1 00:00:02,480 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,640 --> 00:00:10,040 Speaker 2: This is the. 3 00:00:10,000 --> 00:00:13,440 Speaker 3: Bloomberg Daybreak Aisia podcast. I'm Doug Prisner. You can join 4 00:00:13,480 --> 00:00:16,239 Speaker 3: Brian Curtis and myself for the stories, making news and 5 00:00:16,320 --> 00:00:19,439 Speaker 3: moving markets in the APAC region. You can subscribe to 6 00:00:19,480 --> 00:00:22,200 Speaker 3: the show anywhere you get your podcast and always on 7 00:00:22,239 --> 00:00:26,120 Speaker 3: Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App. 8 00:00:27,240 --> 00:00:30,480 Speaker 2: We are joined on the program now by Carol Platte Lebau, 9 00:00:30,600 --> 00:00:34,000 Speaker 2: President of the Yankee Institute, to take a closer look 10 00:00:34,080 --> 00:00:37,880 Speaker 2: at President Biden's decision not to run in November. Carol, 11 00:00:37,920 --> 00:00:40,080 Speaker 2: thank you very much for being with us. Does it 12 00:00:40,200 --> 00:00:44,120 Speaker 2: surprise you at all that many in the Democratic Party 13 00:00:44,240 --> 00:00:48,519 Speaker 2: are falling in here behind Kamala Harris rather than calling 14 00:00:48,600 --> 00:00:52,680 Speaker 2: for a contested convention. I mean it feels like an anointment. 15 00:00:52,960 --> 00:00:54,680 Speaker 2: We don't do annointments in the US. 16 00:00:56,240 --> 00:00:59,680 Speaker 1: No, generally we don't. But given the lateness of the 17 00:00:59,720 --> 00:01:03,960 Speaker 1: out and the closeness of the Democratic National Convention it 18 00:01:04,040 --> 00:01:07,399 Speaker 1: starts just four weeks from tomorrow, I believe the party 19 00:01:07,480 --> 00:01:11,360 Speaker 1: feels as though it has very little option other than 20 00:01:11,400 --> 00:01:13,240 Speaker 1: to move ahead with the vice president. 21 00:01:13,959 --> 00:01:17,040 Speaker 3: So I think it's safe to say that the most 22 00:01:17,080 --> 00:01:21,840 Speaker 3: important thing that we will encounter next is Kamala Harris's 23 00:01:21,959 --> 00:01:24,920 Speaker 3: choice for a running mate. I mean, is there thinking 24 00:01:24,920 --> 00:01:27,160 Speaker 3: that you could share? I mean, how would a strategy 25 00:01:27,240 --> 00:01:29,800 Speaker 3: unfold if she were to look at it strategically. 26 00:01:30,680 --> 00:01:33,920 Speaker 1: Well, Kamala Harris, I think probably or at least the 27 00:01:33,959 --> 00:01:38,080 Speaker 1: people around her, understand that she comes into this race with, 28 00:01:38,520 --> 00:01:42,720 Speaker 1: you know, obviously some advantages that Joe Biden doesn't have, 29 00:01:42,840 --> 00:01:46,920 Speaker 1: in other words, youth and a certain dynamism and a 30 00:01:46,959 --> 00:01:50,520 Speaker 1: certain excitement factor for certain elements of the party, given 31 00:01:50,880 --> 00:01:53,520 Speaker 1: that she is younger, given that she will be the 32 00:01:53,520 --> 00:01:57,200 Speaker 1: first woman of color to head a major party ticket, 33 00:01:57,520 --> 00:02:02,360 Speaker 1: but that she also has certain disadvantage. She obviously is 34 00:02:02,440 --> 00:02:06,400 Speaker 1: a San Francisco Liberal heading a ticket, and she's going 35 00:02:06,440 --> 00:02:08,880 Speaker 1: to realize that she is going to need to bring 36 00:02:09,280 --> 00:02:12,519 Speaker 1: some of the appeal that President Biden was understood to have, 37 00:02:13,280 --> 00:02:17,640 Speaker 1: something that will help bring people from the rust belt, 38 00:02:17,680 --> 00:02:23,480 Speaker 1: the blue wall, blue collar male voters hopefully hold them 39 00:02:23,919 --> 00:02:28,080 Speaker 1: whatever's left of the Old New Deal coalition, and so 40 00:02:28,200 --> 00:02:32,480 Speaker 1: she will be looking at more moderate male candidates, in 41 00:02:32,520 --> 00:02:37,320 Speaker 1: my opinion, people like Andy Basheer, Governor of Kentucky, Roy Cooper, 42 00:02:37,440 --> 00:02:42,880 Speaker 1: the governor of North Carolina, Josh Shapiro, the governor of Pennsylvania, 43 00:02:43,040 --> 00:02:46,399 Speaker 1: but I don't believe he actually will have a shot 44 00:02:46,440 --> 00:02:50,880 Speaker 1: in the end, given the divisions in the Democratic Party 45 00:02:50,960 --> 00:02:55,600 Speaker 1: over support for Israel these days, and the one to watch, 46 00:02:56,000 --> 00:02:59,720 Speaker 1: and I believe the smart bet should be on Senator 47 00:03:00,120 --> 00:03:04,760 Speaker 1: Mark Kelly of Arizona. Arizona is a swing state. Mark 48 00:03:04,840 --> 00:03:08,440 Speaker 1: Kelly is a former astronaut and his wife, of course, 49 00:03:08,560 --> 00:03:12,320 Speaker 1: is Gabrielle Giffords, who was injured in a horrific gun 50 00:03:12,400 --> 00:03:15,040 Speaker 1: violence accident, and he's the one where I think the 51 00:03:15,080 --> 00:03:16,040 Speaker 1: smart money should be. 52 00:03:18,680 --> 00:03:21,840 Speaker 2: This whole process removes some of the uncertainties, but it 53 00:03:21,880 --> 00:03:24,440 Speaker 2: obviously raises a lot of questions. We've just talked about 54 00:03:24,480 --> 00:03:27,079 Speaker 2: a few of them. And another question is there are 55 00:03:27,160 --> 00:03:29,920 Speaker 2: many key voices in the Democratic Party who have not 56 00:03:30,080 --> 00:03:33,440 Speaker 2: weighed in yet