WEBVTT - Surveillance: Not Trade War But Tech Theft, Feldstein says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.400 Bloomberg dot Com, and of course, on the Bloomberg. Can 0:00:34.440 --> 0:00:38.040 we give Professor Faulstein a proper introduction please, I insist. 0:00:38.360 --> 0:00:40.839 The former chairman of the Council of Economic Advisors, the 0:00:40.840 --> 0:00:45.040 former Chief ECONOP advisor to the President Ronald Reagan, Marty 0:00:45.120 --> 0:00:47.880 fauld Stein, the Harvard University Professor of Economics joints this. 0:00:47.920 --> 0:00:50.600 Now that's better, isn't it. It's better. That's better, Marty. 0:00:50.640 --> 0:00:52.680 Great to see you're good to be back on radio. 0:00:53.040 --> 0:00:56.760 In your words, Marty, it is not a China US 0:00:57.120 --> 0:01:01.760 trade war. Why not. What it's really about is not trade. 0:01:01.840 --> 0:01:07.319 It's about China stealing US technology, stealing and by forcing 0:01:07.360 --> 0:01:13.840 American companies who do business in China to transfer their 0:01:13.880 --> 0:01:19.200 technology to Chinese firms, and also the Chinese stealing through 0:01:19.240 --> 0:01:23.600 the internet. So, Marzi, this riises a question. One of 0:01:23.640 --> 0:01:27.280 the moves forward, the point of progress we've seen this 0:01:27.319 --> 0:01:30.039 week has been the Chinese set to be offering to 0:01:30.120 --> 0:01:34.440 buy even more agricultural product. Sounds like for you at least, Marty, 0:01:34.520 --> 0:01:36.200 that's not gonna get it done. That's not gonna be 0:01:36.319 --> 0:01:39.039 enough to broak a deal. It's the opposite that is, 0:01:39.120 --> 0:01:43.119 they're saying, let's not talk about technology theft. Let's talk 0:01:43.160 --> 0:01:47.600 about the trade deficit between China and the US, and 0:01:47.760 --> 0:01:50.600 we the Chinese, can solve that problem. We can buy 0:01:50.640 --> 0:01:53.400 more of this that the other thing. But that doesn't 0:01:53.440 --> 0:01:58.400 deal with the true underlying technology theft, and it doesn't 0:01:58.480 --> 0:02:02.360 change the overall you has trade deficit. It'll shift it 0:02:02.440 --> 0:02:05.600 from China to the rest of the world. The President 0:02:05.760 --> 0:02:09.680 might actually be happy if the bilateral deficit is addressed, 0:02:09.880 --> 0:02:13.760 even if the I T issues are not, and bassillor 0:02:13.840 --> 0:02:16.720 Lightheiser may have a very different point of view on this, Marty. 0:02:17.280 --> 0:02:20.200 Do you see the prospect of the President actually accepting 0:02:20.280 --> 0:02:22.840 this kind of movement from the Chinese, because ultimately, for 0:02:22.919 --> 0:02:26.400 him he might need a win, and anything that moves 0:02:26.440 --> 0:02:31.160 the bilateral deficit in by some form of magnitude palatable 0:02:31.200 --> 0:02:33.680 for the president would be sufficient enough for him. I 0:02:33.760 --> 0:02:36.960 hope not. I hope not. I hope that he's listening 0:02:37.040 --> 0:02:41.120 hard to the voices of Lighthouser and others who are 0:02:41.240 --> 0:02:46.520 saying that's just a diversion from the real issue. To 0:02:46.600 --> 0:02:48.880 get the real interaty addressed, though, you need the Chinese 0:02:48.880 --> 0:02:52.720 to acknowledge the issue is an issue. At the moment, Professor, 0:02:53.080 --> 0:02:56.079 that's not happening. But the US is making it very 0:02:56.120 --> 0:02:58.320 clear to them, as we did not in the beginning. 0:02:58.680 --> 0:03:02.040 In the beginning we talked about the trade deficit, wasn't 0:03:02.080 --> 0:03:06.520 clear what the administration wanted. We're X number of years 0:03:06.560 --> 0:03:08.920 on from a February morning where we all woke up 0:03:08.919 --> 0:03:10.840 in America to the fact that our president of the 0:03:10.919 --> 0:03:13.679 United States was envisioned. Were you on that trip with 0:03:13.760 --> 0:03:16.480 President Nixon? By any chance? I was not, But but 0:03:16.720 --> 0:03:18.960 we were all on that trip with the excitement and 0:03:19.000 --> 0:03:23.000 the history making of it. Are the Chinese now