1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:16,960 Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, 3 00:00:17,040 --> 00:00:23,480 Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,640 --> 00:00:34,960 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg One 5 00:00:35,000 --> 00:00:37,600 Speaker 1: of our high points that Davos was a discussion with 6 00:00:37,720 --> 00:00:40,400 Speaker 1: the Prime Minister of the Republic of Ireland about the 7 00:00:40,479 --> 00:00:44,080 Speaker 1: future of the island nation. That future comes forward today 8 00:00:44,400 --> 00:00:47,680 Speaker 1: as Prime Minister May will travel to Belfast. An extraordinary 9 00:00:47,760 --> 00:00:51,640 Speaker 1: moment for Northern Ireland. Arlene Foster, I believe out with 10 00:00:52,400 --> 00:00:55,200 Speaker 1: comments here through the morning and then we'll hear from 11 00:00:55,200 --> 00:00:58,200 Speaker 1: Prime Minister May this afternoon. Richard has to join us 12 00:00:58,200 --> 00:01:00,360 Speaker 1: in the next hour. Now, Gene free it with us 13 00:01:00,400 --> 00:01:04,120 Speaker 1: with PIMCO and Jurice Raphael will join from Bloomberg Opinion 14 00:01:04,160 --> 00:01:08,160 Speaker 1: here in a moment. Gene, it's extremely important. It is 15 00:01:08,280 --> 00:01:13,160 Speaker 1: about the EU Common Market. Can the European Common Market 16 00:01:13,319 --> 00:01:18,600 Speaker 1: actually move forward without the United Kingdom? Well, I think 17 00:01:18,600 --> 00:01:22,040 Speaker 1: it's it's it's gonna have to get used to the idea. Um, yeah, 18 00:01:22,240 --> 00:01:24,080 Speaker 1: without question, it can move on. I think it's just 19 00:01:24,120 --> 00:01:27,760 Speaker 1: going to be a worse outcome for both sides. UM. 20 00:01:27,840 --> 00:01:31,440 Speaker 1: In the end, you know, UM, we think, you know, 21 00:01:31,480 --> 00:01:33,720 Speaker 1: it doesn't really change the growth outlook all that much 22 00:01:33,800 --> 00:01:35,840 Speaker 1: unless you end up with a no deal Brexit, which 23 00:01:35,880 --> 00:01:38,119 Speaker 1: we don't really see much appetite for on either side. 24 00:01:38,560 --> 00:01:41,880 Speaker 1: So I think from that perspective, yeah, they can move on. Um. 25 00:01:41,959 --> 00:01:44,680 Speaker 1: The precedents that are set will obviously be important, you know, 26 00:01:44,720 --> 00:01:48,840 Speaker 1: as other political disputes come to the four in the future. Um. 27 00:01:48,960 --> 00:01:51,600 Speaker 1: And so from that perspective, it's not likely to be 28 00:01:51,960 --> 00:01:55,000 Speaker 1: you know, an easy divorce. I mean, and we'll talk 29 00:01:55,040 --> 00:01:57,200 Speaker 1: to Ambassador House about this later, Gene. But it really 30 00:01:57,200 --> 00:02:00,200 Speaker 1: harkens back to the Good Friday Agreement of I believe nine. 31 00:02:01,720 --> 00:02:04,040 Speaker 1: Shouldn't the EU give on this? I mean, if this 32 00:02:04,120 --> 00:02:07,280 Speaker 1: is an intractable three, four or five in a year issue, 33 00:02:08,000 --> 00:02:11,280 Speaker 1: isn't it the prerogative of continental Europe to give way 34 00:02:11,320 --> 00:02:14,799 Speaker 1: to some collegial solution, as we saw with a Good 35 00:02:14,840 --> 00:02:18,799 Speaker 1: Friday Agreement. Yeah. I mean, what I would say is that, 36 00:02:18,919 --> 00:02:21,720 Speaker 1: you know, this deal that's been negotiated by this government 37 00:02:22,080 --> 00:02:24,720 Speaker 1: is a pretty good deal for the from the European perspective. 38 00:02:24,760 --> 00:02:27,000 Speaker 1: It's not such a great deal from the UK's perspective. 39 00:02:27,480 --> 00:02:30,240 Speaker 1: So in order to lock that deal in, one would 40 00:02:30,280 --> 00:02:34,040 Speaker 1: think it makes some sense to get some degree of compromise. Now, 41 00:02:34,240 --> 00:02:36,280 Speaker 1: my guess is that both sides need to kind of 42 00:02:36,280 --> 00:02:38,200 Speaker 1: look a little bit over the abyss before they come 43 00:02:38,280 --> 00:02:41,960 Speaker 1: to that sort of willingness to compromise. Um, it needs 44 00:02:42,000 --> 00:02:45,000 Speaker 1: to be clear that there is an alternative that's much worse, 45 00:02:45,560 --> 00:02:47,880 Speaker 1: which is why you have to compromise your beliefs a bit. 46 00:02:48,840 --> 00:02:51,360 Speaker 1: And still we're struggling to find this compromise. Theresa, let 47 00:02:51,360 --> 00:02:53,560 Speaker 1: me bring you in here. You've written extensively on this. 48 00:02:53,680 --> 00:02:56,920 Speaker 1: Of course, we've got Teresa May in Northern Ireland over 49 00:02:57,120 --> 00:03:01,040 Speaker 1: the next couple of days and time running out. Is 50 00:03:01,080 --> 00:03:04,400 Speaker 1: there any chance whatsoever that we could get any changes 51 00:03:04,440 --> 00:03:07,400 Speaker 1: at the margins to this backstop agreement? But we keep 52 00:03:07,480 --> 00:03:11,760 Speaker 1: hearing from various European quarters, from the UK quarters, even 53 00:03:11,800 --> 00:03:14,600 Speaker 1: from Germany, that people need to be creative, they need 54 00:03:14,639 --> 00:03:18,000 Speaker 1: to find solutions. And you know, I agree very much 55 00:03:18,040 --> 00:03:21,560 Speaker 1: with Tom when he says, you know, can't they find something? 56 00:03:21,600 --> 00:03:24,119 Speaker 1: Now it's in everybody's interest. But when you get down 57 00:03:24,160 --> 00:03:27,240 Speaker 1: to the specifics of how do you push through you know, 58 00:03:27,280 --> 00:03:29,520 Speaker 1: do you time limit the backstop. Well, then you know 59 00:03:29,560 --> 00:03:32,200 Speaker 1: what good is an insurance policy that runs out? Do 60 00:03:32,240 --> 00:03:36,600 Speaker 1: you accept unilateral withdrawal that is clearly unacceptable from the 61 00:03:36,640 --> 00:03:40,480 Speaker 1: Irish perspective, And there we run into to a difficulty 62 00:03:40,560 --> 00:03:45,480 Speaker 1: in specifying exactly what needs to happen. One possibility that 63 00:03:45,480 --> 00:03:48,000 Speaker 1: I think the EU is really pushing is finding a 64 00:03:48,040 --> 00:03:51,720 Speaker 1: solution in the political declaration, so not in the withdrawal agreement, 65 00:03:51,960 --> 00:03:54,480 Speaker 1: but finding some kind of legal ease that links