WEBVTT - Pressure on Fed Independence Is Ramping Up, Broaddus Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:27.400 member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:49.199 of course on the Bloomberg And Brian Levitt now he 0:00:49.240 --> 0:00:51.640 is a senior investment strategist at Oppenheimer Funds. Joining us 0:00:51.640 --> 0:00:53.199 here in the studio in New York. B Great to 0:00:53.240 --> 0:00:55.360 see you. Good morning as always, and let's start with 0:00:55.400 --> 0:00:57.360 the Central bank news we can we can pick up 0:00:57.360 --> 0:00:59.160 on what just happened here from the Bank of England. 0:00:59.200 --> 0:01:01.760 Of course, we had to FED the vision yesterday. Let's 0:01:01.760 --> 0:01:04.480 start there. Uh, how did you react to what we 0:01:04.560 --> 0:01:07.920 heard from from the Fed? Um is march on the table? 0:01:07.959 --> 0:01:09.720 Are you looking farther ahead to June? What? What did 0:01:09.720 --> 0:01:11.160 you make of the statement that we got from the 0:01:11.160 --> 0:01:13.039 FED chair in her colleagues yesterday? I don't think there 0:01:13.080 --> 0:01:16.400 was anything particularly that exciting about the Fed statement. UM, 0:01:16.440 --> 0:01:17.840 I don't think we are going to see a rate 0:01:17.920 --> 0:01:20.080 hike in March. I think the Federal Reserve is going 0:01:20.160 --> 0:01:23.560 to UH show the market well in advance of what 0:01:23.600 --> 0:01:26.800 their intentions are, and then the the interest rate probabilities 0:01:26.920 --> 0:01:29.039 right now are somewhere between one and five and one 0:01:29.080 --> 0:01:31.280 and three percent probability of a rate hike in March, 0:01:31.319 --> 0:01:33.319 So that's not gonna happen. Usually you'll see the Fed 0:01:33.640 --> 0:01:38.560 closer to six percent probability. I mean, the Federal Reserve 0:01:38.720 --> 0:01:41.400 is in a in an interesting place, and that we 0:01:41.520 --> 0:01:45.360 are closer to our dual mandate. Although inflation UM has 0:01:45.480 --> 0:01:49.080 improved on the base effects of energy core inflation you know, 0:01:49.120 --> 0:01:51.360 close to one seven, one eight, but not you know, 0:01:51.440 --> 0:01:54.720 not this high pressure economy well above two percent and climbing. 0:01:54.840 --> 0:01:59.040 So we've been in a very prolonged de leveraging, weak 0:01:59.040 --> 0:02:02.960 growth environment. We're getting good signs of inflation, good carry 0:02:03.000 --> 0:02:07.080 through into wages. To raise interest rates significantly now when 0:02:07.120 --> 0:02:09.160 we still have a lot of political uncertainty does not 0:02:09.320 --> 0:02:12.919 seem like uh an appropriate path forward. So March likely 0:02:12.960 --> 0:02:15.359 off the table. Perhaps we'll see we'll see you one 0:02:15.400 --> 0:02:17.079 before the mid half of the year. You mentioned that 0:02:17.160 --> 0:02:19.360 dual mandate. You look at that statement for commentary on 0:02:19.400 --> 0:02:21.960 the labor market. We had this big a DP beat yesterday. 0:02:22.000 --> 0:02:26.400 We've got the job support coming out tomorrow. Were you 0:02:26.480 --> 0:02:29.440 surprised that there wasn't more emphasis on our commentary on 0:02:29.480 --> 0:02:31.520 the labor market in the statement yesterday? I think there 0:02:31.600 --> 0:02:33.840 was some speculation going into it that we were, if 0:02:33.840 --> 0:02:35.959 not nearing full employment and full employment, and perhaps that 0:02:36.000 --> 0:02:38.280 the Committee would be willing to say so. Well, I 0:02:38.280 --> 0:02:41.040 think the Federal Reserve wants to be data dependent on this, 0:02:41.240 --> 0:02:43.320 and they, you know, Yelling in the past has talked 0:02:43.320 --> 0:02:45.799 about a high pressure economy. Perhaps she walks back from 0:02:45.840 --> 0:02:49.000 that a little bit, but this idea that we we 0:02:49.120 --> 0:02:52.000 still have, um, you know, the U six unemployment rate 0:02:52.040 --> 0:02:54.560 is still elevated, and those are people that are temporary 0:02:54.680 --> 0:02:58.880 for economic