WEBVTT - Surveillance: Morgan Stanley Shakeup 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.360 international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg 0:00:23.360 --> 0:00:29.960 dot com, and of course, on the Bloomberg terminal. Each 0:00:29.960 --> 0:00:32.440 of these stories is different. No one better at Bloomberg 0:00:32.440 --> 0:00:34.520 knows that than Street on a rag and who joins 0:00:34.600 --> 0:00:37.240 us right now to say is Bloomberg Wall Street reporter 0:00:37.320 --> 0:00:41.400 barely describes the king of gossip of Wall Street. Who's next? 0:00:41.479 --> 0:00:44.480 Is Golden Sacks gonna have a shake up? Goldman Sachs 0:00:44.640 --> 0:00:46.720 is one of the recent films that we've had a 0:00:46.840 --> 0:00:49.479 CEO shakeup. So you saw that in twenty eighteen when 0:00:49.520 --> 0:00:52.640 Lloyd Blank find I need to come on, I need 0:00:52.720 --> 0:00:55.160 some more fun from these fruits. It's Golden. Seriously, it's 0:00:55.160 --> 0:00:57.680 Golden Sacks next. If Jamie Diamond is gonna take fifteen 0:00:57.720 --> 0:00:59.639 years and James Gorman one the same time, I bet 0:00:59.720 --> 0:01:03.480 David Solomon doesn't want to live anytime soon Tree the 0:01:03.560 --> 0:01:05.920 co president's role. Can we talk about that a little 0:01:05.959 --> 0:01:09.000 bit more? How on Earth does that work well at 0:01:09.080 --> 0:01:11.479 least at this firm. It is important that the Morgan 0:01:11.520 --> 0:01:14.279 Stanley of today is extremely different of the Morgan Stanley 0:01:14.400 --> 0:01:16.840 from ten fifteen years ago. You have a firm that 0:01:16.959 --> 0:01:20.120 is not a pure play Wall Street investment bank anymore. 0:01:20.160 --> 0:01:23.760 It's wealth management arm contributes to nearly fifty pc of 0:01:23.800 --> 0:01:26.360 its overall revenue. So it kind of makes sense to 0:01:26.400 --> 0:01:28.520 pick someone like Ted Pick who has charge of the 0:01:28.640 --> 0:01:31.520 entire investment bank, and Andy Sapperstein, who has really built 0:01:31.560 --> 0:01:36.160 Morgan Stanley into a wealth management powerhouse, starting from with 0:01:36.240 --> 0:01:39.399 the Smith Barney purchase through to last year with the 0:01:39.520 --> 0:01:41.680 Each Trade by which was one of the biggest deal, 0:01:41.760 --> 0:01:44.920 possibly the biggest bank deals since the financial crisis. That 0:01:45.000 --> 0:01:48.600 it has become a major center of gravity for the firm. 0:01:48.720 --> 0:01:51.240 So at Morgan Stanley you had to have a situation 0:01:51.400 --> 0:01:54.240 even without any inside knowledge. The best guess anyone else 0:01:54.280 --> 0:01:57.840 out there would have had was the most logical outcome 0:01:57.920 --> 0:01:59.920 here in trying to figure out who will be the 0:02:00.040 --> 0:02:02.720 top deputy to James Gorman, would have been these two 0:02:02.720 --> 0:02:04.920 men in tet picked from the investment bank and Andy 0:02:04.920 --> 0:02:07.640 Sapustin from the wealth management zone. So three he wants 0:02:07.680 --> 0:02:10.200 three years, He's told the board another three years as 0:02:10.240 --> 0:02:12.920 the CEO. Many people reflecting on what happened with City 0:02:12.919 --> 0:02:14.800 Group in the last couple of years, where Mr Corback 0:02:14.840 --> 0:02:16.960 said something similar, then all of a sudden, Jane phrases 0:02:17.040 --> 0:02:20.200 just started to move really quickly. Was the city situation 0:02:20.320 --> 0:02:22.919 unique or do you expect some people expected to see 0:02:22.919 --> 0:02:26.720 something similar? Here? City Group and Morgan Stanley two very 0:02:26.760 --> 0:02:30.000 different places right now. In fact, Margin Stanley's market cap 0:02:30.360 --> 0:02:33.360 is even higher than City Group right now. Imagine saying 0:02:33.400 --> 0:02:36.320 that a few years ago that that would not have 0:02:36.480 --> 0:02:39.640 been considerable. Even now, City Group has twice the assets 0:02:39.680 --> 0:02:42.799 of Morgan Stanley and City Group has been going through 0:02:42.840 --> 0:02:46.000 a number of challenges on the regulatory front and elsewhere. 