any 0:03:23.120 --> 0:03:28.160 different than they were then about just waiting out the 0:03:28.200 --> 0:03:32.640 American and Western process. Well, they see themselves as much 0:03:32.680 --> 0:03:36.640 more important, much bigger. They see that as an economy 0:03:36.760 --> 0:03:40.840 their real size is equal to ours, equal to the 0:03:40.880 --> 0:03:44.119 European Union, and that gives them a lot a lot 0:03:44.160 --> 0:03:49.160 of leverage with the companies of Asia who want to 0:03:49.200 --> 0:03:54.120 trade with them. So they've got a very different sense 0:03:54.200 --> 0:03:56.800 of their role in the world. Right to catch up 0:03:56.800 --> 0:03:58.520 with you as a whitse It's fantastic to have you 0:03:58.560 --> 0:04:01.480 with us in the studio, Matt found Stein, the Hovid 0:04:01.680 --> 0:04:21.400 University Professor of economics. If you are interested in how 0:04:21.440 --> 0:04:26.280 every big merger craters, this is the conversation of the day. 0:04:26.320 --> 0:04:31.200 Tara la Chapel has been brutal about not just Craft 0:04:31.240 --> 0:04:34.960 and all the rest of it, but every single combination. 0:04:35.520 --> 0:04:39.640 The obligatory press conference, all the grinning, all the smiling, 0:04:39.960 --> 0:04:42.400 and the memo today from Tara la Chapelle is right 0:04:42.440 --> 0:04:46.159 to the point. Warren Buffett those investors more than a 0:04:46.240 --> 0:04:50.760 memo this year, Tara, what did he get wrong? So 0:04:51.240 --> 0:04:54.240 with Warren Buffett, his letter is scheduled to come out tomorrow. 0:04:54.600 --> 0:04:57.120 I think that accessors want to hear more from him 0:04:57.160 --> 0:05:00.960 about his um strategy around invest singing tech stocks. He 0:05:01.000 --> 0:05:03.080 seems to be jumping in and out of those, and 0:05:03.160 --> 0:05:05.720 also more about the succession plan and what's going to 0:05:05.760 --> 0:05:08.920 happen with all. Okay, but think today the big news 0:05:09.000 --> 0:05:12.240 is Craft. Hi, come on, okay, Tara, I just did 0:05:12.279 --> 0:05:16.880 the common size balance sheet analysis. The percentage of goodwill 0:05:17.000 --> 0:05:23.800 on Pepsicola's balance sheet is the percentage of goodwill bad 0:05:23.800 --> 0:05:29.200 will on Craft's financially engineered balance sheet. It's ginormous. It's 0:05:29.240 --> 0:05:33.200 like thirty eight or thirty nine percent a it's failed 0:05:33.680 --> 0:05:36.120 be they got more to write down in the future. 0:05:36.480 --> 0:05:39.920 How did this happen? You know, I think a lot 0:05:39.960 --> 0:05:42.279 of people were just kind of drinking the koolie. You know, 0:05:42.600 --> 0:05:47.080 Craft Highns for a while had the leading operating margins 0:05:47.080 --> 0:05:49.640 in this industry, so they're extremely profitable, and I think 0:05:49.640 --> 0:05:52.520 people thought, you know, this strategy, maybe it does work, 0:05:52.560 --> 0:05:55.839 but it was very shortsighted. Basically, they just got the business. 0:05:55.880 --> 0:05:58.279 They cut as many costs as they can, really weren't 0:05:58.279 --> 0:06:01.279 investing much in the brands, and and you know, that 0:06:01.279 --> 0:06:03.960 strategy only works for so long until you have us 0:06:03.960 --> 0:06:06.240 flip up like this, and then suddenly they need to 0:06:06.279 --> 0:06:09.120 do another mega merger to sort of hide that, bring 0:06:09.160 --> 0:06:11.680 another company in that they can go back to cutting costs, 0:06:11.680 --> 0:06:15.599 because with the businesses they have, you can't slash costs 0:06:15.600 --> 0:06:17.800 into perpetuity. That just doesn't work. And that's what we're 0:06:17.800 --> 0:06:20.279 seeing here. Kick. Should I just say that that was 0:06:20.320 --> 0:06:22.960 the ultimate cf A punt of the week. What was 0:06:23.000 --> 0:06:25.960 that she can't drink the kool a craft on school. 0:06:25.960 --> 0:06:30.840 Its very very smart. Actually missed that tower that was 0:06:30.880 --> 0:06:34.640 actually fantastic. It's four ab A colleague kre Brad Allison 0:06:34.680 --> 0:06:36.760 wrote this morning, I actually think this is quite interesting 0:06:36.800 --> 0:06:39.680 that Berkshire Hathaway's Warren Buffett will go out there this 0:06:39.720 --> 0:06:43.200 weekend and perhaps talk about the struggle to locate great deals. 