1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,000 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Right now, 7 00:00:32,120 --> 00:00:34,239 Speaker 1: I want to get a sense of what's going on 8 00:00:34,360 --> 00:00:37,559 Speaker 1: in up markets. We are dealing obviously with the fallout 9 00:00:37,600 --> 00:00:41,760 Speaker 1: from a Brazilian political crisis, and to give us more 10 00:00:41,840 --> 00:00:45,519 Speaker 1: color on what exactly happened there, Vivian Rodriguez is joining us. 11 00:00:45,520 --> 00:00:48,959 Speaker 1: She's a Latin American economy and government editor for Bloomberg. 12 00:00:49,040 --> 00:00:52,360 Speaker 1: Also here with us is Dave Wilson, Bloomberg Stocks editor, 13 00:00:52,520 --> 00:00:55,760 Speaker 1: columnist and blogger m Live Go on the Bloomberg Vian, 14 00:00:55,760 --> 00:00:57,800 Speaker 1: I'd like to start with you. Can you just give 15 00:00:57,840 --> 00:01:00,320 Speaker 1: us a sense of what actually happened? We do know 16 00:01:00,440 --> 00:01:05,000 Speaker 1: that on Wednesday, a major uh newspaper in Brazil reported 17 00:01:05,080 --> 00:01:10,360 Speaker 1: that the current president, Michelle Tamare, was embroiled in u 18 00:01:10,600 --> 00:01:14,160 Speaker 1: or sort of endorsing some kind of Briberry scheme. Can 19 00:01:14,200 --> 00:01:16,520 Speaker 1: you explain in the library. Sure, it is quite a 20 00:01:16,640 --> 00:01:20,200 Speaker 1: shocking development that that really, you know, sent the country 21 00:01:20,200 --> 00:01:24,440 Speaker 1: back into a crisis that we've seen last year. Right. Basically, 22 00:01:24,480 --> 00:01:27,399 Speaker 1: what we know is that there is a tape, I mean, 23 00:01:27,440 --> 00:01:31,039 Speaker 1: a couple of very high profile executives, I mean recorded 24 00:01:31,040 --> 00:01:34,800 Speaker 1: a conversation with Tamor in March in which basically Tamer 25 00:01:35,280 --> 00:01:37,760 Speaker 1: you know, again, this is all allegedly the newspapers that 26 00:01:37,800 --> 00:01:40,679 Speaker 1: transcripts are not out, but in this recording, Tamor just 27 00:01:40,760 --> 00:01:44,399 Speaker 1: basically gave the okay or endorsed some briberries in a 28 00:01:44,400 --> 00:01:47,960 Speaker 1: big covert up scheme involving the former leader of the 29 00:01:48,480 --> 00:01:51,360 Speaker 1: of the House, which was a mastermind behind the impeachment 30 00:01:51,520 --> 00:01:54,760 Speaker 1: of his predecessor, decept. So it's pretty bad. Yeah, this 31 00:01:54,800 --> 00:01:57,760 Speaker 1: is pretty bad. And the response in markets has been 32 00:01:57,960 --> 00:02:00,160 Speaker 1: pretty fierce. Dave, Can you give us a sense of 33 00:02:00,240 --> 00:02:02,680 Speaker 1: just you know what we are seeing? Oh? Absolutely, I 34 00:02:02,680 --> 00:02:05,680 Speaker 1: mean you look down to Brazil. You see the vestment 35 00:02:05,680 --> 00:02:08,480 Speaker 1: index down ten and a half percent. In early trading. 