WEBVTT - Surveillance: Bitcoin Still Speculative, Patters Says 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:30.800 and of course on the Bloomberg terminal. Right now, Rebecca 0:00:30.840 --> 0:00:33.040 Pattison joins us. We are thrilled to ever whether she's 0:00:33.040 --> 0:00:36.640 with Bridgewater, director of Investment Research, but far more is 0:00:36.680 --> 0:00:39.800 her time on the street bringing a holistic ly together 0:00:39.920 --> 0:00:43.559 the foreign exchange market with everything else out there. Rebecca, 0:00:43.600 --> 0:00:46.800 wonderful to have you with us today. I'm Bitcoin. What 0:00:46.880 --> 0:00:49.640 did we learn this week? I put up there some 0:00:49.680 --> 0:00:52.520 of the dynamics, the silliness of it being a gold 0:00:52.560 --> 0:00:57.160 equivalent or a coin equivalent. What did we learn? I 0:00:57.280 --> 0:01:01.800 think we got reaffirmation that it's a speculative asset and 0:01:01.840 --> 0:01:03.960 it still has a long ways to go to become 0:01:04.000 --> 0:01:06.839 a gold equivalent, to become a proper storehold of wealth, 0:01:07.319 --> 0:01:10.080 something that you can count on to have purchasing power 0:01:10.120 --> 0:01:13.959 over time, that's going to have stable and relatively low volatility. 0:01:14.080 --> 0:01:16.760 This was not a low volatility week or so for 0:01:16.880 --> 0:01:20.040 bitcoin quite the contrary, Rebecca, do you see a generation 0:01:20.120 --> 0:01:22.959 with divide between certain age groups who believe this is 0:01:23.000 --> 0:01:28.840 the new golden other age groups that just do not. Anecdotally, Yes, anecdotally, 0:01:28.880 --> 0:01:32.039 it does seem that people who are looking for alternative 0:01:32.800 --> 0:01:35.600 uh sources of cash if you will, Um, you do 0:01:35.760 --> 0:01:38.319 have a bit of a younger generation bias towards the 0:01:38.319 --> 0:01:43.520 cryptocurrencies versus gold. But um, you know, to me, it's 0:01:43.600 --> 0:01:46.399 it's not the generation as much as the retail versus 0:01:46.400 --> 0:01:50.080 the institutional. The money that's going into bitcoin and other 0:01:50.120 --> 0:01:54.000 cryptocurrencies today is still largely retail. Of course, you're getting 0:01:54.040 --> 0:01:56.840 a few more corporations, you're getting family offices, you're getting 0:01:56.880 --> 0:02:00.600 some hedge funds, But the large institutional money that's thinking 0:02:00.680 --> 0:02:03.200 about do I want this as part of the diversifying 0:02:03.280 --> 0:02:06.280 assets in my portfolio to protect me from draw downs 0:02:06.320 --> 0:02:10.640 from from bad periods of market stress. We're not there yet. 0:02:10.720 --> 0:02:13.200 It might get there over time, but it's not there yet. 0:02:13.240 --> 0:02:15.880 So this is still an asset that I think is 0:02:15.960 --> 0:02:19.440 primarily one to be used for return and speculation, not 0:02:19.600 --> 0:02:22.000 the time. Over time though, Rebecca, do you think that 0:02:22.080 --> 0:02:24.760 invests the conditioning kicks in many people will ask us 0:02:24.760 --> 0:02:28.119 when they're not familiar with financial markets and macro, why 0:02:28.120 --> 0:02:30.160 does the end do so well when things get bad? 0:02:30.160 --> 0:02:32.079 And there are various ways of explaining that, but one 0:02:32.080 --> 0:02:34.600 of them is it just does well. It's worked, and 0:02:34.639 --> 0:02:37.240 it's worked historically. Do we need to be conditioned by 0:02:37.280 --> 0:02:40.680 this somehow to start believing it a little bit more well? 0:02:40.720 --> 0:02:44.680 I think over time you could see that environment come together, 0:02:44.800 --> 0:02:46.640 and there's a couple of things I'd be watching. The 0:02:46.720 --> 0:02:50.080 big one right now is the regulatory ecosystem. You know, 0:02:50.200 --> 0:02:55.679 it's very immature still for cryptocurrencies, and after the Colonial 0:02:55.720 --> 0:02:58.800 pipeline hack paid for with crypto, the ransom was paid 0:02:58.800 --> 0:03:01.440 for crypto, I think you are going to see regulators 0:03:01.440 --> 0:03:04.000 in the US focusing more on this, trying to make 0:03:04.000 --> 