with support for the vice president to 57 00:03:33,480 --> 00:03:36,440 Speaker 2: step up. Do you think that will get resolved or 58 00:03:36,440 --> 00:03:38,760 Speaker 2: do you think that that eventually means that there will 59 00:03:38,760 --> 00:03:40,880 Speaker 2: be a little bit more back and. 60 00:03:40,800 --> 00:03:41,400 Speaker 3: Forth on this. 61 00:03:42,720 --> 00:03:46,440 Speaker 1: I don't think Democrats will go to their convention with 62 00:03:46,680 --> 00:03:50,080 Speaker 1: an open convention on the table in anything but name, 63 00:03:50,800 --> 00:03:56,080 Speaker 1: because they understand just how potentially catastrophic that could be, 64 00:03:56,560 --> 00:04:00,839 Speaker 1: especially given the fact that emotions can run high and 65 00:04:01,360 --> 00:04:04,080 Speaker 1: you know, everyone saw what happened the last time a 66 00:04:04,120 --> 00:04:08,160 Speaker 1: Democratic convention was held in Chicago back in nineteen sixty eight, 67 00:04:08,800 --> 00:04:13,080 Speaker 1: And so right now, of course, Barack Obama, Nancy Pelosi, 68 00:04:13,240 --> 00:04:17,200 Speaker 1: House Minority Leader Hakim Jeffreys, and Senate Minority Leader Chuck 69 00:04:17,240 --> 00:04:23,680 Speaker 1: Schumer have not endorsed Kamala Harris. This isn't because necessarily 70 00:04:23,920 --> 00:04:26,680 Speaker 1: they don't want her as the candidate. In my view, 71 00:04:27,160 --> 00:04:31,200 Speaker 1: Barack Obama in particular has long been a mentor to 72 00:04:31,680 --> 00:04:34,520 Speaker 1: Kamala Harris, and in fact, he is the one who's 73 00:04:34,600 --> 00:04:37,320 Speaker 1: largely responsible for Joe Biden having picked her in the 74 00:04:37,320 --> 00:04:41,320 Speaker 1: first place. The reason in my view that Nancy Pelosi 75 00:04:41,839 --> 00:04:45,039 Speaker 1: and Barack Obama have not spoken up on her behalf 76 00:04:45,160 --> 00:04:50,640 Speaker 1: or indicated an endorsement of her is because, having touted 77 00:04:50,640 --> 00:04:54,040 Speaker 1: themselves as the Party of Democracy for the past three 78 00:04:54,120 --> 00:04:58,160 Speaker 1: and a half years, it does look rather unseemly if 79 00:04:58,480 --> 00:05:03,919 Speaker 1: having essentially helpt other candidates out of an actual Democratic primary, 80 00:05:04,440 --> 00:05:07,880 Speaker 1: and having given Dean Phillips, a backbench congressman who ran 81 00:05:08,200 --> 00:05:11,480 Speaker 1: on the grounds that Joe Biden was having certain mental 82 00:05:11,520 --> 00:05:15,440 Speaker 1: issues a very hard time for having participated. It now 83 00:05:15,440 --> 00:05:20,240 Speaker 1: seems rather unseemly if the Democrats rush to anoind a 84 00:05:20,320 --> 00:05:22,800 Speaker 1: candidate and make it look as though it's simply an 85 00:05:22,960 --> 00:05:24,920 Speaker 1: oligarchic situation. Here. 86 00:05:25,480 --> 00:05:28,720 Speaker 3: Is there a way in which Vice President Harris needs 87 00:05:28,760 --> 00:05:33,320 Speaker 3: to pivot away from the policies of the Biden administration 88 00:05:33,400 --> 00:05:36,159 Speaker 3: and maybe differentiate herself in a unique way. 89 00:05:37,080 --> 00:05:40,320 Speaker 1: Well, it's going to be very difficult for her to 90 00:05:40,400 --> 00:05:44,440 Speaker 1: do that in a lot of ways, given that she 91 00:05:44,640 --> 00:05:49,479 Speaker 1: really is, you know, Joe Biden's vice president and she 92 00:05:49,640 --> 00:05:53,760 Speaker 1: has been there presumably as his partner, for the past 93 00:05:53,800 --> 00:05:58,240 Speaker 1: three and a half years, and so the Biden administration 94 00:05:58,600 --> 00:06:03,599 Speaker 1: really has governed in really at the left side of 95 00:06:03,600 --> 00:06:06,520 Speaker 1: the political spectrum for the past three and a half years, 96 00:06:06,920 --> 00:06:10,839 Speaker 1: and Kamala Harris finds herself on the left side of 97 00:06:10,920 --> 00:06:14,440 Speaker 1: the Democratic Party. It is going to be very difficult 98 00:06:14,760 --> 00:06:19,599 Speaker 1: for her to find places to distinguish herself in a 99 00:06:19,640 --> 00:06:23,200 Speaker 1: way that would not involve moving right, which is something 100 00:06:23,200 --> 00:06:26,279 Speaker 1: that she's not likely to be very comfortable doing. 101 00:06:26,720 --> 00:06:29,679 Speaker 2: And she could not highlight differences with the president while 102 00:06:29,720 --> 00:06:32,640 Speaker 2: the president continues to serve and she continues to serve 103 00:06:32,640 --> 00:06:34,919 Speaker 2: as the vice president so I guess the follow on 104 00:06:35,080 --> 00:06:38,480 Speaker 2: question from that, In your view, would it actually be 105 00:06:38,480 --> 00:06:42,600 Speaker 2: better for the Democratic Party and Kamala Harris if President 106 00:06:42,600 --> 00:06:44,320 Speaker 2: Biden were to step down. 107 00:06:44,279 --> 00:06:50,240 Speaker 1: Now, Actually, for Kamala Harris politically, that would be optimal 108 00:06:50,279 --> 00:06:52,680 Speaker 1: in a lot of ways, because it gives the country 109 00:06:53,400 --> 00:06:57,359 Speaker 1: a visual, It lets her step into the shoes of 110 00:06:57,480 --> 00:07:01,520 Speaker 1: the president, and it lets her everyone. It gives her 111 00:07:01,839 --> 00:07:05,760 Speaker 1: the visual, and it gives her everything she needs to 112 00:07:06,200 --> 00:07:11,480 Speaker 1: start serving as president right away, and that can only 113 00:07:11,560 --> 00:07:12,480 Speaker 1: be helpful to her. 114 00:07:12,680 --> 00:07:15,800 Speaker 3: The timing is very interesting. I mean, obviously, the GOP 115 00:07:16,120 --> 00:07:20,520 Speaker 3: just wrapped up its convention in Milwaukee. Now we have 116 00:07:20,720 --> 00:07:24,760 Speaker 3: Prime Minister Benjamin Netanyahuo's scheduling to land in the US tomorrow. 