1 00:00:09,840 --> 00:00:12,960 Speaker 1: Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,360 Speaker 1: Bloomberg dot com, and of course on the Bloomberg, on 5 00:00:27,360 --> 00:00:30,000 Speaker 1: Bloomberg Television and on radio on police to say, it's 6 00:00:30,000 --> 00:00:33,159 Speaker 1: an Ay cud Low National Economic Council Director, Larry. I 7 00:00:33,200 --> 00:00:36,200 Speaker 1: appreciate your time this morning, sir, so thank you. Let's 8 00:00:36,200 --> 00:00:39,680 Speaker 1: start with that stimulus conversation, the latest update, please, Larry, 9 00:00:39,720 --> 00:00:44,080 Speaker 1: where are we well? The ball is not moving much 10 00:00:44,200 --> 00:00:46,960 Speaker 1: right now. I mean, the two sides are still talking 11 00:00:47,800 --> 00:00:51,080 Speaker 1: and the committee chairs in the Senate and House, the 12 00:00:51,120 --> 00:00:56,279 Speaker 1: relevant committees, they're talking on a lot of these issues appropriations, 13 00:00:56,320 --> 00:00:58,920 Speaker 1: small business, banking and so forth and so on. So 14 00:00:59,600 --> 00:01:02,040 Speaker 1: there's a that's a good thing. On the other hand, 15 00:01:02,080 --> 00:01:05,959 Speaker 1: there's still policy issues that divide the two times the 16 00:01:06,000 --> 00:01:09,959 Speaker 1: two teams. UM President mentioned some of them last night. Uh, 17 00:01:10,120 --> 00:01:12,959 Speaker 1: he doesn't want to bail out poorly run states and 18 00:01:13,000 --> 00:01:16,120 Speaker 1: local governments and their pension funds and so forth, So 19 00:01:16,200 --> 00:01:20,600 Speaker 1: that's an issue. There are other policy issues that remain unresolved. 20 00:01:20,959 --> 00:01:23,759 Speaker 1: So it's very difficult. The clock is taking, as you know, 21 00:01:24,560 --> 00:01:28,039 Speaker 1: be very difficult. Um, even if you had a deal 22 00:01:28,120 --> 00:01:30,560 Speaker 1: the next few days, you've got to go through the 23 00:01:30,600 --> 00:01:32,840 Speaker 1: committee print and then you've got to have votes in 24 00:01:32,880 --> 00:01:35,200 Speaker 1: the House and the Senate. So it's not gonna be easy. 25 00:01:35,400 --> 00:01:38,039 Speaker 1: I don't want to predict anything. I'm just saying, Uh, 26 00:01:38,080 --> 00:01:41,520 Speaker 1: there's more agreement than there was a while back. There 27 00:01:41,520 --> 00:01:47,119 Speaker 1: are still policy disagreements, UM, some numerical disagreements. So we'll 28 00:01:47,120 --> 00:01:50,120 Speaker 1: see it's still up for grabs. Well, let's stop with 29 00:01:50,160 --> 00:01:53,520 Speaker 1: numerical then we get to substance, Larry, what numerical disagreement 30 00:01:53,560 --> 00:01:59,520 Speaker 1: is the right now? Well, I think that in specific areas. 31 00:01:59,600 --> 00:02:02,520 Speaker 1: I mean, I'm not going to get involved in negotiating 32 00:02:02,840 --> 00:02:08,679 Speaker 1: Jonathan this morning, but in specific areas there are numerical issues. Now. 33 00:02:08,720 --> 00:02:13,520 Speaker 1: President Trump, for example, has said, for let's say the checks, 34 00:02:13,840 --> 00:02:17,800 Speaker 1: the mailed out checks for economic assistance. Uh, he's willing 35 00:02:17,840 --> 00:02:20,880 Speaker 1: to bid higher on that. He has no problem. Uh, 36 00:02:20,960 --> 00:02:23,119 Speaker 1: he's willing to go with P p P for these 37 00:02:23,160 --> 00:02:27,760 Speaker 1: small businesses, Uh, no problem. He's willing to help the airlines, 38 00:02:28,400 --> 00:02:32,000 Speaker 1: no problem on that score. He's always been willing to 39 00:02:32,040 --> 00:02:35,400 Speaker 1: do these things. He's willing to help the schools as 40 00:02:35,440 --> 00:02:39,440 Speaker 1: they of course transition and renovate, to make school openings 41 00:02:39,840 --> 00:02:42,960 Speaker 1: UH safe and you know, cover the health guidelines. He's 42 00:02:42,960 --> 00:02:45,480 Speaker 1: willing to do that. He's not willing, though, to pour 43 00:02:45,600 --> 00:02:51,560 Speaker 1: lots of money into various healthcare schemes that might benefit 44 00:02:51,600 --> 00:02:54,360 Speaker 1: folks who are not US citizens. He has a big 45 00:02:54,400 --> 00:02:57,400 Speaker 1: problem with that. I just mentioned some of the state 46 00:02:57,400 --> 00:03:00,919 Speaker 1: and local issues and the pension issue, and there are 47 00:03:01,000 --> 00:03:04,440 Speaker 1: other issues at stake. UM. One thing that's interesting that's 48 00:03:04,480 --> 00:03:08,840 Speaker 1: come up UM in the in the Munition Secretary munition 49 00:03:08,960 --> 00:03:13,200 Speaker 1: proposal called the Republican Proposal. We are very much we're 50 00:03:13,320 --> 00:03:17,640 Speaker 1: keen on on shoring for all kinds of supply chains, 51 00:03:17,680 --> 00:03:22,280 Speaker 1: including pharmaceuticals and related equipment. That's very dar and important, 52 00:03:22,639 --> 00:03:25,799 Speaker 1: and we would like to reward companies that either come 53 00:03:25,840 --> 00:03:28,280 Speaker 1: to the US for the first time or moved back 54 00:03:28,360 --> 00:03:32,120 Speaker 1: from China or wherever. So we proposed investment tax credits. 55 00:03:32,240 --> 00:03:36,080 Speaker 1: Apparently the other side doesn't like that. We've also proposed 56 00:03:36,080 --> 00:03:42,040 Speaker 1: deductions for restaurant meals and other forms of hospitality and entertainment. 57 00:03:42,160 --> 00:03:45,720 Speaker 1: Apparently the numbers there are sticking points, so I can't 58 00:03:45,760 --> 00:03:49,080 Speaker 1: go through the entire list. I'm just gonna say, still issues. 59 00:03:50,360 --> 00:03:52,280 Speaker 1: I think many people feel like we're just going around 60 00:03:52,280 --> 00:03:54,960 Speaker 1: in circles at the moment, Larryous, we drift towards the election. 61 00:03:55,200 --> 00:03:57,680 Speaker 1: One question that's being asked by by many, in fact, 62 00:03:57,760 --> 00:04:00,520 Speaker 1: is whether both sides are negotiating and good faith. Now, 63 00:04:00,640 --> 00:04:02,280 Speaker 1: of course you're not gonna say that about yourself, but 64 00:04:02,320 --> 00:04:03,720 Speaker 1: I do want to do you think the other side 65 00:04:03,760 --> 00:04:06,000 Speaker 1: is nicko shanning and good faith? Do you think speak 66 00:04:06,040 --> 00:04:08,480 Speaker 1: Speaker Pelosi is negoshanning and good faithful? Or is this 67 00:04:08,600 --> 00:04:12,720 Speaker 1: just political postering with Eleven Diace to go, Well, look, 68 00:04:13,280 --> 00:04:17,480 Speaker 1: I'm not a political analyst. Uh. I don't do personal stuff. 