Speaker 1: Runt You by Bank of America Mary Lynch. With virtual reality,
Speaker 1: virtually everything will change. Discover opportunities in a transforming world.
Speaker 1: Be of a, mL dot Com, slash VR, Mary Lynch,
Speaker 1: Pierced Fenner and Smith Incorporated. Ye, Welcome to the Bloomberg
Speaker 1: Surveillance Podcast. I'm Tom Keene with David Gura. Daily we
Speaker 1: bring you insight from the best of economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We
Speaker 1: have a wonderful guest to brief us through this half hour,
Speaker 1: and it's on Distress Desk. It's about taking opportunity when
Speaker 1: nobody else has the courage. Honsky Rooms out of Williams
Speaker 1: College has made a career of listening to the markets
Speaker 1: and then acting when few have the courage uh to act.
Speaker 1: He is with Greylock and joins us Um this morning.
Speaker 1: Where do you learn to buy distress? You were a
Speaker 1: literature major? You know are you? Are you reading Dickens
Speaker 1: or you know ed Gary Ellen Poe to figure out
Speaker 1: how do you train to buy something for twenty cents
Speaker 1: on the dollar when everybody's running for the theater exit. Um.
Speaker 1: I think I had less to do with my education,
Speaker 1: probably more to do with where I grew up. We
Speaker 1: moved to Nigeria when I was three years old, and
Speaker 1: then from Nigeria to Morocco. And my father likes to
Speaker 1: talk about me haggling with the merchants and the markets
Speaker 1: and Moroccos. So that's really interesting actually. And you know,
Speaker 1: when I was a kid, I used to I realized
Speaker 1: that it was pretty easy to make money every time
Speaker 1: around spring cleaning. So you wait for people to take
Speaker 1: all the garbage out, you run around, take the nice
Speaker 1: things in. Two weeks later, you have a stoop sale.
Speaker 1: Are you an embarrassment at a modern Starbucks? Do you
Speaker 1: go in and bid? Um? You know, I'm probably not
Speaker 1: the best person to go to a Starbucks. I just understand.
Speaker 1: Don't understand why you could spend that much money on
Speaker 1: a cup of coffee. What's the opportunity in distress right now?
Speaker 1: Is it like it wasn't oh seven o eight oh nine?
Speaker 1: Or is it all quiet on the Hans front? No,
Speaker 1: I certainly doesn't. You don't have the opportunities that you had,
Speaker 1: uh two thousand nine? Um, But what's going on currently.
Speaker 1: UM One, we're seeing the sort of the last few
Speaker 1: legs of a trade that came about UM in two
Speaker 1: thousand eleven, two thousand twelve, which was Greece. UM there,
Speaker 1: you know, ended up being a technical default on the
Speaker 1: bonds of restructuring bonds traded down to actually quite a
Speaker 1: bit belower lower than than twenty cents in the doll
Speaker 1: or the trading at the same prices North Korean debt UM.
Speaker 1: And now on a back of Brexit, what you're seeing
Speaker 1: in UM you know, the EU is staying together. UM
Speaker 1: So as soon as the vote happened last year, you
Speaker 1: could really tell that Greece was going to be on
Speaker 1: a one way train. UM. So you've gotten recovery maybe
Speaker 1: two bases points left of tightening on the bonds in Greece,
Speaker 1: and you're probably gonna have a pretty good leg of
Speaker 1: an up trade in the equities we we we within.
Speaker 1: That is the basic idea of a cramdown. I've asked
Speaker 1: this question twice last week. Let me ask it of
Speaker 1: you now. I would suggest any resolution of a distress
Speaker 1: sovereign process is somebody has to take a price loss.
Speaker 1: What I mean hearing out of Europe is we're gonna
Speaker 1: extenderation out until we're all dead, and we're gonna lower
Speaker 1: the interest right down to something I can stomach. Okay,
Speaker 1: that's hans Hume one oh one. But isn't part of
Speaker 1: hans Hume one oh one is the creditors have to
Speaker 1: take a price cut. You know, you coming, you buy
Speaker 1: the piece of twenty and they own it at a
Speaker 1: hundred or eighty or whatever, and the takeout price has
Speaker 1: got to be like forty or fifty, right, Um, you know,
Speaker 1: the takeoff price, it depends on the country. In the
Speaker 1: case of Greece, that what they're talking about now in
Speaker 1: terms of debt relief only is in relation to the
Speaker 1: official sector. Um, you know, we in the two thousand
Speaker 1: twelve deal, the private sector took the haircut. We took
Speaker 1: fifty three and a half cents a principal haircut. So
Speaker 1: we're not gonna be part of any future debt forgiveness.
Speaker 1: And quite honestly, I think the Greeks and their biggest
Speaker 1: creditors have some sense of what they're gonna do. It's
Speaker 1: the I, M F and the EU, so you know,
Speaker 1: to a much broader you know, from much broader perspective.
Speaker 1: You're putting your finger on one of the big drivers
Speaker 1: and how you approach this market, which is what possibility
Speaker 1: do you have of getting crammed down? And it's really
Speaker 1: a case by case situation. That's a beauty. Well let's
Speaker 1: continue that fencing. Laqua joins us off from a francying.
