WEBVTT - Danger Is Building In Some Emerging Markets: Bill Rhodes 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.800 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. US 0:00:32.840 --> 0:00:35.680 equities are heading deeper into the red, with the down 0:00:35.720 --> 0:00:39.600 Jones Industrial Index down eight tenths of one percent after 0:00:39.640 --> 0:00:42.640 President Trump said that he was calling off his summit 0:00:42.680 --> 0:00:46.280 with North Korean leader Kim Jong un. Here to talk 0:00:46.320 --> 0:00:49.560 about the implications of this is the Banker to the World. 0:00:49.680 --> 0:00:52.440 He should know about what to expect from this, as 0:00:52.479 --> 0:00:55.240 he has been in a lot of these types of negotiations. 0:00:55.680 --> 0:00:58.800 Bill Rhodes. He is the President, chief executive officer of 0:00:58.800 --> 0:01:01.360 William Rhodes Global Eiser is also the author of the 0:01:01.360 --> 0:01:04.479 book Banker to the World Leadership Lessons from the front 0:01:04.560 --> 0:01:09.280 Lines of Global Finance. Bill Uh, I gather you weren't 0:01:09.280 --> 0:01:12.840 all that surprised that these have become some complicated discussions 0:01:12.840 --> 0:01:15.200 between North Korea and UH the US, But what did 0:01:15.200 --> 0:01:17.200 you make of today's announcement. First of all, it's great 0:01:17.240 --> 0:01:19.640 to be with you guys. Again, I'm not surprised because 0:01:19.720 --> 0:01:22.319 I know Korea quite well. I restructured their dead I 0:01:22.440 --> 0:01:25.840 led to discussions on the chorus FDA, the Free trade 0:01:25.840 --> 0:01:30.920 Agreement UH. And the North always, whether it be the 0:01:31.000 --> 0:01:33.920 grandfather who started the dynasty, Kim Il Song or his 0:01:33.959 --> 0:01:37.000 son Kim Jong il has passed to this one, they 0:01:37.000 --> 0:01:42.720 always agree to do things on the nucle disarmament and 0:01:42.760 --> 0:01:44.560 then they back off on it as soon as they 0:01:44.560 --> 0:01:47.160 get the goodies from US. Uh, you know, in the 0:01:47.200 --> 0:01:52.480 sense of food, grain, whatever. And so UH I was 0:01:52.560 --> 0:01:55.880 highly skeptical from the beginning that he would be willing 0:01:55.920 --> 0:01:58.800 to give up the one thing he's got, which is 0:01:59.160 --> 0:02:02.840 you know, is nuclear weapon and missile capacity as a 0:02:02.840 --> 0:02:05.800 as a chip uh and agree to do a Libya 0:02:05.880 --> 0:02:09.440 type thing where you know, Cadafe gave up everything. The 0:02:09.520 --> 0:02:12.240 question is where do we go from here? And UH, 0:02:12.360 --> 0:02:14.840 we still have a big problem in Korea and what 0:02:14.880 --> 0:02:17.160 are we gonna do about it? Uh? And so I 0:02:17.160 --> 0:02:19.160 think what we have to do is lean on China 0:02:19.200 --> 0:02:21.760 because remember on your show, I mentioned again and again 0:02:21.800 --> 0:02:25.040 the linkage between China UH and Korea and I've done 0:02:25.040 --> 0:02:28.920 our eds on it because of their energy comes in 0:02:29.000 --> 0:02:31.920 from China. And so if we don't get the Chinese 0:02:31.960 --> 0:02:36.680 willing to do the sanctions, there's there's no push to 0:02:36.760 --> 0:02:38.680 go ahead with US. But the US has been pushing 0:02:38.720 --> 0:02:40.799 them to do this, and North Korea, as so far 0:02:40.840 --> 0:02:43.359 as I can tell, hasn't really gotten anything yet from 0:02:43.360 --> 0:02:46.440 the US, and China seems to be working and playing 0:02:46.520 --> 0:02:51.520 ball with the US on trade negotiations. What broke down here? Why? Now? 0:02:52.160 --> 0:02:55.160 I think a couple of things. One you saw over 0:02:55.200 --> 0:02:59.560 the last few weeks, Uh Kim Kim jong loons made 0:02:59.560 --> 0:03:03.200 to trips to China. The Chinese or orchestrating this to 0:03:03.240 --> 0:03:06.440 a great degree, and the Chinese are using this as 0:03:06.480 --> 0:03:09.080 a pawn, the chip in the negotiations on trade with 0:03:09.120 --> 0:03:11.840 the US. UH. And I think we've