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

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Speaker 1: Along with my co host Lisa Bramowitz. Each day we

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

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

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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

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Speaker 1: this week, the European Central Bank will be meeting to discuss,

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Speaker 1: among other things, how to start pairing back it's stimulus.

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Speaker 1: I want to bring in Simon Ballard, a global credit

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Speaker 1: strategist here at Bloomberg. He is based in London, and Simon,

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Speaker 1: I really want to talk to you about the apparent

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Speaker 1: debate that's heating up at the e c B, which

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Speaker 1: is do they have to wind down their purchases first

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Speaker 1: under the quantitative easing program that they have going on

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Speaker 1: right now or can they start by using interest rates

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Speaker 1: from the negative deposit rate area that it is in now.

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Speaker 1: I feel like this is this is crucial and has

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Speaker 1: the potential to really shake markets. Can you give us

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Speaker 1: a sense of what the debate is? No, absolutely so,

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Speaker 1: And I think you know the key point here is,

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Speaker 1: well you know, they're looking towards the normalization of policy

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Speaker 1: over time. I think there's a very different and a

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Speaker 1: very distinct definition to be made between normalization of policy

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Speaker 1: and raising interest rates. Um. And I think the rhetoric,

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Speaker 1: the statement, the language that comes from the ECB over

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Speaker 1: the course of the coming months is going to be

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Speaker 1: how they approach withdrawing in terms of their their their stimulus.

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Speaker 1: As we've seen with the CBS Corporate Sector Purchase Program data.

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Speaker 1: The latest numbers came out this afternoon, delayed because of

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Speaker 1: the holiday in Europe yesterday. As at the end of

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Speaker 1: last week, they own just over ninety billion dollars now

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Speaker 1: of corporate bonds, so they're continuing to buy, they're continuing

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Speaker 1: to stimulate the credit markets. UM. So that's almost a

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Speaker 1: hundred billion dollars of corporate bonds in the past year. Absolutely,

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Speaker 1: that's corporate bonds plus all the all the agency debt

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Speaker 1: that they've been buying as well. So that is purely

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Speaker 1: just the corporate bonds that they've been trying to sort

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Speaker 1: of reflate the you know, the corporate sector with should

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Speaker 1: I say so, Yeah, the language going forward is gonna

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Speaker 1: be very key to how they sort of address moving

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Speaker 1: towards that tightening bus um. But while the you know,

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Speaker 1: the Federal Reserve is expected to increase again next next month,

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Speaker 1: this month, um and then possibly again before the end

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Speaker 1: of the year, I think you know it's gonna be

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Speaker 1: about the the the CBS language rather than the actions

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Speaker 1: in terms of interest rates. Simon, Yes, that the Federal

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Speaker 1: Reserve meeting, I guess the thirteenth and the fourteenth of June.

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Speaker 1: But I'm wondering has the investment community in Europe been

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Speaker 1: satisfied with the purchase program of the European Central Bank?

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Speaker 1: Inasmuch as if there's always a bid, you're always going

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Speaker 1: to find something to sell the central bank. What happens

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Speaker 1: when the central bank stops buying whatever it is you're selling, Well,

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Speaker 1: there in lies the there in lies the long term problem,

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Speaker 1: Pim And you know you've hit the nail exactly on

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Speaker 1: the head. Is the Is the market happy with what

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Speaker 1: the ECB is doing? It depends which side of the

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Speaker 1: trade you're looking at. If you're looking at it from

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Speaker 1: an investor's perspective wanting to buy reasonably placed, high yielding

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Speaker 1: assets for your portfolio, then no, you're not going to

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Speaker 1: be happy. Because we've seen the compression of spreads, we've

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Speaker 1: seen the erosion of yield through the crowding out effect

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Speaker 1: of central banks, not just the ECB, the Bank of England,

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Speaker 1: the Federal Reserved through their commentative policies as well. But

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Speaker 1: the stimulation has brought down yields and returns for to

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Speaker 1: the investor. Alternatively, for those guys that have been along

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Speaker 1: their portfolio over the last several years, they've just watched

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Speaker 1: valuations go through the go through the roof as spreads

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Speaker 1: of compressed and and and quality curves are flattened, as

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Speaker 1: investors have been as we say, crowded out into high

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Speaker 1: into the high yielding space, taken all riskier assets. So, simon,

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Speaker 1: I'm looking at a ten year German yield of about

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Speaker 1: a quarter of a percentage point. This is nothing for