0:02:46.160 --> 0:02:48.200 Morgan Stanley is a different story. They are in a 0:02:48.280 --> 0:02:50.959 good position. They are in what James Gorman calls a 0:02:51.080 --> 0:02:54.480 position of strength, and then whend going is this good? 0:02:54.760 --> 0:02:57.280 It's hard to imagine you'll want to leave. And that's 0:02:57.280 --> 0:02:59.480 why it makes sense when James Government is starting the 0:02:59.520 --> 0:03:01.600 senior man aagement and the boarding saying he wants to 0:03:01.639 --> 0:03:04.160 hang around for at least three more years. So if 0:03:04.200 --> 0:03:07.200 you buy the argument that banks are reshuffling senior management 0:03:07.240 --> 0:03:09.760 ahead of the bank hearings in Washington, d C next week. 0:03:10.040 --> 0:03:13.600 What is the message being sent by the personnel choices, 0:03:13.840 --> 0:03:16.840 by the moves being made. I have to take the 0:03:16.840 --> 0:03:19.560 contrarian side here, Lisa. I'm not sure the Morgan Stanley 0:03:19.600 --> 0:03:23.640 move necessarily signals much to d C. However, the pandemic 0:03:23.680 --> 0:03:25.720 could very well have played at all. It is our 0:03:25.800 --> 0:03:28.880 understanding that James Gorman has been working on this succession 0:03:28.880 --> 0:03:31.040 plan at least for a good part of the last year. 0:03:31.320 --> 0:03:33.919 He does this New Year's resolution every year where the 0:03:33.960 --> 0:03:35.640 start of the year he puts out a list of 0:03:35.680 --> 0:03:38.120 things he wants to accomplish, and this year it very 0:03:38.200 --> 0:03:40.080 much was on the list to make sure that it's 0:03:40.120 --> 0:03:43.600 a smooth transition of power, and that's important for him. Three. 0:03:43.640 --> 0:03:45.760 It's sort of old school to me when I walls 0:03:45.800 --> 0:03:49.440 through the biographers of guys. Edward pick is a guy 0:03:49.480 --> 0:03:52.000 who's seen it all. He went over to the equity 0:03:52.040 --> 0:03:54.520 capital market side, and then he entered the death star 0:03:54.640 --> 0:03:57.360 the fixed income shop, which at Morgan Stanley was an 0:03:57.440 --> 0:04:01.800 absolute train wreck for years. Is he vantaged here because 0:04:01.840 --> 0:04:06.520 he has equity capital markets, in bond capital markets experience. 0:04:06.640 --> 0:04:09.360 He certainly does bring big credentials with him. When you 0:04:09.400 --> 0:04:11.840 say he was started off on the equity capital market side, 0:04:12.200 --> 0:04:14.960 he helped with the I P of none other than Google, 0:04:15.280 --> 0:04:18.039 So he's had some big ticket names that he helped 0:04:18.080 --> 0:04:21.200 take public. Then he took over the equities business and 0:04:21.279 --> 0:04:23.520 in the aftermath of the financial crisis, that was a 0:04:23.560 --> 0:04:26.400 big challenge to make sure that they could lift Morgan 0:04:26.440 --> 0:04:28.720 Stanley's equities business and now it is the number one 0:04:28.720 --> 0:04:30.680 player in Wall Street. And then he helped to fix 0:04:30.720 --> 0:04:33.479 income business that was flagging. So he's clearly built up 0:04:33.480 --> 0:04:36.279 the credentials, he's notched up the winds. So his story 0:04:36.360 --> 0:04:39.159 is certainly very much on the race. Straight tremendous reporting. 0:04:39.200 --> 0:04:41.240 As always, I'm gonna catch up with his blimberg Stree 0:04:41.279 --> 0:04:43.640 Natacha and breaking down the news coming out of More 0:04:43.680 --> 0:04:50.760 Can Standing. Let's bring in Russ Strict show, black Rock 0:04:50.800 --> 0:04:54.480 Global Allocation Fund portfolio manager. Russ. Are we talking about 0:04:54.600 --> 0:04:56.600 talking about it? And should we be talking about it 0:04:56.680 --> 0:05:00.640 this morning? How significant is it? We're gonna be talking 0:05:00.680 --> 0:05:02.680 about it one way or the other? Uh, Look, I 0:05:02.800 --> 0:05:05.520 think this is important. The FED is likely to start 0:05:05.600 --> 0:05:08.239 to shift their their policy stands in the coming months. 