1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,720 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Today 7 00:00:32,880 --> 00:00:36,680 Speaker 1: is all about trade. President Trump announced saying tariffs on 8 00:00:36,800 --> 00:00:40,760 Speaker 1: fifty billion dollars of imports to the US from China. 9 00:00:40,960 --> 00:00:44,360 Speaker 1: China saying that it will retaliate. Moody's putting out a 10 00:00:44,440 --> 00:00:47,640 Speaker 1: note just now saying that because the US tariffs and 11 00:00:47,720 --> 00:00:50,200 Speaker 1: China are restricted to a relatively small range of high 12 00:00:50,200 --> 00:00:55,000 Speaker 1: tech products, we don't expect them to meaningfully impact US inflation. However, 13 00:00:55,480 --> 00:01:00,440 Speaker 1: individual U S sectors ranging from agricultural to aerospace vulnerable 14 00:01:00,520 --> 00:01:04,720 Speaker 1: to retaliation by from China. For more, we want to 15 00:01:04,720 --> 00:01:07,360 Speaker 1: bring in Andrew Mata. He's been covering this all very closely. 16 00:01:07,360 --> 00:01:10,800 Speaker 1: He's global trade and economy reporter for Bloomberg News. Andrew, 17 00:01:10,880 --> 00:01:12,920 Speaker 1: thank you so much for joining me on this very 18 00:01:12,920 --> 00:01:15,720 Speaker 1: busy morning for you. I'm sure. Um. Let's just start 19 00:01:15,760 --> 00:01:19,000 Speaker 1: with what we know so far about what President Trump 20 00:01:19,080 --> 00:01:24,440 Speaker 1: is targeting with these latest round of tariff's. Yeah, so 21 00:01:24,480 --> 00:01:26,880 Speaker 1: he has kind of refined the list that they've put 22 00:01:26,880 --> 00:01:31,760 Speaker 1: out in April. Um. They've removed some pharmaceutical products. We're 23 00:01:31,760 --> 00:01:34,440 Speaker 1: actually still going through the list of frankly, there's there's 24 00:01:34,480 --> 00:01:36,520 Speaker 1: a lot of products in there, but it looks like 25 00:01:37,000 --> 00:01:42,120 Speaker 1: they've removed some pharmaceutical products, they removed some consumer goods, 26 00:01:42,720 --> 00:01:45,280 Speaker 1: and they refined the list a little bit to focus 27 00:01:45,440 --> 00:01:50,280 Speaker 1: on China. China's Made in China plan. This is a 28 00:01:50,320 --> 00:01:55,440 Speaker 1: plan that they have to dominate certain technologies around the world. Okay. 29 00:01:55,760 --> 00:01:58,400 Speaker 1: Uh So, basically what Moody's was saying, with a lot 30 00:01:58,400 --> 00:02:01,360 Speaker 1: of analysts that we've spoken to have been saying is 31 00:02:01,400 --> 00:02:05,440 Speaker 1: that this is a pretty narrow slice of products. So 32 00:02:05,520 --> 00:02:08,840 Speaker 1: the interriffs wouldn't necessarily have a broad impact on the U. 33 00:02:08,919 --> 00:02:12,120 Speaker 1: S economy or frankly, the Chinese economy. But the concern 34 00:02:12,280 --> 00:02:14,000 Speaker 1: is what the retaliation is going to be. Is that 35 00:02:14,040 --> 00:02:16,239 Speaker 1: an accurate kind of assessment of how people are viewing 36 00:02:16,280 --> 00:02:18,720 Speaker 1: this right now? Yeah, I think that's occurred, and in fact, 37 00:02:18,720 --> 00:02:21,079 Speaker 1: that's the view of the International Monetary Fund, that's the 38 00:02:21,160 --> 00:02:24,880 Speaker 1: view of our economists here at Bloomberg Economics. I mean, 39 00:02:24,880 --> 00:02:27,200 Speaker 1: if you just do the math on the back of 40 00:02:27,600 --> 00:02:31,079 Speaker 1: an envelope, you've got fifty billion in tariffs. That's ten 41 00:02:31,160 --> 00:02:35,959 Speaker 1: percent of total US imports from China. You know, so 42 00:02:36,040 --> 00:02:40,240 Speaker 1: the direct economic hit is probably fairly modest. Now, what 43 00:02:40,800 --> 00:02:43,720 Speaker 1: the I M F and others say is, uh, you know, 44 00:02:43,919 --> 00:02:46,880 Speaker 1: this could be problematic if we start to get in 45 00:02:46,919 --> 00:02:51,040 Speaker 1: a situation where this hurts business confidence, where this hurts 46 00:02:51,120 --> 00:02:56,040 Speaker 1: consumer confidence, and the upsurge in the upswing in investment 47 00:02:56,360 --> 00:02:58,960 Speaker 1: and consumer spending that we've seen in recent years starts 48 00:02:58,960 --> 00:03:03,079 Speaker 1: to take a hit. Okay. Also of concern is what 49 00:03:03,120 --> 00:03:06,079 Speaker 1: the retaliation is going to look like by China. Of course, 50 00:03:06,160 --> 00:03:09,160 Speaker 1: China just came out with those disappointing retail sales data, 51 00:03:09,520 --> 00:03:12,880 Speaker 1: so this isn't coming at a great time for that country, 52 00:03:13,400 --> 00:03:18,120 Speaker 1: and they're expecting to target the farm sector, right. Yeah, 53 00:03:18,240 --> 00:03:21,840 Speaker 1: So China again said today that it will respond with 54 00:03:22,040 --> 00:03:27,200 Speaker 1: equal scale, equal intensity. Um, they will put tears on 55 00:03:27,280 --> 00:03:31,639 Speaker 1: a range of American goods, everything from soybeans to chemical 56 00:03:31,720 --> 00:03:37,760 Speaker 1: products to airplanes. So that should have an impact on 57 00:03:37,880 --> 00:03:41,560 Speaker 1: American companies for sure. Um. You know, we'll see if 58 00:03:41,880 --> 00:03:44,200 Speaker 1: how much of an impact it actually has on the 59 00:03:44,320 --> 00:03:48,400 Speaker 1: Chinese economy. Again, you're talking about the second biggest economy 60 00:03:48,400 --> 00:03:51,640 Speaker 1: in the world, so it's a direct economic hit. It 61 00:03:51,720 --> 00:03:55,520 Speaker 1: should be fairly muted. But you know, one major takeaway 62 00:03:55,560 --> 00:03:58,280 Speaker 1: that that that I took from today's announcement was the 63 00:03:58,360 --> 00:04:04,640 Speaker 1: present saidative d retaliates the US will ramp up even further. 