been a little 0:03:11.919 --> 0:03:14.840 naive in the administration thinking that we could get the 0:03:14.880 --> 0:03:18.840 boast the best out of both worlds because we're asking 0:03:18.880 --> 0:03:23.720 the Chinese to reverse their policy, longstanding policy of taking 0:03:23.760 --> 0:03:27.240 advantage when the be intellectual property on trade. UH. And 0:03:27.280 --> 0:03:29.799 then expect, uh, you know, as we begin to push 0:03:29.880 --> 0:03:33.120 him as we should push them, then expect that uh, 0:03:33.639 --> 0:03:36.839 we're gonna get Chi Jin pain to push Kim Jong 0:03:36.960 --> 0:03:39.680 un to do a deal with us, So you really 0:03:39.720 --> 0:03:43.040 can't break that link between the two. And I think 0:03:43.360 --> 0:03:45.680 that if that was a view of the administration, and 0:03:45.760 --> 0:03:48.680 some people think it was, it was naive. UH. The 0:03:48.760 --> 0:03:50.880 other thing is, I think when we deal with the Chinese, 0:03:51.320 --> 0:03:54.000 we need a common front. And all the stories you're 0:03:54.040 --> 0:03:58.839 picking up in Washington. You've got the minutein UH and 0:03:58.920 --> 0:04:02.280 the Larry Cudlow and discussions on one side wanting to, 0:04:02.480 --> 0:04:06.480 you know, be more favorable to China. And then you 0:04:06.480 --> 0:04:10.600 you've got Leightheiser, who is the trade represent representative, tough 0:04:10.640 --> 0:04:13.840 guy on trade UH and Peter Navarro who always had 0:04:13.840 --> 0:04:16.919 a problem with China on the other side, with Wilbur Ross, 0:04:17.080 --> 0:04:20.720 Commerce Secretary in the middle, and UH. What we've got 0:04:20.720 --> 0:04:23.520 to understand is that getting Kim Jong un to the 0:04:23.560 --> 0:04:26.720 table UH is important, but you've got to have some 0:04:26.800 --> 0:04:29.719 preconditions there on the basis of what is his view 0:04:29.760 --> 0:04:32.800 of denuclearization And from what I can pick up, his 0:04:32.880 --> 0:04:35.480 view is step by step, which is what the Chinese 0:04:35.480 --> 0:04:38.200 have been advocating for years with the Six Party talks, 0:04:38.600 --> 0:04:40.760 and we thought we would go in there. John Bolton 0:04:40.839 --> 0:04:43.080 was saying we're going to get a Kadafi type deal 0:04:43.200 --> 0:04:47.279 where he just gives it up UH for uh, you know, 0:04:47.360 --> 0:04:50.080 removal of sanctions. So I think we've got ourselves a 0:04:50.080 --> 0:04:54.279 difficult situation here, and with the trade with China is 0:04:54.360 --> 0:04:57.760 key noting to the Chinese economy, but to our economy 0:04:57.760 --> 0:05:01.040 and the world economy. So I hope the administration can 0:05:01.080 --> 0:05:04.480 get its act together on how they're gonna work on 0:05:04.560 --> 0:05:08.000 both sides here, because there is that linkage between China 0:05:08.080 --> 0:05:10.839 and North Korea and you can't doubt it. The other 0:05:10.920 --> 0:05:13.640 problem we have is you have a very nice person 0:05:13.680 --> 0:05:17.240 who's president of South Korea, but his one goal in 0:05:17.320 --> 0:05:19.240 life because I know him going back to when his 0:05:19.400 --> 0:05:22.080 chief of staff of a former president, President Noe, that 0:05:22.200 --> 0:05:26.440 his one goal in life is reconciliation with North Korea 0:05:26.720 --> 0:05:31.440 and UH, so he'll virtually do anything to get that reconciliation. 0:05:32.000 --> 0:05:35.200 So it's a very very difficult point where we're at. 0:05:35.640 --> 0:05:37.880 And since we're talking about trade, I should mention that 0:05:37.960 --> 0:05:40.080 one of the things that I think we need to 0:05:40.080 --> 0:05:43.840 really move on. I was with President uh Prime Minister 0:05:43.880 --> 0:05:46.320 Trudeau last week. I sat with him in the diets 0:05:46.360 --> 0:05:49.520 of the New York Economic Club and He was making 0:05:49.520 --> 0:05:52.880 the point that you know they'll be flexible in Canada, 0:05:53.520 --> 0:05:55.680 but also they got to be realistic. He says, they'll 0:05:55.720 --> 0:05:59.120 be patient, but uh, we need a deal on after. 