1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey. 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 --> 00:00:33,760 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Let's 5 00:00:33,760 --> 00:00:36,599 Speaker 1: turn our attention now to the State of the Union message. 6 00:00:36,640 --> 00:00:38,440 Speaker 1: I know that a lot of people are waiting for this, 7 00:00:38,520 --> 00:00:41,200 Speaker 1: and Chris Rupki is among them. He is the chief 8 00:00:41,200 --> 00:00:45,879 Speaker 1: financial economist for m u f G Union Bank and 9 00:00:46,159 --> 00:00:49,680 Speaker 1: he joins us here in our studio. Chris Rupki, great 10 00:00:49,680 --> 00:00:52,559 Speaker 1: to have you here. So what kind of economy? What 11 00:00:52,680 --> 00:00:56,080 Speaker 1: kind of economy is? Is the president going to be? Uh? 12 00:00:56,120 --> 00:00:58,800 Speaker 1: What kind of economy do we have? While the president 13 00:00:58,880 --> 00:01:02,560 Speaker 1: speaks no, it was interesting. I remember during the campaign, 14 00:01:02,720 --> 00:01:07,360 Speaker 1: five percent unemployment was phony. He wouldn't be getting people 15 00:01:07,640 --> 00:01:11,000 Speaker 1: into the stadiums if unemployment was really five percent. But 16 00:01:11,080 --> 00:01:14,600 Speaker 1: now the president's crowing about how well the economy is 17 00:01:14,600 --> 00:01:18,240 Speaker 1: doing with unemployment rate at four point one and saying, 18 00:01:18,319 --> 00:01:21,000 Speaker 1: but what do you say, it's good? Yeah, it's it's 19 00:01:21,040 --> 00:01:24,080 Speaker 1: full employment. It's like, why did we do uh, tax 20 00:01:24,120 --> 00:01:26,920 Speaker 1: cuts and Jobs Act? I mean, we've never seen another 21 00:01:26,959 --> 00:01:33,000 Speaker 1: administration in history probably do fiscal stimulus tax cuts unless 22 00:01:33,000 --> 00:01:35,319 Speaker 1: we're in a recession. Why are we getting tax cuts? 23 00:01:35,319 --> 00:01:39,200 Speaker 1: By the way, I haven't seen my time. I think 24 00:01:39,200 --> 00:01:41,280 Speaker 1: it's coming at the end of this week, so I'll 25 00:01:41,280 --> 00:01:43,240 Speaker 1: take a look at it. You should be I'm excited, 26 00:01:43,720 --> 00:01:46,000 Speaker 1: you'd be excited a little bit more in the envelope. Well, 27 00:01:46,040 --> 00:01:49,040 Speaker 1: every time you hear about a company releasing its results, 28 00:01:49,120 --> 00:01:51,240 Speaker 1: they say that there's a little bit more in the envelope. 29 00:01:51,680 --> 00:01:55,240 Speaker 1: Is that not for someone at my level? That's exactly right? 30 00:01:55,960 --> 00:01:58,240 Speaker 1: So can you can you sort of opine about that, 31 00:01:58,320 --> 00:02:00,600 Speaker 1: because you know, you can spend all a talking about 32 00:02:00,600 --> 00:02:03,280 Speaker 1: whether they're going to do a dividend increase or share 33 00:02:03,400 --> 00:02:06,600 Speaker 1: buy back, or maybe they'll pay their workers a little Well, 34 00:02:06,800 --> 00:02:09,800 Speaker 1: we've kind of seen this before, right, What did companies 35 00:02:09,880 --> 00:02:12,560 Speaker 1: do when they get the money? They usually reward their 36 00:02:12,600 --> 00:02:16,919 Speaker 1: shareholders dividends, share buy backs. But yeah, they've been doing 37 00:02:16,960 --> 00:02:21,239 Speaker 1: some good. Pr been giving out some thousand dollar bonuses 38 00:02:21,320 --> 00:02:24,600 Speaker 1: to thousands of their employees, if not the upper levels 39 00:02:24,639 --> 00:02:27,840 Speaker 1: of management. So it's good. I mean, I can't say 40 00:02:27,840 --> 00:02:32,280 Speaker 1: it's it's not good in terms of money wherever it 41 00:02:32,320 --> 00:02:35,600 Speaker 1: comes from. If money circulates in the economy. We're going 42 00:02:35,680 --> 00:02:38,839 Speaker 1: to get some kind of growth. We can't say no. 43 00:02:39,040 --> 00:02:43,360 Speaker 1: It's just that usually Washington with a twenty trillion dollar 44 00:02:43,680 --> 00:02:47,280 Speaker 1: national debt, they would be doing this sort of deficit spending. 45 00:02:47,320 --> 00:02:49,920 Speaker 1: It is deficit spending, right, It's not as if we 46 00:02:49,919 --> 00:02:52,800 Speaker 1: don't have the money. But we're going to print it, right, 47 00:02:53,080 --> 00:02:55,519 Speaker 1: isn't that Well, they're going to issue bonds. That's sort 48 00:02:55,560 --> 00:02:59,799 Speaker 1: of like printing. It's like, why, why now, why are 49 00:02:59,800 --> 00:03:03,880 Speaker 1: we English? I just don't I don't quite get it. Alright, 50 00:03:03,919 --> 00:03:06,200 Speaker 1: So alright, head time I want to jump into we 51 00:03:06,200 --> 00:03:09,320 Speaker 1: get some breaking news. Here's the headline within the press release. 52 00:03:09,400 --> 00:03:13,119 Speaker 1: I love this hungry tape. Hungry Tapeworm was such a 53 00:03:13,160 --> 00:03:16,280 Speaker 1: good band. They'd play Grand Funk Railroad like no one. 54 00:03:16,600 --> 00:03:21,679 Speaker 1: The ballooning costs of healthcare act as a hungry tapeworm 55 00:03:22,200 --> 00:03:27,679 Speaker 1: on the American economy. There's the headline from Amazon, Berkshire, 56 00:03:27,720 --> 00:03:31,240 Speaker 1: haths Away and J See we did that in stereo. 57 00:03:31,720 --> 00:03:34,640 Speaker 1: We do that, Pim and I can do that anyways. 58 00:03:34,760 --> 00:03:38,040 Speaker 1: It's it's a really interesting headline talking about rip up 59 00:03:38,040 --> 00:03:41,920 Speaker 1: the script. Amazon, Berkshire, Hathaway, JP Morgan going to form 60 00:03:41,960 --> 00:03:45,320 Speaker 1: a healthcare company to go after the hungry taper Chris Rupki, 61 00:03:45,480 --> 00:03:49,640 Speaker 1: how much is healthcare is a percent of our jullion 62 00:03:49,680 --> 00:03:54,400 Speaker 1: dollar economy? Is it six or is it actually more? Well, 63 00:03:54,440 --> 00:03:58,800 Speaker 1: I mean more, and I don't have that at my fingertips, 64 00:03:58,920 --> 00:04:07,120 Speaker 1: but it is interesting the FEDS PC inflation core PC inflation. 