64 00:04:05,680 --> 00:04:09,080 Speaker 1: Uh So that's exactly the type of tit for tat 65 00:04:09,240 --> 00:04:13,320 Speaker 1: cycle that economists worry about. I'm startabling to understand the 66 00:04:13,360 --> 00:04:17,559 Speaker 1: backstory here because we heard some discussion that trade talks 67 00:04:17,560 --> 00:04:22,240 Speaker 1: were progressing well between the US and China. Uh. Then 68 00:04:22,279 --> 00:04:25,920 Speaker 1: there was the qualcom an XP announcement earlier today, which 69 00:04:25,920 --> 00:04:28,400 Speaker 1: seemed to be a softening of the ties. I mean, 70 00:04:28,400 --> 00:04:31,480 Speaker 1: it seems like things were moving toward a more conciliatory approach, 71 00:04:31,880 --> 00:04:34,760 Speaker 1: and then and then this comes out. I mean, do 72 00:04:34,839 --> 00:04:37,159 Speaker 1: have a sense of what sort of the strategy is here, 73 00:04:37,279 --> 00:04:41,680 Speaker 1: what the backstory is. Yeah. I think that there's two 74 00:04:41,800 --> 00:04:45,760 Speaker 1: camps within the administration. I mean, there's a camp within 75 00:04:45,800 --> 00:04:50,000 Speaker 1: any administration that's relatively pro market. Uh. These people tend 76 00:04:50,040 --> 00:04:52,400 Speaker 1: to be free traders. I'm thinking of people like Stephen 77 00:04:52,440 --> 00:04:55,679 Speaker 1: Manusian and Larry Cudlow, they tend to be a little 78 00:04:55,680 --> 00:04:57,880 Speaker 1: more transactional. I mean, I think that they were trying 79 00:04:57,880 --> 00:04:59,800 Speaker 1: to head this off with some type of quick deal, 80 00:05:00,440 --> 00:05:03,800 Speaker 1: you know, trying to potentially buys more energy, buys more sleybeans. Uh, 81 00:05:04,080 --> 00:05:06,800 Speaker 1: you know, throws in approval of the n XP deal. 82 00:05:07,440 --> 00:05:11,480 Speaker 1: Uh us uh, goes a little lighter on on ZT 83 00:05:11,640 --> 00:05:13,719 Speaker 1: and then we all go home. Um. But but I 84 00:05:13,720 --> 00:05:16,200 Speaker 1: think that there are people within the administration. I would 85 00:05:16,279 --> 00:05:20,000 Speaker 1: put Ambassador Lightheizer in that camp. I would put certainly 86 00:05:20,040 --> 00:05:23,799 Speaker 1: Peter Navarre in that camp who want deeper structural changes 87 00:05:23,839 --> 00:05:26,200 Speaker 1: to the Chinese economy. And and and and of course 88 00:05:26,200 --> 00:05:29,200 Speaker 1: the president himself wants a reduction in the overall trade deficity. 89 00:05:29,240 --> 00:05:32,279 Speaker 1: If that is the goal, this, uh, this isn't going 90 00:05:32,360 --> 00:05:35,480 Speaker 1: to end anytime soon. Yeah. And frankly, this this does 91 00:05:35,560 --> 00:05:37,000 Speaker 1: raise a lot of questions for what it does to 92 00:05:37,120 --> 00:05:40,200 Speaker 1: Chinese China's economy, especially given the fact that we are 93 00:05:40,240 --> 00:05:43,159 Speaker 1: seeing some signs of it slowing down. Hey, before I 94 00:05:43,240 --> 00:05:44,839 Speaker 1: let you go, I do want to get a sense 95 00:05:44,880 --> 00:05:50,160 Speaker 1: of what's going on with NAFTA. What's the latest there. Wow. Well, NAFTA, 96 00:05:50,680 --> 00:05:55,200 Speaker 1: I would say, is on the back burner right now. Um. 97 00:05:55,240 --> 00:05:58,440 Speaker 1: You know, officials from all three countries were kind of 98 00:05:58,440 --> 00:06:01,000 Speaker 1: working around the clock a few weeks ago to try 99 00:06:01,000 --> 00:06:03,840 Speaker 1: to get a deal um and the deadline really was 100 00:06:03,920 --> 00:06:06,680 Speaker 1: to try to get it done in a timely manner 101 00:06:06,720 --> 00:06:08,760 Speaker 1: so that they could get it through this Congress. I 102 00:06:08,800 --> 00:06:13,080 Speaker 1: think that that deadline has either passed or or will 103 00:06:13,120 --> 00:06:16,760 Speaker 1: pass very shortly. And U, so talks have kind of 104 00:06:16,800 --> 00:06:19,000 Speaker 1: gone in the deep freeze. I mean, the X factor 105 00:06:19,080 --> 00:06:21,159 Speaker 1: really is, you know, does a present just decided to 106 00:06:21,160 --> 00:06:24,680 Speaker 1: withdraw at some point? Yeah, Andrewmeda, thank you so much 107 00:06:24,720 --> 00:06:26,920 Speaker 1: for joining me. It's a very busy day to day 108 00:06:27,000 --> 00:06:29,560 Speaker 1: on the trade front. I'm sure you have your day 109 00:06:29,720 --> 00:06:32,880 Speaker 1: filled out. Andrewmeda at Global Trade and Economy reporter for 110 00:06:33,040 --> 00:06:50,280 Speaker 1: Bloomberg News, joining us from Washington, d C. Emerging market 111 00:06:50,360 --> 00:06:53,640 Speaker 1: currencies are really taking it on the chin today. They 112 00:06:53,680 --> 00:06:55,840 Speaker 1: are down according to the ms c I Index of 113 00:06:55,880 --> 00:07:00,560 Speaker 1: EM Currencies, they are down the most since November two teen. 114 00:07:01,000 --> 00:07:03,320 Speaker 1: Joining me now to talk about this, Paul McNamara. He's 115 00:07:03,360 --> 00:07:07,080 Speaker 1: investment director for Emerging Markets at GAM, which oversees eleven 116 00:07:07,120 --> 00:07:10,040 Speaker 1: billion dollars in developing world assets, and he joins us 117 00:07:10,080 --> 00:07:13,320 Speaker 1: from London. Paul, thank you so much. For joining. I mean, 118 00:07:13,400 --> 00:07:15,920 Speaker 1: this is really an important topic and you have decades 119 00:07:15,960 --> 00:07:19,320 Speaker 1: of experience dealing with it, so you are the person 120 00:07:19,560 --> 00:07:22,120 Speaker 1: what's going on? Why? Why are why are these currencies 121 00:07:22,120 --> 00:07:25,800 Speaker 1: absolutely falling out of bed today? They're actually behaving pretty 122 00:07:25,880 --> 00:07:28,840 Speaker 1: much as as President suggests. I mean, as a rule 123 00:07:28,880 --> 00:07:31,560 Speaker 1: of time, you know, if the dollar