WEBVTT - Contagion From Brazil to EM Is Relatively Limited, Dennis Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.559 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Right now, 0:00:32.600 --> 0:00:35.519 I want to get some perspective from Jeff Dennis. He's 0:00:35.520 --> 0:00:39.760 head of a global emerging market strategy at UBS Securities. Jeff, 0:00:39.920 --> 0:00:42.840 I'm so glad that you could join us, because yesterday 0:00:42.880 --> 0:00:47.080 we did see, uh, the potential demise of the presidency 0:00:47.200 --> 0:00:51.000 of Michele Tamair, although he refuses to resign um, but 0:00:51.080 --> 0:00:54.000 certainly this and Jack's quite a bit more turmoil into 0:00:54.600 --> 0:00:58.400 the Brazilian economy, which already is struggling. I want to 0:00:58.440 --> 0:01:00.600 get your take. Do you think have you've seen any 0:01:00.680 --> 0:01:04.080 signs that there is some level of contagion that's moving 0:01:04.400 --> 0:01:07.440 away from Brazil and into other emerging markets ASTs as well. 0:01:07.920 --> 0:01:10.759 I think what's really interesting is you haven't seen very 0:01:10.840 --> 0:01:13.319 much contagion at all. Now. Obviously, when you get an 0:01:13.360 --> 0:01:18.160 event like Brazil's sudden deterioration of the political situation, you 0:01:18.200 --> 0:01:21.320 will get some heavy selling in Brazil MSCI Brazil the 0:01:21.400 --> 0:01:25.000 doll adjusted index was down early fifteen percent yesterday, and 0:01:25.080 --> 0:01:27.640 you did get some fall out over the rest of EM. 0:01:27.680 --> 0:01:31.440 But in general we have the view here that particularly 0:01:31.480 --> 0:01:34.720 if you look at some of the allegedly vulnerable currencies 0:01:34.760 --> 0:01:38.560 in them, some of the high interest rate deficit currencies 0:01:38.600 --> 0:01:42.000 like a Turkey or South Africa, UM, they've all held up. 0:01:42.160 --> 0:01:44.760 They've both held up relatively well. So I think it's 0:01:44.760 --> 0:01:47.840 fair to say that you've got a shock effect. Of course, 0:01:47.880 --> 0:01:50.040 it looks like a one day shock effect at the moment, 0:01:50.400 --> 0:01:53.360 but the contagion into EM has been has been actually 0:01:53.400 --> 0:01:56.640 relatively limited. So is this just because low rates are 0:01:56.680 --> 0:01:58.840 here forever? People are just looking for that yield and 0:01:58.880 --> 0:02:02.360 they don't really care government, No government turmoil, no turmoil, 0:02:02.400 --> 0:02:05.720 doesn't really matter. More yield, that's all you need to know. Well, 0:02:05.760 --> 0:02:07.600 I mean, I think to a certain extent that it 0:02:07.920 --> 0:02:10.000 is that. I mean, our vi you on EM for 0:02:10.040 --> 0:02:13.760 this year has continued to be UM low, US bond 0:02:13.800 --> 0:02:17.000 deals flat to week a dollar, sucking money towards the 0:02:17.040 --> 0:02:20.000 emerging mars, pushing money towards the emerging markets, with some 0:02:20.040 --> 0:02:22.600 of these high interest rate markets, you know, doing quite 0:02:22.600 --> 0:02:25.280 well because currencies have been strong, and we're not sure 0:02:25.320 --> 0:02:29.040 that scenario is particularly damaged by this Brazil story, although 0:02:29.080 --> 0:02:32.760 of course Brazil was your ultimate number one carry trade story, 0:02:32.760 --> 0:02:34.799 if you like, with an e M And also, I 0:02:34.840 --> 0:02:36.799 think what people are doing is they're saying, look, this 0:02:37.000 --> 0:02:41.240 is a uniquely Brazilian situation that's developed, which is obviously 0:02:41.320 --> 0:02:44.280 very uncertain. We've published a note on it, and really 0:02:44.280 --> 0:02:46.639 the the issue here is how does the political scenario 0:02:46.639 --> 0:02:48.920 play out in Brazil now? But m a lot of 0:02:48.960 --> 0:02:51.359 uncertainty about that. But it's seen, I think by investors 0:02:51.400 --> 0:02:55.240 has really been a rather unique Brazilian situation and the 0:02:55.240 --> 0:02:59.440 global market backdrop, notwithstanding, of course, also a dramatic