WEBVTT - Surveillance: The USMCA Is Encouraging, Lagarde Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.200 Bloomberg dot Com, and of course on the Bloomberg Self. 0:00:32.320 --> 0:00:34.199 Caane back in the studio with me here in New 0:00:34.240 --> 0:00:36.440 York City. Very plase to say that. Mark Shannon joins us. 0:00:36.440 --> 0:00:37.680 You've got a new shop. Mark, just talk to me 0:00:37.720 --> 0:00:39.560 about what you're up to now. Yeah. So I recently 0:00:39.680 --> 0:00:43.680 joined our Bannockburn Global Foreign Exchange, which is based in Cincinnati. 0:00:43.720 --> 0:00:47.919 They specialize financial services private equity midsize corporates. I'll get 0:00:47.960 --> 0:00:49.800 to do a lot of the same kind of thing 0:00:50.000 --> 0:00:53.159 that I do analyzing the global capital markets, but for 0:00:53.200 --> 0:00:56.680 a different client base, more private equity corporations, as opposed 0:00:56.720 --> 0:00:58.600 to where I was before, where I'd be focusing more 0:00:58.600 --> 0:01:00.680 on the asset managers. Talked to me about what you 0:01:00.760 --> 0:01:03.440 tell them about the mess that's emerging in Europe. Once again, 0:01:03.480 --> 0:01:07.160 it's kind of a classic European confrontation between populace and 0:01:07.200 --> 0:01:10.559 this time in Italy, and between unelected officials in the 0:01:10.560 --> 0:01:13.479 European Union. We have the finance minister Germanic tria Um 0:01:13.640 --> 0:01:16.000 go up against some of the other finance ministers in Europe. 0:01:16.000 --> 0:01:18.640 In the last twenty four hours his country's fiscal push 0:01:18.720 --> 0:01:22.600 meeting a European Commission head that compared what was happening 0:01:23.000 --> 0:01:26.280 to taken us towards a Greek style crisis. Yeah, I 0:01:26.319 --> 0:01:28.399 think it's a bit over the topic. That's younger for you. 0:01:28.640 --> 0:01:30.280 I think he often has these kind of over the 0:01:30.319 --> 0:01:32.520 top type of comments. I do think that there is 0:01:32.520 --> 0:01:34.960 a confrontation brewing, but I'm not sure it's really going 0:01:35.000 --> 0:01:36.920 to be on the on the level of Greece. I 0:01:37.000 --> 0:01:40.160 think that both the Italians have learned something, but also 0:01:40.240 --> 0:01:42.280 the EU has learned something from Greece, and that is 0:01:42.280 --> 0:01:45.720 that the fiscal austerity could be counter productive. And I 0:01:45.760 --> 0:01:47.400 was saying before, is that what I think that Italy 0:01:47.440 --> 0:01:50.680 needs the most is growth and can and that means 0:01:50.680 --> 0:01:53.320 that Austeria might not help growth because here's what really happened. 0:01:53.320 --> 0:01:55.040 When you look at the different charts and you compare 0:01:55.040 --> 0:01:58.720 what happened in Italy, growth is really the deficit. That 0:01:58.880 --> 0:02:00.680 is to say that they really under forming in growth. 0:02:00.720 --> 0:02:03.640 And if this new fiscal plan can help stimulate growth 0:02:03.640 --> 0:02:06.080 by having a flatter tax for something like a million 0:02:06.120 --> 0:02:09.040 households fifteen percent tax, and if they can have some 0:02:09.040 --> 0:02:11.880 more social spending the ideas that can lift growth and 0:02:11.919 --> 0:02:14.959 thereby reducing the debt to GDP through stronger growth. The 0:02:15.000 --> 0:02:18.440 market right now is not pricing a positive outcome. We 0:02:18.480 --> 0:02:20.359 haven't had a day of games for the euro since 0:02:20.800 --> 0:02:22.760 last Tuesday, so it's been about a week. Has just 0:02:22.800 --> 0:02:26.079 been weaker Euro story bleeding through. Italian bonds are taking 0:02:26.120 --> 0:02:29.040 a bit of pain as well. The class half full 0:02:29.120 --> 0:02:31.680 approach to all of this is that maybe the moves 0:02:31.680 --> 0:02:34.400 outside of Italian bonds are mild. Maybe the moves outside 0:02:34.440 --> 0:02:36.880 of Italy are mild. But the glass half empty approach 0:02:36.919 --> 0:02:38.680 to all of this is that correlations are picking up, 0:02:38.880 --> 0:02:41.440 and you can see the correlations picking up with Italy 0:02:41.480 --> 0:02:44.440 and what's happening in Italy? Does that concern you? Concerned me? 0:02:44.520 --> 0:02:46.520 But I would really tell the story a little bit differently. 