WEBVTT - Surveillance: Free Trade's Future 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily, we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:29.200 and of course on the Bloomberg Terminent. This is a joy. 0:00:29.320 --> 0:00:32.680 Daniel Kurtz Phelan went to the University of Jonathan Spence 0:00:32.960 --> 0:00:35.879 also known as Yale University, and turned it into a 0:00:35.960 --> 0:00:39.120 China Watch. He has been involved with government, including writing 0:00:39.120 --> 0:00:42.879 speeches for Secretary Clinton, and has now been annointed with 0:00:42.920 --> 0:00:46.040 the worst job in diplomacy, which is filling Gideon Roses 0:00:46.080 --> 0:00:49.080 Shoes at Foreign Affairs, where he has been named editor. 0:00:49.200 --> 0:00:52.040 Daniel Kurtz Phalan joins us at this morning. Daniel, I 0:00:52.120 --> 0:00:53.920 want to go to the United States. I know Lisa's 0:00:54.040 --> 0:00:57.040 very much focused abroad. We had Adam posing on with 0:00:57.160 --> 0:01:01.040 his nostalgia of America. Are we drive owning a nostalgia 0:01:01.200 --> 0:01:05.319 right now? I think you see this across across both parties. 0:01:05.440 --> 0:01:08.720 Right now, there's so much focus on how we get 0:01:08.720 --> 0:01:13.120 back to economic strange to pass that there are ways 0:01:13.160 --> 0:01:16.000 in which families to realize the opportunity with the future 0:01:16.040 --> 0:01:18.920 that's out of opposing piece. The price of nostalgia focuses 0:01:18.959 --> 0:01:21.319 on the trade aspects of this. There's been this really 0:01:21.360 --> 0:01:24.760 fascinating shift against what it in a pretty strong free 0:01:24.760 --> 0:01:28.800 trade consensus across across both parties for some time, and 0:01:29.000 --> 0:01:31.280 the narrative you tend to hear now is that we 0:01:31.360 --> 0:01:34.199 have done too much trade, integrated too much with the world, 0:01:34.280 --> 0:01:38.959 and that has reinforced an equality displaced workers out. Imposen's 0:01:39.040 --> 0:01:41.200 argument is that in fact, for the last twenty years, 0:01:41.200 --> 0:01:44.479 when we've seen this period of rising inequality and stagnating 0:01:44.480 --> 0:01:47.600 wages increast a lot of industries, we've in fact been 0:01:47.600 --> 0:01:51.440 retreating from the world, and trying to to retreat further 0:01:51.520 --> 0:01:54.320 is only going to reinforce those trends. Daniel, in honor 0:01:54.360 --> 0:01:57.640 of John Williamson dying here in the last number of days. 0:01:57.720 --> 0:02:01.000 The nostalgia of the Washington consense is everybody wants to 0:02:01.000 --> 0:02:04.040 go back to when it was cozy, when it was comfortable. 0:02:04.320 --> 0:02:07.960 What does our new Washington consensus look like. So you 0:02:07.960 --> 0:02:09.680 can see some of the outlines of this. In the 0:02:09.680 --> 0:02:14.880 Biden administration, there's much more attempt to to have the state, 0:02:14.960 --> 0:02:17.480 have the government that directs certain portions of the economy. 0:02:17.520 --> 0:02:20.120 There's much more focus on the international competition. I know 0:02:20.160 --> 0:02:22.120 you were just talking about the United States in China, 0:02:22.400 --> 0:02:26.720 but much more focus on how what country controls different 0:02:26.720 --> 0:02:29.880 parts of the supply chain, where semiconductors are manufactured, where 0:02:30.160 --> 0:02:33.200 green technology is manufactured. Uh, those are going to be 0:02:33.200 --> 0:02:36.280 the battles of the future, out imposing and others in 0:02:36.280 --> 0:02:39.160 in this package that leads the major initiative foreign affairs 0:02:40.000 --> 0:02:42.120 try to take a look at this that is not 0:02:42.240 --> 0:02:46.160 about just pulling these things back into our own borders 0:02:46.280 --> 0:02:49.160 or making these all kind of domestic industries, but really 0:02:49.480 --> 0:02:51.639 think about how we shape the global economy in a 0:02:51.639 --> 0:02:55.600 way that addresses those security concerns but also realize the 0:02:55.680 --> 0:02:58.600 economic gains both for Americans in a broad