1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul Sweene. 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 --> 00:00:25,080 Speaker 1: at Bloomberg dot com. Well, income inequality and uneven economic 8 00:00:25,400 --> 00:00:31,120 Speaker 1: economic opportunity clearly became key issues in the sixteen presidential election. 9 00:00:31,560 --> 00:00:33,680 Speaker 1: To help us kind of dig through some of these issues, 10 00:00:33,880 --> 00:00:37,720 Speaker 1: we welcome our two guests, Dr Jonathan Gruberg, Professor of 11 00:00:37,720 --> 00:00:41,960 Speaker 1: economics at the Massachusetts Institute of Technology, and Simon Johnson, 12 00:00:42,040 --> 00:00:44,480 Speaker 1: professor of Entrepreneurship at m I T and former chief 13 00:00:44,479 --> 00:00:46,400 Speaker 1: economists at the I m f I. M f I 14 00:00:46,400 --> 00:00:49,559 Speaker 1: should also say Dr Gruber is also key architect of 15 00:00:49,640 --> 00:00:53,840 Speaker 1: Obamacare and Romney Care. Dr Gruber, Simon, thank you so 16 00:00:53,920 --> 00:00:56,920 Speaker 1: much for joining us. So you guys, let's talk about 17 00:00:57,200 --> 00:00:59,880 Speaker 1: the book you have written, and we're here to discuss 18 00:01:00,080 --> 00:01:03,560 Speaker 1: it's entitled jump Starting America, How Breakthrough Science can Revive 19 00:01:03,640 --> 00:01:06,880 Speaker 1: Economic Growth and the American Dream, which is available now. 20 00:01:07,120 --> 00:01:10,280 Speaker 1: So with this book, Dr gribber Key findings, what's the 21 00:01:10,360 --> 00:01:12,680 Speaker 1: kind of the key fundings that you guys came up 22 00:01:12,680 --> 00:01:15,160 Speaker 1: with here? I think the key point is that we've 23 00:01:15,160 --> 00:01:17,560 Speaker 1: forgotten an important lesson from the U S history, which 24 00:01:17,640 --> 00:01:20,960 Speaker 1: is the in the boom decades post World War Two, 25 00:01:21,000 --> 00:01:24,360 Speaker 1: what drove US economic growth was a fruitful partnership between 26 00:01:24,400 --> 00:01:27,720 Speaker 1: the government and the private sector in developing new technologies 27 00:01:28,040 --> 00:01:30,759 Speaker 1: that that grew the economy. We can get back to that. 28 00:01:31,080 --> 00:01:33,280 Speaker 1: At the peak, we spent two percent of our entire 29 00:01:33,319 --> 00:01:36,039 Speaker 1: economy on publicly financed R and D. It's now down 30 00:01:36,040 --> 00:01:38,840 Speaker 1: to point seven. We need to get back to investing 31 00:01:38,840 --> 00:01:41,200 Speaker 1: more R and D the causes growth, but we did 32 00:01:41,280 --> 00:01:43,360 Speaker 1: do so in a way that involves the whole country, 33 00:01:43,560 --> 00:01:46,399 Speaker 1: not just a few elite coastal cities that have that 34 00:01:46,440 --> 00:01:49,000 Speaker 1: have been the major beneficiaries of R and D expenditure 35 00:01:49,000 --> 00:01:52,559 Speaker 1: in the recent past. Yeah. With that point, Simon, I'm 36 00:01:52,600 --> 00:01:55,840 Speaker 1: just curious. I think it's a fascinating idea. It's a 37 00:01:55,920 --> 00:01:59,680 Speaker 1: great idea. Is the is there the political will given 38 00:01:59,720 --> 00:02:02,240 Speaker 1: the budget deficits we have now to do this? Well, 39 00:02:02,240 --> 00:02:05,080 Speaker 1: that's a great, great Christian evince Behind closed doors. We 40 00:02:05,160 --> 00:02:08,160 Speaker 1: find a lot of agreement across the entire political spectrum 41 00:02:08,280 --> 00:02:10,160 Speaker 1: on the need to support science and i H, as 42 00:02:10,200 --> 00:02:12,080 Speaker 1: you know, gets a lot of support from Republicans and 43 00:02:12,120 --> 00:02:15,200 Speaker 1: from Democrats. More funny for ni AH more initiatives like 44 00:02:15,360 --> 00:02:18,240 Speaker 1: ni H. I think there's interesting that we're proposing a big, 45 00:02:18,280 --> 00:02:20,520 Speaker 1: bold way to do it. I agree, but it would 46 00:02:20,520 --> 00:02:23,640 Speaker 1: be benefit everyone across the country and that matters on Congress. 47 00:02:23,919 --> 00:02:26,400 Speaker 1: What does indeed it does indeed especially in an election 48 00:02:26,440 --> 00:02:28,800 Speaker 1: here coming up. Yes, so Jonathan, kind of how do 49 00:02:28,840 --> 00:02:30,079 Speaker 1: we get there? What are you? What are something the 50 00:02:30,160 --> 00:02:33,880 Speaker 1: practical suggestions that you have guys who call up with 51 00:02:33,880 --> 00:02:37,240 Speaker 1: within your book. So one important practical suggestion is to 52 00:02:37,400 --> 00:02:41,480 Speaker 1: realize that we have incredible reservoirs of talent all around 53 00:02:41,480 --> 00:02:43,720 Speaker 1: the country. That while most of the growth in the 54 00:02:43,760 --> 00:02:45,480 Speaker 1: US has happened in six or eight cities over the 55 00:02:45,560 --> 00:02:48,200 Speaker 1: last couple of decades, we have places. In the book 56 00:02:48,200 --> 00:02:50,919 Speaker 1: we identify a hundred and two places which are large, 57 00:02:50,960 --> 00:02:54,080 Speaker 1: which have well educated populations, and which have affordable housing, 58 00:02:54,360 --> 00:02:57,119 Speaker 1: which could become the technology hubs of tomorrow. The other 59 00:02:57,360 --> 00:02:59,480 Speaker 1: suggestion we make is we need to move to a 60 00:02:59,520 --> 00:03:02,840 Speaker 1: more ape political process through through sort of a commission 61 00:03:03,040 --> 00:03:05,799 Speaker 1: that's an a political commission model on the base closing commission, 62 00:03:06,000 --> 00:03:08,359 Speaker 1: let's make it a technology helb opening commission to help 63 00:03:08,440 --> 00:03:11,280 Speaker 1: the side worship with the dollars of tomorrow. That's actually 64 00:03:11,320 --> 00:03:15,679 Speaker 1: an interesting point and a political confission. Do you think 65 00:03:15,320 --> 00:03:19,440 Speaker 1: I'm just thinking realistically, with all that we're seeing in 66 00:03:19,480 --> 00:03:21,880 Speaker 1: Congress right now and the all the battling back and forth, 67 00:03:22,520 --> 00:03:25,800 Speaker 1: it seems impossible to get coordination across the aisle. But 68 00:03:25,880 --> 00:03:29,160 Speaker 1: it does if you think about you know, electric cars 69 00:03:29,160 --> 00:03:32,440 Speaker 1: and the potential to invest in electric charging stations across 70 00:03:32,480 --> 00:03:35,840 Speaker 1: the country and move towards That spells right, That plays 71 00:03:35,920 --> 00:03:38,520 Speaker 1: right into the green deals. I mean, I mean that 72 00:03:38,680 --> 00:03:40,920 