WEBVTT - Bloomberg's Talev Talks About Trump Oval Office Interview 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's a power 0:00:08.080 --> 0:00:12.360 of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:26.400 Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:26.440 --> 0:00:29.920 I'm Tom Keene with David Gura. Daily we bring you 0:00:29.960 --> 0:00:34.800 insight from the best of economics, finance, investment, and international relations. 0:00:35.240 --> 0:00:40.760 Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 0:00:40.800 --> 0:00:48.240 and of course, on the Bloomberg. Howard Ward, the CIO 0:00:48.280 --> 0:00:50.760 of Growth Equities for Gabelly Funds, kind enough to join 0:00:50.840 --> 0:00:53.120 us here in our Bloomberg eleven three oh studios in 0:00:53.159 --> 0:00:55.560 New York. Hard Great to see you once again, and 0:00:55.640 --> 0:00:57.120 let me start with when I think is an important 0:00:57.160 --> 0:00:58.640 line from one of your most recent notes. You're right, 0:00:59.120 --> 0:01:02.720 this is feeling a bit like late nineteen Help us 0:01:02.720 --> 0:01:06.720 with the historical analog here when you look at the market. Well, 0:01:06.760 --> 0:01:10.240 that's what it was, I thought, as uh, as I 0:01:10.280 --> 0:01:13.160 think many of your listeners have noticed. There's been a 0:01:13.240 --> 0:01:17.160 really tremendous rise in the technology number of the large 0:01:17.160 --> 0:01:20.760 cap technology stocks. Uh, in the last year, you'd be 0:01:20.800 --> 0:01:23.720 hard pressed to find one that has risen less than 0:01:23.760 --> 0:01:27.119 thirty percent over the last twelve months. In the case 0:01:27.240 --> 0:01:31.880 of Apple, it's about sixty above. It's a fifty two 0:01:31.880 --> 0:01:36.720 week low. Uh. You know, Amazon's up, Microsoft, Google, They're 0:01:36.720 --> 0:01:40.880 all up thirty plus. And uh, you know this is 0:01:41.040 --> 0:01:44.479 the and you're having days where some of these very 0:01:44.560 --> 0:01:49.680 large cap names will move two to three percent higher. Uh, 0:01:49.720 --> 0:01:54.320 and a market that has an amazing level of complacency. Um. 0:01:54.480 --> 0:01:56.080 And this you can see it when you look at 0:01:56.080 --> 0:01:58.920 the VIX and you can just feel it from the 0:01:59.000 --> 0:02:02.400 lack of downward pressure in stocks. Uh. We we've gone 0:02:02.400 --> 0:02:05.560 a long time since we've had a five or ten 0:02:05.600 --> 0:02:09.639 percent correction, let alone a fifteen percent correction. And Uh, 0:02:09.680 --> 0:02:11.440 it's gotten too easy to make money. It's gotten too 0:02:11.480 --> 0:02:14.320 easy to make money in large cap tech. Uh. These 0:02:14.320 --> 0:02:19.400 are great companies. They're generating a large sums of profits 0:02:19.440 --> 0:02:23.360 and free cash flow. And that's all good. But you know, 0:02:23.440 --> 0:02:26.120 at some point it probably makes sense to take some 0:02:26.200 --> 0:02:29.680 money off the table. And with respect to the stocks 0:02:29.680 --> 0:02:32.680 that I've just mentioned, I have sold a chunk of 0:02:32.760 --> 0:02:35.160 my Amazon in the last week. I still own a 0:02:35.240 --> 0:02:37.840 chunk of it, but I've I've been a seller of Amazon. 0:02:38.720 --> 0:02:42.560 Great company, but uh, you know, I think that the 0:02:42.639 --> 0:02:45.840 expectations for the overall market are somewhat inflated, and I 0:02:45.880 --> 0:02:49.240 think the expectations for Amazon are as well. How does 0:02:49.280 --> 0:02:51.840 Howard board process and earnings report when this comes out, 0:02:51.840 --> 0:02:53.640 when the Apple report comes out after the buil today, 0:02:53.639 --> 0:02:55.440 what are you gonna be looking for? What's the first 0:02:55.440 --> 0:02:59.600 thing that you check? Well, interestingly enough, in this environment 0:02:59.680 --> 0:03:03.639 that we're in, unless there was a tremendous miss, uh 0:03:03.680 --> 0:03:06.919 in terms of their revenues and earnings. Uh And and 0:03:06.960 --> 0:03:10.799 by the way, the sort of consensus expectations is two 0:03:10.800 --> 0:03:13.440 dollars and two