1 00:00:10,039 --> 00:00:13,720 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Always 2 00:00:14,000 --> 00:00:17,560 Speaker 1: with Michael McKee. Daily we bring you insight from the 3 00:00:17,560 --> 00:00:22,800 Speaker 1: best in economics, finance, investment, and international relations. Find Bloomberg 4 00:00:22,840 --> 00:00:27,240 Speaker 1: Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and of course, 5 00:00:27,760 --> 00:00:33,000 Speaker 1: on the Bloomberg. It is a tough time to make 6 00:00:33,040 --> 00:00:36,760 Speaker 1: money in financials. Sally Crocheck was charged with doing that 7 00:00:36,840 --> 00:00:40,200 Speaker 1: for years and years in her career at various banks 8 00:00:40,280 --> 00:00:42,880 Speaker 1: on Wall Street. Now she is the CEO, of course 9 00:00:42,920 --> 00:00:45,199 Speaker 1: of Lvest And I want to talk about elves in 10 00:00:45,280 --> 00:00:47,199 Speaker 1: just a moment, but let me just ask you from 11 00:00:47,200 --> 00:00:50,640 Speaker 1: your background, as long as we're talking about banks, um 12 00:00:50,960 --> 00:00:55,000 Speaker 1: has banking changed significantly and is it at a point 13 00:00:55,000 --> 00:00:57,920 Speaker 1: now where you can't value banks the same way because 14 00:00:57,920 --> 00:01:02,040 Speaker 1: of regulation? Will you tell me what is the normal 15 00:01:02,200 --> 00:01:07,720 Speaker 1: return on equity through a cycle of there's anything question though, 16 00:01:07,760 --> 00:01:10,880 Speaker 1: because in the in the in the ats, I still 17 00:01:10,880 --> 00:01:14,000 Speaker 1: have trouble with that is for a decade. But because 18 00:01:14,000 --> 00:01:16,600 Speaker 1: of the outside risk the banks took then the return 19 00:01:16,640 --> 00:01:19,759 Speaker 1: on equity was much greater. So when you say normal, 20 00:01:19,920 --> 00:01:24,240 Speaker 1: no no no, no, no no no, the peak return 21 00:01:24,280 --> 00:01:32,120 Speaker 1: on equity was higher. But oh the peak was great, 22 00:01:32,200 --> 00:01:34,440 Speaker 1: and everybody used to look at these banks and say, 23 00:01:34,480 --> 00:01:39,200 Speaker 1: look the return or twice that's no, that was peak 24 00:01:41,160 --> 00:01:43,600 Speaker 1: more than wiped it out. So I don't know, I've 25 00:01:43,640 --> 00:01:45,319 Speaker 1: got to go back and do this. But I'm actually 26 00:01:45,360 --> 00:01:48,240 Speaker 1: not a bank analyst anymore. But at some point, just 27 00:01:48,360 --> 00:01:51,120 Speaker 1: for fun, when's the last time the banks through a 28 00:01:51,200 --> 00:01:54,040 Speaker 1: cycle earned their cost to capital. It's a long time ago, 29 00:01:54,680 --> 00:01:56,840 Speaker 1: a long time ago. And so now we're sort of 30 00:01:56,840 --> 00:01:59,400 Speaker 1: shaking this out. What is that normal r O E. 31 00:02:00,280 --> 00:02:04,120 Speaker 1: Nobody knows. And that's why these things have been just luck, 32 00:02:05,200 --> 00:02:10,840 Speaker 1: which is obviously how do we quote that right? I 33 00:02:10,840 --> 00:02:13,040 Speaker 1: mean people people look at the city group and say, oh, 34 00:02:13,080 --> 00:02:15,360 Speaker 1: look cities back at forty Finally know that's four dollars 35 00:02:15,400 --> 00:02:18,280 Speaker 1: and fifty cents because it did the ten for one reverse. 36 00:02:18,400 --> 00:02:21,720 Speaker 1: These things have been terrible for a long time as stocks. 37 00:02:21,880 --> 00:02:26,160 Speaker 1: What about that financial industry in general? Uh, it's it 38 00:02:26,240 --> 00:02:28,560 Speaker 1: has changed significantly. A lot of the people that you 39 00:02:28,680 --> 00:02:31,320 Speaker 1: knew don't work on Wall Street there in Connecticut now 40 00:02:31,440 --> 00:02:34,840 Speaker 1: you know, Uh, has it changed for the better or 41 00:02:34,840 --> 00:02:37,960 Speaker 1: has it just changed? First of all, it's it's changed 42 00:02:38,000 --> 00:02:40,640 Speaker 1: so on a couple of metrics. Tom and I retalkment. 43 00:02:40,680 --> 00:02:44,400 Speaker 1: This earlier diversity, the skin color and gender of people 44 00:02:44,440 --> 00:02:48,200 Speaker 1: work there. It's gone backwards, so it's become less inclusive 45 00:02:48,480 --> 00:02:53,359 Speaker 1: over time. UM. Some of the riskier businesses have been 46 00:02:53,400 --> 00:02:55,560 Speaker 1: reined in. We just don't know if it's enough, frankly, 47 00:02:55,680 --> 00:02:58,720 Speaker 1: till we go through the next downturn. And then other businesses. 48 00:02:58,760 --> 00:03:01,160 Speaker 1: Some of the great business is the ones that i 49 00:03:01,520 --> 00:03:04,079 Speaker 1: UM was got to be involved in when I was there, 50 00:03:04,120 --> 00:03:06,720 Speaker 1: the wealth management businesses. They're under siege from a lot 51 00:03:06,720 --> 00:03:09,000 Speaker 1: of different areas, so it's not out there. So this 52 00:03:09,040 --> 00:03:12,359 Speaker 1: goes into what you're doing with LS Time Warner to 53 00:03:12,520 --> 00:03:16,160 Speaker 1: own ten per cent of Hulu and we'll get experts 54 00:03:16,160 --> 00:03:19,040 Speaker 1: on it. We'll talk about digital television and the new 55 00:03:19,080 --> 00:03:22,240 Speaker 1: distribution of TV. This goes to the heart of what 56 00:03:22,280 --> 00:03:24,840 Speaker 1: you've done the last three years, which is the new 57 00:03:25,120 --> 00:03:29,760 Speaker 1: distribution of financial advice to people. And this goes into 58 00:03:29,800 --> 00:03:33,360 Speaker 1: the new digital banking and all is the world of 59 00:03:33,400 --> 00:03:36,000 Speaker 1: finance in America? Are going to be totally different in 60 00:03:36,120 --> 00:03:38,520 Speaker 1: ten years or are there still going to be four 61 00:03:38,560 --> 00:03:41,600 Speaker 1: branches on every four corners in New York City and 62 00:03:41,640 --> 00:03:45,440 Speaker 1: sort of business as usual with bolt On Digital or 63 00:03:45,480 --> 00:03:49,080 Speaker 1: does it subsume the old Such a great question, and 64 00:03:49,240 --> 00:03:53,040 Speaker 1: it's going to change quite a bit um over our 65 00:03:53,040 --> 00:03:55,320 Speaker 1: weather's next ten years or twenty years. We all know 66 00:03:55,400 --> 00:03:58,200 Speaker 1: branches are going to be gone at some point. You know, 67 00:03:58,240 --> 00:04:01,160 Speaker 1: my old business, the financial advisor business. I was with 68 00:04:01,200 --> 00:04:03,960 Speaker 1: a brokerage firm not so long ago that told me 69 00:04:04,040 --> 00:04:06,960 Speaker 1: they have more advisors over the age of eighty than 70 00:04:07,080 --> 00:04:09,600 Speaker 1: under the age of thirty. I will let that sink in. 71 00:04:10,360 --> 00:04:13,960 Speaker 1: And so you know, and it's tough to innovate tom 72 00:04:13,960 --> 00:04:16,680 Speaker 1: in those places having been there, because of the regulations, 73 00:04:16,680 --> 00:04:19,920 Speaker 1: because the processes, because of the quarterly earnings, which is 74 00:04:19,960 --> 00:04:23,080 Speaker 1: why a reason there are big opportunities that are available. 75 00:04:23,120 --> 00:04:25,320 Speaker 1: The one that we saw I saw with l VEST 76 00:04:25,800 --> 00:04:27,960 Speaker 1: is that women don't invest in nearly the same extent 77 00:04:28,000 --> 00:04:30,719 Speaker 1: that men do. This may or may not be related 78 00:04:30,720 --> 00:04:32,560 Speaker 1: to the fact that Wall Street tends to be, you know, 79 00:04:33,160 --> 00:04:37,679 Speaker 1: very male, and it cost women tens of thousands, hundreds 80 00:04:37,680 --> 00:04:40,240 Speaker 1: of thousands, millions of dollars over the course of their lives. 81 00:04:40,560 --> 00:04:43,000 Speaker 1: And we're not solving this by putting a bunch of 82 00:04:43,000 --> 00:04:45,840 Speaker 1: offices through the country. We're solving it in a digital way, 83 00:04:45,839 --> 00:04:49,039 Speaker 1: which women are really looking for right now. What is 84 00:04:49,040 --> 00:04:53,520 Speaker 1: it that that attracts them. And I'm thinking of I 85 00:04:53,560 --> 00:04:55,080 Speaker 1: know a lot of women who don't want to go 86 00:04:55,120 --> 00:04:57,240 Speaker 1: to a male doctor. So there are a lot of 87 00:04:57,240 --> 00:04:59,160 Speaker 1: women doctors. But that hasn't put the mails out of 88 00:04:59,160 --> 00:05:03,520 Speaker 1: business and every woman goes you know, so what are 89 00:05:03,520 --> 00:05:06,240 Speaker 1: they looking for that you provide other than okay, this 90 00:05:06,320 --> 00:05:09,159 Speaker 1: is a woman's platform. Well, I'll tell you. Um it 91 00:05:09,279 --> 00:05:12,559 Speaker 1: starts with and this is what the research says that women. 92 00:05:12,600 --> 00:05:14,440 Speaker 1: There are lots of financial advisors who do a great 93 00:05:14,480 --> 00:05:17,719 Speaker 1: job for women. Women report overall that they feel patronized, 94 00:05:18,120 --> 00:05:20,479 Speaker 1: that they look at Wall Street and they don't see 95 00:05:20,760 --> 00:05:23,000 Speaker 1: something that resonates with them. I mean, think about it. 96 00:05:23,360 --> 00:05:26,680 Speaker 1: The language of the industry's outperformed, beat the market, pick 97 00:05:26,760 --> 00:05:30,159 Speaker 1: the winner. The symbol is a bull, and there's not 98 00:05:30,240 --> 00:05:31,760 Speaker 1: a lot of women who look at those war in 99 00:05:31,839 --> 00:05:34,359 Speaker 1: sports analogies and that bull and say that brand is so. 100 00:05:35,680 --> 00:05:39,000 Speaker 1: On top of that, there's some super important things. Women 101 00:05:39,200 --> 00:05:42,440 Speaker 1: live longer than men, women's salaries peak sooner than men, 102 00:05:42,680 --> 00:05:44,720 Speaker 1: and women tend to be more risk aware. They want 103 00:05:44,760 --> 00:05:47,760 Speaker 1: to understand risk more and Wall Street hasn't an investing 104 00:05:47,760 --> 00:05:50,320 Speaker 1: hasn't been doing that for them. So we're doing that 105 00:05:50,360 --> 00:05:53,680 Speaker 1: in a digital platform where we take away the hey, 106 00:05:53,760 --> 00:05:56,200 Speaker 1: you want to pick a large cap value mutual fund 107 00:05:56,279 --> 00:05:59,760 Speaker 1: versus a small cap growth ETF and instead the conversation 108 00:05:59,839 --> 00:06:01,839 Speaker 1: we have with her online is do you want to 109 00:06:01,839 --> 00:06:04,120 Speaker 1: buy a house? Do you want to retire? Well, you 110 00:06:04,120 --> 00:06:06,280 Speaker 1: want to start a business. Here's how you what's your 111 00:06:06,320 --> 00:06:11,640 Speaker 1: advice to James Diamond to drive forward chase digital? Because 112 00:06:11,680 --> 00:06:15,679 Speaker 1: my experience is all the old guard say. You know what, 113 00:06:15,760 --> 00:06:19,920 