0:03:07.960 sure there isn't illicit activity, trying to increase transparency. That 0:03:08.040 --> 0:03:10.440 might make some holders a bitcoin not want to own 0:03:10.480 --> 0:03:13.320 it anymore. They're there for the anonymity, but it could 0:03:13.400 --> 0:03:17.120 create an ecosystem that gives more um credibility to it, 0:03:17.360 --> 0:03:20.280 more encouragement for large institutional players to come in. If 0:03:20.320 --> 0:03:23.000 they come in and you have another source of liquidity there, 0:03:23.320 --> 0:03:26.880 that could bring down volatility over time. That's the positive 0:03:26.919 --> 0:03:30.760 flywheel that I think could change how bitcoin and perhaps 0:03:30.840 --> 0:03:34.679 other cryptocurrencies are perceived. Obviously, there's the environmental issues to 0:03:34.800 --> 0:03:37.640 which are are clearly a problem for some investors. I 0:03:37.680 --> 0:03:40.080 think those things need to get addressed and the volatility 0:03:40.080 --> 0:03:42.760 needs to come down. But if those things can happen, 0:03:43.000 --> 0:03:46.000 I think this could evolve into some some type of 0:03:46.040 --> 0:03:48.360 digital gold. If you will, Rebecca, I want you to 0:03:48.400 --> 0:03:51.600 elaborate on the environmental concerns, because Elon Musk of Tesla 0:03:51.720 --> 0:03:54.040 highlighted this, and you highlighted this in a recent research 0:03:54.080 --> 0:03:58.720 report showing that bitcoin uses up more energy than say, 0:03:58.880 --> 0:04:01.280 even uh switch relent. When you take a look at 0:04:01.320 --> 0:04:04.720 the energy consumption, it's basically a nation onto itself when 0:04:04.760 --> 0:04:07.480 it comes to this area. Can this be solved? How 0:04:07.480 --> 0:04:10.680 big of a concern is this for certain investors? Well, 0:04:10.720 --> 0:04:14.960 increasingly investors are focusing on on environmental and other e 0:04:15.160 --> 0:04:18.520 s G. Issues, so so it is an increasing concern 0:04:18.560 --> 0:04:21.240 for a lot of large institutions. There are ways it 0:04:21.279 --> 0:04:24.120 can be addressed. You can see changes in the technology 0:04:24.240 --> 0:04:27.520 used in bitcoin, for example, that could reduce energy usage. 0:04:28.080 --> 0:04:30.880 You could see the type of energy used, more of 0:04:30.880 --> 0:04:33.560 a focus on renewable energy that could also be a 0:04:33.600 --> 0:04:36.919 positive trend. There's also another option here, which is that 0:04:37.120 --> 0:04:40.640 another cryptocurrency that has lower energy usage but also some 0:04:40.720 --> 0:04:44.400 of the positive characteristics like limited supply, you could see 0:04:44.400 --> 0:04:48.400 that supplant bitcoin. Just because Bitcoin is the dominant currency 0:04:48.480 --> 0:04:51.600 today doesn't mean it will always be. So I think 0:04:51.600 --> 0:04:53.680 there are some different paths, but over time it's going 0:04:53.720 --> 0:04:56.479 to get addressed one way or another. Meanwhile, Rebecca, I 0:04:56.480 --> 0:04:58.479 want to pick up on something that John was talking about, 0:04:58.520 --> 0:05:00.680 because I know that this dovetails into the inflation call. 0:05:00.760 --> 0:05:03.279 The Bridgewater has had this whole cash is trash and 0:05:03.640 --> 0:05:06.159 that Ray Dally is talking about, but moving forward that 0:05:06.240 --> 0:05:08.240 inflation is going to be more of a threat. What 0:05:08.320 --> 0:05:11.200 do you make of the move recently lower in a 0:05:11.320 --> 0:05:15.000 longer term break even rates? Basically longer term inflation expectations 0:05:15.080 --> 0:05:19.039 have come down even as we get this robust data. Yeah, 0:05:19.120 --> 0:05:22.640 I mean, Ore, this is such an unusual time, right. 0:05:22.680 --> 0:05:26.280 We're seeing the biggest US boom um that we've had 0:05:26.279 --> 0:05:30.719 in decades, and we have so many different cross currents. 