Speaker 1: Good morning, Good morning Tom. What a difficult comment by
Speaker 1: Prime Minister May it it seems to me and I
Speaker 1: can honestly say, Francine, I don't think we've seen the
Speaker 1: set of many events of crisis exhaustion in the United Kingdom.
Speaker 1: We've ever seen that in the United States. I mean,
Speaker 1: is the city just overwhelmed this Monday morning. Well, what
Speaker 1: you're talking about, of course, Tom, is this latest terror incident.
Speaker 1: And we understand from Theresa Made that this is a
Speaker 1: terror attack. It was a van that plowed into a
Speaker 1: crowd outside in North London mosque and it's basically as
Speaker 1: you say, Tom, it's the third terrorist attack on the
Speaker 1: capitol in as many months. I don't know if people
Speaker 1: are exhausted, but there's certainly seems to be a resolve
Speaker 1: in the capital of the UK so that it doesn't
Speaker 1: divide the society and brings people closer together, fighting together.
Speaker 1: But all of this is a distraction because there's also
Speaker 1: breggsit talks, so of course the government trying to deal
Speaker 1: with two things at the same time, whilst the Prime
Speaker 1: Minister is weakened almost by the day. Interesting. I don't know, Frenzy,
Speaker 1: and if you heard Hans comes comments are in Greece,
Speaker 1: but I really thought they were interesting about taking a
Speaker 1: distress piece of looking at a time extension and interest
Speaker 1: rate deduction, reduction, I should say, And as he set
Speaker 1: a selected set of cramdowns where each case is different
Speaker 1: as well, Frenzy, why don't you continue with Hans Comes
Speaker 1: right now? Yeah, Hans, I was really interested in your
Speaker 1: comming out in Greece and whether you actually thought that
Speaker 1: any other European countries would need a bail out in
Speaker 1: the next eighteen months. I think that the answers no.
Speaker 1: I mean what I saw, I think the same as
Speaker 1: that everybody else did post the Brexit vote. Um was
Speaker 1: that there was a sense in the EU, you know,
Speaker 1: the different organizations managing the EU setting up for a
Speaker 1: tough negotiation with the UK, which the UK has made
Speaker 1: for for itself, but basically ring fencing the rest of
Speaker 1: you know, the market. Um so I think that you know,
Speaker 1: there's some been some concerns obviously passed about Spain, but
Speaker 1: currently maybe a little bit about the sovereign on the Portugal,
Speaker 1: you know in Portugal, and maybe the banking system in Italy.
Speaker 1: But these are all situations that the balance sheet of
Speaker 1: the EU can support quite readily. And what you've seen
Speaker 1: is a big change in the rhetoric that's come from
Speaker 1: the deep pockets of the EU. Germany even Scheibla has
Speaker 1: backed off some of the austerity talk and has been
Speaker 1: basically supportive of the entire EU project. So I don't
Speaker 1: see any other countries falling by the wayside. Let's continue
Speaker 1: on this. We'll come back with Hans Hume, gray Lock
Speaker 1: and really a lot to talk about their unpack on
Speaker 1: this strange trace. Cramdown trying to say, like k London
Speaker 1: of time, Mr Girl off off off today with this
Speaker 1: Hans Hume of Garylla, we we opened hours ago and
Speaker 1: on China, and I think we want to wander back
Speaker 1: not only the China, but the the the distress of Asia.
Speaker 1: When you and I study this racket, there was little
Speaker 1: in bonds in Asia. Is that no longer true. Is
Speaker 1: there like almost a mature debt market or guys like
Speaker 1: you can play in Asia? Um, you know, there's clearly
Speaker 1: a fixed income market that's developed. Um, you know, mature,
Speaker 1: it's a bit, Yeah, it's mature. Yes. The issue there
Speaker 1: is the on a relative basis, the opportunities for guys
Speaker 1: like us aren't quite as attractive as in some of
Speaker 1: the other geographical areas like Latin America. It's still well,
Speaker 1: there's just been a lot of money chasing chasing returns,
Speaker 1: so you know you'll get on a credit basis issuers
Speaker 1: from China where you're not going to get a real
Speaker 1: pick up and yield for the kind of risk that
Speaker 1: we think you'll be taking. Um. Yeah, potentially, it's the
Speaker 1: biggest market out there. If there is a major correction
Speaker 1: in China and a major sell off, there'll be a
Speaker 1: lot of money going for the exit. Uh, Hans, are
Speaker 1: you expecting a correction in China or what's a likelihood
Speaker 1: at the moment. I know you're still pretty bullish on
Speaker 1: the country, but even if it's a thirty percent chance
Speaker 1: of a correction, that could be quite ugly. Yeah. No,
Speaker 1: and that's fair. Um, you know, personally I don't see
Speaker 1: anything this year. Um. I'm pretty constructive on the markets
Speaker 1: in general. Um. But you know, as a business, we
Speaker 1: don't we don't like to try to anticipate crisis by
Speaker 1: putting short positions on. We find it's actually easier to
Speaker 1: wait for the sell off and then step in for
Speaker 1: the you know workout. Um, so if it happens, will
Speaker 1: be there. Um. I'm not gonna sit there and set
Speaker 1: up a broad number of short positions and Chinese corporates
Speaker 1: and you know, try to profit on a downturn because one,
Speaker 1: I don't think it's a likely scenario, and to even
Speaker 1: if I did it, the negative carry can knock us
Speaker 1: out of the trade before we realize the timing. If
Speaker 1: there's a downturn on, what is the first signal that
Speaker 1: actually tells you that there's a downturn? Is there a
Speaker 1: concern that it could be like the O A crisis
Speaker 1: where some people saw it but actually no one realized
Speaker 1: until it was too late. Um, yeah, I think you know,
Speaker 1: building up to the O A crisis, you saw a
Speaker 1: lot of cracks, you know, starting two thousand six, two
Speaker 1: thousand seven, So it was one of these things where people,
Speaker 1: you know, the markets were telling you that something was
Speaker 1: going on, and the question was had we found a bottom?
