Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg P and L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. The
Speaker 1: leveraged finance industry here to tell us more about it
Speaker 1: is Stephen Oh. He is the global head of Credit
Speaker 1: and fixed Income and co head of Leveraged Finance for
Speaker 1: pine Bridge Investments, helping to manage more than ninety billion dollars.
Speaker 1: He is based in Los Angeles. Stephen Oh, thank you
Speaker 1: very much for being with us. Do you see more
Speaker 1: potential for distressed and leverage loans in the marketplace currently? Well,
Speaker 1: we've been in a ironment where there has been very
Speaker 1: strong fundamentals and earnings growth, therefore reasonably low default rates.
Speaker 1: While distress will be increasing in the future, there currently
Speaker 1: isn't enough excesses to create material problems. Where we see
Speaker 1: the distress forming is not broad based but much more
Speaker 1: idiosyncratic in nature. All right, I'd love to take a
Speaker 1: look at where we're coming from in the year and
Speaker 1: where we're heading. I know you just put out your
Speaker 1: mid year outlook for fixed income, and I'm struck by
Speaker 1: the huge outperformers in the first half, at least in
Speaker 1: the US, the worst rated companies did the best. The
Speaker 1: riskiest securities outperformed. I'm just wondering how long do you
Speaker 1: think that can continue. Well, we're we're in an environment
Speaker 1: where a combination of risk seeking, desire to stretch for yield,
Speaker 1: combined with a benign fundamental near term environment. And so
Speaker 1: in that environment, we've had really two components out performing,
Speaker 1: and one you noted, which was the highest risk component
Speaker 1: within the leverage finance space. But the other element of
Speaker 1: that is asset classes that have less interest rate sensitivity,
Speaker 1: because so far, year to day, most of the differentials
Speaker 1: and fixed income performance has really been around interest rate
Speaker 1: risk as opposed to credit spread fears, with the exception
Speaker 1: of the emerging markets Arena. Well, Stephen, and maybe you
Speaker 1: could just offer a little bit more detailed. Is it
Speaker 1: the desire for yield that drives the price up or
Speaker 1: is it actually the increased performance of the asset, the
Speaker 1: underlying asset the company for example, it's a combination of
Speaker 1: both that's taking place right now, and so in that
Speaker 1: environment in the short term, yes, the macro GDP growth
Speaker 1: is very good. We're in a benign environment of very
Speaker 1: low default race within the leverage finance space. Earnings are
Speaker 1: broadly improving, so there is an element of justification for
Speaker 1: or credit improvement, particularly the area that has perhaps the
Speaker 1: highest yield, which fits investor appetype. But the way we
Speaker 1: like to think about it is this is the type
Speaker 1: of environment where portfolio should be getting more defensive because
Speaker 1: when we think about what we're getting paid in terms
Speaker 1: of incremental units of risk. While triple cs and the
Speaker 1: highest risk component maybe outperforming right now, we don't believe
Speaker 1: that you're getting paid adequately for a large component of
Speaker 1: that arena, and we never have present insights into exactly
Speaker 1: when is going to be the top or one is
Speaker 1: going to be the bottom. But as we recognize the
Speaker 1: fact that we're not getting paid adequately for some element
Speaker 1: of risk, the prudent manner and approach is to reduce
Speaker 1: the risk in your portfolio, not to take more risk.
