1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leie. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,199 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. So 5 00:00:33,320 --> 00:00:36,159 Speaker 1: the main story some White House officials trying to restart 6 00:00:36,240 --> 00:00:38,960 Speaker 1: talks with China to avoid a trade war before US 7 00:00:39,000 --> 00:00:42,280 Speaker 1: tariffs on Chinese products take effect on July six. This, 8 00:00:42,400 --> 00:00:45,239 Speaker 1: according to three people familiar with the plans, setting up 9 00:00:45,240 --> 00:00:48,000 Speaker 1: a battle with others in the administration who favor a 10 00:00:48,159 --> 00:00:50,239 Speaker 1: heart aligne. So what is going on joining us now 11 00:00:50,320 --> 00:00:54,279 Speaker 1: is in shepherdson pantheon macro Economics chief Economist, and it's 12 00:00:54,320 --> 00:00:56,960 Speaker 1: something that's driving sentiment, and yet it's something that's so 13 00:00:57,040 --> 00:00:59,480 Speaker 1: difficult to get your hands around on any given day. 14 00:01:00,040 --> 00:01:02,200 Speaker 1: All it is because it's it's pretty clear that within 15 00:01:02,240 --> 00:01:04,920 Speaker 1: the administration there's something of a fight going on. Um 16 00:01:05,120 --> 00:01:07,360 Speaker 1: I'm I'm pleased to hear that that perhaps there are 17 00:01:07,440 --> 00:01:09,920 Speaker 1: still some adults in the room, and I think that 18 00:01:10,760 --> 00:01:13,840 Speaker 1: talking to China to resolve what our genuine issues. I mean, 19 00:01:13,880 --> 00:01:16,240 Speaker 1: you know, I'm very much on board with the idea 20 00:01:16,280 --> 00:01:19,280 Speaker 1: that Chinese theft of U as intellectual property is an outrage, 21 00:01:19,560 --> 00:01:21,760 Speaker 1: and the way that China forces US business into joint 22 00:01:21,800 --> 00:01:23,920 Speaker 1: ventures is also an outrage. I mean, there's some real 23 00:01:24,160 --> 00:01:27,039 Speaker 1: issues of substance here, but but the idea that we 24 00:01:27,040 --> 00:01:29,720 Speaker 1: can deal with those issues of substance by having a 25 00:01:29,760 --> 00:01:31,840 Speaker 1: tariff war just doesn't make a lot of sense to me. 26 00:01:31,880 --> 00:01:34,440 Speaker 1: And perhaps that's the argument that's now being made within 27 00:01:34,480 --> 00:01:37,600 Speaker 1: the administration. But of course talking about it isn't the 28 00:01:37,600 --> 00:01:40,680 Speaker 1: same as doing it, And we need to see outcomes. 29 00:01:40,680 --> 00:01:43,120 Speaker 1: Markets want to see clarity. They want to see outcomes 30 00:01:43,200 --> 00:01:45,959 Speaker 1: rather than just news that the administrations thinking about doing 31 00:01:46,000 --> 00:01:48,360 Speaker 1: something maybe a bit differently, but at least it's I 32 00:01:48,400 --> 00:01:51,040 Speaker 1: would say the news is a step in the right direction, 33 00:01:51,240 --> 00:01:53,080 Speaker 1: but I need to see something happen so I And 34 00:01:53,120 --> 00:01:55,360 Speaker 1: there are some outrageous things happening in China, and they're 35 00:01:55,440 --> 00:01:57,640 Speaker 1: significant barriers to entry as well. But I think some 36 00:01:57,680 --> 00:01:59,920 Speaker 1: of the administration might push back and say, well, the 37 00:02:00,000 --> 00:02:03,200 Speaker 1: approach of the last ten years hasn't helped um, why 38 00:02:03,200 --> 00:02:06,040 Speaker 1: shouldn't we go about doing things differently. Well, I guess 39 00:02:06,040 --> 00:02:09,359 Speaker 1: the approach of the last several years or decades even 40 00:02:09,400 --> 00:02:12,120 Speaker 1: has been uh not to address these things head on, 41 00:02:12,600 --> 00:02:15,480 Speaker 1: because remember that the trading relationship the US has with 42 00:02:15,600 --> 00:02:20,040 Speaker 1: China happens because it's mutually beneficial. American consumers like buying 43 00:02:20,160 --> 00:02:22,239 Speaker 1: cheap things from China, and that's something that some people 44 00:02:22,240 --> 00:02:25,760 Speaker 1: in the administration don't seem to really understand that we've 45 00:02:25,840 --> 00:02:28,040 Speaker 1: run an enormous trade defers it with China because China 46 00:02:28,160 --> 00:02:30,240 Speaker 1: is the lowest cost producer of an awful lot of 47 00:02:30,280 --> 00:02:33,920 Speaker 1: things clothing, furniture, electronics that people like to buy, and 48 00:02:33,919 --> 00:02:36,240 Speaker 1: they like to buy them at prices that are way 49 00:02:36,240 --> 00:02:39,120 Speaker 1: way below anything that could be achieved in US Manua. 50 00:02:39,240 --> 00:02:41,320 Speaker 1: So sentiment improving this morning off the back of this 51 00:02:41,440 --> 00:02:45,200 Speaker 1: story by our colleagues down in Washington, d C. Also, 52 00:02:45,240 --> 00:02:47,680 Speaker 1: the fundamentals look a little bit better. Um in Europe, 53 00:02:47,720 --> 00:02:50,760 Speaker 1: the pm ice looking solid compared to what we have 54 00:02:50,880 --> 00:02:53,679 Speaker 1: been in the direction of travel. Yeah, that's kind of 55 00:02:53,680 --> 00:02:56,359 Speaker 1: a funny story because European sentiment really ramped up in 56 00:02:56,360 --> 00:02:58,520 Speaker 1: the second off of aste. Everybody got very excited. We 57 00:02:58,520 --> 00:03:01,680 Speaker 1: had to run a very very strong and then that 58 00:03:01,760 --> 00:03:03,320 Speaker 1: was never sustainable. But I think a lot of people 59 00:03:03,320 --> 00:03:05,440 Speaker 1: who are getting out their rule isn't extrapolating, and so 60 00:03:05,600 --> 00:03:08,280 Speaker 1: when it wasn't sustained, they got unhappy. And now we're 61 00:03:08,320 --> 00:03:10,360 Speaker 1: kind of back to something that looks more sustainable and 62 00:03:10,440 --> 00:03:14,640 Speaker 1: still quite positive. Can you predict or give your probabilities 63 00:03:14,880 --> 00:03:16,840 Speaker 1: of to where the FED will be the end of 64 00:03:16,840 --> 00:03:22,560 Speaker 1: the summer summer begins, you know, July one, beckons, where 65 00:03:22,600 --> 00:03:26,280 Speaker 1: are we going to be after the August meeting? Where 66 00:03:26,320 --> 00:03:29,160 Speaker 1: will the FED be? Because there's a huge belief out 67 00:03:29,200 --> 00:03:31,880 Speaker 1: there they're out over their skis, they're just ahead of 68 00:03:31,880 --> 00:03:35,600 Speaker 1: the game. Well, you know, I think that the data 69 00:03:35,640 --> 00:03:37,200 Speaker 