Speaker 1: Runch you by Bank of America Mary Lynch with virtual reality,
Speaker 1: Virtually everything will change. Discover opportunities in a transforming world
Speaker 1: VI of a mL dot Com slash VR, Mary Lynch,
Speaker 1: Pierced Fenner, and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best of economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course, on the Bloomberg Future. Slat down, futures up,
Speaker 1: nine equities churning. But look at the doubt twenty one thousand,
Speaker 1: five to eight, and you weren't in a market because
Speaker 1: the market, the economy, it was terrible. Things are terrible.
Speaker 1: On Friday, you read four dooming gloom articles to get
Speaker 1: you through the terrible weekend, to get to the terrible
Speaker 1: Monday where Drew Madis the stock market goes up again
Speaker 1: because in your wonderful days a U B S with
Speaker 1: more Harris you were right, then, you're right now It's
Speaker 1: a resilient American economy. Can you link your g d
Speaker 1: P optimism right over to the stock market Uh No,
Speaker 1: but I think it's reflecting it. I mean, I think
Speaker 1: when you look at the world today, you see a
Speaker 1: moderate growth environment with moderate inflation, very low interest rates, uh,
Speaker 1: and very low volatility in the economy itself. And so
Speaker 1: you know, when you look at the equity market, for example, uh,
Speaker 1: you know, there's less volatility around everything. So you know,
Speaker 1: you that's why the multiple I think keeps going up
Speaker 1: is because people are like, well, you know, I'm not
Speaker 1: gonna get six percent in terms of nominal growth. I'm
Speaker 1: gonna get four. But I know it's a solid for
Speaker 1: as opposed to six percent us OUR minus four. Let's
Speaker 1: let's go back to original drumatics before we get to
Speaker 1: the markets here, and that is the idea of justifying
Speaker 1: two point eight or three percent g d P. Is
Speaker 1: it a consumer we misjudge? Do we get an investment
Speaker 1: buoyancy or does trade light up like a candle because
Speaker 1: of dollar dynamics. What's gonna be the partial differential that
Speaker 1: makes that happen. Well, so I think the consumer is
Speaker 1: going to have a lot to do with it. Uh.
Speaker 1: And I think we're going to see that investment cycle
Speaker 1: begin because I think the thing that's being misjudged and misunderstood.
Speaker 1: The most uh, and that everyone is getting wrong is
Speaker 1: that productivity. Productivity is cyclically low. This is not a
Speaker 1: structural story. This is a cyclical story and it's been
Speaker 1: persistent because of the low rate environment we've been in.
Speaker 1: This is a really important comment, folks. Let's dive deeper
Speaker 1: into this. And this goes back to how any number
Speaker 1: of Nobel laureates and frankly people that are truly acclaimed
Speaker 1: thinking about efficiency of capital, efficial see of labor. In
Speaker 1: this technological overlay, everybody focuses on technology. It's structural. The
Speaker 1: world's gonna come to an end. You're saying, yeah, that's there,
Speaker 1: but no, it's about a cyclical Dejanet Yellen force low
Speaker 1: productivity because she kept rates low. I wouldn't say she
Speaker 1: forced it, but if you think about what low rates
Speaker 1: have done, low rates have effectively allowed companies that perhaps
Speaker 1: should have gone out of business to stay in business. Uh.
Speaker 1: And so every year that goes by, where that occurs,
Speaker 1: and you have companies that should be getting churned because
Speaker 1: they're they're cost of financing what they're trying to do. Uh. Oh,
Speaker 1: come on, look at the free lunch. Well, they're staying
Speaker 1: in business. And what that's doing is is it's taking
Speaker 1: a percentage of the U S workforce and growing percentage
Speaker 1: of the US workforce and keeping them at firms that
Speaker 1: are not productive. They're not being churned out, and so
Speaker 1: we're not getting the turnover in the labor market that
Speaker 1: puts people to their most efficient use and best use.
Speaker 1: So it's not good for the employees. It hurts their
Speaker 1: wages actually because low productivity firms can't afford to pay
Speaker 1: better um, but they can if they're staying in business.
Speaker 1: A greater and greater percentage of the York's US workforce
Speaker 1: is working at these firms that are not productive, and
Speaker 1: then we wonder why US productivity is. But then the
Speaker 1: review this These are really important comments, folks, whether you
Speaker 1: agree or not with Mr Madison that life the first
Speaker 1: order condition for the FED is to provide financial stability
Speaker 1: at lowered rates to save the banks, except we all
Speaker 1: know the story the second order condition. Are these knock
Speaker 1: on effects of the first order condition? What's the lead
Speaker 1: knock on effect right now of Bill Gross's financial repression
Speaker 1: or the idea of looking at a negative two year
Speaker 1: yield since time real to year yield since time began.