cell 0:02:59.480 --> 0:03:02.079 off in the US market on Wednesday, it's still seen 0:03:02.160 --> 0:03:04.280 as it's fairly benign, and I think that's why e 0:03:04.480 --> 0:03:06.800 m IS is held up very well. You know, Jeff, 0:03:06.840 --> 0:03:09.360 we've heard some comments from muhammadal Area and of Aliens 0:03:09.480 --> 0:03:12.840 and others talking about the increase of leverage in the 0:03:12.919 --> 0:03:15.880 market and given the sort of low rate environment that 0:03:16.120 --> 0:03:18.480 nothing can seemingly shake. I mean, yes, as you point to, 0:03:18.600 --> 0:03:20.679 there is what a day of volatility and then things 0:03:20.680 --> 0:03:23.080 are back to normal again, even though we still haven't 0:03:23.080 --> 0:03:27.240 resolved anything with the Brazilian situation of late uh So, Jeff, 0:03:27.360 --> 0:03:30.160 I'm wondering from your perspective, have you seen or are 0:03:30.200 --> 0:03:35.120 you worried about increasing leverage in emerging markets trades? Not really, 0:03:35.160 --> 0:03:36.840 I mean, I'm certainly not in a position to know 0:03:36.960 --> 0:03:39.600 how much leverage there is in terms of you know, 0:03:39.680 --> 0:03:43.360 people's positioning within the market. Well, we focus on much 0:03:43.400 --> 0:03:46.480 more is how much leverage there isn't there isn't economies 0:03:46.520 --> 0:03:49.000 and what that is doing for the economic outlook. And 0:03:49.040 --> 0:03:52.360 there's no doubt that since the global financial crisis there's 0:03:52.400 --> 0:03:56.280 been a tremendous increase in leverage in in e M countries. 0:03:56.480 --> 0:03:59.000 Obviously everybody always talks about that with respect to China, 0:03:59.040 --> 0:04:01.800 but other countries as well, such as career and the 0:04:01.840 --> 0:04:04.560 way we think that plays out as we think it, 0:04:04.280 --> 0:04:07.200 it is kind of a dampener, if you know, if 0:04:07.240 --> 0:04:11.320 you like, for growth um in these economies. Rather necessarily 0:04:11.360 --> 0:04:14.280 being a significant financial market risk, it just makes it 0:04:14.320 --> 0:04:16.680 hard for these countries to grow given how much debt 0:04:16.720 --> 0:04:19.560 has been taken on board. At the same time, our 0:04:19.720 --> 0:04:24.000 data tells us that over the last few quarters, corporates 0:04:24.040 --> 0:04:26.640 and e M have begun to shed some of that leverage. 0:04:26.680 --> 0:04:30.240 So um, I don't think leverage within these economies is 0:04:30.279 --> 0:04:32.760 a new problem at all. It's a constraint on growth. 0:04:33.160 --> 0:04:34.920 Where we are in terms of perhaps to be making 0:04:35.000 --> 0:04:37.359 leverage bets in the market that may be very different, 0:04:37.400 --> 0:04:39.520 But I'm you know, that's not something that I've got 0:04:39.720 --> 0:04:42.039 a tremendous amount of data on at this point in time. 0:04:42.680 --> 0:04:45.240 So do you think that there's still are opportunities in 0:04:45.360 --> 0:04:48.800 emerging markets debt and if so where well, I'm I 0:04:49.120 --> 0:04:51.440 don't do debt, and so I'm not going to common 0:04:51.520 --> 0:04:54.279 any detail on that. Although certainly why it's benign global 0:04:54.360 --> 0:04:57.000 environment continues, I think there is going to be You're 0:04:57.000 --> 0:05:00.159 going to continue to see yields potentially staying well to 0:05:00.200 --> 0:05:02.240 be low on on em dead as a whole. But 0:05:02.600 --> 0:05:05.279 I think overall, overall, on the equity side, we need 0:05:05.360 --> 0:05:08.520 to see if the markets are indeed going to settle down. 0:05:08.600 --> 0:05:10.839 We need see how the Brazilian story will play out, 0:05:10.880 --> 0:05:13.480 and where do you get any further US market weakness. 