1: flow that we're going to get on the U S 70 00:03:37,200 --> 00:03:40,600 Speaker 1: side between now and the September meeting is going to 71 00:03:40,680 --> 00:03:44,720 Speaker 1: be very strong, very positive, uh, and we might see 72 00:03:44,920 --> 00:03:48,400 Speaker 1: unemployment potentially hitting rates that we haven't been seeing since 73 00:03:48,440 --> 00:03:52,200 Speaker 1: the late nineteen sixties and heading lower. And it's also 74 00:03:52,240 --> 00:03:56,520 Speaker 1: conceivable that between now and September, we're going to see uh, 75 00:03:56,720 --> 00:03:59,280 Speaker 1: finally a sustained pickup and wages at the beginning of 76 00:03:59,280 --> 00:04:02,040 Speaker 1: a sustained pickup and wages, So we might see markets 77 00:04:02,080 --> 00:04:03,800 Speaker 1: finally beginning to think, well, you know, hey, the FEDS 78 00:04:03,840 --> 00:04:07,120 Speaker 1: talking this aggressive game, and maybe they're right. I mean 79 00:04:07,160 --> 00:04:11,120 Speaker 1: within within this is the arch debate. David blanche Flower 80 00:04:11,160 --> 00:04:13,119 Speaker 1: with this yesterday, is saying, look, there's still a whole 81 00:04:13,160 --> 00:04:17,920 Speaker 1: part of America that is feeling not fully employed. The 82 00:04:17,960 --> 00:04:20,280 Speaker 1: Washington Post, I think it was earlier this week and 83 00:04:20,360 --> 00:04:24,440 Speaker 1: what blog talking about four fifth of America where real 84 00:04:24,480 --> 00:04:27,520 Speaker 1: wages are sketchy. You know, they've seen some wage growth, 85 00:04:27,560 --> 00:04:29,920 Speaker 1: but it's been eating up by a little bit of 86 00:04:29,920 --> 00:04:33,800 Speaker 1: a spirited in inflation. When do those people get their 87 00:04:33,960 --> 00:04:38,120 Speaker 1: fair share? Well, this is unfortunately, see that the FED 88 00:04:38,200 --> 00:04:42,359 Speaker 1: can't directly address. This is ant for politicians. All the 89 00:04:42,400 --> 00:04:44,800 Speaker 1: FED can deal with is the aggregates. You know, a 90 00:04:44,839 --> 00:04:47,440 Speaker 1: central bank con conduct monetary policy on the basis of 91 00:04:47,839 --> 00:04:51,200 Speaker 1: distributional problems and inequalities and inequities which are very deep 92 00:04:51,240 --> 00:04:54,120 Speaker 1: in the US and probably are getting deeper. The FED 93 00:04:54,160 --> 00:04:56,280 Speaker 1: can only deal with the aggregates, and the aggregate that's 94 00:04:56,279 --> 00:04:59,320 Speaker 1: scaring them is that the pool of labor is shrinking 95 00:04:59,360 --> 00:05:01,920 Speaker 1: to the point where, uh, we're looking at the rates 96 00:05:01,920 --> 00:05:04,960 Speaker 1: we haven't seen for two generations, and that ultimately starts 97 00:05:05,000 --> 00:05:08,400 Speaker 1: to make them nervous about the distribution of future inflation risks. 98 00:05:08,480 --> 00:05:11,040 Speaker 1: Even if there are tens of millions of people who 99 00:05:11,120 --> 00:05:13,400 Speaker 1: aren't seeing anything that they would call themselves, you know, 100 00:05:13,440 --> 00:05:16,880 Speaker 1: an economic recovery within the core equation. What's the most 101 00:05:16,960 --> 00:05:21,800 Speaker 1: interest to you right now? Consumption dynamics, investment dynamics, Government 102 00:05:21,839 --> 00:05:25,600 Speaker 1: will maybe all the fiscal expansion, and then export dynamics. 103 00:05:25,600 --> 00:05:28,360 Speaker 1: What matters. The big thing now is Capex. Capex has 104 00:05:28,400 --> 00:05:30,320 Speaker 1: been the driving force between the slowdown that we saw 105 00:05:30,320 --> 00:05:34,120 Speaker 1: in sixteen and the rebound that began in mid sixteen 106 00:05:34,320 --> 00:05:36,440 Speaker 1: and has advanced in pretty much a straight line ever since. 107 00:05:36,480 --> 00:05:38,840 Speaker 1: That's all almost all been a capital spending story. It 108 00:05:38,920 --> 00:05:42,159 Speaker 1: started in the oil business when oil prices bottomed out, 109 00:05:42,440 --> 00:05:44,640 Speaker 1: but now it's broadening and it's deepening. And I'm pretty 110 00:05:44,640 --> 00:05:47,040 Speaker 1: bullish about this because it's boosting productivity growth, and it's 111 00:05:47,080 --> 00:05:51,040 Speaker 1: boosting corporate earnings, and it's holding down domestic This is domestic. 112 00:05:51,120 --> 00:05:53,040 Speaker 1: This is a very domestic story, and it's something that 113 00:05:53,800 --> 00:05:55,640 Speaker 1: we've been looking for for ten years, you know, since 114 00:05:55,640 --> 00:05:58,159 Speaker 1: the crash. We've been waiting for this catchup and capital spending, 115 00:05:58,320 --> 00:06:01,800 Speaker 1: and it may be finally is underway, and if it 116 00:06:01,839 --> 00:06:05,159 Speaker 1: can be sustained, it is the single most important development 117 00:06:05,200 --> 00:06:07,400 Speaker 1: in terms of the macro pictures since you know, two 118 00:06:07,440 --> 00:06:11,200 Speaker 1: thousand and eight, when everything exploded. Confidence leads investment decisions, 119 00:06:11,200 --> 00:06:14,479 Speaker 1: and confidence went through the roof when the President entered 120 00:06:14,480 --> 00:06:17,400 Speaker 1: the White House, Donald Trump, UM, I'm wondering whether this 121 00:06:17,440 --> 00:06:21,080 Speaker 1: trade discussion damages confidence to the extent that it could 122 00:06:21,160 --> 00:06:24,360 Speaker 1: hurt the capital expenditure picture as well. Oh, that is 123 00:06:24,400 --> 00:06:26,440 Speaker 1: the threat. And questionably that's the threat. You know, we 124 00:06:26,480 --> 00:06:28,880 Speaker 1: saw back in March April when the tariff stir first 125 00:06:28,880 --> 00:06:30,880 Speaker 1: really burst onto the scene with the steel and alumin 126 00:06:30,960 --> 00:06:33,920 Speaker 1: and the solar panels and the washing machines. Um, we 127 00:06:33,960 --> 00:06:38,040 Speaker 1: saw immediately in the regional data a hit in the 128 00:06:38,080 --> 00:06:41,039 Speaker 1: parts of the country that are most dependent on global 129 00:06:41,040 --> 00:06:43,520 Speaker 1: trade flow. So the Richmond FED, for example, which is 130 00:06:43,520 --> 00:06:45,760 Speaker 1: a servant nobody watches very closely, suddenly had its biggest 131 00:06:45,800 --> 00:06:48,479 Speaker 1: ever one month drop. And that's because it includes supports 132 00:06:48,520 --> 00:06:52,760 Speaker 1: of Baltimore and Norfolk, Virginia and Charleston, So these places 133 00:06:52,760 --> 00:06:55,159 