0:05:30.760 --> 0:05:34.520 Given the reopenings coming out of the pandemic, demand rising 0:05:34.600 --> 0:05:37.280 faster than some supply commedian. You just mentioned that a 0:05:37.320 --> 0:05:39.599 few minutes ago in the European p m I data 0:05:40.240 --> 0:05:42.359 that that it's hard to have a high degree of 0:05:42.360 --> 0:05:44.479 confidence how this is going to play out. But as 0:05:44.560 --> 0:05:47.440 we look at the year or so ahead, we see 0:05:47.839 --> 0:05:51.520 a decent amount of risk that inflation could keep rising. 0:05:51.560 --> 0:05:54.880 It's already rising, but stay higher for longer. And part 0:05:54.920 --> 0:05:57.200 of that is the supply taking a while to catch 0:05:57.320 --> 0:05:59.920 up with the increasing demand. And part of it is 0:06:00.080 --> 0:06:05.520 more structural forces globalization, which has helped reduced inflation for years, 0:06:05.720 --> 0:06:09.000 that's been plateauing and could possibly reverse a little bit. 0:06:09.880 --> 0:06:13.520 The trend towards capital over labor that's starting to reverse 0:06:13.560 --> 0:06:17.480 a little bit as you see higher wages, higher minimum wages, etcetera. Um. 0:06:17.560 --> 0:06:20.640 And so if you see some of these secular forces 0:06:20.680 --> 0:06:24.680 slowing or reversing somewhat and these cyclical forces, we think 0:06:24.720 --> 0:06:27.120 you could be in a slightly higher inflation environment. So 0:06:27.200 --> 0:06:29.960 the day to day moves aside. I think you want 0:06:30.000 --> 0:06:33.159 to be looking as an investor, does my portfolio have 0:06:33.360 --> 0:06:36.640 enough protection if that risk becomes reality? And this isn't 0:06:36.640 --> 0:06:40.160 just as the FED likes to say, transitory inflation. Rebecca, 0:06:40.200 --> 0:06:41.919 I want to get in trouble with Ray Dalio. So 0:06:41.920 --> 0:06:43.880 I'm gonna ask a rude question, and you're such a 0:06:43.880 --> 0:06:46.680 pro you'll give me an honest answer right now. Stock 0:06:46.720 --> 0:06:49.680 bond correlations are really quite odd. That goes into rate 0:06:49.720 --> 0:06:54.640 parity strategies and such. What is a duration the timeline 0:06:55.400 --> 0:06:59.920 of this odd correlation where it begins to affect portfolios. 0:07:00.200 --> 0:07:03.200 We're hearing short term no big deal. When does no 0:07:03.320 --> 0:07:06.839 big deal become a big deal? So, Tom, I think 0:07:06.880 --> 0:07:08.600 I don't think that's a rude question at all. I 0:07:08.600 --> 0:07:11.480 think you're you're highlighting a couple of things that that 0:07:11.520 --> 0:07:14.680 are worth unpacking a little bit. Um First, when we 0:07:14.720 --> 0:07:17.840 think about risk parity strategies all weather, which is our 0:07:17.880 --> 0:07:22.480 our strategy, it's it's a strategic long term assid allocation. 0:07:22.720 --> 0:07:24.720 What we're trying to do is get rid of some 0:07:24.760 --> 0:07:29.000 of the volatility that can come with changes in economic environments, growth, inflation, 0:07:29.560 --> 0:07:32.200 and what that allows us to do is get more 0:07:32.240 --> 0:07:35.560 steady returns over time and then we can compound that, 0:07:35.640 --> 0:07:37.960 which is, as Einstein said, isn't at the eighth wonder 0:07:37.960 --> 0:07:41.240 of the world. Um. So that's a very different strategy 0:07:41.480 --> 0:07:45.200 than save pure alpha, where we're really focusing on uncorrelated 0:07:45.320 --> 0:07:47.880 return streams that are over shorter time periods. It's more 0:07:47.880 --> 0:07:53.160 tactical UM For for folks who are thinking about risk 0:07:53.200 --> 0:07:56.720 parity strategy, remember it's never been determined on one asset 0:07:56.960 --> 0:07:59.640 or one country. It's going to be a balanced mix 0:07:59.680 --> 0:08:03.240 about sets. So even if bond yields rise um, there 0:08:03.280 --> 0:08:05.920 are going to be other bonds that are still attractive China, 0:08:06.000 --> 0:08:08.760 for example, the tenure yield. There is still three much 0:08:08.800 --> 0:08:12.200 more normal policy mix going on. And then you're gonna 0:08:12.240 --> 0:08:13.920 have other assets that are going to give you that 0:08:13.960 --> 0:08:17.000 diversification and that balance no matter what the environment is. 0:08:17.040 --> 0:08:18.760 But the other thing Tom, that I think is really 0:08:18.800 --> 0:08:22.000 important that you just said is about correlation. And I 