based way, 0:02:58.639 --> 0:03:00.959 but also that really shapes the bubble economy. That's a 0:03:00.960 --> 0:03:02.520 lot of work to dig down. So let's pick up 0:03:02.520 --> 0:03:05.960 on that word consensus. How you established consensus on an 0:03:05.960 --> 0:03:08.560 issue like the Chinese Communist Party right now, how you 0:03:08.560 --> 0:03:12.160 get the European allies to come along with you. So 0:03:12.960 --> 0:03:15.360 this is I think the kind of key tension in 0:03:15.400 --> 0:03:17.600 the Biden China policy. The Biden administration, I think in 0:03:17.600 --> 0:03:20.079 the way that has surprised a lot of people. Came 0:03:20.120 --> 0:03:22.720 really out of the gate trying to set a pretty 0:03:22.720 --> 0:03:24.760 hard line on China's I think one of your your 0:03:24.760 --> 0:03:27.840 previous guests said they made clear as they came into 0:03:27.880 --> 0:03:30.120 office that they were not going back to some pre 0:03:30.240 --> 0:03:33.640 Trump consensus on engagement with China, but really continuing the 0:03:33.680 --> 0:03:36.480 hard line there there change the thing that they're trying 0:03:36.480 --> 0:03:39.520 to do differently than the Trump administration is doing that 0:03:39.560 --> 0:03:43.640 with allies, whether that's Japan you saw you saw Japanese 0:03:43.640 --> 0:03:47.360 Prime Minister in Washington Friday, whether it's with our NATO allies, 0:03:47.400 --> 0:03:51.720 with with the Quad, the India, Japan and Australia, and 0:03:51.720 --> 0:03:55.000 our partners in in the rest of Asia. The problem 0:03:55.000 --> 0:03:56.880 is that a lot of these allies have different views 0:03:56.880 --> 0:03:59.200 about how you compete with China. So you saw this 0:03:59.320 --> 0:04:03.320 on Europe most strongly. Europe was striking an investment deal 0:04:03.360 --> 0:04:05.800 with China at the same time that the United States 0:04:05.920 --> 0:04:09.520 was trying to craft this allied front against against the 0:04:09.600 --> 0:04:12.800 Chinese Communist Party and against Chinese influence. So it's very 0:04:12.920 --> 0:04:15.640 very delicate balancing act where the United States one just 0:04:15.720 --> 0:04:17.560 wants to sustain this hard line, but it wants to 0:04:17.600 --> 0:04:20.279 do it with as many allies and partners as it can, 0:04:20.600 --> 0:04:22.919 and that creates a certain tension. You know, this is 0:04:22.960 --> 0:04:24.920 really the strength United States, and I think the Biden 0:04:24.920 --> 0:04:28.039 administration has has tried to keep this in mind. We 0:04:28.200 --> 0:04:31.400 go into this competition with China with an incredible range 0:04:31.440 --> 0:04:33.960 of allies and partners both in Europe and in Asia 0:04:34.000 --> 0:04:36.719 and elsewhere. China doesn't bring a lot to that fight 0:04:36.760 --> 0:04:38.280 when you think about it in those terms. Well, let's 0:04:38.279 --> 0:04:40.159 build on that tension. Though. The issue is, you know, 0:04:40.279 --> 0:04:43.120 through economic history, at the center of a global system 0:04:43.160 --> 0:04:46.479 is a hedgemm that brings everyone else with them. Right now, 0:04:46.560 --> 0:04:49.000 we can't get the Chinese Communist Party to come with us, 0:04:49.240 --> 0:04:51.560 and that's the issue. The major miscalculation of the last 0:04:51.560 --> 0:04:55.000 several decades, and arguably laced with arrogance, was this idea 0:04:55.040 --> 0:04:57.039 that the Chinese Communist Party would want to be more 0:04:57.080 --> 0:04:59.720 like us, to embrace the system that we've all been 0:04:59.760 --> 0:05:02.000 as from and down. That's not gonna happen. So I 0:05:02.000 --> 0:05:04.240 guess the issue that I have every time this comes up, 0:05:04.279 --> 0:05:07.320 and I'm always asking this question, what kind of system 0:05:07.400 --> 0:05:10.520 can we in our allies embrace. If China doesn't want 0:05:10.560 --> 0:05:12.159 any part of it, doesn't want to play by the 0:05:12.160 --> 0:05:15.160 same rules, that that's a great point in look, I 0:05:15.480 --> 0:05:18.080 wrote a book about US policy towards China in the 0:05:18.120 --> 