Speaker 1: What's the key second order effect? Uh, A very low
Speaker 1: level of economic volatility, which is bad for the economy
Speaker 1: we need as a country. The US has always thrived
Speaker 1: in creative destruction. UH. And without creative destruction, we do
Speaker 1: not get to our efficient operating level. And there's another
Speaker 1: reason why perhaps productivity might be too low, which is
Speaker 1: that we are not operating at the right UH. If
Speaker 1: you think of the economy as an engine where we
Speaker 1: don't have the RPMs up high enough with the within
Speaker 1: within the r p ms of the U S economy,
Speaker 1: how many rate rises changes the oil in the tank?
Speaker 1: So maybe we've got a Velveolin moment? Can we does
Speaker 1: Velveolan sponsor us under the under the star under the
Speaker 1: Texico sign something like that? But but but that was
Speaker 1: a Midwest moment, folks, excuse me there. But the basic
Speaker 1: idea we got to get the oil in the engine.
Speaker 1: How many rate increases does it take to get the
Speaker 1: oil in the engine? I think you have to get
Speaker 1: to a more normal level. I also think the balance
Speaker 1: sheet has something to do with it. So I don't
Speaker 1: have the answer for that because I think it's a
Speaker 1: mix of the two. But I do think the FED
Speaker 1: is moving in the right direction, which is towards higher
Speaker 1: FED funds rates, towards normalizing the balance sheet. Uh. And
Speaker 1: I would say that, you know, one of the things
Speaker 1: that concerns me is this idea that the balance sheet
Speaker 1: is going to remain excessively enlarged for an extraordinary period
Speaker 1: of time and that we don't have to return to
Speaker 1: kind of a more historically normal size balance sheet. I
Speaker 1: think in the end, the FED will have to retreat
Speaker 1: from that and move back towards a more normal balance sheet,
Speaker 1: which is somewhere in the order of six to seven
Speaker 1: percent nominally. How long is it gonna take? Because when
Speaker 1: I spoke with the President Caplain of the Dallas FED,
Speaker 1: he kept moving his hand. For those of you who
Speaker 1: can see this on radio, I'm moving my hand down,
Speaker 1: and he was moving it out years. I mean, he
Speaker 1: was on the edge of decades. Are you suggesting this
Speaker 1: is all gonna happen a lot quicker? I think it's
Speaker 1: going to take a decade. On the balance sheet, uh.
Speaker 1: And on interest rates, I'm not sure we'll have a
Speaker 1: decade before the next before the next downturn. But I
Speaker 1: do think we've got a few years, and I think
Speaker 1: by the time we get there, we will have rates
Speaker 1: in a more reasonable place. What what does what does
Speaker 1: the low I want to do? The MetLife angle, the
Speaker 1: institutional angle here in our next section, but in this section,
Speaker 1: what does this world we're in that we've created do
Speaker 1: for investors and savers mean? Forget about somebody who wants
Speaker 1: to buy six thousand shares of Amazon to make a
Speaker 1: quick hitoff whole foods to mom and pop out there,
Speaker 1: what does this environment mean? Well, for people who are
Speaker 1: approaching retirement, they're saving more. And so this is something
Speaker 1: that we've looked at a lot. If you look at
Speaker 1: ten year yields versus savings rates, the relationship is not linear,
Speaker 1: meaning that below a certain interest rate, people save more,
Speaker 1: and above a certain interest rate people save more. When
Speaker 1: it's above it, they're saving because they think the economy
Speaker 1: is going to go into recession. There's this fear out there.
Speaker 1: Below a certain interest rate, there the fear is that
Speaker 1: they're not going to be able to have enough for
Speaker 1: retirement to actually meet their their income needs and retirement,
Speaker 1: so they save more. So in order to kind of
Speaker 1: get people to save less and to boost economic spending
Speaker 1: in the economy, you actually need to move rates up.
Speaker 1: Well maybe that's a paradox and the paradox to take
Speaker 1: it back to econ one oh one. But there's a
Speaker 1: lot of ducks. But how how many rate increases are
Speaker 1: we too normal? Within this really interesting general discussion. I
Speaker 1: mean I would say three. I think he would be
Speaker 1: on the verge of normal with another three or so. Yes. Uh,
Speaker 1: you know historically the FED saw anything below one is abnormal. Uh,
Speaker 1: and then obviously the crisis happened, they went to zero. Um.
Speaker 1: I think once you're above one, you're in a better spot. Uh.