Speaker 1: As we're seeing more people doing Stephen, have you witnessed
Speaker 1: either at Pine Bridge or in your colleagues and competitors
Speaker 1: of business the increase sort of build up of cash
Speaker 1: in order to anticipate that potential opportunity. We're not we
Speaker 1: haven't particularly seen that at this point. I think right
Speaker 1: now cash is being fully invested uh in most asset
Speaker 1: classes because in the market environment where performance is about
Speaker 1: generating current income and current yield, and cash acts as
Speaker 1: a dragon that arena. But having said that, as what
Speaker 1: you get paid in cash has increased in recent months,
Speaker 1: being in cash and having the liquidity flexibility is I
Speaker 1: think a relatively prudent approach for portfolios and looking to
Speaker 1: increase cash or alternatively what we like to call cash
Speaker 1: plus substitute, so high quality generally floating rate assets where
Speaker 1: you're getting paid a premium above cash. But feel comfortable
Speaker 1: us sitting in for now, what's the most dangerous spot
Speaker 1: in the fixed income market right now, heading into your end,
Speaker 1: the most dangerous spot our areas that we believe are
Speaker 1: tied to developed market sovereign Yolk curve and so less
Speaker 1: so on the U S side, because the US and
Speaker 1: the FED has already been engaged in a long process
Speaker 1: of normalization. But as we look at you know, Europe
Speaker 1: as we look at Japan and as we see the
Speaker 1: shifting in their approach UH and as they hit an
Speaker 1: inflection point in their monetary policy, that really is set
Speaker 1: up to cause downward volatility for the next eighteen months.
Speaker 1: So that's interesting, especially because other people are pinpointing, perhaps
Speaker 1: concerned that they have with either leveraged loans which have
Speaker 1: been expanding very quickly and have had much more aggressive structures,
Speaker 1: as well as on the investment grade side, with triple
Speaker 1: B rated bonds with the lowest cheer of investment grade.
Speaker 1: You're saying, again, that's not where the real risk lies.
Speaker 1: It's really in sovereign rates and developed markets. Is that?
Speaker 1: Is that what I'm hearing From a broad based standpoint,
Speaker 1: That's correct, But you actually hit upon something that's very important,
Speaker 1: because risk is not solely about asset classes, but within
Speaker 1: asset classes overall. And just as I noted the fact
Speaker 1: that we believe that we're in an environment right now,
Speaker 1: we're on the leverage loan or the HIO bond side,
Speaker 1: triple C risk is not being adequately compensated on the
Speaker 1: investment great credit side. Triple B s are entering that
Speaker 1: territory as well, and I think The dilemma that most
Speaker 1: portfolio managers face is as they look into the future,
Speaker 1: the next six to twelve months looked fairly benign for
Speaker 1: continuing to take that risk. So it's about timing of
Speaker 1: when does one feel comfortable reducing that exposure, And it's
Speaker 1: always the ongoing issue of short term performance versus long term.
Speaker 1: Well do you believe that this is something that professionals
Speaker 1: are selling down as a result of this condition? Uh,
Speaker 1: we're not seeing a broad base, but we are taking
Speaker 1: the approach and have always taken the approach of a
Speaker 1: contrarian mindset that it when risk appetite is extremely strong,
Speaker 1: the right approaches to become more defensive and similarly the
Speaker 1: time to buy and reach for more risk. And there's
Speaker 1: a lot of fear in the marketplace, uh right now,
Speaker 1: And so you know, I think we're in an environment
Speaker 1: where we're starting to as an analogy, you know, we're
Speaker 1: heading into the baseball playoff push, but now is not
Speaker 1: the time to swing for home runs. It's really more
Speaker 1: about timely singles by taking opportunist to advantage of technical
Speaker 1: driven deviations, and it's really more about shoring up your
Speaker 1: defenses right now when it looks like everything is going smoothly, Stephen,
Speaker 1: just a mountain twenty seconds. You also are favoring emerging markets,
Speaker 1: especially in Asia heading into year end. Is that correct?
Speaker 1: We favor asset class as an area where you're getting
Speaker 1: incremental only paid for complexities, whether in the form of
Speaker 1: structure like clos or bank loans, or in geographic complexity
Speaker 1: and emerging markets overall. And so yes, we like the
Speaker 1: fundamental outlook of We think that a component of the
Speaker 1: sell off that's occurred this year is more technical driven.