reasons. So perhaps we'd like to see, uh, 0:02:59.000 --> 0:03:01.560 you know, better move it down in that before we 0:03:01.600 --> 0:03:04.400 think about significantly raising interest rates. But one of the 0:03:04.400 --> 0:03:08.120 things that the FOMC did mention was business confidence, consumer 0:03:08.200 --> 0:03:10.920 confidence and all that is appropriate. You are starting to 0:03:10.960 --> 0:03:13.560 see some animal spirits, but you know, David, this is 0:03:13.600 --> 0:03:15.640 what we've hoped for this is what we've hoped for 0:03:15.639 --> 0:03:18.080 for a lot of years. Um. And you know, I 0:03:18.080 --> 0:03:19.760 think the Fed could have a couple of rate hikes 0:03:19.800 --> 0:03:22.240 on the table this year, but to aggressively raise rates 0:03:22.240 --> 0:03:24.720 into this is probably not appropriate. There's a piece on 0:03:24.720 --> 0:03:26.680 the Bloomberg this morning I read with with interest that 0:03:26.840 --> 0:03:30.200 is the contours of a debate over the unemployment rate 0:03:30.200 --> 0:03:32.280 are shaping up. Tomorrow will be the first job's report 0:03:32.520 --> 0:03:35.280 under a Donald Trump presidency. Are calling michaelmckeeson a couple 0:03:35.280 --> 0:03:38.000 of days ago, it's still an Obama jobs reported with 0:03:38.200 --> 0:03:41.880 the survey was taken while he was still in office. 0:03:42.840 --> 0:03:44.680 But what do you make of that debate as it 0:03:44.720 --> 0:03:47.640 shapes up now that you have an administration that is not, 0:03:47.720 --> 0:03:51.240 let's say, embracing the straight unemployment rate. Um, how messy 0:03:51.320 --> 0:03:54.040 is that going to be? Potentially, well, it's disconcerting. I 0:03:54.080 --> 0:03:57.160 hope somebody sits down with the administration and sits down 0:03:57.160 --> 0:03:59.680 with President Trump and explains that the Bureau of Labors 0:03:59.720 --> 0:04:03.080 TOSTIS issues a number of unemployment rates. You one through 0:04:03.200 --> 0:04:05.880 U six. You to my favorite one red Hill mining 0:04:05.920 --> 0:04:08.840 town where the streets have no names, right, but you 0:04:08.840 --> 0:04:11.760 know you one through you six? They we and the 0:04:11.800 --> 0:04:14.600 headline number we release what the media focuses on is 0:04:14.720 --> 0:04:18.080 U three, but the administration or the citizens as a 0:04:18.120 --> 0:04:20.240 whole doesn't necessarily have to focus on you three. What 0:04:20.320 --> 0:04:23.200 I always tell clients is picking unemployment rate and stick 0:04:23.279 --> 0:04:25.840 to it. Don't bounce back, because they tend to move 0:04:25.960 --> 0:04:28.440 in unison. And you know, if you think about in 0:04:28.480 --> 0:04:31.359 two thousand nine, the the U six again, which is 0:04:31.760 --> 0:04:37.159 includes temporary workers for for economic reasons that peak, it's 0:04:37.200 --> 0:04:40.279 now down below ten. The U three, which does not 0:04:40.400 --> 0:04:44.599 include those disenfranchised or temporary workers, peaked close to ten percent, 0:04:44.680 --> 0:04:47.040 is now below five. So they've both been halfed again. 0:04:47.320 --> 0:04:50.280 Picking unemployment rate and stick to it, and I hope uh, 0:04:50.920 --> 0:04:54.080 President Trump's economic advisors can get that through to him. 0:04:54.160 --> 0:04:55.680 Let's move to markets here a little bit. We'll come 0:04:55.720 --> 0:04:57.520 back with you after the break. But a lot of 0:04:57.520 --> 0:04:59.039 people at the end of last year told us this 0:04:59.080 --> 0:05:01.280 was going to be a very earning driven market. Uh. 0:05:01.320 --> 0:05:03.640 In two thousand seventeen, we're in earning season. Now, what 0:05:03.640 --> 0:05:05.560 do you make of what we've seen thus far? Well, 0:05:05.560 --> 0:05:07.039 it's a little bit of a mixed bag. I mean, 0:05:07.080 --> 0:05:10.680 I think the the expectations for earnings is that Um, 0:05:10.720 --> 0:05:13.520 you are going to see things that are beneficial corporate earnings, 0:05:13.520 --> 0:05:18.440 which is perhaps lower corporate tax rates, deregulation