1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:13,960 --> 00:00:17,560 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,520 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Francis 5 00:00:27,520 --> 00:00:30,440 Speaker 1: Donald joins us now with Manuelie. Francis. Let me take 6 00:00:30,440 --> 00:00:33,640 Speaker 1: that headline of continued tariffs. Can you make the assumption 7 00:00:33,680 --> 00:00:37,760 Speaker 1: that any new tariffs diminish our economic growth? And if 8 00:00:37,800 --> 00:00:40,239 Speaker 1: that's the case, what is your run rate for the 9 00:00:40,280 --> 00:00:46,640 Speaker 1: economy in the next year. Well, you know, in the 10 00:00:46,680 --> 00:00:50,680 Speaker 1: economy was and put lightly booming, it was doing really well. 11 00:00:50,720 --> 00:00:53,800 Speaker 1: It could take the near term headwind of additional tariffs. 12 00:00:54,000 --> 00:00:57,360 Speaker 1: What would worry me heading into one is you know, 13 00:00:57,440 --> 00:01:01,360 Speaker 1: we're still in the greatest economic shock over fifty years. 14 00:01:01,560 --> 00:01:04,280 Speaker 1: This is not the time to be putting additional headwinds 15 00:01:04,319 --> 00:01:07,720 Speaker 1: on this economy. So you would find I suspect if 16 00:01:07,800 --> 00:01:10,440 Speaker 1: you move towards additional tariffs that you would have more 17 00:01:10,560 --> 00:01:13,080 Speaker 1: damn ward revisions. But you know, your question is really 18 00:01:13,080 --> 00:01:15,160 Speaker 1: well framed, which is what is the run rate for 19 00:01:15,200 --> 00:01:17,520 Speaker 1: the economy? And what we've failed to talk about so 20 00:01:17,640 --> 00:01:20,240 Speaker 1: much in COVID is what does the trend growth look 21 00:01:20,280 --> 00:01:23,319 Speaker 1: like afterwards? Are we getting back to two percent growth? 22 00:01:23,640 --> 00:01:25,760 Speaker 1: My suspicion is because of a lot of the damage 23 00:01:25,800 --> 00:01:27,840 Speaker 1: created here, we're going to see a lot of people 24 00:01:27,920 --> 00:01:31,000 Speaker 1: revising down their potential g d P numbers, and tariffs 25 00:01:31,000 --> 00:01:33,200 Speaker 1: are just going to make that worse. Well. Meanwhile, though, 26 00:01:33,520 --> 00:01:36,040 Speaker 1: seeking on the tariffs and the sort of deglobalization theme 27 00:01:36,080 --> 00:01:39,039 Speaker 1: that we were talking about earlier with Sir Peter westmacod 28 00:01:39,560 --> 00:01:43,399 Speaker 1: the idea that a deglobalization wave and increase in tariffs 29 00:01:43,440 --> 00:01:47,960 Speaker 1: will increase inflation even if growth stays somewhat stagnant. Do 30 00:01:48,000 --> 00:01:50,040 Speaker 1: you buy into that argument that a number of people 31 00:01:50,040 --> 00:01:54,440 Speaker 1: are putting forth. Yes, we suspect that if we do 32 00:01:54,480 --> 00:01:58,080 Speaker 1: see this ongoing deglobalization trend, which isn't just focused on 33 00:01:58,240 --> 00:02:01,720 Speaker 1: US and China, it's happening globally, that does contribute to 34 00:02:01,920 --> 00:02:05,600 Speaker 1: moderate inflationary pressures. We see tons of potential for two 35 00:02:05,600 --> 00:02:08,600 Speaker 1: and a half to three percent inflation in the United States. 36 00:02:08,840 --> 00:02:11,120 Speaker 1: I will say that's more US focused than it is 37 00:02:11,160 --> 00:02:13,720 Speaker 1: around the rest of the world. And again, three COVID, 38 00:02:13,800 --> 00:02:16,480 Speaker 1: we were really fading fighting deflation. We were looking at 39 00:02:16,520 --> 00:02:19,720 Speaker 1: some two percent inflationary pressures. Now because of a supply 40 00:02:19,800 --> 00:02:22,959 Speaker 1: side shock movements in US dollar commodities, the FET is 41 00:02:23,000 --> 00:02:24,639 Speaker 1: going to be focusing more on what it does with 42 00:02:24,720 --> 00:02:27,680 Speaker 1: slightly above to percent inflation. So now if you add 43 00:02:27,680 --> 00:02:30,760 Speaker 1: on that global globalization shock, this is a very different 44 00:02:30,800 --> 00:02:33,480 Speaker 1: paradigm to be implementing trade wards. It's gonna yield very 45 00:02:33,480 --> 00:02:36,480 Speaker 1: different outcomes than what it did, or differently put, you know, 46 00:02:36,520 --> 00:02:39,720 Speaker 1: have a different impact on the economy, worsening some of 47 00:02:39,720 --> 00:02:41,640 Speaker 1: the challenges that we're probably going to face over the 48 00:02:41,680 --> 00:02:46,640 Speaker 1: next two to five years. This is conventional economic wisdom, Francis, 49 00:02:46,720 --> 00:02:48,880 Speaker 1: so it's not controversial. But let me ask you this 50 00:02:48,960 --> 00:02:53,440 Speaker 1: question right here. Last night, the vice president had to 51 00:02:53,440 --> 00:02:56,320 Speaker 1: sit across from someone who was talking about I'm doing 52 00:02:56,320 --> 00:02:58,200 Speaker 1: the work that they've done, and you could see it 53 00:02:58,200 --> 00:02:59,799 Speaker 1: took offense to it. He was talking about the tax 54 00:03:00,120 --> 00:03:02,799 Speaker 1: regime and the tax cut that the vice president, the president, 55 00:03:02,800 --> 00:03:06,120 Speaker 1: this administration had pushed through. The candidate to become the 56 00:03:06,200 --> 00:03:08,680 Speaker 1: vice president, Kamala Harris said they would undo that. On 57 00:03:08,760 --> 00:03:10,959 Speaker 1: day one. They said there would be no tax heights 58 00:03:11,000 --> 00:03:13,800 Speaker 1: for anyone under earning under four ks. You made that 59 00:03:13,840 --> 00:03:16,360 Speaker 1: clear several times, but the corporate tax rate didn't come up, 60 00:03:16,919 --> 00:03:18,919 Speaker 1: not in any detail. And I wonder how you would 61 00:03:19,160 --> 00:03:22,560 Speaker 1: process that if if the next couple of months they 62 00:03:22,560 --> 00:03:24,800 Speaker 1: took control of the White House and the administration had 63 00:03:24,800 --> 00:03:27,400 Speaker 1: the power to get this through Congress, if they undid 64 00:03:27,480 --> 00:03:30,880 Speaker 1: that corporate tax cut of several years ago, how would 65 00:03:30,880 --> 00:03:35,040 Speaker 1: that shift from the American economy. So you say this 66 00:03:35,120 --> 00:03:38,400 Speaker 1: is conventional thinking, but actually so much of what's happening 67 00:03:38,440 --> 00:03:41,760 Speaker 1: with deficits, government debt, and the rule of government that 68 00:03:41,880 --> 00:03:44,480 Speaker 1: conventional thinking is being flipped on its head as we 69 00:03:44,520 --> 00:03:48,040 Speaker 1: explore more things like modern monetary theory and maybe the 70 00:03:48,080 --> 00:03:51,880 Speaker 1: idea that deficits aren't so bad regardless of who wins, 71 00:03:52,160 --> 00:03:56,200 Speaker 1: we should be preparing for exceptionally large deficits and the 72 00:03:56,280 --> 00:03:58,800 Speaker 1: highest level of government debt to GDP that we have 73 00:03:58,920 --> 00:04:00,920 Speaker 1: seen in a mirror ki in history, or at least 74 00:04:00,960 --> 00:04:03,680 Speaker 1: in the past two hundred years. So we're gonna be 75 00:04:03,760 --> 00:04:06,840 Speaker 1: having very big conversations about what those deficits and large 76 00:04:06,880 --> 00:04:10,640 Speaker 1: debt mean. From my perspective, it means no matter who wins, Yes, 77 00:04:10,680 --> 00:04:13,240 Speaker 1: what they spend on will change, but you're going to 78 00:04:13,280 --> 00:04:15,800 Speaker 1: see phenomenal issues at the long end of the curve, 79 00:04:16,080 --> 00:04:19,359 Speaker 1: and you will see ongoing acceptance of the idea that 80 00:04:19,480 --> 00:04:23,000 Speaker 1: large deficits are okay. That means a sleeping of the curve, 81 00:04:23,080 --> 00:04:25,440 Speaker 1: particularly at the long end, and it probably means we 82 00:04:25,480 --> 00:04:28,320 Speaker 1: need to reevaluate that rule of government in this economy. 