WEBVTT - P&L: Tough Questioning in Tillerson Hearing is Bipartisan 0:00:04.760 --> 0:00:07.720 Welcome to the Bloomberg P and L Podcast. I'm Pim 0:00:07.800 --> 0:00:11.080 Fox along with my co host Lisa Abramowitz. Each day 0:00:11.119 --> 0:00:14.360 we bring you the most important, noteworthy, and useful interviews 0:00:14.400 --> 0:00:16.560 for you and your money, whether at the grocery store 0:00:16.800 --> 0:00:19.960 or the trading floor. Find the Bloomberg P L Podcast 0:00:20.000 --> 0:00:28.240 on iTunes, SoundCloud and at Bloomberg dot com. All right, 0:00:28.320 --> 0:00:31.600 let's just bring in Stephen Dennis, who is our Bloomberg 0:00:31.600 --> 0:00:35.760 Senate reporter, and he has been following the confirmation hearings 0:00:35.760 --> 0:00:39.080 that are being held in Washington today. We know that 0:00:39.280 --> 0:00:43.680 Rex Tillerson, former chief executive of Exxon Mobile attampt to 0:00:43.680 --> 0:00:47.360 be the next Secretary of State. Stephen Dennis, So anything 0:00:47.440 --> 0:00:49.479 stand out to you in the in the questioning or 0:00:49.520 --> 0:00:53.279 is it pretty much standard Democrats going after Rex Tillerson 0:00:53.280 --> 0:00:56.320 and his ties and his business experience in Russia and 0:00:56.360 --> 0:01:00.920 the Republicans UH supporting Rex Chillensen. Actually, I think it's 0:01:00.920 --> 0:01:05.959 pretty bipartisan. The tough questioning senators like Marco Rubio are 0:01:06.000 --> 0:01:09.720 going after Tillerson very hard on his ties to Putin 0:01:10.280 --> 0:01:14.160 and also on Putin's record of having uh of his 0:01:14.240 --> 0:01:18.959 dissidents disappearing and getting murdered on the death of civilians 0:01:19.000 --> 0:01:24.160 and Aleppo, which Rubio charges the Russian the Russians with 0:01:24.240 --> 0:01:29.760 perpetrating crimes against Aleppo civilians. And uh So, it's been 0:01:30.319 --> 0:01:32.880 very tough on Tillerson, I think, except for Tillerson has 0:01:32.920 --> 0:01:36.720 sort of said, sort of deflected everything and basically said 0:01:36.760 --> 0:01:39.760 that he needs to know more information and needs no 0:01:39.880 --> 0:01:43.480 classified information, which he won't have until he's confirmed, and 0:01:43.520 --> 0:01:47.080 then he'll give advice. Um So, I think Tillerson is 0:01:47.120 --> 0:01:51.040 basically hopes that he can get through on that sort 0:01:51.040 --> 0:01:53.360 of basis of just sort of trying to deflect as 0:01:53.440 --> 0:01:56.440 much as he can. And uh and it's gonna be 0:01:56.480 --> 0:02:00.080 a real question now for people like Rubio, McCain and 0:02:00.120 --> 0:02:04.360 Lindsey Graham whether they're gonna ultimately vote for Tillerson if 0:02:04.720 --> 0:02:07.800 he loses though that that trio, he will not be 0:02:08.280 --> 0:02:10.079 there's a big chance he will not be confirmed. He 0:02:10.200 --> 0:02:14.160 needs to get some Democratic support. Um So, this might 0:02:14.200 --> 0:02:18.359 be the most interesting nominee as far as whether this 0:02:18.520 --> 0:02:22.280 nominee can get confirmed ultimately. Everybody expects that he will, 0:02:23.200 --> 0:02:25.680 but you know, he's got to. He's got to make 0:02:25.720 --> 0:02:31.359 these Republicans hawks on Russia happy and there's certainly been 0:02:31.400 --> 0:02:34.400 more and more about Russia, and we're certainly going to 0:02:34.480 --> 0:02:38.280 hear a lot of from Trump about whether he has 0:02:38.360 --> 0:02:41.480 ties to Russia. He keeps denying that on Twitter. You know, 0:02:41.600 --> 0:02:45.000 I expect he'll probably deny it, and with questions when 0:02:45.120 --> 0:02:49.680 questions are asked about the leaked report that came out yesterday, 0:02:49.880 --> 0:02:55.120 and also about his own personal finances, he still hasn't 0:02:55.280 --> 0:02:59.560 really detailed everything that he owns, and also how all 0:02:59.600 --> 0:03:01.880 of his loan I wonder if they'll ask about whether 0:03:01.880 --> 0:03:05.800 he will release his tax returns. I would I would 0:03:05.800 --> 0:03:09.120 expect something along those lines, and also how he had 0:03:09.160 --> 0:03:11.600 will extricate himself from