Speaker 1: You know, something on the closer to three in my
Speaker 1: mind is better than two. But I'll take two and
Speaker 1: kind of pinch. You know what's great Aboutdrew maddisas he
Speaker 1: brings the entire entourage from MetLife with him, including a
Speaker 1: general council. He's gonna need his general counsel. And the
Speaker 1: next section as we talk about UH insurance portfolios and
Speaker 1: actual reial assumption, something I know he spends a lot
Speaker 1: of time on as well. We got a little geeki
Speaker 1: there for Global wall Streets where with Drew Maddis of MetLife,
Speaker 1: drew insurance companies of all flavors, including his venerable is
Speaker 1: the Metropolitan Life Insurance Company have to worry about meeting
Speaker 1: the actuarial assumption that has been challenging since his financial
Speaker 1: crisis began. Is there light at the end of at
Speaker 1: the extraally real tunnel? Well, I mean, you know, with
Speaker 1: you know, we haven't had rates move up to the
Speaker 1: way we would have liked. My forecast for the end
Speaker 1: of year tenure is to seventy five. I still think
Speaker 1: we can get there. You know, if you look at
Speaker 1: it from a kind of a monthly move perspective, you're
Speaker 1: looking at eight basis points a month, which is not unreasonable,
Speaker 1: particularly given some of the moves we've seen around some
Speaker 1: of the bigger events. Uh. But yes, it's challenging, and
Speaker 1: that's why we have, uh, you know, we have a
Speaker 1: very solid um team. We have hundreds of people met
Speaker 1: Life Investment Management working uh to kind of you know,
Speaker 1: hit our hit our targets. Uh, and we have a
Speaker 1: lot of expertise in areas that that kind of enable
Speaker 1: us to invest in places you know that that can
Speaker 1: help us as well. So um, you know, uh, you know,
Speaker 1: higher rates would be helpful, but you know, we can
Speaker 1: we can get through without them, our bonds and stocks
Speaker 1: correlated right now? Uh? You know, um, yes, but I
Speaker 1: think you know, fundamentals are actually now beginning to be
Speaker 1: the driver. So one of the things we've created is
Speaker 1: as a proprietary index of um of fundamental activity. And
Speaker 1: what we see is that fundamentals now are driving things,
Speaker 1: not kind of the shock factors anymore. Uh. And so
Speaker 1: we watch this index that we've created to give us
Speaker 1: a sense of whether that's beginning to move or not. Uh.
Speaker 1: And right now, at least our fundamental index is telling
Speaker 1: us that fundamentals are driving things. And then we have
Speaker 1: actually underlying fundamental indicase for credit, real state, uh, the consumer,
Speaker 1: and all of those are suggesting pretty much a goldilocks
Speaker 1: not too hot, not too cold environment. I like the
Speaker 1: goldilocks ideas of goldilocks in the oil patch. I meant
Speaker 1: three seven percent Bob Moon saying it's two move. We
Speaker 1: had to readjust from a hundred down to forty at
Speaker 1: one point, I would suggest we cleared most of the market, right. Uh.
Speaker 1: You know, I think so, I think you know, the
Speaker 1: you know, the the key really for me when when
Speaker 1: we think about oil, uh, in the context of the
Speaker 1: U S at least is it um because the US
Speaker 1: has become this kind of swing producer. Whatever we thought
Speaker 1: the peak oil price was that you could get to
Speaker 1: maybe ten or fifteen years ago, that number has got
Speaker 1: to be lower. And so when you look at the
Speaker 1: average price that you can expect over the next ten years,
Speaker 1: it's something divided by two, right, and so uh, it's
Speaker 1: you know, it's lower than it would have been if
Speaker 1: you asked the same question fifteen or twenty years ago.
Speaker 1: And for me, that's the key feature of kind of
Speaker 1: the U S oil revolution. Dumas thank you so much,
Speaker 1: with met Life, their chief market strategist. It's a huge responsibility,
Speaker 1: folks to try to gauge equities, bonds, currencies, commodities and
Speaker 1: economics across the liabilities of any given insurance company. There,
Speaker 1: what short term it that life? Five years? We have
Speaker 1: a very long run perspective. Come on, give me an answer.
Speaker 1: What short term? Ten years? You're trying to get on fired? Yeah,
Speaker 1: well we're not. The General Council's hanging on every syllable.
Speaker 1: Five of years. I mean, seriously, five years a short
Speaker 1: term for an insurance company. We we make investments, We
Speaker 1: are a liability driven investor, and that means we make
Speaker 1: investments for the long term. There he is with the
Speaker 1: c y a answer. Drew Maddis of MetLife, thank you
Speaker 1: so much worldwide. This is Bloomberg right now with as
Speaker 1: William Priest for a brief time, as we await a
Speaker 1: conversation with a Secretary of Treasury. William Priest wrote an
Speaker 1: iconic book. It was instantly classic and has stayed that
Speaker 1: that's hard to do on shareholder yield. A number of
Speaker 1: years ago. This would be the measurement and cash flow,
Speaker 1: which would we see more of in the next five
Speaker 1: or ten years, dividend growth or share buybacks, which has
Speaker 1: the high ground now in terms of use of cash.
Speaker 1: I think what's gonna happen is, first of all, you
Speaker 1: have to take one step back and say should I
Speaker 1: reinvest or should I return capital? What's critical to that
Speaker 1: is can you earn a premium over your cost of capital?
Speaker 1: If you can indeed reinvest at a premium over your
Speaker 1: cost of capital, you should reinvest or require But for
Speaker 1: many companies, particularly large ones, that's almost impossible. So they
Speaker 1: will return much of that cash to the owners of
Speaker 1: the business, and they will do that either through cash
Speaker 1: buy backs or debt paid down. From a tax standpoint,
Speaker 1: buy backs are favorite. Wall Street doesn't always treat buy
Speaker 1: backs with the same value. It depends on the reason.