0:05:21.480 nineteen forties, and you can see exactly that that mistake, 0:05:21.560 --> 0:05:24.720 going back really towards the beginning of the American relationship 0:05:25.160 --> 0:05:28.640 with the Chinese Communist Party. With Communist China, this notion 0:05:28.760 --> 0:05:31.840 that with just the right amount of trade, the right 0:05:31.839 --> 0:05:34.960 amount of diplomatic engagement, the Chinese would really come to 0:05:34.960 --> 0:05:37.159 see the world the way we do. And you know, 0:05:37.240 --> 0:05:39.640 back when I was writing about about George Marshall in 0:05:39.640 --> 0:05:42.440 the nineteen forties in China, that was an illusion that 0:05:42.480 --> 0:05:45.760 we we clung to pretty bitterly. You see that in 0:05:46.200 --> 0:05:49.039 some of the China policy of the nineteen nineties and 0:05:49.080 --> 0:05:51.520 the in the two thousands, this notion that with just 0:05:51.640 --> 0:05:54.960 the right amount of you know, capitalism or or trade 0:05:55.000 --> 0:05:57.320 or diplomacy, the Chinese would come to really see the 0:05:57.360 --> 0:06:00.080 world the way we do. And and that illusion, I 0:06:00.120 --> 0:06:02.839 think has um has has fallen apart over the last 0:06:02.839 --> 0:06:05.720 four years. I think the question is, can you use competition, 0:06:05.800 --> 0:06:09.000 can you use pressure from that coalition to bring to 0:06:09.080 --> 0:06:11.720 bring the Chinese along. We're seeing something like that with 0:06:11.920 --> 0:06:14.120 climate change right now. The by An administration is going 0:06:14.160 --> 0:06:17.200 to hold a climate summit at the White House on Thursday, 0:06:17.520 --> 0:06:20.360 and they've tried to say, look, we want the Chinese 0:06:20.400 --> 0:06:22.840 to come along. We realize that China is the biggest 0:06:22.839 --> 0:06:25.080 admitter of carbon in the world right now, the US 0:06:25.240 --> 0:06:28.000 the second. Only if these two countries are able to 0:06:28.000 --> 0:06:30.160 do something meaningful on climate change, is the world of 0:06:30.279 --> 0:06:34.760 any hope of of being this challenge. But we can't 0:06:35.320 --> 0:06:37.320 we can't try too hard to bring to bring the 0:06:37.360 --> 0:06:39.720 Chinese along. We need to bring a kind of competitive 0:06:39.800 --> 0:06:42.640 edge to this where we show leadership, we show an 0:06:42.680 --> 0:06:45.839 ability to to to shape the global global action on 0:06:45.880 --> 0:06:48.080 this question or working with our allies, and that kinda 0:06:48.160 --> 0:06:50.560 feels really pressure to come along for its own interests, 0:06:50.600 --> 0:06:54.200 not because we expect that with the right amount of diplomacy, 0:06:54.240 --> 0:06:55.800 the Chinese are simply going to see the world the 0:06:55.800 --> 0:06:58.279 way we do. And the global warming discussion is a 0:06:58.279 --> 0:07:00.640 bigger one that we're gonna be having throughout this week. 0:07:00.800 --> 0:07:03.200 I do want to go back to the US China tensions, 0:07:03.279 --> 0:07:06.960 paired with this disenchantment with the way that globalization really 0:07:06.960 --> 0:07:09.560 worked for a lot of people within the United States 0:07:09.560 --> 0:07:13.200 and elsewhere. What is the modern version of globalization that 0:07:13.240 --> 0:07:16.640 economists that you quoted and had in your magazine seemed 0:07:16.680 --> 0:07:20.240 to think is the path forward? So one one really 0:07:20.280 --> 0:07:22.320 interesting element of this, I think when we talk about trade, 0:07:22.360 --> 0:07:26.000 we tend to think of you know, traditional manufacturing and steel, 0:07:26.840 --> 0:07:30.720 maybe services. There's there's one essay in this set of 0:07:30.760 --> 0:07:33.840 pieces on trade by Matt Slaughter and David McCormick. Dave 0:07:33.920 --> 0:07:37.600 mccormicks the CEO of Bridgewater, Matt Slaughters at Dartmouth. They 0:07:37.600 --> 0:07:40.280 were both senior economic officials in the George of the 0:07:40.360 --> 0:07:42.720 Bush administration. They make the point that when you talk 0:07:42.760 --> 0:07:46.520 about global trade increasingly