83 00:04:28,400 --> 00:04:30,960 Speaker 1: Government is going to get bigger in the US and 84 00:04:31,120 --> 00:04:33,960 Speaker 1: global economy. It's probably going to become a larger employer. 85 00:04:34,200 --> 00:04:37,040 Speaker 1: And I suspect that that is regardless of winds. And 86 00:04:37,120 --> 00:04:39,520 Speaker 1: that's the main tradeable thing here. Not trying to game 87 00:04:39,880 --> 00:04:42,240 Speaker 1: what comes out of November three or the following two 88 00:04:42,279 --> 00:04:44,960 Speaker 1: weeks after that, but one of the seismic shifts that occurred, 89 00:04:44,960 --> 00:04:49,640 Speaker 1: and I think really that's turning conventional thigging on its head. Well, Franstis, 90 00:04:49,680 --> 00:04:51,040 Speaker 1: when we came out of the last election, it was 91 00:04:51,080 --> 00:04:53,359 Speaker 1: all this happy talk about infrastructure spending, and the Trump 92 00:04:53,400 --> 00:04:55,720 Speaker 1: trite turned out to be something very different. It was 93 00:04:55,760 --> 00:04:58,880 Speaker 1: the tax cut trite. At the end of the day, 94 00:04:59,000 --> 00:05:01,120 Speaker 1: I seen I just wonder. I'm just trying to get 95 00:05:01,160 --> 00:05:02,880 Speaker 1: my hands around what this would make for the equity market, 96 00:05:02,880 --> 00:05:05,560 Speaker 1: because the approach right now is a glass haft full 97 00:05:05,720 --> 00:05:07,679 Speaker 1: andrew sheet some more can Stanley us in that line 98 00:05:07,960 --> 00:05:09,560 Speaker 1: Overnight in an interview with US, and I just want 99 00:05:09,600 --> 00:05:12,720 Speaker 1: to Francis for you whether that's a complete picture, because yes, 100 00:05:12,760 --> 00:05:15,200 Speaker 1: there will be some fiscal stimulus regardless of who wins 101 00:05:15,200 --> 00:05:18,880 Speaker 1: this election. But one party is talking about hiking corporate 102 00:05:18,880 --> 00:05:22,840 Speaker 1: tax rights again, the other one is in I do 103 00:05:22,880 --> 00:05:25,400 Speaker 1: not believe that this economy will be in a position 104 00:05:25,440 --> 00:05:28,040 Speaker 1: in the next eighteen months to take any form of 105 00:05:28,080 --> 00:05:31,599 Speaker 1: material tax hikes. We are sitting right now feeling really 106 00:05:31,640 --> 00:05:34,000 Speaker 1: good because a lot of our economic data has shown 107 00:05:34,080 --> 00:05:36,479 Speaker 1: V shaped recoveries, but a lot of that V shaped 108 00:05:36,520 --> 00:05:39,520 Speaker 1: recoveries are red herrings. Housing is not behaving as it 109 00:05:39,560 --> 00:05:42,240 Speaker 1: typically does. Auto is not behaving how it typically does. 110 00:05:42,480 --> 00:05:44,680 Speaker 1: We have I'm looking at my Bloomberg screen here um 111 00:05:45,200 --> 00:05:48,640 Speaker 1: eleven million Americans who are on claims right now, we 112 00:05:48,680 --> 00:05:52,400 Speaker 1: are extremely vulnerable to any type of disruption. And yes, 113 00:05:52,480 --> 00:05:54,960 Speaker 1: if things go well, we get a fiscal package, we 114 00:05:55,000 --> 00:05:57,600 Speaker 1: aid Americans through the next six to twelve months, then 115 00:05:57,640 --> 00:05:59,880 Speaker 1: we can absolutely continue on our road to recovery and 116 00:06:00,040 --> 00:06:03,000 Speaker 1: make these tax changes. But if there is an additional shock, 117 00:06:03,120 --> 00:06:06,200 Speaker 1: if there is an accident, whether it's a geopolitical or financial, 118 00:06:06,440 --> 00:06:08,960 Speaker 1: then we are staring down the possibility and the growing 119 00:06:08,960 --> 00:06:11,560 Speaker 1: tail risk of a double dip here. Now is not 120 00:06:11,640 --> 00:06:15,280 Speaker 1: the moment for large structural changes, and it's the moment 121 00:06:15,279 --> 00:06:17,560 Speaker 1: to build a bridge to the other side. We're still 122 00:06:17,600 --> 00:06:21,800 Speaker 1: an incredibly vulnerable moment in the US economy. Similarly, a 123 00:06:21,839 --> 00:06:24,160 Speaker 1: message for both parties at the moment, Francis fantasy to 124 00:06:24,200 --> 00:06:27,040 Speaker 1: catch up. Francis don't want that of money life investment management. 125 00:06:27,040 --> 00:06:32,960 Speaker 1: Thank you. Right now, We're gonna rip up the script 126 00:06:33,000 --> 00:06:34,560 Speaker 1: and then rip it up again and rip it up 127 00:06:34,560 --> 00:06:38,039 Speaker 1: again through the morning with Rick Davis, formerly the campaign 128 00:06:38,080 --> 00:06:41,280 Speaker 1: manager for Senator McCain of Arizona and of course a 129 00:06:41,320 --> 00:06:46,159 Speaker 1: Bloomberg contributor, Rick, what is the debate Commission? Like, how 130 00:06:46,200 --> 00:06:50,400 Speaker 1: do the candidates and their staff like you go back 131 00:06:50,440 --> 00:06:54,040 Speaker 1: and forth with the debate condition? Are you the boss 132 00:06:54,400 --> 00:06:57,200 Speaker 1: or is it debate Commission the boss? Yeah, it's a 133 00:06:57,240 --> 00:07:00,400 Speaker 1: it's a really hard answer because nobody's the loss. The 134 00:07:00,400 --> 00:07:02,760 Speaker 1: commission sets up a bunch of rules, they pick a 135 00:07:02,760 --> 00:07:05,600 Speaker 1: bunch of sites, then they sit down with the nominees 136 00:07:05,600 --> 00:07:07,560 Speaker 1: of the party. They do this year's in advance, and 137 00:07:07,560 --> 00:07:09,440 Speaker 1: then they sit down with the nominees of the party 138 00:07:09,440 --> 00:07:12,960 Speaker 1: and they start negotiating and out of that negotiation comes 139 00:07:13,040 --> 00:07:17,120 Speaker 1: some version of that schedule and those rules. Uh, some 140 00:07:17,240 --> 00:07:21,600 Speaker 1: of those negotiations are directly between the two candidates. Uh. 141 00:07:21,960 --> 00:07:25,120 Speaker 1: We had Lindsey Graham is our negotiator and Rama Manuel 142 00:07:25,680 --> 00:07:28,560 Speaker 1: was the negotiator for Barack Obama. And we actually got 143 00:07:28,600 --> 00:07:30,920 Speaker 1: so frustrated with the Debate Commission we decided we were 144 00:07:30,960 --> 00:07:33,560 Speaker 1: just going to do the debates ourselves. Then we realized 145 00:07:33,600 --> 00:07:35,520 Speaker 1: the logistics on that was too much, and we went 146 00:07:35,560 --> 00:07:38,280 Speaker 1: back to the commission. But the rules of commission put 147 00:07:38,280 --> 00:07:41,680 Speaker 1: together are meant to be standardized, and that you then 148 00:07:41,760 --> 00:07:46,080 Speaker 1: create a memori Okay, but Rick the brilliantly explained huge 149 00:07:46,120 --> 00:07:50,720 Speaker 1: public value. It's not a standardized time. Is the president? 