Speaker 1: But you have to be very targeted in your purse
Speaker 1: to e M and within Asia Asia, it's really more
Speaker 1: about a corporate story, not a sovereign story the e M. Steven, Oh,
Speaker 1: thank you so much for being with us. That was great.
Speaker 1: Steven though, Global head of Credit and fixed Income at
Speaker 1: pine Bridge Investments. Pine Bridge menages ninety point five billion
Speaker 1: dollars globally. Right now it is that special time of
Speaker 1: day we take a look at small and mid cap stocks.
Speaker 1: They are turning up, but not as much as the
Speaker 1: larger cap piers. Your communists bloggard, I'm left go on
Speaker 1: the bloomberg, not at all. In fact, the rust of
Speaker 1: two thousand is actually lowered by a tenth of at
Speaker 1: the moment it was higher, just like stocks are bouncing around.
Speaker 1: What can I mean? You've got the S and P
Speaker 1: five hundred up a quarter of percents just in the
Speaker 1: last few minutes or so that the Russell has taken
Speaker 1: a leg down here. Of course, you're not talking about
Speaker 1: much movement from yesterday's close in either direction. That said,
Speaker 1: since we're down, let's talk about the stock with the
Speaker 1: biggest decline. De Bold nick Storff. The ticker on that
Speaker 1: one is DBD, the maker of automated telemachines, has tumbled
Speaker 1: thirty three and a half percent. De Bald had an
Speaker 1: unexpected second quarter loss, cut annual forecast, and said it's
Speaker 1: asking banks to ease loan terms. You've got New Linked
Speaker 1: Genetics ticker n l n K down twenty percent. The
Speaker 1: drug developer reported second quarter revenue the trout estimates and
Speaker 1: said it's cutting thirty percent of its staff. Also is
Speaker 1: its chief financial officer will be leaving in a few months.
Speaker 1: Biggest gain in the Russell belongs to what Constainer Store Group,
Speaker 1: whose ticker is TCS. It's up almost the thirty nine
Speaker 1: percent fiscal first quarter results at the reds Ollers showed
Speaker 1: a narrower loss and higher revenue than analysts expected based
Speaker 1: on Bloomberg survey and Pandora Media tick her p one
Speaker 1: letter up eighteen percent. The internet radio company posts a
Speaker 1: smaller loss and higher sales for the second quarter than
Speaker 1: analysts predicted. Thank you very much, David Wilson, Bloomberg stocks
Speaker 1: comust remember to send him an email at d Wilson
Speaker 1: at Bloomberg dot net, sign up for his daily free
Speaker 1: email newsletter, and also you'll get his chart of the
Speaker 1: day featuring Apple and its share buy backs. D Wilson,
Speaker 1: Bloomberg dot net. Return our attention now to CBS and
Speaker 1: it's chief executive, Less Moonvest. The Los Angeles District Attorney's
Speaker 1: Offers said it would not prosecute Mr Moonvest for alleged
Speaker 1: sexual crimes because too much time has elapsed to pursue
Speaker 1: incidents from the nineteen eighties. Here to tell us about
Speaker 1: CBS and potential risks for the company's Brian Weezer. He
Speaker 1: is the senior research analyst for Pivotal Research Group. Brian,
Speaker 1: what's the outlook for CBS with Less Moonvest? Well, the
Speaker 1: question is that is it with or without even though
Speaker 1: it is um clearly indicating he intends to stay. Um.
Speaker 1: I mean it's uh, it's hard to fathom that he
Speaker 1: can continue to do so for very long. UM. You know,
Speaker 1: you have two issues. One is that although really this
Speaker 1: is as much now a board issue as anything, uh,
Speaker 1: it is studying that the board and this day and
Speaker 1: age would not have investigated uh previously, given that reports
Speaker 1: are rumors of this were out there months ago, the board,
Speaker 1: as a sort of press reports of indicated wasn't aware
Speaker 1: of reports for this months ago. On top of the
Speaker 1: CBS news issues that were widely reported in the way
Speaker 1: to the Charlie Rose episode, shall we say, uh, and
Speaker 1: that they didn't act suggests strongly that you have a
Speaker 1: board that was in, for lack of better word, management's pocket. Uh.