0:06:43.760 --> 0:06:46.120 The real question, Tara should have been the deals that 0:06:46.160 --> 0:06:49.080 he had made just aren't turning out that great either. 0:06:49.839 --> 0:06:52.080 This weekend, we're going to spend this weekend talking about 0:06:52.320 --> 0:06:54.400 finding great deals and how hard it is to find 0:06:54.440 --> 0:06:57.560 great deals, and and not spend much time when we 0:06:57.600 --> 0:06:59.600 should be looking back at the deals that have been 0:06:59.600 --> 0:07:02.920 made exactly and you know, a lot of his letters 0:07:02.920 --> 0:07:05.640 he spent as sort of aud top seeing some of 0:07:05.640 --> 0:07:07.920 the business decisions they've made, you know, really getting into 0:07:07.960 --> 0:07:11.160 the weeds of insurance and they're different units. But he doesn't, 0:07:11.480 --> 0:07:14.360 you know, really talk as much about Craft for example, 0:07:14.360 --> 0:07:17.120 and some of these investments that they've made on the 0:07:17.200 --> 0:07:20.560 on the stock market side that really you know nothing, 0:07:20.680 --> 0:07:23.120 we are puzzling to investors. They don't align with what 0:07:23.160 --> 0:07:26.000 we know about Buffet and his belief. It's very odd. 0:07:26.080 --> 0:07:28.840 Hit Oh stop. His belief is to get a preferred coupon. 0:07:28.960 --> 0:07:32.360 That's all it comes down to, is his Yeah, but 0:07:32.400 --> 0:07:34.800 his Buffet one on one is his eight percent or 0:07:34.800 --> 0:07:38.160 whatever it is, preferred coupon. Is that a threat with 0:07:38.280 --> 0:07:42.280 this right down and with the equity price cratering, or 0:07:42.280 --> 0:07:45.760 does he still get his coupon? I mean, I don't 0:07:45.760 --> 0:07:47.680 know the details are on that, but I would suspect 0:07:47.680 --> 0:07:50.240 that we're getting to the point where Buffett really needs 0:07:50.240 --> 0:07:52.240 to consider whether he stays in the stock. They are 0:07:52.280 --> 0:07:55.160 the largest shareholder, even bigger than three GS, and at 0:07:55.160 --> 0:07:58.200 this point it's really hard to defend. I'm sure that 0:07:58.400 --> 0:08:00.080 he's still you know, they've made a ton of this 0:08:00.240 --> 0:08:03.680 investment because of that this guy. How did they how 0:08:03.680 --> 0:08:06.400 did they quote unquote make a ton on this investment. 0:08:06.520 --> 0:08:09.040 So the way this works, so Buffett had helped three 0:08:09.040 --> 0:08:13.200 G buy out hind and then they helped bankroll the 0:08:13.240 --> 0:08:16.480 deal with Craft and Hynes that brought those two companies together, 0:08:16.720 --> 0:08:19.400 and as part of that, Buffett got preferred shares, which 0:08:19.800 --> 0:08:23.920 the company eventually bought back from them, but has left 0:08:23.920 --> 0:08:27.800 Buffet with this huge stake in the common shares. But 0:08:28.280 --> 0:08:29.440 at the end of the day, you know, they did 0:08:29.760 --> 0:08:31.840 make out pretty well because for a while, you know, 0:08:32.000 --> 0:08:33.480 they were getting see this, I think it was a 0:08:33.559 --> 0:08:35.680 nine percent coupon, and on top of it, a stock 0:08:35.800 --> 0:08:37.400 was doing okay for a while, and everyone in the 0:08:37.400 --> 0:08:40.040 industry felt this need to mimic them. So it felt like, 0:08:40.280 --> 0:08:42.520 you know, these guys are the ones to copy that 0:08:42.600 --> 0:08:44.880 they're doing the right thing. It was only a matter 0:08:44.920 --> 0:08:47.040 of time before you know, the curtain would fall and 0:08:47.040 --> 0:08:50.559 we would see that this strategy simply is flawed. And 0:08:50.800 --> 0:08:53.280 you know, I can't imagine how much one Berkshire would say. 0:08:53.280 --> 0:08:56.000 Buffett Um exited the board last year, so he's no 0:08:56.040 --> 0:08:59.120 longer an insider at the company. He's simply a shareholder. Okay, 0:09:00.000 --> 0:09:02.559 thanks so much, folks. I'll