Speaker 1: If the reason for the buy back is to get
Speaker 1: management paid because earnings for share or hire and they
Speaker 1: get a bonus, that's a misuse of cash flow. But
Speaker 1: in theory they are identical. So and and if you
Speaker 1: don't want to talk about this bill, we know each
Speaker 1: other so well that if you want to step aside
Speaker 1: on this, IBM is financial engineering. They basically did William
Speaker 1: Priest one oh one the first four pages of their
Speaker 1: annual report for years and years and years and years,
Speaker 1: and then the show game broke? Did you own IBM?
Speaker 1: As they were financially engineering their way to oblivion. We
Speaker 1: have been negative on IBM for years. They had an
Speaker 1: up quarter. Why have been negative? No revenue growth? No
Speaker 1: revenue growth from umpty ump quarters. Uh, there are too
Speaker 1: many games you can play with a counting, and many
Speaker 1: many years ago, it was uh, Louis when lou rock
Speaker 1: Hiser Show was on, LOUI asked me a question. Because
Speaker 1: I'm I'm a CPO. My background includes that at one
Speaker 1: point I was an accountant. We won't hold that against you. Well,
Speaker 1: he asked me a question. It was one of the
Speaker 1: great straight lines I was ever given. Uh And he said, Bill,
Speaker 1: being an accountant and being a c p A is
Speaker 1: a helpful and being a security analyst or portfolio management.
Speaker 1: And I basically said, well, Lou, you know, accounting is
Speaker 1: a lot like a bathing suit. What it reveals is interesting,
Speaker 1: but what it conceals is vital. And I think accounting
Speaker 1: is a way to obfuscate truth. And it's gotten worse
Speaker 1: and worse as you've gone through time. These sensors just
Speaker 1: gagged me here at surveillance. So I can't respond, okay
Speaker 1: to that. Mr Rukeyser could respond to that, and in
Speaker 1: the modern day even Luu Keiser couldn't respond to the
Speaker 1: bathing suit priest analogy? Am I doing? Okay? John? Yeah,
Speaker 1: that whole really you got the shovel on. Think the
Speaker 1: whole ever deeper? Okay? But IBM, seriously here you look
Speaker 1: at the IBM pages. Everybody thinks it's c P A
Speaker 1: c F A one oh one. And you're saying the
Speaker 1: revenue growth isn't there? Amazon has revenue growth than God is.
Speaker 1: Mr Bezos did he read William priest, I have no idea.
Speaker 1: Why not Why can't you look at why can't you?
Speaker 1: You should? Well, well, who do we have on yesterday? Uh?
Speaker 1: That was wonderful about this. Uh David Rubinstein saying he
Speaker 1: made the same mistake you made, and you know, the
Speaker 1: underestimated Bezos she got revenue growth of Amazon. Does that
Speaker 1: count towards shareholder yield? I think at the end of
Speaker 1: the day, you're going to look at does the entity
Speaker 1: generate cash flow? All businesses are driven ultimately by their
Speaker 1: ability to generate cash flow. Now, we have a definition
Speaker 1: for free cash flow, which essentially indicates that the definition
Speaker 1: that we use, it's the cash available for distribution to
Speaker 1: shareholders after all planned capitals, adpenditures, and all cash taxes.
Speaker 1: So what Bezos has done is essentially say, you know what,
Speaker 1: I can reinvest my capital at a higher than my
Speaker 1: cost of capital, which has been true in this era
Speaker 1: we've been in where the cost of capital is following
Speaker 1: year after year after year. So this is the money question, folks.
Speaker 1: This is critically important as well. This is so important.
Speaker 1: He's got a game going and like Brian Roberts ad Comcast,
Speaker 1: someday you shift Comcast brilliantly shifted from CAPEX development over
Speaker 1: to use the cash to shareholders to great advantage. Do
Speaker 1: you believe Jeff Bezos can shift from revenue high return
Speaker 1: new businesses to a more mature business X number of
Speaker 1: years down the road. I jury is out, but I
Speaker 1: would say probably can. But right now he just looks
Speaker 1: at He is a major disruptor in business today. You
Speaker 1: don't want to be on the other side of what
Speaker 1: he's doing. It's too disruptive. Brunt you by Bank of
Speaker 1: America Mary Lynch. With virtual reality, virtually everything will change.
Speaker 1: Discover opportunities in a transforming world be of a mL
Speaker 1: dot Com, slash VR, Mary Lynch, Pierced Fenner and Smith Incorporated.
Speaker 1: Welcome to our viewers around the world, our listeners on
Speaker 1: Bloomberg Grady as well. I'm joined by the seventy seventh
Speaker 1: Secretary of the Treasury, Steve Monition. Here uh the Gaylord
Speaker 1: Resort a South Washington. See. Thank you very much. Thank you.
