Speaker 1: Brought you by Bank of America Mary Lynch. Investing in
Speaker 1: local communities, economies and a sustainable future. That's the power
Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated
Speaker 1: member s I p C. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best in economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and
Speaker 1: of course on the Bloomberg And Brian Levitt now he
Speaker 1: is a senior investment strategist at Oppenheimer Funds. Joining us
Speaker 1: here in the studio in New York. B Great to
Speaker 1: see you. Good morning as always, and let's start with
Speaker 1: the Central bank news we can we can pick up
Speaker 1: on what just happened here from the Bank of England.
Speaker 1: Of course, we had to FED the vision yesterday. Let's
Speaker 1: start there. Uh, how did you react to what we
Speaker 1: heard from from the Fed? Um is march on the table?
Speaker 1: Are you looking farther ahead to June? What? What did
Speaker 1: you make of the statement that we got from the
Speaker 1: FED chair in her colleagues yesterday? I don't think there
Speaker 1: was anything particularly that exciting about the Fed statement. UM,
Speaker 1: I don't think we are going to see a rate
Speaker 1: hike in March. I think the Federal Reserve is going
Speaker 1: to UH show the market well in advance of what
Speaker 1: their intentions are, and then the the interest rate probabilities
Speaker 1: right now are somewhere between one and five and one
Speaker 1: and three percent probability of a rate hike in March,
Speaker 1: So that's not gonna happen. Usually you'll see the Fed
Speaker 1: closer to six percent probability. I mean, the Federal Reserve
Speaker 1: is in a in an interesting place, and that we
Speaker 1: are closer to our dual mandate. Although inflation UM has
Speaker 1: improved on the base effects of energy core inflation you know,
Speaker 1: close to one seven, one eight, but not you know,
Speaker 1: not this high pressure economy well above two percent and climbing.
Speaker 1: So we've been in a very prolonged de leveraging, weak
Speaker 1: growth environment. We're getting good signs of inflation, good carry
Speaker 1: through into wages. To raise interest rates significantly now when
Speaker 1: we still have a lot of political uncertainty does not
Speaker 1: seem like uh an appropriate path forward. So March likely
Speaker 1: off the table. Perhaps we'll see we'll see you one
Speaker 1: before the mid half of the year. You mentioned that
Speaker 1: dual mandate. You look at that statement for commentary on
Speaker 1: the labor market. We had this big a DP beat yesterday.
Speaker 1: We've got the job support coming out tomorrow. Were you
Speaker 1: surprised that there wasn't more emphasis on our commentary on
Speaker 1: the labor market in the statement yesterday? I think there
Speaker 1: was some speculation going into it that we were, if
Speaker 1: not nearing full employment and full employment, and perhaps that
Speaker 1: the Committee would be willing to say so. Well, I
Speaker 1: think the Federal Reserve wants to be data dependent on this,
Speaker 1: and they, you know, Yelling in the past has talked
Speaker 1: about a high pressure economy. Perhaps she walks back from
Speaker 1: that a little bit, but this idea that we we
Speaker 1: still have, um, you know, the U six unemployment rate
Speaker 1: is still elevated, and those are people that are temporary
Speaker 1: for economic reasons. So perhaps we'd like to see, uh,
Speaker 1: you know, better move it down in that before we
Speaker 1: think about significantly raising interest rates. But one of the
Speaker 1: things that the FOMC did mention was business confidence, consumer
Speaker 1: confidence and all that is appropriate. You are starting to
Speaker 1: see some animal spirits, but you know, David, this is
Speaker 1: what we've hoped for this is what we've hoped for
Speaker 1: for a lot of years. Um. And you know, I
Speaker 1: think the Fed could have a couple of rate hikes
Speaker 1: on the table this year, but to aggressively raise rates
Speaker 1: into this is probably not appropriate. There's a piece on
Speaker 1: the Bloomberg this morning I read with with interest that
Speaker 1: is the contours of a debate over the unemployment rate
Speaker 1: are shaping up. Tomorrow will be the first job's report
Speaker 1: under a Donald Trump presidency. Are calling michaelmckeeson a couple
Speaker 1: of days ago, it's still an Obama jobs reported with
Speaker 1: the survey was taken while he was still in office.
