WEBVTT - Dollar’s Strength Shows Trust in Trump, Mnuchin Says (Correct) 0:00:00.240 --> 0:00:04.040 Runch you by Bank of America Mary Lynch with virtual reality, 0:00:04.320 --> 0:00:09.719 Virtually everything will change. Discover opportunities in a transforming world 0:00:10.160 --> 0:00:14.440 VI of a mL dot Com slash VR, Mary Lynch, 0:00:14.520 --> 0:00:29.240 Pierced Fenner, and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast. 0:00:29.280 --> 0:00:32.760 I'm Tom Keene with David Gura. Daily we bring you 0:00:32.840 --> 0:00:37.640 insight from the best of economics, finance, investment, and international relations. 0:00:38.120 --> 0:00:43.640 Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 0:00:43.640 --> 0:00:51.400 and of course, on the Bloomberg Future. Slat down, futures up, 0:00:51.479 --> 0:00:54.320 nine equities churning. But look at the doubt twenty one thousand, 0:00:54.640 --> 0:00:58.360 five to eight, and you weren't in a market because 0:00:58.360 --> 0:01:02.680 the market, the economy, it was terrible. Things are terrible. 0:01:02.960 --> 0:01:06.120 On Friday, you read four dooming gloom articles to get 0:01:06.160 --> 0:01:09.400 you through the terrible weekend, to get to the terrible 0:01:09.440 --> 0:01:12.279 Monday where Drew Madis the stock market goes up again 0:01:12.560 --> 0:01:14.880 because in your wonderful days a U B S with 0:01:14.920 --> 0:01:18.319 more Harris you were right, then, you're right now It's 0:01:18.360 --> 0:01:22.040 a resilient American economy. Can you link your g d 0:01:22.240 --> 0:01:26.440 P optimism right over to the stock market Uh No, 0:01:26.560 --> 0:01:28.480 but I think it's reflecting it. I mean, I think 0:01:28.600 --> 0:01:32.120 when you look at the world today, you see a 0:01:32.160 --> 0:01:38.040 moderate growth environment with moderate inflation, very low interest rates, uh, 0:01:38.080 --> 0:01:41.839 and very low volatility in the economy itself. And so 0:01:42.240 --> 0:01:45.440 you know, when you look at the equity market, for example, uh, 0:01:45.520 --> 0:01:48.320 you know, there's less volatility around everything. So you know, 0:01:48.400 --> 0:01:50.600 you that's why the multiple I think keeps going up 0:01:50.720 --> 0:01:53.240 is because people are like, well, you know, I'm not 0:01:53.240 --> 0:01:56.400 gonna get six percent in terms of nominal growth. I'm 0:01:56.400 --> 0:01:58.400 gonna get four. But I know it's a solid for 0:01:58.520 --> 0:02:02.320 as opposed to six percent us OUR minus four. Let's 0:02:02.400 --> 0:02:04.920 let's go back to original drumatics before we get to 0:02:04.960 --> 0:02:08.240 the markets here, and that is the idea of justifying 0:02:08.360 --> 0:02:11.560 two point eight or three percent g d P. Is 0:02:11.560 --> 0:02:14.840 it a consumer we misjudge? Do we get an investment 0:02:14.880 --> 0:02:19.160 buoyancy or does trade light up like a candle because 0:02:19.160 --> 0:02:22.840 of dollar dynamics. What's gonna be the partial differential that 0:02:22.919 --> 0:02:25.400 makes that happen. Well, so I think the consumer is 0:02:25.400 --> 0:02:27.000 going to have a lot to do with it. Uh. 0:02:27.000 --> 0:02:29.240 And I think we're going to see that investment cycle 0:02:29.320 --> 0:02:33.320 begin because I think the thing that's being misjudged and misunderstood. 0:02:33.320 --> 0:02:36.440 The most uh, and that everyone is getting wrong is 0:02:36.480 --> 0:02:41.080 that productivity. Productivity is cyclically low. This is not a 0:02:41.120 --> 0:02:44.400 structural story. This is a cyclical story and it's been 0:02:44.440 --> 0:02:46.920 persistent because of the low rate environment we've been in. 0:02:47.080 --> 0:02:49.919 This is a really important comment, folks. Let's dive deeper 0:02:49.960 --> 0:02:52.799 into this. And this goes back to how any number 0:02:52.840 --> 0:02:56.840 of Nobel laureates and frankly people that are truly acclaimed 0:02:57.000 --> 0:03:01.480 thinking about efficiency of capital, efficial see of labor. In 0:03:01.480 --> 0:03:06.680 this technological overlay, everybody focuses on technology. It's