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Speaker 1: Brought you by Bank of America Mary Lynch. Investing in

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Speaker 1: local communities, economies and a sustainable future. That's the power

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Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated

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Speaker 1: member s I p C. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

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Speaker 1: of course on the Bloomberg And Brian Levitt now he

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Speaker 1: is a senior investment strategist at Oppenheimer Funds. Joining us

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Speaker 1: here in the studio in New York. B Great to

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Speaker 1: see you. Good morning as always, and let's start with

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Speaker 1: the Central bank news we can we can pick up

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Speaker 1: on what just happened here from the Bank of England.

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Speaker 1: Of course, we had to FED the vision yesterday. Let's

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Speaker 1: start there. Uh, how did you react to what we

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Speaker 1: heard from from the Fed? Um is march on the table?

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Speaker 1: Are you looking farther ahead to June? What? What did

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Speaker 1: you make of the statement that we got from the

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Speaker 1: FED chair in her colleagues yesterday? I don't think there

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Speaker 1: was anything particularly that exciting about the Fed statement. UM,

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Speaker 1: I don't think we are going to see a rate

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Speaker 1: hike in March. I think the Federal Reserve is going

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Speaker 1: to UH show the market well in advance of what

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Speaker 1: their intentions are, and then the the interest rate probabilities

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Speaker 1: right now are somewhere between one and five and one

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Speaker 1: and three percent probability of a rate hike in March,

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Speaker 1: So that's not gonna happen. Usually you'll see the Fed

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Speaker 1: closer to six percent probability. I mean, the Federal Reserve

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Speaker 1: is in a in an interesting place, and that we

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Speaker 1: are closer to our dual mandate. Although inflation UM has

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Speaker 1: improved on the base effects of energy core inflation you know,

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Speaker 1: close to one seven, one eight, but not you know,

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Speaker 1: not this high pressure economy well above two percent and climbing.

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Speaker 1: So we've been in a very prolonged de leveraging, weak

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Speaker 1: growth environment. We're getting good signs of inflation, good carry

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Speaker 1: through into wages. To raise interest rates significantly now when

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Speaker 1: we still have a lot of political uncertainty does not

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Speaker 1: seem like uh an appropriate path forward. So March likely

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Speaker 1: off the table. Perhaps we'll see we'll see you one

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Speaker 1: before the mid half of the year. You mentioned that

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Speaker 1: dual mandate. You look at that statement for commentary on

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Speaker 1: the labor market. We had this big a DP beat yesterday.

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Speaker 1: We've got the job support coming out tomorrow. Were you

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Speaker 1: surprised that there wasn't more emphasis on our commentary on

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Speaker 1: the labor market in the statement yesterday? I think there

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Speaker 1: was some speculation going into it that we were, if

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Speaker 1: not nearing full employment and full employment, and perhaps that

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Speaker 1: the Committee would be willing to say so. Well, I

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Speaker 1: think the Federal Reserve wants to be data dependent on this,

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Speaker 1: and they, you know, Yelling in the past has talked

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Speaker 1: about a high pressure economy. Perhaps she walks back from

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Speaker 1: that a little bit, but this idea that we we

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Speaker 1: still have, um, you know, the U six unemployment rate

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Speaker 1: is still elevated, and those are people that are temporary

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Speaker 1: for economic reasons. So perhaps we'd like to see, uh,

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Speaker 1: you know, better move it down in that before we

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Speaker 1: think about significantly raising interest rates. But one of the

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Speaker 1: things that the FOMC did mention was business confidence, consumer

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Speaker 1: confidence and all that is appropriate. You are starting to

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Speaker 1: see some animal spirits, but you know, David, this is

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Speaker 1: what we've hoped for this is what we've hoped for

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Speaker 1: for a lot of years. Um. And you know, I

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Speaker 1: think the Fed could have a couple of rate hikes

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Speaker 1: on the table this year, but to aggressively raise rates

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Speaker 1: into this is probably not appropriate. There's a piece on

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Speaker 1: the Bloomberg this morning I read with with interest that

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Speaker 1: is the contours of a debate over the unemployment rate

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Speaker 1: are shaping up. Tomorrow will be the first job's report

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Speaker 1: under a Donald Trump presidency. Are calling michaelmckeeson a couple

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Speaker 1: of days ago, it's still an Obama jobs reported with

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Speaker 1: the survey was taken while he was still in office.

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Speaker 1: But what do you make of that debate as it

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Speaker 1: shapes up now that you have an administration that is not,

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Speaker 1: let's say, embracing the straight unemployment rate. Um, how messy

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Speaker 1: is that going to be? Potentially, well, it's disconcerting. I

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Speaker 1: hope somebody sits down with the administration and sits down

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Speaker 1: with President Trump and explains that the Bureau of Labors

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Speaker 1: TOSTIS issues a number of unemployment rates. You one through

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Speaker 1: U six. You to my favorite one red Hill mining

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Speaker 1: town where the streets have no names, right, but you

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Speaker 1: know you one through you six? They we and the

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Speaker 1: headline number we release what the media focuses on is

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Speaker 1: U three, but the administration or the citizens as a

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Speaker 1: whole doesn't necessarily have to focus on you three. What

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Speaker 1: I always tell clients is picking unemployment rate and stick

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Speaker 1: to it. Don't bounce back, because they tend to move

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Speaker 1: in unison. And you know, if you think about in

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Speaker 1: two thousand nine, the the U six again, which is

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Speaker 1: includes temporary workers for for economic reasons that peak, it's

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Speaker 1: now down below ten. The U three, which does not

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Speaker 1: include those disenfranchised or temporary workers, peaked close to ten percent,

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Speaker 1: is now below five. So they've both been halfed again.

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Speaker 1: Picking unemployment rate and stick to it, and I hope uh,

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Speaker 1: President Trump's economic advisors can get that through to him.

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Speaker 1: Let's move to markets here a little bit. We'll come

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Speaker 1: back with you after the break. But a lot of

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Speaker 1: people at the end of last year told us this

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Speaker 1: was going to be a very earning driven market. Uh.

