WEBVTT - Rice's Actions in Trump Intelligence May Be Improper, Lake Says

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<v Speaker 1>Brought you by Bank of America Mary Lynch. Investing in

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<v Speaker 1>of global connections. Mary Lynch, Pierce Fenner, and Smith Incorporated

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<v Speaker 1>member s I p C. Welcome to the Bloomberg Surveillance Podcast.

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<v Speaker 1>I'm Tom Keene with David Gura. Daily we bring you

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<v Speaker 1>insight from the best in economics, finance, investment, and international relations.

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<v Speaker 1>Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

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<v Speaker 1>of course, on the Bloomberg Bomb Formats. Is the vice

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<v Speaker 1>chairman of Kissinger Associate's former Under Secretary of State for

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<v Speaker 1>Economic Growth, Energy, and the Environment. He joins us now

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<v Speaker 1>in Bloomberg eleven three studios. But I'm good to see you,

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<v Speaker 1>good to be here as always. Let's start with this

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<v Speaker 1>meeting in Florida. Uh, we've seen the president try to

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<v Speaker 1>forge priest relationships with world leaders a few times now

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<v Speaker 1>since he took office. What's gonna be particularly different about

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<v Speaker 1>this encounter in Florida. Well, he's going to have to

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<v Speaker 1>take the measure of President Shijin Ping, who's a very formidable,

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<v Speaker 1>very skillful, very authoritative guy. He knows what he's doing.

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<v Speaker 1>He's been in office for quite some time, he has

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<v Speaker 1>a lot of power. He knows that he wants to

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<v Speaker 1>get out of this meeting, and I think Donald Trump

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<v Speaker 1>is going to have to do a lot of listening.

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<v Speaker 1>He doesn't know much about China, and I suspect Hijin

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<v Speaker 1>Ping will make a number of points about Chinese policy

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<v Speaker 1>that may be new to Trump's ears. So I think

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<v Speaker 1>it would be useful. I know Chijin Ping reasonably well.

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<v Speaker 1>I've met him a number of times. He's a very

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<v Speaker 1>impressive person and a very a very strong figure, and

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<v Speaker 1>he will be articulate in explaining China's views. Where China

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<v Speaker 1>can work with the US and where China feel it

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<v Speaker 1>can't work with the US. There are various areas. I

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<v Speaker 1>think they do want to work on North Korea. They

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<v Speaker 1>don't have as much influence as we perhaps think they do,

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<v Speaker 1>but they do have some. They certainly want to work

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<v Speaker 1>in dealing with terrorism. They want to work on climate

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<v Speaker 1>to the extent Trump wants to work on climate, and

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<v Speaker 1>they're now developing this very very ambitious, very I think

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<v Speaker 1>positive generally notion of increasing infrastructure in the region, and

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<v Speaker 1>a lot of American companies would like to participate in this.

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<v Speaker 1>The question is is Trump going to be willing to

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<v Speaker 1>allow that kind of participation to occur. So President Trump

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<v Speaker 1>doesn't know China well. On whom is he relying to

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<v Speaker 1>to to inform him on how the country works today?

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<v Speaker 1>He has some very capable people on the National Security

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<v Speaker 1>Council staff that will do this. Uh he He also

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<v Speaker 1>seems to be relying on his son in law, Jared Kushner.

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<v Speaker 1>I don't know how it is in a rock he'll

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<v Speaker 1>be dealing with China. But there are good people on

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<v Speaker 1>the National Secure Council staff, but the State Department is

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<v Speaker 1>not at full complement. A lot of the China experts

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<v Speaker 1>are there in the State Department among Foreign service officers,

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<v Speaker 1>but there is not an Assistant Secretary for the Far East,

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<v Speaker 1>non assistant secretary for many other functions as well. But

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<v Speaker 1>I suspect he'll get some good advice, but he has

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<v Speaker 1>to listen to the advice. He has to understand the

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<v Speaker 1>history of U. S. China relations, and he has to

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<v Speaker 1>measure his words very carefully because he has to be understood.

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<v Speaker 1>And if he appears not to really understand what's going

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<v Speaker 1>on in China, not to have any sense of Chinese history.

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<v Speaker 1>To make statements like he has in the past, I

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<v Speaker 1>think it will cause a lot of confusion. This is

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<v Speaker 1>a very important meeting because almost nothing constructive will be

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<v Speaker 1>dying internationally in the world over the next four to

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<v Speaker 1>eight to twelve years without a substantial measure of US

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<v Speaker 1>Chinese cooperation. He has to figure out a framework with

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<v Speaker 1>President Shooting Ping four. That kind of cooperation China is

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<v Speaker 1>very important. Americans should understand it. You can't push them

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<v Speaker 1>around there there they have strong nationalistic pressures. Internally in China,

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<v Speaker 1>they won't be pushed around. The way you deal with

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<v Speaker 1>them is to work with them in a constructive fashion.

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<v Speaker 1>Trump's negotiating tactics may work in the real estate area,

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<v Speaker 1>they're probably not going to work, almost certainly not going

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<v Speaker 1>to work in dealing with China if he takes that

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<v Speaker 1>sort of pugnacious approach that he sometimes does. Performance. You've

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<v Speaker 1>been partied to meetings like this before, you say, met

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<v Speaker 1>that the Chinese president several times as well. How do

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<v Speaker 1>they unfold what's what's going to happen here? How much

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<v Speaker 1>is the formality going to eclipse the opportunity here for

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<v Speaker 1>these two leaders to get to know each other on

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<v Speaker 1>any sort of personal level. Well, I suspect this will

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<v Speaker 1>be somewhat less formal than the meetings, given the sets

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<v Speaker 1>they were in Washington, given the setting, But they have

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<v Speaker 1>to get to know one another, and the best way

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<v Speaker 1>of doing that is for President Trump to listen to

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<v Speaker 1>President Hinjin Ping and hear what he has to say

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<v Speaker 1>first before weighing in with his thoughts. He can learn

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<v Speaker 1>uh a lot about China from listening to President She

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<v Speaker 1>and then say what he has to say. But the

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<v Speaker 1>United States has a problem. That is, we really don't

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<v Speaker 1>have an Asian strategy yet, we haven't put it together.

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<v Speaker 1>Is it that we want to be tough on trade?

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<v Speaker 1>What is our position in the on the question of

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<v Speaker 1>the islands and the South China Sea? What is our

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<v Speaker 1>position on Korea? The Chinese will have and do have

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<v Speaker 1>a strategy. We may or may not agree with the strategy,

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<v Speaker 1>but they have developed a strategy over a number of

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<v Speaker 1>years for the region and for the world. President She

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<v Speaker 1>announced a lot of that in Davos. We don't have

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<v Speaker 1>one yet, we haven't taken the time to put one together.

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<v Speaker 1>That puts President Trump at a disadvantage. He'll be making

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<v Speaker 1>a number of statements, But the Chinese are gonna wonder

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<v Speaker 1>are they part of a broader strategy or they ad

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<v Speaker 1>hoc and are they going to be follow it up?

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<v Speaker 1>Are they going to be ad hoc and then change

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<v Speaker 1>the next day or the next week, which creates a

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<v Speaker 1>sense of unreliability and and and misunderstanding. Well, what's the

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<v Speaker 1>worst press conference you ever had? Were you on a

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<v Speaker 1>plane traveling somewhere and you said, geez, I wish the

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<v Speaker 1>press wasn't here. Did that ever happen to Ambassador Worm answer?

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<v Speaker 1>I always like the press being there because I think

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<v Speaker 1>you normally could on planes have good conversations with the

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<v Speaker 1>press on an informal, off the record basis and explain

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<v Speaker 1>not just what the policy is or was, but give background.

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<v Speaker 1>And I think it's important to have background so the

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<v Speaker 1>press can understand not just what the policy is, but

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<v Speaker 1>how you got there, what the basis of the policy. Critically,

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<v Speaker 1>is Secretary Tillison's policy a new policy or do you

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<v Speaker 1>look at it as bombing him back to John Hay

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<v Speaker 1>or do you know Secretary Route or whoever. I think

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<v Speaker 1>he would be far better served by bringing the press

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<v Speaker 1>along on his trips. Every Secretary of State I've traveled with,

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<v Speaker 1>and I've traveled with seven or eight of them have

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<v Speaker 1>always starting with Rogers Vote to Panama. That was a

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<v Speaker 1>lovely trip in those days. But you know, with Secretary

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<v Speaker 1>Kissinger and and many other subsequent Secretary Kissinger, they've always

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<v Speaker 1>found a way of working with the press. Not the

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<v Speaker 1>press always agrees with them or they always agree with

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<v Speaker 1>the press, but they were able to use the fact

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<v Speaker 1>that the press was on the plane to give background information,

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<v Speaker 1>not just the policy, but why the policy was put

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<v Speaker 1>forward the way it was. What are the underlying reasons

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<v Speaker 1>for the policy, what are the underlying facts? To give

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<v Speaker 1>the press background so they can write their stories. They

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<v Speaker 1>may agree or not agree, but at least you can

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<v Speaker 1>give them background, get to know them, and it works

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<v Speaker 1>very well. It always worked for me, it always worked

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<v Speaker 1>for a number of the secretaries I've traveled with, and

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<v Speaker 1>I think that the American people deserve to have a

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<v Speaker 1>press traveling with the Secretary of State so they can

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<v Speaker 1>communicate the policies more clearly and thoughtfully and with sufficient background.

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<v Speaker 1>That's does Rex Taylerson have more of a worldview, world

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<v Speaker 1>outlook than this white as you talked about not having

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<v Speaker 1>the strategy here going into this meeting with China at

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<v Speaker 1>least not knowing it. Where's that Where's that strategy being devised?

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<v Speaker 1>I assume it's being devised primarily in the National Security

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<v Speaker 1>Council among National Security Council staff. But if they're wise,

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<v Speaker 1>they will call on the experts in the State Department

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<v Speaker 1>who know China very well. Many of them have served

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<v Speaker 1>a long time in China, and I think they can

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<v Speaker 1>add a great deal to the thought process that goes

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<v Speaker 1>into putting together what the President says and and putting

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<v Speaker 1>together a strategy. If that's indeed what they intend to do.

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<v Speaker 1>But since you don't have a lot of people at

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<v Speaker 1>higher levels, it's become a very difficult process to put

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<v Speaker 1>a strategy together. Let's come back with Ambassador harm Mats

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<v Speaker 1>of Kissinger Associates. Of course, this public service to the

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<v Speaker 1>Obama administration some important thoughts. They're linking uh State Department

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<v Speaker 1>matters into Treasury and fiscal policy. Maybe coming back, we'll

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<v Speaker 1>talk about some of the constraints that any administration were

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<v Speaker 1>to have with the dynamics of our debt and deficits.

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<v Speaker 1>Let's rip up the script. I mean, come on, David,

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<v Speaker 1>you have no sleep. You know your team, one our

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<v Speaker 1>executive producers gonna achieve sainthood. So let's rip up the

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<v Speaker 1>script of Robert Pimtz Bob the French election. We are

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<v Speaker 1>distant from Shirock Mitterran Valerie just started to staying. I

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<v Speaker 1>just got an email from Anthony from Sparta. He wants

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<v Speaker 1>to hear my French. He loved it on TV this

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<v Speaker 1>morning tonight. There's a debate. There's all people debating exact mole.

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<v Speaker 1>They're becoming American like, but they're not. You know, the

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<v Speaker 1>French are not becoming American like. They are not. But

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<v Speaker 1>there is a very bright star on the French horizon.