get out on Twitter. Cherylas 0:09:02.640 --> 0:09:05.959 Chapelle Warren Buffeto's investors more than a memo this year. 0:09:06.000 --> 0:09:10.280 It's a terrific precursor. Thank you rather to that meeting 0:09:10.320 --> 0:09:30.800 and normal outspoken of fantastic schwap Since for Financial Research, 0:09:30.920 --> 0:09:34.560 chief fixed income strategist Take Kathy. Great to catch up 0:09:34.559 --> 0:09:37.200 with you what I keep hearing from a lot of 0:09:37.200 --> 0:09:40.320 people on the bye side. Her from Pimco. Yesterday, I 0:09:40.320 --> 0:09:42.559 caught up with Mark kiss all over there. It's to 0:09:42.679 --> 0:09:45.360 fade the strength. It's this theme of fading the strength, 0:09:45.400 --> 0:09:47.880 looking to build cash and go up in quality. Does 0:09:47.920 --> 0:09:51.120 that resonate with you, Kathy? Yeah, yeah, good morning, Thanks 0:09:51.160 --> 0:09:53.480 for having me on. Um. Yeah, we've been we've been 0:09:53.520 --> 0:09:58.600 actually suggesting moving up in credit quality for quite some time. Um. 0:09:58.800 --> 0:10:01.760 I think this, this big move we've had since the 0:10:01.800 --> 0:10:05.200 first of the year, since about Christmas Eve, uh, in 0:10:05.360 --> 0:10:09.800 credit and lower quality credits should be faded. I think. Um, 0:10:09.840 --> 0:10:12.160 there's just really not a lot of substance behind it. 0:10:12.280 --> 0:10:14.840 And when you look at the risk reward trade offs, 0:10:14.880 --> 0:10:16.880 you're saying, well, how much how much reward am I 0:10:16.920 --> 0:10:19.840 getting at these spreads for the risk I'm taking? And 0:10:19.840 --> 0:10:22.600 it doesn't look all that attractive. So, Kathy, where aren't we? 0:10:22.640 --> 0:10:26.280 Are you at about four d basis points over correct? Yeah? 0:10:26.800 --> 0:10:28.480 Is that too tight for you? Then, Kathy, you just 0:10:28.480 --> 0:10:32.360 think that's too tight? Um. You know we're officially neutral here, 0:10:32.800 --> 0:10:36.160 but I would say that it's a bit tight considering 0:10:36.840 --> 0:10:39.680 the risk that we get some downgrades from the triple 0:10:39.760 --> 0:10:43.320 Bees into the junk area. Um, that could overwhelm it. 0:10:43.400 --> 0:10:46.680 And we really still aren't clear on what the FED 0:10:46.840 --> 0:10:49.640 is doing Uh, we know that they're sitting on the sidelines, 0:10:49.679 --> 0:10:51.719 but we don't really know what the next move is 0:10:51.760 --> 0:10:54.080 going to be. Keathy Jones, Just so you understand where 0:10:54.080 --> 0:10:56.199 are we were four and a half hours away from 0:10:56.200 --> 0:10:59.199 the real yields scene on Bloomberg TV on bonds. With 0:10:59.400 --> 0:11:02.120 that mentioned, Kathy, is there any real yield out there? 0:11:02.480 --> 0:11:05.640 I mean, inflation is lower, so do I feel better 0:11:05.679 --> 0:11:09.200 about my inflation and just a yield? Well, there are 0:11:09.880 --> 0:11:12.560 the real yields are higher than they used to be. Okay, 0:11:12.679 --> 0:11:14.760 so when we have the zero industry policy, it was 0:11:14.760 --> 0:11:17.280 really tough to find any real yield. You can find 0:11:17.320 --> 0:11:19.640 a little bit out there, but it's not you know, 0:11:19.679 --> 0:11:23.880 it's not fantastic. It isn't going likely going back to 0:11:23.920 --> 0:11:27.559 where it used to be prior to the financial crisis. Um, 0:11:27.559 --> 0:11:30.880 we just don't don't see nominal rates moving up that 0:11:30.960 --> 0:11:33.599 much relative to inflation. Rich Trueman, did you get that 0:11:33.679 --> 0:11:36.400 where Ms Jones said the real yield is not fantastic? 0:11:36.559 --> 0:11:39.240 Can we put that into an ad ad campaign? Okay, 0:11:39.280 --> 0:11:42.160 that's not what she meant. She's a regular on the show, 0:11:43.480 --> 0:11:48.200 your regular on the shows, Cathy. You enjoyed the program, 0:11:48.240 --> 0:11:50.800 don't you? Oh? I love the program. It's my favorite. 