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Speaker 1: In two thousand seventeen, we're in earning season. Now, what

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Speaker 1: do you make of what we've seen thus far? Well,

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Speaker 1: it's a little bit of a mixed bag. I mean,

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Speaker 1: I think the the expectations for earnings is that Um,

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Speaker 1: you are going to see things that are beneficial corporate earnings,

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Speaker 1: which is perhaps lower corporate tax rates, deregulation of industry. UM,

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Speaker 1: you know, stimulus in the United States. So all of

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Speaker 1: that has favored the more cyclical names in the United States,

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Speaker 1: or at least had heading into the beginning of the

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Speaker 1: year UM and favored small and mid caps. And and

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Speaker 1: I think that that's appropriate. This consolidation we're seeing now

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Speaker 1: in market's is we're dealing with some of the political

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Speaker 1: uncertainties and all of this, I mean very quickly here,

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Speaker 1: when you look at all this, do you change your

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Speaker 1: allocation to your four oh one? Kay? Do you just

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Speaker 1: assume lower bond prices, higher yields? And I can't be traditional, well,

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Speaker 1: I think we should be cautious. Um extrapolating interest rates

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Speaker 1: going up substantially in the United States. That now, that

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Speaker 1: doesn't mean that you know this, this recent backdown in

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Speaker 1: rates is going to sustain. And I think you know

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Speaker 1: cyclically you will see rates move higher in the U

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Speaker 1: S but not substantially. This idea that we're going to

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Speaker 1: break through three on our way to six percent is

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Speaker 1: in my opinion, widely overstated. There are secular forces that

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Speaker 1: are likely to keep rates low in the United States

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Speaker 1: and around a lot of the developed world, not the

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Speaker 1: least of which is aging populations and and and high

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Speaker 1: savings rates in Asia. So, um, you might want to

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Speaker 1: reduce the interest rate sensitivity of your portfolio. You probably

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Speaker 1: at this point in the cycle want to look to

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Speaker 1: credit senior loans. Um. But UM, I don't think that

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Speaker 1: you need to extrapolate that we're going that we now

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Speaker 1: because we're in a forty year whole marketing bonds and

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Speaker 1: now have to go into a forty year bear marketing bonds.

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Speaker 1: We're here with Brian Levitt, senior investment Strategies at Oppenheimer Funds,

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Speaker 1: David Gura, and Tom Keena in New York, and as

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Speaker 1: Michael Barr mentioned, brunched a few moments ago, Donald Trump

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Speaker 1: tweeting this morning. We're not gonna go through all of

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Speaker 1: the tweets that he fired off, but it makes me

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Speaker 1: wonderous sort of how this has changed your investment calculus.

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Speaker 1: How much do you have to pay attention to that,

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Speaker 1: how much you paying attention to the to the political news,

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Speaker 1: and does it change the way that you strategize. Well,

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Speaker 1: we've spent years telling investors that hating the government or

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Speaker 1: loving the government is not an investment strategy. And I

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Speaker 1: think that played out as you watched the futures come

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Speaker 1: in when Trump looked like he was about looked like

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Speaker 1: he was gonna win, and then the rally that you

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Speaker 1: had in the aftermath of that. I think that there's

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Speaker 1: a base case, and a base case says that this

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Speaker 1: should be good for cyclicals in the United States, and

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Speaker 1: this should be good for smaller and mid sized companies. Um.

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Speaker 1: But I think there's some tail risks in all of it,

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Speaker 1: and we've got to be mindful of the tail risks,

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Speaker 1: not the least of which is that, you know, protectionism

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Speaker 1: or trying to support US is strong dollar, and that

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Speaker 1: could lead to a slowdown in US economic activity. Nicely

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Speaker 1: said about terrorists. And one of the things Brian that

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Speaker 1: is in everything we do is we've forgotten what an

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Speaker 1: all American correction is and also an all American bear market.

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Speaker 1: It's been ages, hasn't it. It has been ages that

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Speaker 1: we've We've been in a secular bull market that began

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Speaker 1: on March nine, two thousand nine. And despite the fact

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Speaker 1: that investors have fought, kicking and screaming the whole way, um,

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Speaker 1: and a lot of American households are still not participating

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Speaker 1: it at this point where we are today in February seventeen,

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Speaker 1: this is among the longest in duration and one of

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Speaker 1: the biggest in terms of advance that we've seen in

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Speaker 1: US history. But that doesn't mean it has to be

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Speaker 1: over anytime soon. You had a note about doubt twenty thousand.

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Speaker 1: We marked that here on surveillance with a cold duck

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Speaker 1: and some flat champagne, but warm, warm, and cold duck.

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Speaker 1: I went to Gourmet magazine to prepare warm. What was

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Speaker 1: your takeaway from it? We we we've moved on loow

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Speaker 1: those couple of days ago. We have what was the

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Speaker 1: significance of it? As you saw? Well, I think we

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Speaker 1: we kind of wanted a blog about it in a

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Speaker 1: way to sort of make joke about how we celebrated

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Speaker 1: in March ten thousand and then we had to do

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Speaker 1: it again in two thousand nine when we crossed ten

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Speaker 1: thousand again. Um. But at the point being is that

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Speaker 1: in the season and of themselves don't tell us much.

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Speaker 1: They're they're not mean, we're verting um. As Tom showed

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Speaker 1: on the on the television program earlier, that you know,

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Speaker 1: industries reflected improving human condition and improving condition for for businesses,

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Speaker 1: so they don't have to mean revert as you all know,

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Speaker 1: far more interesting to compare the price level of an

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Speaker 1: index to a fundamental characteristic of a business, whether you

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Speaker 1: want to use book value, sales earnings UM. You look

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Speaker 1: at valuations, they're they're above fair value but but but

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Speaker 1: not but not significantly, particularly when you compare them to

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Speaker 1: the interest rate environment. Can we look, Brian a sharp

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Speaker 1: ratio again? Are we getting back to bob normalcy where

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Speaker 1: we actually have a risk free rate? I'm not sure

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Speaker 1: it's out there somewhere. We we do, we have a

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Speaker 1: risk free rate UM. And you know investors are you know,

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Speaker 1: always looking for what the you know what how they

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Speaker 1: can get the best sharp ratio in their portfolio. I

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Speaker 1: always think I can't eat sharp ratio, right, I can

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Speaker 1: eat returns um. But you know, for investors that are

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Speaker 1: looking for returns um for the with the more reasonable

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Speaker 1: level of volatility, it certainly isn't a reasonable approach UM.