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<v Speaker 1>Emmanuel mccron. Macron was the economic minister in the alarmed

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<v Speaker 1>government earlier on. I know him very well. He's a

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<v Speaker 1>very good friend. He used to work for Rothschild. He's

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<v Speaker 1>an internationalist. He's a fresh new face on the horizon.

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<v Speaker 1>He's doing very well in the polls and I do

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<v Speaker 1>believe that if he were elected president of France, it

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<v Speaker 1>would be a very positive boost for France and a

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<v Speaker 1>very positive boost for Europe and for French American relations.

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<v Speaker 1>I think he's a new rising star and a very

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<v Speaker 1>positive force on the French political scene. What's the central

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<v Speaker 1>issue here in this election is it? Is it to

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<v Speaker 1>membership in the EU? Can you paint with his broader

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<v Speaker 1>brushes that I think it's much more the economy and

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<v Speaker 1>how to deal with the economy. How to get the

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<v Speaker 1>economy going on a sustained basis, uh that would be

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<v Speaker 1>number one. The second is how to work with the

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<v Speaker 1>other major EU partners. Assuming Merkel is re elected, or

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<v Speaker 1>at least as the head of a coalition that's reelected

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<v Speaker 1>may be different from the one she has now, she

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<v Speaker 1>would be an important partner. The Dutch have come through

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<v Speaker 1>without moving to this populace right that some people feared.

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<v Speaker 1>So it may well be that the rising tide of

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<v Speaker 1>the populace right is now receding, and it would received

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<v Speaker 1>a lot further if Matt Crown were elected. So I

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<v Speaker 1>think working with the other Europeans is important, and also

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<v Speaker 1>strengthening NATO. The French understand. I believe that a strong NATO,

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<v Speaker 1>a coherent EU, strong relationship with the US all are

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<v Speaker 1>very important to the future of France. And you need

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<v Speaker 1>someone who is pragmatic to do that. So bring about

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<v Speaker 1>Uncle a Merca. We last spoke. I think before she

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<v Speaker 1>went to the White House, and we were talking about

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<v Speaker 1>what you were going to be observing as all of

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<v Speaker 1>that unfolded. Uh, I'm sure you watched it. I'm sure

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<v Speaker 1>you listen to the to the press conference after US

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<v Speaker 1>Ambassador Harmon at the steam was coming out of this

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<v Speaker 1>so much. He was melting ice trying to be diplomatic.

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<v Speaker 1>I was trying to be diplomatic. But where where does

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<v Speaker 1>that relationship go from from what we sought the White House? Well,

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<v Speaker 1>what I don't understand is that Trump does not seem

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<v Speaker 1>to have the background, um, the historical background to really

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<v Speaker 1>understand the origins of Native the origins of the EU,

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<v Speaker 1>and why they're so important to the US. The US

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<v Speaker 1>was a great power after World War Two, impart because

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<v Speaker 1>it had a strong economy and a strong military, but

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<v Speaker 1>it was also great power because it developed strong alliances.

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<v Speaker 1>It worked to strengthen European unity, which was important for

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<v Speaker 1>stability in Europe and also to counter the spread of

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<v Speaker 1>Soviet Communism during the Cold War. Now we need Europe

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<v Speaker 1>as a partner, UH, to deal with a number of

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<v Speaker 1>things that Putin is doing in various parts of Europe.

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<v Speaker 1>He's trying to undermine European cohesion cause fragmentation within European

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<v Speaker 1>countries and among them, and certainly in NATO. We need

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<v Speaker 1>a strong Europe to resist that kind of thing. And

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<v Speaker 1>and that's really what he has to understand, that that

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<v Speaker 1>a strong Europe can be a big asset. If you

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<v Speaker 1>want to make America great again, you need to have

0:13:14.320 --> 0:13:20.640
<v Speaker 1>also great allies, great friendships, great partnerships, and that should

0:13:20.640 --> 0:13:23.959
<v Speaker 1>be part of a make America great strategy if that's

0:13:24.000 --> 0:13:26.640
<v Speaker 1>the strategy he wants to pursue. But you're not going

0:13:26.679 --> 0:13:29.480
<v Speaker 1>to be great if you have only a strong economy

0:13:29.520 --> 0:13:32.080
<v Speaker 1>and a strong military and you have weak allies. That

0:13:32.160 --> 0:13:34.880
<v Speaker 1>will not make America great again. He's got to make

0:13:34.920 --> 0:13:38.040
<v Speaker 1>sure our allies are great again. Working with Merkel, working

0:13:38.040 --> 0:13:41.760
<v Speaker 1>with Macrol if he's elected, working with other European leaders

0:13:41.840 --> 0:13:44.360
<v Speaker 1>is very definitely a part of that process, or at

0:13:44.440 --> 0:13:48.679
<v Speaker 1>least should be in the need of strategy for doing it. Ambassador,

0:13:48.840 --> 0:13:50.520
<v Speaker 1>Thank you so much, kind of you to come into

0:13:50.720 --> 0:13:54.120
<v Speaker 1>just so much to talk about um just an extraordinary

0:13:54.160 --> 0:13:58.240
<v Speaker 1>time and the Crystal much more from our Washington News bureau.

0:14:10.800 --> 0:14:14.240
<v Speaker 1>Eli Lake, Who's Bloomberg View column last night came out

0:14:14.280 --> 0:14:16.560
<v Speaker 1>in the afternoon percolated in the afternoon. It really blew

0:14:16.640 --> 0:14:20.240
<v Speaker 1>up about four pm UH last night over Susan Rice

0:14:20.280 --> 0:14:25.760
<v Speaker 1>of the Obama administration requesting the names and documents that

0:14:25.800 --> 0:14:28.960
<v Speaker 1>have been blacked out had been redacted. Mr Lake joins

0:14:29.040 --> 0:14:32.360
<v Speaker 1>us right now, I know David's got some important questions. Eli.

0:14:32.720 --> 0:14:36.000
<v Speaker 1>I look at the Google feed and it's just as

0:14:36.040 --> 0:14:40.560
<v Speaker 1>polarized as you would imagine. Susan Rice unmasked Trump team.

0:14:40.600 --> 0:14:43.960
<v Speaker 1>The latest wire tap bombshell turns out to be another

0:14:44.080 --> 0:14:47.680
<v Speaker 1>dud unmasking reporter. This is bigger than Trump that of

0:14:47.720 --> 0:14:51.120
<v Speaker 1>course some Fox News insider, which is it, Eli Lake?

0:14:51.440 --> 0:14:57.560
<v Speaker 1>Who should take comfort from your Bloomberg view piece? At

0:14:57.640 --> 0:15:01.640
<v Speaker 1>this point, I'm really reluctant to right to say, you

0:15:01.680 --> 0:15:03.480
<v Speaker 1>know where the story is going to end, because I'm

0:15:03.480 --> 0:15:08.400
<v Speaker 1>still reporting it. UM. I think it's important for the

0:15:08.400 --> 0:15:13.560
<v Speaker 1>Trump supporters to recognize that this was a unique situation.

0:15:13.720 --> 0:15:19.240
<v Speaker 1>After the election, there were credible allegations that UM that

0:15:19.320 --> 0:15:21.760
<v Speaker 1>there was credible information I should say, an intelligence community

0:15:21.800 --> 0:15:25.600
<v Speaker 1>had concluded the Russians tried to influence the election. There

0:15:25.840 --> 0:15:29.720
<v Speaker 1>was an active FBI investigation that was confirmed last months

0:15:30.240 --> 0:15:33.520
<v Speaker 1>UH into the Trump campaign to see if they UH

0:15:33.680 --> 0:15:37.040
<v Speaker 1>collaborated in some way with the Russians in this influenced operation.

0:15:37.440 --> 0:15:39.400
<v Speaker 1>Susan Rice would have had to have known about that.

0:15:40.000 --> 0:15:43.520
<v Speaker 1>And even though we my my reporting says that she

0:15:43.720 --> 0:15:47.240
<v Speaker 1>was asking for information to be on mass on us,

0:15:47.400 --> 0:15:49.600
<v Speaker 1>the US person, to be on maths that were affiliated

0:15:49.600 --> 0:15:51.160
<v Speaker 1>with the Trump transition that did not have to do

0:15:51.200 --> 0:15:54.280
<v Speaker 1>with Russia. At the same time, this is the environment,

0:15:54.360 --> 0:15:57.800
<v Speaker 1>the backdrop, and it was relevant in that sense of

0:15:57.800 --> 0:16:01.000
<v Speaker 1>a national in the in the national security sense, particularly

0:16:01.080 --> 0:16:02.640
<v Speaker 1>if we were to believe other reports in the New

0:16:02.720 --> 0:16:04.280
<v Speaker 1>York Times and other places that there was a lot

0:16:04.280 --> 0:16:07.960
<v Speaker 1>of intelligence coming in after the election that did show

0:16:08.000 --> 0:16:10.520
<v Speaker 1>that there were more contacts and meetings and so forth

0:16:10.560 --> 0:16:14.440
<v Speaker 1>between Trump World and Russia. On the other hand, none

0:16:14.480 --> 0:16:20.160
<v Speaker 1>of that has amounted to the impeachable offense of collusion. Uh.

0:16:20.200 --> 0:16:22.840
<v Speaker 1>This has been stated by people like James Clapper, who

0:16:22.920 --> 0:16:27.560
<v Speaker 1>was Barack Obama's Director of National Intelligence. And it appears

0:16:27.600 --> 0:16:31.040
<v Speaker 1>that what we're learning now is that the standard for

0:16:31.720 --> 0:16:35.160
<v Speaker 1>a national security advisor to ask who a U S

0:16:35.200 --> 0:16:37.920
<v Speaker 1>person is who is incidentally collected there's no warrant on

0:16:37.960 --> 0:16:40.800
<v Speaker 1>this person, UH in in a in a routine kind

0:16:40.800 --> 0:16:44.280
<v Speaker 1>of wire tap of a foreign target or criminal target

0:16:45.320 --> 0:16:50.160
<v Speaker 1>is so loose that it pretty much you could you

0:16:50.200 --> 0:16:52.440
<v Speaker 1>could you can pretty much look to see anything and

0:16:52.920 --> 0:16:55.920
<v Speaker 1>you would get your request. It appears fulfilled, which is

0:16:55.960 --> 0:16:59.800
<v Speaker 1>what happened in this National Security Council review that started

0:17:00.160 --> 0:17:03.359
<v Speaker 1>under the Trump administration of this policy known as unmaking.

0:17:04.000 --> 0:17:07.040
<v Speaker 1>And that right there is something that ought to wary

0:17:07.200 --> 0:17:11.000
<v Speaker 1>Democrats as well as Republicans, because right now the president

0:17:11.040 --> 0:17:13.840
<v Speaker 1>of Democrat as a president is Sonald Trump. He's a Republican.

0:17:14.280 --> 0:17:18.440
<v Speaker 1>And if indeed, you know, the rules are so laxed

0:17:18.480 --> 0:17:22.480
<v Speaker 1>that you can uh have a back door loophole to

0:17:22.520 --> 0:17:26.520
<v Speaker 1>go around the very strict procedures for surveilling US persons

0:17:26.560 --> 0:17:29.200
<v Speaker 1>by going to a stupid sport known as the FISA court, well,

0:17:29.240 --> 0:17:31.000
<v Speaker 1>then this is something that Trump could then do to

0:17:31.080 --> 0:17:34.680
<v Speaker 1>his domestic opposition. And Democrats should be interested in geting

0:17:34.720 --> 0:17:37.199
<v Speaker 1>the bombo. And I'm actually happy to say that at

0:17:37.280 --> 0:17:40.160
<v Speaker 1>least the ranking Democrats in the Senate and House Intelligence

0:17:40.160 --> 0:17:42.240
<v Speaker 1>committees are now saying that this is something worth looking

0:17:42.240 --> 0:17:45.840
<v Speaker 1>at you. This is great, Uh, the surveillance and friends,

0:17:45.880 --> 0:17:49.040
<v Speaker 1>I guess that's what we'll call it, David, Right, we

0:17:49.080 --> 0:17:52.879
<v Speaker 1>need a new couch Eli Here's what I'm struggling with.

