1 00:00:02,640 --> 00:00:05,360 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:24,759 Speaker 1: at Bloomberg dot com. Well the SMP Banks Index this 8 00:00:24,800 --> 00:00:29,000 Speaker 1: year it's up about Citizens Financial, I seventeen billion dollar 9 00:00:29,040 --> 00:00:31,600 Speaker 1: bank based in Providence, Rhode Island or Boston, is up 10 00:00:31,640 --> 00:00:35,239 Speaker 1: about percent this year. To give us an overview of 11 00:00:35,280 --> 00:00:38,080 Speaker 1: what is going on in the corporate and commercial banking business, 12 00:00:38,240 --> 00:00:40,640 Speaker 1: returned to Don McCree, dons vice chairman and head of 13 00:00:40,680 --> 00:00:43,599 Speaker 1: commercial banking for Citizens Financial Group. He joined us live 14 00:00:43,600 --> 00:00:46,519 Speaker 1: in our Bloomberg Interactive Broker Studio. So, Don, we've had 15 00:00:46,600 --> 00:00:50,120 Speaker 1: just a tremendous melt up in financial markets this year. 16 00:00:50,479 --> 00:00:53,920 Speaker 1: How are your corporate customers feeling right now? Do they 17 00:00:53,960 --> 00:00:55,720 Speaker 1: feel like they need to be aggressive on the M 18 00:00:55,720 --> 00:00:57,840 Speaker 1: and A front um It depends on the nature of 19 00:00:57,880 --> 00:01:00,200 Speaker 1: the customer. I think our customers, i'd say, are are 20 00:01:00,280 --> 00:01:03,880 Speaker 1: optimistic in general. Their businesses are performing quite well. Uh, 21 00:01:03,920 --> 00:01:05,920 Speaker 1: they're getting good, good lift, as you said, on their 22 00:01:05,920 --> 00:01:09,200 Speaker 1: stock prices. So all all else being equal, that's not 23 00:01:09,280 --> 00:01:10,880 Speaker 1: a recipe for a lot of M and A. What 24 00:01:10,959 --> 00:01:13,560 Speaker 1: we're seeing in our businesses is with our smaller clients, 25 00:01:13,600 --> 00:01:16,560 Speaker 1: particularly the private clients, M and A is very robust 26 00:01:16,600 --> 00:01:19,080 Speaker 1: as as clients try to get some scale or maybe 27 00:01:19,080 --> 00:01:22,920 Speaker 1: get repositioned to compete in the broader world economy. One 28 00:01:22,920 --> 00:01:25,399 Speaker 1: thing that I thought was really interesting about Citizens is 29 00:01:25,480 --> 00:01:28,399 Speaker 1: that on your commercial sides, you grew commercial loans by 30 00:01:28,400 --> 00:01:33,759 Speaker 1: about twenty one percent over the past few years. Meanwhile 31 00:01:33,800 --> 00:01:37,440 Speaker 1: piers grew only by ten percent. Why how so if 32 00:01:37,480 --> 00:01:40,119 Speaker 1: you go back in our history, we did our public 33 00:01:40,160 --> 00:01:42,720 Speaker 1: offering just about five years ago, and we'll celebrate our 34 00:01:42,720 --> 00:01:45,959 Speaker 1: public offering uh this fall. Um. We had were owned 35 00:01:46,000 --> 00:01:48,160 Speaker 1: by the Royal Bank of Scotland for eight years post 36 00:01:48,160 --> 00:01:51,840 Speaker 1: the financial crisis, and it was quite a withdrawaling type 37 00:01:51,880 --> 00:01:54,400 Speaker 1: of of event for Citizens Banks, so we spent eight 38 00:01:54,480 --> 00:01:57,280 Speaker 1: years basically static. When we did the I p O, 39 00:01:57,400 --> 00:01:59,800 Speaker 1: we decided to accelerate certain of our businesses which hadn't 40 00:01:59,800 --> 00:02:02,480 Speaker 1: grown in the prior eight years, and we also expanded 41 00:02:02,480 --> 00:02:05,080 Speaker 1: regionally into the southeast and into the Midwest and into 42 00:02:05,160 --> 00:02:07,400 Speaker 1: the New York area. So most of our growth has 43 00:02:07,440 --> 00:02:10,880 Speaker 1: been not necessarily within our traditional client base. It's been 44 00:02:10,880 --> 00:02:12,760 Speaker 1: with new clients, which we're adding at a rate of 45 00:02:12,800 --> 00:02:15,280 Speaker 1: about three hundred a year right now, so particularly in 46 00:02:15,320 --> 00:02:17,120 Speaker 1: the higher growth parts of the country. So in the 47 00:02:17,160 --> 00:02:20,120 Speaker 1: M n A front, I know you guys bought Bowstring Advisors. 48 00:02:20,160 --> 00:02:22,919 Speaker 1: I guess it's a second boutique M and A advisory firm. 49 00:02:23,000 --> 00:02:25,960 Speaker 1: So how do you view M and A opportunities in 50 00:02:26,040 --> 00:02:27,800 Speaker 1: kind of the middle market where I think you guys 51 00:02:27,840 --> 00:02:30,000 Speaker 1: tend to do. You know, it's it's terrific and Bowstring 52 00:02:30,040 --> 00:02:33,040 Speaker 1: has been our latest, our latest acquisition, and it's really 53 00:02:33,080 --> 00:02:35,080 Speaker 1: hit the ground running. As I said, a lot of 54 00:02:35,120 --> 00:02:39,519 Speaker 1: private companies are going through ownership changes and and uh 55 00:02:39,639 --> 00:02:42,800 Speaker 1: basically generational transitions. So we think it's a ripe area 56 00:02:42,880 --> 00:02:44,919 Speaker 1: for M and A in general. What we've tried to 57 00:02:44,960 --> 00:02:47,280 Speaker 1: do is we've added capability, is add firms that have 58 00:02:47,360 --> 00:02:50,040 Speaker 1: specialties in certain industries and specialties in the middle market. 59 00:02:50,280 --> 00:02:52,600 Speaker 1: And you probably see us continue to do that. And 60 00:02:52,880 --> 00:02:54,920 Speaker 1: if I look at my client base, I've got about 61 00:02:54,960 --> 00:02:57,720 Speaker 1: three thousand private companies at the core of my client base, 62 00:02:58,200 --> 00:03:00,600 Speaker 1: and what we've been trying to do the last several 63 00:03:00,680 --> 00:03:03,520 Speaker 1: years is bring a set of high quality solutions and 64 00:03:03,560 --> 00:03:06,560 Speaker 1: advisory capabilities to those clients as they as they kind 65 00:03:06,560 --> 00:03:09,320 Speaker 1: of change their the nature of their businesses. Where where 66 00:03:09,320 --> 00:03:10,799 Speaker 1: are we in the M and A cycle? Was last 67 00:03:10,880 --> 00:03:12,960 Speaker 1: year the peak? I don't think so, based on what 68 00:03:12,960 --> 00:03:15,520 Speaker 1: we're seeing in our pipelines. UM it's our pipelines are 69 00:03:15,600 --> 00:03:17,960 Speaker 1: much stronger this year than they were last year. UM 70 00:03:17,960 --> 00:03:19,920 Speaker 1: and we think that again, it might be different when 71 00:03:19,960 --> 00:03:21,960 Speaker 1: you're talking about large company m and A and mid 72 00:03:22,000 --> 00:03:23,680 Speaker 1: sized company m and A. We think we've got several 73 00:03:23,760 --> 00:03:25,720 Speaker 1: years to run on the mid company size. Are there 74 00:03:25,760 --> 00:03:28,919 Speaker 1: any sectors in particular that you guys are focusing on anything? 