his business. And you know, he 0:03:11.919 --> 0:03:15.639 promised a press conference in December on this very topic 0:03:16.240 --> 0:03:19.280 until hasn't happened talking about that. Why is he holding 0:03:19.280 --> 0:03:21.960 a press conference now at the same time as a 0:03:22.040 --> 0:03:25.440 hearing for one of his cabinet nominees. Well, you know, 0:03:25.600 --> 0:03:28.720 I think now it's probably as good a time as 0:03:28.760 --> 0:03:30.760 any you know, I mean when he was going to 0:03:30.800 --> 0:03:32.919 have it, Uh, you know, you want to do it 0:03:32.960 --> 0:03:37.160 in the middle of the week, get maximum attention. And 0:03:37.560 --> 0:03:40.680 you know to the extent that Tillerson is the one 0:03:41.360 --> 0:03:44.680 pick who may be in the most danger, along with 0:03:44.760 --> 0:03:49.720 possibly the Treasury Secretary pick Stephen manutian Um and maybe 0:03:49.720 --> 0:03:52.680 a few others. Uh, you might you might as well 0:03:53.280 --> 0:03:56.640 have your press conference, have the the big bully pulpit 0:03:57.080 --> 0:04:01.080 um to try and bluster things away. Is there any 0:04:01.200 --> 0:04:05.200 evidence that any of the nominees feel that they are 0:04:05.320 --> 0:04:08.800 going to be unfairly treated as part of the hearings 0:04:08.880 --> 0:04:11.560 because this is not something that is brand new to 0:04:11.640 --> 0:04:15.240 Washington and many of the people, at least as far 0:04:15.240 --> 0:04:18.120 as the Senators are concerned. But for many of the nominees, 0:04:18.560 --> 0:04:23.680 this is really their first interaction with the way Washington works. Yeah. 0:04:23.720 --> 0:04:25.200 I mean, there are a couple of things that are 0:04:25.200 --> 0:04:28.000 different about this cabinet. You know that it's the richest 0:04:28.000 --> 0:04:31.400 cabinet by far. You have billionaires in this cabinet. Just 0:04:31.520 --> 0:04:35.560 dealing with a paperwork when you're a billionaire is an 0:04:35.640 --> 0:04:38.240 order of magnitude different than if you're just you know, 0:04:38.440 --> 0:04:41.880 Joe Q citizen. So people like Wilbur Ross and Betty 0:04:41.920 --> 0:04:44.839 de Voss, who who are very wealthy and are in 0:04:44.880 --> 0:04:48.400 this cabinet, you know, their paperwork is taking a while. Um. 0:04:48.440 --> 0:04:50.760 But also these are people by and large who have 0:04:50.839 --> 0:04:53.800 never been in government before, so being in a hearing 0:04:53.960 --> 0:04:58.200 is is a new experience. Now Rex Stillerson's testified before 0:04:58.240 --> 0:05:02.600 Congress before is ex ce Jeff Sessions, who was at 0:05:02.640 --> 0:05:07.840 his first very marathon hearing yesterday, is certainly experienced as 0:05:07.880 --> 0:05:11.279 a before the Judiciary Committee for Attorney General, right and 0:05:11.279 --> 0:05:14.680 and and so Sessions sort of kind of anticipated where 0:05:14.680 --> 0:05:17.000 the questions were going and kind of knew how to 0:05:17.120 --> 0:05:20.120 dance around most of the questions. Uh, this will be 0:05:20.160 --> 0:05:23.520 an interesting thing to see whether Stephen Manuchian, the Treasury 0:05:23.520 --> 0:05:27.800 Secretary pick, when he has his hearing in the future, um, 0:05:28.240 --> 0:05:31.040 and some of these other picks who have not really 0:05:31.080 --> 0:05:33.960 been before Congress, that they're really going to be under 0:05:33.960 --> 0:05:35.560 the gun and the Democrats are really going to go 0:05:35.640 --> 0:05:40.479 after them because they want to show that the populist 0:05:40.600 --> 0:05:45.560 Trump is not how Trump is governing. He's picking plutocrats 0:05:45.600 --> 0:05:48.320 in their eyes who don't really have the interests of 0:05:48.360 --> 0:05:50.280 working people at heart. And you know you're going to 0:05:50.360 --> 0:05:53.279 see them go. They're already going very hard after Mr 0:05:53.360 --> 0:05:56.880 Poster the well Elaine, I just want to mention Elaine. 0:05:56.920 --> 0:06:02.279 Elaine Chow, who's the nominee for Secretary Transportation, is the 0:06:02.360 --> 0:06:05.560 only Trump appointee who has previously worked at the cabinet level. 