increasingly we're talking about about data, 0:07:46.560 --> 0:07:49.080 about data flows, which have grown something like a hundred 0:07:49.160 --> 0:07:51.640 times in the last the last ten years, and that's 0:07:51.680 --> 0:07:53.880 really the future of global trade. That's a lot of 0:07:53.880 --> 0:07:56.280 what we're talking about, and we're talking about these these 0:07:56.360 --> 0:08:00.400 conflicts over trade going forward. China's working very hard to 0:08:00.480 --> 0:08:03.320 shape global governance of data. You know, they have this 0:08:03.400 --> 0:08:07.240 kind of techno authoritarian model which applies domestically but also 0:08:07.280 --> 0:08:09.960 shapes the way they engage with other countries. The kind 0:08:10.000 --> 0:08:13.320 of economic model the Chinese are trying to bring to 0:08:13.360 --> 0:08:16.520 the rest of the world, And as Slader McCormick argue, 0:08:16.640 --> 0:08:19.800 the US really hasn't gone that far in trying to 0:08:19.880 --> 0:08:22.320 put forth an alternate vision of global governance. So when 0:08:22.320 --> 0:08:24.920 we talk about the trade battles of the future, there's 0:08:25.000 --> 0:08:26.760 likely to be about data as they are to be 0:08:26.840 --> 0:08:30.640 over you know, steel tariffs and the the traditional trade 0:08:30.640 --> 0:08:33.480 battles that were all pretty familiar with. And the question 0:08:33.600 --> 0:08:35.840 is which of these global countries is going to go 0:08:35.880 --> 0:08:38.520 out and shape some kind of global policy about this. 0:08:38.640 --> 0:08:41.360 And this applies to everything from you know how these 0:08:41.440 --> 0:08:46.280 are tax to um to to privacy and all the 0:08:46.360 --> 0:08:49.440 issues that we're familiar with domestically, those are international issues 0:08:49.440 --> 0:08:52.520 as well. And only if the United States goes out 0:08:52.720 --> 0:08:54.439 and tries to put forward it, tries to build some 0:08:54.520 --> 0:08:57.560 kind of coalition, tries to some forward some kind of 0:08:57.600 --> 0:09:03.280 global rules to define data trade going forward. Otherwise other 0:09:03.320 --> 0:09:04.960 countries are gonna are going to step in and do 0:09:05.040 --> 0:09:07.439 that themselves. And that's probably not going to be a model. 0:09:07.480 --> 0:09:09.000 It's probably not going to be an approach that we're 0:09:09.000 --> 0:09:11.360 going to be especially happy with. Just quickly here, I'm 0:09:11.360 --> 0:09:13.439 wondering you're saying that people think that the US is 0:09:13.480 --> 0:09:17.200 behind China and coming up with governance of global data. Meanwhile, 0:09:17.280 --> 0:09:19.480 Tony BLINKLN Secretary of say so that the US was 0:09:19.559 --> 0:09:22.679 behind China when it came to taking advantage of new 0:09:22.760 --> 0:09:27.199 job opportunities resulting from fighting climate change. Is the presiding 0:09:27.240 --> 0:09:30.080 sentiment that the US is falling way behind on a 0:09:30.080 --> 0:09:32.719 lot of the most important issues. I think that's been 0:09:32.760 --> 0:09:36.080 the view over the past few years, whether that's on data, 0:09:36.400 --> 0:09:39.920 whether that's on the technology that goes into UH, into renewables, 0:09:39.960 --> 0:09:42.160 kind of green technology. This is I think at the 0:09:42.160 --> 0:09:44.560 heart of some of what the Biden iministration is trying 0:09:44.559 --> 0:09:46.560 to do with this infrastructure package. You know, we're having 0:09:46.559 --> 0:09:49.960 this debate now about what infrastructure looks like. Some of 0:09:49.960 --> 0:09:53.840 that is twentieth century infrastructure, that's you know, roads and bridges, 0:09:53.920 --> 0:09:55.320 but I think most of us think of when we 0:09:55.360 --> 0:09:57.839 look at infrastructure. The Biden aministration is trying to make 0:09:57.840 --> 0:10:01.040 this case that this really should be about UM, how 0:10:01.160 --> 0:10:05.000 you UH renovate buildings to make them more energy efficient, 0:10:05.000 --> 0:10:08.839 how you invest in these future technologies. That's a politically 0:10:08.840 --> 0:10:10.520 fraud issue. You know, we can go back to the 0:10:11.040 --> 0:10:14.600 cylinder controversy of the Obama administration to see what happens 0:10:14.600 --> 0:10:16.640 when you make some of these investments that go wrong. 