1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul Swinge. You, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,079 Speaker 1: at Bloomberg dot com. Well, it's part of a new 8 00:00:21,120 --> 00:00:23,760 Speaker 1: trade deal. The US is pushing China for a stable 9 00:00:24,320 --> 00:00:28,520 Speaker 1: one um. This actually request comes at odds with years 10 00:00:28,520 --> 00:00:30,600 Speaker 1: of global pressure on China from the Group of Twenty 11 00:00:30,680 --> 00:00:34,839 Speaker 1: Economies in particular to move towards a more free floating currency. 12 00:00:35,080 --> 00:00:37,640 Speaker 1: To get a sense of what's going on, let's bring 13 00:00:37,840 --> 00:00:41,200 Speaker 1: in Dr wind Thin. Dr Thinn is the global head 14 00:00:41,200 --> 00:00:43,639 Speaker 1: of currency strategy of Brown Brothers Harmon in New York. 15 00:00:43,680 --> 00:00:45,879 Speaker 1: He joins us on the phone. So, Dr Thinn, what 16 00:00:46,040 --> 00:00:49,800 Speaker 1: is behind the US move to, you know, in theory, 17 00:00:49,840 --> 00:00:56,520 Speaker 1: push the Chinese to stabilize the one. It's caught me off, 18 00:00:56,520 --> 00:00:58,520 Speaker 1: car because as you know, the US has some pressuring 19 00:00:59,040 --> 00:01:01,200 Speaker 1: China bout his exchange. It positive for years and years 20 00:01:01,240 --> 00:01:03,520 Speaker 1: and years. It's it's getting written up all the time 21 00:01:03,560 --> 00:01:07,120 Speaker 1: in the semi annual Treasury fact supports. Now it's not 22 00:01:07,160 --> 00:01:10,240 Speaker 1: been in designated currency manipulator, but you know it's it 23 00:01:10,280 --> 00:01:12,960 Speaker 1: meets some of the criteria. So then to turn around 24 00:01:13,200 --> 00:01:14,840 Speaker 1: and a most in the same breath asked them to 25 00:01:15,280 --> 00:01:17,840 Speaker 1: basically manipulate the currencies. To me, it just doesn't make 26 00:01:17,840 --> 00:01:20,480 Speaker 1: any sense. Um, you know, they hit the headline yesterday. 27 00:01:21,200 --> 00:01:24,080 Speaker 1: I don't think it's something that really China can really 28 00:01:24,120 --> 00:01:26,440 Speaker 1: commit to. I mean they are you know, opening up 29 00:01:26,840 --> 00:01:30,800 Speaker 1: um uh their economy and markets, the more market forces, 30 00:01:31,280 --> 00:01:32,800 Speaker 1: and to be quite honest, I don't think they want 31 00:01:32,800 --> 00:01:34,399 Speaker 1: to really lose that the career freedom. I mean that 32 00:01:34,480 --> 00:01:36,520 Speaker 1: is if you go into some sort of pig or 33 00:01:36,600 --> 00:01:39,959 Speaker 1: quasi pig uh, you know, you you lose some degrees 34 00:01:39,959 --> 00:01:42,520 Speaker 1: of freedom in terms of running monetary policy. And and 35 00:01:42,520 --> 00:01:44,959 Speaker 1: it's and given how many balls that the Chinese policy 36 00:01:45,000 --> 00:01:49,640 Speaker 1: makes a juggling right now in terms of structure reforms, uh, 37 00:01:49,720 --> 00:01:51,760 Speaker 1: secular slowdown, etcetera, I don't think that's something they want 38 00:01:51,760 --> 00:01:53,560 Speaker 1: to give up. So you know, it's one of those 39 00:01:53,560 --> 00:01:56,480 Speaker 1: things that there's traveling that's being out there. Um you 40 00:01:56,520 --> 00:01:58,680 Speaker 1: know I I I personally if they agreed to it. 41 00:01:58,680 --> 00:01:59,960 Speaker 1: It's not. I don't think it's something that they can 42 00:02:00,080 --> 00:02:03,720 Speaker 1: held to. Yeah, I gotta I gotta admit I was 43 00:02:04,240 --> 00:02:07,400 Speaker 1: struck by the same idea that basically the US has 44 00:02:07,440 --> 00:02:11,040 Speaker 1: been yelling at China all of these years for manipulation 45 00:02:11,160 --> 00:02:14,120 Speaker 1: not only of currency but also of of its companies. 46 00:02:14,160 --> 00:02:16,360 Speaker 1: And so then turn around and say, please manipulate them 47 00:02:16,360 --> 00:02:19,079 Speaker 1: because otherwise your currency is going to weaken too much? 48 00:02:19,560 --> 00:02:23,679 Speaker 1: Is head scratching at best? I'm wondering, do you buy 49 00:02:23,720 --> 00:02:26,840 Speaker 1: that the U n would weaken considerably versus a dollar 50 00:02:27,200 --> 00:02:31,000 Speaker 1: if it were allowed to float freely? Well, I think 51 00:02:31,040 --> 00:02:33,280 Speaker 1: part of that question has to be, uh, frame within 52 00:02:33,560 --> 00:02:35,600 Speaker 1: sort of the view of what what do I? What 53 00:02:35,639 --> 00:02:37,079 Speaker 1: do you? What do I think of em? Because we 54 00:02:37,120 --> 00:02:39,519 Speaker 1: when I say that, is that the correlation between the 55 00:02:39,560 --> 00:02:41,720 Speaker 1: you want exchange rate and for instance, the e M 56 00:02:41,800 --> 00:02:44,959 Speaker 1: s c I e M affects index is up around seventy, 57 00:02:45,760 --> 00:02:49,200 Speaker 1: which is a hugely a huge jump from what used 58 00:02:49,200 --> 00:02:51,560 Speaker 1: to be and what that reflects to me. You know, 59 00:02:51,560 --> 00:02:53,080 Speaker 1: of course it's still a black box, but to me, 60 00:02:53,240 --> 00:02:57,120 Speaker 1: you know, the PBOC fixes still fixes the you want 61 00:02:57,120 --> 00:02:58,960 Speaker 1: to exchange rea and allows to fuctuat in a certain ban, 62 00:02:59,520 --> 00:03:02,880 Speaker 1: but it tells me that this black box fixing mechanism 63 00:03:03,320 --> 00:03:06,640 Speaker 1: is has for better for worse introduced. Uh, you know, 64 00:03:06,919 --> 00:03:09,440 Speaker 1: a more market forces into the exchange rate. That is, 65 00:03:09,480 --> 00:03:11,960 Speaker 1: it's moving along with the rest of EM. So I 66 00:03:11,960 --> 00:03:13,959 Speaker 1: happen to be a little bit more negative on EM 67 00:03:14,000 --> 00:03:16,280 Speaker 1: than many I think out out there. I think there's 68 00:03:16,280 --> 00:03:18,200 Speaker 1: s some issues out quite a few issues out there. 