structural. The 0:03:06.720 --> 0:03:10.200 world's gonna come to an end. You're saying, yeah, that's there, 0:03:10.320 --> 0:03:15.360 but no, it's about a cyclical Dejanet Yellen force low 0:03:15.400 --> 0:03:19.160 productivity because she kept rates low. I wouldn't say she 0:03:19.280 --> 0:03:21.480 forced it, but if you think about what low rates 0:03:21.480 --> 0:03:24.480 have done, low rates have effectively allowed companies that perhaps 0:03:24.520 --> 0:03:27.200 should have gone out of business to stay in business. Uh. 0:03:27.240 --> 0:03:30.040 And so every year that goes by, where that occurs, 0:03:30.080 --> 0:03:33.200 and you have companies that should be getting churned because 0:03:33.280 --> 0:03:36.920 they're they're cost of financing what they're trying to do. Uh. Oh, 0:03:37.000 --> 0:03:40.120 come on, look at the free lunch. Well, they're staying 0:03:40.120 --> 0:03:42.440 in business. And what that's doing is is it's taking 0:03:42.440 --> 0:03:44.560 a percentage of the U S workforce and growing percentage 0:03:44.600 --> 0:03:46.400 of the US workforce and keeping them at firms that 0:03:46.440 --> 0:03:49.720 are not productive. They're not being churned out, and so 0:03:49.760 --> 0:03:51.840 we're not getting the turnover in the labor market that 0:03:51.880 --> 0:03:54.320 puts people to their most efficient use and best use. 0:03:55.120 --> 0:03:57.760 So it's not good for the employees. It hurts their 0:03:57.800 --> 0:04:01.360 wages actually because low productivity firms can't afford to pay 0:04:01.360 --> 0:04:04.600 better um, but they can if they're staying in business. 0:04:05.360 --> 0:04:08.120 A greater and greater percentage of the York's US workforce 0:04:08.280 --> 0:04:11.040 is working at these firms that are not productive, and 0:04:11.040 --> 0:04:13.560 then we wonder why US productivity is. But then the 0:04:13.600 --> 0:04:16.200 review this These are really important comments, folks, whether you 0:04:16.279 --> 0:04:19.479 agree or not with Mr Madison that life the first 0:04:19.600 --> 0:04:22.479 order condition for the FED is to provide financial stability 0:04:22.480 --> 0:04:24.600 at lowered rates to save the banks, except we all 0:04:24.640 --> 0:04:27.599 know the story the second order condition. Are these knock 0:04:27.720 --> 0:04:31.640 on effects of the first order condition? What's the lead 0:04:31.760 --> 0:04:35.960 knock on effect right now of Bill Gross's financial repression 0:04:36.160 --> 0:04:38.960 or the idea of looking at a negative two year 0:04:39.040 --> 0:04:42.599 yield since time real to year yield since time began. 0:04:43.040 --> 0:04:48.480 What's the key second order effect? Uh, A very low 0:04:48.560 --> 0:04:51.960 level of economic volatility, which is bad for the economy 0:04:52.040 --> 0:04:55.960 we need as a country. The US has always thrived 0:04:56.120 --> 0:05:00.600 in creative destruction. UH. And without creative destruction, we do 0:05:00.680 --> 0:05:04.599 not get to our efficient operating level. And there's another 0:05:04.720 --> 0:05:08.840 reason why perhaps productivity might be too low, which is 0:05:08.880 --> 0:05:12.160 that we are not operating at the right UH. If 0:05:12.200 --> 0:05:14.400 you think of the economy as an engine where we 0:05:14.480 --> 0:05:16.720 don't have the RPMs up high enough with the within 0:05:16.880 --> 0:05:19.200 within the r p ms of the U S economy, 0:05:19.400 --> 0:05:21.880 how many rate rises changes the oil in the tank? 0:05:21.960 --> 0:05:25.000 So maybe we've got a Velveolin moment? Can we does 0:05:25.080 --> 0:05:29.080 Velveolan sponsor us under the under the star under the 0:05:29.080 --> 0:05:33.320 Texico sign something like that? But but but that was 0:05:33.360 --> 0:05:36.600 a Midwest moment, folks, excuse me there. But the basic 0:05:36.680 --> 0:05:38.320 idea we got to get the oil in the engine. 