WEBVTT - The President Speaks in Jerusalem 0:00:00.240 --> 0:00:04.040 Runt you by Bank of America Mary Lynch. With virtual reality, 0:00:04.320 --> 0:00:09.719 virtually everything will change. Discover opportunities in a transforming world. 0:00:10.119 --> 0:00:14.440 Be of a, mL dot Com, slash VR, Mary Lynch, 0:00:14.520 --> 0:00:29.240 Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast. 0:00:29.280 --> 0:00:32.760 I'm Tom Keene with David Gura. Daily we bring you 0:00:32.840 --> 0:00:37.640 insight from the best of economics, finance, investment, and international relations. 0:00:38.120 --> 0:00:43.640 Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 0:00:43.640 --> 0:00:53.160 and of course on the Bloomberg. Right now, in Jerusalem, 0:00:53.159 --> 0:00:56.720 President Trump meeting with the President of Israel, Ruben Rivlin. 0:00:56.800 --> 0:00:59.120 He fought in the Six Days War fifty years ago. 0:00:59.520 --> 0:01:03.440 Here is the President of the United States together and 0:01:03.520 --> 0:01:06.120 now today being in Israel is just very very special 0:01:06.200 --> 0:01:12.080 for us. So we expect to have some very interesting talks. Absolutely, 0:01:13.520 --> 0:01:15.760 we are praying for peace, and we are pushing for 0:01:15.880 --> 0:01:19.280 peace for the last one other tears and with God's head, 0:01:19.560 --> 0:01:24.080 somebody will bring us peace all together, all together. Thank you, 0:01:24.600 --> 0:01:31.800 Thank you very much, thank you, thank you, thank you. Yeah, 0:01:31.840 --> 0:01:35.200 a photo opportunity. Now you can hear the cameras going 0:01:35.280 --> 0:01:40.760 behind the United States and Israel flags. Israeli flags and attendance. 0:01:41.120 --> 0:01:43.640 UM can't really guess the crowd size. I would guess 0:01:44.080 --> 0:01:49.080 maybe a hundred journalists as well. And we're again shifting 0:01:49.120 --> 0:01:52.160 to another scene where perhaps we'll have more formal comments 0:01:52.600 --> 0:01:55.840 by Mr Trump. He is in Jerusalem, landing at Tel 0:01:55.840 --> 0:02:02.840 Aviv earlier today and by helicopter to Jerusalem. Uh and uh. 0:02:04.240 --> 0:02:06.840 Right now with David Gurray in Boston. I'm Tom keenan 0:02:06.920 --> 0:02:11.080 New York Jerome Schneider with us with Pimco in our 0:02:11.120 --> 0:02:13.520 New York studios. Jerome, thank you for all of us 0:02:13.520 --> 0:02:17.160 for being so patient with the news flow up this morning. 0:02:17.320 --> 0:02:20.560 Let's get basic here on a Monday, we've seen the 0:02:20.600 --> 0:02:24.920 Trump trade fade, steeper yield curve we've rolled over clearly 0:02:24.960 --> 0:02:28.000 based on news events. To a pro like you, what 0:02:28.040 --> 0:02:31.480 does curve flattening mean? Ultimately, it means that we should 0:02:31.520 --> 0:02:34.000 be expecting rates to move higher over the over the 0:02:34.040 --> 0:02:36.240 new yer term. And I think that you know with 0:02:36.360 --> 0:02:39.640 that mind, it's also a relatively healthy economy that one 0:02:39.680 --> 0:02:42.800 could point to, and and and and ultimately that what 0:02:42.880 --> 0:02:46.160 we see in the market is very different, very different 0:02:46.200 --> 0:02:48.280 than what we should project to the market. Let maybe 0:02:48.280 --> 0:02:50.720 be clear about that ultimately, when you look at short 0:02:50.800 --> 0:02:53.760 term interest rate expectations, that we've seen a very drastic 0:02:53.760 --> 0:02:55.760 move over the past week or two in terms of 0:02:55.760 --> 0:02:58.680 the expectations of a June rate hike. The reality is 0:02:58.680 --> 0:03:00.680 is that when you look at the ottening of the yolker, 0:03:00.720 --> 0:03:03.280 specifically over the past few days, we should expect those 0:03:03.360 --> 0:03:07.120 rates to move higher more more probably probability awaited than 0:03:07.160 --> 0:03:09.600 the market is expecting. So simply put, rates are moving 0:03:09.680 --> 0:03:12.600 higher and we should be preparing for that. Well, we 0:03:12.639 --> 0:03:14.560 should be preparing for that, and I guess I see 0:03:14.600 --> 0:03:16.520 it with a one point two nine percent two year 0:03:16.600 --> 