1 00:00:00,320 --> 00:00:04,160 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:04,200 --> 00:00:07,640 Speaker 1: their trust in independent registered investment advisors to the tune 3 00:00:07,640 --> 00:00:12,240 Speaker 1: of four trillion dollars. Why learn more and find your 4 00:00:12,240 --> 00:00:27,240 Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:27,280 --> 00:00:31,320 Speaker 1: I'm Tom Keane. Always with Michael McKee. Daily we bring 6 00:00:31,360 --> 00:00:35,280 Speaker 1: you insight from the best in economics, finance, investment, and 7 00:00:35,360 --> 00:00:41,519 Speaker 1: international relations. Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, 8 00:00:41,560 --> 00:00:50,040 Speaker 1: and of course on the Bloomberg. Interesting that central banks 9 00:00:50,040 --> 00:00:53,639 Speaker 1: have become a focal point of criticism on the campaign 10 00:00:53,680 --> 00:00:57,120 Speaker 1: trail Donald Trump last week saying that Janet Yellen was 11 00:00:58,120 --> 00:01:00,760 Speaker 1: running things in a political manner, though whole idea was 12 00:01:01,520 --> 00:01:04,200 Speaker 1: she was trying to make the economy better for Barack 13 00:01:04,240 --> 00:01:07,680 Speaker 1: Obama instead of doing the right thing. UM Luigi's and 14 00:01:07,720 --> 00:01:11,360 Speaker 1: gallis as a professor at the University of Chicago Booth School. 15 00:01:11,400 --> 00:01:15,960 Speaker 1: He joins us now he's a finance professor. Um. This 16 00:01:16,040 --> 00:01:18,960 Speaker 1: has not been isolated to the feed. There's a lot 17 00:01:19,000 --> 00:01:21,720 Speaker 1: of political criticism of the Bank of Japan getting into 18 00:01:22,120 --> 00:01:25,399 Speaker 1: fiscal policy, and of course in Europe there's a long 19 00:01:25,400 --> 00:01:29,240 Speaker 1: tradition of the politicians telling the central bankers what they 20 00:01:29,240 --> 00:01:32,840 Speaker 1: think they should be doing. Uh do you worry at 21 00:01:32,880 --> 00:01:37,039 Speaker 1: all that central banking is going to because it hasn't 22 00:01:37,080 --> 00:01:38,920 Speaker 1: been able to produce the results that used to be 23 00:01:38,959 --> 00:01:41,680 Speaker 1: able to produce, that it's going to become politicized, and 24 00:01:41,800 --> 00:01:46,240 Speaker 1: that central banks will lose effectiveness because the politicians will 25 00:01:46,440 --> 00:01:50,240 Speaker 1: start to rule the roost. First of all, the central 26 00:01:50,280 --> 00:01:54,520 Speaker 1: bank banker become the only game in town. And that's 27 00:01:54,520 --> 00:01:59,160 Speaker 1: the reason why they become so uh, such a lightning wault, 28 00:01:59,360 --> 00:02:04,840 Speaker 1: because too many expectations have been sort of put on them, 29 00:02:05,160 --> 00:02:08,120 Speaker 1: and I don't think that they can deliver everything they 30 00:02:08,160 --> 00:02:13,919 Speaker 1: expected to deliver. So this gap between performance and expectation 31 00:02:14,560 --> 00:02:16,480 Speaker 1: is bound to be there for a while, and it's 32 00:02:16,919 --> 00:02:21,320 Speaker 1: sort of a designed to create a political tension. UM. 33 00:02:21,360 --> 00:02:25,680 Speaker 1: I distinguish very much the three if you want area, 34 00:02:26,240 --> 00:02:30,280 Speaker 1: the United States, Japan, and Europe, because in addition to 35 00:02:30,520 --> 00:02:34,840 Speaker 1: the typical problem that central bankers have in in Japan 36 00:02:35,000 --> 00:02:37,720 Speaker 1: and the United States, in Europe, there is the fact 37 00:02:37,760 --> 00:02:40,639 Speaker 1: also that there is no country. You are a governor 38 00:02:41,080 --> 00:02:44,400 Speaker 1: of a country that doesn't exist, and and so that 39 00:02:44,480 --> 00:02:48,320 Speaker 1: creates an additional set of tension. In the United States, 40 00:02:48,360 --> 00:02:53,000 Speaker 1: we don't discuss monetary policy in term of Alabama versus 41 00:02:53,160 --> 00:02:56,880 Speaker 1: New Jersey. In Europe, we do, and and that's that's 42 00:02:56,880 --> 00:03:00,680 Speaker 1: a in additional source of tension for central bankers in Japan. 43 00:03:00,720 --> 00:03:03,920 Speaker 1: They seem to be willing to come closer together the 44 00:03:03,960 --> 00:03:08,639 Speaker 1: fiscal and monetary authorities in the US and Europe they 45 00:03:08,680 --> 00:03:11,280 Speaker 1: don't at this point. Do you think that that gap 46 00:03:11,360 --> 00:03:14,799 Speaker 1: closes if they can't create inflation over the next year 47 00:03:14,840 --> 00:03:19,360 Speaker 1: or so. And I think that Paul Tucker, was the 48 00:03:19,480 --> 00:03:23,200 Speaker 1: former's vice governor of the of the Bank of England, 49 00:03:23,520 --> 00:03:25,359 Speaker 1: once told me, and I think he's writing a book 50 00:03:25,400 --> 00:03:30,440 Speaker 1: about this, that if the central bank has become too independent, 51 00:03:30,520 --> 00:03:33,560 Speaker 1: at some point there is a political backlash and uh, 52 00:03:33,880 --> 00:03:37,280 Speaker 1: sort of they lose all their independence. This has happening 53 00:03:37,400 --> 00:03:40,080 Speaker 1: in the thirties and there is a risk of this 54 00:03:40,160 --> 00:03:44,200 Speaker 1: is happening today. I we think. I think that the 55 00:03:44,240 --> 00:03:49,200 Speaker 1: situation of Japan is the result of twenty years of 56 00:03:50,080 --> 00:03:53,520 Speaker 1: low growth, to say, sort of zero growth, and after 57 00:03:53,600 --> 00:03:59,480 Speaker 1: that politicians express a preference, a political preference that comes 58 00:03:59,520 --> 00:04:01,720 Speaker 1: not from the fact that they are crazy, by the 59 00:04:01,720 --> 00:04:05,680 Speaker 1: fact that the people demand voters demand more intervention. And 60 00:04:05,720 --> 00:04:10,880 Speaker 1: so I think that in Japan, the governor responds more 61 00:04:10,920 --> 00:04:15,800 Speaker 1: to a political demand of voters in Japan. I think 62 00:04:15,800 --> 00:04:20,200 Speaker 1: that in the United States there is more of a isolation, 63 00:04:20,720 --> 00:04:23,080 Speaker 1: and in principle, in Europe there is the highest level 64 00:04:23,120 --> 00:04:26,880 Speaker 1: of isolation. That the European Center Bank has been designed 65 00:04:26,920 --> 00:04:32,039 Speaker 1: to be completely independent from every single state, and changing 66 00:04:32,080 --> 00:04:35,240 Speaker 1: it will require basically the appool of everybody, which is 67 00:04:35,279 --> 00:04:39,320 Speaker 1: as impossible as you can get. Luis Jim Sorry, Banks quiet. 