0:05:08.680 --> 0:05:11.520 It's not unrealistic to think you begin tapering in in 0:05:11.880 --> 0:05:15.000 Q four. Having said all that, you know, despite all 0:05:15.040 --> 0:05:17.159 the ink being spilled, you know, a couple of points, 0:05:18.080 --> 0:05:21.440 long term yields have actually remained remarkably contained. We've never 0:05:21.560 --> 0:05:24.479 taken out the high from back in February and March. 0:05:24.920 --> 0:05:28.840 Bond market volatility is down significantly from where it was 0:05:29.160 --> 0:05:32.680 again back in February and March, despite the biggest inflation 0:05:32.760 --> 0:05:35.680 printing forty years. So this is a big deal. But 0:05:35.880 --> 0:05:38.160 you know, the wheels are not coming off the vehicle yet, 0:05:38.720 --> 0:05:41.000 and I think that's important to realize. We still have 0:05:41.080 --> 0:05:44.479 a one sixty ten year bond market volatility right now 0:05:44.640 --> 0:05:48.159 is still modest. So as of today, that helps explain 0:05:48.240 --> 0:05:52.040 why stocks are only down three I mean, the correction 0:05:52.120 --> 0:05:54.200 has been a non correction. Russ. Can you buy the 0:05:54.279 --> 0:05:56.320 big text here? Have they've been on love for a 0:05:56.400 --> 0:05:59.720 long enough time where they're actually a relative value of 0:06:00.000 --> 0:06:03.400 relatively unloved. I think there are some opportunities in the 0:06:03.440 --> 0:06:05.159 big tech, you know, just to be clear, we're talking 0:06:05.200 --> 0:06:08.760 about I think it is the mega cap high quality tech. 0:06:08.839 --> 0:06:12.039 It's not necessarily the more speculative names, uh, the ones 0:06:12.080 --> 0:06:14.080 where earnings are you know five or ten years out, 0:06:14.120 --> 0:06:17.600 we've actually been trimming those from the portfolio. But yes, 0:06:17.720 --> 0:06:20.640 if you're talking about high quality tech in man to 0:06:20.680 --> 0:06:22.680 perform over the next one to two quarters. If we 0:06:22.760 --> 0:06:25.600 get these gaudy g d P numbers and the cyclical 0:06:25.640 --> 0:06:28.520 trade continues to three years out, I think you want 0:06:28.520 --> 0:06:31.000 to own them. You want them in your portfolio. You know. 0:06:31.040 --> 0:06:33.520 While as we talk about portfolio construction rusts, there is 0:06:33.560 --> 0:06:36.279 a question of whether treasuries can provide truly a hedge 0:06:36.560 --> 0:06:39.840 for equities at this point, especially given the negative correlation 0:06:39.880 --> 0:06:42.880 that's gotten it by one measure to the most since 0:06:42.960 --> 0:06:46.159 the two thousand's what's your sense right now early two thousands, 0:06:46.200 --> 0:06:48.719 I should say, what's your sense of how hedge worthy 0:06:48.880 --> 0:06:52.760 treasuries really are right now? Not much? Uh? You know. 0:06:52.920 --> 0:06:56.080 The reality is things have changed, and if I look 0:06:56.120 --> 0:06:59.599 at stock bond correlations, everyone knows they're taking up. What's 0:06:59.640 --> 0:07:02.920 been let discussed is the fact that equity market volatility 0:07:03.440 --> 0:07:07.120 has remained elevated compared to bond market volatility. There wasn't 0:07:07.120 --> 0:07:09.440 a few a couple of months ago. But the reason 0:07:09.560 --> 0:07:12.920 that's important and the reason it's affecting the efficacy of 0:07:13.000 --> 0:07:16.080 the hedge is that tells you how convex the hedge 0:07:16.120 --> 0:07:18.240 it is. You know, what you're seeing is even in 0:07:18.320 --> 0:07:21.040 these days when the market is down a couple of 0:07:21.080 --> 0:07:23.720 percent the way it was last week, either bonds are 0:07:23.800 --> 0:07:26.400 flat or they're up a little bit, they're not giving 0:07:26.440 --> 0:07:29.560 you that big movement that made them such an efficient 0:07:29.640 --> 0:07:31.640 hedge the way that we're a couple of years ago. 0:07:31.720 --> 0:07:34.040 And that's a big change. You know. We don't talk 0:07:34.120 --> 0:07:36.320 about that a lot. We talked about bitcoin, We talked 0:07:36.320 --> 0:07:41.240 about the FED. If you're building a portfolio, the degradation 0:07:41.360 --> 0:07:44.840 and efficacy of bonds as your primary hedge is a 0:07:44.960 --> 0:07:46.920 big deal. Just to be clear, Hey, Russ, you were 0:07:46.960 --> 0:07:49.120 the first person to mention bitcoin on this program, So 0:07:49.280 --> 0:07:53.880 Finn's be rre about that. Rus, just find me in quickly. 