0:08:22.040 --> 0:08:25.200 think you know every sixty forty portfolios or the last 0:08:25.200 --> 0:08:27.280 couple of decades have just been able to sit back 0:08:27.320 --> 0:08:29.720 and let it roll in. You've had rising stocks and 0:08:29.880 --> 0:08:33.240 falling bond yields. And today there is a chance that 0:08:33.320 --> 0:08:35.960 you're going to see that relationship break apart, and you 0:08:36.000 --> 0:08:38.360 need to understand why that's happening and then what you 0:08:38.400 --> 0:08:41.120 do about it. If we think that relationship is breaking 0:08:41.160 --> 0:08:44.320 apart in part because of inflation, then you want to 0:08:44.320 --> 0:08:46.720 make sure that you don't have too many bonds. You 0:08:46.720 --> 0:08:49.080 want to make sure that you also have other assets 0:08:49.080 --> 0:08:51.720 to protect you against that risk, whether it's gold which 0:08:51.720 --> 0:08:57.080 has been recovering nicely recently, inflation linked bonds, even equities 0:08:57.120 --> 0:08:59.240 that give you more of a steady cash flow over 0:08:59.320 --> 0:09:03.040 time that aren't going to be as vulnerable to that 0:09:03.160 --> 0:09:06.840 duration issue. Rebecca, always smile and always enjoy a contribution. 0:09:06.920 --> 0:09:10.360 Rebecca Pattison NAP which want a director of investment research 0:09:17.080 --> 0:09:18.559 one of our high points of the day to get 0:09:18.559 --> 0:09:22.200 you recalibrated on global Wall Street and particularly American Wall Street. 0:09:22.440 --> 0:09:25.040 He is after saying two hundred thousand jobs will be 0:09:25.120 --> 0:09:28.960 jettison truly and exile on Wall Street. Michael Mayo joins 0:09:29.040 --> 0:09:31.800 US with Wells Fargo from his decades of work, including 0:09:31.840 --> 0:09:34.440 a dark day with Credit Sweets years ago to now 0:09:34.480 --> 0:09:37.640 holding court at Wells Fargo ahead of the US large 0:09:37.720 --> 0:09:40.720 cap bank research Mike Mayo with US, Mike, I've got 0:09:40.800 --> 0:09:43.760 to rip up the script. This is all anybody's talking about, 0:09:44.040 --> 0:09:46.959 and you are the one to give perspective. Can a 0:09:47.120 --> 0:09:51.880 duo run consumer banking? They're gonna try that at JP Morgan. 0:09:52.440 --> 0:09:58.079 Is it feasible? I'm never a fan of dual heads. 0:09:58.400 --> 0:10:03.600 Having said that AP Morgan cultivates a culture of collaboration, 0:10:03.800 --> 0:10:08.120 so whoever collaborates better is ironically the one who could 0:10:08.240 --> 0:10:12.600 ultimately win. We have two women who are in contention 0:10:12.840 --> 0:10:16.120 to take Jamie Diamond's job, having said that, you know, 0:10:16.160 --> 0:10:23.240 when Jamie Diamond retires N plus five at five years to, 0:10:23.280 --> 0:10:25.319 whenever you ask him the question. So I don't think 0:10:25.320 --> 0:10:28.360 it's happening anytime soon. I think that the board wants 0:10:28.400 --> 0:10:30.800 him to stay. Investors wanted to stay. But you do 0:10:30.840 --> 0:10:33.240 have two women who are in contention. If the two 0:10:33.240 --> 0:10:36.160 women are in contention, two men in contention, you know, 0:10:36.240 --> 0:10:39.720 let's be honest. This is absolutely original stuff to your 0:10:39.760 --> 0:10:43.000 research note which stopped Wall Street a few days ago, 0:10:43.520 --> 0:10:48.200 how old the dominant JP Morgan consumer franchise and adapt 0:10:48.240 --> 0:10:52.199 an adjust to automation, to digital banking and the rest 0:10:52.240 --> 0:10:56.960 that you highlight, Well, JP Morgan is a microcosm of 0:10:57.000 --> 0:11:00.439 the broader industry. And for you Tom and going to 0:11:00.520 --> 0:11:04.600 the classics, I'm going to the Greek philosopher Plato who 0:11:04.720 --> 0:11:09.400 said necessity is the mother of invention. Banks have no 0:11:09.600 --> 0:11:13.640 choice but to get more efficient, to use automation and 0:11:13.760 --> 0:11:17.199 the streamline. So whether it's JP Morgan or any other bank, 0:11:17.320 --> 0:11:20.760 even though they're opening up branches and hiring advisors and 0:11:20.800 --> 0:11:23.920 all sorts of people. Over the next ten years, we 