117 00:07:24,800 --> 00:07:27,800 Speaker 3: As a matter of fact, can you set what we've 118 00:07:27,840 --> 00:07:32,040 Speaker 3: witnessed today in the context the timeline that has been unfolding. 119 00:07:32,760 --> 00:07:36,680 Speaker 1: Well, most of the timeline has been driven by the 120 00:07:36,760 --> 00:07:41,320 Speaker 1: fact that it's getting very close in terms of a 121 00:07:41,440 --> 00:07:46,240 Speaker 1: ballot requirements in various states. And if Democrats had waited 122 00:07:46,360 --> 00:07:49,360 Speaker 1: much longer, if Joe Biden had waited much longer to 123 00:07:49,440 --> 00:07:53,680 Speaker 1: make this decision, there could have been ballot access challenges 124 00:07:53,760 --> 00:07:57,400 Speaker 1: brought by Republicans in various states, some of which are 125 00:07:57,480 --> 00:08:01,760 Speaker 1: swing states. And that's not to say that necessarily those 126 00:08:01,880 --> 00:08:05,080 Speaker 1: challenges would have prevailed, but it could have made things 127 00:08:05,200 --> 00:08:10,920 Speaker 1: a lot more dicey in terms of legal challenges to 128 00:08:11,320 --> 00:08:16,000 Speaker 1: whomever the nominee ultimately was. And so, just given what 129 00:08:16,040 --> 00:08:19,280 Speaker 1: they need to do also to get ballots printed in 130 00:08:19,400 --> 00:08:23,080 Speaker 1: practical terms, timeless upon them, this had to happen if 131 00:08:23,080 --> 00:08:24,000 Speaker 1: it was going to happen. 132 00:08:24,640 --> 00:08:28,000 Speaker 2: The Republicans are trumpeting that the Democrats are very beatable 133 00:08:28,040 --> 00:08:30,280 Speaker 2: now that they've been in disarray, but we should remember 134 00:08:30,280 --> 00:08:33,400 Speaker 2: that former President Trump looked himself very beatable when he 135 00:08:33,440 --> 00:08:36,719 Speaker 2: was a convicted felon on thirty four accounts, but then 136 00:08:36,760 --> 00:08:40,200 Speaker 2: he did rebound. Do you think the Democrats can rebound 137 00:08:40,240 --> 00:08:42,800 Speaker 2: from here? Or is the die cast very quickly? 138 00:08:44,280 --> 00:08:47,680 Speaker 1: The die is never cast. The vote happens over a 139 00:08:47,679 --> 00:08:50,480 Speaker 1: period of weeks, of course, but nothing is done until 140 00:08:50,520 --> 00:08:53,640 Speaker 1: it's done, and ultimately the American people are the ones 141 00:08:53,679 --> 00:08:54,640 Speaker 1: who make the decision. 142 00:08:55,679 --> 00:08:58,760 Speaker 2: Right. Okay, well, Carol, thanks very much for being with us. 143 00:08:58,800 --> 00:09:02,439 Speaker 2: Carol Platt live leave, President of the Yankee Institute, with. 144 00:09:02,480 --> 00:09:13,200 Speaker 3: US President Biden not seeking reelection, joining us now from 145 00:09:13,440 --> 00:09:17,679 Speaker 3: just outside San Francisco, is Brandis Kine's rown professor of 146 00:09:17,720 --> 00:09:22,160 Speaker 3: political science at Stanford University, where she is senior Fellow 147 00:09:22,240 --> 00:09:25,679 Speaker 3: at the Hoover Institution. Brandis, thank you so much for 148 00:09:25,760 --> 00:09:28,079 Speaker 3: being with us. Can I begin by just getting your 149 00:09:28,080 --> 00:09:32,040 Speaker 3: reaction to these dramatic events that, as Brian mentioned, have 150 00:09:32,320 --> 00:09:34,680 Speaker 3: just unfolded in about the last five hours or so. 151 00:09:36,280 --> 00:09:39,720 Speaker 4: Yes, on the one hand, it seemed increasingly likely that 152 00:09:39,800 --> 00:09:43,400 Speaker 4: Biden would drop out. On the other hand, I don't 153 00:09:43,400 --> 00:09:46,520 Speaker 4: know that everyone expected it to be today, or even tomorrow, 154 00:09:46,640 --> 00:09:49,960 Speaker 4: or even this week. And you may have seen that 155 00:09:50,080 --> 00:09:53,559 Speaker 4: many of his own aides responded they were learning from 156 00:09:54,440 --> 00:09:59,360 Speaker 4: x formerly known as Twitter. So this was not an 157 00:09:59,400 --> 00:10:02,680 Speaker 4: event that everyone was predicting to happen just at this moment. 158 00:10:03,400 --> 00:10:06,560 Speaker 2: Brendis, do you see a particular trigger for this move 159 00:10:06,679 --> 00:10:09,679 Speaker 2: or was it just sort of the cumulative weight of 160 00:10:09,760 --> 00:10:11,680 Speaker 2: advice from those around the president? 161 00:10:13,520 --> 00:10:18,360 Speaker 4: Well, it's you know, the Democrats, if you had asked 162 00:10:18,400 --> 00:10:20,960 Speaker 4: me a few months ago what position would they like 163 00:10:21,080 --> 00:10:23,960 Speaker 4: to be in? They would like to know that Trump 164 00:10:24,040 --> 00:10:26,840 Speaker 4: is the nominee in the sense of that's who they're 165 00:10:26,840 --> 00:10:31,440 Speaker 4: competing against, and that he won't be replaced by a 166 00:10:31,480 --> 00:10:35,480 Speaker 4: different Republican and then be able to replace Biden with 167 00:10:35,559 --> 00:10:41,560 Speaker 4: someone who they thought might be do even better against Trump. 