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Speaker 1: ten years. Basically, you are giving Germany free money for

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Speaker 1: ten years to do whatever they want. That is how

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Speaker 1: desirous people are of this debt. People do not seemed

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Speaker 1: to be expecting that the ECB will come up with

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Speaker 1: any planned to extricate itself from the simulus program that

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Speaker 1: they have in place any time soon. So is this

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Speaker 1: just an intellectual argument as far as how they might

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Speaker 1: approach uh, some kind of withdrawal from the stimulus, or

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Speaker 1: is there actually going to be a timetable put in

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Speaker 1: place as well? Well, I think, you know, again, we'll

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Speaker 1: look for the language from the c B, as we

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Speaker 1: do from the Federal Reserve in time in terms of

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Speaker 1: their proposed or they're intended time frame. But it's the

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Speaker 1: pace at which that withdrawal happens that could potentially spook

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Speaker 1: the markets, could scare investors away from the from the

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Speaker 1: from the higher yielding assets that they've been crowded out

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Speaker 1: into over the course of the over the course of

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Speaker 1: the last couple of years. Um, you know, we have

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Speaker 1: a quarter of percent on the ten year Bund. That

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Speaker 1: is a lot better than the negative yielding front end

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Speaker 1: of the German curve, which has been negative out to

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Speaker 1: eight nine years in recent months. And again that really

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Speaker 1: reflects the the underlying uncertainty of the investor base. If

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Speaker 1: you wish wanting to be in these assets which are

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Speaker 1: being bought by the central banks, but at the same

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Speaker 1: time still wanting to hold old Treasury, still wanted to

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Speaker 1: hold German government bonds against the backdrop of an uncertain

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Speaker 1: macro environment, so they need that haven cover versus the

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Speaker 1: yield and the riskier assets that they're holding on the

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Speaker 1: other side of the hands. Simon, is it worthy asking

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Speaker 1: what lessons the European Central Bank, the Bank of Japan

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Speaker 1: and the Bank of England, what lessons they have learned,

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Speaker 1: if anything, from the federal reserves efforts with quantitative easing. Well,

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Speaker 1: I think you know, the lesson they're learning is the

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Speaker 1: the sceptibility of the market to react negatively and positively

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Speaker 1: to to to incorrectly timed you know, headlines and statements,

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Speaker 1: and I think you know, as we go through the

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Speaker 1: process of normalization in the US, you know, the impact

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Speaker 1: that this could have on the back end of the

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Speaker 1: quality curve, on the high yielding assets within Europe could

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Speaker 1: be It could be quite severe as we as we

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Speaker 1: pull away the you know, the purse strings and the

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Speaker 1: support mechanism, then you know, looking at how we know,

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Speaker 1: how we found how we finance some of these weaker

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Speaker 1: corporates that people have been buying into for the for

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Speaker 1: the incremental yield could could be could be very difficult.

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Speaker 1: So sim and given this backdrop of seemingly endless central

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Speaker 1: bank money, can anything shake it up? Like for example, say,

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Speaker 1: the UK election that's happening this week, that could potentially

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Speaker 1: pose somewhat of a surprising element to the markets should

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Speaker 1: Prime Minister Theresa May not win re election. Do you

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Speaker 1: think that this could actually shake things? I think more

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Speaker 1: importantly it would be Prime Minister Corbin that would shake

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Speaker 1: things if we did get the surprise, And as the

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Speaker 1: polls have been moving over the last couple of weeks

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Speaker 1: from a from a twenty basis point lead for the

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Speaker 1: Conservatives over the Labor Party down to some polls would

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Speaker 1: now suggest sort of just a one basis point to

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Speaker 1: lead between them. The implications of a labor socialist government

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Speaker 1: coming into the UK with their tax policies and their

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Speaker 1: their thoughts on sort of trying to reflate and nationalize

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Speaker 1: the economy I think could be a big trigger for

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Speaker 1: for for an unwind of risk appetite in Europe. But

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Speaker 1: we're certainly starting within the UK, but that would feed

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Speaker 1: very quickly across Europe as the as questions around Brexit

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Speaker 1: and more sort of the global recovery come into questions.

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Speaker 1: I want to thank you very much for joining us

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Speaker 1: Simon Ballard as our global credit strategist for Bloomberg. He

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Speaker 1: is based in London. The yield curve is contracting. We

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Speaker 1: have seen a steady decline in the gap between thirty

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Speaker 1: year and two year treasury yields. Now it's down to

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Speaker 1: fifty one basis points. That's basically lowest levels since September.

