WEBVTT - Surveillance: Stimulus Hopes With Goldman's Cohen 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.520 Bloomberg dot Com, and of course on the Bloomberg Francis 0:00:27.520 --> 0:00:30.440 Donald joins us now with Manuelie. Francis. Let me take 0:00:30.440 --> 0:00:33.640 that headline of continued tariffs. Can you make the assumption 0:00:33.680 --> 0:00:37.760 that any new tariffs diminish our economic growth? And if 0:00:37.800 --> 0:00:40.239 that's the case, what is your run rate for the 0:00:40.280 --> 0:00:46.640 economy in the next year. Well, you know, in the 0:00:46.680 --> 0:00:50.680 economy was and put lightly booming, it was doing really well. 0:00:50.720 --> 0:00:53.800 It could take the near term headwind of additional tariffs. 0:00:54.000 --> 0:00:57.360 What would worry me heading into one is you know, 0:00:57.440 --> 0:01:01.360 we're still in the greatest economic shock over fifty years. 0:01:01.560 --> 0:01:04.280 This is not the time to be putting additional headwinds 0:01:04.319 --> 0:01:07.720 on this economy. So you would find I suspect if 0:01:07.800 --> 0:01:10.440 you move towards additional tariffs that you would have more 0:01:10.560 --> 0:01:13.080 damn ward revisions. But you know, your question is really 0:01:13.080 --> 0:01:15.160 well framed, which is what is the run rate for 0:01:15.200 --> 0:01:17.520 the economy? And what we've failed to talk about so 0:01:17.640 --> 0:01:20.240 much in COVID is what does the trend growth look 0:01:20.280 --> 0:01:23.319 like afterwards? Are we getting back to two percent growth? 0:01:23.640 --> 0:01:25.760 My suspicion is because of a lot of the damage 0:01:25.800 --> 0:01:27.840 created here, we're going to see a lot of people 0:01:27.920 --> 0:01:31.000 revising down their potential g d P numbers, and tariffs 0:01:31.000 --> 0:01:33.200 are just going to make that worse. Well. Meanwhile, though, 0:01:33.520 --> 0:01:36.040 seeking on the tariffs and the sort of deglobalization theme 0:01:36.080 --> 0:01:39.039 that we were talking about earlier with Sir Peter westmacod 0:01:39.560 --> 0:01:43.399 the idea that a deglobalization wave and increase in tariffs 0:01:43.440 --> 0:01:47.960 will increase inflation even if growth stays somewhat stagnant. Do 0:01:48.000 --> 0:01:50.040 you buy into that argument that a number of people 0:01:50.040 --> 0:01:54.440 are putting forth. Yes, we suspect that if we do 0:01:54.480 --> 0:01:58.080 see this ongoing deglobalization trend, which isn't just focused on 0:01:58.240 --> 0:02:01.720 US and China, it's happening globally, that does contribute to 0:02:01.920 --> 0:02:05.600 moderate inflationary pressures. We see tons of potential for two 0:02:05.600 --> 0:02:08.600 and a half to three percent inflation in the United States. 0:02:08.840 --> 0:02:11.120 I will say that's more US focused than it is 0:02:11.160 --> 0:02:13.720 around the rest of the world. And again, three COVID, 0:02:13.800 --> 0:02:16.480 we were really fading fighting deflation. We were looking at 0:02:16.520 --> 0:02:19.720 some two percent inflationary pressures. Now because of a supply 0:02:19.800 --> 0:02:22.959 side shock movements in US dollar commodities, the FET is 0:02:23.000 --> 0:02:24.639 going to be focusing more on what it does with 0:02:24.720 --> 0:02:27.680 slightly above to percent inflation. So now if you add 0:02:27.680 --> 0:02:30.760 on that global globalization shock, this is a very different 0:02:30.800 --> 0:02:33.480 paradigm to be implementing trade wards. It's gonna yield very 0:02:33.480 --> 0:02:36.480 different outcomes than what it did, or differently put, you know, 0:02:36.520 --> 0:02:39.720 have a different impact on the economy, worsening some of 0:02:39.720 --> 0:02:41.640 the challenges that we're probably going to face over the 0:02:41.680 --> 0:02:46.640 next two to five years. This is conventional economic wisdom, Francis, 0:02:46.720 --> 0:02:48.880 so it's not controversial. But let me ask you this 0:02:48.960 --> 0:02:53.440 question right here. Last night, the vice president had to 0:02:53.440 --> 0:02:56.320 sit across from someone who was talking about I'm doing 0:02:56.320 --> 0:02:58.200 the work that they've done, and you could see it 0:02:58.200 --> 0:02:59.799 took offense to it. He was talking about the tax 0:03:00.120 --> 0:03:02.799 regime and the tax cut that the vice president, the president, 0:03:02.800 --> 0:03:06.120 this administration had pushed through. The candidate to become the 0:03:06.200 --> 0:03:08.680 vice president, Kamala Harris said they would undo that. On 0:03:08.760 --> 0:03:10.959 day one. They said there would be no tax heights 0:03:11.000 --> 0:03:13.800 for anyone under earning under four ks. You made that 0:03:13.840 --> 0:03:16.360 clear several times, but the corporate tax rate didn't come up, 0:03:16.919 --> 0:03:18.919 not in any detail. And I wonder how you would 0:03:19.160 --> 0:03:22.560 process that if if the next couple of months they 0:03:22.560 --> 0:03:24.800 took control of the White House and the administration had 0:03:24.800 --> 0:03:27.400 the power to get this through Congress, if they undid 0:03:27.480 --> 0:03:30.880 that corporate tax cut of several years ago, how would 0:03:30.880 --> 0:03:35.040 that shift from the American economy. So you say this 0:03:35.120 --> 0:03:38.400 is conventional thinking, but actually so much of what's happening 0:03:38.440 --> 0:03:41.760 with deficits, government debt, and the rule of government that 0:03:41.880 --> 0:03:44.480 conventional thinking is being flipped on its head as we 0:03:44.520 --> 0:03:48.040 explore more things like modern monetary theory and maybe the 0:03:48.080 --> 0:03:51.880 idea that deficits aren't so bad regardless of who wins, 0:03:52.160 --> 0:03:56.200 we should be preparing for exceptionally large deficits and the 0:03:56.280 --> 0:03:58.800 highest level of government debt to GDP that we have 0:03:58.920 --> 0:04:00.920 seen in a mirror ki in history, or at least 0:04:00.960 --> 0:04:03.680 in the past two hundred years. So we're gonna be 0:04:03.760 --> 0:04:06.840 having very big conversations about what those deficits and large 0:04:06.880 --> 0:04:10.640 debt mean. From my perspective, it means no matter who wins, Yes, 0:04:10.680 --> 0:04:13.240 what they spend on will change, but you're going to 0:04:13.280 --> 0:04:15.800 see phenomenal issues at the long end of the curve, 0:04:16.080 --> 0:04:19.359 and you will see ongoing acceptance of the idea that 0:04:19.480 --> 0:04:23.000 large deficits are okay. That means a sleeping of the curve, 0:04:23.080 --> 0:04:25.440 particularly at the long end, and it probably means we 0:04:25.480 --> 0:04:28.320 need to reevaluate that rule of government in this economy. 0:04:28.400 --> 0:04:30.960 Government is going to get bigger in the US and 0:04:31.120 --> 0:04:33.960 global economy. It's probably going to become a larger employer. 0:04:34.200 --> 0:04:37.040 And I suspect that that is regardless of winds. And 0:04:37.120 --> 0:04:39.520 that's the main tradeable thing here. Not trying to game 0:04:39.880 --> 0:04:42.240 what comes out of November three or the following two 0:04:42.279 --> 0:04:44.960 weeks after that, but one of the seismic shifts that occurred, 0:04:44.960 --> 0:04:49.640 and I think really that's turning conventional thigging on its head. Well, Franstis, 0:04:49.680 --> 0:04:51.040 when we came out of the last election, it was 0:04:51.080 --> 0:04:53.359 all this happy talk about infrastructure spending, and the Trump 0:04:53.400 --> 0:04:55.720 trite turned out to be something very different. It was 0:04:55.760 --> 0:04:58.880 the tax cut trite. At the end of the day, 0:04:59.000 --> 0:05:01.120 I seen I just wonder. I'm just trying to get 0:05:01.160 --> 0:05:02.880 my hands around what this would make for the equity market, 0:05:02.880 --> 0:05:05.560 because the approach right now is a glass haft full 0:05:05.720 --> 0:05:07.679 andrew sheet some more can Stanley us in that line 0:05:07.960 --> 0:05:09.560 Overnight in an interview with US, and I just want 0:05:09.600 --> 0:05:12.720 to Francis for you whether that's a complete picture, because yes, 0:05:12.760 --> 0:05:15.200 there will be some fiscal stimulus regardless of who wins 0:05:15.200 --> 0:05:18.880 this election. But one party