1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. 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 --> 00:00:28,160 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Yeah. 5 00:00:32,720 --> 00:00:35,680 Speaker 1: The earnings here in the United States continue to take 6 00:00:35,680 --> 00:00:39,199 Speaker 1: the headlines. And it's Morgan Stanley this morning smashing estimates 7 00:00:39,200 --> 00:00:42,839 Speaker 1: with investment banking revenue up seven percent, trading revenue for 8 00:00:43,600 --> 00:00:46,960 Speaker 1: debt trading and equity trading also smashing estimates, and the 9 00:00:47,040 --> 00:00:50,680 Speaker 1: stock up this morning by one point eight percent in 10 00:00:50,720 --> 00:00:52,879 Speaker 1: the pre market. And please to say that joining us 11 00:00:52,920 --> 00:00:55,960 Speaker 1: to react as Kate Moore, black Rock chief equity strategist 12 00:00:56,000 --> 00:00:58,120 Speaker 1: and on the financials so far, Kake, just to get 13 00:00:58,160 --> 00:01:00,160 Speaker 1: your thoughts, I'll go through the single names and can 14 00:01:00,160 --> 00:01:03,360 Speaker 1: talk about the sector. Um JP Morgan, they beat, they 15 00:01:03,360 --> 00:01:06,160 Speaker 1: deliver a record profit, and the stock is down. We 16 00:01:06,240 --> 00:01:08,240 Speaker 1: sort the same thing with government sacks. We haven't seen 17 00:01:08,280 --> 00:01:10,759 Speaker 1: that with Morgan Stanley, but overall we've seen really really 18 00:01:10,800 --> 00:01:13,399 Speaker 1: decent numbers get a market that doesn't seem to be 19 00:01:13,400 --> 00:01:15,679 Speaker 1: overly impressed. Why do you think that is. You know, 20 00:01:15,720 --> 00:01:18,200 Speaker 1: I've heard a host of reasons why the market is 21 00:01:18,240 --> 00:01:22,120 Speaker 1: reacting so softly to what seemed like very very strong 22 00:01:22,200 --> 00:01:26,280 Speaker 1: numbers and very solid expectations for future earnings growth this year. 23 00:01:26,720 --> 00:01:29,280 Speaker 1: You know. Some of them are that deposit betas are 24 00:01:29,720 --> 00:01:32,560 Speaker 1: rising a little bit, i e. That there's more competition 25 00:01:33,240 --> 00:01:35,760 Speaker 1: across the bank's for deposits, and so they're having to 26 00:01:36,160 --> 00:01:40,119 Speaker 1: pass on the benefits of higher rates um to their customers. 27 00:01:40,200 --> 00:01:42,360 Speaker 1: That might be one explanation. Some of it's been the 28 00:01:42,440 --> 00:01:46,440 Speaker 1: guidance from banks around future growth and loan growth has 29 00:01:46,480 --> 00:01:48,600 Speaker 1: been a little bit lower. That might be one excuse. 30 00:01:48,920 --> 00:01:51,000 Speaker 1: To be honest with you, I think the sector is 31 00:01:51,040 --> 00:01:54,200 Speaker 1: an outstanding shape, and I've been kind of disappointed with 32 00:01:54,200 --> 00:01:57,000 Speaker 1: how the market has reacted to these exceptionally strong numbers. 33 00:01:57,440 --> 00:01:59,360 Speaker 1: I think that we need to stay long the financials 34 00:01:59,360 --> 00:02:02,560 Speaker 1: and particularly a cat banks, and it remains one of 35 00:02:02,600 --> 00:02:05,320 Speaker 1: my favorite picks throughout this year. Okay, to what extent 36 00:02:05,440 --> 00:02:07,200 Speaker 1: is there at a market that's just looking at the 37 00:02:07,280 --> 00:02:09,799 Speaker 1: vis pulling back dance with fifteen handle and saying, yeah, 38 00:02:09,840 --> 00:02:11,880 Speaker 1: well done, great first quarter. You're not going to repeat 39 00:02:11,919 --> 00:02:13,960 Speaker 1: it on the trading side. It's too cute. Yeah, well, 40 00:02:14,000 --> 00:02:16,760 Speaker 1: that's right. I mean, look, it takes some skill though 41 00:02:16,800 --> 00:02:20,440 Speaker 1: to be able to really benefit from significantly higher volatility. 42 00:02:20,480 --> 00:02:23,400 Speaker 1: We had these high vall days um and lots of 43 00:02:23,440 --> 00:02:26,040 Speaker 1: plus and mind is one percent inter day moves much 44 00:02:26,040 --> 00:02:28,280 Speaker 1: more so than we saw, of course in two thousands seventeen, 45 00:02:28,280 --> 00:02:31,640 Speaker 1: where there was no movement, but volumes weren't huge. And 46 00:02:31,720 --> 00:02:33,480 Speaker 1: so in order to really take advantage of it, I 47 00:02:33,480 --> 00:02:35,440 Speaker 1: think you need some skill traders, and you need some 48 00:02:35,480 --> 00:02:37,800 Speaker 1: great relationships. So I wouldn't say it has to just 49 00:02:37,880 --> 00:02:40,000 Speaker 1: be about the vix in order to continue to benefit 50 00:02:40,040 --> 00:02:43,240 Speaker 1: from the trading side. Is there an efficient frontier now? 51 00:02:43,680 --> 00:02:47,440 Speaker 1: I mean, Kate, if we're to wax all theoretical right now, 52 00:02:47,520 --> 00:02:49,560 Speaker 1: is there a thing out there that's all curvy and 53 00:02:50,000 --> 00:02:51,960 Speaker 1: stocks and bonds and I know where I want to 54 00:02:52,000 --> 00:02:53,960 Speaker 1: be and maybe I even know what to do with 55 00:02:54,000 --> 00:02:57,880 Speaker 1: my cash? Is does that theory work? Still? I think 56 00:02:57,880 --> 00:03:00,280 Speaker 1: we've had some sort of evolution in thinking about fully 57 00:03:00,360 --> 00:03:04,840 Speaker 1: considered Well, look, we we've been in a period where 58 00:03:04,919 --> 00:03:08,120 Speaker 1: it made sense to hold a significant amount of debt 59 00:03:08,120 --> 00:03:10,040 Speaker 1: and a hold the signific amount of equity at the 60 00:03:10,080 --> 00:03:13,960 Speaker 1: same time. If we are right about a sustained global 61 00:03:14,040 --> 00:03:17,000 Speaker 1: economic expansion persisting for the next couple of quarters, for 62 00:03:17,080 --> 00:03:19,480 Speaker 1: the next couple of years, that we're not kind of 63 00:03:19,520 --> 00:03:21,280 Speaker 1: at the end of the cycle, and that rates will 64 00:03:21,280 --> 00:03:24,200 Speaker 1: continue to rise. We need to be pretty thoughtful about 65 00:03:24,200 --> 00:03:26,880 Speaker 1: how we approach fixed income. You've heard it from US 66 00:03:26,880 --> 00:03:30,040 Speaker 1: many times, but we prefer short duration. We certainly perform 67 00:03:30,160 --> 00:03:33,200 Speaker 1: prefer you know, parsing the margin market debt world over 68 00:03:33,280 --> 00:03:36,640 Speaker 1: some of the long duration uh U S treasuries. But 69 00:03:37,640 --> 00:03:39,560 Speaker 1: I know this sounds I sound like a broken record 70 00:03:39,760 --> 00:03:43,160 Speaker 1: because I'm an equity strategist, But I still strongly believe 71 00:03:43,200 --> 00:03:45,880 Speaker 1: that equities are the place to be, even this late 72 00:03:45,920 --> 00:03:48,680 Speaker 1: in the cycle, even if your returns are not going 73 00:03:48,720 --> 00:03:52,280 Speaker 1: to be north year. Maybe, Kate, what's so important here 74 00:03:52,440 --> 00:03:55,640 Speaker 1: is we forget about you know, cf A one oh 75 00:03:55,680 --> 00:03:57,760 Speaker 1: one like level one. I'm in a panic, and I 76 00:03:57,760 --> 00:03:59,920 Speaker 1: don't know what this means. You look at way to 77 00:04:00,040 --> 00:04:02,880 Speaker 1: average cost to capital. I'm looking at a major, famous 78 00:04:02,920 --> 00:04:06,720 Speaker 1: consumer durable which will you know a staple almost will 79 00:04:06,800 --> 00:04:08,920 Speaker 1: leave it the name of it out, It doesn't matter. 