0:17:53.320 --> 0:17:56.080
<v Speaker 1>You've got the credible information, you've got the FBI investigation,

0:17:56.119 --> 0:17:59.560
<v Speaker 1>you've got the independent reporting by a number of journalism organizations.

0:18:00.200 --> 0:18:01.720
<v Speaker 1>Would there be those who say, look, this is a

0:18:01.760 --> 0:18:04.040
<v Speaker 1>national security advisor looking into something that would have been

0:18:04.040 --> 0:18:05.719
<v Speaker 1>of great concern. You could have outlined this in your

0:18:05.760 --> 0:18:09.560
<v Speaker 1>piece as well. There's nothing here to indicate you're kind

0:18:09.560 --> 0:18:11.240
<v Speaker 1>of alluding to this moment to go that that Susan

0:18:11.320 --> 0:18:14.280
<v Speaker 1>Rice did anything wrong. We're illegal? Am I right in

0:18:14.280 --> 0:18:18.320
<v Speaker 1>reading that correctly? Well? Illegal? I think it's I think

0:18:18.720 --> 0:18:20.639
<v Speaker 1>when I've talked to experts about this, you know the

0:18:20.720 --> 0:18:24.480
<v Speaker 1>law and the procedures, I think it's it's it's legal

0:18:24.560 --> 0:18:27.440
<v Speaker 1>for a natural security advisor to make these unmapped requests,

0:18:27.440 --> 0:18:31.120
<v Speaker 1>and the bar is very low. Improper is a different questions.

0:18:31.359 --> 0:18:34.840
<v Speaker 1>And because this is a key point here, I think

0:18:34.880 --> 0:18:39.000
<v Speaker 1>people are missing. This is stuff that is so shrouded

0:18:39.040 --> 0:18:42.680
<v Speaker 1>in state secrecy. We rarely really get much of an

0:18:42.680 --> 0:18:47.000
<v Speaker 1>insight into how this process works. Every few years, when

0:18:47.320 --> 0:18:50.639
<v Speaker 1>the FIE the law is reauthorized in Congress, there are

0:18:50.720 --> 0:18:53.760
<v Speaker 1>hearings and the leaders of the intelligence community make a

0:18:53.800 --> 0:18:56.920
<v Speaker 1>show of saying that there are great that the intelligence

0:18:56.920 --> 0:19:00.200
<v Speaker 1>community takes great pains to redact the names of s

0:19:00.280 --> 0:19:04.840
<v Speaker 1>persons who were incidentally collected in eavesdropping and monitoring in

0:19:04.840 --> 0:19:08.080
<v Speaker 1>that kind of thing. But if it turns out that

0:19:08.160 --> 0:19:12.240
<v Speaker 1>a political appointee can pretty much request to unmask that

0:19:12.359 --> 0:19:16.439
<v Speaker 1>information at any time, well then it's worth finding you know,

0:19:16.720 --> 0:19:19.920
<v Speaker 1>the origins of this policy, how long this has been

0:19:19.920 --> 0:19:22.959
<v Speaker 1>going on, and hopefully a sense to reform it, So

0:19:23.040 --> 0:19:26.679
<v Speaker 1>I would separate the questions of illegal and improper. And

0:19:26.720 --> 0:19:29.240
<v Speaker 1>if it did turn out that in fact, Susan Rice

0:19:29.600 --> 0:19:32.640
<v Speaker 1>was doing more than just asking for the end the information,

0:19:32.760 --> 0:19:36.320
<v Speaker 1>but was spreading that around to Democrats for any kind

0:19:36.359 --> 0:19:39.000
<v Speaker 1>of political advantage, or that she had something to do,

0:19:39.040 --> 0:19:40.399
<v Speaker 1>and I'm not reporting this, I want to make this

0:19:40.520 --> 0:19:43.200
<v Speaker 1>very clear. She had something to do with leaking um,

0:19:43.280 --> 0:19:45.359
<v Speaker 1>the identity of Mike Flynn, who did end up in

0:19:45.400 --> 0:19:48.320
<v Speaker 1>the newspaper in his phone calls with the Russian ambassador,

0:19:48.600 --> 0:19:50.399
<v Speaker 1>and that forced him to resign. That did have a

0:19:50.440 --> 0:19:54.040
<v Speaker 1>huge political effect. Um, then that reason, she really isn't

0:19:54.040 --> 0:19:56.520
<v Speaker 1>a bit of trouble here. So I want to make

0:19:56.520 --> 0:19:59.359
<v Speaker 1>it very clear that the thing that I'm reporting on

0:19:59.520 --> 0:20:01.840
<v Speaker 1>right now is in and of itself it doesn't appear

0:20:01.880 --> 0:20:04.320
<v Speaker 1>to be illegal, but it may very well be improper.

0:20:04.359 --> 0:20:06.520
<v Speaker 1>And I'm starting to think that the real scandal here

0:20:06.960 --> 0:20:08.840
<v Speaker 1>is the fact that it's not illegal, that it may

0:20:08.880 --> 0:20:11.760
<v Speaker 1>be standard operating procedure. And how long has this been

0:20:11.800 --> 0:20:14.000
<v Speaker 1>going on? Is the question? Can you introduce us here

0:20:14.040 --> 0:20:16.080
<v Speaker 1>to a principle you mentioned in the piece. That's Ezra

0:20:16.200 --> 0:20:17.879
<v Speaker 1>co and Wattnick the name that I don't think we'll

0:20:17.920 --> 0:20:20.359
<v Speaker 1>be familiar to many of our of our listeners, but

0:20:20.520 --> 0:20:23.000
<v Speaker 1>is is or was wielding a pretty heavy hand on

0:20:23.040 --> 0:20:25.800
<v Speaker 1>the National Security Council as an advisor to to the president.

0:20:26.040 --> 0:20:28.080
<v Speaker 1>Who is he? What do we know about his background

0:20:28.160 --> 0:20:31.439
<v Speaker 1>and why was he the one conducting this investigation? Well,

0:20:31.480 --> 0:20:33.600
<v Speaker 1>he's a Defense intelligence I mean he's a he's a

0:20:33.600 --> 0:20:38.040
<v Speaker 1>former Defense Intelligence Agency officer. UM. He was brought in

0:20:38.280 --> 0:20:40.960
<v Speaker 1>originally by Mike flann and I have to say that,

0:20:41.000 --> 0:20:43.159
<v Speaker 1>you know, what he was doing was well within his

0:20:43.240 --> 0:20:47.320
<v Speaker 1>remit as the UM National Security Council's Director for Intelligence,

0:20:47.320 --> 0:20:50.440
<v Speaker 1>which is to review policies like this, which is when

0:20:51.000 --> 0:20:53.760
<v Speaker 1>the White House, you know, what is the procedure for

0:20:53.840 --> 0:20:56.720
<v Speaker 1>unmasking US persons in these reports? And that's when he

0:20:57.520 --> 0:21:01.840
<v Speaker 1>discovered the what the kinds of phenomenal anomalies and then

0:21:01.920 --> 0:21:04.920
<v Speaker 1>and made this available to the General Council. Um, he's

0:21:04.960 --> 0:21:07.480
<v Speaker 1>somebody who has gotten recently, you know, there's been some

0:21:07.520 --> 0:21:10.320
<v Speaker 1>interest to him among you know, sort of the progressive

0:21:10.320 --> 0:21:14.800
<v Speaker 1>and liberal media. Um. Although I have to say at

0:21:14.840 --> 0:21:17.639
<v Speaker 1>this point, Um, the argument that you know, what he

0:21:17.680 --> 0:21:19.560
<v Speaker 1>was doing is improper, I have not seen it. I'm

0:21:19.880 --> 0:21:22.320
<v Speaker 1>you know, we're all reporting his story out. But you know,

0:21:22.760 --> 0:21:25.760
<v Speaker 1>eventually he hands the information over, the General Council says,

0:21:25.760 --> 0:21:28.080
<v Speaker 1>all right, we want you to stop the investigation. At

0:21:28.080 --> 0:21:31.080
<v Speaker 1>this point he complied with that as I've I can,

0:21:31.119 --> 0:21:34.280
<v Speaker 1>I can report and you know, and kind of continued on.

0:21:34.359 --> 0:21:37.680
<v Speaker 1>But the idea that it was improper to review this

0:21:37.880 --> 0:21:41.560
<v Speaker 1>stuff for a policy like this, I mean, that's exactly

0:21:41.600 --> 0:21:44.520
<v Speaker 1>what the Director for Intelligence or what I think it's called,

0:21:44.560 --> 0:21:48.199
<v Speaker 1>the classified Executive Secretariat, it is supposed to do. As

0:21:48.200 --> 0:21:50.720
<v Speaker 1>an asshole security Council. It's not it's not really out

0:21:50.720 --> 0:21:52.840
<v Speaker 1>of the ordinary. And you know, and for that job

0:21:52.880 --> 0:21:55.600
<v Speaker 1>he was qualified. What happens here next day lie with

0:21:55.600 --> 0:21:58.080
<v Speaker 1>with the Chairman of the House Intelligence Committe, Devin Nonez.

0:21:58.880 --> 0:22:01.879
<v Speaker 1>We've seen what you sort of characterizes as bizarre behavior

0:22:01.960 --> 0:22:03.760
<v Speaker 1>him going back and forth to the White House. Obviously

0:22:03.760 --> 0:22:06.280
<v Speaker 1>this could be all tied up into that, but he's

0:22:06.320 --> 0:22:09.240
<v Speaker 1>lost the confidence of some of his colleagues on the hill.

0:22:10.000 --> 0:22:11.359
<v Speaker 1>What are the next steps do you think for the

0:22:11.400 --> 0:22:13.720
<v Speaker 1>for the chairman of the House Intelligence Committee. Well, I

0:22:13.720 --> 0:22:16.640
<v Speaker 1>wrote a very tough column last week because I thought that,

0:22:16.800 --> 0:22:18.960
<v Speaker 1>you know, the story that he had told the press,

0:22:19.000 --> 0:22:21.960
<v Speaker 1>and specifically in an interview with me, it was very

0:22:22.000 --> 0:22:23.800
<v Speaker 1>misleading because he made it appear that he was in

0:22:23.960 --> 0:22:27.439
<v Speaker 1>forming President Trump of new information when you know, his

0:22:27.480 --> 0:22:30.520
<v Speaker 1>own White House had been uh you know, knew about

0:22:30.560 --> 0:22:32.600
<v Speaker 1>it and discovered it and so forth. That said, I

0:22:32.680 --> 0:22:35.840
<v Speaker 1>also understand that the Chairman had his own independent sources

0:22:35.880 --> 0:22:38.360
<v Speaker 1>before all of this, that we're telling him that there

0:22:38.440 --> 0:22:41.840
<v Speaker 1>was you know, improper in mass unmasking going on, and

0:22:41.880 --> 0:22:45.040
<v Speaker 1>that there um were a number of kind of intelligence

0:22:45.040 --> 0:22:47.520
<v Speaker 1>reports that were making their way to the White House

0:22:47.520 --> 0:22:51.760
<v Speaker 1>setting that that that had improper details about the Trump transition.