is talking about hiking corporate 0:05:18.880 --> 0:05:22.840 tax rights again, the other one is in I do 0:05:22.880 --> 0:05:25.400 not believe that this economy will be in a position 0:05:25.440 --> 0:05:28.040 in the next eighteen months to take any form of 0:05:28.080 --> 0:05:31.599 material tax hikes. We are sitting right now feeling really 0:05:31.640 --> 0:05:34.000 good because a lot of our economic data has shown 0:05:34.080 --> 0:05:36.479 V shaped recoveries, but a lot of that V shaped 0:05:36.520 --> 0:05:39.520 recoveries are red herrings. Housing is not behaving as it 0:05:39.560 --> 0:05:42.240 typically does. Auto is not behaving how it typically does. 0:05:42.480 --> 0:05:44.680 We have I'm looking at my Bloomberg screen here um 0:05:45.200 --> 0:05:48.640 eleven million Americans who are on claims right now, we 0:05:48.680 --> 0:05:52.400 are extremely vulnerable to any type of disruption. And yes, 0:05:52.480 --> 0:05:54.960 if things go well, we get a fiscal package, we 0:05:55.000 --> 0:05:57.600 aid Americans through the next six to twelve months, then 0:05:57.640 --> 0:05:59.880 we can absolutely continue on our road to recovery and 0:06:00.040 --> 0:06:03.000 make these tax changes. But if there is an additional shock, 0:06:03.120 --> 0:06:06.200 if there is an accident, whether it's a geopolitical or financial, 0:06:06.440 --> 0:06:08.960 then we are staring down the possibility and the growing 0:06:08.960 --> 0:06:11.560 tail risk of a double dip here. Now is not 0:06:11.640 --> 0:06:15.280 the moment for large structural changes, and it's the moment 0:06:15.279 --> 0:06:17.560 to build a bridge to the other side. We're still 0:06:17.600 --> 0:06:21.800 an incredibly vulnerable moment in the US economy. Similarly, a 0:06:21.839 --> 0:06:24.160 message for both parties at the moment, Francis fantasy to 0:06:24.200 --> 0:06:27.040 catch up. Francis don't want that of money life investment management. 0:06:27.040 --> 0:06:32.960 Thank you. Right now, We're gonna rip up the script 0:06:33.000 --> 0:06:34.560 and then rip it up again and rip it up 0:06:34.560 --> 0:06:38.039 again through the morning with Rick Davis, formerly the campaign 0:06:38.080 --> 0:06:41.280 manager for Senator McCain of Arizona and of course a 0:06:41.320 --> 0:06:46.159 Bloomberg contributor, Rick, what is the debate Commission? Like, how 0:06:46.200 --> 0:06:50.400 do the candidates and their staff like you go back 0:06:50.440 --> 0:06:54.040 and forth with the debate condition? Are you the boss 0:06:54.400 --> 0:06:57.200 or is it debate Commission the boss? Yeah, it's a 0:06:57.240 --> 0:07:00.400 it's a really hard answer because nobody's the loss. The 0:07:00.400 --> 0:07:02.760 commission sets up a bunch of rules, they pick a 0:07:02.760 --> 0:07:05.600 bunch of sites, then they sit down with the nominees 0:07:05.600 --> 0:07:07.560 of the party. They do this year's in advance, and 0:07:07.560 --> 0:07:09.440 then they sit down with the nominees of the party 0:07:09.440 --> 0:07:12.960 and they start negotiating and out of that negotiation comes 0:07:13.040 --> 0:07:17.120 some version of that schedule and those rules. Uh, some 0:07:17.240 --> 0:07:21.600 of those negotiations are directly between the two candidates. Uh. 0:07:21.960 --> 0:07:25.120 We had Lindsey Graham is our negotiator and Rama Manuel 0:07:25.680 --> 0:07:28.560 was the negotiator for Barack Obama. And we actually got 0:07:28.600 --> 0:07:30.920 so frustrated with the Debate Commission we decided we were 0:07:30.960 --> 0:07:33.560 just going to do the debates ourselves. Then we realized 0:07:33.600 --> 0:07:35.520 the logistics on that was too much, and we went 0:07:35.560 --> 0:07:38.280 back to the commission. But the rules of commission put 0:07:38.280 --> 0:07:41.680 together are meant to be standardized, and that you then 0:07:41.760 --> 0:07:46.080 create a memori Okay, but Rick the brilliantly explained huge 0:07:46.120 --> 0:07:50.720 public value. It's not a standardized time. Is the president? 