69 00:03:18,240 --> 00:03:20,920 Speaker 1: That's that's that's weighing on EM. SO I'm looking at 70 00:03:20,919 --> 00:03:24,000 Speaker 1: through a lens of uh sort of, I see EM 71 00:03:24,040 --> 00:03:27,920 Speaker 1: weakness in this year, in two thousand nineteen. So my 72 00:03:28,560 --> 00:03:30,240 Speaker 1: view would be that the you want to probably weakend 73 00:03:30,240 --> 00:03:32,399 Speaker 1: as well along with the rest of EM. So Dr 74 00:03:32,480 --> 00:03:35,560 Speaker 1: Thinn So, given that you know the U. S And 75 00:03:35,640 --> 00:03:38,480 Speaker 1: Chinese negotiators are back at it trying to hammer out 76 00:03:38,480 --> 00:03:41,920 Speaker 1: a trade deal, what is your sense of the what 77 00:03:42,040 --> 00:03:43,920 Speaker 1: will come out of those negotiations and how does that 78 00:03:44,000 --> 00:03:46,800 Speaker 1: impact your view of the dollar? Sure, you know, you 79 00:03:46,880 --> 00:03:48,720 Speaker 1: probably know, yeah, and you guys have been caring at 80 00:03:48,720 --> 00:03:50,600 Speaker 1: a lot of the you know, the news and quite 81 00:03:50,600 --> 00:03:54,360 Speaker 1: timely fashion that we're playing sort of headline ping pong 82 00:03:54,480 --> 00:03:57,280 Speaker 1: right now. But for the most part, we're seeing some 83 00:03:57,320 --> 00:04:00,400 Speaker 1: constructive comes from both sides. This is quite fence from 84 00:04:00,440 --> 00:04:03,119 Speaker 1: back in December, when, if you recall, the US put 85 00:04:03,120 --> 00:04:05,800 Speaker 1: it their span on the Chinese didn't even bother putting 86 00:04:05,840 --> 00:04:08,600 Speaker 1: out any response. So they can they show the lines 87 00:04:08,640 --> 00:04:11,200 Speaker 1: communication and better. Their meetings are much more frequent. Remember 88 00:04:11,200 --> 00:04:13,480 Speaker 1: that we just ended a round in Beijing last week. 89 00:04:13,480 --> 00:04:16,680 Speaker 1: They're here in DC this week. So it's definitely picking 90 00:04:16,720 --> 00:04:18,200 Speaker 1: up all that you have to. Because we have the 91 00:04:18,200 --> 00:04:21,919 Speaker 1: March first deadline, I think most participants in the market 92 00:04:21,920 --> 00:04:24,640 Speaker 1: believe there will be some sort of delay. Despite all 93 00:04:24,640 --> 00:04:27,560 Speaker 1: this positive talk about some progress, it seems that the structure, 94 00:04:28,400 --> 00:04:31,200 Speaker 1: the speaking points of structural reform issue in China, and 95 00:04:31,240 --> 00:04:34,280 Speaker 1: I don't have something that can resolve in two weeks. 96 00:04:34,320 --> 00:04:37,160 Speaker 1: So you know, we've heard comments that we could get 97 00:04:37,160 --> 00:04:39,560 Speaker 1: a sixty day extension, and that's probably sort of the 98 00:04:39,600 --> 00:04:41,600 Speaker 1: base case, and I think the market would actually I 99 00:04:41,680 --> 00:04:43,480 Speaker 1: think that it's positive that we're just even though it's 100 00:04:43,480 --> 00:04:45,400 Speaker 1: pretty much like you know, taking the can down the road, 101 00:04:46,360 --> 00:04:47,599 Speaker 1: you know, from the long term, as you I do 102 00:04:47,640 --> 00:04:49,440 Speaker 1: think they'll come up with some sort of face saving 103 00:04:50,240 --> 00:04:52,800 Speaker 1: compromise that both sides can say the claim victory. Now, 104 00:04:53,520 --> 00:04:57,080 Speaker 1: I don't think it's gonna be some huge shift in 105 00:04:57,080 --> 00:05:00,280 Speaker 1: what in in UM trading relations. I saw it would 106 00:05:00,279 --> 00:05:01,640 Speaker 1: be more long lines what we saw with NAFTA to 107 00:05:01,800 --> 00:05:03,840 Speaker 1: oh just just sort of you know, sort of some 108 00:05:04,080 --> 00:05:05,680 Speaker 1: tweaking here and there. But you know, it's not gonna 109 00:05:05,680 --> 00:05:07,560 Speaker 1: be the greatest trade deals. And Slice Bread, which is 110 00:05:08,120 --> 00:05:12,000 Speaker 1: with spun slice Bread was was a fantastic trade deal. 111 00:05:12,360 --> 00:05:14,560 Speaker 1: Dr Thin, I do want to get your sense going 112 00:05:14,600 --> 00:05:16,200 Speaker 1: back to what you said about emerging markets and the 113 00:05:16,240 --> 00:05:19,320 Speaker 1: correlation between the U N and it broad our emerging markets. 114 00:05:19,360 --> 00:05:21,640 Speaker 1: In the past two days, the UN is weekend versus 115 00:05:21,640 --> 00:05:25,480 Speaker 1: the dollar by the UH actually has strengthened versus the 116 00:05:25,560 --> 00:05:29,480 Speaker 1: dollar UH the most since December and about two months. 117 00:05:29,480 --> 00:05:32,080 Speaker 1: And I'm just wondering, I mean, do you think that 118 00:05:32,080 --> 00:05:34,839 Speaker 1: that is idiosyncratic specific to the rumors that we have 119 00:05:34,920 --> 00:05:37,440 Speaker 1: heard that the US is looking for this is part 120 00:05:37,480 --> 00:05:40,080 Speaker 1: of the trade negotiations, a fixed UN and a sort 121 00:05:40,080 --> 00:05:42,240 Speaker 1: of artificial propping it up. Or do you believe that 122 00:05:42,279 --> 00:05:45,159 Speaker 1: this is sort of more optimism generally around emerging markets, 123 00:05:45,160 --> 00:05:47,720 Speaker 1: whether or not it will last. Yeah, I know, I 124 00:05:47,720 --> 00:05:49,520 Speaker 1: think it's the latter. If you look at the more 125 00:05:49,760 --> 00:05:51,640 Speaker 1: MSCI I refer to the MSc I e m f 126 00:05:51,880 --> 00:05:55,360 Speaker 1: X index. Uh, that's been up the last couple of days. Um, 127 00:05:55,360 --> 00:05:59,200 Speaker 1: it's a multi uh week high, so you know, and 128 00:05:59,240 --> 00:06:01,560 Speaker 1: in general it's also very high coal. You know, good 129 00:06:01,560 --> 00:06:04,680 Speaker 1: news on sort of the US trade um front is 130 00:06:05,080 --> 00:06:08,280 Speaker 1: tends to be reflected in an in a stronger EM currencies, 131 00:06:08,960 --> 00:06:11,320 Speaker 1: also a stronger Ausie dollar, and that you know, there's 132 00:06:11,360 --> 00:06:13,920 Speaker 1: a feedback loop between sort of wider e M and 133 00:06:13,920 --> 00:06:15,960 Speaker 1: and and Yuan, I think, but you know, it's all 134 00:06:15,960 --> 00:06:17,920 Speaker 1: sort of you know and in some ways made the 135 00:06:17,960 --> 00:06:21,040 Speaker 1: two sides of the same coin. Um. You know again, 136 00:06:21,240 --> 00:06:24,919 Speaker 1: um yea. As you know, Marcus Simmon, the pendulum swings 137 00:06:24,920 --> 00:06:26,960 Speaker 1: back and forth extremes. I tend to think sort of 138 00:06:26,960 --> 00:06:29,320 Speaker 1: maybe on the extremely positive side right now, I don't 139 00:06:29,360 --> 00:06:32,240 Speaker 1: think I don't think a significant deal is is likely 140 00:06:32,800 --> 00:06:34,880 Speaker 1: by the March first deadline. It's possible, but I don't 141 00:06:34,880 --> 00:06:37,320 Speaker 1: think it's my base case. Um, and so we may 142 00:06:37,360 --> 00:06:40,000 Speaker 1: see that Pengelum swing back a little bit, so dr thin, 143 