1 00:00:00,080 --> 00:00:12,799 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:12,840 --> 00:00:16,239 Speaker 1: with David Gura. Daily we bring you insight from the 3 00:00:16,239 --> 00:00:21,640 Speaker 1: best of economics, finance, investment, and international relations. Find Bloomberg 4 00:00:21,720 --> 00:00:27,000 Speaker 1: Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 5 00:00:27,320 --> 00:00:34,960 Speaker 1: on the Bloomberg Doug Bando is not removed from our 6 00:00:35,000 --> 00:00:39,360 Speaker 1: debate on international relations. He's with the libertarian Cato Institute. 7 00:00:39,400 --> 00:00:42,159 Speaker 1: I'm gonna call him a conservative. Doug, you had a 8 00:00:42,200 --> 00:00:45,800 Speaker 1: tour of duty with President Ronald Reagan. Let me start 9 00:00:45,840 --> 00:00:50,559 Speaker 1: with the what if? What would Reagan do? I think 10 00:00:50,600 --> 00:00:53,440 Speaker 1: Regan would be tough, but he wouldn't talk the way 11 00:00:53,440 --> 00:00:56,880 Speaker 1: that President Trump has done. He'd recognized it as a superpower. 12 00:00:56,920 --> 00:00:59,360 Speaker 1: We don't have to ratchet up the pressure. He'd make 13 00:00:59,480 --> 00:01:02,920 Speaker 1: very clear any attack on the America's America would be 14 00:01:02,960 --> 00:01:06,440 Speaker 1: responded to. But I think he'd also looked for negotiation. 15 00:01:06,520 --> 00:01:08,560 Speaker 1: I think he'd looked for that back door channel. He 16 00:01:08,640 --> 00:01:11,880 Speaker 1: did that with the Soviets. You know, regular is a 17 00:01:11,880 --> 00:01:13,560 Speaker 1: man who understood you had to be tough, but you 18 00:01:13,600 --> 00:01:15,440 Speaker 1: have to look for diplomatic solutions. We have to have 19 00:01:15,520 --> 00:01:19,280 Speaker 1: both those possibilities and also suggested he had a respect 20 00:01:19,319 --> 00:01:24,880 Speaker 1: for the intelligence community. Chosan Hung has without question the 21 00:01:24,920 --> 00:01:27,479 Speaker 1: read of the Morning. It is a link the article 22 00:01:27,560 --> 00:01:30,639 Speaker 1: on the leader of North Korea in the New York Times. 23 00:01:30,640 --> 00:01:34,119 Speaker 1: It is a spectacular read of his Pulitzer Prize winning 24 00:01:34,760 --> 00:01:37,640 Speaker 1: history in Korea. Doug, do we know who this guy 25 00:01:37,880 --> 00:01:40,679 Speaker 1: is and his President Trump have a clue who he's 26 00:01:40,800 --> 00:01:44,320 Speaker 1: up against? I'm skeptical of the President does. I mean, 27 00:01:44,319 --> 00:01:46,920 Speaker 1: at least his reputation as somebody who doesn't particularly like 28 00:01:47,000 --> 00:01:51,400 Speaker 1: to be briefed and particularly doesn't like to have long briefings. 29 00:01:51,440 --> 00:01:53,840 Speaker 1: So my guess is that he's responding much more kind 30 00:01:53,880 --> 00:01:56,120 Speaker 1: of out of his gut in many ways. I think 31 00:01:56,120 --> 00:01:58,840 Speaker 1: there are certain similarities, oddly enough, between Kim Jong Hoon 32 00:01:58,920 --> 00:02:02,640 Speaker 1: and President Trump and the they respond more emotional, more impulsive, 33 00:02:03,200 --> 00:02:06,000 Speaker 1: and that that that's the reason that's caused for concern. 34 00:02:06,040 --> 00:02:08,280 Speaker 1: I don't think either man wants war, but you get 35 00:02:08,280 --> 00:02:10,840 Speaker 1: a couple of guys kind of being tough against one another, 36 00:02:11,080 --> 00:02:13,760 Speaker 1: things could spire a lot of control. The question here 37 00:02:13,760 --> 00:02:17,080 Speaker 1: about Reagan's rhetoric. We talked so much about his sweeping rhetoric, 38 00:02:17,120 --> 00:02:19,200 Speaker 1: his ability to give a speech that would galvanize the 39 00:02:19,360 --> 00:02:22,799 Speaker 1: the the American people. Uh. Compare the speeches. He gave 40 00:02:22,840 --> 00:02:25,079 Speaker 1: his appreciation for rhetoric to what we're hearing from from 41 00:02:25,080 --> 00:02:27,560 Speaker 1: President Trump. I look at look at the tweets. I 42 00:02:27,600 --> 00:02:30,360 Speaker 1: certainly I'm still focused on that fire and fury line. 43 00:02:30,360 --> 00:02:32,639 Speaker 1: How much of that was was Reagan himself? How much 44 00:02:32,680 --> 00:02:37,000 Speaker 1: of that was a very closely coordinated communications team. Well, 45 00:02:37,080 --> 00:02:39,560 Speaker 1: it's both. I mean Reagan had a very good sense. 46 00:02:39,600 --> 00:02:43,280 Speaker 1: I mean he understood, for example, you know, joke calling 47 00:02:43,320 --> 00:02:46,000 Speaker 1: the evil Empire. He was trying to reach you, Soviets, 48 00:02:46,000 --> 00:02:48,680 Speaker 1: he was trying to reach especially Eastern Europeans. He had 49 00:02:48,720 --> 00:02:51,880 Speaker 1: an audience in mind, but under Gorbitsav At one point 50 00:02:51,919 --> 00:02:53,880 Speaker 1: he was asked, do you still consider the Soviet an 51 00:02:53,960 --> 00:02:56,240 Speaker 1: evil empire? And he basically said that was in the past. 52 00:02:56,639 --> 00:02:59,639 Speaker 1: I'm looking forward, you know. And he had a communications 53 00:02:59,680 --> 00:03:03,680 Speaker 1: team would monitor things. Very concerned about dealing with the Soviets, 54 00:03:03,720 --> 00:03:05,960 Speaker 1: but Reagan was quite willing to buck them when he 55 00:03:05,960 --> 00:03:08,880 Speaker 1: thought it was necessary, being prepared to make a deal. 56 00:03:08,919 --> 00:03:10,840 Speaker 1: But he was prepared to be tougher as well. And 57 00:03:10,960 --> 00:03:13,799 Speaker 1: for example, the Berlin Wall, the line, you know, Mr 58 00:03:13,800 --> 00:03:17,160 Speaker 1: Gorbachev tear down this wall, Reagan kept putting that in 59 00:03:17,200 --> 00:03:20,080 Speaker 1: when staff members were taking it out. His view was, 60 00:03:20,240 --> 00:03:23,000 Speaker 1: this is a clarion call we've got to make. But 61 00:03:23,080 --> 00:03:25,960 Speaker 1: compare that, I think to President Trump. Reagan had a 62 00:03:26,000 --> 00:03:28,320 Speaker 1: specific objective there in terms of who he was trying 63 00:03:28,360 --> 00:03:30,600 Speaker 1: to reach in a way that I think President Trump 64 00:03:30,639 --> 00:03:33,280 Speaker 1: is kind of blustering. I think that's the difference. Doug. 65 00:03:33,320 --> 00:03:35,240 Speaker 1: I draw a line here between what you've written what 66 00:03:35,720 --> 00:03:38,040 Speaker 1: Ambassador Susan Rice writes in the New York Times this morning. 67 00:03:38,080 --> 00:03:39,760 Speaker 1: You've said, there's plenty of evidence that the leader North 68 00:03:39,800 --> 00:03:42,200 Speaker 1: Korea is ruthless and cruel, but none that he's blind 69 00:03:42,360 --> 00:03:45,560 Speaker 1: or suicidal. She writes, by most as sentiments, he's vicious 70 00:03:45,560 --> 00:03:48,760 Speaker 1: and impetuous, but not irrational. Does the rhetoric that we 71 00:03:48,840 --> 00:03:53,600 Speaker 1: hear here match the risk? Well, I think illogically there 72 00:03:53,640 --> 00:03:55,760 Speaker 1: should not be much of her risk. That is the 73 00:03:55,840 --> 00:03:58,960 Speaker 1: northers response got a weakness. They're scared. I mean, they 74 00:03:59,040 --> 00:04:01,440 Speaker 1: point to Afghani stand, they point to a rock. Frankly, 75 00:04:01,440 --> 00:04:04,080 Speaker 1: they point to Libya where the dictator made a deal, 76 00:04:04,120 --> 00:04:06,200 Speaker 1: gave up these nukes and missiles, and look what happened 77 00:04:06,200 --> 00:04:09,600 Speaker 1: to him. So this bluster, I think covers that up. 78 00:04:10,080 --> 00:04:11,640 Speaker 1: You know, they don't want to start a war, they 79 00:04:11,680 --> 00:04:14,640 Speaker 1: want to keep America out. On the other hand, if 80 00:04:14,640 --> 00:04:17,080 Speaker 1: you start calling one on one with the United States 81 00:04:17,160 --> 00:04:21,120 Speaker 1: you start talking about dropping missiles near American possessions, I 82 00:04:21,160 --> 00:04:25,240 Speaker 1: think they've kind of underestimated Americans. You're willingness to put 83 00:04:25,279 --> 00:04:28,080 Speaker 1: up with this stuff, David Girl bring back the esteemed 84 00:04:28,160 --> 00:04:32,919 Speaker 1: uh Mr Bando Cato. But I'm trying to put in 85 00:04:33,000 --> 00:04:36,080 Speaker 1: scope and scale North Korea, which is difficult with the data. 86 00:04:36,760 --> 00:04:40,400 Speaker 1: But the economy of North Korea is on first order, 87 00:04:40,960 --> 00:04:44,279 Speaker 1: two percent the size of New York City's economy. And 88 00:04:44,360 --> 00:04:46,880 Speaker 1: that's just some back of the envelope, back of the 89 00:04:46,920 --> 00:04:51,360 Speaker 1: bow time math. It maybe fo but my quick math 90 00:04:51,480 --> 00:04:54,120 Speaker 1: is two percent the size of the New York City 91 00:04:54,160 --> 00:04:56,840 Speaker 1: economy and greater New York Tug Bando, senior fellow with 92 00:04:56,839 --> 00:04:59,200 Speaker 1: the Kato wins Too, former special assistant to a President 93 00:04:59,279 --> 00:05:01,279 Speaker 1: Ronald Ring and Doug As. I understand you were in 94 00:05:01,320 --> 00:05:03,920 Speaker 1: North Korea rather recently, and just give us a sense 95 00:05:03,960 --> 00:05:07,200 Speaker 1: of how that visit has has shaped your sense of 96 00:05:07,360 --> 00:05:11,200 Speaker 1: this conflict in particular. Sure, and if you're thinking about comparisons, 97 00:05:11,200 --> 00:05:13,800 Speaker 1: it's about the economy of Anchorage. I mean that's the 98 00:05:13,839 --> 00:05:17,480 Speaker 1: economy North Korea. Thank you, you're welcome. I was I 99 00:05:17,520 --> 00:05:19,320 Speaker 1: was there twenty five years ago, so I had a 100 00:05:19,320 --> 00:05:21,920 Speaker 1: point of comparison. I mean, kiel Young has more money 101 00:05:21,960 --> 00:05:24,960 Speaker 1: today than it did twenty five years ago. The countryside 102 00:05:24,960 --> 00:05:28,000 Speaker 1: remains desperately poor. As you pointed out, it's got about 103 00:05:28,000 --> 00:05:30,920 Speaker 1: five percent of the economy of South Korea. I mean, 104 00:05:31,120 --> 00:05:33,599 Speaker 1: you know, you compare Soul, South Korea, and you know 105 00:05:33,680 --> 00:05:36,640 Speaker 1: Kyong Young. I mean, there's no comparison, at least today. 106 00:05:36,680 --> 00:05:39,680 Speaker 1: There's some private cars in North and Killing Young. There's 107 00:05:39,720 --> 00:05:42,080 Speaker 1: cell phones. They're not supposed to reach outside of the country, 108 00:05:42,080 --> 00:05:45,840 Speaker 1: but they are there. If fashionists come to Pyongyang, women 109 00:05:45,920 --> 00:05:49,279 Speaker 1: dressed nice, minister pretty plain, you know, so it's you 110 00:05:49,279 --> 00:05:51,479 Speaker 1: can see a little bit of economic life there that 111 00:05:51,600 --> 00:05:55,480 Speaker 1: Kim Jong un clearly wants economic development. His father, I think, 112 00:05:55,600 --> 00:05:58,720 Speaker 1: viewed it as being destabilizing and frankly didn't care very much. 113 00:05:59,560 --> 00:06:02,479 Speaker 1: But it were means desperately far behind the US. I 114 00:06:02,480 --> 00:06:05,680 Speaker 1: mean desperately far behind South Korea. That's one of the 115 00:06:05,720 --> 00:06:09,799 Speaker 1: things that fuels this kind of rabid nationalism and the bluster. 