Speaker 1: But what do you make of that debate as it
Speaker 1: shapes up now that you have an administration that is not,
Speaker 1: let's say, embracing the straight unemployment rate. Um, how messy
Speaker 1: is that going to be? Potentially, well, it's disconcerting. I
Speaker 1: hope somebody sits down with the administration and sits down
Speaker 1: with President Trump and explains that the Bureau of Labors
Speaker 1: TOSTIS issues a number of unemployment rates. You one through
Speaker 1: U six. You to my favorite one red Hill mining
Speaker 1: town where the streets have no names, right, but you
Speaker 1: know you one through you six? They we and the
Speaker 1: headline number we release what the media focuses on is
Speaker 1: U three, but the administration or the citizens as a
Speaker 1: whole doesn't necessarily have to focus on you three. What
Speaker 1: I always tell clients is picking unemployment rate and stick
Speaker 1: to it. Don't bounce back, because they tend to move
Speaker 1: in unison. And you know, if you think about in
Speaker 1: two thousand nine, the the U six again, which is
Speaker 1: includes temporary workers for for economic reasons that peak, it's
Speaker 1: now down below ten. The U three, which does not
Speaker 1: include those disenfranchised or temporary workers, peaked close to ten percent,
Speaker 1: is now below five. So they've both been halfed again.
Speaker 1: Picking unemployment rate and stick to it, and I hope uh,
Speaker 1: President Trump's economic advisors can get that through to him.
Speaker 1: Let's move to markets here a little bit. We'll come
Speaker 1: back with you after the break. But a lot of
Speaker 1: people at the end of last year told us this
Speaker 1: was going to be a very earning driven market. Uh.
Speaker 1: In two thousand seventeen, we're in earning season. Now, what
Speaker 1: do you make of what we've seen thus far? Well,
Speaker 1: it's a little bit of a mixed bag. I mean,
Speaker 1: I think the the expectations for earnings is that Um,
Speaker 1: you are going to see things that are beneficial corporate earnings,
Speaker 1: which is perhaps lower corporate tax rates, deregulation of industry. UM,
Speaker 1: you know, stimulus in the United States. So all of
Speaker 1: that has favored the more cyclical names in the United States,
Speaker 1: or at least had heading into the beginning of the
Speaker 1: year UM and favored small and mid caps. And and
Speaker 1: I think that that's appropriate. This consolidation we're seeing now
Speaker 1: in market's is we're dealing with some of the political
Speaker 1: uncertainties and all of this, I mean very quickly here,
Speaker 1: when you look at all this, do you change your
Speaker 1: allocation to your four oh one? Kay? Do you just
Speaker 1: assume lower bond prices, higher yields? And I can't be traditional, well,
Speaker 1: I think we should be cautious. Um extrapolating interest rates
Speaker 1: going up substantially in the United States. That now, that
Speaker 1: doesn't mean that you know this, this recent backdown in
Speaker 1: rates is going to sustain. And I think you know
Speaker 1: cyclically you will see rates move higher in the U
Speaker 1: S but not substantially. This idea that we're going to
Speaker 1: break through three on our way to six percent is
Speaker 1: in my opinion, widely overstated. There are secular forces that
Speaker 1: are likely to keep rates low in the United States
Speaker 1: and around a lot of the developed world, not the
Speaker 1: least of which is aging populations and and and high
Speaker 1: savings rates in Asia. So, um, you might want to
Speaker 1: reduce the interest rate sensitivity of your portfolio. You probably
Speaker 1: at this point in the cycle want to look to
Speaker 1: credit senior loans. Um. But UM, I don't think that
Speaker 1: you need to extrapolate that we're going that we now
Speaker 1: because we're in a forty year whole marketing bonds and
Speaker 1: now have to go into a forty year bear marketing bonds.
Speaker 1: We're here with Brian Levitt, senior investment Strategies at Oppenheimer Funds,
Speaker 1: David Gura, and Tom Keena in New York, and as
Speaker 1: Michael Barr mentioned, brunched a few moments ago, Donald Trump
Speaker 1: tweeting this morning. We're not gonna go through all of
Speaker 1: the tweets that he fired off, but it makes me
Speaker 1: wonderous sort of how this has changed your investment calculus.
Speaker 1: How much do you have to pay attention to that,
Speaker 1: how much you paying attention to the to the political news,
Speaker 1: and does it change the way that you strategize. Well,
Speaker 1: we've spent years telling investors that hating the government or
Speaker 1: loving the government is not an investment strategy. And I
Speaker 1: think that played out as you watched the futures come
Speaker 1: in when Trump looked like he was about looked like
Speaker 1: he was gonna win, and then the rally that you
Speaker 1: had in the aftermath of that. I think that there's
Speaker 1: a base case, and a base case says that this
Speaker 1: should be good for cyclicals in the United States, and
Speaker 1: this should be good for smaller and mid sized companies. Um.
Speaker 1: But I think there's some tail risks in all of it,
Speaker 1: and we've got to be mindful of the tail risks,
Speaker 1: not the least of which is that, you know, protectionism
Speaker 1: or trying to support US is strong dollar, and that
Speaker 1: could lead to a slowdown in US economic activity. Nicely
Speaker 1: said about terrorists. And one of the things Brian that
Speaker 1: is in everything we do is we've forgotten what an
Speaker 1: all American correction is and also an all American bear market.