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Speaker 1: And you know, equities UM generally offer pretty good, uh

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Speaker 1: you know, risk adjusted returns compared to most other asset

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Speaker 1: classes outside of equities what are you looking at? What

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Speaker 1: do you like at this point? Well, as I mentioned earlier,

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Speaker 1: we we like UM senior loans, and we like bonds

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Speaker 1: outside the United States, particularly in the emerging markets. UM.

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Speaker 1: You know, for investors that are trying to generate income,

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Speaker 1: it's difficult when ten years only around two four UM

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Speaker 1: inflation is not all that far away from that. There's

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Speaker 1: not a lot of real yield, and you're worried that

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Speaker 1: interest rates rise and the Treasury is gonna issue new

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Speaker 1: bonds and nobody's gonna want your paltry yielding bonds. So

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Speaker 1: senior loans as credit exposure, we think we're still in

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Speaker 1: a good place in the credit cycle. UM. Those loans

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Speaker 1: adjust to keep pace with short term interest rates, so

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Speaker 1: not a lot of interest rate sensitivity. And you know,

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Speaker 1: very interesting is looking outside the United States and some

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Speaker 1: of the emerging markets, places that were in recession or

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Speaker 1: recovering UM, where you can still get attractive real yields. Brian,

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Speaker 1: thank you so much. I thank you very generous of

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Speaker 1: your time today. Brian. Love it with us who that

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Speaker 1: there's still points higher and we've heard that from a

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Speaker 1: number of guests, uh this week right now, someone that

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Speaker 1: knows presidential comments. Um Al brought us joining us a

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Speaker 1: former president of Richmond fed a wonderful to speak to

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Speaker 1: you as we juggle between Governor Carney and the President.

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Speaker 1: Take us back as only albrought us can to a

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Speaker 1: strong dollar discourse. There was a time where every other day,

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Speaker 1: someone besides the albrought us was talking about strong dollar policy.

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Speaker 1: Is that a good thing to have officials jab owning

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Speaker 1: the dollar ever higher? Well, I think you know the

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Speaker 1: first good morning, Tom. I think, uh, it depends to

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Speaker 1: some extent on the context, in the and the tone.

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Speaker 1: I mean maybe often uh, senior officials, often the Treasury

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Speaker 1: Secretary have made sort of generic uh comments. Uh in

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Speaker 1: the same way. Our policy is to have a strong dollar,

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Speaker 1: but that has often been interpreted as we are not

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Speaker 1: going to try to We're going to try to follow

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Speaker 1: economic policies that result in a strong dollar, as opposed

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Speaker 1: to try to manipulate the dollar, either verbally or through

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Speaker 1: some sort of intervention. And I think that's a good

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Speaker 1: thing when you but but you know, as a stand

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Speaker 1: line here, and if you begin to move in on

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Speaker 1: arena where you're doing something more than that that it

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Speaker 1: then it can be upsetting and I think that's what

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Speaker 1: has been going on at currency markets most and most recently.

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Speaker 1: David Garrow jump in here with Albros. I just want

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Speaker 1: to point out the president sitting now at the breakfast.

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Speaker 1: I believe he's having first squeeze Mexican origin this Australian marmote. Yeah,

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Speaker 1: he is going to eat before he speaks. Again, we're

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Speaker 1: continuing to monitor that. Let me ask you about the

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Speaker 1: political pressure on the FED right now. There was so

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Speaker 1: much commentary about the Fed Reserve on the campaign trail.

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Speaker 1: Now we see the contours shaping up of a fight

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Speaker 1: on Capitol Hill over control of the Federal Reserve more

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Speaker 1: more control over its actions. Uh. Is this a new

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Speaker 1: kind of pressure? Is this something that you saw when

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Speaker 1: you were there at the Richmond Fed. Well, we had

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Speaker 1: you know, the FIT has had pressure from the political

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Speaker 1: pressure in one form or another throughout much of its history.

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Speaker 1: Certainly it's recent history. I would say it's sort of

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Speaker 1: ebbs and flows. Uh, in many that I looked back. Uh.

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Speaker 1: I was in the FIT for thirty some years, but

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Speaker 1: actually I remember the f o MC and at the

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Speaker 1: senior level of the organization only between n two thousand

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Speaker 1: and four and through most of that period. Uh, I

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Speaker 1: thought that pressure was was moderate, I guess in the

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Speaker 1: early part of it, when during part of the H. W.

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Speaker 1: Bush administration there was some pressure, and there was always

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Speaker 1: a little bit of pressure after that, but nothing nothing

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Speaker 1: too extreme. Now currently it seems it seems to me that, uh,

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Speaker 1: that it seems to be ramping up. You've got several

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Speaker 1: pieces of legislation in Congress that would uh would impend you,

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Speaker 1: I think on the fred veg independence is a lot

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Speaker 1: of talk. Of course, we don't know what it's going

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Speaker 1: to lead to about the Chairman Yellen or chair Yellen.

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Speaker 1: Her term is up next year, about a year from now,

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Speaker 1: and so there's obviously speculation about whether she will be

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Speaker 1: able to stay or whether she will be replaced. So

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Speaker 1: a lot of a lot of political talk about the

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Speaker 1: FED now more than normal, I think, and frankly for

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Speaker 1: me at least a little bit concerning I'm a matter

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Speaker 1: of personnel. We we got worried that the Jeffrey Lacker,

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Speaker 1: your successor, is going to be stepping down from that job.

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Speaker 1: And when we got that news, Tom and I talked

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Speaker 1: about the special quality of Richmond Fed presidents. There there

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Speaker 1: is some something of regional importance to the folks who

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Speaker 1: have been in that job. You're from Richmond, yourself, Jeffrey

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Speaker 1: Lacker from Lexington. Who would you like to see in

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Speaker 1: that jobs? There's something special about the Richmond Fed president? Well,

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Speaker 1: you know, I don't know that there's anything. Well, we

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Speaker 1: UH like to think that we've had. I think we've

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Speaker 1: had I hope you would agree strong presidents over a

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Speaker 1: period of time. Jeff has done a very fine job

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Speaker 1: in my view. I may we don't always agree on everything,

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Speaker 1: but necessartainly I agree on much of of his UH program.