116 00:06:10,560 --> 00:06:12,280 Speaker 1: All they have to do is look south. I mean, 117 00:06:12,320 --> 00:06:16,039 Speaker 1: any North Korean who visits another country, almost any other 118 00:06:16,080 --> 00:06:19,960 Speaker 1: country knows how far behind they are. We talk a 119 00:06:20,000 --> 00:06:23,279 Speaker 1: lot about the trade relationship between North Korea and China, 120 00:06:23,839 --> 00:06:26,520 Speaker 1: given given the focus of that relationship as we talk 121 00:06:26,560 --> 00:06:29,239 Speaker 1: about sanctions at the UN Security Council, and we certainly 122 00:06:29,240 --> 00:06:30,760 Speaker 1: hear the present talking about Chinese and the need for 123 00:06:30,839 --> 00:06:32,880 Speaker 1: China to do more. How does that play out when 124 00:06:32,920 --> 00:06:36,000 Speaker 1: you're on the ground there. How evident is the is 125 00:06:36,040 --> 00:06:39,720 Speaker 1: that trading relationship. It's actually not very evident at all. 126 00:06:39,800 --> 00:06:43,279 Speaker 1: What's interesting is despite the trading relationship, the relations between 127 00:06:43,279 --> 00:06:45,919 Speaker 1: the two governments is not good. You know that. I 128 00:06:45,920 --> 00:06:48,760 Speaker 1: mean tradition. The North Koreans are very independent. They don't 129 00:06:48,800 --> 00:06:51,400 Speaker 1: want to be a province of China. Back in the fifties, 130 00:06:51,440 --> 00:06:54,440 Speaker 1: the dictator took out kind of the pro China faction 131 00:06:54,920 --> 00:06:57,839 Speaker 1: within the North Korean Communist Party, to the consternation of 132 00:06:57,880 --> 00:07:00,840 Speaker 1: the Chinese. You know, what you find is a lot 133 00:07:00,880 --> 00:07:04,680 Speaker 1: of dismissiveness and complaints about China in their media. And 134 00:07:04,680 --> 00:07:06,720 Speaker 1: what was striking. I went to the war museum, they 135 00:07:06,720 --> 00:07:10,080 Speaker 1: call it the Victorious Fatherland War Museum, and basically you 136 00:07:10,080 --> 00:07:12,040 Speaker 1: would think that Kim Il sung won the war on 137 00:07:12,120 --> 00:07:15,080 Speaker 1: his own you wouldn't be aware that somewhere along the 138 00:07:15,120 --> 00:07:18,040 Speaker 1: line a few hundred thousand Chinese troops showed up. I mean, 139 00:07:18,080 --> 00:07:21,960 Speaker 1: this museum presents this is almost entirely a victory of 140 00:07:21,960 --> 00:07:24,200 Speaker 1: the North Koreans. I mean, China is not even mentioned. 141 00:07:24,200 --> 00:07:27,240 Speaker 1: That kind of thing irritates the Chinese, especially because the 142 00:07:27,280 --> 00:07:30,120 Speaker 1: son of the dictator, Mause Dung died in North Korea. 143 00:07:30,440 --> 00:07:32,120 Speaker 1: You know, I was buried there. I mean, it's a 144 00:07:32,240 --> 00:07:35,840 Speaker 1: very strange relationship, and that that economic side, they don't 145 00:07:35,880 --> 00:07:39,640 Speaker 1: advertise that there the Chinese are involved. They buy minerals 146 00:07:39,880 --> 00:07:42,720 Speaker 1: until recently, call and other stuff, you know, but they 147 00:07:42,720 --> 00:07:45,880 Speaker 1: don't highlight that. Doug I returned to this op ed 148 00:07:45,960 --> 00:07:47,920 Speaker 1: in The Times this morning by Susan Rice from a 149 00:07:48,000 --> 00:07:52,040 Speaker 1: national security advisor. She she writes about preventative war, a 150 00:07:52,040 --> 00:07:53,640 Speaker 1: phrase that we've heard a few times here over these 151 00:07:53,720 --> 00:07:56,240 Speaker 1: last couple of weeks, and she writes that would result 152 00:07:56,280 --> 00:07:59,160 Speaker 1: in hundreds of thousands, if not millions, of casualties metropolitan 153 00:07:59,160 --> 00:08:01,920 Speaker 1: souls twenty six million people are only thirty five miles 154 00:08:01,920 --> 00:08:04,520 Speaker 1: from the border, within easy range of the North missiles 155 00:08:04,560 --> 00:08:07,200 Speaker 1: and artillery. She also notes twenty three thou United States 156 00:08:07,200 --> 00:08:10,840 Speaker 1: troops plus their families live between Seoul and the demilitarized Zone, 157 00:08:10,840 --> 00:08:14,520 Speaker 1: and total at least two thousand Americans reside in South Korea. 158 00:08:14,960 --> 00:08:18,119 Speaker 1: Give us your sense of of the calculus policy makers 159 00:08:18,160 --> 00:08:20,640 Speaker 1: in the Pentagon are going through right now. Of course, 160 00:08:20,680 --> 00:08:23,600 Speaker 1: we had Secretary Maddis on the West coast last evening 161 00:08:23,600 --> 00:08:26,560 Speaker 1: talking to reporters about this, talking solemnly about all the 162 00:08:26,600 --> 00:08:29,120 Speaker 1: preparation that he's been doing, because indeed that is a 163 00:08:29,360 --> 00:08:31,840 Speaker 1: huge component of of his job. What's happening in the 164 00:08:31,840 --> 00:08:35,360 Speaker 1: policy planning department at the Defense Department right now, Well, 165 00:08:35,400 --> 00:08:38,400 Speaker 1: my sense is that, I mean Maddis is until recently 166 00:08:38,400 --> 00:08:40,640 Speaker 1: has talked about how diplomacies deans. So this is not 167 00:08:40,720 --> 00:08:44,120 Speaker 1: a guy looking towards some kind of preventative war. I 168 00:08:44,120 --> 00:08:46,720 Speaker 1: mean he understands the seriousness of it. I mean Matdis 169 00:08:46,760 --> 00:08:49,520 Speaker 1: is a very serious guy and understands the costs of war. 170 00:08:50,040 --> 00:08:52,760 Speaker 1: I think that his statements, though tough, I think in 171 00:08:52,800 --> 00:08:55,200 Speaker 1: many ways you're trying to calm things down a bit 172 00:08:55,640 --> 00:08:57,560 Speaker 1: by making it very clear that you know, we would 173 00:08:57,559 --> 00:09:00,960 Speaker 1: retaliate against anything we're capable of doing it. The North 174 00:09:01,000 --> 00:09:03,640 Speaker 1: had better not act. I don't think that he expects 175 00:09:03,640 --> 00:09:05,840 Speaker 1: North Korea to do so again. I don't think people 176 00:09:05,840 --> 00:09:08,400 Speaker 1: have seen North Korea as being suicidal. I like to 177 00:09:08,440 --> 00:09:11,760 Speaker 1: tell people Kim Jong Oon, like his father and grandfather, 178 00:09:11,880 --> 00:09:14,760 Speaker 1: wants his virgins in this life, not the next. This 179 00:09:14,840 --> 00:09:16,840 Speaker 1: is not a guy who's thinking of wouldn't it be 180 00:09:16,840 --> 00:09:19,640 Speaker 1: wonderful to go out in a bit of glory. He 181 00:09:19,720 --> 00:09:22,920 Speaker 1: wants to preserve the regime. So I think they're looking 182 00:09:23,000 --> 00:09:26,239 Speaker 1: at particularly the questions of mistake. They're worried about escalation. 183 00:09:26,720 --> 00:09:28,280 Speaker 1: I mean, if you wanted to try to take out 184 00:09:28,360 --> 00:09:30,840 Speaker 1: nuclear sights as they're a way you could convince the 185 00:09:30,880 --> 00:09:33,240 Speaker 1: North Koreans it was not the beginning of regime change. 186 00:09:33,640 --> 00:09:36,680 Speaker 1: To me, that's the biggest problem. If the North Koreans 187 00:09:36,760 --> 00:09:40,400 Speaker 1: merely thought you were taking out, say their missile, they 188 00:09:40,480 --> 00:09:42,800 Speaker 1: might decide it's not worth starting a war. But if 189 00:09:42,840 --> 00:09:45,800 Speaker 1: they're convinced this is merely a prelude to an all 190 00:09:45,800 --> 00:09:49,800 Speaker 1: out American attack all Iraq, then I think the lesson 191 00:09:49,840 --> 00:09:52,400 Speaker 1: they learned is you don't wait for the US. You go. 192 00:09:52,720 --> 00:09:56,520 Speaker 1: You started. What you know, if they do a missile 193 00:09:56,640 --> 00:09:58,160 Speaker 1: or whatever they do, I don't want to sound like 194 00:09:58,160 --> 00:10:01,079 Speaker 1: a no ballistics or whatever it's called. And they point 195 00:10:01,160 --> 00:10:04,120 Speaker 1: the things self you know, usually they pointed east if 196 00:10:04,120 --> 00:10:07,400 Speaker 1: you will, in the vicinity of Japan with a capital J. 197 00:10:08,559 --> 00:10:11,280 Speaker 1: What would you expect would be anyone's response if they 198 00:10:11,360 --> 00:10:15,280 Speaker 1: change the vector of that missile launch and pointed selfish 199 00:10:16,280 --> 00:10:19,040 Speaker 1: in the vicinity of Guam, and I mean a thousand 200 00:10:19,040 --> 00:10:22,360 Speaker 1: miles of Guam. But what would be the vector change 201 00:10:22,360 --> 00:10:25,000 Speaker 1: that we would see. Well, my guess is that they've 202 00:10:25,040 --> 00:10:27,959 Speaker 1: monitored very closely. What they try to do is get 203 00:10:28,000 --> 00:10:30,880 Speaker 1: a sense does this look like another test that's going 204 00:10:30,920 --> 00:10:33,839 Speaker 1: to land the ways away or do you actually think 205 00:10:33,880 --> 00:10:36,840 Speaker 1: there's a possibility this could hit. I mean again, one 206 00:10:36,920 --> 00:10:40,960 Speaker 1: missile being shot off. It's almost impossible to imagine that 207 00:10:41,000 --> 00:10:43,880 Speaker 1: would be an attack on Guam because that would be 208 00:10:43,920 --> 00:10:48,199 Speaker 1: the craziest thing imaginable, very unlikely, but still, I mean, 209 00:10:48,240 --> 00:10:49,959 Speaker 1: at the Pentagon, you have to watch that stuff. So 210 00:10:50,000 --> 00:10:51,400 Speaker 1: I think that's what they would look at. And then 211 00:10:51,440 --> 00:10:53,840 Speaker 1: they decide that they think they could take it down. 212 00:10:53,880 --> 00:10:56,360 Speaker 1: The question they do have a sad battery there, you know, 213 00:10:56,360 --> 00:10:58,960 Speaker 1: an anti missile battery. They have to decide could they 214 00:10:59,000 --> 00:11:01,280 Speaker 1: take it out in the terminal phases is coming down 215 00:11:01,720 --> 00:11:03,480 Speaker 1: and if they thought it was coming too close they 216 00:11:03,559 --> 00:11:07,240 Speaker 1: might try that. There's been a lot of criticism of 217 00:11:07,240 --> 00:11:10,400 Speaker 1: previous administrations for not having done more. Eli Lake a 218 00:11:10,480 --> 00:11:13,080 Speaker 1: columnst for bloom Review, writting about that this week that 219 00:11:13,440 --> 00:11:15,120 Speaker 1: you know, there was opportunity in the past before North 220 00:11:15,200 --> 00:11:17,760 Speaker 1: Korea got to where it is today, miniaturizing a nuclear weapon, 221 00:11:17,800 --> 00:11:21,040 Speaker 1: testing these intercontinental ballistic missiles. Take us back to when 222 00:11:21,040 --> 00:11:23,319 Speaker 1: you were in the Reagan White House. To what degree 223 00:11:23,360 --> 00:11:27,199 Speaker 1: was North Korea then on the radar? Oh, it really 224 00:11:27,280 --> 00:11:29,320 Speaker 1: wasn't at all. I mean, the Soviet Union was the 225 00:11:29,320 --> 00:11:31,720 Speaker 1: big issue. I mean, we were still dealing in the 226 00:11:31,760 --> 00:11:34,319 Speaker 1: early days with the Soviet Union as the evil Empire. 