69 00:04:17,520 --> 00:04:20,480 Speaker 1: I can't get into everybody's said. I'm just gonna assume 70 00:04:20,960 --> 00:04:23,880 Speaker 1: that we've been at this since July or mid July, 71 00:04:24,600 --> 00:04:26,800 Speaker 1: that there is good faith at this point. I'm not 72 00:04:26,839 --> 00:04:30,800 Speaker 1: even sure what that means. Look, there's very hard headed, 73 00:04:31,200 --> 00:04:36,160 Speaker 1: experienced professional people engaged in the discussions. There are veterans, 74 00:04:36,279 --> 00:04:40,240 Speaker 1: all right. Speaker Pelosi is a veteran. UH. Mr Mnusian 75 00:04:40,520 --> 00:04:43,000 Speaker 1: is a terrific money man. He knows the budget story 76 00:04:43,279 --> 00:04:47,320 Speaker 1: up and down, including taxes. UH. Senator McConnell is a 77 00:04:47,480 --> 00:04:51,960 Speaker 1: very crafty, wiley veteran in these games. So they are engaged, 78 00:04:52,000 --> 00:04:55,360 Speaker 1: they are talking, Jonathan, and I will ascribe how about this, 79 00:04:55,720 --> 00:04:58,280 Speaker 1: I will ascribe good faith to all sides. I'm not 80 00:04:58,320 --> 00:05:00,599 Speaker 1: going to pick away on that. Let just see that 81 00:05:00,800 --> 00:05:04,760 Speaker 1: the President's done that for you. Sure. Well, Look the 82 00:05:04,760 --> 00:05:08,200 Speaker 1: President said yesterday evening Nancy Pelosi doesn't want to approve 83 00:05:08,240 --> 00:05:11,280 Speaker 1: anythink because she thinks it will help her politically. Not 84 00:05:11,360 --> 00:05:14,840 Speaker 1: too well. I'll leave that to the president. That's his view. 85 00:05:14,880 --> 00:05:17,479 Speaker 1: That's his view, and I don't have a I don't 86 00:05:17,480 --> 00:05:19,599 Speaker 1: have I'm a policy guy, Jonathan, I don't have a 87 00:05:19,680 --> 00:05:22,600 Speaker 1: view on that. I appreciate that. All I all I 88 00:05:22,640 --> 00:05:25,279 Speaker 1: want to say is this. We are in a very 89 00:05:25,360 --> 00:05:28,520 Speaker 1: very strong recovery. The v shape recovery is coming on 90 00:05:28,920 --> 00:05:32,360 Speaker 1: very strong. We had phenomenal numbers yesterday on following on 91 00:05:32,480 --> 00:05:37,720 Speaker 1: employment clients and rising existing home sales um. But there 92 00:05:37,720 --> 00:05:41,120 Speaker 1: are areas of this economy that could benefit from assistance. 93 00:05:41,440 --> 00:05:45,000 Speaker 1: I acknowledge that I don't think the recovery depends on assistance, 94 00:05:45,320 --> 00:05:49,600 Speaker 1: but the p PP lending for small businesses would be 95 00:05:49,760 --> 00:05:53,279 Speaker 1: very helpful. UH. President Trump took the lead awhile back 96 00:05:53,520 --> 00:05:58,680 Speaker 1: on providing UH federal unemployment assistance by an executive order 97 00:05:59,080 --> 00:06:01,160 Speaker 1: with a plus am the states. It would be very 98 00:06:01,240 --> 00:06:05,200 Speaker 1: helpful if Congress appropriated that in some form a way. 99 00:06:05,360 --> 00:06:09,560 Speaker 1: There's unspent funds all over the place from last Springs Bill. 100 00:06:10,360 --> 00:06:14,280 Speaker 1: Why not repurpose that and legislated put it in you know, codified. 101 00:06:14,520 --> 00:06:17,359 Speaker 1: It's not forever. It might be three months or six months. 102 00:06:17,400 --> 00:06:20,679 Speaker 1: That could help Americans. We need the airlines. That could 103 00:06:20,680 --> 00:06:24,360 Speaker 1: help the economy, put people back to work, get kids 104 00:06:24,360 --> 00:06:27,599 Speaker 1: back to school. So I just, you know, sometimes thinks 105 00:06:27,760 --> 00:06:32,320 Speaker 1: instead of these two thousand page bills with gargan numbers, 106 00:06:32,600 --> 00:06:37,039 Speaker 1: why not just have you know, separate votes on specific items. 107 00:06:37,080 --> 00:06:41,920 Speaker 1: That's the way appropriations used to be many decades. I 108 00:06:41,920 --> 00:06:43,800 Speaker 1: have to have to say, you sound a lot more 109 00:06:43,839 --> 00:06:46,400 Speaker 1: like a Senate Republican than you do a member of 110 00:06:46,400 --> 00:06:49,479 Speaker 1: this administration, because that sounds like the position of Leader 111 00:06:49,560 --> 00:06:52,599 Speaker 1: McConnell when you say the V shaped economy is coming 112 00:06:52,640 --> 00:06:55,839 Speaker 1: on very strong. If I'm a Senate Republican right now, 113 00:06:56,160 --> 00:06:58,680 Speaker 1: I'm wondering, Okay, if marries right, why do we need 114 00:06:58,720 --> 00:07:01,120 Speaker 1: a two trillion dollar package? The V shaped recovery is 115 00:07:01,120 --> 00:07:06,159 Speaker 1: coming along very strong? Why do we well, let me say. 116 00:07:06,440 --> 00:07:10,080 Speaker 1: I have many many friends amongst center Republicans, and I 117 00:07:10,160 --> 00:07:13,280 Speaker 1: speak at their breakfast at lunches all the time. But 118 00:07:13,440 --> 00:07:17,040 Speaker 1: I am uh the NYC director for President Trump, who 119 00:07:17,120 --> 00:07:20,200 Speaker 1: has given me a great opportunity, uh, and I'm doing 120 00:07:20,240 --> 00:07:22,680 Speaker 1: my best to help him out on all these issues. 121 00:07:22,920 --> 00:07:26,120 Speaker 1: So don't don't suggest that I'm on one side for another. 122 00:07:26,360 --> 00:07:30,160 Speaker 1: By the way, well, Larry, you give me just the 123 00:07:30,160 --> 00:07:34,120 Speaker 1: president's position, and at the moment, there is no deal 124 00:07:34,160 --> 00:07:37,480 Speaker 1: life between the president's position. In mind, I support him entirely. 125 00:07:37,520 --> 00:07:41,160 Speaker 1: I'm giving you his thoughts on why the numbers don't 126 00:07:41,160 --> 00:07:44,080 Speaker 1: add up and why these policies don't yet work. That's 127 00:07:44,120 --> 00:07:46,160 Speaker 1: the best I can do. I'm not going to predict 128 00:07:46,160 --> 00:07:49,840 Speaker 1: an outcomes, Ouathan, Yes, maybe no, maybe. I mean, I'm 129 00:07:49,880 --> 00:07:51,720 Speaker 1: not here to do that. I just give you a 130 00:07:51,800 --> 00:07:55,800 Speaker 1: lay of the land, and I appreciate you doing that. 131 00:07:55,880 --> 00:07:57,680 Speaker 1: Did lead the McConnell's how the White House not to 132 00:07:57,720 --> 00:08:01,320 Speaker 1: accept a deal, I I am not aware of that. 133 00:08:01,560 --> 00:08:05,080 Speaker 1: I am not aware of that, because reportedly he told 134 00:08:05,120 --> 00:08:07,720 Speaker 1: colleagues that he had told the White House to exactly that, 135 00:08:07,800 --> 00:08:10,920 Speaker 1: not to accept the deal. The president seems to according 136 00:08:10,920 --> 00:08:13,240 Speaker 1: to Chief of Staff Mark Meadows that he can lean 137 00:08:13,280 --> 00:08:15,960 Speaker 1: on Senate Republicans, and from where I'm sitting and where 138 00:08:15,960 --> 00:08:17,920 Speaker 1: others are as well, it doesn't seem to be any 139 00:08:17,920 --> 00:08:19,960 Speaker 1: evidence of that, Larry, Why the confidence that you can 140 00:08:20,040 --> 00:08:23,400 Speaker 1: lean on Senate Republicans to possibile that big What I've 141 00:08:23,400 --> 00:08:28,160 Speaker 1: heard from the President we are a long meeting Wednesday. 142 00:08:29,160 --> 00:08:32,440 Speaker 1: What I've heard from Chief Meadows and what I've heard 143 00:08:32,480 --> 00:08:39,800 Speaker 1: from Secretary Minution is that Leader McConnell and the GOP 144 00:08:40,120 --> 00:08:44,960 Speaker 1: conference in this Senate would be willing to support a 145 00:08:45,120 --> 00:08:51,560 Speaker 1: bill as long as it is a genuinely by partisan 146 00:08:51,679 --> 00:08:56,280 Speaker 1: bill and that their asks are included. For example, we 147 00:08:56,360 --> 00:09:01,640 Speaker 1: haven't talked about liability insurance. That is a controversial matter 148 00:09:02,000 --> 00:09:05,480 Speaker 1: with the House team, but it's an important key ask 149 00:09:05,840 --> 00:09:10,000 Speaker 1: for the Senate Republicans. If there's a genuinely bipartisan bill. 150 00:09:10,720 --> 00:09:13,640 Speaker 1: Leader McConnell has said, uh, and I've heard it from 151 00:09:13,640 --> 00:09:17,760 Speaker 1: the President Mark Meadows notion, Um, they go along with it. 152 00:09:17,880 --> 00:09:20,240 Speaker 1: So I'll just leave it there. I can't speak for once, 153 00:09:20,280 --> 00:09:22,880 Speaker 1: I can't speak for Mr McConnell, but I'm just saying 154 00:09:22,960 --> 00:09:27,240 Speaker 1: that's what i've heard onlinability protection. Have you made any 155 00:09:27,240 --> 00:09:32,200 Speaker 1: progress whatsoever in the last month with House Democrats. Jonathan, 156 00:09:32,280 --> 00:09:34,520 Speaker 1: I'm not going to get involved in that sort of thing. 157 00:09:34,800 --> 00:09:37,080 Speaker 1: You know. I can't do that. I'm not gonna again. 