Speaker 1: You become familiar with the idiosyncrasies of this town, the
Speaker 1: strange customs you're about to become familiar with another, that
Speaker 1: is the semi regular debate about the debt limit. When
Speaker 1: are we going to get it. How how soon is
Speaker 1: that debate going to happen? Follow Let me just say
Speaker 1: we're already having the discussion on it, and I don't
Speaker 1: think it's a debate. Let me be clear. I think
Speaker 1: everybody realizes we need to raise the debt ceiling. The
Speaker 1: government debt is the most important credit in the world
Speaker 1: and where the reserve currency. So this is just a
Speaker 1: little bit of a process. That's the government process of
Speaker 1: how we go about and one of the things I
Speaker 1: think we think about over time is changing this process.
Speaker 1: It should be once we've spent the money that the
Speaker 1: debt limit goes along with the commitment to spend. Is
Speaker 1: it the beginning of September when you think we we
Speaker 1: hit that limit? Is it later in the month. Do
Speaker 1: you have a specific date at this point? We constantly
Speaker 1: review these numbers internally. UM, I don't want to give
Speaker 1: exact projections. As I've said, I've encouraged Congress to act
Speaker 1: before they leave for the summer, but we do have
Speaker 1: enough money to get us through September and case they
Speaker 1: don't back in January. Before you were confirmed, you spoke
Speaker 1: against prioritization of debt payments. Now that you've been on
Speaker 1: the job, You're familiar with the office and the way
Speaker 1: things work here in Washington. Do you still feel that way?
Speaker 1: Are you against prioritization? Let me just say I think
Speaker 1: that the Congress should raise the debt ceiling so that
Speaker 1: we don't have to talk about prioritization. That's really the focus.
Speaker 1: We should be paying our bills when they're due, and
Speaker 1: we shouldn't put the government at risk. There hasn't been
Speaker 1: what I would call a course of consensus around this issue.
Speaker 1: And a few others within the administration. There were some
Speaker 1: of your colleagues who are calling for a clean raise
Speaker 1: of the debt limit, through others who think it should
Speaker 1: be tethered to spending cuts. What's it going to take
Speaker 1: to get to unanimity on this issue? And others within
Speaker 1: the within the administration. Well, I think we have a
Speaker 1: general understanding within the administration and we're clear on that,
Speaker 1: and we're working with Congress. This is really up to
Speaker 1: Congress to raise the debt limit, and again it's something
Speaker 1: I'm confident that they'll do. Before we get to a point.
Speaker 1: That's critical on the issue of unanimity is the White
Speaker 1: House saying there is a date by which we will
Speaker 1: a tax reform proposal from the White House. Are you
Speaker 1: speaking with one voice on that issue? Well, I think
Speaker 1: we've been pretty consistent and saying we're working every week
Speaker 1: very closely with the House and the Senate to have
Speaker 1: a joint plan when we come out, and the idea
Speaker 1: is to get us all on the same page. So
Speaker 1: when we release the combined plan, it's gonna get passed,
Speaker 1: and it's going to get passed by the House and
Speaker 1: the Senate and the President will sign it. And it's
Speaker 1: our focus to get that done this year. It's critical
Speaker 1: to the economy and we're working every day to get
Speaker 1: that done. What's your relationship like with lawmakers on Capitol Hill?
Speaker 1: How have you found that being new to watching, being
Speaker 1: new to this job. I think we're very good relationships
Speaker 1: and uh, I think it's a team effort. I think
Speaker 1: the good news is we understand what we want to do.
Speaker 1: We want to get growth in this country. We want
Speaker 1: to have tax reform. It hasn't been done in thirty years.
Speaker 1: It's critical. We want to simplify personal taxes, we want
Speaker 1: to create a middle income tax cut, and we want
Speaker 1: to make business taxes competitive. We have one of the
Speaker 1: highest tax rates in the world, old with worldwide taxes
Speaker 1: and deferral, which leads to trillions of dollars left off shore.
Speaker 1: You bring up growth. I must say that's the thing
Speaker 1: of this conference. I talked to maybe a half dozen
Speaker 1: economists to every day, and almost without exception, they disagree
Speaker 1: with the projections that you have that we can attain
Speaker 1: three or four percent and growth in the near tow
Speaker 1: to medium term. What are you seeing that they're not? Well? Again,
Speaker 1: I just want to put this in perspective. When Obama
Speaker 1: came into office, he was projecting over four economic growth.
Speaker 1: We obviously haven't tag necked. We've had one of the
Speaker 1: lowest growth rates in modern history, and we're just not
Speaker 1: going to be satisfied with two percent growth. We're gonna
Speaker 1: work every day in this administration and do everything we
Speaker 1: possibly can to unlock the economic capital to create jobs,
Speaker 1: to create better wages, and get growth above three percent.
Speaker 1: We're committed to doing that. You're here among and talking
Speaker 1: to foreign investors. Let me ask you about Siphias. You've
Speaker 1: said your decisions on foreign investment are based largely on
Speaker 1: national security. That's the cornerstone. Would you be in favor
Speaker 1: of an economics benefit test it for investment in the
Speaker 1: U S Well, let me just say they're not largely
Speaker 1: on national security. They're completely on national security, and no
Speaker 1: I I favor sifious to be for national security. There's
Speaker 1: other things we can do to make sure that we
Speaker 1: are economically competitive. But the US is one of the
Speaker 1: freest trading markets in the world. It's one of the
Speaker 1: freest investment markets in the world. We welcome foreign investors
Speaker 1: to invest here, and we just want to make sure
Speaker 1: we get treated the same way abroad. That's really our focus.