the 66 00:03:54,560 --> 00:03:58,040 Speaker 1: two um But the hardline Brexiters in Teresa May's party 67 00:03:58,080 --> 00:04:01,120 Speaker 1: are absolutely adamant that that will be good enough. And 68 00:04:01,160 --> 00:04:03,080 Speaker 1: that leaves a question of whether she can peel off 69 00:04:03,200 --> 00:04:07,440 Speaker 1: enough labor MPs to find support for whatever solution she 70 00:04:07,520 --> 00:04:09,960 Speaker 1: does strike with the EU. And we have to think 71 00:04:09,960 --> 00:04:12,480 Speaker 1: that they will find something for her to bring back 72 00:04:12,520 --> 00:04:14,600 Speaker 1: to Parliament on the four Team. Yeah, and it certainly 73 00:04:14,640 --> 00:04:16,640 Speaker 1: seems that that's what markets are hoping for if you 74 00:04:16,680 --> 00:04:19,279 Speaker 1: look at cable volatility that's been coming down. We've just 75 00:04:19,320 --> 00:04:22,160 Speaker 1: heard from Gene Frieda of Pimco that a no deal 76 00:04:22,279 --> 00:04:24,400 Speaker 1: is not the most likely scenario, and I've heard that 77 00:04:24,440 --> 00:04:28,400 Speaker 1: also from JP Morgan Asset Management earlier this morning. But actually, 78 00:04:29,040 --> 00:04:31,280 Speaker 1: is there more of a chance of no deal than 79 00:04:31,360 --> 00:04:33,520 Speaker 1: markets a pricing for at the moment. Yeah, I mean 80 00:04:33,520 --> 00:04:36,240 Speaker 1: they are the experts. I've you know, always wondered whether 81 00:04:36,279 --> 00:04:40,200 Speaker 1: markets are rather too optimistic, because that is maybe in 82 00:04:40,200 --> 00:04:44,080 Speaker 1: the nature of you know, markets c opportunity. Um, you know, 83 00:04:44,120 --> 00:04:47,960 Speaker 1: there's every possibility that no deal happens almost by accident. 84 00:04:48,040 --> 00:04:50,520 Speaker 1: And if you like, we have a piece last week 85 00:04:50,560 --> 00:04:53,360 Speaker 1: on game theory and how if you try to apply 86 00:04:53,480 --> 00:04:56,320 Speaker 1: game theory to these scenarios you get, you know, this 87 00:04:56,520 --> 00:05:00,240 Speaker 1: very scary outcome that you know might be that you know, 88 00:05:00,360 --> 00:05:02,360 Speaker 1: each side is playing a rather different game and it 89 00:05:02,400 --> 00:05:04,120 Speaker 1: could end up with no deal. So I think it's 90 00:05:04,160 --> 00:05:06,919 Speaker 1: just you know, too early to write that off. And 91 00:05:06,920 --> 00:05:08,880 Speaker 1: it's also a very scary place when you're saying, well, 92 00:05:08,839 --> 00:05:11,479 Speaker 1: at the very last minute, you know, one minute to midnight, 93 00:05:11,760 --> 00:05:14,520 Speaker 1: they'll do something, but nobody can say what that something is. 94 00:05:14,960 --> 00:05:16,600 Speaker 1: Theres I want to show a chart here. This is 95 00:05:16,640 --> 00:05:20,640 Speaker 1: the Republic of Ireland nominal GDP, their animal spirit in 96 00:05:20,839 --> 00:05:24,719 Speaker 1: Northern Ireland as well the Republic of Ireland and green 97 00:05:25,320 --> 00:05:28,600 Speaker 1: UH moving up here normalized back to the year two thousand, 98 00:05:28,760 --> 00:05:32,360 Speaker 1: nineteen years ago, with Northern Ireland underperforming the mass a 99 00:05:32,400 --> 00:05:35,120 Speaker 1: little squishy, but um, it gives you a picture of 100 00:05:35,120 --> 00:05:38,320 Speaker 1: the relative growth rates of the true region. Theresa Raviel. 101 00:05:38,520 --> 00:05:41,680 Speaker 1: If we get a no deal by accident, what are 102 00:05:41,680 --> 00:05:46,120 Speaker 1: the actual outcomes to the Republic of Ireland. Well, the 103 00:05:46,200 --> 00:05:49,599 Speaker 1: consensus is that Ireland hurts big time, that next to 104 00:05:49,640 --> 00:05:53,560 Speaker 1: the UK, Ireland suffers more than any other country. Now 105 00:05:53,560 --> 00:05:56,320 Speaker 1: there's some who said, um, there's actually a report out 106 00:05:56,360 --> 00:05:59,640 Speaker 1: today that so actually, maybe the the downside Ireland isn't 107 00:05:59,720 --> 00:06:02,800 Speaker 1: quite so big as everyone is saying, because of the 108 00:06:02,920 --> 00:06:05,839 Speaker 1: UK may end up with a much looser fiscal policy. 109 00:06:05,880 --> 00:06:08,440 Speaker 1: The Bank of England could end a blowering rate. But 110 00:06:09,000 --> 00:06:11,920 Speaker 1: you know, most economists you speak to in Ireland will say, 111 00:06:12,160 --> 00:06:14,800 Speaker 1: you know, look, the country is so intertwined with the 112 00:06:14,880 --> 00:06:18,960 Speaker 1: UK economy, the agriculture sector, you know in particular, that 113 00:06:19,560 --> 00:06:22,760 Speaker 1: it would not be enough to offset the financial services 114 00:06:22,760 --> 00:06:25,320 Speaker 1: and tech jobs going to Ireland. That that that they 115 00:06:25,320 --> 00:06:27,400 Speaker 1: would be very hurt. The interesting thing is that the 116 00:06:27,480 --> 00:06:29,839 Speaker 1: Irish are not budging on the backstop. They see this 117 00:06:29,920 --> 00:06:34,240 Speaker 1: as you know, absolutely bigger than the economic risk of 118 00:06:34,279 --> 00:06:36,480 Speaker 1: a no deal exit. Gene, let me bring this back 119 00:06:36,520 --> 00:06:38,800 Speaker 1: to the markets. If we get past March twenty nine 120 00:06:38,880 --> 00:06:41,720 Speaker 1: and we don't get that no deal scenario. Is there 121 00:06:41,720 --> 00:06:44,800 Speaker 1: going to be quite a severe repricing in the guilt 122 00:06:44,839 --> 00:06:48,000 Speaker 1: market's given how the Bank of England might react, especially 123 00:06:48,040 --> 00:06:50,040 Speaker 1: with wage growth at its highest level since two thousand 124 00:06:50,080 --> 00:06:53,400 Speaker 1: and eight. Yeah, we do think there would be some repricing. Um, 125 00:06:53,440 --> 00:06:55,240 Speaker 1: But I think I wanted to say I agree with 126 00:06:55,279 --> 00:06:57,800 Speaker 1: Theresa very much. I mean, I think the reason why 127 00:06:57,839 --> 00:06:59,799 Speaker 1: the market does in price a no deal is because 128 00:06:59,800 --> 00:07:02,240 Speaker 1: it's seems so irrational to both sides, a little bit 129 00:07:02,279 --> 00:07:06,160 Speaker 1: like the referendum result itself, and you didn't get the 130 00:07:06,160 --> 00:07:09,080 Speaker 1: big move in Sterling until you actually had the result. 