rises one percent 124 00:07:31,640 --> 00:07:34,200 Speaker 1: against the majors, so say the d X Y the 125 00:07:34,240 --> 00:07:37,760 Speaker 1: Federal reserves trade weighted basket, if it goes up one 126 00:07:37,800 --> 00:07:39,840 Speaker 1: percent against that, it goes up about one and a 127 00:07:39,880 --> 00:07:43,160 Speaker 1: half percent against EM on average. And that's pretty much 128 00:07:43,240 --> 00:07:45,360 Speaker 1: exactly what's happened this year that when the dollar was 129 00:07:45,400 --> 00:07:48,760 Speaker 1: weak for sort of January February, EM did very well. 130 00:07:49,040 --> 00:07:53,000 Speaker 1: Then the dollars snapped back and emerging markets came off 131 00:07:53,480 --> 00:07:56,120 Speaker 1: sort of out of proportion with the developed markets. But 132 00:07:56,200 --> 00:07:58,360 Speaker 1: there's there's nothing really new going on here. I mean, 133 00:07:58,400 --> 00:08:01,440 Speaker 1: EM currencies are really be something only to own when 134 00:08:01,480 --> 00:08:03,800 Speaker 1: when the dollar is weak, and a strong dollar has always, 135 00:08:03,800 --> 00:08:06,080 Speaker 1: you know, for decades, as you say, has been a 136 00:08:06,080 --> 00:08:09,080 Speaker 1: problem for e m f X. All right, So, as 137 00:08:09,520 --> 00:08:14,360 Speaker 1: an investor in developing markets and in the credit in particular, 138 00:08:14,880 --> 00:08:16,880 Speaker 1: how do you maneuver around this? You know, if this 139 00:08:17,000 --> 00:08:19,280 Speaker 1: is going to be the trend, the norm for even 140 00:08:19,360 --> 00:08:21,120 Speaker 1: a couple of weeks or even a couple of months, 141 00:08:21,400 --> 00:08:25,680 Speaker 1: it could decimate credit investments, regardless of of sort of 142 00:08:25,800 --> 00:08:32,000 Speaker 1: your view one um and the actual fundamental Uh, it could. 143 00:08:32,600 --> 00:08:35,120 Speaker 1: I mean the first thing to do is to look 144 00:08:35,160 --> 00:08:38,520 Speaker 1: at countries who are trying to service for foreign debt 145 00:08:38,559 --> 00:08:41,880 Speaker 1: out of local currency revenue, and the most the most 146 00:08:42,000 --> 00:08:44,520 Speaker 1: glaring example of that, I think is Turkey, which which 147 00:08:44,559 --> 00:08:47,800 Speaker 1: is when we've been concerned about for a while. I mean, 148 00:08:48,080 --> 00:08:50,480 Speaker 1: the two currencies hit hardest this year. I've been Turkey 149 00:08:50,480 --> 00:08:53,000 Speaker 1: and Argentina, which are the two which are which are 150 00:08:53,080 --> 00:08:55,880 Speaker 1: running external deficits. And I think that's really where you 151 00:08:55,880 --> 00:08:58,400 Speaker 1: want to be worried. I mean, I m fundamentals now 152 00:08:58,440 --> 00:09:00,520 Speaker 1: are actually much better shape than they were in two 153 00:09:00,559 --> 00:09:04,040 Speaker 1: thousand and thirteen. So our our instinct is really more 154 00:09:04,120 --> 00:09:06,280 Speaker 1: to knuckle down, kind of keep our heads down for 155 00:09:06,320 --> 00:09:08,720 Speaker 1: a bit, because you know, there's a couple of markets 156 00:09:08,760 --> 00:09:11,160 Speaker 1: I think Russia and Brazil in particular, which stand out 157 00:09:11,520 --> 00:09:13,160 Speaker 1: that if we get a little bit of stability on 158 00:09:13,160 --> 00:09:15,720 Speaker 1: the dollar, we think could snap back quite strongly. But 159 00:09:15,760 --> 00:09:17,840 Speaker 1: I think you know, we'd be still quite cautious about 160 00:09:17,880 --> 00:09:20,520 Speaker 1: places like Turkey, you and a lot of other people. 161 00:09:20,559 --> 00:09:25,040 Speaker 1: I think people are absolutely swing Turkey and Argentina. Are 162 00:09:25,080 --> 00:09:28,840 Speaker 1: you actively buying anyone right now? I mean we've actively 163 00:09:28,840 --> 00:09:31,320 Speaker 1: been adding long duration in Brazil because what we've seen 164 00:09:31,320 --> 00:09:33,040 Speaker 1: there is a big steepening of the curves for the 165 00:09:33,040 --> 00:09:35,840 Speaker 1: back end there, I think looks very interesting. We've also 166 00:09:35,840 --> 00:09:38,439 Speaker 1: been dipping a toe into Argentina. I mean, the trouble 167 00:09:38,440 --> 00:09:41,320 Speaker 1: with Argentina is it's not a terribly liquid market, you know, 168 00:09:41,360 --> 00:09:44,120 Speaker 1: and and if you once you're in, it's quite it 169 00:09:44,120 --> 00:09:46,440 Speaker 1: can be quite difficult to get out. But I think, 170 00:09:46,440 --> 00:09:49,880 Speaker 1: you know, unlike Turkey, I think the problems in Argentina 171 00:09:49,920 --> 00:09:52,920 Speaker 1: look fixable. So to the extent that we we we've 172 00:09:53,120 --> 00:09:55,400 Speaker 1: we're trying to catch the falling knife. We'd rather do 173 00:09:55,440 --> 00:09:57,599 Speaker 1: it in Argentina than Turkey. Have you been buying the 174 00:09:57,640 --> 00:10:01,199 Speaker 1: hundred year bonds? No, We've been buying local currency paper 175 00:10:01,440 --> 00:10:04,400 Speaker 1: because I was interested in you know, Argentina managed to 176 00:10:04,480 --> 00:10:09,840 Speaker 1: buy managed to sell bonds with maturities of one hundred 177 00:10:09,960 --> 00:10:12,400 Speaker 1: years last year, and everyone said, this is a terrible idea, 178 00:10:12,720 --> 00:10:15,480 Speaker 1: this is absolutely going to be a losing trade. And 179 00:10:15,520 --> 00:10:17,920 Speaker 1: sure enough, here I'm looking at the dollar price of 180 00:10:18,000 --> 00:10:20,920 Speaker 1: these bonds that were sold at parts on the dollar. 181 00:10:21,080 --> 00:10:24,040 Speaker 1: You know, absolutely crushed. But I have to wonder, you know, 182 00:10:24,440 --> 00:10:26,360 Speaker 1: at what point do you give up? At what point 183 00:10:26,360 --> 00:10:28,480 Speaker 1: do you say, you know what, this ship is moving 184 00:10:28,520 --> 00:10:31,480 Speaker 1: too fast for me to really to catch a knife. 