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Speaker 1: This is at a time when the U S economy

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Speaker 1: is supposedly growing. We're supposedly having a good time, a

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Speaker 1: good uh sort of head. We got a good you

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Speaker 1: know what we got today? We've got a good rallying bonds.

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Speaker 1: If you take a little at the long bond, it

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Speaker 1: is up twenty three thirty seconds. It is now yielding

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Speaker 1: two point eight percent. And as you said, contrast that

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Speaker 1: with the tenure right, take a look two point one

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Speaker 1: three Well, basically, basically the rallying bonds means that people

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Speaker 1: typically are irish. Peter Kenny is here with us to help,

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Speaker 1: but makes sense of what is going on. Senior market

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Speaker 1: strategist with Global Markets Advisory Group, and Peter, you serve

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Speaker 1: on a lot of corporate boards. You've been in this

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Speaker 1: market for decades. Try to help us understand the mixed

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Speaker 1: signals is the yield curve telling us that if the

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Speaker 1: Fed continues on its path of more aggressively raising rates

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Speaker 1: this year, that it is making a policy mistake. We're

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Speaker 1: at a pivot point here in this narrative where we're

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Speaker 1: seeing compression and yields. UH. That compression yields is dramatic,

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Speaker 1: and as you pointed out, we haven't seen yields aliis

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Speaker 1: in September, so well before the presidential election. That's telling

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Speaker 1: us there's a lot of risk off in terms of

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Speaker 1: the global investor mindset. There is tremendous compression, and that

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Speaker 1: compression is in the face of the FED projecting three

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Speaker 1: more rate moves this year, which I don't think it's

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Speaker 1: going to be the case. We may see June, but

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Speaker 1: after June it's fairly pretty much off the table anything

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Speaker 1: from that point on. And the reason why I say

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Speaker 1: that is because even though we're seeing equities that at

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Speaker 1: or near all time high high, as we're seeing economic

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Speaker 1: data this underwhelming. Last month's employment report was a classic

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Speaker 1: example of that. Not only did we get a miss

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Speaker 1: of meaningful size, we saw revisions that were significant for

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Speaker 1: previous two months, and we saw nothing inside that way

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Speaker 1: a report that spoke to any sort of robust growth,

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Speaker 1: wage inflation, average week labor force participation. None of that

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Speaker 1: data spoke to any sort of robust growth. So I

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Speaker 1: think that as much as the FED wants to project

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Speaker 1: higher rates and wants the markets to believe that our

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Speaker 1: rates are going to move higher, markets are towing the Fed.

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Speaker 1: We don't think so. And since the bond market leads

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Speaker 1: the equity market, I think it spells potential headwinds for

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Speaker 1: the equity market as well. So what are you telling

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Speaker 1: your investors? I mean, if you're taking a look right

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Speaker 1: now at the thirty year as I said, two point

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Speaker 1: eight percent for a thirty year, I don't get it.

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Speaker 1: One year is one point one percent. I mean, how

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Speaker 1: do you make sense of this? Well, it's telling us

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Speaker 1: two things. First of all, it's telling us that the

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Speaker 1: market does not believe that the FED is going to

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Speaker 1: raise rates three times this year from here at the

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Speaker 1: end of the year. So does that mean that if

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Speaker 1: they do, then we've got a real problem? Uh? Him.

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Speaker 1: I don't think it's going to get there. I don't

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Speaker 1: think it's going to get there because it's just the

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Speaker 1: flattening of the curve is indicating that the Fed. I

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Speaker 1: don't want to say can't, but I just think it

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Speaker 1: would be very unwise unless we see something in Q

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Speaker 1: two that speaks to something that we didn't see in

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Speaker 1: Q one, which I would argue, we're not seeing I

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Speaker 1: don't I just don't see it yet. Okay, well, here

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Speaker 1: can you can you solve this paradox for me because

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Speaker 1: a lot of people have said something is a miss.

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Speaker 1: You have bond yields going down, typically as barrish, You've

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Speaker 1: got stock prices going up. You have a yield curve flattening,

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Speaker 1: which typically means slower growth. The head stocks to not care.

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Speaker 1: Other people say, no, this all works out just fine

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Speaker 1: because it's a Goldilaw scenario. The Fed will keep rates low.