Speaker 1: Our customers love digital, whatever it is, whether it's La 114 00:06:19,960 --> 00:06:23,440 Speaker 1: Vest or it's checking or Mike. I went into a 115 00:06:23,080 --> 00:06:25,919 Speaker 1: branch bank the other day because they had to sign 116 00:06:25,960 --> 00:06:29,000 Speaker 1: my life away with a notary public thing. I think 117 00:06:29,040 --> 00:06:30,760 Speaker 1: it was the first time I was in a branch bank, 118 00:06:30,839 --> 00:06:35,880 Speaker 1: and like, what two years love digital? Certainly younger customers, 119 00:06:35,920 --> 00:06:37,920 Speaker 1: but the more mature customers as well. And I'll tell 120 00:06:37,920 --> 00:06:39,919 Speaker 1: you a little secret about what we're seeing at lavast 121 00:06:40,440 --> 00:06:43,440 Speaker 1: is people are go. Everybody told me you're gonna have 122 00:06:43,560 --> 00:06:48,400 Speaker 1: to have financial advisors. Women want a human and I thought, okay, 123 00:06:48,440 --> 00:06:50,640 Speaker 1: that makes sense. And the women told us they wanted 124 00:06:50,640 --> 00:06:54,040 Speaker 1: a human until they got into the experience and realized 125 00:06:54,080 --> 00:06:56,479 Speaker 1: they didn't have to understand, you know, sort of figure 126 00:06:56,480 --> 00:06:59,120 Speaker 1: out what standard deviation was and pick the stocks and 127 00:06:59,160 --> 00:07:00,880 Speaker 1: so on, and all of a sudden they said, you 128 00:07:00,880 --> 00:07:04,000 Speaker 1: know what, I can control this. I can I can 129 00:07:04,120 --> 00:07:06,360 Speaker 1: figure out when I want to start my business. So 130 00:07:06,400 --> 00:07:09,080 Speaker 1: people they aren't doing it. Tom nine to five Michael McKain, 131 00:07:09,160 --> 00:07:12,800 Speaker 1: Tom Kinge with Sally Crawchuck on a wide diverse range 132 00:07:12,880 --> 00:07:16,600 Speaker 1: of matters. One of them, Sally, is the belief And 133 00:07:16,600 --> 00:07:18,560 Speaker 1: and just in the last twenty four hours, I've seen 134 00:07:18,960 --> 00:07:22,720 Speaker 1: all sorts of pundits and the non qualified basically say 135 00:07:22,800 --> 00:07:26,240 Speaker 1: go to cash. There's a lot of that emotion out there. 136 00:07:26,680 --> 00:07:29,400 Speaker 1: Go to cash, dude, this go to cash. And I 137 00:07:29,400 --> 00:07:31,320 Speaker 1: don't want to, you know, do a market thing with you, 138 00:07:31,360 --> 00:07:34,000 Speaker 1: because I know you're not doing the Sanford Bernstein thing 139 00:07:34,080 --> 00:07:38,239 Speaker 1: tick by tick now, but come on, things are priced 140 00:07:38,240 --> 00:07:42,360 Speaker 1: to perfection. No one saw this move up. Basically the 141 00:07:42,360 --> 00:07:47,080 Speaker 1: hedge fund industry two and twenty crew has been clobbered. Well, 142 00:07:47,120 --> 00:07:50,760 Speaker 1: how do you respond, as Sally Crawchuck, when you see 143 00:07:50,800 --> 00:07:54,800 Speaker 1: newspaper reports from everyone's saying go to cash. Come on, 144 00:07:55,480 --> 00:08:01,600 Speaker 1: come on, don't cash like they know, honest to goodness, 145 00:08:02,840 --> 00:08:09,200 Speaker 1: feel good. The real job when Brad Hints was at 146 00:08:09,280 --> 00:08:12,480 Speaker 1: Sanford Bernstein, he had a grand banks and the name 147 00:08:12,520 --> 00:08:14,760 Speaker 1: of the boat was go to cash. How do you 148 00:08:14,840 --> 00:08:19,000 Speaker 1: respond to go to caffet? Everybody take of you know, 149 00:08:19,120 --> 00:08:23,360 Speaker 1: relax for goodness sake. Nobody knows where the market is going. 150 00:08:23,520 --> 00:08:26,440 Speaker 1: Warren Buffett doesn't know where the market is going. So 151 00:08:26,880 --> 00:08:29,640 Speaker 1: you know this view that you can call it time, 152 00:08:29,680 --> 00:08:32,080 Speaker 1: it is a waste. And what do you do as 153 00:08:32,080 --> 00:08:35,720 Speaker 1: an investor when you're you're you're buffeted by thank you 154 00:08:35,760 --> 00:08:39,040 Speaker 1: by that, buffeted by Warren Buffett? Go to cash? Right, Well, 155 00:08:39,120 --> 00:08:43,600 Speaker 1: you invest in a diversified investment portfolio and go work 156 00:08:44,160 --> 00:08:48,679 Speaker 1: for goodness say yeah, what you say with elevients makes sense. 157 00:08:49,200 --> 00:08:51,640 Speaker 1: Don't look at the individual stock that you're turning over. 158 00:08:51,800 --> 00:08:53,960 Speaker 1: Is what your goal is at the end? Well, and 159 00:08:54,520 --> 00:08:57,520 Speaker 1: invest regularly. I mean we've got sev our women who 160 00:08:57,520 --> 00:09:01,000 Speaker 1: are now investing regularly. And so know, sometimes you should 161 00:09:01,000 --> 00:09:03,840 Speaker 1: have gone to cash, and sometimes bonds were expensive and 162 00:09:03,880 --> 00:09:07,400 Speaker 1: sometimes stocks were cheap. Nobody can call this and so 163 00:09:07,840 --> 00:09:10,839 Speaker 1: the right way to do this is invest over time. 164 00:09:10,880 --> 00:09:13,120 Speaker 1: And sometimes you'll be buying things on sale and sometimes 165 00:09:13,120 --> 00:09:16,120 Speaker 1: you won't. But you know, if I hear one more 166 00:09:16,200 --> 00:09:20,760 Speaker 1: time you know about bonds being you know, his terrible investment, 167 00:09:21,280 --> 00:09:25,120 Speaker 1: and yet they haven't been still. And by the way, 168 00:09:25,200 --> 00:09:27,599 Speaker 1: investing is always hard. I remember back when I was 169 00:09:27,640 --> 00:09:30,640 Speaker 1: a research analyst at Sanford Bernstein Tom it felt really hard. 170 00:09:30,679 --> 00:09:34,440 Speaker 1: Then in hindsight is just so dang. It just seems 171 00:09:34,480 --> 00:09:36,320 Speaker 1: so easy when you look and you know exactly what's 172 00:09:36,320 --> 00:09:41,120 Speaker 1: gonna happen. You've got a fund that invests in companies 173 00:09:41,160 --> 00:09:45,000 Speaker 1: with women on boards that done very well. But in general, 174 00:09:45,320 --> 00:09:49,200 Speaker 1: how does LS pick what it's going to invest in? 175 00:09:49,360 --> 00:09:51,600 Speaker 1: For me? If I'm well, there are two separate things. 176 00:09:51,640 --> 00:09:54,319 Speaker 1: So Elves is a digital investment platform for women to 177 00:09:54,400 --> 00:09:57,440 Speaker 1: invest in e t fs or managed ETF portfolios with 178 00:09:57,520 --> 00:10:00,960 Speaker 1: a goal of getting you to your goal buy that house, 179 00:10:01,120 --> 00:10:06,480 Speaker 1: retire well or better in sevent market risk or what. Basically, 180 00:10:06,480 --> 00:10:09,560 Speaker 1: it's it's based on your personal characteristics. You are at 181 00:10:09,559 --> 00:10:11,760 Speaker 1: this age, you earned that much. We actually project out 182 00:10:11,800 --> 00:10:14,679 Speaker 1: your life, your salary curve, we project out when you're 183 00:10:14,679 --> 00:10:17,480 Speaker 1: going to die, which will be sooner than women, and 184 00:10:18,520 --> 00:10:21,440 Speaker 1: then we put you in a very inexpensive managed DUTF 185 00:10:21,520 --> 00:10:23,920 Speaker 1: portfolios with that goal of getting you there better and 186 00:10:23,960 --> 00:10:26,559 Speaker 1: we alert you if you fall off track for it. Okay, 187 00:10:26,640 --> 00:10:30,240 Speaker 1: so that's one am I no, no, no, no, you're 188 00:10:30,280 --> 00:10:33,520 Speaker 1: doing that. We're fiduciary. That's our job. Decades of experience. 189 00:10:34,640 --> 00:10:36,920 Speaker 1: You've fallen off Now, well, if you fall off track 190 00:10:36,960 --> 00:10:39,280 Speaker 1: because you don't make a deposit, or if we fall 191 00:10:39,320 --> 00:10:42,000 Speaker 1: off track because we didn't project this kind of market 192 00:10:42,120 --> 00:10:44,200 Speaker 1: environment and let you know what to do to get 193 00:10:44,200 --> 00:10:47,240 Speaker 1: back on. Isn't that refreshing? Because now you think about 194 00:10:47,320 --> 00:10:49,360 Speaker 1: back in January, where you on our off track for 195 00:10:49,400 --> 00:10:53,280 Speaker 1: your goals. Nobody knows. So that's elvest. I have another 196 00:10:53,840 --> 00:10:57,320 Speaker 1: initiative packs elevate Global Woman's Index Fund invest in the 197 00:10:57,360 --> 00:11:00,480 Speaker 1: top rated companies for advancing women. Boy, you may be 198 00:11:00,600 --> 00:11:03,640 Speaker 1: thinking that is a dumb investment strategy. I've never heard 199 00:11:03,640 --> 00:11:07,080 Speaker 1: such a stupid idea in my life. And it's based 200 00:11:07,120 --> 00:11:09,839 Speaker 1: on percent of women on board, percent of women in 201 00:11:09,920 --> 00:11:13,120 Speaker 1: senior leadership team. It's outperforming now a couple of years in. 202 00:11:13,720 --> 00:11:18,199 Speaker 1: To my mind, it is the least crowded trade. Because Tom, 203 00:11:18,280 --> 00:11:19,920 Speaker 1: you will know this. Back when I was a research 204 00:11:19,960 --> 00:11:22,760 Speaker 1: annelist and I would come visit you. Every single time 205 00:11:22,800 --> 00:11:25,200 Speaker 1: we talked about a company, you would ask me, do 206 00:11:25,240 --> 00:11:27,600 Speaker 1: you think management is any good? I would answer it 207 00:11:27,600 --> 00:11:30,920 Speaker 1: with some answer that was my opinion. The only quantification 208 00:11:30,960 --> 00:11:34,439 Speaker 1: I've seen of the value of management, which is so important, 209 00:11:35,080 --> 00:11:38,960 Speaker 1: is based on diversity. Indeed, gender diversity, which leads to outperformance. 210 00:11:38,960 --> 00:11:42,440 Speaker 1: It leads to better business results. So I know it 211 00:11:42,520 --> 00:11:45,160 Speaker 1: is not better are always by a touch, it's by 212 00:11:45,280 --> 00:11:49,439 Speaker 1: a lot, and yet the street doesn't recognize that diversity 213 00:11:49,440 --> 00:11:52,160 Speaker 1: can drive better performance. Is least crowded trade out there 214 00:11:52,440 --> 00:11:55,880 Speaker 1: thirty seconds? What's Ellen need to do? We've got a 215 00:11:55,920 --> 00:11:59,720 Speaker 1: complete distortion in the bond market. Everyone agrees were alter 216 00:11:59,880 --> 00:12:04,640 Speaker 1: a commodative. What would Governor Quacheck recommend the chair? We look, 217 00:12:04,679 --> 00:12:07,640 Speaker 1: it always hurts to raise rates, but it's some I 218 00:12:07,640 --> 00:12:12,280 Speaker 1: mean to me, you know, the economy doesn't feel horrible. 219 00:12:12,640 --> 00:12:15,000 Speaker 1: When I typically say this, I then get people tweeted 220 00:12:15,000 --> 00:12:16,960 Speaker 1: at me. You know, you're you don't know it's this 221 00:12:17,040 --> 00:12:19,160 Speaker 1: is bad and there are there's swaps of people who 222 00:12:19,160 --> 00:12:23,080 Speaker 1: have lost their jobs who need to be retrained. It's tragic. 