75 00:03:28,960 --> 00:03:31,600 Speaker 1: There might be areas of activity. We're seeing a lot 76 00:03:31,639 --> 00:03:34,320 Speaker 1: of activity and business services, which is what boasting is 77 00:03:34,360 --> 00:03:37,160 Speaker 1: at its core. We're seeing a lot of activity actually 78 00:03:37,240 --> 00:03:39,920 Speaker 1: right now in gaming where we have a very strong presence, 79 00:03:39,920 --> 00:03:44,040 Speaker 1: and we're seeing increasing amount of activity in anything tech. UM. So, 80 00:03:44,040 --> 00:03:45,680 Speaker 1: so those are the three that we're really focused on. 81 00:03:45,800 --> 00:03:47,800 Speaker 1: I want to go back to the idea of growing 82 00:03:48,040 --> 00:03:50,640 Speaker 1: your loans and your customer base, and I'm wondering You're 83 00:03:50,640 --> 00:03:52,680 Speaker 1: doing so at a time of a lot of competition, 84 00:03:52,760 --> 00:03:55,200 Speaker 1: both from other regional banks as well as the big banks. 85 00:03:55,240 --> 00:03:57,640 Speaker 1: They're looking to expand their loan books. So how do 86 00:03:57,720 --> 00:04:01,920 Speaker 1: you win customers without loosening your standards to a degree 87 00:04:01,960 --> 00:04:03,600 Speaker 1: that makes you con So the way the way we 88 00:04:03,640 --> 00:04:05,520 Speaker 1: talk about it is Number one, we need to be 89 00:04:05,520 --> 00:04:07,440 Speaker 1: better every day than any one of our competitors is, 90 00:04:07,440 --> 00:04:09,480 Speaker 1: so we have to be intense around our coverage efforts 91 00:04:09,480 --> 00:04:13,160 Speaker 1: and really be bringing those solutions to our clients. Number Two, 92 00:04:13,520 --> 00:04:15,920 Speaker 1: I think we occupy an interesting part of the business. 93 00:04:16,000 --> 00:04:19,719 Speaker 1: You know, our core customer, whether it evaluation or transaction 94 00:04:19,800 --> 00:04:22,919 Speaker 1: size is three hundred million to seven hundred and fifty million. 95 00:04:23,200 --> 00:04:25,560 Speaker 1: That frankly doesn't get the attention of the big guys 96 00:04:25,600 --> 00:04:28,200 Speaker 1: because the transaction sizes are too small, and we think 97 00:04:28,200 --> 00:04:30,960 Speaker 1: we have better experts against that that portion of the 98 00:04:30,960 --> 00:04:33,400 Speaker 1: market that some of our other competitions. So we just 99 00:04:33,440 --> 00:04:35,600 Speaker 1: think we we've been on a real talent hiring war 100 00:04:35,680 --> 00:04:37,480 Speaker 1: for the last four years, brought a lot of very 101 00:04:37,520 --> 00:04:40,200 Speaker 1: experienced people in and we're just covering the market in 102 00:04:40,240 --> 00:04:43,080 Speaker 1: a really intense way. I remember seeing just maybe the 103 00:04:43,160 --> 00:04:45,760 Speaker 1: last weekek or two and Actually, I've seen over the 104 00:04:45,839 --> 00:04:48,839 Speaker 1: less several months articles about JP Morgan Goldman's acts, you know, 105 00:04:48,920 --> 00:04:52,320 Speaker 1: hiring bankers and opening you know, offices, banking offices and 106 00:04:52,720 --> 00:04:55,800 Speaker 1: secondary third tertertiary markets or they wouldn't you know, do 107 00:04:55,880 --> 00:04:58,599 Speaker 1: business before. Are you seeing that at yr level? We are, 108 00:04:58,760 --> 00:05:02,120 Speaker 1: But you know, we've can peted against all those companies forever. 109 00:05:02,200 --> 00:05:04,200 Speaker 1: They're in all of our marketplaces and whether they're they're 110 00:05:04,200 --> 00:05:06,880 Speaker 1: physically or whether they're flying bankers in who are industry experts, 111 00:05:07,160 --> 00:05:09,680 Speaker 1: we go. We go against everybody. The regional is, the 112 00:05:09,720 --> 00:05:13,039 Speaker 1: big investment banks, the small community banks every single day. 113 00:05:13,279 --> 00:05:16,960 Speaker 1: So we haven't seen a real change in the individual 114 00:05:17,000 --> 00:05:20,200 Speaker 1: competitors in the marketplaces. There's competition everywhere, as you said, 115 00:05:20,200 --> 00:05:23,160 Speaker 1: and it's just it's just a brutal market, all right, 116 00:05:23,279 --> 00:05:26,320 Speaker 1: Don mcgree, And he's speaking as a third year veteran 117 00:05:26,920 --> 00:05:30,440 Speaker 1: and somebody who used to run corporate banking at JP Morgan's, 118 00:05:30,520 --> 00:05:32,560 Speaker 1: so he knows what he's talking about when you're talking 119 00:05:32,600 --> 00:05:34,960 Speaker 1: about some of your competitors. Don McCree, thank you so 120 00:05:35,040 --> 00:05:37,200 Speaker 1: much for being with us here. Are really great to 121 00:05:37,200 --> 00:05:39,480 Speaker 1: get your perspective. Don mccree's vice chairman and head of 122 00:05:39,520 --> 00:05:42,560 Speaker 1: Commercial Banking, its Citizens Financial Group, which is based in 123 00:05:42,920 --> 00:05:45,239 Speaker 1: I don't know. I'm gonna shrug. I mean it says Providence, 124 00:05:45,279 --> 00:06:01,960 Speaker 1: Rhode Island, but I hear perhaps it's more Boston. I 125 00:06:01,960 --> 00:06:04,960 Speaker 1: gotta say, Paul Crude is a confusing story right now. 126 00:06:05,000 --> 