0:05:38.360 --> 0:05:40.359 How many rate increases does it take to get the 0:05:40.360 --> 0:05:43.320 oil in the engine? I think you have to get 0:05:43.360 --> 0:05:45.839 to a more normal level. I also think the balance 0:05:45.839 --> 0:05:47.440 sheet has something to do with it. So I don't 0:05:47.440 --> 0:05:49.400 have the answer for that because I think it's a 0:05:49.440 --> 0:05:51.159 mix of the two. But I do think the FED 0:05:51.240 --> 0:05:54.080 is moving in the right direction, which is towards higher 0:05:54.080 --> 0:05:57.599 FED funds rates, towards normalizing the balance sheet. Uh. And 0:05:57.640 --> 0:05:59.039 I would say that, you know, one of the things 0:05:59.040 --> 0:06:01.160 that concerns me is this idea that the balance sheet 0:06:01.200 --> 0:06:05.400 is going to remain excessively enlarged for an extraordinary period 0:06:05.440 --> 0:06:07.520 of time and that we don't have to return to 0:06:07.600 --> 0:06:10.640 kind of a more historically normal size balance sheet. I 0:06:10.640 --> 0:06:12.200 think in the end, the FED will have to retreat 0:06:12.200 --> 0:06:14.880 from that and move back towards a more normal balance sheet, 0:06:14.880 --> 0:06:17.120 which is somewhere in the order of six to seven 0:06:17.160 --> 0:06:19.000 percent nominally. How long is it gonna take? Because when 0:06:19.000 --> 0:06:22.320 I spoke with the President Caplain of the Dallas FED, 0:06:22.560 --> 0:06:24.159 he kept moving his hand. For those of you who 0:06:24.240 --> 0:06:26.840 can see this on radio, I'm moving my hand down, 0:06:27.080 --> 0:06:28.800 and he was moving it out years. I mean, he 0:06:28.880 --> 0:06:31.120 was on the edge of decades. Are you suggesting this 0:06:31.160 --> 0:06:33.640 is all gonna happen a lot quicker? I think it's 0:06:33.640 --> 0:06:36.080 going to take a decade. On the balance sheet, uh. 0:06:36.120 --> 0:06:38.680 And on interest rates, I'm not sure we'll have a 0:06:38.720 --> 0:06:41.960 decade before the next before the next downturn. But I 0:06:42.000 --> 0:06:43.920 do think we've got a few years, and I think 0:06:43.920 --> 0:06:46.400 by the time we get there, we will have rates 0:06:46.440 --> 0:06:49.800 in a more reasonable place. What what does what does 0:06:49.839 --> 0:06:51.680 the low I want to do? The MetLife angle, the 0:06:51.720 --> 0:06:54.320 institutional angle here in our next section, but in this section, 0:06:54.720 --> 0:06:57.279 what does this world we're in that we've created do 0:06:58.080 --> 0:07:01.560 for investors and savers mean? Forget about somebody who wants 0:07:01.600 --> 0:07:04.000 to buy six thousand shares of Amazon to make a 0:07:04.080 --> 0:07:07.760 quick hitoff whole foods to mom and pop out there, 0:07:07.800 --> 0:07:10.440 what does this environment mean? Well, for people who are 0:07:10.480 --> 0:07:14.120 approaching retirement, they're saving more. And so this is something 0:07:14.160 --> 0:07:16.520 that we've looked at a lot. If you look at 0:07:16.520 --> 0:07:20.600 ten year yields versus savings rates, the relationship is not linear, 0:07:21.160 --> 0:07:24.400 meaning that below a certain interest rate, people save more, 0:07:24.480 --> 0:07:27.160 and above a certain interest rate people save more. When 0:07:27.160 --> 0:07:29.320 it's above it, they're saving because they think the economy 0:07:29.400 --> 0:07:32.320 is going to go into recession. There's this fear out there. 0:07:32.320 --> 0:07:34.480 Below a certain interest rate, there the fear is that 0:07:34.520 --> 0:07:35.840 they're not going to be able to have enough for 0:07:35.960 --> 0:07:39.280 retirement to actually meet their their income needs and retirement, 0:07:39.360 --> 0:07:41.680 so they save more. So in order to kind of 0:07:41.680 --> 0:07:44.320 get people to save less and to boost economic spending 0:07:44.320 --> 0:07:46.720 in the economy, you actually need to move rates up. 0:07:46.840 --> 0:07:48.960 Well maybe that's a paradox and the paradox to take 0:07:49.000 --> 0:07:51.840 it back to econ one oh one. But there's a 0:07:51.880 --> 0:07:55.240 lot of ducks. But how how many rate increases are 0:07:55.280 --> 0:08:00.880 we too normal? Within this really interesting general discussion. I 0:08:00.880 --> 0:08:03.200 mean I would say three. I think he would be 0:08:03.200 --> 0:08:06.600 on the verge of