0:06:06.040 --> 0:06:07.680 If you know, I wanted just to break in, I 0:06:07.680 --> 0:06:10.200 mean about the press conference that we're going to be watching. 0:06:10.200 --> 0:06:12.640 I wanted to understand kind of the process of how 0:06:12.680 --> 0:06:15.919 it usually goes down. I mean, how long should president 0:06:15.960 --> 0:06:19.719 elector or does a president elect usually speak for? And 0:06:19.760 --> 0:06:23.080 then how much time is usually allotted to questions. You know, 0:06:23.600 --> 0:06:25.719 I wouldn't be surprised to see this go on a 0:06:25.720 --> 0:06:28.640 little bit longer since there hasn't been a press conference 0:06:28.960 --> 0:06:32.440 in an unprecedented period of time since the election, and 0:06:32.480 --> 0:06:35.359 there are frankly, so many questions out there. But it 0:06:35.440 --> 0:06:39.240 really depends on Trump, you know. He he can bluster 0:06:39.360 --> 0:06:41.400 at the beginning for a few minutes and then open 0:06:41.480 --> 0:06:45.159 it up to questions. Uh. Typically you get six eight 0:06:45.240 --> 0:06:48.359 ten questions at a at a scheduled press conference like 0:06:48.400 --> 0:06:53.040 this with the President Obama. Uh. Trump could go longer 0:06:53.080 --> 0:06:55.320 than that or not. And the other thing is that 0:06:55.360 --> 0:06:58.440 the reporters, you know, keep in mind, these reporters have 0:06:58.440 --> 0:07:01.600 have not had access to Trump and large they might 0:07:01.640 --> 0:07:04.080 try to ask three and four part questions because there 0:07:04.080 --> 0:07:08.080 are so many unanswered questions. You know, he tweets uh, 0:07:08.839 --> 0:07:13.240 little details and and never really interacts with the press 0:07:13.320 --> 0:07:16.120 in a meaningful three or four part way. This is 0:07:16.160 --> 0:07:20.280 the first real opportunity beyond the few interviews that he's 0:07:20.320 --> 0:07:26.120 done with UH, with sort of adversarial press course. So 0:07:26.200 --> 0:07:28.040 this is going to be very interesting to watch how 0:07:28.080 --> 0:07:33.040 he interacts, whether he tries to be marker garious or combative. 0:07:33.120 --> 0:07:36.920 And after yesterday UH and the tweets were seeing in 0:07:36.920 --> 0:07:40.560 all caps this morning decrying fake news and dismissing this 0:07:40.720 --> 0:07:44.280 report as total fiction, I expect he'll probably be very 0:07:44.320 --> 0:07:47.320 compative and very critical of the press for not treating 0:07:47.360 --> 0:07:51.000 him fairly. Stephen Dennis is our Bloomberg Senate reporter and 0:07:51.320 --> 0:07:53.720 he's with us. You know, I was just looking at 0:07:53.760 --> 0:07:55.560 the schedule of hearing is You're gonna be kind of 0:07:55.560 --> 0:08:00.960 busy nine thirty tomorrow morning when Washington James maddis the 0:08:01.040 --> 0:08:03.800 nominee for Secretary of Defense. He'll be testifying before the 0:08:04.320 --> 0:08:09.120 were inveted. He'll be questioned by the Senate Armed Services Committee. 0:08:09.680 --> 0:08:12.360 Then you have Ben Carson. I believe he'll be before 0:08:12.480 --> 0:08:17.000 the Senate Committee on Banking, Housing and Urban Affairs. That's 0:08:17.000 --> 0:08:20.320 a ten am. Yeah. I think Mattis is probably a 0:08:20.440 --> 0:08:23.640 slam dunk. He's a favorite of John McCain, who's no 0:08:23.760 --> 0:08:27.760 friend of Trump most days. Um. But you know, that 0:08:27.800 --> 0:08:31.679 could be interesting if Maddis Rebuke has a different position 0:08:31.720 --> 0:08:35.240 than Trump on Isis on torture, on a number of things. 