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Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox

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Speaker 1: along with my co host Lisa A. Bramowitz. Each day

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Speaker 1: we bring you the most important, noteworthy, and useful interviews

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Speaker 1: for you and your money, whether you're at the grocery

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Speaker 1: store or the trading floor. Find the Bloomberg p and

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Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Yes,

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Speaker 1: we're gonna talk about liquefied natural gas now because we've

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Speaker 1: got a pioneer when it comes to the energy industry.

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Speaker 1: My guest is Sharif Suki. He is the co founder

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Speaker 1: and the chairman of Tullurian and he is the founder,

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Speaker 1: former founder and former chief executive of Shanir and Sharif

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Speaker 1: joins us in our studio here in UH. Great to

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Speaker 1: have you with us, sir, Thanks for coming in. Thank

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Speaker 1: you very much. You're the only trail blazing energy pioneer

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Speaker 1: that I can think of. It is also run a

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Speaker 1: chain of restaurants UH and managed to have a Hollywood

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Speaker 1: Um the film colorization company already in your past. Maybe

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Speaker 1: just give people a little snippet of how you came

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Speaker 1: to create Shaneer and the world of liquefied natural gas. Well,

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Speaker 1: I guess it's a lesson and always keeping your options

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Speaker 1: open and learning as much as you can as you

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Speaker 1: go along, so you never know what's going to prepare

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Speaker 1: you for what. But I think in the mid nineties

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Speaker 1: I was looking for a niche to invest in and

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Speaker 1: to raise money, which is the scale that I hand

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Speaker 1: into a sector there would be changed by technology. That's

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Speaker 1: how I end up ended up being at the energy business.

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Speaker 1: And slowly I learned and um Chanel was founded in

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Speaker 1: nineteen ninety six and um I had twenty years and

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Speaker 1: there huntil two thousan fifteen and then sure if you

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Speaker 1: left Shaneer last year after carl Icon had some issues

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Speaker 1: with the company, and now you've started this new venture

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Speaker 1: to Laurian talld Us about that, what a what are

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Speaker 1: you trying to do with Tolaian? Well, I think the

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Speaker 1: major disagreement with garn at the time was simply whether

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Speaker 1: you would pay dividends out or whether you read invest

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Speaker 1: the money to continue the growth of the company. So

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Speaker 1: I had the view that the market has just been

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Speaker 1: started and that although it didn't look so good for

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Speaker 1: a couple of years, it would come back, and that

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Speaker 1: we needed to continue to go to a company. Carl

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Speaker 1: had a different opinion and we agreed to separate, to

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Speaker 1: go out separate ways Solan. So when they freed me,

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Speaker 1: I had the opportunity to create to Louian In February

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Speaker 1: of two thousand and sixteen. About three months after that,

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Speaker 1: I was fired functioner and to pick up where the

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Speaker 1: things that she Knew did not want to pursue at

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Speaker 1: the time. So we founded a company, found another site

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Speaker 1: that took a team that we were funding, a Chineer,

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Speaker 1: but that j Knew decided to continue the funding led

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Speaker 1: by Martin Houston, and Martin has become my partner. We

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Speaker 1: found it two looking together and we identified a good side,

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Speaker 1: took our old team back, both BECTORL and ge t

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Speaker 1: to collaborate with us again and developed a pretty good

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Speaker 1: site for a plant for a big processing for a

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Speaker 1: big processing plant, a big liquefaction facility in Louisiana with

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Speaker 1: the capacity to export twenty six million tons, which is

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Speaker 1: really replicating the success that I had antinue with the

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Speaker 1: twenty four million tons plant at Sebin Pass. Can you

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Speaker 1: speak a little bit about the supply and demand that

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Speaker 1: currently exists in natural gas because to turn it into

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Speaker 1: liquefied natural gas requires this major investment in process. Uh.

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Speaker 1: And then there is not really a global pricing uh

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Speaker 1: platform for for natural gases there. I mean, it costs

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Speaker 1: different things in different countries. You exactly right. Uh. So

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Speaker 1: there's a number of things that happened that are different

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Speaker 1: from when I started the effort of The first thing

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Speaker 1: is that it has become very clear than the United

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Speaker 1: States is the low cost producer of natural gas and

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Speaker 1: at the same time the low cost manufacturer of liquid

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Speaker 1: faction facilities. So we have a constan advantage compared to

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Speaker 1: the rest of the countries in the world. The second

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Speaker 1: very important thing that has happened is that the natural

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Speaker 1: gas business on a global business is increasingly becoming a

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Speaker 1: very liquid market, thanks in great part to liquid fu

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Speaker 1: natural gas. So we the advent of Australia first and

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Speaker 1: other United States has two major new players into the

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Speaker 1: energy business. You now have twelve cargoes per day available

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Speaker 1: for sale on a global basis, with about forty bcf

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Speaker 1: a day and and by to see if you've got

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Speaker 1: to tell people at the British thermal units in cubic

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Speaker 1: feet cubic feet. So that's why we needed you, so

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Speaker 1: to to put it in perspective, UM, the in two years,

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Speaker 1: when old liquor faction facilities under construction currently will come

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Speaker 1: on the market, the market will be able to produce

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Speaker 1: fifty BCF fifty billion cubic feet of natural gas every day.