00:06:40,839 --> 00:06:43,280 Speaker 1: let's go ahead. No, good, I'm sorry, good, No. I 144 00:06:43,320 --> 00:06:44,679 Speaker 1: think the one thing you have to sort of famous 145 00:06:44,760 --> 00:06:48,960 Speaker 1: whole debate about EM is that the fact that the 146 00:06:49,080 --> 00:06:52,840 Speaker 1: global growth outlook is you know, has worse than significantly 147 00:06:52,960 --> 00:06:55,760 Speaker 1: in the last several weeks. You know, the drade out 148 00:06:55,760 --> 00:06:59,640 Speaker 1: of Germany, UK, Japan and you know some except the 149 00:06:59,680 --> 00:07:02,400 Speaker 1: U S and with retail sales shock or uh you know. 150 00:07:02,600 --> 00:07:04,440 Speaker 1: To me, that's the really the most important thing I 151 00:07:04,480 --> 00:07:06,800 Speaker 1: think going forward for EM is is what's the global 152 00:07:06,800 --> 00:07:08,440 Speaker 1: grout growth outlook. And you know at this point there's 153 00:07:08,480 --> 00:07:11,160 Speaker 1: a big, big question mark UM and we need more 154 00:07:11,160 --> 00:07:13,920 Speaker 1: clarity on that so real quickly dr thin the other 155 00:07:13,960 --> 00:07:16,840 Speaker 1: side of the world, halfway around the world. UM Brexit 156 00:07:17,000 --> 00:07:19,520 Speaker 1: continues to be a very messy situation. Yet the Sterling 157 00:07:19,600 --> 00:07:21,800 Speaker 1: kind of hangs in there around one thirty. What's your 158 00:07:21,840 --> 00:07:24,640 Speaker 1: short term view on on sterling? Sure, you know again 159 00:07:24,880 --> 00:07:26,960 Speaker 1: it's been just like just headlines up and down, the 160 00:07:27,080 --> 00:07:31,160 Speaker 1: headline volatility, UM. I think to me, I think I 161 00:07:31,240 --> 00:07:33,120 Speaker 1: can't take there would be welcome as well. There's been 162 00:07:33,120 --> 00:07:38,280 Speaker 1: talk about extending the Article fifty deadline past the end 163 00:07:38,280 --> 00:07:41,400 Speaker 1: of March. There was headlines in the last year so 164 00:07:41,480 --> 00:07:45,520 Speaker 1: that they could somehow h a man the Irish pack stop. 165 00:07:45,560 --> 00:07:48,440 Speaker 1: I still think that's that's something UK wants, but the 166 00:07:48,440 --> 00:07:50,600 Speaker 1: the EU has made it clear that's a nonstarter, that 167 00:07:50,600 --> 00:07:53,840 Speaker 1: that's non negotiable. So again, I think the pendulum sentiment 168 00:07:53,880 --> 00:07:55,480 Speaker 1: has probably gone a little bit too far and son 169 00:07:55,560 --> 00:07:58,600 Speaker 1: of getting a deal, um, it may swing back a 170 00:07:58,640 --> 00:08:00,559 Speaker 1: little bit more towards the realism that you know, we're 171 00:08:00,560 --> 00:08:04,320 Speaker 1: probably the can down the road. Uh, it just seems that, 172 00:08:04,360 --> 00:08:09,200 Speaker 1: you know, the difference seemed too great to Dr Winton. 173 00:08:09,360 --> 00:08:10,840 Speaker 1: Unfortunately we have to leave it there. Thank you so 174 00:08:10,920 --> 00:08:13,080 Speaker 1: much for being with us, Dr Wintin, Global head of 175 00:08:13,120 --> 00:08:27,600 Speaker 1: Currency Strategy for Brown Brothers Harriman in New York. Well, 176 00:08:27,640 --> 00:08:30,600 Speaker 1: despite the winter storm that has descended upon our nation's capital, 177 00:08:30,640 --> 00:08:33,600 Speaker 1: we still expect to get the minutes from the Federal 178 00:08:33,640 --> 00:08:37,520 Speaker 1: Reserve meeting January meeting at two pm Eastern today, So 179 00:08:37,559 --> 00:08:39,800 Speaker 1: it help us break down what we might see in 180 00:08:40,120 --> 00:08:43,360 Speaker 1: those minutes. As Danielle di Martino booth. Danielle is the 181 00:08:43,440 --> 00:08:48,360 Speaker 1: CEO and Director of Intelligence at Quill Intelligence ll c UH. 182 00:08:48,600 --> 00:08:51,800 Speaker 1: She was also a former advisor at the Dallas Federal Reserve, 183 00:08:51,880 --> 00:08:54,679 Speaker 1: and she is a Bloomberg Opinion economist. Danielle, thanks so 184 00:08:54,760 --> 00:08:58,959 Speaker 1: much for joining us here two o'clock. Despite the storm, 185 00:08:59,000 --> 00:09:01,680 Speaker 1: we should get the minute. What are you expecting to see? 186 00:09:01,800 --> 00:09:04,080 Speaker 1: What are you looking for? Well, I'm expecting to see 187 00:09:04,120 --> 00:09:07,520 Speaker 1: an elaboration on the chatter that we know has been 188 00:09:07,520 --> 00:09:10,760 Speaker 1: going on behind closed doors about that balance sheet um. 189 00:09:10,840 --> 00:09:13,839 Speaker 1: In j Pal's press press conference, he said that over 190 00:09:13,880 --> 00:09:17,400 Speaker 1: the next several meetings they would determine what the thresholds 191 00:09:17,400 --> 00:09:19,760 Speaker 1: would be with the benchmarks are such that they were 192 00:09:19,800 --> 00:09:23,680 Speaker 1: to either potentially taper, but that's looking less likely after 193 00:09:23,800 --> 00:09:27,240 Speaker 1: Mesters comments that said that that quantitative tightening would stop 194 00:09:27,240 --> 00:09:30,680 Speaker 1: on a dime. They wouldn't taper the quantitative tightening, But 195 00:09:30,920 --> 00:09:33,000 Speaker 1: I think the minutes today are going to reveal more 196 00:09:33,040 --> 00:09:36,600 Speaker 1: details about what that process is going to be, what 197 00:09:36,679 --> 00:09:40,120 Speaker 1: economic thresholds will be hit such that they would also, 198 00:09:40,160 --> 00:09:43,360 Speaker 1: in addition to stopping the rate hikes, also stopped shrinking 199 00:09:43,360 --> 00:09:45,440 Speaker 1: the balance sheet. So we've talked with a lot of 200 00:09:45,440 --> 00:09:49,440 Speaker 1: investors and analysts who are still expecting one two more 201 00:09:49,600 --> 00:09:52,840 Speaker 1: rate hikes later this year. Do you think that the 202 00:09:52,840 --> 00:09:55,120 Speaker 1: Federal Reserve is going to hike rates again in this 203 00:09:55,240 --> 00:09:58,640 Speaker 1: credit cycle? No, I think that that train has left 204 00:09:58,640 --> 00:10:00,800 Speaker 1: the station at this point. I don't. I don't think that. 205 00:10:00,920 --> 00:10:02,880 Speaker 1: In in a recent speech when he was up on 206 00:10:02,920 --> 00:10:05,319 Speaker 1: stage with Bernakey and Yell and famously, I don't think 207 00:10:05,320 --> 00:10:07,200 Speaker 1: that he would have opened the door to quantitative easing, 208 00:10:07,400 --> 00:10:10,360 Speaker 1: which he reiterated in a subsequent appearance, if