65 00:04:07,640 --> 00:04:13,160 Speaker 1: A huge weight of that is healthcare. It's like, so 66 00:04:13,600 --> 00:04:17,360 Speaker 1: you mean to tell me financially, yeah, not even psy 67 00:04:18,960 --> 00:04:23,520 Speaker 1: of your budget, of the nation's budget ex. Food and energy. 68 00:04:23,600 --> 00:04:28,080 Speaker 1: After that is healthcare, and then it's ginormous pim Fox 69 00:04:28,080 --> 00:04:31,960 Speaker 1: A key paragraph here with Todd Coombs, Uh, Marvel Selivanberg 70 00:04:32,040 --> 00:04:36,920 Speaker 1: Told and Beth Galletti of Amazon, the three major officers, 71 00:04:36,960 --> 00:04:42,320 Speaker 1: a headquarters location and key operational details will be communicated 72 00:04:42,800 --> 00:04:47,080 Speaker 1: to take on the hungry tapeworm. The hungry tapeworm, Well, 73 00:04:47,560 --> 00:04:49,800 Speaker 1: they say that they're going to provide US employees and 74 00:04:49,800 --> 00:04:54,280 Speaker 1: their families was simplified, high quality, transparent healthcare. The thing 75 00:04:54,320 --> 00:04:56,080 Speaker 1: I would note, though, is that there is no healthcare 76 00:04:56,160 --> 00:05:00,480 Speaker 1: company in this transpriate no no. And Richard Truman mentions 77 00:05:00,560 --> 00:05:04,080 Speaker 1: the United Healthcare Trading Lower Office. To summarize, folks, because 78 00:05:04,080 --> 00:05:06,320 Speaker 1: we went into it a little bit quickly. You're trying 79 00:05:06,360 --> 00:05:09,440 Speaker 1: to get the news to Amazon. Berkshire Hathaway and JP 80 00:05:09,560 --> 00:05:16,400 Speaker 1: Morgan Chase to partner on US employee healthcare. The sub 81 00:05:16,400 --> 00:05:22,280 Speaker 1: beheading is goal is to improve US employee satisfaction while 82 00:05:22,320 --> 00:05:24,600 Speaker 1: reducing costs. I mean, that's the spin. They want their 83 00:05:24,600 --> 00:05:28,080 Speaker 1: employees to be happier with their coverage. But it's a 84 00:05:28,160 --> 00:05:30,200 Speaker 1: it's are we talk about the president and a private 85 00:05:30,240 --> 00:05:32,880 Speaker 1: initiative today? You wonder if you'll mention this in the 86 00:05:32,880 --> 00:05:37,360 Speaker 1: State of the Onion. Very good, Chris Rupki. Uh, this 87 00:05:37,480 --> 00:05:42,400 Speaker 1: kind of announcement, while interesting and perhaps will hurt, will 88 00:05:42,640 --> 00:05:45,800 Speaker 1: help a lot of people. To the point about the 89 00:05:45,800 --> 00:05:50,400 Speaker 1: current healthcare system, Uh, do you see any way to 90 00:05:50,560 --> 00:05:53,840 Speaker 1: rein in the entitlement programs in any way that would 91 00:05:53,880 --> 00:05:57,039 Speaker 1: be meaningful without cutting the quality of the care or 92 00:05:57,080 --> 00:06:00,520 Speaker 1: the quality of the service delivered. It's going to be difficult, 93 00:06:00,640 --> 00:06:05,560 Speaker 1: and I resent your use. Resent your use of the 94 00:06:05,600 --> 00:06:08,440 Speaker 1: word entitlement. When I was a young man in my thirties, 95 00:06:08,560 --> 00:06:14,480 Speaker 1: I could talk about those benefits being entitlements for some people. 96 00:06:15,040 --> 00:06:18,599 Speaker 1: But now as I can see those entitlements or something 97 00:06:18,640 --> 00:06:22,240 Speaker 1: that I will be entitled, so I would say these 98 00:06:22,279 --> 00:06:26,599 Speaker 1: are very important expecture. No, but that goes to the 99 00:06:26,680 --> 00:06:29,880 Speaker 1: absolute societal tension. The late oh they Reinhart at Princeton 100 00:06:30,320 --> 00:06:33,200 Speaker 1: really address this. What's interesting about this Chris to the 101 00:06:33,240 --> 00:06:41,640 Speaker 1: President's speech tonight on infrastructure. Here's private enterprise basically saying enough, yeah, 102 00:06:41,640 --> 00:06:46,560 Speaker 1: but they gotta make money off it. Reducing overall costs 103 00:06:46,640 --> 00:06:51,000 Speaker 1: is called making money to Mr Diamond, I'm not sure that. Yeah, 104 00:06:51,040 --> 00:06:53,880 Speaker 1: it sounds a little suspect, doesn't it. I mean, it's 105 00:06:53,920 --> 00:06:57,560 Speaker 1: a nice idea, but it's kind of like infrastructure spending 106 00:06:57,600 --> 00:07:00,760 Speaker 1: you know that's going to be h have dependent on 107 00:07:00,880 --> 00:07:05,040 Speaker 1: private money? Is It's like, well, what what sort of 108 00:07:05,320 --> 00:07:07,600 Speaker 1: private money is going to come in to do infrastructure? 109 00:07:07,640 --> 00:07:09,880 Speaker 1: How are you? How does the business get paid? How 110 00:07:09,880 --> 00:07:13,520 Speaker 1: do investors get paid? Mr? It's not easy, Mr Bezos 111 00:07:13,760 --> 00:07:17,200 Speaker 1: picking avocados for whole foods. Quote. The health care system 112 00:07:17,240 --> 00:07:21,480 Speaker 1: is complex, and we enter into this challenge open eyed 113 00:07:21,840 --> 00:07:25,520 Speaker 1: about the degree of difficulty. That's not the usual spin. 114 00:07:25,600 --> 00:07:28,680 Speaker 1: Pim Uh, Well, I hope he's got both eyes open, 115 00:07:28,800 --> 00:07:32,200 Speaker 1: because it is a complex system and one that many 116 00:07:32,240 --> 00:07:35,920 Speaker 1: people depend on. Chris to that point, though, about the 117 00:07:36,000 --> 00:07:41,600 Speaker 1: programs and the ability of this society to pay for them, Uh, taxes, 118 00:07:42,520 --> 00:07:45,800 Speaker 1: we cut taxes. That means it's less money to spend 119 00:07:45,800 --> 00:07:49,160 Speaker 1: on these kinds of things. I don't understand the How 120 00:07:49,200 --> 00:07:52,000 Speaker 1: does that not offer a contradiction? Yeah, well there's a 121 00:07:52,160 --> 00:07:54,800 Speaker 1: it is a contradiction. You know, how do how do 122 00:07:54,840 --> 00:07:57,320 Speaker 1: you pay for these moneys? I mean, I mean, how 123 00:07:57,320 --> 00:08:00,400 Speaker 1: do you pay for these programs? Uh? You know. I 124 00:08:00,440 --> 00:08:04,960 Speaker 1: think the current leadership in Washington, you know, has felt 125 00:08:05,040 --> 00:08:10,280 Speaker 1: that we need less Washington, we need less federal government services. 