80 00:04:09,280 --> 00:04:13,320 Speaker 1: They've only got nine point one percent debt. Their cost 81 00:04:13,440 --> 00:04:16,599 Speaker 1: is modeled at two point one percent, which is a 82 00:04:16,760 --> 00:04:21,520 Speaker 1: zero point two percent contribution to a waited average cost 83 00:04:21,560 --> 00:04:25,480 Speaker 1: to capital. This isn't in the theory books. Now, that's right, 84 00:04:25,560 --> 00:04:28,000 Speaker 1: And this is one of the real challenges I think 85 00:04:28,360 --> 00:04:31,640 Speaker 1: when you're looking forward and trying to put together forecasts, 86 00:04:31,920 --> 00:04:35,160 Speaker 1: but then you use historical relationships and historic balance sheets 87 00:04:35,160 --> 00:04:38,800 Speaker 1: and historic um, you know, sort of corporate behavior as 88 00:04:38,839 --> 00:04:42,440 Speaker 1: your guide. That's always this risk, whether you're thinking about 89 00:04:42,440 --> 00:04:45,479 Speaker 1: asset allocation or whether you're thinking about kind of near 90 00:04:45,600 --> 00:04:48,040 Speaker 1: term returns of driving your car by looking through the 91 00:04:48,080 --> 00:04:51,239 Speaker 1: rear view mirror. And so your point about debt being 92 00:04:51,760 --> 00:04:54,520 Speaker 1: relatively low. We've talked about this before, about how what 93 00:04:54,600 --> 00:04:56,560 Speaker 1: a great job companies have done of turning out their 94 00:04:56,600 --> 00:04:59,520 Speaker 1: debt and locking in low rates, and you know, how 95 00:04:59,720 --> 00:05:02,760 Speaker 1: less sensitive they are and how healthy I think their 96 00:05:02,760 --> 00:05:05,120 Speaker 1: balance sheets are relative to say, where they were, you know, 97 00:05:05,200 --> 00:05:07,800 Speaker 1: fifteen or twenty years ago. Um, we need to be 98 00:05:07,800 --> 00:05:10,440 Speaker 1: careful about using history too much as a guide. So, okay, 99 00:05:10,520 --> 00:05:12,480 Speaker 1: what are you concerned about? Most of all, there's no 100 00:05:12,520 --> 00:05:14,960 Speaker 1: big maturity wall coming up for many of these companies, 101 00:05:14,960 --> 00:05:17,359 Speaker 1: as you said, have turned out that debt quite effectively 102 00:05:17,360 --> 00:05:18,920 Speaker 1: of the last couple of years and really locked in 103 00:05:18,960 --> 00:05:21,360 Speaker 1: low right, So what's the concern you know, I really 104 00:05:21,400 --> 00:05:23,680 Speaker 1: worry about risk appetite. We were talking about this in 105 00:05:23,800 --> 00:05:26,360 Speaker 1: terms of trade and geopolitics. I think that's very present. 106 00:05:26,760 --> 00:05:29,200 Speaker 1: You know, there were three things that came up last 107 00:05:29,240 --> 00:05:32,360 Speaker 1: year consistently when talking to companies and talking to investors, 108 00:05:32,400 --> 00:05:35,320 Speaker 1: both on the institutional on the individual side, and they 109 00:05:35,360 --> 00:05:39,000 Speaker 1: were you know, major concerns about where valuations were, anxiety 110 00:05:39,040 --> 00:05:43,320 Speaker 1: around that, uh, significant anxiety around politics and the impact 111 00:05:43,320 --> 00:05:46,880 Speaker 1: that politics could have on market movements. And then I 112 00:05:46,880 --> 00:05:48,960 Speaker 1: think there was a lot of concern that you know, 113 00:05:49,000 --> 00:05:52,120 Speaker 1: significantly higher interest rates were going to you know, be 114 00:05:52,160 --> 00:05:55,400 Speaker 1: around the corner and end impact companies earnings. You know, 115 00:05:55,440 --> 00:05:58,480 Speaker 1: here we are where the anxiety around valuations shouldn't really 116 00:05:58,520 --> 00:06:01,880 Speaker 1: be there. We've compressed multiples, uh, you know around the 117 00:06:01,880 --> 00:06:05,080 Speaker 1: world where now at levels that look much more like 118 00:06:05,120 --> 00:06:08,680 Speaker 1: their five year averages. UM. You know, politics certainly has 119 00:06:08,760 --> 00:06:10,880 Speaker 1: been in play, but most companies have been able to 120 00:06:10,920 --> 00:06:13,960 Speaker 1: continue to operate as usual and are seeing strong growth 121 00:06:14,000 --> 00:06:17,440 Speaker 1: despite the headline noise. And you know, as we were 122 00:06:17,440 --> 00:06:19,960 Speaker 1: saying before, I'm not really concerned that significantly higher rates 123 00:06:20,000 --> 00:06:22,760 Speaker 1: are going to have an impact on on earnings. You know, 124 00:06:23,320 --> 00:06:26,039 Speaker 1: places I'm watching those small and MidCap and I'm watching 125 00:06:26,560 --> 00:06:30,960 Speaker 1: you know, uh, in particular those companies that haven't been 126 00:06:31,000 --> 00:06:34,240 Speaker 1: as smart or engaging in a new round of investment 127 00:06:34,279 --> 00:06:36,520 Speaker 1: that is going to be financed by debt. Okay, well, 128 00:06:36,600 --> 00:06:38,240 Speaker 1: it's great to have you with us to get your thoughts. 129 00:06:38,240 --> 00:06:40,760 Speaker 1: Thank you very much forgiving your trying to Bloomberg Savannas 130 00:06:40,760 --> 00:06:43,200 Speaker 1: on sav and Readier through the morning, Blank Rocks, Chief 131 00:06:43,440 --> 00:06:57,920 Speaker 1: Equity Strategists, Chum Pharaoh at our studios, Blumberg eleventh three 132 00:06:58,040 --> 00:07:02,400 Speaker 1: in New York. I'm Tom Keen and FM Studios in Washington, 133 00:07:02,480 --> 00:07:05,080 Speaker 1: d C. John. Just in the distance, I can see 134 00:07:05,080 --> 00:07:09,040 Speaker 1: the Gucci store, which is always a good and appropriate 135 00:07:09,080 --> 00:07:12,440 Speaker 1: thing here for the World Bank. I m F meetings 136 00:07:12,440 --> 00:07:16,040 Speaker 1: as well, and also today a panel with Luigis and 137 00:07:16,120 --> 00:07:19,800 Speaker 1: Gallis of the Boost School in Chicago. Luigi. One of 138 00:07:19,800 --> 00:07:22,840 Speaker 1: the great jewels which really folds into the modern debate 139 00:07:23,000 --> 00:07:25,920 Speaker 1: right now is a paper by Michael Bordo and Anna 140 00:07:26,000 --> 00:07:31,120 Speaker 1: Schwartz of years ago on the Chicago history of traditional 141 00:07:31,760 --> 00:07:35,440 Speaker 1: Keynesie and economics. And the title of the paper was 142 00:07:35,480 --> 00:07:38,880 Speaker 1: called I S l M and Monitorism, And what it 143 00:07:38,880 --> 00:07:43,960 Speaker 1: amounts to is we set up a geometric structure about 144 00:07:44,000 --> 00:07:47,640 Speaker 1: all this economy stuff works in six and ninety nine 145 00:07:47,640 --> 00:07:50,840 Speaker 1: with Hicks, and we dragged it forward to Milton Friedman. 