Speaker 1: And then you know, because of yeah, real estate here
Speaker 1: in the US, and you put pressure on financial institutions
Speaker 1: and then you know, bear Sterns and then finally collapse
Speaker 1: a Lehman and then we went off. So I don't
Speaker 1: think we're going to have one thing. You know, a market,
Speaker 1: if China leads a downturn, will get a lot of
Speaker 1: signals before things actually the bottom falls out. But one
Speaker 1: of the things about your assessment there is could have
Speaker 1: happened again. It's francy and I know every Friday afternoon
Speaker 1: the doom in gloom letters come out. It's gonna be
Speaker 1: the same again, etcetera, etcetera. I'm not hearing that from
Speaker 1: you that it's the same frameworkers those seven oh eight. Yeah,
Speaker 1: I don't think there's you know, the markets are very different,
Speaker 1: so I think you know you're not. We don't have
Speaker 1: nearly the amount of leverage in our markets that we
Speaker 1: did in two thousand and eight. Um. So if there
Speaker 1: is a all in risk off you know trade where
Speaker 1: everything correlates to one and we're basically going off a cliff,
Speaker 1: it's going to have to happen for a different reason
Speaker 1: than it did in oh eaight um and but yeah no,
Speaker 1: I I just don't see the circumstances for a similar
Speaker 1: type of you know, turnaround in our market generously. You're
Speaker 1: trying this morning, Thank you so much. Humans with Greylock folks.
Speaker 1: We haven't seen him in the ages, which is my fault. Man.
Speaker 1: It's good to see him this morning, without question. The
Speaker 1: interview of the day on Amazon and on Whole Foods Market.
Speaker 1: Joining us now from Newburger Berman is Charles Cantor, with
Speaker 1: decades of experience and attempting to find value in The
Speaker 1: distinction here is he is a kinder general er uh,
Speaker 1: person of bringing together transactions and combinations. You're not adversarial
Speaker 1: when you dial one hundred Avocado and say you guys
Speaker 1: are too cheap, let's go. You do it a more
Speaker 1: gentle way. What's the Cantor distinction. We're trying to think
Speaker 1: about long term value. Were very active and engaged with
Speaker 1: our companies. We're trying to have a constructive dialogue. We
Speaker 1: think we can add a lot of value in helping
Speaker 1: companies think through financial communication, capitalification, capital structure, and and
Speaker 1: it's all about long term and trying to kind of
Speaker 1: put the noise, put the noise away. The chief executive
Speaker 1: officer of Whole Foods has had to skip around on
Speaker 1: rhetoric recently. You're nodding here. Charles Cantor called another operation
Speaker 1: greedy bastards in this transaction, is Newberger Berman greedy bastards?
Speaker 1: I would hope not. We're trying to get a reasonable
Speaker 1: reward for our effort over time. UM and UM. I
Speaker 1: think it's best for others to comment on that. It's
Speaker 1: but ultimately, UM, when you become a public company, your
Speaker 1: responsibilities are too shareholders. When you remain a private company,
Speaker 1: your responsibilities are those that own you privately. But once
Speaker 1: once you come to the public markets, Um, the game
Speaker 1: changes for many any different ways. Legendarily, you walked into
Speaker 1: the Bryant Park Whole Foods and said this place needs
Speaker 1: to be revalued. Was it the gluten free avocados that
Speaker 1: did it for? You know? I think what Wholefuls has
Speaker 1: done so well is it's it's convinced the millennials that
Speaker 1: it's a very cool place to go shop. And and
Speaker 1: the Brian Park shop is by no means a grocery store.
Speaker 1: It's actually a restaurant with grocery as as a side items.
Speaker 1: So they've been whole foods and and and and and
Speaker 1: the management team they have been very forward thinking in
Speaker 1: in in how they've built out their boxes. Um, And
Speaker 1: what people for a long time didn't appreciate or may
Speaker 1: not have realized, is that a set of Whole Foods
Speaker 1: businesses is prepared foods and restaurants, of course have a
Speaker 1: different margin structure than groceries and Briant Park like like
Speaker 1: many of whole foods boxes around the country has an
Speaker 1: incredible energy and vibe that that you probably don't experience
Speaker 1: in some of your traditional grocery stores. Jeff Bezos of Amazon,
Speaker 1: he needs a bidding work. You have made clear with
Speaker 1: your report from dal Jones and Wall Street Journal that
Speaker 1: one should be had. Who would come in to lift
Speaker 1: this transaction over fourteen billion dollars? Look, I think, um,
Speaker 1: I think I suggested that that Amazon was typically thrifty
Speaker 1: in in how they thought about the value of whole foods.