126 00:08:10,360 --> 00:08:14,080 Speaker 1: But I don't know, the next crew that comes in 127 00:08:14,160 --> 00:08:16,040 Speaker 1: might want to do something else. The reason I want 128 00:08:16,120 --> 00:08:19,160 Speaker 1: to focus on healthcare is because of the demographic bulge 129 00:08:19,160 --> 00:08:22,520 Speaker 1: of the baby boom generations could be very expiring and 130 00:08:22,600 --> 00:08:24,800 Speaker 1: so the cost is going to go up. And then 131 00:08:25,280 --> 00:08:29,240 Speaker 1: I recently was at a conference and heard one theory 132 00:08:29,320 --> 00:08:34,240 Speaker 1: about why we have such sluggish growth and low unemployee 133 00:08:34,360 --> 00:08:38,640 Speaker 1: low inflation. It's because as the baby boomers age, right, 134 00:08:38,760 --> 00:08:42,760 Speaker 1: you have an economy is they're pulling out of there. Uh, 135 00:08:43,160 --> 00:08:46,000 Speaker 1: They're they're exiting the job market. Can I can I 136 00:08:46,040 --> 00:08:49,240 Speaker 1: make a surveillance correction? Go ahead? It's so important. I 137 00:08:49,559 --> 00:08:52,840 Speaker 1: M know, Mr Bezos, Mr Diamond, and Mr Buffett go 138 00:08:52,920 --> 00:08:57,600 Speaker 1: to the hungry tapeworm. That is our medical system. Daniel 139 00:08:57,679 --> 00:09:01,800 Speaker 1: Anger to the rescue. It was late. Tape rooms don't 140 00:09:01,800 --> 00:09:05,680 Speaker 1: make you hungry, that's the research. Not that I've ever 141 00:09:05,760 --> 00:09:08,000 Speaker 1: had a tapewroom. You had a tapeworm? M not going 142 00:09:08,280 --> 00:09:12,240 Speaker 1: I've not. I've not had a tapeworm. But they can 143 00:09:12,280 --> 00:09:16,040 Speaker 1: cause a vitamin B twelve deficiency in some patients. But 144 00:09:16,120 --> 00:09:19,040 Speaker 1: they just they don't make you hungry. You just are 145 00:09:19,040 --> 00:09:24,160 Speaker 1: not interested in you know, maybe he would have saved that, Chris. 146 00:09:24,559 --> 00:09:27,199 Speaker 1: You know, Chris ROPI, thank you so much, greatly appreciated 147 00:09:27,200 --> 00:09:41,959 Speaker 1: this morning. Some terrific respective across television in radios. One, 148 00:09:45,200 --> 00:09:47,160 Speaker 1: let's go to healthcare. Why don't you bring in our 149 00:09:47,200 --> 00:09:51,880 Speaker 1: good guest here who's expert on hungry tapework, Max Neeson. 150 00:09:51,960 --> 00:09:53,880 Speaker 1: Let's not go with tape rooms. It's too early in 151 00:09:53,880 --> 00:09:58,880 Speaker 1: the morning everywhere, and some places it's too early for dinner. Um, 152 00:09:59,000 --> 00:10:02,360 Speaker 1: JP Morgan, Berkshire, Hathaway and Amazon say they're going to 153 00:10:02,440 --> 00:10:05,520 Speaker 1: get together and help their employees. They're going to provide better, 154 00:10:05,920 --> 00:10:10,959 Speaker 1: less expensive healthcare. What's your reaction? So my initial reaction 155 00:10:11,040 --> 00:10:13,800 Speaker 1: was this was not the Amazon for a into healthcare 156 00:10:13,880 --> 00:10:16,360 Speaker 1: that that has been expected. You know for about a 157 00:10:16,440 --> 00:10:19,400 Speaker 1: year now, which was something like a more aggressive for 158 00:10:19,559 --> 00:10:23,680 Speaker 1: it into mail order pharmaceuticals from pseudo benefit managers. What 159 00:10:23,720 --> 00:10:27,160 Speaker 1: they're doing is I think even more interesting. UM they're 160 00:10:27,200 --> 00:10:29,880 Speaker 1: potentially going to run along with these two other companies, 161 00:10:30,360 --> 00:10:33,840 Speaker 1: UM their own health plans entirely from plays and since 162 00:10:33,880 --> 00:10:37,000 Speaker 1: they're not just doing this informally, they're creating a company 163 00:10:37,040 --> 00:10:38,760 Speaker 1: that suggests if they figure out how to do this 164 00:10:38,800 --> 00:10:41,760 Speaker 1: well and given the people involved that that's a decent bet, 165 00:10:42,280 --> 00:10:44,320 Speaker 1: um they might try to bring it to other employers. 166 00:10:44,440 --> 00:10:49,400 Speaker 1: Is it Kaiser Permante from forty years ago, where you 167 00:10:49,440 --> 00:10:53,080 Speaker 1: know the heritage out West? They did it different out 168 00:10:53,120 --> 00:10:56,679 Speaker 1: West with Kaiser. I think ultimately, you know, if if 169 00:10:56,720 --> 00:10:59,559 Speaker 1: you they have grand ambitions, and I think if they're 170 00:10:59,600 --> 00:11:01,520 Speaker 1: going to take this kind of step that they probably 171 00:11:01,520 --> 00:11:03,920 Speaker 1: do that's something of the model that they're going to 172 00:11:04,040 --> 00:11:07,360 Speaker 1: look to emulate. UM, you know, doing things starting from 173 00:11:07,360 --> 00:11:10,240 Speaker 1: a different point of view, with a different set of priorities, 174 00:11:10,440 --> 00:11:13,040 Speaker 1: not attempting to to make a profit. UM. As they 175 00:11:13,080 --> 00:11:15,920 Speaker 1: kind of highlighted repeatedly in their press release, UM that 176 00:11:16,040 --> 00:11:19,720 Speaker 1: being the great frustration that so much in American healthcare 177 00:11:19,800 --> 00:11:22,679 Speaker 1: is not geared at bringing cost down, but for um, 178 00:11:22,840 --> 00:11:25,160 Speaker 1: you know, eating out a profit margin for every single 179 00:11:25,200 --> 00:11:28,880 Speaker 1: person along the way ensures PBMs providers. Any chance that 180 00:11:28,960 --> 00:11:31,600 Speaker 1: this is going to present the conflict of interest with 181 00:11:31,640 --> 00:11:35,679 Speaker 1: what their real businesses are, I don't think so, at 182 00:11:35,760 --> 00:11:38,040 Speaker 1: least that at the start, considering that they're you know, 183 00:11:38,080 --> 00:11:42,600 Speaker 1: initially focusing just on their own employees and on other employers. Um, 184 00:11:42,679 --> 00:11:44,320 Speaker 1: you know, at the end of the day, they're they're 185 00:11:44,360 --> 00:11:47,120 Speaker 1: just attempting to to keep costs down from the employees. 