0:03:19.440 yield as well. It's away from your remit in short 0:03:19.560 --> 0:03:23.800 term paper. But nevertheless, I know you're wired at PIMCO 0:03:23.960 --> 0:03:28.239 on weaker dollar, stronger oil. Which is the horse and 0:03:28.360 --> 0:03:30.919 which is the cart? Well, ultimately, you know, I think 0:03:30.919 --> 0:03:33.160 you have to look at the dollar because that, ultimately 0:03:33.240 --> 0:03:35.320 is what the FED is going to key off of. 0:03:35.720 --> 0:03:39.280 When you look at the Fed's transition from this data 0:03:39.320 --> 0:03:42.800 dependent model to more of a conditions dependent model, financial 0:03:42.800 --> 0:03:45.880 conditions dependent model back in two thousand sixteen, that's really 0:03:45.880 --> 0:03:47.600 what we have to focus on. The data is there 0:03:47.640 --> 0:03:50.000 for the for the rate hike The only reason that 0:03:50.040 --> 0:03:52.119 the FED doesn't increase rates over the next six months 0:03:52.240 --> 0:03:54.640 or so by one or maybe even two times is 0:03:54.680 --> 0:03:58.720 that the financial conditions tightened. So being being conditions dependent 0:03:58.800 --> 0:04:03.880 is simply driven by data, I'm sorry, driven by volatility 0:04:03.880 --> 0:04:06.440 and currency, specifically the view of the dollar. So I 0:04:06.480 --> 0:04:08.600 put more weight on the dollar than oil right now. 0:04:08.640 --> 0:04:11.560 But it is interesting, Tom, and this is noteworthy, is 0:04:11.600 --> 0:04:14.960 that we basically have seen whatever it takes policy from 0:04:14.960 --> 0:04:17.719 OPEC and and some of the producers, and that sort 0:04:17.720 --> 0:04:19.480 of found a floor and that could have actually pretty 0:04:19.520 --> 0:04:23.040 positive implications potentially for not only global comedy but really 0:04:23.080 --> 0:04:26.440 the domestic economy as you looked forward to that stabilization, 0:04:26.480 --> 0:04:30.240 it could lead to other things including capex, capital expenditures increasing, 0:04:30.520 --> 0:04:33.039 and ultimately you know that that creates stability and upward 0:04:33.040 --> 0:04:35.960 propensity for the economy. Let's play that a little bit here. 0:04:36.000 --> 0:04:38.840 We saw news from the Saudi oil minister over the weekend. 0:04:38.880 --> 0:04:41.080 That's Audi rabing other participants in that OPEQ and non 0:04:41.080 --> 0:04:43.880 opic dealer willing and eager to continue it. What does 0:04:43.920 --> 0:04:47.159 that mean for the economy going forward? Well, ultimately, the 0:04:47.279 --> 0:04:50.560 downside risk if you will, to lower oil prices, UH 0:04:50.880 --> 0:04:53.599 is something that domestic producers are going to be willing 0:04:53.640 --> 0:04:56.240 to increase their capital expenditures or at least maintain it. 0:04:56.279 --> 0:04:57.880 We've seen it sort of seen it in Rigg growth 0:04:58.360 --> 0:05:01.560 here over the past few months. But ultimately it's sort 0:05:01.600 --> 0:05:03.680 of been a seesaw, you know, when when one when 0:05:03.720 --> 0:05:06.719 one party producing party has cut the other sort of 0:05:06.760 --> 0:05:10.240 increase slightly or vice versa. And I think, what we 0:05:10.400 --> 0:05:12.520 what what the goal is to try to achieve a 0:05:12.520 --> 0:05:15.840 healthy balance centered around fifty dollars, maybe it depths slightly below, 0:05:16.080 --> 0:05:18.840 but ultimately create that stability and that and that's ultimately 0:05:18.880 --> 0:05:21.640 what all producers want so that they can forecast and 0:05:21.880 --> 0:05:24.680 maintain profit margins without being whip sled in terms of 0:05:24.720 --> 0:05:27.120 putting out lays that may ultimately prove to be at 0:05:27.200 --> 0:05:29.440 least in the near term, unprofitable. I want to go 0:05:29.480 --> 0:05:31.599 back to that distinction you were drawing between data dependence 0:05:31.640 --> 0:05:33.919 and conditions dependence. Is this something that we see the 0:05:33.960 --> 0:05:37.520 FED embracing talking about. Help me understand just the difference 0:05:37.560 --> 0:05:40.279 a little bit more well, Yes, And and ultimately you 0:05:40.279 --> 0:05:42.919 can look at even you know, the speeches from you 0:05:42.960 --> 0:05:46.360 know Cleveland President Meister and and and others, you know, 0:05:46.520 --> 0:05:49.880 from even the most dubbish to the to the most hawkish. 