cents of earnings for Apple for the 0:03:13.520 --> 0:03:16.080 quarter on revenues that are going to be real close 0:03:16.120 --> 0:03:19.240 to around fifty three billion dollars for which is amazing 0:03:19.280 --> 0:03:22.160 for one quarter. But unless there's a real miss, the 0:03:22.200 --> 0:03:24.160 focus is really going to be on the guidance that 0:03:24.240 --> 0:03:28.160 they give. Uh. Now you know that also is a 0:03:28.200 --> 0:03:31.880 bit tricky because Apple, I think appropriately has a tendency 0:03:32.000 --> 0:03:36.640 to downplay their guidance, very conservative guidance. And we're heading 0:03:36.680 --> 0:03:42.560 into the the introduction of the tenth anniversary phone, the 0:03:42.600 --> 0:03:46.560 next generation of the iPhone, UH probably coming out this summer, 0:03:47.040 --> 0:03:50.119 and the expectations for this are very large, and that's 0:03:50.160 --> 0:03:52.360 one of the reasons the stock has done so well. 0:03:52.480 --> 0:03:55.680 We've had this rerating of Apple shares in the last year. 0:03:55.720 --> 0:03:58.480 It's gone from ten times forward earnings to fifteen times 0:03:58.520 --> 0:04:01.720 forward earnings, which is still not exorbitant before a company 0:04:01.760 --> 0:04:06.080 of its size, where secular growth and the double digits 0:04:06.160 --> 0:04:08.600 is going to be a challenge, it's probably not far 0:04:08.640 --> 0:04:11.360 from where it's likely to peak. I don't think Apple 0:04:11.400 --> 0:04:14.040 is going to be selling it twenty times forward earnings, 0:04:14.040 --> 0:04:16.320 So the focus with the report is really going to 0:04:16.360 --> 0:04:19.520 be on the guidance. I'm assuming there's not gonna be 0:04:19.600 --> 0:04:21.960 a big mess. It's gonna be uh. There might be 0:04:22.040 --> 0:04:24.960 some news on a new dividend today. They don't always 0:04:24.960 --> 0:04:26.880 do that together with the earnings release. In fact, they 0:04:26.920 --> 0:04:30.320 frequently decouple that. So let's not get our hopes up 0:04:30.360 --> 0:04:32.560 for that. But I think it's going to be a 0:04:32.560 --> 0:04:36.200 pretty healthy report. Apple is made up of a manufacturing 0:04:36.240 --> 0:04:39.400 worry by the gloomsters over the next product won't do it. 0:04:39.640 --> 0:04:41.440 You and I know that we've all known that, folks. 0:04:41.440 --> 0:04:43.839 I mean, everybody's got this stuff. We have almost too 0:04:43.880 --> 0:04:46.719 many loggins at home on Apple, like they shut us 0:04:46.760 --> 0:04:49.599 down because we've got too many toys at home, But 0:04:49.760 --> 0:04:52.800 around it is a service sector that any other CEO 0:04:52.880 --> 0:04:55.440 in the world would die for. What's the sum of 0:04:55.440 --> 0:04:58.920 the parts valuation of Apple? Now, Well, if you've done 0:04:58.920 --> 0:05:00.800 that work recently, Well, what I can tell you Tom 0:05:00.880 --> 0:05:05.880 in the service part, Uh, it's not entirely uh separate 0:05:05.920 --> 0:05:08.040 from the phone itself because a lot of the services 0:05:08.080 --> 0:05:11.599 buying applications through the phone. But really, but but the 0:05:11.640 --> 0:05:15.800 services is about eleven percent of revenues growing in a 0:05:16.000 --> 0:05:18.400 mid teen mid to high teen rate. I'll go with that. 0:05:18.520 --> 0:05:23.040 And and uh, this should over time because it's outgrowing 0:05:23.040 --> 0:05:24.680 the rest of the company. It's going to become a 0:05:24.680 --> 0:05:28.280 bigger part of the business. It should lend a somewhat 0:05:28.279 --> 0:05:32.159 greater to a somewhat greater multiple on the company's earnings 0:05:32.160 --> 0:05:36.440 over time. It's not that material right now. UM. I 0:05:36.440 --> 0:05:39.800 think that the greater issue for Apple long term is 0:05:39.880 --> 0:05:44.600 can they protect that gross margin in the thirty nine area? 0:05:44.640 --> 0:05:46.960 Where is the gross margin created? Is it created in China, 0:05:47.000 --> 0:05:50.200 in the manufacturing process of logistics, or is it created 0:05:50.240 --> 0:05:53.560 in marketing or imagery or goodwill and bad? Well, they 0:05:53.560 --> 0:05:55.520 manage their costs very well, and they get a premium 0:05:55.560 --> 0:05:59.280 price for their product and so uh and by the way, 0:05:59.720 --> 0:06:03.359 the average selling price for the next gen phone is 0:06:03.400 --> 0:06:08.279 expected to be a new high for Apple iPhones. So uh, 0:06:08.320 --> 0:06:12.200 they have continued to defy the skeptics with the pricing 0:06:12.320 --> 0:06:14.720 power of the iPhone. And part of that there's a 0:06:14.800 --> 0:06:18.039 quality of the goods, and part of that the Apple ecosystem, 0:06:18.080 --> 0:06:21.599 which tends to tie you into their applications. Uh, and 0:06:21.640 --> 0:06:25.080 their their their music, and of course they're now getting 0:06:25.120 --> 0:06:27.919 into the area of video content as well. How do 0:06:27.920 --> 0:06:30.120 you mentioned you sold some of your your Amazon stock 0:06:30.160 --> 0:06:32.200 are you? Are you recommending that more broadly? Is this 0:06:32.240 --> 0:06:35.760 a time to a time to sell? Well? I think 0:06:35.800 --> 0:06:41.680 if anybody is sensitive to uh short term market results, 0:06:41.760 --> 0:06:45.120 if they have a tax exempt account, even taxable, if 0:06:45.120 --> 0:06:47.920 you're looking for an exit, what are you waiting for? 0:06:48.320 --> 0:06:52.159 Um You know Amazon, it is a great company, but 0:06:52.520 --> 0:06:54.360 you know it too was up more than more than 0:06:55.680 --> 0:07:00.400 in the last year. And um I can recall back 0:07:00.560 --> 0:07:04.480 in the first quarter of two thousand, which was the 0:07:04.800 --> 0:07:08.280 last up quarter for the bullmarket of the nineties, and 0:07:08.279 --> 0:07:12.680 and and and um I took four hundred million dollars 0:07:12.680 --> 0:07:16.520 of capital gains and technology stocks that quarter doing it 0:07:16.600 --> 0:07:18.680 when I felt like maybe I was a little early, 0:07:18.760 --> 0:07:22.360 but there was the stocks had just gone too far, 0:07:22.480 --> 0:07:25.560 too fast. Um. And that's why I say it feels 0:07:25.600 --> 0:07:28.760 like that again now that it's it's it's gotten too easy. 0:07:29.480 --> 0:07:31.440 You need to take some money off the table here. 0:07:31.480 --> 0:07:34.560 The valuations are more of a challenge than they have been, 0:07:35.320 --> 0:07:38.840 and you're getting more retail investment in these stocks, and 0:07:38.880 --> 0:07:40.520 of course the impact that E t f S is 0:07:40.920 --> 0:07:43.440 is very much part of that. So yeah, I would 0:07:43.440 --> 0:07:45.760 take some money off the table unless you're really committed 0:07:46.160 --> 0:07:48.920 to keeping your position for a long period of time. 0:07:48.920 --> 0:07:50.560 I would let me ask you a bit about growth. 0:07:51.080 --> 0:07:53.560 We've heard the administration talk so much about the potential 0:07:53.560 --> 0:07:56.680 for three percent growth, for percent growth, certainly the unveiling 0:07:56.680 --> 0:07:59.119 of the White House tax proposal, we heard it again 0:07:59.600 --> 0:08:01.480 at what your sense of what the economy is going 0:08:01.520 --> 0:08:05.560 to do domestically, Well, let's start with the sort of 0:08:05.640 --> 0:08:10.280 expectations are right around two percent growth plus or minus 0:08:10.360 --> 0:08:14.960 point to uh for this year and next, and so 0:08:15.200 --> 0:08:18.160 the Trump administration would need to get much more successful 0:08:18.280 --> 0:08:22.200 with their legislative agenda in order to ask, you know, 0:08:22.520 --> 0:08:26.360 improve on that but let's go back to the mathematics 0:08:26.400 --> 0:08:30.200 of how you improve your GDP growth, because it's pretty simple. 