0:11:51.040 --> 0:11:55.360 It's my favorite TV show. God like that. Do you 0:11:55.559 --> 0:12:00.400 like that, Kane? Do you sleep through Limbeg's veilance something TV? 0:12:00.679 --> 0:12:06.680 Lis Ane Saunders doesn't treat me like Kathy. This idea 0:12:06.760 --> 0:12:09.560 of going up in quality just for people not familiar 0:12:10.040 --> 0:12:13.280 with fixed income, What does that ultimately means? Specifically? What 0:12:13.400 --> 0:12:16.680 is coming up in quality mean? Well, I think within 0:12:16.880 --> 0:12:20.640 to say, the investment grade corporate bond area, now about 0:12:20.640 --> 0:12:23.080 half of that university, maybe even a little bit more 0:12:23.400 --> 0:12:27.280 is the lowest UH tier triple B. So we would 0:12:27.280 --> 0:12:32.280 suggest that you you move up and into the say 0:12:32.320 --> 0:12:36.000 the A rated bonds, not abandoned triple be entirely, but 0:12:36.120 --> 0:12:40.439 certainly not concentrate there. And it's easy, particularly if you're 0:12:40.480 --> 0:12:43.520 in a passive strategy that just follows an index, to 0:12:43.600 --> 0:12:46.800 get overweighted in the lower tiers of credit quality. So 0:12:46.960 --> 0:12:50.280 we're suggesting move up at least divide out between the 0:12:50.280 --> 0:12:53.200 triple bs and and some A rated bonds. And in 0:12:53.360 --> 0:12:55.680 the junk world the same story. I mean, if we're 0:12:56.200 --> 0:12:59.640 even within junk, if you're heavily concentrated in the triple 0:12:59.679 --> 0:13:02.440 C to your risk of default, getting some bonds at 0:13:02.480 --> 0:13:05.920 default is very high if we go into a slowdown 0:13:05.960 --> 0:13:08.160 in the economy. I mean this, what you just said, 0:13:08.160 --> 0:13:11.319 they're cat is extremely important because people are not buying 0:13:11.360 --> 0:13:15.559 individual bonds nowadays. They're buying indexes, They're buying ETFs, are 0:13:15.559 --> 0:13:21.079 buying segmented Are our listeners too segmented in your bond world? 0:13:21.400 --> 0:13:26.600 Should they be buying more blended et fs and portfolios? Well, 0:13:26.640 --> 0:13:28.600 you know, we we like e TF so we like 0:13:28.679 --> 0:13:31.880 passive strategies because they're really you know, provide you a 0:13:31.880 --> 0:13:35.559 lot of liquidity and a very cost effective way to invest. 0:13:35.600 --> 0:13:38.200 So I wouldn't abandon it entirely, but yeah, we do 0:13:38.320 --> 0:13:41.120 think you need to be somewhat strategic here and and 0:13:41.200 --> 0:13:45.520 even tactical in how you allocate within the passive in 0:13:45.559 --> 0:13:49.160 the passive world, because it's been pretty easy for a 0:13:49.240 --> 0:13:52.840 very long time as asset prices kind of moved up 0:13:52.880 --> 0:13:54.880 with the FED being very easy, and we've had a 0:13:54.920 --> 0:13:57.559 little bit of that year to day. But when things 0:13:57.720 --> 0:14:01.080 change is going to get more challenging. Jiants always criites 0:14:01.080 --> 0:14:03.520 a catch up with you. Thank you. She said the 0:14:03.559 --> 0:14:07.800 real yield five times in the interview. I kept counting. No, 0:14:07.960 --> 0:14:25.200 that's great, Cathy. Thank you strategist. I want to make 0:14:25.240 --> 0:14:28.080 clearer the markets just shifted. There's no other way to 0:14:28.120 --> 0:14:31.120 put it. On a Friday morning, we had higher yields. 0:14:31.120 --> 0:14:34.480 A thirty year bond with a vengeance has come lower 0:14:34.560 --> 0:14:38.720 yield three basis points to four digits three point zero 0:14:38.800 --> 0:14:42.440 one nine. The abruptness of that is sobering, with a 0:14:42.520 --> 0:14:46.480 tenure two point six six percent green on the screen 0:14:46.560 --> 0:14:50.720 on futures. But also sterling comes in abruptly in the 0:14:50.840 --> 0:14:54.760 Euro one thirteen thirty seven. And as Karen mentioned there, 0:14:54.800 --> 0:15:01.400 it is Samsonite, Caterpillar, and Xerox to be a list 0:15:01.440 --> 0:15:05.320 of companies that we would get to. She is senior 0:15:05.400 --> 0:15:09.120 vice president for TIT for TAT Trade, UH for Vanguard, 0:15:09.240 --> 0:15:14.120 and Matthias joins us now supremely qualified on Washington on 0:15:14.280 --> 0:15:17.600 our domestic and international relations. And I should point out 0:15:17.640 --> 0:15:20.720 she's a member of the CFA Institute, so unlike so 0:15:20.760 --> 0:15:24.560 many in Washington, she actually understands the bid and they 0:15:24.600 --> 0:15:27.360 ask and thrilled to have you with today what's the bid? 0:15:27.360 --> 0:15:30.800 And ask on American trade right now? It's so interesting. 