146 00:07:51,680 --> 00:07:56,840 Speaker 1: Neither of those parties, Hicks, Kines, Alvin Hansen, or Milton 147 00:07:56,920 --> 00:08:02,200 Speaker 1: Friedman at Chicago had to deal with trill in dour deficits. 148 00:08:02,200 --> 00:08:07,080 Speaker 1: How does the fiscal debt fold in through our traditional 149 00:08:07,240 --> 00:08:11,720 Speaker 1: economic models. I think they certainly did not have to 150 00:08:11,760 --> 00:08:15,640 Speaker 1: deal with the deficit of this size, But also they 151 00:08:15,640 --> 00:08:17,160 Speaker 1: did not have to deal with the deficits of the 152 00:08:17,280 --> 00:08:20,800 Speaker 1: side in a moment where the level of debt is 153 00:08:20,840 --> 00:08:25,240 Speaker 1: so high and where the economy is doing relatively well. 154 00:08:25,320 --> 00:08:28,360 Speaker 1: So I think that what is surprising is not so 155 00:08:28,440 --> 00:08:31,560 Speaker 1: much that we have a deficit where the huge deficit 156 00:08:31,640 --> 00:08:34,120 Speaker 1: in two thousand and nine was a bigger deficit, but 157 00:08:34,200 --> 00:08:39,719 Speaker 1: that was in a difficult moment, uh sort of economically, 158 00:08:39,800 --> 00:08:44,160 Speaker 1: and now we are nine years into an expansion and 159 00:08:44,840 --> 00:08:47,200 Speaker 1: the economy is doing relatively well. So I think that 160 00:08:47,880 --> 00:08:51,719 Speaker 1: increasing the deficit at this moment of the cycle, with 161 00:08:52,480 --> 00:08:57,719 Speaker 1: this level of debt coming in my reduce the ability 162 00:08:57,800 --> 00:09:02,200 Speaker 1: to do contact policy when never session will come. Can 163 00:09:02,280 --> 00:09:07,800 Speaker 1: you say that the rising debt and deficit lowers the 164 00:09:07,960 --> 00:09:12,160 Speaker 1: degrees of freedom that monetary authorities have, whether it's the 165 00:09:12,200 --> 00:09:16,000 Speaker 1: Italian government or its chairman Powell, does it? Does it 166 00:09:16,160 --> 00:09:21,680 Speaker 1: give you just less choice? Given an outside chuck Um? 167 00:09:21,880 --> 00:09:27,200 Speaker 1: First of all, I will differentiade between the Italian situation 168 00:09:27,240 --> 00:09:30,760 Speaker 1: that you have, situation that you ask control its own currency, 169 00:09:31,120 --> 00:09:34,120 Speaker 1: So they have a flexibility that Italy does not have. 170 00:09:34,880 --> 00:09:39,120 Speaker 1: They said, I think that what I'm most worried about 171 00:09:39,520 --> 00:09:42,920 Speaker 1: is the limited ability of the fiscal policy. So when 172 00:09:42,960 --> 00:09:46,880 Speaker 1: the next recession will come, and one forecast that can 173 00:09:46,920 --> 00:09:49,360 Speaker 1: make for sure there will be ever session at some point. 174 00:09:49,480 --> 00:09:51,520 Speaker 1: I don't know when, but there will be another session, 175 00:09:51,840 --> 00:09:56,840 Speaker 1: and we have limited ability to uh intervene from a 176 00:09:56,880 --> 00:09:59,960 Speaker 1: monitory point of view because in the typical Rey session 177 00:10:00,000 --> 00:10:03,440 Speaker 1: and interest rate drop by five cents a point, and 178 00:10:03,800 --> 00:10:07,040 Speaker 1: where is the space for the monetary policy to act? Luigi, 179 00:10:07,200 --> 00:10:09,400 Speaker 1: let me bring in my colleague. He and I have 180 00:10:09,440 --> 00:10:14,359 Speaker 1: been discussing the World Cup coming up in Russia. Would 181 00:10:14,400 --> 00:10:21,600 Speaker 1: be there last night in the early evening. I'm talking 182 00:10:21,840 --> 00:10:27,920 Speaker 1: brighton Tottenham Premier League football, not the World Cup. John Farrell, John, 183 00:10:28,000 --> 00:10:30,199 Speaker 1: I just don't get it. So let's bring him Mr 184 00:10:30,320 --> 00:10:33,520 Speaker 1: Ferrell with more important items. A professor greatest speak to 185 00:10:33,520 --> 00:10:36,640 Speaker 1: you again, we're talking about exhausting fiscal policy. Let's talk 186 00:10:36,640 --> 00:10:39,560 Speaker 1: about exhausting monetary policy. That the FED has made a 187 00:10:39,600 --> 00:10:41,599 Speaker 1: move here in the United States in a way that 188 00:10:41,640 --> 00:10:45,480 Speaker 1: the ECB really hasn't. And Professor, I look at Europe 189 00:10:45,559 --> 00:10:48,680 Speaker 1: right now with some concern about the next downturn in Europe, 190 00:10:48,920 --> 00:10:50,480 Speaker 1: and not so much on the fiscal side, a lot 191 00:10:50,480 --> 00:10:52,640 Speaker 1: of people concerned about that, but on the on the 192 00:10:52,640 --> 00:10:55,560 Speaker 1: monetary policy side, with the deposit rate still as negative 193 00:10:55,640 --> 00:10:57,520 Speaker 1: as it is and the ban of sheet as big 194 00:10:57,720 --> 00:11:00,720 Speaker 1: as as it is, in growing Yeah, I think that 195 00:11:01,160 --> 00:11:05,360 Speaker 1: if the United States UH shouldn't share, the Europe is 196 00:11:05,360 --> 00:11:08,720 Speaker 1: in a war situation because there is no European fiscal 197 00:11:08,800 --> 00:11:11,840 Speaker 1: policy to to know of, and as you said, the 198 00:11:11,880 --> 00:11:16,400 Speaker 1: monetary policy is basically zero interest rate, so that it's 199 00:11:16,440 --> 00:11:20,440 Speaker 1: not very much room. Um. I think that there is 200 00:11:20,720 --> 00:11:24,400 Speaker 1: still way to go in the European expansion, so we 201 00:11:24,480 --> 00:11:27,400 Speaker 1: hope that we don't have in a session soon, but 202 00:11:27,880 --> 00:11:30,480 Speaker 1: if we had to add one, it wouldn't look look 203 00:11:30,520 --> 00:11:32,680 Speaker 1: pretty well. Professor. The reason I bring this up is 204 00:11:32,720 --> 00:11:35,680 Speaker 1: because arguably in Europe we've seen peak growth in terms 205 00:11:35,679 --> 00:11:37,840 Speaker 1: of the absolute levels of growth that we had at 206 00:11:37,840 --> 00:11:39,640 Speaker 1: the back end of last year, in the beginning of 207 00:11:39,640 --> 00:11:42,839 Speaker 1: this year, and yet CPI is barely one and a 208 00:11:42,840 --> 00:11:44,640 Speaker 1: half percent. It's at one point three and got revised 209 00:11:44,720 --> 00:11:47,240 Speaker 1: lower this morning on the continents. So the e cp 210 00:11:47,360 --> 00:11:49,360 Speaker 1: has got a choice to make now, haven't they, Professor. 