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Speaker 1: I would like I think one thing that has hopefully

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Speaker 1: distinguished the FED, the Richmond FED is we've always had

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Speaker 1: people with good grounding and economics UH and who have

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Speaker 1: felt that UH the policies that we advocate in the

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Speaker 1: positions on particular policy questions that we support a well

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Speaker 1: grounded in UH economics and in economic research. I think

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Speaker 1: it's been the case, at least for the last three

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Speaker 1: presidents that we have maintained a strong research department. For example,

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Speaker 1: when I was president, had been part of the Jeff's

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Speaker 1: UH presidency. We had a Marvin good Friend UH distinguished

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Speaker 1: monetary ecommerce was at the Bank. He was my chief advisor.

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Speaker 1: He's now at Carnegie Mellon University. Dave and I felt

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Speaker 1: I had really high quality uh advice and UH he

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Speaker 1: was able to form solid positions. I hope that that

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Speaker 1: tradition will be continued. Okay, you're way too kind. The

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Speaker 1: Richmond Fed has a research depth and particularly on zero

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Speaker 1: sum economics, like nobody forget about algebraic production functions and

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Speaker 1: their uses before Cobb Dougles one Thomas M. Humphrey, who

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Speaker 1: I've read everything he's ever read, spring In He wrote

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Speaker 1: this for President Trump al Merk and Chillis in classicals

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Speaker 1: Insights from Doctrinal History. Do we have a president who

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Speaker 1: wants to hearken back to the mercantilism that Thomas Humphrey

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Speaker 1: owns within this research, I don't. I don't think any

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Speaker 1: of us want. Oh you mean, do we have a

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Speaker 1: president of the United States? Yes? Do we have a president? Yes,

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Speaker 1: the President United States. Look, even though I'm no longer

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Speaker 1: at the FED, I do try to be careful not

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Speaker 1: to get too deeply involved in political commentary. But uh,

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Speaker 1: the short answer that I would give you is that

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Speaker 1: it is a concern for me anyway defined for our audience.

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Speaker 1: What's wrong with saying America first? Uh. I don't think

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Speaker 1: there is anything wrong with saying America first. You know,

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Speaker 1: the different people will mean different things when they say

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Speaker 1: America first. Uh. And I can't speak for President Trump.

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Speaker 1: I can only speak for myself. I want America to

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Speaker 1: be first among a group of very strong nations and

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Speaker 1: training partners, so that our strength contributes to the strength

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Speaker 1: of other economies and and vice versa. And this is

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Speaker 1: you know, it gets to the point of a mutually

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Speaker 1: beneficial trading regime. You mentioned Tom Uprey. I think he

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Speaker 1: would support what I'm saying pretty strongly. So that's that's

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Speaker 1: the world that we have been moving towards, I think

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Speaker 1: throughout the post war period. I hope that we continue

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Speaker 1: to do that. Uh. And we'll just send to see

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Speaker 1: the current administration evolves. Uh. Against that that kind of criterion.

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Speaker 1: It's a lot of talking Capital Hill about making the

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Speaker 1: FED more data depending, having more rules based Federal Reserve.

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Speaker 1: You you sat in the echoes building around that giant table.

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Speaker 1: How difficult would that be as a policymaker to be

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Speaker 1: more tightly tied to two rules? Well, I think that

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Speaker 1: there's something to be said. Well, first let me say

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Speaker 1: this that there are we we use something called the

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Speaker 1: tailor rule as a guide to policy. Uh. And my

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Speaker 1: own view is that that is often beneficial and I

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Speaker 1: think uh uh, you know, continuing in in that vein

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Speaker 1: and conducting policy would be a good thing if we

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Speaker 1: were if if a particular monetary policy implementation operational rule

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Speaker 1: we're mandated H. I would have some concerns about that.

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Speaker 1: To put it mildly that I think the key first

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Speaker 1: of all, you need to know what the rule is.

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Speaker 1: If it's rigid, doesn't allow any discretion, uh, in in

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Speaker 1: particular situations that could be that could get a problem.

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Speaker 1: I think for the fifth let's go al brought us.

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Speaker 1: Thank you so much for the Premier and to get

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Speaker 1: a major shout out to the work of the Richmond

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Speaker 1: fed on Mr brod us is watch and to get

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Speaker 1: him back here. It was great. They are in search

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Speaker 1: of a new president, I believe on Tuckers on the shortlist.

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Speaker 1: There is well brought you by Bank of America Mary Lynch,

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00:20:14,160 --> 00:20:18,400
Speaker 1: dedicated to bringing our clients insights and solutions to meet

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00:20:18,440 --> 00:20:21,919
Speaker 1: the challenges of a transforming world. That's the power of

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Speaker 1: Global Connections, Mary Lynch Pierce Federan Smith Incorporated Member s

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00:20:27,840 --> 00:20:34,520
Speaker 1: I p C. Anytime we speak with Craig Maffata Maffata Nathanson,

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Speaker 1: there's forty five to seventy themes that we can work

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Speaker 1: on today, We're gonna focus on one on one theme,

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Speaker 1: Craig Moffatt on Verizon. Is my cell phone bill too high?

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Speaker 1: Is it? Is it a dwoppoli or triapoli where we're

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Speaker 1: all getting taken to the cleaners every month. Well, I'll

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Speaker 1: tell you if if this is a duopoly or triopoly,

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Speaker 1: it's not working very well for the triopoli UM Verizon

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Speaker 1: right now is struggling with UH mid single digit negative

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Speaker 1: revenue growth and its wireless business. A T and T

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Speaker 1: is struggling with mid single digit revenue declines in its

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Speaker 1: wireless business. Sprint is struggling with revenue declines in its

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Speaker 1: wireless business. The only operator that's growing in wireless right

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Speaker 1: now is T Mobile UM, which is a very price

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Speaker 1: competitive and aggressive competitor. So UM by all outward signs.