0:15:31.160 --> 0:15:33.840 You know, trade takes forever, and you can achieve so 0:15:33.920 --> 0:15:36.440 much just by threatening, Like look at the markets this morning. 0:15:36.920 --> 0:15:39.040 What we're doing with China and with Europe, that is 0:15:39.080 --> 0:15:40.720 what is going on right now. There's a lot of 0:15:40.800 --> 0:15:46.720 chess thumping, silver back, gorilla posing power posing, to paraphrase Amy, 0:15:46.720 --> 0:15:50.960 good morning meeting at Bloomberg, surveillance to continue. So what 0:15:51.080 --> 0:15:54.480 happens after the chess thumping, Well, that's the interesting thing. Trade, 0:15:54.520 --> 0:15:57.640 Real trade agreements take a long time to accomplish. Tariffs 0:15:57.680 --> 0:15:59.600 you can slap them on right away, you can do 0:15:59.680 --> 0:16:02.720 some political damage. So I think this is just a 0:16:02.760 --> 0:16:05.880 moment where everyone's trying to to to pile their chips 0:16:05.960 --> 0:16:08.040 up on the table. So when they really start playing 0:16:08.080 --> 0:16:10.960 the game, when they really start negotiating trade agreements, they 0:16:10.960 --> 0:16:14.120 have something to play with. So I would I would 0:16:14.200 --> 0:16:16.800 read through a lot of it as an investment. But 0:16:16.880 --> 0:16:21.040 it's a unilateral, bilateral discussion, and we're all at tuned 0:16:21.040 --> 0:16:25.080 to bilateral or multilateral that is right. Solutions are they 0:16:25.120 --> 0:16:29.160 out there? I do think there are some multilateral solutions 0:16:29.160 --> 0:16:31.840 that are still possible. We have a president who is very, 0:16:31.960 --> 0:16:35.520 very bilaterally focused on trade. Obviously he's trying to you know, 0:16:35.760 --> 0:16:38.240 carve off and do one on one negotiations with with 0:16:38.320 --> 0:16:40.720 the major trading partners. But I do think the European 0:16:40.840 --> 0:16:44.680 Union will stick together on the trading front. Um. You know, 0:16:44.720 --> 0:16:47.040 these this this headline that we just had this morning 0:16:47.040 --> 0:16:51.160 about Caterpillar or Xerox and Samsonite uh tariffs from Europe. 0:16:51.400 --> 0:16:54.880 M is sort of a positioning play. But I think 0:16:55.000 --> 0:16:56.880 I think let's like bring it back up a little 0:16:56.920 --> 0:17:00.520 bit global trade right now, global trade disc beautes are 0:17:00.560 --> 0:17:04.800 a proxy for people's worry about global growth. Okay, but 0:17:05.359 --> 0:17:07.400 you know the Bentley was down today, so I didn't 0:17:07.400 --> 0:17:09.479 bring it into the office early, and I came in 0:17:09.480 --> 0:17:13.480 in a fine German automobile. Why can't we have no 0:17:13.640 --> 0:17:16.800 tariffs on autos and see if the best car wins 0:17:16.960 --> 0:17:19.720 at whatever price point. Well we could do that if 0:17:19.720 --> 0:17:22.320 there was one global president and everybody voted for here. 0:17:22.520 --> 0:17:25.800 But the answers were afraid to do that, right America 0:17:25.880 --> 0:17:27.840 is afraid to do that. Well, every country in the 0:17:27.880 --> 0:17:31.359 world is. Germany is afraid to go to no tariffs, 0:17:32.040 --> 0:17:35.520 I think so. And Japan, for example, protects its agricultural 0:17:35.560 --> 0:17:40.639 industry pretty significantly. I mean, in automobiles, automobiles are unit decision. 