0:10:16.960 --> 0:10:19.240 But the case they're trying to make is that when 0:10:19.240 --> 0:10:21.760 we think about infrastructure, when we think about investments in 0:10:21.800 --> 0:10:23.920 ways that are going to be key to the competition 0:10:23.960 --> 0:10:26.760 with the future, whether that's on data and technology, whether 0:10:26.800 --> 0:10:30.240 that's on on renewables, that we need to think about 0:10:30.280 --> 0:10:33.360 these questions much more broadly than we have traditionally. You 0:10:33.400 --> 0:10:35.080 and I and the tame We're gonna be talking about 0:10:35.120 --> 0:10:37.360 this for a long long time. Dan Castrod in their 0:10:37.520 --> 0:10:45.599 Foreign Affairs editor Greater catch up with you, sir, to 0:10:45.760 --> 0:10:50.560 make care Morgan standing Investment Management, fixed income portfolio manager, Jim, 0:10:50.640 --> 0:10:53.520 let's start with credit, shall weight some of these companies? 0:10:53.960 --> 0:10:56.240 Some of this universe is actually stronger than it was 0:10:56.280 --> 0:10:58.960 twelve months ago, Jim. Some people struggle to see that. 0:10:59.000 --> 0:11:01.560 Can you just explain it for for us? Yeah, it's 0:11:01.559 --> 0:11:04.360 all about cash flow, right, So effectively, what people were 0:11:04.400 --> 0:11:06.520 able to do in the last twelve months is with 0:11:06.679 --> 0:11:08.840 rates so low in the aid of QI, is that 0:11:08.920 --> 0:11:11.680 many corporations were able to refinance their debt for longer 0:11:11.800 --> 0:11:14.400 terms and at lower interest rates. And we also have 0:11:14.440 --> 0:11:18.240 to recognize is that as the economy recovers, you get 0:11:18.240 --> 0:11:21.079 this cash flow that starts to come back into the market. 0:11:21.280 --> 0:11:23.559 That cash flow for a bond investor is key because 0:11:23.559 --> 0:11:26.840 that's what's going to keep default risk down. So as 0:11:26.960 --> 0:11:30.040 the economy is growing and we expected to grow this year, 0:11:30.120 --> 0:11:32.680 next year, in in the year following, and as that 0:11:32.760 --> 0:11:35.400 cash flow stays very very positive, and as long as 0:11:35.440 --> 0:11:39.480 we don't expect interest rates to rise substantially consistently over 0:11:39.520 --> 0:11:42.360 the next several years, and that means that the refinancing 0:11:42.440 --> 0:11:44.880 risk of all the debt that they've taken on is 0:11:44.920 --> 0:11:46.960 still going to come at a very very low rate. 0:11:47.080 --> 0:11:49.800 And right now spreads are tight, as you've been pointing out, 0:11:50.000 --> 0:11:52.280 and as long as that doesn't widen so much, it 0:11:52.400 --> 0:11:56.960 basically sets up for um better interest coverage rates, meaning 0:11:57.240 --> 0:12:00.319 the amount of payment that you have to pay on 0:12:00.360 --> 0:12:03.080 the debt that you have outstanding. So they'll start to 0:12:03.080 --> 0:12:06.240 look better, especially with the backdrop of an expectation of 0:12:06.240 --> 0:12:09.320 a better and growing economy with more positive cash flow. 0:12:09.440 --> 0:12:11.240 So that's why credits doing well. Jim, I want you 0:12:11.280 --> 0:12:14.320 to synthesize the x X as it's HSBC on it today. 0:12:14.440 --> 0:12:17.200 Rollen Center has been great, man Hornbox has been great, etcetera. 0:12:17.440 --> 0:12:20.480 I want you to synthesize the game of guessing the 0:12:20.520 --> 0:12:23.320 win of this and the duration of some of these 0:12:23.760 --> 0:12:27.320 arguments about we're gonna see higher yields, we're gonna see 0:12:27.360 --> 0:12:31.079 lower yields. How's the x X is playing well? The 0:12:31.320 --> 0:12:33.160 way that I think about it is that the tails 0:12:33.240 --> 0:12:37.000 are fat on both sides, so effectively, Yes, we have 0:12:37.040 --> 0:12:39.400 a lot of monetary expansion and there could be some 0:12:39.440 --> 0:12:41.880 inflation risks and all of those risks have gone up 0:12:41.920 --> 0:12:44.440 because of what we're doing. But on the other side 0:12:44.480 --> 0:12:46.520 of that, what we have to question is that have 0:12:46.720 --> 0:12:50.800 things structurally really changed where we were prior to the pandemic? 