68 00:04:39,320 --> 00:04:42,400 Speaker 1: The first five minutes forty seven seconds of the show, Mike, 69 00:04:42,440 --> 00:04:44,719 Speaker 1: I'm over here with Arthur Levitt picking out our Super 70 00:04:44,760 --> 00:04:48,480 Speaker 1: Bowl tickets, giants, and you're giants to no. I mean, 71 00:04:48,839 --> 00:04:50,479 Speaker 1: I mean they'll talk about Arthur later in the show. 72 00:04:50,640 --> 00:04:52,880 Speaker 1: We will. I mean that will come up for those 73 00:04:52,880 --> 00:04:54,839 Speaker 1: of you worldwide. It's it's always fun to see the 74 00:04:54,839 --> 00:04:59,359 Speaker 1: start of the football season where certain teams stumble and 75 00:04:59,440 --> 00:05:02,120 Speaker 1: others don't. Good morning, everyone, Luigi. You and I have 76 00:05:02,160 --> 00:05:06,600 Speaker 1: talked a lot this morning about some of the unsettlements 77 00:05:06,640 --> 00:05:09,560 Speaker 1: of this September. Are we anywhere in the vicinity of 78 00:05:09,720 --> 00:05:14,839 Speaker 1: orthodox economics? Are you teaching oldline economics at Boost School? 79 00:05:14,839 --> 00:05:19,160 Speaker 1: Are you teaching something all new? My great fortune is 80 00:05:19,240 --> 00:05:22,279 Speaker 1: I teach actually finance, and so I don't need to 81 00:05:22,320 --> 00:05:25,880 Speaker 1: go into the macroeconomics component, which is more challenging these 82 00:05:26,120 --> 00:05:28,679 Speaker 1: so so negative rates come on, you're teaching negative rates. 83 00:05:28,880 --> 00:05:34,600 Speaker 1: There's god, is there an orthodoxy to negative rates? Um, Actually, 84 00:05:35,279 --> 00:05:38,520 Speaker 1: negative rates are not that strange historically. If we think 85 00:05:38,560 --> 00:05:41,720 Speaker 1: about we have rates, we have rates have been negative 86 00:05:41,800 --> 00:05:44,880 Speaker 1: for a long time in the seventies. It's just the 87 00:05:44,960 --> 00:05:50,440 Speaker 1: nominal component. And in Chicago we believe that, Um, sort 88 00:05:50,480 --> 00:05:52,520 Speaker 1: of you should look at we are viables, and so 89 00:05:52,800 --> 00:05:55,480 Speaker 1: I don't think it's such a sort of dramatic change. 90 00:05:55,560 --> 00:05:57,680 Speaker 1: But the fact is, if Mike McKee has a mortgage 91 00:05:57,720 --> 00:06:01,160 Speaker 1: on his seven bedroom flat over in the aside six 92 00:06:01,480 --> 00:06:04,240 Speaker 1: six seven bethrooms, five bears, or if two or three 93 00:06:04,240 --> 00:06:09,760 Speaker 1: fireplaces four four, good for you. But Luigi, if only 94 00:06:10,000 --> 00:06:14,039 Speaker 1: my home example, if my home mortgage comes down, I 95 00:06:14,120 --> 00:06:17,039 Speaker 1: get the effect on the public. What's the effect of 96 00:06:17,120 --> 00:06:21,040 Speaker 1: negative rates? If they don't transmit through to individual bank 97 00:06:21,040 --> 00:06:25,880 Speaker 1: accounts are almost like an institutional artifact. I think that 98 00:06:26,120 --> 00:06:30,680 Speaker 1: they will start to to trickle down. Actually, if we're 99 00:06:30,720 --> 00:06:33,680 Speaker 1: seeing countries like Switzerland that have been playing with the 100 00:06:34,320 --> 00:06:37,160 Speaker 1: negative rates for longer that now, at least for a 101 00:06:37,240 --> 00:06:42,320 Speaker 1: large deposit, you have to pay to deposit, and for 102 00:06:42,360 --> 00:06:45,160 Speaker 1: small deposits they you don't formally have to pay, but 103 00:06:45,279 --> 00:06:47,400 Speaker 1: they charge you if he here and if he does so, 104 00:06:47,520 --> 00:06:50,600 Speaker 1: basically who are in the negative rate as well? The 105 00:06:50,680 --> 00:06:53,840 Speaker 1: only thing we don't really know, because we're now really 106 00:06:53,880 --> 00:06:57,480 Speaker 1: tested this bound is how low you can go until 107 00:06:57,520 --> 00:07:00,800 Speaker 1: people started to hold cash, and you know, holding cash 108 00:07:00,880 --> 00:07:04,200 Speaker 1: is not simple. That our risk and sons of Forth 109 00:07:04,600 --> 00:07:07,560 Speaker 1: and the easy b is trying to make it harder 110 00:07:07,600 --> 00:07:11,960 Speaker 1: by retiring the five hundred uer notes UH and songs 111 00:07:12,000 --> 00:07:14,560 Speaker 1: of Forth, But we don't know how law you can 112 00:07:14,640 --> 00:07:17,760 Speaker 1: you can go. That's really the only technical issue that 113 00:07:17,800 --> 00:07:20,960 Speaker 1: we have negative We have great negative rates. But what 114 00:07:21,000 --> 00:07:23,520 Speaker 1: seems to be happening in practice it's all theory, but 115 00:07:23,680 --> 00:07:25,920 Speaker 1: in practice banks seem to be pulling back from wanting 116 00:07:25,960 --> 00:07:30,040 Speaker 1: to make loans because of the cost to them. Actually 117 00:07:30,920 --> 00:07:34,640 Speaker 1: it depends because if you are really if your alternative 118 00:07:34,720 --> 00:07:38,040 Speaker 1: costs is to deposit at the central bank and pay 119 00:07:38,120 --> 00:07:41,200 Speaker 1: for it, making a loan even at the zero rate 120 00:07:41,320 --> 00:07:45,400 Speaker 1: might might be attractive. I think that Unfortunately, where we've 121 00:07:45,480 --> 00:07:50,880 Speaker 1: seen UH negative rates on on the positive central bank, 122 00:07:50,960 --> 00:07:54,240 Speaker 1: like in Europe, the banking sector is not particularly healthy, 123 00:07:54,320 --> 00:07:57,720 Speaker 1: so UH they withdraw from making loans altogether, but but 124 00:07:58,000 --> 00:08:03,679 Speaker 1: with a healthy banking sector. UH, negative rates at the 125 00:08:03,720 --> 00:08:09,240 Speaker 1: Central Bank should push more loans into the economy. Oh, Michael, 126 00:08:09,360 --> 00:08:13,000 Speaker 1: this is great, Chair of the Fed. A monetary policy game. 127 00:08:13,640 --> 00:08:16,040 Speaker 1: You can plug in how many quarters you have remaining 128 00:08:16,040 --> 00:08:19,280 Speaker 1: in your term? You can plug in the Fed. This 129 00:08:19,320 --> 00:08:22,760 Speaker 1: is what they do at Booth School. We'll get We'll 130 00:08:22,800 --> 00:08:27,600 Speaker 1: get some people playing that. I guess didn't run Paul's 131 00:08:27,600 --> 00:08:32,880 Speaker 1: ever played this game. No, Um, you were mentioning football 132 00:08:33,080 --> 00:08:36,319 Speaker 1: and I was talking with the Luigi's and Gallis about um. 133 00:08:36,360 --> 00:08:40,400 Speaker 1: He said he only follows real football. He follows a 134 00:08:40,520 --> 00:08:42,440 Speaker 1: C Milan and La Liga, which is not having a 135 00:08:42,480 --> 00:08:45,600 Speaker 1: good year. Italy in general not having a good year, 136 00:08:45,720 --> 00:08:48,040 Speaker 1: which sort of brings us to where I wanted to 137 00:08:48,080 --> 00:08:52,079 Speaker 1: go with this. UH. Last week the European leaders got 138 00:08:52,080 --> 00:08:54,640 Speaker 1: together and there was quite a break between Mateo Renzy, 139 00:08:54,640 --> 00:08:58,000 Speaker 1: the Prime Minister of Italy, and the rest of the Europeans, 140 00:08:58,040 --> 00:09:01,760 Speaker 1: and especially Angela Merkel. They would not let the Italians 141 00:09:01,800 --> 00:09:05,640 Speaker 1: have budget flexibility to deal with their banking crisis. Are 142 00:09:05,679 --> 00:09:09,360 Speaker 1: we starting to see the unraveling of Europe? I mean, 143 00:09:09,400 --> 00:09:11,559 Speaker 1: the question that went through my mind is did the 144 00:09:11,600 --> 00:09:15,640 Speaker 1: bridge get it right? Certainly, there is a lot of tension. 