Speaker 1: is an interesting way to get both sides of the 73 00:03:40,920 --> 00:03:43,400 Speaker 1: aisle on the same page. Because you do you kind 74 00:03:43,400 --> 00:03:45,680 Speaker 1: of dot every eye in course every take. Well, you 75 00:03:45,680 --> 00:03:49,320 Speaker 1: could plug various technology visions into the mechanism that we're proposing, 76 00:03:49,360 --> 00:03:51,400 Speaker 1: So the Green New Deal absolutely could fit there. If 77 00:03:51,400 --> 00:03:53,080 Speaker 1: you want to promote more life science, if you want 78 00:03:53,120 --> 00:03:55,240 Speaker 1: to into cure cancer, that could be the priority that 79 00:03:55,480 --> 00:03:57,720 Speaker 1: gets plugged in. The key point is spend a lot 80 00:03:57,720 --> 00:03:59,640 Speaker 1: more on the on the basic science. Privacy is not 81 00:03:59,640 --> 00:04:01,440 Speaker 1: gonna do that because the private sector can't get and 82 00:04:01,480 --> 00:04:03,560 Speaker 1: no one company can get all the games. But once 83 00:04:03,600 --> 00:04:06,960 Speaker 1: you create that scientific information and infrastructure, it can spread 84 00:04:07,160 --> 00:04:09,880 Speaker 1: and be a catalyst for private sector development. And that 85 00:04:09,920 --> 00:04:12,560 Speaker 1: can happen absolutely everywhere in the country. Is not This 86 00:04:12,600 --> 00:04:15,040 Speaker 1: is not a Silicon Valley or Boston promoting book. This 87 00:04:15,120 --> 00:04:18,400 Speaker 1: is promoting a jump stop for thirty six forty five. Hey, 88 00:04:18,440 --> 00:04:21,600 Speaker 1: let's go for fifty American states. So, Jonathan, I mean, 89 00:04:21,760 --> 00:04:24,600 Speaker 1: when you think about it, the university system of this 90 00:04:24,680 --> 00:04:28,360 Speaker 1: country has been, you know, are one of the backbones 91 00:04:28,400 --> 00:04:32,359 Speaker 1: of technological advances over time. Um is that? And it 92 00:04:32,400 --> 00:04:35,960 Speaker 1: seems like that could be anywhere. That could be anywhere. 93 00:04:35,960 --> 00:04:38,520 Speaker 1: I mean I think of cities like Austin, Texas, which 94 00:04:38,520 --> 00:04:41,360 Speaker 1: have become you know, huge tech areas. I mean, uh, 95 00:04:41,800 --> 00:04:43,839 Speaker 1: my son's at the University of Colorado. There's a tech 96 00:04:43,880 --> 00:04:46,440 Speaker 1: community out there in Boulder, in Denver. It can really 97 00:04:46,440 --> 00:04:49,960 Speaker 1: happen anywhere. But does it? What's again? I'm just kind 98 00:04:49,960 --> 00:04:52,799 Speaker 1: of wondering. I just don't see the government stepping up 99 00:04:52,839 --> 00:04:57,640 Speaker 1: with big dollars today. Well, so two points in that. 100 00:04:57,720 --> 00:04:59,520 Speaker 1: One of one of our favorite examples in the book 101 00:04:59,560 --> 00:05:02,800 Speaker 1: is or lay To, Florida, home of the Emails not 102 00:05:02,920 --> 00:05:05,720 Speaker 1: Mickey Mouse. Forty five minutes east is the center for 103 00:05:05,760 --> 00:05:08,640 Speaker 1: the US micro computer micro simulation industry and the largest 104 00:05:08,720 --> 00:05:11,400 Speaker 1: University of America, University of Central Florida, which went from 105 00:05:11,480 --> 00:05:14,000 Speaker 1: mid sized university to now having the thirteenth rank electrical 106 00:05:14,000 --> 00:05:16,920 Speaker 1: engineering department in the country. That area, forty five minutes 107 00:05:16,960 --> 00:05:19,320 Speaker 1: of Orlando, has created a hundred thousand jobs over the 108 00:05:19,320 --> 00:05:23,960 Speaker 1: past thirty years through a partnership of the government, the university, 109 00:05:24,000 --> 00:05:27,039 Speaker 1: and the private sector. And where confident that this can happen. Look, 110 00:05:27,040 --> 00:05:29,440 Speaker 1: if you want evidence, look at the Republican reaction the 111 00:05:29,440 --> 00:05:33,080 Speaker 1: Green New Deal largely negative. Accept Lamar Alexander said how 112 00:05:33,120 --> 00:05:34,800 Speaker 1: much he liked the research and development part of the 113 00:05:34,800 --> 00:05:38,359 Speaker 1: Green New Deal. That's where we can get consensus. So interesting, 114 00:05:38,920 --> 00:05:41,400 Speaker 1: I asked both of you this question is when you 115 00:05:41,640 --> 00:05:44,000 Speaker 1: when you do this and you move into away from 116 00:05:44,120 --> 00:05:46,880 Speaker 1: the coastal areas, as you say, we've seen what um, 117 00:05:47,120 --> 00:05:50,279 Speaker 1: what this has done to Seattle in terms of real estate. 118 00:05:50,320 --> 00:05:52,240 Speaker 1: We've seen what it's done to San Francisco in terms 119 00:05:52,240 --> 00:05:55,320 Speaker 1: of homelessness. It seems to me there has to be 120 00:05:55,400 --> 00:05:59,880 Speaker 1: a really concerned, uh concerted effort with local communities to 121 00:06:00,120 --> 00:06:02,560 Speaker 1: sure that this doesn't happen in the locals, don't those 122 00:06:02,600 --> 00:06:06,760 Speaker 1: who do not participate in this program don't get priced out. Yeah, absolutely, well, 123 00:06:06,800 --> 00:06:09,000 Speaker 1: thank you to New York for the backlash against Amazon 124 00:06:09,160 --> 00:06:11,760 Speaker 1: for making that point rather abundantly clear. Of course, it's 125 00:06:11,760 --> 00:06:14,880 Speaker 1: a priority, absolutely, And you're also right that local communities 126 00:06:14,920 --> 00:06:17,000 Speaker 1: have to be on board now. And you also know 127 00:06:17,040 --> 00:06:19,360 Speaker 1: that more than two thirty communities in the United States 128 00:06:19,360 --> 00:06:22,800 Speaker 1: bid on Amazon h U two. So they want the jobs. 129 00:06:23,120 --> 00:06:25,760 Speaker 1: The jobs need to come with sustainable growth and and 130 00:06:25,800 --> 00:06:27,520 Speaker 1: real estate is a key piece of this. One thing 131 00:06:27,600 --> 00:06:29,359 Speaker 1: that makes so many parts of the Unit States attractive 132 00:06:29,360 --> 00:06:31,360 Speaker 1: is real estate is really really cheap. If we say 133 00:06:31,400 --> 00:06:33,000 Speaker 1: the numbers on air, and I think a lot of 134 00:06:33,000 --> 00:06:35,400 Speaker 1: your New York based listeners are gonna want to move immediately. 