131 00:07:09,160 --> 00:07:11,080 Speaker 1: I think this would be very similar if you get 132 00:07:11,120 --> 00:07:12,920 Speaker 1: a good outcome. I mean, I think it's right to 133 00:07:12,960 --> 00:07:15,800 Speaker 1: say that there is some catch up potential, but the 134 00:07:15,880 --> 00:07:18,840 Speaker 1: longer it takes to get there, the more upside potential 135 00:07:18,880 --> 00:07:21,760 Speaker 1: we're taking out, because this uncertainty is leading businesses to 136 00:07:21,800 --> 00:07:24,520 Speaker 1: move away from the UK. Jean free to thank you 137 00:07:24,560 --> 00:07:26,760 Speaker 1: so much, Truth Roughio, wonderful to have you with us 138 00:07:27,240 --> 00:07:43,920 Speaker 1: this morning as well with Bloomberg Opinion. So the main 139 00:07:43,960 --> 00:07:46,320 Speaker 1: event this evening the President set to speak to a 140 00:07:46,400 --> 00:07:49,080 Speaker 1: House chamber full of Democrats. AIDS have promised a speech 141 00:07:49,120 --> 00:07:52,160 Speaker 1: full of optimism despite a continuing battle over a border 142 00:07:52,160 --> 00:07:56,080 Speaker 1: wold and another government shut down seemingly looming. Joining us 143 00:07:56,120 --> 00:07:58,440 Speaker 1: now a man whose resume and experience in government would 144 00:07:58,480 --> 00:08:00,800 Speaker 1: take a whole segment on radio to read the author 145 00:08:01,040 --> 00:08:03,440 Speaker 1: of a world in disarray. The president of the Council 146 00:08:03,440 --> 00:08:06,480 Speaker 1: on Foreign Relations, it is Richard has good morning to 147 00:08:06,520 --> 00:08:10,480 Speaker 1: embass it up. Good morning. Help his frame the significance 148 00:08:10,920 --> 00:08:13,440 Speaker 1: of this evening's address. You've had to write a few 149 00:08:13,480 --> 00:08:16,800 Speaker 1: of them. Um, how significant is this evening's Well? The 150 00:08:16,840 --> 00:08:20,000 Speaker 1: president only gets a few opportunities to speak to the 151 00:08:20,040 --> 00:08:24,320 Speaker 1: country this way. There's a dramatic, almost theatrical setting this one, though, 152 00:08:24,440 --> 00:08:28,240 Speaker 1: look comes against It's the midpoint of the Trump term. 153 00:08:28,480 --> 00:08:31,960 Speaker 1: You just have the government shutdown. The economy has been 154 00:08:32,080 --> 00:08:34,440 Speaker 1: been doing okay, but we also have a rising tide 155 00:08:34,520 --> 00:08:36,839 Speaker 1: of political populism. So I don't think there's a lot 156 00:08:36,840 --> 00:08:39,640 Speaker 1: of surprises. My guesses as supporters will find things in 157 00:08:39,679 --> 00:08:42,439 Speaker 1: this that will justify their support, and as critics will 158 00:08:42,440 --> 00:08:45,000 Speaker 1: go on being critics. Is this an appropriate forum to 159 00:08:45,280 --> 00:08:47,600 Speaker 1: announce some kind of policy change or some kind of 160 00:08:47,640 --> 00:08:51,080 Speaker 1: intention to announce the policy change. I don't think you're 161 00:08:51,080 --> 00:08:53,000 Speaker 1: going to see that. Uh, I think it's more to 162 00:08:53,240 --> 00:08:56,960 Speaker 1: underscore the basics of your message, make the case that 163 00:08:56,960 --> 00:08:59,840 Speaker 1: you've had a successful presidency at the at the at 164 00:08:59,840 --> 00:09:02,160 Speaker 1: the mid term. This also takes place, if you will, 165 00:09:02,200 --> 00:09:05,080 Speaker 1: at the opening moments of So I don't think you're 166 00:09:05,120 --> 00:09:11,280 Speaker 1: gonna see departures. The departures that we're gonna see is 167 00:09:11,320 --> 00:09:15,560 Speaker 1: typically him going off script. So really, Kevin surreally is adamant. 168 00:09:15,960 --> 00:09:18,640 Speaker 1: He's gonna come out, He's gonna read the speech and 169 00:09:18,679 --> 00:09:21,600 Speaker 1: move on. Is it that basic? Is it that perfunctory 170 00:09:21,640 --> 00:09:23,320 Speaker 1: what we're going to see? Yeah? I would think the 171 00:09:23,320 --> 00:09:26,040 Speaker 1: only moment he goes off script would be if he 172 00:09:26,080 --> 00:09:30,360 Speaker 1: says something there's then some slightly unexpected either laughing or 173 00:09:30,800 --> 00:09:33,480 Speaker 1: booing from the Democrats in the house, and then he 174 00:09:33,520 --> 00:09:36,440 Speaker 1: goes off script with some kind of impromptu ra post 175 00:09:36,480 --> 00:09:38,520 Speaker 1: to that. But I don't think you're gonna have any 176 00:09:38,679 --> 00:09:40,360 Speaker 1: sort of fun. This is not gonna be sudden. He's 177 00:09:40,360 --> 00:09:42,880 Speaker 1: gonna start tweeting during the speech and go seriously off 178 00:09:43,200 --> 00:09:46,000 Speaker 1: to get in Rockman today in the financial times of 179 00:09:46,080 --> 00:09:48,680 Speaker 1: thirty years of Trump, I mean, forget about thirty years. 180 00:09:49,080 --> 00:09:51,839 Speaker 1: Can you presume that there's enough I love the phrase 181 00:09:51,920 --> 00:09:54,199 Speaker 1: you have Trump is Um, is there enough Trump is 182 00:09:54,280 --> 00:09:56,520 Speaker 1: m where it's not eight but twelve years? I mean, 183 00:09:56,679 --> 00:09:59,200 Speaker 1: is there a follow on to a two term to 184 00:09:59,320 --> 00:10:02,440 Speaker 1: a two term Trump presidency? Well, there the elements of it. 185 00:10:02,640 --> 00:10:04,760 Speaker 1: This will probably surprise you or so in both parties. 186 00:10:04,760 --> 00:10:06,920 Speaker 1: Certainly in the Republican Party, I think that you know, 187 00:10:07,080 --> 00:10:10,760 Speaker 1: people like the Vice President NICKI Haley, Mike Pompeyo, and 188 00:10:11,160 --> 00:10:14,800 Speaker 1: Buddy Carter, the first George who Donald Trump has remade 189 00:10:14,840 --> 00:10:18,280 Speaker 1: the Republican Party so at least for his immediate success. 