0:05:59.240 --> 0:06:01.360 And one of the things it troubles me is at 0:06:01.360 --> 0:06:05.200 the elections in Mexico or coming up July one, and 0:06:05.279 --> 0:06:09.280 you have a candidate there who basically says, if this 0:06:09.320 --> 0:06:11.400 isn't done by the time he takes office in December, 0:06:11.440 --> 0:06:14.919 he's gonna want tougher conditions. The topics are a trade 0:06:15.040 --> 0:06:19.400 political instability not only in Asia but also closer to 0:06:19.480 --> 0:06:25.640 home between Mexico, Canada, the United States, ongoing renegotiations of NAFTA, 0:06:25.800 --> 0:06:29.560 as well as deterioration in the Turkish Lera. Here to 0:06:29.600 --> 0:06:32.400 help us understand more about this is Bill Rhodes. He 0:06:32.520 --> 0:06:35.520 is Banker to the World. His book is called Banker 0:06:35.560 --> 0:06:38.520 to the World Leadership Lessons from the front Lines of 0:06:38.600 --> 0:06:42.680 Global Finance. And Bill, I would just offer that your 0:06:42.720 --> 0:06:47.080 book not only is about what you have done in 0:06:47.120 --> 0:06:51.240 the world of finance, but whom you have met, the 0:06:51.360 --> 0:06:55.120 people that you have met and interacted with, And I 0:06:55.160 --> 0:06:59.160 think that that's a key element to bring out because 0:07:00.440 --> 0:07:02.880 most action is done by people it's not something that 0:07:02.920 --> 0:07:04.920 falls from the sky. And I'm wondering if you could 0:07:04.920 --> 0:07:09.000 just describe for us what you believe is the sort 0:07:09.040 --> 0:07:12.800 of issue when it relates to the Mexican economy and 0:07:13.000 --> 0:07:18.000 the upcoming Mexican presidential elections and the people involved. Well, 0:07:18.000 --> 0:07:20.680 this is a big election year for Latin America. We 0:07:20.760 --> 0:07:24.360 all we already had this the blackle down in Venezuela, 0:07:24.480 --> 0:07:28.240 where you know, a dishonest election where less than half 0:07:28.240 --> 0:07:31.320 the people even showed up to vote. We have Mexico, 0:07:31.360 --> 0:07:35.520 as you mentioned, we also have Columbia, and we have Brazil. UH. 0:07:35.560 --> 0:07:39.360 This is the biggest election year in recent history in 0:07:39.440 --> 0:07:41.880 Latin America. So what happens here is key as far 0:07:41.920 --> 0:07:48.200 as Mexico goes. Lopezo Brador, who's to the far left UH, 0:07:48.320 --> 0:07:51.760 is running ahead in the polls. UM. Now some of 0:07:51.800 --> 0:07:54.120 the candidates have have dropped out, and we'll have to 0:07:54.160 --> 0:07:57.360 see what finally happens. But the election is is basically 0:07:57.360 --> 0:08:00.440 almost a month away. It's it's July first, and he's 0:08:00.480 --> 0:08:05.320 made statements that on two areas, one that UH that 0:08:05.440 --> 0:08:08.640 he's going to look at the the oil contracts have 0:08:08.720 --> 0:08:10.800 been given out by the pinion Yet of government which 0:08:10.840 --> 0:08:13.600 has helped the Mexican economy grow, to see if they 0:08:13.640 --> 0:08:17.120 were done fairly or in a corrupt way, which is 0:08:17.360 --> 0:08:21.040 you know, concerned people. And then the other thing is, uh, 0:08:21.280 --> 0:08:23.280 since we don't seem to be able to reach an 0:08:23.280 --> 0:08:28.160 agreement with Pinioneto and Trudeau in Canada, Uh, what will 0:08:28.200 --> 0:08:31.080 happen with NAFTA and after's key to all three countries 0:08:31.160 --> 0:08:34.640 and not only economically but security was and so it's 0:08:34.640 --> 0:08:41.000 a very concerning situation. Uh. And uh, the Mexicans are concerned. Uh, 0:08:41.080 --> 0:08:43.800 we should be concerned here and I know the Canadians 0:08:44.200 --> 0:08:48.160 just having sat with with Prime Minister Trudeau uh on 0:08:48.320 --> 0:08:51.160 the diets when he spoke last week. And by the way, 0:08:51.200 --> 0:08:54.280 I think I was very much impressed because he says 0:08:54.280 --> 0:08:57.120 he'll be patient, uh to get this