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Speaker 1: The entire consumption of the United States is about seventy

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Speaker 1: five billion cubic feet, so two thirds of the market

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Speaker 1: on a global basis that is on the water at

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Speaker 1: any given time. UH. It's two thirds of the size

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Speaker 1: of the American market. It is larger than the European market.

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Speaker 1: So it's a very very significant floating market that is

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Speaker 1: extremely flexible in terms of what direction it can go into.

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Speaker 1: Because those are allowed ships and there's probably two hundred

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Speaker 1: and twenty of those today and in two years there'll

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Speaker 1: be two hundred and fifty loaded with not liquefied natural gas.

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Speaker 1: They can basically go to wherever they need it. And

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Speaker 1: sure if just in our last minute or so here,

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Speaker 1: where do you see prices for UH natural gas and

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Speaker 1: and and liquid natural gas over the next five to

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Speaker 1: ten years, Well, in the United States, I don't see

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Speaker 1: anything different than what we have today. So some workedween

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Speaker 1: two fifty and three donors in m MBTU. On a

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Speaker 1: global basis, the the excess inventory is being solved very

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Speaker 1: very very quickly because low prices generate new demand, so

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Speaker 1: demand year on year for that liquid natural gasses up

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Speaker 1: and on that basis, we're gonna have a very very

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Speaker 1: tight system by two. Thank you. So I see higher

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Speaker 1: prices for global prices very quickly, higher prices for global prices.

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Speaker 1: Thank you very much for joining us. A pleasure. I

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Speaker 1: look forward to having you again because we didn't even

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Speaker 1: get into the whole kind of history of how the

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Speaker 1: liquefied natural gas came about and also some of the

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Speaker 1: challenges that you that you faced. Much appreciated for joining

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Speaker 1: A shriek Tuki. He is the co founder and chairman

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Speaker 1: of Tlaurean. Thank you very much. Our topic is the

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Speaker 1: world of retail and joining us as Bert Flickinger. He

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Speaker 1: is managing director Strategic Resource Group and he can be

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Speaker 1: followed on Twitter at Bert Underscore Flickinger. Bert. Great to

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Speaker 1: have you with us here in the studio. You know, uh,

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Speaker 1: Peter Barnes is in our Bloomberg one oh six one

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Speaker 1: studio in Boston, and maybe you could talk a little

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Speaker 1: bit about the geographical issues that are facing retail because

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Speaker 1: I was reading that in the support area of Boston,

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Speaker 1: for example, it's attracted you. If you want to get

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Speaker 1: retail space, you're gonna end up paying top dollar for that.

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Speaker 1: But a lot of other places are not so hot.

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Speaker 1: To give us the the lowdown precisely, pim Southport, South

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Speaker 1: Street seaports just booming in terms of customer accounts. They

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Speaker 1: got Primark from the UK, which is drawing a lot

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Speaker 1: of customers. They're doing off price full line department stores.

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Speaker 1: Sex Fifth Avenue downtown is one of the great Sex

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Speaker 1: Fifth Avenue stores in Boston is really really one of

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Speaker 1: the birthplaces of retail. Ben Camarada for t j X Incorporated. Um,

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Speaker 1: are you taking me to Fi Leans basement too? But

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Speaker 1: MRV wish to the great Chris Baldwin today at BJ's

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Speaker 1: Wholesale Club and a lot of great retailers, George de

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Speaker 1: Mulis and his Where where did all those great retailers go?

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Speaker 1: Because we got the results all right, Michael Core's stock

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Speaker 1: moves higher because they beat analyst estimates up like Ralph

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Speaker 1: Lauren the same story. But Macy's, J C. Penny Nordstrom,

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Speaker 1: Cole's what what kind of market are they facing? Tailor

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Speaker 1: two cities Nord from is making a lot of on

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Speaker 1: characteristic mistakes, similar to mistakes Target made in Canada, and

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Speaker 1: Canada's turning around to be really tough for Nords of Penn.

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Speaker 1: J C. Penny wins are Frank Blake Retailer Turnaround of

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Speaker 1: the Year Award. Marvin Ellison is doing a great job

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Speaker 1: with Steve set Off, former CEO of Sacks on the board,

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Speaker 1: Mike Alman, who u cleaned up the company when Bill

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Speaker 1: Ackman and Steve Roth left Penny on death store step

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Speaker 1: Penny's got great apparel, great price points five seven nine

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Speaker 1: dollars co exclusive with Disney Nike's coming in Adi DA.

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Speaker 1: But Sophora is the real story at j C. Penny.