145 00:09:15,679 --> 00:09:19,839 Speaker 1: I think that the strong positions taken by Matteo and 146 00:09:19,920 --> 00:09:24,200 Speaker 1: see were in part just internal tactic. There is a 147 00:09:24,320 --> 00:09:27,600 Speaker 1: big anti European sentiment in Italy and so he needs 148 00:09:27,640 --> 00:09:31,319 Speaker 1: to cater to to this. But there is also some substance. 149 00:09:31,840 --> 00:09:37,240 Speaker 1: As I was saying earlier in Bratislava, we didn't get 150 00:09:37,400 --> 00:09:40,160 Speaker 1: a sense that you are was moving ahead after the 151 00:09:40,160 --> 00:09:44,480 Speaker 1: Brexit vote. We expected some plan to show more unity, 152 00:09:44,679 --> 00:09:48,800 Speaker 1: more sort of common purposes, more direction. We have not 153 00:09:48,880 --> 00:09:52,320 Speaker 1: seen any of that. So um, I think that there 154 00:09:52,320 --> 00:09:57,079 Speaker 1: are some strong tensions to sort of break down. You. 155 00:09:57,520 --> 00:10:01,679 Speaker 1: The difficulties is that uh is very hard to get 156 00:10:01,720 --> 00:10:05,320 Speaker 1: out of the ure without killing yourself. So that's what 157 00:10:05,760 --> 00:10:08,880 Speaker 1: at the moment is keeping at least the your's on together. Well, 158 00:10:08,880 --> 00:10:12,400 Speaker 1: do you think the Italian referendum is going to be 159 00:10:12,520 --> 00:10:16,199 Speaker 1: as important to the future of Europe and European markets 160 00:10:16,280 --> 00:10:20,160 Speaker 1: as some people have suggested. I think it's as important 161 00:10:20,240 --> 00:10:22,079 Speaker 1: as you make it, in the sense that if you 162 00:10:22,080 --> 00:10:27,320 Speaker 1: look at the substance, is not that crucial because it's 163 00:10:27,360 --> 00:10:31,439 Speaker 1: a constitutional reform that is trying to get away from 164 00:10:32,320 --> 00:10:38,120 Speaker 1: a system that is based on two chambers with no differentiation, 165 00:10:38,440 --> 00:10:42,480 Speaker 1: and it's very baroque and very difficult to manage. It's 166 00:10:42,520 --> 00:10:44,800 Speaker 1: not going all the way to one chamber. Is not 167 00:10:44,880 --> 00:10:48,439 Speaker 1: really the linear reform that everybody would expect. So there's 168 00:10:48,440 --> 00:10:51,600 Speaker 1: a lot of the debate whether half of the reform 169 00:10:51,720 --> 00:10:55,120 Speaker 1: is better than a reform. Now, if you sort of 170 00:10:55,480 --> 00:10:58,839 Speaker 1: then say that if Wenzy lose the referendum, Wenzy will 171 00:10:58,880 --> 00:11:02,160 Speaker 1: go home and the warden fall apart, of course you 172 00:11:02,240 --> 00:11:05,360 Speaker 1: might have some self fulfiliate expectation in this sense. I 173 00:11:05,400 --> 00:11:08,400 Speaker 1: don't think that that's the case. What is the difference 174 00:11:08,720 --> 00:11:16,480 Speaker 1: between Italian populism and American populism? Um, Actually you have 175 00:11:16,600 --> 00:11:20,760 Speaker 1: to differentiade various type of Italian populace. And since we 176 00:11:20,840 --> 00:11:26,360 Speaker 1: do have the Northern League that is um sort of 177 00:11:26,440 --> 00:11:29,720 Speaker 1: now featuring a populist which is quite similar to the 178 00:11:29,720 --> 00:11:32,600 Speaker 1: one of the National Front in France and actually quite 179 00:11:32,640 --> 00:11:35,320 Speaker 1: similar to the one of Donald Trump. In fact, the 180 00:11:35,440 --> 00:11:39,040 Speaker 1: leader of the Norther Link came here and trying to 181 00:11:39,080 --> 00:11:43,079 Speaker 1: connect with Trump and link with Trump. And more interesting 182 00:11:43,280 --> 00:11:47,400 Speaker 1: is actually the Five Star movement populace because it is 183 00:11:47,679 --> 00:11:50,800 Speaker 1: neither from the left nor the right, as some left 184 00:11:50,800 --> 00:11:54,120 Speaker 1: wing components and right wing components. UM. And it's more 185 00:11:54,320 --> 00:12:00,760 Speaker 1: like broad based populis like we add in the United 186 00:12:00,800 --> 00:12:03,400 Speaker 1: States at the beginning of the twentieth century. End of 187 00:12:03,440 --> 00:12:07,400 Speaker 1: the professor, thank you so much, Louis's and Gollis with 188 00:12:07,880 --> 00:12:11,160 Speaker 1: the bus school, Mike, we're a news organization headlines out 189 00:12:11,160 --> 00:12:14,600 Speaker 1: on Mr Trump, and I want to be direct, folks, 190 00:12:15,000 --> 00:12:17,240 Speaker 1: We've got to report these headlines to you. But what 191 00:12:17,320 --> 00:12:20,160 Speaker 1: I really would want to say the images that we 192 00:12:20,200 --> 00:12:23,320 Speaker 1: see from New York that John Tucker, Michael McKee and 193 00:12:23,320 --> 00:12:26,360 Speaker 1: I and our whole staff have along with all New Yorkers, 194 00:12:26,360 --> 00:12:29,080 Speaker 1: have lived with for the last forty eight hours. UM. 195 00:12:29,160 --> 00:12:33,480 Speaker 1: Here shots against the police are borderline unforgivable. The police 196 00:12:33,480 --> 00:12:36,280 Speaker 1: have been out here, they've been at risk. Uh. Certainly 197 00:12:36,280 --> 00:12:38,559 Speaker 1: with the New Jersey John, with the New Jersey robot 198 00:12:39,240 --> 00:12:42,400 Speaker 1: explosion that was the Elizabeth station that Saturday, there was 199 00:12:42,440 --> 00:12:45,439 Speaker 1: also been a trash can down at the shore. You 200 00:12:45,520 --> 00:12:48,800 Speaker 1: saw Mayor to Blasio and Governor Cuomo, the governor of 201 00:12:48,840 --> 00:12:51,960 Speaker 1: the state of New York walking Michael down the Dubris 202 00:12:51,960 --> 00:12:55,640 Speaker 1: student Street. And UM for Mr Trump to say police 203 00:12:55,679 --> 00:12:59,120 Speaker 1: don't act because afraid of profile and acquisitions. Mr Trump 204 00:12:59,120 --> 00:13:01,760 Speaker 1: says police, quote know who A lot of these people 205 00:13:01,880 --> 00:13:06,200 Speaker 1: are just completely goes against the heroism and duty of 206 00:13:06,280 --> 00:13:09,280 Speaker 1: service that I've seen the lasts A man who insisted 207 00:13:09,360 --> 00:13:13,320 Speaker 1: until Friday President Obama was not born in the United States, 208 00:13:14,280 --> 00:13:16,800 Speaker 1: And uh, you know what are you saying? Yeah? And 209 00:13:16,800 --> 00:13:18,640 Speaker 1: I well, I want to say this, folks. And we 210 00:13:18,640 --> 00:13:21,600 Speaker 1: didn't mention Michael Bloomberg here, but as we mentioned Mereda Plazio, 211 00:13:21,640 --> 00:13:24,800 Speaker 1: of course Mr Bloomberg is majority owner of Bloomberg LP 212 00:13:25,000 --> 00:13:28,480 Speaker 1: in this television and radio station as well. Mr Trump 213 00:13:28,520 --> 00:13:31,200 Speaker 1: out with headlines those on Fox News, and we'll have 214 00:13:31,240 --> 00:13:44,480 Speaker 1: more on that through the week, no doubt. I'd like 215 00:13:44,520 --> 00:13:48,080 Speaker 1: to look at the Wells Fargo uproar through the eyes 216 00:13:48,280 --> 00:13:52,160 Speaker 1: of the cell side analyst who has by hold or 217 00:13:52,280 --> 00:13:56,920 Speaker 1: Sell Renn and Hawking at ubs rights up on Wells Fargo. 