he had 209 00:10:10,520 --> 00:10:13,200 Speaker 1: not already taken rate hikes completely off the table. Do 210 00:10:13,240 --> 00:10:15,200 Speaker 1: you think that today's meeting minutes are going to show this? 211 00:10:15,720 --> 00:10:18,719 Speaker 1: I certainly do. I do, and and so that is 212 00:10:18,760 --> 00:10:22,120 Speaker 1: going to be positive for markets, right Well, I think 213 00:10:22,120 --> 00:10:25,920 Speaker 1: that markets have already priced in the positivity in today's minutes, 214 00:10:26,400 --> 00:10:29,200 Speaker 1: So I think that anything shy of the devishness that's 215 00:10:29,240 --> 00:10:32,680 Speaker 1: anticipated will be very unwelcome news. So that the market 216 00:10:32,720 --> 00:10:36,440 Speaker 1: has gotten fairly fairly ahead of itself. So, Danielle, we've 217 00:10:36,440 --> 00:10:39,280 Speaker 1: had the markets experience a tremendous amount of volatility in 218 00:10:39,320 --> 00:10:42,439 Speaker 1: December then kind of coming back reversing itself in January. 219 00:10:42,559 --> 00:10:44,120 Speaker 1: So far this year to date, a lot of it 220 00:10:44,160 --> 00:10:46,800 Speaker 1: was due to the Fed in the in the changing 221 00:10:46,840 --> 00:10:50,400 Speaker 1: positioning and policy and commentary and messaging. Do you think 222 00:10:50,400 --> 00:10:54,480 Speaker 1: the Fed minutes today will shine a light on what happened? Well, 223 00:10:54,520 --> 00:10:57,760 Speaker 1: I think that they will elaborate on the reasons that 224 00:10:57,880 --> 00:11:00,960 Speaker 1: the Fed went on pause. It will go into some 225 00:11:01,000 --> 00:11:05,440 Speaker 1: of the global economic um challenges that we've seen. Obviously, 226 00:11:05,440 --> 00:11:08,120 Speaker 1: We've seen Germany and Italy week and even more. Uh, 227 00:11:08,240 --> 00:11:11,080 Speaker 1: since then China is a train wreck. UM. So I 228 00:11:11,120 --> 00:11:14,240 Speaker 1: think that it will detail some of the reasons globally 229 00:11:14,280 --> 00:11:17,200 Speaker 1: and even here at home with housing UM being weak 230 00:11:17,520 --> 00:11:20,320 Speaker 1: in terms of justifying their position. I think that there 231 00:11:20,320 --> 00:11:24,120 Speaker 1: will be a lot of details. So out today, Golvins, 232 00:11:24,160 --> 00:11:28,320 Speaker 1: Peter Oppenheimer and a Bloomberg television interview said that the 233 00:11:28,400 --> 00:11:32,320 Speaker 1: expectations of recession have been overblown, and you can see 234 00:11:32,320 --> 00:11:37,320 Speaker 1: this by the positive performance of both credit and equities. 235 00:11:38,160 --> 00:11:41,000 Speaker 1: You disagree with that, why, well, I don't think that 236 00:11:41,040 --> 00:11:44,480 Speaker 1: you can actually take back the lagged defects of the 237 00:11:44,559 --> 00:11:48,079 Speaker 1: rate height of the rate tightening that has occurred. Uh. 238 00:11:48,120 --> 00:11:50,560 Speaker 1: The LaGG defects on the economy take nine to twenty 239 00:11:50,559 --> 00:11:53,080 Speaker 1: four months to settle in, so I don't think that 240 00:11:53,080 --> 00:11:56,800 Speaker 1: those can necessarily be reversed. On a more fundamental level. UH. 241 00:11:56,880 --> 00:11:59,839 Speaker 1: We follow at quil Intelligence very closely the breath of 242 00:12:00,160 --> 00:12:03,080 Speaker 1: jobless claims, and as of last week we saw fifty 243 00:12:03,080 --> 00:12:05,920 Speaker 1: three percent of states have rising year over year jobless claims. 244 00:12:06,200 --> 00:12:09,199 Speaker 1: Challenge your grain Christmas layoff data. We've seen six straight 245 00:12:09,280 --> 00:12:12,480 Speaker 1: months of year over year increases, and we know that 246 00:12:12,640 --> 00:12:14,760 Speaker 1: the best year of M and A on record mergers 247 00:12:14,760 --> 00:12:17,080 Speaker 1: and acquisitions on record, which was last year. We know 248 00:12:17,240 --> 00:12:21,160 Speaker 1: that that realizing synergy, so to speak, means that when 249 00:12:21,200 --> 00:12:23,600 Speaker 1: two companies get married, that there's going to be layoffs 250 00:12:23,640 --> 00:12:26,280 Speaker 1: that follow. And indeed that is the fastest growing category 251 00:12:26,559 --> 00:12:30,040 Speaker 1: of reasons behind layoffs. So we we we think that 252 00:12:30,040 --> 00:12:32,280 Speaker 1: this fifty three of states is going to increase. It's 253 00:12:32,320 --> 00:12:34,680 Speaker 1: just two percent just over a year ago, So we 254 00:12:34,720 --> 00:12:37,080 Speaker 1: think that that's going to increase, and that that alone 255 00:12:37,200 --> 00:12:39,599 Speaker 1: states that if you've got rising joblessness, you've got a 256 00:12:39,720 --> 00:12:42,880 Speaker 1: rising probability of a recession. So, Daniel, you're the author 257 00:12:42,920 --> 00:12:44,480 Speaker 1: of a book who's title I just love. I think 258 00:12:44,480 --> 00:12:47,360 Speaker 1: it's great, just titled fed Up and Insiders take on 259 00:12:47,400 --> 00:12:50,480 Speaker 1: why the Federal Reserve is bad for America? Why is 260 00:12:50,480 --> 00:12:53,120 Speaker 1: the Federal Reserve bad for America? In your opinion, Well, 261 00:12:53,160 --> 00:12:55,640 Speaker 1: I'm I'm an old uh. I guess I'm an old 262 00:12:55,679 --> 00:12:59,920 Speaker 1: markets veteran who took securities pricing way back when mark 263 00:13:00,000 --> 00:13:03,640 Speaker 1: It's actually determined prices. And you know, back in in 264 00:13:03,640 --> 00:13:07,040 Speaker 1: the aftermath of of Black Monday, Alan Greenspan started leaking 265 00:13:07,080 --> 00:13:10,040 Speaker 1: information to fix and come trading desks ahead of FED 266 00:13:10,080 --> 00:13:12,480 Speaker 1: moves to inject liquidity into the markets. This is a 267 00:13:12,480 --> 00:13:15,400 Speaker 1: matter of public record. And as the years went by, 268 00:13:15,559 --> 00:13:17,400 Speaker 1: every time there was a bigger hiccup, whether it was 269 00:13:17,440 --> 00:13:20,800 Speaker 1: long term capital management blowing up or San Diego and 270 00:13:21,240 --> 00:13:24,880 Speaker 1: in the municipal bankruptcy, whatever it was, every time there 271 00:13:25,040 --> 00:13:27,160 Speaker 1: was the need for the FED to step in, they 272 00:13:27,280 --> 00:13:29,920 Speaker 1: had to step in in a bigger way. And I 273 00:13:29,960 --> 00:13:35,360 Speaker 1: think intervening in market functionality is inherently not non American. 