186 00:11:47,120 --> 00:11:48,560 Speaker 1: It will be more interesting when they bring it to 187 00:11:48,600 --> 00:11:51,040 Speaker 1: other companies or if they try to get into providers. 188 00:11:51,080 --> 00:11:53,320 Speaker 1: And we know that everybody with Jeff Bezos is cut 189 00:11:53,320 --> 00:11:55,600 Speaker 1: and chiseled. Maybe I can't say that a Mruture half 190 00:11:55,600 --> 00:12:00,120 Speaker 1: away and JP Morgan. But is this the beginning of 191 00:12:00,440 --> 00:12:05,080 Speaker 1: companies saying enough is enough. We're gonna essentially self insures. 192 00:12:05,120 --> 00:12:08,680 Speaker 1: All we're talking about here, they're gonna self ensure where 193 00:12:08,679 --> 00:12:15,439 Speaker 1: you begin to separate healthy employed America away from unhealthy, 194 00:12:15,679 --> 00:12:19,600 Speaker 1: lesser or unemployed America. I mean that that's already a 195 00:12:19,640 --> 00:12:22,440 Speaker 1: reality in our health care system. If you work at 196 00:12:22,440 --> 00:12:26,760 Speaker 1: a large complayer, your your health care is subsidized to 197 00:12:27,400 --> 00:12:31,440 Speaker 1: an extent that that nobody really realizes unless you later 198 00:12:31,559 --> 00:12:35,040 Speaker 1: end up unemployer on the individual market, where um, the 199 00:12:35,080 --> 00:12:37,000 Speaker 1: burden falls much more a question and you pay much 200 00:12:37,000 --> 00:12:39,280 Speaker 1: more out of pocket, You pay higher prices because you 201 00:12:39,320 --> 00:12:43,240 Speaker 1: don't have the benefit of that enormous employer tax exclusion 202 00:12:43,559 --> 00:12:46,120 Speaker 1: for healthcare benefits and the power you know, all of 203 00:12:46,120 --> 00:12:48,800 Speaker 1: that negotiating power aggregated in the form and not just 204 00:12:48,880 --> 00:12:51,319 Speaker 1: your employer, but you know everyone who they participate in 205 00:12:51,360 --> 00:12:55,200 Speaker 1: the PBM or or bigger insure with. What the what 206 00:12:55,280 --> 00:12:59,080 Speaker 1: are some of the competitive challenges to putting together something 207 00:12:59,120 --> 00:13:02,200 Speaker 1: like this, um, I mean, they're gonna have to basically 208 00:13:02,280 --> 00:13:05,680 Speaker 1: learn how to operate, you know, however much they're gonna do. 209 00:13:05,800 --> 00:13:08,920 Speaker 1: You know, they might still contract with an insure man 210 00:13:09,040 --> 00:13:12,199 Speaker 1: for parts of of the business, like self insured companies 211 00:13:12,240 --> 00:13:14,439 Speaker 1: currently do. But every piece that they're going to pick 212 00:13:14,520 --> 00:13:16,120 Speaker 1: up on their own and run on their own, they're 213 00:13:16,160 --> 00:13:17,800 Speaker 1: gonna have to learn how to do from the start, 214 00:13:17,880 --> 00:13:19,880 Speaker 1: and you know, they put the challenge on themselves to 215 00:13:19,920 --> 00:13:22,559 Speaker 1: figure out how to do it better with more technology. 216 00:13:22,840 --> 00:13:25,960 Speaker 1: Max I'm begging Max needs of course, folks. With Bloomberg 217 00:13:25,960 --> 00:13:29,640 Speaker 1: gut Fly, he writes these terrific chart paragraph charts stories. 218 00:13:29,640 --> 00:13:31,760 Speaker 1: Are you go to write about this today? I'm I've 219 00:13:31,800 --> 00:13:34,960 Speaker 1: already started really really looking forward to this already brought 220 00:13:35,120 --> 00:13:38,280 Speaker 1: also brought in his his medicine kit to help you 221 00:13:38,320 --> 00:13:41,360 Speaker 1: get over the plague. So he cares it's a plague. 222 00:13:41,360 --> 00:13:44,880 Speaker 1: It's like a thirteenth century Thix. Seriously. Fortunately you're in 223 00:13:44,920 --> 00:13:48,760 Speaker 1: the surveillance cone of silence, so you're hermetically sealed away 224 00:13:48,800 --> 00:13:51,400 Speaker 1: from me. Is that why I'm hermetically so you see 225 00:13:51,440 --> 00:13:54,319 Speaker 1: the car. I thought Max and I were together. No, 226 00:13:54,520 --> 00:14:00,320 Speaker 1: Max is gonna get the play. But an interesting concept, right, 227 00:14:00,679 --> 00:14:04,320 Speaker 1: It's it's absolutely fascinating up particularly the notion and this 228 00:14:04,400 --> 00:14:06,560 Speaker 1: is probably the thing I'm gonna focus on um that 229 00:14:06,679 --> 00:14:09,280 Speaker 1: this is kind of a pilot among themselves to figure 230 00:14:09,280 --> 00:14:11,920 Speaker 1: out can we make a company out of this for 231 00:14:11,960 --> 00:14:25,600 Speaker 1: other people? Max, Thank you so much. Terry Haynes is 232 00:14:25,680 --> 00:14:29,040 Speaker 1: ever Cores I s E. Senior political strategist. He's the 233 00:14:29,040 --> 00:14:32,240 Speaker 1: head of political analysis and a managing director. He is 234 00:14:32,280 --> 00:14:36,000 Speaker 1: also experienced in the ways of Washington, d C. Former 235 00:14:36,280 --> 00:14:38,880 Speaker 1: Chief Council Staff director of the U. S. House Committee 236 00:14:38,880 --> 00:14:42,440 Speaker 1: on Financial Services and Senior Council on US House Energy 237 00:14:42,480 --> 00:14:46,280 Speaker 1: and Commerce Committee, and a variety of other government positions. Terry, 238 00:14:46,320 --> 00:14:48,360 Speaker 1: good to have you with us here on Bloomberg. What 239 00:14:48,400 --> 00:14:50,840 Speaker 1: are you going to be listening for