0:05:13.560 --> 0:05:16.000 But while yields are low, and while the dollars flats 0:05:16.000 --> 0:05:19.679 are weaker. Um, I think you'll find that emerging markets 0:05:19.680 --> 0:05:24.360 will will stabilize. We've got tremendous inflows coming into e M. UM, 0:05:24.400 --> 0:05:27.600 we're looking for strong earnings growth this year also across 0:05:27.640 --> 0:05:30.400 em ALO that's now at some risk as our Latin 0:05:30.440 --> 0:05:33.120 strategies to argue this morning in Brazil because of these 0:05:33.120 --> 0:05:36.039 events and so um, and of course everybody is talking 0:05:36.080 --> 0:05:38.320 about the seasons you know, selling main go away and that. 0:05:38.400 --> 0:05:41.120 Obviously that sort of thing is always a concern. But frankly, 0:05:41.160 --> 0:05:43.720 we think the fundamental backdrop to e M is still 0:05:43.760 --> 0:05:47.760 relatively good. And I think it's impressive how this Brazilian 0:05:47.800 --> 0:05:50.400 crisis which suddenly developed in a market that people have 0:05:50.520 --> 0:05:52.920 generally wanted to be in. I think the way it's 0:05:52.920 --> 0:05:55.839 had limited effect on the markets generally is quite impressive. 0:05:56.200 --> 0:05:58.360 Just real quick, Do you think that this complacency over 0:05:58.360 --> 0:06:01.839 the long run is going to be problem addict Um, 0:06:01.880 --> 0:06:04.320 I don't think it is at this level. And I'm 0:06:04.360 --> 0:06:08.000 talking about that Visa v as an e M strategist. 0:06:08.040 --> 0:06:11.000 Looking at valuations, I mean, valuations are a little on 0:06:11.000 --> 0:06:12.919 the high side in the M, but they're nothing like 0:06:13.000 --> 0:06:15.919 as stretch as they've been let me rephrase that they 0:06:15.960 --> 0:06:18.400 have not as stretch as they've been sometimes in the past. 0:06:18.400 --> 0:06:20.279 They're not as stretch as they are in the US. 0:06:20.360 --> 0:06:24.280 So I continue to believe that while is benign scenario 0:06:24.440 --> 0:06:29.320 plays out, most of the market risks actually exist in 0:06:29.360 --> 0:06:31.560 the developed world. Are we going to see further US 0:06:31.640 --> 0:06:33.960 market weakness, for example? Are we going to see an 0:06:34.000 --> 0:06:36.919 upside surprise and inflation that pushes bondial time? You know 0:06:37.080 --> 0:06:40.599 nothing neither of those, particularly being in our scenario, but 0:06:40.760 --> 0:06:44.000 those are the concerns and I don't I don't think Mark, 0:06:44.080 --> 0:06:46.760 given where global markets are, I don't see em as 0:06:46.800 --> 0:06:49.120 being complacent at all. Jeff Dennis, thank you so much 0:06:49.120 --> 0:06:51.320 for joining us. Jeff Dennis as head of Global Emerging 0:06:51.360 --> 0:06:55.080 Market Strategy at UBS Securities. He is based in Boston. 0:07:07.680 --> 0:07:09.000 I want to bring in someone to sort of help 0:07:09.480 --> 0:07:13.600 understand what's really driving this. Mike mclog joins US now 0:07:13.680 --> 0:07:15.840 in our Bloomberg eleven three our studios. Mike McLoone is 0:07:15.880 --> 0:07:19.640 a commodity strategist for Bloomberg Intelligence, and Mike, how much 0:07:19.760 --> 0:07:23.040 is this a story of a supply demand dynamic that's 0:07:23.040 --> 0:07:27.000 improving for oil? And how much is this the weakening 0:07:27.080 --> 0:07:31.160 dollar that is giving rise to the price of crude. 0:07:31.320 --> 0:07:34.120 I guess the answers yes to that, all right, I understood, 0:07:34.880 --> 0:07:38.040 it's it's both um. One thing that was when we 0:07:38.120 --> 0:07:40.640 talked about oil earlier in there's oil needed a flush. 0:07:40.680 --> 0:07:43.160 It was all bullish at fifty five and fifty three 0:07:43.200 --> 0:07:45.160 early in the year, and all the positions were very long. 0:07:45.240 --> 0:07:47.760 We all knew supply was coming on and it's had 0:07:47.760 --> 0:07:49.960 its flushed. We had that and what's happened. We flushed 0:07:49.960 --> 0:07:52.200 out a lot of hedge fund positions, so it got 0:07:52.200 --> 0:07:54.320 down to forty five. Now it's bouncing again. One thing 0:07:54.360 --> 0:07:56.840 that's really changed for oil is it got rid of 0:07:56.920 --> 0:07:59.040 the positions. We are we you know, we kind of 0:07:59.040 --> 0:08:01.040 took the tide away, so saw what the market had 0:08:01.040 --> 0:08:03.520 and open and brought out opex resolve to cut. So 0:08:03.560 --> 0:08:07.120 that seems to be happening, and the dollars weaken this year. 0:08:07.120 --> 0:08:08.960 The dollar has been stronger four years in a row, 0:08:09.000 --> 0:08:10.480 so that's been a bit of a pressure factor in 0:08:10.520 --> 0:08:13.840 all CA money. So I see oil is stabilizing, not bullish, 0:08:14.080 --> 0:08:15.680 but it looks like we got rid of the flush. 