WEBVTT - Ray McGuire & Robert Rubin Talks Trump and Tariffs 0:00:02.520 --> 0:00:08.480 Bloomberg Audio Studios, podcasts, radio News. 0:00:08.920 --> 0:00:11.880 I want to welcome everyone here, and this is a 0:00:11.920 --> 0:00:15.160 forum to talk about investment ideas and a frame of reference. 0:00:15.680 --> 0:00:19.439 And we have the task of explaining how to navigate 0:00:19.480 --> 0:00:22.520 the current business climate, and these two gentlemen we'll explain 0:00:22.600 --> 0:00:24.959 to us how we can frame the current events that 0:00:25.000 --> 0:00:27.159 we're facing off with and how companies are grappling with 0:00:27.240 --> 0:00:30.560 them at a time where the business climate changes in 0:00:30.600 --> 0:00:34.400 thirty minute increments. Joining us here is Ray MacGuire, president 0:00:34.440 --> 0:00:37.839 of Lazard, as well as the seventieth US Secretary of 0:00:37.920 --> 0:00:40.760 the Treasury, Robert Rubin. They have both told me that 0:00:40.800 --> 0:00:43.400 I can call them Bob and Ray or your honor. 0:00:43.720 --> 0:00:46.599 I want to start with this question of where are 0:00:46.640 --> 0:00:51.120 your honor If you want. 0:00:51.200 --> 0:00:53.440 Your honor, your people in Congress who called me things 0:00:53.479 --> 0:00:56.680 far south of Bob, I'll tell you, well. 0:00:56.560 --> 0:00:58.640 Hopefully we don't go there, but I do want to 0:00:58.640 --> 0:01:01.960 start with just where we are in the day's news, 0:01:02.000 --> 0:01:04.080 which is the tariffs and this idea that we got 0:01:04.120 --> 0:01:08.400 twenty five percent tariffs actually put on Mexico on Canada, 0:01:08.480 --> 0:01:12.600 an additional ten percent tariffs put on China. I want 0:01:12.600 --> 0:01:14.600 to start with you, Ray, how are companies making sense 0:01:14.640 --> 0:01:14.880 of this? 0:01:15.959 --> 0:01:16.520 You know it. 0:01:18.000 --> 0:01:23.960 We're in the early stages of this tariff diplomacy, if 0:01:24.000 --> 0:01:29.960 you will, geopolitical diplomacy, and boards and senior managements are 0:01:30.200 --> 0:01:34.360 now trying to assess the implications. It's been advertised for 0:01:34.400 --> 0:01:38.680 a while and today it's begun to be implemented. Having 0:01:38.760 --> 0:01:44.080 said that, there's also the suggestion that in April there's 0:01:44.120 --> 0:01:45.920 going to be a reset, so there'll be a review, 0:01:47.160 --> 0:01:52.440 and most investors, most companies do take a long term view, 0:01:53.080 --> 0:01:55.960 and so we'll see how this early move on the 0:01:56.040 --> 0:01:59.760 chess board plays out. People are assessing, companies are assessing 0:01:59.760 --> 0:02:04.120 them implications, But for the most part, there's a long 0:02:04.200 --> 0:02:07.600 term view that is now being contemplated. We've not seen 0:02:07.720 --> 0:02:12.000 this level of terrorist at least in modern times. We've 0:02:12.040 --> 0:02:15.560 seen it historically, the implications of which historically have been 0:02:15.600 --> 0:02:18.720 pretty dramatic, and we'll see today whether or not the 0:02:18.720 --> 0:02:20.480 implications are going to be equally as dramatic. 0:02:21.040 --> 0:02:22.880 Bob, how do you take a long term view when 0:02:22.880 --> 0:02:24.400 it's unclear what the destination is? 0:02:26.440 --> 0:02:27.560 Well, I have the following deal. 0:02:27.760 --> 0:02:29.440 I think these are going to adverse the effect us 0:02:29.440 --> 0:02:33.320 with respect inflation. The adverse effects us respect the growth, 0:02:34.240 --> 0:02:37.040 adversity effect productivity, but I think is an even bigger 0:02:37.080 --> 0:02:39.960 point in some respects Lisa, we have treaty obligations with 0:02:40.040 --> 0:02:44.480 Canada and Mexico and we have now violated congressionally approved treaties. 