Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: And we may not have an overall recession, we're having
Speaker 2: a rolling recession. Econ of roll looks pretty strongly. It
Speaker 2: is when it comes to jobs.
Speaker 1: The financial stories that shape our world.
Speaker 2: Three major regional bank failures send shockwaves through the banking system.
Speaker 2: We're all trying to figure out what to make of
Speaker 2: generative AI.
Speaker 1: Through the eyes of the most influential voices.
Speaker 2: Welcome down, doctor Paul Krugman, Ryan moynihan, a Bank of America,
Speaker 2: deebro Lair of the Paulson Institute, well then Hubbard of
Speaker 2: the Columbia Business School.
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: Forget about war in the Middle East and Europe, or
Speaker 2: whether the FED is going to cut or raise rays.
Speaker 2: All anyone is talking about is AI and Nvidia's tree
Speaker 2: growing to the sky. This is Bloomberg Wall Street Week.
Speaker 2: I'm David Weston. This week we'll talk with Nobel Prize
Speaker 2: winning economist Paul Romer about US trade policy, what it
Speaker 2: should let in and what it should keep out.
Speaker 3: What we want to do is encourage as much flow
Speaker 3: of ideas around the world as we can, but we
Speaker 3: don't need to worry so much about the flows of ours.
Speaker 2: And with former House Majority Leader Eric Canter of Mollis
Speaker 2: about the role of business in changing the direction of
Speaker 2: the Republican Party.
Speaker 4: Donald Trump has transformed the Republican Party.
Speaker 5: It is much more of a populist party now.
Speaker 2: But first we start with what the Fed's rapid increase
Speaker 2: in interest rates has meant for those who owe money.
Speaker 2: Years of record low interest rates naturally led to more borrowing,
Speaker 2: whether by the federal government or private individuals and companies.
Speaker 6: When you have the real interest rate very low, like
Speaker 6: we had when I nominal interest rate, nominal bond yield
Speaker 6: was less than one percent, and real bond yields were
Speaker 6: one and a half one in three quarters negative, that's
Speaker 6: free money. And what that free money does is everybody
Speaker 6: goes in and they borrow and buy things and your
Speaker 6: until it's unhealthy.
Speaker 2: But now that interest rates have risen to the five
Speaker 2: percent range, there's a piper to be paid, with borrowers
Speaker 2: needing to refinance loans as they come do. But the
Speaker 2: extraordinary thing that we're facing is a trillion plus dollars
Speaker 2: of debt that's coming due over the next three four years.
Speaker 7: And that debt needs to get refinanced.
Speaker 2: Even as banks hesitate to take more on their balance sheets.
Speaker 4: If you raise those capital levels, they are going to
Speaker 4: have lower roe and factually they'll be less capital for lending, all.
Speaker 2: Of which creates opportunities for what we call distressed investors and.
Speaker 8: High ye olden loans. There's a lot of dispersion, meaning
Speaker 8: that if you look at ratings, for example, double b's
Speaker 8: are pricing in negative defaults, triple cs are pricing and
Speaker 8: high defaults. So I think if you can get these
Speaker 8: credits picked right and not make mistakes, you're going to
Speaker 8: earn nine to ten percent. And it's time to start
Speaker 8: doing that and.
Speaker 2: To tell us where he sees these opportunities. Welcome town,
Speaker 2: Joshua Friedman. He's co founder and co CEO of Canyon
Speaker 2: part So, josh thank you so much for being back
Speaker 2: with this. Let's take a step back, as we say,
Speaker 2: we had really low, historically low interest rates for a
Speaker 2: long time. Lot Buiple took a lot of debt on
Speaker 2: and now they've come back up. So where do you
Speaker 2: see the most debt A massed out there?
Speaker 9: Thank you for having me again on the show. I
Speaker 9: think when you zoom out today and try to look
Speaker 9: at the overall context. I think there are at least
Speaker 9: four sets of balance sheets that all are carrying an
Speaker 9: awful lot of leverage relative to historical levels, and in
Speaker 9: many ways unsustainable amounts. The first one is the federal
Speaker 9: government itself, which is sitting with thirty five trillion dollars
Speaker 9: of debt and managed to amass the last trillion in
Speaker 9: record time, something like one hundred and six days. And
Speaker 9: the pressure that refinancing that debt, which has relatively short
Speaker 9: average maturities, is a lot of pressure on interest rate
Speaker 9: markets generally. So that's the first balance sheet. The second one,
Speaker 9: I would say, is corporate balance sheets. And as you mentioned,
Speaker 9: if you give something to people for free, they take
Speaker 9: on a lot of it, and what was free was debt.
Speaker 9: So this balance sheet after balance sheet after balance sheet
Speaker 9: in the corporate world, mostly in private equity sponsored companies,
Speaker 9: where the level of debt is six seven eight times EBITITAH,
Speaker 9: and those maturities are rapidly advancing, and the rate of
Speaker 9: interest on those debt on that debt is quite high.
