterprise, and we still
Speaker 1: have yet to see what's going to replace it. I
Speaker 1: think there's still some uncertainty what's going to replace it?
Speaker 1: But what we have seen is kind of an end
Speaker 1: to the evil private sector rhetoric. Do you invest thinking
Speaker 1: it's a double digit return world? Or is David Harrow
Speaker 1: a single digit guy? Now? I think what you have
Speaker 1: to invest is a you have to think of what's
Speaker 1: inflation while it's one or two percent, and then you
Speaker 1: know worship interest rate speed and you had a couple
Speaker 1: points to that, and what's the equity risk premium when
Speaker 1: you add it all together. I think equities through time,
Speaker 1: if you have an inflation environment of one to two percent,
Speaker 1: should be should do eight to ten percent through time
Speaker 1: through time, And what you achieve is dependent on where
Speaker 1: you enter in the evaluation cycle. So if stocks are
Speaker 1: kind of rich and you enter there, you will get
Speaker 1: less than that eight to ten percent. Stocks are kind
Speaker 1: of average valuation, I would presume you would get around
Speaker 1: eight to ten percent, and you could buy stocks at
Speaker 1: a cheap valuation level and the cycle you will do
Speaker 1: better than eight to ten percent. But I hope for
Speaker 1: my shareholders that we could do close to double digit
Speaker 1: and that we could beat the index that we compete
Speaker 1: against by a measurable one one basis points and luckily,
Speaker 1: over twenty years we've been able to beat it by
Speaker 1: four hundred basis points, so we got we get bonus points.
Speaker 1: David Harrow with US on International Investing. David, you more
Speaker 1: buy and holding Now is your so called portfolio turnover rate?
Speaker 1: Is it lower and lower or are you churning in
Speaker 1: holding stocks for like ten minutes or ten months? Well,
Speaker 1: we tend to be very much on the buy and
Speaker 1: hold camp. If if you look at our strategy to
Speaker 1: analyze the business, to price a business, to buy it
Speaker 1: low and to sell it, dear, business valuation and the
Speaker 1: creation of business value tends to be a lot more
Speaker 1: stable than price. Price is very very volatile, whereas business
Speaker 1: value even through cycle tends to be somewhat moving gentle fashion.
Speaker 1: So we tend to be very long term shareholders. Some
Speaker 1: stocks we've owned for over a decade as an example. Now,
Speaker 1: when prices, when you have atility uh and prices that
Speaker 1: may pick up our portfolio turnover rate. So the natural
Speaker 1: rate is probably a year, but in very volatile periods,
Speaker 1: and if you have a out of inflows and outflows,
Speaker 1: it could drift up to thirty percent a year, probably
Speaker 1: still well below the average fund which you know, some
Speaker 1: funds literally are you know, trading every two days and
Speaker 1: you see two portfolio turnover for us, it's a very
Speaker 1: very different strategy. How does what President she unveiled at
Speaker 1: his One Belt, One Road for UM change the calculus
Speaker 1: for you or for investors more generally outline these ambitious
Speaker 1: plans outlining the need for private investment, Does that change
Speaker 1: the calculus for you at all? Well, again, you know
Speaker 1: these are plans and these are mostly words, and what
Speaker 1: you really need to see, for instance, is you know,
Speaker 1: an increase infrastructure development as part of this plan really
Speaker 1: suggests and more airports, ports, ports, railway, etcetera, etcetera, etcetera,
Speaker 1: more trade, more free trade. Now, if all this happens,
Speaker 1: it's quite good, and it's really good for infrastructure. Uh, infrastructure,
Speaker 1: which is kind of the oil that lubricates economic growth.
Speaker 1: And you know we have we own shares and companies
Speaker 1: like Lafarge Wholesome that is one of the leading cement
Speaker 1: makers in the world. I mean, this would be very
Speaker 1: good for Lafarge Wholesome, This would be very good for Glencore,
Speaker 1: which is a big producer of copper. So I mean
Speaker 1: it would be good for our portfolio. It would be
Speaker 1: good for global growth, would be good for just about everyone.