0:07:54.040 --> 0:07:56.400 You still nurse in that cash position. She still sits 0:07:56.440 --> 0:07:58.960 on that gun. Take Prince of Summer. We do have 0:07:59.080 --> 0:08:01.440 the cash position again. It's it's the flip side of 0:08:01.520 --> 0:08:05.600 that being very underweight duration. Everyone's got a volatility. They 0:08:05.600 --> 0:08:09.000 look to manage their portfolio. Two. In the absence of duration, 0:08:09.120 --> 0:08:11.360 you need other hedges. Part of it is cash. There 0:08:11.360 --> 0:08:14.400 are other things as well. There's ball as an asset class. Uh, 0:08:14.520 --> 0:08:17.200 there's f X pairs. But in a world where you're 0:08:17.240 --> 0:08:20.280 not getting that convexity from durations at hedge, you're gonna 0:08:20.360 --> 0:08:23.280 run with more cash. Russ thank you best that I'd saying. 0:08:23.320 --> 0:08:32.160 Ruskulligh strict that of black Rock. Right now in London, 0:08:32.440 --> 0:08:35.440 Roger Boodle joined us. He's with Capital Economics or chairman. 0:08:36.200 --> 0:08:39.439 Very important work of the Telegraph is well, Roger, I 0:08:39.559 --> 0:08:42.079 really have to ask about the churn that we're seeing 0:08:42.280 --> 0:08:46.200 right now in this great economy. The Philip Lane comment 0:08:46.280 --> 0:08:49.280 that John Farrell just had is so important. Uh, you're 0:08:49.280 --> 0:08:53.160 Ambrose Evans preachers the Telegraph writing up inflation worries. Do 0:08:53.320 --> 0:08:57.839 you have inflation worries? Yes? I do, actually um for 0:08:57.920 --> 0:09:01.240 the first time for quite a long time now saying 0:09:01.280 --> 0:09:03.319 that I've got inflation worries. And I don't think it's 0:09:03.360 --> 0:09:06.160 going back to the inflation of the nine seventies. But 0:09:06.280 --> 0:09:07.839 it concerns me that a lot of people in the 0:09:07.920 --> 0:09:10.360 markets and central banks and governments are becoming I think 0:09:10.360 --> 0:09:12.760 a bit complacent about this now. At the moment of course, 0:09:12.800 --> 0:09:15.320 we're seeing you know, particular prices going up, and as 0:09:15.400 --> 0:09:18.760 some of your people have been saying, this morning, those 0:09:18.800 --> 0:09:21.360 effects are going to fade out. Frankly that I think 0:09:21.400 --> 0:09:23.920 the bigger issue is the stance of policy. All this 0:09:24.080 --> 0:09:27.360 money slashing around, these incredibly low interest rates. I think 0:09:27.400 --> 0:09:30.360 we risk an inflation surge. Roger, Is there a place 0:09:30.440 --> 0:09:32.840 around the world where you think that complacency it's more 0:09:32.880 --> 0:09:36.719 concentrated a region, a country at central bank? Well, I 0:09:36.800 --> 0:09:38.840 think the danger has put this with the danger's greatest 0:09:38.960 --> 0:09:44.040 in the States because the economy was not that hard hit. 0:09:44.120 --> 0:09:47.240 I was hard hit by the pandemic, but not as 0:09:47.280 --> 0:09:49.920 hard hit as countries in the Eurozone or the UK. 0:09:50.160 --> 0:09:56.000 And you've had this massive, absolutely massive fiscal stimulus, and 0:09:56.080 --> 0:09:58.720 the money supply has grown substantially, and you're already at 0:09:58.760 --> 0:10:00.840 four point two and the latest a give for the CPI. 0:10:01.679 --> 0:10:04.880 I think you'll see inflation readily at five percent, and 0:10:05.040 --> 0:10:07.560 I don't think it's going to subside that easily. At 0:10:07.600 --> 0:10:10.239 the other end of the spectrum, I think the Eurozone 0:10:10.440 --> 0:10:13.679 is not facing that much of an inflationary danger. Of course, 0:10:13.720 --> 0:10:16.040 there will be the spikes the result of our commodity 0:10:16.120 --> 0:10:18.000 prices and energy prices and so on, but I don't 0:10:18.000 --> 0:10:19.640 think you're going to see anything like five percent in 0:10:19.640 --> 0:10:21.520 the Eurozone and the UK is I think