135 00:06:35,480 --> 00:06:37,400 Speaker 1: But you can buy a house in place like Pittsburgh 136 00:06:37,440 --> 00:06:40,040 Speaker 1: for less than two thousand dollars a nice house, right, 137 00:06:40,279 --> 00:06:42,400 Speaker 1: So what you want you don't want to lose that. 138 00:06:42,440 --> 00:06:45,640 Speaker 1: You want to understand and appreciate that as part of 139 00:06:45,680 --> 00:06:48,200 Speaker 1: the package, and you want to use that as a 140 00:06:48,240 --> 00:06:49,520 Speaker 1: big part of the message, and you don't want to 141 00:06:49,560 --> 00:06:51,560 Speaker 1: run out of space. So it's very important you think 142 00:06:51,720 --> 00:06:53,599 Speaker 1: as a community about what kind of zoning you're going 143 00:06:53,640 --> 00:06:55,680 Speaker 1: to have, what kind of develop you're gonna you're going 144 00:06:55,720 --> 00:06:57,680 Speaker 1: to allow. People want to live together, they want to cluster, 145 00:06:57,880 --> 00:06:59,960 Speaker 1: they want to live closer together than in the past. 146 00:07:00,080 --> 00:07:01,400 Speaker 1: You need to make sure there's enough space for that. 147 00:07:02,240 --> 00:07:06,600 Speaker 1: Is there enough trained Does this country have enough trained engineers, 148 00:07:06,800 --> 00:07:09,240 Speaker 1: technical people to to do this? I mean when I, 149 00:07:09,840 --> 00:07:12,160 Speaker 1: you know, several years ago when I came out of college, 150 00:07:12,160 --> 00:07:14,360 Speaker 1: it was everybody on the wall street. Now my kids 151 00:07:14,400 --> 00:07:16,240 Speaker 1: in our college that they're just all thinking tech and 152 00:07:16,320 --> 00:07:19,280 Speaker 1: engineering and apps and things like that. Do we have 153 00:07:19,480 --> 00:07:23,280 Speaker 1: enough technical expertise in this country right now? We have 154 00:07:23,400 --> 00:07:26,400 Speaker 1: enough skill, we don't have enough technical expertise. I think 155 00:07:26,440 --> 00:07:29,400 Speaker 1: that once again, one thing we've fallen behind on. One thing. 156 00:07:29,400 --> 00:07:31,280 Speaker 1: The government did really well in the decades after World 157 00:07:31,320 --> 00:07:33,760 Speaker 1: War Two, through things like the National Defense Education Act, 158 00:07:34,160 --> 00:07:37,600 Speaker 1: was invest in both high school and college education the sciences. 159 00:07:37,720 --> 00:07:39,640 Speaker 1: We need to get back to that. If we simply 160 00:07:39,960 --> 00:07:43,640 Speaker 1: increase government investment in science but don't boost the supply 161 00:07:43,720 --> 00:07:47,119 Speaker 1: of scientists, we're just gonna increase income inequality. We increase 162 00:07:47,160 --> 00:07:50,200 Speaker 1: the demand and the supply. That means a large investment 163 00:07:50,320 --> 00:07:54,080 Speaker 1: with local buying into improved education at both the high 164 00:07:54,120 --> 00:07:56,800 Speaker 1: school and college levels. Yeah, that's that's an actually a 165 00:07:56,840 --> 00:07:58,640 Speaker 1: really good point. I will tell you with my my 166 00:07:58,800 --> 00:08:02,160 Speaker 1: kids who came up with very interesting degrees they wanted 167 00:08:02,200 --> 00:08:04,720 Speaker 1: to study, and I pushed them all towards technology because 168 00:08:04,720 --> 00:08:06,200 Speaker 1: it seemed to be the place to be. As you 169 00:08:06,240 --> 00:08:09,600 Speaker 1: say it, is there a buy in from the university 170 00:08:09,680 --> 00:08:13,880 Speaker 1: level um to help support that, for instance, make technology 171 00:08:13,920 --> 00:08:17,520 Speaker 1: degrees more affordable. That's a kiosk absolutely, And you know 172 00:08:17,520 --> 00:08:19,520 Speaker 1: who's gonna drive that the young people. The young people 173 00:08:19,560 --> 00:08:22,600 Speaker 1: want the technology skills they want. I think that it's 174 00:08:22,640 --> 00:08:25,240 Speaker 1: mixing technology with creative that's the future. That's what the 175 00:08:25,280 --> 00:08:27,760 Speaker 1: artificial intelligence machines are not going to take away from you. 176 00:08:27,920 --> 00:08:30,000 Speaker 1: But it has to be affordable. It has to be affordable, 177 00:08:30,040 --> 00:08:31,600 Speaker 1: and we've got to look at that at the federal level. 178 00:08:31,640 --> 00:08:35,360 Speaker 1: That after Sputnik seven, that's what we did. We made physics, 179 00:08:35,400 --> 00:08:38,080 Speaker 1: math education much more affordable. Spread that around the country. 180 00:08:38,200 --> 00:08:40,000 Speaker 1: There's a federal piece, but there's also a local and 181 00:08:40,040 --> 00:08:42,680 Speaker 1: state piece. Right there's gonna be pathways through community colleges 182 00:08:42,679 --> 00:08:44,800 Speaker 1: and other ways through state schools. We were very good 183 00:08:44,800 --> 00:08:46,240 Speaker 1: at that in the past, and we've taken our eye 184 00:08:46,280 --> 00:08:48,800 Speaker 1: off that ball. Frankly interesting, gentlemen, Thank you very much. 185 00:08:48,880 --> 00:08:52,040 Speaker 1: Dr Jonathan Gruber, Professor of Economics and m I T 186 00:08:52,160 --> 00:08:55,880 Speaker 1: and Simon Johnson, Professor Entrepreneurship at m i T discussing 187 00:08:56,000 --> 00:08:58,920 Speaker 1: their new book, jump Starting America, How Breakthrough Science can 188 00:08:58,960 --> 00:09:02,480 Speaker 1: revive economic oath and the American Dream. That book is 189 00:09:02,520 --> 00:09:16,440 Speaker 1: available now. Thank you very much, gentlemen. I am Paul 190 00:09:16,440 --> 00:09:18,560 Speaker 1: Swingey and we have Vince Cignerella sitting in for Lisa 191 00:09:18,640 --> 00:09:21,320 Speaker 1: brahma Witz this morning. I guess taking a look at 192 00:09:21,320 --> 00:09:24,240 Speaker 1: the f O m C mean minutes from yesterday just 193 00:09:24,280 --> 00:09:26,400 Speaker 1: kind of confirms what I think the market was already discounting, 194 00:09:26,440 --> 00:09:29,680 Speaker 1: which is the Fed remains committed to being on the sideline, 195 00:09:29,679 --> 00:09:31,640 Speaker 1: at least for the near term. To see what that 196 00:09:31,679 --> 00:09:34,600 Speaker 1: means for the credit markets. We welcome our next guest, 197 00:09:34,800 --> 00:09:37,439 Speaker 1: r J. Gallas, and your portfolio manager, head of the 198 00:09:37,520 --> 00:09:40,600 Speaker 1: Municipal Bond Investment Group ahead of the Duration Committee for 199 00:09:40,640 --> 00:09:44,000 Speaker 1: Federated Investors. He joined us on the phone from Pittsburgh. 