of industry. UM, 0:05:18.520 --> 0:05:20.800 you know, stimulus in the United States. So all of 0:05:20.839 --> 0:05:23.360 that has favored the more cyclical names in the United States, 0:05:23.440 --> 0:05:25.320 or at least had heading into the beginning of the 0:05:25.440 --> 0:05:28.040 year UM and favored small and mid caps. And and 0:05:28.080 --> 0:05:31.640 I think that that's appropriate. This consolidation we're seeing now 0:05:31.680 --> 0:05:34.120 in market's is we're dealing with some of the political 0:05:34.160 --> 0:05:36.400 uncertainties and all of this, I mean very quickly here, 0:05:37.040 --> 0:05:39.680 when you look at all this, do you change your 0:05:39.720 --> 0:05:42.560 allocation to your four oh one? Kay? Do you just 0:05:42.640 --> 0:05:48.400 assume lower bond prices, higher yields? And I can't be traditional, well, 0:05:48.440 --> 0:05:53.000 I think we should be cautious. Um extrapolating interest rates 0:05:53.000 --> 0:05:56.160 going up substantially in the United States. That now, that 0:05:56.320 --> 0:05:59.000 doesn't mean that you know this, this recent backdown in 0:05:59.080 --> 0:06:00.719 rates is going to sustain. And I think you know 0:06:00.760 --> 0:06:03.880 cyclically you will see rates move higher in the U 0:06:04.000 --> 0:06:07.160 S but not substantially. This idea that we're going to 0:06:07.240 --> 0:06:09.600 break through three on our way to six percent is 0:06:09.680 --> 0:06:13.400 in my opinion, widely overstated. There are secular forces that 0:06:13.440 --> 0:06:16.080 are likely to keep rates low in the United States 0:06:16.080 --> 0:06:18.080 and around a lot of the developed world, not the 0:06:18.160 --> 0:06:21.200 least of which is aging populations and and and high 0:06:21.240 --> 0:06:24.800 savings rates in Asia. So, um, you might want to 0:06:24.880 --> 0:06:28.120 reduce the interest rate sensitivity of your portfolio. You probably 0:06:28.160 --> 0:06:29.640 at this point in the cycle want to look to 0:06:29.720 --> 0:06:34.800 credit senior loans. Um. But UM, I don't think that 0:06:34.839 --> 0:06:37.839 you need to extrapolate that we're going that we now 0:06:37.920 --> 0:06:40.080 because we're in a forty year whole marketing bonds and 0:06:40.080 --> 0:06:42.320 now have to go into a forty year bear marketing bonds. 0:06:42.320 --> 0:06:44.760 We're here with Brian Levitt, senior investment Strategies at Oppenheimer Funds, 0:06:44.800 --> 0:06:47.520 David Gura, and Tom Keena in New York, and as 0:06:47.560 --> 0:06:50.479 Michael Barr mentioned, brunched a few moments ago, Donald Trump 0:06:50.520 --> 0:06:52.360 tweeting this morning. We're not gonna go through all of 0:06:52.400 --> 0:06:53.680 the tweets that he fired off, but it makes me 0:06:53.680 --> 0:06:56.440 wonderous sort of how this has changed your investment calculus. 0:06:56.440 --> 0:06:57.719 How much do you have to pay attention to that, 0:06:57.720 --> 0:06:59.839 how much you paying attention to the to the political news, 0:06:59.880 --> 0:07:02.640 and does it change the way that you strategize. Well, 0:07:02.680 --> 0:07:05.719 we've spent years telling investors that hating the government or 0:07:05.800 --> 0:07:09.000 loving the government is not an investment strategy. And I 0:07:09.000 --> 0:07:11.640 think that played out as you watched the futures come 0:07:11.640 --> 0:07:13.400 in when Trump looked like he was about looked like 0:07:13.440 --> 0:07:15.560 he was gonna win, and then the rally that you 0:07:15.600 --> 0:07:17.920 had in the aftermath of that. I think that there's 0:07:17.920 --> 0:07:20.240 a base case, and a base case says that this 0:07:20.280 --> 0:07:22.960 should be good for cyclicals in the United States, and 0:07:23.000 --> 0:07:25.840 this should be good for smaller and mid sized companies. Um. 0:07:26.040 --> 0:07:27.840 But I think there's some tail risks in all of it, 0:07:27.880 --> 0:07:30.080 and we've got to be mindful of the tail risks, 0:07:30.120 --> 0:07:33.480 not the least of which is that, you know, protectionism 0:07:33.640 --> 0:07:36.640 or trying to support US is strong dollar, and that 0:07:36.680 --> 0:07:39.680 could lead to a slowdown in US economic activity. Nicely 0:07:39.800 --> 0:07:43.040 said about terrorists. And one of the things Brian that 0:07:43.280 --> 0:07:46.880 is in everything we do is we've forgotten what an 0:07:46.880 --> 0:07:51.280 all American correction is and also an all American bear market. 