218 00:13:57,800 --> 00:14:00,199 Speaker 1: And I believe his call unless he wants to tell 219 00:14:00,240 --> 00:14:03,480 Speaker 1: me I'm wrong? Is s E. L. L. Brendan. Good morning, 220 00:14:03,679 --> 00:14:06,319 Speaker 1: Good morning Tom. How you doing? Oh? I think I'm good. 221 00:14:06,520 --> 00:14:10,880 Speaker 1: How do you take judicial action or whatever? We saw 222 00:14:11,040 --> 00:14:16,440 Speaker 1: fines with Wells Fargo and folded into securities analysis. Yeah, 223 00:14:16,720 --> 00:14:18,600 Speaker 1: it's a it's a very hard one. And of course, 224 00:14:18,679 --> 00:14:23,240 Speaker 1: my my cell rating, which we initiated on in I 225 00:14:23,280 --> 00:14:26,000 Speaker 1: want to stay with the March of this year. UH 226 00:14:26,280 --> 00:14:31,120 Speaker 1: had certainly I wasn't calling for this right, um, but 227 00:14:31,760 --> 00:14:35,400 Speaker 1: my my thesis was based around not only a worry 228 00:14:35,440 --> 00:14:39,800 Speaker 1: that earnings estimates were too high UH for particularly using 229 00:14:41,120 --> 00:14:44,720 Speaker 1: and those have dropped steadily from about four or fifty 230 00:14:45,080 --> 00:14:48,360 Speaker 1: when we initiated to now just about four dollars twenty cents, 231 00:14:48,400 --> 00:14:51,320 Speaker 1: so that has actually worked out reasonably well. We were 232 00:14:51,320 --> 00:14:54,240 Speaker 1: also concerned though, that that the valuation just didn't leave 233 00:14:54,320 --> 00:14:58,360 Speaker 1: much room for error. Um. The idea that you would 234 00:14:58,440 --> 00:15:03,320 Speaker 1: value a Siffy, a global Ciffy at the same level 235 00:15:03,360 --> 00:15:08,640 Speaker 1: as you would value a regional bank average didn't seem appropriate. Um. 236 00:15:08,760 --> 00:15:11,600 Speaker 1: And maybe it has to do with scar tissue from covering, 237 00:15:11,680 --> 00:15:14,240 Speaker 1: you know, the five bulge bracket investment banks here in 238 00:15:14,280 --> 00:15:17,000 Speaker 1: the States and seeing how much the regulators is just 239 00:15:17,480 --> 00:15:21,600 Speaker 1: beating up on those those firms. Um. We were worried about, um, 240 00:15:21,800 --> 00:15:24,160 Speaker 1: the the idea that you had a big premium with 241 00:15:24,280 --> 00:15:28,920 Speaker 1: no regulatory discount, and unfortunately, now Wells is seeing how 242 00:15:29,560 --> 00:15:33,240 Speaker 1: harsh the kleague lights can be turned on when a 243 00:15:33,360 --> 00:15:38,000 Speaker 1: g Siffy stuff some stumbles but you were early on 244 00:15:38,040 --> 00:15:44,560 Speaker 1: the call, and uh, you talked about valuations. Subtract the 245 00:15:44,600 --> 00:15:49,440 Speaker 1: recent scandal from your evaluations. If if if the price 246 00:15:49,520 --> 00:15:52,880 Speaker 1: came down, would it still be all buy? And the 247 00:15:52,920 --> 00:15:56,160 Speaker 1: reason I asked that is because for a long time 248 00:15:56,200 --> 00:15:58,520 Speaker 1: everybody said this was a different bank. This is not 249 00:15:58,640 --> 00:16:01,520 Speaker 1: the same as the Wall Street investment banking model. They 250 00:16:01,560 --> 00:16:05,120 Speaker 1: stick to their knitting. They do credit intermediation, do a 251 00:16:05,120 --> 00:16:07,960 Speaker 1: lot of mortgages, and so therefore they're insulated from a 252 00:16:08,040 --> 00:16:11,720 Speaker 1: lot of the other's problems. Yeah, we'll just be clear. 253 00:16:11,880 --> 00:16:14,840 Speaker 1: My rating is not a buy. Uh no, No, I 254 00:16:14,840 --> 00:16:16,840 Speaker 1: mean would it would it go back? Would it become 255 00:16:17,320 --> 00:16:21,320 Speaker 1: by well, it wouldn't go back because I initiated with itself. 256 00:16:21,400 --> 00:16:25,640 Speaker 1: But but but avoiding the stick worker in here for detail. Um, 257 00:16:26,360 --> 00:16:29,680 Speaker 1: of course, there's a price right at which every security, 258 00:16:29,680 --> 00:16:31,960 Speaker 1: in my opinion, has a price at which it becomes attractive. 259 00:16:32,280 --> 00:16:35,480 Speaker 1: Right now, I think that the idea that we've got 260 00:16:35,880 --> 00:16:40,080 Speaker 1: um a worry to our rating because of some sort 261 00:16:40,080 --> 00:16:44,200 Speaker 1: of catalyst within the next couple of months, I'd say 262 00:16:44,200 --> 00:16:46,680 Speaker 1: that risk is low in at least in our assessment, 263 00:16:47,360 --> 00:16:51,280 Speaker 1: the risk is low. Um. With that being said, uh, 264 00:16:51,320 --> 00:16:55,200 Speaker 1: you know, we've seen the premium come in a great 265 00:16:55,240 --> 00:16:58,400 Speaker 1: deal on valuation at this point, it's on the next 266 00:16:58,400 --> 00:17:01,040 Speaker 1: twelve months consensus space. This it said about the same 267 00:17:01,080 --> 00:17:06,920 Speaker 1: valuation as JP Morgan um, and that to me feels 268 00:17:07,040 --> 00:17:11,720 Speaker 1: less inappropriate than where it was before. UM for sure. 269 00:17:12,000 --> 00:17:15,440 Speaker 1: But when I think about risks to the upside um, 270 00:17:16,040 --> 00:17:18,040 Speaker 1: you know, I think they're pretty limited here in the 271 00:17:18,040 --> 00:17:21,160 Speaker 1: near term. Do you know what's on the balance sheet? 272 00:17:21,880 --> 00:17:24,640 Speaker 1: It's a critical question to me, and that is Mike said, 273 00:17:24,640 --> 00:17:29,479 Speaker 1: Wells Fargo has always been different. That translates into the 274 00:17:29,560 --> 00:17:31,399 Speaker 1: idea that we know what's on the balance sheet, do 275 00:17:31,480 --> 00:17:35,000 Speaker 1: we well? I mean, that's the issue with all banks. 276 00:17:35,040 --> 00:17:38,360 Speaker 1: I think, um, you know, part of our concern with 277 00:17:38,800 --> 00:17:43,199 Speaker 1: earnings estimates were that there is um more risk in 278 00:17:43,240 --> 00:17:46,679 Speaker 1: the auto loan book than we felt as though investors 279 00:17:46,720 --> 00:17:51,359 Speaker 1: were aware of and expecting. Um. You know, Wells has 280 00:17:51,359 --> 00:17:56,040 Speaker 1: stated often that of their auto loan book is subprime, 281 00:17:56,160 --> 00:17:59,080 Speaker 1: but that's based upon their internal models. If you use 282 00:17:59,320 --> 00:18:02,760 Speaker 1: Ico scores, the number is substantially higher. It's something like 283 00:18:02,800 --> 00:18:05,639 Speaker 1: the quarter. And if you want to include near prime, 284 00:18:05,760 --> 00:18:08,240 Speaker 1: in other words, say just a non prime, sub prime 285 00:18:08,280 --> 00:18:11,960 Speaker 1: and near prime, you know, it's it's roughly of that book. 286 00:18:12,359 --> 00:18:14,680 Speaker 1: So you know, in our view there a full spectrum 287 00:18:14,760 --> 00:18:18,800 Speaker 1: lender and and uh, most people don't treat them that way. 288 00:18:19,280 --> 00:18:22,760 Speaker 1: They've also