0:12:51.320 --> 0:12:54.040 Is that we had structural disinflation, and the reason why 0:12:54.080 --> 0:12:57.040 is that we had aging population, which is demographics, We 0:12:57.080 --> 0:12:59.679 had technology and all the other factors that have been 0:12:59.720 --> 0:13:02.679 pushed prices lower. Has that just magically gone away as 0:13:02.720 --> 0:13:06.480 the aging population has the technology and everything else. Is 0:13:06.520 --> 0:13:09.000 that really gone at this point? And if the answer 0:13:09.040 --> 0:13:12.079 to that is no, then those structural factors are going 0:13:12.120 --> 0:13:15.719 to reassert themselves and do at least keep yields from 0:13:15.840 --> 0:13:20.120 rising out of control. Or excessively high. Now, if we 0:13:20.200 --> 0:13:22.400 start to get you know, over the next twelve months, 0:13:22.440 --> 0:13:24.840 if the data starts to you know, slow down, which 0:13:24.840 --> 0:13:26.800 we do think the rate of growth will start to 0:13:26.800 --> 0:13:30.040 slow down over the next twelve months, but still stay positive, 0:13:30.440 --> 0:13:34.920 will it be enough to generate consistent de anchored inflation. 0:13:35.200 --> 0:13:37.320 And that's the question that we have to ask ourselves. 0:13:37.360 --> 0:13:39.880 It's not is inflation a risk, Yes, it's a risk. 0:13:39.880 --> 0:13:42.480 It's always a risk. Can rates go up, sure? But 0:13:42.720 --> 0:13:46.040 is inflation becoming de anchored where we expect growth rate 0:13:46.080 --> 0:13:50.640 of prices to consistently move higher over this year, next year, 0:13:50.679 --> 0:13:51.959 or the year after, the year after that, in the 0:13:52.040 --> 0:13:54.720 year after that, And once that gets ingrained in psychology, 0:13:54.760 --> 0:13:57.520 one can think that, you know, yields could stay high. 0:13:57.520 --> 0:14:00.439 But until that starts to happen, I still think that 0:14:00.480 --> 0:14:04.280 we're in a relatively low yielding environment. And I can't 0:14:04.320 --> 0:14:07.079 dismiss a tale of two percent move in the tenure Treasury, 0:14:07.080 --> 0:14:10.720 and I can't dismiss a tale of something closer to either. 0:14:11.000 --> 0:14:13.280 It really just depends on how all of this unfolds. 0:14:13.440 --> 0:14:15.720 And Jim, that's the great story, going back to the 0:14:15.720 --> 0:14:18.240 credit story, and I'm really glad that John brought up Netflix. 0:14:18.480 --> 0:14:21.040 It's a great story and frankly it has survived and 0:14:21.120 --> 0:14:23.960 thrived during the pandemic. There are also the stories of 0:14:24.040 --> 0:14:26.040 United Air, which came out yesterday and said it would 0:14:26.040 --> 0:14:29.520 stop losing money only when business and international travel recovered 0:14:29.560 --> 0:14:32.240 to sixty of where it was back in two thousand 0:14:32.240 --> 0:14:34.600 and nine, team, which seems like a tall feat given 0:14:34.640 --> 0:14:38.680 the pace of vaccinations. Would you say, overall, on average, 0:14:38.720 --> 0:14:41.320 the majority of companies have a better balance sheet now 0:14:41.360 --> 0:14:44.200 than pre pandemic is at fifty fifty. How is the 0:14:44.240 --> 0:14:47.640 overall profile based on where it used to be? I 0:14:47.640 --> 0:14:50.240 think it's just like you said, it's very idiosyncratic, right, 0:14:50.280 --> 0:14:51.760 So it depends, you know, if you're looking at the 0:14:51.760 --> 0:14:53.880 cruise lines, if you're looking at the airlines, you're looking 0:14:53.880 --> 0:14:57.120 at some very very specific, uh, sectors of the economy 0:14:57.120 --> 0:14:59.840 that we're very very hard hit by the pandemic. When 0:14:59.840 --> 0:15:01.920 you look at say the broader industrials, when you look 0:15:01.960 --> 0:15:04.600 at say paper packaging, when you look at other areas, 0:15:04.920 --> 0:15:07.120 we could even look