0:02:46.520 --> 0:02:48.639 The key thing I think that made the dollar turn 0:02:48.800 --> 0:02:50.840 last week was not what was going on in Italy 0:02:51.200 --> 0:02:52.680 that didn't happen until the very end of the week. 0:02:52.680 --> 0:02:55.440 Would happen was a Federal Reserve met and confirmed that 0:02:55.480 --> 0:02:58.320 they will not only tighten another time in December this year, 0:02:58.440 --> 0:03:01.040 but they're sticking with three hikes new next year, and 0:03:01.080 --> 0:03:02.600 the e c B says, sorry, we're not gonna be 0:03:02.600 --> 0:03:04.280 able to raise rates until the end of next summer 0:03:04.400 --> 0:03:06.959 at the earliest, and the Bank of Japan seems nowhere 0:03:06.960 --> 0:03:08.960 near close to raising interest rates. So I think that 0:03:09.360 --> 0:03:12.359 what the Federal Reserve did was singnal the continued divergence. 0:03:12.639 --> 0:03:14.720 And then the other factor that I would about to 0:03:14.720 --> 0:03:17.080 put as part of this story is the huge ralliant 0:03:17.080 --> 0:03:19.840 oil prices another leg up today, and this is because 0:03:20.240 --> 0:03:23.160 I primarily supply concerns, and here's you know, people are 0:03:23.160 --> 0:03:26.360 talking about how Trump is succeeding with his tactics with 0:03:26.880 --> 0:03:30.680 South Korea NAFTA two point oh, but one area that 0:03:30.720 --> 0:03:33.680 has been very successful is getting countries to participate in 0:03:33.680 --> 0:03:37.840 this embargo when it's not just countries around Iran, but 0:03:37.880 --> 0:03:41.680 we're talking about France and the Netherlands cutting back on 0:03:41.720 --> 0:03:45.000 their oil from from the Iranians a month ahead of time. 0:03:45.360 --> 0:03:47.520 And so I think that the supply concerns, So what's 0:03:47.520 --> 0:03:50.800 the problem here? Strong dollar because of fed higher oil prices, 0:03:50.800 --> 0:03:54.120 wagon emerging markets, and the Italian story. I mean, is 0:03:54.520 --> 0:03:57.720 Chairman Paul's central banker to the world, central banker to 0:03:57.800 --> 0:04:01.360 emerging markets, but it's also sent banker to the oil cartel. 0:04:01.560 --> 0:04:04.280 I mean again the professor, he alluded to that in 0:04:04.280 --> 0:04:06.720 the press conference. Maybe we'll talk more about it in 0:04:06.840 --> 0:04:11.520 speech today at the National Association for Business. But he 0:04:12.120 --> 0:04:16.320 is central banker to all these interplaying features, isn't he. Well, 0:04:16.360 --> 0:04:18.360 I I don't know if he'd say he's central banker 0:04:18.400 --> 0:04:20.120 to that, but I would say, is that what happens 0:04:20.120 --> 0:04:22.200 in the US still matters for a lot of these 0:04:22.240 --> 0:04:24.039 contest I mean, it does not have to take into 0:04:24.040 --> 0:04:26.960 account what happens to Saudi politics as a Saudi real 0:04:27.320 --> 0:04:30.120 when it makes policy. I mean, John, let me do this. 0:04:30.200 --> 0:04:35.400 I mean, you know how how on what I'm doing brand? 0:04:35.440 --> 0:04:37.279 I'm trying to bring it up here just a log 0:04:37.440 --> 0:04:40.520 chart of of of brand and I'm sorry, since the 0:04:40.560 --> 0:04:44.040 middle of August, it's a straight line up. Yeah, I mean, 0:04:44.040 --> 0:04:46.640 there's a little bit of persistence to the trend. Is 0:04:46.720 --> 0:04:50.279 this drip drip going on? It's like the Chinese water 0:04:50.320 --> 0:04:53.920 torture on emerging markets. And what it is is a 0:04:53.960 --> 0:04:57.839 stronger royal price, stronger dollar and just the heel to 0:04:57.839 --> 0:04:59.880 the United States just keep climbing, and the Federal was 0:05:00.000 --> 0:05:02.560 of is not backing away from great hikes. Do you 0:05:02.600 --> 0:05:04.400 have a more constructive view on AM with that as 0:05:04.440 --> 0:05:07.920 your backdrop? Unfortunately