0:07:50.840 --> 0:07:55.640 What's his power here as president, as candidate and with 0:07:55.760 --> 0:08:00.480 his visibility obviously in his vocal treatment, what's his ability 0:08:00.560 --> 0:08:05.520 to change the commission or make a more malleable process 0:08:05.760 --> 0:08:09.040 to get to his outcome. Yeah, you can always say no, 0:08:09.280 --> 0:08:11.600 And that's what the president is saying this morning. I 0:08:11.600 --> 0:08:14.760 would say, though, the Debate Commission would never have announced 0:08:14.840 --> 0:08:19.120 that they did agree on a virtual debate unless somebody 0:08:19.160 --> 0:08:22.120 in the Trump campaign had said yes to that. So 0:08:22.200 --> 0:08:25.280 this is another example of Donald Trump not being connected 0:08:25.320 --> 0:08:28.280 to the leadership of this campaign and and now going 0:08:28.480 --> 0:08:31.640 rogue on the Debate Commission and probably the Biden campaign 0:08:31.640 --> 0:08:34.720 because the Biden campaign was signed off on this format too. 0:08:35.120 --> 0:08:37.520 I would say we tried this in the primaries in 0:08:37.559 --> 0:08:41.479 two thousand when I ran John McCain's campaign against George W. Bush, 0:08:41.559 --> 0:08:43.960 and we didn't want to do a debate because the logistics. 0:08:44.000 --> 0:08:45.960 It was on the other side of the country and 0:08:46.000 --> 0:08:49.400 we were trying to campaign to win, and the press 0:08:49.640 --> 0:08:53.480 pressure on us to participate in that debate forced us 0:08:53.520 --> 0:08:55.600 to do a virtual debate where the two of us 0:08:55.640 --> 0:08:59.079 were in different sizes of the country, and for my purposes, 0:08:59.240 --> 0:09:02.240 that was a dis ester. Rick, Just to jump in, 0:09:02.360 --> 0:09:04.880 just some response from the campaign that I want to 0:09:04.920 --> 0:09:07.200 bring to our audience very quickly, they will pass on 0:09:07.240 --> 0:09:09.960 the sad excuse for a debate. The campaign will hold 0:09:09.960 --> 0:09:13.120 a rally instead of that remote debate. So it looks 0:09:13.120 --> 0:09:15.560 like the president in the campaign on the same page here, Rick, 0:09:16.000 --> 0:09:18.960 I just wander from your perspective with this poll just 0:09:19.000 --> 0:09:21.840 coming in from Fox News with Biden having a fifty 0:09:21.840 --> 0:09:25.640 three to forty three lead nationally, where do you see 0:09:25.679 --> 0:09:27.839 the polls right now? Because I read the polls out 0:09:27.840 --> 0:09:30.679 this morning. I've gone through the numbers multiple times, and 0:09:30.760 --> 0:09:32.880 Tom just calls up into a ball thinking about four 0:09:32.960 --> 0:09:35.760 years ago, what are they worse right now? Rick? How 0:09:35.760 --> 0:09:38.000 do you read the polls? Yeah, so, first of all, 0:09:38.040 --> 0:09:41.120 you gotta understand, polls are a static picture. They're not dynamic. 0:09:41.360 --> 0:09:44.559 They don't take people's opinions over time. They take them 0:09:44.559 --> 0:09:48.320 in one instance, so they're only accurate that day. And 0:09:48.559 --> 0:09:51.360 in a campaign that's moving around, like four years ago, 0:09:51.720 --> 0:09:56.360 where you had all these massive black swan events in October, 0:09:56.840 --> 0:10:00.120 you know, whether it was a Hollywood uh video o 0:10:00.440 --> 0:10:04.840 or Comey reopening the investigation of Hillary. The polls don't 0:10:04.920 --> 0:10:08.280 take that into consideration. They only give you a snapshot. 0:10:08.360 --> 0:10:12.280 So what we know today is that Biden has some momentum, 0:10:12.520 --> 0:10:16.640 some movement toward him since the last debate, including the 0:10:16.679 --> 0:10:20.280 period of time that that that the President contracted COVID, 0:10:20.720 --> 0:10:22.720 And it looks like some of that movement is in 0:10:22.760 --> 0:10:27.320 a new voter group, not just suburban women, but white males. 0:10:27.559 --> 0:10:30.800 And that is a signal to Trump that he may 0:10:30.840 --> 0:10:33.360 have a Trump problem with his base. Rick, how much 0:10:33.400 --> 0:10:37.040 momentum did Mike Pence give to the Trump campaign last night? 0:10:38.200 --> 0:10:40.800 You know, I think that he stabilized the Trump campaign. 