just about 0:10:21.559 --> 0:10:23.400 in between those two cases. Do you think there's some 0:10:23.400 --> 0:10:26.760 fun interal stability risk here along with that? Yes, I do. 0:10:27.559 --> 0:10:31.640 The big question is what central banks do, and if 0:10:31.760 --> 0:10:34.840 they don't do anything very much for some considerable time, 0:10:35.520 --> 0:10:37.199 then I think the risk is that they're going to 0:10:37.280 --> 0:10:41.880 be bounced into jumping interest rates, and then that has 0:10:41.960 --> 0:10:46.480 a very substantial stability risk. I think the appropriate thing 0:10:46.600 --> 0:10:49.319 once we're clear that the economy really is pretty strong 0:10:49.400 --> 0:10:53.080 and inflation biggers are picking up, I think central banks 0:10:53.120 --> 0:10:56.880 should start to edge up interest rates pretty soon. Roger, 0:10:57.240 --> 0:11:00.120 what's going to be the impetus behind higher wages in 0:11:00.160 --> 0:11:02.400 the United States? To a lot of people who come 0:11:02.440 --> 0:11:06.120 on this show say, it's sort of a predetermining factor 0:11:06.360 --> 0:11:10.960 too longer lasting inflation. As you're predicted, what depends how 0:11:11.000 --> 0:11:13.599 strong the economy is. Uh, and all the signs of 0:11:13.760 --> 0:11:15.959 the economy is going to be very strong, and that 0:11:16.120 --> 0:11:18.520 increases the bargaining power of labor. Now, it's not going 0:11:18.600 --> 0:11:23.199 to appear necessarily immediately, but it does happen, and the 0:11:23.280 --> 0:11:26.800 economy is very strong. As a shortage of of people, 0:11:27.160 --> 0:11:29.720 wages are a bit up, but you're right to say 0:11:29.880 --> 0:11:32.839 that you can't have continuing inflation going mad for a 0:11:32.880 --> 0:11:35.760 long time unless wages pick up. But I think they will. 0:11:36.080 --> 0:11:38.520 And after all, wage ournalists will have to pay higher 0:11:38.559 --> 0:11:41.880 prices in the shops and that will affect their living wage, 0:11:41.920 --> 0:11:44.120 and they'll want to get some sort of compensation for that. 0:11:44.400 --> 0:11:46.640 This is how inflation starts. And by the way, in 0:11:47.000 --> 0:11:49.640 the past, you know, when inflation has got a bit 0:11:49.679 --> 0:11:53.199 out of control, it's always begun with people saying, oh, 0:11:53.320 --> 0:11:56.040 these are special factors, don't worry, it will fade out, 0:11:56.440 --> 0:11:58.240 and with a central bank saying, I know, we're taking 0:11:58.280 --> 0:12:00.400 a relaxed approach, and then, of course a bit later 0:12:00.480 --> 0:12:02.199 down the line they find out that it doesn't play. 0:12:02.240 --> 0:12:06.400 Now I'm sitting here trying to make these two views coherent. 0:12:06.480 --> 0:12:09.120 This idea that we could get inflation that rises to 0:12:09.240 --> 0:12:11.760 five and stays there for a while, and the idea 0:12:11.800 --> 0:12:15.920 of a financial stability risk that torpedoes markets and causes 0:12:16.280 --> 0:12:19.679 perhaps a return to pressures on the economy. I mean, 0:12:19.720 --> 0:12:23.280 can you square the trajectory of the inflationary push and 0:12:23.440 --> 0:12:27.719 perhaps the market crash that subsequently results. So I don't 0:12:27.760 --> 0:12:31.080 think it's the inflation itself that actually poses the risk 0:12:31.120 --> 0:12:33.920 to markets. Obviously, it's a risk of bond markets um 0:12:34.200 --> 0:12:37.480 these incredibly low yields. But as far as equities is 0:12:37.480 --> 0:12:41.079 a concerned, I don't think inflation itself obviously, which is 0:12:41.160 --> 0:12:43.640 then sensitive to whatever happens in bond markets. Now the 0:12:43.760 --> 0:12:46.440 risk is from policy. Now. Of course, if the policy 0:12:46.520 --> 0:12:49.599 makers decided they're prepared to tolerate five percent inflation for 0:12:49.679 --> 0:12:54.439 a bit, then fair enough that doesn't materialize, but I 0:12:54.520 --> 0:12:58.880 would presume that at some point or other five would 0:12:58.920 --> 0:13:01.319 be seen to be too I now the Fed has 0:13:01.600 --> 0:13:05.800 altered its target, it's prepared to tolerate inflation, hasn't it explicitly? 