0:11:24.040 --> 0:11:27.760 expect headcount to decline by two hundred thousand jobs, up 0:11:27.800 --> 0:11:30.400 to two hundred thousand jobs for the banking industry. And 0:11:30.400 --> 0:11:34.200 that's because you have automation in the back office, digitization 0:11:34.280 --> 0:11:38.280 the front office, and because banks have no choice as 0:11:38.320 --> 0:11:42.079 they compete against big tech, big retail at a bunch 0:11:42.080 --> 0:11:44.839 of non banks that have a lot less regulation. How 0:11:44.920 --> 0:11:49.360 is that going to go down politically, Mike, Uh, not 0:11:49.440 --> 0:11:51.800 always well, but it could be better than in the 0:11:51.840 --> 0:11:57.200 past because with natural attrition, banks can try to, you know, 0:11:57.280 --> 0:12:00.960 walk that fine line between becoming a lot more efficient 0:12:01.559 --> 0:12:06.120 and without destroying their you know, political and regulatory reputations 0:12:06.559 --> 0:12:09.280 and also their E s G scores because everyone's watching. 0:12:09.600 --> 0:12:11.200 You know, if you fire a lot of people, that 0:12:11.280 --> 0:12:14.319 hurts your interesting E s G scores. And so it's 0:12:14.320 --> 0:12:16.200 a it's a it's a tough job. It's a different 0:12:16.280 --> 0:12:18.640 job to be a bank deo today. In the past, 0:12:18.679 --> 0:12:23.840 it was about creating, generating sustained long term value. Today 0:12:23.880 --> 0:12:25.959 it's doing that and a lot more. You need to 0:12:26.000 --> 0:12:30.079 be more tuned to issues around climate UH and social 0:12:30.120 --> 0:12:34.040 issues UM and diversity, and so it's a bigger challenge. 0:12:34.400 --> 0:12:39.720 What does that mean for the physical presence on main Street, Well, 0:12:39.760 --> 0:12:41.840 a lot less branches. You're going to see a lot 0:12:41.960 --> 0:12:45.280 less branches and a lot less people per branch. And 0:12:45.640 --> 0:12:48.200 they call it d I Y do it yourself and 0:12:48.280 --> 0:12:52.000 also more do it together services. So you'll see banks, 0:12:52.320 --> 0:12:55.080 you know, working with customers that show them how to 0:12:55.160 --> 0:13:00.320 adapt to using more digital tools. And the pandemic Herbo 0:13:00.520 --> 0:13:04.559 charged the tech revolution at banks. You can't force a 0:13:04.720 --> 0:13:08.280 change in customer behavior, but the pandemic did so, and 0:13:08.320 --> 0:13:12.439 that played into the banking industry's strategic UH playbook for 0:13:12.440 --> 0:13:14.199 the next five or ten years. Mike, when you talk 0:13:14.240 --> 0:13:16.880 about competition from a number of different sources, we should 0:13:16.880 --> 0:13:19.839 also talk about competition from the Federal Reserve itself, for forum, 0:13:19.880 --> 0:13:22.800 the US government, the Federal Reserve saying yesterday that they're 0:13:22.800 --> 0:13:25.280 going to put out a report on the US digital 0:13:25.280 --> 0:13:29.120 dollar debate this summer that could disintermediate the big banks. 0:13:29.160 --> 0:13:32.840 How much you paying attention to this, Well, you have 0:13:32.920 --> 0:13:35.319 to pay attention to this. I mean there's threats to 0:13:35.480 --> 0:13:40.280 banks and disenter mediation of banking goes back half a century, 0:13:40.520 --> 0:13:43.840 and so you first saw that with traditional bank loans 0:13:43.920 --> 0:13:47.800 getting the center mediated to the capital markets, and then 0:13:47.840 --> 0:13:50.840 you've seen that with some of the fintech players and 0:13:50.880 --> 0:13:53.439 the payments business, and so you have to watch, you know, 0:13:53.480 --> 0:13:58.439 anything related to you know, digital uh currencies or anything else. 0:13:58.760 --> 0:14:03.600 Having said that, I think the banking industries business model 0:14:03.720 --> 0:14:09.160 resiliency for the largest banks is underappreciated. And a deposit 0:14:09.280 --> 0:14:12.280 at a large bank is different than a deposit at 0:14:12.320 --> 0:14:16.679 another bank. It's driven by a hybrid distribution system that's 0:14:16.720 --> 0:14:20.640 physical and digital. It's driven by multiproducts, whether it's a 0:14:20.720 --> 0:14:25.520 