0:08:35.520 --> 0:08:38.240 So that's something to watch for. You know, Ben Carson, 0:08:38.360 --> 0:08:40.360 that could be a very entertaining hearing. He's a guy 0:08:40.440 --> 0:08:44.040 who previously said he doesn't have much experience in government 0:08:44.160 --> 0:08:46.360 and had there was a real question whether he wanted 0:08:46.400 --> 0:08:49.719 to even be an administration and so I think the 0:08:50.080 --> 0:08:52.480 Democrats are going to try and test whether he really 0:08:52.520 --> 0:08:57.520 has the knowledge to handle that that department. And uh, 0:08:57.760 --> 0:09:02.160 Wilbur Ross also he's up at ten am tomorrow as 0:09:02.200 --> 0:09:07.520 well in Washington's before the Commerce, Science, and Transportation uh committee. Yeah, 0:09:07.640 --> 0:09:11.880 now Ross is sort of interesting, obviously well known on 0:09:11.920 --> 0:09:17.079 Wall Street billionaire. UM. I think the real question with 0:09:17.160 --> 0:09:19.520 him is how he's going to handle conflicts of interest 0:09:20.200 --> 0:09:23.200 um and that sort of thing. But you know that 0:09:23.240 --> 0:09:26.760 there's no real expectation that his his nominee is nomination 0:09:26.920 --> 0:09:29.480 is going to be in trouble. And you know, part 0:09:29.480 --> 0:09:31.199 of the thinking I think is, you know, you don't 0:09:31.240 --> 0:09:36.280 really want to get a billionaire mad Yeah, well so, 0:09:36.520 --> 0:09:40.160 uh so that that'll be uh someone interesting for you know, 0:09:40.240 --> 0:09:42.360 people who watch Wall Street to see how he handles 0:09:43.000 --> 0:09:46.480 handles himself. But I think that will probably be pretty standard. 0:09:46.520 --> 0:09:51.200 Fair Stephen, have you heard about Republican and frankly or 0:09:51.280 --> 0:09:54.920 Democratic senators getting together before these hearings and trying to 0:09:54.960 --> 0:09:56.720 come up with a game plan, because it does feel 0:09:56.760 --> 0:10:00.880 like there has been some I don't know conflict if 0:10:01.080 --> 0:10:06.480 in turn to seeing conflicts certainly between some Republicans. Now absolutely, 0:10:06.520 --> 0:10:10.520 I think the Republicans and Democrats sort of treat these 0:10:10.559 --> 0:10:14.200 things by and large as teams, and they sort of 0:10:14.240 --> 0:10:17.560 dole out who's gonna ask which line of questioning, who's 0:10:17.600 --> 0:10:20.240 gonna you know, with the Jeff Sessions, who was going 0:10:20.280 --> 0:10:21.679 to defend him on X and who was going to 0:10:21.760 --> 0:10:24.800 defend him on why? There there wasn't a whole lot 0:10:24.800 --> 0:10:27.439 of Republicans who really wanting to go after Jeff Sessions, 0:10:27.440 --> 0:10:29.920 and the Democrats you know, went after him a little bit, 0:10:29.920 --> 0:10:32.160 but they didn't go after him as hard as they 0:10:32.240 --> 0:10:34.720 potentially could have. You know, he's a he's a colleague, 0:10:34.760 --> 0:10:36.839 he's going to win confirmation. You've got to deal with 0:10:36.920 --> 0:10:41.160 him as Attorney General. So uh, he didn't really go 0:10:41.480 --> 0:10:44.880 that hard at the allegations of racism as they could 0:10:44.960 --> 0:10:49.520 have um in his past. And uh so that we're 0:10:49.520 --> 0:10:51.520 going to see more of that today. I mean the 0:10:51.640 --> 0:10:57.400 unprecedented spectacle of Corey Booker going after UM Jeff Sessions, 0:10:57.600 --> 0:11:01.560 a fellow senator that's basically on heard of, and it 0:11:01.559 --> 0:11:04.439 could be something that sets up Corey Booker to potentially 0:11:04.520 --> 0:11:08.400 run help him run for president four years from now. Um. 0:11:08.440 --> 0:11:10.560 You know, he's one of the rising stars in the 0:11:11.480 --> 0:11:14.520 on the Democratic side, and they're looking at the party 0:11:14.559 --> 0:11:16.760 spaces looking for fighters right now, and they see him 0:11:16.800 --> 0:11:19.480 as one. I just want to mention that I mentioned 0:11:19.520 --> 0:11:21.960 Wilbur Ross. He's not going to be uh at the 0:11:22.000 --> 0:11:27.920 hearing tomorrow. It'll be January. Stephen Dennis, thank you so 0:11:28.000 --> 0:11:41.120 much for joining us. Steven Dennis Blueberg, SENEC reporter. It 0:11:41.280 --> 0:11:43.200 is the big debate. It is the debate that is 0:11:43.280 --> 0:11:46.560 keeping up people at night and is keeping bond. King's 0:11:47.320 --> 0:11:50.480 going at each other with the numbers. I want to 0:11:50.480 --> 0:11:53.520 get a number from Mike materas So, Senior Vice president 0:11:53.559 --> 0:11:58.000 and co chair of Franklin Templeton's Fixed Income Policy Committee. 