185 00:10:32,679 --> 00:10:34,600 Speaker 1: I mean, you know, one of the things about em 186 00:10:34,720 --> 00:10:36,320 Speaker 1: is that you know that this kind of counts as 187 00:10:36,400 --> 00:10:38,839 Speaker 1: routine turbulence. I mean, it's not often we get a 188 00:10:38,920 --> 00:10:41,000 Speaker 1: year go by without, you know, sort of something that 189 00:10:41,040 --> 00:10:44,080 Speaker 1: requires a strong stomach to get through. I mean, you know, 190 00:10:44,120 --> 00:10:47,800 Speaker 1: even in even in the Great bond bond rally, currency 191 00:10:47,840 --> 00:10:50,520 Speaker 1: rally before the global financial crisis, you had, you know, 192 00:10:50,559 --> 00:10:52,760 Speaker 1: you had outbreaks like two thousand and six which were 193 00:10:52,840 --> 00:10:55,640 Speaker 1: very similar to this UM. I think, you know, we 194 00:10:55,760 --> 00:10:59,080 Speaker 1: put our faith in fundamental unfashionable as that sounds, and 195 00:10:59,120 --> 00:11:00,960 Speaker 1: that you know that there are enough countries which which 196 00:11:00,960 --> 00:11:03,120 Speaker 1: which don't look to us to have these very deep 197 00:11:03,160 --> 00:11:06,199 Speaker 1: seated problems. And that's unlike two thousand and thirteen when 198 00:11:06,320 --> 00:11:08,920 Speaker 1: you had the Fragile five, you had current account deficits 199 00:11:08,920 --> 00:11:11,720 Speaker 1: all over the place. You know, I think you know, 200 00:11:11,800 --> 00:11:14,480 Speaker 1: anybody goes into a m you have to be ready 201 00:11:14,520 --> 00:11:18,400 Speaker 1: to ride out a bit of turbulence, although it's not 202 00:11:18,480 --> 00:11:21,240 Speaker 1: always it's not always easy. Well, but at what point 203 00:11:21,440 --> 00:11:26,240 Speaker 1: is does turbulence shift into something more serious? More and 204 00:11:26,360 --> 00:11:32,080 Speaker 1: more with contagion I think, I mean, contagion isn't something real, 205 00:11:32,280 --> 00:11:35,440 Speaker 1: to be honest. I mean usually if you look at say, 206 00:11:35,520 --> 00:11:39,440 Speaker 1: you know, the classic example, which was Asia, they all 207 00:11:39,480 --> 00:11:41,360 Speaker 1: went down because they all had the same problem, which 208 00:11:41,440 --> 00:11:45,720 Speaker 1: was too much especially short term foreign currency borrowing serviced 209 00:11:45,720 --> 00:11:49,160 Speaker 1: out of usually property investments. You know, so all the 210 00:11:49,160 --> 00:11:51,679 Speaker 1: countries which have the same problem, you know it suffered 211 00:11:51,720 --> 00:11:54,840 Speaker 1: the same suffered the same outcome. I mean this time, 212 00:11:54,960 --> 00:11:57,040 Speaker 1: like I said, it's really only Turkey we see is 213 00:11:58,200 --> 00:12:01,040 Speaker 1: as a crisis candidate. When we're we're staring very clear 214 00:12:01,040 --> 00:12:03,800 Speaker 1: of Turkey across the rest. You know, if you don't 215 00:12:03,840 --> 00:12:05,880 Speaker 1: see fundamental problems, I think you kind of have to 216 00:12:05,880 --> 00:12:08,480 Speaker 1: grit your teeth and stay involved. Twenty seconds. Are you 217 00:12:08,520 --> 00:12:12,280 Speaker 1: worried about e t f s? Of course, Well that 218 00:12:12,480 --> 00:12:14,600 Speaker 1: you know they're they're cheaper than the funds we offer. 219 00:12:14,640 --> 00:12:16,920 Speaker 1: We're out performing them. I think we'll worry more when 220 00:12:16,920 --> 00:12:18,320 Speaker 1: we see an e t F that does better than 221 00:12:18,320 --> 00:12:21,400 Speaker 1: our funds. Paul McNamara Thank you so much for being 222 00:12:21,679 --> 00:12:24,520 Speaker 1: with me. A very important topic today. Paul McNamara is 223 00:12:24,559 --> 00:12:28,480 Speaker 1: Investment director for Emerging Markets at GAM UK, overseeing about 224 00:12:28,520 --> 00:12:33,520 Speaker 1: eleven billion dollars in developing world assets. Joining me from London. 225 00:12:47,480 --> 00:12:50,920 Speaker 1: A lot of cross currents right now in the debt markets. 226 00:12:50,960 --> 00:12:53,439 Speaker 1: There's a big question is it time to go long 227 00:12:53,760 --> 00:12:56,680 Speaker 1: risk given how tight spreads are in a lot of 228 00:12:56,679 --> 00:12:59,319 Speaker 1: the corporate credit market and given the fact that companies 229 00:12:59,360 --> 00:13:02,000 Speaker 1: are levering up, or is it time to back away 230 00:13:02,160 --> 00:13:04,760 Speaker 1: even though the good times could keep rolling for a 231 00:13:04,760 --> 00:13:07,679 Speaker 1: while longer? Here to answer that question, Greg Hahn, President 232 00:13:07,679 --> 00:13:12,320 Speaker 1: and Chief investment Officer at Winthrop Capital Management in New York. Greg, 233 00:13:12,320 --> 00:13:14,920 Speaker 1: thank you so much for being with me. You've been 234 00:13:15,120 --> 00:13:17,959 Speaker 1: in the dept markets for a very long time. You've 235 00:13:17,960 --> 00:13:21,760 Speaker 1: seen a lot of different cycles. There are concerns that 236 00:13:21,840 --> 00:13:25,240 Speaker 1: we are heading towards the peak of this credit cycle, 237 00:13:25,320 --> 00:13:27,680 Speaker 1: given the fact that we are seeing a record pace 238 00:13:27,760 --> 00:13:30,360 Speaker 1: of M and A globally and we are seeing leverage 239 00:13:30,440 --> 00:13:33,040 Speaker 1: ratios take up on some of the loans that we've 240 00:13:33,040 --> 00:13:35,400 Speaker 1: seen issued. Are you worried about the end of the 241 00:13:35,480 --> 00:13:39,559 Speaker 1: credit cycle and that it's imminent so we're not worried 242 00:13:40,040 --> 00:13:44,000 Speaker 1: we're seeing opportunity. Uh the I would tell you though, 243 00:13:44,040 --> 00:13:46,520 Speaker 1: that we are seeing signs that the credit cycle is 244 00:13:46,520 --> 00:13:49,040 Speaker 1: starting to shift. And we would also add deer list 245 00:13:49,120 --> 00:13:53,079 Speaker 1: the increase in bankruptcy. So the bankruptcy councils showed a 246 00:13:53,160 --> 00:13:57,080 Speaker 1: spike class February UM and anecdotally, as we talked to 247 00:13:57,240 --> 00:13:59,760 Speaker 1: bankruptcy councils around the country, they're seeing a pick up 248 00:13:59,800 --> 00:14:03,360 Speaker 1: an activity um and it's covering all sectors, including real estate. 