checking account, savings account, credit card, mortgage investment. So, um, yes, 0:14:25.680 --> 0:14:28.720 you have to watch this. But the death of banks 0:14:28.720 --> 0:14:32.480 has been greatly exaggerated the last few decades. Mike, perhaps 0:14:32.480 --> 0:14:34.480 the death of banks, but just quickly here, I'm wondering 0:14:34.520 --> 0:14:36.840 what you think in terms of mergers and acquisitions, how 0:14:36.880 --> 0:14:39.840 consolidated could the industry get as they cut what you 0:14:39.960 --> 0:14:44.480 estimate to be two hundred thousand jobs. Absolutely, there should 0:14:44.480 --> 0:14:48.000 be an acceleration and bank mergers. Goliath is winning. The 0:14:48.080 --> 0:14:51.760 largest banks have scale, The smaller banks need to generate 0:14:51.800 --> 0:14:54.440 that scale. That was mentioned as the number one reason 0:14:54.880 --> 0:14:57.280 for the biggest recent merger in the last few years 0:14:57.280 --> 0:15:00.400 now known as as truest Um. So we wouldn't be 0:15:00.440 --> 0:15:03.200 surprised to see half the number of banks out there 0:15:03.760 --> 0:15:07.600 over the next decade. Just before we run, Mike, a 0:15:07.600 --> 0:15:10.280 lot has been made of v SG and diversity, and 0:15:10.320 --> 0:15:12.520 you touched on that yourself in this conversation. You would 0:15:12.640 --> 0:15:14.600 want to bring it up. Why do you think that 0:15:14.680 --> 0:15:16.840 wasn't a big part of the consideration for Morgan Stanley 0:15:16.920 --> 0:15:22.280 shake up. Look, ultimately, um, you know, the ability of 0:15:22.400 --> 0:15:27.160 managers to generate the returns helped the firm as a 0:15:27.200 --> 0:15:31.040 whole um and represent the firm you know drives these decisions. 0:15:31.160 --> 0:15:35.680 And so Jamie Diamond didn't select the two women coheads 0:15:35.720 --> 0:15:38.800 of consumer who are likely the next one of those 0:15:38.800 --> 0:15:41.760 are the next successor because they're women. It's because they're 0:15:41.760 --> 0:15:44.280 the most capable. So I think the chips ball where 0:15:44.320 --> 0:15:47.280 they will, well said Mike, Thank you, Mike Mayo West 0:15:47.320 --> 0:15:50.000 Farco ahead of US large cap bank research on a 0:15:50.080 --> 0:15:58.280 situation on Wall Street. Terry Hinges joins US now with 0:15:58.360 --> 0:16:01.880 Venia policy. Their under here in a good student of 0:16:01.880 --> 0:16:06.920 the dynamics of Washington, Terry. There's isolationism in America. It's 0:16:06.960 --> 0:16:10.480 always been there, back to the founders, a certain character, 0:16:10.600 --> 0:16:13.400 let's say, in the pre World War Two era, all 0:16:13.480 --> 0:16:18.720 sorts of shades. After World War Two, a unique Trump isolationism, 0:16:18.840 --> 0:16:22.120 a sense there, and now with Israel, Gaza, and even 0:16:22.160 --> 0:16:24.600 with this announcement from the I m F for a 0:16:24.760 --> 0:16:29.120 cash call, a new isolationism in Washington. What does that 0:16:29.200 --> 0:16:33.520 look like? Uh, Tom, good morning. What I think it 0:16:33.600 --> 0:16:39.440 looks like is a essentially a rebalancing of international responsibilities 0:16:39.480 --> 0:16:43.320 with the with domestic responsibilities. There's a I think there's 0:16:43.320 --> 0:16:45.120 a sense, and there's been a sense for about five 0:16:45.240 --> 0:16:48.080 or six years that frankly I think predates Trump. Uh, 0:16:48.200 --> 0:16:51.240 that we've been spending too much time and effort thinking 0:16:51.240 --> 0:16:54.720 globalism is going to solve all our problems and instead 0:16:54.920 --> 0:16:59.320 understanding that it's exacerbated a lot. What I'll shorthand is 0:16:59.360 --> 0:17:03.360 the flyover country problem and try a fly over part 0:17:03.840 --> 0:17:07.399 nation problem. And uh, and we ought to be spending 0:17:07.400 --> 0:17:09.760 some more time with that. So you know, we're back 0:17:09.760 --> 0:17:12.960 to the old wrangle of exactly how much time and 0:17:12.960 --> 0:17:16.119 effort we ought to be spending on domestic priorities as 0:17:16.119 --> 0:17:19.280 opposed to worrying about the international and you know, frankly, 0:17:19.320 --> 0:17:22.600 that complicates policy making across the board. Do you ascribe 0:17:22.600 --> 0:17:25.720 to the tradition that foreign policy doesn't matter when people 0:17:25.760 --> 0:17:29.160 waltz into the two thousand twenty two or two thousand 0:17:29.200 --> 0:17:32.080 twenty four booth or does it matter this time around? 