normal with another three or so. Yes. Uh, 0:08:06.640 --> 0:08:10.720 you know historically the FED saw anything below one is abnormal. Uh, 0:08:10.720 --> 0:08:14.160 and then obviously the crisis happened, they went to zero. Um. 0:08:14.280 --> 0:08:17.200 I think once you're above one, you're in a better spot. Uh. 0:08:17.240 --> 0:08:19.400 You know, something on the closer to three in my 0:08:19.520 --> 0:08:22.640 mind is better than two. But I'll take two and 0:08:22.760 --> 0:08:25.000 kind of pinch. You know what's great Aboutdrew maddisas he 0:08:25.040 --> 0:08:27.880 brings the entire entourage from MetLife with him, including a 0:08:27.920 --> 0:08:31.240 general council. He's gonna need his general counsel. And the 0:08:31.280 --> 0:08:34.760 next section as we talk about UH insurance portfolios and 0:08:34.800 --> 0:08:37.560 actual reial assumption, something I know he spends a lot 0:08:37.600 --> 0:08:39.559 of time on as well. We got a little geeki 0:08:39.640 --> 0:08:43.480 there for Global wall Streets where with Drew Maddis of MetLife, 0:08:43.920 --> 0:08:47.920 drew insurance companies of all flavors, including his venerable is 0:08:47.960 --> 0:08:52.040 the Metropolitan Life Insurance Company have to worry about meeting 0:08:52.120 --> 0:08:57.400 the actuarial assumption that has been challenging since his financial 0:08:57.400 --> 0:08:59.880 crisis began. Is there light at the end of at 0:09:00.040 --> 0:09:03.600 the extraally real tunnel? Well, I mean, you know, with 0:09:04.280 --> 0:09:06.319 you know, we haven't had rates move up to the 0:09:06.360 --> 0:09:08.200 way we would have liked. My forecast for the end 0:09:08.200 --> 0:09:10.959 of year tenure is to seventy five. I still think 0:09:11.000 --> 0:09:13.200 we can get there. You know, if you look at 0:09:13.200 --> 0:09:15.360 it from a kind of a monthly move perspective, you're 0:09:15.360 --> 0:09:18.920 looking at eight basis points a month, which is not unreasonable, 0:09:19.000 --> 0:09:21.120 particularly given some of the moves we've seen around some 0:09:21.120 --> 0:09:24.760 of the bigger events. Uh. But yes, it's challenging, and 0:09:24.760 --> 0:09:26.560 that's why we have, uh, you know, we have a 0:09:26.720 --> 0:09:29.840 very solid um team. We have hundreds of people met 0:09:29.880 --> 0:09:33.120 Life Investment Management working uh to kind of you know, 0:09:33.200 --> 0:09:35.520 hit our hit our targets. Uh, and we have a 0:09:35.559 --> 0:09:37.880 lot of expertise in areas that that kind of enable 0:09:37.960 --> 0:09:40.199 us to invest in places you know that that can 0:09:40.240 --> 0:09:44.360 help us as well. So um, you know, uh, you know, 0:09:44.520 --> 0:09:47.040 higher rates would be helpful, but you know, we can 0:09:47.080 --> 0:09:49.760 we can get through without them, our bonds and stocks 0:09:49.960 --> 0:09:57.280 correlated right now? Uh? You know, um, yes, but I 0:09:57.600 --> 0:10:00.800 think you know, fundamentals are actually now beginning to be 0:10:00.920 --> 0:10:03.480 the driver. So one of the things we've created is 0:10:03.840 --> 0:10:08.320 as a proprietary index of um of fundamental activity. And 0:10:08.320 --> 0:10:10.760 what we see is that fundamentals now are driving things, 0:10:10.880 --> 0:10:14.520 not kind of the shock factors anymore. Uh. And so 0:10:14.559 --> 0:10:16.960 we watch this index that we've created to give us 0:10:17.000 --> 0:10:19.600 a sense of whether that's beginning to move or not. Uh. 0:10:19.640 --> 0:10:23.400 And right now, at least our fundamental index is telling 0:10:23.480 --> 0:10:25.440 us that fundamentals are driving things. And then we have 0:10:25.600 --> 0:10:30.880 actually underlying fundamental indicase for credit, real state, uh, the consumer, 0:10:31.280 --> 0:10:33.800 and all of those are suggesting pretty much a goldilocks 0:10:33.880 --> 0:10:35.800 not too hot, not too cold environment. I like the 0:10:35.800 --> 0:10:38.600 goldilocks ideas of goldilocks in the oil patch. I meant 0:10:39.559 --> 0:10:43.600 three seven percent Bob Moon saying it's two move. We 0:10:43.640 --> 0:10:46.000 had