00:06:07,799 Speaker 1: I'm looking at CREWD traded on the Nimax, down about 127 00:06:07,800 --> 00:06:09,840 Speaker 1: three quarters of one percentage point. I'm just trying to 128 00:06:09,880 --> 00:06:13,080 Speaker 1: figure out, though, what's the bigger influence here, the idea 129 00:06:13,200 --> 00:06:15,599 Speaker 1: of trade wars being back on the table, the U 130 00:06:15,680 --> 00:06:17,880 Speaker 1: S and China failing to come to some sort of agreement, 131 00:06:18,279 --> 00:06:21,720 Speaker 1: or are we concerned about the Iranian sanctions and the 132 00:06:21,760 --> 00:06:25,360 Speaker 1: contaminated oil from Russia here to way in, Dr ellen Wald, 133 00:06:25,480 --> 00:06:29,640 Speaker 1: president of Transversal Consulting, also a nonresident Senior Fellow at 134 00:06:29,680 --> 00:06:32,400 Speaker 1: the Atlantic Councils of Global Energy Center, and a Bloomberg 135 00:06:32,440 --> 00:06:35,920 Speaker 1: Opinion calumnist. Dr Wall, thank you so much for joining us. 136 00:06:35,920 --> 00:06:39,360 Speaker 1: So what is the dominant factor here over the next 137 00:06:39,440 --> 00:06:42,719 Speaker 1: few weeks that will drive oil prices? I think the 138 00:06:42,800 --> 00:06:47,520 Speaker 1: dominant factor in futures trading last night was definitely the 139 00:06:47,880 --> 00:06:51,400 Speaker 1: terroriffts issue with China and fears that this could cause 140 00:06:51,400 --> 00:06:55,240 Speaker 1: a recession and that that will take demand oil demand. 141 00:06:55,600 --> 00:06:58,800 Speaker 1: But now I think we're seeing traders and and also 142 00:06:58,880 --> 00:07:01,920 Speaker 1: computer algorithms to their senses and realize that there's a 143 00:07:01,960 --> 00:07:04,080 Speaker 1: whole lot more going on in the soil market than 144 00:07:04,160 --> 00:07:07,120 Speaker 1: just fears of a recession. And like you mentioned, we've 145 00:07:07,160 --> 00:07:10,120 Speaker 1: got these sanctions on Iran which everyone knows are going 146 00:07:10,160 --> 00:07:12,840 Speaker 1: to take some amount of oil off the market, but 147 00:07:12,960 --> 00:07:16,560 Speaker 1: we're just not quite sure yet exactly how much part 148 00:07:16,600 --> 00:07:19,960 Speaker 1: of that has to do with Iran's importers. Because this 149 00:07:20,040 --> 00:07:23,160 Speaker 1: isn't an oil embargo. The United States is not sending ships, 150 00:07:23,200 --> 00:07:26,160 Speaker 1: despite the fact they did just send several aircraft carriers 151 00:07:26,160 --> 00:07:28,760 Speaker 1: to the Middle East. They're not sending ships h to 152 00:07:29,800 --> 00:07:33,200 Speaker 1: basically embargo that oil. It all depends on whether Iran's 153 00:07:33,320 --> 00:07:38,000 Speaker 1: importers decided to stop importing that oil. And right now 154 00:07:38,040 --> 00:07:41,200 Speaker 1: it looks like the big ones in question are going 155 00:07:41,240 --> 00:07:44,040 Speaker 1: to be India and China. Those are the biggest importers 156 00:07:44,120 --> 00:07:47,680 Speaker 1: of Iranian oil, and India seems to have halted its 157 00:07:47,720 --> 00:07:50,880 Speaker 1: imports for the month of May. But a lot I 158 00:07:50,880 --> 00:07:53,520 Speaker 1: think those depend on what happens with the Indian election. 159 00:07:53,600 --> 00:07:58,000 Speaker 1: If Moody loses the election of COMS party is more powerful. 160 00:07:58,040 --> 00:07:59,880 Speaker 1: You know, they could have an impact on whether or 161 00:08:00,120 --> 00:08:02,480 Speaker 1: they want to adhere to these U S nations. Right now, 162 00:08:02,720 --> 00:08:06,400 Speaker 1: they've been very compliant and they've halted imports for me, 163 00:08:06,560 --> 00:08:09,920 Speaker 1: but that's not necessarily a given going forward. Then with 164 00:08:10,000 --> 00:08:13,640 Speaker 1: China will definitely see a decrease in some respects. But 165 00:08:13,760 --> 00:08:16,920 Speaker 1: China's got a whole lot of Iranian oil actually stored 166 00:08:17,400 --> 00:08:21,360 Speaker 1: in a port right near China, and they can basically 167 00:08:21,480 --> 00:08:24,480 Speaker 1: tap into that oil. It's not it hasn't passed through 168 00:08:24,480 --> 00:08:27,800 Speaker 1: customs yet, so it hasn't actually been imported to give 169 00:08:27,880 --> 00:08:31,080 Speaker 1: me to China, and they could basically just tap into 170 00:08:31,120 --> 00:08:32,800 Speaker 1: that at which they have been doing. But there's a 171 00:08:32,800 --> 00:08:36,840 Speaker 1: lot of oil there, so we could see UH imports 172 00:08:36,840 --> 00:08:41,120 Speaker 1: from China continue for some time. Um. Then we've got Venezuela. 173 00:08:41,440 --> 00:08:43,480 Speaker 1: What in the world is going on there of the 174 00:08:43,559 --> 00:08:46,840 Speaker 1: US leaning on India to try to get them to 175 00:08:46,840 --> 00:08:49,439 Speaker 1: stop importing Venezuelan oil, but look, you can't ask them 176 00:08:49,440 --> 00:08:53,120 Speaker 1: to stop importing Iranian and Venezuelan oil at the same time. 177 00:08:53,800 --> 00:08:57,080 Speaker 1: Plus we've seen this, um, you know, we've seen a 178 00:08:57,160 --> 00:09:00,199 Speaker 1: lot of uh, you know, action going on in Venezuela 179 00:09:00,280 --> 00:09:04,280 Speaker 1: that hasn't reached the oil importing the oil producing areas yet, 180 00:09:04,520 --> 00:09:09,600 Speaker 1: but it could, particularly if Guido isn't successful in in Caracas. 181 00:09:09,640 --> 00:09:12,560 Speaker 1: There's definitely a possibility, and I think that the pdvs 182 00:09:12,640 --> 00:09:16,840 Speaker 1: A people know this, that the tensions could move out 183 00:09:16,920 --> 00:09:21,520 Speaker 1: of Caracas and into other areas, particularly the oil producing regions. 