158 00:09:37,120 --> 00:09:39,040 Speaker 1: We not, Larry. I mean, you've you've given me enough 159 00:09:39,160 --> 00:09:41,240 Speaker 1: information so far on how the talks are going. I'm 160 00:09:41,240 --> 00:09:43,160 Speaker 1: just trying to work out whether you've made any progress 161 00:09:43,160 --> 00:09:44,720 Speaker 1: on that particular topic. And it seems to be a 162 00:09:44,760 --> 00:09:48,600 Speaker 1: huge sticking point for negotiations. Because you're such a great 163 00:09:48,679 --> 00:09:51,240 Speaker 1: journalist and I'd love to give you as much information 164 00:09:51,280 --> 00:09:56,920 Speaker 1: as possible, but I cannot include you in the negotiations. Larry, 165 00:09:56,960 --> 00:09:59,400 Speaker 1: what's the plan? B Once you walk away, You've seen 166 00:09:59,400 --> 00:10:02,679 Speaker 1: this a million times. At some point you realize nothing 167 00:10:02,679 --> 00:10:07,960 Speaker 1: gets done. Well, look, we have an election in what 168 00:10:08,200 --> 00:10:12,640 Speaker 1: eleven days? Yeah, the clock is ticking. The clock is ticking. 169 00:10:13,400 --> 00:10:18,440 Speaker 1: I mean, just mechanically, mechanically, it takes a while. You've 170 00:10:18,480 --> 00:10:22,120 Speaker 1: got to vote in both houses. You might have to 171 00:10:22,160 --> 00:10:24,840 Speaker 1: have a conference vote. Now, that could be done fast, 172 00:10:24,920 --> 00:10:27,679 Speaker 1: but you know, we take it there too. Just writing 173 00:10:27,800 --> 00:10:31,840 Speaker 1: up the legislative print of a two thousand plus page 174 00:10:31,880 --> 00:10:35,320 Speaker 1: bill takes time. And then you have the issue of 175 00:10:35,360 --> 00:10:41,559 Speaker 1: the operational executions. All right, Uh, I don't know that 176 00:10:41,559 --> 00:10:46,760 Speaker 1: that could be done, mailing checks, re engaging the lending 177 00:10:46,800 --> 00:10:50,920 Speaker 1: programs for small businesses. Um, we would do the best 178 00:10:51,000 --> 00:10:53,680 Speaker 1: we can. Secretary Munition did a heck of a job 179 00:10:53,800 --> 00:10:57,120 Speaker 1: last spring, but I don't know between now and the election, 180 00:10:57,800 --> 00:11:02,640 Speaker 1: So those are still dangling in the air. Well, Larry, 181 00:11:02,679 --> 00:11:04,040 Speaker 1: if you can't get it done now, and this is 182 00:11:04,080 --> 00:11:06,040 Speaker 1: my final question, you've given us so much time this morning, 183 00:11:06,040 --> 00:11:08,360 Speaker 1: and I appreciate that, thank you. It doesn't look like 184 00:11:08,360 --> 00:11:10,320 Speaker 1: you've made a lot of progress on state aid. It 185 00:11:10,320 --> 00:11:12,480 Speaker 1: doesn't look like you've made a lot of progression on 186 00:11:12,520 --> 00:11:15,280 Speaker 1: liability protections. You can't confirm or tonight that right now. 187 00:11:15,960 --> 00:11:17,800 Speaker 1: If you can't get us done in the next eleven days, 188 00:11:18,280 --> 00:11:23,079 Speaker 1: why would you be able to get this done before January. Well, 189 00:11:23,520 --> 00:11:26,400 Speaker 1: we're gonna take this a day at a time. The 190 00:11:26,400 --> 00:11:31,920 Speaker 1: election results well undoubtedly bear heavilyer on this. And remember, 191 00:11:31,920 --> 00:11:34,400 Speaker 1: of course, the Congress is still in session. There's a 192 00:11:34,400 --> 00:11:37,839 Speaker 1: so called lane duck session that will come up. You've 193 00:11:37,840 --> 00:11:41,400 Speaker 1: got a judicial vote coming I believe next week. With 194 00:11:41,480 --> 00:11:44,880 Speaker 1: respect him, Miss Barrett, highly qualified, terrific candidate for the 195 00:11:44,920 --> 00:11:50,400 Speaker 1: Supreme Court. So it's tricky business, and the clock is ticking, 196 00:11:50,520 --> 00:11:52,920 Speaker 1: so we will see. I don't want to make any predictions. 197 00:11:53,120 --> 00:11:56,400 Speaker 1: What I do know is this, Jonathan, the economy is 198 00:11:56,520 --> 00:12:01,319 Speaker 1: running faster and hotter than almost any but he thought possible. 199 00:12:01,559 --> 00:12:06,040 Speaker 1: And as President Trump said last night with great clarity, 200 00:12:06,120 --> 00:12:10,040 Speaker 1: he is not going to allow tax hikes or regulatory hikes. 201 00:12:10,080 --> 00:12:14,679 Speaker 1: He's for lowering taxes and regulation. He completely opposes a 202 00:12:14,840 --> 00:12:19,000 Speaker 1: government takeover of healthcare. He completely opposes an end to 203 00:12:19,120 --> 00:12:23,199 Speaker 1: oil and natural gas, which would be devastating for the economy. 204 00:12:23,480 --> 00:12:28,160 Speaker 1: You've got economists, distinguished economists at the Hoover Institute, Stanford, 205 00:12:28,280 --> 00:12:31,320 Speaker 1: who say those policy would lose ten percent of g 206 00:12:31,440 --> 00:12:35,480 Speaker 1: d P five million jobs. Middle class families with the 207 00:12:36,720 --> 00:12:40,400 Speaker 1: dollars their whole increase under Trump, which was a record increase. 208 00:12:40,800 --> 00:12:44,560 Speaker 1: That's what the president opposes. He doesn't see a dark winner. 209 00:12:45,160 --> 00:12:50,440 Speaker 1: He's he's an optimistic recovery and prosperity. Uh. The other 210 00:12:50,520 --> 00:12:54,120 Speaker 1: team looks to me like very pessimism and a stagnation, 211 00:12:54,640 --> 00:12:58,680 Speaker 1: uh decline scenario. Those came out in the debate last night, 212 00:12:58,880 --> 00:13:01,800 Speaker 1: and I think that it's gonna bear heavily on November 213 00:13:01,800 --> 00:13:05,160 Speaker 1: as results. Larry, if I was leading McConnell right now, 214 00:13:05,200 --> 00:13:07,360 Speaker 1: here and you talk about the hot economy, I'd be 215 00:13:07,400 --> 00:13:09,480 Speaker 1: asking why on earth do we need a two trillion 216 00:13:09,520 --> 00:13:11,680 Speaker 1: dollar package. Larry, It's great to catch up with you 217 00:13:11,880 --> 00:13:13,599 Speaker 1: as always, and I appreciate your time this morning and 218 00:13:13,600 --> 00:13:16,360 Speaker 1: hopefully we can catch up on payrolls Friday after the election. 219 00:13:16,400 --> 00:13:20,360 Speaker 1: Sir Larry Catlo, National Economic Council Director, A special thanks, 220 00:13:20,360 --> 00:13:28,400 Speaker 1: of course, also to Bloomberg Radio listeners as well. So 221 00:13:28,480 --> 00:13:31,920 Speaker 1: if you have any interest in hydrocarbons, any interest in 222 00:13:31,960 --> 00:13:34,880 Speaker 1: the future of this great debate, not out to November, 223 00:13:34,960 --> 00:13:38,080 Speaker 1: not out of the inauguration, but how about ten years, 224 00:13:38,480 --> 00:13:41,400 Speaker 1: we have the correct guest for good conversation. We rip 225 00:13:41,480 --> 00:13:44,080 Speaker 1: up the script with left Sony best Laws of course 226 00:13:44,120 --> 00:13:47,360 Speaker 1: Wall Street we contributor and truly one of the world's 227 00:13:47,440 --> 00:13:51,360 Speaker 1: experts on natural guests dynamics as well. SONA thank you 228 00:13:51,400 --> 00:13:55,440 Speaker 1: so much for joining us. What is the political economics 229 00:13:55,480 --> 00:13:59,240 Speaker 1: of the less oil? These two candidates were talking about? 