Speaker 9: Most of the floating rate debt was not fixed, and
Speaker 9: refinancing the old debt today is expensive. The third set
Speaker 9: is real estate balance sheets, and in many cases people
Speaker 9: might have swapped or capped their interest rates for two
Speaker 9: years or three years, but they didn't cap it for
Speaker 9: twenty years. Or if they fixed their interest rate, it
Speaker 9: might have been fixed for five years or seven years
Speaker 9: or ten years, but you're well into that period. And
Speaker 9: when you have to refinance into a six percent plus
Speaker 9: environment from a three percent environment, you can't.
Speaker 10: Sustain as much debt.
Speaker 9: So it leaves a gap and there's going to be
Speaker 9: a lot of interesting opportunities in those balance sheets. And
Speaker 9: the final balance sheets that are really a little bit
Speaker 9: out of whack are banks, both national critical banks that
Speaker 9: hone a lot of commercial real estate loans as well
Speaker 9: as regional banks. And we're starting to see some of
Speaker 9: the exposure in those balance sheets. And what is causing well, well,
Speaker 9: they're slowly tiptoeing back into the lending business. It's really
Speaker 9: constraining a lot of those activities that they might otherwise
Speaker 9: engage in.
Speaker 2: Why are we going to sort out? If I can
Speaker 2: say the sheep from the goats, where are you going
Speaker 2: to see some bankruptcies? Some of these people really go away.
Speaker 9: You're starting to see it. The number of bankruptcies has
Speaker 9: gone up statistically by quite a bit. And the place
Speaker 9: where you see that good company versus bad company in
Speaker 9: the most extreme light is in real estate.
Speaker 10: You see bad real estate.
Speaker 9: And what I mean by that might be markets that
Speaker 9: are having outflows of people that are never recovered from
Speaker 9: the COVID work at home phenomenon, where there are outmoded
Speaker 9: buildings that might have been built, like office buildings that
Speaker 9: are somewhat obsolete, that don't look like they're ever recovering.
Speaker 9: That we're sold for a price of X, and now
Speaker 9: the debt is trading at fifty cents or low or
Speaker 9: and the keys are being handed over. So those are
Speaker 9: really bad assets with bad balance sheets. There are other
Speaker 9: properties in real estate that are very good assets. Let's
Speaker 9: just take simple multifamily in very good markets, fully leased, etc.
Speaker 9: Maybe rents are a little soft, but they're still okay,
Speaker 9: fully occupied. But the balance sheet when it has to
Speaker 9: be refinanced, when the constructions completed, the building is done,
Speaker 9: it has to be permanently financed. The rate of interest
Speaker 9: is in the sixes, it's not in the threes, and
Speaker 9: therefore the proceeds that can be maintained in a sustainable way,
Speaker 9: are maybe half what the sponsor was expecting.
Speaker 2: Now, I'm going to guess that Canyon Partners is more
Speaker 2: interested in the second of those than the first of those.
Speaker 2: So where are you seeing opportunities right now, Canyon Partners,
Speaker 2: where are you seeing you can step in and really
Speaker 2: play a significant role in really restructuring some of these.
Speaker 9: Sure, well, there are certain deals that are just liquidations
Speaker 9: or pure bankruptcies, the ftx's of the world and others.
Speaker 9: Those can be very very interesting and last for a
Speaker 9: certain period of time. Those are a little bit anomalous.
Speaker 9: Maybe The much more systematic pattern is good company bad
Speaker 9: balance sheet six and a half seven, seven and a
Speaker 9: half times ebatah. But the value really does.
Speaker 10: Exceed the debt.
Speaker 9: It requires a careful study of what rights you have
Speaker 9: versus the borrower and what rights you have versus the
Speaker 9: other creditors, because we're in a gloves off environment and
Speaker 9: people try to take advantage of their positions to fix
Speaker 9: the balance sheet in a way that advantages themselves.
Speaker 2: Josh, it's so great to have you, beck On Wallsher,
Speaker 2: thank you for being here. That's Josh Friedman of Kenyon Partners.
Speaker 2: Markets were off to the races this week, with both
Speaker 2: the S and P five hundred and the now setting
Speaker 2: new records. The SMP was up one point seven percent
Speaker 2: of the week that's ending at five oh eight eight.
Speaker 2: That's staying above the year end consensus of the Bloomberg
Speaker 2: Elves despite the l's taking their median number up by
Speaker 2: fifty points. The NASDAC added one point four percent, while
Speaker 2: the yield on the tenure fell just over three basis
Speaker 2: points to end the shortened trading week at four point
Speaker 2: two five percent. To take us through the weekend, the markets,
Speaker 2: Welcome back now, Alicia Levine, bny Melon, the head of
Speaker 2: Investment Strategy and Equity Advisory Solutions. Alicia, great to have
Speaker 2: you back with us. Thank you for being here. Thanks David, So,
Speaker 2: I guess first of all, how much of this was
Speaker 2: in Nvidia, I mean, in video is quite a phenomenon
Speaker 2: in the equity markets this week. How much of what
Speaker 2: we're seeing in the equity markets is really because the
Speaker 2: Nvidia effect.