184 00:09:21,559 --> 00:09:24,440 Speaker 1: So dr world, How much leverage does the United States 185 00:09:24,480 --> 00:09:27,440 Speaker 1: have on some of these companies like China, like India 186 00:09:27,480 --> 00:09:31,640 Speaker 1: about you know where they import their oil from. Yeah, 187 00:09:31,760 --> 00:09:35,400 Speaker 1: it really depends, and um I think it really does depend. 188 00:09:35,640 --> 00:09:39,360 Speaker 1: So some of the big importers in in India, We've 189 00:09:39,400 --> 00:09:43,000 Speaker 1: got Naraya, which is actually owned by Rossnas mostly and 190 00:09:43,080 --> 00:09:45,319 Speaker 1: so that's going to be very difficult to convince them 191 00:09:45,320 --> 00:09:48,520 Speaker 1: to stop importing venezuela and oil because and in fact, 192 00:09:48,559 --> 00:09:51,720 Speaker 1: what we've seen happen is that China and Russia are 193 00:09:51,720 --> 00:09:55,160 Speaker 1: actually importing venezuela and oil and then reselling it. So, 194 00:09:55,520 --> 00:09:57,679 Speaker 1: you know, we may not necessarily be able to even 195 00:09:57,720 --> 00:10:01,520 Speaker 1: track whether India is bo buying venezuelan oil. That's just 196 00:10:01,640 --> 00:10:03,360 Speaker 1: you know, it looks like they're buying from China or 197 00:10:03,360 --> 00:10:05,040 Speaker 1: it looks like it's buying from Russia. But it's really 198 00:10:05,120 --> 00:10:08,720 Speaker 1: Venezuelan and and this is a big issue, and so 199 00:10:08,760 --> 00:10:12,400 Speaker 1: the US means a lot on its diplomatic influence. But um, 200 00:10:12,440 --> 00:10:15,440 Speaker 1: you know, we know that the Commerce Secretary is actually 201 00:10:15,480 --> 00:10:20,120 Speaker 1: in India right now for a um for finance confidence 202 00:10:20,240 --> 00:10:23,280 Speaker 1: and part to state in a trade form. And you 203 00:10:23,280 --> 00:10:26,400 Speaker 1: know he's saying, look, the US government cannot you know, 204 00:10:26,559 --> 00:10:29,880 Speaker 1: make sure that you get oil at a discount. Just 205 00:10:29,920 --> 00:10:33,199 Speaker 1: don't do that. That's not how it works. And India 206 00:10:33,200 --> 00:10:36,600 Speaker 1: is really looking for some kind of They're saying, we'll 207 00:10:36,640 --> 00:10:39,679 Speaker 1: look give us something. We want to comply with your sanctions, 208 00:10:39,720 --> 00:10:42,319 Speaker 1: but you know we need something for from you. We're 209 00:10:42,320 --> 00:10:46,439 Speaker 1: speaking with Dr eleen walda president of Transversal Consulting, and 210 00:10:46,559 --> 00:10:48,520 Speaker 1: I just want to take a step back because there 211 00:10:48,559 --> 00:10:52,760 Speaker 1: are all of these idiosyncratic stories, uh specific to nations 212 00:10:52,960 --> 00:10:58,760 Speaker 1: and geopolitical battles. I'm trying to understand, are we at 213 00:10:58,800 --> 00:11:02,880 Speaker 1: a greater risk of an oil glut or are we 214 00:11:03,040 --> 00:11:06,120 Speaker 1: one crisis away from an oil shortage? Even this seems 215 00:11:06,120 --> 00:11:09,280 Speaker 1: like a very basic question, and yet there are many 216 00:11:09,280 --> 00:11:12,680 Speaker 1: different answers that I've gotten to this. It almost depends 217 00:11:12,679 --> 00:11:15,280 Speaker 1: on the day that you ask that question. Because last week, 218 00:11:15,280 --> 00:11:17,640 Speaker 1: when we got the e I A numbers that showed 219 00:11:17,640 --> 00:11:19,280 Speaker 1: a huge bill that seemed like we're on the verge 220 00:11:19,320 --> 00:11:21,720 Speaker 1: of a massive oil glut. And then if you look 221 00:11:21,840 --> 00:11:25,600 Speaker 1: at um the demand side of the equation, then you're saying, well, look, 222 00:11:25,640 --> 00:11:28,520 Speaker 1: we could be heading to a global recession and that's 223 00:11:28,559 --> 00:11:30,559 Speaker 1: going to tak demand and then we're definitely going to 224 00:11:30,600 --> 00:11:33,400 Speaker 1: be in an oil glut. So so so it really depends, 225 00:11:33,440 --> 00:11:35,360 Speaker 1: I think what numbers you're looking at and on what 226 00:11:35,520 --> 00:11:37,600 Speaker 1: day of the week. But if you're looking at what's 227 00:11:37,600 --> 00:11:41,480 Speaker 1: coming from Iran, what's happening with Russia, what's happening with Venezuela, 228 00:11:41,800 --> 00:11:44,880 Speaker 1: then you could say, look, we're heading towards a possible 229 00:11:44,920 --> 00:11:48,480 Speaker 1: oil shortage because Iran could be could be down a 230 00:11:48,520 --> 00:11:52,160 Speaker 1: million barrels. Venezuela could you know it could hold production 231 00:11:52,200 --> 00:11:55,200 Speaker 1: at any point. You know, they're they're one oil upgrader 232 00:11:55,320 --> 00:11:58,920 Speaker 1: or malfunction away from from barely putting any oil in 233 00:11:58,960 --> 00:12:02,080 Speaker 1: the market. And then you've got Russia with this contaminated 234 00:12:02,080 --> 00:12:06,240 Speaker 1: oil and they say that they have resumed clean oil sales, 235 00:12:06,280 --> 00:12:09,200 Speaker 1: but but Belarus is saying, look, we're still getting contaminated oil, 236 00:12:09,280 --> 00:12:11,360 Speaker 1: and we don't know what to do with it, So 237 00:12:11,720 --> 00:12:13,720 Speaker 1: if you look at it from that respect, you're saying, well, 238 00:12:13,760 --> 00:12:16,440 Speaker 1: we could be actually in a shortage. Plus, you've got 239 00:12:16,559 --> 00:12:20,959 Speaker 1: Saudi Saudias, You've got a Ramco raising their pricing to 240 00:12:21,080 --> 00:12:24,960 Speaker 1: Asia saying we are will sell you oil in June, 241 00:12:25,320 --> 00:12:27,040 Speaker 1: but we're going to charge more for it because we 242 00:12:27,080 --> 00:12:29,360 Speaker 1: think there's less oil out there. You've got fewer options. 