0:10:40.840 --> 0:10:44.280 I mean, think about what's happened in one week. The 0:10:45.040 --> 0:10:48.920 Trump debate was a disaster a week ago for Donald Trump. 0:10:49.480 --> 0:10:53.439 He almost immediately contracted COVID and then he blew up 0:10:53.520 --> 0:10:57.800 his own negotiations over the stimulus. That's one week. That's 0:10:57.800 --> 0:11:01.240 an amazing amount of activity. And so I think last 0:11:01.360 --> 0:11:03.720 night what what Mike Pence did was something that the 0:11:03.720 --> 0:11:06.160 campaign hasn't been able to do before with the candidate, 0:11:06.360 --> 0:11:09.679 and that is stabilized the debate. His set of facts, 0:11:09.760 --> 0:11:13.119 his diagram of where the country is headed, is exactly 0:11:13.120 --> 0:11:15.439 what the Trump campaign has been selling, and he did 0:11:15.440 --> 0:11:18.840 a good job delivering that, did a very confident job. 0:11:18.840 --> 0:11:20.720 Just to wrap things up, Rick, very quickly, we had 0:11:20.760 --> 0:11:23.840 the former New York mat Rudy Giuliani on the program yesterday. 0:11:23.920 --> 0:11:26.840 Without much prompt ding or encouragement, he came out swinging. 0:11:27.600 --> 0:11:30.320 What we see today is the campaign coming out swinging 0:11:30.320 --> 0:11:33.679 against the Debate Commission. This is that classic siege mentality 0:11:33.720 --> 0:11:36.560 in the final few weeks of the campaign, every once 0:11:36.600 --> 0:11:39.520 against us. Is this a strategy that's gonna work? Rick? 0:11:39.679 --> 0:11:42.719 Is it working now? Well? You know, the bunker is 0:11:42.760 --> 0:11:46.160 a very nasty place to have to occupy. And that's 0:11:46.160 --> 0:11:48.599 where the Trump campaign is right now. Not only is 0:11:48.640 --> 0:11:51.679 their top leadership out with COVID, but the polls are 0:11:51.679 --> 0:11:54.680 turning against him. I would say one thing that sort 0:11:54.679 --> 0:11:57.880 of defies that is the nimbleness or lack there of, 0:11:58.120 --> 0:12:02.120 of Donald Trump's addressing the stimulus negotiations. He's flip floped 0:12:02.160 --> 0:12:05.720 now three times in three days. Um, there's no question 0:12:05.800 --> 0:12:08.600 that that Congress wants a stimulus. They know what the 0:12:08.640 --> 0:12:12.679 public needs and and what the Fed is requiring, and 0:12:12.760 --> 0:12:17.240 so I think that the decision making at the top 0:12:17.320 --> 0:12:20.439 has always been Donald Trump. There's no campaign that's going 0:12:20.480 --> 0:12:23.400 to get in his way. He's running the bus and 0:12:23.600 --> 0:12:26.080 the buses veering all over the road, and that does 0:12:26.120 --> 0:12:30.959 not help him collect the votes he needs for election day. Rick, 0:12:31.040 --> 0:12:33.240 wonderful to catch up to get your inside, Rick Davis 0:12:33.320 --> 0:12:40.400 that the former McCain campaign MANTAA and BLIMPA contributor Michael 0:12:40.400 --> 0:12:42.760 Moore joins us right now ahead of all of our finances. 0:12:42.800 --> 0:12:45.679 We're thrilled you could take time out from a hollacious 0:12:46.040 --> 0:12:49.640 day as well. Michael Moore, is there any evidence from 0:12:49.679 --> 0:12:53.640 your team did if you roll up in industry, profits 0:12:53.679 --> 0:12:59.800 go up. I don't know that profits go up, but 0:13:00.320 --> 0:13:04.680 is this feeling that scale matters in the asset management 0:13:04.679 --> 0:13:07.520 business as more and more of the money moves to 0:13:07.559 --> 0:13:12.040 passive so that you can't survive as a niche player. 0:13:12.679 --> 0:13:15.600 Uh not that either Eaton Vans or Morgan Stanley was 0:13:15.640 --> 0:13:18.720 exactly niche, but they weren't part of the trillion dollar 0:13:18.800 --> 0:13:22.600 club of the behemoth. And now together they joined that club. 0:13:23.080 --> 0:13:29.560 Will they add profit to Morgan Stanley's income statement? Yeah, 0:13:29.600 --> 0:13:31.839 I think that's the idea. I mean, James Gorman has 0:13:31.920 --> 0:13:34.960 really reshaped Morgan Stanley. I mean he started with the 0:13:35.000 --> 0:13:39.040 Smith Barney deal in the financial crisis, and now this 0:13:39.120 --> 0:13:43.559 year you have e Trade and you have