36 00:02:08,840 --> 00:02:11,800 Speaker 1: A circuit breaker kicked in in the local market that 37 00:02:13,440 --> 00:02:16,359 Speaker 1: basically put off buying and selling for half an hour. 38 00:02:16,520 --> 00:02:19,959 Speaker 1: There's possibility of other circuit breakers if you get a 39 00:02:20,000 --> 00:02:22,680 Speaker 1: steeper decline, and it's showing up here in the US 40 00:02:22,800 --> 00:02:25,800 Speaker 1: in terms of what's going on with for example, the 41 00:02:25,840 --> 00:02:29,440 Speaker 1: Ice Shares MSCI Brazil Exchange Trading Fund, which is down 42 00:02:29,760 --> 00:02:32,480 Speaker 1: sixteen percent at the moment, and then you look through 43 00:02:32,600 --> 00:02:35,960 Speaker 1: the American depository receipts of Brazilian company to trade here 44 00:02:36,160 --> 00:02:39,600 Speaker 1: and they're taking quite the hit as well. Uh. One example, 45 00:02:39,680 --> 00:02:42,480 Speaker 1: the government controlled the energy company petrol Bra, which is 46 00:02:42,520 --> 00:02:45,200 Speaker 1: down about fourteen and a half percent at the moment. Yeah. Well, 47 00:02:45,240 --> 00:02:48,240 Speaker 1: and remember that Petro braw is also involved with some 48 00:02:48,280 --> 00:02:52,240 Speaker 1: allegations of a scandal and taking and having some kind 49 00:02:52,240 --> 00:02:55,600 Speaker 1: of corruption probe is ongoing to this day. Vivian, can 50 00:02:55,600 --> 00:02:58,520 Speaker 1: you give us a sense of what the fallout could 51 00:02:58,560 --> 00:03:03,960 Speaker 1: be from the allegation from Michelle Tamayor and how this 52 00:03:04,160 --> 00:03:08,000 Speaker 1: would bleed out into markets in a practical sense. Okay, 53 00:03:08,040 --> 00:03:10,360 Speaker 1: So I mean bottom line, I mean the government. We 54 00:03:10,400 --> 00:03:12,840 Speaker 1: don't know if we're going to have a government in 55 00:03:12,840 --> 00:03:15,679 Speaker 1: this shape and form a week from now. So in 56 00:03:15,800 --> 00:03:19,440 Speaker 1: markets are really responding I mean to that reality, right, 57 00:03:19,960 --> 00:03:23,200 Speaker 1: if Timer is found, really, if these tapes you know, 58 00:03:23,240 --> 00:03:26,200 Speaker 1: are proving to be legitimate, and if the Supreme Court 59 00:03:26,240 --> 00:03:29,560 Speaker 1: opens an investigation. I mean pressure will mount for him 60 00:03:29,560 --> 00:03:31,519 Speaker 1: to potentially I mean at the bottom line of all this, 61 00:03:31,639 --> 00:03:34,239 Speaker 1: he might even have to resign. We are too far. 62 00:03:34,600 --> 00:03:36,880 Speaker 1: I mean, there's there's a lot of things can happen there, 63 00:03:37,080 --> 00:03:40,200 Speaker 1: but it is a possibility. What is what is tragic here? 64 00:03:40,240 --> 00:03:43,400 Speaker 1: You mentioned Petro Bras, right, Yes, it was involved in 65 00:03:43,440 --> 00:03:46,560 Speaker 1: all that corruption scandal. They started cleaning up the company. 66 00:03:46,800 --> 00:03:50,440 Speaker 1: It posted a very good quarter recently, but now you 67 00:03:50,520 --> 00:03:53,600 Speaker 1: just sent them all back down again. And it's worth 68 00:03:53,640 --> 00:03:55,800 Speaker 1: reminding that some of these Brazilian companies are some of 69 00:03:55,840 --> 00:03:58,760 Speaker 1: the especially in agrie business in emerging markets, are some 70 00:03:58,800 --> 00:04:01,400 Speaker 1: of the largest companies in the world. So yes, he 71 00:04:01,440 --> 00:04:04,440 Speaker 1: has the potential for a ripple effect in emerging market 72 00:04:04,440 --> 00:04:07,200 Speaker 1: dedicated funds. Yes, and Vivian to that point, I was 73 00:04:07,240 --> 00:04:10,440 