0:02:44.720 --> 0:02:46.519 What does that do to our credibility around the world 0:02:46.600 --> 0:02:49.640 aspect to our commitments? And that can adversity affect us 0:02:49.720 --> 0:02:52.880 geo politically and adversity effect us economically. We have spent 0:02:53.400 --> 0:02:56.040 all these years since World War Two developing alliances and 0:02:56.080 --> 0:02:59.840 allies excuse me, supported by all sorts of commitments in 0:02:59.840 --> 0:03:02.520 our our partner has been enormously in our economic self interest, 0:03:02.960 --> 0:03:05.799 well in our economic self interest, in our geopolitical self interest, 0:03:05.880 --> 0:03:06.920 and I think we're putting. 0:03:06.639 --> 0:03:07.280 All that at risk. 0:03:08.520 --> 0:03:08.640 Right. 0:03:08.680 --> 0:03:11.080 Do you see companies thinking about it that way or 0:03:11.120 --> 0:03:15.240 dealing with international partners who are calling into question some 0:03:15.360 --> 0:03:19.040 of the framework of being able to come through the. 0:03:19.360 --> 0:03:20.760 Answers that and I agree with Bob. 0:03:21.040 --> 0:03:25.960 Companies are being forced to now contemplate variables that historically 0:03:26.000 --> 0:03:29.000 we haven't contemplated. Remember the peak of US manufacturing happened 0:03:29.040 --> 0:03:32.960 in nineteen seventy nine. Between nineteen seventy nine and today, 0:03:33.120 --> 0:03:36.680 we have relied on a supply chain that has been 0:03:36.800 --> 0:03:41.560 so dependent upon our international partners, especially our closest one 0:03:41.640 --> 0:03:45.760 being Canada in Mexico, and so as that begins to 0:03:45.800 --> 0:03:49.440 be challenged, how we onshore or at some point we 0:03:49.480 --> 0:03:52.040 talked about nearshoring and near sharing was canadon in Mexico. 0:03:52.680 --> 0:03:57.080 Since we've now applied tariffs to those countries, it's unclear 0:03:57.160 --> 0:03:59.240 how US manufacturers will navigate. 0:03:59.280 --> 0:04:00.000 So we're exposed. 0:04:01.160 --> 0:04:05.360 The corporate America is exposed, especially those in the industrial 0:04:05.720 --> 0:04:08.800 in the industrial arena's technology, perhaps a little less soil 0:04:08.880 --> 0:04:11.280 that we have exposure to what's taking place on the 0:04:11.360 --> 0:04:16.160 chip front, But the implications here on the market we've 0:04:16.160 --> 0:04:18.640 seen today you've seen a sell off of two to 0:04:18.680 --> 0:04:22.320 three trillion dollars. Risk is off today. Before today you 0:04:22.360 --> 0:04:24.760 had a little bit more risk on. You look at 0:04:24.800 --> 0:04:28.080 the volatility index, which is a VIX. Historically it's average twenty. 0:04:28.120 --> 0:04:30.440 Now you're at twenty five or so. If you look 0:04:30.480 --> 0:04:32.840 at the options on VIX fifty, which gets to the 0:04:32.920 --> 0:04:35.880 high end of risk, we see more activity in those 0:04:35.920 --> 0:04:38.520 options in what we've seen in quite some time. So 0:04:38.760 --> 0:04:44.240 you now are in a relatively complex environment with interdependency, 0:04:44.600 --> 0:04:46.800 having to do with the supply chain for all the 0:04:46.839 --> 0:04:49.560 goods and all the products that we consume. 0:04:49.920 --> 0:04:51.400 We're gonna have to be able to manage through that. 0:04:51.960 --> 0:04:55.560 Bobby mentioned that this is going to cause inflation, and 0:04:55.600 --> 0:04:59.400 it's also going to cause some sort of deceleration and growth. 0:05:00.160 --> 0:05:03.680 People argue that tariffs in the long run are disinflationary. 