0:22:52.160 --> 0:22:54.199
<v Speaker 1>But that said, you know, the fact that it was

0:22:54.400 --> 0:22:57.280
<v Speaker 1>he made it appear that he was forming the president

0:22:57.320 --> 0:23:00.360
<v Speaker 1>of something he didn't know. Um, I thought was uh

0:23:00.640 --> 0:23:03.400
<v Speaker 1>count miss leading and deceptive, and I did burn him

0:23:03.400 --> 0:23:06.040
<v Speaker 1>on noting my diet I criticized him very harshly a

0:23:06.040 --> 0:23:09.040
<v Speaker 1>column last week on that said, the fact that now

0:23:09.080 --> 0:23:12.879
<v Speaker 1>it's come out, um that Susan Rice had requested in

0:23:13.240 --> 0:23:15.680
<v Speaker 1>dozens of the cases. You know, this kind of unmasking

0:23:15.760 --> 0:23:19.520
<v Speaker 1>in some ways vindicates is initial concerns about this, which

0:23:19.800 --> 0:23:22.760
<v Speaker 1>because it's very classified and because it's a really complex

0:23:22.760 --> 0:23:26.920
<v Speaker 1>issue and most people covering it our political orders. Yeah,

0:23:27.080 --> 0:23:28.840
<v Speaker 1>we're gonna have to leave it there, Eli, Thank you

0:23:28.920 --> 0:23:33.080
<v Speaker 1>so much. Really appreciate the sequence of Bloomberg View columns

0:23:33.080 --> 0:23:35.240
<v Speaker 1>that we've seen from Mr Like Eli like writing for

0:23:35.320 --> 0:23:47.880
<v Speaker 1>Bloomberg View, making national news brought you by Bank of America,

0:23:48.000 --> 0:23:52.200
<v Speaker 1>Mary Lynch, dedicated to bringing our clients insights and solutions

0:23:52.520 --> 0:23:55.800
<v Speaker 1>to meet the challenges of a transforming world. That's the

0:23:55.880 --> 0:24:01.000
<v Speaker 1>power of global connections. Mary Lynch, Pierce Federan Smith Incorporated,

0:24:01.160 --> 0:24:06.919
<v Speaker 1>Member s I p C. So I'm gonna make this

0:24:07.000 --> 0:24:08.600
<v Speaker 1>very quick because David Girl has got to get to

0:24:08.600 --> 0:24:11.040
<v Speaker 1>her esteem. Guest here who's taken an oath to be

0:24:11.119 --> 0:24:13.879
<v Speaker 1>brief with us, uh today, here's the deal. Many of

0:24:13.920 --> 0:24:16.240
<v Speaker 1>you know that I consider the Verizon a o L

0:24:16.320 --> 0:24:19.280
<v Speaker 1>transaction to be one of the great transactions of this

0:24:19.400 --> 0:24:21.919
<v Speaker 1>Era by Tim Armstrong. I put it in a class

0:24:21.920 --> 0:24:26.480
<v Speaker 1>with Pete Peterson's Blackstone transaction. It's just an amazing deal

0:24:26.520 --> 0:24:30.160
<v Speaker 1>to bring a O l over to Verizon. Forget about that.

0:24:30.200 --> 0:24:33.520
<v Speaker 1>What you need to know, David Gura is Kelly Potter

0:24:33.760 --> 0:24:38.120
<v Speaker 1>is out of Lawrence Academy playing hockey for Connecticut College.

0:24:38.359 --> 0:24:42.560
<v Speaker 1>And the uproar is, Tim, nothing has changed from when

0:24:42.600 --> 0:24:46.560
<v Speaker 1>you were coaching hockey at CC. North Dakota is gonna

0:24:46.600 --> 0:24:50.600
<v Speaker 1>get rid of women's hockey. Nothing's changed in the women's sports,

0:24:51.000 --> 0:24:55.040
<v Speaker 1>of this women's sports milieu in twenty years. Tom, let

0:24:55.040 --> 0:24:57.160
<v Speaker 1>me tell you something. First, great to be back here

0:24:57.320 --> 0:25:01.320
<v Speaker 1>and the Lawrence Academy, Connecticut College, but more importantly women's

0:25:01.560 --> 0:25:04.520
<v Speaker 1>ice hockey. You know, I coach women's ice hockey during

0:25:04.640 --> 0:25:06.439
<v Speaker 1>played lacrosse there, but also in the winter, I used

0:25:06.480 --> 0:25:08.680
<v Speaker 1>to coach the women's ice hockey team. And look, the

0:25:08.720 --> 0:25:11.320
<v Speaker 1>bottom line is, uh, you know, women's sports is an

0:25:11.320 --> 0:25:14.439
<v Speaker 1>amazing uh since Title nine, but there's a lot more

0:25:14.480 --> 0:25:18.640
<v Speaker 1>work to be done. Said, well, it's funny we own

0:25:18.720 --> 0:25:21.240
<v Speaker 1>makers dot Com, which is number one women's leadership brand

0:25:21.240 --> 0:25:23.600
<v Speaker 1>in the world. And uh, I just think that the

0:25:23.680 --> 0:25:27.000
<v Speaker 1>women's leadership movement right now has a lot of energy

0:25:27.040 --> 0:25:29.760
<v Speaker 1>behind it. And the North Dakota situation you just brought

0:25:29.800 --> 0:25:31.639
<v Speaker 1>up is exactly the type of thing that needs to

0:25:31.680 --> 0:25:35.200
<v Speaker 1>get addressed. Things David flabbergast. Could you see them take

0:25:35.280 --> 0:25:39.000
<v Speaker 1>men's basketball away from U n C. David, Would that happen?

0:25:39.160 --> 0:25:41.119
<v Speaker 1>It wouldn't happen. Let's take an old thing get started.

0:25:41.520 --> 0:25:44.440
<v Speaker 1>All right, this is the rebranding. You've gotten some flag

0:25:44.520 --> 0:25:46.639
<v Speaker 1>for this, Uh, the rebranding of the company of Yahoo

0:25:46.680 --> 0:25:48.440
<v Speaker 1>and AO. I'll tell us a bit about the branding.

0:25:48.520 --> 0:25:50.000
<v Speaker 1>What this company is gonna look like a lot of

0:25:50.000 --> 0:25:52.560
<v Speaker 1>people wondering what shape it's gonna take. Sure, So David,

0:25:52.560 --> 0:25:55.200
<v Speaker 1>good to see you again. And Uh. One thing that

0:25:55.600 --> 0:25:57.840
<v Speaker 1>we're talking about today is the launch of a new

0:25:57.880 --> 0:26:01.640
<v Speaker 1>B two B name, which is essentially House of Brands supporter.

0:26:02.119 --> 0:26:04.960
<v Speaker 1>We uh, we'll touch about over a billion consumers once

0:26:05.000 --> 0:26:07.720
<v Speaker 1>the Yahoo deal closes. Where we have a house of

0:26:07.760 --> 0:26:10.399
<v Speaker 1>brand strategy, which is we have about twenty major brands,

0:26:10.440 --> 0:26:14.840
<v Speaker 1>which include a O L, Yahoo, Tech, Crunch, uh On, Gadget,

0:26:15.119 --> 0:26:18.520
<v Speaker 1>Movie Phone. So we have a really big digital portfolio.

0:26:18.720 --> 0:26:21.800
<v Speaker 1>And like a Berkshire Hathaway or Procter and Gamble, oath

0:26:21.960 --> 0:26:25.199
<v Speaker 1>is the name that we're taking that basically supports those brands.

0:26:25.200 --> 0:26:28.560
<v Speaker 1>As a consumer, you probably won't see Oath a lot um.

0:26:28.640 --> 0:26:30.760
<v Speaker 1>You'll see our brand. So if you are a sports fan,

0:26:30.800 --> 0:26:33.200
<v Speaker 1>you'll see Yahoo Sports. If your finance fan, you'll see

0:26:33.480 --> 0:26:36.159
<v Speaker 1>Yahoo Finance. If you're into tech, you'll see tech Crunch.

0:26:36.560 --> 0:26:38.680
<v Speaker 1>So we wanted to have a values based brand that

0:26:38.720 --> 0:26:41.440
<v Speaker 1>holds everything together. It's really the Oath is the soil

0:26:41.520 --> 0:26:44.200
<v Speaker 1>that great brands grow out of. And our mission statement

0:26:44.280 --> 0:26:47.360
<v Speaker 1>is build brands people love, and that's a long term commitment.

0:26:47.480 --> 0:26:50.159
<v Speaker 1>Oath is a commitment word, and that's why we decided

0:26:50.200 --> 0:26:52.480
<v Speaker 1>to name the company from a B two B standpoint Oath.

0:26:52.680 --> 0:26:54.919
<v Speaker 1>How much did this blueprint change? Is you're building this

0:26:55.000 --> 0:26:57.800
<v Speaker 1>house of brands over these last many months. Of course,

0:26:57.840 --> 0:26:59.560
<v Speaker 1>you had the the Yahoo hacking, you were going through

0:26:59.600 --> 0:27:02.119
<v Speaker 1>all of that, the deal was being reevaluated and changed.

0:27:02.520 --> 0:27:05.040
<v Speaker 1>How was your vision for this this combined company changed?

0:27:05.080 --> 0:27:08.240
<v Speaker 1>You know, the vision stayed basically the same, which is

0:27:08.280 --> 0:27:11.560
<v Speaker 1>we're betting on two simple principles. One is that the

0:27:11.560 --> 0:27:14.800
<v Speaker 1>world is going to get connected by software and by

0:27:14.840 --> 0:27:17.640
<v Speaker 1>mobile phones, and the second is that brands are gonna

0:27:17.640 --> 0:27:20.040
<v Speaker 1>matter even more when that happens because the level of

0:27:20.080 --> 0:27:22.040
<v Speaker 1>noise in the world that brands are going to continue

0:27:22.080 --> 0:27:25.320
<v Speaker 1>to pop out and there's a chance to grow global brands.

0:27:25.760 --> 0:27:28.440
<v Speaker 1>The Yahoo data breach that happened, I think is something

0:27:28.480 --> 0:27:30.840
<v Speaker 1>that's happened a lot to a lot of companies. It's

0:27:30.840 --> 0:27:33.639
<v Speaker 1>something that yeah, Who's done a great job working through

0:27:33.760 --> 0:27:36.560
<v Speaker 1>and we're focused now on basically, you know, launching the

0:27:36.600 --> 0:27:39.119
<v Speaker 1>next series of great brands for the world. Facebook, I

0:27:39.160 --> 0:27:41.760
<v Speaker 1>believe the other day did a Snapchat equivalent. Not that

0:27:41.760 --> 0:27:45.119
<v Speaker 1>I'm in Tim, I'm sorry, I'm not a snap I'm sorry,

0:27:45.160 --> 0:27:48.280
<v Speaker 1>but but help me here with how you compete with Facebook,

0:27:48.320 --> 0:27:50.880
<v Speaker 1>compete with Google and the other juggernauts. Yeah, so our

0:27:50.920 --> 0:27:54.080
<v Speaker 1>strategy is interesting. So we we have a different strategy

0:27:54.119 --> 0:27:56.200
<v Speaker 1>than competing head on with them. We're partners with them.