Speaker 11: So it's in Vidia, but it's not just in Vidia
Speaker 11: per se, because what in video represents is the next
Speaker 11: growth leg of corporate America, of productivity and of earnings
Speaker 11: for the fastest growing companies in America. So yes, it
Speaker 11: was that one company, but it's also what it represented
Speaker 11: is in that the AI revolution looks to be real.
Speaker 11: The growth is spectacular. It won't be the only company
Speaker 11: that benefits from So there are creators and there they
Speaker 11: are benefacturers from this, and so all that went into
Speaker 11: the invidious story. So, yes, the numbers were terrific. They
Speaker 11: beat a high bar, right, they beat a high bar.
Speaker 11: I mean, it's remarkable, remarkable that the market rally, but
Speaker 11: the earnings were good, the outlook was great, and so
Speaker 11: that just rallied the whole complex related to AI.
Speaker 2: There's been concern that the market's a little too narrow.
Speaker 2: We were talking about the Magnificent seven. I guess we
Speaker 2: talk about it all the time. Is there any indication
Speaker 2: that the market is broadening out a little bit?
Speaker 11: So it's a great question because in some ways the
Speaker 11: Magnificent seven has turned into the feisty five. Right, So
Speaker 11: a couple of the larger companies are simply stumbling this year,
Speaker 11: not just on fundamentals but also on sock price. At
Speaker 11: the same time, you are seeing a broadening out to
Speaker 11: other parts of the large cap universe. We're not there
Speaker 11: yet in small cap, but we are in large caps.
Speaker 11: So the industrials are doing well, healthcare is doing well,
Speaker 11: parts of consumer are doing well, so that part of
Speaker 11: the world it's broadening out. But that whole Magnificent seven
Speaker 11: I think, is going to crack apart. And now ELI
Speaker 11: Lilly is part of that as well, so that was
Speaker 11: not part of ELI Lily was not part of the
Speaker 11: Magnificent seven last year, So you're seeing a broadening.
Speaker 2: It was a time not long ago when it was
Speaker 2: all about the Fed. Are they going to cut, how
Speaker 2: much they're gonna cut, how soon are they're going to cut?
Speaker 2: How much risk is there in the marketplace right now?
Speaker 2: But the Fed not cutting as much as we thought
Speaker 2: or hope they would.
Speaker 11: So let's roll that question back a little bit. The
Speaker 11: real risk is inflation. That's the risk, and then of
Speaker 11: course the Fed's reaction function to it. So as long
Speaker 11: as inflation stays on this downward path, the Fed can
Speaker 11: cut and can cut by June. The big risk here
Speaker 11: is what happens with CPI for February reported in March. Right,
Speaker 11: If it's another hot month, then you could get some
Speaker 11: dislocation in the market. But where we stand today, I
Speaker 11: think that the FED story is very understood. So the
Speaker 11: market very quickly went from pricing in six cuts to
Speaker 11: three cuts for this year, even as growth was better,
Speaker 11: Earning slightly better, and the markets just kind of digested it.
Speaker 11: So I think as long as the FED cuts by June,
Speaker 11: the story remains in tact, which is fair a bullish one,
Speaker 11: it's a strong one.
Speaker 2: So that's monetary policy. We're on a fiscal policy because
Speaker 2: there's still some money coming out of the federal government
Speaker 2: under those bills that got enacted in prior years.
Speaker 11: That's right, So I think there's no accident to note
Speaker 11: that those enormous two trillion dollar bills that came out
Speaker 11: of the administration that were passed a couple of years ago,
Speaker 11: the IRA, the Chips Act, the Infrastructure Act. Guess when
Speaker 11: the money really starts getting pumped into the economy. That
Speaker 11: is in twenty twenty.
Speaker 10: Four, an election year.
Speaker 11: So we're seeing one hundred billion dollars coming in from
Speaker 11: those acts this year into the economy. And at the
Speaker 11: same time, Congress both Democrats and Republicans, are passing a
Speaker 11: tax bill that also bring the fiscal stimulus into the
Speaker 11: economy in an election year, So I'd say that what
Speaker 11: that tells me is it's going as the year goes on,
Speaker 11: it's going to be harder to get the recession because
Speaker 11: the fiscal policy is working towards growth. And so with that,
Speaker 11: I think that the risk of a recession that folks
Speaker 11: still want worry about because of the tightening of policy
Speaker 11: and the retraction and bank credit to the economy, it's
Speaker 11: being offset by the fiscal into the economy.
Speaker 2: I know that historically markets don't discount geopolitical risk very well,
Speaker 2: but at some point do they have to start thinking
Speaker 2: about it. Where are we today?
Speaker 11: We look to be fracturing. We look to be going
Speaker 11: back to a place where there are blocks, there's competition
Speaker 11: both militarily and economically, and for that you have to
Speaker 11: go back past the Cold War, because the Cold War
Speaker 11: was essentially two blocks, and we're going back before that.
Speaker 11: I'd say, ultimately, if you want to think of it
Speaker 11: this way, the US is really involved in a two
Speaker 11: front war right now, and the question is is there
Speaker 11: a third one?