200 00:09:44,280 --> 00:09:47,200 Speaker 1: R J. Welcome to the show. What did you take 201 00:09:47,240 --> 00:09:49,760 Speaker 1: away from the f O m C notes and kind 202 00:09:49,760 --> 00:09:52,679 Speaker 1: of the recent dubbish uh commentary from the Fed, how 203 00:09:52,679 --> 00:09:56,440 Speaker 1: are you positioning your funds? Well, good morning, thanks for 204 00:09:56,520 --> 00:10:00,560 Speaker 1: having me. I thought on that that the minutes weren't 205 00:10:00,600 --> 00:10:03,800 Speaker 1: really necessarily market moving, but that doesn't mean there wasn't 206 00:10:03,920 --> 00:10:07,440 Speaker 1: there wasn't some revelation in there that that I think 207 00:10:07,480 --> 00:10:11,640 Speaker 1: is material first and foremost. Uh. It basically suggested to 208 00:10:11,679 --> 00:10:15,160 Speaker 1: me the tone of the minutes themselves affirms the FED 209 00:10:15,240 --> 00:10:18,760 Speaker 1: that is at neutral, that that one remaining dot that 210 00:10:18,840 --> 00:10:21,199 Speaker 1: ticks up next year on the dot plot. If you 211 00:10:21,240 --> 00:10:24,640 Speaker 1: look at the medians, um, don't have don't they don't 212 00:10:24,640 --> 00:10:27,679 Speaker 1: put too much confidence in that dot. They sound like 213 00:10:27,800 --> 00:10:30,760 Speaker 1: they're equally likely that the next move is an ease 214 00:10:30,800 --> 00:10:33,319 Speaker 1: as it is a hike. And it's certainly affirmed the 215 00:10:33,360 --> 00:10:37,040 Speaker 1: view that this year is not likely to see any 216 00:10:37,080 --> 00:10:40,160 Speaker 1: move of FED target rates, at least not in twenty nine. Team, 217 00:10:40,160 --> 00:10:43,120 Speaker 1: We'll see what happens next year. J question for you 218 00:10:43,160 --> 00:10:45,040 Speaker 1: because this is kind of baffles me. Just a little 219 00:10:45,040 --> 00:10:47,320 Speaker 1: bit ahead of the Duration committee. This is something I 220 00:10:47,360 --> 00:10:50,640 Speaker 1: assume you're keen on the balance sheet. We went from 221 00:10:50,760 --> 00:10:53,120 Speaker 1: prior to the financial crisis, a balance sheet of under 222 00:10:53,120 --> 00:10:55,800 Speaker 1: a trithlen and now essentially the Fed is saying we 223 00:10:55,840 --> 00:10:57,880 Speaker 1: need to keep it at three and a half TRISN 224 00:10:58,160 --> 00:11:00,920 Speaker 1: does does that create any anxiety and us to why 225 00:11:00,920 --> 00:11:05,880 Speaker 1: they need to leave that much stimulus in the system. Well, 226 00:11:06,400 --> 00:11:08,120 Speaker 1: just for background, I used to work on the Fed's 227 00:11:08,160 --> 00:11:10,679 Speaker 1: open market desk. I was a trader at the New 228 00:11:10,720 --> 00:11:12,560 Speaker 1: York FED back in the nineties. At the time, the 229 00:11:12,600 --> 00:11:16,679 Speaker 1: system open market account was seven hundred or eight hundred billion, 230 00:11:16,720 --> 00:11:19,679 Speaker 1: you know, a fraction of its size today. And I 231 00:11:19,679 --> 00:11:23,480 Speaker 1: think over the decades that have that have followed, the 232 00:11:23,600 --> 00:11:27,160 Speaker 1: implementation of monetary policy changed drastically with all the various 233 00:11:27,160 --> 00:11:30,000 Speaker 1: iterations of q E and then the development of various 234 00:11:30,000 --> 00:11:33,520 Speaker 1: programs to manage short rates, you know, target rates, if 235 00:11:33,520 --> 00:11:36,560 Speaker 1: you will, within the context of a massive amount of 236 00:11:36,559 --> 00:11:39,400 Speaker 1: reserves in the banking system. And I think number one, 237 00:11:39,400 --> 00:11:43,679 Speaker 1: they've shown that that their current framework works, that they 238 00:11:43,720 --> 00:11:46,680 Speaker 1: can target short term rates even with massive amounts of 239 00:11:46,679 --> 00:11:50,760 Speaker 1: excess reserves. Paying interest on reserves is another meaningful change 240 00:11:51,000 --> 00:11:53,560 Speaker 1: that has occurred. Cored about ten or eleven years ago, 241 00:11:53,600 --> 00:11:55,840 Speaker 1: if I recall correctly, So I don't think they're fed. 242 00:11:56,520 --> 00:12:00,240 Speaker 1: UM needs to have UH needs to regress, if you will, 243 00:12:00,240 --> 00:12:03,240 Speaker 1: back to the balance sheet that existed ten twenty years ago. 244 00:12:03,880 --> 00:12:06,880 Speaker 1: UM the framework. It works, and I think they've proven that. 245 00:12:07,440 --> 00:12:09,960 Speaker 1: And since it does, that means they have much more 246 00:12:10,000 --> 00:12:15,120 Speaker 1: flexibility to leave the balance sheet larger if, in fact, 247 00:12:15,440 --> 00:12:19,559 Speaker 1: the markets broadly defined suggests they should. Well, one thing 248 00:12:19,679 --> 00:12:22,520 Speaker 1: that suggests they should leave it larger is the fact 249 00:12:22,559 --> 00:12:25,199 Speaker 1: that the inter bank market for reserves is functioning fine. 250 00:12:25,760 --> 00:12:28,240 Speaker 1: That the demand for cash if you chart on Bloomberg, 251 00:12:28,360 --> 00:12:31,600 Speaker 1: the currency in circulation on the FED balance sheet, because 252 00:12:31,600 --> 00:12:34,400 Speaker 1: that's a big liability, right, has surged in the last 253 00:12:34,440 --> 00:12:37,440 Speaker 1: ten years. Um, So there's there's plenty of reason to 254 00:12:37,440 --> 00:12:41,080 Speaker 1: have a larger balance sheet even without the reserve markets. 255 00:12:40,960 --> 00:12:44,240 Speaker 1: That the demand for currency extremely large and it's grown rapidly. 256 00:12:44,880 --> 00:12:48,520 Speaker 1: So that's one market that's telling you a big balance sheets. Okay, 257 00:12:48,520 --> 00:12:51,280 Speaker 1: I think another set of markets are also telling you that. 258 00:12:51,600 --> 00:12:56,079 Speaker 1: Number One. UH, the confluence of tightening in December and 259 00:12:56,120 --> 00:13:00,319 Speaker 1: the perception of autopilot, which was fueled by the FED 260 00:13:00,400 --> 00:13:04,840 Speaker 1: don't communications uh with respect to the balance sheet painted 261 00:13:05,000 --> 00:13:09,439 Speaker 1: a worrisome picture that rates were still going up, quantitative 262 00:13:09,440 --> 00:13:12,720 Speaker 1: tightening was was was going to persist, and the FED 263 00:13:13,080 --> 00:13:17,439 Speaker 1: ran the risk of of overtightening generally speaking, and that 264 00:13:17,520 --> 00:13:19,320 Speaker 1: had a lot to do with the fourth quarter tumult, 265 00:13:20,360 --> 00:13:23,480 Speaker 1: the FED reacted to financial conditions which became very adversarial. 