190 00:10:18,320 --> 00:10:19,719 Speaker 1: So there'll be a little bit of a who can 191 00:10:19,760 --> 00:10:22,560 Speaker 1: be more of a Trump continuity person? I think in 192 00:10:22,600 --> 00:10:25,680 Speaker 1: the Democrats that they'll portray themselves as very anti Trump, 193 00:10:25,840 --> 00:10:28,560 Speaker 1: but you'll see elements of similarity. Certainly on trade. No 194 00:10:28,559 --> 00:10:31,200 Speaker 1: one's going to be a free trade candidate. Um, some 195 00:10:31,280 --> 00:10:34,160 Speaker 1: elements of resentment against a wealthy So I actually think 196 00:10:34,200 --> 00:10:38,000 Speaker 1: you're going to see elements of Trumpism across the political spectrum. Richard, 197 00:10:38,000 --> 00:10:39,679 Speaker 1: Do you expect him to state his case for the 198 00:10:39,720 --> 00:10:42,319 Speaker 1: latest foreign policy decisions and do you see some kind 199 00:10:42,320 --> 00:10:44,760 Speaker 1: of overrunching strategy here from the White House in the 200 00:10:44,800 --> 00:10:47,200 Speaker 1: State Department. I think foreign policy will not be a 201 00:10:47,240 --> 00:10:50,079 Speaker 1: centerpiece of the speech. But yes, you'll see talk about 202 00:10:50,120 --> 00:10:53,200 Speaker 1: North Korea, the progress the President will argue that we've 203 00:10:53,200 --> 00:10:55,920 Speaker 1: made the run up to the second summit. I think 204 00:10:55,960 --> 00:10:59,240 Speaker 1: you'll see some talk about the justification for getting out 205 00:10:59,240 --> 00:11:02,320 Speaker 1: of the I n F Agreement, maybe something about a 206 00:11:02,360 --> 00:11:06,000 Speaker 1: call for democracy in in Venezuela. I think on China 207 00:11:06,080 --> 00:11:08,680 Speaker 1: trade you'll see the an argument. So yes, you're gonna 208 00:11:08,679 --> 00:11:13,600 Speaker 1: basically see an argument for he'll essentially claim success for 209 00:11:13,760 --> 00:11:15,880 Speaker 1: his idea that we need to get allies and others 210 00:11:15,920 --> 00:11:18,080 Speaker 1: to partner more, that we need to get out of 211 00:11:18,120 --> 00:11:20,840 Speaker 1: bad trade deals. I think you're gonna see essentially his 212 00:11:20,880 --> 00:11:23,360 Speaker 1: effort to put the best possible face on what his 213 00:11:23,360 --> 00:11:25,480 Speaker 1: foreign policy has been. Do you think actually these might 214 00:11:25,520 --> 00:11:27,320 Speaker 1: provide some mattery as well. We can actually hear some 215 00:11:27,360 --> 00:11:30,960 Speaker 1: bipartisan support, some applause in the House on some of 216 00:11:31,000 --> 00:11:33,559 Speaker 1: these areas. I think possibly on Venezuela that's one of 217 00:11:33,600 --> 00:11:36,280 Speaker 1: those issues that that cuts across party lines because Democrats 218 00:11:36,320 --> 00:11:39,720 Speaker 1: ought to be supporting democracy against this this thug and 219 00:11:39,720 --> 00:11:41,960 Speaker 1: and and this tyrant. That that is one, but many 220 00:11:42,000 --> 00:11:43,920 Speaker 1: other areas you're not going to see it. On the 221 00:11:43,920 --> 00:11:46,280 Speaker 1: I n F Agreement, you may see some agreement on 222 00:11:46,280 --> 00:11:49,240 Speaker 1: it getting tougher with China on trade. I think some 223 00:11:49,280 --> 00:11:51,319 Speaker 1: of the biggest differences, so I doubt will even mention 224 00:11:51,360 --> 00:11:53,079 Speaker 1: it would be climate change that will be one of 225 00:11:53,120 --> 00:11:55,400 Speaker 1: those issues that will be It will be the silence 226 00:11:55,400 --> 00:11:57,600 Speaker 1: that will be deafening rather than something he'll make your 227 00:11:57,640 --> 00:11:59,640 Speaker 1: claim for. As you point out only in the conversation 228 00:11:59,640 --> 00:12:02,080 Speaker 1: that to piically some of these addresses can just end 229 00:12:02,160 --> 00:12:04,480 Speaker 1: ump in in a case of confirmation bias for the 230 00:12:04,480 --> 00:12:07,720 Speaker 1: person watching the actual speech. The people that don't like 231 00:12:07,800 --> 00:12:10,559 Speaker 1: the president aren't gonna like him afterwards, and the people 232 00:12:10,559 --> 00:12:14,000 Speaker 1: that like the president I'm gonna afterwards. So what does 233 00:12:14,000 --> 00:12:17,400 Speaker 1: it change, Tom, It's just it's a come on, this 234 00:12:17,480 --> 00:12:20,240 Speaker 1: is just pomping circumstance, right, This is a moment of 235 00:12:20,240 --> 00:12:22,800 Speaker 1: off Broadway theater for the United States, and exactly what 236 00:12:22,880 --> 00:12:25,640 Speaker 1: you said, it reinforced the president. Look, he continues to 237 00:12:25,679 --> 00:12:28,080 Speaker 1: play towards the base. That's important also because you know, 238 00:12:28,160 --> 00:12:30,120 Speaker 1: the other unspoken thing is obviously going to be the 239 00:12:30,160 --> 00:12:32,839 Speaker 1: Mulla report. That's we don't know when it's gonna be dropped, 240 00:12:32,840 --> 00:12:34,840 Speaker 1: whether it's going to bring that up, I mean nobody, 241 00:12:34,880 --> 00:12:36,880 Speaker 1: but that's but that's the unspoken thing. So again, for 242 00:12:36,920 --> 00:12:39,520 Speaker 1: the President of the United States, it's important that there 243 00:12:39,640 --> 00:12:42,199 Speaker 1: be no fissures in his base. Okay, what what is 244 00:12:42,240 --> 00:12:45,120 Speaker 1: Stacy Abrams of of George You're gonna do? This is 245 00:12:45,160 --> 00:12:48,200 Speaker 1: an unusual I mean we're supposed to hear from who 246 00:12:48,360 --> 00:12:52,400 Speaker 1: Senator Schumer, Speaker Pelosi, three or four other young worthies 247 00:12:52,440 --> 00:12:55,680 Speaker 1: in the party. This is different, isn't it. It's absolutely different, 248 00:12:55,679 --> 00:12:58,240 Speaker 1: And I think you're gonna see here's some things about race, 249 00:12:58,400 --> 00:13:03,479 Speaker 1: about opportunity, immigration, uh, and the need for greater economic 250 00:13:04,280 --> 00:13:06,080 Speaker 1: equality in the United State. If you're going to hear 251 00:13:06,120 --> 00:13:09,280 Speaker 1: that sort of a democratic agenda, please, I was gonna say, 252 00:13:09,280 --> 00:13:11,440 Speaker 1: we have a limited time with the ambassador. I actually 253 00:13:11,480 --> 00:13:13,520 Speaker 1: wanted to get to Brexit. You were the us N 254 00:13:13,600 --> 00:13:16,720 Speaker 1: void to Northern Ireland UM, a key part of the 255 00:13:16,760 --> 00:13:19,560 Speaker 1: peace process and the United States involvement in it through 256 00:13:19,559 --> 00:13:23,080 Speaker 1: the late nineties. Ambassador, how disappointed are you in the 257 00:13:23,160 --> 00:13:27,160 Speaker 1: UK government's approach to the UK's departure from the European units, 258 00:13:27,160 --> 00:13:29,560 Speaker 1: specifically around the issue with the Irish border. I think 259 00:13:29,600 --> 00:13:32,400 Speaker 1: there's many reasons to be skeptical of Brexit, but this 260 00:13:32,480 --> 00:13:34,720 Speaker 1: is on the shortlist, and the idea that the Prime 261 00:13:34,760 --> 00:13:37,240 Speaker 1: Minister has now has opened up the possibility of going 262 00:13:37,280 --> 00:13:39,720 Speaker 1: to amend a good Friday agreement for the sake of 263 00:13:39,760 --> 00:13:42,439 Speaker 1: salvaging Brexit seems to me to have it have it backwards. 