0:27:56.240 --> 0:27:58.240
<v Speaker 1>So Huffing a Post, which we own, is the largest

0:27:58.240 --> 0:28:02.400
<v Speaker 1>distributed news source on Facebook. We have big deals with Google,

0:28:02.600 --> 0:28:06.800
<v Speaker 1>with Amazon, uh, with Apple. So we look at those

0:28:06.840 --> 0:28:09.280
<v Speaker 1>and be honest with you, I look at them as uh,

0:28:09.480 --> 0:28:12.760
<v Speaker 1>really a distribution source for our business. So we basically

0:28:12.760 --> 0:28:15.520
<v Speaker 1>both put content all over those distributions sources and we

0:28:15.680 --> 0:28:19.639
<v Speaker 1>monetize with them also. So I love those companies and

0:28:19.720 --> 0:28:21.800
<v Speaker 1>our content people love those companies, and we're going to

0:28:21.880 --> 0:28:25.560
<v Speaker 1>work in that ecosystem. We partner with everyone in that

0:28:25.680 --> 0:28:27.639
<v Speaker 1>in the space, So we're we're not looking to compete,

0:28:27.680 --> 0:28:30.080
<v Speaker 1>We're looking to differentiate. Kim, how are you processing what

0:28:30.080 --> 0:28:31.960
<v Speaker 1>we're seeing with YouTube right now? Obviously you care a

0:28:32.000 --> 0:28:33.600
<v Speaker 1>lot about ad revenue as well as you look to

0:28:33.640 --> 0:28:36.040
<v Speaker 1>this new to this new brand, But you see the

0:28:36.119 --> 0:28:39.120
<v Speaker 1>difficulty that YouTube and Google is facing, uh, you know,

0:28:39.600 --> 0:28:42.360
<v Speaker 1>monitoring what's being put out on YouTube. Talk about the

0:28:42.360 --> 0:28:44.600
<v Speaker 1>complexity there and how you make sure that what happens

0:28:44.640 --> 0:28:46.520
<v Speaker 1>there isn't happening with your brands as well. So I

0:28:46.520 --> 0:28:49.400
<v Speaker 1>think you know, we're we're a brand company. We're building

0:28:49.440 --> 0:28:51.600
<v Speaker 1>brands people love. So from our standpoint, we want to

0:28:51.600 --> 0:28:53.920
<v Speaker 1>be in a brand safe environment and really scaled. I

0:28:53.960 --> 0:28:56.280
<v Speaker 1>think the tension point you're saying at the YouTube's and

0:28:56.280 --> 0:28:59.040
<v Speaker 1>and Facebook is you know that they're they're dealing with

0:28:59.120 --> 0:29:02.280
<v Speaker 1>billions of humors and trying to connect you know, millions

0:29:02.360 --> 0:29:04.320
<v Speaker 1>or hundreds of millions of videos at the same time

0:29:04.320 --> 0:29:06.640
<v Speaker 1>and try to monetize them. To be honest with you,

0:29:06.680 --> 0:29:08.640
<v Speaker 1>the things that have been happening recently are probably a

0:29:08.720 --> 0:29:12.120
<v Speaker 1>natural outcome of the scale we face it, um, you know. Also,

0:29:12.200 --> 0:29:14.600
<v Speaker 1>but the flip side of it, the silver lining is

0:29:14.640 --> 0:29:17.200
<v Speaker 1>it is if we can solve those issues as an

0:29:17.240 --> 0:29:19.760
<v Speaker 1>industry and all the companies can solve them. You know,

0:29:20.160 --> 0:29:22.200
<v Speaker 1>you can either have smaller scale and not have all

0:29:22.200 --> 0:29:23.840
<v Speaker 1>those problems, or you can have big scale and be

0:29:23.840 --> 0:29:26.520
<v Speaker 1>connected to billions of consumers and fix that and then

0:29:26.560 --> 0:29:29.280
<v Speaker 1>having a wonderful business. And I think we're heading towards

0:29:29.280 --> 0:29:32.560
<v Speaker 1>the wonderful business side. Um. But I think the advertisers

0:29:32.600 --> 0:29:35.760
<v Speaker 1>are speaking. They want brand, trusted environments. Who's gonna put

0:29:35.800 --> 0:29:39.080
<v Speaker 1>Twitter out of their misery? I think I'm I'm a

0:29:39.120 --> 0:29:41.440
<v Speaker 1>big believer in Twitter and big believer in the management

0:29:41.440 --> 0:29:45.120
<v Speaker 1>team at Twitter and very close with them. So I'm

0:29:45.240 --> 0:29:47.520
<v Speaker 1>guessing that their their misery is going to turn to

0:29:47.600 --> 0:29:49.320
<v Speaker 1>joy at some point, and it's going to be self

0:29:49.360 --> 0:29:52.600
<v Speaker 1>resurrected from how those guys are doing and girls are

0:29:52.600 --> 0:29:54.600
<v Speaker 1>doing their work. Did you notice, David, he didn't answer

0:29:54.600 --> 0:30:00.120
<v Speaker 1>that question. If you want to follow timbarks drinking, Thank

0:30:00.160 --> 0:30:03.400
<v Speaker 1>you so much for the oath discussion a year particularly

0:30:03.480 --> 0:30:06.240
<v Speaker 1>after inside, I'm gonna tweet this out. Good morning Serious

0:30:06.240 --> 0:30:09.880
<v Speaker 1>sex TEMN Channel one nineteen in North Dakota as we

0:30:09.920 --> 0:30:25.120
<v Speaker 1>looked at women's North Dakota hockey David, why don't you

0:30:25.160 --> 0:30:26.920
<v Speaker 1>bring him in? All and Ruskins over on the phone

0:30:26.920 --> 0:30:29.480
<v Speaker 1>with a Queen of England trying to explain to the

0:30:29.600 --> 0:30:32.480
<v Speaker 1>week sterlink tour. Yeah, we'll get to that in just

0:30:32.560 --> 0:30:34.240
<v Speaker 1>a month. Let me ask you about the South African

0:30:34.280 --> 0:30:35.680
<v Speaker 1>rand first, if I could. We saw a piece of

0:30:35.720 --> 0:30:38.440
<v Speaker 1>breaking news here Bloomberg breaking uh in exclusive this morning.

0:30:38.480 --> 0:30:40.480
<v Speaker 1>The head of South Africa's treasury has asked to leave

0:30:40.480 --> 0:30:42.480
<v Speaker 1>his post at the end of this month, a year

0:30:42.480 --> 0:30:44.280
<v Speaker 1>before his contract runs out. So it seems like we're

0:30:44.280 --> 0:30:47.280
<v Speaker 1>getting compounding bad news out of South Africa. We've seen

0:30:47.280 --> 0:30:49.240
<v Speaker 1>the weakening of the rand here over these last seven

0:30:49.280 --> 0:30:52.520
<v Speaker 1>days and down eleven precent. I think, what's your sense

0:30:52.520 --> 0:30:54.440
<v Speaker 1>of where things are going here? And I mentioned the compounding?

0:30:55.080 --> 0:30:59.040
<v Speaker 1>Is there there more yet to happen? It's definitely yes, absolutely, yeah.

0:30:59.040 --> 0:31:00.880
<v Speaker 1>I think we're at a little bit of pivot point here.

0:31:01.040 --> 0:31:03.560
<v Speaker 1>You know, the market I guess is talking about is

0:31:03.560 --> 0:31:07.280
<v Speaker 1>there some sort of Dilma moment as it were, whereby

0:31:07.400 --> 0:31:10.600
<v Speaker 1>you know, you'd have a change in leadership and you know,

0:31:11.320 --> 0:31:14.040
<v Speaker 1>change in philosophy to some extential perhaps even some of

0:31:14.080 --> 0:31:16.840
<v Speaker 1>the old god coming back in, the old Finance minister

0:31:16.920 --> 0:31:21.080
<v Speaker 1>coming back in seen as relatively credible, and the rand

0:31:21.080 --> 0:31:25.440
<v Speaker 1>could perhaps rally substantially from here. We alternatively, we continue

0:31:25.480 --> 0:31:27.480
<v Speaker 1>on the path we've just set over the last few days,

0:31:27.480 --> 0:31:29.960
<v Speaker 1>in which case, you know, dollar rand I think will

0:31:30.000 --> 0:31:33.080
<v Speaker 1>be up well into the four teens before we know it.

0:31:33.880 --> 0:31:35.840
<v Speaker 1>I imagine you've looked at with the reading agencies have

0:31:35.920 --> 0:31:37.480
<v Speaker 1>had to say here. Of course they're putting it, putting

0:31:37.520 --> 0:31:40.320
<v Speaker 1>South Africa unnoticed. What stood out to you from from

0:31:40.360 --> 0:31:43.560
<v Speaker 1>from those commentaries, Well, the actions have been pretty quick,

0:31:43.840 --> 0:31:46.560
<v Speaker 1>so you know, look, you know, to some extent to

0:31:46.680 --> 0:31:50.480
<v Speaker 1>your earlier question, there's a lot up in the air

0:31:50.520 --> 0:31:53.160
<v Speaker 1>in terms of the political direction where as to where

0:31:53.160 --> 0:31:55.840
<v Speaker 1>South Africa goes. And in some sense, I don't think,

0:31:56.120 --> 0:31:58.800
<v Speaker 1>you know, it makes a lot of sense to change

0:31:58.880 --> 0:32:01.880
<v Speaker 1>ratings right at this very moment when you can wait

0:32:02.240 --> 0:32:05.840
<v Speaker 1>a few weeks and perhaps have much more information, so

0:32:06.360 --> 0:32:07.640
<v Speaker 1>that that is a bit of a stand up. But

0:32:07.680 --> 0:32:09.320
<v Speaker 1>at the same time, of course you've got you know

0:32:09.360 --> 0:32:12.080
<v Speaker 1>what the smp S actions already, You've got let's see

0:32:12.080 --> 0:32:15.720
<v Speaker 1>where Moodies go. Is it one notch two notches. Um,

0:32:15.800 --> 0:32:19.040
<v Speaker 1>you know it. It is substantial. Of course, if South

0:32:19.080 --> 0:32:22.720
<v Speaker 1>Africa uses its investment grade. Okay, help our rookie ffects

0:32:22.760 --> 0:32:27.200
<v Speaker 1>traders listening worldwide. Where does a guy like you enter

0:32:27.280 --> 0:32:32.960
<v Speaker 1>the trade long South African rand strong ran week US dollar?

0:32:33.680 --> 0:32:38.120
<v Speaker 1>Does Allen Ruskin wait for a press release, a Bloomberg headline?

0:32:38.400 --> 0:32:41.800
<v Speaker 1>Do you do it technically? How do you do this? Tom?