0:08:30.720 --> 0:08:33.760 You can have your existing workforce work more hours. That's 0:08:33.760 --> 0:08:37.680 probably not gonna result in much. You can add to 0:08:37.800 --> 0:08:41.840 your labor force and that's a one half of one percent, 0:08:42.040 --> 0:08:45.480 maybe a one percent boost at most. Or you can 0:08:45.520 --> 0:08:50.600 improve your the productivity of your workforce, and productivity has stalled, 0:08:51.200 --> 0:08:53.480 you know, that's a one percent or less than one 0:08:53.520 --> 0:08:57.480 percent improvement these days, and so it's really hard to 0:08:57.520 --> 0:09:00.280 get a rate of growth north of two percent. And 0:09:00.360 --> 0:09:02.960 that's why we haven't done it for a while. Can 0:09:03.000 --> 0:09:07.000 you can you change the tax code and engineer growth 0:09:07.080 --> 0:09:10.040 or three or fourth three or four percent for a 0:09:10.120 --> 0:09:13.280 few quarters? Yes, But unless you can go back to 0:09:14.040 --> 0:09:17.840 the equation of the productivity and labor force and how 0:09:17.840 --> 0:09:19.600 are you going to improve that, it's not going to 0:09:19.640 --> 0:09:36.600 be sustainable. Our word with us with good belly funds, David, 0:09:36.600 --> 0:09:38.480 I think we need to talk to edge funds. Two 0:09:38.520 --> 0:09:41.200 in t Yeah, our colleague Eric Shoutsker, number of our 0:09:41.200 --> 0:09:43.320 colleagues are at the Milk and Institute Global Conference in 0:09:43.360 --> 0:09:46.040 Beverly Hills, and there are some great interviews yesterday. More 0:09:46.040 --> 0:09:48.800 will be on our air, both on radio and television. Today, 0:09:48.880 --> 0:09:51.400 Eric Shatsker sat down with Ken Griffin, the head of Citadel, 0:09:51.400 --> 0:09:53.560 and they had a very wide ranging conversation in which 0:09:53.559 --> 0:09:56.880 they talked about investing, They talked about the political landscape. 0:09:56.880 --> 0:09:59.120 But in Washington they talked about, as you say, the 0:09:59.200 --> 0:10:01.719 status of the future of hedge funds. Here's what he 0:10:01.760 --> 0:10:04.160 had to say. It's not just a shakeout for the 0:10:04.160 --> 0:10:08.439 hedge fund industry, it's a shakeout for active management. Right 0:10:08.440 --> 0:10:11.480 we see the rise of passive money in ETFs and 0:10:11.600 --> 0:10:14.520 index products. We're seeing money come out of active management 0:10:14.840 --> 0:10:19.240 and head towards passive structures. Now, as that happens, the 0:10:19.280 --> 0:10:22.800 money that's in passive structures obviously is not pursuing elpha 0:10:22.800 --> 0:10:25.120 in the same way. That should make the markets a 0:10:25.120 --> 0:10:28.200 little less efficient, but should create a larger profit pool 0:10:28.280 --> 0:10:30.439 for those who remain. So we're gonna find a new 0:10:30.440 --> 0:10:33.880 equilibrium over the months and years to come. Passive's gonna 0:10:33.880 --> 0:10:36.480 be bigger, Active is gonna be smaller, and the firms 0:10:36.480 --> 0:10:41.960 that are best able to assemble, analyze, and incorporate information 0:10:42.000 --> 0:10:44.920 in their investment decision making processes are going to continue 0:10:44.960 --> 0:10:48.560 to earn outsize returns can't grif from there. The head 0:10:48.559 --> 0:10:52.120 of Citadel speaking with Pelli Garic Shatzker yesterday, we've had that, 0:10:52.120 --> 0:10:54.360 We've we've been following this debate for so long, the 0:10:54.360 --> 0:10:56.400 active versus passive today. What did you hear there from 0:10:56.480 --> 0:10:58.640 Mr Griffin? Well, that was interesting. And there's one Greek 0:10:58.720 --> 0:11:06.240 letter in there that there's discussion here, and that is alpha, beta, gamma, delta, vega, theta. 0:11:06.480 --> 0:11:10.040 They all mean different things to different people. But the 0:11:10.400 --> 0:11:13.520 thrust of this, David, is so many of our listeners 0:11:13.640 --> 0:11:16.240 are just trying to beat a benchmark, or even make 0:11:16.440 --> 0:11:19.719 the benchmark. That's the advantage of passive. You're gonna make 0:11:19.760 --> 0:11:22.160 the index, or maybe you want to beat the index. 0:11:22.320 --> 0:11:25.600 Robert Kirby was a legend at Capital Guardian Trust in 0:11:25.679 --> 0:11:28.000 Los Angeles, and he would say, boy, if you can 0:11:28.040 --> 0:11:31.880 make two percentage points better and the SMP, you're living large. 