Speaker 1: That's a problem. Then when you look at what's going
Speaker 1: on with Viacom and the murder potential, where one of
Speaker 1: the concerns is that you have a board CBS who
Speaker 1: is really acting primarily in the CEO's interests, not in
Speaker 1: shareholders interests. They're going to go to Viacom at some point.
Speaker 1: This is just delaying it. Well, but you bring up
Speaker 1: a lot of good points there I mean also the
Speaker 1: fact that the board is coming out and saying that
Speaker 1: they're hiring outside council to investigate the issue. They're doing
Speaker 1: that now after the news before it came out. Why
Speaker 1: didn't they do that, uh, you know, six months ago
Speaker 1: or however long ago when they first found out. But
Speaker 1: Brian translate all of this and concern about the board
Speaker 1: into what a shareholder ought to be doing, or what
Speaker 1: somebody who's looking at the decline and CBS shares ought
Speaker 1: to be thinking. Is this a buying opportunity or does
Speaker 1: this indicate that there are a lot of problems that
Speaker 1: really maybe haven't even been flushed out yet. You know,
Speaker 1: A joke that uh, CBS is board has managed to
Speaker 1: make Viacom's board look good, which is a very difficult task. Um. Unfortunately,
Speaker 1: that is the outcome here. Whereas prior to all, the
Speaker 1: CBS had a chance to kind of well, they had
Speaker 1: a fighting chance at independence, a fighting chance at persuading
Speaker 1: investors to fight as hard as possible to keep CBS
Speaker 1: independence so that it could be sold on to someone
Speaker 1: else for a higher price than what Viacom might pay.
Speaker 1: And now here we are, Viacom will be We'll have
Speaker 1: the upperhand in any negotiation. Um, you have to assume
Speaker 1: the combination happened and not unfavorable terms to CBS. Of course,
Speaker 1: it's impossible to know what those terms will be, what
Speaker 1: the combinations, what the ratios will be for any sure
Speaker 1: exchanges or anything else like that. But it will happen,
Speaker 1: and so I wouldn't It's hard to call the buying
Speaker 1: opportunity of a hold rating on the stock. Brian. What
Speaker 1: are the jewels in the CBS business? Is it the
Speaker 1: television network and the TV studo? Yeah, I mean, certainly
Speaker 1: they they've been in power, although it does so many
Speaker 1: questions are are are are opened up by movies if
Speaker 1: he is in fact eventually removed um, because you know,
Speaker 1: he singularly was involved in most of their businesses, I
Speaker 1: mean Simon and Schust the part that he was least
Speaker 1: involved with, and of course is probably the least important. Um.
Speaker 1: Show Time has developed in its own right, um and
Speaker 1: is doing well and you know, has relatively a significant
Speaker 1: degree of autonomy. But of course, the flagship broadcast network
Speaker 1: is you know, the kind of where the the flywheel moves,
Speaker 1: Um for the whole business. It's it's certainly they're all
Speaker 1: access business, which is one of the more promising and
Speaker 1: issues for streaming service from you know, a traditional broadcaster UM.
Speaker 1: Obviously that they've been successful in driving retransmission consent, blade
Speaker 1: revenues UM and recapturing economics from their local broadcast affiliates UM,
Speaker 1: but primarily because of the success it had at the
Speaker 1: broadcast network level. So you know, that's all without movies,
Speaker 1: it's it's not clear that it would be as successful.