0:32:41.840 --> 0:32:44.280
<v Speaker 1>I think the South African rand is not a currency

0:32:44.320 --> 0:32:47.240
<v Speaker 1>for rookies. I would say that as a warning point,

0:32:48.000 --> 0:32:50.680
<v Speaker 1>you know, because this thing flies around. Really we've seen

0:32:50.720 --> 0:32:53.760
<v Speaker 1>you know, seven eight percent move in in roughly a week,

0:32:53.840 --> 0:32:57.240
<v Speaker 1>So that tells you that. Um, certainly, if you're thinking

0:32:57.280 --> 0:33:00.640
<v Speaker 1>in terms of yield and carry, you don't really want

0:33:00.680 --> 0:33:03.280
<v Speaker 1>to just have your all your eggs in one basket

0:33:03.320 --> 0:33:05.360
<v Speaker 1>and in a currency like the South African rand. So

0:33:05.600 --> 0:33:09.880
<v Speaker 1>that's a starting point right now. It's unfortunately much more

0:33:09.960 --> 0:33:14.240
<v Speaker 1>of a political story than an economic story. So you know,

0:33:14.320 --> 0:33:17.000
<v Speaker 1>typically I like it more when we're reacting to data,

0:33:17.080 --> 0:33:20.160
<v Speaker 1>when we're looking at the broader macro environment, which I

0:33:20.160 --> 0:33:23.520
<v Speaker 1>think is still actually slightly friendly for carry. We've had

0:33:23.560 --> 0:33:25.280
<v Speaker 1>a very good run for carry, but it's still I

0:33:25.280 --> 0:33:28.360
<v Speaker 1>think slightly friendly in the South African rand naturally lends

0:33:28.400 --> 0:33:31.480
<v Speaker 1>itself to be in that basket. But right now I'd

0:33:31.480 --> 0:33:33.880
<v Speaker 1>be very cautious because, as I said, we're at a pivoct. Really,

0:33:33.880 --> 0:33:36.720
<v Speaker 1>we could be at thirteen on good political news or

0:33:36.760 --> 0:33:38.800
<v Speaker 1>so called good political news, and we could be at

0:33:38.800 --> 0:33:41.120
<v Speaker 1>fourteen and a half quite easily in a heartbeat. I

0:33:41.160 --> 0:33:42.400
<v Speaker 1>thought there was a good piece of the Wall Street

0:33:42.480 --> 0:33:44.560
<v Speaker 1>Journal this mooeting looking at the Chinese currency. I want

0:33:44.560 --> 0:33:45.640
<v Speaker 1>to ask you a bit about that as we had

0:33:45.680 --> 0:33:47.360
<v Speaker 1>to these meetings on on Friday. In the lead of

0:33:47.360 --> 0:33:49.200
<v Speaker 1>that piece was there's a new twist in the persistent

0:33:49.280 --> 0:33:52.120
<v Speaker 1>argument that China is keeping its currency artificially low against

0:33:52.120 --> 0:33:56.640
<v Speaker 1>the dollar, the un has actually been rising. As again,

0:33:56.680 --> 0:33:58.080
<v Speaker 1>as we head to those meetings this Friday, what are

0:33:58.120 --> 0:33:59.840
<v Speaker 1>we seeing with the currency and sort of what would

0:33:59.840 --> 0:34:02.160
<v Speaker 1>the nsequences be if the US does in fact label

0:34:02.240 --> 0:34:05.360
<v Speaker 1>a trying out currency manipulator. Well, I think the U

0:34:05.440 --> 0:34:08.160
<v Speaker 1>s has been in a tricky situation because the old

0:34:08.200 --> 0:34:11.319
<v Speaker 1>story where you saw a lot of pressure for dollar

0:34:11.480 --> 0:34:14.520
<v Speaker 1>Chinese to go down and the Chinese were resistant of that,

0:34:14.480 --> 0:34:17.920
<v Speaker 1>they were resistant of Chinese currency strength kind of flipped

0:34:17.920 --> 0:34:19.759
<v Speaker 1>on its head and has flipped on his head for

0:34:19.840 --> 0:34:23.479
<v Speaker 1>quite a while, whereby the currencies, if anything, too weak

0:34:23.560 --> 0:34:26.640
<v Speaker 1>and was weakening faster than they would have wanted, and

0:34:26.680 --> 0:34:28.840
<v Speaker 1>they were trying to resist it that way around, in

0:34:28.880 --> 0:34:31.360
<v Speaker 1>which case that was pretty much consistent with what the

0:34:31.440 --> 0:34:33.640
<v Speaker 1>U S would want anyway. So the US has found

0:34:33.680 --> 0:34:36.359
<v Speaker 1>itself in a in a somewhat difficult position. And I think,

0:34:36.400 --> 0:34:39.800
<v Speaker 1>you know, even people who said, okay, you know the currency,

0:34:40.040 --> 0:34:42.719
<v Speaker 1>the Chinese currency is misvalued, have had to rethink. And

0:34:42.800 --> 0:34:44.359
<v Speaker 1>you know, people like the I m F, I think,

0:34:44.400 --> 0:34:46.799
<v Speaker 1>said okay, you know we're closer to fair value here,

0:34:47.000 --> 0:34:50.120
<v Speaker 1>don't you, Brink has led. I'll give you a just

0:34:50.239 --> 0:34:53.600
<v Speaker 1>BC credit on a weak sterling call. If anything, you've

0:34:53.640 --> 0:34:57.200
<v Speaker 1>been more aggressive about it our suggestion than he just BC.

0:34:57.400 --> 0:35:00.320
<v Speaker 1>You're getting to have some more company right now. Is

0:35:00.360 --> 0:35:04.240
<v Speaker 1>it about weak sterling or is it about strong dollar?

0:35:05.320 --> 0:35:07.320
<v Speaker 1>A little bit of both really, but I'd say, actually,

0:35:07.640 --> 0:35:09.080
<v Speaker 1>you know, if you had to put more weight, it

0:35:09.160 --> 0:35:12.480
<v Speaker 1>was at least as much really on a stronger dollars story,

0:35:12.640 --> 0:35:15.600
<v Speaker 1>and that is not panning out quite according to plan,

0:35:15.719 --> 0:35:18.680
<v Speaker 1>of course. But I think you know, the good news Tim,

0:35:18.800 --> 0:35:22.359
<v Speaker 1>just to interrupt there was was that it's nice when

0:35:22.400 --> 0:35:25.960
<v Speaker 1>you forecast currencies and you like both legs really, so

0:35:26.080 --> 0:35:30.000
<v Speaker 1>in that sense, we like both. This is really important, David, currencies.

0:35:30.040 --> 0:35:32.400
<v Speaker 1>You don't talk about one currency. You've heard me scream

0:35:32.440 --> 0:35:35.399
<v Speaker 1>about this. It's about a pair. And if you get

0:35:35.400 --> 0:35:38.200
<v Speaker 1>them both going in the right direction, that's where you

0:35:38.280 --> 0:35:41.439
<v Speaker 1>make the alpha. That's a that's a cardinal rule. That's

0:35:41.480 --> 0:35:44.719
<v Speaker 1>not said enough exactly, Tim. So I think, look, I

0:35:44.719 --> 0:35:47.200
<v Speaker 1>think both are gonna work in that direction. I e.

0:35:47.360 --> 0:35:50.440
<v Speaker 1>Sterling will be somewhat weaker in and of itself really

0:35:50.719 --> 0:35:55.040
<v Speaker 1>and the dollars should be somewhat stronger. But it's a

0:35:55.120 --> 0:35:58.600
<v Speaker 1>case of somewhat right. I think we're you know, looking

0:35:58.640 --> 0:36:02.879
<v Speaker 1>now at a dollar moves which are more contained than

0:36:02.920 --> 0:36:05.279
<v Speaker 1>we would have anticipated at this point in time. And

0:36:05.320 --> 0:36:08.319
<v Speaker 1>given what the Feds actually the catalyst to get strong dollar,

0:36:08.440 --> 0:36:11.080
<v Speaker 1>to get the February dollar we're supposed to have be

0:36:11.160 --> 0:36:14.000
<v Speaker 1>a mayor junior or September dollar, well, I think a

0:36:14.040 --> 0:36:17.040
<v Speaker 1>couple of things time. I think firstly, the Fed hopefully

0:36:17.600 --> 0:36:21.759
<v Speaker 1>you know, still more in play than the market that projects.

0:36:21.920 --> 0:36:24.719
<v Speaker 1>And I think that that that's a pretty comfortable call

0:36:24.800 --> 0:36:27.200
<v Speaker 1>at this point. So we're talking, uh, you know, Ray

0:36:27.239 --> 0:36:29.839
<v Speaker 1>takes in June and September and then a balance sheet

0:36:29.880 --> 0:36:33.719
<v Speaker 1>action towards the end of the year. So that is

0:36:33.760 --> 0:36:36.160
<v Speaker 1>all consistent with the stronger dollar story. But we need

0:36:36.160 --> 0:36:39.120
<v Speaker 1>the back end in general to play to play ball

0:36:39.160 --> 0:36:40.840
<v Speaker 1>in all of this, right, we have to keep in

0:36:40.880 --> 0:36:45.080
<v Speaker 1>mind that the tenure has been incredibly well behaved, really

0:36:45.160 --> 0:36:47.960
<v Speaker 1>and I think if tenure heels and the broader heeled

0:36:47.960 --> 0:36:50.839
<v Speaker 1>curve backs up, then you know the story kicks into

0:36:50.840 --> 0:36:55.600
<v Speaker 1>gear and with with more gusta with the euro with Strala,

0:36:55.600 --> 0:36:57.040
<v Speaker 1>we had the speech by to reason, We've got to

0:36:57.120 --> 0:36:59.960
<v Speaker 1>EU meeting tomorrow again hammering out what the price is

0:37:00.040 --> 0:37:02.680
<v Speaker 1>going to be here for for brexit. How how long

0:37:02.800 --> 0:37:05.719
<v Speaker 1>terms can you be on currency amidst all of the

0:37:05.920 --> 0:37:07.680
<v Speaker 1>much nations that we're going to see here over these

0:37:07.719 --> 0:37:10.399
<v Speaker 1>next two years. Yeah, I think you know, some people

0:37:10.440 --> 0:37:13.640
<v Speaker 1>would say, look in this respect, when you're looking at

0:37:13.880 --> 0:37:16.879
<v Speaker 1>a to your political profile, you can actually be quite

0:37:16.920 --> 0:37:20.600
<v Speaker 1>long term. But you're still reading the tea leaves. You're

0:37:20.640 --> 0:37:22.640
<v Speaker 1>still trying to get a sense of, you know, is

0:37:22.680 --> 0:37:26.959
<v Speaker 1>the EU twenty seven which is looking for the UK

0:37:27.200 --> 0:37:30.440
<v Speaker 1>to first set up some sort of divorce rules before

0:37:30.480 --> 0:37:33.000
<v Speaker 1>we actually come up with a new set of trade rules,

0:37:33.120 --> 0:37:35.480
<v Speaker 1>or you know, is the UK winning and we're actually

0:37:35.480 --> 0:37:37.239
<v Speaker 1>doing this all in parallel kind of thing. So I

0:37:37.280 --> 0:37:40.320
<v Speaker 1>think you're constantly kind of making some sort of judgment

0:37:40.360 --> 0:37:44.480
<v Speaker 1>about who's got the upper hand as far as the

0:37:44.480 --> 0:38:00.520
<v Speaker 1>politics is concerned. It McAuley of City good bit, take

0:38:00.520 --> 0:38:02.799
<v Speaker 1>good morning, good morning, time, get to be with you.

0:38:02.960 --> 0:38:06.719
<v Speaker 1>Did you change your auto recommendations yesterday off of one

0:38:06.800 --> 0:38:10.080
<v Speaker 1>month's auto sales? Now? You know, our our views, you know,

0:38:10.120 --> 0:38:13.000
<v Speaker 1>has been pretty consistent of mid seventeen million auto sales

0:38:13.040 --> 0:38:17.040
<v Speaker 1>with a peak coming in eighteen and sixteen million is

0:38:17.040 --> 0:38:20.319
<v Speaker 1>our nineteen estimate. Um, you know last year in March,

0:38:20.400 --> 0:38:22.960
<v Speaker 1>in March sixteen we also had about a sixteen and

0:38:22.960 --> 0:38:25.880
<v Speaker 1>a half million SAR. The full year ended up at

0:38:25.920 --> 0:38:28.760
<v Speaker 1>seventeen and a half. Of these fluctuations are not that uncommon.

0:38:28.840 --> 0:38:30.360
<v Speaker 1>Um you know on February we were seventeen and a

0:38:30.400 --> 0:38:32.239
<v Speaker 1>half a million. We do see a bit more downside

0:38:32.280 --> 0:38:35.319
<v Speaker 1>now is we're approaching the peak based on our latest work.