168 00:10:41,600 --> 00:10:44,319 Speaker 4: And so, while on the one hand, I don't have 169 00:10:44,480 --> 00:10:49,280 Speaker 4: private information suggesting there was a particular conversation today that 170 00:10:49,360 --> 00:10:53,280 Speaker 4: pushed Biden and his family over the edge, the timing 171 00:10:53,400 --> 00:10:57,000 Speaker 4: certainly suggests that, you know, Trump is the nominee. He's 172 00:10:57,040 --> 00:11:00,800 Speaker 4: now been formally nominated by the Republicans. So they're in 173 00:11:01,440 --> 00:11:04,199 Speaker 4: a position that I think many would have said they'd 174 00:11:04,280 --> 00:11:06,120 Speaker 4: like to be in many respects. 175 00:11:06,240 --> 00:11:08,720 Speaker 3: So if we can agree, then at the GOP convention 176 00:11:08,880 --> 00:11:11,800 Speaker 3: last week, there was a strategy going forward, the assumption 177 00:11:11,960 --> 00:11:15,040 Speaker 3: being that Donald Trump and Joe Biden would be going 178 00:11:15,120 --> 00:11:17,959 Speaker 3: head to add in this race. Now it would seem 179 00:11:18,120 --> 00:11:21,640 Speaker 3: as though the Trump campaign has to make a little 180 00:11:21,679 --> 00:11:24,000 Speaker 3: bit of a pivot here. If you were advising them, 181 00:11:24,040 --> 00:11:25,880 Speaker 3: what would they need to do next. 182 00:11:27,840 --> 00:11:31,440 Speaker 4: They certainly need to think about how these shifts the 183 00:11:31,520 --> 00:11:35,839 Speaker 4: coalition a bit, and how some of the you know, 184 00:11:35,920 --> 00:11:38,520 Speaker 4: some of the things that the Trump campaign was probably 185 00:11:38,520 --> 00:11:41,679 Speaker 4: counting on was not just sort of pivotal voters or 186 00:11:41,720 --> 00:11:46,440 Speaker 4: swing voters maybe leaning more towards Biden, but they were 187 00:11:46,480 --> 00:11:49,440 Speaker 4: counting on a lack of enthusiasm and lower turnout, and 188 00:11:49,480 --> 00:11:52,880 Speaker 4: of course all of that remains to be seen with 189 00:11:52,920 --> 00:11:57,480 Speaker 4: who we presume will be the nominee with Kamala Harris. 190 00:11:57,960 --> 00:12:02,880 Speaker 4: But you know, the sense that there was a sense 191 00:12:02,920 --> 00:12:05,960 Speaker 4: that young voters would would be even more likely than 192 00:12:06,040 --> 00:12:09,800 Speaker 4: usual to stay home. There was increasing evidence that many 193 00:12:09,920 --> 00:12:14,640 Speaker 4: underrepresented minorities, such as Black Americans, were not as enthusiastic. 194 00:12:15,559 --> 00:12:18,520 Speaker 4: The Trump campaign has to now update in terms of 195 00:12:18,559 --> 00:12:20,040 Speaker 4: those turnout expectations. 196 00:12:21,720 --> 00:12:24,280 Speaker 2: I wonder whether or not the Vice president's hands will 197 00:12:24,320 --> 00:12:26,880 Speaker 2: be tied a little bit in terms of trying to 198 00:12:26,920 --> 00:12:30,520 Speaker 2: differentiate herself from the president, because she's still serving as 199 00:12:30,600 --> 00:12:35,600 Speaker 2: vice president and you know from your experience, so will 200 00:12:35,640 --> 00:12:38,480 Speaker 2: she be able to carve out a new direction? For instance, 201 00:12:39,280 --> 00:12:44,160 Speaker 2: could we see a gap between her policy towards China, 202 00:12:44,200 --> 00:12:45,600 Speaker 2: for instance, than the president's. 203 00:12:46,840 --> 00:12:50,080 Speaker 4: I think that's a great question. And what I think 204 00:12:50,160 --> 00:12:56,839 Speaker 4: we'll see is perhaps some movement on issues particularly and 205 00:12:57,240 --> 00:12:59,960 Speaker 4: China would be one of them, but they'll be more 206 00:13:00,000 --> 00:13:04,800 Speaker 4: movements that are then supported by Biden himself, at least publicly. 207 00:13:05,360 --> 00:13:05,520 Speaker 2: Right. 208 00:13:05,840 --> 00:13:09,000 Speaker 4: I don't foresee a huge breach in the sense of 209 00:13:09,320 --> 00:13:11,840 Speaker 4: I'm a part of because in some ways she can't 210 00:13:12,040 --> 00:13:15,360 Speaker 4: run as a part of the Biden administration and who's 211 00:13:15,400 --> 00:13:19,760 Speaker 4: helped formulate many of the policies. But presidents update policies 212 00:13:19,800 --> 00:13:22,800 Speaker 4: all the time, particularly in areas such as foreign affairs, 213 00:13:23,280 --> 00:13:26,960 Speaker 4: due to new developments, and so that can be packaged 214 00:13:26,960 --> 00:13:29,520 Speaker 4: in a way, particularly if it's an incremental move. 215 00:13:29,920 --> 00:13:32,760 Speaker 3: So right now the betting markets are indicating the probability 216 00:13:32,800 --> 00:13:35,200 Speaker 3: of Trump winning in November that it took a small 217 00:13:35,640 --> 00:13:38,520 Speaker 3: move lower, although I think that he does remain at 218 00:13:38,520 --> 00:13:40,840 Speaker 3: this point to clear favorite. Is there a period of 219 00:13:40,880 --> 00:13:44,880 Speaker 3: time that you would want to elapse before polling data 220 00:13:44,920 --> 00:13:50,080 Speaker 3: would reliably begin to reflect how Kamala Harris would be 221 00:13:50,200 --> 00:13:52,760 Speaker 3: received in the election in November. 