Speaker 1: are very sensitive to this. The danger now is that 134 00:06:55,200 --> 00:06:58,239 Speaker 1: if this tariff war expands to cover pretty much everything 135 00:06:58,279 --> 00:07:00,799 Speaker 1: we import from China, you start to the whole country 136 00:07:00,839 --> 00:07:03,200 Speaker 1: because you start to hit consumers directly, and you depress 137 00:07:03,240 --> 00:07:05,880 Speaker 1: their incomes and their spending power, and suddenly you're you're 138 00:07:05,880 --> 00:07:09,040 Speaker 1: a retailer or your service provider. Um, you don't appear 139 00:07:09,080 --> 00:07:12,000 Speaker 1: to be directly affected by tariffs today, but you could be, 140 00:07:12,200 --> 00:07:17,560 Speaker 1: and that uncertainty is proving to be really quite painful. Um. Okay, 141 00:07:17,640 --> 00:07:21,960 Speaker 1: this was all really interesting. John doesn't care Panama England 142 00:07:22,000 --> 00:07:25,240 Speaker 1: on Sunday. What do you think? Well, I think you're 143 00:07:25,520 --> 00:07:28,960 Speaker 1: gonna win, probably gonna get John. I watched Peru and 144 00:07:29,000 --> 00:07:32,400 Speaker 1: they were fun because they couldn't penetrate to the goal, 145 00:07:32,480 --> 00:07:35,640 Speaker 1: so they shot like Americans. They shot a lot. Yeah, 146 00:07:35,840 --> 00:07:38,520 Speaker 1: they're really be impressed by that. You watched France Peru yesterday. 147 00:07:38,560 --> 00:07:41,280 Speaker 1: I watched the highlights. I don't watch the game. You're 148 00:07:41,280 --> 00:07:46,960 Speaker 1: gonna watch the England. England are gonna England are going 149 00:07:47,000 --> 00:07:51,640 Speaker 1: to score five or six, probably in the first twenty minutes. Definitely, definitely, Yeah, yeah, 150 00:07:51,880 --> 00:07:53,559 Speaker 1: right that that was the dream I had last night. Anyway, 151 00:07:53,600 --> 00:08:10,640 Speaker 1: you really sat in this this game on Sunday. This 152 00:08:10,800 --> 00:08:14,960 Speaker 1: is the interview of the day. If you're coming up 153 00:08:15,000 --> 00:08:19,680 Speaker 1: on July one and you are at home recalibrating your 154 00:08:19,760 --> 00:08:24,440 Speaker 1: net nonworth, you've done something wrong. You're told that the 155 00:08:24,440 --> 00:08:27,760 Speaker 1: markets up double digit and you're not. You run a 156 00:08:27,800 --> 00:08:31,280 Speaker 1: hedge fund. I'm that's a joke, folks. But Lisa Challott 157 00:08:31,320 --> 00:08:34,920 Speaker 1: with us with Morgan Stanley, and she writes incredibly intelligently 158 00:08:35,520 --> 00:08:38,120 Speaker 1: for Morgan Stanley Wealth Management, and does this with a 159 00:08:38,160 --> 00:08:45,280 Speaker 1: prodigious mathematics background in her academics mathematics. In My Portfolio 160 00:08:45,440 --> 00:08:50,040 Speaker 1: at Home, Peter Lynch called it diversification. How diversified do 161 00:08:50,120 --> 00:08:52,280 Speaker 1: I have to be in the equity markets right now? 162 00:08:52,960 --> 00:08:57,080 Speaker 1: So right now we're we're actually encouraging clients to have, um, 163 00:08:57,120 --> 00:08:59,959 Speaker 1: you know, be closer to their maximum level of diversity 164 00:09:00,080 --> 00:09:02,520 Speaker 1: casan and and that really has to do with the 165 00:09:02,559 --> 00:09:07,480 Speaker 1: fact that we've seen equity performance to be extraordinarily concentrated 166 00:09:07,600 --> 00:09:11,520 Speaker 1: quite frankly for most of the last ten years in 167 00:09:11,520 --> 00:09:15,000 Speaker 1: in tech and in consumer discretionary sectors. And you know, 168 00:09:15,080 --> 00:09:17,640 Speaker 1: as we get into the late innings of the cycle, 169 00:09:18,040 --> 00:09:21,280 Speaker 1: you really want to to kind of protect your yourself 170 00:09:21,320 --> 00:09:23,160 Speaker 1: and risk managing. Not that we're going to run a 171 00:09:23,240 --> 00:09:26,640 Speaker 1: hedge at home, but do you get out of the 172 00:09:26,679 --> 00:09:30,959 Speaker 1: text or do you buy those that have not advanced? 173 00:09:31,440 --> 00:09:35,640 Speaker 1: What a tempt What a difficult It is a difficult call. 174 00:09:35,760 --> 00:09:38,120 Speaker 1: So you know, look, our perspective is not that this 175 00:09:38,200 --> 00:09:42,760 Speaker 1: is about exiting technology or consumer discretionary per se. It's 176 00:09:42,880 --> 00:09:46,640 Speaker 1: really more about being much more selective about stock picking 177 00:09:46,800 --> 00:09:50,120 Speaker 1: and utilizing quality and value as some of those attributes. 178 00:09:50,320 --> 00:09:51,800 Speaker 1: So what are some of the things that have not 179 00:09:51,920 --> 00:09:56,280 Speaker 1: participated as much? Would be some of the stocks, uh 180 00:09:56,360 --> 00:09:59,439 Speaker 1: you know in tech for example, that are in the 181 00:10:00,040 --> 00:10:04,400 Speaker 1: software services hardware spaces, that are that are more leverage 182 00:10:04,400 --> 00:10:06,840 Speaker 1: to that capital spending cycle that we think is coming. 183 00:10:07,320 --> 00:10:10,040 Speaker 1: Um So we would we would kind of balance um 184 00:10:10,480 --> 00:10:14,079 Speaker 1: uh portfolios intach with that, but we're also looking at 185 00:10:14,200 --> 00:10:17,079 Speaker 1: at owning energy, and we're looking at owning healthcare as 186 00:10:17,120 --> 00:10:19,600 Speaker 1: well as we get a little bit more late cycle 187 00:10:19,640 --> 00:10:21,480 Speaker 1: and a little bit more defensive at least. So this 188 00:10:21,520 --> 00:10:23,880 Speaker 1: is within the equity market. Let me cross asset just 189 00:10:23,920 --> 00:10:25,480 Speaker 1: a little bit and walk me through where we are 190 00:10:25,480 --> 00:10:27,959 Speaker 1: in terms of correlations and how difficult or easy it 191 00:10:28,000 --> 00:10:31,800 Speaker 1: is to actually be diversified. Yeah, so that's that's a 192 00:10:31,840 --> 00:10:35,920 Speaker 1: fantastic point. You know. One of the things that has 193 00:10:35,960 --> 00:10:40,080 Speaker 1: plagued portfolios, I think for a good portion of this 194 00:10:40,240 --> 00:10:44,280 Speaker 1: cycle has been that we haven't had great diversification between 195 00:10:44,320 --> 00:10:47,440 Speaker 1: stocks and bonds and and you know, between and among 196 00:10:48,080 --> 00:10:52,880 Speaker 1: uh stocks and credit. They've been very, very very highly correlated. UM. 197 00:10:52,920 --> 00:10:56,360 Speaker 1: I think we're at that breaking point right now where 