Speaker 2: Yeah, infascination. Sooner or later, the markets are going to
Speaker 2: have to deal with all this geopolitics. Thank you so
Speaker 2: much for Alesha Levin of BNY Mellon and this is
Speaker 2: Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. US trade
Speaker 2: policy is already playing a role in this presidential election
Speaker 2: as a leading Republican candidate, Donald Trump is calling for
Speaker 2: an across the board tariff of ten percent on goods
Speaker 2: imported from all countries and potentially much higher from China.
Speaker 2: Nobel Prize winning economist Paul Romer of Boston College takes
Speaker 2: us through the economic effects of tariffs.
Speaker 3: I think we need a more nuanced view, and it's
Speaker 3: really one that goes all the way back to the
Speaker 3: origins of my work distinguishing ideas from objects. And what
Speaker 3: we want to do is encourage as much flow of
Speaker 3: ideas around the world as we can. But we don't
Speaker 3: need to worry so much about the flows of objects
Speaker 3: because we don't get very much benefit out of the
Speaker 3: trade and the objects. And as I'll describe that, there's
Speaker 3: some costs associated with those.
Speaker 2: I think historically, as economists have told us that free
Speaker 2: trade is really valuable to growing the economy, that you
Speaker 2: have comparative advantage, really grow an economy. If you actually
Speaker 2: do cut back on free trade, do you have to
Speaker 2: give up growth in the economy. No, so you don't
Speaker 2: have to give up the growth because it's the trade
Speaker 2: and ideas which is essential for faster growth. So, for example,
Speaker 2: if you've got a firm that invents, like a better
Speaker 2: pharmaceutical in the United States, you want them to be
Speaker 2: able to earn royalties on that all over the world
Speaker 2: because the returns to innovation will be higher and they'll
Speaker 2: discover more things. But that doesn't mean that the pill
Speaker 2: has to be manufactured in the United States. The firm
Speaker 2: can get the royalties just on the intellectual property and
Speaker 2: have that manufactured anywhere. To give you another example, when
Speaker 2: during the seventies, Japan had gotten better at making cars
Speaker 2: according to these zero defect quality control standards, and we
Speaker 2: came to an agreement with Japan where we said, Toyota, Honda,
Speaker 2: those companies they can come and manufacture cars in the
Speaker 2: United States. So the ideas that they had developed they
Speaker 2: could earn a profit on, and US consumers could get
Speaker 2: the benefits of higher quality cars. But we still had
Speaker 2: cars that were manufactured by workers in the United States.
Speaker 2: And that's the advantage of some kind of restrictions on
Speaker 2: the trade in goods is that we can actually protect
Speaker 2: the jobs and the incomes for the people who you know, unfortunately,
Speaker 2: for the last two decades, have really been left behind.
Speaker 2: One of the concerns repeated most frequently about tariffs is
Speaker 2: the effect that they may have on economic growth overall,
Speaker 2: even if they do save some jobs.
Speaker 7: I don't think there's any debate among serious economists. From
Speaker 7: a macroeconomic standpoint, trade is good. Therefore, moving against trade
Speaker 7: is bad in terms of the impact on the overall economy.
Speaker 7: Whether we go into a crash and the depression, I'm
Speaker 7: not sure I would predict that, but it's bad on
Speaker 7: a micro level. The problem with free trade, so to speak,
Speaker 7: is that there were jobs lost. The opening of China
Speaker 7: into the WTO unabashedly, unquestionably caused US manufacturing jobs, but
Speaker 7: the overall economy was better. Everything you and I bought
Speaker 7: was cheaper and better because it was made in China.
Speaker 7: And yeah, we can reverse all that. We can ban television,
Speaker 7: SATs and bicycles from China, and the consequences would be
Speaker 7: not I don't think disastrous, but.
Speaker 10: They would be noticeably bad.
Speaker 3: The way to cut it is high school educated versus
Speaker 3: college educated people. And if you look at something like
Speaker 3: life expectancy, high school educated people are dying younger. They're
Speaker 3: dying from these deaths of despair. If you look at employment,
Speaker 3: the average adult, the average number of adults who have
Speaker 3: a job in the United States has gone down, mostly
Speaker 3: because the people who are high school educated have such
Speaker 3: miserable prospects.
Speaker 10: That some of them have given up.
Speaker 3: The rest are staying there in the market, but they're
Speaker 3: they're really they're really suffering. So life expecting, see willingness
Speaker 3: to work. I mean, these are the kinds of underlying
Speaker 3: indicators that tell us life is not getting better. It's
Speaker 3: getting worse for a large fraction of the people here
Speaker 3: in the United States. And we got to think about
Speaker 3: what do we do to give them a growth prospect
Speaker 3: like the rest of us have the college educated have
Speaker 3: What will make it so that they can see progress
Speaker 3: in their lives and even progress where their children will
Speaker 3: do better than they did.