227 00:11:34,360 --> 00:11:36,600 Speaker 1: We had bression of you know, I mean the the 228 00:11:36,600 --> 00:11:39,199 Speaker 1: the kind of general secretaries. You got Andropov, who is 229 00:11:39,240 --> 00:11:42,079 Speaker 1: a former KGB chief. You know, so the US is 230 00:11:42,120 --> 00:11:45,440 Speaker 1: worried about a real chance nuclear exchange with the real 231 00:11:45,559 --> 00:11:48,800 Speaker 1: nuclear power. If we weren't even talking about nuclear weapons 232 00:11:48,840 --> 00:11:52,079 Speaker 1: for North Korea, then it was a very small subset 233 00:11:52,600 --> 00:11:54,640 Speaker 1: that it became kind of the bigger issue. In the 234 00:11:54,640 --> 00:11:58,000 Speaker 1: Soviet Union went away, it's China went away. They're kind 235 00:11:58,040 --> 00:12:00,600 Speaker 1: of left is the real bad guys. I've never asked 236 00:12:00,600 --> 00:12:03,240 Speaker 1: this question because it's never gone through my puny little brain. 237 00:12:03,880 --> 00:12:08,559 Speaker 1: My experience of so called nuclear is either movies, cinema, Hollywood. 238 00:12:09,160 --> 00:12:11,440 Speaker 1: I guess we dropped two bombs on Japan a few 239 00:12:11,840 --> 00:12:16,760 Speaker 1: years ago. Have we ever done a supposed modern nuclear exchange? 240 00:12:16,880 --> 00:12:20,640 Speaker 1: Is this like to the military people? Is this all 241 00:12:20,679 --> 00:12:24,240 Speaker 1: as new as it is for us? Oh? Yeah, because 242 00:12:24,280 --> 00:12:27,160 Speaker 1: I mean certainly our nuclear weapons and the hydrogen bombs 243 00:12:27,160 --> 00:12:29,680 Speaker 1: are far more powerful. I mean what you find is 244 00:12:29,960 --> 00:12:33,679 Speaker 1: people occasionally say this warhead has the power of say 245 00:12:33,800 --> 00:12:36,840 Speaker 1: ten of the bombs that were dropped on near Hiroshima 246 00:12:36,920 --> 00:12:39,080 Speaker 1: or something. I mean, we are in a different world 247 00:12:39,120 --> 00:12:42,840 Speaker 1: the father than of multiple nukes falling. We have merved warheads. 248 00:12:42,880 --> 00:12:45,800 Speaker 1: We have multiple warheads on a missile. I mean, you know, 249 00:12:45,840 --> 00:12:49,200 Speaker 1: we have miniaturized, we have tactical We're in such a 250 00:12:49,320 --> 00:12:51,640 Speaker 1: vastly different world here that you know, the US has 251 00:12:51,679 --> 00:12:54,080 Speaker 1: a quite an arsenal. I mean North Koreans we think 252 00:12:54,160 --> 00:12:57,760 Speaker 1: might have about twenty maybe nuclear warheads of you know, 253 00:12:57,840 --> 00:12:59,719 Speaker 1: we have no idea really how how they could to 254 00:12:59,760 --> 00:13:03,560 Speaker 1: be toployed and presented. The US has a vast arsenal. 255 00:13:03,800 --> 00:13:05,559 Speaker 1: You get into a nuclear it's change, and you know 256 00:13:05,640 --> 00:13:07,360 Speaker 1: the North can do some harm the U S can 257 00:13:07,400 --> 00:13:10,560 Speaker 1: wipe out the North without any question. Great to speak 258 00:13:10,559 --> 00:13:12,440 Speaker 1: to you, very valid briefly this morn. Yeah, Doug Band 259 00:13:12,800 --> 00:13:16,760 Speaker 1: from Anchorage. That's very good. That parallel useful as well. 260 00:13:16,840 --> 00:13:19,040 Speaker 1: Doug banda senior fell at the Cato Institute, former special 261 00:13:19,040 --> 00:13:34,360 Speaker 1: assistant to presidents around Reagan on our phone lines. Always 262 00:13:34,360 --> 00:13:36,679 Speaker 1: good on a Friday to speak to Jeffrey Rosenberg. He 263 00:13:36,840 --> 00:13:41,520 Speaker 1: synthesizes the financial and the mathiness of what we do 264 00:13:42,080 --> 00:13:46,319 Speaker 1: with where do I get some yield? Among other great services. 265 00:13:46,360 --> 00:13:51,360 Speaker 1: He writes a note for black Rock with uncommonly smart charts. Jeffrey, 266 00:13:51,360 --> 00:13:55,240 Speaker 1: if we get inflation today in twenty eight minutes, if 267 00:13:55,280 --> 00:13:59,200 Speaker 1: we get another inflation report comes September and then we 268 00:13:59,360 --> 00:14:03,520 Speaker 1: staggered was September twenty FED meeting? Do any of those 269 00:14:03,559 --> 00:14:08,199 Speaker 1: inflation port reports really matter? Yeah? Thanks Tom. You know 270 00:14:08,600 --> 00:14:12,040 Speaker 1: they do matter because the FED is telling a narrative 271 00:14:12,280 --> 00:14:17,000 Speaker 1: of transitory weakness. So the inflation prints that come in 272 00:14:17,000 --> 00:14:20,960 Speaker 1: inform the markets expectations as well as the FEDS and 273 00:14:21,080 --> 00:14:23,960 Speaker 1: the FMC members expectations just to whether or not that 274 00:14:24,120 --> 00:14:27,120 Speaker 1: story actually playing out, and so to the extent that 275 00:14:27,160 --> 00:14:31,160 Speaker 1: we don't get big disappointments in today's print, and that's 276 00:14:31,200 --> 00:14:35,280 Speaker 1: going to hold up the expectation that transitory story works, 277 00:14:35,400 --> 00:14:38,920 Speaker 1: and that's about keeping the December rate hike in play. 278 00:14:38,960 --> 00:14:41,720 Speaker 1: September in the balance sheet is about growth. The rate 279 00:14:41,800 --> 00:14:44,760 Speaker 1: hikes are about infltation. I mean within this and I 280 00:14:45,240 --> 00:14:47,440 Speaker 1: don't believe I've ever asked this question. Let's try it out, 281 00:14:47,480 --> 00:14:50,880 Speaker 1: David and Mr Rosenberg h the idea, do you know 282 00:14:51,000 --> 00:14:54,440 Speaker 1: ahead of the certitude of a CPI report or is 283 00:14:54,480 --> 00:14:56,520 Speaker 1: it like the jobs report where we sort of go 284 00:14:56,560 --> 00:14:59,760 Speaker 1: into it blind. Well, we we go into it with 285 00:14:59,760 --> 00:15:02,360 Speaker 1: a out of expectations, and we do a tremendous amount 286 00:15:02,400 --> 00:15:07,960 Speaker 1: of analysis within our within our sorry, within our inflation team, 287 00:15:08,000 --> 00:15:12,120 Speaker 1: and looking at the components, analyzing trends in pricing and 288 00:15:12,200 --> 00:15:15,880 Speaker 1: building up bottoms up forecasts, and so there are just 289 00:15:16,040 --> 00:15:18,640 Speaker 1: like there is in the case of the payroll report, 290 00:15:18,680 --> 00:15:21,680 Speaker 1: and in some sense, because roll and payroll volatility has 291 00:15:21,680 --> 00:15:25,000 Speaker 1: been so low, the inflation prints have actually taken on 292 00:15:25,200 --> 00:15:27,560 Speaker 1: as great or even great or important. So there's a 293 00:15:27,600 --> 00:15:30,720 Speaker 1: lot of expectations around a point two point one eight 294 00:15:30,880 --> 00:15:33,240 Speaker 1: in terms of the number today. So you have built 295 00:15:33,240 --> 00:15:37,240 Speaker 1: into the market same kind of dynamic of expectations and 296 00:15:37,280 --> 00:15:42,800 Speaker 1: then disappointment or um excitement over the you know, the 297 00:15:42,840 --> 00:15:44,480 Speaker 1: number that we're gonna get a few minutes. How does 298 00:15:45,240 --> 00:15:47,520 Speaker 1: this relate to the PPI numbers that we got yesterday? 299 00:15:47,560 --> 00:15:49,760 Speaker 1: And they compliment one another, what do they tell you about? 300 00:15:50,080 --> 00:15:54,640 Speaker 1: Rosenberger has no idea how smart that question is, given 301 00:15:54,680 --> 00:15:58,360 Speaker 1: the worship for PPI numbers twenty and thirty years ago. 302 00:15:59,320 --> 00:16:01,920 Speaker 1: You know, there is a little bit um. They're they're 303 00:16:02,040 --> 00:16:05,440 Speaker 1: very different in terms of components in the short run, right, 304 00:16:05,520 --> 00:16:09,280 Speaker 1: so when we're talking about the short run market expectations 305 00:16:09,640 --> 00:16:13,200 Speaker 1: and short run movements, there's not a tremendous amount of correlation. 306 00:16:13,280 --> 00:16:16,680 Speaker 1: What you do have is you have it's feeding into 307 00:16:16,680 --> 00:16:19,360 Speaker 1: the narrative. And again Tom, back to your comments about 308 00:16:19,400 --> 00:16:21,600 Speaker 1: comparing it to to pay roll employment, it's kind of 309 00:16:21,600 --> 00:16:26,160 Speaker 1: like initial jobless claims or a DP. It feeds into 310 00:16:26,840 --> 00:16:31,280 Speaker 1: the narrative around the data over longer periods of time 311 00:16:31,560 --> 00:16:33,760 Speaker 1: that are really kind of outside the day to day 312 00:16:33,800 --> 00:16:39,720 Speaker 1: market movements. There's there's obviously connection between purchasing purchase prices UH, 313 00:16:39,760 --> 00:16:42,720 Speaker 1: producer prices and and and consumer prices, but in the 314 00:16:42,800 --> 00:16:46,480 Speaker 1: in the short run UM, it really has a very 315 00:16:46,520 --> 00:16:50,320 Speaker 1: different set of drivers. There's overlap, but but there's a 316 00:16:50,400 --> 00:16:53,360 Speaker 1: there's a very different set of near term drivers. What's 317 00:16:53,400 --> 00:16:55,480 Speaker 1: your sense of how wetted this feed is to to 318 00:16:55,680 --> 00:16:58,080 Speaker 1: raising rates again this year? In other words, are they 319 00:16:58,120 --> 00:17:00,800 Speaker 1: on a tract that necessitates that or is there really 320 00:17:00,840 --> 00:17:03,160 Speaker 1: some flexibility or chance here of reversal in light of 321 00:17:03,160 --> 00:17:06,520 Speaker 1: these data and others. So you know, this is where 322 00:17:06,560 --> 00:17:09,560 Speaker 1: the market gets a lot of cross currents because it's 323 00:17:09,600 --> 00:17:12,600 Speaker 1: a diverse group of people that we hear from. And 324 00:17:12,640 --> 00:17:15,359 Speaker 1: so it's a committee and there's a committee day based 325 00:17:15,359 --> 00:17:18,560 Speaker 1: decisions and there's a spectrum of viewpoints. But what the 326 00:17:18,640 --> 00:17:22,600 Speaker 1: central message of the committee is that we should get 327 00:17:22,600 --> 00:17:25,480 Speaker 1: on with normalization, that the goals of the Fed have 328 00:17:25,680 --> 00:17:28,880 Speaker 1: mainly been achieved, and that they want to move on 329 00:17:29,040 --> 00:17:31,960 Speaker 1: with normalization at a gradual and predictable pace to not 330 00:17:32,840 --> 00:17:37,080 Speaker 1: unlind financial market conditions that would unlind the benefits of 331 00:17:37,080 --> 00:17:42,480 Speaker 1: what the accumulated benefits of normal of of accommodation have 332 00:17:42,720 --> 00:17:44,960 Speaker 1: given the economy. But they want to get on with 333 00:17:45,000 --> 00:17:47,879 Speaker 1: normalization because they don't want to overheat. And part of 334 00:17:47,880 --> 00:17:52,600 Speaker 1: the payroll story is these unemployment rates are real. Every 335 00:17:52,640 --> 00:17:55,960 Speaker 1: measure of the labor markets is pointing to the potential 336 00:17:56,000 --> 00:18:00,000 Speaker 1: that we are or are on track to an overheating economy, 337 00:18:00,040 --> 00:18:04,119 Speaker 1: and that's classic business cycle overheating that eventually becomes the 338 00:18:04,160 --> 00:18:06,480 Speaker 1: roots of your next procession, and they want to avoid that, 339 00:18:06,520 --> 00:18:08,840 Speaker 1: so they want to get on with it without disrupting 340 00:18:08,880 --> 00:18:11,440 Speaker 1: banana market. T want to rip up the script here. 341 00:18:11,520 --> 00:18:14,040 Speaker 1: We trust Jeff Rosenberg enough to be very adept at 342 00:18:14,080 --> 00:18:17,800 Speaker 1: going outside