it's difficult to write I think so, 0:05:07.960 --> 0:05:09.719 I think that, But here's what it gives me the 0:05:09.800 --> 0:05:12.359 idea though, that why I think I'm still pretty negative 0:05:12.400 --> 0:05:14.920 on EM. It's not just because of these macro forces, 0:05:14.920 --> 0:05:18.039 but every so often I hear from my emerging market 0:05:18.240 --> 0:05:22.120 analysts and context that time to pick a bottom. And 0:05:22.160 --> 0:05:24.400 so we just had one of those phases, maybe it 0:05:24.440 --> 0:05:26.240 was about three or four weeks ago where the emerging 0:05:26.279 --> 0:05:27.960 where a lot of these emerging market alliss said, oh, 0:05:28.000 --> 0:05:32.120 we're cheap value now, so let's uh, emerging markets are goodbye, 0:05:32.120 --> 0:05:33.760 and so the same thing with Italian bonds. I think 0:05:33.760 --> 0:05:36.080 it was one of the largest asset managers had had 0:05:36.480 --> 0:05:40.080 up there up there portfolio investment in Italian bonds just 0:05:40.160 --> 0:05:42.000 for just in time for this to happen. But there 0:05:42.040 --> 0:05:43.360 is a price of the story. In the price of 0:05:43.400 --> 0:05:45.360 the story in the m has got pretty cheap. And 0:05:45.480 --> 0:05:48.120 within sort of emerging markets, you've had some pretty aggressive 0:05:48.360 --> 0:05:52.279 rallies and pockets of emerging markets in various securities, various 0:05:52.960 --> 0:05:55.760 foreign exchange markets, various currencies, and Mark there must be 0:05:55.839 --> 0:05:58.960 some opportunities there that you've identified. There are opportunities, but 0:05:59.160 --> 0:06:02.080 from from from my point of view, I think medium 0:06:02.160 --> 0:06:05.160 term investors, it's too early to go back into emerging markets. 0:06:05.440 --> 0:06:07.640 You say, well, there's value there. I say, yes, there's value, 0:06:07.720 --> 0:06:10.080 but it's going to give be more value shortly. Well, 0:06:10.120 --> 0:06:11.640 I guess it depends what how you wear and give 0:06:11.680 --> 0:06:13.960 you a short term sort of FX trade to date trade, 0:06:13.960 --> 0:06:16.160 and then maybe there's some opportunities out there. You're thinking 0:06:16.200 --> 0:06:18.400 more about digging a hole and starting a business in 0:06:18.440 --> 0:06:20.640 some of these countries at the moment, Mark, I would 0:06:20.800 --> 0:06:23.200 put I I take your point that for short term 0:06:23.240 --> 0:06:26.080 traders there there's I mean, there's enough volatility and emerging 0:06:26.120 --> 0:06:29.800 market currencies to have a short short term punt. But 0:06:29.880 --> 0:06:32.279 for long term people are thinking about their pension funds, 0:06:32.440 --> 0:06:36.200 people are thinking about endowments. I think too early for 0:06:36.200 --> 0:06:38.800 emerging markets. I'd be more comfortable maybe the middle of 0:06:38.880 --> 0:06:40.479 next year, but I think the Federal Reserve will be 0:06:40.560 --> 0:06:43.240 darned nearly done with the great hikes. Mark Chandler grant 0:06:43.320 --> 0:06:45.680 To can't shove the Banic Burnt Global for X, Chief 0:06:45.680 --> 0:07:00.640 market strategist and managing partner. Some of our guests are deceptive. 0:07:00.839 --> 0:07:05.360 They like to drive things down to simple concepts, usually 0:07:05.440 --> 0:07:11.360 simple concepts that provide couraging crisis, that provide UH, the 0:07:11.440 --> 0:07:14.360 ability to be in the market when you should be 0:07:14.400 --> 0:07:17.240 in the market, and even if there's pain, you're there 0:07:17.400 --> 0:07:21.280 and you're organized. But what is very deceptive is underneath 0:07:21.280 --> 0:07:24.400 the simplicity, there's a lot of first order principles in 0:07:24.440 --> 0:07:27.760 a lot of academics. He's out of Lehigh University, out 0:07:27.760 --> 0:07:31.480 of Wharton, UH, and he's not only a c f A, 0:07:32.320 --> 0:07:36.640 but also very cool a certified public accountant as well, 0:07:36.960 --> 0:07:40.960 and that would be Robert Dahl of Duvin Bob. I 0:07:41.040 --> 0:07:44.680 mean c f A, c p A. What how did 0:07:44.720 --> 0:07:47.400 your brain get through that? I mean, I've never gotten 0:07:47.400 --> 0:07:50.880 debits and credits, right, I guess I have nothing else 0:07:50.920 --> 0:07:52.760 better to do but read a book and study and 0:07:52.800 --> 0:07:55.520 take it. That's my friend. Well, it's a very cool 0:07:55.640 --> 0:07:58.960 set of academics around it. Take the academics now to 0:07:59.040 --> 0:08:01.200 this market at it. I mean in terms of like 0:08:01.200 --> 0:08:03.960 like cap em and all the rest of the mumbo jumbo. 