thing done because 0:08:57.120 --> 0:09:01.560 it's so important, but it's got to get done. So 0:09:02.040 --> 0:09:04.400 you know we're talking about Maxo. I want to I 0:09:04.400 --> 0:09:07.720 want to just shift in general to emerging markets. You 0:09:07.760 --> 0:09:12.360 mentioned Venezuela also clearly there in a crisis of humanitarian, political, 0:09:12.440 --> 0:09:17.040 and economic proportions. The Turkish lira, meanwhile, is continuing to 0:09:17.120 --> 0:09:20.640 fall out of bed, down about four percent today, even 0:09:20.720 --> 0:09:25.720 after the emergency rate hike yesterday by the Turkish Central Bank. UM. 0:09:25.760 --> 0:09:30.839 Given your experience with restructuring debt and helping Brazil during 0:09:31.120 --> 0:09:34.360 the the e M crisis in the late nineteen nineties 0:09:34.600 --> 0:09:37.679 and as vice chair of senior vice chair of City Group, 0:09:38.000 --> 0:09:41.040 you know how significant is this? Are we heading toward 0:09:41.080 --> 0:09:44.600 another emerging markets crisis of that magnitude? I think it's 0:09:44.640 --> 0:09:48.319 a very good Uh, it's a very good question. I 0:09:48.360 --> 0:09:51.120 was with Paul Krugman a week ago in Argentina at 0:09:51.160 --> 0:09:53.640 a conference and he and I were talking about it, 0:09:53.640 --> 0:09:55.880 and I noticed he's come out with tweets since Yes, 0:09:55.960 --> 0:09:58.679 he has said that it is. It's actually resonate. Resonates 0:09:59.080 --> 0:10:01.880 because he and I I on the private sector side, 0:10:01.920 --> 0:10:03.880 he in academia, were the two who called the Asian 0:10:03.880 --> 0:10:08.360 financial crisis UH, and mine came out in the Financial 0:10:08.360 --> 0:10:12.240 Times article. His came out with a paper or study. 0:10:12.960 --> 0:10:16.319 I would say there are similarities, but there are big differences. 0:10:16.640 --> 0:10:20.000 I think the similarities are as you get some of 0:10:20.000 --> 0:10:23.320 this UH liquidity what's been slashing around now to get 0:10:23.400 --> 0:10:25.560 us out of the Great recession. I've said this on 0:10:25.640 --> 0:10:29.920 your program before and Bloomberg Television. We're gonna see rates 0:10:29.960 --> 0:10:31.719 go up in the United States, which we are, the 0:10:31.800 --> 0:10:34.599 quantitative easing is being ratchant back and some of this 0:10:34.720 --> 0:10:36.720 search and reach for yield is is going to come 0:10:36.720 --> 0:10:39.480 back and hit us. And one of the groups that 0:10:40.000 --> 0:10:42.320 took advantage of this a number of countries in the 0:10:42.360 --> 0:10:47.120 emerging markets borrowed heavily in foreign currency, sometimes short term 0:10:47.160 --> 0:10:49.920 as in the case of Turkey, in the case of Argentina, 0:10:50.040 --> 0:10:55.400 longer term and UH. Those countries who have fiscal deficits 0:10:55.920 --> 0:10:59.120 UH and aren't prepared to face this I think could 0:10:59.120 --> 0:11:02.960 be in trouble, particularly if we see the FED continuing 0:11:03.040 --> 0:11:06.160 to raise interest rates, which I think they will UH, 0:11:06.200 --> 0:11:09.640 and the quantitative eas in going out. Just having come 0:11:09.640 --> 0:11:14.200 back from Argentina, President Macari was very much the darling 0:11:14.200 --> 0:11:17.959 of the markets. But he has a program called Gradualismo, 0:11:18.600 --> 0:11:21.800 which is gradual reform. And the problem is when you 0:11:21.800 --> 0:11:24.520 get into difficult situations, you can't be gradually about it. 0:11:24.600 --> 0:11:27.200 You've got to be more upfront. And I think he 0:11:27.240 --> 0:11:29.480 did the proper thing, although it was tough for him 0:11:29.520 --> 0:11:31.040 to do, to call in the I m F to 0:11:31.080 --> 0:11:33.719 get some support so he can implement the rest of 0:11:33.760 --> 0:11:38.240 the reforms. So Argentina was the one over the last 0:11:38.240 --> 0:11:40.880 few weeks where interest rates went up to they raised 0:11:40.880 --> 0:11:43.720 them three times. UH. The I m F and we 0:11:43.760 --> 