0:08:15.760 --> 0:08:17.800 I mean, anytime it goes higher, we get more production. 0:08:17.840 --> 0:08:20.120 From the US. But it's done for now. It's it's 0:08:20.120 --> 0:08:22.080 a market. It's stuck, and it's in the middle of 0:08:22.080 --> 0:08:24.360 the range between forty five and fifty five. Although then 0:08:24.400 --> 0:08:27.040 you have to wonder if people are just getting rid 0:08:27.080 --> 0:08:30.120 of their shorts and going long, could the market be 0:08:30.240 --> 0:08:33.480 in for a swing to the downside later on if 0:08:33.520 --> 0:08:35.439 there isn't the same kind of support to sort of 0:08:35.880 --> 0:08:37.480 keep it up, you know, in other words, people who 0:08:37.480 --> 0:08:39.480 are have short bets that they're going to close out 0:08:39.559 --> 0:08:41.760 and sort of prop up or the market. Yeah, that's 0:08:41.760 --> 0:08:44.800 another yes, all right, I have to look my fare 0:08:44.840 --> 0:08:46.600 and put it up for the air and the wind. 0:08:46.640 --> 0:08:49.120 Because which way it goes now I don't know. But 0:08:49.200 --> 0:08:51.720 one thing that really had our ax to grind early 0:08:51.760 --> 0:08:54.120 in their as positions were way too long. There's still 0:08:54.120 --> 0:08:56.320 a little bit long, but they're mostly flushed. And which 0:08:56.360 --> 0:08:58.160 way it goes next, I don't know, but it looks 0:08:58.200 --> 0:09:00.920 like it's very well supported around forty five, very good 0:09:00.920 --> 0:09:03.280 resistance around fifty five, and we might be in arrange 0:09:03.360 --> 0:09:06.240 for who knows how long. And one way you can 0:09:06.280 --> 0:09:09.280 really tell the range of position emotions get really extreme 0:09:09.280 --> 0:09:11.240 at the at the ends, and we just got that again. 0:09:11.280 --> 0:09:12.839 So here we are in the middle. What do you do? 0:09:13.120 --> 0:09:15.160 You know, the momentum right now is up well. So 0:09:15.280 --> 0:09:17.880 next week OPEC members are going to meet and talk 0:09:17.920 --> 0:09:22.280 about prolonging the output cuts is they're widely expected to do. 0:09:22.640 --> 0:09:25.960 Given the recent bounce up in prices, how will that 0:09:26.040 --> 0:09:29.360 affect these negotiations? So I think that's what happened. This 0:09:29.360 --> 0:09:31.680 This bounce in prices is in the last few days, 0:09:31.679 --> 0:09:34.520 but for the year, crude oil is down or so 0:09:34.600 --> 0:09:36.320 it got down to forty five. To me, that brought 0:09:36.360 --> 0:09:39.559 out their resolve and they have made the point clear 0:09:39.600 --> 0:09:42.440 we're going to be cutting offsetting US production. It looks 0:09:42.480 --> 0:09:45.080 like it's happening. It looks like it should continue, and 0:09:45.120 --> 0:09:47.080 they have bested interest in doing something. They have rush 0:09:47.160 --> 0:09:49.400 on their side, so it looks like it's gonna work 0:09:49.440 --> 0:09:51.320 for now. One thing we did recent analysis and if 0:09:51.320 --> 0:09:54.280 you look all the estimates of production of OPEC crude 0:09:54.320 --> 0:09:58.400 O help US US liquid fuels, that drop in production 0:09:58.520 --> 0:10:01.920 has been is the first time it's strap below month 0:10:01.960 --> 0:10:05.520 moving average since the crisis. So if this is sustained, 0:10:05.720 --> 0:10:08.319 it should at least support the market. Now do bullmarket 0:10:08.360 --> 0:10:10.560 that's another story. You know, a couple of years ago, 0:10:10.559 --> 0:10:14.120 when we talked about the dramatic decline in crude values, 0:10:14.160 --> 0:10:16.480 people were using it as a proxy for global growth. 