WEBVTT - Surveillance: Growth Composition Is Improving, Dutta Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane jay Ley. 0:00:13.960 --> 0:00:16.960 We bring you insight from the best in economics, finance, 0:00:17.040 --> 0:00:23.520 investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.159 Bloomberg dot Com, and of course on the Bloomberg. We 0:00:27.240 --> 0:00:30.200 have a wonderful guest to begin across the nation in worldwide. 0:00:30.200 --> 0:00:34.440 He's Adam Posen, Yes, running the Peterson Institute, but far 0:00:34.520 --> 0:00:39.080 more one of our leading economists, including a very visible 0:00:39.360 --> 0:00:44.519 effort at the American Economic Association meetings over the weekend. Adam, 0:00:44.840 --> 0:00:49.600 I thought much more than normal these headline These meetings 0:00:49.760 --> 0:00:53.440 made headlines. What was the lead thought that you got 0:00:53.800 --> 0:00:58.520 out of the discussions of posing, yelling Bernanke and others. Uh. 0:00:58.920 --> 0:01:02.600 The main thought, of course, centered around Ben Bernanke's annual 0:01:02.800 --> 0:01:05.920 presidential address. Uh. Not that he gives it every year, 0:01:05.959 --> 0:01:07.800 but this year he was president, and it was a 0:01:07.840 --> 0:01:12.680 major plea, an argument more than plea, that monetary policy 0:01:12.880 --> 0:01:17.240 can offset the next recession successfully, that there is room 0:01:17.280 --> 0:01:21.200 to go negative on interest rates, that quee done properly 0:01:21.360 --> 0:01:24.200 on a large scale can make a big difference. And frankly, 0:01:24.200 --> 0:01:26.520 there was a pushback on that for me to a 0:01:26.560 --> 0:01:30.120 limited degree, from Janet Yelling his successor, from Larry Summers 0:01:30.280 --> 0:01:33.160 Um and I think this was a really important discussion 0:01:33.200 --> 0:01:36.560 to have. There's a huge amount of convergence on the 0:01:36.600 --> 0:01:40.319 idea of public investment UH in this low inflation, low 0:01:40.640 --> 0:01:46.800 interest rate environment, and there is a desire to have 0:01:46.959 --> 0:01:49.680 a constructive front, so I think I think there was 0:01:49.720 --> 0:01:51.800 a lot going on there. Also for the profession, was 0:01:51.840 --> 0:01:54.600 a lot going on about changes in the profession where 0:01:54.600 --> 0:01:58.360 Ben Bernanky Janet Yelling have been really leading some efforts 0:01:58.400 --> 0:02:03.440 about diversity and sexism less racism, but that's not as 0:02:03.440 --> 0:02:04.800 big a deal for the rest of the world. And 0:02:04.840 --> 0:02:07.560 every econ one on one book, including Abel Bernancy. There's 0:02:07.640 --> 0:02:10.320 chapter twenty seven which is naval gazing, which is what 0:02:10.400 --> 0:02:13.480 economists like to do. Alan Blinder of Princeton does that 0:02:13.600 --> 0:02:15.799 this morning with an essay in the Wall Street Journal. 0:02:16.320 --> 0:02:20.280 Really talking about this two percent target, which is a 0:02:20.400 --> 0:02:24.359 huge debate. I spoke to Charles Evans of Chicago, a 0:02:24.440 --> 0:02:27.280 Federaries serve President Chicago about to at length. I think 0:02:27.280 --> 0:02:31.240 it was six seven weeks ago. Is is well defined 0:02:31.360 --> 0:02:37.480 for our audience the two percent debate very simply the 0:02:37.520 --> 0:02:40.440 idea is that if you go directly for zero percent 0:02:40.560 --> 0:02:43.960 inflation target, you're probably going to mess things up because 0:02:43.960 --> 0:02:49.080 there's creeping price changes and it tends to be deflationary 0:02:49.200 --> 0:02:52.519 in real terms if which sounds contradictory, but anyway, the 0:02:52.560 --> 0:02:55.040 effect is deflationary if you set for too lower target. 