264 00:13:42,640 --> 00:13:46,319 Speaker 1: Why wasn't this higher up on the list of priorities 265 00:13:46,360 --> 00:13:49,040 Speaker 1: going into the vote? Well, not only wasn't it higher 266 00:13:49,120 --> 00:13:51,079 Speaker 1: up because people didn't think through any of this. The 267 00:13:51,360 --> 00:13:54,199 Speaker 1: whole Breggsit debate was about the symbol of bregsit rather 268 00:13:54,280 --> 00:13:59,080 Speaker 1: than the reality of it. But it's interesting her coalition partner, 269 00:13:59,320 --> 00:14:03,600 Speaker 1: the Democrats to Unionist Party, which is pro Bregsit, actually 270 00:14:03,640 --> 00:14:06,880 Speaker 1: stands the most to lose from Brexit because bregsit would 271 00:14:06,960 --> 00:14:10,760 Speaker 1: ignite I believe a real dynamic towards Irish unity, which 272 00:14:10,800 --> 00:14:14,640 Speaker 1: is exactly what the d UP the Democratic Unionists opposed. 273 00:14:14,760 --> 00:14:16,920 Speaker 1: So it's one of those situations. It's actually one of 274 00:14:16,920 --> 00:14:19,920 Speaker 1: those weird moments in politics where you have a major 275 00:14:19,960 --> 00:14:22,920 Speaker 1: political party in Northern Ireland acting in ways that are 276 00:14:22,920 --> 00:14:26,600 Speaker 1: totally inconsistent with its own purported self interest. The literature 277 00:14:27,280 --> 00:14:30,840 Speaker 1: is that over time they're simply more Catholics, and there's 278 00:14:30,880 --> 00:14:35,400 Speaker 1: a demographic shift in Northern Ireland or twenty years on 279 00:14:35,560 --> 00:14:39,880 Speaker 1: from the Good Friday agreement. Is that demographic shift occurred 280 00:14:40,240 --> 00:14:44,080 Speaker 1: where the Unionists are ever more lonely. Well, the democratic 281 00:14:44,120 --> 00:14:47,160 Speaker 1: shift is occurring. It's gradual. It hasn't reached the tipping point. 282 00:14:47,360 --> 00:14:49,480 Speaker 1: But the bregsit debate could be the thing that puts 283 00:14:49,480 --> 00:14:52,120 Speaker 1: it over the top sooner, because you'll have this combination 284 00:14:52,440 --> 00:14:57,240 Speaker 1: of a slightly larger Catholic pro Irish unification demographic vote 285 00:14:57,560 --> 00:14:59,680 Speaker 1: on top of that. Now you might begin to see 286 00:14:59,720 --> 00:15:03,240 Speaker 1: young Protestants and those who don't particularly religiously affiliate say 287 00:15:03,680 --> 00:15:07,000 Speaker 1: I am going to choose unification with Ireland if the 288 00:15:07,120 --> 00:15:10,880 Speaker 1: UK agreement. I mean it's a core issue because a 289 00:15:10,960 --> 00:15:13,800 Speaker 1: border pole is a possibility at any point and this 290 00:15:13,840 --> 00:15:16,000 Speaker 1: could bring about a so called border pole with both 291 00:15:16,040 --> 00:15:18,400 Speaker 1: sides and the Republic of Ireland and Northern Ireland. If 292 00:15:18,400 --> 00:15:20,680 Speaker 1: you get a majority in both then that that would 293 00:15:20,720 --> 00:15:22,840 Speaker 1: set things in motion. Investor, thank you so much. We 294 00:15:22,840 --> 00:15:25,200 Speaker 1: were absolutely thrilled. Thank you us on this historic day 295 00:15:25,200 --> 00:15:29,000 Speaker 1: where the Prime Minister travels to Belfast, Richard Oss at 296 00:15:29,040 --> 00:15:45,760 Speaker 1: the Council on Foreign Relations as well. Let's get to it. 297 00:15:45,800 --> 00:15:48,840 Speaker 1: Brian Jacobson with us right now. Will's Fargo Asset Management 298 00:15:49,200 --> 00:15:52,120 Speaker 1: uh In Wells Capital Management with us today on the 299 00:15:52,160 --> 00:15:55,160 Speaker 1: strategy out there. I love within your Matthewnist, the PhD 300 00:15:55,200 --> 00:15:58,960 Speaker 1: from Madison and all uh Dr Jacobson. The idea of 301 00:15:59,160 --> 00:16:01,600 Speaker 1: risk pres me this is something that John and I 302 00:16:01,640 --> 00:16:06,360 Speaker 1: talk about all the time. Define why risk premia? Risk premium, 303 00:16:06,480 --> 00:16:11,320 Speaker 1: the risk premium plural John Latin the risk premia. Why 304 00:16:11,320 --> 00:16:13,840 Speaker 1: does that matter? Now? Well, I think that it really 305 00:16:13,840 --> 00:16:16,640 Speaker 1: matters because you know risk premia. It just refers to 306 00:16:16,680 --> 00:16:21,640 Speaker 1: what are those compensations for risk that investors expected over time? 307 00:16:21,640 --> 00:16:23,720 Speaker 1: If I go out two years, I need more, I 308 00:16:23,760 --> 00:16:26,840 Speaker 1: need a larger risk premia out ten years. That's correct. 309 00:16:26,840 --> 00:16:28,720 Speaker 1: So there's like a term risk premium as far as 310 00:16:28,760 --> 00:16:30,680 Speaker 1: locking up your savings for a long period of time. 311 00:16:30,720 --> 00:16:34,680 Speaker 1: There's a credit risk premium for extending credit to entities 312 00:16:34,720 --> 00:16:37,200 Speaker 1: that could possibly go bankrupt, the equity risk premium, the 313 00:16:37,280 --> 00:16:39,920 Speaker 1: value premium, size premium. Right, So that's why it's the 314 00:16:39,960 --> 00:16:44,240 Speaker 1: plural premium. How do you harvest these things efficiently? Uh 315 00:16:44,280 --> 00:16:47,080 Speaker 1: And we actually think that one of the beautiful things 316 00:16:47,120 --> 00:16:49,880 Speaker 1: about taking that risk premia perspective is that you can 317 00:16:49,960 --> 00:16:53,400 Speaker 1: get a better diversified portfolio instead of thinking just in 318 00:16:53,520 --> 00:16:57,360 Speaker 1: the confines of a long only strategy. Think about whether 319 00:16:57,440 --> 00:17:00,000 Speaker 1: or not you can implement some long short using future 320 00:17:00,120 --> 00:17:02,240 Speaker 1: his contracts in order to try to harvest these to 321 00:17:02,320 --> 00:17:07,720 Speaker 1: get uncorrelated or low correlation returns to your core portfolio. 