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Speaker 1: If this isn't a competitive industry, then I don't know

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Speaker 1: what is. Can you overlay what we learned from Apple

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Speaker 1: this week onto that Apple announcing they sold three point

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Speaker 1: five million phones to new customers. Where are these new

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Speaker 1: customers going for wireless service? Well, remember, the short answer

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Speaker 1: is not the United States. UM. Interestingly, UM, the the

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Speaker 1: upgrade cycle, that is how quickly people are replacing their

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Speaker 1: their smartphones in the United States is still lengthening. UM.

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Speaker 1: When there's a new I phone that tends to shorten

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Speaker 1: it temporarily. But there's no question that the trend has

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Speaker 1: been people keeping their phones longer. UM. And there are

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Speaker 1: two a couple of obvious reasons for that, right. One

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Speaker 1: is the real innovation in smartphones today is coming from

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Speaker 1: the software, not the hardware, so people are able to

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Speaker 1: upgrade the software relatively easily. UM. But also the change

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Speaker 1: in the way phones are paid for, with the elimination

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Speaker 1: of the old subsidy plans and replacement with people buying

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Speaker 1: their own phones, gives people a natural incentive to say,

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Speaker 1: I want to keep my old phone longer. I mean, David,

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Speaker 1: to Craig's point, I love the sense this is professional

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Speaker 1: security analysis, folks. A T and T S results were

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Speaker 1: nearly impenetrable. I mean, that's just bizarre. With organic revenue growth,

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Speaker 1: that's it's negative single digit. I mean that's grim David, Yeah,

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Speaker 1: it's grimm and and uh Craig, I want to know

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Speaker 1: what the path forward is for A. T and T

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Speaker 1: is as you see it, of course, is the ongoing

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Speaker 1: merger discussion, all of the antitrust stuff associated with it.

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Speaker 1: But what's your sense of where this company's headed. Well,

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Speaker 1: you know, it's interesting. Let's compare and contrast A T

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Speaker 1: and T and Verizon for a second. Um, A T

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Speaker 1: and T has made some very clear bets on media

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Speaker 1: at large, right They They first acquired Direct Tv in

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Speaker 1: an in an acquisition that sixty seven billion dollars including

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Speaker 1: debt that UM that took him in the direction of

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Speaker 1: the traditional pay TV business, and now they're buying Time

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Speaker 1: Warner UM. By most accounts, they're really diversifying away from

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Speaker 1: the wireless business. Verizon has made very small little moves

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Speaker 1: UM first A O L and Yahoo, big big brand

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Speaker 1: names I suppose in some people's minds, but tiny little

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Speaker 1: moves in the grand scheme of things, UM and So

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Speaker 1: they've really stood pat and they're they're investing more in

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Speaker 1: the wireless business. They're big transaction was a couple of

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Speaker 1: years ago where they bought in the other half of

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Speaker 1: Verizon Wireless from to phone. Um, you couldn't have two

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Speaker 1: more diametrically opposed strategies. And the market right now is

429
00:24:08,119 --> 00:24:11,560
Speaker 1: very enamored with A T and t s boldness in

430
00:24:11,800 --> 00:24:14,040
Speaker 1: making a big move and wants Verizon to do the

431
00:24:14,080 --> 00:24:17,520
Speaker 1: same thing, do something big, whatever it is. Um. But

432
00:24:17,720 --> 00:24:20,200
Speaker 1: it's easy to imagine how that narrative will get turned

433
00:24:20,200 --> 00:24:22,880
Speaker 1: on its head if it turns out that the big

434
00:24:22,880 --> 00:24:26,359
Speaker 1: bold moves that A T and T made, particularly direct TV,

435
00:24:27,400 --> 00:24:29,359
Speaker 1: it turns out to have been the wrong move. Um.

436
00:24:29,400 --> 00:24:31,280
Speaker 1: What if it turns out that what A T and

437
00:24:31,320 --> 00:24:35,640
Speaker 1: T really needs, for example, isn't a satellite TV business

438
00:24:35,680 --> 00:24:39,840
Speaker 1: in a in a declining pay TV industry, but instead

439
00:24:39,920 --> 00:24:42,520
Speaker 1: is a bunch of wires to support their next generation

440
00:24:42,560 --> 00:24:47,320
Speaker 1: wireless business. Have you ever been more uncertain? Quickly here, Craig,

441
00:24:47,320 --> 00:24:51,119
Speaker 1: Have you've ever been more uncertain about the wireless monopoly

442
00:24:51,200 --> 00:24:55,200
Speaker 1: and the wireless certitude of cash flow? Well, I've never

443
00:24:55,240 --> 00:24:59,400
Speaker 1: seen it as a monopoly. Um. But and to be fair,

444
00:24:59,480 --> 00:25:03,439
Speaker 1: I've always had real reservations about the structural attractiveness of

445
00:25:03,480 --> 00:25:08,040
Speaker 1: the wireless business. Um. And so to me, this is

446
00:25:08,720 --> 00:25:12,080
Speaker 1: this is exactly the outcome that anyone would have expected,

447
00:25:12,160 --> 00:25:16,840
Speaker 1: which is you have a relatively unattractive industry structure um

448
00:25:16,840 --> 00:25:18,960
Speaker 1: that was papered over for a long time by the

449
00:25:19,000 --> 00:25:21,760
Speaker 1: fact that you just had rapid growth in the category.

450
00:25:22,040 --> 00:25:24,480
Speaker 1: But once the category hit a wall, like it really

451
00:25:24,480 --> 00:25:27,760
Speaker 1: did in about the end or so and everybody had

452
00:25:27,760 --> 00:25:32,480
Speaker 1: a smartphone, this industry has been has been a very

453
00:25:32,600 --> 00:25:35,040
Speaker 1: very poor place to make returns. You were way out

454
00:25:35,080 --> 00:25:37,080
Speaker 1: front of the Craig Morfatt, Thank you so much. Mofatt.

455
00:25:37,119 --> 00:25:51,399
Speaker 1: Nathan said, why don't you bring in Jordan right now?

456
00:25:51,400 --> 00:25:54,520
Speaker 1: We're waiting for the president there. It's it's it's a

457
00:25:54,640 --> 00:25:59,920
Speaker 1: lengthy introduction. It's a lengthy introduction. It is interdenominational, inter

458
00:26:00,080 --> 00:26:02,600
Speaker 1: religious event of the National Prayer Breakfast, which has been

459
00:26:02,600 --> 00:26:05,280
Speaker 1: going on for the better part of half a century. Uh.