0:11:46.880 came one week, which caught the imagination. But Turkey, and 0:11:46.960 --> 0:11:50.120 something I said twice on Bloomberg Television over the last 0:11:50.160 --> 0:11:53.320 three months, Turkey has been hanging out there because their 0:11:53.360 --> 0:11:56.840 heavy borrow is a private sector short term and they 0:11:56.880 --> 0:11:59.280 haven't moved interest rates up fast enough, and so you 0:11:59.320 --> 0:12:03.760 have tremendous pressure on the Turkish lira. UH. And Urvan 0:12:03.920 --> 0:12:06.400 keeps telling the central bank not to raise interest rates 0:12:06.440 --> 0:12:09.280 because his view of the of the of of of 0:12:09.800 --> 0:12:13.320 economics is that central bank should have low interest rates 0:12:13.320 --> 0:12:16.800 and then you won't have any inflation. Well, unfortunately, I 0:12:16.840 --> 0:12:19.840 don't think Devon ever took a course in economics. But 0:12:19.880 --> 0:12:22.800 that's another situation. And so I think that what you 0:12:22.880 --> 0:12:26.640 have here is you have the possibility of those countries 0:12:27.320 --> 0:12:30.320 UH that could have problems. And the other element to 0:12:30.360 --> 0:12:34.520 throw in this is that if the price of oil 0:12:35.480 --> 0:12:38.760 sticks in between seventy and eighty, that'll be big for 0:12:38.800 --> 0:12:42.520 the oil exporters, except as well where the production has collapsed, 0:12:42.520 --> 0:12:48.200 which I forecast in my early eighteen January oh ed. 0:12:48.640 --> 0:12:50.800 But I think that what will happen is those countries 0:12:50.840 --> 0:12:53.520 who are importers are going to be hit. So that's 0:12:53.600 --> 0:12:56.080 kind of a triple whammy. So we just have about 0:12:56.559 --> 0:12:59.760 forty five seconds here. Who is the next shooter drop 0:12:59.800 --> 0:13:03.920 which nation in developing markets? Not clear because it's going 0:13:03.960 --> 0:13:06.880 to depend. Also if you have an ease up in 0:13:07.120 --> 0:13:11.240 uh by Opec uh and the Russians are talking about 0:13:11.360 --> 0:13:15.720 maybe easing up somewhat to keep the price from going 0:13:15.760 --> 0:13:18.800 too high in the South East. Han agreed. So it's 0:13:18.840 --> 0:13:21.600 it's not clear. But just in general, a lot of 0:13:21.600 --> 0:13:24.760 the African countries have barred very heavily in foreign currency, 0:13:25.240 --> 0:13:27.680 and I think that uh a number of them are 0:13:27.880 --> 0:13:31.520 oil importers, so they could have they could have problems. 0:13:32.040 --> 0:13:34.360 So we have to see how this, you know, this 0:13:34.480 --> 0:13:38.400 uncertainty uh that we're facing unfolds, but it's something that 0:13:38.480 --> 0:13:41.640 needs to be watched without a doubt. And uh, you know, 0:13:41.679 --> 0:13:46.040 I see people on on TV and radio and everything saying, oh, 0:13:46.080 --> 0:13:48.600 this is not going to be a problem. I think 0:13:48.640 --> 0:13:51.600 it could be a problem. It depends on how every 0:13:51.640 --> 0:13:55.640 individual country handles. But if you told anyone even at 0:13:55.679 --> 0:13:59.080 the beginning of this year that Argentina would be asking 0:13:59.160 --> 0:14:02.000 for a standby line, they'd have laughed at you because 0:14:02.000 --> 0:14:04.760 they have just bought those hundred year bonds and they Yeah. 0:14:04.880 --> 0:14:06.920 Bill Rhodes unfortunately have to live it there. You could 0:14:06.920 --> 0:14:09.720 continue for another hour. Bill Rhodes, President, chief executive officer 0:14:09.960 --> 0:14:13.400 of William R. Rhodes Global Advisors, author of Banker to 0:14:13.440 --> 0:14:17.199 the World, also former Seatre, Vice chair of City Group, 0:14:17.440 --> 0:14:20.200 has been in all of these negotiations. A wonderful voice 0:14:20.280 --> 0:14:37.680 on this day. This is Bloomberg. Shares of General Motors 0:14:37.840 --> 0:14:40.640 higher today as well as Ford Motor. General Motors up 0:14:40.680 --> 0:14:43.280 about seven tenths of a percent. Forward Motor up nearly 0:14:43.320 --> 