0:08:04.240 --> 0:08:07.560 How do you stay in this market. You stay in 0:08:07.640 --> 0:08:13.239 because you recognize that we've got an amazing earnings profile. Yes, 0:08:13.600 --> 0:08:17.080 for the Bears, it's a decelerating but it's still gonna 0:08:17.120 --> 0:08:19.840 be plus twenty instead of plus twenty five. That's all 0:08:19.880 --> 0:08:23.280 pretty good news. Um. Look, they're gonna be bumps along 0:08:23.280 --> 0:08:26.280 the way. Valuation is no longer cheap. We've got a 0:08:26.320 --> 0:08:30.160 little competition. We're getting little expensive versus the rest of 0:08:30.200 --> 0:08:32.800 the world. So you know these things that will bite 0:08:32.840 --> 0:08:36.960 at the edges, I think without question, But you still 0:08:37.000 --> 0:08:40.160 want to be there. This bullmark is okay, Okay, fancy guy. 0:08:40.320 --> 0:08:42.920 Let's John, let's dazzle people here with the y intercept 0:08:42.960 --> 0:08:45.880 on the y axis. Okay, I'm talking to Courtney down 0:08:45.880 --> 0:08:50.000 to Georgetown and we're talking lord linear cap M theory. 0:08:50.120 --> 0:08:53.600 The fact is it's hinged on a straight line, sitting 0:08:53.640 --> 0:08:56.880 on the Y axis, and that is the anchor called 0:08:56.920 --> 0:08:59.480 the risk free rate. I think a lot of our 0:08:59.520 --> 0:09:03.160 our listeners understand the risk free rate. Bob dal do 0:09:03.240 --> 0:09:05.880 you have a clue where the risk free raiders? Does 0:09:05.960 --> 0:09:09.360 Jerome Powell know where the risk free rate is? I 0:09:09.440 --> 0:09:11.679 think no one knows, and it does seem to be 0:09:11.720 --> 0:09:15.600 moving around. Um, and we're getting closer to it. That's 0:09:15.640 --> 0:09:20.000 why the Fed conversations are getting harder. We've been in 0:09:20.040 --> 0:09:22.360 a period for the last couple of years, as you know, 0:09:22.960 --> 0:09:26.200 where um, the Feds in the process of normalizing, so 0:09:26.280 --> 0:09:28.680 you know, next meeting, they're gonna meet and they're gonna 0:09:28.720 --> 0:09:31.000 raise rates next meeting, and then went on or on. 0:09:31.240 --> 0:09:35.079 We're getting to the point now we're approaching neutral, whatever 0:09:35.120 --> 0:09:38.360 that number is, and therefore these conversations get a little tougher. 0:09:38.440 --> 0:09:40.280 What told to me about the competition for capital that 0:09:40.360 --> 0:09:44.520 just comes from vanilla generic tea bills two more than 0:09:44.600 --> 0:09:46.360 on a one month tea bill a five year note 0:09:46.400 --> 0:09:49.040 now with a yield of almost three percent? Bob, is 0:09:49.080 --> 0:09:50.959 there some real competition for capital in a white that 0:09:51.000 --> 0:09:55.200 it wasn't twelve months ago. Yeah, it's emerging competition. Look, 0:09:55.400 --> 0:09:58.760 I think I'll get better than that in the stock market. 0:09:58.800 --> 0:10:01.880 But the number you gave me is no longer zero. 0:10:02.520 --> 0:10:05.439 You know, it was a while where where cash returned 0:10:05.440 --> 0:10:07.439 close to zero and I could get a two percent 0:10:07.600 --> 0:10:11.200 yield in the stock market, plus capital appreciation as earnings 0:10:11.240 --> 0:10:14.080 came through. And we're beginning to creep in with some 0:10:14.200 --> 0:10:18.360 other conversations it's not the only asset in town anymore. Well, 0:10:18.440 --> 0:10:21.640 let's talk about the portfolio construction then, Bob, and coming forward, 0:10:21.679 --> 0:10:24.840 Tom talks about the risk free Right, there's some real 0:10:24.920 --> 