266 00:13:23,800 --> 00:13:25,880 Speaker 1: They called off the dogs on tightening, and they said, hey, 267 00:13:25,920 --> 00:13:29,520 Speaker 1: the balance sheet can remain large because the markets are 268 00:13:29,520 --> 00:13:32,120 Speaker 1: telling us that's what they sort of need. And if 269 00:13:32,280 --> 00:13:35,040 Speaker 1: the FED is sticking by what share Powell said in 270 00:13:35,080 --> 00:13:38,360 Speaker 1: his January press conference that his primary goal is to 271 00:13:38,440 --> 00:13:43,040 Speaker 1: extend the economic expansion. If that's your primary goal, then 272 00:13:43,640 --> 00:13:48,199 Speaker 1: the balance sheet is a secondary goal, and one primes 273 00:13:48,280 --> 00:13:50,480 Speaker 1: the other. And I think that as a result, they 274 00:13:50,480 --> 00:13:52,160 Speaker 1: can have a big balance sheet and they're okay with it. 275 00:13:52,160 --> 00:13:55,320 Speaker 1: It doesn't really necessarily worry me per se. What worries 276 00:13:55,360 --> 00:13:57,880 Speaker 1: me is when people are talking about, you know, modern 277 00:13:57,920 --> 00:14:01,400 Speaker 1: monetary theory, this idea of there's a free lunch, that 278 00:14:01,559 --> 00:14:04,560 Speaker 1: the era of the currencies has told us that you 279 00:14:04,600 --> 00:14:08,160 Speaker 1: can print your own money to as far as the 280 00:14:08,200 --> 00:14:11,240 Speaker 1: eye can see to fund all kinds of fiscal expansion. 281 00:14:11,600 --> 00:14:14,520 Speaker 1: I think that worries me. That's reckless. And I wonder 282 00:14:14,600 --> 00:14:18,480 Speaker 1: if a large balance sheet is misperceived or misunderstood by 283 00:14:18,480 --> 00:14:21,480 Speaker 1: those proponents of such theories to say, yeah, there's a 284 00:14:21,520 --> 00:14:25,160 Speaker 1: free lunch, that that's worrisome. The politics of this get worrisome. 285 00:14:25,400 --> 00:14:27,560 Speaker 1: So are j just you know, the next three thirty seconds, 286 00:14:27,840 --> 00:14:29,280 Speaker 1: you know, just give us your sense a kind of 287 00:14:29,320 --> 00:14:32,320 Speaker 1: economic growth. Obviously, the first quarter GDP a big slow 288 00:14:32,360 --> 00:14:34,080 Speaker 1: down from the fourth quarter. Are you one of Are 289 00:14:34,080 --> 00:14:37,520 Speaker 1: you in that campus says we will see accelerating growth 290 00:14:37,640 --> 00:14:41,520 Speaker 1: in the remainder of nineteen in the US? Yes, yeah, 291 00:14:41,520 --> 00:14:44,560 Speaker 1: we are. We are clearly the first quarters slower, uh, 292 00:14:44,720 --> 00:14:47,400 Speaker 1: you know, maybe a high one handle, maybe two uh, 293 00:14:47,480 --> 00:14:49,200 Speaker 1: you know, slower than where we've been, but but not 294 00:14:49,400 --> 00:14:53,120 Speaker 1: terribly so. And we do think that's quite possible that 295 00:14:53,560 --> 00:14:56,880 Speaker 1: chare Powell and his colleagues on the FOMC uh, there's 296 00:14:56,880 --> 00:15:00,200 Speaker 1: a reasonable probability they can achieve the soft landing. Word 297 00:15:00,200 --> 00:15:02,840 Speaker 1: of how Chairman Greenspan did back in the nineties, where 298 00:15:02,880 --> 00:15:05,880 Speaker 1: you had an extensive monetary tightening in ninety four. It 299 00:15:05,960 --> 00:15:08,440 Speaker 1: was very difficult at the time for financial markets, but 300 00:15:08,600 --> 00:15:12,280 Speaker 1: on net a recession did not result. The Fed stopped 301 00:15:12,280 --> 00:15:16,000 Speaker 1: tightening and achieved a soft landing, higher monetary policy rates, 302 00:15:16,000 --> 00:15:19,880 Speaker 1: some tightening without the subsequent recession. That's their stated goal. 303 00:15:20,320 --> 00:15:23,200 Speaker 1: I think the markets are suggesting they have a reasonable 304 00:15:23,200 --> 00:15:25,560 Speaker 1: probability of achieving that goal. Of course, they're not the 305 00:15:25,600 --> 00:15:28,600 Speaker 1: only variable. What happens in China, it happens in Europe 306 00:15:28,600 --> 00:15:31,760 Speaker 1: trade policy and all the attenument risks around that are 307 00:15:31,800 --> 00:15:34,080 Speaker 1: things to consider as well. R J. Gallow will have 308 00:15:34,120 --> 00:15:36,800 Speaker 1: you back again. Lots to talk about across the FED. 309 00:15:37,200 --> 00:15:40,080 Speaker 1: R J. Gallo, senior portfolio Managic had the MISS Bond 310 00:15:40,120 --> 00:15:44,040 Speaker 1: Investment Group and head of the Duration Committee for Federated Investors. 311 00:15:44,080 --> 00:16:05,320 Speaker 1: He joined us on the phone from Pittsburgh, Pennsylvania. Well, 312 00:16:05,320 --> 00:16:08,880 Speaker 1: Theresa May accepted the European Union's offer to extend Brexit 313 00:16:08,960 --> 00:16:11,560 Speaker 1: to October thirty one and must now sell it to 314 00:16:11,720 --> 00:16:15,480 Speaker 1: skeptical members of Parliament and a Conservative party losing patients 315 00:16:15,800 --> 00:16:18,920 Speaker 1: in her leadership. To get the latest, we welcome Leonel Laurent, 316 00:16:19,280 --> 00:16:22,960 Speaker 1: columnists covering financial markets for Bloomberg Opinion. He calling us 317 00:16:23,040 --> 00:16:26,680 Speaker 1: from London. Leonel, thank you so much for joining us. 318 00:16:27,200 --> 00:16:31,760 Speaker 1: What does this extension mean for Theresa May and her government? 319 00:16:33,320 --> 00:16:38,040 Speaker 1: So essentially, what this extension does is buy more time 320 00:16:38,560 --> 00:16:41,200 Speaker 1: and we have to again stress that this is the 321 00:16:41,440 --> 00:16:46,000 Speaker 1: second extension granted by EU leaders to the UK. So 322 00:16:46,080 --> 00:16:48,640 Speaker 1: there is a sense not just of deja but is 323 00:16:48,760 --> 00:16:54,840 Speaker 1: now an eternal, never ending political impast setting in but 324 00:16:55,360 --> 00:16:57,440 Speaker 1: as you say, the ball is now in the UK's 325 00:16:57,520 --> 00:17:00,480 Speaker 1: court and Theresa May is simply you're going to have 326 00:17:00,520 --> 00:17:03,600 Speaker 1: to try all of her options again, which a bit 327 00:17:03,600 --> 00:17:06,520 Speaker 1: more time, which includes trying to pass the deal that 328 00:17:06,600 --> 00:17:09,600 Speaker 1: has been rejected three times by her own parliament, perhaps 329 00:17:09,600 --> 00:17:13,160 Speaker 1: it may get through a fourth time, or working more 330 00:17:13,200 --> 00:17:17,080 Speaker 1: with Jeremy Corbyn, the real enemy of the Conservatives, to 331 00:17:17,320 --> 00:17:20,760 Speaker 1: get a potentially different deal that would get a different 332 00:17:21,160 --> 00:17:23,919 Speaker 1: but positive support in Parliament. So there are options, but 333 00:17:23,960 --> 00:17:27,000 Speaker 1: crucially there is more time to achieve those options. But 334 00:17:27,080 --> 00:17:29,879 Speaker 1: even with more options, for history tells