274 00:13:35,720 --> 00:13:39,320 Speaker 1: Given the fact that real rates right now are not 275 00:13:39,400 --> 00:13:42,520 Speaker 1: much above zero, do you think that the FED is 276 00:13:42,600 --> 00:13:46,000 Speaker 1: out of ammunition to counter the next downturn? I think 277 00:13:46,000 --> 00:13:48,760 Speaker 1: it's going to be very difficult. I'm not sure how 278 00:13:48,840 --> 00:13:52,240 Speaker 1: quickly we will recapture the zero bound, but I think 279 00:13:52,240 --> 00:13:55,080 Speaker 1: Powell's understanding that we will go back to zero is 280 00:13:55,120 --> 00:13:57,680 Speaker 1: what has opened the door to his discussing quantitative easing 281 00:13:58,120 --> 00:14:00,600 Speaker 1: real quick. Here. Where do you think the next credit 282 00:14:00,640 --> 00:14:02,960 Speaker 1: crisis is going to be? You know, it's hard to say, 283 00:14:02,960 --> 00:14:04,480 Speaker 1: but I would have to say that with all the 284 00:14:04,520 --> 00:14:07,120 Speaker 1: negative yielding corporate debt in Europe and the fact that 285 00:14:07,120 --> 00:14:10,960 Speaker 1: the ECB was able to to to intervene in that 286 00:14:11,000 --> 00:14:13,920 Speaker 1: market and to purchase bonds in that market, suggests to 287 00:14:13,960 --> 00:14:16,680 Speaker 1: me that that is the most overvalued credit market in 288 00:14:16,720 --> 00:14:20,000 Speaker 1: the world. Negative yielding debt still eight trillion dollars or 289 00:14:20,040 --> 00:14:24,240 Speaker 1: more out there of such debt, which defies logic to 290 00:14:24,280 --> 00:14:28,800 Speaker 1: pay a borrower to borrow money from you. Danielle D. 291 00:14:28,920 --> 00:14:31,720 Speaker 1: Martino Booth, thank you so much for being here. Danielle D. 292 00:14:31,800 --> 00:14:35,280 Speaker 1: Martino Booth is chief executive of Quill Intelligence l l C. 293 00:14:35,520 --> 00:14:38,120 Speaker 1: Also a former advisor at the Dallas Federal Reserve and 294 00:14:38,120 --> 00:14:42,040 Speaker 1: a Bloomberg opinion columnist, author of Fed Up and Insiders 295 00:14:42,080 --> 00:14:54,880 Speaker 1: take on why the Food Reserve is bad for America. 296 00:14:55,520 --> 00:14:58,840 Speaker 1: Earnings recession is upon us. That is what we keep 297 00:14:58,840 --> 00:15:02,480 Speaker 1: hearing from a lot of analysts across Wall Street. But 298 00:15:02,520 --> 00:15:04,760 Speaker 1: the question is doesn't really matter when it comes to 299 00:15:04,960 --> 00:15:07,880 Speaker 1: how much stocks can rally and is it so bad 300 00:15:07,960 --> 00:15:10,840 Speaker 1: other than they are words sounding just terrible. Joining us 301 00:15:10,840 --> 00:15:13,520 Speaker 1: here in the Bloomberg Interactive Broker Studios is nickole As, 302 00:15:13,600 --> 00:15:16,640 Speaker 1: co founder of Data Trek Research l l SEE. Also 303 00:15:16,680 --> 00:15:19,240 Speaker 1: a Bloomberg opinion columnist, Nick, thank you so much for 304 00:15:19,320 --> 00:15:22,200 Speaker 1: being here. Also a fellow University of Chicago grad. I 305 00:15:22,240 --> 00:15:24,440 Speaker 1: had through that throw that in, So let's talk about this. 306 00:15:25,080 --> 00:15:28,120 Speaker 1: Are we looking at an earnings recession? Here in nine 307 00:15:28,400 --> 00:15:30,800 Speaker 1: and does it matter. The short answer on point one 308 00:15:30,880 --> 00:15:33,360 Speaker 1: is we absolutely are. First quarter earning should be down 309 00:15:33,360 --> 00:15:36,560 Speaker 1: about two two point two percent. Second quarter expectations are 310 00:15:36,640 --> 00:15:38,960 Speaker 1: running one percent, but they were two percent a month ago, 311 00:15:39,000 --> 00:15:42,400 Speaker 1: so we'll certainly see analysts cut those numbers too negative quarters. 312 00:15:42,400 --> 00:15:44,240 Speaker 1: That's an earnings recession. And now we kind of know 313 00:15:44,240 --> 00:15:45,960 Speaker 1: why the market fell apart in the fourth quarter of 314 00:15:46,040 --> 00:15:48,440 Speaker 1: last year. It was discounting this As far as what 315 00:15:48,520 --> 00:15:53,200 Speaker 1: it means for the future, not very much. I mean, analysts, markets, investors, 316 00:15:53,200 --> 00:15:55,120 Speaker 1: they're all looking for a settlement to the trade deal 317 00:15:55,320 --> 00:15:58,040 Speaker 1: to reignitet liibal economic growth and get the second half 318 00:15:58,080 --> 00:16:00,200 Speaker 1: earnings back on track. And that's why we're rallying this year. 319 00:16:00,480 --> 00:16:02,800 Speaker 1: So Nick, I was a former sell side analyst, So 320 00:16:02,920 --> 00:16:05,440 Speaker 1: I'm trying to ask you, how do you use sell 321 00:16:05,480 --> 00:16:07,440 Speaker 1: side research these days and what do you think they're 322 00:16:07,480 --> 00:16:09,160 Speaker 1: getting right and wrong as they think about earnings for 323 00:16:09,160 --> 00:16:11,360 Speaker 1: next year? For example? Yeah, I was also a sell said, 324 00:16:11,480 --> 00:16:13,680 Speaker 1: let's spen spent a decade the old First Boston covering 325 00:16:13,680 --> 00:16:16,160 Speaker 1: the autos in the nineteen nineties. I was there as well, 326 00:16:16,680 --> 00:16:20,200 Speaker 1: And so you know, analysts, industry analysts do one thing 327 00:16:20,320 --> 00:16:23,040 Speaker 1: very well. They analyze the industry and they try to 328 00:16:23,080 --> 00:16:26,040 Speaker 1: factor all those things into their earnings models. But they 329 00:16:26,040 --> 00:16:28,480 Speaker 1: are generally late to cut numbers, as we all know. 330 00:16:28,960 --> 00:16:31,320 Speaker 1: So we should have been seeing number cuts all the 331 00:16:31,360 --> 00:16:33,160 Speaker 1: way through the middle half of the middle and back 332 00:16:33,160 --> 00:16:35,480 Speaker 1: half of last year. We're only getting them now. And 333 00:16:35,520 --> 00:16:37,400 Speaker 1: that kind of tells you that the market was ahead 334 00:16:37,440 --> 00:16:40,800 Speaker 1: of the analysts. And they usually are priced typically leads fundamentals, 335 00:16:40,800 --> 00:16:45,800 Speaker 1: and this is no exception, So don't use them, So 336 00:16:45,960 --> 00:16:48,480 Speaker 1: use them for what they're sorry, I mean, let's take 337 00:16:48,520 --> 00:16:51,120 Speaker 1: this to the logical stuff. Here are they useful? They 338 00:16:51,160 --> 00:16:53,720 Speaker 1: are useful from two perspectives. First, they have a deep 339 00:16:53,720 --> 00:16:56,400 Speaker 1: industry knowledge, and if you want to be a fundamental investor, 