0:07:51.640 --> 0:07:53.840 It's been ages, hasn't it. It has been ages that 0:07:53.880 --> 0:07:56.119 we've We've been in a secular bull market that began 0:07:56.240 --> 0:07:59.440 on March nine, two thousand nine. And despite the fact 0:07:59.560 --> 0:08:03.440 that investors have fought, kicking and screaming the whole way, um, 0:08:03.480 --> 0:08:06.560 and a lot of American households are still not participating 0:08:06.600 --> 0:08:10.800 it at this point where we are today in February seventeen, 0:08:11.240 --> 0:08:13.960 this is among the longest in duration and one of 0:08:14.000 --> 0:08:16.480 the biggest in terms of advance that we've seen in 0:08:16.560 --> 0:08:18.440 US history. But that doesn't mean it has to be 0:08:18.480 --> 0:08:21.920 over anytime soon. You had a note about doubt twenty thousand. 0:08:22.000 --> 0:08:24.000 We marked that here on surveillance with a cold duck 0:08:24.080 --> 0:08:27.320 and some flat champagne, but warm, warm, and cold duck. 0:08:29.480 --> 0:08:34.480 I went to Gourmet magazine to prepare warm. What was 0:08:34.520 --> 0:08:37.480 your takeaway from it? We we we've moved on loow 0:08:37.520 --> 0:08:39.560 those couple of days ago. We have what was the 0:08:39.559 --> 0:08:42.200 significance of it? As you saw? Well, I think we 0:08:42.200 --> 0:08:44.080 we kind of wanted a blog about it in a 0:08:44.080 --> 0:08:46.679 way to sort of make joke about how we celebrated 0:08:46.720 --> 0:08:49.920 in March ten thousand and then we had to do 0:08:49.960 --> 0:08:52.880 it again in two thousand nine when we crossed ten 0:08:52.960 --> 0:08:56.320 thousand again. Um. But at the point being is that 0:08:56.360 --> 0:08:58.720 in the season and of themselves don't tell us much. 0:08:58.800 --> 0:09:01.600 They're they're not mean, we're verting um. As Tom showed 0:09:01.600 --> 0:09:04.080 on the on the television program earlier, that you know, 0:09:04.120 --> 0:09:08.160 industries reflected improving human condition and improving condition for for businesses, 0:09:08.200 --> 0:09:10.400 so they don't have to mean revert as you all know, 0:09:10.520 --> 0:09:13.480 far more interesting to compare the price level of an 0:09:13.520 --> 0:09:16.319 index to a fundamental characteristic of a business, whether you 0:09:16.360 --> 0:09:19.800 want to use book value, sales earnings UM. You look 0:09:19.840 --> 0:09:23.080 at valuations, they're they're above fair value but but but 0:09:23.200 --> 0:09:26.079 not but not significantly, particularly when you compare them to 0:09:26.120 --> 0:09:28.959 the interest rate environment. Can we look, Brian a sharp 0:09:29.160 --> 0:09:33.280 ratio again? Are we getting back to bob normalcy where 0:09:33.320 --> 0:09:35.760 we actually have a risk free rate? I'm not sure 0:09:35.880 --> 0:09:38.199 it's out there somewhere. We we do, we have a 0:09:38.280 --> 0:09:41.240 risk free rate UM. And you know investors are you know, 0:09:41.280 --> 0:09:44.000 always looking for what the you know what how they 0:09:44.000 --> 0:09:46.839 can get the best sharp ratio in their portfolio. I 0:09:46.880 --> 0:09:48.959 always think I can't eat sharp ratio, right, I can 0:09:48.960 --> 0:09:52.000 eat returns um. But you know, for investors that are 0:09:52.040 --> 0:09:55.479 looking for returns um for the with the more reasonable 0:09:55.559 --> 0:09:59.480 level of volatility, it certainly isn't a reasonable approach UM. 0:10:00.040 --> 0:10:03.320 And you know, equities UM generally offer pretty good, uh 0:10:03.520 --> 0:10:06.440 you know, risk adjusted returns compared to most other asset 0:10:06.440 --> 0:10:09.000 classes outside of equities what are you looking at? What 