243 00:12:30,320 --> 00:12:32,560 Speaker 1: Dr ellen Wald, thank you so much for joining us. 244 00:12:32,640 --> 00:12:36,439 Speaker 1: Dr walda's president Transversal Consulting. She's also a nonresident Senior 245 00:12:36,480 --> 00:12:39,480 Speaker 1: Fellow at the Atlantic Council's Global Energy Center and a 246 00:12:39,559 --> 00:12:42,760 Speaker 1: contributor to Bloomberg Opinion. Dr wall thank you so much. 247 00:13:00,080 --> 00:13:03,840 Speaker 1: Joining us. Here is of course our very own Mike mcloane, 248 00:13:03,880 --> 00:13:06,240 Speaker 1: who covers this sector and has for years. He is 249 00:13:06,280 --> 00:13:09,640 Speaker 1: a commodity strategist for Bloomberg Intelligence. Mike, it seems like 250 00:13:09,840 --> 00:13:12,400 Speaker 1: equity markets in the US are trying to shake off 251 00:13:12,440 --> 00:13:16,280 Speaker 1: concerns of some sort of increase in trade tensions between 252 00:13:16,320 --> 00:13:19,000 Speaker 1: the U S and China. Not the same in soft commodities. 253 00:13:19,040 --> 00:13:21,360 Speaker 1: What's going on, at least not yet. The market is 254 00:13:21,400 --> 00:13:25,080 Speaker 1: basically expecting this, hoping for and it was kind of 255 00:13:25,120 --> 00:13:27,719 Speaker 1: the main hope for the support at the time, and 256 00:13:27,720 --> 00:13:30,200 Speaker 1: in fact, hedge funds are records short. So right now 257 00:13:30,240 --> 00:13:32,640 Speaker 1: we're giving hedge funds a gift. They're making money. Their 258 00:13:32,679 --> 00:13:35,360 Speaker 1: record short corn, soybeans. I've never seen him that short 259 00:13:35,400 --> 00:13:38,080 Speaker 1: before in the markets, working so forth. But it needs 260 00:13:38,120 --> 00:13:40,720 Speaker 1: to be sustained. You know, this is the growing season, 261 00:13:40,720 --> 00:13:42,760 Speaker 1: This is really what matters. In fact, what's down really 262 00:13:42,800 --> 00:13:45,840 Speaker 1: the most days lean hawks, because we're expecting to export those. 263 00:13:46,280 --> 00:13:48,559 Speaker 1: Wait a minute, lean hogs were not on my g 264 00:13:48,760 --> 00:13:50,560 Speaker 1: l c O screen. I thought I had everything here. 265 00:13:50,760 --> 00:13:53,680 Speaker 1: Well it's it's there in the Bloomberg Commodity Index. Not 266 00:13:53,840 --> 00:13:55,960 Speaker 1: as widely traded, but that's been really one of the 267 00:13:55,960 --> 00:13:59,600 Speaker 1: problems out of China is the African swine fever reducing 268 00:13:59,640 --> 00:14:02,360 Speaker 1: their apply. They need to import more. We expected more 269 00:14:02,400 --> 00:14:04,240 Speaker 1: to be from the US and okay, well that might 270 00:14:04,240 --> 00:14:07,079 Speaker 1: be off the table. So you mentioned just where are 271 00:14:07,120 --> 00:14:10,680 Speaker 1: we in the growing season, planting season? Where are we 272 00:14:10,720 --> 00:14:13,320 Speaker 1: here for these commodity prime planting season right now? And 273 00:14:13,320 --> 00:14:15,880 Speaker 1: this is the time of year you're usually pricing a 274 00:14:15,920 --> 00:14:18,800 Speaker 1: little bit of production risk premium, meaning what if we 275 00:14:18,840 --> 00:14:21,000 Speaker 1: don't get the best weather. For the last five years, 276 00:14:21,000 --> 00:14:23,120 Speaker 1: we had some of the best weather in history, but 277 00:14:23,120 --> 00:14:25,160 Speaker 1: we're not doing that yet this year. We're actually pricing 278 00:14:25,160 --> 00:14:27,120 Speaker 1: in the discount, which is very rare and more so 279 00:14:27,200 --> 00:14:29,960 Speaker 1: now and with record shorts, so the market is set 280 00:14:30,040 --> 00:14:32,680 Speaker 1: up for potential massive rally, but it just needs a spark, 281 00:14:32,680 --> 00:14:35,040 Speaker 1: and right now it's the wrong way. Well, I'm trying 282 00:14:35,080 --> 00:14:36,320 Speaker 1: to understand. I want to go back to what you 283 00:14:36,360 --> 00:14:39,160 Speaker 1: were talking about with respect to the hedge funds that 284 00:14:39,240 --> 00:14:42,640 Speaker 1: are have record shorts. Is this because this is basically 285 00:14:42,720 --> 00:14:46,400 Speaker 1: a hedge against a deal not getting done between the 286 00:14:46,440 --> 00:14:48,680 Speaker 1: US and China, uh, you know, and that sort of 287 00:14:48,680 --> 00:14:52,440 Speaker 1: offsetting long bets in equities. Or is this because they 288 00:14:52,480 --> 00:14:55,360 Speaker 1: do expect some sort of risk with respect to the 289 00:14:55,360 --> 00:14:59,000 Speaker 1: planting season or some other issue that will lead to 290 00:14:59,040 --> 00:15:01,960 Speaker 1: a decline in prices much more of the former, And 291 00:15:01,960 --> 00:15:04,600 Speaker 1: I think that's what we're most people are missing, is 292 00:15:04,680 --> 00:15:07,480 Speaker 1: this is a very much macro picture interest and hedge 293 00:15:07,480 --> 00:15:12,120 Speaker 1: funds are all especially being former macro hedge fund strategists, 294 00:15:12,200 --> 00:15:13,880 Speaker 1: this makes a lot of sense. This is your short 295 00:15:13,880 --> 00:15:15,880 Speaker 1: where you think it's going to matter the most and 296 00:15:16,000 --> 00:15:19,800 Speaker 1: right here, but it's also when weather premiums gonna matter 297 00:15:19,840 --> 00:15:21,240 Speaker 1: within a month, and that's really not gonna make a 298 00:15:21,280 --> 00:15:25,680 Speaker 1: difference until really July. So, Mike, we talked about kind 299 00:15:25,680 --> 00:15:28,880 Speaker 1: of exporting agricultural exports. Just give us a sense of 300 00:15:28,960 --> 00:15:32,160 Speaker 1: how much of some of these soft commodities agricultural commodities 301 00:15:32,320 --> 00:15:35,680 Speaker 1: are in fact exported to China. For example, first and 302 00:15:35,720 --> 00:15:39,720 Speaker 1: foremost of soybeans. So before I guess we were exporting 303 00:15:39,720 --> 00:15:42,600 Speaker 1: about sixty before last year, typically we were up the 304 00:15:42,600 --> 00:15:45,760 Speaker 1: fifty percent of our total exports is a total production, 305 00:15:45,800 --> 00:15:49,280 Speaker 1: soybeans were being exported most of them too um to China. 