150 00:07:50,840 --> 00:07:55,640 Speaker 1: What's his power here as president, as candidate and with 151 00:07:55,760 --> 00:08:00,480 Speaker 1: his visibility obviously in his vocal treatment, what's his ability 152 00:08:00,560 --> 00:08:05,520 Speaker 1: to change the commission or make a more malleable process 153 00:08:05,760 --> 00:08:09,040 Speaker 1: to get to his outcome. Yeah, you can always say no, 154 00:08:09,280 --> 00:08:11,600 Speaker 1: And that's what the president is saying this morning. I 155 00:08:11,600 --> 00:08:14,760 Speaker 1: would say, though, the Debate Commission would never have announced 156 00:08:14,840 --> 00:08:19,120 Speaker 1: that they did agree on a virtual debate unless somebody 157 00:08:19,160 --> 00:08:22,120 Speaker 1: in the Trump campaign had said yes to that. So 158 00:08:22,200 --> 00:08:25,280 Speaker 1: this is another example of Donald Trump not being connected 159 00:08:25,320 --> 00:08:28,280 Speaker 1: to the leadership of this campaign and and now going 160 00:08:28,480 --> 00:08:31,640 Speaker 1: rogue on the Debate Commission and probably the Biden campaign 161 00:08:31,640 --> 00:08:34,720 Speaker 1: because the Biden campaign was signed off on this format too. 162 00:08:35,120 --> 00:08:37,520 Speaker 1: I would say we tried this in the primaries in 163 00:08:37,559 --> 00:08:41,479 Speaker 1: two thousand when I ran John McCain's campaign against George W. Bush, 164 00:08:41,559 --> 00:08:43,960 Speaker 1: and we didn't want to do a debate because the logistics. 165 00:08:44,000 --> 00:08:45,960 Speaker 1: It was on the other side of the country and 166 00:08:46,000 --> 00:08:49,400 Speaker 1: we were trying to campaign to win, and the press 167 00:08:49,640 --> 00:08:53,480 Speaker 1: pressure on us to participate in that debate forced us 168 00:08:53,520 --> 00:08:55,600 Speaker 1: to do a virtual debate where the two of us 169 00:08:55,640 --> 00:08:59,079 Speaker 1: were in different sizes of the country, and for my purposes, 170 00:08:59,240 --> 00:09:02,240 Speaker 1: that was a dis ester. Rick, Just to jump in, 171 00:09:02,360 --> 00:09:04,880 Speaker 1: just some response from the campaign that I want to 172 00:09:04,920 --> 00:09:07,200 Speaker 1: bring to our audience very quickly, they will pass on 173 00:09:07,240 --> 00:09:09,960 Speaker 1: the sad excuse for a debate. The campaign will hold 174 00:09:09,960 --> 00:09:13,120 Speaker 1: a rally instead of that remote debate. So it looks 175 00:09:13,120 --> 00:09:15,560 Speaker 1: like the president in the campaign on the same page here, Rick, 176 00:09:16,000 --> 00:09:18,960 Speaker 1: I just wander from your perspective with this poll just 177 00:09:19,000 --> 00:09:21,840 Speaker 1: coming in from Fox News with Biden having a fifty 178 00:09:21,840 --> 00:09:25,640 Speaker 1: three to forty three lead nationally, where do you see 179 00:09:25,679 --> 00:09:27,839 Speaker 1: the polls right now? Because I read the polls out 180 00:09:27,840 --> 00:09:30,679 Speaker 1: this morning. I've gone through the numbers multiple times, and 181 00:09:30,760 --> 00:09:32,880 Speaker 1: Tom just calls up into a ball thinking about four 182 00:09:32,960 --> 00:09:35,760 Speaker 1: years ago, what are they worse right now? Rick? How 183 00:09:35,760 --> 00:09:38,000 Speaker 1: do you read the polls? Yeah, so, first of all, 184 00:09:38,040 --> 00:09:41,120 Speaker 1: you gotta understand, polls are a static picture. They're not dynamic. 185 00:09:41,360 --> 00:09:44,559 Speaker 1: They don't take people's opinions over time. They take them 186 00:09:44,559 --> 00:09:48,320 Speaker 1: in one instance, so they're only accurate that day. And 187 00:09:48,559 --> 00:09:51,360 Speaker 1: in a campaign that's moving around, like four years ago, 188 00:09:51,720 --> 00:09:56,360 Speaker 1: where you had all these massive black swan events in October, 189 00:09:56,840 --> 00:10:00,120 Speaker 1: you know, whether it was a Hollywood uh video o 190 00:10:00,440 --> 00:10:04,840 Speaker 1: or Comey reopening the investigation of Hillary. The polls don't 191 00:10:04,920 --> 00:10:08,280 Speaker 1: take that into consideration. They only give you a snapshot. 192 00:10:08,360 --> 00:10:12,280 Speaker 1: So what we know today is that Biden has some momentum, 193 00:10:12,520 --> 00:10:16,640 Speaker 1: some movement toward him since the last debate, including the 194 00:10:16,679 --> 00:10:20,280 Speaker 1: period of time that that that the President contracted COVID, 195 00:10:20,720 --> 00:10:22,720 Speaker 1: And it looks like some of that movement is in 196 00:10:22,760 --> 00:10:27,320 Speaker 1: a new voter group, not just suburban women, but white males. 197 00:10:27,559 --> 00:10:30,800 Speaker 1: And that is a signal to Trump that he may 198 00:10:30,840 --> 00:10:33,360 Speaker 1: have a Trump problem with his base. Rick, how much 199 00:10:33,400 --> 00:10:37,040 Speaker 1: momentum did Mike Pence give to the Trump campaign last night? 200 00:10:38,200 --> 00:10:40,800 Speaker 1: You know, I think that he stabilized the Trump campaign. 201 00:10:40,840 --> 00:10:44,280 Speaker 1: I mean, think about what's happened in one week. The 202 00:10:45,040 --> 00:10:48,920 Speaker 1: Trump debate was a disaster a week ago for Donald Trump. 203 00:10:49,480 --> 00:10:53,439 Speaker 1: He almost immediately contracted COVID and then he blew up 204 00:10:53,520 --> 00:10:57,800 Speaker 1: his own negotiations over the stimulus. That's one week. That's 205 00:10:57,800 --> 00:11:01,240 Speaker 1: an amazing amount of activity. And so I think last 206 00:11:01,360 --> 00:11:03,720 Speaker 1: night what what Mike Pence did was something that the 207 00:11:03,720 --> 00:11:06,160 Speaker 1: campaign hasn't been able to do before with the candidate, 208 00:11:06,360 --> 00:11:09,679 Speaker 1: and that is stabilized the debate. His set of facts, 209 00:11:09,760 --> 00:11:13,119 Speaker 1: his diagram of where the country is headed, is exactly 210 00:11:13,120 --> 00:11:15,439 Speaker 1: what the Trump campaign has been selling, and he did 211 00:11:15,440 --> 00:11:18,840 Speaker 1: a good job delivering that, did a very confident job. 212 00:11:18,840 --> 00:11:20,720 Speaker 1: Just to wrap things up, Rick, very quickly, we had 213 00:11:20,760 --> 00:11:23,840 Speaker 1: the former New York mat Rudy Giuliani on the program yesterday. 214 00:11:23,920 --> 00:11:26,840 Speaker 1: Without much prompt ding or encouragement, he came out swinging. 215 00:11:27,600 --> 00:11:30,320 Speaker 1: What we see today is the campaign coming out swinging 216 00:11:30,320 --> 00:11:33,679 Speaker 1: against the Debate Commission. This is that classic siege mentality 217 00:11:33,720 --> 00:11:36,560 Speaker 1: in the final few weeks of the campaign, every once 218 00:11:36,600 --> 00:11:39,520 Speaker 1: against us. Is this a strategy that's gonna work? Rick? 219 00:11:39,679 --> 00:11:42,719 Speaker 1: Is it working now? Well? You know, the bunker is 220 00:11:42,760 --> 00:11:46,160 Speaker 1: a very nasty place to have to occupy. And that's 221 00:11:46,160 --> 00:11:48,599 Speaker 1: where the Trump campaign is right now. Not only is 222 00:11:48,640 --> 00:11:51,679 Speaker 1: their top leadership out with COVID, but the polls are 223 00:11:51,679 --> 00:11:54,680 Speaker 1: turning against him. I would say one thing that sort 224 00:11:54,679 --> 00:11:57,880 Speaker 1: of defies that is the nimbleness or lack there of, 225 00:11:58,120 --> 00:12:02,120 Speaker 1: of Donald Trump's addressing the stimulus negotiations. He's flip floped 226 00:12:02,160 --> 00:12:05,720 Speaker 1: now three times in three days. Um, there's no question 227 00:12:05,800 --> 00:12:08,600 Speaker 1: that that Congress wants a stimulus. They know what the 228 00:12:08,640 --> 00:12:12,679 Speaker 1: public needs and and what the Fed is requiring, and 229 00:12:12,760 --> 00:12:17,240 Speaker 1: so I think that the decision making at the top 230 00:12:17,320 --> 00:12:20,439 Speaker 1: has always been Donald Trump. There's no campaign that's going 231 00:12:20,480 --> 00:12:23,400 Speaker 1: to get in his way. He's running the bus and 232 00:12:23,600 --> 00:12:26,080 Speaker 1: the buses veering all over the road, and that does 233 00:12:26,120 --> 00:12:30,959 Speaker 1: not help him collect the votes he needs for election day. Rick, 234 00:12:31,040 --> 00:12:33,240 Speaker 1: wonderful to catch up to get your inside, Rick Davis 235 00:12:33,320 --> 00:12:40,400 Speaker 1: that the former McCain campaign MANTAA and BLIMPA contributor Michael 236 00:12:40,400 --> 00:12:42,760 Speaker 1: Moore joins us right now ahead of all of our finances. 