Speaker 1: But you know, these are politicians and often what they
Speaker 1: say does not materialize. Where's the growthiness right now? Not
Speaker 1: the value, but the growthiness. I see you at w
Speaker 1: P P. Martin Searle's company at some point, but you know,
Speaker 1: is it like an entertainment or cable or something. Where's
Speaker 1: where's David Harrow's growthiness right now? Yeah? You know, you
Speaker 1: don't see just these high pockets of growth. And maybe
Speaker 1: you know, certain areas of financial technology, maybe certain areas
Speaker 1: of UM credit expansion. You're starting to see a lending
Speaker 1: pick up in Europe as an example. I mentioned it before.
Speaker 1: Europe is looking a little better and part of that
Speaker 1: manifests itself and better lending volumes. Um. You know, autos
Speaker 1: aren't growing, but they're still selling at We're at a
Speaker 1: pretty high level. Um. You know, even though you know
Speaker 1: it's slowed down the auto global automobile sales are at
Speaker 1: a high level. You still see respectable automobile sales even
Speaker 1: in the United States, despite the fact that perhaps too
Speaker 1: much incentive is needed to maintain those levels. But you
Speaker 1: still see places in China and the emerging markets growing
Speaker 1: um some consumer products luxury goods are growing. Soft goods
Speaker 1: in particular, company carrying that owns Gucci and in Paris,
Speaker 1: and Gucci is an Italian company carrying owner owner is
Speaker 1: a French company. You go into a Gucci store in
Speaker 1: London on Necessariday afternoon and mob seeing a mobs to
Speaker 1: buy your wife Gucci is very hot. Thank you, Fastion.
Speaker 1: Advice for the wise guy from David get one more
Speaker 1: question and with David Harold before I hit him over
Speaker 1: there very quickly, David, And light of the tweet from
Speaker 1: the present this morning, light of the reports of the
Speaker 1: new tension between Europe and the US, how much does
Speaker 1: that matter to you as a global investor, global politics
Speaker 1: and and the comedy between the US and Europe. Not
Speaker 1: really too much, David, because what really matters is how
Speaker 1: does this impact a company's ability to generate cash flow streams?
Speaker 1: And so much of it again just ends up being noise. Now,
Speaker 1: I said, I just saw the tweet about this trade deficit. Well,
Speaker 1: the problem is that some of this is autos. But
Speaker 1: the German car companies, namely BMW and Mercedes, have substantial
Speaker 1: operations in the United States and are huge exporters. Every
Speaker 1: X Serish truck literally around the world is made in
Speaker 1: South Carolina. So when you when you go around the
Speaker 1: world and seeing X five and X three and X
Speaker 1: two and X one, those are all US cars, you
Speaker 1: know made, And so I mean this is this is
Speaker 1: again the problem with politicians. They just say things that
Speaker 1: aren't always accurate. David, thank you so much. David here
Speaker 1: greatly and Harriss Associates greatly appreciate that. This morning, it
Speaker 1: is our great pleasure to bring you know a gentleman
Speaker 1: who has changed worldwide how we get around, how we fly.
Speaker 1: His effect has been profound. I can think of very
Speaker 1: few people in the airline business even approaching the work
Speaker 1: of Michael O'Leary and the impact he runs a small
Speaker 1: shop called Ryan Air. I met you in the basement
Speaker 1: of our London offices. I think the Right Brothers had
Speaker 1: just landed and the Carolinis on the beach. You've been
Speaker 1: doing this, Michael a long time? Is it still fun?
Speaker 1: Thank you? Tom. I know you didn't say that I've
Speaker 1: improved their form after the weekend we've had, but are
Speaker 1: you still having fun? I'm having more any more. It
Speaker 1: is the most fun you can have with your clothes
Speaker 1: on tom in Europe bringing forward lower affairs, keep driving
Speaker 1: down those air fairs and making it impossibly for other
Speaker 1: airlines to compete. After what Mr Walsh and companies saw
Speaker 1: this weekend, can you outsource I T. We don't think so.
Speaker 1: I mean we've deliberately insourced the whole I T function
Speaker 1: under Ryanair Labs for the last couple of years now.