0:10:26.840 talk that the risk might be in the risk free asset, 0:10:27.160 --> 0:10:30.400 which is the treasury market, another bond market as well. 0:10:30.440 --> 0:10:32.200 And then the next down to maybe they won't offer 0:10:32.240 --> 0:10:34.880 you that hedge, bobbab we are we having that discussion now? 0:10:35.000 --> 0:10:37.520 Is it's still too early to have that discussion. I 0:10:37.880 --> 0:10:41.440 think it's early because I can't see a recession out 0:10:41.480 --> 0:10:45.400 my window. Um, you know, we'll get another recession, but 0:10:46.080 --> 0:10:48.720 I'm enjoying and trying to figure out where to be 0:10:48.800 --> 0:10:51.800 where the earnings are going to come from. But yeah, 0:10:51.920 --> 0:10:56.080 we're unlikely to get in the next downturn, returns on 0:10:56.280 --> 0:10:59.560 cash like we typically do. Rates will peek at a 0:10:59.640 --> 0:11:02.760 lower level than we're used to. All they say, Bob Doll, 0:11:02.840 --> 0:11:06.360 if you look outside Bob Doll's window, he's got checked 0:11:06.440 --> 0:11:11.600 up the ibbots and chart back to up X. But 0:11:11.720 --> 0:11:13.640 to that point, Bob and the one of the most 0:11:13.640 --> 0:11:16.719 famous good morning Mr Ibbots and Professor Ibbotson. If you're 0:11:16.760 --> 0:11:20.280 listening up Yale, Bob Doll, what's really serious here is 0:11:20.320 --> 0:11:23.840 we've forgotten what a correction is. We've got we've forgotten 0:11:23.840 --> 0:11:27.439 what a bear market is explained to our audience. Where 0:11:27.559 --> 0:11:30.200 part of the game is you have to withstand the 0:11:30.240 --> 0:11:33.120 emotion of bear markets. You and I haven't had that 0:11:33.200 --> 0:11:37.880 conversation in about fourteen and a half years now. We haven't, thankfully, 0:11:37.880 --> 0:11:40.640 we haven't had to the bottom line and the most 0:11:40.640 --> 0:11:44.240 simple way to put his thocks do go down um, 0:11:44.280 --> 0:11:47.920 and it's usually accompanied by, uh, some sort of problem 0:11:48.080 --> 0:11:51.080 with the economy, which I repeat is not visible yet, 0:11:51.080 --> 0:11:54.120 but we will get there. And uh, you have to 0:11:54.280 --> 0:11:55.760 know what you own. You have to know what your 0:11:55.800 --> 0:11:58.800 time frame is. You know, somebody said to me recently, 0:11:59.320 --> 0:12:01.240 you know, can you tell me what to buy um 0:12:01.280 --> 0:12:03.560 if my time horizon is to the end of the year, 0:12:03.880 --> 0:12:08.640 And I said, yeah, cash, because because in lots of 0:12:08.679 --> 0:12:12.360 short term period stocks go down. Um. You'll look at 0:12:12.360 --> 0:12:14.240 those same ibits and charts and you look at the 0:12:14.240 --> 0:12:18.400 annual numbers and you'll find out stocks go down um 0:12:18.600 --> 0:12:23.600 more than of the years um. So we are so 0:12:23.600 --> 0:12:26.880 so spoiled because it's been such a beautiful ride. And 0:12:26.920 --> 0:12:30.080 it brings to mind financial advisors some who say, you know, 0:12:30.240 --> 0:12:32.400 I'm just buying the index fun or I'm just buying 0:12:32.400 --> 0:12:37.439 the ETF because they're safe. This word is really important. 0:12:37.520 --> 0:12:41.160 John Farrells spoiled. It's unfortunately accurate. I'm as guilty of 0:12:41.280 --> 0:12:43.959 it as anyone all of us. I mean, we've had 0:12:44.080 --> 0:12:49.319 six straight years of valuation appreciation. He's going up six 0:12:49.440 --> 0:12:52.520 straight years. We're breaking that trend this year. Six in 0:12:52.520 --> 0:12:55.840 a row has never happened before. The fixes back to 0:12:56.960 --> 0:12:59.800 oh no, what a world. Yeah, I'm just a round 0:12:59.840 --> 0:13:02.240 thing down, even though I've come back and forth on 0:13:02.280 --> 0:13:06.120 this before. There's a difference between peat margins and peak markets. 