Speaker 1: Brian Weezer, thank you so much for joining us and
Speaker 1: for your insights. Brian Weezer is senior research analyst for
Speaker 1: Pivotal Research Group. And right now I'm looking at these
Speaker 1: shares of Viacom down about three quarters of a percent
Speaker 1: and CBS shares down about a half a percent. It's
Speaker 1: been a rocky period, though, rocky couple of days for
Speaker 1: both shares, although Viacom has come out the better of
Speaker 1: the two by far, in particular from Friday last week,
Speaker 1: when Viacom shares were up about four and a half
Speaker 1: percent and CBS down more than six percent. What do
Speaker 1: Puerto Rican municipal bonds as well as tobacco settlements and
Speaker 1: bonds tied to a New Jersey Mega mall have in common.
Speaker 1: Here to tell us is Matt Winkler. He is columnist
Speaker 1: and for Bloomberg Opinion. It's also editor in chief emeritus
Speaker 1: of Bloomberg News. And you can follow Matt Winkler on
Speaker 1: Twitter at Matthew Underscore Winkler. Alright, Matt Winkler, what do
Speaker 1: these three assets have in common? Uh? They depend on
Speaker 1: a booming economy and ours is just a year away
Speaker 1: from perhaps surpassing the longest expansion in our time, UM,
Speaker 1: and that was back in the nineties. And uh, there's
Speaker 1: every indication that the economy can at least match that
Speaker 1: record and keep going. And UH, the reason why these
Speaker 1: very risky, high yield investments are doing as well as
Speaker 1: they are is typically investors want the greatest yield wherever
Speaker 1: they can get them, and when times are good, which
Speaker 1: they are right now. Uh, the so called risk on
Speaker 1: trade is very attractive, especially UM in the debt market
Speaker 1: where you have some of these issues with coupons of
Speaker 1: six plus and that is a very very attractive UM
Speaker 1: bond h to say the least, when we've had interest
Speaker 1: rates as low as they've been for ten years now.
Speaker 1: So that's what they have in common. And UH, so
Speaker 1: far so good, so far, so good. You highlight some
Speaker 1: really important statistics here in this column. For one, UH,
Speaker 1: the sales tax bonds in Puerto Rico, which has been
Speaker 1: decimated by Hurricane Maria, has yet to fully rebuild. Those
Speaker 1: have doubled in price. UH. You talk about how junk
Speaker 1: graded municipal debt has gained more than four percent so
Speaker 1: far this year. Well, investors who went to top rated
Speaker 1: corporate debt in the US debt of the likes of
Speaker 1: Apple and Amazon, you would have lost money. UM where
Speaker 1: where just sort of the tipping point comes where we
Speaker 1: will have to face the reality of perhaps a not
Speaker 1: yet built New Jersey mega mall that they are supposedly
Speaker 1: going to be financing and then paid back so LESA.
Speaker 1: The dichotomy is that when you're in a normal economic cycle,
Speaker 1: like presumably the one we're in, when the Fed UH
Speaker 1: is very excited about the expansion, so excited that it
Speaker 1: has announced several times that's going to raise interest rates,
Speaker 1: all the investment grade debt behaves as you would expect
Speaker 1: it to. It retreats because higher interest re means that
Speaker 1: at some point, UH, the economy has to UH slow
Speaker 1: down for the highest yielding investments. However, in the debt market,
Speaker 1: it goes its own way until the music stops, and
Speaker 1: it's very sudden. But it's kind of like, for example,
Speaker 1: two thousand six. Uh, if we look back now, we
Speaker 1: should have been pretty concerned, um, because it was just
Speaker 1: two years from the worst or meanest recession since the
Speaker 1: Great Depression. But in two thousand six, everybody was partying.