237 00:12:42,800 --> 00:12:45,679 Speaker 1: We're thrilled you could take time out from a hollacious 238 00:12:46,040 --> 00:12:49,640 Speaker 1: day as well. Michael Moore, is there any evidence from 239 00:12:49,679 --> 00:12:53,640 Speaker 1: your team did if you roll up in industry, profits 240 00:12:53,679 --> 00:12:59,800 Speaker 1: go up. I don't know that profits go up, but 241 00:13:00,320 --> 00:13:04,680 Speaker 1: is this feeling that scale matters in the asset management 242 00:13:04,679 --> 00:13:07,520 Speaker 1: business as more and more of the money moves to 243 00:13:07,559 --> 00:13:12,040 Speaker 1: passive so that you can't survive as a niche player. 244 00:13:12,679 --> 00:13:15,600 Speaker 1: Uh not that either Eaton Vans or Morgan Stanley was 245 00:13:15,640 --> 00:13:18,720 Speaker 1: exactly niche, but they weren't part of the trillion dollar 246 00:13:18,800 --> 00:13:22,600 Speaker 1: club of the behemoth. And now together they joined that club. 247 00:13:23,080 --> 00:13:29,560 Speaker 1: Will they add profit to Morgan Stanley's income statement? Yeah, 248 00:13:29,600 --> 00:13:31,839 Speaker 1: I think that's the idea. I mean, James Gorman has 249 00:13:31,920 --> 00:13:34,960 Speaker 1: really reshaped Morgan Stanley. I mean he started with the 250 00:13:35,000 --> 00:13:39,040 Speaker 1: Smith Barney deal in the financial crisis, and now this 251 00:13:39,120 --> 00:13:43,559 Speaker 1: year you have e Trade and you have Van and U. 252 00:13:44,480 --> 00:13:47,280 Speaker 1: I think his strategy as those all can work together, 253 00:13:47,360 --> 00:13:50,760 Speaker 1: and now you know, the traditional investment bank is less 254 00:13:50,800 --> 00:13:54,280 Speaker 1: than half the firm Bloomberg surveillance worldwide. Michael Moore bringing 255 00:13:54,360 --> 00:13:57,160 Speaker 1: up the elephant in the room. Let's go to someone 256 00:13:57,200 --> 00:14:03,400 Speaker 1: with some experience on Smith Bernie Sweet. How did that go? Yeah, 257 00:14:03,559 --> 00:14:06,079 Speaker 1: it's interesting Smith Barney. It's just you know that it's 258 00:14:06,120 --> 00:14:08,160 Speaker 1: just a behemouth, you know, just got a tremendous amount 259 00:14:08,200 --> 00:14:12,000 Speaker 1: of brokers out there, gives them immediate retail presence. Michael, 260 00:14:12,080 --> 00:14:16,360 Speaker 1: I mean when you think about Morgan Stanley here, give 261 00:14:16,440 --> 00:14:18,679 Speaker 1: us a sense of where their asset management business kind 262 00:14:18,720 --> 00:14:22,240 Speaker 1: of ranks, uh in the world of asset management, which 263 00:14:22,360 --> 00:14:28,040 Speaker 1: is facing uh pressure on fees. Yeah. I mean it 264 00:14:28,120 --> 00:14:31,520 Speaker 1: was always seen UH as one of the smaller players, 265 00:14:31,560 --> 00:14:34,240 Speaker 1: at least among the bank asset managers. You have Goldman 266 00:14:34,400 --> 00:14:39,360 Speaker 1: and JP Morgan with huge businesses on the asset management side. 267 00:14:39,600 --> 00:14:43,440 Speaker 1: Morgan Stanley was always a bit smaller, especially after the 268 00:14:43,480 --> 00:14:47,440 Speaker 1: financial crisis. They sold their van camp in business uh, 269 00:14:47,480 --> 00:14:50,560 Speaker 1: and you know, Gorman later said he regretted that move. 270 00:14:50,680 --> 00:14:54,680 Speaker 1: So this seems to be um reversing that. And then 271 00:14:54,760 --> 00:14:59,080 Speaker 1: some black Rock's got thirty something percent operating mark. Morgan 272 00:14:59,160 --> 00:15:02,320 Speaker 1: Stanley is a little later on that. Obviously the goals 273 00:15:02,360 --> 00:15:05,000 Speaker 1: to get operating margin up as well. How do you 274 00:15:05,000 --> 00:15:08,000 Speaker 1: actually affect this, Michael Moore? You mean, today's a day 275 00:15:08,000 --> 00:15:11,920 Speaker 1: where nobody talks about job cuts are overlays and overlaps. 276 00:15:11,960 --> 00:15:14,240 Speaker 1: I mean, what happens to the say, two thousand people 277 00:15:14,240 --> 00:15:19,520 Speaker 1: at Eaton events right right right? I think you probably 278 00:15:19,520 --> 00:15:23,720 Speaker 1: will see some some overlap there, um, you know, but 279 00:15:23,760 --> 00:15:27,280 Speaker 1: the thing for the banks is not just the operating margin, 280 00:15:27,840 --> 00:15:33,320 Speaker 1: but the return on equity. And the really attractive uh 281 00:15:33,520 --> 00:15:37,200 Speaker 1: piece of both asset management and wealth management is the 282 00:15:37,280 --> 00:15:41,000 Speaker 1: capital charges are so much lower than the trading and 283 00:15:41,040 --> 00:15:45,720 Speaker 1: investment banking sides of the business. So it's interesting, Michael. 284 00:15:45,720 --> 00:15:49,280 Speaker 1: I'm looking at the b Q function for Morgan Stanley 285 00:15:49,280 --> 00:15:50,920 Speaker 1: and look seeing that the stock is down about four 286 00:15:50,920 --> 00:15:55,520 Speaker 1: point seven year today, doing better than its peers. Is 287 00:15:55,560 --> 00:16:01,600 Speaker 1: that a validation Mr Gorman's focus on private wealth as 288 00:16:01,600 --> 00:16:07,600 Speaker 1: opposed to maybe some of the more volatile capital markets businesses. Yeah. 289 00:16:07,640 --> 00:16:09,600 Speaker 1: I think you'd have to say that, especially in a 290 00:16:09,720 --> 00:16:14,840 Speaker 1: year where the traditional trading businesses have done quite well. Um. 291 00:16:14,920 --> 00:16:18,320 Speaker 1: So the fact that they're holding up even in that environment, 292 00:16:18,560 --> 00:16:23,360 Speaker 1: uh does seem to validate that strategy. You know, Gorman 293 00:16:23,440 --> 00:16:26,440 Speaker 1: saying today that it's a happy coincidence that they're doing 294 00:16:26,480 --> 00:16:30,400 Speaker 1: these deals while uh, the investment banking side of things 295 00:16:30,480 --> 00:16:33,120 Speaker 1: is doing, uh, doing quite well at least in the 296 00:16:33,160 --> 00:16:36,280 Speaker 1: first half. And we'll learn more on the next week 297 00:16:36,400 --> 00:16:38,640 Speaker 1: on the third quarter. Michael Moore, thank you so much. 298 00:16:38,680 --> 00:16:40,680 Speaker 1: Getting ready for next week as big as week of 299 00:16:40,720 --> 00:16:43,800 Speaker 1: the any day swing Michael Moore ahead of our US 300 00:16:43,880 --> 00:16:47,840 Speaker 1: finance team, all of our coverage of global Wall Street 301 00:16:51,880 --> 00:16:55,240 Speaker 1: right now widely anticipated for you. Abby Joseph Cohen joins 302 00:16:55,360 --> 00:16:59,400 Speaker 1: US with Goldman Sachs or Advisory Director and senior investment 303 00:16:59,440 --> 00:17:01,640 Speaker 1: Strategy And of course the lay of the land here 304 00:17:01,800 --> 00:17:06,119 Speaker 1: is when Abby Joseph Cohen tries to synthesize our economics 305 00:17:06,160 --> 00:17:09,640 Speaker 1: and our finance into a belief in the equity markets. 