223 00:12:23,480 --> 00:12:26,240 Speaker 1: If you look at the economy overall, and I'm in 224 00:12:26,320 --> 00:12:29,160 Speaker 1: the economy every day, it doesn't feel terrible. It's never 225 00:12:29,200 --> 00:12:31,880 Speaker 1: a great time to raise rates. When you raise rates, 226 00:12:31,880 --> 00:12:34,920 Speaker 1: the banks tend to you know, sort of every time 227 00:12:35,480 --> 00:12:39,120 Speaker 1: you know, have have a I want to say, crisis 228 00:12:39,160 --> 00:12:41,600 Speaker 1: is a strong word, but put it with a C. Falter. 229 00:12:42,559 --> 00:12:45,080 Speaker 1: The markets falter and it's scary. We're gonna falter towards it. 230 00:12:45,120 --> 00:12:49,480 Speaker 1: Break generous of your time this morning. On many topics. 231 00:12:59,559 --> 00:13:01,520 Speaker 1: What do you do these days? Do you? And we 232 00:13:01,559 --> 00:13:06,600 Speaker 1: were talking with Sally ProCheck do get out of everything 233 00:13:06,760 --> 00:13:09,480 Speaker 1: right now, go to cash, as Tom suggested, and as 234 00:13:09,520 --> 00:13:12,679 Speaker 1: she laughed at Michael Purpos has to make these recommendations. 235 00:13:12,760 --> 00:13:17,200 Speaker 1: Chief global strategist for Weeden in Company UM. Sally was 236 00:13:17,960 --> 00:13:21,360 Speaker 1: pretty positive on the idea of you just continue to 237 00:13:21,600 --> 00:13:24,760 Speaker 1: find good investments and keep your money in it and 238 00:13:24,840 --> 00:13:28,280 Speaker 1: don't panic right now. Um. But the world looks like 239 00:13:28,320 --> 00:13:31,160 Speaker 1: it it's on the edge of its chair ready to panic. 240 00:13:31,679 --> 00:13:34,280 Speaker 1: So what do you advise? Well, I think I'm in 241 00:13:34,720 --> 00:13:37,240 Speaker 1: Sally's camp on on this one. Uh. You know, the 242 00:13:37,760 --> 00:13:41,040 Speaker 1: equity markets have proven this year and over over several 243 00:13:41,040 --> 00:13:42,800 Speaker 1: of the last few years that they've been able to 244 00:13:42,840 --> 00:13:45,920 Speaker 1: climb walls not just a worry but also of hatred. 245 00:13:46,000 --> 00:13:48,160 Speaker 1: You know, there's been a kind of revulsion with the 246 00:13:49,160 --> 00:13:53,400 Speaker 1: price earnings multiples and the peg ratios um that you see, 247 00:13:53,760 --> 00:13:56,080 Speaker 1: you know, and certainly you in the US equity asset 248 00:13:56,120 --> 00:13:58,760 Speaker 1: class um. But you know, within that there's a lot 249 00:13:58,800 --> 00:14:02,320 Speaker 1: of great you know pullstrating at twelve times earnings, and uh, 250 00:14:02,480 --> 00:14:05,400 Speaker 1: there's a lot of other companies that that are you know, 251 00:14:05,440 --> 00:14:08,400 Speaker 1: attractively priced and also pay dividends that are noticeably higher 252 00:14:08,400 --> 00:14:10,240 Speaker 1: than what you're gonna get on the tenure treasury yield 253 00:14:10,240 --> 00:14:12,679 Speaker 1: and the SMP five pays a dividing yield, notice will 254 00:14:12,679 --> 00:14:14,600 Speaker 1: be higher than what you're gonna get on the tenure. Yeah, 255 00:14:14,640 --> 00:14:18,240 Speaker 1: but you know, we're we're looking at stocks that a 256 00:14:18,240 --> 00:14:21,880 Speaker 1: lot of people think are just levels that are created 257 00:14:22,000 --> 00:14:25,840 Speaker 1: artificially by Janet Yelling, Right. I mean if two days 258 00:14:25,880 --> 00:14:28,720 Speaker 1: after Brexit, right, you know, immediately after Direxity had this 259 00:14:28,760 --> 00:14:32,080 Speaker 1: huge sort of volatility spike and equity sold off and 260 00:14:32,240 --> 00:14:35,200 Speaker 1: utilities actually put in a lifetime high to trading days 261 00:14:35,280 --> 00:14:38,560 Speaker 1: after after the Brexit, Right, And that really was a 262 00:14:38,600 --> 00:14:41,320 Speaker 1: testament to what Yelling and actually her appears in Japan 263 00:14:41,440 --> 00:14:44,000 Speaker 1: and and and Europe I've been doing with with you know, 264 00:14:44,240 --> 00:14:47,200 Speaker 1: taking bond yields to levels that we've never seen before 265 00:14:47,320 --> 00:14:51,920 Speaker 1: or even contemplated before. So I think the um, you know, 266 00:14:51,960 --> 00:14:54,720 Speaker 1: there's certainly things where you're looking at utilities which are 267 00:14:54,720 --> 00:14:58,000 Speaker 1: not only just stretched in terms of you know, many valuations, 268 00:14:58,040 --> 00:15:00,800 Speaker 1: but there within a lot of these utility you're looking at, 269 00:15:01,120 --> 00:15:03,800 Speaker 1: they've almost been manufactured to be sort of turbo bonds 270 00:15:03,800 --> 00:15:06,040 Speaker 1: in a way, and in other words that the amount 271 00:15:06,040 --> 00:15:07,960 Speaker 1: of money that they pay out as dividends is much 272 00:15:08,000 --> 00:15:10,800 Speaker 1: higher than they might have been normally, and and so forth. 273 00:15:11,080 --> 00:15:13,080 Speaker 1: So I think you have to be very careful with 274 00:15:13,120 --> 00:15:15,040 Speaker 1: some of those, uh, some of those. On the other hand, 275 00:15:15,040 --> 00:15:17,240 Speaker 1: there are other companies, you know, there's some MLPs that 276 00:15:17,280 --> 00:15:19,520 Speaker 1: are actually the m LP as a class is one 277 00:15:19,560 --> 00:15:22,240 Speaker 1: that's been you know, really unloved because of the oil crash. 278 00:15:22,840 --> 00:15:26,600 Speaker 1: And if volumes start coming back in in in in 279 00:15:26,640 --> 00:15:28,200 Speaker 1: a lot of these basins, a lot of those will 280 00:15:28,240 --> 00:15:29,960 Speaker 1: benefit and they you have a lot of catch up 281 00:15:30,000 --> 00:15:32,200 Speaker 1: certainly with their peers and there that are reads or 282 00:15:32,480 --> 00:15:37,080 Speaker 1: or the utilities. You know, the selling stocks is always 283 00:15:37,080 --> 00:15:39,000 Speaker 1: telling a story and that sounds like a good story 284 00:15:39,080 --> 00:15:43,120 Speaker 1: until I look and I see West Texas is right right. Yeah. 285 00:15:43,200 --> 00:15:45,040 Speaker 1: I I put a note doubt a couple of weeks 286 00:15:45,080 --> 00:15:47,160 Speaker 1: ago saying, you know, watch for a sort of a 287 00:15:47,240 --> 00:15:49,600 Speaker 1: tactical move in oil from forty five to forty So 288 00:15:49,640 --> 00:15:52,960 Speaker 1: we're now here. We're just a little bit below forty. 289 00:15:52,800 --> 00:15:56,360 Speaker 1: I'm not you know, tactically going long just yet, but 290 00:15:56,400 --> 00:15:58,120 Speaker 1: I probably will be at some point soon. I don't 291 00:15:58,120 --> 00:16:02,320 Speaker 1: look at this move as as thing really um uh 292 00:16:02,960 --> 00:16:05,680 Speaker 1: akin to what we saw back in January and February 293 00:16:05,680 --> 00:16:07,880 Speaker 1: when oil was going to twenty six and people were saying, 294 00:16:07,880 --> 00:16:10,240 Speaker 1: we're talking about ten and fifteen. I don't think it's 295 00:16:10,400 --> 00:16:12,080 Speaker 1: I don't think that's it's that. I think it's a 296 00:16:12,120 --> 00:16:16,920 Speaker 1: function of of gasoline inventories um being higher than expected, 297 00:16:16,960 --> 00:16:19,280 Speaker 1: the summer drive being a little bit weaker there. But 298 00:16:19,720 --> 00:16:21,960 Speaker 1: you know, my broader framework for oils, it's sort of 299 00:16:21,960 --> 00:16:25,760 Speaker 1: in that's forty five range, and it's not probably gonna 300 00:16:25,760 --> 00:16:28,600 Speaker 1: get too much weaker here unless we get something, you know, 301 00:16:28,720 --> 00:16:31,760 Speaker 1: some some real you know supply up upside, and so 302 00:16:31,880 --> 00:16:35,840 Speaker 1: the oil impact on other asset classes fades as well. Yes, exactly. 303 00:16:35,920 --> 00:16:37,960 Speaker 1: It was really interesting. If you saw yesterday, you saw 304 00:16:38,000 --> 00:16:43,480 Speaker 1: the SMP crude relationship get almost tick for tick yesterday 305 00:16:43,520 --> 00:16:45,280 Speaker 1: right in the middle of the day. That relationship had 306 00:16:45,320 --> 00:16:48,120 Speaker 1: been fading over the last few weeks, and it really 307 00:16:48,120 --> 00:16:49,800 Speaker 1: came back, and so it was interesting. It's sort of 308 00:16:49,800 --> 00:16:52,440 Speaker 1: a test you saw a crude you know, equities can 309 00:16:52,520 --> 00:16:54,920 Speaker 1: handle crewde being, you know, going from fifty to forty five, 310 00:16:55,680 --> 00:16:58,000 Speaker 1: once you get down to that forty handle and breaking forty. 311 00:16:58,040 --> 00:16:59,960 Speaker 1: I think it was sort of psychological and it's almost 312 00:17:00,160 --> 00:17:02,560 Speaker 1: like some programs kicked in that was keeping that correlation 313 00:17:02,920 --> 00:17:04,879 Speaker 1: as tight as we saw yesterday. So if we go 314 00:17:04,960 --> 00:17:07,120 Speaker 1: lower and crewed here, yeah, it's gonna be it's gonna 315 00:17:07,160 --> 00:17:09,200 Speaker 1: be pressure on equities. Well a couple of well, it 316 00:17:09,320 --> 00:17:10,760 Speaker 1: was like last week, a couple of days ago. I 317 00:17:10,760 --> 00:17:14,200 Speaker 1: can say last week double lines, Jeffrey good Luck said 318 00:17:14,680 --> 00:17:19,320 Speaker 1: sell everything. Nothing looked good here Today he gets a 319 00:17:19,440 --> 00:17:23,359 Speaker 1: second to that emotion from Bill Gross, who's out with 320 00:17:23,480 --> 00:17:28,880 Speaker 1: his new investment advisory newsletter from Janice Capital, says by gold, 321 00:17:29,119 --> 00:17:31,600 Speaker 1: he says, I don't like bonds, I don't like stocks, 322 00:17:31,640 --> 00:17:34,959 Speaker 1: I don't like private equity. Real assets such as land, 323 00:17:35,359 --> 00:17:38,159 Speaker 1: gold and tangible planted equipment at a discount are the 324 00:17:38,160 --> 00:17:42,480 Speaker 1: favorite asset categories. And obviously we will be talking with 325 00:17:42,880 --> 00:17:48,560 Speaker 1: the sage from Newport Beach on Friday, Job's Day as always, 326 00:17:48,600 --> 00:17:51,240 Speaker 1: Tom Bill Gross will be joining us at eight thirty 327 00:17:51,320 --> 00:17:54,600 Speaker 1: Wall Street time, and we can ask him about this um. 328 00:17:54,640 --> 00:17:57,919 Speaker 1: But He said that with lack of global growth, you're 329 00:17:57,920 --> 00:18:02,480 Speaker 1: getting a Ponzi scheme in the markets. Michael Purvis is 330 00:18:02,480 --> 00:18:04,880 Speaker 1: with us. I sort of asked you this question earlier, 331 00:18:04,920 --> 00:18:08,040 Speaker 1: but now you've got this these strong comments from Bill 332 00:18:08,080 --> 00:18:10,480 Speaker 1: Gross backing up what Jeff Goodluck said to the best 333 00:18:10,520 --> 