0:11:32.520 --> 0:11:36.280 Mr Bogol and Vanguard has said maybe you will, some will, 0:11:36.360 --> 0:11:40.439 many won't. Alpha is different. Alpha's trying to make it 0:11:41.120 --> 0:11:43.160 so that you can get a two percent hedge fund 0:11:43.200 --> 0:11:47.520 fee and pick up twenty of the gain over some 0:11:47.679 --> 0:11:51.240 hurdle rate. It's totally different than like your four oh 0:11:51.320 --> 0:11:53.760 one K and so you've got to be careful about 0:11:53.760 --> 0:11:59.719 the conflation of those two strains of thought. There is 0:11:59.800 --> 0:12:02.600 less alpha to be had. This interview happened about one 0:12:02.880 --> 0:12:06.360 thirty yesterday, one thirty Wall Street time, right after our 0:12:06.400 --> 0:12:08.600 colleague spoke with the President United States, and Eric asked 0:12:09.240 --> 0:12:11.920 Mr Griffin what he thought about that proposal the President made, 0:12:12.240 --> 0:12:14.000 or the fact that he's considering the breaking up the 0:12:14.000 --> 0:12:16.480 big banks, and Ken Griffin telling him he's in favor 0:12:16.559 --> 0:12:18.880 of breaking up the big banks. He says he favors 0:12:18.880 --> 0:12:21.160 a new glass Steagle and said he saw some opportunity 0:12:21.160 --> 0:12:23.520 there for Citadel if that were if that were to happened. 0:12:23.559 --> 0:12:28.240 Ken Griffin a long time Republican donor, somebody who as 0:12:28.240 --> 0:12:30.240 an affiliated member of that of that party, has given 0:12:30.240 --> 0:12:32.160 a lot of money to that party. He talked a 0:12:32.200 --> 0:12:33.959 lot about Washington the context of that. If you said 0:12:33.960 --> 0:12:35.560 a hundred days is not enough time to judge with 0:12:35.600 --> 0:12:38.839 the President, well yeah, I'll go with that, but you know, 0:12:38.880 --> 0:12:41.160 I would defer to the hedge fund manager Michael the Key, 0:12:43.520 --> 0:12:46.439 who has actually looked around at what people are going 0:12:46.520 --> 0:12:50.160 to do about this incredibly exciting idea of a new 0:12:50.400 --> 0:12:54.960 redux of nineteen thirty three banking uh to take us 0:12:55.000 --> 0:12:57.160 back there. It was a pretty ugly time for the nation. 0:12:57.280 --> 0:13:01.400 And to remind everyone, Glass Steagle's not an act, it's 0:13:01.440 --> 0:13:05.559 not even a legislation. It's it's it's some paragraphs slid 0:13:05.760 --> 0:13:12.559 into a very slim three yet profound thirty four combo. 0:13:13.440 --> 0:13:17.880 No one's talking about any kind of reform, and particularly today, David, 0:13:17.880 --> 0:13:20.800 you're not going to get a slim act today. I 0:13:20.840 --> 0:13:24.000 mean just look at a voluminous DoD Franks Yeah, or 0:13:24.000 --> 0:13:25.680 even that funding billed at the House and saidn't have 0:13:25.720 --> 0:13:27.640 to vote on two thousand pages. They're going to be 0:13:28.200 --> 0:13:31.079 presumably finding their way through this week. Ken Griffin saying 0:13:31.480 --> 0:13:33.439 his biggest concern in the coming years the US could 0:13:33.440 --> 0:13:35.720 slide into recession. I wrote, Eric Shouts grafted this interview. 0:13:35.720 --> 0:13:39.520 He very elegantly asked Ken Griffin about Citadel, noting that 0:13:39.559 --> 0:13:41.640 a lot of people have said it's a tough shop 0:13:41.679 --> 0:13:44.160 to work in. People come through, they get chewed, chewed up, 0:13:44.160 --> 0:13:46.680 and they move on. And I thought that Ken Griffin 0:13:46.760 --> 0:13:48.280 was like he said, there's a lot of good people 0:13:48.320 --> 0:13:51.720 availble to hire. I would suggest people listen to Mr 0:13:51.760 --> 0:13:55.160 Ackman's interview with Francy Lay. I thought the New York 0:13:55.160 --> 0:13:58.200 Times did a nice treatment on Mr Paulson today in 0:13:58.240 --> 0:14:00.800 the cover of their Business section. All these guys is 0:14:00.880 --> 0:14:06.040 Ken mentions there are really struggling to have the opportunity 0:14:06.200 --> 0:14:12.120 for return, opportunity for alpha, given how dampened volatility is 0:14:12.160 --> 0:14:15.840 across asset classes. And I mean the VIX ten point 0:14:15.840 --> 0:14:19.760 one six with that nine print yesterday is symbolic of 0:14:19.800 --> 0:14:22.040 a lot of other asset classes as well. You can 0:14:22.120 --> 0:14:24.480 check out all these interviews on the Bloomberg at tv go. 0:14:25.120 --> 0:14:26.720 Of course you can look at at Bloomberg dot com. 0:14:26.760 --> 0:14:28.680 It's well Bill Ackman and Ken Griffin and a number 0:14:28.680 --> 0:14:31.680 of other ones. Can we talk, say, John, can we 0:14:31.720 --> 0:14:33.640 do two Greek letters and one interviewer? Is that too 0:14:33.760 --> 0:14:39.600 much data? Was that the optunity in college? No? I 0:14:39.640 --> 0:14:43.680 wasn't looking for. That was a sorority. This is Bloomberg. 