306 00:15:49,400 --> 00:15:51,640 Speaker 1: That dropped down the forty percent last year, and now 307 00:15:51,680 --> 00:15:53,600 Speaker 1: we're hoping to get that back up, but typically takes 308 00:15:53,600 --> 00:15:55,880 Speaker 1: a little while. And now we have these massive supply. 309 00:15:55,960 --> 00:15:58,360 Speaker 1: There's just these big bags of soybeans everywhere. We gotta 310 00:15:58,360 --> 00:16:00,800 Speaker 1: get rid of that. Yeah, just waiting out to be sold. 311 00:16:01,320 --> 00:16:04,800 Speaker 1: Really interesting. The idea that this soft commodities have become 312 00:16:04,840 --> 00:16:07,120 Speaker 1: such sort of a macro bet. Is there any other 313 00:16:07,280 --> 00:16:11,520 Speaker 1: period in history that's analogous to this where soft commodities 314 00:16:11,520 --> 00:16:15,800 Speaker 1: have played such a central role in macro trading strategies? 315 00:16:16,120 --> 00:16:18,400 Speaker 1: You have to go back. One of the first things 316 00:16:18,440 --> 00:16:20,120 Speaker 1: I think of when you say that is the Great 317 00:16:20,280 --> 00:16:23,200 Speaker 1: Grain Robbery, which was in the early I think it 318 00:16:23,200 --> 00:16:25,840 Speaker 1: was seventy three or so. We exported a whole bunch 319 00:16:25,880 --> 00:16:28,600 Speaker 1: of grain to the Soviet Union at the time because 320 00:16:28,640 --> 00:16:30,840 Speaker 1: they were had a massive drought and had very little, 321 00:16:31,440 --> 00:16:34,680 Speaker 1: um little production. I just remember four grain traders in 322 00:16:34,680 --> 00:16:36,240 Speaker 1: the pits were talked about, Yeah, that's when I lost 323 00:16:36,240 --> 00:16:39,000 Speaker 1: my job and I stopped trading into becoming a pit clerk. 324 00:16:39,040 --> 00:16:41,000 Speaker 1: Because there's a lot of people who lost a lot 325 00:16:41,000 --> 00:16:42,960 Speaker 1: and made a lot there in that period. So I 326 00:16:43,000 --> 00:16:45,200 Speaker 1: have to go back, just real quick into the lean hogs. 327 00:16:45,440 --> 00:16:48,160 Speaker 1: Are the prices going up or down? Well, they went 328 00:16:48,240 --> 00:16:50,480 Speaker 1: up a lot and now they're mean reverting back down. 329 00:16:50,520 --> 00:16:53,040 Speaker 1: So the market priced in this massive increase in demand 330 00:16:53,280 --> 00:16:55,360 Speaker 1: with swine fever, and it's not getting it, at least 331 00:16:55,360 --> 00:16:57,280 Speaker 1: it might not be getting it. With his latest tweet 332 00:16:58,160 --> 00:17:00,040 Speaker 1: lean hoggs, I mean you heard it here first, that 333 00:17:00,160 --> 00:17:03,960 Speaker 1: pork bellies. It's used to be used to bellies. Paul 334 00:17:04,000 --> 00:17:07,680 Speaker 1: Sweeney is getting hungry. It is eleven oh eight a m. 335 00:17:07,920 --> 00:17:11,879 Speaker 1: Wall Street time, and he is very interested in lean hoggs. 336 00:17:11,920 --> 00:17:14,080 Speaker 1: Only with Mike mcglow, can you talk about lean hoggs. 337 00:17:14,160 --> 00:17:17,719 Speaker 1: But Mike covers all things commodities. Mike mcglogne commodity strategies 338 00:17:17,760 --> 00:17:19,720 Speaker 1: for Bloomberg Intelligence. Thanks so much for joining us. I mean, 339 00:17:19,760 --> 00:17:37,040 Speaker 1: I think we'll probably talking to him a lot more. Well. 340 00:17:37,080 --> 00:17:39,359 Speaker 1: The trade talks between the US and China hit a 341 00:17:39,400 --> 00:17:42,479 Speaker 1: little bit of a speed bump yesterday as President Trump 342 00:17:42,520 --> 00:17:45,800 Speaker 1: tweeted that he will consider raising a tariffs by the 343 00:17:45,880 --> 00:17:48,399 Speaker 1: end of the week. To get the latest on what 344 00:17:48,600 --> 00:17:50,720 Speaker 1: on this developing story, we turned to Mike McDonough. Mike 345 00:17:50,800 --> 00:17:53,320 Speaker 1: is a chief economist for Financial Products of Bloomberg. He 346 00:17:53,440 --> 00:17:56,360 Speaker 1: joins us live here in a Bloomberg eleven three oh studios. So, Mike, 347 00:17:56,400 --> 00:17:58,520 Speaker 1: from your perspective and you're a reading of what's been 348 00:17:58,560 --> 00:18:00,439 Speaker 1: going on over the last twenty four hour, do you 349 00:18:00,440 --> 00:18:03,879 Speaker 1: think the trade negotion trade negotiations are in fact really 350 00:18:03,920 --> 00:18:05,760 Speaker 1: at an impasse? Here? What you said, they hit a 351 00:18:05,800 --> 00:18:07,680 Speaker 1: speed bump. I guess we're trying to figure out whether 352 00:18:07,680 --> 00:18:10,800 Speaker 1: it's a speed bump or a wall. Right. Uh, you 353 00:18:10,840 --> 00:18:14,880 Speaker 1: know this is a serious concern, right what what what drove? 354 00:18:15,640 --> 00:18:18,040 Speaker 1: But what was the driver of this tweet? Is it 355 00:18:18,119 --> 00:18:20,600 Speaker 1: just trying to squeeze out a couple of extra concessions 356 00:18:20,720 --> 00:18:23,960 Speaker 1: or is it something more meaningful or structural? That they're 357 00:18:23,960 --> 00:18:28,399 Speaker 1: trying to change with the potential agreement. I just have 358 00:18:28,480 --> 00:18:31,600 Speaker 1: to say that is so two nine. What's driving that tweet? 