Speaker 1: You've talked about a strong dollar and a dependable dollar.
Speaker 1: Not to get into the semantics here, but what's the
Speaker 1: difference between the two. How do you define a dependable dollar. Well, again,
Speaker 1: the dollar is the reserve currency the world. Um, Again,
Speaker 1: it's not our focus where the dollar is in the
Speaker 1: short term. There's obviously certain negative aspects of a strong
Speaker 1: dollar as it relates to our exports. But on the
Speaker 1: other hand, the strong dollar is a vote of confidence
Speaker 1: in the US economy and the Trump administration, similarly to
Speaker 1: what is going on with the stock market. So this
Speaker 1: is one of the most important economic investment opportunities the
Speaker 1: US and we're seeing a lot of attractions here and
Speaker 1: that's a lot about what this conference is today on
Speaker 1: the issue of investment. A few months back, you're talking
Speaker 1: to a colleague of mine out in l a at
Speaker 1: the Milk and Conference, and you suggested that ultra long
Speaker 1: bonds absolutely made a sense. Do you still believe that?
Speaker 1: Are you walking back from that a little bit in
Speaker 1: la I'm not. I'm not walking back again. It's something
Speaker 1: that we're very seriously considering. UM. I do think it's
Speaker 1: a tool that the government should strongly consider, and we're
Speaker 1: reaching out through the Borrowing Committee and investors to to
Speaker 1: see what the demand is. I mean, what we don't
Speaker 1: want to do is create a program that's a completely
Speaker 1: one off program. We want to see if it would
Speaker 1: be an important part of our borrowing capabilities. In the past,
Speaker 1: people in your position have been advisors to the President
Speaker 1: on picking future chairs of the Federal Reserve? Has the
Speaker 1: presidents solicited your advice on who the next FED chair
Speaker 1: should be? Well on all the financial regulatory positions. Gary
Speaker 1: Koon and I are working very closely together in making
Speaker 1: recommendations to the President so that he he and I
Speaker 1: have have interviewed all the people and have made joint
Speaker 1: recommendations to the President. What do you think constitutes a
Speaker 1: good FED chair? In other words, broadly speaking, what do
Speaker 1: you what do you think the president should be looking
Speaker 1: for gonna in a FED share this next turn, Well,
Speaker 1: let me just say we haven't made any decisions yet
Speaker 1: on the FED chair um whether we're gonna have a
Speaker 1: new one or we're not going to have a new one,
Speaker 1: and uh, we'll be working closely together with the President
Speaker 1: as we consider all the issues. What is your relationship
Speaker 1: like with that, Mr Cone? We we hear so much
Speaker 1: about the palace intrigue, reports of division or discord within
Speaker 1: within the White House. What's your sense of how the
Speaker 1: economic team is working, how it's working together. I think
Speaker 1: the Economic team couldn't be working better together. And that's
Speaker 1: a combination of myself, Gary Cohne, Wilbert Ross, It's Bob
Speaker 1: Leitheiser on trade, it's mcmilvany on the budget. We meet constantly,
Speaker 1: and Uh, I think we couldn't be working together. As
Speaker 1: it relates to Gary and I, he and he and
Speaker 1: I have known each other for a very long in
Speaker 1: period of time and we're worked together very closely in
Speaker 1: the past otto warm beer has passed away from the
Speaker 1: twenty two year old student who was in North Korea
Speaker 1: from more than a year. The President has passed along
Speaker 1: his condolences and said that he's reaffirming his opposition to
Speaker 1: the policies of the North Korean regime. What more can
Speaker 1: you do? We've seen the Treasury Department deploy and implement
Speaker 1: sanctions against North Korea. As you react to this news
Speaker 1: and think about steps forward, are there more tools in
Speaker 1: the Treasury Department's tool kit when it comes to sanctions. Well,
Speaker 1: let me first say it's a it's a very unfortunate situation,
Speaker 1: and I also pass on my condolences to his family. Uh.
Speaker 1: He was treated very poorly and nobody should be treated
Speaker 1: like that. And as we've said before, we are firmly
Speaker 1: committed at Treasury to use all our powers to put
Speaker 1: sanctions on North Korea and work with our allies to
Speaker 1: stop what they're doing. And that's the missile testing, the
Speaker 1: nuclear testing. Um this is something we're working very closely
Speaker 1: with our allies on. I spoke with your predecessor about sanctions.
Speaker 1: It was something he was very we sted in and
Speaker 1: worked hard to raise the status of that's a policy
Speaker 1: tool implementing sanctions in the in the realm of national security.
Speaker 1: Do you see your sanctions policy as an extension of that.