249 00:14:03,480 --> 00:14:07,280 Speaker 1: So that's anecdotal, but with spread wider right now, especially 250 00:14:07,280 --> 00:14:09,800 Speaker 1: on the investment grade site since February, we're seeing wonderful 251 00:14:09,800 --> 00:14:11,800 Speaker 1: opportunities in the bond market. All right, So where are 252 00:14:11,800 --> 00:14:16,400 Speaker 1: you seeing the opportunity specifically? So we like we like banks, 253 00:14:16,840 --> 00:14:18,760 Speaker 1: some of these banks that are forced to build their 254 00:14:19,040 --> 00:14:22,280 Speaker 1: capital ratios, like Wells Fargo and Deutsche Bank. That helps 255 00:14:22,280 --> 00:14:25,000 Speaker 1: bond holders. All that does is so that's that's the 256 00:14:25,040 --> 00:14:28,920 Speaker 1: capital level underneath the bond piece of it, and we 257 00:14:29,000 --> 00:14:32,560 Speaker 1: like that. Okay. One thing that you noted in the 258 00:14:32,600 --> 00:14:34,640 Speaker 1: research piece that you sent over was that you like 259 00:14:34,840 --> 00:14:39,000 Speaker 1: triple B rated corporate bonds. This is the lowest rated 260 00:14:39,240 --> 00:14:42,080 Speaker 1: tier of investment grade debt and Frankly, it has been 261 00:14:42,080 --> 00:14:45,360 Speaker 1: pinpointed by the likes of PIMCO and Western Asset Management 262 00:14:45,400 --> 00:14:48,080 Speaker 1: as being uh, kind of harboring quite a bit of 263 00:14:48,200 --> 00:14:52,640 Speaker 1: risk nowadays, more so than usual. Why do you like it? 264 00:14:52,720 --> 00:14:55,280 Speaker 1: Even though these are the companies that are arguably levering 265 00:14:55,320 --> 00:14:59,240 Speaker 1: up the most. So we have to be careful to 266 00:14:59,600 --> 00:15:02,280 Speaker 1: not ain't the whole in the whole sector with the 267 00:15:02,320 --> 00:15:04,640 Speaker 1: same brush. There are parts of the triple B sector 268 00:15:05,120 --> 00:15:07,720 Speaker 1: that we think make a lot of sense. There's industrials 269 00:15:07,720 --> 00:15:11,680 Speaker 1: defense that are wonderful companies that are well run. But 270 00:15:11,720 --> 00:15:13,720 Speaker 1: when you look at some of the specialty finance, if 271 00:15:13,720 --> 00:15:15,760 Speaker 1: you look at the real sector, some of the reeds 272 00:15:15,800 --> 00:15:17,800 Speaker 1: are going to feel some pressure and we see some 273 00:15:17,840 --> 00:15:20,520 Speaker 1: downgrades in that area as well. But again we've seen 274 00:15:20,680 --> 00:15:23,760 Speaker 1: we've seen triple B spreads widen out much further than 275 00:15:23,880 --> 00:15:27,160 Speaker 1: a the single A spread over the last year, and 276 00:15:27,320 --> 00:15:30,040 Speaker 1: there's opportunity we're being compensated for that risk right now. 277 00:15:30,240 --> 00:15:32,800 Speaker 1: That's really interesting. And that's actually uh somewhat of a 278 00:15:32,840 --> 00:15:36,800 Speaker 1: controversial and uh and and uh kind of against the 279 00:15:36,840 --> 00:15:40,960 Speaker 1: market kind of bet right now. Yeah, market still market 280 00:15:41,000 --> 00:15:45,320 Speaker 1: still moving straight lines. So uh, these are positional and 281 00:15:45,440 --> 00:15:48,920 Speaker 1: so with we expect as the summer comes through, volatility 282 00:15:48,960 --> 00:15:52,400 Speaker 1: is going to come down. With volatility coming down, we'll 283 00:15:52,400 --> 00:15:56,080 Speaker 1: see some spread contractions. We're expecting that we're knock on wood. 284 00:15:56,120 --> 00:15:58,560 Speaker 1: We're expecting a little bit quieter summer than we saw 285 00:15:58,600 --> 00:16:00,560 Speaker 1: in the beginning. And what support in that is the 286 00:16:00,600 --> 00:16:03,320 Speaker 1: new issue calendar starting to slow. So when we had 287 00:16:03,360 --> 00:16:06,760 Speaker 1: new issuance, which is supporting a lot of stock buy backs, 288 00:16:06,760 --> 00:16:08,520 Speaker 1: I'll give you that we're seeing a lot of stock 289 00:16:08,560 --> 00:16:12,720 Speaker 1: buy backs, UM, but uh, Corporate America is a lot 290 00:16:12,760 --> 00:16:16,800 Speaker 1: savvy or at managing their capital structure right now. And 291 00:16:16,800 --> 00:16:19,600 Speaker 1: and we we think that the triple B sector offers 292 00:16:19,600 --> 00:16:22,440 Speaker 1: some value. So you started by by saying that you 293 00:16:22,480 --> 00:16:24,880 Speaker 1: are seeing signs are getting towards the end of the 294 00:16:24,880 --> 00:16:28,720 Speaker 1: credit cycle. Um, where does the biggest risk lie If 295 00:16:28,760 --> 00:16:33,160 Speaker 1: that is the case, Well, this it always happens that 296 00:16:33,640 --> 00:16:36,800 Speaker 1: we'll see it in UM subprime lending. The banks are 297 00:16:36,840 --> 00:16:39,560 Speaker 1: taking money. For the most part, we're seeing banks reduced 298 00:16:39,600 --> 00:16:43,720 Speaker 1: their loan loss reserves UM, and that's helping to support 299 00:16:43,720 --> 00:16:47,080 Speaker 1: bank earnings. But when the cycle turns, we don't have 300 00:16:47,120 --> 00:16:49,880 Speaker 1: that cushion in the banking sector. So that's one area 301 00:16:49,920 --> 00:16:52,400 Speaker 1: that we're seeing right now where there's some some concern. 