been growing their cardbook rapidly. Uh. The C 289 00:18:22,960 --> 00:18:26,280 Speaker 1: and I book is heavily toted to energy and most 290 00:18:26,320 --> 00:18:29,359 Speaker 1: of that is below investment grade. We've seen a great 291 00:18:29,400 --> 00:18:31,520 Speaker 1: deal of attention brought to that here in the last 292 00:18:31,600 --> 00:18:35,320 Speaker 1: six months. So you know, I don't know how to 293 00:18:35,320 --> 00:18:37,800 Speaker 1: answer your question directly, Tom, but what I would generally 294 00:18:37,840 --> 00:18:41,280 Speaker 1: say is that, uh, there's probably more risk in that 295 00:18:41,320 --> 00:18:45,959 Speaker 1: loan book than most investors ascribe now very quickly. Uh, 296 00:18:46,119 --> 00:18:49,480 Speaker 1: would a change in management change in Mr Stumps office 297 00:18:49,560 --> 00:18:53,439 Speaker 1: make a difference? Well, I mean, if you if you 298 00:18:53,560 --> 00:18:57,520 Speaker 1: mean by that might would make a difference to my rating. Uh, No, 299 00:18:57,720 --> 00:18:59,920 Speaker 1: I mean I don't. I don't think the management theme 300 00:19:00,640 --> 00:19:04,360 Speaker 1: is a negative. In fact, I think it's a very 301 00:19:04,359 --> 00:19:07,720 Speaker 1: well run bank. We said that in our initiation. UM, 302 00:19:07,760 --> 00:19:11,960 Speaker 1: we don't have a structural concern about them. This development 303 00:19:12,760 --> 00:19:15,560 Speaker 1: is certainly going to crank the heat up on this 304 00:19:15,640 --> 00:19:19,560 Speaker 1: management team. UM, but we've seen other strong management teams 305 00:19:19,560 --> 00:19:23,120 Speaker 1: survive equal amounts to keat right and on the back 306 00:19:23,160 --> 00:19:26,240 Speaker 1: of the whale trade diamonds under pressure for a while 307 00:19:26,280 --> 00:19:29,480 Speaker 1: and he's still here though. Okay, very valuable, Thank you 308 00:19:29,560 --> 00:19:33,080 Speaker 1: so much. Brendan Hawkins with this this morning from ubs 309 00:19:33,200 --> 00:19:41,440 Speaker 1: on Well's far worldwide. This is Bloomberg. Who you put 310 00:19:41,440 --> 00:19:45,360 Speaker 1: your trust in? Matters. Investors have put their trust in 311 00:19:45,359 --> 00:19:49,600 Speaker 1: independent registered investment advisors to the tune of four trillion dollars. 312 00:19:50,320 --> 00:19:54,119 Speaker 1: Why they see their role is to serve, not sell. 313 00:19:55,000 --> 00:19:57,320 Speaker 1: That's why Charles Schwab is committed to the success of 314 00:19:57,359 --> 00:20:02,000 Speaker 1: over seven thousand independent financial advice who's who passionately dedicate 315 00:20:02,040 --> 00:20:06,240 Speaker 1: themselves to helping people achieve their financial goals. Learn more 316 00:20:06,680 --> 00:20:14,360 Speaker 1: and find your independent advisor dot com. Well, the good 317 00:20:14,359 --> 00:20:16,919 Speaker 1: news is there's only that we're down to the fifty 318 00:20:17,000 --> 00:20:21,200 Speaker 1: day mark in the election countdown, only fifty days left 319 00:20:21,240 --> 00:20:24,639 Speaker 1: in this um election season. And I know a lot 320 00:20:24,680 --> 00:20:28,639 Speaker 1: of people would be celebrating that news. Jack Gabriel, Um, 321 00:20:29,000 --> 00:20:30,640 Speaker 1: I don't know if you'd be celebrating or not as 322 00:20:30,640 --> 00:20:33,600 Speaker 1: a voter, As an American, you probably would be. But 323 00:20:33,640 --> 00:20:35,840 Speaker 1: as somebody who has to write about all this stuff, 324 00:20:36,160 --> 00:20:38,240 Speaker 1: it's got to be great for your business. He has 325 00:20:38,359 --> 00:20:43,720 Speaker 1: at Capital Alpha writes about politics for them a long 326 00:20:43,760 --> 00:20:47,840 Speaker 1: time Washington Observer, and you got to say, um, you 327 00:20:47,880 --> 00:20:52,880 Speaker 1: always think it can't get any worse than it does. Chuck. Yeah, yes, 328 00:20:53,200 --> 00:20:56,080 Speaker 1: good morning, Thanks for having me on you. You've got 329 00:20:56,080 --> 00:20:58,800 Speaker 1: to worry when a political proctologist has as much of 330 00:20:58,960 --> 00:21:01,760 Speaker 1: business as as I do right now. So guys like 331 00:21:01,840 --> 00:21:06,280 Speaker 1: I do right now. But there's some early, eerie similarities 332 00:21:06,640 --> 00:21:09,159 Speaker 1: going on here, and uh, you know, we have a 333 00:21:09,200 --> 00:21:13,040 Speaker 1: backdrop with all these you know, these four violent, seemingly 334 00:21:13,160 --> 00:21:16,600 Speaker 1: terrorist events over the weekend. Uh you know, the backdrop 335 00:21:16,760 --> 00:21:19,640 Speaker 1: is that Hillary Clinton's lead in national polls is down 336 00:21:19,680 --> 00:21:23,600 Speaker 1: to less than one percent. So, uh, you know, the 337 00:21:23,600 --> 00:21:27,640 Speaker 1: hottest hand in the political forecasting business has been made 338 00:21:27,680 --> 00:21:30,119 Speaker 1: silver at five thirty eight. And he said there's no 339 00:21:30,200 --> 00:21:32,639 Speaker 1: need for Democrats to panic unless it's like, you know, 340 00:21:32,680 --> 00:21:36,040 Speaker 1: the polls say the same thing a week from now. Well, 341 00:21:36,080 --> 00:21:38,240 Speaker 1: you know, these these terrorist attacks get us off to 342 00:21:38,320 --> 00:21:41,560 Speaker 1: a heck of a start at the beginning of this week. Yeah. 343 00:21:41,600 --> 00:21:44,199 Speaker 1: I I saw that story, and I think kind of 344 00:21:44,240 --> 00:21:47,880 Speaker 1: what he was pointing at is next a week from 345 00:21:47,880 --> 00:21:51,080 Speaker 1: tomorrow morning, what are we all going to be talking about. 346 00:21:51,160 --> 00:21:53,320 Speaker 1: I mean, it's going to be the day after the debate, 347 00:21:53,440 --> 00:21:59,280 Speaker 1: and that it could be definitive. Interesting piece out today 348 00:21:59,359 --> 00:22:05,480 Speaker 1: from ABC News pollsters who also do work for US 349 00:22:05,920 --> 00:22:09,520 Speaker 1: UH suggesting debates in the past, don't you know, Gary Langer, 350 00:22:09,600 --> 00:22:12,920 Speaker 1: reporting debates in the past don't usually move the needle, 351 00:22:13,200 --> 00:22:17,120 Speaker 1: but I would imagine listen could be really, really really important. Well, yeah, 352 00:22:17,160 --> 00:22:19,960 Speaker 1: there was. There was just one of those golden moments 353 00:22:20,000 --> 00:22:23,800 Speaker 1: back in the campaign between Reagan and Carter. And it 354 00:22:23,840 --> 00:22:26,280 Speaker 1: wasn't the first debate. I believe it was the second one. 355 00:22:26,359 --> 00:22:29,680 Speaker 1: But you know, there has been really a great deal 356 00:22:29,720 --> 00:22:33,040 Speaker 1: of anxiety. You had the Iranian hostage situation going on. 357 00:22:33,520 --> 00:22:37,280 Speaker 1: A lot of Americans felt very helpless throughout that whole period. 