359 00:18:31,640 --> 00:18:36,040 Speaker 1: I mean, honestly, this is very, very very current. Mike McDonough, 360 00:18:36,200 --> 00:18:39,000 Speaker 1: I am looking at a story just published on the 361 00:18:39,000 --> 00:18:43,000 Speaker 1: Bloomberg that Robert lydhis or the top negotiator with China 362 00:18:43,119 --> 00:18:47,000 Speaker 1: for the US, told President Trump that Beijing was backpedaling 363 00:18:47,280 --> 00:18:49,240 Speaker 1: on the trade deal that they originally agreed with, saying 364 00:18:49,240 --> 00:18:51,879 Speaker 1: that they would not change Chinese law as part of 365 00:18:51,920 --> 00:18:55,520 Speaker 1: the agreement, which was part of the initial arrangement. If 366 00:18:55,560 --> 00:18:58,639 Speaker 1: that's the case, President Trump's tweets aren't, what's to blame 367 00:18:58,840 --> 00:19:01,840 Speaker 1: is that there is a structural problem in the negotiations 368 00:19:02,160 --> 00:19:03,760 Speaker 1: that maill make it very hard to get a deal 369 00:19:03,760 --> 00:19:05,800 Speaker 1: done in your term. Now agreed, that would be a 370 00:19:05,840 --> 00:19:09,760 Speaker 1: major structural issue, structural issue, and it would be quite 371 00:19:09,800 --> 00:19:12,560 Speaker 1: challenging the seats here. Trump has now also put on 372 00:19:12,600 --> 00:19:15,800 Speaker 1: this deadline of Friday where he was increased tariffs. It's 373 00:19:15,920 --> 00:19:17,639 Speaker 1: very hard for me to say, even if you have 374 00:19:17,720 --> 00:19:21,639 Speaker 1: a low level delegation come from China to have these talks, 375 00:19:21,640 --> 00:19:24,000 Speaker 1: I don't see how they get enough done by Friday 376 00:19:24,080 --> 00:19:27,119 Speaker 1: to prevent these from being implemented, especially if that is 377 00:19:27,160 --> 00:19:30,880 Speaker 1: the cause. You know, one one thing I've always talked 378 00:19:30,920 --> 00:19:33,520 Speaker 1: about with you guys on the show is that you know, 379 00:19:34,400 --> 00:19:37,760 Speaker 1: back in Q four, both economies were weakening, markets were 380 00:19:37,800 --> 00:19:39,879 Speaker 1: selling off, and I think the bar for a trade 381 00:19:39,880 --> 00:19:43,880 Speaker 1: deal on both sides had gone down. Subsequently, Kona's China's 382 00:19:43,880 --> 00:19:47,080 Speaker 1: economy stabilizing, the US is doing much better. Markets are 383 00:19:47,080 --> 00:19:48,960 Speaker 1: doing better, So I almost wonder if the bar for 384 00:19:49,040 --> 00:19:51,840 Speaker 1: both sides has gone up, So maybe they regret a 385 00:19:51,880 --> 00:19:54,119 Speaker 1: couple of the concessions they had made in the past, 386 00:19:54,440 --> 00:19:56,919 Speaker 1: which would jive. I mean, that's just a theory I have, 387 00:19:57,040 --> 00:19:59,440 Speaker 1: but it would jive with what you were saying about 388 00:19:59,520 --> 00:20:03,960 Speaker 1: China pulling back some of the intellectual property I mean again, 389 00:20:04,080 --> 00:20:06,960 Speaker 1: which brings us to the question that I always have. Um, 390 00:20:07,000 --> 00:20:09,080 Speaker 1: you know, when we talk about this trade issue issue, 391 00:20:09,240 --> 00:20:11,560 Speaker 1: who really needs it more? Would you guess? And even 392 00:20:11,600 --> 00:20:13,440 Speaker 1: given you mentioned both economies tend to be doing a 393 00:20:13,480 --> 00:20:15,639 Speaker 1: little bit better, what do you think who's which side 394 00:20:15,680 --> 00:20:18,600 Speaker 1: needs a good deal more? You know, I mean, I 395 00:20:18,640 --> 00:20:21,840 Speaker 1: think you know, it depends on if you're talking what 396 00:20:21,840 --> 00:20:24,600 Speaker 1: what perspective you're talking from in short term or long term. 397 00:20:24,640 --> 00:20:28,359 Speaker 1: But I think um, President Trump looking at you know, 398 00:20:28,640 --> 00:20:32,080 Speaker 1: elections aren't that far away. I think he that victory 399 00:20:32,119 --> 00:20:34,000 Speaker 1: would go a long way for him politically, and it 400 00:20:34,000 --> 00:20:36,800 Speaker 1: would also do a lot for markets, which are kind 401 00:20:36,840 --> 00:20:38,919 Speaker 1: of one and the same. You know, one thing, you 402 00:20:38,920 --> 00:20:43,639 Speaker 1: have to think about how much of the market market 403 00:20:43,640 --> 00:20:46,920 Speaker 1: performance over the past several months has been because they've 404 00:20:46,960 --> 00:20:49,320 Speaker 1: kind of written off this trade war. This isn't something 405 00:20:49,320 --> 00:20:51,520 Speaker 1: we really need to worry about. So if you bring 406 00:20:51,560 --> 00:20:53,240 Speaker 1: that back front and center, it will have you know, 407 00:20:53,280 --> 00:20:58,160 Speaker 1: cause yourself in a market may cause some uncertainty with 408 00:20:58,160 --> 00:21:01,320 Speaker 1: within business leaders. Maybe then push off investment. You could 409 00:21:01,359 --> 00:21:04,040 Speaker 1: actually cause the economy to slow down based on the 410 00:21:04,080 --> 00:21:05,640 Speaker 1: sentiment of that, and then we go back to where 411 00:21:05,640 --> 00:21:09,399 Speaker 1: we were. So I think both sides really needed um, 412 00:21:09,440 --> 00:21:12,320 Speaker 1: you know, China's economy again, it was slowing. They've kind 413 00:21:12,320 --> 00:21:14,800 Speaker 1: of stabilized it. You suddenly put these tariffs on, They're 414 00:21:14,800 --> 00:21:17,160 Speaker 1: gonna there's gonna be a lot more need for stimulus, 415 00:21:17,200 --> 00:21:20,399 Speaker 1: physical monetary stimulus. There both sides needed, uh, and I 416 00:21:20,440 --> 00:21:22,760 Speaker 1: think that's why ultimately we get it. But I have 417 00:21:22,880 --> 00:21:26,639 Speaker 1: to say this was certainly an unexpected curveball for everybody. 