0:10:09.000 --> 0:10:11.840 do you like at this point? Well, as I mentioned earlier, 0:10:11.880 --> 0:10:15.400 we we like UM senior loans, and we like bonds 0:10:15.440 --> 0:10:18.559 outside the United States, particularly in the emerging markets. UM. 0:10:18.600 --> 0:10:21.960 You know, for investors that are trying to generate income, 0:10:22.000 --> 0:10:25.640 it's difficult when ten years only around two four UM 0:10:25.720 --> 0:10:27.880 inflation is not all that far away from that. There's 0:10:27.880 --> 0:10:29.480 not a lot of real yield, and you're worried that 0:10:29.559 --> 0:10:31.960 interest rates rise and the Treasury is gonna issue new 0:10:32.000 --> 0:10:34.559 bonds and nobody's gonna want your paltry yielding bonds. So 0:10:34.840 --> 0:10:37.439 senior loans as credit exposure, we think we're still in 0:10:37.480 --> 0:10:40.240 a good place in the credit cycle. UM. Those loans 0:10:40.240 --> 0:10:42.360 adjust to keep pace with short term interest rates, so 0:10:42.440 --> 0:10:44.840 not a lot of interest rate sensitivity. And you know, 0:10:45.040 --> 0:10:47.640 very interesting is looking outside the United States and some 0:10:47.720 --> 0:10:50.960 of the emerging markets, places that were in recession or 0:10:51.000 --> 0:10:55.120 recovering UM, where you can still get attractive real yields. Brian, 0:10:55.160 --> 0:10:56.960 thank you so much. I thank you very generous of 0:10:56.960 --> 0:10:59.880 your time today. Brian. Love it with us who that 0:11:00.000 --> 0:11:02.160 there's still points higher and we've heard that from a 0:11:02.240 --> 0:11:17.400 number of guests, uh this week right now, someone that 0:11:17.440 --> 0:11:21.360 knows presidential comments. Um Al brought us joining us a 0:11:21.400 --> 0:11:24.920 former president of Richmond fed a wonderful to speak to 0:11:24.960 --> 0:11:28.760 you as we juggle between Governor Carney and the President. 0:11:28.840 --> 0:11:32.520 Take us back as only albrought us can to a 0:11:32.720 --> 0:11:36.880 strong dollar discourse. There was a time where every other day, 0:11:37.360 --> 0:11:41.480 someone besides the albrought us was talking about strong dollar policy. 0:11:41.880 --> 0:11:45.400 Is that a good thing to have officials jab owning 0:11:45.440 --> 0:11:49.079 the dollar ever higher? Well, I think you know the 0:11:49.600 --> 0:11:53.240 first good morning, Tom. I think, uh, it depends to 0:11:53.320 --> 0:11:55.720 some extent on the context, in the and the tone. 0:11:55.760 --> 0:12:01.200 I mean maybe often uh, senior officials, often the Treasury 0:12:01.240 --> 0:12:06.679 Secretary have made sort of generic uh comments. Uh in 0:12:06.720 --> 0:12:09.920 the same way. Our policy is to have a strong dollar, 0:12:10.040 --> 0:12:13.520 but that has often been interpreted as we are not 0:12:13.600 --> 0:12:15.680 going to try to We're going to try to follow 0:12:15.720 --> 0:12:19.560 economic policies that result in a strong dollar, as opposed 0:12:19.559 --> 0:12:22.640 to try to manipulate the dollar, either verbally or through 0:12:22.679 --> 0:12:25.600 some sort of intervention. And I think that's a good 0:12:25.640 --> 0:12:28.280 thing when you but but you know, as a stand 0:12:28.280 --> 0:12:30.559 line here, and if you begin to move in on 0:12:30.679 --> 0:12:32.960 arena where you're doing something more than that that it 0:12:33.040 --> 0:12:34.800 then it can be upsetting and I think that's what 0:12:35.120 --> 0:12:38.199 has been going on at currency markets most and most recently. 0:12:38.280 --> 0:12:40.439 David Garrow jump in here with Albros. I just want 0:12:40.480 --> 0:12:42.960 to point out the president sitting now at the breakfast. 0:12:43.120 --> 0:12:50.400 I believe he's having first squeeze Mexican origin this Australian marmote. Yeah, 0:12:50.840 --> 0:12:52.559 he is going to eat before he speaks. Again, we're 0:12:52.559 --> 0:12:55.480 continuing to monitor that. Let me ask you about the 0:12:55.480 --> 0:12:57.400 political pressure on the FED right now. There was so 0:12:57.480 --> 0:13:00.000 much commentary about the Fed Reserve on the campaign trail. 