302 00:16:53,120 --> 00:16:55,440 Speaker 1: Al Right, so you like bank debt, but you are 303 00:16:55,480 --> 00:17:00,480 Speaker 1: concerned the banks are reducing the subprime market. It's that 304 00:17:00,560 --> 00:17:03,560 Speaker 1: subprime auto, you know, it's it's really you're you're seeing 305 00:17:03,560 --> 00:17:05,960 Speaker 1: it come through in the consumer sector. The consumers looking 306 00:17:06,000 --> 00:17:09,159 Speaker 1: really good right now, but it's a consumer balance. She 307 00:17:09,240 --> 00:17:11,439 Speaker 1: looks good, the job market solid, there's a lot of 308 00:17:11,480 --> 00:17:15,080 Speaker 1: good things happening, and we would expect that it's going 309 00:17:15,160 --> 00:17:17,679 Speaker 1: to flow through some of the statistics and we're going 310 00:17:17,720 --> 00:17:19,960 Speaker 1: to see that consumption increased. People are going to go 311 00:17:20,000 --> 00:17:22,520 Speaker 1: out and take on loans to go buy cars or 312 00:17:22,600 --> 00:17:25,879 Speaker 1: lease cars, and it's gonna put pressure. It's not going 313 00:17:25,920 --> 00:17:28,399 Speaker 1: to happen immediately, but the trend is gonna We're not 314 00:17:28,440 --> 00:17:30,240 Speaker 1: going to move in the straight line. It is gonna 315 00:17:30,280 --> 00:17:33,280 Speaker 1: shift heading into the end of the year. We would 316 00:17:33,280 --> 00:17:37,159 Speaker 1: not we wouldn't be surprised to see a slowdown in 317 00:17:37,200 --> 00:17:41,439 Speaker 1: the second half or the mid mid part of two. Yeah. 318 00:17:41,480 --> 00:17:45,520 Speaker 1: So with respect to the backdrop of interest rates, you 319 00:17:45,560 --> 00:17:47,560 Speaker 1: know that the federalserve is getting more hawkish. Do you 320 00:17:47,600 --> 00:17:50,479 Speaker 1: expect the tenure yield to climateially? I mean, how much 321 00:17:50,480 --> 00:17:54,240 Speaker 1: are you sort of hanging your market view on the 322 00:17:54,280 --> 00:17:57,600 Speaker 1: idea of higher tenure yields. Right, So this is this 323 00:17:57,640 --> 00:17:59,760 Speaker 1: is the interesting part because remember we're still in the 324 00:18:00,040 --> 00:18:02,359 Speaker 1: huge experiment. We've got a four and a half trillion 325 00:18:02,400 --> 00:18:06,040 Speaker 1: dollar bond portfolio on our central banks balance seat, and 326 00:18:06,080 --> 00:18:08,920 Speaker 1: we're pushing short term interest rates up, talking about tightening. 327 00:18:09,160 --> 00:18:12,240 Speaker 1: Yet interest rates are still near historic blows and we're 328 00:18:12,240 --> 00:18:14,800 Speaker 1: getting relieved. So investors are coming back into the market 329 00:18:14,800 --> 00:18:17,080 Speaker 1: and saying, I can finally earn a rate of return 330 00:18:17,560 --> 00:18:20,880 Speaker 1: on my short term bond portfolio. Um, so we see 331 00:18:20,960 --> 00:18:23,960 Speaker 1: we're looking at the ten year Treasury in a range 332 00:18:23,960 --> 00:18:26,719 Speaker 1: of three to three thirty five going into the end 333 00:18:26,760 --> 00:18:29,560 Speaker 1: of the year. And the risk, the biggest risk, is 334 00:18:29,600 --> 00:18:32,479 Speaker 1: that the Federal Reserve actually inverts the yield curve, pushes 335 00:18:32,520 --> 00:18:35,760 Speaker 1: short term interest rates higher than long term interest rates. 336 00:18:36,320 --> 00:18:39,640 Speaker 1: And initially we started the year thinking that they weren't 337 00:18:39,680 --> 00:18:41,800 Speaker 1: going to do that, and we're they're going to push 338 00:18:41,800 --> 00:18:44,000 Speaker 1: to the edge and not not continue. But we think 339 00:18:44,119 --> 00:18:47,360 Speaker 1: we think that they actually will continue. So one thing 340 00:18:47,359 --> 00:18:50,600 Speaker 1: that I'm curious about is how people are viewing uh 341 00:18:50,680 --> 00:18:53,400 Speaker 1: sort of stocks and versus bonds right now, and if 342 00:18:53,440 --> 00:18:56,240 Speaker 1: people are risk on and thinking that the U. S 343 00:18:56,280 --> 00:18:59,960 Speaker 1: economy has another bump up to go before the turning 344 00:19:00,000 --> 00:19:02,920 Speaker 1: of the credit cycle, why wouldn't you just go into 345 00:19:03,000 --> 00:19:09,760 Speaker 1: equities rather than well lower rated ponds. So the equity market, 346 00:19:10,119 --> 00:19:13,040 Speaker 1: in our view of the equity market is it's got. 347 00:19:13,160 --> 00:19:16,000 Speaker 1: This has been a long rally and it's it's late stage. 348 00:19:16,080 --> 00:19:18,919 Speaker 1: So the penalty for missing earnings right now is pretty severe. 349 00:19:18,960 --> 00:19:22,240 Speaker 1: And we've seen that in retail with with L Brand's, 350 00:19:22,600 --> 00:19:25,520 Speaker 1: Dollar General, Walmart. We've seen it in some of the tech, 351 00:19:26,119 --> 00:19:30,320 Speaker 1: So it's in several industries. When a company doesn't hit expectations, 352 00:19:30,359 --> 00:19:34,800 Speaker 1: you'll see stock go down seven to ten trading. That's 353 00:19:34,800 --> 00:19:38,760 Speaker 1: that's that's stressful. So what are you buying in the 354 00:19:38,760 --> 00:19:43,840 Speaker 1: equity market? So, and we still like there's some tech 355 00:19:43,920 --> 00:19:47,400 Speaker 1: large cap tech that we like, like Microsoft that we 356 00:19:47,560 --> 00:19:50,200 Speaker 1: UM we've been adding to. We still like Walmart, even 357 00:19:50,240 --> 00:19:54,360 Speaker 1: though UM the last earnings released was a little controversial. 358 00:19:55,000 --> 00:19:57,640 Speaker 1: UM we've been added to that. We're adding the salesforce, 359 00:19:57,760 --> 00:20:00,240 Speaker 1: so we're we're across the board on our blended strategy. 