340 00:16:56,520 --> 00:16:59,880 Speaker 1: you need that information. And somebody, particularly the analysts that 341 00:17:00,040 --> 00:17:02,680 Speaker 1: have ten twenty years of experience covering a sector, they're 342 00:17:02,760 --> 00:17:05,159 Speaker 1: very useful to understand the sector and the managements and 343 00:17:05,160 --> 00:17:08,159 Speaker 1: everything else. If you want to understand where the market's going, though, 344 00:17:08,200 --> 00:17:10,040 Speaker 1: you've got to be thinking about where the analysts will 345 00:17:10,040 --> 00:17:12,480 Speaker 1: be taking their numbers versus what they're doing with them 346 00:17:12,520 --> 00:17:15,800 Speaker 1: right now. Well that sounds like an ad for Bloomberg Intelligence. Um. 347 00:17:15,880 --> 00:17:18,440 Speaker 1: But Nick, So when you think about the market, how 348 00:17:18,680 --> 00:17:21,639 Speaker 1: how important are some of these geopolitical macro issues, whether 349 00:17:21,640 --> 00:17:24,000 Speaker 1: it's you know, the trade deal with China, you know, 350 00:17:24,480 --> 00:17:27,119 Speaker 1: a Brexit deal. You know, that sounds a lot more 351 00:17:27,160 --> 00:17:29,280 Speaker 1: macro obviously than some of the micro levels you were 352 00:17:29,280 --> 00:17:33,080 Speaker 1: talking about. For the moment, macro really trumps everything else, 353 00:17:33,119 --> 00:17:35,760 Speaker 1: I think in the US equity market because the near 354 00:17:35,880 --> 00:17:38,200 Speaker 1: term fundamentals, both in the US and around the world 355 00:17:38,240 --> 00:17:40,679 Speaker 1: are kind of sluggish. We're seeing a possible recession in 356 00:17:40,720 --> 00:17:44,280 Speaker 1: parts of Europe, China, slowing. US retail sales and other 357 00:17:44,359 --> 00:17:46,639 Speaker 1: data have been kind of sloppy, and so the markets 358 00:17:46,640 --> 00:17:50,400 Speaker 1: are really hinging on whether or not we get a good, descriptive, 359 00:17:50,640 --> 00:17:53,600 Speaker 1: detailed trade deal between the US and China that then 360 00:17:53,680 --> 00:17:57,080 Speaker 1: gives both corporates and investors confidence to invest in the 361 00:17:57,119 --> 00:18:00,560 Speaker 1: back half of the year. Okay, So Christian christnam Money 362 00:18:00,600 --> 00:18:03,760 Speaker 1: of Oppenheimer Funds was on Blueberg Television earlier this morning, 363 00:18:03,760 --> 00:18:06,119 Speaker 1: and he was saying he could see this credit cycle, 364 00:18:06,240 --> 00:18:10,399 Speaker 1: this rally and markets continuing for five more years. Is 365 00:18:10,440 --> 00:18:16,960 Speaker 1: that feasible to you? Anything is possible. Let's not get 366 00:18:17,000 --> 00:18:21,639 Speaker 1: into relatives. Were philosophical. We're ten years into a recovery. 367 00:18:21,680 --> 00:18:23,640 Speaker 1: In practical terms, if you sort of give a pass 368 00:18:23,680 --> 00:18:25,720 Speaker 1: to two thousand and eleven, right, but they don't die 369 00:18:25,720 --> 00:18:28,000 Speaker 1: of old aged YadA, YadA. I mean, is if you 370 00:18:28,320 --> 00:18:31,720 Speaker 1: is it, is it a likely outcome to you? Likely? No, possible? Yes, 371 00:18:31,760 --> 00:18:36,000 Speaker 1: I would give odds odds, you know with some of 372 00:18:36,080 --> 00:18:37,960 Speaker 1: New York term issues like we're getting this year with 373 00:18:38,000 --> 00:18:40,760 Speaker 1: this bump in the road with earnings. Um. But you know, 374 00:18:41,880 --> 00:18:43,679 Speaker 1: cycles tend to form for a reason and tend to 375 00:18:43,680 --> 00:18:46,120 Speaker 1: repeat for a reason. People get too enthusiastics at the top, 376 00:18:46,359 --> 00:18:48,119 Speaker 1: they take on too much credit, and then you have 377 00:18:48,160 --> 00:18:50,639 Speaker 1: an economic downturn and the leverage kills him. But we 378 00:18:50,720 --> 00:18:53,840 Speaker 1: have heard very little enthusiasm. I mean, let's be very honest. 379 00:18:53,880 --> 00:18:57,280 Speaker 1: People have been bearished upon parish doubling down on parishness 380 00:18:57,480 --> 00:18:59,920 Speaker 1: for the past ten years. Yes, but I mean it's 381 00:19:00,160 --> 00:19:03,000 Speaker 1: in in a you know, historically low indest rate environment. 382 00:19:03,280 --> 00:19:06,199 Speaker 1: You know, how crazy was that in hindsight? But how 383 00:19:06,240 --> 00:19:08,280 Speaker 1: about the volatility nick that we've been dealing with just 384 00:19:08,320 --> 00:19:10,159 Speaker 1: over the last couple of three months. How does that 385 00:19:10,200 --> 00:19:13,160 Speaker 1: factor into your analysis? I mean we've been whipsawed December 386 00:19:13,280 --> 00:19:15,720 Speaker 1: versus year to day nineteen. How does that factor in 387 00:19:16,480 --> 00:19:17,879 Speaker 1: we have in whip saw, but I would put it 388 00:19:17,920 --> 00:19:20,520 Speaker 1: into a larger historical context. So, for example, a third 389 00:19:20,600 --> 00:19:23,840 Speaker 1: quarter of the last year SMP had no one percent days, 390 00:19:24,040 --> 00:19:25,960 Speaker 1: meaning it didn't move more than one percent in any 391 00:19:26,000 --> 00:19:28,840 Speaker 1: given day. Same with Q four of seventeen. You have 392 00:19:28,880 --> 00:19:31,120 Speaker 1: to go back to the early nineteen sixties to see 393 00:19:31,280 --> 00:19:34,320 Speaker 1: entire quarters where there was no volatility of that nature 394 00:19:34,400 --> 00:19:36,840 Speaker 1: one percent days. So in the grand scheme of things, 395 00:19:36,840 --> 00:19:39,680 Speaker 1: we're reverting back to a norm, to a mean. On average, 396 00:19:39,720 --> 00:19:41,640 Speaker 1: the SMP will have a one percent day every week 397 00:19:41,680 --> 00:19:44,719 Speaker 1: of the year. That's the average. Back to Nick real 398 00:19:44,800 --> 00:19:47,120 Speaker 1: quick here you were saying that you think that things 399 00:19:47,160 --> 00:19:48,960 Speaker 1: are going to be driven much more by the macro, 400 00:19:49,119 --> 00:19:54,679 Speaker 1: but we have seen sectors go through downturns, housing, energy. 