0:38:35.400 --> 0:38:37.400
<v Speaker 1>But um, yes, they's number did not call us to

0:38:37.480 --> 0:38:40.000
<v Speaker 1>change our Our opinion is you know, there's a partial

0:38:40.040 --> 0:38:44.279
<v Speaker 1>differentiation of revenue units is compared to price and then

0:38:44.320 --> 0:38:47.839
<v Speaker 1>in the auto world, there's also size of car. How

0:38:47.960 --> 0:38:50.960
<v Speaker 1>critical is it that they can't sell the big cars,

0:38:51.000 --> 0:38:53.960
<v Speaker 1>so they're starting to give away a lot of incentives.

0:38:54.040 --> 0:38:58.040
<v Speaker 1>What does that do down the income statement? Sure? So,

0:38:58.040 --> 0:39:00.319
<v Speaker 1>so the companies recover, like four and GM, we think

0:39:00.360 --> 0:39:03.000
<v Speaker 1>the majority of profits in North America come from the

0:39:03.040 --> 0:39:06.080
<v Speaker 1>pickup truck segments, and pickups we think has actually a

0:39:06.200 --> 0:39:09.760
<v Speaker 1>very unique supplied demand imbalance. We have seen com pricing

0:39:09.760 --> 0:39:13.759
<v Speaker 1>pressure in sedan segments even crossover segments now since last year.

0:39:13.840 --> 0:39:17.080
<v Speaker 1>So some of this incentives rising affordability head to win

0:39:17.200 --> 0:39:21.239
<v Speaker 1>our natural later cycle pressure points that we see. Why

0:39:21.280 --> 0:39:24.520
<v Speaker 1>did GM confirm their twenty seventeen guidance last week instead

0:39:24.560 --> 0:39:26.400
<v Speaker 1>of all the negativity that we read about them on

0:39:26.480 --> 0:39:29.360
<v Speaker 1>the auto sector Because the pickup trucks have a unique

0:39:29.360 --> 0:39:31.880
<v Speaker 1>supply demand in balance, and we think that continues. And

0:39:31.880 --> 0:39:34.600
<v Speaker 1>that's why despite costs for peak auto for the past

0:39:34.640 --> 0:39:38.279
<v Speaker 1>three years, right three years um, your profits in North

0:39:38.320 --> 0:39:40.839
<v Speaker 1>America from domestic O e m's like GM and Ford

0:39:40.840 --> 0:39:43.160
<v Speaker 1>have been strong. So I think the pickup trucks story

0:39:43.160 --> 0:39:46.880
<v Speaker 1>is frankly highly overlooked. In his whole debate about the cycle,

0:39:47.239 --> 0:39:50.040
<v Speaker 1>how weird are you about the glut. You've got a

0:39:50.040 --> 0:39:51.840
<v Speaker 1>glat of new vehicles, a glat of old vehicles, and

0:39:51.840 --> 0:39:53.960
<v Speaker 1>you've got companies here who are trying to reinvent their

0:39:54.000 --> 0:39:56.040
<v Speaker 1>product lines. It seems like that's a recipe for for

0:39:56.040 --> 0:39:58.479
<v Speaker 1>a lot of trouble. Yeah, I mean, you are seeing

0:39:58.480 --> 0:40:00.640
<v Speaker 1>awf leaves of volume again pret now fill this later

0:40:00.719 --> 0:40:03.080
<v Speaker 1>point in the cycle, and some affordability had warned the

0:40:03.160 --> 0:40:05.920
<v Speaker 1>report we published actually last night, we're kind of making

0:40:05.920 --> 0:40:08.640
<v Speaker 1>the argument that if you look at affordability historically, even

0:40:08.680 --> 0:40:10.640
<v Speaker 1>if you account, you know, for some of the pressures

0:40:10.680 --> 0:40:13.160
<v Speaker 1>that are incrementally occurring, we don't think we're in some

0:40:13.200 --> 0:40:16.160
<v Speaker 1>sort of unshottered territory in terms of monthly payments and

0:40:16.200 --> 0:40:19.400
<v Speaker 1>auto sales and how they relate to the current macro economy.

0:40:19.480 --> 0:40:22.000
<v Speaker 1>They have consumer confidence, disposable income, So we don't think

0:40:22.000 --> 0:40:24.480
<v Speaker 1>we're in some sort of unshotted territory. But at this

0:40:24.760 --> 0:40:26.880
<v Speaker 1>kind of seventh eighth ending of the cycle, you should

0:40:26.960 --> 0:40:30.400
<v Speaker 1>start to see some you know, pressure points in select segments,

0:40:30.400 --> 0:40:33.000
<v Speaker 1>and and kind of our point is all that's happening

0:40:33.000 --> 0:40:36.440
<v Speaker 1>and all that's been absorbed. Um, But the pickup truck story,

0:40:36.440 --> 0:40:38.480
<v Speaker 1>which is the anchor for earnings. Again, the majority we

0:40:38.520 --> 0:40:40.759
<v Speaker 1>think of GM and Ford um had does not get

0:40:40.760 --> 0:40:42.879
<v Speaker 1>the attention in public. There's a lot of times people

0:40:43.040 --> 0:40:45.000
<v Speaker 1>equated to housing or oil, and we think it's a

0:40:45.080 --> 0:40:48.760
<v Speaker 1>much bigger story than than that. With this, we continue

0:40:48.800 --> 0:40:52.000
<v Speaker 1>each I did a chart of US car inflation price change,

0:40:52.320 --> 0:40:55.319
<v Speaker 1>if you will, really real to see some real price

0:40:55.360 --> 0:40:59.319
<v Speaker 1>erosion year over year in used cars. How linked are

0:40:59.360 --> 0:41:02.399
<v Speaker 1>the equity shares of the big auto companies to use

0:41:02.480 --> 0:41:07.640
<v Speaker 1>card dynamics. There's certainly some some exposure from a lending perspective.

0:41:07.719 --> 0:41:11.000
<v Speaker 1>We saw, you know, Ford had an impact late last year. Well,

0:41:12.239 --> 0:41:14.160
<v Speaker 1>I need to interrupt because this is so important. I'm

0:41:14.200 --> 0:41:16.680
<v Speaker 1>sorry didn't get into my puny brain. It's do you

0:41:16.719 --> 0:41:20.880
<v Speaker 1>agree with Steve Iceman that there is a subprime auto

0:41:21.120 --> 0:41:25.400
<v Speaker 1>challenge in the markets? I mean, we have seen delinquencies

0:41:25.480 --> 0:41:27.120
<v Speaker 1>generally rise. I mean we don't think that we haven't

0:41:27.120 --> 0:41:30.480
<v Speaker 1>seen data on subprime deminquency that seems um kind of

0:41:30.520 --> 0:41:33.359
<v Speaker 1>again as an outlying relative to the past. And there's

0:41:33.400 --> 0:41:35.919
<v Speaker 1>been a lot of articles written about subprime lending being

0:41:35.920 --> 0:41:37.960
<v Speaker 1>pulled back in the fourth quarter, which is fine, and

0:41:38.000 --> 0:41:40.319
<v Speaker 1>we want to see rational lending behavior. So what we're

0:41:40.320 --> 0:41:42.759
<v Speaker 1>looking for is, if there is a problem, if there

0:41:42.840 --> 0:41:45.719
<v Speaker 1>is a higher delinquency rate in subprime, we want to

0:41:45.719 --> 0:41:47.600
<v Speaker 1>see the industry kind of pulled back on that. Has

0:41:47.640 --> 0:41:49.320
<v Speaker 1>been a lot of reports that that did occur in

0:41:49.360 --> 0:41:51.240
<v Speaker 1>the fourth quarter because what the market want, the equat

0:41:51.280 --> 0:41:53.680
<v Speaker 1>prices of these companies want to see, Tom is they

0:41:53.719 --> 0:41:57.239
<v Speaker 1>want to see different behavior than prior cycles. They want

0:41:57.239 --> 0:42:00.320
<v Speaker 1>to see, you know, production cutsift sales are weaker, reduction

0:42:00.360 --> 0:42:02.759
<v Speaker 1>cuts are okay to maintain the inventory. They want to

0:42:02.760 --> 0:42:05.160
<v Speaker 1>see you start pint lending, to your question, kind of

0:42:05.160 --> 0:42:07.040
<v Speaker 1>get pulled back if that becomes an issue. And that's

0:42:07.040 --> 0:42:09.520
<v Speaker 1>what we think is the bigger story, UM, because you

0:42:09.560 --> 0:42:11.040
<v Speaker 1>know these docks, you know, like if you look at

0:42:11.040 --> 0:42:14.000
<v Speaker 1>GM earnings going from three dollars to over six dollars,

0:42:14.160 --> 0:42:16.560
<v Speaker 1>they only have an earnings problem. They have a multiple

0:42:16.600 --> 0:42:18.840
<v Speaker 1>problem on their equity prices. And I think part of

0:42:18.880 --> 0:42:22.000
<v Speaker 1>it is how will these companies react in a post

0:42:22.040 --> 0:42:24.960
<v Speaker 1>peak environment to someone these kind of natural pressure points

0:42:24.960 --> 0:42:27.000
<v Speaker 1>for the curve. But now we have not been in

0:42:27.040 --> 0:42:28.720
<v Speaker 1>the view that there's some sort of an auto bubble

0:42:28.760 --> 0:42:31.560
<v Speaker 1>there for lending. UM, although at this point in the cycle,

0:42:31.640 --> 0:42:34.760
<v Speaker 1>you are you know, you do type of cities, pressure points.

0:42:34.400 --> 0:42:36.799
<v Speaker 1>What's the financing picture look like to you? Quickly? We'll

0:42:36.840 --> 0:42:38.200
<v Speaker 1>come back and talk more in a moment. In the

0:42:38.239 --> 0:42:40.040
<v Speaker 1>last thirty seconds we got here before the break. Has

0:42:40.080 --> 0:42:43.160
<v Speaker 1>the financing picture look yeah, it's okay. I mean we

0:42:43.160 --> 0:42:44.840
<v Speaker 1>think we're seeing the linquent is kind of you know,

0:42:44.880 --> 0:42:47.200
<v Speaker 1>move up a little bit to use car pricing pressures

0:42:47.239 --> 0:42:49.360
<v Speaker 1>having a bit of an impact. If you're you know,

0:42:49.440 --> 0:42:51.640
<v Speaker 1>long pick off the trucks which has a lot less

0:42:51.719 --> 0:42:54.120
<v Speaker 1>leasing than sedance, we think you're in better shape, which

0:42:54.120 --> 0:42:56.920
<v Speaker 1>is why in our selectivity we prefer the max pick

0:42:57.000 --> 0:42:59.719
<v Speaker 1>up exposure that you can find. But generally we're seeing

0:42:59.719 --> 0:43:01.960
<v Speaker 1>what you typically see you know at this stage later

0:43:02.080 --> 0:43:04.840
<v Speaker 1>on in the cycle. Um. But you know, as the

0:43:04.920 --> 0:43:08.120
<v Speaker 1>last cycle proved um, you know, use vehicle prices strengthen

0:43:08.239 --> 0:43:10.640
<v Speaker 1>very quickly after the last procession because you know, card

0:43:10.640 --> 0:43:13.360
<v Speaker 1>density came down quickly, so some there's some natural hedges

0:43:13.440 --> 0:43:16.960
<v Speaker 1>here in terms of the cyclical exposure reentertainment Colley, So