0:02:55.440 --> 0:02:58.240 So all the central banks converged on a two percent 0:02:58.320 --> 0:03:03.200 target in the late nineties early two thousand's, and Ben 0:03:03.240 --> 0:03:07.080 bernanke Rick Michigan, a number of people myself included, all 0:03:07.120 --> 0:03:13.400 contributed to that. The argument right now is completely excuse 0:03:13.440 --> 0:03:17.680 me that the inflation expectations are, if anything, being dragged 0:03:17.680 --> 0:03:20.040 to the downside towards zero. You look at bond markets 0:03:20.040 --> 0:03:23.160 in Europe and Japan until lesser degree US, they're pricing 0:03:23.160 --> 0:03:25.760 and no inflation and no interest rate hikes out many 0:03:25.760 --> 0:03:28.359 many years. And so the question is if you get 0:03:28.400 --> 0:03:30.880 to a recession, you don't have much room to cut rates, 0:03:31.440 --> 0:03:35.160 and and we're maybe driving down inflation in bad ways 0:03:35.480 --> 0:03:38.680 and expectations in bad ways by not achieving our inflation target. 0:03:38.880 --> 0:03:41.400 So the debate is is it better to raise the 0:03:41.400 --> 0:03:44.120 inflation target. If you raise the inflation target, can you 0:03:44.200 --> 0:03:46.240 get there? How do you get there? I don't want 0:03:46.280 --> 0:03:48.000 to interrupt. To me, that's the heart of the matter 0:03:48.080 --> 0:03:51.200 is the execution. Okay, anybody can set a target, or 0:03:51.240 --> 0:03:54.800 a strategy or a theme, etcetera. But the heart of 0:03:54.800 --> 0:03:58.000 it to me at imposing is then you have to 0:03:58.360 --> 0:04:02.560 affect a pro Is there any proof that a central 0:04:02.600 --> 0:04:06.440 bank can reflate short of pretty money? I'll you know 0:04:06.480 --> 0:04:10.120 the deutsch Land of a long time ago. At the moment, 0:04:10.160 --> 0:04:13.280 the evidence isn't great. Um So I my main pitch 0:04:13.360 --> 0:04:17.359 in these sessions at a A was Unfortunately, if you 0:04:17.400 --> 0:04:20.239 look at Japan, the Bank of Japan over the last 0:04:20.240 --> 0:04:23.040 five years roughly has done pretty much everything that Bernankey 0:04:23.120 --> 0:04:26.120 or Krugman or I or many people ask them to 0:04:26.160 --> 0:04:30.240 do for their own reasons and including setting inflation target, 0:04:30.279 --> 0:04:33.479 including doing aggressive que and the amount of difference it's 0:04:33.520 --> 0:04:37.320 made in terms of inflation outcomes has been minimal. On 0:04:37.360 --> 0:04:39.520 the other hand, I would hate to run the experiment. 0:04:39.520 --> 0:04:42.440 If they hadn't done that, what would have happened in Japan? 0:04:42.480 --> 0:04:45.400 They would have been in deflation, possibly accelerating inflation with 0:04:45.440 --> 0:04:47.880 more harm. And I mean, I can't jump in. I 0:04:47.880 --> 0:04:49.840 just want to bring the conversation to the story of 0:04:49.920 --> 0:04:52.840 the moment and talk about the federal reserves, involvement in 0:04:52.880 --> 0:04:56.599 asset prices and its role shapey financial conditions. What we've 0:04:56.600 --> 0:05:00.360 seen over the last week quite clearly is renewed sans 0:05:00.520 --> 0:05:03.240 renewed tensions in the Middle East, and yet a financial 0:05:03.279 --> 0:05:06.440 market is set of financial markets that don't show real 0:05:06.520 --> 0:05:08.880 signs of stress. There is a belief, because we've been 0:05:08.880 --> 0:05:11.039 conditioned over the last couple of years, that if we 0:05:11.040 --> 0:05:12.920 get into any difficulty, the FETE will be there to 0:05:12.960 --> 0:05:15.040 ball a sound. I just wonder from your conversations over 0:05:15.080 --> 0:05:18.120 the last week how much discomfort there is with that 0:05:18.200 --> 0:05:21.320 at the moment, and how uncomfortable should central banks be 0:05:21.720 --> 0:05:25.960 with this situation? Well, I think I think John, the 0:05:25.960 --> 0:05:31.159 the issue is sorry that the central banks recognized that 0:05:31.240 --> 0:05:34.680 a they shouldn't be making judgments on geopolitical matters. They 0:05:34.720 --> 0:05:37.479 have no way to do that. But be that, going 0:05:37.520 --> 0:05:41.400 back to nine eleven and before, the impact on macroeconomic 0:05:41.440 --> 0:05:44.960 outcomes of even oil disruptions, of even major security threats 0:05:45.000 --> 0:05:47.560 do not tend to be lasting. Again, that doesn't mean 0:05:47.600 --> 0:05:50.520 they're not important, but it means that in terms of 0:05:50.800 --> 0:05:52.760 the course of the things central banks are supposed to 0:05:52.800 --> 0:05:57.520 talk about, which include