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Speaker 1: You're going to have growth kind of chuggle on good

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Speaker 1: job openings from the Jolt report today. Where do you

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Speaker 1: stand on this? Okay, So, if you look at the

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Speaker 1: equity markets versus versus the debt markets, the equity markets

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Speaker 1: are at or in your all time highs. However, keep

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Speaker 1: in mind that they're trading at a pe that is

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Speaker 1: well above a historical standard. Um. The Dow Jones is

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Speaker 1: trading at a pe currently of eighteen sixty one UH,

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Speaker 1: the SMP trading at at a pe of a nineteen

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Speaker 1: thirty four, the nastac is off the charts. Of course,

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Speaker 1: much of this move higher in prices that we've seen

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Speaker 1: in equities was largely predicated upon the Trump bump, which

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Speaker 1: we've seen largely wash away in the debt markets. However,

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Speaker 1: in the equity markets were still seeing these elevated, elevated evaluations,

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Speaker 1: and I think that that is largely due to the

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Speaker 1: large cap tech space. So if you look at retail,

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Speaker 1: the retail sector, the energy sector, the financial sector, these

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Speaker 1: are large sectors of the spid. All of them are

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Speaker 1: down meaningfully. Yeah, but I mean, in fairness, you could

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Speaker 1: say that they all have some idiosyncratic issues. Right. Energy

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Speaker 1: prices have come down quite a bit, the retail sect

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Speaker 1: sector is being decimated by all sorts of trends. Uh.

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Speaker 1: And then that you have financials, which are directly affected

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Speaker 1: by the yield curve. Yes, but they may have idiosyncratic

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Speaker 1: issues that are very vertical specific, but they still have

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Speaker 1: to participate in any meaningful move higher in the market,

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Speaker 1: and they're not going to well. I'm just looking for example,

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Speaker 1: Exxon Mobile. The shares of Exxon Mobile down ten and

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Speaker 1: a half percent so far this year, perfectly shares of

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Speaker 1: Macy's a down thirty seven percent so far this year.

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Speaker 1: But guess what if you'd like to buy shares in Tesla,

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Speaker 1: which has got a market value I believe greater than forward. Uh,

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Speaker 1: you're buying into a stock that is up more than

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Speaker 1: sixty so far this year. Yes, So it's very much

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Speaker 1: a question of software. Test was really it's a manufacturing company,

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Speaker 1: but it's really a software company. Software companies stand to

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Speaker 1: gain the most from this move higher that we've seen

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Speaker 1: over the last three or four months because of some

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Speaker 1: accounting changes that are coming into play in July, which

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Speaker 1: will force them to recognize software revenues in a way

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Speaker 1: that has never been recognized before. It was just gonna

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Speaker 1: help earnings. It's going to help their revenue numbers. It's

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Speaker 1: going to help their PE salesforce, dot com up so

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Speaker 1: coac case. Well, so, do you think that overall there's

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Speaker 1: enough headwind, enough of a headwind to cause a market

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Speaker 1: correction or is there so much bifurcation that it's going

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Speaker 1: to kind of just study itself exactly so the latter,

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Speaker 1: and I think that there is enough bifurcation, there's enough

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Speaker 1: dissimilarity within the market for there to be a bit

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Speaker 1: of A four for equities. So let's say we see

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Speaker 1: the SMP five pull in over the next month and

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Speaker 1: a half to two months, maybe five point five. Let's

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Speaker 1: say it settles in and find support of that would

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Speaker 1: be meaningful and very really, very very positive because we

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Speaker 1: give the sectors of the market that have underperformed an

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Speaker 1: opportunity to catch up. You're you're assuming that there's some

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Speaker 1: rational thought process behind this, right, I mean it's a

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Speaker 1: little hard to to do that. You know, when you're

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Speaker 1: looking at let's say a company like Tesla and this

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Speaker 1: knock is up sixt and you know it is still on,

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Speaker 1: you know, it is still a hope story there. It

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Speaker 1: definitely is very much a hope story, and it's extremely

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Speaker 1: elevated in terms of its valuations. It's it's in that space,

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Speaker 1: and it's that's that's part of the DNA of that company,

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Speaker 1: and it's got sales. Well, there's the other companies, software

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Speaker 1: companies that are in that space that get that merit,

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Speaker 1: that valuation. Thanks very much for being with us as always.

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Speaker 1: Peter Kennedy, Senior market strategist at Global Market Advisory and

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Speaker 1: independent market strategist for Kenny and Co. Well, there's been

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Speaker 1: a ton of speculation about the slowdown in vehicle sales

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Speaker 1: in the US and what this means for automakers. So

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Speaker 1: luckily we have someone to really help us understand just

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Speaker 1: how big of a slowdown this really is going to be.