Van and U. 0:13:44.480 --> 0:13:47.280 I think his strategy as those all can work together, 0:13:47.360 --> 0:13:50.760 and now you know, the traditional investment bank is less 0:13:50.800 --> 0:13:54.280 than half the firm Bloomberg surveillance worldwide. Michael Moore bringing 0:13:54.360 --> 0:13:57.160 up the elephant in the room. Let's go to someone 0:13:57.200 --> 0:14:03.400 with some experience on Smith Bernie Sweet. How did that go? Yeah, 0:14:03.559 --> 0:14:06.079 it's interesting Smith Barney. It's just you know that it's 0:14:06.120 --> 0:14:08.160 just a behemouth, you know, just got a tremendous amount 0:14:08.200 --> 0:14:12.000 of brokers out there, gives them immediate retail presence. Michael, 0:14:12.080 --> 0:14:16.360 I mean when you think about Morgan Stanley here, give 0:14:16.440 --> 0:14:18.679 us a sense of where their asset management business kind 0:14:18.720 --> 0:14:22.240 of ranks, uh in the world of asset management, which 0:14:22.360 --> 0:14:28.040 is facing uh pressure on fees. Yeah. I mean it 0:14:28.120 --> 0:14:31.520 was always seen UH as one of the smaller players, 0:14:31.560 --> 0:14:34.240 at least among the bank asset managers. You have Goldman 0:14:34.400 --> 0:14:39.360 and JP Morgan with huge businesses on the asset management side. 0:14:39.600 --> 0:14:43.440 Morgan Stanley was always a bit smaller, especially after the 0:14:43.480 --> 0:14:47.440 financial crisis. They sold their van camp in business uh, 0:14:47.480 --> 0:14:50.560 and you know, Gorman later said he regretted that move. 0:14:50.680 --> 0:14:54.680 So this seems to be um reversing that. And then 0:14:54.760 --> 0:14:59.080 some black Rock's got thirty something percent operating mark. Morgan 0:14:59.160 --> 0:15:02.320 Stanley is a little later on that. Obviously the goals 0:15:02.360 --> 0:15:05.000 to get operating margin up as well. How do you 0:15:05.000 --> 0:15:08.000 actually affect this, Michael Moore? You mean, today's a day 0:15:08.000 --> 0:15:11.920 where nobody talks about job cuts are overlays and overlaps. 0:15:11.960 --> 0:15:14.240 I mean, what happens to the say, two thousand people 0:15:14.240 --> 0:15:19.520 at Eaton events right right right? I think you probably 0:15:19.520 --> 0:15:23.720 will see some some overlap there, um, you know, but 0:15:23.760 --> 0:15:27.280 the thing for the banks is not just the operating margin, 0:15:27.840 --> 0:15:33.320 but the return on equity. And the really attractive uh 0:15:33.520 --> 0:15:37.200 piece of both asset management and wealth management is the 0:15:37.280 --> 0:15:41.000 capital charges are so much lower than the trading and 0:15:41.040 --> 0:15:45.720 investment banking sides of the business. So it's interesting, Michael. 0:15:45.720 --> 0:15:49.280 I'm looking at the b Q function for Morgan Stanley 0:15:49.280 --> 0:15:50.920 and look seeing that the stock is down about four 0:15:50.920 --> 0:15:55.520 point seven year today, doing better than its peers. Is 0:15:55.560 --> 0:16:01.600 that a validation Mr Gorman's focus on private wealth as 0:16:01.600 --> 0:16:07.600 opposed to maybe some of the more volatile capital markets businesses. Yeah. 0:16:07.640 --> 0:16:09.600 I think you'd have to say that, especially in a 0:16:09.720 --> 0:16:14.840 year where the traditional trading businesses have done quite well. Um. 0:16:14.920 --> 0:16:18.320 So the fact that they're holding up even in that environment, 0:16:18.560 --> 0:16:23.360 uh does seem to validate that strategy. You know, Gorman 0:16:23.440 --> 0:16:26.440 saying today that it's a happy coincidence that they're doing 0:16:26.480 --> 0:16:30.400 these deals while uh, the investment banking side of things 0:16:30.480 --> 0:16:33.120 is doing, uh, doing quite well at least in the 0:16:33.160 --> 0:16:36.280 first half. And we'll learn more on the next week 0:16:36.400 --> 0:16:38.640 on the third quarter. Michael Moore, thank you so much. 0:16:38.680 --> 0:16:40.680 Getting ready for next week as big as week of 0:16:40.720 --> 0:16:43.800 the any day swing Michael Moore ahead of our US 0:16:43.880 --> 0:16:47.840 finance team, all of our coverage of global Wall Street 0:16:51.880 --> 0:16:55.240 right now widely anticipated for you. Abby Joseph Cohen joins 0:16:55.360 --> 0:16:59.400 US with Goldman Sachs or Advisory Director and senior investment 0:16:59.440 --> 0:17:01.640 Strategy And of course the lay of the land here 0:17:01.800 --> 0:17:06.119 is when Abby Joseph Cohen tries to synthesize our economics 0:17:06.160 --> 0:17:09.640 and our finance into a belief in the equity markets. 