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Speaker 1: P and L is brought to you by proper Cloth,

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Speaker 1: a leader in men's custom shirts, with proprietary smart sized

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Speaker 1: order your first custom shirt today. Welcome to the Bloomberg

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Speaker 1: P and L Podcast. I'm Pim Fox. Along with my

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Speaker 1: co host Lisa Abramowitz. Each day we bring you the

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Speaker 1: most important, noteworthy, and useful interviews for you and your money,

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Speaker 1: whether at the grocery store or the trading floor. Find

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Speaker 1: the Bloomberg P and L Podcast on iTunes, SoundCloud and

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Speaker 1: at Bloomberg dot com. The White House Press Secretary Sewan

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Speaker 1: Spicer saying the President had been concerned for a few

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Speaker 1: weeks that General Michael Flynn had misled Vice President, hence

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Speaker 1: here to tell us more. Ariel Cohen, Senior Fellow at

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Speaker 1: the Atlantic Council and also director of the Center for Energy,

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Speaker 1: Natural Resources and Geo Politics. Uh DR Cohen, thank you

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Speaker 1: very much for being with us and the Institute for

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Speaker 1: Analysis of Global Security, also based in Washington, d C.

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Speaker 1: Maybe you could just give us your reaction to the

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Speaker 1: ongoing and I guess investigation into the former head of

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Speaker 1: the National Security Council. Well, unfortunately, this is an unprecedented

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Speaker 1: situation where from the get go, from the beginning, the

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Speaker 1: National Security Advisor is investigated by the FBI counter intelligence

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Speaker 1: their allegations flying. You remember General Flynn appeared at the

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Speaker 1: unfortunate dinner with Mr Putin and also Jill Stein from

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Speaker 1: the Green Party was sitting at their table. Uh. This

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Speaker 1: was for the Russian UM fake news channel Russia Today

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Speaker 1: in UM. And then the question is what does it involve.

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Speaker 1: Is it just a bad judgment or something more significant?

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Speaker 1: And of course I'm not private to any information beyond

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Speaker 1: what we have in open sources. But at the same

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Speaker 1: time I must say, UM, there were clandestine, uh hush

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Speaker 1: hush contacts between electoral campaigns and foreign powers, including identified

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Speaker 1: KGB agents. For example, Henry Kissinger was negotiating or at

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Speaker 1: least in contact with UM the Soviet representative who was

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Speaker 1: identified KGB before Richard Nixon took power in But Kissinger

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Speaker 1: and ultimate pro was very careful to advise his boss,

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Speaker 1: President Nixon, to keep meticulous notes and to advise other

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Speaker 1: people about his contact. So he did it with the

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Speaker 1: blessing of the principle UM. Kissinger also had a lot

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Speaker 1: of behind closed doors and under the table contacts with

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Speaker 1: the Chinese UH, and for that during the Cuban missile crisis,

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Speaker 1: Bobby Kennedy, President's brother, an attorney general, was in contact

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Speaker 1: with the Russian ambassador um anatoly Rin to try to

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Speaker 1: evade the nuclear holocaust UH caused by the Soviet placing

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Speaker 1: nuclear weapons in Cuba. So there were precedents, and we

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Speaker 1: will see in the next weeks how General Flynn extracts

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Speaker 1: himself out of this. Uh. Well, the bigger issue here

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Speaker 1: there there are a couple of bigger issues. First of all, Uh,

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Speaker 1: there's an issue of security. And if indeed, uh, Michael

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Speaker 1: Flynn wied to Vice President Pence, that's part of the issue. No,

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Speaker 1: and not only that, but then, but the idea that

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Speaker 1: there is some kind of security breach that not all

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Speaker 1: members of the core group in President Trump's administration are

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Speaker 1: on the same page about this is a problem. No,

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Speaker 1: up aolutely. Uh. First of all, Um, misleading or or

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Speaker 1: misinforming Vice President Pence was probably a very bad idea.