0:10:16.760 --> 0:10:19.400 People were saying that there isn't as much demand from China, 0:10:19.840 --> 0:10:24.200 that the US inventories are too full. Now it's a 0:10:24.200 --> 0:10:27.439 totally different game. Why is it not considered a proxy 0:10:27.440 --> 0:10:30.200 at all for economic growth or you know, maybe it should. 0:10:30.200 --> 0:10:33.160 People be reading more into it with respect to the 0:10:33.200 --> 0:10:36.160 global expansion. That is the key question. And you have 0:10:36.200 --> 0:10:39.640 to blame technology. That's what crude oil has going against it, 0:10:39.640 --> 0:10:41.160 and that's why I like to bring out that's one 0:10:41.200 --> 0:10:43.960 of the key commodities you can grow crude oil. I 0:10:44.080 --> 0:10:45.760 used to have a farm, we grew we get a 0:10:45.760 --> 0:10:49.120 lot of our patroying in this country are gasoline from corn. 0:10:49.160 --> 0:10:53.839 Now so technologies well no, hell, I had a farm 0:10:53.840 --> 0:10:56.080 and we we grew corn, and you know it's a 0:10:56.080 --> 0:10:58.800 lot of it's now used for ethanol. Thirty of the 0:10:58.840 --> 0:11:01.520 corn in this country. So basically ten percent of our 0:11:01.559 --> 0:11:04.800 gasoline nousrom methanel. So that's what crudels going against it, 0:11:04.800 --> 0:11:06.400 and that's why I always go back to the metals. 0:11:06.640 --> 0:11:11.080 You can't grow metals, gold, copper, They've been mind since 0:11:11.120 --> 0:11:14.760 antiquity and so looking ahead and commodities with the weaker dollar, 0:11:14.880 --> 0:11:17.560 metals usually perform the best. And that's part of the 0:11:17.559 --> 0:11:19.400 reason we put out a bit today that looks like 0:11:19.400 --> 0:11:22.679 the pillars of a line for commodities. UM energy is 0:11:22.679 --> 0:11:25.520 stopped going down, Crudel stopped going down. Looks like the 0:11:25.520 --> 0:11:29.160 the dollar has peaked, and the agriculture market should be 0:11:29.160 --> 0:11:33.360 doing well. With massive US exports corn beans, wheat meat, 0:11:33.400 --> 0:11:35.600 their exports off the chart, and the really the main 0:11:35.640 --> 0:11:39.280 way to suppress those exports is higher prices. Mike mclogan, 0:11:39.280 --> 0:11:41.240 thank you so much for joining us. Truly fascinating. I'm 0:11:41.240 --> 0:11:43.319 looking at iron ore contracts which are up almost five 0:11:43.320 --> 0:11:45.720 percent today, so to your point, uh, they would be 0:11:45.920 --> 0:11:49.160 the beneficiaries of some of this good news for them, 0:11:49.280 --> 0:11:52.960 the lower dollar, as well as a generally benign environment. 0:11:53.360 --> 0:11:56.720 Mike McLoone is an industrials analyst a commodity strategist for 0:11:56.920 --> 0:11:59.760 Bloomberg Intelligence, and he joins us in our Bloomberg eleven 0:11:59.800 --> 0:12:11.480 three oh studios in New York City. We want to 0:12:11.480 --> 0:12:13.640 take a moment to let you know about something new 0:12:13.720 --> 0:12:17.160 from Bloomberg. Starting right now. You can use our io 0:12:17.440 --> 0:12:20.640 s app or our new Google Chrome extension to scan 0:12:20.840 --> 0:12:25.040 any news story on any website, instantly revealing relevant news 0:12:25.080 --> 0:12:28.320 and market data from Bloomberg and other sources related to 0:12:28.400 --> 0:12:32.000 companies and people you're reading about. So no matter where 0:12:32.040 --> 0:12:33.839 you're reading the news, you can bring the power of 0:12:33.880 --> 0:12:37.480 Bloomberg's news and data with you. It's pretty amazing. Download 0:12:37.520 --> 0:12:40.520 our io s app or search for the Bloomberg extension 0:12:40.520 --> 0:12:42.880 on the Chrome Store to try it out. Learn more 0:12:42.920 --> 0:12:51.880 at Bloomberg dot com slash lens. Well. We heard from 0:12:51.880 --> 0:12:55.080 Steven manuch In, the head of the Treasure Department here 0:12:55.120 --> 0:12:58.200 in the US yesterday. He gave his first Congressional testimony 0:12:58.240 --> 0:13:00.520 since taking office, and it was a really why arranging 0:13:00.559 --> 0:13:05.160 discussion from tax reform h to financial regulatory reform. Nathan 0:13:05.200 --> 0:13:08.360 Dean was listening closely, and he had some pretty compelling thoughts. 