inflation, unemployment, financial stability. These national 0:05:57.520 --> 0:06:00.599 security threats, even very big ones, do not tend to 0:06:00.720 --> 0:06:04.599 matter that much, and I and so they should not 0:06:04.720 --> 0:06:06.840 be reacting to this. And I think for once markets 0:06:06.839 --> 0:06:09.560 are pricing that correctly that they should not expect much 0:06:09.600 --> 0:06:13.280 to come out of this. Long term product of investment 0:06:13.320 --> 0:06:16.000 is going to be disrupted. Waste of human lives, waste 0:06:16.000 --> 0:06:18.880 of money, waste of opportunities is going to occur, But 0:06:19.080 --> 0:06:23.200 in terms of trading relative values not not really an issue. 0:06:23.640 --> 0:06:26.240 One last quick point, as was stressing one of the 0:06:26.279 --> 0:06:29.400 session with a lot of central bank officials Sunday morning 0:06:29.400 --> 0:06:31.680 at a E A phil plane from the e c B, 0:06:31.839 --> 0:06:34.520 the deput Government Bank in Japan all pointed out that 0:06:34.560 --> 0:06:36.200 they've had low rates for a very long time and 0:06:36.240 --> 0:06:39.880 no asset bubbles in recent years, and so I think 0:06:39.880 --> 0:06:42.840 people are overly concerned about that. And do you think 0:06:42.839 --> 0:06:44.200 that's the case though, when you look at the fixed 0:06:44.200 --> 0:06:47.000 income market and see at one point last year that 0:06:47.040 --> 0:06:50.400 we had seventeen trillion dollars of negative yielding assets, largely 0:06:50.440 --> 0:06:54.400 because of central bank involvements in financial markets, I find 0:06:54.400 --> 0:06:56.520 it difficult to get my hands around the idea that 0:06:56.560 --> 0:06:58.520 the ECB can sit there comfortably and say that they 0:06:58.520 --> 0:07:02.200 have not no role and asset prices and asset distication 0:07:02.279 --> 0:07:04.560 to the point that we might even have a bumble. Yeah, 0:07:04.600 --> 0:07:06.680 I realized that that's a very common point of view. 0:07:06.720 --> 0:07:08.719 But I think the world divides john into the people 0:07:08.760 --> 0:07:12.120 who think we have low rates because central banks took action, 0:07:12.640 --> 0:07:17.040 versus versus we take action because we have low rates. 0:07:17.080 --> 0:07:20.160 And I think there are very fundamental causes of these 0:07:20.200 --> 0:07:24.520 low rates. And it's demographics, it's technology, it's low growth prospects. 0:07:24.680 --> 0:07:27.280 It's been added to by the Trump administration creating huge 0:07:27.280 --> 0:07:30.320 amounts of uncertainty about the trade regime and now security. 0:07:30.440 --> 0:07:34.000 These all drive down real factors. There's no investment demand 0:07:34.200 --> 0:07:36.320 and the central banks are merely reacting to that. People 0:07:36.360 --> 0:07:38.480 would like to say it's the central banks causing it, 0:07:38.920 --> 0:07:41.600 and the central banks don't always admit that they're not 0:07:41.640 --> 0:07:43.760 causing it because they don't want to seem powerless. But 0:07:43.880 --> 0:07:47.440 in my view, it's the other way around. Okay, this 0:07:47.480 --> 0:07:49.440 is really important. It will be a huge topic with 0:07:49.520 --> 0:07:53.920 Sherman Greenspan this morning. What is causing the dearth of 0:07:54.080 --> 0:07:58.800 business investment? Yeah, and that that's the question, and I 0:07:58.960 --> 0:08:01.960 tend to be I am reluctantly. But in recent years, 0:08:02.000 --> 0:08:03.640 and you and I have talked about this time come 0:08:03.680 --> 0:08:06.240 around to sort of a Robert Gordon point of view, 0:08:06.320 --> 0:08:09.120 which is that there's been some kind of fundamental technology. 0:08:09.160 --> 0:08:12.240 That's where Greenspan is too. Alan Greenspan has come around 0:08:12.240 --> 0:08:15.000 the Northwestern Yeah, because when you look at the to me, 0:08:15.520 --> 0:08:18.960 the big arguments are first that almost all the rich countries, 0:08:18.960 --> 0:08:22.320 including Japan, Western Europe, US all slowed down in productivity 0:08:22.320 --> 0:08:24.560 growth that roughly the same time, and it was before 0:08:24.600 --> 0:08:28.320 the crisis, and that that to me suggested some kind 0:08:28.320 --> 0:08:32.280 of global fundamental It's been phenomenal, Adam Post, and thank 0:08:32.320 --> 0:08:36.280 you so much for joining us from American Economic Association meetings. 