Speaker 1: We think whole foods is uniquely attractive strategic asset. Um,
Speaker 1: do you have a valuation number that is in mind
Speaker 1: without giving away the secrets, We don't, But but but
Speaker 1: there's there's plenty of room um above. Should should others
Speaker 1: step in? I think what was so remarkable amongst the
Speaker 1: many remarkable things around around thinking about the deal, was
Speaker 1: that Amazon's share value went up UM equal to the
Speaker 1: total transaction value of I mean I kind of candidly
Speaker 1: joked that that Amazon got Whole Foods for free. It's
Speaker 1: I can't remember of another transaction where the entire purchase
Speaker 1: price was covered by bye bye bye by the increase
Speaker 1: in Amazon's value. Look, Walmart, for example, went down twelve
Speaker 1: billion dollars. So I think there are many grocery executives,
Speaker 1: boards of directors, both in the US and globally that
Speaker 1: are probably going to think about the strategic value of
Speaker 1: the sasset very quickly. Here would you suggest any acquirer,
Speaker 1: including Mr Bezos could bring net income in the bottom
Speaker 1: line of the income statement up rapidly? Can they add
Speaker 1: if it's a hundred basis point business making one percent,
Speaker 1: can they get that up to two hundred basis points quickly?
Speaker 1: I think UM as a deal itself, UM, those that
Speaker 1: acquire this asset will make a very very good risk
Speaker 1: adjusted return. I think Amazon specifically, I'm guessing yet, but
Speaker 1: I'm probably not far off. They have about fifty million
Speaker 1: prime members. My guess is Whole Foods has about twelve
Speaker 1: to th million customers. There's a huge opportunity to take
Speaker 1: to take the prime members um into the Whole food store,
Speaker 1: whether that be in person um or through the wire,
Speaker 1: so to speak. Very quickly, and I want to come
Speaker 1: back Charles Cancer. When people go into Whole Foods within
Speaker 1: your research at New Burger Berman, are they buying the
Speaker 1: fancy pants organic stuff or as Whole Foods about the
Speaker 1: more private label three, it's, it's, it's it's probably a
Speaker 1: bit about both. I think people go to Whole Foods
Speaker 1: because the brand resonates with their values and across American,
Speaker 1: across the world, people care about what they eat, and
Speaker 1: Whole Foods has been a pioneer in getting people to
Speaker 1: think through what they put in their body. Brunch you
Speaker 1: by Bank of America, Mary Lynch. With virtual reality, virtually
Speaker 1: everything will change. Discover opportunities in a transforming world, be
Speaker 1: of a mL dot Com, slash VR, Mary Lynch pierced
Speaker 1: Fenner and Smith Incorporated. And now we go to David
Speaker 1: West and his conversation with Robert Ross. What is your
Speaker 1: main argument to them all why they should be investing
Speaker 1: in the United States right now. Mr Secretary, it's the
Speaker 1: same reason as American companies should be and in fact are,
Speaker 1: namely regulatory reform, getting rid of red tape, tax reform,
Speaker 1: getting our rates down to very very competitive levels, unleashing
Speaker 1: our energy resources, fixing our trade agreements, and creating a
Speaker 1: much more healthy environment for businesses and consumers. So all
Speaker 1: of those reasons are the why excuse me? So let's
Speaker 1: talk about fixing those trade agreements. One of the things
Speaker 1: you mentioned, which comes within your purview, um to what extent,
Speaker 1: is fixing the trade agreements. You've been very outspoken you
Speaker 1: want trade, but you want fair trade. To what extent
Speaker 1: to tightening up those trade arrangements encourage US investment in
Speaker 1: the sense that people need to be here to manufacture
Speaker 1: so they're not subject to whatever restrictions there might be. Well,
Speaker 1: I think it's a factor, but probably a relatively small factor.
Speaker 1: I think cutting the tax or it's hugely as we
Speaker 1: have is planned to do, is a very very big benefit.
Speaker 1: Our tax structure used to be a major disadvantage. Similarly,
Speaker 1: our regulatory structure had been a huge disadvantage. We were
Speaker 1: I believe the most overregulated country going well, when you're
Speaker 1: paying a lot of tax and you're having a lot
Speaker 1: of regulatory bread tape, that discourages not only green field investment,
Speaker 1: it discourages any kind of investment in the country. So
Speaker 1: we think it's mostly the question of removing impediments and
Speaker 1: then coupling that with the normal benefits of the US
Speaker 1: A huge population base, wonderful market, open access to it
Speaker 1: once you're here, highly educated workforce. That those are the
Speaker 1: kinds of fundamental factors that were always at work, but
Speaker 1: now we're supplemented with the improvements in business climate created
Speaker 1: by President Trump. As you suggest, Mrs Secretary, you have
Speaker 1: plans to cut taxes as well as reform taxes to
Speaker 1: somewhat different things. You have plans, and there's a lot
Speaker 1: of you worry about that initially during the tramp administration.