306 00:17:10,119 --> 00:17:14,880 Speaker 1: All listen, whether they agree or disagree, Abby, just simply, now, 307 00:17:15,000 --> 00:17:20,760 Speaker 1: can you, at the margin acquire equities this morning? That's 308 00:17:20,760 --> 00:17:25,919 Speaker 1: a terrific question Tom for traders um and the answer is, 309 00:17:26,320 --> 00:17:30,160 Speaker 1: of course, it depends upon your time horizon. The Goldman 310 00:17:30,240 --> 00:17:37,240 Speaker 1: Sacks House few is that SNP five is currently modestly undervalued, 311 00:17:37,720 --> 00:17:40,960 Speaker 1: and of course that's based upon the straight arithmetic what 312 00:17:41,000 --> 00:17:44,720 Speaker 1: we expect for corporate profits, but also very importantly what 313 00:17:44,760 --> 00:17:47,520 Speaker 1: we expect from the Fed. And if you think the 314 00:17:47,560 --> 00:17:50,840 Speaker 1: Fed is going to stay friendly, then there could be 315 00:17:51,080 --> 00:17:54,360 Speaker 1: some room to grow in the equity market. By the way, 316 00:17:54,400 --> 00:17:56,880 Speaker 1: not just in the United States, but in the other 317 00:17:56,960 --> 00:18:01,119 Speaker 1: major markets as well. However, what we've discovered is that 318 00:18:01,240 --> 00:18:05,359 Speaker 1: there is intense volatility and it has been rising. That 319 00:18:05,560 --> 00:18:09,720 Speaker 1: is not unusual, uh, as we approach a major election 320 00:18:09,960 --> 00:18:13,240 Speaker 1: in the United States, and also as we see that 321 00:18:13,280 --> 00:18:18,800 Speaker 1: there has been some erratic movement with regard to fiscal policy. 322 00:18:19,119 --> 00:18:21,960 Speaker 1: It's not just the Fed. We're also now looking at 323 00:18:22,000 --> 00:18:24,919 Speaker 1: what happens to the stimulus bill. I think it was 324 00:18:25,119 --> 00:18:27,960 Speaker 1: very clear over the last few days f O m 325 00:18:28,040 --> 00:18:31,240 Speaker 1: C and other statements from the Fed that they believe 326 00:18:31,400 --> 00:18:34,720 Speaker 1: we need another stimulus package. Speaker Pelosi with David Weston 327 00:18:34,720 --> 00:18:36,480 Speaker 1: here in the twelve noon hour, Abby, I want to 328 00:18:36,480 --> 00:18:40,560 Speaker 1: go back to when it was just so darn simple. 329 00:18:40,960 --> 00:18:44,840 Speaker 1: John Templeton was there, Schreyer was there, Marylynch, Robert Kirby 330 00:18:44,920 --> 00:18:48,000 Speaker 1: and they talked to lu Rue Kaiser about the simplicity 331 00:18:48,160 --> 00:18:52,600 Speaker 1: of a stock market major crash, etcetera, etcetera. Now there 332 00:18:52,720 --> 00:18:57,000 Speaker 1: is so much complexity, there is so much information to flow. 333 00:18:57,400 --> 00:19:00,840 Speaker 1: How do you stay convict with a convict? Should call 334 00:19:00,960 --> 00:19:06,280 Speaker 1: on equities? Given the complete cacophony of information that we have, 335 00:19:07,040 --> 00:19:11,880 Speaker 1: you know was a market event. Basically the economy had 336 00:19:12,000 --> 00:19:15,439 Speaker 1: not been afflicted by whatever was going on, So it 337 00:19:15,560 --> 00:19:18,199 Speaker 1: was okay to go back to those models do a 338 00:19:18,280 --> 00:19:23,040 Speaker 1: calculation about valuation. That is not the situation right now, 339 00:19:23,359 --> 00:19:25,640 Speaker 1: And I have to tell you that I am quite 340 00:19:25,720 --> 00:19:31,280 Speaker 1: concerned that there could be considerable downside as well, depending 341 00:19:31,760 --> 00:19:35,240 Speaker 1: on any number of factors that we can't fit easily 342 00:19:35,280 --> 00:19:38,760 Speaker 1: into our models. This includes what will the Congress do, 343 00:19:39,400 --> 00:19:43,480 Speaker 1: what will the President say, and of course the election outcome. 344 00:19:43,920 --> 00:19:49,359 Speaker 1: And so those of us who have lived our professional 345 00:19:49,440 --> 00:19:53,080 Speaker 1: lives really focusing in on the math, I think should 346 00:19:53,080 --> 00:19:56,639 Speaker 1: feel very humble right now, because what we recognize is 347 00:19:56,680 --> 00:20:00,520 Speaker 1: that the models may not be able to properly reflect 348 00:20:00,880 --> 00:20:04,080 Speaker 1: all of the volatility, not just in the markets, but 349 00:20:04,200 --> 00:20:07,880 Speaker 1: in the economy, in policy, and also of course an 350 00:20:07,920 --> 00:20:12,639 Speaker 1: investor sentiment one other thing. Within the equity market itself, 351 00:20:12,680 --> 00:20:16,560 Speaker 1: there are wide gaps in relative valuation and that tells 352 00:20:16,640 --> 00:20:21,760 Speaker 1: us something too. When markets rising, what we see is 353 00:20:21,840 --> 00:20:24,920 Speaker 1: that there are just a handful of stocks that tend 354 00:20:24,960 --> 00:20:27,960 Speaker 1: to drive that performance, and that of course could make 355 00:20:28,000 --> 00:20:32,560 Speaker 1: the market more suspect as well and more volatile and 356 00:20:32,640 --> 00:20:36,399 Speaker 1: vulnerable should there be some disappointments with regard to just 357 00:20:36,480 --> 00:20:41,440 Speaker 1: a small handful of those particular issues. I mean, good 358 00:20:41,480 --> 00:20:44,200 Speaker 1: morning from London. What what examples the market you think 359 00:20:44,320 --> 00:20:46,560 Speaker 1: pricing in at the moment, And when you say, you know, 360 00:20:46,600 --> 00:20:48,720 Speaker 1: it is very difficult to read what the U S 361 00:20:48,720 --> 00:20:52,000 Speaker 1: election will bring in terms of composition of the House 362 00:20:52,359 --> 00:20:55,600 Speaker 1: or even you know, giving of power if Joe Biden 363 00:20:55,600 --> 00:20:57,840 Speaker 1: were to win. So how does the market react in 364 00:20:57,880 --> 00:21:01,000 Speaker 1: that case? When we take a look at a lot 365 00:21:01,040 --> 00:21:04,520 Speaker 1: of the surveys that are done of investors, what we're 366 00:21:04,560 --> 00:21:08,119 Speaker 1: seeing is the I don't want to say presumption, but 367 00:21:08,200 --> 00:21:13,080 Speaker 1: the increasing probability of let's call it the blue wave. Uh. 368 00:21:13,119 --> 00:21:16,440 Speaker 1: There seems to be in probability that Mr Biden will 369 00:21:16,480 --> 00:21:20,840 Speaker 1: be elected based upon polling. Uh. There is the possibility 370 00:21:20,880 --> 00:21:25,000 Speaker 1: that the Senate could switch over to the Democratic column, 371 00:21:25,440 --> 00:21:27,679 Speaker 1: and of course there is the presumption. This is a 372 00:21:27,720 --> 00:21:32,000 Speaker 1: presumption that the House will stay blue. And what we're 373 00:21:32,040 --> 00:21:36,680 Speaker 1: seeing from investors over the last several days is that 374 00:21:36,800 --> 00:21:39,320 Speaker 1: a blue wave might not be such a bad thing 375 00:21:39,840 --> 00:21:42,880 Speaker 1: because it would give us more certainty with regard to policy, 376 00:21:43,200 --> 00:21:46,760 Speaker 1: particularly with regard to the use of fiscal policy to 377 00:21:47,000 --> 00:21:51,359 Speaker 1: help our economy. At this point, the general sense is 378 00:21:51,440 --> 00:21:55,640 Speaker 1: that while the economy is recovering, it is recovering slowly 379 00:21:55,840 --> 00:22:00,320 Speaker 1: Number one. Number two, there are structural problems that need 380 00:22:00,400 --> 00:22:04,399 Speaker 1: to be addressed in terms of long term unemployment. Some 381 00:22:04,480 --> 00:22:07,119 Speaker 1: of the industries that have been very hard hit and 382 00:22:07,160 --> 00:22:11,600 Speaker 1: these are things that interest rate policy writ large doesn't 383 00:22:11,640 --> 00:22:15,280 Speaker 1: really help. It has to be done through fiscal policy. 