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Speaker 1: When we were Paris, Sephora attracts more custos as many

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Speaker 1: customers consumers as the Eiffel Tower and the Eiffel Towers

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Speaker 1: opened more hours per day than Sephoras because they can't

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Speaker 1: control the Saphour crowds on Shaunsliz Sophor Cosmetics for Cosmetics

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Speaker 1: over six million customers a year. Sephora, Shawnsalise, Macy's is

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Speaker 1: doing a lot of exciting things. So we're seeing this

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Speaker 1: accelerating retail ice age consolidation where Barney's, Niemon Marcus Bergdorf

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Speaker 1: could file for bankruptcy, Bonton Group, Macy with its blowing

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Speaker 1: deal's company net consolidators as well, be Northstrom, as well

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Speaker 1: be Hudson Bay Sacks. So while it's tougher time now,

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Speaker 1: as you said, earnings up, sales soft, we see that

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Speaker 1: bouncing back, but they really have to do what's for

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Speaker 1: is doing so well in the UK when we're talking

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Speaker 1: to one of their co directors, what so foreign Harvey

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Speaker 1: Nichols are doing in London in terms of digital special

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Speaker 1: exciting events to your present point before going on air,

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Speaker 1: making clothes that people want to buy, great styles, great fabric,

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Speaker 1: great fit. The leaders are really in London and people

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Speaker 1: need to see that. And as you referenced, they're really

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Speaker 1: really exciting development with young designers too. But Bert, if

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Speaker 1: I'm a retail investor or even an institutional investor, should

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Speaker 1: I just sit on the sidelines for now and wait

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Speaker 1: until these these big big name company these like Macy's

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Speaker 1: and Pennies and Nordstrom's get their act together. Peter, You're

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Speaker 1: completely correct, sit on the sidelines until after Holiday seventeen.

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Speaker 1: The bankruptcy will start when they have to pay their

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Speaker 1: bills when the vendors don't fill up Tin Cup and

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Speaker 1: Tin Cup Week in February of eighteen, and then Macy's

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Speaker 1: and a number of the other son Nords from Hudson

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Speaker 1: Bay Sachs will be the real winners. And that's probably

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Speaker 1: the time to invest off off price. Anytimes a good time,

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Speaker 1: uh particularly with t j Ax. Well I was gonna, well,

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Speaker 1: go ahead, Peter. Well. I was also going to ask about,

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Speaker 1: you know, any specialty retailers that you like. You know,

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Speaker 1: I'm thinking about the foot lockers of the world, or

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Speaker 1: the bed baths and beyond. How are they survive, how

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Speaker 1: are they doing? Are they okay? And are they safe

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Speaker 1: places for investors? These days they're okay, But it really

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Speaker 1: depends on World World Cup and big athletic events in

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Speaker 1: off price what we really like. There was an article

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Speaker 1: in Barance this weekend that the dead on b JS

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Speaker 1: is trading at nine and UH five eighths per cent.

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Speaker 1: Dynamic new leader and Chris Baldwin and uh b J's

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Speaker 1: in the entire southeast and northeastern seaboard of the US

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Speaker 1: is really doing well and saving customers money, both individual

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Speaker 1: as well since institutional or commercial customers. Well, since you

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Speaker 1: mentioned wholesale clubs, I gotta ask you about Costco because

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Speaker 1: I mean that is the you know, that's the leader, right,

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Speaker 1: Costco is the leader. Lost Jeff Bradman, who was even

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Speaker 1: better than Sam Walton in terms of everything Jeff Bradman

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Speaker 1: and his dad did was a winner. They betted a

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Speaker 1: thousand in retail save families at Costco UH five six

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Speaker 1: thousand a year. During the supermarket strike the last decade,

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Speaker 1: Brotman would let about eight to ten Latino families when

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Speaker 1: we were in the market sign up on one Costco

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Speaker 1: membership card. They couldn't shop in the neighborhood supermarkets. Costco

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Speaker 1: has has stores that do up to five six million

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Speaker 1: a week high volume stores anywhere outside our pack and

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Speaker 1: save client in New Zealand and UH. Costco can beat

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Speaker 1: anybody and anything. And my former Procter and Gamble teammate

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Speaker 1: Mike Parrott's doing a great job as their chief merchant.

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Speaker 1: Hey Bert, Let's finish up though on with the online retailers.

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Speaker 1: You know, where do these companies hide in the face

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Speaker 1: of competition from Amazon, I mean, can they survive? Uh?

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Speaker 1: Even the well costco has its special niche obviously, but

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Speaker 1: what about the rest of these retailers. How do they

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Speaker 1: how do they compete against the Amazons of the world.

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Speaker 1: I'm gonna I'm gonna channel Peter. To Macy's credit, they

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Speaker 1: moved from the twentieth largest online retailer. Macy's dot com

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Speaker 1: is now ranked number seven in retail Richard Baker and

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Speaker 1: his team at Hudson Babe but guilt in off price

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Speaker 1: for sex fifth avenue and sex says off fiveth. So

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Speaker 1: a combination of bricks and clicks with I'm your channel's

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Speaker 1: great way to survive. But you're you're right, there's gonna

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Speaker 1: be darwinning destruction for the people that don't to it

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Speaker 1: ouch Darwinnie and destruction. You know, everybody, Let me just

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Speaker 1: focus on Walmart. I know we did. You know we

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Speaker 1: talked a little bit of Amazon. Walmart is serious about

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Speaker 1: online right very stock is up eight eight for Walmart

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Speaker 1: stock is up eighteen percent so far this year. They

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Speaker 1: pay a two and a half percent dividend and they're

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Speaker 1: not going quietly into the night. Not going quietly, and

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Speaker 1: it might be a Peter Barnes good good investment for now.