every min and actually commenting on the state 343 00:18:17,840 --> 00:18:22,240 Speaker 1: of our world. Punham Gyle, Jeff Rosenberg and Bloomberg Intelligence 344 00:18:22,320 --> 00:18:26,560 Speaker 1: just reported and publish a scathing note on J. C. 345 00:18:26,800 --> 00:18:30,399 Speaker 1: Penny and the idea of a stock going from thirty 346 00:18:30,560 --> 00:18:37,040 Speaker 1: to ten, migrating eight, cratering to five, and enjoying three 347 00:18:37,080 --> 00:18:41,960 Speaker 1: dollars and nine cents this morning. Help us with what 348 00:18:42,119 --> 00:18:46,600 Speaker 1: you observe of the disruption as you mentioned of Amazon, 349 00:18:47,200 --> 00:18:49,679 Speaker 1: we we are when you look at yael C plus 350 00:18:49,760 --> 00:18:52,280 Speaker 1: I plus G plus n X, do you really have 351 00:18:52,320 --> 00:18:55,560 Speaker 1: a handle on consumption as you see something like J. C. 352 00:18:55,720 --> 00:19:00,119 Speaker 1: Penny blow up an Amazon prosper so well to so 353 00:19:00,240 --> 00:19:03,600 Speaker 1: to put it into today's you know, ten minute fifteen 354 00:19:03,640 --> 00:19:08,680 Speaker 1: minute attention span, uh conversation. This this is about the 355 00:19:08,720 --> 00:19:15,600 Speaker 1: impact of technology on inflation. It's about the tech on pricing, 356 00:19:15,760 --> 00:19:19,560 Speaker 1: So you J C. Penny, the retailer's Amazon, what is that? All? 357 00:19:19,680 --> 00:19:24,359 Speaker 1: Part of technology is the dominant force in our era, 358 00:19:24,480 --> 00:19:29,200 Speaker 1: right the technology curve has gone vertical, the tremendous dramatic changes, 359 00:19:29,280 --> 00:19:32,639 Speaker 1: the second machine age, everything that we've seen, even in 360 00:19:32,680 --> 00:19:36,280 Speaker 1: the last five to seven years, the incredible acceleration and 361 00:19:36,320 --> 00:19:42,439 Speaker 1: the macro implication of technology is technology is disinflationary. And 362 00:19:42,600 --> 00:19:45,320 Speaker 1: that's the challenge, and it's a huge challenge. Back to 363 00:19:45,320 --> 00:19:48,240 Speaker 1: our earlier conversation to the FED, which is still operating 364 00:19:48,280 --> 00:19:53,320 Speaker 1: with nineteen sixties technology of Phillips curves that anticipate that 365 00:19:53,359 --> 00:19:57,679 Speaker 1: there's a trade off between unemployment and broad based price inflation. 366 00:19:57,760 --> 00:20:01,359 Speaker 1: But in the technology we're we may not see that 367 00:20:01,480 --> 00:20:03,760 Speaker 1: to the same degree. So it's a huge impact, you know, Jeff. 368 00:20:04,680 --> 00:20:07,040 Speaker 1: One of the high points yesterday was our conversation with 369 00:20:07,119 --> 00:20:10,520 Speaker 1: a very distinguished Brigadier General Mr. Kimmitt, who has not 370 00:20:10,560 --> 00:20:13,280 Speaker 1: only given public service to the nation, but he's had 371 00:20:13,280 --> 00:20:15,000 Speaker 1: the ability to get up in front of a mic 372 00:20:15,040 --> 00:20:17,639 Speaker 1: at the State Department and be the smooth guys a 373 00:20:17,720 --> 00:20:20,480 Speaker 1: C F A, etcetera. And I said to him, I said, 374 00:20:20,480 --> 00:20:22,440 Speaker 1: why did you get your c f A. And he said, 375 00:20:22,440 --> 00:20:24,960 Speaker 1: because they went to Harvard Business School and didn't learn anything. 376 00:20:25,359 --> 00:20:28,760 Speaker 1: And I mentioned Temper, I mentioned Cardigi Mellon where you went. 377 00:20:28,840 --> 00:20:33,240 Speaker 1: I mean, does the underlying mathematics of m I T. 378 00:20:33,480 --> 00:20:36,800 Speaker 1: Sloan Cardigi Melon. You know some of the great public 379 00:20:36,840 --> 00:20:40,440 Speaker 1: schools that we've got, Penn State as a rigorous economics program, 380 00:20:40,440 --> 00:20:43,600 Speaker 1: and on and on Michigan where Diane Swunk went. Does 381 00:20:43,640 --> 00:20:46,840 Speaker 1: the mathematics of the sixties even work now in a 382 00:20:46,960 --> 00:20:52,239 Speaker 1: in a in a in a bimodal American world. So so, 383 00:20:52,320 --> 00:20:56,320 Speaker 1: one of the things that you know, quantitative tools give 384 00:20:56,440 --> 00:20:59,679 Speaker 1: us is they give us a rigorous way of thinking. 385 00:20:59,720 --> 00:21:02,680 Speaker 1: They of us a systematic way of thinking that allows 386 00:21:02,760 --> 00:21:07,480 Speaker 1: us to test the logic and our understanding. But there's 387 00:21:07,560 --> 00:21:10,879 Speaker 1: limits to those tools, and they are best fault of 388 00:21:10,920 --> 00:21:13,040 Speaker 1: these tools. And when we listen to our policymakers who 389 00:21:13,040 --> 00:21:17,199 Speaker 1: are very um wedded to these tools, it's interesting to 390 00:21:17,280 --> 00:21:20,239 Speaker 1: see the debate about how much reliance is there, Like, 391 00:21:20,280 --> 00:21:23,960 Speaker 1: for example, the estimation of our star. There have been 392 00:21:24,000 --> 00:21:26,960 Speaker 1: five papers in the last five months written on this 393 00:21:27,400 --> 00:21:30,399 Speaker 1: and they come to very different conclusions. And it highlights 394 00:21:30,440 --> 00:21:34,480 Speaker 1: that in many of these areas the application of rigor 395 00:21:35,359 --> 00:21:39,320 Speaker 1: hard science to what is essentially a social science doesn't 396 00:21:39,320 --> 00:21:43,560 Speaker 1: always work, uh as well as the rigor of the 397 00:21:43,600 --> 00:21:45,840 Speaker 1: models would like us to believe. And so there's a 398 00:21:45,960 --> 00:21:50,040 Speaker 1: place for judgment, and there's a place for human understanding. 399 00:21:50,280 --> 00:21:52,880 Speaker 1: And that's the important balance that that we should get 400 00:21:52,880 --> 00:21:55,280 Speaker 1: out of, you know, using our tool Kain, and I 401 00:21:55,320 --> 00:21:57,720 Speaker 1: think we hear that from from many of our policymakers, 402 00:21:57,760 --> 00:22:00,080 Speaker 1: and and when we lose sight of that, and and 403 00:22:00,119 --> 00:22:03,119 Speaker 1: we get two wedded to a dogmatic view of the 404 00:22:03,200 --> 00:22:07,840 Speaker 1: world and loose sight of the balance, and that things 405 00:22:07,880 --> 00:22:12,240 Speaker 1: can fail. Uh, you can, you know, really see things 406 00:22:12,720 --> 00:22:15,119 Speaker 1: come unraveled. So I think that's an important, you know, 407 00:22:15,119 --> 00:22:19,199 Speaker 1: sort of balancing point to the quantitative tool kit. And 408 00:22:19,240 --> 00:22:21,399 Speaker 1: the point about inflation is is to sort of highlight 409 00:22:21,440 --> 00:22:23,600 Speaker 1: that you have structural change. So if I fit a 410 00:22:23,600 --> 00:22:26,200 Speaker 1: bunch of historical data and it worked in the past, 411 00:22:26,480 --> 00:22:28,960 Speaker 1: I gotta understand how the structure of the economy is 412 00:22:29,040 --> 00:22:31,800 Speaker 1: changing and what these influences are that might challenge that 413 00:22:32,000 --> 00:22:35,199 Speaker 1: happening in the future. Jeffrey Rosenberg with us, and we 414 00:22:35,240 --> 00:22:39,640 Speaker 1: have a luxury with an adept and quite festile Mr 415 00:22:39,760 --> 00:22:43,280 Speaker 1: Rosenberg to change the script. Jeff Rosenberg in the equity market, 416 00:22:43,280 --> 00:22:47,360 Speaker 1: the VIX eleven twelve, and then we have a jump 417 00:22:47,440 --> 00:22:50,800 Speaker 1: condition to seventeen. What does a jump condition in the VIX? 418 00:22:50,840 --> 00:22:53,280 Speaker 1: I mean, still below the long term average of twenty, 419 00:22:53,520 --> 00:22:56,200 Speaker 1: but what does that reset towards a little more angst 420 00:22:56,200 --> 00:23:00,600 Speaker 1: than the VIX signal? Well, Tom, it's a really really 421 00:23:01,160 --> 00:23:05,760 Speaker 1: interesting conversation and an important conversation. You know, what that 422 00:23:05,880 --> 00:23:10,200 Speaker 1: jump says to me is there has been a very 423 00:23:10,440 --> 00:23:14,800 Speaker 1: very large build up over a number of years of 424 00:23:14,880 --> 00:23:19,920 Speaker 1: people selling volatility. That that seems kind of a strange concept. 425 00:23:19,960 --> 00:23:23,200 Speaker 1: How do you sell volatility? But one of the new developments. 426 00:23:23,520 --> 00:23:26,960 Speaker 1: You know, every financial cycle is sort of characterized by 427 00:23:27,119 --> 00:23:30,679 Speaker 1: some new development something we had really never seen before 428 00:23:30,760 --> 00:23:33,760 Speaker 1: and so don't really know how to ausit, track it, 429 00:23:33,960 --> 00:23:37,040 Speaker 1: understand it. It's the confluence of, you know, some very 430 00:23:37,160 --> 00:23:42,280 Speaker 1: unique characteristics of this cycle and what is the productive 431 00:23:42,359 --> 00:23:45,159 Speaker 1: characteristic of this cycle. It has been a perverse and 432 00:23:45,280 --> 00:23:49,720 Speaker 1: persistent lack of income, zero interest rates, negative interest rates, 433 00:23:49,880 --> 00:23:52,360 Speaker 1: and so one of the strategies that has been incredibly 434 00:23:52,440 --> 00:23:59,000 Speaker 1: successful has been to generate income through selling options, selling volatility, 435 00:23:59,280 --> 00:24:02,359 Speaker 1: and it's been was successful that the sizes have gotten 436 00:24:02,400 --> 00:24:05,080 Speaker 1: bigger and bigger and bigger. So when you see a 437 00:24:05,400 --> 00:24:10,320 Speaker 1: relatively small move triggered by the stuff we're talking about 438 00:24:10,320 --> 00:24:12,840 Speaker 1: in the in the tweets and the geopolitical risk, that 439 00:24:13,080 --> 00:24:18,560 Speaker 1: small trigger results in a much larger reaction in and 440 00:24:18,600 --> 00:24:22,000 Speaker 1: that larger reaction should be telling you something. It's telling 441 00:24:22,000 --> 00:24:25,199 Speaker 1: you something about the build up of these positions in 442 00:24:25,240 --> 00:24:29,200 Speaker 1: the market and the vulnerability that build up creates to 443 00:24:29,359 --> 00:24:33,199 Speaker 1: a very small geopolitical risk in this case, but to 444 00:24:33,280 --> 00:24:36,480 Speaker 1: any small spark. And it's a very kind of important 445 00:24:36,560 --> 00:24:39,159 Speaker 1: data point to to keep an eye on today and 446 00:24:39,320 --> 00:24:43,240 Speaker 1: Monday and Tuesday, and as we roll forward into the fall. 447 00:24:44,440 --> 00:24:46,960 Speaker 1: You have a noe doubt on on on bank loans, 448 00:24:47,000 --> 00:24:49,240 Speaker 1: looking at bonds and bank loans and concert with with 449 00:24:49,400 --> 00:24:52,760 Speaker 1: each other. Uh, give us, give us your your sense, 450 00:24:52,760 --> 00:24:54,800 Speaker 1: your take on on the degree to which bank loans 451 00:24:54,800 --> 00:24:57,840 Speaker 1: should be considered at this point. Well, thank you for 452 00:24:57,880 --> 00:25:00,600 Speaker 1: mentioning the note. Let me I hate I know you guys. Hey, 453 00:25:00,640 --> 00:25:04,560 Speaker 1: when I do shameless plugs shaming is we we have 454 00:25:04,600 --> 00:25:07,359 Speaker 1: a noe doubt. It's my fixing theme strategists publication. I 455 00:25:07,400 --> 00:25:10,119 Speaker 1: do it monthly, It's on our website. But the notice 456 00:25:10,800 --> 00:25:14,680 Speaker 1: is not just about bank loans. And and it's interesting, David. 