us, or at 335 00:17:29,920 --> 00:17:31,119 Speaker 1: least what we've seen in the last two and a 336 00:17:31,119 --> 00:17:34,240 Speaker 1: half years, that the chances of getting this done by 337 00:17:34,280 --> 00:17:37,639 Speaker 1: the thirty one slim to none. What what is concerning 338 00:17:37,640 --> 00:17:39,280 Speaker 1: me as a as a former trader and the guys 339 00:17:39,320 --> 00:17:41,640 Speaker 1: I'm talking to on the street, is I'm hearing that 340 00:17:41,680 --> 00:17:46,120 Speaker 1: this makes the no deal risk gone, that there's a 341 00:17:46,160 --> 00:17:49,600 Speaker 1: sense of complacency that's come over of the currency markets, 342 00:17:49,680 --> 00:17:52,000 Speaker 1: and that we can now step in and by Stirling 343 00:17:52,840 --> 00:17:56,200 Speaker 1: without the worries that preceded it of a deal ending 344 00:17:56,320 --> 00:18:00,480 Speaker 1: by Friday. How does that feel to you? That that 345 00:18:00,560 --> 00:18:03,160 Speaker 1: does not feel too good to me? It doesn't feel 346 00:18:03,160 --> 00:18:05,600 Speaker 1: good to me either. That's why I think I think 347 00:18:05,600 --> 00:18:07,560 Speaker 1: he would be right to be cautious. And the reason 348 00:18:07,600 --> 00:18:11,800 Speaker 1: why it's simply because the next date to bear in 349 00:18:11,880 --> 00:18:16,320 Speaker 1: mind is October thirty one, right Halloween. And essentially what 350 00:18:16,400 --> 00:18:19,240 Speaker 1: you have to bear in mind is if if you 351 00:18:19,280 --> 00:18:22,520 Speaker 1: see this as you know, obviously it's a cliche to 352 00:18:22,560 --> 00:18:25,000 Speaker 1: talk about a game of a game of chicken, but 353 00:18:25,080 --> 00:18:27,440 Speaker 1: the point is, if we get to October thirty one 354 00:18:27,600 --> 00:18:30,680 Speaker 1: and there is no progress, we have to ask ourselves 355 00:18:31,160 --> 00:18:34,520 Speaker 1: whether the EU, which by this point will have already 356 00:18:34,680 --> 00:18:38,320 Speaker 1: had European parliamentary elections which the UK will have had 357 00:18:38,320 --> 00:18:40,480 Speaker 1: to take part in, will now have to decide whether 358 00:18:40,520 --> 00:18:43,919 Speaker 1: it wants the Commission, the Executive arm which is going 359 00:18:43,960 --> 00:18:48,879 Speaker 1: to have a sort of long term and and a 360 00:18:48,960 --> 00:18:53,600 Speaker 1: new a whole new you know, a Risman, take a 361 00:18:53,600 --> 00:18:57,359 Speaker 1: whole new team of people, whether and and they they 362 00:18:57,400 --> 00:18:59,480 Speaker 1: sit on November one, and he's going to have to 363 00:18:59,480 --> 00:19:03,160 Speaker 1: decide whether it really wants Brexit to in effect European 364 00:19:03,160 --> 00:19:05,560 Speaker 1: decision making. And my concern is that the more time 365 00:19:05,560 --> 00:19:08,440 Speaker 1: goes on, the more preparations for an odeal Brexit will 366 00:19:08,480 --> 00:19:12,960 Speaker 1: be finalized. And you know, sadly the accident theory is possible, 367 00:19:13,480 --> 00:19:17,760 Speaker 1: or even the political will to leave with an nodeal 368 00:19:17,800 --> 00:19:20,320 Speaker 1: on either side will be there too. So I'm not 369 00:19:20,800 --> 00:19:23,720 Speaker 1: convinced that the nodial risk has gone well. We can 370 00:19:23,760 --> 00:19:25,919 Speaker 1: sense even over here in the US the sense of 371 00:19:25,960 --> 00:19:30,080 Speaker 1: frustration and resignation on the part of you know, obviously 372 00:19:30,160 --> 00:19:33,520 Speaker 1: the members of Parliament, but also the British people. Isn't 373 00:19:33,560 --> 00:19:36,920 Speaker 1: it to the point now or that you know, it's 374 00:19:37,000 --> 00:19:40,120 Speaker 1: clear that the existing plan isn't going to work, can't work, 375 00:19:40,200 --> 00:19:42,520 Speaker 1: doesn't have any support, that it's probably worth coming back 376 00:19:42,520 --> 00:19:46,600 Speaker 1: and trying something new, whether that's a second referendum or 377 00:19:46,760 --> 00:19:50,080 Speaker 1: something else. Aren't we at that point? We are at 378 00:19:50,080 --> 00:19:52,199 Speaker 1: that point? We you could say we were at that 379 00:19:52,240 --> 00:19:54,119 Speaker 1: point a couple of months ago, you could say we 380 00:19:54,119 --> 00:19:57,480 Speaker 1: were at that point, um, maybe even at the end 381 00:19:57,520 --> 00:20:01,320 Speaker 1: of last year. That the problem is that at politics 382 00:20:02,280 --> 00:20:04,840 Speaker 1: is about other things, and there is a lot of 383 00:20:05,040 --> 00:20:08,879 Speaker 1: layers of self interest here, um And I think that 384 00:20:09,160 --> 00:20:13,159 Speaker 1: the concern is that there is just maybe not not 385 00:20:13,160 --> 00:20:16,320 Speaker 1: not as many incentives to do the right thing by 386 00:20:16,600 --> 00:20:22,160 Speaker 1: the voters. Then then we might prefer so the self 387 00:20:22,200 --> 00:20:26,359 Speaker 1: interest is perhaps elected representatives, is that maybe keep their jobs. 388 00:20:26,400 --> 00:20:29,400 Speaker 1: Maybe they think that they will lose it if they 389 00:20:29,560 --> 00:20:32,840 Speaker 1: advocate for a second referendum or some kind of new 390 00:20:33,000 --> 00:20:35,800 Speaker 1: radical change. And I think on both sides what we 391 00:20:35,840 --> 00:20:41,240 Speaker 1: are seeing is political reluctance to take responsibility for Brexit. 392 00:20:41,840 --> 00:20:43,960 Speaker 1: I appreciate up until now it really has been the 393 00:20:44,080 --> 00:20:47,280 Speaker 1: UK that should have taken responsibility. It hasn't. And I 394 00:20:47,280 --> 00:20:50,080 Speaker 1: think we're also seeing that you reluctant to do the 395 00:20:50,080 --> 00:20:52,639 Speaker 1: work for it and take responsibility for the harm of 396 00:20:52,640 --> 00:20:54,480 Speaker 1: a of a no deal brexit. So right now it 397 00:20:54,560 --> 00:20:58,760 Speaker 1: is very much a political game rather than doing the 398 00:20:58,840 --> 00:21:05,479 Speaker 1: right thing for the country. Any chance of She has 399 00:21:05,480 --> 00:21:07,240 Speaker 1: said perhaps that she would like to have something done 400 00:21:07,280 --> 00:21:11,960 Speaker 1: by is to not participate in the EU elections. Sure, 401 00:21:12,480 --> 00:21:16,080 Speaker 1: these these are all possibilities. And remember that the most 402 00:21:17,119 --> 00:21:23,440 Speaker 1: hard line Brexit supporters view European elections as absurd, borderline treason. 