0:05:50.040 --> 0:05:53.960 Everybody points to, here's the situation, but if this happens, 0:05:54.120 --> 0:05:57.360 then we may not be moving. Everybody wants to normalize 0:05:57.400 --> 0:06:00.560 the balance sheet. Everybody wants that normalization process to continue, 0:06:00.720 --> 0:06:03.279 but if that you know, does if a certain situation 0:06:03.320 --> 0:06:05.360 at all, then they might have to react. So that 0:06:05.440 --> 0:06:10.400 conditions dependency is critical to the markets, and we can 0:06:10.520 --> 0:06:13.080 we know, generally speaking the data it's sort of firm. 0:06:13.120 --> 0:06:15.919 We sort of no idea sure. Q one GDPs was 0:06:15.960 --> 0:06:19.680 a bit disappointing, but jobs data, even even even wage 0:06:19.680 --> 0:06:23.200 pressures are are relatively stable, although inflation, immittedly from the 0:06:23.240 --> 0:06:26.520 headline perspective is a bit disappointing. Those are things that 0:06:26.520 --> 0:06:28.559 they can quote look through and we're all well aware 0:06:28.560 --> 0:06:31.480 of that. But this conditions is the factor that toggles 0:06:31.640 --> 0:06:34.280 the decision making process of the Fed. This June, within 0:06:34.320 --> 0:06:36.560 the debate, drump sider of PIMCO with us within the 0:06:36.600 --> 0:06:41.680 debated PIMCO about how the American economy will prosper. We 0:06:41.720 --> 0:06:45.479 can all agree their gains occurring right now, but once again, 0:06:45.520 --> 0:06:49.040 are the gains going to the few versus being spread 0:06:49.080 --> 0:06:52.480 across a wider part of the American populace. Well that 0:06:52.480 --> 0:06:54.400 that has to be Ultimately, there's gonna be a few 0:06:54.400 --> 0:06:56.960 policy implications in this, and you can look at it 0:06:57.000 --> 0:06:59.960 and from retrospect, and clearly, you know, since the financial crisis, 0:07:00.080 --> 0:07:02.640 it's been skewed one way. But I think ultimately we've 0:07:02.800 --> 0:07:05.760 looked tom about what the policy is looking forward. You know, 0:07:05.839 --> 0:07:08.719 we have a period of time here where animal spirits 0:07:08.720 --> 0:07:11.720 have been relatively constructive. Therefore, you know, they've basically been 0:07:11.760 --> 0:07:14.760 fermenting over periods of time, and we see that in 0:07:15.200 --> 0:07:17.760 both the corporate world and also in the retail the 0:07:17.760 --> 0:07:20.400 individual investor world. But as we move forward, we have 0:07:20.480 --> 0:07:23.520 to really look and see if there's risks on the horizon. 0:07:23.600 --> 0:07:25.880 You know, we were very concerned about at the beginning 0:07:25.880 --> 0:07:28.600 of the Trump presidency about things like protectionism and trans 0:07:28.640 --> 0:07:32.960 to deglobalization. But it's quite possible those don't materialize to 0:07:33.000 --> 0:07:35.840 the severe point that people had expected, and so those 0:07:35.880 --> 0:07:38.920 are positive implications ultimately that that sort of tilt to 0:07:39.000 --> 0:07:42.160 the positive site. I'm not being I'm not being pollyannish here, 0:07:42.240 --> 0:07:46.320 and I'm not being overly optimistic. It's not allowed, of course, 0:07:46.400 --> 0:07:48.400 not if you've been to any one of our investment 0:07:48.440 --> 0:07:50.800 committee meetings. You know, we we we all, we all 0:07:50.800 --> 0:07:53.080 have to put our real hats on and sometimes our 0:07:53.120 --> 0:07:55.720 hard hats. But at the same time, this is something 0:07:55.840 --> 0:07:58.600 that is going to be the tradeoff. If animal spirits 0:07:58.600 --> 0:08:00.840 are going to continue, how does it off? And policy 0:08:00.880 --> 0:08:02.840 implications of one of the key factors in the next 0:08:02.880 --> 0:08:05.720 six months to drive that. Final thoughts with Jerome Schneider 0:08:06.160 --> 0:08:08.880 of PIMCO this morning, are are we just clipping coupons? 