0:13:06.520 --> 0:13:08.400 Is that something that you're kind of pushing the clients 0:13:08.440 --> 0:13:10.800 at the moment as well? Yes, yes, yes, I hear 0:13:11.160 --> 0:13:13.920 a lot of bearish people say, well, peak earnings, we've 0:13:13.960 --> 0:13:17.120 grown twenty five percent, that's going to decelerate. Therefore I 0:13:17.120 --> 0:13:22.080 should sell stock careful. If plus twenty five earnings goes 0:13:22.160 --> 0:13:25.000 to minus five, yes, sell some stocks. But if we're 0:13:25.040 --> 0:13:28.000 going from place to plus twenty, not so fast. Can 0:13:28.000 --> 0:13:31.040 you own the banks here, and Mr Doll, I can. 0:13:31.200 --> 0:13:36.400 Here's my problem. They're still so over owned and overbelieved. Yes, 0:13:36.440 --> 0:13:40.120 they're pretty cheap. Yes, the fundamentals are reasonably good. They're 0:13:40.120 --> 0:13:42.880 not perfect, but there as they've been since the first 0:13:42.880 --> 0:13:45.720 of the year, overbelieved and overall. I can't get out 0:13:45.720 --> 0:13:48.920 of a meeting with a bunch of financial advisors where 0:13:48.960 --> 0:13:51.800 they don't ask what about the banks? I need that 0:13:51.920 --> 0:13:55.360 question to stop being asked before I can really get interested. 0:13:55.520 --> 0:13:57.559 Bob Doll, thank you so much, greatly appreciate it. With 0:13:57.880 --> 0:14:10.400 vine Ford, you know, it's for them to say that 0:14:10.440 --> 0:14:12.920 about the hurricanes is a big deal. It's got to 0:14:12.960 --> 0:14:14.400 be a huge to tell people. This is about the 0:14:14.480 --> 0:14:18.760 decline in sales last month eleven percent down versus the 0:14:18.920 --> 0:14:23.280 estimate for nine Once again, Ford Motor September, US vehicle 0:14:23.320 --> 0:14:29.320 sales decline eleven point two seventy F series trucks made. 0:14:29.320 --> 0:14:31.960 And you wonder how much of that has made in Canada, 0:14:32.040 --> 0:14:35.560 how much is made in Mexico or the United States? 0:14:36.160 --> 0:14:41.760 Trade yesterday Here is Christine Leguard. The impact is there already. 0:14:42.400 --> 0:14:45.280 And if you think of, you know, the the the 0:14:45.280 --> 0:14:49.000 impact that all the measures that have been floating around 0:14:49.360 --> 0:14:53.160 would have on global growth, then you're really talking about 0:14:53.200 --> 0:14:57.200 a major risk that would impact particularly China, because it's 0:14:57.240 --> 0:15:00.040 obviously one of the targets and the main target, but 0:15:00.240 --> 0:15:03.080 also all the other countries that are part of the 0:15:03.120 --> 0:15:06.400 supply chain or that provide raw materials. So you're talking 0:15:06.440 --> 0:15:11.520 about emerging market economies and many low income countries as well. 0:15:11.920 --> 0:15:16.320 Were a lot of the hardship and the difficult decisions, 0:15:16.600 --> 0:15:19.920 and the financing is so badly needed. You know, how 0:15:19.920 --> 0:15:24.680 can we advocate domestic revenue mobilization in countries of sub 0:15:24.720 --> 0:15:27.960 Saria and Africa if they can no longer participate in 0:15:28.320 --> 0:15:33.800 trade or supply chain organizations because of the threat applying 0:15:33.880 --> 0:15:37.800 to trade at large, the larger threat. And to bring 0:15:37.800 --> 0:15:40.840 it to this weekend in Canada and the United States, 0:15:40.880 --> 0:15:43.040 the U S m c A. I read to write 0:15:43.040 --> 0:15:45.400 it down here, it's such a new phrase for me, 0:15:45.960 --> 0:15:50.520 and I understand becomes Y m c A. It's US 0:15:50.520 --> 0:15:54.440 okay within this and within U S m c A. 0:15:55.440 --> 0:16:00.960 Now I got the song in my head. Now I'm 0:16:00.960 --> 0:16:04.000 not going to dance. That won't work out. And I 0:16:04.000 --> 0:16:07.960 would take um if I look at US m c 0:16:08.360 --> 0:16:11.520 A and I look at the dictate of what President 0:16:11.560 --> 0:16:16.600 Trump is very clearly advocated. It is an effort that 0:16:17.080 --> 0:16:19.760 brings in Canada, brings in Mexico, and I don't want 0:16:19.760 --> 0:16:22.320 to get you in trouble. You're gonna ask, did Canada 0:16:22.400 --> 0:16:25.480 and Mexico came into the rhetoric of President Trump? And 0:16:25.560 --> 0:16:27.640 is that something we're going to see in the coming 0:16:27.720 --> 0:16:31.520 years as a president looks at multilateral and brings it 0:16:31.560 --> 0:16:35.160 over to a unilateral approach. You know, It's it's hard 0:16:35.200 --> 0:16:37.960 for me to say and to make any comment about 0:16:38.000 --> 0:16:40.120 the agreement because we haven't had a chance to review 0:16:40.120 --> 0:16:43.760 It's I've read the same articles as you, but it's 0:16:43.800 --> 0:16:46.640 been in the making for thirteen months, so it's it's 0:16:47.720 --> 0:16:51.240 it's obvious that there must have been back and forth 0:16:51.280 --> 0:16:54.800 bargaining trade off and that's it's the whole point about negotiations. 