0:05:03.720 --> 0:05:06.240 It's a one time price shock and then it gets 0:05:06.279 --> 0:05:09.400 absorbed and it's sort of part of the mess to 0:05:09.400 --> 0:05:12.960 get to a final goal of bringing more domestic production, 0:05:13.960 --> 0:05:18.479 reviving domestic production. What's your outlook. Do you think that 0:05:18.520 --> 0:05:20.160 it's going to look a bit different than. 0:05:20.040 --> 0:05:23.479 That, Well, a little bit technical for the moment at least, 0:05:23.600 --> 0:05:26.240 you're right, it's a one time supply shock, so that 0:05:26.360 --> 0:05:28.600 increases costs, and then it can level off. So the 0:05:28.680 --> 0:05:30.760 rate of inflation may not have gone up, but costs 0:05:30.760 --> 0:05:35.120 will be higher to consumers, to our producers, the producers 0:05:35.120 --> 0:05:37.840 who compete with imported goods can now raise their prices, 0:05:39.160 --> 0:05:42.800 and I think in terms of the long run for US, 0:05:43.360 --> 0:05:46.120 I think it means less productivity because the whole theory 0:05:46.160 --> 0:05:50.400 of trade is comparative advantage, so that every country gets 0:05:50.400 --> 0:05:52.760 the benefit of getting the most it possibly can for 0:05:52.800 --> 0:05:55.600 that which it is best suited to produce, and now 0:05:55.600 --> 0:05:56.640 we're interfering. 0:05:56.200 --> 0:05:56.840 With that process. 0:05:56.880 --> 0:05:58.840 It will cost us in terms of productivity and growth. 0:05:59.720 --> 0:06:02.200 I think I think this is about ideology and the desiions. 0:06:02.360 --> 0:06:04.719 I think you're it's about ideology and I think of 0:06:04.839 --> 0:06:06.359 not factor analysis grounded. 0:06:07.960 --> 0:06:11.600 It raises this question about a time when heading into 0:06:11.640 --> 0:06:17.120 this year, companies, we're talking about incredible dynamism, incredible expansionism, 0:06:17.200 --> 0:06:19.919 the idea of American exceptionalism. You're going to see a 0:06:19.960 --> 0:06:24.240 boom in deal making. Ray, do you think that that's 0:06:24.360 --> 0:06:27.080 just on hold, that that can come back, or do 0:06:27.120 --> 0:06:32.479 you think that people are rethinking that in corporate executive offices. 0:06:33.000 --> 0:06:37.159 Well, let's be clear about productivity and how does it 0:06:37.200 --> 0:06:44.680 we transition. In order to rebuild the industrial infrastructure of 0:06:44.680 --> 0:06:46.600 this country, it will take five to ten years. So 0:06:46.839 --> 0:06:50.599 while we think about being able to remove ourselves from 0:06:50.640 --> 0:06:53.440 that supply chain dynamic, the reality is it will take 0:06:53.480 --> 0:06:56.560 a while before we do that. Having said that, is 0:06:56.640 --> 0:06:59.239 I think about some of the tailwinds in this environment. 0:07:00.240 --> 0:07:03.400 You have I don't know ten trillion dollars sitting on 0:07:03.400 --> 0:07:05.719 the sideline, seven and a half trillion on corporate balance 0:07:05.720 --> 0:07:09.400 sheets two and a half trillion. With the asset managers, 0:07:10.280 --> 0:07:13.440 you have fourteen trillion dollars or so of debt available 0:07:13.520 --> 0:07:17.440 to trillion and with the asset managers twelve trillion traditional banks. 0:07:18.080 --> 0:07:22.160 Will we need to somehow deploy that capital to continue 0:07:22.200 --> 0:07:23.040 to grow the entries? 0:07:23.120 --> 0:07:23.840 Yes, we will. 0:07:24.680 --> 0:07:26.440 So I have, on the one hand, a lot of 0:07:26.440 --> 0:07:30.160 capital that is pent up. On the other hand, notwithstanding 0:07:30.160 --> 0:07:32.160 the sell off that we're seeing in the market today 0:07:32.200 --> 0:07:34.960 which brings it back down to still it is a 0:07:34.960 --> 0:07:38.520 pretty historical high. We're trading at twenty semi times next 0:07:38.600 --> 0:07:41.800 year's earning forward earnings. So I look at the dynamics 0:07:41.840 --> 0:07:44.440 of the resources that we have and how we deploy 0:07:44.520 --> 0:07:47.160 those resources, and the pent up demand for growth. 0:07:48.000 --> 0:07:51.640 So we will pause for a while as we. 0:07:52.360 --> 0:07:56.960 Understand and interpret the implications of the tariff dynamics, and 0:07:57.080 --> 0:07:59.600 once we get to a new normal, then at some 0:07:59.680 --> 0:08:01.920 point we will re engage. Will it be at the 0:08:01.920 --> 0:08:05.080 same levels that we've engaged re engaged historically unclear? 