360 00:20:00,760 --> 00:20:02,479 Speaker 1: Greg Han, thank you so much for being with me. 361 00:20:02,920 --> 00:20:06,200 Speaker 1: Greg Han, President and chief investment Officer at Winthrop Capital 362 00:20:06,359 --> 00:20:10,520 Speaker 1: Management in New York. Definitely a controversial call there. With 363 00:20:10,560 --> 00:20:14,200 Speaker 1: respect to the Triple B bonds, the lowest rated UH 364 00:20:14,480 --> 00:20:17,720 Speaker 1: tier of investment grade bonds has seen a huge surge 365 00:20:17,720 --> 00:20:21,600 Speaker 1: and outstanding UH. The outstanding is almost tripled since two 366 00:20:21,600 --> 00:20:24,600 Speaker 1: thousand and ten. At the same time, his point is 367 00:20:24,640 --> 00:20:28,080 Speaker 1: well taken that there are specific companies that are in 368 00:20:28,359 --> 00:20:43,600 Speaker 1: solid shape and that are in that bucket. When it 369 00:20:43,600 --> 00:20:46,879 Speaker 1: comes to international relations, it can be tough to parse 370 00:20:46,960 --> 00:20:50,240 Speaker 1: out what you need to pay attention to from the noise. Here. 371 00:20:50,280 --> 00:20:52,440 Speaker 1: To help us do that is Jack Divine. I'm very 372 00:20:52,440 --> 00:20:55,040 Speaker 1: pleased to say he's founding partner and president of the 373 00:20:55,119 --> 00:20:57,680 Speaker 1: ark And Group, also a member of the Council of 374 00:20:57,760 --> 00:21:02,440 Speaker 1: Foreign Relations and former acting Director of the CIA S 375 00:21:02,520 --> 00:21:06,760 Speaker 1: Operations outside the US. Jack, thank you so much for 376 00:21:06,840 --> 00:21:10,719 Speaker 1: joining me today. You put out your latest intelligence report, 377 00:21:10,760 --> 00:21:13,480 Speaker 1: and I was interested to know just taking a step back. 378 00:21:13,480 --> 00:21:16,120 Speaker 1: In a previous interview, we talked about how the biggest 379 00:21:16,200 --> 00:21:19,240 Speaker 1: risk was probably North Korea. What is it now? Has 380 00:21:19,240 --> 00:21:23,000 Speaker 1: it changed? I think it has changed. I think the 381 00:21:23,040 --> 00:21:26,200 Speaker 1: summit has put at least temporarily on the hold. I mean, 382 00:21:26,200 --> 00:21:31,280 Speaker 1: I think the there was momentum moving towards UH. Frankly 383 00:21:31,400 --> 00:21:33,760 Speaker 1: looked at a certain point as if we might end 384 00:21:33,840 --> 00:21:36,040 Speaker 1: up having to take some military actions. So I think 385 00:21:36,040 --> 00:21:39,240 Speaker 1: we're on hold on that side of it, and the 386 00:21:39,320 --> 00:21:43,320 Speaker 1: real work, the real work begins. The place I'm I 387 00:21:43,359 --> 00:21:45,879 Speaker 1: would keep an eye on is Iran. Now, you know, 388 00:21:45,920 --> 00:21:49,120 Speaker 1: we bounced back and forth, but I would say even 389 00:21:49,119 --> 00:21:51,880 Speaker 1: as early as the seventies when I remember meeting one 390 00:21:51,880 --> 00:21:54,760 Speaker 1: of the directors for a meeting and he was saying 391 00:21:54,800 --> 00:21:57,399 Speaker 1: that the number one target, one, number one problem is 392 00:21:57,800 --> 00:22:01,480 Speaker 1: North Korea. And when President and Trump met President Obama 393 00:22:01,520 --> 00:22:04,399 Speaker 1: for the transition, number one problem with North Korea. So 394 00:22:04,480 --> 00:22:08,159 Speaker 1: it's always been up near the very top. So in 395 00:22:08,200 --> 00:22:10,600 Speaker 1: those states, he didn't have nuclear weapons, so it was 396 00:22:10,680 --> 00:22:13,560 Speaker 1: even more of a problem in the last couple of years. 397 00:22:13,600 --> 00:22:16,800 Speaker 1: So I think I think we're at least step earlier 398 00:22:16,800 --> 00:22:18,879 Speaker 1: in a good spot. Okay, So then if the focus 399 00:22:18,960 --> 00:22:22,520 Speaker 1: is shifting to Iran as the likely hotspot, what's the 400 00:22:22,560 --> 00:22:24,680 Speaker 1: real issue here? The Iran deal is all but dead 401 00:22:24,720 --> 00:22:30,760 Speaker 1: at this point. What do you expect will happen going forward? Well, 402 00:22:30,800 --> 00:22:34,040 Speaker 1: I think this is my problem in understanding the IRANDEA. 403 00:22:34,119 --> 00:22:36,399 Speaker 1: What's the if you walk away from the deal, what 404 00:22:36,480 --> 00:22:39,360 Speaker 1: happens next? What's our what's our next move? How does 405 00:22:39,400 --> 00:22:41,760 Speaker 1: this play out? And I think there's two schools of 406 00:22:41,880 --> 00:22:46,280 Speaker 1: thought here. One is the regime is so fragile that 407 00:22:46,320 --> 00:22:48,879 Speaker 1: if we are able to keep the heat on, it 408 00:22:49,040 --> 00:22:53,280 Speaker 1: will be an internal regime change. I'm of the other school, 409 00:22:53,320 --> 00:23:01,560 Speaker 1: which is, we have consistently overestimated how much uh tension 410 00:23:01,600 --> 00:23:05,199 Speaker 1: there is a society and how much pain then we 411 00:23:05,320 --> 00:23:08,200 Speaker 1: underestimate and how much pain a society can go through. 412 00:23:08,200 --> 00:23:11,160 Speaker 1: I mean, you look at Venezuela today or North Korea. 413 00:23:11,920 --> 00:23:16,320 Speaker 1: The Iranians live better than either of those countries. But um, 414 00:23:16,359 --> 00:23:20,080 Speaker 1: my point is, uh, if we're looking for regime change 415 00:23:20,320 --> 00:23:22,600 Speaker 1: by walking away, and that's the end of the play, 416 00:23:23,800 --> 00:23:27,000 Speaker 1: I think we're in a in a poor position because 417 00:23:27,080 --> 00:23:29,359 Speaker 1: I think the Europeans are looking for a way around. 