0:08:09.160 --> 0:08:12.120 Is is the gold chrome? Given all the noise that's 0:08:12.160 --> 0:08:15.440 out there in your statement of a higher rate environment, 0:08:15.920 --> 0:08:18.240 is a goal just to make the coupon and defend 0:08:18.760 --> 0:08:21.880 the goals preserve capital, the goals to preserve capital with 0:08:22.000 --> 0:08:25.280 the notion that inflation is gently increasing, so purchasing power 0:08:25.280 --> 0:08:28.560 and preserving and purchasing power is the essential element of 0:08:28.600 --> 0:08:31.840 proper investing these days, specifically with those bent for fixed 0:08:31.880 --> 0:08:34.640 income allocations. And I think once you moved to a 0:08:34.679 --> 0:08:37.720 higher rate paradigm, which we're clearly moving and edging towards 0:08:37.760 --> 0:08:40.360 that over the next one to maybe even three years, 0:08:40.679 --> 0:08:43.760 you know, it becomes ever more apparent that that becomes attractive. 0:08:43.840 --> 0:08:48.480 So maintaining optionality to defend against higher rates by having 0:08:48.520 --> 0:08:53.120 limited exposure to effectively two interest rates at the same time. 0:08:53.200 --> 0:08:56.880 Ability to embrace those higher interest rates predominantly through items 0:08:56.920 --> 0:08:59.600 such as hedging and even as simple as owding floating 0:08:59.640 --> 0:09:03.040 rate floating rate notes is essential. One thing just to 0:09:03.120 --> 0:09:05.360 highlight tom here is you know, we see libelar and 0:09:05.400 --> 0:09:08.240 sort of the money market instruments, although it's clearly not 0:09:08.760 --> 0:09:12.200 a harbinger of doom or stress in the marketplace, but 0:09:12.360 --> 0:09:15.240 one month libelar crossed one percent for the first time 0:09:15.280 --> 0:09:18.000 since December of two thousand eight. Last week, and so 0:09:18.160 --> 0:09:21.000 it's a noteworthy that we are finally seeing some tip 0:09:21.080 --> 0:09:23.640 of the hat at least to a normalization happening in 0:09:23.760 --> 0:09:27.200 front end markets as we moved to to the FED. 0:09:27.280 --> 0:09:30.360 That is, obviously, as I mentioned previously, more conditions dependent. 0:09:30.920 --> 0:09:33.600 Jerome Pimco had this big confab a couple of weeks back, 0:09:33.640 --> 0:09:37.920 the secular form uh Newt Gingrich was there, Larry Summers 0:09:37.960 --> 0:09:39.640 was there, the whole lot. What did you take away 0:09:39.679 --> 0:09:41.880 from that about where things are headed in Washington, How 0:09:41.920 --> 0:09:44.280 that's going to devetail with the work that you do. Yeah, well, 0:09:44.280 --> 0:09:45.920 you know, once every year we'd like to bring in 0:09:46.320 --> 0:09:50.040 bringing folks on the outside to help help show shut 0:09:50.080 --> 0:09:52.080 some light on the corners of the realm, corners of 0:09:52.040 --> 0:09:54.600 the universe that we normally don't see. And as you mentioned, 0:09:54.679 --> 0:09:58.120 and we did have our normal normal lineup of you, uh, Bernankey, 0:09:58.200 --> 0:10:00.760 Entriche and Gordon Brown. But at the same time, we're 0:10:00.800 --> 0:10:03.600 really focused on how the world will evolve, looking at 0:10:03.640 --> 0:10:07.480 ultimately at animal spirits with that and how they'll effectively 0:10:07.520 --> 0:10:10.840 move move the economy going forward, both domestically and globally. 0:10:11.120 --> 0:10:14.199 Implications of things we obviously are well aware of populism, 0:10:14.200 --> 0:10:17.640 political populism, uh ebbing and flowing, you know, obviously France 0:10:17.679 --> 0:10:20.160 and the election outcome there was very was very it 0:10:20.240 --> 0:10:22.760 was very pointing in that and then ultimately, you know, 0:10:22.840 --> 0:10:24.840 figuring out where we stand in the world. We're at 0:10:24.840 --> 0:10:29.360 a point where clearly we've been utilizing monetary policy in 0:10:29.480 --> 0:10:32.720 excess for the past seven eight nine years and is 0:10:32.760 --> 0:10:35.000 that remain or or how do we evolve out of 0:10:35.040 --> 0:10:38.720 that situation? And those aren't uh, those aren't concurrent clearly 0:10:38.760 --> 0:10:41.679 as the Fed debates one side of it and other another. Uh, 0:10:41.960 --> 0:10:45.719 