222 00:13:53,880 --> 00:13:59,000 Speaker 4: Absolutely. And one of the things I assume that Biden himself, 223 00:13:59,080 --> 00:14:01,720 Speaker 4: to the extent that these reports that he was resisting 224 00:14:02,120 --> 00:14:05,800 Speaker 4: stepping down, would know very well from his long years 225 00:14:05,800 --> 00:14:09,120 Speaker 4: in politics, is that often there are these movements after 226 00:14:09,200 --> 00:14:13,800 Speaker 4: a debate or after a convention that favor of particular candidate, 227 00:14:13,840 --> 00:14:16,800 Speaker 4: but then the fundamentals tend to return. That's what all 228 00:14:16,840 --> 00:14:21,000 Speaker 4: of the political science evidence suggests that those are usually 229 00:14:22,240 --> 00:14:25,240 Speaker 4: very temporary events. And so I'm sure he was thinking, look, 230 00:14:25,280 --> 00:14:28,960 Speaker 4: we know this and so and with Kamala, we both 231 00:14:29,040 --> 00:14:33,480 Speaker 4: want to see how she's received now, and of course 232 00:14:33,520 --> 00:14:36,040 Speaker 4: she's not the official nominee yet, but let's say that 233 00:14:36,080 --> 00:14:39,400 Speaker 4: within a week it becomes, as you pointed out earlier 234 00:14:39,440 --> 00:14:44,600 Speaker 4: in this session, she's increasingly seen as the likely nominee. 235 00:14:45,080 --> 00:14:48,200 Speaker 4: How she's received, but also how these post debate, post 236 00:14:48,840 --> 00:14:52,360 Speaker 4: Republican convention bounces kind of come to earth. 237 00:14:53,240 --> 00:14:55,200 Speaker 2: Branda Simon advised, I need to ask you a very 238 00:14:55,200 --> 00:14:57,800 Speaker 2: short question, okay, and you won't be able to answer it, 239 00:14:57,840 --> 00:14:59,080 Speaker 2: But who wins in November? 240 00:15:01,880 --> 00:15:03,600 Speaker 4: I think it's about I think we do want You 241 00:15:03,640 --> 00:15:05,160 Speaker 4: asked me how long? I think you want a week 242 00:15:05,240 --> 00:15:07,280 Speaker 4: or two before we make strong predictions on that. 243 00:15:07,840 --> 00:15:12,760 Speaker 3: Brandis Caine's wrong, Professor of political science at Stanford University, 244 00:15:12,840 --> 00:15:15,000 Speaker 3: where she is senior fellow at the Hoover Institution. 245 00:15:21,760 --> 00:15:26,160 Speaker 2: James bat Managing director and chief investment Officer at Center 246 00:15:26,360 --> 00:15:30,280 Speaker 2: Asset Management, James, thank you for joining us. What is 247 00:15:30,320 --> 00:15:34,480 Speaker 2: the single most important issue for the presidential election that's 248 00:15:34,520 --> 00:15:37,200 Speaker 2: coming up? And is it, you know, is it more 249 00:15:37,240 --> 00:15:39,920 Speaker 2: about character or is it something that would be in 250 00:15:39,960 --> 00:15:42,360 Speaker 2: the business and finance area. 251 00:15:43,120 --> 00:15:47,240 Speaker 5: Well, I think what happened today raises the uncertainty level 252 00:15:48,040 --> 00:15:52,040 Speaker 5: to a great degree. The knee jerk reaction of a 253 00:15:52,080 --> 00:15:54,920 Speaker 5: lot of pundits has been that this is analogous somehow 254 00:15:54,960 --> 00:15:58,920 Speaker 5: to Lyndon Johnson in nineteen sixty eight when he dropped out. 255 00:15:59,440 --> 00:16:01,920 Speaker 5: People have to remember, though, that Johnson dropped out of 256 00:16:01,920 --> 00:16:05,080 Speaker 5: the race in March nineteen sixty eight when the primaries 257 00:16:05,160 --> 00:16:08,240 Speaker 5: was still underway. It's not like today where all the 258 00:16:08,280 --> 00:16:12,160 Speaker 5: delegates that have been pledged are there and the convention 259 00:16:12,320 --> 00:16:17,280 Speaker 5: which takes place on starts on August nineteenth, you know, 260 00:16:17,320 --> 00:16:20,760 Speaker 5: allows that to basically unfold. You know, what you have 261 00:16:20,960 --> 00:16:24,360 Speaker 5: is essentially an environment where it still can be an 262 00:16:24,360 --> 00:16:27,560 Speaker 5: open race. I'm not so sure Harris is the one 263 00:16:27,560 --> 00:16:31,120 Speaker 5: who actually gets the nod. Here to a certain degree, 264 00:16:31,560 --> 00:16:34,280 Speaker 5: you could have essentially an environment where, because the way 265 00:16:34,320 --> 00:16:37,240 Speaker 5: the Democratic primary is set up and the number of 266 00:16:37,280 --> 00:16:41,520 Speaker 5: super delegates that they have, all you need is essentially, 267 00:16:41,840 --> 00:16:44,720 Speaker 5: you know, those super delegates representing a third of the 268 00:16:45,040 --> 00:16:48,920 Speaker 5: amount to get the nomination. But I think you know, 269 00:16:48,960 --> 00:16:51,680 Speaker 5: when you look at it from positives and negatives, you know, 270 00:16:51,920 --> 00:16:54,600 Speaker 5: the sad part of this whole thing is it highlights, 271 00:16:54,680 --> 00:16:57,920 Speaker 5: you know, how the post Citizens United decision by the 272 00:16:57,960 --> 00:17:00,280 Speaker 5: Supreme Court shows that, you know, very small group of 273 00:17:00,320 --> 00:17:03,840 Speaker 5: billionaires can kind of cut off the purse strings and 274 00:17:04,080 --> 00:17:06,960 Speaker 5: change elections to a great degree. On a positive side, however, 275 00:17:07,119 --> 00:17:10,120 Speaker 5: is that maybe we'll see a campaign on issues rather 276 00:17:10,119 --> 00:17:13,280 Speaker 5: than just cults of personalities, right, I mean, let's see 277 00:17:13,280 --> 00:17:16,600 Speaker 5: who wins the Republicans running on the platform of eighteen 278 00:17:16,680 --> 00:17:19,159 Speaker 5: eighty eight versus the Democrats running on the platform in 279 00:17:19,240 --> 00:17:20,240 Speaker 5: nineteen sixty eight. 