0:17:40.880 --> 0:17:44.040 You know that. I would suggest it's not like corn. 0:17:44.280 --> 0:17:48.480 You know perfect you know, nineteenth century commodity, and I 0:17:48.800 --> 0:17:52.160 just don't. Isn't it good for the Germans to call 0:17:52.240 --> 0:17:55.359 the president's bluff and say, okay, tariff guy, let's do 0:17:55.400 --> 0:17:59.600 no tariffs. I think it's really tough because those industries 0:18:00.000 --> 0:18:02.080 employ a ton of people, both in the US and 0:18:02.160 --> 0:18:04.480 in Germany, and those are voters both in the US 0:18:04.520 --> 0:18:06.960 and in Germany. And like you said, a car is 0:18:06.960 --> 0:18:12.520 not a ear of corn. A car moves back and forth. Theoretically, No, 0:18:12.640 --> 0:18:15.280 it's not a soybean. It is part of a huge 0:18:15.320 --> 0:18:18.080 integrated global supply chain, and the companies don't want to 0:18:18.080 --> 0:18:20.920 blow that to a matthiass expertise. What do you see 0:18:20.960 --> 0:18:24.800 in the Senate where they are worried about agriculture in 0:18:24.920 --> 0:18:27.800 terms of China and the US negotiations, forge about all 0:18:27.840 --> 0:18:30.760 the chest thumping, as you call it, that we're gonna 0:18:30.760 --> 0:18:34.840 witness in Washington, what does a given senator from Iowa 0:18:35.040 --> 0:18:38.640 or Idaho actually think, Well, they would like to have 0:18:38.840 --> 0:18:41.400 China buy more U S agricultural products, and I think 0:18:41.440 --> 0:18:43.520 the thing that they're most worried about is that there 0:18:43.600 --> 0:18:46.520 is some huge breakdown in trade talks or in the 0:18:46.920 --> 0:18:51.040 in the bilateral agricultural relationship between China and the US. 0:18:51.040 --> 0:18:53.200 Were China says, okay, no Moss, We're going to buy 0:18:53.240 --> 0:18:56.640 everything from Brazil. That would be a disaster. So that's 0:18:56.640 --> 0:18:59.560 why you see the Chinese offering to buy more agricultural 0:18:59.600 --> 0:19:03.920 products part of their trade talks. You're you're a student 0:19:04.040 --> 0:19:07.280 of Washington and you're doing this for Vanguard. I understand, 0:19:07.840 --> 0:19:10.840 but you're doing it within a gilded age. I'm looking 0:19:10.840 --> 0:19:15.120 at yields today coming in abruptly again the German tenure 0:19:15.160 --> 0:19:18.480 I find stunning now folks, point zero nine eight, it's 0:19:18.520 --> 0:19:22.679 ground down another thousands. I mean, these are all important discussions, 0:19:22.680 --> 0:19:26.320 and their discussions of disinflation, that's right. Does that mean 0:19:26.359 --> 0:19:29.440 we don't care about Martin Feldstein's fiscal deficit or debt 0:19:29.480 --> 0:19:33.280 because low yields are going to come to the rescue forever? Well, 0:19:33.280 --> 0:19:35.280 that's that's a really good question. We can have a 0:19:35.480 --> 0:19:38.159 deep academic discussion, but we don't do those on Friday 0:19:38.240 --> 0:19:41.120 to continue. I know, I know. So you know, in 0:19:41.119 --> 0:19:43.560 in active funds, as investors were trying to figure out 0:19:43.600 --> 0:19:46.600 where we can make some some return for our investors, 0:19:47.000 --> 0:19:49.840 um with with our with our strategies and and You're right, 0:19:49.880 --> 0:19:52.199 it is very challenging, but there are a lot of 0:19:52.240 --> 0:19:55.840 tail winds. It's not just trade, It's not just this president. 0:19:55.880 --> 0:19:58.239 It's not just this last couple of years that are 0:19:58.320 --> 0:20:03.640 driving yields lower. Uh. You have a combination of demographics, technology, globalization, 0:20:03.960 --> 0:20:07.800 whereas inflation. This this should be the perfect environment for inflation, 0:20:08.040 --> 0:20:10.439 and we can barely crack two percent. As a student 0:20:10.600 --> 0:20:15.080 of Washington, how do you how do you define the 0:20:15.160 --> 0:20:18.520 paths forward for our new socialism? Howard Dean spoke to 0:20:18.600 --> 0:20:21.640 us this morning and he was piercing about it being 0:20:21.680 --> 0:20:24.000 a one off. Do you do you buy it as 0:20:24.040 --> 0:20:26.040 a one off. We've been doing a lot of work 0:20:26.240 --> 0:20:28.960 in our in our group at Vanguard on income inequality 0:20:29.119 --> 0:20:32.399 and ways to think about it, try to resolve it. 0:20:32.720 --> 0:20:36.080 I think some of these discussions around socialism and changing 0:20:36.160 --> 0:20:40.960 the overall objectives of government are driven by income inequality, 0:20:41.119 --> 0:20:43.320 and um, you know that's something we're gonna have to tackle. 