monetary policy committees are debating the other side. But ultimately 0:10:45.920 --> 0:10:48.800 that quote endgame will be very important so we debated 0:10:48.840 --> 0:10:50.960 that as well. So those ideas will be forthcoming, and 0:10:51.080 --> 0:10:53.360 we encourage everybody to look at the PIMCO website for 0:10:53.400 --> 0:10:55.800 them to be published in the forthcoming days. There was 0:10:55.840 --> 0:11:00.319 a shameless plug I teed that up. But we get 0:11:00.320 --> 0:11:03.720 a budget tomorrow, We're headed toward a government shutdown in 0:11:03.720 --> 0:11:07.040 September if we don't have a spending figured out by that. 0:11:07.080 --> 0:11:09.640 How worried are you about all of that? Yeah? Ultimately 0:11:09.760 --> 0:11:11.920 am I worried right this second? No, But this is 0:11:11.960 --> 0:11:14.840 a sort of festering in the background, and ultimately, you know, 0:11:14.920 --> 0:11:17.880 you cannot overlook the debt ceiling implications later on this year. 0:11:18.040 --> 0:11:20.160 So when we come back later on this summer, you know, 0:11:20.160 --> 0:11:22.800 while we might view it as a quiet summer, uh, 0:11:22.840 --> 0:11:24.600 you know, this is going to be at the forefront 0:11:24.600 --> 0:11:26.920 of the implications for us to pay attention to Truro. 0:11:27.120 --> 0:11:29.240 Thank you so much, Rup Schneider. I'm more than patient 0:11:29.280 --> 0:11:45.520 with the global news flow this morning. He is with Pimcom, 0:11:45.559 --> 0:11:49.360 impatiently waiting in Boston with the Red Sox one game 0:11:49.360 --> 0:11:53.280 above five, losing three straight grow to the Oakland A's. 0:11:53.720 --> 0:11:57.160 He's up there to assist John Ferrell, David Gurral yes, Tom, 0:11:57.200 --> 0:11:58.400 thanks a much here with her and timber Of the 0:11:58.400 --> 0:12:00.559 director of Global Macro Fideli Investment. He was given me 0:12:00.600 --> 0:12:02.080 the lay of the land here, beautiful bureau. You are 0:12:02.120 --> 0:12:05.800 Bloomberg Studios, high up overlooking a lot of the city. 0:12:05.800 --> 0:12:08.360 You're great to have you with us. And let's start 0:12:08.400 --> 0:12:10.280 with with oil. We heard Karen Mosko a few moments 0:12:10.360 --> 0:12:13.120 go talking about the potential for an exten extension of 0:12:13.160 --> 0:12:16.720 that opaque and non OPEC production freeze agreement. Gives your 0:12:16.720 --> 0:12:19.080 sense of your optimism for that and sort of what 0:12:19.120 --> 0:12:21.880 that means for for markets going forward. Yes, well, a 0:12:21.960 --> 0:12:25.160 very good morning to you. You know, I'm pretty bullish 0:12:25.240 --> 0:12:28.200 on oil. I think eventually we're going to go higher. 0:12:28.320 --> 0:12:31.960 The oil complex will be trading indeficit, which will be 0:12:31.960 --> 0:12:34.640 a big change from where it has been. And most 0:12:34.679 --> 0:12:36.800 people probably agree with that. It's just a matter of 0:12:37.200 --> 0:12:39.360 timing and how long does it take to work off 0:12:39.400 --> 0:12:43.000 all of that excess inventory. So certainly the news out 0:12:43.000 --> 0:12:46.400 of OPEC is helpful if you're if you're bullish, and 0:12:46.800 --> 0:12:48.439 you know, one of the communicators I tend to look 0:12:48.480 --> 0:12:50.959 at is a CRB ROW industrial CRB. You know R 0:12:51.000 --> 0:12:53.200 I N D on your Bloomberg again, that's been in 0:12:53.240 --> 0:12:56.160 a pretty sustained up trend, and I think it's a 0:12:56.200 --> 0:12:58.880 better measure than for instance, coppera iron or which have 0:12:58.960 --> 0:13:02.480 been under pressure lately as well as oil. So um, 0:13:02.520 --> 0:13:04.640 I think commodities are in a good place here to 0:13:04.679 --> 0:13:07.040 continue to rally. Is in a good place You look 0:13:07.040 --> 0:13:09.960 at the the U S economy overall, what's your sensitive 0:13:10.000 --> 0:13:12.440 what's what's still lacking? We're lagging when you look at 0:13:12.480 --> 0:13:16.240 it now. So there's so much noise and headlines and 0:13:16.320 --> 0:13:19.320 you know, tweeting and this and that, and um, I 0:13:19.360 --> 0:13:21.840 think a lot of people tend to