at leisure, all of these areas 0:15:07.280 --> 0:15:10.440 can start to actually get um, you know, better balance 0:15:10.440 --> 0:15:13.080 sheets to extent that they have been able to. Many 0:15:13.120 --> 0:15:16.920 companies have been able to refinance their debt for longer 0:15:17.040 --> 0:15:20.040 terms and at lower interest rates. So in that sense, 0:15:20.080 --> 0:15:22.400 there there there's a cohort of companies that are out 0:15:22.440 --> 0:15:25.280 there that do have stronger looking balance sheets, and that's 0:15:25.320 --> 0:15:27.520 mainly in the investment grade sectors. And I would say 0:15:27.520 --> 0:15:30.240 that many of the financials actually have come out looking 0:15:30.640 --> 0:15:33.200 like they have a lot stronger balance sheets. But then 0:15:33.200 --> 0:15:36.120 there are other sectors still, like the reopening sectors, that 0:15:36.200 --> 0:15:38.120 the sectors that get the hardest hits. So these are 0:15:38.600 --> 0:15:40.560 as you pointed out, the airlines and some of the 0:15:40.600 --> 0:15:43.640 cruise lines and things of that nature, that you know 0:15:43.760 --> 0:15:47.280 that's really going to depend on the vaccine, the rollout, 0:15:47.320 --> 0:15:49.880 how quickly that happens, how quickly people are willing to 0:15:49.920 --> 0:15:52.440 get back on an airplane and start traveling, which, by 0:15:52.480 --> 0:15:54.120 the way, I think will be pretty quick. I think 0:15:54.120 --> 0:15:56.440 the speed at which people return to that will be 0:15:56.480 --> 0:15:58.960 faster than most people think. Jim, it's gonna catch ups. 0:15:59.160 --> 0:16:01.600 As a wise Jim can Morgan Stanley Investment Management, Fixing 0:16:01.680 --> 0:16:10.640 comport Folio manage it right now? And this is a joy. 0:16:10.720 --> 0:16:13.960 Benjamin Laidler not only has done it once twice, but 0:16:14.120 --> 0:16:17.240 indeed three times in a row. He's made a major 0:16:17.320 --> 0:16:21.680 bullmarket call and been right, right right, holding cord at 0:16:21.840 --> 0:16:25.680 hsb C for years and then onto a different projects. 0:16:25.720 --> 0:16:27.880 We are thrilled that Ben Laidler gives us a first 0:16:27.960 --> 0:16:32.600 interview with eat Toro Yanny s. He is Israeli operation. 0:16:32.840 --> 0:16:35.160 It is big in digital and moving over to the 0:16:35.160 --> 0:16:39.000 equity markets, and Mr Laidler will provide global market strategy 0:16:39.080 --> 0:16:43.960 for uh TOROL. Ben Laidler, can you reaffirmed now you're 0:16:44.240 --> 0:16:52.000 very lonely double digit equity return for two thousand twenty one? Yeah, 0:16:52.000 --> 0:16:54.800 I think. Sorry, I don't think it's a forecast anymore though, 0:16:54.840 --> 0:16:56.840 I mean we're up for the year, so I think 0:16:56.840 --> 0:17:00.960 it's really a question so hanging onto what we've got when, 0:17:01.040 --> 0:17:04.600 which is is going to be you know, pretty historic, right, 0:17:04.640 --> 0:17:07.240 I mean we've had I think only twice in the 0:17:07.280 --> 0:17:09.280 last fifty years if we had this sort of three 0:17:09.359 --> 0:17:13.120 in a row strong equity markets. So yes, I think 0:17:13.119 --> 0:17:15.600 we do. Valuations are very high, but I think earnings 0:17:15.600 --> 0:17:18.760 are just going to keep keep surprising. I think first quarter, 0:17:18.800 --> 0:17:20.600 which we're obviously in the middle of reporting right now, 0:17:20.720 --> 0:17:23.240 is going to be um, you know, the latest, I think. 0:17:23.240 --> 0:17:25.480 But I still think with these sort of top line 0:17:25.480 --> 0:17:28.600 growth numbers being revised up and all this operating leverage 0:17:28.960 --> 0:17:31.240 that this earning story is going to keep is going 0:17:31.280 --> 0:17:34.080 to keep delivering, and that I think really is um 0:17:34.119 --> 0:17:36.920 you know, the fact the foundation here, given the Laidler 0:17:37.080 --> 0:17:40.840 bull market, what is your experience or guestimate of what 0:17:40.920 --> 0:17:44.280 they will do with all that cash. We're already seeing 0:17:44.400 --> 0:17:47.119 buy backs being the flavor, the favor