230 00:13:59,600 --> 00:14:05,560 Speaker 1: What is your timeline to What is really interesting is 231 00:14:05,640 --> 00:14:09,040 Speaker 1: that the candidates are talking about it, but the markets 232 00:14:09,080 --> 00:14:13,880 Speaker 1: are taking care of it themselves. You had the BPCO 233 00:14:14,120 --> 00:14:18,920 Speaker 1: on recently, and also the way the market is going 234 00:14:19,040 --> 00:14:22,440 Speaker 1: right now and the way people are behaving. Every utility 235 00:14:22,480 --> 00:14:26,800 Speaker 1: company is increasing the share of it's renewable energy within 236 00:14:27,040 --> 00:14:32,080 Speaker 1: its own energy um energy use. In the US, if 237 00:14:32,080 --> 00:14:37,320 Speaker 1: you go to Texas, the largest growth sector in energy 238 00:14:37,480 --> 00:14:41,720 Speaker 1: in Texas is in fact renewable energy, solar energy. You 239 00:14:41,840 --> 00:14:45,320 Speaker 1: go into the Middle East, the largest investments that are 240 00:14:45,320 --> 00:14:48,800 Speaker 1: going on in the Middle East in Saudi in u A, 241 00:14:49,440 --> 00:14:53,280 Speaker 1: in solar. So the point that is really interesting that 242 00:14:54,000 --> 00:14:57,080 Speaker 1: was missed last night was the fact that people are 243 00:14:57,120 --> 00:15:02,080 Speaker 1: already investing in solar or inac in Windsor. I was 244 00:15:02,120 --> 00:15:05,680 Speaker 1: in the Washington News Beer of Bloomberg with Spencer Abraham 245 00:15:05,840 --> 00:15:09,160 Speaker 1: long ago and far away our Secretary of Energy for 246 00:15:09,280 --> 00:15:13,160 Speaker 1: Bush the Younger, the day we discovered that America really 247 00:15:13,240 --> 00:15:18,200 Speaker 1: doesn't have a national oil policy. Do we need one? 248 00:15:20,040 --> 00:15:22,840 Speaker 1: You know, there there was a time when we needed 249 00:15:22,920 --> 00:15:27,280 Speaker 1: an oil policy and energy policy when energy was such 250 00:15:27,320 --> 00:15:30,200 Speaker 1: a huge part of the economy. Remember when we started, 251 00:15:30,280 --> 00:15:33,720 Speaker 1: you know, when we actually did have an energy policy 252 00:15:33,760 --> 00:15:36,960 Speaker 1: at one point, or we what we call energy policy, 253 00:15:37,200 --> 00:15:40,320 Speaker 1: was when energy was more like fifteen percent of the economy, 254 00:15:40,360 --> 00:15:44,680 Speaker 1: maybe ten percent. Today, the size of the energy sector, 255 00:15:44,840 --> 00:15:47,040 Speaker 1: which is really the mainly the oil and gas sector 256 00:15:47,480 --> 00:15:52,080 Speaker 1: in the US, is close to three, and so energy, 257 00:15:52,120 --> 00:15:55,280 Speaker 1: while being very important, is not where it was compared 258 00:15:55,320 --> 00:15:58,320 Speaker 1: to health sector, compared to technology, compared to the other 259 00:15:58,360 --> 00:16:01,720 Speaker 1: sectors that have been growing. So it's not that we 260 00:16:01,760 --> 00:16:04,880 Speaker 1: don't need energy to lubricate and to use our in 261 00:16:04,960 --> 00:16:09,400 Speaker 1: our in our parts and in our manufacturing, but it 262 00:16:09,680 --> 00:16:14,280 Speaker 1: is not exactly as important as it was at the 263 00:16:14,400 --> 00:16:17,600 Speaker 1: period that you're talking about, and when I started working 264 00:16:17,600 --> 00:16:21,360 Speaker 1: on energy in my career well after, let's talk about 265 00:16:21,360 --> 00:16:23,640 Speaker 1: where you think we're going. Right now, we're producing about 266 00:16:23,640 --> 00:16:26,400 Speaker 1: tamillion pounds of all a day in the United States. 267 00:16:26,400 --> 00:16:28,120 Speaker 1: What do you think the trajectory is of all of 268 00:16:28,120 --> 00:16:30,120 Speaker 1: this actually is over the next five to ten years. 269 00:16:31,720 --> 00:16:34,800 Speaker 1: I think, as Vice President Biden said, it is going 270 00:16:34,840 --> 00:16:37,440 Speaker 1: to be a transition. It has been a very slow transition. 271 00:16:37,560 --> 00:16:40,240 Speaker 1: When I started again working on this transition, it was 272 00:16:40,280 --> 00:16:43,720 Speaker 1: almost like twenty years ago, UM natural gas was taking 273 00:16:44,040 --> 00:16:46,320 Speaker 1: um a little bit more share from oil, but it 274 00:16:46,400 --> 00:16:49,080 Speaker 1: was pretty slow. As we've seen in the last two years, 275 00:16:49,120 --> 00:16:52,360 Speaker 1: natural gas has taken a bigger share from coal and oil, 276 00:16:52,800 --> 00:16:55,960 Speaker 1: and solar and wind are taking a bigger share from 277 00:16:56,000 --> 00:16:59,680 Speaker 1: everything else. So the transition could could be a while. 278 00:17:00,520 --> 00:17:04,600 Speaker 1: As you as we see the electric cars have been 279 00:17:04,640 --> 00:17:07,360 Speaker 1: a little bit slower to come to market. Tesla obviously 280 00:17:07,400 --> 00:17:11,240 Speaker 1: has been fabulous, and other cars are still having technical 281 00:17:11,240 --> 00:17:14,760 Speaker 1: problems when they come in. But if you look at 282 00:17:14,800 --> 00:17:18,199 Speaker 1: the economy moving forward, I would think that whether it 283 00:17:18,320 --> 00:17:21,280 Speaker 1: is ten years or fifteen years or twenty five years, 284 00:17:21,560 --> 00:17:25,520 Speaker 1: there will be a transition that with faster and faster 285 00:17:25,720 --> 00:17:29,199 Speaker 1: growth towards uneibles as the technology that is helping with 286 00:17:29,240 --> 00:17:33,560 Speaker 1: batteries help us move in that direction much faster. It's fun. 287 00:17:33,880 --> 00:17:38,520 Speaker 1: Has the pandemic accelerated that shift? You know, the pandemic 288 00:17:38,560 --> 00:17:40,879 Speaker 1: hasn't slowed it down the side. I think what is 289 00:17:40,920 --> 00:17:44,880 Speaker 1: really interesting is that oil and gas got slowed down 290 00:17:44,920 --> 00:17:48,480 Speaker 1: with the pandemic, right and generally the economy slowed down, 291 00:17:48,480 --> 00:17:51,240 Speaker 1: which meant that you were using energy less. In fact, 292 00:17:51,359 --> 00:17:53,879 Speaker 1: the President last night said that we have cleaned area, 293 00:17:53,880 --> 00:17:56,000 Speaker 1: and the reason is because our economy is not a 294 00:17:56,080 --> 00:17:59,000 Speaker 1: full capacity. Of course, air gets to be cleaner if 295 00:17:59,040 --> 00:18:01,760 Speaker 1: you're not drive in as much and not using your factories. 296 00:18:02,240 --> 00:18:08,000 Speaker 1: But but renewable energy investments have been going pretty close 297 00:18:08,040 --> 00:18:10,760 Speaker 1: to schedule, maybe delayed a little bit, but much faster 298 00:18:10,960 --> 00:18:13,199 Speaker 1: than the oil and gas investments that were in the 299 00:18:13,240 --> 00:18:17,520 Speaker 1: works before COVID. That's a lot of this begs the 300 00:18:17,600 --> 00:18:20,440 Speaker 1: question what we need the government to do here? If, 301 00:18:20,440 --> 00:18:22,639 Speaker 1: as you say, that private companies are heading in this 302 00:18:22,760 --> 00:18:27,679 Speaker 1: direction anyway, you know what the government could do is 303 00:18:27,840 --> 00:18:31,280 Speaker 1: we had some we had a lot of support for 304 00:18:31,400 --> 00:18:35,320 Speaker 1: cooling gas industry over the last twenty thirty years, and 305 00:18:35,359 --> 00:18:38,159 Speaker 1: if some of that could also move more into the 306 00:18:38,760 --> 00:18:41,320 Speaker 1: into the renewable energy, I think it would be really 307 00:18:41,359 --> 00:18:44,960 Speaker 1: really helpful. Also in terms of the government having clear 308 00:18:45,000 --> 00:18:51,199 Speaker 1: policies on on regulation and making it easier to invest 309 00:18:51,320 --> 00:18:56,480 Speaker 1: in infrastructure and in energy, particularly renewable energy, could make 310 00:18:56,480 --> 00:18:59,440 Speaker 1: it easier. As you know, the regulation that has had 311 00:18:59,480 --> 00:19:03,119 Speaker 1: been and the looked around solar energy has been very confusing. 