460
00:26:05,359 --> 00:26:08,040
Speaker 1: And so we have we have various religious leaders speaking.

461
00:26:08,040 --> 00:26:10,000
Speaker 1: Now the President there on the dice. He'll be speaking soon.

462
00:26:10,000 --> 00:26:12,200
Speaker 1: And as Tom said, we'll bring that those comments to

463
00:26:12,240 --> 00:26:13,960
Speaker 1: you live as soon as they begin. Until then, there,

464
00:26:14,040 --> 00:26:16,680
Speaker 1: let's talk to Jordan Rochester. He's for Extragist at number

465
00:26:16,960 --> 00:26:19,360
Speaker 1: joining us on the Specium Enterprise phone line. Specium Enterprise

466
00:26:19,560 --> 00:26:23,480
Speaker 1: nationwide fiber based network and i T Infrastructure Solutions and join.

467
00:26:23,560 --> 00:26:25,040
Speaker 1: Let me start just by getting your reaction to what

468
00:26:25,080 --> 00:26:27,280
Speaker 1: we learned from the Bank of England this morning. There's

469
00:26:27,320 --> 00:26:30,679
Speaker 1: the no move, no change to policy, some revision to

470
00:26:30,720 --> 00:26:34,439
Speaker 1: the to the forecast commentary about inflation. Give us your

471
00:26:34,440 --> 00:26:37,160
Speaker 1: take on what we saw this morning. Hi, good morning,

472
00:26:37,160 --> 00:26:39,200
Speaker 1: thanks having me young guys. So I'm gonna say to

473
00:26:39,280 --> 00:26:41,560
Speaker 1: Mr Mark Karney at the banks being well done, sir.

474
00:26:42,280 --> 00:26:46,119
Speaker 1: They managed to upgrade their GDP forecasts from what was

475
00:26:46,160 --> 00:26:49,480
Speaker 1: a very low level in November at the last update

476
00:26:49,520 --> 00:26:52,399
Speaker 1: we had to what is you know, a pretty healthy

477
00:26:52,480 --> 00:26:55,040
Speaker 1: number for the UK. You know, the train growth is

478
00:26:55,080 --> 00:26:57,280
Speaker 1: around two cents year and year in the UK, and

479
00:26:57,840 --> 00:27:00,639
Speaker 1: provided the forecast to just you know, around on that level.

480
00:27:01,320 --> 00:27:04,240
Speaker 1: But the main thing for markets was will the Bank

481
00:27:04,240 --> 00:27:07,920
Speaker 1: of England raised their inflation forecast profile. What they did, though,

482
00:27:08,119 --> 00:27:11,159
Speaker 1: was they lowered the natural rate of unemployment estimate in

483
00:27:11,200 --> 00:27:14,719
Speaker 1: their modeling, which allowed them more slack in the labor market.

484
00:27:15,040 --> 00:27:17,560
Speaker 1: So therefore, in fact their inflation forecasts rather than going

485
00:27:17,680 --> 00:27:20,760
Speaker 1: up as some had hoped for, and the rates market

486
00:27:20,840 --> 00:27:23,040
Speaker 1: was hoping perhaps for a bit more of a hawk's

487
00:27:23,080 --> 00:27:25,240
Speaker 1: tone from that front, they revised them lower in the

488
00:27:25,280 --> 00:27:28,119
Speaker 1: long run. What is it? On that note, we have

489
00:27:28,240 --> 00:27:31,119
Speaker 1: these revisions and we have Mark Arney saying today the

490
00:27:31,119 --> 00:27:33,040
Speaker 1: Governor of the Bank of England and saying the Brexit

491
00:27:33,119 --> 00:27:35,840
Speaker 1: journey is really just beginning. How much credence do you

492
00:27:35,880 --> 00:27:38,280
Speaker 1: place in these forecasts amid all the revisions, amid all

493
00:27:38,280 --> 00:27:40,399
Speaker 1: the changes the midd all the uncertainty about what happens

494
00:27:40,400 --> 00:27:43,919
Speaker 1: to the UK economy. Um. I think the reporter in

495
00:27:43,960 --> 00:27:45,919
Speaker 1: the Q and A of that press conference, after a

496
00:27:46,000 --> 00:27:49,119
Speaker 1: very good questions, they asked, Mark Kearney, look at the

497
00:27:49,119 --> 00:27:52,200
Speaker 1: forecast you made when you cut interest rates in reaction

498
00:27:52,240 --> 00:27:55,240
Speaker 1: to Brexit have im proven so far to be wrong.

499
00:27:55,280 --> 00:27:57,240
Speaker 1: How can you have any conference in the forecast you're

500
00:27:57,280 --> 00:28:00,600
Speaker 1: making today to be right. He didn't really answer that

501
00:28:00,720 --> 00:28:03,560
Speaker 1: question in any way around it. But of course there

502
00:28:03,640 --> 00:28:05,680
Speaker 1: is a lot of uncertainty and what the market is

503
00:28:05,720 --> 00:28:07,680
Speaker 1: struggling to do, and it's the same as the US

504
00:28:07,720 --> 00:28:10,359
Speaker 1: and what's going on with Donald Trump is we know

505
00:28:10,440 --> 00:28:13,600
Speaker 1: how to trade and price for what rates market is

506
00:28:13,600 --> 00:28:16,040
Speaker 1: going to do to typical economic indicators, but we are

507
00:28:16,200 --> 00:28:20,960
Speaker 1: not so great at forecasting the impact of politics. So

508
00:28:21,000 --> 00:28:23,560
Speaker 1: the uncertainty of all of everyone's forecast from the fair,

509
00:28:23,680 --> 00:28:26,560
Speaker 1: the Bank of England's and Bank Japan, anyone their their

510
00:28:26,600 --> 00:28:29,520
Speaker 1: forecast a mercy to the political developments going on, and

511
00:28:29,600 --> 00:28:32,040
Speaker 1: Brexit is a very good example of how things go

512
00:28:32,760 --> 00:28:34,800
Speaker 1: pretty well or in fact, that you could go quite badly.