Speaker 2: It's not just goods that the United States and forces
Speaker 2: world broad It also welcomes capital investment, as Nippon Steel
Speaker 2: seeks even now to invest in US steal something the
Speaker 2: Biden administration is carefully reviewing.
Speaker 12: This is a test for the Biden administration. Has their
Speaker 12: commitment to resilience and industrial policy in a serious commitment
Speaker 12: based on a desire to strengthen and make more resilient
Speaker 12: the economy, or is it a cloak for protectionists pandering
Speaker 12: to traditional industries with no genuine national security rationale. There
Speaker 12: is no remotely plausible national security rationale for questioning the
Speaker 12: nipon steel. Nipon US steel transaction Japan is a staunch ally.
Speaker 12: The production will continue to take place in the United States.
Speaker 12: The result will be the infusion of more capital into
Speaker 12: the US steel industry. The result will be lower price
Speaker 12: steel as an input when a hundred times as many
Speaker 12: US workers are in industries that use steal as are
Speaker 12: in the steel industry self. So this should be a
Speaker 12: layup for policy makers who have the right motivations, and
Speaker 12: if it's not, it is a sign of very troubling economic.
Speaker 10: Nationalism on the part of the United States.
Speaker 3: I think foreign investment is by far the most important
Speaker 3: vector for moving ideas around the world. There's licensing, there's
Speaker 3: intellectual property, but it's really foreign it's firms that carry ideas.
Speaker 3: So NIP on steel could bring its ideas in about
Speaker 3: how it makes how to make steel or better, better,
Speaker 3: more efficient methods. That's just like Toyota and Honda had
Speaker 3: these ideas about quality control, which interesting we were ideas
Speaker 3: developed by a professor in the United States deming, but
Speaker 3: nobody has States would listen to him, so he took
Speaker 3: the ideas to Japan.
Speaker 2: They developed them.
Speaker 3: They turned out to be fantastically important, and then we
Speaker 3: got them back through the direct foreign investment by those firms.
Speaker 3: So we definitely want us both to protect our firm's
Speaker 3: ability to go earn a return in other countries in
Speaker 3: the world, but also we want to fight for that.
Speaker 3: We also want to fight for the ability for the
Speaker 3: foreign firms that have good ideas to come and supply
Speaker 3: them to workers and consumers in the United States.
Speaker 2: So you're an economist, of course, you're not a national
Speaker 2: security expert. How does national security cut across this petific
Speaker 2: because there are concerns it's some investment, foreign investment, particularly
Speaker 2: from some rivals, if not enemies, rivals in some US
Speaker 2: industries could actually undermine our national security.
Speaker 3: Yeah again, I think I think people are like barking
Speaker 3: up the wrong tree here. I think that what we
Speaker 3: should really be thinking about on national security is we
Speaker 3: want to make critical security technology goods like chips in
Speaker 3: the United States so that if things get really bad,
Speaker 3: we control the supply, and we want to make things
Speaker 3: like masks, like for.
Speaker 2: The next pandemic in the United States.
Speaker 3: And we've gotten ourselves in a position where we are
Speaker 3: not self sufficient in chips or masks, So those are
Speaker 3: the things we need to invest in, and if necessary,
Speaker 3: put tariff barriers because it'll be a little more expensive
Speaker 3: to produce them here. But put tariff barriers or subsidized
Speaker 3: one way or the other make it profitable for firms
Speaker 3: to make those kind of goods here. We're doing that
Speaker 3: sum with chips. I don't think we're doing it as
Speaker 3: much as we should with the medical technologies. But then
Speaker 3: moving out from the security sense of areas and the
Speaker 3: kind of emergency areas, we should be thinking about a
Speaker 3: way to make sure that there's a demand for these
Speaker 3: high school educated individuals to get a job in a
Speaker 3: factory that pays a wage and pays a wage which
Speaker 3: is higher than the wage that a worker gets in Vietnam,
Speaker 3: and to make that attractive for the firm to hire
Speaker 3: the US worker instead of the worker in Vietnam. We're
Speaker 3: going to have to have either subsidies or tariff barriers.
Speaker 2: Yea.
Speaker 3: And I did only say that this could get us
Speaker 3: back to the system that worked for us in the
Speaker 3: twentieth century, because what we did was we reduced the
Speaker 3: number of high school educated individuals because a lot of
Speaker 3: people were getting college education. There was still a demand
Speaker 3: for those high school educated people in manufacturing. So a
Speaker 3: reduction supply same demand, wages were going up. So both
Speaker 3: the people who got more education got higher wages, but
Speaker 3: the people who didn't get more education got higher wages
Speaker 3: because they were becoming more scarce. That all file apart
Speaker 3: when with globalization, where instead of hiring more expensive high
Speaker 3: school educated workers in the United States, firms just went
Speaker 3: anywhere in the world to chase the lowest wages. So
Speaker 3: this is like is going to be like a big
Speaker 3: food fight, I think in the profession. But I think
Speaker 3: we have to get serious about the reality of this
Speaker 3: and not just keep talking about, well, we'll find a
Speaker 3: way to share the gains if we engage in trade.