Speaker 1: It's been ages, hasn't it. It has been ages that
Speaker 1: we've We've been in a secular bull market that began
Speaker 1: on March nine, two thousand nine. And despite the fact
Speaker 1: that investors have fought, kicking and screaming the whole way, um,
Speaker 1: and a lot of American households are still not participating
Speaker 1: it at this point where we are today in February seventeen,
Speaker 1: this is among the longest in duration and one of
Speaker 1: the biggest in terms of advance that we've seen in
Speaker 1: US history. But that doesn't mean it has to be
Speaker 1: over anytime soon. You had a note about doubt twenty thousand.
Speaker 1: We marked that here on surveillance with a cold duck
Speaker 1: and some flat champagne, but warm, warm, and cold duck.
Speaker 1: I went to Gourmet magazine to prepare warm. What was
Speaker 1: your takeaway from it? We we we've moved on loow
Speaker 1: those couple of days ago. We have what was the
Speaker 1: significance of it? As you saw? Well, I think we
Speaker 1: we kind of wanted a blog about it in a
Speaker 1: way to sort of make joke about how we celebrated
Speaker 1: in March ten thousand and then we had to do
Speaker 1: it again in two thousand nine when we crossed ten
Speaker 1: thousand again. Um. But at the point being is that
Speaker 1: in the season and of themselves don't tell us much.
Speaker 1: They're they're not mean, we're verting um. As Tom showed
Speaker 1: on the on the television program earlier, that you know,
Speaker 1: industries reflected improving human condition and improving condition for for businesses,
Speaker 1: so they don't have to mean revert as you all know,
Speaker 1: far more interesting to compare the price level of an
Speaker 1: index to a fundamental characteristic of a business, whether you
Speaker 1: want to use book value, sales earnings UM. You look
Speaker 1: at valuations, they're they're above fair value but but but
Speaker 1: not but not significantly, particularly when you compare them to
Speaker 1: the interest rate environment. Can we look, Brian a sharp
Speaker 1: ratio again? Are we getting back to bob normalcy where
Speaker 1: we actually have a risk free rate? I'm not sure
Speaker 1: it's out there somewhere. We we do, we have a
Speaker 1: risk free rate UM. And you know investors are you know,
Speaker 1: always looking for what the you know what how they
Speaker 1: can get the best sharp ratio in their portfolio. I
Speaker 1: always think I can't eat sharp ratio, right, I can
Speaker 1: eat returns um. But you know, for investors that are
Speaker 1: looking for returns um for the with the more reasonable
Speaker 1: level of volatility, it certainly isn't a reasonable approach UM.
Speaker 1: And you know, equities UM generally offer pretty good, uh
Speaker 1: you know, risk adjusted returns compared to most other asset
Speaker 1: classes outside of equities what are you looking at? What
Speaker 1: do you like at this point? Well, as I mentioned earlier,
Speaker 1: we we like UM senior loans, and we like bonds
Speaker 1: outside the United States, particularly in the emerging markets. UM.
Speaker 1: You know, for investors that are trying to generate income,
Speaker 1: it's difficult when ten years only around two four UM
Speaker 1: inflation is not all that far away from that. There's
Speaker 1: not a lot of real yield, and you're worried that
Speaker 1: interest rates rise and the Treasury is gonna issue new
Speaker 1: bonds and nobody's gonna want your paltry yielding bonds. So
Speaker 1: senior loans as credit exposure, we think we're still in
Speaker 1: a good place in the credit cycle. UM. Those loans
Speaker 1: adjust to keep pace with short term interest rates, so
Speaker 1: not a lot of interest rate sensitivity. And you know,
Speaker 1: very interesting is looking outside the United States and some
Speaker 1: of the emerging markets, places that were in recession or
Speaker 1: recovering UM, where you can still get attractive real yields. Brian,
Speaker 1: thank you so much. I thank you very generous of
Speaker 1: your time today. Brian. Love it with us who that
Speaker 1: there's still points higher and we've heard that from a
Speaker 1: number of guests, uh this week right now, someone that
Speaker 1: knows presidential comments. Um Al brought us joining us a
Speaker 1: former president of Richmond fed a wonderful to speak to
Speaker 1: you as we juggle between Governor Carney and the President.
Speaker 1: Take us back as only albrought us can to a
Speaker 1: strong dollar discourse. There was a time where every other day,
Speaker 1: someone besides the albrought us was talking about strong dollar policy.
Speaker 1: Is that a good thing to have officials jab owning
Speaker 1: the dollar ever higher? Well, I think you know the
Speaker 1: first good morning, Tom. I think, uh, it depends to
Speaker 1: some extent on the context, in the and the tone.