418 00:21:26,760 --> 00:21:29,320 Speaker 1: You know, the more than I hear you talk, and 419 00:21:29,680 --> 00:21:34,399 Speaker 1: you're very familiar with China with these negotiations. Uh, the 420 00:21:34,480 --> 00:21:37,000 Speaker 1: more I'm surprised that the market response has been as 421 00:21:37,040 --> 00:21:40,840 Speaker 1: muted as it is, because basically, President Trump, I don't 422 00:21:40,880 --> 00:21:43,919 Speaker 1: see how he can back down from implementing tariffs that 423 00:21:44,000 --> 00:21:48,159 Speaker 1: he's threatening unless there's some meaningful shift by either the 424 00:21:48,240 --> 00:21:51,760 Speaker 1: Chinese negotiators coming over without losing face. And it seems 425 00:21:51,800 --> 00:21:54,920 Speaker 1: like China's kind of, I don't know, putting their feet 426 00:21:54,920 --> 00:21:57,720 Speaker 1: in the ground. They're not necessarily they're not necessarily rolling over. 427 00:21:57,960 --> 00:22:01,399 Speaker 1: I mean, I think the market reaction has been fairly significant, 428 00:22:01,480 --> 00:22:03,440 Speaker 1: but I do agree people are just trying to figure 429 00:22:03,440 --> 00:22:05,280 Speaker 1: out what what do we make of this? Is this 430 00:22:05,440 --> 00:22:07,879 Speaker 1: something you know? Do we get these tariffs even if 431 00:22:07,920 --> 00:22:09,840 Speaker 1: it's temporary, and then we get a trade deal. I 432 00:22:09,840 --> 00:22:12,440 Speaker 1: think the baseline for most people is there will still 433 00:22:12,520 --> 00:22:15,560 Speaker 1: be a trade deal, though the road they're certainly got 434 00:22:15,560 --> 00:22:17,840 Speaker 1: a bit bumpier. Um. But I think if you take 435 00:22:17,880 --> 00:22:20,800 Speaker 1: this out even a step further, if you're Europe or 436 00:22:20,840 --> 00:22:23,320 Speaker 1: if you're North Korea, if you're anyone right now who's 437 00:22:23,359 --> 00:22:25,840 Speaker 1: negotiating with Trump and he's been saying things are going 438 00:22:25,920 --> 00:22:28,520 Speaker 1: really well, or it's trending in the right direction, you're 439 00:22:28,520 --> 00:22:30,600 Speaker 1: gonna take a step back and be concerned right now. 440 00:22:30,640 --> 00:22:33,399 Speaker 1: I think. I mean, to me, the administration lost some 441 00:22:33,440 --> 00:22:36,479 Speaker 1: credibility in terms with with some of their partners are 442 00:22:36,520 --> 00:22:38,480 Speaker 1: trying to negotiate with because now they're going to have 443 00:22:38,520 --> 00:22:42,199 Speaker 1: to question trust. Um So, I think that's something that 444 00:22:42,240 --> 00:22:44,880 Speaker 1: the markets also going to have to kind of digest. Now. 445 00:22:44,960 --> 00:22:48,199 Speaker 1: Think about it, if these trade talks get back on track, 446 00:22:48,720 --> 00:22:51,760 Speaker 1: or the markets or investors going to uh see a 447 00:22:51,800 --> 00:22:53,959 Speaker 1: tweet from Trump and say, Okay, Trump saying things are 448 00:22:54,000 --> 00:22:56,200 Speaker 1: going well, must be going well. I don't. I don't 449 00:22:56,240 --> 00:22:58,159 Speaker 1: think they're going to trust that the same way they 450 00:22:58,200 --> 00:23:00,320 Speaker 1: did so. I think they're going to need much more 451 00:23:00,359 --> 00:23:05,640 Speaker 1: tangible results, uh to feel good about what's happening on trade. So, Mike, 452 00:23:05,760 --> 00:23:07,359 Speaker 1: let's see if you can give us a sense of 453 00:23:07,359 --> 00:23:09,639 Speaker 1: how much these tariffs really hurt the Chinese. Have we 454 00:23:09,720 --> 00:23:12,879 Speaker 1: seen any data to suggests that they really are something 455 00:23:13,080 --> 00:23:15,400 Speaker 1: that are concerned to the Chinese and the government. It's 456 00:23:15,400 --> 00:23:17,960 Speaker 1: definitely a concern. I mean, you know, the the tariffs 457 00:23:18,000 --> 00:23:20,720 Speaker 1: that have been put in place right now, um so, 458 00:23:20,920 --> 00:23:25,600 Speaker 1: China's economy was slowing originally because of the deleveraging process 459 00:23:25,600 --> 00:23:27,960 Speaker 1: some domestic reasons. But then you know, at the start 460 00:23:28,000 --> 00:23:30,080 Speaker 1: of this year and towards end of last year, you 461 00:23:30,160 --> 00:23:33,080 Speaker 1: got these tariffs which did start taking a few tents 462 00:23:33,080 --> 00:23:36,479 Speaker 1: of a percent probably off China Chinese GDP growth. You 463 00:23:36,520 --> 00:23:39,359 Speaker 1: implement the full swath of tariffs that are being discussed, 464 00:23:39,400 --> 00:23:42,080 Speaker 1: you know, you're you're talking about a much more meaningful 465 00:23:42,160 --> 00:23:45,040 Speaker 1: clip on China's GDP growth rate from I've seen estimates 466 00:23:45,040 --> 00:23:47,680 Speaker 1: from half a percent to a full percent UH. That 467 00:23:47,760 --> 00:23:50,800 Speaker 1: would force the Chinese government, you know, right after they 468 00:23:50,800 --> 00:23:54,320 Speaker 1: finally stabilize the economy, to have to consider far more 469 00:23:54,320 --> 00:23:57,760 Speaker 1: meaningful UH stimulus, both on the physical monetary side, and 470 00:23:57,800 --> 00:24:00,920 Speaker 1: that's not something as you're trying to, you know, stabilize 471 00:24:00,920 --> 00:24:03,240 Speaker 1: your economy, de leverage something you want to have to 472 00:24:03,320 --> 00:24:05,600 Speaker 1: be dealing with. Mike mcdonnoth, thank you so much for 473 00:24:05,600 --> 00:24:09,000 Speaker 1: being with us. This is such an interesting area because honestly, 474 00:24:09,119 --> 00:24:12,520 Speaker 1: the fate of these trade discussions really will determine the 475 00:24:12,600 --> 00:24:15,440 Speaker 1: trajectory of a lot of the rest of twenty nineteen. 476 00:24:15,640 --> 00:24:18,800 Speaker 1: So definitely a really important area to focus on. Mike 477 00:24:18,880 --> 00:24:22,600 Speaker 1: McDonald's chief economist for Financial Products at Bloomberg LP, joining 478 00:24:22,680 --> 00:24:26,600 Speaker 1: us here in our Bloomberg Interactive Broker's studios. Thanks for 479 00:24:26,640 --> 00:24:28,840 Speaker 1: listening to the Bloomberg P and L podcast. You can 480 00:24:28,880 --> 00:24:31,720 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 481 00:24:31,760 --> 00:24:34,959 Speaker 1: podcast platform you prefer. Paul Sweeney, I'm on Twitter at 482 00:24:34,960 --> 00:24:37,639 Speaker 1: pt Sweeney. I'm Lisa abram Woyd's I'm on Twitter at 483 00:24:37,680 --> 00:24:40,480 Speaker 1: Lisa A. Bramwoit's one before the podcast. You can always 484 00:24:40,480 --> 00:24:42,560 Speaker 1: catch us worldwide on Bloomberg Radio