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Speaker 1: In eighteen Doug McMillan hand picked from Mr Sam Walton

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Speaker 1: out of Jonesboro, Arkansas. Uh, one of the first person

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Speaker 1: in seventeen years, Pim and Peter top merchant top store operators,

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Speaker 1: completely turning the company around. What and Walmart had a

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Speaker 1: lot of nepotism with Sam Walton's son Robbed and brother

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Speaker 1: in law running dot com. Now they have professionals running it,

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Speaker 1: and Walmart will win on land and online. All right,

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Speaker 1: I gotta tell you, I think sometimes my wife is

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Speaker 1: single handedly helping to keep t J Max and Walmart

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Speaker 1: up there because she's that those places all the time.

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Speaker 1: Your wife as smart as their summer interns of Goodbye Anywhere,

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Speaker 1: and they find the best fashions for for ten dollars.

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Speaker 1: This is your great producer, does uh? Sam Lang best

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Speaker 1: bargain's best prices. Peter, thanks very much. Bert Flickinger is

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Speaker 1: managing director Strategic Resource Group, and I want to thank

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Speaker 1: of course Peter Barnes, my guest host today. Let's turn

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Speaker 1: our attention now to yield. How do you get yield

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Speaker 1: in the yield starved environment? For example, the thirty year

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Speaker 1: right now pays two point seven nine the ten year

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Speaker 1: pays well, it doesn't pay very much more pace two

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Speaker 1: point to one percent. And for people that are looking

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Speaker 1: for yield, where are they gonna go? Well, maybe they're

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Speaker 1: gonna stop in Joel Beam's office. He's managing director senior

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Speaker 1: portfolio manager at Salient and the topic is real estate

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Speaker 1: investment trust. Joel, thank you very much for being with us,

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Speaker 1: Thanks for having me give us the lay of the

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Speaker 1: land when it comes to real estate investment trust. Because

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Speaker 1: we know that the income gets passed through untaxed to

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Speaker 1: the recipient, and the recipient pays the tax. But there

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Speaker 1: are a wide variety of reeds out there. Give us

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Speaker 1: some some understanding. Indeed, it's a trillion dollar market cap

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Speaker 1: and the the property exposure that's possible to access through

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Speaker 1: this marketplace is quite diverse, and it really reflects the

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Speaker 1: main street property markets. So there are shopping centers, office buildings, warehouses,

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Speaker 1: specialty um reachs like things that an't like prisons for instance.

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Speaker 1: I mean, there's all manner of commercial property available in

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Speaker 1: that trillion dollar market. What what do you specialize in

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Speaker 1: or what what do you recommending that people pay attention to? Currently,

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Speaker 1: we pay attention to the main food groups. So you

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Speaker 1: know it's largely it's it's uh industrial property, office property, UM,

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Speaker 1: retail hotels, so fairly standard fare um for us, and

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Speaker 1: I think right now they're there's you know, actually there's

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Speaker 1: quite a lot of dispersion that's come back into our market.

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Speaker 1: I mean, the prices have generally been a little bit

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Speaker 1: homogeneous over the last few years, and this year is

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Speaker 1: particularly with the retail sector you see getting knocked out

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Speaker 1: of bed. It's um, it's been a really interesting opportunity

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Speaker 1: to pick up some stock. And Joe Peter here in Boston,

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Speaker 1: you do right, and your most recent research note though

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Speaker 1: that people have to be really careful about the you know,

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Speaker 1: chasing yield here. Uh, you have to be kind of

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Speaker 1: selective can expand on that and so what what is

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Speaker 1: the risk right now in the reach space? Well, there's

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Speaker 1: always risk, um, this is nothing is riskless. And UM,

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Speaker 1: you know our our sector you know, certainly has some yield.

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Speaker 1: The stocks that trade at lower multiples and you know, um,

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Speaker 1: you know, I have a greater opportunity to get more

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Speaker 1: of your return and current yield and less in growth.

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Speaker 1: And if you um aren't careful, you know, sometimes you

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Speaker 1: can get exposed to companies that might have a dividend cut,

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Speaker 1: maybe they're overpaying. So you know, we all want yield,

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Speaker 1: but remember you can't We can't give you, and you

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Speaker 1: can't find what the Earth doesn't provide. And we are

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Speaker 1: in a low yield environment across the investment landscape, so

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Speaker 1: one must always be careful. And um, you know that's

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Speaker 1: my short advice somewhere. Yeah, and as with metals, which

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Speaker 1: we were just talking about in the last segment, Um,

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Speaker 1: your space is very interest rate sensitive and and we

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Speaker 1: have the Fed placed yet again to raise interest rates

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Speaker 1: potentially by the end of the year. How does that

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Speaker 1: play into all this? Well, long term real estate shouldn't

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Speaker 1: and doesn't really correlate with rate changes except that right now,

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Speaker 1: you know, we're living in an extraordinary time where the