198 00:10:56,400 --> 00:10:59,560 Speaker 1: we're beginning to see the values of diversification where stocks 199 00:10:59,600 --> 00:11:04,320 Speaker 1: are in fact pretty meaningfully outperforming treasury eesier to date, 200 00:11:04,400 --> 00:11:07,839 Speaker 1: where where um, you know, investment grade credit has begun 201 00:11:07,920 --> 00:11:11,000 Speaker 1: to underperform a little bit, which is at uh a 202 00:11:11,240 --> 00:11:14,360 Speaker 1: contrast to to what's happened in high yield, where total 203 00:11:14,360 --> 00:11:17,440 Speaker 1: returns and high yield have actually held up. Uh. So 204 00:11:17,520 --> 00:11:20,679 Speaker 1: diversification is beginning to work. Uh. And we think as 205 00:11:20,720 --> 00:11:23,240 Speaker 1: the cycle matures, that will continue to do. So what 206 00:11:23,280 --> 00:11:25,280 Speaker 1: did you consider to be the reason that explains the 207 00:11:25,480 --> 00:11:28,560 Speaker 1: performance in in high yield further down in credit quality 208 00:11:28,800 --> 00:11:31,559 Speaker 1: when investment grad is looking soft. Yeah, now, so that's 209 00:11:31,559 --> 00:11:34,960 Speaker 1: a fantastic question. We we often get it. UM. One 210 00:11:34,960 --> 00:11:36,760 Speaker 1: of the things that's happened is that you know, the 211 00:11:36,800 --> 00:11:40,600 Speaker 1: investment grade market is facing two headwinds really UM. One 212 00:11:40,880 --> 00:11:44,520 Speaker 1: is issuance, right, so we continue to see UM, just 213 00:11:44,960 --> 00:11:49,640 Speaker 1: a huge explosion of supply. And then secondarily, we're at 214 00:11:49,679 --> 00:11:54,000 Speaker 1: a period in the cycle where treasuries are finally actually 215 00:11:54,080 --> 00:11:59,000 Speaker 1: yielding something, and so UM we're getting competition uh. In 216 00:11:59,000 --> 00:12:01,600 Speaker 1: in in the middle of the ratings band in the 217 00:12:01,720 --> 00:12:06,200 Speaker 1: double a kind of space with treasuries where investment grade 218 00:12:06,360 --> 00:12:08,760 Speaker 1: is the spreads are so tight you're just not getting 219 00:12:08,760 --> 00:12:11,960 Speaker 1: paid enough for the underlying interest rate risk um, and 220 00:12:12,000 --> 00:12:14,640 Speaker 1: so you may as well just just don't um, you know, 221 00:12:14,679 --> 00:12:18,319 Speaker 1: the maturity match treasuries. How's dividend growth going? I mean, 222 00:12:18,760 --> 00:12:20,520 Speaker 1: I mean, I've heard about share buy backs and we 223 00:12:20,640 --> 00:12:24,560 Speaker 1: did a text cutting everybody. What about dividing growth? Yes, 224 00:12:24,640 --> 00:12:27,520 Speaker 1: so dividend growth is um is one of the reasons 225 00:12:27,520 --> 00:12:32,199 Speaker 1: that socks are doing so well. Uh this year despite valuations. 226 00:12:32,240 --> 00:12:34,840 Speaker 1: You've got to share buy backs. But we're looking at 227 00:12:34,840 --> 00:12:38,440 Speaker 1: dividend growth and uh, you know, payouts still remain below 228 00:12:38,480 --> 00:12:41,559 Speaker 1: average when you look at them overall across the SMP 229 00:12:41,640 --> 00:12:44,240 Speaker 1: five hundred UM and dividend growth is looking in the 230 00:12:44,360 --> 00:12:47,040 Speaker 1: kind of six percent range, and you compare that to 231 00:12:47,200 --> 00:12:50,199 Speaker 1: the level at which earnings per share a look are 232 00:12:50,200 --> 00:12:52,280 Speaker 1: looking to grow this year, which is about eighteen based 233 00:12:52,280 --> 00:12:56,480 Speaker 1: on consensus with within. This is the biggest mistake people make. 234 00:12:56,640 --> 00:12:58,640 Speaker 1: You have people come in and they've got a pot 235 00:12:58,640 --> 00:13:01,640 Speaker 1: of money, and everybody he's all happy, happy happy. Forget 236 00:13:01,640 --> 00:13:05,360 Speaker 1: about the happy, happy happy. What's the biggest mistake people 237 00:13:05,360 --> 00:13:08,040 Speaker 1: are making right now? So I think the biggest mistake 238 00:13:08,120 --> 00:13:10,720 Speaker 1: people are making is um, you know, thinking that they 239 00:13:10,760 --> 00:13:15,280 Speaker 1: can time the market and trying UM to sell or 240 00:13:15,480 --> 00:13:17,840 Speaker 1: you know, trying to to pick an entry point. You know. 241 00:13:17,880 --> 00:13:19,679 Speaker 1: One of the things that we've said is that it 242 00:13:19,760 --> 00:13:22,360 Speaker 1: is late in the cycle. We probably want to keep 243 00:13:22,400 --> 00:13:26,280 Speaker 1: our our current positions intact until we see more indications 244 00:13:26,320 --> 00:13:29,120 Speaker 1: of a real change in the economic outlook, which we 245 00:13:29,160 --> 00:13:31,960 Speaker 1: don't see yet. UM. But this is a time when 246 00:13:32,080 --> 00:13:35,280 Speaker 1: we can be opportunistic with our cash. We don't need 247 00:13:35,320 --> 00:13:38,320 Speaker 1: to try to be cute um and quote unquote wait 248 00:13:38,360 --> 00:13:41,080 Speaker 1: for the correction. We can sit in cash for a 249 00:13:41,080 --> 00:13:45,640 Speaker 1: little while now. Um, we're actually getting paid to have cash, 250 00:13:45,880 --> 00:13:47,720 Speaker 1: and it's the first time in a decade. So cash 251 00:13:47,760 --> 00:13:50,200 Speaker 1: is an asset class for us. Lisa Chelle, thank you 252 00:13:50,240 --> 00:13:53,880 Speaker 1: so much, greatly appreciate it. With Morgan Stanley Wealth UH Management, 253 00:14:06,640 --> 00:14:09,520 Speaker 1: this is a joy. There is a pedigree to research. 254 00:14:09,640 --> 00:14:14,080 Speaker 1: There is a trailing history of excellence in research, and 255 00:14:14,160 --> 00:14:17,800 Speaker 1: you can go back on hydro Carbon's fifteen and I 256 00:14:17,920 --> 00:14:21,880 Speaker 1: dare say even longer ago to a shop at Deutsche 257 00:14:21,880 --> 00:14:25,040 Speaker 1: Bank where on the back of their research report they 258 00:14:25,080 --> 00:14:29,800 Speaker 1: had the definitive Excel spreadsheet on Wall Street of supply 259 00:14:29,960 --> 00:14:33,640 Speaker 1: and Demand, and Adam Sabinski and Paul Sanki would then 260 00:14:33,680 --> 00:14:37,320 Speaker 1: tell you what they got wrong in gaming supply. Move 261 00:14:37,360 --> 00:14:41,080 Speaker 1: it forward at Missoi. O America's Paul Sanky joins us 262 00:14:41,440 --> 00:14:44,400 Speaker 1: UH this morning. Congratulations on the new effort with Missooi, 263 00:14:44,920 --> 00:14:48,400 Speaker 1: and it's certainly a wonderful time. I remember a time 264 00:14:48,400 --> 00:14:51,720 Speaker 1: where you guys blew it on Russia supply. I mean, 265 00:14:51,720 --> 00:14:53,760 Speaker 1: I don't want to bring up one of your greatness calls, 266 00:14:54,320 --> 00:14:57,560 Speaker 1: but there was a moment where you guys, Adam totally 267 00:14:57,640 --> 00:15:02,240 Speaker 1: got wrong Russians supp dynamics. Do you feel that dumb? Now? 268 00:15:02,320 --> 00:15:07,520 Speaker 1: Do you do you actually know what's some five dynamics? 