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Speaker 1: Mark Lenieve is vice president of US Marketing, Sales and

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Speaker 1: Service for Ford Motor Company, and he joins us by

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Speaker 1: phone from Dearborn, Michigan. Mark, thank you so much for

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Speaker 1: joining us. Uh. Ford actually had a monthly victory over

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Speaker 1: General Motors last month with respect to sales. You came

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Speaker 1: out with sales numbers that were ahead of GMS and

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Speaker 1: better than expected. That's the good news. The bad news

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Speaker 1: was it seems like there was quite a bit of

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Speaker 1: support that Ford received from some of the fleet sales

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Speaker 1: and still saw materials slowdown in sales by retailers. How

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Speaker 1: concerned are you about this and have we already seen

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Speaker 1: the worst of the sales declines? Well, first of all,

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Speaker 1: I appreciate being on with you guys, and um, you know,

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Speaker 1: the the year so far as been really interesting from

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Speaker 1: a vehicle sales standpoint, where it's portant to remember that

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Speaker 1: we're operating in a in an industry believe is going

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Speaker 1: to be seventeen point five seventeen point six million units

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Speaker 1: for the year. That's that's an historically high number, you know,

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Speaker 1: going back you know, twenty thirty years and some of

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Speaker 1: the heydays of the early early part of the two thousand.

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Speaker 1: So we have leveled off plateau as we uh as

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Speaker 1: we say back here in Dearborn from last year's record level,

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Speaker 1: but it's still a very healthy pace. Retail is relatively

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Speaker 1: flat with a year ago. Our fleet business overall fleet

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Speaker 1: business and industry about the same and and Fords tract

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Speaker 1: and right with those numbers, albeit at a much higher

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Speaker 1: transaction pricing due to sell on a very rich mix

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Speaker 1: of of our new pickup, van and suv lineup. Mark,

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Speaker 1: could you speak a little bit about the company's efforts

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Speaker 1: to create a core of electric or hybrid vehicles and

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Speaker 1: why that is so important for the future of the

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Speaker 1: company if you look to the future and some of

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Speaker 1: the obviously regulatory standards that we're gonna have to meet

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Speaker 1: as well as meeting as meeting customer customer expectations. Um,

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Speaker 1: we're putting electrified uh technology, what be it's mild hybrids

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Speaker 1: all the way to full plug in electrics across much

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Speaker 1: of our lineup. We don't feel like the business should

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Speaker 1: be such a it's just small specialized vehicles that carry

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Speaker 1: this technology. So we're looking at technology broadly across our car,

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Speaker 1: SUV and even truck and van lineups, and and we

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Speaker 1: want to have to man sure that the consumers have

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Speaker 1: choice where they can they can make economic decisions based

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Speaker 1: on vehicle usage or using the car for just you know,

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Speaker 1: for work or for or for just leisure activity, and

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Speaker 1: they can make a logical decision and have a lot

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Speaker 1: of choice that they want to full plug in versus

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Speaker 1: a mould hybrid or eco boost engines that also get

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Speaker 1: great fuel economy. You know, Mark, you're talking about the

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Speaker 1: volume of sales, and then hinted at the price point

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Speaker 1: and that basically prices are going up. That consumers are

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Speaker 1: buying more expensive cars even and trucks, so even if

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Speaker 1: they're buying fewer of them, the actual revenues are are bigger.

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Speaker 1: I'm wondering how long you see prices rising to the

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Speaker 1: degree that they have, given the fact that we are

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Speaker 1: seeing deterioration in auto loans, in the quality uh in

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Speaker 1: a consumers appetite to incur more debt, and the lending

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Speaker 1: standards on behalf of big banks, from JP Morgan to

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Speaker 1: City Group. Well, the trend that we're seeing in pricing,

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Speaker 1: which is large largely driven by what we call segmentation,

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Speaker 1: which is people moving from passenger cars into utilities and trucks,

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Speaker 1: has really been going there's steadily since two thousand nine,

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Speaker 1: really coming out of the out of the big recession.

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Speaker 1: So we've seen your on your increased not only in

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Speaker 1: unit volume, but almost all the industry growth in that

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Speaker 1: window has been in the suv and truck lineup, and

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Speaker 1: within those numbers. Within SUVs and trucks, customers are electing

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Speaker 1: for electing and choosing much higher trim levels, higher technology packages.