0:14:46.880 one percent. This comes after the Trump administration is trying 0:14:46.920 --> 0:14:50.720 to use national security laws to consider imposing new tariffs 0:14:51.160 --> 0:14:55.160 on vehicle and automobile parts imports. Here to tell us 0:14:55.200 --> 0:14:58.120 more about this is Alan Boum. He is principal of 0:14:58.160 --> 0:15:02.600 Boum and Associates and based in West Bloomfield, Michigan, and 0:15:02.640 --> 0:15:04.720 he joins us now. Alan, thank you very much for 0:15:04.920 --> 0:15:10.200 being with us. If these tariffs of as much as 0:15:10.200 --> 0:15:13.000 on automobile imports, where do you put in place? What 0:15:13.080 --> 0:15:18.880 would that do to US automobile manufacturers? Oh? Chaos, because 0:15:19.280 --> 0:15:24.320 us automobile manufacturers is obviously a broad term, UM. And 0:15:24.440 --> 0:15:26.760 you know, let's take the clock back to the nineteen 0:15:26.880 --> 0:15:31.560 eighties when the Japanese were importing huge amounts of products 0:15:31.600 --> 0:15:35.880 into the US, and we had voluntary agreements which in 0:15:35.960 --> 0:15:40.800 fact worked far better than even the people at the 0:15:40.840 --> 0:15:43.360 time thought. And what I mean by that is Toyota 0:15:43.360 --> 0:15:47.280 and Nissan and Honda to start and others later established 0:15:47.280 --> 0:15:51.520 production here in the US, and that it matters where 0:15:51.520 --> 0:15:54.440 the vehicles come from, because if you're producing here in 0:15:54.480 --> 0:15:58.280 the US, your supply is obviously much better than when 0:15:58.320 --> 0:16:01.560 you're trying to get products from Japan, where a lot 0:16:01.600 --> 0:16:03.960 of other markets might be trying to do it. And 0:16:04.000 --> 0:16:08.680 so the result was, UM that the Japanese UH had 0:16:08.800 --> 0:16:14.320 tremendous products, they were very efficient, and UH really presented 0:16:14.440 --> 0:16:21.040 presented huge problems for the Detroit Three. So, Allen, I'm 0:16:21.080 --> 0:16:26.000 just wondering, I'm sure after the reports have come out now, UH, 0:16:26.040 --> 0:16:27.960 that there will be a host of lobbyists that will 0:16:27.960 --> 0:16:30.400 head to President Trump's office and try to convince him 0:16:30.680 --> 0:16:33.920 to either go through with the tariffs or to abandon 0:16:33.960 --> 0:16:37.760 them all together. So I'm wondering General Motors and Ford, 0:16:37.800 --> 0:16:39.960 for example, are they going to be for these or 0:16:40.040 --> 0:16:44.800 against these? Well, obviously it depends upon uh, you know, 0:16:44.840 --> 0:16:48.800 how they're put together. Uh. Just how Canada and Mexico 0:16:48.920 --> 0:16:52.880 fit into all this. Um Ford, for example, brings in, 0:16:53.360 --> 0:16:56.560 uh the Eco Sport from Turkey. Uh. They're talking about 0:16:56.680 --> 0:16:59.840 bringing in the Focus, which is now no longer produced 0:17:00.040 --> 0:17:04.600 in Michigan from China. Um and GM brings in the 0:17:04.800 --> 0:17:10.160 Envision from China as well. UM. So all automakers are 0:17:10.240 --> 0:17:15.520 global um and there it's not just their assembly footprint 0:17:15.600 --> 0:17:20.439 but their supplier footprint. And this could be very destructive 0:17:20.760 --> 0:17:24.640 to their relationships with their suppliers who are used to 0:17:24.680 --> 0:17:28.240 a certain process. And that could mean higher prices for 0:17:28.359 --> 0:17:32.520 the automakers to buy from the suppliers, and obviously that 0:17:32.600 --> 0:17:36.240 gets backed on. So alan who is actually arguing for 0:17:36.280 --> 0:17:39.040 these I mean, who's lobbying President Trump saying this is 0:17:39.080 --> 0:17:45.200 a fantastic idea. Uh that's interesting question because I think 0:17:45.280 --> 0:17:47.959 it's much more from the political side than it is 0:17:48.000 --> 0:17:51.960 the business side. Uh. You know, this is obviously some 0:17:52.160 --> 0:17:56.920 of the UH labor organizations might be comfortable with this, 0:17:57.359 --> 0:18:02.160 but I say