269 00:15:08,280 --> 00:15:10,760 Speaker 1: I think the Russian call, especially with the way they're 270 00:15:10,760 --> 00:15:12,760 Speaker 1: working with Saudi as closely as they are, which is 271 00:15:12,800 --> 00:15:17,240 Speaker 1: a massive change, has made it certainly more transparent as 272 00:15:17,240 --> 00:15:19,400 Speaker 1: well as the fact, remember Tom, now that the Russian 273 00:15:19,400 --> 00:15:22,040 Speaker 1: companies are quoted, so the data is somewhat better just 274 00:15:22,760 --> 00:15:26,160 Speaker 1: Russian level of disclosure obviously, but we still, I think, 275 00:15:26,200 --> 00:15:28,320 Speaker 1: have a much better idea of what's going on in Russia. 276 00:15:28,480 --> 00:15:30,480 Speaker 1: And I would highlight that the main change he is 277 00:15:30,520 --> 00:15:32,480 Speaker 1: to get off the subject of being wrong in the past. 278 00:15:32,920 --> 00:15:35,720 Speaker 1: The main, real, huge dynamic here has been the Saudi 279 00:15:35,960 --> 00:15:40,040 Speaker 1: Russia entants that we have through the auspices of OPEC. 280 00:15:40,160 --> 00:15:43,320 Speaker 1: Russia being a non OPAC member doesn't change the fact 281 00:15:43,360 --> 00:15:46,000 Speaker 1: that OPEC decisions are now basically made by those two countries. 282 00:15:46,080 --> 00:15:48,200 Speaker 1: There may be those two countries. So is of what's 283 00:15:48,240 --> 00:15:50,360 Speaker 1: the v N thing? Is it like? Is it like 284 00:15:50,400 --> 00:15:52,560 Speaker 1: a play? Is it like a three hex soul parpara? 285 00:15:52,880 --> 00:15:55,280 Speaker 1: It really somewhat is I mean people have talked about 286 00:15:55,320 --> 00:15:58,600 Speaker 1: the death of OPEC from one Naimi in fourteen couldn't 287 00:15:58,640 --> 00:16:01,280 Speaker 1: get cuts from the other members and you know, rolled 288 00:16:01,320 --> 00:16:06,320 Speaker 1: the market over very aggressively. Um, now it's become almost 289 00:16:06,320 --> 00:16:09,120 Speaker 1: a stronger organization in a strange way because you now 290 00:16:09,160 --> 00:16:12,680 Speaker 1: have no peck and you've got these additional members such 291 00:16:12,720 --> 00:16:17,560 Speaker 1: as for example, as a Baijan Kazakhstan Oman who essentially 292 00:16:17,800 --> 00:16:21,360 Speaker 1: formed part of the meeting circus. But at a given level, 293 00:16:21,520 --> 00:16:26,160 Speaker 1: it's a circus. In the response you have is it's 294 00:16:26,200 --> 00:16:30,840 Speaker 1: Saudi Russia does America playing at all? Because I see 295 00:16:30,920 --> 00:16:34,160 Speaker 1: chart after a chart of of oil independence in America. 296 00:16:34,720 --> 00:16:37,920 Speaker 1: America is absolutely huge. The Saudi's love Trump are we 297 00:16:38,040 --> 00:16:41,320 Speaker 1: part of that uh no, But when Donald says, can 298 00:16:41,360 --> 00:16:44,160 Speaker 1: you bring the oil price down, it doesn't take long 299 00:16:44,200 --> 00:16:46,480 Speaker 1: before we have an announcement of increased production. Now there's 300 00:16:46,480 --> 00:16:50,120 Speaker 1: obviously other factors there, but a key factor was unquestionably 301 00:16:50,840 --> 00:16:53,360 Speaker 1: the President saying saying prices are too high and don't 302 00:16:53,400 --> 00:16:55,520 Speaker 1: forget and I don't want to be I want to 303 00:16:55,600 --> 00:16:57,400 Speaker 1: get any legal trouble here. But you know, there's also 304 00:16:57,440 --> 00:17:02,200 Speaker 1: a strong relationship between this administration the Russians. How is demand? 305 00:17:02,240 --> 00:17:05,160 Speaker 1: Because I make a joke about your truly extraordinary work 306 00:17:05,240 --> 00:17:08,440 Speaker 1: years ago without in Saminski, but part of your courage 307 00:17:08,560 --> 00:17:11,919 Speaker 1: intellectually was not only to do the supply game, but 308 00:17:12,000 --> 00:17:14,760 Speaker 1: actually to also figure out the demand side, which to 309 00:17:14,800 --> 00:17:17,520 Speaker 1: me right now is rather a mystery, isn't it. Well, 310 00:17:17,560 --> 00:17:19,840 Speaker 1: demand has always been the first principle, so it's really 311 00:17:19,840 --> 00:17:22,000 Speaker 1: the question of getting tomand right first and then worrying 312 00:17:22,000 --> 00:17:25,359 Speaker 1: about supply. My view is that, you know, the global 313 00:17:25,400 --> 00:17:28,120 Speaker 1: economy is stronger than people appreciate. From having done quite 314 00:17:28,119 --> 00:17:30,520 Speaker 1: a bit of travel in emerging markets over the past 315 00:17:30,800 --> 00:17:35,080 Speaker 1: six months. One interesting line given my new employees that's Miszouho, 316 00:17:35,240 --> 00:17:38,679 Speaker 1: is that Japan is currently in its longest economic expansion 317 00:17:38,720 --> 00:17:41,280 Speaker 1: since World War Two, and it's really a global it's 318 00:17:41,280 --> 00:17:43,199 Speaker 1: a global picture, so it's not you know, the patchy 319 00:17:43,280 --> 00:17:45,000 Speaker 1: stuff we normally see of a bit of weakness here 320 00:17:45,000 --> 00:17:47,040 Speaker 1: and a bit of strength that Europe's doing lots. You know, 321 00:17:47,160 --> 00:17:48,920 Speaker 1: all of that adds up to very strong demand on 322 00:17:49,160 --> 00:17:52,040 Speaker 1: are there a lot of tankers sitting off Singapore? Remember 323 00:17:52,080 --> 00:17:55,480 Speaker 1: the Bloomberg Business Week cover years ago of all the tankers. 324 00:17:55,520 --> 00:17:58,159 Speaker 1: Quite the opposite, quite the opposite of the Saudi Russia 325 00:17:58,280 --> 00:18:00,600 Speaker 1: entent that we've talked about since six scene has brought 326 00:18:00,680 --> 00:18:04,679 Speaker 1: down infantry levels aggressively, and we're now below historic average 327 00:18:04,720 --> 00:18:07,280 Speaker 1: levels in global oil inventory. One area where we may 328 00:18:07,320 --> 00:18:10,080 Speaker 1: get rising invagry is if the sanctions on Iran story 329 00:18:10,160 --> 00:18:13,880 Speaker 1: gets going and there, and we now see companies unwilling 330 00:18:13,920 --> 00:18:17,200 Speaker 1: to buy Iranian oil as a new emerging threat this summer. 