0:11:58.000 --> 0:12:00.480 Mike thank you so much for joining us. Do you 0:12:00.559 --> 0:12:03.680 think that there is a certain threshold, a certain number 0:12:03.840 --> 0:12:07.800 for US ten year yields to climb above at which 0:12:08.000 --> 0:12:10.920 we can say goodbye to the thirty five year bond 0:12:10.960 --> 0:12:15.640 bull market? Um? Well, is there a number? I don't 0:12:15.640 --> 0:12:19.120 know if there's specifically a number, but uh, we're of 0:12:19.160 --> 0:12:23.080 the opinion that we we could see yields move as 0:12:23.160 --> 0:12:26.000 high as three percent this year, probably more towards the 0:12:26.120 --> 0:12:29.679 end of the year, but that wouldn't necessarily mean that 0:12:29.679 --> 0:12:32.920 that the bull the bull bond market has has ended. 0:12:33.040 --> 0:12:35.920 I think that there are a lot of demographic trends 0:12:35.920 --> 0:12:40.200 globally that are in place that will keep UH global 0:12:40.240 --> 0:12:44.440 growth as well as inflation under control over the intermediate 0:12:44.559 --> 0:12:47.560 to possibly even longer than that. That's a that's an 0:12:47.600 --> 0:12:49.599 important point. In other words, even if the if the 0:12:49.720 --> 0:12:52.800 yields on ten year treasuries to does climb, do climb 0:12:52.840 --> 0:12:56.480 above three percent, there still could be potentially a plateauing 0:12:56.600 --> 0:12:58.840 from there, in your view, I think, I think so. 0:12:59.280 --> 0:13:04.240 I think that uh there that higher interest rates at 0:13:04.280 --> 0:13:09.800 some point will will choke off economic growth and slow 0:13:10.280 --> 0:13:12.760 slow US the U S economy down as well as 0:13:12.800 --> 0:13:17.319 other economies, and with that UH not see inflation rise 0:13:17.559 --> 0:13:21.079 and UM and UH interest rates rise as well. Mike, 0:13:21.120 --> 0:13:24.000 could you comment on municipal bonds because I was reading 0:13:24.000 --> 0:13:27.319 a story today about how corporate tax cuts could actually 0:13:27.360 --> 0:13:31.120 reduce demand for municipal bonds from banks and insurance companies 0:13:31.160 --> 0:13:36.720 because lower rates make municipals less attractive compared with taxable investments. 0:13:36.760 --> 0:13:39.320 How does that work out? Well, I think it's more 0:13:39.360 --> 0:13:43.679 a matter of depending upon how the tax code ends up, 0:13:44.080 --> 0:13:48.560 but it will make UH corporate bonds and even treasuries 0:13:48.640 --> 0:13:53.120 more attractive, especially if you go with the Republican UH proposal, 0:13:53.160 --> 0:13:55.120 which I think is a sixteen and a half percent 0:13:55.559 --> 0:14:02.280 tax UH paid by individuals UM so, so I don't 0:14:02.280 --> 0:14:05.520 think it has an impact per se on municipal rates, 0:14:05.559 --> 0:14:10.800 but it gives provides more competition for municipal bonds. Having 0:14:10.800 --> 0:14:13.600 said that, I think it's important to realize that a 0:14:13.720 --> 0:14:17.160 ten year double A municipal bond right now has a 0:14:17.240 --> 0:14:20.320 yield of about a hundred and fifteent higher than the 0:14:20.400 --> 0:14:23.360 ten year treasury, so it has a spread over treasuries 0:14:23.440 --> 0:14:27.760 to begin with. So I think that it will provide 0:14:27.760 --> 0:14:31.400 more competition, but not necessarily be apparel for the municipal 0:14:31.440 --> 0:14:34.000 bond market. Mike, you know one question that I have 0:14:34.160 --> 0:14:37.720 given your prediction that ten year treasure yields will climb 0:14:37.800 --> 0:14:40.760 above three percent this year, I have to wonder what, 0:14:40.920 --> 0:14:45.960 I'm sorry, approach three not approach okay, approach three percent 0:14:46.120 --> 0:14:49.520 this year? What does that mean for corporate bonds. I 0:14:49.560 --> 0:14:52.240 know that we've seen the fastest pace of issuance of 0:14:52.320 --> 0:14:55.200 investment grade bonds to start the year. UH and meanwhile, 0:14:55.360 --> 0:14:57.960 yields on junk bonds have climbed to the lowest in 0:14:58.080 --> 0:15:00.680 two thousand and fourteen, leaving a pretty all cushion of 0:15:00.720 --> 0:15:04.120 extra spread to sort of absorb that kind of increase. Yeah, 0:15:04.160 --> 0:15:07.160 that's sort of the quandary that fixed income investors are 0:15:07.160 --> 0:15:09.400 in right now. I