0:13:08.480 --> 0:13:11.360 Nathan Deed is a government analyst at Bloomberg Intelligence and 0:13:11.400 --> 0:13:14.760 he comes to us from our Bloomberg studios in Washington, 0:13:14.880 --> 0:13:17.439 d C. Nathan, thank you so much for joining us. 0:13:17.480 --> 0:13:20.200 I want to just start with a bit of research 0:13:20.240 --> 0:13:23.200 that you put out today, throwing some cold water on 0:13:23.240 --> 0:13:25.400 some of the promises and the hopes that have been 0:13:25.400 --> 0:13:29.800 reflected in markets for tax reform and financial regulation. Could 0:13:29.800 --> 0:13:31.720 you just sort of give us a sense of what 0:13:31.800 --> 0:13:33.840 your view is here. Yeah, you know, for tax reform, 0:13:33.840 --> 0:13:35.720 this is something that we've seen in the financial sector 0:13:35.840 --> 0:13:38.760 for ever since the election. I think everybody's seen what's 0:13:38.760 --> 0:13:41.240 happened to financial stocks. You know. One of the things 0:13:41.280 --> 0:13:43.360 that we point to is in late March, when you know, 0:13:43.400 --> 0:13:46.840 they failed to pass the Obamacare's vote for the first time. 0:13:47.160 --> 0:13:49.240 You know, bank stocks took about a teen percent hit. 0:13:49.320 --> 0:13:52.360 Why because they wanted tax reform and it showed that 0:13:52.400 --> 0:13:55.680 there wasn't the stability to agree on something, and we 0:13:55.800 --> 0:13:57.800 just seemed to play out, you know, with the turmoil 0:13:57.880 --> 0:13:59.559 that's going on in the White House right now and 0:13:59.640 --> 0:14:02.800 some of the testimony from the Senate from Stephen Manuchin yesterday, 0:14:03.000 --> 0:14:05.880 you know, the financial sector wants a tax reform and 0:14:05.920 --> 0:14:08.640 there's just really no clear line to getting it done 0:14:08.640 --> 0:14:12.439 this year. Well, did did Treasury Secretary Manuchin say anything 0:14:12.520 --> 0:14:16.800 yesterday that gave you hope about anything concrete? So you know, 0:14:16.920 --> 0:14:18.960 one of the things that I think from yesterday's hearing 0:14:19.000 --> 0:14:21.160 that really surprised us with the amount of focus on 0:14:21.200 --> 0:14:24.440 housing reform and specifically Fannie and Freddie, you know, Senator 0:14:24.480 --> 0:14:26.520 crape of the chairman of the Senate Banking Committee, came 0:14:26.520 --> 0:14:28.800 out and spent good deal of his opening statement talking 0:14:28.800 --> 0:14:32.040 about housing reform. Secretary Menuchin came back and said, well, 0:14:32.080 --> 0:14:33.760 you know, housing reform is something that we're going to 0:14:33.880 --> 0:14:36.360 get to after dot Frank, so that probably is around 0:14:36.360 --> 0:14:39.560 the July August time frame, and so there's seems to 0:14:39.600 --> 0:14:42.160 be some momentum building for actually to try and do 0:14:42.280 --> 0:14:45.200 something before the capital buffers of the g SS go 0:14:45.280 --> 0:14:48.440 to zero, which is on January one. Well, and I'm 0:14:48.440 --> 0:14:51.120 looking at the shares of Fanny May and they did 0:14:51.160 --> 0:14:54.680 spike up after the election of President Trump and after 0:14:54.680 --> 0:14:58.240 Stephen Manuchin made some comments that gave people a sense 0:14:58.280 --> 0:15:00.800 that it was going to be re vamped reform to 0:15:00.840 --> 0:15:03.240 possibly give more money back to shareholders, but then it 0:15:03.280 --> 0:15:05.120 came right back down and really didn't move much. So 0:15:05.160 --> 0:15:07.040 it's not that necessarily the market doesn't seem to be 0:15:07.040 --> 0:15:11.320 pricing in because I'm kind a big reform or shift exactly. 0:15:11.320 --> 0:15:12.800 And the one thing that we're telling our clients to 0:15:12.840 --> 0:15:15.120 be careful of our comments from his the h f 0:15:15.120 --> 0:15:17.560 A director Mel Watt, you know, he said that he 0:15:17.640 --> 0:15:21.960 may stop the dividend payments to help with that capital situation. 