331 00:18:17,280 --> 00:18:20,520 Speaker 1: There's a number of issues here regarding threats. One is Iran, 332 00:18:20,600 --> 00:18:24,800 Speaker 1: your other is obviously Venezuela. We have Libya. But also remember, 333 00:18:24,800 --> 00:18:26,480 Speaker 1: as a result of this meeting, we now have less 334 00:18:26,480 --> 00:18:29,879 Speaker 1: spare capacity and less oil and infantry. So the market 335 00:18:29,960 --> 00:18:32,960 Speaker 1: is subject to volatile risk with this strength of demand 336 00:18:32,960 --> 00:18:35,520 Speaker 1: that we have. What is your oil call I mean, 337 00:18:35,600 --> 00:18:38,840 Speaker 1: I mean, what I find remarkable is no one rationalized 338 00:18:38,920 --> 00:18:41,679 Speaker 1: up to seventy and now it's you know, something that 339 00:18:41,720 --> 00:18:44,640 Speaker 1: we all expect. But what is the called twelve months 340 00:18:44,640 --> 00:18:47,639 Speaker 1: out of oil? Well, we find room to be extremely bullish. 341 00:18:47,680 --> 00:18:50,280 Speaker 1: I mean, I think that the liquidity globally that we've 342 00:18:50,320 --> 00:18:52,520 Speaker 1: seen over the past ten years we all know has 343 00:18:52,560 --> 00:18:55,439 Speaker 1: to end with inflation. And the way we're really getting 344 00:18:56,160 --> 00:18:58,320 Speaker 1: evidence of this liquidity is the strength of global oil 345 00:18:58,359 --> 00:19:00,560 Speaker 1: demand in my business, and I think the way that 346 00:19:00,600 --> 00:19:03,359 Speaker 1: we're going to play through into inflation is by essentially 347 00:19:03,440 --> 00:19:05,919 Speaker 1: running out of oil supply and having too much oil demand, 348 00:19:05,920 --> 00:19:09,000 Speaker 1: and therefore inflation mechanism is going to be a hundred 349 00:19:09,000 --> 00:19:11,360 Speaker 1: dollar plus oil prices. One of the things I think 350 00:19:11,359 --> 00:19:14,840 Speaker 1: that all of us don't get is the mathematics of 351 00:19:14,880 --> 00:19:19,880 Speaker 1: how tight supply and demand are described for our audience. 352 00:19:20,520 --> 00:19:23,600 Speaker 1: We talked about oil supplies a separate entity, but that 353 00:19:23,640 --> 00:19:27,680 Speaker 1: Martilly and Cross supply and demand is really pretty tight. 354 00:19:28,240 --> 00:19:30,280 Speaker 1: My word, you can't underestimate it. I mean, let's start 355 00:19:30,320 --> 00:19:32,480 Speaker 1: this just the basic number of a hundred million barrels 356 00:19:32,480 --> 00:19:34,520 Speaker 1: a day of demand. We have to meet that every 357 00:19:34,520 --> 00:19:37,040 Speaker 1: single day, every day. We need to find a hundred 358 00:19:37,160 --> 00:19:41,760 Speaker 1: million barrels and uh, you know, Christophe de Marjorie, one 359 00:19:41,760 --> 00:19:44,879 Speaker 1: of my favorite unfortunately late CEO of Totel, believed we 360 00:19:44,920 --> 00:19:47,720 Speaker 1: could not supply physically more than a hundred million barars 361 00:19:47,760 --> 00:19:50,520 Speaker 1: a day. That was his call ten years ago before 362 00:19:50,520 --> 00:19:53,480 Speaker 1: he tragically passed. And now we find ourselves a hundred 363 00:19:53,480 --> 00:19:56,000 Speaker 1: million bars a day, and we find the saudiast of 364 00:19:56,040 --> 00:19:57,639 Speaker 1: One of the most interesting comments to come out of 365 00:19:57,640 --> 00:20:00,520 Speaker 1: the open meeting today was the Energy uster of Saudi 366 00:20:00,520 --> 00:20:02,720 Speaker 1: Arabia saying, we have two million barrels a day of 367 00:20:02,760 --> 00:20:06,200 Speaker 1: spare capacity that's very expensive to run. And what does 368 00:20:06,200 --> 00:20:08,520 Speaker 1: that mean. It means that it's very expensive to just 369 00:20:08,640 --> 00:20:12,119 Speaker 1: leave ready to produce oil sitting there maintained and not 370 00:20:12,200 --> 00:20:14,320 Speaker 1: make money from it. And they feel I think at 371 00:20:14,359 --> 00:20:16,080 Speaker 1: a given point, I thought there's a huge line from 372 00:20:16,080 --> 00:20:17,919 Speaker 1: the open meeting that no one really picked up on. 373 00:20:18,240 --> 00:20:19,719 Speaker 1: What they're saying. I think is they're going to run 374 00:20:19,800 --> 00:20:22,320 Speaker 1: less spare capacity and that we're going to run more 375 00:20:22,400 --> 00:20:24,040 Speaker 1: risk in the oil market. As a result, it will 376 00:20:24,080 --> 00:20:26,840 Speaker 1: be a lower inventory. So if we add all that 377 00:20:26,920 --> 00:20:28,960 Speaker 1: up to answer your question, we've got a hundred million 378 00:20:28,960 --> 00:20:32,040 Speaker 1: barrels a day of oil demand globally, we may have 379 00:20:32,119 --> 00:20:34,800 Speaker 1: two million barrels a day spare after this increase. I 380 00:20:34,800 --> 00:20:37,120 Speaker 1: mean it is drum tight. And if you see something 381 00:20:37,119 --> 00:20:39,920 Speaker 1: like Libya in a week from nowhere we lose potentially 382 00:20:39,920 --> 00:20:42,199 Speaker 1: seven hundred thousand bars a day, then how do you 383 00:20:42,320 --> 00:20:45,840 Speaker 1: respond to the international relations set? I think of the 384 00:20:45,880 --> 00:20:49,040 Speaker 1: great Robert Caplan folks, my book of the Summer, The Returner, 385 00:20:49,080 --> 00:20:54,359 Speaker 1: Marco Polos Road, Robert Caplan on China and the Self China. 386 00:20:54,480 --> 00:20:59,760 Speaker 1: See within those tight inventories, do you have concern about 387 00:21:00,240 --> 00:21:04,280 Speaker 1: the gap from the Malacca straight up to Missouri's Japan completely? 