00:18:14,800 Speaker 1: known investors in the world, they hate everything in the 334 00:18:15,080 --> 00:18:17,920 Speaker 1: in the Wall Street asset classes at this point, Well, 335 00:18:17,960 --> 00:18:20,040 Speaker 1: I don't hate everything in the Wall Street as the 336 00:18:20,080 --> 00:18:22,000 Speaker 1: classes as we were just talking about. I do think 337 00:18:22,000 --> 00:18:26,400 Speaker 1: there's some very interesting long opportunities within US equities UM 338 00:18:26,440 --> 00:18:29,639 Speaker 1: and and in some emerging market equities. But on gold 339 00:18:29,720 --> 00:18:32,120 Speaker 1: I'm absolutely on that same page, and I think it's 340 00:18:32,119 --> 00:18:34,280 Speaker 1: a it's a it's going to continue to be a 341 00:18:34,320 --> 00:18:36,480 Speaker 1: good trade this year and well into next year. And 342 00:18:36,520 --> 00:18:38,560 Speaker 1: there's a few reasons for that. First of all, you 343 00:18:38,600 --> 00:18:41,040 Speaker 1: have the you know, the relative yield argument, you know, 344 00:18:41,080 --> 00:18:44,880 Speaker 1: with with so much of sovereign paper negative or certainly 345 00:18:45,119 --> 00:18:48,040 Speaker 1: very very low, that makes the relative cost ownership. But 346 00:18:48,080 --> 00:18:50,920 Speaker 1: I think there's a broader issue here about the rise 347 00:18:51,000 --> 00:18:55,320 Speaker 1: of a more dynamic geopolitical UH and political UH discussion, 348 00:18:55,359 --> 00:18:59,360 Speaker 1: and and the in the Eurozone as well. And yet 349 00:18:59,400 --> 00:19:03,119 Speaker 1: there's an even UH additional factor that that what I 350 00:19:03,160 --> 00:19:04,840 Speaker 1: think is going to set up here is that in 351 00:19:04,880 --> 00:19:07,840 Speaker 1: the US you're gonna start seeing higher inflation prints and 352 00:19:07,840 --> 00:19:11,000 Speaker 1: you're gonna see the FED. You're not going to see 353 00:19:11,000 --> 00:19:14,840 Speaker 1: the tenure treasury yield really rise because it's the ten 354 00:19:14,880 --> 00:19:17,720 Speaker 1: uere treasury yield is really anchored by what's happening by 355 00:19:17,880 --> 00:19:21,600 Speaker 1: in the Japanese and and and German bond markets. So 356 00:19:22,160 --> 00:19:26,240 Speaker 1: what is effectively happened here is that the FED has 357 00:19:26,560 --> 00:19:29,800 Speaker 1: seated a little bit of its ability to control things 358 00:19:29,880 --> 00:19:32,399 Speaker 1: to some of these foreign central banks and their policies. 359 00:19:32,840 --> 00:19:36,160 Speaker 1: And if inflation continues to rise, that's going to set 360 00:19:36,160 --> 00:19:38,520 Speaker 1: the table for for goal to move up. You know, 361 00:19:39,119 --> 00:19:43,320 Speaker 1: several hundred dollars on announces inflation stocks, Yes, it is, 362 00:19:43,440 --> 00:19:46,080 Speaker 1: and it's needed for stocks. If you look at if 363 00:19:46,080 --> 00:19:49,679 Speaker 1: you match, is now the expectation out six months of 364 00:19:49,800 --> 00:19:54,040 Speaker 1: higher inflation once we get the inflation, is that too 365 00:19:54,160 --> 00:19:57,240 Speaker 1: late to be in stocks? Well, I would, I would say, 366 00:19:57,240 --> 00:19:59,159 Speaker 1: I think right now, you know we've seen you know, 367 00:20:00,000 --> 00:20:03,359 Speaker 1: extended price earnings ratios here, right, you know, we're at 368 00:20:03,400 --> 00:20:06,560 Speaker 1: post grate financial highs in the In the Pees, I 369 00:20:06,600 --> 00:20:09,119 Speaker 1: think you're gonna start seeing in the second half of 370 00:20:09,160 --> 00:20:10,879 Speaker 1: this year, in the first half of next year, you're 371 00:20:10,920 --> 00:20:13,560 Speaker 1: gonna see nominal GDP pick up. If you look at 372 00:20:13,640 --> 00:20:16,840 Speaker 1: nominal GDP was really weak last year, right on top 373 00:20:16,880 --> 00:20:20,480 Speaker 1: of Kevin and growth collapse. That was right, was inflation 374 00:20:20,560 --> 00:20:22,960 Speaker 1: that was contracting last year. And now I think it's 375 00:20:22,960 --> 00:20:26,480 Speaker 1: gonna folks to translate that into the P divided by 376 00:20:26,480 --> 00:20:31,280 Speaker 1: the E. Mr Purvis is suggesting that nominal GDP picks up, 377 00:20:31,320 --> 00:20:33,840 Speaker 1: which means revenue picks up and drifts down the income 378 00:20:33,920 --> 00:20:38,200 Speaker 1: straight man to a higher E. May I suggest, Mike 379 00:20:38,280 --> 00:20:42,080 Speaker 1: McKee that Mr gross and others are looking for a 380 00:20:42,119 --> 00:20:47,480 Speaker 1: diminished P within the PELL. Then that's the that's the difference. That's, 381 00:20:47,680 --> 00:20:50,800 Speaker 1: I believe, Michael, the distinction in the debate. That's what 382 00:20:50,840 --> 00:20:54,879 Speaker 1: they seem to be saying. Yesterday, Bill was suggesting that 383 00:20:55,200 --> 00:20:58,359 Speaker 1: it just takes a small move in price to wipe 384 00:20:58,359 --> 00:21:02,880 Speaker 1: you out these days because value are so artificial. You're 385 00:21:02,880 --> 00:21:05,120 Speaker 1: not you're disagreeing, you're going to do that. No, I'm 386 00:21:05,119 --> 00:21:08,360 Speaker 1: not disagreeing. I'm saying that the walls worry out there 387 00:21:08,440 --> 00:21:14,640 Speaker 1: are now many and focused. They're they're very sharp opinions. 388 00:21:14,680 --> 00:21:18,159 Speaker 1: This is gonna happen and Michael around us. All is 389 00:21:18,200 --> 00:21:22,080 Speaker 1: the basic hedge fund carnage. The reality that people that 390 00:21:22,200 --> 00:21:25,680 Speaker 1: listen to Gary Schilling have made a ton of money 391 00:21:25,800 --> 00:21:29,280 Speaker 1: or Steve Major at HSBC, and people that were long 392 00:21:29,520 --> 00:21:34,600 Speaker 1: and dumb and buy and hold look like geniuses. Right 393 00:21:35,200 --> 00:21:38,800 Speaker 1: right now that the SMP is up the six percent 394 00:21:38,880 --> 00:21:42,560 Speaker 1: year today, right, we're all gonna die. Equity market sentiment 395 00:21:42,640 --> 00:21:46,320 Speaker 1: has been um really cautious or sort of pale green 396 00:21:46,400 --> 00:21:48,879 Speaker 1: light throughout most of this year. What I think is 397 00:21:48,880 --> 00:21:52,000 Speaker 1: really fascinating is that in March, if you look at 398 00:21:52,000 --> 00:21:54,800 Speaker 1: the VIX positioning in the futures market and went from 399 00:21:54,880 --> 00:22:00,760 Speaker 1: extraordinarily bullish vis back in February to extraordinarily parish VIX 400 00:22:01,200 --> 00:22:03,280 Speaker 1: really after the March f O m C. I think 401 00:22:03,320 --> 00:22:06,240 Speaker 1: that's the key pivot point there, and the Vicks market 402 00:22:06,280 --> 00:22:08,119 Speaker 1: got it right. I mean, you know what, what do 403 00:22:08,200 --> 00:22:10,720 Speaker 1: we see here? We see extremely low realized ball on 404 00:22:10,840 --> 00:22:13,640 Speaker 1: the heels of fresh lifetime and the d X sp 405 00:22:13,880 --> 00:22:16,160 Speaker 1: X and the and the dat Mike, I go back 406 00:22:16,160 --> 00:22:18,960 Speaker 1: to my proxy. I do not own shares in Colgate. 407 00:22:19,520 --> 00:22:22,119 Speaker 1: I should point out Mike as well. I don't floss 408 00:22:22,320 --> 00:22:25,480 Speaker 1: that's in the news today. That's almost too much information? 409 00:22:25,720 --> 00:22:28,959 Speaker 1: Why you was that too much information for radio? Okay? 410 00:22:29,000 --> 00:22:31,560 Speaker 1: Thank you? Why I mean that? Why you yet? Uh 411 00:22:31,600 --> 00:22:35,560 Speaker 1: time out chair Colgate? Uh? Michael McKee and Michael Purvis 412 00:22:35,800 --> 00:22:39,720 Speaker 1: has done twelve point two percent for the last ten years, 413 00:22:39,760 --> 00:22:43,200 Speaker 1: climbing against a set of walls of worry? Why are 414 00:22:43,280 --> 00:22:46,760 Speaker 1: these recent walls of worry different from all the other ones? 415 00:22:47,800 --> 00:22:51,200 Speaker 1: I think the real focal point here is is that 416 00:22:51,280 --> 00:22:54,159 Speaker 1: the role of central banking and the role of the 417 00:22:54,200 --> 00:22:57,520 Speaker 1: tenure treasury yield in the equity equation has become more 418 00:22:57,600 --> 00:23:01,120 Speaker 1: and more dominant. And if there's were ursul in that right, 419 00:23:01,160 --> 00:23:04,720 Speaker 1: if that, if that, if that, uh, cork explodes the 420 00:23:04,760 --> 00:23:06,639 Speaker 1: other way and we have a massive sell off and 421 00:23:06,680 --> 00:23:10,680 Speaker 1: sovereign paper, that is going to be you know, very 422 00:23:10,720 --> 00:23:13,959 Speaker 1: disruptive to the equity framework that is supporting a lot 423 00:23:14,040 --> 00:23:15,720 Speaker 1: of these things, which is, let's face it, you know, 424 00:23:15,960 --> 00:23:18,720 Speaker 1: buybacks will go out the window. If the tenure treasuries 425 00:23:18,760 --> 00:23:22,800 Speaker 1: at three and a half percent, the cost of you know, 426 00:23:23,280 --> 00:23:25,480 Speaker 1: certainly the cost of of debt capital, it's gonna go 427 00:23:25,560 --> 00:23:27,080 Speaker 1: up a lot, and that's gonna hurt earnings and all 428 00:23:27,119 --> 00:23:29,760 Speaker 1: that that's been part of that. The thing is, how 429 00:23:29,800 --> 00:23:33,239 Speaker 1: do you um pop this bill gross bond bubble at 430 00:23:33,280 --> 00:23:35,880 Speaker 1: any time in the foreseeable future. It's hard for me 431 00:23:35,960 --> 00:23:38,919 Speaker 1: to imagine. I'm not saying do you imagine? Do you 432 00:23:38,960 --> 00:23:43,000 Speaker 1: imagine it's a jump condition? What was the word we use? Take, well, tantrum? 433 00:23:43,320 --> 00:23:45,199 Speaker 1: Is it going to be a tantrum? Or is it smooth? 