0:08:36.280 --> 0:08:54.840 He is with the Peterson Institute. It is not a 0:08:54.920 --> 0:08:59.200 surprise to those that no international relations that, without question, 0:08:59.280 --> 0:09:03.760 the most trend essay that we have seen some Stephen A. Cook, 0:09:03.800 --> 0:09:07.000 he is with a Council on Foreign Relations. His book 0:09:07.200 --> 0:09:11.640 False Dawn is absolutely definitive and at times heart wrenching 0:09:12.040 --> 0:09:14.320 on his experience of the Middle East. And we are 0:09:14.400 --> 0:09:16.960 thrilled they could join us. He could join us this 0:09:17.040 --> 0:09:21.400 morning in our Washington studios. Stephen Cook you stopped this 0:09:21.480 --> 0:09:26.439 debate distracted by John Bolton yesterday afternoon with your publication 0:09:26.640 --> 0:09:30.680 in Foreign Policy. You minced no words, we should leave 0:09:30.960 --> 0:09:33.200 and leave. Now. What has been in a response to 0:09:33.280 --> 0:09:37.120 your essay yesterday, Well, it's actually been rather surprising. There's 0:09:37.120 --> 0:09:40.000 been a lot of support for the essay. I've heard 0:09:40.000 --> 0:09:43.960 from members of Congress, former members of Congress, former ambassadors, 0:09:44.559 --> 0:09:48.120 my dissertation supervisor, UH, and a variety of others. It's 0:09:48.160 --> 0:09:51.600 been a former marine to former Marines who served in 0:09:51.600 --> 0:09:57.360 the Rock. They've said, look, after now almost seventeen years, 0:09:57.800 --> 0:10:01.240 you're calling a spade a spade that there's not much 0:10:01.320 --> 0:10:03.280 for the United States to do in Iraq, and to 0:10:03.800 --> 0:10:09.280 take out Costam Suleimani over over Iraq, a place where 0:10:09.520 --> 0:10:14.200 Americans are vulnerable for no discernible reason, seems to be 0:10:16.480 --> 0:10:19.280 a policy that is unnecessarily reckless. You're the pro I'm 0:10:19.320 --> 0:10:22.240 the amateur. The night that night to two am in 0:10:22.280 --> 0:10:24.680 the morning, I stood in the Bloomberg Television Studios in 0:10:24.720 --> 0:10:28.000 New York and open the National Geographic Atlas, looked at 0:10:28.000 --> 0:10:29.839 the map and said, you've got to be kidding me. 0:10:30.280 --> 0:10:33.640 That was in two thousand three. You just visited Iraq, 0:10:33.760 --> 0:10:38.600 which we agree is totally changed from oh three oh five, 0:10:38.760 --> 0:10:41.440 and on and on and on. What did you observe 0:10:41.520 --> 0:10:45.000 there that says to you leave and leave now? The 0:10:45.040 --> 0:10:47.720 bottom line for me and Iraq was that Iraq really 0:10:47.840 --> 0:10:52.120 isn't a state. Uh that map no longer exists. There 0:10:52.200 --> 0:10:54.480 is a territory that we call Iraq, and there are 0:10:54.600 --> 0:10:58.480 discernible borders. But as the classic definition, the state of 0:10:58.720 --> 0:11:01.640 the state that controls the monopoly of violence that can 0:11:01.800 --> 0:11:04.640 enforce property rights doesn't exist. You have a number of 0:11:04.679 --> 0:11:09.160 different a number of myriad of armed groups fighting over 0:11:09.400 --> 0:11:13.400 national resources and impoverishing what would otherwise be a wealthy country. 0:11:13.559 --> 0:11:16.480 It is simply a river into the Persian Gulf. On 0:11:16.559 --> 0:11:19.720 the right side is Iranian oil fields. On the left 0:11:19.720 --> 0:11:24.720 side Iraq's treasure. What keeps Iran from just not moving 0:11:25.120 --> 0:11:28.239 west over the river to pick up all those oil fields? 0:11:28.280 --> 0:11:32.239 It really doesn't have to Iran. As every any Iraqi 0:11:32.280 --> 0:11:34.560 you will tell you that Iran is the most influential 0:11:34.600 --> 0:11:38.360 farm presence in the country. The protests that broke out 0:11:38.480 --> 0:11:43.120 in Iraq in October were in part about Iranian dominance. 