0:13:00.080 --> 0:13:02.199 Now we see the contours shaping up of a fight 0:13:02.240 --> 0:13:05.320 on Capitol Hill over control of the Federal Reserve more 0:13:05.480 --> 0:13:09.080 more control over its actions. Uh. Is this a new 0:13:09.160 --> 0:13:10.920 kind of pressure? Is this something that you saw when 0:13:10.920 --> 0:13:14.040 you were there at the Richmond Fed. Well, we had 0:13:14.080 --> 0:13:19.200 you know, the FIT has had pressure from the political 0:13:19.240 --> 0:13:22.440 pressure in one form or another throughout much of its history. 0:13:22.440 --> 0:13:25.160 Certainly it's recent history. I would say it's sort of 0:13:25.280 --> 0:13:31.520 ebbs and flows. Uh, in many that I looked back. Uh. 0:13:32.160 --> 0:13:34.080 I was in the FIT for thirty some years, but 0:13:35.040 --> 0:13:37.240 actually I remember the f o MC and at the 0:13:37.320 --> 0:13:41.960 senior level of the organization only between n two thousand 0:13:41.960 --> 0:13:47.320 and four and through most of that period. Uh, I 0:13:47.360 --> 0:13:50.320 thought that pressure was was moderate, I guess in the 0:13:50.360 --> 0:13:53.920 early part of it, when during part of the H. W. 0:13:54.160 --> 0:13:56.600 Bush administration there was some pressure, and there was always 0:13:56.600 --> 0:13:59.200 a little bit of pressure after that, but nothing nothing 0:14:00.000 --> 0:14:05.319 too extreme. Now currently it seems it seems to me that, uh, 0:14:05.800 --> 0:14:09.120 that it seems to be ramping up. You've got several 0:14:09.120 --> 0:14:13.439 pieces of legislation in Congress that would uh would impend you, 0:14:13.520 --> 0:14:16.000 I think on the fred veg independence is a lot 0:14:16.040 --> 0:14:18.240 of talk. Of course, we don't know what it's going 0:14:18.280 --> 0:14:23.120 to lead to about the Chairman Yellen or chair Yellen. 0:14:23.960 --> 0:14:27.120 Her term is up next year, about a year from now, 0:14:27.160 --> 0:14:31.080 and so there's obviously speculation about whether she will be 0:14:31.160 --> 0:14:34.200 able to stay or whether she will be replaced. So 0:14:34.240 --> 0:14:37.520 a lot of a lot of political talk about the 0:14:37.560 --> 0:14:40.520 FED now more than normal, I think, and frankly for 0:14:40.560 --> 0:14:42.680 me at least a little bit concerning I'm a matter 0:14:42.720 --> 0:14:45.200 of personnel. We we got worried that the Jeffrey Lacker, 0:14:45.240 --> 0:14:47.920 your successor, is going to be stepping down from that job. 0:14:47.960 --> 0:14:49.720 And when we got that news, Tom and I talked 0:14:49.760 --> 0:14:52.880 about the special quality of Richmond Fed presidents. There there 0:14:52.960 --> 0:14:54.960 is some something of regional importance to the folks who 0:14:55.000 --> 0:14:56.880 have been in that job. You're from Richmond, yourself, Jeffrey 0:14:56.920 --> 0:14:59.600 Lacker from Lexington. Who would you like to see in 0:14:59.600 --> 0:15:03.520 that jobs? There's something special about the Richmond Fed president? Well, 0:15:03.560 --> 0:15:08.080 you know, I don't know that there's anything. Well, we 0:15:08.400 --> 0:15:10.800 UH like to think that we've had. I think we've 0:15:10.840 --> 0:15:13.640 had I hope you would agree strong presidents over a 0:15:13.680 --> 0:15:16.880 period of time. Jeff has done a very fine job 0:15:17.000 --> 0:15:19.680 in my view. I may we don't always agree on everything, 0:15:19.720 --> 0:15:25.600 but necessartainly I agree on much of of his UH program. 0:15:26.320 --> 0:15:30.600 I would like I think one thing that has hopefully 0:15:30.720 --> 0:15:34.040 distinguished the FED, the Richmond FED is we've always had 0:15:34.600 --> 0:15:37.880 people with good grounding and economics UH and who have 0:15:38.040 --> 0:15:42.440 felt that UH the policies that we advocate in the 0:15:42.480 --> 0:15:46.760 positions on particular policy questions that we support a well 0:15:46.880 --> 0:15:52.680 grounded in UH economics and in economic research. I think 0:15:52.800 --> 0:15:55.800 it's been the case, at least for the last three 0:15:55.840 --> 0:16:00.880 presidents that we have maintained a strong research department. For example, 0:16:01.160 --> 0:16:05.320 when I was president, had been part of the Jeff's 0:16:05.480 --> 0:16:10.560 UH presidency. We had a Marvin good Friend UH distinguished 0:16:10.560 --> 0:16:14.240 monetary ecommerce was at the Bank. He was my chief advisor. 