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Speaker 1: And as always in Washington, it's not the transgression that

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Speaker 1: gets you, it's lying a bit about the transgression. So

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Speaker 1: that's a known thing for an ultimate insider, as Mike Flynn,

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Speaker 1: this was to me a surprise. UH. Secondly, now you

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Speaker 1: are having Congress the Senate eager to investigate a broader

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Speaker 1: range of issues in terms of connections to Russia, and

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Speaker 1: we will see how that will go. So from the beginning,

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Speaker 1: instead of focusing on massive challenges I've just written today about, uh,

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Speaker 1: the North Korean and Iranian nuclear I'm sorry, ballistic missile

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Speaker 1: tests that probably were timed to derail the Japanese Prime

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Speaker 1: Minister's visit to lag almar and UH to test the

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Speaker 1: administration instead of focusing on that and Mr Natanio coming

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Speaker 1: to town tomorrow. UH, the President and the Vice President

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Speaker 1: and the White House have to deal with investigations and

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Speaker 1: allegations and everything else that distracts them from the business

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Speaker 1: of running the country and running the free world. UH.

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Speaker 1: Dr con What if you could just step back a second.

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Speaker 1: I want to ask you about Russia because I've been

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Speaker 1: looking at the performance of the Russian rouble and it

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Speaker 1: has continued to gain strength against the US dollar. UH,

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Speaker 1: increase in any oil revenue because of cutbacks and OPEC

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Speaker 1: production and so on. What if you could just give

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Speaker 1: us a perspective of what kind of situation does Vladimir

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Speaker 1: Putin face as president, Because you know, many times you

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Speaker 1: always think the opposition or the person you don't know

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Speaker 1: has everything together and is quite organized. Sometimes everyone's, you know,

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Speaker 1: in the same boat, they just don't know it. The

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Speaker 1: Russians are in the same boat with the Iranians and

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Speaker 1: the Saudis, that's for sure. That's why they're pushing so

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Speaker 1: hard to cut production. This is the first time we

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Speaker 1: see Russia cutting significantly uh it's output. But the main

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Speaker 1: burden is of course on the market maker of the Saudias,

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Speaker 1: and also Iran is not increasing its production as fast

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Speaker 1: as they want. But this is a challenge for the

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Speaker 1: Trump administration. If we really want to uh force Iran

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Speaker 1: to comply with the Obama era nuclear agreement, we may

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Speaker 1: want to keep the oil prices down. We may want

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Speaker 1: to increase domestic production, including shale, and also to allow

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Speaker 1: the United States to produce more by opening UM the

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Speaker 1: offshore acreage for exploration and exploitation of oil and gas

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Speaker 1: UM in the Pacific Shelf, Atlantic shell Off and the

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Speaker 1: Gulf of Mexico. President Obama, just before he finished his term,

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Speaker 1: closed back a lot of acreage that was opened before,

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Speaker 1: and also on land. We want to increase UM opportunities

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Speaker 1: for e NP, for exploration and production. As far as

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Speaker 1: Russia is concerned, of course, Uh, Putin is playing his

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Speaker 1: cards quite well, and his cards are bad. The economy.

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Speaker 1: I just came back two weeks ago from Russia. Uh,

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Speaker 1: and then I was there before in December. The economy

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Speaker 1: is not doing great. They ran out of growth, so

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Speaker 1: their only hope is oil gas, uh, some other raw materials.

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Speaker 1: And then nuclear reactors and space launchers and the space

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Speaker 1: launch industry just collapse. It was an incredible thing to

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Speaker 1: watch when I was there, the investigations by the secret

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Speaker 1: police of their space sector that just people because of

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Speaker 1: corruption because uh they were stealing precious metal. Um, they

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Speaker 1: just destroyed a whole industry. Right, Thank you so much.

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Speaker 1: Aril Cohen, Senior fellow at the Atlantic Council, breaking down

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Speaker 1: what the potential implications are for the regarding the resignation

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Speaker 1: of Michael Flynn. I'm Lisa Bramoy. It's here with pim Fox.

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Speaker 1: com Custom shirts made Smarter. After high drama at the

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Speaker 1: High Court in the United States, we're taking We've been

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Speaker 1: taking a little bit of a breather from the immigration

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Speaker 1: executive Order that President Trump signed, but it has not

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Speaker 1: gone away, and we want to get a sense of

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Speaker 1: what the next steps are for this presidential administration. I

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Speaker 1: want to bring Alex Narrasta, immigration policy analyst at the

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Speaker 1: Center for Global Liberty and Prosperity at the Cato Institute

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Speaker 1: in Washington, d C. Alex, I'm so glad that you

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Speaker 1: could join us. I just want to start first with

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Speaker 1: what is the next step for President Trump. Do we

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Speaker 1: have a sense of that yet? Well, the next step

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Speaker 1: that everyone's talking about is that he's just going to

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Speaker 1: put out a newer draft of the executive order that

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Speaker 1: removes all of a lot of the thorny issues that

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Speaker 1: the Court has raised, as well as all the draft

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Speaker 1: are and oversights that were in there in the first issue. UM.