403 00:21:24,359 --> 00:21:29,119 Speaker 1: On the other hands, given that she has accepted this 404 00:21:29,760 --> 00:21:32,159 Speaker 1: potential poet heady first extension, we are now in the 405 00:21:32,200 --> 00:21:35,000 Speaker 1: realms of possibility. Everything is now possible. There could be 406 00:21:35,440 --> 00:21:39,000 Speaker 1: European elections in the UK and maybe they might be 407 00:21:39,040 --> 00:21:43,119 Speaker 1: a catalyst for change, maybe as the Conservatives do very poorly, 408 00:21:43,160 --> 00:21:45,840 Speaker 1: maybe if there's a different kind of sentiment in the country, 409 00:21:46,040 --> 00:21:49,280 Speaker 1: pro labor, pro Europe. All the other way you might see, 410 00:21:49,359 --> 00:21:51,399 Speaker 1: you might see things change. Lionel, thank you so much. 411 00:21:51,440 --> 00:21:54,000 Speaker 1: Lion on the rent calmness, covering finance and markets for 412 00:21:54,000 --> 00:21:56,960 Speaker 1: Bloomberg Opinion in London. I can actually hear the resignation 413 00:21:57,200 --> 00:21:59,399 Speaker 1: in his voice, as we can with many other folks. 414 00:21:59,440 --> 00:22:19,080 Speaker 1: As we discussed this issue well. T Mobile is in 415 00:22:19,160 --> 00:22:22,480 Speaker 1: the throes of trying to close its proposed acquisition of 416 00:22:22,640 --> 00:22:25,959 Speaker 1: Sprint and all stock deal currently valued at almost thirty 417 00:22:25,960 --> 00:22:29,440 Speaker 1: billion dollars, but the regulators aren't so sure. To get 418 00:22:29,440 --> 00:22:31,560 Speaker 1: the latest on what is going on in the world 419 00:22:31,560 --> 00:22:34,000 Speaker 1: of wireless in the US, we welcome John Butler. John 420 00:22:34,080 --> 00:22:37,239 Speaker 1: is a senior telecom analyso Bloomberg Intelligence. He joins us 421 00:22:37,240 --> 00:22:40,480 Speaker 1: live in our Bloomberg Interactive Brooker studio here in New York. So, John, 422 00:22:40,760 --> 00:22:44,240 Speaker 1: it looks like the regulators are a little concerned here. 423 00:22:44,240 --> 00:22:48,800 Speaker 1: Why so, they're concerned about the aggregation of share that 424 00:22:48,840 --> 00:22:53,160 Speaker 1: would occur if you get Sprint and T Mobile together together, 425 00:22:53,280 --> 00:22:57,320 Speaker 1: they'll have over a hundred million retail wireless subs, which 426 00:22:57,359 --> 00:22:59,680 Speaker 1: will be right on par with for rise in and 427 00:22:59,800 --> 00:23:03,720 Speaker 1: a T and T, so overnight you would have a 428 00:23:03,840 --> 00:23:07,440 Speaker 1: market with three big players as opposed to the four 429 00:23:07,480 --> 00:23:11,080 Speaker 1: players you have right now. And I think they look 430 00:23:11,119 --> 00:23:14,119 Speaker 1: at what T Mobile has done in terms of wireless 431 00:23:14,160 --> 00:23:17,720 Speaker 1: pricing over the past five years. They by the way, 432 00:23:17,720 --> 00:23:21,760 Speaker 1: have been very aggressive in pricing their wireless plans and 433 00:23:21,880 --> 00:23:24,360 Speaker 1: have really sort of kept A T and TM Verizon 434 00:23:24,480 --> 00:23:27,480 Speaker 1: honest if you will. So I think the big concern 435 00:23:27,560 --> 00:23:31,000 Speaker 1: to sort of close out the question is if suddenly 436 00:23:31,119 --> 00:23:33,760 Speaker 1: they're on par in terms of size with A T 437 00:23:33,920 --> 00:23:36,399 Speaker 1: and T and Verizon, are they going to need to 438 00:23:36,440 --> 00:23:40,240 Speaker 1: really go out with low prices to get subs um 439 00:23:40,280 --> 00:23:43,320 Speaker 1: you know, And that's the concern. But is that the question? 440 00:23:43,480 --> 00:23:47,560 Speaker 1: I mean, it seems to me that they seeing what 441 00:23:47,600 --> 00:23:51,199 Speaker 1: T Mobile has done, um, they probably just keep continuing 442 00:23:51,240 --> 00:23:54,120 Speaker 1: to do that to keep trying to gain market share. 443 00:23:54,240 --> 00:23:57,160 Speaker 1: Because as you said, they're not any bigger than Verizon 444 00:23:57,720 --> 00:23:59,280 Speaker 1: or a T and T. It just puts them in 445 00:23:59,320 --> 00:24:02,919 Speaker 1: the same league. So I'm not so sure. I just 446 00:24:02,920 --> 00:24:05,560 Speaker 1: don't get the d o J response to this. I mean, 447 00:24:05,840 --> 00:24:07,760 Speaker 1: do they I guess, as you say, they feel like 448 00:24:07,800 --> 00:24:09,679 Speaker 1: prices are going to go up from here? Yeah. I 449 00:24:09,680 --> 00:24:12,399 Speaker 1: mean we think is businessmen and we look at it 450 00:24:12,480 --> 00:24:15,000 Speaker 1: and we say, you know, g T Mobile has been 451 00:24:15,119 --> 00:24:18,680 Speaker 1: very successful with this strategy, why would they suddenly back 452 00:24:18,720 --> 00:24:21,920 Speaker 1: off of it just because they're bigger. I don't think 453 00:24:21,920 --> 00:24:25,000 Speaker 1: they will. They're a disruptor by nature. I think they're 454 00:24:25,040 --> 00:24:27,680 Speaker 1: going to continue to do that, exactly. And I don't 455 00:24:27,680 --> 00:24:30,359 Speaker 1: think and then they can't compete in the streaming business 456 00:24:30,400 --> 00:24:32,960 Speaker 1: yet either, so they still need something to go after 457 00:24:33,040 --> 00:24:37,400 Speaker 1: the two big guys, right exactly. Um, I think the 458 00:24:37,400 --> 00:24:41,840 Speaker 1: telco's naturally are moving into content distribution, and I really 459 00:24:41,840 --> 00:24:44,080 Speaker 1: applaud that, by the way. I think it's a good move. 460 00:24:44,480 --> 00:24:47,280 Speaker 1: It's getting to be a crowded market. But to get 461 00:24:47,280 --> 00:24:49,080 Speaker 1: back to what we were saying, I don't see T 462 00:24:49,280 --> 00:24:53,000 Speaker 1: Mobile amending their behavior as a marketer in any way. 463 00:24:53,040 --> 00:24:55,600 Speaker 1: But I'm not sure the regulators see that or look 464 00:24:55,640 --> 00:24:57,960 Speaker 1: at the market from that angle. I'm sure that, you know, 465 00:24:58,000 --> 00:25:01,000 Speaker 1: the easy thing for the regulators and from an antitrust perspective, 466 00:25:01,000 --> 00:25:03,359 Speaker 1: as they're just saying, hey, we're going from four to three, 467 00:25:03,800 --> 00:25:05,760 Speaker 1: that's enough for us to block the deal. I'm sure 468 00:25:05,800 --> 00:25:07,879 Speaker 1: that that's the simplistic way to look at it. But 469 00:25:07,920 --> 00:25:11,040 Speaker 1: the reality is, aren't the economics kind of tough in 470 00:25:11,080 --> 00:25:13,760 Speaker 1: the US wireless business, Like, don't they have to merge 471 00:25:13,760 --> 00:25:16,960 Speaker 1: otherwise one of these guys is just gonna blow out 472 00:25:16,960 --> 00:25:20,280 Speaker 1: of the business they do. I mean the it's funny. 