0:16:14.320 --> 0:16:16.960 He's now at Carnegie Mellon University. Dave and I felt 0:16:16.960 --> 0:16:21.520 I had really high quality uh advice and UH he 0:16:21.640 --> 0:16:24.560 was able to form solid positions. I hope that that 0:16:24.640 --> 0:16:29.120 tradition will be continued. Okay, you're way too kind. The 0:16:29.320 --> 0:16:34.840 Richmond Fed has a research depth and particularly on zero 0:16:34.960 --> 0:16:40.400 sum economics, like nobody forget about algebraic production functions and 0:16:40.440 --> 0:16:45.960 their uses before Cobb Dougles one Thomas M. Humphrey, who 0:16:46.000 --> 0:16:50.320 I've read everything he's ever read, spring In He wrote 0:16:50.360 --> 0:16:55.280 this for President Trump al Merk and Chillis in classicals 0:16:55.440 --> 0:17:00.280 Insights from Doctrinal History. Do we have a president who 0:17:00.280 --> 0:17:04.040 wants to hearken back to the mercantilism that Thomas Humphrey 0:17:04.320 --> 0:17:09.760 owns within this research, I don't. I don't think any 0:17:09.840 --> 0:17:12.040 of us want. Oh you mean, do we have a 0:17:12.080 --> 0:17:16.600 president of the United States? Yes? Do we have a president? Yes, 0:17:16.720 --> 0:17:20.879 the President United States. Look, even though I'm no longer 0:17:20.960 --> 0:17:22.639 at the FED, I do try to be careful not 0:17:22.720 --> 0:17:25.880 to get too deeply involved in political commentary. But uh, 0:17:26.160 --> 0:17:27.760 the short answer that I would give you is that 0:17:28.119 --> 0:17:32.680 it is a concern for me anyway defined for our audience. 0:17:33.000 --> 0:17:40.760 What's wrong with saying America first? Uh. I don't think 0:17:41.320 --> 0:17:46.280 there is anything wrong with saying America first. You know, 0:17:46.400 --> 0:17:50.240 the different people will mean different things when they say 0:17:50.359 --> 0:17:54.520 America first. Uh. And I can't speak for President Trump. 0:17:54.560 --> 0:17:57.840 I can only speak for myself. I want America to 0:17:57.880 --> 0:18:03.720 be first among a group of very strong nations and 0:18:03.800 --> 0:18:08.920 training partners, so that our strength contributes to the strength 0:18:09.320 --> 0:18:14.000 of other economies and and vice versa. And this is 0:18:14.160 --> 0:18:18.240 you know, it gets to the point of a mutually 0:18:18.359 --> 0:18:21.280 beneficial trading regime. You mentioned Tom Uprey. I think he 0:18:21.320 --> 0:18:26.160 would support what I'm saying pretty strongly. So that's that's 0:18:26.160 --> 0:18:28.880 the world that we have been moving towards, I think 0:18:29.280 --> 0:18:33.320 throughout the post war period. I hope that we continue 0:18:33.560 --> 0:18:37.000 to do that. Uh. And we'll just send to see 0:18:38.119 --> 0:18:44.080 the current administration evolves. Uh. Against that that kind of criterion. 0:18:44.520 --> 0:18:46.320 It's a lot of talking Capital Hill about making the 0:18:46.400 --> 0:18:49.359 FED more data depending, having more rules based Federal Reserve. 0:18:49.440 --> 0:18:52.159 You you sat in the echoes building around that giant table. 0:18:53.200 --> 0:18:55.359 How difficult would that be as a policymaker to be 0:18:55.840 --> 0:19:00.200 more tightly tied to two rules? Well, I think that 0:19:00.280 --> 0:19:04.320 there's something to be said. Well, first let me say 0:19:04.359 --> 0:19:07.359 this that there are we we use something called the 0:19:07.400 --> 0:19:10.800 tailor rule as a guide to policy. Uh. And my 0:19:10.840 --> 0:19:14.080 own view is that that is often beneficial and I 0:19:14.080 --> 0:19:17.880 think uh uh, you know, continuing in in that vein 0:19:17.880 --> 0:19:22.040 and conducting policy would be a good thing if we 0:19:22.040 --> 0:19:28.480 were if if a particular monetary policy implementation operational rule 0:19:29.280 --> 0:19:34.359 we're mandated H. I would have some concerns about that. 0:19:34.400 --> 0:19:36.440 To put it mildly that I think the key first 0:19:36.440 --> 0:19:39.280 of all, you need to know what the rule is. 0:19:39.359 --> 0:19:43.359 If it's rigid, doesn't allow any discretion, uh, in in 0:19:43.480 --> 0:19:46.320 particular situations that could be that could get a problem. 