Speaker 3: We've had twenty years and we haven't done any sharing
Speaker 3: of the games with those people who are so depressed
Speaker 3: and miserable and discouraged. So let's go back to what
Speaker 3: worked in the twentieth century.
Speaker 2: Whatever the merits of free trade or protectionism, it is
Speaker 2: not at all certain how much difference the presidential election
Speaker 2: will have given the positions of the leading candidates.
Speaker 10: What do you mean by a free trade agreement?
Speaker 13: Right? Do you mean the traditional kind of US approach
Speaker 13: to a very very comprehensive, maximally liberalizing, aggressively liberalizing agreement.
Speaker 13: We're not doing that with anybody right now. It's actually
Speaker 13: insensitive to the dynamics in the global economy and the
Speaker 13: US economy right now to push on with that program,
Speaker 13: which may have been fit for the eighties and the nineties,
Speaker 13: maybe was starting to show its age in the two
Speaker 13: thousands and twenty tens.
Speaker 2: It's twenty twenty three.
Speaker 10: We need new policies.
Speaker 14: Both gentlemen have shown that they are both protectionists. President
Speaker 14: Biden has kept on the tariffs that that President Trump
Speaker 14: had imposed on China. I do think though, that there
Speaker 14: will be some changes, particularly if Trump is elected. What
Speaker 14: he has already said on the campaign trails, this ten
Speaker 14: percent flat you know, tariff on all imports. I think
Speaker 14: there's a real question does he have the legal or
Speaker 14: statutory ability to do that. If you actually go back
Speaker 14: to President Nixon's administration, he did that same thing in
Speaker 14: nineteen seventy one. He put an import ten percent import
Speaker 14: surcharge on all imports. Now we'll sort of see what happens.
Speaker 14: A lot of lip service doesn't necessarily transcend into translate
Speaker 14: into reality.
Speaker 3: I think both the Democrats and the Republicans are moving
Speaker 3: away from this kind of like obsession about extreme kind
Speaker 3: of extreme free trade. There are some advantages to some
Speaker 3: restrictions on trade, and we've just got to think about
Speaker 3: what are the parts that matter versus what are the
Speaker 3: parts that don't matter?
Speaker 10: And I think they're the biden Is trition.
Speaker 3: It's been a little bit more thoughtful, or at least
Speaker 3: I'm hopeful they'll be more thoughtful about continuing to support
Speaker 3: the direct foreign investment even as they try and subsidize
Speaker 3: like the chip manufacturing.
Speaker 2: That was doctor Paul Romer of Boston College coming up.
Speaker 2: Is either major party an ally of business these days?
Speaker 2: We ask former House Majority Leader Eric Canter of Molus, you.
Speaker 4: Got the best shot at having advocates for an expanded
Speaker 4: free market system for lower regulations, lower taxes. As a
Speaker 4: Republican supporter, You're not going to see that with a Democrat.
Speaker 2: That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Bloomberg Wall Street Week. I'm David Weston. Welcome
Speaker 2: now former House Majority Leader Eric Canter, vice chairman of
Speaker 2: Mullis So, Eric, welcome back. Great to have you on
Speaker 2: the program.
Speaker 10: There's great to be here.
Speaker 2: You have been known to be a Republican in the past,
Speaker 2: as best I heard a call. It strikes me as
Speaker 2: we go into this presidential election, things are a bit
Speaker 2: different these days in various respects. One could say that
Speaker 2: both the Democrats and the Replicans seem to be flirting
Speaker 2: with populism. How much difference is there between these two
Speaker 2: alternatives today as opposed to ten fifteen years ago.
Speaker 10: The first of all, yes, I am a Republican. I'm
Speaker 10: still a Republican.
Speaker 4: I am a limited government, fiscal conservative, pro free market republican.
Speaker 10: And I do think.
Speaker 4: That when you're looking at the two parties from a
Speaker 4: business standpoint, you got the best shot at having advocates
Speaker 4: for an expanded free market system for lower regulations, lower taxes.
Speaker 4: As a Republican supporter, you're not going to see that
Speaker 4: with the Democrats. So there's no question I think you
Speaker 4: are right. You know, Donald Trump has transformed the Republican Party.
Speaker 4: It is much more of a populist party now with
Speaker 4: a lot of nationalistic tendencies.
Speaker 2: But there was a time that was thought, whether fairly
Speaker 2: or unfairly, Republican Party tend to be more pro business.
Speaker 2: Democrats not so much. But Donald Trump has certainly not
Speaker 2: gone out of his way to be a friend to business,
Speaker 2: at least explicitly.
Speaker 4: Well, I think that again, some of there are particular industries,
Speaker 4: particular companies that he has a beef with, and we've
Speaker 4: seen that sort of play out in his prior administration,
Speaker 4: and so I suspect if we see another Trump administration
Speaker 4: that you're going to again see some of that tension
Speaker 4: between certain industries, let's say the tech industry.
Speaker 10: And some others that he's picked.