473 00:25:20,440 --> 00:25:24,159 Speaker 1: Telecom is a scale business with the capital ass I 474 00:25:24,160 --> 00:25:26,720 Speaker 1: mean really, if you're the big guy in the market, 475 00:25:27,359 --> 00:25:30,879 Speaker 1: you can really sort of call the shots, so to speak. 476 00:25:31,040 --> 00:25:35,000 Speaker 1: And if you're a subscale player like T Mobile and 477 00:25:35,040 --> 00:25:37,840 Speaker 1: to a much greater degree, Sprint, you're in a very 478 00:25:37,920 --> 00:25:43,040 Speaker 1: disadvantaged position. And then as upgrades happen over time that 479 00:25:43,240 --> 00:25:45,920 Speaker 1: it requires a lot of capital, you end up as 480 00:25:45,920 --> 00:25:50,240 Speaker 1: a subscale player getting further and further behind. So I 481 00:25:50,280 --> 00:25:54,320 Speaker 1: think ultimately, if this deal doesn't go through, Sprints gonna 482 00:25:54,320 --> 00:25:59,280 Speaker 1: have to either partner with someone or I thought or 483 00:25:59,400 --> 00:26:02,640 Speaker 1: think they will have to become a regional player. Yeah, 484 00:26:02,920 --> 00:26:05,560 Speaker 1: and Sprint obviously is the one that's the greatest disadvantaged 485 00:26:06,040 --> 00:26:09,600 Speaker 1: therein um you know, it almost seems like the way 486 00:26:09,640 --> 00:26:11,720 Speaker 1: you're telling the story, as you say, we think about 487 00:26:11,720 --> 00:26:14,119 Speaker 1: this as businessman, if it continues to go down this 488 00:26:14,240 --> 00:26:17,199 Speaker 1: road and Sprint continues to suffer, it almost sounds like 489 00:26:17,200 --> 00:26:19,320 Speaker 1: T Mobile could come in and rescue them at at 490 00:26:19,320 --> 00:26:22,439 Speaker 1: the back end, of this and combine anyway. They really 491 00:26:22,640 --> 00:26:25,720 Speaker 1: could in a way, because again, the small gets smaller 492 00:26:25,720 --> 00:26:29,760 Speaker 1: and the big get bigger in a scale market like telecom. 493 00:26:29,840 --> 00:26:33,520 Speaker 1: For T Mobile, though, I think if a deal gets denied, 494 00:26:33,600 --> 00:26:36,879 Speaker 1: you know, ultimately they're going to have to invest more too, 495 00:26:36,920 --> 00:26:40,880 Speaker 1: because if you look at their their spectrum portfolio, those 496 00:26:40,960 --> 00:26:44,200 Speaker 1: air waves where they're offering wireless, they have some big 497 00:26:44,240 --> 00:26:46,919 Speaker 1: gaps there that A T and T and Verizon don't, 498 00:26:47,480 --> 00:26:49,760 Speaker 1: So I think they're gonna need to step forward and 499 00:26:49,800 --> 00:26:52,360 Speaker 1: spend a lot of money just to fill those gaps, 500 00:26:53,080 --> 00:26:55,240 Speaker 1: and then they're going to have the added expense of 501 00:26:55,359 --> 00:26:59,600 Speaker 1: rolling out five g on top of it. So you know, uh, 502 00:27:00,000 --> 00:27:02,280 Speaker 1: even three or five years hence, are they're going to 503 00:27:02,400 --> 00:27:04,679 Speaker 1: have the capital to come back to the table and 504 00:27:04,720 --> 00:27:07,600 Speaker 1: try and buy Sprint. I'm not sure on that one. 505 00:27:08,160 --> 00:27:11,480 Speaker 1: For Sprint, it would make sense for a cable operator 506 00:27:11,560 --> 00:27:14,240 Speaker 1: to make maybe look at them, because in terms of 507 00:27:14,480 --> 00:27:17,719 Speaker 1: moving into adjacent markets, the cable guys are now starting 508 00:27:17,760 --> 00:27:21,000 Speaker 1: to test the waters and wireless. So I don't think 509 00:27:21,040 --> 00:27:23,280 Speaker 1: Sprint is out of options in the wake of this 510 00:27:23,320 --> 00:27:26,119 Speaker 1: deal not going through, But like you, Vince, I started 511 00:27:26,160 --> 00:27:29,640 Speaker 1: look at it in question what the regulators are thanking. So, John, 512 00:27:29,680 --> 00:27:32,200 Speaker 1: I know at Blomberg Intelligence, Uh, you guys have the 513 00:27:32,200 --> 00:27:35,160 Speaker 1: advantage of working with some great experts, including generally who 514 00:27:35,160 --> 00:27:38,119 Speaker 1: does antitrust? What is Jen saying in terms of the 515 00:27:38,119 --> 00:27:41,280 Speaker 1: odds of this and getting approved. So I was chatting 516 00:27:41,280 --> 00:27:43,960 Speaker 1: with Jenn about that, and we agree that the odds 517 00:27:43,960 --> 00:27:46,720 Speaker 1: of it not going through are probably in the range 518 00:27:46,760 --> 00:27:50,120 Speaker 1: of six or so. So fort that it does get 519 00:27:50,119 --> 00:27:53,280 Speaker 1: it okay. It's a tough one to call. It always 520 00:27:53,320 --> 00:27:55,560 Speaker 1: comes down to the wire in a case like this, 521 00:27:56,240 --> 00:27:59,400 Speaker 1: where you know, just as we were talking about, Sprint 522 00:27:59,560 --> 00:28:02,720 Speaker 1: almost can make the failing firm argument of hey, if 523 00:28:02,840 --> 00:28:06,040 Speaker 1: this doesn't go through, we're done. You know, I'm not 524 00:28:06,160 --> 00:28:10,200 Speaker 1: sure they really are in that position where they're completely done, 525 00:28:10,359 --> 00:28:12,640 Speaker 1: and so who knows if they'll win the day there. 526 00:28:12,720 --> 00:28:15,080 Speaker 1: But I think right now we're looking at a forty 527 00:28:15,640 --> 00:28:18,440 Speaker 1: chance that the deal gets it okay, inserting that's probably 528 00:28:18,480 --> 00:28:22,600 Speaker 1: not what the companies were envisioning when they announced this deal. Um. Interesting. 529 00:28:22,680 --> 00:28:25,320 Speaker 1: John Butler, thanks so much for keeping us on top 530 00:28:25,359 --> 00:28:28,359 Speaker 1: of what is going on with the Sprint T Mobile 531 00:28:28,400 --> 00:28:30,840 Speaker 1: deal in the US wireless business. John is a senior 532 00:28:31,119 --> 00:28:34,840 Speaker 1: telecoms analysts for Bloomberg Intelligence. Thanks for listening to the 533 00:28:34,880 --> 00:28:37,440 Speaker 1: Bloomberg P and L podcast. You can subscribe and listen 534 00:28:37,520 --> 00:28:40,880 Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer. 535 00:28:41,240 --> 00:28:44,040 Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa 536 00:28:44,040 --> 00:28:46,680 Speaker 1: Abram Woyd's I'm on Twitter at Lisa Abram Woit's one 537 00:28:46,880 --> 00:28:49,520 Speaker 1: before the podcast. You can always catch us worldwide. I'm 538 00:28:49,520 --> 00:28:50,360 Speaker 1: Bloomberg Radio