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Speaker 1: The vehicles themselves are getting more expensive as as we

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Speaker 1: add we I meant technology, safety equipment to the vehicles.

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Speaker 1: So in some in some regards it's tended to defy

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Speaker 1: gravity um in terms of prices. The price increases that

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Speaker 1: we've seen facilitated by incentives and cheap credit. Yeah, but

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Speaker 1: as a percent of as a percent of selling price,

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Speaker 1: incentives are really relatively stable over the last seven or

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Speaker 1: eight years because because you're spending somewhat higher per union

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Speaker 1: incentive spent against you know, a much higher selling price

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Speaker 1: now credit has entered into it. Over the last seven years,

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Speaker 1: nominal interest rates have gone down. Fuel you know, fuel

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Speaker 1: which goes into the average consumers cost of vehicle usage

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Speaker 1: in the months, has come down in and payment terms

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Speaker 1: have extended out, although not much more so than we've

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Speaker 1: seen over twenty twenty. Your trend line and leasing is

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Speaker 1: relatively stable to where it was six seven, eight years

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Speaker 1: ago as a percent of the overall market. So it's

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Speaker 1: something that we keep an eye on, but it's it's

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Speaker 1: certainly not what we would consider any kind of an

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Speaker 1: alarming factor at this time. Inventory levels speak to those

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Speaker 1: that are on lots all across the United States, when

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Speaker 1: does that back up make it more difficult for you

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Speaker 1: to get the next year's model out to those dealers.

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Speaker 1: You've got some spot accesses and a couple you know,

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Speaker 1: you can look across a competitive landscape on a couple

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Speaker 1: of segments from a couple of competitors. But at Ford,

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Speaker 1: we feel we're in ideal position. Sitting at roughly seventy

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Speaker 1: days heating in an important summer selling season. The industry

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Speaker 1: is in in relatively good shape. You can point to,

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Speaker 1: you know, a given competitor in a in a in

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Speaker 1: a segment or two that would be considered somewhat high.

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Speaker 1: Many have reasons for doing it. They might have planned

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Speaker 1: downtime for plant changeovers and things of that sort. But

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Speaker 1: overall the industry is not what I would call stock affected.

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Speaker 1: Where that's been where you've got an unmanageable level of

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Speaker 1: stock in the industry. I want to thank you very

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Speaker 1: much for joining us today. Mark le Nave is the

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Speaker 1: vice president of Marketing and sales and Service at the

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Speaker 1: Ford Motor Company, joining us from bint in Michigan. We're

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Speaker 1: gonna take a look now at labor, but not just

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Speaker 1: any labor, people who want to come to work in

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Speaker 1: the United States on H one B visas. And here

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Speaker 1: to tell us more is Caitlin Webber, government analyst Global

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Speaker 1: trade policy for Bloomberg Intelligence, joining us from Washington. Caitlin,

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Speaker 1: a pleasure to have you with us. UM. I was

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Speaker 1: looking at the number of applicants for these eighty five

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Speaker 1: thousand UH spots that are available for the H one

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Speaker 1: B visa program, and last year right two hundred and

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Speaker 1: thirty thousand people applied for just eighty five thousand visas.

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Speaker 1: Is that accurate? Yeah, that's right. UM and I don't

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Speaker 1: think we have the numbers out yes this year for

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Speaker 1: this current filing season which just ended back in April.

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Speaker 1: But um, the the level was probably right up right

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Speaker 1: up there with the demand. UM. I think that the

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Speaker 1: U s c I, s U S and Citizenship Immigration

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Speaker 1: Services had to actually stop applications after five days because

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Speaker 1: there was just so much demand. So how does the

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Speaker 1: program work? Because I know that there's their time limits involved,

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Speaker 1: but then there are also exemptions that can be made.

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Speaker 1: So under the hn B visa, a highly skilled worker

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Speaker 1: can be brought in to work in the US for

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Speaker 1: a specific company for a period of up to six

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Speaker 1: years three years UM with another three year UM a

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Speaker 1: three year extension. The program isn't intended to UM only

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Speaker 1: bring in workers whose skill set UM you know, are

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Speaker 1: scarce supply in the US. UM. US companies are supposed

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Speaker 1: to attest that they have made efforts to hire American

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Speaker 1: workers that they couldn't fire. They couldn't they couldn't find

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Speaker 1: American workers to fill these slots, and so they have

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Speaker 1: to make those at test stations when they're when they're

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Speaker 1: filing to bring in workers on these visas. Right, Well,

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Speaker 1: President Trump has been a big critic of these visas

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Speaker 1: and said that they're very bad for US workers because

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Speaker 1: companies give foreign workers a priority and ostensibly will be

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Speaker 1: more willing to hire overseas if it means paying less.