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Speaker 1: entire investment landscape seems to be priced at a premium,

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Speaker 1: so as the overall return landscape moves, and that's primarily

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Speaker 1: risk free rates. Right, Um, there are certain sectors that

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Speaker 1: might be susceptible to it from a you know, from

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Speaker 1: a buying and selling in the markets every day point

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Speaker 1: of view. Long term, Um, you know, a bond can't

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Speaker 1: raise the rent um, like we can say on a

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Speaker 1: commercial property that we own. So so there isn't correlation

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Speaker 1: over the long term, but it's extremely important right now

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Speaker 1: where it seems well established that many things are expensive,

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Speaker 1: it's important to have a strategy. Um, you know, I

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Speaker 1: think the passive fad in today's environment is way long

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Speaker 1: in the tooth. Can you speak about one particular read

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Speaker 1: at all, Chatham Lodging Trust. They're based in Palm Beach, Florida,

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Speaker 1: and I think that they kind of quality. I mean,

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Speaker 1: I know they're in your fund, but there are a

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Speaker 1: read that's focused on the hospitality industry. Yeah, we think

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Speaker 1: it's a great company that's been a little bit choppy,

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Speaker 1: you know, performance wise, but the business is plotting along.

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Speaker 1: In our in our strategies, we try to have our

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Speaker 1: common stock hotel investments with limited service hotels because the

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Speaker 1: margins are better. Um so, you know, really great brands

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Speaker 1: like like Marriott Residents In and Hilton Garden In. You know,

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Speaker 1: really nice margins, great business. And in our more credit

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Speaker 1: oriented investments, we like we like more full service hotels,

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Speaker 1: like we have a big investment in Ashford hospit Mentality

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Speaker 1: Prime that you probably saw just to quickly. I just

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Speaker 1: said like that the dividend the yield on on Chatham

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Speaker 1: Lodging Trust symbol is c l dt uh six and

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Speaker 1: a half percent. Right now, Peter and Joel, you are

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Speaker 1: looking at harvesting some gains here, are you not? We

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Speaker 1: do that all the time, sir, so so what but

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Speaker 1: but specifically you're talking about harvesting gains and preferreds. Why? Well,

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Speaker 1: I think it's as I mentioned earlier, it seems well

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Speaker 1: established in the credit space, in particular that you know,

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Speaker 1: valuations are elevated and there seems to be you know,

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Speaker 1: really more you know, really more downside risk than than

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Speaker 1: upside opportunity for a lot of credit instruments. So we

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Speaker 1: are absolutely for years have been in block and tackle

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Speaker 1: mode sort of selling low yield where there's no more

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Speaker 1: upside in the price, and we've been trying to source

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Speaker 1: and buy opportunities for you know, a fair return and

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Speaker 1: some price stability and and upside. I want to thank

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Speaker 1: you very much for spending time of this coming in

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Speaker 1: a very interesting Joel Beam is a managing director senior

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Speaker 1: portfolio manager at Salient. The topic of course is reets

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Speaker 1: and just to mention that they manage the salient reats strategy.

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Speaker 1: It's called the Select Income Fund. Joining us is Eric Lacel.

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Speaker 1: He is the chief economist for URBC Global Asset Management.

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Speaker 1: They've got a mirror three billion dollars under management and

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Speaker 1: joining us from Toronto. And you know, Eric, maybe you

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Speaker 1: could give us a sort of non US perspective of

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Speaker 1: how the US economy looks to you and what is

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Speaker 1: it's uh, what are some of its strengths and some

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Speaker 1: of its weaknesses at the moment, Well, thanks for having

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Speaker 1: me to to me, it looks like it's doing pretty well.

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Speaker 1: I won't say it's necessarily broken, unambiguously clear of that

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Speaker 1: two percent to hurdle that has proven so hard to

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Speaker 1: overcome over the last eight or nine years, but is

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Speaker 1: an economy running towards the top end. I think of

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Speaker 1: what we've grown used to and you can see that

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Speaker 1: demonstrated in quite a lot of measures. Granted, the hard

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Speaker 1: data maybe not quite performing online with the soft data,

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Speaker 1: but overall it looks like there's been a pickup. I

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Speaker 1: don't know if we can attribute all of that back

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Speaker 1: to the election in November, just because there's a global

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Speaker 1: element to this, and there's a part of it that

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Speaker 1: started way back last summer. But I would say moving

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Speaker 1: fairly well right now. And I should say, as as

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Speaker 1: someone living to the north of the U. S. It's

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Speaker 1: something that's been beneficial to Canada as well. It's helped

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Speaker 1: Canada move quite nicely forward to but Erica Peter Barnes here,

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Speaker 1: a lot of the rise in the equity markets has

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Speaker 1: been attributed to the expectation that the new president's agenda

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Speaker 1: will get past and we'll help to stimulate the economy

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Speaker 1: even more if if if that, assuming that's what it needs.