280 00:17:20,400 --> 00:17:22,800 Speaker 3: Well, it seems clear in terms of economic policy if 281 00:17:22,800 --> 00:17:26,600 Speaker 3: you look at what the GOP is advocating, increased tariffs, 282 00:17:27,400 --> 00:17:30,840 Speaker 3: tax cuts. I mean, so the contrast seems pretty sharp. 283 00:17:31,320 --> 00:17:34,160 Speaker 3: What's your point of view here on what this means 284 00:17:34,160 --> 00:17:37,480 Speaker 3: from markets? Let's imagine right now that the betting markets 285 00:17:37,520 --> 00:17:40,600 Speaker 3: have it bright and Donald Trump has a real strong 286 00:17:40,720 --> 00:17:43,840 Speaker 3: chance of regaining power. Has the market fully discounted to 287 00:17:43,920 --> 00:17:44,960 Speaker 3: Trump presidency? 288 00:17:46,080 --> 00:17:47,600 Speaker 5: Well, I think if you look at just the action 289 00:17:47,760 --> 00:17:53,280 Speaker 5: last week where we had a significant rotation into small caps, cyclicals, banks, 290 00:17:53,359 --> 00:17:56,440 Speaker 5: I mean, what that was indicating at least was that 291 00:17:56,480 --> 00:18:00,440 Speaker 5: we were going to avoid a soft landing to see 292 00:18:00,560 --> 00:18:04,640 Speaker 5: earnings recover. The economy essentially go from a sideways moving 293 00:18:04,680 --> 00:18:08,639 Speaker 5: to acceleration, and you'd see this continuing rotation from the 294 00:18:08,720 --> 00:18:12,240 Speaker 5: magnificent seven, which really have garnered all the attention because 295 00:18:12,240 --> 00:18:15,840 Speaker 5: that's where the earnings power has been, towards a broadening 296 00:18:15,840 --> 00:18:19,320 Speaker 5: out of the market towards cyclicals and small caps in particular. 297 00:18:19,560 --> 00:18:21,960 Speaker 5: I think what this does is it raises that level 298 00:18:21,960 --> 00:18:24,080 Speaker 5: of uncertainty as to whether or not we're going to 299 00:18:24,119 --> 00:18:28,080 Speaker 5: go back to a twenty sixteen, twenty seventeen type of 300 00:18:28,200 --> 00:18:31,080 Speaker 5: environment of trading, where people will give the benefit of 301 00:18:31,119 --> 00:18:33,960 Speaker 5: the doubt that we are not late cycle, but we're 302 00:18:33,960 --> 00:18:37,080 Speaker 5: early cycle, and small caps will be the beneficiaries of 303 00:18:37,119 --> 00:18:40,800 Speaker 5: that earnings acceleration, which frankly doesn't reconcile with what the 304 00:18:40,880 --> 00:18:43,040 Speaker 5: economic backdrop is in reality. 305 00:18:44,160 --> 00:18:47,240 Speaker 2: So that sort of rotation that we saw last week 306 00:18:47,240 --> 00:18:51,480 Speaker 2: because unfortunately, to put a kind of bluntly seemed like 307 00:18:51,520 --> 00:18:55,119 Speaker 2: go was out of quality into weaker quality names. 308 00:18:56,000 --> 00:18:58,320 Speaker 5: Well, right, the things that would benefit from both the 309 00:18:58,400 --> 00:19:01,640 Speaker 5: Fed cutting interest rates, which would alleviate the interest rate 310 00:19:01,680 --> 00:19:04,919 Speaker 5: burden for many smaller companies or more indebted, but also 311 00:19:05,520 --> 00:19:08,000 Speaker 5: a broadening out of earnings. I mean, the reason why 312 00:19:08,040 --> 00:19:11,160 Speaker 5: the Magnificent seven have done so well and now represent 313 00:19:11,200 --> 00:19:12,840 Speaker 5: a third of the S and P five hundreds. That's 314 00:19:12,840 --> 00:19:15,080 Speaker 5: where essentially all of the earnings growth has come from. 315 00:19:15,200 --> 00:19:17,680 Speaker 5: In fact, even if you look at buybacks, just looking 316 00:19:17,720 --> 00:19:20,480 Speaker 5: at Apple alone, it accounts for ten percent of all 317 00:19:20,520 --> 00:19:23,360 Speaker 5: the dollar value of the buybacks over this past year. 318 00:19:23,400 --> 00:19:25,679 Speaker 5: But as active managers, you really have to make a 319 00:19:25,720 --> 00:19:29,840 Speaker 5: decision if you want to distinguish yourself from benchmarks. There's 320 00:19:29,840 --> 00:19:31,880 Speaker 5: really three patch you can go on. You could stick 321 00:19:31,920 --> 00:19:34,160 Speaker 5: with the magnificent seven and say this was a correction 322 00:19:34,720 --> 00:19:36,879 Speaker 5: and these numbers, these names are going to continue to 323 00:19:37,200 --> 00:19:40,320 Speaker 5: work well. The rotation or second is that the rotation 324 00:19:40,400 --> 00:19:44,479 Speaker 5: that we saw small caps, cyclicals, banks are basically going 325 00:19:44,520 --> 00:19:47,880 Speaker 5: to take the baton now of leadership that really relies 326 00:19:47,960 --> 00:19:51,960 Speaker 5: upon a very significant acceleration in the economy, a big 327 00:19:52,000 --> 00:19:55,640 Speaker 5: alleviation and interest rate burden by the FED reducing rates significantly. 