0:15:22.320 --> 0:15:24.760 You know, they asked the Secretary Treasury about that yesterday 0:15:24.760 --> 0:15:26.240 and he just said, you know, I'm looking forward to 0:15:26.320 --> 0:15:28.760 working with the f h f A on that um. 0:15:28.800 --> 0:15:31.120 But you know, when I say that there's a momentum, 0:15:31.320 --> 0:15:33.920 just have to remember it's also it's Congress. You know, 0:15:34.480 --> 0:15:37.640 big things don't usually happen right now, and so you know, 0:15:37.720 --> 0:15:39.680 as long as there's a silabuster in the Senate, and 0:15:39.760 --> 0:15:42.360 this would actually be you know, a silibuster type entity 0:15:42.400 --> 0:15:44.960 housing reform would would be subject to a filibuster, a 0:15:45.000 --> 0:15:47.240 lot of things have to happen before it actually gets done, 0:15:47.320 --> 0:15:49.600 you know, Nathan. One thing that I'm struck by is 0:15:49.600 --> 0:15:53.200 that the bulk of financial regulation really doesn't come from 0:15:53.280 --> 0:15:56.720 say Dodd Frank, but from some of these regulatory agencies. 0:15:57.120 --> 0:16:00.440 And one thing that Treasury secretariest you have venution with Minutum, 0:16:00.520 --> 0:16:04.840 was asked about yesterday was the sort of backdoor appointment 0:16:04.920 --> 0:16:07.360 of someone to lead the Office of the Controller of 0:16:07.360 --> 0:16:13.160 the Currency without having to get confirmed by Congress um. 0:16:13.320 --> 0:16:16.600 And this actually leads to the potential for some of 0:16:16.600 --> 0:16:19.720 these agencies to work together and change regulations outside of 0:16:19.760 --> 0:16:22.200 the purview of Congress, can you talk a little bit 0:16:22.200 --> 0:16:26.800 about what the scope for regulatory changes from the agency level. 0:16:27.160 --> 0:16:29.320 So this is exactly how dot frank is going to 0:16:29.360 --> 0:16:31.720 be rolled back. If you come in two twenty and 0:16:31.720 --> 0:16:33.400 look back and what's happened, this is how it's going 0:16:33.440 --> 0:16:37.360 to happen. So you can essentially roll back majority of 0:16:37.400 --> 0:16:41.040 dot frank via the regulatory process and bypassed Congress what 0:16:41.120 --> 0:16:43.040 they did at the o c C by putting in 0:16:43.080 --> 0:16:45.440 a new you know, acting director that's only going to 0:16:45.480 --> 0:16:48.000 be for a hundred thirty days, you know, but look 0:16:48.000 --> 0:16:50.760 at them to actually start winding down the compliance and 0:16:50.760 --> 0:16:54.800 the interpretive guidance and how people should react or some 0:16:54.960 --> 0:16:57.320 comply with dot frank. There's a lot of things that 0:16:57.360 --> 0:16:59.640 they can do to the vocal rule, to you know, 0:17:00.200 --> 0:17:04.520 mutual fund regulations, to even capital change how things are calculated. 0:17:04.560 --> 0:17:07.320 And so the regulatory process is the easiest way to 0:17:07.400 --> 0:17:09.640 roll back dot frank. The problem is it just takes 0:17:09.680 --> 0:17:12.560 a lot of time. Have we seen any progress whatsoever 0:17:12.600 --> 0:17:17.320 in any regulatory body toward lighter regulation? Not yet. I mean, 0:17:17.440 --> 0:17:19.520 I think the SEC and the CFTC are the ones 0:17:19.560 --> 0:17:21.560 that are ahead of the game. You know, they're they're 0:17:21.640 --> 0:17:23.960 now led by Trump appointees. You know, the Fund of 0:17:24.040 --> 0:17:25.560 Reserve and the fd i C are still led by 0:17:25.640 --> 0:17:28.800 Obama pointees. In the prudential banking space, they usually have 0:17:28.880 --> 0:17:31.000 to agree, so that's going to be a little bit later. 0:17:31.000 --> 0:17:34.639 But on the sec CFTC front, things actually impacting the markets. 