388 00:21:04,280 --> 00:21:06,639 Speaker 1: I mean, look again the current inventory level, which is 389 00:21:06,680 --> 00:21:09,080 Speaker 1: lowered from what we thought was high at sixty days 390 00:21:09,080 --> 00:21:12,720 Speaker 1: of forward cover of demands, so there's only sixty days, 391 00:21:13,200 --> 00:21:16,640 Speaker 1: there's fifty now they brought down the inventory levels, so 392 00:21:16,720 --> 00:21:19,639 Speaker 1: basically fifty days of forward cover if everything. You know, 393 00:21:19,680 --> 00:21:23,080 Speaker 1: if you lose any kind of significant supply, as you're 394 00:21:23,160 --> 00:21:27,320 Speaker 1: highly quite rightly saying, there are really a major choke 395 00:21:27,400 --> 00:21:30,360 Speaker 1: points is the Straits of Malacca. You've obviously got one 396 00:21:30,880 --> 00:21:34,639 Speaker 1: in the Gulf of Arabia as well, Gulf Posure and um, 397 00:21:35,040 --> 00:21:37,520 Speaker 1: you know there's immense risk out there there really is. Additionally, 398 00:21:37,520 --> 00:21:38,960 Speaker 1: I think what people are missing here, which is a 399 00:21:39,040 --> 00:21:41,719 Speaker 1: huge point, is the Permian is now constrained, so one 400 00:21:41,760 --> 00:21:43,960 Speaker 1: of the biggest growth drivers that we've had over the 401 00:21:44,000 --> 00:21:46,879 Speaker 1: past six seven years can't produce moraile. In fact, yesterday 402 00:21:46,920 --> 00:21:49,959 Speaker 1: we had Marathon oil down over five pc because they 403 00:21:50,000 --> 00:21:51,760 Speaker 1: said we've had to drop a rig in the Permian 404 00:21:52,000 --> 00:21:53,679 Speaker 1: because we can't do anything with the oil. But with 405 00:21:53,760 --> 00:21:57,360 Speaker 1: your price bolishness in the constraint of supply and demand, 406 00:21:58,160 --> 00:22:00,840 Speaker 1: you know, basically hid your car have been on love 407 00:22:00,920 --> 00:22:04,719 Speaker 1: since time began. Do you go along hydrocarbon stocks you're 408 00:22:04,760 --> 00:22:06,959 Speaker 1: talking to about me and Adamsominski getting the Rusher cor 409 00:22:07,040 --> 00:22:12,520 Speaker 1: wrong oil had its biggest from out it was loved. 410 00:22:12,560 --> 00:22:13,960 Speaker 1: We went to twelve paces of the S and P. 411 00:22:14,240 --> 00:22:17,280 Speaker 1: Past ten to eight years, we've been dreadful, I admit, 412 00:22:17,400 --> 00:22:20,160 Speaker 1: but this year is better and we're showing at least 413 00:22:20,600 --> 00:22:22,400 Speaker 1: at least we're keeping up with the market this year 414 00:22:22,440 --> 00:22:26,200 Speaker 1: after you brutal year last year. Some of these companies, 415 00:22:26,240 --> 00:22:28,800 Speaker 1: and I'll cite Chevron, are doing very very well. They're 416 00:22:28,840 --> 00:22:31,760 Speaker 1: generating large quantities of free cash flow and their intention 417 00:22:31,880 --> 00:22:35,240 Speaker 1: basically is to buy backstock and pay more dividends, and 418 00:22:35,280 --> 00:22:37,879 Speaker 1: we've pushed very very hard for these companies to finally 419 00:22:37,960 --> 00:22:41,680 Speaker 1: generate a decent return for sell they have a new religion, 420 00:22:41,680 --> 00:22:43,720 Speaker 1: do they have a new religion like the airlines guid 421 00:22:43,840 --> 00:22:46,320 Speaker 1: We called it the Renaissance theme, you know, and the 422 00:22:46,400 --> 00:22:48,600 Speaker 1: idea is you can do better you have him. You 423 00:22:48,640 --> 00:22:50,760 Speaker 1: got to go to the University of Manchester to say 424 00:22:50,760 --> 00:22:55,000 Speaker 1: Renaissance that way, well done. You know, I can't keep 425 00:22:55,080 --> 00:22:59,600 Speaker 1: up the spinning mills, you know, the local part, you know, 426 00:22:59,680 --> 00:23:07,880 Speaker 1: the little bar at Claridges. Anyway, the companies have got 427 00:23:07,960 --> 00:23:12,040 Speaker 1: financial discipline. Uh there's there's a little bit of an 428 00:23:12,040 --> 00:23:14,000 Speaker 1: exception with x on X and have a tremendous amount 429 00:23:14,000 --> 00:23:15,800 Speaker 1: of growth in their capex seven next five years. But 430 00:23:15,840 --> 00:23:17,320 Speaker 1: if you look at Chevron, they have no need to 431 00:23:17,359 --> 00:23:19,840 Speaker 1: grow capex and they have volume growth and these kind 432 00:23:19,840 --> 00:23:23,040 Speaker 1: of all prices they're generating terrific free cash. This has 433 00:23:23,040 --> 00:23:26,040 Speaker 1: been wonderful Paul so much with Missouri. Just thrilled that 434 00:23:26,080 --> 00:23:28,960 Speaker 1: he's with us today, giving us perspective, of course on 435 00:23:29,000 --> 00:23:32,600 Speaker 1: those meetings in Vienna, but forward what we will see 436 00:23:32,600 --> 00:23:35,600 Speaker 1: in oil and oil right now seventy four up almost 437 00:23:35,600 --> 00:23:54,160 Speaker 1: two dollars seventy four, Sanky driving the market higher, bringing 438 00:23:54,240 --> 00:23:57,080 Speaker 1: Professor Dawn, all right, so go ahead, Professor long the 439 00:23:56,880 --> 00:24:02,520 Speaker 1: the long the the economic implications of current immigration policy 440 00:24:03,920 --> 00:24:09,240 Speaker 1: in the short run. Who knows. Trump has absolutely no 441 00:24:09,480 --> 00:24:13,840 Speaker 1: idea what the impact of economic impact of as immigration 442 00:24:13,920 --> 00:24:18,359 Speaker 1: and trade policies are, and apparently neither do lots of 443 00:24:18,480 --> 00:24:23,120 Speaker 1: other people in the administration. Wilburt Ross was just saying 444 00:24:23,400 --> 00:24:26,600 Speaker 1: earlier this week that the United States has a trade 445 00:24:26,640 --> 00:24:30,600 Speaker 1: surplus with Canada in dollars, but a trade deficit with 446 00:24:30,720 --> 00:24:34,920 Speaker 1: Canada in terms of value, a statement that makes absolutely 447 00:24:35,000 --> 00:24:38,760 Speaker 1: no sense and that appears to reach back to ideas 448 00:24:38,840 --> 00:24:42,000 Speaker 1: of Carl Marx in the mid nineteenth century. That Marx 449 00:24:42,040 --> 00:24:46,360 Speaker 1: could never make coherent and never make worth at all. Right, 450 00:24:46,480 --> 00:24:49,720 Speaker 1: That values fluctuate around what people are willing to pay 451 00:24:49,760 --> 00:24:54,520 Speaker 1: for things. Um, there's nothing. Value cannot be consistently different 452 00:24:54,560 --> 00:24:59,000 Speaker 1: than price in the longer run. Um look in the 453 00:24:59,080 --> 00:25:03,919 Speaker 1: longer run, um. The United States was a superpower and 454 00:25:04,000 --> 00:25:07,240 Speaker 1: Britain was merely a great power in the twentieth century 455 00:25:08,040 --> 00:25:14,000 Speaker 1: because the forty million emigrants from Europe to elsewhere in 456 00:25:14,080 --> 00:25:17,240 Speaker 1: the late nineteenth and early twentieth century went to the 457 00:25:17,320 --> 00:25:23,000 Speaker 1: United States rather than to Britain, Canada and Australia. If Britain, Canada, 458 00:25:23,040 --> 00:25:26,720 Speaker 1: and Australia had been as welcoming to immigrants as the 459 00:25:26,800 --> 00:25:31,280 Speaker 1: United States was between eighteen seventy and nineteen twenty UM, 460 00:25:31,400 --> 00:25:34,440 Speaker 1: well then the twentieth century history