Speaker 1: I mean maybe often uh, senior officials, often the Treasury
Speaker 1: Secretary have made sort of generic uh comments. Uh in
Speaker 1: the same way. Our policy is to have a strong dollar,
Speaker 1: but that has often been interpreted as we are not
Speaker 1: going to try to We're going to try to follow
Speaker 1: economic policies that result in a strong dollar, as opposed
Speaker 1: to try to manipulate the dollar, either verbally or through
Speaker 1: some sort of intervention. And I think that's a good
Speaker 1: thing when you but but you know, as a stand
Speaker 1: line here, and if you begin to move in on
Speaker 1: arena where you're doing something more than that that it
Speaker 1: then it can be upsetting and I think that's what
Speaker 1: has been going on at currency markets most and most recently.
Speaker 1: David Garrow jump in here with Albros. I just want
Speaker 1: to point out the president sitting now at the breakfast.
Speaker 1: I believe he's having first squeeze Mexican origin this Australian marmote. Yeah,
Speaker 1: he is going to eat before he speaks. Again, we're
Speaker 1: continuing to monitor that. Let me ask you about the
Speaker 1: political pressure on the FED right now. There was so
Speaker 1: much commentary about the Fed Reserve on the campaign trail.
Speaker 1: Now we see the contours shaping up of a fight
Speaker 1: on Capitol Hill over control of the Federal Reserve more
Speaker 1: more control over its actions. Uh. Is this a new
Speaker 1: kind of pressure? Is this something that you saw when
Speaker 1: you were there at the Richmond Fed. Well, we had
Speaker 1: you know, the FIT has had pressure from the political
Speaker 1: pressure in one form or another throughout much of its history.
Speaker 1: Certainly it's recent history. I would say it's sort of
Speaker 1: ebbs and flows. Uh, in many that I looked back. Uh.
Speaker 1: I was in the FIT for thirty some years, but
Speaker 1: actually I remember the f o MC and at the
Speaker 1: senior level of the organization only between n two thousand
Speaker 1: and four and through most of that period. Uh, I
Speaker 1: thought that pressure was was moderate, I guess in the
Speaker 1: early part of it, when during part of the H. W.
Speaker 1: Bush administration there was some pressure, and there was always
Speaker 1: a little bit of pressure after that, but nothing nothing
Speaker 1: too extreme. Now currently it seems it seems to me that, uh,
Speaker 1: that it seems to be ramping up. You've got several
Speaker 1: pieces of legislation in Congress that would uh would impend you,
Speaker 1: I think on the fred veg independence is a lot
Speaker 1: of talk. Of course, we don't know what it's going
Speaker 1: to lead to about the Chairman Yellen or chair Yellen.
Speaker 1: Her term is up next year, about a year from now,
Speaker 1: and so there's obviously speculation about whether she will be
Speaker 1: able to stay or whether she will be replaced. So
Speaker 1: a lot of a lot of political talk about the
Speaker 1: FED now more than normal, I think, and frankly for
Speaker 1: me at least a little bit concerning I'm a matter
Speaker 1: of personnel. We we got worried that the Jeffrey Lacker,
Speaker 1: your successor, is going to be stepping down from that job.
Speaker 1: And when we got that news, Tom and I talked
Speaker 1: about the special quality of Richmond Fed presidents. There there
Speaker 1: is some something of regional importance to the folks who
Speaker 1: have been in that job. You're from Richmond, yourself, Jeffrey
Speaker 1: Lacker from Lexington. Who would you like to see in
Speaker 1: that jobs? There's something special about the Richmond Fed president? Well,
Speaker 1: you know, I don't know that there's anything. Well, we
Speaker 1: UH like to think that we've had. I think we've
Speaker 1: had I hope you would agree strong presidents over a
Speaker 1: period of time. Jeff has done a very fine job
Speaker 1: in my view. I may we don't always agree on everything,
Speaker 1: but necessartainly I agree on much of of his UH program.
Speaker 1: I would like I think one thing that has hopefully
Speaker 1: distinguished the FED, the Richmond FED is we've always had
Speaker 1: people with good grounding and economics UH and who have
Speaker 1: felt that UH the policies that we advocate in the
Speaker 1: positions on particular policy questions that we support a well
Speaker 1: grounded in UH economics and in economic research. I think
Speaker 1: it's been the case, at least for the last three
Speaker 1: presidents that we have maintained a strong research department. For example,
Speaker 1: when I was president, had been part of the Jeff's
Speaker 1: UH presidency. We had a Marvin good Friend UH distinguished
Speaker 1: monetary ecommerce was at the Bank. He was my chief advisor.