Speaker 1: Are you doing anything differently than Secretary louis doing when
Speaker 1: it comes to sanctions, Well, let me just comment. You know,
Speaker 1: sanctions have been around for a long period of time,
Speaker 1: and specifically post nine eleven. They are a very important
Speaker 1: tool for policy makers. So we will continue to use
Speaker 1: sanctions to the maximum amount that we can. And I
Speaker 1: constantly meet with Secretary Tillerson and Secretary Matters and at
Speaker 1: the National Security Council. This is one of the tools
Speaker 1: we talk about and all of our foreign policy objectives.
Speaker 1: I don't know if you've opened your mail from yesterday,
Speaker 1: but a number of Congressman, Republicans Democrats wrote you about
Speaker 1: Rose and Potential Investing are becoming a controlling investor of
Speaker 1: SITCO given the status of that company, raising concerns about
Speaker 1: what that might mean for sanctions, having a company with
Speaker 1: so much infrastructure in the U S under Russian control?
Speaker 1: Are you concerned about that as well? Well? First of all,
Speaker 1: I do read my math because again late yesterday, Um,
Speaker 1: you know I can't comment on any specific cases and Siphius,
Speaker 1: but I can assure them and I can assure others.
Speaker 1: I take my role as chair of Cephius very seriously.
Speaker 1: We will use Ciphius solely for the purposes of protecting
Speaker 1: our national security, and any transaction that's within our jurisdiction
Speaker 1: we will look at very careful. Like just the last
Speaker 1: question here about an op ed that Gary Code and
Speaker 1: Aatrian McMaster read for The Wall Street Journal on the
Speaker 1: arena seeing the world community as less of a community,
Speaker 1: as a place where countries are competing against one another
Speaker 1: in that space. What's what's the what's the role of
Speaker 1: multi ladder institutions. Oh, I think there's a significant role.
Speaker 1: I mean, I think there's a lot of common objectives
Speaker 1: that we have. I think whether it's the World Bank,
Speaker 1: whether it's the I m F or or others, there's
Speaker 1: definitely a role for us, working with our allies with
Speaker 1: these institutions to to create fixes for problems around the world.
Speaker 1: I think, as you know, kind of we've been worked
Speaker 1: being with the Greeks on the dead crisis. They are
Speaker 1: we're pleased that we've come to an agreement, or the
Speaker 1: Europeans have come to an agreement. Then I worked closely
Speaker 1: with the I m F and with our partners. Although
Speaker 1: this is primarily a European issue, we wanted to make
Speaker 1: sure that this was done. And uh, we're very pleased
Speaker 1: with the I m f S role in those negotiations,
Speaker 1: sectual menation. Thank you very much, The seventy seventh Secretary
Speaker 1: of the Treasury back to you. This is a great pleasure,
Speaker 1: great great pleasure. This is truly one of the nation's leaders.
Speaker 1: I'm trying to get your kids to learn a multiplication,
Speaker 1: label tables and actually get through trigonometry in high school.
Speaker 1: Here's what you need to know. He was what was
Speaker 1: called a Westinghouse scholar. This is a few years ago,
Speaker 1: before Princeton, before this, before that, everybody who was cool
Speaker 1: didn't want to do what you and I did, which
Speaker 1: is a lot of science and a lot of math,
Speaker 1: and you took a trophy in high School's a Westinghouse scholar.
Speaker 1: It's like the movie October Sky. It's a nerd on
Speaker 1: the block. How did you get through the social impact
Speaker 1: of math and science where everybody said what Tom Layton did,
Speaker 1: that's not cool. Well, I just love math and science,
Speaker 1: so I had a lot of fun doing it and uh,
Speaker 1: there are a few other kids. At the time, there
Speaker 1: were there were a few others, but there was also
Speaker 1: that social tension of that's not cool what Tom Layton
Speaker 1: of acomy is doing. That's not cool. Yeah, no, that's true,
Speaker 1: and we we faced that same challenge today. I think
Speaker 1: in terms of what is emphasized and um, it is
Speaker 1: a challenge I think for the country with with within
Speaker 1: this and within your public service. Along with the success
Speaker 1: of acama ie and and what you've done in the
Speaker 1: the internet is the idea of the rigor of mathematics.
Speaker 1: How do we help kids get through the tough moments
Speaker 1: the rigor where you're looking at signed, co sign, tangent
Speaker 1: and there's other three functions on the other how do
Speaker 1: we get through the rigor? You know? I think one
Speaker 1: key is to make math be interesting. I and to
Speaker 1: show kids what it can be used to do. Uh,
Speaker 1: you know, take search, that's all math, and you know,
Speaker 1: I think when you expose it to kids in the
Speaker 1: right way, show them the magic of math, of power
Speaker 1: of math, that goes a long way to increasing interest.
Speaker 1: Later on. Tom Layton, of course, is a co founder
Speaker 1: of Amy Technologies in the Internet, in video and all
Speaker 1: a lot of the nuts and bolts of how what
Speaker 1: we take for granted happens every day. I've got about
Speaker 1: eight themes to go with you, but I'm gonna go
Speaker 1: right now to the M and A market of Silicon Valley,
Speaker 1: which is we extrapolate out valuations of tech up starts.