attribute everything that's 0:13:21.840 --> 0:13:24.960 happening to the latest headlines, and the way I see 0:13:25.000 --> 0:13:27.600 it sort of sort of the force through the trees, 0:13:27.640 --> 0:13:30.280 if you will. There are really two major issues that 0:13:30.360 --> 0:13:32.640 we have to get right. One is China. You know, 0:13:32.760 --> 0:13:35.240 China just pumped a lot of credit into the system 0:13:35.280 --> 0:13:38.360 to reflate yet again. Uh, there are credit impulse, which 0:13:38.360 --> 0:13:41.199 actually is an indicator that you guys developed on Bloomberg 0:13:41.480 --> 0:13:44.440 is running at airt of GDP rate. But the year 0:13:44.480 --> 0:13:46.680 over your change has gone from plus ten to now 0:13:47.080 --> 0:13:49.760 minus one, so that credit impulse has come and gone. 0:13:50.160 --> 0:13:52.839 So one question is what is the aftermath that I'm 0:13:52.840 --> 0:13:55.320 going to look like? My sentence at the global reflation 0:13:55.840 --> 0:13:59.400 is still intact. And I have liked non US equities 0:13:59.520 --> 0:14:01.840 all year and I continue to do. And the other 0:14:01.840 --> 0:14:04.320 one is what kind of late cycle in the US 0:14:04.400 --> 0:14:06.679 are we actually heading in? And this is where the 0:14:06.720 --> 0:14:10.120 fiscal stuff comes in, because the wrong fiscal kind of 0:14:10.160 --> 0:14:13.679 stimulus that foot pushes the demand side could actually shorten 0:14:13.760 --> 0:14:16.800 the cycle, which is kind of ironic because they could 0:14:16.840 --> 0:14:19.680 push the FED into overdrive and therefore earth the cave 0:14:19.760 --> 0:14:22.960 and then lead us into a recession. But less actually 0:14:22.960 --> 0:14:25.680 could be more in that sense, you're in timor with 0:14:25.760 --> 0:14:29.080 us with fidelity. Out of Babs in colleges, you know 0:14:29.440 --> 0:14:31.960 you're in. There is no bad house in the neighborhood 0:14:31.960 --> 0:14:35.560 around Babs in college. It's in a pretty fancy climb 0:14:35.680 --> 0:14:39.240 of Boston, Massachusetts. I like in your note you provide 0:14:39.240 --> 0:14:42.240 clarity by saying the US is the best house in 0:14:42.280 --> 0:14:45.320 the neighborhood, but there are other places to buy right now. 0:14:45.400 --> 0:14:49.200 Why the shift, because we are in a global reflation 0:14:49.480 --> 0:14:53.080 from since about five quarters ago, so from twenty from 0:14:54.920 --> 0:14:57.480 the US was the best house in the neighborhood, but 0:14:57.560 --> 0:15:01.000 now it's actually only one of a number of good houses. 0:15:01.120 --> 0:15:03.720 And this is why non US equities, whether it's developed 0:15:03.800 --> 0:15:06.920 or emerging markets, have actually done very well. They're actually 0:15:07.000 --> 0:15:09.440 up more since the election in the US market, which 0:15:09.560 --> 0:15:12.320 very few people would have would have predicted six months ago. 0:15:12.720 --> 0:15:15.080 So I do think this is a global story. China 0:15:15.240 --> 0:15:17.840 is very much behind it, and as long as China 0:15:17.880 --> 0:15:20.760 can sort of keep it it's it's stuff together, I 0:15:20.800 --> 0:15:24.360 think global equities will continue to not only go up, 0:15:24.400 --> 0:15:28.560 but actually I'll perform the US. Do you see cash 0:15:28.600 --> 0:15:31.200 flows sustained? I mean one of the big surprises here 0:15:31.240 --> 0:15:35.920 has been UH the rise in UH earnings and revenues. 0:15:35.960 --> 0:15:38.720 I mean they were pretty good, weren't they. Yes. Q 0:15:38.920 --> 0:15:42.360 one earnings for the SMP are of four year over 0:15:42.480 --> 0:15:45.000 year UM, and that's in that that force. Those are 0:15:45.040 --> 0:15:47.040 easy comps, of course, because the Q one of last 0:15:47.120 --> 0:15:49.160 year was the bottom of the cycle when earnings were 0:15:49.160 --> 0:15:53.160 falling at seven. But it's a global story. Earnings are 0:15:53.240 --> 0:15:57.000 inflecting higher everywhere, and you have a pretty significant p 0:15:57.280 --> 0:15:59.440 discount you know in e M at twelve, which of 0:15:59.480 --> 0:16:01.400 course is is justified. You just have to look at 0:16:01.440 --> 0:16:04.560 Brazil last week to know why. But even non US 0:16:04.760 --> 0:16:07.800 um equities are training at a fourteen multiple, whereas the 0:16:07.880 --> 0:16:11.200 US is at an eighteen multiple on a forward earning spaces. 