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Speaker 1: Reissue that order, um, and then it will be much

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Speaker 1: more legally defensible and wipe out a lot of the

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Speaker 1: courts disagreements. So we've heard a lot of talk about

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Speaker 1: what harm could come from either the passage or the

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Speaker 1: acceptance of this executive order or or not or the

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Speaker 1: rejection of it. Where do you in in this well

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Speaker 1: the band um? I'm much more uh sort of interested

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Speaker 1: in what the supposed benefits are. I mean, we can

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Speaker 1: talk about the cost of the band as well. But

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Speaker 1: it's supposed to try to decrease or eliminate foreign born

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Speaker 1: terrorism on US soil. But the seven countries that are

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Speaker 1: part of this band that will put it on this

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Speaker 1: temporary band, um, there have been zero Americans killed in

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Speaker 1: terrorist atacks committed by folks from these seven countries on

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Speaker 1: US soil and none uh, no convictions or arrest at

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Speaker 1: all of Libyans or Syrians for planning attacks on you

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Speaker 1: as well. So in order to understand like what downsides

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Speaker 1: could happen from this um, we need to realize that

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Speaker 1: the upsides are very small that I existent at all. Now,

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Speaker 1: on the downside, you have about fifty thousand Green cards

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Speaker 1: a year going to folks from these countries. That's about

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Speaker 1: five percent or so of the total each year, and

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Speaker 1: a few hundred thousands visitors, not very many. So the

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Speaker 1: economic impact of this right off the bat won't be

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Speaker 1: that great for Americans. But because there's really no upside

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Speaker 1: in terms of how it could decrease terrorism, uh, it's

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Speaker 1: it's still a net cost. Before we uh so leave

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Speaker 1: the immigration topic, I want to get your thoughts about immigration,

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Speaker 1: but legal immigration as well as the illegal immigration from

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Speaker 1: Mexico obviously not part of this specific travel band, but

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Speaker 1: I'm wondering if I could get your deeper view as

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Speaker 1: to the forward looking to the direction of immigration policy. Well,

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Speaker 1: I think we're immigration policy should be heading is toward

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Speaker 1: a liberalization i than a restriction. So the reason why

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Speaker 1: people come illegally to the United States is that there

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Speaker 1: is no legal pathway from them to come legally in

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Speaker 1: the first place. So if you take a look at

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Speaker 1: green cards in the US, which is the way that

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Speaker 1: you get lawful permanent residency and can eventually apply for citizenship.

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Speaker 1: There is no category in there for a low skilled

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Speaker 1: worker unless they're closely related to an American UM. So

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Speaker 1: just to say that again, because most people don't realize

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Speaker 1: that there is no green card category for a low

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Speaker 1: skilled worker UM. And that is the main reason why

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Speaker 1: these low skilled workers from Mexico, Central America and some

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Speaker 1: other countries are able to come come here illegally, is

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Speaker 1: that there is no way from the come legally, and

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Speaker 1: I think that we should allow them to come legally

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Speaker 1: and work here. Now, the other areas of immigration, like

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Speaker 1: high skilled workers entrepreneurs, those also need to be expanded

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Speaker 1: so that we can allow more people to come here

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Speaker 1: and grow our economy and start new businesses. UM. But

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Speaker 1: on the low end side, the reason why we have

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Speaker 1: illegalization is that just can't come legally. Alex what do

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Speaker 1: you say to people who say that these immigrants are

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Speaker 1: taking us jobs? Well, there's really no evidence of that.

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Speaker 1: We don't live in a fixed pie economy. There's not

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Speaker 1: a fixed number of jobs, which means that if there

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Speaker 1: are more people in this country who are spending money,

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Speaker 1: who are starting businesses, who are working, that actually increases

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Speaker 1: the number of jobs that are available. Meanwhile, if the

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Speaker 1: number of people in this country were to decrease, it

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Speaker 1: wouldn't free up jobs for Americans, for unemployed people. Um.