0:08:05.520 --> 0:08:06.840 Yeah, But do you think that we're going to have 0:08:06.880 --> 0:08:09.200 that boom and m and a, that boom and deals 0:08:09.200 --> 0:08:12.680 that everyone was expecting that's been propelling financial stocks higher. 0:08:13.120 --> 0:08:18.280 Well, we had the prospect of that, didn't We When 0:08:18.280 --> 0:08:20.960 we came in, we thought that there was going to 0:08:21.000 --> 0:08:23.920 be because of the factors of the availability of capital 0:08:24.240 --> 0:08:26.360 where the market was going. And we also thought there's 0:08:26.400 --> 0:08:28.360 going to be a relaxation in some of the regulatory 0:08:28.440 --> 0:08:30.920 environments having to do with what took place in the 0:08:31.000 --> 0:08:34.200 many environment last year, where regulators came in and upset 0:08:34.200 --> 0:08:36.480 a few of those transactions, said note or a few 0:08:36.520 --> 0:08:39.280 implications which are pretty severe on a few of those 0:08:39.320 --> 0:08:43.040 companies that were not able to e merge, and given 0:08:43.080 --> 0:08:45.960 the pent up demand and demand for growth for these companies, 0:08:45.960 --> 0:08:48.520 and so I think you will see some once this 0:08:49.200 --> 0:08:53.400 the first move in the tariff environment, once that move 0:08:53.440 --> 0:08:55.960 gets digested, the implications of which are still going to 0:08:55.960 --> 0:08:58.319 be long term is Bob reference. 0:08:58.520 --> 0:09:01.480 Well, and Bob, something that you talked about is that 0:09:01.559 --> 0:09:04.600 one of the foundations to the business climate in the 0:09:04.679 --> 0:09:08.240 United States has been some level of predictability. Is what 0:09:08.480 --> 0:09:09.960 some level of predictability? 0:09:10.080 --> 0:09:13.520 Oh boy, Yeah. And I think what we're doing absolutely is. 0:09:14.240 --> 0:09:16.560 And I think that that goes even beyond that. The 0:09:16.640 --> 0:09:21.679 rule of law underlies our economy, and I think we're 0:09:21.400 --> 0:09:25.120 and that gives you a certainty and predictability, and I 0:09:25.160 --> 0:09:28.439 think a lot of what's going on is adversely affecting confidence. 0:09:29.720 --> 0:09:31.200 It is now, and I think we'll more so in 0:09:31.200 --> 0:09:34.160 the future. Confidence in the rule of law. This whole 0:09:34.160 --> 0:09:37.640 discussion about retribution and the use of the law enforcement 0:09:37.679 --> 0:09:40.679 agency in the United States to attack our components or 0:09:40.679 --> 0:09:42.960 opponents throughout the administrations is a good example. 0:09:43.120 --> 0:09:44.319 I think, just as I said. 0:09:44.120 --> 0:09:46.199 A moment ago, I think the violation of our treaty 0:09:46.280 --> 0:09:49.520 obligations to Mexico and to Canada. 0:09:50.440 --> 0:09:51.559 So yeah, I think that. 0:09:52.920 --> 0:09:57.560 I think predictability and confidence are essential and undermined underlie 0:09:57.679 --> 0:10:00.600 rather our economy. And I think I think of another 0:10:00.600 --> 0:10:02.240 good example, if I may, if something I think is 0:10:02.280 --> 0:10:05.880 doing tremendous damage, which is Doge. I've spent my entire 0:10:05.920 --> 0:10:08.959 career focused on fiscal discipline. We bounced the budget in 0:10:09.040 --> 0:10:11.720 nineteen ninety eight, first time in thirty years. I think 0:10:11.720 --> 0:10:13.240 we knew what the heck we were doing. I don't 0:10:13.280 --> 0:10:15.319 think these people the foggiest notion what they're doing. And 0:10:15.360 --> 0:10:19.000 I think DOSE is doing tremendous damage to government and 0:10:19.080 --> 0:10:24.000 to the recipients of government services and government activities. Now, 0:10:24.320 --> 0:10:27.280 are there excess expended? Are there inefficiencies and is there 0:10:27.280 --> 0:10:29.959 excess regulation, Yes, but you approach it with the cost 0:10:30.080 --> 0:10:34.079 of a rational cost benefit analysis, not a burn and 0:10:34.880 --> 0:10:37.160 the burning down of what exists, and then the thought 0:10:37.200 --> 0:10:38.520 that you rebuild it. And I think, I think we 0:10:38.559 --> 0:10:41.520 really are doing tremendous damage to government and to our economy. 