Speaker 1: What do you say too, would be investors right now
Speaker 1: and say, let's wait and see if that happens, because
Speaker 1: right now it looks somewhat less likely or certainly delayed
Speaker 1: from what we originally thought last January. Well, the timing
Speaker 1: the administration has very little control over that really requires
Speaker 1: activity by the Congress. But we seem to be making
Speaker 1: very good progress on healthcare reform, and that's really the
Speaker 1: prerequisite to getting the tax reform enacted. So the first
Speaker 1: key to timing on tax will be when we get
Speaker 1: the healthcare reform completed. Uh. Talk about the trade agreements
Speaker 1: again that you raise. Where are we right now? For example,
Speaker 1: let's be specific NAFTA. We've talked about that before when
Speaker 1: you've been on the program. Where are we in the
Speaker 1: process of renegotiating NAFTA and who's responsible? Is it you
Speaker 1: or is it your colleague Bob Lyheiser. Well as to
Speaker 1: where we are, we are right now awaiting the maturation
Speaker 1: of the ninety day letter that we're required under the
Speaker 1: Trade Promotion Act to send to the Congress. That clock
Speaker 1: text on the of August. Thirty days before that, we
Speaker 1: will we will be revealing to the Congress a more
Speaker 1: detailed negotiating strategy than we had discussed with them before.
Speaker 1: So the eighteenth of August is a big red letter
Speaker 1: day for trade. But even short of that, we have
Speaker 1: a big day very soon. In the middle of July
Speaker 1: is our next announcement period, the next meeting session with
Speaker 1: the Chinese. As you know, we've accomplished quite a little
Speaker 1: bit ever since the dayton at the Mara Largo conference,
Speaker 1: and we're hoping to achieve still more deliverable items in
Speaker 1: the very very near future. Okay, we want to welcome
Speaker 1: again our listeners on Bloomberg Radio as well as Bloomberg TV.
Speaker 1: We're talking with Wilbert Ross, the U S. Commerce Secretary.
Speaker 1: So before we get to China, let's go back just
Speaker 1: for moments and AFTA. So you're saying mid July, there's
Speaker 1: supposed to be a more detailed outline of the negotiating
Speaker 1: strategy e commerce than August eighteen, you really start the negotiations.
Speaker 1: Give us a sense after that, what is your hope
Speaker 1: on the timetable when you might have something concluded. With
Speaker 1: the Mexican government and the Canadian well, both governments are
Speaker 1: quite receptive to the idea of a renegotiation. They both
Speaker 1: know that this is at best an outdated agreement, doesn't
Speaker 1: really address the digital economy, that doesn't very much address
Speaker 1: services in general, certainly doesn't do much on financial services.
Speaker 1: Also doesn't do very much unnatural resources. So those are
Speaker 1: some big gaping holes in it. In part because some
Speaker 1: Mexicans have changed their regulations for the better unnatural resources,
Speaker 1: and in part because nobody way back when NAFTA was
Speaker 1: negotiated even knew there would be the digital economy. So
Speaker 1: first of all, it needs updating. Second of all, that
Speaker 1: needs some reprovisioning to adjust to the economic realities of today.
Speaker 1: For example, their rules of origin, namely what percentage of
Speaker 1: the total content of a product will qualify as true
Speaker 1: NAFTA product even though it came from outside NAFTA. In automotive,
Speaker 1: they specified particular parts to which the percentages applied. Well,
Speaker 1: half those parts aren't even used in cars anymore because
Speaker 1: automotive technology has progressed. So there are many things like
Speaker 1: that that need to be fixed, and I think everybody
Speaker 1: is up to the idea of fixing them. Is currency
Speaker 1: manipulation on the agenda and the negotiations with Canada and Mexico, Well,
Speaker 1: neither Canada nor Mexico in my view, is a currency manipulator.
Speaker 1: As you're aware, the Congress has specified that determining whether
Speaker 1: currency is manipulated is the purview of Treasury, and Congress
Speaker 1: has laid out very very specific tests to apply. Those
Speaker 1: tests are applied twice a year, generally in April and October,
Speaker 1: and very recently Treasury Secretary Manuchtion released the results of
Speaker 1: this year and found that there are no currency manipulations.
Speaker 1: That's quite different from the question are there misalignments. I
Speaker 1: think the Mexican pace, so for example, has been very
Speaker 1: weak against the dollar, partly out of concern that the
Speaker 1: trade negotiations might go very badly. That lately has rallied some.
Speaker 1: And my best guess is that once we have the
Speaker 1: noon NAFTA, there's a pretty good chance that both the
Speaker 1: Canadian and the Mexican currencies will strengthen because of removing
Speaker 1: that uncertainty from their picture. So that's the way we're
Speaker 1: looking at currency visa be these negotiations. We're speaking with
Speaker 1: Wilver Rossi's US Converse Secretary for Television and Radio on Bloomberg.