0:17:33.560 --> 0:17:36.120 I think it matters to them always. Frankly. There there 0:17:36.119 --> 0:17:42.240 are always issues that that that differentiate candidates. Uh. And 0:17:42.440 --> 0:17:44.439 you know, we we see a lot of those happening 0:17:44.560 --> 0:17:47.440 right now. You've already you've already hit on it with 0:17:47.520 --> 0:17:51.200 the part of it with Middle East policy. Uh. China. 0:17:51.760 --> 0:17:55.520 China policy, of course is a very big and you know, 0:17:55.600 --> 0:17:59.600 frankly bipartisan initiative at this point that anybody that wanted 0:17:59.640 --> 0:18:02.240 to change China policy at this point would be looked 0:18:02.240 --> 0:18:06.400 at very skeptically. Uh. You know, the eyeballs on Russia, 0:18:06.520 --> 0:18:09.240 same thing. Uh, just to name three off the top. 0:18:09.320 --> 0:18:12.080 But yeah, it does matter to It does matter to voters. 0:18:12.560 --> 0:18:15.280 Let's jump to June, the president's first big obous trip, 0:18:15.320 --> 0:18:16.720 when he's going to go go over to Europe. What do 0:18:16.760 --> 0:18:20.840 you think the priorities are the priorities for them are 0:18:21.240 --> 0:18:23.680 they want to show Firstly, they want to show off, 0:18:24.359 --> 0:18:29.440 uh that they're America's back them, that they want uh 0:18:29.520 --> 0:18:33.480 to show cozy relationships across the board with the European 0:18:33.560 --> 0:18:35.880 Union number one. Number two, they actually want to show 0:18:35.920 --> 0:18:38.800 how they're moving the ball forward, and they're gonna have 0:18:38.880 --> 0:18:42.719 to get past this, uh, this nord Stream problem and 0:18:42.800 --> 0:18:45.760 put it into a broader context to show how that 0:18:45.840 --> 0:18:50.560 decision to wave sanctions there is positive for other aspects 0:18:50.600 --> 0:18:53.560 of the European project. And third, they want to show 0:18:53.680 --> 0:18:58.120 united front against Russia, but more importantly China. Uh, that's 0:18:58.119 --> 0:19:00.680 where they go. They've got a Germany of them, haven't they. 0:19:00.800 --> 0:19:02.680 With that in mind, Harry, not so much as a 0:19:03.040 --> 0:19:07.399 European problem is a Germany problem. Yeah, yeah, exactly. You know, 0:19:07.880 --> 0:19:10.159 there's some wags and Brussels always say if Hitler had 0:19:10.240 --> 0:19:15.240 understood that Dolly to do was to conquered everybody economically, uh, 0:19:15.359 --> 0:19:18.480 as Germany has with the the U. Uh. You know 0:19:18.640 --> 0:19:20.679 that we wouldn't have had the Second World War. But 0:19:20.760 --> 0:19:24.360 the more important part of this is that, uh, you've 0:19:24.359 --> 0:19:26.639 got a new government, You've got more instability in Germany 0:19:26.680 --> 0:19:28.159 for the first time in a long time. You've got 0:19:28.200 --> 0:19:31.000 a new government, a new way of looking at things. Uh. 0:19:31.280 --> 0:19:34.480 Some people say a loss of confidence. Uh. So that 0:19:34.640 --> 0:19:38.000 is that those are all variables that the administration is 0:19:38.000 --> 0:19:40.120 going to have to work with to resolve. So it's 0:19:40.119 --> 0:19:42.040 a higher mountain than it was just a few months ago. 0:19:42.080 --> 0:19:44.280 I meanwhile, here at home, Terry, one reason why I 0:19:44.320 --> 0:19:47.879 love reading your reports is because you actually assign probabilities 0:19:47.920 --> 0:19:51.680 to the likelihood of certain legislative initiatives getting passed. Where 0:19:51.720 --> 0:19:55.200 are we in terms of the probability of a bipartisan 0:19:55.359 --> 0:20:00.000 infrastructure bill getting passed in the near term, Well, thank you, Liza, 0:20:00.000 --> 0:20:03.280 and and you know I've been non consensus uh was 0:20:03.359 --> 0:20:07.920 non consensus uh about sixty