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Speaker 1: Most of those people they disappeared, they would take their

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Speaker 1: jobs with them. UM. And that's because more people are

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Speaker 1: a benefit to the economy, more people as workers, as consumers,

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Speaker 1: as entrepreneurs, as investors, as people who make their lives

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Speaker 1: and their homes here. It stimulates a lot more economic

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Speaker 1: activity uh than the jobs that they merely take themselves.

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Speaker 1: So that when you look across American states, you see

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Speaker 1: the states that are doing the worst are the places

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Speaker 1: where there are the fewest demogrants and nobody wants to

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Speaker 1: move to a lot of the places that have a

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Speaker 1: lot of job opportunities for natives and for immigrants are

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Speaker 1: the ones where everybody's moving to. Thank you very much

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Speaker 1: for joining us, Alexa nor Rasta. He is immigration policy

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Speaker 1: analysts Center for Global Liberty and Prosperity at the Cato

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Speaker 1: Institute in Washington, d C. It seems we cannot go

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Speaker 1: a day without u S docks hitting a new high,

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Speaker 1: and our next guest thinks that they will keep rising.

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Speaker 1: I want to bring in Phil Orlando, Chief Equity strategist

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Speaker 1: for Federated Global Invested Investment Management and Phil I want

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Speaker 1: to start with inflation. We got a very good reading

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Speaker 1: today with wholesale prices coming in. They rose at the

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Speaker 1: fastest pace since two thousand twelve. I believe when is

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Speaker 1: inflation going to become a problem for U S stock valuations? Well,

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Speaker 1: that's an interesting question because the metric you just referenced

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Speaker 1: was nominal inflation. What we like to look at is

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Speaker 1: core year of a year inflation, which strips out the

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Speaker 1: volatility of food, energy, and and more recently with the

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Speaker 1: pp I trade services, that number was actually a poor number.

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Speaker 1: It was up one point six percent year of a year.

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Speaker 1: It was down to tick from December. You look at

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Speaker 1: the most recent wage data we got when the January

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Speaker 1: Labor report came out, year of a year wage growth,

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Speaker 1: which had been two point nine December is now down

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Speaker 1: to two point five percent. Basically, you're saying that inflation

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Speaker 1: doesn't seem to be getting ahead of itself at this point.

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Speaker 1: It seems to be in a sort of sweet spot

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Speaker 1: for stocks. Well, yeah, inflation. You know, there are folks

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Speaker 1: that are thinking, you know, inflation is going to go

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Speaker 1: vertical eventually and it might, but it's not right now.

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Speaker 1: And and if the FED is truly data dependent, as

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Speaker 1: they've been telling us for the last you know, so

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Speaker 1: many years, uh, it's not in the numbers. Inflation is

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Speaker 1: not a concern right now. Now. You raised another interesting point,

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Speaker 1: which is that with inflation ticking up, bond yield should

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Speaker 1: be ticking up, and and and stock multiples should be

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Speaker 1: going the other way, you know, based upon the mathematics

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Speaker 1: of the FED model, and and and I agree with

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Speaker 1: that conceptually, but if you go back and look at

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Speaker 1: you know, the last twenty cycles were bond yields sort

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Speaker 1: of moved up gradually, you can coexist with expanding multiples.

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Speaker 1: The reality is that that price earnings ratios continue to

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Speaker 1: expand as treasury yields get to five It's not until

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Speaker 1: treasury yields surpass five percent that we start to see

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Speaker 1: that contraction. So we're still okay. Just to sort of

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Speaker 1: what we were talking about offline, is that ten year

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Speaker 1: treasury yields are now near the lowest since two ten

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Speaker 1: relative to the earnings yield on the smp FRED. So

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Speaker 1: it raises the question of at what point where people

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Speaker 1: cycle back into bonds seeing that there is an alternative

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Speaker 1: two stocks and holding stocks just by virtue of their

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Speaker 1: dividend payments. Well, I don't know if I can connect

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Speaker 1: those thoughts, but I just want to give you some stats. Right,

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Speaker 1: take a look at the SMP five hundred is up

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Speaker 1: more than four and a quarter percent so far this year.