0:20:43.359 --> 0:20:46.760 So I don't think socialism, this discussion around socialism is 0:20:47.119 --> 0:20:50.720 the one way. I think it's a symptom of an 0:20:50.760 --> 0:20:54.360 economic environment that's been growing over a number of years, 0:20:54.680 --> 0:20:57.359 got a major problem. Since I've last seen you, I 0:20:57.440 --> 0:21:00.439 wanted to Helsinki with the leaders of the world. And 0:21:00.480 --> 0:21:03.320 I enjoyed the Helsinki summer, which is like twenty five 0:21:03.320 --> 0:21:07.080 hours in a day. What a gorgeous city. I was thunderstood. 0:21:07.400 --> 0:21:09.879 Have you been there in the winter? Yes, I actually 0:21:10.000 --> 0:21:13.040 was just there in January. What is it like when 0:21:13.080 --> 0:21:15.800 it's dark? Stop? What's it like when it's dark all day? 0:21:15.920 --> 0:21:19.119 It's lovely, it's snows and it's sort of glows in 0:21:19.160 --> 0:21:21.320 the snow with a beautiful, huge moon, and there's no 0:21:21.359 --> 0:21:24.440 one there. It's very peaceful. You would be bored. Is 0:21:24.520 --> 0:21:27.439 it like Frozen? I mean everything it's frozen. It's like 0:21:27.480 --> 0:21:29.640 the movie Frozen. Yeah, they have They actually have ice 0:21:29.760 --> 0:21:33.639 ratings for the different inlets and lake areas, so that 0:21:33.800 --> 0:21:36.520 you know, you know, if you got to go out 0:21:36.720 --> 0:21:39.320 like the opening scene of Frozen. Yeah, you know this 0:21:39.359 --> 0:21:41.879 one Paul Sweeney where the iceman come out. Of course, 0:21:44.119 --> 0:21:48.120 I'm sorry. I was gonna say, you'd never leave the bar. 0:21:50.640 --> 0:21:52.359 I think you have to wait. They have a drink. 0:21:52.440 --> 0:21:55.000 I tried. It's what is the drink? I tried. It's white. 0:21:55.400 --> 0:22:00.159 It's a coconut thing or something. I don't know, don't me. 0:22:00.560 --> 0:22:03.639 It's like some Paul Sweeney somehow nose the answer to this. 0:22:04.080 --> 0:22:07.600 It's like some famous finished drink with gin and white 0:22:07.640 --> 0:22:10.560 stuff in it or something that sounds perfect for they 0:22:10.800 --> 0:22:12.879 use it a duke when they lose. Amatheist, Thank you 0:22:12.920 --> 0:22:15.360 so much, so good to see you. And please, where 0:22:15.359 --> 0:22:19.119 are you based out of now? Are you at Vanguard 0:22:19.680 --> 0:22:22.760 Active Fixed Income Team? So we're you know, we're managing 0:22:22.800 --> 0:22:25.119 a couple hundred billion in active assets. Thank you. You You 0:22:25.200 --> 0:22:27.359 gotta go to television. Thank you so much for joining 0:22:27.440 --> 0:22:45.280 us Amatheist with Vanguard Today. There are exactly three people 0:22:45.520 --> 0:22:49.000 that I would like to talk to about this exceptionally 0:22:49.080 --> 0:22:52.040 historic week in fashion. One is, of course, the great 0:22:52.160 --> 0:22:55.720 Vanessa Friedman over at the New York Times, My good 0:22:55.760 --> 0:22:59.200 friend Robert Burke with all he's done in retail over 0:22:59.240 --> 0:23:03.960 the years. And our guest Dana Telsey. Dana, you grew 0:23:04.080 --> 0:23:09.359 up literally X number of years old, toddling around Bergdorf Goodman. 0:23:09.480 --> 0:23:14.280 When did you discover Chanel at Bergdorf Goodman many many 0:23:14.359 --> 0:23:18.760 years ago? What is amazing about Channel is in every category, 0:23:19.160 --> 0:23:23.960 whether it's handbags, whether it's clothing, whether it's cosmetics, they dominate. 0:23:24.240 --> 0:23:27.080 And while Carl Lagerfeld did not just for Chanel but 0:23:27.160 --> 0:23:30.199 for the fashion industry. Seems like we'll never see anything 0:23:30.240 --> 0:23:33.320 like that again. Why will we never see a Lagerfeld again? 0:23:33.440 --> 0:23:35.879 Is it just there's too much money being thrown at 0:23:35.920 --> 0:23:38.600 the industry. I mean, he did Chloe and then he 0:23:38.640 --> 0:23:41.160 did this, he did that, and then a thirty year 0:23:41.240 --> 0:23:44.600 plus run at Chanel. Why can't that Pixie does be 0:23:44.680 --> 0:23:48.959