328 00:19:55,920 --> 00:19:57,960 Speaker 5: The third, which I think is the winning path is 329 00:19:58,000 --> 00:20:02,840 Speaker 5: actually treasury bonds, goal old infrastructure utility stocks, and then 330 00:20:03,160 --> 00:20:07,320 Speaker 5: classic defensive growth stocks like staples and healthcare. I think 331 00:20:07,359 --> 00:20:09,600 Speaker 5: those are the names and those are the asset classes 332 00:20:09,600 --> 00:20:12,480 Speaker 5: that are going to preserve capital better in the environment 333 00:20:12,520 --> 00:20:13,119 Speaker 5: going forward. 334 00:20:13,200 --> 00:20:15,439 Speaker 3: So if you're being so defensive, I mean, are you 335 00:20:15,520 --> 00:20:18,200 Speaker 3: also assuming that we're going to see a meaningful slowdown 336 00:20:18,480 --> 00:20:19,320 Speaker 3: in the economy. 337 00:20:19,840 --> 00:20:22,119 Speaker 5: I think we continue to go sideways. And the problem 338 00:20:22,200 --> 00:20:25,159 Speaker 5: is if you look at expectations of earnings growth, you 339 00:20:25,240 --> 00:20:27,920 Speaker 5: look out to the fourth quarter of twenty twenty four, 340 00:20:28,040 --> 00:20:31,879 Speaker 5: you've got five percent top line growth but fifteen percent 341 00:20:31,960 --> 00:20:34,200 Speaker 5: earnings growth. And that's consistent with what you have in 342 00:20:34,240 --> 00:20:38,320 Speaker 5: the first quarter of twenty twenty five. It's not really 343 00:20:38,359 --> 00:20:42,399 Speaker 5: what's happening from a perspective of no soft lenning, no recession, 344 00:20:42,760 --> 00:20:46,199 Speaker 5: and a rapid acceleration of economy in expectations, because when 345 00:20:46,200 --> 00:20:49,000 Speaker 5: you look at the yield curve, it's indicating continuing recession, 346 00:20:49,320 --> 00:20:53,120 Speaker 5: earning slowdown. We're now seeing the unemployment rate Psalm's rule, 347 00:20:53,160 --> 00:20:56,320 Speaker 5: which indicates recession. And we look bottom up. I mean 348 00:20:56,359 --> 00:20:59,320 Speaker 5: where we're seeing opportunities is continuing to be on a 349 00:20:59,320 --> 00:21:01,840 Speaker 5: bottom of pcpeffective in some of these restructing stories and 350 00:21:01,880 --> 00:21:04,880 Speaker 5: some of those classic defensive stocks. And I think at 351 00:21:04,880 --> 00:21:06,920 Speaker 5: some point the Magnificent seven are going to run out 352 00:21:06,960 --> 00:21:10,159 Speaker 5: of steam. I think it's calling the top on the 353 00:21:10,160 --> 00:21:13,000 Speaker 5: Magnificent Seven. This cycle is going to be much more 354 00:21:13,000 --> 00:21:15,560 Speaker 5: difficult than it was back in ninety nine and two thousand, 355 00:21:15,840 --> 00:21:19,119 Speaker 5: simply because these companies are actually executing very very well, 356 00:21:19,200 --> 00:21:21,920 Speaker 5: but let's not forget. I think at some point over 357 00:21:21,960 --> 00:21:23,800 Speaker 5: the next year or two, we're going to get a 358 00:21:23,880 --> 00:21:27,040 Speaker 5: day when Nvidia is down thirty or forty percent on 359 00:21:27,240 --> 00:21:30,360 Speaker 5: record volume, when it announces a flat or negative book 360 00:21:30,400 --> 00:21:33,919 Speaker 5: to book bill ratio, because the buyer's appetite for specialized 361 00:21:33,960 --> 00:21:37,320 Speaker 5: chips is simply sated. Because when you get the buyers 362 00:21:37,359 --> 00:21:41,120 Speaker 5: of these chips. Microsoft's now spending two times depreciation. That's 363 00:21:41,520 --> 00:21:44,600 Speaker 5: double edged twenty five year median. Meta is spending two 364 00:21:44,640 --> 00:21:46,680 Speaker 5: and a half times as depreciation. That's at all sort 365 00:21:46,720 --> 00:21:50,639 Speaker 5: of peak. Google or Alphabet's spending three times as depreciation, 366 00:21:50,720 --> 00:21:53,800 Speaker 5: which is two times it's it's long term median. So 367 00:21:54,320 --> 00:21:56,639 Speaker 5: you know that is really the environment they're going to 368 00:21:56,640 --> 00:21:59,040 Speaker 5: be in for I think at some point in time 369 00:21:59,200 --> 00:22:02,560 Speaker 5: high risk since seven. So I think the opportunity set 370 00:22:02,720 --> 00:22:06,720 Speaker 5: is preservation of capital in bomb gold, infrastructure, utilities, and 371 00:22:06,760 --> 00:22:07,680 Speaker 5: staples in healthcare. 372 00:22:07,880 --> 00:22:09,840 Speaker 2: I get it. A lot of people, a lot of 373 00:22:09,840 --> 00:22:12,639 Speaker 2: people have already thought that. In fact, we saw Stanley 374 00:22:12,680 --> 00:22:18,719 Speaker 2: Drunkenmeller get out of Nvidia earlier. You know what's evident too, 375 00:22:18,840 --> 00:22:21,320 Speaker 2: is that when I looked at it, it looked like 376 00:22:21,359 --> 00:22:23,600 Speaker 2: he got out somewhere around say five hundred and then 377 00:22:23,680 --> 00:22:26,400 Speaker 2: so fifty now, and it's trading at about what one's 378 00:22:26,480 --> 00:22:29,359 Speaker 2: seventeen now, so it's one hundred percent higher than the 379 00:22:29,400 --> 00:22:31,679 Speaker 2: time that he got out. So it is a little tricky, 380 00:22:31,720 --> 00:22:34,200 Speaker 2: but it seems like what you're saying is get out 381 00:22:34,359 --> 00:22:37,719 Speaker 2: while you can, unless you can stump, you know, stomach 382 00:22:37,800 --> 00:22:40,360 Speaker 2: a thirty percent draw down sometimes or headshet. 