0:16:11.240 --> 0:16:13.440 So the earning story is good if if you look 0:16:13.480 --> 0:16:17.600 at the county year numbers for seventeen and you adjust 0:16:17.680 --> 0:16:21.440 for the normal downward drift that happens to estimates, earning 0:16:21.440 --> 0:16:24.760 should be up eight percent over sixteen, and in twenty eighteen, 0:16:24.800 --> 0:16:28.440 which of course is still miles away, would be up 0:16:28.480 --> 0:16:31.360 six percent on on that math, And those numbers don't 0:16:31.400 --> 0:16:35.720 really reflect any potential boost from either tax cuts and 0:16:35.880 --> 0:16:38.880 or deregulations. So UM, I don't think it's fair to 0:16:38.920 --> 0:16:41.880 say that on the earnings estimate side people have um 0:16:42.360 --> 0:16:46.600 unusually optimistic expectations. If there if there's a premium built in, 0:16:46.680 --> 0:16:49.120 it's on the valuation side, which I do think can 0:16:49.160 --> 0:16:51.720 be an issue going forward. There was for such a 0:16:51.760 --> 0:16:54.720 time for many months now political risk driving so much 0:16:55.200 --> 0:16:57.120 has that dissipated. Now are you returning now to to 0:16:57.160 --> 0:17:01.040 a sense that monetary policy, central banking is back in 0:17:01.080 --> 0:17:03.200 the driver's seat once again? It's political risk off the 0:17:03.240 --> 0:17:06.280 table to agree that it was with France with the 0:17:06.280 --> 0:17:09.080 French election now over with Yes, I've been very bullish 0:17:09.119 --> 0:17:11.560 on on Europe, sort of expecting that to be the 0:17:11.600 --> 0:17:15.600 sleeper hit of teen. And you know, but people were 0:17:15.680 --> 0:17:19.160 very focused on election risk, certainly after Bregson and after 0:17:19.240 --> 0:17:22.000 the U S election and when that didn't materialize, and 0:17:22.040 --> 0:17:24.560 actually the Dutch election a few months earlier was already 0:17:24.560 --> 0:17:29.360 a hint that that populism might actually be contained in Europe. 0:17:29.359 --> 0:17:31.679 And I suspect that that seems to be that that 0:17:31.800 --> 0:17:35.640 is the case. So but there is political risk always, 0:17:35.720 --> 0:17:38.400 of course, but when we're seeing on the trade front, 0:17:38.440 --> 0:17:41.600 which is really where the international risk is, so far, 0:17:41.800 --> 0:17:44.280 things have been pretty benign. You know, We've had summits 0:17:44.280 --> 0:17:48.120 and meetings with international leaders and uh, it's been kind 0:17:48.119 --> 0:17:51.399 of dovish on the trade side and on the fiscal side. Domestically, 0:17:51.760 --> 0:17:53.800 we're we're still waiting and there doesn't seem to be 0:17:53.840 --> 0:17:56.960 a lot of momentum. So it's steady as she goes 0:17:57.080 --> 0:18:01.240 right now, Very good room. You're into timor with this 0:18:01.359 --> 0:18:06.200 with fidelity in Jerusalem at the Presidential Residents with the 0:18:06.280 --> 0:18:11.000 garden is assembled, the US delegation with President Trump, and 0:18:11.080 --> 0:18:14.919 this includes comments by Reuben Rivlin, the President of Israel, 0:18:15.000 --> 0:18:18.040 not the Prime Minister. Mr you know, the president and 0:18:18.080 --> 0:18:22.440 of course with Mr Trump, it is UH to podium 0:18:22.480 --> 0:18:24.600 with the U. S. Flag on the left, the Israeli 0:18:24.680 --> 0:18:27.399 flag on the right, UH, and the President's flag I 0:18:27.440 --> 0:18:29.680 believe in the center of the national flag. I should 0:18:29.720 --> 0:18:33.200 state as well, it is a spectacular backdrop at the 0:18:33.240 --> 0:18:38.640 presidential residence. And of course this creates great residents within Israel, 0:18:38.800 --> 0:18:43.200 really pretty much in the heart of Jerusalem. So the 0:18:43.200 --> 0:18:47.240 President President Rivlin uh speaking right now. I think we'll 0:18:47.280 --> 0:18:49.480 wait on that and wait for Mr Trump to begin 0:18:49.600 --> 0:18:55.080 his comments. Uh. Here in a moment, David Gura, all 0:18:55.119 --> 0:18:58.240 of Washington is watching his trip, but busy on an 0:18:58.280 --> 0:19:01.679 airplane returning as Mr pre Mr Bannon. Do we know 0:19:01.840 --> 0:19:06.000 David this morning wide Prebous and Bannon are returning to Washington. 