of the moment, 0:17:47.280 --> 0:17:51.680 flavor of the moment. Yeah, I think you're going to 0:17:51.720 --> 0:17:54.680 see more of frankly everything right. I mean you're seeing 0:17:54.680 --> 0:17:56.920 more buy backs, You're seeing more dividends. I mean sort 0:17:56.920 --> 0:17:59.560 of dividend and buy back strategies have you know, recovered 0:17:59.560 --> 0:18:02.360 from beginning to recover from how badly they did last year. 0:18:03.080 --> 0:18:04.240 You know, you're going to see a pick up in 0:18:04.240 --> 0:18:06.560 CAPEX as well, which I think is really important to 0:18:06.600 --> 0:18:08.400 keep an eye on because I think, you know, we're 0:18:08.400 --> 0:18:10.359 talking a lot about this year, but really what we 0:18:10.359 --> 0:18:13.480 should be caring about is what next year begins to 0:18:13.520 --> 0:18:16.320 look like. Right, I mean consensus ove percent early go 0:18:16.440 --> 0:18:18.560 for next year that seems a little bit pedestrian compared 0:18:18.600 --> 0:18:20.199 to this year. You know, we want to see more 0:18:20.280 --> 0:18:23.560 than that. If if this rally is really going to continue, 0:18:23.760 --> 0:18:25.720 and I think CAPEX is going to be you know, 0:18:25.880 --> 0:18:27.399 capex is going to be an important part of that. 0:18:27.440 --> 0:18:30.439 And I think how consumers sort of spend down this 0:18:30.520 --> 0:18:34.200 sort of sort of access savings they have right now, Ben, 0:18:34.240 --> 0:18:36.840 you've been a stock bull. You have been right again 0:18:37.000 --> 0:18:39.639 and again. There is a question out in markets right 0:18:39.680 --> 0:18:42.120 now of whether a one point six percent treasury yields 0:18:42.160 --> 0:18:46.000 and the tenure is incoherent with the optimism that we're 0:18:46.000 --> 0:18:51.119 seeing in stocks. Well, I guess there's ten years of 0:18:51.160 --> 0:18:53.600 inflation history that or you know, or thirty years of 0:18:53.600 --> 0:18:55.840 sort of bullmarket history that would sort of argue against that. 0:18:55.920 --> 0:18:58.040 But you know, to your point, I mean, I think 0:18:58.040 --> 0:19:01.000 bond yields are going to go up. I think, you know, 0:19:01.080 --> 0:19:03.200 one of the reasons I think markets are so resilient 0:19:03.359 --> 0:19:05.720 is we've just been hugely stress tested here right with 0:19:05.800 --> 0:19:08.479 this bondy or tantrum um and and sort of markets 0:19:08.480 --> 0:19:10.760 sort of survived. So I think bond yields are going up. 0:19:10.800 --> 0:19:13.600 I think equities can survive that as long as it's 0:19:13.600 --> 0:19:16.359 sort of a moderate rise for the right reasons. I 0:19:16.680 --> 0:19:19.640 you know, growth at growth expectations continue to move higher 0:19:19.640 --> 0:19:22.080 and I fully expect that to be the case. And 0:19:21.920 --> 0:19:24.919 and just more broadly, um, you know, bondy yields are important, 0:19:24.960 --> 0:19:27.040 but it's not just about bond yields, right, I mean, 0:19:27.080 --> 0:19:29.959 bondy yields were at one point nine percent, you know, 0:19:30.040 --> 0:19:32.720 coming into last year, and markets were fine with that. 0:19:33.240 --> 0:19:35.840 And you know, bondy yields are zero or negative and 0:19:35.880 --> 0:19:37.760 the rest of the world and that's not helping their 0:19:37.760 --> 0:19:40.719 equity markets. So you know, bondyles are important, but you know, 0:19:40.720 --> 0:19:42.639 there's a lot more to that, corporate profitability and the 0:19:42.640 --> 0:19:45.600 earnings recovery, all of which I think is is very 0:19:45.680 --> 0:19:48.639 very healthy here. Corporate profitability and earnings potential. Is that 0:19:48.760 --> 0:19:51.560 isolated to the United States? Are you seeing the opportunity 0:19:51.600 --> 0:19:56.920 set shift to Europe or perhaps even beyond? Absolutely? I 0:19:56.960 --> 0:19:59.600 think this we've been in this sort of global rotation trade. 0:19:59.640 --> 0:20:01.520 I mean, it's arted off with China, so first in 0:20:01.600 --> 0:20:04.160 first out, you know, best performing major market last year. 0:20:04.440 --> 0:20:07.000