six for some time on that. 0:20:08.000 --> 0:20:11.320 I think that's coming together, Uh, in a kind of 0:20:11.680 --> 0:20:14.680 eight hundred billion to one trillion range at the top. 0:20:15.040 --> 0:20:17.520 There's clearly a desire to want to do something there, 0:20:17.680 --> 0:20:21.879 and on a bipartisan basis, it amounts to a plus 0:20:21.960 --> 0:20:24.680 up of about a hundred percent over what we would 0:20:24.680 --> 0:20:28.480 be spending on infrastructure anyway. So it's not insignificant, but 0:20:28.600 --> 0:20:30.720 it would take a quite a while to roll out. 0:20:31.320 --> 0:20:34.480 The bigger question is that you know whether or not, uh, 0:20:34.600 --> 0:20:37.320 it's gonna be able to roll out faster. It doesn't 0:20:37.359 --> 0:20:40.280 sound like that's gonna happen, So the people won't see 0:20:40.280 --> 0:20:43.640 in businesses won't see a difference to that very much. 0:20:44.000 --> 0:20:46.280 And I also think it makes the the what the 0:20:46.280 --> 0:20:49.879 administration calls the Family's Package, which is most of the 0:20:49.880 --> 0:20:53.040 rest of us call everything else, uh, that much harder 0:20:53.080 --> 0:20:56.760 to get. Democrats will understand that the last train is 0:20:56.760 --> 0:20:59.160 going to leave the station. They want everything they want 0:20:59.200 --> 0:21:02.720 in it. People tend to forget that the Affordable Care 0:21:02.760 --> 0:21:05.600 Act had got passed on reconciliation, but it took something 0:21:05.640 --> 0:21:08.480 like five months after the House at first passed it 0:21:08.600 --> 0:21:11.679 to finalize it. And that's a positive case. So you know, 0:21:11.720 --> 0:21:14.480 they're Washington is going to fool around with the Family's 0:21:14.520 --> 0:21:17.040 Package into the winter and probably you know, i'd say 0:21:17.040 --> 0:21:18.840 at least into the winter with the likelihood of that 0:21:18.840 --> 0:21:23.760 getting passed. If I have that very much below at 0:21:23.760 --> 0:21:26.679 this point, I'll give you, I'll give you it's alive 0:21:26.720 --> 0:21:29.040 and kicking it, but I don't see the path forward 0:21:29.160 --> 0:21:31.640 for it right now. Jerry. We had the privilege speaking 0:21:31.680 --> 0:21:35.280 to the Republican from Montana yesterday, Steve Danes, and it 0:21:35.359 --> 0:21:39.480 was really good conversation. I am fascinated by how you 0:21:39.600 --> 0:21:45.320 translate the middle ground of American politics is personified by 0:21:45.400 --> 0:21:49.720 John Tester and Steve Danes in Montana. What's the future 0:21:49.800 --> 0:21:57.480 of the middle in America if Montana is living it? Um, 0:21:57.520 --> 0:21:59.479 you know what, those are two very smart members. I've 0:21:59.520 --> 0:22:02.000 had the plug her to spend a fair amount of 0:22:02.000 --> 0:22:05.480 time with Senator Tester over the years. And uh, he's 0:22:05.480 --> 0:22:09.880 a very capable senator. The U and and somebody's really 0:22:09.880 --> 0:22:13.959 looking out for things the you know, the the uh. 0:22:14.240 --> 0:22:18.800 The way people present themselves these days is market themselves 0:22:18.840 --> 0:22:23.680 in politics is polarized, they'd say, necessarily so. But there's 0:22:23.680 --> 0:22:25.480 an awful lot of people trying to figure out what 0:22:25.520 --> 0:22:28.480 the middle ground is and and work on it from there. 0:22:29.040 --> 0:22:31.760 We're losing some of those good people, people like Rob 0:22:31.840 --> 0:22:34.640 Portman and Pat Toomey, but as you point out, people 0:22:34.680 --> 0:22:38.320 like Tester and Danes are still there, and uh, you know, 0:22:38.359 --> 0:22:42.240 between him, people like Tim Scott, for example. I think 0:22:42.280 --> 0:22:45.440 there's there's still an awful lot of people in the Congress, 0:22:45.440 --> 0:22:48.439 particularly in the Senate, that are looking to try to 0:22:48.520 --> 0:22:52.760 figure out exactly how to deal with the what we'll 0:22:52.760 --> 0:22:55.600 call the problems of the middle uh and UH and 0:22:55.720 --> 0:22:59.119 improve things, so you know, I remain optimistic about that 0:22:59.160 --> 0:23:01.600