358 00:22:37,640 --> 00:22:40,359 Speaker 1: They want to change, but there was this issue about 359 00:22:40,400 --> 00:22:44,840 Speaker 1: the Reagan's viability, which he seemed to finally answer uh 360 00:22:44,920 --> 00:22:48,320 Speaker 1: in that second debate. And you know, it's interesting these 361 00:22:48,640 --> 00:22:52,280 Speaker 1: there's this sense of in the public right now that's 362 00:22:52,320 --> 00:22:55,399 Speaker 1: that's kind of reinforced by these attacks that you know, 363 00:22:55,480 --> 00:22:59,239 Speaker 1: they feel a helplessness about homegrown terrorism. UH. And some 364 00:22:59,320 --> 00:23:01,480 Speaker 1: would say the LEAs and ability to deal with or 365 00:23:01,520 --> 00:23:04,880 Speaker 1: even call it what it is. So you know, there's 366 00:23:05,000 --> 00:23:08,120 Speaker 1: kind of a risk if this continues to amp up, 367 00:23:08,440 --> 00:23:10,480 Speaker 1: it works to Trump's advantage, and then if he does 368 00:23:10,560 --> 00:23:13,560 Speaker 1: have a you know, a Golden Reagan like moment in 369 00:23:13,600 --> 00:23:17,640 Speaker 1: the debates, it could really make a for major breakout. 370 00:23:17,800 --> 00:23:20,160 Speaker 1: Helped me with a question I couldn't answer this weekend 371 00:23:20,200 --> 00:23:25,240 Speaker 1: for people spontificating about politics, Chuck Gabriel, Which states matter 372 00:23:25,400 --> 00:23:28,840 Speaker 1: right now? Um, there are about ten states that matter, 373 00:23:28,880 --> 00:23:32,000 Speaker 1: but me within that, yeah, but really probably only more 374 00:23:32,080 --> 00:23:37,959 Speaker 1: like six. And where Trump is really shocked the Democratic 375 00:23:38,240 --> 00:23:42,520 Speaker 1: strategists and stakeholders is that he's pulled ahead in Iowa 376 00:23:42,600 --> 00:23:47,359 Speaker 1: and Nevada, and most importantly in Ohio and Florida. Um 377 00:23:47,680 --> 00:23:52,000 Speaker 1: Mitt Romney won two six electoral votes. You need to seventy, 378 00:23:52,240 --> 00:23:55,480 Speaker 1: so Trump needs sixty four and to hold all of 379 00:23:55,600 --> 00:23:58,680 Speaker 1: Romney states, and you know, Florida gets your twenty nine, 380 00:23:59,160 --> 00:24:03,600 Speaker 1: Ohio eight team, in Iowa, Nevada six apiece. So where 381 00:24:03,600 --> 00:24:07,520 Speaker 1: he'd actually hold onto those those four states, he'd be 382 00:24:07,600 --> 00:24:10,200 Speaker 1: within less than a half a dozen votes of getting there. 383 00:24:10,240 --> 00:24:14,360 Speaker 1: And he's also you know, risen a little bit in Minnesota. 384 00:24:14,680 --> 00:24:18,920 Speaker 1: Excuse me, in Michigan, I should say uh, and and 385 00:24:19,000 --> 00:24:22,280 Speaker 1: a couple of other states. So in Colorado, so there's 386 00:24:22,320 --> 00:24:25,960 Speaker 1: there's really uh for the first time in a conceivable. 387 00:24:26,359 --> 00:24:30,600 Speaker 1: It's now conceivable that he has a viable path to election, 388 00:24:30,800 --> 00:24:33,200 Speaker 1: and it's begun to really freak out a lot of people. 389 00:24:34,640 --> 00:24:39,080 Speaker 1: Why what's happened to to change this? When you look 390 00:24:39,119 --> 00:24:44,560 Speaker 1: at what he's done recently with an incomprehensible economic plan 391 00:24:44,640 --> 00:24:49,520 Speaker 1: that has been widely panned, his comments about disarming Hillary 392 00:24:49,520 --> 00:24:55,040 Speaker 1: Clinton's secret service detail, uh, and the whole birth thing, um, 393 00:24:55,560 --> 00:24:59,240 Speaker 1: the lies about that, how does he do it? Well, 394 00:24:59,400 --> 00:25:01,880 Speaker 1: let's just just say I don't know that he deserves 395 00:25:01,960 --> 00:25:04,920 Speaker 1: much credit at all. Mrs Clinton had a very bad 396 00:25:05,119 --> 00:25:09,679 Speaker 1: literally and figuratively a stumble last weekend, and you know, 397 00:25:09,800 --> 00:25:12,679 Speaker 1: with regard to her pneumonia and the seeming dissembling of 398 00:25:12,720 --> 00:25:16,600 Speaker 1: a campaign about about that, and and then that comment 399 00:25:16,640 --> 00:25:19,399 Speaker 1: about the deplorable, So she may be at at the 400 00:25:19,400 --> 00:25:22,399 Speaker 1: absolute bottom. And even with that, you know, Trump is 401 00:25:22,440 --> 00:25:24,800 Speaker 1: still at least a half dozen or so. It's not 402 00:25:25,000 --> 00:25:27,880 Speaker 1: the twenty one if you also conclude the fact she's 403 00:25:27,880 --> 00:25:30,399 Speaker 1: winning in North Carolina away for his number. So he 404 00:25:30,440 --> 00:25:32,639 Speaker 1: may be peaking now. And that's why, you know, folks 405 00:25:32,720 --> 00:25:36,159 Speaker 1: like Nate Silver said, wait a week, but you know 406 00:25:36,240 --> 00:25:39,280 Speaker 1: she has her issues, and you know from the very 407 00:25:39,320 --> 00:25:43,040 Speaker 1: beginning the question in this campaign has been just how 408 00:25:43,160 --> 00:25:47,040 Speaker 1: angry is America? How many Americans really are angry? How 409 00:25:47,040 --> 00:25:50,520 Speaker 1: many want to change? And and you know, Donald Trump, 410 00:25:51,000 --> 00:25:53,280 Speaker 1: he's certainly the candidate of change, but can he make 411 00:25:53,400 --> 00:25:56,760 Speaker 1: himself seem viable just like being disciplined as he's been 412 00:25:56,800 --> 00:25:59,359 Speaker 1: in the last few weeks arguably, and then having a 413 00:25:59,359 --> 00:26:01,720 Speaker 1: good debate truck you've got a conduit into all the 414 00:26:01,800 --> 00:26:04,280 Speaker 1: fancy polling people, the people that we never talked to 415 00:26:04,480 --> 00:26:07,800 Speaker 1: and really are never visible. What do they say about turnout? 416 00:26:07,800 --> 00:26:10,280 Speaker 1: Are we just too far away from the first Tuesday 417 00:26:10,280 --> 00:26:12,159 Speaker 1: of November to have a handle on that, or do 418 00:26:12,200 --> 00:26:15,880 Speaker 1: you have a dynamic on what turnout will be biggest 419 00:26:15,920 --> 00:26:19,560 Speaker 1: wild cart? And and that's that's really another reason why 420 00:26:19,840 --> 00:26:24,000 Speaker 1: you know, the the tail risk Trump story is viable 421 00:26:24,080 --> 00:26:27,399 Speaker 1: because it's not it's not clear that, for instance, millennials 422 00:26:27,400 --> 00:26:29,320 Speaker 1: are going to turn out for Hillary Clinton, or that 423 00:26:29,359 --> 00:26:32,160 Speaker 1: they might even turn off to her and go towards 424 00:26:32,240 --> 00:26:36,280 Speaker 1: third party candidates like Gary Johnson and Jill Stein instead. 425 00:26:36,920 --> 00:26:39,960 Speaker 1: And African American voters are clearly going to vote for 426 00:26:40,080 --> 00:26:44,320 Speaker 1: Trump as much, if not more than than Obama, but 427 00:26:44,400 --> 00:26:46,160 Speaker 1: it's not really clear that they're going to march out 428 00:26:46,160 --> 00:26:48,600 Speaker 1: to vote in the same numbers and with the same enthusiasm. 