Speaker 4: Out for particular ire But on the whole, if you
Speaker 4: look at what he did policy wise, from tax standpoint
Speaker 4: or regulatory standpoint, he's much more grounded in who he
Speaker 4: is as a business person than any Democratic nominee Joe
Speaker 4: Biden or otherwise whatever be.
Speaker 2: What about trade, because certainly Donald Trump came in and
Speaker 2: imposed a lot of tariffs inclaring I would say some
Speaker 2: extradiny ruins under Section three oh one, which hadn't been
Speaker 2: used that much before that, and that was not always
Speaker 2: friendly to business some of the trade restrictions you impose.
Speaker 2: Is there a big difference between Democrats and Republics right
Speaker 2: now on the use of trade protection devices?
Speaker 4: Well, you know, it's interesting to see those trade policies
Speaker 4: that were put in place by President Trump have really
Speaker 4: been continued by President Biden.
Speaker 10: So there really hasn't been much of a shift.
Speaker 4: I think US leadership in terms of trade, whether it's
Speaker 4: more trade deals or any kind of deepening of those
Speaker 4: relationships and a multilateral basis, even a bi level basis,
Speaker 4: I would say it is hard.
Speaker 10: To come by now.
Speaker 4: Free trade is not necessarily something that rallies either party,
Speaker 4: and I do think you're going to see a continued
Speaker 4: increase in protectionism. You've heard the discussion that President Trump
Speaker 4: has put forward increasing tariffs ten percent across the board.
Speaker 4: He's even mentioned a sixty percent in position in tariffs.
Speaker 10: On goods coming in from China.
Speaker 4: So I do think that you're seeing a ratcheting up
Speaker 4: of that kind of rhetoric that's going to manifest itself
Speaker 4: in some policy.
Speaker 2: We've got a lot of geopulutive situations going on, and
Speaker 2: we've got a war in Europe, We've got a war
Speaker 2: in Gaza really with Israel Hamas, We've got tensions over
Speaker 2: in Asia as well. As you talk to Mollus's clients,
Speaker 2: is the issue of geopolgis rising on the agenda as
Speaker 2: they talk to you? Is it more concerned today than
Speaker 2: it was five years ago?
Speaker 4: Certainly it's a topic of discussion all the time, and
Speaker 4: especially with multinationals if they're either European, Western based American multinationals,
Speaker 4: very concerned with what's going on in the Middle East.
Speaker 4: I spent a lot of time there, and certainly that's
Speaker 4: one of the most active places on the globe right
Speaker 4: now in terms of transactions and growth oriented policies. Same hand,
Speaker 4: you know, people are looking to see, hey, what's going
Speaker 4: on over in the levant with Hamas and Israel and
Speaker 4: is that going to spread? And I think thus far
Speaker 4: we've seen that not spread. I don't think you Ron
Speaker 4: wants to see it spread so, yes, geopolitics is a
Speaker 4: discussion throughout most boardrooms and conversations that I'm having. But
Speaker 4: I also think, you know, it's it's one election. Because
Speaker 4: there's a lot of elections globally this year. One election
Speaker 4: matters most, and that's here.
Speaker 2: Turn to the fiscal side for a lot of concern
Speaker 2: about what we're doing in terms of borrowing money, the
Speaker 2: annual deficit where it is, and the death that's accumulating
Speaker 2: and seculating. Quite quickly, I'm going to say I don't
Speaker 2: hear much out of either the most likely candidates, whether
Speaker 2: it's Donald Trump or Joe Biden right now about really
Speaker 2: getting on our arms around that.
Speaker 4: Well, you know you asked about geopolitics and whether that's
Speaker 4: a topic of discussion, Yes, I do think more relevant
Speaker 4: to the deal world, which is what we do at MOLUS.
Speaker 10: Is the interest rights.
Speaker 4: And it's been very interesting to see the reaction of
Speaker 4: the markets after Chairman Powell has pretty much indicated that
Speaker 4: the time for raising rates is subsided, and now the
Speaker 4: market is trying to assess when there will be a cut,
Speaker 4: whether we'll be at this level for longer. But really
Speaker 4: very few people are talking about increasing rates this here,
Speaker 4: which is helping. I think the overall investor outlook for
Speaker 4: more transactions, more deals to come.
Speaker 10: And when you.
Speaker 4: Look at Washington and how they view interest rates, if
Speaker 4: the market's saying, hey, we can maybe live with some
Speaker 4: more certainty now at these levels, the problem is in Washington,
Speaker 4: these levels are very expensive given the debt load that
Speaker 4: has been undertaken. And you're right, neither Joe Biden or
Speaker 4: Donald Trump are talking about how do we solve this
Speaker 4: fiscal situation we've got And obviously at the core of
Speaker 4: it for the federal government is the increase and expense
Speaker 4: at the entitle level, and that's a really tough and
Speaker 4: tricky political mindfield.
Speaker 2: One of the things that business craves is certainty, predictability,
Speaker 2: whatever it is high, low it or is as we
Speaker 2: know what it is. I'm going to pick on your
Speaker 2: old shop now the House Representatives of the moment, because
Speaker 2: there hasn't been a lot of certainty coming out of Congress,
Speaker 2: and particularly I would say on the House represents side.