Speaker 1: To be fair, I don't think what happened this weekend
Speaker 1: had to do withoutsourcing. But there's clearly something wrong with
Speaker 1: their disaster recovery program. I mean there's no way that
Speaker 1: any large company can operate with all of its data
Speaker 1: in one center where some power surge takes it all out.
Speaker 1: I mean, it's just it's beyond incompetent. And we've had
Speaker 1: this three or four times now. Right to be fair
Speaker 1: to British Airways, there are a small airline company in London.
Speaker 1: You may ye vaguely. They carry about thirty million pastors
Speaker 1: a year. We'd cary about a hundred and twenties, so
Speaker 1: you know, but I think there's something wrong with the
Speaker 1: disaster recovery program. We are in our data centers are
Speaker 1: spread across five different data centers in Europe with disaster
Speaker 1: recovery programs for each one, so if one thing goes down,
Speaker 1: you switch to the other four um But you know,
Speaker 1: ultimately these are just blips. Be A is doing a
Speaker 1: reasonably good job. They're trying to lower their costs. Unfortunately
Speaker 1: can't lower them down to where Ryan areas, so they're
Speaker 1: still not able to compete with us on price. But
Speaker 1: the good news is that we're continuing to expand rapidly.
Speaker 1: We have produced guidance this morning. We see our fares
Speaker 1: falling by another five to seven percent in the next
Speaker 1: twelve months, but profits will rise by about eight percent,
Speaker 1: and so good do you think is the business model?
Speaker 1: We're buying back another six hundred million euros of our
Speaker 1: shares in the next couple of months. What's the greatest
Speaker 1: challenge that you face. You talked about the expansion of
Speaker 1: the reducing fierce even more. What's the biggest challenge that
Speaker 1: you face in the next six months. I think, without
Speaker 1: doubt it's always cost discipline keeping. How do we get
Speaker 1: the cost to come down again? And this is where
Speaker 1: you know our new aircraft order with Boeing we're taking
Speaker 1: delivery of fifty grade boweing seventies seven eight hundreds each
Speaker 1: year for the next eight years. That's going to take
Speaker 1: down our costs. We're talking to airports all over Europe
Speaker 1: who are terrified that Anatally is now in chapter eleven.
Speaker 1: Air Berlin, Yeah, Berlin's how do you get to Rome?
Speaker 1: What are you gonna do about Rome? Where now the
Speaker 1: second largest airline in Rome. We're have a big base
Speaker 1: in Champago and with a big base in Film and Gino.
Speaker 1: And I think what happens tom is as Alatali emerges
Speaker 1: from chapter eleven. It would probably be more focused on
Speaker 1: Longhold where they can make money. And I think they're
Speaker 1: gonna have to cut their capacity on shorthold where they're
Speaker 1: just unable to compete with Ryan there either on Italian
Speaker 1: domestics or shorthold European routes. It's plainly a trip. That's
Speaker 1: the sigma do you know? Yeah? No, Do you see
Speaker 1: any indication that the American public wants anything but cheap price?
Speaker 1: I keep hearing these theories. They want this, they want that, Bologna.
Speaker 1: They just want the lowest price. And it's not just
Speaker 1: the American public, the European customer as well. People booking
Speaker 1: a trip, the first questions who's got the cheapest fairs.
Speaker 1: They want safety, they want new aircraft, and they want punctuality.
Speaker 1: But other than that, they're willing to trade almost every
Speaker 1: element of customer service, which is if you look at
Speaker 1: the Ryan Revolution, Tom in the last twenty years, we
Speaker 1: were the first people to start charging for the onboard snacks,
Speaker 1: the first people start charging you for checked in bags.