211 00:11:49,440 --> 00:11:52,199 Speaker 1: They can either sort of have their credibility question and 212 00:11:52,280 --> 00:11:55,080 Speaker 1: start moving before they get back to target, or sit 213 00:11:55,120 --> 00:11:59,200 Speaker 1: here and wait and ultimately it might never happen. Yeah, 214 00:11:59,280 --> 00:12:01,680 Speaker 1: I think that the first thing they need to do 215 00:12:01,880 --> 00:12:05,360 Speaker 1: is convinced that adding at one point three percent inflation 216 00:12:05,640 --> 00:12:08,679 Speaker 1: is too low. You know, in the e c B 217 00:12:09,280 --> 00:12:13,120 Speaker 1: website is still written that the price stability means to 218 00:12:13,240 --> 00:12:16,600 Speaker 1: have an inflation below two percent and and some of 219 00:12:16,640 --> 00:12:19,560 Speaker 1: the c B board members say below but close to 220 00:12:19,640 --> 00:12:23,560 Speaker 1: two percent, and but others just saying that below two 221 00:12:23,600 --> 00:12:26,840 Speaker 1: percent is fine. So I think that the first job 222 00:12:26,880 --> 00:12:29,560 Speaker 1: of drug is to convince them again that one point 223 00:12:29,559 --> 00:12:32,360 Speaker 1: three is too law and something needs to be done. 224 00:12:33,720 --> 00:12:36,800 Speaker 1: I look, Luigia, where we are today. I want to 225 00:12:36,840 --> 00:12:39,199 Speaker 1: save time for our panel today, and I guess I 226 00:12:39,240 --> 00:12:40,760 Speaker 1: have to do that right now, because you've got to 227 00:12:40,760 --> 00:12:43,280 Speaker 1: get on with your I m F today as well, 228 00:12:43,360 --> 00:12:46,120 Speaker 1: Professors and goals. It was a panel that you know. 229 00:12:46,280 --> 00:12:48,560 Speaker 1: I was thrilled that Madame m Guard's people called me 230 00:12:48,640 --> 00:12:50,440 Speaker 1: up the honor to do the panel with you and 231 00:12:50,800 --> 00:12:54,160 Speaker 1: Laura Tyson of Berkeley and Mr Harrington of Edelman. They're 232 00:12:54,240 --> 00:12:58,880 Speaker 1: profoundly important folks. Edelement in the measurement of people's moods 233 00:12:58,920 --> 00:13:02,800 Speaker 1: worldwide where they aimed eedlement trust parameter. But Luhig, I 234 00:13:02,800 --> 00:13:05,480 Speaker 1: had no idea when I accepted this panel on trust 235 00:13:05,679 --> 00:13:10,880 Speaker 1: and resilience we would have the political discourse of the day. 236 00:13:11,000 --> 00:13:16,240 Speaker 1: The trust seems to be evaporating towards a new populous state. 237 00:13:17,000 --> 00:13:20,800 Speaker 1: Is it the same populism nation the nation or is 238 00:13:20,840 --> 00:13:26,160 Speaker 1: it really each culturally discreet? Of course, there are many 239 00:13:26,200 --> 00:13:30,160 Speaker 1: ways to be dysfunctional, many way to be populistic. And 240 00:13:30,600 --> 00:13:32,680 Speaker 1: I think that there is a web common theme, and 241 00:13:32,720 --> 00:13:35,800 Speaker 1: the common theme is that the elite that tends to 242 00:13:35,840 --> 00:13:40,000 Speaker 1: be a globalized elite does not appear to be trust wealthy. 243 00:13:40,080 --> 00:13:43,959 Speaker 1: I think that the lack of trust is not fault 244 00:13:44,000 --> 00:13:47,880 Speaker 1: of the people who don't trust us. Is our fault 245 00:13:48,080 --> 00:13:51,640 Speaker 1: that we don't appear and hopefully just a p M 246 00:13:51,679 --> 00:13:55,600 Speaker 1: MAB there's also some substance, but we don't appear as 247 00:13:55,640 --> 00:14:00,040 Speaker 1: trust wealthy, as we should be given the responsibilities that 248 00:14:00,200 --> 00:14:03,480 Speaker 1: we are in charge with. John, I think that part 249 00:14:03,520 --> 00:14:06,160 Speaker 1: of this is almost media exhaustion, where you and I 250 00:14:06,200 --> 00:14:10,880 Speaker 1: are buffeted every single day by the next populous crisis 251 00:14:10,960 --> 00:14:14,959 Speaker 1: or populous reality, and we almost become numb to it. Yeah, 252 00:14:15,000 --> 00:14:17,480 Speaker 1: I'd have to say, if we've seen a populous crisis yet, 253 00:14:17,880 --> 00:14:20,720 Speaker 1: And I asked that because we had the Brexit vote 254 00:14:20,760 --> 00:14:22,920 Speaker 1: and I don't see a crisis in the economy, and 255 00:14:23,120 --> 00:14:25,280 Speaker 1: we've had the President of the United States do on 256 00:14:25,360 --> 00:14:26,840 Speaker 1: a Trump walk into the White House, and I don't 257 00:14:26,840 --> 00:14:29,640 Speaker 1: see a crisis in the economy. Quite the opposite. I'm 258 00:14:29,640 --> 00:14:32,240 Speaker 1: just wondering whether we've actually seen that populous crisis that 259 00:14:32,360 --> 00:14:38,640 Speaker 1: many people forecast but ultimately hasn't materialized. I think he's building. 260 00:14:38,840 --> 00:14:42,400 Speaker 1: If you have paid attention to the last Italian elections, 261 00:14:42,520 --> 00:14:46,960 Speaker 1: I think there was arts were quite disruptive, and we 262 00:14:47,000 --> 00:14:49,000 Speaker 1: don't know when we'll have a government. So I think 263 00:14:49,040 --> 00:14:53,840 Speaker 1: that there is building momentum in different places. And I 264 00:14:53,880 --> 00:14:56,200 Speaker 1: agree with you, we have not seen the wars yet, 265 00:14:56,360 --> 00:14:58,600 Speaker 1: And Professor, I think some people might say that maybe 266 00:14:58,600 --> 00:15:01,440 Speaker 1: Italy without a government is it's a better place at 267 00:15:01,440 --> 00:15:04,880 Speaker 1: the moment. Professor l which she's in Gallas University of Chicago, 268 00:15:05,200 --> 00:15:08,520 Speaker 1: both School of Business professor in Washington, d C. With 269 00:15:08,640 --> 00:15:23,280 Speaker 1: Tom Keane and to get to the markets and the 270 00:15:23,320 --> 00:15:26,160 Speaker 1: commodity market. It's been a rally that not too many 271 00:15:26,200 --> 00:15:29,360 Speaker 1: people saw coming. It's certainly not at this magnitude. By 272 00:15:29,400 --> 00:15:32,920 Speaker 1: eight percent on Brent here today, by almost twelve on 273 00:15:33,200 --> 00:15:35,000 Speaker 1: w t I. It's away. And I'm really pleased to 274 00:15:35,040 --> 00:15:38,080 Speaker 1: say that Francisco