0:10:41.880 --> 0:10:43.240 Right, you're nodding, do you want to add. 0:10:43.040 --> 0:10:44.880 In a little? 0:10:45.360 --> 0:10:51.040 The answer is the response is, as you think about 0:10:51.280 --> 0:10:55.560 the world geoeconomically and geopolitically, the anchor, the sacro sa 0:10:55.800 --> 0:10:58.560 anchor that the US has is a rule of law. 0:11:00.559 --> 0:11:03.520 It has never been a factor in any conversations that 0:11:03.559 --> 0:11:05.520 we've had up. 0:11:05.360 --> 0:11:05.920 To this point. 0:11:06.720 --> 0:11:07.680 Is it a factor now? 0:11:08.600 --> 0:11:08.839 It is. 0:11:09.720 --> 0:11:12.080 It is moving into the conversation in the ways that 0:11:12.080 --> 0:11:17.199 we haven't we haven't visited historically. So we need to 0:11:16.160 --> 0:11:20.520 be very mindful of conversations that today. It is not 0:11:20.720 --> 0:11:23.800 central to the conversations, but it has now become part 0:11:23.800 --> 0:11:25.840 of the conversation where historically it hasn't been. 0:11:26.559 --> 0:11:30.000 One thing that some people would argue, the Trump administration 0:11:30.200 --> 0:11:34.839 argues is that this is an effort to rearrange a 0:11:34.880 --> 0:11:39.520 system that has been structurally disadvantaging the United States, especially 0:11:39.559 --> 0:11:42.040 when it comes to China. And they make the argument 0:11:42.080 --> 0:11:45.920 that you need to play tough and do different things 0:11:45.960 --> 0:11:50.960 to try to shake up the status quo. Are companies 0:11:51.000 --> 0:11:53.240 still talking like that? Do they expect this to just 0:11:53.280 --> 0:11:57.440 be a negotiation that they're to raise point Bob that 0:11:57.640 --> 0:12:00.240 there will be a new normal that will emerge and 0:12:00.240 --> 0:12:02.600 that the second half of this year we'll have a 0:12:02.600 --> 0:12:06.160 more stable kind of foundation that's more visible for corporations. 0:12:06.320 --> 0:12:08.240 What kind of a new normal do you want to have, Lisa, 0:12:09.120 --> 0:12:10.120 I think that the normal. 0:12:10.440 --> 0:12:10.920 No, I'm sure. 0:12:11.040 --> 0:12:13.920 I think there's a new normal of irrationality, and I 0:12:13.920 --> 0:12:15.920 don't think that's going to be helpful to our economy. 0:12:16.600 --> 0:12:18.920 I think our new normal to be to return to 0:12:19.080 --> 0:12:23.280 sensible cost benefit judgments about everything that we do in 0:12:23.320 --> 0:12:25.080 terms of public policy, and I don't think and I 0:12:25.080 --> 0:12:26.800 think we're doing exactly opposite right now. 0:12:27.880 --> 0:12:30.800 What we're hearing from companies Ray is that there could 0:12:30.880 --> 0:12:34.439 be some reasons behind some of the tariffs, and some 0:12:34.559 --> 0:12:36.920 investors have come out and said that tariffs are attacks, 0:12:37.000 --> 0:12:37.920 but some have said. 0:12:37.679 --> 0:12:39.040 You know, both our attacks. 0:12:40.120 --> 0:12:43.120 Some have come out and said that you know that 0:12:43.160 --> 0:12:45.520 they can manage through this. The US economy is strong 0:12:45.559 --> 0:12:48.440 and resilient and once we're past this negotiation tip for 0:12:48.520 --> 0:12:52.480 TAT they can continue with the growth plans, and they 0:12:52.480 --> 0:12:55.600 still are optimistic about the consumer. Ray have you heard 0:12:55.600 --> 0:12:56.640 anything different than that? 0:12:57.600 --> 0:13:02.680 I think there is optimism still, but optimism maybe without 0:13:02.720 --> 0:13:09.199 the same level of conviction. Right, So the the randomness 0:13:09.400 --> 0:13:13.400 that appears to be at play here is not one 0:13:13.440 --> 0:13:15.640 that gives boards. And see there's a lot of confidence. 