Speaker 1: So Mr Secretary, let's talk about one specific UH product,
Speaker 1: and that is steel. UH. The administration has been quite
Speaker 1: outspoken and I must say has taken some action on
Speaker 1: steel that hasn't been taken a good long time. There
Speaker 1: are various reports about what the approach to steal might be,
Speaker 1: including the idea that perhaps there would be duty free
Speaker 1: going up to a quota and then after that a
Speaker 1: duty would kick in. Can you tell us what the
Speaker 1: approach of the the Trump administration is right now to
Speaker 1: steal employees? Well, it's right now our work in progress,
Speaker 1: because we have not yet submitted our report from Commerce
Speaker 1: to the President, nor has he had a chance therefore
Speaker 1: to act upon it. But in general, enforcement has been
Speaker 1: a very big hallmark of the present administration. We now
Speaker 1: have in place a hundred sixty one trade cases which
Speaker 1: have put either anti dumping or countervailing duties on steel
Speaker 1: products from about thirty seven different countries. So this this
Speaker 1: has been a very big problem, the problem of global
Speaker 1: over capacity and more importantly, global overproduction. So the report
Speaker 1: will address those issues, will address them in the context
Speaker 1: of national security the to find the way that section
Speaker 1: to thirty two defines it, which is a pretty broad definition,
Speaker 1: including very strong reference to the needs of the economy.
Speaker 1: So it will then perhaps make some specific recommendations as
Speaker 1: to measures to deal with that, and those could range
Speaker 1: from the ones you describe two more complicated ones. But
Speaker 1: the real key will be what does the President ultimately
Speaker 1: decide to do with the recommendations. He has announced that
Speaker 1: he intends to take bold action. Mr Secretary, what I
Speaker 1: just find puzzling is that U. S. Steel producers are
Speaker 1: having trouble making money now even though you have severe
Speaker 1: anti dumping tariffs of like triple digits. Uh currently, why
Speaker 1: not just let it go? I mean, why you have
Speaker 1: to simulate and user demand whether or not you do
Speaker 1: anything about China which is having its own problems with
Speaker 1: overcapacity and their own profits. So, how does it any
Speaker 1: more tariffs fix that? Well, it's more complicated than just
Speaker 1: tariffs under two thirty two. There's also the potential for quotas,
Speaker 1: there's a potential for tariffreight quotas. They are all kinds
Speaker 1: of potentials to be brought to bear. The reason that
Speaker 1: the individual cases have been ineffective is that the w
Speaker 1: t O, the World Trade Organization, rules are so precise
Speaker 1: that you have to identify very clearly the product and
Speaker 1: very clearly the place of origin. And what that means
Speaker 1: is if I'm a serial dumper, of which there are
Speaker 1: quite a few lurking out there. If I'm a serial dumper,
Speaker 1: all I have to do is trendship it through another
Speaker 1: country and I evade the duty or send it to
Speaker 1: another country for further processing. However trivial that processing might
Speaker 1: be or give it a little further processing in my
Speaker 1: own country. So those trade cases help, but they have
Speaker 1: not been able to cure the systemic problem. That's why
Speaker 1: there are thirty seven different countries involved. The dumping of
Speaker 1: steel from one country into another makes that second country
Speaker 1: have excess capacity which they then dump, and then the
Speaker 1: country they dump it into continues the saga. So one
Speaker 1: ton of dump steel probably results in three or four
Speaker 1: tons of dislocation in different markets throughout the world. The
Speaker 1: two thirty two gives the potential for a broader solution
Speaker 1: that is less geography dependent and less individual product dependent. Finally,
Speaker 1: Mr Secretary, if we just read the newspapers or watched
Speaker 1: the evening news, and that we would include that all
Speaker 1: of Washington is consumed with investigations of various sorts and
Speaker 1: lawyers going back and forth. Give us a peek inside
Speaker 1: the administration. You've been called perhaps the most powerful Commerce
Speaker 1: secretary in history. You have a lot in your agenda,
Speaker 1: even as we've discussed, we've touched some of right now,
Speaker 1: to what extent does this really impinge on your ability
Speaker 1: to get your job done or a different way to
Speaker 1: put it, how do you avoid it becoming a distraction. Well,
Speaker 1: it's not a distraction at all. Um. I was in
Speaker 1: Miami on Friday with the President when he made his
Speaker 1: amazing announcement about how we're going to redo relationships with Cuba,
Speaker 1: and it was more excitement than at most average campaign rallies.
Speaker 1: It was a very heartwarming event, and especially because they
Speaker 1: had on stage a man who when he was twelve
Speaker 1: years old, his father was assassinated by the Castro regime
Speaker 1: and shortly after that the regime figured out this little
Speaker 1: boy was a child prodigy violinist, so they ordered him
Speaker 1: to appear on some TV spectacular. The brave little boy refused,
Speaker 1: so the next day the stormtroopers came to his house,
Speaker 1: surrounded him and said, you a little boy, Now you
Speaker 1: must play for us. You know what this boy did.
Speaker 1: He played the star spangled banner, and that's what the
Speaker 1: President had him play again on the stage in Miami.
Speaker 1: It's one of the most heartwarming, heartrending tales I've seen
Speaker 1: in a long time. President is going about his job,
Speaker 1: which is managing the country. These investigations are something of
Speaker 1: a side show. As far as I can see. There's
Speaker 1: no there there. It's just kind of a series of
Speaker 1: TV appearances by the various investigators, but there's been nothing
Speaker 1: to engin will come to bear. And so in terms
Speaker 1: of the overall picture, President is carrying out his program
Speaker 1: than on commerce. We certainly are carrying out our program.