384 00:22:15,680 --> 00:22:19,640 Speaker 1: And so what we basically see is that investors are 385 00:22:19,720 --> 00:22:25,640 Speaker 1: now looking at the possibility of movement towards the Democrats. 386 00:22:26,040 --> 00:22:29,760 Speaker 1: Uh that may in fact be viewed in a positive way. 387 00:22:30,080 --> 00:22:32,960 Speaker 1: And here I'm talking about not the short term modeling 388 00:22:33,680 --> 00:22:36,800 Speaker 1: based upon what's happening in this year's corporate profits and 389 00:22:36,800 --> 00:22:40,440 Speaker 1: so on, but rather the longer term outlook for twenty 390 00:22:40,480 --> 00:22:44,560 Speaker 1: one and beyond. But what does it mean for how 391 00:22:44,680 --> 00:22:47,159 Speaker 1: so let's say we do have a Biden administration was 392 00:22:47,240 --> 00:22:49,880 Speaker 1: actually you know, also Democrats in the House, what does 393 00:22:49,920 --> 00:22:52,680 Speaker 1: it mean for what the how the econmual will change 394 00:22:52,680 --> 00:22:56,280 Speaker 1: in the US? Yeah. One of the things I believe 395 00:22:56,359 --> 00:23:00,760 Speaker 1: that I've picked up anecdotally, and I stressed this as anecdotally, 396 00:23:01,240 --> 00:23:03,960 Speaker 1: is that what I speak to investors, there is some 397 00:23:04,160 --> 00:23:09,280 Speaker 1: uncertainty as to what the president uh plans would be 398 00:23:09,359 --> 00:23:13,480 Speaker 1: in a second second term. Uh So there's not really 399 00:23:13,520 --> 00:23:18,280 Speaker 1: an understanding beyond tax policy in terms of what would happen. 400 00:23:18,359 --> 00:23:21,600 Speaker 1: There has been disappointment, for example, in terms of no 401 00:23:21,760 --> 00:23:26,080 Speaker 1: follow up on infrastructure policy. Uh. There are concerns in 402 00:23:26,200 --> 00:23:31,120 Speaker 1: terms of what would happen with regard to regulatory policy, 403 00:23:31,160 --> 00:23:34,480 Speaker 1: particularly as it relates to some environmental issues. And there 404 00:23:34,520 --> 00:23:38,160 Speaker 1: are also some concerns as relates to healthcare. Now, one 405 00:23:38,200 --> 00:23:41,280 Speaker 1: of the things that many investors are now concerned about, 406 00:23:41,880 --> 00:23:46,120 Speaker 1: as are many voters, is that we have a rise 407 00:23:46,200 --> 00:23:50,040 Speaker 1: in unemployment. Fortunately, it has been moving lower. One of 408 00:23:50,080 --> 00:23:53,400 Speaker 1: the reasons it's moving lower is not just because jobs 409 00:23:53,400 --> 00:23:56,960 Speaker 1: are being restored. We've now restored about half of the 410 00:23:57,000 --> 00:24:00,400 Speaker 1: twenty two million jobs that were lost, but we also 411 00:24:00,440 --> 00:24:03,600 Speaker 1: see that people are stepping out of the labor force. 412 00:24:04,200 --> 00:24:08,439 Speaker 1: And just the arithmetic of what is an unemployment rate UM, 413 00:24:08,560 --> 00:24:11,600 Speaker 1: the denominator is the number of people in the labor 414 00:24:11,680 --> 00:24:14,840 Speaker 1: force looking for jobs, and we see that that number 415 00:24:14,880 --> 00:24:18,120 Speaker 1: has been getting smaller UM, and that is of concern 416 00:24:18,560 --> 00:24:22,080 Speaker 1: um too many people. Uh. And so when we take 417 00:24:22,119 --> 00:24:27,240 Speaker 1: a look at what investors are concerned about now, not 418 00:24:27,359 --> 00:24:30,440 Speaker 1: much concerned about what this quarter's earnings will be your 419 00:24:30,480 --> 00:24:34,920 Speaker 1: next quarter. And even for one, even though the cans 420 00:24:35,000 --> 00:24:38,000 Speaker 1: the Goldman Sack's view is a little bit stronger than 421 00:24:38,040 --> 00:24:42,320 Speaker 1: the consensus, the general view is that world economic growth 422 00:24:42,640 --> 00:24:46,960 Speaker 1: will be jumping up fixed to eight UM next year. 423 00:24:47,160 --> 00:24:49,960 Speaker 1: In part because of a low base. But what happens 424 00:24:50,000 --> 00:24:52,760 Speaker 1: after that and what happens to some of the structural 425 00:24:52,800 --> 00:24:56,800 Speaker 1: problems that have been unveiled by in fact, this this 426 00:24:57,280 --> 00:25:01,880 Speaker 1: very difficult pandemic Joseph ConA, Goldman Sachs and Advisory director 427 00:25:02,320 --> 00:25:05,000 Speaker 1: and senior investment strategist, Abby, you know, I kid about 428 00:25:05,000 --> 00:25:08,840 Speaker 1: a three hour conversation. There's so many good research pieces 429 00:25:08,880 --> 00:25:12,399 Speaker 1: your shop is putting out on the bigger broader view, 430 00:25:12,920 --> 00:25:16,720 Speaker 1: but I really must come back to China and the collapse, 431 00:25:16,880 --> 00:25:21,360 Speaker 1: the lessening of world trade. It's a serious issue. How 432 00:25:21,400 --> 00:25:26,000 Speaker 1: do we fix it? It's an enormously serious issue, Tom, 433 00:25:26,520 --> 00:25:30,280 Speaker 1: and we think that one of the best approaches is 434 00:25:30,320 --> 00:25:34,600 Speaker 1: to work with our economic allies to fix this. And 435 00:25:34,840 --> 00:25:38,640 Speaker 1: that's what the Transpacific Partnership was all about. Uh. This 436 00:25:38,720 --> 00:25:42,400 Speaker 1: was a group of approximately fifteen countries with the United 437 00:25:42,440 --> 00:25:45,800 Speaker 1: States at the head and other nations that are either 438 00:25:45,880 --> 00:25:48,200 Speaker 1: based in Asia or do a great deal of trade 439 00:25:48,200 --> 00:25:51,800 Speaker 1: in Asia, and the one exception to the membership was China. 440 00:25:52,240 --> 00:25:55,679 Speaker 1: The idea was to create an economic alliance that would 441 00:25:55,680 --> 00:25:59,320 Speaker 1: have some pushback against what China is trying to do. 442 00:26:00,240 --> 00:26:02,960 Speaker 1: And one of the very first things that the Trump 443 00:26:03,000 --> 00:26:07,280 Speaker 1: administration did upon taking office was to remove the United 444 00:26:07,359 --> 00:26:12,719 Speaker 1: States from the TPP, but that organization continues on and 445 00:26:12,720 --> 00:26:16,879 Speaker 1: what we basically see is that without US leadership, h 446 00:26:17,000 --> 00:26:20,600 Speaker 1: the member states that remain are having a little more 447 00:26:20,640 --> 00:26:23,840 Speaker 1: difficulty than they might have had in terms of pushing 448 00:26:23,880 --> 00:26:28,160 Speaker 1: back against China. So I think that that was a problem. Uh. 449 00:26:28,240 --> 00:26:29,959 Speaker 1: The other thing, of course, that we need to do 450 00:26:30,040 --> 00:26:33,520 Speaker 1: is to make sure that we have appropriate trade alliances 451 00:26:33,560 --> 00:26:36,879 Speaker 1: in other parts of the world as well, in including 452 00:26:36,880 --> 00:26:41,480 Speaker 1: Europe UM. And what we have seen UH is very 453 00:26:41,520 --> 00:26:45,320 Speaker 1: difficult actually to decipher in terms of how much of 454 00:26:45,359 --> 00:26:49,360 Speaker 1: the deterioration in trade for the United States has been 455 00:26:49,400 --> 00:26:53,639 Speaker 1: related to trade policy versus, of course the deterioration in 456 00:26:53,720 --> 00:26:56,359 Speaker 1: the global economy at large. I mean, we're in a 457 00:26:56,400 --> 00:27:00,480 Speaker 1: twin deficit. That's absolutely extraordinary. Stephen Roy Chuck's more Stanley 458 00:27:00,480 --> 00:27:02,359 Speaker 1: and of course, as you know, Abby dr Roach at 459 00:27:02,400 --> 00:27:06,760 Speaker 1: Yale University UH now really points out this this multiple 460 00:27:06,880 --> 00:27:12,439 Speaker 1: deviation move in our twin deficit. Are you optimistic we 461 00:27:12,480 --> 00:27:15,080 Speaker 1: can get that back to mean or is there a 462 00:27:15,080 --> 00:27:19,919 Speaker 1: new permanence here to our challenge fiscal and trade deficits. 