0:16:55.520 --> 0:16:59.560 Two things that I'm quite pleased about. One is um 0:16:59.600 --> 0:17:03.800 it ex ists, and to have this tree lateral agreement 0:17:04.000 --> 0:17:08.000 trilateral agreement between Mexico, US and Canada, is I think 0:17:08.040 --> 0:17:12.320 a very positive I'm encouraged with that because not so 0:17:12.359 --> 0:17:15.760 long ago, many but many of us were in fear 0:17:16.000 --> 0:17:18.920 that there would be nothing. So there is an agreement. 0:17:19.480 --> 0:17:22.159 Number one. Number two, what I hear is that the 0:17:22.320 --> 0:17:25.960 services are also partly or entirely I don't know. I 0:17:25.960 --> 0:17:28.760 haven't read it yet. Covered and I think that is 0:17:28.880 --> 0:17:33.200 really showing the way that TPP, for instance, was was doing, 0:17:33.520 --> 0:17:37.080 in other words, expanding beyond the products that cross borders 0:17:37.520 --> 0:17:41.280 to services that also do, but not physically because many 0:17:41.359 --> 0:17:44.159 of them are are digital. There is a lot of 0:17:44.359 --> 0:17:48.320 upside to be had from services being included in the 0:17:48.400 --> 0:17:53.040 reduction of barriers. Christian Leaguard at the International Monetary Phone PIM, 0:17:53.119 --> 0:17:56.840 this was a really interesting meeting. This was the kickoff 0:17:57.400 --> 0:18:00.960 to their annual meeting in Indonesia in three years. It's 0:18:00.960 --> 0:18:05.639 in Marrakech, with Indonesian authorities in the front row in 0:18:05.720 --> 0:18:08.800 their embassy as well, of course, shattered by the earth 0:18:10.200 --> 0:18:12.960 by natural disaster. We're literally in the in the green 0:18:13.080 --> 0:18:15.440 room in the back, and the Ambassador of Indonesia sentence 0:18:15.520 --> 0:18:19.000 regrets because he had an emergency meeting with their foreign 0:18:19.000 --> 0:18:22.760 minister as well. So there was a whole overlay of emotion. 0:18:23.400 --> 0:18:26.280 And you had one part the i m F brass 0:18:26.320 --> 0:18:29.600 one part i m F staffers, and also a lot 0:18:29.640 --> 0:18:34.600 of Bloomberg surveillance guests and hosts in Economics and Politics 0:18:34.600 --> 0:18:37.960 of Washington, Douglas Holds Econ among others of the CBO 0:18:38.119 --> 0:18:43.920 there listening for the nuances you know the speech, Um, 0:18:43.960 --> 0:18:46.800 they're listening there for one or two sentences of what's 0:18:46.840 --> 0:18:50.040 the tone towards the world economic outlook next week? And 0:18:50.040 --> 0:19:04.080 of course her thoughts on all this trade issue, film 0:19:04.080 --> 0:19:07.080 Flis and Tom Keane on Amazon, and on the state 0:19:07.160 --> 0:19:10.080 of our labor economy. Without question, our interview of the day, 0:19:10.480 --> 0:19:13.800 if not of the week, is Alan Krueger of Princeton University. 0:19:14.200 --> 0:19:16.399 I put him in a category with a Nobel laureate 0:19:16.440 --> 0:19:20.320 Michael Spence, in that there's an exceptionally broad spectrum of 0:19:20.359 --> 0:19:24.600 economics and social studies that Professor Krueger does, but he 0:19:24.760 --> 0:19:31.159 is definitive Card and Krueger on the minimum wage, Alan Krueger, 0:19:31.160 --> 0:19:34.680 were you surprised at Jeff Bezos set a fifteen dollar 0:19:34.880 --> 0:19:39.639 minimum wage level for Amazon nationwide. I think he did 0:19:39.680 --> 0:19:43.680 the right thing. Um. I think what Amazon has done 0:19:44.440 --> 0:19:48.919 is what one expects of a responsible