322 00:17:07,920 --> 00:17:12,679 Speaker 1: This conversation sounds like the real you you started. You 323 00:17:12,800 --> 00:17:16,919 Speaker 1: started this conversation if you want sea Feroal's property, Friday, 324 00:17:16,960 --> 00:17:19,000 Speaker 1: I'm telling me so, Brian. Let's talk about how difficult 325 00:17:19,040 --> 00:17:21,600 Speaker 1: it is to have a balanced portfolio amid the price 326 00:17:21,640 --> 00:17:24,080 Speaker 1: action that we've had through nineteen so far. A lot 327 00:17:24,080 --> 00:17:26,879 Speaker 1: of people may describe the price action of nineteen as 328 00:17:27,040 --> 00:17:29,720 Speaker 1: as risk one. Now, classic risk on that you and 329 00:17:29,760 --> 00:17:34,000 Speaker 1: I know, Brian, is when risk assets rally and haven 330 00:17:34,040 --> 00:17:39,120 Speaker 1: assets sell off. The softer That hasn't happened through In fact, 331 00:17:39,119 --> 00:17:42,440 Speaker 1: treasuries have been resilient, gold is rallied, the Japanese yen 332 00:17:42,480 --> 00:17:44,240 Speaker 1: has been resiment as well. And I think a concern 333 00:17:44,560 --> 00:17:47,440 Speaker 1: that HSBC and Golden and others have written about quite 334 00:17:47,440 --> 00:17:51,520 Speaker 1: recently is what is your diversifying asset group. If we 335 00:17:51,560 --> 00:17:54,680 Speaker 1: do get a return to the volatility of December, where 336 00:17:54,720 --> 00:17:57,000 Speaker 1: is your buffer coming from? And that's why, actually one 337 00:17:57,000 --> 00:17:59,320 Speaker 1: of the reasons why we like taking that risk premium 338 00:17:59,400 --> 00:18:03,040 Speaker 1: view is because if you do think about the risk 339 00:18:03,119 --> 00:18:05,600 Speaker 1: assets in your traditional risk off assets, when they move 340 00:18:05,680 --> 00:18:08,640 Speaker 1: up in tandem or down in tandem, where's the diversification 341 00:18:08,720 --> 00:18:10,800 Speaker 1: coming from. But then I also have to point out, 342 00:18:10,800 --> 00:18:13,040 Speaker 1: even in a long only context, if you take that 343 00:18:13,160 --> 00:18:17,119 Speaker 1: time perspective, that it might just require patients to really 344 00:18:17,160 --> 00:18:20,800 Speaker 1: play out. So over short periods of time UH three months, 345 00:18:20,880 --> 00:18:23,960 Speaker 1: six months, even a year, you can oftentimes see these 346 00:18:24,000 --> 00:18:27,000 Speaker 1: correlations be a lot higher than what you would expect 347 00:18:27,080 --> 00:18:29,520 Speaker 1: to see play out over three years. So I think 348 00:18:29,560 --> 00:18:31,640 Speaker 1: one of the lessons that I learned from Tom over 349 00:18:31,680 --> 00:18:33,679 Speaker 1: the years by listening to him is that some of 350 00:18:33,680 --> 00:18:38,000 Speaker 1: the cardinal rules of successful investing is diversification. But then 351 00:18:38,040 --> 00:18:41,840 Speaker 1: also patients, you have to be patient enough to allow 352 00:18:41,920 --> 00:18:45,639 Speaker 1: diversification to work itself out. But in these times when 353 00:18:45,760 --> 00:18:50,480 Speaker 1: you do see all assets effectively moving up together in tandem, 354 00:18:50,520 --> 00:18:53,360 Speaker 1: it does make you wonder about the sustainability of these 355 00:18:53,359 --> 00:18:55,320 Speaker 1: moves higher. So one of the reasons on the Multi 356 00:18:55,359 --> 00:18:59,120 Speaker 1: Asset Solutions team and some of our portfolios, we've trimmed 357 00:18:59,119 --> 00:19:01,360 Speaker 1: a little bit of our act the exposure. We had 358 00:19:01,359 --> 00:19:04,320 Speaker 1: an overweight UH in December with the drubbing that we 359 00:19:04,400 --> 00:19:06,960 Speaker 1: got in December, viewing that as being somewhat overdone on 360 00:19:07,080 --> 00:19:10,720 Speaker 1: fears of recession. Now that those recession risks have receded, 361 00:19:10,840 --> 00:19:13,800 Speaker 1: we thought we would get a decent rally. Uh. But 362 00:19:14,000 --> 00:19:16,680 Speaker 1: now that the SMP five hundred has gotten up towards 363 00:19:17,040 --> 00:19:19,919 Speaker 1: surpassed that a little bit, we've taken a little bit 364 00:19:19,960 --> 00:19:22,360 Speaker 1: of that overweight off. See Tom, I'm hearing much much 365 00:19:22,600 --> 00:19:25,280 Speaker 1: more of this from from people on the buy side, especially. 366 00:19:25,280 --> 00:19:27,800 Speaker 1: We've had a big, big moves through nineteen and the 367 00:19:27,840 --> 00:19:29,520 Speaker 1: debate is whether you want to face some of the 368 00:19:29,560 --> 00:19:31,960 Speaker 1: strengths selling into some of the rallies. And I keep 369 00:19:31,960 --> 00:19:33,760 Speaker 1: hearing it more and more. I've heard it from Paige Jim, 370 00:19:33,800 --> 00:19:36,200 Speaker 1: I'm now hearing it from weast Fanga. Well, I get 371 00:19:36,240 --> 00:19:38,760 Speaker 1: the idea that we've I mean, I haven't even looked, folks. 372 00:19:38,760 --> 00:19:41,320 Speaker 1: I've been so busy worrying about Tom Brady's what he's 373 00:19:41,320 --> 00:19:44,240 Speaker 1: gonna wear for the parade. Uh. Today the doubt I 374 00:19:44,280 --> 00:19:47,760 Speaker 1: got I got your one Wait, that's one percent. You're 375 00:19:47,880 --> 00:19:51,000 Speaker 1: I've done this before. Hold on three point six seven 376 00:19:51,080 --> 00:19:55,080 Speaker 1: percent when your return on the dow right now? And 377 00:19:55,240 --> 00:19:58,280 Speaker 1: you know I I you know we're getting back from 378 00:19:58,320 --> 00:20:00,600 Speaker 1: the carnage of last year. It's there is to it. 379 00:20:00,760 --> 00:20:02,040 Speaker 1: I think there is a lot to be said for 380 00:20:02,080 --> 00:20:04,359 Speaker 1: the fact that this was a bit of a recovery 381 00:20:04,560 --> 00:20:07,840 Speaker 1: from the market overdoing it on the downside, which is 382 00:20:07,840 --> 00:20:10,920 Speaker 1: why we still remain slightly overweight with equities and a 383 00:20:11,000 --> 00:20:13,439 Speaker 1: lot of our core portfolios. It's just we've trimmed that 384 00:20:13,560 --> 00:20:16,320 Speaker 1: overweight with this rebound that we've had here today eight 385 00:20:16,400 --> 00:20:21,439 Speaker 1: point two percent. I mean, go to cash. What has 386 00:20:21,560 --> 00:20:24,840 Speaker 1: changed through December and January? Just speaking to the fundamentals, 387 00:20:24,880 --> 00:20:27,399 Speaker 1: what I see is a massive shift in sentiment. The 388 00:20:27,400 --> 00:20:30,679 Speaker 1: actual underlying economy here in the United States has remained 389 00:20:30,720 --> 00:20:34,399 Speaker 1: pretty solid through December through January, but the perception was 390 00:20:34,440 --> 00:20:37,320 Speaker 1: that the economy was weakening going into December. The fear 391 00:20:37,400 --> 00:20:38,800 Speaker 1: was that the Fed was going to be making the 392 00:20:38,880 --> 00:20:43,080 Speaker 1: mistake by continuing to hike the The economy was rolling over, 393 00:20:43,119 --> 00:20:46,080 Speaker 1: the yield curve was flattening, so people were afraid of recession. 