463 00:27:21,160 --> 00:27:23,560 Speaker 1: You know, we can talk about the numbers Tom and 464 00:27:23,600 --> 00:27:25,880 Speaker 1: I'll do that for just a moment, and to say 465 00:27:25,880 --> 00:27:29,520 Speaker 1: that we have never seen numbers like this. When we 466 00:27:29,560 --> 00:27:31,600 Speaker 1: look at the deficit, the best way to look at 467 00:27:31,640 --> 00:27:34,359 Speaker 1: it is as a percentage of g d P, and 468 00:27:34,400 --> 00:27:40,480 Speaker 1: it's currently running about which is simply astronomical. One of 469 00:27:40,560 --> 00:27:44,400 Speaker 1: the big questions, however, is how are we using that deficit? 470 00:27:45,040 --> 00:27:48,480 Speaker 1: Um number one and number two? Can we grow out 471 00:27:48,560 --> 00:27:52,080 Speaker 1: of it? Uh? And I believe that the numbers this year, 472 00:27:52,160 --> 00:27:55,320 Speaker 1: as horrifying as they are, don't really tell us as 473 00:27:55,400 --> 00:27:57,879 Speaker 1: much as we need to know about the future. So, 474 00:27:57,960 --> 00:28:01,159 Speaker 1: for example, if we look at the Congressional Budget Office, 475 00:28:01,200 --> 00:28:06,680 Speaker 1: it looks like those deficit numbers will start moving somewhat lower. However, 476 00:28:06,800 --> 00:28:10,439 Speaker 1: let's think about this, how are we using the money 477 00:28:10,600 --> 00:28:13,600 Speaker 1: that we we have in terms of the fiscal stimulus 478 00:28:13,640 --> 00:28:17,119 Speaker 1: and so on. If we use it to grow the economy, 479 00:28:17,440 --> 00:28:20,560 Speaker 1: if we use it to provide relief where relief is needed, 480 00:28:20,880 --> 00:28:25,119 Speaker 1: that is absolutely essential. Um and And so it becomes 481 00:28:25,119 --> 00:28:27,360 Speaker 1: a question not just of the numbers, but what happens 482 00:28:27,359 --> 00:28:30,440 Speaker 1: with him. Um. You know Steve Rhodes who I worked 483 00:28:30,440 --> 00:28:33,359 Speaker 1: with as a child at the Federal Reserve in Washington 484 00:28:33,440 --> 00:28:37,040 Speaker 1: many years ago. Uh, makes some very interesting points. And 485 00:28:37,400 --> 00:28:39,720 Speaker 1: one of the things that I believe we need to 486 00:28:39,720 --> 00:28:42,680 Speaker 1: talk about again is not just the twin deficit, but 487 00:28:42,800 --> 00:28:45,040 Speaker 1: what does it mean for currency? What does it mean 488 00:28:45,080 --> 00:28:49,280 Speaker 1: for the US dollar um Thus far, we are seeing 489 00:28:49,520 --> 00:28:53,440 Speaker 1: that the dollar is okay, but in recent weeks and 490 00:28:53,480 --> 00:28:56,680 Speaker 1: months we see that the dollar is coming off its 491 00:28:56,760 --> 00:29:00,880 Speaker 1: high levels that it achieved early in twenty twenty. It's 492 00:29:00,920 --> 00:29:04,400 Speaker 1: something that's worth watching because, as you well know, our 493 00:29:04,440 --> 00:29:09,720 Speaker 1: treasury market often depends upon FIGN buying uh and and 494 00:29:09,760 --> 00:29:12,360 Speaker 1: so we're watching that. The other thing to watch is 495 00:29:12,440 --> 00:29:17,640 Speaker 1: FEIGN direct investment. That is, how much are companies directly 496 00:29:17,680 --> 00:29:21,080 Speaker 1: investing in the United States. I'm not talking about portfolio 497 00:29:21,160 --> 00:29:25,280 Speaker 1: stock portfolios. I'm talking about whether FEIGN companies are actually 498 00:29:25,320 --> 00:29:28,440 Speaker 1: investing in the United States new factories and so on. 499 00:29:28,800 --> 00:29:30,680 Speaker 1: This is not a good year to be measuring that 500 00:29:30,880 --> 00:29:34,400 Speaker 1: because there's not much of that new construction going on anywhere. 501 00:29:35,440 --> 00:29:37,840 Speaker 1: I mean, is the money going to the right places? 502 00:29:38,040 --> 00:29:39,680 Speaker 1: I mean, you know, you said it beautifully. It needs 503 00:29:39,720 --> 00:29:42,680 Speaker 1: to make sure that you're addressing the concerns in the 504 00:29:42,720 --> 00:29:45,560 Speaker 1: economy so that we can grow out of this debt. 505 00:29:45,840 --> 00:29:48,880 Speaker 1: Where should it go to? And are the current people 506 00:29:48,920 --> 00:29:51,520 Speaker 1: in charge, you know, going to put it where it 507 00:29:51,600 --> 00:29:54,880 Speaker 1: should be. So not propping up actually you know, I 508 00:29:54,920 --> 00:29:59,520 Speaker 1: guess old energy or not propping up companies that wouldn't survive. Well, 509 00:29:59,640 --> 00:30:03,320 Speaker 1: let's let's start pre pandemic. One of our concerns had 510 00:30:03,360 --> 00:30:07,280 Speaker 1: been um where the money from the corporate tax cut went. 511 00:30:08,080 --> 00:30:10,840 Speaker 1: We all know that with a sharp reduction in the 512 00:30:10,840 --> 00:30:15,320 Speaker 1: effective tax rate of corporations, profit margins went up, cash 513 00:30:15,400 --> 00:30:18,960 Speaker 1: levels went up, and in many industries that cash was 514 00:30:19,040 --> 00:30:22,040 Speaker 1: not used for growth. Instead it was used to buy 515 00:30:22,040 --> 00:30:25,960 Speaker 1: back shares increased dividends. That's great for investors short term, 516 00:30:26,320 --> 00:30:29,400 Speaker 1: but long term, what investors need our companies that are 517 00:30:29,520 --> 00:30:32,880 Speaker 1: using their cash and their profits to invest in the future. 518 00:30:33,080 --> 00:30:36,240 Speaker 1: And we really didn't see enough of that um And 519 00:30:36,320 --> 00:30:39,400 Speaker 1: so that's one thing that we're looking at which industries 520 00:30:39,680 --> 00:30:43,640 Speaker 1: could be helpful. We are looking, for example, at what 521 00:30:43,800 --> 00:30:47,040 Speaker 1: happens in terms of where are the future growth industries. 522 00:30:47,360 --> 00:30:51,840 Speaker 1: Advanced manufacturing actually did see some increases. You know, when 523 00:30:51,840 --> 00:30:55,920 Speaker 1: we talk about manufacturing, there are the differences between those 524 00:30:55,960 --> 00:30:59,320 Speaker 1: things that are more commodity like and those things that 525 00:30:59,400 --> 00:31:02,160 Speaker 1: are more ants, and the United States continues to do 526 00:31:02,320 --> 00:31:05,560 Speaker 1: well in those categories. We need to focus there. We 527 00:31:05,600 --> 00:31:08,480 Speaker 1: need to focus on infrastructure. And it's not just the 528 00:31:08,560 --> 00:31:10,560 Speaker 1: roads and the bridges and the airports. As much as 529 00:31:10,600 --> 00:31:12,920 Speaker 1: we need those and we need to repair those and 530 00:31:12,960 --> 00:31:15,400 Speaker 1: that creates a lot of jobs. We also need to 531 00:31:15,440 --> 00:31:18,120 Speaker 1: invest heavily in broadband. If we take a look at 532 00:31:18,120 --> 00:31:21,600 Speaker 1: the parts of this country that are really suffering because 533 00:31:21,640 --> 00:31:24,640 Speaker 1: they don't have it, it is the rural areas, and 534 00:31:24,680 --> 00:31:27,880 Speaker 1: there are some urban deserts as well that don't have 535 00:31:28,200 --> 00:31:32,240 Speaker 1: band coverage. Here in the City of New York ent coverage. 