Speaker 1: This didn't happen when ak am I was around. You
Speaker 1: didn't get money come in and then they'd say it's
Speaker 1: a forty two billion dollar company, and that's the vogue
Speaker 1: right now. How did this begin to happen? Like with Uber?
Speaker 1: How do we extrapolate Uber into an umpteen billion dollar company? Well,
Speaker 1: we act shliakam I went through that. Did you go through?
Speaker 1: We did? We started and in nine did one of
Speaker 1: the largest I p O s ever and did get
Speaker 1: a very high got up to about thirty five billion
Speaker 1: shot chart Luncher. Yeah. And then of course reality does
Speaker 1: set in and during the bubble bursting had a tremendous crash.
Speaker 1: We've lost you know, seven one in value and you
Speaker 1: know managed through a lot of hard work from very
Speaker 1: talented employees to survive that and then grow into a
Speaker 1: very profitable, uh and fast growing company today. Yeah, the
Speaker 1: rate to return folks off the tobacco of two thousand.
Speaker 1: One of them is jaw dropping and really speaks. It's
Speaker 1: pretty much a linear function of of double digit excellence
Speaker 1: and shareholder return. I guess I got to go to
Speaker 1: the video question. I perceived video on the Internet as
Speaker 1: a kid's domain. Kids love it. We all know that.
Speaker 1: I mean, I get all the statistics. Do adults want video? Oh?
Speaker 1: I think so. And you know, kids grow up and
Speaker 1: you to doing some of the same things as when
Speaker 1: they were kids. So we see the video coming over
Speaker 1: the top as being increasing. Uh And ultimately I think
Speaker 1: in the long run, most all video will be over.
Speaker 1: I P. It'll be over, I P. But within the
Speaker 1: video that you're the backbone of, there's got to I
Speaker 1: get the generational shift that the young kids today on YouTube, etcetera.
Speaker 1: Will use video more. Do you see evidence now that
Speaker 1: adults want video? In journalism, it's a real debate. Yes.
Speaker 1: Now you see the video traffic and share substantially increasing.
Speaker 1: We see the traffic on akama I, you know, growing
Speaker 1: at very substantial rates. And I do think and you
Speaker 1: talk to the world's major broadcasting executives, and I think
Speaker 1: now they all believe that the large majority of video
Speaker 1: watching across you know, the globe will be digital and
Speaker 1: that includes adults. Of course, how do you retain employees today?
Speaker 1: I don't know what the headcount is it ACoM, but
Speaker 1: you got the young upstarts gonna they think they know
Speaker 1: everything and you're like, yeah, please is come on? How
Speaker 1: do you retain that that constructive ego of those bright
Speaker 1: kids today? Well, we work hard to make OKAM would
Speaker 1: be a great place to work. Part of that is
Speaker 1: having a really innovative culture with teamwork. You know, it's
Speaker 1: what matters that Akama is the quality of the idea,
Speaker 1: not the rank of the person who said it. Uh,
Speaker 1: you know, and that really is very helpful and to
Speaker 1: grow innovation. And you get a lot of innovation from
Speaker 1: folks coming out of school, uh, you know that have
Speaker 1: fresh ways of looking at things, and that's that's vital
Speaker 1: for engineering and mathematics is a is an area where
Speaker 1: you love to start projects and you keep them going
Speaker 1: way too long. How do you do with Christiansen talks
Speaker 1: about which is disrupt the failed projects? How do you
Speaker 1: get rid of failed projects? That it's always hard to
Speaker 1: shut something down and you know we're we're not perfect
Speaker 1: aut it either. But you know, in order to be
Speaker 1: able to continue to fund innovation or new ideas, you
Speaker 1: do have to terminate objects that you know, at one
Speaker 1: point seemed like they had a lot of promise but
Speaker 1: no longer do and that you've invested in you say, okay,
Speaker 1: that one didn't work out. You know, innovation is always
Speaker 1: a high risk endeavor and most ideas are not going
Speaker 1: to work out, and you do need the discipline to
Speaker 1: shut him down when it's when that becomes clear. One
Speaker 1: final question, did ad more Rick Over come over for dinner?
Speaker 1: Your father knew ad Rick Over? This is for those
Speaker 1: of you younger, this was an extraordinary and unique individual.
Speaker 1: How every navy did ad more Rick Over come over
Speaker 1: for dinner? Yes, many times, and he was an extraordinary
Speaker 1: human being. He was wound up like a top. He
Speaker 1: made the submarines go, didn't he? He did? And uh,
Speaker 1: you know, I had the benefit of growing up in
Speaker 1: a home where science was really important. My dad worked
Speaker 1: very closely with add more rick Over and uh, you know,
Speaker 1: very hard working man. This has been great. Thomas Layton
Speaker 1: back and I thank you so much thanks for listening
Speaker 1: to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews
Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keene. David Gura is at
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