394 00:20:46,160 --> 00:20:48,200 Speaker 1: Those fears are beginning to fade a bit. A lot 395 00:20:48,240 --> 00:20:50,520 Speaker 1: of it has to deal with the Fed Fed pivot. 396 00:20:50,960 --> 00:20:53,359 Speaker 1: We're gonna let you go to television right now, but 397 00:20:53,480 --> 00:20:56,520 Speaker 1: I just want to know, well, the emotion I just 398 00:20:56,600 --> 00:21:00,119 Speaker 1: said I got a gift. I'm up eight percent in 399 00:21:00,240 --> 00:21:03,119 Speaker 1: five weeks. Why don't I just go to cash and 400 00:21:03,160 --> 00:21:05,520 Speaker 1: say thank you for the year. Well, I don't do that, 401 00:21:05,600 --> 00:21:09,520 Speaker 1: do it? No? No, it is. But it's also because 402 00:21:09,720 --> 00:21:12,480 Speaker 1: the fact is that you were down a lot more 403 00:21:12,520 --> 00:21:16,560 Speaker 1: than that in December and there and what are the 404 00:21:16,560 --> 00:21:20,680 Speaker 1: fundamentals they're pointing towards continued earnings growth and we think 405 00:21:20,720 --> 00:21:23,720 Speaker 1: that you could still get decent single digit gains from here. 406 00:21:23,920 --> 00:21:41,879 Speaker 1: Dr Jacobson, thank you so much Asset Management. Now you 407 00:21:41,960 --> 00:21:44,520 Speaker 1: speak to one of the most interesting feeds on Twitter. 408 00:21:44,560 --> 00:21:46,840 Speaker 1: They love him, they hate him, They go back and forth. 409 00:21:47,280 --> 00:21:51,400 Speaker 1: Another strong man argument. Fallacy Douglas Cast joins US Sea 410 00:21:51,400 --> 00:21:54,560 Speaker 1: Breeze Partners with a nodding acquaintance with the street, going 411 00:21:54,600 --> 00:21:57,920 Speaker 1: back at least to Kidder Peabody for those of you younger, 412 00:21:58,000 --> 00:22:02,480 Speaker 1: that's a venerable firm, the venerable cast from another time 413 00:22:02,520 --> 00:22:06,320 Speaker 1: and place. Doug. Let's talk stocks here, But first, how 414 00:22:06,359 --> 00:22:09,560 Speaker 1: are you position this morning? You are you selling into 415 00:22:09,600 --> 00:22:14,879 Speaker 1: this dow strength? Well, we covered most, we actually covered 416 00:22:14,920 --> 00:22:19,720 Speaker 1: all our shorts um back leading up to the Chris 417 00:22:19,920 --> 00:22:24,159 Speaker 1: Christmas Eve low and went long and began to scale 418 00:22:24,160 --> 00:22:29,720 Speaker 1: out quite quickly, probably in a matter of two weeks, 419 00:22:30,320 --> 00:22:34,119 Speaker 1: and I've begun to reshort the market. I think we're 420 00:22:34,640 --> 00:22:38,880 Speaker 1: we're not tom quite back to the euphoria of late 421 00:22:39,000 --> 00:22:43,399 Speaker 1: January two thousand eighteen or the middle of September of 422 00:22:43,480 --> 00:22:47,320 Speaker 1: last year, but we're definitely back into the bull market 423 00:22:47,400 --> 00:22:50,400 Speaker 1: and complacency. And I was listening to my buddy Jim 424 00:22:50,440 --> 00:22:53,679 Speaker 1: Paulson in the in in the other segment, and I 425 00:22:53,720 --> 00:22:58,760 Speaker 1: love Jim, um he thinks in second level terms and 426 00:22:58,800 --> 00:23:02,679 Speaker 1: outside of the envelope. The irony is that I embarish 427 00:23:03,000 --> 00:23:06,320 Speaker 1: with a similar macro view as his. And I what 428 00:23:06,400 --> 00:23:09,280 Speaker 1: I would say to Jim if he's listening, I to 429 00:23:09,440 --> 00:23:14,800 Speaker 1: him concerned that SMP earnings will come in flatted down 430 00:23:15,000 --> 00:23:19,960 Speaker 1: in two thousand nineteen. But I can't see how um 431 00:23:20,160 --> 00:23:22,840 Speaker 1: the markets returned to the old highs. To do so, 432 00:23:23,560 --> 00:23:27,400 Speaker 1: we need valuations to expand. Now. I recognize that there 433 00:23:27,400 --> 00:23:32,600 Speaker 1: has been some pivot and monetary policy, but um uh. 434 00:23:32,680 --> 00:23:36,480 Speaker 1: And we're having a little liquidity fueled market rally over 435 00:23:36,520 --> 00:23:39,199 Speaker 1: the last three weeks, but I don't think it can 436 00:23:39,320 --> 00:23:42,880 Speaker 1: last if we detached from the real economy. That dog 437 00:23:42,920 --> 00:23:45,560 Speaker 1: you here barking in the background is, uh, Dougs dog, 438 00:23:45,640 --> 00:23:49,199 Speaker 1: Tom Brady, Paul, why don't you jump in there? So 439 00:23:49,320 --> 00:23:53,639 Speaker 1: Doug Brady. I hated that game. It was, you know, 440 00:23:53,680 --> 00:23:56,440 Speaker 1: sometimes almost as if both teams realized the winner was 441 00:23:56,440 --> 00:23:58,040 Speaker 1: going to going to go to the White House after 442 00:23:58,080 --> 00:24:01,919 Speaker 1: the win. I all that like humor out on Twitter. 443 00:24:02,080 --> 00:24:05,480 Speaker 1: Mr Kass, let's talk stocks. Jump in here, let's talk stocks. 