from the President 240 00:14:50,880 --> 00:14:54,440 Speaker 1: Donald Trump's State of the Union message? Good to be here, Pim, 241 00:14:54,440 --> 00:14:57,640 Speaker 1: and thank you the well I'm going to be you know, 242 00:14:57,720 --> 00:15:00,400 Speaker 1: the President essentially is going to divide this each into 243 00:15:00,520 --> 00:15:03,360 Speaker 1: three parts. Uh, and I think everybody knows what the 244 00:15:03,600 --> 00:15:05,640 Speaker 1: what those three parts will be, so I won't spend 245 00:15:05,680 --> 00:15:08,040 Speaker 1: long on them. First will be the I think the 246 00:15:08,080 --> 00:15:12,040 Speaker 1: first year achievements. You know they uh, we all dip 247 00:15:12,040 --> 00:15:14,680 Speaker 1: into the Trump Show on a daily basis, but this 248 00:15:14,720 --> 00:15:17,440 Speaker 1: is an opportunity to to provide the best of a 249 00:15:17,480 --> 00:15:20,520 Speaker 1: framing device for the president in his first year in office. 250 00:15:20,520 --> 00:15:22,480 Speaker 1: So I think they'll do that. They'll run through a 251 00:15:22,480 --> 00:15:25,760 Speaker 1: bunch of priorities. Infrastructure, of course, is going to get 252 00:15:25,760 --> 00:15:28,200 Speaker 1: hammered in quite a bit. I expect him to talk 253 00:15:28,280 --> 00:15:32,000 Speaker 1: about trade, housing, finance, a bunch of other things, and 254 00:15:32,040 --> 00:15:35,520 Speaker 1: finally a national security focus. The two things I'm going 255 00:15:35,560 --> 00:15:40,600 Speaker 1: to listen to with particularly closely, one I think will 256 00:15:40,640 --> 00:15:44,640 Speaker 1: be housing finance. Uh. I expect Secretary Manution to testify 257 00:15:44,680 --> 00:15:47,480 Speaker 1: this morning on the Hill that he remains interested now 258 00:15:47,560 --> 00:15:49,800 Speaker 1: in finance it's not a secret that he is. But 259 00:15:50,240 --> 00:15:53,080 Speaker 1: at the same time, renewed commitment to trying to get 260 00:15:53,120 --> 00:15:58,480 Speaker 1: something done UH from the administration UH will will be 261 00:15:58,520 --> 00:16:01,640 Speaker 1: important for markets, and I can leave whatever signals on 262 00:16:01,760 --> 00:16:04,600 Speaker 1: trade the President wants to send. I've always said the 263 00:16:04,600 --> 00:16:07,560 Speaker 1: trades one of the three big unknowns UH this year, 264 00:16:08,640 --> 00:16:12,240 Speaker 1: certainly trade policy as the top that. And the question 265 00:16:12,280 --> 00:16:14,360 Speaker 1: really is UH. You know, we got a positive read 266 00:16:14,360 --> 00:16:16,360 Speaker 1: out of NAFTA yesterday out of the end of the 267 00:16:16,360 --> 00:16:19,680 Speaker 1: Montreal round from from U. S. T. R. Lightheiser. UH. 268 00:16:19,720 --> 00:16:23,320 Speaker 1: The question is does the President continue that kind of 269 00:16:23,440 --> 00:16:28,320 Speaker 1: pro pro business, pro market approach that he first talked 270 00:16:28,320 --> 00:16:31,280 Speaker 1: about in Davos last week and was underscored by Lightheiser, 271 00:16:31,960 --> 00:16:34,680 Speaker 1: or does he go back to a more saber rattling 272 00:16:34,960 --> 00:16:37,440 Speaker 1: If I don't like it, I'll get rid of its 273 00:16:37,440 --> 00:16:40,040 Speaker 1: sort of approach where it comes to NAFTA, and that 274 00:16:40,080 --> 00:16:43,320 Speaker 1: will be market moving as well. Terry, based on your 275 00:16:43,400 --> 00:16:46,560 Speaker 1: experience to whom is the President really going to be 276 00:16:46,640 --> 00:16:51,480 Speaker 1: speaking tonight, Well, but my experience is that the President 277 00:16:52,080 --> 00:16:54,800 Speaker 1: uses this speech to speak directly to the American people. 278 00:16:54,840 --> 00:16:57,920 Speaker 1: It's it's the largest audience that the president will have 279 00:16:58,000 --> 00:17:01,760 Speaker 1: all year. Uh, non la, there's some disaster of course 280 00:17:01,800 --> 00:17:05,919 Speaker 1: that that requires. But UH, presidents always look at this 281 00:17:05,960 --> 00:17:09,560 Speaker 1: opportunity as one where they get to actually talk to 282 00:17:09,600 --> 00:17:14,639 Speaker 1: the American people. They get to characterize their own presidency directly, UH, 283 00:17:14,800 --> 00:17:18,600 Speaker 1: and they get to lay out their priorities directly, so 284 00:17:18,640 --> 00:17:21,440 Speaker 1: that they can you know, not only frame you know, 285 00:17:21,720 --> 00:17:24,720 Speaker 1: what it is, how it is uh that they want 286 00:17:24,760 --> 00:17:28,680 Speaker 1: to move forward, but also you know, frankly in political terms, uh, 287 00:17:28,760 --> 00:17:31,000 Speaker 1: put the opposition on the back foot too. Well, That's 288 00:17:31,000 --> 00:17:32,879 Speaker 1: where I was going with this, because of course, this 289 00:17:33,000 --> 00:17:37,199 Speaker 1: the first president that really uses the social media world 290 00:17:37,400 --> 00:17:41,200 Speaker 1: of Twitter and a variety of other mechanisms to speak 291 00:17:41,240 --> 00:17:45,320 Speaker 1: directly to his constituents and indeed to the country in 292 00:17:45,320 --> 00:17:48,760 Speaker 1: the world. Sure, and he gets to use but he 293 00:17:49,160 --> 00:17:53,639 Speaker 1: gets to use the the cameras in the more conventional 294 00:17:53,680 --> 00:17:57,720 Speaker 1: media here to uh to to do something other than 295 00:17:58,240 --> 00:18:01,919 Speaker 1: uh other then kind of you know, the message at 296 00:18:01,960 --> 00:18:05,280 Speaker 1: the moment, and actually gets to frame his own presidency 297 00:18:05,440 --> 00:18:08,680 Speaker 1: and uh and have people to try to understand exactly 298 00:18:08,720 --> 00:18:11,800 Speaker 1: what he's up to as president beyond beyond the Twitter 299 00:18:11,880 --> 00:18:14,240 Speaker 1: of the day and uh. And that's I think that's 300 00:18:14,280 --> 