457 00:25:14,720 --> 00:25:18,000 Speaker 1: You know, every media person who's read my note talks 458 00:25:18,040 --> 00:25:20,240 Speaker 1: about bank loans. And the whole point of putting out 459 00:25:20,240 --> 00:25:22,520 Speaker 1: the piece is that it's the title of the pieces. 460 00:25:22,640 --> 00:25:25,360 Speaker 1: Float like a butterfly. And so when I say floating rate, 461 00:25:25,480 --> 00:25:27,560 Speaker 1: you say bank loans, I say floating rate, you say 462 00:25:27,600 --> 00:25:31,080 Speaker 1: bank loans. Right, But there's more to the floating rate 463 00:25:31,160 --> 00:25:33,480 Speaker 1: universe than just bank loans. And one of the critical 464 00:25:33,520 --> 00:25:35,520 Speaker 1: things that I'm highlighting here, going back to the earlier 465 00:25:35,520 --> 00:25:38,399 Speaker 1: part of our conversation about what inflation means for keeping 466 00:25:38,400 --> 00:25:41,600 Speaker 1: the feed on its path, is that very quietly here, 467 00:25:41,880 --> 00:25:44,760 Speaker 1: the FED has been raising interest rates and raising the 468 00:25:44,800 --> 00:25:49,639 Speaker 1: attractiveness of achieving income results by taking less risks. And 469 00:25:49,760 --> 00:25:53,120 Speaker 1: I just talked about is people are taking huge, inordinate 470 00:25:53,200 --> 00:25:56,880 Speaker 1: amounts of risk to generate into selling volatility. You can 471 00:25:56,960 --> 00:25:58,760 Speaker 1: do it in the front end of the yield curve, 472 00:25:59,200 --> 00:26:01,760 Speaker 1: and it's still lower yielding than taking out a lot 473 00:26:01,800 --> 00:26:04,920 Speaker 1: of risk. But the reduction and risk for what's becoming 474 00:26:04,960 --> 00:26:07,960 Speaker 1: more attractive something investors should be taking a lot. Okay, 475 00:26:07,960 --> 00:26:10,280 Speaker 1: And I love the idea, and you write it much 476 00:26:10,320 --> 00:26:14,119 Speaker 1: more than floating paper the idea than from Stanley Fisher 477 00:26:14,280 --> 00:26:16,920 Speaker 1: is the Openers Economic Club of New York speech a 478 00:26:17,000 --> 00:26:19,439 Speaker 1: year and a half ago, the Ultra Accommodator speech, folks 479 00:26:19,800 --> 00:26:22,359 Speaker 1: is Jeff Rosenberg to your point on floating and bait 480 00:26:22,480 --> 00:26:27,720 Speaker 1: change behavior. He talked about the percent change from a 481 00:26:27,800 --> 00:26:32,240 Speaker 1: low interest rate level. How much should we wait percent 482 00:26:32,480 --> 00:26:37,520 Speaker 1: change from a given unit of of of yield versus 483 00:26:37,600 --> 00:26:42,399 Speaker 1: the absolute change back to what's supposedly normal, So you know, 484 00:26:42,520 --> 00:26:45,720 Speaker 1: the percent changes get very large. I don't think it's 485 00:26:45,720 --> 00:26:47,920 Speaker 1: the percent change, though that matters here time. I think 486 00:26:47,920 --> 00:26:49,840 Speaker 1: what it is is it's more of a bit of 487 00:26:49,880 --> 00:26:53,200 Speaker 1: a tipping point argument, meaning that when you're at zero 488 00:26:53,320 --> 00:26:57,359 Speaker 1: interest rates, you will do anything for income, and that's 489 00:26:57,400 --> 00:26:59,960 Speaker 1: what we've been in. When you're at negative interest rates, 490 00:27:00,200 --> 00:27:04,199 Speaker 1: you'll you'll do even more to reach for income. But 491 00:27:04,240 --> 00:27:06,879 Speaker 1: when you start to bring interest rates back from zero, 492 00:27:07,160 --> 00:27:10,840 Speaker 1: the first it's not worth it, The first fifty not 493 00:27:10,960 --> 00:27:13,520 Speaker 1: worth it. But we could be looking at very shortly 494 00:27:13,560 --> 00:27:16,840 Speaker 1: here a hundred and twenty five, hundred and fifty, a 495 00:27:16,960 --> 00:27:22,960 Speaker 1: hundred seventy five, and slowly and quietly the fundamental backdrop 496 00:27:23,080 --> 00:27:25,520 Speaker 1: that has dominated the last eight or nine years of 497 00:27:25,680 --> 00:27:29,560 Speaker 1: zero interest rates is no longer there and that kind 498 00:27:29,600 --> 00:27:32,280 Speaker 1: of development has been happening. And I highlighted in this 499 00:27:32,359 --> 00:27:37,800 Speaker 1: figure the flattening of yield between high risk yield which 500 00:27:37,800 --> 00:27:41,280 Speaker 1: you're going down in yield and low risk yield which 501 00:27:41,320 --> 00:27:44,959 Speaker 1: is going up and yield that's unsustainable. You can't have 502 00:27:45,119 --> 00:27:48,240 Speaker 1: this going on wherever. We're out of time. I got 503 00:27:48,240 --> 00:27:51,760 Speaker 1: twenty seconds. Does that lead to instabilities? By definition, if 504 00:27:51,760 --> 00:27:54,439 Speaker 1: you have that conflation of yield, does it lead to 505 00:27:54,520 --> 00:27:59,040 Speaker 1: unstable outcomes? It doesn't, It doesn't have to it. People's 506 00:27:59,119 --> 00:28:04,480 Speaker 1: portfolio are relatively balanced and the recognition of that yield 507 00:28:04,560 --> 00:28:08,200 Speaker 1: shift and people are paying attention, which is the point 508 00:28:08,200 --> 00:28:10,400 Speaker 1: of my pay look at some of this lower risk 509 00:28:10,440 --> 00:28:13,479 Speaker 1: ill This stuff is actually attractive to be balancing. This 510 00:28:13,560 --> 00:28:16,720 Speaker 1: is we gotta go. This is way to euclidean. Dr Rosenberg, 511 00:28:16,800 --> 00:28:19,119 Speaker 1: thank you so much. At black Rock. Coming up, we 512 00:28:19,240 --> 00:28:33,800 Speaker 1: do more geometry. This is Bloomberg, a little bit of 513 00:28:33,880 --> 00:28:36,159 Speaker 1: move in the bond market, lower yields by just a 514 00:28:36,240 --> 00:28:40,600 Speaker 1: basis point of shift, if you would. I'm in here 515 00:28:40,720 --> 00:28:44,640 Speaker 1: looking at the many lines of data, David guru before 516 00:28:44,840 --> 00:28:47,520 Speaker 1: you bring in our steam guest, and I'm trying to 517 00:28:47,520 --> 00:28:51,600 Speaker 1: figure out what's transitory and what's not it's transitory that 518 00:28:51,640 --> 00:28:54,600 Speaker 1: the Chicago Cubs are in. First place that I would 519 00:28:54,640 --> 00:28:59,360 Speaker 1: say is is probably tobacco. I've got a negative. I 520 00:28:59,400 --> 00:29:02,200 Speaker 1: think I've got a negative. The waiting on tobacco is 521 00:29:02,280 --> 00:29:05,760 Speaker 1: less than one percent, and it is a negative statistic. 522 00:29:05,840 --> 00:29:09,880 Speaker 1: For the second month in a row, we went positive 523 00:29:09,920 --> 00:29:13,440 Speaker 1: point for positive point five, a huge jump whatever that 524 00:29:13,480 --> 00:29:17,240 Speaker 1: anomally is positive point one. And then last month we 525 00:29:17,280 --> 00:29:21,400 Speaker 1: went negative zero point four and now we're negative zero 526 00:29:21,480 --> 00:29:25,200 Speaker 1: point one. If tobacco's transitory and I don't even know 527 00:29:25,440 --> 00:29:28,360 Speaker 1: somewhere and here's wireless cell phones, will have to look 528 00:29:28,360 --> 00:29:32,800 Speaker 1: for that as well, transitory transitory. Uh. Diane Spak joins 529 00:29:32,840 --> 00:29:34,640 Speaker 1: us now. She's the founder of DS Economics. He joins 530 00:29:34,680 --> 00:29:36,680 Speaker 1: us on our phone line sponsored by Spectrum Enterprise. Your 531 00:29:36,720 --> 00:29:39,280 Speaker 1: nation might provide her of scalable fiber network services and 532 00:29:39,360 --> 00:29:43,239 Speaker 1: managed cloud solutions. And Diane, let me just start by 533 00:29:43,240 --> 00:29:45,080 Speaker 1: asking you, sir, of what you're looking at beneath the 534 00:29:45,120 --> 00:29:47,320 Speaker 1: headline numbers here. I know you flagged shelter is something 535 00:29:47,360 --> 00:29:50,680 Speaker 1: you're gonna be paying particularly close attention to. Here it 536 00:29:50,680 --> 00:29:54,680 Speaker 1: looks like shelter up here point one percent. Give me 537 00:29:54,680 --> 00:29:57,440 Speaker 1: a sense of what you're looking for this morning. Well, actually, 538 00:29:57,440 --> 00:29:59,760 Speaker 1: one of the interesting things is, as Tom has already 539 00:29:59,800 --> 00:30:02,360 Speaker 1: point in it out there is the issue of the 540 00:30:02,560 --> 00:30:06,440 Speaker 1: increase in UH cell phone the cell phone cellfire continued 541 00:30:06,480 --> 00:30:09,000 Speaker 1: to fall, and that's something that's supposed to be a 542 00:30:09,000 --> 00:30:11,200 Speaker 1: one off, but now it's we're several months into that 543 00:30:11,240 --> 00:30:16,600 Speaker 1: one off. Yeahs a multiple on that tobacco issue that 544 00:30:16,640 --> 00:30:20,120 Speaker 1: you mentioned, that's important. It came off of a surge 545 00:30:20,320 --> 00:30:23,200 Speaker 1: in taxas in California and California so that's a large 546 00:30:23,240 --> 00:30:25,840 Speaker 1: state that that's why we saw that fall off there. 547 00:30:25,880 --> 00:30:27,440 Speaker 1: But of course this is more bad news for the 548 00:30:27,480 --> 00:30:30,520 Speaker 1: FED even if we keep looking at these one off incidences. 549 00:30:30,760 --> 00:30:33,320 Speaker 1: At the end of the day, the Federal Reserve is 550 00:30:33,360 --> 00:30:35,800 Speaker 1: dealing with inflation. That's too cool. This is you know, 551 00:30:35,880 --> 00:30:38,800 Speaker 1: the porridge is too cool. Goldilocks is not quite here yet. 552 00:30:39,120 --> 00:30:41,680 Speaker 1: She's not happy with sitting at this, you know, at 553 00:30:41,680 --> 00:30:44,120 Speaker 1: this particular place at the table, and neither is the FET. 554 00:30:44,200 --> 00:30:46,959 Speaker 1: And I think that's the real issue is didn't expect 555 00:30:46,960 --> 00:30:48,960 Speaker 1: this to make or break the FETs decision. I think 556 00:30:49,000 --> 00:30:51,000 Speaker 1: what we're going to see is the data we see 557 00:30:51,040 --> 00:30:54,400 Speaker 1: from September and October, which is going to come out. Um, 558 00:30:54,560 --> 00:30:58,040 Speaker 1: that's the September and October inflation data that comes out 559 00:30:58,080 --> 00:31:02,160 Speaker 1: before the January, the December mean and in January. Um, Dad, 560 00:31:02,240 --> 00:31:04,000 Speaker 1: the data is going to determine whether or not we 561 00:31:04,000 --> 00:31:05,640 Speaker 1: get a turn of the year move and turned to 562 00:31:05,720 --> 00:31:08,280 Speaker 1: your rate hike. Um. So we're still a little bit 563 00:31:08,280 --> 00:31:11,080 Speaker 1: always there. But you got to see a pickup, a 564 00:31:11,120 --> 00:31:13,800 Speaker 1: couple of tents of a pickup in now time, folks, 565 00:31:13,840 --> 00:31:16,360 Speaker 1: we sell the advantage of the Bloomberg terminal. David, I 566 00:31:16,440 --> 00:31:19,440 Speaker 1: just brought up with a great search engine search. Thank 567 00:31:19,480 --> 00:31:24,200 Speaker 1: you Thomas Seconda for that gift and David Timborelli, among others. 568 00:31:23,960 --> 00:31:27,760 Speaker 1: The log chart of wireless cell phone Diana, I'm gonna 569 00:31:27,760 --> 00:31:29,640 Speaker 1: put this out on Twitter so you can see it. 570 00:31:30,040 --> 00:31:32,520 Speaker 1: And as Diane correctly states, as always we get that 571 00:31:32,560 --> 00:31:36,160 Speaker 1: from Dr Swank the vectors in the ugly yelling direction. 