Speaker 1: Not because we wanted your money. We wanted people to
Speaker 1: start bringing checked in bags. And I've been transformational. I'm
Speaker 1: on air on our surveillance golf stream. I'm paying people
Speaker 1: not to bring the snacks to me. That's a gold
Speaker 1: Michael Leary, thank you so much. With Ryan here, let's
Speaker 1: speak in London. This is Bloomberg. David, why don't you
Speaker 1: bring in our esteem? Gust very glad to looking forward
Speaker 1: to this next conversation with Graham Allison. He is a
Speaker 1: professor at the Kennedy School of Government at Harvard University,
Speaker 1: the director of the Belfry Center for Science and International Affairs,
Speaker 1: the author of a new book, Destined for War. Can
Speaker 1: America and China Escape the Cydities Trap? He joins us
Speaker 1: now on our phone lines and running through his bio,
Speaker 1: Theere failed to mention his role in government as well,
Speaker 1: having served as Assistant Secretary of Defense previously as well.
Speaker 1: Great to have you with us and help me with
Speaker 1: the Greek term. First, I think we should begin there
Speaker 1: at the Cydities trap? What is it and what can
Speaker 1: we learn from it? Here in two thousand seventeen. Okay,
Speaker 1: so it's a mouthful, and some people have a little
Speaker 1: trouble saying Thucidities I practiced, I didn't practice before the Okay,
Speaker 1: So Thucidities was the father of history. He wrote about
Speaker 1: the great conflict in the Classic Greece between Athens and Sparta,
Speaker 1: and the Thucidities trapped is when a rising power threatens
Speaker 1: to displace a ruling power. Bad things happened, alarm bell
Speaker 1: should sound danger ahead. In Thucydities case, it was, as
Speaker 1: he said famously quote the rise of Athens and the
Speaker 1: fear that this instilled in Sparta that made the war inevitable.
Speaker 1: In this book, I look at the last five years,
Speaker 1: I find sixteen cases in which a rising power threatened
Speaker 1: to displace the ruling power. Twelve of them ended in
Speaker 1: war four and not war, but in general, business as
Speaker 1: usual will produce history as usual. And in the case
Speaker 1: of the rise of China, which is now threatening to
Speaker 1: displace the US in arena after arena, either we'll learn
Speaker 1: the lessons of history or will be just to repeat it,
Speaker 1: probably with the inevitability of that trap. If anything, that
Speaker 1: the last presidential campaign taught us to look at this
Speaker 1: relationship in a binary uh. And there are a lot
Speaker 1: of people who fear the rise of China is conflict
Speaker 1: with China, conflict between China and the US, and inevitability
Speaker 1: as you see him in a word, No, okay. So
Speaker 1: when Tucidity said made the war inevitable, if when read
Speaker 1: it in context, as I say in the book, here's exaggerating.
Speaker 1: He bent this to be hyperbole just for the purpose
Speaker 1: of emphasis, just likely would be a more likely, more
Speaker 1: more appropriate word. So if we look at the recent history,
Speaker 1: as I say, just the last five hundred years, twelve
Speaker 1: cases of war, four cases of not war. So that
Speaker 1: clearly does not mean inevitable. That just means that's the
Speaker 1: way to bid it. If people don't learn, Graham, you
Speaker 1: founded the Kennedy School at Harvard. You were the force
Speaker 1: that got it going and got it onto bigger and
Speaker 1: better things. If you were lecturing today at Kennedy on
Speaker 1: North Vietnam, what will be? This is the number one
Speaker 1: question I get on excuse me a North Korea, A
Speaker 1: little misstatement there by myself. Yeah, North Korea, what do
Speaker 1: the how are the president's comments received in North Korea
Speaker 1: by their leadership? Well? I think the North Korean's or
Speaker 1: a puzz sol for all of us. And I don't
Speaker 1: believe anybody has a good fix on him. I mean,
Speaker 1: Kim Jongwin, at least until the past year, was clearly
Speaker 1: the strangest, most erratic, most impulsive, most unpredictable character you
Speaker 1: know on the on the global stage. And so this
Speaker 1: is a guy who, uh, he looks at his local
Speaker 1: things that he may be suspicious and gets a rocket
Speaker 1: launcher that blessed him away in public, who killed his
Speaker 1: half brother or had him killed in the recent event
Speaker 1: in Malaysias. So it's a very strange guy. Nonetheless, I
Speaker 1: think as he looks and listens to Trump, he may
Speaker 1: at least think that things will change. What he's learned
Speaker 1: from his father and from his grandfather is that North
Speaker 1: Korea can just take one step after another and defy
Speaker 1: the US and defy China in creating nuclear weapons, building
Speaker 1: nuclear arsenal testing, miss being capable to now to deliver
Speaker 1: a warhead against South Korea, also delivereral warhead against Japan,
Speaker 1: and god forbid soon but in the next year or so,
Speaker 1: as soon on the current path to be able to
Speaker 1: deliver a warhead against San Francisco or Los Angeles. So
Speaker 1: he hears Trump saying, no, I'm telling you, this is
Speaker 1: not going to happen. Of course, that's the same thing
Speaker 1: he heard from George W. Bush. That's the same thing
Speaker 1: you heard from Obama. That's the same thing he heard
Speaker 1: from Clinton. That's the same thing he heard from she
Speaker 1: and his predecessors. So I suspect he thinks he can
Speaker 1: get away with it, and that's why I think this
Speaker 1: is going to be very dangerous. He's strange, He's dangerous.