0:14:57.080 --> 0:15:01.000 This is a great pleasure. I will probably talk to 0:15:01.080 --> 0:15:03.360 Chairman Bernankey about this. We'll see how much time I 0:15:03.400 --> 0:15:07.440 have David Gurrow joining us now. Next year will be 0:15:07.480 --> 0:15:12.040 the twentieth anniversary of Against the Tide. It was definitive. 0:15:12.120 --> 0:15:17.080 If you were cool, you carried Douglas Irwin's Against the 0:15:17.120 --> 0:15:21.200 Tide hardcover around with you. Some people, Doug actually read it. 0:15:21.960 --> 0:15:24.880 Hard to believe. I guess maybe the President United States 0:15:24.880 --> 0:15:28.240 didn't read it. But let me ask you right now, 0:15:28.680 --> 0:15:32.560 in two thousand and seventeen, to vamp off of Paul 0:15:32.640 --> 0:15:38.440 Krugman's Ricardo's Dilemma, what you and Professor Krugman do in 0:15:38.440 --> 0:15:44.640 international economics and international trade is complex, isn't it. I mean, 0:15:44.640 --> 0:15:49.040 what Ricardo did on comparative advantage is a tough concept 0:15:49.120 --> 0:15:53.400 to grasp, isn't it. Actually just a few weeks ago, um, 0:15:53.440 --> 0:15:58.320 it was two anniversary of David Ricardo's theory of comparative advantage. Uh, 0:15:58.360 --> 0:16:01.320 And I've written about that. Krugman's written about that in 0:16:01.480 --> 0:16:05.360 his little essay called Ricardo's Difficult Idea. And as we 0:16:05.400 --> 0:16:08.120 know in the classroom, it's very difficult even with bright 0:16:08.160 --> 0:16:11.920 twenty year olds to talk about this idea of compared 0:16:11.960 --> 0:16:14.680 to advantage. That's certainly tough in the policy realm as well. 0:16:14.840 --> 0:16:18.000 Is it difficult to talk to a grizzled seventy year 0:16:18.000 --> 0:16:22.760 old sitting in the Oval office as well about comparative advantage? Well, 0:16:22.800 --> 0:16:25.640 he does seem that he has this zero some you know, 0:16:25.760 --> 0:16:27.440 a view of trade, and I don't know where that 0:16:27.440 --> 0:16:31.160 comes from his business background as UHM sino owner or 0:16:31.280 --> 0:16:34.160 property developer, where you know, in the casino, if the 0:16:34.160 --> 0:16:36.880 house wins, you lose in property. Either you get the 0:16:36.880 --> 0:16:39.480 property or someone else does. But international trade is a 0:16:39.560 --> 0:16:43.480 very different activity where both countries can benefit from exchanging 0:16:43.520 --> 0:16:46.120 goods and services with one another. Professor, And what are 0:16:46.120 --> 0:16:48.760 we learning about this administration's trade policy at this point? 0:16:48.800 --> 0:16:50.560 We've been citing an interview that our colleagues did with 0:16:50.560 --> 0:16:55.280 the President yesterday. He said he's already to rewrite revise 0:16:55.360 --> 0:16:57.920 and after just waiting on the Democrats in the Congress 0:16:57.920 --> 0:16:59.720 to give him the authorization to do that. Of course, 0:16:59.720 --> 0:17:01.360 there's all this formality with the letter having to be 0:17:01.400 --> 0:17:03.520 sent in this and that. But we certainly saw the 0:17:03.600 --> 0:17:07.760 countervailing duties imposed last week on uh softwood. Talk of 0:17:07.800 --> 0:17:11.000 that happening with Darry wilber Ross now looking at aluminum 0:17:11.000 --> 0:17:13.600 as well. What are we learning about the priorities of 0:17:13.640 --> 0:17:16.760 this administration when it comes to trade. Well, I think 0:17:16.880 --> 0:17:20.600 the administration is learning that politics is difficult. Their divisions 0:17:20.640 --> 0:17:23.800 within the administration about how hard alignes take on China 