434 00:23:45,680 --> 00:23:48,159 Speaker 1: I think it's gonna be more of a smooth with 435 00:23:48,240 --> 00:23:51,359 Speaker 1: the occasional speed bump glide path than it is something 436 00:23:51,400 --> 00:23:54,280 Speaker 1: truly traumatic. You know, you had this Taper trantrum May 437 00:23:54,280 --> 00:23:58,560 Speaker 1: of two thousand thirteen. Bernanke said, uh, you know taper 438 00:23:58,600 --> 00:24:00,640 Speaker 1: in the bond yield. The ten or yield went from 439 00:24:00,640 --> 00:24:02,200 Speaker 1: one point five up to two, to two and a 440 00:24:02,280 --> 00:24:07,080 Speaker 1: quarter and onwards up to three. And what happened Every 441 00:24:07,240 --> 00:24:10,360 Speaker 1: economic metric in the US basically rolled over because the 442 00:24:10,400 --> 00:24:13,120 Speaker 1: market is so steel to low interest rates. I think 443 00:24:13,160 --> 00:24:16,080 Speaker 1: the FED understands that, I think other there appears and 444 00:24:16,160 --> 00:24:18,840 Speaker 1: other central banks understand that that it has to be 445 00:24:18,920 --> 00:24:21,320 Speaker 1: a glide path. So the only way to get it 446 00:24:21,680 --> 00:24:24,040 Speaker 1: not to be a glide path really is for some 447 00:24:24,200 --> 00:24:28,080 Speaker 1: complete rejection of all these investors who are ultimately supporting 448 00:24:28,119 --> 00:24:32,440 Speaker 1: bonds to to say, you know, we're not going to 449 00:24:32,520 --> 00:24:35,120 Speaker 1: own the SASA class. It's hard to really envision where 450 00:24:35,119 --> 00:24:37,600 Speaker 1: do they go with all that money? Right, I mean? 451 00:24:37,840 --> 00:24:40,280 Speaker 1: And so um in in in a sudden way. Now 452 00:24:41,200 --> 00:24:43,200 Speaker 1: the big tail risk I think, and this is does 453 00:24:43,480 --> 00:24:47,800 Speaker 1: is there a political event that appsolutely that somehow transforms 454 00:24:47,840 --> 00:24:50,399 Speaker 1: the way some of these central banks are operating. That 455 00:24:50,520 --> 00:24:52,880 Speaker 1: could be something where you don't get a glide path. 456 00:24:52,960 --> 00:24:55,240 Speaker 1: But again that's really I put that in the tail 457 00:24:55,760 --> 00:24:59,359 Speaker 1: camp and not not not in the base case. Are 458 00:24:59,440 --> 00:25:01,679 Speaker 1: you long the markets? I mean within all of this 459 00:25:01,800 --> 00:25:04,439 Speaker 1: professional discussion, all people want to know is should they 460 00:25:04,480 --> 00:25:06,640 Speaker 1: be in the markets? Tom two weeks ago, I took 461 00:25:06,680 --> 00:25:10,400 Speaker 1: my year in price target of the Spire and raised 462 00:25:10,400 --> 00:25:15,800 Speaker 1: it up to and and decreased my earnings. At the 463 00:25:15,840 --> 00:25:19,040 Speaker 1: same time, I was at one twenty SMP earnings for 464 00:25:19,040 --> 00:25:21,560 Speaker 1: the year. I brought it down to one fifteen. My 465 00:25:21,720 --> 00:25:25,320 Speaker 1: big thesis is that the pe expansion, I think people 466 00:25:25,359 --> 00:25:27,200 Speaker 1: are going to have to just get used to these 467 00:25:27,800 --> 00:25:30,840 Speaker 1: twenty handle ps and learn to live with it. And 468 00:25:30,880 --> 00:25:34,160 Speaker 1: I think that's that's really the rub folks. There are 469 00:25:34,240 --> 00:25:37,480 Speaker 1: moments in Bloomberg surveillance that are dramatic and will do 470 00:25:37,560 --> 00:25:41,520 Speaker 1: international relations. What you just heard from Mr Purvis, there 471 00:25:41,560 --> 00:25:44,800 Speaker 1: is something to think about six months out in one 472 00:25:44,880 --> 00:25:48,840 Speaker 1: year out to translate the egos down and the p 473 00:25:49,080 --> 00:25:52,840 Speaker 1: goes up in the ratio. I would respectfully suggest that 474 00:25:52,880 --> 00:25:56,000 Speaker 1: as an outlier called Michael Purvis has always thank you 475 00:25:56,080 --> 00:25:59,440 Speaker 1: so much to the weed and great uh your optimism, 476 00:25:59,480 --> 00:26:04,359 Speaker 1: money UH, American economy and American investment is greatly appreciated. 477 00:26:13,240 --> 00:26:16,280 Speaker 1: David Gerber with me right now, Michael McKean of Surveillance Golfstream, 478 00:26:16,680 --> 00:26:20,560 Speaker 1: David Gern, Tim King, Steve Short with us. The short report, 479 00:26:21,080 --> 00:26:26,439 Speaker 1: Steve is forty dollars a barrel now different than forty 480 00:26:26,480 --> 00:26:31,560 Speaker 1: dollars a barrel was X number of quarters ago. Absolutely, Tom, 481 00:26:31,640 --> 00:26:34,920 Speaker 1: because a couple of quarters ago you had forty dollars 482 00:26:34,920 --> 00:26:37,439 Speaker 1: a barrel. And what we were we were on the 483 00:26:37,480 --> 00:26:40,960 Speaker 1: cusp of seasonality. That is to say that we knew 484 00:26:41,000 --> 00:26:43,440 Speaker 1: crewd all demand was going to be high. We knew 485 00:26:43,520 --> 00:26:46,680 Speaker 1: gasolene demand was going to be high because gasolene prices 486 00:26:46,720 --> 00:26:50,480 Speaker 1: were so low. So forty dollar oil, when you juxtaposed 487 00:26:50,560 --> 00:26:55,840 Speaker 1: that with sixty gasoline and diesel fuel, you certainly had 488 00:26:55,880 --> 00:26:59,560 Speaker 1: the incentive for the refinery to ramp up production during 489 00:26:59,600 --> 00:27:03,080 Speaker 1: the last two quarters and indeed, that's what we have seen. 490 00:27:03,640 --> 00:27:06,919 Speaker 1: But now forty dollars a barrel oil is a completely 491 00:27:06,960 --> 00:27:10,560 Speaker 1: different story because we are now at the end of 492 00:27:10,560 --> 00:27:14,120 Speaker 1: the season, so we're about to transition into the weakest 493 00:27:14,200 --> 00:27:18,120 Speaker 1: demand part right year. Okay, you say that a lot 494 00:27:18,160 --> 00:27:21,840 Speaker 1: of guys at sixty feet you're down looking at valves 495 00:27:21,880 --> 00:27:25,199 Speaker 1: and wrenches and bolts in the whole thing. The eco 496 00:27:25,320 --> 00:27:29,840 Speaker 1: guys are all saying demand will persist. Guys like Steve 497 00:27:29,880 --> 00:27:34,800 Speaker 1: Shark and Phil Verlager are saying, h maybe not discuss 498 00:27:35,400 --> 00:27:39,399 Speaker 1: that's it, because yes, demand will persist. Where about demand 499 00:27:39,520 --> 00:27:43,200 Speaker 1: is about to us about to fall off? You crude, 500 00:27:43,240 --> 00:27:46,320 Speaker 1: all demand in September and October will be a million 501 00:27:46,320 --> 00:27:49,240 Speaker 1: barrels fewer than than it is today because as we 502 00:27:49,359 --> 00:27:52,679 Speaker 1: go turn around season. So yes, I do not argue 503 00:27:52,760 --> 00:27:55,399 Speaker 1: about the demand side. But let's to keep in mind 504 00:27:55,760 --> 00:27:58,359 Speaker 1: that this is also a supply side. You have to 505 00:27:58,480 --> 00:27:59,800 Speaker 1: you know, you always have to look at the other 506 00:27:59,800 --> 00:28:02,960 Speaker 1: side out of the equation. So where the market where 507 00:28:03,000 --> 00:28:06,760 Speaker 1: the bulls made a lot of hey, shall we say 508 00:28:06,920 --> 00:28:09,240 Speaker 1: back at the end of the winter and early spring, 509 00:28:09,600 --> 00:28:12,719 Speaker 1: was on the notion of fallen us production, which is 510 00:28:12,800 --> 00:28:16,240 Speaker 1: obviously true. Production in the United States is now one 511 00:28:16,280 --> 00:28:19,520 Speaker 1: point three one point four million barrels lower today than 512 00:28:19,520 --> 00:28:22,360 Speaker 1: where it was at its peak last year. But let's 513 00:28:22,400 --> 00:28:24,840 Speaker 1: keep in mind the United States is not the only 514 00:28:24,880 --> 00:28:28,720 Speaker 1: producer of crudel out there. In that vein for everyone 515 00:28:28,880 --> 00:28:31,320 Speaker 1: barrel the U S producer took off of the market 516 00:28:31,359 --> 00:28:35,920 Speaker 1: over the last year. OPEC replaced that oil with two barrels. 517 00:28:35,960 --> 00:28:39,760 Speaker 1: So hence why yes, demand is strong and in fact, guys, 518 00:28:40,040 --> 00:28:43,400 Speaker 1: demand for gasoline in the United States this summer has 519 00:28:43,520 --> 00:28:47,320 Speaker 1: never been stronger. We had record gasoline demand this summer, 520 00:28:47,600 --> 00:28:51,520 Speaker 1: and guess what, we also set a record supply for 521 00:28:51,560 --> 00:28:54,640 Speaker 1: gasoline on the East Coast. This is the market area 522 00:28:54,720 --> 00:28:58,280 Speaker 1: that delivers, takes and makes delivery against the Namics contract. 523 00:28:58,680 --> 00:29:01,600 Speaker 1: This is the first time ever that we saw record 524 00:29:01,640 --> 00:29:05,480 Speaker 1: gasoline supply occur in the summer. It normally occurs in 525 00:29:05,520 --> 00:29:08,320 Speaker 1: the first quarter when all that snow and rice kills 526 00:29:08,400 --> 00:29:12,120 Speaker 1: off a lot of demand. So the bulls the market 527 00:29:12,320 --> 00:29:17,000 Speaker 1: took demands best shot this year, record gasoline supply in 528 00:29:17,120 --> 00:29:20,400 Speaker 1: near record roll demand, and the cluck persists. Let's bring 529 00:29:20,440 --> 00:29:23,120 Speaker 1: in David. David. Yes, Stephen, if Tumbulin deult me, I'll 530 00:29:23,160 --> 00:29:25,680 Speaker 1: have you pulled down, pull away from the valves, put 531 00:29:25,680 --> 00:29:27,680 Speaker 1: down the wrench, and pull back to maybe thirty ft 532 00:29:27,720 --> 00:29:31,160 Speaker 1: sixty feet and just explained to me what happened to 533 00:29:31,200 --> 00:29:34,520 Speaker 1: this rally we saw up until June. And I wonder 534 00:29:34,560 --> 00:29:36,640 Speaker 1: when you look at the history books, when you look 535 00:29:36,640 --> 00:29:38,800 Speaker 1: at seasonality here, is it useful to compare this to 536 00:29:38,800 --> 00:29:42,480 Speaker 1: what we saw, say in two thousand fourteen. Very interesting 537 00:29:42,520 --> 00:29:46,440 Speaker 1: what happened this year? We had david the largest short 538 00:29:46,520 --> 00:29:49,840 Speaker 1: covering rally that we had ever seen. Back in the 539 00:29:49,920 --> 00:29:53,680 Speaker 1: first half of February. Wall Street was record short. They 540 00:29:53,680 --> 00:29:57,320 Speaker 1: had never sold more oil forward than they had at 541 00:29:57,360 --> 00:30:01,520 Speaker 1: that point, and therefore you had weeks after week February, 542 00:30:01,560 --> 00:30:06,440 Speaker 1: March and April where the bear was buying more oil 543 00:30:06,760 --> 00:30:10,360 Speaker 1: than the bull. How is that possible? They were covering 544 00:30:10,480 --> 00:30:15,160 Speaker 1: their shorts. So the speculative bull never bought into this market. 545 00:30:15,360 --> 00:30:19,760 Speaker 1: This market was fueled primarily by speculators covering. When you 546 00:30:19,800 --> 00:30:23,240 Speaker 1: look at the commitments of trader reports every Friday afternoon, 547 00:30:23,560 --> 00:30:26,840 Speaker 1: you were seeing in some instances for everyone barrel that 548 00:30:27,000 --> 00:30:31,080 Speaker 1: the bullish speculator was buying the bearers speculator was buying 549 00:30:31,160 --> 00:30:34,720 Speaker 1: back ten, eleven, twelve barrels. So when the bear is 550 00:30:34,760 --> 00:30:39,479 Speaker 1: out buying the bull. Hence you get at rally. You 551 00:30:39,560 --> 00:30:42,440 Speaker 1: also look at what was the producer, David doing at 552 00:30:42,480 --> 00:30:45,520 Speaker 1: this time. The producer in the Brent Crudel market, which 553 00:30:45,520 --> 00:30:49,960 Speaker 1: is the global market for oil sold in nineteen weeks, 554 00:30:50,000 --> 00:30:54,760 Speaker 1: they set seventeen record short positions. A producer only short 555 00:30:54,920 --> 00:30:58,880 Speaker 1: oil when they're hedge forward production. So the producer was 556 00:30:59,000 --> 00:31:01,520 Speaker 1: telling us that they were not going to pull back, 557 00:31:01,560 --> 00:31:03,600 Speaker 1: and they were taking advantage of this rally and they 558 00:31:03,600 --> 00:31:05,840 Speaker 1: were selling the heck out of it. So now that 559 00:31:05,880 --> 00:31:08,520 Speaker 1: we're at a point in labor day is four or 560 00:31:08,520 --> 00:31:12,560 Speaker 1: five weeks away. Once labor day hits, gasoline demand comes off, 561 00:31:12,840 --> 00:31:15,920 Speaker 1: crude all demand comes off. We have the speculator who 562 00:31:16,000 --> 00:31:19,040 Speaker 1: is now more into balance and the producer who's well hedged. 