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Speaker 1: But we haven't actually seen much of that agenda move forward,

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Speaker 1: and it looks like the markets are really kind of

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Speaker 1: hanging on tax reform. What about all that? Right Well,

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Speaker 1: I think that's absolutely fair, and I'll circle around to

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Speaker 1: that in a moment, but I would really make the

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Speaker 1: comment at same time that do keep in mind there

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Speaker 1: are some other things that work here. If financial conditions

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Speaker 1: in general are very favorable. There's a bit of a

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Speaker 1: rubber ball bounce effect from a tough start to two

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Speaker 1: thousand sixteen and so on, So there are other things

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Speaker 1: that work. I would say that what's maybe underappreciated by

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Speaker 1: the White House legacy. If I can say that so

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Speaker 1: far is there does seem to be a shift in

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Speaker 1: the deregulation environment. Not a lot of legislation, but a

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Speaker 1: lot of executive orders. They could change in terms of

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Speaker 1: the temperature in the room as well. And when I

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Speaker 1: look at various measures of concern about regulation, those are

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Speaker 1: already coming down. So I think there's been some progress there.

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Speaker 1: There's been that big boost in confidence, and don't make

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Speaker 1: me try and link it back coherently to some sort

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Speaker 1: of policy change, but that seems to have been linked

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Speaker 1: in part to the change of political landscape as well,

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Speaker 1: And then you're absolutely right, will we get tax cuts

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Speaker 1: doesn't look likely this year. I'm still budgeting for something

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Speaker 1: in two thousand eighteen, but that something has slowly been

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Speaker 1: whittled down to a much less exciting something than one

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Speaker 1: might have imagined in the fall of last year. So

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Speaker 1: I think there might be a bit of help in

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Speaker 1: two thousand eighteen. But other factors are and maybe the

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Speaker 1: most important and so far undiscussed one is that perhaps

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Speaker 1: a bit of that secular stagnation is fading, really just

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Speaker 1: for for chronological reasons, if nothing else. And this idea

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Speaker 1: that a negative confidence shock was maybe one of the

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Speaker 1: things that did in the global economy back in two

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Speaker 1: thousand and eight, two thousand nine, and maybe there's been

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Speaker 1: a positive confident shock, and whether it makes sense that

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Speaker 1: it happened or not, it has happened, and that might

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Speaker 1: be helping to pull us out of that secular stagnation

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Speaker 1: as well. And a good and a good point to

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Speaker 1: pivot to the FED with, because you know, obviously the

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Speaker 1: FED helped help this recovery along, most analysts would agree,

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Speaker 1: but now the FED is trying to, you know, reduce

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Speaker 1: its accommodation. What about what's your outlook for FED policy

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00:24:42,840 --> 00:24:45,439
Speaker 1: going forward for the rest of the year, right, I

430
00:24:45,480 --> 00:24:48,120
Speaker 1: wouldn't say I have an overly provocative one. It involves

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00:24:48,119 --> 00:24:50,919
Speaker 1: the assumption of probably a rate hike and probably a

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00:24:50,960 --> 00:24:53,439
Speaker 1: bit of draw down on the bond side, So fairly

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00:24:53,440 --> 00:24:55,359
Speaker 1: in line I would say, with where the market sits

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00:24:55,440 --> 00:24:58,040
Speaker 1: right now. But to me that the big question, certainly

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00:24:58,040 --> 00:24:59,919
Speaker 1: as investors, is just whether or not this is the

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00:25:00,080 --> 00:25:02,800
Speaker 1: right decision, whether it's a policy error or not. And

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00:25:02,840 --> 00:25:04,960
Speaker 1: I sit firmly in the camp that thinks this is

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00:25:05,000 --> 00:25:08,280
Speaker 1: the right thing to do. Granted, lots of ambiguity about

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00:25:08,280 --> 00:25:11,320
Speaker 1: what neutral or natural is and where eventually this all ends.

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00:25:11,359 --> 00:25:13,840
Speaker 1: But it does certainly make sense that rates are going up.

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00:25:14,000 --> 00:25:16,840
Speaker 1: I don't get too too concerned about the low wage story.

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00:25:16,880 --> 00:25:19,080
Speaker 1: It seems to me that this is clearly an economy

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00:25:19,080 --> 00:25:21,399
Speaker 1: getting fairly tight, and so it's it's probably the right

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00:25:21,440 --> 00:25:22,959
Speaker 1: thing to do in and so far the FED has

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00:25:22,960 --> 00:25:25,199
Speaker 1: acted reasonably in the market seems to be judging that

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00:25:25,280 --> 00:25:28,520
Speaker 1: as well. Hey, Eric, whatever camp you're in, I'm assuming

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00:25:28,560 --> 00:25:32,840
Speaker 1: that it's using Canadian lumber to build the houses, right,

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00:25:32,920 --> 00:25:36,560
Speaker 1: to build the cabins. That's right, all right, I'm leading

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00:25:36,600 --> 00:25:38,280
Speaker 1: you know where I'm leading you. I'm leading you down

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00:25:38,359 --> 00:25:41,320
Speaker 1: the NAFTA path, because you know, everyone thinks NAFTA and

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00:25:41,359 --> 00:25:44,880
Speaker 1: then you know, unless the President pays a visit to uh,