Speaker 1: He's now at Carnegie Mellon University. Dave and I felt
Speaker 1: I had really high quality uh advice and UH he
Speaker 1: was able to form solid positions. I hope that that
Speaker 1: tradition will be continued. Okay, you're way too kind. The
Speaker 1: Richmond Fed has a research depth and particularly on zero
Speaker 1: sum economics, like nobody forget about algebraic production functions and
Speaker 1: their uses before Cobb Dougles one Thomas M. Humphrey, who
Speaker 1: I've read everything he's ever read, spring In He wrote
Speaker 1: this for President Trump al Merk and Chillis in classicals
Speaker 1: Insights from Doctrinal History. Do we have a president who
Speaker 1: wants to hearken back to the mercantilism that Thomas Humphrey
Speaker 1: owns within this research, I don't. I don't think any
Speaker 1: of us want. Oh you mean, do we have a
Speaker 1: president of the United States? Yes? Do we have a president? Yes,
Speaker 1: the President United States. Look, even though I'm no longer
Speaker 1: at the FED, I do try to be careful not
Speaker 1: to get too deeply involved in political commentary. But uh,
Speaker 1: the short answer that I would give you is that
Speaker 1: it is a concern for me anyway defined for our audience.
Speaker 1: What's wrong with saying America first? Uh. I don't think
Speaker 1: there is anything wrong with saying America first. You know,
Speaker 1: the different people will mean different things when they say
Speaker 1: America first. Uh. And I can't speak for President Trump.
Speaker 1: I can only speak for myself. I want America to
Speaker 1: be first among a group of very strong nations and
Speaker 1: training partners, so that our strength contributes to the strength
Speaker 1: of other economies and and vice versa. And this is
Speaker 1: you know, it gets to the point of a mutually
Speaker 1: beneficial trading regime. You mentioned Tom Uprey. I think he
Speaker 1: would support what I'm saying pretty strongly. So that's that's
Speaker 1: the world that we have been moving towards, I think
Speaker 1: throughout the post war period. I hope that we continue
Speaker 1: to do that. Uh. And we'll just send to see
Speaker 1: the current administration evolves. Uh. Against that that kind of criterion.
Speaker 1: It's a lot of talking Capital Hill about making the
Speaker 1: FED more data depending, having more rules based Federal Reserve.
Speaker 1: You you sat in the echoes building around that giant table.
Speaker 1: How difficult would that be as a policymaker to be
Speaker 1: more tightly tied to two rules? Well, I think that
Speaker 1: there's something to be said. Well, first let me say
Speaker 1: this that there are we we use something called the
Speaker 1: tailor rule as a guide to policy. Uh. And my
Speaker 1: own view is that that is often beneficial and I
Speaker 1: think uh uh, you know, continuing in in that vein
Speaker 1: and conducting policy would be a good thing if we
Speaker 1: were if if a particular monetary policy implementation operational rule
Speaker 1: we're mandated H. I would have some concerns about that.
Speaker 1: To put it mildly that I think the key first
Speaker 1: of all, you need to know what the rule is.
Speaker 1: If it's rigid, doesn't allow any discretion, uh, in in
Speaker 1: particular situations that could be that could get a problem.
Speaker 1: I think for the fifth let's go al brought us.
Speaker 1: Thank you so much for the Premier and to get
Speaker 1: a major shout out to the work of the Richmond
Speaker 1: fed on Mr brod us is watch and to get
Speaker 1: him back here. It was great. They are in search
Speaker 1: of a new president, I believe on Tuckers on the shortlist.
Speaker 1: There is well brought you by Bank of America Mary Lynch,
Speaker 1: dedicated to bringing our clients insights and solutions to meet
Speaker 1: the challenges of a transforming world. That's the power of
Speaker 1: Global Connections, Mary Lynch Pierce Federan Smith Incorporated Member s
Speaker 1: I p C. Anytime we speak with Craig Maffata Maffata Nathanson,
Speaker 1: there's forty five to seventy themes that we can work
Speaker 1: on today, We're gonna focus on one on one theme,
Speaker 1: Craig Moffatt on Verizon. Is my cell phone bill too high?
Speaker 1: Is it? Is it a dwoppoli or triapoli where we're
Speaker 1: all getting taken to the cleaners every month. Well, I'll
Speaker 1: tell you if if this is a duopoly or triopoly,
Speaker 1: it's not working very well for the triopoli UM Verizon
Speaker 1: right now is struggling with UH mid single digit negative
Speaker 1: revenue growth and its wireless business. A T and T
Speaker 1: is struggling with mid single digit revenue declines in its
Speaker 1: wireless business. Sprint is struggling with revenue declines in its
Speaker 1: wireless business. The only operator that's growing in wireless right
Speaker 1: now is T Mobile UM, which is a very price
Speaker 1: competitive and aggressive competitor. So UM by all outward signs.
Speaker 1: If this isn't a competitive industry, then I don't know
Speaker 1: what is. Can you overlay what we learned from Apple
Speaker 1: this week onto that Apple announcing they sold three point
Speaker 1: five million phones to new customers. Where are these new
Speaker 1: customers going for wireless service? Well, remember, the short answer
Speaker 1: is not the United States. UM. Interestingly, UM, the the
Speaker 1: upgrade cycle, that is how quickly people are replacing their
Speaker 1: their smartphones in the United States is still lengthening. UM.