0:13:05.880 --> 0:13:09.480 But phats fill present for a while for a few years. 0:13:09.720 --> 0:13:11.800 But if this gets bedded in, then I think it 0:13:11.880 --> 0:13:14.600 has to act. And then if it acts by raising 0:13:14.640 --> 0:13:18.160 interest rates by anything other than a tiny amount, you've 0:13:18.200 --> 0:13:21.040 got to wonder. In the financial conditions in which we've 0:13:21.120 --> 0:13:25.640 been living with very high asset valuations, huge amounts of debt, 0:13:25.720 --> 0:13:28.439 you've got to wonder what the fallout from that will be, 0:13:28.640 --> 0:13:31.280 and I think that will be quite ugly. Roger Bruttle 0:13:31.400 --> 0:13:34.400 very quickly. Here have we've forgotten the joy of nominal 0:13:34.520 --> 0:13:36.840 g D P. I mean you and I are fossil 0:13:37.000 --> 0:13:39.839 enough to remember the bright lights of nominal g d 0:13:40.000 --> 0:13:44.520 P really helping corporations, the corporate spirit, the business spirit, 0:13:44.559 --> 0:13:46.959 if you will have we've forgotten a little bit of 0:13:47.000 --> 0:13:50.480 inflation could be a good thing. Well, I hadn't forgotten 0:13:50.520 --> 0:13:53.800 about that. The trouble with a little bit of inflation 0:13:53.880 --> 0:13:56.520 is a bit like being a little bit pregnant. Things 0:13:57.480 --> 0:14:02.080 stay that way, would I play tend not to stay 0:14:02.160 --> 0:14:06.000 that way? Now in some conditions. In the fift and 0:14:06.080 --> 0:14:09.240 sixes we had inflation to three. It didn't get out 0:14:09.280 --> 0:14:11.280 of control, at least not for a long while, but 0:14:11.360 --> 0:14:13.439 then it did get out of control. I think you're 0:14:13.520 --> 0:14:15.840 right in the sense that we obviously don't want an 0:14:15.920 --> 0:14:18.800 economy and that's flat on its back with zero inflation, 0:14:18.880 --> 0:14:22.040 let alone deflation. And if we've got two percent, that's 0:14:22.120 --> 0:14:25.080 perfect probably good, better than having one percent or zero, 0:14:25.480 --> 0:14:28.240 maybe even three. For a few years, it's perfectly okay. 0:14:28.480 --> 0:14:30.720 But once you get to these higher levels then I 0:14:30.800 --> 0:14:34.960 think you do begin to get difficulties emerging. And so far, 0:14:35.080 --> 0:14:38.560 of course, central banks have not wanted to accept something 0:14:38.640 --> 0:14:42.400 like five. Maybe they will not. The conversation I expected 0:14:42.480 --> 0:14:44.080 between the two of you to round this up, but 0:14:44.160 --> 0:14:48.040 we'll leave it there. Roger, thank you, Roger the Caman, 0:14:48.440 --> 0:14:50.520 I bet you are. But it's not the good kind either. 0:14:56.400 --> 0:14:58.640 We talked to Senator as we talked to congressman and 0:14:58.720 --> 0:15:02.760 women sometimes in manufactured. Steve Danes of Montana is the 0:15:02.880 --> 0:15:06.600 real deal. He is original Montana, growing up in Bozeman, 0:15:06.880 --> 0:15:11.359 chemical engineer from Montana State University. Ween there within Republican 0:15:11.480 --> 0:15:15.240 politics and the Senator joins us this morning. Senator Janes 0:15:15.520 --> 0:15:19.760 is Montana's government site says Montana works. What are you 0:15:19.800 --> 0:15:25.600 gonna do with the three point eight zero percent unemployment rate? Well, 0:15:25.640 --> 0:15:27.840 I'll tell you a big shout out to our new 0:15:27.880 --> 0:15:30.920 governor of Montana, Gratten forty, who has been a friend 0:15:30.920 --> 0:15:32.920 of mine for twenty years. We were in business together 0:15:33.040 --> 0:15:36.320 in the Cloud, competing business for twelve years. Greg understands 0:15:36.360 --> 0:15:38.440 how you make economies work, how you create jobs. In 0:15:38.600 --> 0:15:42.320 Montana was the very first state that eliminated that three 0:15:42.920 --> 0:15:47.560 week supplemental federal unemployment insurance benefit. Because when you take 0:15:47.560 --> 0:15:50.200 a look at the state benefit plus the federal benefit, 0:15:50.280 --> 0:15:52.640 he was about seventeen bucks an hour to stay home. 0:15:52.960 --> 0:15:55.760 And this isn't about folks. Being lazy. This is about logic. 