Speaker 1: How do you you counsel a student who wonders how
Speaker 1: you engage with a leader like that. We've enjoyed talking
Speaker 1: with your colleague, Ambassador Nicholas Burns from time to time
Speaker 1: here on the show. Of course, he's dealt with these issues.
Speaker 1: Ambassador Chris Hill, whom we've talked to as well, has
Speaker 1: dealt with him as well, how do you engage how
Speaker 1: do you deal with with with the leader who is
Speaker 1: so erratic? Well, I get if an excellent question that
Speaker 1: I would say that we've had great diplomats and great
Speaker 1: secretaries of state try to deal with this little But
Speaker 1: the truth is that if you look at the facts, unsuccessfully,
Speaker 1: that is, the succession of efforts have not been successful
Speaker 1: in dealing with either Kim Jolin or with his dad.
Speaker 1: I think, Uh, I start by asking about all leaders
Speaker 1: and their regimes, what do they really care about? What
Speaker 1: matters most to him? And I think for him it's
Speaker 1: his survival and the survival of the Kim regime. It's
Speaker 1: essentially a dynasty. But I think that I think therefore, Uh,
Speaker 1: to the extent that he feels that the regime is threatened,
Speaker 1: if there was a credible way to do that, we
Speaker 1: might be able to move him. A book that's getting
Speaker 1: considered in Rave reviews, Destined for War Graham Allison, who
Speaker 1: is at Harvard's Kennedy School, indeed was the founder and
Speaker 1: the soul of the school. A guy named Kissinger says,
Speaker 1: of this book, I read it with great interest. I
Speaker 1: can only hope that the U. S. China relationship becomes
Speaker 1: the fifth case to resolve itself peacefully. Speaking of peacefully,
Speaker 1: let's talk NATO, Professor Allison, there was a thing called
Speaker 1: the Truman Doctrine March twelfth, ninety seven. How scared were
Speaker 1: we in March of nine? Extremely uh? The again hard
Speaker 1: to remember the Cold War, but the Soviet Union emerged
Speaker 1: from World War Two as the other great power. UH.
Speaker 1: The Soviet Union was getting its act together and aggressively
Speaker 1: reaching into Europe, including into Greece and into Turkey, into France,
Speaker 1: into Italy, into their politics. And the Truman administration initially
Speaker 1: with the Truman Doctrine, and then with the Marshall Plan
Speaker 1: also in thy seven, and then with the creation of
Speaker 1: NATO in pushed back and basically that's the reason why
Speaker 1: we have a free Europe today. Let me ask you
Speaker 1: about the message, the tone, the content of the President's
Speaker 1: speech in Brussels last week. He received a lot of
Speaker 1: criticism for focusing so much on funding and so little
Speaker 1: on the alliance and its history and its importance. Let
Speaker 1: me stick with the funding side of things for just
Speaker 1: a second. Here. You've written about this before. I think
Speaker 1: your agreement here that European nations, most allies should be
Speaker 1: doing more to get to the two percent commitment they've
Speaker 1: they've made. Why is that case so difficult to make?