429 00:26:48,720 --> 00:26:52,320 Speaker 1: So meanwhile, the Trump folks really are the deplorable so 430 00:26:52,400 --> 00:26:56,000 Speaker 1: to speak, really are very very motivated. So turn out 431 00:26:56,080 --> 00:26:58,920 Speaker 1: is absolutely the number one question, and you'd get a 432 00:26:58,920 --> 00:27:01,680 Speaker 1: different opinion and read the article you read in Real 433 00:27:01,720 --> 00:27:07,199 Speaker 1: Clear Politics or Bloomberg. Charles Gabriel with us the Capital Alpha, 434 00:27:07,640 --> 00:27:10,840 Speaker 1: whose note all notes on politics are distinctive, and the 435 00:27:10,920 --> 00:27:16,040 Speaker 1: distinction of Chuck Gabriel is it is eclectic and it 436 00:27:16,280 --> 00:27:20,560 Speaker 1: is very sharp about things under the radar. Um. Let 437 00:27:20,560 --> 00:27:24,160 Speaker 1: me start with a basic question, Chuck, which is more 438 00:27:24,240 --> 00:27:29,679 Speaker 1: important House analysis or the Senate analysis? Right now? Certainly 439 00:27:29,720 --> 00:27:32,720 Speaker 1: the Senate that the House is not really in play 440 00:27:32,800 --> 00:27:37,240 Speaker 1: because Republicans had a really good midterm election a couple 441 00:27:37,280 --> 00:27:40,240 Speaker 1: of years ago. They have the highest majority that they've 442 00:27:40,240 --> 00:27:43,080 Speaker 1: had literally, you know, since the late twenties, I believe, 443 00:27:43,720 --> 00:27:47,639 Speaker 1: and the Democrats have had an okay recruiting cycle but 444 00:27:47,880 --> 00:27:51,320 Speaker 1: not a great one. So there really aren't enough seats 445 00:27:51,440 --> 00:27:55,200 Speaker 1: truly in play, uh to net the Democrats the net 446 00:27:55,280 --> 00:27:58,520 Speaker 1: thirty that they would take over, but never let us. 447 00:27:58,560 --> 00:28:00,399 Speaker 1: The House is still important because if you have a 448 00:28:00,400 --> 00:28:04,199 Speaker 1: big shift, it will it will somewhat moderate to denote 449 00:28:04,440 --> 00:28:08,040 Speaker 1: obviously there the Republican leadership's behavior to sit it, on 450 00:28:08,040 --> 00:28:11,200 Speaker 1: the other hand, extremely key because if Republicans keep both 451 00:28:11,240 --> 00:28:13,600 Speaker 1: the House and Senate, it will be a check on 452 00:28:14,200 --> 00:28:18,840 Speaker 1: President Clinton's agenda. They would control the budget process. Uh, 453 00:28:18,880 --> 00:28:21,800 Speaker 1: it would. It would be truly very very important, And 454 00:28:21,840 --> 00:28:25,160 Speaker 1: that's why we have felt that from the market perspective 455 00:28:25,560 --> 00:28:28,119 Speaker 1: it would be a constructive outlook because it would kind 456 00:28:28,119 --> 00:28:31,320 Speaker 1: of compel Mrs Clinton to deal with Republicans on a 457 00:28:31,560 --> 00:28:35,840 Speaker 1: tax reform, on an infrastructure spending, the jobs bill, et cetera. 458 00:28:36,640 --> 00:28:40,040 Speaker 1: So that's that's why the Senate really is really important. 459 00:28:40,080 --> 00:28:42,840 Speaker 1: I think our most our best piece of this cycle 460 00:28:43,040 --> 00:28:46,200 Speaker 1: was called It's the Senate Stupid for that obvious reason. 461 00:28:46,840 --> 00:28:49,360 Speaker 1: Is it still have we seen Senate races tighten up 462 00:28:49,360 --> 00:28:53,719 Speaker 1: with the presidential race, Well, that's the big story that 463 00:28:53,720 --> 00:28:56,640 Speaker 1: that you've had a number of good, you know, good 464 00:28:56,880 --> 00:28:59,680 Speaker 1: arguably good Republican incumbents that have been running ahead of 465 00:28:59,720 --> 00:29:03,680 Speaker 1: Donald Trump in these key states like New Hampshire in 466 00:29:03,840 --> 00:29:08,280 Speaker 1: Pennsylvania and Florida, or Marco Rubio reversed and decided to 467 00:29:08,360 --> 00:29:10,960 Speaker 1: run after all. So, frankly, if you were a look 468 00:29:11,000 --> 00:29:15,400 Speaker 1: at pulling averages right now, particularly since Republicans are actually 469 00:29:15,400 --> 00:29:18,840 Speaker 1: ahead in the race to the one Democratic race seat 470 00:29:18,880 --> 00:29:21,640 Speaker 1: that's a race for the one Democratic seat that said risk, 471 00:29:21,760 --> 00:29:25,320 Speaker 1: that's Harry Reid seat. Nevada Congressman Joe Heck is actually 472 00:29:25,360 --> 00:29:28,000 Speaker 1: ahead on that front. And as a result of that, 473 00:29:29,080 --> 00:29:31,960 Speaker 1: right now, they'd lose in that three. Uh, and they 474 00:29:32,000 --> 00:29:34,240 Speaker 1: can't lose in that four if Hiller Clinton wins the 475 00:29:34,280 --> 00:29:37,120 Speaker 1: vice president break a tie. So you know, you've really 476 00:29:37,160 --> 00:29:40,640 Speaker 1: had a bit of a mini breakout for Republicans and 477 00:29:40,680 --> 00:29:45,120 Speaker 1: distancing themselves from Trump's fortunes. And with Marco Rubio ahead 478 00:29:45,120 --> 00:29:49,680 Speaker 1: in Florida. Uh, and uh, Rob Portman really one of 479 00:29:49,720 --> 00:29:53,360 Speaker 1: the big stars of this whole race in Ohio, doing 480 00:29:53,360 --> 00:29:55,680 Speaker 1: so well that the Democrats are pulling back money from 481 00:29:55,720 --> 00:29:59,120 Speaker 1: former Governor Ted Strickland. You know, that's why you know 482 00:29:59,120 --> 00:30:01,800 Speaker 1: we have toss up of Republicans keeping the Senate now, 483 00:30:01,800 --> 00:30:05,720 Speaker 1: even though they'll still have to thread the needle today. Uh. 484 00:30:05,960 --> 00:30:08,320 Speaker 1: The House Speaker Paul Ryan comes to New York to 485 00:30:08,440 --> 00:30:11,320 Speaker 1: give a speech or Tom King will be there the 486 00:30:11,360 --> 00:30:15,000 Speaker 1: Economic Club of New York. Uh. Kind of the question 487 00:30:15,040 --> 00:30:19,280 Speaker 1: that keeps coming up from people is how much is 488 00:30:20,040 --> 00:30:22,960 Speaker 1: he going to put up with from the presidential candidate. 489 00:30:23,000 --> 00:30:26,080 Speaker 1: I mean, how low can Donald Trump sink and still 490 00:30:26,160 --> 00:30:30,600 Speaker 1: keep Paul Ryan on board and the House, you know, 491 00:30:32,200 --> 00:30:36,160 Speaker 1: from from becoming a battleground. Well, those are two distinct questions, 492 00:30:36,240 --> 00:30:39,560 Speaker 1: and I think they've already really tested, you know, Paul 493 00:30:39,680 --> 00:30:43,800 Speaker 1: Ryan's uh, intestinal fortitude and his own willingness to to 494 00:30:44,080 --> 00:30:47,479 Speaker 1: you know, to put himself at risk or to align 495 00:30:47,560 --> 00:30:49,760 Speaker 1: himself with things that he doesn't believe in. So I 496 00:30:50,120 --> 00:30:52,320 Speaker 1: think we passed that some time ago, and he's filling 497 00:30:52,360 --> 00:30:56,280 Speaker 1: a way to to work with Trump without really embracing 498 00:30:56,360 --> 00:30:59,680 Speaker 1: everything he says. And Trump has been more disciplined of late, 499 00:30:59,720 --> 00:31:02,720 Speaker 1: I mean whole thing over the weekend and on the Birtherism. 