to readjust from a hundred down to forty at 0:10:46.040 --> 0:10:50.480 one point, I would suggest we cleared most of the market, right. Uh. 0:10:50.520 --> 0:10:53.280 You know, I think so, I think you know, the 0:10:53.400 --> 0:10:55.960 you know, the the key really for me when when 0:10:55.960 --> 0:10:58.920 we think about oil, uh, in the context of the 0:10:59.000 --> 0:11:03.880 U S at least is it um because the US 0:11:03.920 --> 0:11:06.679 has become this kind of swing producer. Whatever we thought 0:11:06.720 --> 0:11:09.120 the peak oil price was that you could get to 0:11:09.440 --> 0:11:12.360 maybe ten or fifteen years ago, that number has got 0:11:12.360 --> 0:11:14.200 to be lower. And so when you look at the 0:11:14.280 --> 0:11:16.959 average price that you can expect over the next ten years, 0:11:17.440 --> 0:11:21.079 it's something divided by two, right, and so uh, it's 0:11:21.320 --> 0:11:23.560 you know, it's lower than it would have been if 0:11:23.600 --> 0:11:26.440 you asked the same question fifteen or twenty years ago. 0:11:26.840 --> 0:11:29.360 And for me, that's the key feature of kind of 0:11:29.400 --> 0:11:32.040 the U S oil revolution. Dumas thank you so much, 0:11:32.040 --> 0:11:36.600 with met Life, their chief market strategist. It's a huge responsibility, 0:11:36.640 --> 0:11:40.840 folks to try to gauge equities, bonds, currencies, commodities and 0:11:41.040 --> 0:11:45.600 economics across the liabilities of any given insurance company. There, 0:11:45.600 --> 0:11:49.680 what short term it that life? Five years? We have 0:11:49.760 --> 0:11:52.880 a very long run perspective. Come on, give me an answer. 0:11:52.960 --> 0:11:55.959 What short term? Ten years? You're trying to get on fired? Yeah, 0:11:56.040 --> 0:11:58.840 well we're not. The General Council's hanging on every syllable. 0:11:59.720 --> 0:12:02.000 Five of years. I mean, seriously, five years a short 0:12:02.120 --> 0:12:05.719 term for an insurance company. We we make investments, We 0:12:05.800 --> 0:12:08.400 are a liability driven investor, and that means we make 0:12:08.440 --> 0:12:10.560 investments for the long term. There he is with the 0:12:10.640 --> 0:12:13.800 c y a answer. Drew Maddis of MetLife, thank you 0:12:13.920 --> 0:12:31.240 so much worldwide. This is Bloomberg right now with as 0:12:31.240 --> 0:12:33.320 William Priest for a brief time, as we await a 0:12:33.320 --> 0:12:37.280 conversation with a Secretary of Treasury. William Priest wrote an 0:12:37.480 --> 0:12:40.880 iconic book. It was instantly classic and has stayed that 0:12:40.880 --> 0:12:44.640 that's hard to do on shareholder yield. A number of 0:12:44.840 --> 0:12:48.240 years ago. This would be the measurement and cash flow, 0:12:48.800 --> 0:12:52.040 which would we see more of in the next five 0:12:52.160 --> 0:12:56.240 or ten years, dividend growth or share buybacks, which has 0:12:56.280 --> 0:13:00.000 the high ground now in terms of use of cash. 0:13:00.080 --> 0:13:02.160 I think what's gonna happen is, first of all, you 0:13:02.160 --> 0:13:04.200 have to take one step back and say should I 0:13:04.240 --> 0:13:07.960 reinvest or should I return capital? What's critical to that 0:13:08.240 --> 0:13:10.480 is can you earn a premium over your cost of capital? 0:13:10.520 --> 0:13:13.360 If you can indeed reinvest at a premium over your 0:13:13.480 --> 0:13:16.640 cost of capital, you should reinvest or require But for 0:13:16.720 --> 0:13:21.120 many companies, particularly large ones, that's almost impossible. So they 0:13:21.120 --> 0:13:24.120 will return much of that cash to the owners of 0:13:24.120 --> 0:13:26.079 the business, and they will do that either through cash 0:13:26.160 --> 0:13:30.160 buy backs or debt paid down. From a tax standpoint, 0:13:30.240 --> 0:13:33.240 buy backs are favorite. Wall Street doesn't always treat buy 0:13:33.280 --> 0:13:37.760 backs with the same value. It depends on the reason. 