0:15:55.840 --> 0:15:57.720 You just look at the what you could make going 0:15:57.760 --> 0:15:59.760 to work versus staying home, and you can make more 0:15:59.840 --> 0:16:02.360 by staying home. Greg stepped out a little over two 0:16:02.360 --> 0:16:05.120 weeks ago and said no more of that. Twenty states 0:16:05.720 --> 0:16:08.320 now have followed Montana's lead. We we have right now 0:16:08.520 --> 0:16:12.040 in this country is primarily a labor crisis, not a 0:16:12.160 --> 0:16:14.400 job crisis, as evidence by the eight point one million 0:16:14.480 --> 0:16:16.360 jobs available right now. You know, you get down to 0:16:16.400 --> 0:16:19.440 the Western Cafe and Boseman, Senator, and that's where you're 0:16:19.440 --> 0:16:22.360 gonna actually learn what's going on. What does the anecdotal 0:16:22.440 --> 0:16:26.560 evidence you were the governor's see right now in Montana 0:16:26.800 --> 0:16:29.360 after this decision was made. I mean it clicks in 0:16:29.480 --> 0:16:32.480 in late June, I believe June seven. But what have 0:16:32.680 --> 0:16:37.040 you observed with this policy action? Well, you're talking about 0:16:37.080 --> 0:16:40.640 the Western Cafe. I'm getting homesick. That's inside baseball there. 0:16:40.680 --> 0:16:42.320 But you can go to the Western Cafe or go 0:16:42.480 --> 0:16:44.680 up and down the main streets across Montana. You're gonna 0:16:44.760 --> 0:16:47.680 hear a couple of things. First, help widened science everywhere, 0:16:47.800 --> 0:16:49.920 now hiring everywhere. My wife and I were in my 0:16:50.080 --> 0:16:53.320 pickup driving by a small business recently in Montana, and 0:16:53.320 --> 0:16:55.560 there were balloons all around this business. I thought, what's 0:16:55.600 --> 0:16:57.480 going on. It looked like a car lot or something. 0:16:57.560 --> 0:16:59.360 There was a tent set up with people inside. They 0:16:59.400 --> 0:17:02.840 were doing live radio hits. It was a hiring promotion. 0:17:02.920 --> 0:17:05.200 They were trying to find people to work. But here's 0:17:05.200 --> 0:17:07.160 one of the adults we've already heard in Montana. We've 0:17:07.200 --> 0:17:09.479 had a business there in Helena that was seeing one 0:17:09.560 --> 0:17:13.160 to two applicants every few weeks prior to the governor's 0:17:13.200 --> 0:17:17.159 action to suspend these federal additional benefits. After that happened, 0:17:17.520 --> 0:17:20.480 they saw sixty applications come in within the first seventy 0:17:20.480 --> 0:17:22.880 two hours. So it's early, it's anecdotal, but we're gonna 0:17:22.960 --> 0:17:24.879 keep an eye on that. Clearly, I think we're going 0:17:24.920 --> 0:17:27.480 in the right direction here of creating incentives to get 0:17:27.520 --> 0:17:29.440 back to work incentive. You clearly believe this is the 0:17:29.520 --> 0:17:31.760 right policy for the state of Montana. Do you think 0:17:31.800 --> 0:17:35.040 that applies to the rest of the country. Well, governors 0:17:35.040 --> 0:17:37.440 will make that decision, But I think generally, anytime you 0:17:37.520 --> 0:17:39.399 are paying people more to stay home than to go 0:17:39.520 --> 0:17:41.879 to work, that's a problem. And I think it does 0:17:41.960 --> 0:17:44.320 depend certainly when it's an urban versus ural kind of 0:17:44.400 --> 0:17:47.320 situation as well, so with within the states, there may 0:17:47.359 --> 0:17:51.000 be differing kinds of incentive issues going on. But again, 0:17:51.040 --> 0:17:53.480 I think come back to common sense. When you have 0:17:53.560 --> 0:17:57.000 these very generous benefits that were needed for a time 0:17:57.000 --> 0:17:59.240 when we hit that crisis last year, it was the 0:17:59.320 --> 0:18:01.440 right thing to do. But you can't keep people paying 0:18:01.480 --> 0:18:03.720 people more to stay at home than to go to work. Clearly, 0:18:03.760 --> 0:18:06.359 people find this an intuitive argument. What do you make 0:18:06.400 --> 0:18:08.760 of the argument that perhaps because children haven't been able 0:18:08.760 --> 0:18:11.200 to go back to school in many places still, that 0:18:11.359 --> 0:18:14.720 that's how the bank participation in this labor force. Yeah, 0:18:14.720 --> 0:18:16.879 I think that that's a fair point, and I think 0:18:16.920 --> 0:18:18.919 it's important that there's just not one thing we need 0:18:18.960 --> 0:18:20.920 to do here to continue to get folks back on 0:18:21.000 --> 0:18:23.080 the job. I think the child Cares You is a 0:18:23.200 --> 0:18:25.720 very real issue that's quite so important we get the 0:18:25.840 --> 0:18:29.160 schools opened up and kids back in the classroom. Parents 0:18:29.240 --> 0:18:31.640 are upset, they want their kids back in the classroom. 0:18:31.680 --> 0:18:33.840 They learn better in the classroom, and you know, it 0:18:33.840 --> 0:18:36.120 allows mom and dad to get back on the job 0:18:36.359 --> 0:18:38.200 if they need to do that. Senator. When I think 0:18:38.200 --> 0:18:40.760 of Montana, I think of the c c C back 0:18:40.800 --> 0:18:44.240 in the nineteen thirties, which helps shaped Yellowstone National Park 0:18:44.359 --> 0:18:48.159 one of the key national places, uh that are that 0:18:48.359 --> 0:18:52.400 really represent America's natural history. I'm wondering from your perspective, 0:18:52.680 --> 0:18:56.200 whether you're becoming more open to the idea of something 0:18:56.359 --> 0:18:59.000 akin to that, some sort of work program or some 0:18:59.119 --> 0:19:02.840 sort of info structure spending that goes beyond just fixing 0:19:03.119 --> 0:19:06.960 certain bridges and tunnels at this point, given where we 0:19:07.000 --> 0:19:10.760 are in the economic cycle. Yeah. Well, I I've chaired 0:19:10.800 --> 0:19:14.199 the National Park Subcommittee for the last couple of Congresses, 0:19:14.240 --> 0:19:16.119 so I'm a big fan of our national parks. So 0:19:16.200 --> 0:19:17.800 We've spent a lot of time as a family in 0:19:17.840 --> 0:19:20.520 the wilderness areas in our national parks, as people who 0:19:20.560 --> 0:19:23.359 love the outdoors, as so many Montana's do. But I 0:19:23.440 --> 0:19:26.200 think fundamentally, first, remember we passed the Great America Outdoors 0:19:26.240 --> 0:19:28.840 Act under President of Trump and the very strong bypars 0:19:28.880 --> 0:19:32.160 of vote, which really was targeted infrastructure for our national 0:19:32.280 --> 0:19:34.840 parks as well as funding the Land and Water Conservation Fund. 0:19:35.200 --> 0:19:37.119 So we we've already I think made a down payment 0:19:37.160 --> 0:19:40.840 on infrastructure for national parks badly needed to repair some 0:19:40.960 --> 0:19:43.920 of the really the fraying edges of our national parks. 0:19:44.160 --> 0:19:46.840 But I think stepping back on the infrastructure question, I 0:19:46.920 --> 0:19:48.399 think we need to come back just to find what 0:19:48.520 --> 0:19:55.200 infrastructure is. It's roads, it's highways, bridges, waterways, broadband, UH, airports, 0:19:55.880 --> 0:19:58.960 wastewater systems. And I think there's room for a by 0:19:59.040 --> 0:20:01.760 parts and comprom eyes if we really defined infrastructure as 0:20:01.840 --> 0:20:03.360 kind of the man of woman on the street would say, 0:20:03.359 --> 0:20:06.080 it is not some of these social programs, free community college, 0:20:06.119 --> 0:20:08.760 free daycare that the Biden administration is saying, that's part 0:20:08.840 --> 0:20:11.280 of infrastructure. What size bill would you like to see 0:20:11.359 --> 0:20:14.320 with that bipartisan plan. We've heard a headline number about 0:20:14.320 --> 0:20:18.119 eight hundred billion dollars. Yeah, I think there's a range somewhere, 0:20:18.240 --> 0:20:22.440 probably in the five to eight hundred billion dollar U range. 0:20:22.720 --> 0:20:24.600 That's still a huge amount of money. I think we've 0:20:24.640 --> 0:20:28.320 been desensitized as we've been talking these trillion dollar numbers 0:20:28.359 --> 0:20:30.879 now over the last year and a half. Remember these 0:20:30.920 --> 0:20:33.800 are it's massive amounts of spending, and I think we 0:20:33.920 --> 0:20:36.720