large company, especially 0:19:48.960 --> 0:19:50.760 at a time and the economy is doing so well. 0:19:51.520 --> 0:19:54.719 I think this is also an indication that wages are 0:19:54.760 --> 0:19:57.800 determined by more than just the blying demand, that companies 0:19:57.840 --> 0:19:59.880 have a lot of discretion over how much they pay 0:19:59.880 --> 0:20:05.320 their workers. Within this, Alan, is that maxim and the 0:20:05.400 --> 0:20:07.800 fear that if you raise the minimum wage, all other 0:20:07.880 --> 0:20:13.560 wages grow up, go up rather and labor and employer's 0:20:13.840 --> 0:20:17.960 lose control of their income. Statement, is that a legitimate fear, 0:20:18.000 --> 0:20:20.720 Whether it's a success of Amazon or it's a mom 0:20:20.760 --> 0:20:24.280 and pop shop in New Jersey barely getting by well, 0:20:24.320 --> 0:20:26.159 I think it's a sign of a healthy economy that 0:20:26.160 --> 0:20:30.280 we're going to see wages rise. Wages are gradually picking 0:20:30.320 --> 0:20:32.600 up flower than you would expect given the unemployment rate 0:20:33.080 --> 0:20:35.800 below four percent, And of course you need to balance. 0:20:36.640 --> 0:20:38.399 You don't want wages to be so high that it 0:20:38.440 --> 0:20:41.120 puts businesses out of business. But I don't think we're 0:20:41.119 --> 0:20:44.680 at much risk of that right now. Alan Cruger, could 0:20:44.720 --> 0:20:48.400 you share with people a little anecdote or story about 0:20:48.440 --> 0:20:52.399 your work comparing restaurant jobs in New Jersey and Pennsylvania 0:20:52.440 --> 0:20:56.439 and what you learned. Sure, what David cart and I 0:20:56.480 --> 0:21:01.600 discovered twenty five years ago was that the traditional UH 0:21:01.760 --> 0:21:04.399 supply and demand model at I was taught, that I 0:21:04.400 --> 0:21:07.440 taught my students is much more complicated in real life, 0:21:08.240 --> 0:21:11.639 and study after study has found that minimum wage increases 0:21:12.320 --> 0:21:15.879 don't reliably have an adverse effect unemployment. The job markets 0:21:15.960 --> 0:21:20.560 much more complicated when employers pay higher wages, they have 0:21:20.680 --> 0:21:24.640 lower turnover, they have higher productivity, they find it easier 0:21:24.680 --> 0:21:28.399 to recruit workers and fill vacancies, and these effects can 0:21:28.560 --> 0:21:32.800 offset the traditional demand side law of demand effect of 0:21:32.840 --> 0:21:37.040 a higher wage, possibly putting downward pressure on employment. If 0:21:37.080 --> 0:21:40.280 that's the case, why don't you see a revision in 0:21:40.400 --> 0:21:46.440 the way experts and economists who advised the government, Why 0:21:46.440 --> 0:21:51.439 don't they revise their description of what a minimum wage 0:21:51.520 --> 0:21:55.240 increase would do. I think this is one error where 0:21:55.240 --> 0:21:58.000 we have seen major change in the economics profession and 0:21:58.040 --> 0:22:01.760 in public policy since our work. The governments in the 0:22:01.840 --> 0:22:05.919 UK and Germany have imposed nationwide minimum wages substantially above 0:22:06.000 --> 0:22:09.359 the US level. I think the way the minimum wages 0:22:09.400 --> 0:22:11.959 presented in textbooks is much more balanced now, much more 0:22:12.000 --> 0:22:16.800 even handed. Explains that the job market is not perfectly competitive, 0:22:17.000 --> 0:22:21.119 that employers have market power, that bargaining power, monopsony power, 0:22:21.200 --> 0:22:25.639 the ability of companies to have disgression over wages influences 0:22:25.680 --> 0:22:29.040 the job market. Professor, as you do so well. You 0:22:29.080 --> 0:22:32.200 mentioned the word which is a confusing word, folks. This 0:22:32.320 --> 0:22:34.080 is how you move from a B minus to a 0:22:34.160 --> 0:22:37.520 C minus under Krueger and economics is try to tackle 0:22:38.160 --> 0:22:43.359 monopsony okay Alan. It's a rubber plantation in Singapore where 0:22:43.359 --> 0:22:48.040 the British plantation owner controls the price, the labor wage 0:22:48.119 --> 0:22:51.160