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Speaker 1: All right, Um, you've got a big fund to move,

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Speaker 1: I know, the Federated Global Allocation Fund, Right, that's like

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Speaker 1: almost a half a have a trillion No, no, no no,

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Speaker 1: a million billion. I beg your pardon. So we're about

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Speaker 1: four okay, not from your lips to god. Yeah, And

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Speaker 1: and you know it's it's one of these global asset

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Speaker 1: allocation You've got everything from nest lee to bonds to okay,

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Speaker 1: So why is it that on the one hand, you

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Speaker 1: could have a Greek course that tells us that we're

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Speaker 1: all going, you know, in a handbasket. On the other hand,

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Speaker 1: as Lisa just started off the segment, we're hit new

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Speaker 1: highs uh with stocks. So how do you reconcile all

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Speaker 1: this handwringing and um, the world is ending conversation with

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Speaker 1: stock uh stock crisis moving higher. Well, it's gonna make

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Speaker 1: more You're gonna make more money if you get a

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Speaker 1: corporate tax cut. Right. Look, the old chestnut is that stocks,

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Speaker 1: you know, climb a wall of worry. And that's certainly

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Speaker 1: to some degree what we're doing now. If you're asking

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Speaker 1: the question, we've had a phenomenal run here since the election. Uh,

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Speaker 1: you know, the smps up more than ten percent, the

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Speaker 1: Russell's up more than Should we have a correction here?

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Speaker 1: In their terms, I can't disagree with that. And and

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Speaker 1: and the reality is that stocks do look a little

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Speaker 1: over brought to me here in near tournament. I wouldn't

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Speaker 1: be at all surprised if we had a modest correction,

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Speaker 1: which I would define is something in the you know,

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Speaker 1: two to five percent neighborhood. But if I'm looking out

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Speaker 1: over the next three years, Let's say, if I'm looking

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Speaker 1: out three years and I'm putting in place trump Anomics,

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Speaker 1: you know, tax cuts, deregulation, more infrastructure spending, YadA, YadA,

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Speaker 1: YadA YadA. We're we're looking at SMP. What's the worst

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Speaker 1: bet over the next twelve months? In your opinion, it

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Speaker 1: ought to be treasury yields. Treasury yields out to work

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Speaker 1: higher that that if if if economic growth and inflation

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Speaker 1: tick up as they should over the next two years.

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Speaker 1: Treasury yields ought to go up as well. But from

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Speaker 1: let's say a retiree standpoint, if somebody is about to

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Speaker 1: retire and they have a sort of safe allocation two bonds,

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Speaker 1: is it going to be a blood bath for them

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Speaker 1: or is it going to be a little bit of pain,

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Speaker 1: but ultimately it should be an orderly kind of move

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Speaker 1: into another rate cycle. Well, that's a different question, which

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Speaker 1: is to say that not every retiree has all of

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Speaker 1: their money in benchmark tenure treasuries. You know, our fixed

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Speaker 1: income guys would say that we would underweigh treasuries, but

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Speaker 1: there are other aspects of the fixed income market that

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Speaker 1: are perfectly fine spread products. And then our equity guys

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Speaker 1: would say, well, you ought to have, you know, even

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Speaker 1: though they're not doing so great at the moment, you

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Speaker 1: ought to have some of the big dividend payers on

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Speaker 1: the equity side, your your reats and your utilities and

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Speaker 1: consumer staples and whatever, because those are companies that are

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Speaker 1: paying you three or four five percent dividend yields when

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Speaker 1: you've got a treasury yield, you know, paying half that

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Speaker 1: at two and a half percent. So there are ways

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Speaker 1: for a retiree to get their income without having you know,

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Speaker 1: all of their money. And treasury yields benchmark tenure treasury

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Speaker 1: bonds with the yields are going up in the prices

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Speaker 1: are going down. Phil Orlando, thanks very much for spending

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Speaker 1: time with us. You've got to spend more time. Always

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Speaker 1: my pleasure. Just invite me, invite me, I'll come your time.

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Speaker 1: I should say he's got a red heart tie on

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Speaker 1: Happy check out, ordinating cuff links. He thinks ahead, he's

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Speaker 1: got as they say, he's a strategic thinker, and so

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Speaker 1: are you. Thank you, Phil Orlando, Chief equity strategist for

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Speaker 1: Federated Global Investment Management. Thanks for listening to the Bloomberg

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Speaker 1: P and L podcast. You can subscribe and listen to

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Speaker 1: interviews at iTunes, SoundCloud or whatever podcast as platform you prefer.

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Speaker 1: I'm pim Fox. I'm out there on Twitter at pim Fox.

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Speaker 1: I'm out there on Twitter at Lisa Abramo. It's one

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Speaker 1: before the podcast. You can always catch us worldwide on

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