0:13:15.720 --> 0:13:18.400 So whatever the new normal is, will they react? Is 0:13:18.440 --> 0:13:20.880 they will react whatever whenever we get there. If it's 0:13:20.920 --> 0:13:24.160 a new normal of continued unpredictability, there's quite quite certain 0:13:24.559 --> 0:13:25.960 how aggressive people are going to act. 0:13:26.000 --> 0:13:26.960 So I would. 0:13:26.960 --> 0:13:30.400 Continue to pay pay it, pay attention to the volatility index. 0:13:31.000 --> 0:13:33.760 I would continue to pay attention to the tenure treasure, 0:13:33.800 --> 0:13:36.600 which I think what the administration is currently looking. 0:13:36.400 --> 0:13:37.800 To as guidance. 0:13:38.160 --> 0:13:40.240 And see if we get to a new normal, what 0:13:40.280 --> 0:13:41.320 that new normal looks like. 0:13:41.440 --> 0:13:42.360 It's not clear yet. 0:13:43.200 --> 0:13:45.959 Fun Yeah, And if a new normal, Lisa, is new 0:13:45.960 --> 0:13:49.000 normal which the world has tariff walls, we haven't because 0:13:49.000 --> 0:13:51.360 they have to have retali We're having retaliation already. We'll 0:13:51.360 --> 0:13:54.120 continue to have retaliation. And if the new war, if 0:13:54.120 --> 0:13:57.200 the new normal is a world of tariff walls, then 0:13:57.240 --> 0:14:00.880 will all just be less productive, less efficient, and less 0:14:00.880 --> 0:14:03.439 effective as economies, and our people will as a result, 0:14:03.520 --> 0:14:05.160 do less well and they would otherwise have done. 0:14:05.679 --> 0:14:08.720 You mentioned the ten year treasure yields and Scott Bessett 0:14:08.760 --> 0:14:11.280 has made it. The treasure secretary under Donald Trump has 0:14:11.320 --> 0:14:13.320 made it very clear that the ten year treasure yield 0:14:13.360 --> 0:14:16.160 is his north star in some ways, that he wants 0:14:16.200 --> 0:14:20.760 to bring yields lower. That is a requirement to deal 0:14:20.800 --> 0:14:25.520 with the deficit that we have. Is that how companies 0:14:25.520 --> 0:14:28.200 are thinking about it as well? Is this how people? 0:14:28.200 --> 0:14:30.120 I think that actually ten year treasure yields? 0:14:30.360 --> 0:14:31.880 Now, pray Tell does he plan to do that? 0:14:34.440 --> 0:14:36.560 Seriously? Yeah, this is something I know a little bit about. 0:14:36.760 --> 0:14:38.040 Oh yeah, how pray Tell does he? 0:14:38.560 --> 0:14:38.640 No? 0:14:39.320 --> 0:14:39.920 I'm serious. 0:14:40.160 --> 0:14:41.960 I would have gone into Act twenty six years. This 0:14:42.040 --> 0:14:43.160 is what I did for a living and I was 0:14:43.160 --> 0:14:44.640 a treasury for one of it. How does he want 0:14:44.640 --> 0:14:45.760 to bring ten year yields down? 0:14:46.480 --> 0:14:46.720 Well? 0:14:46.960 --> 0:14:50.720 He says that according to his plans that there will 0:14:50.760 --> 0:14:54.080 be greater efficiencies through doche but also through cost cuts. 0:14:54.120 --> 0:14:55.600 Those an't going to create data efficiencies. 0:14:55.640 --> 0:14:57.560 What those is going to do is tear apart our government. 0:14:58.160 --> 0:14:59.480 But that he you need. 0:14:59.360 --> 0:14:59.960 A greater efficial. 0:15:00.040 --> 0:15:01.800 In the way you do that is you look at 0:15:01.800 --> 0:15:04.800 the excesses in both regulation and government and then you're 0:15:04.800 --> 0:15:07.200 approach them with a course of reasoned course benefit. 0:15:07.280 --> 0:15:08.680 Now not slash and burn. 0:15:10.320 --> 0:15:12.480 Well, the ten your treasure yield has been down every 0:15:12.520 --> 0:15:15.320 single week, Donald Trump, the ten your treasure yield has 0:15:15.360 --> 0:15:16.080 been down every since. 