might because of the the unintended consequences, 0:18:02.480 --> 0:18:05.640 and of course the other thing. Using this national security 0:18:06.400 --> 0:18:10.400 law as part of the justification creates a whole lot 0:18:10.440 --> 0:18:14.840 of problems in terms of legal and trade policy. And 0:18:14.920 --> 0:18:19.280 of course this is a cliche, but it's true. Business 0:18:19.359 --> 0:18:24.560 hates uncertainty, and this is clearly uncertain Alan. Is it 0:18:24.640 --> 0:18:28.120 possible that this is also somehow entwined in the ongoing 0:18:28.200 --> 0:18:33.439 NAFTA negotiations? Oh sure, and uh, you know that is 0:18:33.800 --> 0:18:38.080 uh for all of the automakers. That's a critical thing. 0:18:38.119 --> 0:18:40.600 You know. I was reading something this morning, uh, and 0:18:40.640 --> 0:18:44.920 it said that eight million vehicles are are imported into 0:18:44.960 --> 0:18:47.040 the US. And I looked at that and said, oh, 0:18:47.119 --> 0:18:50.440 that's crazy. And then I realized that they were talking 0:18:50.480 --> 0:18:54.600 about Canada and Mexico, which were half of that. Um. 0:18:54.800 --> 0:18:57.639 And you know, we don't even think of those as imports. 0:18:57.800 --> 0:19:01.720 NAFTA is obviously a fact of life. UM. And so yes, 0:19:01.800 --> 0:19:06.880 there are four million imports from outside DAFTA. But clearly 0:19:06.920 --> 0:19:10.399 the NAFTA processes is absolutely critical to the industry. And 0:19:10.440 --> 0:19:13.560 again I go back to the supplier base where uh, 0:19:13.960 --> 0:19:16.080 you know, the automakers have said, if you want to 0:19:16.119 --> 0:19:20.159 supply US, we want the Mexico price or the China price, 0:19:20.600 --> 0:19:24.800 and oftentimes that is meant suppliers have opened up new 0:19:24.840 --> 0:19:29.159 plans in low cost UH locations. So, Ellen, when you 0:19:29.240 --> 0:19:32.200 head into Detroit and meet with people at the big 0:19:32.320 --> 0:19:35.879 US carmakers, is the feeling that this will all just 0:19:35.920 --> 0:19:38.960 settle down and that it's mostly just a trade negotiation 0:19:39.000 --> 0:19:43.960 tactic or is there real fear? Well, the you know, 0:19:44.000 --> 0:19:47.840 there's so much uncertainty day to day in what the 0:19:47.920 --> 0:19:51.640 policy is. And I go back to Mike Cliche, I mean, 0:19:51.720 --> 0:19:55.720 look at the fuel economy is situation. The automakers want 0:19:55.800 --> 0:20:00.600 some relief, but they didn't want relief that would get 0:20:00.640 --> 0:20:04.919 the hornets going in in California to get legislaed, to 0:20:04.960 --> 0:20:08.960 get the lawsuits going, and more uncertainty. And so now 0:20:08.960 --> 0:20:12.520 they're saying, wait a minute, we really mean that we 0:20:12.720 --> 0:20:15.520 just wanted a little little things on the edges here. 0:20:15.600 --> 0:20:18.840 Please don't don't don't draw the whole system into the 0:20:19.000 --> 0:20:23.680 correct Alan, and that's that's where we are Allan, thank 0:20:23.680 --> 0:20:25.640 you so much for joining us. It's always fun having 0:20:25.680 --> 0:20:30.160 you on. Alan Baum is the principle of Baum and Associates, 0:20:30.200 --> 0:20:33.639 which is based in West Bloomfield, Michigan. Uh and is 0:20:33.720 --> 0:20:37.440 a firm that's focused on automotive research for the analysis 0:20:37.440 --> 0:20:42.919 of auto sales. Really interesting discussion and definitely uncertainty the 0:20:43.080 --> 0:21:00.240 word of the day and the year, maybe the decade. 0:21:04.240 --> 0:21:08.000 Donald Trump. President Donald Trump is set to as sign 0:21:08.240 --> 0:21:13.480 a revamp of Dodd Frank financial legislation. He has expected 0:21:13.520 --> 0:21:15.399 to sign that at the White House. We will of 0:21:15.400 --> 0:21:18.879 course bring that to live. Uh. The final vote in 0:21:18.880 --> 0:21:22.160 the House it was to fifty eight to one fifty 0:21:22.280 --> 0:21:26.320 nine in favor. It was a bipartisan Senate crafted bill 0:21:26.520 --> 0:21:30.280 and is designed to loosen regulations for many community banks 0:21:30.320 --> 0:21:34.560 and regional lenders, including custodian banks such as a State Street. 