Speaker 1: looking at the biggest emerging markets bond et F today 74 00:04:10,480 --> 00:04:13,240 Speaker 1: it's an eleven point three billion dollars I shared JPMorgan 75 00:04:13,360 --> 00:04:15,720 Speaker 1: U S dollar emerging markets bond et F and it 76 00:04:15,840 --> 00:04:18,640 Speaker 1: is down the most since December. And you know, I 77 00:04:18,680 --> 00:04:22,160 Speaker 1: was just looking at the composition and Brazilian assets or 78 00:04:22,200 --> 00:04:25,720 Speaker 1: the fifth account for the fifth most UH of any 79 00:04:25,800 --> 00:04:28,880 Speaker 1: nation in this particular e t F. So you could 80 00:04:28,920 --> 00:04:33,200 Speaker 1: potentially see ripple effect. Are you seeing that, Dave elsewhere? Well, 81 00:04:33,240 --> 00:04:35,279 Speaker 1: I mean to an extent, but when you turn to 82 00:04:35,320 --> 00:04:37,560 Speaker 1: the stock market. We actually got a reminder on the 83 00:04:37,640 --> 00:04:41,760 Speaker 1: Markets Live blog earlier from Cameron christ who's a macro strategist. 84 00:04:42,200 --> 00:04:45,360 Speaker 1: Just when you go through the MSc I Emerging Markets Index, 85 00:04:45,440 --> 00:04:47,480 Speaker 1: you see that nine of the ten biggest companies are 86 00:04:47,480 --> 00:04:50,159 Speaker 1: based in Asia. We're talking about the likes of you know, 87 00:04:50,200 --> 00:04:53,440 Speaker 1: Ali Baba Group, for example, and they had earnees out 88 00:04:53,440 --> 00:04:55,800 Speaker 1: that word so great, But then there a whole lot 89 00:04:55,800 --> 00:04:58,799 Speaker 1: of others, you know, Samsung, Electrocs and so on, so 90 00:04:59,040 --> 00:05:01,320 Speaker 1: to that ext and I mean sure there was going 91 00:05:01,360 --> 00:05:04,680 Speaker 1: to be a knock on effect, it may not be 92 00:05:04,880 --> 00:05:08,520 Speaker 1: quite what you might expect, given that, you know, while 93 00:05:08,680 --> 00:05:12,000 Speaker 1: Brazilian companies are certainly substantial and market value, it's not 94 00:05:12,040 --> 00:05:14,479 Speaker 1: like they dominate the index in the same sense that 95 00:05:14,560 --> 00:05:17,799 Speaker 1: you know, you think about you know, Apple or Facebook 96 00:05:17,800 --> 00:05:20,839 Speaker 1: here in the US. Thank you so much for for 97 00:05:20,920 --> 00:05:23,240 Speaker 1: that perspective. I'm sure we'll be talking again about this. 98 00:05:23,240 --> 00:05:26,600 Speaker 1: This isn't going away anytime soon. Vivian Rodriguez, Latin American 99 00:05:26,600 --> 00:05:29,680 Speaker 1: Economy and Government editor for Bloomberg as well as Dave Wilson, 100 00:05:29,839 --> 00:05:33,440 Speaker 1: Bloomberg Stocks editor, columnist and Bloggert m Live go on 101 00:05:33,520 --> 00:05:43,440 Speaker 1: at the Bloomberg Thank you so much. We want to 102 00:05:43,480 --> 00:05:45,440 Speaker 1: take a moment to let you know about something new 103 00:05:45,480 --> 00:05:48,320 Speaker 1: from Bloomberg. 