312 00:19:03,400 --> 00:19:05,800 Speaker 1: It has been on off, on, off, on off, and 313 00:19:05,880 --> 00:19:08,960 Speaker 1: it has affected consumers. So having something that is clear 314 00:19:09,320 --> 00:19:13,439 Speaker 1: and long term would help the industry. Let's end on 315 00:19:13,480 --> 00:19:17,399 Speaker 1: infrastructure more broadly. Four years ago, after the election, the 316 00:19:17,440 --> 00:19:19,680 Speaker 1: Trump Trade, the so called Trump trade was all about 317 00:19:19,720 --> 00:19:23,440 Speaker 1: infrastructure spending. Wasn't just about tax cuts, It's all about 318 00:19:23,480 --> 00:19:26,479 Speaker 1: infrastructure spending. Then if started, it just did not happen. 319 00:19:27,240 --> 00:19:29,840 Speaker 1: Why does it not happen in America? Why can't we 320 00:19:29,880 --> 00:19:34,000 Speaker 1: make it happen. You know, I think, Um, it's interesting 321 00:19:34,040 --> 00:19:36,919 Speaker 1: because two thousand eight it did not happen either, Right, 322 00:19:37,000 --> 00:19:39,679 Speaker 1: there was a moment where we could have put some 323 00:19:39,760 --> 00:19:43,480 Speaker 1: of the money that came into the economy, um, into 324 00:19:43,560 --> 00:19:46,399 Speaker 1: the doctor. As you said, it didn't happen during the 325 00:19:46,480 --> 00:19:50,400 Speaker 1: last four years. I'm actually more optimistic Jonathan about the 326 00:19:50,440 --> 00:19:53,280 Speaker 1: next four years. I think this is a time where 327 00:19:53,359 --> 00:19:56,439 Speaker 1: post COVID. COVID has had a lot of physical and 328 00:19:56,520 --> 00:19:59,280 Speaker 1: psychological impact on people, but this might be the time 329 00:19:59,320 --> 00:20:03,840 Speaker 1: where in fact, you have industry, you have the financial sector, 330 00:20:03,960 --> 00:20:07,560 Speaker 1: and you have the government coming together to build infrastructure. 331 00:20:08,040 --> 00:20:10,399 Speaker 1: And I think that some of the delays we could 332 00:20:10,600 --> 00:20:15,120 Speaker 1: blame on on all kinds of things, but the biggest 333 00:20:15,160 --> 00:20:19,239 Speaker 1: problems about infrastructure in our country is that, you know, 334 00:20:19,320 --> 00:20:22,520 Speaker 1: sort of federal versus states issues and some of the 335 00:20:22,560 --> 00:20:26,119 Speaker 1: regulation that has delayed infrastructure. And that could be something 336 00:20:26,160 --> 00:20:29,760 Speaker 1: that the Democrats come together with the Republicans and health 337 00:20:29,800 --> 00:20:33,199 Speaker 1: resolves so that our roads and bridges do catch up 338 00:20:33,280 --> 00:20:36,480 Speaker 1: with the Chinese. I mean, it is really interesting how 339 00:20:36,600 --> 00:20:40,080 Speaker 1: in the last especially post COVID, how the Chinese have 340 00:20:40,160 --> 00:20:44,440 Speaker 1: continued with their infrastructure but also continued investing in their 341 00:20:44,640 --> 00:20:48,760 Speaker 1: new financial structure. We're still in a financial structure which 342 00:20:48,840 --> 00:20:52,720 Speaker 1: is the old mode. Whereas they're bringing in digital currency, 343 00:20:53,080 --> 00:20:56,800 Speaker 1: they're bringing in um you know, clean energy, they're bringing 344 00:20:56,920 --> 00:21:00,159 Speaker 1: in new infrastructure, they're being in new health policy. Is 345 00:21:00,440 --> 00:21:02,520 Speaker 1: so I think it is time, if we want to 346 00:21:02,560 --> 00:21:05,240 Speaker 1: be number one, to to bring all of those things 347 00:21:05,240 --> 00:21:08,480 Speaker 1: together and to the forefront. It's interesting to me how 348 00:21:08,600 --> 00:21:10,960 Speaker 1: much the rest of the world is waiting for the 349 00:21:11,080 --> 00:21:13,800 Speaker 1: US to come out with some sort of fiscal support bill. 350 00:21:14,080 --> 00:21:17,280 Speaker 1: How this affects Europe, it affects emerging markets. How much 351 00:21:17,320 --> 00:21:20,600 Speaker 1: does the recovery in the developing world in particular hinge 352 00:21:20,840 --> 00:21:24,479 Speaker 1: on the US passing fiscal stimulus. Well, I mean, if 353 00:21:24,520 --> 00:21:29,720 Speaker 1: we have something like a tweet trillion UH fiscal stimulus, 354 00:21:29,760 --> 00:21:33,600 Speaker 1: it will be large. It will impact other countries. But 355 00:21:33,800 --> 00:21:36,680 Speaker 1: also what has happened over the last week or two 356 00:21:36,760 --> 00:21:39,800 Speaker 1: in Washington with the World Bank IMF meetings, as you 357 00:21:39,840 --> 00:21:44,520 Speaker 1: could see, was relatively i would say, hugely different than 358 00:21:44,560 --> 00:21:47,560 Speaker 1: what tom Kin and I have experienced before with the 359 00:21:47,560 --> 00:21:50,520 Speaker 1: i m F. We also have, in addition to the 360 00:21:50,640 --> 00:21:54,080 Speaker 1: US stimulus, the IMF head and the chief economist of 361 00:21:54,080 --> 00:21:56,400 Speaker 1: the I M S saying that countries should start borrowing 362 00:21:56,440 --> 00:21:58,680 Speaker 1: a lot more. That is the exact opposite of the 363 00:21:58,720 --> 00:22:01,960 Speaker 1: austerity plants that you had for the last twenty thirty 364 00:22:02,040 --> 00:22:04,520 Speaker 1: years by the I m F. So if you put 365 00:22:04,560 --> 00:22:07,600 Speaker 1: that together with our stimulus, I think it could be 366 00:22:07,640 --> 00:22:12,320 Speaker 1: a very interesting period of higher growth in the economies 367 00:22:12,520 --> 00:22:16,200 Speaker 1: of across the clock plus interest rates and in fact 368 00:22:16,200 --> 00:22:18,600 Speaker 1: not go into a negative zone. And we might be 369 00:22:19,080 --> 00:22:21,720 Speaker 1: going faster into a period of inflation with the kind 370 00:22:21,760 --> 00:22:24,480 Speaker 1: of death that is getting accumulated and will continue to 371 00:22:24,480 --> 00:22:28,000 Speaker 1: get accumulated. So we might have different problems on our 372 00:22:28,040 --> 00:22:31,400 Speaker 1: hands very soon. I'm started very quickly here you are 373 00:22:31,600 --> 00:22:36,399 Speaker 1: of Iran. Is President Biden's strategy with Iran the same 374 00:22:36,440 --> 00:22:42,359 Speaker 1: as President Obama's? You know, I think that that countries 375 00:22:42,400 --> 00:22:46,280 Speaker 1: are evolving. I'm not sure if his policy is the same. 376 00:22:46,960 --> 00:22:50,480 Speaker 1: I think his policy is to engage just his life, 377 00:22:50,520 --> 00:22:53,640 Speaker 1: like he said last night, with with the allies, so 378 00:22:53,760 --> 00:22:57,439 Speaker 1: that the approach to Iran will be an approach that 379 00:22:57,960 --> 00:23:01,520 Speaker 1: brings together all allies together and it's not just one 380 00:23:01,560 --> 00:23:06,560 Speaker 1: country versus another country. And if you do bring it 381 00:23:06,680 --> 00:23:10,159 Speaker 1: run back into society, into the normal society and the 382 00:23:10,240 --> 00:23:13,119 Speaker 1: normal economy. I think that region could be in a 383 00:23:13,240 --> 00:23:17,480 Speaker 1: much better place than it is today after bachelors. Always 384 00:23:17,520 --> 00:23:19,640 Speaker 1: fantastic to catch up with you, Thanks for your time 385 00:23:19,800 --> 00:23:22,919 Speaker 1: of Rock Creek Group and Bloomberg Wall Street Week contributor 386 00:23:28,040 --> 00:23:30,520 Speaker 1: joining us now on this market. A lot to Childood 387 00:23:30,560 --> 00:23:32,760 Speaker 1: j H C m C a fund manager, A lot 388 00:23:32,760 --> 00:23:35,399 Speaker 1: of fantastic to catch up with you. As always, this 389 00:23:35,480 --> 00:23:38,800 Speaker 1: credit market spread to tight treasury yehs a low, they 390 00:23:38,920 --> 00:23:41,720 Speaker 1: been higher this week. Fixed income, it's been a huge 391 00:23:41,720 --> 00:23:44,800 Speaker 1: trade through. Do you think it's gonna break anytime soon? 392 00:23:47,119 --> 00:23:49,840 Speaker 1: Good morning? All Well, it's hard to tell whether it 393 00:23:49,920 --> 00:23:51,960 Speaker 1: breaks or not, but you can't. I mean, this is 394 00:23:51,960 --> 00:23:54,840 Speaker 1: a mistake. I think many people too. They're very short 395 00:23:54,920 --> 00:23:58,800 Speaker 1: term oriented and if you think of running portfolios, they're 396 00:23:58,880 --> 00:24:02,560 Speaker 1: they're like tankers you've hid, just shift them overnight. So 397 00:24:02,880 --> 00:24:05,560 Speaker 1: will the market break? You know? I think the market 398 00:24:05,600 --> 00:24:09,399 Speaker 1: is getting expensive and I do think if you dissect 399 00:24:09,520 --> 00:24:13,520 Speaker 1: the credit market, its fortunes are closely tied to whether 400 00:24:13,560 --> 00:24:17,040 Speaker 1: economic growth happens and what kind of a stimulus package passes. 