0:19:06.280 --> 0:19:08.080 I don't think that we have a great sense of that. 0:19:08.119 --> 0:19:10.040 The White House is saying that that was in the 0:19:10.080 --> 0:19:12.360 plans all along. Secretary of Commerce S. Woolber Ross also 0:19:12.400 --> 0:19:14.720 heading back to to Washington as well. Marty Shank and 0:19:14.760 --> 0:19:17.000 I were talking a little earlier about the complement of 0:19:17.040 --> 0:19:19.679 staff the President brought with him to Saudi Arabia. Of course, 0:19:19.720 --> 0:19:21.680 through a number of big business deals that were announced there. 0:19:21.680 --> 0:19:26.280 The President cave that speech to regional leaders on Sunday afternoon. 0:19:26.320 --> 0:19:27.960 So the White House maintaining here this was in the 0:19:28.000 --> 0:19:29.800 cards all along for those two men to have back. 0:19:29.800 --> 0:19:33.080 But you're right in pointing out the drama that exists 0:19:33.080 --> 0:19:36.800 in Washington continues to exist and persist. Uh. There will 0:19:36.840 --> 0:19:38.840 be the reports here that there could be hearing with 0:19:38.920 --> 0:19:41.040 James Coby this week on on Capitol Hill, the former 0:19:41.080 --> 0:19:44.439 FBI director. So that story, which the White House had 0:19:44.440 --> 0:19:47.000 desperately wanted to leave behind, is certainly continuing in Washington, 0:19:47.080 --> 0:19:49.920 d C. This week. Now, the symbolism from Saudi Arabia 0:19:50.000 --> 0:19:52.280 to Israel and then on to the Roman the Vatican 0:19:52.800 --> 0:19:56.160 on an extended trip. I will point out that the President, 0:19:56.960 --> 0:19:59.400 just as a casual observer from a distance like all 0:19:59.440 --> 0:20:02.119 of us, looks a lot more rested today than he 0:20:02.160 --> 0:20:04.760 did when he gave his speech to David in Saudia. 0:20:04.800 --> 0:20:08.959 There's no question that he looked exhausted here twelve and 0:20:08.960 --> 0:20:11.800 twenty four hours, a nine day trip with two summits. 0:20:12.000 --> 0:20:14.439 Marty Shanko commenting earlier as well, you know, foreign travel 0:20:14.560 --> 0:20:16.399 is difficult, as is the first foreign trip that the 0:20:16.440 --> 0:20:19.840 president has taken, the first official trip that he's taken overseas. 0:20:19.840 --> 0:20:23.080 It has jam packed, involves a lot of geographical breath 0:20:23.080 --> 0:20:24.680 as you're as you're mentioning, and just it's a lot 0:20:24.720 --> 0:20:27.080 to get one's head around. Anyone who's traveled with the 0:20:27.119 --> 0:20:29.560 government official at that kind of rank knows that everything 0:20:29.640 --> 0:20:32.680 is tightly scheduled. You're in a bubble um. Everything, every 0:20:32.680 --> 0:20:34.840 minute is taken kind of like when you go to Davos, 0:20:34.880 --> 0:20:39.280 tom every minute is pre scheduled in. But I I 0:20:39.359 --> 0:20:42.000 will take issue and that I once to the trip 0:20:42.040 --> 0:20:44.560 where it was every day day here, day yere day there. 0:20:45.160 --> 0:20:48.560 The moving city to city is a whole another level exhaustion, 0:20:48.640 --> 0:20:52.640 whether it's Asia, Europe and North America. As a presence 0:20:52.640 --> 0:20:54.760 doing and of course many of our listeners, particularly C 0:20:54.960 --> 0:21:11.560 class officers are doing as well. Yeah, thank you very 0:21:11.640 --> 0:21:16.600 much and shalom. I'm honored to be in the great 0:21:16.640 --> 0:21:21.639 State of Israel, the homeland of the Jewish people. I 0:21:21.640 --> 0:21:24.640 am awed by the beauty and majesty of this sacred 0:21:25.800 --> 0:21:33.719 and very holy land. President Rivlin, Mrs Rivlin, thank you 0:21:33.760 --> 0:21:39.160 so much, thank you, thank you for opening your wonderful 0:21:39.200 --> 0:21:45.040 home and welcoming Milani and myself to your amazing country, 0:21:45.040 --> 0:21:47.720