think that with a lot of 0:15:09.400 --> 0:15:13.800 the proposals UH that of the Republicans and Trump administration, 0:15:14.200 --> 0:15:17.480 if if they're passed, I think it extends the business cycle, 0:15:18.080 --> 0:15:22.160 which is good for for corporations. At the same time, though, 0:15:22.200 --> 0:15:24.880 a lot of the a lot of that positive news, 0:15:24.920 --> 0:15:27.720 and potentially I think it's important. Not necessarily it's not 0:15:27.760 --> 0:15:29.920 necessarily going to be passed, but a lot of it 0:15:30.040 --> 0:15:34.360 is already reflected in UH in yields on corporate investment 0:15:34.440 --> 0:15:37.280 grade corporate bonds as as well as high yield. So 0:15:37.360 --> 0:15:41.720 we are we're positive on credit, less positive on relative value. 0:15:41.840 --> 0:15:44.680 Right now we would in other words, what does that 0:15:44.720 --> 0:15:46.920 mean in terms of a trade? Oh? Sure, So what 0:15:46.920 --> 0:15:50.640 it means is that, uh, given womans and most would 0:15:50.640 --> 0:15:52.560 say that we are in the latter stages of the 0:15:52.600 --> 0:15:57.480 business cycle. Fiscal policy that will be passed to the 0:15:57.480 --> 0:16:00.240 extent that it's past, it's passed later on this year 0:16:00.560 --> 0:16:04.600 will probably extend the business cycle. That's positive for corporate credit. 0:16:04.720 --> 0:16:08.480 That when that the prospects of a recession are further off. 0:16:09.160 --> 0:16:12.080 At the same time, though, spreads have come in on 0:16:12.640 --> 0:16:16.440 investment ary corporate bonds probably about thirty thirty basis points 0:16:16.440 --> 0:16:18.920 over the last few months, and even more so on 0:16:19.040 --> 0:16:22.560 high yield, so they're spread to treasuries. The risk premium 0:16:22.680 --> 0:16:28.840 has shrunk. Should there be any disappointments where risk premiums 0:16:28.960 --> 0:16:31.360 rise on these on these sectors of the markets, we 0:16:31.400 --> 0:16:33.520 would look at look at that as an opportunity to 0:16:33.560 --> 0:16:36.440 buy because we feel the business cycle will be longer. 0:16:36.960 --> 0:16:40.960 But current levels were just moderately we find corporate bonds 0:16:40.960 --> 0:16:44.400 and high you'll just moderately attractive, just moderately attractive for 0:16:44.480 --> 0:16:48.440 high you because I note that the inflows into et 0:16:48.680 --> 0:16:52.800 f s exchange traded funds, particularly for a high yield debt, 0:16:53.640 --> 0:16:58.920 added about a billion and a quarter. I was gonna say, 0:16:59.280 --> 0:17:02.800 a tremendous, tremendous influence a very and it's a very 0:17:02.800 --> 0:17:05.520 efficient way of getting exposure to the high yield market. 0:17:06.320 --> 0:17:09.520 I shares seven to ten year treasury bonding TF had 0:17:09.560 --> 0:17:13.439 the biggest outflows. Is this an indication of what we 0:17:13.480 --> 0:17:17.040 can expect if indeed we get some kind of fiscal 0:17:17.119 --> 0:17:21.879 spending bill passed by the Congress. Well, typically it's interest 0:17:21.960 --> 0:17:28.679 rates are rising because business prospects are getting better, and 0:17:28.720 --> 0:17:31.040 that's good for corporate credit. And that's the reason why 0:17:31.119 --> 0:17:34.240 individuals are buying corporate bonds is there they feel comfortable 0:17:34.240 --> 0:17:37.440 with the credit quality. And in that type of environment 0:17:37.440 --> 0:17:40.760 of rising treasury rates, corporate bond yields are going to rise, 0:17:40.800 --> 0:17:43.960 but not as much as treasury yields will rise, So 0:17:44.040 --> 0:17:47.120 it gives you some some protection to the downside. Mike, 0:17:47.119 --> 0:17:51.280 what's your greatest conviction call on the markets? Uh? This year? 0:17:51.320 --> 0:17:53.600 I mean, do you have any sort of contrarian bets 0:17:53.640 --> 0:17:58.760 that you're making on either a recovery or a big loss. Yeah, 0:17:58.760 --> 0:18:00.959 I would say probably the more. In the In the 0:18:01.000 --> 0:18:02.919 near term first half of the year, I think that 0:18:02.960 --> 0:18:06.040 we could see a bit of a disappointment and growth 0:18:06.920 --> 0:18:11.359 given that interest rates have risen, that oil prices have risen, UH, 0:18:11.600 --> 0:18:13.960 the dollar has risen, and I think all of these 0:18:14.080 --> 0:18:17.960 are our headwinds to the US economy and the global 0:18:17.960 --> 0:18:21.639 econ We've had a global manufacturing rebound in the second 0:18:21.640 --> 0:18:24.280 half of this year and that probably will taper off 0:18:24.320 --> 0:18:26.000 in the first half of the neck of the of 0:18:26.480 --> 0:18:29.520 of this year last year's rebound UH, and I think 0:18:29.560 --> 0:18:31.800 that we may see see a little bit of disappointment 0:18:31.840 --> 0:18:35.080 instead of I think in the near term treasury yields 0:18:35.080 --> 0:18:39.160 can can rise, probably from maybe upport around the two 0:18:39.160 --> 0:18:41.960 and three quarter area. But I think that we could 0:18:42.000 --> 0:18:44.560 see a declining yields in the first half of the 0:18:44.600 --> 0:18:47.280 year based on growth disappointment, only then to see in 0:18:47.280 --> 0:18:49.560 the second half of the year are rebound as more 0:18:50.119 --> 0:18:53.879 as more of the fiscal policy UH is discussed and 0:18:53.960 --> 0:18:57.320 hopefully passed, which will have a positive effect on two 0:18:57.359 --> 0:19:00.639 thousand and eighteen growth. So look possibly lower yields in 0:19:00.680 --> 0:19:02.480 the first half of the year rather than higher yields. 0:19:02.680 --> 0:19:04.800 I think that's a contrary of you. I want to 0:19:04.840 --> 0:19:06.840 thank you very much for spending time with us. Mike 0:19:07.160 --> 0:19:10.960 Matta Rosso is the senior vice president and co chair 0:19:11.000 --> 0:19:27.320 of Franklin Templeton's Fixed Income Policy Committee. Now let's turn 0:19:27.359 --> 0:19:31.440 our attention to an ongoing story which has to do 0:19:31.520 --> 0:19:37.560 with an unsubstantiated intelligence reports involving Russia and the President elect. 0:19:37.600 --> 0:19:39.480 And here to tell us more as Chris Strom, he 0:19:39.720 --> 0:19:44.520 is Justice Department reporter for Bloomberg News. Chris, what can 0:19:44.560 --> 0:19:49.119 you tell us about this report and is there any 0:19:49.240 --> 0:19:52.680 veracity in it? Is it truthful at all? Well, this 0:19:53.240 --> 0:19:55.960 is a thirty five page report that is just full 0:19:56.200 --> 0:20:02.840 of multiple allegations that are unsubstantiated. However, some of them 0:20:02.880 --> 0:20:07.960 appear to be rooted in reality to a degree. For example, 0:20:08.200 --> 0:20:12.440 there's there's indications in the report that the that there 0:20:12.480 --> 0:20:19.000 have been UH questions about business dealings by UH by 0:20:19.080 --> 0:20:23.159 Trump associates. Now we know from our reporting that the 0:20:23.240 --> 0:20:29.800 FBI has already been looking into UH possible corruption UH 0:20:29.840 --> 0:20:34.800 tied to Donald Trump's X campaign chief Paul Manafort over 0:20:34.840 --> 0:20:40.640 in Ukraine. Now, there are multiple, multiple allegations in these 0:20:40.680 --> 0:20:42.800 thirty five pages. They're also I just so, I just 0:20:42.840 --> 0:20:46.159 want to mention and having looked at the documents that 0:20:46.160 --> 0:20:50.080 you're talking about, there are multiple grammatical mistakes, there are 0:20:50.400 --> 0:20:55.760 multiple repetition, there's multiple repetition. Uh, it doesn't seem like 0:20:55.800 --> 0:21:03.280 a coherent document. It just seems grammatical and substantive mistakes. Yeah, 0:21:03.320 --> 0:21:07.280 and it just seems it doesn't seem like a document 0:21:08.040 --> 0:21:13.520 that was prepared by any um, I guess, substantiated organization. 