401 00:19:54,880 --> 00:19:57,360 Speaker 1: What's the next sector to face a downturn? I'll tell 402 00:19:57,359 --> 00:19:59,479 Speaker 1: you the section we're looking at actually today for our 403 00:19:59,520 --> 00:20:02,800 Speaker 1: note for and Tonita's healthcare. Healthcare has not been a 404 00:20:02,880 --> 00:20:04,800 Speaker 1: leadership group this year, and it's supposed to be a 405 00:20:04,840 --> 00:20:07,360 Speaker 1: defensive group, and it's up only seven on the large 406 00:20:07,400 --> 00:20:10,600 Speaker 1: cap side versus eleven for the SMP, and it's lacking, 407 00:20:10,600 --> 00:20:13,640 Speaker 1: and it's lacking pretty seriously. And you know, you've seen 408 00:20:13,920 --> 00:20:16,600 Speaker 1: the three top names Fies, United Health, Johnson, and Johnson. 409 00:20:16,720 --> 00:20:19,280 Speaker 1: None of them are performing this year. So healthcare is 410 00:20:19,280 --> 00:20:21,280 Speaker 1: the one area that kind of befuddles us right now 411 00:20:21,320 --> 00:20:22,879 Speaker 1: because it should be working better than It is a 412 00:20:23,000 --> 00:20:25,919 Speaker 1: good growth group, it has good fundamentals, and yet so 413 00:20:25,960 --> 00:20:29,480 Speaker 1: far you're to date nothing done. Healthcare befuddlement. I can 414 00:20:29,520 --> 00:20:33,240 Speaker 1: I can relate to that? Nicolas co founder of Data 415 00:20:33,320 --> 00:20:35,399 Speaker 1: Trek Research l l C. He joins us in our 416 00:20:35,400 --> 00:20:38,480 Speaker 1: Bloomberg eleven three Ghost studios. Nick, thanks so much for 417 00:20:38,600 --> 00:20:52,719 Speaker 1: joining us. Deutsche Bank was one of the only major 418 00:20:52,800 --> 00:20:55,800 Speaker 1: banks that would continue to lend to the Trump organization 419 00:20:55,960 --> 00:20:59,520 Speaker 1: after a series of bankruptcies which created a sort of 420 00:20:59,560 --> 00:21:03,280 Speaker 1: cannunt drum for the German lender when a President Trump 421 00:21:03,359 --> 00:21:06,320 Speaker 1: won the US election. Joining us here to talk a 422 00:21:06,359 --> 00:21:09,880 Speaker 1: little bit about the deliberations inside of Deutsche Bank at 423 00:21:09,880 --> 00:21:13,320 Speaker 1: the time and the implications today. Shakia and Sarapore. He 424 00:21:13,359 --> 00:21:15,800 Speaker 1: has a reporter for Bloomberg News, joining us here in 425 00:21:15,800 --> 00:21:18,920 Speaker 1: our Bloomberg Interactive Broker's studios. So Shakin, can you lay 426 00:21:19,000 --> 00:21:22,760 Speaker 1: out just what was happening in and how Deutsche Bank 427 00:21:23,080 --> 00:21:27,280 Speaker 1: was discussing it? Sure? So in the aftermath election, Deutsche 428 00:21:27,280 --> 00:21:30,960 Speaker 1: Bank discover that it had, you know, what would appear 429 00:21:31,000 --> 00:21:33,320 Speaker 1: to be a problem on its hands, where it had 430 00:21:33,400 --> 00:21:36,639 Speaker 1: lent a considerable amount of money to the incoming president 431 00:21:36,680 --> 00:21:39,719 Speaker 1: and his company, and those loans were going to be 432 00:21:40,920 --> 00:21:44,000 Speaker 1: start coming to during a hypothetical second term, and they 433 00:21:44,040 --> 00:21:46,280 Speaker 1: had to confront the risk of, well, what happens if 434 00:21:46,320 --> 00:21:49,119 Speaker 1: he defaults, the company defaults, and we have to go 435 00:21:49,160 --> 00:21:51,760 Speaker 1: after his assets? What? What is that? What kind of 436 00:21:51,800 --> 00:21:54,440 Speaker 1: situations that create for us? So internally at Deutsche Bank, 437 00:21:54,440 --> 00:21:57,520 Speaker 1: at the highest level, bank executives discussed, you know, this 438 00:21:57,560 --> 00:22:01,320 Speaker 1: possible hypothetical risk, and as part of their deliberations they 439 00:22:01,359 --> 00:22:04,679 Speaker 1: discussed extending the repayment term for his loans so they 440 00:22:04,720 --> 00:22:07,600 Speaker 1: wouldn't mature until after a hypothetical second term. Now, the 441 00:22:07,600 --> 00:22:10,720 Speaker 1: bank ultimately decided against this. They didn't change the terms 442 00:22:10,720 --> 00:22:13,080 Speaker 1: of his loans and instead they decided they won't do 443 00:22:13,080 --> 00:22:16,800 Speaker 1: any more business with him. So the current status of 444 00:22:16,880 --> 00:22:19,600 Speaker 1: the business between Deutsche Bank, President Trump and his companies, 445 00:22:19,840 --> 00:22:22,400 Speaker 1: as I understand it, it's not the corporate investment bank 446 00:22:22,400 --> 00:22:25,199 Speaker 1: making the loans, it's the private wealth management that that's right, 447 00:22:25,680 --> 00:22:29,920 Speaker 1: that's right. So the investment bank had been doing business 448 00:22:29,920 --> 00:22:33,920 Speaker 1: with the President or with Mr Trump and his company UM. 449 00:22:34,040 --> 00:22:36,560 Speaker 1: You know, a more than decade ago, they had len 450 00:22:36,640 --> 00:22:40,439 Speaker 1: actually considerable amount of money to Mr Trump UM to 451 00:22:40,560 --> 00:22:43,600 Speaker 1: construct this tower in Chicago. Now the issue is he 452 00:22:43,760 --> 00:22:47,880 Speaker 1: defaulted on the loan. UH. They were dueling lawsuits. Trump's 453 00:22:47,920 --> 00:22:52,720 Speaker 1: lawsuit against Deutsche accused them of basically having UM having 454 00:22:52,840 --> 00:22:55,359 Speaker 1: started the global financial crisis back in two thousand eight, 455 00:22:55,440 --> 00:22:57,080 Speaker 1: or being part of the banks that that brought that 456 00:22:58,400 --> 00:23:01,160 Speaker 1: brought that into existence. And so the investment bank decided, 457 00:23:01,200 --> 00:23:02,639 Speaker 1: We're not going to do any more business with this 458 00:23:02,680 --> 00:23:05,680 Speaker 1: guy UM. But the private bank and the wealth management 459 00:23:05,680 --> 00:23:08,040 Speaker 1: decided they want to keep his business, and they started 460 00:23:08,040 --> 00:23:12,240 Speaker 1: as sending him credit. So Eric Trump, which is who 461 00:23:12,320 --> 00:23:15,159 Speaker 1: is one of the sons of President Trump, said, this 462 00:23:15,240 --> 00:23:17,680 Speaker 1: story is complete nonsense. We are one of the most 463 00:23:17,840 --> 00:23:20,639 Speaker 1: under leveraged real estate companies in the country. Speaking of 464 00:23:20,680 --> 00:23:25,280 Speaker 1: course of the Trump administration, How does this factor into 465 00:23:25,400 --> 00:23:29,880 Speaker 1: the Trump organization today? As well as UH Deutsche banks 466 00:23:29,920 --> 00:23:34,280 Speaker 1: sort of perilous relationship with the President that already is 467 00:23:34,320 --> 00:23:37,160 Speaker 1: in existence with respect to these loans that are outstanding, 468 00:23:37,200 --> 00:23:39,760 Speaker 1: I mean for the Trump organization. You know, Eric is 469 00:23:39,880 --> 00:23:42,719 Speaker 1: right in that they don't have a ton of leverage 470 00:23:42,760 --> 00:23:45,360 Speaker 1: that we can see. Um the loans that they take 471 00:23:45,359 --> 00:23:47,840 Speaker 1: out against their properties when weighed against the value of 472 00:23:47,840 --> 00:23:50,080 Speaker 1: the properties, and a lot of cases it's pretty small. 