0:15:16.240 --> 0:15:18.000 But there's people starting to worry about the economy. 0:15:19.120 --> 0:15:21.560 So then I would ask you ray at a certain point. 0:15:21.840 --> 0:15:22.800 No, I will. 0:15:25.200 --> 0:15:27.000 I'm now being excluded from the conversation. 0:15:28.720 --> 0:15:30.880 All right, I'll send you totally quiet. 0:15:31.560 --> 0:15:34.920 No, I actually I would love to have to further 0:15:34.920 --> 0:15:35.200 the cover. 0:15:35.560 --> 0:15:39.160 That's what I'm yeelding to the secondary and I'm looking 0:15:39.200 --> 0:15:41.640 at the chart here and unfortunately, if it happens to 0:15:41.680 --> 0:15:44.400 be right, well, no. 0:15:44.400 --> 0:15:46.680 This is this is really the key question. And actually 0:15:46.720 --> 0:15:49.480 to your point, there has been this theory that if 0:15:49.520 --> 0:15:53.280 yields go down, you end up with more economic dynamism 0:15:53.280 --> 0:15:55.480 because companies will invest more. And that has been the 0:15:55.520 --> 0:15:57.920 FED put right, this idea that if they lower rates 0:15:58.160 --> 0:16:00.400 that will encourage people to spend more. That is not 0:16:00.440 --> 0:16:02.680 what we're seeing in markets. That is the opposite. What 0:16:02.720 --> 0:16:07.400 we're seeing is yields lower risk off people scared exactly 0:16:07.440 --> 0:16:11.240 to your point and right to your point from your perspective, 0:16:11.640 --> 0:16:15.880 do companies see yields lower as a positive shift before 0:16:15.920 --> 0:16:17.920 when we were talking about the potential for rate hikes 0:16:18.280 --> 0:16:21.880 or are they growing increasingly concerned to Bob's point that 0:16:21.960 --> 0:16:26.000 this really represents a pretty massive, massive and seismic shift 0:16:26.360 --> 0:16:27.080 in the economy. 0:16:27.160 --> 0:16:31.240 Remember this is we're responding real time, right. I got 0:16:31.240 --> 0:16:34.440 a pretty low tenure, and I got a stock market 0:16:34.440 --> 0:16:37.920 to Soloft treat two to three trillion dollars today and 0:16:37.960 --> 0:16:41.960 a VIC that's gone up by twenty percent. So the 0:16:42.080 --> 0:16:44.960 data is and I got a conference call that's taking 0:16:45.000 --> 0:16:47.880 place now up north, and I got one that's going 0:16:47.920 --> 0:16:50.240 to take place to night leave. I got one that's 0:16:50.280 --> 0:16:52.400 taking place tonight that we're all going to witness. So 0:16:52.440 --> 0:16:55.640 the question is is CEOs are waiting to digest as 0:16:55.720 --> 0:16:57.360 much and boards are waiting to do just as much 0:16:57.360 --> 0:17:01.360 of this information as they can and then somehow position 0:17:01.520 --> 0:17:03.960 themselves for what the world is going to look like 0:17:04.359 --> 0:17:06.040 after the next two days or so. 0:17:06.520 --> 0:17:09.440 But it won't be just that. They have to look 0:17:09.480 --> 0:17:10.560 at the entire. 0:17:11.920 --> 0:17:15.240 Supply chain infrastructure and how it impacts what they do 0:17:15.320 --> 0:17:19.160 as will the US consumer. And if you go through 0:17:19.200 --> 0:17:22.359 and look at the implications on the large retailers out there, 0:17:23.080 --> 0:17:29.360 both electronic retailers and food retailers look at consumer staples. 0:17:29.400 --> 0:17:31.800 For some reason, consumer staples are up. I'm looking at 0:17:31.800 --> 0:17:34.960 some of the companies with which are in we interact 0:17:34.960 --> 0:17:36.520 every day, and their stock scens have been moving in 0:17:36.520 --> 0:17:39.320 the right direction. Well, right direction means the stocks are 0:17:39.320 --> 0:17:41.360 moving up. And I'm looking at this and you're looking 0:17:41.359 --> 0:17:42.840 at what you're looking at the vics here. 0:17:45.000 --> 0:17:47.520 It's easier sometimes to talk about what the market's. 0:17:47.200 --> 0:17:51.040 Doing, bought working here. So it's something that we suggest 0:17:51.200 --> 0:17:52.120 you put a slide up. 0:17:52.760 --> 0:17:54.560 You can just keep talking on this, Bob, I want 0:17:54.600 --> 0:17:56.399 to come back to you about this idea. 0:17:56.640 --> 0:17:57.639 So you're excluding me. 0:18:00.080 --> 0:18:01.639 You want to come back to me, I may not, 0:18:01.840 --> 0:18:03.119 I may not engage. 