0:11:43.640 --> 0:11:48.040 Our killing of customs. Solimana has really changed the terms 0:11:48.040 --> 0:11:51.160 of the debate, those protesters as still want or Iran out, 0:11:51.280 --> 0:11:54.640 but now the Iraqi parliament also wants the United States out. Stephen, 0:11:54.720 --> 0:11:56.679 is that the president's objective to get out of the 0:11:56.679 --> 0:11:58.600 Middle lag so many people full of walls and now 0:11:58.640 --> 0:12:01.080 the scratching their heads after last week because it still 0:12:01.120 --> 0:12:04.160 is objective. Well, your question speaks to the strategic and 0:12:04.200 --> 0:12:07.880 coherence of the administration at this point. The President says 0:12:07.880 --> 0:12:10.960 he wants to reduce America's footprint in the Middle East, 0:12:11.040 --> 0:12:13.439 yet he takes actions that threatened to draw the United 0:12:13.480 --> 0:12:17.600 States further into the region. Stephen, if the United States retrenches, 0:12:17.960 --> 0:12:20.400 where does it leave the coalition of the fight against 0:12:20.400 --> 0:12:23.840 ISIS in the region? Well, it's a very good question, 0:12:24.040 --> 0:12:26.920 and I think that the United States can continue to 0:12:27.040 --> 0:12:31.520 fight terrorism without having as large and as vulnerable a 0:12:31.520 --> 0:12:33.720 footprint as it does in a place like a rock 0:12:34.040 --> 0:12:36.959 where we're really not welcome, and that where we're so 0:12:37.040 --> 0:12:39.720 hamstrung and so impotent that there's not much that we 0:12:39.760 --> 0:12:42.839 can do at the moment. As you know, over the 0:12:42.880 --> 0:12:45.600 last several decades, General Sulemani was at the epicentral and 0:12:45.600 --> 0:12:48.439 effort to build out a sheer sphere of influence. So 0:12:48.440 --> 0:12:50.439 imagine there are some allies, some allies of the United 0:12:50.480 --> 0:12:52.960 States that did want them in the Middle East to 0:12:53.000 --> 0:12:55.320 help them push back against that. Stephen, your thoughts on 0:12:55.400 --> 0:12:59.240 that situation, Well, I think that it's undoubtedly the case 0:12:59.360 --> 0:13:04.120 that the Saudias, the Maratis, the Israelis are particularly interested 0:13:04.120 --> 0:13:07.240 in ensuring that the United States remains in the Middle 0:13:07.240 --> 0:13:11.320 East to counter Iran. I don't think that anybody is 0:13:11.440 --> 0:13:14.319 arguing that the United States should just withdraw from the 0:13:14.360 --> 0:13:18.160 Middle East. Iraq is a zombie state. Iraq is not 0:13:18.240 --> 0:13:20.160 a place where the United States can do much good 0:13:20.200 --> 0:13:23.040 at this point. But we have lots of presents, and 0:13:23.080 --> 0:13:25.000 there's a smart way to be in the Middle East, 0:13:25.360 --> 0:13:28.640 and being in a rock and killing customs Sulimani over 0:13:28.760 --> 0:13:31.839 Iraq doesn't seem to be a good thing. Steve, When 0:13:31.840 --> 0:13:34.520 we've heard very little from Israel in the last couple 0:13:34.520 --> 0:13:38.960 of days, why, well, the Israelis are obviously quite concerned 0:13:39.000 --> 0:13:43.959 about blowback on them. Uh. It's well known that his 0:13:44.200 --> 0:13:48.840 Balah and Iranian proxy Lebanese terrorist group has hundreds of 0:13:48.880 --> 0:13:52.520 thousands of rockets that can be rained down on Israel. Now, 0:13:52.559 --> 0:13:56.000 Israel has made a lot of progress in developing defenses 0:13:56.040 --> 0:13:59.120 against this. But the sheer number of rockets in the 0:13:59.120 --> 0:14:03.960 possession of his law is deeply worrying to the Israelis UH, 0:14:04.000 --> 0:14:06.480 and they do not want to be implicated in this. 0:14:06.559 --> 0:14:10.800 They don't want to be the focal point of Iran's retaliation. 0:14:11.040 --> 0:14:12.880 Isn't it quite original? State? And that we have all 0:14:12.880 --> 0:14:15.920 of these various different, contradicting interests in the region, and 0:14:15.960 --> 0:14:18.320 yet we struggle to identify one nation in the Middle 0:14:18.320 --> 0:14:20.720 East at the moment that was happy with that strike 0:14:20.760 --> 0:14:23.720 Thursday night and to Friday original list. That that is 0:14:23.800 --> 0:14:27.000 I think a very very good point. Uh. We are 0:14:27.120 --> 0:14:29.520 at a point in the Middle East where it's very 0:14:29.600 --> 0:14:34.400 very hard for American policymakers to define exactly what's important 0:14:34.440 --> 0:14:37.640 to us, and this leads to a series of contradictory policies. 