Speaker 1: And now joining us a gentleman who had a job
Speaker 1: in the locker room of the Pittsburgh Steelers and the
Speaker 1: rest of his career was downhill from there. Michael Hayden
Speaker 1: joins us. Of course, General Hayden is a former head
Speaker 1: of the National Security Agency, Director of the National Security Agency.
Speaker 1: I make just of his time with the Pittsburgh Steelers.
Speaker 1: General very quickly, or what did you learn in the
Speaker 1: Pittsburgh Steelers locker room before Ducane? Uh? The Steelers represent
Speaker 1: the city almost perfectly, and the epic of the city
Speaker 1: is the Lucar. Go to work, do your job, work hard.
Speaker 1: And that's the way the Steelers operated as an organization,
Speaker 1: and the reason they're so popular in Pittsburgh is that's
Speaker 1: the way they operate on the field too. You know. Uh,
Speaker 1: we have so many topics to speak of, and we
Speaker 1: have a generous time with you this morning. Let me
Speaker 1: speak with the uproar right now of a Commander in
Speaker 1: chief abdicating decision making on the branches to the Secretary
Speaker 1: of Defense, etcetera. UM, we've had strong language on this
Speaker 1: show this morning that this is not appropriate. Do you
Speaker 1: agree that President Trump must take a more direct interest
Speaker 1: in the apportionment of our troops abroad? It would be
Speaker 1: good if he took a more direct personal interest and
Speaker 1: let me live you caution you can overachieve them that
Speaker 1: and try to make tactical decisions from the White House,
Speaker 1: which was a complaint sometimes against the Obama administration. So yeah,
Speaker 1: I think you should so show more interest, but be
Speaker 1: very clear to make no mistake. This is his re sponsibility.
Speaker 1: Don't care Secretary Mattos picks the final number. This is
Speaker 1: the President's number, and he will have to live and
Speaker 1: we should expect him to live with the consequences. General,
Speaker 1: talk to me a little bit about Jim Comey. So
Speaker 1: you you know him? How well do you know him?
Speaker 1: I do? Yes, Um, we had fairly frequent contact in
Speaker 1: the Bush of sation. It would have been oh four,
Speaker 1: oh five, oh six. Um, he was the Deputy Attorney
Speaker 1: General at the time. Do not routine, but we knew
Speaker 1: one another. In fact, have a bit of a history
Speaker 1: on different sides of an issue with regard to the
Speaker 1: president's surveillance program. But you know, Jim was tough, well informed,
Speaker 1: and only ethical. You're probably closer to the story than
Speaker 1: most of us. So how do you see this investigation
Speaker 1: into Russia unfolding? You think more people will be called
Speaker 1: to testify and actually, how long does it take to
Speaker 1: do this investigation and follow up testimonies? Well, the good
Speaker 1: news is Bob Mueller is going to conduct an exhaustive
Speaker 1: investigation and so he's gonna touch everyone in any way,
Speaker 1: shape or form related. The bad news is and Sary
Speaker 1: reports this that's time is gonna take a year or
Speaker 1: a year and a half, and so we're gonna have
Speaker 1: that kind of hanging over us. And you ask where
Speaker 1: do I think this ends up? I think it ends
Speaker 1: up in a clown. It's in there. Of course there
Speaker 1: was collaboration. You're gonna find evidence if you go in
Speaker 1: there and thinking no, no way, you're gonna find a
Speaker 1: lack of evidence. And this is gonna roman a question
Speaker 1: mark over the country. I I'm afraid general, we want
Speaker 1: to come back and talk about the immediate uh moments
Speaker 1: of cybersecurity and issues I guess of espionage and intelligence.
Speaker 1: But I guess you didn't fly a Beach twenty nine bomber.
Speaker 1: You came out of the Air Force in the nineteen
Speaker 1: sixty nine. What was your response when you heard that
Speaker 1: the US jetted had shot a Syrian jet out of
Speaker 1: the skies over the weekend? Yeah, not unexpected. That's a
Speaker 1: crowded battle space and what's happening. And there were two
Speaker 1: wars going on, the Russian the Iranians, the Syrians fighting
Speaker 1: the Syrian opposition that was kind of the west of
Speaker 1: the country, and then we were fighting Ice and they
Speaker 1: were obviously related, but you could separate them. Now that
Speaker 1: we've got isis on their back foot. Well, we're getting
Speaker 1: some break up there with Generator and we'll try to
Speaker 1: get a better connection. Uh there in a moment. We're
Speaker 1: speaking with Michael Hayden, forcedtar general and former director of
Speaker 1: the National Security Agency this morning. We'll see what we
Speaker 1: can do to get that hooked up again. That may
Speaker 1: be in the in the day of the modern cell phone,
Speaker 1: that can be a challenge with all that technology. General, Hey,
Speaker 1: how is the n S a different now than it
Speaker 1: was on your tour of duty? Well, it's kind of
Speaker 1: continue the trendline we knew was going to be there
Speaker 1: when I was there, and that's moving in the direction
Speaker 1: of well, letting to explain the dilemma. We're going through
Speaker 1: a world in which signals intelligence, which is accepting communications,
Speaker 1: was too too little, too hard to get to a
Speaker 1: world in which the communications are there are too much,
Speaker 1: too hard to understand. And we moves keep moving in
Speaker 1: that direction of too much, too hard to understand. And
Speaker 1: so it's the volume of modern communications that most challenges
Speaker 1: n A plus the availability of high end encryption around