0:17:23.960 --> 0:17:27.280 and on Mexico and NAFTA, and also divisions between the 0:17:27.400 --> 0:17:30.120 executive branch in Congress over what to do as well. 0:17:30.160 --> 0:17:32.920 You've seen some pushback from members of Congress who are 0:17:32.960 --> 0:17:36.440 afraid of just ripping up NAFTA because Mexico will retaliate 0:17:36.440 --> 0:17:39.000 against our farm ex sports. So we get Republicans members 0:17:39.000 --> 0:17:41.320 of Congress from the Midwest farm states who are very 0:17:41.400 --> 0:17:43.359 much against that. Now, in terms of some of the 0:17:43.359 --> 0:17:46.720 other things you pointed out in UH softwood lumber or 0:17:47.040 --> 0:17:50.760 some of the anti anti dumping and countervailing duties, these 0:17:50.800 --> 0:17:55.040 are actually sort of relatively small product specific trade skirmishes 0:17:55.040 --> 0:17:58.240 that occur under any administration, So that's not really attacked 0:17:58.760 --> 0:18:01.080 or a switch in terms of Trumpet administration. But I 0:18:01.119 --> 0:18:03.760 do expect you'll see many more of those UH, smaller 0:18:04.040 --> 0:18:06.639 problems cropping up as well. When you talk to the 0:18:06.640 --> 0:18:09.159 sector of commerce, he says a priority for the administration 0:18:09.240 --> 0:18:13.280 is more enforcement. Looking back on the last few administrations, 0:18:14.440 --> 0:18:17.119 to what degree was enforcement prioritize? What what stands to 0:18:17.200 --> 0:18:22.080 change here? What stands changes that Usually enforcement depends on 0:18:23.040 --> 0:18:25.800 the private sector petitioning the government, So an import competing 0:18:25.840 --> 0:18:29.280 industry will say no imports are being dumped in the market. 0:18:29.359 --> 0:18:32.240 This is unfair. They notify the government, and the government 0:18:32.320 --> 0:18:35.679 launches an investigation. What the Trumpet administration promises to do 0:18:35.760 --> 0:18:38.000 is be much more proactive, not wait for the private 0:18:38.040 --> 0:18:40.800 industry to file a case, but actually say we're going 0:18:40.840 --> 0:18:43.560 to initiate cases on our own. And the statute that 0:18:43.600 --> 0:18:47.679 they've chosen to invoke now is a very obscure provision 0:18:47.680 --> 0:18:48.960 in the U s Trade Lock dating back in the 0:18:49.040 --> 0:18:53.840 nine saying national security is an issue. So that was 0:18:53.880 --> 0:18:55.680 the case they announced just a couple of weeks ago 0:18:55.760 --> 0:18:59.080 regarding a steal um, and so I think we're gonna 0:18:59.119 --> 0:19:02.200 get any more trade cases that they themselves are going 0:19:02.240 --> 0:19:04.919 to start the initiation process and not wait for the 0:19:04.920 --> 0:19:08.920 private sector to to begin on their own. Professor ages ago, 0:19:08.960 --> 0:19:12.360 you did a wonderful compendium of Jacob Viner of Chicago 0:19:12.480 --> 0:19:15.560 lectures in Economics three oh one. What should we learn 0:19:15.600 --> 0:19:20.800 from Jacob Viner about mercantile is m Well, you're Jacob 0:19:20.880 --> 0:19:23.560 Viner is one of the great students of mercantilism, one 0:19:23.560 --> 0:19:25.560 of the great scholars of all time in terms of 0:19:25.560 --> 0:19:27.919 international trade. He wrote a terrific book called Studies in 0:19:27.960 --> 0:19:30.960 the Theory of International trade, and he wrote in the 0:19:31.000 --> 0:19:33.680 nineteen thirties and forties, and in particularly the period when 0:19:33.960 --> 0:19:36.040 the US was trying aft World or two to set 0:19:36.080 --> 0:19:39.000 up this new institution called the GAT the General Agreement 0:19:39.040 --> 0:19:40.800 on Tarifs and Trade, to try to bring down trade 0:19:40.800 --> 0:19:43.040 barriers around the world. And he was a little bit 0:19:43.040 --> 0:19:45.400 skeptical that they could pull this off, because he realized 0:19:45.400 --> 0:19:48.320 that the pull of mercantiless thinking, the worry about that 0:19:48.640 --> 0:19:50.560 is going to harm the domestic economy if we open 0:19:50.640 --> 0:19:53.240 up to trade. Um is so powerful in the public's 0:19:53.280 --> 0:19:55.920 