Speaker 1: Highest yielding investments were sought after around the world. It
Speaker 1: was a little bit different then because we were making
Speaker 1: those investments as trip away so it was a bit
Speaker 1: of a um, uh, misleading and can and con actually
Speaker 1: to the world. But here we are today. We have
Speaker 1: very legitimate high yield investments. They are rated or not
Speaker 1: rated at all. They're rated low and um, they're not
Speaker 1: going to follow the behavior patterns of the of what
Speaker 1: the Fed does the way conventional investment grade debt does,
Speaker 1: and investors for their part, are gonna say, look, as
Speaker 1: long as things are going well, um, getting the compound
Speaker 1: interest from the high yielding investment is a far better
Speaker 1: return total return, even if it's at a discount on
Speaker 1: the dollar. And so that's why you've had some of
Speaker 1: these bankrupt issues. To say the least appreciate as they have,
Speaker 1: because as long as they're paying something, people want them,
Speaker 1: so then there This really raises an important question, especially
Speaker 1: as you raise the rating agency issue, the rating a
Speaker 1: rating company issue from leading up to the prior crisis.
Speaker 1: Do investors recognize the risks that they're taking the specific
Speaker 1: issues of these different municipalities or are they investing through
Speaker 1: index funds that don't necessarily delineate or do the fundamental
Speaker 1: research that would unearth the problems and figure out what
Speaker 1: the correct compensation ought to be for investors. So, Uh,
Speaker 1: most of the performances actively managed, so it's not an algorithm. UM.
Speaker 1: And since you mentioned the context of ratings, you know,
Speaker 1: ratings themselves have been essentially contrary indicators. UM. When rating
Speaker 1: companies downgrade in sen grade debt, particularly sovereign debt. Uh,
Speaker 1: it's been a buying opportunity and you've seen that over
Speaker 1: and over again. So the reality probably is that the
Speaker 1: investors who are buying these high risk communities or muni
Speaker 1: junk aren't really paying any attention to the credit rating. Uh,
Speaker 1: it doesn't mean anything to them. What they're looking at
Speaker 1: is something more fundamental, which is what are these borrowers
Speaker 1: able to pay right now, Um, what is the return
Speaker 1: I likely will get for the preeseeable future? And is
Speaker 1: that reward much greater than the risk that the world's
Speaker 1: going to come to an end tomorrow? And the way
Speaker 1: they see it is the world's not going to come
Speaker 1: to an end tomorrow or the day after or the
Speaker 1: day after. Therefore, this is very attractive and it's a
Speaker 1: very rational decision. Um. So that's the mindset. And so far,
Speaker 1: as I said, so good until it ends. Well. This
Speaker 1: is in about thirty sex and I was wondering, is
Speaker 1: it possible that things are really not as good as
Speaker 1: many have scribe because state and local pension plans they
Speaker 1: have less than three quarters of the money that they
Speaker 1: need in order to meet their promised payouts. Is it
Speaker 1: possible that things are really not good under the surface.
Speaker 1: It's possible, Um. Bloomberg News uh just published a piece
Speaker 1: that said, uh, you know, the faults by municipal issuers
Speaker 1: is relatively low this year. I think only three I
Speaker 1: think I've mentioned so far this year. So that's another
Speaker 1: indication that in a booming economy, the big and small
Speaker 1: state and local governments have tax revenue that is more
Speaker 1: than adequate to cover their expenses. Matt Winkler, thank you
Speaker 1: so much for being with us. Matt Winkler is a
Speaker 1: columnist for Bloomberg Opinion, also editor in chief Emeritus of
Speaker 1: Bloomberg News. Our next guest has been a long time
Speaker 1: proponent of free trade and the importance that it brings
Speaker 1: two economies and how much it has helped the American economy.
Speaker 1: Dr Adam Posen, President of the Peterson Institute for International
Speaker 1: Economics in Washington, d C. Dr Posen, I'm so glad
Speaker 1: that you could join us today. UM, I want to
Speaker 1: start with a question of who's in your camp now.