00:18:16,880 Speaker 1: particularly important for this president Frankly, all right, what would 301 00:18:16,880 --> 00:18:22,160 Speaker 1: you like to hear about regarding housing finance? What I'd 302 00:18:22,160 --> 00:18:23,760 Speaker 1: like to I don't have the luxury I'll tell you 303 00:18:23,800 --> 00:18:25,680 Speaker 1: what I'd like to hear. What I think is, uh, 304 00:18:26,280 --> 00:18:28,919 Speaker 1: what I'll be interested in is whether or not that 305 00:18:29,000 --> 00:18:32,200 Speaker 1: makes the speech Frankly, Uh that it has been a 306 00:18:32,200 --> 00:18:35,040 Speaker 1: as I say, by priority of Secretary minutions for some time. 307 00:18:35,600 --> 00:18:38,399 Speaker 1: He first talked about his desire to want to do 308 00:18:38,480 --> 00:18:41,920 Speaker 1: something on housing finance before he was even Treasury secretary, 309 00:18:41,960 --> 00:18:45,639 Speaker 1: after he was nominated. But the end of and every 310 00:18:45,680 --> 00:18:49,639 Speaker 1: time he talks about this, the markets blip in a 311 00:18:49,680 --> 00:18:56,280 Speaker 1: positive way, housing stocks a rise. And I'd like to see, frankly, 312 00:18:56,359 --> 00:18:58,600 Speaker 1: is whether there's a commitment from the President himself to 313 00:18:58,600 --> 00:19:00,920 Speaker 1: invest political capital in this, because if that's the case, 314 00:19:00,960 --> 00:19:03,920 Speaker 1: then you might get something. What what what's your read 315 00:19:03,960 --> 00:19:07,960 Speaker 1: on Fannie Mae and Freddie mac My My read generally 316 00:19:08,160 --> 00:19:10,880 Speaker 1: is that you know, we've got a situation where, uh 317 00:19:10,920 --> 00:19:15,280 Speaker 1: the enterprises have been in conservatorship for a decade. Uh, 318 00:19:15,600 --> 00:19:17,840 Speaker 1: it's uh, it's time to take a serious look at 319 00:19:17,880 --> 00:19:19,520 Speaker 1: whether to get them out or not to the previous 320 00:19:19,560 --> 00:19:23,480 Speaker 1: administration's policy was that we'll get them out one Congress 321 00:19:23,480 --> 00:19:25,320 Speaker 1: tells us to get them out, but not before then. 322 00:19:25,880 --> 00:19:29,840 Speaker 1: And uh. And what needs to happen fundamentally is, UH 323 00:19:30,560 --> 00:19:33,120 Speaker 1: is there needs to be an understanding and some kind 324 00:19:33,119 --> 00:19:35,439 Speaker 1: of coming together in Congress and you know, with the 325 00:19:35,440 --> 00:19:38,719 Speaker 1: President and Secretary Munition as well, UH, to talk about 326 00:19:39,280 --> 00:19:41,320 Speaker 1: what housing finance is going to look like going forward. 327 00:19:41,359 --> 00:19:43,600 Speaker 1: I mean, are we gonna get are we gonna if 328 00:19:43,600 --> 00:19:47,400 Speaker 1: we're gonna get greater participation from financial institutions? What does 329 00:19:47,440 --> 00:19:50,760 Speaker 1: that look like? Uh? There is some policy difference between 330 00:19:51,240 --> 00:19:54,399 Speaker 1: Democrats and Republicans and whether there should be whether the 331 00:19:55,160 --> 00:19:59,040 Speaker 1: g SC structure should still be maintained. Uh, that's compromisable 332 00:19:59,119 --> 00:20:03,280 Speaker 1: in my view. But what you're you know, the fundamental 333 00:20:03,320 --> 00:20:04,800 Speaker 1: issue is going to be whether or not we're going 334 00:20:04,840 --> 00:20:07,000 Speaker 1: to get more capital into the housing market or not. 335 00:20:07,280 --> 00:20:09,240 Speaker 1: And uh, and whether we're gonna get a greater focus 336 00:20:09,240 --> 00:20:11,520 Speaker 1: on housing finance because our view has always been here 337 00:20:12,000 --> 00:20:14,960 Speaker 1: has always been that the current state of affairs has 338 00:20:14,960 --> 00:20:17,359 Speaker 1: been a negative for the housing market and a negative 339 00:20:17,400 --> 00:20:20,920 Speaker 1: for the markets generally. Based on your understanding of Secretary 340 00:20:21,000 --> 00:20:24,040 Speaker 1: Minutions background, what does he bring that special to the 341 00:20:24,119 --> 00:20:28,600 Speaker 1: conversation and debate about housing finance. I think two things. One, 342 00:20:28,680 --> 00:20:31,920 Speaker 1: he's actually he's actually been in the markets. He actually 343 00:20:32,000 --> 00:20:34,840 Speaker 1: understands the markets on the first firsthand the basis, and 344 00:20:34,880 --> 00:20:39,360 Speaker 1: I think that's important. We have not had, Uh, it's 345 00:20:39,359 --> 00:20:42,200 Speaker 1: been a while since we've had a Treasury secretary that 346 00:20:41,840 --> 00:20:44,760 Speaker 1: that that that had that kind of direct knowledge. I mean, 347 00:20:45,119 --> 00:20:48,600 Speaker 1: certainly i'd give I'd give Secretary Geithner and Secretary Paulson 348 00:20:49,000 --> 00:20:52,080 Speaker 1: both both marks for that, but it's been a little while. 349 00:20:52,119 --> 00:20:55,520 Speaker 1: Secretary Louse certainly didn't have that that sort of fundamental background. 350 00:20:55,600 --> 00:20:59,040 Speaker 1: Number one. Number two, he brings a he brings a 351 00:20:59,080 --> 00:21:03,200 Speaker 1: commitment to it and what you need fundamentally on this issue. 