572 00:31:36,440 --> 00:31:39,800 Speaker 1: Let me do that when I put that out right now, folks, Uh, Diane, 573 00:31:39,840 --> 00:31:42,760 Speaker 1: pay so close attention to to what FED policymakers are saying. 574 00:31:42,760 --> 00:31:45,360 Speaker 1: We've alluded to the transitory comment that the FED chair 575 00:31:45,400 --> 00:31:47,600 Speaker 1: made a few months ago. Now. We heard from Jim 576 00:31:47,600 --> 00:31:49,880 Speaker 1: Buller earlier this week, our colleague Kathleen Hayes sat down 577 00:31:49,920 --> 00:31:52,120 Speaker 1: with him in St. Louis for an interview, and his 578 00:31:52,160 --> 00:31:54,640 Speaker 1: pessimism about a rise in inflation was reeled and think 579 00:31:54,680 --> 00:31:56,760 Speaker 1: we'd see much change here by by the end of 580 00:31:56,760 --> 00:31:59,280 Speaker 1: the year. What's your sense of how much unanimity there 581 00:31:59,360 --> 00:32:02,520 Speaker 1: is among FED policymakers on the issue of the transitory 582 00:32:02,600 --> 00:32:05,880 Speaker 1: nature of the so called transitory nature of inflationary headwinds. 583 00:32:06,480 --> 00:32:08,400 Speaker 1: I think there was a lot of hope that they 584 00:32:08,400 --> 00:32:10,520 Speaker 1: were transitory, and I think what you're seeing is that 585 00:32:10,640 --> 00:32:13,720 Speaker 1: shift over to if it's transitory or not it's been 586 00:32:13,800 --> 00:32:16,240 Speaker 1: it's being becoming too long. It certainly is too long 587 00:32:16,280 --> 00:32:19,040 Speaker 1: and has already postponed to September rate hike. I frankly 588 00:32:19,080 --> 00:32:21,520 Speaker 1: thought we never had a September rate hike in there. 589 00:32:21,720 --> 00:32:24,280 Speaker 1: But the next determinators do we have enough for December 590 00:32:24,360 --> 00:32:26,520 Speaker 1: rate hike? And what's a real challenge for the SEED 591 00:32:26,680 --> 00:32:29,600 Speaker 1: is even though many of them believe this is transitory 592 00:32:29,640 --> 00:32:31,480 Speaker 1: and it could work out by next year and their 593 00:32:31,520 --> 00:32:34,640 Speaker 1: medium term outlook is still fine, what they're concerned about 594 00:32:34,720 --> 00:32:36,800 Speaker 1: is that without inflation, it's hard to have the cover 595 00:32:36,920 --> 00:32:40,560 Speaker 1: they need to raise rates against the backdrop of additional 596 00:32:40,600 --> 00:32:43,440 Speaker 1: financial easing. You know, who would have thought some you know, 597 00:32:43,560 --> 00:32:46,440 Speaker 1: some kinds of access to credit would be much easier 598 00:32:46,480 --> 00:32:48,600 Speaker 1: to get today than it was when the FED started 599 00:32:48,680 --> 00:32:52,040 Speaker 1: raising rates. And so this is still highly accomminative FED, 600 00:32:52,280 --> 00:32:55,040 Speaker 1: but it's even more so, you know, a credit market 601 00:32:55,080 --> 00:32:57,480 Speaker 1: that's beginning to finally loosen up, which we you know, 602 00:32:57,560 --> 00:33:01,720 Speaker 1: would expect normally, but there's been nothing normal about this recovery. 603 00:33:02,000 --> 00:33:03,240 Speaker 1: Let me let me put a question to you that 604 00:33:03,240 --> 00:33:04,880 Speaker 1: I put to Jeff Rosenberg just a moment ago, and 605 00:33:04,920 --> 00:33:07,440 Speaker 1: that is how you regard the CPN numbers in concert 606 00:33:07,480 --> 00:33:09,640 Speaker 1: with the PPI numbers. What does one tell you about 607 00:33:09,640 --> 00:33:13,080 Speaker 1: the other? If anything, Well, you know they're they're related, Um, 608 00:33:13,080 --> 00:33:16,160 Speaker 1: they are a different waiting. The pc numbers are really 609 00:33:16,200 --> 00:33:18,680 Speaker 1: important and the PPI the PPI numbers are sort of 610 00:33:18,720 --> 00:33:21,480 Speaker 1: a pipeline number. They've redone them, so our history on 611 00:33:21,520 --> 00:33:23,360 Speaker 1: them isn't as good in terms of how much they 612 00:33:23,400 --> 00:33:25,520 Speaker 1: really give us in terms of a leite time in 613 00:33:25,640 --> 00:33:28,800 Speaker 1: terms of overall pipeline inflation, and how much that's actually 614 00:33:28,840 --> 00:33:32,440 Speaker 1: translated into what consumers spend. I think it's important to 615 00:33:32,440 --> 00:33:35,240 Speaker 1: note too, is this division we're really seen, is it's 616 00:33:35,240 --> 00:33:38,480 Speaker 1: more structural and it's really reminiscent of the late ninety nineties. 617 00:33:38,680 --> 00:33:41,320 Speaker 1: We had Walmart back then hit critical mass in hit 618 00:33:41,360 --> 00:33:44,440 Speaker 1: in rural areas and really brought down prices. Now we're 619 00:33:44,440 --> 00:33:48,160 Speaker 1: having Amazon phenomena. They're very similar in terms of pricing. 620 00:33:48,400 --> 00:33:50,320 Speaker 1: Do you hear a dog in the bat reacting to 621 00:33:50,360 --> 00:33:55,560 Speaker 1: the latest one? I think that's that's that's Maynard Kane's 622 00:33:55,640 --> 00:34:00,440 Speaker 1: Maynard kin be good. I'm doing this from home today. 623 00:34:00,440 --> 00:34:04,640 Speaker 1: You asked me to be honest. Family. That's okay. I 624 00:34:04,680 --> 00:34:08,680 Speaker 1: gotta face for radio because I had I watched myself carefully. Thankfully, 625 00:34:08,680 --> 00:34:12,040 Speaker 1: everything's benign, but I have to get Okay. We'll continue 626 00:34:12,080 --> 00:34:16,560 Speaker 1: with Diane swunk in our dog Maynard Keynes this morning. 627 00:34:16,719 --> 00:34:18,400 Speaker 1: Just that's what you've been thinking about. More broadly, here 628 00:34:18,400 --> 00:34:21,400 Speaker 1: we can talk a bit more about these inflation reads. Uh, 629 00:34:22,160 --> 00:34:23,560 Speaker 1: if you want, but I just want to when you 630 00:34:23,560 --> 00:34:25,880 Speaker 1: look at the economy generally, what's what's giving you the 631 00:34:25,880 --> 00:34:29,600 Speaker 1: most pause, the greatest concern at this point. Well, clearly 632 00:34:29,600 --> 00:34:32,560 Speaker 1: it's policy uncertainty, and we're seeing that pick up globally 633 00:34:32,600 --> 00:34:34,759 Speaker 1: as well as in the United States. Many people that 634 00:34:34,840 --> 00:34:38,279 Speaker 1: were betting on tax reform, health care reform, and the 635 00:34:38,320 --> 00:34:41,480 Speaker 1: whole broad spectrum of the agenda. Are now putting a 636 00:34:41,480 --> 00:34:43,520 Speaker 1: lot of projects on the shelf that they thought that 637 00:34:43,560 --> 00:34:45,400 Speaker 1: they would be moving on this year because of that 638 00:34:45,520 --> 00:34:48,799 Speaker 1: uncertainty and that dappen's growth, and so that's something I'm 639 00:34:48,920 --> 00:34:52,760 Speaker 1: very concerned about going forward. Also, looking at these inflation numbers, 640 00:34:52,760 --> 00:34:54,600 Speaker 1: I do think, you know, the core number is held 641 00:34:54,600 --> 00:34:57,080 Speaker 1: at one point seven percent. We did see you asked 642 00:34:57,080 --> 00:34:59,360 Speaker 1: me earlier about the relationship between the p p I 643 00:34:59,400 --> 00:35:02,200 Speaker 1: and the cp You know, really interesting is that we 644 00:35:02,239 --> 00:35:05,240 Speaker 1: saw a surge in accommodation costs in the p p I. 645 00:35:05,320 --> 00:35:07,640 Speaker 1: We did not see that the opposite happened in the 646 00:35:07,719 --> 00:35:12,320 Speaker 1: July accommodations portions for the CPI, And so you really 647 00:35:12,360 --> 00:35:15,440 Speaker 1: are seeing some disconnect there. That could be squeezing margins, 648 00:35:15,480 --> 00:35:18,799 Speaker 1: That could be Airbnb providing a lot of competition for 649 00:35:19,000 --> 00:35:22,000 Speaker 1: these accommodations, more narrowing margins. I mean, all of the 650 00:35:22,040 --> 00:35:23,960 Speaker 1: above is a little bit rough, and it gets to 651 00:35:24,440 --> 00:35:28,120 Speaker 1: how much um pricing power do we have any even 652 00:35:28,160 --> 00:35:30,959 Speaker 1: what is a tight labor market economy, and it's still 653 00:35:31,080 --> 00:35:33,839 Speaker 1: very limited for the Federal Reserve. You know, one more 654 00:35:33,920 --> 00:35:36,040 Speaker 1: rate hike. I think they'd like to squeeze in this year, 655 00:35:36,239 --> 00:35:38,600 Speaker 1: but it's going to be difficult for them. They're really 656 00:35:38,600 --> 00:35:41,520 Speaker 1: concerned about easing financial conditions. At the other end of 657 00:35:41,560 --> 00:35:44,040 Speaker 1: the spectrum, they're also worried about the fact that there 658 00:35:44,120 --> 00:35:46,480 Speaker 1: is a lot of uncertainty. We're now talking about an 659 00:35:46,480 --> 00:35:49,279 Speaker 1: expansion that we're eight years into and you're starting to 660 00:35:49,320 --> 00:35:52,400 Speaker 1: see some things that are very similar to the nines 661 00:35:52,480 --> 00:35:57,400 Speaker 1: and those that that seems almost impossible. But there is 662 00:35:57,440 --> 00:36:00,560 Speaker 1: some tight labor market conditions where some produce there's and 663 00:36:00,760 --> 00:36:03,879 Speaker 1: some service providers in particular saying we don't have enough 664 00:36:03,960 --> 00:36:07,359 Speaker 1: qualified individuals, either low skilled or high skilled to fill 665 00:36:07,440 --> 00:36:09,960 Speaker 1: the jobs and we're having to curb what we do. 666 00:36:10,160 --> 00:36:13,799 Speaker 1: We haven't heard that since and that's something to be 667 00:36:13,800 --> 00:36:16,920 Speaker 1: concerned about, especially when we talk about pulling back further 668 00:36:17,080 --> 00:36:20,920 Speaker 1: on immigration as well. That's a big concern among whether 669 00:36:20,960 --> 00:36:26,880 Speaker 1: they're large, medium, or small manufacturers and um service providers 670 00:36:26,920 --> 00:36:29,280 Speaker 1: out there. We're really seeing people having a hard time 671 00:36:29,640 --> 00:36:32,440 Speaker 1: finding workers that they once thought were easy to find. 672 00:36:32,880 --> 00:36:35,239 Speaker 1: Help me with the role that energy is playing right 673 00:36:35,239 --> 00:36:37,560 Speaker 1: now in the in the US economy. We see oil 674 00:36:37,560 --> 00:36:39,840 Speaker 1: here hovering around forty bucks a barrel w t I 675 00:36:40,320 --> 00:36:43,239 Speaker 1: barrel what's the role that energy is playing. Well, you know, 676 00:36:43,320 --> 00:36:45,600 Speaker 1: the interesting thing is that we've gotten so efficient. That's 677 00:36:45,640 --> 00:36:48,680 Speaker 1: one of the places we've seen extraordinary productivity games. We 678 00:36:48,719 --> 00:36:51,560 Speaker 1: can produce oil in this price range now and we're 679 00:36:51,640 --> 00:36:54,600 Speaker 1: a world player. That is amazing. We are still adding 680 00:36:55,000 --> 00:36:58,160 Speaker 1: jobs in the oil industry. It's about eight thousand or 681 00:36:58,280 --> 00:37:01,560 Speaker 1: point five percent of the total labor force um a month. 682 00:37:01,600 --> 00:37:03,480 Speaker 1: So it's not a big sector. You know, we have 683 00:37:03,520 --> 00:37:06,160 Speaker 1: to keep that in mind. But it has spillover effects 684 00:37:06,160 --> 00:37:08,320 Speaker 1: that have yet to come through in terms of investment. 