0:21:34.760 --> 0:21:37.240 Here to tell us more about this is our own 0:21:37.320 --> 0:21:40.359 Arnold Cucuda. He is our banking and credit analyst for 0:21:40.640 --> 0:21:44.640 Bloomberg Intelligence. Arnold, thank you very much for being here. 0:21:45.119 --> 0:21:46.920 Maybe just tell people a little bit about I believe 0:21:46.920 --> 0:21:49.960 there's sort of three areas that this is really going 0:21:50.000 --> 0:21:53.360 to effect. Yes, so this bill is actually it's it's 0:21:53.400 --> 0:21:56.560 more about helping the regional banks. So anybody really under 0:21:56.560 --> 0:22:00.960 two billion of assets? Right, So basically the systemically important 0:22:00.960 --> 0:22:04.439 financial institution threshold, which used to be a fifty billion, 0:22:04.600 --> 0:22:08.600 is now going up. So what up to Basically what 0:22:08.640 --> 0:22:11.280 that means is less regulation for those banks that fall 0:22:11.320 --> 0:22:15.679 between this. Now for some of the bigger banks, like uh, 0:22:15.840 --> 0:22:18.880 you know, I look more at them, the US systemically 0:22:18.920 --> 0:22:23.040 important banks. So in that area State Street and Bank 0:22:23.080 --> 0:22:26.200 in New York, they're going to get some capital relief 0:22:26.440 --> 0:22:29.440 in terms of um, you know, not counting Central bank 0:22:29.520 --> 0:22:31.680 deposits at at the FED and the e c B 0:22:32.160 --> 0:22:34.760 from their denominator of of a ratio, which basically it 0:22:34.760 --> 0:22:39.840 will help boost that ratio for those banks. So definitely 0:22:40.600 --> 0:22:42.720 helped to some regional banks. And people have been saying 0:22:42.720 --> 0:22:45.800 that we might see a consolidation in smaller banks as 0:22:45.800 --> 0:22:47.320 a result of this. I want to shift gears a 0:22:47.359 --> 0:22:49.960 little bit because we are seeing uh the shareholder meeting 0:22:50.000 --> 0:22:54.520 of Deutsche Bank unfold and it shares down nearly five 0:22:54.600 --> 0:22:58.520 percent in Germany. Uh, you know right now after announcing 0:22:58.520 --> 0:23:01.840 that it would uh cut more than seven thousand people. 0:23:02.640 --> 0:23:05.080 I think one big question is what's its plan? I mean, 0:23:05.080 --> 0:23:07.680 what's its strategy? What does it want to be? Yes, 0:23:07.760 --> 0:23:10.679 we know it wants to cut costs. What next? Well, 0:23:10.760 --> 0:23:13.359 so it's it's funny because it was supposed to be 0:23:13.440 --> 0:23:15.959 no more, no more crying, you know, faith and Christian. 0:23:16.440 --> 0:23:19.080 But you know, I guess. You know, even though investors 0:23:19.080 --> 0:23:21.479 got what they wanted, Uh, still you know, do what 0:23:21.520 --> 0:23:24.080 do what they say? Still don't like it. So uh 0:23:24.080 --> 0:23:26.720 the strategy is UM. You know, today was kind of 0:23:26.720 --> 0:23:29.160 a reiteration and kind of filling in the blanks of hey, 0:23:29.240 --> 0:23:31.399 you know, the new CEO came on board and said, hey, 0:23:31.600 --> 0:23:34.800 we're gonna shift focus, you know, cut um our reliance 0:23:34.840 --> 0:23:37.359 on the corporate investment bank. But it's it's only just 0:23:37.400 --> 0:23:40.840 a little bit, right, so they're currently seen they had 0:23:40.840 --> 0:23:43.400 about fifty percent revenue coming from the corporate investment bank. 0:23:44.520 --> 0:23:47.760 That will be you know, uh sorry, uh they sent 0:23:47.800 --> 0:23:50.360 from non c IB that'll go to So it's really 0:23:50.359 --> 0:23:52.800 only your small shift. And in terms of the cuts 0:23:53.080 --> 0:23:56.760 coming in equities of head count there that you know, 0:23:57.240 --> 0:23:59.160 it kind of makes sense there because you know that's 0:23:59.160 --> 0:24:03.000 an area that they've act UM technology UM. I guess 0:24:03.040 --> 0:24:06.119 investments were lagging there UM And I think that carries 0:24:06.160 --> 0:24:08.080