Speaker 1: Republicans traditionally were the party of free trade. Where do
Speaker 1: we go when the populism of that party flips that
Speaker 1: narrative on its head. Thank you very much for having
Speaker 1: me on Bloomberg Markets today and to talk about this
Speaker 1: issue in in in terms of flipping. Yeah, there's there's
Speaker 1: various times in American history where the parties have had
Speaker 1: different roles on trade. There were periods where the Republicans
Speaker 1: were anti trade and the Democrats were not, or we
Speaker 1: pro free trade. One can think of Cordell Hull, FRANKL. Delo,
Speaker 1: Roosevelt Secretary of State and Anclendela Roosevelt and um then
Speaker 1: President Truman pushing the idea that trade deals with Europe,
Speaker 1: with Japan, with the major economies were necessary for peace
Speaker 1: and security, UM as well as the economic benefits. So
Speaker 1: when you look today, however, it is hard in the
Speaker 1: Congress to find anybody who's really pushy it. There's a
Speaker 1: handful of some older Republican senators who are standing by
Speaker 1: their principles on free trade, and there's a handful of
Speaker 1: moderate Democrats. UM. But I think that's kind of misrepresents
Speaker 1: the situation. I promised not to go on too long,
Speaker 1: but two points. First, there are a lot of people
Speaker 1: in the Congress who may or may not be have
Speaker 1: free trade out of conviction, but it can be convinced
Speaker 1: on national security or a job safety grounds, and for
Speaker 1: whom being anti trade isn't as much of a priority
Speaker 1: as it is safe for President Trump. And the second
Speaker 1: thing is, if you look at the polling data, and
Speaker 1: we're going to be hosting a release from the Pew
Speaker 1: Research Group on these polling in September, all the recent
Speaker 1: polling data suggests there is a growing pro trade, pro
Speaker 1: globalization feeling among younger people of all parties in the US,
Speaker 1: and so that's where we have to hope the allies
Speaker 1: come from for everybody's good. Dr Polston, It's been written
Speaker 1: that low cost airfares in Europe have done more for
Speaker 1: the integration of Europe than all of the political moves
Speaker 1: on the part of the various countries in the European Union.
Speaker 1: Do you believe that internationalization and globalization can be stopped?
Speaker 1: I think internationalization and globalization for the world as a
Speaker 1: whole can't be stopped, but it can be halted, temporarily,
Speaker 1: reversed and limited. Um. So, getting out of the vague
Speaker 1: into the specific, you're absolutely right, Pim. What matters in
Speaker 1: some ways, both for politics and economics is how international
Speaker 1: integration affects people's day to day lives. Do they meet
Speaker 1: people from other countries? Do they value goods and services
Speaker 1: from other countries? Do they look at those people as
Speaker 1: allies and friends? Do they interact in a business sense
Speaker 1: and see the opportunities? And if the US pulls out
Speaker 1: and pulls back from leading and supporting an open world economy,
Speaker 1: which the US has done for seventy years, then there
Speaker 1: will be a lot more small countries and emerging markets
Speaker 1: who will get bullied either by the US or by
Speaker 1: China or by Russia, and their associations will be less.
Speaker 1: But at the same time, the economic advantages are so
Speaker 1: overwhelming that it's like, you know, trying to plug the dike,
Speaker 1: something else will get through. And so this is why
Speaker 1: I wrote in Foreign Affairs a few months ago, as
Speaker 1: much as I dislike what the Trump administration is doing
Speaker 1: on trade, that what they're doing is probably going to
Speaker 1: be more harmful. Through other channels, Trade and the rest
Speaker 1: of the world will continue. So Dr Posen, I want
Speaker 1: to note that you also sit on a panel of
Speaker 1: economic advice the United States Congressional Budget Office, and with
Speaker 1: that perspective and that interaction with the current administration, I'd
Speaker 1: love to get your view on how many people within
Speaker 1: the administration are proponents of free trade and UH and
Speaker 1: how conflicted it really is there or whether the message
Speaker 1: is pretty consistent UH consistently for tariffs across the board.
Speaker 1: My sense is the message is consistent across the board.