383 00:22:40,200 --> 00:22:42,240 Speaker 5: Which is what we would be doing. Actually, yeah, and 384 00:22:42,359 --> 00:22:43,960 Speaker 5: need to own the but hedge, and that's probably the 385 00:22:43,960 --> 00:22:44,959 Speaker 5: better way to approach it. 386 00:22:45,480 --> 00:22:49,720 Speaker 2: Just briefly, Joe Manchin, you know, does that interest you? 387 00:22:49,800 --> 00:22:51,840 Speaker 2: Does that add a new wrinkle here? 388 00:22:52,800 --> 00:22:54,840 Speaker 5: I'm not sure. I think you're going to continue to 389 00:22:54,840 --> 00:22:57,199 Speaker 5: see other people come out of the woodwork here. What 390 00:22:57,240 --> 00:23:01,440 Speaker 5: do they say that the only thing that satisfies presidential 391 00:23:01,480 --> 00:23:04,919 Speaker 5: ambitions is either winning the office or being horizontal in 392 00:23:04,920 --> 00:23:07,000 Speaker 5: a coffin? Right? So I mean it's going to be 393 00:23:07,440 --> 00:23:09,160 Speaker 5: you know, at some point in time, I think you're 394 00:23:09,160 --> 00:23:11,199 Speaker 5: going to continue to see and let's not forget the 395 00:23:11,280 --> 00:23:15,440 Speaker 5: super delegates with the Democratic Party. You know, they essentially 396 00:23:15,440 --> 00:23:19,040 Speaker 5: can you know, make or break someone's nomination. It's going 397 00:23:19,119 --> 00:23:21,439 Speaker 5: to be exciting. I think it's if you're a political person, 398 00:23:21,880 --> 00:23:23,600 Speaker 5: this is going to be a very exciting time heading 399 00:23:23,640 --> 00:23:27,080 Speaker 5: into the convention. That being said, it creates a higher 400 00:23:27,160 --> 00:23:30,720 Speaker 5: level of uncertainty for investors. I would argue it's more 401 00:23:30,840 --> 00:23:34,240 Speaker 5: akin towards Bush Gore and hanging Chad. 402 00:23:34,400 --> 00:23:35,160 Speaker 2: Oh no. 403 00:23:36,520 --> 00:23:40,359 Speaker 5: Exactly, and then actually Johnson dropping out in nineteen sixty eight. 404 00:23:40,760 --> 00:23:42,560 Speaker 3: So let's talk a little bit about the FED very 405 00:23:42,640 --> 00:23:45,840 Speaker 3: quickly before we let you go, James Pce at the 406 00:23:45,920 --> 00:23:49,080 Speaker 3: end of the week, is there a risk that inflation, 407 00:23:49,400 --> 00:23:51,800 Speaker 3: I mean, although it's come down that at some point 408 00:23:51,800 --> 00:23:54,720 Speaker 3: it kind of goes sideways to the point you made 409 00:23:54,720 --> 00:23:57,919 Speaker 3: earlier where things may go sideways and the FED is 410 00:23:58,400 --> 00:24:00,879 Speaker 3: perhaps not in a position to cut, but twice we 411 00:24:00,960 --> 00:24:02,800 Speaker 3: get one rate cut between now and the end of 412 00:24:02,840 --> 00:24:03,160 Speaker 3: the year. 413 00:24:03,640 --> 00:24:06,000 Speaker 5: Yeah, We've been of the belief all year long that 414 00:24:06,040 --> 00:24:08,399 Speaker 5: the FED is only going to cut in reaction to 415 00:24:08,880 --> 00:24:12,960 Speaker 5: further slowdown in economic growth or an increase in the 416 00:24:13,040 --> 00:24:15,560 Speaker 5: unemployment rate. And what we always remind people of is 417 00:24:15,560 --> 00:24:18,119 Speaker 5: if you look at the seven cutting cycles, you know 418 00:24:18,160 --> 00:24:21,439 Speaker 5: since nineteen sixty nine, the stock market fell on average 419 00:24:21,480 --> 00:24:24,440 Speaker 5: about twenty five percent in the first two hundred days 420 00:24:24,480 --> 00:24:27,359 Speaker 5: after the first FED rate cut, So be careful what 421 00:24:27,400 --> 00:24:29,160 Speaker 5: you wish for when you want the FED to come 422 00:24:29,160 --> 00:24:31,480 Speaker 5: in and start lowering interest rates. 423 00:24:32,080 --> 00:24:35,199 Speaker 2: Just briefly twenty seconds. Is so you mentioned you like 424 00:24:35,520 --> 00:24:38,280 Speaker 2: to be defensive any one pick in particular. 425 00:24:39,880 --> 00:24:42,040 Speaker 5: I think if you just look across the Staples group, 426 00:24:42,200 --> 00:24:44,280 Speaker 5: you know there are plenty of stocks that are yielding 427 00:24:44,400 --> 00:24:47,080 Speaker 5: three and a half or four percent across the space. 428 00:24:47,280 --> 00:24:50,760 Speaker 5: Even in the medical technology field, like Metronic or Zimmer 429 00:24:51,119 --> 00:24:53,440 Speaker 5: those are names that I think across the board right now, 430 00:24:53,480 --> 00:24:55,600 Speaker 5: dividend yield is one of the factors that we think 431 00:24:55,640 --> 00:24:57,400 Speaker 5: will work very well over period of time. 432 00:24:57,800 --> 00:25:00,240 Speaker 2: All right, James, thank you so much. James bon Day, 433 00:25:00,240 --> 00:25:04,760 Speaker 2: Managing Director, Chief investment Officer at Center Asset Management. 434 00:25:06,760 --> 00:25:09,720 Speaker 3: This has been the Bloomberg Daybreak Asia podcast, bringing you 435 00:25:09,760 --> 00:25:12,880 Speaker 3: the stories making news and moving markets in the Asia Pacific. 436 00:25:13,400 --> 00:25:16,520 Speaker 3: Visit the Bloomberg Podcast channel on YouTube to get more 437 00:25:16,560 --> 00:25:20,159 Speaker 3: episodes of this and other shows from Bloomberg. Subscribe to 438 00:25:20,200 --> 00:25:23,960 Speaker 3: the podcast on Apple, Spotify, or anywhere else you listen, 439 00:25:24,080 --> 00:25:27,159 Speaker 3: and always on Bloomberg Radio, the Bloomberg Terminal, and the 440 00:25:27,200 --> 00:25:28,280 Speaker 3: Bloomberg Business app.