Speaker 1: Why does it have to be made? And such maybe
Speaker 1: a ham handed way by the President in Brussels, it's
Speaker 1: clearly something he cares a lot about. Why Why hasn't
Speaker 1: he Why haven't previous presents made much traction there? Well,
Speaker 1: I think it's a great question, and I think essentially
Speaker 1: the President speaks for many Americans when he says, rightly,
Speaker 1: Germans are as wealthy as the US, why should the
Speaker 1: U S Citizens taxpayers pay more to defend Germans. The
Speaker 1: Germans are prepared to pay for for themselves. And the
Speaker 1: answer is, well, we've been doing that through the period
Speaker 1: of the Cold War, when NATO was the pillar essential
Speaker 1: for the defeat of the evil Empire. That was understandable
Speaker 1: or at least explainable. But in the period the last
Speaker 1: twenty five years since the end of the Cold War,
Speaker 1: this becomes less and less plausible. From the European perspective.
Speaker 1: A free writer's role is a good is a good role.
Speaker 1: Uh And even though repeatedly presidents and secretaries of Defense
Speaker 1: have said to the NATO counterparts this cannot continue. We're
Speaker 1: not going to continue doing this. American tax players won't
Speaker 1: continue supporting it. Basically they've said yes, yes, yes, but
Speaker 1: they meant no, no, no. So I think I can
Speaker 1: empathize with President Trump's frustrations, which you're shared by many people.
Speaker 1: If you look at Gates's speech at his last NATO meeting,
Speaker 1: it looks very similar to the to what Trump was
Speaker 1: saying about. You know, look, guys, this cannot go on
Speaker 1: in this fast but moving people from a position in
Speaker 1: which you can't really exclude them from a defensive perimeter
Speaker 1: because we care about their defense as well. Uh is
Speaker 1: a dilimma. There will be some listening today who will
Speaker 1: sympathize with what Secretary of State Rex Tillerson said mumbled
Speaker 1: off Mike on his first trip to Europe as Secretary
Speaker 1: of State. Why why is NATO relevant? What do you
Speaker 1: say to them? How do you make the case to
Speaker 1: to Americans this alliance, which is stories and has been
Speaker 1: around for for so long, indeed, art triggered after nine eleven,
Speaker 1: has done more than Yeoman's work in Afghanistan in our
Speaker 1: war there. How do you make the case for its
Speaker 1: continued relevance that Americans should continue to put billions of
Speaker 1: dollars a year to pay for it. Well, I would
Speaker 1: say that the three things. First is the historic fact
Speaker 1: that it's been the greatest alliance in history that was
Speaker 1: essential for the defeat of the evil empires. Secondly, it
Speaker 1: is our closest set of colleagues for engagement in the world.
Speaker 1: So NATO members are with the US in Afghanistan today.
Speaker 1: NATO members were eager to be with the US after
Speaker 1: nine eleven. So if the US wants any company in
Speaker 1: the world in terms of values, interests, institutions, uh, it's NATO.
Speaker 1: And then thirdly, as President Trump has said, for the
Speaker 1: fight on terrorism, basically Europe is the heart of that.
Speaker 1: Now as you see the populations that have come into
Speaker 1: the European complies and not been fully intovated. What is
Speaker 1: your quickly, what is your prescription professor for Secretary Madison,
Speaker 1: Secretary Tillerson. Well, I think they have a hard job
Speaker 1: dealing with the NATO counterparts because the NATO counterparts have
Speaker 1: become accustomed to basically not being serious about defense, not
Speaker 1: being serious about their own defense, not spending what they
Speaker 1: should spend, and even worse than what they spend is
Speaker 1: what they spend it on mainly on the headquarters and
Speaker 1: bands and flyovers, not fighting capability. So trying to get
Speaker 1: Pato to be a good partner is going to be
Speaker 1: a long, hard shout. It has been. This has been wonderful.
Speaker 1: Destined for war Graham Allison again. Robert D. Calpot writing
Speaker 1: it up in the Journal today. I'm one money of
Speaker 1: the constructive reviews. Destined for Ward is most thoughtful. He
Speaker 1: is at Kennedy School, Harvard. Thanks for listening to the
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keene. David Gura is at David Gura. Before the podcast,
Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio, brought
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