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00:25:45,000 --> 00:25:47,520
Speaker 1: you know the well. I mean, I guess I was

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00:25:47,520 --> 00:25:51,359
Speaker 1: gonna say Wisconsin or northern Michigan in order to uh

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Speaker 1: sort of talk about the timber trade or indeed even

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00:25:55,280 --> 00:25:58,639
Speaker 1: the the oil and energy trade from Canada Mexico is

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00:25:58,680 --> 00:26:01,560
Speaker 1: always the in the headline, what's your view of any

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00:26:01,720 --> 00:26:06,560
Speaker 1: possible renegotiation for for NAFTA and making it actually better? Yeah,

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00:26:06,680 --> 00:26:08,520
Speaker 1: I mean, this is a timely subject in the sense

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00:26:08,560 --> 00:26:11,560
Speaker 1: that the official negotiations start next week, to my knowledge,

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00:26:11,560 --> 00:26:13,920
Speaker 1: and so we will learn much more shortly. We learned

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00:26:14,040 --> 00:26:16,639
Speaker 1: a fair chunk last month, of course, when that that

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00:26:16,720 --> 00:26:19,159
Speaker 1: big eight teen page report came out of out of

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00:26:19,200 --> 00:26:22,520
Speaker 1: the White House proposing various NAFTA changes, And so in

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Speaker 1: terms of how that plays out, I'll confess I'm a

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00:26:25,400 --> 00:26:28,000
Speaker 1: little concerned. And it's not that anyone's proposing to tear

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00:26:28,160 --> 00:26:30,479
Speaker 1: NAFTA up. It's not that giant new tear ups are

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00:26:30,520 --> 00:26:33,440
Speaker 1: being proposed for any particular area. I worry more about

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00:26:33,520 --> 00:26:36,800
Speaker 1: almost the foundation of NAFTA and some of the aims there,

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00:26:36,880 --> 00:26:40,040
Speaker 1: and in particular some of the subtle changes. You're eliminating

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00:26:40,040 --> 00:26:43,360
Speaker 1: a trade resolution panel that that's actually quite important. Right now,

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00:26:43,400 --> 00:26:46,760
Speaker 1: disputes are resolved in an impartial way. If disputes instead

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00:26:46,800 --> 00:26:49,919
Speaker 1: are resolved by national courts, you get much less predictable

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00:26:49,920 --> 00:26:53,879
Speaker 1: and maybe much less free trade oriented outcomes. And similarly,

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00:26:53,880 --> 00:26:55,720
Speaker 1: one of the proposals in there is to allow what

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00:26:55,760 --> 00:26:58,760
Speaker 1: are called safeguard exclusions, and really what that means is

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00:26:58,800 --> 00:27:01,920
Speaker 1: if any sector is hurt by free trade, they can

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00:27:01,960 --> 00:27:04,760
Speaker 1: put tariffs on and these basic point of free trade is,

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00:27:04,760 --> 00:27:07,440
Speaker 1: isn't the hurt sectors, but sectors do get hurt along

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00:27:07,480 --> 00:27:09,959
Speaker 1: the way be a comparative advantage. And so I do

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00:27:10,000 --> 00:27:12,520
Speaker 1: worry that NAFTA could continue with no new tariffs but

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00:27:12,640 --> 00:27:15,919
Speaker 1: really be substantially defangd So consider me somewhat concerned. And

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00:27:15,920 --> 00:27:18,920
Speaker 1: of course that's hugely relevant for both Mexico and Canada.

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00:27:18,960 --> 00:27:21,040
Speaker 1: They are number two and three in terms of global

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00:27:21,080 --> 00:27:23,560
Speaker 1: trade linkages with the U S right after China. So

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00:27:23,600 --> 00:27:25,080
Speaker 1: it is a big deal, and I think that there

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00:27:25,119 --> 00:27:27,840
Speaker 1: are some more pernicious changes proposed than maybe the surface

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00:27:27,880 --> 00:27:31,200
Speaker 1: would suggest. Yeah, and the president's target is the sixty

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00:27:31,240 --> 00:27:36,240
Speaker 1: billion dollar trade deficit with Mexico. So what sectors of

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00:27:36,320 --> 00:27:38,840
Speaker 1: trade between the US and Mexico do you think are

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00:27:38,880 --> 00:27:41,560
Speaker 1: most at risk? And all of this, I suppose the

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00:27:41,560 --> 00:27:43,720
Speaker 1: motor vehicle one is is a side that gets the

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00:27:43,720 --> 00:27:47,280
Speaker 1: greatest attention, And indeed Mexico has been hugely successful in

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Speaker 1: terms of picking up a lot of production and manufacturing there.