352 00:21:03,200 --> 00:21:05,640 Speaker 1: And I think this was proved in the last time 353 00:21:05,680 --> 00:21:08,320 Speaker 1: anybody tried to do something like this. Um, you need 354 00:21:08,359 --> 00:21:10,600 Speaker 1: commitment from the highest levels of the government and the 355 00:21:10,680 --> 00:21:13,920 Speaker 1: executive branch, particularly to try to uh trying to knock 356 00:21:14,000 --> 00:21:16,480 Speaker 1: heads together in the Congress and get something done here, 357 00:21:16,920 --> 00:21:20,520 Speaker 1: and that hasn't existed for a while. And Secretary Munition 358 00:21:20,840 --> 00:21:23,800 Speaker 1: would like to do this. He's been clear about it. Uh. 359 00:21:23,840 --> 00:21:27,560 Speaker 1: And now that now that he's used some political capital 360 00:21:27,600 --> 00:21:30,720 Speaker 1: on tax reform, uh, he appears to be interested in 361 00:21:30,760 --> 00:21:33,000 Speaker 1: doing it again. So we'll see where he goes, and 362 00:21:33,040 --> 00:21:34,840 Speaker 1: we'll see if the President agrees and wants to say 363 00:21:34,880 --> 00:21:37,320 Speaker 1: something about it in the speech. We'll be listening and 364 00:21:37,440 --> 00:21:39,960 Speaker 1: we'll also be looking for your reaction to it as well. 365 00:21:40,000 --> 00:21:44,159 Speaker 1: Thank you very much. Terry Haynes is Evercore i SES 366 00:21:44,320 --> 00:21:47,679 Speaker 1: senior political strategist. He's the head of political analysis and 367 00:21:47,880 --> 00:22:04,560 Speaker 1: a managing director. Our guest is Emily Rowland, head of 368 00:22:04,600 --> 00:22:08,560 Speaker 1: Capital markets research at John Hancock Investments. Joining us from Boston, 369 00:22:08,800 --> 00:22:11,639 Speaker 1: home to Bloomberg one oh six one Boston, Newburyport and 370 00:22:11,760 --> 00:22:14,760 Speaker 1: thirteen thirty in Metro West and the South Shore. Emily, 371 00:22:14,800 --> 00:22:18,800 Speaker 1: thank you very much for being with us. Complacency and volatility. 372 00:22:18,840 --> 00:22:21,240 Speaker 1: I'm wondering if you could describe your thinking about both 373 00:22:21,240 --> 00:22:23,639 Speaker 1: of those as they affect investors. You know, when I 374 00:22:23,640 --> 00:22:26,639 Speaker 1: think about our outlook heading into I would say it 375 00:22:26,720 --> 00:22:29,720 Speaker 1: was probably a bit more optimistic than consensus. We really 376 00:22:29,760 --> 00:22:33,560 Speaker 1: felt that Pact reform and earnings growth were likely under 377 00:22:33,600 --> 00:22:37,679 Speaker 1: appreciated catalysts that would drive markets higher, and really looking 378 00:22:37,680 --> 00:22:40,880 Speaker 1: at the extraordinary returns that we've seen so far this year, 379 00:22:40,960 --> 00:22:43,720 Speaker 1: markets are up seven percent in one of the best 380 00:22:43,760 --> 00:22:46,160 Speaker 1: starts to a year in recent history, and in our view, 381 00:22:46,160 --> 00:22:49,240 Speaker 1: would be pretty difficult to keep up this pace. We 382 00:22:49,320 --> 00:22:52,000 Speaker 1: really think it's it's highly likely that we'll see some 383 00:22:52,119 --> 00:22:55,920 Speaker 1: sort of pull back in the cards, some increased volatility 384 00:22:55,960 --> 00:23:00,000 Speaker 1: as we continue into and we think investors really probably 385 00:23:00,080 --> 00:23:04,200 Speaker 1: aren't prepared for this. Just looking back last year, the 386 00:23:04,280 --> 00:23:07,240 Speaker 1: maximum draw down we saw in the SMP five hundred 387 00:23:07,720 --> 00:23:10,840 Speaker 1: was three percent. That means that even if you chose 388 00:23:10,880 --> 00:23:14,720 Speaker 1: the worst day to invest in, the mostly losses three percent. 389 00:23:14,800 --> 00:23:19,000 Speaker 1: Now that hadn't happened since and the average is about four. 390 00:23:20,440 --> 00:23:22,400 Speaker 1: So we think we're going to get back to those 391 00:23:22,440 --> 00:23:25,520 Speaker 1: averages and investors might be caught off guard when volatility 392 00:23:25,560 --> 00:23:27,960 Speaker 1: really does start to pick up. Here. Well, what should 393 00:23:28,000 --> 00:23:30,600 Speaker 1: investors do in order to heads or prepare for this 394 00:23:30,680 --> 00:23:33,520 Speaker 1: increased volatility that you say we're going to get. Well, 395 00:23:33,560 --> 00:23:36,479 Speaker 1: we think it's important for investors to simply revisit their 396 00:23:36,600 --> 00:23:40,320 Speaker 1: risk tolerances make sure that they're investing in a way 397 00:23:40,359 --> 00:23:42,960 Speaker 1: that aligns with their longer term goals, because if you 398 00:23:43,000 --> 00:23:46,200 Speaker 1: think about it, you know, the investors psychology is sort 399 00:23:46,240 --> 00:23:49,120 Speaker 1: of pointing to this environment where we're kind of moving 400 00:23:49,200 --> 00:23:53,520 Speaker 1: into and maybe not quite yet excessive optimism, but we're 401 00:23:53,520 --> 00:23:55,679 Speaker 1: sort of moving into I would call it sort of 402 00:23:55,680 --> 00:23:59,120 Speaker 1: the excitement phase now, and we're really starting to see 403 00:23:59,119 --> 00:24:02,399 Speaker 1: that evidence with the flow data. If you look at 404 00:24:02,440 --> 00:24:05,840 Speaker 1: the first couple of weeks of from a flow into 405 00:24:05,840 --> 00:24:09,920 Speaker 1: global equity standpoint, we're seeing about four times the flows 406 00:24:09,920 --> 00:24:13,080 Speaker 1: into equities that we saw this time last year. So 407 00:24:13,119 --> 00:24:16,639 Speaker 1: we're seeing investors get excited and potentially the sort of 408 00:24:16,680 --> 00:24:19,760 Speaker 1: the wrong time in the market. So we're suggesting that 409 00:24:19,840 --> 00:24:21,640 Speaker 1: they really kind of take a look at their long 410 00:24:21,760 --> 00:24:25,280 Speaker 1: term plan. Okay, So having sort of said that, is 411 00:24:25,320 --> 00:24:27,800 Speaker 1: there anything specific that you would offer. Is it to 412 00:24:27,880 --> 00:24:32,199 Speaker 1: rebalance the portfolio based on the performance of the constituent parts, 413 00:24:32,760 --> 00:24:35,720 Speaker 1: Is it actually maybe taking a profit? I mean, as 414 00:24:35,720 --> 00:24:39,159 Speaker 1: you mentioned, SMP five has a gain right now of 415 00:24:39,200 --> 00:24:41,959 Speaker 1: almost seven percent for the year, the Nasdaq is up 416 00:24:42,000 --> 00:24:47,760 Speaker 1: more than eight percent. Market timing is not necessarily a 417 00:24:47,760 --> 00:24:52,040 Speaker 1: a shore fire away to financial success. But having