418 00:23:29,520 --> 00:23:32,360 Speaker 1: I think they're going to be frustrated and finding that. 419 00:23:32,400 --> 00:23:34,480 Speaker 1: I think the Chinese and Russians are going to try 420 00:23:34,520 --> 00:23:40,040 Speaker 1: to find ways to provide sustenance. So the deal may 421 00:23:40,200 --> 00:23:47,200 Speaker 1: stay uh stay aflow, but I in a very disorganized way, 422 00:23:47,280 --> 00:23:49,520 Speaker 1: no way that any of us would recognize it as 423 00:23:49,560 --> 00:23:52,919 Speaker 1: being meaningful. So what happens? I mean, if it doesn't 424 00:23:53,000 --> 00:23:56,600 Speaker 1: work out and the economy starts to go south and 425 00:23:56,640 --> 00:23:58,760 Speaker 1: they're not getting the benefits, then I would expect the 426 00:23:58,800 --> 00:24:01,520 Speaker 1: Iranians to return to the developing a nuclear weapon and 427 00:24:01,600 --> 00:24:03,560 Speaker 1: what is our game plan that day? And that is 428 00:24:03,600 --> 00:24:06,720 Speaker 1: not clear to me. There's a school thought to think, 429 00:24:06,840 --> 00:24:08,280 Speaker 1: you know, you punch them in the nose and get 430 00:24:08,280 --> 00:24:11,520 Speaker 1: their attention. I That's not the way I think things 431 00:24:11,560 --> 00:24:13,080 Speaker 1: get done. If you do that, you have to have 432 00:24:13,119 --> 00:24:15,119 Speaker 1: a plan. What they're going to what are they going 433 00:24:15,160 --> 00:24:16,639 Speaker 1: to do? What are you gonna do next? And I 434 00:24:16,680 --> 00:24:20,520 Speaker 1: think we're there's a vacuum and discussion about what's the 435 00:24:20,560 --> 00:24:25,200 Speaker 1: next move here? So why am enthusiastic about I think 436 00:24:25,240 --> 00:24:28,600 Speaker 1: the dolomits in North Korea? Um, I'm not. I'm not 437 00:24:28,640 --> 00:24:30,919 Speaker 1: happy the way things are going on around. You know. 438 00:24:31,040 --> 00:24:33,560 Speaker 1: One thing that I'm struggling with personally is when I 439 00:24:33,600 --> 00:24:36,119 Speaker 1: see all the headlines about uh, you know, for example, 440 00:24:36,280 --> 00:24:39,000 Speaker 1: out of G seven, I'm President Trump and the relations 441 00:24:39,040 --> 00:24:42,960 Speaker 1: with long long standing allies of the US. How important 442 00:24:43,119 --> 00:24:45,600 Speaker 1: is it that there has been a breakdown of trust 443 00:24:45,600 --> 00:24:49,520 Speaker 1: to communication between the allies. This is an interesting point. 444 00:24:49,840 --> 00:24:51,640 Speaker 1: You and I touched on it a long time ago, 445 00:24:51,720 --> 00:24:55,320 Speaker 1: and that is I think when we look at the 446 00:24:55,359 --> 00:25:00,320 Speaker 1: alliance um and much of the static recent it is 447 00:25:00,359 --> 00:25:02,480 Speaker 1: about how the Alliance is going to fall apart, and 448 00:25:02,520 --> 00:25:04,639 Speaker 1: it's disastered and so on, and the truth of the 449 00:25:04,680 --> 00:25:08,080 Speaker 1: matter is, uh, you know, the G seven is not 450 00:25:08,080 --> 00:25:09,960 Speaker 1: going to become the G six. They're not gonna be 451 00:25:10,520 --> 00:25:14,240 Speaker 1: We are such a big player in this that my 452 00:25:14,400 --> 00:25:16,040 Speaker 1: guests as they walked out of the room and each 453 00:25:16,040 --> 00:25:17,760 Speaker 1: of them said to themselves, Hey, how do we cut 454 00:25:17,760 --> 00:25:21,000 Speaker 1: a deal with this demistration? You know? And then the 455 00:25:21,119 --> 00:25:24,119 Speaker 1: same thing on on Korea said, oh, the South Koreans 456 00:25:24,119 --> 00:25:27,000 Speaker 1: weren't fully briefed, and it's like, well, where do you 457 00:25:27,000 --> 00:25:30,320 Speaker 1: think the South Koreans to go go? They well, so 458 00:25:31,160 --> 00:25:35,120 Speaker 1: I think we blow this out of proportion. What is emerging, though, 459 00:25:35,119 --> 00:25:37,359 Speaker 1: which I think is a really interesting point for me, 460 00:25:38,160 --> 00:25:40,359 Speaker 1: is there is a way that countries are going to 461 00:25:40,440 --> 00:25:42,119 Speaker 1: have to learn to deal with Trump, and they're on 462 00:25:42,160 --> 00:25:44,840 Speaker 1: a steep learning curve, and that is you're never going 463 00:25:44,920 --> 00:25:48,800 Speaker 1: to be per permanently in an endearing friend. You're gonna 464 00:25:48,840 --> 00:25:51,199 Speaker 1: be a friend as long as everything's working fine, and 465 00:25:51,240 --> 00:25:52,959 Speaker 1: then if not, he's going to treat you as if 466 00:25:53,000 --> 00:25:56,760 Speaker 1: you're not a friend. So we've been accustomed for twenty 467 00:25:56,840 --> 00:26:00,919 Speaker 1: years of some kombala where we try and get together. 468 00:26:01,480 --> 00:26:03,240 Speaker 1: So it is the real shake up, but it is 469 00:26:03,280 --> 00:26:06,440 Speaker 1: not going to change the ingredients. You know, the Europeans 470 00:26:06,440 --> 00:26:08,560 Speaker 1: are not going to go into arms the Russians, and 471 00:26:09,200 --> 00:26:11,159 Speaker 1: you know the Japanese are not going to go in 472 00:26:11,400 --> 00:26:15,959 Speaker 1: arms with the Chinese. I mean just parameters to this right, 473 00:26:16,080 --> 00:26:19,080 Speaker 1: We're overstating it, Jack Devine, thank you so much for 474 00:26:19,160 --> 00:26:22,080 Speaker 1: being with me today. Always wonderful getting your insights. Jack Devine, 475 00:26:22,160 --> 00:26:25,480 Speaker 1: founding partner and president of the Arkan Group, also a 476 00:26:25,520 --> 00:26:28,679 Speaker 1: member of the Council of Foreign Relations, and the former 477 00:26:29,119 --> 00:26:32,879 Speaker 1: acting director of the c I A s x US Operations. 478 00:26:35,920 --> 00:26:38,440 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 479 00:26:38,760 --> 00:26:42,679 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 480 00:26:42,800 --> 00:26:46,240 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 481 00:26:46,280 --> 00:26:49,840 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa 482 00:26:49,880 --> 00:26:53,000 Speaker 1: Abramoit's one before the podcast. You can always catch us 483 00:26:53,040 --> 00:27:01,560 Speaker 1: worldwide on Bloomberg Radio.