536 00:31:32,400 --> 00:31:34,720 Speaker 1: There's some neighborhoods that don't have it. But when you 537 00:31:34,760 --> 00:31:37,520 Speaker 1: go to the Midwest, you go to other parts of 538 00:31:37,520 --> 00:31:42,520 Speaker 1: the country, we're looking at coverage broadband of those kids, 539 00:31:42,560 --> 00:31:47,360 Speaker 1: those are not able to study remotely, Those businesses are afflicted, 540 00:31:47,720 --> 00:31:50,480 Speaker 1: and you can't create as many new jobs there as 541 00:31:50,520 --> 00:31:52,240 Speaker 1: you might like. I mean, I want you to stay 542 00:31:52,280 --> 00:31:54,480 Speaker 1: with us, and I promise you Abby, I'm not gonna 543 00:31:54,480 --> 00:31:57,720 Speaker 1: ask you about individual companies, but this is a hugely 544 00:31:57,800 --> 00:32:03,640 Speaker 1: important and symbolics ory for global Wall Street international business 545 00:32:03,760 --> 00:32:07,360 Speaker 1: machines will do what has been demanded for years. They 546 00:32:07,360 --> 00:32:11,400 Speaker 1: are basically going to split up into two companies. They 547 00:32:11,400 --> 00:32:14,640 Speaker 1: are going cloud. It is all the vogue and is Abby. 548 00:32:14,760 --> 00:32:19,520 Speaker 1: Joseph Cohen mentions there is a talk of technological infrastructure 549 00:32:20,040 --> 00:32:22,960 Speaker 1: is being dated and they will split that off. This 550 00:32:23,040 --> 00:32:26,600 Speaker 1: is Arvin Krishna. This is a new IBM coming in 551 00:32:26,600 --> 00:32:30,320 Speaker 1: in the spring of this year, creating a revolution after 552 00:32:30,520 --> 00:32:34,640 Speaker 1: under performance ten years trailing IBM per year. I'm gonna 553 00:32:34,680 --> 00:32:38,640 Speaker 1: call it three percent per year stock appreciation. The dividend 554 00:32:38,680 --> 00:32:42,560 Speaker 1: trades like an electric utility in Germany, five or six percent, 555 00:32:42,880 --> 00:32:46,560 Speaker 1: with mouldy single digit dividend growth. Abby, I don't want 556 00:32:46,600 --> 00:32:49,200 Speaker 1: you to talk about IBM. You'd be put in the 557 00:32:49,280 --> 00:32:52,320 Speaker 1: David Costant time out chair. But I do want you 558 00:32:52,400 --> 00:32:57,360 Speaker 1: to talk about creative destruction in technology. This is one 559 00:32:57,400 --> 00:33:02,120 Speaker 1: of your wheelhouses. It is in evitable that they clear 560 00:33:02,320 --> 00:33:05,680 Speaker 1: out of old technologies, isn't it all of the companies 561 00:33:05,840 --> 00:33:11,719 Speaker 1: in the greater technology area. Well, Tom, you are making 562 00:33:11,760 --> 00:33:15,120 Speaker 1: a very valuable case, um, and one that I think 563 00:33:15,160 --> 00:33:19,160 Speaker 1: has great validity. And the good fortune in the United 564 00:33:19,200 --> 00:33:22,520 Speaker 1: States is a lot of the newer technologies and the 565 00:33:22,600 --> 00:33:27,000 Speaker 1: leading technology companies are based here. And one of the 566 00:33:27,000 --> 00:33:29,840 Speaker 1: things we of course need to encourage is this sort 567 00:33:29,880 --> 00:33:36,600 Speaker 1: of creative discretion. Excuse me, creative destruction, not just in technology, 568 00:33:36,640 --> 00:33:39,880 Speaker 1: but in a whole host of other industries as well. 569 00:33:40,240 --> 00:33:42,600 Speaker 1: And one of the things that the pandemic has done 570 00:33:43,040 --> 00:33:46,680 Speaker 1: has been to push us even more dramatically in that direction. 571 00:33:47,200 --> 00:33:51,520 Speaker 1: Technology writ large is doing well in the pandemic because 572 00:33:51,560 --> 00:33:54,840 Speaker 1: we all need technology to get our work done for 573 00:33:54,920 --> 00:33:57,560 Speaker 1: those of us who are fortunate enough to be able 574 00:33:57,560 --> 00:33:59,800 Speaker 1: to work from home. But there are so many other 575 00:33:59,840 --> 00:34:05,200 Speaker 1: industries had have been terribly afflicted by this pandemic in 576 00:34:05,280 --> 00:34:08,680 Speaker 1: terms of their employment and so on. And what we 577 00:34:08,760 --> 00:34:13,040 Speaker 1: are seeing is that when we are emerging as we 578 00:34:13,080 --> 00:34:17,520 Speaker 1: have begun to do, as this recession is easing up, 579 00:34:17,520 --> 00:34:21,400 Speaker 1: and we are seeing growth now, what we are seeing, however, 580 00:34:21,760 --> 00:34:25,440 Speaker 1: is that there are some industries that are lagging just 581 00:34:25,480 --> 00:34:27,799 Speaker 1: because of time. I I need to get one more 582 00:34:27,920 --> 00:34:31,239 Speaker 1: question in Abbey before we start your busy day, and 583 00:34:31,280 --> 00:34:34,600 Speaker 1: that is a new regulation of Washington against Facebook, Apple, 584 00:34:34,640 --> 00:34:37,720 Speaker 1: the winners as well. They're not going after international business 585 00:34:37,800 --> 00:34:40,400 Speaker 1: with machines, which is a failed plan. We all agree 586 00:34:40,440 --> 00:34:43,800 Speaker 1: with that. You and I remember across the Bloomberg terminal 587 00:34:44,080 --> 00:34:47,840 Speaker 1: when the Justice Department dumped the Microphitesoft case. Are you 588 00:34:47,960 --> 00:34:54,560 Speaker 1: worried about the regulation of America's technologically successful companies. I 589 00:34:54,600 --> 00:34:59,880 Speaker 1: am always worried about inappropriate regulation, you know, capitalism or 590 00:35:00,200 --> 00:35:06,040 Speaker 1: best with regulators who understand what the focus should be, 591 00:35:06,400 --> 00:35:10,160 Speaker 1: and that is to enhance economic growth UM. And so 592 00:35:10,320 --> 00:35:15,000 Speaker 1: what we have in that particular report UM is something 593 00:35:15,080 --> 00:35:19,080 Speaker 1: that is an analysis. It's analysis. It's not necessarily a 594 00:35:19,080 --> 00:35:23,280 Speaker 1: blueprint for what would happen in terms of regulatory moves. 595 00:35:23,920 --> 00:35:26,960 Speaker 1: Recognize that it's not necessarily the Congress that will be 596 00:35:27,000 --> 00:35:30,640 Speaker 1: making the ultimate decisions in this What they've done, however, 597 00:35:30,800 --> 00:35:34,480 Speaker 1: is raised a number of very interesting red flags, some 598 00:35:34,680 --> 00:35:38,040 Speaker 1: of them more relevant than others. But this is just 599 00:35:38,160 --> 00:35:40,600 Speaker 1: the beginning of the discussion. I think there's a lot 600 00:35:40,640 --> 00:35:44,279 Speaker 1: more to come. Uh. The professional regulators, of course, will 601 00:35:44,320 --> 00:35:47,799 Speaker 1: be much more dramatically involved than they have been to 602 00:35:47,840 --> 00:35:50,480 Speaker 1: this point. Abby, thank you so much generous of your 603 00:35:50,520 --> 00:35:53,560 Speaker 1: time today, particularly on this breaking news. Abby, Joseph Cohen 604 00:35:54,239 --> 00:35:59,440 Speaker 1: with Goldman Sachs. Thanks for listening to the Bloomberg Surveillance podcast. 605 00:35:59,760 --> 00:36:04,319 Speaker 1: So subscribe and listen to interviews on Apple Podcasts, SoundCloud, 606 00:36:04,680 --> 00:36:08,919 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 607 00:36:08,960 --> 00:36:12,440 Speaker 1: Tom Keene before the podcast. You can always catch us 608 00:36:12,560 --> 00:36:14,760 Speaker 1: worldwide I'm Bloomberg Radio