Speaker 1: the world, which makes it hard for the agency to
Speaker 1: do the up not for us for sixty years without
Speaker 1: giving away the trade secrets. How do you respond to
Speaker 1: someone from the public saying, people like you general could
Speaker 1: tell what we're doing on our cell phones. Are we
Speaker 1: that vulnerable to intelligence communities? Can they just quote unquote
Speaker 1: tap right into our conversations? The threat you just described
Speaker 1: isn't one that our citizens should feel for the American
Speaker 1: intelligence community that said there there are other intelligence or
Speaker 1: inventions are on the world that have got at what
Speaker 1: they do and what you describe is technically possible. Our
Speaker 1: intelligence is controlled by law, controlled by oversight, controlled by
Speaker 1: a by a culture of deep perspective to the Furth
Speaker 1: Amendment about unreasonable search and seizure. And so although you
Speaker 1: get some imedgining issues and more nos, Congress are going
Speaker 1: to debate one of those later this summer. That's good
Speaker 1: to American privacy is not from American intelligence. It's from
Speaker 1: foreign intelligence services. And can I just add from the
Speaker 1: commercial sector that does gather a bunch of information on
Speaker 1: each and every one of us for their own commercial needs. Yeah,
Speaker 1: and that's something that certainly food for thought. General, Can
Speaker 1: you talk to us a little bit about intelligence sharing
Speaker 1: with foreign entities In the wake of the Manchester attacks,
Speaker 1: there were questions here in the UK about whether the
Speaker 1: UK should really give files to certain entities in the US.
Speaker 1: Is that a dangerous mindset? It is? And um I
Speaker 1: was request say uh for just under three years. And
Speaker 1: in that time I went and visited about fifty countries
Speaker 1: and that that was an espionage tourism. I went to
Speaker 1: those countries because we considered each and every one of
Speaker 1: them to be partners with US, and we shared information,
Speaker 1: frankly with with countries that might supprise the general American population,
Speaker 1: because you know, intelligence services have a lot in common,
Speaker 1: even when their political systems that they serve might be
Speaker 1: arguing with one another. Now, the tightest relationship we have
Speaker 1: is what the google countries we called the Five Eyes ourselves,
Speaker 1: the British, the Canadians, Australians, and the New Zealanders. And
Speaker 1: they're particularly in the kind of work that n s
Speaker 1: A does. They're almost inseparable. And so I know we
Speaker 1: had some rough water here after the Manchester event, that
Speaker 1: I think we held that pretty quickly because all these
Speaker 1: countries depend on the others. What do you think the
Speaker 1: Trump administration's message to NATO should be. I know there
Speaker 1: was a lot of talk when President Trump came here
Speaker 1: about the fact that their allies, but he did not
Speaker 1: mention Article five. Is that just noise for nothing? Well, no,
Speaker 1: that that that's real and it has a political effect.
Speaker 1: And I wish some of the things that, frankly wish
Speaker 1: all of the things you were saying, and some other
Speaker 1: things too weren't happening. But I have found in my
Speaker 1: life experience and this this is a bright spot. The
Speaker 1: deepest keel on our relationship with other nations is almost
Speaker 1: always intelligence. It's it's the part of the ship that
Speaker 1: keeps the rest of the ship more steady than it
Speaker 1: would otherwise be. So although that behavior you described as bad,
Speaker 1: how it's just the political level doesn't help intelligence. I
Speaker 1: also believe that our intelligence relationships are are actually quite
Speaker 1: stable general. The time that we've got left with you,
Speaker 1: you had a wonderful moment uh in an auditorium named
Speaker 1: after a half Arnold, I believe, out at the Colorado
Speaker 1: Springs Academy of the Air Force, where you spoke to
Speaker 1: a bunch of cadets in January of this year. What
Speaker 1: did you tell the young cadets? Uh? You know, in
Speaker 1: the media, I think we're so distorted with the news
Speaker 1: slow military. What did you tell the troops sitting in
Speaker 1: the half Arnold auditorium? I was honored they were giving
Speaker 1: me an award for leadership, uh, And I had a
Speaker 1: chance to talk to actually half of the core candets.
Speaker 1: And that's a really big crowd, and its fundamentally what
Speaker 1: I said to them was you work hard, do your job,
Speaker 1: but be a technical expert. But the more senior you get,
Speaker 1: the hiring rank you achieve, the less you're going to
Speaker 1: rely on Any professional expertise at the Air Force has
Speaker 1: taught you and the more you're going to rely on
Speaker 1: what you learned at home, at church, from your mom
Speaker 1: and dad, from your neighbors, the basic values that that
Speaker 1: creates American society. And at one point you get promoted
Speaker 1: for doing things right. At a certain point, you get
Speaker 1: promoted for doing the right things'll generated. Let's leave it there.
Speaker 1: Michael Hay, the former director of the n s A
Speaker 1: from Vacaine and of course the director of the Central
Speaker 1: Intelligence Agency at one point as well. Thanks for listening
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews
Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keene. David Gura is at
Speaker 1: David Gura. Before the podcast, you can always catch us worldwide.
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