0:13:37.920 --> 0:13:40.120 If the reason for the buy back is to get 0:13:40.160 --> 0:13:42.760 management paid because earnings for share or hire and they 0:13:42.800 --> 0:13:45.839 get a bonus, that's a misuse of cash flow. But 0:13:46.200 --> 0:13:49.320 in theory they are identical. So and and if you 0:13:49.320 --> 0:13:50.880 don't want to talk about this bill, we know each 0:13:50.880 --> 0:13:53.199 other so well that if you want to step aside 0:13:53.200 --> 0:13:58.920 on this, IBM is financial engineering. They basically did William 0:13:59.000 --> 0:14:01.679 Priest one oh one the first four pages of their 0:14:01.720 --> 0:14:05.040 annual report for years and years and years and years, 0:14:05.520 --> 0:14:09.000 and then the show game broke? Did you own IBM? 0:14:09.160 --> 0:14:12.560 As they were financially engineering their way to oblivion. We 0:14:12.600 --> 0:14:15.600 have been negative on IBM for years. They had an 0:14:15.679 --> 0:14:19.120 up quarter. Why have been negative? No revenue growth? No 0:14:19.240 --> 0:14:22.920 revenue growth from umpty ump quarters. Uh, there are too 0:14:22.920 --> 0:14:26.280 many games you can play with a counting, and many 0:14:26.360 --> 0:14:30.160 many years ago, it was uh, Louis when lou rock 0:14:30.240 --> 0:14:32.640 Hiser Show was on, LOUI asked me a question. Because 0:14:32.640 --> 0:14:35.240 I'm I'm a CPO. My background includes that at one 0:14:35.280 --> 0:14:38.520 point I was an accountant. We won't hold that against you. Well, 0:14:38.520 --> 0:14:40.200 he asked me a question. It was one of the 0:14:40.200 --> 0:14:43.400 great straight lines I was ever given. Uh And he said, Bill, 0:14:43.520 --> 0:14:45.120 being an accountant and being a c p A is 0:14:45.120 --> 0:14:47.760 a helpful and being a security analyst or portfolio management. 0:14:48.160 --> 0:14:50.240 And I basically said, well, Lou, you know, accounting is 0:14:50.280 --> 0:14:53.000 a lot like a bathing suit. What it reveals is interesting, 0:14:53.000 --> 0:14:56.200 but what it conceals is vital. And I think accounting 0:14:56.440 --> 0:15:00.360 is a way to obfuscate truth. And it's gotten worse 0:15:00.480 --> 0:15:04.320 and worse as you've gone through time. These sensors just 0:15:04.320 --> 0:15:08.000 gagged me here at surveillance. So I can't respond, okay 0:15:08.080 --> 0:15:12.040 to that. Mr Rukeyser could respond to that, and in 0:15:12.080 --> 0:15:15.560 the modern day even Luu Keiser couldn't respond to the 0:15:15.880 --> 0:15:20.160 bathing suit priest analogy? Am I doing? Okay? John? Yeah, 0:15:21.320 --> 0:15:24.440 that whole really you got the shovel on. Think the 0:15:24.480 --> 0:15:27.800 whole ever deeper? Okay? But IBM, seriously here you look 0:15:27.800 --> 0:15:30.480 at the IBM pages. Everybody thinks it's c P A 0:15:30.560 --> 0:15:34.240 c F A one oh one. And you're saying the 0:15:34.280 --> 0:15:38.520 revenue growth isn't there? Amazon has revenue growth than God is. 0:15:38.600 --> 0:15:42.000 Mr Bezos did he read William priest, I have no idea. 0:15:42.240 --> 0:15:44.680 Why not Why can't you look at why can't you? 0:15:44.680 --> 0:15:47.920 You should? Well, well, who do we have on yesterday? Uh? 0:15:48.040 --> 0:15:52.000 That was wonderful about this. Uh David Rubinstein saying he 0:15:52.120 --> 0:15:54.320 made the same mistake you made, and you know, the 0:15:54.400 --> 0:15:57.640 underestimated Bezos she got revenue growth of Amazon. Does that 0:15:57.920 --> 0:16:00.920 count towards shareholder yield? I think at the end of 0:16:00.960 --> 0:16:04.440 the day, you're going to look at does the entity 0:16:04.560 --> 0:16:10.040 generate cash flow? All businesses are driven ultimately by their 0:16:10.040 --> 0:16:13.760 ability to generate cash flow. Now, we have a definition 0:16:13.800 --> 0:16:19.560 for free cash flow, which essentially indicates that the definition 0:16:19.560 --> 0:16:22.480 that we use, it's the cash available for distribution to 0:16:22.600 --> 0:16:27.360 shareholders after all planned capitals, adpenditures, and all cash taxes. 0:16:27.920 --> 0:16:31.200 So what Bezos has done is essentially say, you know what, 0:16:31.560 --> 0:16:34.240 I can reinvest my capital at a higher than my 0:16:34.360 --> 0:16:36.640 cost of capital, which has been true in this era 0:16:36.760 --> 0:16:39.200 we've been in where the cost of capital is following 0:16:39.280 --> 0:16:41.840 year after year after year. So this is the money question, folks. 