0:14:38.160 --> 0:14:42.880 President Trump has been unpredictable, but this is also a 0:14:42.920 --> 0:14:47.280 problem with the Obama administration identifying what's important, developing a strategy, 0:14:47.400 --> 0:14:52.640 matching up national resources to that strategy, and pursuing those interests. 0:14:52.720 --> 0:14:54.800 It's been a problem for some time all of your 0:14:54.920 --> 0:14:58.400 nationwide we wellcommuter Bloomberg surveillance. John Farrow in New York 0:14:58.440 --> 0:15:01.040 Time Time keenan Washington and the Stephen A. Cook of 0:15:01.080 --> 0:15:03.960 the Council on Foreign Relations, And again you've seen my 0:15:04.120 --> 0:15:09.840 rave review for his False Dawn, which is decidedly not dated. Protest, 0:15:09.920 --> 0:15:13.280 democracy and violence, Stephen A. Cook, how do you respond 0:15:13.280 --> 0:15:16.240 to every pro I've ever talked to that said, Look, 0:15:16.360 --> 0:15:21.600 Iran is the one real economy, real nation, real culture, 0:15:21.680 --> 0:15:25.200 real middle class of the Middle East. Have we just 0:15:25.680 --> 0:15:30.320 frittered it away with the agony since nineteen seventy nine? 0:15:30.400 --> 0:15:36.680 Have we handed away forever Persia? Well, it's I think 0:15:36.920 --> 0:15:39.960 it's a very very tough issue. There has been a 0:15:39.960 --> 0:15:42.720 lot of effort on the part of people in Washington 0:15:42.800 --> 0:15:46.400 to think of ways and how to improve relations with Iran, 0:15:46.440 --> 0:15:48.240 but Iran has to want to do that as well. 0:15:48.320 --> 0:15:51.920 We had the Joint Comprehensive Plan of Action, but then 0:15:52.240 --> 0:15:54.560 once that was signed General cut some solar money went 0:15:54.600 --> 0:15:59.200 out to consolidate and extend Iran's influence around the region. 0:15:59.200 --> 0:16:02.600 That made it very difficult for actually people both on 0:16:02.640 --> 0:16:07.080 both sides of both sides of the debate to defend 0:16:07.960 --> 0:16:12.080 uh a warming of relations between the two countries. So 0:16:12.160 --> 0:16:14.240 let me ask you this question. And I asked to 0:16:14.320 --> 0:16:16.880 have the atmstra VENs in general Kimmitt as well. We've 0:16:16.880 --> 0:16:20.040 got a lot of people listening with family in the 0:16:20.080 --> 0:16:23.080 military exposed in a new and different way in the 0:16:23.200 --> 0:16:26.200 last three or four days. How do you respond when 0:16:26.240 --> 0:16:29.920 you see troop movements and troop announcements Bloomberg with the 0:16:30.880 --> 0:16:34.600 Marines moving from the Mediterranean into the Persian Gulf. How 0:16:34.640 --> 0:16:39.640 do you, as a academic respond to these military movements. Well, 0:16:39.680 --> 0:16:42.160 one of the things that that concerns me is that 0:16:42.240 --> 0:16:45.560 we are moving forces back into the Middle East. But 0:16:45.640 --> 0:16:49.240 it's entirely unclear to anybody why we are doing it. 0:16:49.560 --> 0:16:52.400 If there is an interest, if there is a strategy 0:16:52.560 --> 0:16:54.760 that is at play here, then we need to know 0:16:54.800 --> 0:16:58.000 about it. Otherwise, these guys are being sent to the 0:16:58.040 --> 0:17:01.280 Middle East for no discernible Folks want to rip up 0:17:01.280 --> 0:17:03.240 the scripture. This is so keen. Thank you for your 0:17:03.280 --> 0:17:07.919 notes on our coverage from Friday, Stephen Cook. It's just simple. 0:17:08.240 --> 0:17:12.000 The military prose and the academic prose say the same thing. 0:17:12.640 --> 0:17:18.760 What's the strategy? How do we find an American strategy 0:17:18.840 --> 0:17:21.440 for the Middle East? Well, this is I think this 0:17:21.520 --> 0:17:23.560 is a problem that any I think any president at 0:17:23.560 --> 0:17:25.320 this point is going and I'm not going to pin 0:17:25.400 --> 0:17:28.760 this on the President Trump. That's right. We the Cold 0:17:28.760 --> 0:17:32.120 War ended thirty years ago and the world is changing. 