Blanche has entered the studio the head 275 00:15:38,080 --> 00:15:41,800 Speaker 1: of Global Commodities and Derivatives Research for Mary Lynch. Francisco 276 00:15:42,000 --> 00:15:46,160 Speaker 1: what happened this year that maybe some people weren't positioned for. Well, look, 277 00:15:46,560 --> 00:15:49,680 Speaker 1: I think I think we've had a meaningful reduction in 278 00:15:50,200 --> 00:15:53,760 Speaker 1: supply on driven by the Cordel or big in Russia 279 00:15:54,400 --> 00:15:58,520 Speaker 1: UM and importantly we've had strong old girls and that's 280 00:15:58,600 --> 00:16:01,520 Speaker 1: led to maybe a fast at an expected invagory withdrawal 281 00:16:01,920 --> 00:16:05,040 Speaker 1: still relates to oil, and that's pushed the price of 282 00:16:05,680 --> 00:16:09,560 Speaker 1: crude higher. That that's that's one one thing. Obviously, metals, 283 00:16:09,880 --> 00:16:12,360 Speaker 1: as you know, having performed as well, and there's smaller 284 00:16:12,520 --> 00:16:15,960 Speaker 1: set of issues there and and on the on the 285 00:16:15,960 --> 00:16:18,560 Speaker 1: precious side, gold has had a nice run up because 286 00:16:18,600 --> 00:16:20,360 Speaker 1: I think people starting to get a little bit nervous 287 00:16:20,440 --> 00:16:25,040 Speaker 1: about policy tightening, volativities picked up and that supported the pressures. 288 00:16:25,080 --> 00:16:27,760 Speaker 1: So there's different reasons driving the moority prices higher, but 289 00:16:27,760 --> 00:16:31,200 Speaker 1: but in general, I mean the strong global growth and 290 00:16:31,200 --> 00:16:34,560 Speaker 1: and the uncertainty about about when it's gonna peak have 291 00:16:34,720 --> 00:16:37,640 Speaker 1: been driving the commodity complex. So we've got three things 292 00:16:37,640 --> 00:16:39,760 Speaker 1: to work through. UM. One is on oil, and we'll 293 00:16:39,800 --> 00:16:41,600 Speaker 1: do that first, and then the second part is these 294 00:16:41,640 --> 00:16:45,600 Speaker 1: sort of idiostocratic stories around metals like aluminum. And then 295 00:16:45,600 --> 00:16:47,960 Speaker 1: the third part is only what global policy means for 296 00:16:48,520 --> 00:16:52,840 Speaker 1: security a product like gold. Um, let's start with oil Francisco. 297 00:16:53,080 --> 00:16:55,880 Speaker 1: The geopolitical risk premium that was injected into this market 298 00:16:55,880 --> 00:16:58,040 Speaker 1: over the last couple of weeks. Seemingly it's going to 299 00:16:58,160 --> 00:17:01,280 Speaker 1: drain back out. Can we keep prices elevated once that 300 00:17:01,320 --> 00:17:04,520 Speaker 1: geopolitical risk premium drains back out if you do believe 301 00:17:04,600 --> 00:17:07,800 Speaker 1: it will train back out. Well, first of all, I 302 00:17:07,880 --> 00:17:10,040 Speaker 1: think I think there's a little bit of geo political risk, 303 00:17:10,080 --> 00:17:12,760 Speaker 1: but not a lot. Um If you if you look 304 00:17:12,800 --> 00:17:15,879 Speaker 1: at the well again, it depends if you call Venezuelan 305 00:17:15,880 --> 00:17:18,240 Speaker 1: production falling geo political risk, then yes, you have geo 306 00:17:18,240 --> 00:17:20,040 Speaker 1: political risk, but I think that's been the main driver 307 00:17:20,600 --> 00:17:24,080 Speaker 1: of of prices moving higher. On the supply side, right, 308 00:17:24,119 --> 00:17:27,440 Speaker 1: you've had a cartel cut, collective cut, and then you've 309 00:17:27,440 --> 00:17:30,000 Speaker 1: had a collapse in Venezuelan production that really kicked off 310 00:17:30,400 --> 00:17:32,920 Speaker 1: starting right around jun July of last year and it's 311 00:17:32,920 --> 00:17:35,520 Speaker 1: accelerated into the start of this year, and that's been 312 00:17:35,560 --> 00:17:38,200 Speaker 1: a big driver of of the upper price moving oil 313 00:17:38,280 --> 00:17:40,639 Speaker 1: prices UM so I think I think the geo political 314 00:17:40,680 --> 00:17:44,640 Speaker 1: risk premium is readically modest still UH, and prices could 315 00:17:44,720 --> 00:17:49,720 Speaker 1: definitely push higher if if that geo political risk UH 316 00:17:50,000 --> 00:17:52,159 Speaker 1: becomes more prominent. But I do think we're going to 317 00:17:52,240 --> 00:17:54,520 Speaker 1: hire anyway. We have an eighty o our target by 318 00:17:54,560 --> 00:17:56,240 Speaker 1: by the end of the quarter. We think we're going 319 00:17:56,280 --> 00:17:58,680 Speaker 1: pretty much in a straight line to eighty from here. 320 00:17:59,040 --> 00:18:02,800 Speaker 1: We have seasonal fectors, we have cyclical factors. There's a 321 00:18:02,840 --> 00:18:04,400 Speaker 1: lot of reasons to believe that in the short run, 322 00:18:04,400 --> 00:18:06,120 Speaker 1: in the next couple of months, oil prices are gonna 323 00:18:06,119 --> 00:18:08,880 Speaker 1: move higher. But within that is move higher, And if 324 00:18:08,880 --> 00:18:11,240 Speaker 1: we don't have a Memory Francisco planche of a hundred 325 00:18:11,240 --> 00:18:15,160 Speaker 1: dollars a barrel, it's a terrific bowl market in oil, 326 00:18:15,840 --> 00:18:18,240 Speaker 1: and the vector's garment would say is from the lower 327 00:18:18,359 --> 00:18:22,000 Speaker 1: left of the upper right, why can't oil just drive 328 00:18:22,320 --> 00:18:25,960 Speaker 1: higher based on to make the global economy a great again. 329 00:18:26,000 --> 00:18:29,879 Speaker 1: The economy uh it can tom and and and I 330 00:18:29,920 --> 00:18:31,760 Speaker 1: think one of the other issues that's popped out more 331 00:18:31,800 --> 00:18:34,160 Speaker 1: recently is that even though we're seeing very strong growth 332 00:18:34,200 --> 00:18:36,960 Speaker 1: in the US and and even in Canada, we're starting 333 00:18:36,960 --> 00:18:40,160 Speaker 1: to hit a lot of transportation bottlenecks here. So UM 334 00:18:40,359 --> 00:18:43,320 Speaker 1: much of the much of the supply that was expected 335 00:18:43,320 --> 00:18:45,800 Speaker 1: to come from from North America is getting clogged up 336 00:18:45,840 --> 00:18:50,240 Speaker 1: in pipes. We've seen differentials to uh W t I 337 00:18:50,320 --> 00:18:53,600 Speaker 1: in in shale basins like the Permian. So the Midland 338 00:18:53,800 --> 00:18:58,359 Speaker 1: UM prices have have really the coupled from prices uh 339 00:18:58,400 --> 00:19:00,240 Speaker 1: in other parts of the US and around the world. 