minds and in the minds of politicians that it's a 0:19:56.000 --> 0:19:58.800 very difficult thing to do. And yet remarkably, over the 0:19:58.840 --> 0:20:02.040 past sixty seventy years or so, the US has exerted 0:20:02.040 --> 0:20:05.040 that tremendous leadership in bringing down trade berries around the world, 0:20:05.040 --> 0:20:08.440 and I think worldwide ecomic prosperity today that we see 0:20:09.000 --> 0:20:11.800 owe something to that. Douglas Irwin, thank you so much. 0:20:11.800 --> 0:20:14.800 With Dartmouth Coology as a wonderful book coming out later 0:20:15.040 --> 0:20:19.600 this year on our Trade policy Vintage two thousand seventeen. 0:20:19.640 --> 0:20:22.959 I just put on Twitter David Gura his classic Against 0:20:23.000 --> 0:20:26.200 the Tide. I also put out Krugman's David Ricardo piece 0:20:26.200 --> 0:20:30.800 which is must must must read of the frustration of 0:20:30.880 --> 0:20:35.119 pros and talking about how trade can benefit societies even 0:20:35.160 --> 0:20:38.720 with a massive labor disruption in the wild, dispersion of 0:20:38.760 --> 0:20:41.720 wages and income. And I even did a photograph of 0:20:41.800 --> 0:20:52.560 Jacob Viner's classic summary by Douglas Irwin, brought you by 0:20:52.800 --> 0:20:56.520 Bank of America. Mary Lynch, dedicated to bringing our clients 0:20:56.640 --> 0:20:59.960 insights and solutions to meet the challenges of a trans 0:21:00.040 --> 0:21:04.120 forming world. That's the power of global connections, Mary Lynch, 0:21:04.240 --> 0:21:14.200 Pierce Federan Smith Incorporated, Member s I p C. There's 0:21:14.240 --> 0:21:17.800 something new from Bloomberg. It's called Lens. Starting right now, 0:21:17.880 --> 0:21:20.719 you can use the Bloomberg Io s app off your 0:21:20.760 --> 0:21:25.679 iPhone or iPad, or our new Google Chrome extension to 0:21:25.760 --> 0:21:29.679 read any news story on any website, scan it, and 0:21:29.680 --> 0:21:34.159 then instantly see the news stories relevant market data from Bloomberg. 0:21:34.480 --> 0:21:37.560 In addition, see all the bios of the key people 0:21:38.000 --> 0:21:41.199 mentioned in the story. It's called lens, and it is 0:21:41.280 --> 0:21:44.359 just that, a lens into the people and the data 0:21:44.480 --> 0:21:48.720 of any story you may be reading. Again, Lens brings 0:21:48.760 --> 0:21:52.000 you the power of Bloomberg's news and data download or 0:21:52.040 --> 0:21:55.359 Io s app or search for the Bloomberg extension at 0:21:55.400 --> 0:21:58.720 the Chrome Store to try Lens out. Learn more at 0:21:58.760 --> 0:22:06.720 Bloomberg dot com slash lens. Talking earlier about the Greek letters, 0:22:06.760 --> 0:22:10.480 we're elthinging it about Ken Griffith at Citadel as well. 0:22:11.200 --> 0:22:15.240 Maybe it's time to theta Julian. Emmanuel joins us with UBS. 0:22:15.320 --> 0:22:18.760 He's does derivatives and equities for UBS. Will usually keep 0:22:18.800 --> 0:22:22.639 the conversation sort of not simple, but you know, focused 0:22:22.680 --> 0:22:24.920 on where we're going in stocks and bonds. I guess 0:22:24.960 --> 0:22:27.200 we could do that, Julian, but I want to talk 0:22:27.280 --> 0:22:30.640 about how everybody's smart. And there's a lot of research 0:22:30.720 --> 0:22:34.320 about the time function, the theta function on the X 0:22:34.359 --> 0:22:38.399 axis until you blow up in the bottom line is 0:22:38.560 --> 0:22:41.400 a lot of research, folks, is somewhere in the vicinity 0:22:41.440 --> 0:22:44.000 of three years. You can be a genius. You can 0:22:44.040 --> 0:22:46.560 be smart. You can be oh I got out of that. Okay, 0:22:46.600 --> 0:22:48.880 you can be a genius. You can be smart four 0:22:48.880 --> 0:22:52.440 times a row, and then whammo, you get hit by 0:22:52.520 --> 0:22:55.880 one negative event. And that happens to every hedge fund, 0:22:55.880 --> 0:22:58.840 and frankly it happens to me. David Gura, John Tucker, 0:22:58.880 --> 0:23:01.840 you've never enjoyed the six experience because you're going up, up, 0:23:01.920 --> 0:23:07.760 up for hours. I'm an investment genius, yes, Julian. How 0:23:07.800 --> 0:23:11.240