0:17:10.119 --> 0:17:14.880 All listen, whether they agree or disagree, Abby, just simply, now, 0:17:15.000 --> 0:17:20.760 can you, at the margin acquire equities this morning? That's 0:17:20.760 --> 0:17:25.919 a terrific question Tom for traders um and the answer is, 0:17:26.320 --> 0:17:30.160 of course, it depends upon your time horizon. The Goldman 0:17:30.240 --> 0:17:37.240 Sacks House few is that SNP five is currently modestly undervalued, 0:17:37.720 --> 0:17:40.960 and of course that's based upon the straight arithmetic what 0:17:41.000 --> 0:17:44.720 we expect for corporate profits, but also very importantly what 0:17:44.760 --> 0:17:47.520 we expect from the Fed. And if you think the 0:17:47.560 --> 0:17:50.840 Fed is going to stay friendly, then there could be 0:17:51.080 --> 0:17:54.360 some room to grow in the equity market. By the way, 0:17:54.400 --> 0:17:56.880 not just in the United States, but in the other 0:17:56.960 --> 0:18:01.119 major markets as well. However, what we've discovered is that 0:18:01.240 --> 0:18:05.359 there is intense volatility and it has been rising. That 0:18:05.560 --> 0:18:09.720 is not unusual, uh, as we approach a major election 0:18:09.960 --> 0:18:13.240 in the United States, and also as we see that 0:18:13.280 --> 0:18:18.800 there has been some erratic movement with regard to fiscal policy. 0:18:19.119 --> 0:18:21.960 It's not just the Fed. We're also now looking at 0:18:22.000 --> 0:18:24.919 what happens to the stimulus bill. I think it was 0:18:25.119 --> 0:18:27.960 very clear over the last few days f O m 0:18:28.040 --> 0:18:31.240 C and other statements from the Fed that they believe 0:18:31.400 --> 0:18:34.720 we need another stimulus package. Speaker Pelosi with David Weston 0:18:34.720 --> 0:18:36.480 here in the twelve noon hour, Abby, I want to 0:18:36.480 --> 0:18:40.560 go back to when it was just so darn simple. 0:18:40.960 --> 0:18:44.840 John Templeton was there, Schreyer was there, Marylynch, Robert Kirby 0:18:44.920 --> 0:18:48.000 and they talked to lu Rue Kaiser about the simplicity 0:18:48.160 --> 0:18:52.600 of a stock market major crash, etcetera, etcetera. Now there 0:18:52.720 --> 0:18:57.000 is so much complexity, there is so much information to flow. 0:18:57.400 --> 0:19:00.840 How do you stay convict with a convict? Should call 0:19:00.960 --> 0:19:06.280 on equities? Given the complete cacophony of information that we have, 0:19:07.040 --> 0:19:11.880 you know was a market event. Basically the economy had 0:19:12.000 --> 0:19:15.439 not been afflicted by whatever was going on, So it 0:19:15.560 --> 0:19:18.199 was okay to go back to those models do a 0:19:18.280 --> 0:19:23.040 calculation about valuation. That is not the situation right now, 0:19:23.359 --> 0:19:25.640 And I have to tell you that I am quite 0:19:25.720 --> 0:19:31.280 concerned that there could be considerable downside as well, depending 0:19:31.760 --> 0:19:35.240 on any number of factors that we can't fit easily 0:19:35.280 --> 0:19:38.760 into our models. This includes what will the Congress do, 0:19:39.400 --> 0:19:43.480 what will the President say, and of course the election outcome. 