340 00:19:00,680 --> 00:19:04,760 Speaker 1: Sam's happened for Western Canada prices UM and that that's 341 00:19:04,800 --> 00:19:07,480 Speaker 1: I think on a slowdown investment a little bit UM so. 342 00:19:07,480 --> 00:19:09,760 Speaker 1: So my sense is that that we are very reliant 343 00:19:09,800 --> 00:19:12,760 Speaker 1: on on a US infrastructure system is quite clogged up. 344 00:19:12,760 --> 00:19:15,080 Speaker 1: And and at the same time, the cartel is getting 345 00:19:15,119 --> 00:19:17,560 Speaker 1: closer to a deal on June twenty two where they 346 00:19:17,600 --> 00:19:20,320 Speaker 1: may either extend or at least keep a very very close, 347 00:19:20,720 --> 00:19:24,680 Speaker 1: very tight grip on the oil market because Saudi Arabia 348 00:19:24,720 --> 00:19:28,960 Speaker 1: needs it. And also now Russia, UM, with with the 349 00:19:29,000 --> 00:19:31,880 Speaker 1: economic pressures they're facing, they're probably also gonna keep gonna 350 00:19:31,960 --> 00:19:34,800 Speaker 1: gonna be leaning towards staying in the deal. So that 351 00:19:34,800 --> 00:19:38,440 Speaker 1: that's what's going on in oil. I look at the 352 00:19:38,800 --> 00:19:41,479 Speaker 1: going on an oil and I guess the money question 353 00:19:41,520 --> 00:19:45,159 Speaker 1: and John Farroll is better to san I am is 354 00:19:45,200 --> 00:19:49,960 Speaker 1: does it fold over into other commodities? Is oil discreet 355 00:19:50,760 --> 00:19:56,680 Speaker 1: or can Francisco blancheo along Brazil this morning? Um? Well, 356 00:19:56,720 --> 00:19:59,760 Speaker 1: I mean definitely oil. Oil has a lot of spill 357 00:19:59,800 --> 00:20:04,199 Speaker 1: over effects. Um. And Um you know, to your to 358 00:20:04,240 --> 00:20:07,439 Speaker 1: your point, there's gonna be Um if if we do 359 00:20:07,600 --> 00:20:10,080 Speaker 1: break above eighty bucks and start to see a more 360 00:20:10,160 --> 00:20:13,840 Speaker 1: sustained rally, that's gonna have spillover effects, gonna is going 361 00:20:13,840 --> 00:20:17,680 Speaker 1: to move into other markets. Um. And And what's interesting 362 00:20:17,720 --> 00:20:20,760 Speaker 1: about it is really that that we're seeing some of 363 00:20:20,760 --> 00:20:24,560 Speaker 1: it already. Um. We've seen finally recovering some of the 364 00:20:24,640 --> 00:20:28,639 Speaker 1: energy equities. We are seeing moves in in in the 365 00:20:28,720 --> 00:20:31,840 Speaker 1: MLP sector. So even outside just the cruel oil, right 366 00:20:31,880 --> 00:20:34,680 Speaker 1: outside just the the outright crueler price. We're starting to 367 00:20:34,680 --> 00:20:38,040 Speaker 1: see other sectors reacting and and and that's because the 368 00:20:38,080 --> 00:20:41,400 Speaker 1: back end of the price of oil might might even 369 00:20:41,480 --> 00:20:44,000 Speaker 1: move on on a four basis UH in the next 370 00:20:44,040 --> 00:20:47,280 Speaker 1: few weeks. Francancisco, Francisco, this is this really interesting story 371 00:20:47,760 --> 00:20:50,920 Speaker 1: in aluminium over the last couple of weeks. And it's 372 00:20:50,920 --> 00:20:53,840 Speaker 1: an inviously cratic event that roussel has been sanctioned by 373 00:20:54,080 --> 00:20:56,840 Speaker 1: the United States, and ultimately it's very huge concern about 374 00:20:56,880 --> 00:20:58,960 Speaker 1: whether supply is going to come from What are the 375 00:20:58,960 --> 00:21:01,119 Speaker 1: base case? What is the base case for you guys 376 00:21:01,160 --> 00:21:05,440 Speaker 1: now looking at the situation in aluminium. Well, so, so 377 00:21:05,560 --> 00:21:08,359 Speaker 1: first thing, uh you have to you have to put 378 00:21:08,359 --> 00:21:10,359 Speaker 1: in perspective is russ is about six percent of the 379 00:21:10,359 --> 00:21:15,040 Speaker 1: global aluminium market and that's uh and and obviously that's 380 00:21:15,080 --> 00:21:18,639 Speaker 1: creating a pressure on the price. But but we we 381 00:21:18,680 --> 00:21:21,359 Speaker 1: already saw the first round of tariffs adding pressure to 382 00:21:21,400 --> 00:21:24,879 Speaker 1: aluminum risk premium UM and and that was a direct 383 00:21:24,920 --> 00:21:29,040 Speaker 1: effect of the out of the tariff UM in the US. Now, 384 00:21:29,080 --> 00:21:33,000 Speaker 1: obviously we are saying a large chunk of the market 385 00:21:33,040 --> 00:21:36,560 Speaker 1: being carved out. So we do think aluminium could be 386 00:21:36,600 --> 00:21:40,160 Speaker 1: going to three tho dollars at on um. The pressure 387 00:21:40,160 --> 00:21:44,080 Speaker 1: on the aluminium price is directly proportional to the Tariuts 388 00:21:44,119 --> 00:21:48,080 Speaker 1: as well as to the to the sanctions. Right so, um, 389 00:21:48,160 --> 00:21:50,560 Speaker 1: so in in our view, we're talking about one of 390 00:21:50,560 --> 00:21:52,919 Speaker 1: the biggest players in the market. We're talking about a 391 00:21:53,040 --> 00:21:56,439 Speaker 1: large portion of the supply side being pulled out. Can 392 00:21:56,480 --> 00:21:58,520 Speaker 1: you imagine if we pulled out six percent of global 393 00:21:58,520 --> 00:22:01,200 Speaker 1: oil supply, I mean in that that would be I 394 00:22:01,240 --> 00:22:04,639 Speaker 1: mean six percent of global oil supply is bigger than Iraq. 395 00:22:04,720 --> 00:22:06,679 Speaker 1: Iraqi is four and a half percent of global supply. 396 00:22:06,720 --> 00:22:09,320 Speaker 1: To bring into context, so so this is a lot 397 00:22:09,359 --> 00:22:11,840 Speaker 1: of a lot of aluminium. And uh now, aluminium is 398 00:22:11,840 --> 00:22:14,240 Speaker 1: a much more common ingredient. There is some spare capacity. 399 00:22:14,240 --> 00:22:17,280 Speaker 1: We're gonna probably restart smelters in parts of the world 400 00:22:17,280 --> 00:22:20,160 Speaker 1: that that um had been shut down for a while. 401 00:22:20,600 --> 00:22:23,919 Speaker 1: But that that's the story, right and and um and 402 00:22:23,920 --> 00:22:26,640 Speaker 1: and you know, the politics have gotten in the way 403 00:22:26,640 --> 00:22:30,199 Speaker 1: of aluminium here. Francisco Blanch, great to have you with 404 00:22:30,280 --> 00:22:32,359 Speaker 1: us and to get that context and perspective. Head of 405 00:22:32,400 --> 00:22:50,000 Speaker 1: Global Commodities and Derivatives Research for Merrow Lynch right now, 406 00:22:50,440 --> 00:22:52,879 Speaker 1: um he is the pitbull terrier for the Bush family. 