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Speaker 1: What's the status on President Trump's efforts to clamp down

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Speaker 1: on this program and what are some of the rebuttals

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Speaker 1: that some of these companies have made to some of

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Speaker 1: the criticisms. So right around when the filing season was

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Speaker 1: opening a couple of months ago, the Trump administration put

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00:23:27,080 --> 00:23:29,280
Speaker 1: out a couple of warnings to companies telling them not

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00:23:29,359 --> 00:23:32,600
Speaker 1: to discriminate against US workers. They put on another warning

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00:23:32,720 --> 00:23:35,760
Speaker 1: saying that they were going to step up work site

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00:23:36,040 --> 00:23:40,200
Speaker 1: enforcement visits um and they were going to target specifically

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00:23:40,280 --> 00:23:43,320
Speaker 1: I T outsourcing companies who are particularly dependent on these

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00:23:43,400 --> 00:23:46,320
Speaker 1: visas for those site visits. There was also an executive

439
00:23:46,400 --> 00:23:49,359
Speaker 1: order that came out late April, after the filing season

440
00:23:49,440 --> 00:23:53,080
Speaker 1: was already closed, where the administration ordered a multi agency

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00:23:53,119 --> 00:23:57,239
Speaker 1: review of the program with a goal that eventually there

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00:23:57,280 --> 00:24:00,720
Speaker 1: will be new rules or guidance that could change the

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00:24:00,720 --> 00:24:03,480
Speaker 1: way that the visas are allocated. Right now, they're allocated randomly,

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00:24:03,600 --> 00:24:07,000
Speaker 1: just in a random lottery but increasingly there's been calls

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00:24:07,320 --> 00:24:10,560
Speaker 1: from inside the administration and outside the administration to allocate

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00:24:10,600 --> 00:24:13,560
Speaker 1: those visas based on pay or based on skills that

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00:24:13,600 --> 00:24:16,840
Speaker 1: are UM and scarce supply. What do you hear from

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00:24:16,840 --> 00:24:20,040
Speaker 1: the companies that would be most affected by this infosis?

449
00:24:20,119 --> 00:24:23,880
Speaker 1: For example, they're based in India, Tata Consultancy Services also

450
00:24:23,920 --> 00:24:26,280
Speaker 1: based in India. You have Cognizant based in the United

451
00:24:26,320 --> 00:24:29,120
Speaker 1: States as well as Accenture, they're based in Dublin. They're

452
00:24:29,160 --> 00:24:32,720
Speaker 1: all big users of H one B VISs. It's interesting,

453
00:24:32,760 --> 00:24:35,840
Speaker 1: you know, of course these companies UM. They say that

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00:24:35,880 --> 00:24:39,560
Speaker 1: the current rhetoric around the program is really unfortunate. That

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00:24:39,640 --> 00:24:42,520
Speaker 1: they bring in these workers to do you know, to

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00:24:42,720 --> 00:24:45,080
Speaker 1: do good work and they're important part of the economy.

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00:24:45,480 --> 00:24:49,520
Speaker 1: At the same time, these companies are really trying to

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00:24:49,720 --> 00:24:53,560
Speaker 1: increase local hiring in the United States. They UM on

459
00:24:53,600 --> 00:24:56,080
Speaker 1: a lot of their earnings calls, they're sort of UM,

460
00:24:56,119 --> 00:24:58,199
Speaker 1: you know, boasting about the fact that they are hiring

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00:24:58,240 --> 00:25:02,520
Speaker 1: thousands and thousands more Americans, more U S workers UM

462
00:25:02,640 --> 00:25:05,240
Speaker 1: than and they're and they're they're trying to bring down

463
00:25:05,240 --> 00:25:07,720
Speaker 1: their H one B visas. Now there's there's questions about

464
00:25:07,720 --> 00:25:11,040
Speaker 1: what that might mean for their margins UM, but you

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00:25:11,080 --> 00:25:13,200
Speaker 1: know they are trying to sort of balance this line

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00:25:13,280 --> 00:25:16,240
Speaker 1: between saying that this is a this is a good program, UM.