Speaker 2: How large a factor is that in business planning? How
Speaker 2: can you plan ahead when you don't know we don't
Speaker 2: even know we're going to fund the government right now?
Speaker 4: You know, David, it is amazing to see how many
Speaker 4: years we've lived with that kind of uncertainty and let's
Speaker 4: just say alleged dysfunction in Washington, it is pretty extraordinary.
Speaker 4: At least a decade, if not more, there has been
Speaker 4: this type of uncertainty with whether Congress is going to
Speaker 4: be able to even come up with the spending plan.
Speaker 4: We are facing in short order, within a week the
Speaker 4: potential shutdown of the government, and then a week after
Speaker 4: that a larger potential shutdown of the government.
Speaker 10: And that is combined with the.
Speaker 4: Press that the Senate has now put on the House
Speaker 4: of Representatives on the foreign aid package.
Speaker 10: So there's a lot of uncertainty.
Speaker 4: But what I see in the markets today, in the
Speaker 4: business world is almost trying to tune out that noise
Speaker 4: because people feel like at the end of the day,
Speaker 4: Washington will figure it out. And I do believe, given
Speaker 4: my experience in that town, that ultimately on the floor
Speaker 4: of the House of Representatives, it's too eighteen that matters.
Speaker 4: That's the majority number to get anything passed, and well
Speaker 4: over two eighteen members want to avoid any long shutdown
Speaker 4: or any real catastrophes. So I do think in the end,
Speaker 4: markets are right that it'll get there, but it is uncertain,
Speaker 4: so it doesn't help things.
Speaker 2: Okay, thank you so much for being Gregort's really appreciate Eric.
Speaker 2: That's Eric Canter of Molus. Finally, one more thought. Daron
Speaker 2: Sorkin said, decisions are made by those who show up,
Speaker 2: but there are lots of people who take the other road,
Speaker 2: don't show up and don't get to make the decisions.
Speaker 2: Something we've come to ghosting. Ghosting is nothing new. After all,
Speaker 2: they made a movie about Ferris Bueller ghosting his high
Speaker 2: school teacher repeatedly over thirty years ago.
Speaker 7: Fueller canda get dressed and come on over, Fueller, he
Speaker 7: has been absence of the nine times.
Speaker 2: But this ghosting business is getting a bit more serious
Speaker 2: than simply cutting class in high school. Major tech firms
Speaker 2: like Google have failed to show up for testimony in
Speaker 2: front of Senate committees.
Speaker 15: I'm deeply disappointed at Google, one of the most influential
Speaker 15: digital platforms in the world, chose not to send its
Speaker 15: own top corporate leadership to engage this committee.
Speaker 2: And Elon Musk tried his best to ghost Twitter when
Speaker 2: he tried to get out of his firm commitment to
Speaker 2: buy the company for forty three billion dollars, only to
Speaker 2: be told by a Delaware judge he had no choice
Speaker 2: but to show up and bring his money with him,
Speaker 2: and he did even more than that.
Speaker 16: Elon Musk made his present felt at the company's headquarters yesterday,
Speaker 16: posting a video of himself walking into the offic says,
Speaker 16: carrying a kitchen. Sinke betweeted entering Twitter headquarters. Let that sink.
Speaker 2: In Employment website indeed reports on a whole new area
Speaker 2: rife with ghosting hiring people. According to its survey, a
Speaker 2: substantial majority of job applicants have ghosted there would be employers,
Speaker 2: often more than once, and even more remarkable, eighty seven
Speaker 2: percent of those surveyed reported that they'd gone through the
Speaker 2: interview process, accepted a job, and then simply failed to
Speaker 2: show up on their first day. I've never failed to
Speaker 2: show up for an interview or a job, but years
Speaker 2: ago I was on the receiving end of my own
Speaker 2: form of ghosting, and it was the Supreme Court that
Speaker 2: didn't show up. I was a lawyer in private practice
Speaker 2: representing an engineering firm that had lost a case where
Speaker 2: the damages were more than the company it was worth.
Speaker 2: The state rules, the firm had to post a bond
Speaker 2: and the full amount of the judgment, which obviously couldn't
Speaker 2: do as it didn't have collateral to cover the bond.
Speaker 2: I petitioned the court over a weekend for a stay
Speaker 2: of the bond requirement and asked the court to decide
Speaker 2: whether the bond was constitutional. The court granted my stay
Speaker 2: and agreed to take the case. And then we waited
Speaker 2: for the case to be set for oral argument, and
Speaker 2: we waited, and we waited. After a couple of years,
Speaker 2: the case just went away as the appeal proceeded without
Speaker 2: the bond, which I suppose is what the court had
Speaker 2: in mind all along. But then again, long before Aaron
Speaker 2: Sorkin talked about decisions being made by those who show up,
Speaker 2: the Danish philosopher Soren Kickergor even more famously said, not
Speaker 2: to decide is to decide. That does it. For this
Speaker 2: episode of Wall Street Week, I'm David Weston. See you
Speaker 2: next week,