0:43:17.040 --> 0:43:18.600
<v Speaker 1>do you go thrill to have them on today? After

0:43:18.640 --> 0:43:21.800
<v Speaker 1>the shock yesterday of the auto report will continue with

0:43:21.880 --> 0:43:25.480
<v Speaker 1>Mr mccaulley and talk about individual securities here in a

0:43:25.560 --> 0:43:27.360
<v Speaker 1>moment any time. I want to ask you about what

0:43:27.400 --> 0:43:30.200
<v Speaker 1>we heard from David Einhorn if green Light Capital last

0:43:30.239 --> 0:43:32.320
<v Speaker 1>week at proposal that he made for a new share

0:43:32.320 --> 0:43:34.279
<v Speaker 1>of structure for GM. How did you react to what

0:43:34.840 --> 0:43:37.560
<v Speaker 1>he's proposed on the heels of that announcement. What more

0:43:37.560 --> 0:43:39.560
<v Speaker 1>information do we have about how that might play out

0:43:39.560 --> 0:43:43.360
<v Speaker 1>and what management thinks of it. Rating agency said that

0:43:43.400 --> 0:43:45.479
<v Speaker 1>there will be a risk of of GM's credit ratings

0:43:45.520 --> 0:43:47.920
<v Speaker 1>falling below investment grade, which would be a serious issue

0:43:47.920 --> 0:43:50.120
<v Speaker 1>at this stage of the cycle for any company. So

0:43:50.160 --> 0:43:52.000
<v Speaker 1>we don't really have a formal view, but what we

0:43:52.040 --> 0:43:53.960
<v Speaker 1>wrote in a note is that the root of the

0:43:54.000 --> 0:43:57.239
<v Speaker 1>GM problem is a perception problem tied to pick up

0:43:57.320 --> 0:44:00.399
<v Speaker 1>trucks and believe it or not, technology and the real

0:44:00.400 --> 0:44:03.480
<v Speaker 1>opportunity have to take their loss making card business, we

0:44:03.520 --> 0:44:06.680
<v Speaker 1>think into something that's much better um in the past,

0:44:06.719 --> 0:44:09.000
<v Speaker 1>you know, buy backs and dividends and certain things that

0:44:09.120 --> 0:44:11.000
<v Speaker 1>we're not really helpful to the stock. And with all

0:44:11.040 --> 0:44:13.200
<v Speaker 1>the view on the last proposal, but well, I think

0:44:13.200 --> 0:44:15.000
<v Speaker 1>the rating agencies with a key voice here, we have

0:44:15.040 --> 0:44:16.719
<v Speaker 1>to kind of see how this play is out. But

0:44:16.760 --> 0:44:18.359
<v Speaker 1>what we really want to focus on was the root

0:44:18.400 --> 0:44:20.680
<v Speaker 1>of the problem, which is a perception problem that we

0:44:20.719 --> 0:44:22.520
<v Speaker 1>think is really the cause of of you know, where

0:44:22.600 --> 0:44:26.520
<v Speaker 1>valuations stand today. Help me with with some fact checking here.

0:44:27.120 --> 0:44:29.800
<v Speaker 1>We've heard from the CEOs of GM and Ford. They've

0:44:29.880 --> 0:44:32.719
<v Speaker 1>you know, made some moves, perhaps not in light of

0:44:32.719 --> 0:44:34.960
<v Speaker 1>what the President has said or asked them to do,

0:44:35.000 --> 0:44:37.080
<v Speaker 1>but they've decided to keep some factories here, move some

0:44:37.120 --> 0:44:39.360
<v Speaker 1>production here to the US, and that's been in the

0:44:39.360 --> 0:44:41.560
<v Speaker 1>works for for a long time. Something that struck me

0:44:41.560 --> 0:44:44.239
<v Speaker 1>when I heard Mark Fields talk after one of these

0:44:44.239 --> 0:44:45.840
<v Speaker 1>one of these news items, was this is something that

0:44:45.880 --> 0:44:49.560
<v Speaker 1>made financial sense, didn't have anything to do with with politics.

0:44:50.160 --> 0:44:52.239
<v Speaker 1>Is there truth to that is? And if that's the case,

0:44:52.680 --> 0:44:54.319
<v Speaker 1>why did it take the company so long to do

0:44:54.360 --> 0:44:57.200
<v Speaker 1>what it's done? Sure? Yeah, no, absolutely. And there's something

0:44:57.200 --> 0:44:59.760
<v Speaker 1>we wrote about even last night that well, we're watching

0:44:59.760 --> 0:45:03.440
<v Speaker 1>for how does the industry react as auto sales plateau?

0:45:03.480 --> 0:45:05.200
<v Speaker 1>And I mean to be talking last segments about some

0:45:05.239 --> 0:45:07.480
<v Speaker 1>of the pressure points that you're seeing. And certainly, you know,

0:45:07.480 --> 0:45:09.400
<v Speaker 1>one of the questions we've gotten for an investors of

0:45:09.440 --> 0:45:12.640
<v Speaker 1>the past few years is why are automakers adding capacity

0:45:12.760 --> 0:45:15.799
<v Speaker 1>when auto sales are plaque coming? You see companies take

0:45:15.880 --> 0:45:19.400
<v Speaker 1>that back, Yeah, you kind of score point for rational

0:45:19.480 --> 0:45:22.560
<v Speaker 1>behavior whause exactly what you want to see um at

0:45:22.560 --> 0:45:25.120
<v Speaker 1>this point of the cycle. So there's a lot of

0:45:25.120 --> 0:45:27.960
<v Speaker 1>capacity coming in and we have to watch that very carefully. Yeah,

0:45:27.960 --> 0:45:29.640
<v Speaker 1>I gotta look at a chart, and if I want

0:45:29.680 --> 0:45:31.479
<v Speaker 1>to look at a long term chart to get forward,

0:45:31.480 --> 0:45:33.160
<v Speaker 1>because they're the only ones that didn't go out of business,

0:45:33.200 --> 0:45:35.600
<v Speaker 1>I guess I could look at the Europeans as well.

0:45:36.120 --> 0:45:39.080
<v Speaker 1>Sell me here, and why is an institution or a

0:45:39.120 --> 0:45:43.480
<v Speaker 1>long term retail investor I want to own these dogs?

0:45:43.640 --> 0:45:47.480
<v Speaker 1>I mean they're cyclical, six percent total return for four

0:45:47.600 --> 0:45:50.520
<v Speaker 1>in the last ten years. Help me? Or are they

0:45:50.520 --> 0:45:52.919
<v Speaker 1>going to become like the airline stocks where they grow

0:45:53.000 --> 0:45:56.480
<v Speaker 1>up and finally deliver massive cash flow or is it

0:45:56.520 --> 0:46:01.319
<v Speaker 1>the same old cyclical story of metal benders in Detroit? Short?

0:46:01.320 --> 0:46:03.279
<v Speaker 1>So clear, you know we we don't recommend Ford where

0:46:03.320 --> 0:46:05.560
<v Speaker 1>neutral on Ford have been for the last few years,

0:46:05.560 --> 0:46:08.680
<v Speaker 1>but the GM we we do recommend sisty one dollar

0:46:08.760 --> 0:46:10.640
<v Speaker 1>price target. And here's the thing that most of the

0:46:10.680 --> 0:46:13.600
<v Speaker 1>profits here come from a segment that is bigger than

0:46:13.600 --> 0:46:15.799
<v Speaker 1>it's been in many many years. Pick up trucks. Three

0:46:15.800 --> 0:46:20.200
<v Speaker 1>players have over market share. Think about how fragmented the

0:46:20.239 --> 0:46:22.920
<v Speaker 1>global automotive industry is, and you have these companies and

0:46:22.920 --> 0:46:25.759
<v Speaker 1>this is why we're seeing earnies confirmations in spite of

0:46:25.800 --> 0:46:27.360
<v Speaker 1>all the pressure points that we talked about in the

0:46:27.400 --> 0:46:29.680
<v Speaker 1>last segment. Um At the same time, you have, I think,

0:46:29.719 --> 0:46:32.319
<v Speaker 1>but what is an overlooked that's call a self help

0:46:32.400 --> 0:46:34.879
<v Speaker 1>story over the longer term where you know a lot

0:46:34.920 --> 0:46:37.919
<v Speaker 1>of talk to me about autonomous and shared mobility connected cards.

0:46:37.960 --> 0:46:39.520
<v Speaker 1>We do a lot of work on this, and a

0:46:39.520 --> 0:46:42.120
<v Speaker 1>lot of investors tend to you rightfully focus on the

0:46:42.160 --> 0:46:45.080
<v Speaker 1>suppliers who will provide content on these more advanced vehicles,

0:46:45.120 --> 0:46:47.680
<v Speaker 1>but there's not as much attention on who the future

0:46:47.719 --> 0:46:51.719
<v Speaker 1>mobility providers and specifically the mobility networks of tomorrow are

0:46:51.800 --> 0:46:53.640
<v Speaker 1>going to be. And we think that that in the

0:46:53.760 --> 0:46:57.760
<v Speaker 1>automaker space, there's gonna be some select opportunities, winners and losers,

0:46:58.040 --> 0:47:00.160
<v Speaker 1>and we think GM is one of those opportunities. Me

0:47:00.280 --> 0:47:03.399
<v Speaker 1>here though with their GM dividend payout ratio, they got

0:47:03.400 --> 0:47:07.759
<v Speaker 1>five six seven gazillion dollars in free cash flow. They're

0:47:07.840 --> 0:47:10.000
<v Speaker 1>running it like they did thirty years ago. When do

0:47:10.080 --> 0:47:13.879
<v Speaker 1>I get a real dividend payout from these people? Yeah?

0:47:13.920 --> 0:47:16.480
<v Speaker 1>I mean they're paying on a pretty healthy dividend of

0:47:16.680 --> 0:47:19.080
<v Speaker 1>about two and a half billion per year, they're buying backstops,

0:47:19.080 --> 0:47:22.279
<v Speaker 1>they've got a pretty um tight capital allocation policy from

0:47:22.440 --> 0:47:25.160
<v Speaker 1>all free cash flow going to shareholders and either investing

0:47:25.200 --> 0:47:28.239
<v Speaker 1>in UM this year incremental six and fimillion dollars just

0:47:28.360 --> 0:47:31.600
<v Speaker 1>an autonomous UM technology alone. So we actually we're seeing

0:47:31.640 --> 0:47:34.560
<v Speaker 1>investment and we're seeing some pretty decent kind of capital returns.

0:47:35.040 --> 0:47:36.960
<v Speaker 1>Thank you so much it Tay mcaulley with US was

0:47:37.000 --> 0:47:39.960
<v Speaker 1>sitting greatly appreciate it. Any auto. This is what we

0:47:40.040 --> 0:47:42.360
<v Speaker 1>love to do. This is what this is what surveillance

0:47:42.400 --> 0:47:45.680
<v Speaker 1>is about. Jamie Butters one day, who's a genius on

0:47:45.920 --> 0:47:54.399
<v Speaker 1>the whole Detroit thing, and then an expert like Mr mccaulley.

0:47:56.239 --> 0:48:00.560
<v Speaker 1>Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

0:48:00.680 --> 0:48:05.719
<v Speaker 1>listen to interviews on iTunes, SoundCloud, or whichever podcast platform

0:48:05.880 --> 0:48:09.440
<v Speaker 1>you prefer. I'm out on Twitter at Tom Keene, David

0:48:09.480 --> 0:48:13.120
<v Speaker 1>Gura is at David Gura. Before the podcast, you can

0:48:13.239 --> 0:48:29.480
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