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00:25:16,280 --> 00:25:18,840
Speaker 1: You know, these workers are important and we in the

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00:25:18,920 --> 00:25:21,680
Speaker 1: United States economy needs them, at the same time saying

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00:25:21,800 --> 00:25:24,760
Speaker 1: we're trying to respond to this rhetoric and and this

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00:25:24,800 --> 00:25:28,520
Speaker 1: potential reform by increasing our local hiring. What effect would

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00:25:28,560 --> 00:25:31,119
Speaker 1: this have, if any, on the educational system in the

472
00:25:31,200 --> 00:25:35,760
Speaker 1: United States Because university such as University of Michigan, of Illinois, Chicago,

473
00:25:36,359 --> 00:25:38,719
Speaker 1: University of Pennsylvania, Johns Hopkins, so on, all the way

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00:25:38,760 --> 00:25:43,840
Speaker 1: down the line, they also have our home to recipients

475
00:25:43,840 --> 00:25:46,480
Speaker 1: of H one B visas. Yeah, and it's interesting because

476
00:25:46,800 --> 00:25:51,760
Speaker 1: UM nonprofits and and universities are actually exempt from the cap.

477
00:25:51,840 --> 00:25:57,320
Speaker 1: So right now the there's an eighty thousand visa limit

478
00:25:57,400 --> 00:26:01,159
Speaker 1: every year in universities and nonprofits are sent from that cap.

479
00:26:01,200 --> 00:26:04,520
Speaker 1: There has been an effort UM within the administration to

480
00:26:05,600 --> 00:26:07,960
Speaker 1: clamp down on I guess, for lack of a better term,

481
00:26:08,040 --> 00:26:12,600
Speaker 1: what diploma mills UM. So there has been increasingly calls

482
00:26:12,800 --> 00:26:18,159
Speaker 1: for rules that would require UM universities bringing in h

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00:26:18,200 --> 00:26:21,960
Speaker 1: ONMB workers to be accredited before they're able to file

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00:26:22,000 --> 00:26:25,640
Speaker 1: those cap exempt applications. Caitlyn, real quick, is there any

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00:26:25,720 --> 00:26:29,480
Speaker 1: teeth behind some of the criticisms that President Trump have

486
00:26:29,600 --> 00:26:31,360
Speaker 1: put out there. I'm gonna cure a lot of review

487
00:26:31,560 --> 00:26:34,760
Speaker 1: and warnings, but I don't really hear much by way

488
00:26:34,840 --> 00:26:39,040
Speaker 1: of law or changing policies formally. Yeah, that's that's exactly right.

489
00:26:39,240 --> 00:26:43,440
Speaker 1: A lot of tough talk, not a lot of action yet.

490
00:26:44,040 --> 00:26:47,040
Speaker 1: UM the review, there's actually no deadline for that review.

491
00:26:47,280 --> 00:26:50,239
Speaker 1: I think it's probably likely we'll see some results at

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00:26:50,280 --> 00:26:54,080
Speaker 1: least before the filing season opens in April. UM. I

493
00:26:54,080 --> 00:26:57,320
Speaker 1: also think that there's probably a decent likelihood that there

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00:26:57,359 --> 00:27:02,200
Speaker 1: could be a company, you know, potentially prosecuted for alleged

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00:27:02,320 --> 00:27:05,600
Speaker 1: abuse UM of the program as a result of these

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00:27:05,600 --> 00:27:08,440
Speaker 1: work site visits. That would be a really interesting case

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00:27:08,480 --> 00:27:11,600
Speaker 1: to try to set the precedent through just prosecution of

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00:27:12,240 --> 00:27:16,960
Speaker 1: some violation or flagrant uh misallocation of the resources. Caitlin Webber,

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00:27:16,960 --> 00:27:18,600
Speaker 1: thank you so much for joining us. Caitlin Webber is

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00:27:18,600 --> 00:27:23,280
Speaker 1: a government analyst and global trade policy expert for Bloomberg Intelligence,

501
00:27:23,320 --> 00:27:29,480
Speaker 1: and she's based in Washington, d C. Thanks for listening

502
00:27:29,560 --> 00:27:32,440
Speaker 1: to the Bloomberg p m L podcast. You can subscribe

503
00:27:32,480 --> 00:27:36,040
Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever

504
00:27:36,119 --> 00:27:39,600
Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter

505
00:27:39,880 --> 00:27:43,640
Speaker 1: at pim Fox. I'm on Twitter at Lisa abramoits one

506
00:27:43,840 --> 00:27:46,560
Speaker 1: before the podcast, you can always catch us worldwide on

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00:27:46,600 --> 00:27:47,440
Speaker 1: Bloomberg Radio