401 00:24:17,440 --> 00:24:20,320 Speaker 1: So I think that's a possibility. Yes, Lolly, what's so 402 00:24:20,359 --> 00:24:22,760 Speaker 1: important to me? And it's great to have you on 403 00:24:22,920 --> 00:24:27,000 Speaker 1: with the Matthew conversation is in Japan, we are witnessing 404 00:24:27,000 --> 00:24:30,080 Speaker 1: almost a lassitude where the dynamics have been sucked out 405 00:24:30,080 --> 00:24:33,480 Speaker 1: of the fixed income market for various reasons. Is that 406 00:24:33,520 --> 00:24:35,680 Speaker 1: going to be the surprise a year and two years 407 00:24:35,720 --> 00:24:40,280 Speaker 1: forward that we migrate from bond and fixed income dynamics 408 00:24:40,320 --> 00:24:46,200 Speaker 1: to a much more static market. It's possible. But look, 409 00:24:46,240 --> 00:24:49,760 Speaker 1: there are differences between the Japanese markets in the US markets. Um. 410 00:24:49,800 --> 00:24:53,320 Speaker 1: The investor based is different, the indices are different, um. 411 00:24:53,359 --> 00:24:57,200 Speaker 1: So they're absolutely notable differences. The key point is they've 412 00:24:57,240 --> 00:24:59,359 Speaker 1: been fighting with low rate for an extended period of 413 00:24:59,359 --> 00:25:03,480 Speaker 1: time and a little to no inflation. Can that happen here? Sure? 414 00:25:03,520 --> 00:25:05,960 Speaker 1: I mean I think Cathy hits Kathy Jones hit the 415 00:25:06,080 --> 00:25:08,600 Speaker 1: right point, which is, you know, we're talking about rising 416 00:25:08,680 --> 00:25:10,760 Speaker 1: ten year rates and blah blah blah. Look, people were 417 00:25:10,760 --> 00:25:13,480 Speaker 1: talking about a four year and four percent ten year 418 00:25:14,000 --> 00:25:17,359 Speaker 1: not that long ago, right for not thinking like maybe 419 00:25:17,400 --> 00:25:20,800 Speaker 1: one percent, Max, I think it is entirely possible, it's 420 00:25:20,880 --> 00:25:24,439 Speaker 1: lower for longer. It is entirely, entirely possible. And what's amazingly, 421 00:25:24,520 --> 00:25:28,400 Speaker 1: says as Cathy Jones stretch and he flapped, there was extraordinary, 422 00:25:29,119 --> 00:25:33,120 Speaker 1: Thank you Tom, that it definitely was extraordinary, which brings 423 00:25:33,160 --> 00:25:35,919 Speaker 1: me to credit spread slyly. One reason why I always 424 00:25:35,960 --> 00:25:38,560 Speaker 1: love having you on is because you're very realistic about 425 00:25:38,560 --> 00:25:42,119 Speaker 1: the fundamental picture and struggle with pairing it with the 426 00:25:42,240 --> 00:25:45,560 Speaker 1: unlimited or seemingly liquidity from central banks. How do you 427 00:25:45,600 --> 00:25:48,359 Speaker 1: retain that bearish view in light of the fact the 428 00:25:48,359 --> 00:25:51,240 Speaker 1: FED is backstopping this market and don't fight the Fed 429 00:25:51,480 --> 00:25:56,120 Speaker 1: is the predominant feeling across the street. So it's actually interesting. 430 00:25:56,400 --> 00:25:58,439 Speaker 1: I'll tell you how we're constructing, how we're thinking about it, 431 00:25:58,480 --> 00:26:00,520 Speaker 1: but this don't fight the Fed. I think it's very 432 00:26:00,520 --> 00:26:03,040 Speaker 1: interesting because I think one of the possible mistakes the 433 00:26:03,080 --> 00:26:05,959 Speaker 1: market is making for the future is now I think 434 00:26:06,000 --> 00:26:09,720 Speaker 1: everybody now bigs in that the corporate bond purchasing is 435 00:26:09,760 --> 00:26:12,879 Speaker 1: now in the tool kits, as you know, as J. 436 00:26:13,040 --> 00:26:15,840 Speaker 1: Powell talks about. But there may be a nuance in 437 00:26:15,840 --> 00:26:19,000 Speaker 1: this crisis versus the global financial crisis, which is this 438 00:26:19,160 --> 00:26:22,040 Speaker 1: was a global pandemic and it's hit everybody at the 439 00:26:22,080 --> 00:26:25,399 Speaker 1: same time. It wasn't there was no bad actor. So 440 00:26:25,480 --> 00:26:28,880 Speaker 1: I will warn the market that in the future when 441 00:26:28,880 --> 00:26:31,560 Speaker 1: we have another crisis, which we will cycles still happen 442 00:26:31,600 --> 00:26:35,200 Speaker 1: regardless of what other people say it is entirely possible 443 00:26:35,560 --> 00:26:38,560 Speaker 1: that corporate bonds may not be in the tools. I 444 00:26:38,560 --> 00:26:40,240 Speaker 1: just want to make sure I plant that feet in 445 00:26:40,359 --> 00:26:43,480 Speaker 1: people's mind. The second piece is how do we construct 446 00:26:43,480 --> 00:26:46,360 Speaker 1: the portfolios. Look, I think investment grade has gone really expensive, 447 00:26:46,400 --> 00:26:48,840 Speaker 1: well in duration investment grade. I think what you need 448 00:26:48,880 --> 00:26:52,119 Speaker 1: to do is pick the companies that are actually on 449 00:26:52,160 --> 00:26:54,640 Speaker 1: a path to de leverage. There are not a whole 450 00:26:54,640 --> 00:26:57,920 Speaker 1: lot of them, and take duration risk on those. It's 451 00:26:57,920 --> 00:27:01,520 Speaker 1: a bad credit picking, Hi, you we're still playing the liquidity, 452 00:27:01,520 --> 00:27:03,800 Speaker 1: which is the refinancing theme. So buy the bonds that 453 00:27:03,880 --> 00:27:06,720 Speaker 1: are callable in good quality companies. The rest of the 454 00:27:06,760 --> 00:27:10,440 Speaker 1: high yield is challenging. And just because you guys talked 455 00:27:10,440 --> 00:27:11,719 Speaker 1: about math and you knew I was going to talk 456 00:27:11,760 --> 00:27:14,320 Speaker 1: about statistics, let me walk you through one thing. High 457 00:27:14,359 --> 00:27:16,560 Speaker 1: yield average index spread in the US is four hundred 458 00:27:16,600 --> 00:27:19,879 Speaker 1: and ninety today. Okay, let's just assume to beat that 459 00:27:20,000 --> 00:27:22,359 Speaker 1: index you have to back for companies that are in 460 00:27:22,400 --> 00:27:25,720 Speaker 1: the five eight hundred basis points in spread range. That's 461 00:27:25,760 --> 00:27:29,399 Speaker 1: only of the US high yield index, And out of 462 00:27:29,400 --> 00:27:35,840 Speaker 1: that twenty per cent, nearly half half is energy, leisure, 463 00:27:36,320 --> 00:27:41,320 Speaker 1: capital goods that are at the epic center of coronavirus 464 00:27:41,320 --> 00:27:45,240 Speaker 1: related slowdown and stimmulus stainments. This is why you can't 465 00:27:45,280 --> 00:27:51,040 Speaker 1: disentangle high yield fundamentals from the economic recovery. So let's 466 00:27:51,040 --> 00:27:52,640 Speaker 1: start with investment gride and then we got to high 467 00:27:52,680 --> 00:27:54,480 Speaker 1: yield because you set a couple of things there. The 468 00:27:54,520 --> 00:27:57,240 Speaker 1: companies with an investment grade on the path towards the leveraging. 