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00:27:50,920 --> 00:27:53,080
Speaker 1: To me, though, I think this will get very complicated

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00:27:53,200 --> 00:27:56,719
Speaker 1: very quickly, given the supply chain linkages and the reimporting

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00:27:56,720 --> 00:27:58,680
Speaker 1: and re exporting of products that were made in one

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00:27:58,720 --> 00:28:01,480
Speaker 1: country and back to the other. It really manufacturing and

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00:28:01,720 --> 00:28:04,199
Speaker 1: autos being one of the flagship is the is the

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00:28:04,280 --> 00:28:06,359
Speaker 1: obvious one there. But you know, you do worry a

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00:28:06,359 --> 00:28:08,280
Speaker 1: little bit though about one of the aims that the

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00:28:08,359 --> 00:28:10,560
Speaker 1: US has here, which is that this goal to to

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00:28:10,640 --> 00:28:13,600
Speaker 1: achieve a more balanced trade trade balance, and so that

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00:28:13,680 --> 00:28:15,800
Speaker 1: that's a noble goal, but it's not clear whether a

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00:28:15,880 --> 00:28:18,800
Speaker 1: government can really achieve let me let me break in, Eric,

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00:28:18,880 --> 00:28:21,040
Speaker 1: because there's is there there's no evidence that having a

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00:28:21,080 --> 00:28:24,160
Speaker 1: trade balance one way or any other necessarily affects whether

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00:28:24,160 --> 00:28:26,320
Speaker 1: your economy is doing well or the people in your

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00:28:26,400 --> 00:28:29,320
Speaker 1: country are actually living well well. I agree with me,

509
00:28:29,720 --> 00:28:31,639
Speaker 1: and you know, Barry, I can Green would argue that

510
00:28:31,640 --> 00:28:34,359
Speaker 1: the exorbitant privilege is if you're the world's reserve currency

511
00:28:34,400 --> 00:28:37,000
Speaker 1: in the US certainly is then you almost by definition

512
00:28:37,080 --> 00:28:38,960
Speaker 1: right a trade deficit, and so I think it will

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00:28:39,000 --> 00:28:41,680
Speaker 1: be hard to eliminate. And simultaneously, the White House wants

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00:28:41,680 --> 00:28:44,360
Speaker 1: more business investment and fiscal stimulus, and of course that

515
00:28:44,400 --> 00:28:47,080
Speaker 1: means less aggregate national savings, and of course you need

516
00:28:47,120 --> 00:28:48,960
Speaker 1: to be a national net saver if you're going to

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00:28:49,040 --> 00:28:51,080
Speaker 1: run a current account surplus. So I'm not sure they'll

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00:28:51,080 --> 00:28:52,800
Speaker 1: be able to achieve that. That worries me a bit

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00:28:52,840 --> 00:28:56,240
Speaker 1: as well. Well. I was not asking that Ontario and

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00:28:56,280 --> 00:28:58,880
Speaker 1: the linkages in the Ontario economy with the United States,

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00:28:58,920 --> 00:29:00,800
Speaker 1: because if you stand at the Acida Bridge, you know,

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00:29:00,880 --> 00:29:03,400
Speaker 1: or the Bluewater Bridge with their building, I mean, it's

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00:29:03,520 --> 00:29:07,640
Speaker 1: basically a unified economy. It really is, yeah, massively, So

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00:29:07,880 --> 00:29:10,320
Speaker 1: that's right. And I can say from the Canadian perspective

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00:29:10,360 --> 00:29:14,240
Speaker 1: that three quarters of Canadian exports go to the U S.

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00:29:14,280 --> 00:29:17,400
Speaker 1: And gosh, it represents at least a quarter of Canadian GDP,

527
00:29:17,560 --> 00:29:19,680
Speaker 1: so huge on that side. Not quite as big on

528
00:29:19,720 --> 00:29:21,640
Speaker 1: the U S side, just because the U S economy

529
00:29:21,680 --> 00:29:24,200
Speaker 1: is so much bigger, but these are hugely integrated. There

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00:29:24,240 --> 00:29:26,880
Speaker 1: would be massive consequences both for the border states in

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00:29:26,880 --> 00:29:29,640
Speaker 1: the US and also for Ontario in particular, but some

532
00:29:29,680 --> 00:29:32,400
Speaker 1: of the other manufacturing and exporting hubs as well. So

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00:29:32,440 --> 00:29:34,000
Speaker 1: it's it's a big deal for all of us. It's

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00:29:34,000 --> 00:29:36,160
Speaker 1: a middling sized deal I think for all of you.

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00:29:36,400 --> 00:29:39,800
Speaker 1: Were slightly reassured that behind the scenes, one hears that

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00:29:39,800 --> 00:29:42,160
Speaker 1: Trump isn't focused on Canada. Canada is getting caught up

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00:29:42,200 --> 00:29:45,040
Speaker 1: and there's nevertheless, thanks very much. Eric la Cell, chief

538
00:29:45,040 --> 00:29:51,640
Speaker 1: economist RBC Global Asset Management, joining US from Toronto. Thanks

539
00:29:51,640 --> 00:29:54,280
Speaker 1: for listening to the Bloomberg P and L podcast. You

540
00:29:54,320 --> 00:29:58,080
Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,

541
00:29:58,200 --> 00:30:01,680
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm

542
00:30:01,720 --> 00:30:05,240
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa

543
00:30:05,280 --> 00:30:08,400
Speaker 1: abramoids one before the podcast, you can always catch us

544
00:30:08,480 --> 00:30:10,040
Speaker 1: worldwide on Bloomberg Radio