473 00:23:50,359 --> 00:23:52,280 Speaker 1: You know. They'll have a building valued that like let's 474 00:23:52,280 --> 00:23:54,119 Speaker 1: say x and the loan will be for like a 475 00:23:54,200 --> 00:23:57,920 Speaker 1: tenth of x UM, which is, you know, not typical 476 00:23:58,040 --> 00:24:00,679 Speaker 1: when it comes to commercial real estate developers. UM. And 477 00:24:00,720 --> 00:24:02,800 Speaker 1: they own a lot of their properties free and clear. 478 00:24:02,880 --> 00:24:06,240 Speaker 1: Now the issue is they have a tremendous, tremendous amount 479 00:24:06,240 --> 00:24:08,760 Speaker 1: of debt oh to Deutscha as well as Ladder Capital 480 00:24:08,840 --> 00:24:11,600 Speaker 1: and Deutscha. That relationship with Deutsche is one thing that 481 00:24:11,880 --> 00:24:14,560 Speaker 1: Democrats in Congress really want to spend the next two 482 00:24:14,640 --> 00:24:17,640 Speaker 1: years going over with a fine tooth comb because they've 483 00:24:17,680 --> 00:24:19,680 Speaker 1: spent the last two years in the minority. They haven't 484 00:24:19,680 --> 00:24:21,600 Speaker 1: been able to dig into this relationship. And they think 485 00:24:21,640 --> 00:24:24,560 Speaker 1: there's something there and that's what they're gonna do. What 486 00:24:24,560 --> 00:24:28,959 Speaker 1: what do they think is there there is this? You know, 487 00:24:29,400 --> 00:24:31,880 Speaker 1: no one will say this explicitly, but if you read 488 00:24:31,880 --> 00:24:35,199 Speaker 1: between the lines, they these are the two separate thrand 489 00:24:35,400 --> 00:24:38,280 Speaker 1: threads that they're chasing. On one hand, they think of 490 00:24:38,359 --> 00:24:41,880 Speaker 1: Deutsche Bank as a bank that has gotten to problems 491 00:24:41,920 --> 00:24:45,320 Speaker 1: when it comes to money laundering controls. It's so that's 492 00:24:45,560 --> 00:24:47,560 Speaker 1: that's one thing. The second thing is Deutsche Bank has 493 00:24:47,600 --> 00:24:49,880 Speaker 1: done a lot of business in Russia. The third thing 494 00:24:50,000 --> 00:24:51,600 Speaker 1: is Deutsche Bank has done a lot of business with 495 00:24:51,640 --> 00:24:55,359 Speaker 1: President Trump. Now are those three things connected in some way? 496 00:24:55,800 --> 00:25:00,479 Speaker 1: That's kind of the overarching question that they want to answer. Okay. 497 00:25:00,600 --> 00:25:02,159 Speaker 1: So that's why we're going to be getting a lot 498 00:25:02,200 --> 00:25:04,480 Speaker 1: of news about Deutsche Bank and President Trump from here 499 00:25:04,520 --> 00:25:07,480 Speaker 1: on out right, because the houses scrutinizing this and probably 500 00:25:07,560 --> 00:25:10,560 Speaker 1: driveling it out to get a sense of some kind 501 00:25:10,560 --> 00:25:13,880 Speaker 1: of illicit relationship. But as far as what we know now, 502 00:25:13,920 --> 00:25:18,080 Speaker 1: there is no evidence to that effect. There's no evidence whatsoever. Okay, 503 00:25:18,160 --> 00:25:21,560 Speaker 1: And and and to not public at least not public evidence. 504 00:25:21,600 --> 00:25:25,000 Speaker 1: And Eric Trump's point, it is not an over leveraged 505 00:25:25,560 --> 00:25:28,679 Speaker 1: company at this point that's facing bankruptcy or anything like that. No. 506 00:25:28,800 --> 00:25:30,879 Speaker 1: I mean, when you look at Trump Organization loans that 507 00:25:30,920 --> 00:25:34,359 Speaker 1: have been securitized into cnbs, they're making their payments on time. 508 00:25:34,440 --> 00:25:37,040 Speaker 1: There's no delinquency of any kind, and the amounts that 509 00:25:37,080 --> 00:25:39,480 Speaker 1: they borrowed are it's very low relative to the value 510 00:25:39,480 --> 00:25:41,600 Speaker 1: of those buildings. Well, Deutsche Bank is not doing new 511 00:25:41,640 --> 00:25:44,439 Speaker 1: business with the Trump organization. Who is That is a 512 00:25:44,440 --> 00:25:48,359 Speaker 1: great question. We don't that that's the answer. That's the 513 00:25:48,359 --> 00:25:50,879 Speaker 1: next story, okay, because the real estate business is a 514 00:25:50,920 --> 00:25:53,840 Speaker 1: business that obviously needs big chunks of capital. But I'm 515 00:25:53,880 --> 00:25:56,280 Speaker 1: guessing there's also revolving credits that they need to maintain 516 00:25:56,320 --> 00:25:59,800 Speaker 1: properties and do upgrades and things like that, and that typically, 517 00:26:00,200 --> 00:26:03,000 Speaker 1: you know, means external financing somewhere. That's right. And a 518 00:26:03,080 --> 00:26:04,680 Speaker 1: lot of these loans, I mean, some of their loans 519 00:26:04,680 --> 00:26:07,880 Speaker 1: are interest only with bloom payments and maturity and their path. 520 00:26:07,960 --> 00:26:10,520 Speaker 1: The company's past practice has been to rEFInd those loans 521 00:26:10,520 --> 00:26:12,760 Speaker 1: when it's nearing maturity. So for a lot of these 522 00:26:12,760 --> 00:26:14,879 Speaker 1: loans from Ladder and from Deutsche, they come to and 523 00:26:14,880 --> 00:26:17,679 Speaker 1: a hypothetical second term question is what happens Do they 524 00:26:17,680 --> 00:26:20,120 Speaker 1: pay off those balances or they seek financing from other 525 00:26:20,560 --> 00:26:24,120 Speaker 1: lenders and what kind of risks does that entail, both 526 00:26:24,119 --> 00:26:28,600 Speaker 1: for the lenders, for the company, for the White House. Excellent, Shaheen, 527 00:26:28,720 --> 00:26:32,640 Speaker 1: Thanks very much. Shaheen Sirapor, Bloomberg reporter for Bloomberg News. 528 00:26:34,680 --> 00:26:36,920 Speaker 1: Thanks for listening to the Bloomberg p and l podcast. 529 00:26:37,080 --> 00:26:39,680 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts 530 00:26:39,800 --> 00:26:42,879 Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on 531 00:26:42,920 --> 00:26:45,560 Speaker 1: Twitter at pt Sweeney. I'm Lisa Abramoy. It's I'm on 532 00:26:45,560 --> 00:26:48,600 Speaker 1: Twitter at Lisa Abramoyit's one before the podcast. You can 533 00:26:48,600 --> 00:26:51,000 Speaker 1: always catch us worldwide. I'm Bloomberg Radio