Speaker 1: There are one or two people I know who serve
Speaker 1: in various capacities in the administration who I believe are
Speaker 1: trying to fight internally. But look, the President has chosen
Speaker 1: to make this a priority. I've said for two years
Speaker 1: when when he was the nominee, that this is a
Speaker 1: sincere conviction of his and other people have now documented
Speaker 1: he's been saying the same things on trade with great
Speaker 1: fervor for thirty years. He hasn't. It's one of the
Speaker 1: few things he hasn't changed his mind or flip flopped
Speaker 1: on in his thirty years of interfering in public life.
Speaker 1: So you know, UM, I shouldn't say interfering intervening inublic life. Um,
Speaker 1: so I think it's not worth be it people betting
Speaker 1: in markets or journalists getting into Oh does there somebody
Speaker 1: in the White House who secretly cares deeply? This is
Speaker 1: like the nonsense about Colin Powell and Iraq fifteen years ago. Um.
Speaker 1: In the end, the President has a priority on being
Speaker 1: anti trade, anti globalization, against US interests, and that dominates
Speaker 1: he is. The people who fit his role his view
Speaker 1: on that are the ones who advance just to push
Speaker 1: back for a second doctor post. I mean the President
Speaker 1: said that he is for fair trade. Yeah, yeah, you know,
Speaker 1: it's it's but his definition of fair trade doesn't make
Speaker 1: any sense. Um. Fair trade is about the idea that you,
Speaker 1: the people have the choice, and uh that you don't
Speaker 1: get ridiculous cheating in the sense of substandard goods and
Speaker 1: services or huge government subsidies. There is a that of
Speaker 1: goods and services, notably in steel and aluminum, where China
Speaker 1: has huge subsidies and probably is cheating. But you know,
Speaker 1: it's actually a very small piece of the world economy.
Speaker 1: It's worth fighting about. But you know, think of it
Speaker 1: in football terms, right, Um, there's a difference between oh
Speaker 1: my god, somebody tackled low and you call a penalty
Speaker 1: and they should suffer the penalty, versus oh my god,
Speaker 1: these guys have like destroyed the playing field. It's unsafe
Speaker 1: and taking my team off the field. Trump when he
Speaker 1: says his definition of fair trade is to claim everything
Speaker 1: is due to an uneven playing field with unsafe surf,
Speaker 1: hazardous surfaces, and that's just wrong. It's just you got
Speaker 1: a team to play. You're playing. It's a team to
Speaker 1: plays a little dirty and you want to make sure
Speaker 1: the ref makes most of the calls and that you
Speaker 1: you you play the game and you beat him. Anyway,
Speaker 1: Just twenty seconds here a doctor pose in I want
Speaker 1: to just go back to what you said about how
Speaker 1: younger people are increasingly for free trade. Just how significant
Speaker 1: is that wave. I don't know politically, I'm frankly not
Speaker 1: a political scientist. I don't know how to assess how
Speaker 1: influential will be. But poll after poll, especially from credible
Speaker 1: places like pube but other mainstream posters, shows that there
Speaker 1: is actually majority support for trade now if you ask
Speaker 1: the question um, and that it's increasingly correlated with age,
Speaker 1: meaning the younger you are, the more in favor you are.
Speaker 1: And so, you know, this is one of those things where, yeah,
Speaker 1: there are certain individuals whose communities feel they were hurt
Speaker 1: by trade, and probably they were hurt by some combination
Speaker 1: of technology, trade and cultural change they didn't want to
Speaker 1: face UM. But you know that's not most of the
Speaker 1: people in the US. You've gotta leave it there. Thank
Speaker 1: you very much, Dr Adam pose And he is the
Speaker 1: president of the Peterson Institute for International Economics. Thanks for
Speaker 1: Liz ening to the Bloomberg P and L podcast. You
Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.
Speaker 1: It's one before the podcast. You can always catch us
Speaker 1: worldwide on Bloomberg Radio