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Max Abelson has 113 00:06:21,040 --> 00:06:23,960 Speaker 1: been listening to the testimony. Max Abelson as a finance 114 00:06:23,960 --> 00:06:26,440 Speaker 1: reporter for Bloomberg News and Business Week, and he joins 115 00:06:26,440 --> 00:06:28,960 Speaker 1: me here in our Bloomberg eleven three oh studio. Is 116 00:06:29,040 --> 00:06:33,480 Speaker 1: quite a wide ranging testimony, from everything from tax reform 117 00:06:34,080 --> 00:06:37,440 Speaker 1: to banking regulations. What stood out most to you? You know, 118 00:06:37,720 --> 00:06:41,039 Speaker 1: as a reporter, we're trained not to ever express opinions, 119 00:06:41,080 --> 00:06:43,279 Speaker 1: but I think it's probably fair to share this opinion that, 120 00:06:43,839 --> 00:06:45,920 Speaker 1: you know, hearings in the Senate can sometimes be boring, 121 00:06:46,440 --> 00:06:49,440 Speaker 1: But when we just saw something that was definitely not boring. 122 00:06:49,520 --> 00:06:53,120 Speaker 1: It was Stephen Mnuchin versus Elizabeth Warren one on one, 123 00:06:53,600 --> 00:06:57,359 Speaker 1: and then you can tell they just really see the 124 00:06:57,360 --> 00:06:59,640 Speaker 1: world differently, and they really want at it, and they 125 00:06:59,680 --> 00:07:02,640 Speaker 1: want at it on a subject that is absolutely central 126 00:07:02,680 --> 00:07:05,320 Speaker 1: to the shape of the American banking system, which is 127 00:07:05,360 --> 00:07:08,400 Speaker 1: Glass Stiegel. Right. They basically we're arguing she was saying, 128 00:07:08,400 --> 00:07:11,119 Speaker 1: how can you say that you support a modern Glass 129 00:07:11,120 --> 00:07:14,880 Speaker 1: Steagle while not supporting a breakup of the major banks. Yeah. 130 00:07:15,160 --> 00:07:19,360 Speaker 1: I mean I have seen a bunch of Senate hearings 131 00:07:19,400 --> 00:07:22,200 Speaker 1: in my time, and I think I've never heard a 132 00:07:22,240 --> 00:07:25,679 Speaker 1: more memorable quote than what Stephen Nuchin told Elizabeth Elizabeth Warren, 133 00:07:25,720 --> 00:07:30,800 Speaker 1: which is, we've been very consistent, we support century glass Stiegel, 134 00:07:30,960 --> 00:07:34,160 Speaker 1: but not Glass Stegl. And that is going to be 135 00:07:34,200 --> 00:07:37,360 Speaker 1: a really hard, hard needle for these for this administration 136 00:07:37,360 --> 00:07:40,480 Speaker 1: to thread, because what they want to say is that 137 00:07:40,520 --> 00:07:45,480 Speaker 1: they are populous who support reining in dangerous banking. But 138 00:07:45,920 --> 00:07:48,800 Speaker 1: on the other hand, the people who make up the administration, 139 00:07:48,840 --> 00:07:51,400 Speaker 1: like Steven Manucin himself form a partner from Goldman Sex 140 00:07:51,520 --> 00:07:53,840 Speaker 1: or Wall Street alumni who don't want to hurt the 141 00:07:53,840 --> 00:07:55,680 Speaker 1: big banks. They want to they want to cut back 142 00:07:55,840 --> 00:07:59,360 Speaker 1: back rules, not add to them. And obviously, when Elizabeth 143 00:07:59,360 --> 00:08:02,280 Speaker 1: Warren says the century Glass egle, she's talking about something 144 00:08:02,560 --> 00:08:04,120 Speaker 1: very different. Well, you know, I thought that it was 145 00:08:04,200 --> 00:08:06,480 Speaker 1: interesting and a lot of the questions there seemed to 146 00:08:06,560 --> 00:08:09,400 Speaker 1: be a divide, and as sort of a quest to 147 00:08:09,480 --> 00:08:13,640 Speaker 1: find out whether Treasury Secretary Manuchin has talked with anyone 148 00:08:13,760 --> 00:08:16,360 Speaker 1: other than banking elite, right, I mean, because that was 149 