685 00:37:08,320 --> 00:37:10,800 Speaker 1: When you're running at these prices different than a hundred 686 00:37:10,800 --> 00:37:13,600 Speaker 1: bucks per barrel and you're investing like crazy, we don't 687 00:37:13,640 --> 00:37:15,880 Speaker 1: have all those spillover effects we'd like to see right now. 688 00:37:16,120 --> 00:37:19,279 Speaker 1: Dan Dominiqunstam always brilliant at Deutsche Bank the other day 689 00:37:19,800 --> 00:37:25,600 Speaker 1: suggests lower inflation, but yet a circuitous positive of real 690 00:37:25,760 --> 00:37:29,759 Speaker 1: economic growth. So better real GDP combined with lower inflation 691 00:37:29,800 --> 00:37:32,279 Speaker 1: and a mix it at you denominal g d P. 692 00:37:32,800 --> 00:37:35,759 Speaker 1: The center tendency of that is you've got to have 693 00:37:35,920 --> 00:37:40,439 Speaker 1: investment at some point. You are hardwired. I can't begin 694 00:37:40,480 --> 00:37:44,319 Speaker 1: to convey how unique miss Swank is. Besides, she has 695 00:37:44,360 --> 00:37:48,239 Speaker 1: Chicago cub tickets, which is the basic idea. Diane. You 696 00:37:48,239 --> 00:37:53,439 Speaker 1: are hardwired into investment decisions. When do they turn on 697 00:37:53,760 --> 00:37:57,359 Speaker 1: the investment switch? You know, we really just haven't seen 698 00:37:57,400 --> 00:38:00,200 Speaker 1: it yet. Outside of oil sector, which is coming act 699 00:38:00,239 --> 00:38:03,320 Speaker 1: a little bit but clearly not booming. It's really very tepid. 700 00:38:03,400 --> 00:38:05,440 Speaker 1: And like I said, I'm talking to companies that were 701 00:38:05,480 --> 00:38:08,320 Speaker 1: ready to go this year with corporate tax reform on 702 00:38:08,400 --> 00:38:10,920 Speaker 1: what they thought would be an expansion for them to 703 00:38:10,960 --> 00:38:13,120 Speaker 1: be able to do something. What what is holding it back? 704 00:38:13,160 --> 00:38:16,160 Speaker 1: Don't give me this Washington malarkey. It's more than that. Why, 705 00:38:17,280 --> 00:38:20,359 Speaker 1: you're right, it's also a slow economy. What's been interesting, too, 706 00:38:20,440 --> 00:38:23,600 Speaker 1: is that you are starting to see some manufacturers talk 707 00:38:23,680 --> 00:38:26,440 Speaker 1: about more automation because they're literally running out of workers. 708 00:38:26,480 --> 00:38:28,879 Speaker 1: And many of these small towns it's a very small 709 00:38:28,960 --> 00:38:31,880 Speaker 1: labor pool, and they moved out to these rural areas 710 00:38:31,920 --> 00:38:35,960 Speaker 1: because it was che high quality. Now they can't paint 711 00:38:36,000 --> 00:38:38,080 Speaker 1: the picture. You're in Chicago and I know you're on 712 00:38:38,160 --> 00:38:42,400 Speaker 1: the Magic Mile there with prod and all the other stores. Diane, 713 00:38:42,640 --> 00:38:46,600 Speaker 1: you go, you go west of Chicago X number of 714 00:38:46,640 --> 00:38:51,240 Speaker 1: miles described that small factory. Well, you know, It's interesting 715 00:38:51,280 --> 00:38:53,799 Speaker 1: because actually they're they're further than that. A lot of 716 00:38:53,800 --> 00:38:55,839 Speaker 1: the factories of the companies that I'm talking to are 717 00:38:55,880 --> 00:39:00,359 Speaker 1: in northern Wisconsin. There in northern Michigan. They're very far 718 00:39:00,480 --> 00:39:04,320 Speaker 1: from urban centers. Unlike the Amazon um places we're seeing 719 00:39:04,320 --> 00:39:07,400 Speaker 1: the million square feet in Kenosha, right outside of Chicago 720 00:39:07,480 --> 00:39:09,840 Speaker 1: to get our you know, to get our Amazon deliveries 721 00:39:09,880 --> 00:39:12,840 Speaker 1: really quickly. These are factories that are actually much further 722 00:39:12,920 --> 00:39:16,560 Speaker 1: out and they're very very small towns which have um 723 00:39:16,600 --> 00:39:19,040 Speaker 1: they've kepped the labor force. But then anyone else that 724 00:39:19,080 --> 00:39:21,399 Speaker 1: they try to bring in, every single one of them 725 00:39:21,360 --> 00:39:23,600 Speaker 1: says they have a hard time passing the drug tests. 726 00:39:23,760 --> 00:39:26,520 Speaker 1: I just looked at the Quest drug passing data, and 727 00:39:26,560 --> 00:39:28,040 Speaker 1: if you look at the map, they have a great 728 00:39:28,040 --> 00:39:32,440 Speaker 1: interactive map, the highest drug um positive rates are in 729 00:39:32,560 --> 00:39:35,640 Speaker 1: rural America. You don't it's complete flip flop from the 730 00:39:35,680 --> 00:39:37,600 Speaker 1: past where you saw urban cores and a lot of 731 00:39:37,680 --> 00:39:40,920 Speaker 1: drug uses. It's now very if you were the map 732 00:39:41,360 --> 00:39:44,880 Speaker 1: runs hot on positive drug tests is in rural America, 733 00:39:45,000 --> 00:39:47,439 Speaker 1: and that's where these factories moved to, and so they're 734 00:39:47,440 --> 00:39:51,239 Speaker 1: having a hard time attracting I just the map, I 735 00:39:51,320 --> 00:39:53,719 Speaker 1: just brought. Isn't it a great map. It's a terrific map. 736 00:39:53,760 --> 00:39:56,360 Speaker 1: It's in It's in my monthly. Right up the darkest 737 00:39:56,400 --> 00:39:59,400 Speaker 1: the dark or market David Garl. The darkest color is Brooklyn, 738 00:39:59,440 --> 00:40:03,959 Speaker 1: New York. David Jump jump jump in here with it's 739 00:40:04,040 --> 00:40:07,680 Speaker 1: great having you on. You give us. You know the 740 00:40:07,680 --> 00:40:10,080 Speaker 1: guy up in northern Wisconsin, David. All I know is 741 00:40:10,080 --> 00:40:12,879 Speaker 1: he's sitting in three rows down from David heroind Green 742 00:40:12,920 --> 00:40:17,120 Speaker 1: Bay pack Well, and he might be already working at 743 00:40:17,120 --> 00:40:18,839 Speaker 1: a factory and great. But one of the things we're 744 00:40:18,840 --> 00:40:21,120 Speaker 1: going to see is that it was overtime hours go up. 745 00:40:21,239 --> 00:40:24,200 Speaker 1: But again that happened in the because they can't find 746 00:40:24,239 --> 00:40:26,480 Speaker 1: additional workers, so they run him over time and then 747 00:40:26,520 --> 00:40:29,920 Speaker 1: you start getting fatigue and risks of accidents off the 748 00:40:30,040 --> 00:40:32,760 Speaker 1: With that quest data, this is really interesting. You're expected 749 00:40:32,760 --> 00:40:34,880 Speaker 1: to do the opioid stuff that's actually peaked off in 750 00:40:34,880 --> 00:40:38,080 Speaker 1: the last two years. The biggest surge in drug US 751 00:40:38,320 --> 00:40:41,880 Speaker 1: outside of the states that have legalized marijuana is cocaine. 752 00:40:42,040 --> 00:40:44,640 Speaker 1: And that surprised me. And one of the main drivers 753 00:40:44,680 --> 00:40:48,680 Speaker 1: of that is mandatory tests after an accident is cocaine. 754 00:40:49,160 --> 00:40:51,879 Speaker 1: And that surprised me. And that's something that I think 755 00:40:51,960 --> 00:40:54,680 Speaker 1: is important is you know, you're seeing positive drug tests 756 00:40:54,680 --> 00:40:57,200 Speaker 1: after an accident, and that's not something anyone can afford. 757 00:40:57,440 --> 00:40:58,920 Speaker 1: I'm great to speak with you is always thank you 758 00:40:58,960 --> 00:41:01,319 Speaker 1: very much and for helping us take part. Those numbers 759 00:41:01,360 --> 00:41:03,440 Speaker 1: there in real time, just got them acrossing the bloomberg 760 00:41:03,480 --> 00:41:04,920 Speaker 1: and they're going right into Diane Swamp, the founder of 761 00:41:04,960 --> 00:41:21,000 Speaker 1: DS Economics, joining us on our phone line. Michael Mayo 762 00:41:21,440 --> 00:41:24,480 Speaker 1: is taking stagecoach lessons. He darkens the door at Wells 763 00:41:24,520 --> 00:41:29,080 Speaker 1: Fargo after a story career of upsetting executives. What was 764 00:41:29,120 --> 00:41:31,600 Speaker 1: it like when you met the senior manager at Wells Fargo? 765 00:41:31,680 --> 00:41:33,759 Speaker 1: Did they was there silent? Is it like Game of 766 00:41:33,800 --> 00:41:36,439 Speaker 1: Thrones where you go into that big room at King's 767 00:41:36,560 --> 00:41:39,000 Speaker 1: Landing and you know you gotta watch your back? What 768 00:41:39,080 --> 00:41:42,879 Speaker 1: was it like well at Wells Fargo Securities, the head 769 00:41:42,920 --> 00:41:47,120 Speaker 1: of Research Global Research is Diane Shoemaker Creed, Yes, who's 770 00:41:47,160 --> 00:41:49,040 Speaker 1: well known with the the industry. She's one of the 771 00:41:49,360 --> 00:41:54,520 Speaker 1: top ranked women in banking. And you know, she said, 772 00:41:54,520 --> 00:41:57,719 Speaker 1: we're a very collaborative firm, and I'd say, yesterday, you know, 773 00:41:57,760 --> 00:41:59,640 Speaker 1: we came out with our launch of banks at Wells 774 00:41:59,640 --> 00:42:03,520 Speaker 1: Fargo's securities and part of the launched I DEALT collaborated 775 00:42:03,520 --> 00:42:07,319 Speaker 1: with about a dozen other analysts within research and so 776 00:42:07,440 --> 00:42:11,239 Speaker 1: the collaboration is just fantastic. So regardless of my my 777 00:42:11,360 --> 00:42:14,840 Speaker 1: career tom so far week six at well Fargus secure 778 00:42:14,880 --> 00:42:18,480 Speaker 1: curity is so good. You've only insulted in California size 779 00:42:18,920 --> 00:42:22,080 Speaker 1: group of people, Mike Mayo, your fiery and passion and 780 00:42:22,360 --> 00:42:26,520 Speaker 1: let's get right to the house of Mr Corbett. People 781 00:42:26,560 --> 00:42:32,200 Speaker 1: have been waiting and waiting, why now bank? So we 782 00:42:32,640 --> 00:42:35,640 Speaker 1: expect City Group stock to double the next four to 783 00:42:35,760 --> 00:42:39,680 Speaker 1: five years. That's partly because of what Michael Corbett, the 784 00:42:39,719 --> 00:42:43,000 Speaker 1: CEO and City Group has done, and it's partly because 785 00:42:43,040 --> 00:42:46,600 Speaker 1: of what we think they should do. What City Group 786 00:42:46,640 --> 00:42:50,839 Speaker 1: has done is they've reduction reduced structural risk, permanent risk 787 00:42:50,880 --> 00:42:54,120 Speaker 1: reduction at City Group to probably the lowest level that 788 00:42:54,160 --> 00:42:57,239 Speaker 1: I've seen since the merger with Travelers. This and that 789 00:42:57,680 --> 00:42:59,759 Speaker 1: you know through the stock beta you're going to see 790 00:42:59,760 --> 00:43:01,600 Speaker 1: the big gest reduction the stock. They did, the biggest 791 00:43:01,640 --> 00:43:05,120 Speaker 1: reduction and the cost of capital and the biggest reduction 792 00:43:05,160 --> 00:43:09,240 Speaker 1: and risk premium for any bank stock around How much 793 00:43:09,440 --> 00:43:13,360 Speaker 1: is City Group like Sandy Wilds City Group, is it 794 00:43:13,440 --> 00:43:17,959 Speaker 1: completely moved on from the Wild years. It's so much 795 00:43:18,000 --> 00:43:21,960 Speaker 1: moved on. Well. Number one, City Group can concentrate on 796 00:43:22,000 --> 00:43:25,640 Speaker 1: being a large bank and optimizing what they have. No 797 00:43:25,920 --> 00:43:29,640 Speaker 1: more big bank mergers. I'm not gonna you never say 798 00:43:29,680 --> 00:43:33,440 Speaker 1: never with mergers, but the big mergers, the merger after merger. 