513
00:28:34,920 --> 00:28:37,920
Speaker 1: Ebody asked this question, well, Jordan, Frankly, folks, we should

514
00:28:37,960 --> 00:28:40,640
Speaker 1: ask it once a week, once every two weeks. What's

515
00:28:40,680 --> 00:28:43,120
Speaker 1: the bet now on the street? You can look at

516
00:28:43,120 --> 00:28:47,000
Speaker 1: the positioning of investors. There's a lot of fancy calculations

517
00:28:47,040 --> 00:28:50,040
Speaker 1: done in this, folks. But Jordan Rochester, what is the

518
00:28:50,120 --> 00:28:55,560
Speaker 1: foreign exchange bet right now? In terms of starting whichever

519
00:28:55,600 --> 00:28:57,200
Speaker 1: way you want to go? What is what is the

520
00:28:57,240 --> 00:29:01,040
Speaker 1: most extended bet that's out there. I'll tell you what

521
00:29:01,200 --> 00:29:04,200
Speaker 1: It's got to be. The long dollar view. After Donald

522
00:29:04,200 --> 00:29:09,000
Speaker 1: Trump's victory, I think that is starting to turn. And

523
00:29:09,040 --> 00:29:11,800
Speaker 1: the conversation we're having with clients is we're talking about

524
00:29:11,800 --> 00:29:15,280
Speaker 1: how actually protectionism from Donald Trump is actually a negative

525
00:29:15,320 --> 00:29:18,320
Speaker 1: for the dollar. And whilst the good stuff about tax

526
00:29:18,360 --> 00:29:22,080
Speaker 1: cuts and tax reform will probably take place during this

527
00:29:22,080 --> 00:29:24,080
Speaker 1: this year, it's more of the second half of the

528
00:29:24,160 --> 00:29:25,719
Speaker 1: year story and it might not be as good as

529
00:29:25,720 --> 00:29:28,440
Speaker 1: the market thinks. It's going to be and the protection

530
00:29:28,560 --> 00:29:30,440
Speaker 1: is um. It's something that Donald Trump can do a

531
00:29:30,520 --> 00:29:33,800
Speaker 1: lot faster. The President doesn't need permission from Congress to

532
00:29:33,880 --> 00:29:37,600
Speaker 1: throw tarifs on China, for example, and that's actually against

533
00:29:37,600 --> 00:29:40,080
Speaker 1: the consensus. We believe that's a dollar negative. So for

534
00:29:40,120 --> 00:29:42,720
Speaker 1: now we're actually short dollar in We think that could

535
00:29:42,760 --> 00:29:44,640
Speaker 1: definitely get down to one ten in the next couple

536
00:29:44,680 --> 00:29:47,520
Speaker 1: of sessions, and even even lower perhaps if Donald Trump

537
00:29:47,600 --> 00:29:49,600
Speaker 1: keeps going down the way he's going. And to the

538
00:29:49,760 --> 00:29:53,040
Speaker 1: clear folks, when Mr Rochester says short dollar year and

539
00:29:53,040 --> 00:29:56,760
Speaker 1: you're implying a stronger year and a weaker dollar, right,

540
00:29:57,040 --> 00:30:01,320
Speaker 1: that's right. I love the life. Your note that super

541
00:30:01,360 --> 00:30:06,240
Speaker 1: Tuesday might be better renamed average average Thursday, super average Thursday.

542
00:30:06,480 --> 00:30:08,800
Speaker 1: What's your what's your outlook for Stirling at this point?

543
00:30:08,880 --> 00:30:11,520
Speaker 1: What do you think it could test? So a lot

544
00:30:11,560 --> 00:30:14,640
Speaker 1: of the recent movement sterling, Sterling is headed higher against

545
00:30:14,640 --> 00:30:17,040
Speaker 1: the dollar, for example, and against the euro. A lot

546
00:30:17,080 --> 00:30:19,400
Speaker 1: of it was not due to any fundamental change in

547
00:30:19,440 --> 00:30:21,840
Speaker 1: the UK outlook. It was for positioning reduction. A lot

548
00:30:21,880 --> 00:30:24,320
Speaker 1: of people got very short and sterling and we're hoping

549
00:30:24,440 --> 00:30:27,480
Speaker 1: for like parity from some on the street I've seen

550
00:30:27,520 --> 00:30:30,760
Speaker 1: against the dollar. Um, what what's happened now is the

551
00:30:30,760 --> 00:30:32,920
Speaker 1: Bank of England has said, look, we revised lower our

552
00:30:32,920 --> 00:30:35,760
Speaker 1: assumption of the unemployment rate. We're not hiking this year,

553
00:30:36,080 --> 00:30:39,040
Speaker 1: and that removes that a bit of that uncertainty from

554
00:30:39,080 --> 00:30:41,760
Speaker 1: the market. So I think sterling had lower from here.

555
00:30:41,800 --> 00:30:44,240
Speaker 1: Really I'd like to I'd like to play it by

556
00:30:44,240 --> 00:30:46,800
Speaker 1: buying the euro and selling the pounds rather than against

557
00:30:46,840 --> 00:30:48,880
Speaker 1: the dollar, because again, like I said, I think there

558
00:30:48,880 --> 00:30:51,360
Speaker 1: could be a weak dollar policy co from the Trump

559
00:30:51,400 --> 00:30:55,200
Speaker 1: administration any day. Now you mentioned the change here, you're

560
00:30:55,240 --> 00:30:57,400
Speaker 1: having to pay more attention to politics. How's that change

561
00:30:57,400 --> 00:31:00,440
Speaker 1: of the dynamics of for X Generally a lot of

562
00:31:00,440 --> 00:31:02,840
Speaker 1: pressure here to get a better sense of the pulse,

563
00:31:02,880 --> 00:31:05,440
Speaker 1: the political pulse. How are you doing that? How's that changing?

564
00:31:05,520 --> 00:31:09,640
Speaker 1: Just the way that you and others operate. How's it changing?