0:16:41.840 --> 0:16:46.160 This is critically important as well. This is so important. 0:16:46.800 --> 0:16:50.600 He's got a game going and like Brian Roberts ad Comcast, 0:16:51.080 --> 0:16:56.960 someday you shift Comcast brilliantly shifted from CAPEX development over 0:16:57.000 --> 0:17:00.240 to use the cash to shareholders to great advantage. Do 0:17:00.320 --> 0:17:05.080 you believe Jeff Bezos can shift from revenue high return 0:17:05.160 --> 0:17:08.720 new businesses to a more mature business X number of 0:17:08.800 --> 0:17:11.800 years down the road. I jury is out, but I 0:17:11.880 --> 0:17:14.640 would say probably can. But right now he just looks 0:17:14.680 --> 0:17:18.960 at He is a major disruptor in business today. You 0:17:19.040 --> 0:17:21.120 don't want to be on the other side of what 0:17:21.160 --> 0:17:30.359 he's doing. It's too disruptive. Brunt you by Bank of 0:17:30.400 --> 0:17:35.000 America Mary Lynch. With virtual reality, virtually everything will change. 0:17:35.480 --> 0:17:40.040 Discover opportunities in a transforming world be of a mL 0:17:40.119 --> 0:17:45.720 dot Com, slash VR, Mary Lynch, Pierced Fenner and Smith Incorporated. 0:17:51.000 --> 0:17:52.800 Welcome to our viewers around the world, our listeners on 0:17:52.800 --> 0:17:54.680 Bloomberg Grady as well. I'm joined by the seventy seventh 0:17:54.720 --> 0:17:57.680 Secretary of the Treasury, Steve Monition. Here uh the Gaylord 0:17:57.680 --> 0:18:00.479 Resort a South Washington. See. Thank you very much. Thank you. 0:18:00.720 --> 0:18:03.639 You become familiar with the idiosyncrasies of this town, the 0:18:03.680 --> 0:18:06.000 strange customs you're about to become familiar with another, that 0:18:06.119 --> 0:18:09.480 is the semi regular debate about the debt limit. When 0:18:09.480 --> 0:18:11.359 are we going to get it. How how soon is 0:18:11.400 --> 0:18:13.680 that debate going to happen? Follow Let me just say 0:18:13.680 --> 0:18:16.240 we're already having the discussion on it, and I don't 0:18:16.240 --> 0:18:18.600 think it's a debate. Let me be clear. I think 0:18:18.640 --> 0:18:22.720 everybody realizes we need to raise the debt ceiling. The 0:18:22.760 --> 0:18:25.600 government debt is the most important credit in the world 0:18:25.680 --> 0:18:27.800 and where the reserve currency. So this is just a 0:18:27.800 --> 0:18:30.879 little bit of a process. That's the government process of 0:18:31.000 --> 0:18:33.000 how we go about and one of the things I 0:18:33.040 --> 0:18:35.960 think we think about over time is changing this process. 0:18:36.000 --> 0:18:38.760 It should be once we've spent the money that the 0:18:38.800 --> 0:18:41.879 debt limit goes along with the commitment to spend. Is 0:18:41.920 --> 0:18:43.840 it the beginning of September when you think we we 0:18:43.920 --> 0:18:45.520 hit that limit? Is it later in the month. Do 0:18:45.560 --> 0:18:48.040 you have a specific date at this point? We constantly 0:18:48.080 --> 0:18:50.920 review these numbers internally. UM, I don't want to give 0:18:50.960 --> 0:18:54.840 exact projections. As I've said, I've encouraged Congress to act 0:18:55.000 --> 0:18:57.960 before they leave for the summer, but we do have 0:18:58.080 --> 0:19:00.359 enough money to get us through September and case they 0:19:00.400 --> 0:19:02.760 don't back in January. Before you were confirmed, you spoke 0:19:02.760 --> 0:19:05.639 against prioritization of debt payments. Now that you've been on 0:19:05.680 --> 0:19:07.360 the job, You're familiar with the office and the way 0:19:07.359 --> 0:19:10.440 things work here in Washington. Do you still feel that way? 0:19:10.440 --> 0:19:13.040 Are you against prioritization? Let me just say I think 0:19:13.359 --> 0:19:16.560 that the Congress should raise the debt ceiling so that 0:19:16.600 --> 0:19:21.119 we don't have to talk about prioritization. That's really the focus. 