407 00:22:53,000 --> 00:22:56,119 Speaker 1: John Snow knew of New Hampshire. He is the mechanical 408 00:22:56,119 --> 00:23:01,760 Speaker 1: engineer from the Massachusetts Institute of Technology. And uh, Mr Sannuna, 409 00:23:02,160 --> 00:23:04,600 Speaker 1: Governor Sannuna, I can only say that you will always 410 00:23:04,640 --> 00:23:07,639 Speaker 1: be fifty five years old and protective of the Bush 411 00:23:07,720 --> 00:23:13,000 Speaker 1: family instead of your more august and retired view. Right now, 412 00:23:13,119 --> 00:23:17,760 Speaker 1: I want to go back to and where some will 413 00:23:17,800 --> 00:23:22,280 Speaker 1: say Mrs Bush salvage the Bush campaign at a speech 414 00:23:22,280 --> 00:23:25,480 Speaker 1: in Lebanon, New Hampshire, and Mr Bush was struggling with 415 00:23:25,600 --> 00:23:29,520 Speaker 1: Mr Buchanan, and uh, some would say Barbara Bush saved 416 00:23:29,640 --> 00:23:33,800 Speaker 1: the day. What did she bring to the politics is 417 00:23:33,840 --> 00:23:38,679 Speaker 1: George Herbert Walker Bush tried to drag the Republican Party 418 00:23:38,720 --> 00:23:43,320 Speaker 1: towards his Republican Party. Well, Barbara Bush had a very 419 00:23:43,359 --> 00:23:48,399 Speaker 1: good political sense. Uh. She liked, I think campaigning in 420 00:23:48,440 --> 00:23:52,399 Speaker 1: New Hampshire, and every time she came here, she seemed 421 00:23:52,440 --> 00:23:56,680 Speaker 1: to connect directly with the voters. You know, we're a seemy, 422 00:23:56,800 --> 00:23:59,600 Speaker 1: touched me, feel me kind of campaign state, and she 423 00:23:59,760 --> 00:24:03,480 Speaker 1: was able to do that quite well. Um, she was 424 00:24:03,680 --> 00:24:08,560 Speaker 1: sort of very comfortable, and I think that comfortable conveyed 425 00:24:08,760 --> 00:24:12,720 Speaker 1: a a sense of warmth, and that sense of warmth 426 00:24:12,960 --> 00:24:15,800 Speaker 1: obviously went to the benefit of the president. There have 427 00:24:15,840 --> 00:24:19,880 Speaker 1: been criticisms over the years of any number of families. 428 00:24:19,920 --> 00:24:21,720 Speaker 1: We can take it back. You were not active in 429 00:24:21,760 --> 00:24:24,399 Speaker 1: the John Adams administration, were you. I think that was 430 00:24:24,920 --> 00:24:28,280 Speaker 1: even before that. I was around for the second one. 431 00:24:28,400 --> 00:24:31,080 Speaker 1: You were around for Quincy Adams. But there's always talk 432 00:24:31,160 --> 00:24:35,760 Speaker 1: about royal families of American politics. The Kennedy's, of course, 433 00:24:35,800 --> 00:24:39,000 Speaker 1: have been front and center in that debate. Were the 434 00:24:39,080 --> 00:24:44,280 Speaker 1: Bushes and was she the queen of a royal family? Well, 435 00:24:44,320 --> 00:24:48,760 Speaker 1: you know, they were strong believers in public service and 436 00:24:49,880 --> 00:24:55,280 Speaker 1: it was something that they felt an obligation to. UM. 437 00:24:55,600 --> 00:24:59,240 Speaker 1: They had an active life in the private sector, unlike 438 00:24:59,240 --> 00:25:03,040 Speaker 1: a lot of the their so called dynasty families in 439 00:25:03,080 --> 00:25:07,960 Speaker 1: American politics, all of them from the President who founded 440 00:25:08,080 --> 00:25:12,960 Speaker 1: and who was one of the early founders and certainly 441 00:25:13,000 --> 00:25:16,520 Speaker 1: developed a great company offshore drilling companies, the Potto Oil 442 00:25:17,520 --> 00:25:22,400 Speaker 1: jeb certainly had a big private sector life in Florida 443 00:25:22,560 --> 00:25:26,520 Speaker 1: and George w including ownership of the Texas Rangers. So 444 00:25:27,040 --> 00:25:30,719 Speaker 1: they as the family, were able to combine private sector 445 00:25:30,800 --> 00:25:37,040 Speaker 1: public sector involvement UM quite effectively. I really do think 446 00:25:37,119 --> 00:25:40,879 Speaker 1: that they all understood that they wanted to give a 447 00:25:40,880 --> 00:25:44,679 Speaker 1: little bit back to the system. She certainly instill that 448 00:25:44,920 --> 00:25:49,639 Speaker 1: in the kids. UM. They they recognized her as the 449 00:25:50,359 --> 00:25:54,439 Speaker 1: as the definer of what the family was like and 450 00:25:54,560 --> 00:25:59,679 Speaker 1: UH and responded to it. So I I think, UH, 451 00:26:00,400 --> 00:26:03,520 Speaker 1: although there was never any stated agenda, there was an 452 00:26:03,520 --> 00:26:08,640 Speaker 1: implicit you owe UH the communities you live in, the 453 00:26:08,680 --> 00:26:12,200 Speaker 1: country you live in a little bit of payback, and 454 00:26:12,400 --> 00:26:17,000 Speaker 1: public service was the mechanism of payback. Governor Sunu, do 455 00:26:17,080 --> 00:26:21,600 Speaker 1: you a call the first time that you met Barbara Bush. 456 00:26:21,840 --> 00:26:25,720 Speaker 1: I think the first time was probably in the night 457 00:26:25,960 --> 00:26:30,960 Speaker 1: campaign that was not successful for the president of the 458 00:26:31,080 --> 00:26:35,200 Speaker 1: eventual president, George Bush, but I don't remember it specifically. 459 00:26:35,240 --> 00:26:39,080 Speaker 1: But I really got to know them extremely well after 460 00:26:39,240 --> 00:26:42,200 Speaker 1: I was elected governor in eighty two and then he 461 00:26:42,280 --> 00:26:46,720 Speaker 1: was vice president UM. And they were smart enough to 462 00:26:46,800 --> 00:26:51,639 Speaker 1: know that if there's any continued ambitions to be president, 463 00:26:51,720 --> 00:26:54,720 Speaker 1: it is good to develop a good relationship with the 464 00:26:54,760 --> 00:26:57,919 Speaker 1: governor of New Hampshire. But we became very close friends 465 00:26:58,600 --> 00:27:01,400 Speaker 1: while I was governor. My wife and I actually spent 466 00:27:01,480 --> 00:27:04,640 Speaker 1: a couple of nights with them in the vice presidential 467 00:27:04,680 --> 00:27:10,280 Speaker 1: residence in Washington and at Goobern at events for national 468 00:27:10,320 --> 00:27:13,080 Speaker 1: governors and things like that. So we we developed a 469 00:27:13,200 --> 00:27:17,840 Speaker 1: very close friendship even before the eighty eight campaign. What 470 00:27:17,880 --> 00:27:22,280 Speaker 1: was what was Barbara Bush like in in your relationship 471 00:27:22,359 --> 00:27:25,240 Speaker 1: with her as the White House chief of staff for 472 00:27:25,720 --> 00:27:32,640 Speaker 1: George H. W. Bush serving in You remember, historically there's 473 00:27:32,680 --> 00:27:36,399 Speaker 1: been some tough relationships between chiefs of staffs and first Lady. 474 00:27:36,440 --> 00:27:40,000 Speaker 1: But I was very lucky. We had a very good relationship. 