565
00:31:09,680 --> 00:31:12,080
Speaker 1: I guess we spend a little bit less time on

566
00:31:12,560 --> 00:31:14,400
Speaker 1: tracking the data and a little bit more time on

567
00:31:14,520 --> 00:31:21,880
Speaker 1: updating on Twitter feed to put it bromptly. Four ye

568
00:31:22,080 --> 00:31:24,480
Speaker 1: he tends to tweet between three am and four m

569
00:31:24,480 --> 00:31:27,600
Speaker 1: in London time, so whenever we wake up we find

570
00:31:27,600 --> 00:31:29,480
Speaker 1: out what's going on. I mean, this morning was the

571
00:31:29,480 --> 00:31:33,680
Speaker 1: tweets of Australia, for example, Um, and yeah, that's the

572
00:31:33,720 --> 00:31:35,640
Speaker 1: sort of change in the way we have to operate again,

573
00:31:35,720 --> 00:31:38,720
Speaker 1: are you from Australia? Jordan's no, I can do a

574
00:31:38,720 --> 00:31:43,440
Speaker 1: great Australian accident. Okay. I just was gonna what's your

575
00:31:43,480 --> 00:31:47,600
Speaker 1: thought of the news like that? For another having a

576
00:31:47,680 --> 00:31:56,360
Speaker 1: great time, Tom, you talked about strong yet We're okay enough,

577
00:31:56,440 --> 00:32:00,320
Speaker 1: come on, crackodile, calm down. Jordan helped me. R was

578
00:32:00,400 --> 00:32:06,920
Speaker 1: strong Yen. Where does strong Yenn impinge? Mr? Abbe? So

579
00:32:07,320 --> 00:32:10,760
Speaker 1: if you get below a hundred and ten, it's still okay.

580
00:32:10,760 --> 00:32:12,959
Speaker 1: It's down to a hundred five against the dollar. When

581
00:32:13,000 --> 00:32:16,240
Speaker 1: you start to get a bit more noise, however, typically

582
00:32:16,280 --> 00:32:18,600
Speaker 1: what would happen is when the dollar end gets to

583
00:32:18,720 --> 00:32:23,680
Speaker 1: one oh five, but currently around one twelve, the officials

584
00:32:23,720 --> 00:32:28,200
Speaker 1: in Japan start talking about currency moves are unwarranted, or

585
00:32:28,360 --> 00:32:31,440
Speaker 1: they just start verbally interveneing, which is just nothing. It's

586
00:32:31,480 --> 00:32:35,240
Speaker 1: just commentary. One oh five against the dollar used to

587
00:32:35,320 --> 00:32:38,200
Speaker 1: be the level where people said this is our Bay's line.

588
00:32:38,560 --> 00:32:41,720
Speaker 1: But I think with the Trump administration's focus on currency manipulation,

589
00:32:42,200 --> 00:32:45,000
Speaker 1: you may see less of that. So if our babe.

590
00:32:45,160 --> 00:32:47,720
Speaker 1: It's if you get below ninety five when people start

591
00:32:47,720 --> 00:32:51,560
Speaker 1: to say the Albanomics trade is over. Help us with

592
00:32:51,680 --> 00:32:53,120
Speaker 1: the with the strength of the dollar. We're having a

593
00:32:53,160 --> 00:32:55,760
Speaker 1: conversation throughout the week really about the comments that Peter

594
00:32:55,880 --> 00:32:59,240
Speaker 1: Navarre made to the FT. Peter Navara, the head of

595
00:32:59,240 --> 00:33:02,760
Speaker 1: the new Trade Council, White House Trade Council. How did

596
00:33:02,800 --> 00:33:04,840
Speaker 1: you interpret those What does that say to you about

597
00:33:04,920 --> 00:33:07,760
Speaker 1: the degree to which this administration is going to regard

598
00:33:07,920 --> 00:33:11,680
Speaker 1: or talk about the dollar. So they got to talk

599
00:33:11,760 --> 00:33:15,120
Speaker 1: it down and that's pretty clear. It's something we were

600
00:33:15,160 --> 00:33:18,520
Speaker 1: expecting anyway, and it's it's starting to bear fruit in

601
00:33:18,680 --> 00:33:21,200
Speaker 1: terms of against the Euro and the German manipulation of

602
00:33:21,280 --> 00:33:24,600
Speaker 1: the currency points. Let's remember when we talk about the ECB,

603
00:33:24,720 --> 00:33:27,200
Speaker 1: for example, who is the you know, the one side

604
00:33:27,240 --> 00:33:30,080
Speaker 1: of the NPC committee he's always talking about the upside

605
00:33:30,160 --> 00:33:33,360
Speaker 1: risks to inflation. It's Germany. So if you're talking about

606
00:33:33,400 --> 00:33:38,239
Speaker 1: Germany manipulating the euro to that benefit, it's just incorrect. Um.

607
00:33:38,760 --> 00:33:40,760
Speaker 1: The Germans are the ones who are the more more

608
00:33:40,840 --> 00:33:45,280
Speaker 1: hawkish members of the ECB Council. So Um, what it

609
00:33:45,360 --> 00:33:47,280
Speaker 1: does tell me about the Trump administration is they will

610
00:33:47,280 --> 00:33:49,080
Speaker 1: be very protectionist at the same time one a week

611
00:33:49,120 --> 00:33:51,680
Speaker 1: of that. Put that simply, and they can do it

612
00:33:52,200 --> 00:33:54,600
Speaker 1: if they impose Paris on any of their trading partners.

613
00:33:54,640 --> 00:33:57,600
Speaker 1: That's a clear way to do Jordan. Thanks for the update, Jordan,

614
00:33:58,240 --> 00:34:00,040
Speaker 1: and the accent, and it was a good accent. It

615
00:34:00,160 --> 00:34:11,880
Speaker 1: was Jordan Roch to this morning. Thanks for listening to

616
00:34:11,960 --> 00:34:17,960
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud,

617
00:34:18,440 --> 00:34:22,640
Speaker 1: or whichever podcast platform you prefer. I'm out on Twitter

618
00:34:22,760 --> 00:34:26,520
Speaker 1: at Tom Keene. David Gura is at David Gura. Before

619
00:34:26,600 --> 00:34:30,960
Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg Radio,

620
00:34:43,440 --> 00:34:46,920
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621
00:34:47,040 --> 00:34:50,920
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622
00:34:51,080 --> 00:34:54,759
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623
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624
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