469 00:27:57,359 --> 00:28:02,400 Speaker 1: You said there weren't, manny, where'd you find them? They're 470 00:28:02,440 --> 00:28:04,359 Speaker 1: not that many, but there are a few companies that 471 00:28:04,400 --> 00:28:06,879 Speaker 1: have basically learned their lesson and they're gonna be leveraged. 472 00:28:06,880 --> 00:28:09,639 Speaker 1: I mean they are basically selling assets and they're making 473 00:28:09,680 --> 00:28:12,480 Speaker 1: sure they are working down their leverage and either that 474 00:28:12,600 --> 00:28:15,120 Speaker 1: we're basically when people were talking about that, there were 475 00:28:15,160 --> 00:28:17,560 Speaker 1: you know, three four for and a half times levered 476 00:28:17,680 --> 00:28:21,000 Speaker 1: pre chronicle virus crisis, where the market was a little 477 00:28:21,040 --> 00:28:23,560 Speaker 1: bit criticizing. Okay, it's started the leverage now because the 478 00:28:23,560 --> 00:28:26,000 Speaker 1: good times may not last. I think those companies are 479 00:28:26,000 --> 00:28:29,679 Speaker 1: really working towards working down that leverage now. There is 480 00:28:29,680 --> 00:28:32,480 Speaker 1: a point that I think there are some there is 481 00:28:32,520 --> 00:28:35,080 Speaker 1: a narrative in the market which I don't agree with, 482 00:28:35,160 --> 00:28:38,480 Speaker 1: which is this golden age of bond investor, because now 483 00:28:38,520 --> 00:28:40,920 Speaker 1: that people have put on the seat, they're gonna be leverage. 484 00:28:41,320 --> 00:28:44,560 Speaker 1: Let me point this out. Large companies are not borrowing 485 00:28:44,600 --> 00:28:47,360 Speaker 1: from banks. They're going to the bond market. The biggest 486 00:28:47,400 --> 00:28:50,320 Speaker 1: difference between bank and the bond market is bank that 487 00:28:50,720 --> 00:28:53,600 Speaker 1: is table at par with no penalty. You can't do 488 00:28:53,720 --> 00:28:55,640 Speaker 1: that with the bond market. So what are your I 489 00:28:55,800 --> 00:28:59,040 Speaker 1: G or high yield? What the companies are banking on 490 00:28:59,480 --> 00:29:03,800 Speaker 1: future IBADOG growth or asset sales to de leverage. Again, 491 00:29:04,080 --> 00:29:08,800 Speaker 1: that is highly highly dependent on the economic growth, Lilly, 492 00:29:08,920 --> 00:29:12,800 Speaker 1: our preferreds a legitimate yield equivalent or do they have 493 00:29:12,840 --> 00:29:17,400 Speaker 1: too much of an equity component? I think preferred if 494 00:29:17,440 --> 00:29:19,640 Speaker 1: you find you know, there are some fixed for life 495 00:29:19,640 --> 00:29:23,280 Speaker 1: preferred that are very high coupon, and you know, I 496 00:29:23,280 --> 00:29:25,520 Speaker 1: think as the company is through the pandemic, none of 497 00:29:25,600 --> 00:29:28,240 Speaker 1: these things are going to get cold. So at least 498 00:29:28,400 --> 00:29:32,200 Speaker 1: until you get a better picture of the outlook, there 499 00:29:32,240 --> 00:29:36,360 Speaker 1: are decent places to be yes, Lally, is there any 500 00:29:36,400 --> 00:29:39,000 Speaker 1: trade to be had in the eleven days left before 501 00:29:39,040 --> 00:29:43,880 Speaker 1: the U S Election? No? I mean it's it's these 502 00:29:43,880 --> 00:29:46,360 Speaker 1: things are very hard. But the market is similar to 503 00:29:46,400 --> 00:29:50,000 Speaker 1: the equity market. There is a general trade that's happening, 504 00:29:50,000 --> 00:29:53,800 Speaker 1: which is stimulus induced. Right, whichever party wins, it's likely 505 00:29:53,840 --> 00:29:56,120 Speaker 1: we're gonna have a stimulus. The question is how big 506 00:29:56,160 --> 00:29:58,440 Speaker 1: it's going to be. And you can see it the 507 00:29:58,480 --> 00:30:01,280 Speaker 1: companies that may get the better from the stimulus. You 508 00:30:01,280 --> 00:30:04,320 Speaker 1: can see the stocks and also on the bond market 509 00:30:04,360 --> 00:30:07,520 Speaker 1: a little bit of a movement, but nothing does. It's 510 00:30:07,560 --> 00:30:11,160 Speaker 1: not recommending. It's not the golden age of credit. Was 511 00:30:11,280 --> 00:30:12,640 Speaker 1: I've got to ask, was that a little bit of 512 00:30:12,640 --> 00:30:16,320 Speaker 1: shade a page Jim and Greg Peter's in the last 513 00:30:16,320 --> 00:30:20,600 Speaker 1: couple of weeks trouble Hold on, Hold on a second, 514 00:30:20,600 --> 00:30:23,000 Speaker 1: hold on, No, I'm not actually calling anybody out. I 515 00:30:23,000 --> 00:30:25,520 Speaker 1: have heard that narrative. I'm not sure they're one of them, 516 00:30:25,640 --> 00:30:30,320 Speaker 1: so I can't really open. Okay, I'm just wondering if 517 00:30:30,360 --> 00:30:32,120 Speaker 1: I should tee them up for a conversation at the 518 00:30:32,200 --> 00:30:34,760 Speaker 1: nine o'clock in the next couple of weeks, so that 519 00:30:34,920 --> 00:30:40,440 Speaker 1: I thank you as always seriously trying to start some 520 00:30:46,400 --> 00:30:48,320 Speaker 1: what we've tried to do it on a Friday. This 521 00:30:48,360 --> 00:30:51,680 Speaker 1: is really really important, is trying to understand that yes, 522 00:30:51,720 --> 00:30:55,480 Speaker 1: we do economics, finance, investment, Yes we do politics, and 523 00:30:55,560 --> 00:30:58,320 Speaker 1: we do it with fancy ties and suits and dresses. 524 00:30:58,600 --> 00:31:01,240 Speaker 1: As we talked to the bloomer elite of the world, 525 00:31:01,280 --> 00:31:03,680 Speaker 1: and we've forgotten not that there's a whole bunch of 526 00:31:03,720 --> 00:31:06,440 Speaker 1: other people out there helping us with that has been 527 00:31:06,520 --> 00:31:09,720 Speaker 1: Patrick Foy. Pet Foy is with a small shop called 528 00:31:09,720 --> 00:31:16,040 Speaker 1: the Metropolitan Metropolitan Transit Authority where he is chairman and CEO. 529 00:31:16,240 --> 00:31:18,400 Speaker 1: And pet I want to go right down to the basics. 530 00:31:18,440 --> 00:31:20,760 Speaker 1: So last time you were on, we talked about a 531 00:31:20,800 --> 00:31:25,360 Speaker 1: bus driver moving people around Northern Central Park. How about 532 00:31:25,640 --> 00:31:30,360 Speaker 1: Radigan Hendy Hartley Woods in Augustine doing what you guys 533 00:31:30,400 --> 00:31:36,600 Speaker 1: do every day, which is jumping on tracks of moving railroads. Yeah, 534 00:31:36,640 --> 00:31:39,600 Speaker 1: those five tom those five Long Island Railroad employees on 535 00:31:39,640 --> 00:31:42,960 Speaker 1: Wednesday at the Long Island Railroad East New York station, 536 00:31:43,040 --> 00:31:47,680 Speaker 1: save the man's life mt A. People do that regularly. Uh. 537 00:31:47,720 --> 00:31:49,640 Speaker 1: They were the right five men on the on the 538 00:31:49,720 --> 00:31:53,040 Speaker 1: on the spot. They called the train dispatchers, stop the trains. 539 00:31:53,320 --> 00:31:55,360 Speaker 1: They were flaggers, so they knew what they knew what 540 00:31:55,400 --> 00:31:58,560 Speaker 1: to do, jumped down and brought the man up to 541 00:31:58,920 --> 00:32:02,040 Speaker 1: up the safety. It have been a terrible situation had 542 00:32:02,080 --> 00:32:05,360 Speaker 1: they not been there, had they not been used their 543 00:32:05,400 --> 00:32:09,160 Speaker 1: training and their brave ray and courage saved the man's life. 544 00:32:09,200 --> 00:32:13,240 Speaker 1: Incredible public You are distracted by getting billions in aid 545 00:32:13,640 --> 00:32:18,280 Speaker 1: from this natural disaster along with other cities nationwide. What 546 00:32:18,440 --> 00:32:21,160 Speaker 1: is your message to the elites of Washington this morning 547 00:32:21,480 --> 00:32:23,480 Speaker 1: on your need to get a check in the mail? 548 00:32:25,040 --> 00:32:28,720 Speaker 1: But there are three reasons the MTA needs twelve billion dollars. 