0:17:32.240 --> 0:17:35.320 And I think that it's very very hard after now 0:17:35.440 --> 0:17:38.960 being in the region in this very significant way for 0:17:38.960 --> 0:17:42.159 almost two decades, it's very hard to discern what it 0:17:42.280 --> 0:17:45.240 is important to the United States. Is it building democratic societies? 0:17:45.440 --> 0:17:48.800 Is it fighting terrorism? Is it oil? Is it Israel? 0:17:49.160 --> 0:17:51.240 No one has a real clear answer to this, and 0:17:51.280 --> 0:17:55.359 it's I think it's up to us people, academics, military strategists, 0:17:55.359 --> 0:17:58.199 and others to debate this. Do we decide what it is? 0:17:58.280 --> 0:18:01.440 With a great sacrifice, So all in America off of 0:18:01.520 --> 0:18:04.359 September eleven, of two thousand one, and to steal a 0:18:04.440 --> 0:18:08.360 line from Freed Zicaria, what does the post nine eleven 0:18:08.400 --> 0:18:12.439 world look like to you? It looks like a mess? Uh. 0:18:12.600 --> 0:18:16.480 There is no real Uh. It seems it's a very 0:18:16.520 --> 0:18:18.399 long time ago in nine eleven where we had this 0:18:18.560 --> 0:18:22.080 purpose and we've lost it. We've gotten wrapped around the 0:18:22.080 --> 0:18:25.320 axle on politics in the Middle East, on things that 0:18:25.400 --> 0:18:28.240 aren't as important to us. It's now time to sit 0:18:28.320 --> 0:18:31.800 back and consider exactly what's important to the United States 0:18:31.840 --> 0:18:33.600 in this part of the world. Thank you so much 0:18:33.640 --> 0:18:35.720 for coming and Stephen and Cook folks, and the counts 0:18:35.760 --> 0:18:38.320 on foreign relations. I will put out on Twitter and 0:18:38.359 --> 0:18:54.600 LinkedIn today his important essay and foreign policy places. Saide 0:18:54.600 --> 0:18:57.080 that Jena Mountain Adams is with us Blimbag Intelligence chief 0:18:57.240 --> 0:19:00.840 Equity strategists, your thoughts on obvious the East Cold Gina. 0:19:00.880 --> 0:19:04.800 Then we'll get to the call at Bloomberg more volatility, 0:19:05.200 --> 0:19:08.400 closer to trend levels, higher equity markets through the year. Though, 0:19:08.640 --> 0:19:10.679 what do you come down on that? Uh? You know, 0:19:10.760 --> 0:19:12.919 if I can, I can sympathize with the idea that 0:19:12.960 --> 0:19:16.480 equity markets continue their advance that they've been in for 0:19:17.320 --> 0:19:19.920 more than a decade. Now, you know, I don't I 0:19:20.000 --> 0:19:22.439 don't know about the higher vall call. I think that 0:19:22.480 --> 0:19:25.119 you'd have to have a pretty significant change in market 0:19:25.160 --> 0:19:28.760 structure in order to get higher prices with higher volatility. 0:19:28.800 --> 0:19:31.280 That certainly was the case in the very very late 0:19:31.359 --> 0:19:36.400 market extension of into two thousand. You know, if that's 0:19:36.440 --> 0:19:38.200 your call that we're going to go into some kind 0:19:38.200 --> 0:19:40.800 of melt up phase, then you will see volatility rise 0:19:40.880 --> 0:19:44.280 as prices rise. I think it's real. I really struggled 0:19:44.320 --> 0:19:45.639 to make the case that we're in a melt up, 0:19:46.080 --> 0:19:49.600 I think instead, you know, investors are somewhat hesitant. It's 0:19:49.600 --> 0:19:52.879 really a story of liquidity driving prices, and that to 0:19:52.960 --> 0:19:56.600 me means volatility stays low as prices advanced. That would 0:19:56.600 --> 0:19:59.199 be my only issue, um is I think you do 0:19:59.280 --> 0:20:01.480 needed to see a big change in the way that 0:20:01.560 --> 0:20:05.080 markets behave and see a massive shift and sentiment as well, 0:20:05.640 --> 0:20:08.280 really driving some kind of melt up phase in order 0:20:08.280 --> 0:20:10.520 to have praises rates with volatility. So let's talk about 0:20:10.560 --> 0:20:13.080 something important, because you've touched on it. I remember in January, 0:20:13.880 --> 0:20:15.520 I think it was there was a feeling that maybe 0:20:15.520 --> 0:20:18.159 this was it, this was the melt up, that final 0:20:18.320 --> 0:20:21.120 stages of a ball market where things start to rip 0:20:21.480 --> 0:20:25.159 and everyone starts to participate. Two years later, here we 0:20:25.200 --> 0:20:29.480 are still talking about the same dynamic, potentially the characteristics 0:20:29.520 --> 0:20:33.159 of a late cycle, end of cycle melt up in 0:20:33.160 --> 0:20:34.720 a ball market. What are they and why is it 0:20:34.800 --> 0:20:36.560 so different to what we see in the last compliments. 