444 00:24:05,520 --> 00:24:07,720 Speaker 1: One of the things we're seeing in the earnings this 445 00:24:07,760 --> 00:24:09,800 Speaker 1: season that, you know, some of these big growth companies 446 00:24:09,840 --> 00:24:12,800 Speaker 1: are not shy about stepping up their spending their investments, 447 00:24:12,880 --> 00:24:15,160 Speaker 1: even in what might be a slowing economy. So we've 448 00:24:15,200 --> 00:24:19,119 Speaker 1: had Amazon, uh talked about higher spending. We've had Google 449 00:24:19,200 --> 00:24:21,000 Speaker 1: last night talked about higher spending. We might even have 450 00:24:21,040 --> 00:24:24,159 Speaker 1: Disney tonight after the close. What does that mean to 451 00:24:24,320 --> 00:24:26,879 Speaker 1: you and what might be a slowing economy. How do 452 00:24:26,920 --> 00:24:29,800 Speaker 1: you think stocks perform even if they are investing in 453 00:24:29,840 --> 00:24:34,639 Speaker 1: what are perceived to be good growth businesses. Well, my brace, 454 00:24:34,960 --> 00:24:38,680 Speaker 1: my basic concept or precept is, as you know because 455 00:24:38,720 --> 00:24:40,679 Speaker 1: I send your piece I wrote this morning on on 456 00:24:40,960 --> 00:24:43,840 Speaker 1: Real Money, pro is that when the spending, when the 457 00:24:43,840 --> 00:24:48,119 Speaker 1: spend line ramps up for whatever reason, whether it's planned 458 00:24:48,119 --> 00:24:53,680 Speaker 1: equipment r and d compliance, courts, head count, adding new 459 00:24:53,720 --> 00:24:57,760 Speaker 1: business lines as Google is doing. The share price and 460 00:24:57,880 --> 00:25:01,639 Speaker 1: free cash flow usually humble. Um. As you said, it 461 00:25:01,760 --> 00:25:05,760 Speaker 1: started with Amazon Amazon last week, the hit parade of 462 00:25:05,840 --> 00:25:11,280 Speaker 1: higher expenses occurred and the stock got slammed than last night. Uh, 463 00:25:11,359 --> 00:25:14,040 Speaker 1: there was an interesting trade opportunity because I saw that 464 00:25:14,119 --> 00:25:17,520 Speaker 1: cap spend build up and the reduction and free cash flow, 465 00:25:17,520 --> 00:25:20,320 Speaker 1: and I actually shot at some Google stock at eleven 466 00:25:20,440 --> 00:25:23,359 Speaker 1: fifty eight. It was up twenty dollars on top of 467 00:25:23,400 --> 00:25:27,520 Speaker 1: the regular trading session game, only to fall about forty 468 00:25:28,480 --> 00:25:31,760 Speaker 1: about forty five or fifty five points um a couple 469 00:25:31,800 --> 00:25:35,320 Speaker 1: of minutes later when people analyze the results more closely. 470 00:25:36,080 --> 00:25:39,760 Speaker 1: Um so. So I think that's that's a problem. In 471 00:25:39,800 --> 00:25:46,680 Speaker 1: the case of Google. Um um they they I think 472 00:25:46,680 --> 00:25:49,800 Speaker 1: their cash positions around a hundred and nine billions. They've 473 00:25:49,840 --> 00:25:53,160 Speaker 1: only they've only spent three or four billion on acquisitions. 474 00:25:53,200 --> 00:25:56,080 Speaker 1: The rest has been through R and D and so 475 00:25:56,200 --> 00:25:59,800 Speaker 1: far we haven't seen much of it. And I'm afraid, 476 00:26:00,080 --> 00:26:03,080 Speaker 1: as you mentioned, Uh, Disney, I think Tom just a 477 00:26:03,119 --> 00:26:05,840 Speaker 1: second ago, I'm afraid in the case of Disney, we're 478 00:26:05,840 --> 00:26:09,280 Speaker 1: gonna see very much the situation where it's going to 479 00:26:09,400 --> 00:26:14,359 Speaker 1: become clear that the ad spend both in the fourth 480 00:26:14,400 --> 00:26:16,560 Speaker 1: quarter end, but more importantly in the next two or 481 00:26:16,600 --> 00:26:20,160 Speaker 1: three years for the streaming project is going to really 482 00:26:20,320 --> 00:26:23,760 Speaker 1: dart the least square of the company. This is really 483 00:26:23,840 --> 00:26:26,120 Speaker 1: this is really important for us, your least square. There's 484 00:26:26,200 --> 00:26:28,399 Speaker 1: the cast is trying to impress us with his linear 485 00:26:28,440 --> 00:26:32,680 Speaker 1: regression dog. There's there's people that deploy free cash flow 486 00:26:33,119 --> 00:26:34,679 Speaker 1: and you know, they burn it. They're like up in 487 00:26:34,720 --> 00:26:37,080 Speaker 1: the you know, the food court, burning up paper. And 488 00:26:37,080 --> 00:26:39,760 Speaker 1: there's others. There's a purpose to it. Do you partition 489 00:26:39,840 --> 00:26:43,280 Speaker 1: these stocks that are spending oodles of money into those 490 00:26:43,320 --> 00:26:45,879 Speaker 1: that have a hope of return and those that do not. 491 00:26:46,240 --> 00:26:49,080 Speaker 1: Are you just agnostic? You don't like anybody that spends 492 00:26:49,080 --> 00:26:53,159 Speaker 1: a lot of capex um. I like it when I 493 00:26:53,200 --> 00:26:58,320 Speaker 1: can see the fruits of that labor. We have seen 494 00:26:58,359 --> 00:27:00,840 Speaker 1: it yet Disney when going to see it for many 495 00:27:00,920 --> 00:27:06,840 Speaker 1: years because as it embraces the it's basically excuse the pun, 496 00:27:06,920 --> 00:27:10,480 Speaker 1: but it's trying to build a better mouse trap. As 497 00:27:10,520 --> 00:27:14,840 Speaker 1: they embraced the next the Netflix strategy. Um so I 498 00:27:14,920 --> 00:27:16,840 Speaker 1: would be wary of Disney. I want to get this 499 00:27:16,920 --> 00:27:18,760 Speaker 1: in dug cast before we come back and talk some 500 00:27:18,840 --> 00:27:21,679 Speaker 1: theory and all that Twitter. You made a big splash 501 00:27:21,760 --> 00:27:25,240 Speaker 1: last year with Twitter. Your opiniata out on Twitter? On 502 00:27:25,400 --> 00:27:28,560 Speaker 1: it all? Twitter has value? Does it still have value? 503 00:27:28,800 --> 00:27:32,240 Speaker 1: Should Google or the others by Twitter? Twitter is my 504 00:27:32,359 --> 00:27:38,240 Speaker 1: largest equity position, That says vibes. Who is well, you 505 00:27:38,280 --> 00:27:40,640 Speaker 1: know it's always the cast is talking to us. But 506 00:27:40,640 --> 00:27:45,120 Speaker 1: but who is the most likely acquirer of Twitter? Who 507 00:27:45,200 --> 00:27:49,600 Speaker 1: needs it the most? I have long thought that Google 508 00:27:49,720 --> 00:27:54,639 Speaker 1: will would acquire both of the Dorsey companies Square and Twitter. 509 00:27:55,600 --> 00:27:58,399 Speaker 1: Look you think their failure of their failure in payments 510 00:27:58,800 --> 00:28:01,639 Speaker 1: and then social media makes a great deal of Sensecast. 511 00:28:09,119 --> 00:28:13,320 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 512 00:28:13,400 --> 00:28:18,720 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 513 00:28:18,760 --> 00:28:23,000 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 514 00:28:23,040 --> 00:28:27,240 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.