0:19:43.920 --> 0:19:49.359 And so those of us who have lived our professional 0:19:49.440 --> 0:19:53.080 lives really focusing in on the math, I think should 0:19:53.080 --> 0:19:56.639 feel very humble right now, because what we recognize is 0:19:56.680 --> 0:20:00.520 that the models may not be able to properly reflect 0:20:00.880 --> 0:20:04.080 all of the volatility, not just in the markets, but 0:20:04.200 --> 0:20:07.880 in the economy, in policy, and also of course an 0:20:07.920 --> 0:20:12.639 investor sentiment one other thing. Within the equity market itself, 0:20:12.680 --> 0:20:16.560 there are wide gaps in relative valuation and that tells 0:20:16.640 --> 0:20:21.760 us something too. When markets rising, what we see is 0:20:21.840 --> 0:20:24.920 that there are just a handful of stocks that tend 0:20:24.960 --> 0:20:27.960 to drive that performance, and that of course could make 0:20:28.000 --> 0:20:32.560 the market more suspect as well and more volatile and 0:20:32.640 --> 0:20:36.399 vulnerable should there be some disappointments with regard to just 0:20:36.480 --> 0:20:41.440 a small handful of those particular issues. I mean, good 0:20:41.480 --> 0:20:44.200 morning from London. What what examples the market you think 0:20:44.320 --> 0:20:46.560 pricing in at the moment, And when you say, you know, 0:20:46.600 --> 0:20:48.720 it is very difficult to read what the U S 0:20:48.720 --> 0:20:52.000 election will bring in terms of composition of the House 0:20:52.359 --> 0:20:55.600 or even you know, giving of power if Joe Biden 0:20:55.600 --> 0:20:57.840 were to win. So how does the market react in 0:20:57.880 --> 0:21:01.000 that case? When we take a look at a lot 0:21:01.040 --> 0:21:04.520 of the surveys that are done of investors, what we're 0:21:04.560 --> 0:21:08.119 seeing is the I don't want to say presumption, but 0:21:08.200 --> 0:21:13.080 the increasing probability of let's call it the blue wave. Uh. 0:21:13.119 --> 0:21:16.440 There seems to be in probability that Mr Biden will 0:21:16.480 --> 0:21:20.840 be elected based upon polling. Uh. There is the possibility 0:21:20.880 --> 0:21:25.000 that the Senate could switch over to the Democratic column, 0:21:25.440 --> 0:21:27.679 and of course there is the presumption. This is a 0:21:27.720 --> 0:21:32.000 presumption that the House will stay blue. And what we're 0:21:32.040 --> 0:21:36.680 seeing from investors over the last several days is that 0:21:36.800 --> 0:21:39.320 a blue wave might not be such a bad thing 0:21:39.840 --> 0:21:42.880 because it would give us more certainty with regard to policy, 0:21:43.200 --> 0:21:46.760 particularly with regard to the use of fiscal policy to 0:21:47.000 --> 0:21:51.359 help our economy. At this point, the general sense is 0:21:51.440 --> 0:21:55.640 that while the economy is recovering, it is recovering slowly 0:21:55.840 --> 0:22:00.320 Number one. Number two, there are structural problems that need 0:22:00.400 --> 0:22:04.399 to be addressed in terms of long term unemployment. Some 0:22:04.480 --> 0:22:07.119 of the industries that have been very hard hit and 0:22:07.160 --> 0:22:11.600 these are things that interest rate policy writ large doesn't 0:22:11.640 --> 0:22:15.280 really help. It has to be done through fiscal policy. 0:22:15.680 --> 0:22:19.640 And so what we basically see is that investors are 0:22:19.720 --> 0:22:25.640 now looking at the possibility of movement towards the Democrats. 0:22:26.040 --> 0:22:29.760 Uh that may in fact be viewed in a positive way. 0:22:30.080 --> 0:22:32.960 And here I'm talking about not the short term modeling 0:22:33.680 --> 0:22:36.800 based upon what's happening in this year's corporate profits and 0:22:36.800 --> 0:22:40.440 so on, but rather the longer term outlook for twenty 0:22:40.480 --> 0:22:44.560 one and beyond. But what does it mean for how 0:22:44.680 --> 0:22:47.159 so let's say we do have a Biden administration was 0:22:47.240 --> 0:22:49.880 actually you know, also Democrats in the House, what does 0:22:49.920 --> 0:22:52.680 it mean for what the how the econmual will change 0:22:52.680 --> 0:22:56.280 in the US? Yeah. One of the things I believe 0:22:56.359 --> 0:23:00.760 that I've picked up anecdotally, and I stressed this as anecdotally, 0:23:01.240 --> 0:23:03.960 is that what I speak to investors, there is some 0:23:04.160 --> 0:23:09.280 uncertainty as to what the president uh plans would be 0:23:09.359 --> 0:23:13.480 in a second second term. Uh So there's not really 0:23:13.520 --> 0:23:18.280 an understanding beyond tax policy in terms of what would happen. 0:23:18.359 --> 0:23:21.600 There has been disappointment, for example, in terms of no 0:23:21.760 --> 0:23:26.080