0:20:36.880 --> 0:20:39.360 So if there are really just several pillars that characterize 0:20:39.400 --> 0:20:40.919 a melt up, in our mind, you have to have 0:20:41.080 --> 0:20:46.600 rising prices on rising volatility on deteriorating fundamentals. That means 0:20:46.680 --> 0:20:51.280 a decelerating earning scrowth outlook on just a massive explosion 0:20:51.280 --> 0:20:55.120 and optimism reflected in the sentiment surveys. That we've been 0:20:55.160 --> 0:20:57.720 missing a lot of those characteristics at various points in 0:20:57.720 --> 0:21:00.760 this cycle. But the one that really has we've struggled 0:21:00.800 --> 0:21:04.719 to sort of find is that massive optimistic sentiment. I 0:21:04.720 --> 0:21:07.159 think in fits and starts, you do develop periods in 0:21:07.160 --> 0:21:11.080 which investors are a little bit more enthusiastic. Late seventeen 0:21:11.200 --> 0:21:13.119 was one of those periods. We did see a major 0:21:13.200 --> 0:21:16.320 market peak occur in early eighteen, but it proved not 0:21:16.440 --> 0:21:18.760 to be the secular bull market peak because you didn't 0:21:18.800 --> 0:21:21.920 have enough long term build and optimism I would suggest 0:21:22.880 --> 0:21:25.879 to really support a massive melt up peak developing. I 0:21:25.880 --> 0:21:28.440 think we're in a similar state now. We probably are 0:21:29.000 --> 0:21:31.800 a little excessively optimistic. You see it in the strategists 0:21:31.800 --> 0:21:34.440 all caving on their on their forecast, right. You know, 0:21:34.480 --> 0:21:36.160 I used to be one of these strategists, and thank 0:21:36.160 --> 0:21:38.320 god I don't have to do this forecasting anymore, because 0:21:38.359 --> 0:21:40.840 it is really, really, you know, it's tricky when the 0:21:40.880 --> 0:21:44.360 market is inflating on sentiment and sentiment and alone, it's 0:21:44.400 --> 0:21:46.479 really difficult to predict how far it's going to go, 0:21:46.920 --> 0:21:49.960 but we haven't seen a massive improvement and fundamentals to 0:21:50.000 --> 0:21:52.360 really drive those market outcomes right now, so we are 0:21:52.400 --> 0:21:56.000 probably slightly over optimistic in the short run. That said, 0:21:56.760 --> 0:21:59.120 most of the flows over the course of the last 0:21:59.119 --> 0:22:01.160 several years have gone to the bond market, not into 0:22:01.200 --> 0:22:03.600 the equity market. You did see some equity influence at 0:22:03.600 --> 0:22:06.040 the end of last year, but not nearly as much 0:22:06.400 --> 0:22:08.800 as you would normally see when stocks are peaking and 0:22:08.920 --> 0:22:13.080 sentiment is overly enthusiastic. Gena and the zeitgeis this morning, 0:22:13.359 --> 0:22:16.720 is any given company switching from share buy back to 0:22:16.880 --> 0:22:20.640 dividends increased dividends? Walk us through that. In this case, 0:22:20.680 --> 0:22:24.120 it was an essay on Apple computer and they really 0:22:24.119 --> 0:22:26.120 need to get their act together and just switch from 0:22:26.119 --> 0:22:30.760 share buy back, massive two dividend growth more sprightly. What's 0:22:30.800 --> 0:22:34.359 the soil? What there? What's the distinction between share buy 0:22:34.440 --> 0:22:37.840 back and dividends? I think it's signal more than anything. 0:22:38.119 --> 0:22:41.880 I think that traditionally, the signal of a switch from 0:22:42.040 --> 0:22:44.520 sort of a short term boost to share prices via 0:22:44.560 --> 0:22:48.800 share buy back to a longer term commitment to dividend 0:22:49.400 --> 0:22:52.800 is a signal of a slowing longer term growth outlook 0:22:53.240 --> 0:22:56.119 to most investors, and so the results is, if you 0:22:56.160 --> 0:22:59.960