500 00:31:03,400 --> 00:31:06,520 Speaker 1: You know, it's just sort of a diversion to be said. 501 00:31:06,600 --> 00:31:10,320 Speaker 1: But but as as you know, the individual House members 502 00:31:10,320 --> 00:31:13,240 Speaker 1: go as they seek reelection, you have to remember that 503 00:31:13,680 --> 00:31:16,720 Speaker 1: they are in these what we call virtual man case 504 00:31:16,760 --> 00:31:20,600 Speaker 1: that are the gerrymandered congressional districts that are very, very conservative. 505 00:31:21,080 --> 00:31:24,080 Speaker 1: Their biggest worry every two years is you know, facing 506 00:31:24,080 --> 00:31:27,360 Speaker 1: a primary challenge. They're all past that, so I don't 507 00:31:27,400 --> 00:31:30,280 Speaker 1: think they're worried about uh, you know, the mixture of 508 00:31:30,320 --> 00:31:34,320 Speaker 1: deplorables versus progressive that they're going to run into. Regardless 509 00:31:34,320 --> 00:31:37,120 Speaker 1: of what Trump says, I want to go back to turnout. 510 00:31:37,200 --> 00:31:41,600 Speaker 1: What does Secretary Clinton need to do to boost her turnout? Yeah, 511 00:31:41,600 --> 00:31:44,880 Speaker 1: it's it's a really tough question. Uh, you know, I 512 00:31:44,920 --> 00:31:47,840 Speaker 1: think they had they're scratching their heads over there and 513 00:31:47,920 --> 00:31:50,800 Speaker 1: beginning to worry that you know, maybe there's a brilliance 514 00:31:50,840 --> 00:31:53,640 Speaker 1: in Trump's you know, continuing to tweet out these things 515 00:31:53,680 --> 00:31:56,360 Speaker 1: that send everybody off on as while Goose chased on 516 00:31:56,320 --> 00:31:59,600 Speaker 1: these distracting issues that really are kind of non issues. 517 00:31:59,680 --> 00:32:04,640 Speaker 1: They they threatened to disqualify him with with um uh, 518 00:32:04,680 --> 00:32:07,880 Speaker 1: you know, with with white college educated voters, and she 519 00:32:08,120 --> 00:32:11,520 Speaker 1: there's a chance that that could offset his advantage with 520 00:32:11,600 --> 00:32:15,160 Speaker 1: working class votors. But nevertheless, you know, she's just basically 521 00:32:15,240 --> 00:32:18,360 Speaker 1: run into her own problems with net disapproval rates. Hied 522 00:32:18,400 --> 00:32:21,160 Speaker 1: this net disapproval rates. So over the weekend there was 523 00:32:21,200 --> 00:32:23,840 Speaker 1: a lot of talk from her surrogates that she just 524 00:32:23,880 --> 00:32:26,520 Speaker 1: needed to get back to reminding people of what she 525 00:32:26,640 --> 00:32:29,880 Speaker 1: stands for on the campaign trail, rather than responding to 526 00:32:29,920 --> 00:32:33,120 Speaker 1: a Trump and attacking him. But it's a very tough question. 527 00:32:33,160 --> 00:32:35,360 Speaker 1: How do you motivate millennials? But you know, if I 528 00:32:35,400 --> 00:32:40,240 Speaker 1: could just say they actually vector Bernie Sanders and Liz 529 00:32:40,320 --> 00:32:43,440 Speaker 1: Warren out to Ohio to really deal with this parent 530 00:32:43,520 --> 00:32:46,120 Speaker 1: and millennials may be breaking for the third party candidates 531 00:32:46,120 --> 00:32:47,800 Speaker 1: and it doesn't seem to be working. I guess for 532 00:32:47,880 --> 00:32:54,480 Speaker 1: both candidates to motivate the marginal turnout. Does a positive 533 00:32:54,560 --> 00:32:57,720 Speaker 1: message work? Or are we dealing with a cynical Chuck 534 00:32:57,800 --> 00:33:03,400 Speaker 1: Gabriel today? Which is only activity works? Which is it? Uh? It? 535 00:33:03,400 --> 00:33:06,560 Speaker 1: It has seemed as though only negativity has worked to 536 00:33:06,680 --> 00:33:09,360 Speaker 1: this point. And you I think we may know the 537 00:33:09,400 --> 00:33:13,160 Speaker 1: winner by his signs, his or her signs when he 538 00:33:13,320 --> 00:33:16,280 Speaker 1: or she is has the luxury to break positive down 539 00:33:16,320 --> 00:33:20,000 Speaker 1: the stretch and neither of them really does now. But ironically, 540 00:33:20,040 --> 00:33:22,480 Speaker 1: Donald Trump, because he has you know, he has been 541 00:33:22,560 --> 00:33:26,200 Speaker 1: sort of indefatigably negative. You know that which does not 542 00:33:26,920 --> 00:33:29,120 Speaker 1: has not killed him, has argue made him stronger. If 543 00:33:29,120 --> 00:33:32,040 Speaker 1: he could go positive from here on end, Uh, he 544 00:33:32,160 --> 00:33:34,920 Speaker 1: might have an advantage. What is it that you will 545 00:33:34,920 --> 00:33:39,200 Speaker 1: be looking for in the debate? What is there something 546 00:33:39,240 --> 00:33:44,400 Speaker 1: that um that will be the definitive moment to follow? 547 00:33:45,480 --> 00:33:48,240 Speaker 1: I'll be looking for his ability to You know, I 548 00:33:48,320 --> 00:33:53,200 Speaker 1: loved your intro into the discussion about about how he 549 00:33:53,760 --> 00:33:58,840 Speaker 1: just seemed almost incoherent at parts or contradictory at times 550 00:33:59,240 --> 00:34:01,720 Speaker 1: with his econom on my plan. You know, it'll it'll 551 00:34:01,760 --> 00:34:07,000 Speaker 1: be important that he's able to articulate that without a teleprompter, 552 00:34:07,400 --> 00:34:10,160 Speaker 1: you know what he plans to do for the economy, 553 00:34:10,280 --> 00:34:13,320 Speaker 1: and whether he can basically look in the camera and 554 00:34:13,320 --> 00:34:16,640 Speaker 1: and basically say that Hillary Clinton and Barack Obama have 555 00:34:16,800 --> 00:34:20,000 Speaker 1: let us down without saying off putting things that scare 556 00:34:20,040 --> 00:34:24,280 Speaker 1: people and put us alliances at risk and stoop markets, etcetera. 557 00:34:24,320 --> 00:34:27,400 Speaker 1: If he can reach those, you know that that threshold 558 00:34:28,200 --> 00:34:32,960 Speaker 1: of viability and be disciplined, you may be surprised again. 559 00:34:33,000 --> 00:34:36,120 Speaker 1: And I would just say markets have decided that he 560 00:34:36,200 --> 00:34:39,200 Speaker 1: represents tail risks because they're worried about him as a protectionists, 561 00:34:39,239 --> 00:34:42,680 Speaker 1: they're worried about him anti immigration. We don't. We think 562 00:34:42,680 --> 00:34:45,080 Speaker 1: that markets might initially react, but it might be as 563 00:34:45,120 --> 00:34:49,080 Speaker 1: short lived and reaction as we saw with the Brexit bok, 564 00:34:49,080 --> 00:34:51,840 Speaker 1: which lasted all of two days. Chuck Gabriel, thank you 565 00:34:51,880 --> 00:34:55,759 Speaker 1: so much for the Capital alpham Thanks for listening to 566 00:34:55,800 --> 00:35:00,200 Speaker 1: the Bloomberg surveillance podcast. Subscribe and listen to interview. Use 567 00:35:00,239 --> 00:35:05,600 Speaker 1: on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm 568 00:35:05,600 --> 00:35:09,960 Speaker 1: on Twitter at Tom Keane. Michael McKee is at Economy 569 00:35:10,000 --> 00:35:13,759 Speaker 1: Before the podcast. You can always catch us worldwide. I'm 570 00:35:13,800 --> 00:35:24,680 Speaker 1: Bloomberg Radio. Who you put your trust in matters. 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