549 00:32:28,720 --> 00:32:32,280 Speaker 1: One is jobs, jobs, jobs, the second is social equity, 550 00:32:32,320 --> 00:32:36,080 Speaker 1: and the third is environment. I described last time I 551 00:32:36,200 --> 00:32:38,480 Speaker 1: was on the drastic cuts we may be forced to 552 00:32:38,520 --> 00:32:42,520 Speaker 1: make in service of the fifth reduction on subways and busses, 553 00:32:42,600 --> 00:32:45,240 Speaker 1: up the fifty percent on Long Island Railroad and Metro 554 00:32:45,320 --> 00:32:49,160 Speaker 1: North and laying off eight to nine thousand colleagues our 555 00:32:49,280 --> 00:32:52,760 Speaker 1: preliminary estimates. If we were if our hand were forced 556 00:32:52,760 --> 00:32:55,160 Speaker 1: then we had to do, that would be a reduction 557 00:32:55,240 --> 00:32:58,000 Speaker 1: and economic activity in the New York region of about 558 00:32:58,040 --> 00:33:01,440 Speaker 1: a hundred billion dollars and a reduction of about three 559 00:33:01,520 --> 00:33:05,280 Speaker 1: hundred and fifty thousand jobs, including three hundred thousand jobs 560 00:33:05,640 --> 00:33:08,520 Speaker 1: in New York. From a social equity point of view, 561 00:33:08,600 --> 00:33:11,040 Speaker 1: right now, we're carrying on subway and busses about three 562 00:33:11,080 --> 00:33:14,080 Speaker 1: million customers a day. That's up substantially from the depths 563 00:33:14,120 --> 00:33:18,120 Speaker 1: of pandemic. But those are workers who can't work remotely, 564 00:33:18,120 --> 00:33:21,360 Speaker 1: who can't telecommute, and there were essential workers. And just 565 00:33:21,520 --> 00:33:24,800 Speaker 1: as mt A workers at subways, buses, Long Island Railroad 566 00:33:24,800 --> 00:33:28,160 Speaker 1: and Metro North or heroes carrying heroes during the depths 567 00:33:28,200 --> 00:33:31,240 Speaker 1: of the pandemic, they continue to do that. The people 568 00:33:31,360 --> 00:33:33,920 Speaker 1: were carrying don't have the option of a car, they 569 00:33:33,960 --> 00:33:36,920 Speaker 1: don't have an option of working from home. And it's 570 00:33:36,960 --> 00:33:40,200 Speaker 1: a matter of social equity. And lastly, there's a limit. 571 00:33:40,440 --> 00:33:43,960 Speaker 1: We're now carrying about ninety percent of pre pandemic passenger 572 00:33:44,040 --> 00:33:47,720 Speaker 1: car and truck volumes on our bridges and tunnels mighty percent. 573 00:33:47,960 --> 00:33:51,040 Speaker 1: There's a limit to how many cars and trucks can 574 00:33:51,120 --> 00:33:53,560 Speaker 1: come into the City of New York, can come into Manhattan. 575 00:33:53,840 --> 00:33:56,160 Speaker 1: We're near reaching that limit. So from the point of 576 00:33:56,200 --> 00:33:59,200 Speaker 1: view of jobs, social equity in the environment, we need 577 00:33:59,240 --> 00:34:02,960 Speaker 1: this funding as a first order priority. Okay, so what's 578 00:34:02,960 --> 00:34:06,160 Speaker 1: your absolute deadline when it comes to making these cuts. 579 00:34:06,640 --> 00:34:10,279 Speaker 1: What's your deadline for getting this funding. So at LISA, 580 00:34:10,400 --> 00:34:13,040 Speaker 1: like any organization, we're on a calendar year. We will 581 00:34:13,080 --> 00:34:16,600 Speaker 1: present a plan and a budget to our board in November. 582 00:34:17,000 --> 00:34:19,440 Speaker 1: The board will vote on it in December. It's got 583 00:34:19,440 --> 00:34:23,440 Speaker 1: to be adopted in December, and obviously bond investors and 584 00:34:23,480 --> 00:34:25,920 Speaker 1: credit rating agencies and folks like yourselves are going to 585 00:34:25,960 --> 00:34:28,920 Speaker 1: be looking at that process. So we really need funding 586 00:34:28,960 --> 00:34:33,080 Speaker 1: and certainty about funding uh early to mid December at 587 00:34:33,080 --> 00:34:35,920 Speaker 1: the at the absolute latest. If a bill doesn't. We've 588 00:34:35,920 --> 00:34:39,120 Speaker 1: been obviously watching the sausage making going on in Washington, 589 00:34:39,200 --> 00:34:43,120 Speaker 1: and we really urge the Senate Republican leadership to support 590 00:34:43,200 --> 00:34:45,680 Speaker 1: funding for mass transit as well as the State of 591 00:34:45,680 --> 00:34:47,239 Speaker 1: New York. In the City of New York. If we 592 00:34:47,320 --> 00:34:50,120 Speaker 1: don't get that, the m t A may be forced 593 00:34:50,120 --> 00:34:53,040 Speaker 1: our hand, may be forced to make drastic draponent and 594 00:34:53,120 --> 00:34:56,879 Speaker 1: service cuts until weigh off thousands of people. The economics, 595 00:34:56,920 --> 00:34:59,920 Speaker 1: social equity, and environmental consequences of that will be dum 596 00:35:00,000 --> 00:35:02,400 Speaker 1: at it. I have to say, Pat, as a lifelong 597 00:35:02,440 --> 00:35:06,279 Speaker 1: New Yorker born and raised, Yes, wridership has increased from 598 00:35:06,320 --> 00:35:08,880 Speaker 1: the depths of the pandemic, but is far below anything 599 00:35:08,880 --> 00:35:12,120 Speaker 1: it has been in recent memory. Given the fact that 600 00:35:12,120 --> 00:35:14,360 Speaker 1: the m t A, the subway system, etcetera is the 601 00:35:14,400 --> 00:35:18,799 Speaker 1: lifeblood of New York City, is New York City dying now? 602 00:35:18,920 --> 00:35:21,000 Speaker 1: New York City is not not dying. New York City 603 00:35:21,080 --> 00:35:24,480 Speaker 1: is experiencing a tough time. New York was the epicenter 604 00:35:24,520 --> 00:35:27,040 Speaker 1: of the pandemic. Frankly the United States in the world, 605 00:35:27,400 --> 00:35:30,680 Speaker 1: thanks the Governor Clomo's leadership that uh, you know, we've 606 00:35:30,680 --> 00:35:34,719 Speaker 1: broken the curve. Havn't uh we've broken the curve, right, 607 00:35:34,719 --> 00:35:38,279 Speaker 1: The curves been broken. Infection rates are are low. Other 608 00:35:38,320 --> 00:35:41,239 Speaker 1: parts of the country. You're experiencing spikes. New York City 609 00:35:41,320 --> 00:35:42,960 Speaker 1: is going through a tough time. New York City has 610 00:35:43,000 --> 00:35:47,440 Speaker 1: gone through tough times before the nineteen pandemic hind eleven, 611 00:35:47,440 --> 00:35:51,120 Speaker 1: Superstorm Sandy. I've lived here all my life in New York. 612 00:35:51,200 --> 00:35:55,319 Speaker 1: The city will survive. Other cities New York, London, Milan, Bombay, 613 00:35:55,320 --> 00:35:59,200 Speaker 1: Bombay have gone through pandemics in the past. New York 614 00:35:59,239 --> 00:36:01,560 Speaker 1: will get through us. But to get through what the 615 00:36:01,640 --> 00:36:03,680 Speaker 1: m t A has got to be funded. It is 616 00:36:03,719 --> 00:36:06,440 Speaker 1: the circulatory system of the New York City Regional eCOM. 617 00:36:07,360 --> 00:36:10,440 Speaker 1: Pet Forward. Thank you so much for the Metropolitan Transit Authority, 618 00:36:10,520 --> 00:36:14,360 Speaker 1: their chairman, and their c Thanks for listening to the 619 00:36:14,400 --> 00:36:20,879 Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple podcasts. SoundCloud, 620 00:36:21,280 --> 00:36:25,480 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 621 00:36:25,520 --> 00:36:29,799 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 622 00:36:30,239 --> 00:36:31,320 Speaker 1: I'm Bloomberg Radio