would have been very different, 461 00:25:34,920 --> 00:25:37,399 Speaker 1: and kind of the capital of the English speaking world 462 00:25:37,400 --> 00:25:41,760 Speaker 1: would have been Westminster rather than kind of Washington, d c. 463 00:25:42,760 --> 00:25:47,840 Speaker 1: That the United States willingness to let huge numbers of 464 00:25:47,960 --> 00:25:53,639 Speaker 1: people in UM, absolutely huge numbers because they wanted to 465 00:25:53,680 --> 00:25:59,080 Speaker 1: become Americans, and because they became Americans was the principal 466 00:25:59,160 --> 00:26:02,639 Speaker 1: thing that made the United States the richest and most 467 00:26:02,680 --> 00:26:06,560 Speaker 1: powerful nation in the world. That made um the twentieth 468 00:26:06,640 --> 00:26:10,200 Speaker 1: century the American century, you know, cut off or even 469 00:26:10,240 --> 00:26:15,879 Speaker 1: substantially limit immigration, and you're guaranteeing that the one century 470 00:26:15,920 --> 00:26:18,920 Speaker 1: is not going to be an American century. It might 471 00:26:18,960 --> 00:26:21,680 Speaker 1: be an Indian century, it might be a Chinese century, 472 00:26:21,720 --> 00:26:25,200 Speaker 1: it might be a European century. But if Donald Trump's 473 00:26:25,240 --> 00:26:30,200 Speaker 1: policies on trade and immigration are continued, it certainly will 474 00:26:30,240 --> 00:26:33,600 Speaker 1: not be an American centric alright. So, having so, having 475 00:26:33,640 --> 00:26:38,639 Speaker 1: said that and eloquently put you stopped at nineteen twenty, 476 00:26:40,200 --> 00:26:44,960 Speaker 1: and I'm wondering if then you can proceed into the 477 00:26:45,040 --> 00:26:49,000 Speaker 1: future from there, and whether we have created a kind 478 00:26:49,040 --> 00:26:53,440 Speaker 1: of nostalgia for a period that never really existed anyway. Well, 479 00:26:53,560 --> 00:26:57,479 Speaker 1: we then have this forty year hiatus from nineteen twenty 480 00:26:57,560 --> 00:27:03,119 Speaker 1: five to nineteen sixty, when the anti immigration people kind 481 00:27:03,160 --> 00:27:07,879 Speaker 1: of one and I think this was to our great shame, 482 00:27:08,080 --> 00:27:10,760 Speaker 1: because we locked a bunch of people who wanted to 483 00:27:10,800 --> 00:27:15,200 Speaker 1: flee the Nazis into Europe right before and during World 484 00:27:15,240 --> 00:27:17,040 Speaker 1: War Two, and a hell of a lot of them 485 00:27:17,119 --> 00:27:21,920 Speaker 1: died as a result. Um. But the fact that from 486 00:27:22,000 --> 00:27:25,919 Speaker 1: nineteen twenty five to nineteen sixty we did push immigration 487 00:27:26,160 --> 00:27:30,400 Speaker 1: very low, you know, it did substantially change the character 488 00:27:30,760 --> 00:27:34,879 Speaker 1: of America in the sense that it was no longer 489 00:27:35,040 --> 00:27:39,679 Speaker 1: so visible to the people who say reached maturity in 490 00:27:39,800 --> 00:27:44,439 Speaker 1: nineteen seventy five, that we were a nation of immigrants. 491 00:27:45,280 --> 00:27:48,360 Speaker 1: It seemed that most people were here and their parents 492 00:27:48,359 --> 00:27:51,080 Speaker 1: had been born here, and maybe there were these weird 493 00:27:51,160 --> 00:27:54,640 Speaker 1: grandparents or great grandparents from the old country, but they 494 00:27:54,680 --> 00:27:57,400 Speaker 1: weren't around that very much if they were still alive. 495 00:27:58,880 --> 00:28:02,920 Speaker 1: And those people who came to maturity in say nine, 496 00:28:04,359 --> 00:28:09,520 Speaker 1: they're now the people who are rather foolishly watching Fox 497 00:28:09,720 --> 00:28:13,320 Speaker 1: rather than Bloomberg right now. Um, And so as a result, 498 00:28:13,359 --> 00:28:15,920 Speaker 1: they're being scared out of their wits and their eyeballs. 499 00:28:15,960 --> 00:28:18,520 Speaker 1: Their ears are glued to the screen or the signal 500 00:28:18,880 --> 00:28:23,520 Speaker 1: while they're sold fake diabetes cures an overpriced goldfund. Okay, 501 00:28:24,359 --> 00:28:27,879 Speaker 1: professor okay, in in that in that context, just to 502 00:28:28,000 --> 00:28:31,080 Speaker 1: push it forward into economics, is it is it possible? 503 00:28:31,480 --> 00:28:34,399 Speaker 1: I'll go ahead, Tom, all right. What I want to 504 00:28:34,440 --> 00:28:37,239 Speaker 1: know is is it possible that what you're describing in 505 00:28:37,320 --> 00:28:40,640 Speaker 1: terms of that extra push that you get from immigrants, 506 00:28:40,920 --> 00:28:43,720 Speaker 1: could that be one of the reasons why we've seen 507 00:28:43,800 --> 00:28:46,560 Speaker 1: what's gone on with GDP below what we think of 508 00:28:46,600 --> 00:28:51,240 Speaker 1: as trend Well, as you say, the big puzzle seems 509 00:28:51,280 --> 00:28:56,560 Speaker 1: to be declining entrepreneurship and declining business formation. And if 510 00:28:56,600 --> 00:29:01,120 Speaker 1: you look back at American history, you know, from Andrew 511 00:29:01,160 --> 00:29:06,520 Speaker 1: Carnegie and Nicola Tesla to today, a huge chunk of 512 00:29:06,560 --> 00:29:12,640 Speaker 1: our innovators are inventors, are entrepreneurs, have been smart, industrious 513 00:29:12,720 --> 00:29:16,880 Speaker 1: people coming from abroad. That the United States has willingness 514 00:29:16,920 --> 00:29:19,520 Speaker 1: to be open to immigrating means that we've creamed the 515 00:29:19,720 --> 00:29:23,760 Speaker 1: entrepreneurs and the innovators off of the rest of the 516 00:29:23,800 --> 00:29:27,680 Speaker 1: world and given them homes here. And Trump is now 517 00:29:27,840 --> 00:29:31,160 Speaker 1: trying and in fact is having a marketable success in 518 00:29:31,280 --> 00:29:33,920 Speaker 1: reversing that. Professor, We're gonna have to leave it there 519 00:29:33,960 --> 00:29:37,440 Speaker 1: with breaking news Professor DeLong at the University of California, Berkeley. 520 00:29:37,480 --> 00:29:40,280 Speaker 1: Can't say enough about his website and also his Twitter 521 00:29:40,320 --> 00:29:45,040 Speaker 1: feed as well. Very informative and always a source of debate. 522 00:29:52,440 --> 00:29:56,640 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 523 00:29:56,680 --> 00:30:02,000 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 524 00:30:02,040 --> 00:30:06,280 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 525 00:30:06,320 --> 00:30:10,520 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.