Speaker 1: When there's a new I phone that tends to shorten
Speaker 1: it temporarily. But there's no question that the trend has
Speaker 1: been people keeping their phones longer. UM. And there are
Speaker 1: two a couple of obvious reasons for that, right. One
Speaker 1: is the real innovation in smartphones today is coming from
Speaker 1: the software, not the hardware, so people are able to
Speaker 1: upgrade the software relatively easily. UM. But also the change
Speaker 1: in the way phones are paid for, with the elimination
Speaker 1: of the old subsidy plans and replacement with people buying
Speaker 1: their own phones, gives people a natural incentive to say,
Speaker 1: I want to keep my old phone longer. I mean, David,
Speaker 1: to Craig's point, I love the sense this is professional
Speaker 1: security analysis, folks. A T and T S results were
Speaker 1: nearly impenetrable. I mean, that's just bizarre. With organic revenue growth,
Speaker 1: that's it's negative single digit. I mean that's grim David, Yeah,
Speaker 1: it's grimm and and uh Craig, I want to know
Speaker 1: what the path forward is for A. T and T
Speaker 1: is as you see it, of course, is the ongoing
Speaker 1: merger discussion, all of the antitrust stuff associated with it.
Speaker 1: But what's your sense of where this company's headed. Well,
Speaker 1: you know, it's interesting. Let's compare and contrast A T
Speaker 1: and T and Verizon for a second. Um, A T
Speaker 1: and T has made some very clear bets on media
Speaker 1: at large, right They They first acquired Direct Tv in
Speaker 1: an in an acquisition that sixty seven billion dollars including
Speaker 1: debt that UM that took him in the direction of
Speaker 1: the traditional pay TV business, and now they're buying Time
Speaker 1: Warner UM. By most accounts, they're really diversifying away from
Speaker 1: the wireless business. Verizon has made very small little moves
Speaker 1: UM first A O L and Yahoo, big big brand
Speaker 1: names I suppose in some people's minds, but tiny little
Speaker 1: moves in the grand scheme of things, UM and So
Speaker 1: they've really stood pat and they're they're investing more in
Speaker 1: the wireless business. They're big transaction was a couple of
Speaker 1: years ago where they bought in the other half of
Speaker 1: Verizon Wireless from to phone. Um, you couldn't have two
Speaker 1: more diametrically opposed strategies. And the market right now is
Speaker 1: very enamored with A T and t s boldness in
Speaker 1: making a big move and wants Verizon to do the
Speaker 1: same thing, do something big, whatever it is. Um. But
Speaker 1: it's easy to imagine how that narrative will get turned
Speaker 1: on its head if it turns out that the big
Speaker 1: bold moves that A T and T made, particularly direct TV,
Speaker 1: it turns out to have been the wrong move. Um.
Speaker 1: What if it turns out that what A T and
Speaker 1: T really needs, for example, isn't a satellite TV business
Speaker 1: in a in a declining pay TV industry, but instead
Speaker 1: is a bunch of wires to support their next generation
Speaker 1: wireless business. Have you ever been more uncertain? Quickly here, Craig,
Speaker 1: Have you've ever been more uncertain about the wireless monopoly
Speaker 1: and the wireless certitude of cash flow? Well, I've never
Speaker 1: seen it as a monopoly. Um. But and to be fair,
Speaker 1: I've always had real reservations about the structural attractiveness of
Speaker 1: the wireless business. Um. And so to me, this is
Speaker 1: this is exactly the outcome that anyone would have expected,
Speaker 1: which is you have a relatively unattractive industry structure um
Speaker 1: that was papered over for a long time by the
Speaker 1: fact that you just had rapid growth in the category.
Speaker 1: But once the category hit a wall, like it really
Speaker 1: did in about the end or so and everybody had
Speaker 1: a smartphone, this industry has been has been a very
Speaker 1: very poor place to make returns. You were way out
Speaker 1: front of the Craig Morfatt, Thank you so much. Mofatt.
Speaker 1: Nathan said, why don't you bring in Jordan right now?
Speaker 1: We're waiting for the president there. It's it's it's a
Speaker 1: lengthy introduction. It's a lengthy introduction. It is interdenominational, inter
Speaker 1: religious event of the National Prayer Breakfast, which has been
Speaker 1: going on for the better part of half a century. Uh.
Speaker 1: And so we have we have various religious leaders speaking.
Speaker 1: Now the President there on the dice. He'll be speaking soon.
Speaker 1: And as Tom said, we'll bring that those comments to
Speaker 1: you live as soon as they begin. Until then, there,
Speaker 1: let's talk to Jordan Rochester. He's for Extragist at number
Speaker 1: joining us on the Specium Enterprise phone line. Specium Enterprise
Speaker 1: nationwide fiber based network and i T Infrastructure Solutions and join.