799 00:43:33,719 --> 00:43:37,040 Speaker 1: It took City Group, you know, like a decade and 800 00:43:37,120 --> 00:43:39,880 Speaker 1: a half to integrate these acquisitions. Actually, City Group had 801 00:43:39,920 --> 00:43:44,560 Speaker 1: something called Project Rainbow, which is creating one global consumer platform. 802 00:43:44,600 --> 00:43:47,520 Speaker 1: They finally finished that last year, and that stems back 803 00:43:47,560 --> 00:43:50,880 Speaker 1: from the early part of last decade with Sandy Wild's acquisitions. 804 00:43:50,880 --> 00:43:53,400 Speaker 1: That's one. Number two would be the credit risk. City 805 00:43:53,400 --> 00:43:56,520 Speaker 1: Group has a lot more prime lending and super prime lending, 806 00:43:56,560 --> 00:43:59,000 Speaker 1: a whole lot less subprime lending. Now, some of that 807 00:43:59,160 --> 00:44:01,439 Speaker 1: was put in the books after Sandy Wild left, for sure, 808 00:44:01,760 --> 00:44:04,600 Speaker 1: but I'd say in terms of the credit risk, the 809 00:44:04,640 --> 00:44:08,400 Speaker 1: overall risk profile of the firm, acquisitions risk is a 810 00:44:08,440 --> 00:44:10,680 Speaker 1: lot less at City Group. And over the next five years, 811 00:44:10,680 --> 00:44:13,239 Speaker 1: we expect City Group to buy back one third of 812 00:44:13,239 --> 00:44:15,440 Speaker 1: its shares and the only thing that prevents them from 813 00:44:15,480 --> 00:44:18,200 Speaker 1: doing that is messing up. So as long as they 814 00:44:18,200 --> 00:44:20,000 Speaker 1: don't blow a big hole in their balance sheet as 815 00:44:20,000 --> 00:44:22,000 Speaker 1: long as they don't you know, trip on the way 816 00:44:22,719 --> 00:44:25,640 Speaker 1: to work. We think they can buy backstock, so you 817 00:44:25,640 --> 00:44:29,080 Speaker 1: can legally front run the biggest buyer, City Group stock. 818 00:44:29,160 --> 00:44:31,360 Speaker 1: That is, you can buy shares a City Group stock 819 00:44:31,920 --> 00:44:34,360 Speaker 1: knowing that City Group are based on our forecast that 820 00:44:34,360 --> 00:44:36,439 Speaker 1: they'll buy back one third of shares over five years. 821 00:44:36,480 --> 00:44:38,880 Speaker 1: I've never seen anything like that before. So that's what 822 00:44:38,920 --> 00:44:42,279 Speaker 1: they've done. Now, what they haven't done is they still 823 00:44:42,280 --> 00:44:46,200 Speaker 1: haven't generated returns above the cost of capital. You still 824 00:44:46,200 --> 00:44:50,880 Speaker 1: have single digit return on equity. What do they do 825 00:44:50,960 --> 00:44:54,400 Speaker 1: get retail going? Well, some of this is in their plans. 826 00:44:54,400 --> 00:44:56,480 Speaker 1: They had their first investor day in a decade a 827 00:44:56,480 --> 00:44:59,160 Speaker 1: few weeks ago. And some of this will simply be 828 00:44:59,480 --> 00:45:02,279 Speaker 1: a matter of time, getting a lot more efficient, getting 829 00:45:02,280 --> 00:45:04,160 Speaker 1: a little bit more revenue growth. And some of that's 830 00:45:04,160 --> 00:45:06,799 Speaker 1: the function of the major headwinds, you know, having you know, 831 00:45:06,920 --> 00:45:09,440 Speaker 1: played out. I would digress, Mr Girl, They've got some 832 00:45:09,520 --> 00:45:11,160 Speaker 1: really stiff comp I was just waiting for you to 833 00:45:11,160 --> 00:45:13,240 Speaker 1: make a joke about how you saw Project Rainbow performed 834 00:45:13,280 --> 00:45:15,680 Speaker 1: live back in nineteen whatever it was, Tom, you didn't do, 835 00:45:15,760 --> 00:45:22,080 Speaker 1: And let me ask you about the comparison between Goldman 836 00:45:22,120 --> 00:45:24,720 Speaker 1: Sachs and Morgan Stanley. How useful is that comparison today 837 00:45:24,719 --> 00:45:27,680 Speaker 1: and what does it tell you about both of those banks? Well, 838 00:45:27,719 --> 00:45:30,200 Speaker 1: I think it's very useful. We did a major change. 839 00:45:30,239 --> 00:45:32,120 Speaker 1: I've been on your show in the past and we 840 00:45:32,200 --> 00:45:34,719 Speaker 1: said Morgan Stanley was our top pick five years ago, 841 00:45:34,800 --> 00:45:37,120 Speaker 1: and so for the first time in five years, we swapped. 842 00:45:37,640 --> 00:45:40,480 Speaker 1: We now picked Goldman Sacks over Morgan Stanley. Even though 843 00:45:40,520 --> 00:45:43,400 Speaker 1: Goldman Sacks is, you know, on their back. If I said, 844 00:45:43,640 --> 00:45:47,960 Speaker 1: you know, terrible trading quarter, the heat is on calls 845 00:45:48,000 --> 00:45:50,120 Speaker 1: for change in management, who would I be talking about. 846 00:45:50,640 --> 00:45:53,520 Speaker 1: I'd be talking about Morgan Stanley, you know, mid two 847 00:45:53,560 --> 00:45:56,839 Speaker 1: thousand and twelve, So role reversal here. I do think 848 00:45:56,880 --> 00:45:59,440 Speaker 1: the heat is on Goldman Sacks. One third of the 849 00:45:59,440 --> 00:46:02,160 Speaker 1: company rating has performed worst in classroom look at you 850 00:46:02,200 --> 00:46:04,960 Speaker 1: every year comparisons. How on their backs are they at 851 00:46:04,960 --> 00:46:07,320 Speaker 1: this point? I think the intensity of Goldman Sachs is 852 00:46:07,360 --> 00:46:09,719 Speaker 1: probably greater than it's ever been since their I p O. 853 00:46:10,000 --> 00:46:12,400 Speaker 1: When's the last time you heard the CEO and CFOs 854 00:46:12,400 --> 00:46:15,759 Speaker 1: say publicly as they've done the last month that you know, 855 00:46:15,840 --> 00:46:18,879 Speaker 1: we've we have not executed. So if the CEO saying 856 00:46:18,880 --> 00:46:21,200 Speaker 1: you're not executing. I think there's a lot of vacations 857 00:46:21,239 --> 00:46:24,200 Speaker 1: getting to happen, a lot of vacation of getting cancer 858 00:46:24,239 --> 00:46:26,719 Speaker 1: at Goldman Sachs. This but I agree with this, but 859 00:46:26,880 --> 00:46:29,239 Speaker 1: not just Goldman Sachs. David, I would agree this is 860 00:46:29,280 --> 00:46:31,520 Speaker 1: one of those years in the street where you're just 861 00:46:31,560 --> 00:46:34,479 Speaker 1: going Are we going away for eight days? I don't 862 00:46:34,480 --> 00:46:37,400 Speaker 1: think so. There's a lot of that going on. Davids. 863 00:46:37,480 --> 00:46:39,879 Speaker 1: One more question. I want to come back and ask 864 00:46:39,960 --> 00:46:43,440 Speaker 1: him more general questions and ask him what's what's Morgan 865 00:46:43,480 --> 00:46:46,879 Speaker 1: Stanley's focus right now? Is it on growth at this point? Well, look, 866 00:46:47,000 --> 00:46:52,239 Speaker 1: James Gorman was underappreciated five years ago. He agreed transformed 867 00:46:52,320 --> 00:46:55,520 Speaker 1: Morgan Stanley's business mix as much as any large bank. 868 00:46:55,840 --> 00:46:58,319 Speaker 1: I mean you look at wealth management, investment management, that 869 00:46:58,360 --> 00:47:00,960 Speaker 1: went from one third to one half. So you know, 870 00:47:01,080 --> 00:47:03,120 Speaker 1: he was, you know, skating where the puck is going 871 00:47:03,160 --> 00:47:05,440 Speaker 1: to be, using their way in Gretzky analogy, and they 872 00:47:05,560 --> 00:47:08,480 Speaker 1: benefited through that for the last five years. However, I 873 00:47:08,520 --> 00:47:12,440 Speaker 1: went to the annual meeting that was almost up and 874 00:47:12,520 --> 00:47:14,400 Speaker 1: purchase New York. It was a rainy day and I 875 00:47:14,440 --> 00:47:17,320 Speaker 1: asked almost all of the questions. But my key question 876 00:47:17,480 --> 00:47:20,640 Speaker 1: was you achieved the savings with the brokerge integration with 877 00:47:20,719 --> 00:47:23,919 Speaker 1: Smith Barney, you refinanced your high cost debt back from 878 00:47:24,160 --> 00:47:26,960 Speaker 1: you know, earlier this decade, you achieved a lot of 879 00:47:27,000 --> 00:47:30,360 Speaker 1: the project streamline expense saving, you redemployed the access deposits 880 00:47:30,440 --> 00:47:33,400 Speaker 1: and others. You've done a lot of yourself help. What's next? 881 00:47:34,280 --> 00:47:36,600 Speaker 1: And they said to some degree, their their growth is 882 00:47:36,640 --> 00:47:38,879 Speaker 1: a function of the economy. So I'd like to see 883 00:47:38,920 --> 00:47:42,719 Speaker 1: Morgan Stanley better define the next stage of their evolution. 884 00:47:43,000 --> 00:47:45,520 Speaker 1: You know, it's all fine, but from my standpoint, they're 885 00:47:45,520 --> 00:47:47,799 Speaker 1: a victim of their success when it comes to the 886 00:47:47,800 --> 00:47:50,279 Speaker 1: stock price, at least relative to Goldman Sacks and since 887 00:47:50,320 --> 00:47:53,960 Speaker 1: Goldman Sachs when public, Goldman has shown about twice as 888 00:47:54,000 --> 00:47:57,160 Speaker 1: fast organic revenue growth with about half as much earnings risks, 889 00:47:57,520 --> 00:48:00,319 Speaker 1: and they're cheaper. Made a lot of headline that year 890 00:48:00,320 --> 00:48:03,840 Speaker 1: ago in governance in Bank of America? Are you choosing 891 00:48:03,840 --> 00:48:08,319 Speaker 1: to review Bank of American? Mr Moynihan's efforts. Look, we 892 00:48:08,480 --> 00:48:12,279 Speaker 1: think that Bank America stock has upside over the next 893 00:48:12,320 --> 00:48:15,320 Speaker 1: three years. We think this is the stage for national 894 00:48:15,360 --> 00:48:18,760 Speaker 1: banking that they got distracted the nineties because they didn't integrate. 895 00:48:18,760 --> 00:48:21,799 Speaker 1: That's just not got the move they got. They got 896 00:48:21,800 --> 00:48:25,520 Speaker 1: distracted by financial crisis. They're growing organic deposits. We still 897 00:48:25,560 --> 00:48:28,320 Speaker 1: think the Border Bank America should hold management more accountable, 898 00:48:28,360 --> 00:48:30,080 Speaker 1: but we think man will get the job done anyway. 899 00:48:30,080 --> 00:48:31,520 Speaker 1: We're gonna come back with Mike Mayo. A couple of 900 00:48:31,520 --> 00:48:33,800 Speaker 1: moments with Mr Mayo. Here he is with Wells Fargo 901 00:48:34,480 --> 00:48:38,840 Speaker 1: security screen on the screen up thirty nine three and 902 00:48:38,880 --> 00:48:41,759 Speaker 1: the VIX comes in fifteen point one seven and some 903 00:48:41,800 --> 00:48:44,480 Speaker 1: real volatility of the VIX, some nice tense of a 904 00:48:44,520 --> 00:48:48,120 Speaker 1: percentage point moves. It has an elasticity that I haven't 905 00:48:48,160 --> 00:48:50,520 Speaker 1: seen in weeks and weeks, and of course much of 906 00:48:50,520 --> 00:48:55,040 Speaker 1: that wrapped around the knock on effects of our geo politics. 907 00:49:00,080 --> 00:49:07,080 Speaker 1: M H. Thanks for listening to the Bloomberg Surveillance podcast. 908 00:49:07,520 --> 00:49:12,719 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 909 00:49:12,840 --> 00:49:17,160 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom Keene, 910 00:49:17,239 --> 00:49:21,759 Speaker 1: David Guras at David Gura. Before the podcast, you can 911 00:49:21,800 --> 00:49:24,920 Speaker 1: always catch us World one. I'm Bloomberg Radio