563 00:31:19,320 --> 00:31:21,040 Speaker 1: Let me ask you about reports here. We're going to 564 00:31:21,080 --> 00:31:23,600 Speaker 1: see some of these Libyan ports come back online. They've 565 00:31:23,600 --> 00:31:25,640 Speaker 1: been offline I think for a couple of years now. 566 00:31:25,760 --> 00:31:28,400 Speaker 1: When you look at the global picture here, Uh, you know, 567 00:31:28,520 --> 00:31:30,520 Speaker 1: is that going to just extend this as you see? You? 568 00:31:31,320 --> 00:31:34,680 Speaker 1: I believe so, David. Uh. And you also let's keep 569 00:31:34,720 --> 00:31:36,240 Speaker 1: in mind and I forgot to bring this up. Thank 570 00:31:36,280 --> 00:31:38,600 Speaker 1: you for reminding me. Is we also had those Fort 571 00:31:38,680 --> 00:31:42,720 Speaker 1: McMurray fires back in May which knocked off eight hundred 572 00:31:42,720 --> 00:31:45,760 Speaker 1: thousand barrels a day of Canadian production for for a 573 00:31:45,800 --> 00:31:49,480 Speaker 1: little while. That Carenadian production is coming back online. It's 574 00:31:49,520 --> 00:31:52,360 Speaker 1: coming back online at a time of the year when 575 00:31:52,400 --> 00:31:55,600 Speaker 1: our demand is falling. And to your point with regard 576 00:31:55,680 --> 00:31:58,880 Speaker 1: to Libya, and also in my main thesis, and this 577 00:31:58,920 --> 00:32:02,920 Speaker 1: has been my thesis, it's November and that OPEC meeting 578 00:32:03,360 --> 00:32:08,320 Speaker 1: on the Thursday that Thanksgiving is we are looking at 579 00:32:08,440 --> 00:32:11,240 Speaker 1: the largest chasm between the Sunny side of OPEC and 580 00:32:11,280 --> 00:32:15,280 Speaker 1: the Sia side of OPEC. So Saudi Arabia, the Sunnies 581 00:32:15,560 --> 00:32:20,600 Speaker 1: have no interest in financing a rand nuclear ambitions, so 582 00:32:21,160 --> 00:32:24,320 Speaker 1: they are going to keep I believe the world awash 583 00:32:24,480 --> 00:32:26,640 Speaker 1: in oil. You got the word bearish a lot and 584 00:32:26,640 --> 00:32:30,240 Speaker 1: your dense report, folks. We protect the copyright of our guests. 585 00:32:30,280 --> 00:32:32,000 Speaker 1: We're not going to send you out the short report. 586 00:32:32,040 --> 00:32:35,560 Speaker 1: Get it from Steve Shock. I watched Phillies baseball last night. Steve, 587 00:32:36,200 --> 00:32:39,960 Speaker 1: there was a piteaba, it was a site. It was 588 00:32:40,040 --> 00:32:43,800 Speaker 1: just it's just it's Phillies baseball is just unique, Steve, 589 00:32:43,840 --> 00:32:46,200 Speaker 1: give us your call on oil. I believe you're bearish. 590 00:32:46,480 --> 00:32:50,160 Speaker 1: How barish is bearish? Yeah, I've been barished and and 591 00:32:50,200 --> 00:32:53,280 Speaker 1: I've embarrassed UH for the last few years. I got 592 00:32:53,400 --> 00:32:56,800 Speaker 1: nicked up at the at the winter because I broke 593 00:32:56,840 --> 00:33:00,040 Speaker 1: the cardinal rule of trading. You never fade seasonal of 594 00:33:00,120 --> 00:33:04,400 Speaker 1: the seasonality that is demanding oil cut to the chase. No, 595 00:33:04,600 --> 00:33:07,920 Speaker 1: I look, yeah, I was in the media. I like 596 00:33:08,000 --> 00:33:10,760 Speaker 1: the below forty dollars. I like it back below thirty dollars. 597 00:33:10,880 --> 00:33:13,680 Speaker 1: As we go, we think that we have this is seriously, 598 00:33:13,880 --> 00:33:17,520 Speaker 1: we have a supply demand dynamic now to retest the 599 00:33:17,600 --> 00:33:22,840 Speaker 1: twenty nine level. Absolutely record gasoline supplies. Guys near record 600 00:33:22,880 --> 00:33:25,320 Speaker 1: crudal supplies for this time of the year, and demand 601 00:33:25,400 --> 00:33:27,440 Speaker 1: is about the fall. I feel like oil lower and 602 00:33:27,480 --> 00:33:29,720 Speaker 1: I think we could tell you what's what's so interesting 603 00:33:29,720 --> 00:33:31,280 Speaker 1: your folks and I don't have any math on this, 604 00:33:31,400 --> 00:33:36,600 Speaker 1: David or anything is short. That's an outlier call now, David, 605 00:33:37,120 --> 00:33:39,040 Speaker 1: more than it was when it was the last time 606 00:33:39,360 --> 00:33:43,120 Speaker 1: to Stephen Short, brilliant, Thank you so much the short 607 00:33:43,320 --> 00:33:56,520 Speaker 1: report and now joining us someone who's going to clear 608 00:33:56,800 --> 00:34:02,920 Speaker 1: the air. We usually speak to standaling calendar about the budget, 609 00:34:03,040 --> 00:34:06,720 Speaker 1: about news in Washington, but now the News is wherever 610 00:34:06,720 --> 00:34:11,400 Speaker 1: the presidential candidates aret stand, is there a demonstrable Secretary 611 00:34:11,480 --> 00:34:16,680 Speaker 1: Clinton fiscal plan or a Mr Trump fiscal plan. Well, 612 00:34:16,680 --> 00:34:20,560 Speaker 1: it's interesting you asked today Tom. Yesterday Trump started talking 613 00:34:20,600 --> 00:34:24,239 Speaker 1: about Donald Trump excuse me, started talking about he was 614 00:34:24,239 --> 00:34:28,200 Speaker 1: going to double the amount that that Hillary was going 615 00:34:28,239 --> 00:34:32,600 Speaker 1: to spend on infrastructure. That would be five and fifty 616 00:34:32,680 --> 00:34:34,960 Speaker 1: six hundred billion dollars. That would be on top of 617 00:34:35,000 --> 00:34:37,719 Speaker 1: a tax cut plan that that would lose between ten 618 00:34:37,960 --> 00:34:42,160 Speaker 1: and thirteen trillion dollars according to various estimates. So the 619 00:34:42,200 --> 00:34:45,239 Speaker 1: fiscal plan for Donald Trump is not complete, but it's 620 00:34:45,280 --> 00:34:49,600 Speaker 1: a big, big deficit increaser, debt increaser um. By contrast, 621 00:34:49,680 --> 00:34:52,600 Speaker 1: the Hillary Clinton plan has been estimated by others, not 622 00:34:52,640 --> 00:34:55,759 Speaker 1: find me, but others as being about break even. But 623 00:34:56,000 --> 00:34:59,399 Speaker 1: I would urge everybody that, uh, you can't take any 624 00:34:59,400 --> 00:35:01,560 Speaker 1: of these things seriously at this point. Okay, I'll go 625 00:35:01,640 --> 00:35:04,000 Speaker 1: with that, but come on, it's back and forth. Joe 626 00:35:04,000 --> 00:35:07,319 Speaker 1: Wisenthal Bloomberg Stand yesterday put out a tweet where he 627 00:35:07,360 --> 00:35:10,279 Speaker 1: goes Donald Trump Kenzie and something like that I paraphrase. 628 00:35:10,800 --> 00:35:16,600 Speaker 1: Is Donald Trump someone associated with modern Keynesian theory? No, 629 00:35:16,760 --> 00:35:20,520 Speaker 1: he's not associated with any economic theory in particular, UH 630 00:35:20,600 --> 00:35:22,759 Speaker 1: and and and in fact, that's been missing from the 631 00:35:22,760 --> 00:35:27,359 Speaker 1: budget debate extasy from the election debate, UH completely, any 632 00:35:27,400 --> 00:35:30,879 Speaker 1: serious discussion about the budget, fiscal policy, economics other than 633 00:35:31,000 --> 00:35:32,800 Speaker 1: I'm going to make it better. And that's both sides. 634 00:35:33,360 --> 00:35:36,239 Speaker 1: But Trump in particular has has gone out of his 635 00:35:36,280 --> 00:35:38,080 Speaker 1: way to say I'm going to cut taxes, I'm going 636 00:35:38,160 --> 00:35:40,239 Speaker 1: to spend more. I'm not going to touch Medicare and 637 00:35:40,280 --> 00:35:44,120 Speaker 1: Social Security. I think they should be increased. If anything, UM, 638 00:35:44,600 --> 00:35:47,440 Speaker 1: I don't think it's Kenzie and I think it's political 639 00:35:48,160 --> 00:35:49,960 Speaker 1: that is, to try to appeal to as many different 640 00:35:49,960 --> 00:35:53,840 Speaker 1: groups as possible, and it's just not doable given the 641 00:35:53,880 --> 00:35:55,760 Speaker 1: current state of the of the economy and the current 642 00:35:55,800 --> 00:35:58,279 Speaker 1: state of the of the budget. Stand David Gurray here, 643 00:35:58,320 --> 00:36:00,040 Speaker 1: always great to talk to you. I tell you we 644 00:36:00,120 --> 00:36:01,879 Speaker 1: gotta stop meeting this way. That is, whenever we talk 645 00:36:01,960 --> 00:36:04,040 Speaker 1: about the prospect of a government shutdown. You're the man, 646 00:36:04,239 --> 00:36:07,560 Speaker 1: the man that we call it's happening again. You're writing 647 00:36:07,600 --> 00:36:10,279 Speaker 1: about that the chances of this happening aren't great, but 648 00:36:10,560 --> 00:36:12,319 Speaker 1: there are chances that it could happen here in the 649 00:36:12,360 --> 00:36:14,360 Speaker 1: next few months. And I was reading your most recent 650 00:36:14,360 --> 00:36:17,640 Speaker 1: piece on this, and you wrote that a shutdown would 651 00:36:17,640 --> 00:36:20,279 Speaker 1: put Donald Trump in a very difficult spot. He'd either 652 00:36:20,320 --> 00:36:22,600 Speaker 1: have to support Republican leadership that wouldn't seem to be 653 00:36:22,600 --> 00:36:24,360 Speaker 1: in control, or you'd have to criticize it, but the 654 00:36:24,360 --> 00:36:27,560 Speaker 1: GOP House and Senate majorities in further jeopardy. Look at 655 00:36:27,600 --> 00:36:32,000 Speaker 1: the news from last night. Here's Donald Trump seemingly throwing 656 00:36:32,000 --> 00:36:36,359 Speaker 1: his support behind Paul Ryan's rival, then saying he does 657 00:36:36,440 --> 00:36:40,600 Speaker 1: not intend to support Paul Ryan the Speaker of the House. Uh, 658 00:36:41,680 --> 00:36:43,680 Speaker 1: I hate to say, kind of negates your argument here. 659 00:36:43,719 --> 00:36:46,320 Speaker 1: We already have Donald Trump here going against the Republican 660 00:36:46,400 --> 00:36:49,440 Speaker 1: leadership on Capitol Hill. No, it doesn't negate it at all. 661 00:36:49,480 --> 00:36:52,160 Speaker 1: First of all, let's just say that we remind everybody 662 00:36:52,160 --> 00:36:55,000 Speaker 1: that are that that my piece was published on Sunday 663 00:36:55,160 --> 00:36:57,760 Speaker 1: and Trump took to it. Took so Tuesday to decide 664 00:36:57,800 --> 00:36:59,799 Speaker 1: that Paul Ryan wasn't his guy. And one of the 665 00:36:59,800 --> 00:37:01,480 Speaker 1: things I said in the piece was that it's it's 666 00:37:01,640 --> 00:37:04,520 Speaker 1: entirely possible that rather than feel as if he's got 667 00:37:04,560 --> 00:37:06,960 Speaker 1: to support the Republican leadership, he may just decide to 668 00:37:07,239 --> 00:37:10,799 Speaker 1: break with him. And you wouldn't he would seem to 669 00:37:10,800 --> 00:37:13,160 Speaker 1: indicate from what he said yesterday that breaking with him 670 00:37:13,200 --> 00:37:16,200 Speaker 1: is what he's gonna do. Uh. Now, let's let's not 671 00:37:16,280 --> 00:37:18,440 Speaker 1: take one day in the campaign is an indication of 672 00:37:18,680 --> 00:37:21,279 Speaker 1: what's going to happen, because anything. What what we know 673 00:37:21,360 --> 00:37:24,480 Speaker 1: for sure is that this campaign is as variable as possible, 674 00:37:24,520 --> 00:37:27,120 Speaker 1: and that Trump in particular doesn't seem to remember from 675 00:37:27,160 --> 00:37:29,000 Speaker 1: one day to another what he's promised and what he 676 00:37:29,040 --> 00:37:31,239 Speaker 1: said he's gonna do. So there could be a Kumbaya 677 00:37:31,360 --> 00:37:35,040 Speaker 1: moment as we're talking over the radio. Um, But let's 678 00:37:35,080 --> 00:37:37,239 Speaker 1: get back to the basic thing here, that is that 679 00:37:37,640 --> 00:37:40,920 Speaker 1: a shutdown is not impossible given the logistics. That is, 680 00:37:40,960 --> 00:37:43,600 Speaker 1: they've only got about nine or ten full legislative days 681 00:37:43,640 --> 00:37:48,959 Speaker 1: by the time Congress gets back in September before Yeah, 682 00:37:49,200 --> 00:37:51,800 Speaker 1: you know, I mean they're there their home from basically 683 00:37:51,880 --> 00:37:54,680 Speaker 1: the beginning of July to the Labor Day. It's uh, 684 00:37:54,760 --> 00:37:57,000 Speaker 1: they would say they're working, but they're you know, they're 685 00:37:57,040 --> 00:38:01,120 Speaker 1: also um and and even the days that they're here 686 00:38:01,160 --> 00:38:03,080 Speaker 1: in Washington, they're not going to be four working days. 687 00:38:03,120 --> 00:38:05,439 Speaker 1: They don't uh In some days they don't take votes 688 00:38:05,440 --> 00:38:07,160 Speaker 1: in the House until after six thirty. The other days 689 00:38:07,200 --> 00:38:11,359 Speaker 1: they won't take votes in the House after four pm. Right, 690 00:38:11,760 --> 00:38:15,560 Speaker 1: Um so, uh, that's why you can't do any one 691 00:38:15,600 --> 00:38:17,919 Speaker 1: issue as as Tom and I have talked for many 692 00:38:18,000 --> 00:38:21,480 Speaker 1: years about this, any one emotional issue like some of 693 00:38:21,520 --> 00:38:24,319 Speaker 1: which the Republicans have already raised, could easily throw a 694 00:38:24,320 --> 00:38:27,360 Speaker 1: monkey ranch into the into this the plan of preventing 695 00:38:27,360 --> 00:38:29,759 Speaker 1: a government shutdown. And that's what I was trying to say, 696 00:38:29,760 --> 00:38:32,920 Speaker 1: which is you can't dismiss it at hand. I wonder 697 00:38:32,960 --> 00:38:35,040 Speaker 1: what the biggest cost here is that you see if 698 00:38:35,080 --> 00:38:37,360 Speaker 1: if there is a shutdown is the biggest cost political? 699 00:38:37,880 --> 00:38:40,120 Speaker 1: I think of the American people and their faith in 700 00:38:40,400 --> 00:38:45,040 Speaker 1: Congress right now, so minimal? Can it go any lower? Well? Yeah, 701 00:38:45,080 --> 00:38:46,680 Speaker 1: I mean it's got a few percentage points, what's it, 702 00:38:46,800 --> 00:38:49,279 Speaker 1: nine or ten percent approval rating for Congress, so they've 703 00:38:49,280 --> 00:38:51,960 Speaker 1: got a little ways to go. Um it a lot, 704 00:38:52,000 --> 00:38:54,880 Speaker 1: looks short term, the political cost will be the greatest, 705 00:38:55,520 --> 00:38:58,040 Speaker 1: especially because the Republicans are likely to get blamed given 706 00:38:58,080 --> 00:38:59,680 Speaker 1: the baggage and the fact that they've been blamed for 707 00:38:59,680 --> 00:39:02,080 Speaker 1: the last few shutdowns over the you know, since New English. 708 00:39:02,160 --> 00:39:04,439 Speaker 1: This time, If this last more than two or three weeks, 709 00:39:04,480 --> 00:39:07,600 Speaker 1: it'll start to have an econ impact economic impact as 710 00:39:07,640 --> 00:39:10,920 Speaker 1: a government contract to start to crept down operations. Stan, calendar, 711 00:39:11,080 --> 00:39:14,120 Speaker 1: let me ask you the basic question, Are my taxes 712 00:39:14,239 --> 00:39:17,440 Speaker 1: going up um in the next six months? No, but 713 00:39:17,680 --> 00:39:20,759 Speaker 1: um in the next five years almost certainly, I mean, 714 00:39:20,800 --> 00:39:23,560 Speaker 1: no matter who gets elected. Is it back to Rockefeller? 715 00:39:23,640 --> 00:39:25,480 Speaker 1: I mean, are we back to the marginal rate? My 716 00:39:25,520 --> 00:39:29,160 Speaker 1: father was No, No, we're not. We're not talking about 717 00:39:29,200 --> 00:39:32,920 Speaker 1: the pre Reagan rates. But um, there won't be comprehensive 718 00:39:32,960 --> 00:39:35,880 Speaker 1: tax reform unless there's some increase in rates um to 719 00:39:36,000 --> 00:39:39,480 Speaker 1: cover the the elimination of some of the of a 720 00:39:39,520 --> 00:39:42,520 Speaker 1: variety of other provisions. Um. So rachel will go up 721 00:39:42,560 --> 00:39:45,359 Speaker 1: a little bit. Uh, and and the total effect will 722 00:39:45,400 --> 00:39:48,000 Speaker 1: be you'll be paying higher taxes because some of the 723 00:39:48,120 --> 00:39:50,440 Speaker 1: deductions and credits will go away as well. Oh you're kidding. 724 00:39:51,160 --> 00:39:54,239 Speaker 1: I'm shocked. Stan set a calendar with us about the 725 00:39:54,239 --> 00:39:58,960 Speaker 1: elimination of deductions in credits. San calendar with US fiscal policy. 726 00:39:59,560 --> 00:40:02,840 Speaker 1: I note just in the CBO site stand corpus MSL 727 00:40:02,880 --> 00:40:06,279 Speaker 1: group that there's no discussion of presidential politics or the 728 00:40:06,320 --> 00:40:09,279 Speaker 1: CBO wouldn't do that. But buried at the bottom of 729 00:40:09,320 --> 00:40:13,000 Speaker 1: their their their page is something that matters for President 730 00:40:13,040 --> 00:40:17,600 Speaker 1: Clinton or matters for President Trump, which is potential GDP 731 00:40:18,440 --> 00:40:23,239 Speaker 1: and underlying inputs, which is really pretty arcane, but it 732 00:40:23,360 --> 00:40:29,680 Speaker 1: goes stand to the guestimate forward. You own this territory. 733 00:40:29,719 --> 00:40:34,040 Speaker 1: Can we make an intelligent guestimate now like we did 734 00:40:34,120 --> 00:40:36,760 Speaker 1: ten and twenty years ago? Or is it just hopeless? 735 00:40:37,840 --> 00:40:41,120 Speaker 1: Hopeless is probably too strong a term. But um, really, 736 00:40:41,480 --> 00:40:44,160 Speaker 1: when you're talking about projecting the US economy twenty years out, 737 00:40:44,520 --> 00:40:47,720 Speaker 1: you're talking about something that's pure fantasy. You're talking about, 738 00:40:47,760 --> 00:40:51,120 Speaker 1: you know, multiple elections, You're talking about multiple international incidents. 739 00:40:51,120 --> 00:40:52,959 Speaker 1: You're talking about a global as opposed to a close 740 00:40:53,080 --> 00:40:56,799 Speaker 1: you know, domestic economy go out eight years probably not, 741 00:40:56,960 --> 00:40:59,319 Speaker 1: I would say anything mong longer than two or three 742 00:40:59,360 --> 00:41:03,719 Speaker 1: is is pure guesswork. Uh and and and becomes increasingly 743 00:41:04,040 --> 00:41:07,360 Speaker 1: less reliable the longer you get out. Um. I mean, look, 744 00:41:07,640 --> 00:41:09,919 Speaker 1: you you use the word fiscal policy a couple of times. 745 00:41:09,960 --> 00:41:12,560 Speaker 1: They're ready what fiscal policy? I mean the fiscal policy 746 00:41:12,600 --> 00:41:14,879 Speaker 1: we're using now is is basically the same one we've 747 00:41:14,880 --> 00:41:17,359 Speaker 1: had for the last five years because Congress and then 748 00:41:17,400 --> 00:41:19,240 Speaker 1: the President have been able to get their act together 749 00:41:19,280 --> 00:41:21,560 Speaker 1: on coming to coming up with a budget that's relevant 750 00:41:21,880 --> 00:41:23,719 Speaker 1: to either where we are now or where they think 751 00:41:23,760 --> 00:41:26,200 Speaker 1: we're going, right, Stan, let me have you forecast something 752 00:41:26,239 --> 00:41:27,560 Speaker 1: that I think might be a little bit easier. And 753 00:41:27,640 --> 00:41:29,920 Speaker 1: that is what this budget process is going to look like. 754 00:41:29,920 --> 00:41:33,440 Speaker 1: We have had cr continuing resolution after continuing resolution. It's 755 00:41:33,440 --> 00:41:35,200 Speaker 1: become the order of the day. We've had a time 756 00:41:35,239 --> 00:41:39,680 Speaker 1: and time again. Is this government now relying on that completely? 757 00:41:39,680 --> 00:41:41,080 Speaker 1: In other words, are you we ever going to see 758 00:41:41,120 --> 00:41:43,520 Speaker 1: return to the kind of appropriations process, the kind of 759 00:41:43,520 --> 00:41:45,440 Speaker 1: budgeting process that we've had in the past, or is 760 00:41:45,480 --> 00:41:49,040 Speaker 1: this the new normal? H? This is the new normal. Um, 761 00:41:49,160 --> 00:41:52,600 Speaker 1: there's no incentive to do real appropriations. Uh. The impact 762 00:41:52,719 --> 00:41:55,759 Speaker 1: is a disincentive to do it. Um. And let me 763 00:41:55,760 --> 00:41:58,959 Speaker 1: take it a little longer to the larger point, David, 764 00:41:59,040 --> 00:42:01,000 Speaker 1: And that is the not only you're going to see, 765 00:42:01,000 --> 00:42:03,480 Speaker 1: not individual appropriations very often. You're not going to see 766 00:42:03,480 --> 00:42:06,279 Speaker 1: a budget anytime soon. Uh. You know, we haven't had 767 00:42:06,320 --> 00:42:08,840 Speaker 1: one for five years or so. And Congress and the president. 