00:08:16,400 --> 00:08:19,280 Speaker 1: sort of one question that that someone just asked you, 150 00:08:19,400 --> 00:08:22,320 Speaker 1: who are you surrounding yourself by When you talk to 151 00:08:22,360 --> 00:08:24,800 Speaker 1: people on Wall Street, do they feel like they have 152 00:08:24,840 --> 00:08:27,920 Speaker 1: a pretty direct line to Treasure Secretary Manuchion, Lisa, you 153 00:08:28,080 --> 00:08:31,200 Speaker 1: better believe it. And if it's not Stephen Manton himself, 154 00:08:31,440 --> 00:08:35,080 Speaker 1: it's Craig Phillips, who comes from I believe it's Blackstone, 155 00:08:35,480 --> 00:08:37,920 Speaker 1: it's um Justin musen It who comes from. I think 156 00:08:37,920 --> 00:08:42,240 Speaker 1: it's Morgan Stanley. Wall Street is really really excited that 157 00:08:42,400 --> 00:08:45,960 Speaker 1: instead of sort of fighting with their regulators and fighting 158 00:08:45,960 --> 00:08:48,560 Speaker 1: with the officials in Treasury and the federal Reserve and 159 00:08:48,600 --> 00:08:50,040 Speaker 1: the o c C and the f d i C 160 00:08:50,240 --> 00:08:52,960 Speaker 1: and the sec. The people that Donald Trump is putting 161 00:08:52,960 --> 00:08:55,000 Speaker 1: in those positions and the Stephen Manuchin is putting in 162 00:08:55,000 --> 00:08:58,840 Speaker 1: those positions come from Wall Street. And the crazy irony 163 00:08:58,880 --> 00:09:02,640 Speaker 1: here is that the phrase century glass segel comes from 164 00:09:02,679 --> 00:09:05,079 Speaker 1: Elizabeth Warren. She used that phrase in her in her 165 00:09:05,080 --> 00:09:07,240 Speaker 1: bill with McCain, which and of course what does she 166 00:09:07,320 --> 00:09:09,400 Speaker 1: want to do. She wants to break up the big banks, 167 00:09:09,840 --> 00:09:13,360 Speaker 1: and that exact phrase was adopted by the Trump administration, 168 00:09:13,440 --> 00:09:18,240 Speaker 1: and they mean something entirely different. But I just have 169 00:09:18,280 --> 00:09:21,160 Speaker 1: to add in that, like a curveball. On top of 170 00:09:21,200 --> 00:09:24,439 Speaker 1: that curveball, is that breaking up the banks is something 171 00:09:24,440 --> 00:09:26,280 Speaker 1: that Trump himself has talked about. It was part of 172 00:09:26,320 --> 00:09:29,280 Speaker 1: the Republican platform, right, and I think that they brought 173 00:09:29,280 --> 00:09:31,080 Speaker 1: that up trying to say, how can we correlate these 174 00:09:31,120 --> 00:09:33,680 Speaker 1: two Max Abilson, thank you so much for the instant 175 00:09:33,720 --> 00:09:36,960 Speaker 1: reaction to what we've been hearing with the testimony of 176 00:09:36,960 --> 00:09:40,679 Speaker 1: Stephen Nuchin, head of the Treasure Department in front of 177 00:09:40,760 --> 00:09:46,760 Speaker 1: the Senate Banking Committee. Thanks for listening to the Bloomberg 178 00:09:46,800 --> 00:09:49,440 Speaker 1: p m L podcast. You can subscribe and listen to 179 00:09:49,480 --> 00:09:54,000 Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 180 00:09:54,400 --> 00:09:58,000 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 181 00:09:58,000 --> 00:10:01,560 Speaker 1: on Twitter at Lisa Abramowitz. Before the podcast, you can 182 00:10:01,600 --> 00:10:03,959 Speaker 1: always catch us worldwide on Bloomberg Radio