Speaker 1: Let me start just by getting your reaction to what
Speaker 1: we learned from the Bank of England this morning. There's
Speaker 1: the no move, no change to policy, some revision to
Speaker 1: the to the forecast commentary about inflation. Give us your
Speaker 1: take on what we saw this morning. Hi, good morning,
Speaker 1: thanks having me young guys. So I'm gonna say to
Speaker 1: Mr Mark Karney at the banks being well done, sir.
Speaker 1: They managed to upgrade their GDP forecasts from what was
Speaker 1: a very low level in November at the last update
Speaker 1: we had to what is you know, a pretty healthy
Speaker 1: number for the UK. You know, the train growth is
Speaker 1: around two cents year and year in the UK, and
Speaker 1: provided the forecast to just you know, around on that level.
Speaker 1: But the main thing for markets was will the Bank
Speaker 1: of England raised their inflation forecast profile. What they did, though,
Speaker 1: was they lowered the natural rate of unemployment estimate in
Speaker 1: their modeling, which allowed them more slack in the labor market.
Speaker 1: So therefore, in fact their inflation forecasts rather than going
Speaker 1: up as some had hoped for, and the rates market
Speaker 1: was hoping perhaps for a bit more of a hawk's
Speaker 1: tone from that front, they revised them lower in the
Speaker 1: long run. What is it? On that note, we have
Speaker 1: these revisions and we have Mark Arney saying today the
Speaker 1: Governor of the Bank of England and saying the Brexit
Speaker 1: journey is really just beginning. How much credence do you
Speaker 1: place in these forecasts amid all the revisions, amid all
Speaker 1: the changes the midd all the uncertainty about what happens
Speaker 1: to the UK economy. Um. I think the reporter in
Speaker 1: the Q and A of that press conference, after a
Speaker 1: very good questions, they asked, Mark Kearney, look at the
Speaker 1: forecast you made when you cut interest rates in reaction
Speaker 1: to Brexit have im proven so far to be wrong.
Speaker 1: How can you have any conference in the forecast you're
Speaker 1: making today to be right. He didn't really answer that
Speaker 1: question in any way around it. But of course there
Speaker 1: is a lot of uncertainty and what the market is
Speaker 1: struggling to do, and it's the same as the US
Speaker 1: and what's going on with Donald Trump is we know
Speaker 1: how to trade and price for what rates market is
Speaker 1: going to do to typical economic indicators, but we are
Speaker 1: not so great at forecasting the impact of politics. So
Speaker 1: the uncertainty of all of everyone's forecast from the fair,
Speaker 1: the Bank of England's and Bank Japan, anyone their their
Speaker 1: forecast a mercy to the political developments going on, and
Speaker 1: Brexit is a very good example of how things go
Speaker 1: pretty well or in fact, that you could go quite badly.
Speaker 1: Ebody asked this question, well, Jordan, Frankly, folks, we should
Speaker 1: ask it once a week, once every two weeks. What's
Speaker 1: the bet now on the street? You can look at
Speaker 1: the positioning of investors. There's a lot of fancy calculations
Speaker 1: done in this, folks. But Jordan Rochester, what is the
Speaker 1: foreign exchange bet right now? In terms of starting whichever
Speaker 1: way you want to go? What is what is the
Speaker 1: most extended bet that's out there. I'll tell you what
Speaker 1: It's got to be. The long dollar view. After Donald
Speaker 1: Trump's victory, I think that is starting to turn. And
Speaker 1: the conversation we're having with clients is we're talking about
Speaker 1: how actually protectionism from Donald Trump is actually a negative
Speaker 1: for the dollar. And whilst the good stuff about tax
Speaker 1: cuts and tax reform will probably take place during this
Speaker 1: this year, it's more of the second half of the
Speaker 1: year story and it might not be as good as
Speaker 1: the market thinks. It's going to be and the protection
Speaker 1: is um. It's something that Donald Trump can do a
Speaker 1: lot faster. The President doesn't need permission from Congress to
Speaker 1: throw tarifs on China, for example, and that's actually against
Speaker 1: the consensus. We believe that's a dollar negative. So for
Speaker 1: now we're actually short dollar in We think that could
Speaker 1: definitely get down to one ten in the next couple
Speaker 1: of sessions, and even even lower perhaps if Donald Trump
Speaker 1: keeps going down the way he's going. And to the
Speaker 1: clear folks, when Mr Rochester says short dollar year and
Speaker 1: you're implying a stronger year and a weaker dollar, right,
Speaker 1: that's right. I love the life. Your note that super
Speaker 1: Tuesday might be better renamed average average Thursday, super average Thursday.
Speaker 1: What's your what's your outlook for Stirling at this point?