said that, 418 00:24:52,760 --> 00:24:55,240 Speaker 1: you don't get you don't go broke taking a profit, 419 00:24:55,720 --> 00:24:58,280 Speaker 1: right you know, So we certainly believe that rebalancing is 420 00:24:58,560 --> 00:25:01,120 Speaker 1: a good thing to you at all times. But don't 421 00:25:01,119 --> 00:25:03,760 Speaker 1: get me wrong, I'm calling for a pullback in the markets, 422 00:25:03,800 --> 00:25:08,199 Speaker 1: But actually our view is quite positive. More broadly, you know, 423 00:25:08,320 --> 00:25:11,480 Speaker 1: thinking about our longer term outlook twelve to eighteen months 424 00:25:11,480 --> 00:25:14,880 Speaker 1: to synchronized global growth story really is a powerful one. 425 00:25:15,280 --> 00:25:19,840 Speaker 1: Earnings growth remains supportive. We're seeing significant upgrades in terms 426 00:25:19,840 --> 00:25:22,280 Speaker 1: of the earnings outlook for next year. You know, when 427 00:25:22,280 --> 00:25:24,200 Speaker 1: I look at the numbers at the beginning of this year, 428 00:25:24,280 --> 00:25:27,680 Speaker 1: is about eleven percent outlook for earnings growth next year 429 00:25:27,720 --> 00:25:30,639 Speaker 1: and that's been bumped up the sixteen percent on the 430 00:25:30,680 --> 00:25:35,399 Speaker 1: back of tax reform and other positive momentum here. So 431 00:25:35,440 --> 00:25:39,359 Speaker 1: as long as we continue to see inflation remains somewhat subdued, 432 00:25:39,440 --> 00:25:41,960 Speaker 1: which which we think is our real base case here, 433 00:25:42,440 --> 00:25:44,960 Speaker 1: we think that this cycle can continue and that there 434 00:25:44,960 --> 00:25:50,440 Speaker 1: are opportunities for risk assets heading into It's just important 435 00:25:50,480 --> 00:25:53,760 Speaker 1: to remember that we are going to experience more normal 436 00:25:53,880 --> 00:25:57,399 Speaker 1: levels of volatility. Okay, having said that, then where do 437 00:25:57,480 --> 00:26:01,120 Speaker 1: you look for this relative value you? Is it outside 438 00:26:01,160 --> 00:26:04,960 Speaker 1: the United States? Is it in specific industry groups or 439 00:26:05,000 --> 00:26:08,800 Speaker 1: specific asset classes? Yeah? Sure, Um, we are positive on 440 00:26:08,880 --> 00:26:12,679 Speaker 1: both US and non US equities today. Um, there is 441 00:26:12,760 --> 00:26:18,360 Speaker 1: a good valuation opportunity looking overseas. Typically, the US trades 442 00:26:18,440 --> 00:26:22,399 Speaker 1: to UH non US equities at about an eight percent premium, 443 00:26:22,400 --> 00:26:26,200 Speaker 1: and that's actually about twenty four percent today, So comparing 444 00:26:26,359 --> 00:26:30,359 Speaker 1: US versus non US from evaluation standpoint, we think that 445 00:26:30,400 --> 00:26:35,000 Speaker 1: there's an opportunity overseas. We also are suggesting that investors 446 00:26:35,040 --> 00:26:39,199 Speaker 1: consider international small cap equities. Not only do they have 447 00:26:39,520 --> 00:26:43,480 Speaker 1: a historical performance advantage over their large cap piers, but 448 00:26:43,520 --> 00:26:47,639 Speaker 1: the earnings outlook for small cap equities overseas is actually 449 00:26:47,640 --> 00:26:51,680 Speaker 1: outpacing the outlook for international small cap equities. And really 450 00:26:51,680 --> 00:26:56,640 Speaker 1: the idea here is that those domestically oriented companies overseas, 451 00:26:56,640 --> 00:27:00,359 Speaker 1: those smaller companies are really going to be the itative 452 00:27:00,440 --> 00:27:05,000 Speaker 1: beneficiaries of this strong synchronized global growth we're seeing particularly 453 00:27:05,040 --> 00:27:08,960 Speaker 1: picking up overseas alright, but international small cap won't that 454 00:27:09,000 --> 00:27:12,640 Speaker 1: be effected if the US dollar continues to weaken. Yeah, 455 00:27:12,680 --> 00:27:15,720 Speaker 1: we're seeing a continued a weakening of the US a 456 00:27:15,800 --> 00:27:19,480 Speaker 1: dollar here, which will be an advantage to US investors 457 00:27:19,520 --> 00:27:23,880 Speaker 1: that are investing overseas. And again, the strengthening euro, if 458 00:27:23,880 --> 00:27:28,040 Speaker 1: you think about investing overseas, will have a put some 459 00:27:28,080 --> 00:27:32,240 Speaker 1: pressure on those large European multinational firms. But again, those 460 00:27:32,280 --> 00:27:36,560 Speaker 1: domestically oriented companies will be more insulated from that dynamic. 461 00:27:36,880 --> 00:27:39,400 Speaker 1: Give you ten seconds to tell us what investment would 462 00:27:39,440 --> 00:27:43,400 Speaker 1: you absolutely positively stay away from Yeah, I mean certainly, 463 00:27:43,440 --> 00:27:46,600 Speaker 1: I think you know, U. S. Treasuries. We're starting to 464 00:27:46,640 --> 00:27:50,439 Speaker 1: see a pretty meaningful backup in yields here. We've been 465 00:27:50,520 --> 00:27:54,000 Speaker 1: negative on you know, corporate a government debt for quite 466 00:27:54,040 --> 00:27:58,760 Speaker 1: some time. Here, there's simply better opportunities in this reflationary 467 00:27:58,880 --> 00:28:02,440 Speaker 1: environment to invest equities over fixed income. Thank you very 468 00:28:02,520 --> 00:28:04,679 Speaker 1: much for being with us. Emily Rowland is the head 469 00:28:04,720 --> 00:28:08,719 Speaker 1: of capital markets Research at John Hancock Investments and joining 470 00:28:08,800 --> 00:28:19,760 Speaker 1: us from Boston. Thanks for listening to the Bloomberg Surveillance podcast. 471 00:28:20,119 --> 00:28:25,080 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 472 00:28:25,240 --> 00:28:29,520 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 473 00:28:29,640 --> 00:28:33,520 Speaker 1: Keene before the podcast. You can always catch us worldwide. 474 00:28:33,960 --> 00:28:35,040 Speaker 1: I'm Bloomberg Radio.