475 00:27:40,080 --> 00:27:44,240 Speaker 1: I think I think she obviously sensed that that I 476 00:27:44,359 --> 00:27:48,119 Speaker 1: was there to have the President's back. She certainly felt 477 00:27:48,400 --> 00:27:51,960 Speaker 1: that was one of her responsibilities as well, and so 478 00:27:52,080 --> 00:27:56,240 Speaker 1: we shared this mutual responsibility and and and as a result, 479 00:27:56,280 --> 00:27:59,359 Speaker 1: I think that helped bring us even closer together. There's 480 00:27:59,800 --> 00:28:04,439 Speaker 1: a comment that has been published from the late Tim Russert, 481 00:28:04,800 --> 00:28:08,640 Speaker 1: having made a speech quite a while ago talking about 482 00:28:08,960 --> 00:28:14,439 Speaker 1: when you finally left the White House of President George H. W. Bush, 483 00:28:15,000 --> 00:28:19,879 Speaker 1: h that she kind of was someone that you confided in. 484 00:28:19,920 --> 00:28:24,199 Speaker 1: I'm wondering if you could expand on that. Well, she 485 00:28:24,440 --> 00:28:27,320 Speaker 1: was someone I felt very close to. Uh and UH. 486 00:28:28,080 --> 00:28:32,160 Speaker 1: When I was leaving, we spent two or three occasions 487 00:28:32,240 --> 00:28:36,000 Speaker 1: talking about, frankly, the good times we had had. I 488 00:28:36,520 --> 00:28:41,040 Speaker 1: left really on a positive note. I had expected to 489 00:28:41,160 --> 00:28:43,840 Speaker 1: last about six to nine months, which is what most 490 00:28:43,920 --> 00:28:46,520 Speaker 1: Jesus staff last. I left it in the White House 491 00:28:47,640 --> 00:28:52,360 Speaker 1: a little over three years, and and it was very positive. 492 00:28:52,400 --> 00:28:57,280 Speaker 1: We stayed close um uh during that transition, and we 493 00:28:57,320 --> 00:28:59,920 Speaker 1: stayed close afterwards. In fact, I came back to the 494 00:29:00,000 --> 00:29:03,480 Speaker 1: White Does a few times and played Ross Perrot and 495 00:29:03,480 --> 00:29:06,920 Speaker 1: the mock debates, and every time I went back, spent 496 00:29:07,000 --> 00:29:10,320 Speaker 1: a little time chatting with her. She she was really 497 00:29:10,400 --> 00:29:12,760 Speaker 1: the rock of the family, and even in the White House, 498 00:29:12,800 --> 00:29:16,000 Speaker 1: she was the rock the President counted on. And those 499 00:29:16,080 --> 00:29:19,000 Speaker 1: were tough times in the ninety two campaigns, and she 500 00:29:19,160 --> 00:29:24,200 Speaker 1: was there um as as uh stalwart as she had 501 00:29:24,240 --> 00:29:27,840 Speaker 1: been in the eighty eight campaign. You mentioned the role 502 00:29:27,960 --> 00:29:30,160 Speaker 1: of the chief of staff, and I'm wondering if you 503 00:29:30,160 --> 00:29:33,560 Speaker 1: could expand on your thoughts about the current White House 504 00:29:33,640 --> 00:29:36,400 Speaker 1: Chief of Staff and some of the issues that Mr 505 00:29:36,480 --> 00:29:40,440 Speaker 1: Kelly is probably facing. Well, I haven't had any time 506 00:29:40,480 --> 00:29:45,480 Speaker 1: to spend with General Kelly, so I my my analysis 507 00:29:45,520 --> 00:29:49,200 Speaker 1: would only be through the press that I've seen, and frankly, 508 00:29:49,560 --> 00:29:51,920 Speaker 1: that means I probably don't have a real feeling for 509 00:29:52,000 --> 00:29:54,040 Speaker 1: what's going on down there, So I'm going to pass 510 00:29:54,080 --> 00:29:59,000 Speaker 1: on that. Okay, you have been credited with being part 511 00:29:59,000 --> 00:30:01,360 Speaker 1: of a group of people that had recommended David Suitor 512 00:30:01,880 --> 00:30:05,200 Speaker 1: New Hampshire as appointment to the Supreme Court of the 513 00:30:05,280 --> 00:30:09,840 Speaker 1: United States. Uh. Do you have any thoughts about that 514 00:30:09,920 --> 00:30:15,040 Speaker 1: recommendation and subsequent roles of White House chiefs of staff 515 00:30:15,880 --> 00:30:19,720 Speaker 1: for those kinds of appointments. Yeah. If if you read 516 00:30:19,760 --> 00:30:22,480 Speaker 1: my book, you'll actually get the real story. I actually 517 00:30:22,600 --> 00:30:27,320 Speaker 1: ended up supporting Edith Jones in the final selection. David 518 00:30:27,360 --> 00:30:31,040 Speaker 1: Sudor was a great uh Supreme Court judge in New 519 00:30:31,080 --> 00:30:34,880 Speaker 1: Hampshire and a terrible Supreme Court judge when he got 520 00:30:34,920 --> 00:30:40,600 Speaker 1: to Washington. UM. It is a great example, in my opinion, 521 00:30:41,160 --> 00:30:45,479 Speaker 1: of somebody who lives their life with a singular ambition uh, 522 00:30:45,560 --> 00:30:48,320 Speaker 1: and lives their life in order to achieve it. And 523 00:30:48,720 --> 00:30:52,160 Speaker 1: sometimes when you when they get there, the person that's 524 00:30:51,920 --> 00:30:55,040 Speaker 1: at the destination is different than the person that was 525 00:30:55,080 --> 00:30:58,440 Speaker 1: perceived on the trip. And it's one of the great 526 00:30:58,480 --> 00:31:04,240 Speaker 1: disappointments in my public life that that David Suitor ended 527 00:31:04,320 --> 00:31:09,960 Speaker 1: up being as as really a different a Supreme Court 528 00:31:10,040 --> 00:31:15,120 Speaker 1: judge than he sold both the President and all the 529 00:31:15,200 --> 00:31:21,160 Speaker 1: lawyers that that vetted him for the President in that process. 530 00:31:21,400 --> 00:31:23,960 Speaker 1: Boyd and Gray is certainly one of the great conservatives 531 00:31:24,000 --> 00:31:27,640 Speaker 1: in Washington, and uh, he and his staff were all 532 00:31:28,040 --> 00:31:33,360 Speaker 1: quite conservative. They were absolutely convinced reading David Suitor's New 533 00:31:33,360 --> 00:31:36,600 Speaker 1: Hampshire decisions, that this was going to be a good 534 00:31:36,600 --> 00:31:39,560 Speaker 1: conservative judge, and it turned out otherwise. I want to 535 00:31:39,560 --> 00:31:42,880 Speaker 1: thank you very much for joining us former Governor of 536 00:31:42,880 --> 00:31:45,840 Speaker 1: New Hampshire, Johnson new New former White House Chief of 537 00:31:45,840 --> 00:31:49,960 Speaker 1: Staff under President George H. W. Bush, sharing his thoughts 538 00:31:50,040 --> 00:31:54,520 Speaker 1: and memories of Barbara Bush, former First Lady and matriarch 539 00:31:54,600 --> 00:31:58,880 Speaker 1: of the Bush family. She died and was ninety two 540 00:31:59,000 --> 00:32:09,600 Speaker 1: years old. Thanks for listening to the Bloomberg Surveillance podcast. 541 00:32:09,960 --> 00:32:14,920 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 542 00:32:15,080 --> 00:32:19,400 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 543 00:32:19,480 --> 00:32:23,360 Speaker 1: Keene before the podcast. You can always catch us worldwide. 544 00:32:23,800 --> 00:32:24,880 Speaker 1: I'm Bloomberg Radio.