Speaker 1: What do you think it could test? So a lot
Speaker 1: of the recent movement sterling, Sterling is headed higher against
Speaker 1: the dollar, for example, and against the euro. A lot
Speaker 1: of it was not due to any fundamental change in
Speaker 1: the UK outlook. It was for positioning reduction. A lot
Speaker 1: of people got very short and sterling and we're hoping
Speaker 1: for like parity from some on the street I've seen
Speaker 1: against the dollar. Um, what what's happened now is the
Speaker 1: Bank of England has said, look, we revised lower our
Speaker 1: assumption of the unemployment rate. We're not hiking this year,
Speaker 1: and that removes that a bit of that uncertainty from
Speaker 1: the market. So I think sterling had lower from here.
Speaker 1: Really I'd like to I'd like to play it by
Speaker 1: buying the euro and selling the pounds rather than against
Speaker 1: the dollar, because again, like I said, I think there
Speaker 1: could be a weak dollar policy co from the Trump
Speaker 1: administration any day. Now you mentioned the change here, you're
Speaker 1: having to pay more attention to politics. How's that change
Speaker 1: of the dynamics of for X Generally a lot of
Speaker 1: pressure here to get a better sense of the pulse,
Speaker 1: the political pulse. How are you doing that? How's that changing?
Speaker 1: Just the way that you and others operate. How's it changing?
Speaker 1: I guess we spend a little bit less time on
Speaker 1: tracking the data and a little bit more time on
Speaker 1: updating on Twitter feed to put it bromptly. Four ye
Speaker 1: he tends to tweet between three am and four m
Speaker 1: in London time, so whenever we wake up we find
Speaker 1: out what's going on. I mean, this morning was the
Speaker 1: tweets of Australia, for example, Um, and yeah, that's the
Speaker 1: sort of change in the way we have to operate again,
Speaker 1: are you from Australia? Jordan's no, I can do a
Speaker 1: great Australian accident. Okay. I just was gonna what's your
Speaker 1: thought of the news like that? For another having a
Speaker 1: great time, Tom, you talked about strong yet We're okay enough,
Speaker 1: come on, crackodile, calm down. Jordan helped me. R was
Speaker 1: strong Yen. Where does strong Yenn impinge? Mr? Abbe? So
Speaker 1: if you get below a hundred and ten, it's still okay.
Speaker 1: It's down to a hundred five against the dollar. When
Speaker 1: you start to get a bit more noise, however, typically
Speaker 1: what would happen is when the dollar end gets to
Speaker 1: one oh five, but currently around one twelve, the officials
Speaker 1: in Japan start talking about currency moves are unwarranted, or
Speaker 1: they just start verbally interveneing, which is just nothing. It's
Speaker 1: just commentary. One oh five against the dollar used to
Speaker 1: be the level where people said this is our Bay's line.
Speaker 1: But I think with the Trump administration's focus on currency manipulation,
Speaker 1: you may see less of that. So if our babe.
Speaker 1: It's if you get below ninety five when people start
Speaker 1: to say the Albanomics trade is over. Help us with
Speaker 1: the with the strength of the dollar. We're having a
Speaker 1: conversation throughout the week really about the comments that Peter
Speaker 1: Navarre made to the FT. Peter Navara, the head of
Speaker 1: the new Trade Council, White House Trade Council. How did
Speaker 1: you interpret those What does that say to you about
Speaker 1: the degree to which this administration is going to regard
Speaker 1: or talk about the dollar. So they got to talk
Speaker 1: it down and that's pretty clear. It's something we were
Speaker 1: expecting anyway, and it's it's starting to bear fruit in
Speaker 1: terms of against the Euro and the German manipulation of
Speaker 1: the currency points. Let's remember when we talk about the ECB,
Speaker 1: for example, who is the you know, the one side
Speaker 1: of the NPC committee he's always talking about the upside
Speaker 1: risks to inflation. It's Germany. So if you're talking about
Speaker 1: Germany manipulating the euro to that benefit, it's just incorrect. Um.
Speaker 1: The Germans are the ones who are the more more
Speaker 1: hawkish members of the ECB Council. So Um, what it
Speaker 1: does tell me about the Trump administration is they will
Speaker 1: be very protectionist at the same time one a week
Speaker 1: of that. Put that simply, and they can do it
Speaker 1: if they impose Paris on any of their trading partners.
Speaker 1: That's a clear way to do Jordan. Thanks for the update, Jordan,
Speaker 1: and the accent, and it was a good accent. It
Speaker 1: was Jordan Roch to this morning. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm out on Twitter
Speaker 1: at Tom Keene. David Gura is at David Gura. Before
Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg Radio,
Speaker 1: brought you by Bank of America Mary Lynch. Dedicated to
Speaker 1: bringing our clients insights and solutions to meet the challenges
Speaker 1: of a transforming world. That's the power of global connections.
Speaker 1: Mary Lynch, Pierce Feeder and Smith Incorporated member s I
Speaker 1: P See