768 00:42:08,960 --> 00:42:10,920 Speaker 1: Congress in particular just isn't going to be able to 769 00:42:10,960 --> 00:42:12,839 Speaker 1: get its act together to come up with to get 770 00:42:12,840 --> 00:42:15,480 Speaker 1: an agreement on consensus on anything. So when they talk 771 00:42:15,520 --> 00:42:17,759 Speaker 1: about changing the budget process to fix it, don't believe 772 00:42:17,760 --> 00:42:20,040 Speaker 1: it when they talk about regular order, don't believe it. 773 00:42:20,280 --> 00:42:22,120 Speaker 1: We're gonna muddle through and it's all going to be 774 00:42:22,160 --> 00:42:24,360 Speaker 1: on the monetary side, that that's going to be the 775 00:42:24,440 --> 00:42:27,160 Speaker 1: controlling or trying to control the economy. And is anybody 776 00:42:27,239 --> 00:42:29,000 Speaker 1: safe for you upset about that or does it seem 777 00:42:29,080 --> 00:42:31,320 Speaker 1: like when you're on Capitol Hill, you talk to representative, 778 00:42:31,360 --> 00:42:33,520 Speaker 1: you talk to senators, they're okay with the fact that 779 00:42:33,520 --> 00:42:36,840 Speaker 1: that's the new order of the day. Um they're not 780 00:42:36,880 --> 00:42:38,920 Speaker 1: okay with it, but they're they're less okay with what 781 00:42:39,040 --> 00:42:41,920 Speaker 1: the changes might be. I mean, I've testified in front 782 00:42:41,920 --> 00:42:43,440 Speaker 1: of the House and sent a budget committee this year 783 00:42:43,440 --> 00:42:45,719 Speaker 1: about how to change the process, and what I've told 784 00:42:45,760 --> 00:42:48,280 Speaker 1: them is don't do it, because you're going to disagree 785 00:42:48,280 --> 00:42:50,040 Speaker 1: on it. I mean, there's no agreement of consensus on 786 00:42:50,080 --> 00:42:51,960 Speaker 1: what to do or how to do it anyway, So 787 00:42:52,000 --> 00:42:53,880 Speaker 1: all you're gonna do is provide a pool a cruel 788 00:42:53,880 --> 00:42:57,000 Speaker 1: hoax to voters who think that you're making things better. Um, 789 00:42:57,360 --> 00:43:00,160 Speaker 1: So muddle along is I think going to be the 790 00:43:00,160 --> 00:43:02,040 Speaker 1: the order of the day, probably through the end of 791 00:43:02,080 --> 00:43:04,200 Speaker 1: the decade. So they had a hearing with you, but 792 00:43:04,320 --> 00:43:07,200 Speaker 1: not a hearing on the President's budget. Right. That was 793 00:43:07,280 --> 00:43:08,879 Speaker 1: one of the things I pointed out to them and said, 794 00:43:08,920 --> 00:43:11,440 Speaker 1: how is it possible that they invited me to testify 795 00:43:11,520 --> 00:43:14,680 Speaker 1: but not the director of the Office Management and Budget. Unbelievable. 796 00:43:14,800 --> 00:43:19,319 Speaker 1: Um I called that the political equivalent of Hutzbah and 797 00:43:19,320 --> 00:43:25,640 Speaker 1: and Tom Kim will explain it. Let's a level four Stan. 798 00:43:25,760 --> 00:43:28,319 Speaker 1: You know, I look at this and we have so 799 00:43:28,800 --> 00:43:32,400 Speaker 1: been through this before. But seriously, what is the urgency? 800 00:43:32,480 --> 00:43:37,279 Speaker 1: We've got Speaker Ryan jousting with Mr Trump and Secretary 801 00:43:37,280 --> 00:43:40,360 Speaker 1: Clinton on Twitter always, you know, to be honest, always 802 00:43:40,360 --> 00:43:45,000 Speaker 1: trying to piece together a democratic coalition. They're the undecided 803 00:43:45,160 --> 00:43:48,800 Speaker 1: and that and they always use your world to create fear. 804 00:43:49,680 --> 00:43:55,040 Speaker 1: Is it valid now to create fear about our fiscal future? 805 00:43:55,640 --> 00:43:59,719 Speaker 1: Or is that overwrought? Over Rought is probably the better 806 00:43:59,719 --> 00:44:02,960 Speaker 1: way to look at it now. All the deficit s 807 00:44:03,000 --> 00:44:06,560 Speaker 1: gold groups will tell you that the debt is still 808 00:44:06,560 --> 00:44:08,840 Speaker 1: an issue and it will be getting bigger over the 809 00:44:08,880 --> 00:44:11,640 Speaker 1: over time. But currently I don't know too many economists 810 00:44:11,640 --> 00:44:14,040 Speaker 1: who think the deficit is a present of GDP is worrisome. 811 00:44:14,080 --> 00:44:16,560 Speaker 1: In fact, many would like it to be larger. Um 812 00:44:16,840 --> 00:44:19,640 Speaker 1: given the slow growth in the economy. UM so it's 813 00:44:19,640 --> 00:44:21,399 Speaker 1: just not going to be much of an issue this year. 814 00:44:21,920 --> 00:44:25,279 Speaker 1: There is, it will re emerge, the deficit and the 815 00:44:25,320 --> 00:44:28,800 Speaker 1: debt eventual debt is emotional as opposed to a substantive 816 00:44:28,800 --> 00:44:31,560 Speaker 1: issue for most voters. But I don't see the candidates 817 00:44:31,560 --> 00:44:33,040 Speaker 1: talking about it because they don't have a clue how 818 00:44:33,080 --> 00:44:35,400 Speaker 1: to deal with it. You know, I see you stand 819 00:44:35,480 --> 00:44:37,319 Speaker 1: as the captain of a ship maybe floating in the 820 00:44:37,360 --> 00:44:40,600 Speaker 1: Potomac taking on whether you're shaking your fist at the heavens, 821 00:44:40,600 --> 00:44:43,160 Speaker 1: reaching these candidates to talk more about this. Do you 822 00:44:43,200 --> 00:44:45,040 Speaker 1: think there's any likelihood that's going to be for all 823 00:44:45,040 --> 00:44:47,160 Speaker 1: the concern about the state of the U. S. Economy, 824 00:44:47,160 --> 00:44:50,600 Speaker 1: all the talk about the U. S worker, his condition, 825 00:44:51,200 --> 00:44:52,759 Speaker 1: what's going to happen to him here in the next 826 00:44:52,840 --> 00:44:55,880 Speaker 1: few years? Why is it? Do you think that politicians 827 00:44:55,920 --> 00:45:00,360 Speaker 1: are not concerned about budget policy, about bipartist ship on 828 00:45:00,360 --> 00:45:03,000 Speaker 1: the hill? Why isn't this coming to the fore Uh? Well, 829 00:45:03,040 --> 00:45:05,040 Speaker 1: bi partisanship has gone out of the way for years, 830 00:45:05,760 --> 00:45:09,000 Speaker 1: has gone to the wayside, you know, for for years now. Um, 831 00:45:09,080 --> 00:45:12,160 Speaker 1: and it's not there just isn't anything, even even in 832 00:45:12,600 --> 00:45:15,839 Speaker 1: the absence of a crisis, is severe crisis, It's not 833 00:45:15,880 --> 00:45:18,839 Speaker 1: likely you're going to get bi partisanship on any issue. Um, 834 00:45:19,160 --> 00:45:21,879 Speaker 1: but the economy. The economy has taken a backseat here 835 00:45:21,880 --> 00:45:25,719 Speaker 1: to highly emotional issues about leadership, about place in the 836 00:45:25,760 --> 00:45:31,560 Speaker 1: world for the country, about some sort of macho patriotism, um, 837 00:45:31,680 --> 00:45:35,040 Speaker 1: and substantive im Are we talking about energy policy? Are 838 00:45:35,040 --> 00:45:37,480 Speaker 1: we talking about the economy? Or we? I mean only 839 00:45:37,520 --> 00:45:39,400 Speaker 1: in the most general terms. And I don't see this 840 00:45:39,480 --> 00:45:43,319 Speaker 1: happening or changing anytime soon. My biggest fear is I said, 841 00:45:43,320 --> 00:45:45,279 Speaker 1: you're gonna need a crisis. How big a crisis that 842 00:45:45,320 --> 00:45:47,279 Speaker 1: we're gonna need? Given the crisis fatigue we've had in 843 00:45:47,280 --> 00:45:49,800 Speaker 1: this country for the last ten years or so? Where's 844 00:45:49,840 --> 00:45:53,200 Speaker 1: the deficit the GDP right now? Two and a half 845 00:45:53,239 --> 00:45:57,640 Speaker 1: three that's like a massive victory lap for all involved. 846 00:45:58,080 --> 00:46:01,320 Speaker 1: Why are we so miserable? Well, Tom, you know, I 847 00:46:01,400 --> 00:46:03,879 Speaker 1: tell you this, A lot of people rationally about this. 848 00:46:04,000 --> 00:46:06,840 Speaker 1: I mean, don't forget going back to the Puritans, a 849 00:46:07,480 --> 00:46:10,719 Speaker 1: government in debt and government and deficit was considered to 850 00:46:10,719 --> 00:46:13,560 Speaker 1: be a corrupt government. And that has maintained its way 851 00:46:13,600 --> 00:46:15,839 Speaker 1: through the American psyche for two hundred and fifty three 852 00:46:15,920 --> 00:46:19,759 Speaker 1: hundred and fifty years. Um, you can't. I can tell 853 00:46:19,800 --> 00:46:21,640 Speaker 1: you from the comments I get on my blog on 854 00:46:21,719 --> 00:46:25,560 Speaker 1: Forbes that, um, you just mentioned that the deficit should 855 00:46:25,560 --> 00:46:29,480 Speaker 1: be higher, and there are people seriously want of removing 856 00:46:29,520 --> 00:46:33,600 Speaker 1: body parts from the author. So um, it's totally Remember 857 00:46:33,640 --> 00:46:37,759 Speaker 1: the Bloomberg audience is more thoughtful about this than the 858 00:46:37,800 --> 00:46:41,320 Speaker 1: average American voter, getting your John Winter pollution there. Yeah, 859 00:46:42,520 --> 00:46:44,759 Speaker 1: but but all of us grew up with this. There 860 00:46:44,800 --> 00:46:47,360 Speaker 1: was always some nut job in the family that was 861 00:46:47,480 --> 00:46:52,040 Speaker 1: quoting six eighty Massachusetts. I mean seriously, I mean, you 862 00:46:52,080 --> 00:46:56,799 Speaker 1: know the theology you speak of is valid. Do you 863 00:46:56,880 --> 00:47:00,400 Speaker 1: see a lessoning of it or that always are fall back? 864 00:47:01,280 --> 00:47:06,359 Speaker 1: The debt to build aircraft carriers is bad? Yeah, look, 865 00:47:06,960 --> 00:47:09,319 Speaker 1: it's the bad part. It's it's we should o you know, 866 00:47:09,360 --> 00:47:11,360 Speaker 1: in spite of the fact that we have ample evidence 867 00:47:11,400 --> 00:47:13,800 Speaker 1: that there are times the government should run a deficit 868 00:47:14,480 --> 00:47:17,360 Speaker 1: and should go into debt. Thank you. Alexander Hamilton's um, 869 00:47:17,760 --> 00:47:21,840 Speaker 1: you know, and we did, we do musicals about him, obviously. Um. 870 00:47:22,120 --> 00:47:25,560 Speaker 1: You know, it's the theology is there, the fear is there, 871 00:47:25,719 --> 00:47:29,359 Speaker 1: and people American voters, the average American voters still make 872 00:47:29,400 --> 00:47:31,640 Speaker 1: that bad analogy, which is I have to balance my 873 00:47:31,719 --> 00:47:34,000 Speaker 1: budget why shouldn't the government And by the way, the 874 00:47:34,000 --> 00:47:36,520 Speaker 1: average American is more in debt than the government is. 875 00:47:36,880 --> 00:47:40,120 Speaker 1: Stand Thanks for the briefing. It's just wonderful to speak 876 00:47:40,160 --> 00:47:45,040 Speaker 1: to you given the volume of noise across both parties 877 00:47:45,680 --> 00:47:50,920 Speaker 1: we've had over the last days and weeks. Thanks for 878 00:47:51,000 --> 00:47:55,360 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 879 00:47:55,520 --> 00:48:00,680 Speaker 1: interviews on iTunes, SoundCloud, or whichever podcast platform them you prefer. 880 00:48:01,239 --> 00:48:04,719 Speaker 1: I'm on Twitter at Tom Keane, Michael McKee is at 881 00:48:04,840 --> 00:48:09,120 Speaker 1: Economy Before the podcast. You can always catch us worldwide. 882 00:48:09,440 --> 00:48:10,480 Speaker 1: I'm Bloomberg Radio