0:19:21.200 --> 0:19:24.520 We should be paying our bills when they're due, and 0:19:24.560 --> 0:19:27.440 we shouldn't put the government at risk. There hasn't been 0:19:27.440 --> 0:19:29.760 what I would call a course of consensus around this issue. 0:19:29.800 --> 0:19:31.840 And a few others within the administration. There were some 0:19:32.080 --> 0:19:34.240 of your colleagues who are calling for a clean raise 0:19:34.280 --> 0:19:35.760 of the debt limit, through others who think it should 0:19:35.760 --> 0:19:38.280 be tethered to spending cuts. What's it going to take 0:19:38.320 --> 0:19:40.680 to get to unanimity on this issue? And others within 0:19:40.720 --> 0:19:43.399 the within the administration. Well, I think we have a 0:19:43.400 --> 0:19:46.800 general understanding within the administration and we're clear on that, 0:19:46.840 --> 0:19:48.879 and we're working with Congress. This is really up to 0:19:48.960 --> 0:19:52.440 Congress to raise the debt limit, and again it's something 0:19:52.480 --> 0:19:55.359 I'm confident that they'll do. Before we get to a point. 0:19:55.400 --> 0:19:58.080 That's critical on the issue of unanimity is the White 0:19:58.119 --> 0:19:59.880 House saying there is a date by which we will 0:20:00.119 --> 0:20:03.040 a tax reform proposal from the White House. Are you 0:20:03.080 --> 0:20:05.320 speaking with one voice on that issue? Well, I think 0:20:05.320 --> 0:20:08.920 we've been pretty consistent and saying we're working every week 0:20:09.760 --> 0:20:12.480 very closely with the House and the Senate to have 0:20:12.560 --> 0:20:15.880 a joint plan when we come out, and the idea 0:20:16.080 --> 0:20:18.800 is to get us all on the same page. So 0:20:18.840 --> 0:20:22.120 when we release the combined plan, it's gonna get passed, 0:20:22.160 --> 0:20:23.679 and it's going to get passed by the House and 0:20:23.680 --> 0:20:25.840 the Senate and the President will sign it. And it's 0:20:25.880 --> 0:20:28.760 our focus to get that done this year. It's critical 0:20:28.800 --> 0:20:30.840 to the economy and we're working every day to get 0:20:30.920 --> 0:20:34.160 that done. What's your relationship like with lawmakers on Capitol Hill? 0:20:34.200 --> 0:20:35.919 How have you found that being new to watching, being 0:20:35.960 --> 0:20:38.600 new to this job. I think we're very good relationships 0:20:38.720 --> 0:20:41.520 and uh, I think it's a team effort. I think 0:20:41.520 --> 0:20:44.120 the good news is we understand what we want to do. 0:20:44.440 --> 0:20:47.320 We want to get growth in this country. We want 0:20:47.320 --> 0:20:50.359 to have tax reform. It hasn't been done in thirty years. 0:20:50.720 --> 0:20:53.840 It's critical. We want to simplify personal taxes, we want 0:20:53.840 --> 0:20:56.080 to create a middle income tax cut, and we want 0:20:56.080 --> 0:20:58.639 to make business taxes competitive. We have one of the 0:20:58.720 --> 0:21:01.840 highest tax rates in the world, old with worldwide taxes 0:21:02.320 --> 0:21:06.040 and deferral, which leads to trillions of dollars left off shore. 0:21:06.480 --> 0:21:08.600 You bring up growth. I must say that's the thing 0:21:08.600 --> 0:21:10.480 of this conference. I talked to maybe a half dozen 0:21:10.480 --> 0:21:13.840 economists to every day, and almost without exception, they disagree 0:21:13.840 --> 0:21:15.879 with the projections that you have that we can attain 0:21:15.920 --> 0:21:17.720 three or four percent and growth in the near tow 0:21:17.800 --> 0:21:21.480 to medium term. What are you seeing that they're not? Well? Again, 0:21:21.480 --> 0:21:23.560 I just want to put this in perspective. When Obama 0:21:23.640 --> 0:21:27.960 came into office, he was projecting over four economic growth. 0:21:28.040 --> 0:21:30.040 We obviously haven't tag necked. We've had one of the 0:21:30.080 --> 0:21:34.159 lowest growth rates in modern history, and we're just not 0:21:34.200 --> 0:21:36.680 going to be satisfied with two percent growth. We're gonna 0:21:36.720 --> 0:21:39.439 work every day in this administration and do everything we 0:21:39.520 --> 0:21:44.359