0:19:46.359 --> 0:19:49.000 I think for the fifth let's go al brought us. 0:19:49.000 --> 0:19:50.680 Thank you so much for the Premier and to get 0:19:50.680 --> 0:19:54.120 a major shout out to the work of the Richmond 0:19:54.119 --> 0:19:56.679 fed on Mr brod us is watch and to get 0:19:56.760 --> 0:19:58.720 him back here. It was great. They are in search 0:19:58.720 --> 0:20:01.320 of a new president, I believe on Tuckers on the shortlist. 0:20:01.359 --> 0:20:14.040 There is well brought you by Bank of America Mary Lynch, 0:20:14.160 --> 0:20:18.400 dedicated to bringing our clients insights and solutions to meet 0:20:18.440 --> 0:20:21.919 the challenges of a transforming world. That's the power of 0:20:21.960 --> 0:20:27.800 Global Connections, Mary Lynch Pierce Federan Smith Incorporated Member s 0:20:27.840 --> 0:20:34.520 I p C. Anytime we speak with Craig Maffata Maffata Nathanson, 0:20:35.000 --> 0:20:38.600 there's forty five to seventy themes that we can work 0:20:38.640 --> 0:20:41.120 on today, We're gonna focus on one on one theme, 0:20:41.359 --> 0:20:45.439 Craig Moffatt on Verizon. Is my cell phone bill too high? 0:20:46.320 --> 0:20:51.600 Is it? Is it a dwoppoli or triapoli where we're 0:20:51.640 --> 0:20:54.840 all getting taken to the cleaners every month. Well, I'll 0:20:54.840 --> 0:20:57.640 tell you if if this is a duopoly or triopoly, 0:20:57.720 --> 0:21:01.840 it's not working very well for the triopoli UM Verizon 0:21:01.920 --> 0:21:06.880 right now is struggling with UH mid single digit negative 0:21:06.880 --> 0:21:09.359 revenue growth and its wireless business. A T and T 0:21:09.640 --> 0:21:13.240 is struggling with mid single digit revenue declines in its 0:21:13.240 --> 0:21:16.960 wireless business. Sprint is struggling with revenue declines in its 0:21:16.960 --> 0:21:20.959 wireless business. The only operator that's growing in wireless right 0:21:21.000 --> 0:21:24.800 now is T Mobile UM, which is a very price 0:21:24.880 --> 0:21:29.560 competitive and aggressive competitor. So UM by all outward signs. 0:21:29.760 --> 0:21:32.520 If this isn't a competitive industry, then I don't know 0:21:32.520 --> 0:21:35.359 what is. Can you overlay what we learned from Apple 0:21:35.440 --> 0:21:37.920 this week onto that Apple announcing they sold three point 0:21:37.920 --> 0:21:40.479 five million phones to new customers. Where are these new 0:21:40.520 --> 0:21:46.320 customers going for wireless service? Well, remember, the short answer 0:21:46.400 --> 0:21:52.080 is not the United States. UM. Interestingly, UM, the the 0:21:52.200 --> 0:21:55.560 upgrade cycle, that is how quickly people are replacing their 0:21:55.640 --> 0:21:59.119 their smartphones in the United States is still lengthening. UM. 0:21:59.160 --> 0:22:01.920 When there's a new I phone that tends to shorten 0:22:01.960 --> 0:22:05.520 it temporarily. But there's no question that the trend has 0:22:05.560 --> 0:22:09.359 been people keeping their phones longer. UM. And there are 0:22:09.359 --> 0:22:11.480 two a couple of obvious reasons for that, right. One 0:22:11.600 --> 0:22:15.160 is the real innovation in smartphones today is coming from 0:22:15.200 --> 0:22:18.560 the software, not the hardware, so people are able to 0:22:18.640 --> 0:22:23.520 upgrade the software relatively easily. UM. But also the change 0:22:23.520 --> 0:22:27.080 in the way phones are paid for, with the elimination 0:22:27.160 --> 0:22:30.760 of the old subsidy plans and replacement with people buying 0:22:30.760 --> 0:22:33.400