0:21:13.520 --> 0:21:18.080 Where does this come from? Well, the the belief at 0:21:18.080 --> 0:21:22.399 this point is that it came from a former m 0:21:22.400 --> 0:21:25.840 I six intelligent agents over in Great Britain and his 0:21:25.960 --> 0:21:30.080 intelligence team put it together. UM. We are still trying 0:21:30.160 --> 0:21:33.880 to verify exactly where the report came from and what 0:21:34.119 --> 0:21:38.040 in it might actually have any sense of credibility. What 0:21:38.160 --> 0:21:42.200 we do know is that there was a a two 0:21:42.359 --> 0:21:46.280 or three page summary that was attached to the briefing 0:21:46.720 --> 0:21:50.840 that the intelligence agencies gave Donald Trump in President Obama 0:21:51.080 --> 0:21:55.880 last week, and we have not seen what is in that. 0:21:56.480 --> 0:22:01.000 It's that very slim down version, and questions remain whether 0:22:01.880 --> 0:22:05.119 the intelligence agencies in that, in that very condensed version 0:22:05.680 --> 0:22:11.399 only presented information that seems to have uh, you know, 0:22:11.520 --> 0:22:17.600 some sense of credibility or some additional independent sources verifying 0:22:18.080 --> 0:22:20.639 what was in it. But certainly the document as a 0:22:20.680 --> 0:22:28.439 whole contains all kinds of unsubsidiated allegations. Aside from this document, 0:22:28.520 --> 0:22:31.879 that we've heard that the Russia is suspected of hacking 0:22:32.280 --> 0:22:34.879 the Republican National Committee as well as the d n C, 0:22:35.280 --> 0:22:38.760 and that they're holding material that could potentially be damning 0:22:38.840 --> 0:22:41.399 for President elect Trump and that they could you know, 0:22:41.560 --> 0:22:44.000 use is basically a bargaining chip that they have some 0:22:44.200 --> 0:22:48.000 leverage when it comes to negotiations. Is there anything in 0:22:48.240 --> 0:22:52.000 this memo that was attached to Adassier given to us, 0:22:52.119 --> 0:22:55.040 allegedly given to President elected Trump. Is there anything that 0:22:55.160 --> 0:22:58.280 sort of seems like the most possible thought er for 0:22:58.880 --> 0:23:02.440 UH leverage or or that the Russians could use to 0:23:02.680 --> 0:23:06.359 just sort of get President elect Trump to do something 0:23:06.400 --> 0:23:09.680 that perhaps uh might not be And there's nothing, there's 0:23:09.720 --> 0:23:12.880 nothing that I can say right now that that we 0:23:12.960 --> 0:23:17.280 have any indication that it is going to be something, uh, 0:23:17.480 --> 0:23:20.879 something that is verified incredible that could be used to 0:23:20.920 --> 0:23:25.920 blackmail Donald Trump. UM. I think that there's concern now 0:23:26.600 --> 0:23:30.800 uh between among lawmakers in Congress that this needs to 0:23:30.800 --> 0:23:33.960 be looked at in in in detail to find out 0:23:34.720 --> 0:23:36.880 if there is anything. But it's also important to remember 0:23:36.920 --> 0:23:40.080 that that, you know, Trump has sent out tweets saying 0:23:40.119 --> 0:23:42.840 that this is fake news and that there's nothing. He 0:23:43.160 --> 0:23:47.800 saying that the Russians and the Russians have also But 0:23:47.800 --> 0:23:50.119 it's important to remember the Russians also denied hacking, as 0:23:50.359 --> 0:23:52.320 you know, they denied hacking as well. And I think, 0:23:52.600 --> 0:23:55.160 you know, the intelligence agencies have pretty fortunately come out 0:23:55.560 --> 0:23:58.239 with you know, the uh, you know, back backing up 0:23:58.280 --> 0:24:00.760 the idea that that the Russian government was hacking the 0:24:00.840 --> 0:24:03.159 DNC and other political groups. Well, we're just going to 0:24:03.240 --> 0:24:06.560 mention that. In one of Donald Trump's tweets earlier, he 0:24:06.640 --> 0:24:10.439 asked if these leaks, the leaks of this dossier or 0:24:10.480 --> 0:24:13.560 this document of he described dirt, meant that we are 0:24:13.680 --> 0:24:17.760 quote living in Nazi Germany, says he prepares to hold 0:24:17.800 --> 0:24:19.680 his first I mean this this memo, you know, it's 0:24:19.720 --> 0:24:21.600 I mean, it's it's it's a bomb that just went 0:24:21.680 --> 0:24:23.639 off last night, and we're all trying to's we're all 0:24:23.720 --> 0:24:25.679 kind of scrambling now to try and figure out what 0:24:25.720 --> 0:24:28.960 it means, what might be in it that has any 0:24:29.040 --> 0:24:32.440 you know any any substance so far. Is there anything 0:24:32.520 --> 0:24:35.520 that sort of stood out to you? One thing? I 0:24:35.560 --> 0:24:37.640 can't say if there's anything that jumped out to me, Um, 0:24:37.840 --> 0:24:39.880