0:17:34.680 --> 0:17:37.800 We've begun to see some technical changes, but you know 0:17:38.000 --> 0:17:40.080 the whole part, you know, most of the Dot Frank 0:17:40.200 --> 0:17:43.080 still remains as is today, and real quick, Nathan. On 0:17:43.119 --> 0:17:45.960 the tax reform side, are there any deadlines we should 0:17:45.960 --> 0:17:48.880 be keeping an eye out that would prompt some real 0:17:49.280 --> 0:17:52.200 kind of soul searching with respect to our tax code? 0:17:52.720 --> 0:17:54.679 You know, I think I think if you look at 0:17:54.680 --> 0:17:56.760 what Congress has to do, June and July is probably 0:17:56.760 --> 0:17:58.240 gonna be spent a lot of time talking about the 0:17:58.240 --> 0:18:01.600 FBI director. August is recess September, they're going to have 0:18:01.640 --> 0:18:04.240 to be doing government shutdown and debt ceiling. So I 0:18:04.240 --> 0:18:07.840 think October November is really when I think you're going 0:18:07.880 --> 0:18:09.960 to see some more debate. But again, a lot of 0:18:10.000 --> 0:18:12.000 it depends on what's going to go on with healthcare 0:18:12.000 --> 0:18:13.760 and what's going to happen with the President. I love 0:18:13.760 --> 0:18:15.439 how you say, you know, June and July, people are 0:18:15.440 --> 0:18:16.840 gonna be looking at the FBI. I thought you're gonna 0:18:16.840 --> 0:18:18.200 say people are gonna be sending a lot of time 0:18:18.200 --> 0:18:22.000 in the beach, you know, contemplating their political careers. Imagine 0:18:22.040 --> 0:18:24.400 it's been a bit of exhausting of an exhausting time 0:18:24.960 --> 0:18:28.320 to keep track of both developments as well as potential 0:18:28.720 --> 0:18:30.679 uh you know, red flags it really ought to be 0:18:30.680 --> 0:18:33.479 paying attention to that could actually have a change. Uh. 0:18:33.560 --> 0:18:36.000 And we really appreciate you following all that for us. 0:18:36.240 --> 0:18:39.680 Nathan Dean is a government analyst of for financial services. 0:18:40.200 --> 0:18:43.399 He works at Bloomberg Intelligence. He is coming to us 0:18:43.400 --> 0:18:48.080 from a Bloomberg newsroom in Washington, d C. Talking about 0:18:48.320 --> 0:18:52.680 what the implications are leading to as far as financial 0:18:52.680 --> 0:19:08.160 reform and tax changes. Well, we've heard a lot about 0:19:08.160 --> 0:19:11.960 President Trump's upcoming odyssey around the world. He's going to 0:19:11.960 --> 0:19:15.440 be spending eight days across the Mideast and Europe. And 0:19:15.720 --> 0:19:19.000 Marty Shanker is the senior executive editor of Global Economics 0:19:19.000 --> 0:19:21.239 and Government here at Bloomberg News. He comes to us 0:19:21.280 --> 0:19:25.480 now from Washington, d C. Marty, can you just start 0:19:25.480 --> 0:19:28.200 by explaining what the purpose of this trip is other 0:19:28.240 --> 0:19:31.240 than a nice uh, a bunch of photo opportunities in 0:19:31.280 --> 0:19:35.040 a nice distraction. Well, every president test of his first 0:19:35.040 --> 0:19:38.879 trip abroad, and this is it, all right? So the 0:19:38.960 --> 0:19:44.040 purpose really is for Donald Trump to establish his presidential 0:19:44.200 --> 0:19:48.600 stature in the world stage. Um. So it's a carefully 0:19:48.680 --> 0:19:54.600 choreographed exercise in being presidential. And I think a lot 0:19:54.640 --> 0:19:58.560 of people are anxious to see just how he performs this. 0:19:58.560 --> 0:20:02.000 This White House is not been a hallmark of organization 0:20:02.080 --> 0:20:06.400 and car choreography, um, but they have put a tremendous 0:20:06.440 --> 0:20:09.320 effort in this one. So uh, let's see how it 0:20:09.320 --> 0:20:12.440 turns out. Well. And when you talk about careful choreography, 0:20:12.440 --> 0:20:14.920 I think that the big fear here is that President 0:20:14.920 --> 0:20:19.800 Trump goes off script right. Well, yes, and that it's 0:20:19.840 --> 0:20:22.800 not just outside the White House. I think that that's 0:20:22.800 --> 0:20:26.239 true inside the White House. Um So Uh, some of 0:20:26.280 --> 0:20:30.240 his more senior and trusted aids will be traveling with 0:20:30.320 --> 0:20:33.760 him at various points, um, try and making sure he 0:20:33.880 --> 0:20:39.000 stays on message. What is the messages? You know, these 0:20:39.040 --> 0:20:43.360