0:18:04.119 --> 0:18:09.359 I think you'll engage a little bit. You're talking about 0:18:09.359 --> 0:18:11.240 how you have quite a bit of experience as being 0:18:11.240 --> 0:18:12.680 the Treasury secretary. 0:18:12.359 --> 0:18:13.720 Of experience, but good idea. 0:18:13.800 --> 0:18:16.480 And you said, how is he going to bring down 0:18:16.480 --> 0:18:17.600 ten year treasure yields? 0:18:18.280 --> 0:18:20.240 And right now we see them dropping. 0:18:20.440 --> 0:18:22.719 The best way to bring down treasuries is to have 0:18:22.760 --> 0:18:26.919 a sound economy and then have, in response to that, 0:18:26.960 --> 0:18:31.480 have sound monetary policy, and then have treasury yiels adjust accordingly. 0:18:31.680 --> 0:18:34.359 You don't want to have eels go down because people 0:18:34.560 --> 0:18:36.440 are concerned that we're going to have a weak economy 0:18:36.520 --> 0:18:38.720 or that we may run into growth problems. 0:18:39.160 --> 0:18:42.280 It raises this question, even if these teriffs come off, 0:18:42.359 --> 0:18:43.680 even if they rolled back. 0:18:44.000 --> 0:18:45.960 If what rolls back the terriffs, Oh, I'm sorry. 0:18:45.840 --> 0:18:48.159 If they are being used as a cudgel of sorts, 0:18:50.280 --> 0:18:54.960 how long can this uncertainty remain before just the idea 0:18:54.960 --> 0:18:59.560 of having uncertainty is really pernicious for growth. 0:19:02.960 --> 0:19:10.320 Cain famously said that confidence underlies economic activity, and confidence 0:19:10.359 --> 0:19:13.439 is predictability. And I think that the actions we're taking, 0:19:14.520 --> 0:19:18.040 the tariffs, the immigration actions that we're taking, we're doing 0:19:18.040 --> 0:19:19.880 with dough which, as I said, I think doing tremendous 0:19:19.920 --> 0:19:23.600 damage to government and ineffectively addressing what is a real 0:19:23.640 --> 0:19:26.640 problem with your inefficiencies and excess regulation. I think all 0:19:26.680 --> 0:19:29.840 of that have not only substant effects, but adverse effects 0:19:29.840 --> 0:19:32.159 on confidence and unpredictability. And I think all this talk 0:19:32.200 --> 0:19:34.560 about retribution, of which there's been a lot of talk, 0:19:35.119 --> 0:19:38.000 I think feeds that that lack of confidence and unpredictability. 0:19:39.160 --> 0:19:42.240 Right from your perspective, how long can this go on 0:19:43.040 --> 0:19:46.160 before companies that are delaying some of their investment plans 0:19:46.920 --> 0:19:49.200 just take them off the table, you know. 0:19:49.200 --> 0:19:51.119 I think it's early days again. 0:19:51.280 --> 0:19:54.560 I think you're in the early innings of this tariff diplomacy, 0:19:55.520 --> 0:20:00.160 and companies are pretty wise and thoughtful about how they engage. 0:20:00.359 --> 0:20:05.200 This still remains the largest, used to be faster grow 0:20:05.200 --> 0:20:07.680 an economy that exists on the planet. So there's still 0:20:07.720 --> 0:20:10.920 confidence in what's taking place in the uas US notwithstanding 0:20:11.000 --> 0:20:13.520 the lack of predictability. A lot of reserves, a lot 0:20:13.560 --> 0:20:16.199 of capital reserves, a lot of pent up capital that 0:20:16.280 --> 0:20:19.040 needs to be allocated. So I don't think there's going 0:20:19.080 --> 0:20:21.879 to be a rush to judgment. Having said that, the 0:20:21.920 --> 0:20:25.960 more the actions are unpredictable, then that goes to the 0:20:26.080 --> 0:20:29.800